CEC 2023 Annual Report released
I am pleased with the great progress we made during the year on several fronts. Achieving notable progress on our sustainability priorities, settling the remaining historical risks, and continuing with the consolidation of our DRC business was at the centre of the milestones achieved in the year.
We are confident in the agility of the business to effect change whenever necessary to enable continued delivery of value to our shareholders.
On behalf of the Board of Directors, I am pleased to present to you the highlights of the Company’s performance in 2023. Over the past five years, CEC has continued to evolve and deliver shareholder value amidst a changing and generally improving business landscape. We are pleased with the progress that we continue to make, year after year, as we work tirelessly to meet our operational targets and deliver on our strategy and commitments to our shareholders.
I believe that the CEC shareholders are seeing the positive transformation and the attendant results that the Company is recording. 2023 saw CEC achieve several key milestones that we believe will set the Company on the right trajectory to attain its set ambition for the period up to 2027. Noting that the year 2027 will mark the end of the current planning cycle, when we expect to reach significant milestones on several strategic initiatives that the Company is pursuing. The corporate strategy continues to undergo regular evaluation, reviews, and control to ensure its relevance and effectiveness given the dynamic operating environment.
I am pleased with the great progress we made during the year on several fronts. Achieving notable progress on our sustainability priorities, settling the remaining historical risks, and continuing with the consolidation of our DRC business was at the centre of the milestones achieved in the year. On the sustainability front, we commissioned the 34 MW Solar PV plant at our Riverside location in Kitwe and commenced with the evacuation of power into the grid. In tandem, CEC commenced the implementation of the 60MW Solar PV plant located at Itimpi in Kitwe. All this is in line with our green growth agenda and comes alongside technological improvements to the transmission network that we continue to adopt as we embed the energy transition process. The combined capital investment made in the period for both our Riverside and Itimpi Solar plants was USD75 million.
Our green agenda remains much broader than the two projects cited, encompassing generation to strengthen power sourcing and conditioning the power network through technological adoption, to facilitate flexibility in our operations. To finance all this, we need to continue to be innovative and look to include options that best support the strategy. In this regard we listed a debut USD 200 million Green Bond on the LuSE, aiming to not only refinance existing projects, but also to finance near-term planned projects.
A key development for the year was the negotiated settlement that was concluded with KCM to manage the risks from the long-standing debt owed to us by them. The issue, as may be recalled from the previous report, was protracted and remained outstanding over a long period, leading to an evocation of the arbitration process by CEC, as provided under the contractual arrangements. The matter has finally been settled by an Award by Consent of the parties, endorsed by the sole arbitrator. The resultant significant impact of the settlement of the risks associated with the debt has been the restoration of the Company’s balance sheet, as will be noted from this report. This better positions the Company to pursue further priority capital investments and actualise its sustainable growth agenda.
The Board has been resolute on the need to scale up our service delivery in the DRC market, to effectively support efforts to reduce unmet demand that continues to affect that country. This requires that more transmission capacity is made available through upgrades and the construction of new infrastructure, to enable the delivery of more power required. In 2023, the Company signed up new customers and commissioned transmission infrastructure necessary to take power to some of our new customers’ facilities. As we implement our green generation projects and sign new PPAs, we see a broadening of our sourcing portfolio, enabling new further signings and supporting our projected demand growth well into the future.
The hallmark of the Company’s milestones for the period was the registration and listing of the Green Bond, which is geared to play a critical role in this early phase of the Company’s adoption of the energy transition.
Financial Performance
I am pleased with the continuing good financial results recorded in the year, as they evidence the focus that has been placed on prudent management of business risks and quality capital investment. The Company has recorded steady revenue growth, reflecting quality sales and an effective sourcing strategy. In 2023, our revenue of USD 382 million was 2% higher than in 2022. The profitability was USD137.6 million, an impressive increase from USD50.8 million in 2022, on account of a net impact of USD136.2 million which was a one-off debt writeback resulting from the settlement achieved with KCM and the full impairment of the Kabompo project costs.
Environmental Sustainability
CEC continues to work towards delivering on its sustainability ambitions. The strategies that have been put in place, are aligned with SDGs seven (7) and thirteen (13) on affordable clean energy and climate responsibility respectively, which are among the SDGs adopted, to guide our sustainability decisions and actions. The year saw us build carbon offsets to 34,067.77 tonnes against the 6,558.96 tonnes of carbon emissions generated from our operations, ideally presenting a favorable greenhouse gas balance. In our quest to broaden our efforts in offsetting carbon emissions, we continued with our tree planting programme in the year and attained a total of 500,000 trees planted since the inception of our programme. The tree planting programme has the dual impact of managing emissions and preserving water sources.
The capital investments made in the year such as our renewable energy investments, as well as modernisation of our assets and sourcing of finance, encompassed a focus on environmental sustainability.
Stakeholder Relationships
Creating shared value remains at the heart of the CEC business. The Company places reliance on its internal resources and strong relationships to grow a strong business, drawing on its technical expertise and capacity to consistently deliver growing value to its key stakeholders and the wider community.
CEC upholds the realisation of the need to support aspects of the Government’s development plan, for the benefit of the broader communities in which we operate. In this regard, we are pleased to have completed establishing of a paediatric Intensive Care Unit at Kitwe Teaching Hospital. We further maintain our support to the Power Dynamos Football Club, supporting and impacting the development of sport in the communities and the Country at large.
The extension of shared value was actualised in the year through CSR initiatives, payments to lenders and suppliers, the statutory contribution made to Government and local authorities, and dividend payouts to shareholders. In the year, CEC’s statutory contribution to Government and local authorities increased year-over-year by 28% to USD 135.2 million. Further, the dividend distribution to shareholders increased year-over-year by 10% to USD 55.2 million.
Corporate and Board Governance
The Board continued to uphold corporate values in strengthening disclosures, transparency, and ethical conduct in all its communications and interactions with our various stakeholders, including shareholders and the public. In improving the effectiveness of the Board, we overhauled the terms of reference of all Board committees addressing identified gaps and making them more relevant and better aligned with the current corporate governance trends. With respect to capacity building for the Board, we facilitated specific training in ESG and fraud awareness equipping them with skills relevant to the business and knowledge that best aligns with the reviewed and revalidated strategy.
We bade fond and grateful farewell to Thomas Featherby who resigned on 31st March 2023, having served on the board since 29th August 2018. He had a great impact on the board and shall be greatly missed.
Business Agility
The Board continues to actively engage with the management team to re-evaluate the corporate strategy and closely monitor its implementation. It is important that we are continuously aligned on the set priorities for the business and ensure the best outcome in service delivery to our customers and to put the business on a strong path towards sustainable value creation.
As the sector is expected to experience reform arising from the implementation of the Open Access Market, we have remained an active participant in the processes setting the reform agenda. Internally, we have assessed corporate readiness and set in motion an action plan that will enable us to effectively operate in the Open Access Market environment. We are confident in the agility of the business to effect change whenever necessary to enable continued delivery of value to our shareholders.
We are proud of the progress that our subsidiaries are making. CEC DRC, working with its parent company CEC PLC, and its partners in the DRC market, has made tremendous progress in strengthening the contracting structure and applicable payment arrangements. Once completed, this will move our DRC company to the next phase of development, help it to acquire more demand, and strengthen collections. CEC Renewables had its first full year of operation in 2023, enabling it to embed governance and processes. It successfully operated the 34MW Riverside Solar PV Plant,delivering power to the grid, implementing the energy forecasting and billing system, and effectively meeting its business objectives for the year. We will continue to build and strengthen governance in CEC Renewables to ensure the Company delivers on its mandate of effectively and successfully managing our solar generation assets.
Appreciation
As we reflect on the year and more importantly, the last three years of the business, we extend sincere gratitude to the management team and staff of CEC for their commitment to delivering on our strategy and achieving the important milestones that have been recorded in the year under review, such as the listing of Zambia’s debut USD 200 million Green Bond, which is expected to anchor CEC’s green energy generation ambitions.
London Mwafulilwa
Chairperson
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