Hydro faces many risks and uncertainties within its worldwide business operations and the global marketplace. We are exposed to changing economic and market conditions and price volatility can have a significant impact on Hydro's reported and operating results. Repositioning and restructuring activities are important in determining the viability of our future aluminium operations.
Our primary smelting operations are highly dependent on securing substantial amounts of energy at competitive prices. We are exposed to increasingly onerous legislation on CO2 emissions that impact Hydro directly, relating to aluminium production, and indirectly, through higher power prices.
Risk management in Hydro is based on the principle that risk evaluation and mitigation is an integral part of all business activities. Hydro's main strategy for mitigating risk related to volatility in cash flow is to maintain a solid financial position and strong credit worthiness. Hydro is also taking proactive measures to reduce credit risk, improve its financial position and further adjust the cost of its smelter operations.
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Annual sensitivities based on normal annual business volumes, LME USD 1 800 per mt, Oil USD 500 per mt, petroleum coke USD 400 per mt, caustic soda USD 300 per mt, coal USD 70 per mt, NOK/USD 6.10, NOK/BRL 2.70, NOK/EUR 8.20 . Aluminium price sensitivity is net of aluminium price indexed costs and excluding unrealized effects related to operational hedging. Currency sensitivity on financial items includes effects from intercompany positions. Excludes effects of priced contracts in currencies different from underlying currency exposure (transaction exposure). Excludes effects from BRL/USD hedge.