Analysis of Copperbelt Energy Corporation Plc.

NB: We do not resell your papers. Upon ordering, we do an original paper exclusively for you.

NB: All your data is kept safe from the public.

Introduction

Copperbelt Energy Corporation PLC (CEC) is an energy company that produces, transmits, distributes, and sells electricity. The company generates electricity from water, solar, gas, and heat sources and sends it through a network of transmission lines, high voltage substations, and control centers. We are also investing in infrastructure development through telecommunications projects. In Zambia and Nigeria, the company serves residential, industrial, and industrial consumers. CEC is based in Kitwe, Zambia. Copperbelt Energy Corporation Plc is a Zambian company that produces, transmits, distributes, and sells electricity at mines in the Democratic Republic of the Congo (DRC).

About the Company

CECs main business is to supply electricity to copper mines in Copperbelt Province, Zambia, and the Democratic Republic of the Congo. CEC provides the transmission of system and bicycle power over the network on behalf of ZESCO Ltd and other customers in the Zambia and Southern Africa power pools. The company operates a transmission link with the Democratic Republic of the Congo. CECKabompo Hydro Power Limited (CECKHPL), CEC DRC Sarl, CECInnoVent South, InnoVentCEC North, and Power Dynamos Sports Limited are five registered subsidiaries of CEC (PDSL). CEC-DRC Sarl is a unique cause car integrated to steady the energy buying and selling section and develop the companys hobby withinside the DRC market.

Analysis of Organization

Corporate Governance Analysis

The companys articles of incorporation provide for a board of 12 members. The Executive Director is the only Managing Director of the Board of Directors. The role and responsibilities of the Board of Directors are clearly defined in the articles of incorporation. The main role of the Board is to provide the company with a strategic direction and to effectively monitor its management and performance. The Board of Directors has established several committees to assist in the fulfillment of its mission, each with its own role and responsibility in key areas.

The Board of Directors and its committees meet quarterly, with special or additional meetings as needed. Each director receives informational materials at least seven days before each meeting. The company secretary is responsible for the timely completion and distribution of Board agenda and information materials, as well as compliance with all laws governing Board procedures and Board operations. The company secretary also advises the Board on corporate governance. The Chief Financial Officer attends all Board and committee meetings. Committee meetings also include senior management. This allows officers to participate in Board deliberations at the committee level and allows directors to discuss matters of mutual interest.

The company has a conflict of interest policy that helps directors and employees disclose conflicts of interest. Directors, key executives, officers, and employees who trade company securities during the six-month block period possesses price-sensitive information that has not yet been released to the market under the companys insider trading policy. To maintain the highest standards of corporate governance and ensure that the interests of shareholders and all stakeholders are taken into account, the Board has further developed and improved its governance structure in 2020 (The Copperbelt Energy Corporation Plc., 2020). The Board committee has been streamlined and reduced from seven in 2019 to five in 2020 (The Copperbelt Energy Corporation Plc., 2020). Regulatory standards of corporate governance have been fully met in terms of compliance and compliance. The annual meeting 2020 was virtually the first to be held due to the business environment and the challenges of COVID-19. The virtual meeting was well received and increased the participation and participation of our shareholders.

Stockholder Analysis

Profitable growth is vital for long-time period economic viability of the organization. Since its privatization, CEC has been worthwhile almost continuously. Because CECs commercial enterprise is capital-intensive, the companys sustained operations and feasible improvement will necessitate large expenditure. The company has chronic asset funding software; this is crucial to maintaining its strong community and making sure that our clients have a constant delivery that lets them hold operating. CEC invests in its strength infrastructure on an everyday foundation and continues it to an excessive standard. CEC is likewise persevering with spending money on power technology potential and pursuing a numerous portfolio of clean, renewable producing belongings, including hydro, solar, and renewable hybrids.

Risk and Return

The impact and threat of the COVID-19 pandemic pervaded every element of the companys business, but it was not the only danger it faced. A further risk to the company was that the BSA would expire on March 31, 2020, without an extension or succession agreement with ZESCO (The Copperbelt Energy Corporation Plc, 2020). BSA supports key business agreements between three companies, including CEC, which provides ZESCO wheel services to Copperbelt customers, ZESCO, which powers CECs, and three companies that mutually provide international wheel services.

The return and risk could be measured by two theoretical models, which are modern portfolio and postmodern portfolio theory (Obaid & Hendi, 2021). The basic and most important purpose of a profitable organizations investment effort is to generate revenue. This is because revenue is the key to the long-term survival of an organization. Postmodern portfolio theory assumes that investors make rational investment decisions and that all investors have the same expectations for future market growth. A new evolutionary method of studying and rationally applying modern portfolio theorys rational investment through asset allocation is called postmodern portfolio theory (Obaid & Hendi, 2021). By analyzing expected return and risk and accepting assets with expected return values below the expected return level, the company can better adapt this theory to the market environment and investor goals. The idea is that the selected portfolio had lower returns and higher risk with respect to individual assets and the portfolio as a whole (Obaid & Hendi, 2021). The total return was about 0.31, and the overall risk value was about 0.51. Some investments of Copperbelt Energy Corporation PLC have experienced negative yield volatility. A negative sign indicates that the modern portfolio achieves higher returns on this asset alone than on the entire portfolio. Postmodern portfolio theory preferences are reflected in negative references to changing risks.

The next risk is that with the announcement of SI 57 on May 29, 2020, the Minister of Energy declares all transmission lines and distribution lines of the company as carriers, and the ERB unilaterally charges quasi-economic transmission charges. Another significant threat is KCMs US $ 153.1 million debt repaid at the end of the year (The Copperbelt Energy Corporation Plc., 2020). PSA expired between KCM and the company on May 31, 2020, after which ZESCOs transmission services were supported to maintain connectivity to the CEC network and allow ZESCO to power ZESCO. Delivering KCM over the CEC network had no support for the KCMs request.

During the period, the Board and management spent most of their time addressing the main risks and difficulties of the business. The organizations top priority was to find solutions through communication and stakeholder meetings. In this regard, as previously reported, the company has held BSA talks with the government and ZESCO from February 2020 until the contract expires due to the blockade. The negotiations did not produce the expected results, but the company continued to seek ways to engage in more dialogue, including attending government-sponsored meetings. Similarly, at KCM, the organization has made several attempts to get the parties to agree on an open issue. This includes not only the settlement of debt but also the request for an agreement that allows the parties to continue to receive significant services without interruption. If KCM debt is not paid, it can damage the CEC balance sheet and reduce profitability. This is evident in this years financial performance, which the CEC details from the annual report.

Capital Structure Choices

The standard beta is sometimes referred to as the leverage beta because it represents the capital structure of the company. Copperbelt Energy Corporation Plc beta for five years is 0.21and it is excluded from the distribution (Infront Analytics, 2022). The market cap estimates for 47.883B, while the forward dividend and yield are 2.76, which is 5.78% (Dow Jones & Company, 2022). In 52 weeks range, the average volume shows the figure of 1,637,635 (Dow Jones & Company, 2022). Copperbelt Energy Corporation has achieved cost savings as a result of its investments and usage of class A power quality instruments (Mulenga et al., 2018). Long-term debt, preferred stock, and/or equity rates make up the capital structure associated with a companys long-term financing.

Dividend Policy

Over the last decade, CEC has increased its dividend payments. CEC dividends (13.29%) are higher than the bottom 25% (1.99%) of dividend payers in the ZM market (MarketWatch, 2022). CEC dividends are included in 25% (13.29%) of dividend payers in the ZM market (11.97 percent) (MarketWatch, 2022). The current dividend yield is 13.29%, according to the. The CEC companys top priority is to maximize shareholder value. Based on this goal and the annual financial statements, the Board of Directors resolved an interim dividend of US $ 34.1 million paid to shareholders (2019: the US $ 30.9 million). Over the past five years, CEC has repaid approximately $ 128 million to shareholders and more than $ 247 million to the Treasury (The Copperbelt Energy Corporation Plc., 2020). The company intends to maintain a certain dividend in accordance with the dividend policy.

Stock Price Monitoring

The stock price was gradually going down from the middle of 2021 until today. According to Yahoo Finance, the stock price was at 53.48 in June 2021 and went down to 48.81 (Yahoo Finance, 2022). Such a trend might be caused by the fact that natural gas prices have dropped after peaking in October. Rising interest rates and inflation are another reason for the oil price fluctuation, and thus, another factor affecting the changes in the stock price of the company assets (Zou, 2018). However, the overall trend considering the stock price from the beginning of 2021 up to the current time, the stock price has increased. According to the growth estimates for the next five years, the stock price is going to be 1.56% up each year (Dow Jones & Company, 2022). For instance, it was 43.11 in January 2021, and in January 2022, it has reached 48.88 (Yahoo Finance, 2022). The overall trend of stock monitoring is positive with the presence of price fluctuations.

Valuation

The balance between supply and demand was a problem throughout the year as demand continued to outpace supply. This was mainly due to below-average water levels in the countrys large hydropower plants. Shortage peaked at 40% of domestic demand before steadily improving throughout the year (Fusion Media Limited, 2022). In order to avoid more widespread economic consequences, mining customers have been spared from power limiting measures and have received full demand. Mining customers consumption of 3,284 GWh has increased by 5% from 2019 (3,137 GWh), indicating a year-round recovery (Fusion Media Limited, 2022). In the global market, positive copper prices generally have the potential to increase future mining productivity.

This organization has maintained a high level of network reliability and has provided excellent service to its customers. The integrated power grid was sensitive to certain vibrations in both Zambia and the Democratic Republic of the Congo due to the countrys power shortages. Despite these obstacles, our operations team handles the network brilliantly and successfully and continues to interact closely with others on larger interconnected networks. The companys power plant improvement initiatives, including plant renewal, modernization, and digitization, are ongoing as they strive to improve the performance of both individual plants and the network as a whole. This years investment was lower than expected as COVID-19 affected the investment program, but spending on facility renewals and modernization will increase in the future.

In the field of health and safety, performance standards are world-class quality. The company has been working hard to create and establish a safety culture throughout the organization, but the company continues to maintain clean health, 82.57 million man-hours without accidents, and our strength culminates (MarketScreener, 2021). The company is consistently pursuing initiatives to improve its safety culture. The Kahle River catchment in Copperbelts Chililabombwe was planted with 15,000 native trees as part of a program to regenerate and regreen the flora to protect and protect the environment (MarketScreener, 2021). Finally, it contributes to the reduction of CO2 emissions and other environmental factors that contribute to climate change.

The Zambian government has taken some legislative and regulatory measures that may affect the business environment and thus the operation of the company. In response to the 2019 National Energy Policy, the 2019 Electricity Law No. 11 and Energy Ordinance No. 12 were enacted. Both laws came into effect in February 2020 (MarketScreener, 2021). The Commission de Régulation (ERB) has also hired a new advisor to oversee the previously blocked Service Cost Survey (CoSS). The CoSS report is expected to be completed in 2021, and the results will be incorporated into future electricity rate assessments.

The Minister of Energy issued Decree No. 57 of 2020 on May 29, 2020. Under this decree, a companys transmission lines and distribution lines are called general carriers. In a judicial review proceeding in the High Court, the CEC challenged this decision and the subsequent steps by the ERB to set uneconomical charges for the use of the company system. After the balance sheet date, the High Court ruled in favor of the company. The administration has appealed the High Courts ruling. The Bulk Supply Agreement (BSA) supporting the business relationship between CEC and ZESCO will expire on March 31, 2020 (MarketScreener, 2021). While the parties were negotiating a replacement contract, the negotiations broke shortly before the deadline.

The parties are still looking for ways to solve the problem and are continuing to serve all Copperbelt power users. The company aims to resolve this issue as soon as possible. The power supply contract between CEC and KCM expired at the end of May 2020 and was not extended (MarketScreener, 2021). As a result of subsequent events, the load on KCM was transferred from the power supply services business area to the use of the grid and related services. In this structure, the company needs to enter into two contracts, a transmission usage contract and a grid connection contract. The need to enter into these two contracts remains CECs top priority.

Suggestion for Improving the Company

By summarizing the analysis of the CEC PLC, it could be concluded that the company needs to improve and grow its business, benefiting from ongoing market changes and global energy shifts. Maintaining a healthy level of investment in energy networks through power system updates and modernization, technology implementation, and process digitization is critical to the company. This is very important because it brings significant business benefits by reducing operational costs and increasing efficiency, and it brings measurable value to customers and the industry as a whole. The company will continue to leverage the opportunities offered by the widespread use of renewable energy to drive investment in distributed generation and connect cleaner energy sources to the grid to contribute to the energy transition agenda.

Copperbelt Energy Corporation PLCs must strive for operational excellence by raising the bar for providing high quality and reliable service to their customers. This can be achieved by integrating the integrated management system into the process. To function effectively in the changing context of the energy sector, companies need to invest in human capital to ensure they have the necessary skills. Organizations are encouraged to focus on providing exciting and interesting roles for all employees. CEC can embody our values and focus on building a strong corporate culture that promotes employee participation, productivity, and success in the region.

References

Dow Jones & Company. (2022). Copperbelt Energy Corp. PLC. Web.

Fusion Media Limited. (2022). Copperbelt Energy Corp Plc (CECZ). Web.

Infront Analytics. (2022). Copperbelt Energy Corporation PLC. Web.

Market Screener. (2021). Audited results for the financial year ended 31 December 2020. Web.

MarketWatch. (2022). Copperbelt Energy Corp. PLC. Web.

Mulenga, E., Bollen, M., & Karlsson, O. (2018). The importance of power quality monitoring for modern network operators and industries in Zambia. In Engineering Institution of Zambia (EIZ) 2018 Symposium, pp. 23-39. Web.

Obaid, H. J., & Hendi, A. J. M. (2021). Risk and return analysis for companies registered in the Iraq stock exchange based on the sortino and sharpe methods. Estudios de Economía Aplicada, 39(10), 44. Web.

The Copperbelt Energy Corporation Plc. (2020). CEC 2020 Annual Report. CECInvestor. Web.

Yahoo Finance. (2022). Web.

Zou, X. VECM model analysis of carbon emissions, GDP, and international crude oil prices. Discrete Dynamics in Nature and Society, 2018. Web.

Click Here To Order Now!