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Unpacking the CEC, ZESCO impasse

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The recent action by government to declare Copperbelt Energy Corporation (CEC) power lines as common transmission lines has stirred a strong debate.

Some view it as exploitation, others as private property grab by the government, saying it is paints good picture regarding property rights.

Some analysts say that could scare away local and international investors.

Meanwhile, PeP President, Sean Tembo says before jumping to conclusions, the nature of the agreement between the two parties should be critically looked into.

He says, before the outcry and blue murder about Zesco wheeling it’s power through CEC’s transmission and distribution network, the nation should remember that the SI is not saying that the said service will be free of charge.

The SI provides for remuneration by Zesco to CEC for use of their infrastructure. Such remuneration will be determined by ERB from time to time.

“So in my view, we need to wait and see what kind of remuneration ERB comes up with.

“If such remuneration is reasonable, then there is no need to cry blue murder. If the said remuneration is too low, then this SI will amount to expropriation of private property and can be subject to challenge in court,” he says.

He said the entire principle of the SI, my view is that it is bittersweet because on one hand, it sends a very bad signal to the international business community that private property is not safe in Zambia, and this might undermine the flow of FDI.

He added that on the other hand, CEC has acted unreasonably during these negotiations because they want to insist on a continuation of the previous arrangement whereby they bought power from Zesco at ridiculously low rates and sold that power at exorbitant prices, thereby making supernormal profits.

“CEC seems to premise their “arrogance” on the fact that they own the power transmission and distribution networks to the mines and can therefore arm twist Government.

“The same transmission and distribution network that was built by Government and which CEC bought for a song in 1997,” said Tembo.

He said that is not acceptable as it amounts to economic sabotage. Therefore, in that light and that light only, the actions of the Minister to issue the SI last Friday is acceptable.

However, Msegede Salema, responding to Tembo’s view said: “I feel you have missed the ploy here my brother. This SI has been done in bad faith and has nothing to do with the Bulk Power Purchase Agreement which Zesco has refused to renew.”

According to Salema, the SI is specifically designed to keep KCM running which owes CEC more than $130 million and all efforts to have this money paid have failed.

“Today, 1st June, 2020 CEC was scheduled to terminate power supply to KCM having tried to available means to have KCM pay its debt. So on Friday the minister of mines decides to issue this SI which will allow Zesco to supply power to KCM after CEC terminates supply,” said Salema.

“To me this is acting in bad faith. Government should have ensured that KCM pays its debt to CEC and everyone else the mining company owes money. Period,” added Salema.

Salema urged Tembo to familiarize with the history of CEC so that he can revisit his perception, saying it’s infrastructure was built by government and CEC bought it for a song.

Salema said CEC can be traced to its origin to a company that was called Northern Rhodesia Power Corporation established in 1952.

In or around 1954, the company became the Rhodesia-Congo Border Power Corporation whose purpose was to supply reliable and secure electricity to the mines in Northern Rhodesia and the Congo by interconnecting separately run thermal power stations in the mining areas.

Later, the company sourced and supplied hydroelectric power from the Congo to supply to the mines in Northern Rhodesia before the production of hydroelectricity from the Kariba Dam.

“At Zambia’s independence in 1964, the Rhodesia-Congo Border Power Corporation became Copperbelt Power Company (CPC), an entity that supplied electricity to the mines until 1986 when it was incorporated into the Zambia Consolidated Copper Mines (ZCCM) as its Power Division,” noted Salema.

Meanwhile, Davies MM Chanda writing in the Times of Zambia published on 23rd October, 2014 noted that:

“In 1997, CEC was born out of the privatization of ZCCM Power Division. Cinergy Global Power of the USA and National Grid of the UK acquired the controlling stake in the Company.

The two investors subsequently sold off their 77 per cent stake in the Company to a group of local entrepreneurs with DFI backing.”

Chanda noted that, CEC became the first comprehensive electricity privatization in Sub-Saharan Africa and the Company is today increasingly seen as a successful model for privately owned and managed power utilities in Africa.

In January 2008, CEC made a giant step to become Zambia’s first power utility to list on the Lusaka Stock Exchange (LuSE) and remains the only one to date.

Presently, CEC has empowered over 4000 Zambians through direct and indirect ownership of shares in the Company through the LuSE.

In 2009, CEC extended its business interests into telecommunications when it commercialized it fibre optic assets, partnering with Realtime Technology Alliance Africa (Pty), a well-established Internet Service Provider (ISP), currently servicing most of Zambia’s large corporate entities.

In 2012, CEC stepped up its investment in the sector when it partnered with Mauritian-registered Liquid Telecommunications Limited, to form the CEC Liquid Telecoms joint venture, a company that has become a force to reckon with in Zambia’s telecommunication market in its few years of existence.

In its quest to grow and diversify the business, CEC has embarked on developing its flagship hydro power project – the 40 Mega Watts (MW) Kabompo Gorge Hydro Power project, located on the Kabompo River in Mwinilung’a District of North-Western Province.

The development of the first hydro power station in that part of the country represents a shift in the country’s norm, where the main hydropower stations are located in the southern part of the country.

It is also a significant step in bringing reliable power to the main load centers in the Northern and North-West parts of the country.

It also expands CEC’s contribution to Zambia’s Electricity Supply Industry and comes at a time when all efforts are being made to address a crippling power deficit in a country where access to electricity is still below 30per cent.

The US$215 million investment has considerable social and economic benefits for the local communities and the country at large.
These include employment creation, upgrade of existing infrastructure, potential to accelerate rural electrification in five chiefdoms, which are traversed by the 110km long 33kV power transmission line for construction power, and the creation of two new townships, contributing to well-planned urbanization of Mwinilung’a District.

In its quest to attain pan-African status, CEC has positioned itself to take advantage of the opportunities in the African power infrastructure space by providing innovative solutions and building strategic partnerships on a continent with happening growth and an insatiable appetite for electric power.

The CEC Group, through wholly owned subsidiary CEC Africa Investments Limited (CECA), now has a footprint in three other African countries – Nigeria, Namibia and Sierra Leone.

“In Namibia, CECA signed a Joint Development Agreement with Namibia’s national power utility, NamPower and Kudu Power Limited to acquire up to 30% interest in Namibia’s 800MW Kudu gas to power generation project and to offtake up to 300MW of the scheme’s output on long term basis.

“The Company has acquired operating assets in Africa’s largest economy, Nigeria, through Abuja Electricity Distribution Company and Shiroro Hydropower Plant,” noted Chanda.

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Start: 2019-07-01 End: 2019-07-31