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CEC arbitration matter still ongoing despite end of BSA

CEC Plc has notified shareholders that the arbitration matter regarding outstanding amounts owed to ZESCO Limited is still ongoing despite the epilogue of the BSA on 31st March 2020, according to the latest SENS announcement from the company.

Shareholders are referred to the cautionary announcement, dated 27th September 2019, issued by the Board of Directors of Copperbelt Energy Corporation Plc (“CEC” or “the Company) informing the market that CEC was in receipt of a notice of intention to arbitrate from ZESCO Limited (“ZESCO”), pursuant to the Bulk Supply Agreement and Article 3 of the UNCITRAL Arbitration Rules 1976, resulting from ZESCO’s claim that CEC has failed to pay money due to them for electricity supplied under the BSA”, read a statement by Julia C Z Chaila, CEC’s Company Secretary, issued in Lusaka, Zambia on Thursday, 16th April 2020.

The debt in contention is related to amounts owed by Konkola Copper Mines (KCM) whom CEC had also taken legal action against in the past. “Copperbelt Energy Corporation, Zambia’s supplier of electricity to mining companies on the Copperbelt has dragged Konkola Copper Mines to court over a US$30 million debt it is owed based on an internal agreement”, read a report by the Post Newspaper published in 2014 and available on the ZCCM IH website. Fast forward to 2019, following Mines Minister Richard Musukwa’s statement to parliament which indicated that KCM faced high indebtedness and insolvency concerns, ZCCM Investment Holdings Plc asked the Lusaka High Court to grant them an order to appoint Milingo Lungu of Messrs Lungu Simwanza and Company as provisional liquidator of Konkola Copper Mines Plc.

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CEC further disclose in the SENS announcement that there was a further ground for disagreement. “ZESCO’s other cited ground is its disagreement with a statement in CEC’s 2018 annual report relating to the contingent liability arising from the 2014 Energy Regulation Board electricity tariff increase specific to the mining companies, which the mining customers have legally contested and were granted a Court injunction, pending determination of the matter by the High Court for Zambia”.

According to Edwin Goli Mulenga in his article published this website (An autopsy of the death of CEC-ZESCO BSA), On Wednesday 11th October 2017, the then Minister of Energy David Mabumba, announced policy measures that were being taken to migrate electricity tariffs to cost reflectivity for all customer categories. “Madam Speaker, in December 2016, negotiations were held between ZESCO, the Copperbelt Energy Corporation (CEC) and the mining houses in good faith on moving tariffs towards cost reflectivity and achieving closure on all outstanding billing issues by January, 2017”, read the speech by the Minister, available on the National Assembly website. “Madam Speaker, arising from the negotiations, the interim average mining tariff was determined at US$9.3/kWh effective January, 2017, pending the conclusion of the cost-of-service study”.

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