Zambia has declared distribution and transmission lines of Copperbelt Energy Corp. (CEC) as “common carrier”, a move the company described as expropriation.
CEC said the order from Zambian Minister of Energy Mathew Nkhuwa, titled Statutory Instrument No. 57 of 2020 (SI 57) was given shortly before the end of the company’s power supply agreement (PSA) with Konkola Copper Mines (KCM).
Because of this move, CEC is “on the brink of defaulting” on its loans, with the government’s move having taken away its commercial and property rights, it said.
This took effect at midnight on May 31. The company said this followed failed negotiations on the renewal of a bulk supply agreement (BSA) with state-owned power company Zesco.
KCM had run up debts of around $144 million to CEC in early May. On May 26, Zesco asked CEC for permission to use its transmission network to supply power to a “new unknown client” in the Copperbelt.
CEC said it was ready to start negotiations provided that the new customer did not owe it money and that it did not have a deal already with CEC.
Nkhuwa wrote to CEC on May 28 asking the company to help supply power from Zesco to KCM. The declaration of CEC’s network as common carrier came the next day, with the Energy Regulation Board (ERB) setting the tariff for transmission at around 30% of the price CEC has set.
These moves constitute expropriation of its infrastructure, CEC said, and are highly detrimental to its business and its ability to continue as a going concern. The company will engage in dialogue with the Zambian government with the aim of winning back its rights, CEC said.
On June 1, CEC said it had cut off KCM from its network, complaining that the mining company had been unwilling to engage in talks and failed to pay its debts.
KCM is majority owned by Vedanta Resources but ran into problems in 2019 when the Zambian government appointed a liquidator to run the mining company. As far as CEC is concerned, both Zesco and KCM are controlled by the Zambian government.
CEC operates a network in Zambia and a transmission interconnection with Congo Kinshasa. It has more than 1,000 km of high voltage transmission lines and 43 substations across the Copperbelt. CEC reported revenue of $408.3 million in 2019, down by 3% on the year.