Zambian mines and energy minister Christopher Yaluma says companies, including the local units of Glencore Xstrata plc and Vedanta Resources plc, have agreed to start talks to pay more for power in Africa’s biggest copper producer.
“They are willing to re-negotiate the contracts,” he told Bloomberg News by mobile phone from here.
Zambia is building new power plants to end an electricity shortage that has led to daily cuts. Mines, which are struggling with declining copper prices and rising costs as they follow ore bodies deeper underground, pay about half the cost of generating for new projects, according to the Copperbelt Energy Corporation, the biggest supplier to operators.
The Energy Regulation Board has granted state-owned power supplier Zesco Limited a “double-digit” tariff increase for its non-mining customers, such as households and companies that include the local units of SABMiller plc and Illovo Sugar Limited, Yaluma added, declining to provide the actual percentage increase for the utility. The increase is “much lower” than the average 26% Zesco applied for in July last year, and will probably become effective in January, he said.
Zesco produces more than 90% of Zambia’s power, some of which it sells to Copperbelt Energy that in turn sells to mines owned by companies including Vedanta, Glencore Xstrata and China Nonferrous Metals Company. Zambia’s mining industry accounts for about half of the country’s power demand.
Vedanta’s Konkola Copper Mines unit has stated that it will cut 1,529 jobs as it seeks to lower costs and boost productivity..
Copperbelt Energy increased its tariffs to mines by 28% in January 2011, except for Vedanta’s KCM, which agreed to increases over five years. Mines owned by Barrick Gold Corporation and First Quantum Minerals Limited buy their power directly from Zesco.
Zambia needs higher power tariffs to be able to grow supply and upgrade its distribution network, Yaluma said.
“This network has been totally neglected,” he added. “Come next year December there will be sufficient supply outstripping demand, but we don’t know if the network will be in shape to transmit the power.”
Source: Bloomberg News. For more information, click here.
Picture: The Copperbelt Energy Corporation supplies electricity to the mining companies based in the Copperbelt province of Zambia.