Copperbelt Energy Corporation says it will stop supplying power to Konkola Copper Mines Plc (KCM) from today after talks on extending their supply agreement broke down over debt owed to CEC.
Energy Minister Mathew Nhkuwa said in a statement that KCM would now get its power directly from state-owned utility Zesco Ltd, which until now has sold electricity to CEC for onward supply to KCM.
“The power supply agreement between Konkola Copper Mines and Copperbelt Energy Corporation (CEC) is coming to an end at midnight tonight (Sunday). However, despite this development, let me assure the nation that there will be no power disruption to the mine. On 29th May 2020, I issued Statutory Instrument No. 57 of 2020 declaring all transmission and distribution lines operated by the CEC as a common carrier. This means that this infrastructure is now available to other players in the electricity market to use for commercial purposes at agreed terms and conditions by the parties. I exercised this power pursuant to section 15 of the electricity act no. 11 of 2019,” Mr Nkhuwa said.
“Let me emphasise that this infrastructure still belongs to CEC and will be accessed by other parties at a fee and on agreed terms and conditions,” he added.
“Lastly, let me remind all actors in this matter that mining is a strategic industry to the economy of Zambia and I expect all parties to act in the national interest. The government therefore urges all the parties currently in discussion to conclude the negotiations as quickly as possible. While the negotiations are going on, power supply to the mine must continue.”
But CEC said the power supply agreement with KCM which came to an end on March 31 and was only extended through mutual agreement until May 31.
CEC said KCM owes it $132 million in debt.
“Negotiations for its further extension have broken down, despite CEC’s best efforts in good faith towards securing a new contract,” the statement said.
“Without a renewed contract in place, CEC cannot continue supplying power to KCM as doing so would jeopardise the Company’s financial position and endanger its efforts to provide essential power supply to its other customers,” it said.
“CEC has informed KCM that its supply will be discontinued, after making clear throughout the negotiations that this would be the only option available should they fail to engage constructively in the negotiations and in resolving their substantial debt.”
In trying to agree the new contract, CEC sought to resolve KCM’s outstanding debt of $132 million as well as obtain a firm commitment from KCM regarding the timely payment of electricity charges going forward, it said.
CEC said it had informed KCM that its supply will be discontinued, adding that this was the only option available after the talks failed to resolve KCM’s outstanding debt and obtain a firm commitment from KCM regarding the timely payment of electricity charges going forward.
“Due care has been taken to make certain that the process of discontinuing supply ensures the safety of personnel and equipment and preserves the integrity of the mine,” CEC said.
A CEC Spokesperson said, “It is unfortunate that it has come to this. Over the past several months, we have made clear to KCM the consequences of their non-payment and their unwillingness to engage in negotiations in good faith. Sadly, they have chosen not to honour our previous agreement or pay the considerable sum that is owed. In order to protect our staff, our customers and all our shareholders, we have had no choice but to discontinue the supply of power. All efforts will be made to ensure that this is done in a way that protects the safety of both personnel and equipment.”
“KCM remains an important customer to CEC given that it is directly connected to and fed from the CEC power network at multiple points. This means that even if KCM signs a PSA with another provider, KCM will still require transmission and connection services from CEC. Like any other customer, KCM cannot exist on the CEC network without a form of connection services agreement with the Company. As a customer-centred business, CEC remains open to continuing to work with KCM and other parties that may be involved to negotiate and enter into the required transmission and connection agreements, should the need arise. CEC will continue to meet its core mandate of providing all such transmission and connection services at the best quality possible.”
While Zesco will now transport power to KCM, it will still travel through CEC power lines.
Mr. Nkhuwa said in an interview that CEC would be breaking the law if it refused to transport the power.
“I issued a statutory instrument on Friday declaring the CEC lines a common carrier. CEC is therefore obliged to transport the power from Zesco to KCM at a fee,” Mr. Nkhuwa said.