Slide 1: Hydro - a resource rich and fully integrated aluminium company
Hydro - a resource rich and fully integrated aluminium company Jørgen C. Arentz Rostrup, Executive Vice President and CFO March 9, 2011 (1)
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: Takeover of Vale's aluminium business finalized
Takeover of Vale’s aluminium business finalized • Global Bauxite & Alumina organization • Headquarter in Rio de Janeiro • 4 200 employees in Brazil • Ready to take leadership at operations • Strong management team in place • Increased output main challenge from 2010 production level • Alunorte alumi
Slide 4: Strong positions across aluminium value chain
Strong positions across aluminium value chain Raw materials processing Primary aluminium production, Aluminium in products and energy marketing and recycling Bauxite Primary Metal Rolled Extruded & Alumina Energy Metal Markets Products Products • Long-term power • 2.4 million tonnes • 3.8 million to
Slide 5: 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 6: Hydro becomes long in bauxite and alumina
Hydro becomes long in bauxite and alumina Aluminium equivalent equity capacity, million tonnes • Hydro’s position Hydro end-2010 Pro forma end-2010 Pro forma 2016 transformed from large (Before Vale transaction) (60% Paragominas) (100% Paragominas) share of long-term 4.2 contract sourcing to full re
Slide 7: Gives Hydro control of world-class assets
Gives Hydro control of world-class assets Paragominas, bauxite mine Bauxite licenses Alunorte, alumina refinery • Capacity: 10 million tonnes CAP alumina • Capacity: 6.3 million tonnes • Ownership: 60%, 100% refinery project • Ownership: 91% from 2015 • First quartile cash cost position including Pa
Slide 8: New global Bauxite & Alumina business area
New global Bauxite & Alumina business area MRN Paragominas CAP alumina Alunorte alumina Alpart bauxite mine bauxite mine refinery project refinery alumina refinery • 5% ownership • 60% ownership, 100% • 81% ownership • 91% ownership • 35% ownership • Signed volume by 2015 • Time schedule • World’s l
Slide 9: 66% of bauxite availability concentrated in 3 countries
66% of bauxite availability concentrated in 3 countries Billion tonnes Guinea 14.9 China 2.1 Mali 0.9 1.2 0.0 4.0 India Vietnam Jamaica Venezuela 1.6 2.3 1.1 0.5 1.8 0.4 0.3 0.0 Indonesia Cameroon 1.0 0.1 1.2 0.0 Brazil Australia 8.2 9.5 5.9 2.0 Big-league (Top- 3) Total bauxite, billion tonnes: res
Slide 10: Alumina market is consolidating
Alumina market is consolidating Equity alumina production less equity alumina requirement, million tonnes Alcoa 4.3 Alcoa 8.0 Vale 3.0 Chalco 2.8 Glencore 2.4 BHP Billiton 2.1 Chalco 2.0 Hydro 1.5 BHP Billiton 1.9 Glencore 1.5 Kaiser 1.0 Rio Tinto 0.7 Alcan 0.8 Klesch -0.5 Sual 0.7 Rusal -0.6 Rio Ti
Slide 11: Shift towards shorter contract durations
Shift towards shorter contract durations % of LME per tonne alumina Contract durations Platts index in USD 1) for long-term contracts 420 <2000 2011 13.0- 13.25- 400 13.8% 14.75% 12.2- 12.7% 380 15% 25% 25% 360 45% 340 30% 60% 320 300 280 16-Aug 31-Aug 15-Sep 29-Sep 13-Oct 27-Oct 11-Nov 26-Nov 10-De
Slide 12: Attractive commercial foundation for alumina
Attractive commercial foundation for alumina Alumina market appears balanced • Scarcity of high-quality bauxite World outside China, million tonnes 70 • Large alumina and bauxite deficit 62 64 in China seems to continue 58 60 60 56 • Growth expectations for aluminium 50 requires new alumina capacity
Slide 13: Improvement program on track
Improvement program on track Operational improvements 300 • Improved current efficiency • Reduced power consumption • Reduced anode consumption Fixed cost reductions and lean operations 200 125 Further operational improvements Technology costs/spin-offs USD Investments 300/tonne 100 Maintenance and
Slide 14: Strong focus to further improve cost position
Strong focus to further improve cost position Estimated primary aluminium production Estimated business operating cost 2014 by CRU cash costs USD/tonne First half 2010, USD/tonne 2 800 2 800 Hydro Peer companies 2 400 2 400 2 000 2 000 1 600 1 600 Hydro 1 200 1 200 Accumulated world capacity, 1 000
Slide 15: Qatalum in full production from June 2011
Qatalum in full production from June 2011 • Restart after power outage commenced on September 15, 2010 with ambition to finish ramp-up by end-Q1 2011 • Ramp-up is currently being hampered by technical challenges related to the cooling water system for the steam turbines • Power plant built by Genera
Slide 16: Substantial values in long-term assets in Norway
Substantial values in long-term assets in Norway • Stable and solid cash generation Power production capacity (TWh) • Indicative annual EBITDA NOK 1.6 – 1.8 billion per region and reversion year • Hydro’s power balance, normal year Telemark • Normal production ~9.4 TW 3.0 0.5 • Sourcing on long-term
Slide 17: Strategy for further value creation
Strategy for further value creation Bauxite & Alumina • Integrate • Expand • Commercialize Primary Metal • Reposition • Keep solid cash flow in current assets • Expand in high-class assets Energy • Increase value of business and competence • Focus on operation and commercialization of current assets
Slide 18: Mid-term development scenario thinking
Mid-term development scenario thinking World outside China 1 000 tonnes 28 000 Supply Demand 27 000 26 000 25 000 3%–6% 24 000 5%–9% 23 000 22 000 Supply influences Demand influences 21 000 19% • New projects • GDP growth • Potential restart • Further restocking 20 000 • Supply disruptions • Emergin
Slide 19: Global inventory days falling
Global inventory days falling World reported primary aluminium inventories • Inventory days reduction driven by 1 000 tonnes Days increased consumption 7 000 80 70 • High inventories – well known in market 6 000 • Different views on unreported inventories 60 5 000 • Estimated total reported and unre
Slide 20: China balanced in primary aluminium
China balanced in primary aluminium 1 000 tonnes • Reduced production in Q4 to 600 meet energy efficiency targets 500 • Demand met by inventory draw down 400 Net import 300 • Production expected to 200 increase after Chinese new year 100 • China expected to be broadly balanced in primary aluminium 0
Slide 21: Encouraging 2011 market outlook
Encouraging 2011 market outlook World outside China (quarterly demand annualized) • World outside China 1 000 tonnes • 19% demand growth in 2010 30 000 • Consumption 24.3 million tonnes 28 000 26 000 • 7% demand growth expected in 2011 24 000 • Manageable supply/demand balance in 2011 22 000 • Capac
Slide 22: Strong financial position
Strong financial position Net cash/(debt), NOK billion 11.0 Dec 31, Jun 30, Dec 31, NOK billion 2009 2010 2010 Cash and cash equivalents 2.6 2.2 10.9 Short-term investments 1.5 1.3 1.3 Short-term debt (2.0) (1.5) (0.9) Long-term debt (0.1) (2.1) (0.3) Net cash/(debt) 2.0 (0.1) 11.0 Net int.-bearing
Slide 23: Proposed 2010 dividend NOK 0.75 per share
Proposed 2010 dividend NOK 0.75 per share • Strong commitment to cash return to shareholders • Improved earnings and market outlook • Cash generation capability • Solid financial position • Average four year payout ratio is ~55% • Dividend policy is 30% payout over the cycle • Represents payout of ~
Slide 24: Priorities 2011
Priorities 2011 • Successful integration of Vale aluminium organization and assets • Upstream repositioning through USD 300 program and Qatalum ramp-up • Solid operations with firm cost control and strong market focus (24)
Slide 25: www.hydro.com
www.hydro.com