Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Pareto Power and Renewable Energy Conference 2016
21 slides from Norsk Hydro Asa's conference presentation, Jan 14, 2016
Slide 1: Our energy strategy going forward
Our energy strategy going forward Arvid Moss EVP and Head of Energy and Corporate Business Development
Slide 2: Attractively positioned world-class assets with global reach
Attractively positioned world-class assets with global reach Now in a first-quartile position on the industry cost curve Norway’s North America Norway 2nd largest • 1,015,000 tpy hydro-powered • Alouette aluminium smelter in hydropower Europe’s Canada, expansion potential aluminium capacity producer
Slide 3: Leading performance compared to aluminium peers
Leading performance compared to aluminium peers Strong relative position drives value-creation in challenging markets First-quartile aluminium producer Strongest balance sheet, USD/t Total Debt/Total Equity, 2010-2014 2,000 251 % 181 % 1,500 1,000 71 % 25 % 11 % 500 0 10,000 20,000 30,000 40,000 50,
Slide 4: Energy represents ~1/3 of smelter cost and ~50% of the total value chain cash cost
Energy represents ~ 1/3 of smelter cost and ~ 50% of the total value chain cash cost 40% 15% Primary 30% Alumina Carbon Bauxite 35% 35% 5% 25% Energy Energy Energy Energy Total energy cost: ~50% Percentages indicate share of respective input costs globally Illustrative figures Source: CRU 4
Slide 5: 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 6: 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 6
Slide 7: Hydro is second largest hydropower producer in Norway
Hydro is second largest hydropower producer in Norway But a net buyer of power globally Norwegian power producers* Power production and consumption TWh normal production in Hydro smelters** 42 TWh 20 10 14 5 19 18 16 14 12 ~20 ~17 10 8 6 4 Production Consumption Production Consumption 2 Norway Outsi
Slide 8: Hydro energy needs are spread across the value chain, global regions and energy carriers
Hydro energy needs are spread across the value chain, global regions and energy carriers Europe Power 19.6 TWh North America Natural gas 3.2 TWh Power 1.7 TWh Middle East Power 4.6 TWh South America Power 7.3 TWh Australia/Asia Coal 4.9 TWh Power 1.0 TWh Fuel oil 8.2 TWh Hydro’s energy consumption i
Slide 9: Power Markets
Power Markets HYDRO
Slide 10: 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 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2022 2023 2024 2025 Historical systemprice Forward
Slide 11: 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 Rolling 12 month data TWh BRL/MWh 600 700 600 500 500 N 400 Belo Monte 400 Rio Madeira Teles Pires NE 3
Slide 12: Energy in Hydro
Energy in Hydro HYDRO
Slide 13: 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 13
Slide 14: 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 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: 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 17: Broad optionality to maintain asset value within the reversion regime
Broad optionality to maintain asset value within the reversion regime • Law proposal from government on industrial ownership Merge into a larger publicly-owned asset with one or several owners published 9 November • Proposal for hydropower JVs: • Maximum 1/3 private ownership maintained NewCo >= 9 T
Slide 18: 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 energy sourcing strategies Analyze energy markets and provide insight Optimize power portfolio Lead power sourcing negotiations Im
Slide 19: 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 20: 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
Slide 21: Infinite Aluminium Hydro
INFINITE ALUMINIUM HYDRO
Norsk Hydro — Pareto Power and Renewable Energy Conference 2016 on 6ix