Zambia copper miners face $276m bill in power dispute

JOHANNESBURG (Bloomberg) - Zambian copper miners including the local unit of Glencore Plc could face a power bill of more than $276-million if they lose a dispute with the government over electricity tariff rises, according to Copperbelt Energy Corp., their biggest supplier.

A resolution to the three-year battle could come by the end of the month, Copperbelt said in its 2016 annual report, published on Friday. If the High Court rules in favor of the energy regulator and its tariff increases, the supplier will be ordered to pay state-owned power producer Zesco Ltd. $276-million in outstanding fees. The company would in turn pass the cost onto customers, Copperbelt said.

A ruling could bring an end to a dispute that has raged in Africa’s second-biggest copper producer since April 2014, when Zambia’s Energy Regulation Board raised tariffs for mining operators by almost 30 percent. The Chamber of Mines of Zambia, which represents the companies, asked the High Court in Lusaka, the capital, to review if the increase was lawful. The regulator again raised prices in January, 2016.

“Most of the mines have contested this tariff increase,” said Copperbelt Energy. “From April 2, 2014 to Dec. 31, 2016, the mines opted to pay the invoices in part, based on the old tariffs.”
 

Power Shortage

Zambia is emerging from its worst-ever power shortage, which started when hydropower dam levels dropped in 2015, leading to rolling outages that lasted as long as 12 hours a day. The supply situation has improved as rains replenish reservoirs used to generate almost 90 percent of the country’s electricity.

Copperbelt has been invoiced by Zesco using the new tariffs, which are now almost double what they were before the 2014 increase, the company said. Miners have argued they have individual power-supply contracts and any changes to those must be negotiated.

Nathan Chishimba, president of the Chamber of Mines, declined to comment on the case as it’s yet to be concluded. On electricity prices, the various parties “have had very cordial and rational discussions, which we hope to conclude shortly,” he said in emailed comments.

“Progress has been made on the subject matter,” Energy Minister David Mabumba said by text message.

Zesco and the Energy Regulation Board didn’t immediately respond to requests for comment.

“By year end, the tariff discussions could not be concluded though relatively good progress was made,”  Owen Silavwe, Copperbelt’s managing director, said in the report. “Tariff discussions will continue in 2017 and we remain confident that closure on this matter will be achieved before the end of the first quarter of 2017.”