Maravi

Lumwana seeks protection against Zesco PSA termination notice

Lumwana seeks protection against Zesco PSA termination notice
Written by Maluba Jere
Sunday, January 25, 2009 7:14:17 AM

LUSAKA High Court judge Martin Imasiku has adjourned to February 17, the case in which Lumwana Mining Company has sued Zesco over its notice to terminate the Power Supply Agreement (PSA) and disconnect the mine from the electricity grid.

Zesco in July this year issued a 180-day notice to disconnect power from the mine from January 26, 2009.

Lumwana Mining managing director, Harry Michael stated in an affidavit filed in the Lusaka High Court that the mine wanted a protective relief against the threat to terminate the agreement pending arbitration hearing in the London Court of International Arbitration.

Michael said in February 2006, Lumwana Mining and Zesco signed a connection agreement that allowed Zesco to design, construct, install and commission a 330KV electricity network from Kansanshi Mine.

He said Lumwana Mining met all conditions in the agreement, including payment of US$16 million as its share of capital to the Lumwana Power Project, which was supposed to be completed in 18 months.

He said when Zesco connected power to the mine on April 16, 2006, it did not comply with requirements to give notice of commencement of test completion but through a letter in January, 2008 made a demand for electricity power supply.

He said Lumwana received the letter on February 12, 2008 and replied on February 14 reminding Zesco that it had not given the 14-day notice prior to the start of tests of completion.

Even after further reminders, Zesco never responded and Lumwana Mining on May 1, 2008 notified Zesco that the PSA had come into effect and also made demand schedules.

Michael said Zesco then warned that if Lumwana did not settle all outstanding invoices, then it would exercise provisions of the PSA but the mine disputed allegations of default and suggested an arbitration process.

He said Zesco then issued a 180-day notice of termination of the PSA effective January 26, 2009 on allegation that Lumwana Mining had breached the PSA and the mine disputed and declared a dispute and negotiations were held.

"Lumwana has made several requests to Zesco to withdraw the notice of termination of the PSA but it has refused," he said.

He said on September 30, 2008 Lumwana Mining wrote to Zesco proposing payment of final settlement of the dispute and also repeated the request for the power utility to withdraw the notice of termination of the PSA and also the intention to withdraw notice of arbitration.

"Despite this, Zesco has not withdrawn the notice of termination of power supply and thus it remained effective and will be implemented unless an order protecting Lumwana Mining is made by the court," he said.

He said as a result, Lumwana was left with no option but to issue a notice of arbitration and had since made a request to the London Court of International Arbitration to appoint an arbitrator for the purpose of resolving the dispute.

He complained that Lumwana Mining was likely to suffer substantial and irreparable harm if the protective relief against the threat to terminate the PSA was not granted because it had no alternative source of power.

The matter comes up on February 17.

Labels: LUMWANA MINING COMPANY, ZESCO

posted by MrK @ 7:11 AM