Hernic enters new Eskom buy-back programme

30th November 2012 By: Natasha Odendaal - Creamer Media Senior Deputy Editor

JOHANNESBURG (miningweekly.com) – Ferrochrome producer Hernic would temporarily shut down two furnaces at its De Kroon operations on December 1, as it entered a new power buy-back programme with State-owned Eskom.

Hernic, which completed its first buy-back agreement with the constrained power utility in June, would restart the furnaces in March.

Under the buy-back programme, Eskom provides compensation to companies that are able to reduce their demand for electricity temporarily, while sustaining employment levels and meeting existing contractual commitments.

Hernic COO and joint acting CEO Johan Swanepoel said that the arrangement would slash the company’s total production capacity by 40%, but added that the agreement was mutually beneficial.

He said the option was weighed against the current volatile commodity cycles and market conditions within the ferrochrome industry, as well as Hernic’s operational and maintenance requirements and customers’ contracts.

"We are very mindful of the impact this will have on all affected stakeholders and we will endeavour to minimise the impact,” Swanepoel added.

Hernic said Eskom implemented the buy-back programme to create enough electricity capacity to undertake more planned maintenance on its power stations during the summer months, when demand was lower.

Eskom spent R1.8-billion between mid-December 2011 and the end of May on buying back power from industrial customers, many of which were in the ferrochrome sector.

Over this period, Eskom secured over 1 000 MW of capacity allocated to participating large customers.