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Zambia Assures Mines of Power as Supply Deal Deadline Looms

Copper mines in Zambia, Africa’s second-biggest producer of the metal, will have continuous electricity even if a supply deal lapses next month with no agreement to replace it, Energy Minister Matthew Nkhuwa said.

Most producers, including the local unit of Glencore Plc, buy power from Copperbelt Energy Corp., which in turn purchases it from state-owned Zesco Ltd. under a two-decade old accord. That pact expires on March 31 and an industry lobby group flagged uncertainty surrounding it as the biggest risk that copper mines face this year.

“I don’t think we’ll get to a point where we are going to switch off power to the mines,” Nkhuwa said in an interview in his office in Lusaka, the capital. “We’ll never get to there.”

Mines in Zambia account for about half of the southern African nation’s power consumption, and contribute about 70% of export earnings, so any disruption in supply could have a massive impact on the economy. The government’s foreign exchange reserves are already near a record low, and economic growth last year was the slowest in more than two decades.

Zesco and Copperbelt Energy are in discussions and the government is monitoring these and has set a time-line for a conclusion before the end of March, Nkhuwa said.

“If the worst got to the worst, the president can use his powers and declare a decree,” he said. “That is strategic economic equipment, and if there was no power supplied, it would be sabotage of some kind to the whole country.”

The government won’t use a new bulk-supply deal to increase power tariffs for mining companies, according to Nkhuwa. Rather, a cost-of-service study that’s underway and due for completion by year-end will determine any changes to electricity prices the mines pay, he said.

Source: Bloomberg

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