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Billiton must lift veil on Eskom prices

Mar 15 2013 15:36 Sake24

The bosses of global miner BHP Billiton.

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Johannesburg – Fin24’s sister publication Sake24 on Friday won a long legal battle in which the Court of Appeal ruled that BHP Billiton must make public the prices it pays Eskom for electricity.

This follows after a long legal battle between BHP Billiton, Sake24 and Jan de Lange, specialist-journalist of the publication.

BHP Billiton appealed an earlier ruling of Judge Frans Kgomo in the South Gauteng High Court in Johannesburg that BHP Billiton and Eskom are compelled, in the interest 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 have to reveal the duration of the contracts, as well as the names of the individuals who signed the contracts.

BHP Billiton fought tooth and nail against revealing the information in terms of the Promotion of Access to Information Act in both the High Court and the Court of Appeal. Eskom offered no resistance and was merely present as an observer at both court cases.

Eskom is making massive losses because of the low prices that BHP Billiton is paying.

The two BHP Billiton smelters alone use 5.68% of Eskom's power generation capabilities, and all indications show they may receiving the power at lower than cost price from Eskom.

Hillside, the bigger of the two smelters, uses 1 200MW, which makes it the third biggest electricity user in the country. This usage is only surpassed by the cities of Cape Town and Durban, which each uses 1 300MW.

The country would hence not have had an electricity crisis if Eskom had not supplied power to the two smelters.

The electricity prices for Hillside and Mozal are partly or wholly determined by the aluminium price on the London Metal Exchange (LME) 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 entirely responsible for the R9.5bn loss Eskom suffered in the year to end-March 2009, which it blamed on “derivatives”, an accounting term for prices that are calculated on the basis of external factors.

*For more business news in Afrikaans, visit Sake24.

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eskom  |  bhp billiton  |  electricity tariffs
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