Norsk Hydro May Sell Unused Electricity as Aluminum Prices Slump

Norsk Hydro ASA, Europe’s third-biggest aluminum supplier, may resell power it bought from Vattenfall AB as it cuts production amid falling prices for the metal.

Norsk Hydro may sell on a portion of the 18 terawatt-hours of electricity it committed to buy in 2008, Halvor Molland, a spokesman for the Oslo-based company, said in a March 1 e-mail. Three-month benchmark aluminum prices have fallen 30 percent since May 2011 to $1,969.25 a metric ton, London Metal Exchange data show.

The aluminum producer pledged to buy the power on Sept. 10, 2008, five days before the collapse of Lehman Brothers Holdings Inc., in a deal to supply Norsk Hydro’s Soeral plant from 2013 to 2020. Norway’s power-intensive industries used 34.4 terawatt-hours of electricity last year, 17 percent below the average for 2000 to 2008, according to Statistics Norway data.

“After the Lehman bankruptcy triggered a financial crisis, Soeral curtailed output and mothballed half of production capacity, which means we have taken the power bought from Vattenfall directly into our portfolio” for possible resale, Molland said.

The Soeral plant in Norway produces 90,000 metric tons of aluminum annually, compared with full output of 185,000 tons, he said.

Excess Power

“I don’t think this will have a material impact on Nordic or Norwegian power prices,” John Brottemsmo, senior analyst at energy adviser Bergen Energi AS, said today by phone from Bergen, Norway. “The company has sold excess power not needed for metal manufacturing to the market in the past, and will continue to do so as long as they curtail aluminum production.”

Power for next-year delivery in the Nordic area cost as much as 70 euros a megawatt-hour when Norsk Hydro signed its deal with Vattenfall. That compares with 37.50 euros as of 11:38 a.m., according to Nasdaq OMX Group Inc.’s energy exchange in Oslo.

Norsk Hydro is Norway’s second-largest power producer, generating an average 9.5 terawatt-hours from 17 hydroelectric power stations every year. It sells excess output to the energy market, according to its annual report.

The company’s smelters in Norway consume as much as 14 terawatt-hours in full production, according to Molland, who declined to comment on the prices of power purchase agreements.

“Parts of the power we originally bought from Vattenfall has been redirected to our Neuss smelter in Germany, 2.2 terawatt-hours of annual supply for 2013 through 2017,” Molland said. Production at Neuss is 50,000 tons of aluminum a year, below its 230,000 ton capacity, he said.

The Soeral plant, jointly owned with Rio Tinto Alcan Inc., buys 2.6 terawatt-hours annually in a separate contract with Norwegian utilities Agder Energi AS, Lyse Energi AS, Statkraft SF and Norsk Hydro, the company said in an Oct. 29 statement.

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