Eskom and BHP Billiton today announced that they have reached agreement on an amended power supply contract for the Mozal aluminium smelter in Mozambique. Discussions relating to the contracts for the supply of electricity to the Hillside and Bayside smelters in South Africa will continue over the coming months with the intention of concluding binding agreements before the end of Eskom's 2010/11 financial year.
Eskom Acting Chairman, Mpho Makwana, explains: "The agreement, effective 31 March 2010, removes the impact of embedded derivatives on Eskom's balance sheet, as well as all onerous conditions. This amended agreement is also an important step in ensuring that both Eskom and BHP Billiton continue advancing the growth and development of southern Africa. We commend BHP Billiton for this unprecedented step on signing the amended Mozal contract, which shows their commitment to South Africa and the SADC region."
Whilst discussions relating to the South African smelters are continuing over the coming months, the BHP Billiton smelter contracts at Hillside and Bayside in Richards Bay will remain firm and binding. Eskom will maintain its interruptibility at the smelters in line with the provisions of the contract.
BHP Billiton South Africa Chairman, Dr Xolani Mkhwanazi, said: "BHP Billiton remains acutely conscious of the electricity supply challenges facing South Africa and the region and has been exploring innovative and sustainable solutions to these challenges. With the announcement of the amended Mozal agreement, Eskom and BHP Billiton remain confident that, given the necessary time and commitment, innovative and mutually beneficial solutions will be found for the South African smelters. The smelters continue to make an important contribution to the South African economy and at present continue to fulfil a commitment to a 10% power reduction. Eskom's success is our success and we will continue to work with Eskom to address issues of common concern."
The new pricing agreement will be submitted to the National Energy Regulator of South Africa for approval.