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Minerals and Energy Minister Dipuo Peters has overturned months of stonewalling by Eskom

Minister Elizabeth
Dipuo Peters
26 May 2010 – Peters confirmed for the first time in a written response to a parliamentary question that the company paid an average of 12.3c a kilowatt hour for Eskom power supplied to its Mozal aluminium smelter in the year to March.

She said Anglo American also paid well below the production cost of 24.3c a kilowatt hour.

The contract with Motraco, the Mozambique company that carries power to BHP Billiton’s Mozal aluminium smelter, was signed in 1997 and expires in 2025.

It is being renegotiated, but officials have refused to say what the new prices will be.

Ina Wilken, of the National Consumer Forum, told Business Times: "This is outrageous. Consumers in South Africa don’t even have enough money to put food on the table but they still have to pay 41c a kilowatt hour. It is totally irrational and I am outraged."

Cosatu spokesman Patrick Craven said: "This confirms everything we have feared. It is basic unfairness, where the poorest pay the most."

Pieter van Dalen, the DA’s spokesman on state-owned enterprises, who exposed the preferential rates in April, said: "They are raping our country and its resources and not giving anything back.

"I am disgusted, to say the least. It’s like getting an undeserved hiding in school and you still have to say thank you afterwards."

Renegotiation of the contracts was intended to be finalised by tomorrow.

Eskom could not be reached for a comment.

In another parliamentary questioning earlier this month by Barbara Hogan, the minister of public enterprises said: "The final pricing agreements have been signed with the referred-to companies and negotiations are ongoing to clarify certain details. The aluminium sector has been prioritised."

IFP MP Peter Smith, who put the question to Peters, said: "At the very least, the new prices must cover the full cost to Eskom of producing the power."

Van Dalen said he believes the negotiations will involve only two of BHP Billiton’s three aluminium smelters, and that the contract with Motraco "will not be renegotiated.

"We are stuck with it; it is a fixed contract."

The deals with the other smelters were worked out on derivatives – the exchange rate to the US dollar and aluminium prices determine the price of electricity.

In other words, if the price of aluminium goes up, Eskom gets a better rate for power, and vice-versa.