Long-term production agreement with Rusal

(July 24, 2002) Hydro Aluminium and Russian Aluminium (Rusal) have entered into a long-term agreement for production and sourcing of high quality extrusion ingots to meet the increasing needs of their global markets. The agreement, to last in excess of ten years, builds on existing relations between Hydro Aluminium and Rusal.

CEREMONY: Sergey Bubuov (left), Svein Richard Brandtzæg, Gulzhan Moldozhanova and Oleg Burkatsky signed a long-term agreement at Vækerø Wednesday. (Picture: Kåre Foss)

Hydro will participate in upgrading the aluminium cast house at Rusal’s Sayanogorsk smelter, located in southern Siberia. The development will take place in two stages. The first stage is to be completed by the end of 2003, adding annual capacity of an 80,000 tonnes of extrusion ingot. The second stage, to follow a few years later, will further bring casting capacity up to 160,000 tonnes per year.

This will substantially increase Rusal’s production of quality alloyed cast house products, consistent with the company’s long-term strategy of increasing the share of value-added casthouse products, including extrusion ingots, rolling slabs and primary foundry alloys, in its total production mix.

The capital investment on Hydro’s hand is very limited. Hydro Aluminium will provide its own proprietary casting equipment as well as assist with know-how, which Rusal will deploy and supply extrusion ingots according to Hydro Aluminium’s quality specifications. This will cause Sayanogorsk to become a global source for Hydro and also to strengthen Rusal’s position as the largest Russian exporter of high quality billets.

"This program represents an important step in our plans to invest in value-adding production capacity across the Rusal group," said Gulzhan Moldozhanova, Rusal’s Director of Strategy and Corporate Development. "In this instance, we are also delighted to be working closely with our colleagues at Hydro Aluminium. This both increases the opportunities for scale efficiencies and gives us access to world-leading technology and know-how," Dr. Moldozhanova said.

"Hydro Aluminium is a leading supplier to the global markets for aluminium extrusion ingots. We are now preparing ourselves to meet the growing need for high-end products in Asia. This production agreement will allow Hydro to bring significant additional volumes of extrusion ingot to all our markets, " said Svein Richard Brandtzæg, president of Hydro Aluminium’s Metal Products sector.

Rusal is the second largest primary aluminium producer in the world, formed in March 2000 from the merger of a number of largest smelters and other aluminium producers located in the CIS. The Company accounts for 75% of Russia's primary aluminium output and 10% of the global primary aluminium output. Rusal is a fully vertically integrated company with a complete production cycle from bauxite mining and the production of raw materials, to the production of primary metal, semi-products and aluminium-based end products. The construction of the second stage at Sayanogorsk smelter will bring about 260,000 tonnes of new potroom capacity by 2007. The global role of the company will be further strengthened by overseas investment program. Rusal is headquartered in Moscow.

Hydro Aluminium, a member of the Norwegian based oil and energy, aluminium and agri group Norsk Hydro, earlier this year acquired the German aluminium company VAW Aluminium AG. Through this acquisition Hydro now has an annual business volume of approximately 2,8 million tonnes, and a primary aluminium production capacity of approximately 1,4 million tonnes in its fully and partly owned smelters in Australia, Germany, Norway, Canada and Slovakia. Hydro is also meeting future needs by expanding its primary aluminium plants in Norway, Slovakia, and its network of aluminium remelt and recycling facilities in Europe and USA.

Hydro Aluminium and Rusal have been trading partners for a number of years. This unparalleled agreement marks a new level of co-operation between these two industry leaders.