UPDATE 1-Congo halts mining expansions in east due to power shortage

Thu Mar 6, 2014 8:38am EST

Related Topics

* Government says will implement power rationing

* Congo reported record copper output in 2013

* Glencore, Freeport have mining projects in Katanga

By Peter Jones

KINSHASA, March 6 (Reuters) - Democratic Republic of Congo's prime minister has told mining companies to halt any expansion plans requiring extra power in the copper-rich Katanga province due to an "energy crisis", a document seen by Reuters showed on Thursday.

In a letter addressed to President Joseph Kabila and various government ministers, Augustin Matata Ponyo said that national power company SNEL should not grant any new energy contracts for mining companies nor allow changes to existing contracts.

"I equally consider it necessary that mining clients postpone immediately and until further notice any expansion project requiring additional energy," Ponyo wrote in a letter dated January 10.

International mining companies such as Glencore and Freeport McMoRan have major operations in Congo's southeastern Katanga province, drawn to the region by huge copper deposits.

Katanga Mining, a Glencore-owned firm, aims to expand its copper output to 300,000 tonnes in 2014 as part of a plan to become Africa's largest producer of the metal. The company produced 136,192 tonnes in 2013, it said in a March press release.

Glencore declined to comment and Freeport was not immediately available for comment.

Congo produced a record 942,000 tonnes of copper last year, a leap of 52 percent from the year before, the International Monetary Fund said. That would make it Africa's largest producer of the metal, according to commodities analysis company CRU Group.

Exports from Congo's mining sector make up about 80 percent of the country's annual export revenues, according to the prime minister's letter.

BIG COMPETITION

Miners in Katanga have complained of insufficient and unreliable energy supplies limiting production. In the letter, Ponyo says that of Katanga's demand of around 900 megawatts (MW) from the mining companies, only 461.7 MW is available.

To manage the energy deficit, Ponyo says the government will ration power allocation to each mining firm. Allocations will be on the basis of the age of the contract, the level of production and the minimum energy levels required to carry out profitable business, he says.

Congo will also import 100 MW of energy from Zambia's national electricity operator in order to minimise the energy deficit, the letter says.

"There is going to be big competition between the companies as to who gets more and discussions with the government are likely to be fierce," said Control Risks analyst Christoph Wille.

Congo hopes that the Inga III hydroelectric dam project, projected to generate 4,800 MW of energy from the Congo river, will one day solve its energy deficit for good.

But progress has been slow and construction could take five to six years to complete from a planned start date in October 2015. The government is also working on "important projects to rehabilitate and extend existing electricity infrastructure, as well as construct new hydroelectric centres," says Ponyo.

"But the anticipated effects of these works will only be visible in several years," he added.

Earlier on Thursday South African state power utility Eskom imposed blackouts for the first time since 2008 on Thursday, forcing rail networks and banks to switch to emergency generators after heavy rains soaked power station coal supplies.

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