Oct 22, 2012
Eskom asks Nersa to review ‘prudency’ of aluminium contractsBack
Maputo|Melbourne|Natal|Africa|Aluminium|BHP Billiton|Eskom|Mining|Sustainable|Africa|Mozambique|Energy|State-owned Electricity Utility|Brian Dames|Mohamed Adam|Power|South Africa
© Reuse this
The aluminium-price-linked contracts, which were signed in the 1990s and are known to be highly favourable to the world’s largest mining company, have come in for ongoing criticism since the load-shedding crisis of 2008.
Hitherto, Eskom has indicated that it would seek a negotiated settlement with the Melbourne-domiciled company, as was the case with regard to the future supply of power to BHP Billiton’s aluminium smelter in Maputo, Mozambique.
In fact, CEO Brian Dames insists the group remains open to continuing negotiations with BHP Billiton in order to reach a settlement, but says the approach to Nersa followed on from several investigations and engagements and is currently regarded as the “most prudent way to deal with this matter”. He also highlights that all of its other large customers, including 184 municipalities, mines and factories, were now paying the regulated tariff.
BHP Billiton communications and external affairs VP Lulu Letlape said the group had been informed by Eskom of its intention to approach Nersa.
However, the company did not have a firm view on whether Nersa was the appropriate forum for a review of the Hillside and Bayside contracts, saying only that it would not "preempt the regulator’s decision on the terms of the review".
Letlape confirmed that the two companies had been unable to reach agreement on the KwaZulu-Natal smelter contracts, despite the successful Mozal negotiations of 2010.
Eskom’s head of regulatory and legal Mohamed Adam reports that the application is premised on the Electricity Regulation Act, which obliges both Eskom and Nersa to act in the best interests of the economy and the country.
Therefore, Eskom believes Nersa has the authority to intervene in the interests of a sustainable electricity industry and to ensure that the interests of all stakeholders are “balanced”.
The submission would be made in line with the general powers granted to Nersa in the legislation, as well as Nersa’s specific authority to adjudicate “discriminatory access or pricing”.
“Our view is that circumstances have changed and that [Eskom] as well as Nersa have an obligation to look into these contracts, given these changed circumstances.
“So, they do have the power to look into them and based on their conclusions will have the power, then, to take whatever action necessary to deal with their findings,” Adam said.
Nersa was likely to pursue an adjudication process that was transparent and consultative.
However, Adam refused to offer insight into the current losses associated with the contracts, noting that the current legal contest involving Media24 and BHP Billiton in relation to disclosure of contract details prevented him from offering further details.
But CFO Paul O’Flaherty indicates that the current negative value associated with the embedded derivatives recorded in its financial statements, listed at around R5-billion, is “the difference between a Megaflex price and what we are actually charging” the smelters.
Edited by: Creamer Media Reporter© Reuse this Comment Guidelines (150 word limit)
Other Metals News
Updated 7 minutes ago Tanzania plans to spend $14.2-billion to construct a new rail network in the next five years financed with commercial loans, the transport minister said, as the country aims to become a regional transport hub. Tanzania, like its neighbour Kenya, wants to capitalize...
Updated 14 minutes ago The Airports Company South Africa (ACSA) has agreed to pay almost R2-million for fixing the prices of parking bays at OR Tambo International Airport in Johannesburg, the Competition Commission said on Monday. "In terms of the settlement, ACSA admits that it engaged...
Updated 42 minutes ago Zimbabwe's Econet Wireless said on Monday the government's requirement to have mobile phone operators share telecommunications infrastructure was a disguised move by authorities to seize the assets. Econet, which owns 80 percent of telecoms infrastructure, said in a...
Recent Research Reports
Projects in Progress 2015 - First Edition (PDF Report)
In fact, this edition of Creamer Media’s Projects in Progress 2015 supplement tracks developments taking place under the Renewable Energy Independent Power Producer Procurement Programme, which has had four bidding rounds. It appears to remain a shining light on the...
Electricity 2015: A review of South Africa's electricity sector (PDF Report)
Creamer Media’s Electricity 2015 report provides an overview of State-owned power utility Eskom and independent power producers, as well as electricity planning, transmission, distribution and the theft thereof, besides other issues.
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
This Week's Magazine
Projected capital expenditure (capex) in the South African automotive assembly industry should reach a record R7.48-billion this year, says the National Association of Automobile Manufacturers of South Africa (Naamsa) in its 2014 fourth quarter business review. Capex...
After several years of navigating project-threatening red tape and currency fluctuations, the 4.4 MW Bronkhorstspruit biogas power plant, which will supply clean energy to a leading automotive manufacturer in Gauteng, is expected to enter production before June....
South African paper and pulp producer Sappi reported earlier this month that it would build a pilot plant for the production of low-cost Cellulose NanoFibrils, or CNF (nanocellulose) at the Brightlands Chemelot Campus in Sittard-Geleen in the Netherlands.
The long-term outlook for Nigeria is a country that has the potential to be very strong. So affirmed International Monetary Fund (IMF) Nigeria Mission Chief and Senior Resident Representative Dr Gene Leon on recently. "But we are starting from a point of huge...
Poor infrastructure planning and inadequate maintenance are becoming increasingly problematic for new developments and the associated infrastructure required to support such developments. In many urban and rural municipalities, the state of infrastructure has been...