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KCM and CEC Power Supply Agreement (PSA)

First established in March 2000 for a period of 20 years(until March 2020)

Payment in US$ to be paid offshore to CEC in London

Initial obligation for CEC to meet a maximum demand of 250MW with an escalation of up to 300MW provided KCM did not purchase the Nkana Smelter and Refinery (Nkana Smelter and Refinery were still in the hands of the Zambian govt and had a separate agreement of 75MW).

Payment had two components;

  1. Energy Charge
  2. Capacity Charge(together with a bonus/penalty system)

Energy tariff specified in USc/KWh and split into; (a)Wholesale Energy and (b)Supplied Energy component based on metered usage.

In November 2000, these charge rates(for both energy and capacity) were fixed with a provision for indexing in subsequent years of the agreement based on US Producers Purchasing Index(PPI) for 3 months prior to the start of the year.

Energy Charge rates fixed in November 2000

(a) Wholesale Energy tariff = USc0.79/KWh

(b) Supply Energy tariff = USc0.18/KWh

Capacity Charge was similarly split into (a) Wholesale Capacity and (b) Connected Capacity component based on the KCM system less monthly discount proportion depending on the peak demand.

Capacity Charge rates fixed in November 2000

(a) Wholesale capacity tariff = US$8.92/KWh per month

(b) System capacity tariff = US$2.41/KWh per month.

In 2005 these charges had been indexed and increased to 5.35% from the November 2000 tariffs.

2005 tariffs;

Energy = USc1.021/KWh

Capacity = US$11.94 per KW per month

Applying escalation of 5.35% every five years the CEC tariffs in 2020 would be;

Energy = USc1.19/KWh

Capacity = USc13.96/KWh per month.

It would interesting to see in black and white what the ZESCO/CEC Bulk Supply Agreement(BSA) looked like, just for learnings.

It would also be interesting to see in black and white what the new ZESCO/KCM Power Supply Agreement looks like.

In 2005 KCM consumed 539 GWh just on pumping out (340m3/day) water from its Underground Mines(381GWh at Konkola and 158 GWh at Nchanga).

With a fully developed Konkola Deep, 609GWh of power would be need just for pumping out water.

It would take Kafue Gorge with installed generation of 900MW about 33 days operating at 85% total efficiency to supply this amount of energy. That is 9% of power generated from Kafue Gorge for pumping water before you can mine.

For a fully developed Konkola Deep Mine(KDM) to thrive it definately needs cheap and reliable energy.

The more I look at this the more I see it beneficial for whoever buys KCM to buy Maamba Colliery as well. Close off that Nchanga Open Pit, transfer those skills and equipment to Maamba to mine that coal efficiently and generate power(Open pitting mining skills from Nchanga+boiler operating skills from smelting +electrical generating, transmission & distributing skills from both ZESCO &CEC, KCM can sort out its pumping energy issues). With the current installed capacity of 300MW, uprating to 400-600MW will be enough to meet both the maximum demand and energy requirements of KDM with more than enough to sell.

Just like pyrite at Nampundwe provides a solution to energy deficient Konkola copper concentrate, the coal at Maamba should provide all weather (water pumping) power to KDM.

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