Norsk Hydro Asa · OSL:NHY
Norsk Hydro Asa — Investor Day (September 2008)
157 slides from Norsk Hydro Asa's investor day presentation, Sep 25, 2008
Slide 1: Capital Markets Day 2008
Capital Markets Day 2008 Eivind Reiten, President and CEO September 25, 2008 (1)
Slide 2: Hydro's value proposition
Hydro’s value proposition ● Solid long-term fundamentals for aluminium ● Industry-leading captive power position ● World-class upstream growth projects ● Leading positions in attractive extrusion segments ● Competence in metallurgy and project execution – basis for solar growth ● Strong operational
Slide 3: Strong position in aluminium value chain
Strong position in aluminium value chain Bauxite/ Energy Primary Casthouse Fabricated Remelt alumina aluminium products products (3)
Slide 4: Solid long-term fundamentals for aluminium
Solid long-term fundamentals for aluminium (4)
Slide 5: Aluminum demand outpaces GDP growth
Aluminum demand outpaces GDP growth World total aluminum consumption and GDP, 1970–2007 (1970=1) 4.5 4.0 3.5 Historical correlation basis for most industry forecasts 3.0 2.5 2.0 1.5 1.0 0.5 0 1970 1975 1980 1985 1990 1995 2000 2007 Aluminium consumption Source:WBMS, IAI, Global Insight, WMM, McKinse
Slide 6: Growth and infrastructure drive demand
Growth and infrastructure drive demand ● Accelerating Chinese urbanization Annual growth rates 2001-2007 and industrialization 2001-2007 Percent growth per capita China 17.7 15.6 ● Aluminium replacing other 11.3 9.6 materials as preferred metal ● Aluminium part of solution to World excluding China g
Slide 7: Support for high aluminium price
Support for high aluminium price ● High energy and raw material prices 2.1 LME - USD (3-month avg.) 2.0 LME forward - USD 1.9 LME - NOK (3-month avg.) LME forward - NOK +97% 1.8 1.7 2001-2013 ● Healthy supply/demand balance 1.6 1.5 1.4 1.3 ● Negative correlation between US 1.2 +28% dollar and LME pr
Slide 8: Responding to global climate challenge
Responding to global climate challenge ● Renewable energy focus ● 66% hydropower as source for Hydro’s primary aluminium production ● Solar expansion ● Primary aluminium ● New technology, less kwh/kg ● Potential for increased heat recovery ● Prepared for future CO2 capturing ● Life-cycle perspective
Slide 9: Strategy
Strategy (9)
Slide 10: Aluminium Metal
Aluminium Metal ● Strong focus on operational performance and improvements ● Maintain competitive cost position ● Leverage strong market and customer position for metal products ● Mature and realize growth projects in metal and alumina ● Leading in technology – HAL4e development (10)
Slide 11: Competitive cost position
Competitive cost position USD/tonne 3 100 B OC We ight e d a v e ra ge R io T int o A lc a n 2 700 A lc o a H ydro ( C R U) C ha lc o 2 300 UC R us a l 1 900 1 500 1 100 700 Accumulated tonnes 0 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000 45 000 (1 000 tonnes) Source: CRU, 2008. Business
Slide 12: Qatalum on target
Qatalum on target ● 36% complete by end-August ● All main contractors on site ● 12 000 workers ● Challenges ● Cost pressure ● Performance of sub-contractors ● Investment ● Estimate (100%) ~USD 5.6 billion (12)
Slide 13: Growth options beyond Qatalum
Growth options beyond Qatalum 1.5 million tonnes of possible new metal capacity Qatalum 2, Qatar CAP, Brazil Metal Alumina Kurri Kurri, Kimberley, Australia Australia Metal Bauxite and alumina East Canada Metal (13)
Slide 14: Aluminium Products
Aluminium Products ● Extrusion and Building Systems – build on proven business concept, selective growth in Europe, Middle-East and Asia ● Rolled Products – focus on margin management and cash generation (14)
Slide 15: Selective growth in high-return segments
Selective growth in high-return segments ● 2008 acquisitions Underlying RoaCE – Extrusion* ● Alumafel (Spain), Building Systems 13.1% 12.9% ● Expral (Spain), Extrusion Eurasia 11.7% ● Successful and speedy integration ● Accretive to earnings ● Market leader in Spain 2006 2007 2008** * Extrusion Eura
Slide 16: Energy
Energy ● Expand solid captive power position ● Long-term power sourcing at predictable costs ● Solar growth based on competence in metallurgy and project execution (16)
Slide 17: Results of new Norwegian reversion law
Results of new Norwegian reversion law Hydro’s production volume and year for reversion Telemark No reversion 2.7 0.5 2049 3.0 Sogn 2051-2057 Røldal Suldal 2022 2.7 TWh (17)
Slide 18: Attractive starting position in solar
Attractive starting position in solar HyCore NorSun Ascent Solar Building Systems Polysilicon Ingots and wafers Thin-film Energy-efficient buildings ● Fundamental drivers support strong solar market growth ● Solar industry in transition from entrepreneurial to industrial scale ● Excellent fit with k
Slide 19: Technological leadership
Technological leadership HAL4e smelter technology ●Six cells in operation in Årdal ●Improved energy efficiency ●Top environmental performance ●Prepared for CO2 capturing Casthouse and downstream ●World-leading casthouse system ●Integrated R&D and alloy development ●Proprietary concept for extrusion
Slide 20: Recruiting and retaining talent
Recruiting and retaining talent ● Targeting science and finance students ● Organization and leadership development (20)
Slide 21: Strong operational performance
Strong operational performance (21)
Slide 22: Continued focus on HSE
Continued focus on HSE TRI rate Hydro employees ● Weaker safety results 12 ● Three fatalities in 2008 10 8 ● New HSE strategy ● Focus on commitment and accountability 6 4 2 0 2002 2003 2004 2005 2006 2007 2008* * 12-month rolling August 2007-August 2008 (22)
Slide 23: Continued productivity improvements
Continued productivity improvements Annual creep 1.5-2.0% in primary aluminium Strong improvements in U.S. extrusion 1 000 mt, excluding closed capacity 3 300 70 Full-t ime 450 3 100 3 076 60 equivalents 439 2 900 2 990 435 437 2 918 50 440 433 2 700 2 702 429 428 40 430 2 500 2 384 422 424 422 418
Slide 24: Return on capital
Return on capital Underlying RoaCE Hydro Aluminium Metal Aluminium Products Energy 22.3% 23.1% 21.2% 16.4% 16.3% 15.7% 14.5% 14.2% 12.6% 5.8% 5.3% 4.6% 2006 2007 2008* 2006 2007 2008* 2006 2007 2008* 2006 2007 2008* Capital employed – June 30, 2008 (NOK billion) 41.5 30.2 17.0 4.0 * Last 12 months,
Slide 25: Capital allocation
Capital allocation (25)
Slide 26: World-class investment projects
World-class investment projects NOK billion ● ~75% of 2008-2009 investments upstream ~13 ~12 ● Aluminium Metal ● Qatalum: USD 2.8 billion ● Agreement with Vale for new alumina refinery ~6 ● Aluminium Products ● Selective growth in Extrusion and Building Systems ● Energy 2007 2008E 2009E ● Solar grow
Slide 27: Shareholder return
Shareholder return Relative development in USD October 1, 2007 – September 19, 2008 ● Maintained dividend policy 1.6 ● 30% of net income over time 1.5 1.4 1.3 ● Payout 2007 1.2 ● 21% ordinary dividend 1.1 ● 49% extraordinary dividend 1.0 0.9 0.8 ● Share buyback and extraordinary 0.7 dividends as sup
Slide 28: Hydro's competitive strengths
Hydro’s competitive strengths ● Strong energy coverage ● Reputable partner in joint ventures ● Solid operational performance ● Project management excellence ● Technological leadership ● Financial solidity ● Close to markets and customers ● Open culture, agile and flexible organization (28)
Slide 29: www.hydro.com
www.hydro.com
Slide 30: Market outlook
Market outlook Arvid Moss, Executive Vice President and Head of Strategy and Business Development September 25, 2008 (1)
Slide 31: Short-term outlook
Short-term outlook (2)
Slide 32: Solid growth in aluminium semis consumption
Solid growth in aluminium semis consumption 2008 Building & C onstruction Share of consumption Transport 2007 Packaging & Foil Engineering (Machinery, Equipment and Electrical) C onsumer durables and other Western Europe North America* C hina ~10 mt (2007) ~ 11 mt (2007) ~ 15 mt (2007) Expected deve
Slide 33: Rolled products consumption
Rolled products consumption Moderate, but positive growth rates in Europe Western Europe North America Asia Pacific Million tonnes Million tonnes Million tonnes 7 7 15% 15% 7 15% 6 13% 13% 6 6 13% 11% 11% 11% 5 9% 5 5 9% 9% 7% 7% 7% 4 4 4 5% 5% 5% 3 3% 3 3% 3 3% 1% 1% 1% 2 -1% 2 2 -1% -1% 1 -3% 1 -3
Slide 34: Extruded products consumption
Extruded products consumption Soft landing in Europe, but large fall in American demand Europe North America Million tonnes Million tonnes 3.5 11% 3.5 11% 9% 9% 3.0 7% 3.0 7% 5% 5% 2.5 3% 2.5 3% 1% 1% 2.0 -1% 2.0 -1% -3% -3% 1.5 -5% 1.5 -5% -7% -7% 1.0 -9% 1.0 -9% -11% -11% 0.5 -13% 0.5 -13% -15% -1
Slide 35: China – new export loop-hole closed
China – new export loop-hole closed 1 000 tonnes ● 15% export tax on non-alloyed primary metal and extruded products from mid 2007 600 Net import 400 ● From August 20, 2008: 15% export tax also 200 on alloyed primary metal 0 - 200 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 ● Power prices to grid has increased tw
Slide 36: Most export of semis and fabricated from China ends up in Asia
Most export of semis and fabricated from China ends up in Asia 1 000 tonnes 2 000 1 800 1 600 1 400 Other regions Middle East 1 200 Latin America 1 000 Oceania 800 Europe North America 600 Asia 400 200 0 2004 2005 2006 2007 Source: Antaike February 2008 (7)
Slide 37: Slight increase in inventories year to date
Slight increase in inventories year to date USD per tonne days 3 500 60 3 000 Aluminium inventories 50 (days of consumption)* 2 500 Al price (LME 3 month) 2 000 Average inventories 40 1 500 1 000 30 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 *IAI and LME reported stocks, annualized
Slide 38: 2008/2009 outlook
2008/2009 outlook ● Primary aluminium consumption seen up ~7% in 2008, lower growth expected in 2009 ● Driven still by China ● US still weak, Europe is weakening ● Consumption effects from latest financial unrest ● European semis consumption expected at a somewhat lower level in 2009 than in 2008 ●
Slide 39: Long-term outlook
Long-term outlook (10)
Slide 40: Healthy demand for aluminium
Healthy demand for aluminium ● Properties lead to increased market share ● Aluminium intensive urbanisation and infrastructure ● Climate challenge – aluminium as part of the solution ● Recyclability more important with high energy price ● Expected annual demand growth 5-6% coming 10 years ● China re
Slide 41: Considerable new smelter capacity needed
Considerable new smelter capacity needed Estimated capacity changes 2008-15 Million tonnes 2008 demand 40 Creep 3 Implies > USD 100 billion in total investments over next 7 years Closures 2 China supply growth* 15 Represents ~6 new smelters annually RoW supply growth 6 with 500 000 tonnes per year c
Slide 42: China: increasingly dependant on import of bauxite/alumina
China: increasingly dependant on import of bauxite/alumina Million tonnes (annualized) H1 2008 2007 26.9 30 24.6 2006 Net import of 25 20.1 alumina 20 2005 15.6 Alumina 15 production 10 Bauxite import 5 in alumina equivalents* 0 F-05 M-05 A-05 M-05 J-05 J-05 A-05 S-05 O-05 N-05 D-05 J-06 F-06 M-06 A
Slide 43: China: increasingly dependant on import of energy
China: increasingly dependant on import of energy 50 000 45 000 40 000 35 000 30 000 TWh 25 000 20 000 15 000 10 000 5 000 0 1990 2005 2015 2030 C oal Oil Gas Nuclear Hydro Biomass+waste Other renewables Total Imports (coal, oil, gas) Source: IEA-World Energy Outlook 2007 Refererence Case (14)
Slide 44: Strong increase in power price to the aluminium industry in China since 2002
Strong increase in power price to the aluminium industry in China since 2002 0.50 60 0.48 0.46 55 Average power 0.44 price C hinese RMB/kWh (Left 0.42 50 scale) Average power 0.40 price USD/MWh (Right scale) 0.38 45 0.36 0.34 40 0.32 0.30 35 2001 2002 2003 2004 2005 2006 2007 2008E Source: Antaike 2
Slide 45: Regions with available and competitive energy resources getting fewer
Regions with available and competitive energy resources getting fewer (16)
Slide 46: New investments: complex and expensive
New investments: complex and expensive Very long lead times for projects outside China ● Minimum 5-7 years for greenfield aluminium projects, more for alumina projects Increase in construction cost > 50 % over last 4 – 5 years ● Smelters, alumina plants, power plants (17)
Slide 47: Power contracts in U.S. and Europe expire
Power contracts in U.S. and Europe expire Production in Europe/U.S. (1 000 tonnes) covered by existing power contracts ● Current avg. power price (CRU) for 10 000 this capacity is ~50 USD/MWh in 9 000 2008 8 000 Next 5 years ~3.5 ● The corresponding est. avg. market mill tonnes production 7 000 are
Slide 48: Climate policies – effects on aluminium
Climate policies – effects on aluminium Demand-effect ● Changed semi’s and end-product prices ● Aluminium vs. steel and plastics when CO2 emissions get a price tag ● Regulatory measures Supply – effects on production cost and long-term prices ● Cost per tonne CO2 increases over time ● Direct carbon
Slide 49: Potential CO2 effects on demand
Potential CO2 effects on demand Neutral ● Total effect limited Opportunity Technical performance Threat Price Customer preferences Regulation ● Automotive: potential for weight Automotive reduction – but not the only measure for CO2 reduction Other transportation* Construction ● Construction: potent
Slide 50: CO2 emission trading systems impact the production cost for primary aluminium
CO2 emission trading systems impact the production cost for primary aluminium Tonne CO2 per tonne aluminium produced ● Direct emissions from the smelting 14 process 12 ● Indirect emissions from power 10 generation needed to produce 8 aluminium 6 ● Future price for CO2 emissions at a ~40 4 USD/tonne
Slide 51: The indirect effect from CO2-cost has been substantial in Europe
The indirect effect from CO2-cost has been substantial in Europe Forward €/MWh 100 90 80 C alculated C O2 cost (coal) 70 C oal cost 60 50 operation&maintenance 40 30 Production cost coal 20 power 10 Spot power price Germany (EEX) 0 (quarterly average) Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul
Slide 52: Global introduction of CO2 emission trading systems under development
Global introduction of CO2 emission trading systems under development Region 2008 - 2012 2013 - 2020 2020 - 2030 2030 - 2050 EU, EEA Direct Outside scope Compensation Indirect No compensation Compensation? Australia/NZ Direct Compensation Compensation gradually reduced? Indirect US, Canada Direct Co
Slide 53: Summing up
Summing up Business operating cost 2008 Demand 2008 Demand 2015 3 500 3 000 RoW demand 2 500 Chinese demand growth growth Supply 2008 CAGR 08-15 CAGR 2 000 11% 08-15 3.3 % 1 500 1 000 500 5 500 10 500 15 500 20 500 25 500 30 500 35 500 40 500 45 000 50 000 55 000 60 000 65 000 Source: CRU/Hydro (24)
Slide 54: Summing up
Summing up Considerable new smelter capacity needed ● Takes more time - high energy and construction costs drive full costs for new capacity ● Cost for new bauxite-, alumina- and power capacity also increasing Most of existing capacity will need to be in production to meet demand ● Higher delivered
Slide 55: www.hydro.com
www.hydro.com
Slide 56: Energy
Energy Jørgen C. Arentz Rostrup, Executive Vice President and Head of Energy September 25, 2008 (1)
Slide 57: Key messages
Key messages ● Solid coverage for Aluminium energy consumption ● Strong captive power position ● Industrial ambitions within Solar (2)
Slide 58: Power
Power (3)
Slide 59: Strong power position
Strong power position – self-generated and renewable energy sources Share of self-generated power *) Share of renewable energy origin Percent Percent 50% 80% 45% 70% 40% 60% 35% 30% 50% 25% Industry avg 40% 2007 **) 20% 30% 15% 20% 10% 5% 10% 0% 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2
Slide 60: Long-term power sourcing at competitive prices
Long-term power sourcing at competitive prices Indexation of power supplies ● Power consumption ~26 TWh in Percent Metal in 2008 100% 90% 80% ● Self-generation and long-term 70% contracts ensures predictability 60% 50% 40% 30% ● Limited commodity exposure 20% ● Indexation to LME and coal with time-l
Slide 61: Increased power prices over time
Increased power prices over time German forward price development ● German and Nordic forward prices 90 more than doubled since 2003 80 ● Increasing fuel cost – coal price up from Forward prices, EUR/MWh 70 90 to 170 USD/ton last year 60 ● Cost of CO2 introduced 50 ● Tighter demand/supply balance 40
Slide 62: New power secured
New power secured ● Vattenfall contract signed September 10 ● 18 TWh power contract with Vattenfall AB ● Deliveries 2013-2020 ● Secures coverage for power consumption in Norway to 2020, incl. Søral ● Germany ● Neuss on cash-plus basis ● 2009: 80% covered with market contracts ● Exploring alternative
Slide 63: Reversion
Reversion ● Effects for private companies ● No renewal or new concessions ● Can own up to 1/3 of publicly owned plants ● Everlasting concessions if sold to public companies ● Implications for Hydro ● First large system to revert in 2022 ● Financial impact muted by: ● Public everlasting concession po
Slide 64: Solid operational performance
Solid operational performance Production cost 2005-2007 *) Average LTI 2005-2007 *) Availability NOK/MWh Percent 30 98 96 25 94 20 92 90 15 88 10 86 84 5 82 0 80 P eers Hydro A verage P eers H ydro A verage 1997 2002 2007 *) Source: PA Consulting Group Benchmark Study 2007 (9)
Slide 65: Power portfolio management
Power portfolio management – significant volatility in price and volume Quarterly production and spot price ● Norwegian power portfolio optimized TWh NOK/MWh versus market 3.5 550 500 ● Production and market prices strongly 3.0 450 impacted by hydrological conditions 400 ● ”Dry” versus ”wet” years 2
Slide 66: Developing Norwegian hydropower assets
Developing Norwegian hydropower assets ● New normal production 9.4 TWh ● Development potential 0.5 – 1 TWh ● Utilizing existing concession areas and infrastructure ● Investments NOK 1.2 – 2.5 billion from 2011 onwards (11)
Slide 67: Growth ambitions
Growth ambitions ● Ambition to increase share of captive power ● Develop energy positions for smelter growth ● Capitalize on energy market and project management skills (12)
Slide 68: Solar
Solar (13)
Slide 69: Opportunities for growth in the solar market
Opportunities for growth in the solar market Short term: Uncertainty on future growth rate Long term: High growth potential 25 World PV market, GW/yr 20 Source UBS: 48% CAGR 15 10 47% CAGR 5 Source Solarbuzz: 24% CAGR 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 *) CAGR = Compounded Annual Gr
Slide 70: Hydro has secured opportunities across the value chain
Hydro has secured opportunities across the value chain – investments around 800 MNOK Polysilicon Ingot Wafer Cell Module System/ Installation HyCore NorSun Hydro Building Ascent Systems (15)
Slide 71: NorSun: Årdal plant in operation
NorSun: Årdal plant in operation ● Hydro largest industrial owner with 18% ownership ● Production of monocrystalline silicon ingots and wafers ● 155 MW production in Årdal, Norway. Started 2008 ● Planning production of silicon wafers in Singapore (350 MW) ● Investment in polysilicon production ● 29%
Slide 72: Ascent: Promising pilot performance
Ascent: Promising pilot performance ● Hydro largest owner with 26.5% ● Produces thin-film solar cells for integration into buildings ● Pilot plant in operation since Q2 2008 ● Commercial scale plant operational 2010 ● Aggressive ramp-up feasible NASDAQ: ASTI (17)
Slide 73: Ascent + Hydro Building Systems
Ascent + Hydro Building Systems = a promising partnership ● Joint development team ● Prototype window shades with solar cells ● Energy-efficient facades that capture solar energy and produce electricity (18)
Slide 74: Hydro positioned across the solar value chain
Hydro positioned across the solar value chain Polysilicon Ingot Wafer Cell Module System/ Installation Metallurgy Industrialization Internal synergies / building systems (19)
Slide 75: Key messages
Key messages ● Solid coverage for Aluminium energy consumption ● Strong captive power position ● Industrial ambitions within Solar (20)
Slide 76: www.hydro.com
www.hydro.com
Slide 77: Aluminium Metal
Aluminium Metal Jan Arve Haugan, Senior Vice President and Acting Head of Aluminium Metal September 25, 2008 (1)
Slide 78: Key messages
Key messages We focus on a strong performance culture ● Leading health, safety and environmental performance ● Increasing output from existing facilities ● Aluminium Metal Production System ensures continuous improvements ● Facing the industry-wide cost pressure We develop our business ● Alunorte ex
Slide 79: We focus on a strong performance culture
We focus on a strong performance culture (3)
Slide 80: Strong performance culture: safety
Strong performance culture Continuous safety improvement TRI per million hours work ● Well below average in Europe 10 9 ● Drive improvement in work environment 8 and environment 7 6 5 ● Leading Safety Program at each plant 4 3 ● Increased focus on proactive response – 2 better risk awareness 1 0 200
Slide 81: Strong performance culture: increased production
Strong performance culture Increased production Electrolysis output in tonnes* ● Amperage increase in all lines 1 100 000 1 050 000 ● A major contributor to improvement in productivity 1 000 000 950 000 ● By continued technological and operational improvements 900 000 ● Low cost creep – low capital
Slide 82: Strong performance culture: reduced energy consumption
Strong performance culture Reduced specific energy consumption kwh / Kg aluminium* ● Specific energy consumption per kilo 15.5 aluminium significantly reduced 15.0 14.5 ● Further reduction in energy targeted 14.0 ● New cell technology 13.5 ● Optimized process control 13.0 ● Improved operational stab
Slide 83: Strong performance culture: reduced emissions
Strong performance culture Reduced specific emissions Kg CO2e / kg aluminium* Specific emissions kg fluorine / tonne aluminium** 6 1.4 1.2 5 1.0 4 0.8 3 0.6 2 Qatalum 0.4 1 0.2 0 0.0 1990 1995 2000 2005 2006 2007 2010 Hydro Alcoa Alcan EAA IAI ** Hydro majority-owned smelters Source: Hydro (2007), A
Slide 84: Aluminium Metal Production System
Aluminium Metal Production System AMPS is not a project – it’s a way of operating! A systemized method for Standardized work processes development of operational excellence and continuous Defined customer and supplier relationships improvements ● Product quality ● Cost Optimized flow ● Safety Dedica
Slide 85: AMPS implementation
AMPS implementation Progress according to plan ● Implementation in Norwegian plants started in 2007 ● Implementation outside Norway starts October 2008 ● To be implemented in Qatalum (9)
Slide 86: AMPS – continuous improvements
AMPS – continuous improvements Low-cost creep Increased production 1 000 mt, excluding closed capacity, 100%-owned lines in Norway Sunndal SU 4 average production mt/day 230 229 229 765 758 759 226 757 224 760 754 222 755 748 220 220 221 747 746 219 750 220 218 741 742 745 740 735 730 210 A vg 0 7 8
Slide 87: Addressing the cost challenge
Addressing the cost challenge Smelting production cost Costs in USD per tonne indexed, 2006=100 * Alumina 140 ● Equity and LME-based contracts 120 Power 100 ● Long-term contract portfolio and equity supply 80 60 Carbon 40 ● Stronger focus on procurement ● Change supply portfolio focusing on cost 20
Slide 88: Other operating cost
Other operating cost Continued focus on efficiencies 20 ● Productivity – tonnage “creep” without adding capacity cost 12 ● Organisational development – AMPS 68 ● Maintenance planning – preventive maintenance Wage related, incl. Infrastructure Other maintenance (12)
Slide 89: Global carbon sourcing
Global carbon sourcing Anodes Coke Pitch (13)
Slide 90: Solid power portfolio going forward
Solid power portfolio going forward Power coverage through 2020 Percent ● Long term power coverage 120% 100% ● Equity power and competitive Neuss contract prices 80% Contract ● Neuss on cash basis 60% 40% Equity 20% 0% 2008 2010 2012 2014 2016 2018 2020 Based on existing smelter capacity and decided
Slide 91: Well covered with alumina
Well covered with alumina CAP positions Hydro for further growth in metal Alumina coverage Percent 140% 120% LME-linked contracts 100% 80% Equity from CAP* 60% 40% Equity 20% 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 *CAP is illustrated with the first stage plus two expansi
Slide 92: We develop our business
We develop our business (16)
Slide 93: Alunorte – world's leading alumina refinery
Alunorte – world’s leading alumina refinery Highly competitive cash cost Production development in million tonnes EXPANSION 3 6.5 6.0 Expansion 3 from 4.4 million 5.5 tonnes to 6.3 million tonnes. 5.0 The world’s largest alumina 4.5 refinery. 4.0 3.5 Completed before time. 3.0 2.5 Construction start
Slide 94: CAP – new world class alumina refinery
CAP – new world class alumina refinery ● Important step to further expand equity alumina production ● The new plant will have an initial capacity of 1.86 million tonnes per year ● Significant expansion potential which could bring the final output up to 7.4 million tonnes per year ● Investment estima
Slide 95: Qatalum – according to plan
Qatalum – according to plan Large-scale organizational build-up ● Multi-national organization ● Recruitment and organization development ● Operational preparedness (19)
Slide 96: Qatalum: well positioned to serve all major markets
Qatalum: well positioned to serve all major markets Qatar Hydro off-take agreement for 100% of Qatalum products ● First metal by end of 2009 ● Building up to a sales volume to ~600 000 tonners per year through 2010 ● Targeting markets in Asia, Europe and the U.S. ● Product focus: extrusion ingot, pr
Slide 97: Hydro cost position better than average
Hydro cost position better than average Qatalum will improve average position – Neuss runs on cash basis USD/tonne 3 100 B OC Wo rld weighted average 2 700 Qatalum (estimate) 2 300 Neuss 1 900 Hydro (CRU) Hydro (CRU) excl Neuss 1 500 Hydro (CRU) ex Neuss incl Qatalum 1 100 700 Accumulated tonnes 0 5
Slide 98: Develop technology to fulfill ambitions
Develop technology to fulfill ambitions 2007 2009 2020 HAL300 technology HAL4e technology Beyond HAL4e ● Low diffuse emissions ● Improved energy efficiency ● Zero PFC concept ● Good working environment ● Benchmark GHG ● Simpler CO2 capture ● SU4, Qatalum ● Prepared for CO2 ● New materials and cell d
Slide 99: HAL4e technology
HAL4e technology (23)
Slide 100: Production increase: 40% per cell
Production increase: 40% per cell Kg aluminium/cell/day 3 500 3 000 2 500 2 000 1 500 1 000 500 0 HAL300 AP35 HAL4e (24)
Slide 101: Novel smelter concepts
Novel smelter concepts ● Concentrate and separate CO2 from process gas ● Energy recovery ● Next generation process control ● Anode production technologies ● Automation ● Cranes ● AGV ● Material transportation (25)
Slide 102: Technological leadership
Technological leadership – entry to partnership ● Technology as entry-ticket to joint venture partnerships ● …and to supplier relations ● Low specific investment cost ● Leading health, safety and environmental performance ● Technical knowhow and operational excellence (26)
Slide 103: Key messages
Key messages We focus on a strong performance culture ● Leading health, safety and environmental performance ● Increasing output from existing facilities ● Aluminium Metal Production System ensures continuous improvements ● Facing the industry wide cost pressure We develop our business ● Alunorte ex
Slide 104: www.hydro.com
www.hydro.com
Slide 105: Aluminium Products
Aluminium Products Svein Richard Brandtzæg, Executive Vice President and Head of Aluminium Products September 25, 2008 (1)
Slide 106: Key messages
Key messages ● Major restructuring completed ● Improvements despite weaker markets ● Growth based on competitive advantage ● Leading through technology (2)
Slide 107: Underlying RoaCE last 12 months 5.3%
Underlying RoaCE last 12 months 5.3% Underlying RoaCE July 2007-June 2008 16 12 8 4 0 -4 Extrusion Rolled Products Automotive -8 Capital employed June 30, 2008: NOK 17.0 billion (3)
Slide 108: Aluminium Products seasonality
Aluminium Products seasonality Underlying EBIT (NOK million)* 991 1 000 905 800 765 600 529 400 361 200 0 H1 2006 H2 2006 H1 2007 H2 2007 H1 2008 Volume (1 000 mt)* 900 871 872 850 833 837 800 798 750 700 H1 2006 H2 2006 H1 2007 H2 2007 H1 2008 *Including EBIT and volumes from divested activities (4
Slide 109: Extrusion
Extrusion (5)
Slide 110: Solid market position in Europe
Solid market position in Europe Market share 1997 2007 24 % 24 % 20 % 20 % 16 % 16 % 12 % 12 % 8% 8% 4% 4% 0% 0% Hydro APA* Alcoa Sapa Sapa Hydro** Alcan Aleris Best estimates shown for competitor market share. * Alcan/ Pechiney/ Alusuisse ** Market share Hydro ~15% included extruded products from A
Slide 111: Industry leadership in safety
Industry leadership in safety Comparison with Extrusion Alcan, Alcoa and SAPA in 2007 2007 TRI* 18 16.0 16 14 12 10 8 5.9 6 4.5 4 3.3 2 0 Sapa (old) Alcan Alcoa Extrusion Eurasia * Total recordable injuries per million hours worked (7)
Slide 112: Safety focus helps operational performance
Safety focus helps operational performance Correlation between HSE and manufacturing performance Efficiency Tonnes/man-year Safety TRI* * Total recordable injury - recorded per million hours worked (8)
Slide 113: Excellent productivity development
Excellent productivity development Extrusion Eurasia 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Jan-Jun Tonnes/man-year C ost/kg (9)
Slide 114: Efficiency improvement
Efficiency improvement Extrusion Americas 2 900 2 700 2 500 2 300 2 100 1 900 1 700 1 500 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 FTEs* * FTE= full-time employees (10)
Slide 115: Business development
Business development Expral, Spain ● Spanish market share increased from 6% to 9%* ● Strong growth potential in industrial segment ● Successful integration ongoing * internal estimates (11)
Slide 116: Growth opportunities
Growth opportunities Extrusion Eurasia Extrusion Americas (12)
Slide 117: Building Systems
Building Systems CHELSEA Customer INTERCOM, NY CHELSEA Customer INTERCOM, NY DIQUE IV – Puerto Madero Larnaka Airport, Cyprus Foch 94, Beirut Q-Tower, Manila (13)
Slide 118: Three strong brands
Three strong brands WICONA HYDRO (14)
Slide 119: Business development
Business development Alumafel, Spain ● Spanish market share from 7% to 12%* ● Lift to leading position in Spain Alumetal, Italy ● Efficient logistics and commercial network ● Strengthen Italian market position ● Closer to the customer * internal estimates (15)
Slide 120: Encouraging new opportunities
Encouraging new opportunities (16)
Slide 121: Development in energy efficiency
Development in energy efficiency InventSkin® multiple layer façade concept ● Several energy-efficiency functions ● Reduces primary energy and CO2 emissions ● Our next step is … (17)
Slide 122: Great outlook
Great outlook (18)
Slide 123: Rolled Products
Rolled Products (19)
Slide 124: Four strong business units
Four strong business units Foil ● Flexible packaging and technical applications Litho ● Offset plates for the printing industry Packaging & Building ● Cans, packaging and architecture Automotive, Heat Exchanger ● Transport, heat exchangers and special & General industry Engineering (20)
Slide 125: Competitive performance
Competitive performance 2007 RoaCE* 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0% Alcoa* Hydro Rolled Products Elval Novelis *Source: Annual Reports and Hydro analysis; Internal calculation for the rolled segments (21)
Slide 126: Upgrading product portfolio
Upgrading product portfolio Continuous annealing line Start-up: November 2008 (22)
Slide 127: Automotive
Automotive (23)
Slide 128: Global player and advanced technology
Global player and advanced technology Precision Tubing Structures ● Global leadership in Precision Tubing ● Structures in a leading position within crash management systems (24)
Slide 129: Leading through technology
Leading through technology (25)
Slide 130: Meeting the climate challenge
Meeting the climate challenge Significant reduction in emissions since 1999 Increased recycling competence Kg CO2e / Kg aluminium* 7 6 5 4 3 2 1 0 1990 1995 2000 2005 2010** * Average specific emissions from Hydro’s Norwegian smelters ** Qatalum (26)
Slide 131: Focus – Nevada Solar 1
Focus – Nevada Solar 1 ● 64 MW solar field ● Now being duplicated at La Risca, Spain (27)
Slide 132: R&D – focus and integration
R&D – focus and integration Rolled Energy Products Extrusion Automotive R&D R&D R&D R&D Precision Solar Rolling Extrusion Tubing (28)
Slide 133: Summing up
Summing up (29)
Slide 134: Key messages
Key messages • Executing further growth potentials in Extrusion Eurasia and Building Systems • Achieving margin leadership in European Rolled Product industry • Taking advantage of fast-growing market for energy-efficient buildings (30)
Slide 135: www.hydro.com
www.hydro.com
Slide 136: Qatalum
Qatalum Tom Røtjer, Executive Vice President and Head of Projects September 25, 2008 (1)
Slide 137: Qatalum: Hydro – QP partnership
Qatalum: Hydro – QP partnership Joint venture agreement 50% 50% z Gas supply z Technology and competence z Industrial climate z Metal marketing z Site and off-take z Project Power plant and smelter management (2)
Slide 138: Qatalum location
Qatalum location Mesaieed Industrial City (3)
Slide 139: Start-up around year-end 2009
Start-up around year-end 2009 Total investment USD 5.6 billion (4)
Slide 140: Qatalum smelter
Qatalum smelter Largest greenfield capacity built in one step ● First-stage capacity ● Smelter: 585 000 tonnes per year ● 704 cells in 2 double-lined potrooms ● Hydro technology ● Anode plant and casthouses ● 1 325 MW power plant ● Possible expansion to 1.2 million tonnes ● Advanced technology ● Low
Slide 141: Qatalum project schedule
Qatalum project schedule ● Heads of agreement December 2004 ● Joint venture agreement March 2006 ● Investment decision October 2006 ● Final build decision July 2007 ● Production start-up Around year-end 2009 ● Ramp-up During 2010 (6)
Slide 142: Global procurement
Global procurement (7) HYDRO
Slide 143: "Crunch time" in Gulf construction market
”Crunch time” in Gulf construction market (8)
Slide 144: Site preparation
Site preparation 10 million tonnes of landfill = 200 000 truckloads (9)
Slide 145: 12 000 people on site
12 000 people on site Continuous focus on safety (10)
Slide 146: Construction village for 10 000 people
Construction village for 10 000 people • Wide range of services and leisure activities (11)
Slide 147: Potroom buildings 1.2 km long
Potroom buildings 1.2 km long (12)
Slide 148: Potroom buildings
Potroom buildings (13)
Slide 149: Potroom buildings
Potroom buildings (14)
Slide 150: Pot-tending machine prototype tested in Su4
Pot-tending machine prototype tested in Su4 (15)
Slide 151: Anode superstructures by Great Wall, China
Anode superstructures by Great Wall, China (16)
Slide 152: Potshells from AMA, Bahrain
Potshells from AMA, Bahrain (17)
Slide 153: Anode baking plant
Anode baking plant (18)
Slide 154: Piling comes to a completion
Piling comes to a completion (19)
Slide 155: Jetty construction
Jetty construction (20)
Slide 156: On track in a challenging environment!
On track in a challenging environment! (21)
Slide 157: www.hydro.com
www.hydro.com (22)