BHP defends South Africa electricity fee
South African power utility Eskom has called on customers to cut power usage by 10 per cent.
And, amid speculation over the low price BHP pays for its electricity under long-term contracts, Eskom has called on the country's energy regulator to review the price.
"Our aluminium business has always paid more for electricity than the cost of generation and, for many years, has paid well above the market rate for power," BHP said, according to local media reports.
Business newspaper Beeld reported late last week that Eskom is selling electricity to BHP's aluminium smelters, Hillside in Richards Bay and Mozal in Mozambique, for half the 41¢ it costs to produce one kilowatt-hour.
"While the agreements will now be in the public domain, we remain firm in our belief that the negotiated pricing agreements are legally binding," BHP said.
BHP entered into its initial contract with Eskom in 1992, with the contract to run until 2028.Wires
Frequently Asked Questions about this Article…
The dispute centers on the price BHP Billiton's aluminium smelters pay for electricity in South Africa. Eskom has asked the energy regulator to review the price amid media reports about low contracted rates, while BHP says its negotiated pricing agreements are legally binding and that its aluminium business has paid more than the cost of generation.
The controversy specifically involves BHP's aluminium smelters at Hillside in Richards Bay and the Mozal smelter in Mozambique, both named in local media coverage of the electricity pricing.
BHP has defended its position, saying its aluminium business has historically paid more than the cost of generation and, for many years, has paid well above the market rate for power. The company also stressed that the negotiated pricing agreements are legally binding.
Eskom has urged customers to cut power usage by 10 percent because of fears of power shortages as demand rises. It has also called on South Africa's energy regulator to review the price charged under the long-term contracts referenced in media reports.
Yes. Business newspaper Beeld reported that Eskom is selling electricity to BHP's aluminium smelters for about half of the 41 cents it costs to produce one kilowatt-hour. That figure was reported by the media and is part of the dispute being reviewed.
BHP entered into its initial contract with Eskom in 1992, and according to the article that contract was written to run until 2028.
The article notes fears that power shortages could occur as demand rises this winter, which is why Eskom has warned customers to reduce usage by 10 percent. The pricing dispute itself has prompted regulatory review and public attention, but the article does not provide a definitive link between the contract dispute and outages.
Investors should monitor official updates from BHP and Eskom, any public releases of the negotiated agreements, and actions by South Africa's energy regulator. These developments could affect public perception, regulatory risk, and operational conditions for BHP's aluminium business, according to the article's coverage.
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