Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Bank of America Merrill Lynch Global Metals & Mining Conference 2010
20 slides from Norsk Hydro Asa's conference presentation, May 12, 2010
Slide 1: Hydro takes over Vale's aluminium business in transforming transaction
Hydro takes over Vale’s aluminium business in transforming transaction Svein Richard Brandtzæg, President and CEO Bank of America Merrill Lynch Global Metals & Mining Conference – May 12, 2010 (1) Not for distribution in the United States, Australia, Canada or Japan
Slide 2: Cautionary note
Cautionary note Certain statements included within this announcement contain forward-looking information, including, without limitation, those relating to (a) forecasts, projections and estimates, (b) statements of management’s plans, objectives and strategies for Hydro, such as planned expansions,
Slide 3: Cautionary note
Cautionary note This announcement is not an offer for sale of securities in the United States or any other country. The securities referred to herein have not been registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”), and may not be sold in the United States absen
Slide 4: World-class assets in resource-rich Brazil
World-class assets in resource-rich Brazil CAP alumina Alunorte refinery project alumina refinery Increasing stake from Increasing stake from 20% to 81% 34% to 91% • Bauxite licenses • Sales contract portfolio • Competence MRN bauxite mine Paragominas bauxite mine Albras aluminium smelter Current st
Slide 5: Transforming transaction
Transforming transaction • Hydro becomes long in bauxite and alumina • Gives control of world-class assets • Lifts Hydro to first-tier in aluminum industry • Provides more robustness at lower aluminium prices • Equity financing extends long-standing partnership with Vale • Positions Hydro for growth
Slide 6: Aluminium is the metal of the future
Aluminium is the metal of the future Vital building block for sustainable development (6) Not for distribution in the United States, Australia, Canada or Japan
Slide 7: Healthy long-term demand for aluminium
Healthy long-term demand for aluminium Primary aluminium consumption in 1 000 tonnes 80 000 +76% 70 000 60 000 50 000 +54% 40 000 +39% 30 000 +18% 20 000 10 000 0 1980 1990 2000 2010E 2020E Source: CRU (7) Not for distribution in the United States, Australia, Canada or Japan
Slide 8: Transaction summary
Transaction summary • Hydro will take over from Vale: • Bauxite mining operations • Alumina refining operations • Aluminium smelting operations • Bauxite exploration portfolio and bauxite/alumina sales contracts portfolio • Initial consideration: USD 4.9 billion • 22% ownership in Hydro 2) after the
Slide 9: Transaction partly funded by rights issue
Transaction partly funded by rights issue • Expected gross proceeds of NOK 10 billion (~USD 1.75 billion) • Norwegian Government intends to participate under certain conditions • Government Pension Fund Norway (Folketrygdfondet) has committed to subscribe for its 5.9% share • Balance of transaction
Slide 10: Assumed assets: production and capacity
Assumed assets: production and capacity Paragominas Alunorte Albras 60% ownership 57% ownership 51% ownership 3 722 3 370 2 867 2 642 2 425 2 246 1 134 233 233 232 230 0 2006 2007 2008 2009 2006 2007 2008 2009 2006 2007 2008 2009 5 900 4 000 3 600 3 600 2 500 2 500 2 000 0 235 235 235 235 2006 2007
Slide 11: Upstream earnings become more robust
Upstream earnings become more robust Average 2007-2008 EBITDA Assumed assets Hydro and assumed Hydro from Vale assets combined USD 2.0 billion USD 0.8 billion USD 2.8 billion 8% 11 % 4% 20 % 15 % 39 % 21 % 61 % 64 % 57 % Bauxite & Alumina Primary Aluminium Downstream Energy and other Hydro Underlyin
Slide 12: Bauxite ownership – a key strength
Bauxite ownership – a key strength • Paragominas has potential to supply bauxite in a 100-year perspective • Competitive position of Alunorte improved by largely captive bauxite • Current Paragominas capacity represents 5% of 2009 world bauxite production • Global bauxite sector highly concentrated
Slide 13: Resource owners take rising share of profits
Resource owners take rising share of profits Significant shift in profit pool split in steel sector USD billion 1) 90 38 210 404 8% 15% 17% 11% 26% 7% Raw materials 22% 39% 81% 78% 61% 35% 1995 2000 2005 2008 Steel making Coking coal Iron ore 1) Calculated based on EBITDA x demand/production, calcul
Slide 14: Alumina prices on upwards trend
Alumina prices on upwards trend Hydro estimates of average contract prices USD per tonne alumina % of LME per tonne alumina • 3 to 10 years contract prices 313 13.4-14.0% have moved upwards 13.0-13.8% 12.2-12.7% • Bauxite and alumina prices strongly affected by Chinese growth 211 184 • China bauxite
Slide 15: Long alumina and bauxite position
Long alumina and bauxite position Upstream position transformed Hydro end-2010 Pro forma end-2010 Pro forma 2016 (60% Paragominas) (100% Paragominas) 4.2 Aluminium equivalent equity 3.7 capacity in million tonnes 3.3 2.2 2.2 1.9 1.8 1.4 0.5 Bauxite Alumina Aluminium Bauxite Alumina Aluminium Bauxite
Slide 16: Rights issue preserves financial flexibility
Rights issue preserves financial flexibility Pro forma net debt development 1) • Strong commitment to maintain USD billion investment grade credit rating 0.0 1.75 (0.1) • Funds cash component in transaction (1.1) (0.7) • Significant expansion potential in Hydro net (debt)/cash Acquisition cash compo
Slide 17: Vale and Hydro: joint future commitments
Vale and Hydro: joint future commitments • Vale to be important joint-venture bauxite partner in coming years • Competence transfer • Relations to local authorities • Vale becomes second largest shareholder in Hydro • Vale representative to join Hydro’s Board of Directors • Vale has agreed to • Not
Slide 18: Attractively positioned, global reach
Attractively positioned, global reach Norway • 900 000 tonnes hydro-powered aluminium production Continental Europe • Technology centre, R&D for next-generation smelter • Leading mid and downstream position • Hydropower developments (Holsbru) • New recycling centre (Karmøy) North America Asia • Alou
Slide 19: World-class upstream growth pipeline
World-class upstream growth pipeline Strong track-record in project execution Qatalum Hydropower Paragominas CAP Aluminium aluminium plant developments bauxite mine alumina refinery and power Qatar Norway Brazil Brazil plant Angola • Potential for • Development potential • Brownfield expansion • Fir
Slide 20: A stronger Hydro
A stronger Hydro • Full bauxite integration • New know-how • Long alumina position • Technology leadership • Premier assets across value chain • More financially robust • Lower break-even • Greater growth potential (20) Not for distribution in the United States, Australia, Canada or Japan
Norsk Hydro — Bank of America Merrill Lynch Global Metals & Mining Conference 2010 on 6ix