Answer to Question #106361 in Financial Math for George Mwila Chola

Question

You have been requested by the shareholders to prepare a detailed report analysing the financial performance and financial position of COPPERBELT ENERGY CORPORATION PLC for the year ended 31st December 2018.

The Annual Report and Accounts for Copperbelt Energy Corporation Plc are on the website(https://cecinvestor.com/cec-2018-annual-report-erratum/).

REQUIRED:


a) Explain in detail what the company owns and what it owes as at 31st December 2018
(15 marks)
b) Explain in detail the changes in what the company owns and what it owes between 31st December 2017 and 31st December 2018 ( 15 marks)
c) Explain why Total equity has reduced from US$343.5m in 2017 to US $373.4m in 2018.
(6 marks)
d) Explain why cash and cash equivalents have increased from US$68.1m in 2017 to US$86.7m in 2018. (10 marks)

Answer 1

a)The company owns the following assets:

• 1,000km of 66kV and 220kV transmission lines
• 1,050MVA regional transmission interconnector
• 6 thermal power generating units with 80MW total capacity
• 183 transformers
• 42 high voltage substations
• 1MW solar PV power plant
• 900,000MT biodiesel generating plant

Total assets on December 31, 2018: 642.070 (In thousands of USD)

Loans as of December 31, 2018 amounted to 53.375 (In thousands of USD)

b) The change occurred in the following positions: (In thousands of USD)

Property, plant and equipment from 437.533 to 441.967

Investments in subsidiaries from 1 to 2

Trade and other receivables from 89.655 to 110.367

Cash and cash equivalents from 68.104 to 86.690

Liabilities (In thousands of USD)

Loans and borrowings 53,375 (December 31, 2018) 59,535 (December 31, 2017)

Customer financed long term payables 21,679 (December 31, 2018) 28,225 (December 31, 2017)

Employee benefits 2,911 (December 31, 2018) 2,907 (December 31, 2017)

Deferred income 13,377 (December 31, 2018) 12,408 (December 31, 2017)

Deferred tax liabilities 73,006 (December 31, 2018) 69,076 (December 31, 2017)

Non-current liabilities 164,348 (December 31, 2018) 172,151 (December 31, 2017)

Current tax liabilities 8,349 (December 31, 2018) 17,783 (December 31, 2017)

Loans and borrowings 6,160 (December 31, 2018) 14,020 (December 31, 2017)

Trade and other payables 89,861 (December 31, 2018) 72,319 (December 31, 2017)

Amounts due to related parties 0 (December 31, 2018) 193 (December 31, 2017)

Current liabilities 104,370 ( December 31, 2018)104,315 (December 31, 2017)

Total liabilities 268,718 (December 31, 2018) 276,466 (December 31, 2017)

c) The increase in total capital was due to the total +29.858

decreas Revaluation reserve 10,208

increase Retained earnings 40.066

d)The increase was due to an increase in bank balances. The Company has no overdraft facility as at reporting date (2017: USD12.5 million with Standard Chartered Bank). The overdraft facility bore interest at the 5.5% above the 1-month USD LIBOR. This indicates a competent financial policy of the company’s managers.

In general, financial indicators indicate the stable operation of the company and its financial stability.