Hydro Aluminium AS

25 years ago: An aluminium giant is born

(September 1, 2011)
A very successful merger. This is how most people would characterize the new company – Hydro Aluminium – born in Norway 25 years ago, on September 1, after the merger with ÅSV. It was the day that brought to life a Norwegian aluminium giant with a strong base in the European market.



Hydro’s aluminium business has developed significantly over the past 25 years, since the ÅSV merger in 1986, through acquisitions, partnerships and growth. Hydro is today a focused aluminium company with operations throughout the value chain, from bauxite mining to the sale of aluminium products.

Exciting story
An interesting story lies behind the creation of Hydro Aluminium AS in 1986.



In truth, there were not two, but three partners who joined forces in 1986. Just prior to the merger between Årdal og Sunndal Verk (ÅSV) and Norsk Hydro’s Aluminium Division, Hydro acquired five extrusion plants in Europe from Alcan. It was from these various pieces that a new Hydro Aluminium culture was created.

These were companies that completed each other. ÅSV had extensive knowledge in electrolysis technology. Hydro had a more commercial organization that also invested heavily downstream. The acquisition of the Alcan plants virtually doubled Hydro’s extrusion operation and gave the new company a solid foothold in the European extrusion industry.

Politics and industry
Hydro and ÅSV had been talking together for a long time – years – before the merger became fact. In 1982, stuck with rock-bottom metal prices, many aluminium producers suffered a crisis year. One was ÅSV, the Norwegian state-owned company that lost share capital and needed an injection of new money from its owner. Two years later, however, producers experienced a golden year with top prices. The fluctuations were enormous.

At the same time, many in Norway’s political environment were voicing their desire to see the domestic aluminium industry come together in a larger and more powerful unit.



ÅSV’s challenge was to secure market access. As a result, its board of directors decided in December 1985 to look into a solution that would achieve a certain level of ownership integration with West Germany’s Vereinigte Aluminium-Werke (VAW). Such a solution would provide ÅSV with solid footing in the emerging European Federation and create a powerful industrial company in Europe. But the scheme attracted no great enthusiasm in some of the political camps in Norway.

A group of union officials then stepped in, taking the initiative for Norway’s Minister of Industry, demanding a last attempt with Hydro to achieve a Norwegian solution. Håkon Sandvold of ÅSV and Torvild Aakvaag of Hydro – the top executives of the two companies –had been in contact with each other the whole way. Sandvold also sat on Hydro’s board of directors.

The Industry Minister contacted the companies, and, in early 1986, things started happening fast. When the matter came up in Norway’s Parliament the same spring, there was broad political agreement regarding a merger between ÅSV and Hydro’s Aluminium Division.

The agreement was approved.

Hydro’s Aluminium Division was merged debt-free into ÅSV. This gave Hydro an interest of 70 percent in Hydro Aluminium AS, with the state owning the remaining 30 percent. At the same time, the state owned 51 percent of Hydro.

Later, Hydro used its option to buy the remaining shares from the state, thereby making Hydro Aluminium AS into a wholly owned subsidiary.

Hydro sells non-strategic stake in Norwegian power producer

(July 26, 2011)
Norsk Hydro ASA has on July 25, 2011, entered into an agreement to divest its 20.86% non-strategic ownership stake in northern Norwegian power production company SKS Produksjon AS to Salten Kraftsamband AS for a cash consideration of NOK 1 billion for the shares.

The sale does not affect Hydro’s ownership of 9.4 TWh of annual power production in Norway.

“The stake in SKS has been a minority position and a financial asset for Hydro yielding an annual dividend of approx NOK 30 million over the past two years. I am pleased with the valuation we have achieved in this transaction,” says Hydro’s CFO Jørgen C. Arentz Rostrup.

“As SKS is located in an area where Hydro has no industrial power consumption and with no synergies to our other power operations, the divestment has no effect on Hydro’s primary aluminium production in Norway. We will continue to develop our captive power assets in Norway over the next years,” Rostrup says.

SKS Produksjon operates solely as a power production company and distributes dividends to its owners on a regular basis. There is no physical power off-take agreement to Hydro and no link to Hydro’s other power assets in Norway. Following the transaction, SKS Produksjon will be fully owned by Salten Kraftsamband.

SKS Produksjon owns nine power stations in Nordland in the northern part of Norway, with a normal annual production of close to 1.8 TWh per year. Around 280 GWh of the production is sold as quota power at cost.

Hydro’s ownership represents about 370 GWh of the total production, or about 310 GWh when adjusted for quota power.

The transaction is expected to be completed on July 26, 2011. Hydro expects to recognize a gain of about NOK 650 million in its third-quarter result, with no material tax expense implications.

Hydro owns 9.4 TWh of renewable hydropower capacity in Norway and is currently executing an upgrade and expansion program with a total investment of about NOK 1.2 billion for the period 2011-2015.

Second quarter 2011: Results rise on higher volumes and prices

(July 26, 2011)
Hydro had underlying earnings before financial items and tax of NOK 1,906 million in the second quarter, up from NOK 1,448 million in the first quarter. Higher realized alumina and aluminum prices combined with higher volumes supported underlying results for the quarter.


Underlying EBIT NOK 1,906 million
Seasonally firm markets
Improved bauxite and alumina production performance
Higher realized alumina and aluminium prices, raw material cost pressures continue
Strong contribution from energy business
Midstream improve on higher volumes
Stable downstream results
Qatalum expected to reach full production by end-Q3
Primary Metal USD 300 cost improvement program on track
“I’m pleased to see improved production performance in Bauxite & Alumina, following the takeover of Vale’s aluminium operations in February. At the same time we continue to focus on cost repositioning along our aluminium value chain. Consistent focus on operational performance and margin management have supported results in seasonally firm markets and will make us more robust going forward,” Hydro’s President and CEO Svein Richard Brandtzæg said.

“We remain optimistic about the prospects for aluminium demand, however, recent increased uncertainty due to a more volatile macro environment and sovereign debt issues may result in increased demand fluctuations in the coming months,” Brandtzæg said.

Underlying EBIT for Bauxite & Alumina rose during the quarter due to the effect of the acquired bauxite and alumina activities from Vale and improved production performance.

Underlying results for Primary Metal also improved compared to the first quarter, mainly due to higher realized aluminium prices and sales volumes, partly offset by increased raw material costs. Ramp-up of production at Qatalum, the 50/50 joint venture between Qatar Petroleum and Hydro, continued during the quarter and is expected to reach full capacity by the end of the third quarter.

Underlying results for Hydro’s midstream operations rose in the second quarter from the first, along with higher volumes and positive ingot inventory valuation effects.

Underlying EBIT for Rolled Products was unchanged compared to the first quarter. Lower operating costs offset the effects of somewhat lower sales volumes and operating margins. Operating cost per mt declined with lower energy and logistic costs.

Extruded Products’ underlying EBIT decreased in the second quarter compared with the previous quarter. Sales volumes were seasonally higher in most business sectors, but lower margins and higher costs more than offset the effect of higher volumes.

Energy generated solid underlying results, but at a lower level compared to the first quarter due to seasonally lower power production and lower prices.

Operating cash flow contributed to a reduction of net debt of NOK 1.4 billion for the quarter including an increase in working capital. Net cash used in investment activities for the quarter amounted to NOK 1.1 billion. Dividends paid in the quarter amounted to NOK 1.6 billion. At the end of the quarter Hydro’s net debt position was NOK 2.9 billion.