Zambian Power Surplus to Shrink as Copper Mining Expands

Zambia, Africa’s second-biggest copper producer, will have a shrinking power surplus in 2015 as demand outpaces supply expansion.

The country will have a “very marginal power supply surplus for next year, but that is being eaten into,” Cyprian Chitundu, managing director at state-owned electricity provider Zesco Ltd., said in an interview today during a conference in Lusaka, the capital.

Projects such as First Quantum Mineral Ltd.’s Sentinel mine and copper smelter will contribute to increasing demand next year, Chitundu said. Zesco is depending chiefly on the coal-fired Maamba plant and the Itezhi Tezhi hydropower station to bolster supplies in 2015. The company accounts for more than 90 percent of Zambian electricity generation.

“With Zambian miners increasing capacity over the next few years, grid tightness could worsen if new generation capacity additions are further delayed,” Patrick Jones, a London-based analyst with Nomura International Plc, said in a Nov. 14 e-mailed note.

Zesco is negotiating an electricity supply agreement with First Quantum for the Sentinel copper mine the Vancouver-based company is building in the northwest of Zambia, Chitundu said. The two are discussing the price that First Quantum will pay for the power, he said.

‘Binding Arrangement’

While Zesco doesn’t want to sell electricity for a lower price than it buys it for from independent producers, First Quantum doesn’t want to pay more than other mining companies, according to Chitundu.

The mining company, which also operates the Kansanshi mine in Zambia, has “entered into a binding arrangement” with Zesco, and the Sentinel mine was connected to the national grid in August, John Gladston, a spokesman for First Quantum, said in reply to e-mailed questions.

First Quantum is among mining companies Zesco is encouraging to invest in their own power generation to mitigate against the risk of price fluctuation, Chitundu said. The utility has capacity to produce around 2,200 megawatts of power, while peak demand reaches 1,900 megawatts, Zesco said in July.

Mines in Zambia won a judicial review in July over a power-price increase exceeding 28 percent that the energy regulator granted Zesco in April. The country was overtaken last year by the Democratic Republic of Congo as the continent’s largest copper producer.

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