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he Energy Regulator has approved six-year
negotiated pricing agreements (NPAs) for ferrochrome smelters operated in South
Africa by both Glencore-Merafe Chrome Venture and Samancor Chrome.
The National Energy Regulator of South
Africa (Nersa) issued a statement on November 6 confirming NPAs had been
approved for four of Glencore-Merafe Chrome Venture’s ferrochrome operations in
Mpumalanga, Limpopo and North West, as well as for six of Samancor Chrome’s
smelter operations in Mpumalanga, Limpopo and North West.
Eskom submitted the applications to the
regulator on May 9 in line with the interim long-term NPA framework approved by
Mineral Resources and Energy Minister Gwede Mantashe in August 2020.
The framework targets large power users
with minimum consumption thresholds of 80 GWh and/or load factors greater than
70% and where electricity is a large cost component.
The interim long-term NPA framework aims to
incentivise, through discounted tariffs, the retention of operations in
strategic sectors that would otherwise be severely curtailed or shut down
without discounted rates.
In the past, tariffs have been indexed to
the price of the commodity being produced, but it was not immediately clear
whether that was the case for the Glencore-Merafe and Samancor Chrome NPAs.
Nersa reported that Eskom will implement
separate six-year NPAs for Glencore-Merafe Chrome Venture’s Boshoek (130 MVA),
Wonderkop (310 MVA), Lion (275 MVA) and Lydenburg (165 MVA) operations.
The Samancor Chrome operations, meanwhile,
collectively amount to 1 363 MVA, or projected baseload sales of about 7.6 TWh
yearly, and include: Ferrometals (270 MVA), Middelburg Ferrochrome (286 MVA),
Tubatse Ferrochrome (245 MVA), Tubatse Alloy (220 MVA), TC Smelters (140 MVA)
and Dikwena Chrome (202 MVA).
The NPAs could be implemented one full
calendar month after Nersa’s approval and terminate 72 calendar months
thereafter.
Nersa did not provide tariff details but
indicated that the NPAs were set at a level to ensure the sustainability of the
operations, while covering Eskom’s cost of supply.
It also did not confirm whether the
agreement included a clause for Eskom to interrupt supply, which is the case
with other NPAs.
The State-owned utility, whose tariffs have
been rising steeply for several years, has indicated previously that to qualify
for an NPA larger consumers need to show that they would not be sustainable on
the applicable standard tariff.