Norsk Hydro: Hydro and Glencore to become partners to further develop Alunorte

27 Apr 2023 08:00 CEST

Hydro has signed an agreement with Glencore, who will acquire 30 percent of the
Brazilian alumina refinery Hydro Alunorte and Hydro's 5 percent ownership in the
Brazilian bauxite producer Mineracão Rio do Norte (MRN).

Glencore will acquire an additional 40 percent stake in MRN, which is currently
owned by Vale. This 40 percent interest will be acquired by Hydro from Vale and
immediately sold to Glencore on a back-to-back basis. After the transactions,
Hydro will no longer have an ownership position in MRN.

The bauxite agreement between Vale and Hydro will be terminated and, following
the transactions, Glencore will continue to supply approximately 30 percent of
Alunorte's long-term bauxite requirements from MRN.

Hydro invites to conference call today (Thursday, April 27) at 08:30 CEST (06:30
GMT) to provide further details on the transactions. Please refer to separate
invitation or Hydro.com for dial-in details.

"This transaction is an important step to deliver on Hydro's strategy. Proceeds
from the transaction will be used for strategic growth and for shareholder
distribution. Alunorte remains a core strategic asset for Hydro and is a key
source of low-carbon alumina supply to our primary aluminum smelters. Hydro will
continue to be long alumina, but now more balanced in relation to the demand
from our aluminium smelter portfolio," says President and CEO of Hydro, Hilde
Merete Aasheim.

Hydro's 2025 strategy, launched in 2020, outlined a clear ambition to lift
profitability and drive sustainability throughout the whole company.  Part of
the strategy has been to develop Alunorte, allocating capital to sustain and
improve operations, and continue efforts to strengthen the refinery's first
quartile cost and carbon position as well as increasing community engagement.

"Our Bauxite and Alumina business area has made significant progress over the
last years to bring down the footprint of producing alumina, which enables Hydro
to strengthen our position in low-carbon aluminium.  We look forward to becoming
partners with Glencore, and their broad industrial experience within metals and
mining, to further develop Alunorte," says Aasheim.

Hydro and Glencore will continue efforts to reduce carbon emissions from
Alunorte through the fuel switch project that aims to substitute fuel oil with
LNG, and the electrification of the coal boilers, bringing Alunorte to the first
decile on the global carbon curve already in 2025, thereby positioning Alunorte
as a leading supplier of low-carbon alumina. In addition to the decarbonization
of Alunorte, the partners are committed to continuing the development of social
projects to improve the lives and livelihoods of nearby communities.

The transactions will have a total net enterprise value of USD 1.11 billion,
which will be adjusted for Alunorte's net debt as of June 30, 2023. Net debt for
30 percent of Alunorte as of March 31, 2023, was USD 335 million. The enterprise
value and net debt exclude asset retirement obligations of USD 40 million on a
30 percent basis.

The parties have also agreed to a post-closing price adjustment based on
financial performance of Alunorte over a period of 21 months from June
30, 2023. Subject to Alunorte's performance, Hydro may make certain repayments
to Glencore which are capped at USD 55 million.

The transactions are subject to customary regulatory approvals. Closing of both
transactions is expected in the second half of 2023.

Additional information related to the distribution of the proceeds will be
provided on closing of the transaction.

After the transactions, Hydro will remain the largest shareholder of Alunorte
with 62 percent ownership. Glencore will own 30 percent of Alunorte, while the
remaining four minority shareholders shall collectively own 8 percent.

Alunorte will continue to be consolidated in Hydro's financial accounts. There
will be no remeasurement or recognized gain related to this transaction.

Alunorte alumina refinery has an annual nameplate capacity of 6.3 million tonnes
of alumina and is a key raw material source for Hydro's smelter operations,
including the adjacent Albras smelter, Norwegian primary aluminium smelters, and
external customers. The transaction will have no impact on the physical supply
contracts or cost to Hydro Aluminium Metal.

Bauxite from MRN supplies one third of Alunorte's bauxite needs, while the
remaining share is supplied from Hydro's fully owned Paragominas bauxite mine.
Following the transaction, MRN will continue to be independently operated with
Glencore as the largest shareholder owning 45 percent.  The remaining 55 percent
shall be owned by South 32, Rio Tinto and CBA.

Hydro was advised by Citi Group and Latham & Watkins.

Investor contact:
Line Haugetraa
+47 41406376

Media contact:
Halvor Molland
+47 92979797

The information was submitted for publication from Hydro Investor Relations and
the contact persons set out above. 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
expansions, investments, divestments, curtailments or other projects, (c)
targeted production volumes and costs, capacities or rates, start-up costs, cost
reductions and profit objectives, (d) various expectations about future
developments in Hydro's markets, particularly prices, supply and demand and
competition, (e) results of operations, (f) margins, (g) growth rates, (h) risk
management, and (i) qualified statements such as "expected", "scheduled",
"targeted", "planned", "proposed", "intended" or similar. Although we believe
that the expectations reflected in such forward-looking statements are
reasonable, these forward-looking statements are based on a number of
assumptions and forecasts that, by their nature, involve risk and uncertainty.

Various factors could cause our actual results to differ materially from those
projected in a forward-looking statement or affect the extent to which a
particular projection is realized. Factors that could cause these differences
include, but are not limited to: our continued ability to reposition and
restructure our upstream and downstream businesses; changes in availability and
cost of energy and raw materials; global supply and demand for aluminium and
aluminium products; world economic growth, including rates of inflation and
industrial production; changes in the relative value of currencies and the value
of commodity contracts; trends in Hydro's key markets and competition; and
legislative, regulatory and political factors. No assurance can be given that
such expectations will prove to have been correct. Except where required by law,
Hydro disclaims any obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
This information is considered to be inside information pursuant to the EU
Market Abuse Regulation and is subject to the disclosure requirements pursuant
to Section 5-12 the Norwegian Securities Trading Act.

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588743_Presentation - Transaction Hydro and Glencore.pdf