ZCCM Investments Holdings (“ZCCM-IH” or “the Company”) on Monday 6 February 2023 commenced distribution of ZMW85.2 million (USD4.43 million) or ZMW0.53 per share being a total final dividend payable to shareholders for the financial year ended 31 December 2020. This was approved by the company’s shareholders at the 18th Annual General Meeting held on 9th December 2022.

The dividend paid was as a result of a Group profit of ZMW2.1 billion (USD109 million), and a Company profit of ZMW568 million (USD29.5 million) recorded for financial year ended 31 December 2020. A Group profit of ZMW307 million (USD15.98 million) and a Company profit of ZMW153 million (USD7.96 million) were recorded the year prior, representing a 594% and 271% increase in profit respectively.

Profit Recorded at Group Level was on account of a 70% increase in the value of dividends received due to improvements in the performance of investee companies. Additionally, two companies paid dividend during the period, as opposed to the year prior where one dividend payment was received by the Company.

Due to favorable copper prices of USD6,200 per ton recorded in 2020, a 3% increase from the USD6,000 per ton recorded in 2019, investee company share of profit on equity increased by 254% during the period.

Total Group assets also increased with value going from ZMW15.2 billion (USD790 million) in 2019 to ZMW 23.7 billion (USD1.2 billion) by the conclusion of 2020. This 55.9% increase was on account of a 63% increase in investment of associates, and a 219% increase in Cash and Cash equivalents resulting from a receipt of ZMW208 million (USD10.8 million) in dividends in 2020.

Further, the Group recorded a 95% increase in retained earnings during the period under review. This increased from ZMW2.1 billion (USD109 million) in 2019 to ZMW4.2 billion (USD218 million) in 2020.

Profit Recorded at Company Level was attributed to a recorded income of K226 million (USD11.75 million) for the year, a growth of 32% when compared to ZMW171 million (USD8.89 million) recorded the year prior.

With most assets being denominated in USD, some gains achieved were a result of the significant depreciation of the Kwacha against the United States Dollar. The years under review saw an average increase of 40.9% in exchange rate gains, with the average rate increasing from ZMW13.2/USD in 2019 to ZMW18.6/USD in 2020.

Retained earnings at Company level also increased, with ZMW1.5 billion (USD78 million) recorded for 2020 from ZMW978 million (USD50.9 million) recorded the year prior, a 53% increase.

Payment of Dividends by ZCCM-IH to its Shareholders is governed by the Company’s Dividend Policy as amended on 29th March 2018. The ZCCM-IH Dividend Policy stipulates that a minimum of 35% of the unconsolidated Net Profit after Tax (“NPAT”) for any financial year in which a positive unconsolidated NPAT is recorded be paid to its shareholders as dividends.

The ZMW85.2 million (USD4.43 million) dividend paid constitutes 37.7% of NPAT and is the fifth consecutive year reported that the Company has declared a dividend for a return on investment to our shareholders.  

To access the Company’s Strategic Plan, kindly click the following link: https://zccm-ih.financifi.com/download/2018-2023-strategic-plan/ 

Note, all USD conversions are as at the closing rate on 6 February 2023 when dividend payment commenced.

In an effort to diversify its energy mix portfolio, Copperbelt Energy Corporation Plc (“CEC” or “the Company”) commissioned a 33.11MW Solar Photovoltaic Plant (Solar PV Plant) in Kitwe on 15 February 2023. This is an upgrade of its 1.04MW Riverside Solar Photovoltaic Plant.

The solar project is being undertaken by CEC Renewables Ltd, a wholly owned subsidiary by CEC, in which ZCCM Investments Holdings (“ZCCM-IH”) currently holds a 31.03% stake. 

Diversifying the CEC Energy Mix 

CEC’s power energy is heavily reliant on hydro power sourced from ZESCO. This makes up approximately 91.05% of its power since the commissioning of the Solar PV Plant that is largely distributed to the mining firms on the Copperbelt. Owing to its extensive infrastructure, CEC has been the sole supplier of power energy to these mining firms in Kitwe, Luanshya, Mufulira, Chambishi Chingola and Chililabombwe since post privatisation operations commenced in 1997.

CEC’s high dependency on ZESCO for power supply however does put the Company business continuity at high risk. This risk is evidenced by what transpired during the expiration and renegotiating of the Bulk Supply Agreement (“BSA”) between CEC and ZESCO in March 2022. While the BSA has since been renewed for an additional thirteen (13) year period with a clause to safeguard CEC’s operations by granting the Company access to ZESCO transmission infrastructure for domestic wheeling purposes added, the continuity of the BSA was threatened. In addition, ZESCO itself is still heavily reliant (81.5%) on hydro-electric power which is prone to climatic and weather changes.

In view of the above, CEC through its wholly owned subsidiary CEC Renewables Limited has responded by taking the bold step to innovate and investing in renewable sources of energy to diversify the energy mix portfolio in order to avert some of the risks associated with the mono-power source that is largely hydro-based.

The Riverside Solar PV Plant Project

CEC Renewables Limited completed construction of the 33.11MW Solar PV Plant, expanding on an existing 1.04MW Solar PV Plant in Kitwe. The location of the plant was strategic as it is close to existing CEC infrastructure thus simplifying grid connectivity, monitoring and operation, as well as maintenance of the facility. The facility’s current total capacity is now 34.15MW which will be used for domestic wheeling. This is the first major step towards power generation, with CEC now being approximately 8.95% less dependent on ZESCO for power and reducing its operational costs at the same time. 

Future CEC Renewables Projects

In its BSA with ZESCO, CEC has a fixed fee power supply limit of 380MW. The 380MW exceeds CEC’s current demand, however this is anticipated to change in the near future. As such, the Company is targeting to develop an installed capacity of 200MW of renewable energy on the Copperbelt by 2024. To this end, in addition to the Riverside Solar PV Plant, CEC:

Benefits to ZCCM-IH

ZCCM-IH has held a 24.1% stake in CEC in since November 2018. This was increased to 31.03% earlier in the year. The increase is as a result of the confidence in CEC’s business continuity and the projected business growth arising from the expansion into renewable energy that is aimed at delivering maximum shareholder value and return. With the global drive to decarbonisation and net zero, CEC is headed in the right direction to become a leading clean energy producer in Zambia. In addition, CEC has been a consistent dividend payer since 2015 with continuous payments on average of USD22 million per annum to its shareholders.

At an Extraordinary General Meeting (“EGM”) held 31 March 2023, ZCCM Investments Holdings Plc (“ZCCM-IH” or “the Company”) shareholders approved the conversion of the 20% profit-based dividend rights in Kansanshi Mining Plc (“KMP” or “the Mine”) to a 3.1% gross revenue royalty right. This conversion entails that the historically unpredictable dividend rights have been replaced with guaranteed quarterly royalty rights of 3.1% of the Mine’s total revenue to be made over the Life of the Mine (“LoM”).

The estimated life of the mine is at least until 2045, during which the Company’s annual income from KMP is anticipated to be consistent and guaranteed. This is due to royalty income being based on sales of all metal products from the mine licence, as such as long as KMP is producing, ZCCM-IH is guaranteed to receive the royalty from the gross sales. The metals will be sold at obtaining commodity prices.

Dividend Vs. Royalty Structures

Dividends, payable at the discretion of the Board of Directors are a percentage of net annual profits paid out to shareholders based on the percentage of shares held at the time. As is the case with KMP, ZCCM-IH held and continues to hold a 20% stake in KMP (albeit with royalty rights now). This resulted in the Company having limited influence in deciding whether dividends were to be paid for a particular year and how much these would be, which was also dependent on some portion of the revenue being held to fund expansion projects. In addition, dividends are neither consistent, predictable, or even guaranteed.

However, the Company’s royalty income will be charged at 3.1% of the KMP’s total revenue from the sale of Copper, Gold, and all other metal products. These payments take into consideration the S3 Expansion Project currently underway at KMP, and will be made prior to any debt repayments, production costs incurred, or tax obligations being considered. As a result, ZCCM-IH is guaranteed consistent and predictable income paid on a quarterly basis.

20% Dividend Payments Vs. 3.1% Royalty Payments

In addition to ZCCM-IH being guaranteed consistent and predictable income, given prevailing commodity prices and anticipated production at KMP, royalty styled payments also means potentially higher income for ZCCM-IH. For instance, comparing actual dividends received from KMP between 2009 and 2021 which yielded a total income of USD337 million for ZCCM-IH, in the same period if the royalty styled payments of 3.1% were in place, ZCCM-IH would have realised an estimated total income of USD672 million (99.4% more) which is nearly double the income for the Company from KMP.

What Royalties Will Mean for ZCCM-IH and its Shareholders

During the EGM, the ZCCM-IH Board Chairperson Ms. Dolika Banda stated that “the royalty arrangement will give the Company consistent and stable income, and fundamentally, will change the financial health of ZCCM-IH by so doing”.

As detailed in the ZCCM-IH Strategic Plan for years 2020 to 2026 (“Strategic Plan”), the Company will use the KMP royalty income to pursue various key investments encompassing the entire mining value chain. These investments include extensive exploration of critical minerals, through to value addition projects with the ultimate goal of increasing value and return on investment for the Company’s shareholders, and to create national economic success stories for the benefit of all Zambians.

To access the Company’s Strategic Plan, kindly click the following link: https://zccm-ih.financifi.com/download/2018-2023-strategic-plan/