CIRCULAR TO CEC SHAREHOLDERS REGARDING THE OFFER FROM ZAMBIAN TRANSMISSION LLP AND INCORPORATING THE OPINION OF THE INDEPENDENT FINANCIAL ADVISER

Transcription

1 REGARDING THE OFFER FROM ZAMBIAN TRANSMISSION LLP AND INCORPORATING THE OPINION OF THE INDEPENDENT FINANCIAL ADVISER 26 FEBRUARY 2018

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3 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION The definitions and interpretation commencing on page (ix) of this Circular apply throughout this Circular, including this cover page (unless specifically defined where used or the context indicates a contrary intention). Shareholders are referred to pages (v) and 10 of this Circular which set out the action required of them with regard to the Offer, full details of which are set out in this Circular. If you are in any doubt as to the action you should take, please consult your Broker, banker, legal advisor, accountant or other professional advisor. If you have disposed of all your CEC Shares, then this Circular should be forwarded to the broker, banker or agent through whom you disposed of such CEC Shares except that this Circular should not be forwarded or transmitted by you to any person in any territory other than Zambia, unless the Circular can lawfully be distributed to such person or in such territory. Incorporated in the Republic of Zambia, Company Registration Number: Share Code: CEC ISIN: ZM ( CEC or the Company ) CIRCULAR TO CEC SHAREHOLDERS regarding THE OFFER FROM ZAMBIAN TRANSMISSION LLP and incorporating THE OPINION OF THE INDEPENDENT FINANCIAL ADVISER Sponsoring Broker: Independent Financial Adviser: Legal Advisor: Corpus Legal Practitioners Transfer Agent: Corpserve Transfer Agents Limited 26 FEBRUARY 2018

4 IMPORTANT LEGAL NOTES Disclaimer CEC accepts responsibility for the information contained in this Circular, has taken all reasonable care to ensure that this Circular is true and correct in all material respects, does not contain any untrue statement of a material fact, is not misleading and does not omit to state any material fact, the result of which would make the statements, opinions and intentions herein, in the context in which they are made, misleading in any material respect. SBZ, the Sponsoring Broker, and Corpus Legal Practitioners, the Legal Adviser, have not separately verified the information contained in this Circular. Accordingly, no representation, warranty or undertaking, express or implied is made and no responsibility is accepted by the Sponsoring Broker and the Legal Adviser as to the accuracy or completeness of the information contained in this Circular or any other information provided by CEC. The Sponsoring Broker and the Legal Adviser do not accept any liability in relation to the information contained in this Circular or any other information provided by CEC in connection with the Offer. The statements made in this paragraph are without prejudice to the responsibilities of CEC. No person has been authorised by CEC to give any information or to make any representation not contained in or not consistent with this Circular and, if given or made, such information or representation must not be relied upon as having been authorised by CEC or the Sponsoring Broker and the Legal Adviser. Neither the delivery of this Circular nor any subscription made in connection herewith shall, under any circumstances, create any implication that there has been no change in the affairs of CEC since the date hereof, or that any other financial statement or other information supplied in connection with the Circular is correct at any time subsequent to the date indicated in the document containing the same. Forward-looking Statements This Circular includes certain forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements, including, without limitation those concerning: CEC s strategy; expected or future financial results, growth prospects and outlook of CEC s operations, individually or in the aggregate; outlook for the industry; Zambian economy; CEC s liquidity and financial position. These forward-looking statements are not based on historical facts, but rather reflect CEC s current expectations concerning future results and events and generally may be identified by the use of forwardlooking words or phrases such as believe, aim, expect, anticipate, intend, foresee, forecast, likely, should, planned, may, estimated, potential, will, will likely result, will continue or similar words and phrases. Similarly, statements that describe CEC s objectives, plans or goals are or may be forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause CEC s actual results, performance or achievements to differ materially from the anticipated results, performance or achievements expressed or implied by these forward-looking statements. Although CEC believes that the expectations reflected in these forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. CEC Shareholders should review carefully all information included in this Circular. The forward-looking statements included in this Circular are made only as of the Last Practicable Date. The delivery of this Circular does not at any time imply that the information contained herein is correct at any time subsequent to the Last Practicable Date or that any other information supplied in connection with this Circular is correct as of any time subsequent to the date indicated in the document containing the same. CEC undertakes no obligation to update (whether publicly or otherwise) or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Circular or to reflect the occurrence of unanticipated events. All forward-looking statements in this Circular and all subsequent written and oral forward-looking statements attributable to CEC or any person acting on its behalf have not been reviewed and reported on by CEC s auditors. ii

5 Publication on website A copy of this Circular will be available on CEC s website at by no later than 12 noon on the Business Day following the date of this Circular. iii

6 IMPORTANT DATES Shareholders must please refer to and take note of the Important Dates and Times Section of the Offer Document from Zambian Transmission LLP Firm Intention Announcement released on LuSE SENS 30 January 2018 Firm Intention Announcement published in the press 31 January 2018 Offer Document from Zambian Transmission LLP posted to CEC Shareholders 19 February 2018 Circular posted to CEC Shareholders 26 February 2018 Notice of posting of this Circular released on LuSE SENS 27 February 2018 Offer to CEC Shareholders opens at 08:00 20 February 2018 Last date that the Offer can be declared unconditional 20 April 2018 Last Day to Trade in order to be eligible to accept the Offer 17 April 2018 Shares trade ex the Offer from commencement to trade 18 April 2018 Record date, being the final date upon which CEC Shareholders must be recorded in the register in order to be eligible to accept the Offer 20 April 2018 Offer to CEC Shareholders closes at 13:00 20 April 2018 Last day for receipt of postal acceptances, postmarked on or before Friday 20 April 2018 to be received by 13:00 20 April 2018 Date on which share transfers will be traded on the LuSE (T+0) 30 April 2018 Settlement Date (T+3) 03 May 2018 Offer Price available for collection 04 May 2018 Results of the Offer released on LuSE SENS 07 May 2018 Results of the Offer published in the press 08 May 2018 Notes: 1. The above dates and times are based on information contained in the Zambian Transmission Offer Document. The above dates and times are subject to amendment at the discretion of the Offeror, which discretion includes the ability to extend the Closing Date of the Offer, subject to the prior written approval of the LuSE and the SEC being obtained, any change will be released on the LuSE SENS and will be published in the Zambian press. 2. The abovementioned dates and times are Zambian dates and times. All references to days are to Business Days. 3. Payment of the Offer Price will be made within 10 Business Days of the Closing of the Offer. 4. Although the salient dates and times are subject to change, such statement may not be regarded as consent or dispensation for any change to the time period which may be required in terms of the Takeovers Rules, where applicable, and any such consent or dispensation must be specifically applied for and approved by the LuSE and the SEC. iv

7 ACTION REQUIRED BY SHAREHOLDERS The definitions commencing on page (ix) of this Circular apply to this section. THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. PLEASE TAKE CAREFUL NOTE OF THE FOLLOWING PROVISIONS REGARDING THE ACTIONS REQUIRED BY SHAREHOLDERS. If you have disposed of all your CEC Shares, then this Circular should be forwarded to the broker, banker or agent through whom you disposed of such CEC Shares except that this Circular should not be forwarded or transmitted by you to any person in any territory other than Zambia, unless the Circular can lawfully be distributed to such person or in such territory. CEC does not accept responsibility and will not be held liable for any act of, or omission by, any Custodian or Broker, including, without limitation, any failure on the part of the Custodian or Broker or any registered holder of CEC Shares to notify the holder of any beneficial interest in those CEC Shares of the Offer set out in the Offer Document and in this Circular. OFFER The options available to CEC Shareholders are: - to accept the Offer in respect of all your shares; - to accept the Offer in respect of part of your shares; or - to reject the Offer. If you wish to reject the Offer, you do not need to take any further action. If you wish to accept the Offer, you must do so in the manner prescribed in the Offer Document from Zambian Transmission LLP. v

8 CORPORATE INFORMATION Directors Mr. Hanson Sindowe (Chairman) Mr. Munakupya Hantuba (Vice Chairman) Mr. Michael J. Tarney Brigadier-General Emelda Chola Mr. Reynolds Bowa Mr. Abel Mkandawire Dr. Sixtus C. Mulenga Mr. Ronald Tamale Mr. Joe M. Chisanga Mr. Taimoor Labib Ms. Mildred T. Kaunda Mr. Owen Silavwe (Executive) Company Secretary and Registered Office Julia C Z Chaila Stand 3614, 23rd Avenue Nkana East (PO Box 20819, Kitwe, Zambia) Date of Incorporation 19 September 1997 Place of incorporation Zambia Sponsoring Broker Stockbrokers Zambia Limited 32 Lubu Road Long Acres (P O Box 38956, Lusaka, Zambia) Independent Financial Adviser Deloitte and Touche Abacus Square, Stand 2374/B Thabo Mbeki Road Lusaka Legal Adviser Corpus Legal Practitioners Ground Floor, Elunda Office Park, Elunda II Addis Ababa Roundabout (P O Box 32115, Lusaka, Zambia) Transfer Secretary Corpserve Transfer Agents Limited No. 6 Mwaleshi Road Olympia Park (PO Box 37522, Lusaka, Zambia) vi

9 TABLE OF CONTENTS IMPORTANT LEGAL NOTES...II DISCLAIMER...II FORWARD-LOOKING STATEMENTS...II PUBLICATION ON WEBSITE...III IMPORTANT DATES...IV ACTION REQUIRED BY SHAREHOLDERS...V CORPORATE INFORMATION...VI TABLE OF CONTENTS...VII DEFINITIONS...IX BACKGROUND TO THE OFFER AND RECOMMENDATION INTRODUCTION PURPOSE OF THIS CIRCULAR DETAILS OF CEC DETAILS OF THE OFFEROR RATIONALE FOR THE OFFER DETAILS OF THE OFFER CONDITIONS OF THE OFFER EFFECT OF THE CONDITIONS ON OFFER IRREVOCABLE UNDERTAKINGS AGREEMENTS IN RELATION TO THE OFFER CAPACITY OF THE OFFEROR TO IMPLEMENT THE OFFER OFFEROR S STRATEGIC PLANS FOR CEC EFFECTS OF THE OFFER ON THE COMPANY S LUSE LISTING CEC CURRENT TRADING AND FUTURE PROSPECTS TAX IMPLICATIONS OF THE OFFER FINANCIAL INFORMATION SHARE CAPITAL INFORMATION...7 vii

10 18. SHAREHOLDING OF CEC INTERESTS OF DIRECTORS OF CEC IN CEC SHARES EXPERTS CONSENT THE ICB ANALYSIS OF THE OFFER DIRECTORS VIEW ON THE OFFER RECOMMENDATION BY THE ICB DIRECTORS RESPONSIBILITY STATEMENT COSTS OF THE OFFER ACTION TO BE TAKEN BY CEC SHAREHOLDERS DOCUMENTS AVAILABLE FOR INSPECTION...11 ANNEXURE A FAIR AND REASONABLE OPINION...12 ANNEXURE B CEC SHARE PRICE INFORMATION...16 viii

11 DEFINITIONS The following definitions apply throughout this Circular, unless otherwise stated or the context requires otherwise. In this Circular, unless otherwise indicated, the words or phrases in the left-hand column bear the meaning stipulated in the right-hand column. Words in the singular shall include the plural and vice versa, words importing natural persons shall include juristic persons (whether corporate or unincorporated and vice versa) and words in the masculine shall import both the feminine and neuter. APMC Binding Offer Letter Board Broker Bulk Supply Agreement Business Day Cautionary Announcement CDC CEC or the Company CEC Group or the Group CEC Liquid Telecom CEC Shareholders Africa Infrastructure Fund I K/S, acting by its general partner, Africa Infrastructure Fund I GP ApS; the letter dated 23 January 2018 submitted to the Board by the Offeror containing the firm intention to make a binding offer for all of the ordinary shares of CEC Plc; the Board of Directors of CEC; any person registered as a broking member (equities) in terms of the Rules of the LuSE made in accordance with the provisions of the Securities Act; the bulk supply agreement dated 21 November 1997 between ZESCO and CEC, as amended by: (i) the first amendment to the Bulk Supply Agreement dated 31 March 2000, (ii) the Second amendment to the Bulk Supply Agreement dated 9 February 2001 and (iii) the third amendment to the Bulk Supply Agreement dated 22 August 2002, each amendment made between the parties to the Bulk Supply Agreement; any day of the week, excluding Saturdays, Sundays and all official Zambian public holidays; the announcement published by CEC on 03 October 2017; CDC Group Plc, a public limited company incorporated in England with company number ; Copperbelt Energy Corporation Plc, a public company incorporated in accordance with the laws of Zambia and listed on the LuSE with company registration number ; CEC and its subsidiaries, as defined under the Companies Act; CEC Liquid Telecommunication Limited a company incorporated under the Companies Act with registration number ; registered holders of CEC Shares; CEC Shares ordinary shares in the capital of CEC with a par value of ZMW 0.01; Circular Closing Date Closing Price COMESA or Common Market this circular to CEC Shareholders dated 26 February 2018 regarding the Offer from Zambian Transmission LLP; the date on which the Offer closes for acceptance by CEC Shareholders, in accordance with the terms of the Offer; the closing or middle market quotation of a CEC Share as reported by the LuSE as at the Last Practicable Date; Common Market for Eastern and Southern Africa; ix

12 Companies Act Conditions Directors Dividend Effective Offer Price Firm Intention Announcement Form of Acceptance Golden Share Hai ICB Independent Financial Adviser Last Practicable Day Legal Adviser LuSE LuSE CSD LuSE SENS the Companies Act, Chapter 388 of the Laws of Zambia; the conditions set out in the Offer Document and summarised in section 7 on page 3 of this Circular and the conditions in the Form of Acceptance; the Directors appointed by the Board by a resolution at a meeting on 1 February 2018 to constitute the ICB of CEC; the dividend in respect of the CEC Shares of US$0.016 or ZMW per CEC Share approved by the directors of CEC on 25 January 2018 and announced by CEC on 29 January 2018 for payment to CEC Shareholders recorded on the register on Friday, 2 March 2018; the effective cash consideration of US$ following the adjustment resulting from the deduction of the Dividend per CEC Share from the Offer Price as described in paragraph 2 of Part III of the Offer Document and payable by the Offeror for each CEC Share disposed of by CEC Shareholders in terms of the Offer; the announcement issued by CEC and released on the LuSE SENS on 30 January 2018 and published in the press on 31 January 2018 setting out the terms of a firm intention by Zambian Transmissions LLP to make a binding offer for all the ordinary shares of CEC; the form of acceptance and authority relating to the Offer for use by CEC Shareholders which will be sent by the Offeror to CEC Shareholders with the Offer Document; a share in CEC Plc that may only be issued to, held by or transferred to the Minister of Finance in Zambia or his successor or nominee on his behalf, or other person acting on behalf of the Government of the Republic Zambia; Hai Telecommunications Limited a company incorporated under the Companies Act with registration number 46358; the independent committee of the Board constituted pursuant to the Takeover Rules comprising of Dr. Sixtus C. Mulenga, Mr. Joe M. Chisanga and Mr. Owen Silavwe; the independent financial adviser to the ICB with respect to the Offer, being Deloitte & Touche; Wednesday, 14 February 2018, being the last practicable date prior to the finalisation of this Circular; the legal adviser to the ICB with respect to the Offer, being Messrs Corpus Legal Practitioners; the Lusaka Securities Exchange Plc, a company incorporated in Zambia with registration number and licensed to operate a stock exchange under the Securities Act; the LuSE Central Shares Depository Limited, a company incorporated in Zambia with registration number and licensed to operate the central depository and serve as custodian of the LuSE tradeable securities and to hold such securities in electronic form on behalf of the beneficial owners; the stock exchange news service of the LuSE; x

13 Merger Control Clearance Offer Offer Price Offer Document Offer Period Offeror SBZ SEC Securities Act Takeover Rules Transaction UK USD Zambia ZECI ZECI Bonds ZESCO ZMW clearance from the COMESA Competition Commission for the Transaction or any other relevant clearance required under applicable merger control laws, or clearance deemed to have been obtained by applicable law (e.g. by lapse of waiting periods or declined jurisdiction); the cash offer by the Offeror to acquire all of the CEC shares described in the Offer Document on the terms and subject to the Conditions to be set out in the Offer Document and in the Form of Acceptance and where the context so arises, any subsequent revision, variation, extension or renewal thereof; the price of US$ per CEC Share as set out in paragraph 2 of Part III of the Offer Document, subject to the adjustment as described in paragraph 2 of Part III and paragraph 5.16 of Section B of Part IV of the Offer Document; the formal offer document to be sent by the Offeror to the CEC Shareholders in accordance with the Takeover Rules; the period from Tuesday 20 February 2018 until whichever of the following dates is the later: (a) 1:00pm on 20 April 2018; (b) the date on which the Offer is declared to have lapsed or been withdrawn; or (c) the Unconditional Date; Zambian Transmission LLP, a limited liability partnership incorporated in England with partnership number OC420634; Stockbrokers Zambia Limited a company incorporated in Zambia (registration number ), a member of the LuSE and licensed by the Securities and Exchange Commission as a dealer and sponsoring broker to the Company; the Securities and Exchange Commission Zambia, a statutory body established under the Securities Act; the Securities Act No. 41 of 2016 of Zambia; the Securities (Takeover and Mergers) Rules Statutory Instrument No. 170 of 1993; the transaction contemplated by the Offer as described in the Offer Document; United Kingdom of Great Britain and Northern Ireland; the lawful currency of the United States of America; the Republic of Zambia; Zambian Energy Corporation (Ireland) Limited, a company incorporated in Ireland with company number ; the non-callable exchangeable bond issued by ZECI on 6 March 2014 and as amended and restated on 21 November 2014 with a maturity date of 5 March 2019, and the non-callable exchangeable bond issued by ZECI on 21 November 2014 also with a maturity date of 5 March 2019, each of which are exchangeable into CEC Shares; ZESCO Limited, a private limited company incorporated under the Companies Act with registration number ; and the lawful currency of the Republic of Zambia. xi

14 BACKGROUND TO THE OFFER AND RECOMMENDATION 1. INTRODUCTION In the Firm Intention Announcement released on the SENS on 30 January 2018 and published in the press on 31 January 2018, CEC Shareholders were advised of the Binding Offer Letter received from the Offeror expressing the Offeror s intention to make an Offer to purchase all of the ordinary shares in the capital of CEC for a cash Offer Price of US$ per CEC Share, subject to adjustment. Following receipt of the Binding Offer Letter by the Board, at a meeting of the Board held on 1 February 2018, the Board pursuant to the Takeover Rules appointed the ICB to discharge the duties of the Board in relation to the Offer. The ICB is required upon receipt of the Binding Offer Letter, to consider the Offer and provide CEC Shareholders with its opinion and recommendation regarding the Offer having, inter alia, obtained and given due consideration to the fair and reasonable opinion of the Independent Financial Adviser. The Offeror has sent an Offer Document to CEC Shareholders which sets out details of the Offer and the Offeror, the rationale for the Offer and the strategic intent of the Offeror on completion of the Offer. This Circular sets out a summary of the Offer to the CEC Shareholders and the ICB s recommendations regarding the Offer and the action to be taken by Shareholders. 2. PURPOSE OF THIS CIRCULAR The purpose of this Circular is to provide CEC Shareholders with relevant information regarding the Offer, including, inter alia, the fair and reasonable opinion of the Independent Financial Adviser, in accordance with Rule 5 (1) of the Third Schedule of the Takeover Rules; the ICB s views regarding the Offer and the Offer Price and its opinion on the Offer Price, having inter alia, obtained and given due consideration to the fair and reasonable opinion of the Independent Financial Adviser. For a full understanding of the terms and conditions of the Offer, this Circular should be read in conjunction with the Offer Document from Zambian Transmission LLP. 3. DETAILS OF CEC 3.1 General CEC is an independent power transmission and distribution company with core operations in Zambia. The Company operates and maintains power transmission, distribution and generation assets. CEC owns and operates approximately 1,000km of 220kV and 66kV transmission lines, about 700km of optical ground wire, 42 major substations and 80MW of embedded gas turbine generation. The Company accounts for approximately 50 per cent of Zambia s electrical energy consumption. CEC is a key supplier of power to Zambia s Copperbelt Province through long term power supply agreements with mining companies and provides transmission services to the national utility, ZESCO. The Company s services include generation backup services to its mining customers. In this regard, CEC owns and operates 80MW of generation capacity which is also used for peaking purposes. The Company has over 60 years of experience in supplying power to the mines and is a member of the Southern African Power Pool. Over the last 6 years, the Company has added to its service offering the power trading segment through which it supplies power to its mining customers in the Democratic Republic of Congo. 1

15 In March 2011, the Company expanded its business to include investments in telecommunications through a 50 per cent joint venture in CEC Liquid Telecom, which has a wholly owned subsidiary, Hai (formerly Realtime). CEC has been listed on the Lusaka Securities Exchange since January Subsidiaries CEC Liquid Telecom (Joint Venture between CEC and Liquid Telecommunications Holdings Limited) CEC Liquid Telecom is a 50:50 joint venture partnership between CEC and Liquid Telecommunications Holdings Limited. CEC Liquid Telecom provides wholesale telecommunications services in Zambia. Headquartered in Lusaka, CEC Liquid Telecom owns and operates a national long haul broadband fibre-based backbone from Chirundu to Kasumbalesa as well as a new long haul broadband fibre from Lusaka to Livingstone and Livingstone to Sesheke. CEC Liquid Telecom also has fibre rings in most major towns and provincial capitals in Zambia. The company provides competitive high-quality products and services through the wholesale of national and international fibre bandwidth. CEC Liquid Telecom has become the preferred wholesale broadband connectivity company in Zambia. In 2016, CEC Liquid Telecom acquired a licence which allows it to provide services to the retail market and the focus in the near term is to roll out products that will facilitate the provision of reliable connectivity to the retail market while retaining its core provision of services to the wholesale market. Hai Hai is a 100 per cent subsidiary of CEC Liquid Telecom, focused on providing internet services to a niche market of corporate and retail customers. Its core business is the provision of high speed internet services, private leased circuits using optic fibre technology and internet over radio technology. The focus of this business is to drive internet content delivery which drives internet usage and to increase internet penetration in the country. 4. DETAILS OF THE OFFEROR The Offeror is a limited liability partnership incorporated under the Laws of England and is currently wholly owned by CDC. It has entered into a binding equity commitment letter with APMC pursuant to which APMC has agreed, subject to valid acceptances being received by the Offeror in respect of 50 per cent of the CEC Shares and the Offer becoming unconditional, to provide a fixed amount of capital which will result in it having a minority interest in the Offeror. Pursuant to the members agreement in relation to the Offeror, CDC will retain management and voting control of the Offeror. CDC is the United Kingdom s development finance institution and is wholly owned by the UK Government Department for International Development. CDC is a development finance institution with a near 70-year heritage of making successful investments and supporting the building of businesses throughout Africa to create jobs and make a lasting difference to people s lives. CDC is managed via an independent private sector board and professional management team. CDC has total assets worth USD6.0 billion as at 31 December 2016 and has a specific mandate to invest equity and debt in infrastructure assets across Africa. CDC has a priority to invest in economic development first, and is a long-term investor that seeks to maximise development impact via private sector investment. APMC is an alternative investment fund domiciled in Denmark with the purpose of creating and enabling opportunities through investments in African infrastructure. APMC was launched in August 2017 with a total fund commitment of USD650 million. It is backed by a selection of blue chip Danish institutional investors. Fundraising is ongoing, and APMC has an initial target of 10 to 15 investments, and an operating period of 10 years. APMC s sector focus is on energy (power generation and transmission, oil and gas mid-stream and refineries) and transportation (rail, roads, ports and storage). 2

16 5. RATIONALE FOR THE OFFER As part of its rationale for the Offer set out in paragraph 4 of Part III of the Offer Document, CEC is viewed by the Offeror as a well-regarded company with a strong capable Zambian team at the helm. The Offeror believes that the Zambian energy sector is one of the most well developed in Africa and has evolved and reformed considerably over the last ten years to enhance its long-term sustainability. The legislative and regulatory framework governing the energy sector encourages private investment. The Offeror intends to take advantage of and capitalise on the investor-friendly environment in order to support CEC management provide reliable power to its existing customers and expand the Company s activities. CDC and APMC believe that they have the requisite expertise to support CEC s management achieve its goals and enhance shareholder value over the long term through improved efficiencies, performance, increased market share and greater diversification. 6. DETAILS OF THE OFFER Subject to the Terms and Conditions outlined in this Circular, the Offeror is offering to acquire all the issued shares in the capital of CEC at the Offer Price, subject to adjustment. Based on the Offer Price, the issued ordinary share capital of CEC is valued at approximately USD380 million or ZMW3.678billion. The exchange rate (based on the average bid rate as at the close of business on 29 January 2018 published by Stanbic Bank Zambia Limited as provided by the Offeror) being US$1: ZMW In accordance with paragraph 2 of Part III of the Offer Document, the Offer Price is to be adjusted by the deduction of the Dividend from the Offer Price of US$ per CEC Share giving rise to an Effective Offer Price of US$ per CEC Share. The Offer extends to any CEC Shares not already owned, or agreed to be acquired, by the Offeror and which are unconditionally allotted or issued and fully paid (or credited as fully paid) on or before the Closing Date. The Offer is being implemented by way of a takeover offer in accordance with the Securities Act and the Takeover Rules, however, it will only become effective once all the Conditions of the Offer have been satisfied or where, applicable, waived by the Offeror. 7. CONDITIONS OF THE OFFER The Offer is being made subject to the following Conditions: (a) (b) (c) (d) valid acceptances to the Offer being received amounting to more than 50 per cent of the voting rights normally exercisable at general meetings by CEC Shareholders for this purpose (to the extent, if any, required by the SEC) any such voting rights attaching to any CEC Shares that are unconditionally allotted or issued before the Offer becomes or is declared unconditional as to acceptances, whether pursuant to the exercise of any subscription rights, conversion rights or otherwise; the COMESA Competition Commission granting its unconditional approval or deemed to have granted its approval (by the lapse of the applicable waiting period) of the Offer; all necessary filings have been made in respect of the Offer to, and all required authorisations, orders, grants, recognitions, confirmations, consents, clearances, licenses, permissions, exemptions and approvals necessary, appropriate or required in respect of the Offer from the Energy Regulation Board of Zambia in relation to CEC s transmission license, electricity supply license and electricity generation license; the unconditional consent of Stanbic Bank Zambia Limited (as Mandated Lead Arranger and 3

17 Security Trustee), the Standard Bank of South Africa Limited (as Facility Agent), Standard Chartered Bank, Citibank International Plc, Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden NV, DEG- Deutsche Investition- und Entwicklungsgeselschaft mbh and Societe de Promotion et de Participation pour la Cooperation Economique SA to the acquisition of a controlling interest in CEC by the Offeror pursuant to Clause 7.2 of the Common Terms Agreement between the parties to require the repayment of amounts accrued as a result of such acquisition, on terms and in a form satisfactory to the Offeror; (e) (f) (g) (h) the Consent of ZESCO pursuant to Clause 28(b)(ii)(c) of the Bulk Supply Agreement to any Change of Control (as defined in the Bulk Supply Agreement) of CEC resulting from the Offer and the waiver by ZESCO of its right to terminate the Bulk Supply Agreement as a result of such Change of Control, on terms and in a form satisfactory to the Offeror; the Consent of the Minister of Finance of Zambia as holder of the Golden Share to any change of control of CEC resulting from the Offer in accordance with the constitutional documents of CEC, on terms and in a form satisfactory to the Offeror; the execution by CEC and ZESCO of an unconditional and irrevocable amendment to the Bulk Supply Agreement which provides for the extension of the term of the Bulk Supply Agreement for an additional period of 20 years on commercial terms which are no less advantageous to CEC than the existing terms of the Bulk Supply Agreement in a form on terms satisfactory to the Offeror; and all necessary filings having been made in respect of the Offer and all required authorisations, orders, grants, recognitions, confirmations, consents, clearances, licenses, permissions, exemptions and approvals necessary or appropriate or required for or in respect of the Offer, including, without limitation, its implementation and financing or the proposed acquisition of any shares in, or control or CEC to the Offeror from all appropriate governments, governments, governmental, quasi-governmental, supranational, statutory or regulatory, or investigative bodies, trade agencies, professional bodies, associations, institutions environmental bodies and courts, and from persons or bodies with whom any member of the CEC Group has entered into contractual arrangements, where absence of such would have an adverse effect on the Offeror or the CEC Group as the case may be and all such authorisations, orders, grants, recognitions, confirmations, consents, clearances, licenses, permissions, exemptions and approvals remaining in full force and effect at the time at which the Offer becomes otherwise unconditional in all respects and no intimation or notice of any intention to revoke, suspend, restrict, modify or not renew any of the same having been received and all necessary filings having been made and all appropriate waiting periods (including any extension thereof) under any applicable legislation and regulations in any jurisdiction having expired, lapsed or ben terminated, in each case as may be necessary in connection with the Offer under the laws or regulations of any jurisdiction and all necessary statutory or regulatory obligations in any jurisdiction having been complied with. 8. EFFECT OF THE CONDITIONS ON OFFER If the Conditions are not satisfied or waived by the Offeror on or before the Closing Date or such later date as the SEC may agree, the Offer will lapse. 9. IRREVOCABLE UNDERTAKINGS The Offeror has received an irrevocable undertaking to accept, or procure the acceptance of the Offer from Standard Chartered Private Equity Limited and Marina IV (Singapore) Pte. Ltd, as holders of the ZECI Bonds, in respect of 562,888,648 CEC Shares (representing approximately 34.6 per cent of the CEC Shares in issue as at the Last Practicable Date). These CEC Shares are currently held by ZECI, and the undertaking is subject to ZECI not exercising its option to settle the ZECI Bonds in cash upon the exercise of the exchange rights in accordance with the provisions of the ZECI Bonds. 4

18 Should the Offer lapse or fail to become unconditional, Standard Chartered Private Equity Limited and Marina IV (Singapore) Pte. Ltd have granted the Offeror an option to purchase their CEC Shares, following the exchange of the ZECI Bonds for CEC shares, at the Offer Price. The Offeror has also received an irrevocable undertaking not to accept the Offer from ZCCM Investment Holdings PLC in respect of 325,000,000 CEC Shares (representing approximately 20.0 per cent of the CEC Shares in issue as at the Last Practicable Date). Dealings by irrevocably committed person(s) in CEC Shares As far as the Company is aware having made due enquiry from the Transfer Agent, neither Standard Chartered Private Equity Limited and Marina IV (Singapore) Pte. Ltd nor ZCCM Investment Holdings PLC have dealt in CEC Shares during the period beginning 6 (six) months before the Offeror s due diligence process and ending on the Last Practicable Date. 10. AGREEMENTS IN RELATION TO THE OFFER No agreement exists between CEC and any CEC Shareholders which could be considered material to a decision regarding the Offer to be taken by CEC Shareholders. As at the Last Practicable Date, no other agreements have been entered into between CEC and any of the directors of CEC or CEC Shareholders in relation to the Offer. 11. CAPACITY OF THE OFFEROR TO IMPLEMENT THE OFFER Full acceptance of the Offer (other than by those CEC Shareholders who have irrevocably undertaken not to accept the Offer) will result in the payment by the Offeror of approximately US$304 million in cash to the CEC Shareholder. The cash consideration payable to the CEC Shareholders under the terms of the Offer will be funded by way of capital contributions to the Offeror from CDC and APMC. CDC has incorporated the Offeror in order to facilitate the acquisition of the CEC Shares. CDC and APMC have entered into legally binding commitments with the Offeror to enable it satisfy, in full, the cash consideration payable to CEC Shareholders under the terms of the Offer (other than by those CEC Shareholders who have irrevocably undertaken not to accept the Offer). CDC and APMC have each provided confirmation to Pangaea Securities Limited, as transaction adviser to CDC and the Offeror, that they have the requisite funds to contribute to the capitalisation of the Offeror and that they have satisfied all of their internal processes in order to make such contributions subject to the Offer becoming unconditional. CDC and APMC have also provided confirmation from their primary bankers that they are existing clients and remain in good standing. 12. OFFEROR S STRATEGIC PLANS FOR CEC If acceptances of the Offer are received in respect of the CEC Shares representing more than 60 per cent of the CEC Shares, the Offeror may seek to syndicate its investment, either by entering into arrangements for the sale of certain of the CEC Shares following settlement of the Offer, or by obtaining additional equity and/or debt investment in the Offeror. These arrangements will not affect the ability of CEC Shareholders to accept the Offer or the Offer Price payable to CEC Shareholders. The Offeror intends to continue the business of CEC, including supporting CEC s current activities. The Offeror attaches great importance to the skills and experience of the existing management and employees of CEC and hopes that they will play an important part in the successful implementation of its plans for CEC. The Offeror intends to retain and build on CEC s highly talented operational management and employees to support the continued development and expansion of CEC s business. 5

19 If the Offer becomes or is declared unconditional in all respects, the existing employment rights of the management and employees of CEC will be fully safeguarded in accordance with statutory and contractual requirements. The Offeror intends to support the existing business of CEC in Zambia and support management s efforts to expand CEC s regional power trading efforts, harnessing CEC s strategic position and infrastructure. In addition, the Offeror intends to support the development and integration of least-cost power by CEC. 13. EFFECTS OF THE OFFER ON THE COMPANY S LUSE LISTING If the Offer becomes, or is declared unconditional in all respects, the Offeror intends to keep the Company listed on the LuSE, provided it is in full compliance with the requirements of the LuSE, the Companies Act and the Securities Act. 14. CEC CURRENT TRADING AND FUTURE PROSPECTS The business has been profitable for a number of years and further seeks to continue its positive growth trajectory through focused investments and growth opportunities, with a focus on developing its key markets in Zambia and the rest of Southern Africa. The Company is well placed to benefit from the anticipated growth in the mining sector on the Copperbelt in Zambia and the Katanga region of the Democratic Republic of Congo (DRC), both of whom are implementing expansion projects, which will require additional power supply. The strategy for the business will be focused on projects on the supply and demand sides that are aligned and supportive of the growth in the core business. This requires the Company to continue its efforts of putting in place a multiple power sourcing strategy that integrates third party power sources with a small proportion of its own sources. Harnessing and integrating technological improvements in renewables, especially grid-scale projects, forms a critical part of the Company s future. Where appropriate, the Company will evaluate its role and potential to add value by participating in off-grid solutions. From a market perspective, Zambia remains a top priority for the Company and it continues to evaluate opportunities to expand its participation and value addition in this market. On a regional level power trading, which offers a great opportunity for further growth, has become an integral part of the business. In this regard, the Company will focus on nurturing the opportunity to grow its participation in power trading and play a role in unlocking regional transmission infrastructure to help deepen the regional market and support firmer power trades. CEC s level of participation in power trades will reflect the Company s risk appetite. The Company s ability to integrate a number of power sources to provide a secure and reliable service will continue to define our service offering. The strategic focus is around having a rational and robust methodology of allocating capital to new projects with the aim of enhancing shareholder value. CEC seeks to be a strategic partner in private power projects or publicprivate partnership power projects within the region that align with its core business enabling CEC to create value for all stakeholders. The Company continues to build a robust pipeline of power projects across Zambia, including its 40MW Kabompo Gorge Hydro power Project in Zambia s North-Western Province and grid scale solar projects. Other prospects in Zambia include possible hydro generation projects on the Luapula River. CEC aims to develop projects in a viable manner while achieving an appropriate risk allocation among the various parties. CEC has the critical skills required to developing power infrastructure in Zambia and the region. The Telecoms business has been expanding its market share in the wholesale and retail segments. The Company has over the last two years created value and become profitable with good prospects for further growth. However, it is important that CEC, being primarily a power business, continuously evolves its strategy around its continued investment in the telecoms business going forward. Telecoms businesses around the world are generally adopting strategies that have a high focus on provision of 6

20 content as a driver for bandwidth growth. CEC Shareholders are referred to the cautionary announcement issued on 19 February TAX IMPLICATIONS OF THE OFFER There is no capital gains or property transfer tax payable on the sale of listed securities in Zambia. Proceeds from the sale of the CEC Shares, however, may be taxed in the hands of the recipient. CEC Shareholders who sell some or all of their shares in this Offer should consult with their accountant, tax adviser or other professional adviser on any tax liability. 16. FINANCIAL INFORMATION 16.1 Historical financial information The consolidated annual financial statements of CEC for the 3 (three) financial years ended 31 December 2014, 31 December 2015 and 31 December 2016 are available on the CEC website at and are incorporated into this Circular by reference Pro forma financial information The Offer Price is to be settled wholly in cash. Accordingly, the Offer will not have any effect on the financial information of CEC and, therefore, the pro forma financial information of CEC and pro forma effects per CEC Share are not required to be disclosed in this Circular. 17. SHARE CAPITAL INFORMATION Authorised share capital Ordinary Shares Special Share Number of Shares 2,000,000,000 1 Nominal value of each share (ZMW) ZMW0.01 ZMW1.40 Share capital (Kwacha) ZMW20,000,000 ZMW1.40 Issued share capital Ordinary Shares Special Shares Number of Shares (Maximum) 1,625,000,597 1 Share capital (Kwacha) ZMW16,250, ZMW SHAREHOLDING OF CEC Shareholder Number of Shares held % Holding ZECI 845,000, % ZCCM Investment Holdings PLC 325,000, % Standard Chartered Zambia Securities Services Nominees Limited 106,328, % Subtotal 1,276,328, % Other Shareholders 348,672, % Total shares in issue 1,625,000, % 7

21 19. INTERESTS OF DIRECTORS OF CEC IN CEC SHARES At the Last Practicable Date, Directors of CEC held, directly and indirectly, beneficial interest in 623,723,303 CEC Shares, representing approximately per cent of the total shares of CEC. The direct and indirect beneficial interest of the Directors of CEC is as follows. Director Beneficial Total Number % Holding Direct Indirect of Share % Holding Mr. Hanson Sindowe - 300,092, ,092, Mr. Michael J Tarney 2,354, ,596, ,950, Mr. Abel Mkandawire - 153,246, ,246, Mr. Owen Silavwe 982, , Mr. Munakupya Hantuba 343, , Dr. Sixtus C. Mulenga 107, , Brigadier-General Emelda Chola Mr. Reynolds Bowa Mr. Ronald Tamale Mr. Joe M. Chisanga Mr. Taimoor Labib Mrs. Mildred T. Kaunda Total 3,787, ,935, ,723, Dealings by the Directors in CEC Shares None of the Directors of CEC have dealt for value in CEC Shares during the period beginning 6 (six) months before the Offeror s due diligence process and ending on the Last Practicable Date. 20. EXPERTS CONSENT SBZ, Corpus Legal Practitioners, and Deloitte & Touche have given, and not withdrawn, their consents to the issue of this Circular with the inclusion of their names and report(s) in the forms and contexts in which they appear. 21. THE ICB In accordance with Rule 5 (3) of the Third Schedule of the Takeover Rules, the Board constituted an independent committee of the Board comprising of: Name Dr. Sixtus C. Mulenga Mr. Joe M. Chisanga Mr. Owen Silavwe Position Independent Non-Executive Director Independent Non-Executive Director Executive Director The ICB was constituted by the Board for purposes of discharging the duties of the Board in relation to this Offer, determining the fairness and reasonableness of the Offer and making the appropriate recommendations to the shareholders. 8

22 22. ANALYSIS OF THE OFFER In order to comply with the provisions of Clause 5 (1) of the Third Schedule of the Takeover Rules, the ICB retained an Independent Financial Adviser to advise the ICB as to whether the Offer is, or is not, fair and reasonable and to render its reasons for this advice. Annexure I of this Circular provides the opinion on the Offer prepared by the Independent Financial Adviser, Deloitte & Touche, the conclusion of which is that the Offer is, in their opinion, fair and reasonable. The Offeror is offering to acquire all the issued shares in the capital of CEC for a cash consideration of US$ per share being the Effective Offer Price following the adjustment to take into account the Dividend. The Effective Offer Price of US$ translates to ZMW per CEC Share based on an exchange rate of ZMW9.7035: US$1.00 (being the bid rate as at close of business on 14 February 2018 published by Stanbic Bank Zambia Limited) and represents a premium of approximately: (a) 0.26 per cent to the Closing Price of ZMW2.108 per CEC Share on 14 February 2018; (b) (c) per cent to the volume weighted average Closing Price of ZMW1.47 per CEC Share for the three (3) months ended on 14 February 2018; and per cent to the volume weighted average Closing Price of ZMW1.46 per CEC Share for the twelve (12) months ended on 14 February The Independent Financial Adviser has advised the ICB that it has considered the Offer and is of the opinion that the Offer is fair and reasonable. The opinion of the Independent Financial Adviser is included in Annexure I to this Circular and the opinion has not been withdrawn prior to the publication of this Circular. 23. DIRECTORS VIEW ON THE OFFER The ICB has reviewed the Offer and has noted that the Effective Offer Price has been set at US$ per CEC Share. Further, the ICB has received and reviewed the valuation analysis conducted and prepared by the Independent Financial Adviser and which has concluded that the value of the shares corresponding to the fair market value of the shareholder equity as at 31 December 2017 is in the region of USD 0.19 and USD 0.24 per CEC Share. Accordingly, the view of the ICB is that the Offer of US$ per CEC Share is fair and reasonable. Having reviewed the Offer and the analysis prepared by the Independent Financial Adviser, the ICB concurs with the view expressed by the Independent Financial Adviser. Further, the ICB believes that the Offer provides an opportunity for CEC Shareholders to realise value at a fair and reasonable valuation and it also provides a further opportunity to partner with CDC to drive the further growth of CEC going forward. 24. RECOMMENDATION BY THE ICB Pursuant to the provisions of Rule 5 (2) of the Third Schedule of the Takeover Rules, the ICB has a responsibility to provide its recommendations regarding acceptance of the Offer. In light of the comments made in section 23 (Directors View of the Offer) of this Circular, the ICB believes that the Offer is both fair and reasonable and, therefore acceptable. In rendering their recommendations, the ICB has not had regard to general or specific investment objectives, financial situation, tax status or position, risk profiles or particular needs and constraints and circumstances of any individual CEC Shareholder or group of CEC Shareholders. As each CEC 9

23 Shareholder or group of CEC Shareholders would have different investment objectives and profiles, the ICB recommends that any individual CEC Shareholder or group of CEC Shareholders seek independent advice in the context of the CEC Shareholder s specific investment portfolio, including the CEC Shareholder s investment in CEC, from the CEC Shareholder s broker, banker, legal adviser, accountant, tax adviser or other professional adviser immediately. 25. DIRECTORS RESPONSIBILITY STATEMENT The Directors of the ICB jointly and severally accept full responsibility for the accuracy of information contained in this Circular and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in this Circular have been arrived at after due and careful consideration and in accordance with the LuSE Listing Requirements and any other applicable laws. The Directors of the ICB confirm that the particulars in this Circular contain all such information within their knowledge (or which it would be reasonable for them to obtain by making enquiries) as investors and their professional advisers would reasonably require and reasonably expect to find for the purpose of making an informed assessment of the Offer. 26. COSTS OF THE OFFER The total estimated costs of the Offer incurred by the Company amount to about US$120,000 which includes payments to the various advisers and other third-party service providers. Brokerage and LuSE commissions are the responsibility of the buyer and sellers of CEC Shares in the Offer. 27. ACTION TO BE TAKEN BY CEC SHAREHOLDERS (a) (b) (c) CEC Shareholders would have received prior to, or together with this Circular, the Offer Document from the Offeror which includes the Form of Acceptance. CEC Shareholders are to read both the Offer Document and this Circular to make an informed decision regarding the Offer. The options available to you are to: accept the Offer in respect of all your CEC Shares; accept the Offer in respect of part of your CEC Shares; or reject the Offer. (d) (e) If you wish to reject the Offer, you do not need to take any further action. If you wish to accept the Offer, you must do so in the manner described in the Offer Document. Please note that if your CEC Shares are held in certificated form, you will need to dematerialize the shares so that they are held in uncertificated form before you accept the Offer. You are advised to contact your broker as soon as possible to ensure that the dematerialization process can be implemented in sufficient time to enable you to accept the Offer in accordance with the Offer Document. 10

24 28. DOCUMENTS AVAILABLE FOR INSPECTION The following documents, or copies thereof, will be available for inspection during normal business hours at the registered office of CEC at Stand 3614, 23rd Avenue Nkana East, Kitwe and at Abacus Square, 1st Floor, Stand No. 2374/B, Thabo Mbeki Road, Lusaka or at the office of the Sponsoring Broker, from 09.00hrs to 16.30hrs Monday through Friday during the Offer Period: (a) the Articles of Association of CEC; (b) the audited financial statements of CEC for each of the past three financial years up to 31 December 2016; (c) the unaudited financial results of CEC for the six months ended 30 June 2017; (d) (e) (f) (g) (h) (i) the report of the Independent Financial Adviser on the Offer; a signed copy of this Circular; the consent of all the appointed advisers of CEC; the letters of approval from the LuSE and the SEC relating to this Circular and the Zambian Transmission LLP Offer Document; the irrevocable undertaking dated 22 January 2018 to accept, or procure the acceptance of the Offer from Standard Chartered Private Equity Limited and Marina IV (Singapore) Pte. Ltd, as holders of the ZECI Bonds, in respect of 562,888,648 CEC Shares (representing approximately 34.6 per cent of the CEC Shares in issue as at the Last Practicable Date); and the irrevocable undertaking dated 5 January 2018 not to accept the Offer from ZCCM Investment Holdings PLC in respect of 325,000,000 CEC Shares (representing approximately 20.0 per cent of the CEC Shares in issue as at the Last Practicable Date). Dated at Lusaka this day of DR. SIXTUS C. MULENGA (CHAIRMAN OF ICB) MR. JOE M. CHISANGA (MEMBER OF ICB) MR. OWEN SILAVWE (MEMBER OF ICB) 11

25 ANNEXURE A - FAIR AND REASONABLE OPINION CIRCULAR TO CEC SHAREHOLDERS The Independent Committee of the Board of Directors Copperbelt Energy Corporation Plc 1 st Floor Abacus House Stand No. 2374/B Thabo Mbeki Road Lusaka Deloitte & Touche Abacus Square, Stand 2374/B Thabo Mbeki Rd PO Box Lusaka Zambia Tel: Fax: February 2018 Dear Sirs, Re: Independent Financial Adviser s fair and reasonable opinion report on the offer from Zambian Transmission LLP to purchase all of the ordinary shares of Copperbelt Energy Corporation Plc Introduction Copperbelt Energy Corporation Plc ( CEC or the Company ) is a listed company on the Lusaka Securities Exchange Limited ( LuSE ) and is the main supplier of power to the mining companies on the Copperbelt region in Zambia and the Democratic Republic of Congo ( DRC ) Katanga region through Société Nationale d Electricité ( SNEL ). The Company also: Wheels power on behalf of the state utility ZESCO to a number of substations on the Copperbelt region to enable distribution of electricity to non-mining related loads; and Provides international wheeling services to other Utilities within the Southern African Power Pool ( SAPP ) and is a joint venture investor in telecoms assets of CEC Liquid Telecommunications Limited. The Directors of CEC have received a firm intention from Zambian Transmission LLP to make a binding offer to purchase all of the ordinary shares of CEC (the Offer ). In compliance with schedule 5 of the LuSE listing rules and Rule 5 (1) (2) of SI No.170m of 1993, the Independent Committee of the CEC Board has appointed Deloitte & Touche as the Independent Financial Adviser to: Perform a valuation of the shares of CEC as at 31 December 2017, which is appropriate for the Offer, in accordance with the Takeovers and Mergers Rules. The valuation is to be based on the Discounted Cash Flow ( DCF ) valuation methodology as the primary valuation approach. Two other valuation methods (cost approach and the market approach) were used, to corroborate the DCF findings; Use the results of the valuation to present the fair and reasonable opinion to the Independent Committee of the CEC Board in regard to the Zambian Transmission LLP Offer; Issue an independent fair and reasonable opinion, which shall be included in the Circular to shareholders on the terms of the Zambian Transmission LLP Offer in terms of the Takeover and Mergers rules; and 12

26 Authorise CEC to refer to or include the fair and reasonableness opinion in the Circular to shareholders on the Zambian Transmission LLP offer. Definition of value For purposes of this engagement, we define fair market value, as the amount for which an asset could be exchanged, a liability settled or an equity instrument granted could be exchanged, between knowledgeable willing parties in an arm s length transaction. The conclusion of fair market value reached is therefore a reasonable estimate of the price at which an asset may change hands between two willing parties. It should be understood that the actual price paid in any transaction involving the Company may differ from the appraised fair market value due to factors such as the motivation of the parties, the negotiation skills of the parties, the structure of the transaction or other factors unique to the transaction. We have valued the Company under the premise of a going-concern business enterprise. This premise of value considers that the management of the Company will implement only those prospective financial and operational strategies that will maximise the value of the business entity. Additionally, it assumes that there is no uncertainty about future events, such as recurring operating losses or financial difficulties, that would call into question the fundamental assumption that the Company can continue to operate as a going-concern. Sources of information In preparing the valuation, we have had access to the following sources of information: Audited financial statements for the years ended 31 December 2015 and 2016; Management accounts for the year ended 31 December 2017; The Company s projections for the eight years ending 31 December 2025; The information disclosed in the circular to the shareholders; CEC historical and current share price; The Offer; Management representations of information about the Company; and Other publicly available information relevant to CEC and the industry in which the Company operates. Scope and limitations of review The scope of our work has been limited to the matters set out in our terms of reference and to reviewing the information made available to us by CEC management as shown above. Our report is limited to only those matters arising that would appear to us to be of significance in arriving at a valuation for CEC. Our procedures and enquiries did not include verification work or constitute an audit in accordance with generally accepted auditing standards. Therefore, we do not express any opinion on any financial data or other information referred to in this report. Insofar as our work related to forecasts, we have reviewed their compilation to satisfy ourselves that they have been prepared on the basis of the underlying assumptions. However, those forecasts and assumptions are the sole responsibility of the directors of the Company. We have commented on those assumptions where appropriate but accept no responsibility for them, or the ultimate accuracy and realisation of the forecasts. Furthermore, you should note that there will usually be differences between forecast and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. You should not assume that all information which you may have produced to other partners or staff of the firm has been made available to the personnel engaged in preparing this report. This report is issued on the understanding that you have drawn our attention to all matters of which you are aware concerning the Company financial position or the proposed transaction which may have an impact on our report up to the date of sign off. 13

27 We reserve the right to review all calculations included or referred to in our report and, if we consider it necessary, to revise our opinion in the light of any information existing at the valuation date which becomes known to us after the date of the valuation report. We have no responsibility to update the report for events and circumstances occurring after the date of this report. This report has been prepared solely for your use and for the purpose outlined above. It should not be quoted or referred to or used for any other purpose. We shall, therefore, not be responsible for financial or other consequences flowing from any error in, or omission from, our report resulting from the limitations in scope referred to in this letter and you agree to hold us harmless from the effects of any such error or omission unless caused by bad faith on our part. Management confirmation of facts We provided this report to the Management of the Company and they have confirmed that to the best of their knowledge and belief: The facts as stated, so far as they are aware, are accurate in all material aspects; They have made available to us all significant information relevant to the report of which they have knowledge; and They are not aware of any material matters relevant to our terms of reference that have been excluded. Independent valuation We performed an independent valuation as at 31 December We have considered market and economic conditions up to the date of issue of this report. Our valuation is primarily based on the Discounted Cash Flow ( DCF ) valuation methodology under the income approach. In addition, we have used two other valuation methods (cost approach and the market approach), to corroborate the DCF findings. The DCF method is based on the premise that the value of the business enterprise is the present value of the future economic income to be derived by the owners of the business. Cash flows attributable to shareholders are derived by deducting interest paid and loan repayments from free cash flows and discounted at the cost of equity. Under the cost approach, we relied on the unaudited balance sheet as at 31 December Our analysis relied wholly on the book value of assets as indicated on the unaudited accounts, in order to arrive at an indicative valuation of the Company. For purposes of the market approach, we were unable to identify transactions in Zambia or the region which are sufficiently comparable to CEC, to facilitate a comparator analysis. We were however able to complete the market approach using the comparable listed companies method. Based on the DCF valuation methodology utilised in the valuation analysis and assumptions used, we believe that the fair value for CEC as at 31 December 2017, is in the region of USD0.19 per share on a pessimistic view to USD0.24 per share on an optimistic view. Assessment of qualitative factors From the information considered, we also noted the following qualitative factors relevant to our assessment of reasonableness of the Offer: The CEC stock price per share on LuSE remained broadly flat between 15 May 2017 and 29 January 2018 at USD0.14 per share. Following the issuance of the announcement on 30 January 2018 regarding a firm intention from Zambian Transmission LLP to make a binding offer to purchase all of the ordinary shares of CEC, the 14

28 Company s share price increased from USD0.14 to the current price of USD0.21 per share as at 15 February The average volume of CEC shares traded on a daily basis between 15 May 2017 and 29 January 2018 was 16,414. Opinion The Effective Offer price by Zambian Transmission LLP of USD per share compares with a fair value in the region of USD0.19 and USD0.24 per share as at 31 December Based on the information considered and our valuation results, we are of the opinion that the Offer is fair and reasonable. Consent We hereby consent to the inclusion of this report in whole and references thereto, in the form and context in which they appear, in the Circular. Yours faithfully, Deloitte & Touche Humphrey Mulenga Senior Partner AUD/F