Eskom agrees to huge electricity discounts for two companies in South Africa
Eskom has agreed to a 62 cents/kWh electricity tariff for Samancor Chrome and Glencore–Merafe Chrome ferrochrome smelters.
The chrome operators repeatedly said the current energy costs for their operations were unsustainable and threatened to lay off thousands of employees if an agreement could not be reached.
While a temporary tariff of 87.74 c/kWh was agreed in January, the chrome companies said that it wasn’t enough to keep their operations sustainable.
Eskom said the new tariff intervention improves its liquidity without requiring higher tariffs, additional borrowing, or further government support.
It added that the tariff gives it predictable sales volumes for up to the next five years and protects public investments in the utility, as well as its ability to support reindustrialisation and economic growth.
All agreements remain subject to approval by the National Electricity Regulator of South Africa (NERSA). Eskom has submitted the application to NERSA for approval of the 62c/kWh tariff.
NERSA is expected to conduct a public consultation process in due course, as per the regulatory process.
Eskom CEO Dan Marokane said that Eskom’s turnaround over the last three years has restored baseload electricity supply, for which there is no alternative source for energy-intensive users.
Without the turnaround, Marokane said that Eskom would not have been in a “position to support the ferrochrome industry or play a meaningful role in preventing job losses.”
He added that Eskom will work with labour, producers and stakeholders to balance its own financial sustainability and deliver electricity to drive economic growth.
How the Negotiated Price Agreements (NPA) will work
Eskom said that the amended NPA is a medium‑term solution of up to five years and enables a proactive, time‑bound, case‑by‑case approach.
This will allow the SOE to tailor pricing and contractual structures to the specific commercial circumstances of each smelter.
The group said that ferroalloy and iron and steel segments are experiencing sustained pressure from global commodity markets, rising input costs and structural competitive challenges.
Thus, the ferroalloy and iron and steel segments will be prioritised over other smelter industry sectors.
“For these segments, pricing will be determined through a structured, bottom‑up assessment that takes into account the cost of production, electricity intensity, and exposure to commodity prices,” said Eskom.
“This is not a uniform approach; rather, it allows for tailored pricing solutions specific to each smelter.”
It added that this approach applies a consistent economic logic while retaining the flexibility to respond to sector‑specific conditions.
It added that this is primarily designed to avoid both under-support, which can result in plant closures, and over‑subsidisation, which can distort competition.
It noted the differentiated approach ensures it can apply a consistent economic framework across the smelting sector, while avoiding the risk of unintended pricing benchmarks or cross-sector distortions.
The 62 c/kWh is far lower than the costs that citizens across South Africa have to pay, with household fees ranging from R2.00 to over R4.50 per kWh.
Marokane has previously warned against the danger of negotiated electricity pricing discounts for energy-intensive firms, stating that the costs ultimately fall on households.
Loading ...