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Alba Iulia
Thursday, July 2, 2020

ZESCO, KCM seal direct power supply deal, shuts out CEC

Headlines ZESCO, KCM seal direct power supply deal, shuts out CEC

ZESCO Limited says it has entered into a long-term agreement with Konkola Copper Mines following successful conclusion of negotiations.

ZESCO Director Strategy and Corporate Services Patrick Mwila says the agreement between ZESCO and KCM is part of ZESCO’s long-term strategy of correcting imbalances in the power supply chain.

He says the artificial imbalances were the result of the Bulk Supply Agreement (BSA) that was signed between ZESCO and Copperbelt Energy Plc (CEC) on 21 November 1997 which had been commercially disadvantageous to ZESCO.

“These imbalances were aided by certain clauses which ensured only CEC could supply the lucrative Copperbelt mining market ever since the BSA was signed in 1997,” he said.

Mr. Mwila says the development is also in line with the Government’s new policy framework, which supports an open Electricity Supply Industry that is intended to encourage participation of various players in the three key segments of the value chain, Generation, Transmission and Distribution.

He says the landmark agreement will ensure ZESCO and consequently the Zambian economy and public are able to benefit from direct commercial agreements between ZESCO and potential generators of foreign exchange.

Meanwhile, Mr. Mwila says despite the initial failure to finalize a new power supply agreement to replace the now expired Bulk Supply Agreement, ZESCO has continued to make power available to CEC to allow it to supply its consumers who have already contracted for power supply from CEC and to supply ZESCO’s existing consumers in the Copperbelt.

He added that this is despite the fact that CEC continues to owe ZESCO millions of dollars in unpaid arrears.

“By eliminating monopolistic tendencies, the Zambian electricity sub-sector will soon realize efficiencies, as neither ZESCO nor any other owner of Transmission or Distribution Infrastructure can claim exclusivity for their use as third parties will be able to supply power across Zambia. ZESCO welcomes this competitive environment and the opportunity to prove that it can compete on a level playing field with the best competitors in the market,” he said.

“Specifically, ZESCO is now in a position to compete for the supply of power directly to those mining consumers in the Copperbelt who are able and willing to enter into new commercial relationships. Supply to such consumers was previously the preserve of CEC, but with the lapse of the BSA, the consumers, ZESCO and CEC are free to buy and sell power from anywhere and supply to anyone as long as the terms are commercially competitive. ZESCO also notes that under these circumstances, ZESCO’s traditional consumers may also be subject to competitive bids or solicitations from other potential suppliers, but we firmly support the new market framework and we are ready to prove that we can supply power more competitively than anyone else in the Southern African region.”

He said, “The “common carrier” declaration typically unlocks resources and avoids “hoarding” of Transmission capacity or even worse still, duplication of infrastructure by competing players in the ESI. Transmission and Distribution asset owners still remain fully in charge of their assets, but they must negotiate wheeling arrangements on commercial terms once they are approached by parties intending to trade. The law thus prevents any party from using its vantage point to block commercial trade and stipulates that if the parties fail to agree on wheeling terms for the power, any aggrieved party may then appeal to the Electricity Regulation Board to arbitrate and determine fair terms and conditions of supply.”

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28 COMMENTS

  1. “…..any aggrieved party may then appeal to the Electricity Regulation Board to arbitrate and determine fair terms and conditions of supply.”

    Hehehehehe ……..

    There is no fair regulatory body in Zambia , if ministers can ignore court orders to pay back monies earned during campains , which decision can go against anything PF ?

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  2. This is a fundraising strategy for 2021! Once mission is accomplished, it will be given to the Choncholis!
    But Vedanta and CEC will have the last laugh! The Wheels of Justice grind slowly. Chirwa was fired in 2012 and awarded damages 8 years later in 2020! It will be ordinary Zambians to pay for PF misdeeds through higher taxes! Trouble with Zambians is they get cheated easily!

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  3. Just simply nonsensical both companies are 100% government run…so what’s so special about this deal????

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  4. And some silly chaps were saying CEC was untouchable because they are funding opposition. If I hear ati puuuuum.

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  5. They will pay CEC a user fee of their choosing. And Zesco will only pay CEC if they’re paid by KCM.

  6. Chikubabe: We hv 2b concerned here about the slow pace at which u get justice in Zambia. Prof Chirwa’s case was in the High Court for 8 years in spite of the rather large number of judges that hv been appointed! Is this really fair?

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  7. Mr Patrick Mwila must be a moron. KCM and Zesco are both owned by PF government, so their deal amounts to collusion not competition. And the so called regulator is ndwiii.
    Didnt this same Mwila tell us recently Zesco hates long term agreements like bsa with Cec?

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  8. HAS LUNATIC KAIZAR COMMENTED ON THIS?? I CANT SEE HIS COMMENT….THE LUNATIC HAS AN ANSWER FOR EVERYTHING THAT SUITS HIS CORRUPT TUMMY!!! RESPECTED FOR GENERALS IN USA ARE CRITICIZING TRUMP. PEOPLE ARE DEMONSTRATING. HERE THIS SO CALLED PRESIDENT IS BUSY THREATENING CITIZENS. ZAMBIANS YOU ARE IN FOR A TREAT…ROUGH TIMES INDEED……..COWARDICE WILL TEACH YOU A LESSON…. ALL THE YOUTHS NOW MUST BE CADRES OF PF TO SURVIVE… THANK GOD I AM FINANCIALLY INDEPENDENT…. KZ DONT EVEN ATTEMPT TO TRACK ME….GOOGLE BACK TO BACK ENCRYPTION….. EVEN CIA FAILED TO HACK INTO WIKILEAKS….

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  9. Its really sad how understand level of things is so low….
    Before:
    – KCM bought power from CEC who bought power from Zesco
    – This power was transmitted from Zesco to KCM via CEC powerlines

    Now:
    – KCM will buy power directly from Zesco
    – Will still need this power transmitted via CEC power lines
    – however, these power lines have now been declared common carrier but still belong to CEC
    – Means however, wants to use them still has to sign an agreement with CEC and power for the transmission
    – CEC is saying you need an agreement and you also owe $140m which you need to settle.
    In summary CEC has lost revenue from electricity but still has transmission revenue.

    Question is how will KCM get the power from Zesco with out a transmission agreement with CEC and not…

  10. Looks like the theives read blogs on LT and adapt their lies accordingly………they saw us asking why CEC must be common carrier and not zesco …

    Where are Zesco transmission lines common carrier ?

    Stop lying , when was a law passed to declear ZESCO transmission lines common carrier ??

    Which other power producer has been allowed to sell their power direct to the consumer via ZESCO tx lines ???

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  11. ABOUT TIME ! !
    AN END OF ONE OF THE BIGGEST SCAMS PERPETRATED AT PRIVITISATIONOF THE MINES
    IT’S HARD TO UNDERSTAND HOW ANY PATRIOTIC ZAMBIAN CANNOT SUPPORT THIS MOVE BY GRZ

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  12. ANSWER: Yes. In simple terms, this is a hostile takeover of CEC power lines by Zesco (BOMA)!!

  13. Agreement kuti? There is no news here, this rogue agreement will be reversed after 8years and with costs. So ba CEC, dont panic. Besides ,this is jst a PF to PF agreement. Doesnt concern CEC, which has the keys & formula to the power lines. PF mongrels are wet dreaming again.

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  14. ZCCM power Division should have been handed over to ZESCO right from inception of the privatization saga. Lets have a commission of Inquiry on privatization for this matter to be resolved and make sure it does not recur again.

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  15. Zesco after cutting off CEC contract they want to use the carrier Transmission infrastructure of CEC by force PF is after destroying Zambian owned business and promoting foreign business we know Zesco has been given to Chinese that’s why all these favors for Chinese Zesco.
    But my advice to CEC is that they should not fight for that power of Zesco leave Zesco and invest in power production produce your own power and use your infrastructure to transmit it and if Zesco want to use your carrier Transmission infrastructure charge them lets see how they will manage to compete for the supply of power directly to those mining consumers in the Copperbelt with you.
    Invest in solar nuclear and wind production of electricity finish.

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  16. So the issue of CEC is politically motivated do you hear what KZ is saying Zambia is finished with PF in power.

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  17. At a time when Zesco was producing 1,500 megawatts, GRZ paid Eskom of SA US$20M for 300 megawatts of power. Zesco’s transmission loss is at 20% while that of CEC is at 2%. So what GRZ imported from Eskom just covered Zesco’s transmission loss. If Zesco were efficient there wouldn’t have been any need for GRZ to spend that kind of money. This is what will happen, so don’t be excited about this deal. Zesco is going sink itself. What GRZ must do is to allow CEC to comptet with Zesco, let Zesco invest in infrastructure like CEC has done. Stronghandedness won’t take us anywhere. Whatever Edgar and his are doing will cause more injury to the energy sector, and most of these decisions will be reversed the moment he walks out of State House. But that won’t be without consequences

  18. In power market structures well established and functional trades will happen and be settled with parties at anytime meaning capacity and power will be contracted and settled for minutes,day ahead,extended,month ahead or years ahead Now the party with security(installed capacity) of supply and robust transmission infrastructural like Zesco has developed always have that advantage to assume regional control status in supply and power trades and settlements However there should be no hostile competition for supply to ensure grid code and healthy discovery that will develop the energy sector and benefit ultimately the people this is okay ZESCO should supply but some points must be read critically to ensure they reflect consensus in proper functional power market structure

  19. This Zesco is setting out policy and regulation of the sector in Zambia, is that not the preserve of Erb and the government and its minister? Oh sorry forgot that Zesco is superior to both.

  20. But its like no control inside if you have its only fair you pay charges for making power available there if those can beat congession manage to source from where they will sell into zesco grid CURRENTLY only Zesco has the security of supply in the Zambian energy sector to 2050

  21. So, a Zambian para-state organisation seeks to cut off a Zambian indigenous organisation, to deal directly with a foreign owned entity. CEC is a publicly owned company. Many small investors, Individual Zambians, have bought and own shares in CEC which they have bought from LuSE. GRZ owns 24.1 % shares in CEC on behalf of the Zambian people as well! What is this government doing in disadvantaging local individual Zambian investors within the shallow capital market Zambia has?

    ZESCO should then be privatised in whole, or by unbundling it into three entities re Generation. Transmission, and Distribution. All three entities should then be floated on the Lusaka Securities Exchange! Let ZESCO be privatised!

  22. The Later had the opportunity to reinvest down the integrated value chain in the power utilities market structure to maximize those share holder values contracts of differences embedded in only agreements have implied counter party risks including other issues of force majeure cec given its investor service was slow to invest in security of supply Zescos strategy that reinvested heavy in generations plants has consolidated it to be a regional power trading company and it will be very difficult for cec to to be in hostile competition to zesco they risky putting their Transmissions assets to be strategy the best case scenario is to sell or lease to zesco and be a tt company hoping to unbundle zesco into units is not a viable thing to do for zambia and the sector you…

  23. you simply loose the synergy of units perhaps the best lessons can be seen in the eskoms difficulties to implement what is easier proposed than could be implemented the timeline keeps on being rescheduled as challenges become a reality so breaking up zesco into its units might be the best however the investments atmospheres in the energy is still viable for serious investors who want the vertical intergration into the national grid

  24. Hw does a company which is properly led sign a long-term power supply contract with a company which is in liquidation? KCM is supposed to be a cash customer according to normal business practice.

  25. The only solution here is to remove PF from power next year this country is upside down under PF and if we continue like this as a country we are finished PF can not manage this country it’s too big for them.PF is trying to kill CEC the same way they kill the post newspaper same way they did to Prime TV there are too good at destroying Zambian owned companies and promoting Chinese companies.You want ZESCO to supply electricity direct to KCM bypassing CEC so that all the profit goes to your ZESCO which you know very well that you have already given to Chinese what is there for Zambians in PF Government nothing everything is for Chinese.

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