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BHP Billiton ordered to reveal Africa smelters’ energy costs

Keywords: Tags  BHP Billiton, Eskom, South Africa Supreme Court of Appeal, Hillside, Mozal, aluminum, Jethro Wookey

LONDON — South Africa’s Supreme Court of Appeal (SCA) has dismissed BHP Billiton Plc’s challenge of a South Gauteng High Court ruling that the miner must disclose what it is paying for electricity supplied to its Hillside aluminum smelter in Richards Bay, South Africa, and its Mozal smelter in Mozambique.

The appeal was dismissed by the SCA’s deputy president, Khayelihle Kenneth Mthiyane, who also ordered power group Eskom Holdings SOC Ltd. to pay application costs to South African publishing group Media 24, on whose behalf journalist Jan de Lange originally requested the information under the country’s access to information laws.

"In terms of these contracts, Mozal is entitled to receive electricity from the 1990s until March 2026, and Hillside until 2028, at a lower rate than the standard tariff," Mthiyane said in a statement published on the SCA website. "The two smelters, Hillside and Mozal, consume 5.68 percent of Eskom’s total baseload electricity capacity. In 2008, the electricity supply was repeatedly interrupted and the country was afflicted by regular power outages."

De Lange first requested the information in 2009, and Media 24 advanced the request to the South Gauteng High Court, where Judge Frans Kgomo ruled in favor of the applicant. BHP Billiton then lodged an appeal.

BHP Billiton is receiving the electricity supplied to its smelters at a fraction of what other smelting companies are paying, sources said, and Eskom itself referred the contracts to the National Energy Regulator of South Africa in October 2012 to determine whether the regulator could set the contracts aside.

According to financial statements for the year ended March 31, 2009, Eskom incurred operating losses of 3.2 billion rand, Mthiyane said in the ruling. In the same year, Eskom incurred further losses on embedded derivatives of 9.5 billion rand.

"Media 24 is of the view that the embedded derivatives arise entirely out of the contracts that Eskom has with Billiton," Mthiyane added. "BHP Billiton then argued that from ‘an accounting perspective,’ the contracts were ‘not loss-making’ and were contributing towards Eskom’s operating profits, albeit at smaller margins than might have otherwise been the case."

A version of this article was first published by AMM sister publication Metal Bulletin.

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