Norsk Hydro

Hydro and Lyse to establish hydropower company

Hydro and Lyse plan to merge part of their respective hydropower production to create a stronger joint hydropower company. The agreement secures long-term access to renewable power for Hydro’s industrial operations in Norway.

• Lyse and Hydro will merge their power production assets in the south-west region of Norway through the establishment of a new company, to include Hydro’s hydropower assets Røldal-Suldal Kraft (RSK) and the majority of Lyse’s power production portfolio
• The new company will be called Lyse Kraft DA and have a normal annual power production capacity of 9.5 TWh, of which Hydro will own 25.6 percent and Lyse 74.4 percent
• The agreement is expected to bring synergies of approximately NOK 500 million in net present value

As a consequence of the transaction, the RSK assets will not revert to state ownership at the end of 2022, meaning Hydro can use its share of the power produced by the new company for aluminum production in Norway.

“This is a great day for the future of Norwegian renewable-based industry. The agreement is strategically important for Hydro, as it secures the value of our RSK hydropower assets and contributes to predictability for further industrial development in Norway,” says Hydro President & CEO Hilde Merete Aasheim.

Hydro will become a larger renewable operator
Based on the agreement, Hydro will remain the operator of the RSK assets and assume operatorship for Lyse’s fully owned hydropower plants. Consequently, Hydro will larger power operator and remain the Norway’s third-largest provider of renewable power, with a combined renewables production of 13.6 TWh in a normal year. Hydro’s annual production, based on equity shares, will be 9.4 TWh in a normal year.

Aasheim says the transaction is in line with the company’s strategy to strengthen its position in low-carbon aluminium and grow in the renewable energy sector.

“The agreement supports both objectives, as we secure long-term access to renewable power, and Hydro will become a larger hydropower operator. At the same time, we secure the value that RSK represents for Hydro,” she says.

Future-proof solution
Lyse will become responsible for the water management and market activities with a portfolio of 9.5 TWh. The CEO of Lyse, Eimund Nygaard, says the agreement creates value in several areas.

“The agreement makes Lyse the third-largest power market entity in Norway and gives us a chance to build an even more competent and robust power management organization in Stavanger,” he says, adding that the operator agreement with Hydro will also give economies of scale, increased professionalism and new development opportunities for the power plants and the employees who will get a new employer.