THE sole arbitrator in the matter where Zesco Limited instituted arbitration proceedings against the Copperbelt Energy Corporation Plc (CEC) over monies purportedly owed to the former by the latter for electricity supplied under the now lapsed Bulk Supply Agreement (BSA) has issued an interim/partial award determining some aspects of the commercial dispute.
In a cautionary notice issued via the Lusaka Securities Exchange (LuSE), CEC company secretary Julia Chaila disclosed that the arbitral proceedings commenced by Zesco against CEC had concluded.
In 2019, Zesco took action against CEC pursuant to the BSA and the UNCITRAL Arbitration Rules arguing that CEC did not fully pay money due to Zesco for electricity supplied under the BSA.
Zesco also disagreed with a statement in CEC’s 2018 annual report relating to the contingent liability arising from the 2014 Energy Regulation Board (ERB) electricity tariff increase specific to mining companies, which mining companies legally contested and were granted a stay pending determination of the matter in the High Court for Zambia.
According to Chaila, the principal claim relates to the tariff discussion of 2011 in relation to Konkola Copper Mines Plc (KCM) and the impact of Statutory Instrument No. 33 of 2012, which outlawed charging and/or paying in any currency other than the Zambian kwacha.
“The arbitral proceedings (which are confidential between the parties in accordance with paragraph 26 (i) of the Agreement) have concluded. Accordingly, the Board of Directors of CEC wishes to inform shareholders that following the said proceedings, the sole arbitrator, on 21st July 2021, issued an Interim/Partial Award determining some aspects of the dispute between the parties. The quantum of the liability and related interest in (1) above as well as the contingent liability referenced in (2) have been reserved for the Final Award. The Board will keep shareholders informed regarding this important matter as events unfold,” said Chaila in the cautionary notice issued on September 7.
She advised shareholders to exercise caution when dealing in the company’s securities until further notice.
The lingering uncertainty over the lapsed BSA was largely credited for CEC’s share price dropping to K0.87 per share by end of LuSE trading on June 12, 2020 compared to K1.21 on March 31, 2020, the day the BSA expired.
Since then, CEC has endured upheavals, among them the declaration of its transmission and distribution infrastructure as common carrier, twice, through Statutory Instrument Number 57 of 2020 (SI 57) and its successor, SI Number 24 of 2021, which replaced SI 57.
Following the issuance of SI 57 in May 2020, Zesco proceeded to utilise CEC’s infrastructure to provide KCM with electricity at a rate dictated by the ERB, but which CEC argued was detrimental to its business as it was sub-economic.
CEC’S share price has, however, rallied to recover lost gains and has been holding steady at K1.40 a share on the back of strong financial performance last year, despite being owed over US $155 million in unpaid electricity bills by the embattled mining company, KCM.