Eskom, South Africa's beleaguered power utility, said on Thursday it would "buy back" power from industrial customers to improve a shortage that is projected to damage growth in Africa's most advanced industrial economy for the next five years.

Aluminium prices had jumped to a seven-month high after earlier press reports that Eskom was considering a "complete power supply buyback" from aluminium smelters and planning to effectively shut them down for the remainder of 2008.

But the utility said the measure - which is one of several initatives the power company is pursuing to improve supply - would not specifically target international aluminium plants, which are its biggest users of electricity. BHP Billiton (NYSE: BHP - News) , which operates two smelters in South Africa, is Eskom's biggest industrial customer.

One of the government's pet foreign investment goals over the past decade was luring the aluminium industry to the country, which still has the world's cheapest electricity. Aluminium smelting is among the most power-intensive of all manufacturing processes.

"We are considering to what extent we are able to negotiate with some industrial customers to buy megawatts back from them," Jacob Maroga, Eskom's chief executive, said on Thursday. "We are looking at buying back significant amounts of megawatts for a significant amount of time."

A power buyback would involve Eskom paying industrial customers for the lost production caused by retaining a portion of their electricity supply. It is necessary, said an Eskom representative, because the utility "needed firmer measures in place to deal with the emergency than we have at the moment."

The country's mining sector is currently operating at only 90 per cent of its normal power supply, but Eskom and the government say this is "voluntary."

A buyback, said the representative, would be a "far more dependable contractual agreement" than the country's arrangement with the mining sector.

Mr Maroga's comments, however, might affect the mining sector's negotiations with Eskom. The country's largest gold and platinum producers have all forecast lower production this year as a result of the power cuts.

Eskom stressed that it was considering many options for its buyback scheme and that it is too early to know which customers it would involve. "We can't just take the biggest customers off the top of the pile and assume that they offer the best solution," an Eskom representative said.

After BHP Billiton, Eskom's largest industrial customers are Sasol (NYSE: SSL - News) , the petrochemical company, and Anglo American, the mining group.

Tom Albanese, Rio Tinto chief executive, has said the company would delay buildling its planned smelter at Coega in South Africa until the company had concrete guarantees of its power supply.

Eskom announced its buyback plans on Thursday as one of several "recovery plan" initiatives. The utility will also purchase 45m tonnes of coal over the next two years to improve supply to its coal-fired power plants.

It will also independently accept cogeneration bids from independent power producers. "Within the next month we will present a clear pricing framework with the intention of signing up bidders as soon as possible," Brian Dames, Eskom's generation division head, said .

The cheapness of South African electricity has previously deterred foreign power companies from entering the market. Eskom supplies 95 per cent of the country's power.