Hillside positive on Eskom pricing agreement

SOUTH32 Hillside smelter remains optimistic of a proposed new power supply pricing agreement with Eskom amid growing concerns of a shutdown if an agreement is not reached.

While it has been reported that the power utility could lose its biggest customer following an agreement rejection by the National Energy Regulator (NERSA), Hillside said it has made good progress with a new agreement proposal.

‘Eskom has submitted the agreement to NERSA for review in accordance with the usual process. Nersa determined that to review the application, a long-term pricing framework was required.

‘We are optimistic that the government will finalise a framework quickly to enable the review to proceed,’ said Hillside Vice President of Operations, Calvin Mkhabela.

Speaking at a mining indaba this week, South32’s Chief Operations Officer, Mike Fraser, said Hillside is a baseload customer, which means its demand can be met without the need for significant transmission infrastructure.

‘The rate paid by Hillside is reflective of the low cost to Eskom to deliver bulk power to the smelter,’ he said.

He also emphasised the key role played by Hillside in Eskom’s disaster management plans.

‘Our power agreements with Eskom include a load-shedding provision which allows for the smelters to be used as additional capacity when technical issues at generating plants put pressure on the system.

‘In the 2019 financial year, Hillside was load-shed 52 times, once a week on average and consistently throughout the year, not just during peak periods of system emergencies that we see in the summer months.

‘Therefore, we plan for load-shedding and ensure the smelters are running at peak performance to minimise the impact of load-shed events on production,’ he said.

Fraser said smelters rely on a globally competitive power price which is important to all industry.

‘Hillside is the only primary aluminium smelter in South Africa and meets the vast majority of the demand for aluminium from the downstream industry.

‘With aluminium considered to be the metal of the future, there is scope to create jobs with the development of an aluminium hub in Richards Bay that would see more of Hillside’s production diverted to the domestic market.

‘This scenario is only possible with a competitively-priced supply of power to Hillside and smaller players in the downstream industry,’ he said.

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