BHP Billiton ‘expects’ Eskom to respect power deals

Eskom, which needs to generate cash to build new power stations to meet rising demand in Africa's biggest economy, 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 chairperson 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 under-pricing 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.

Fast-rising electricity costs
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. – Reuters

We make it make sense

If this story helped you navigate your world, subscribe to the M&G today for just R30 for the first three months

Subscribers get access to all our best journalism, subscriber-only newsletters, events and a weekly cryptic crossword.”

Reuters
Guest Author

Related stories

WELCOME TO YOUR M&G

Already a subscriber? Sign in here

Advertising

Latest stories

Joshua Cohen’s ‘The Netanyahus’ wins the Pulitzer Prize for fiction

The Pulitzer Prize awards grants another controversial award to a book that mixes both fiction and non-fiction

Court hears text message irrelevant to Mkhwebane’s legal fortunes

Advocate Andrew Breitenbach, appearing for parliament, said the message he received did not advantage his client and was no cause to suspend the impeachment inquiry against the public protector

Tazné van Wyk murder trial: accused twin sister brought in...

Murder accused’s twin sister tells court of interacting with the accused two days after the deceased went missing

Those who attack funerals self-identify as pariahs

What happens in Israel and Palestine does not affect Israelis and Palestinians, alone. It fuels a global fault-line of mistrust, suspicion, intolerance and violence
Advertising

press releases

Loading latest Press Releases…
×