Norsk Hydro As Ord

Good morning and welcome to Hydro's Q4 2022 presentation and conference call. We will start off with a presentation by our CFO followed by a Q&A session. Note that you will need to be dialed into the conference call in order to ask questions after the presentation. With that, I turn the microphone over to you, Paul.

Good morning and welcome from me as well. It's a pleasure to share both our fourth quarter and full year results with you today. And I would like to start with the key highlights from the quarter. Let's turn to slide two. For Q4, we report an EBITDA of NOK 7.2 billion. Strong results on the back of strong aluminum markets, but down from the third quarter on lower upstream prices and higher costs. As uncertainty has increased, and demand weakened in the fourth quarter, we have had strong focus on cash release and margin management with a free cash flow coming in at 5.8 billion. For the full year, we are very pleased to report a second consecutive year of record results with an adjusted EBITDA of NOK 39.7 billion, which is 42% increase from 2021. The higher realized all-in metals and alumina prices Record high results in both extrusions and energy highly influence the full year results. These factors were offset by higher fixed and raw material costs upstream. We are also pleased to report a full year adjusted ratio of 22% over double of our overall profitability goal of 10% over the time. We have also delivered 0.3 billion above the improvement target for 2022 of accumulated NOC 7.5 billion. Positive traction for greener products, improved product mix, higher margins, and market share growth results in a delivery of 1.8 billion in accumulated commercial ambitions, also above what we were expecting for the year as a whole. At our capital market stay in December, we went through a realistic pathway to near-zero aluminum products and how we are working to increase our portfolio of low-carbon aluminum products selling at an increasing premium. Since then, we have progressed on that roadmap, taking the final investment decision on two additional L-boilers at the Alenorcha Aluminum Refinery in Brazil. which together with the LNG fuel switch project and the existing will allow Alenotja to reduce 1 million tons of CO2 emissions per year, supporting Alenotja's ambition to reach the first of the refinery carbon emission curve by 2025. On the back of these strong financials, the board will propose a cash dividend distribution of 53% of adjusted net income from continuing operations to hydro shareholders. amounting to NOC 11.5 billion or NOC 5.65 kroners per share. A new 2 billion NOC share buyback program will also be proposed, which results in a total distribution of around 62% in line with our 50 to 70% guidance at our capital markets day in December. Let's then move to slide three. At the end of 2022, there was high uncertainty for 2023 aluminum demand. At the war in Ukraine, the energy crisis in Europe, high inflation, and China's zero COVID policy was impacting economic growth. Several of these factors are still much at play. However, the start of 2023 and development in demand has been more on the positive side compared to our internal expectations in Q4. And we also see that for the industry in general, resulting in forecasts of GDP growth for 23 being adjusted up to around 3%. One of the larger contributing positive factors, at least to the market sentiment, is the reopening of the Chinese economy, following the abolishment of zero COVID policies and also additional governmental stimulus. In addition, a more optimistic view on the broader macro picture in the Western world . The demand developments, together with curtailments of both aluminum and aluminum capacity inside and outside China, has driven up the aluminum and all-in aluminum price through the fourth quarter, and further increasing in the start of 2023, with the LME price sitting at around $2,500 and the alumina price at around $365 with Atlantic premium on top in our region. So far, the positive sentiment regarding Chinese reopening is based on expectations of strengthening demand and a tightening balance. And we still need to see the physical figures supporting this in the months to come. When accounting for all moving parts just mentioned, as we move to slide four, We still expect largely balanced markets for 23, slightly tighter than our last update at Capital Marketplace. Even though energy prices have compounded in general, there are still power-driven curtailments, with the majority of the recent ones taking place in China, around 1.3 million tons, mainly in the Yunnan region, with another 600,000 tons at the immediate region. In Europe, gas and electricity prices have decreased significantly since Q3, but are still expected to be too high for widespread unsubsidized smelter restarts. While energy prices have fallen, so have many product premiums, partly offsetting the relief on the cost side. Overall margins have, however, improved significantly as energy costs have plummeted. However, they are still at a level where an average German spot-based smelter margin does not look attractive to produce aluminum. So according to CRU's cost model, around 600,000 tons is still at high risk of curtailment, especially if we see a new upswing in power prices, and around 400,000 tons is at medium or high risk of curtailment at higher power prices. On the other side, We have seen smaller restarts enabled by governmental support, which of course can make the total margin picture more attractive. Let's then move to slide five. If we move from the development in European energy to the Nordic markets, then the system price was down in Q4 22 in line with a weaker European price development following lower production costs in coal and gas power plants and mild weather. The risk of Norwegian rationing is no longer present, as the Nordic hydrological balance has improved, however, still remains below normal levels. Northern Scandinavia has managed to reduce the price gap towards Southern Scandinavia, mainly due to higher consumption, as weather turns colder in combination with increased control with the hydrology. Still, Northern Scandinavia will remain systematically oversupplied the coming years, and should continue to price below the south if we assume normal market fundamentals. Let's move to slide six. When accounting for all moving parts just mentioned, we still expect largely balanced market . Let's finish the market section by moving downstream, where in Q4, Fudo's exclusion saw a 12% decrease in sales volume compared to Q4 21. European demand for exclusions in the fourth quarter of 22 is estimated to have decreased 16% compared to the same quarter last year, and 9% compared to the third quarter of 22, partly driven by seasonality. Demand for the industrial and the building and construction segments have continued to weaken into the fourth quarter, while growth in automotive demand is improving as supply chain issues are easing. Some top segments, such as renewables, including solar, is also showing robust growth. North American exclusion demand is estimated to have decreased 8% during the fourth quarter of 22 compared to the same quarter last year, and decreasing 14% compared to the third quarter of 22. Demand is moderating in the building and construction sector amid softening housing market indicators, while the automotive segment is improving as vehicle production is picking up. Crew estimates that European and North American demand for excluded products will decrease 18% and 5% respectively for the first quarter of 2023. And we expect largely similar development in our exclusion business with a relatively worse performance in North America. Let's then move to slide seven. At the recent Capital Markets Day in December, we gave a detailed strategic update, and we are delivering accordingly. On strengthening our position in low-carbon aluminum, two of the most significant achievements in the fourth quarter was firstly the first sales of our Hydro Cepal 100R, which is recycled aluminum based on 100% post-consumer scrap, sold to the development of the very modern Hausburg Innovation Park in Germany. And secondly, the first partnership in a line of many with Mercedes-Benz to partner on the road to zero, delivering our first Spearhead low-carburet reducer 3.0 product to them already in 2023 to be used in their EQ line. This is the central part of our future value creation and business going forward. And all the developments across the organization contribute to the end results of increasing sales of low carbon aluminum at premium prices. This is the red thread to everything that we do. The end customer cares about the carbon footprint, which this quarter has been further supported by the new L boilers in Alamocha mentioned earlier. But like us, they also increasingly care about our broader environmental footprint. We are therefore pleased to have invested into a pilot plant for extracting metals from bauxite residue to reduce the need for potential residue deposits areas in the future, saving both carpet and the environment, together with a company called Wave Aluminium. Together, we will build a pilot plant to process 50,000 tons of bauxite residue per year, and the plant is expected to be in operations by 2024. The project can potentially be expanded to process 2 to 4 million pounds of bauxite residue per year, and that will support Hydro's target of achieving 10% utilization of bauxite residue generation by 2030 and eliminating the need for new permanent storage of bauxite residue by 2050. On the second pillar, the transition to a low-carbon society also provides opportunities for Hydro's new energy area. In the fourth quarter, Hydro, Eveni and Sepir announced a partnership to explore an onshore wind project located in the area between Høyanger and Sundfjord in Norway. The renewable power will be used by existing industry and enable new industrial development in the region. For Rhein, the process to raise capital is still ongoing. In the fourth quarter, Hydro Havram also announced a 5 megawatt green hydrogen pilot project at Hydro Heijang in Norway, and Hydro Havram is maturing the project, which is pending funding support from Enova. Let's then move to slide eight. Strengthening our position in low-carbon aluminum starts with having a robust position on the cost curve. And we have a long track record of establishing and delivering on target improvement programs in Hydro. And throughout these years, it has always been very important to ensure that the improvement can be tracked back to the bottom line. Our current program was initiated in 2019 with a baseline in 2018, when our adjusted EBITDA excluding Hydro rolling amounted to 15 billion dollars. Since 2018, We have had a positive impact from favorable market conditions with around 30 billion impact from higher sales prices, as well as currency. Only partly offset by NOC 15.4 billion in higher raw material costs. Downstream volumes, margins, and energy price and volume contributed with another 6.9 billion. And we then have NOC 4.6 billion in increased fixed costs, partly driven by inflation. in addition to 1.8 billion in negative other effects, like corporate costs, V&A ship unloader outage, and accounting effects related to the Roeldal-Söldal Power DA restructuring. Without our improvement efforts, our EBITDA today would have been 30 billion. But adding the NOC 9.6 billion from the improvement program and commercial ambition brings it to 39.7 billion. We still have not 4.4 billion to deliver in the years to come, which you should expect to contribute to our bottom line in the same way going forward. Our key value lever is to continue to position the company to capture value from growing demand for greener and circular aluminum. Greener aluminum with a lower carbon footprint is an important enabler for the green transition. And the demand for aluminum towards 2030 in Hydro's main market is set to grow at 3% per year. But low carbon aluminum demand is expected to outpace the rest of the market with a current estimate of 20% compound annual growth rate from 2022 to 2030. For the full year of 22, we have increased sales of greener products with 180,000 pounds. a 25% increase for Zircon and a 70% increase for the Reduxa. Going forward, we have the ambition to at least increase the sales by another 280,000 tons by 2025, but with increased capacity if we are able to continue to exceed our targets. And as we continue to reduce the footprint of the product, the value effects will increase as the last tons of low-carbon products come at a much higher premium. Slide 10, please. Then, let's dive into the detailed results and start with the development from Q3 to Q4. Adjusted EBITDA for the fourth quarter was down 2.5 billion compared to the third quarter. The main negative drivers were 2.3 billion in 6% lower real life aluminum prices, 14% lower oil and aluminum prices, NOC 0.6 billion on lower downstream volumes. NOC 0.7 billion on higher fixed costs, mainly driven by seasonality, inflation, and one-offs, around a third each. And NOC 0.6 billion in other effects, mainly lower positive eliminations and higher corporate costs. Q3 was also positively impacted by NOC 1.3 billion related to a revision of prior period CO2 compensation. and NOK 550 million in current compensation, which remains stable in Q4. This was partly offset by higher downstream margins of 0.4 billion, higher energy prices and volume of NOK 1.3 billion, and NOK 1.3 billion in net effect of power sales, which includes the loss on energy's buyback from aluminum metal of 250 million NOK. Slide 11. If we then move to the key financials for the quarter, then year over year, revenues decreased by about 5% to not 44.1 billion for the fourth quarter. Compared to the third quarter, the decrease was 18%, mainly on lower real life prices and volume. For the quarter, there was around 3.3 billion negative effects adjusted out of EBITDA, which includes negative unrealized effects on LME and raw material contracts. some smaller rationalization costs in exclusion, and a positive currency gain offset by other effects, resulting in a reported EBITDA of 3.9 billion. Moving on, we have adjusted depreciation and amortization of around 2.2 billion in the quarter, resulting in an adjusted EBIT of 4.9 billion. Financial income of 271 million NOC for the fourth quarter includes 356 million in forex gain, primarily reflecting a gain on Euro-embedded energy derivatives on the back of tightened Euro-NOC interest differential. Then we have a large income tax expense for the quarter, amounting to NOC 1.5 billion, about 91% of income before tax. This is mainly due to the reassessment of recoverability of deferred tax assets in Volcae Plalumina, resulted in a net charge of about 1.4 billion, related to tax losses carried forward. This was partly offset by the legal restructuring of the associate Lyse Kraft DA, resulting in lower power surtax of around 550 million NOK. Overall, this provides a net income from continuing operations of NOK 158 million, down from NOC 8.5 billion in the same quarter last year and 6.7 in the third quarter. Adjusted net income was 2.4 billion compared to NOC 5.8 billion last year and NOC 6.3 billion in the third quarter. And consequently, adjusted earnings per share was 0.99 NOC, down from NOC 2.57 in Q4 last year and NOC 2.91 in Q3. Let's then move into the business areas, starting with bauxite and alumina. Moving to slide 12. Adjusted EBITDA for both Sight and Illumina decreased significantly from 2.4 billion in Q4-21 to not 101 million in Q4-22. This is mainly driven by lower Illumina sales prices and higher caustics and energy prices. This was partly offset by positive currency effects. In addition, the fourth quarter 2021, included insurance compensation of around 498 million related to a decommissioned grain. Compared to the third quarter of 2022, the adjusted EBITDA also saw a decrease mainly driven by $22 realized lower aluminum sales practice and higher raw material costs of around 150 million. mainly driven by plastic soda, which is lower than our guidance from last quarter of around 250 to 300 million, primarily due to the lower energy prices than what we expected. For the first quarter, Alunochi is expected to remain around nameplate capacity. We expect higher realized alumina prices than realized in the third quarter based on current market conditions and timeline profile. And we also expect continued lower raw material costs, around 100 to 150 million, or lower coal and fuel oil prices. And finally, we expect around 100 million in higher fixed costs, mainly non-recurring. Let's move to slide 13. Moving on to aluminum metals, in this quarter, adjusted EBITDA increased from NOK 4.7 billion in Q4 2021 to NOK 4.8 billion in Q4 2022. The results improved slightly, mainly due to positive contribution from power sales and positive currency effects, partly offset by lower oil and metal prices, lower sales volumes, and higher raw material costs and fixed costs. In the fourth quarter, Aluminium metal completed the curtailment of 130,000 tons of primary aluminum production at Husnet and Karmøy in response to reduced market demand for aluminum billets in Europe. The power sales for the quarter amounted to 2.2 billion, where not 1.4 billion from Slovakia and not 0.8 billion came from Husnet and Karmøy. Compared to the third quarter of 22, adjusted EBITDA for aluminum metal decreased from about 6.5 billion due to lower all-in metal prices, higher fixed costs of around 300 million, partly seasonal, partly inflation, and partly WOMO, and lower CO2 compensation as Q3 included a positive 1.3 billion related to a revision of previous CO2 compensation. This was partly offset by 400 million lower raw material costs, driven by alumina and energy, and partly offset by higher carbon costs. But in total, it is in line with last quarter's guidance of around 400 to 500 million. For Q1, 75% of primary production is priced at $2,239 per metric ton. while 40% of premiums affecting Q1 are booked at $643 per ton, and in total, Q1 real-life premium is expected to be in the range of $475 to $525 per ton. Compared to the fourth quarter, we expect lower volumes driven by the curtailment, attrition, and coin rate, and we also expect lower raw material costs of around $400 to $500 million, mainly energy and carbon. Fixed costs are also expected to decrease around 200 to 300 million. When it comes to CO2 compensations for 2023, then the reference price based on 2022 prices has increased, representing an upside from the current 550 million of quarterly compensation that we received today. And we estimate that CO2 compensation will be around 800 to 900 million per quarter, which is somewhat down from previous estimates due to the curtailed volumes at Carme and Husnet. We also expect lower results on power sales in Q1 versus Q4, given by Sovalco, as the last power was sold in Q4. For Carme and Husnet, however, we expect the higher results driven by higher locked-in price towards energy and higher curtailment volume. In total, we expect a net power sales effect of around 900 million chroma negative. Let's then move to slide 14. Adjusted EBITDA for metal markets decreased in the fourth quarter from 284 million in Q4 21 to negative 91 million due to lower results from the sourcing and trading activities and negative currency and inventory valuation effects. partly offset by increased results from the reflectors. The large negative currency effects are driven by 150 million in translation effects due to stronger NOP as the operational currency is different from the reporting currency. And the other 100 million in transaction effects is due to a stronger euro towards the dollar as customer pricing in different currency than operational currency in which the margin is optimized. The lower commercial results are mainly driven by an inventory impairment of around 100 million, which will be reversed next quarter, and also large decreases in ingot premiums. Excluding the currency and inventory valuation effects, the results for the quarter was 160 million, down from not 350 million in Q4 21 on commercial results, but remember that this includes 100 million that we will get back in the next quarter. Looking into the next quarter, as always, remember that trading results and currency effects in metal markets are by nature volatile. However, based on the current market, we expect lower recycling margins, but seasonally higher production in Europe. In addition, we expect a reversal of the inventory impairment and potentially significant re-evaluation reversal effect if the market stays as of now. At current prices, we expect full-year results in metal markets, excluding effects and inventory effects, to be around a billion. Let's move then to slide 50. Adjusted EBITDA for the fourth quarter increased compared to the same quarter last year. Increased results from the recyclers driven by increased sales premium were partly offset by lower sales volumes and higher fixed and variable costs. Despite weaker markets, extrusion strengthened margins on a favorable product mix. In addition, results for the fourth quarter of 21 were negatively impacted by non-recurring costs of 330 million related to the scrapping of assets. If adjusting for this one off, results were fairly flat from Q4 21. Compared to the third quarter of 22, the adjusted EBITDA decreased due to seasonally lower sales volumes, higher fixed and variable costs, and reduced demand, but partly offset by strong contributions from strategic segments in extrusions. If we look into the first quarter, we expect continued strong margin levels in extrusions, but offset by lower recycling volumes and premiums, and higher fixed and variable costs. We expect continued market uncertainty and a softening of the exclusion markets in Europe and North America, which will result in lower sales volumes. Let's then move to slide 16. The final business area is energy, where the adjusted EBITDA decreased from 1.7 billion in Q4 21 to 1.5 billion in Q4 22. The loss on an internal fixed price contract entered into early October with aluminium metal to sell the power from their smelter containment into the market accounted for around negative 250 million in Q4. In addition, lower production and lower gain on price area differences negatively impacted the results. Higher prices partly offset the lower results. Compared to the third quarter, adjusted EBITDA increased as a result of higher production and around 450 million lower tax costs in the equity-accounted investment company, Lysekraft DA, partly offset by lower gain on price area differences, lower gains from participation in physical balancing markets, and a loss on the internal price contract. If we look into Q1, the price and volume uncertainty is, as always, large. and production and prices will depend on hydrological conditions. However, we do see the hydrological balance in the Nordics improving, but still remaining below normal levels. Based on the current outlook, we expect lower gains from the NO2, NO3 spread differential, and at current spot prices, the estimated negative delta is around 400 million. In addition, we expect a significant increase in losses on the aluminum metal buyback contract versus fourth quarter, as the average locked-in price towards aluminum metal is around 3,600 kroners per megawatt hour for around 389 gigawatt hours. And the current estimated NO2 price for Q1 is around 1,106 kroner. We have partly hedged this. However, the estimated positive effect on the hedge at the above market prices is around 180 million kroner. We have 319 gigawatt hour hedge at 123 euros, but this is the system price and not the NO2 price. Let's then move to slide 17. If we just dive into the developments in net debt, we see a picture which turns from net cash, which turns to net cash during the quarter. Based on the starting point of 3.1 billion in net debt from Q3, our overall net position improved by 4.4 billion quarter-on-quarter to not 1.3 billion in net cash based on the following. Firstly, we generated 7.2 billion in adjusted EBITDA. Then net operating capital decreased by about 2.6 billion, and I will get back to the details here on the next slide. And then we had other operating cash flow adjustments amounting to 0.2 billion, mainly driven by 1.1 billion of dividend received from Catalan, and 0.4 billion increased accruals, partly offset by taxes paid of 1.1 billion. Net investments were 4.2 billion for the quarter, quite in line with the expectations. And as a result, we generated free cash flow from operations of a positive 5.8 billion in Q4. In addition, we bought back shares of around 0.6 billion as part of our 2 billion mandate. And finally, we have a negative 0.7 billion in other, mainly coming from currency effects on debt and cash, which represented a net 0.3 billion increase. offset by 0.5 billion NOC in new leases, and NOC 0.5 billion from other effects. If we move on to adjusted net debt, then we start by adjusting for the 2.6 billion in collateral included in debt per Q4, mainly related to strategic and operational hedging positions, and NOC 1.3 billion increase since the last quarter due to higher LME. The next adjustment of negative NOC 4.5 billion reflect, among else, assets and retirement obligations, as well as assets in Hydro's captive insurance company that are not available to service Hydrodebt. Then we have a small pension liability of 0.3 billion, which has increased NOC 1.2 billion from last quarter assets on falling interest rates on the curve. With these adjustments, we end up with an adjusted net debt position of 6 billion at the end of the fourth quarter let them move to slide 18. we have an exciting investment portfolio for 23 and the following years to deliver on our strategic ambitions and we are working structured to ensure that we are freeing our cash from operating capital to support it For 2020, for the fourth quarter, we reduced operating capital of 2.6 billion, mainly driven by 0.3 billion in lower inventory levels, 1.9 billion in lower trade receivables and payables, and 1.7 billion in received CO2 compensation. This is partly offset by an additional accrual for CO2 compensation and also release or reversal of other payable accruals. We have worked targeted to reduce working capital this quarter, especially given the high market uncertainty. And for our exclusion operations, we have released inventories above target, despite sharply falling demand. However, we are releasing NOK 2.6 billion compared to our guiding of NOK 5 billion at Q3. And the main reasons for this are quite straightforward. Firstly, we have around 1.7 billion in receivables related to power sales at Slovakia insurance and taxes that we were expecting in Q4 that are delayed into Q1, and the majority of that has now already been received, which lifts the total figure to 4.3 billion. Secondly, there is a slight price effect, and there are also some minor volumes and other effects. If we then look at our total guided release of around 8 billion for Q4 and 2023 communicated at our capital markets day, then we estimate that the corresponding figure now is right below 6 billion with around 4 billion remaining in 2023. The main reason for the lower figure is the increase in prices for the products that we sell. On the CapEx side, the 2022 CapEx came in at NOK 11.5 billion, including Hydro Rang. And this is 100 billion, a million below the guidance at Captain Markets Day in December. This 100 million will be carried over into 2023, increasing the CapEx guidance for 2023 slightly to NOK 13.6 billion, excluding Hydro Rang. Let's then move to slide 19. Strong cash generation and a robust balance sheet enables us to deliver on our ambition to deliver solid distributions to our shareholders. And we are happy to be able to continue this for 2022. At our capital markets day, we guided for a total shareholder distribution of 50 to 70% of adjusted net income. This was based on our estimated adjusted net income for the year. and an ambition to distribute up to not 23 billion in adjusted net debt, reflecting high cycle earnings, and holding back around 3.5 billion to preserve cash for the committed M&A transactions . In line with this, the board of directors has proposed a distribution to shareholders of 13.5 billion, equal to around 62% of adjusted net income from continuing operations. The distribution will be split between an ordinary dividend of not 5.65 per share and a share buyback program of 2 billion. The dividend alone represents a 53% cash distribution, a year-end yield of around 8% and a five-year average payout ratio of 78%. Please also remember that last year's payment reflected the proceeds from the raw product phase. As always, the final distribution for 2022 is subject to approval by the annual general meeting on May 10th, 2023. Let's then move to the last slide. Let me then finish with an update on our capital return dashboard, summarizing our key financial targets and priorities. At the end of Q4, we ended at 106 billion capital employed, and delivered an underlying 12-month rolling ROC check of 22%. We have delivered well above our target of 10% for the year as a whole. And we're looking at our balance sheet and the key ratio of adjusted net debt to EBITDA. Then we are at the ratio of 0.2 times, well within our goal of being below two times over the cycle, supporting our proposed shareholder distributions of NOC 13.5 billion. following not 16.1 billion in distributions for 2021, or around 30 billion in total distribution for the two years combined. In Q4, we also saw a continued strong free cash flow of 5.8 billion, bringing our overall free cash flow for the year to 14 billion, despite the build in net operating capital of 8.8 billion over the same period. mainly driven by higher volumes, prices, receivables on CO2 compensations, and receivables on power savings. Improvements were realized by year end 2022 amounting to NOK 9.6 billion, well above target, strengthening our position in low carbon aluminum. And finally, we allocated capital in line with our strategic modes and spent 11.5 billion, including 1.2 billion in hyrdorad. And on that note, I would like to thank you all for joining the presentation and open up the session for questions. Thank you.

Thank you very much, Paul. We will then start Q&A. Please note that you will need to be dialed into the conference call in order to ask questions. It will not be possible to ask questions over the webcast. Operator, we're then ready for questions. Thank you.

Sure. Thank you. As a reminder, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. We will take the first question from line Daniel Major from UBS. The line is open now. Please go ahead.

Hi. Thanks for the presentation. Can you hear me okay? Yeah. Great. Thanks. Yeah, a couple of questions. The first one with respect to the curtailed capacity in southern Norway, demand outlook seems to be stabilizing and improving. The opportunity cost of selling power is not as high as it was. What's your plan for restarting that capacity?

Thank you, Lance. Well, as it stands today, it's correct that the market is looking a bit better than what we expected coming out of Q4. And the alternative value for power is also lower. But as you know, these curtailments are purely driven by the end market demand. And as we see it now, coming into the year, there is still uncertainty, and we will have to monitor the market development going forward before potentially announcing a restart of these two facilities again.

Okay, thanks. Yes, second question, looking at your commercial ambitions, target, you've achieved 1.8 billion, but you're only targeting about 1.2 billion out to 2027. Is that a conservative estimate? And does that all come through green premiums? I thought perhaps there might be more potential upside there, particularly considering the potential loss of Russian volumes in the green aluminium space. A few more details on that.

Well, as you know, Dan, we have a history of strengthening improvement programs as we identify more potential. This is what we saw when we did the capital market state process that we have quite a high certainty about. And then the more contracts we are able to sign with customers for strengthening greener premiums, then the more this will increase going forward. what we know today and not expectations of things to come that would come on top.

Very clear. Thanks. If I could just squeeze one more in, if I could. Just on the Rhine outlook and just a little bit of clarity on what the remaining capex is, including all of the projects that are under construction effectively. Thanks.

Yeah, on Ryan, as I mentioned, we are still working to raise capital. And as you know, since the IPO markets are not very active, the private track looks to be the more attractive. And we will spend the time it takes to ensure that we get the value we believe this portfolio has. So this is still ongoing as it was at capital market stage. When it comes to CapEx for the year, the estimate is 2.5 billion without a raise, and then there are some hundred million into the next year also based on the current portfolio that we have. Okay, thanks.

Thank you, Dan. Thank you. Thank you. We will take the next question from line, Ioannis Mavoulis from Morgan Sand. Ioannis, please go ahead.

Yes, good morning, Paul. Thanks for the presentation. A couple of questions from my side. The first on the CO2 compensation, can you give us an update here? Has the Norwegian fiscal budget been ratified by Parliament? And the question here is more so around local media flight and some concerns. about the quantum compensation in the years to come. Do you see any risks around that policy going forward, or are you fairly confident that the guidance you gave us earlier this morning will be sustained and only driven by the CO2 price and not any scope changes? Thank you.

Well, as we see it today, based on the process that was undertaken before Christmas, based on external communication and the like from central authorities also, this is what we should expect going forward. We have no reason to believe that this should be different. As we have discussed earlier, there is a focus on the CO2 compensation element in the current market environment, but there's also a broad understanding of why the CO2 compensation element is put in place. This is to ensure that there is a balanced playing field between us and non-European producers which are not subject to the same carbon costs and to maintain production in Europe going forward as we await CBAM gradually rolling in from 2026 and the years beyond that. The CO2 compensation is the best way to ensure such a level playing field. This is the message that is communicated from authorities, and that is the background for the conversation that we have. So, no view from our side that this should be different going forward.

That's very clear. Thank you very much. And the second question, going back to Daniel's point around the capacity resorts, because you have cut capacity across electrolysis, cast house, and recycling. So, my question here is, which facilities would offer the best economics for a possible restart? And is it fair to assume that the electrolysis capacity will be the last to come online?

Well, there's several elements to take into account here. it's easier to swing up and down with the cast houses and the re-melters where possible. So in order to restart the smelters, you should have better insight and more clarity towards the strength in the market continuing into the year. So, short-term fluctuations we take on the remelter side, but if we gain sufficient comfort in the strength that we are seeing so far subsiding further in the year, then the remelters would be next. Perfect. Thank you very much.

Thank you.

Thank you. We will take the next question from Liam Fitzpatrick from DB. The line is open now. Please go ahead.

Thank you. Hi, Paul. Three questions from my side. First of all, just on extrusions, I know you're giving us the CRU view in terms of the rollout of demand this year, but can you give some color in terms of what you're seeing in Europe in particular? Do you think the D stock has pretty much played out at this point? And linked to that, I can see your premium guidance is down for Q1 based on the contract lags. In terms of where premiums are at the moment, would you expect premiums to start to go back up in terms of what you realize from Q2 onwards? That's the first question. The second one on Rhine, I guess a follow-up. Can you give a little bit more color perhaps in terms of timing? Is your plan still to try and get a private contract? stakes are done this year. And then the third one, apologies if I missed this, could you just walk us through what you said the delta would be in terms of the aluminium metal power gains, Q4 and Q1? And then similarly for the power division, I think you said that the loss on those contracts would increase. Can you actually give us a number for Q1? Thank you.

Thank you, Liam. So if we start with the exclusions, which is the most rewarding part of this to talk about. Exclusion volumes that we see into the first quarter are quite similar to CRU's expectations. We're maybe expecting a bit lower in North America, but more in line on the European side. And this is still driven by the same sector as we discussed earlier, strong automotive, strong into renewables, and then weaker building and construction. But when you look at what we expect going forward, you should also see that we are keeping margins at falling volumes. So the fourth quarter results had a negative volumetric effect of around 0.6 billion, but we have a 0.4 billion in positive margin effect in falling markets. So for us, it is important to continue to manage margins and also to ensure that we move as much volumes as possible into the strategic growth segment. The outlook for Q1 has improved quite a bit over the latter quarters from our side based on what we expected internally, but this is mainly due to strength in margin in strategic growth segments and not so much on the volume side. We do think that the destocking has played out and we actually Seeing it may be stronger on the primary aluminum side than on the extrusion volumetric side as we currently speak. What we see so far into the first quarter when it comes to primary sales is stronger than what we expected only some months ago. And I think that reflects the fact that these stocks have taken place fast and demand comes back as the world is not looking as bad as many people feared in November and December. On premium, good question. There's high volatility there, especially in light of the Midwest and, to some extent, the European standard ingot premium movement. So we have a lower guidance for Q1, but if you were to take market prices all premiums that we see now, that would be somewhat higher, probably around $550 per ton mark. On your third question, on Rhine, we haven't set any given timeline. Of course, we have an intention to do it sooner rather than later. But as I mentioned, we will ensure that we spend the time capital rate process that we are in now to get the best possible value for right. So we don't restrict ourselves with the next month or quarter or so. We'd rather ensure that we get max value out of this. Then for aluminum metal, there are many moving parts as you correctly referred to. And in Q4, we have the strong effects from sales of power, and that was very much held by Slovakia, which was the majority of it, but Carmel and Husnet also contributed. Most or everything is locked in in primary now with energy. If you look into Q1 compared to Q4, then the net effect will be 900 million lower, and that's primarily because dextrovoltaic volume falls off, but somewhat different prices on the volumes that we've locked in for Carme and Husna. For energy, it's quite a complex picture because they have bought back the power at, as I mentioned, quite high price levels for Q1, which was the market rate at the time. And then they haven't been able to hedge a lot of that on the NO2 market. So we have 3,600 NOCs at locked-in price for Q1. We have 389 gigawatt hours. And if you take 3,600, minus the 1,106, which is the market NO2 price now, multiply that with 389 gigawatt hours, then you should get the negative effect of purely the power space. I also said that we have hedged some of this using mostly system price, not NO2, which, of course, sits at a lower level, so you don't get the same positive benefits. And we have around 180 million, which offset that with how the market looks today.

Okay. Thank you, Paul. That was all very clear. If I could do one very quick follow-up just on Rhine, maybe if you could just remind us. I think you said at the CMD, that until you get a partner or some sort of capital injection, you're not going to bring forward additional projects over and above what have already been kind of approved and where you're starting building. Is that still the case and still the approach?

What we said was that for this year, we have the four projects that we have approved, and that is what is requiring the main carbon expense. What we will be focusing on top of that is developing projects. So that's correct. You should not expect large decisions into projects outside of development projects in this year while we work on the capital rates. Understood. Thank you. Thank you.

Thank you. There's no further question at this time.

Great. Thank you very much, Operator. And thank you all for joining us today. And please don't hesitate to contact us in investor relations if you have any further questions. Wish you all a great day. Thank you.