Norsk Hydro ASA · OSL:NHY
Norsk Hydro ASA — Investor Day (December 2005)
49 slides from Norsk Hydro ASA's investor day presentation, December 2005
Slide 1: Forward-looking statements / use of non-GAAP financial measures
Forward-looking statements/ use of non-GAAP financial measures In order to utilize the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995, Hydro is providing the following cautionary statement: This presentation contains certain forward-looking statements
Slide 2: Cautionary note
Cautionary note The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under exist
Slide 3: Capital Markets Day 2005
Capital Markets Day 2005 Eivind Reiten President and CEO Eivind Reiten President and CEO
Slide 4: Agenda
Agenda z Market conditions z 2005 performance z Strategy and outlook 4
Slide 5: Key messages
Key messages z Record-high earnings and strong financial position z Strong growth in Oil & Energy - 2005-2010: 6% annual growth - 2006: 615 000 boed z Strategy shift in Aluminium - Reduce investments - Prioritize upstream investments - Reduce downstream exposure – focus on cash generation 5
Slide 6: Market conditions
Market conditions
Slide 7: High oil prices
High oil prices USD per boe 70 z Positive market outlook Brent 60 z Higher value of existing portfolio 50 z Attractive industry – tougher international competition 40 30 20 10 0 1999 2000 2001 2002 2003 2004 2005 Source: Ecowin Brent FOB Dated NWE, Spot, Close (Nominal) 7
Slide 8: Improved aluminium prices
Improved aluminium prices USD per tonne 2 300 z Higher energy prices support LME (3 month) higher aluminium prices, but: 2 100 - Primary metal returns in Europe and United States adversely 1 900 affected 1 700 - Focus on energy-rich areas and repositioning 1 500 1 300 1 100 1999 2000 2001 2002 2003
Slide 9: New investment criteria
New investment criteria z Oil & Energy USD 30-35 per barrel z Aluminium USD 1 600 - 1 700 per tonne z NOK/USD 6.50 9
Slide 10: 2005 performance
2005 performance
Slide 11: Building a stronger Hydro
Building a stronger Hydro z The Hydro Way is our platform z Leadership and competence development z International organization – diversity is key z Encouraging innovation and sense of urgency z Attracting new talents z Skills and experiences shared across Hydro 11
Slide 12: Safety first
Safety first Total reported injuries per million working hours (TRI) Rate 15 10 5 0 2000 2001 2002 2003 2004 2005 YTD 12
Slide 13: Record-high earnings
Record-high earnings EBITDA* in NOK billion 51.1 48.5 38.6 37.9 31.7 2002 2003 2004 2004 2005 Jan-Sept Jan-Sept * Adjusted EBITDA from continuing operations. Jan-Sept figures not annualized. 13
Slide 14: Improved returns
Improved returns Return on average capital employed – RoaCE* 14.5% 13.0% 9.5% 8.4% 7.5% 7.2% 2001 2002 2003 2004 2004 2005 Jan-Sept Jan-Sept * Continuing operations, Jan-Sept figures not annualized 14
Slide 15: Improved returns by business area
Improved returns by business area Return on average capital employed – RoaCE Oil & Energy Aluminium 23.4% 21.5% Write-downs German smelters 16.2% 16.2% 13.1% 11.6% 7.0% 4.7% 5.9% 5.8% 3.5% 2.7% 0.9% 2001 2002 2003 2004 2004 2005 2001 2002 2003 2004 2004 2005 *Jan-Sept figures not annualized Jan-Sept
Slide 16: Strong financial position
Strong financial position Adjusted net debt/equity ratio 0.67 0.60 Target 0.5 0.44 0.38 0.34 0.11 0.04 1999 2000 2001 2002 2003 2004 2005 Sept 16
Slide 17: Capital allocation – upstream focus
Capital allocation – upstream focus NOK billion 2005 37.5 * z Spinnaker transaction z Other investments lower than planned 30.0 NOK 25-30 2006 - 2010 23.8 billion annually z Oil & Energy - Projects on track - Increased exploration activity z Aluminium - Scale down overall investment level - Priority
Slide 18: 2005 dividend in line with 2004 level
2005 dividend in line with 2004 level Dividend in NOK/share z Buyback of shares as supplement 20.0 11.0 10.5 10.0 9.5 2000 2001 2002 2003 2004 18
Slide 19: Competitive shareholder returns
Competitive shareholder returns Total shareholder return (TSR) 1 Jan 2000 - 2 Dec 2005 Hydro ENI BG Group Total ExxonMobil Chevron Shell BP Alcan Alcoa -50% 0% 50% 100% 150% 200% 250% Source: Datastream 2 Dec 2005, NYSE, USD 19
Slide 20: A closer look at project execution: Ormen Lange
A closer look at project execution: Ormen Lange Tom Røtjer Project Director, Ormen Lange
Slide 21: Ormen Lange and Langeled
= = eas /” nd Langeled e Ormen Lange a
Slide 22: Aluminium
Aluminium
Slide 23: Aluminium outlook and strategy
Aluminium outlook and strategy z Growing demand for aluminium products z Increased costs – an industry challenge z Strategy shift for Hydro - Prioritize upstream investment and repositioning - Reduce downstream exposure – focus on cash generation z Roadmap to increased profitability 23
Slide 24: Growing demand for aluminium products
Growing demand for aluminium products 4.0 - 4.5% annual growth rate 2005-2015 Million tonnes 70 60 29% China 50 24% 40 21% 13% 30 87% 79% 76% 71% Other 20 10 0 2000 2005E 2010E 2015E Source: CRU 2005 24
Slide 25: Rising global smelter costs
Rising global smelter costs Up USD 250 per tonne since 2003 USD per tonne 1 500 1 375 1 290 1 120 1 080 1 080 1 000 500 0 2001 2002 2003 2004 2005 Source: CRU (Corporate Operating Cost definition) 25
Slide 26: Hydro power costs on world average
Hydro power costs on world average German prices not competitive Power prices German electricity prices World smelter production 2005 €/MWh Million tonnes World average 26 USD/MWh 6 50 Spot prices Forward price 5 40 4 30 3 20 2 10 1 0 0 0-5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 40+ 2000 2002 2004
Slide 27: Repositioning enhances smelter portfolio
Repositioning enhances smelter portfolio Smelter geography Smelter size Europe Below 300 ktpy Outside Europe Above 300 ktpy 2 000 2 000 1 820 1 820 17% 33% 29% 43% 780 780 100% 83% 67% 100% 71% 57% 2000 2005E 2010E 2000 2005E 2010E All figures in 1 000 tonnes per year 27
Slide 28: Downstream – focus on cash generation
Downstream – focus on cash generation Capital employed per business area Sept 2005 incl. Spinnaker Exploration z Significant capital employed in NOK 102 billion Aluminium Other 6% z Unsatisfactory returns Aluminum downstream 20% z Urgent measures downstream - Reduce investments Oil & Energy 46% - Fo
Slide 29: Roadmap to increased profitability
Roadmap to increased profitability 2010 target: 9% RoaCE* 9% Approx. 7% 2005E level Energy prices Other, net Downstream Metals Qatalum and 2010 contribution contribution Alunorte 3 * The roadmap excludes price, market and one-time effects. Aluminium price and currencies at 2005 levels (1 850 USD/t a
Slide 30: Oil & Energy
Oil & Energy
Slide 31: Oil & Energy outlook and strategy
Oil & Energy outlook and strategy z Profitable production growth z Realize potential of strong portfolio z Strengthen resource base z Technological and operational leadership 31
Slide 32: Profitable production growth
Profitable production growth 1 000 boe/day 1 000 Historical performance Targets z 2006 target: 615 000 boed 750 z 2005-2010 annual growth: 6% 750 6% 8% CAGR** 615 CAGR 2001-2005* z 2010 expected: 750 000 boed 500 z Increased production outside Norway 250 0 2001 2002 2003 2004 2005E 2006E 2010E * Com
Slide 33: 2005: International breakthrough
2005: International breakthrough Russia Canada Iran Libya US Gulf of Mexico Angola Brazil 33
Slide 34: Strong exploration performance
Strong exploration performance 14 discoveries in 2005* – 7 in Norway Norway Denmark Iran Libya US Gulf of Mexico Angola 7 Spinnaker Exploration discoveries in 2005 * Excluding Spinnaker Exploration discoveries 34
Slide 35: Building strong position in Gulf of Mexico
Building strong position in Gulf of Mexico z Spinnaker acquisition z Attractive and broad portfolio - High-quality deepwater developments - Substantial exploration potential - Significant high-margin production z World-class competence joining forces 35
Slide 36: Positive outlook for Norwegian shelf
Positive outlook for Norwegian shelf z Strong production growth 2005-2010 - 20% higher production, increased share of gas z High near-term activity level - 15 new fields under development - About 40 exploration wells planned 2006-2007 z Interesting opportunities in northern areas 36
Slide 37: Oil and gas: reserves and resources
Oil and gas: reserves and resources Additional expected reserves and Million boe resources in existing portfolio 4 000 Expected reserves in fields in production and fields under development 3 000 2 000 1 000 0 Proven reserves year- Additional expected 2005E Production Added expected Additional expec
Slide 38: Stepping up exploration
Stepping up exploration Exploration spending in NOK billion 5.0 z Following up on strategic moves NOK 4-5 billion z About 60 wells planned in 2006 z Attractive exploration portfolio 2.1 - Balanced risk - Geography 1.4 2004 2005E 2006 38
Slide 39: Technological and operational leadership
Technological and operational leadership z Cost-efficient, safe and smart operations z Driving innovation - Subsea technology - Advanced drilling - Increased oil recovery - Environmental technology 39
Slide 40: Summing up
Summing up z Oil & Energy - 2005-2010: 6% annual production growth - 2006 target: 615 000 boed - Increased potential on Norwegian Continental Shelf - Strong international growth - Step up exploration z Aluminium - Improve profitability – roadmap to return target - Reduced total investments – priorit
Slide 41: A closer look at project execution: Ormen Lange
A closer look at project execution: Ormen Lange Tom Røtjer Project Director, Ormen Lange
Slide 42: Ormen Lange and Langeled
= = eas /” nd Langeled e Ormen Lange a
Slide 43: Ormen Lange
Ormen Lange z Norway’s largest industrial project z Largest gas development in Europe z Total investments: NOK 66 billion (2003 NOK) z Hydro 18% equity 43
Slide 44: On schedule and within budget
On schedule and within budget z Decision based on well-defined concept z Successful contract strategy and selection of contractors z International tendering and competitive Norwegian response z Ormen Lange / Langeled 57% complete 44
Slide 45: Successful project execution
Successful project execution z Strong safety ambition z Sound implementation of risk management z Leadership of multi-company integrated team z Active stakeholder management 45
Slide 46: Subsea-to-shore concept
Subsea-to-shore concept z Multiphase flow and hydrate control z Long tie-back z High-capacity wells z Driving force behind subsea compression development 46
Slide 47: Challenging field location
Challenging field location z The ultimate challenge for pipelaying and marine operations z Pipelines and installations in slide area z 850 - 1 100 meters water depth and freezing temperatures 47
Slide 48: Langeled – the world's longest subsea pipeline
Langeled – the world’s longest subsea pipeline z 1 200 km offshore pipeline project z 70 million Sm3 gas production per day z Supply of 20% UK gas demand for decades to come 48
Slide 49: Ormen Lange – the Arctic analogy
Ormen Lange – the Arctic analogy z Hydro is short-listed for the development of the Shtokman field 49 54755_3_ER • Hydro Media • 12.2005