CDC and A P Moller Capital make bid to acquire CEC for K3.709 billion

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The CDC Group has made a bid to acquire a majority stake in Copperbelt Energy Corporation (CEC) which is listed on the Lusaka Securities Exchange.

According to financial details of the offer obtained in Lusaka, based on the Offer Letter, the issued ordinary share capital of CEC is valued at approximately US$ 380 million or K3.709 billion.

CDC is offering to acquire all of the issued CEC Shares for a cash consideration of US$ 0.2338 per share.

The offer is based on the average mid exchange rate of K9.7614: US$1 (being the average mid-rate on 22 January 2018 published by Bank of Zambia) and equates to K2.28220 per share and represents a premium of approximately 59.59% to the Closing Price of K1.43 per CEC Share on 22 January 2018 which is the last business day prior to the date of submission of the Offer Letter.

It also translates to 69.05% to the volume weighted average Closing Price of K 1.35 per CEC Share for the 12 months ended on 22 January 2018.

CDC is the United Kingdom’s development finance institution and is wholly owned by the UK Government Department for International Development and as at 31 December 2016, CDC had total assets worth US$ 6.0 billion and has a specific mandate to invest in infrastructure assets across Africa.

AP Moller Capital is an alternative investment fund creating and enabling opportunities through investments in African infrastructure and was launched in August 2017 with a total fund commitment of US$650m backed by a selection of blue chip Scandinavian institutional investors.

Sameh Shenouda, CDC’s Head of Infrastructure, said: “Power infrastructure is vital for Africa’s economic growth and job creation. CDC’s bid for Copperbelt Energy Corporation will increase both renewable power generation in Zambia and the growth of regional power trading. Power outages cost African countries an estimated 1-2% of GDP annually and Zambia and its neighbours require an increase in the supply of reliable power.” 

“CEC is one of Zambia’s leading companies but we believe it has much more to offer. Under CDC and A P Moller’s ownership it is planned that CEC will bring an additional 150MW of renewable generation to the Zambian network and increase the amount of much-needed power available. Our proposal has the support of the Zambian government who recognise the long-term, positive role that CDC has played in the economic development of the country.”

The Board of CEC is now following the process required by the Zambian Takeover Code and an offer document and circular will be circulated to shareholders in due course.  

If the offer is successful, it will be partly financed by A P Moller Capital’s Africa Infrastructure Fund, CDC’s co-investor.

CEC owns, operates and maintains power transmission as well as generation assets and supplies electricity to customers in Zambia.

CDC’s offer for the company is based on an explicit developmental strategy to expand renewable power generation in Zambia and increase regional power trading. 
While CEC has a strong track record in transmitting reliable power in Zambia, supplying over 700MW to industry and households in the Copperbelt region, CDC sees the company’s potential to increase its power generation capacity in order to support the growing demand for electricity in Zambia.

Kim Fejfer, A P Moller Capital’s Managing Partner and CEO, said: “The power sector in Africa is significantly underdeveloped, whether we look at energy access, installed capacity, or overall consumption. The sub-Saharan Africa’s residential and industrial sectors suffer electricity shortages which mean that countries struggle to sustain GDP growth.” 

“A P Moller Capital and CDC together focus on making a lasting difference by helping businesses to become profitable and economically sound over the long term. With this investment, we believe we can support further development of Zambia’s power generation capacity and infrastructure,” he added.

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42 COMMENTS

    • Whether they are tribalists, AT LEAST WE HAD A GOOD EXAMPLE OF A COMPANY WITH ZAMBIAN PRIVATE SHAREHOLDING THAT HAS PERFORMED WELL. I wish we could have such in all key sectors of the economy!!.

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    • Let me tell you young chaps below the age of 35 something! If Zambia was a company like ZCCM it wouldve been one of the richest countries in Africa!

      This CEC that is one of Zambias best companies was formerly Power Division a Subsidiary of ZCCM! ZCCM bane was one of the top 200 companies in the world back in 1984! ZCCM still owns properties and shares in other companies that were acquired during its heydays.

      Then came along a small demon called Kafupi that destroyed this amazing legacy!

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    • This is stock purchase and it is an absolutely wrong way to transact on this deal. Stock purchases don’t give the true reflection of the actual assets. For instance, all CEC’s total infrastructure for powerlines, transformers, substations, etc. is worth billions of dollars.

      Its stock is just a reflection of market sentiment on any given day, that’s why a penny stock can immediately rise to be a hundred-dollar stock in a single day depending outlook without changing its original asset base. Not all that glitters is gold!!!

      Your stock price does not reflect your true value that’s why the British are using this method while singing songs of long been supporting the smart people of the Zambian Enterprise, etc. The renewable more energy generation will take place with or without the…

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    • Continued …

      The renewable more energy generation will take place with or without the bit to take over.

      Your best alternative is not a whole sale in this case but to issue new authorized shares and dilute the current one for a 1:5 ratio. What that would do is the new purchase prices off will take on the 1 meaning you only sell 20% of your company at that price.

      What will follow is that as soon as the CDC Group and A P Moller Capital take over your stock at 100%, your current stock price will skyrocket. Next, they will be having a dual listing in London and the company will immediately be worth ten or twenty times what they bought it for.

      Then they will turn around and do a share buy back meaning they will be paying themselves back their seed money of $380 Million and at that…

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    • Continued …

      Then they will turn around and do a share buy back meaning they will be paying themselves back their seed money of $380 Million and at that point, they now own your company using other people’s money and you sold your birthright for a song.

      I advise on such things as an investment banker for a huge fee every day, but here I am give free advice to CEC and its shareholders. You are being taken for a ride. Your company which I must say is the only successful leverage buyout from the privatization era is worth billions.

      The leverage buyout model was supposed to be used for privatizing all parastatal companies during the FTJ term of office, but he refused to use it because he wanted to have access to immediate cash through ZPA which he could lay his corrupt hands on…

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    • Continued …

      The leverage buyout model was supposed to be used for privatizing all parastatal companies during the FTJ term of office, but he refused to use it because he wanted to have access to immediate cash through ZPA which he could lay his corrupt hands on.

      If the rest of the privatization model was done on the CEC premise as earlier advocated by myself those long lonely days of real advocacy, the average smart person of the Zambian Enterprise would have been wealth just like the current shareholders of CEC are.

      This model was going to work for all companies and it is what helped produce the Russian oligarchy with immediate 35 billionaires, during the same time Zambians were being condemned to poverty due to different schools of thought. We should have learned our lessons…

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    • Continued …

      We should have learned our lessons by now.

      Why am I giving you this advice? I care … $380 Million is nothing compared to your company’s real worth. Secondly, Ayatollah’s (HH) fees from the FTJ privatization was estimated at $300 Million in liquidity and yet today his liquidity is only about $75 Million.

      Remember that Ayatollah was one person, but this means all the shareholders get to share $300M. This is peanuts and you actually keep that by issuing more shares and float those to the CDC Group and A P Moller Capital that way you will benefit more later by using the top analogy I gave.

      Another sale of a Zambian owned company to a British Government entity. Remember ZAMOX? F00000LISH FTJ was buy screaming, privatization, privatization, privatization … private…

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    • Continued …

      Another sale of a Zambian owned company to a British Government entity. Remember ZAMOX? F00000LISH FTJ was buy screaming, privatization, privatization, privatization … private hands should control commerce!!!!

      Meanwhile, he sold (Zambia Oxygen, a Zambian Parastatal) ZAMOX to British Oxygen – British Parastatal. Privatization my as************!!!!!!!!

      Zambia Is Greater Than Any Single One Of Us ~ B R Mumba, Sr.

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    • Auto correct pali phone ya shupa … meant to say “… FTJ was “busy” screaming, privatization, privatization, privatization … private hands should control commerce!!!!

      The other part reads “… The renewable more energy generation will take place with or without the “bid” to take over not “bit”

      Ala fingi fi lubene …

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    • @BR Mumba, Sr.. You have really explained the issues…even if some of the things flew over my head at least you confirmed some of the my thoughts: 1) CEC is worth more than the value it has been earmarked to be sold at 2) If we had privatized cautiously, we could have produced our won millionaires to drive our economy- the Russian way 3) despite the privatization that already happened, we can still pick up pieces and start creating ground Zambians to own the economy- however difficult and long it may take.

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  1. This is positive news and represents a vote of confidence in the Zambian economy. I cannot wait for the mandatory offer on the CEC shares which will represent a significant capital gain on my investment in the shares.

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  2. CEC is an example of a good Zambian company coming out of privatization. I thought it would be worth close to a billion dollars.

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  3. If only we were privy to such info regarding govt entities give an example of ZAF land deal or NRDC Proposal no discussion of figures involved.

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  4. This is a good image on CEC but no do not sell. GRZ should instead invest in the company n make it an example to the rest. If sold what then will b our pride as a nation?the company doesn’t make losses… it’s the same mistakes we have made with most of parastatals… and now we are at the mercy of foreign governments. The idea should now even be entertained. Unless they are willing to sell state owned companies in their home countries.

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  5. Selling CEC is the dumbest thing GRZ can do. But as the case has been with other institutions, they probably have already done it.

    Zambia is already on course in developing renewable energy and generating nuclear power.

    It’s unnecessary to sell CEC at this moment. If you sell CEC to the British, I guarantee you efforts already made to develop renewable energy will not go anywhere.

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    • CEC is a private company; GRZ just has a small share in CEC. So your accusation of GRZ is seriously misplaced.

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    • @7.1 Fact, While that is true GOVERNMENT CAN STILL PREVENT THE SALE and possibly BUY THOSE SHARES!! We have seen Preachers or father of liberal economics, the USA PREVENTING sale of American companies to Chinese or Arabs!! So we can if we have a strong willed government!! After all the greater part of CEC money comes from merely supplying electricity that is already produced by ZESCO!! It is now that they are even thinking of generating from renewables, which ZESCO can do many times over given the new tariff, but for the corruption!!

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  6. Don’t sell. In the coming years energy sector will be one of the key strategic assets to own in Africa. You can use it to project political and economic power in any African country you own a significant chunk of it. This is why the UK government wants to buy a significant portion of the CEC shares. Selling CEC shares now is like Zuckerberg selling Facebook six months after creating it. If carefully managed, CEC can be worth Billions of United states dollars in the coming years. Don’t Sell.

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  7. I am surprised the majority of Zambians have no objection to CEC being sold to the British but hell would have broken loose if it was going to be sold to the Chinese. It simply shows how the western world have brain washed us. The western world is running after Chinese investment and at the same time speaking against the third world going for the same investment because they don’t like competition.

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  8. Why sell an entity that is doing well? Once sold, tariffs will go up. Mines are always complaining that electric tariffs are high, they should wait and see.

    We never learn, what have we learnt and gained from selling or placing our resources in private ownership?……more poverty and misery.

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    • CEC is a private company. The owners can do as they please. They may be changing their business model. Who knows but I am sure they are not dull people judging from the successes they have scored with this company.

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  9. CEC isn’t owned by govt. this where bena Sisala, Charles Milupi, Hanson Sindoyi. etc make their butter. The relationship between CEC and Zesco favours Zesco to own it. British partners pulled out earlier because of that. Will these chaps not favour mzungu companies like Glenco, First Quantum, etc when there’s a power deficit? I can smell a big rat

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  10. @1.3 B R Mumba, Sr
    Sometimes its best for one to just shut up other than trying to rave off such vile ignorant verbature! When you buddle assets together, there is always a marriage value that arises, something that falls off is assets are unbundled and disposed off indivitually. If you know that main factors that precipitated the subprime meltdown in the US and other Western economies, you would not come to this site to puke “ifyabupuba, uleke kupusa sure Mumba napapata!”

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  11. A critical question :

    Why does CEC get to act like the cheese between the sandwich ?

    They buy from zesco at cheap price and sell to the mines at higher price.

    Why couldnt Zesco deal directly with the mines as consumers ?

    Here in matero, I dont have to go through a middle man. My electricity account is direct with Zesco.

    This is just a cosy cartel for the middle man to get a cut without doing any work.

    Sure, maybe historically CEC put up tbe distribution network to the mines, but Chiluba should have merged it into Zesco rather than allow a select few individuals to get jam money

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  12. Will this be like ZAMEFA, where foreigners want to buy all the shares and end up gaining total control? Do not kick out Zambian shareholders. If Zambians keep their shares it will be OK. If they are forced to sell it is bad because control, ownership and management will go out of Zambia. The rate of technological development will be dictated by foreigners. People do not care about Zambian development when they don’t live in Zambia period. That is why thousands of Africans are dying in the Mediterranean Sea trying to go to Europe to do menial jobs. There is no job growth in Africa because industries are building capacity in Europe and other countries even if they have operations in Africa. Elect leaders who understand international commerce.

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  13. When you review the forward looking statement on CEC and any statement from CEC Investor Service on the same Do you the transaction to be Overvalued ,Undervalued or Fairly reflecting the assets and future opportunities implied in the offer of Can you give us the estimated analyst
    Price / Book (%), Price / Tangible Book (%), Price / Earnings (x), Price / LTM EPS (x), Book Value ($), Tangible Book ($),Do you know last quarter EPS ($) Can you estimate your own and see the Long-term EPS say forward looking 2018 December .What about the share volumes and activity for CEC does the averages reflect “fair value”
    I am sure CEC Investor Service and this Transaction must be available…

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  14. for public interest explanation and disclosure
    There is no harm in requesting CEC Investor Service to Give further reasoning on the valuation of CEC assets in the transaction to be acquired in generation ,transmission and generation
    Of interest would be what was the value (EPS) for CEC When it was acquired from ZCCM at what value and what is the estimated the return over the investments made ,given the current volume of shares for this value Is the Transaction a fair reflection of CEC assets or whether the transaction is at arm’s length or market forward Looking
    Was the opportunity given to Zesco Vic Malo to Offer and what is it for energy security…

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  15. Thus said ,However I like Sind the Mr CEC and his team should be given the credit for the performance and value added to CEC such that they should be allowed to get value for the Assets The offer though is undervalued should be upped given to value of CEC created and opportunities for the Future in its core businesses

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  16. THIS IS THE IDEA AS IT CAN BE REPLICATED NOT THE ONE IN PARADISE PAPERS FOR WHICH OTHERS CANNOT COPY AND REPLICATE VALUE

    AT LEAST WHEN ONE CAN READ CEC FINANCIALS I CAN SEE THE IDEA TO CREATE VALUE AND SHORT SELL WHEN ITS THAT IS WHAT MR CEC HAS SHOWN US ZAMBIANS SUCH IDEAS THAT HAVE GROWN THE OF K 1.4 PER SHARE IN CEC(UNDERVALUED) CAN BE REPLICATED ANY IDEA THAT IS NOT REFERRED TO AND HAS NO VALUE IS NOT TRUE AND HAS NO VALUE IN UK AS OTHERS CANNOT EARN SUPERIOR RETURNS BY ARBITRAGING THE SAME

    UNLIKE THIS CEC IDEA THAT IDEA IS FAKE BY HH IS FAKE IT HAS NO FAIR VALUE AND IF SUCH IDEA WAS A TRUE IDEA MANY IN UK WILL BE RICHER BY REPLICATION IT’S A FRAUD

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  17. As a consumer, you pay more to Zesco. As a reseller, in this case CEC, they buy at discounted prices (volume discounts) from Zesco. CEC then sells to other companies by adding some markup or percentage profit, meaning they can even undercut Zesco’s price to those companies.
    CEC can undercut Zesco prices if they are clever to have a low cost-base compared to Zesco. They can also lower prices by bundling the power they sell to companies with other products and services. The effective price a company pays for bundled items become much cheaper than buying various items separately. I hop e that’s gives you about of understanding to your question.

    Chipimo 2021

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  18. HH is vindicated now CEC is sold for US$380million, next is Luangwa national park and kafue then NRDC and state house. Privatization has started. I have no technical comment because i dont understand issues of shares

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  19. Normally the Off taker (in this case CEC(formerly) Zccm) manages the risk in power generation development and guarantees capacity for the bulk supply of the generated power He negotiates the tariff that forms part of the Financing or closure unless the individuals can crowd fund and have the bargain to guarantee power and power to develop ad negotiate the price, they may not have the bulk and muscle to purchase like the off taker in typical EPC contracts customers get the spoils its not the discount but embedded and sometimes costly to supply individuals than bulk or PPA driven customers as it were

    So in terms of the role ZCCM or CEC has played in the…

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  20. the development of energy sector or Installed Capacity supply for Zambia, this transaction should be seen in view of what role will it make for power and energy security for Zambia Will it continue at the same pace as CEC or better to add to some Mega watts of in an integrated approach to mix the energies or will they recover to reinvest without additional new capital in those Kilometres of voltage lines and MVAs It should be seen in a broader context than an individual company sell There has to be some compliancy to the broader National energy development Plan and strategic fit as the sector of transaction is one of the sectors that is not easily given…

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  21. to any foreign let alone in telecoms , just like that there has to be some diligence If Zescolo can form an Entity or be allowed some shares together with CDC better even for vertical integration of supply to meet the diverse integrated energy resourcing plans for the country Zambia long-term

    But the owners must be given chance to sell for the value created at a good price to reflect the value of plant and equipment, capacity and contracts not at this undervalued share price

    Abayelo ababako lily kwakazembe

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  22. #15 Mwape, what you should be saying is that Zesco should be sold to CEC, or any other investor. You will see how efficiently it will be run and the benefits to yourself and all other Zambians.

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