DA leaks secret Eskom report

2010-04-21 16:43

The Democratic Alliance (DA) has posted a confidential business report from Eskom on the internet, claiming it proves that the electricity utility has been selling power to BHP Billiton at below cost.

Eskom acting chairman and CEO Mpho Makwana has threatened to take DA MP Pieter van Dalen to court, calling the leaking of the document to the politician “a form of crime”.

The 291-page document, marked “strictly confidential”, backs up a statement Van Dalen made during Makwana’s briefing to parliament’s portfolio committee on public enterprises that Motraco (the Mozambique Transmission Company) owes Eskom R100 million.

Makwana told Business Report that the claim about Motraco’s debt was “not true”.

Motraco owns a transmission network built expressly to supply power to BHP Billiton’s Mozal aluminium smelter in Mozambique.

Van Dalen said the report supports his allegation that Eskom charged BHP Billiton just over 12c per kilowatt-hour for electricity supplied to Mozal.

He arrived at the figure by dividing the company’s power bill by the amount of electricity supplied to it according to the report.

The terms of the contract under which Eskom has been powering this and two other BHP Billiton smelters are at the heart of a controversy over a special pricing agreement between the mining giant and South Africa’s embattled electricity utility.

Makwana told MPs yesterday that Eskom had managed to renegotiate its “onerous” contract with BHP Billiton which, along with a deal to supply power to Anglo American’s zinc operations in Namibia, left the company with an accounting loss of R9.5 billion in the 2008/09 financial year.

He said it should be signed on May 27, releasing Eskom from 95% of its liabilities in terms of embedded derivatives, which linked the future value of the long-term contract with BHP Billiton to the aluminium price.

The contracts became a massive burden for cash-strapped Eskom when the commodity price plunged during the global economic crisis.

Eskom said efforts to restructure Anglo American’s contract were proving more difficult.

Makwana refused to answer a question from the Independent Democrats (ID) on whether Eskom was selling electricity it bought from Mozambique to BHP Billiton’s smelters at a loss.

It buys electricity from the Cahora Bassa Dam, then channels it to the smelters through Motraco.

He said he had the answer, but would provide it to parliament in writing, drawing protest from opposition MPs who said he was clearly reluctant to make the information known to the media.

Makwana told committee members that the generating cost of a kilowatt-hour would rise to 24.3c and the production cost to 41.6c this year once the new electricity tariffs came into effect.

Eskom’s communications team today said they would respond to the leaking of the report at a later stage.

Van Dalen claimed that the document “provides definitive proof, among other things, that Eskom has been charging vastly discounted electricity tariff rates to companies that provide little or no benefit to the South African economy”.

He said it was leaked to the official opposition by “high-level” Eskom officials.

Meanwhile, ID MP Lance Greyling said he would ask public enterprises minister Barbara Hogan whether Eskom had been forced to pay a penalty for renegotiating its contract with BHP Billiton. – Sapa

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