KONKOLA Copper Mines Plc (in liquidation) has admitted to owing its power supplier, Copperbelt Energy Corporation Plc (CEC) a whopping $132 million for power supplied and used by the mine over several months.
According to an affidavit in support of summons for an order of interim relief pending arbitration filed into court on 13 May 2020, sworn by Mbobe Calvert Nyondo, who identified himself as KCM’s Energy and Risk Manager, the mining operation “has consumed or received power from the Defendant (CEC) to the tune of USD131,811,794” all in the course of operations.
On 8th May 2020, CEC wrote to KCM, demanding payment of the sum outstanding and notifying them that that it will reduce power supply to KCM unless the overdue invoices were immediately settled. This moved KCM to seek a restraining order from the Kitwe High Court to stop CEC to cut power to the mine.
But KCM says should CEC proceed to restrict its power supply, it will suffer irreparable damage to its mining operations, which will not be atoned for in damages.
However, CEC states that the continued non-payment for power by KCM was threatening its existence. Documents filed into court by KCM include a letter written by CEC on May 6, this year, to the Ministry of Energy, Ministry of Finance and Ministry of Mines and Minerals Development requesting for a meeting to agree on a mechanism that will enable continued power supply to KCM.
In the said letter, the CEC board disclosed that the power utility was faced with serious challenges in continuing to supply power to KCM without an appropriate solution to liquidating the accumulated debt of US$130 million.
The board stated that the winding up proceedings of KCM had impacted its ability to discharge some of its obligations, adding that since February, 2019, to-date, the mining company had been unable to make any cash payments towards electricity bills.
“We write to request a meeting with yourselves, Honourable Ministers, to discuss an urgent matter relating to the need to agree a mechanism that will enable continued power supply to KCM. As you are aware, the winding-down proceedings currently in progress at KCM, have impacted the mine’s ability to discharge some of its obligations. For example, since February, 2019 to-date, KCM has been unable to make any cash payments towards electricity bills for power consumed at its operations,” read the letter in part.
“As at April, 2020, KCM’s indebtedness to CEC stands at US$130 million and is continuing to expand. As the amounts owing by KCM remain outstanding, CEC is required, on a monthly basis, to impair these amounts in its books, leading to a grievous deterioration of its financial position, which if left unchecked, could wipe out CEC’s going concern position with dire consequences on jobs and service delivery to the mines and the rest of the Copperbelt.”
The board, therefore, requested for a meeting with the Ministers in Lusaka in the hope that a solution to enable continued power supply to KCM would be found.
“In this regard, CEC is faced with serious challenges in continuing to supply power to KCM without an appropriate solution on liquidating the accumulated debt and a mechanism to discharge KCM’s ongoing electricity bills being agreed with government. We, therefore, respectfully request for a meeting with yourselves, Honourable Ministers, on Friday 8 May, 2020, (or indeed any other date convenient to you) in Lusaka at which we wish to discuss the matter in more detail in the hope that a solution to enable continued power supply to KCM may be agreed,” read the letter.
News Diggers! learnt that CEC would today restrict power supply to KCM as a result of the mining company’s failure to settle the accumulated electricity bill.
However, KCM has sought and been granted a court order of interim relief as a matter of urgency to prevent losses and damages that would be caused if CEC proceeded to restrict power supply to it.
In the said affidavit,t KCM Energy and Risk Manager Mbobe Nyondo, explained that KCM was among the consumers of CEC’s power pursuant to a Power Supply Agreement (PSA) dated March 13, 2000.
He added that the said PSA lapsed by effluxion of time on March 30, this year, and that by a letter dated April 17, 2020, and executed by KCM and CEC, the PSA was extended to May 31, 2020.
Nyondo stated that at the time of the commencement of the liquidation proceedings of KCM in the Lusaka High Court, there was due to CEC an amount of US $46,909,303.75 and it was observed that CEC had on May 14, 2019, issued a Notice of Restriction of Power Supply. He added that the pre-liquidation indebtedness of KCM to CEC was ascertained to be US $46,465,364.72.
“In the course of the operations during the liquidation period, KCM has consumed or received power from CEC to the tune of US$131,811,794,” read the affidavit.
Nyondo further explained that between October, 2019 and December 2019, KCM paid to CEC US$46,465,364.72, which included the amount of US$24,064,722.00 on which the May 14, 2019, Notice to Restrict was issued.
“That CEC, notwithstanding the said payment above have issued a demand notice for the amount of US$131, 811,794 and are seeking to restrict power supply to KCM based on their Restriction Notice of May 14, 2019, contrary to the terms of the Power Supply Agreement. KCM has not only disputed this demand, but also the Notice of Restriction of May 14, 2019, has been disputed,” he stated.
“It is the position of KCM, which position shall be articulated at the hearing that it is incumbent upon CEC to issue a fresh notice for their intended action as the earlier one has long since abated and the amounts in excess of the US$24,064,722.00 referred to, therein, have been paid by KCM to CEC.”
He stated that the PSA in Clause 23 provided that all disputes arising from the Agreement must be finally settled in Arbitration.
Nyondo added that KCM in compliance with Clause 23 of the PSA intends to refer the said dispute to arbitration and prayed for interim relief as a matter of urgency so as to forestall the losses, damages and injury that will be consequent upon a restriction of power; which interim relief was granted.