[miningmx.com] – BHP Billiton would hold Eskom to an electricity supply deal first agreed in the Nineties amid criticism the arrangement sees the mining giant pay a substantial discount for the power.
Writing in BDLive, an online publication, BHP Billiton SA chairman, Xolani Mkhwanazi rejected the suggestion that his company profited unfairly from the deal.
“BHP Billiton expects our contracts to be honoured. We believe absolutely in the sanctity of all contracts,” said Mkhwanazi.
“We also understand that as a business, we have a responsibility to fulfil our obligations to our employees, customers, suppliers and shareholders and the broader community of Richards Bay and KwaZulu-Natal.
“The Eskom contracts were negotiated on a risk-sharing basis and in terms of a recognised international model.
“First, this was important to ensure the financial viability of the smelters over the long term, which is necessary to provide a reasonable return on the substantial investment. Without that we would not have made the investment. We have invested more than R60bn in our aluminium business in Southern Africa during this time.”
Citing energy analyst, Chris Yelland, BDLive said BHP Billiton was entitled to pay between 20c and 26c per kilowatt hour at its Richards Bay smelters.
By contrast, Eskom had an operating cost per kilowatt hour of 47c and supplies other large industrial and mining customers at an average of 56c-58c/kWh, it said.
Mkhwanazi added in his article for BDLive that Eskom profited by billions from the arrangement over the years, as the risk-sharing formula in one of the arrangements was linked to the aluminium price.
Between 1995 and 2008, when the price was high, Eskom generated “significant additional revenue and benefits” which amounted to R45bn cumulatively in 2008 prices, said BDLive citing Mkhwanazi.
