Lubumbashi - The Democratic
Republic of Congo signed a provisional agreement to import power from South
Africa that could boost copper production this year by as much as 20 percent,
according to the country’s chamber of mines.
Congolese state-owned power company SNEL proposed
importing 200 megawatts from South African utility Eskom Holdings SOC at
meetings in Johannesburg on April 20 and April 21, said Ben Munanga, chairman
of the energy commission at the chamber.
Eskom has 1 000 megawatts available for export for as
long as 10 years, but only 200 megawatts can be delivered to Congo because of
grid constraints in the transmission network between the two countries, Munanga
said Saturday in an interview in the Congolese capital, Kinshasa. Still, that
could help to boost Congo’s copper output by as much as 200 000 metric tons,
Munanga estimated.
“There’s a deficit so any effort to bridge the gap is
very welcome,” said Munanga, who attended the first day of the meetings.
Congo, Africa’s biggest copper producer, has installed
power-generating capacity of 2,442 megawatts, but only about half of that is
operational after years of mismanagement and under-investment. SNEL estimates
that demand from copper miners outstrips supply by 750 megawatts, a shortfall
that has been one of the biggest constraints on output growth in the past three
years. Congo produced a record 1.03 million tons in 2014, but output has been
little changed since then, falling to 995 805 tons in 2015 before climbing back
to 1.02 million tons last year.
Term sheet
SNEL confirmed that that the utility signed a term
sheet with Eskom outlining the main points for a 200-megawatt contract, with a
view to concluding a renewable, five-year power-supply agreement soon.
“We still have a few years to go before we have new
hydropower capacity on our network so if we have such an opportunity to buy we
are going to take it,” SNEL spokesman Medard Kitakani said by phone from
Kinshasa on Monday, adding that the offer from Eskom was unexpected.
Eskom said a deal may be signed next month.
Read also: Eskom should toe the line, Gigaba says
“We are in discussions,” spokesman Khulu Phasiwe said
by phone. “If they go well, we will be signing the deal before the beginning of
June.”
Eskom will sell the power to SNEL, which will add mark-up
and transit fees, before redistributing to the miners. This could increase the
unit cost to mining companies by as much as 27 percent, but it’s still
preferable to the alternatives, Munanga said.
‘No-brainer’
“If you compare the cost of imported power to the cost
of diesel it’s a no-brainer,” he said.
Mining companies including Glencore’s Mutanda Mining and
China Minmetals Corporation’s MMG have installed diesel generators to top up
power-supply for copper production, which can increase costs by as much as $1 000
per ton, according to the chamber of mines. Copper traded as much as 1.1
percent higher at $5 686.50 on the London Metal Exchange by 1:29 p.m.
Kitakani said SNEL’s mark-up and transit fees would be
negotiated with the miners and defended the utility’s right to make a margin on
the power contracts.
Eskom is ready to export the power as soon as June 1,
but the negotiation of amended power-purchase agreements between SNEL and the
mining companies is expected to take longer, Munanga said. SNEL’s failure to
deliver on previous power contracts has damaged trust between the utility and
the miners, who will be reluctant to finance SNEL acquiring the electricity
from Eskom without guarantees that onward delivery to each mining project will
be respected.
“If SNEL was a healthy organization that could import
power itself and then redistribute it wouldn’t be as difficult,” said Munanga.
“We think two months is the minimum.”
Negotiations will begin this week between SNEL and the
mining companies, who must decide how much power they are each prepared to
take, according to SNEL.
“We have been very transparent with these mining
companies by inviting them to join the meetings in South Africa,” Kitakani
said. “The timing of an agreement will now depend on them.”
BLOOMBERG