RIGHTS OFFER CIRCULAR 2014
A copy of this Rights Offer Document has been delivered to PACRA for registration. PACRA has not checked and will not check the accuracy of the statements made and therefore accepts no responsibility for the financial soundness of the Company or the value of the securities concerned.
THIS RIGHTS OFFER DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION The Definitions and Interpretations commencing on page 11 of this Rights Offer Document apply, mutatis mutandis, throughout this Rights Offer Document including this cover page. This Rights Offer Document is not an invitation to the public to subscribe for Shares in CEC, but is an offer to existing CEC Shareholders to acquire Shares in the Company on the terms and conditions set out in this Rights Offer Document. Shareholders are referred to page 8 of this Rights Offer Document, which sets out the action required of them with regard to the Rights Offer, full details of which are set out in this Rights Offer Document. If you are in any doubt as to the action that you should take, please consult your Broker, banker, legal adviser, accountant or other professional adviser immediately. If you have disposed of all of your CEC Shares, this Rights Offer Document should be forwarded to the purchaser to whom, or the Broker, banker or agent through whom you disposed of such Shares except that this Rights Offer Document should not be forwarded or transmitted by you to any person in any territory other than Zambia unless the Rights Offer can lawfully be made to such person or in such territory. The Rights that are represented by the Letter of Allocation are valuable and may be renounced or sold on the LuSE. Letters of Allocation can, however, only be traded in dematerialised form and, accordingly, CEC has issued all Letters of Allocation in dematerialised form. The record of holders of Certificated Shares is being maintained by the Transfer Secretary which has made it possible for holders of Certificated Shares to enjoy the same rights and opportunities as holders of Dematerialised Shares in respect of the Letters of Allocation. Instructions on how to renounce or sell the rights represented by the Letters of Allocation are set out in paragraph 1.3 of this Rights Offer Document. Only whole numbers of CEC Shares will be issued in terms of the Rights Offer and Shareholders will be entitled to rounded numbers of Shares once the Ratio of Entitlement has been applied. Excess applications will not be allowed. This Rights Offer Document is issued in compliance with the Listings Requirements for the purpose of providing information to Shareholders with regards to the Company. If you are in any doubt as to the action to be taken, you should contact your Broker, bank manager, legal advisor, accountant or other professional adviser.
Copperbelt Energy Corporation PLC (Incorporated in the Republic of Zambia) (Registration number 39070) Share code: CEC ISIN: ZM0000000136 (“CEC” or “the Company”)
RIGHTS OFFER DOCUMENT TO CEC SHAREHOLDERS
relating to: a Rights Offer of CEC Shares at an issue price of ZMW0.62 per share, in the ratio of 5 Rights Offer Shares for every 8 CEC Shares held at the close of business on 31 January 2014 and including: •
revised listing particulars for purposes of providing information to the public on CEC, which complies with the Listings Requirements; and
•
a Letter of Allocation (to be completed by Qualifying Shareholders).
Rights Offer opens at 10:00 on
03 February 2014
Rights Offer closes at 14:00 on
28 February 2014
DIRECTORS’ RESPONSIBILITY STATEMENT The Directors whose names appear on page 14 of this Rights Offer Document, collectively and individually accept full responsibility for the accuracy of the information given in this Rights Offer Document and certify that, to the best of their knowledge and belief, there are no facts the omission of which would make any statement in this Rights Offer Document false or misleading and that they have made all reasonable inquiries to ascertain such facts and that this Rights Offer Document contains all information required by law and by the Listings Requirements.
Investment bank, Bookrunner and Transaction Adviser Standard Bank
Legal Adviser to CEC Messrs Chibesakunda & Company
Sponsoring Broker and Main Receiving Agent Stockbrokers Zambia Limited
Independent Reporting Accountant PricewaterhouseCoopers Zambia
Auditor Grant Thornton Date of issue: Monday, 03 February 2014 This Rights Offer Document is available in English only. Copies of this Rights Offer Document may be obtained from the registered office of CEC, the Sponsoring Broker and the Transfer Secretary whose addresses are set out in the “Corporate Information and Advisers” section of this Rights Offer Document and will be available from Monday, 03 February 2014 until Monday, 03 March 2014, both days inclusive. The Rights Offer Document will also be available in electronic form from the Company’s website (www.cecinvestor.com) from Monday, 03 February 2014. A copy of this Rights Offer Document, together with the Form of Instruction and other requisite documents referred to in section 126 of the Companies Act, was lodged with PACRA at Plot No. 8471 Mwayi House, Haile Selassie Avenue, Long Acres, Lusaka, Zambia and the Form of Instruction was registered by the PACRA at the same address on Friday, 31 January 2014 as required by section 123 of the Companies Act.
4
COPPERBELT ENERGY CORPORATION PLC
CERTAIN FORWARD-LOOKING STATEMENTS This Rights Offer Document includes certain “forward-looking information”. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements, including, without limitation those concerning: CEC’s strategy; financial results, growth prospects and outlook of CEC’s operations, individually or in the aggregate; CEC’s liquidity and financial position; and the outcome and consequences of any pending litigation proceedings. These forward-looking statements are not based on historical facts, but rather reflect CEC’s current expectations concerning future results and events and generally may be identified by the use of forward-looking words or phrases such as “believe”, “aim”, “expect”, “anticipate”, “intend”, “foresee”, “forecast”, “likely”, “should”, “planned”, “may”, “estimated”, “potential” or similar words and phrases. Similarly, statements that describe CEC’s objectives, plans or goals are or may be forward-looking statements. 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. CEC Shareholders should review carefully all information, including the pro forma financial statements and the notes to the pro forma financial statements, included in this Rights Offer Document. The forward-looking statements included in this Rights Offer Document are made only as of the Last Practicable Date. The delivery of this Rights Offer Document does not at any time imply that the information contained herein is correct at any time subsequent to the Last Practicable Date or that any other information supplied in connection with this Rights Offer is correct as of any time subsequent to the date indicated in the document containing the same. CEC undertakes no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Rights Offer Document or to reflect the occurrence of unanticipated events. All forward-looking statements in this Rights Offer Document and all subsequent written and oral forwardlooking statements attributable to CEC or any person acting on its behalf have not been reviewed and reported on by CEC’s auditors in accordance with ISAE 3420, Assurance Engagements to Report on the Compilation of Pro Forma Financial Information included in a prospectus.
RIGHTS OFFER DOCUMENT 2014
5
CORPORATE INFORMATION AND ADVISERS Company Secretary and Registered Office
Transfer Secretary
Julia C Z Chaila
Corpserve Transfer Agents Limited
Stand 3614, 23rd Avenue
6 Mwaleshi Road
Nkana East
Olympia Park
Kitwe
Republic of Zambia
Republic of Zambia
(PO Box 37522, Lusaka, Zambia)
(PO Box 20819, Kitwe, Zambia)
Investment Bank,Transaction Adviser and Bookrunner
Sponsoring Broker & Main Receiving Agent
The Standard Bank of South Africa Limited
Stockbrokers Zambia Limited
30 Baker Street
Second Floor
Rosebank
Exchange Building / Central Park
2196
Cairo Road / Church Road
Republic of South Africa
Lusaka
(PO Box 61150 Marshalltown, 2107, Republic of South
Republic of Zambia
Africa)
(PO Box 38956, Lusaka, Zambia)
Legal Adviser
Independent Reporting Accountant
Messrs Chibesakunda & Company
PricewaterhouseCoopers Zambia
Maanu Centre
Stand 2374, Thabo Mbeki Road
Stand 4647 Beit Road
Lusaka
Addis Ababa Roundabout
Republic of Zambia
Lusaka
(PO Box 30942, Lusaka, Zambia)
Republic of Zambia (PO Box 30279, Lusaka, Zambia)
1.1.1.1 Receiving Agents African Alliance Securities
Equity Capital Resources
The Colosseum, Block A Ground Floor
House No. 12 Mushemi Road
Bwinjimfumu Road, Rhodes Park
Longacres
Lusaka
Lusaka
Republic of Zambia
Republic of Zambia
Intermarket Securities
Madison Asset Management
Farmers House, Central Park
Dar-es-Salaam Place
Cairo Road / Church Road
South of Main Post Office
Lusaka
Cairo Road / Church Road
Republic of Zambia
Lusaka Republic of Zambia
Pangaea Securities 3rd Floor Farmers House, Central Park Cairo Road Lusaka Republic of Zambia
6
COPPERBELT ENERGY CORPORATION PLC
TABLE OF CONTENTS CERTAIN FORWARD-LOOKING STATEMENTS
5
CORPORATE INFORMATION AND ADVISERS
6
ACTION REQUIRED BY CEC SHAREHOLDERS
8
SALIENT DATES AND TIMES
10
DEFINITIONS AND INTERPRETATIONS
11
DIRECTORS OF CEC
14
1.
14
RIGHTS OFFER DOCUMENT
1.1 Introduction 14 1.2
Rationale of the Rights Offer and use of proceeds
14
1.3 Particulars of the Rights Offer 17 1.4
Pro forma financial information
23
1.5
Estimated expenses in relation to the Rights Offer
24
1.6
Information on CEC
24
1.7 Material changes 29 1.8
Litigation statement
29
1.9
Working capital statement
29
1.10
Directors’ responsibility statement
29
1.11
Consents
29
1.12
Documents available for inspection
30
ANNEXURE 1: TABLE OF ENTITLEMENT
31
ANNEXURE 2: INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF CEC
32
ANNEXURE 3: INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE HISTORICAL FINANCIAL INFORMATION OF CEC
35
ANNEXURE 4: TRADING HISTORY OF CEC SHARES ON THE LUSE (REBASED)
67
ANNEXURE 5: DIRECTORS AND SENIOR MANAGEMENT OF CEC
68
ANNEXURE 6: DIRECTORS AND SENIOR MANAGEMENT OF CEC SUBSIDIARIES
74
ANNEXURE 7: CORPORATE GOVERNANCE
81
ANNEXURE 8: REVISED LISTING PARTICULARS
85
LETTER OF ALLOCATION AND ACCEPTANCE FORM
96
RIGHTS OFFER DOCUMENT 2014
7
ACTION REQUIRED BY CEC SHAREHOLDERS The Definitions and Interpretations commencing on page 11 of this Rights Offer Document apply mutatis mutandis to this section. Please take careful note of the following provisions regarding the action required by Shareholders: •
If you are in any doubt as to what action you should take arising from this Rights Offer Document, please consult your Broker, banker, legal advisor, accountant or other professional advisor immediately.
•
If you have disposed of all of your CEC Shares, this Rights Offer Document should be handed to the purchaser of such Shares or to the Broker, banker, legal advisor or other agent through whom the disposal was effected.
•
This Rights Offer Document contains information relating to the Rights Offer. You should carefully read through this Rights Offer Document and decide how you wish to treat the Rights allocated to you in terms of the Rights Offer.
Action to be taken by CEC Shareholders In order to participate in the Rights Offer, you need a copy of this Rights Offer Document and your Letter of Allocation, detailing your name, the number of CEC Shares that you held as at the Record Date, which was 31 January 2014, and the number of Rights Offer Shares that you are entitled to purchase on the basis of 5 Rights Offer Shares for every 8 CEC Shares held on the Record Date – and then follow the courses of action provided in section 1.3 of this Rights Offer Document and summarised below. If you are a Qualifying Shareholder and wish to buy more Rights Offer Shares, over and above your entitlement on the Record Date, you should contact your Broker to purchase LA Options listed on the LuSE during the period from 27 January 2014 to 21 February 2014, at the then prevailing market price, and thereafter proceed to subscribe for the Rights Offer Shares associated with the purchased LAs, at the Rights Offer Price of ZMW 0.62 per Rights Offer Share. Pursuant to this Rights Offer, Qualifying Shareholders may elect one of four courses of action to follow. The four options are summarised below. Should you have any questions about the appropriate action to take, please consult your financial advisor or your Broker, or the Sponsoring Broker to the Rights Offer. o SUBSCRIBE for the Rights Offer Shares offered (acceptance) Complete Section A of the Letter of Allocation / Acceptance Form (at the end of this Rights Offer Document) and send to your Broker to effect payment for the Rights Offer Shares being subscribed for. Alternatively, if you do not have a broking relationship, you can deposit or transfer your payment to the Sponsoring Broker at the following bank account: BANK
:
Cavmont Bank Ltd
ACCOUNT NAME
:
CEC RIGHTS OFFER MAIN
ACCOUNT NUMBER
:
800000182308
SORT CODE
:
130001
SWIFT CODE
:
CVMCZMLU
And send the completed Acceptance Form, together with your certified Deposit Slip as proof of payment, or a Cheque or Bank Draft, in favour of “CEC RIGHTS OFFER”, crossed “not negotiable” and “not transferable” by no later than 12h00 on Wednesday, 26 February 2014 (being the last day to receive postal acceptances).
8
COPPERBELT ENERGY CORPORATION PLC
o SELL all your rights through the LuSE (renunciation) Complete Section B of the Letter of Allocation (at the end of this Rights Offer Document) and send it to your Broker or alternatively to the Sponsoring Broker with the instructions to “sell the rights”. Participants will be permitted to sell their rights over the LuSE between Friday, 27 January 2014 and Friday, 21 February 2014 at the then prevailing market price. o SUBSCRIBE in part for Rights Offer Shares AND SELL the remaining rights through the LuSE Complete Section B of the Letter of Allocation (at the end of this Rights Offer Document) and deposit or transfer your payment to either your Broker, or alternatively to the Sponsoring Broker at the following bank account: BANK
:
Cavmont Bank Ltd
ACCOUNT NAME
:
CEC RIGHTS OFFER MAIN
ACCOUNT NUMBER
:
800000182308
SORT CODE
:
130001
SWIFT CODE
:
CVMCZMLU
Send the completed form to your Broker, or to the Sponsoring Broker with the instructions to “subscribe for a number of Rights Offer Shares and sell the balance”, together with your certified Deposit Slip as proof of payment, or a Cheque or Bank Draft, in favour of “CEC RIGHTS OFFER”, crossed “not negotiable” and “not transferable” by no later than 12h00 on Thursday, 20 February 2014 to the Sponsoring Broker whose details are given on page 4. Participants will be permitted to sell their rights over the LuSE between Monday, 27 January 2014 and Friday, 21 February 2014 at the then prevailing market price. o Non Action Shareholders not selecting any of the foregoing options by Friday, 28 February 2014, the closing of the Offer Period, will have deemed to have selected none of the available options and such rights pertaining to the Rights Offer will lapse. The Bookrunner will, on a best endeavours basis, procure purchasers for unsubscribed shares in a rump placement process as contemplated in paragraph 1.3 herein. Neither CEC, nor any of the advisors to the transaction, take any responsibility and will not be held liable for failure on the part of a Broker to notify the Sponsoring Broker of a shareholders’ course of action in relation to the Rights Offer.
RIGHTS OFFER DOCUMENT 2014
9
SALIENT DATES AND TIMES The Definitions and Interpretations commencing on page 11 of this Rights Offer Document apply mutatis mutandis to this section.
2014
CEC Shares commence trading ex-entitlement at 10:00 on
Monday, 27 January
Listing of and trading in the LA Options from commencement of business on
Monday, 27 January
Last day to trade in CEC Shares in order to participate in the Rights Offer (cum entitlement) on
Tuesday, 28 January
Record Date in order to be entitled to participate in the Rights Offer on
Friday, 31 January
Rights Offer opens at 10:00 on
Monday, 03 February
LA Options credited to an electronic account held at the CSD
Monday, 03 February
Last day for trading LA Options on the LuSE on
Friday, 21 February
Listing of Rights Offer Shares and trading therein on the LuSE commences at 10h00 on Last day to receive postal acceptances
Monday, 24 February Wednesday, 26 February
Rights Offer closes at 14:00 on
Friday, 28 February
Payment to be made and Letter of Allocation to be lodged with the Transfer Secretary on
Friday, 28 February
Rights Offer Shares issued on or about
Monday, 03 March
CSD accounts in respect of Qualifying Shareholders debited and updated with Rights Offer Shares
Monday, 03 March
Results of the Rights Offer announcement released on SENS on
Monday, 03 March
Results of Rights Offer published in press on or around
Wednesday, 05 March
Notes: 1. No physical share certificates will be issued in respect of Rights Offer Shares. 2. If you are a Qualifying Shareholder holding Dematerialised Shares you are required to duly complete the Letter of Allocation Form with payment in the manner and time stipulated on the Letter of Allocation Form and deliver this to your Broker. 3. Unless otherwise indicated, all times are Zambian times and are subject to change. Any such change will be published in the Zambian press.
10
COPPERBELT ENERGY CORPORATION PLC
DEFINITIONS AND INTERPRETATIONS Throughout this Rights Offer Document and the Annexures hereto, unless the context indicates otherwise, the words in the column on the left below shall have the meaning stated opposite them in the column on the right below, reference to the singular shall include the plural and vice versa, words denoting one gender include the other and words and expressions denoting natural persons include juristic persons and associations of persons:
“Acceptance Form” “Act” or “Securities Act” “AEDC”
the form in this Rights Offer Document that must be completed in order to subscribe for the Rights Offer Shares; the Securities Act Chapter 354 of the Laws of Zambia; Abuja Electricity Distribution Company PLC (Registration number RC 638681), a company registered in Nigeria;
“Aflife”
African Life Financial Services Zambia (Registration number 35932), a company registered in Zambia;
“African Alliance
African Alliance Zambia Securities Limited (Registration Number 69735), a company incorporated in
Securities”
Zambia;
“Articles”
the Articles of Association of the Company;
“the Board” or “the
the board of directors of CEC as at the date of this Rights Offer Document and “Director” shall be
Directors”
construed accordingly;
“Bookrunner”
refers to The Standard Bank of South Africa Limited;
“Broker” “Business Day” “CEC” or “the Company”
any person registered as a broking member (equities) in terms of the Rules of the LuSE made in accordance with the provisions of the Securities Act; any day of the week, excluding Saturdays, Sundays and all official Zambian public holidays; CEC PLC (Registration number 39070), a public company incorporated in accordance with the laws of Zambia, the entire issued share capital of which is listed on the LuSE;
“CEC Group” or “the Group”
CEC and its subsidiaries, as defined under the Companies Act Chapter 388 of the Laws of Zambia;
“CEC Liquid”
CEC Liquid Telecom Limited (Registration number 92298), a company registered in Zambia;
“CEC Shareholders” or “Shareholders” “CEC Shares” or “Shares” “Certificated Shares”
registered holders of CEC Shares; ordinary Shares of CEC with a par value of ZMW0.01 each in the authorised and issued share capital of the Company; CEC Shares which have not yet been dematerialised in terms of the requirements of CSD, title to which is represented by a share certificate or other documents of title;
“the Companies Act”
the Companies Act, Chapter 388 of the laws of Zambia;
“Copperbelt”
the mining area of Zambia, which is centred around the Copperbelt Province of Zambia;
“Corporate Governance Code” “CSD” or “LuSE CSD” “Dematerialised Shareholders” “Dematerialised Shares” “Documents of Title”
the corporate governance code of the LuSE; the Central Securities Depository maintained by the LuSE; CEC Shareholders who hold Dematerialised Shares in CEC; CEC Shares which have been incorporated into the CSD system and which are no longer evidenced by a share certificate or other documents of title; share certificates, certified transfer deeds, balance receipts, or any other documents of title to CEC Shares;
“DPS”
dividend per share;
“DRC”
Democratic Republic of Congo;
“Earnings Per Share” or
earnings attributable to each CEC share, calculated by dividing the Company's profit attributable to
“EPS”
Shareholders by the weighted average number of issued CEC Shares;
“EGM” or “Extraordinary General Meeting” “ECR” or “Equity Capital Resources”
the extraordinary general meeting of CEC Shareholders held on 26 July 2013; Equity Capital Resources PLC (Registration Number 60559), a company incorporated in Zambia; means a form of instruction in respect of the Letter of Allocation reflecting the rights of Certificated
“Form of Instruction”
Shareholders and on which Certificated Shareholders are entitled to indicate whether they wish to take up, dispose of or renounce all or a portion of their Rights;
RIGHTS OFFER DOCUMENT 2014
11
“Golden Share” or “Special Share” is a share in CEC that may only be issued to, held by and transferred to “Golden Share”
the Minister responsible for finance or his successor or a nominee on his behalf or any other Minister or other Person acting on behalf of GRZ the Special Shareholder;
“GRZ”
Government of the Republic of Zambia; the Board member appointed by GRZ, pursuant to the Golden Share, usually the Permanent Secretary
“GRZ Nominated Member”
of the Ministry of Mines, Energy and Water Development as shall be designated as such by the Minister from time to time; means the International Financial Reporting Standards and Interpretations adopted by the
“IFRS”
International Accounting Standards Board (“IASB”) and the International Financial Reporting Interpretations Committee of the IASB;
“Independent Reporting Accountant”
PricewaterhouseCoppers Zambia (Registration number 4808), a company incorporated in Zambia;
“Intermarket”
Intermarket Securities Limited (Registration number 32901), a company incorporated in Zambia;
“Investment Bank”
means Standard Bank or such other bank as the company may appoint;
“Irrevocable Letter of Undertaking”
the agreement entered into between CEC and a significant shareholder in terms of which that shareholder agrees, subject to certain conditions, to confirm that they will follow their rights pursuant to the Rights Offer;
“Kabompo”
CEC Kabompo Hydro Power Limited (Registration number 99488), a company registered in Zambia;
“KANN”
KANN Utility Company Limited (Registration number RC 920561), a company registered in Nigeria; being the rights arising under the Letters of Allocation to subscribe for shares, which rights are
“LA Options”
represented by a book entry kept by the CSD;
“Last Practicable Date”
31st December 2013; the legal advisers to the Company with respect to the Rights Offer, being Messrs Chibesakunda &
“Legal Advisers”
Company;
“Letter of Allocation” “Listings Requirements”
a renounceable letter of allocation to be issued to CEC Shareholders in electronic form relating to the Rights Offer; the Listings Requirements of the LuSE, as amended from time to time; the Lusaka Stock Exchange Limited (Registration number 30495), a company incorporated in Zambia
“LuSE”
and licensed to operate as a stock exchange under the Securities Act, Chapter 354 of the Laws of Zambia; Madison Asset Management Company Limited (Registration number 68406), a company incorporated in
“MAM Co”
Zambia;
“Main Receiving Agent”
Stockbrokers Zambia Limited or such other person as the Company may appoint;
“NAV”
Net asset value;
“Net Asset Value Per
CEC Shareholders' equity, as determined by deducting liabilities from assets, divided by the weighted
Share” or “NAV per share”
average number of CEC Shares in issue; the period between Monday, 03 February at 10:00 (Zambian time) when the Rights Offer will open and
“Offer Period”
Friday, 28 February at 14:00 (Zambian time) when the Rights Offer will close; The Patents and Companies Registration Agency of Zambia, established pursuant to section 366 of the
“PACRA”
Companies Act as amended;
“Pangaea”
Pangaea Securities Limited (Registration Number 33424), a company incorporated in Zambia;
“PAT”
profit after tax;
“PBT”
profit before tax;
“Person”
a natural individual or body corporate with legal capacity; a registered holder of CEC Shares included on the register of Shareholders of CEC as at the Record Date
“Qualifying Shareholder”
and which does not have its registered address in any jurisdiction in which it would be unlawful to make the Rights Offer; the number of Rights Offer Shares to which Shareholders are entitled in terms of the Rights Offer, being
“Ratio of Entitlement”
5 Rights Offer Shares for every 8 CEC Shares held on the Record date for the Rights Offer, and/or such proportionate lower number of Shares in respect of a holding of less than 8 CEC Shares held on the Record Date;
“Realtime”
12
Realtime Technology Alliance Africa Limited (Registration number 46358), a company registered in Zambia;
COPPERBELT ENERGY CORPORATION PLC
“Receiving Agents” “Record Date” “Register”
Stockbrokers Zambia, Pangaea, Intermarket, African Alliance, MAM Co and ECR; the last day for Shareholders to be recorded in the register in order to participate in the Rights Offer, being close of business on Friday, 31 January; means the register of Certificated Shareholders maintained by CEC and the sub-register of Dematerialised Shareholders maintained by the Transfer Secretary;
“Revised Listing
means the revised listing particulars of the Company contained in this Rights Offer Document as set out
Particulars”
in this Rights Offer Document and including all annexures thereto;
“Rights” “Rights Offer” “Rights Offer Document”
means the renounceable and transferable right of Existing Shareholders to subscribe for a prescribed number of shares of CEC which number is set out in the Letter of Allocation; this Rights Offer of Shares in CEC at the Rights Offer price of ZMW0.62 in the ratio of 5 Rights Offer Shares for every 8 CEC Shares held on the Record Date; means this bound document, dated Monday, 03 February 2014, incorporating a Form of Instruction, where applicable;
“Rights Offer Share Price”
the price per new CEC share to be offered to CEC Shareholders in terms of the Rights Offer being
or “Subscription Price”
ZMW0.62 per CEC share;
“the Rights Offer Shares”
the 625,000,000 CEC Shares, which are the subject of the Rights Offer;
“Rump Shares”
the Rights Offer Shares not allocated where less than 100 percent of the number of Rights Offer Shares available are subscribed for in the Rights Offer; the Southern African Power Pool formed pursuant to the Intergovernmental Memorandum of
“SAPP”
Understanding signed on 28th August 1995; which was replaced by the Inter-Utility Memorandum of Understanding of 21st July 2006, and is an arrangement for, inter alia, co-operation in matters of electricity generation and distribution between member states including Zambia;
“the SEC”
the Securities and Exchange Commission Zambia, a statutory body established under the Securities Act;
“SENS”
Securities Exchange News Service of the LuSE;
“Sponsoring Broker”
Stockbrokers Zambia Limited or such other person as the Company may appoint;
“Stanbic Zambia”
Stanbic Bank Zambia Limited (Registration number 6559), a company registered in Zambia and a registered bank; The Standard Bank of South Africa Limited (Registration number 1962/000738/06), a public company
“Standard Bank”
incorporated in accordance with the laws of the Republic of South Africa and a registered bank; or; Stanbic Bank Zambia Limited;
“Stockbrokers Zambia Limited” or “Stockbrokers Zambia”
Stockbrokers Zambia Limited (Registration number 52224), a company registered in Zambia and a member of LuSE and licensed by the SEC as a dealer;
“Transaction Advisor”
Standard Bank or such other person as the Company may appoint;
“the Transfer Agent”
Corpserve Transfer Agents Limited (Registration number 74349), a company registered in Zambia
“UK”
United Kingdom;
“USD” or “$”
United States Dollars;
“Xerxes”
Xerxes Global Investments Limited (Registration number RC 647178), a company registered in Nigeria;
“Zambia”
the Republic of Zambia;
“ZCCM”
Zambia Consolidated Copper Mines Limited
“ZCCM-IH”
ZCCM Investments Holdings PLC (Registration number 771), a company registered in Zambia;
“ZECI”
Zambia Energy Corporation (Ireland) Limited (Registration number 1045) a company registered in Ireland; the legal tender of Zambia until 30 June 2013 and whose equivalent face value to ZMW is multiplied by
“ZMK” or “ZK” or “K”
a multiplicand of one thousand and which is no longer used for ordinary transactions as at 30th June 2013; and the legal tender of Zambia in which all monetary amounts in this Rights Offer Document are expressed
“ZMW”
unless otherwise indicated and whose equivalent face value to the ZMK is divided by a multiple of one thousand.
RIGHTS OFFER DOCUMENT 2014
13
Copperbelt Energy Corporation PLC (Incorporated in the Republic of Zambia) (Registration number 39070) Share code: CEC ISIN: ZM0000000136 (“CEC” or “the Company”)
Non-Executive Directors
Executive Directors
Jean Madzongwe
Hanson Sindowe
Munakupya Hantuba
Michael J. Tarney
Reynolds Bowa Abel Mkandawire Pius H Maambo Charity Mwansa Edson Hamakowa Klaas Bleeker Mildred T Kaunda 1.
RIGHTS OFFER DOCUMENT
1.1
Introduction
On 10 July 2013, CEC announced its intention to raise equity capital by way of a renounceable Rights Offer to Qualifying Shareholders. On 26 July 2013, at an Extraordinary General Meeting, Shareholders authorised the Board to proceed with the Rights Offer. In this regard, Shareholders approved the creation of an additional 1,000,000,000 ordinary Shares and resolved to place these Shares under the control of the Board for purposes of implementing the Rights Offer. Pursuant to the terms of the Rights Offer, 625,000,000 CEC Shares will be offered for subscription to Qualifying Shareholders recorded in the Register at the close of trade (Zambian time) on Friday, 31 January 2014. CEC Shareholders will receive Rights to subscribe for Rights Offer Shares on the basis of 5 Rights Offer Shares for every 8 CEC Shares held, at a subscription price of ZMW0.62 per Rights Offer Share. 1.2
Rationale of the Rights Offer and use of proceeds
CEC strives to build a pan-African energy infrastructure platform. In this regard, the Company seeks to expand its operations within Zambia and the rest of Africa. The Company has identified a number of growth opportunities within select countries in sub-Saharan Africa and has undertaken critical feasibility work to develop robust business plans with respect to each opportunity. In addition, CEC has invested preliminary capital with respect to these projects and has engaged with select investors to partner with the Company to launch these projects in the near term. The Board seeks to use the Rights Offer proceeds, net of expenses, to fund these select growth opportunities. In addition, the Board intends to use a portion of the Rights Offer proceeds to reduce the Company’s overall debt levels. The strengthening of the Company’s overall financial position is expected to provide additional support to realising its growth strategy.
14
COPPERBELT ENERGY CORPORATION PLC
1.2.1
Overview
CEC seeks to develop energy generation and transmission projects across a range of energy sources. The Company seeks to expand its current generation and transmission capacity within existing operations whilst launching new projects across sub-Saharan Africa. It is in this context that the Company has created a unique investment vehicle, CEC Africa, through which these various projects will be developed and launched. 1.2.2
Use of proceeds
The proceeds of the Rights Offer will be applied (i) to undertake a number of capital projects and investments detailed below and (ii) to re-finance part of a bridge facility of USD45m from Standard Bank taken out in August 2013 to acquire interests in the Nigerian power sector. The main focus of investment going forward will be the development of transmission, hydro generation and renewable energy in Zambia. CEC will also support the development of its joint ventures in telecommunications, CEC Liquid and Realtime, to further the network roll-out and provision of services based on fibre optic technology. The main areas of capital expenditure and investment are detailed in the table below. It should be noted that CEC will have access to additional sources of funding from retained earnings, corporate debt and project specific finance where projects are being undertaken through subsidiaries and the subsidiary has acquired limited or non-recourse debt finance as, for example, is expected to be the case with Kabompo.
In selecting projects for future investment, CEC takes the following factors into account: i.
The need to maintain and expand its core transmission and distribution network on the Copperbelt, and continually deliver a high quality of service to its customer base;
ii.
The need to secure reliable future sources of supply for its core customer base, and therefore make investments into viable sources of power generation;
iii.
The Social, Health and Environmental impacts of the projects such that impacts are managed in accordance with both local and international standards, including the Equator Principles of the World Bank Group;
iv.
The overall financial returns on projects, so that the return requirements of debt and equity providers are satisfied;
v.
The competence within the organisation to successfully deliver projects, taking into account the expertise of staff, training requirements and the overall governance framework of the project.
Item Description 1
Core Business Capital Expenditure The CEC transmission network being one of the oldest in the country requires continuous reinvestment to renew ageing assets and expand system capacity to meet growing customer demand. CEC operates a capital expenditure policy where: •
Customer dedicated infrastructure is co-financed between CEC and its customerss
•
Assets common to more than one customer are financed by CEC
Within the next two years, CEC will be required to upgrade the capacity of some of its common assets. These expansion works mostly include replacement of ageing and provision of additional transformer capacity at CEC’s main 220kV substations that include Michelo, Luano and Kitwe substations.
RIGHTS OFFER DOCUMENT 2014
15
2
CEC Kabompo Hydro Power Limited The Kabompo Hydro Project was awarded to a CEC-led consortium by the Zambian Government in 2008. The project is located in Mwinilunga District, in Zambia’s North-Western Province. The Kabompo Project is CEC’s first investment into hydroelectric power generation in Zambia. The project will comprise an underground power station with 40MW generation capacity and an annual energy output of 135GWh. The project is located approximately 35km from an extension to the national 330kV electricity grid being constructed to connect the Kalumbila mining project and town development being developed by First Quantum Minerals. Sinohydro has been selected as EPC contractor for the project, and an Early Works Agreement was signed to facilitate the commencement of the detailed scheme design, preparation of the project site including roads and accommodation for workers, and the construction of a diversion channel to facilitate access to the site where the proposed dam will be constructed. The project will cover a land area of approximately 12,000 hectares. The project design incorporates construction of a Roller Compacted Concrete Dam 60 metres in height, an underground power house and tunnelling of around 4km in total for the headrace, penstock and tailrace. Environmental approvals for the project have been granted by the Zambia Environmental Management Agency (‘ZEMA’) and environmental management and compliance processes have been implemented, including the development of a Resettlement Action Plan for affected communities. The project is currently wholly owned by the CEC Group. It is intended that CEC will retain a 60% interest in the project, with the remaining 40% to be held by CEC Africa. A debt to equity ratio of around 70/30 is envisaged. Standard Bank has been appointed as lead arranger for the project debt. The estimated project cost is USD215m, including the transmission lines, environmental works, construction of roads and social facilities and interest during construction. The current project plan envisages commissioning of the project in 2016. The initial stages of the project have been financed by CEC through equity contribution, and around USD14m has been spent on the project to date. A further USD17m (KMW94m) will be spent by CEC PLC as equity contribution. Kabompo was incorporated on 7th February 2013.
3
220kV Zambia-DRC Interconnector Project The project involves the construction of a 220kV double circuit transmission line parallel to the existing 220kV single circuit interconnector between Zambia and the DRC, near the Kasumbalesa border post. The interconnector has a total length of 142km; approximately 51km is located in Zambia and 91km is located in the DRC. The Zambian leg, at 51km, is being developed by CEC whilst the remaining 91km is being developed by Société Nationale d’Electricité in the DRC. Once completed, the interconnector will provide significant strategic benefits to the region by: Contributing to strengthening the central corridor which is currently the only gateway for north-to-south trade in the SAPP; •
Enhancing the development of a reliable competitive electricity market in the SAPP;
•
Increasing the capacity of Zambia-DRC interconnection from 260MW to 500MW, thus significantly increasing north-to-south trade in the SAPP;
•
Securing firm electricity trade through the interconnector by addressing single circuit risk thereby reducing disruptions to regional trade; and
•
Significantly improving the reliability and security of electricity transmission and related trade channelled through the interconnector.
The total project cost of the Zambian section of the project amounts to USD15.8m. 16
COPPERBELT ENERGY CORPORATION PLC
4
CEC Liquid Fibre Rollout CEC Liquid was formed in 2011 as a 50/50 joint venture company between CEC and Liquid Telecom of Mauritius. The company operates under a ‘Carrier of Carriers’ Licence issued by ZICTA through which fibre optic connectivity is provided to organisations that possess ZICTA licenses – primarily comprising other telecommunications carriers, banks, large industrial and mining companies and Zambian Government institutions and agencies. CEC Liquid has constructed a fibre optic network within the main commercial centres in Zambia, and also provides two international links through Zimbabwe to South Africa which connects into international fibre cables linking to other African countries and other continents. CEC Liquid is one of Zambia’s main carriers of international internet traffic. The next stage of development for CEC Liquid is to roll out fibre more extensively in the main commercial and residential centres of Zambia using ‘GPON’ fibre technology. This initiative will extend the availability of fibre to a wider number of residential, commercial and business premises. The first area where GPON is being deployed is the Rhodes Park area of Lusaka. CEC Liquid is securing debt facilities of USD16m to undertake this investment, and CEC has been requested to provide a guarantee facility for half of this amount with the other half being provided by Liquid Telecom.
In addition to the projects set out above, the Board seeks to use a portion of Rights Offer proceeds to develop a number of renewable energy projects. These include (i) completion of feasibility studies for the construction of a cascade of five hydro sites capable of generating 700MW on the Luapula River that defines the border between Luapula Province of Zambia and Katanga Province of DRC, (ii) construction of a 1 MW bio-gasification project on the Copperbelt (iii) development of a solar generation plant on the Copperbelt. The Board believes that the Rights Offer will allow the Company to withstand the impact of current global economic and financial markets and allow it to retain strategic flexibility in order to preserve and grow long-term shareholder value. 1.3
Particulars of the Rights Offer
1.3.1
Terms of the Rights Offer
The Rights Offer will be made by way of renounceable Rights on the basis of: 5 Rights Offer Shares for every 8 CEC Shares held by Qualifying Shareholders on the Record Date, for subscription at a price of ZMW0.62 per Rights Offer Share. Qualifying Shareholders recorded in the Register at the close of business (Zambian time) on Friday, 31 January will be entitled to participate in the Rights Offer. The gross proceeds of the Rights Offer are expected to amount to approximately ZMW387,500,000. The Rights Offer subscription price represents a discount of 19.5 percent and 9.5 percent to the share price and 30 day volume weighted average price of CEC, respectively, as at the close of trading on Thursday, 16 January 2014. Three of CEC’s largest holders, as set out below, have undertaken to take up the following percentage of Rights pertaining to it: ZECI
100%, being 325,000,000 rights
ZCCM-IH
100%, being 125,000,000 rights
Aflife
100%, being 42,654,305 rights
Irrevocable Letters of Undertaking have been obtained in this regard. Excess applications will not be allowed. Please find further detail in section 1.3.10 below. RIGHTS OFFER DOCUMENT 2014
17
The Rights Offer Shares will, upon allotment and issue, rank pari passu with all other existing CEC Shares and shall be fully paid up and freely transferable. The attached Letter of Allocation contains details of the rights to which Qualifying Shareholders are entitled, as well as the procedure for acceptance and/or sale and/or renunciation of all or part of those rights. The Subscription Price is payable in full, in Kwacha, by qualifying Shareholders holding Shares on acceptance of the Rights Offer. Qualifying Shareholders who have accepted the Rights Offer must ensure that the necessary funds are deposited with their Broker. No debentures have been issued or offered with respect to the Rights Offer and no other claims or rights have been offered or issued in respect of the Rights Offer. Rights Offer Statistics •
The Rights Offer subscription price is ZMW0.62.
•
The Ratio of Entitlement is 5:8.
•
The number of CEC Shares in issue at the date of this Rights Offer Document is 1,000,000,000.
•
The number of Rights Offer Shares to be issued by the Company is 625,000,000.
•
The number of CEC Shares in issue immediately following completion of the Rights Offer is 1,625,000,000.
•
The Rights Offer Shares as a percentage of the enlarged issued Share Capital of the Company immediately following completion of the Rights Offer are in excess of 38 percent.
•
The estimated gross proceeds receivable by the Company before expenses are ZMW387,500,000.
•
The estimated expenses of the Rights Offer are ZMW15,760,000.
•
The estimated net proceeds receivable by the Company after expenses are ZMW371,740,000.
1.3.2
Rights Offer period
The Rights Offer will open at 10:00 (Zambian time) on Monday, 03 February and will close at 14:00 (Zambian time) on Friday, 28 February. The LA Options will be listed on the LuSE from 12:00 (Zambian time) on Monday, 27 January until 12:00 (Zambian time) on Friday, 21 February under the Alpha Code CECLA ISIN: ZM0000000425. 1.3.3 Rights Qualifying Shareholders will receive Rights to subscribe for Rights Offer Shares on the basis of 5 Rights Offer Shares for every 8 CEC Shares held, for subscription at ZMW 0.62 per Rights Offer Share. The entitlement of each Qualifying Shareholder is to be reflected in the appropriate block in the Letter of Allocation, which is attached with this Rights Offer Document. CEC Shareholders will have their CSD or Broker accounts automatically credited with their Rights. 1.3.4
Particulars in respect of the Rights Offer Shares
The Rights Offer Shares will rank for dividends equally with other ordinary Shares of CEC; and will rank pari passu with existing securities of the same class (ordinary Shares). The Company may, by resolution, convert all or any of its paid up shares into stock and reconvert any stock into paid up shares of any nominal value. There are no fixed date(s) on which entitlement to dividends arises. There is no arrangement under which future dividends are waived or agreed to be waived.
18
COPPERBELT ENERGY CORPORATION PLC
1.3.5
Rights Offer entitlement
The number of Rights Offer Shares to which Qualifying Shareholders will be entitled is set out in the Table of Entitlement in Annexure 1 to this Rights Offer Document. The entitlement of each Qualifying Shareholder is to be reflected in the appropriate block in the Letter of Allocation, which is enclosed with this Rights Offer Document. 1.3.6
Fractional Rights
The whole number of Rights to subscribe for Rights Offer Shares to which Qualifying Shareholders will become entitled will be determined by the Ratio of Entitlement. Only whole numbers of Shares will be issued and Shareholders will be entitled to subscribe for rounded numbers of CEC Shares once the Ratio of Entitlement has been applied. Fractional entitlements of 0.5 or greater will be rounded up and fractional entitlements of less than 0.5 will be rounded down. 1.3.7
Holdings of odd lots in multiples other than 8 Shares
Shareholders holding less than 8 CEC Shares, or not a whole multiple of 8 CEC Shares, will be entitled, in respect of such holdings, to participate in the Rights Offer in accordance with the Table of Entitlement in Annexure 1 to this Rights Offer Document. 1.3.8
Shareholder commitments
ZECI, ZCCM-IH and Aflife, CEC’s largest shareholders, have entered into agreements with CEC pursuant to which they have irrevocably committed, for CEC’s benefit, to subscribe for not less than 492,654,305 CEC Rights Offer Shares (being approximately 78.8 percent of the CEC Rights Offer Shares). CEC has secured Irrevocable Letters of Undertaking from ZECI, ZCCM-IH and Aflife. 1.3.9
Minimum subscription
The Irrevocable Letters of Undertaking, as discussed in paragraph 1.3.8 above, ensure that the Rights Offer will be subscribed at a minimum level of 78.8 %, amounting to ZMW 305,445,669 and is therefore not conditional on a minimum subscription. The Irrevocable Letters of Undertaking, in the opinion of the Directors, is sufficient to provide the amounts required for, preliminary expenses, commissions and proposed investments referred to in this Rights Offer Document. 1.3.10 Rights Offer applications No excess applications will be accepted for Rights Offer Shares not taken up pursuant to the terms of the Rights Offer. Rights not exercised will lapse and such unsubscribed Rights Offer Shares will be offered to new Shareholders in an accelerated placement as contemplated below. An announcement will be released on SENS and published in the Zambian press on or about Monday, 03 March, stating the results of the Rights Offer and the basis of allocation of any additional Rights Offer Shares for which application is made. The pool of Rights Offer Shares available will be dealt with as set out below: •
if all the Rights Offer Shares are taken up in the Rights Offer, then no additional Rights Offer Shares will be made available for allocation to applicants or new investors;
•
if the Rights Offer Shares taken up in the Rights Offer are less than 100 percent of the number of Rights Offer Shares available, such Rights Offer Shares not subscribed for (the “Rump Shares”), will be offered by the Bookrunner at the direction of the Directors (on a reasonable endeavours basis), in an international and local placement, to institutional investors (“The Placement”); and
•
the Board shall allocate Rights Offer Shares to CEC Shareholders who have applied and paid for any Rights Offer Shares unless such allocation would: (a) result in fractional Shares, in which case such allocation shall be rounded to the nearest multiple of one Rights
RIGHTS OFFER DOCUMENT 2014
19
Offer Share (unless the application of the Ratio of Entitlement results in a fractional share of less than 0.5, in which case such allocation will be rounded down to zero); (b) result in a violation of applicable law or the rules or regulations of a Zambian Governmental authority or the Listings Requirements; or (c) constitute a breach of the fiduciary duties of the Board (such allocation principles, the “Allocation Principles”). Cheques and/or refunding of monies in respect of unsuccessful applications for Rights Offer Shares by Shareholders will be posted to the relevant applicants, at their risk, on or about Friday, 07 March. No interest will be paid on monies received in respect of unsuccessful applications. 1.3.11 Rump Placement With respect to Rump Shares, these have been placed under the control of the Directors to be issued through the Bookrunner to such persons as the Directors in their absolute discretion may decide. Such Rump Shares have not been and will not be registered under the United States Securities Act of 1933, as amended (“US Securities Act”) and, subject to certain exceptions, may not be offered or sold within the United States. The Rump Shares will either be (i) offered and resold outside of the Unites States to non-U.S professional and institutional investors, in reliance on Regulations of the US Securities Act and/or (ii) offered domestically in Zambia. The Rump Shares will be allocated at the absolute discretion of the Board. 1.3.12 Procedure for acceptance, renunciation or sale of Rights The attached Letter of Allocation reflects the number of Rights Offer Shares for which a shareholder is entitled to subscribe. Any instruction to accept, sell or renounce all or part of the Rights Offer Shares allocated to them may be made by means of confirmation of instruction to the holder’s Broker or the Sponsoring Broker. 1.3.12.1 Acceptance Full details of the procedure for acceptance of the Rights Offer are contained below. Please contact the Sponsoring Broker for further detail if required. It should be noted that: •
acceptances are irrevocable and may not be withdrawn;
•
acceptances may be made only by means of confirmation with either a Receiving Agent or the Sponsoring Broker;
•
any instruction to sell or renounce all or part of the Rights Offer Shares may only be made by means of confirmation with either a Receiving Agent or the Sponsoring Broker;
•
confirmation with either a Receiving Agent or Sponsoring Broker together with a certified Bank Deposit Slip as proof of payment, or a cheque or Bank Draft, in favour of “CEC RIGHTS OFFER”, crossed “not negotiable” and “not transferable”, for the relevant Rights Offer Shares must be received by either a Receiving Agent or Sponsoring Broker at the addresses set out in the “Corporate information” section of this Rights Offer Document by no later than 12h00 on Friday, 28 February 2014, or Wednesday, 26 February 2014 if by way of postal acceptance;
•
confirmation with either a Receiving Agent or Sponsoring Broker to take up the Rights will be regarded as complete only when monies have been cleared for payment;
•
such payment will constitute an irrevocable acceptance of the Rights Offer upon the terms and conditions set out in this Rights Offer Document once monies have been cleared for payment;
•
if no instruction is received by the Sponsoring Brokers set out above, the Rights Offer will be deemed to have been declined and the Rights to purchase the Rights Offer Shares in terms of the Letter of Allocation will lapse regardless of who holds it; and
•
no acknowledgement of receipt will be given for monies received in respect of the Rights Offer.
1.3.12.2 Renunciation or sale of Rights
20
•
CEC has issued the Letters of Allocation in dematerialised form.
•
The LA Options are negotiable and can be traded on the LuSE.
COPPERBELT ENERGY CORPORATION PLC
•
Qualifying Shareholders who do not wish to purchase all, or some of the Rights Offer Shares allocated to them as reflected in the Letter of Allocation, may sell or renounce or lapse their Rights.
•
In addition, Qualifying Shareholders who wish to sell the Rights allocated to them as reflected in the Letter of Allocation must confirm such action with the Sponsoring Broker in accordance with the instructions contained on page 8, to be received no later than 12h00 on Friday, 21 February 2014.
•
The Sponsoring Broker or Receiving Agent will endeavour to procure the sale of the Rights on the LuSE on behalf of such qualifying Shareholders and will remit the proceeds in accordance with the payment instruction reflected in the Acceptance Form, net of Brokerage charges and associated expenses. Neither the Sponsoring Broker nor the Company nor any Broker appointed by either of them will have any obligation or responsibility for any loss or damage whatsoever in relation to or arising out of the timing of such sales, the price obtained or any failure to sell such Rights. References in this paragraph to Shareholders include references to the person or persons executing the confirmation of action and any person or persons on whose behalf such person or persons executing the instruction is/are acting and in the event of more than one person executing the instruction, the provisions of this paragraph shall apply to them, jointly and severally.
•
Shareholders who do not wish to sell the Rights allocated to them as reflected in the Letter of Allocation, and who do not wish to purchase the Rights Offer Shares offered in terms of the Rights Offer but who wish to renounce their Rights, should instruct their Receiving Agent or the Sponsoring Broker in accordance with the instructions contained therein, to be received by no later than 12h00 on Friday, 21 February 2014.
•
Shareholders who wish to purchase only a portion of the Rights Offer Shares allocated to them must indicate on the Acceptance Form, the number of Rights Offer Shares which they wish to purchase.
1.3.12.3 Payment •
Currency
The amount due on acceptance of the Rights Offer is payable in Zambian Kwacha. •
Payment terms
The amount due on acceptance is payable in Zambian Kwacha by deposit or electronic funds transfer to your Broker / Receiving Agent, or alternatively to the Sponsoring Broker at the following bank account: BANK : Cavmont Bank Ltd. ACCOUNT NAME
:
CEC RIGHTS OFFER MAIN
ACCOUNT NUMBER
:
800000182308
SORT CODE
:
130001
SWIFT CODE
:
CVMCZMLU
Payment may also be in the form of manager’s cheques or bankers’ drafts (crossed “not negotiable”) in respect of subscriptions and should be made payable to “CEC RIGHTS OFFER”. Cheques and bankers’ drafts and completed Letters of Allocation should be lodged, with payment, with your Broker / Receiving Agent or the Sponsoring Broker at the addresses set out in the “Corporate information” section of this Rights Offer Document by no later than 12h00 on Friday, 28 February 2014. All cheques or drafts received by the Receiving Agents will be deposited immediately. In the event that any cheque or bank’s draft is dishonoured, CEC, in its sole discretion, may treat the relevant acceptance as void or may tender delivery of the relevant Rights Offer Shares to which it relates against payment in cash of the Rights Offer Price for such Rights Offer Shares. Payments received in respect of an application which is rejected or otherwise treated as void by CEC, or which is otherwise not validly received in accordance with the terms stipulated in this paragraph, will be posted by registered mail (without interest) by way of a cheque drawn in Zambian Kwacha to the applicant concerned, at the applicant’s risk on or about Friday, 07 March. If the applicant concerned is not a CEC Shareholder and gives no address in the Acceptance Form, then the relevant refund will be held by CEC with no interest payable to the applicant until collected by the applicant.
RIGHTS OFFER DOCUMENT 2014
21
1.3.12.4 Dematerialised Shares Shareholder’s LuSE CSD accounts will be credited with the Rights Offer Shares subscribed for in terms of the Rights on or about Monday, 03 March 2014. 1.3.13 Lapse of Rights 1.3.13.1 Qualifying Shareholders The Rights of Qualifying Shareholders who fail to instruct a Receiving Agent as to what action they intend to take or fail to comply with the procedures set out in this section, within the timelines stipulated will lapse and such Qualifying Shareholders will not be entitled to any payment under the terms of the Rights Offer. Neither CEC nor the Transfer Secretary, or any Broker appointed by them will be responsible for any loss or damage whatsoever suffered by such CEC Shareholders in relation to the lapsing of their Rights. 1.3.14 Applicable law All transactions arising from the provisions of this Rights Offer Document and the accompanying Form of Instruction will be governed by and be subject to the laws of Zambia. The distribution of this Rights Offer Document may be restricted by law in certain jurisdictions. Persons who are in possession of this Rights Offer Document are cautioned to familiarise themselves with, and observe, any such restrictions. The Rights Offer Shares have not been and will not be registered in any jurisdiction outside of Zambia. Any investor(s) from any jurisdiction outside of Zambia, is (are) required to comply with the laws of that jurisdiction in participating in this Rights Offer. 1.3.15 Tax consequences CEC Shareholders are advised to consult their tax and financial advisers regarding any taxation implications pertaining to them regarding the acceptance of their Rights in terms of the Rights Offer. 1.3.16 Documents of Title No new share certificates will be issued to Qualifying Shareholders in respect of those Rights Offer Shares to which they were entitled and for which they have subscribed. 1.3.17 Registration of documents The following documents, in English, have been lodged with, and registered by, PACRA on Friday, 31 January in terms of section 126 of the Companies Act for purposes of implementing the Rights Offer: •
a signed copy of this Rights Offer Document;
•
the Letters of Allocation attached to this Rights Offer Document;
•
a signed Statutory Declaration by a Director and the Secretary of the Company, or in their absence a power of attorney signed by the respective Directors;
•
copies of the signed Irrevocable Letters of Undertaking;
•
the letters of consent from the Investment Bank and Transaction Adviser, Sponsoring Broker, Legal Adviser, Transfer Secretary and Receiving Agents to act in their respective capacities and to their names being stated in this Rights Offer Document;
22
•
a copy of the application for listing of the Rights Offer Shares to be issued pursuant to the Rights Offer; and
•
a copy of the letter from the LuSE agreeing to the listing of the Rights Offer Shares and the Letters of Allocation.
COPPERBELT ENERGY CORPORATION PLC
1.3.18 LuSE listings The LuSE has approved the listings of: •
the Letters of Allocation in respect of all of the Rights Offer Shares with effect from the commencement of trade on Monday, 27 January to the close of trade on Friday, 21 February, both days inclusive; and
•
625,000,000 Rights Offer Shares with effect from the commencement of trade on Monday, 24 February.
1.4
Pro forma financial information
The unaudited pro forma financial effects set out below have been prepared to assist CEC Shareholders to assess the impact of the Rights Offer on the Earnings Per Share and Net Asset Value Per Share of CEC. Due to the nature of these pro forma financial effects, they are presented for illustrative purposes only and because of its nature may not fairly present the Group’s financial position, changes in equity, results of operations or cash flows. The unaudited pro forma financial effects have been prepared in accordance with the Listings Requirements and the Guide on pro forma Financial Information issued by the Zambian Institute of Chartered Accountants. These unaudited pro forma financial effects are the responsibility of the Board. The material assumptions on which the pro forma financial effects are based are set out in the notes following the table. The unaudited pro forma financial effects set out below should be read in conjunction with the unaudited pro forma balance sheet at 30 June 2013 and income statement, which is included as Annexure 2 to this Rights Offer Document.
Pro forma financial effects Pro forma
Before EPS NAV per share Ordinary Shares in issue Weighted average number of ordinary Shares in issue
adjustments
After
Percentage change (%)
0.056
-0.022
0.034
-39.3
0.92
-0.12
0.80
-13.0
1,000,000,000
+625,000,000
1,625,000,000
+62.5
1,000,000,000
+625,000,000
1,625,000,000
+62.5
Notes and assumptions: •
Published June 2013 information relates to the Group results.
•
Net proceeds from the share issue of KMW371,740,000 have been adjusted against current assets and equity.
•
Per LuSE’s Listings Rules the EPS calculation is based on the weighted average number of issued shares adjusted as though the Rights Offer had taken place at the beginning of the 6 month period.
RIGHTS OFFER DOCUMENT 2014
23
1.5
Estimated expenses in relation to the Rights Offer
The total costs of the Rights Offer, including advisory fees, regulatory costs, filing costs, marketing and printing costs is estimated at ZMW15,760,000 or 4.1 % of the Rights Offer. The table below sets out expenses incurred in relation to the Rights Offer. Amount ZMW’000 Financial Advisory and Bookrunner fees
13,563
Sponsoring Broker fees
662
Legal Adviser fees
320
Fees paid to Reporting Accountant
91
Transfer agent fees
50
Printing, posting and public relations
247
Advertising
45
Receiving Agent fees
310
LuSE listing fees
125
SEC registration fees
125
PACRA registration fees
222
Fees paid in respect of Irrevocable Undertakings Total
1.6
15,760
Information on CEC
1.6.1 General CEC is an independent power transmission and distribution company with core operations in Zambia and an expanding footprint in the rest of Africa. The Company operates and maintains power transmission, distribution and generation assets. CEC owns and operates approximately 900km of 220KV and 66KV transmission lines, 520km of optic fibre on power lines, and 250km in trenches, 40 major substations and 80MW of gas turbine generation. The Company accounts for approximately 50% of Zambia’s electrical power consumption. CEC is a key supplier to Zambia’s Copperbelt Province through long term power supply agreements with mining companies. In this regard, the Company’s services include generation backup services. CEC owns and operates 80MW generation capacities to provide emergency power to customers. CEC’s power wheeling activities span the Copperbelt of Zambia. The Company has over 50 years of experience in supplying power to the mines and is a member of the SAPP. In recent years, the Company has expanded its business to include investments in telecommunications through 50% joint ventures in CEC Liquid and Realtime. CEC Africa was incorporated to undertake international investments in the power sector in sub-Saharan Africa as its core business. CEC has been listed on the LuSE since January 2008. 1.6.2 Subsidiaries CEC Liquid (Joint Venture between CEC PLC and Liquid Telecommunications Holdings Limited) CEC Liquid is a 50:50 joint venture partnership between CEC and Liquid Telecommunications Holdings Limited. CEC Liquid provides wholesale telecommunications services in Zambia. Headquartered in Lusaka, CEC Liquid owns and operates a national long haul broadband fibre based backbone from Chirundu to Kasumbalesa. The company provides
24
COPPERBELT ENERGY CORPORATION PLC
competitive high quality product services through the wholesale of national and international fibre bandwidth. CEC Liquid has become the preferred wholesale broadband connectivity company in Zambia. Realtime (Joint Venture between CEC and Realtime Technology Alliance Africa) Realtime is an internet service provider that focuses on a niche market of corporate customers. Its core business is to provide high speed internet services and private leased circuits using optic fibre technology. The company is a 50:50 joint venture with Realtime Technology Alliance Africa. This joint venture has enabled Realtime to become a large fibre optic network provider in Zambia. CEC Africa CEC Africa was established by CEC to develop, finance and operate power projects across sub-Saharan Africa, covering distribution, transmission, thermal generation, hydro and renewable energy. The company is currently a wholly owned subsidiary of CEC, although a process has commenced to invite investment into CEC Africa from third parties including Development Banks, Private Equity Funds and Infrastructure Funds. CEC Africa has a strong pipeline of power projects in development across Africa, including projects in Namibia, Sierra Leone, Zambia and Nigeria. CEC Africa is incorporated in Mauritius. CEC Africa has approved four projects to date: i.
Acquisition of a 75% interest in KANN Utility Company Limited, which has acquired a 60% interest in Abuja Electricity Distribution Company (‘AEDC’) through a process of international competitive tender. AEDC supplies power in Kogi, Abuja, Niger and Nasarawa States (the first letters of which the name ‘KANN’ is derived from) in which more than 10 million people live. The electrification rate is around 27%, and AEDC has around 600,000 customers. The total consideration paid to the Bureau of Public Enterprises, the privatisation arm of the Nigerian Government, for the 60% interest in AEDC was USD164m. The financing structure for the transaction incorporated an acquisition finance facility of USD121.8m from UBA in Nigeria to KANN Utility Company, and inter-company loans of USD65m between CEC and CEC Africa. In order to provide this inter-company loan to CEC Africa, CEC secured bridge finance facilities from Standard Bank. The financing structure incorporates the pre-funding of a debt service reserve account, and the funds raised were also used to cover transaction costs paid to legal, technical, financing and environmental advisors. The takeover of AEDC management by an experienced CEC led team took place on 1 November 2013. The priorities of the management team for the first few months include the reduction of technical and commercial losses, investment in urgent repairs, improvement in health and safety standards and the development of capital investment and performance improvement plans. AEDC has approximately 3,000 employees. The Federal Government of Nigeria supports private sector management of the power sector, and has established a regulatory system that facilitates cost reflective tariffs to be established for different segments of the sector. Although, there are expected to be initial challenges in transforming the previously state owned utilities, the growth prospects for the sector are good due to the strong correlation to expected robust growth in the Nigerian economy, and the positive impact the privatisation process is expected to have on the availability of power for AEDC to sell to its customers, linked to the investment in a new generation plant.
ii. Acquisition of a 20% interest in North South Power, which has a long term concession to operate the 600MW Shiroro Hydro Plant in Niger State. This project was also secured through an international competitive tender administered by the Bureau of Public Enterprises, as was the case with AEDC. The plant is largely in good working order, and currently provides around 20% of the grid connected power capacity available in Nigeria. The plant has a long term Power Purchase Agreement with the Nigerian Bulk Electricity Trader, which is a Nigerian Government owned company that procures power on behalf of the distribution companies including AEDC. CEC Africa is providing operational services to the project.
RIGHTS OFFER DOCUMENT 2014
25
An amount of USD22.5m was paid to secure the 20% interest in the project. Further development costs of around USD1.5m have been incurred. The financing for the share acquisition was provided through an inter-company loan between CEC and CEC Africa. CEC secured its funding for the inter-company loan through a bridge facility from Standard Bank. The takeover of management at Shiroro Hydro took place on 1st November 2013. There are around 450 employees, a number of whom are employed at social facilities such as the school and hospital at Shiroro. The plant has performed well for the first few weeks of operation. iii. An acquisition of a 55% interest in Nishati Investments Limited, which owns Arandis Power, the developer of a 120MW HFO Generation plant in Arandis, Namibia. The issuance of shares is based on CEC Africa providing funding for a bankable feasibility study / project development in accordance with agreed project milestones. iv. A Joint Development Agreement with TCQ Power, a company registered in Lebanon to acquire a controlling interest in a generation concession in Sierra Leone. The generation plant will be developed as an Independent Power Producer selling to the Government-owned ‘National Power Authority’ with appropriate credit and political risk support arrangements. CEC Kabompo Kabompo, one of the subsidiaries of CEC, was incorporated for the sole purpose of hydroelectric power generation as its business. CEC PLC owns 99% of Kabompo, with CEC Ventures owning the remaining 1%. Further detail on Kabompo can be found in section 1.2 herein. 1.6.3 Prospects CEC seeks to continue its positive growth trajectory through focused investments in a range of power generation opportunities in Zambia and the rest of Africa. The Company is well placed to benefit from the growth in the Zambian mining sector with the commissioning of new mines. As part of its growth strategy, CEC seeks to be a strategic partner in private power projects or public-private partnership power projects within the region and is focused on opportunities that create value for the Company and its investors. The Company has built a robust pipeline of power projects across Africa, including its flagship 40MW Kabompo Gorge Hydro Project in Zambia’s North Western Province. Other prospects in Zambia include possible hydro generation projects on the Luapula River. CEC has acquired critical skills with respect to developing infrastructure in Africa. Accordingly, the Company’s extensive design and operating expertise position CEC to launch projects in the rest of Africa most notably through prospects in Nigeria and Namibia. 1.6.4
Share capital information
1.6.4.1 Increase in authorised share capital Pursuant to the implementation of the Rights Offer, at the EGM held on 26 July 2013, Shareholders approved the increase of CEC’s authorised share capital by the creation of 1,000,000,000 ordinary Shares. Shareholders further resolved to place the newly issued Shares under the control of the Board in order to execute the Rights Offer. 1.6.4.2 Change of nominal value At the EGM, Shareholders also resolved to approve a conversion of the Company’s entire issued share capital into stock and subsequent conversion into Shares in order to accommodate the Kwacha rebasing that commenced on 1 January 2013. CEC’s share capital, previously denominated in United States Dollars, is now denominated in ZMW. Accordingly, CEC’s share capital comprises ordinary shares with a par value of ZMW0.01 per share and special share
26
COPPERBELT ENERGY CORPORATION PLC
capital of ZMW1.40, comprising 1 special share of ZMW1.40 per share. Pursuant to the redenomination of the Company’s share capital, Shareholders resolved that the Company’s retained profits be debited with ZMW9,860,000. 1.6.4.3 Authorised and issued share capital The authorised and issued share capital of CEC before and after the Rights Offer is set out below: Before the Rights Offer Authorised share capital
After the Rights Offer
Ordinary Shares
Special Share
Ordinary Shares
Special Share
2,000,000,000
1
2,000,000,000
1
ZMW0.01
ZMW1.40
ZMW0.01
ZMW1.40
Share capital
ZMW20,000,000
ZMW1.40
ZMW20,000,000
ZMW1.40
Issued share capital
Ordinary Shares
Special Share
Ordinary Shares
Special Share
1,000,000,000
1
1,625,000,000
1
ZMW10,000,000
ZMW1.40
ZMW16,250,000
ZMW1.40
N/A
N/A
N/A
N/A
Number of Shares Nominal value of each share
Number of Shares Share capital Share Premium
1.6.4.4 Securities listed on LuSE CEC’s ordinary shares are the only Shares listed on the LuSE. There are no Shares listed on any stock exchange other than the LuSE. 1.6.5
Shareholder spread
As at the Last Practicable Date, Shareholders (other than Directors) who are beneficially interested, directly and indirectly, in 5% or more of the Company’s ordinary Shares and their holdings after the Rights Offer, are set out below: Before the Rights Offer Shareholder
Number of Shares held
After the Rights Offer
% holding
Number of Shares held
% holding
ZECI
520,000,000
52.0%
845,000,000
52.0%
ZCCM-IH
200,000,000
20.0%
325,000,000
20.0%
68,246,888
6.8%
110,901,193
6.8%
Subtotal
788,246,888
78.8%
1,280,901,193
78.8%
Other Shareholders
211,753,112
21.2%
344,098,807
21.2%
1,000,000,000
100%
1,625,000,000
100%
Aflife
Total shares in issue
RIGHTS OFFER DOCUMENT 2014
27
Directors’ interests in CEC As at 31 December 2012, the interests of Directors in CEC, as recorded in the register and on the LuSE, were as follows:
2012 Total ordinary issued Shares of the Company
2011
2010
1,000,000,000
1,000,000,000
1,000,000,000
Hanson Sindowe
2,092,000
2,092,000
3,092,000
Michael J Tarney
1,838,000
1,230,000
549,000
Neil Croucher*
5,269,000
4,581,000
4,000,000
19,000
19,000
-
9,218,000
7,922,000
7,641,000
Hanson Sindowe
110,802,000
110,802,000
83,792,000
Michael J Tarney
61,513,000
61,513,000
34,502,000
Abel Mkandawire
56,584,000
56,584,000
29,574,000
228,899,000
228,899,000
147,868,000
Direct shareholding
Munakupya Hantuba
Indirect shareholding
*Mr Neil Croucher left the Board of CEC on 27th August 2013 Mr Hanson Sindowe sold 1,000 shares of his direct holding post 31 December 2012.
1.6.6
Changes in Directors’ interests before and after the Rights Offer Before the Rights Offer
Director
After the Rights Offer
Direct
Indirect
Direct
Indirect
Hanson Sindowe
2,091,000
110,802,000
1,306,875
180,053,250
Michael Tarney
1,838,000
61,513,000
2,986,750
99,958,625
19,000
-
30,875
-
-
56,584,000
4,324,500
91,949,000
3,948,000
228,899,000
8,649,000
371,960,875
Munakupya Hantuba Abel Mkandawire
1.6.7
Changes in remuneration of Directors
The remuneration of Directors, in their capacity as the Board, will in no way be affected as a result of the Rights Offer. 1.6.8
Corporate governance
The Corporate Governance practices of CEC are set out in Annexure 7 of this Rights Offer Document. 1.6.9
Trading history of CEC Shares on the LuSE
A table setting out the price history of CEC Shares on the LuSE has been included in Annexure 4 of this Rights Offer Document.
28
COPPERBELT ENERGY CORPORATION PLC
1.7
Material changes
The Directors report that to their knowledge there have been no material changes in the financial or trading position of the Company since 31 December 2012, the date of the last audited financial statements as set out in Annexure 3 of this Rights Offer Document. No material property has been disposed of in the last five years as at the date of this Rights Offer Document. 1.8
Litigation statement
As at the Last Practicable Date, the Directors are aware that the Company faces a possible arbitration action following a claim by one of its customers as damages for loss of equipment, allegedly due to its supply of low quality electricity. CEC is confident of its defence to the claim. CEC has since notified its insurers of the claim and expects a third party settlement in the event of the claim succeeding. 1.9
Working capital statement
The Directors are of the opinion that the working capital available to CEC is sufficient for the Group’s present requirements, for at least the next 12 months from the date of issue of the Rights Offer Document. The Directors believe that the Company has adequate resources to continue in operational existence for the foreseeable future. 1.10
Directors’ responsibility statement
The Directors whose names appear on page 14 of this Rights Offer Document, collectively and individually accept full responsibility for the accuracy of the information given in this Rights Offer Document and certify that, to the best of their knowledge and belief, there are no material facts the omission of which would make any statement in this Rights Offer Document false or misleading and that they have made all reasonable inquiries to ascertain such facts and that this Rights Offer Document contains all information required by law and by the Listings Requirements. The Directors confirm that the listing particulars include all such information within their knowledge (or which it would be reasonable for them to obtain by making enquiries) as investors and their professional advisers would reasonably require and reasonably expect to find for the purpose of making an informed assessment of the assets and liabilities, financial position, profits and losses and prospects of the Company and of the rights attaching to the securities to which the listing particulars relate. 1.11 Consents Each of the advisers, whose names appear in the “Corporate Information and Advisers” section of this Rights Offer Document have consented and have not, prior to the Last Practicable Date, withdrawn their written consent to the inclusion of their names and, where applicable, reports in the form and context in which they appear in this Rights Offer Document.
RIGHTS OFFER DOCUMENT 2014
29
1.12
Documents available for inspection
Copies of the following documents will be available for inspection at the registered offices of CEC in Kitwe and Lusaka and Stanbic Zambia during normal business hours (excluding Saturdays, Sundays and public holidays) from the date of issue of this Rights Offer Document up to and including Friday, 7 March 2014: •
the Articles of Association of CEC and each of its operating subsidiaries;
•
the audited annual financial statements of CEC for the three financial years ended 31 December 2012;
•
copies of service agreements with Directors, managers or secretary/ies entered into during the last three years;
•
Statutory Declaration of the Directors of CEC;
•
the pro forma financial statements of CEC for the six months to 30th June 2013;
•
agreements in respect of CEC’s material loans;
•
the Irrevocable Letters of Undertaking;
•
written consents of the investment bank, Bookrunner, Transaction Advisor, Sponsoring Broker & Main Receiving Agent, Legal Advisers, Reporting Accountant and Transfer Secretary to the inclusion of their names in this Rights Offer Document in the context and form in which they appear; and
•
a signed copy of this Rights Offer Document and Letters of Allocation.
Company Secretary: Julia C Z Chaila Signed at CEC Offices, Republic of Zambia BY THE DIRECTORS on the 24th day of January 2014
Name
Signature
Hanson Sindowe
Signed
Michael J. Tarney
Signed
Jean Madzongwe
Signed by Mr Hanson Sindowe (by power of attorney given on 31 May 2013)
Reynolds Bowa
Signed
Munakupya Hantuba
Signed
Abel Mkandawire
Signed
Pius H Maambo
Signed
Edson Hamakowa
Signed
Klaas Bleeker
Signed by Mr Hanson Sindowe (by power of attorney given on 31 May 2013)
Charity Mwansa
Signed
Mildred T Kaunda
Signed
30
COPPERBELT ENERGY CORPORATION PLC
ANNEXURE 1: TABLE OF ENTITLEMENT The number of Rights Offer Shares to which qualifying Shareholders will be entitled is set out below, based on the assumption that CEC Shareholders will be entitled to 5 Rights Offer Shares for every 8 CEC Shares held. Shareholders’ entitlements will be rounded up or down, as appropriate with fractions of 0.5 and above being rounded up, and only whole numbers of Rights Offer Shares will be issued, in accordance with the Listings Requirements. Number of CEC
Rights Offer Shares
Number of CEC
Rights Offer Shares
Number of CEC
Rights Offer Shares
Shares held
entitlement
Shares held
entitlement
Shares held
entitlement
1
1
41
26
81
51
2
1
42
26
82
51
3
2
43
27
83
52
4
3
44
28
84
53
5
3
45
28
85
53
6
4
46
29
86
54
7
4
47
29
87
54
8
5
48
30
88
55
9
6
49
31
89
56
10
6
50
31
90
56
11
7
51
32
91
57
12
8
52
33
92
58
13
8
53
33
93
58
14
9
54
34
94
59
15
9
55
34
95
59
16
10
56
35
96
60
17
11
57
36
97
61
18
11
58
36
98
61
19
12
59
37
99
62
20
13
60
38
100
63
21
13
61
38
22
14
62
39
23
14
63
39
24
15
64
40
25
16
65
41
26
16
66
41
27
17
67
42
28
18
68
43
29
18
69
43
30
19
70
44
31
19
71
44
32
20
72
45
33
21
73
46
34
21
74
46
35
22
75
47
36
23
76
48
37
23
77
48
38
24
78
49
39
24
79
49
40
25
80
50
RIGHTS OFFER DOCUMENT 2014
31
ANNEXURE 2: INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF CEC INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT TO THE DIRECTORS OF COPPERBELT ENERGY CORPORATION PLC ON THE COMPILATION OF PRO FORMA FINANCIAL INFORMATION Report on the compilation of pro forma financial information We have completed our assurance engagement to report on the compilation of the pro forma financial information of Copperbelt Energy Corporation PLC (the “Company”) by its Directors. The pro forma financial information consists of the proforma summary statement of comprehensive income for the six month period ended 30 June 2013 and the proforma summary statement of financial position as at 30 June 2013 as set out on page 34 herein. The applicable criteria on the basis of which the Directors have compiled the pro forma financial information are specified in Section 8 of the LuSE Listing rules. The pro forma financial information has been compiled by the Directors to illustrate the impact of the Rights Offer set out in Note 1.4 of the prospectus document on the Company’s financial position as at 30 June 2013 and its financial performance for the six month period ended 30 June 2013 as if the Rights Offer had taken place at 30 June 2013. As part of this process, information about the Company’s financial position and financial performance has been extracted by the Directors from the Company’s summary of unaudited results for the six months ended 30 June 2013. For the purposes of this engagement, we are not responsible for updating or re-issuing any reports or opinions on any historical financial information used in compiling the proforma financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the proforma financial information. Directors’ Responsibility for the pro forma Financial Information The Directors are responsible for compiling the pro forma financial information on the basis of Section 8 of the LuSE Listing rules. Reporting Accountant’s Responsibilities Our responsibility is to express an opinion, as required by the LuSE Listing rules about whether the pro forma financial information has been compiled, in all material respects, by the Directors on the basis of the LuSE Listing rules and in a manner consistent with the Company’s accounting policies. We conducted our engagement in accordance with International Standard on Assurance Engagements (ISAE) 3420, Assurance Engagements to Report on the Compilation of pro forma Financial Information Included in a Prospectus, issued by the International Auditing and Assurance Standards Board. This standard requires that the practitioner comply with ethical requirements and plan and perform procedures to obtain reasonable assurance about whether the Directors have compiled, in all material respects, the pro forma financial information on the basis of the LuSE Listing rules. The purpose of pro forma financial information included in a prospectus is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the entity as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the event or transaction at 30 June 2013 would have been as presented. A reasonable assurance engagement to report on whether the pro forma financial information has been compiled, in all material respects, on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the Directors in the compilation of the pro forma financial information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether: a. The related pro forma adjustments give appropriate effect to those criteria; and b. The pro forma financial information reflects the proper application of those adjustments to the unadjusted financial
32
COPPERBELT ENERGY CORPORATION PLC
information. The procedures selected depend on the practitioner’s judgment, having regard to the practitioner’s understanding of the nature of the company, the event or transaction in respect of which the pro forma financial information has been compiled, and other relevant engagement circumstances. The engagement also involves evaluating the overall presentation of the pro forma financial information. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion, the pro forma financial information has been compiled, in all material respects, on the basis of the LuSE Listing rules.
PricewaterhouseCoopers, Zambia Chartered Accountants Lusaka 17 January 2014
RIGHTS OFFER DOCUMENT 2014
33
Copperbelt Energy Corporation PLC Summary of unaudited statement of comprehensive income for the six month period ended 30 June 2013 June 2013 Published information ZMW’000
Revenue Other comprehensive income
Proforma adjustments ZMW’000
June 2013 Proforma information ZMW’000
723,852
723,852
-
-
Profit before interest and tax
89,784
89,784
Net finance (costs)/income
(4,259)
(4,259)
(29,934)
(29,934)
55,592
55,592
Income tax expense Profit attributed to shareholders Earnings per share (Kwacha)
0.056
-0.022
0.034
Summary of unaudited statement of financial position as at 30 June 2013 June 2013 Published information ZMW’000
Total non-current assets Total current assets
Proforma adjustments ZMW’000
1,498,230
June 2013 Proforma information ZMW’000
1,498,230
283,055
371,740
654,796
Total assets
1,781,285
371,740
2,153,026
Total equity
924,955
371,740
1,296,695
Total non-current liabilities
343,294
Total current liabilities Total Equity and Liabilities Net assets per share
343,294
513,036
513,036
1,781,285
371,740
2,153,026
0.92
-0.12
0.80
Sources: 1. June 2013 Published information: Extracted from Summary Consolidated unaudited results for the six month period ended 30 June 2013 as published by the Company. 2. Pro forma adjustments: Compiled per terms of the Rights Offer as detailed in Paragraph 1.3 of the Rights Offer document and summarised effects per Paragraph 1.4.
34
COPPERBELT ENERGY CORPORATION PLC
ANNEXURE 3: INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE HISTORICAL FINANCIAL INFORMATION OF CEC The Directors Copperbelt Energy Corporation PLC 23rd Avenue P.O. Box 20819 Nkana East Kitwe Dear Sirs Subject: Reporting Accountants’ report We have examined the audited financial statements of Copperbelt Energy Corporation PLC (the “Company”) for the three years ended 31 December 2010, 2011 and 2012. Grant Thornton Chartered Accountants, Zambia is the auditor of the Company and has issued an unmodified audit report on the financial statements from which the information set out below was extracted. No audited financial statements have been prepared for any period subsequent to 31 December 2012. The financial information set out is based on the audited financial statements of the Company after taking into account any adjustments we believe were necessary. The audited financial statements are prepared on the basis of the accounting policies set out below which conform to operative International Financial Reporting Standards (IFRS). Directors’ responsibility for the historical information The financial statements on which the following information is based are the responsibility of the directors who approved them for issue. The directors are responsible for the contents of the prospectus in which this report is included. Our report has been prepared in accordance with the Zambia Securities Act 1993 and the Third Schedule to the Securities (Registration of Securities) Rules, 1993. We are a firm of accountants with partners who hold practising certificates issued by the Zambia Institute of Chartered Accountants under the Accountants Act, 1982. Reporting Accountants’ responsibility for the historical information Our work included an assessment of evidence obtained by the Company’s auditor relevant to the amounts and disclosures in the financial information for the years ended 31 December 2010, 2011 and 2012. It also includes an assessment of significant judgements and estimates made by those responsible for the preparation of the financial statements underlying the financial information and whether the accounting policies are appropriate to the company’s circumstances, consistently applied and adequately disclosed. Basis for qualified opinion Copperbelt Energy Corporation PLC has a policy of not recognising deferred income tax on revaluation surplus on property, plant and equipment. In our opinion, this policy is not in accordance with IAS 12 ‘Income taxes.’ Applying the provisions of IAS 12 using the enacted tax rate of 35% would result in additional deferred tax liabilities of K186million, K180million and K175million for the years ended 31 December 2010, 2011 and 2012 respectively. Accordingly the revaluation reserve should be reduced by the same amount for the respective years. In order to reflect the annual usage of the assets, an adjustment between the depreciation charge and deferred tax will need to be made which will result in increased net profit by K1.5million, K5.5million and K5.5million for the years ended 31 December 2010, 2011 and 2012 respectively. Qualified opinion In our opinion, except for the effects of the matter described in the basis for qualified opinion paragraph, the information set out on pages 36 to 66 below gives, for the purposes of the prospectus, a true and fair view of the results of the company for the years ended 31 December 2010, 2011 and 2012 and the assets and liabilities as at 31 December 2010, 2011 and 2012 in the manner required by the Zambia Securities Act 1993. PricewaterhouseCoopers has given and has not withdrawn its written consent, prior to the issue of this Offer Document, with its statement included in the form and context in which it is in as fact, included under Annexure 2, Reporting Accountants’ Report. PricewaterhouseCoopers, Zambia Chartered Accountants Lusaka
17 January 2014
RIGHTS OFFER DOCUMENT 2014
35
Below is the historical financial information of Copperbelt Energy Corporation PLC for the three years ended 31 December 2010, 2011 and 2012. All the numbers are in rebased Zambian Kwacha (ZMW). The Financial Statements have been prepared in accordance with IFRS. Statement of Comprehensive Income YEARS ENDED 31 DECEMBER In ZMW'000
2012
2011
2010
Revenue
1,332,021
960,435
802,509
Cost of sales
(966,303)
(703,714)
(582,538)
365,718
256,721
219,971
50,875
98,118
24,585
(258,761)
(183,672)
(168,917)
157,832
171,167
75,639
6,990
5,034
2,873
Finance expense
(7,046)
(6,769)
(5,488)
Net finance cost
(56)
(1,735)
(2,614)
Profit before tax
157,776
169,432
73,025
Income tax expense
(48,617)
(69,209)
(23,966)
Profit for the year
109,159
100,223
49,059
Gross gains on cash flow hedges
-
-
18,392
Income tax relating to other comprehensive income
-
-
(6,438)
109,159
100,223
61,013
109.16
100.22
61.01
56.12
60
48.19
Gross profit Other operating income Operating expenses Results from operating activities Finance income
Other comprehensive income:
Total comprehensive income for the year Earnings per share (Kwacha) Dividends per share Source 1: audited financial statements
36
COPPERBELT ENERGY CORPORATION PLC
Copperbelt Energy Corporation PLC Statement of financial position as at 31 December 2012
2011
2010
1,177,436
1,128,545
1,127,732
78,498
4,659
9,318
1,255,934
1,133,204
1,137,050
16,689
20,127
13,467
292,189
252,407
115,392
20,115
76,539
42,176
328,993
349,073
171,035
1,584,927
1,482,277
1,308,085
Share capital
140
140
140
Share premium
207
207
207
Revaluation reserve
499,630
515,476
531,322
Retained earnings
389,386
320,474
287,891
889,363
836,297
819,560
93,972
118,643
119,631
103,073
51,941
53,619
Deferred employee benefits
34,258
26,066
18,867
Deferred income
48,387
-
-
Deferred tax liability
87,643
94,974
87,945
367,333
291,624
280,062
55,201
51,124
34,335
243,727
244,629
165,309
1
1,023
-
29,302
57,580
8,820
328,231
354,356
208,463
695,564
645,980
488,525
1,584,927
1,482,277
1,308,085
0.89
0.84
0.82
In ZMW'000
ASSETS Non-current assets Property, plant and equipment Investments in joint ventures
Current assets Inventories Trade and other receivables Cash and cash equivalents
Total assets
EQUITY AND LIABILITIES Equity
Non-current liabilities Interest-bearing loans Non-current trade and other payables
Current liabilities Current portion of interest-bearing loans Trade and other payables Amounts due to related party Tax payable
Total liabilities Total equity and liabilities Net assets per share (Kwacha)
RIGHTS OFFER DOCUMENT 2014
37
NOTES TO THE FINANCIAL STATEMENTS Dividends The policy of the Company in respect of the payment of dividends is a matter to be determined by the Board in accordance with the principles outlined below: The Company’s actual accumulated profits arising from the business of the Company in respect of each year after: •
provision of working capital as determined by the Board;
•
transfer to reserves as in the opinion of the Board ought reasonably to be made;
•
service of all debts and full compliance with any financing agreements to which the Company is party at the relevant time of payment;
•
taking into account the interests of the shareholders in minimizing taxation liabilities; and
•
shall be distributed by the Company to the shareholders by way of dividend.
The Company has a policy of declaring dividends twice a year; in March and August. Dividends of ZMW 21,093 thousand and ZMW 35,000 thousand were paid on 06th April and 21st September, 2012 respectively.
General Information The Company Copperbelt Energy Corporation PLC is a Company domiciled in Zambia. The Company’s principal business is the generation, transmission, distribution and sale of electricity. Principal accounting policies The principal accounting policies applied by the Company in the preparation of these financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. The Financial Statements have been prepared in accordance with International Financial Reporting Standards and the Zambia Companies’ Act CAP 388 (as amended). a)
Going Concern At the reporting date loan amounts repayable within twelve (12) months amount to ZMW 55,201 thousand. After reviewing the available information including the Company’s strategic plans and continuing support from the Company’s working capital funders, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
b)
Basis of presentation The financial statements are prepared in accordance with the provisions of the Zambia Companies Act and International Financial Reporting Standards (IFRS). The financial statements are presented in accordance with IAS 1 “Preparation of financial statements” (Revised 2007). The company has elected to present the “Statement of Comprehensive income” in one statement, namely the “Statement of Comprehensive Income”. IAS 1 also requires the presentation of a comparative statement of financial position and related notes at the beginning of the first comparative period. Management consider that this is not necessary as the December 2010 statement of financial position is the same as that previously published. The financial statements have been prepared under the historic cost convention, as modified by the revaluation of property, plant and equipment, available-for-sale financial assets, and financial assets and liabilities at fair value through profit or loss.
38
COPPERBELT ENERGY CORPORATION PLC
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3. c)
Foreign currencies
i.
Presentational and functional currency The Company’s functional currency is Zambian Kwacha, which is the Company’s presentational currency.
ii.
Statement of comprehensive income items have been translated using the average exchange rate for the year as an approximation to the actual exchange rate. Assets and liabilities have been translated using the closing exchange rate. Any differences arising from this process have been recognised in other comprehensive income. The following exchange rates have been applied: ZMK: USD Average Closing exchange rate exchange rate Year ended 31 December 2010
4,796.68
4,796.11
Year ended 31 December 2011
4,862.17
5,117.04
Year ended 31 December 2012
5,139.52
5,146.61
All historical financial information, except where specifically stated, is presented in Zambian Kwacha rounded to the nearest ZMW thousand. iii
Basis of translating transactions and balances Foreign currency transactions are translated into the functional currency using the rates of exchange prevailing at the date of transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in statement of comprehensive income.
d)
New standards and interpretations
Standard
Description
Effective date
IFRS 9
The IASB aims to replace IAS 39 ‘Financial Instruments: Recognition and
1 January 2015
Measurement’ (IAS 39) in its entirety with IFRS 9. To date, the chapters dealing with recognition, classification, measurement and derecognition of financial assets and liabilities have been issued. These chapters are effective for annual periods beginning on or after 1 January 2015. Chapters dealing with impairment methodology and hedge accounting are still being developed. Further, in November 2011, the IASB tentatively decided to consider making limited modifications to IFRS 9’s financial asset classification model to address application issues. IFRS 10
A package of new consolidation standards is effective for annual periods
1 January 2013
beginning or after 1 January 2013. IFRS 10 supersedes IAS 27 ‘Consolidated and Separate Financial Statements’ (IAS 27) and SIC 12 ‘Consolidation – Special Purpose Entities’. IFRS 10 revises the definition of control and provides extensive new guidance on its application. These new requirements have the potential to affect which of the Group’s investees are considered to be subsidiaries and therefore change the scope of consolidation.
RIGHTS OFFER DOCUMENT 2014
39
Standard
Description
Effective date
IFRS 11
Joint Arrangements – the Standard aligns more closely the accounting by the
1 January 2013
investors with their rights and obligations relating to the joint arrangement. In addition, IAS 31’s option of using proportionate consolidation for joint ventures has been eliminated. IFRS 11 now requires the use of the equity accounting method, which is currently used for investments in associates. IFRS 12
Integrates and makes consistent the disclosure requirements for various types
1 January 2013
of investments, including unconsolidated structured entities. It introduces new disclosure requirements about the risks to which an entity is exposed from its involvement with structured entities. IFRS 13
This standard will replace the guidance on fair value measurement in existing
1 January 2013
IFRS accounting literature with a single standard. IAS 19
The IAS 19 Amendments include a number of targeted improvements
1 January 2013
throughout the Standard. The main changes relate to defined benefit plans. This would entail: •
eliminating the ‘corridor method’, requiring entities to recognise all actuarial gains and losses arising in the reporting period.
•
changing the measurement and presentation of certain components of defined benefit cost.
•
enhancing the disclosure requirements, including information about the characteristics of defined benefit plans and the risks that entities are exposed to through participation in them.
The IAS 19 Amendments are effective for annual periods beginning on or after 1 January 2013 and will apply retrospectively. IAS 27
The Standard requires that when an entity prepares separate financial
(Revised)
statements, investments in subsidiaries, associates, and jointly controlled
1 January 2013
entities are accounted for either at cost, or in accordance with IFRS 9 Financial Instruments. The Standard also deals with the recognition of dividends, certain Group reorganisations and includes a number of disclosure requirements. IAS 28
This Standard supersedes IAS 28 Investments in Associates and prescribes the
1 January 2013
accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures. The Standard defines ‘significant influence’ and provides guidance on how the equity method of accounting is to be applied (including exemptions from applying the equity method in some cases). It also prescribes how investments in associates and joint ventures should be tested for impairment. Amendments
New disclosures are required for all financial instruments that are set off
to IFRS 7
in accordance with IAS 32.42 and for financial assets that are subject to an enforceable master netting arrangement or similar arrangement regardless whether they are set off.
40
COPPERBELT ENERGY CORPORATION PLC
1 January 2013
Amendments
IAS 32.42, which is unchanged, requires that an entity offsets financial assets
to IAS 3
and financial liabilities when it has a legally enforceable right to set off the
1 January 2014
recognised amounts, and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. However, new guidance in IAS 32.AG38B clarifies that the right of set-off: a)
must not be contingent on a future event; and
b)
must be legally enforceable in all of the following circumstances:
i)
the normal course of business;
ii)
the event of default; and
iii)
the event of insolvency or bankruptcy of the entity and all of the counterparties.
Mandatory Effective Date and Transition Disclosures - Amendments to IFRS 9 and IFRS 7
1 January 2014
On 16 December 2011, the IASB issued ‘Mandatory Effective Date and Transition Disclosures (Amendments to IFRS 9 and IFRS 7)’, which amended the effective date of IFRS 9 to annual periods beginning on or after 1 January 2015, and modified the relief from restating comparative periods and the associated disclosures in IFRS 7. Annual Improvements Cycle 1 January 2013 The IASB’s annual improvements project provides a streamlined process for dealing efficiently with a collection of amendments to IFRSs. The primary objective of the process is to enhance the quality of standards, by amending existing IFRSs to clarify guidance and wording, or to correct for relatively minor unintended consequences, conflicts or oversights. The IASB considered the finalisation of a number of amendments discussing and finalising: (1) Repeated application of IFRS 1 (2) IFRS 1 — Exemption for borrowing costs (3) IAS 1 — Comparative information (4) IAS 16 — Classification of servicing equipment (5) IAS 32 — Tax effect of distribution to holders of equity instruments (6) IAS 34 — Interim financial reporting and segment information. Based on the Company’s current business model and accounting policies, management does not expect material impact on its financial statements when the standards or interpretations become effective. e)
Business combinations On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net asset acquired is credited to the statement of comprehensive income in the period of acquisition. Changes in the Company’s ownership interest that do not result in a loss of control are accounted for as equity transactions. Purchase of non-controlling interests are recognised directly within equity being the difference between the fair value of the consideration paid and the relevant share acquired of the carrying value of the net assets to the subsidiary. Contingent and deferred consideration arising as a result of acquisitions is stated at fair value. Contingent and deferred consideration is based on management’s best estimate of the likely outcome and best estimate of fair value, which is usually, but not always, a contracted formula based on a multiple of net profit after tax. Prior to 1 October 2009, business combinations were accounted for under the provisions of the previous version of IFRS 3 such that acquisition costs were not expensed.
RIGHTS OFFER DOCUMENT 2014
41
f)
Revenue recognition Revenue in respect of supply of electricity is recognised upon delivery of power for a given period to customers. Revenue comprises the fair value of consideration received or receivable for the sale of the Company’s products in the ordinary course of the Company’s activities. Revenue is shown net of trade allowances, duties and taxes paid.
g)
Property, plant and equipment Property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. If a revaluation is undertaken, increases in the carrying amount arising on revaluation of property, plant and equipment are credited to the revaluation surplus in shareholders’ equity. Decreases that offset previous increases of the same asset are charged against fair value reserves directly in equity; all other decreases are charged to the income statement. Each year, the difference between depreciation based on the revalued carrying amount of the asset charged to the income statement and depreciation based on the asset’s original cost, net of any related deferred income tax, is transferred from the revaluation surplus to retained earnings. Depreciation is calculated to write off the cost or revalued amount of property, plant and equipment on a straight line basis over the expected useful lives of the assets concerned. The principal annual rates used for this purpose are: % Properties Transmission and Distribution Network
2.0 1.5–8.33
Motor vehicles
20.0
Office equipment, furniture and fittings
20.0
Capital work in progress is not depreciated. The assets’ residual values and useful lives are reviewed at each reporting date and adjusted if appropriate. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount. These are included in the income statement in the other operating income. When revalued assets are sold, the amounts included in the revaluation surplus relating to these assets are transferred to retained earnings. h)
Leased assets Where fixed assets are financed by leasing agreements, which give rights approximating to ownership (finance leases) the assets are treated as if they had been purchased and the capital element of the leasing commitments is shown as obligations under finance lease. The lease rentals are treated as consisting of capital and interest elements. The capital element is applied to reduce the outstanding obligations and the interest element is charged to the statement of comprehensive income over the period of the lease so as to produce a constant periodic rate of interest in the remaining balance of the liability under the lease agreement for each accounting period.
42
COPPERBELT ENERGY CORPORATION PLC
Rentals payable under operating leases are charged to the statement of comprehensive income over the term of the relevant lease and in accordance with the terms of the relevant leases. i)
Lease of land Leases of land are classified as operating leases on the basis that although land has infinite economic life and the right to use the land passes on acquisition, ownership has a fixed lease term of 99 years, or the unexpired portion thereof. Upfront payments made to obtain the right to use the land are capitalised as a lease prepayment and recognised on a straight line basis over the unexpired portion of the lease as an operating lease expense.
j)
Financial assets The Company classifies its investments into the following categories: financial assets at fair value through income, debtors and receivables, held-to-maturity financial assets and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and re-evaluate this at every reporting date. i
Financial assets at fair value through income This category has two sub-categories: financial assets held for trading and those designated at fair value through profit or loss at inception. A financial asset is classified into the ‘financial assets at fair value through income’ category at inception if acquired principally for the purpose of selling in the short term, if it forms part of a portfolio of financial assets in which there is evidence of short term profit taking, or if so designated by management. Financial assets designated as at fair value through profit or loss at inception are those that are: •
held in internal funds to match investment contracts liabilities that are linked to the changes in fair value of these assets. The designation of these assets to be at fair value through profit or loss eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases;
•
managed and whose performance is evaluated on a fair value basis. Assets that are part of these portfolios are designated upon initial recognition at fair value through profit or loss.
ii
Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market other than those that the Company intends to sell in the short term or that it has designated as at fair value through income or available for sale. Loans and receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of debtors and receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to their original terms.
iii
Held-to-maturity financial assets Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturities other than those that meet the definition of debtors and receivables that the Company’s management has the positive intention and ability to hold to maturity. These assets are recognised initially at fair value and subsequently measured at amortised cost using the
RIGHTS OFFER DOCUMENT 2014
43
effective interest method, less provision for impairment. A provision for impairment is established when there is objective evidence that the Company will not be able to collect all amounts due according to their original terms. iv
Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are either designated in this category or not classified in any of the other categories. Financial assets are derecognised when the rights to receive cash flows from them have expired or where they have been transferred and the Company has also transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables and held-to-maturity financial assets are carried at amortised cost using the effective interest method. Realised and unrealised gains and losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are included in the income statement in the period in which they arise. Unrealised gains and losses arising from changes in the fair value of non-monetary securities classified as available for sale are recognised in equity. When securities classified as available for sale are sold or impaired, the accumulated fair value adjustments are included in the income statement as net realised gains or losses on financial assets. Interest on available-for-sale securities calculated using the effective interest method is recognised in the income statement. Dividends on available-for-sale equity instruments are recognised in the income statement when the Company’s right to receive payments is established. The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active, the Company establishes fair value by using valuation techniques.
k)
Impairment of assets i
Financial assets carried at amortised cost The Company assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Objective evidence that a financial asset or group of assets is impaired includes observable data that comes to the attention of the Company about the following events: •
significant financial difficulty of the issuer or debtor;
•
a breach of contract, such as a default or delinquency in payments;
•
it becoming probable that the issuer or debtor will enter bankruptcy or other financial reorganisation; or
•
observable data indicating that there is a measurable decrease in the estimated future cash flow from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the Company, including:
o
adverse changes in the payment status of issuers or debtors in the Company; or
o
national or local economic conditions that correlate with defaults on the assets in
the Company.
The Company first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant. If the Company determines that no objective evidence of
44
COPPERBELT ENERGY CORPORATION PLC
impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss has been incurred on debtors and receivables or held-to-maturity investments carried at amortised cost, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement. If a held-to-maturity investment or a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under contract. If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognised in the income statement. ii
Financial assets carried at fair value The Company assesses at each reporting date whether there is objective evidence that an availablefor-sale financial asset is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and current fair value, less any impairment loss on the financial asset previously recognised in profit or loss – is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not subsequently reversed. The impairment loss is reversed through the income statement, if in a subsequent period the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss.
iii
Impairment of other non-financial assets Assets that have an indefinite useful life, for example land, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).
l) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is calculated on a weighted average basis and includes all expenditure incurred in bringing the inventories to their present location and condition. Net realisable value is the price at which inventory can be realised in the normal course of business and takes into account all directly related costs to be incurred in marketing, selling and distribution. Provision is made for obsolete, slow moving and defective inventories. m)
Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments and balances held with banks.
RIGHTS OFFER DOCUMENT 2014
45
n) Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method. o)
Borrowing costs Borrowing costs, being interest payable on loans directly attributable to the acquisition, production or construction of qualifying assets that need a substantial period of time to get ready for their intended use are capitalised.
p)
Short/long term indebtedness Short term indebtedness includes all amounts due to be repaid within twelve months from the reporting date, including installments due on loans of longer duration. Long term indebtedness represents all amounts repayable more than twelve months from the reporting date.
q) Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. Tax currently payable is based on the results for the year as adjusted for items which are non-assessable or disallowed for tax purposes. Deferred taxation liabilities are recognised for all taxable temporary differences. Temporary differences can arise from the recognition for tax purposes of items of income or expense in a different accounting period from that in which they are recognised for financial accounting purposes. The tax effect of these temporary timing differences is computed by applying enacted statutory tax rates to any differences between carrying values per the financial statements and their tax base, and accounted for as deferred tax. Deferred taxation assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised. r)
Employee benefits i
Pension obligations All local employees below 55 years are registered with the statutory defined contribution pension scheme. A defined contribution scheme is a pension plan under which the Company pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees’ benefits relating to employee service in the current and prior periods. For the defined contribution scheme, the Company makes mandatory contributions to the National Pension Scheme Authority. These contributions constitute net periodic costs and are charged to the income statement as part of staff costs in the year to which they relate. The Company has no further obligation once the contributions have been paid. Secondly, there is a defined benefit pension scheme, the assets of which are held in a separate trusteeadministered fund. The pension scheme is funded by contributions to the pension scheme. The contributions by the Company are charged to the statement of comprehensive income in the period to which the contributions relate. The Company contributes 10.7% and the employees 5% of the employee’s basic salary towards the scheme.
ii
Deferred employee benefits The expected costs of providing post-retirement benefits under defined benefits arrangements relating to employees service during the period are charged to the statement of comprehensive income. Any
46
COPPERBELT ENERGY CORPORATION PLC
actuarial assumptions are recognized immediately in the statement of comprehensive income. In all cases, the pension costs are assessed in accordance with the advice of independent qualified actuaries but require the exercise of significant judgements in relation to assumptions for future salary and pension increases, long term price inflation and investment returns. While management believes the assumptions used are appropriate, a change in assumptions would impact the earnings of the Company. s) Provisions Provisions are recognised when: the Company has a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. t)
Dividend distribution Dividend distribution to the Company’s shareholders is recognised as a liability in the financial statements in the period in which the dividends are approved by the Company’s shareholders.
u) Investments Investments are stated at cost. v)
Environmental costs The Company is subject to various regulations and environmental costs are charged to the statement of comprehensive income as they are incurred.
w)
Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary Shares and share options are recognised as a deduction from equity, net of any tax effects.
x)
Earnings per share The Company presents weighted basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to the shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees.
y)
Segment reporting IFRS 8 requires segments to be identified on the basis of the internal reports about operating units of the Company that are regularly reviewed by the Chief Operating Decision Maker (CODM) to allocate resources and to assess their performance. A segment is a distinguishable component of the Company that is engaged either in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. Segment revenue is based on the geographical location of customers.
RIGHTS OFFER DOCUMENT 2014
47
ii
Equity and reserves Share capital represents the nominal value of Shares that have been issued. Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of Shares are deducted from share premium, net of any related income tax benefits. The revaluation reserve within equity comprises gains and losses due to the revaluation of property, plant and equipment. This reserve is non-distributable. Retained earnings include all current and prior period results as disclosed in the statement of comprehensive income. Dividend distributions payable to equity shareholders are included in ‘Dividends payable’ when the dividends have been approved in a general meeting prior to the reporting date. The Company has investments in joint ventures. These investments are valued at cost. All transactions with owners of the parent are recorded separately within equity.
Critical accounting estimates and judgements The preparation of financial statements in conformity with adopted IFRS requires management to make judgements and estimates that affect the application of policies and reported amounts of assets, liabilities, income, expenses and contingent liabilities. Estimates are based on historical experience and other assumptions that are considered reasonable under the circumstances. The estimates and judgements are under continuous review. Significant accounting judgements •
Translating presentational currency Management have applied the average monthly exchange rate as an approximation to the actual exchange rate for the purposes of translating the Company’s USD transactions into ZMW. The Directors have conducted an exercise to evaluate the impact of these fluctuations on the presentation of the Company’s results and has concluded that the application of the average exchange rate is a reasonable approximation to the actual rate;
Management of financial risk •
Financial risk The Company is exposed to a range of financial risks through its financial assets and financial liabilities. The most important components of this financial risk are interest rate risk, foreign exchange risk and credit risk. These risks are exposed to general and specific market movements. The Company manages these positions with a framework that has been developed to monitor its customers and return on its investments.
•
Credit risk The Company has exposure to credit risk, which is the risk that a counter party will be unable to pay amounts in full when due. The key area where the Company is exposed to credit risk is amounts due from customers. The Company’s exposure to credit risk is influenced mainly by individual characteristics of each customer. The demographics of the Company’s customer base, including the default risk of the industry and country, in which customers operate, has less of an influence on credit risk. Approximately 36% of the Company’s revenue is attributable to sales transactions with a single customer. The Company enters into Agreements with new customers, each customer is analysed individually for
48
COPPERBELT ENERGY CORPORATION PLC
creditworthiness before credit terms and conditions are offered. The Company’s review includes trade references from other suppliers, when available, and in some cases bank references. Credit limits are established for each customer, which represents the maximum open amount without requiring approval from the senior management; these limits are reviewed annually. Customers that fail to meet the Company’s benchmark creditworthiness may transact with the Company only on a cash basis. All the Company’s customers have been transacting with the Company for over five years, and losses have occurred infrequently. In monitoring customer credit risk, customer supplies are within the predetermined credit limits, and further supplies are restricted if amounts remain outstanding for more than 60 days regardless of the amount. Trade and other receivables relate mainly to the Company’s mining customers and other legal entity customers that account for 99% and 1% respectively. Customers that are graded as “high risk” are those for whom outstanding amounts exceed 60 days, and such customers are placed on a restricted customer list, and future electricity supplies are restricted. The Company does not require collateral for trade and other receivables. The Company establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main component of this allowance relates to individually significant exposures, and a collective loss component is established for groups of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment of statistics for similar financial assets. •
Capital management The Company’s objective when managing capital is to safeguard the Company’s ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders. The Company has complied with all capital requirements of its funders. The Company sets the amount of capital in proportion to its overall financing structure. The Group manages the capital structure and makes adjustments to it in the light of the economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of the dividends paid to shareholders, return capital to shareholders, issues new Shares, or sell assets to reduce debt.
•
Capital structure 2012
2011
2010
K'000
K'000
K'000
Cash and cash equivalents
20,115
76,539
42,176
Interest bearing liabilities
(149,173)
(169,766)
(153,966)
889,363
836,297
825,446
760,305
743,070
713,656
Equity
The Directors define capital as equity plus cash less borrowings and its financial strategy in the short term is to minimize the level of debt in the business whilst ensuring sufficient finances are available to continue the Company’s business activities. •
Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. Typically the Company ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 60 days, including the servicing of financial obligations; this excludes the potential impact of RIGHTS OFFER DOCUMENT 2014
49
extreme circumstances that cannot reasonably be predicted, such as natural disasters. •
Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.
•
Currency risk In respect of other monetary assets and liabilities denominated in foreign currencies, the Company ensures that the risk is kept to an acceptable level by matching assets and liabilities in the statement of financial position. Net exposure is kept to an acceptable level by denominating recognised trade receivables in United States Dollars.
•
Interest rate risk The Company is exposed to interest rate risk to the extent of the balance of the bank accounts and loans.
Segmental reporting An operating segment is a distinguishable component of the Company that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the Company’s Board of Directors to make decisions about the allocation of resources and assessment of performance about which discrete financial information is available. Gross margin information is sufficient for the Board of Directors to use for such purposes. The Board of Directors reviews information regarding the operating divisions which match the main external revenues earned by the Company, and management information regarding the operating assets and liabilities of the main business divisions within the Company. In ZMW'000
2012
2011
2010
1,278,088
909,359
749,886
49,240
48,440
48,785
-
127
2,120
4,693
2,509
1,717
1,332,021
960,435
802,509
(966,303)
(703,714)
(582,538)
365,718
256,721
219,971
(258,761)
(183,672)
(168,917)
50,875
98,118
24,585
157,832
171,167
75,639
(56)
(1,735)
(2,614)
157,776
169,432
73,025
Revenue by business segment Electricity transmission Wheeling – domestic Wheeling – international Rural electrification
Cost of sales Gross profit Central operating costs Other income Operating profit Finance costs Profit before tax
50
COPPERBELT ENERGY CORPORATION PLC
Due to the nature of the Company’s operations, groups of assets and liabilities are each used to generate a number of the revenue streams above, statement of financial position items cannot be discretely allocated to the above components. The Board of Directors reviews management information regarding the operating assets and liabilities of the main reporting entities within the Company as follows: Wheeling In ZMW'000
Operating assets Non- current assets Trade receivables and inventories Cash, cash equivalents
Transmission
Domestic
Others
Total
1,118,059
49,240
87,976
1,255,275
233,574
4,084
91,859
329,517
20,115
20,115
1,371,748
53,324
180,656
1,605,698
Other operating income In ZMW'000
2012
2011
2010
Capital charge
4,407
7,766
7,306
-
8,286
6,519
46,468
82,066
10,760
50,875
98,118
24,585
Telecoms income Sundry income
RIGHTS OFFER DOCUMENT 2014
51
Operating expenses 2012
2011
2010
67,541
66,475
51,280
109,584
82,031
69,475
Non-Executive directors’ fees and benefits
905
677
633
Auditors’ remuneration – audit services
262
161
201
50
46
48
8,870
7,125
7,210
22,303
15,135
11,863
5,045
2,614
2,418
185
1,509
(2,283)
44,016
7,899
28,072
258,761
183,672
168,917
2012
2011
2010
Salaries and wages
58,706
46,150
47,246
Retirement Benefits
5,155
4,562
2,792
21,300
8,744
10,093
24,423
22,575
9,345
109,584
82,031
69,475
In ZMW'000
2012
2011
2010
Interest on overdue debtors
6,601
2,107
2,327
389
2,927
547
6,990
5,034
2,873
In ZMW'000
2012
2011
2010
Interest on bank loans
7,046
5,839
4,130
-
930
1,358
7,046
6,769
5,488
In ZMW'000
Depreciation Personnel and staff related costs
Tax services Insurance costs Stores and maintenance Football expenses Bad debts provision Other operating expenses
Personnel and staff related costs In ZMW'000
Pension contributions and provisions Other staff costs (Overtime, shift differentials and bonuses)
Finance income
Bank interest
Finance expenses
Interest on overdue creditors
52
COPPERBELT ENERGY CORPORATION PLC
Income tax expense 2012
2011
2010
35%)
55,948
62,180
32,121
Deferred taxation
(7,331)
7,029
(1,717)
48,617
69,209
30,403
157,776
178,579
91,416
55,222
62,503
31,996
101
10,593
(465)
(1,411)
19
(38)
Capital allowances and depreciation
(5,295)
(3,906)
(1,089)
Tax charge
48,617
69,209
30,403
At the beginning of the year
57,580
24,258
23,510
Charge for the year (note 12(a))
55,948
62,180
32,121
939
3,945
(29)
(85,165)
(32,803)
(31,344)
29,302
57,580
24,258
In ZMW'000
(a) Charge for the year: Income tax on taxable profit @ 35% (2011 @
(b) Reconciliation of the tax charge: Profit before taxation Taxation at current rate on accounting profit Permanent differences: Disallowable expenses Profit on disposal of assets Timing differences:
(c) Movement in taxation payable account:
Exchange differences Payments made during the period At the end of the year
Income tax assessments have not yet been agreed with the Zambia Revenue Authority (ZRA) for the period ended 31 December 2012. A self-assessment system for income tax was introduced for periods subsequent to 31 March 2004. Quarterly tax returns for the year ended 31 December 2012 were made on the due dates during the year.
2012
2011
2010
Accelerated tax allowances
88,633
93,358
92,190
Unrealised exchange losses
(990)
1,616
(563)
87,643
94,974
91,627
At the beginning of the year
94,974
91,627
93,344
Provision made during the year (note 11(a))
(7,331)
3,347
(1,717)
At the end of the year
87,643
94,974
91,627
In ZMW'000
(e) Deferred taxation This represents:
Analysis of movement:
RIGHTS OFFER DOCUMENT 2014
53
Earnings per share The calculation of earnings per share is based on:•
Retained profit for the year attributable to ordinary shareholders; and
•
Number of ordinary Shares outstanding during the year.
In ZMW'000
2012
2011
2010
109,159
100,223
61,013
1,000,000
1,000,000
1,000,000
Retained profit for the year attributed to ordinary shareholders
Number of ordinary Shares (‘000)
The Company has no additional potential Shares outstanding. Diluted earnings per share The calculation of diluted earnings per share was based on the profit attributable to ordinary shareholders of ZMW 109.16 (2011: ZMW 100.22; 2010: ZMW 61.01) and a weighted average number of ordinary Shares. The denominator used in the calculation for the Basic Earnings per Share (EPS) is 1,000,000,000 for both 2012 and 2011.
54
COPPERBELT ENERGY CORPORATION PLC
RIGHTS OFFER DOCUMENT 2014
55
-
95,891
98,318
98,434
At 31 December 2012
At 31 December 2011
At 31 December 2010
Net book value
(1,560) 145,914
6,558
Disposals
822,623
802,010
865,559
115,074
142,630
157,391
127,757
19,228
At 31 December 2012
39,879
128,246
-
16,453
111,793
3,981
75,195
-
2,577
-
38,835
36,360
10,190
13,689
98,104
At 31 December 2011
-
26,170
Charge for the year
Disposals
1,595
2,386
At 31 December 2010
216
Charge for the year
Extra depreciation
-
Charge for the year
Disposals
-
1,379
At 1 January 2010
Depreciation
273,671
980,633
7,625
-
285,637
-
31,214
-
254,423
-
15,359
-
239,064
Transmission & Distribution network (Secondary)
(19,591)
102,449
103,428
-
877,205
(273)
18,495
-
858,983
19,289
-
839,694
Transmission & Distribution network (Primary)
At 31 December 2012
150
-
102,299
2,270
-
100,029
3,464
-
96,565
Buildings
Disposals
Transfers from CWIP
Additions
At 31 December 2011
Disposals
Transfers from CWIP
Additions
At 31 December 2010
Disposals
Transfers from CWIP
Additions
At 1 January 2010
Cost/valuation
EQUIPMENT SUMMARY
PROPERTY, PLANT &
9,307
8,188
6,351
33,424
3,056
30,368
-
3,015
27,353
-
(12)
2,831
24,534
39,775
-
1,219
-
38,556
(15)
1,911
-
36,660
(14)
6,266
-
30,408
Equipment fixtures & fittings
9,522
10,468
11,716
21,328
(87)
2,800
18,615
(2,607)
4,409
16,813
-
(1,197)
2,955
15,055
33,044
(168)
4,129
-
29,083
(2,954)
5,702
-
26,335
(1,256)
3,008
-
24,583
Motor vehicles
45,356
52,170
70,162
-
-
-
-
-
-
-
-
70,162
-
(116,551)
134,543
52,170
(59,592)
66,546
45,216
(47,358)
66,013
26,728
Capital work-in progress
1,127,732
1,128,545
1,177,436
322,298
(1,647)
67,540
256,405
(2,607)
65,098
193,914
10,406
(1,209)
47,024
137,693
1,499,734
(19,759)
-
134,543
1,384,950
3,242
-
66,546
1,321,646
(1,270)
-
66,013
1,256,903
Total
Property, plant and equipment (continued) A schedule listing the properties as required by Section 164 and the Second Schedule of the Companies Act, Cap 388 of the Laws of Zambia is available for inspections by Members or their duly authorised representatives at the registered office of the Company. •
Included in cost of property, plant and equipment are fully depreciated assets amounting to ZMW 54,300 thousand (2011: ZMW 49,600 thousand) (2010: ZMW 48,900 thousand). The notional depreciation not charged in these financial statements on these assets amounts to ZMW 3,459 thousand (2011: ZMW 3,345 thousand, 2010:-ZMW 2,561 thousand).
•
The transfer of some of the title to property, transferred from ZCCM Investment Holdings (ZCCM–IH) has not yet been concluded, but is in progress.
•
No interest on capital borrowings was capitalized to property, plant and equipment.
•
At 31 December 2009, the Company’s properties were revalued by Bitrust Real Estate, Rainbow Surveys Limited and Sherwood Greene registered valuers on the basis of realisable market value. The Company’s primary transmission assets were revalued internally on the basis of depreciated replacement cost. The surplus on revaluation totalling ZMW 15,846 thousand was transferred to a revaluation reserve.
•
The Company has vehicles valued at ZMW 8,770 thousand (2011: ZMW 8,402 thousand, 2010: ZMW 7,805 thousand) under operating leases with Barclays Bank (Z) Limited. These assets have not been capitalised in the Company’s books and are therefore, not included as part of property, plant and equipment.
•
Included in capital work in progress is an amount of ZMW 32,706 thousand relating to the development of the Kabompo Gorge Hydro Electric project.
Investments in joint venture In ZMW'000
2012
2011
2010
4,659
9,318
9,318
73,839
-
-
-
(4,659)
-
78,498
4,659
9,318
At Cost At the beginning of the year Acquired during the year (CEC Liquid) Impairment during the year At the end of the year
The Company interests in the joint ventures are as follows:
Country of
Assets
Liabilities
Revenue
31 Dec
ZMW’M
ZMW’M
ZMW'M
ZMW’M
ZMW’M
Incorporation
Interest
Profit
Realtime Technology Alliance Africa
Zambia
12,594
12,553
33,088
2,016
50%
CEC Liquid Limited
Zambia
316,745
16,876
39,309
(1,375)
50%
329,339
29,429
72,397
641
56
COPPERBELT ENERGY CORPORATION PLC
The Company reports its interest in the joint ventures using the proportionate consolidation. The Company’s share of the assets, liabilities, income and expenses of the joint venture are combined with equivalent items in the consolidated financial statements on a line by line basis. The joint ventures were acquired in July 2009 and March 2012 respectively. Inventories 2012
2011
2010
13,685
16,503
9,023
3,004
3,624
4,444
16,689
20,127
13,467
Trade receivables
244,185
289,657
93,843
Less: impairment of debt
(10,612)
(147,106)
(13,021)
233,573
142,551
80,822
14,743
4,842
3,367
8,393
-
-
35,550
105,015
31,203
292,189
252,408
115,392
In ZMW'000
Fuel Spares and consumables
Trade and other receivables
Prepayments and deposits CEC Liquid Other receivables (a)
Other receivables •
The Company in 2007 approved a Share Ownership Plan (ESOP) to allow members of staff to purchase Shares in the Company at the time of floatation of these Company Shares. The plan allowed the members of staff to obtain the loans to enable them to purchase Shares. The other receivables include ZMW 10,760 thousand (2011: ZMW 13,355 thousand, 2010: ZMW 10,800 thousand) due from employees under the ESOP.
•
The Company was awarded an arbitration award of ZMW 53,715 thousand included in the 2011 other receivables.
The Company’s exposure to credit, currency and impairment losses related to trade and other receivables are disclosed in note 25. In ZMW'000
2012
2011
2010
20,074
76,448
42,133
41
91
43
20,115
76,539
42,176
Cash and cash equivalents Bank balances Petty cash
The Company’s exposure to interest rate risk and sensitivity analysis for financial assets and liabilities are disclosed in note 25.
RIGHTS OFFER DOCUMENT 2014
57
In ZMW'000
2012
2011
2010
140
140
140
-
-
-
140
140
140
-
-
-
Share capital Authorised 1,000,000,000 (2011 : 1,000,000,000) Ordinary Shares of 14 Ngwee each (2012: 14 Ngwee each) 1 Special Share of 1 ZMK
Issued and fully paid 1,000,000,000 (2012 : 1,000,000,000) Ordinary Shares of 14 Ngwee each (2012: 14 Ngwee each) 1 Special Share of 1 ZMK
The rights relating to the Special Share include the right to convene, receive notice for and attend any general meeting of the Company or any meeting of any class of shareholders of the Company and to add items to the agenda. 2012
2011
2010
169,766
164,271
198,606
33,834
51,170
(54,427)
(45,674)
(34,335)
149,173
169,767
164,271
(55,201)
(51,124)
(34,335)
93,972
118,643
129,936
4,117
-
-
3,582
5,276
(note b)
38,217
47,542
29,059
African Life Financial Services (note c)
12,867
-
55,201
51,124
In ZMW'000
Interest bearing loans At the beginning of the year Addition during the year Payments during the year
Amounts due within one year At the end of the year
Due to: Stanbic (note a) DBSA (loan fully paid) Citibank N. A. London, Citibank Zambia and DEG
34,335
This relates to the contractual terms of the Company’s interest bearing loans and borrowings which are measured at amortised cost. The details of the Company’s exposure to interest rate, foreign currency and liquidity risk is in note 24.
58
COPPERBELT ENERGY CORPORATION PLC
2012
In ZMW'000
2011
2010
Capital Payment
Interest
Principal
Capital Payment
Interest
Principal
Capital Payment
Interest
Principal
Less than 1 year
55,201
7,046
55,201
51,124
5,838
51,124
34,342
5,392
34,342
More than 1 year
93,972
-
93,972
118,642
-
118,642
129,929
-
129,929
149,173
7,046
149,173
169,766
5,838
169,766
164,271
5,392
164,271
The Stanbic loan of ZMW 4,117 thousand bears interest of LIBOR plus 5.5%. The loan is payable on demand. The Citibank Zambia, Citibank N. A. London and DEG loan of ZMW 67,856 thousand is made up of four tranches totalling (A nil/ B ZMW 24,704 thousand/ C ZMW 17,419 thousand and D ZMW 25,733 thousand. Tranche A loan bears an interest of LIBOR plus 2.3%, tranches B and C bear interest at LIBOR plus 2.5%, while Tranche D bears interest of LIBOR plus 3.375%. Tranche A is repayable in 9 equal instalments to end by December 2012, tranches B and C are repayable in 13 equal instalments to end by December 2014 while tranche D obtained in April 2011 is repayable in 12 equal instalments to end by January, 2014. The ZMW 77,199 thousand African Life Financial Services is made of two tranches. Tranche A loan of ZMW 51,446 thousand bears interest of LIBOR plus 2.5% and will be fully repaid by March 2019. The loan has a five year grace period and will be repaid in four semi-annual instalments commencing in September 2017. Tranche B loan of ZMW 25,733 thousand bears interest of LIBOR plus 4% and will be fully repaid by March 2014. 2012
2011
2010
CNMC Luanshya Copper Mines (note a)
56,371
-
-
First Quantum Mining and Operations (note b)
46,702
51,941
53,619
103,073
51,941
53,619
In ZMW'000
Non-current trade and other payables
The CNMC Luanshya Copper Mines (CLM) long term creditor relates to the procurement of transmission assets in Luanshya area from CLM. The credit is interest free and repayment is over seven years upon reaching certain milestones. The assets were acquired in December 2012. At the inception of the agreement, the Company recognised an asset and liability at an amount equal to the fair value of the equipment. The First Quantum Mining and Operations (FQM) long term creditor relates to the procurement of transmission assets in Ndola area from FQM. The credit is interest free and repayment is over ten years. The assets were acquired in December 2008. At the inception of the agreement, the Company recognised an asset and liability at an amount equal to the fair value of the equipment. The movement between 2011 and 2012 is attributed to charges of capital charge income levied by CEC. The Company’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 24. Deferred employee benefits The Company has established a defined contribution pension scheme for its employees, membership of which is compulsory. In addition, the Company provides further benefits to its employees based on the salary of each employee on retirement. The Company’s obligations, based on overall retirement benefits, are accounted for as a defined benefit scheme.
RIGHTS OFFER DOCUMENT 2014
59
•
Actuarial assumptions An actuarial valuation was carried out for the financial year ended December 2012. Assumptions for the Actuarial Valuation are as below: Retirement benefit valuation done as per Table A shown below. Salary increases have been assumed at 10%. Investment returns will exceed future inflation by 4% per annum. Discount rate of 10% has been used on future cash flows. Mortality is assumed as per actuarial assumptions. Withdrawals have been put at a rate of 12.5% at age 20 reducing to nil at age 50 and thereafter. Table A
Age
Annual rate
20
12.5%
25
10.0%
30
7.5%
35
7.5%
40
5.0%
45
2.5%
50
0.0%
55
0.0%
Normal retirement age for the Company is 55 years. •
The amounts recognised in the statement of financial position are as follows: 2012
2011
2010
Present value of unfunded obligation
34,258
26,066
18,687
Recognised liability for defined benefit obligation
34,258
26,066
18,687
Total employee benefits
34,258
26,066
18,687
At the beginning of the year
26,066
18,687
10,124
Retirement provisions
15,476
10,401
10,098
-
-
-
Benefits paid
(7,284)
(3,022)
(1,535)
At the end of the year
34,258
26,066
18,687
3,359
2,101
2,907
3,359
2,101
2,907
In ZMW'000
Exchange gain
(IV) Expense recognised in the income statement Current service costs
60
COPPERBELT ENERGY CORPORATION PLC
Deferred Income In 2012 CEC entered into an Indefeasible right of use agreement of the excess capacity on its Telecoms Assets with CEC Liquid Telecommunication Limited for a period of 15 years with a consideration of ZMW 51,843 thousand. The consideration is being amortised over 15 years. 2012
2011
2010
At the beginning of the year
51,843
-
-
Amortisation for the year
(3,456)
-
-
At the end of the year
48,387
-
-
103,073
51,941
53,619
2012
2011
2010
220,656
224,394
139,842
6,032
3,741
7,276
12,703
12,821
17,889
4,336
3,673
302
243,727
244,629
165,309
In ZMW'000
Trade and other payables In ZMW'000
Trade creditors Accrued expense Other creditors Social security and PAYE
Related party transactions On 27 October 2006, Cinergy Zambia BV and National Grid Zambia BV (companies incorporated in the Netherlands) holding 77% shareholding of the Company, passed resolutions to change their names to Zambian Power BV and Zambian Transmission BV. The two entities were subsequently acquired by Zambian Energy Corporation (Netherlands) BV. ZCCM – Investments Holdings PLC and individual shareholders continue to own Shares in the Company. The following transactions were carried out with related parties: •
Amounts due from/(to) related parties
In ZMW'000
Zambian Energy Corporation
2012
2011
2010
1
1,023
-
Being dividends payable
RIGHTS OFFER DOCUMENT 2014
61
•
Directors’ remuneration
A listing of the members of the Board of Directors is included in Annexure 5. During the year, Directors received cash remuneration for services rendered to the Company of ZMW 905 thousand (2011: ZMW 677 thousand, 2010: ZMW 646 thousand). •
Executive management remuneration
(Executive management team, excluding directors (shown in (ii) above)) In ZMW'000
Short-term employment benefits Post-employment benefits Total remuneration •
2012
2011
2010
17,281
15,257
10,307
502
413
168
17,783
15,670
10,474
Individual shareholders
Three shareholders of the Company are also executive directors. The Company pays salaries and provides other benefits to three of the individual shareholders that are in employment with the Company. •
Zambian Energy Corporation Limited
Two of the Zambian Energy Corporation Limited representatives on the Company’s Board are also executive directors. Both executive directors are also individual shareholders in the Company. The Company pays salaries and provides other benefits to the two members that are in employment with the Company. •
Transactions with joint ventures
Realtime Technology Alliance Africa Limited (RTAA) During the year CEC invoiced (RTAA) ZMW 269 thousand for usage of the Fibre Assets and rentals. For services rendered, the Company was invoiced ZMW 631 thousand by RTAA. The net outstanding balance due to CEC at the reporting date was ZMW 2,701 thousand. The opening balance at the beginning of the year was ZMW 4,544 thousand. CEC Liquid During the year CEC invoiced (CEC Liquid) ZMW 872 thousand for usage of the maintenance and support services. For services rendered, the Company was invoiced ZMW 1,350 thousand by CEC Liquid. The net outstanding balance due to CEC at the reporting date was ZMW 8,323 thousand. The opening balance at the beginning of the year was ZMW 7,195 thousand. Financial instruments Exposure to currency, interest rate, credit and liquidity risk arises in the normal course of the Company’s business. •
Credit risk
Exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:
62
COPPERBELT ENERGY CORPORATION PLC
CARRYING AMOUNTS In ZMW'000
Trade and other receivables Cash and cash equivalents
2012
2011
2010
292,189
252,408
115,392
20,115
76,539
42,176
312,304
328,947
157,568
The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was: CARRYING AMOUNTS In ZMW'000
2012
2011
2010
Domestic
27,600
138,655
77,230
6,481
3,894
3,592
34,081
142,549
80,822
DRC
The Company’s most significant customer, Konkola Copper Mines accounts for ZMW 153,332 thousand of the trade receivables carrying amount at 31 December 2012 (2011: ZMW 194,350 thousand; 2010: ZMW37,380 thousand). Some of the 2011 carrying amount was impaired during the year due to a dispute on tariff increments •
Impairment losses
The aging of trade receivables at the reporting date was: 2012
In ZMW'000
2011
2010
Gross Amount
Impaired Amount
Net Amount
Gross Amount
Impaired Amount
Net Amount
Gross Amount
Impaired Amount
Net Amount
0 – 21
132,874
-
132,874
106,812
-
106,812
75,038
-
75,038
22 – 45
59,394
-
59,394
40,066
4,327
35,739
134
-
134
46 – 59
-
-
-
43,039
43,039
-
106
-
106
10,612
41,306
99,740
99,740
-
18,565
13,021
5,544
244,185
10,612
233,573
289,657
147,106
93,843
13,021
80,822
Over 60 51,918
142,551
The movement in the allowance for impairment in respect of trade receivables during the year was as follows: In ZMW'000
At the beginning of the year New provisions Write back of impairment loss At the end of the year
2012
2011
2010
147,268
14,210
16,493
184
136,742
-
(136,840)
(3,684)
(2,283)
10,612
147,268
14,210
The collectability of receivables is assessed at the reporting date and specific allowances are made for any doubtful receivables based on a review of all outstanding amounts at the year end. Bad debts are written off during the year in which they are identified. The write back in 2012 was as a result of agreeing a 5 year tariff plan with KCM.
RIGHTS OFFER DOCUMENT 2014
63
•
Liquidity risk
The following are the contractual maturities of financial liabilities: Carrying
Contractual
Within
1 to 2
2 to 5
Longer than
Amount
Cash flows
1 Year
Years
Years
5 Years
ZMW’M
ZMW’M
ZMW’M
ZMW'M
ZMW’M
ZMW’M
Loans
149,173
149,173
55,201
42,506
-
51,466
Trade payables
323,729
220,656
220,656
-
-
103,073
Other payables
23,071
23,071
23,071
-
-
-
495,973
400,675
306,703
42,506
-
154,539
Loans
169,767
169,767
51,124
67,166
51,477
-
Trade payables
276,333
276,333
224,391
-
-
51,943
Other payables
20,233
20,233
20,233
-
-
-
466,333
466,333
295,748
67,166
51,477
51,943
Loans
154,163
154,163
34,335
46,042
73,786
-
Trade payables
195,696
195,696
142,077
-
53,619
-
Other payables
27,136
27,136
26,920
-
216
-
376,994
376,994
295,748
46,042
127,622
31 December 2012: Non-derivative Financial liabilities
Total 31 December 2011: Non-derivative Financial liabilities
Total 31 December 2010: Non-derivative Financial liabilities
Total
• Currency risk Exposure to currency risk The Company’s exposure to foreign currency risk was as follows based on notional amounts: In ZMW'000
2012
2011
2010
Trade receivables
6,482
107
58
Other receivables
-
2,379
475
(4,518)
(11,119)
(5,702)
1,964
(8,633)
(5,170)
Other payables Balance sheet net exposure The following significant exchange rates applied during the year:
Average Rates
US$1
64
COPPERBELT ENERGY CORPORATION PLC
2012
2011
2010
5,140
4,862
4,797
•
Fair values
Fair values versus carrying amounts The fair values of financial assets and liabilities, together with carrying amounts shown in the balance sheet are as follows: Designated
Classified as held
Held to Maturity
Loans and
Fair value for
on Intitial
for trading
Investments
Receivables
each class
ZMW’M
ZMW’M
ZMW’M
ZMW'M
ZMW’M
Receivables
-
-
-
244,185
233,573
Other receivables
-
-
-
50,295
50,295
Cash and cash equivalents
-
-
-
20,115
20,115
Total financial assets
-
-
-
314,595
303,983
Loans
-
-
-
(149,173)
(149,173)
Trade payables
-
-
-
(220,656)
(220,656)
Other payables
-
-
-
(23,071)
(23,071)
Total financial liabilities
-
-
-
(392,900)
(392,900)
Net position
-
-
-
(78,305)
(88,917)
Receivables
-
-
-
289,653
142,549
Other receivables
-
-
-
109,857
109,857
Cash and cash equivalents
-
-
-
76,540
76,540
Total financial assets
-
-
-
476,050
328,946
Loans
-
-
-
(169,767)
(169,767)
Trade payables
-
-
-
(224,391)
(224,391)
Other payables
-
-
-
(20,233)
(20,233)
Total financial liabilities
-
-
-
(414,391)
(414,391)
Net position
-
-
-
61,659
(85,445)
Receivables
-
-
-
95,637
82,016
Other receivables
-
-
-
33,452
33,452
Cash and cash equivalents
-
-
-
43,816
43,816
Total financial assets
-
-
-
172,905
159,285
Loans
-
-
-
(154,163)
(154,163)
Trade payables
-
-
-
(142,077)
(142,077)
Other payables
-
-
-
(26,920)
(26,920)
Total financial liabilities
-
-
-
(323,159)
(323,159)
Net position
-
-
-
496,065
482,444
recognition
31 December 2012 Financial assets
Financial liabilities
31 December 2011 Financial assets
Financial liabilities
31 December 2010 Financial assets
Financial liabilities
RIGHTS OFFER DOCUMENT 2014
65
Capital commitments Capital commitments authorised and contracted for by the directors as at 31 December 2012 amounted to ZMW 4,215 thousand (2011: ZMW 12,793 thousand; 2010: ZMW 7,194 thousand) and capital expenditure authorised but not contracted for was ZMW nil (2011: ZMW nil; 2010: ZMW nil). Contingent liabilities There were no known contingent liabilities at 31 December 2012 ZMW nil (2011: ZMW nil; 2010: ZMW nil). Events subsequent to the reporting date There has not arisen since the end of the financial year any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the company, to affect substantially the operations of the economically entity, the results of those operations or the state of affairs of the economic entity in subsequent financial years except: •
On 21st February 2013, KANN Utility Company Limited, a joint venture of the Copperbelt Energy Corporation PLC (CEC) and XerXes Global Investments signed a Sale and Purchase Agreement to acquire a 60% interest in the AEDC. The agreement was signed with the Federal Government of the Republic of Nigeria and the Bureau of Public Enterprises. AEDC has a franchise for distributing electricity in four states, comprising the Federal Capital Territory of Abuja, Niger State, Kogi State and Nasarawa State. Serving 133,014sq.km with a population of 10.5 million people in 2.3 million households, the AEDC covers a relatively lightly populated area dominated by the Federal Capital. It has around 600,000 customers and an average electrification rate of 27%. Approximately 3,000 people are employed by AEDC. AEDC purchases power from the Nigeria Bulk Electricity Trading PLC (the ‘Bulk Trader’) and is connected to various power generation plants by the Transmission Company of Nigeria.
•
The Company incorporated an investment company CEC Africa Limited which will hold Shares for the various interests the company is pursuing. The Company will hold 100% shareholding in this company.
•
66
In March 2013, the Company entered into a $40million agreement with Standard Bank of South Africa
COPPERBELT ENERGY CORPORATION PLC
ANNEXURE 4: TRADING HISTORY OF CEC SHARES ON THE LUSE (REBASED) High
Low
Close
Volume Traded
Value Traded
(Kwacha)
(Kwacha)
(Kwacha)
(Million)
(ZMW Million)
Quarter ended December-10
0.71
0.62
0.67
13,274,329
11,855,350
March-11
0.70
0.68
0.70
11,351,523
7,854,183
June-11
0.74
0.68
0.70
2,418,466
1,715,911
September-11
0.70
0.63
0.70
6,505,679
4,292,847
December-11
0.67
0.64
0.65
1,904,332
1,228,823
March-12
0.69
0.64
0.69
10,595,947
6,830,807
June-12
0.70
0.67
0.68
10,446,407
7,005,405
September-12
0.69
0.64
0.68
2,912,298
1,944,575
December-12
0.69
0.64
0.68
2,912,298
1,944,575
December-12
0.69
0.65
0.68
391,375
256,503
January-13
0.71
0.65
0.71
460,318
312,935
February-13
0.84
0.70
0.83
4,800,807
3,726,229
March-13
0.84
0.80
0.83
2,728,906
2,278,907
April-13
0.86
0.83
0.84
1,219,233
1,040,520
May-13
0.84
0.75
0.80
2,132,502
1,792,730
June-13
0.80
0.78
0.79
6,698,750
5,313,538
July-13
0.79
0.74
0.75
4,320,696
3,228,776
August-13
0.75
0.73
0.73
3,102,219
2,400,563
September-13
0.72
0.68
0.68
514,590
347,120
October-13
0.68
0.63
0.66
9,012,685
5,959,225
November-13
0.66
0.65
0.66
2,747,102
1,813,298
December-13
0.67
0.66
0.66
1,093,975
722,220
02 January-14
0.73
0.73
0.73
6,000
4,380
03 January-14
0.73
0.73
0.73
1,341
1,542
06 January-14
0.73
0.73
0.73
32,571
23,794
Month ended
Daily
07 January-14
0.73
0.73
0.73
15,273
11,149
09 January-14
0.73
0.73
0.73
115,695
84,457
10 January-14
0.73
0.73
0.73
3,400
4,964
13 January-14
0.74
0.74
0.74
10,959
8,110
14 January-14
0.74
0.74
0.74
1,292
956
15 January-14
0.74
0.74
0.74
49,349
36,518
16 January-14
0.77
0.77
0.77
153,000
117,810
RIGHTS OFFER DOCUMENT 2014
67
ANNEXURE 5: DIRECTORS AND SENIOR MANAGEMENT OF CEC Directors of CEC At any one time, there shall be a Government Director appointed by a Special Member who has the exclusive right to appoint, remove and replace such Director. A Special Member means the holder of the Special Share which is ZMW1.40 and may only be issued to, held by and transferred to the Minister responsible for Finance or his successor or nominee on his behalf or any other Minister or other person acting on behalf of GRZ. The Special member is entitled to convene, receive notice of and to attend any General Meeting of the Company or any meeting of any class of members of the Company, to add items to the agenda thereof upon the giving of notice to the Secretary and to speak there at, but shall carry no right to vote. The full names and profiles of the Directors of CEC are below. The business/physical address of the Directors is Copperbelt Energy Corporation PLC, Plot 3614, 23rd Avenue, Nkana East, Kitwe. The postal address is P O Box 20819, Kitwe, Zambia. Non-Executive Directors Name: Jean Madzongwe
Experience
Nationality: Zimbabwean
Jean serves as the Non-Executive Deputy Chairperson at CEC. She has been a Director at the
Qualifications: Bachelors degree,
Company since 2006. She has over 20 years’ experience in the SADC Energy Sector providing
Industrial Engineering (Farleigh
professional knowledge and technical advice on energy sector projects and programmes.
Dickinson University US), MBA (Henley
Jean is currently working for the Development Bank of Southern Africa. She is currently a
Management College UK)
Director on the Board of Amigo Partners and has previously served on the Boards of the South Africa National Energy Association (an affiliate of the World Energy Council), Women in Oil and Energy of South Africa.
Name: Reynolds Bowa
Experience
Nationality: Zambian
Reynolds represents ZCCM-IH on the CEC Board. He joined the Board in the year 2012.
Qualifications: Bachelor of Science,
Reynolds currently owns and manages an oil marketing company, Petrotech Oil Corporation
Engineering (UNZA)
Limited. Reynolds has over 27 years of engineering experience at senior management level in organisations that include ZCCM, Zambia Airways and the Caltex Oil Corporation. He is a Fellow of the Engineering Institution of Zambia (FEIZ), and serves on the Engineering Registration Board. Reynolds currently sits on the boards of the following entities: •
ZCCM Investments Holdings Limited
•
Engineering Registration Board
Name: Abel Mkandawire
Experience
Nationality: Zambian
Abel has been a Non-Executive Director at CEC since 2006. He serves as a Director at Behrens
Qualifications: Bachelors degree,
Limited. He has worked at Behrens Limited, where he has served as Chairman, since 1980.
Engineering
Prior to joining Behrens Limited, he worked at ZESCO from 1972 and held different roles within the Company including that of General Manager. Abel is a Fellow of the Institution of Electrical Engineers (UK). He sits (or has sat) on the boards of the following entities:
68
•
Networked Computer Resources
•
National HIV/AIDS/STI/TB
•
Standard Chartered Bank Zambia Plc
•
Zambia Centre for Accountancy Studies
•
Zambia Association of Chambers of Commerce and Industry
•
Madison Life Insurance Company
•
Batoka Energy Holdings Limited
COPPERBELT ENERGY CORPORATION PLC
Name: Munakupya Hantuba
Experience
Nationality: Zambian
Munakupya has served as Non-Executive Director at CEC since 2008. He sits as a Director on
Qualifications: Bachelors degree,
several other boards including Lafarge PLC, Real Estate Investments Zambia Limited, African
Economics, MBA (Finance)
Life Financial Services Limited, Holiday Inn, Dunavant Cotton, Public Service Pensions Fund, Zamanglo Prospecting and Sinyuka. He is Chief Executive Officer at African Life Financial Services, a position he has held for the last eight years. Prior to that, Munakupya worked at Anglo American Corporation, Meridien Bank and Aflife Zambia. He has considerable experience in the financial sector. He is also a member of a number of professional societies and other interest groups.
Name: Klaas Bleeker
Experience
Nationality: Dutch
A Non-Executive Director at CEC since May 2012, Klaas has extensive work experience in
Qualifications: Masters degree in
Africa as an investment advisor for a number of African investment projects. He has vast
Business Economics (University of
project financing experience, having worked at FMO NV Netherlands Development Financing
Groningen, Netherlands)
Company, from 1978-2007. Klaas sits on the boards of the following entities: •
Rabai Holdings
•
European Fund for Southwest Europe
Name: Pius Haangoma Maambo
Experience
Nationality: Zambian
Independent Non-Executive Director at CEC since March 2011. Pius is currently the Chairman
Qualifications: Bachelors degree,
and Chief Executive Officer at Avantgarde Corporate Ventures. He previously worked for
Engineering (Metallurgy)
over 30 years’ in the Zambian mining industry holding different senior posts in a number of mines owned by ZCCM before moving to the private sector. He is a Chartered Engineer of the Institution of Materials, Minerals and Mining and a Member of the Engineering Institution of Zambia. Pius sits as a Director on the Stanbic Bank and Avantgarde Corporate Ventures boards. He is also the Chairman of the Kalulushi Trust School on the Copperbelt.
Name: Edson M Hamakowa
Experience
Nationality: Zambian
Edson has been an Independent Non-Executive Director at CEC since March 2011. He is a
Qualifications: ACCA, ZICA
Chartered Accountant with over 30 years’ experience in the accounting field. He has held various senior positions in the oil marketing industry both in Zambia and internationally. Edson is a member of the Board of Directors for Standard Chartered Bank Zambia Plc. He previously served as a Director at Zambia National Commercial Bank, ZESCO and the Zambia Accountancy Center Boards. Edson is an ACCA holder and a member of ZICA.
Name: Charity Mwansa (GRZ
Experience
representative)
Charity is the Permanent Secretary in the Ministry of Mines, Energy and Water Development.
Nationality: Zambian
She is a member of the CEC Board as GRZ Nominated Director representing the Special
Qualifications: LLB (UNZA), Advocate
Shareholder – Government, in respect of its ‘Golden Share’ in the Company. Charity is a
of the High Court and Supreme Court
former Member of Parliament and has held various senior offices in the public and private
of Zambia
sector. She is a lawyer by profession. She currently sits as a Director on the Boards of: •
ZESCO
•
INDENI
•
Zambezi River Authority
•
Tazama Pipelines
RIGHTS OFFER DOCUMENT 2014
69
Name: Mildred T Kaunda
Experience
Nationality: Zambian
Mildred is the founder and principal consultant of communications firm Cutting Edge PR.
Qualifications: Bachelor of Arts (Cum
She focuses on the ongoing sustainability of the agency, creates strategic communication
Laude), MBA (Melbourne Business
frameworks for client’s campaigns and oversees all client service. She is a results oriented
School, University of Melbourne,
senior executive with over 24 years’ experience in media relations, positioning strategies,
Australia)
branding & integrated marketing communications plans and financial services. Mildred has worked in various international financial institutions including: Investec, Standard Corporate and Merchant Bank, East and African Development Bank, Meridien Bank and Deloitte, in Kenya, South Africa and Zambia. She is a Chartered Public Relations Practitioner (CPRP) of the Public Relations Institute of Southern Africa (PRISA), a senior member (MIPRA) of the International Public Relations Association (IPRA) as well as a member of the Zambia Public Relations Association and the Public Relations Society of America. Mildred was elected in January 2010 as the IPRA Council Member and National Chair for Zambia for a two-year term. She was a member of the interim founding committee that launched the Zambia Public Relations Association (ZAPRA) in May 2010 and was elected a committee member of the same in December 2010 for a two-year term. She is a board member of the American Chamber of Commerce in Zambia and is a Representative Director for ZCCM-IH PLC.
Executive Directors Name: Hanson Sindowe (Chairman and
Experience
Chief Executive Officer)
Hanson is the Executive Chairman and Chief Executive Officer at Copperbelt Energy
Nationality: Zambian
Corporation. He has over 25 years experience in the mining industry and has been a Director
Qualifications: Bachelors degree,
at the Company since 2006. He has a wide range of experience at senior management level,
Electrical Engineering (University of
having previously been General Manager of Zambia Consolidated Copper Mines Limited
Zambia)
(ZCCM) Power Division and Managing Director of Zambia Railways. He sits on the board of directors of the following entities:
70
•
Batoka Energy Holding Limited
•
Green Trade Limited
•
Zambia Energy Corporation (Ireland) Limited
•
Zambia Energy Corporation Limited
•
Madison General Insurance Company Zambia Limited
•
CEC Liquid Telecommunication Limited
•
Realtime Technology Alliance Africa Limited
•
Sinazongwe Energy Corporation Limited
•
CEC Kabompo Hydro Power Limited
COPPERBELT ENERGY CORPORATION PLC
Name: Michael John Tarney (MD:
Experience
Corporate Division)
Michael is the Managing Director of Corporate Development Division for CEC; he has been
Nationality: British
an Executive Director at the Company since 2006. Previously employed as Audit Manager
Qualifications: Chartered Accounting
by PricewaterhouseCoopers, Michael has also worked for Marconi Corporation PLC and as
and Engineering (Cambridge
Financial Controller-International Operations for National Grid PLC. Michael is currently in
University)
charge of the corporate development process and is responsible for implementing CEC’s growth strategy as well as identifying potential growth areas in the energy sector in Zambia and abroad. Michael sits or has sat on the following boards: •
Batoka Energy Holding Limited
•
CEC Africa Investments Limited
•
Zambian Energy Corporation (Ireland) Limited
•
Zambian Energy Corporation Limited
•
Madison Assets Management Company Limited
•
CEC Liquid Telecommunication Limited
•
Realtime Technology Alliance Africa Limited
•
Sinazongwe Energy Corporation Limited
•
CEC Kabompo Hydro Power Limited
•
Arandis Power
Senior Management Name: Silavwe Owen (MD: Operations)
Experience
Nationality: Zambian
Owen was appointed Managing Director - Operations in 2013. Prior to this appointment
Qualifications: Bachelors degree,
he served as the Chief Operations Officer for the Company from March 2012. Owen has
Electrical Engineering
previously held the position of Commercial Director responsible for organic business
Master of Science, Electrical Power
development and other commercial aspects of the Company’s operations division. Having
Engineering
served in various positions within CEC, including System Planning Engineer, Projects Engineer, Projects Manager and Business Development Manager, Owen rose through the ranks to his current position. He has been one of the main contributors to reforming contractor procurement processes in CEC as well as financing and implementation structures of organic business growth projects.
Name: Christopher Nthala (Chief
Experience
Operating Officer)
Christopher was appointed Chief Operating Officer for CEC in 2013, heading the Operations
Nationality: Zambian
Directorate and responsible for the management of all operations aspects of the power
Qualifications:
system (system operations, system maintenance, emergency power, system safety). He
Bachelors degree in Engineering
has over 20 years’ experience in the Zambian electricity supply industry, holding various
(Electrical) , Diploma in Distribution
portfolios up to Director for Generation and Transmission at ZESCO. He has also served as
Engineering (British Electricity
Manager for the power distribution network at Kansanshi Mine in Zambia, a subsidiary of
International, UK), Advanced
First Quantum Minerals. Furthermore, he has been involved with SAPP activities for many
Management of Power Systems
years, rising to Chairman of the Management Committee.
(SwedPower/Vattenfall, Sweden)
RIGHTS OFFER DOCUMENT 2014
71
Name: Irene Lombe Chibesakunda
Experience
(Chief Financial Officer)
Irene is the Company’s Chief Financial Officer responsible for overseeing the financial
Nationality: Zambian
management of the Company’s operations at CEC Group level. Irene has extensive
Qualifications: FCCA, FZICA
experience at senior management level with over 20 years’ experience both in the public and private sector. She has held key positions in the Ministry of Finance and Bank Zambia Plc. She was previously Commissioner – Corporate Services (Finance, IT and Human Resources) at the Zambia Revenue Authority. Irene has sat on the Board of ZCCM-IH, and currently sits on the Boards of: •
World Vision Zambia
•
First National Bank Zambia
Name: Julia Chaila (Director: Legal,
Experience
Company Secretary)
Julia is the Management head of the In-house Legal Department, which she established
Nationality: Zambian
in 1997. She is also Company Secretary for CEC. Julia has over 20 years’ experience in
Qualifications: Bachelor of Laws
Corporate and Commercial law, and has in particular specialised in energy, construction and
Degree (University of Zambia),
mining law. Julia has previously held several senior positions in both the private and public
Advocate of the High Court and
sector, including as Management Head of the ZCCM Legal Department on the Copperbelt.
Supreme Court of Zambia, Chartered
Julia is an active member of the Law Association of Zambia and currently sits on the Legal
Arbitrator (United Kingdom)
Practitioners Committee and the Electoral Board. She is Director on the Boards of: •
Arandis Power
•
CEC Kabompo Hydro Power Ltd
•
CEC Pension Scheme Trust
•
Zambia Forest and Forestry Industries Company Ltd
•
Nkana Water and Sewerage Company
•
CHEP
Name: Aaron Botha
Experience
Nationality: Zambian
Aaron is responsible for directing the technical and commercial aspects of the Kabompo
Qualifications: Chartered Engineer,
Hydro Power project and other new development projects, such as the Arandis HFO Project
Bachelor of Engineering degree –
in Namibia. Work in these projects covers project feasibility and engineering design studies,
Electrical (UNZA), BTEC Diploma in
contract arrangements, aspects of project financing and other commercial arrangements.
Industrial Measurements and Control
Prior to this appointment, he worked as CEC’s Technical Director and later Projects Director,
(Bolton Institute of Technology), MBA
responsible for the management of all technical aspects with regard to Protection,
(Edith Cowan University).
Metering, Telecommunications, System Performance, Asset Management and Emergency Power generating systems to ensure reliable and continuous power supply to the Company’s customers. He has also managed the implementation of the Company’s short term and long term capital projects. He has over 20 years of practical experience at senior management level, having been responsible for various engineering and operational requirements of the high voltage and distribution system of the power networks in ZCCM and now CEC.
Name: Roland Lwiindi (Director:
Experience
International Projects)
Roland has extensive experience in the Engineering field, having worked for ZCCM and
Nationality: Zambian
ZESCO where he served as Chief Engineer, Regional Transmission Manager and Senior
Qualifications: Bachelor of
Manager prior to joining CEC. He is currently managing the development of the Luapula
Engineering (Electrical) degree from
Hydro power projects - Zambian/DRC joint venture initiative.
University of Zambia, Postgraduate Diploma in Power Systems from Norway
72
COPPERBELT ENERGY CORPORATION PLC
Name: Silvester Hibajene (Director:
Experience
Strategy & Regulation)
Silvester joined CEC in October 2009 and is responsible for corporate development strategy
Nationality: Zambian
and regulatory issues. Silvester is one of the founding staff of the Department of Energy for
Qualifications: Mechanical Engineer
which he worked for 10 years prior to being promoted to the position of Deputy Permanent
and obtained his degree from the
Secretary (Technical) in the Ministry of Energy and Water Development; a position which he
University of Zambia; Masters in
held for 6 years. He subsequently, joined the Energy Regulation Board where he worked for
Energy Studies from Sussex University
10 years, initially as Technical Director and then as Executive Director for 6 years.
in the UK Name: Mutale Mukuka (Director:
Experience
Corporate Finance)
Mutale is responsible for driving through financial strategy, ensuring optimal project
Nationality: Zambian
delivery structures are in place as well as overseeing statutory reporting across several
Qualifications: Chartered
jurisdictions. He has over ten years’ experience covering a number of industries in corporate
Management Accountant
finance, tax planning, project structuring, financial reporting and control. He has previously served as Corporate Finance Manager, Business Planning Manager and Senior Accountant. Prior to Joining CEC, he worked for Zambia Revenue Authority (Zambian Tax Authority). He began his career in auditing and is a qualified Chartered Management Accountant and a Fellow of ZICA.
Name: Chance Mugala (Operations
Experience
Finance Director)
Chance is a Chartered Accountant and a qualified corporate Treasurer with over thirteen
Nationality: Zambian
years’ experience in various industries. In CEC, Chance is responsible for treasury
Qualifications: Bachelor of
management, financial reporting, financial control and analysis, budgeting and insurance.
Accountancy (Copperbelt University),
His experience includes the agriculture and electricity industries, as well as non –
Fellow of the Association of Chartered
governmental agencies. Chance previously worked as Senior Finance Manager, Senior
Certified Accountants of the United
Accountant and Financial Accountant.
Kingdom, Fellow of the Zambia Institute of Chartered Accountants. Associate Member of Corporate Treasurers of the United Kingdom Name: Benny Simukoko (Projects
Experience
Director)
Benny is responsible for implementing and managing the Company’s short, medium and
Nationality: Zambian
long term capital projects. He has over 10 years’ practical experience in a wide spectrum of
Qualifications: Bachelor of
engineering at various management levels, having been responsible for various engineering
Engineering in Electrical Machines and
and operational requirements of the low, medium and high voltage distribution system of
Power Systems (University of Zambia)
the CEC (and ZCCM) power network. He has successfully managed a number of multi-million dollar engineering projects in both ZCCM and CEC.
Name: Titus Mwandemena
Experience
(Commercial Director)
Titus leads the Account Management and Business Development team. He has extensive
Nationality: Zambian
experience in the Zambian Electricity Supply Industry of which the first eleven years
Qualifications: Bachelor of
involved operation and maintenance of high voltage transmission lines and substations.
Engineering Degree (UNZA) and
Later experience included investment planning for transmission systems and substations,
a MBA-Management of Financial
international competitive bidding, project management and business development.
Institutions and Portfolio Management (CBU)
RIGHTS OFFER DOCUMENT 2014
73
Name: Yonah Banda (Director:
Experience
Technical Services)
Yonah is the Director responsible for all metering systems for CEC electrical power supply
Nationality: Zambian
network, IT and telecommunication systems company wide, power systems communication,
Qualifications: Bachelors Degree
SCADA and support for commercial telecommunication systems riding on CEC excess fibre
in Electric Engineering (University
capacity. Yonah is also responsible for garage and transport services for the entire Company.
of Zambia), Post Graduate Diploma
He has previously held various engineering positions in CEC, ZCCM Power Division and
in Electrical Power Distribution
Copperbelt Power Company.
Energy (UK), Certificate in Advanced
Leadership (Haggai Institute, HawaiiUSA), Certificate in Business Focused Project Management (University of Cape Town), Member of Engineering Institute of Zambia, Engineering Registration Board of Zambia and the UK Institute of Engineering and Technology Name: Jacob Njovu (Director:
Experience
Organisational Resources)
Jacob is the Director responsible for all human resources functions in the Company. The
Nationality: Zambian
function also encompasses the security section. Jacob has extensive experience in human
Qualifications: Bachelor of Arts
resources, having worked for over 20 years in the human resources sector of the Copperbelt
degree (University of Zambia) and a
mines. Before joining CEC, Jacob worked at Ndola Lime as Human Resources Manager. He
degree in Occupational Psychology
serves as Secretary to the Remuneration and Employee Development Committee of the CEC
(University of Sheffield)
Board.
ANNEXURE 6: DIRECTORS AND SENIOR MANAGEMENT OF CEC SUBSIDIARIES CEC Africa The full names and profiles of the Directors of CEC Africa are below. The business/physical address and postal address of the Directors is 4th Floor Ebene Skies, Rue de l’Institut, Ebene, Mauritius. Director
Brief profile
Non-Executive Directors Name: Amal Autar
Experience
Nationality: Mauritian
Amal is an executive director of Mauritius International Trust Company, a position he has
Qualifications: Bachelor’s Degree from
held since 2007. His career in trust and corporate service work spans more than 15 years
the University of Witswatersrand;
in the global business sector; where he has built extensive experience in the structuring
Associate of the Institute of Chartered
and administration of global business companies, trusts and funds. Amal is an associate
Secretaries and Administrators
member of the Society of Trust and Estate Practitioners.
Name: Bishwarnath Bob Bachun
Experience
Nationality: Mauritian
Bishwarnath has over 25 years’ experience in banking, auditing and management of
Qualifications: Fellow of the Chartered
companies including administration and setting up of funds. He is currently an executive
Association of Certified Accountants,
director of Mauritius International Trust Company. Previously he was the Managing Director
UK.
of Halifax Management Limited. Bishwarnath is a Fellow of the Chartered Association of Certified Accountants, UK.
74
COPPERBELT ENERGY CORPORATION PLC
Name: Siyanga Malumo
Experience
Nationality: Zambian
Siyanga Malumo is an acknowledged power and infrastructure expert in Africa. He has over
Qualifications: Bachelor of Arts
thirty years’ experience in investment banking; and as Chief Executive Officer of Meridien
(Business, Economics, Laws) from the
BIAO Bank, he created a network of banks in West Africa. Siyanga also held senior positions
University of Zambia; MBA from McGill
in the African Development Bank and the International Commercial Bank.
University; Diploma in French from the University of Madagascar; Diploma in Portuguese from the Escola Cambridge in Lisbon
Full name: Klaas Bleeker (Refer to Annexure 5 for profile) Executive Directors Name: Michael John Tarney (Refer to Annexure 5 for profile)
Realtime The full names and profiles of the Directors of Realtime are below. The business/physical address of the Directors is Plot 78, Luzi Road, Northmead, Lusaka. The postal address is P O Box 38688, Lusaka. Director
Brief profile
Non-Executive Directors Name: Michael John Tarney (Refer to Annexure 5 for profile)
Name: Ron F Hyslop
Experience
Nationality: Zimbabwean
Ron Hyslop was, in 1980, one of the founder shareholders of Realtime Computers Zimbabwe
Qualifications: No formal tertiary
and has over the years been responsible for the vision of Realtime. He has been responsible
qualifications
for the expansion of Realtime into South Africa, Botswana and Zimbabwe. Ron has a flair for business development and works with Realtime Zambia to identify new opportunities.
Name: Hanson Sindowe (Refer to Annexure 5 for profile) Name: Shuller Habeenzu
Experience
Nationality: Zambian
Shuller Habeenzu is founder and Director of ITM Consult - a research driven consultancy
Qualifications: Degree in Mathematics
working at the intersection of information technology, business, education, health and the
(UNZA), Master in Computer Science
environment. Prior to that, from 2008 Shuller served as CEO of the Zambia Business Forum,
(University of Essex), Associate
facilitating public-private sector dialogue on business reforms, including liberalisation of
member for Certified Fraud Examiners
the international gateway. Shuller has over twenty years’ experience in the development and management of Information and Communication Technology in various capacities including leading the transformation of Zamnet’s pioneer ISP; General Manager of UUNET Zambia (a corporate data network services provider); Chief Executive Officer of the ICT regulatory authority in Zambia; as well as co – leader of the ICT Policy Technical team established to draft the national ICT Policy. Shuller is a member of the National ICT Sector Advisory Group and Zambian node for Research ICT Africa, a pan-African ICT research network.
RIGHTS OFFER DOCUMENT 2014
75
Name: David Edward Beaumont Long
Experience
Nationality: Zimbabwean
David has over 30 years’ experience in business development and leadership. He served as
Qualifications: Bachelor of Law
Chairman and Chief Executive of Lyons Africa Holdings, which operated in Zimbabwe and
degree, MBA, member of the Chartered
Zambia. He is also a consultant for a number of organisations in Zimbabwe with emphasis
Institute of Arbitrators, Fellow of
on strategy planning, change management initiatives and corporate finance transactions.
the Institute of Directors, Accredited
David is engaged in directing several businesses. He is the Chairman of the Beit Trust
Mediator and graduate member of
Correspondents for Zambia, Malawi and Zimbabwe as well as a Trustee of Childline. David
the International World Presidents
holds a Bachelor of Law degree, MBA, is a member of the Chartered Institute of Arbitrators,
Organisation.
Fellow of the Institute of Directors, Accredited Mediator and a graduate member of the International World Presidents Organisation.
Executive Directors Name: Kenneth Roy Hyslop
Experience
Nationality: Zimbabwean
Ken has been with Realtime since 1987 and helped grow a small computer business in 1987
Qualifications: Bachelor of Commerce
into a large multi-company ICT business by 2001 with offices in Harare, Bulawayo, Gweru, Lusaka and Gaborone. In 2001 Realtime was launched in Zambia and he helped grow it into a serious player in the large ICT project sector in Zambia. In 2005, he helped establish Realtime as an Internet Services Provider that has grown from strength to strength. Apart from Board duties, Ken also serves as Managing Director – Corporate Development.
Senior Management Name: Samson Longwe (Managing
Experience
Director)
Samson was seconded to Realtime Zambia from Copperbelt Energy Corporation PLC where
Nationality: Zambian
he worked as Business Development Manager. His initial task at Realtime Zambia, prior to
Qualifications: Degree in Economics
his appointment as Managing Director in 2010, was to establish the Company’s Commercial
and Business Administration
Department with the objective to grow the company’s market share. He has more than 15 years of post-graduate experience with a particular focus on commercial and strategic management.
Name: Mwape Chilufya (Finance
Experience
Director)
Mwape is a chartered accountant with over 8 years’ experience in the Energy and
Nationality: Zambian
Communication industries. He has been with Realtime since 2010 and has been heading the
Qualifications: Chartered Accountant
Finance function for the last two years.
with ACCA Name: Suzyo Chipeta (Technical
Experience
Director)
Suzyo has over 8 years’ extensive experience in design, implementation and integration of
Nationality: Zambian
ICT systems. He has extensive knowledge in the deployment of key communication network
Qualifications: Bachelor of Science
infrastructure such as optic fibre, VSATs and wireless technologies.
Degree in Computing and a Diploma in Telecommunications Engineering
76
COPPERBELT ENERGY CORPORATION PLC
Name: Boyd Banda (Sales and
Experience
Marketing Director)
Boyd has a wealth of experience in marketing, sales and advertising with over 13 years’
Nationality: Zambian
experience at senior management level and a proven track record.
Qualifications: MSc in Marketing (University of Glamorgan), Higher Diploma in Marketing (UK), member of the Chartered Institute of marketing UK (MCIM) and the Zambia Institute of Marketing (MZIM) Name: Mable Chishimba (Director
Experience
Corporate Planning and Strategy)
Mabel is a graduate of the Chartered Institute of Management Accountants (CIMA) with
Nationality: Zambian
extensive experience in the Energy and Communication sectors. She was initially seconded
Qualifications: CIMA
from CEC to Realtime as the Finance Director, but was later moved to head the new department in Realtime that looks at the corporate strategy of the business.
Name: Moono Sindowe (Head of
Experience
Human Resources)
Moono joined Realtime Zambia initially under the Commercial Department but was later
Nationality: Zambian
upgraded to establish the company’s HR Department, which she currently heads. She has
Qualifications: Bachelor of Arts
extensive knowledge in organizational dynamics, Industrial Psychology and general human
Degree in Business Management
resources management.
and Industrial Psychology, associate member of the Zambia Institute of Human Resources Management Name: Clara Mvula (Company
Experience
Secretary)
Clara has experience in property management and valuation. She has over 10 years of
Nationality: Zambian
experience in company secretarial and administration.
Qualifications: Bachelor of Science (Land Economy) (CBU) Masters in Business Administration (University of Westminster)
CEC Liquid The full names and profiles of the Directors of CEC Liquid are below. The business/physical address of the Directors is 37B Cheetah Road, Kabulonga, Lusaka. The postal address is Postnet 145, Private Bag E835, Kabulonga, Lusaka. Director
Brief profile
Non-Executive Directors Name: Hanson Sindowe (Refer to Annexure 5 for profile) Name: Michael John Tarney (Refer to Annexure 5 for profile) Name: Nicholas Trevor Rudnick
Experience
Nationality: German
Nic Rudnick is founder, CEO & Director of the Liquid Telecommunications Group, one of the
Qualifications: BA (Law), LLB (Cape)
largest and fastest growing Satellite and Fibre optic providers on the African continent with
and LLM (Telecommunications)
operations and infrastructure in 12 countries. Nic is a well-recognized entrepreneur and legal expert within the industry.
RIGHTS OFFER DOCUMENT 2014
77
Name: Wellington Makamure
Experience
Nationality: Zimbabwean
Wellington is currently Managing Director of Liquid Telecommunications Zimbabwe. He has
Qualifications: Degree in Physics, MBA
over 23 years’ experience in the telecommunications and electronics industry with 18 of those years at very senior management levels.
Name: Andrew Kapula
Experience
Nationality: Zambian
Andrew is the Senior Manager-Telecoms & Information Technology at CEC. He has vast
Qualifications: Degree in Electronics
experience in Information and Communication Technologies and has held different
and Telecommunications Engineering
positions since joining the Company in 1995. In his current role, he is responsible for
and a Masters degree in Computing
formulating policies and procedures for the corporate telecoms and IT function.
Systems Design Name: Garth Douglas Schooling
Experience
Nationality: South African
Garth is the immediate past Managing Director of CEC Liquid Telecommunications Zambia.
Qualifications: Masters Diploma in
He has 40 years’ experience in the Telecommunications industry, covering all aspects of the
Technology, a Diploma in Data-metrics
industry, and including telecommunications and management consulting. The initial 33 of
and a Project Management Diploma
those years were with Telkom SA, of which 14 were in Senior Management.
Senior Management Name: Dr. Jerome Chabuka Kawesha
Experience
(Managing Director)
Dr Kawesha has 20 years’ work experience with 6 years in the Petroleum energy sector and
Nationality: Zambian
over 14 years in the ICT sector. He was formerly with Airtel including its fore-runners Celtel
Qualifications: Doctorate in
and Zain until 30th October 2013 and has served various private and public institutions
Business Administration (DBA) -
at board and committee levels. He was previously board chairperson for the Pensions and
Telecommunications Management
Insurance Authority (PIA).
(AIU, USA), Masters - International Management (Rushmore, USA), MMBA Liberalized Telecom Markets (LTM) (Blekinge Tekniska Hogskola - Institute of Technology, Sweden), Certificate in Computer Programming & Information Processing (London City College, UK). Other academic attainments include Certificate in Civil and Commercial Mediation (Stellenbosch University, SA) and Corporate Governance Name: Jonathan Soko (Chief Operating
Experience
Officer)
Jonathan has over 20 years’ experience in the ICT and industrial control industries, 5 of
Nationality: Zambian
which were at senior management and executive level. His most recent positions before
Qualifications: Degree in
joining CEC Liquid Telecom were Deputy CEO of Realtime, Zambia, and Director Special
Telecommunications Systems,
Projects at CEC. Jonathan is currently studying for an MBA.
Design and Management, Diploma in Telecommunications
78
COPPERBELT ENERGY CORPORATION PLC
Name: Gerrie B Opperman (Head
Experience
Strategy & Planning)
Gerrie is responsible for Network Planning, Strategy, and Product Development. Gerrie has
Nationality: South African
more than 41 years’ experience in most disciplines in the ICT industry, 16 years of which
Qualifications: Master’s Diploma
were at senior management and executive level. His most recent position prior to joining
in Technology, National Teacher’s
CEC Liquid Telecom was Executive: Network Planning, Strategy, and Product Development
Diploma Technical and multiple post
with Multi-Links Telkom, Nigeria.
qualification courses Name: Marjorie Nalubamba (Head
Experience
Marketing & Sales)
Marjorie is responsible for identifying new markets, being involved in new product
Nationality: Zambian
development and handling public relations activities. Marjorie has over 20 years’ experience
Qualifications: Chartered Marketer,
in ICT sales with the last 10 years in the telecommunications industry.
Bachelor of Science, Mathematics with Computer Science and MBA
Name: Edgar R Mvula (Human
Experience
Resources Manager)
Edgar is responsible for managing the human capital aspects of CEC Liquid Telecom
Nationality: Zambian
including industrial relations, manpower services and training. Edgar has been a Human
Qualifications: Commerce Degree (in
Resources practitioner for over 20 years and was Employee Relations Manager with
Human Resource Management) with
Copperbelt Energy Corporation PLC from 2004. His experience as a Human Resources
a major in Business Management,
practitioner has been in all the areas of the Human Resources function including activities
Diploma in Education and a Diploma in
relating to labour relations, manpower planning, pay accounting and conditions of service.
Training Management Name: Bright Tembo (Chief Financial
Experience
Officer)
Bright is responsible for all financial aspects of the operations of CEC Liquid Telecom. Bright
Nationality: Zambian
is a UK Chartered Accountant with over 24 years’ experience in Accounting practice, 16
Qualifications: UK Chartered
years of which were in the mining industry, and 4 years on World Bank projects. The senior
Accountant
positions he has held include Group Accounting Manager for Mopani Copper Mines, Finance Director at Nampak Zambia Limited and Finance Director at Realtime Zambia Limited.
Name: Mevis Kasongo Chisanga
Experience
(Company Secretary)
Mevis is the CEC Senior Legal Counsel – Corporate Development. She has 19 years post
Nationality: Zambian
graduate experience in Corporate and Commercial law, Corporate Advisory Services,
Qualifications: Bachelor of Laws
Litigation, Conveyance and Company Secretarial. Mevis also has specialisation in energy,
Degree (University of Zambia),
construction and family law. She has previously held senior positions in both NGOs and the
Advocate of the High Court and
private sector. Mevis is an active member of the Law Association of Zambia and currently
Supreme Court of Zambia
sits on the Women’s Rights Committee. She is also the Company Secretary on the Boards of: •
CEC Pension Trust Scheme
•
CEC Properties Ltd
•
Sinazongwe Energy Corporation Ltd
RIGHTS OFFER DOCUMENT 2014
79
CEC Kabompo Hydro Power Limited The full names and profiles of the Directors of Kabompo are below. The business/physical address of the Directors is Stand 3614, 23rd Avenue, Nkana East, Kitwe. The postal address is P O Box 21076, Kitwe Director
Brief profile
Non-Executive Directors Name: Hanson Sindowe (Refer to Annexure 5 for profile) Name: Michael John Tarney (Refer to Annexure 5 for profile) Name: Julia Chaila (Refer to Annexure 5 for profile) Name: Stephen Katuka
Experience
Nationality: Zambian
Currently serving as Member of Parliament for Mwinulunga Constituency and serving on
Qualifications: Advanced Telecoms
several Parliamentary Committees. Mr Katuka previously served in the Zambia Army from
Technician Course from the Zambia
1972 to 1992 and sits or has sat on the following boards:
Institute of Technology; Radio
•
Webber Finance Limited
Technician Course from Military
•
Hutchissons Contracts and General Dealers
Technician College and Technology
•
Mwinilunga Minerals
from the International Computer
•
Lunga Mineral Resources
Limited (ICL) Name: Mayondi Kalwiji
Experience
Nationality: Zambian
A former civil servant commanding over 20 years of service and rising to the Position of
Qualifications: Bachelor of Education
Director – Parliamentary Business in the office of the Republican Vice President, Mr Kalwiji
with Adult Education (UNZA);
is now a businessman and Managing Director of Lunga Car Hire.
Certificates in Hardware Maintenance and Software Skills (Technical College of South Africa), Disaster Management, Adult Education (UNZA) and Diploma in Education (UNZA)
Senior Management Name: Humphrey Mulela (Managing
Experience
Director)
Humphrey is Managing Director of Kabompo. Prior to his retirement from CEC in 2009,
Nationality: Zambian
Humphrey held various senior positions, both in CEC and its predecessor ZCCM, including
Qualifications: Bachelor of
Chief Operating Officer, Operations Director and Director Organisational Resources. He has
Engineering, Degree University of
34 years of work experience in mining industry engineering operations and in the electrical
Zambia
energy sector. He is a Member of the Engineering Institution of Zambia.
Name: Vincent Nyirenda
Experience
Nationality: Zambian
Vincent is the company’s Commissioning Director; responsible for developing the Kabompo
Qualifications: Bachelor of Science
Gorge Hydroelectric Power Project. Previously, Vincent served in various positions in CEC,
Degree in Mechanical Engineering
rising to position of Compliance and Quality Manager. He has 10 years of work experience in
(UNZA) and Post-Graduate Diploma in
business process re-engineering and 5 years’ experience in leadership development. He is a
Management studies (Management
member of the Engineering Institution of Zambia.
College of South Africa)
80
COPPERBELT ENERGY CORPORATION PLC
Name: Lizzie Muwowo
Experience
Nationality: Zambian
Lizzie is Finance Director for the company. She joined ZCCM, the predecessor to CEC, as
Qualifications: Bachelor of
a Graduate on Development and rose to the position of Management Accountant. In
Accountancy Degree from the
CEC, she has held various positions including that of Financial Operations Accountant,
University of Zambia; Fellow of the
Re-engineering Officer, Internal Audit Manager as well as Senior Manager – Strategy &
Association of Chartered Certified
Performance Management. She has over 25 years’ working experience and has extensive
Accountants; Member of ZICA
accounting and management experience.
Name: Chishimba Lamba (Company
Experience
Secretary)
Chishimba is currently the CEC Senior Legal Counsel – Core Business. He has 10 years post
Nationality: Zambian
bar experience. He worked for several years in one of the country’s larger law firms where he
Qualifications: Bachelor of Laws
practiced in various legal areas. Chishimba is currently involved in the core legal work for the
Degree (University of Zambia),
operations division of CEC and has gained immense experience in construction, commercial
Advocate of the High Court and
and energy law. He is responsible for providing legal guard to the Company’s corporate
Supreme Court of Zambia.
governance policies and procedures. Chishimba is an active litigator handling most of the Court matters to which the Company is a party. He is a member of the Law Association of Zambia.
ANNEXURE 7: CORPORATE GOVERNANCE In recognition of the importance of conducting its affairs with integrity and in accordance with generally accepted good corporate practice, the Company remains resolute in its commitment to the principles of integrity, openness and accountability. The Company fully supports the principles of good corporate governance adopted from the LuSE Corporate Code of Governance. The Company’s corporate governance philosophy encompasses not only regulatory and legal requirements such as those under the Corporate Governance Code but also several voluntary practices at a high level of business ethics, effective supervision and enhancement of shareholder value. It is in this context that the Company has implemented the following committees and procedures: Board of Directors The Board formulates the overall strategies and policies of the Company. The Board’s principal duty is to promote the long term success of the Company by creating and delivering sustainable shareholder value and also the achievement of any short term objectives. As at 31 December 2012, the Company had a unitary Board with 12 Directors, 9 of whom are Independent Non-Executive Directors and three of whom are Executive Directors. The Board is unitary in terms of structure and not in appointments or representation. The composition of the Board promotes a balance of authority and prevents any one Director from exercising undue influence over decision making. The Board has six Committees whose duties and responsibilities are set out in the respective terms of reference. The appointment and replacement of Directors is governed by its Articles of Association. On appointment, Directors are made aware of what is expected of them in terms of their duties as Directors in and outside Committee and Board meetings. The Board is the highest governing authority in the Company and has ultimate responsibility for corporate governance. The Board appreciates that strategy, risk, performance and sustainability are inseparable and is responsible for approving the strategic direction of the Group, which integrates these elements. The Board is governed by the Articles that sets out the framework of its accountability, responsibility and duty to the Company. The Board has a fiduciary duty to conduct its business in the best interest of the Company and, in discharging its duty, RIGHTS OFFER DOCUMENT 2014
81
ensures that the Company performs in the best interests of its stakeholders. The Company’s key stakeholders include present and future investors, clients, business partners, employees, regulators and the societies in which it operates. The Company has an Executive Chairman and in compliance with the LuSE Corporate Code of Governance, the Board has appointed a Non-Executive Director as Deputy Chairperson. For a brief CV of each Director please see Annexure 5 above. Board meetings The Board meets formally at least 4 times a year. In addition, Directors meet ahead of the scheduled meeting at which the Group’s budget and business plan is examined in the context of an approved strategy. At this meeting, the Directors engage with senior executives on the implementation of the Group’s strategy. The Board has adopted a policy to visit key operations on an annual basis. All Directors are kept informed between meetings of major developments affecting the Group. The record of attendance at Board meetings for the financial year ended 31 December 2012 is set out in the table below. Board Meetings and Directors’ Attendance Number of Meetings held in the year: 4 Number of Meetings Attended DIRECTORS Hanson Sindowe
4
Jean Madzongwe
3
George Zulu
2
Edson Hamakowa
3
Michael Tarney
4
Abel Mkandawire
4
Munakupya Hantuba
2
Reynolds Bowa
1
Neil Croucher
4
Pius H Maambo
4
Klaas Bleeker
3
Hampande Hachongo
1
Alternate Directors* Leon Cornelius
1
Oscar Kalumiana
2
Vine Mwense
1
The meetings set out above reflect the period 1 January 2012 to 31 December 2012. *Alternate Directors for duration of Board meetings only. Independence of the Board The Independent Non-Executive Directors complement the Executive Directors through the diverse range of skills and experience they have from their involvement in other businesses and sectors. They also provide independent perspectives on corporate governance and general strategy to the Board as a whole. The roles of Chairman and Managing Directors are separate. The Chairman, an Executive Director, presides over the Board, providing it with effective leadership and ensuring that all relevant information is placed before it for decision. CEC has two Managing Directors: the Managing Director of Corporate Development Division and the Managing Director of Operations. 82
COPPERBELT ENERGY CORPORATION PLC
The Company has a formal Conflict of Interest policy on the declaration and management of conflicts of Directors and Officers of the Company. Any potential situation or transactional conflict by a Director must be reported to the Chairman or Company Secretary or declared at a meeting at which the matter is to be discussed at the Board. Appointment and re-election of Directors The policy on Director appointments and re-election to office, and the nomination and evaluation processes to be followed are prescribed in the Company’s Articles of Association. A Director must be appointed by member(s) holding at least 10% of the nominal share capital. The nomination committee considers and makes appropriate recommendations to the Board on the appointment and re-election of Independent Non-Executive Directors whose final appointment is undertaken corporately by the shareholders at the Annual General Meeting of the Company. All recommended Director appointments are subject to background and reference checks. Re-election of Directors to the Board are made according to a formal and transparent process. Each Non-Executive Director is given a letter of appointment. Non-Executive Directors Non-Executive Directors, representing shareholders holding 10% or more of the issued share capital in the Company, hold tenure on the Board as determined by their respective appointing authority. Independent Non-Executive Directors can hold office for up to three years but retire annually and are not eligible for re-election after their three year tenor has ended. Non-Executive Directors receive a Directors fee for their contribution to the Board which is remunerated on a quarterly basis and are paid sitting allowances for Board and Committee meeting at which they are in attendance. In addition to the fees and allowances, Non-Executive Directors are entitled to claim travelling and other expenses incurred in carrying out the business of the Company and attending Board and committee meetings. Remuneration of Directors The Directors have no power to vote remuneration to themselves or any members of their board. Board Committees The Board has established and mandated a number of permanent standing committees to perform specific work on its behalf in various notable areas affecting the business of the Group. They are the: •
Executive Committee;
•
Audit Committee;
•
Remuneration and Employee Development Committee;
•
Safety, Health and Environment (SHE) Committee;
•
Business Development Committee; and
•
Nominations Committee.
Although all the committees assist the Board in the discharge of its duties and responsibilities, it does not abdicate its responsibilities. The Board and each committee give attention to new and existing governance and compliance matters according to their respective mandates. Each committee operates according to Board-approved terms of reference. In accordance with the LuSE Corporate Governance Code, a Non-Executive Director chairs each Board committee. The committee chairpersons are appointed by the Board. Each committee chairperson participates fully in setting the agenda and reporting back to the Board at the Board
RIGHTS OFFER DOCUMENT 2014
83
meeting that follows a committee meeting. Each committee chairperson attends the Annual General Meeting and is available to respond to shareholder questions on committee activities. During the financial year ended 31 December 2012, all committees conducted a self-assessment of their effectiveness with positive outcomes in each case, and all committee terms of reference were also reviewed and updated. The Board has established committees to oversee various aspects of the Company’s business and operations. The Board has delegated its authority on certain defined areas to these committees. The committees comprise Executive Directors, Non-Executive Directors and senior management. Reports of committee meetings are submitted at each Board meeting. Executive Committee The Board has an Executive Committee whose role is to oversee the major operations of the business including key customer issues, stakeholder management, financial performance, capital projects and management issues. The committee comprises six members and is chaired by Jean Madzongwe, the Deputy Chairperson of the Board. Audit Committee The Committee provides oversight on the effectiveness of The Group’s financial reporting systems and accuracy of information and that the Group’s published financial statements represent a true and fair reflection of this position. The Committee ensures that appropriate accounting policies, controls and compliance procedures are in place and also risk management, compliance management and other internal control activities in the Company. The committee comprises four members, who are all Non-Executive Directors and is chaired by Edson Hamakowa. The Audit Committee sets the principles for recommending the use of the external auditors for non-audit services. Remuneration and Employee Development Committee The Committee oversees employee remuneration and Mineworkers Union of Zambia (MUZ) wage negotiations, key organisational changes, management and leadership development, pension scheme arrangements, training and employee development policies. The committee comprises five members and is chaired by Abel Mkandawire. Safety, Health and Environment (SHE) Committee The committee’s key mandate is to ensure that management of SHE matters in the Company are aligned with the overall business strategy of the Company and is geared towards attainment of its commitments and obligations in these fields. The committee comprises of four Non-Executive Directors and five members of senior management including the two Company Managing Directors. The Chairman of the committee is Pius H Maambo. Business Development Committee The committee is responsible for reviewing and approving the Company’s new business development projects and related matters. The committee comprises of seven members and is chaired by Munakupya Hantuba. Nominations Committee The Committee is tasked with the responsibility of considering candidates for appointment to the Board and making recommendations for approval of Independent Directors, whose appointments are undertaken by the shareholders at the general meetings of the Company. The Committee is chaired by the Chairperson of the Board, Hanson Sindowe. The Nominations Committee makes appropriate recommendations for appointment of Directors, following a careful and considered evaluation of the balance of skills, knowledge and experience and that there is diversity in Board membership.
84
COPPERBELT ENERGY CORPORATION PLC
Fraud and whistle blowing CEC has developed whistle blowing procedures to enable employees who have concerns over the conduct of the Company or any of its employees in any area to report these concerns in a confidential manner, such that the issues raised can be investigated and addressed independently. Declaration of interests The Directors of CEC have no material beneficial interests in the Rights Offer in their capacity as Directors whether directly or indirectly. Limitations of powers in the Articles There is nothing in the Articles of CEC which limits the power of a Director and/or the Company Secretary from voting on a proposal, arrangement or contract so long as the particular Director or the Company Secretary discloses his or her interest to the Board prior to the voting or decision making process.
ANNEXURE 8: REVISED LISTING PARTICULARS These Revised Listing Particulars do not constitute an invitation to the public to subscribe for CEC Shares, but are issued for the purposes of giving information to Shareholders with regard to the Company and the Rights Offer. These Revised Listing Particulars contain the information required in terms of the Listings Requirements and have been included given that implementation of the Rights Offer will result in CEC issuing Rights Offer Shares amounting to 62.5 percent of its current issued share capital. At the Last Practicable Date, the authorised share capital of CEC comprised 2,000,000,000 authorised ordinary shares and CEC had authorised share capital of ZMW 20,000,000. A total of 625,000,000 CEC Shares are offered for subscription upon the terms and conditions set out in this Rights Offer Document. The Rights Offer is made by way of renounceable rights, at a subscription price of ZMW 0.62 per Rights Offer Share on the basis of 5 Rights Offer Shares for every 8 CEC Shares held by Qualifying Shareholders at the close of trade on the Record Date. Details of CEC’s rationale for the Rights Offer and use of proceeds are set out under “Rationale of the Rights Offer and use of proceeds” in section 1.2. The Rights Offer Shares will, upon allotment and issue, rank pari passu with all other existing ordinary shares and shall be fully paid and freely transferable. CEC Shares will be traded on the LuSE Only whole numbers of shares will be issued and CEC Shareholders will be entitled to subscribe for rounded numbers of CEC Shares once the Ratio of Entitlement has been applied. Fractional Rights of 0.5 or greater will be rounded up and fractional Rights of less than 0.5 will be rounded down. Excess applications will not be allowed The Directors, whose names are listed on page 14, collectively and individually accept full responsibility for the accuracy of the information given and certify that to the best of their knowledge and belief there are no facts that have been omitted which would make any statement false or misleading and that all reasonable enquiries to ascertain such facts have been made and that this document contains all information required by law and the Listings Requirements. Each of the sponsors and advisers, including the independent reporting accountants, whose names appear in the “Corporate Information and Advisers” section of this Rights Offer Document have consented in writing to act in the capacities stated and to their names being stated in these Revised Listing Particulars and have not withdrawn their
RIGHTS OFFER DOCUMENT 2014
85
consent prior to the publication of these Revised Listing Particulars. The Rights Offer timetable is set out under page 10 of this Rights Offer Document. 10.1
Information on the Group Information on CEC and its subsidiaries is outlined under the “Information on CEC” section of this Rights Offer Document. Incorporation particulars in respect of CEC and its subsidiaries is summarised below:
Company
CEC
CEC Africa
CEC Liquid
Realtime
Kabompo
Place of
Lusaka, Republic
Ebene, Republic of
Lusaka, Republic
Lusaka, Republic
Lusaka, Republic
incorporation
of Zambia
Mauritius
of Zambia
of Zambia
of Zambia
Date of
19 September
incorporation
1997
7 February 2013
12 May 2011
15 January 2001
7th February 2013
114510
92298
46358
99488
USD1,000
ZMW10,000
ZMW5,000
ZMW10,000
USD1,000
ZMW10,000
ZMW5,000
ZMW5,000
Registration
39070
number
Authorised share capital
Issued share capital
10.2
ZMW20,000,000 and ZMW1.40 Special Share ZMW10,000,000 and ZMW1.40 Special Share
Financial information CEC’s historical financial information, in respect of the 3 years ended 31 December 2010, 2011 and 2012, is set out in Annexure 3. Pro forma financial information is set out in Annexure 2.
10.3
Information on the Directors and Senior Management of CEC Information on CEC’s Directors and senior management is provided in Annexure 5. Information on the Directors and senior management of CEC Subsidiaries is outlined in Annexure 6.
10.4
Share capital and major shareholders Information on CEC’s share capital and its shareholder spread, pre and post the Rights Offer, is outlined in section 1.6.5.
10.5
Variations to rights attaching to shares The rights attached to any class (unless otherwise provided by the terms of issue of the Shares of that class) may, whether or not the Company is being wound-up, be varied with the consent in writing of the holders of three-quarters of the issued Shares of that class, or with the sanction of a Special Resolution passed at a separate General Meeting of the holders of the Shares of the class. The rights conferred upon the holders of the Shares of any class issued with preferred or other rights shall, unless otherwise expressly provided by the terms of issue of the Shares of that class, be varied by the creation
86
COPPERBELT ENERGY CORPORATION PLC
or issue of further Shares ranking equally with the first-mentioned Shares. 10.6
Material capital commitments, contingent liabilities and lease payments Details of the Company’s capital commitments, contingent liabilities and lease payments, as outlined in the Company’s historical financial statements (Annexure 3) are set out below: 2012
2011
2010
Leased vehicles
8,770
8,402
7,807
Lease payments
2,795
3,011
2,225
134,931
69,141
65,999
4,215
12,793
7,194
-
-
-
4,215
12,793
7,194
In ZMW'000
Operating lease
Capital expenditure and commitments Capital expenditure Capital commitments* Contingent liabilities Contingent Liabilities
* Commitments are in respect of the Company’s capital expenditure. 10.7
Material borrowings, loans receivable and loans to Directors In ZMW'000
2012
2011
2010
(67,856)
(3,582)
(9,592)
(77,199)
(115,015)
(96,412)
(4,117)
(51,171)
(47,960)
(149,173)
(169,767)
(153,964)
Company loans held CITI Bank Loan Facility of USD35m African Life Financial Service Loan of USD10m Stanbic Loan of USD40m
These borrowings were undertaken to fund the Company’s working capital and capital expenditure requirements. Directors’ Loans Held 2012
2011
2010
Hanson Sindowe
386
480
556
Michael J Tarney
513
329
236
1,640
614
824
2,539
1,423
1,616
In ZMW'000
Employee Share Option (ESOP) Loans
Neil Croucher
RIGHTS OFFER DOCUMENT 2014
87
2012
In ZMW'000
2011
2010
Vehicle Loans Hanson Sindowe
19
Michael J Tarney
19
Neil Croucher
0
86
38
86
Neil Croucher ceased to be a Director on 27th August 2013.
10.8
Additional information 10.8.1 Principal immovable property 10.8.1.1 Principal immovable property owned or leased Details of the principal immovable properties owned or leased by CEC and its subsidiaries are outlined in Annexure 3. 10.8.1.2 Material acquisitions of property •
50% stake in CEC Liquid Telecoms CEC Liquid Telecoms is a joint venture company formed by CEC and Liquid Telecommunications Holdings Ltd. It was incorporated in May 2011. CEC Liquid owns and operates a nation-long haul broadband fibre-based backbone from Chirundu to Kasumbalesa. Its business is the provision of high quality product/services through wholesaling of fibre bandwidth, terrestrial internet bandwidth and lease of dark fibre.
•
50% stake in Realtime Realtime is an internet service provider (ISP) and focuses on a niche market of corporate customers. Its core business comprises provision of high speed internet services and private leased circuits using optic fibre technology. Realtime’s joint venture with CEC has enabled the company to become the largest optic fibre network provider in Zambia; with connection to submarine fibre cables that connect the rest of the world.
•
60% in Abuja Electricity Distribution Company (Abuja, Nigeria) CEC and its Nigerian partners (together, KANN SPV) were selected preferred bidder for the purchase of the State-run electricity distribution company of Abuja. A Sale and Purchase Agreement, for the acquisition of 60% interest in the company was signed with the Government. KANN is a joint venture of CEC and Xerxes Global Investments Ltd, Nigeria. CEC holds 75% in the company.
•
20% in Shiroro Hydro Power Company CEC and its Nigerian partners (together, North South Power) were awarded a 30 year concession to operate the 600MW Shiroro Hydro Power Plant. CEC has 20% interest in the company.
•
Arandis A Development Agreement was signed in November 2012 for the development of a 120 MW Heavy Fuel Oil (HFO) power plant in the mining town of Arandis, Namibia. The Project is to utilise HFO imported into Walvis Bay port, but also includes a waste oil recycling facility that
88
COPPERBELT ENERGY CORPORATION PLC
will process waste oil from ships docking at Walvis Bay and other locations in the Southern African region. It is intended that the project will supply power to the Namibian power utility, NamPower, under a long term purchase agreement.
10.8.1.3 Material disposals of property No material property has been disposed of in the in the last five years as at the date of this Rights Offer Document 10.8.2 Subsidiary companies Details of CEC’s primary operating subsidiary companies are set out in the “Information on CEC” section in paragraph 1.6. 10.8.3 Royalties CEC does not pay any royalties to any entity; neither private nor governmental. 10.8.4 Promoters No promoter had any material beneficial interest, direct or indirect, in the promotion of CEC or in any property acquired or proposed to be acquired by CEC out of the proceeds of the issue or during three years preceding the Last Practicable Date. There have been no commissions paid or payable in respect of underwriting during the three years preceding the Last Practicable Date. There have been no commissions, discounts, brokerages or other special terms granted in connection with the issue or sale of any securities, stock or debentures in the capital of CEC, where this has not been disclosed in any audited annual financial statements, excluding the below: DBSA Loan •
The $10m loan was fully repaid in June 2012. The loan was secured on the Cosak substation. The debentures created under English and Zambian law as security for the loan are yet to be discharged.
African Life Financial Services loan •
The $15m will be repaid by September, 2017. The loan is secured on the NFC and Luanshya Copper mines receivables. A debenture was created under Zambian Law.
10.8.5 Material contracts No material contracts have been disposed of in the in the last five years as at the date of this Rights Offer Document. 10.8.7 Borrowing Powers The Directors may exercise the powers of the Company to borrow money, to charge any property or business of the company or all, or any of its uncalled capital and to issue debentures or give any other security for a debt, liability or obligation of the company or of any other person provided that: •
the Directors may not give any guarantee or indemnity or create any encumbrance over all or any
RIGHTS OFFER DOCUMENT 2014
89
of the undertaking, property, assets or uncalled share capital of the company save for the purposes of financing the rehabilitation, development or expansion of the business without the approval of the approval of Board of Directors representing the interests of members representing ninety percent (90%) in nominal value of the Shares of the Company; and •
the written consent of ZCCM-IH, not to be unreasonably withheld, is required where a mortgage or charge over all or a material part of the Company’s property, assets or undertaking.
The borrowing powers of the Company may be varied by a special resolution of CEC Shareholders. 10.8.8 Debentures No debentures have been issued by CEC or any of its subsidiaries, save for the loans listed below: DBSA Loan •
The USD10m loan was fully repaid in June 2012. The loan was secured on the Cosak substation. The debentures created under English and Zambian law as security for the loan are yet to be discharged.
African Life Financial Services loan •
The USD15m will be repaid by September, 2017. The loan is secured on the NFC and Luanshya Copper mines receivables. A debenture was created under Zambian Law.
10.8.9 Directors emoluments and interest in CEC Shares and service contracts •
Details on Directors emoluments are set out in CEC’s historical financial statements as set out in Annexure 3.
•
There have been no fees paid or accrued as payable to a third party in lieu of Directors’ fees.
•
The remuneration receivable by any of the Directors will not be varied in consequence of the Rights Offer.
•
Details of Directors’ interests in CEC Shares are set out in section 1.6.7 of this Rights Offer Document.
•
Directors’ service contracts, where appropriate, are available for inspection as outlined in section 1.1.2.
10.8.10 Irrevocable undertakings ZECI, ZCCM-IH and Aflife, CEC’s largest shareholders, have entered into agreements with CEC pursuant to which they have irrevocably committed, for CEC’s benefit, to subscribe for not less than 492,654,305 CEC Rights Offer Shares (being approximately 78.8 percent of the CEC Rights Offer Shares). CEC has secured Irrevocable Letters of Undertaking from ZECI, ZCCM-IH and Aflife. 10.8.11 Estimated expenses in relation to the Rights Offer Details of preliminary expenses and estimated expenses relating the Rights Offer are set out in section 1.5 of this Rights Offer Document. 10.8.12 Trading history of CEC Shares on the LuSE A table setting out the trading history of CEC Shares on the LuSE has been included in Annexure 4. 10.8.13 Corporate Governance
90
COPPERBELT ENERGY CORPORATION PLC
Details of CEC corporate governance practices are set out in Annexure 5.
10.8.14 Business prospects The Directors opinion on the prospect of the Business of CEC is set out on in section under the section titled “Information on CEC”. 10.8.15 Options or Preferential rights in respect of Securities The Company does not have any options or preferential rights in respect of the Company’s Shares. 10.9
Details of government protection and of any investment encouragement law affecting CEC There are legal provisions currently in force in Zambia which encourage and protect investments. The Constitution of the Republic of Zambia in Article 16 recognizes and protects investment property. The Zambia Development Agency Act No. 11 of 2006 (the “ZDA Act”) provides tax incentives granted to companies that invest in priority sectors. The energy sector is one of the priority sectors and CEC has taken advantage of and is benefitting from the incentives provided therein. CEC Liquid and CEC Kabompo Hydro Power Limited are also holders of Investment Licences which carry tax incentives under the ZDA Act.
10.10
Dividends and dividend policy The Company’s dividend policy is outlined in the historical financial statements set out in Annexure 3.
10.11
Material changes There has been no material change in the financial or trading position of CEC that has occurred since the end of the last financial period for which either audited annual financial statements or unaudited interim reports have been published.
10.12
Adequacy of capital The Directors are of the opinion that the working capital available to CEC and its subsidiaries, upon raising ZMW387,500,000 through the Rights Offer is sufficient for the Group’s present requirements, that is for at least the next 12 months from the date of these Revised Listing Particulars.
10.13
Litigation statement As at the Last Practicable Date, the Directors are aware that the Company faces a possible arbitration action following a claim by one of its customers as damages for loss of equipment allegedly due to its supply of low quality electricity. CEC is confident of its defence to the claim. CEC has since notified its insurers of the claim and expects a third party settlement in the event of the claim succeeding.
10.14
Directors’ responsibility statement The Directors whose names appear on page 14 of this Rights Offer Document, collectively and individually accept full responsibility for the accuracy of the information given in this Rights Offer Document and certify that, to the best of their knowledge and belief, there are no material facts
RIGHTS OFFER DOCUMENT 2014
91
the omission of which would make any statement in this Rights Offer Document false or misleading and that they have made all reasonable inquiries to ascertain such facts and that this Rights Offer Document contains all information required by law and by the Listings Requirements. The Directors confirm that the listing particulars include all such information within their knowledge (or which it would be reasonable for them to obtain by making enquiries) as investors and their professional advisers would reasonably require and reasonably expect to find for the purpose of making an informed assessment of the assets and liabilities, financial position, profits and losses and prospects of the Company and of the rights attaching to the securities to which the listing particulars relate. 10.14
Directors’ declaration The Directors declaration is included in the documents available for inspection as set out in section 1.10 of this Rights Offer Document.
10.15
Consents Each of the advisers, including the independent reporting accountants, whose names appear in the “Corporate Information and Advisers” section have consented in writing to act in the capacities stated and to their names being stated in these Revised Listing Particulars and have not withdrawn their consent prior to the publication of these Revised Listing Particulars.
10.16
Documents available for inspection Details on the documents available for inspection are set out in section 1.12 of this Rights Offer Document.
92
COPPERBELT ENERGY CORPORATION PLC
Copperbelt Energy Corporation PLC (Incorporated in the Republic of Zambia) (Registration number 39070) Share code: CEC Share ISIN: ZM0000000136 LA code: CECLA LA ISIN: ZM0000000425 (“CEC” or “the Company”)
1.
LETTER OF ALLOCATION AND ACCEPTANCE FORM
RENOUNCEABLE LETTER OF ALLOCATION (“LA”) An offer is hereby made to shareholders of CEC, who were registered as such at the close of business on Friday, 31 January 2014 (“Record Date”), to subscribe for new Ordinary Shares of par value ZMW 0.01 each (“Rights Offer Shares”), at a subscription price of ZMW 0.62 as at Record Date. This offer should be read in conjunction with the Rights Offer Document to CEC Shareholders, dated Monday, 03 February 2014, detailing the terms and conditions of the Rights Offer (“Rights Offer Document”).
2.
CEC RIGHTS OFFER SUBSCRIPTION ARRANGEMENTS 2.1
Summary of Rights Offer Shares to be issued 625,000,000 renounceable Rights Offer Shares are hereby offered to CEC Shareholders, registered as such at the close of business on Friday, 31 January 2014, being the Record Date, for subscription in cash at a price of ZMW 0.62 each, payable on acceptance, on the basis of 5 Rights Offer Shares for every 8 Ordinary Share held as at Record Date. This renounceable Letter of Allocation, posted to Shareholders from Monday, 03 February 2014 sets out the entitlement of the person to whom this Rights Offer Document is addressed.
2.2
Time table
The Rights Offer opens - 10h00
Monday, 03 February
Dealing in LA’s commences
Monday, 03 February
Last day for splitting LA’s – 12h00
Thursday, 20 February
Last day for dealing in LA’s – 12h00
Friday, 21 February
Last day for receiving postal acceptances
Wednesday, 26 February
Rights Offer closes – 17h00 3.
Friday, 28 February
COURSES OF ACTION Set out below are the various options open to Shareholders with respect to the rights accruing to them in terms of the Rights Offer: 3.1
Acceptance - SUBSCRIBE for all the Rights Offer Shares offered
RIGHTS OFFER DOCUMENT 2014
93
A person to whom this Rights Offer is made (and/or his/her renouncee) who wishes to apply for Rights Offer Shares, must complete the renounceable Letter of Allocation in accordance with the instructions contained therein and forward or post it, clearly marked, “CEC Rights Offer”, to their broker. Alternatively, if they do not hold a brokerage account, they can contact the Sponsoring Broker together with payment in accordance with section 1.3. The completed Letter of Allocation and payment, if posted, must reach any of the addresses or offices of the Receiving Agents by no later than 12h00 on Wednesday, 26 February 2014. 3.2
Renunciation – SELL all rights to the Rights Offer Shares being offered by trading them on the LuSE The right to subscribe for Rights Offer Shares in CEC, as detailed in the Letter of Allocation, may be renounced (nil paid) by completing the Letter of Allocation in accordance with the instructions contained therein. Such renounced rights may be sold by your Broker on the LuSE, if there are buyers during the period allotted for trading of rights. The completed Letter of Allocation must reach any of the addresses or offices of the Sponsoring Broker and Main Receiving Broker by no later than 12h00 on Friday, 21 February 2014.
3.3
Splitting – SUBSCRIBE in part for the Rights Offer Shares and SELL the remaining Rights by trading
them on the LuSE A Letter of Allocation may be split into letters of smaller denominations by completing the Letter of Allocation in accordance with the instructions contained therein. Splitting allows a shareholder to subscribe for some of the new Shares offered and to sell the rights on the balance of Shares not taken up. The last day for splitting will be on Thursday, 20 February 2014, at 12h00.
3.4
No action - The 4th option Shareholders not selecting any of the foregoing options by Friday, 28 February 2014, the closing of the Offer Period, will have deemed to have selected none of the available options and such rights pertaining to the Rights Offer will lapse. The bookrunner will, on a best endeavours basis, procure purchasers for unsubscribed Rights Offer Shares in a rump placement process as contemplated in paragraph 1.3 of the Rights Offer Documentation.
4. PAYMENT The amount due on acceptance is payable in Zambia Kwacha by deposit or electronic funds transfer to your Broker or alternatively, the Sponsoring Broker at the following bank account: BANK : Cavmont Bank Ltd. ACCOUNT NAME
:
CEC RIGHTS OFFER MAIN
ACCOUNT NUMBER
:
800000182308
SORT CODE
:
130001
SWIFT CODE
:
CVMCZMLU
Payment may also be in the form of manager’s cheques or bankers’ drafts (crossed “not negotiable”) in respect of subscriptions should be made payable to “CEC Rights Offer”. All cheques or drafts received by the Receiving Agents will be deposited immediately. Applications will be regarded as complete only when cheques or bankers’ drafts have been cleared.
94
COPPERBELT ENERGY CORPORATION PLC
5.
LISTING AND REGISTRATION OF THE RIGHTS OFFER SHARES The Listings Committee of the LuSE has granted a primary listing for, and permission to deal in, all renounceable Letters of Allocation (nil paid) relating to the Rights Offer Shares, between Monday, 27 January 2014 and Friday, 21 February 2014. Application has been made for the Rights Offer Shares offered in terms of the Rights Offer to be listed on the LuSE on or about Monday, 03 March 2014.
6.
CONFIRMATION LETTERS Shareholders will NOT be issued share certificates, but will instead be issued confirmations of allotment of Rights Offer Shares held at the LuSE CSD. Confirmation of allotments in respect of the Rights Offer Shares will be posted on or about Monday, 03 March 2014, at the risk of the Shareholders to whom they are addressed.
7.
EXPENSES OF THE TRANSACTION The cash expenses of the Transaction, amounting to approximately ZMW 15,760,000, relate to various advisory and regulatory fees and charges, registration and listing fees, brokerage commissions, marketing and other third party expenses, and will be paid by CEC out of the proceeds of the Rights Offer.
8.
ADDRESSES AND OFFICES Shareholders may forward completed Letters of Allocation to any one of the addresses or offices as contained in page 6.
RIGHTS OFFER DOCUMENT 2014
95
Copperbelt Energy Corporation PLC (Incorporated in the Republic of Zambia) (Registration number 39070) Share code: CEC Share ISIN: ZM0000000136 LA code: CECLA LA ISIN: ZM0000000425 (“CEC” or “the Company”)
DIRECTORS
Non-Executive Directors
Executive Directors
Jean Madzongwe
Hanson Sindowe
Munakupya Hantuba
Michael J. Tarney
Reynolds Bowa Abel Mkandawire Pius H Maambo Charity Mwansa Edson Hamakowa Klaas Bleeker
Address 23rd Avenue Nkana East Kitwe Zambia (PO Box 20819, Kitwe, Zambia) RENOUNCEABLE LETTER OF ALLOCATION: This document is valuable and may be traded on the LuSE or renounced freely. Please read the instructions and notes in this Letter of Allocation in conjunction with the Rights Offer Rights Offer Document dated Monday, 03 February 2014 to which it relates. If you are in any doubt as to the action to be taken, you should contact your Broker, bank manager, lawyer, accountant or other professional advisor. [NAME OF SHAREHOLDER] NAME
A.
ADDRESS
ACCEPTANCE (as per paragraph 3.1 of the Letter of Allocation) Number of CEC shares registered
Number of CEC Rights Offer Shares
in your name at the close of
which you may subscribe for at
AMOUNT PAYABLE in ZMW by
business at 16h00, Friday, 31
ZMW0.62 per Rights Offer Share
12h00 on Friday, 28 February 2014
January 2014
on 5 for 8 basis
[NUMBER OF SHARES HELD]
[RIGHTS OFFER ENTITLEMENT]
SIGNATURE(S):
96
[ADDRESS OF SHAREHOLDER]
DATE:
COPPERBELT ENERGY CORPORATION PLC
[AMOUNT PAYABLE FOR RIGHTS]
IF YOU WISH TO SUBSCRIBE FOR THESE RIGHTS OFFER SHARES WHICH HAVE BEEN OFFERED TO YOU, YOU MAY DEPOSIT OR TRANSFER YOUR MONEY TO THE FOLLOWING BANK ACCOUNT: BANK : Cavmont Bank Ltd. ACCOUNT NAME
:
CEC RIGHTS OFFER MAIN
ACCOUNT NUMBER
:
800000182308
B SORT CODE
:
130001
SWIFT CODE
:
CVMCZMLU
Simply return this form, together with your certified RTGS form or deposit slip as proof of payment or a cheque or bank draft in favour of “CEC Rights Offer Main” crossed “not negotiable” and “not transferable” by no later than 14h00 on 28 February 2013 to a Receiving Agent whose details are given on page 6. By signing this form, you understand and accept that should such cheque be dishonoured, you will forfeit the right to take up the Rights Offer Shares and will have no claim whatsoever and will indemnify CEC in this regard.
B.
FORM OF RENUNCIATION/SPLITTING
(To be completed by the Shareholder named above if the right to subscribe for the Rights Offer Shares is to be renounced or if this Letter is to be split) TO:
The Directors
Copperbelt Energy Corporation
I/We, the shareholder(s) named, would like to take up …………...... (Number of Rights Offer Shares) of the total Rights Offer Shares offered above. I/We hereby renounce the balance of my/our right to subscribe for the Rights Offer Shares allocated to me/us in favour of the Person(s) signing the registration application form (see Section C below) in relation to such Rights Offer Shares, or in default of a named person, in favour of the underwriter. Details of split required Split No.
SIGNATURE(S):
1. 2. 3
DATE:
4.
IF YOU WISH TO SUBSCRIBE FOR THESE RIGHTS OFFER SHARES WHICH HAVE BEEN OFFERED TO YOU, YOU MAY DEPOSIT OR TRANSFER YOUR MONEY TO THE FOLLOWING BANK ACCOUNT. BANK : Cavmont Bank Ltd. ACCOUNT NAME
:
CEC RIGHTS OFFER MAIN
ACCOUNT NUMBER
:
800000182308
B SORT CODE
:
130001
SWIFT CODE
:
CVMCZMLU
RIGHTS OFFER DOCUMENT 2014
97
C.
REGISTRATION APPLICATION FORM
(To be completed by the person(s) to whom the right has been renounced, or by his/her/their agent). (PLEASE PRINT) FIRST NAME(S)
SURNAME or NAME OF CORPORATE BODY
ADDRESS
TO: The Directors Copperbelt Energy Corporation I/We the person(s) named above, confirm I/we have full legal capacity to contract and request you to allot the Rights Offer Shares covered by this Letter in my/our name(s). I/We authorise you to place my/own name(s) on the register as members of the Company in respect of the Shares so allocated, subject to the conditions set out in Rights Offer Document to Shareholders dated 03 February 2014 and to the Articles of Association of the Company and enclose herewith my/our cheque/ or other proof of payment.
SIGNATURE(S):
98
DATE:
COPPERBELT ENERGY CORPORATION PLC