The expansion and modernization of Hydro Aluminium Sunndal is to be carried out as planned, the Board of Norsk Hydro having today verified its previous decision. According to the updated plans, production capacity at the metal plant will be increased to 328,800 tonnes per year when the new plant comes on stream in 2004, and arrangements will be made to increase capacity to about 350,000 tonnes per year from 2007. New Sunndal will contribute significantly to value creation in Hydro Aluminium Metal Products.
"The Main Study has confirmed that this is an excellent project, from a strategic, technical, financial and environmental point of view. The study process has contributed to making a clearly profitable project even better. New Sunndal will not only be the largest aluminium plant in Europe, but will also have a per capita productivity that ranks among the best in the world " says President and CEO of Norsk Hydro, Eivind Reiten.
Last year Hydro Aluminium marketed more than 2.1 million tonnes of foundry products. This volume is expected to grow further this year, making Hydro the European market leader for foundry products such as extrusion ingot and foundry alloys, the two products to be produced in Sunndal. Hydro's own potroom production of aluminium in 2000 stood at 762 000 tonnes. As a consequence of new Sunndal and certain other capacity expansions, production will rise to approx. 960 000 from 2005. In addition, Hydro has the opportunity of increasing its stake in the Slovalco metal plant in Slovakia.
Pre-study capacity increased
The main study has resulted in some minor changes being made to the project:
The number of electrolytic reduction cells will be increased from 336 to 340, which means that the capacity of the new facility will be 238,800 tonnes per year.
The design of the cell linings and rectifiers will be such so that amperage can gradually be increased to 275 kA by the year 2007, providing additional capacity of 22,000 tonnes.
The total Sunndal project will require an investment of NOK 5.6 billion, or roughly USD 600 million based on the current exchange rate. The plant will be completed in 2004. The investment figure is based on the fact that binding offers have been received for 85 per cent of the totality of contracts. This reduces risk significantly. The investment figure still contains satisfactory project reserves.
Greater production of aluminium in Sunndal will require an increased supply of anodes which are an important input factor in the electrolytic process. Several alternatives are being looked into and it is planned to reach a final decision in September.
High productivity and a better environment
Productivity at New Sunndal will be 570 tonnes per employee per year, which is on a par with the best plants in the world. The facility will utilize Hydro's HAL250 technology which is very suitable for this particular type of plant and which will make significant improvements to both the indoor and outdoor environment. New Sunndal will meet all existing and known environmental requirements. Emissions of greenhouse gases per tonne metal produced will be significantly reduced, and despite the fact that production will be doubled, total emissions of CO2 equivalents will remain practically unchanged.
Robust project with sound profitability
The financial assumptions on which the expansion at Sunndal are based remain the same, and the project is financially just as attractive and robust even without inclusion of the amperage increase. The internal rate of return after tax exceeds 15 per cent.
For the first five years, a major proportion of Sunndal's foreign currency earnings have been hedged at USD exchange rates that are considerably higher than 7.50. This contributes towards increasing the project's profitability.
Power price is based on the market price for long-term contracts in 2001 and is equivalent to the expected alternative price for power. The estimate for power costs is marginally higher than the
18 øre per kWh which formed the basis of the Board resolution of August 2000. Power supplies will be covered through Hydro's long-term purchase agreement with Statkraft and on the open power market.
The project is based on a London Metal Exchange aluminium price of USD 1550.
Investment costs per tonne new capacity at Sunndal, estimated on the total future capacity of the facility with any necessary minor additional investments taken into consideration, will be less than USD 3,000 per tonne, which is significantly less than the average for greenfield plants as well as for similar expansions.
The Ministry of Trade and Industry has confirmed that the Environmental Impact Assessment from 1992, that was originally approved in 1997, is still valid. The State Pollution Control Authority (SFT) is currently evaluating emission applications for the Su 4 project.