In South Africa communities faced regular and sustained price increases on electricity yet BHP Billiton through special pricing agreements is paying a quarter of that of other consumers to run its aluminium smelters. A recent court case could see those pricing agreements exposed to the public.

Judge rules against BHP Billiton, Eskom secrecy

by Donwald Pressly
Business Report

Newspaper group Media24 has won a court action to make public the special pricing agreements between Eskom and BHP Billiton, but the mining multinational says it is weighing up its options and it may take the matter on appeal.

Should it not do so, the information about the multibillion-rand secret pricing agreements is likely be made available within a few days. The long-term deals are believed to provide BHP Billiton with favourable electricity pricing of about a quarter of that of other consumers to run its aluminium smelters.

Judge Frans Kgomo, in the South Gauteng High Court, ruled against Eskom, BHP Billiton, Hillside Aluminium, Motraco-Companhia de Transmissão de Moçambique and the minister of justice and constitutional development.

The judgment noted that South Africa had been experiencing power outages – “so-called load shedding” – since 2008 and residents faced regular and sustained price increases on electricity, “while the Billiton Group’s businesses enjoy security of supply without having to worry about increases until 2026 at the least and 2028 at the most”.

He found that public interest overrode concerns about commercial harm to the BHP Billiton group.

Sake24 journalist Jan de Lange, the first applicant, and Media 24, the second applicant, requested in September 2009 information concerning the pricing agreements.

This included all documents relating to the formula “or manner of determination of the price” for the supply of electricity by Eskom to two smelters owned by BHP Billiton – the Hillside smelter in Richards Bay and the Mozal smelter in Maputo, Mozambique.

They also sought documents relating to all signatories to written agreements between Eskom and BHP Billiton, or its affiliates, for the supply of power to the smelters and all documents relating to the date of commencement and termination of written agreements between the parties.

Eskom argued that the bulk purchase agreement contained commercial and technical information “of a highly confidential nature” belonging to BHP Billiton, “the disclosure of which will cause significant harm to the commercial and financial interest of the group, thereby putting it at a disadvantage in its contractual negotiations”.

The applicants argued that Eskom’s refusal to release the information was unlawful. They argued that if all public bodies were allowed to hide behind confidentiality agreements of clauses to avoid disclosure “that would be a negation of the spirit and purpose of the Promotion of Access to Information Act”.

The judge found that the confidentiality agreement was not applicable to the agreements “in issue here”. They were confidentiality agreements between Hillside Smelters and Billiton before the present agreements were signed. The agreements related, instead, to the supply of electricity to Bayside’s aluminium pot lines.

The judge noted that the two smelters consumed 5.68 percent of Eskom’s total base load capacity, supporting “the conclusions by the applicants and the general public that the extent of the rolling electricity blackouts experienced in South Africa since 2008 would have been substantially reduced.”

Johnny Dladla, BHP Billiton’s spokesman, said: “We respect the laws of the countries in which we operate. However, we also have an obligation to protect the interests of our employees, customers and shareholders. We will carefully consider the court’s ruling with the view of determining whether there are grounds for an appeal.”

Willem de Klerk, an attorney representing the applicants, said the court had not ordered any time limit for the provision of the information. If there was no appeal from BHP Billiton and Eskom it was likely that the information would be public within a few days.

Eskom said it would abide by the court’s ruling.