Norsk Hydro ASA

Stefan Solberg - Investor Relations Eivind Reiten - President and Chief Executive Officer John Ottestad - Chief Financial Officer Svein Richard Brandtzaeg - Incoming President and Chief Executive Officer

Jon Bergtheil - Citigroup Svein Richard Brandtzaeg Jason Fairclough - Merrill Lynch Rob Clifford - Deutsche Bank Melanie Burton - BaseMetals.com Nadia - Metropolitan Unidentified Analyst Unidentified Analyst

Okay, now I think we are ready to start. Welcome everyone to the presentation Norsk Hydro fourth quarter results.

For those of you who are joining us here at the presentation and then also for those who are joining us on the web, the results will be presented by the present CEO Eivind Reiten, CFO John Ottestad, and also incoming President and CEO, Svein Richard Brandtzaeg who is currently heading, he is responsible for a public business. Before we start, I would just like to go ahead into the Safe Harbor statement, which is on the screen in front of you.

Please read it carefully and then I will just hand over to Eivind to give us a run-through of the results.

Thank you, Stefan. Maybe I should, instead of talking a lot about results, I should be talking more about the fabulous projects we have in Qatar because that is really more pleasant part of what we are doing, but I will revert to that in a minute as part of explaining the strategic progress.

But great to see you and I will give you some highlights of the results. First of all, the results in the third quarter and then I am talking about the underlying EBIT as you probably are familiar with, is much in line with the previous quarters and about the same level also on an underlying basis at fourth quarter in 2007.

The reason for that is that we have solid operational performance, but the price, the key prices, the aluminum prices in fourth quarter this year is actually higher in Norwegian kroner than the price is in the previous quarter. Although these higher prices have been offset to a large extent by also continued cost pressure, and then you will see the total delight third party where we have taken out the part of the inventory impairment.

So, when we are talking about the underlying results in the continuation, we are talking about this after the impairment of the inventory 700 million, which was communicated already a few weeks ago. The fourth quarter is a very solid operational performance, no doubt that we have seen a dramatic decline in the aluminum market and the aluminum price but as you may remember we are selling on a four-month forward so, so far we have not been hit by the sharpest drop in those prices.

We have taken decisive corrective actions to cut back capacity and we are proud of presenting the progress of the Qatar smelter. The next chart is just to give a brief overview of the market.

You probably know it that it has been dropping like this and this is the forward curve as we speak today. May I draw your attention to the fact that over the last two years, including 2008, the aluminum price has actually been quite stable around $2,600 per ton coming down in Norwegian Kroner due to the weakening of the US dollar over the same period, but all in all high and even in 2008 quite decent prices and take a look here, by end of third quarter we had two and a half $2,400 by end of fourth quarter we were $1,000 down.

So this is a dramatic thing that happened, a tremendous drop and that was what we are now facing a price at a much, much lower level than we have been for a long time and at the same time we are still having possible cost base due to the related to the higher prices, input cost prices that we have experienced in 2006 and 2007 and until we have got part of now able to take the full benefit of the lower interest costs we are clearly seeing on the profit. The next chart is just to show how dramatic the downturn is.

This is the upstream, the massive products part and you see from the fourth to the third quarter you see drop in sales volumes of roughly 20% even worse in some areas, but remember there are also seasonal variations. The fourth quarter is already weaker than third quarter but this drop is far beyond what is the seasonal effect.

The next one is just to show the total the same picture. For the downstream part what stands out, here on the positive side is clearly on the building system.

It is a growing business where we are producing and delivering advanced building components to the construction industry and we are working with the high end market basically here and the market has had held up remarkably well. Earnings are good, and we are still doing quite well in that business.

At the other side of the line, you will find the automotive part, automotive structure and precision tubing with a significant and not surprisingly a sharp drop in volumes affecting the results. All in all we see a significant buildup of inventory and we are now approaching which you will see on the next slide, we are approaching inventory level up to 100 days.

We are approaching a level which we have not seen since we have the fall of the Berlin Wall back in the early ‘90s and where we had a significant inflow of Russian capacity to the rest of the world. So, clearly, there is an imbalance between supply and demand.

Curtailed capacity is taking effect, but still we are building inventories. The Chinese picture is quite interesting.

First of all, we see that Chinese export is coming actually down. We have two reasons for that.

One, being the fact that the Chinese capacity adjustment has been quite significant and China has taken down the production capacity quite much with more than 3 million tonnes since the downturn truly started. Secondly, the metal price, the aluminum price at the Shanghai exchange is actually now higher $200 to $300 per tonne higher than the London metal exchange, but not giving the producers in China any incentive at all to export, and then you have the export tax on pure alloyed aluminum, which are put in place in order and you see the small bar here saying that this is basically now coming also to an end.

So, China has been quite rapid in responding to the reduced demand and we see China more and more dealing with China as China, and the rest of the world has to deal with overcapacity and when we take a look at how capacity reductions or curtailments are taking place there we see that the percent in Alcoa or Chalco has been doing quite a bit. We have been quite decisive in taking down capacity and you see the others in percentage of total capacity.

The basis for doing that is of course that we see that in the present situation, it is extremely important to maintain the strength of the Company that we are speedy in taking out capacity while we are not making money, and of course we are starting with a capacity at the highest end of the costs curve and that is the reason why we have taken out the high cost smelters. I will go to the detail later.

All in all of the curtailment that has been announced, close to 7 million tonnes roughly half-and-half between China and rest of the world, you see China 22%, 52% to what has been announced Alcoa and Hydro, Alcoa 11% and Hydro 5% but still even with the curtailed capacity taking full effect with this 1 million tonne still of the 3.5 million tonnes we think that about 1 million tonne has been previously taken effect, but even when the 3.5 million tonnes have taken full effect there is still a gap between the production capacity in the rest of the world, ex China I mean and the consumption rate that we saw during January. So, if January consumption is going to be the sort of the sustained rate for the rest of this year more capacity will have to be taken out if they are going to see a more balanced market.

That is not up to me to decide but it is just to give a feel for the fact that we are still building inventory at the present level, but any change in the positive direction of consumption even a small one could easily change that because so much capacity is already taken up. But there are clearly not only things that are going in disadvantage in this case.

Input costs are coming sharply down, and we have been struggling and you have seen me talking about these cost curves for the crude oil, for the freight rates and for the petrol coke and for the energy prices in Europe because I have been talking about them going up and up and up as a struggle for the industry. Now, they are coming sharply down and we are putting a lot of efforts now into our procurement in order to make sure that the leverage or the power as a large and long term buyer of these products and get as speedy as possible to benefit from the falling prices.

On the next page, we are trying to give a clue of how significant the cost reduction will be. So, the effect of the high cost capacity that we have curtailed and the lower interest cost prices that we are now seeing when they take full effect, not more or less from second half of 2009.

We are seeing a cost level per tonne which is around a third lower than the costs we are currently running at, which is of course significant but it is also a fact that it hurts a lot for the time being before we are able to take off these costs. The reason why we cannot take it off today is that we have contracts with our suppliers starting with the shipping companies on freight.

That is being on petrol coke. We have produced anode at a much higher petrol coke price than previously announced.

We put them into the production. We have to account for it, but it will be washed out and we will see a sharp decline in input cost level during the year.

I would also like to spend a few minutes on this, maybe the most important slide of all to understand what our strategic position is. This used to be the cost curve CRU.

It is not ours. It is CRU.

CRU has made a new one given the more recent in input prices, but it goes without saying that making a precise cost curve here means that you have to make it everyday because the cost is so dynamic. But what I like to share with you is what is happening to Hydro and we have plotted it along the old cost curve, but of course we have also benefited from this downturn but forget about that for a minute, just talk about the relative position.

So, what we have done, we have decided to close down the smelter in Germany and the smelter at the Karmoy, the Soderberg technology, the two quite far highest cost smelters in our portfolio, which is clearly moving over cost position to the left of the cost curve. Then, a year from now, we will be starting up the Qatar smelter, a smelter that clearly will be among the 10% lowest cost smelters on a cash operating level.

At the top of this, you see that we are taking a significant trip to the left on the cost curve. Taking out the highest cost, very up here putting in around the same amount of volume, the same volume at a very, very end of the curve down there will of course improve the competitive position; obviously, other competitors are also taking out some capacity probably more or less up here but none of them have the same sort of leverage by taking out on the high cost and then facing in this very, very low cost.

So, it is very important for us that we continue to deliver the progress in Qatar, so we have this lowest cost smelter to bring metals to the market already a year from now, but market outlook, to conclude on this section, is quite easy to say. It is very limited forward visibility.

We are very well prepared for a very difficult 2009. We hope that we might see some improvements during 2009, but we cannot say that because we see it we can just say that there must be a limit to how far down these things can go and we see curtailments taking place.

So, the only thing I can say is that we prepare for a very difficult year but we are also prepared for taking the benefit if things start to improve and to make sure that we take the full benefit of input cost reduction is also going to be very important. So, we then say a little bit more about capacity curtailments and the corrective actions because that is what we can do, and this is just giving you a list of the closures we have done.

We have done the Karmoy Soderberg, which is not coming to come back on stream at all and then we have curtailed capacity in another Norwegian smelter. The 10% in the Slovakian smelter and we are taking out 100% of a smelter in Germany because of the high energy cost there.

This is capacity that is not shutdown forever. It is just curtailed and when and to what extent it will come back on stream of course is very dependent upon the market.

Then we have taken out 50% of the Alpart alumina refinery in Jamaica and we have reduced our remelt activity where we have a strong position in Europe, also quite significantly and the remelt capacity is of course the first one that we will put in place again when market starts to pick up. It gives us a lot of flexibility in case of, as market increased again and before we begin to restart primary capacity, we will certainly then increase the capacity in our remelt system to remelt a lot of ingots.

That is now being on the LME store. So, we have a fantastic position in order also to benefit when things are turning around.

A significant cost reduction program is also in place and we are cutting capacity. We are cutting capital expenditure also significant to which I will revert to, and the same in the downstream business, we have taken out or in process of taking out around more than 2,000 employees in that business, 13% of the manning and going forward, we are well prepared for doing more adjustments if need be.

In this business that is being the extrusion of rolled products and the fabricated business, the flexibility of adjusting cost is much higher and you can do it much speedier than in the upstream part. So, here we are almost adjusting capacity as we speak and I mean as the market is falling and therefore, it is easier to manage your cash in this business and in the upstream when the timelines are more demanding when it comes to taking out cost.

We are taking down inventories, freeing up operating capital and we are taking down the CapEx in the product business area with as much as 50% compared to the 2008 level. So, a lot of corrective actions are in place.

Let us take a short look at the numbers and I have already commented on the underlying EBIT, just to say that is probably also said before. It is not the level of earnings in the fourth quarter that has problem.

It is more of the prices and the market situation at the turn of the year and as we speak, and if you take the 868 million, if you can take out the inventory, you will also see from the numbers that there are not unexpectedly a lot of one off things that goes into unrealized numbers related to a lot of items. We have a huge gain on a power contract in Norway, just unrealized because of the pricing formula in this market-to-market every quarter, and then coal prices and aluminum going down, we realized a significant gain.

We have unrealized LME hedging position due to the position to take when customers are pricing the metal a fall in prices and we are losing significantly on the forward positions, but of course, almost every dollar there is offset by pricing with our customers. So, we are not going to suffer this loss, but the contract we have with our customers we cannot book in a mark-to-market.

We have only to book the LME positions. It is nothing to be concerned about.

It is just have to put it in the book. Then we have the impairments asset write-downs, which we communicated a few weeks ago in the asset both in the upstream and the downstream parts and we have a mark-to-market loss on a power contract in Germany, because the power we have sourced for the Neuss smelter is below in the market price.

So, we have to account for a loss there. Cash wise, it has not had any effect for the fourth quarter; there might be some cash effects from this going forward but these numbers do go up and down in the quarters to come.

It is just for your explanation. The next chart just shows you the full year, just confirming what I said as we have made an underlying EBIT of slightly more than 6 billion for 2008, which is absolutely an acceptable number then we have all these items excluded.

We have significant loss on our currency position because we have hedged over cash flow in US dollar and when the US dollar has strengthened as it has over the last half year, we have lost on that ground and around half of it relates to the US dollar. Last year, we have more than 3 billion in gain on that one.

The rest of the 5 billion relates to euro. Forget about it is just total internal business that has no cash effect.

No effect on the equity. It just helps to set up between our total companies and the model is arranged, but a loss on the US dollar position is clearly a lot that all in all since we announced the hedging of our cash flow, the dollar hedging program we have a loss of around 1 billion when you take the big profits we had enjoyed in 2007 and the loss in 2008.

You may be surprised when you look into the numbers about the fact that with IFRS reported income of negative, more than 3 billion. We still pay taxes that relates to the energy business.

We have strong earnings from our energy business and they are subject to special taxation. So, that is the reason why we have 15% as a tax rate for the group as whole for the year.

We are pleased into the presentation details about each of the segment sectors here. You see a nice improvement in the bauxite and alumina well operated Alunorte expansion of running at full capacity, as expected a nice improvement in earnings but of course in the coming quarters, they will suffer from lower LME levels, and therefore a lower income.

On the primary aluminum, I have already explained, it is the inventory write-down the part of the 700 million that takes the number down, except for the prices are much slightly higher actually than the previous quarter. What is important here to note is that the capacity they have already curtailed, not only decided but already output takes on the primary production in Q1 with about 10% all in all.

So, the 23% of course is not taking full effect for first quarter from the [37.25] and then secondly, we still benefit from the forward sales. So, we have sold 85% of first quarter production prices before the really sharp dip.

So, 85% of first quarter is already clocked in at close to $1,900 per tonne. Just so you know that when you are probably making your estimates for first quarter if the price significantly above the present market price.

Commercial, not much to say, the drop is mainly related to inventory write-downs and of course also the remelt business has a reduced sale. In the rolled product business, you see a fourth quarter that was actually clearly stronger than fourth quarter a year ago.

Shipments were down, but margins were held up quite nicely. Pressure on margin some has due to the currency but nevertheless fourth quarter was not bad at all for our rolled business, but looking forward, we have to say that we see continued market decline and particularly the segment is going towards the automotive industry.

It is most severely hurt. So, there will be a challenge there to make sure that we maintain decent margin.

There is a stronger pressure on margin of course when the markets are following that. We have a strong position, particularly in some segments and we have been doing better in fourth quarter in rolled business than I think most expected.

In the extrusion business, as you know we have a very strong European operation or Eurasia as we call it. First of all, the US operations are really weak.

This is the tenth quarter in a row, the tenth consecutive quarter where we are seeing consumption going down in the US, and on top of that we have around 70 million in impairment on inventory there. So, we are posting still a profit in our Eurasian business, but clearly a loss in US.

The demand is coming down and fourth quarter was a challenge. First and second quarter will be at least as challenging, even though first quarter is usually much stronger.

First and second quarters are much stronger seasonally than fourth quarter, but markets are clearly weak. Automotive goes almost without saying that with a drop of 25% to 30% in the take from the automotive industry.

We have been struggling with the profitability of that business for quite sometime. We were in the process now in putting new orders into production to take full benefit of the capacity that we have built up and then we got tremendous headwinds due to the breakdown of the automotive business, and therefore we are posting clearly unsatisfactory results and a significant loss in fourth quarter.

Going from the total challenging part to the bright spots again and I was just saying that of our energy business have actually produced a EBIT of more than 1.7 billion for the year and close to 600 million only for fourth quarter, high prices, higher production and therefore higher net spot sales and excellent commercial maneuvering of the people managing our energy business really produces, continued to produce very, very strong results. It is going to be a strong going forward as well as water reservoir levels are below normal, but I keep saying to those people that if you walk in a Norwegian mountain see the enormous amount of snow there and you will be quite relaxed because the secret of Norwegian hydropower production is that we are storing all the water as snow during the winter and for me being quite keen skier and crossing a lot of Norwegian mountains, I can assure you that the reservoir of levels will be much below normal when we see the sun coming up and starting to melt that snow.

So, it is going to be a high seasonal production in Q1, certainly spot prices might be somewhat lower, but 2009 should be another very good year for our energy business. Capital allocation, a few comments at the end on capital allocation.

Return on capital that is confirming what I said, yes, it is not because of the dream numbers like several digits return on capital employed but it is not a dramatically low numbers. It is just coming down to 7% and we see the main drop relates to primary and we see the energy business here producing very, very good return numbers.

What is more interesting probably is to take a look at the cash flow development and 2008 has produced from operations net cash of close to 3 billion and then we have accounted for 2.3 billion in a cash negative effect of our dollar all our currency hedges, because these hedges are done in the market and we have to pay out, but actually before the currency we produced a net cash from operation, so more than 5 billion. Then we have the investments, gross investment is half of that and the rests are more sustained or other type of investment, 8.8 billion.

Dividend and share buyback all in all 6 billion on which in kroner negative cash flow all in all for the year after the investment of close to 9. So, in respect of the fact that this was a year where we lost on our currency, we should not be disappointed at all about the cash flow development as such.

But to give you a little bit more understanding of the balance sheet, the next chart is just to explain the development in our net pension or pension liability. You see that it is increasing from close to 6 billion up to close to 12 billion, and not much have happened to the pension as such.

It is just a natural accounting that we have had to reduce the discount rate we use meaning that the pension obligations, the liability automatically increases and there is a reduction and also the value of the plan assets in our pension scheme simply because the market has been going down. So, that is the reason and if the interest rate comes back, discount rates have to be increased again, this would go down and it is not an interest bearing asset of the liability that we will have to account for.

The pension costs, net periodic pension cost is estimated to increase around half a billion and that has been to be recognized in our accounting, in our numbers cash flow wise. That is not the cash flow effect of it.

Our pension scheme is very well funded and we do not see any need for the year or years to come to increase the funding of the pension because as I said luckily it is well funded and we do not see a need for funding. That is over and above a normal funding that we are having.

So, the financial position all in all is not bad at all. By the end of the year, we had 3.5 billion in net cash.

We are increasing our investments in project Qatalum, the project financing of the Qatalum smelter, and here you will see the pension liability from leases and things that are total accounting wise increase. So, we end up with an adjusted debt of about 15 billion of which 10 billion relates to the pension, and the rest of the Qatalum is well funded.

It is 2.6 billion in project financing of the 5.6 billion, and 3 billion is expected to come as equity from the owners and we have given you the numbers for the remaining amount to be put in here, and the need for finalizing Qatalum is the reason why we are now ongoing to raise additional funding in 2009. So, that is what we have been doing in order to make sure that we had all the financing needed to complete Qatalum.

We had good credit facilities already established, but we are clearly also working on additional funding and credit line in order to make sure that we have a solid and long term financing particularly in the Qatalum smelter. It is Qatalum that is really causing the total big burden on our CapEx.

You see the light blue and the dark blue, it is basically Qatalum and that is the major part. We have taken down for 2009 the CapEx level of the rest of the group to 40%, and when you take a look into 2010 you will see that we have around 1.5 billion on which remaining in CapEx for Qatalum and we expect that we are able to renew with an even lower CapEx in 2010 than in 2009.

So, our financial flexibility is huge as soon as we have concluded or completed Qatalum and that is quite important to do and to keep in mind. If markets are improving and the cash flows from operations are improving, we might spend more going forward.

If not, we can clearly cut back significantly, and we have also a [handful] on their operating capital, so we put a lot of effort and importance on maintaining a solid rating and maintaining our investment credit rating, and that is also one of the reasons why the Board did not propose any dividend for 2008 being paid in 2009. We focused on our investment grade for investment rating and we recognized the fact that we are going in the market for financing in the year where the credit markets are quite challenging and therefore we hope that our shareholders understand that after so many years of treating them extremely well we have to pause for a year in the present difficult circumstances.

Let me almost conclude by drawing your attention back to the Qatalum, 60% complete by the turn of the year. The progress is very good, also as we speak has been good since the turn of the year and I said in my presentation in Norway earlier today that by end of March when I am handing over the CEO responsibilities to Svein Richard Brandtzaeg, you should expect at 75% of Qatalum is completed.

A tremendous achievement so far, we have a great respect for the remaining 25%. We have 17 workers, as we speak, on site.

We maintain both the time schedule and budget as we have announced this from the very beginning and we had run the sort of the cash cost analysis, once again, it confirms that this is really a low cost smelter that will be creating clearly cash positive earnings even at today’s price level. So, going forward, for Svein Richard and his team, priorities no doubt and I am speaking on behalf of almost anyone.

I have been taking a look at this industry. It will be the corrective measures to cope with the low prices, to curtail capacity, tackle costs, focus on working capital, cash focus all through and make sure that we stay as a Company with operational excellence in all sort of corners of the Company and not to forget, to complete Qatalum 70% or 65% or 75% complete is not complete, it is only complete when it is up running and is due to start production around the turn of the year 2009, 2010.

So, when we are making our presentation a year from now, we should be showing pictures from the first metal coming out of Qatalum. So, thank you for listening and please any questions you might have, I will try to help you out assisted by my team here.

At this time, we will open up the floor for questions. We have the web and please wait until we get the microphone before you.

You have been very disciplined in cutting capacity, like at Neuss upstream where the profitability warranted. What is your thinking on downstream areas like automotive?

These constant losses, difficult to streamline losses and what are your thoughts on that type of area?

Well, you are right. We have been cutting a lot of capacity that we have been de-manning a lot.

On the other hand, we had long term contracts with the automotive industry and we have obligations there. So, it is hard for us because we cannot just walk away from it.

We have to deliver on our commitment, but as we see it today, we will take out more manning, take out more costs in that area going forward as well, and with the heavy losses we are posting there and we have actually been struggling with that for some time. I am sure that with the downturn going forward also we would turn any stone and I mean there are no sacred cows there.

Whatever we are able to do here to reduce the losses going forward will be done.

Jason Fairclough from Banc of America Securities, Merrill Lynch. Two questions if I may.

First, just on M&A. There is a large mining company looking to sell some aluminum assets, and you previously said that you might consider looking at assets like that.

Is that something you are still considering, it is the bottom of the cycle? It seems like a great time to buy.

Second, would that be far wrong in saying that at today’s aluminum prices Hydro is loss-making on the net basis?

I think answering your last question first, with today prices and the cost level that we are seeing just as we speak before we have got the benefit of the falling costs, you are not far away when you are saying that we are loss-making just on the daily operations, simply because we are struggling with the high costs. Another question is what we will be if this cost level continues when we have gotten the interest costs out.

Then, we are of course in a different shape and when we have got the full effect of curtailment. So, but just as we speak we have the squeeze as you will understand, but then, another qualification to that if you are talking about first quarter and I am going to guide you but I have already said that 85% of first quarter is sold at a price below to 1,900.

So, when I am saying that we are loss-making or concerning that it is just made on the calculation we are making on today’s price and today’s cost level, but the fact is that first quarter will be a combination of almost today’s price but in a cost level but a price that is significantly higher than today. So, you have to do a lot of mathematics to arrive on whether we are loss-making or not but we are clearly not making much money with today’s situation.

On the M&A, I think it goes pretty much without saying that with a very severe market situation we are seeing, the appropriate for you to know would be to complete Qatar to make sure that we can have a sound financing of the Qatar investments and that we are coping with the falling market, and yes, we have been talking about looking at M&A opportunities previously but the reason why I am picked that up as a priority now is that clearly on top of that list you will see the corrective measures and the execution of Qatalum, with some more transparency. Let us discuss that later, but we want probably could be seen at slightly on the conservative side than on the aggressive side when it comes to dealing with our balance sheet.

Two questions, one is you have cut a lot more than your competitors. Is that you think reflecting the fact that you are higher up the cost curve now or have they just been slower and what do you think are the reasons for that?

The second one is on Qatalum again. There was originally always talked about taking that project further.

So, Qatalum II given that such low cost. Are you getting from your partners to move in to Phase II fairly quickly to make a push on market share?

Well, the last line, just to say we are not having any push for the time being and that is mainly because well, mainly at least the main reason is that if Qatar has to do a lot more work on the capacity to deliver more gas as well they prepared to commit to new gas deliveries, and therefore, we are well prepared for such intermission between the first phase and the potential second phase. But what we are seeing from the first phase encouraged at the loss when it comes to thinking long term about the new phase, but it is a very welcome intermission now given the very difficult market situation.

So, we are not at all talking about the Phase II, now we are concentrating entirely on bringing Phase I successfully on the street. Your first question about why are we sort of in one of the leaders on capacity side.

Well, first of all, at least my philosophy is that when we experience this type of dramatic downturns. I mean if you are not decisive or speedy in taking out capacity and actually hoping for things to change and then in the meantime building millions and millions of dollars every week.

You are actually weakening your company and not strengthening that. So, we have moved very decisively and with high speed to take out capacity.

So, that is the reason why we have made our analysis. We have made our homework, but from thereon we just do it, and last week, we had Board discussions in our Board in Germany on Wednesday.

We had the works council gathered on Thursday and we stopped the first phase on Friday. So, that is about being speedy and taking actions and I think that is very important than those who are most active and able to be invested with others who are coming out as the strongest company.

Secondly, of course, and I am not going to comment on other companies, but we had two smelters that stood out. We had quite stretch in our team when it comes to high and low costs, and therefore it was quite as we say “not misunderstanding”, when I say “easy” but it is not quite easy from an analytical point-to-point to the two smelters that have to go down first.

It is a very, very difficult to give the message to the employees and it is a lot of effort related to that, but that was the reason. It is not because we are very soft on the competitors, because actually we are to the left of the average of the cost curves.

So, the averages of the smelters are at higher cost than Hydro that I will not speculate on why they have not done as much as we have.

Are you thinking a very useful guidance on how the group’s average cost will move after Qatalum? I do not expect as precise an answer to my next question, but what do you think will happen to the group’s return on capital after Qatalum?

I mean then you have to have a lot of interests. I would say that with several hundreds of US dollar in lower production cost per tonne, it will mean a lot all others being equal.

It would mean significant improvement on the return if you take it from, let me call it that a cash perspective, but remember that when we had Qatalum in place we will have the capital cost related to Qatalum into the equation at the beginning. So, how the return on capital will work out, I am not able to say, the important thing is that future growth be able to make money at a much lower LME than before.

So, the sort of the hurdle rate where we do not make money if it moved significantly down and the profitability when we have more normal LME prices will be of course much, much higher, and I think that all depends, but to me this is so extremely important because if I had to stand here and the only leverage I had was to take on high capacity and shrinking the group as such. Well, I would have to do that, but I am so glad that at the same time can put in the most competitive capacity in the world in the other hand.

So, even if the market is going to stay at the low level, I can exchange high cost capacity with low cost capacity and deliver the same amount of aluminum to the market at a much lower production cost and that is a fabulous situation to be in.

Aluminum prices are very close to five-year lows. Today, we saw inventories rise by nearly 5% mostly out of Detroit.

So, considering the state of the US auto industry at the moment, do you think prices have a scope to go much lower? They are about $13.20; I think was the rate today.

So, maybe 12 or…?

I would say that I mean we have experienced so much in the last couple of months that we did not expect to see and therefore I am so much humbled when I say that this is not going to go much, much lower, but the reason why I am saying that I do not think that is going to go much, much lower is simply the fact that I mean it is quite a sort of a consensus view that 60% to 70% of the capacity today are producing at a cash deficit, and at least we do not need five years at the university to understand that this is not going to be a sustained level, either people have to or companies have to curtail capacity or the capacity will be curtailed by itself simply because we are on the companies are running out of cash, and if you ask sort of good analysts to do an analysis, before these things happen, I do not think any one would have said that it is likely that you would see prices at this level at all because so many of the smelters are underwater. There are a lot of reasons why you not intermediate period could see those low levels and I should be very, very careful in saying that we will not see them drop further.

But I believe I think we are now in a sort of an area where the downside is very, very limited. That is my best view, but I could be proven wrong.

But I would like to say that we are experts on seeing only the downside when things are going down and only upside when things are going up and when things turnaround and we get a few signs that things are not going further down. It could be a pretty sharp move the other way also.

So, whether the price is $400, $500 higher or a few dollars lower half a year or a year from now, it is anybody’s guess. The fact is today that the present price level for the industry as a whole is not at sustainable level.

Just regard to the Qatar smelter, what do you envisage perhaps in level to be when it comes on stream at the end of the year if all goes well? Is it going to be full production because of its low cost capacity?

No. It is not at all going to be full capacity.

We have nothing to be said of the startup plan. That has to be aligned with all the market plans and all the logistics, but to give you a sort of an understanding on what we will start as carefully at the beginning or at the turn of the year and we will probably use the first six to eight, nine months to approve ramp up.

So, we are in the mid of next year before we have Qatalum up to, let me say, 75% to 80% of capacity and full capacity during third quarter. That is the plans are today they might be somewhat adjusted depending on market conditions and all other details.

We have one question from the web.

[68.25] if there is a policy for how much of a profit from Qatalum will be paid to Hydro.

Would you like to talk about how we get our hands around the cash?

I would say that first of all, cash will go to servicing the debt in Qatalum because just the 15% of the investment is project finance and we see that even at very depressed price levels, Qatalum will be in a position to service its debt for both the interest and the long repayment. With regards to the dividends from the Company that is up to the Board of the Company to decide, but we have a very good margin for servicing the debt.

And earlier this year, there was some chatter in the market, some of it emanating from Nordic brokers that you were just about to sell your power assets. Do you have any commentary on the future of those assets within the Hydro group?

I am very glad I get that question. Any rumor about us selling our power assets is just pure speculations.

It is not going to happen, and I am talking on behalf of myself and my successor, and I do not know how you should characterize the person that would sell these assets when you see how important they are for the group. These assets are going to stay as an integrated part of the group and it is possible we would rather develop that part of the group than selling it.

Okay. Are there any more questions?

Yes, please.

I would like to know, last year, the LME invented ten-year contracts for aluminum. Did you sell any aluminum at such a long forward distance?

No. We did not.

We have not been selling at all from those, in that sort of our business. We are selling forward just on a few month basis.

We have for the time being, no long term hedges in place even that we did some strategic hedging where we sold forward a couple of years, two, three years. That is not part of our portfolio today.

So, we have only a very short term and we have no plans for the time being and not at least at the present price levels to do that sort of long term selling. Okay.

If there are no any further questions, I would just find out any more information from you Stefan, no?

No.

I would just like to say thank you. Thank you for being here and it is my last presentation.

I have been doing this for eight years now. So, I am handing over to Svein Richard Brandtzaeg, who is here and he will take power from 30th or the very end of March.

So, I am sure you will be able to welcome him and listen to his presentations going forward. So, to all of you, thank you for the cooperation and thank you for being here.