The Zambia Chamber of Mines has warned that non-renewal of the Bulk Supply Agreement (BSA) between Zesco Limited and the Copperbelt Energy Corporation (CEC) Plc risks affecting production in the mining sector.
And the Chamber says non-renewal of the Agreement will cause severe price distortions in the electricity sub-sector if an agreement between Zesco and CEC is not reached.
Both the CEC and Zesco have confirmed that the BSA, which ensured a steady supply of power to the Copperbelt mines and residents for over two decades using CEC’s infrastructure, will not be renewed upon expiry on March 31, 2020.
But in an interview, Chamber of Mines president Goodwell Mateyo urged Zesco to consider reviewing their position on the renewal of the BSA to avoid unnecessary disruption to mining production this year, which had already been negatively affected by the 2019 mining fiscal regime, among other costs.
“We can’t state how it will affect production, it’s obvious that there is going to be distortion of costs to the industry if Zesco doesn’t reconsider its decision not to renew the Bulk Supply Agreement. There is a risk that it could affect production in the industry, but CEC indicated that they have a ‘plan B’; they could bring in power imports. Zesco has indicated that it’s willing to supply the power directly to the mines, but it’s difficult to see how they can do that considering that the network and distribution infrastructure is still owned and operated by the CEC. So, ultimately, this comes with a lot of concerns and potential distortions in the sector so we hope that Zesco will consider changing its decision over the power supply agreement,” Mateyo, who is also Mopani Copper Mines’ general legal counsel, said.
“CEC has indicated that they will get to continue to supply power leveraging on power imports to its network and distribution network, but again, there are lots of contingencies with that so we hope that Zesco will re-look this decision because it might potentially cause distortions in the sector.”
And when asked whether mining companies had plans to import their own power when the BSA lapses, he observed that the timeframe was too short to seal a power import deal between now and the end of March.
“We can do that, but on a long-term arrangement, the date on which the supply agreement between Zesco and CEC expires is March 31, this year, which is less than three months from now. It will be difficult to come up with alternative arrangements within a space of three months because analysing these deals for such projects typically takes a long time. The starting point is that there will be power as it is now whatever the case, but the case in point is who supplies it and how they actually go about that, that’s where the question marks are,” said Mateyo.