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Billiton: Eskom deal had govt backing

Johannesburg - City Press’ sister publication, Sake24, on Friday last week won a long legal battle in which the Supreme Court of Appeal ruled that BHP Billiton [JSE:BIL] must make public the price it pays Eskom for electricity.

This followed a battle between BHP Billiton, Sake24 and Jan de Lange, the publication’s specialist reporter.

BHP Billiton spokesperson Lulu Letlape told City Press the company was disappointed by the ruling, but that it would accept the judgment.

She said: “We think it is important for the public to recognise that the construction or refurbishment of the smelters followed strategic decisions by successive governments between 1970 and 2003 to encourage large-scale industrial projects by making surplus electricity capacity available.

“The agreements were entered into by both parties in good faith and with the full knowledge and support of the government of the day.”

BHP Billiton appealed against an earlier ruling of Judge Frans Kgomo in the South Gauteng High Court in Joburg.

Kgomo found that BHP Billiton and Eskom should be compelled, in the interests of the public, to reveal the pricing formula by which Eskom sells electricity to BHP Billiton’s two aluminium smelters, Hillside in Richards Bay and Mozal in Maputo.

According to the ruling, they also had to reveal the duration of the contracts, as well as the names of the individuals who signed the contracts.

The two BHP Billiton smelters alone use 5.68% of Eskom’s power generation capability.

Hillside, the bigger of the two smelters, uses 1 200MW, which makes it the third biggest electricity user in the country.

Its usage is only surpassed by the cities of Cape Town and Durban, each of which uses 1 300MW.

The electricity prices for Hillside and Mozal are partly or wholly determined by the aluminium price on the London Metal Exchange according to a highly secretive formula in a contract that was signed in the 1990s.

The agreement is valid for decades.

According to Sake24’s information, these two contracts are responsible for the R9.5bn loss Eskom suffered in 2009.

  – City Press/Sake24

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