A Zambian High Court on February 26, ruled against an energy statute pronounced in 2020 declaring the state power utility as carrier of carriers. Energy Minister, Matthew Nkhuwa had signed a Statutory Instrument No.57 making ZESCO Ltd a ‘carrier of carriers’ in a move that was seen as disadvantaging Lusaka Securities Exchange listed Copperbelt Energy Corporation (ZM:ISIN0000000136).
In a judgment delivered by Judge Elita Phiri Mwikisa, relief was granted to CEC Plc prohibiting the energy ministry from implementing SI.57 and that all provisions the statutory instrument came with will be rendered illegal.
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Energy risks scaled up in 1Q20 following the divorce between ZESCO Ltd and CEC Plc with the 20yr Bulk Supply Agreement (BSA) non – renewal whose spat weighed the CEC Plc stock on the Zambian bourse shaving significant valuation in market capitalization.
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Africa’s second largest copper producer, has grappled with an energy tariff quagmire which has complicated the relationship between the power utility ZESCO Ltd and CEC Plc which has for years sold electricity to the mines. The statutory instrument was dubbed by many analysts as retrogressive and did impact cash generation capacity of CEC Plc. With this outcome, the energy ministers directive to provide CEC plc a wheeling path for ZESCO Ltd to supply power to Konkola Copper Mines (KCM) on terms dictated by the Energy Regulatory Board (ERB) was rendered null and void.
POLICY INCONSISTENCY COULD DENT INVESTOR CONFIDENCE
In the labyrinth of energy reforms, this judgement will cite the Zambian authorities for policy inconsistency and further could dent energy investor sentiment. Zambia has more energy reforms this year as per economic recovery plan with the cost of service study earmarked for completion in 1Q21 while tariff revision discussions for independent power producers would be tabled in addition.
However with Zambia reorganizing its shareholding in key mines, it is still likely that the power utility will supply energy to Konkola and Mopani Copper Mines either way. Further litigation to challenge this stance in higher court is still forecast.
The Kwacha Arbitrageur