Zambia Power Company Seeks 10-Fold Profit Jump on Price Increase

  • Zesco wants to more than double commercial electricity tariffs
  • Company says increase will attract investment needed to expand

Zambia’s state-owned electricity company has sought permission to more than double power prices in a move that would boost operating profit 10-fold next year. The increases wouldn’t apply to mines in Africa’s second-largest copper producer.

Zesco Ltd. has asked to increase commercial users’ tariffs to 0.88 kwacha a kilowatt hour from 0.31 kwacha, effective Nov. 1. Together with other increases, this will add 14.8 billion kwacha ($1.2 billion) to revenue and boost operating profit to 9.8 billion kwacha from last year’s 963 million kwacha, according to a notice posted on the Energy Regulation Board’s website that invites comment on the plan.

Zambia is confronting its worst power crisis on record after falling water levels at the Kariba North Bank hydropower station cut Zesco’s generation by two-thirds. The company is seeking “cost-reflective” tariffs to attract power-plant operators so the country can meet demand. Price increases of the order Zesco has requested could add to inflation, which accelerated to 7.7 percent in September, the highest since January.

The Energy Regulation Board declined to comment on Oct. 7 on when prices may rise for mining companies, who account for more than half of Zambia’s power demand. Barrick Gold Corp. and Glencore Plc were among mining companies to challenge an April 2014 increase in court in a case that has yet to be concluded.

Zambia's kwacha has weakened amid falling copper prices and a power shortage

The energy regulator will hold public hearings on the tariff increase in November, and announce a decision by the end of the month, according to a statement posted on its website.

Zambia’s electricity crisis has caused rolling power cuts lasting as long as 14 hours a day, leading to job cuts and reduced productivity. Along with falling copper prices, it’s among the main factors that led to Moody’s Investors Service Ltd. cutting Zambia’s credit rating by one level in September.

Zambia has capacity to produce about 2,300 megawatts of power, nearly all of which comes from plants Zesco operates. The company earlier this month signed a deal with Sinohydro Corp. to build the 750-megawatt Kafue Gorge Lower hydropower plant at a cost of $2 billion.

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