Zambia Seeks to Renegotiate Power Prices With Glencore, Vedanta

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Zambia wants to renegotiate power supply agreements with mining companies including local units of Glencore Xstrata Plc (GLEN) and Vedanta Resources Plc (VED) that it views as unfavorable, according to Mines Minister Christopher Yaluma.

“To continue maintaining the future of the network, we need that cost reflectivity,” he told reporters today in Lusaka, the capital of Africa’s biggest copper producer. “If we don’t do that, where are we going to get the money, apart from huge borrowings?”

Higher costs will put pressure on Zambia’s mining industry, the largest power user, as falling copper prices lead to threats of thousands of firings. The country needs to invest about $5 billion to meet a supply shortfall, according to Zesco Ltd., the state-owned electricity company. The price of copper for three-month delivery has dropped about 12 percent this year.

Zambia’s government signed long-term power purchase agreements with mining companies as part of a privatization process that began in the 1990s. The energy regulator approved a 30 percent electricity tariff increase for some mines in 2011.

 

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