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BHP power deal in balance
Edited by : AL CIRCLE
2 min read
More than 1600 jobs will be on the line at BHP Billiton's Hillside and Bayside aluminium smelters in KwaZulu-Natal if Eskom gets its way in setting aside a controversial electricity supply deal.
Eskom this week said it will refer the supply contract with BHP to energy regulator Nersa.
The 25-year contract dates back to 1992 when SA had a power oversupply. But now Eskom wants it to be set aside, saying the cost to the utility is too high.
The contract, which is confidential, links BHP's electricity tariff to the dollar price of aluminium. It has given BHP a significant discount on its tariffs, which led it to build the electricity-intensive smelters in Richards Bay in the 1990s. Eskom said the deal will cost it more than R5-billion over the life of the contract.
"An increase in the cost of doing business under the current market conditions would impact the sustainability of our aluminium business and consequently the long-term jobs and downstream business in Richards Bay," said Kesagee Nayager, a BHP spokesman. Marius Kloppers, BHP's CEO, said in February he was "deprioritising" the aluminium business.
Eskom's decision to refer the deal to Nersa, which can set aside some contracts, comes after the parties failed to agree in lengthy talks. Eskom and BHP renegotiates a similar supply contract for BHP's aluminium smelter in Mozambique.
BHP, which has been fighting a court application by Media24 specialist reporter Jan de Lange for supply contract details to made public, may be forced by the Nersa processes to reveal what price it has been paying for power.
The Supreme Court of Appeal will hear the De Lange application on November 8. Eskom hasn't been opposing the application made under the Promotion of Access to Information Act in 2010.
Pieter van Dalen, DA MP, said last month BHP may be paying as little as 8.8c per kWh due to the low aluminium price, compared with Eskom's current tariff of 61c per kWh.
BHP said it would not "like to speculate at this stage" on whether it would legally challenge a Nersa decision on the contract.
Eskom this week said it will refer the supply contract with BHP to energy regulator Nersa.
The 25-year contract dates back to 1992 when SA had a power oversupply. But now Eskom wants it to be set aside, saying the cost to the utility is too high.
The contract, which is confidential, links BHP's electricity tariff to the dollar price of aluminium. It has given BHP a significant discount on its tariffs, which led it to build the electricity-intensive smelters in Richards Bay in the 1990s. Eskom said the deal will cost it more than R5-billion over the life of the contract.
"An increase in the cost of doing business under the current market conditions would impact the sustainability of our aluminium business and consequently the long-term jobs and downstream business in Richards Bay," said Kesagee Nayager, a BHP spokesman. Marius Kloppers, BHP's CEO, said in February he was "deprioritising" the aluminium business.
Eskom's decision to refer the deal to Nersa, which can set aside some contracts, comes after the parties failed to agree in lengthy talks. Eskom and BHP renegotiates a similar supply contract for BHP's aluminium smelter in Mozambique.
BHP, which has been fighting a court application by Media24 specialist reporter Jan de Lange for supply contract details to made public, may be forced by the Nersa processes to reveal what price it has been paying for power.
The Supreme Court of Appeal will hear the De Lange application on November 8. Eskom hasn't been opposing the application made under the Promotion of Access to Information Act in 2010.
Pieter van Dalen, DA MP, said last month BHP may be paying as little as 8.8c per kWh due to the low aluminium price, compared with Eskom's current tariff of 61c per kWh.
BHP said it would not "like to speculate at this stage" on whether it would legally challenge a Nersa decision on the contract.
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