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Debt strategy

To secure access to capital markets at attractive terms and remain financially solid, Hydro aims to maintain an investment grade credit rating from the leading agencies, Standard & Poor's (current rating BBB) and Moody's (current rating Baa2).

Aluminium ingots

Hydro targets, over the business cycle, a ratio of Adjusted funds from operations of at least 40 percent of Adjusted net interest bearing debt, and an Adjusted net interest-bearing debt to Adjusted equity ratio below 55 percent.

Adjusted funds from operations is defined as Net income adjusted for non-cash items such as depreciation, amortization and impairments, and deferred taxes. Adjustments are also made for Hydro's share of depreciation, amortization and impairments in its equity accounted investments as well as for unrealized effects on derivative contracts and certain other non-cash items.

Net interest-bearing debt is defined as Hydro's short- and long-term interest-bearing debt adjusted for Hydro's liquidity positions. Adjusted net interest-bearing debt is adjusted for liquidity positions regarded unavailable for servicing debt; other obligations which are considered debt-like in nature; and adjustments for the indebtedness of Hydro's equity accounted investments. The adjustments are considered relevant because they affect Hydro's ability to service existing debt and to incur additional debt.

For more information about capital management, please see Annual Report Note 35.


Most of Hydro’s indebtedness is situated in the parent company, Norsk Hydro ASA. In general, the terms of each of the debt agreements and indentures governing the indebtedness have contained the following:

  • Cross-default provisions
  • Provisions restricting the pledging of assets to secure future borrowings without granting equivalent status to existing lenders
  • No financial ratio covenants
  • No provisions connected to Hydro’s credit rating or value of underlying assets
  • No lender-right to demand repayment prior to scheduled maturity