Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Day (November 2023)
126 slides from Norsk Hydro Asa's investor day presentation, Nov 29, 2023
Slide 1: Capital Markets Day 2023
Capital Markets Day 2023 Vækerø, Norway November 29, 2023
Slide 2: Cautionary note
Cautionary note Certain statements included in this announcement contain forward-looking information, including, without limitation, information relating to (a) forecasts, projections and estimates, (b) statements of Hydro management concerning plans, objectives and strategies, such as planned expan
Slide 3: Agenda, November 29
Agenda, November 29 All times CET 09:00-09:05 Welcome Pioneering the green aluminium transition, 09:00-09:50 powered by renewable energy 09:50-10:10 Hydro going to market 10:10-10:40 Q&A and break 10:40-12:00 Business area presentations 12:00-13:00 Q&A and lunch Strengthened resilience and greener v
Slide 4: Pioneering the green aluminium transition, powered by renewable energy
Pioneering the green aluminium transition, powered by renewable energy Capital Markets Day 2023 Hilde Merete Aasheim President and Chief Executive Officer
Slide 5: Health and safety #1 priority
Health and safety #1 priority TRI1) per million hours worked HRI2) per million hours worked 12 months rolling average 12 months rolling average 5 3 4 2.81 average since Oct’19 2 3 1.3 average since Oct’19 2 2.39 per end-Oct’233) 1 1 0.69 per end-Oct’233) 0 0 Oct’19 Oct’20 Oct’21 Oct’22 Oct’23 Oct’19
Slide 6: 2020: Set out a forceful agenda towards 2025
2020: Set out a forceful agenda towards 2025 Profitability & Sustainability 1 Strengthen position in low-carbon aluminium 2 Grow in new energy Develop a more robust, higher earnings and more sustainable company 6
Slide 7: Delivered on the 2025 agenda
Delivered on the 2025 agenda Improvement program NOK billion +0.2 -1.4 10.0 Operational excellence 8.6 8.4 Fixed cost Improved earnings EBITDA margin podium positions in all business Procurement areas compared to our peers 2023E 2023 target 2025 target CMD 2022 Improved portfolio Commercial initiati
Slide 8: Delivered on the 2025 agenda
Delivered on the 2025 agenda Podium positions in all business areas Bauxite & Alumina Aluminium Metal Alumina Cost Curve, USD per tonne1) Smelter Cost Curve, USD per tonne1) 2) 600 2 800 500 2 300 Improved earnings 400 1 800 300 EBITDA margin podium positions in all business 1 300 areas compared to
Slide 9: Delivered on the 2025 agenda
Delivered on the 2025 agenda Reallocating capital 2021 2023 Improved earnings EBITDA margin podium positions in all business Sale of rolling Sell down at areas compared to our peers business Alunorte Deliver on strategic priorities Improved portfolio Reducing risks and freeing up cash towards Grow i
Slide 10: Delivered on the 2025 agenda
Delivered on the 2025 agenda Climate On track to achieve Pursuing 10% HalZero & CCS GHG emissions For new capacity and reduction by 2025 existing smelters Improved earnings Nature EBITDA margin podium positions in all business areas compared to our peers On track to Deliver on our eliminate 1:1 reha
Slide 11: 2025: Strategic resilience in a world in transition
2025: Strategic resilience in a Simplified operating cash flow development NOK billion world in transition 1% 100% 7% 13% Greener premiums 18% 17% Recycling 12% 15% • Greener volumes and Extrusions premiums Energy • More robust earnings Upstream 66% 58% portfolio in Extrusions Improved earnings Othe
Slide 12: The world around us has changed since 2020
The world around us has changed since 2020 Megatrends of geopolitical tensions and sustainability converge, driving new risks and opportunities 12
Slide 13: The future of aluminium in the green transition
The future of aluminium in the green transition Refurbishment of buildings Wind power Hydropower Solar power Copper Renewable substitution Electrical vehicle transition power transition Aluminium a key enabler Renewable energy is at the Greener is more than low- for the green transition core of gree
Slide 14: Hydro has a unique position to succeed in this new reality
Frida – se på alternative bilder? Hydro has a unique position to succeed in this new reality 118 years of industrial experience, solving global challenges through innovation, technological advances and strong commercial mindset • Market leading position in low-carbon aluminium with a concrete roadma
Slide 15: Shifting gear to capture opportunities in a new reality
Shifting gear to capture opportunities in a new reality Key steps for Hydro to lead the green aluminium transition towards 2030 1 2 3 4 Step up growth investments Step up ambitions within Execute on ambitious Shape the market for in Recycling and Extrusions renewable power decarbonization and greene
Slide 16: Step up growth investments in Extrusions
Step up growth investments in Extrusions 1 2 3 4 • Increase market share in high-growth, non- commoditized segments leveraging innovation and solution offerings Extrusions EBITDA NOK billion (real 2023) 10.0-12.0 • Develop and grow capacity and capabilities through investments in new presses, fabric
Slide 17: Step up growth investments in Recycling
Step up growth investments in Recycling 1 2 3 4 Strengthen scrap sorting capabilities; secure feedstock PCS capacity1) Recycling EBITDA Tonnes (‘000) NOK billion 850-1,200 5-8 Expand global asset base across the value chain 80-430 1.5-4.5 770 520-670 Diversify product portfolio, develop innovative 5
Slide 18: Step up our ambitions in renewable power generation
Step up our ambitions and efforts in renewable power generation 1 2 3 4 Secure access to renewable power Hydro Rein to deliver onshore wind EBITDA 2030 Hydro Energy Classic and Hydro Rein through hydropower system and solar projects, main focus in the NOK billion2) upgrades and expansions Nordics an
Slide 19: Execute on decarbonization and technology road map
Execute on ambitious decarbonization and technology road map, step up to contribute to nature positive and a just transition 1 2 3 4 Update picture Contribute to a nature positive future Forcefully deliver on net-zero Improve lives and livelihoods through initiatives on biodiversity, roadmap, decarb
Slide 20: Hydro maintains 2030 climate target, despite portfolio changes
Hydro maintains 2030 climate target, despite portfolio changes 2018 2025 2030 2050 1 2 3 4 Reducing Hydro’s CO2 exposure Fuel switch, electrifying boilers, New initiatives identified to Renewable power, green through portfolio changes grid mix improvements, smelter maintain 30% target – will depend
Slide 21: Contribute to a nature positive future
Contribute to a nature positive future through initiatives on biodiversity, waste handling and land-use 1 2 3 4 Partnerships for Nature Positive No Net Loss Ambition for Paragominas Supply chain emissions Outcomes • No Net Loss of biodiversity for our • Develop opportunities for positive • Establish
Slide 22: Improving lives and livelihoods by supporting a just transition
Improving lives and livelihoods wherever we operate by supporting a just transition 1 2 3 4 Just transition framework Respect and promote Support positive local Responsible supply Invest in education human rights development chain
Slide 23: Shape market for greener aluminium, in partnership with customers
Shape market for greener aluminium, in partnership with customers 1 2 3 4 Utilize Hydro’s combined strengths as a fully integrated company from mine to metal Partner with strategic customers to grow market for greener aluminium Partner with Original Equipment Manufacturers to champion joint decarbon
Slide 24: Greener earnings uplift potential 2030
Greener earnings uplift potential 2030 NOK 2 billion1) Greener product capability from total aluminium portfolio1) Hydro is Million tonnes capacity potential Tonnes CO2e per tonne Al. in High-potential Hydro pioneering the 5 product pending capital allocation CIRCAL <2.3t/t product potential green a
Slide 25: Strategic direction – business area implications
Strategic direction – business area implications Bauxite & Alumina Energy Aluminium Metal Extrusions • Execute on 2030 • Pursue profitable captive • Step up growth and be an • Step up growth investments decarbonization targets and hydropower growth options industry leader within recycling aiming to
Slide 26: Hydro 2030: Key priorities towards 2030
Hydro 2030: Pioneering the green aluminium transition, powered by renewable energy Key priorities towards 2030 Step up growth investments in Recycling and Step up ambitions within 1 Extrusions to take lead in the market opportunities emerging from the green transition 2 renewable power generation Ex
Slide 27: Hydro going to market
Hydro going to market Trond Olaf Christophersen Executive Vice President, Corporate Development 27
Slide 28: Largely balanced markets towards 2030
Largely balanced markets towards 2030 Healthy demand outlook driven by transport and electrical Global semis demand 2023-2030 119 Largely balanced market with recycling playing important role In million tonnes In million tonnes 3 122 7 Transport 3 6 0 1 3 Construction 2 6 +22 2 Packaging 2 Foil stoc
Slide 29: Aluminium is a key enabler for the entire green transition
Aluminium is a key enabler for the entire green transition 2030 energy transition will require 15-22 million tonnes aluminium, increasing to 25-42 million tonnes by 2050 Additional aluminium demand from green transition enablers1) E-mobility transition Circular building & Heating & cooling Million t
Slide 30: EV transition driving strong growth in aluminium demand
EV transition driving strong growth in aluminium demand Key choices on component design and material selection are being matured now Aluminium content per car growing While EV share of sales is growing exponentially Aluminium in car, kg EV sales penetration, % 350 EVs Average aluminium 100 300 conte
Slide 31: EVs are not built the same way as combustion engine cars
EVs are not built the same way as internal combustion engines cars Radical change in design leading to changing dynamics for aluminium usage Aluminium demand from extrusions driven by switch to EVs Use of aluminium large and mega castings accelerating Tonnes (‘000) Kg per vehicles (Europe)1) Tonnes
Slide 32: Solar market provides strong growth potential for aluminium
Solar market provides strong growth potential for aluminium Regional growth potential within aluminium mounting systems GW installed CAGR 2022-30 800 for global solar segment 700 600 14% 500 Chinese domestic alu demand from 400 solar in 2023 300 ~2.8 million 200 tonnes 100 Potential aluminium demand
Slide 33: Aluminium is an attractive substitute for copper
Aluminium is an attractive substitute for copper Especially in segments with high growth from green transition Copper demand expected to exceed supply from 2027 onwards Key substitution facts Forecast Million tonnes 2 0 Copper: ~ $8,400/t Aluminium: ~ $2,200/t -2 -4 -6 Price ratio of >3.5x -8 leads
Slide 34: Transition to EVs enables substitution opportunities
Transition to EVs enables substitution opportunities EVs contain considerably more copper than combustion engines Potential additional global Application A demand in 2030 Replacing complex copper cabling with approx. 3kg of aluminium solution 100kt Price, Weight, Emissions 60-80kg 4x Application B P
Slide 35: Green transition drives substantial expansion of electricity grids
Green transition drives substantial expansion of electricity grids Average annual demand for aluminium by 2040 in stated policies scenario Million tonnes 20 20 17 15 14 10 5 Reaching 1.5 degree scenario requires adding or refurbishing 80 million kms 0 2020 2030 Aluminium (transmission) 2040 Copper (
Slide 36: From cutting tailpipe emissions to cutting embedded emissions
From cutting Carbon Footprint ICE vs EV tailpipe emissions ICE to cutting embedded emissions Materials EV production Manufacturing Use phase 83% +40% 0 10 20 30 40 50 60 Of the embedded emissions Emissions from materials, Tonne CO2e from aluminium, steel and including batteries, increase polymer 40%
Slide 37: Aluminium smelter perspective: CO2 footprint below 4 kgCO2/kg
Aluminium smelter perspective: 18 million mt produced globally with CO2 footprint below 4 kgCO2/kg Aluminium smelter emissions curve 2023 Tonnes CO2e per tonne Aluminium 24 Scope 1 + 2 emissions 22 20 18 16 14 12 10 8 6 4 4 2 0 0 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000 45 000 50 000 5
Slide 38: Full value chain perspective: embedded emissions below 4.0
Full value chain perspective: 7 million mt of primary production with embedded emissions below 4.0 kgCO2/kg aluminium Cradle-to-gate emissions curve 2023 Tonnes CO2e per tonne Aluminium 24 Other Scope 3 emissions1) 22 Bauxite & Alumina emissions (NHY wholly owned) 20 Bauxite & Alumina emissions (Rus
Slide 39: The green transition represents a massive shift for the aluminium industry
The green transition represents a massive shift for the aluminium industry Above market growth towards 2030 8%-10% 1) 10%-15% 2) 5%-8% 3) 1) Automotive CAGR 2022 - 2030 2) Solar CAGR EU 2022 -2030 3) HVACR CAGR of major markets 2022-2030 39
Slide 40: Many vying to take sustainable aluminium leading positions
Many vying to take sustainable aluminium leading positions Only Hydro with integrated advantage Customer Share of Global Primary and recycling Decarbonization co-innovation “One roof” mine to renewables presence capabilites technology roadmap on end-products component traceability Peer 1 Peer 2 Clos
Slide 41: Positioning Hydro to pioneer the green aluminium transition
Positioning Hydro to pioneer the green aluminium transition Growing recycling capabilities 100% Earnings uplift potential 2030 of NOK 2 billion1) <2.3t/t 80% Greener product capability from total aluminium portfolio1) 60% Million tonnes capacity potential 40% Tonnes CO2e High-potential 5 per tonne A
Slide 42: The unique Hydro offering
The unique Hydro offering Strategic partnerships Integrated value with chain offering industry front runners Broad low-carbon Decarbonization product roadmap to portfolio with 2030, and spearhead net-zero products 42
Slide 43: Step up growth in Extrusions
Step up growth in Extrusions Paul Warton Executive Vice President, Hydro Extrusions 43
Slide 44: Hydro Extrusions delivering strong EBITDA uplift
Hydro Extrusions delivering strong EBITDA uplift through targeting high-growth, advanced segments HE sales volumes split per segment HE EBITDA EBITDA per tonne vs peers Million tonnes NOK million NOK per tonne 7.020 10 000 1.4 6.500 1.25 Distribution 15% 5.696 11% 8 000 Automotive 10% 16% Transport
Slide 45: Industry trends towards 2030 are favorable for Hydro Extrusions
Industry trends towards 2030 are favorable for Hydro Extrusions, driven by customer needs and segment growth Opportunity to leverage Hydro Extrusions’ strengths increases as target segments develop Customer needs Segment growth HE capabilities • As industries and applications mature, • More growth e
Slide 46: Hydro Extrusions will leverage opportunities from greener transition
Hydro Extrusions will leverage opportunities from greener transition to strengthen market positions Secular growth drivers in key segments HE positioning and growth ambitions Automotive CAGR • Strong global positions, long term relationships with major automotive OEMs 2022-30: • Proven capabilities,
Slide 47: Critical growth projects under execution
Critical growth projects under execution, maturing projects to enable profitable growth Further strengthening flagship plants in the portfolio, leveraging key trends Key trends Project under execution Project capacity growth since 2021 • Sustainable products with Capacity added Growth1) Hungary recy
Slide 48: Significant automotive growth business last quarters
Significant automotive growth business last quarters Record levels of OEM sole supply Partnerships Advanced offering of added value Across geographies and units contracts with large OEMs activities and fabrication services (Revenue in BEUR) 0.9 – 1.0 2.4 – 2.6 Tier1 OEM 4 2 contracts contracts 1.5 –
Slide 49: Reducing own emissions and helping customers improve sustainability
Reducing own emissions and helping customers improve their products’ sustainability towards 2030 Greener sourcing Greener production Greener products Reduce water -24%1 CO2 usage by 30%2) -27%1) CO2 direct/ emissions and waste indirect generation by on extrusion emissions billets 20%2) Zero hazardou
Slide 50: Reducing own emissions and helping customers improve sustainability
Reducing own emissions and helping customers improve their products’ sustainability towards 2030 Greener sourcing Greener production Greener products Greener Sweden PV-powered press Shaping the market Pilot project towards net-zero Solar-powered press in Poland First project with Hydro CIRCAL 100R H
Slide 51: Customers partnering with Hydro Extrusions to make greener products
Customers from all industries partnering with Hydro Extrusions to make greener products Partnering to cut carbon Cleanest Dirt Bike Ever project Solar panel systems made Light and flat-packed BOA emissions from its value chain to remove emissions from from low-carbon conference tables made with in h
Slide 52: Digitalization, AI and automation
Digitalization, AI and automation Key levers to improve performance and profitability AMR = Automatic Meter Reading Automation • PT Taicang Fabrication – reducing 95 AMR = Sensors with real-time FTEs through Automation & EBS1) tracking of energy, water, gas (>20% of work-force) consumption and vibra
Slide 53: HE increasing profitability towards 2030
HE increasing profitability towards 2030 through uplift from growth projects and underlying improvements Growing market share in dedicated segments, further operational and commercial improvements HE volumes per segment HE EBITDA ambitions Indicative NOK billion (real 2023) 1.25 million Share growth
Slide 54: Hydro Extrusions 2030 strategic direction
Hydro Extrusions 2030 strategic direction XXX • Growing with the underlying markets • Growing in non-commoditized segments fitting with HE’s capabilities • Continue to compete based on capabilities and service + Market share growth ambition in high-growth, profitable segments • Investments to suppor
Slide 55: Step up growth in Recycling
Step up growth in Recycling Eivind Kallevik Executive Vice President, Hydro Aluminium Metal 55
Slide 56: 2025 recycling targets achieved with 2023 year-end installed capacity
2025 recycling targets achieved Post Consumer Scrap with 2023 year-end installed capacity Consumption and targeted capacity, tonnes (‘000) Installed capacity ramping up 520-670 Actual PCS consumption 540 Recent recycling projects with production and post-consumer scrap capacity 180 Tonnes (‘000) 320
Slide 57: Megatrends support recycling agenda
Megatrends support recycling agenda Increasing focus on circular economy from both consumers and regulators Innovate for circularity Waste to value Technology Regulatory frameworks Global semis demand (Mt) 98 ∆ 29 100% PCS 17% Process 36% 13% scrap1 14% Primary 70% 51% 2022 demand Incremental demand
Slide 58: Post-consumer scrap generation is increasing
Post-consumer scrap generation is increasing But multiple hurdles exist for its utilization Post-consumer scrap recovery CAGR Price spread scrap Key trends in aluminium recycling Tonnes (‘000) 2.4% Clean vs. complex post-consumer scrap, EUR/tonne Specialty and greener Europe 2020-2040 6 000 • Growth
Slide 59: Mixed scrap types require sorting capabilities
Mixed scrap types require sorting capabilities and ability to convert to various products Securing access to the right scrap – key success factor High Low Need for sorting High EC wire chops Clean profiles Painted profiles Shredded profiles Castings Taint Tabor Twitch Post- Mix of pre- and Mix of pr
Slide 60: Diversifying and high-grading recycling product portfolio
Diversifying and high-grading recycling product portfolio across markets and geographies Successfully completed organic and inorganic projects in 2023 include: Introducing Hydro CIRCAL, Diversifying portfolio and increasing EI market share in the growing high-margin HyForge US capacity • 40kt of PCS
Slide 61: Hydro has a proven track record developing recycling capabilities
Hydro has a proven track record developing recycling capabilities Increasing use of PCS and Diversifying asset and product portfolio2) Expanding specialty and greener product offerings3) sorting capacity 1) Recycling product portfolio mix Increasing CIRCAL 75R capacity 100% Tonnes (‘000) +40% ~250-3
Slide 62: Stepping up activities across the recycling value chain
Stepping up activities across the recycling value chain Continuing to transform scrap into sustainable solutions for our customers Scrap sourcing Sorting Melting/casting Products & Commercial • Strengthen existing and grow new • Increase sorting capacity through • Greenfield / brownfield • Develop a
Slide 63: Hydro with competitive advantages in recycling
Recycling 2030 ambitions: Hydro with competitive 850-1,200 advantages in recycling 770 540 Full value chain with multiple product outlets 2023 2027 2030 • Large recycling asset base in Europe and North America • Broad range of products – extrusion ingot, sheet ingot, foundry alloys, HyForge, Master
Slide 64: Primary aluminium roadmap to zero
Primary aluminium roadmap to zero Eivind Kallevik Executive Vice President, Hydro Aluminium Metal 64
Slide 65: Widening our scope to reach zero CO2 emissions
Widening our scope to reach zero CO2 emissions Structured approach to reduce emissions throughout primary value chain CO2e emissions kgCO2/kgAl Renewable power Pursuing optionality is crucial for our path to across value chain. net-zero Initiatives on track ~1.4 ~0.2-0.3 ~0.3 ~1.6 Bio material Incre
Slide 66: Pursuing optionality to decarbonize casthouses
Pursuing optionality to Starting industrialization of bio-methane from 2024, decarbonize casthouses stepping up activities in electrification Bio-methane Hydrogen tests and Direct electrification Important milestones for all initiatives: bio-methane, • Introducing bio- pilots: pilots: hydrogen and d
Slide 67: Electrolysis decarbonization on track – carbon capture
Electrolysis decarbonization on track – carbon capture Technology shift for existing aluminium smelters CO2e emissions kgCO2/kgAl ~1.4 ~0.2-0.3 ~0.3 ~1.6 Bio material • Testing of Verdox technology ongoing at Sunndal ~0.3-0.5 ~4.0 ~0.0 • Installing capture ready cells REDUXA 4.0 Bauxite & Logistics
Slide 68: Electrolysis decarbonization on track - HalZero
Electrolysis decarbonization on track - HalZero Ground-breaking technology to change the game CO2e emissions kgCO2/kgAl ~1.4 ~0.2-0.3 ~0.3 ~1.6 Bio material • Approval to start construction ~0.3-0.5 of new test facility in ~0.0 ~4.0 Porsgrunn - expected to be REDUXA 4.0 Bauxite & Logistics Anode Sme
Slide 69: Anode decarbonization
Anode decarbonization Utilizing bio-materials in anode production triggers Bio-methane and bio-materials in the process potentials for below zero emissions • Fuel switch to bio-methane in anode baking furnace – Havila contract • Substitution to bio-based packing materials CO2e emissions kgCO2/kgAl B
Slide 70: Logistics decarbonization
Logistics decarbonization Choosing the right solutions leads to reduced What we have done emissions. Ambition: 30% reduction by 2030 • >95% of AM volumes now have the major transport leg by sea • 85% emission reduction on container transport from China to Europe CO2e emissions kgCO2/kgAl • Moving vo
Slide 71: Hydro has a unique value proposition in aluminium
Hydro has a unique value proposition in aluminium Going to market with a combined offering of primary and recycled aluminium with a full product spectrum and with tailor-made alloys is unique to AM Extrusion ingot Near zero Full service offering aluminium Foundry alloy Hydro CIRCAL100R uniqueness/ p
Slide 72: Track record gives solid foundation for new partnerships
Track record gives solid foundation for new partnerships Exploring new arenas for collaboration and co-development with existing partners while pursuing new partnerships Our approach Decarbonization of customer footprint through purchase of low-carbon products Collaboration on sustainability and co-
Slide 73: Changing the aluminium game with transparent and certified
CO2e emissions kgCO2/kgAl ~1.4 Changing the aluminium game with ~0.2-0.3 ~0.3 ~1.6 Bio material transparent and certified from mine to metal ~0.3-0.5 ~0.0 ~4.0 REDUXA Bauxite & Logistics Anode Smelting Casting1) Zero 4.0 Alumina Production carbon product 1) Casting includes cold metal remelting 73
Slide 74: Hydro Bauxite & Alumina: Lifting profitability, in a sustainable way
Hydro Bauxite & Alumina Lifting profitability, in a sustainable way John Thuestad Executive Vice President, Hydro Bauxite & Alumina 74
Slide 75: B&A is an important enabler for low-carbon aluminium
B&A is an important enabler for low-carbon aluminium Controlling the top of the We can produce among the lowest carbon Enabling greener premiums for our primary aluminium and value chain aluminum in the world extrusion products Bauxite 4-6 times Hydro has the highest quality, lowest carbon and most
Slide 76: Alunorte reducing carbon 70% by 2030
Alunorte reducing carbon 70% by 2030 CO2e emissions kgCO2/kgAl 4.0 -71% 1.4 0.4 1.0 1.4 0.3 0.7 0.3 0.4 • Already 1st Quartile emissions in 2023 0.3 2023 Gas & 2025 elBoilers 2027 elBoilers 2030 • Fuel Switch and three el-boilers will 0.3 elBoilers 4&5 6-10 move Alunorte to one of the lowest smelter
Slide 77: Contribute to nature positive
Contribute to nature positive Reforestation Residue management • Best practice reforestation program • Hydro is current best practice in in Paragominas, exceeding 1-to-1 Residue management averaging 0.7T replanting on a strict a three-year cycle: of Residue per T of alumina • Year 1 = Deforestation
Slide 78: Investing in the community is our license to operate
Investing in the community is our license to operate Social Infrastructure Community Projects Stakeholder Engagement • Construction of 9 Terpaz community • Investment in community-based projects • Transparency, dialogue and volunteer centers (3 already built) targets security, benefitted 80 thousand
Slide 79: Focus on driving profitability in a sustainable way
Focus on driving profitability in a sustainable way CAPEX: 5.7 BNOK Improvement program Tailings dry backfill Fuel switch El-boilers Hydro Energy 1,000HA - 700 000 tons - 400 000 Improvements Commercial 60% IRR land usage 26% IRR CO2 >50% IRR tons CO2 NOK 3.2 Billion NOK 620 million • Tailings dry
Slide 80: Industry frontrunner with robust operations
Industry frontrunner with robust operations B&A have developed a more robust operation, but current market environment is challenging Improved operations Competitive cost position • Nameplate production at Alunorte/Paragominas for the last 3 CRU (2023), USD per tonne Alumina1) years 600 500 • Greatl
Slide 81: Energy at the core of green transition
Energy at the core of green transition Arvid Moss Executive Vice President, Hydro Energy 81
Slide 82: Pioneering the green aluminium transition, powered by renewable energy
Pioneering the green aluminium transition, powered by renewable energy Hydro’s energy consumption1) 18.3 Hydropower Europe Onshore Wind2) 1.5 Electricity 18.3 TWh Solar PV2) North America Natural gas 1.5 TWh Electricity 2.3 TWh 2.3 1.9 12,0 Energy Solutions3) Natural gas 1.9 TWh Green hydrogen3) Mid
Slide 83: Geopolitics driving energy transition and friendshoring
Geopolitics driving energy transition, green value chains and friendshoring of critical resources Combined ambitions in Norway, Sweden, Denmark, Germany and UK1) GW 600 500 400 300 200 100 0 Onshore Offshore PV 2020 2030 2040 Illustration: picture alliance / Zoonar | gd ae. IEA: World Energy Investm
Slide 84: Norwegian power market surplus in question
Norwegian power market surplus in question Public opposition to onshore wind parks limiting the effect of attractive renewable resources Norwegian Power Balance Market uncertainty prevails TWh • Power market balance weakening (short-med term) 300 • Demand from electrification and new industries outp
Slide 85: Energy: Strong production platform and growth opportunities
Energy: Strong production platform, market performance and growth opportunities Resource spend Norwegian hydropower players 2021 NOK per MWh Strong platform for value creation 50 • EBITDA “platform” from operations • 8 TWh on long term contracts (predictable prices) + 2 TWh (average) net long spot v
Slide 86: Hydro Rein’s journey: Fast-tracking portfolio development
Hydro Rein’s journey: Fast-tracking portfolio development CUSTOMERS PORTFOLIO PEOPLE CAPITALIZATION 5.3 TWh p.a.1) 2.6 GW 1) 392) ~75 3) JV with Macquarie signed under long-term gross capacity total # of renewable projects Asset Management Hydro Rein FTEs EUR & USD PPAs in construction & secured in
Slide 87: Current portfolio adds 2.4 TWh to REIN’s captive power
Current portfolio adds 2.4 TWh to REIN’s captive power1) 1.7 GW gross, approximately USD1.8 billion gross Renewable energy Projects under construction Gross GW Stor-Skälsjön Ventos de São Zacarias Mendubim Boa Sorte Under 1,0 0,7 1.7 construction Secured 0,9 • 25% ownership share • 49.9% ownership s
Slide 88: Hydro Rein on track to becoming preferred supplier
Hydro Rein on track to becoming preferred supplier of renewable energy solutions to industrials 2026 Targets communicated at Hydro’s Capital Markets Day 2022 2030 vision of continued profitable growth 3 GW >500 MW 400-450 MNOK1) Sustainable & attractive risk-adjusted returns Gross portfolio in added
Slide 89: Multiple value levers to create attractive returns
Multiple value levers to create attractive returns Value levers at project and platform level Key value levers Comments and selected examples Project equity IRR Base stand alone project equity IRR Hydro Rein with access to Optimize capital structure (including refinancing), several value creation St
Slide 90: Norwegian power projects remain attractive
Norwegian power projects remain attractive Attractive resource base and cost level across technologies prevail Range of LCOE and Nordic system price towards 20301) 2023 EUR per MWh • Cost of selected technologies show that attractive projects can be matured in Norway • Short/medium term relies on on
Slide 91: Project based PPAs still most attractive for sourcing
Project based PPAs still most attractive for sourcing Hydro Rein a key vehicle Monthly spot price and future prices in NO2 Nominal EUR per MWh 450 Monthly spotprice Hydro Rein Futures • Strong capabilities, responsible 250 Analysis partner LCOE Onshore Wind • Developer and long term owner • Profitab
Slide 92: Increasing value of flexible hydropower
Increasing value of flexible hydropower Enabler for renewables at low shaping cost Sorted hourly power prices in NO2 1) Firming cost for onshore wind 2023 EUR per MWh 2023 EUR per MWh 500 30 450 25 400 20 350 300 15 250 10 200 150 5 100 0 50 0 NO2 Germany 2023 2040 Higher value for increasing instal
Slide 93: Hydro Havrand: World’s first aluminium made with green hydrogen
Hydrogen breakthrough Hydro Havrand: World’s first aluminium made with green hydrogen 1 ‘World first’ test in Navarra, Spain 2 ‘World’s first’ pilot in Høyanger, Norway 3 Roadmap to further fuel switch • First batch of aluminium with • Full scale 3 year pilot – and • Develop roadmap to further fuel
Slide 94: Empowering the future of green mobility
Empowering the future of green mobility Progress in the sustainable battery materials portfolio throughout 2023 STRATEGIC TARGETS 3x Value uplift in 2030 on equity invested by 2027 GROWTH ASSETS Circular solutions 50% ownership Anode materials 30% ownership Anode materials Lithium 12% ownership • Fu
Slide 95: Value creation across the energy space going forward
Value creation across the energy space going forward High performance and profitability ambitions: 1 Energy Classic ROACE > 15% Hydro Rein JV platform annual eIRR 10 – 20 % Batteries 3x invested capital, 20% TSR average annually Grow value of our Norwegian portfolio through upgrading of 2 existing h
Slide 96: Strengthened resilience and greener value creation
CFO Strengthened resilience and greener value creation Pål Kildemo Executive Vice President and Chief Financial Officer 96
Slide 97: Earnings driven lower by weaker economic growth
Earnings driven lower by weaker economic growth Robust capital structure supporting strategic capital allocation Adjusted Return-seeking and Growth Adjusted RoaCE1) EBITDA Free cash flow 3) 4) Adjusted net debt (cash) capex share of total capex 8.5% 25.7 BNOK 7.1 BNOK 20.4 BNOK ~60% 13.8 23.3 20.4 2
Slide 98: Market uncertainty continues into 2024
Market uncertainty continues into 2024 AEBITDA sensitivity 2024 Revenue and cost drivers (indexed) NOK billion Petroleum coke FOB USG 26.4 El Billet premium 25.7 0.9 0.2 1.1 5 3 1.0 0.7 0.6 4 2 3 2 1 1 0 0 Q1-20 Q2-21 Q4-19 Q1-22 Q1-23 Q3-19 Q4-19 Q2-20 Q3-20 Q4-20 Q1-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-2
Slide 99: Handling short-term volatility
Handling short-term volatility Short-term and medium-term mitigation Aluminium Metal Utilizing portfolio flexibility, margin management, • Electrolysis production curtailed by ~130kt (Norwegian smelters) freeing up cash, and securing downside • Volumes shifted between product segments • Utilizing sh
Slide 100: Integrated margin hedging strengthens low-cycle earnings
Integrated margin hedging • Derivative positions locked in at historical strong margins strengthens low-cycle earnings • Negative realised values through a strong market, and positive market value going into a softer market • Hedged raw materials offset part of cost increase Strategic hedging status
Slide 101: Our financial framework guides the short and long-term
Our financial framework guides the short and long-term Solid framework for lifting returns and cash flow and managing uncertainty NOK NOK 6.1 Strengthening improvement Total shareholder distribution since 2019 30.7 billion and commercial ambition 2024 - 2030 amounting to 30.7 BNOK billion Improvemen
Slide 102: Extended improvement ambitions
Extended improvement ambitions Strengthening future competitiveness and positioning with additional potential from digitalization, greener premiums and commercial improvements in Energy Improvement program Ambitions extended with additional NOK 1 billion until 2030 Digitalization initiatives 5.4 BNO
Slide 103: Extending the improvement ambitions to 2030
Extending the improvement ambitions to 2030 Targeting NOK 14.0 billion in accumulated improvements and NOK 6.1 billion in commercial ambitions by 2030 Commercial ambition Strategic growth 2024-2030 incremental improvement potential of NOK 5.4 billion NOK 3.3 billion initiatives Recycling growth Comm
Slide 104: Significant thematic improvements across organization
Significant thematic improvements across organization NOK 6.8 billion improvements through global business services, procurement and digitalization Global Business Services Procurement Digitalization NOK billion NOK billion NOK billion GBS staffs & other 3.1 >3 GBS HR GBS Finance 0.7 GBS IT 2 1.6 0.
Slide 105: Targeting NOK 2 billion Net Operating Capital release 2024
Targeting NOK 2 billion Net Operating Capital release 2024 Structural changes and market effects driving Net Net Operating Capital1) 2024 guiding Operating Capital increase historically NOK billion Release NOK 2 billion NOK 17 billion NOC increase since Q4-20 34 • Weakening reporting currency (NOK)
Slide 106: Capital allocated according to strategic modes
Capital allocated according to strategic modes Strategic modes reflect global megatrends and high-return opportunities Safe, compliant and efficient operations The Hydro Way Businesses Bauxite & Alumina Aluminium Metal Recycling Energy Extrusions Strategic mode Sustain and improve Sustain and improv
Slide 107: Underlying 2024 capex in line with last year’s guidance
Underlying 2024 capex in line with last year’s guidance Added flexibility depending market development Historical capex Potential for Sustaining capex development NOK Billion accelerated NOK Billion organic growth 67% sustaining 55% sustaining depending on 9.5 capex 23.5 capex 9.3 0.9 0.7 ~22.5 mark
Slide 108: Greener investments drive value creation
Greener investments drive value creation Hydro’s largest prioritized investment areas combine sustainability and profitability Recycling (PCS) B&A (El-Boilers) Electrolysis abatement Other Greener investments / Total Investments Several large recycling Substantial Technology roadmaps in • Energy sav
Slide 109: Strong profitability in strategic growth areas
Strong profitability in strategic growth areas Indicative profitability in current return-seeking and Recycling growth portfolio • Increase proportion of post consumer scrap (PCS), lowering metal cost • Improved economies of scale in brownfield expansions • Sorting technology and equipment standardi
Slide 110: Press replacements giving new capabilities and cost savings
Press replacements giving new Press consolidation capabilities and cost savings Indicative profitability in current return-seeking and growth portfolio CoC: ~7% IRR 15-30% Two old presses One new press Manning 2 x 8 FTEs per shift 4-5 FTEs per shift Maintenance cost p.a. EUR 1,500K EUR 350-450K IRR
Slide 111: Capital allocation increases earnings resilience
Capital allocation increases earnings resilience Extrusion and recycling margins, greener premiums growing as share of total earnings EBITDA NOK billion 5% Greener premiums 15% Recycling Extrusions Energy 24% 13% Upstream Other 17% 9% 7% 15% 18% 12% 50% 58% 66% -3% -4% -2% 2013-2022 Q3-23 LTM Improv
Slide 112: Hydro profitability growth roadmap
Hydro profitability growth roadmap Main drivers – improvement efforts, growth and market development ARoaCE potential 2030 AEBITDA potential 2030 Cash flow potential after Main further upside drivers Profitability target of >10% NOK billion sustaining CAPEX1) 2030 • Sustainability differentiation an
Slide 113: Bauxite & Alumina profitability growth roadmap
Bauxite & Alumina profitability growth roadmap Main drivers – fuel switch, commercial differentiation and market development ARoaCE potential 2030 AEBITDA potential 2030 Cash flow potential after Main further upside drivers Profitability target of >10% NOK billion sustaining CAPEX1) 2030 • Positive
Slide 114: Aluminium Metal and Metal Markets profitability growth roadmap
Aluminium Metal and Metal Markets profitability growth roadmap Main drivers – improvement efforts, commercial differentiation and market development ARoaCE potential 2030 AEBITDA potential 2030 Cash flow potential after Main further upside drivers Profitability target of >10% (>8%) NOK billion susta
Slide 115: Extrusions profitability growth roadmap
Extrusions profitability growth roadmap Main drivers – improvement program and commercial ambition ARoaCE potential 2030 AEBITDA potential 2030 Cash flow potential after Main further upside drivers Profitability target of >8% NOK billion sustaining CAPEX1) 2030 • Selective profitable growth NOK bill
Slide 116: Energy profitability growth roadmap
Energy profitability growth roadmap Main drivers – Net spot sales volume and market development Classic - AEBITDA potential 2030 Classic - Cash flow potential REIN JV – pro-rata AEBITDA Main further upside drivers NOK billion after sustaining CAPEX1) 2030 potential (Hydro’s share)2) 2030 • Additiona
Slide 117: Ambition for shareholder distribution
Paid out May 23 Ambition for shareholder 2023 Dividend, NOK/share 1.00 1.25 1.75 1.25 1.25 1.25 6.85 5.65 distribution Dividend yield1) 3.0% 3.0% 2.8% 3.2% 3.8% 3.1% 9.9% 16.1 7.7% 13.5 Share of Adj. Net • Final proposal for distribution at Q4 reporting in Income3) 32% 70% 45% 45% 239% 100% 118% 61%
Slide 118: Why invest in Hydro: key takeaways from today
Why invest in Hydro: key takeaways from today Portfolio of profitable growth projects Pathway to net-zero aluminium Greener earnings uplift potential 2030 products supported by partnerships as key enablers for the green transition 2030: NOK 2 billion Refurbishment of buildings Electrical vehicle tra
Slide 119: Appendix
») Hydro Appendix
Slide 120: Significant exposure to commodity and currency fluctuations
Significant exposure to commodity and currency fluctuations Aluminium price sensitivity +10% Currency sensitivities +10% NOK million Sustainable effect: 3 170 NOK million USD BRL EUR 2 220 AEBITDA 3,840 (890) 10 One-off reevaluation effect: AEBITDA Adjusted Net Income Financial items (1,040) 1,220 (
Slide 121: Bauxite & Alumina sensitivities
Bauxite & Alumina sensitivities Annual sensitivities on adjusted EBITDA if +10% in price Revenue impact NOK million • Realized alumina price lags PAX by one month 1 910 Cost impact Bauxite • ~2.45 tonnes bauxite per tonne alumina • Pricing partly LME-linked Caustic soda (30) (100) • ~0.1 tonnes per
Slide 122: Aluminium Metal sensitivities
Aluminium Metal sensitivities Annual sensitivities on adjusted EBITDA if +10% in price Revenue impact NOK million • Realized price lags LME spot by ~1-2 months • Realized premium lags market premium by ~2-3 months 3 200 Cost impact 1 140 Alumina • ~1.9 tonnes per tonne aluminium • ~ 2-3 months lag (
Slide 123: CAPEX sensitivity to FX
CAPEX sensitivity to FX Capex currency exposure3) Annual sensitivities on CAPEX if +10% in currency1) • BRL ~40% NOK million • USD ~15% • EUR ~20% 500 • NOK and other ~25% The estimates for the different currencies exposures 250 for capex are based on the 2024-2026 allocation 200 guidance. The annua
Slide 124: Assumptions behind scenarios
Assumptions behind scenarios Scenarios are not forecasts, but illustrative earnings, cash flow and return potential based on sensitivities • Starting point – AEBITDA Q3-23 LTM Price and FX assumptions • Cash flow calculated as AEBITDA less EBIT tax and long-term sustaining capex, less lease payments
Slide 125: Investor Relations in Hydro
Investor Relations in Hydro Martine Rambøl Hagen Next event t: +47 91708918 Fourth quarter results and e: martine.rambol.hagen@hydro.com 2023 Annual Report Elitsa Boyadzhieva February 14, 2024 t: +47 91775472 e: elitsa.boyadzhieva@hydro.com For more information see Frida Rongved Jacobsen www.hydro.c
Slide 126: Hydro
Hydro