Together with the European Bank for Reconstruction and Development (EBRD), Norsk Hydro, today acquired 40.8 per cent of the outstanding shares of Slovalco a.s, the Slovakian primary aluminium producer. The share purchase gives Hydro and the EBRD each a holding of 40 per cent of the voting shares of Slovalco. ZSNP, a Slovakian state controlled aluminium manufacturer, which sold the shares to Hydro and the EBRD, will continue to hold a 20 per cent stake. On an equity basis, the transaction values Slovalco at US$ 187.5 million. The share purchase is subject to approval from Slovakian competition authorities.
“Slovalco’s location offers an excellent opportunity in respect of securing Hydro's long term supply of high quality products to our customers, especially in Central and Southern Europe,” said Jon-Harald Nilsen, executive vice president Hydro Light Metals.
Alain Pilloux, EBRD Business Group Director for Central Europe, said: “This is an essential step in the restructuring and privatisation of ZSNP. It demonstrates that one can isolate a viable part of a large and struggling industrial company and turn it in to an efficient and environmentally sound investment opportunity.”
It was in 1994 that Hydro and the EBRD each purchased a 20 per cent of the voting shares in Slovalco, a subsidiary of ZSNP, which was established to complete and operate a state-of-the-art smelter, allowing inefficient and polluting production units to be shut down. In 2000, buying additional shares from ZSNP, Hydro, whose core business includes oil, energy, light metals and agriculture, increased its stake to 29 per cent of the voting shares (14.5 per cent of the outstanding shares).
As part of today’s transaction, Hydro and the EBRD have also entered in to an option arrangement, which, if fully exercised, allows Hydro to take over the shares held by the EBRD. This would give Hydro 80 per cent of the voting shares. The option must be exercised prior to the end of 2006.
Today’s sale confirms not only the year-long close co-operation between Hydro Aluminium and Slovalco, but also the significant role Slovalco plays in Hydro's supplier system of aluminium casthouse products in Europe. Through a series of off take agreements, Hydro handles a substantial part of the metal produced in Slovalco. This plays an important part in Hydro's overall metal supply in Europe. Specific products include extrusion ingots and primary foundry alloys.
Slovalco, which is located in Ziar nad Hronom, in central Slovakia, recently announced its board’s decision to expand production capacity, based on Hydro's pot room technology HAL230. The expansion, fully financed by Slovalco, is expected to add 37,000 tons of primary aluminium and will cost approximately US$ 80 million. Together with other similar programmes, the company expects in time to increase the overall production volume of primary aluminium from 109,000 tonnes currently, to a level of 155,000 tonnes in 2004. Utilizing primary aluminium and remelting, total output in 2004 could reach 180,000 tonnes of aluminium casthouse products.
Norsk Hydro aims to strengthen its position as one of the largest integrated aluminium companies. An important part of this is to secure Hydro's position as market leader in Europe for aluminium and extruded products.
In 2000, Hydro Aluminium Metal Products, a division of Hydro, had a global business volume of 2.15 million tons, making the company one of the international leaders in the supply of aluminium casthouse products. Out of this, approximately 780,000 tonnes was virgin aluminium production. Recycling and remelting of aluminium made up an additional 380,000 tonnes. The balance is supplied through strategic partners and other commercial arrangements. Together this makes up the metal supplier system, a vital part of Hydro's strategy for its aluminium and light metals activities. Hydro's aluminium cast house products are extrusion ingots, primary foundry alloys, sheet ingot and wire rod. Major end use markets are the automotive and construction industries.
The EBRD aims to foster the transition from centrally planned to market economies in central and eastern Europe and the Commonwealth of Independent States. It is owned by 60 countries, the European Investment Bank and the European Community.