Eskom announced on Friday that it had extended an eleventh-hour 62c/kWh tariff offer to ferrochrome producers Glencore‑Merafe Chrome Venture and Samancor, but indicated that negotiations on the precise terms and conditions still needed to be finalised before the package could be submitted for regulatory approval.

Hence the details of the package, including its structure, duration, take-or-pay commitments, and any risk-and-reward sharing, would only be made available once the negotiations had been concluded and a submission was made to the National Energy Regulator of South Africa (Nersa) for its approval of the discounted tariff.

Eskom CEO Dan Marokane promised that the terms and conditions would be shared transparently both in the submission and during the public participation process that Nersa would conduct.

He also indicated that the package being prepared for Glencore‑Merafe Chrome Venture and Samancor would form the basis of a standard smelter offer that could be extended to other ferroalloy producers, including those smelters that process manganese and vanadium.

No timeframe was given for concluding the Nersa process in relation to the ferrochrome offer, or for launching a broader standard offer for smelters.

R10bn From Existing Debt-Relief Package

Marokane promised that other electricity customers would not be leaned on to subsidise the reduced tariff to the smelters.

Instead, the initial funding to close the revenue gap that would arise for Eskom would be secured within the framework of the existing R230-billion debt relief package that had been extended to the utility by government, with an outstanding R10-billion transfer from the National Treasury to Eskom under the package to be used to close the gap this year.

Much store was also being given to Eskom meeting its target of making cumulative savings of R112-billion by 2029 to help fund the lower tariffs to the smelters without breaching its commitment of keeping future standard tariff hikes to single-digit levels.

The current Eskom standard tariff stands at 195.95c/kWh, a price that includes subsidies for those industrial customers that have secured a negotiated price agreement with Eskom.

Announcing the offer just hours before the February 28 deadline set for reaching a deal with the two companies to prevent the closure of further capacity, Electricity and Energy Minister Dr Kgosientsho Ramokgopa expressed optimism that the offer would be sufficient to avert large-scale planned retrenchments.

In fact, the Minister argued that there was potential to restart mothballed capacity and raise the number of smelters in operation from 11 currently to 49 by the end of 2027, and increase employment in the sector from about 11 400 people to over 121 000 people over the same period.

Marokane emphasised the importance of the smelters to Eskom’s overall demand, noting that restored demand from Glencore‑Merafe Chrome Venture and Samancor would represent yearly sales of 12.8 TWh, while a return of other smelters would represent 26 TWh, excluding the large aluminium smelters.

Ramokgopa acknowledged that other electricity consumers, including struggling households and businesses, might perceive the offer being made to the smelters as unfair.

However, he said the decision to support the sector was based on difficult trade-offs that took account not only of the risks to jobs and industrial capacity but also South Africa’s critical minerals ambitions.

He also said that upcoming revisions to the electricity pricing policy would seek to ensure greater fairness by outlining support for poor households and small businesses, alongside efforts to sustain strategic beneficiation and industrial capacity.