The only electricity generating company listed on the Lusaka Securities and Exchange has advised shareholders and stakeholders that the contract they have with national utility that provides it with the power it supplies both to domestic mining companies and exports to the Congo will be ending in March this year.
CEC Plc which has prided itself as being one of the most successful stories of the privatization era of the last 1990s has been in contract with ZESCO for the past 20 years.
“In accordance with Section 81(1) of the Securities Act No. 41 of 2016, the Board of Directors of Copperbelt Energy Corporation Plc (“CEC” or “the Company”) advises the Company’s shareholders, and the market, that the power purchase agreement or Bulk Supply Agreement (“BSA”) between CEC and ZESCO Limited (“ZESCO”), entered into on 21 November 1997 is expected to come to an end on 31 March 2020”, read the statement issued to SENS by the company’s Company Secretary Julia C Z Chaila by order of the board on Thursday, 2nd January 2020.
According to the company, “the Government of the Republic of Zambia (“GRZ”), through the Minister of Energy, and ZESCO have notified CEC of their position that the BSA will expire on the date stated above and will not be renewed”.
The company has largely benefitted from the 20-year Bulk Supply Agreement has recently been making strides to diversify its energy mix. In their last annual report, the company indicated that it would also purse the Congo export market. Fast forward to December 2019, the company also signaled to the market that it would consider tapping into the Southern African Power Pool should the stalemate regarding the BSA still continue, as reported by Diggers News Paper on 19th December 2019. What was ironic was that the counterparty was also a member of SAPP and therefore, CEC was obligated to have discourse with its fellow member regarding any power requirements.
The company’s shares, which are currently trading at K1.25, have plummeted by 13.79% over the last 53 weeks, according to the company’s investor website. Financial Insight has noted that the CEC security has been the most traded in 2019.
Following months of speculation albeit Ministry of Energy’s continued advice on the epilogue of the Bulk Supply Agreement, CEC’s statement now provides comfort from the company’s perspective on the way forward and what its position is during this period. The company has indicated that it will continue to engage with the counterparties of the BSA. “CEC will, in the meantime, continue working closely with both the Government and ZESCO with the aim of arriving at a mutually acceptable solution post the BSA”.
Sources close to the matter that have indicated that the counterparties to the agreement will ensure a seamless transition and continued supply to all mining players currently being supplied by CEC. “GRZ and ZESCO have expressed to CEC their commitment to continue facilitating an efficient and economical supply of power to consumers on the Copperbelt both during the validity of and post the BSA”, according to the statement from CEC.