The Copperbelt Energy Corporation Plc (CEC) will, effective 1 June 2020, discontinue the supply of power to Konkola Copper Mines Plc (KCM) as the power supply agreement (PSA) between CEC and KCM came to an end on 31 March 2020 but was extended through mutual agreement of the parties, up to 31 May 2020.
Negotiations for its further extension have broken down, despite CEC’s best efforts in good faith towards securing a new contract and engaging in comprehensive and cooperative negotiations.
In trying to agree the new contract with KCM, CEC sought to resolve KCM’s outstanding debt of USD132 million as well as obtain a firm commitment from KCM regarding the timely payment of electricity charges going forward. These costs continue to increase – it is CEC’s expectation that KCM’s debt to CEC will grow to at least USD144 million as at 31 May 2020.
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.
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.
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. While CEC is not obligated to supply power to KCM after the contract expires, CEC will continue, on a commercial basis, to supply the minimum power required for purposes of safeguarding personnel and the mine’s assets.
A spokesperson for CEC 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.
The Copperbelt Energy Corporation Plc (CEC) is a licensed independent power generation, transmission, distribution and supply company whose core business is the supply of power to the copper mines based in the Copperbelt Province of Zambia and some mining companies in the DRC in conjunction with that country’s state utility, SNEL. CEC wheels power through its network on behalf of ZESCO Ltd on the Copperbelt, owns and operates a transmission interconnection with the DRC, over 1,000 kilometres of high voltage transmission lines and 43 substations across the Copperbelt.
CEC has five incorporated subsidiaries – CEC-Kabompo Hydro Power Limited (CEC-KHPL), CEC DRC Sarl, CEC-InnoVent South, InnoVent-CEC North and Power Dynamos Sports Limited (PDSL). CEC-KHPL is the special purpose vehicle through which CEC is developing the 40MW Kabompo Gorge hydroelectric power project in Mwinilunga District of the North-Western Province of Zambia, while CEC DRC Sarl is a special purpose vehicle incorporated to secure the power trading segment and grow the Company’s interest in the DRC market. PDSL is a special purpose vehicle which runs Power Dynamos Football Club.
CEC is listed on the Lusaka Securities Exchange and is a member of the Southern African Power Pool.