The Copperbelt Energy Corporation – CEC and Zambia’s state owned power giant ZESCO failure to successfully negotiate and reach agreement for a new bulk supply agreement – BSA which came to an end on 31 March 2020 has been linked to the announced closure of Mopani Copper Mines – MCM.
An energy expert who spoke to the Zambian Business Times – ZBT but asked to have his identity withheld has linked the placing of Mopani Copper Mines – MCM on care and maintenance (which in effect is temporal closure of the Kitwe and Mufulira based mines) to the collapse of negotiations between ZESCO and CEC over BSA, which directly affects the energy costs for Mopani. The cost of power is a key component of the cost structure for an underground mine such as MCM.
Even last time when Mopani closed and sent away its workers, if you remember, it was the time ZESCO increased tariffs across board but the mine rejected the revised tariffs and CEC was forced to initially restrict power supply to the mine but later resumed supply.
On August 11, 2017, CEC then restricted power supply to one of their largest customers, Mopani Copper Mines from 190 megawatts to 94 megawatts officially stating that the mine did not want to pay the revised tariffs. Mopani then went on to state that they would retrench 4,700 workers and locked out the mine.
It had to take the intervention of the head of state, President Lungu who met with Glencore group executives for the mine to reopen. MCM influence on the economy of Kitwe, which is Zambia’s second largest city by population and Mufulira is so pervasive due to high reliance on the copper mine and lack of diversified economic activities.
The BSA which was entered into on 21 November 1997 had come to an end on 31 March 2020. Energy Minister Mathew Nkhuwa and ZESCO have confirmed to CEC and the nation of their position that the BSA will not be renewed at terms which have been described as ‘not beneficial to the Zambian people’.
On the other hand, CEC has indicated that it could not agree to terms demanded by ZESCO as they would injure the Corporation’s business model and impact it’s ability to continue operating as a going concern.
According to information made available to ZBT by CEC public relations advisor Muntanga Sibalwa on April 8, 2020, the Copperbelt based corporation had in the last seven weeks engaged ZESCO and the Ministry of Energy to put in place an interim agreement but that it became clear during the negotiations that the intension was to agree a wholesomely new deal with totally new terms, hence the two parties could not reach an agreement on account of certain new terms.
When pressed to state which specific terms are behind the bone of contention, CEC could not disclosed the terms imposed by ZESCO and when pressed to get further details on the options for CEC to develop its own power generation plants, Sibalwa was unable to share further information regarding the matter on what is believed to be high sensitivities around the negotiations.
CEC has since pledged to remain committed to continue providing seamless power supply services to all it’s customers (mining and non-mining customers) on the Copperbelt province while the parties continue to seek resolution of the outstanding matters and follow through with conclusion of the negotiation for a new bulk supply agreement.
“In this view, achieving a mutually acceptable bulk supply agreement between the parties remains of strategic importance to the electricity sector and the country. Therefore, CEC remains confident that the parties will use the next several weeks to narrow the negotiation differences gap, culminating into a new power supply agreement”, She added.
The company has also indicated that it will ensure that any agreement it enters into will be negotiated in good faith and reflect a fair outcome so as to ensure that CEC as a business continues to operate sustainably and in the interest of all it’s stakeholders who include shareholders, customers, employees, debt providers and many others.
The Northwestern province based copper mines, the includes Zambia’s largest miner, First Quantum Minerals – FQM’s Kansanshi and Kalumbila Mines, are directly supplied with power by ZESCO and are not affected by the stalled negotiations between ZESCO and CEC.
The Association of Mine Suppliers and Contractor’s issued a press statement on Monday 6 April 2020 accusing MCM of being insincere and using the COVID 19 pandemic and the downward trend in global copper prices as an excuse to exit the mine and Zambia.
The contractors association further stated that MCM has terminated a lot of local contractors jobs and has since moved its procurement office to South Africa, preferring to sub-contract jobs to foreign companies at the expense of local ones.
