Zambia Accused of Expropriation in Escalating Electricity Spat

(Bloomberg) --

A privately owned power transmission company accused the Zambian government of taking steps to expropriate its assets, as a dispute over supplies to a key mine in Africa's second-biggest copper producer escalated.

The feud is centered around electricity provision to Konkola Copper Mines, the Vedanta Resources Ltd. unit that the government placed under liquidation a year ago, and which has a $144 million unpaid power bill. It's also the latest in clashes between the government and the country's copper mining industry, which accounts for more than 70% of foreign-exchange earnings but which the government has accused of failing to fairly spread wealth.

The state last week declared Copperbelt Energy Corp.'s electricity lines as a “common carrier,” meaning by law other companies are allowed to use them by paying a fee. Konkola reached a power-supply deal with state-owned Zesco Ltd., which now wants to use the infrastructure. The energy regulator set a fee for using the infrastructure that's about 30% of what CEC normally charges, the company said.

“The government has for all intents and purposes taken steps that amount to expropriation of the CEC infrastructure and CEC is now on the brink of defaulting on all its loans borrowed from international lenders,” the company, which services most mines in the country, said in a statement. “The government's actions have the full effect of taking away CEC's commercial and property rights.”

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Energy Minister Matthew Nkhuwa denied it was expropriating the power lines, and said the government was operating within the law.

“We are not taking over,” he said by phone Wednesday. “It is their infrastructure.”

The government's backing for Konkola in this squabble comes in the midst of a separate dispute that led to a state-owned minority shareholder forcing the company into liquidation. Zambia had accused parent company, Vedanta, of lying about expansion plans and paying too little tax, while it countered that it's a “loyal investor.”