The Copperbelt Energy Corporation says negotiations for a new bulk supply agreement with ZESCO failed because of some new proposed terms that the government is demanding which if accepted, would be injurious to its operations.
CEC has confirmed the end of its long term power purchase agreement with ZESCO effective 31st March 2020 bringing an end to a 23-year contract.
CEC Corporate Communications Manager Chama Nsabika said in a statement that while the initial understanding was that the two parties involved would work to put in place an interim agreement, it became clear during the negotiations that the intention was to agree a wholesomely new agreement with totally different terms.
Ms. Nsabika has charged that CEC has held its end throughout this period and approached the negotiations in good faith and that narrowing the negotiation gap aimed at achieving a mutually acceptable power supply agreement is of strategic importance to the electricity sector and the country.
She says CEC will however continue providing seamless power supply services to all mining and non-mining consumers on the Copperbelt during the negotiation period for a new power supply agreement, barely 24 hours after energy minister Mathew Nkhuwa directed that no power interruption should occur to the Copperbelt with power supply to continue under Zesco terms.
“Additionally and most importantly, it has come to government’s attention over the last few days, that CEC is in fact not even willing to sign an agreement with a twelve (12) month tenure, which has been the basis of all negotiations conducted by the two parties over the last seven (7) weeks and, which was initially proposed by Government and ZESCO”.
CEC admitted that the negotiating parties were unable to agree to a number of terms by the last day of the contract.
“At end of day on 31st March 2020, the parties had not reached agreement on account of certain terms seen as key requirements from either side and which so far are not acceptable to either party”.
CEC believes that agreeing to some of the terms would affect the company’s financial performance.
“On its part, CEC has faced some terms being demanded by the GRZ team which, if accepted, would be injurious to the CEC business and impact its ability to continue operating as a going concern”.
Issues related to financial performance related to how much the product electricity is sold by either negotiating party and what are acceptable margins.
The interim average mining tariff was determined at US$9.3/kWh effective January, 2017, pending the conclusion of the cost-of-service study.
“In CEC’s view, achieving a mutually acceptable power supply agreement between the parties remains of strategic importance to the electricity sector and the country. Therefore, CEC remains confident that the parties will use the next several weeks to narrow the negotiation gap so as to achieve the much-required new power supply agreement between them”.