BHP Billiton and Eskom have agreed to review the power supply agreements to the BHP Billiton’s aluminium smelters in South Africa and Mozambique. The parties will now work towards concluding negotiations for definitive legal agreements over the coming months.

The parties anticipate that such agreements could include a package of measures that would reduce the impact of financial derivatives on Eskom’s balance sheet while also ensuring a competitive supply of electricity to the smelters.

Details of the measures under consideration are commercially confidential, but may involve BHP Billiton assuming responsibility for the commodity pricing and currency exchange risks related to the contracts which would in turn reduce the volatility of Eskom’s earnings and improve its balance sheet.

These measures have been developed after lengthy discussions with Eskom that took into account the legal, technical and financial implications of the long term supply contracts.

BHP Billiton said that while the proposed measures would positively influence the electricity supply position over time, the grid would remain under pressure for the foreseeable future. The company would therefore continue to fulfil its commitment to reduce electricity consumption in support of Eskom and the country by maintaining a 10% power reduction in South Africa.

BHP Billiton is grateful to Eskom for its willingness to work with us in the development of mutually beneficial outcomes that are favourable to both parties and the public. We are confident that this will strengthen the foundation for a solid partnership with Eskom and our long term commitment to South Africa.