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London - BHP Billiton's two South African aluminium smelters are unlikely to shut soon to cut the country's power demand and stabilise the grid, power and coal sources said on Monday.
"From a distance it looked like a very attractive option, to cut power demand by shutting the smelters, but the devil is in the detail and the economics of shutting were prohibitive," a power industry source said.
"The power buy-back option was just far too expensive for Eskom," he added.
South Africa wants to pursue ways of cutting consumption which will be less damaging to its reputation, the source said.
Eskom has sent teams abroad to look at ways power is rationed in other countries as an alternative to load-shedding, which cuts all users equally. This is one option under consideration, sources close to Eskom said.
Power will rise just over 14% in April and will rise again after that - eventually higher tariffs will have an effect on power consumed, they said.
Even if Eskom and BHP had agreed on terms to close the smelters, the cost would be so high that the central government would be bound to reject the plan, the power source said.
Talks continue
However, BHP Billiton is still in talks with South African state utility Eskom. Asked if BHP was still discussing shutting or partly shutting the two smelters to save power, BHP spokesperson Bronwyn Wilkinson said BHP was in talks about possible options to run its aluminium business in a sustainable manner.
BHP has removed pots randomly from locations spread through its potlines at the two plants to reduce power consumption by 10%.
Aluminium smelters cannot be run safely in a sustainable manner with some pots missing from the lines because this can lead to electrical instability, aluminium industry sources said.
BHP's two smelters, Hillside and Bayside, have not had their power supply raised to 95% and remain at 90% of normal supply.
Eskom is in the process of restoring power to 95% of normal levels to the mining industry and will, following the same process, restore power fully, eventually to all industrial consumers including mining companies, the power industry source said.
It will be up to central government to decide if Eskom should, while restoring power, give priority to any sector such as coal mining, for example, because it supplies fuel needed for power generation.
Without such direction from government, Eskom will work towards fully restoring power to all, the source said.
Eskom is confident that the grid is stabilised enough to meet projected demand, he said.
Coal concern
Coal remains one of Eskom's greatest causes for concern because of the numerous factors that can affect its supply, he said.
Eskom has faced problems due to insufficient quantity of coal, the wrong quality of coal (fine powder rather than lumps or with a high water content due to rains which are hard to handle) and truck transport problems, among others, he said.
Eskom said on Saturday that 12 of its coal-fired plants have at least five days of coal stocks.
Last week South African power and coal sources said stocks had fallen to almost nothing at four Eskom plants and back to critically low levels at another two plants.
- Reuters