Post date: Aug 30, 2011 11:21:29 AM
Zambia's main electricity supplier to mines, Copperbelt Energy Corporations (CEC) says electricity costs are expected to nearly double by 2015 as the company adds new power generation plants.
KITWE, ZAMBIA (FILE) (REUTERS - Zambia's Copperbelt Energy Corporations (CEC), the main supplier of power to mines, expects the cost of electricity to nearly double by 2015 as new generation plants come on line, its managing director for corporate development said on Wednesday.
Michael Tarney told Reuters in an interview that the cost of electricity for the mines would have to increase from the current price of around 5 cents per kilowatt hour because the capital costs for new generation plants were high.
"I think that the selling price of power to large mines should migrate towards 8 to 10 (US) cents by 2015 that's my best estimate okay. Now if you look at the actual cost of production okay the cost of production of new generation is higher than that okay its 10 to 12 cents for these new generation plants okay but as they are still being built we can't necessarily argue that people they should pay 8 to 10 cents now, that they should pay 10 to 12 cents -- they should pay that when the stations are up and running," said Tarney.
Miners in Africa's top copper producer were investing in new mines and expansion projects, which would raise their power requirements by about 40 percent in the next four years.
CEC also said some mining companies were contesting the 30 percent electricity price increase for 2011 which Zambia's energy regulator approved this month but CEC would try to convince them to pay.
"I think it would be quite serious if they delay the projects further because it means we wouldn't get any power stations coming on line and you, the demand will actually beat the supply and then of course you have difficulties on who should get the supply, who shouldn't be receiving supply the domestic and the mines. It's not acceptable for other sectors to suffer to be honest everyone needs to have the power so I think that's the decision we have to take if we can't increase the tariffs then we won't be able to get the projects financed then we all suffer, said Tarney.
According to Tarney, Southern Africa faces a power shortage which is likely to worsen in the next two to three years, and there is a need to attract investment in electricity generation.
The national grid in South Africa, the continent's biggest economy, nearly collapsed in 2008, forcing mines and smelters to shut for days and costing the country billions of dollars in lost output.
Foreign mining companies operating in Zambia include Canada's First Quantum Minerals, London-listed Vedanta Resources, Glencore International Plc of Switzerland and Brazil's VALE.