OVERVIEW OF CEC OPERATIONS

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OVERVIEW OF CEC OPERATIONS

• COPPERBELT ENERGY CORPORATION PLC

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INTRODUCTION

• This Presentation Covers
• An overview of CEC.
• Discussion of Energy sector
• CEC Shareholding governance issues
• Listing
• Features and highlights of CECs operations
• Customer relations
• Conclusion

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CEC SOME STATISCS

• Business Electricity Utility operating on the
  Copperbelt Province of Zambia
  
• Supply of power to mines
• Power Transmission for ZESCO and SNEL (DRC)
• Provision of fibre-optic based telecommunications
  services
  
• Infrastructure
• 835km of 220kV and 66kV transmission lines
• 80MW of Gas turbine generation
• 36 major substations
• 520km of fibre optic
• Current demand of CEC Customers520MW
• Demand is projected to increase by 400MW by 2010
• Power wheeled for other parties
• 270MW in respect of ZESCO Copperbelt loads
• 210MW in respect of SNEL exports to SAPP

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REGIONAL ENERGY SECTOR

• Net deficit in interconnected Southern African
  countries in the short/medium term.
  
• Zambia, S. Africa, Zimbabwe, Botswana, Namibia
  and Swaziland load shedding becoming
  increasingly common.
  
• Limited surpluses in DRC and Mozambique.
• Several power projects under development or
  planning most are relatively expensive
  
• Increasing transmission interconnectivity and
  co-operation (SAPP) has lowered the risk of
  stranded generation
  
• Larger power projects are becoming more
  attractive.
  
• Development of large to huge (Grand Inga)
  projects will eventually bring down the costs of
  power.

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ZAMBIAN ENERGY SECTOR

• Zambia endowed with energy resources such as
  hydropower wood fuel
  
• Has an installed electricity generation capacity
  of 1786MW out which 1676MW is hydro, current
  rehabilitations will take capacity to circa
  2000MW
• Three key players
• Zesco Generation, transmission, distribution,
  supply
  
• CEC transmission, distribution and supply
• Lunsemfwa Hydropower - generation

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FOCUS ON ZAMBIAS POWER SITUATION

• Currently deficit of up to 250MW being
  experienced due to
  
• Overall economic growth
• Unprecedented growth of Zambias mining sector
• Generators undergoing necessary rehabilitation
• often load shedding is necessary due to
  unavailability or high cost of power imports
  
• Deficit is mainly during peak hours, but also
  increasingly during non-peak hours
  
• Zambia needs both peaking and base load power
  Zambian load curve is characterised by mines
  base power requirements.
  
• Very rapid load growth is expected over the next
  three years (new mining projects)
  
• Completion of rehabilitation of generators on
  schedule is critical
  
• New generation required to restore supply-demand
  balance this could take 6 or more years.

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ZAMBIASDEMAND FORECAST vs GENERATION CAPACITY
EXISTING GENERATION CAPACITY (POST_REHAB)
ZAMBIA FORECAST WINDOW

• Demand is projected to exceed post-rehab
  generation capacity between
  
• 2010 (under high scenario), and
• 2013 (under low demand scenario)

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CECs ROLE IN THE ENERGY SECTOR

• CEC as supplier to the mines plays critical role
  in Zambian electricity sector and the economy
  
• CEC accounts for 60 of electricity consumption
  in Zambia
  
• The DRC Zambia interconnector critical
• Plans to expand its telecommunication business
• CEC has relevant skills and financial capacity to
  participate in the development of the sector
  
• Challenges in the sector present an opportunity
  for CEC to investment in generation, transmission
  and alternative energy source projects
  
• Governments in the region and Zambia in
  particular wish to encourage private sector
  participation CEC uniquely placed

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CECs OWNERSHIP STRUCTURE
Zam-En
ZCCM-IH
Private investors
20
3
77
Copperbelt Energy Corporation
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Zam-En OWNERSHIP STRUCTURE
DBSA 20
Batoka Energy 60
Aldwych International 2
Zambian Energy Corporation
FMO 18
77
Copperbelt Energy Corporation
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BOARD OF DIRECTORS
Zam-En Vincent Malambo - Chairman Hanson Sindowe
Michael Tarney Siyanga Malumo Jorry Mwenechan
ya Jean Madzongwe (DBSA) Helen Tarnoy (FMO/Aldwy
ch)
CEC Hanson Sindowe Executive Chairman Michael
Tarney Neil Croucher Abel Mkandawire Jean Madz
ongwe Helen Tarnoy Dr Buleti Nsemukila Emmanue
l Mutati Joseph Chikolwa John Kaite Hon. Charle
s Milupi, MP
Executive Committee
Audit Committee
Remuneration Committee
Business DevelopmentCommittee
SHE Committee
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CEC PROGRESS DEVELOPEMNT
ZCCM Ownership
NG/Cinergy Ownership
Zam-En Ownership
Engineering driven Under-capitalised Mining focu
s
Reliant on ZCCM corporate support
New investment funding from supporting banks
New project devt focus Zambia and SADC
Mainly Zambian board and management
Re-capitalisation New processes and re-engineerin
g, skills transfer Mainly Zambian management Mai
nly UK/US board
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LISTING PROCESS

• Commitment made by majority shareholders to sell
  down in order to
  
• Achieve share ownership in CEC by Zambian public
• Widen shareholder base from which to raise funds
  for future expansion
  
• Afford institutional and individual investors the
  opportunity to participate directly in net income
  stream of CEC and capital gains
  
• Enhance investor and general public awareness of
  CEC
  
• Motivate and incentivise CEC employees through
  share ownership

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OFFER STRUCTURE

• Zambian Transmission BV and Zambian Energy BV
  offering for sale 125,000,000 shares each
  
• Pre-allocation of 150,000,000 ordinary shares in
  CEC to NAPSA and Aflife
  
• Public offer of 50,000,000
• Preferential offer for sale of 50,000,000 to
  employees
  
• Offer to open mid November and close mid
  December
  
• Relevant approvals received from SEC and LuSE
• Proposed listing date 14 January 2008
• Advisers to the offer and listing Standard Bank
  South Africa
  
• Sponsoring Broker Stockbrokers Zambia
• Receiving agents ZANACO, Stanbic, Stockbrokers
  Zambia, Pangea, Intermarket

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OWNERSHIP STRUCTURE POST LISTING
Zambian Investors Development Banks
ZCCM
Employee Share Scheme
Listed Shares LuSE
Total 25
20
Zambian Energy Corporation
Zambian Technical Team
52
3
Copperbelt Energy Corporation
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Operational features

• Recent Performance
• Financial performance
• Operational performance
• Safety and the Environment
• New Business Development
• Focus areas for the future
• Conclusion

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Financial performance

• Consistent delivery of satisfactory profits to
  shareholders
  
• Significant reinvestment into infrastructure
• Increased efficiencies
• Pressure due to strengthening Kwacha and
  weakening US Dollar
  
• Long term profitability
• Consistent and secure income stream

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Turnover/Gross Profit
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Operating costs/Labour
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Operational Performance

• Independent Engineering Audit undertaken in 2005
• Generally very good assessment
• Areas of concern related mainly to documentation
  of procedures
  
• Risk Management Process introduced
• Independent Audit of Risk Management process
  conducted results awaited
  
• Customer Survey conducted earlier this year
• Performance rated good but some concerns
  regarding Emergency plant
  
• Need to establish benchmarks to measure
  performance (customer survey, standard measures
  CAIDI, SAIFI etc)
  
• Maintenance systems effective but need to focus
  on further CBM implementation
  
• Maintain appropriate levels of reinvestment
• Low system voltages remain a concern
• Emergency power a major part of CECs service
• Maintain high level of availability
• Significant reinvestment
• Improved operating regime
• Determine residual life of alternators and
  develop maintenance regime
  
• Protection system
• Obtain Maximum value out of protection audit

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SHE Performance and Key Achievements

• Safety Management System based on OSHAS18001
  established
  
• Independent SHE Audits
• SHE Subcommittee of the Board
• Social Welfare function set up for CECs HIV/AIDS
  and Malaria roll-back programmes
  
• Nil CEC fatality record and 80 reduction in
  LTAs since 1998
  
• HIV/AIDS prevalence survey conducted
• 22 Peer Educators trained (50 CEC employees
  50 spouses)
  
• Improved VCT uptake
• Malaria-roll back programme implemented with
  partners
  
• Environmental Management System based on
  OSHAS14001 established
  
• Only 1 serious environmental incident in past 9
  years.
  
• CEC is PCB free

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Incident Trends
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Focus areas for the future

• Constantly look to improve efficiencies
• Maintain focus on core business
• Asset management of ageing asset base.
• Increasing utilisation means less slack in the
  system
  
• Refine CBM
• Maintain high availability of Emergency Power
• New Business Development
• Expanded role within the ESI (generation,
  transmission projects, renewables,
  electrification etc.)
  
• Expansion projects
• ZESCO tariff renegotiations
• Regulatory issues (Grid code, licences)
• Human Resources
• Create flexible organisation able to respond to
  changing environment
  
• Retain competent staff
• Energise staff to buy in to new code of ethics
  and vision
  
• Stakeholder relations
• Closer liaison with customers during changing
  environment (tariff renegotiation, grid code,
  IPPs, possible power shortages, etc)
  
• Government/Zesco/ERB due to possible expanded
  role within the ESI
  
• New Shareholders

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Asset Management challengesTransformers Age
Profile
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Customer relations

• A few large mining customers
• Unique needs of the customer well understood
• Regular interactions at various levels
• Customer survey conducted results good with a
  few areas to focus on
  
• Currently an excellent payment record
• Issues currently under discussion
• Review of the BSA/PSAs to ensure ZESCOs
  sustainability
  
• Defaulting on long term agreements
• Price shocks to be avoided
• Thorough analysis required to ensure appropriate
  tariff levels
  
• Region must maintain its competitive advantage
• Current and future shortages of power
• Huge investments must not be stranded
• Growth of the economy dependent on availability
  of power
  
• Need for power factor correction on the
  Copperbelt to improve stability and voltage levels

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Customer relations

• Relationship with ZESCO governed through the Bulk
  Supply Agreement (BSA)
  
• Relationship with mining customers governed
  through the Power Sales Agreements (PSAs)
  
• Established in 1997 at arms length by
  stakeholders (government, mines, buyers and
  international advisors)
  
• Long term agreements to 2020 in some cases
• Unique needs of the customer well understood

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Conclusion

• CEC is a strong asset rich Zambian Company with
  exposure to the rapidly growing energy and mining
  sectors, and a 10-year profit history
  
• Zam-En as the main shareholder in CEC supports
  wider Zambian participation, and a new growth
  strategy for the company
  
• Strong support of Development Banks with long
  term, developmental focus
  
• Strong, energy intensive, growth oriented
  customers
  
• Strong Governance is a key focus for the Board
• One of few successful Zambian private companies
  that is not foreign owned

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