Norsk Hydro: Disappointing Norwegian national budget for industry and power development
06 Octubre 2023 - 5:19AM
The proposal for the national budget, presented by the
Norwegian government on Friday, October 6, includes several
elements that affect Hydro's operations in Norway. The most
significant impact is on the CO2 compensation scheme. Hydro is
surprised and disappointed that the scheme is further weakened. The
proposal for wind power taxation does not contribute to triggering
sufficient investments to ensure an adequate supply of power for
industry and the green transition.
The total impact of changes in the CO2 compensation scheme for
Hydro in 2023, is estimated at a reduction of approximately NOK 1
billion. Hydro is concerned about the negative signaling effect the
government's constant changes have on the predictability of
Norwegian industry.
“We are surprised and disappointed the government has once again
chosen to weaken the competitiveness of the industry by cutting the
established CO2 compensation scheme. This is unfortunate and it
undermines the predictability of Norwegian industrial policy,” says
President & CEO Hilde Merete Aasheim.
The purpose of the CO2 compensation scheme is to create a level
playing field with other countries and prevent carbon leakage,
which means energy intensive industries move production to
countries with higher CO2 emissions.
The CO2 compensation scheme is part of the EU emissions trading
system. The scheme partially compensates for the additional costs
in energy expenses the industry incurs due to European CO2 prices
affecting Norwegian energy prices. In Norway, Hydro utilizes 100
percent renewable energy that does not emit CO2 in its aluminum
production.
In the 2024 state budget proposal, the government suggests a
further weakening of the CO2 compensation scheme for the industry
by nearly doubling the CO2 quota price floor from NOK 200 per
tonne, which was introduced in 2022, to NOK 375 per tonne for 2023.
The total impact on Hydro in 2023 is estimated to be approximately
NOK 1 billion. Consequently, Hydro must reverse parts of the
previously calculated compensation for the first and second
quarters of 2023 with roughly half of this amount, and record
approximately corresponding lower amounts for the third and fourth
quarters. The state budget will be discussed by the Norwegian
Parliament during the autumn and the final budget decision is
expected in December.
The quota price floor in the CO2 compensation scheme was first
introduced in the 2023 state budget, and in the budget proposal
presented in the autumn of 2022, the government stated the CO2
compensation scheme was now ‘sustainable in a time of tighter
economic constraints.’ The government was also supposed to invite
the industry to a dialogue on how the scheme should be further
developed. This has been the basis for Hydro's provisions in the
accounts for 2023 and for new investments the company is
planning.
"The government presented a compensation level towards 2030 last
year where they were clear the CO2 compensation scheme should
remain unchanged. Therefore, it is unfortunate for the trust in
political decisions that this is no longer the case and it is being
changed once again at the first opportunity. It is also highly
regrettable the government has not followed up on the process and
the dialogue regarding the scheme as they promised the industry
would be involved in," says Aasheim.
"We are planning significant investments in new technology to
cut CO2 emissions and create greener products the world needs. A
robust and predictable CO2 compensation scheme is one of the most
critical prerequisites for the industry to continue investing in
Norway, enabling us to create value and employment based on
renewable energy. The Norwegian Parliament should now come together
and provide stability to the CO2 compensation scheme towards 2030,
so the industry can regain the predictability essential for further
industrial development," says Aasheim.
The government proposes further changes in power taxation. The
high-price contribution (høyprisbidraget) for hydropower is
abolished from October 1, 2023. A basic rent tax of 35 percent is
introduced for wind power, which is slightly less than the
government's original proposal of 40 percent and it is still not
investment neutral. It is crucial for developers of new renewable
energy and for the industry that the actual contract price is the
basis for basic rent taxation (grunnrentebeskatning).
"The overall tax increases in the 2023 government budget created
significant unpredictability and, at the same time, weakened the
opportunity to develop wind and hydropower projects that Norway
needs to achieve its climate goals. It is good the government is
removing the high-price contribution from October 1. However, it is
disappointing the government has not listened to the industry and
the renewable energy sector, and addressed wind power taxation. The
proposal for wind power taxation also does not contribute to
triggering sufficient investments to ensure an adequate supply of
power for industry and the green transition," says Aasheim.
Investor contact: Martine Rambøl Hagen+47
91708918Martine.Rambol.Hagen@hydro.com
Media contact: Halvor Molland +47
92979797Halvor.Molland@hydro.com
This information is subject to the disclosure requirements
pursuant to Section 5-12 the Norwegian Securities Trading Act
Lucapa Diamond (TG:NHY)
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