Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Day (2015)
25 slides from Norsk Hydro Asa's investor day presentation, 2015
Slide 1: Energy
Energy Arvid Moss Capital Markets Day 2015
Slide 2: Aiming for an injury-free working environment
Aiming for an injury-free working environment Total recordable injuries (TRI) per million hours worked 24 20 16 12 8 4 0 2008 2009 2010 2011 2012 2013 2014 2015 YTD Hydro Energi Energi Norge H2** TRI rate YTD end-Nov (own employees) – cases per 1 million hours worked ** Source: Energi Norge, Own emp
Slide 3: Energy strategic priorities
Energy strategic priorities • Realize full potential of strong • Mature captive growth • Capitalize on strong climate asset base and competencies opportunities position over time • Further improve operational and • Raise income potential from • Capture value of the green commercial performance marke
Slide 4: Energy has a dual mission in Hydro
Energy has a dual mission in Hydro Strong, sustainable value creator and energy provider throughout the value chain To own, operate and maximize To provide competitive power sourcing value of Hydro’s energy assets and global energy competence 4
Slide 5: Energy: Securing power supply, maximizing asset value
Energy: Securing power supply, maximizing asset value Signed a power contract with Signed a power contract Signed power contracts Signed a power Alouette agreed on terms Signed 2016 power Lyse, Norway with Axpo, Norway with Eidsiva and BKK, contract for Neuss for new power contract, contracts for B&
Slide 6: Power Markets
Power Markets HYDRO
Slide 7: Nordic power prices decline over the last years
Nordic power prices decline over the last years Downward trend also reflected in forward curve EUR / MWh 60 50 40 30 20 10 0 2000 2001 2002 2003 2004 2005 2005 2006 2007 2008 2009 2010 2010 2011 2012 2013 2014 2015 2015 2016 2017 2018 2019 2020 2020 2021 2022 2023 Historical systemprice Nordpool For
Slide 8: Nordic power prices halved from 2008 to 2015
Nordic power prices halved from 2008 to 2015 Mainly driven by lower CO2 and coal prices, as well as lower demand and higher inflow Nordic system price and the most important price drivers • More inflow in 2015 compared to 2008 2015 €/MWh 55 • Total Nordic nuclear is relatively similar in both 50 yea
Slide 9: German power prices drop 60% from 2008 to 2015
German power prices drop 60% from 2008 to 2015 Mainly driven by lower CO2 and coal prices German power price and the most important price drivers • Growth in renewable power offsets reduction in 2015 €/MWh nuclear capacity 75 70 • Other drivers not included here e.g. changes in 65 60 thermal generat
Slide 10: Interconnected Brazilian hydropower-based system
Interconnected Brazilian hydropower-based system Thermal power has increased in importance during recent dry years Brazilian power balance and price development Interconnected power system, Brazil TWh BRL/MWh 600 700 600 500 500 400 N Belo Monte 400 300 Rio Madeira Teles Pires NE 300 200 200 SE 100
Slide 11: Energy in Hydro
Energy in Hydro HYDRO
Slide 12: Value creation in Energy dependent on wide array of factors
Value creation in Energy dependent on wide array of factors Volume Expiring Power and new Price contracts Commercial Drivers Sustaining and operational CAPEX competence CAPEX and OPEX & Earnings for taxes new GWh 12
Slide 13: Competitive production costs driven by economies of scale and operational improvements
Competitive production costs driven by economies of scale and operational improvements Taxes and fees account for a large share of costs, making sustainable framework conditions crucial Average operating cost, incl. tax/fees, by category Total operating costs for Norwegian power producers* 2007-2014
Slide 14: Maximizing value from commercial optimization
Maximizing value from commercial optimization Leveraging benefits of flexible hydropower in an environment of increasing balancing needs Hydro has one of the strongest commercial competence centers Physical assets optimized in spot markets and balancing markets in the Nordic power market • Increasin
Slide 15: Delivering value from growth
Delivering value from growth Driven by capacity additions, debottlenecking and operating competence • The normal production in Hydro’s power plants raised from 9.4 in 2008 to 10 TWh in 2013 − New power plants since 2008 Normal production 2008 9,4 TWh − Holsbru, Vasstøl, and Vigeland acquisition − Im
Slide 16: Providing competitive global energy sourcing and competence
Providing competitive global energy sourcing and competence Commercial competence, analytical capability and market insight B&A Primary Metal Rolled Products Assist with updating of energy sourcing strategies Analyze energy markets and provide insight Optimize electric power portfolio Lead power sou
Slide 17: Improving smelter cost position with competitive power sourcing
Improving smelter cost position with competitive power sourcing Utilizing moderate pricing environment in Norway and abroad Sourcing platform for fully-owned smelters, Norway* Sourcing platform for JVs and Rheinwerk smelter** TWh TWh 20 25 18 16 20 14 12 15 10 8 10 6 4 5 2 0 0 2015 2016 2017 2018 20
Slide 18: Industrial ownership framework for RSK assets
Industrial ownership framework for RSK assets 03 18
Slide 19: Norwegian reversion regime
Norwegian reversion regime Private ownership not to exceed 1/3 in Norwegian waterfalls Regional hydropower producers in Norway Hydro’s hydropower assets NTE Trønder Sogn Energi 2051-2057 Tafjord Sunndal 3.2 SFE Sogn Telemark Årdal Høyanger 2044-2049 Østfold Energi Eidsiva Røldal-Suldal BKK E-co 2022
Slide 20: Broad optionality to maintain asset value within the reversion regime
Broad optionality to maintain asset value within the reversion regime Sell to a publicly-owned entity Merge into a larger publicly-owned asset with one or several owners TWh 10* 2 1 3 Sell 2/3 7 NewCo >= 9 TWh or 7 3 Sell 100% 7 >= 6 TWh RSK ~3 TWh Energy Energy production production with RSK w/o RS
Slide 21: Maintaining industrial ownership of RSK volumes is Hydro's preferred alternative
Maintaining industrial ownership of RSK volumes is Hydro’s preferred alternative Government proposal to allow private entities physical hydropower offtake from minority stakes • Law proposal from government on industrial ownership Proposed model for industrial ownership (ANS/DA) published 9 November
Slide 22: Sustainability and climate agenda
Sustainability and climate agenda 04 22
Slide 23: Hydro's climate strategy is to be carbon-neutral from a life-cycle perspective by 2020
Hydro’s climate strategy is to be carbon-neutral from a life-cycle perspective by 2020 Integrated into business strategy in all business areas • Increasing energy-efficiency and reducing emissions in production processes in aluminium plants, rolling mills, and alumina refinery • Increasing productio
Slide 24: Gradual reduction in life-cycle carbon balance towards 2020
Gradual reduction in life-cycle carbon balance towards 2020 Use-phase benefits of aluminium products have the largest effect Hydro’s carbon balance 2014 - 2020 Million tonnes CO2 3 2.5 2 1.5 1 0.5 0 Life-cycle carbon-neutral ambition -0.5 On track -1 Balance 2014 Emissions Net emissions/user Increas
Slide 25: Energy mid-term goals
Energy mid-term goals Creating shareholder value by maximizing value of own hydropower assets and ensuring reliable and competitive energy supply for Hydro Ambitions Target Timeframe • Improve safety performance – injury free environment TRI <2 2020 • Robust industrial ownership for RSK – maintain p