Norsk Hydro: Reorganization plan for Markbygden Ett AB approved in Umeå District Court

October 29, 2024 at 03:00 AM EDT

As part of the reorganization plan of Markbygden Ett AB, also supported by Hydro, Hydro has agreed to a settlement for the long-term power purchase agreement (PPA) with the company. In the settlement, Hydro is entitled to a compensation of up to EUR 248 million for its voluntary termination of the PPA.

Hydro Energi AS signed a long-term PPA with Markbygden Ett AB in 2017 for an annual baseload supply of 1.65 TWh in the period 2021-2039. The contract was a key enabler for financing and developing the onshore wind park Markbygden, located west of Piteå, in northern Sweden. The park’s annual production was estimated to be 2.2 TWh.

Due to significantly lower-than-expected production levels, Markbygden Ett AB has experienced financial challenges for several years. The wind park ceased power deliveries to Hydro on February 6, 2023 and entered into a company reorganization process in November 2023. As of third quarter 2024, non-delivered power since February 2023 amounts to 2.5 TWh.

According to the approved plan, Hydro is entitled to a total compensation of up to EUR 248 million as a settlement of the ongoing dispute relating to the company's non-performance under the PPA, and as compensation to Hydro for the voluntary cancellation of the PPA. Any compensation to Hydro is subject to a future sale of the park, with the ultimate compensation received depending on the sale proceeds and an agreed value sharing mechanism. Hydro will continue to work constructively with the company towards improved operations and a future sale of the park.

The sourcing situation at Hydro’s Norwegian smelters remains robust through 2030, based on an average annual equity hydropower production of 9.4 TWh and a long-term contract portfolio of around 10 TWh per year. Hydro is actively pursuing available alternatives for renewable power sourcing, including onshore wind, to meet the need for cost-competitive power for its industrial operations.

Subject to fulfillment of certain closing requirements, the plan is expected to become effective during November 2024.

Investor contact:
Elitsa Boyadzhieva
+47 91775472
elitsa.boyadzhieva@hydro.com

Media contact:
Anders Vindegg
+47 93864271
anders.vindegg@hydro.com