Copperbelt Energy Corporation Limited 2014 annual report

Copperbelt Energy Corporation PLC

Annual Report 2014

To be the leading Zambian investor, developer and operator of energy infrastructure in Africa by providing innovative solutions and building strategic partnerships through committed professional teams.

Being honest in all our dealings

Supporting each other

Building good team relationships

Being open to new ideas

Developing a “Can Do” attitude

MISSION

VISION

CORPORATE VALUES

We are committed to:

Supply reliable energy and high quality services to meet our customers’ unique and changing needs efficiently and proactively through robust infrastructure, diverse power sources and professional teams.

Increase value for our shareholders through responsible and transparent corporate conduct, innovation and investing prudently.

•

•

•

•

•

•

•

CEC and its Group entities

Statement from the Chairman

Report from the Managing Director

Report from the Chief Financial Officer

Corporate Social Responsibility Report

Group Financial Statements and Financial Statements for the year ended

31 December 2014

2

6

10

18

26

30

CONTENTS

CEC AND ITS GROUP ENTITIES

The Copperbelt Energy Corporation PLC (CEC) is an independent power transmission and distribution company with interests in closely linked businesses in Zambia and the African region, including optic fibre based telecommunications.

A member of the Southern African Power Pool (SAPP) and listed on the Lusaka Stock Exchange (LuSE), CEC has a deep insight into the mining industry, enabling it to provide quality electricity and other power products and services to the majority of the mines in Zambia.

Well positioned as a developer of energy infrastructure in Africa and respected in the region for its skills in designing and operating transmission systems, CEC is an emerging independent power generating company, with some strategic generating projects in the pipeline.

• Over 50 years of experience in supplying power to the mines• Circa 1,000 kilometres of 220kV and 66kV transmission lines• 540 kilometres of optic fibre on power lines• 41 High Voltage substations and dedicated control centre• 80MW embedded thermal generation• Power transmission for national utilities – Zambia and Democratic Republic of Congo (DRC)• Owns Zambian part of the Zambia – DRC Interconnector line• Accounts for over 50% of power consumed in Zambia

COPPERBELT ENERGY CORPORATION PLC2

CEC Liquid Telecom owns and operates a national long haul broadband fibre based backbone from Chirundu to Kasumbalesa. Its business is the provision of competitive high quality products through wholesaling of national and international fibre bandwidth capacity, terrestrial internet bandwidth and lease of dark fibre for both short and long haul, locally and internationally, and with access to submarine fibre cables.

CEC Liquid Telecom’s market segment is in wholesale. The infrastructure is neutral and operated in a non-exclusive manner in Zambia, Zimbabwe, Lesotho, Botswana and South Africa.

CEC Liquid Telecom is a joint venture company of CEC and regional fibre infrastructure builder and operator, Liquid Telecommunications Holdings Limited of Mauritius. It has become the preferred wholesale broadband connectivity telecommunications company both at national level and within the region.

CEC Africa Investments Limited (CEC Africa) is an investments holding company established to develop, finance and operate power infrastructure projects across sub-Saharan Africa.

A Pan-African power assets developer, CEC Africa provides access to an African power platform with attractive assets across sub-Saharan Africa and has a strong pipeline of both green field and brown field power projects in development across Africa.

Riding on the opportunity presented by Africa’s significant infrastructure deficit and growing investment interest for infrastructure in Africa, CEC Africa offers an attractive investment vehicle in Africa’s energy infrastructure sector.

KANN Utility Limited (KANN)Abuja Electricity Distribution Company Limited (AEDC)

KANN Utility is a 75% subsidiary of CEC Africa Investments Limited. KANN holds 60% majority equity stake in AEDC and, as the operator, is responsible for implementing the business plan.

AEDC is a power distribution company in Nigeria and has a franchise for distributing electricity in four states, comprising the Federal Capital Territory of Abuja, Niger State, Kogi State and Nasarawa State. The AEDC distribution zone covers 133,014km2 with a population of 10.5 million people in 2.3 million households, dominated by the Federal Capital. It has over 700,000 customers and an average electrification rate of 30%.

3ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2014

>>> CEC & ITS GROUP ENTITIES

North South Power Company Limited

North South Power Company Limited has a concession to operate the Shiroro hydroelectric power plant. The hydro plant was commissioned in 1990 and is Nigeria’s newest hydroelectric power plant and is in good working order. It is located in the Niger State. The plant is situated 500 metres downstream from the confluence of the Kaduna and Dinya Rivers, and is located within the AEDC franchise distribution zone. It has an installed capacity of 600MW, consisting of 4x150MW generating units at a head level of 97m. The plant’s water reservoir is capable of storing approximately 7bn m3, which allows for a 42% utilisation factor.

The Group holds an effective 20% equity minority stake.

A joint venture between CEC and RTAA (PTY) Limited of Botswana, Realtime Technology Africa Alliance Zambia (Realtime) is an internet service provider, focused on the niche market of corporate customers. Its core business comprises provision of high speed internet services and private leased circuits using optic fibre technology.

Realtime has been operational in Zambia for more than a decade, while RTAA, its 50% parent, has operated in the Sub-Saharan African region for more than 30 years. Realtime has successfully implemented ICT connectivity projects from design to operation using the national and metropolitan fibre loops.

Realtime has become the largest optic fibre network provider in Zambia and is connected to submarine fibre cables that connect the rest of the world.

Realtime’s Unique Value Proposition

• Trust• Client relationship• Abilities• Accountability• Availability• Uniqueness



STATEMENT FROMTHE CHAIRMAN

Hanson Sindowe


I am delighted to share with you the performance, in the financial year 2014, of our Company, Copperbelt Energy Corporation Plc (CEC Plc) and its associated businesses – together, the Copperbelt Energy Group (the Group). The financial and operational performance details presented in this report cover CEC Plc, CEC Africa Investments Limited (CEC Africa), Realtime Technology Africa Alliance Limited (Realtime) and CEC Liquid Telecommunication Limited (CEC Liquid Telecom). CEC Africa is a wholly owned subsidiary of CEC Plc and is the platform for the Group’s investments in North South Power Company Limited (NSP) and Abuja Electricity Distribution Company (AEDC), both operating assets in Nigeria. Realtime and CEC Liquid Telecom are 50% joint ventures.The electricity landscape in the geographic regions where the Group currently operates were, in 2014, generally characterized by insufficient electricity generation to meet the demand. Both Zambia and Nigeria are experiencing positive economic growth rates, resulting in increased demand for electricity for both residential and

commercial/industrial consumption. However, the rate at which new investment is being deployed to bring on additional generating capacity is not a match for the demand. In this supply-demand gap lies opportunities for the Group to explore, and I am happy to report that apart from consolidating the acquisitions of operating assets made in 2013, we actively continued to pursue viable projects to develop within Zambia and Sub-Saharan Africa during the year under review.

Group Health, Safety, Environmental and Social (HSES) performance

Significant strides were made in the area of maintaining safe and healthy environments and practices for our staff and larger communities in all our entities. There is now in place a Group HSES function to ensure consistency and standardization of practice across the Group. Equally of note is the alignment of existing environmental and social management systems to international standards, particularly the International Finance Corporation’s Performance Standards. This proactive decision speaks much about the Group’s commitment not only to HSES practices but also to the attainment of the highest possible industry standards.

In terms of actual performance, CEC Plc improved its records over 2013, particularly in the area of road traffic accidents (RTAs) and incidents, which had and still continue to be a source of concern. Nonetheless, RTAs were halved in 2014 (2013: 10). I am happy to state that the improvement in these statistics is in no small measure attributable to the sustained driver retraining of all staff, which training includes defensive driving skills. May I hasten to state that we are not settling for this record but will continue to work on attaining a nil RTA record. Community safety cannot be ignored and in this regard, the Company continued to reach out to and educate our communities through sensitization programs within the communities and through mass media communication channels.

A laudable achievement was the clocking of 4.74 million man hours without a system lost time accident, stretching from 3.86 million hours at the

close of 2013. This is no mean feat and credit is due to both management and staff for this exemplary performance. Time away from work as a result of illness is as bad as that occasioned through injury, as both lead to lost productivity. Hence, interventions to reduce sickness among our staff and their families and wider community, through our Welfare Office, continued and bore positive fruit during the year.

CEC Liquid Telecoms introduced a Safety, Health and Environment policy and procedures to promote an HSES culture in the company’s operations. This resulted in improved HSES statistics over the previous year.

NSP maintained the good HSES performance at Shiroro Hydropower Plant (Shiroro), which has recorded zero lost time accidents since take-over in November 2013 and no system fatalities since it was commissioned in 1990. At AEDC, challenges remain but efforts during the year concentrated around sensitizing communities on electricity risks and hazards with a bid to reducing the number of third-party fatalities as well as on strengthening the HSES function, including the development of relevant HSES policies.

Operational performance

Performance across the Group was positive, with CEC Plc substantially growing the international wheeling and international power trading business streams and increasing revenue earned therefrom. While energy sales to mining customers witnessed a marginal decline and the domestic wheeling stream posted a reduction owing to ZESCO Limited’s system reconfiguration, overall performance was satisfactory and both these areas are expected to rebound in the near to medium-term. Company performance in 2014 was within the context of an improved power supply situation, in comparison to 2013, and a more resilient power network.

The distribution environment in Nigeria remained challenging throughout 2014. The power market continued to operate under Interim Rules with non-cost reflective tariffs preventing the commencement of the Transitional Electricity Market, which would render all commercial contracts


enforceable. Distribution, transmission and generation capacity constraints persisted during the year, resulting in insufficient availability of power. The loss profile for AEDC remained high but with notable reductions recorded in respect of Aggregate Technical Commercial and Collection losses to 48.5% at end 2014, from a high of around 60% at take-over. The company also improved its billing efficiency and collection rate.

Although equally operating under Interim Rules, the generation subsector fared better than distribution. With a focus on maintaining plant operational integrity and reliability at Shiroro, primary electro-mechanical plant overhaul continued during the year, with three out of the four generating units now overhauled and the last one expected to be overhauled by October 2015. Complete overhaul essentially renders the units as good as new, extending each unit’s asset life by about 8 years.

Both telecoms businesses continued to expand networks, increase market share and roll out new products on the market, increasing the number of customers, hence, the share of their respective markets. The telecoms market continued to be fiercely competitive and it is commendable that Realtime and CEC Liquid Telecom were able to position themselves as market leaders.

Financial performance

The Group posted positive key financial ratios, in the main, with turnover (USD581m) and gross profit (USD87m) increasing over 2013. Despite AEDC recording increased turnover for the year, it posted an EBIDTA loss, which largely contributed to the Group’s net loss of USD164m for the year. The AEDC loss is attributed to the business operating under Interim Rules, resulting in accrued losses, which are, however, recoverable in future. A detailed report on AEDC and the Group financial performance is contained in the Chief Financial Officer’s report from page 18

CEC Plc Board Operation

During the year, the composition of

the board changed with the exit and entry of directors. In March 2014, Jean Madzongwe, who had represented the Development Bank of Southern Africa on the board since 2006 and was the deputy non-executive chairperson of the board at the time, retired from the board. Klaas Bleeker, the FMO/Aldwych representative also retired from the board at the same time. Two independent non-executive directors, Edson Hamakowa and the now late Pius Maambo retired from the board in July 2014, in accordance with the Company’s Articles of Association, after serving for three consecutive periods. I take this opportunity to post-humously pay tribute to Pius Maambo who passed away in February 2015. His contributions to the board and the business will remain invaluable. I also thank all the directors who exited during the year for the value they brought to the Company during the tenure of their directorship, and wish them well in their future endeavours.

I take pleasure in welcoming to the board, Kanad Virk and Ronald Tamale, both representing Standard Chartered Private Equity. Joe Chisanga and Sixtus Mulenga are the other new directors, appointed to the board to take up the independent non-executive seats. CEC Plc Managing Director, Owen Silavwe, assumed the board executive seat effective August 2014. I wish them all a productive stay on the board and look forward to their experience and insights, which will bring the necessary diversity and skills needed for our board to perform to the expected standards.

Outlook

Going into 2015, our expectations as a Group will be to continue on the growth trajectory set for each unit and as a composite. Consolidating the gains recorded in 2014 and forging new opportunities, both in Zambia and internationally, to ensure a sustained rich pipeline of projects and viable operating assets continues to be our goal. We will continue renewing and strengthening the network infrastructure of our respective business units, re-engineering processes, and focusing and delivering on the critical needs of each unit.

We are confident that the attractiveness

of African markets will keep the demand for power and power infrastructure on the upswing, placing us in good stead to forge ahead with our business growth and expansion agenda in new, previously un-entered markets as well as existing and more familiar ones.

Sincere gratitude goes to our 3,500-strong workforce for the performance recorded in 2014 and now being reported. The skills, knowledge, experience, dedication and sometimes sacrifice that each of our staff brings on board cannot be overlooked nor over-emphasized in realizing this performance. We will continue investing in our staff and work on attracting necessary skill and talent across cultures.

Hanson SindoweChairman13 March 2015

>>> STATEMENT FROM THE CHAIRMAN



REPORT FROM THE MANAGINGDIRECTOROwen Silavwe


It has been another very important year for the Copperbelt Energy Corporation Plc and its group of companies. We worked hard throughout the year to become more customer-centric, so as to enhance our ability to meet our customer’s requirements, progressively renew the state of our power infrastructure and enhance our power trading business on the international market. While the power situation in Sub-Saharan Africa generally remains very tight, improvements in the power balance in Zambia, seen at the end of 2013, proved instrumental to the more improved picture that characterised 2014. In Zambia, we put a lot of effort in renewing key assets on the 220kV transmission network backbone, enhancing the Company’s long-term capability to sustain a high quality and more secure service to our customers. Our performance on the international power market, though occasionally hampered by regional power shortages, was remarkable.

Power generation in Nigeria continued to be below the 2014 projection and averaged 4,000MW. This was mainly attributed to inadequate gas supply needed to increase generation capacity, transmission constraints and non-cost reflective tariffs, which for a long time have made the industry unattractive to new private sector investment. Nigeria’s installed generating capacity is around 10,000MW but actual power generated is about 40% of installed capacity.

Significant effort was made to prepare the power sector for the commencement of the Transitional Electricity Market (TEM) in which commercial contracts would become effective. At Shiroro, focus was on

ensuring reliable plant operating capacity, while at Abuja Electricity Distribution Company (AEDC), major efforts during the year were directed towards obtaining a favourable regulatory environment as well as at establishing performance metrics for the business, including the Aggregate Technical, Commercial and Collection (ATC&C) losses, which are a major performance parameter under the privatisation agreement with the Federal Government of Nigeria. Both North South Power Company Limited (NSP) and AEDC embarked on the change management process, aimed at ensuring business processes are re-engineered to serve the new business objectives under the privatised Nigerian Electricity Supply Industry (NESI) environment. During the year, the areas of focus were Procurement, Human Resources, ICT and Commercial processes. Notable progress has been recorded, and includes the streamlining of procurement processes, human resource restructuring and commercial process improvements.

These activities and efforts, while underpinning our performance in 2014, are fundamental to laying a firm foundation for our long-term success, and to enable us reliably meet the needs of our customers, our social responsibilities in communities where we operate and, indeed, our targeted return on investments; and to securing any long-term financing needs that may arise, going forward.

OUR PERFORMANCE IN 2014

Health, Safety, Environment & Social (HSES)

Given the nature of our business, our performance in the area of health, safety, environment and social (HSES) remains critical and one in which we cannot afford to relent but progressively push for continuous improvement.

The Group, in 2014, established the Group HSES function to demonstrate its continued commitment to ensuring high and consistent HSES standards across the Group, and that HSES issues are handled at the highest level possible. Gradually, the Group is streamlining its processes and procedures to reflect the global

character that the business has taken. Group level documents are being developed to support processes. Most business units will have up to three years to fully implement their systems to reflect expectations of an international business like ours. Those business units with already developed systems will require much shorter time scales.

Individual business units performed well by the standards and targets each unit had set for itself. However, from a Group perspective, there is room for improvement. The performance witnessed in the year is expected as some of the business units have long and successful HSES cultures in place, whereas HSES culture and performance in NSP and AEDC are at varying levels, with AEDC requiring a lot more work to achieve the targeted improvements.

At CEC Plc (the Company), we have continued to invest our efforts and time in upgrading, implementing and maintaining high standards in HSES management systems, guided by risk assessment and management. As always, we set very challenging but achievable HSES targets at the beginning of each year.

In 2014, 9 out of 13 leading HSES performance indicators were fully delivered – demonstrating a lot of room for improvement, and we will work to enhance our visible HSES leadership in the coming year.

System safety is not only important for our employees; it is equally important that we ensure members of the public fully understand the risk of exposing themselves to power infrastructure. In this regard, we held 153 public High Voltage (HV) sensitization campaigns aimed at promoting health and safety awareness among communities traversed by our infrastructure. Included in these campaigns are stakeholders such as transporters of abnormal height loads.

We are pleased to note that we have, again, extended man hours without a system based lost time accident (LTA) from 3.86 million in 2013 to 4.74 million at the end of 2014. Road safety has increasingly become a challenge as the Zambian roads continue to witness an unprecedented growth in


vehicle population. Our safety team has been doing a great job of retraining employees in defensive driving skills and imparting a heightened road sense. During the year, notable improvements were recorded, with road traffic accidents at 5 against 10 in 2013.

Support for employee health through the malaria roll back programme and onsite voluntary counselling and testing (VCT) are on-going interventions successfully implemented during the review period. The Company is also pleased to have hosted a sports networking gala aimed at encouraging healthy and balanced lifestyles through exercise and sport. We believe these programmes will have long term benefits for employees, their families and communities. Our commitment to good environmental stewardship and performance forms part of the Company’s core values. The need for environmental sustainability guided our operations and project implementation during the year and in a quest to enhance our HSES procedures and practices, the Company embarked on a process to align its existing environmental and social management system to the International Finance Corporation Performance Standards. In cooperation with the Company’s lenders, an environmental and social action plan (ESAP) was agreed and is being actively implemented. The seriousness we attach to safety has been extended to our operating assets in Nigeria. Both NSP and AEDC

have put in place intervention systems and monitoring mechanisms for safety performance. It is, therefore, pleasing to note that the Nigerian operations have also recorded significant improvement in their HSES performance and records. Shiroro, believed to have the best safety record among generation and distribution companies in Nigeria, recorded no fatalities and zero lost time accidents during the year. . The company’s HSE department has been reinforced since take-over and during the year, the risk register was prepared, for the first time in the company’s history; and five key policies (including Safety and Environment) were prepared and signed off. In addition, several auditable procedures were prepared.

At AEDC, key milestones in the SHE development system were achieved and are now in place and operational. These include establishment of a board health, safety and environmental (HSES) committee and development of health, safety, environmental and social policies. Much progress has been made in this area in the first full year of the company’s operations since take-over; however, many challenges lie ahead and especially, we need to reduce drastically, the number of fatalities both third-party and among the staff.

Through 2014, AEDC recorded 20 fatalities, 17 of them being third party and occasioned mainly by acts of electricity theft, vandalism, illegal installations and tampering. We acknowledge the huge impact any loss of life has on the family, community and

the company, hence, a comprehensive plan has been put together to address these challenges through a Fatality Prevention Strategy, which has been developed and is already being implemented.

We continue monitoring the situation and will aggressively implement the agreed actions stipulated in the strategy, until we achieve the zero fatality target we have set for ourselves across the Group. Interventions will include addressing the company’s safety culture through training of all vulnerable or at risk teams, starting with our technical staff, and continuous sensitization of communities on the risks associated with electrical installations.

On the positive side, no dangerous environmental occurrences were recorded during the year, while the number of near-miss reports, at 17, is encouraging. Equally, positive numbers were recorded for internal HSES awareness communication (70), public sensitization, toolbox safety talk and safety meetings at 71, 510 and 188 respectively.

The Company

Transmission and distribution of electricity through deployment of our extensive power infrastructure in and around the Copperbelt, including the management and provision of emergency power, remains our core business in Zambia. Reliability,

>>> REPORT FROM THE MANAGING DIRECTOR

Unfenced Transformer site at Ozuja Okengwe Market near Okene Ser-vice Centre, Kogi State

AEDC Management team with the HSES Public / Community Sensiti-sation campaign Team paying homage to village owners, the EMIR of

Dutse Alhaji


efficiency and secure power supply are our customers’ key requirements, and we are committed is to ensure we continuously deliver on these.

In 2014, our mine customers saw a much more improved power supply situation, both from the power-availability and system-stability perspectives. With an improved supply situation in the country, the full power requirements of our customers were met and no requests for demand side management, seen earlier in 2013, were necessary.

Total energy sales to our mine customers in 2014, at 4,208GWh, were 2% less than the 4,274GWh achieved in 2013. This year-on-year reduction in energy sales was due to lower energy consumption by some of our mining customers who operated at lower than anticipated production capacities. This consumption trend reflected mostly in the first half of the year but rebound substantially by the end of the year. Barring substantial changes in the global macro-economic environment, we expect full demand recovery within the first half of 2015, with an upward trend in demand as key projects currently under construction begin to draw early power.

CEC Plc has delivered good financial performance on the back of restoration of the tariff to United States Dollar (USD) terms in addition to an inspiring performance in our international power trading business. At the end of quarter one, 2014, the Government

revoked Statutory Instrument 33 of 2012 (SI 33), which had disallowed use of currencies other than the Kwacha for local transactions. Following the revocation, contracts reverted to USD tariffs, restoring value and heading off potential future currency related risks introduced by SI 33.

The international power trading and wheeling business activities demonstrated rapid growth in 2014, increasing from 84.5GWh to 295.4GWh and 490GWh to 1,026GWh year-on-year respectively. This represents growth of 250% in international power trading and 100% in international wheeling.

While lauding this remarkable performance, we are mindful that there are areas of the business that we need to improve on and challenges to resolve. This includes the area of domestic wheeling and some issues surrounding our supplying power to Konkola Copper Mines Plc (KCM).

Domestic wheeling has seen a reduction in the last couple of years, with the monthly average capacity reducing from 252MW in 2013 to 237MW in 2014, representing a 6% reduction year-on-year. As reported in 2013, the fall is mainly due to the embedded heavy fuel (HFO) generation plant commissioned in Ndola at the end of 2012. With all its positive impacts on system performance, being an embedded generation, the HFO plant has assumed direct supply to some of the local loads. In the medium term,

we expect that domestic wheeling should outgrow any negative effects of this otherwise welcome development. We expect a return to positive trends in domestic wheeling once current projects to expand our supply points to ZESCO, to meet projected growth by domestic and commercial loads, are commissioned over the next two years.

On the customer side, one of our mining customers has regrettably resisted returning to USD tariffs in line with the power supply agreement (PSA) between the parties as expected following revocation of SI 33 explained above. The implication is that the said customer has continued to pay less than the full tariff since April 2014, in turn affecting CEC’s ability to pay ZESCO the full tariff as well. We continue to invest management’s efforts to correct this situation and we expect that the Company will use all means available to it to achieve a resolution.

The power network, which had exhibited some vulnerability in 2013, demonstrated good improvement in resilience levels to both internally and externally generated abnormalities. The improvement in power availability at national level was key to this improvement. It is worth noting that the national power system is far from achieving long-term stability given the forecasted demand growth, which needs to be matched by investments in new generating capacity. In this regard, we remain keen to play a key role in the development of the Luapula River’s hydropower potential. Our

MD / CEO of Abuja Electricity Distribution Company Limited Mr. Neil Croucher during the launch of the AEDC HSES Community engagement

programmes at the AEDC Head Office in Abuja

Gwagwalada substation inspection


engagement with the Government to agree the model for development of this generation resource will continue in 2015. Early works by Sinohydro Corporation on the 40MW Kabompo Gorge Hydropower project are progressing well while the financing process, which was earlier impacted by SI 33 of 2012, is back on track, with expectations for financial close before the end of 2015.

Operationally, the improvements we have been implementing to our emergency power supply services were, again, tested in 2014. The response to this category three (CATIII) incident (total loss of ZESCO supply to the Copperbelt) could not have been better. The efforts we are investing in training our people, cooperating with ZESCO in improving the operating regime and improving the underlying processes are paying off.

On the network infrastructure side, our asset renewal programme has continued. During the year, we launched efforts to renew and upgrade the transmission backbone while keeping the momentum of a similar programme focussed on the distribution infrastructure. We upgraded the capacity of two high voltage substations that form the heart of the power network on the Copperbelt, augmenting the Company’s ability to meet customers’ forecasted demand growth in the next 3 – 5 years. We will continue delivering on our objective of renewing our energy infrastructure under the on-going 10-year rolling capital programme.

Organic business growth

We made good progress on a number of our organic growth projects. Projects currently under implementation include the NFCA South East Ore Body, the Second Zambia-DRC 220kV Interconnector and the ZESCO Supply-points Upgrade.

The Synclinorium project, commissioned in early 2014, is already delivering early power required for the Mopani Copper Mines Synclinorium project. The South East Ore Body project, whose object is to deliver about 50MW to the new underground mine being constructed by Non-Ferrous



protection unit were established, and a business information system installed. A stakeholder engagement strategy is also being implemented.

It is worth noting that largely due to the non-cost reflective tariff model, the NESI is yet to implement the Transitional Electricity Market (TEM) where all power contracts will become effective, but is rather still operating under the interim market rules; which require that AEDC pays 65% of the Market Operator’s bill, accruing 35% to be paid in future. This accrual results in losses being recorded against the business, from an accounting perspective, which losses will be recovered over time as tariffs are migrated up towards cost reflectivity. Subsequent to the reporting period, the multi-year tariff order (MYTO) was revised, resulting in a 27% increase in tariffs with effect from January 2015. This will rise to 59% when the tariff increase to residential customers is effected in July 2015. Following the revised tariff model, AEDC is currently revisiting its business plan. Substantially, it will remain as submitted in the acquisition bid but will consider the revised MYTO provisions with regard to capital expenditure, operating expenditure and allowable returns, as well as performance requirements with respect to ATC&C loss reductions, new customer connections, improved quality of customer service and metering obligations.

(ii) NSP

The generation subsector in the NESI has fared relatively better than the distribution subsector. CEC Africa has some exposure to this favourable environment through its equity holding in NSP, concessionaire of the 600MW Shiroro HydroElectric Power plant. Whilst NSP was also affected by the Interim Rules period and was only able to collect 40% of its invoiced bills to the Market Operator during the year, the company comfortably met its cash obligations.

Africa (NFCA) in Chambishi, has made good progress but requires doubling of efforts to ensure it is commissioned within expected timescales.

The Second Zambia-DRC 220kV Interconnector project is on schedule to be commissioned by the end of quarter three in 2015. This important project aims to expand the capacity of the transmission corridor between Zambia and the Democratic Republic of Congo (DRC) from 250MW to a firm capacity of 550MW. Not only will this project contribute to enhanced regional power trade in the SAPP, but it will also offer a firm path in support of CEC’s increasingly important international power trading business.

Investments

The two operating assets in Nigeria, AEDC and NSP, under CEC Africa experienced their first full year of operations under the privatised Nigerian Electricity Supply Industry (NESI) environment. 2014 was challenging, as expected, due to the evolving regulatory regime focussed on resolving the liquidity shortfall in the NESI, among other issues. The crisis is particularly challenging at distribution level, with distribution companies suffering the brunt of years of a deteriorating loss situation.

(i) AEDC

Currently, AEDC’s power allocation from the grid is 11.5% as determined by the regulator. This allocation falls short of the total requirement of AEDC customers in its catchment area. As a result, the company cannot adequately satisfy current demand, leading to load management measures being effected. The monthly average energy received was around 300GWh. In addition, challenges of high ATC&C losses, electricity fraud, unmetered customers and poor information systems continued to be experienced during the year.

Strategies to address these challenges and stabilize the business, including reduction of both the technical and non-technical losses, are in place with some already being implemented. Pre-payment metering and business process re-engineering, coupled with reduced non-technical losses in maximum demand (MD) customers and sustaining reduced distribution losses within that class of customers are some of the key non-technical loss reduction measures being executed. With regard to technical losses reduction, measures include network reconfiguration to optimise load patterns and shift load from overloaded circuits, and eliminating leaking insulators and hot-spots. In addition, the company will improve management of distribution transformers and optimize preventive maintenance.

Even when these challenges are being faced, notable operational achievements were made in 2014 and include reduced ATC&C losses from circa 60% at take-over to 48.5%, improved billing efficiency to 83% from 63% in November 2013 and an improved collection rate. The number of customer meter connections was increased and customer service levels improved. On the customer service side, a call centre – operational since June 2014 – and revenue


During February 2014, NSP successfully commissioned Unit 1, following a long outage for overhaul. In April 2014, overhaul of Unit 3 was started and the unit was commissioned in December 2014. The extended outages resulted in overall plant availability of 74%. The plant capacity factor for 2014 was 41%. This is on the lower end of the design range of capacity for Shiroro and was due to the low water levels inherited at take-over in November 2013, and the relatively modest water inflows during the 2014 rain season. The water basin feeding Shiroro experiences its main rain season between April and October; therefore, maximum reservoir height is usually attained in October. The maximum attained in 2014 was 377.9m, against the maximum possible of 382.5m. This represents an energy shortfall of about 21%. The generation pattern for 2015 is expected to be close to that experienced during 2014.,

(iii) Telecommunications Business

Our investments in the telecommunications sector, which include CEC Liquid Telecom and Realtime Zambia recorded encouraging growth; consolidating their market positions and are now recognised brand names in the market.

CEC Liquid Telecom, an equal joint venture between CEC and Liquid Telecommunications Holdings of Mauritius, has continued to consolidate its position of being the preferred wholesale broadband connectivity telecommunications company in the market. The company whose backbone already spans from Chirundu/Kariba to Kasumbalesa grew its fibre footprint alongside inner town roads and highways from 2,185km in 2013 to 2,494km in 2014, and expanded its product portfolio to include Gigabit Passive Optical Network (GPON), which has been tested and launched in Lusaka’s Rhodes Park residential area while further installations have been commissioned in other residential areas including Northmead, Arcades, Kabulonga and Sunningdale. This fibre to the home (FTTH) project has covered most parts of Lusaka and the project is set to be extended to the Copperbelt in 2015.

CEC Liquid Telecom is also implementing a third fully redundant routing out of Zambia through Livingstone under

its Lusaka-Livingstone-Victoria-Falls fibre project currently under construction. These activities will not only enhance the company’s quality of service provision but should also drive further growth. We are happy to report that the company has now turned cash positive and we are more confident of its future profitability.

Realtime, another equal joint venture between CEC and Realtime Technology Africa Alliance Limited, is doing well in launching new products on the market and improving the quality of service provision resulting in market share growth in 2014, in a market of ever increasing competition and tightening margins. Being an internet service provider (ISP), Realtime Zambia plays in a market with relatively less barriers to entry and high incidences of market consolidation, factors that encourage a very competitive business landscape. In 2014, the company grew its number of customer connections, increasing internet traffic by over 30% over the previous year. Data circuits also grew from 178Mb/s to 340Mb/s over the same period, a jump of nearly 100%.

The company also increased its footprint to areas beyond the line of rail and was able to expand its network countrywide. Realtime Zambia’s investment activities focused on expanding the 4G WiMax network and reinforcing backup power supplies through installation of diesel generator sets, power inverters and DC battery supplies. The 4G WiMax network complements the metropolitan fibre network as a backup solution in times of fibre cuts, for early connection of customers prior to fibre installations and to service areas yet to be accessible on fibre. Given that the WiMax network is already LTE (Long-Term Evolution) compatible, it provides for the network’s next generation requirements while also ensuring that Realtime Zambia continues to offer best-in-class service provision to its customers.

People

As a Group, we are committed to developing all our employees so they become the best they can. We continue to provide opportunities for our employees’ learning and development at different levels. The development programme for our graduate engineers at CEC Plc remains a critical tool for effectively imparting early industrial experience and CEC company culture. The Company’s future is only assured if we can invest in our future engineers and technicians. We remain committed to developing an inclusive high performance culture and reward system that drives productivity and provides an environment where our employees can achieve professional and career growth.

The revival of the Mutende Group, a community-service focused employee group, is an encouraging development through which we hope volunteers among our employees will partner with the Company to contribute to the wellbeing of the communities where we operate. Through this group, our employee volunteers in partnership with the Company are giving their resources, time and enthusiasm to support a wide range of charity projects in our communities. The effort demonstrated in mobilizing resources and identifying charities to partner with in the last quarter of 2014 is highly commendable.



Our Nigerian assets have embraced the concept of community support and are implementing a number of activities in this regard. At Shiroro, the business continues to invest in the local school that it manages for the local community. The school has been rehabilitated to raise its standards. In addition, the company operates a hospital, which will be sub-concessioned to ensure that it is properly run by health professionals. NSP has been an active member of the Shiroro community and has sent representatives to various local events and repaired a section of the main road linking Shiroro to the Niger State capital of Minna.

AEDC’s community outreach during the year focused on raising awareness on community safety in high risk areas. As part of this programme, the company undertook community sensitization campaigns on safety.

I take this opportunity to thank the shareholders, directors, management and staff for their support during the year and wish the Group continued success in the years ahead.

Owen SilavweManaging Director13 March 2015


REPORT FROM THE CHIEF FINANCIAL OFFICERMutale Mukuka


Group performance

The Group continues to make positive strides in most respects as it continues to focus on stabilizing the operations in Nigeria and growing its Zambian operations. Group turnover, at USD581m, increased by 88% compared to the prior year. The increase in revenue is mostly attributed to Abuja Electricity Distribution Company (AEDC) revenues, which have been consolidated in the Group. The comparative figures include only two months’ financial results for AEDC.

The Company’s revenues increased by 9% from USD267m to USD292m and the Company’s gross profit, at USD89m, increased 18% compared to the previous financial year. The increase in both revenue and gross margin is attributed to the tarriff increment.

The Group’s operating costs increased by 127% to USD201m from USD88m prior year. The increase is on account of the effect of consolidating AEDC’s full results in 2014 in comparison to 2013, which consolidated only two months.

The Group posted a net loss for year of USD164m compared to USD87m profit in the prior year. The profit for 2013 included a gain on bargain purchase of USD133m.

The business plan of AEDC provided for a five year turnaround period and, so far, management is on track to meet the various performance targets, including reduction of the Aggregate Technical Commercial and Collection (ATC&C) losses. The graph below provides the operational statistical profile of the ATC&C losses, respective Collection losses profile and technical and commercial losses from takeover date to 31 December 2014. Additionally, the business improved its billing efficiency over the period, which led to steady increase in energy billed over the period. The overall business performance of AEDC, with respect to these parameters, was impressive for year 1. More detailed graphical representation of the energy billed vis-a-vis the energy delivered is provided in the graph overleaf. The Nigerian Electricity Regulatory Commission (NERC) awarded an average tariff increase of 10%.

Earnings Per Sharein US Cents

Group

Year

US

Cen

ts

Company

ATC&C Losses

Collection Losses

Tech & Commercial Losses

AEDC’s ATC&C Loss Profile


Business segmentation

The consolidated financial statements are largely impacted by AEDC, which has been consolidated in the Group financial statements, and whose size is significant to the overall Group. The investment in NSP of 20% is equity accounted for in the consolidated financial statements. The two telecoms entities represent a small contribution to the consolidated finanacial statements as they are joint ventures, which are equity accounted in accordance with IFRS11: Joint Arrangements. Below are summarized financial highlights for the five operating entities in the Group.

The Company

Turnover increased by 9% from the previous year. The increase in revenue is attributed to the tarriff increment. Earnings before interest depreciation taxation and amortization (EBIDTA) increased in excess of 25% due to increased income from regional power trading, exchange gains arising from the depreciation of the Zambian Kwacha and the effect of the restoration of major contracts to USD following revocation of Statutory Instrument 33 of 2012. The return on assets was comparable to that of 2013, signifying that the Company continues to invest in assets that generate an acceptable level of revenue per USD1 invested. As shown in the graph below, the CEC Plc entity financials for 2014 took a steady upward trend as measured by various indicators including, Turnover, Gross Margin, EBIDTA and NET Income.

USD'000 CEC Plc AEDC NSP CEC Liquid Realtime

2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

Revenue 291,948 267,066 289,044 46,971 63,179 24,582 13,333 10,570 7,017 7,201

Gross Profit 88,697 75,542 (1,540) (8,059) 44,922 20,959 7,294 5,175 3,510 3,671

EBITDA 60,603 47,719 (122,036) (23,485) 41,353 16,678 1,701 1,281 1,084 1,156

>>> REPORT FROM THE CHIEF FINANCIAL OFFICER

Energy Delivered (KWh)

Energy Billed (KWh)

Billing Efficiency

Profit before interest and taxes

EBITDA

Earnings per share (US Cents)

Net profit

Company Performance in USD’000

AEDC’s Energy Profile


The financial performance of Realtime Zambia was comparable to that of prior year. Turnover was at USD7m compared to USD7.2m in 2013. EBIDTA for the year was comparable to 2013 at USD1m.

CEC Liquid Telecom increased its turnover by 26% on account of increased bandwidth sales while EBIDTA increased by 32% to USD1.7m.

NSP has relatively steady revenues and cash flows. Turnover for the year was recorded at USD63m, compared to USD25m the previous year (2013 turnover was based on two months of operations). EBIDTA more than doubled for the year, at USD41m compared to USD16m in 2013. Earnings for NSP are a function of the hydrology and the tariffs. Under the Bulk Purchase Agreement, a hydrology floor of 40% is guaranteed. Below is a graph highlighting that.

AEDC posted an increase in revenue of USD242m, representing full year’s revenues relative to two months revenues for 2013 (from date of acquisition). However, an EBIDTA loss of USD122m was posted during the year. The company operated under Interim Rules as published by the NERC. The Interim Rules recognize that electricity tariffs in Nigeria are not yet cost-reflective, as a result, AEDC is only obliged to pay 65% of the Market Operator’s bill (Power Purchase Invoice). The company has no immediate obligation to pay 35% of the Market Operator’s bill. That 35% is accrued on a monthly basis and results in the company posting losses. However, the busines is cash flow neutral.

NSP Net Energy Generated in GWh

Collections, MO Bills and MO Payments (Naira)

Collections MO Bill (Naira) Payment to MO


Revocation of Statutory Instrument 33 of 2012

On 21 March 2014, Zambia’s Minister of Finance revoked Statutory Instruments Number 33 of 2012 (SI 33) and 55 (SI 55) of 2013. The effect of the revocation of SI 33 on the Company was that key contracts, including the Power Supply Agreements (PSAs) and the Bulk Supply Agreement (BSAs), reverted to being US Dollar contracts. The effect was that the business could match its borrowings denominated in US Dollar to its revenues. Resulting from the change in the currency of the key contracts, the Group, in line with provisions of IAS 21, changed its functional currency from Zambian Kwacha to US Dollar.

Capital deployment

CEC has a portfolio of diverse businesses and is considering a project pipeline which will, upon completion further diversify the Group. We continuously review our holding to evaluate opportunities that will create options for the future and to provide the necessary flexibility to support future growth, aimed at improved service to our customers as well as maximization of shareholder return. The viability of such opportunities depends on the outlook of each business, as well as on general market conditions. The ongoing focus supports the optimal allocation of capital across the Group.

Investments

During the year, the Group advanced the development of the 40MW Kabompo Hydroelectric Power Project in North-Western Zambia, the 128MW Heavy Fuel Oil (HFO) project in Sierra Leone and the 800MW Kudu Gas Power project in Namibia. Equally, work was progressed to expand the renewables portfolio by exploring installation of solar parks of up to 50MW in Zambia and up to 300MW, auxiliary to the Shiroro hydropower plant in the Niger State of Nigeria. Total expenditure for the year relating to projects under development was USD18m.

Financial strength / Going Concern

The Group’s total assets grew by 26% with significant growth in property, plant and equipment, trade receivables as well as in cash and cash equivalents. The increase in trade receivables was mainly due to the inclusion of the AEDC receivables, increase in cash and cash equivalents within the Group. Trade debtor days increased from 68 in 2013 to 89 in 2014. The increase in other receivables was mainly attributable to incorporation of AEDC’s increased debtor days and with respect to CEC Plc’s unresolved legacy disputes triggered by the revocation of SI 33 of 2012 with one mining customer.

The Group’s loss of USD164m resulted in a negative EPS. The Group’s current liabilities were higher than the current assets, a position which resulted in a net current liability position of USD99m. The current liability is attributed to the higher trade payables arising from AEDC. Based on the current trading interim rules, AEDC has an obligation to cover 65% of the Market Operator’s invoice and the balance is accrued for payment in the future. The accrual of 35% of the bill is the reason for the net current liability. It is worth noting that this position is expected to reverse in the medium-term, due to expected increase in tariffs which will impact positively on AEDC’s revenues. In January 2015, the NERC published the revised Multi-Year Tariff Order (MYTO v2.1), which provides for an increase in commercial and industrial customers’ tariffs of 27% effective 1 February 2015, with a provision to further increase domestic tariffs to provide an overall tariff increase of 59%, effective 1 July 2015.


Acid test ratio (times)Group

Company

1.50

1.00

-2010 2011 2012 2013 2014

0.50


Rights Issue

In February 2014, the Company called for a renounceable rights offer by which 625,000,597 new shares were offered to qualifying shareholders. The rights offer, to raise additional equity capital, opened on 3 February 2014 and closed on 7 March 2014. The offer was fully subscribed; with the Company’s three largest shareholders, Zambian Energy Corporation (Ireland) Limited (ZECI), ZCCM – Investments Holdings Plc (ZCCM-IH) and African Life Financial Services (Aflife), fully taking up their additional rights and maintaining their holding at 52%, 20% and 7.22% respectively. Local institutional investors increased their holding from 8.93% to 14.44% after the rights offer. A total of 25,360,242 new shares representing 1.56% of the Company’s enlarged ordinary share capital were not taken up by qualifying existing retail shareholders. CEC placed the entire rump (the “Rump Placement”) with Farallon Capital Management, at its sole discretion. Post-rights offer, CEC’s issued ordinary share capital stands at 1,625,000,597 and a total of K387,500,000.00 (USD61m) was raised by the Company. As a result of this injection of equity, the Group’s capital position has improved, providing the business with additional headroom for debt financing. The proceeds of the rights issue were mainly applied to reducing the Group’s indebtedness by paying down the bridge facilities secured in 2013 to partly finance projects in Nigeria.

AEDC’s long-term tarriff derivation is based on the tarriff framework as provided in the MYTO section 6.1 and section 6.4 respectively. The two sections prescribe the factors/assumptions that should impact on the changes to the end user electricity tarriffs. The business plan and forecast of AEDC’s financials assume a tarriff profile based on the provisions of the MYTO.

Below is a detailed illustration of MYTO section 6.1 and section 6.4.


Senior debt facilities

The Group, during the year, successfully refinanced its legacy high coupon short-term financing with a blend of commercial and Development Finance Institution (DFI) tranches of medium to long-term debt with tenors of 5 and 12 years respectively. These facilities are matches for the profiles of the Group earnings. Typically, investment horizons for power / electricity infrastructure assets are long-term in nature and this alignment of debt to investment profile mitigates the risk. In addition to the debt at CEC Plc, the Group has a facility with UBA Nigeria, which was originally 7 year debt and is now remaining with 6 years to maturity. At the end of the year, the Group had net borrowings of USD237.4m million (2013: USD230.9m). The revised financing arrangements align the Group cash flows to debt repayments and provide some increased operational and financial flexibility with a new set of financial terms, which are set out in note 23 to the accounts.

The weighted average debt maturity was 7.21 years compared to 4.04 years the previous year. The increase in the weighted average debt maturity years, of 3.17 years, is attributed to the debt refinancing that happened during the year. Maturity of the facilities is spread over the years, as highlighted below.

Financial priorities

In 2014, our highest financial priorities were to address our near-term debt maturities, recapitalize the Group with additional equity, all of which will increase our financial flexibility, and help align the debt repayment profile to the cash flow generated, taking into account the investment plan over the next few years.

Looking forward, priorities for 2015 will include further re-profiling of the debt repayment with particular focus on 2015 to 2017. Other activities to be prioritized include overall currency alignment of respective borrowing currency of earnings to manage the risk of currency mismatch. The Group will further explore risk management options for the management of the long term interest risk.

Finally, the Group will focus on implementing an Enterprise Resource Program that accounts for the growth to date and the ever changing operating environments and need to provide accurate and timely information for decision making and reporting requirements.

Dividends

Subsequent to the reporting period, the Directors recommended, on Tuesday, 27th January 2015, an interim dividend of US Cents 0.86 per ordinary share, which translates to 5.53 Ngwee (K 0.0553) per share, using the Bank of Zambia mid-rate applicable on the date of declaration. The dividend was to be paid to the shareholders registered in the share register of the Company at the close of business on Friday, 27 February 2015. Dividend payment was effected on Monday, 2 March 2015.


32 38 38 38 30 19 8 8 8 8 12 4

Group debt repayment profile

USDm


Electricity tariffs

Post-reporting date, the NERC effected a tariff increase of 27% effective 1 February 2015 on commercial and industrial customers. NERC further announced a 59% tariff increase to domestic consumers effective 1 July 2015. This should result in increased collections, which will improve AEDC’s working capital position.

Management remains hopeful and expectant that the business will remain resilient, going into the next period, and that as the NESI market settles into the privatized landscape and AEDC, particularly, continues to implement its 5 year turn-around business plan, the fruits of the strategies will bear on the financial performance of the business and the Group.

Mutale MukukaChief Financial Officer13 March 2015


CORPORATESOCIALRESPONSIBILITYREPORT


The Group, in 2014, responded to various needs of stakeholders and communities around our businesses, initiating and supporting initiatives that especially enhance or uplift the socio-economic standing of communities.

Social infrastructure

At CEC Plc, the major socio-economic project undertaken during the year was the installation of street lights around selected key parts of Kitwe’s Nkana East residential area, where the Company’s operations are headquartered, and the adjoining Nkana West area. Noteworthy about this project is the use of solar lighting, alongside conventional lights, for certain sections of streets. As the Company is keen on developing renewable energy technologies, including solar, the project is also being used to pilot solar lighting at that scale. At year-end, 85% of works had been completed at USD18,000. The remaining portion is expected to be completed mid-year 2015.

NSP, in Nigeria, during the year under review, repaired a section of the main road linking Shiroro to Minna, the Niger State capital.

Education

At the University of Zambia, the project that has been going on for nearly 5 years, immense progress was made as it draws to a close. Two live demonstration high voltage substations, with associated transmission system, were constructed. The power systems are complete with protection, transmission, telecommunications and SCADA functions. The intention is offer students practical knowledge and experience of working with modern high voltage power systems. During the year, the market value of equipment and services provided to the project was USD2.2m.

As part of education sector support, the Company provided mentorship and internship opportunities to 67 students from various institutions of higher

learning spread across disciplines but with the majority pursuing engineering and technical studies. Similarly, Realtime offered internship opportunities to 9 engineering students during the year.

The Company recognizes the importance of investing in engineering and sciences in learning institutions because it is from that pool that its future engineers and technicians will come. Hence, support to the Junior Engineers, Technicians and Scientists (JETS) was scaled up during the year, with both financial and material support, as well as the involvement of some engineering staff in the adjudication of projects presented at the fairs.

As a demonstration of its commitment to renewables energy, the Company initiated an essay writing competition targeted at high school children and intended to cultivate an interest for sustainable energy in that age group. The object was not only to introduce the subject to our young people, but also to pique their interest and open them up to identifying opportunities for green energy within their immediate local environs and how those might be sustainably exploited. A further example of demonstrated sustainability was the continued planting of trees at various schools on the Copperbelt. Schools and school children are particularly targeted because of the potential impact that inculcating these values in them early on has on the environment generally.

Health

Health is another pillar of the Company’s social responsiveness, and in 2014, the main interventions were carried out in Kanyikezhi area, where the Kabompo Gorge Hydroelectric Project is situated. The area is prone to malaria and very far from the government health facilities. Two outreach programmes were undertaken in March and August; the initial targeted mainly at the female folk and children. The results of the first outreach prompted the Company to make a follow-up later in the year, targeted at prevention. Hence, preventative measures were undertaken, in partnership with non-governmental organizations working in the health



space as well as the Ministry of Health, included Indoor Residue Spraying of residences, distribution of insecticide treated mosquito bed nets and malaria testing.

In Nigeria, NSP continued to invest in the local school it manages for the community and which makes up part of the company’s non-core assets. The school’s infrastructure has been rehabilitated to raise its standards.

Sports

Fitness through sport was high on the Company’s wellness agenda during the year, culminating in the hosting of the first ever sports networking gala, which attracted the participation of three other corporates, including the Company’s second largest customer – Mopani Copper Mines Plc.

Support to the Power Dynamos Football Club (Power Dynamos) continued. The team overcame its uncharacteristic poor showing in 2013 to finish second and be one of the two teams representing the country in continental club competitions. Although, Power Dynamos closed the year with no silverware, they played in all major competitions. The annual grant to the Club for 2014 was USD992,660.

Infrastructure improvements were made to the club stadium, and included expansion of the VIP seating area, installation of ticketing booths and improvements to the water reticulation system. In a bid to improve income and safety of gate takings during matches, a contract was signed with mobile communications provider, MTN Zambia, for the use of its mobile money platform.

In readiness to comply with world football governing body FIFA Club Licensing requirements, a company called Power Dynamos Sports Limited was registered in December 2014. Its primary purpose is to manage the affairs of the Club as an established business entity. CEC Plc is currently the sole shareholder.

Other sports, particularly golf and body building, also received the Company’s support during the year.

Financial support was also rendered to third-parties in athletics – one being the national athletics association to enable Zambian athletes’ participation in the Glasgow Commonwealth Games and the other to enable the country host a regional schools’ confederation tournament.

Health and safety

The safety of communities around our installations is taken very seriously and continuous efforts are made to educate and enlighten residents on the dangers of electricity. Hence, safety community sensitizations were undertaken at both CEC Plc and AEDC. The objective, especially at AEDC, is to use these fora to raise awareness on safety in high risk areas so as to eliminate third-party fatalities.

The Group, across all business units, will in the coming year continue to identify and make investments in those areas, while not being core to the business are still critical to business success and positive, mutually beneficial relationships.



GROUP FINANCIAL STATEMENTS ANDFINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2014

Directors’ report

Directors’ responsibilities in respect of the preparation of the financial statements

Independent auditor’s report

Statements of financial position

Statements of profit or loss and other comprehensive income

Statements of changes in equity

Statements of cash flows

Notes to the financial statements

32

51525354555759



>>> DIRECTORS’ REPORT

DIRECTORS’ REPORT

The Directors have pleasure, in submitting to the shareholders, their report on the Group financial statements and financial statements for Copperbelt Energy Corporation Plc (“the Company”) for the year ended 31 December 2014.

The Company continued to be listed on the Lusaka Stock Exchange (LuSE) and is the holding Company for CEC Africa Investments Limited (CEC Africa), a subsidiary investment company registered in Mauritius, and has 50% shareholding each in CEC Liquid Telecommunication Limited (CEC Liquid Telecom) and Realtime Technology Africa Alliance Limited (Realtime) joint ventures.

The Company’s principal business continues to be the generation, transmission, distribution and sale of electricity.

1 The Group

The Company has direct shareholding in four companies namely, (i) CEC Africa (ii) Realtime (iii) CEC Liquid Telecom and CEC-Kabompo Hydro Power Limited (CEC-KHPL)

The wholly-owned subsidiary, CEC Africa, continues to hold the Company’s equity interest in projects and companies across Sub-Saharan Africa. As at 31 December 2014, CEC Africa held equity interest (Indirect) in the following operating power companies (i) 45% equity interest in Abuja Electricity Distribution Company (Nigeria) and 20% equity interest in North South Power Company Limited (Nigeria). CEC Africa is the vehicle through which CEC undertakes international investments in the power sector in Sub-Saharan Africa to achieve its vision of becoming a leading investor, developer and operator of energy infrastructure in Africa.

2 Principal activities

The principal activities of the Group are the generation, transmission, distribution and sale of electricity and telecommunications service provision.

The Company’s core business remains the transmission, distribution, generation and sale of electricity, primarily on the Copperbelt, whilst its joint venture companies focus on telecommunications. Realtime’s principal activities is provision of IP connectivity, which includes provision of internet services with associated services, corporate connectivity solutions (installation and operation of a wide area network through provision of either optic fibre private leased circuits or virtual services and a host of other services typically of the ICT industry, whilst CEC Liquid Telecom’s principal activities are the provision of wholesale capacity and internet bandwidth to Zambia Information and Communication Technology Authority (ZITCA) licensed private and public operators.

The principal activity of CEC Africa is to operate as an investment company. During the year ended 31 December 2014, CEC Africa held the following investments:

• 75% equity investment in KANN Utility Company Limited, a Nigerian investment holding company, which holds 60% majority equity interest in the Abuja Electricity Distribution Company (AEDC), also a Nigerian company, which has the franchise rights to supply and distribute electricity to four Nigerian states including the Federal Capital Abuja, Niger, Nasarawa and Kogi.

• 100% equity investment in CEC Investments Hydro Limited, a Mauritian investment company, which subsequently owns 20% equity interest in North South Power Company Limited (NSP), a Nigerian company that holds a 30 year concession to operate and maintain the 600MW Shiroro Hydropower Plant (Shiroro).


>> DIRECTORS’ REPORT cont...

3 Share Capital

The authorised share capital of the Company is K20,000,000 divided into 2,000,000,000 ordinary shares of par value K0.01 each and 1 Special Share capital of K1.40 comprising 1 Special Share of K1.40 held in the Company by the Government of the Republic of Zambia.

i) Shareholding

Pursuant to the Rights Issue undertaken during 2014, the following additional shares were issued: Zambian Energy Corporation (Ireland) Limited 325,000,000 ZCCM Investments Holdings Plc 125,000,000 Private Individuals / Institutions 157,000,597

As at 31 December 2014, the Company’s shareholding was as shown below:

Zambian Energy Corporation (Ireland) Limited 845,000,000

ZCCM Investments Holdings Plc 325, 000,000

Private individuals / Institutions 455,000,597

Government of the Republic of Zambia (Golden Share) 1 Special share

ii) Significant shareholding in the Company

As at 31 December 2014, substantial shareholding (5 per cent or more) in the Company’s share capitals were as follows:

Zambian Energy Corporation (Ireland) Limited 52%ZCCM Investments Holdings Plc 20%African Life Financial Services 7%

iii) Mandatory offer

In compliance with the provisions of the Third Schedule of the Securities (Takeovers and Mergers) Rules, Statutory Instrument No. 170 of 1993, made pursuant to the Securities Act Cap 354 of the Laws of Zambia and the Harmonised Listing Rules of LuSE and as directed by the Securities and Exchange Commission of Zambia (SEC), Batoka Energy Holdings (Ireland) Limited undertook a Mandatory Offer to the minority shareholders of CEC to acquire the shares in CEC not owned by Zambian Energy Corporation (Ireland) Limited (ZECI). This arose from an internal re-organisation involving ownership in ZECI, which holds 52% of the shares in CEC. It was the position of SEC that the re-organisation of ZECI had resulted in an obligation on Batoka Ireland to make a Mandatory Offer to the shareholders of CEC under the Takeovers Rules. The offer was, however, not taken up by the minority shareholders of CEC.

4 Activity on the Lusaka Stock Exchange

The stock actively traded during the year under review, opening at K0.73 per share and closing at K0.62 (2013: K0.73). The share price for much of the year was within the range K0.66 to K0.69 and lower than 2013 prices. Total number of shares traded in the year on LuSE was 63,772,415 (2013: 95,610,106).




5 Financial Results

Below is a table of financial highlights for the Group over the last two years. The consolidated financial results have incorporated 100% of the Company and CEC Africa. The results of CEC Africa are a consolidation of the results of all of its investments. The share of profit or loss of the telecom Joint Ventures (CEC Liquid and Realtime) and the associate NSP have been incorporated.

Key Statistics Consolidated The Company CEC Africa

2014 2013 2014 2013 2014 2013

Revenue (USD'000) 580,991 309,407 291,948 267,066 289,044 46,971

Gross profit (USD'000) 87,157 58,018 88,697 75,452 (1,540) (8,060)

PBIT(USD'000) (100,055) 111,299 50,135 37,311 (150,190) 91,129

Net profit (USD'000) (164,022) 87,424 33,605 24,009 (197,627) 80,105

Property, plant and equipment (NBV)(USD'000) 763,803 706,599 231,289 234,398 532,627 472,429

Inventory (USD'000) 5,892 6,408 2,869 3,972 3,022 2,671

Current assets (USD'000) 278,665 112,529 161,615 110,414 154,314 50,643

Total assets (USD'000) 1,106,715 871,182 542,228 415,687 564,487 561,756

Current liabilities (USD'000) 377,604 215,917 112,326 152,948 225,540 163,345

Loans (USD'000) 237,423 230,942 99,740 103,259 284,462 213,375

Non-current liabilities (USD'000) 292,208 206,651 150,424 78,935 295,249 120,155

Equity (USD'000) 436,903 448,614 279,478 183,804 191,920 278,256

Acid test ratio (Times) 0.72 0.24 0.57 0.58 0.67 0.29

EBITDA (USD'000) (61,434) 125,969 60,603 47,719 (120,102) 93,564

Return on assets - 13% 9% 9% - 16%

Return on equity - 19% 12% 13% - 29%

Earnings per share (USD cents) (0.108) 0.087 0.022 0.024 - -

NSP Realtime CEC Liquid

2014 2013 2014 2013 2014 2013

Revenue 63,179 24,582 13,333 10,570 7,017 7,201

Gross profit 44,922 20,959 7,294 5,176 3,510 3,671

Net loss/profit (5,056) 8,556 (112) (1,130) 485 474

Share of loss/profit (1,011) 1,711 (56) (565) 242 237

Total assets 267,100 281,100 51,236 37,517 2,511 2,366

Total Liabilities 222,044 222,008 22,061 8,230 1,635 1,896

6 Going Concern

During the year ended 31 December 2014, the Group made a loss of USD164.02m (2013: profit of USD87.42m). At that date, the Group’s total current liabilities exceeded its total current assets by USD98.94m (2013: USD103.39m).

The net current liability position is largely driven by the AEDC payables balance, which is an accumulation of a significant portion of the Market Operator’s bill. During the year, AEDC operated based on Interim Rules. Under these rules, AEDC had an obligation to pay 53% of the Market Operators bills for the four months January 2014 to April 2014, which threshold was increased in May 2014 to 65%. The unpaid Market Operators liability representing 47% (January to April 2014) and 35% (May to December 2014) is accrued and forms part of the payables amount as a current liability. The Market Operator’s bill represents 62% of the Group’s current liability at year end.

Subsequent to the reporting period, the Nigerian Electricity Regulatory Commission (NERC) increased AEDC consumer tariffs whose implementation is phased. The commercial and industrial end user tariffs were increased by 10% effective 1 February 2015, whereas the domestic consumer tariffs were increased by 59% but will only be effective 1 July 2015.



The Directors have reviewed the forecasts and projections of AEDC, which take into account tariff increases, planned subsidies funding (intervention fund), in collaboration with the Central Bank of Nigeria, planned reductions in Aggregate Technical, Commercial and Collection losses, continued deferral of the payment of a certain proportion of the Market Operator’s bill, capital investments required to improve service delivery and financial support offered by KANN Utility Company Limited, the 60% shareholder of AEDC.

Based on the foregoing, the directors expect the Group to continue as a going concern, realise its assets and discharge its liabilities in the normal course of business. Accordingly, the financial statements are prepared on the basis of accounting policies applicable to a going concern.

7 Investments in subsidiaries

During the year, the Company retained its equity interest in the two Zambian telecommunications joint ventures and subsidiary operations as listed below:

Realtime Technology Africa Alliance Limited - 50%CEC Liquid Telecommunication Limited - 50%CEC-Kabompo Hydro Power Limited - 100%

In 2013, the Company incorporated a 100% subsidiary CEC Africa, a Mauritius based investment company, which at 31 December 2014, held the following investments:

KANN Utility Limited (Nigeria) - 75%CEC Africa Hydro Investments Limited (Mauritius) - 100%CEC Africa (Sierra Leone) Limited - 50.1%Copperbelt Energy Nigeria Limited - 100%CEC Africa Services Limited (Zambia) - 100%

The trading results for these investments has been incorporated in the Group consolidated results.

8 Capital expenditure

The Group incurred USD25.8m on additions to capital expenditure compared to USD10.0m in 2013. The Company’s capital expenditure strategy and decisions continued to be centred on minimizing business risks, enhancing customer satisfaction and ensuring future business activities. Major areas of expenditure remained in the areas of emergency generation equipment, transmission and distribution equipment, protection and metering equipment, safety, health and environmental (SHE) equipment, IT, vehicles and communications and control equipment.

As in previous years, the capital expenditure programme focussed on critical business operational areas; in particular, the refurbishment of the Gas Turbine Alternators (GTAs) to improve reliability of standby power plant, replacement of system assets that had reached the end of their useful lives and to maintain the required high standards for SHE compliance.

In the Nigerian operations, extensive capital expenditure is expected. AEDC, the distribution company has plans to stabilise its operations by investing in the commercial process, anchored by investments in the billing and vending systems, customer metering and ICT infrastructure to support newly reengineered business processes. In 2014, Capital expenditure at AEDC was focussed on improvement of quality of supply through replacement of faulty transformers and circuit breakers, reduction of ATC & C losses, enhancement of ICT infrastructure and improvement of safety standards. Approximately USD11.5m was spent.

At NSP, the planned major routine rehabilitation of a turbine and generator unit will be undertaken in the final quarter of 2015. The timing takes into account the hydrological cycle of the power plant.

9 Insurance

The Group has insured its operational assets against property damage and business interruption. The Group also maintains insurance for its Directors in respect of their duties as Directors of the Company. Besides the foregoing, the Company has cover for employer’s liability, public and product liability, group personal accident, motor vehicle

6 Going Concern (continued)




insurance and group life assurance. These policies are renewable and run on an annual basis.

10 Dividends and transfers to reserves

The policy of the Company in respect of the payment of dividends is a matter that is 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; and• taking into account the interests of the shareholders in minimizing taxation liabilities; • 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. However, in 2014 no dividend was declared because of the need to fund its investments and projects.

Retained profit taken to reserves at 31 December 2014 was USD33,605,000.

There were no dividends declared by any of the subsidiaries. However, subsequent to the year end on 27 January 2015, an interim dividend of US Cents 0.86 per ordinary share for 2015 was proposed for payment by the Directors.

11 Developments

The total energy sales to the Zambian mines supplied by CEC Plc for the year 2014 at 4,208GWh were marginally lower than those for 2013, at 4,274GWh. This 2% reduction in sales volumes was mainly attributed to production challenges by one of the large mining customers.

The energy volumes wheeled for ZESCO Limited (ZESCO) under domestic wheeling continued to be impacted negatively by system reconfigurations that ZESCO was undertaking on its network. A monthly average of 237MW was wheeled in 2014 compared to the monthly average of 252MW in 2013.

The average copper price for the year under review was USD6,859 per tonne, representing a 7% reduction from the 2013 annual average price.

There was a significant increase in international power trading and international power wheeling volumes from a total of 84.540GWh and 490GWh in 2013 to 295.445GWh and 1,026GWh in 2014 respectively. This 250% increase in international power trading volumes and 100% in international power wheeling volumes is attributed to the growing demand from the Democratic Republic of Congo (DRC) mining sector and generation challenges in that country. Two international power supply contracts for mining companies in the DRC through Société Nationale D’Electricité (SNEL), the national utility in the DRC, were signed in 2014.

CEC has a number of projects under its organic business development programme. The Synclinorium project was completed and is delivering commissioning power to Mopani Copper Mines. Other projects, that include the South East Ore body, which is aimed at supplying power to new projects at NFC Africa Mining, have advanced. These projects are important as they not only seek to expand customers’ operations but will also significantly extend the life of the respective mines. One mining and metallurgical plant Power Supply Agreement (PSA) was signed during the year under review with China Civil Company Limited. The total additional load from the mine is expected to exceed 10MW in the medium-term.

The regulatory environment in the Nigerian power sector continued to evolve as it settled into being a predominantly private investor led sector. The Nigerian economy suffered some shocks due to the significant, unprecedented oil price drop in the latter part of 2014. Nigeria is highly reliant on crude oil exports for its foreign exchange earnings. This development put devaluation pressure on the local currency, the Naira, and upward interest rate pressure on Naira denominated debt. The regulatory regime in the power sector, however, allows for tariff adjustment on account of exchange rate movements and it is expected, therefore, that the sector will get some relief from this burden at the next tariff review.

9 Insurance (continued)



12 Operations

During the year under review, the main source of the Company’s purchases of energy to meet customers’ requirements was ZESCO, under the Bulk Supply Agreement. Energy sales to the mine customers totaled 4,208GWh compared to 4,274GWh in 2013. Average capacity sales were 544MW compared to 554MW in 2013. The marginal decline was attributed to production challenges at some mines. Security of supply was satisfactory throughout the year. Following the commissioning of additional voltage compensation equipment on the Copperbelt by ZESCO, there were fewer incidents of low voltages recorded during peak demand hours compared to the previous year.

The Company’s full complement of emergency Gas Turbine Alternators (GTAs) was restored in June 2014, after the obsolete excitation system on Unit No. 1 at Luano was replaced with a modern static excitation system. Further enhancements to the reliability of the GTA fleet included retrofitting the control equipment on both units at Bancroft with a modern system.

2014 was relatively a quiet year in terms of thefts and vandalism of the system. There were no thefts of overhead copper conductors reported during the year under review. This was attributed to the robust measures put in place to combat theft and vandalism of the Company’s equipment and the Security section continued to proactively work with the surrounding communities as well as the Zambia Police and other stakeholders to ensure safety of the transmission lines.However, two (2) cases of cable theft were recorded at one substation and these were reported to the Zambia Police for joint operation.

Due to the low reservoir levels when NSP took over operations at Shiroro in November 2013, and below average inflows during the 2014 rain season from April to October, the power station produced 2,024GWh of electricity, representing only about 86% of the designed annual energy generation. The maximum reservoir level attained during 2014 was 377.91m above sea level on 22 October, and this level is some 4.59m below the maximum power pool elevation.

AEDC operations continue to be affected by the low levels of generation in Nigeria, exacerbated by frequent vandalism to the gas pipelines that are the main source of fuel to the thermal power plants on which the Nigerian grid depends. For most months of the year, AEDC received over its allocated 11.5% of national capacity. This was due, in large part, to factors beyond the control of the utility such as the inability of some regions to accept their allocated power.

13 Safety and Health

CEC’s consistent investment in implementing the Company’s Safety and Health Management systems continued. Risk assessments and risk management remained at the core of the Company’s safety and health management system. SHE targets were met for 9 out of 13 key SHE performance indicators. Man hours without a system based lost time accident were extended from 3.86 million to 4.74 million, an achievement that reflects the importance that the Company places on SHE matters and, particularly, the safety of the power system. In comparison to 2013 performance, there was notable improvement especially, in the area of road traffic accidents (5 20I4 Vs. 10 2013). The Company continued to maintain, at very low levels, system breaches (2 2014 Vs.1 2013) and reportable incidents (4 2014 Vs.4 2013). The main drivers of this overall good SHE performance were management’s commitment and responsibility to maintaining legislation and industry practices, employee competency and training programmes, improved employee involvement and communication with stakeholders.

Support for employee welfare through the malaria roll back and onsite Voluntary Counseling and Testing (VCT) programmes continued. The Company also organized and hosted a sports networking gala to encourage employees to adopt healthy lifestyles through exercise and sport for the benefit of themselves, their families and the Company.

AEDC developed and launched safety and health management systems modelled on modern practices. These include establishment of a board health, safety and environmental (HSE) committee and development of health, safety, environmental and social policies. Much progress has been made in this area in the first full year of the company’s operations since takeover; however, many challenges lie ahead and especially, we need to reduce drastically, the number of fatalities both third-party and among the staff. Through 2014, AEDC recorded 20 fatalities, 17 of them being third party and occasioned mainly by acts of electricity theft, vandalism, illegal installations and tampering. We acknowledge the huge impact any loss of life has on the family, community and the company, hence, a comprehensive plan has been put together to address these challenges




through a Fatality Prevention Strategy, which has been developed and is already being implemented

NSP trained 150 members of staff in firefighting as part of a campaign to make safety every employee’s business. The company also launched a risk identification exercise in pursuance of a Corporate Risk Register. At asset level, Shiroro recorded no fatalities during the year, a record it has been maintained for the last 10 years. Further no lost time accidents were recorded. Shiroro’s safety record is considered the best among the generation companies in Nigeria.

14 Environmental matters

Environmental performance was maintained at satisfactory levels. There were no legal contraventions and no serious environmental incidents.

In a quest to enhance environmental performance and sustainability, the Company focused on aligning the existing environmental and social management system to the IFC Performance Standards. The Company also planted trees and citrus fruits in selected primary and secondary schools in Kitwe. Schools were specifically targeted in order to inculcate environmentally sustainable values in the young generation for a better future of the environment and humanity.

CEC’s corporate culture has embedded environmental policies into all managerial and operational functions and has earned recognition by corporate stakeholders. In July 2014, the Kitwe District Chamber of Commerce and Industry awarded CEC the Environment Award.

AEDC embarked on the process of putting in place a framework for environmental systems implementation, which will guide its approach to environmental management and compliance. In addition, the company ensured all required licences and permits were obtained.

NSP engaged a consultant to develop a register of environmental reporting and compliance obligations encompassing local, state, federal and international regulations and legislation.

15 Human Resources

The total remuneration of employees during the year amounted to USD62,901,000 (2013: USD32,304,000) and the average number of employees was as follows: The Group USD62,901,000 (2013: 32,304,000) The Company USD21,975,000 (2013: 20,203,000) CEC Africa USD40,926,000 (2013: 9,522,000)

Month Number

The Company CEC Africa Total

January 387 4,128 4,515

February 387 4,064 4,451

March 389 4,072 4,461

April 390 4,084 4,474

May 380 2,653 3,033

June 387 2,673 3,060

July 392 2,742 3,134

August 391 2,733 3,124

September 390 2,731 3,121

October 390 2,733 3,123

November 391 2,733 3,124

December 390 2,733 3,123

Average for the year 390 3,165 3,555

13 Safety and Health (continued)



The Group is committed to continuing to attract and retain skilled employees, capable of achieving the Group’s objectives for its current business and future growth, and consequently enhancing shareholder value.

16 The Board

Role of the Board

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. The Board is primarily responsible for the governance of Risk and Capital in order to ensure that the Group, Company and subsidiaries operate as sustainable organisations capable of fulfilling their stated objectives over the long-term.

Board Composition

The Articles of Association of the Company provide for the Board to comprise twelve Board Members. The Board has seven Committees, whose duties and responsibilities are set out in the respective terms of reference. The appointment and replacement of Directors is governed by the Company’s 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. Each new Director receives a formal induction, which includes presentation on the business, visits to Company key sites, an information pack that includes copies of the Company’s Articles of Association, latest Annual Report and Accounts, Committee terms of reference and copies of recent Board and Committee minutes and supporting papers. The induction programme also addresses issues of governance and regulatory matters, and Directors’ statutory duties.

At the last Annual General Meeting (AGM) (25 July 2014) of the Company, the then Executive Chairman, Hanson Sindowe, announced his retirement from the position of Executive Chairman and took up the position of Non-Executive Chairman. Michael Tarney took up a position in CEC Africa in August 2014 but will continue to serve as a Non-Executive Director in the Company. The Membership of the Board as at 31 December 2014 was:

Executive Director

Owen Silavwe Appointed on 20 August 2014

Non-Executive Directors

Hanson Sindowe Chairperson Munakupya Hantuba Deputy Chairperson Abel MkandawireCharity MwansaMildred KaundaReynolds Bowa Michael Tarney Ronald Tamale Appointed on 18 March 2014 Kanad Virk Appointed on 18 March 2014Klaas Bleeker Resigned on 18 March 2014Jean Madzongwe Resigned on 18 March 2014

Executive

Independant Non-Executive

Non-Executive 75%

12BOARD

MEMBERS

11NON-EXECUTIVE

MEMBERS

1EXECUTIVEDIRECTOR

17%8%

15 Human Resources (continued)




Independent Non-Executive Directors

Sixtus Mulenga Appointed on 25 July 2014 Joe M Chisanga Appointed on 25 July 2014Pius H Maambo Resigned on 25 July 2014 Edson M Hamakowa Resigned on 25 July 2014

Directors’ Interests in CEC

As at 31 December 2014, the interests of Directors in the Company, as recorded in the register and on the Lusaka Stock Exchange, were as follows:

2014 2013 2012 2011

Total ordinary issued Shares of the Company

1,625,000,597 1,000,000,000 1,000,000,000 1,000,000,000

Direct shareholding

Hanson Sindowe 1,774,567 1,092,041 2,092,000 2,092,000

Michael J Tarney 1,837,630 1,837,630 1,837,630 1,230,000

Owen Silavwe 650,000 400,000 400,000 400,000

Munakupya Hantuba 343,625 19,231 19,231 19,231

Reynolds Bowa 343,050 - - -

Sixtus Mulenga 50,000 50,000 50,000 50,000

Indirect shareholding

Hanson Sindowe 300,092,866 110,802,000 110,802,000 110,802,000

Michael J Tarney 166,596,215 61,513,000 61,513,000 61,513,000

Abel Mkandawire 153,246,550 56,854,00 56,854,00 56,854,00

Board meetings

Board meetings and Directors’ attendance The Board meets quarterly on a scheduled basis during the year and on an ad hoc basis when required. Quarterly meetings are held over two or three days, Committee meetings preceding the Board meeting. This meeting structure enhances the effectiveness of the Board and its Committees.

All Directors are expected to allocate sufficient time to the Company to discharge their respective obligations as Directors and attend all Board and Committee meetings. During the year ended 31 December 2014, there were four scheduled Board meetings in February, May, August and November.

Board evaluation

The Board undertakes a review of its performance and that of the Committees and accordingly, a formal evaluation of the performance and effectiveness of the Board and its Committees, enlarged, is undertaken annually.

The table below shows attendance of Directors and alternates at Board and Committee meetings held during the year.

16 The Board (continued)



Board EXCOM Audit Rem Invest SHE Risk Nom

Number of meetings held in the year

10 5 5 4 4 5 2 2

Director

Hanson Sindowe 10 5 4 - - - - 2

Munakupya Hantuba 9 4 - - 4 4 - -

Charity Mwansa 1 - - - - - - -

Edson Hamakowa 6 - 4 - - - - -

Michael Tarney 9 5 5 2 4 4 2 -

Abel Mkandawire 10 - - 3 - 4 - 2

Ronald Tamale 6 4 5 - 1 - 2 -

Reynolds Bowa 10 5 - - - - 2 -

Owen Silavwe 10 5 4 3 - 4 - -

Pius H Maambo 5 1 - 2 - 2 - -

Klaas Bleeker 1 3 - - - - - -

Joe M. Chisanga 3 - 3 - - - 2 -

Sixtus Mulenga 3 - - 1 - 2 - -

Mildred Kaunda 9 - 5 4 - - - -

Siyanga Malumo (ex-official) 1 1 - - 3 - - -

Kanad Virk 5 1 1 - - - - -

Reuben Zulu* 1 - - - - - - -

Charles Mulenga * 2 - - - - - - -

*Alternate Directors to Charity Mwansa

Board support

The Corporate Secretariat provides administrative and logistical support to the Board.

All Directors receive financial, operating and other relevant information to help them discharge their duties. Board papers are circulated at least a week ahead of each Board meeting, to ensure Directors have time to review them before meetings.

Directors have access to independent professional advice at Company expense, if they consider it appropriate. During the year, the Independent Committee of the Board appointed, pursuant to the Mandatory Offer by Batoka Energy Holdings (Ireland) Limited, a shareholder of Zambian Energy Corporation (Ireland) Limited, which holds 52% of the Company’s shareholding, Legal Advisors to obtain independent legal advice in the discharge of their functions.

Induction and training Induction programmes are carried out for all new Directors. Directors also receive ongoing training, to ensure they can appropriately perform their duties as and when planned. The induction programme addresses issues on governance and regulatory matters and Directors’ statutory duties.



Conflict of interest

The Company’s Conflict of Interest Policy allows the Board to authorize actual or potential conflicts of interest. The authorisation procedure involves Corporate Secretariat issuing guidance and providing other communication to the Board meeting identifying any conflict or potential conflicts, which the Board considers as matters arise.

In addition, Directors are expected to advise the Chairperson or Company Secretary of any actual or potential conflict as soon as they arise, so the Board can consider them at the next available opportunity. Adherence to this procedure is encouraged by the Board.

Chairperson’s roles and responsibilities

The roles of the Chairperson are primarily:

a. Running the Board effectively and ensuring that the Board, as a whole plays a full and constructive part in developing and determining the Company’s strategy and overall commercial objectives.

b. Promoting the highest standards of integrity, probity and corporate governance throughout the Company and particularly at Board level.

c. Ensuring that the Board receives accurate, timely and clear information on the Company’s performance and the issues, challenges and opportunities facing the Company.

d. Ensuring effective communication with the Company’s stakeholders, including senior management, and ensuring that members of the Board develop and understand the views of the Company’s major investors.

Annual General Meetings (AGM)

This is an important event, which provides a valuable opportunity for the Board to communicate with shareholders and to meet them informally after the main business of the meeting. All Directors are expected to attend the AGM.

Shareholders are encouraged to attend and to use the opportunity to ask questions. However, if it is not practical for a shareholder to attend, they are encouraged to appoint a proxy to vote on their behalf on the resolutions.

Risk Management and Internal Control

The Board is responsible for establishing, maintaining and reviewing sound risk management and internal control systems, and there is an ongoing process in place for identifying, evaluating and managing significant risks.

To this end, a new committee of the Board called the Risk Committee was established in August 2014.






COMMITTEES

Exec

utiv

e

Rem

uner

atio

n an

d Em

ploy

ee D

evel

opm

ent

Aud

it

Safe

ty, H

ealth

& E

nviro

n-m

ent

Inve

stm

ent

Nom

inat

ion

Risk

Mr. Hanson Sindowe

Mr. Munakupya Hantuba

Mr. Michael Tarney

Mr. Siyanga Malumo (ex-official)

Mr. Abel Mkandawire

Mrs. Mildred T. Kaunda

Dr. Sixtus Mulenga

Mr. Ronald Tamale

Mr. Kanad Virk

Mr. Joe M. Chisanga

Mr. Reynolds Bowa

Mr. Owen Silavwe

Committee Chairperson

Committee Member

The Board has established seven Committees, which have confirmed terms of reference and procedures. The Committees report to the Board of Directors.





Safety, Health and Environment Committee (SHE)

Remuneration and Employee Development Committee

Nominations Committee

The SHE Committee’s key mandate is to ensure that management of SHE matters in the Company is aligned with the overall business strategy of the Company and is geared towards attainment of its commitments and obligations in these fields.

In order to attain this mandate, the Committee focuses on quarterly reviews of the safety, health and environmental performance of the Company.

The Committee oversees employee remuneration and Mineworkers Union of Zambia (MUZ) wage negotiations, key organizational chang-es, management and leadership development, pension scheme arrangements, training and employee development policies.

The Committee is tasked with the responsibility of considering candidates for appointment to the Board and making recommenda-tions for approval of Independent Directors, whose appointments are undertaken by the shareholders at the general meetings of the Company.

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.

Risk CommitteeThe purpose of the Committee is to assist the respective Boards of Directors of the Group in their oversight of the companies’ manage-ment of key risks, including strategic and operational risks, as well as the guidelines, policies and processes for monitoring and mitigating such risks.

The Committee’s role also includes reviewing the effectiveness of the Group’s risk management systems, practices and procedures, and providing recommendations for improvements, where necessary. In performing its duties, the Committee maintains effective working relationships with the respective Boards of Directors, Management, Compliance & Quality and Internal Auditors.


Executive Committee Audit Committee

Investment Committee

The Executive Committee’s role is to oversee, the major operations of the business including key customer issues, stakeholder manage-ment, financial performance, capital projects and operational man-agement issues. This Committee meets on scheduled quarterly dates and between meetings as necessary and appropriate

Its responsibilities are to:• Recommend policy to the Board;• Develop policy framework and statements for the Board;• Monitor the financial status and performance of the Company;• Represent the Board at major stakeholders and Company func-

tions and ensure effective communication internally, at all levels of the Company and externally.

• Review and approve the Company’s public relations policy and year-to-year strategy;

• Ensure an effective planning process for the Company in all its operations and functions.

The Audit Committee provides oversight on the effectiveness of the Company’s financial reporting systems and accuracy of information, and that the Company’s published financial statements represent a true and fair reflection.

The Committee ensures that appropriate accounting policies, con-trols and compliance procedures are in place and also risk manage-ment, compliance management and other internal control activities in the Company. Meetings are attended by senior management and the Company’s external auditors as required.

The Investment Committee was established in order to have a streamlined approach to the various business growth opportunities under consideration by the Company.

The Committee provides focussed guidance to grow the CEC busi-ness outside the core business, in areas that will create value for the shareholders.



17 Directors’ fees and remuneration

The Company paid USD1,357,000 to Executive Directors as remuneration and USD313,000 to Non-Executive Directors as Directors’ fees.

There was USD297,000 outstanding as ESOP loans from the Executive Director and two Non-Executive Directors at the year end. Members of the Board were not entitled to any form of defined pension benefits from the Company.

18 Corporate social responsibility

The Group continued to support various corporate social initiatives, including sponsoring Power Dynamos Football Club through direct funding, which during the year totaled USD993,000 (2013: USD1,089,000).

19 Gifts and donations

The Group is committed to making a positive difference to the Communities in which it operates. During the year, the Company made donations to support a number of community initiatives and charitable causes. The total cost for donations in 2014 was USD220,000 (2013: USD614,000).

20 Other material facts, circumstances and events

The Directors are not aware of any material facts, circumstances or events, which occurred between the accounting date and the date of this report, which might influence an assessment of the Company’s financial position or the results of its operation.

21 Auditors

At the last Annual General Meeting of the shareholders of the Company, Messrs KPMG were appointed as auditors of the Company.

In accordance with the Company’s Articles of Association, Messrs KPMG will retire as auditors of the Company at the conclusion of the forthcoming Annual General Meeting and have expressed their willingess to continue in office; a resolution for their appointment and fixing their remuneration will be tabled at the Annual General Meeting.

By order of the Board

Julia C Z ChailaCompany Secretary13 March 2015


A review of CEC Plc’s compliance with the LuSE Corporate Governance Code as at 31 December 2014, showed that full compliance rate was at 96%. The summary of the compliance status is shown in the chart below.

SUMMARY OF AREAS THAT ARE NOT FULLY COMPLIANT OR INAPPLICABLE

1. AREAS OF NON-COMPLIANCE

i) The Board must have a charter or terms of reference defining its functions and Setting out its responsibilities.

ii) The details of the Board charter must be provided in the Annual Report.

ii) The organisation should have a justifiable long-term incentive program for management.

2. AREAS OF PARTIAL COMPLIANCE

i) The audit committee or similar committee should review executive expense Accounts.

3. AREAS NOT APPLICABLE

i) Where share options have been granted to non-executive directors, the boardmust obtain the prior approval of share owners and meet the specific requirements of the Companies Act.

CEC’S COMPLIANCE STATUS OF CORPORATE GOVERNANCE RULES

1% - PARTIALLY COMPLIANT

3% - NON-COMPLIANT

96% - FULLY COMPLIANT


2013 LuSE CODE COMPLIANCE TABLE

CATEGORY

TOTA

LRU

LES

APP

LCA

BLE

TO C

EC

NO

T A

PPLC

ABL

E TO

CEC

FULL

COM

PLIA

NCE

PART

IAL

COM

PLIA

NCE

NO

NCO

MPL

IAN

CE

%N

A

%FC

%PC

%N

C

1 General Matters 15 15 12 3 0 80 0 20

2 Chairman & CEO 5 5 5 0 100 0 0

3 Executive & Non-Executive Directors 4 4 4 0 100 0 0

4 Director Compensation 9 9 8 1 0 89 11 0

5 Share & Share Dealings 4 3 1 3 28 100 0 0

6 Board Meetings 4 4 4 0 100 0 0

7 Board Evaluations 1 1 1 0 100 0 0

8 Company Secretary 3 3 3 0 100 0 0

9 Board Committees 10 10 10 0 100 0 0

10 Legal & Compliance 2 2 2 0 100 0 0

11 External Audit 6 6 6 0 100 0 0

12 Internal Audit 12 12 12 0 100 0 0

13 Risk 7 7 7 0 100 0 0

14 Integrated Sustainability Reporting 7 7 7 0 100 0 0

15 Disclosure & Stakeholder Reporting 4 4 4 0 100 0 0

16 Organisation Integrity 6 6 6 0 100 0 0

99 98 1 94 1 3 1 96 1 3


Board of Directors and Secretary

HANSON SINDOWE

Non-Executive

ABEL MKANDAWIRE

Non-Executive

MILDRED KAUNDA

Non-Executive

JULIA C. Z. CHAILA

Company Secretary

MUNAKUPYA HANTUBA

Non-Executive

KANAD VIRK

Non-Executive

JOE CHISANGA

Non-Executive

OWEN SILAVWE

Executive

RONALD TAMALE

Non-Executive

SIxTUS MULENGA

Non-Executive

CHARITY MWANSA

Non-Executive/Special Shareholder

Representative

MICHAEL J. TARNEY

Non-Executive

REYNOLDS BOWA

Non-Executive

DIRECTORS & MANAGEMENT


Senior Management Team

OWEN SILAvWE Managing Director

MUTALE MUKUKA Chief Financial Officer

CHRISTOPHER NTHALA Chief Operating Officer

TITUS MWANDEMENA Chief Commercial Officer

AARON BOTHA Chief Projects Officer

JULIA CHAILA Company Secretary / Chief Legal Counsel

DORCAS PHIRI Acting Human Resources Director

ISAAC MATE Group Health, Safety, Environment and Social Director



The directors are responsible for the preparation and fair presentation of the Group financial statements and financial statements of Copperbelt Energy Corporation Plc (“the Company”), comprising the statements of financial position as at 31 December 2014, and the statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes, in accordance with International Financial Reporting Standards and the requirements of the Companies Act of Zambia. In addition, the directors are responsible for preparing the directors’ report.

The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error, and for maintaining adequate accounting records and an effective system of risk management.

The directors have made an assessment of the ability of the Company and its subsidiaries to continue as a going concern and have no reason to believe the business will not be a going concern in the year ahead.

The auditor is responsible for reporting on whether the group financial statements and financial statements of Copperbelt Energy Corporation Plc are fairly presented in accordance with the applicable financial reporting framework, as described above.

Approval of Group financial statements and financial statements

The Group financial statements and financial statements of Copperbelt Energy Corporation Plc, as identified in the first paragraph, were approved by the directors on 13 March 2015 and were signed on their behalf by:

Director Director DirectorHanson Sindowe Owen Silavwe Joe M Chisanga

Directors’ responsibilities in respect of the preparation of financial statements


Independent auditor’s report To the shareholders of Copperbelt Energy Corporation Plc

Report on the financial statements

We have audited the group financial statements and financial statements of Copperbelt Energy Corporation Plc (“the Company”), which comprise the statements of financial position as at 31 December 2014, and the statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the financial statements which include a summary of significant accounting policies and other explanatory notes, as set out on pages 53 to 108.

Directors’ responsibility for the financial statements

The Directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of Zambia, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, these financial statements present fairly, in all material respects, the consolidated and separate financial position of Copperbelt Energy Corporation Plc as at 31 December 2014, and its consolidated and separate financial performance and consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards, and the requirements of the Companies Act of Zambia.

Other matter

The financial statements for the year ended 31 December 2013 were audited by another auditor who expressed an unmodified opinion on those statements on 26 June 2014.

Report on other legal and regulatory requirements

In accordance with Section 173 (3) of the Companies Act of Zambia, we report that, in our opinion the required accounting records, other records and registers have been properly kept in accordance with the Act.

KPMG Chartered Accountants 17 March 2015Lusaka, Zambia

Victor Sitabule M/PC 0000018 Partner

KPMG Chartered AccountantsFirst Floor, Elunda TwoAddis Ababa RoundaboutRhodes Park, LusakaPO Box 31282Lusaka, Zambia

Telephone +260 211 372 900Website www.kpmg.com

KPMG Chartered Accountants, a Zambian partnership, is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Partners: A list of partners is available at the above mentioned address.


Statements of financial position As at 31 December 2014 GROUP COMPANY

In thousands of US Dollars 2014 2013 2014 2013

Assets NOTE

Property, plant and equipment 14 763,803 706,599 231,289 234,398

Development costs 15(a) 27,744 12,852 27,744 12,852

Intangible assets 15(b) 113 145 - -

Investments in subsidiaries 16 - - 2 2

Investments in joint ventures 17(a) 15,046 14,878 15,294 15,294

Investment in associate 17(b) 21,344 24,179 - -

Loans to subsidiary 18 - - 106,284 42,727

Non-current assets 828,050 758,653 380,613 305,273

Inventories 19 5,892 6,408 2,869 3,972

Loans to subsidiary 18 - - 28,000 52,360

Trade and other receivables 20 168,635 60,623 78,431 34,479

Amount due from related parties 28 (i) 1,695 1,855 8,989 8,740

Cash and cash equivalents 21 102,443 43,643 43,326 10,863

Current assets 278,665 112,529 161,615 110,414

Total assets 1,106,715 871,182 542,228 415,687

Equity

Share capital 22 2,849 1,817 2,849 1,817

Share premium 60,078 40 60,078 40

Revaluation reserve 116,040 94,214 91,349 94,214

Foreign currency translation reserve 29,338 6,214 - -

Retained earnings 78,780 144,024 125,202 87,733

Attributable to owners 287,085 246,309 279,478 183,804

Non-controlling interest 149,818 202,305 - -

Total equity 436,903 448,614 279,478 183,804

Liabilities

Loans and borrowings 23 204,857 137,716 86,589 10,000

Other payables 24 16,106 17,266 16,106 17,266

Employee benefits 25 6,333 7,842 6,333 7,842

Deferred income 26 7,833 8,777 7,833 8,777

Deferred tax liability 12 (f) 57,079 35,050 33,563 35,050

Non-current liabilities 292,208 206,651 150,424 78,935

Current tax liabilities 12 (d ) 13,954 8,198 11,414 5,400

Loans and borrowings 23 32,566 93,226 13,151 93,259

Trade and other payables 27 317,839 99,746 77,593 42,635

Bank overdrafts 21 10,143 11,670 10,143 11,654

Amounts due to related parties 28 (ii) 3,102 3,077 25 -

Current liabilities 377,604 215,917 112,326 152,948

Total liabilities 669,812 422,568 262,750 231,883

Total equity and liabilities 1,106,715 871,182 542,228 415,687

These financial statements were approved by the Board of Directors on 13 March 2015 and were signed on its behalf by:

Director Director Director

The notes on pages 59 to 108 form an integral part of these financial statements.

>>> GROUP FINANCIAL STATEMENTS AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014


Statements of profit or loss and other comprehensive income For the year ended 31 December 2014

GROUP COMPANY

In thousands of US Dollars NOTE 2014 2013 2014 2013

Revenue 7(i) 580,991 309,407 291,948 267,066

Cost of sales (493,834) (251,389) (203,251) (191,614)

Gross profit 87,157 58,018 88,697 75,452

Other income 7(ii) 14,644 7,304 12,852 11,564

Gain on bargain purchase 36 - 133,091 - -

Share of profit/(loss) from joint ventures 17(c) 186 (328) - -

Share of (loss)/profit from associate 17(c) (1,011) 1,711 - -

Operating expenses 8 (201,031) (88,497) (51,414) (49,705)

Operating (loss)/profit (100,055) 111,299 50,135 37,311

Finance income 10 1,251 4,208 9,819 4,212

Finance costs 11 (50,541) (12,189) (11,829) (4,506)

Net finance costs (49,290) (7,981) (2,010) (294)

(Loss)/profit before income tax (149,345) 103,318 48,125 37,017

Income tax expense 12 (a) (14,677) (15,894) (14,520) (13,008)

(Loss)/profit for the year (164,022) 87,424 33,605 24,009

Other comprehensive income Items that are or may be reclassified to profit or loss

Revaluation surplus 78,385 - - -

Amortisation of revaluation reserve 2,865 2,865 2,865 2,865

Foreign currency translation difference 35,373 (2,347) - -

Defined benefits plan actuarial gains/ (losses) 25(iv) 1,537 (740) 1,537 (740)

Related tax 12(b) (24,054) - (538) -

Total comprehensive income (69,916) 87,202 37,469 26,134

(Loss)/profit attributable to:

Owners of the Company (69,108) 78,593 33,605 24,009

Non-controlling interest (94,914) 8,831 - -

(164,022) 87,424 33,605 24,009

Total comprehensive income attributable to:

Owners of the Company (17,429) 78,371 37,469 26,134

Non-controlling interest (52,487) 8,831 - -

(69,916) 87,202 37,469 26,134

Basic and diluted earnings per share 13 (0.108) 0.087 0.022 0.024




Statement of changes in equity - GroupFor the year ended 31 December 2014

In thousands of US DollarsShare

capitalShare

premiumRevaluation

reserve

Foreign currency

translation reserve

Retained earnings

Non-controlling

interestTotal

Balance at 1 January 2013 28 40 97,079 8,561 68,812 - 174,520

Total comprehensive income

Amortisation of revaluation reserve - - (2,865) - 2,865 - -

Profit for the year - - - - 78,593 8,831 87,424

Defined benefit plan actuarial loss - - - - (740) - (740)

Foreign currency translation difference - - - (2,347) - - (2,347)

Total comprehensive income - - (2,865) (2,347) 80,718 8,831 84,337

Transactions with owners ofthe Company

Acquisition of subsidiary - - - - - 193,474 193,474

Transfer of share capital 1,789 - - - (1,789) - -

Dividend paid - - - - (3,717) - (3,717)

Balance at 31 December 2013 1,817 40 94,214 6,214 144,024 202,305 448,614

Balance at 1 January 2014 1,817 40 94,214 6,214 144,024 202,305 448,614


Revaluation surplus - - 35,273 - - 43,112 78,385

Deferred tax on revaluation surplus - - (10,582) - - (12,934) (23,516)

Amortisation of revaluation reserve - - (2,865) - 2,865 - -

Loss for the year - - - - (69,108) (94,914) (164,022)

Defined benefit plan actuarial gain - - - - 1,537 - 1,537

Related tax - - - - (538) - (538)

Foreign currency translation difference - - - 23,124 - 12,249 35,373

Total comprehensive income - - 21,826 23,124 (65,244) (52,487) (72,781)


Rights issue 1,032 60,038 - - - - 61,070

Balance at 31 December 2014 2,849 60,078 116,040 29,338 78,780 149,818 436,903

Retained earnings Retained earnings are the carried forward recognised income, net of expenses of the Group, plus current year’s loss attributable to the shareholders, less dividend paid.

Share premium The share premium relates to the excess amounts paid by the shareholders on the issue of share capital net of pre-incorporation costs.

Revaluation reservesRevaluation reserve is a non-distributable reserve which represents revaluation surplus on buildings net of deferred tax.

Foreign currency translation reserveThe foreign currency translation reserve arises from the translation of foreign operations.



Statement of changes in equity - CompanyFor the year ended 31 December 2014

In thousands of US DollarsShare

capitalShare

premiumRevaluation

reserveRetained earnings Total

Balance at 1 January 2013 28 40 97,079 67,105 164,252


Profit for the year - - - 24,009 24,009

Defined benefits plan actuarial loss - - - (740) (740)

Amortisation of revaluation reserve - - (2,865) 2,865 -

Total comprehensive income - - (2,865) 26,134 23,269


Transfer of share capital 1,789 - - (1,789) -

Dividends paid - - - (3,717) (3,717)

Balance at 31 December 2013 1,817 40 94,214 87,733 183,804

Balance at 1 January 2014 1,817 40 94,214 87,733 183,804


Profit for the year - - - 33,605 33,605

Defined benefits plan actuarial gain - - - 1,537 1,537

Related tax - - - (538) (538)

Amortisation of revaluation reserve - - (2,865) 2,865 -

Total comprehensive income - - (2,865) 37,469 34,604


Rights issue 1,032 60,038 - - 61,070

Balance at 31 December 2014 2,849 60,078 91,349 125,202 279,478

Retained earnings Retained earnings are the carried forward recognised income, net of expenses of the Company, plus current year’s loss attributable to the shareholders, less dividend paid.

Share premium The share premium relates to the excess amounts paid by the shareholders on the issue of share capital net of pre-incorporation costs.

Revaluation reservesRevaluation reserve is a non-distributable reserve which represenst revaluation surplus on buildings net of deferred tax.




Statements of cash flowsFor the year ended 31 December 2014


GROUP COMPANY


Cash flows from operating activities

(Loss)/profit before income tax (149,345) 103,318 48,125 37,017

Adjustments for:

Depreciation 14 38,589 15,402 10,468 10,408

Amortisation 15(b) 32 - - -

Exchange difference on tax 12(d) 570 (377) 570 (377)

Loss/(profit) on disposal of plant and equipment 7/8 8,188 (63) (19) (90)

Share of profit from associate/joint venture 825 (1,383) - -

Gain on bargain purchase 36 - (133,091) - -

Translation differences 37,215 (2,943) - -

Finance income 10 (1,251) (4,208) (9,819) (4,212)

Finance costs 11 50,541 12,189 11,829 4,506

Operating profit before changes in working capital (14,636) (11,156) 61,154 47,252

Changes in:

- Inventories 516 (3,087) 1,103 (722)

- Trade and other receivables (129,350) (7,307) (43,952) 17,889

- Amounts due from related parties 160 - (249) (7,123)

- Amounts due to related parties 25 926 25 -

- Deferred income and employment benefits (916) 1,957 (916) (1,926)

- Trade and other payables 216,933 63,243 33,798 (8,108)

Cash generated from operating activities 72,732 44,576 50,963 47,262

Interest paid 11 (29,203) (12,189) (11,829) (4,506)

Income tax paid 12(d) (11,516) (12,278) (11,101) (12,278)

Net cash generated from operating activities 32,013 20,109 28,033 30,478

Cash flows from investing activities

Acquisition of plant and equipment 14 (25,769) (10,030) (7,457) (9,875)

Proceeds from disposal of plant and equipment 173 199 117 189

Acquisition of intangible assets 15(b) - (145) - -

Interest received 10 1,251 4,208 9,819 4,212

Acquisition of subsidiary - (152,650) - -

Investment in Joint Ventures or Associate - (24,900) - (2)

Loan to subsidiary - - (39,197) (95,087)

Development costs 15(a) (14,892) (7,082) (14,892) (7,082)

Net cash used in investing activities (39,237) (190,400) (51,610) (107,645)


Statements of cash flows (cont)For the year ended 31 December 2014

GROUP COMPANY


Cash flows from financing activities

Proceeds from loans and borrowings 23 119,000 211,015 119,000 85,000

Repayment of loans and borrowings 23 (122,519) (8,914) (122,519) (8,814)

Related party loan received 23 10,000 - - -

Proceeds from issue of shares 61,070 - 61,070 -

Dividends paid - (3,717) - (3,717)

Net cash generated from financing activities 67,551 198,384 57,551 72,469

Net increase/(decrease) in cash and cash equivalents 60,327 28,093 33,974 (4,698)

Cash and cash equivalents at 1 January 21 31,973 3,880 (791) 3,907

Cash and cash equivalents at 31 December 92,300 31,973 33,183 (791)




Notes to the financial statements For the year ended 31 December 2014

1 Reporting entity

Copperbelt Energy Corporation Plc (“the Company”) is domiciled in the Republic of Zambia. The address of the Company’s registered office is 23rd Avenue, Nkana East, Kitwe. These Group financial statements comprise the Company, subsidiaries, associate and joint venture (together referred to as the “Group” and individually “Group Companies”). Its principal business activity is the generation, transmission, distribution and sale of electricity.

2 Basis of accounting

The Group financial statements and financial statements of Copperbelt Energy Corporation Plc have been prepared in accordance with the International Financial Reporting Standards (IFRSs) and the requirements of the Companies Act of Zambia.

Details of the Group’s significant accounting policies are included in note 31.

3 Going concern

During the year ended 31 December 2014, the Group made a loss of USD164.02m (2013: profit of USD87.42m), and as of that date, its total current liabilities exceeded total current assets by USD98.94m (2013: USD103.39m).

The net current liability position is largely driven by the AEDC payables balance which, is an accumulation of a significant portion of the Market Operator’s bill. During the year, AEDC operated based on Interim Rules. Under these rules, AEDC had an obligation to pay 53% of the Market Operator’s bills for the four months January 2014 to April 2014, which threshold was increased in May 2014 to 65%. The unpaid Market Operator’s liability representing 47% and 35% for the four months and 8 months respectively is accrued and forms part of the payables amount as a current liability. The Market Operator’s bill represents 62% of the Group’s current liability at year end.

Subsequent to the reporting date, the NERC increased AEDC consumer tariffs, whose implementation is phased. The commercial and industrial end user tariffs were increased by 59% effective 1 February 2015 whereas the domestic consumers’ tariffs were increased by 59% but effective 1 July 2015. The monthly fixed fee for all tariffs was left unchanged. The tariff increases implemented in February 2014 resulted into 20% overall increase in revenue billed.

The directors have reviewed the forecasts and projections of AEDC, which take into account tariff increases, planned subsidies funding (intervention fund), in collaboration with the Central Bank of Nigeria, planned reductions in Aggregate Technical, Commercial and Collection losses, continued deferral of the payment of a certain proportion of the Market Operator’s bill, capital investments required to improve service delivery and financial support offered by KANN Utility Company Limited, the 60% shareholder of AEDC.

In addition to the above listed measures, the Group has commenced financing initiatives at CEC Africa, where identified equity providers have progressed with the due diligence aimed at facilitating the flow of equity, which will partly dilute the Group’s interest in CEC Africa. It is expected that part of the equity to be raised will be reserved to support operating subsidiaries.

Based on the foregoing, the directors expect the Group to continue as a going concern, realise its assets and discharge its liabilities in the normal course of business. Accordingly, the financial statements are prepared on the basis of accounting policies applicable to a going concern.



4 Functional and presentation currency

These financial statements are presented in USD, which is the Company’s functional currency. All the amounts have been rounded to the nearest thousand unless otherwise indicated.

5 Use of judgements and estimates

In preparing these consolidated financial statements, management has made judgements, estimates and assumptions that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.

A. Judgments

Information about judgments made in applying accounting policies that have the most significant effects on the amounts recognised in the consolidated financial statements is included in the following notes:

• Note 17 - classification of the joint arrangement;• Note 31(A) - consolidation: whether the Group has de facto control over an investee; and

B. Assumptions and estimation uncertainty

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ending 31 December 2014, is set out below in relation to the impairment of financial instruments and in the following notes:

• Note 25 – measurement of defined benefit obligations: key actuarial assumptions;• Note 30 – impairment of accounts receivable: assumption and about the amounts recoverable and

timing of the cash flow.• Note 30 - determination of fair value of financial instruments with significant unobservable inputs;• Note 12 - recognition of deferred tax assets: availability of future taxable profit against which carry

forward tax losses can be used;• Note 34 - recognition and measurement of provisions and contingencies: key assumptions about the

likelihood and magnitude of an outflow of resources; and• Note 14 – determination of fair value of property.




5 Use of judgements and estimates (continued)

Measurement of fair values

A number of the Group’s accounting policies and disclosures require the measurement of fair values for both financial and non-financial assets and liabilities.

The Group has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the Chief Financial Officer.

The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which such valuations should be classified.

Significant valuation issues are reported to the Group’s Audit Committee.

When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either

directly (i.e. as prices) or indirectly (i.e. derived from prices).• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Further information about the assumptions made in measuring fair values is included in the following notes:

• Note 14 - property; and• Note 30 - financial instruments.



6 Segmental reporting

A. Basis for segmentation

The Group has the following two reportable segments. These two segments represent strategic supply lines. For each of the strategic supply lines, the Group’s Managing Director reviews internal management reports on a monthly basis.

The following summary describes the nature of each of the supply lines.

Reportable segment Description

Transmission This involves the transmission of high voltage power.

Distribution This involves the transmission of low voltage power and is close to consumption sources.

Information related to each reportable segment is included below. Performance is measured based on services, growth and profit before income tax, as included in the internal management reports that are reviewed by the Managing Director. Segment growth and profit are used to measure performance as management believes that such information is relevant in evaluating the results of the segment.

The Group operates in two geographical segments, Zambia and Nigeria.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Segment capital expenditure is the total cost incurred to acquire segment assets that are expected to be used for more than one period.

B. Information about reportable segments

31 December 2014 Transmission Distribution Total

Revenue - external 291,948 289,043 580,991

Depreciation 10,468 28,121 38,589

Operating profit/(loss) 50,135 (150,190) (100,055)

Net finance costs (2,010) (47,280) (49,290)

Profit/(loss) before income tax 48,125 (197,470) (149,345)

Income tax expenses (14,520) (157) (14,677)

Profit/(loss) for the year 33,605 (197,627) (164,022)




6 Segmental reporting (continued)

B. Information about reportable segments (continued)



Depreciation 10,408 4,994 15,402

Operating profit 37,311 73,988 111,299

Net finance costs (294) (7,687) (7,981)

Profit before income tax 37,017 66,301 103,318

Income tax expense (13,008) (2,886) (15,894)

Profit for the year 24,009 63,415 87,424

The segment assets and liabilities and cash flows as at 31 December 2014 were as follows:


Segment assets 542,228 564,487 1,106,715

Segment liabilities 262,750 407,062 669,812

Cash flows from operating activities 28,033 3,981 32,013

Cash flows used in investing activities (51,610) 12,373 (39,237)

Cash flows from financing activities 57,551 10,000 67,551

Capital expenditure 7,457 18,312 25,769



Segment assets 415,687 455,495 871,182


Cash flows from operating activities 30,478 (10,369) 20,109

Cash flows used in investing activities (107,645) (82,755) (190,400)


Capital expenditure 9,875 155 10,030

Segment assets comprise primarily property, plant and equipment, trade and other receivables and operating cash.

Segment liabilities comprise trade and other payables, deferred tax and loans and borrowings.

Capital expenditure comprises additions to property, plant and equipment.

Two customers contribute more than 10% to the Group’s revenue each.




c. Geographic information

The geographical information below analyses the group’s revenue and non-current assets by the Company’s country of domicile.

31 December 2014 Zambia Nigeria Total


Depreciation 10,468 28,121 38,589

Operating profit/(loss) 50,135 (150,190) (100,055)

Net finance costs (2,010) (47,280) (49,290)

Loss before income tax 48,125 (197,470) (149,345)

Income tax expenses (14,520) (157) (14,677)

Loss for the year 33,605 (197,627) (164,022)



Depreciation 10,408 4,994 15,402

Operating profit 37,311 73,988 111,299

Net finance costs (294) (7,687) (7,981)

Profit before income tax 37,017 66,301 103,318

Income tax expense (13,008) (2,886) (15,894)

Profit for the year 24,009 63,415 87,424





B. Information about reportable segments (continued)


Segment assets 542,228 564,487 1,106,715


Cash flows from operating activities 28,033 3,981 32,013

Cash flows used in investing activities (51,610) 12,373 (39,237)


Capital expenditure 7,457 18,312 25,769



Segment assets 415,687 455,495 871,182


Cash flows from operating activities 30,478 (10,369) 20,109

Cash flows used in investing activities (107,645) (82,755) (190,400)


Capital expenditure 9,875 155 10,030

7 i. RevenueGROUP COMPANY


Electricity transmission 276,796 255,627 276,795 254,511

Electricity Distribution 289,043 41,224 - -

Wheeling – domestic 13,584 11,478 13,585 11,477

Others 1,568 1,078 1,568 1,078

580,991 309,407 291,948 267,066

ii. Other incomeGROUP COMPANY


Power trading 10,482 3,170 10,482 3,170

Recharge of services rendered to CEC Africa - - - 5,747

Profit on disposal of plant and equipment - 63 19 90

Sundry income 4,162 4,071 2,351 2,557

14,644 7,304 12,852 11,564



8 Operating expensesGROUP COMPANY


Depreciation of property, plant and equipment 38,589 15,402 10,468 10,408

Amortisation of intangible assets 13 - - -

Loss on disposal of plant and equipment 8,188 - - -

Personnel and staff related costs (note 9) 62,901 32,304 21,975 20,203

Non-Executive directors’ fees and benefits 2,288 391 313 237

Auditors’ remuneration – audit services 325 458 97 76

Tax services 10 9 10 9

Insurance costs 4,324 2,273 1,866 1,825

Stores and maintenance 2,958 3,032 2,958 3,032

Football expenses 993 1,089 993 1,089

Bad debts provisions 44,052 3,745 136 10

Project costs 1,018 15,422 1,018 5,421

Donations 220 614 220 614

Council rates 485 546 485 546

Other operating expenses 34,667 13,212 10,875 6,235

201,031 88,497 51,414 49,705

9 Personnel and staff related costsGROUP COMPANY


Salaries and wages 52,357 24,355 13,001 12,282

Retirement benefits 911 802 911 802

Pension contribution and provisions 470 1,099 470 1,099

Other staff costs differentials and bonuses 5,842 4,939 5,842 4,939

Staff medical costs 2,024 747 1,012 723

Staff training 1,297 362 739 358

62,901 32,304 21,975 20,203

10 Finance incomeGROUP COMPANY


Interest on overdue debtors 820 - 820 606

Interest earned - related party - - 8,439 3,482

Interest earned - other 431 4,208 560 124

1,251 4,208 9,819 4,212




11 Finance costsGROUP COMPANY


Interest on bank loans 29,203 12,189 11,829 4,506

Exchange loss 21,338 - - -

50,541 12,189 11,829 4,506

12 Income tax expense

a. Amount recognised in profit or loss

GROUP COMPANY


Current tax expense 16,702 15,248 16,545 12,362

Deferred tax (credit)/expense (2,025) 646 (2,025) 646

Total income tax expense 14,677 15,894 14,520 13,008

b. Amounts recognised in OCI2014 2013

GROUP In thousands of US Dollars

Before tax

Tax expense

Net of tax

Before tax

Tax expense

Net of tax

Actuarial gain 1,537 (538) 999 - - -

Revaluation surplus 78,385 (23,516) 54,869 - - -

79,922 (24,054) 55,868 - - -

COMPANY

Actuarial gain 1,537 (538) 999 - - -

c. Reconciliation of the tax charge:

(Loss)/profit before tax (149,345) 103,318 48,125 37,017

Income tax using domestic tax rate (52,271) 36,161 16,844 12,956

Non-deductible expenses 378 (134) 378 (134)

Under provision in prior year 52 344 52 186

Deferred tax on employee benefits (2,754) - (2,754) -

Unrecognised temporary differences 39,918 (20,477) - -

Tax charge 14,677 15,894 14,520 13,008

d. Current tax liabilities

At the beginning of the year 8,198 5,605 5,400 5,693

Charge for the year 16,702 15,248 16,545 12,362

Exchange differences 570 (377) 570 (377)

Payments made during the period (11,516) (12,278) (11,101) (12,278)

At the end of the year 13,954 8,198 11,414 5,400



12 Income tax expense (continued)

f. Deferred tax liabilities

Movement in deferred tax balances (Group)

2014 In thousands of US

Dollars

Balance1 January

2014

Recognised in profit or

loss

Recognised in OCI

Balance 31 December

2014

Deferred tax assets

Deferred tax liability

Property, plant and equipment 35,096 706 - 35,802 - 35,802

Revaluation surplus - - 23,516 23,516 - 23,516

Employee benefits - (2,754) 538 (2,216) (2,216) -

Unrealised exchange gain (46) 23 - (23) (23) -

35,050 (2,025) 24,054 57,079 (2,239) 59,318

2013 In thousands of US Dollars

Net Balance 1 January

2013


lossNet Deferred tax

assets Deferred tax

liability

Property, plant and equipment 35,888 (792) 35,096 - 35,096

Unrealised exchange gain (192) 146 (46) (46) -

35,696 (646) 35,050 (46) 35,096

Movement in deferred tax balances (Company)

2014In thousands of US

Dollars

Balance1 January

2013


loss

Recognised in OCI

Balance 31 December

2013

Deferred tax assets

Deferred tax liability

Property, plant and equipment 35,096 706 - 35,802 - 35,802

Employee benefits - (2,754) 538 (2,216) (2,216) -

Unrealised exchange gain (46) 23 - (23) (23) -

35,050 (2,025) 538 33,563 (2,239) 35,802

2013 In thousands of US Dollars

Net Balance 1 January

2013


lossNet Deferred tax

assets Deferred tax

liability

Property, plant and equipment 35,888 (792) 35,096 - 35,096

Unrealised exchange gain (192) 146 (46) (46) -

35,696 (646) 35,050 (46) 35,096




12 Income tax expense (continued)

f. Deferred tax liabilities (continued)

Unrecognised deferred tax assets

Deferred tax assets have not been recognised in respect of the following items, because it is not yet probable that future taxable profits will be available against which the Group can utilize the benefits therefrom.

Tax losses 2014 2013

AEDC 299,514 236,431

KANN 70,800 29,323

370,314 265,754

These tax losses relate to a subsidiary acquired in 2013 and management has established that it is uncertain whether future taxable profits will be available against which the loss can be used, therefore, this amount has been included in the balance of unrecognised tax assets as at 31 December 2014.

Income tax assessments have not yet been agreed with the Zambia Revenue Authority (ZRA) for the period ended 31 December 2014. Quarterly tax returns for the year ended 31 December 2014 were made on the due dates during the year.

13 Basic and diluted earnings per share

The calculation of the Group basic earnings per share at 31 December 2014 was based on the loss attributable to ordinary shareholders of USD164,022,000 (2013: profit of USD87,424,000) and weighted average number of ordinary shares during the year ended 31 December 2014 of 1,511,986,103 (2013: 1,000,000,000).

GROUP COMPANY


(Loss)/ profit attributable to ordinary shares (164,022) 87,424 33,605 24,009

Weighted average number of ordinary shares (000)

Issued at beginning of year 1,000,000 1,000,000 1,000,000 1,000,000

Issued during the year 511,986 - 511,986 -

Weighted average number of ordinary shares at end of year 1,511,986 1,000,000 1,511,986 1,000,000

Basic and diluted earnings per share (0.108) 0.087 0.022 0.024

The Company has no additional potential shares outstanding.


Not

es t

o th

e fi

nanc

ial s

tate

men

ts

Fo

r th

e y

ear

en

de

d 3

1 D

ece

mb

er

20

14

14

Prop

erty

, pla

nt a

nd e

quip

men

tG

roup

In t

hous

and

s o

f US

Do

llars

Tran

smis

sion

and

bu

ildin

gs

Tran

smis

sion

and

di

strib

utio

n ne

twor

k (p

rimar

y)

Equi

pmen

t di

strib

utio

n ne

twor

k (s

econ

dary

)Fi

xtur

es a

nd fi

ttin

gsM

otor

veh

icle

sCa

pita

l Wor

k in

pr

ogre

ss T

otal

Co

st o

r re

valu

atio

n

Bal

ance

at

1 Ja

nuar

y 20

1319

,906

190,

540

53,1

757,

728

6,42

113

,633

291,

403

On

acqu

isiti

on18

,975

500

,820

-39

8-

11,7

3953

1,93

2

Add

ition

s-

--

-15

59,

875

10,0

30

Tran

sfer

from

CW

IP61

83,

697

844

205

2,

079

(7,4

43)

-

Dis

posa

ls

--

--

(723

)-

(723

)

Bal

ance

at 3

1 D

ecem

ber 2

013

39,4

9969

5,05

754

,019

8,33

17,

932

27,8

0483

2,64

2

Bala

nce

at 1

Jan

uary

201

439

,499

695,

057

54,0

198,

331

7,93

227

,804

832,

642

Add

ition

s2

9,89

1-

6,64

073

3 8

,503

25,7

69

Reva

luat

ion

surp

lus

78,3

85-

--

--

78,3

85

Tran

sfer

from

CW

IP12

36,

255

3,84

796

658

(10,

979)

-

Dis

posa

ls-

--

-(4

41)

(8,2

63)

(8,7

04)

Bala

nce

at 3

1 D

ecem

ber

2014

118,

009

711,

203

57,8

6615

,067

8,88

217

,065

928,

092

Dep

reci

atio

n

Bal

ance

at 1

Jan

uary

201

31,

104

16,2

5628

,338

6,49

44,

144

-56

,336

On

acqu

isiti

on1,

055

53,7

17-

120

--

54,8

92

Cha

rge

for y

ear

526

10,4

563,

116

544

760

-15

,402

Dis

posa

ls

--

--

(587

)-

(587

)

Bal

ance

at

31 D

ecem

ber 2

013

2,68

580

,429

31,4

547,

158

4,31

7-

126,

043

Bala

nce

at 1

Jan

uary

201

42,

685

80,4

2931

,454

7,15

84,

317

-12

6,04

3

Cha

rge

for y

ear

433

33,4

513,

304

483

918

-38

,589

Dis

posa

ls-

--

-(3

43)

-(3

43)

Bala

nce

at 3

1 D

ecem

ber

2014

3,11

811

3,88

034

,758

7,64

14,

892

-16

4,28

9

Car

ryin

g a

mo

unts

At 3

1 D

ecem

ber

2014

114,

891

597,

323

23,1

087,

426

3,99

017

,065

763,

803

At 3

1 D

ecem

ber

2013

36,8

1461

4,62

822

,565

1,17

33,

615

27,8

0470

6,59

9



Not

es t

o th

e fi

nanc

ial s

tate

men

ts

Fo

r th

e y

ear

en

de

d 3

1 D

ece

mb

er

20

14

14

Prop

erty

, pla

nt a

nd e

quip

men

t (co

ntin

ued)

Com

pany

In t

hous

and

s o

f US

Do

llars

Tran

smis

sion

and

bu

ildin

gs

Tran

smis

sion

and

di

strib

utio

n ne

twor

k (p

rimar

y)

Equi

pmen

t di

strib

utio

n ne

twor

k (s

econ

dary

)Fi

xtur

es a

nd fi

ttin

gsM

otor

veh

icle

sCa

pita

l Wor

k in

pr

ogre

ss T

otal

Co

st o

r re

valu

atio

n

Bal

ance

at

1 Ja

nuar

y 20

1319

,906

190,

540

53,1

757,

728

6,42

113

,633

291,

403

Add

ition

s-

--

--

9,87

59,

875

Tran

sfer

from

CW

IP35

069

884

417

52,

079

(4,1

46)

-

Dis

posa

ls

--

--

(723

)-

(723

)

Bal

ance

at 3

1 D

ecem

ber 2

013

20,2

5619

1,23

854

,019

7,90

37,

777

19,3

6230

0,55

5

Bala

nce

at 1

Jan

uary

201

320

,256

191,

238

54,0

197,

903

7,77

719

,362

300,

555

Add

ition

s-

--

--

7,45

77,

457

Tran

sfer

from

CW

IP12

36,

255

3,84

796

658

(10,

979)

-

Dis

posa

ls

--

--

(441

)-

(441

)

Bala

nce

at 3

1 D

ecem

ber

2014

20,3

7919

7,49

357

,866

7,99

97,

994

15,8

4030

7,57

1

Dep

reci

atio

n

Bal

ance

at 1

Jan

uary

201

31,

104

16,2

5628

,338

6,49

4 4,

144

-56

,336

Cha

rge

for y

ear

430

5,57

83,

116

529

755

-10

,408

Dis

posa

ls

--

- -

(587

)-

(587

)

Bal

ance

at

31 D

ecem

ber 2

013

1,53

421

,834

31

,454

7,02

34,

312

-66

,157

Bala

nce

at 1

Jan

uary

201

31,

534

21,8

34

31,4

547,

023

4,31

2-

66,1

57

Cha

rge

for y

ear

433

5,57

43,

304

329

828

-10

,468

Dis

posa

ls-

--

-(3

43)

-(3

43)

Bala

nce

at 3

1 D

ecem

ber

2014

1,96

727

,408

34,7

587,

352

4,79

7-

76,2

82

Car

ryin

g a

mo

unts

At 3

1 D

ecem

ber

2014

18,4

1217

0,08

523

,108

647

3,19

715

,840

231,

289

At 1

Dec

embe

r 20

1318

,722

169,

404

22,5

6588

03,

465

19,3

6223

4,39

8


14 Property, plant and equipment (continued)

a. 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.

b. Included in the cost of property, plant and equipment are fully depreciated assets amounting to USD11,779,000 (2013:USD10,816,000). The notional depreciation not charged in these financial statements on these assets amounts to USD785,000 (2013: USD721,000).

c. 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.

d. 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 totaling USD2,483,699 was transferred to a revaluation reserve. During the year, the Group revised its policy on revaluation of property to revalue every 3 years instead of 5 years. The first revaluation using the new policy is due in 2015.

e. At 31 December 2014 the Group’s land and buildings at the Abuja Electricity Distribution Company (AEDC) were revalued by Achoru Associates, registered valuers on the basis of fair market value. The surplus on revaluation totalling USD78,385,000 was transferred to a revaluation reserve. The following are the major assumptions made:

• Curernt supply and demand of available land and buildings in the area or location

• The extent of the site, the design and quality of the buildings

The Group policy is to revalue its properties every five years.

15 a. Development costsGROUP COMPANY

At cost In thousands of US Dollars

2014 2013 2014 2013


Additions during the year 14,892 7,082 14,892 7,082


The project development cost relates to the cost incurred on behalf of a 100% subsidiary CEC-Kabompo Hydro Power Limited, towards the construction of a power station.

b. Intangible assets

The Intangible assets comprise the accounting software in AEDC and KANN.

GROUP COMPANY


Cost

Balance at 1 January 145 - - -

Acquisition - 145 - -

Balance at 31 December 145 145 - -

Amortisation

Amortisation charge for the year 32 - - -

Carrying amounts 113 145 - -

The directors have considered the risk that the software in progress is impaired and have concluded based on development of the software post year end that it is not impaired.





16 Investments in subsidiaries

CompanyIn thousands of US Dollars

Percentage shareholding

31 December2014


31 December 2013

CEC Africa Investments Ltd 100 1 100 1

Kabompo Hydro Power Company Ltd 100 1 100 1

2 2

17 Equity accounted investees

a. Investments in joint ventures

2014 Group In thousands of US Dollars

Realtime CEC Liquid Total

Balance at 1 January 235 14,643 14,878

Share of profit/(loss) 242 (56) 186

Share foreign currency transaltion reserve (18) - (18)

Balance at 31 December 459 14,587 15,046

2013 Group

Balance at 1 January (15) 15,208 15,193

Share of profit/(loss) 237 (565) (328)

Share foreign currency transaltion reserve 13 - 13

Balance at 31 December 235 14,643 14,878

Company Jointly controlled entities


31 December 2014


31 December 2013

Realtime Technology Alliance Africa Limited 50 1,000 50 1,000

CEC Liquid Telecommunication Limited 50 14,294 50 14,294

Balance at 31 December 15,294 15,294



17 Equity accounted investees (continued)

b. Investment in associates

North South Power Company Limited

GroupIn thousands of US Dollars

31 December2014

31 December2013

Balance at 1 January 24,179 -

Acquisition during the year - 24,900

Share of (loss)/profit (1,011) 1,711

Restatement adjustment on cost investment (1,824) (2,400)

Foreign currency translation reserve - (32)

Balance at 31 December 21,344 24,179

c. Jointly controlled entities

i. Realtime Technology Alliance Africa Limited

In thousands of US Dollars31 December

201431 December

2013

Total assets 2,511 2,366

Total liabilities (1,635) (1,896)

Net assets 876 470

Revenues 7,017 7,201

Other income 44 -

Expenses (6,434) (6,581)

Finance costs (142) (146)

Profit before tax 485 474

Income tax (expense)/credit - -

Profit for the year 485 474

Share of profit (50%) 242 237

ii CEC Liquid Telecommunication Limited


201431 December

2013

Total assets 51,236 37,517

Total liabilities (22,061) (8,230)

Net assets 29,175 29,287

Revenues 13,333 10,570

Other income 103 43

Expenses (13,509) (11,424)

Loss before tax (73) (811)

Income tax expense (39) (319)

Loss for the year (112) (1,130)

Share of loss (50%) (56) (565)

Total share of profits/(loss) from joint ventures 186 (328)




17 Equity accounted investees (continued)

Associate

iii North South Power Company Limited


201431 December

2013

Total assets 267,100 281,238

Total Liabilities (222,044) (222,008)

Net assets 45,056 59,230

Revenues 63,179 24,582

Expenses (29,811) (5,465)

Finance costs (40,589) (6,800)

(Loss)/profit before tax (7,221) 12,317

Income tax(expense)/credit 2,165 (3,761)

(Loss)/profit for the year (5,056) 8,556

Share of (loss)/profit (20%) (1,011) 1,711

18 Loans to subsidiary

GROUP COMPANY

At cost In thousands of US Dollars

2014 2013 2014 2013

Balance at 1 January - - 95,087 -

Advanced during the year - - 31,758 91,605

Loan repayment - - (1,000) -

Interest charged during the year (note 10) - - 8,439 3,482

Balance at 31 December - - 134,284 95,087

Current - - 28,000 52,360

Non-current - - 106,284 42,727

- - 134,284 95,087

During the year, CEC Plc advanced CEC Africa Investments Limited loans amounting to USD31,758,000. As at 31 December 2014, the loans had accrued interest of USD8,439,000. The loans were advanced under six agreements and accrue interest at LIBOR plus as noted below:

Amounts advanced USD Interest rate %

Loan 1 21,000,000 8.5

Loan 2 23,000,000 8.5

Loan 3 41,000,000 5

Loan 4 8,000,000 8.5

Loan 5 28,525,000 6.5

Loan 6 1,000,000 6.5

Total 122,525,000



18 Loans to subsidiary (continued)

The loans are repayable on demand and have an option of converting the repayable amount (including the accrued interest) into shares in CEC Africa Investments Limited. The intention is to recall the loans after 2 years.

19 Inventories

GROUP COMPANY


Fuel 1,749 2,423 1,748 2,423

Spares and consumables 4,143 3,985 1,121 1,549

5,892 6,408 2,869 3,972

In 2014 inventories of USD4,775,000 (2013:USD2,448,000) were recognized as expenses during the year and included in cost of sales.

20 Trade and other receivables

GROUP COMPANY


Trade receivables 186,602 59,855 74,429 31,354

Less: impairment of debts (45,059) (2,013) (2,071) (1,935)

141,543 57,842 72,358 29,419

Prepayments and deposits 2,368 1,645 672 744

Other receivables 24,724 1,136 5,401 4,316

168,635 60,623 78,431 34,479

a. Other receivablesThe 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 USD1,386,000 (2013: USD986,000) due from employees under the ESOP.

b. The Group’s exposure to credit and currency risks are disclosed in note 30.

21 Cash and cash equivalentsGROUP COMPANY

Cash at bankIn thousands of US Dollars

2014 2013 2014 2013

Bank balances 66,957 31,687 43,309 10,848

Margin deposits 35,469 11,941 - -

Petty cash 17 15 17 15

102,443 43,643 43,326 10,863

Bank overdrafts (10,143) (11,670) (10,143) (11,654)

As per statement of cash flows 92,300 31,973 33,183 (791)




21 Cash and cash equivalents (continued)

a. The Company has an overdraft facility of USD10 million, general short term banking facility of USD6,270,000 with Stanbic Bank Zambia Limited. The US Dollar overdraft bears interest at 1 month LIBOR plus 7.5%. The ZMW40 million facility bears interest at 1% above the Bank of Zambia Policy Rate.

b. The Company has an overdraft facility of USD12.5 million. The overdraft facility bears interest at 5.5% above the 1 month USD LIBOR.

c. Margin deposit relates to long term portion of the balance of USD40 million deposited in the Debt Service Reserve Account maintained with creditor bank. The amount is held as lien in line with the terms and conditions under which the Groupwas granted a loan of USD122 million for financing of its acquisition of a 60% interest in Abuja Electricity Distribution Company.

The Group’s exposure to interest rate risk and sensitivity analysis for financial assets and liabilities are disclosed in note 30.

22 Share capital

GROUP COMPANY


Authorised1 Special Share of ZMW1.40

At 1 January 1,817 28 1,817 28

Rights Issue 1,433 - 1,433 -

Transfer of share capital - 1,789 - 1,789

At 31 December 3,250 1,817 3,250 1,817

Issued and fully paid 1 Special Share of ZMW1.40

At 1 January 1,817 28 1,817 28

Rights Issue 1,032 - 1,032 -

Transfer of share capital - 1,789 - 1,789

At 31 December 2,849 1,817 2,849 1,817

a. 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.

b. After the Rights Issue, the Company nominal share capital is now USD2,849,000.

A Rights Offer was made by way of renounceable Rights on the basis of 5 Rights Offer Shares for every 8 CEC shares held by Qualifying Shareholders (1,000,000,000) on the Record Date, Friday 31 January 2014, for subscription at a price of ZMW0.62 per Rights Offer Share. The Rights Offer closed on 7th March 2014, and the gross proceeds for all the rights followed was ZMW387,500,000 (USD64,500,000).



23 Loans and borrowings

GROUP COMPANY


At beginning of the year 230,942 28,841 103,259 27,073

Addition during the year 119,000 211,015 119,000 85,000

Loan from related parties 10,000 - - -

Payments during the year (122,519) (8,914) (122,519) (8,814)


Current 32,566 93,226 13,151 93,259

Non-current 204,857 137,716 86,589 10,000

237,423 230,942 99,740 103,259

Standard Bank 13,151 85,000 13,151 85,000

Citibank N.A London, Citibank Zambia and DEG - 5,759 - 5,759

African Life Financial Services - 2,467 - 2,500

United Bank for Africa 19,415 - - -

32,566 93,226 13,151 93,259

The amounts payable within one year and after one year are as per 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 30.

2014 2013

In thousands of US Dollars Payment CapitalInterest Total Payment Capital

Interest Total

Group

Less than 1 year 32,566 19,370 51,936 93,226 11,046 104,272

More than 1 year 204,857 72,000 276,857 137,716 84,000 221,716

237,423 91,370 328,793 230,942 95,046 325,988

Company

Less than 1 year 13,151 7,370 20,521 93,259 7,046 100,305

More than 1 year 86,589 - 86,589 10,000 - 10,000

99,740 7,370 107,110 103,259 7,046 110,305

a. Senior debt

During the year, the Company signed a USD120 million loan facility of which USD105 million was drawn down and the remainder will be drawn down in 2015. This facility was syndicated and led by Standard Bank. As at 31 December 2014, the loan balance was USD99.74 million made up of two tranches, the Commercial Lender (CL) and Developmental Financial Institutions (DFI) tranche. The CL comprises Stanbic Bank Zambia Limited, Standard Chartered Bank and Citibank International Plc. The Commercial tranche bears interest of 3 months LIBOR plus a margin of 5.25%. The balance of the Commercial tranche at 31 December 2014 was USD44.740 million. The DFI tranche comprises Nederlandse Financierings-Maatschappij Voor Ontwikkelingslanden N.V. (FMO), Deutsche Investitions - Und Entwicklungsgesellschaft Mbh (DEG), Société De Promotion Et De Participation Pour La Coopération (Proparco). The DFI tranche bears interest of 3 months LIBOR plus a margin of 5.75% for the first 84 months and 6.5% thereafter. The balance of the DFI tranche at 31 December 2014 was USD55 million. The loan is payable in March 2026.




23 Loans and borrowings (continued)

United Bank for Africa

On 22 August 2013, KANN Utility obtained a long-term loan of USD122 million from a consortium of local and foreign commercial banks for the purpose of part payment of the outstanding consideration amount on acquisition of a 60% interest in Abuja Electricity Distribution Plc. The loan carries interest at LIBOR plus 8.5% and is compounded quarterly with a moratorium on interest payment till 22 August 2014 and the first interest payment was made on 30 September 2014. The principle loan amount is repayable in 23 equal instalments commencing 31 March 2015.

The UBA loan is secured by:

i. Lien on the 60% shares of the Company in its subsidiary, Abuja Electricity Distribution Company;ii. Pledge of the equity investment of the shareholders in the Company;iii. A first fixed and floating charge over the shares of the Company in its subsidiary, Abuja Electricity Distribution Company;iv. A first charge over the various facility accounts in favour of the creditor bank on behalf of the Company;v. Corporate guarantee of CEC Africa Investments Limited; andvi. A security deposit of USD40m transferred to the Debt Service Reserve Account (“DSRS”)

Zambian Energy Corporation Ireland

During the year CEC Africa obtained a long term loan of USD10 million from a related party, Zambian Energy Corporation (Ireland) Limited (ZECI). The loan carries interest at LIBOR +8% and is unsecured. The loan is repayable in 2018.

24 Other payables

GROUP COMPANY


CNMC Luanshya Copper Mines 10,952 10,952 10,952 10,952

Less amounts payable to CNMC LCM within one year (1,490) (745) (1,490) (745)

9,462 10,207 9,462 10,207

First Quantum Mining and Operations 6,644 7,059 6,644 7,059

16,106 17,266 16,106 17,266

a. 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. In 2013, the agreed threshold of 196,244,000Kwh was reached, hence, a payment of USD1,490,000 is due in 2014.

b. 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 effective from the date when the conditions of the agreement will be met. 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 2013 and 2014 is attributed to charges of capital charge income levied by CEC.

c. The Company’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 30.



25 Employee benefits

Copperbelt Energy Corporation Plc (CEC Plc) awards terminal benefits to its employees upon retirement, in addition to the retirement benefits received from the CEC Pension Trust Scheme. These benefits are payable depending on date of joining the Company as well as seniority. The benefits are paid as below:

Regulation and Governance This Scheme is unfunded and the employer only pays a benefit upon retirement of an individual qualifying for the benefit. The regulator, Pensions and Insurance Authority (PIA) does not regulate Gratuity Schemes such as this one. However, Companies that provide an additional and separate unfunded gratuity in their books should operate within governing covenants and agreements with employee representative bodies. Taxation of this scheme falls under the relevant provisions of the Income Tax Act. The Company is fully responsible for the appropriate governance framework and administration of this arrangement, including decisions as to whether to prefund the benefit costs, or amend the arrangement design.

Actuarial assumptionsThe following were the principal actuarial assumptions at the reporting date (expressed as weighted averages).Inflation has been assumed at 12%, discount rate at 18.5% and salary increase at 15%.

Sensitivity analysisReasonably possible changes, at the reporting date, to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation as at 31 December 2014 by the amounts shown below.

• Discount rate (1% movement) - USD786 increase, USD103 decrease.• Future salary growth (1% movement) – negative USD585 increase, USD542 decrease.• Mortality – standard aids loading at USD575 and heavy aids loading at USD1,022.




25 Employee benefits (continued)

i. The amounts recognised in the statement of financial position are as follows:

GROUP COMPANY


Present value of unfunded obligation 6,333 7,842 6,333 7,842

Total employee benefit liabilities 6,333 7,842 6,333 7,842

ii. Movement in net defined benefit liability

Balance at 1 January 7,842 6,656 7,842 6,656

Interest cost 1,200 1,098 1,200 1,098

Current service cost 318 479 318 479

Benefits paid (442) (653) (442) (653)

Actuarial gains/(losses) (1,537) 740 (1,537) 740

Exchange differences (1,048) (478) (1,048) (478)

Balance at 31 December 6,333 7,842 6,333 7,842

iii. Expense recognised in profit or loss

Interest cost 1,200 1,098 1,200 1,098

Exchange differences (1,048) (478) (1,048) (478)

Current service costs 318 479 318 479

470 1,099 470 1,099

iv. Included in other comprehensive income

Actuarial (gains)/losses (1,537) 740 (1,537) 740



26 Deferred incomeGROUP COMPANY



Armotisation (944) 642 (944) 642


In 2012, CEC Plc 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 USD9,790,000. The consideration is being amortised over 15 years.

27 Trade and other payablesGROUP COMPANY


Trade payables 281,897 25,369 64,436 36,960

Accrued expenses 33,642 1,405 4,043 1,405

Other payables 2,300 72,106 8,190 3,404

Social security and PAYE - 866 924 866

317,839 99,746 77,593 42,635

28 Related party transactions

CEC Plc owns 50% of Realtime and CEC Liquid Telecom. CEC Plc also owns 100% of CEC Africa and CEC-Kabompo Hydro Power Limited.

The following transactions were carried out with related parties:

i. Amounts due from related partiesGROUP COMPANY


CEC Africa - - 7,294 6,885

Realtime - 211 - 211

CEC Liquid 1,695 1,644 1,695 1,644

1,695 1,855 8,989 8,740

ii. Amounts due to related parties

Realtime - - 25 -

xerxes Global Investments 3,102 3,077 - -

Total 3,102 3,077 25 -




28 Related party transactions (continued)

iii. Sales to related partiesCOMPANY

In thousands of US Dollars 2014 2013

CEC Africa 409 5,747

Realtime 16 63

CEC Liquid 146 236

571 6,046

iv. Purchases from related parties

Realtime 117 119

v. Directors’ remunerationA listing of the members of the Board of Directors is included in the Directors’ report on page 39.

During the year, Directors received cash remuneration for services rendered to the Company of USD313,000 (2013:USD237,000).

vi. Executive management remuneration(Executive management team, excluding directors (shown in (v) above))

Short term employment benefits 3,787 3,450

Post employment benefits 199 213

3,986 3,663

vii. Individual shareholdersOne shareholder of the Company is also a director and in employment with the Company. The Company pays salaries and provides other benefits to one of the shareholders that is in employment with the Company.



29 Management of financial risk

Financial riskThe Group 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 Group manages these positions with a framework that has been developed to monitor its customers and return on its investments.

Credit riskThe Group 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 Group is exposed to credit risk is trade and other recevieables.

The Group’s exposure to credit risk is influenced mainly by individual characteristics of each customer. The demographics of the Group’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 22% of the Group’s revenue is attributable to sales transactions with a single customer.

The Group enters into Agreements with new customers, each customer is analysed individually for creditworthiness before credit terms and conditions are offered. The Group’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 Group’s benchmark creditworthiness may transact with the Group only on a cash basis.

In monitoring customer credit risk for selected Group companies, 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.

The Group does not have in place collateral for trade and other receivables.

The Group 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.




29 Management of financial risk (continued)

Capital management The Group’s objective when managing capital is to safeguard the Group’s ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders. The Group has complied with all capital requirements of its funders.

The Group 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 Group may adjust the amount of the dividends paid to shareholders, return on capital to shareholders, issues new shares, or sell assets to reduce debt.

Capital structureGROUP COMPANY


Cash and cash equivalents (note 21) 92,300 31,973 33,183 (791)

Loans and borrowings (note 23) (237,423) (230,942) (99,740) (103,259)

Equity 436,903 448,614 279,478 183,804

291,780 249,645 212,921 79,754

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 Group’s business activities. Market riskMarket risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Group’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 riskThe Group is exposed to foreign currency risks arising from exchange rate fluctuations. Foreign currency denominated purchases and sales, together with foreign currency denominated borrowings, comprise the currency risk of the Group. These risks are minimised by matching the foreign currency receipts to the foreign currency payments as well as holding foreign currency bank accounts.

Interest rate riskThe Group is exposed to interest rate risk to the extent of the balance of the bank accounts and borrowings.



30 Financial instruments

Exposure to currency, interest rate, credit and liquidity risk arises in the normal course of the Group’s business.

i. Credit riskExposure 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:

GROUP COMPANY

Carrying amount Carrying amount


Loans to subsidiary - - 134,284 95,087

Amounts due from related parties 1,695 1,855 8,989 8,740

Trade and other receivables (note 20) 166,267 58,978 77,759 33,735

Cash and cash equivalents (note 21) 102,443 43,643 43,326 10,863

270,405 104,476 264,358 148,425

The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:

GROUP COMPANY



Domestic 92,528 30,692 65,805 28,306

Other 49,015 27,150 6,553 1,113

141,543 57,842 72,358 29,419

Impairment losses

The aging of trade receivables at the reporting date was:

Group 2014 2013

In thousands of US

DollarsGross Impairment Net Gross Impairment Net

Days

0-21 days 24,673 - 24,673 24,673 - 24,673

22-45 days 19,253 (9,304) 9,949 30,050 - 30,050

46-59 days 10,797 (10,797) - - - -

Over 60 days 131,879 (24,958) 106,921 5,132 (2,013) 3,119

186,602 (45,059) 141,543 59,855 (2,013) 57,842




30 Financial instruments (continued)

Impairment losses (continued)

i. Credit risk (continued)

Company 2014 2013

In thousands of US

DollarsGross Impairment Net Gross Impairment Net

Days

0-21 days 35,306 - 35,306 24,673 - 24,673

22-45 days 12,113 - 12,113 1,549 - 1,549

46-59 days 10,797 - 10,797 - - -

Over 60 days 16,213 (2,071) 14,142 5,132 (1,935) 3,197

74,429 (2,071) 72,358 31,354 (1,935) 29,419

The movement in the allowance for impairment in respect of trade receivables during the year was as follows:

GROUP COMPANY



Increase in impairment provision 43,046 55 136 15

Write back of impairment loss - - - (6)


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.

ii. Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’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 Group’s reputation.




ii. Liquidity risk (continued)

The following are the contractual maturities of financial liabilities:

31 December 2014 - Group In thousands of US Dollars

CarryingAmount

Contractualcash flows

Within1 year

1 to 2 years

2 to 5years

Longer than 5 years

Non-derivative financial liabilities

Amounts due to related parties 3,102 3,102 3,102 - - -

Loans and borrowings 237,423 328,793 47,551 82,826 117,226 81,190

Trade and other payables 333,945 333,945 317,839 16,106 - -

Bank overdrafts 10,143 10,143 10,143 - - -

Total 584,613 675,983 394,741 98,932 117,226 81,190

31 December 2013


Amounts due to related parties 3,077 3,077 3,077 - - -



Bank overdrafts 11,670 11,670 11,670 - - -

Total 362,701 457,747 218,798 86,066 105,700 47,183

31 December 2014 - Company In thousands of US Dollars

CarryingAmount

Contractualcash flows

Within1 year

1 to 2 years

2 to 5years

Longer than 5 years


Amounts due to related parties 25 25 25 - - -



Bank overdrafts 10,143 10,143 10,413 - - -

Total 203,607 210,952 101,182 30,132 14,026 65,907

31 December 2013


Loans and borrowings 103,259 110,305 100,305 - 2,500 7,500


Bank overdrafts 11,654 11,654 11,654 - - -

Total 174,814 181,860 154,594 17,266 2,500 7,500





iii. Exposure to currency risk

Group 2014 2013

At 31 DecemberIn thousands of US Dollars

USD

Naira Exposure

(USD equivalent)

ZMW Exposure

(USD equivalent)

USD Total USD

Naira Exposure

(USD equivalent)

ZMW Exposure

(USD equivalent)

USD Total

Financial assets

Trade and other receivables 75,055 90,204 1,008 166,267 31,634 26,144 1,200 58,978

Amounts due from related parties 1,695 - - 1,695 1,855 - - 1,855

Cash and cash equivalents 32,913 59,117 10,413 102,443 80 32,780 10,783 43,643

Total financial assets 109,663 149,321 11,421 270,405 33,569 58,924 11,983 104,476

Financial liabilities

Trade and other payables (94,992) (237,946) (1,007) (333,945) (59,901) (57,111) - (117,012)

Loans and borrowings (237,423) - - (237,423) (230,942) - - (230,942)

Bank overdraft (4,106) - (6,037) (10,143) (10,044) (16) (1,610) (11,670)

Total financial liabilities (336,521) (237,946) (7,044) (581,511) (300,887) (57,127) (1,610) (359,624)

Net exposure (226,858) (88,625) 4,377 (311,106) (265,318) 1,797 10,373 (255,148)

Company 2014 2013

At 31 DecemberIn thousands of US Dollars

USDZMW

Exposure (USD equivalent)

USD Total USDZMW

Exposure (USD equivalent)

USD Total

Financial assets

Trade and other receivables 76,751 1,008 77,759 32,535 1,200 33,735

Amounts due from related parties 8,989 - 8,989 8,740 - 8,740

Cash and cash equivalents 32,913 10,413 43,326 80 10,783 10,863

Total financial assets 118,653 11,421 130,074 41,355 11,983 53,338


Trade and other payables (92,692) (1,007) (93,699) (59,870) (31) (59,901)

Loans and borrowings (99,740) - (99,740) (103,259) - (103,259)

Bank overdraft (4,106) (6,037) (10,143) (10,044) (1,610) (11,654)

Total financial liabilities (196,538) (7,044) (203,582) (173,173) (1,641) (174,814)

Net exposure (77,885) 4,377 (73,508) (138,703) 10,342 (128,361)

The following significant exchange rates applied during the year

Closing rate Average rate

2014 2013 2014 2013

Exchange rate USD USD USD USD

ZMW 6.3800 5.5100 6.1548 5.3800

Naira 183 162 166 161




iii. Exposure to currency risk (continued)

Exchange rate sensitivity

A strengthening (weakening) of the US Dollar by 10 percent, as indicated below against the Naira and Kwacha at 31 December 2014, would have increased/(decreased) equity and profit or loss by the amounts shown below. This computation is based on the foreign exchange rate variance that the Group considered reasonably possible at the reporting date. The computation assumes all the other variables remain constant.

Strengthening Weakening

In thousands of US Dollars Equity Profit or loss Equity Profit or loss

31-Dec-14

Naira 8,862 8,862 (8,862) (8,862)

31-Dec-13

Naira 180 180 (180) (180)

Company

31-Dec-14

Zambian Kwacha 437 437 (437) (437)

31-Dec-13

Zambian Kwacha 1,034 1,034 (1,034) (1,034)

iv. Interest rate risk

At the reporting date the Group had the following interest-bearing financial instruments:

GROUP COMPANY



variable rate instruments

Loans and borrowings (237,423) (230,942) (99,740) (103,259)

Cash and cash equivalents 92,300 31,973 33,183 (791)

(145,123) (198,969) (66,557) (102,468)

Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points in the interest rates at the reporting date would have increased/(decreased) equity and profit or loss by the amounts shown below. The analysis assumes all the other variables remain constant.

GROUP COMPANY

Strengthening Weakening Strengthening Weakening

In thousands of US Dollars100 basis points 100 basis points 100 basis points 100 basis points

Equity Profit or loss Equity Profit or loss Equity Profit or loss Equity Profit or loss

31-Dec-14

Variable rate instrument 1,451 1,451 (1,451) (1,451) 666 666 (666) (666)

31-Dec-13

Variable rate instrument 1,990 1,990 (1,990) (1,990) 1,025 1,025 (1,025) (1,025)

Fair value sensitivity analysis for fixed rate instruments

The Group does not have fixed rate instruments, hence, they do not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore, a change in interest rates at the reporting date would not affect the statement of comprehensive income.

Group





v. 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:

Group 31 December 2014 31 December 2013

In thousands of US DollarsCarrying Amount Fair value Carrying

Amount Fair value

Financial assets

Trade and other receivables 166,267 166,267 58,978 58,978

Cash and cash equivalents 102,443 102,443 43,326 43,326


Total financial assets 270,405 270,405 104,159 104,159



Trade and other payables (333,945) (333,945) (117,012) (117,012)

Bank overdrafts (10,143) (10,143) (11,670) (11,670)

Amounts due to related parties (3,102) (3,102) (3,077) (3,077)

Total financial liabilities (584,613) (584,613) (362,701) (362,701)

Net exposure (314,208) (314,208) (258,542) (258,542)

Company 31 December 2014 31 December 2013

In thousands of US DollarsCarrying Amount Fair value Carrying

Amount Fair value

Financial assets

Trade and other receivables 77,759 77,759 33,735 33,735

Loans to subsidiary 134,284 134,284 95,087 95,087


Cash and cash equivalents 43,326 43,326 10,863 10,863

Total financial assets 264,358 264,358 148,428 148,425



Trade and other payables (93,699) (93,699) (59,901) (59,901)

Bank overdrafts (10,143) (10,143) (11,654) (11,654)

Amounts due to related parties (25) (25) - -

Total financial liabilities (203,607) (203,607) (174,814) (174,814)

Net exposure 60,751 60,751 (26,389) (26,389)

All the financial assets and financial liabilities are all level 3 Category.



31 Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by the Group.

Set out below is an index of the significant accounting policies, the details of which are available on the note reference below.

A. Basis of consolidationB. RevenueC. Finance income and finance costsD. Income taxE. BorrowingsF. Earnings per shareG. Foreign currency H. Financial instrumentsI. Share capitalJ. Property, plant and equipmentK. Intangible assets L. ImpairmentM. ProvisionsN. Segment reportingO. InventoriesP. Employee benefitsQ. Development costs

A. Basis of consolidation

i. Business combinations

Business combinations are accounted for using the acquisition method as at the acquisition date – i.e. when control is transferred to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if they are related to the issue of debt or equity securities.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.

Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.




31 Significant accounting policies (continued)

A. Basis of consolidation (continued)

i. Business combinations (continued)

If share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s employees (acquiree’s awards) and relate to past services, then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based measure of the replacement awards compared with the market-based measure of the acquiree’s awards and the extent to which the replacement awards relate to pre-combination service.

ii. Non-controlling interests (NCI)

NCI are measured at their proportionate share of the acquiree’s identifiable net assets at the acquisition date.Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

iii. Subsidiaries

Subsidiaries are entities controlled by the Group. The Group ‘controls’ an entity if it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date when control ceases.

iv. Loss of control

When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related NCI and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.

v. Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

vi. Interests in equity-accounted investees

The Group’s interests in equity-accounted investees comprise interests in associates and a joint venture.

Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies. A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.

Interests in associates and joint ventures are accounted for using the equity method. They are recognised initially at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements includes the Group’s share of the profits or loss and OCI of equity accounted investees, until the date on which significant influence or joint control ceases.




B. Revenue

Revenue comprises of monies earned by distributing and providing electricity to the end user. Revenue from prepaid electricity is deferred and recognised as and when the customer consumes/uses electricity.

Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyers of electricity and no significant uncertainties remain regarding the derivation of consideration or associated costs.

Revenue comprises the fair value of consideration received or receivable for the distribution of electricity to the end user.

Other incomeOther income relates to power trading and the revenue is recognised as when earned.

C. Finance income and finance costs Finance income comprises interest income on funds invested, bank interest received and dividend income. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is recognised in profit or loss on the date that the Group’s right to receive payment is established. Finance costs comprise interest expense on borrowings. All non – qualifying borrowing costs are recognised in profit or loss using the effective interest method.

Foreign currency gains and losses are reported on a net basis as either finance income or finance cost depending on whether foreign currency movements are in a net gain or net loss position.

D. Income tax

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to items recognised directly in equity, or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Current tax payable also includes any tax liability arising from the declaration of dividends.

Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend is recognised.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit nor loss.

Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.





D. Income tax (continued)

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.

The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. For this purpose, the carrying amount of investment property measured at fair value is presumed to be recovered through sale, and the Company has not rebutted this presumption.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

E. Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost, any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowing using the effective interest method.

F. Earnings per share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by dividing the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding adjusted for the effects of all dilutive potential ordinary shares, which comprise convertible redeemable accumulative preferred stock.

G. Foreign currency

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currency of the Group entities at exchange rates at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Foreign currency differences are generally recongised in profit or loss. Non-monetary items that are measured based on historical cost in a foreign currency are not translated.




G. Foreign currency (continued)

Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into US Dollar at exchange rates at the reporting date. The income and expenses of foreign operations are translated into US Dollar at the exchange rates at the dates of the transactions.

Foreign currency differences are recognised in OCI and accumulated in the foreign currency translation reserve (translation reserve), except to the extent that the translation difference is allocated to NCI.

When a foreign operation is disposed of in its entirety or partially such that control significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the Group disposes of part of its interest in a subsidiary that includes a foreign operation while retaining control, then the relevant proportion of the cumulative amount is reattributed to NCI. When the Group disposes of only part of an associate or joint venture while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

H. Financial instruments

Non-derivative financial assets

The Group classifies non-derivative financial assets into the following category; loans and receivables.The Group classifies non-derivative financial liabilities into the other financial liabilities category.

Non-derivative financial assets and financial liabilities – recognition and de-recognition

The Group initially recognises loans and receivables issued on the date when they are originated.The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial assets are transferred, or it neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control over the transferred asset. Any interest in such derecognised financial assets that is created or retained by the Group is recognised as a separate asset or liability.

The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.

Non-derivative financial assets – measurement Loans and receivables

These assets are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method. Loans and receivables comprise trade and other receivables, cash and cash equivalents and loans to subsidiaries.





H. Financial instruments (continued)

Non-derivative financial liabilities – measurement Other financial liabilities

Non-derivative financial liabilities are initially recognised at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest method. Non-derivative financial liabilities comprise other financial liabilities and include interest bearing loans and borrowings and trade and other payables.

Amortised cost

Amortised cost is the amount at which the financial asset or financial liability is measured at initial recognition, minus principle repayment and plus or minus cumulative amortisation using the effective interest method, with any difference between cost and redemption value.

Offsetting

Financial assets and financial liabilities are not offset, unless the Group has a legal right to offset the amounts and intends either to settle on a net basis or realize the asset and settle the liability simultaneously.

Cash and cash equivalents In the statement of cash flows, cash and cash equivalents includes bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management.

I. Share capitalOrdinary 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.

J. Property, plant and equipment Recognition and measurement

Items of property, plant and equipment are measured at cost or valuation less accumulated depreciation and impairment losses.

Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.




J. Property, plant and equipment (continued) Recognition and measurement (continued)

The gain or loss on disposal of an item of plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of the item of property and equipment, and are recognized net within other income in profit or loss. When revalued assets are sold, the amounts included in the revaluation surplus reserve are transferred to retained earnings.

When the use of a property changes from owner-occupied to investment property, the property is remeasured to fair value and reclassified as investment property. Any gain arising on remeasurement is recognised in profit or loss to the extent that it reverses a previous impairment loss on the specific property, with any remaining gain recognised in other comprehensive income and presented in the revaluation reserve in equity. Any loss is recognised immediately in profit or loss.

Subsequent expenditureExpenditure incurred to replace a component of an item of property, plant and equipment that is accounted for separately, including major inspection and overhaul expenditure is capitalised. Other subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the item of property, plant and equipment. All other expenditure is recognised in profit or loss as an expense as it is incurred.

DepreciationDepreciation is recognised in the profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Leased assets under finance leases are depreciated over the shorter of the lease term and their useful lives.

The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows: Rates %Properties 2Transmission and distribution network 1.5 – 8.33Motor vehicles 20 Office equipment, furniture and fittings 20

Capital work in progress is not depreciated.

Depreciation methods, useful lives and residual values are reviewed at each reporting date, and adjusted if appropriate. There were no revised estimates in respect of items of property, plant and equipment during the year.





K. Intangible assets

Goodwill

Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets. The Group measures goodwill at the acquisition date as: • the fair value of the consideration transferred; plus • the recognised amount of any non-controlling interests in the acquiree; plus if the business combination

is achieved in stages, the fair value of the existing equity interest in the acquiree; less • the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities

assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

Goodwill on acquisitions of non-controlling interestsAcquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. Previously, goodwill was recognised on the acquisition of non-controlling interests in a subsidiary, which represented the excess of the cost of the additional investment over the carrying amount of the interest in the net assets acquired at the date of the transaction.

Subsequent measurement Goodwill is measured at cost less accumulated impairment losses. In respect of equity-accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment, and an impairment loss on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying amount of the equity-accounted investee.

Other intangible assets Other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses.

Subsequent expenditure Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred.

Amortisation Amortisation is based on the cost of an asset less its residual value. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The estimated useful lives for the current and comparative years are as follows:

• Purchased software 3 – 5 years

Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.




L. Impairment

Non derivative financial assets Trade and other receivables

Financial asset are assessed at each reporting date to determine whether there is objective evidence of impairment.

Objective evidence that financial assets are impaired includes:

• default or delinquency by a debtor;• restructuring of an amount due to the Group on terms that the Group would not consider otherwise;• indications that a debtor or issuer will enter bankruptcy;• adverse changes in the payment status of borrowings or issuers;• the disappearance of an active market for a security; or• observable data indicating that there is measureable decrease in expected cash flows from a group of

financial assets.

Financial assets measured at amortised costThe Group considers evidence of impairment for trade and other receivables and loans to subsidiaries. All individual significant assets are individually assessed for impairment. Those found not to be impaired are then collectively assessed for any impairment that has been incurred but not yet individually identified. Assets that are not individually significant are collectively assessed for impairment. Collective assessment is carried out by grouping together assets with similar risk characteristics.

In assessing collective impairment, the Group uses historical information on the timing of recoveries and the amount of loss incurred, and makes an adjustment if current economic and credit conditions are such that the actual losses are likely to be greater or lesser than suggested by historical trends.

An impairment loss is calculated as the difference between an asset’s carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account. When the Group considers that there are no realistic prospects of recovery of the asset, the relevant amounts are written off. If the amount of impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, then the previously recognised impairment loss is reversed through profit or loss.

Non-financial assets

At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than investments and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash generating units (CGUs).





L. Impairment (continued)

Non – Financial assets (continued)

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessment of the time value of money and the risks specific to the asset or CGU.

An impairment loss is recognised if the carrying amount of an asset or CGUs exceeds its recoverable amount.

Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

M. Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre tax rate that reflects current market assessment of the time value of money and, where appropriate the risks specific to the liability.

N. Segment reporting

IFRS 8 requires segments to be identified on the basis of the internal reports about operating units of the Group that are regularly reviewed by the Chief Operating Decision Maker to allocate resources and to assess their performance. A segment is distinguishable component of the Group 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.

O. Inventories

Inventories are measured at the lower of cost and net realisable value.

Costs, including an appropriate portion of fixed and variable overhead expenses, are assigned to inventories held by the method most appropriate to the particular class of inventory, with valuation being on weighted average basis.

Net realisable value is the estimated selling price in the ordinary course of business, less all estimated costs necessary to make the sale.




P. Employee benefits

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 Group 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 Group makes mandatory contributions to the National Pension Scheme Authority. These contributions constitute net periodic costs and are charged to the profit or loss as part of staff costs in the year to which they relate. The Group 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 trustee-administered fund. The pension scheme is funded by contributions to the pension scheme. The contributions by the Group are charged to the profit or loss in the period in which the contributions relate. The Group contributes 10.7% and the employees 5% of the employee’s basic salary towards the scheme.

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 profit or loss. Any actuarial assumptions are recognized immediately in other 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 Group.

Q. Development costs

Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sale the asset. The expenditure capitalised includes the cost of materials, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use, and capitalised borrowing costs.

Other development expenditure is recognised in profit or loss as incurred.

Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses.




32 New standards and interpretations not yet adopted

A number of new standards, amendments to standards and interpretations are effective for annual periods beginning on or after 1 January 2015, and have not been applied in preparing these financial statements. Those which may be relevant to the Group are set out below. The Group does not plan to adopt these standards early. These will be adopted in the period that they become mandatory unless otherwise indicated:

Effective date Standard, Amendment or Interpretation

Summary of Requirements

1 January 2015 Defined Benefit Plans: Employee Contributions (Amendments to IAS 19)

The amendments introduce relief that will reduce the complexity and burden of accounting for certain contributions from employees or third parties. Such contributions are eligible for practical expedient if they are:• set out in the formal terms of the plan;• linked to service; and • Independent of the number of years of service.

When contributions are eligible for the practical expedient, a Group is permitted (but not required) to recognise them as a reduction of the service cost in the period in which the related service is rendered. The Group’s defined benefit plan meets these requirements and, consequently, the Group intends to apply this amendment and will recognise the contributions as reduction of the service costs in the period in which the related service is rendered.

The amendments apply retrospectively for annual periods beginning on or after 1 July 2014, with early adoption permitted.

The impact of the adoption of the standard on the financial statements for the Group has not yet been quantified. The Group intends to adopt that standard when it becomes effective.

1 January 2016 Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11)

The amendments require business combination accounting to be applied to acquisitions of interests in a joint operation that constitutes a business.

Business combination accounting also applies to the acquisition of additional interests in a joint operation while the joint operator retains joint control. The additional interest acquired will be measured at fair value. The previously held interest in the joint operation will not be remeasured. As a consequence of these amendments, the Group will amend its accounting policy with effect from 1 July 2016 for acquisitions of interests in a joint operation. The amendments apply prospectively for annual periods beginning on or after 1 January 2016 and early adoption is permitted.




32 New standards and interpretations not yet adopted (continued)



1 January 2016 Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38)

The amendments to IAS 16 Property, Plant and Equipment explicitly state that revenue-based methods of depreciation cannot be used for property, plant and equipment.

The amendments to IAS 38 Intangible Assets introduce a rebuttable presumption that the use of revenue-based amortisation methods for intangible assets is inappropriate. The presumption can be overcome only when revenue and the consumption of the economic benefits of the intangible asset are ‘highly correlated’, or when the intangible asset is expressed as a measure of revenue.

The Group currently has several intangible assets and plants that are amortised or depreciated using a revenue-based method. The Group cannot overcome the rebuttable presumption above for its intangible assets, and consequently will have to change the amortisation and depreciation method for these items. The Group has assessed that the straight-line method would be the most appropriate method and will early adopt these amendments for its year ending 30 June 2015.

The amendments apply prospectively for annual periods beginning on or after 1 January 2016 and early adoption is permitted.


1 January 2016 Equity Method in Separate Financial Statements (Amendments to IAS 27)

The amendments allow an entity to apply the equity method in its separate financial statements to account for its investments in subsidiaries, associates and joint ventures. The amendments apply retrospectively for annual periods beginning on or after 1 January 2016 and early adoption is permitted.


1 January 2016 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)

The amendments require the full gain to be recognised when assets transferred between an investor and its associate or joint venture meet the definition of a ‘business’ under IFRS 3 Business Combinations. Where the assets transferred do not meet the definition of a business, a partial gain to the extent of unrelated investors’ interests in the associate or joint venture is recognised. The definition of a business is key to determining the extent of the gain to be recognised.

The amendments apply prospectively for annual periods beginning on or after 1 January 2016 and early adoption is permitted.








1 January 2016 Disclosure Initiative (Amendments to IAS 1)

The amendments provide additional guidance on the application of materiality and aggregation when preparing financial statements.

The amendments apply for annual periods beginning on or after 1 January 2016 and early application is permitted.


1 January 2016 Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28)

The amendment to IFRS 10 Consolidated Financial Statements clarifies which subsidiaries of an investment entity are consolidated instead of being measured at fair value through profit and loss. The amendment also modifies the condition in the general consolidation exemption that requires an entity’s parent or ultimate parent to prepare consolidated financial statements. The amendment clarifies that this condition is also met where the ultimate parent or any intermediary parent of a parent entity measures subsidiaries at fair value through profit or loss in accordance with IFRS 10 and not only where the ultimate parent or intermediate parent consolidates its subsidiaries.

The amendment to IFRS 12 Disclosure of Interests in Other Entities requires an entity that prepares financial statements in which all its subsidiaries are measured at fair value through profit or loss in accordance with IFRS 10 to make disclosures required by IFRS 12 relating to investment entities.

The amendment to IAS 28 Investments in Associates and joint ventures modifies the conditions where an entity need not apply the equity method to its investments in associates or joint ventures to align these to the amended IFRS 10 conditions for not presenting consolidated financial statements. The amendments introduce relief when applying the equity method which permits a non-investment entity investor in an associate or joint venture that is an investment entity to retain the fair value through profit or loss measurement applied by the associate or joint venture to its subsidiaries.

The amendments apply retrospectively for annual periods beginning on or after 1 January 2016, with early application permitted.







1 January 2017 IFRS 15 Revenue from Contracts with Customers

This standard replaces IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of ZYx, IFRIC 18 Transfer of Assets from Customers and SIC-31 Revenue – Barter of Transactions Involving Advertising Services.The standard contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognised.

This new standard will most likely have a significant impact on the Group, which will include a possible change in the timing of when revenue is recognised and the amount of revenue recognised. The Group is currently in the process of performing a more detailed assessment of the impact of this standard on the Group and will provide more information in the year ending 30 June 2015 financial statements.The standard is effective for annual periods beginning on or after 1 January 2017, with early adoption permitted under IFRS.


1 January 2018 IFRS 9 Financial Instruments On 24 July 2014, the IASB issued the final IFRS 9 Financial Instruments Standard, which replaces earlier versions of IFRS 9 and completes the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement.

This standard will have a significant impact on the Group, which will include changes in the measurement bases of the Group’s financial assets to amortised cost, fair value through other comprehensive income or fair value through profit or loss. Even though these measurement categories are similar to IAS 39, the criteria for classification into these categories are significantly different. In addition, the IFRS 9 impairment model has been changed from an “incurred loss” model from IAS 39 to an “expected credit loss” model, which is expected to increase the provision for bad debts recognised in the Group.

The standard is effective for annual periods beginning on or after 1 January 2018 with retrospective application, early adoption is permitted.





33 Capital commitments

Capital commitments authorised and contracted for by the directors as at 31 December 2014 amounted to USD7,546,000 (2013: USD6,559,000).

34 Contingent asset and liabilities

The Energy Regulation Board (ERB) awarded an electricity tariff increase to ZESCO Limited applicable to all mining companies with effect from 2 April 2014.

The ERB communicated a 28.8% tariff increase from 5.31 USc/kWh to 6.84 USc/kWh for CEC Plc under the Bulk Supply Agreement (BSA) between ZESCO and CEC Plc. Under the various Power Supply Agreements (PSAs) between CEC Plc and its mining customers, this tariff decision resulted in differentiated increases linked to different customer tariff categories.

Most of the mining customers have contested this tariff increase and have since commenced an action in the High Court by way of Judicial Review. During the period from 2 April 2014 to 31 December 2014, the mining customers opted to pay the invoices in part, based on the old tariffs exclusive of the 2014 ERB tariff increase.

Pursuant to the ERB directive, ZESCO has continued to invoice CEC Plc on the basis of the new tariffs and CEC Plc, in turn, has continued to invoice its mining customers on the same basis. CEC Plc payments to ZESCO during the period have been based on the old tariff prevailing (exclusive of 2014 ERB tariff increase), pending determination of the matter in the High Court.

In this regard, in the event of the court’s ruling in favour of the ERB, It will be expected that CEC Plc will pay an amount equivalent to USD60,682,512 to ZESCO upon receipt of the amounts owing from the mining customers.

35 Events subsequent to the reporting date

DividendsSubsequent to the reporting period, the Directors approved on 27 January 2015, the payment of a dividend of USD0.86 per ordinary share, which translates to 5.53 Ngwee (K0.0553) per share, using the Bank of Zambia mid-rate applicable on the date of declaration. The dividend was to be paid to the shareholders registered in the share register of the Company as at the close of business on Friday, 27 February 2015. Dividend payment was effected on Monday, 2 March 2015.

Tariff increaseThe Nigeria Electricity Regulatory Commission (NERC) effected a tariff increase of 27% effective 1 February 2015 on commercial and industrial customer. NERC further announced a 59% tariff increase to domestic consumers effective 1 July 2015. This should result in increased collections, which will improve AEDC’s working capital position.

Apart from the matters highlighted above, there were no material events after 31 December 2014 requiring disclosure in the financial statements.

36 Gain on bargain purchase

On 1 November 2013, KANN Utility Company Limited acquired a 60% interest in Abuja Electricity Distribution Company (“the Sub-subsidiary”) by acquiring 60% of the shares and voting interests in the Sub-subsidiary. The Sub-subsidiary is in the business of marketing and distributing electricity to retail customers within the Federal Capital Territory (FCT) and the surrounding states in Nigeria which includes Niger, Kogi and Nasarawa.

KANN was setup for the sole purpose of acquiring AEDC and the directors believe that by taking control of AEDC, the Group would be able to improve operations of AEDC by bringing to bear expertise available within the Group in terms of supply of electricity, reduction of ATC&C losses, amongst others, and generate returns for the shareholders.

In the two months to 31 December 2013, AEDC contributed revenue of USD47 million and a loss of USD28 million to the Group’s results. If the acquisition had occurred on 1 January 2013, the directors’ estimate that consolidated revenues would have been USD0.22 billion. In determining these amounts, the directors have assumed that the fair value adjustments, determined provisionally, that arose on the acquisition date would have been the same if the acquisition had occurred on 1 January 2012.



36 Gain on bargain purchase (continued)

The following summarizes consideration transferred, and the recognized amounts of assets acquired and liabilities assumed at the acquisition date.

Consideration transferred

GROUP

Fair Value

Purchase consideration 164,137

Identifiable assets acquired and liabilities assumed

Property plant and equipment 481,149

Intangible assets 128

Inventories 3,480

Cash and cash equivalents 11,487

Unearned revenue in relation to prepaid meter sales (864)

Total 495,379

Less

60% interest in net assets acquired (297,228)

Gain on bargain purchase (133,091)

If new information obtained is within one year from the acquisition date, about facts and circumstances that existed at the acquisition date identifies adjustments to the above amounts, or any additional provisions that existed at the acquisition date, then the acquisition accounting will be revised.

The shareholding of the subsidiary as at 31 December 2013 is as follows:

Number of ordinary shares Interest (%)

KANN Utility Company Limited 6,000,000 60%

Bureau of Public Enterprises 3,200,000 32%

Ministry of Finance Incorporated 800,000 8%

10,000,000 100%



Stanbic BankCorner Obote AvenueP O Box 21600Kitwe, Zambia

KPMG Chartered AccountantsFirst floor, Elunda TwoAddis Ababa RoundaboutRhodes Park, LusakaP O Box 31282Lusaka, Zambia

Operations Head Office23rd AvenueP O Box 20819Nkana EastKitwe, ZambiaT : +260 212 244 556F : +260 212 244 040

Corporate Office1st Floor Abacus SquareStand No. 2374/BThabo Mbeki RoadPost Net 145Private Bag E835KabulongaLusaka, ZambiaT : +260 211 261 298F : +260 211 261 640

Shareholder ContactJulia C. Z. ChailaCompany Secretary / Chief Legal CounselT : +260 212 244 274F : +260 212 244 212

Chama Nsabika-KalimaSenior Manager Corporate CommunicationT : +260 212 244 914F : +260 211 261 640

Website : www.cecinvestor.comEmail : [email protected]

Citibank Zambia LimitedCitibank HouseAddis Ababa RoundaboutP O Box 30027Lusaka, Zambia

Citibank LondonCitiGroup CentreCanada SquareCanary Wharf E145LBLondon, England

BANKERS

AUDITORS

CORPORATE CONTACT INFORMATION

Standard Chartered BankStandard HouseCairo RoadP O Box 32238Lusaka, Zambia



www.cecinvestor.com

Investor Relations

Copperbelt Energy Corporation Limited 2014 annual report