Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Presentation (July 2007)
110 slides from Norsk Hydro Asa's investor presentation, July 2007
Slide 1: Investor presentation
Investor presentation July 2007 www.hydro.com
Slide 2: Cautionary note in relation to certain forward-looking statements
Cautionary note in relation to certain forward-looking statements Certain statements contained in this announcement constitute “forward-looking information” within the meaning of Section 27A of the US Securities Act of 1933, as amended, and Section 21E of the US Securities Exchange Act of 1934, as a
Slide 3: Table of contents
Table of contents A brief company overview 5 Business area presentation - Bauxite & Alumina 26 - Aluminium Metal 33 - Aluminium Products 46 - Power 59 - Oil & Gas 66 Second quarter results 2007 79 - Oil & Energy 82 - Aluminium Metal 88 - Aluminium Products 91 Additional financial information 95 Inve
Slide 4: A brief company overview
A brief company overview 4
Slide 5: Hydro – a focused aluminium and power company
Hydro – a focused aluminium and power company Streamlining “new” Hydro Power Aluminium Metals Aluminium Products Implementing merger of Hydro’s oil and gas activities with Statoil Oil Gas Divesting Polymers ld So Polymers Aluminium Metals 5
Slide 6: Significant value creation through restructuring
Significant value creation through restructuring NOK billion 2007 1) 195 Oil & Gas 99 Aluminium & Power 389 49 Fertilizer 46 Dividends & Buybacks 1999 2) 61 Conglomerate 1) 20 July 2007 close. Aluminium and Oil & Gas based on transaction equation 2) 4 January 1999 close, nominal value 6
Slide 7: Share price development “new” Hydro
Share price development “new” Hydro Relative development NYSE 18 December 2006 – 20 July 2007 2.1 New Hydro Statoil Alcoa Alcan 2.0 79% 20% 42% 101% 1.9 1.8 1.7 1.6 1.5 1.4 1.3 1.2 1.1 1.0 0.9 0.8 12/18/2006 1/18/2007 2/18/2007 3/18/2007 4/18/2007 5/18/2007 6/18/2007 7/18/2007 Source: Yahoo Finance,
Slide 8: Status merger of oil and gas activities with Statoil
Status merger of oil and gas activities with Statoil z All regulatory approvals received z Approved by the Extraordinary General Meetings of Hydro and Statoil 5 July 2007 z Expected completion 1 October 2007 z Hydro shareholders will receive 0.8622 shares in StatoilHydro for each Hydro share they ho
Slide 9: Hydro – a resourceful aluminium and power company
Hydro – a resourceful aluminium and power company Aluminium Metal 25 000 employees, 7 000 in Norway 1) Operations in more than 30 countries Aluminium Products Annual turnover above NOK 100 billion Operating income NOK 7.8 billion in 2006 Power Market capitalization NOK 99 billion 2) Automotive 1) Ex
Slide 10: Strong aluminium industry position
Strong aluminium industry position Integrated Emerging Market Mining & Metal Manufacturing 3 900 Primary Rolled Extrusions Other 3 552 3 406 3 151 Production in 1 000 tonnes in 2006 2 500 1 930 1 799 1 359 1100 1 040 985 930 915 845 616 429 270 260 230 163 Alcoa¹ Alcan Hydro United Chalco BHP Rio CV
Slide 11: Peer comparison 2006
Peer comparison 2006 Metal sales vs primary production (tons) Downstream in % of primary production Alcoa 156% Alcoa 98% Alcan 127% Alcan 39% Hydro 198% Hydro 95% 100% 100% Alumina ownership coverage Captive power * Alcoa 218% Alcoa 21 % Alcan 74% Alcan 43 % Hydro 55% Hydro 34 % 100% 100% Source: Co
Slide 12: Aluminium Metal and Products 2006
Aluminium Metal and Products 2006 Aluminium Metal Aluminium Products Casthouse Bauxite Alumina Electrolysis Smelter base Rolled products Carbon Extruded products Casthouse volumes (million tons) Alloys Remelter base z Smelter based 1.8 z Remelt based 1.4 3.6 Ingot z 3rd party 0.3 z Inventory 0.1 Sal
Slide 13: Aluminium value chain 2006
Aluminium value chain 2006 Million tons Bauxite z MRN equity production – Brazil: 0.9 million tons Bauxite* 0.5 1.4 z Alpart equity production – Jamaica: 1.3 million tons Alumina Alumina** 1.0 0.8 z Alunorte – Brazil: 1.3 million tons Aluminium z Alpart – Jamaica: 0.6 million tons Metal Primary alum
Slide 14: Primary metal production versus remelting
Primary metal production versus remelting Primary production Remelting z Commodity business z Only 5% of energy required to produce primary metal z Cyclical z Margin business z Capital and energy intensive - More labor intensive z Full LME exposure z High RoaCE business z High USD exposure - Less ca
Slide 15: Earnings distribution 2006
Earnings distribution 2006 Hydro Alcoa Alcan EBITDA ATOI adding back Tax & Depreciation Business Group Profit Other Alumina Packaging Packaging Alumina & 4% Products 8% 4% 12% Power Bauxite 14% Products Alumina 13% 11% Products 22% 27% 12% Metal Metal Metal 64% 63% 47% Source: Company filings Alcoa:
Slide 16: Revenue split aluminium peers 2006
Revenue split aluminium peers 2006 Other Pacific 11% Other Europe Other 13% North Americas 24% 18% America 6% 13% Europe 45% Europe North 76% USA America 57% 37% ‘New’ Hydro Alcoa Alcan Upstream 30% Down Upstream stream* Down Upstream Down 44% 42% stream 58% stream 70% 56% Source: Company reports 20
Slide 17: Competitive return on capital
Competitive return on capital RoaCE 14% Peer range * Aluminium (Metal & Products) 12% 10% 8% 6% 4% 2% 0% 2003 2004 2005 2006 2007 * Alcoa and Alcan Source: Bloomberg return on capital methodology. 12 month rolling Q1 2003-Q1 2007. Hydro figures are approximations to Bloomberg methodology. 17
Slide 18: Strong Aluminium cash flow
Strong Aluminium cash flow NOK billion Accumulated EBITDA net of accumulated investments Accumulated EBITDA 2003-Q2 2007 42.6 Accumulated investments 2003-Q2 34.0 22.4 23.2 15.2 20.2 18.8 15.5 6.5 11.8 5.6 2003 2004 2005 2006 Q2 2007 18
Slide 19: Hydro – adjusted net debt/equity ratio
Hydro – adjusted net debt/equity ratio 0.50 0.31 0.23 0.15 0.11 2004 2005 2006 June 30 - 2007 US GAAP* US GAAP* IFRS IFRS Interest-bearing debt + net pension liability (tax adjusted) + operating lease commitments (discounted) – cash and cash equivalents – short term investments divided by shareholde
Slide 20: Payout to shareholders 2000-2006
Payout to shareholders 2000-2006: NOK 37 billion Average payout ratio 2004 – 2006: ~50 percent NOK million 3 949 Dividend Buyback 1 589 1 684 6 100 5 500 5 021 1 155 555 763 2 576 2 711 2 811 2 470 2000 2001 2002 2003 2004 2005 2006 3 243 3 711 2 711 3 366 6 685 7 089 10 049 Dividend allocated to th
Slide 21: Dividend policy
Dividend policy 30% payout ratio over time 1 Year 5 year Target 44% z High commodity prices have supported current dividend 35% 36% payout and share buy backs 33% 31% z Revised dividend policy for “new” 26% Hydro - Hydro will continue existing 18% dividend policy with an average payout ratio of 30 p
Slide 22: Share price development (NYSE)
Share price development (NYSE) 1 January 1999 to 20 July 2007 Hydro 574% ConocoPhillips 301% Alcan 262% Total 222% BG Group 182% ENI 175% ExxonMobil 153% Alcoa 134% Chevron 125% RepsolYPF 117% Shell 101% BP 63% Source: Yahoo Finance, NYSE, USD 22
Slide 23: Priorities 2007
Priorities 2007 z Operational excellence in all businesses z World-class project execution of Qatalum z Pursue new upstream growth initiatives z Build on leading downstream market positions z Final integration with Statoil z Launch “new” Hydro – Capital Markets Day 6 September 23
Slide 24: Strategy for long-term growth
Strategy for long-term growth z Build on a leading, global position in upstream aluminium z Pursue attractive opportunities in alumina, bauxite and primary aluminium z Leverage strong platforms in Extrusion, Precision Tubing, Building Systems and Rolled Products z Captive hydro power production a st
Slide 25: Bauxite & Alumina
Bauxite & Alumina 25
Slide 26: Good bauxite equity coverage for Hydro
Good bauxite equity coverage for Hydro Relative to primary aluminium Equity coverage Long term evergreen contract coverage 100% 80% 45% 73% 74% 74% 75% 60% 40% 20% 55% 27% 26% 26% 25% 0% 2000 2005 2006 2007E 2010E Consumption 3.3 8.1 8.4 8.4 9.6 Production 1.8 2.2 2.2 2.2 2.4 million tons * Equity p
Slide 27: Alumina 2006 production
Alumina 2006 production Global market 68 million tons Geography Company Other Europe 6% 8% Alcoa/WMC Australia 20% Others 27% CIS 32% 9% North America UC Rusal 9% 16% CVRD Latin America Hydro 2% 21% 3% China 19% Chinese owned BHP Billiton Alcan 13% 6% 8% 2005 alumina production: 61 million tons. Onl
Slide 28: Alumina spot price
Alumina spot price Percentage of aluminium LME 3-month price USD/ton Percent 800 30 600 20 400 10 200 0 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 % of LME 3-month aluminium price Spot alumina price Source: LME, Metal Bulletin, CRU, Macquarie Research 28
Slide 29: Alunorte alumina refinery – key asset in repositioning
Alunorte alumina refinery – key asset in repositioning z Targeting 6.5 million tons production capacity by 2009, up from 4.6 million tons in 2006 z Hydro stake 34 percent of world’s largest refinery z Bauxite supplies from CVRD z First-quartile investment costs and highly competitive conversion cost
Slide 30: Strengthening captive alumina coverage
Strengthening captive alumina coverage Relative to primary aluminium Own production coverage Long-term contracts 100% 75% 29% 37% 71% 45% 63% 50% 57% 55% 43% 77% 25% 23% 0% 1998 2002 2006 2007E 2010E Consumption 2.4 2.8 3.5 3.3 3.9 Production 0.5 1.2 1.9 2.1 2.8 million tons 30
Slide 31: Hydro joins alumina project in Brazil
Hydro joins alumina project in Brazil z Agreement with Brazilian mining group CVRD, Hydro share 20 percent z Alumina refinery to be located 5 km from Alunorte - Bauxite supply from CVRD’s operation in Paragominas through existing pipeline - Hydro and CVRD already partners in Alunorte, the world’s la
Slide 32: Aluminium Metal
Aluminium Metal 32
Slide 33: Aluminium Metal
Aluminium Metal z Strong focus on return on capital z Restructuring on track z Operational excellence and production creep z Long-term profitable growth z Expected primary production 2010: 2 000 000 tons z Qatalum smelter project (Qatar) on stream end 2009 33
Slide 34: Primary aluminium 2006 production
Primary aluminium 2006 production Global market 34 million tons Geography Company Other Africa 4% 5% North America Alcoa Australasia 16% 10% 7% Alcan Latin America 10% 7% Europe Middle East 15% Rusal Other 5% 12% 53% Hydro CIS 5% 13% China 28% BHP Billiton 4% Chalco 3 % Source: CRU / Hydro 34
Slide 35: China driving the demand for primary aluminium
China driving the demand for primary aluminium 4 percent annual growth rate 2005-2020 Million ton 70 60 35% China Other 34% 50 31% 40 22% 30 13% 20 87% 78% 69% 66% 65% 10 0 2000 2005 2010E 2015E 2020E Source: CRU 2006 35
Slide 36: Estimated metal flow to and from China
Estimated metal flow to and from China 1 000 tons Net scrap metal import 3 000 1 000 2005 2006 2007 2008 2009 2010 2011 -1 000 Net export Primary / alloyed -3 000 Semi-fabricated Fabricated Scrap metal Net -5 000 Source: Company estimate May 2007 36
Slide 37: Aluminium market price – 3 month LME
Aluminium market price – 3 month LME USD per mt Primary aluminium LME USD/ton 3 000 LME (3-month avg.) 2 800 LME forward Q2 2007 average 2 799 2 600 Q2 2007 end 2 725 2 400 2 200 Q1 2007 average 2 746 2 000 1 800 Q1 2007 end 2 780 1 600 1 400 Average 2007 (1st half) 2 772 1 200 Average 2006 (year) 2
Slide 38: Repositioning enhances smelter portfolio
Repositioning enhances smelter portfolio Smelter geography Smelter size Rest Europe Above 300 000 tons Norway Below 300 000 tons Outside Europe 2 000 2 000 1 825 1 799 1 825 1 799 27% 19% 19% 29% 30% 43% 56% 57% 43% 780* 780 100% 100% 71% 70% 57% 17% 24% 38% 2000 2005 2006 2010E 2000 2005 2006 2010E
Slide 39: Qatalum – mega smelter in key region
Qatalum – mega smelter in key region z 50/50 joint venture between Qatar Petroleum and Hydro z 585 000 tons annually – expansion potential to 1.2 million tons annually - Production start-up Q4 2009 z First quartile operating cost – captive gas power z Proprietary smelting technology z Investment cos
Slide 40: Industry costs rising – Hydro’s position improved
Industry costs rising – Hydro’s position improved Hydro’s position including captive power: USD 80-100 lower than indicated Cost (USD/ton) z Alumina 2 500 - Two thirds of cost increase 2 250 - Coming down from peak 2 000 2006: Industry average: 1 640 1 750 Hydro average: 1 547 z Energy 1 500 2003: I
Slide 41: Aluminum industry operating cost increasing
Aluminum industry operating cost increasing USD per ton 1 640 1 450 Other cost Power Alumina 1 290 1 120 1 090 35% 36% 41% 41% 45% 28% 28% 28% 28% 26% 37% 36% 31% 31% 29% 2002 2003 2004 2005 2006 Source: CRU 2006 (Corporate operating cost definition) 41
Slide 42: Realisations
CRU industry cost for Hydro Weighted average, percent 120 7 15 100 13 2 10 80 30 60 114 10 98 100 40 Economy of scale Efficient work processes 44 Technology Local cost level 20 Contracts Regulatory & Tax frames 0 Alumina Overhead Carbon Casthouse Power Other Labour BOC SOC COC Realisations costs cos
Slide 43: Long-term power supply at competitive cost
Long-term power supply at competitive cost Contract portfolio Aluminium Metal Norway 1) 7 TWh captive production z Power supply and price secured 7 TWh long-term contracts Australia 3.5 TWh z Norway: gradual increase in power price until 2010 as new Canada 1.6 TWh contracts replace old Slovakia 1.0
Slide 44: Aluminium Metal financials
Aluminium Metal financials NOK million 2006 2005 2004 Operating revenues 68 405 54 579 51 957 Depreciation 1 728 1 687 3 798 Operating income 6 362 2 694 785 Non-consolidated investees 837 272 281 Adjusted EBITDA 9 134 4 821 5 297 Investments 1) 1 979 1 792 4 244 Operating & market statistics Primar
Slide 45: Aluminium Products
Aluminium Products 45
Slide 46: Aluminium Products
Aluminium Products z Continued strong profitability in Extrusion and Building Systems z All time high shipments in Rolled Products z Divestment of Aluminium Castings and Meridian for NOK 4.3 billion completed z Divestments in process - Magnesium remelters and smaller businesses z Closures - Magnesiu
Slide 47: Leading position in downstream niches
Leading position in downstream niches Rolled Products Extrusion Building Systems Precision Tubing z World’s largest mills z Number two z Number one in z World leader - Alunorf (hot) global player Europe - Europe - Grevenbroich (cold) z Innovative z Leading brands - North America solutions z Number o
Slide 48: Strengthened profitability
Strengthened profitability Adjusted profitability 2006 RoaCE 9.5% 4% Capital employed: NOK 15.7 billion Extrusion 1) Rolled Products Automotive 2) NOK 5.9 billion NOK 8.9 billion NOK 0.9 billion 1) Including Extrusion Europe, Extrusion Overseas, Building Systems and Precision Tubing, 2) Including Au
Slide 49: Extrusion – key figures 2006
Extrusion – key figures 2006 Revenues by region 1) Volume split 2) NOK 22.7 billion 605 000 tons Other Precision 6% Tubing North 11% America 21% Extrusion Europe Extrusion Americas 73% Europe 24% 52%** Building Systems 13% 1) Revenues include Extrusion and Precision Tubing, internal sales not elimin
Slide 50: Extrusion peer group comparison – relative size
Extrusion peer group comparison – relative size 1 000 tons 1 215 North America Europe 685 620 460 530 280 230 160 140 120 110 55 Alcoa/Sapa Hydro Indalex Alcan Kaiser Bonnell Aleris Metra Figures show soft alloys, internal estimates 2006 Market size sources are CRU and EAA 50
Slide 51: Extrusion peer group comparison – market shares
Extrusion peer group comparison – market shares Europe North America Market size 2.8 million tons Market size 1.9 million tons Hydro 16% Alcoa Other 25% 36% Alcoa 12% Other 49% Indalex Sapa 15% Metra 13% Sapa 2% 3% Bonnell Hydro Alcan 6% Kaiser 8% 8% 7% Figures show soft alloys, internal estimates 2
Slide 52: Rolled Products – portfolio evaluation concluded
Rolled Products – portfolio evaluation concluded z Well invested portfolio z Leading rolling mills in Europe – 50% AluNorf ownership, the flagship z Excellent technology and market position z Strong organization z Main challenge in the mid-term is China z Europe: shift in ownership in the industry i
Slide 53: Rolled Products – key figures 2006
Rolled Products – key figures 2006 Revenues by region Volume split NOK 23 billion 1 million tons Other 12% Litho North 17% America 8% Foil 16% Europe 80% Strip 67% 53
Slide 54: Rolled Products peer group comparison – relative size
Rolled Products peer group comparison – relative size 1 000 tons 4 000 Europe North America Other Total 3 094 3 000 470 2 436 2 000 1 000 1 000 910 0 Novelis - Hindalco * Alcoa** Hydro Alcan*** * 12 Feb 07: Hindalco agreement to acquire Novelis for USD 6 billion: Chart incl. Hindalco rolled products
Slide 55: Rolled Products peer group comparison – market shares
Rolled Products peer group comparison – market shares European market North American market 4.6 million tons 5.3 million tons 470 Hydro Hydro 1.5% 1% 16% 17% Novelis 23% 22% 59% 25% 76% Other Novelis 60% 23% Other 76.5% Market sources are CRU and EAA 55
Slide 56: Aluminium Products financials
Aluminium Products financials 1) NOK million 2006 2005 2004 Operating revenues 49 844 42 477 43 533 Depreciation 1 666 2 913 1 848 Operating income (83) (370) 1 072 Non-consolidated investees (179) 47 68 Adjusted EBITDA 1 715 2 670 3 058 Investments 2) 1 250 1 970 1 951 Rolled Products sales volumes
Slide 57: EBITDA per ton: Extrusion and Rolled Products
EBITDA per ton: Extrusion and Rolled Products 2 304 Extrusion Rolled Products 1 967 1 769 1 647 1 609 1 440 1 376 1 319 2004 2005 2006 1st half 2007 US GAAP US GAAP IFRS IFRS 57
Slide 58: Power
Power 58
Slide 59: Captive hydropower – a solid basis for aluminium smelting
Captive hydropower – a solid basis for aluminium smelting z Power production has built Hydro’s industry z Energy competence is an integral part of aluminium growth ambitions z Well-developed production assets provide stable cash-flow z Power competence to support growth strategy z Renewable energy w
Slide 60: Norway’s second largest hydroelectric power producer
Norway’s second largest hydroelectric power producer Røldal 2.7 TWh z 1 860 MW installed capacity Reversion in 2022 Suldal z All capacity connected to the grid Sogn* Reversion in 2044-2057 3.6 TWh z ~9 TWh production in a normal year z Low production costs and Telemark No reversion 2.7 TWh investmen
Slide 61: The hydro power portfolio is flexible
The hydro power portfolio is flexible z The market value of the power portfolio is optimized continuously z Actual spot exposure will vary from hour to hour based on own production z ~2 TWh exposed to prevailing spot prices 61
Slide 62: The power portfolio
The power portfolio Based on the period 2007-2009 Uses Long-term contracts Sources Aluminium Metal 13.5 TWh Own production 7- 11 TWh Short-term contracts Other (mainly internal) 1.5 TWh Long-term contracts Power portfolio 7 TWh 16 – 20 TWh Market sales Dry year reserve Market contracts 0 – 4 TWh ~ 2
Slide 63: Nordic power market – forward curves
Nordic power market – forward curves NOK/MWh 500 450 400 350 300 250 200 150 End Q2 2006 End Q4 2006 End Q1 2007 End Q2 2007 63
Slide 64: Power financials
Power financials NOK million 2006 2005 2004 Operating revenues 1) 6 292 6 614 4 108 Depreciation 120 142 121 Operating income 1 185 1 123 741 Non-consolidated investees 22 10 2 Adjusted EBITDA 1 337 1 283 875 Investments 2) 42 98 241 Power production, TWh 8.3 10.8 8.1 Acquired under long-term contra
Slide 65: Oil & Gas
Oil & Gas 65
Slide 66: Profitable production growth
Profitable production growth 1 000 boe/day Historical performance 1 000 Target Expected z 2007 target 585 000 boed 800 z 2010 expected 700 000 boed 700 - Capacity constraints lead to project delays 600 563 573 585 z Growth from high-quality portfolio 400 z Improved growth prospects beyond 2010 200 0
Slide 67: New fields on stream 2007 – 2010
New fields on stream 2007 – 2010 Hydro share at Start Field name peak production Country Type Operator year (boed) 2007 Ormen Lange 70 000 Norway Gas/condensate Hydro, Shell Rosa 14 000 Angola Oil Total Independence Hub Area 12 500 US GoM Gas Hydro, Dominion, Anadarko Vilje 10 000 Norway Oil Hydro N
Slide 68: Discoveries
Discoveries 2007 Exploration 2006 Q4 2007 Q3 2007 Q2 2007 Q1 2007 YTD Exploration wells completed 18 51 9 9* Discoveries 11** 26 7 4 Success rate – percent 61% 51% 78% 44% Discoveries by area Norway 1) 5 6 2 3 US Gulf of Mexico 2) 3 8 2 1 Libya 3) 1 7 1 0 Canada 4) 0 2 0 0 Angola 5) 1 2 1 0 Iran 6)
Slide 69: Oil and gas production per quarter
Oil and gas production per quarter 1 000 boe/day Oil Gas 173 208 192 147 176 178 184 197 142 164 123 154 169 168 442 422 418 415 406 399 405 402 398 394 391 385 368 381 2004 2005 2006 2007 Average 572 563 573 584 69
Slide 70: Production costs per barrel
Production costs per barrel NOK/boe Gas injection costs Production costs excluding gas injection 34.1 32.2 5.5 25.3 7.9 20.7 5.4 2.8 28.6 24.3 17.9 19.9 2004 2005 2006 2007 YTD Production in million boe 209 206 209 106 70
Slide 71: Average prices and exchange rates
Average prices and exchange rates Oil Oil Gas 450 80 USD/boe NOK/boe NOK/USD NOK/Sm3 NOK/boe USD/boe 400 70 Q1 2005 46.4 291.7 6.29 1.47 350 Q2 2005 49.8 317.9 6.39 1.31 60 Q3 2005 60.4 390.6 6.47 1.36 300 Q4 2005 55.6 368.8 6.63 1.85 50 Avg. 2005 53.1 342.2 6.44 1.52 250 40 Q1 2006 60.6 403.5 6.67
Slide 72: Operating costs per boe
Operating costs per boe 160 154.1 140 128.1 120 111.6 94.9 100 82.1 80 60 40 20 NOK/boe 0 2004 2005 2006 2007 YTD YTD excl GoM Exploration 6.0 8.9 23.9 13.6 8.4 Net transportation 8.3 9.4 12.4 10 10.1 Other cost/income 0.7 3 2.7 4.3 3.6 Deprec.& aband. 46.4 48.2 83.1 66.1 55.9 Gas for injection 2.8
Slide 73: Exploration activity and costs
Exploration activity and costs NOK million 2 400 2 200 2 000 1 800 1 600 1 400 1 200 1 000 Expensed 800 share 600 400 200 0 - 200 - 400 - 600 - 800 Capitalized 2003 2004 2005 2006 2007 share -1 000 Expensed Expensed old wells Refund insurance Iran Seismic Spinnaker 73
Slide 74: UK gas prices – NBP forward curves
UK gas prices – NBP forward curves Pence/th 105 95 85 75 65 55 45 35 25 15 5 End Q2 2006 End Q4 2006 End Q1 2007 End Q2 2007 74
Slide 75: Flexibility – increased value of gas portfolio
Flexibility – increased value of gas portfolio Norwegian Continental Shelf Strong reserve base Excellent Operator Basin Master St.Fergus Access to Infrastructure NBP* Easington*** Emden Bacton TTF** Zeebrugge/Hub Dunkerque PEG**** Gas Market Presence Long-term sales Spot sales Downstream marketing S
Slide 76: Ormen Lange/Langeled 97 percent complete
Ormen Lange/Langeled 97 percent complete z Norway’s largest industrial project. Largest gas development in Europe z Hydro 18 percent equity z Supply 20 percent of UK gas demand z Langeled South gas export to UK began 1 October 2006 z Ormen Lange start-up October 2007 76
Slide 77: Oil and gas reserves and resources
Oil and gas reserves and resources* Million boe 4 000 CMD 2005 3 000 2 000 z Added total ~350 mboe in new resources in 2006 z Few sanctioned fields in 2006 1 000 z 2006 production 209 mboe z Total reserve/resource base up 120 mboe 0 Proven reserves Additional expected 2006 Production Added expected
Slide 78: Second quarter results 2007
Second quarter results 2007 78
Slide 79: Highlights second quarter
Highlights second quarter z Strong results in all businesses z Favorable market conditions z Final approval of Qatalum z Agreement to develop new alumina refinery in Brazil z Ormen Lange 97 percent complete, on track for October start-up z Shareholders’ and regulatory approval of oil and gas merger
Slide 80: Consolidated income statements
Consolidated income statements NOK million Q2 2007 Q1 2007 Q2 2006 Revenue 46 529 46 865 48 026 Share of the profit in equity accounted investments 350 283 358 Other income, net 301 1 075 432 Revenues and income 47 180 48 224 48 816 Depreciation, amortization and impairment (4 651) (4 593) (4 000) O
Slide 81: Earnings before financial items and tax (EBIT)
Earnings before financial items and tax (EBIT) NOK million Q2 2007 Q1 2007 Q2 2006 Exploration and Production 10 857 10 146 11 675 Energy and Oil Marketing 987 1 310 1 178 Eliminations (389) (290) 344 Oil & Energy 11 455 11 166 13 196 Aluminium Metal 2 465 2 534 2 333 Aluminium Products 355 1 315 32
Slide 82: Oil & Energy highlights
Oil & Energy highlights z Oil and gas production 558 000 boed z Record-high international production z Ormen Lange phase I on time and budget z Vega and Vega South development plan approved z StatoilHydro preparation on schedule 82
Slide 83: Oil & Energy key figures
Oil & Energy key figures Operational data Q2 2007 Q1 2007 Q2 2006 Oil and gas production (1 000 boe/day) 558 610 537 Realized oil price, USD/boe 67.2 55.9 67.9 Realized oil price, NOK/boe 403.3 347.8 422.2 Realized gas price, NOK/Sm³ 1.62 1.90 1.79 Exploration expense, NOK million 653 786 618 EBIT,
Slide 84: Exploration activity
Exploration activity z Nine wells completed in Q2 z Seven new discoveries in Q2 - Four commercial – two in Norway, one in Libya and one in GoM - Three under evaluation - In addition one discovery in Norway from Q1 declared commercial z Activity of NOK 904 million 84
Slide 85: Oil & Energy prospects
Oil & Energy prospects z Continued high oil price z 2007 production target 585 000 boed maintained z High exploration activity z Merger with Statoil to be completed 1 October z Official opening of Ormen Lange 6 October 85
Slide 86: Another strong quarter for “new” Hydro
Another strong quarter for “new” Hydro NOK million Q2 EBIT (est) Q2 EBITDA (est) Aluminium Metal 2 465 3 124 Aluminium Products 355 671 Power 395 415 Corporate and other (50) (35) Total 3 165 4 175 Special items (245) (389) Total after special items 2 920 3 786 86
Slide 87: Significant restructuring of Aluminium executed
Significant restructuring of Aluminium executed z 180 000 tons of high-cost primary capacity closed - Final cost NOK 900 million vs estimated NOK 1 000 million z Majority of automotive component business divested - New management in place to turn around Automotive Structures z Magnesium business exi
Slide 88: Aluminium Metal highlights
Aluminium Metal highlights z Record results in first half z Realized aluminium price USD 2 606 per ton in Q2 z Smelter production 435 000 tons in Q2 as projected z Impairment write-down US remelters NOK 144 million z Final Qatalum approval z New alumina growth initiative in Brazil 88
Slide 89: Aluminium Metal EBIT
Aluminium Metal EBIT Adjusted for special items NOK million z Realized aluminium price 2 399 - USD 2 606 per ton 2 245 - +1% vs Q1 2007, +10% vs Q2 2006 2 120 - NOK 16 174 per ton 1 928 1 832 1 812 - -2% vs Q1 2007, +5% vs Q2 2006 z Reduced price in NOK main reason for lower Q2 EBIT z Primary produc
Slide 90: Aluminium Metal prospects
Aluminium Metal prospects z Continued high aluminum prices z 83 percent of Q3 production sold at 2 606 USD/ton end June - Including full effect of strategic hedges z Continued weak USD will have negative impact z European market conditions remain strong z 2007 production target 1 730 000 tons mainta
Slide 91: Aluminium Products highlights
Aluminium Products highlights z Underlying results remain strong z Solid markets for Extrusion and Rolled Products in Europe z Continued portfolio restructuring z Challenging US markets - Cost-improvement measures implemented 91
Slide 92: Aluminium Products EBIT
Aluminium Products EBIT Adjusted for special items NOK million z Rolled Products 498 492 - Margin and volume improvement z Extrusion 398 367 - Positive margin development - Volumes stable - Weak results in the US 269 260 z Automotive - Weak results - Divested activities (Castings) included in Q1 wit
Slide 93: Aluminium Products prospects
Aluminium Products prospects z Favorable outlook for main European markets z Weak US markets z Seasonal reduction in volumes in second half of 2007 z Ensure value creation from restructured portfolio 93
Slide 94: Additional financial information
Additional financial information 94
Slide 95: Conversion to IFRS
Conversion to IFRS z Hydro will use IFRS as primary GAAP from 2007 z Comparable IFRS figures for 2006 z US GAAP figures for 2005 and earlier z Limited impact on results - Net income 2006 - US GAAP NOK 17.4 billion - IFRS NOK 17.7 billion z Main differences compared with US GAAP - Presentation and cl
Slide 96: Adjusted income Q2 2007
Adjusted income Q2 2007 NOK million Reported income Adjustments Adjusted income Exploration and Production 10 857 (323) 10 534 Energy and Oil Marketing 987 117 1 104 Eliminations (389) 390 1 Oil & Energy 11 455 184 11 639 Aluminium Metal 2 465 (220) 2 245 Aluminium Products 355 137 492 Other activit
Slide 97: Special items impacting income statement Q2 2007
Special items impacting income statement Q2 2007 NOK million Unrealized (gains)/losses on oil and gas derivatives, Spinnaker Exploration & Production (9) Unrealized (gains)/losses on gas contracts Exploration & Production (314) Unrealized (gains)/losses on gas contracts Energy and Oil Marketing 144
Slide 98: Estimated EBIT and EBITDA for “new” Hydro 2007
Estimated EBIT and EBITDA for “new” Hydro 2007 Q1 Q2 Special Special EBIT (est) Reported Adjusted EBIT (est) Reported Adjusted items items Aluminium Metal 2 534 (135) 2 399 Aluminium Metal 2 465 (220) 2 245 Aluminium Products 1 315 (817) 498 Aluminium Products 355 137 492 Power 300 (22) 278 Power 39
Slide 99: Variance analysis Hydro
Variance analysis Hydro NOK million First half Q2 2007 28 842 14 198 2006 32 404 15 620 Variance EBIT (3 562) (1 422) Prices and currency - Oil (624) (5) - Gas (691) (173) - LME 2 635 1 604 - Currency (1 514) (511) - Margin (1 865) (2 230) - Volume 1 175 1 579 - Strategic hedges (370) (109) - Deriva
Slide 100: Consolidated balance sheets
Consolidated balance sheets NOK million 30 June 2007 31 March 2007 30 June 2006 Cash and cash equivalents 20 896 21 881 7 725 Short-term investments 6 274 14 982 12 669 Receivables and other current assets 42 092 44 377 47 021 Inventories 15 639 16 564 15 985 Assets held for sale 7 167 – – Non-curre
Slide 101: Statement of cash flows
Statement of cash flows Six months ended Six months ended NOK million 30 June 2007 30 June 2006 Operating activities: Net income 11 654 10 715 Depreciation, amortization and impairment losses 9 245 7 860 Other adjustments (4 091) 4 405 Net cash provided by operating activities 16 808 22 980 Investin
Slide 102: Adjusted income 2006
Adjusted income 2006 US GAAP NOK million Reported income Adjustments Adjusted income Exploration and Production 41 352 4 993 46 345 Energy and Oil Marketing 3 578 50 3 628 Eliminations 1 323 (1 323) – Oil & Energy 46 253 3 720 49 973 Aluminium Metal 6 362 232 6 594 Aluminium Products (83) 1 064 981
Slide 103: Special items impacting income statement 2006
Special items impacting income statement 2006 US GAAP NOK million Unrealized (gains)/losses on oil and gas derivatives, Spinnaker Exploration & Production (222) Impairment loss Gulf of Mexico Exploration & Production 5 240 Unrealized (gains)/losses on gas contracts Exploration & Production (25) Unre
Slide 104: Special items impacting income statement 2006
Special items impacting income statement 2006 US GAAP NOK million Net impact operating income Hydro 4 661 Non-cons. investees - unrealized currency (gains)/losses Alunorte Aluminium Metal (94) Non-cons. investees - unrealized (gains)/losses on LME contracts Aluminium Metal 143 Alunorte Non-cons. inv
Slide 105: Indicative price and currency sensitivities 2007
Indicative price and currency sensitivities 2007 NOK million Income before tax Net income Change Oil price per barrel 1 190 345 1 USD Aluminium price per tonne 1 000 655 100 USD NOK million Income before tax Net income Change USD Oil & Energy 1 NOK 10 340 3 780 USD Aluminium Metal 3 280 2 130 1 NOK
Slide 106: Primary aluminium production 2003-2006
Primary aluminium production 2003-2006 1 000 tons Smelter site Country Interest 2006 2005 2004 2003 Sunndal Norway 100.0% 357 362 306 210 Karmøy Norway 100.0% 288 277 278 271 Årdal Norway 100.0% 232 233 222 215 Neuss Germany 100.0% 226 225 223 221 Slovalco 1) Slovakia 20.0% 158 159 157 27 Kurri-Kurr
Slide 107: Aluminium Metal hedge programs
Aluminium Metal hedge programs 1) 2007 2008 2006-2008 program – volume ton 2) 163 800 167 100 2006-2008 program – LME price USD/ton 2 300 2 200 2003-2007 program (Sunndal) – volume ton 3) 108 900 – 2003-2007 program (Sunndal) – LME price USD/ton 1 500 – 2003-2007 program (Sunndal) – LME price NOK/to
Slide 108: Aluminium – operational data
Aluminium – operational data Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Volumes and prices 2007 2007 2006 2006 2006 2006 2005 2005 2005 Primary production (1 000 mt) 435 433 450 449 451 449 464 461 457 LME realized (USD/mt) including hedges 2 606 2 588 2 430 2 462 2 368 2 146 1 851 1 770 1 842 NOK/USD realized incl
Slide 109: Investor Relations in Hydro
Investor Relations in Hydro 109
Slide 110: Investor Relations in Hydro
Investor Relations in Hydro t: +47 22 53 84 83 Ada Christiane Rieker Vice President m: +47 951 82 718 e: ada.christiane.rieker@hydro.com t: +47 22 53 92 80 Stefan Solberg Investor Relations Officer m: +47 917 27 528 e: stefan.solberg@hydro.com t: +47 22 53 92 24 Irene Raposo Investor Relations Secre