COPPERBELT Energy Corporation (CEC) has refuted former Zesco board chairman Mbita Chitala’s claims that the corporation had schemed a corporate capture of Zesco.
In a statement, Wednesday, CEC senior manager corporate affairs Chama Nsabika said the claims by Dr Chitala were meritless and the corporation was currently discussing what additional action it would take to challenge this.
“We are deeply concerned with the way Dr. Chitala’s book is positioned and with its depiction of CEC. Our Board is discussing any additional action the Company could take, about which our stakeholders will be informed accordingly. CEC remains committed to transparency and full disclosure. The Company reassures all its stakeholders that it is engaging constructively with the new board and management team at ZESCO, the Ministry of Energy and the ERB with the key objective of advancing the interest of the sector in a fair and equitable manner,” Nsabika stated.
She noted that Dr Chitala contradicted himself several times in the book.
“CEC is deeply concerned by the claims made by Mbita Chitala, the immediate past board chairman of ZESCO Limited (ZESCO), in his recently released book, ‘Corporate Capture: The Political Economy of Electricity Management in Zambia (How Not to Manage a State Enterprise)’. The integrity of the book, which is purported to contain information inter alia suggestive of a CEC scheme in the alleged corporate capture of ZESCO, is questionable and the claims made against CEC meritless. It is extremely disappointing that Dr Chitala chose to make such serious and unsubstantiated claims against a company bound by strict disclosure obligations as a listed entity, whose information can easily be verified. As one of the leading listed companies on the Lusaka Securities Exchange (LuSE), CEC adheres to strong corporate governance principles and conduct and has clear, transparent and honest communication and disclosures,” Nsabika said.
“Whatever Dr. Chitala’s motives, it is clear that he makes several contradictions, misstatements, omissions of fact and repositioning of narratives to lead the reader to a particular conclusion. Dr Chitala openly acknowledges various schemes, including the establishment of a new special purpose vehicle, which were considered to take over CEC while he was chairman of ZESCO. He provides two detailed options which he sketches out in the book. This could explain his motivation to undermine CEC so as to bring its value down and possibly take over the Company on the cheap.”
Nsabika said CEC was still studying the book and were seeking legal guidance on some of the allegations and inaccurate statements.
“We are continuing to study the book systematically and are still seeking legal guidance on some of the allegations and inaccurate statements. However, in the interest of transparency, we would like to highlight a few of the allegations and inaccurate statements: Throughout the book, Dr. Chitala tries to build the narrative that CEC’s shareholding is dominated by foreign interests. In Table 60, he presents a ‘CEC shareholding at becoming public’, which is completely fabricated. Two shareholder groups in the table which he credits with a combined 45.1 percent shareholding in the Company were not even shareholders of the company at the time. ZCCM IH and ZECI, two entities representing Zambians, held over 72 percent of the shares which is not captured therein,” Nsabika said.
“In Table 61, he again continues with the misrepresentation showing shareholding in 2018 with ZCCM-IH at 13.25% instead of 20%. CEC is a listed company on the LuSE and, therefore, its shareholding is a matter of public record and easily verifiable by anyone. It is surprising that Dr. Chitala, whose biography at the beginning of the book refers to him as, ‘a registered finance and investment adviser with the Zambian Securities and Exchange Commission’ couldn’t verify this basic information which he relies on to make a key argument in his book.”
Nsabika said Dr Chitala contradicted himself with regards to the actual tariffs CEC pays Zesco.
“An allegation he makes consistently is that CEC disadvantages ZESCO by paying a suboptimal tariff. Dr Chitala contradicts himself with regard to what the actual tariff CEC pays ZESCO. On page xvii, he states, ‘[ZESCO sold] to the mines through CEC at an average tariff of US$c 6.33/kWh. This was simply poor business’. Yet on page 114, he states, ‘Under the BSA, CEC obtained power from ZESCO at an average tariff of US$c 8.11/kWh. If the chairman of ZESCO for 5 years is not clear what their largest customer buys power at, why should we expect any difference from those he reported to? No wonder Mr Ronald Chitotela recently argued in Parliament that under the BSA, ZESCO sold power to CEC at US$c 3/kWh,” Nsabika said.
“CEC – Mopani Tariff Negotiations of 2017; Dr Chitala on page 148 writes: ‘Until I left ZESCO, CEC had not concluded its tariff discussions with Mopani and failed to provide any progress to ZESCO or government.” This is, again, another blatant lie by Dr Chitala. The truth is that CEC and Mopani completed these negotiations within 2017 and signed an addendum to their Power Supply Agreement (PSA) reflecting the agreed changes in tariff. It is again difficult to understand the motive behind blatant lies as presented on this subject by Dr Chitala. Following the signing of the addendum between CEC and Mopani, CEC proceeded to inform both ZESCO and the government and proposed a draft addendum to the BSA to ZESCO. However, under the leadership of Dr Chitala, ZESCO was unwilling to review the addendum from CEC nor to sign it.”
Nsabika said what had been presented in the book on the Bulk Supply Agree was misrepresented.
“..Dr Chitala completely omits an important aspect of the BSA contained in Clause 1 (a) (iii) which prohibited CEC from purchasing the power it supplied to its mining customers from any other source but ZESCO, unless in situations where ZESCO had no capacity to supply CEC’s power requirements. The BSA, therefore, exclusively reserved the Copperbelt mining market for ZESCO’s power and, thus, solidly protected ZESCO’s business interest in this respect. It was always clear that under the BSA, CEC could not and did not buy power from any other company but ZESCO,” she stated.
Nsabika said Dr Chitala also contradicted himself on claims that CEC owed Zesco amounts ranging from US$225 – 325 million.
“Dr Chitala makes various claims of CEC owing ZESCO an amount ranging from US$225 – 325 million. On page xxix, he pegs CEC’s alleged owing to ZESCO at US$325 million and on page 120, when discussing his proposal for ZESCO to acquire CEC, he states, ‘ZESCO would have to pay a cash price of US$288 million. However, ZESCO also noted that CEC owed ZESCO about US$257.1 million and that this amount would be used to offset the price for the purchase of any ordinary shares from CEC’. However, Dr Chitala goes on to contradict himself on page 124 by stating that the purported money that CEC owes ZESCO is the subject of Judicial Review proceedings in a case brought by the Chamber of Mines against the Energy Regulation Board (ERB) in 2014. Dr. Chitala states, ‘If the ERB decision is determined to be lawful by the Zambian High Court, ZESCO would be entitled to claim US$ 225 million from CEC’. Worth noting is that CEC would also be entitled to claim a similar amount from the mines in such a case. Further, Dr Chitala omits to state that the decision of the ERB, while being the subject of the ongoing judicial review, has also been stayed by the High Court,” Nsabika said.
Nsabika said CEC was committed to promoting transparency.
“Again, Dr. Chitala selectively does not take the reader through to the final outcome but rather chooses to end with the following, ‘ZESCO considered the CEC action as groundless, not least since ZESCO had not been privy to that PSA and was itself free as the Electricity Act 2019 provided to compete for business’. The final outcome is that the matter came up for a status conference in August 2021 at which both ZESCO and KCM informed the court that they were discontinuing their actions following the quashing of SI 57 of 2020 by the High Court upon which they had grounded their respective claims. ZESCO finally filed its notice discontinuing the action,” stated Nsabika.