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

Subscribe to the M&G

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years, and we’ve survived right from day one thanks to the support of readers who value fiercely independent journalism that is beholden to no-one. To help us continue for another 35 future years with the same proud values, please consider taking out a subscription.

Reuters
Guest Author

Related stories

SAA to receive R10.5-billion government bailout after all

Several struggling state-owned entities received extra funds after the medium term budget policy speech

Former state security minister Bongo back in court

Bongo and his co-accused will appear in the Nelspruit magistrate’s court in Mpumalanga over charges of fraud, corruption and theft

Gas: South Africa’s next ‘battleground’

As government pushes for a huge increase in electricity generation from gas, serious questions are being raised about the logic behind the move

Khaya Sithole: What’s the state’s role in business?

State participation is valid when the market can’t deliver what’s needed, such as roads and rail networks and telecommunications. But banks and airlines are private enterprise concerns

Covid-19 puts Eskom’s integrated resource plan at risk

The economic effects of the pandemic could hamper the government’s initiative to procure new generation capacity

Renewables will light up the darkness

More than 11 800MW of new electricity capacity from independent power producers will come online in 2022, giving Eskom space to do more maintenance on its unreliable infrastructure
Advertising

Subscribers only

The shame of 40 000 missing education certificates

Graduates are being left in the lurch by a higher education department that is simply unable to deliver the crucial certificates proving their qualifications - in some cases dating back to 1992

The living nightmare of environmental activists who protest mine expansion

Last week Fikile Ntshangase was gunned down as activists fight mining company Tendele’s expansions. Community members tell the M&G about the ‘kill lists’ and the dread they live with every day

More top stories

The high road is in harm reduction

While the restriction of movement curtailed the health services for people who use drugs in some parts of the world, it propelled other countries into finding innovative ways to continue services, a new report reveals

Khaya Sithole: Tsakani Maluleke’s example – and challenge

Shattering the glass ceiling is not enough, the new auditor general must make ‘live’ audits the norm here in SA

State’s wage freeze sparks apoplexy

Public sector unions have cried foul over the government’s plan to freeze wages for three years and have vowed to fight back.

‘Veteran’s stripes’ vs ‘kind and fair’

This weekend the Democratic Alliance will choose between two starkly different visions for its future
Advertising

press releases

Loading latest Press Releases…

The best local and international journalism

handpicked and in your inbox every weekday