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.
July 26, 2011
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.
Certain statements included within this announcement contain forward-looking information, including, without limitation, those relating to (a) forecasts, projections and estimates, (b) statements of management’s plans, objectives and strategies for Hydro, such as planned expansions, investments 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, as well as (i) statements preceded by “expected”, “scheduled”, “targeted”, “planned”, “proposed”, “intended” or similar statements.
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 aluminium business; 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.
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