SAfrica to renegotiate long-term smelter contracts

CAPE TOWN, Sept 15 (Reuters) - South African power utility Eskom will have to renegotiate long-term aluminium contracts, the main factor behind the utility's record annual loss, Public Enterprises Minister Barbara Hogan said on Tuesday. Eskom reported a loss of 9.7 billion rand ($1.30 billion) in August, arising mainly from fair value losses from derivative contracts linked to the price of aluminium and called "embedded derivatives". Eskom had signed multi-decade aluminium smelter contracts with BHP Billiton, one of the world's top mining companies. BHP defended the price it had negotiated as "internationally competitive". "The embedded derivatives is a big problem. We will have to renegotiate that contract for embedded derivatives," Hogan told parliament's public enterprises portfolio committee. "It is a complete misnomer to say that the embedded derivative contract was actually a hedging risk, that is completely wrong." (Reporting by Wendell Roelf)