CEC 2024 AGM Management Presentation

Business Environment Highlights

Open Access Market

• Zambia has been working to migrate to an open access market regime to facilitate fair and unhindered access and spur further competition in the market
• The market guidelines and rules have been approved by stakeholders
• Supporting laws are now the subject of government processes before implementation
• This is expected to trigger ringfencing of all licensed activities in the electricity market

Power Situation

• Though somewhat tight, 2023 saw a good balance between supply and demand, enabling meeting of Zambia’s demand from local sources and DRC’s demand from our portfolio of sources
• However, Zambia and most countries in the region have experienced a drought resulting in no more than 50% of normal precipitation being received
• Consequently:
  • There has been inadequate power to meet demand in Zambia – a supply gap of about 750MW has been declared resulting in 8 hours load shedding
  • The power situation at the regional level has worsened
  • Regional tariffs to spike over the next 2-3 years
• CEC has continued to add more expensive sources to its supply portfolio to meet its demand
• We require our customers to take resulting uplift in tariffs

KCM Indebtedness to CEC

• Reached settlement with KCM on the debt owed to CEC through arbitral award by consent:
  • This resulted in partial write back of a significant portion of the debt that was impaired in 2019
  • Agreed terms include payment terms for any outstanding debt and ongoing bills

Financial Performance

Revenue

• Revenue diversification efforts underway. Efforts have started realising some benefits and over the planning period the revenue concentration should significantly reduce
• Revenue increased 2% relative to 2022. Revenue has consistently been on an upward trend for the last 3 years mainly on the back of increased regional and local power sales

Profitability
Overall, profitability measures were significantly better than prior years, impacted by better quality sales, an effective power sourcing strategy and more importantly, the impact of one-off debt write back which had the effect of dwarfing the prior year’s performance.

Shareholder Rewards
Sustained improvement in financial performance evidenced by:

• Profitability growth
• Dividend payout growth
• Risk mitigation approaches which has allowed for restoration of balance sheet
• Clarity around the 2023 – 2027 strategic objectives

These have all led to an increase in the share price

2024 Operational Priorities

Demand Growth

• With increased pledges for FDI in the mining sector and wider economy, refocus on demand acquisition in all markets
• Enhance pipeline conversion effort linked to strengthening of supply portfolio
• Consider extending supply to new markets

Power Sourcing

• Work on both short-term and long-term solutions
• Continue to integrate renewable sources in our supply portfolio
• Work across geographies and technologies to acquire more third-party sources

Managing Impacts of the Drought

• A supply gap of about 30% poses risk to the business
• We will focus on putting in place appropriate solutions that mitigate potential impacts of the drought
• Based on our ability to find power, we will aim to extend the provision of solutions to the wider market

Open Access Regulations

• We anticipate open access regulations will be approved and implemented in the course of 2024
• We are working with all stakeholders to agree a smoothened path for implementation of open access market regulations
• Adequately prepare for changes

Capital Projects

• Refocus important asset renewal and modernisation programme
• Progress next phase of renewables programme
• Participate in strengthening of key transmission infrastructure to facilitate efficient movement of power to load centres

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CEC 2024 AGM Management Presentation.pdf