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(DAILY MAIL) Zesco to switch off Lumwana

Zesco to switch off Lumwana
By CHARLES MUSONDA

ZESCO Limited will with effect from January 26, 2009, stop supplying power to Lumwana Copper Mine (LCM), which has no alternative source of electricity.
This is because LCM has allegedly defaulted in paying for the service, thereby breaching its obligations contained in the Power Supply Agreement (PSA) the two companies signed on February 15, 2006.

LCM has applied to the Lusaka High Court for protection, pending arbitration in the London Court of International Arbitration.

In a notice of termination of the PSA dated July 28, 2008 and addressed to LCM managing director Harry Michael, Zesco managing director Rhodnie Sisala said: “Please note that the termination of the power supply agreement does not release LCM from its obligations to settle outstanding amounts with all interests and or damages as may be applicable.”

But in his affidavit in support of originating summons filed in the Lusaka High Court on November 20, 2008, Mr Michael said LCM was likely to suffer substantial and irreparable harm if no protective relief against the threatened termination of the PSA was granted.

“The plaintiff has no alternative source of electricity…in the premises an application is hereby made for protective relief pending arbitration,” Mr Michael said.

High Court Judge Hilda Chibomba has set tomorrow as the date for an interim hearing of LCM’s application.

Mr Michael, of house number 4, Lumwana, said in February 2006 his company and Zesco entered into a power connection agreement where it was agreed that Zesco would design, construct, install and commission a 330KV power transmission network from Kansanshi to Lumwana.

He said LCM met all conditions prescribed in the agreement, including payment of US$ 16 million (about K50 billion) to Zesco as its share of the capital costs.

He said pursuant to the agreement, Zesco was required to complete its works within 18 months from the date of payment of capital contribution or as might be agreed by the parties.

Mr Michael said Zesco’s works were completed on November 16, 2007, while LCM completed its works on April 14, 2008, and accordingly the mine was connected to the Zesco network on April 16, 2008.

He said the connection agreement required completion tests to be carried out and Zesco was to give LCM a 14-day notice prior to the tests.

Mr Michael said after differing on the tests and following connection and commencement of power supply to the mine, LCM notified Zesco on May 1, 2008, that the PSA had come into effect.

He said LCM also submitted its demand schedules in pursuance of the PSA.

“Zesco made no reply to the said letter but in its letter dated June 20, 2008, Zesco stated that it has met both the completion date and the first supply date defined in the PSA.

“Zesco further stated that if LCM did not immediately settle outstanding invoices it will exercise provisions of the PSA,” he said.

Mr Michel said on June 27, 2008, LCM wrote to Zesco disputing allegations of default and asked for a good-faith negotiation to try to resolve issues amicably.
He said Zesco did not reply to the request and instead issued a 180-day notice on July 28, 2008, to terminate the PSA effective from January 26, 2009, and alleged that LCM had breached the agreement.

Mr Michael disputed that LCM had breached the agreement and accordingly declared a dispute, after which it issued a notice of intention to arbitrate.
He said LCM had made several requests to Zesco to withdraw its notice of terminating the PSA but the power firm had refused.

Mr Michael said on September 30, 2008, LCM proposed to Zesco a payment in final settlement of the dispute and repeated its request for the latter to withdraw its notice of terminating the PSA.

He said his company further withdrew its intention to arbitrate on August 1, 2008, in a bid to persuade Zesco to withdraw its notice of termination.

“Despite LCM withdrawing its notice of intention to arbitrate, Zesco has not withdrawn its notice of termination and this remains effective and will be implemented unless an order protecting LCM is made by this honourable court,” he said.

Mr Michael said consequently LCM was left with no option but to re-issue a notice of arbitration and had asked the London Court of International Arbitration to resolve the dispute between the two parties in accordance with provision of the agreement.

Labels: LCM, LUMWANA MINING COMPANY, PSA, RECESSION, ZESCO

posted by MrK @ 1:08 AM