BHP expects Eskom to honour power deals

2013-04-03 11:39

BHP Billiton expects power utility Eskom to honour deals that are letting the mining giant buy electricity for its smelters at just over half the cost of production, the company has said.

Eskom, which needs to generate cash to build new power stations to meet rising demand, has been trying to renegotiate the long-term preferential deals since 2009.

It has now asked the energy regulator to review the contracts, which are linked to the price of aluminium and the rand-dollar exchange rate and which contributed in large part to Eskom’s annual loss of R9.7 billion in 2009.

In a letter to the Business Day newspaper, BHP Billiton South Africa chairman Xolani Mkhwanazi said the contracts were negotiated in good faith on a risk-sharing basis and followed recognised international models.

“BHP Billiton expects our contracts to be honoured,” he said.

The contracts with BHP, which consumes 9% of Eskom’s power output, date from the early 1990s when there was abundant supply in South Africa, the legacy of a government policy of underpricing power to attract industry.

Details of the deals became public last month after a court ruled in favour of a public information request by a newspaper.

The disclosure has fuelled criticism from industry and consumers who say they should not bear the burden of fast-rising electricity costs when BHP pays a fraction of the cost price.

Mkhwanazi defended the deals, saying in past years the contracts had benefited Eskom as well.

“Over the period of the contracts, BHP Billiton for many years paid above the standard electricity tariff for industry,” he said.

“As a result of these contracts, Eskom has generated significant additional revenues and benefits, which have contributed to the cost of establishing the electricity generation and transmission infrastructure in South Africa.”

Eskom has managed to change a similar deal it had with Anglo American’s Scorpion zinc mine in Namibia.

The regulator is planning to hold a public hearing on the BHP contracts at the end of April.

Join the conversation!

24.com encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions.

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
0 comments
Comments have been closed for this article.

Inside News24

 
/News

Book flights

Compare, Book, Fly

Traffic Alerts
There are new stories on the homepage. Click here to see them.
 
English
Afrikaans
isiZulu

Hello 

Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.


Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.

Settings

Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.




Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.