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Norsk Hydro: Write-Down of Book Value of German Primary Aluminium
Plants
OSLO, Norway, Dec. 14 /PRNewswire-FirstCall/ -- Hydro will write down the book
value of its German primary aluminium plants by approximately NOK 1.5 billion
after tax due to weakened competitiveness caused by the strengthened EUR versus
USD, and increasing energy costs. The write-down will be charged to the fourth
quarter results this year, and will have no cash effect.
The strengthening of the Euro versus US dollars puts European aluminium
producers at a cost disadvantage in the global aluminium market. The current
power contracts for Hydro's German primary aluminium plants expire end of 2005.
Current power prices in Germany are significantly higher than in 2002, when
these plants were acquired. Hydro then anticipated a significant increase in
future power costs. However, based on the ongoing negotiations for renewal of
the contracts, Hydro now expects an even higher increase than in 2002.
Based on this situation the expected future cash flows from the German primary
aluminium plants, based in Euro, are not sufficient to support the present book
value of these assets.
The assumptions used for the calculations are for the coming four years based
on the forward curve for both the aluminium price and the USD/EUR currency
ratio. For the longer term an aluminium price of USD 1,500 and a USD/EUR ratio
of 1.14 are used. The power price assumptions reflect the current market level
and outlook for the longer term.
The final write-down amount will be included in the fourth quarter 2004
results, and is expected to represent a charge to operating income of
approximately NOK 2.4 billion. As a consequence of the write down, the
applicable deferred taxes will be reduced by approximately NOK 0.9 billion.
Hydro has two fully-owned and one part-owned primary aluminium plants in
Germany. Hydro Aluminium Neuss, with a production of 221,000 tonnes in 2003, is
a key supplier of metal to Hydro's major rolled products units in Norf and
Grevenbroich, and with operating costs on level with other European primary
aluminium plants. Hydro Aluminium Stade had a production of 69,000 tonnes in
2003. Hydro also owns 33 percent of Hamburger Aluminium-Werk, where Hydro's
share of the production volume in 2003 was 43,000 tonnes. The write-down
applies to all three assets. After the write-down, the remaining book value is
approximately NOK 900 million. Hydro will continue to evaluate the future
competitive position of its German primary aluminium plants.
The acquisition of the German aluminium company VAW in 2002 gave Hydro a solid
platform for further development of the company as one of the world's leading
aluminium suppliers, with a value creation potential among the best in the
industry. The acquisition contributed to broadening Hydro Aluminium's
geographical reach, and strengthened the company's positions in several
important market segments. A rapid and efficient integration process resulted
in cost reductions better than targeted. This has made an important
contribution to the performance improvements for Hydro Aluminium over the last
couple of years.
Hydro is a Fortune 500 energy and aluminium supplier operating in more than 40
countries. The company is a leading offshore producer of oil and gas, the
world's third-largest aluminium supplier and a leader in the development of
renewable energy sources. Hydro's 36,000 employees create value by
strengthening the viability of the customers and communities we serve.
Certain statements in this press release are or may constitute
"forward-looking" statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Statements that are not in the nature of
historical facts may be deemed to be forward-looking statements and may contain
identifying words such as "believes," "anticipates," "plans," "expects" and
similar expressions. These forward looking statements are based on Hydro's
current expectations, assumptions, estimates and projections about the company
and the industries in which it engages in business. All forward-looking
statements involve risks and uncertainties. For a detailed description of
factors that could cause Hydro's actual results to differ materially from those
expressed in or implied by such statements, please refer to its annual report
on Form 20-F for the year-ended December 31, 2003 and subsequent filings on
Form 6-K with the U.S. Securities and Exchange Commission. With respect to
each non-GAAP financial measure Hydro uses in connection with its financial
reporting and other public communications, Hydro provides a presentation of
what Hydro believes to be the most directly comparable GAAP financial measure
and a reconciliation between the non-GAAP and GAAP measures. This information
can be found in Hydro's earnings press releases, quarterly reports and other
written communications, all of which have been posted to Hydro's website
(http://www.hydro.com/).
Contact Idar Eikrem Thomas Knutzen
Telephone (+47) 22 53 32 73 +47 22539115
Cellular (+47) 95 02 83 63 +47 90612359
E-mail
DATASOURCE: Norsk Hydro
CONTACT: Idar Eikrem, +47-22-53-32-73, Cellular, +47-95-02-83-63,
, or Thomas Knutzen, +47-22539115, Cellular,
+47-90612359, , both of Norsk Hydro
Web site: http://www.hydro.com/