Strategy and targets

miners

Bauxite and alumina

Following the completion of its ambitious "from B to A" improvement program, reducing cost and increasing safety and efficiency continues to be key priorities for Bauxite & Alumina in the coming year together with improving alumina production volumes at Alunorte and further increasing bauxite production at Paragominas. We will also work towards securing and developing bauxite resources for future decades. Optimizing and enhancing the commercial value of our attractive sales portfolio will continue to be an important item on our agenda. We will also continue our proactive approach to regulatory challenges by ongoing systematic dialogue with key stakeholders in Brazil.

2015 targets

  • Reduction in total recordable injuries per million hours (TRI) from 2.3 in 2014 to 2.0 in 2015 for own employees
  • Increase annual production levels in Alunorte to 6.2 million mt and in Paragominas 9.9 million mt
  • Deliver "from B to A" contribution of at least NOK 300 million
  • No reportable environmental incidents
  • Establish an enhanced system for monitoring and evaluation of social project portfolio
  • Develop social indicators for Brazilian operations

2015 results

  • Reduction in TRI rate by 27 percent from 2.3 to 1.7 for own employees
  • Annual production level in Alunorte was stabilized at 6.0 million mt which is a prerequisite for lifting the production further. Improved annual production at Paragominas by 0.6 million mt compared to 2014 to 10.1 million mt including several months of 11 million mt on an annualized basis
  • Delivered "from B to A" contribution of NOK 300 million on an annual basis and completed the program realizing NOK 1 billion accumulated annual improvements
  • Achieved no reportable environmental incidents
  • Hydro's new system for planning, monitoring and evaluating social projects in Brazil implemented for three representative projects

2016 targets

  • Stabilize TRI with a target of 1.8 in 2016 for own employees and contractors
  • Annual production levels of 6.2 million mt in Alunorte and 10.1 million mt in Paragominas
  • Deliver "Better Bauxite & Alumina" contribution of at least NOK 500 million
  • Increase index sales volumes up to 46 percent of total alumina sales volumes
  • No reportable environmental incidents
  • Achieve targeted rehabilitation area for Paragominas mining operations of 325 hectares
  • Reduce the volume of waste sent for incineration by 1 percent for Alunorte and 2 percent for Paragominas
  • Develop plan for approval of infrastructure projects with significant impact on the social development in Barcarena
  • Completion of two major sustaining capital expenditure projects in Alunorte and Paragominas on time and on budget
  • Maintain and comply with the ICMS regulatory framework renewed in 2015

Strategic mid-term goals

  • Improve our safety performance and strive for an injury free environment (2020)
  • Deliver on our new improvement ambition of NOK 1 billion (2019)
  • Lift alumina production at Alunorte through stabilization and debottlenecking to 6.6 million mt (2018)
  • Lift bauxite production at Paragominas through debottlenecking to 11 million mt (2018)
  • Shift more than 85 percent of our alumina sales portfolio to index-based pricing (2020)
  • Achieve a ratio of 1:1 on mine clearing and rehabilitation (2017) and eliminate the reforestation gap (2020)

Ambitions going forward

We are strongly committed to safety and to eliminating high-risk incidents in our operations. Going forward, we intend to capitalize on our strong position in bauxite and alumina in a resource constrained world. This will increase our attractiveness as a partner in new ventures and our ability to exploit other opportunities which may arise. Reducing our impact on the local environment is also an important objective going forward, including closing the gap between clearing for mining operations and rehabilitation.


Primary Metal

A key ongoing strategic focus for Primary Metal is the continuous improvement of the efficiency of our smelter system, while constantly addressing the cost challenges facing our business. We have a strong commitment to ensuring a safe work environment and a highly motivated and engaged work force. In order to secure the viability of our operations over time, we intend to focus on business opportunities that enhance our cost position. We will also maintain our technological leadership, which contributes to lower operating costs, reduced emissions, and ensures our attractiveness as a partner for world-class projects within an industry with sound long-term fundamentals.

2015 targets

  • Maintain total recordable injuries per million hours worked (TRI) of < 2.Footnote 1
  • Strong cost discipline with further targeted improvements for fully owned smelters
  • Continue focus on operating capital
  • Further progress on joint venture USD 180 per mt improvement program
  • Emissions of 1.61 mt CO2e/mt aluminium from electrolysis, down from 1.62 in 2014Footnote 2
  • Continued employee participation rate of more than 96 percent in My Way, Hydro's enhanced people performance and development system
  • Continued reduction of employee exposure to work place hazards

2015 results

  • TRI rate increased slightly to 2.0 from a record low rate of 1.9 in 2014
  • Further improvements achieved for fully owned smelters beyond USD 300 cost reduction program
  • Continuous focus on net operating capital, however some increase during the year
  • Global joint venture improvement program progressed further with USD 140 per mt achieved by the end of 2015
  • Qatalum first decile business operating cash cost position maintained. Dividend of NOK 0.9 billion paid in 2015 (Hydro share)
  • Emissions of 1.60 mt CO2e/mt aluminium from electrolysis, down from 1.62 in 20142)
  • Above 96 percent of all employees participated in My Way or another appraisal dialog tool
  • Reduction of employee exposure to work place hazards by 5 percent or more at all production sites in 2015

2016 targets

  • Reduce TRI rate < 2.0
  • Successfully execute the Karmøy Technology Pilot project
  • Continue focus on operating capital
  • Achieve roughly NOK 400 million of the "Better Primary Metal" ambition including NOK 300 million relating to the completion of the joint venture USD 180 per mt improvement program
  • Emissions of 1.59 mt CO2e/mt aluminium from electrolysis2), down from 1.60 in 2015
  • Continued employee participation rate of more than 96 percent in My Way, Hydro's enhanced people performance and development system1)
  • Continued reduction of employee exposure to work place hazards
  • Further increase awareness of the importance of integrity in general and the risks of bribery and corruption in particular through training across the organization

Strategic mid-term goals

  • Improve our safety performance and strive for an injury free environment (2020)
  • Deliver on our new improvement ambition of NOK 1 billion (2019)
  • Realize approximately 200,000 mt of incremental, technology driven capacity increase (2025)
  • Verify the world's most energy efficient smelter technology with completion of  HAL4e pilot plant (2017)

Ambitions going forward

Hydro has the ambition to continuously strengthen its smelter portfolio maintaining a strong emphasis on sustainable cost development. We will continue to focus on lean smelter operations, operational excellence and safety. The ongoing development of next-generation technology, HAL4e, will provide a strong technological basis for continued organic growth, increased efficiency and lower emissions.aluminium rods

Metal Markets

Hydro's flexible and extensive multi-sourcing system enables us to rapidly adjust our remelt production to market demand. We intend to capitalize on this flexibility going forward to secure our market position and create additional value on top of LME for our production capacity. We will also exploit this competitive advantage to optimize our casthouse utilization and margin contribution. Global optimization of Qatalum sales volumes continues to be key priority.

2015 targets

  • Progress with implementation of key product strategies
  • Progress on implementation of new AFM casting technology during 2015 with completion in 2016
  • Further increase in usage of post-consumer scrap
  • Further increased sales of recycling-friendly alloys
  • Maintain strong focus on risk management and capital discipline

2015 results

  • Achieved defined key milestones for several product strategies
  • AFM casting tables installed in Høyanger and Årdal. Qualifications with customers ongoing
  • Increased the use of post-consumer scrap by 23,000 mt
  • Increase of sales of recycling-friendly alloys from remelters
  • Strong focus on risk management and capital discipline maintained

2016 targets

  • Further progress with implementation of key product strategies
  • Complete implementation of new AFM casting technology
  • Further increase the usage of post-consumer scrap by 10 percent
  • Further increased sales of recycling-friendly alloys enabling the use of lower quality scrap
  • Maintain strong focus on risk management and capital discipline

Strategic mid-term goals

Increase recycling of post-consumed scrap by 150,000 mt to improve margins and reduce environmental impact (2020)

Ambitions going forward

Our vision is to be the preferred partner for casthouse products and services. We will strengthen our focus on enhancing product premium margins by utilizing the flexibility of our multi-sourcing system to manage our global product portfolio in an optimal way. We will continue our strong focus on safety and risk management, and maintain firm discipline on operating costs and capital expenditures.

rolls of aluminum

Rolled Products

Maintaining our strong market position and increasing returns continue to be key priorities in our Rolled Products business operations. Differentiation through innovation in products, processes and services is an important means to grow our market share and margin contribution. Measures aimed at increasing efficiency and reducing costs will continue together with efforts to reinforce safe operations and sustainable business practices.

2015 targets

  • Reverse negative trend in TRI and bring rate down by 30 percent
  • Realize targeted Climb improvements through further process as well as cost improvements and cost initiatives
  • Improve delivery reliability compared to the two previous years
  • Start of production at our new UBC recycling line
  • Realize minimum one step change related to alloy, product or process development supported by our innovation drive
  • Further increase awareness of competition regulations through training across organization
  • Progress on implementation of enhanced Rolled Products Business System procedures

2015 results

  • The TRI rate improved by 5 percent, nevertheless fell short of our ambitious target of 30 percent improvement
  • Climb improvement targets of NOK 800 million cost and revenue improvement compared to the end of 2011 achieved one year ahead of schedule
  • Delivery reliability remained on 2014 level, influenced by certain production reliability incidents
  • New UBC recycling line started up in February 2016
  • Step changes realized include copper free material solutions for heat exchanger applications and new alloy for next generation converting foil
  • Competition regulations trainings carried out according to planned schedule and content 
  • Rolled Products Business System procedures further substantiated and implemented 

2016 targets

  • Bring the TRI-rate below 4
  • Achieve approximately NOK 200 million of the "Better Rolled Products" improvement ambition
  • Improve delivery reliability compared to the two previous years by 5 percent
  • Finalize and start up new automotive line on time and on budget
  • Realize minimum one step change related to alloy, product or process development supported by our innovation drive
  • Ensure that existing compliance system is further implemented in all relevant applications of the Rolled Products Business System

Strategic mid-term goals

  • Improve our safety performance and strive for an injury free environment (2020)
  • Deliver on our new improvement ambition of NOK 900 million (2019)
  • Differentiate through product innovation, quality and service –  minimum 1 step change per year
  • Increase nominal automotive Body-in-White  nominal capacity to 200 kmt (2017)
  • Complete ramp-up of UBC recycling line to more than 40 kmt (2017)
  • Lift recycling of post-consumer scrap to more than 100 kmt (2020)

Ambitions going forward

We are committed to a safe working environment and to eliminating accidents in our operations. We aim to increase the returns of our business operations, concentrating on operational excellence and involving all employees in continuous improvement. We will pursue growth opportunities and keep our focus on innovation and technology to sharpen our competitive edge.

hydroelectric dam

Energy

Hydro is the second largest power plant operator in Norway, with more than 100 years of experience in hydropower production. We intend to develop the value of our Norwegian assets and to use our extensive energy competence to secure competitive energy sources for our global activities. Operational excellence and on-going improvement continue to be a key priority to secure cost effective, safe and reliable production.

2015 targets

  • Operational excellence, continued strong emphasis on HSE in projects as well as in operations with no recordable injuries
  • Further efforts on securing competitive long term power sourcing for the aluminium operations including the potential pilot plant at Karmøy
  • Progress construction of small hydropower plants and continue efficiency improvements in existing plants
  • Strengthen local presence in Brazil to secure competitive energy supplies for our alumina refining and aluminium smelting operations and exploit commercial opportunities in the Brazilian power market

2015 results

  • Maintained a strong focus on safe operations, however one recordable injury (TRI) occurred in 2015
  • Secured power contracts at competitive prices for our Norwegian smelters; an additional 1.05 TWh annually for the period 2021–30 and 330 GWh for the period 2031-40.
  • Rjukan upgrade successfully completed according to plan 
  • Mannsberg and Midtlæger small hydropower plants projects initiated and progressing as planned
  • Norsk Hydro Energia Ltda in Brazil established as a vehicle for the power market operations, power contracts for B&A operations secured

2016 targets

  • Operational excellence, and continued strong emphasis on HSE in projects and operations through visible leadership with no recordable injuries
  • Compliance with relevant frameworks in the regions where we operate
  • Progress on ensuring robust industrial ownership for the Røldal-Sudal Kraft (RSK) energy assets
  • Deliver additional production volumes through upgrades/sustaining investments and completion of Mannsberg/Midtlæger
  • Progress on securing new competitive sourcing contracts in Norway
  • Progress on supporting competitive energy supply as well as energy policy and framework development for other business areas

Strategic mid-term goals

  • Operational excellence, and continued strong emphasis on HSE in projects and operations through visible leadership and no recordable injuries
  • Ensure robust industrial ownership for RSK energy assets– maintain physical power offtake post 2022
  • Deliver additional production volumes through upgrades/sustaining investments
  • Secure 4-6 TWh new competitive sourcing contracts in Norway post 2020
  • Support competitive energy supply as well as energy policy and framework development for other business areas on a continuous basis

Ambitions going forward

Our goal is to develop our equity power position and capitalize on our energy competence, supporting the sourcing of energy to our operations on a global basis.

greenhouse worker

Viability performance

2015 targets

  • No fatal accidents. Total recordable injuries per million hours down by 12 percent to 2.8
  • Emission of 1.61 mt CO2e/mt aluminium from production
  • The two main recycling projects in Germany and Luxembourg shall both be within schedule and total cost estimates
  • Implementation of Hydro's new system for planning, monitoring & evaluating social projects in Brazil
  • Roll-out of My Way to further 40 percent of all employees

2015 results

  • A Hydro employee became a victim of the Germanwings crash during business travel
  • Total recordable injuries per million hours down by 6 percent to 3.0 for own employees. Target not reached
  • Emission of 1.60 mt CO2e/mt aluminium from production
  • The recycling project in Luxembourg started up according to plan, in Germany in February 2016
  • Implementation of Hydro's new system for planning, monitoring & evaluating social projects in Brazil Hydro's new system for planning, monitoring and evaluating social projects in Brazil implemented for threerepresentative projects
  • Roll-out of My Way to further 40 percent of all employees achieved

2016 targets

  • No fatal accidents. Total recordable injuries per million hours down from 3.0 to 2.8 for own employees and from 3.2 to 3.0 for contractor employees
  • Emission of 1.59 footnote reference 3mt CO2e/mt aluminium from electrolysis, down from 1.60 in 2015
  • Further increase the usage of post-consumer scrap by 10 percent
  • To improve social conditions, develop an infrastructure project that aims to have significant impact on the social development of the Barcarena municipality in Brazil
  • 96 percent of all employees completed the appraisal dialogue tool My Way within agreed time-line
  • 74 percent Employee Engagement Index score on the employee engagement survey Hydro Monitor

Strategic mid-term goals

  • No fatal accidents. Total recordable injuries per million hours below 2
  • Become climate neutral by 2020
  • Recycling of 250,000 metric tons post-consumed scrap and increasing the share of recycled metal in our production
  • Achieve a ratio of 1:1 of mined areas to rehabilitated areas (2017) and eliminate the reforestation gap (2020)
  • All suppliers are committed to complying with Hydro's CSR principles
  • Hydro scores in the top 25 percent on the Employee Engagement Index in Hydro Monitor 

Footnote 1 Includes combined performance for Primary Metal and Metal Markets. TRI includes both employees and contractors.

Footnote 2 Emissions targeted for 2015 include Husnes and about 50,000 mt of curtailed capacity in Sundal that was restarted in the middle of 2015. The reported 2016 target will be subject to recalculation following final agreement with EU authorities related to the emission trading scheme (ETS) on new methodology for measurement and calculation of the GHG emissions from electrolysis.

footnote reference 3 The reported 2016 target will be subject to recalculation following final agreement with EU authorities related to the Emission Trading Scheme (ETS) on new methodology for measurement and calculation of the GHG emissions from electrolysis.

  • Annual report 2015

  • Annual report 2015

  • Annual report 2015

  • Annual report 2015

  • Annual report 2015

  • Annual report 2015

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  • Annual report 2015

  • Annual report 2015


Updated: September 12, 2016