Latest news with #HillsideAluminium
News24
26-06-2025
- Business
- News24
The hidden cost of Eskom's electricity deals with smelters
A fierce debate has erupted over the preferential electricity pricing deals – known as Negotiated Pricing Agreements – that Eskom has struck with major industrial users like South32's Hillside aluminium smelter and ferrochrome producers, writes Chris Yelland for EE Business Intelligence. Government insists these deals are vital to protect jobs and exports, but critics say they lack transparency, impose costs on other customers and ordinary consumers, and contradict the principles of a fair and competitive electricity market. Hillside: South Africa's 'congealed electricity' South32's Hillside Aluminium smelter in Richards Bay is one of the largest of its kind globally, and a cornerstone of South Africa's aluminium industry. With no local bauxite reserves, Hillside relies on imported feedstock and vast amounts of electricity – 10.3 TWh per year, around 5.6% of Eskom's total sales. Under the 10-year NPA approved by NERSA in 2021, Hillside pays a discounted rate for electricity that currently amounts to around R10 billion per year less than it would pay on Eskom's standard Megaflex tariff for mines and large industry. The effective discount over the life of the agreement is about 50%. Interruptability vs. affordability Eskom justifies this discount by pointing to Hillside's role in stabilising the grid. The smelter's operations can be interrupted briefly during supply shortfalls, providing a form of demand-side flexibility that Eskom can use instead of reserve generation. But according to a recent and critical analysis by Meridian Economics, this function could be replicated – more cheaply – using 1.2 GW of two-hour battery energy storage. Using current battery procurement prices from the IPP Office, such a solution would cost less than R3 billion per year, suggesting a net discount of R7 billion annually to Hillside. The case for socioeconomic value Supporters of the NPA argue it helps preserve jobs and downstream aluminium beneficiation. Hillside employs about 1 800 workers directly and supplies 27% of its output domestically. But critics say this argument is based on false binaries – that without the NPA, the smelter would close and jobs would vanish. Instead, the electricity used at Hillside could be reallocated to smaller businesses, potentially yielding broader and more resilient economic benefits. The real question, then, is not whether Hillside provides value – but whether that value exceeds what other sectors could generate with the same power. NERSA and the fog of regulation The National Energy Regulator of South Africa (NERSA) approved the Hillside NPA in 2021, but the process was opaque. The decision lacked detailed economic modelling, failed to evaluate alternatives like battery storage, and made no attempt to compare Hillside's benefit to that of alternative electricity uses. It would further appear that no other party in South Africa has done a proper economic analysis and calculation of the real socioeconomic benefits of the Hillside NPA. Furthermore, key economic inputs – like the pricing escalation clause and aluminium price 'upside' mechanisms – were based on unclear rationale. Although the NPA was touted as free of embedded derivatives, Meridian Economics argues that a call-option structure remains embedded in the deal. Cabinet's broader move: more NPAs are coming In a related development, Cabinet has just approved a framework to extend NPAs to South Africa's ferrochrome and alloys smelters – long-time industrial electricity users struggling with soaring electricity tariffs. According to Energy & Electricity Minister Kgosientsho Ramokgopa, the aim is to protect energy-intensive exporters and maintain South Africa's industrial base. But this raises more questions than answers: Are these deals being driven by sound economic analysis and proper power planning, or by ad hoc industrial policy dressed up as regulation? A system at odds with reform Eskom is in financial distress. Other customers – particularly households and SMEs – are paying ever-higher prices for less reliable power. Load shedding, grid instability and rising tariffs have become hallmarks of the crisis. And yet, one of Eskom's biggest customers pays half-price for electricity – a situation kept under wraps until civil society group Open Secrets forced publication of the full Hillside NPA. That it took four years for civil society to scrutinise the deal signals how deeply broken the oversight processes are. Towards a transparent future The principle of cross-subsidisation can be legitimate – but only when clearly justified. Preferential electricity pricing must be scrutinised like any public subsidy: through open modelling, public hearings and clear metrics of cost-benefit. Right now, that is not happening. Eskom, NERSA and the Ministry of Energy & Electricity must explain why energy-intensive smelters deserve these deals – and why other commercial, industrial, manufacturing and mining customers and ordinary consumers should foot the bill. Without that, NPAs risk entrenching elite privilege at the expense of national equity, economic dynamism, and the future of South Africa's energy system. Chris Yelland is managing director, EE Business Intelligence. This article was first published by EE Business Intelligence (Pty) Ltd and may not be published without the written permission of EE Business Intelligence. References 1. – Meridian Economics Briefing Note, June 2025. 2. Cabinet approves discounted electricity prices for ferrochrome and alloys – by Linda Ensor, Business Day, 25 June 2025. 3. Cabinet unveils plans for chrome tax as Ramokgopa defends plans to save SA's smelters – by Na'ilah Ebrahim, News24, 25 June 2025.
IOL News
12-05-2025
- Business
- IOL News
South32 appoints Matt Daley as new CEO amid significant operational changes
Matt Daley will initially join South32 as deputy CEO starting February next year before assuming the CEO role later in the year when Kerr steps down. Image: Supplied Tawanda Karombo South32, which operates in South Africa, Mozambique and Australia, has picked Anglo American technical and operations director Matt Daley as new CEO with effect from next year when incumbent Graham Kerr steps down. In South Africa, South32 operates the Hillside Aluminium project although in January it temporarily shut down the Wessels manganese mine in the Northern Cape before re-opening it. In March this year, Hillside was the subject of a claim by an Australian company that charged that the South32 subsidiary had improperly used intellectual property related to metal transportation at the South African operation. Daley will initially join South32 as deputy CEO starting February next year before assuming the CEO role later in the year when Kerr steps down. '(Daley) is a highly accomplished executive with extensive operational and leadership experience, including in copper and in the Americas, and the board is confident he is the right successor for Graham,' said South32 chairperson, Karen Wood. Anglo American has also appointed Tom McCulley as technical director with immediate effect. Duncan Wanbald, CEO of Anglo American said in the eight years that Daley served at the company he had 'brought his considerable energy and passion for mining to his teams' and the company as a whole. Wanbald said Daley had recently helped to drive 'operational excellence and nowhere more so than in the extensive safety improvement' work. Meanwhile, Wood said Kerr had contributed immensely to the company through the demerger from BHP and the subsequent transformation of South32's portfolio. 'As inaugural CEO, Graham Kerr has been instrumental in establishing South32's values-based culture, building a quality leadership team, and implementing our strategy, underpinned by a disciplined approach to capital allocation and cost management,' said Wood. Daley said he was delighted to be joining South32. He said South32's portfolio had evolved substantially in recent years and that the company was 'well positioned for potential future growth with a strong balance sheet, an attractive commodity mix, and a pipeline of options' in highly prospective regions. Daley's appointment will be of greater significance for South32's South African operations especially at a time of rising costs and other operational dynamics. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. 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Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Next Stay Close ✕ Global trade upheavals could also affect supply and demand dynamics as well as pricing for commodities such as aluminium and manganese that the company produces from South Africa. South32 has been reducing capital expenditure for its South African aluminium operations but expects to ramp up over the next year while it has received the approvals from the Competition Commission to divest the Metalloys local manganese alloy smelter. Its South African aluminium operations at Hillside raised saleable production by 1% to 362 000 tons in the half year period to December 'as the smelter continued to test its maximum technical capacity, despite the impact of load shedding'. Aluminium sales from Hillside firmed up by 10% in the December 2024 quarter as inventories at the mine returned to normal levels. Hillside Aluminum's costs at $2 135 per ton were expected to rise to $2 351 over the full year. During the half year, the operation had higher higher sales volumes of 362 000 tons, with lower raw material input prices for coke and pitch offset by higher alumina and energy prices, and a stronger South African rand. South32's South African manganese operations consists of two manganese mines in the Kalahari basin, and the Metalloys manganese alloy smelter that was placed on care and maintenance in 2020 is now being disposed of. Visit:
