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Better power prospects for SA mines

Power “’ more
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Cape Town, South Africa — MININGREVIEW.COM — 07 October 2009 – South Africa’s power utility Eskom expects to reach its target of a 15% reserve margin or spare capacity within five years, which is good news for the country’s mining industry after last year’s power crisis.

Eskom has been battling to meet fast rising demand in Africa’s biggest economy, and insufficient spare capacity last year brought mines and industry to a virtual standstill at one stage.

Reuters reports that the utility has since built up its coal stockpiles, but it will take a few more years before planned power stations come on stream.

“We want to be above 15%, and currently we estimate to be about 10%. We believe we will reach the reserve margin in five years,” chief executive Jacob Maroga told reporters here after briefing parliament.

Maroga told the committee that Eskom was in talks with global miner BHP Billiton to renegotiate long-term aluminium contracts. Last month public enterprises minister Barbara Hogan said Eskom needed a new deal with BHP after the multi-decade, commodity-linked contracts had been largely blamed for the utility’s record annual loss.

BHP said the commodity-linked contracts it had agreed with Eskom were internationally competitive.

“Going forward, we are engaging with them to start saying we want to remove this linkage of commodity to price so that they can now also pay standard tariffs,” Maroga said.

“But it’s going to be a negotiation because it’s going to be a willing parties process to make sure that we can have a mutually beneficial outcome,” he added.

Maroga did not want to provide details of the interactions with BHP, but added it was important to learn from long-term contracts so that they reflected present-day realities, without creating an impression Eskom did not honour its commitments. He said Eskom’s aluminium contracts represented about 5% or 2 000 megawatts of South Africa’s grid of 40 000 MW.

BHP Billiton’s spokesman Bronwyn Wilkinson declined to confirm whether the talks were ongoing. “We won’t comment on our interactions with governments or suppliers so I cannot comment on whether Eskom has approached us to renegotiate the supply contracts to the aluminium smelters,” she said.