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Zesco’s termination of CEC bulk supply questionable – energy experts

A GROUP of energy experts has questioned Zesco’s motive behind the refusal to renew a Bulk Supply Agreement it entered into with the Copperbelt Energy Corporation (CEC) over 22 years ago.

On November 21, 1997, Zesco Limited and CEC entered into an agreement where the former was supplying power to the latter at wholesale, a deal that comes to an end on March 31 this year.

Since then, CEC has been supplying power to mining companies on the Copperbelt, as well as most mining residential areas.

The company is also the major financier of the Zambian premier league side Power Dynamos Football Club.

Last Friday, CEC informed its shareholders that energy minister Mathew Nkhuwa had notified management that the agreement would not be extended once it expires at the end of March.

Responding to the government’s decision, the Energy Advisory and Solicitation Institute (EASI) argued that CEC was already proven to be a responsible stakeholder in the energy sector.

EASI chairperson Chisakula Kaputu said the motive behind the government’s refusal to renew the agreement with CEC was highly questionable.

“Zesco has since the post 2000 commercialisation narrative still remained in the doldrums of a social enterprise with very little to show of a financially sustainable business model existing,” he said in a statement yesterday.
“…EASI believes that we have an energy sector at crossroads with pertinent issues of cost reflective tariffs, Electricity Supply Industry (ESI) sustainability and viability, reform uncertainty, legacy PPAs and BSAs, energy security, etc at the fore, as such transparency and good intent is demanded of all the energy sector players/stakeholders.”

Kaputu demanded clarification from the PF government on what he termed as an ambiguous statement.
He stated that both Zesco and CEC were key stakeholders in the energy sector, hence the need for the government to reflect on the decision.

“The energy sector needs CEC as an already proven key stakeholder and only second to Zesco in functional responsibility in the power generation, transmission, distribution and supply portfolios. The energy sector needs Zesco the most as sole owner of 66 per cent of national installed capacity and over 30,000 km of transmission and distribution national grid as well as custodian of [the] National Control Centre/systems operator functionality,” stated Kaputu. “Government’s decision on the nearing expiring ZESCO – CEC BSA must be taken in the best interest of the country and energy sector above all else. Ambiguity around the bold statement that the ZESCO-CEC BSA ‘will not be renewed’ after it expires on 31st March 2020 needs to be clarified at the earliest opportunity. In order to calm the anxiety of the mining load owners and Copperbelt Province energy users in general, the discussion/negotiation around the ZESCO-CEC BSA issue needs to be expedited with resolution made way ahead of the expiry date of 31st March 2020.”

According to a notice to shareholders, the government, through Nkhuwa and Zesco, had notified CEC that the Bulk Supply Agreement would not be renewed once it expired.

“In accordance with Section 81(1) of the Securities Act No. 41 of 2016, the Board of Directors of Copperbelt Energy Corporation Plc (“CEC” or “the Company”) advises the Company’s shareholders, and the market, that the power purchase agreement or Bulk Supply Agreement (“BSA”) between CEC and ZESCO Limited (“ZESCO”), entered into on 21 November 1997 is expected to come to an end on 31 March 2020,” company secretary Julia Chaila stated. “The Government of the Republic of Zambia (“GRZ”), through the Minister of Energy, and Zesco have notified CEC of their position that the BSA will expire on the date stated above and will not be renewed. GRZ and Zesco have expressed to CEC their commitment to continue facilitating an efficient and economic supply of power to consumers on the Copperbelt both during the validity of and post the BSA. CEC wishes to emphasise its unwavering commitment to use its infrastructure and capabilities in ensuring continued and seamless supply of power to all consumers on the Copperbelt now and after the BSA.”

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