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Vedanta, Glencore Xstrata Agree to Start Zambia Power Talks

Nov. 5 (Bloomberg) -- Zambian Mines and Energy Minister Christopher Yaluma said companies including the local units of Glencore Xstrata Plc and Vedanta Resources Plc agreed to start talks to pay more for power in Africa’s biggest copper producer.

“They are willing” to renegotiate the contracts, he said on Nov. 2 by mobile phone from Lusaka, the capital.

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 expense of generating power for new projects, according to Copperbelt Energy Corp., the biggest supplier to operators.

The Energy Regulation Board has granted state-owned power supplier Zesco Ltd. 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 Ltd., Yaluma said, declining to provide the actual percentage increase for the utility. The increase is “much lower” than the average 26 percent Zesco applied for in July last year and will probably become effective in January, he said.

Agnes Phiri, a spokeswoman for the regulator, declined to comment in a response to e-mailed questions.

Zesco produces more than 90 percent of Zambia’s power, some of which which it sells to Copperbelt Energy that in turn sells to mines owned by companies including Vedanta, Glencore Xstrata and China Nonferrous Metals Co. Zambia’s mining industry accounts for about half of the country’s power demand.

Job Cuts

Zambian President Michael Sata yesterday asked his labor minister to tell Kishore Kumar, chief of executive officer of Vedanta’s Konkola Copper Mines, that the government would revoke the company’s license if it proceeded with plans to fire workers.

“Mr. Fackson Shamenda go and tell Mr. Kumar, if he wants to lay off people at Konkola, let him lay off one person, we shall take his license away from him,” Sata said in comments broadcast by state-owned ZNBC Radio.

Konkola on Nov. 1 said it will cut 1,529 jobs as it seeks to lower costs and boost productivity. Copper for delivery in December rose 0.5 percent to $3.269 a pound on the Comex in New York. The metal for delivery in three months fell 1.3 percent to $7,149 a metric ton on the London Metal Exchange yesterday.

Power Prices

Copperbelt Energy increased its tariffs to mines by 28 percent in January 2011, except for Vedanta’s KCM, which agreed to increases over five years. Mines owned by Barrick Gold Corp. and First Quantum Minerals Ltd. buy their power directly from Zesco.

Konkola, Zambia’s biggest electricity user, is considering building its own coal-fired power plant in the country’s Southern Province, to help protect itself from rising prices, the company said in July.

Zambia needs higher power tariffs to be able to expand supply and upgrade its distribution network, Yaluma said.

“This network has been totally neglected,” he said. “Come next year December there will be sufficient supply outstripping demand but we don’t know if the network will be in such a shape to transmit the power.”

Cephas Sinyangwe, a spokesman for Glencore Xstrata’s Mopani mine, declined to comment when contacted by e-mail. A Konkola representative didn’t respond to a message for comment. Emmanuel Mutati, president at the Chamber of Mines of Zambia, couldn’t be reached after four calls to his mobile phone.

To contact the reporter on this story: Matthew Hill in Lusaka at mhill58@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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