GOVERNMENT has announced the takeover of all electricity transmission and distribution lines operated by the Copperbelt Energy Corporation Plc (CEC) Plc through Statutory Instrument Number 57 of 2020.
But CEC has announced that it will cut power supply to Konkola Copper Mines Plc (KCM) following the expiry of the Power Supply Agreement (PSA), which expired on March 31, but extended through mutual agreement to 31 May.
Meanwhile, in reaction to the SI, Alliance for Democracy and Development (ADD) president Charles Milupi has condemned government’s arbitrary takeover of the power utility, saying it undermines the protection of property rights in the country.
The SI, signed on May 29, 2020, by Energy Minister Mathew Nkhuwa, states that the transmission and distribution lines operated by the company have now been declared as a common carrier and shall be used on terms determined by the Energy Regulation Board (ERB).
“In exercise of the powers contained in section 15 of the Electricity Act, 2019, the following regulations are made: These regulations may be cited as the Electricity (common carrier) (declaration) regulations, 2020. The transmission and distribution lines set out in the schedule are declared as a common carrier for the purposes of the act and shall be used on the terms and conditions determined by the Energy Regulation Board. Schedule; Transmission lines – All transmission lines operated by the Copperbelt Energy Corporation, Distribution lines – all distribution lines operated by the Copperbelt Energy Corporation,” read the SI signed by Nkhuwa.
But CEC stated that the utility would not continue supplying power to KCM without an agreement in place as further negotiations for further extensions had broken down.
“The Copperbelt Energy Corporation (CEC) Plc will, effective June 1, 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 March 31, 2020, but was extended through mutual agreement of the parties, up to May 31, 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 US $132 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 US $144 million as at May 31, 2020,” read the statement.
“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.”
It added that it would continue to supply minimum required power to safeguard personnel and the mine’s assets despite not being obligated to do so.
“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,” read the statement.
“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.”
Meanwhile, in an interview, Milupi said the government had only made this decision because of the dispute CEC had with KCM and had simply displayed its ignorance on how to handle such disputes.
“Looking at it from national interest, the reason that has happened is because CEC have a dispute with KCM, who is their customer, who has not paid, and has not been paying. According to the last (notice) that was reported, we are talking of US $132 million. Most of that money actually belongs to Zesco, which is a government parastatal and this is because this power is obtained from Zesco. So, the company is listed on the Lusaka Securities Exchange where individual Zambians, I believe, including even some senior members of this Cabinet, bought shares, invested, including some pension houses in Zambia, they invested. Now to protect this company that has not been doing well, that has not been paying anybody, government can take this drastic action against a company that is probably one of the very few successful companies we have in this country declaring dividends to government and so on. Protecting it against the interest of these foreigners, you know, KCM is owned by foreigners. This reminds us how this government is hell-bent on protecting the interest of foreigners against locals,” Milupi said.
“So, when he has done that, KCM will continue to operate without paying for power and ultimately someone will have to and pay for it and who is going to pay for it? It’s Zambians who are paying through these massively high tariffs. Declaring CEC assets as common carrier will not lower tariffs or reduce prices of goods and services in this country and so on. They are displaying utter ignorance in the way they are handling this.”
He added that the move was also meant to squeeze and antagonize the private sector even when the country remained desperate for investment.
“This government is desperate to prove to the world that they are going to do the right things in order to attract…first of all, even funding from IMF and other multilaterals to see good corporate governance in the country, to go and squeeze the private sector does not show good corporate governance in the country, does not show the protection of property rights in the country. It means anyone in Zambia who owns anything, this government can wake up one moment and declare that the State will take this over because that’s what this means. When you are desperate for investment, because this government cannot invest, they have run out of money, the Ministry of Finance have already…they have no money so they cannot invest in anything. So the country itself is desperate for investment, both local and also Foreign Direct Investment (FDI). This action that they have taken does not encourage investment, not even local investment. How they hope to turn this country around, how they hope to create employment, how they hope to bring economic activity that will reduce the cost of living, whilst antagonizing investors in this manner is beyond anybody’s comprehension,” said Milupi, who added that the service offered to the mines by CEC was beyond just supply, but ensuring that the quality of power supplied was within acceptable limits, which government, through Zesco, would have a hard time living up to.