Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Day (2022)
98 slides from Norsk Hydro Asa's investor day presentation, Dec 16, 2022
Slide 1: Capital Markets Day 2022
Unique position in a new reality Capital Markets Day 2022
Slide 2: Forward-looking statements
Certain statements included in this announcement contain forward-looking information, including, without limitation, information relating to (a) forecasts, projections and estimates, (b) statements of Hydro management concerning plans, objectives and strategies, such as planned expansions, investmen
Slide 3: Agenda
All times GMT 08.00 – 08.05 Welcome 08.05 – 09.05 Unique position in a new reality 09.05 – 09.35 Q&A and Break Ambitious pathway to net-zero 09.35 – 10.50 and sustainable value creation 10.50 – 11.20 Q&A and Break Increasing robustness of cash 11.20 – 12.10 flows and returns 12.10 – 12.30 Q&A 33
Slide 4: Hilde Merete Aasheim, President and CEO
Capital Markets Day 2022 Hilde Merete Aasheim President and CEO
Slide 5: Lifting profitability, driving sustainability
Lifting profitability, driving sustainability Total Recordable Incidents Adjusted RoaCE 12-month rolling per million hours worked 12-month rolling % 26,9 % 18,60% 3,39 3,32 3,03 3,70% 2,65 2,51 2018 2019 2020 2021 2022 2020 2021 LTM Q3 2022 V Engagement factor Improvement Adjusted EBITDA program sta
Slide 6: Stock price index / TSR
Stock price index (incl. dividend) / TSR1) 400 Total Annualized 350 Norsk Hydro 98% 19% 300 Peer range2) (7) – 80% (2) – 16% 250 200 150 100 50 0 Apr-19 Jul-19 Apr-20 Jul-20 Apr-21 Jul-21 Apr-22 Jul-22 Oct-19 Oct-20 Oct-21 Oct-22 Jan-19 Jan-20 Jan-21 Jan-22 Peer range NHY 1) TSR calculated including
Slide 7: Shifting external environment creates both risks and opportunities
Shifting external environment creates both risks and opportunities 7
Slide 8: Regulatory drivers: RePowerEU, Critical Raw Materials Act, Renewable Energy Directive
• RePowerEU • Lifting national security and self- • Inflation Reduction Act driving sufficiency as top priority • Critical Raw Materials Act investments in renewable energy, new • Renewable Energy Directive energy solutions and climate • Green/clean technology lifted as technologies future trade opp
Slide 9: Semis demand growth driven by transport and electrical
Semis demand growth driven by transport and electrical Global semis demand 2022-2030 In million tonnes 122 3 8 Transport 3 0 1 6 3 Construction Additional aluminium demand from green transition1) In million tons 2 Packaging 16 +24 14 2 Foil stock 13 12 4 Electrical 11 10 10 Consumer durables 2 8 Mac
Slide 10: New primary capacity still necessary to balance markets
Majority of announced primary growth based on high carbon energy sources In million tons 35,2 t CO2e per t Al 12.1 6.2 2,1 New primary capacity still necessary to balance markets 0,5 1,8 Global aluminium consumption In million tonnes 1,7 29,1 140 CAGR CAGR World. Ex Creep/ Likely Probable Additional
Slide 11: Seizing opportunities where our capabilities match megatrends
Seizing opportunities where our capabilities match megatrends 1 2 11
Slide 12: Competitive positions on global cost curves
Bauxite & Alumina Aluminium Metal Alumina Business Operating Cost curve (2022) Smelter Business Operating Cost curve1) (2022) 5000 750 Alunorte back in 1st 4000 quartile after fuel switch ~2300 ~200 USD/mt, 3000 USD/t 500 ~245 USD/mt post fuel switch ~1000 ~115 USD/t, 2000 ~140 USD/t USD/t 250 post
Slide 13: Power sourcing for smelters in Europe
Power sourcing for smelters Power sourcing for Hydro smelters in Norway1) TWh in Europe 18 Total consumption 16 14 12 Smelter business operating cost 10 curve 2022 8 USD/tonne 6 4 3 200 2 3 000 0 2 800 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2 600 Spot/Short-term Captive Wind power Hydropo
Slide 14: Strengthening future competitiveness with improvement program
Strengthening future competitiveness and positioning with additional NOK 0.8 and 1.5 billions in 2023 and 2025. Further stretched with additional NOK 1.5 billion by 2027 Improvement program Ambitions increased in 2023 and 2025, and extended with additional NOK 1 billion until 2027 Fixed cost 11.0 10
Slide 15: Delivering on our recycling ambition
• Delivering on our recycling ambition - several investment decisions made, IRR 15-30% • Increasing ambitions to use PCS by 140kt, lifting EBITDA ambitions by NOK 1 billion All approved project pipeline Attractive RoaCE in our AM recycling portfolio PCS usage and ambition EBITDA Seizing the market o
Slide 16: Extrusions: portfolio restructuring and EBITDA target
• Automotive, systems business and Portfolio commercial transport restructuring • Exited non-attractive operations and segments • Dedicated improvement program for Cost procurement and operational excellence reductions (EBS) Extrusions EBITDA • Capacity and capabilities in attractive NOK billions 14
Slide 17: Energy: leveraging strong platform and capabilities
Leveraging strong platform and capabilities • Approx 3.5 BNOK earnings “platform” (LTM adjusted to normal production and no area price Energy Operations gain) & Energy Markets • In addition, commercial contribution of approx. 400 MNOK average last 3 years • USD 2.7 billion contracted revenues1) • NO
Slide 18: On track to meet 30 percent reduction in scope 1 and 2 CO2e
• On track to meet 30 percent reduction • 1:1 reforestation on track • On track to deliver on target of in scope 1 and 2 CO2e by 2030 empowering 500,000 people with • No net-loss biodiversity ambition for • Net-zero by 2050 or earlier new projects skills and education by 2030 • Reduce specific scope
Slide 19: Reducing footprint of external purchased metal to reduce scope 3
Reducing footprint of external purchased metal is the main source to Upstream scope 3 GHG target reduce scope 3 emissions, in addition to external alumina, alloying pr tonne aluminium* elements, anodes, caustic soda, fuel and other goods and services -30% 5,1 3,6 Replacing ingots and pre-consumer sc
Slide 20: Profitability roadmap
Profitability roadmap AEBITDA Q3-2022 LTM - 2027 BNOK, excluding new energy RoaCE 27% 41.5 • Recycling: Double PCS and EBITDA by 20251) increased • By 40 kt PCS by 2025 and additional 100 kt PCS by 2027 • Lifting EBITDA by additional NOK 1 billion RoaCE • Extrusion: Increase EBITDA to NOK 8 billion
Slide 21: Hydro's strengths
• Global, highly • Leading innovation • Close customer • Comprehensive low- skilled workforce throughout value chain collaboration and carbon aluminium • Strong focus on • Product development in partnerships offerings development, diversity, collaboration with • Integrated value chain • Renewable en
Slide 22: Arvid Moss, EVP Energy
Capital Markets Day 2022 Arvid Moss EVP Energy
Slide 23: War in Ukraine puts the global energy system to a test
The war in Ukraine is putting the global energy system to a test EU increasing 2030 renewables targets European power prices 2021 – 2022 2030 - reduction target €/MWh Nordic System German % net reduction in GHG emissions, from 1990 levels 55 57 700 60 40 600 40 20 500 0 400 2014 2020 2022 V 300 200
Slide 24: Renewable capacity, green hydrogen and battery demand forecasts
Norway and Sweden renewable capacity Cumulative pipeline of green hydrogen European battery demand forecast1) electrolysers proposed by EMEA developers TWh GW GW 210x Solar PV Wind 105.5 Stationary storage 1.5 2.4x Vehicles 34 2 +34% ann. 24 1 14 32 0 0.4 23 29.8 30.8 30.9 27.0 14 12.4 7.1 0.5 2.1 2
Slide 25: Realizing value potential in Batteries, Hydro Rein & Hydro Havrand
Realizing value potential in Batteries, Hydro Rein & Hydro Havrand 2020: Hydro 2025 Strategy 1905 1991 2016 - 2019 2017 2021 Wind power PPAs First battery investment Latest growth asset Energy markets operations Hydro Rein Batteries unit established Hydro Havrand established 2021 Developer, owner an
Slide 26: Leading power market player
Excellent hydropower operations & growth projects Leading power market player 14.0 TWh NOK 1 billion 200 GWh Operations of power Potential Hydro Potential increased Top 5 in Europe Among the top 10% assets in Norway. Market analysis, market largest energy trading investments in Lyse production in Fo
Slide 27: Energy strategy and role in decarbonizing Hydro
Operations and projects: HSE excellence, Decarbonizing Hydro operating 40 power plants across Norway • Power sourcing, managing and matching profiles and (hydropower and wind). Large scale project execution consumptions across new units and Hydro • Hydro Rein offering renewable power and energy solu
Slide 28: Major renewable energy producer, market player and offtaker
Major renewable energy producer, market player and offtaker In Operation Offtake Aluminium Metal Hydropower in Norway (equity): 9.4 TWh Norwegian smelters: 17 TWh Hydropower in Norway (operator): 13 TWh Wind power in Norway (operator): 0.7 TWh Offtake Extrusions Selected Extrusion plants: 0.1 TWh So
Slide 29: Hydro Rein: significant progress last 24 months
Significant progress last 24 months Hydro Rein EBITDA estimates 2026/27. CAPEX 21-26 3.6 TWh NOK 2.5 billion signed under long-term USD 2.7 billion Remaining capex for contracted revenues projects in construction, EUR & USD PPAs incl. 2.1 BNOK in 2023 20 1.7 GW 30 gross capacity in numbers of renewa
Slide 30: Large portfolio of complementary projects
Sørlige Nordsjø II, offshore wind, phase I: 1,500 MW Focus on early phase opportunities Stor-Skälsjön, wind: 260 MW Southern Sweden, 9 early wind development projects: 672 MW Development model based on strategic partnerships with Jylland in Denmark, 2 solar relevant stakeholders, from landowners to
Slide 31: Strategic growth in batteries
S T R AT E G I C G R O W T H Anode materials Circular solutions Battery materials Vianode targeting substantial market Hydrovolt targeting 25% market share Selectively explore share for synthetic graphite in Europe within EV battery recycling in Europe. and North America Work to integrate downstream
Slide 32: Vianode and Hydrovolt emissions reduction
Description Status Capacity • All process steps • Small size industrial Emissions reduction compared to the production process in today’s market equipment R&D In operation • Located in Kristiansand, Samples Norway • All process steps Renewable power • Industrial environment In operation Customer • N
Slide 33: Batteries: significant progress last 24 months
Significant progress last 24 months Key capabilities 10,000 20,000 2x EVs with Vianode Value uplift on equity EV batteries secured by Raw materialsScaling capability, energy expertise graphite from plant invested Hydrovolt and automotive experience under construction 90% NOK 3 billion NOK 0.9 billio
Slide 34: Hydro Havrand: first mover in green hydrogen
First mover position from industrial consumption in Hydro Strategic approach and overview Establishing as a developer, owner and operator of Multi-GW 30% 70+ green hydrogen production facilities. potential internal Hydro reduction of Hydro potential Hydro offtake emissions by 2030 locations worldwid
Slide 35: Expanded footprint in the Nordics
Expanded footprint in the Nordics in terms of 1 power and market operations, projects and sourcing Sourcing and management of power and fuels for 2 Hydro operating assets across geographies Hydro Rein successfully established as separate 3 company with external capital and partners Hydro Havrand dev
Slide 36: Hilde Merete Aasheim, President and CEO
Capital Markets Day 2022 Hilde Merete Aasheim President and CEO
Slide 37: Key properties of aluminium match green transition requirements
Importance of aluminium within key green transition technologies1 PV Electric vehicles Key properties of aluminium match requirements – lightweight, conductive, corrosion resistance Wind power Electricity networks Infinitely recyclable with very low energy need and high resource efficiency Concentra
Slide 38: Low-carbon and recycled aluminium to make up majority of market by 2030
Low-carbon and recycled aluminium to make up majority of EU and North America market by 2030 Greener demand growth is outpacing the Estimated demand from currently stated company emissions reduction rest of the market targets – demand upside as new targets are expected ’22 -’30 CAGR Low-carbon Recyc
Slide 39: Estimated demand based on currently stated ambitions
Estimated demand based on currently stated ambitions Examples of front runners with ambitious 2030 targets Scope 3 reduction targets Specific aluminium commitments Europe and North America low-carbon1) and recycled GAGR Share of low-carbon1) aluminium demand by sector (million tonnes) - estimate (’2
Slide 40: Primary aluminium on renewable energy has lower footprint
20.3 Primary aluminium produced on renewable energy 16.6 lower than the world global primary average 8.6 Recycled aluminium from Hydro 6.7 More than 5.7 4.0 3.0 2.3 0.5 lower than the world global primary Hydro Hydro Hydro Hydro Hydro Primary Primary Primary Primary average CIRCAL CIRCAL REDUXA REDU
Slide 41: On track to achieve 30% carbon emissions reduction by 2030
On track to achieve 30% carbon emissions reduction by 2030 and net-zero by 2050 or earlier GHG emissions – ownership equity Million tonnes CO2e (% of 2018 baseline emissions) 2018 2025 2030 2050 Fuel switch, Renewable power, green or earlier Electrifying coal boilers, grid electrical boilers, hydrog
Slide 42: Recycling sales volume growth
Sales volume, tonnes (000s) ~3X ~140 100 40 50 55 20 2020 2021 2022e 2023e 2025e Mid-term capacity ~2X ~1000 Sales volume, tonnes (000s) 650 430 450 250 75 2020 2021 2022e 2023e 2025e Mid-term capacity 42 1) Post-consumer scrap > 75%. 2) Footprint < 4.0
Slide 43: John Thuestad, EVP Bauxite & Alumina
Capital Markets Day 2022 John Thuestad EVP Bauxite & Alumina
Slide 44: Alunorte CO2e emissions
CO2e per ton of Alumina (scope 1 and 2) CRU Global Alumina 2022 Alunorte Fuel Switch Alunorte today Electrical boilers by 2025 • 1st quartile on CO2e • 1st decile on CO2e (0.65t CO2e) • Reduce 25%, 0.45t CO2e • 46% below the industry by 2025 average • 63% below the industry average 2022 Industry avg
Slide 45: Alunorte fuel switch and decarbonization
Tonnes CO2e / tonne aluminium Scope 1 and 2 emissions 3.2 ~1.4 • Replacing heavy fuel oil with natural gas • Reducing annual CO2e emissions by 700,000 tonnes 2025: Fuel Switch • Cost BRL ~1.3 billion (NOK ~2 billion) & elBoilers • First gas consumption in Q2 2023 and all oil assets converted to gas
Slide 46: Eivind Kallevik, EVP Aluminium Metal
Capital Markets Day 2022 Eivind Kallevik EVP Aluminium Metal
Slide 47: Technology roadmap to zero carbon aluminium by 2030
Clear technology roadmap to deliver industrial volumes of zero carbon aluminium by 2030 New process technology for decarbonizing Technologies for decarbonizing existing Technologies for more PCS-use and new capacity smelters casthouse decarbonization 3.2 ~1.4 3.2 ~1.4 ~6.9 4.8 CO2e emissions per yea
Slide 48: HalZero: first metal by 2025
On track to deliver first metal by 2025 and industrial scale pilot volumes by 2030 Promising technology basis confirmed Funding received Norwegian Research Council and Gassnova Test site chosen Hydro Porsgrunn Technology Center Final engineering of test facility close to completion Construction plan
Slide 49: Carbon capture: first test completed at Sunndal
On track to deliver first metal by 2025 and industrial scale pilot volumes by 2030 Successfully completed first test at the Sunndal smelter Further testing in progress for 2023 Second test planned for early 2023, received funding from Gassnova Location of industrial scale pilot to be decided Verdox
Slide 50: Sorting technology and casthouse decarbonization
Advanced sorting technology ready. Progress on casthouse decarbonization technology HySort technology ready for industrialization Program to test viable technologies in progress Enabling further growth in Hydro CIRCAL and scaling Green hydrogen test pilot by Hydro Havrand to be built at production o
Slide 51: New recycling plant and hydrogen pilot Høyanger
New recycling plant and hydrogen pilot Høyanger plant Fuel switch process Recycler melting furnace Saves Fuel switch type LNG to green H2 Technology PEM annually 51
Slide 52: Strategic partnerships for low and zero carbon aluminium
Hydro is shaping the market for low and zero carbon aluminium through strategic partnerships Decarbonizing Mercedes-Benz’ value chain through strategic partnership Collaborate from 2023 to 2030 on a common roadmap with the target to find low-carbon aluminium solutions suitable for automotive applica
Slide 53: Eivind Kallevik, EVP Aluminium Metal
Capital Markets Day 2022 Eivind Kallevik EVP Aluminium Metal
Slide 54: Key investment decisions made: PCS usage and EBITDA uplift
Key investment decisions made PCS usage and ambition 620-770 Tonnes (‘000) 520-670 100 150 +290-440 70 120 50 280 2) 2020 2022E Creep Growth/ Alumetal 2025 new Growth 2027 other EBITDA uplift NOK million 3.1-3.5 2.6-3.0 0.5 0.4 -2.8 3.1 0.4 0.4 0.1 +1.4-1.8 0.8 1.4 2020 2022 2022 market Creep Growth
Slide 55: Post-consumer scrap availability and price spread
Global estimated recovery from Price spread LME vs. complex Large scrap volumes leaving Europe, ~1 post-consumer scrap collected increases post-consumer scrap increased million tons – an untapped potential Million tons USD/tonne 3800 70 Forecast 3300 60 2800 50 2300 40 1800 30 1300 AM Recycling inde
Slide 56: Scrap sourcing, shredding and recycling value chain
Scrap sourcing Scrap shredding Large Recycling Multiple product Product and market Meeting customer and partnering and sorting asset base segments development needs - partnerships Market scrap – Scrap conversion for Primary Customer increased share of customers ingots scrap complex PCS Extrusion Ing
Slide 57: Combined competencies and asset base in Europe and North America
Utilizing our combined competencies, strong asset base, market position and value chain Europe Aluminium Metal 5 Primary smelters 5 Extrusions 10 North America Aluminium Metal 3 Extrusions 9 57
Slide 58: Paul Warton, EVP Extrusions
Capital Markets Day 2022 Paul Warton EVP Extrusions
Slide 59: Building Systems and Precision Tubing growth opportunities
Building Systems and Precision Tubing offering unique value added and specialty solutions growth opportunities • Increased penetration in E-mobility supported by substitution Extrusion Europe • Recycling capacity to facilitate increased PCS usage • Grow in automotive and commercial transport Extrusi
Slide 60: Competitive cost base and sustainability agenda
More competitive cost base, stronger customer interaction, targeted capacity expansion and sustainability agenda provide for business resilience going forward • Strong focus on selected segments where Extrusions has competitive advantage Portfolio restructuring • Exited non-attractive operations and
Slide 61: Extrusions EBITDA
Extrusions EBITDA EBITDA-margin per unit in Hydro Extrusion (%) NOK billions 0.6 2022 YTD Sep >5% 2018 YTD Sep 2.0 5.7 -1.3 0-5% 0.3 <0% 4.1 Adj. EBITDA Underlying Core Commercial Inflation and Actual 2021 2018 market improvement ambitions other EBITDA growth levers adjustments Total Hydro Extrusion
Slide 62: Extrusions EBITDA target 2025
Extrusions EBITDA NOK billions 0.9 Uplift from projects under execution 0.6 Continued cost reduction 8.0 programs, including 1.3 -1.3 procurement and EBS Customer partnerships and 0.8 Commercial Excellence initiatives 5.7 Actual 2021 EBITDA Underlying market growth Core improvement levers Commercial
Slide 63: Strengthening flagship plants in the portfolio
Further strengthening flagship plants in the portfolio, leveraging key trends • Sustainable products with low-carbon Hungary recycling footprint Cressona Bay-Zero The Dalles upgrade • Recyclability and keeping materials “in (recycling upgrade) the loop” Navarra recycling • Greener energy sourcing Sj
Slide 64: Hueck acquisition: synergies-driven business case
Synergies driven business case with clear upside for customer offering • German family owned extrusion and building systems business located Attractive platform for growing Hydro’s moderate market share in Germany close to Düsseldorf • Provider of aluminium window, door, and façade systems to the Eu
Slide 65: Extrusion Sweden net-zero carbon aluminium platform
Extrusion Sweden, Hydro Havrand and Hydro Rein to produce a platform for net-zero carbon aluminium in two steps Step 1 (2023) Thousand tonnes CO2e per year Combined usage of solar energy and battery energy storage system 13.9 Electricity 1.9 -1.9 PV BESS Energy efficiency emissions 4.2 MWp 4.5 MW He
Slide 66: Innovationsbogen, Augsburg, Germany
Innovationsbogen – Augsburg, Germany • Innovationsbogen is the first development of the Augsburg Innovation park. A futuristic office building, designed to match the needs of modern companies. • Sustainability, efficiency and flexibility are at the heart of the project and using Hydro CIRCAL 100R wa
Slide 67: Trond Olaf Christophersen, EVP Corporate Development
Capital Markets Day 2022 Trond Olaf Christophersen EVP Corporate Development
Slide 68: Integrated value chain drives decarbonization capabilities
Hydro’s control of integrated value chain drives key decarbonization capabilities Business Bauxite & Alumina Aluminium Metal Recycling Energy Extrusions World’s largest extrusion Primary production with Leading in PCS recycling for Strong starting Captive renewable power company with integrated 1st
Slide 69: Low-carbon product suite and pricing
• Strong scale position within recycling and low carbon aluminium Near-zero • Ambitious, yet concrete, decarbonization roadmap across aluminium e.g., 100% entire value chain PCS uniqueness/ pricing • Delivering pilot volumes of ultra low carbon and 100% PCS to Advanced low-carbon frontrunner partner
Slide 70: Decarbonizing primary value chain through circularity
Capitalize on market demand through circularity while decarbonizing primary value chain XX t CO2e/t in progress / achieved XX t CO2e/t spearheads XX t CO2e/t first commercially available volumes XX t CO2e/t pilot volumes Current emission levels Further use of PCS and green sourcing Further implement
Slide 71: Delivering decarbonization to industry front runners
Utilizing integrated value chain and trusted partner position to deliver decarbonization to industry front runners Unlocking commercial and technological solutions Enabling decarbonization journey transition Driving demand Access to full suite of greener aluminium solutions Support in making the rig
Slide 72: Pål Kildemo, EVP and CFO
Capital Markets Day 2022 Pål Kildemo EVP and CFO
Slide 73: Financial performance LTM Q3 2022
Adjusted Adjusted net debt / Adjusted RoaCE1) Free cash flow 3,4) Adjusted net debt (cash) EBITDA AEBITDA6) 26.9% 41.5 BNOK 12.9 BNOK 7.8 BNOK 0.2 LTM Q3 2022 LTM Q3 2022 LTM Q3 2022 Q3 2022 LTM Q3 2022 -74% 25.6 ppt +299% -91% 26.9 41.5 +396% -69% Target <2 2.3 12.9 25.4 2.0 10.5 23.3 18.6 28.0 7.7
Slide 74: Current market prices indicate healthy financials
However, current market prices indicate still healthy financials Revenue and cost drivers AEBITDA sensitivity 2023 NOK billion El Billet premium (indexed) Petroleum coke FOB USG (indexed) 4,0 2,0 3,0 1,5 41.5 2,0 1,0 1,0 0,5 0,0 0,0 15.8 Q1-19 Q3-19 Q1-20 Q3-20 Q1-21 Q3-21 Q1-22 Q3-22 Q1-19 Q3-19 Q1
Slide 75: Lifting cash flows towards 2025 and 2027
• Increasing improvement program target for 2025 and extending Strategic program to 2027 Improvement Improvement growth program and New strategic • Setting ambitious operating capital ambitions for 2023 program and commercial initiatives growth • Contingency measures in place commercial ambition ini
Slide 76: Targeting NOK 14.0 billion in improvements by 2027
Targeting NOK 14.0 billion in improvements by 2027 Commercial ambition Strategic growth 2023-2027 incremental improvement potential of NOK 3.5 billion1), 2) NOK 1.4 billion initiatives Recycling growth Operational NOK billion Procurement Fixed cost Commercial initiatives excellence 0.6 NOK 1.4 billi
Slide 77: Contingency measures and hedging
Aluminium Metal • Electrolysis production curtailed by ~100kt, aim at 110 -130kt (Norwegian smelters) • Additional primary casthouse production reduced by ~50kt • Recycling production reduced by ~ 45 kt European primary demand 2023 (% change Y/Y) • Volumes shifted between product segments 10% • Furt
Slide 78: Net operating capital days
• Strong demand and raw material supply Net Operating Capital Days1) challenges reduce relative inventory levels in Variance +/- avg 46 days 2021 11 7 9 • Safety stock- and seasonality build 1H 2022 4 offset by high revenues 2 2 1 • Q3 2022 downturn caused demand to fall -3 -3 faster than production
Slide 79: Strategic hedging status
✓ Derivative positions locked in at historical strong margins ✓ Negative values reflect an expectation to realise stronger business margins ✓ Hydro benefits from strong USD and LME price ✓ Hedged raw materials offset part of expected cost increase Strategic hedging status Hedged volumes and Integrat
Slide 80: Strategic modes by business area
Strategic modes reflect global megatrends and high-return opportunities Safe, compliant and efficient operations – The Hydro Way Businesses Bauxite & Alumina Aluminium Metal Recycling Energy Extrusions Strategic mode Sustain and improve Sustain and improve Selective growth Selective growth Selective
Slide 81: Capex 2022E and guidance
Inorganic growth in line with strategic modes could come in addition. Alumetal transaction dependent on regulatory outcome Historical capex Capex 2022E and guidance NOK Billion NOK Billion Current guiding 2022 Old guiding 2023 Updated guiding 2023-26 2.3 Alumetal 0.6 Hueck Havrand REIN ~2.5 ~1-1.5 R
Slide 82: Sustaining capex development
Short-term sustaining impacted by backlog from Covid, supply chain issues, inflation and FX. Long term normalizing at the end of lifetime extension programs Historical sustaining capex Capex 2022E and guidance NOK billion NOK billion 0.6 8.0 Increased asset 1.0 base out in 0.5 7.5 7.0 0.7 7.0 time:
Slide 83: Indicative profitability in return-seeking and growth portfolio
Indicative profitability in current return-seeking and growth portfolio • Increase proportion of post consumer scrap (PCS), lowering metal cost • Improved economies of scale in brownfield expansions • Sorting technology and equipment standardization CoC: ~7% IRR 15- 30% • New presses with improved c
Slide 84: Sustainability-linked bonds and capital structure
10% • Framework published to facilitate issuance of green and sustainability linked bonds carbon 660 000 emission Linked Sustainability mt Bonds PCS • Linked to Hydro’s sustainability ambitions reduction by 2025 • CICERO Shades of Green provided Second Party Opinion allocating medium green by 2025 s
Slide 85: Sustainability ratings and leadership
• Transparent and consistent reporting approach for more than three decades 19.7 (Low risk) AA rating #3 in diversified metals sector “Leading initiatives to • Sustainability is fully integrated in Hydro’s strategy (3/180) achieve carbon-free aluminum” • Further improvements on several ratings in 20
Slide 86: Main drivers – improvement, growth and market developments
Main drivers – improvement, growth and market developments ARoaCE potential Market scenarios 2027 Main further upside drivers Main downside risks Profitability target of >10% • Sustainability differentiation and ability • Negative market and macro 31 % to produce net-zero aluminium developments, inc
Slide 87: Main drivers – fuel switch, commercial differentiation
Main drivers – fuel switch, commercial differentiation and market development ARoaCE potential Market scenarios 2027 Main further upside drivers Main downside risks Profitability target of >10% • Positive market and macro • Operational disruptions 13 % 13 % developments • Negative market and macro 1
Slide 88: Main drivers – improvement efforts, commercial differentiation
Main drivers – improvement efforts, commercial differentiation, and market development ARoaCE potential Market scenarios 2027 Main further upside drivers Main downside risks Profitability target of >10% (>8%) 36 % • Positive market and macro developments • Negative market and macro 33 % • Commercial
Slide 89: Main drivers – improvement program and commercial ambition
Main drivers – improvement program and commercial ambition ARoaCE potential Main further upside drivers Main downside risks Profitability target of >8% • Selective profitable growth including • Negative market and macro 16 % larger projects developments, incl. trade restrictions • Continuous portfol
Slide 90: Main drivers – net spot sales volume and market development
Main drivers – Net spot sales volume and market development AEBITDA potential (ex new Energy) Market scenarios 2027 Main further upside drivers Main downside risks NOK billion (ex new Energy) • Additional growth opportunities • Negative market and macro 9,0 Additional upside from • Further commercia
Slide 91: Dividends and shareholder distribution
Paid out May 11 and Dividend yield vs peers3) September 21 2022 Dividend 2.4% 3.0% 3.0% 2.8% 3.2% 3.8% 3.1% 9.9% Peer I 0.8% yield1) Downstream 6.85 Peer H 0.0% Dividend, NOK/share Peer G 0.0% Peer F 3.7% 3.3% • Strong financials in 2022 allow solid shareholder distribution Peer E Hydro 9.9% • Hydro
Slide 92: Stock price index / TSR and dividend yield vs peers
Stock price index / TSR 1st 400 quartile cost position AM 350 300 Low 250 carbon footprint 200 150 Long-term 100 50 renewable power contracts 0 Increased Jan-19 Jan-20 Jan-21 Jan-22 Apr-19 Oct-19 Apr-20 Oct-20 Apr-21 Oct-21 Apr-22 Oct-22 Jul-19 Jul-20 Jul-21 Jul-22 Peer range NHY improvement ambitio
Slide 93: Appendix
») Hydro Appendix
Slide 94: Price and currency sensitivities
Aluminium price sensitivity +10% Currency sensitivities +10% NOK million Sustainable effect: 4 120 NOK million USD BRL EUR 2 884 AEBITDA 4,440 (600) (200) One-off reevaluation effect: AEBITDA Adjusted Net Income Financial items (510) 890 (4,180) Other commodity prices, sensitivity +10% NOK million •
Slide 95: Annual sensitivities on adjusted EBITDA: Bauxite & Alumina
Annual sensitivities on adjusted EBITDA if +10% in price Revenue impact NOK million • Realized alumina price lags PAX by one month 2 000 Cost impact Bauxite • ~2.45 tonnes bauxite per tonne alumina • Pricing partly LME-linked Caustic soda (50) (170) • ~0.1 tonnes per tonne alumina (470) (350) • Pric
Slide 96: Annual sensitivities on adjusted EBITDA: Aluminium Metal
Annual sensitivities on adjusted EBITDA if +10% in price Revenue impact NOK million • Realized price lags LME spot by ~1-2 months • Realized premium lags market premium by ~2-3 months 4170 Cost impact Alumina 1608 • ~1.9 tonnes per tonne aluminium • ~ 2-3 months lag • Mainly priced on Platts index -
Slide 97: Scenarios and assumptions
Scenarios are not forecasts, but illustrative earnings, cash flow and return potential based on sensitivities • Starting point – AEBITDA Q3-22 LTM Price and FX assumptions • Improvement potential in real 2021 terms, upstream margins based on 2021 average Assumptions used in Q3 2022 2023 2027 scenari
Slide 98: Hydro – Industries that matter
Hydro Industries that matter