Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Presentation (June 2007)
113 slides from Norsk Hydro Asa's investor presentation, June 2007
Slide 1: Investor presentation
Investor presentation June 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 32 - Aluminium Products 46 - Power 59 - Oil & Energy 66 First quarter results 2007 81 - Oil & Energy 84 - Aluminium Metal 87 - Aluminium Products 90 Additional financial information 95 In
Slide 4: A brief company overview
A brief company overview 4
Slide 5: Hydro businesses in 2007
Hydro businesses in 2007 z Streamlining “new” Hydro Power Aluminium Metals Aluminium Products z Strategic decision to merge Hydro’s oil and gas activities with Statoil Oil Gas z Divestment of Polymers ld So Polymers 5
Slide 6: Significant value creation through restructuring
Significant value creation through restructuring NOK billion 2007** 174 Oil & Gas 90 Aluminium & Power 362 52 Fertilizer 46 Dividends & Buybacks 1999* 61 HYDRO Conglomerate * 4 January 1999 close, nominal value ** 31 May 2007 close. Aluminium and Oil & Energy based on transaction equation adjusted f
Slide 7: New Hydro share price increased 56% following demerger announcement
”New” Hydro share price increased 56% following the instant 19% increase at demerger announcement Relative development NYSE 18 December 2006 – 31 May 2007 ”New” Hydro 56% Alcan 80% Alcoa 35% Oslo Stock Exchange 12% Benchmark Index Source: Yahoo Finance, NYSE, USD 7
Slide 8: Hydro – a resourceful aluminium and power company
Hydro – a resourceful aluminium and power company Aluminium Metal 22-23 000 employees, 7 000 in Norway* 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 89 billion** Automotive * Exc
Slide 9: Strong aluminium industry position
Strong aluminium industry position Integrated Emerging Market Mining & Metal Manufacturing Primary Rolled Extrusions Other 3 900 3 552 3 406 3 151 Production in 1 000 tonnes in 2006 2 500 1 930 1 799 1 359 1 040 985 930 915 845 616 429 270 260 230 163 Alcoa¹ Alcan Hydro United Chalco BHP Rio CVRD No
Slide 10: 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%
Slide 11: 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 12: 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 alu
Slide 13: 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 14: Aluminium and power earnings distribution 2006
Aluminium and power 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 %
Slide 15: Revenue split aluminium peers 2006
Revenue split aluminium peers 2006 Other Pacific 11% Other Europe Other 13% North Americas 18% 24% America 6% 13% Europe 45% Europe North 76% America USA 57% 37% ‘New’ Hydro Alcoa Alcan Upstream Down 30 % stream* Upstream 42 % Upstream Down Down 44 % 58 % stream stream 70 % 56 % Source: Company repo
Slide 16: Competitive return on capital
Competitive return on capital RoaCE 16 % Peer range * Aluminium 14 % 12 % 10 % 8% 6% 4% 2% 0% 2003 2004 2005 2006 * Alcoa and Alcan Source: Bloomberg return on capital methodology. 12 month rolling Q1 2003-Q4 2006. Hydro figures are approximations to Bloomberg methodology. 16
Slide 17: Strong Aluminium cash flow
Strong Aluminium cash flow NOK billion Accumulated EBITDA net of accumulated investments Accumulated EBITDA 2003-2006 Accumulated investments 2003-2006 34.0 15.2 23.2 7.7 15.2 18.8 15.5 11.8 6.5 5.6 2003 2004 2005 2006 17
Slide 18: Adjusted net debt/equity ratio
Adjusted net debt/equity ratio 0.50 0.31 0.23 0.11 0.07 2004 2005 2006 Q1 2007 US GAAP US GAAP IFRS IFRS Interest-bearing debt + net pension liability (tax adjusted) + operating lease commitments (discounted) – cash and cash equivalents – other liquid assets divided by shareholders’ equity + minorit
Slide 19: Payout to shareholders 2000-2006
Payout to shareholders 2000-2006: NOK 37 billion 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 the year for which the dividend was paid. The (a
Slide 20: 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 Hydro will continue existing 26 % dividend policy with an average payout ratio of 30 percent of net 18 % earnings z Share buy-
Slide 21: Share price development (NYSE)
Share price development (NYSE) 1 January 1999 to 1 May 2007 Hydro 462 % ConocoPhillips 221 % Total 189 % BG Group 143 % ENI 142 % ExxonMobil 119 % Alcan 116 % Chevron 91 % Alcoa 89 % RepsolYPF 79 % Shell 69 % BP 49 % 0% 100 % 200 % 300 % 400 % 500 % Source: Yahoo Finance, NYSE, USD 21
Slide 22: Share price development new Hydro
Share price development “new” Hydro Relative development NYSE 18 December 2006 – 31 May 2007 1.9 New Hydro Statoil Alcoa Alcan 1.8 56 % 2% 36 % 80 % 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 Source: Yahoo Finance, NYSE, USD 22
Slide 23: Hydro – priorities 2007
Hydro – priorities 2007 z Successful integration of oil and gas activities with Statoil z Launch of “new” Hydro z Operational excellence z Competitive return on capital z World-class execution of Qatalum z Solid platform for upstream growth 23
Slide 24: Strategy for long-term growth
Strategy for long-term growth z Building on a leading, global position in upstream aluminium z Pursuing attractive opportunities in alumina, bauxite and primary aluminium z Leveraging strong platforms in Extrusion, Precision Tubing, Building Systems and Rolled Products z Power production is a strate
Slide 25: Bauxite & Alumina
Bauxite & Alumina 25
Slide 26: 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 to
Slide 27: 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, Hydro estimates, end Q1 2007 27
Slide 28: 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 28
Slide 29: 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 30: Alunorte alumina refinery – key asset in repositioning
Alunorte alumina refinery – key asset in repositioning z Targeting 6.5 million ton production by 2009 z Hydro stake 34 percent of world’s largest refinery z First-quartile investment costs and highly competitive conversion costs z Platform for pursuing new opportunities in Brazil and other bauxite r
Slide 31: Aluminium Metal
Aluminium Metal 31
Slide 32: 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 Key development projects - Qatalum smelter project (Qatar) on stream end 2009 - Alunorte alumi
Slide 33: Primary aluminium 2006 production
Primary aluminium 2006 production Global market 34 million tons Geography Company Africa 5% Other 4 % 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 BHP Billiton 4 28 % % Chalco 3 % Source: CRU / Hydro
Slide 34: China driving the demand for primary aluminium
China driving the demand for primary aluminium 4 percent annual growth rate 2005-2020 Million ton 70 China Other 60 35% 50 34% 31% 40 22% 30 13% 20 65% 66% 69% 78% 10 87% 0 2000 2005 2010E 2015E 2020E Source: CRU 2006 34
Slide 35: Estimated metal flow to and from China
Estimated metal flow to and from China Net scrap metal import 1 000 tons 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 35
Slide 36: Aluminium market price – 3 month LME
Aluminium market price – 3 month LME USD per mt Primary aluminium LME USD/tonne LME (3-month avg.) Q1 2007 average 2 746 3 000 LME forward Q1 2007 end 2 780 2 500 Q4 2006 average 2 725 Q4 2006 end 2 803 2 000 Q3 2006 average 2 528 Q3 2006 end 2 584 1 500 Q2 2006 average 2 682 Q2 2006 end 2 630 1 000
Slide 37: Primary aluminium production volumes 2005-2010
Primary aluminium production volumes 2005-2010* 1 000 tons 2 000 1 825 1 799 1 730 2005 2006 2007E 2010E * Including closed or to-be-closed capacity of Hamburg, Stade and Søderberg at Årdal, Høyanger. Qatalum in full production from mid-2010. 37
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 1 825 19% 43% 27% 29% 43% 56% 780* 780 71% 38% 57% 100% 100% 17% 2000 2005 2010E 2000 2005 2010E All figures in 1 000 tons per year, * 200
Slide 39: Industry costs rising – Hydro's position improved
Industry costs rising – Hydro’s position improved Significant shift in industry cost curve* Cost (USD/ton) z Alumina - Two thirds of cost increase 2 500 - Coming down from peak 2 250 2 000 2006: Industry average: 1 640 z Energy Hydro average: 1 547 1 750 - Oil and gas prices 1 500 2003: Industry and
Slide 40: Aluminum industry operating cost increasing
Aluminum industry operating cost increasing USD per ton 1 640 1 450 Other cost Power Alumina 1 290 45% 1 120 41% 1 090 41% 35% 36% 26% 28% 28% 28% 28% 37% 36% 31% 29% 31% 2002 2003 2004 2005 2006 Source: CRU 2006 (Corporate operating cost definition) 40
Slide 41: CRU industry cost for Hydro
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 Local cost level Technology 20 44 Contracts Regulatory & Tax frames 0 COC SOC BOC Net Realisations Carbon Casthouse costs Overhead cost Alumina Other Labour
Slide 42: Long-term power contracts ensure predictable cost levels
Long-term power contracts ensure predictable cost levels going forward Contract portfolio Aluminium Metal Norway* 14 TWh z Power supply and price secured 3.5 TWh Australia z Norway: gradual increase in power Canada 1.6 TWh price until 2010 as new contracts replace old 1.0 TWh Slovakia z Germany: mod
Slide 43: Qatalum project – profitable mega-smelter in key region
Qatalum project – profitable mega-smelter in key region z 585 000 tons annually – expansion potential to 1.2 million tons annually z First quartile operating cost – captive gas power z 50/50 joint venture between Hydro and Qatar Petroleum z Proprietary smelting technology z Final cost estimate and b
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 1) Investments 1 979 1 792 4 244 Operating & market statistics 2006 2
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. Solid platform for good returns in Extrusion z Divestment of Aluminium Castings and Meridian for NOK 4.3 billion completed z Divestments in process - Automotive Structu
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 global z Number one in z World leader - Alunorf (hot) player Europe - Europe - Grevenbroich (cold) z innovative z Leading brands - North solutions America z Number o
Slide 48: Strengthened profitability
Strengthened profitability Adjusted profitability 2006 Remaining assets Planned divestments 9.5% 4% RoaCE 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
Slide 49: Extrusion – key figures 2006
Extrusion – key figures 2006 Revenues by region* Volume split* NOK 22.7 billion 605 000 tons Other Precision 6% Tubing North 11 % America 21 % Extrusion Europe Americas Extrusion 73 % 24 % Europe 52 %** Building Systems 13 % * Revenues include Extrusion and Precision Tubing, internal sales not elimi
Slide 50: Extrusion peer group comparison – relative size
Extrusion peer group comparison – relative size 1215 North America Europe 1 000 tons 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% Alcan Bonnell Hydro 8% 6 % Kaiser 8% 7% Figures show soft alloys, internal est
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 6bn: Chart incl. Hindalco rolled products produc
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: Extrusion and Rolled products - EBITDA per ton
Extrusion and Rolled products - EBITDA per ton 2 304 1 769 1,647 1 674 1,440 1,354 2004 2005 2006 Extrusion Rolled Products 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 Reversion in 2022 2.7 TWh Suldal z 1 860 MW installed capacity Sogn* Reversion in 2044-2057 3.6 TWh z ~9 TWh production in a normal year Telemark No reversion 2.7 TWh z Low production costs and investment levels Production volume and year f
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 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 End Q1 2006 End Q4 2006 End Q1 2007 63
Slide 64: Hydroelectric power provides stable income long term
Hydroelectric power provides stable income long term NOK million 2006 2005 2004 Operating revenues 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 42 98 241 Capital employed (average) 4 227 4 2
Slide 65: Oil & Energy
Oil & Energy 65
Slide 66: Profitable production growth
Profitable production growth 1 000 boe/day 1 000 Historical performance 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 year Field name peak production Country Type Operator (boed) 2007 Ormen Lange 70 000 Norway Gas/ Condensate Hydro Rosa 14 000 Angola Oil Total Independence Hub Area 12 500 US GoM Gas Hydro, Dominion, Anadarko Vilje 10 000 Norway Oil Hydro Njord G
Slide 68: Discoveries
Discoveries Q1 Q4 Q3 Q2 Q1 Exploration 2006 2005 2007 2006 2006 2006 2006 Exploration wells completed 51 22 9 13 13 14 11 Discoveries 26 14 4 5 7 8 6 Success rate – percent 51% 64% 44% 39% 54% 57% 55% Discoveries by area Norway 1) 6 7 3 2 1 3 0 US Gulf of Mexico 2) 8 7* 1 1 2 2 3 Libya 3) 7 3 0 0 1
Slide 69: Proved reserves of oil and gas
Proved reserves of oil and gas SEC definition Reserves 31 December 2005 – million boe 2 046 Reserve revisions 45 New reserves 34 Production 2006 (209) Reserves 31 December 2006 – million boe 1 916 Reserve replacement ratio and reserve life Reserve replacement ratio 2006 38% Reserve replacement ratio
Slide 70: Production costs per barrel YTD 2007
Production costs per barrel YTD 2007 Gas injection cost NOK/boe Production cost excluding gas injection 32.2 30.8 30 7.9 5.7 25.3 25 20.7 5.4 20 2.8 15 24.3 25.1 10 17.9 19.9 5 0 2004 2005 2006 2007 Production in million boe 209 206 209 55 USGAAP figures for 2004, 2005 and 2006. However, no differen
Slide 71: Petroleum production per quarter
Petroleum production per quarter 1 000 boe/day Oil Gas 173 208 192 147 176 178 184 201 154 142 168 123 169 442 422 418 415 406 399 405 402 394 391 385 368 381 2004 2005 2006 2007 Average 572 563 573 610 71
Slide 72: Average prices and exchange rates
Average prices and exchange rates Oil Oil Gas USD/boe NOK/boe NOK/USD NOK/Sm3 450 NOK/boe USD/boe 80 Q1 2005 46.4 291.7 6.29 1.47 Q2 2005 49.8 317.9 6.39 1.31 400 70 Q3 2005 60.4 390.6 6.47 1.36 350 60 Q4 2005 55.6 368.8 6.63 1.85 300 Ave. 2005 53.1 342.2 6.44 1.52 50 250 40 Q1 2006 60.6 403.5 6.67
Slide 73: Operating costs per boe
Operating costs per boe 160 154,1 NOK/boe 140 126,8 120 109.0 94.9 100 82.1 80 60 40 20 0 2004 2005 2006 2007 YTD YTD excl HGoM Exploration 6.0 8.9 23.9 14.3 8.3 Net transportation 8.3 9.4 12.4 10.8 11.1 Other cost/income 0.7 3 2.7 6.9 6.9 Deprec.& aband. 46.4 48.2 83.1 63.9 52.8 Gas for injection 2
Slide 74: Exploration activity/costs
Exploration activity/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 2003 2004 2005 2006 2007 Capitalized -1 000 share Expensed Expensed old wells Refund insurance Iran Seismic Spinnaker 74
Slide 75: Average realized gas prices
Average realized gas prices NOK/Sm3 1.03 1.09 1.52 1.93 1.90 1.97 1.90 1.85 1.79 1.73 1.47 1.36 1.31 1.20 1.10 1.07 1.03 1.01 1.06 0.99 0.98 2003 2004 2005 2006 Q1 2007 75
Slide 76: 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 jan-06 jan-07 jan-08 jan-09 jan-10 jan-11 jan-12 End Q1 2006 End Q4 2006 End Q1 2007 76
Slide 77: 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 78: Ormen Lange/Langeled 94 percent complete
Ormen Lange/Langeled 94 percent complete z Norway’s largest industrial project. Largest gas development in Europe z Total investments: NOK 66 billion (2003 NOK) 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-u
Slide 79: 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 80: First quarter results 2007
First quarter results 2007 80
Slide 81: Highlights first quarter
Highlights first quarter z Strong results in Aluminium Metal and Oil & Energy z Results for Aluminium Products significantly improved z Continued strong market conditions z Ormen Lange/Langeled on track z Oil and gas merger with Statoil expected to close 1 October 81
Slide 82: Consolidated income statements
Consolidated income statements NOK million Q1 2007 Q4 2006 Q1 2006 Revenue 48 753 48 213 53 050 Share of the profit in equity accounted investment 286 59 321 Other income, net 1 075 496 244 Revenues and income 50 114 48 768 53 615 Depreciation, amortization and impairment (4 703) (8 425) (4 131) Oth
Slide 83: Earnings before financial items and tax (EBIT)
Earnings before financial items and tax (EBIT) NOK million Q1 2007 Q4 2006 Q1 2006 Exploration and Production 10 146 7 246 12 927 Energy and Oil Marketing 1 310 1 324 1 157 Eliminations (290) 539 57 Oil & Energy 11 166 9 109 14 140 Aluminium Metal 2 534 899 1 706 Aluminium Products 1 315 (481) 486 O
Slide 84: Oil & Energy – highlights
Oil & Energy – highlights z Oil and gas production 610 000 boed z Four new discoveries z Ormen Lange/Langeled on track – 94 percent complete z Peregrino field development plan approved by Brazilian authorities z Realized oil price: USD 55.94 per bbl z Realized gas price: NOK 1.90 per Sm3 84
Slide 85: Oil & Energy – key figures
Oil & Energy – key figures Operational data Q1 2007 Q4 2006 Q1 2006 Oil and gas production (1 000 boe/day) 610 595 610 Realized oil price, USD/boe 55.94 57.80 60.61 Realized oil price, NOK/boe 347.80 369.20 403.50 Realized gas price, NOK/Sm³ 1.90 1.97 2.16 Exploration expense, NOK million 786 2 093
Slide 86: Oil & Energy – prospects
Oil & Energy – prospects z 2007 production target of 585 000 boed z Ormen Lange start-up on schedule z Peregrino development phase on track z High exploration activity z Planned merger with Statoil expected to close 1 October 2007 86
Slide 87: Aluminium Metal – highlights
Aluminium Metal – highlights z Best-ever quarterly result z Realized aluminium price of 2 588 USD per tonne z Smelter production 433 000 tonnes as projected z Strong casthouse product premiums in Europe 87
Slide 88: Aluminium Metal – EBIT
Aluminium Metal – EBIT Adjusted for special items NOK million z Realized aluminium price 2 399 - USD 2 588 per tonne - +7% vs. Q4 2006, +21% vs Q1 2006 2 120 - NOK 16 480 per tonne 1 928 - +4% vs. Q4 2006, +12% vs Q1 2006 1 832 1 812 z Primary production 433 000 tonnes z Higher raw material and ener
Slide 89: Aluminium Metal – prospects
Aluminium Metal – prospects z Continued high aluminium prices z 83 percent of expected Q2 production sold at 2 573 USD/tonne as of 31 March - Including full effect of strategic hedges z Final build decision for Qatalum expected in July 2007 z 2007 production target – 1 730 000 tonnes - Årdal Søderbe
Slide 90: Aluminium Products – highlights
Aluminium Products – highlights z Record results - Strong performance in Extrusion and Rolled Products - Divestment of Automotive businesses, net gain NOK 690 million z Primary magnesium plant in Canada closed in March z Continued restructuring 90
Slide 91: Aluminium Products – EBIT
Aluminium Products – EBIT Adjusted for special items NOK million z Rolled Products 498 - Margin and volume improvement compared with Q1 and Q4 2006 398 367 z Extrusion - Positive margin development, somewhat down from Q4 269 260 - Volumes stable z Automotive - Weak results - Divested activities (Cas
Slide 92: Aluminium Products – prospects
Aluminium Products – prospects z Building on competitive positions in Europe - Strong markets for Extrusion, Building Systems and Rolled Products in Europe z Weak automotive and US markets z Portfolio restructuring continues - US Ellenville extrusion plant to be closed in Q2 92
Slide 93: Strong results for new Hydro in Q1 2007
Strong results for “new” Hydro in Q1 2007 Estimated Estimated NOK million EBIT EBITDA Aluminium Metal 2 534 3 074 Aluminium Products 1 315 1 661 Power 300 328 Corporate and other (250) (233) Total * 3 899 4 830 Special items (800) (800) Total after special items * 3 099 4 030 * Hydro Polymers exclud
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: Consolidated balance sheets
Consolidated balance sheets NOK million 31 March 2007 31 December 2006 31 March 2006 Cash and cash equivalents 21 881 6 760 20 762 Short-term investments 14 982 15 020 3 850 Receivables and other current assets 44 377 42 488 48 294 Inventories 16 564 16 497 15 230 Assets held for sale - 3 691 - Non-
Slide 97: Statement of cash flows
Statement of cash flows NOK million Q1 2007 Q1 2006 Year 2006 Operating activities: Net income 5 594 4 783 17 933 Depreciation, amortization and impairment loss 4 703 4 131 22 707 Other adjustments 4 544 6 583 (2 256) Net cash provided by operating activities 14 841 15 497 38 384 Investing activitie
Slide 98: Variance analysis Hydro
Variance analysis Hydro NOK million Q1 2007 2007 14 823 2006 16 870 Variance EBIT (2 047) Prices and currency (619) - Oil (518) - Gas 1 031 - LME (1 003) - Currency - Margin 402 - Volume (251) - Strategic hedges (261) - Derivatives (1 741) - Associates and JCE (28) - Exploration and production costs
Slide 99: Special items impacting income statement Q1 2007
Special items impacting income statement Q1 2007 NOK million Unrealized (gains)/losses on oil and gas derivatives, Spinnaker Exploration & Production 355 Unrealized (gains)/losses on gas contracts Exploration & Production 417 Unrealized (gains)/losses on gas contracts Energy and Oil Marketing 67 Unr
Slide 100: Adjusted income Q1 2007
Adjusted income Q1 2007 NOK million Reported income Adjustments Adjusted income Exploration and Production 10 146 772 10 918 Energy and Oil Marketing 1 310 45 1 355 Eliminations (290) 289 (1) Oil & Energy 11 166 1 106 12 272 Aluminium Metal 2 534 (135) 2 399 Aluminium Products 1 315 (817) 498 Other
Slide 101: Adjusted income 2006
Adjusted income 2006 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 Other ac
Slide 102: Special items impacting income statement 2006
Special items impacting income statement 2006 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) Unrealized (
Slide 103: Special items impacting income statement 2006
Special items impacting income statement 2006 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 Alunorte Aluminium Metal 143 Non-cons. investees -
Slide 104: Aluminium Metal hedge programs
Aluminium Metal hedge programs 1) 2007 2008 2006-2008 program – volume tonne 2) 163 800 167 100 2006-2008 program – LME price USD/tonne 2 300 2 200 2003-2007 program (Sunndal) – volume tonne 3) 108 900 - 2003-2007 program (Sunndal) – LME price USD/tonne 1 500 - 2003-2007 program (Sunndal) – LME pric
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: Hydro primary aluminium production 2003-2006
Hydro 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 Kurr
Slide 107: Aluminium – operational data
Aluminium – operational data Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Volumes and prices 2007 2006 2006 2006 2006 2005 2005 2005 2005 Primary production (1 000 mt) 433 450 449 451 449 464 461 457 444 LME realized (USD/mt) including hedges 2 588 2 430 2 462 2 368 2 146 1 851 1 770 1 842 1 783 NOK/USD realized incl
Slide 108: Financial overview 2006
Financial overview 2006 NOK billion Revenues*: 201 Adj. EBITDA: 77 Operating income: 52 3% 4% 2% 2% 12 % 12 % 25 % 49 % 22 % 83 % 86 % Net Income: 17 Investments: 27 Capital Employed: 96 5% 5 %2 % 6% 7% 16 % 32 % 53 % 86 % Oil & Energy 63 % 25% Aluminium Metal Aluminium Products Other * Divisional e
Slide 109: Return on capital employed – RoaCE
Return on capital employed – RoaCE 16.6% 14.9% 12.9% 8.4% 2003 2004 2005 2006 109
Slide 110: Dividends
Dividends NOK/share 5.00 4.40 4.00 2.10 2.20 1.90 2.00 2000 2001 2002 2003 2004 2005 2006 Recalculated to reflect 5 for 1 share split effective 10 May 2006 110
Slide 111: Earnings per share
Earnings per share NOK* 14.00 12.54 9.02 6.50 5.50 4.56 2001 2002 2003 2004 2005 2006 * Continuing operations. Recalculated to reflect 5 for 1 share split 10 May 2006 111
Slide 112: Investor Relations in Hydro
Investor Relations in Hydro 112
Slide 113: 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 24 55 Gudmund Isfeldt Investor Relations Officer m: +47 480 01 180 e: gudmund.isfeldt@hydro.com t: +47 22 53 92 80 Stefan Solberg Investor Relations O