KCM owes CEC U$ 44 million

THE Copperbelt Energy Corporation (CEC) has restricted the supply of electricity to Konkola Copper Mines (KCM) because the giant mining company has refused to make payments for the electricity consumed between April 2014 to date, accumulating electricity bills totaling about US$44million.

CEC corporate communication manager Chama Nsabika-Kalima said the Power Supply Agreement (PSA) between the twoo provided for restriction of electricity supply, which entailed a reduction of electricity of an agreed minimum limit, ensuring continued availability of power for essential operations such as pumping of water to prevent flooding of the mine, ventilation and operation of medical facilities.

Ms Kalima said in a press release that the restriction was effected if payment for electricity consumed  continued to remain outstanding beyond a specified period.

“CEC  wishes to advise that it has commenced restriction of electricity supply to Konkola Copper Mines Plc (KCM) in accordance with the provisions set out in the Power Supply Agreement for non-payment of outstanding invoices.

“The restriction is effected if payment for electricity consumed continues to remain outstanding beyond a specified period. KCM has refused to make payments for the electricity consumed between April 2014 to date, accumulating electricity bills totaling about US$44 million,” Ms Kalima said.

Ms Kalima said the PSA obliged the parties that even where there was a dispute, each party must continue to carry out its obligations CEC continuing to supply electricity and KCM paying for the electricity it consumes.

“In this regard, in the event that KCM disputes an invoice issued, it is obliged by the PSA to settle portions of the invoice that it does not dispute. Consequently, despite KCM having declared a dispute and taken the matter to court in April 2014, CEC has continued to supply electricity to KCM.

“However, KCM has reneged on its contractual obligations and refused to pay CEC for invoices issued from March 2014 todate. KCM’s refusal to make payments against invoices issued, even on undisputed amounts, has had a serious adverse effect on CEC’s business and essentially entails that CEC has been subjected to subsidizing and sustaining the KCM operations for close to six months,” she said.

Ms Kalima said CEC further advised that there was a dispute on the Tariff Increase Directive issued by the Energy Regulation Board in April 2014, which was the subject of litigation by the Chamber of Mines before the High Court.

She said CEC, therefore, denied that it had effected a unilateral increase in power tariffs contrary to the provisions of the PSA as the increase was implemented industry-wide pursuant to a directive by the regulator. “Arising from unpaid invoices, CEC issued a Restriction Notice in accordance with the provisions set out in the PSA. However, rather than meet its contractual obligations, KCM obtained an interim order of injunction from the High Court, restraining CEC from restricting, suspending, disconnecting or otherwise interrupting supplies of electricity.

“During the period that the Interim Order of Injunction remained in place, CEC continued to meet its obligations in full. However, KCM on its part has consistently refused to pay for the electricity it has consumed, save for a payment of US$16.4 million in partial compliance with a Mandatory Order of Injunction issued by the Commercial Court in favour of CEC on 3rd September 2014,” she said.

Ms Kalima said subsequent to the Interim Order of Injunction, the High Court heard arguments inter partes in May 2014 and in its ruling of 16th September 2014 set aside the injunction it had earlier granted, ex parte, to KCM.

“The effect of this ruling is that the CEC Restriction Notice of April 2014 remains valid and enforceable, in view of KCM’s continued default in payment.  As a consequence, CEC on 20th September 2014 began a planned and coordinated process (with KCM) of restriction of supplies to the KCM operations.

“CEC recognizes that the PSA prescribes power restriction as a measure of last resort in the event of persistent default in payment. It is regrettable that CEC has been compelled to take such an action. However, it has become necessary to protect the CEC business and the interests of its shareholders and other stakeholders. It is hoped that KCM will perform its obligations to enable the parties revert to a normal business relationship,” she said.