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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