The National Transmission Company of South Africa (NTCSA) says it is seeking to conclude a new electricity supply agreement with the Mozal aluminium smelter in Mozambique in a manner that safeguards its financial sustainability and protects South African electricity consumers from unintended cost impacts.
The existing electricity supply arrangement between the parties has been in place for more than 20 years and is due to expire on March 15. The NTCSA confirms that all parties have long been aware of the contract end date and that discussions on a replacement agreement are underway.
According to the NTCSA, Mozal requires an electricity price significantly below the direct cost of supply in order to remain globally competitive. However, the transmission company says such a pricing structure is no longer sustainable for the NTCSA going forward.
“It has become clear that this arrangement is not sustainable for the NTCSA,” says CEO Monde Bala. Any future agreement would need to balance support for regional industrial activity with fairness to South African electricity consumers, he adds.
The NTCSA also points out that the National Energy Regulator of South Africa’s negotiated price agreement policy mechanism does not extend beyond South Africa’s borders, limiting the regulatory tools available to support discounted cross-border electricity pricing.
Bala says the NTCSA has consistently indicated an appropriate price range for the supply of electricity to Mozal over the past year and remains open to finding a mutually acceptable solution. Engagements with stakeholders in South Africa and Mozambique are continuing.
