‘BHP con­tracts main fac­tor be­hind record loss’

Weekend Argus (Saturday Edition) - - BUSINESS -

JO­HAN­NES­BURG: BHP Bil­li­ton’s multi-decade alu­minium smelter con­tracts with Eskom, the main fac­tor be­hind the util­ity’s record an­nual loss, are glob­ally com­pet­i­tive, BHP said.

Eskom re­ported a loss of R9.7 bil­lion on Thurs­day, mainly at­trib­ut­able to fair value losses from de­riv­a­tive con­tracts linked to the price of alu­minium. The util­ity said it would re­view the con­tracts to limit its ex­po­sure to the fluc­tu­a­tions in the alu­minium price which more than halved dur­ing the com­pany’s fi­nan­cial year to end-March.

“The price BHP Bil­li­ton pays for power to the smelters is in­ter­na­tion­ally com­pet­i­tive ... in valu­ing such con­tracts it is im­por­tant to con­sider the en­tire length of the agree­ment be­cause looking at one year in iso­la­tion can be mis­lead­ing,” BHP spokes­woman Bron­wyn Wilkin­son said.

She said dur­ing times of high alu­minium prices BHP paid “sig­nif­i­cantly higher” tar­iffs to Eskom, and a lower price than the stan­dard tar­iff when the price of the metal dropped.

Eskom CE Ja­cob Maroga said some of th­ese com­mod­i­typrice linked con­tracts had 20 more years to run. In the 1970s, Eskom had power to spare and sought deals with com­pa­nies such as BHP to pay for elec­tric­ity based on tar­iffs linked to the price of met­als.

Wilkin­son said BHP had based its de­ci­sion to in­vest $6 bil­lion (R46bn) to build its alu­minium smelters in South Africa be­cause of the avail­abil­ity of th­ese long-term power sup­ply con­tracts. – Reuters

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.