Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Merrill Lynch Global Metals & Mining Conference 2007
35 slides from Norsk Hydro Asa's conference presentation, May 9, 2007
Slide 1: Hydro - The aluminium and power investment opportunity
Hydro - The aluminium and power investment opportunity Executive Vice President and CFO, John Ottestad Merrill Lynch Global Metals & Mining Conference Dublin, 9 May 2007 2007-05-07
Slide 2: Agenda
Agenda z Focused aluminium company - Core business areas - Market position - Strategy for growth z ’New’ Hydro as an investment opportunity Date: 2007-05-07 • Page: 2 •
Slide 3: Significant value creation through restructuring
Significant value creation through restructuring NOK billion 2007** 169 Oil & Gas 87 Aluminium & Power 348 52 Fertilizer 40 Dividends & Buybacks 1999* 61 HYDRO Conglomerate * 4 January 1999 close, nominal value ** 30 April 2007 close. Aluminium and Oil & Energy based on transaction equation adjusted
Slide 4: 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 Date: 2007-05-07
Slide 5: 'New' Hydro share price appreciation 51% following the instant 19% increase at demerger announcement
’New’ Hydro share price appreciation 51% following the instant 19% increase at demerger announcement Relative development NYSE 18 December 2006 – 1 May 2007 ”New” Hydro 51 % Alcan 20 % Alcoa 14 % Oslo Stock Exchange 9% Benchmark Index Source: Yahoo Finance, NYSE, USD Date: 2007-05-07 • Page: 5 •
Slide 6: 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 Power Automotive Market capitalization NOK 87 billion** * Excluding H
Slide 7: 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 1 040 985 845 930 915 616 550 429 260 230 163 Alcoa¹ Alcan Hydro United Chalco BHP Rio CVRD No
Slide 8: Peer comparison 2006
Peer comparison 2006 Metal sales versus primary production Downstream in % of primary production Alcoa Alcoa 98 % 156 % 127 % Alcan 39 % Alcan Hydro 73 % Hydro 200 % 100% 100% Alumina coverage Captive power * Alcoa 218 % Alcoa 21 % Alcan 74 % Alcan 43 % Hydro 55 % Hydro 34 % 100% 100% * CRU 2006 for
Slide 9: Aluminium and power earnings distribution 2006
Aluminium and power earnings distribution 2006 Hydro Alcoa Alcan EBITDA ATOI adding back Tax & Depreciation Business Group Profit Power Alumina Packaging Packaging Alumina & 9% 7% 4% 12 % Bauxite Other* Products Alumina Products 13 % 14 % 22 % 27 % 12 % Products 12 % Metal Metal Metal 57 % 47 % 63 %
Slide 10: Aluminium Metal
Aluminium Metal Date: 2007-05-07 • Page: 10 •
Slide 11: 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 2 500 2006 Hydro average 1 547 2006 - Two thirds of cost increase 2 250 2003 Hydro average 1 120 - Coming down from peak 2 000 2003 1 750 z Energy 2006 industry ave. 1 640 1 500 Hydro
Slide 12: 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 13: 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 14: 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 15: Increasing alumina equity coverage for Hydro
Increasing alumina equity coverage for Hydro Relative to primary aluminium Alumina equity coverage (bars) Equity alumina production (line) Percent million tons 100 % 4,0 75 % 75 % 3,0 2,8 55 % 50 % 2,0 43 % 1,9 23 % 25 % 1,2 1,0 0,5 0% 0,0 1998 2002 2006 2010E Date: 2007-05-07 • Page: 15 •
Slide 16: Aluminium Products
Aluminium Products Date: 2007-05-07 • Page: 16 •
Slide 17: 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 18: Strengthened profitability
Strengthened profitability 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 and Precision Tubing, 2) Inc
Slide 19: Power
Power Date: 2007-05-07 • Page: 19 •
Slide 20: Captive hydropower has built Hydro's industry
Power Captiveproduction hydropowerhas– built Hydro’s a solid basis industry 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 sup
Slide 21: Hydroelectric power production and concessions
Hydroelectric power production and concessions Røldal z Norway’s second largest 2022 2.7 hydroelectric power producer Suldal - 1 860 MW installed capacity - 9 TWh normal production/year Sogn 2044-2057 3.6 z Acquired power under long-term contracts in Norway until 2020 ~ 7 TWh Telemark No reversion 2
Slide 22: Financials
Financials Date: 2007-05-07 • Page: 22 •
Slide 23: 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. Date: 2007-05-07 • Page: 2
Slide 24: Strong results for 'new' Hydro businesses in 2006
Strong results for ‘new’ Hydro businesses in 2006 Operating Adjusted Operating NOK billion Depreciation Investments revenues EBITDA income Aluminium Metal 68.4 9.1 (1.7) 6.4 2.0 Aluminium Products 49.8 1.7 (1.7) (0.1) 1.3 Power 6.3 1.3 (0.1) 1.2 0.04 Other Activities 9.8 2.0 (0.4) 1.2 0.5 Corporate
Slide 25: 'New' Hydro trades in line with aluminium peers
‘New’ Hydro trades in line with aluminium peers Relative development NYSE 1 January 2007 – 1 May 2007 1,4 'New' Hydro* Alcoa Alcan 35 % 19% 26% 1,3 1,2 1,1 1,0 0,9 3-Jan-07 18-Jan-07 2-Feb-07 17-Feb-07 4-Mar-07 19-Mar-07 3-Apr-07 18-Apr-07 * ‘New’ Hydro share price calculated as Hydro share price le
Slide 26: Hydro - the investment opportunity
Hydro - the investment opportunity z 101 years of entrepreneurship z High quality asset base z Focus on operational performance z Upstream growth focus z Project execution excellence z Solid balance sheet z Strong market fundamentals Date: 2007-05-07 • Page: 26 •
Slide 27: Additional Financial Information
Additional Financial Information Additional Financial Information Date: 2007-05-07 • Page: 27 •
Slide 28: Segment information
Segment information Operating income NOK million 2006 2005 2004 Aluminium Metal 6 362 2 694 785 Aluminium Products (83) (370) 1 072 Power 1 185 1 123 741 Other activities 1 229 (88) 274 Corporate and eliminations (885) 1 064 (854) Total 7 808 4 423 2 018 Adjusted EBITDA 1) NOK million 2006 2005 2004
Slide 29: 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 Primary aluminium production (tons)
Slide 30: 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 31: Power financials
Power financials 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 Power production, TWh 8.3 10.8 8.1 Acquired under long-term contracts fo
Slide 32: Combined income statements – Hydro after demerger
Combined income statements – Hydro after demerger NOK million 2006 2005 Operating revenues 102 632 92 100 Depreciation, depletion and amortization 3 674 3 975 Impairment losses 289 1 259 Other operating costs 90 863 82 444 Operating income 7 808 4 423 Non-consolidated investees 761 491 Financial inc
Slide 33: Combined balance sheets – Hydro after demerger
Combined balance sheets – Hydro after demerger NOK million 31 December 2006 31 December 2005 Cash and cash equivalents 6 609 10 266 Short-term investments 15 020 3 859 Receivable Hydro Petroleum 200 779 Receivables and other current assets 20 181 19 073 Inventories 14 220 12 952 Current assets held
Slide 34: 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
Slide 35: 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
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