Eskom deal with BHP Billiton akin to power theft

Business Report 12 November 2012.

After many months, more like years, Eskom has responded to public pleading for information on their sweetheart deal with BHP Billiton, to supply cheap power to the Hillside and Mozal aluminium smelters.

A few days ago Paul O’Flaherty (Eskom’s chief financial officer) treated the nation to a lesson in modern arithmetic when he announced that the residual seven to eight years of the BHP Billiton “contract” would result in an accumulated loss to Eskom of R5.5 billion. Based on an ex-generator delivery of 2000 megawatts, that represents a loss of something over 4c per kilowatt hour while Eskom’s present unit cost of production is declared at some 50c/kWh. To believe this is akin to O’Flaherty’s belief in leprechauns as the arithmetic is based on some wondrous crystal ball-gazing to estimate the future aluminium price, rand/dollar exchange rates, and world price of coal…

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