Good morning, ladies and gentlemen. We're all gathered here today. My name's Alan. I'm the operations manager. I'm just going to go through a few fire regulations. As you can see, we've got four fire exits in this room. Sorry about that. A few technical issues. As I was saying, fire exits, one to your left, two behind you, one to the right. The meeting point is outside the hotel to your left, just on Palace Drive. For your information as well, today at 5:30 P.M., we have a fire alarm test. So if you hear the fire alarms going off at 5:30 P.M. today, it's just a test. Okay? Enjoy your meeting.
Hello everyone, and welcome to Hydro's Capital Markets Day 2024. My name is Martine Rambøl Hagen, and together with my colleagues Elitza, Blessy, Mathias Gautier, Margrethe Hovi, and Camilla Gille, we are responsible for Investor Relations in Hydro. So we are very happy to see so many joining us here in London today, and also a very warm welcome to everyone joining us on the webcast. So the headline for this year's Capital Markets Day is accelerating the green aluminum transition, and this together with our strategic direction towards 2030 will be the key focus in today's presentation. And then before we continue, I would also like to draw your attention towards the cautionary note related to forward-looking statements that you will see both in the presentation up on the screen and also in the presentation that has been published and printed on your tables.
Then let's move over to the agenda for the day. We will start with the presentation by our President and CEO, going through our strategic direction towards 2030, also focusing on execution. We will, after the CEO presentation, move over to business area presentations, starting with EVP of Extrusions, Paul Warton, going through the extrusion story, followed up by the EVP of Aluminium Metal, Hanne Simensen, taking us through both the primary part and the recycling part and the totality that is aluminium metal. After that, we will have a Q&A session around 9:30 A.M., followed by a break before we start again at 10:00 A.M.
Then our EVP of Bauxite and Alumina, John Thuestad, will take us through the storyline for BNA, followed by EVP of Energy, Kari Ekelund Thørud, going through the energy storyline, before we end the presentation with our CFO, Trond Olaf Christophersen, taking you through the financials on a group level. We will then end the presentation session again with the Q&A before we go into a lunch, and I hope as many as possible will join us for a lunch right outside of this room afterwards. And then starting from 12:30 P.M., we will have one-to-one meetings with the CEO, CFO, and the EVPs for sell-side analysts and investors that have signed up and received a schedule. We'll get back to that later on. So with that, having this agenda in the back, we are ready to officially kick off the day.
So we will start with a film before our President and CEO, Eivind Kallevik, will enter the stage. Thank you so much.
It started with a dream of industry for a viable global society. With the power of waterfalls came opportunity. There, water became power. Power became the means for production, creating industries that matter. Through the ages, we have built on over 100 years of innovation. As we continue to develop products and solutions for the future, in the small details and the grand visions, we believe in more than just production. We believe in shaping tomorrow with precision, with responsibility, ensuring we reduce our environmental footprint, operate ethically, and support the communities where we operate. Built on the forces of nature, we are pioneering the green aluminium transition powered by renewable energy.
So first and foremost, a warm welcome from me as well. It's really good to be back at Capital Markets Day. It's not my first Capital Markets Day, but it's certainly the first one as a CEO. So from that perspective, I would say slightly exciting day. But let's get started and get on the way. And as always, we should start and need to start with what is the most important part of what we do in Hydro, and that is safety to make sure that our people get home in the same way as when they started, either in a shift or in the offices where they work. Over the years, we've seen good improvements on the statistical side, both when it comes to high-risk incidents as well as the total recordable injury rate.
But I have to say, over the last 18 months, we've learned the hard way that statistics is one thing, and then sometimes we're awakened with brutal realities. So on July 9 this year, the same day as we signed the new agreement with Porsche, we had a fatality in Albras, our joint venture smelter in Brazil, where a young man died and was not able to go home that day. What is particularly disappointing when you look back at this incident is that it took good engineers a very short time of figuring out a new solution on how to do that operation without putting people in harm's way. And we need to find solutions, and we need to continue to work to discover these risks and fix the risks before we have these incidents that happen.
We have a very ambitious agenda towards 2030, but I have to say, if we cannot fix and if we cannot manage the safety issues, then the strategy will always be at risk because we cannot execute on a strategy if we cannot keep our people and environment safe. If we look back to 2024 or 2023, we did launch a new ambitious strategy towards 2030 at the last Capital Markets Day. This year has been all about execution. We are very much on track to deliver NOK 9.9 billion from the improvement program, surpassing the NOK 9.5 billion that we set as a target last year. In addition, we have good progress on the commercial side. We have generated some NOK 3 billion in commercial value over the year.
Also very happy, on June 24, we closed the transaction with Macquarie, launching Hydro Rein as a full-fledged renewables company in its own right, with its own balance sheet and a very strong growth portfolio going forward. We also made good progress, and we'll come back to this, both on the recycling side as well as on the extrusions growth agenda. That being said, with the market headwinds we've had, there have been challenges to meet EBITDA targets of NOK 8 billion in extrusions and NOK 3 billion for recycling by 2025. If we look at the sustainability agenda, we are clearly on track to reach the 10% emissions reduction by 2025, and we have good progress towards the 30% reduction by 2030. And these efforts are, of course, an important baseline for us when we talk about and we deliver our impact on the emerging markets for greener aluminum.
The strategic partnerships that we've talked a lot about also have entered some quite new and interesting phases, both when it comes to the Mercedes contract as well as with the Porsche contract, quite some important milestones during the year. Finally, when it comes to financial returns, we are committed, and we are still delivering more than 10% ROACE over the cycle, and we will continue to deliver good shareholder returns in the periods ahead. So we are well suited for the journey towards 2030, but still, to be competitive, we need to constantly adapt to the ever-changing and evolving geopolitical and macroeconomic landscape that we see around us. So 2024 has been, in many ways, a landmark year. More than 3.7 billion in 72 countries, representing more than half the global population, has been heading to the polls. It's truly been an eventful or an election year.
From our perspective, we see that despite the economic headwinds, climate policy remains relatively healthy and unchanged, and it's a key priority in many of the regions where we operate. So obviously, in the U.S., there is some federal uncertainty that still persists, but what we see on the state level is that policies are, to a large extent, expected to continue regardless of the new federal administration. So our impression is quite clear. The global push to meet the climate ambitions are quite clear and quite alive and well also today. At the same time, and we see this in Europe, there is a clear need and a growing focus not only on the green transition, but also to remain competitive on the industrial side.
So both the US and the European Union are quite clear that the green transition needs to create or at least sustain the industrial activity that we have in order to succeed in the times to come. In addition, the geopolitical tensions that we see are elevating the awareness around the security of supply and the strategic resilience around us, making reliable access to key materials and minerals a growing concern in the market. For Hydro, this evolving landscape both presents opportunities and reinforces our strategic direction towards 2030. With our strong position in low carbon and recycled aluminum, proximity to key markets in Europe and North America, renewable power assets, and the integrated value chain, we should be ideally positioned to navigate and safely create substantial value on this basis going forward.
What we've said and what we see now over time is that aluminium is a key part of the green transition that we see around us. Now, according to Bloomberg New Energy Finance, demand is set to rise substantially, and it's driven by sectors such as electric vehicles, energy storage, grid infrastructure, and development of renewable power. In fact, in all scenarios that they have, demand is expected to grow significantly towards 2050, reaffirming aluminium's critical role in the green transition. Now, while long-term prospects remain strong, there are certainly some short-term challenges in key markets. The European extrusion market is currently soft, with demand below historical averages, but we do expect to see recovery in key markets. 7 million tons.
If you look at the volumes below 4 kilos, that is only expected to grow with roughly one million tons, and that is predominantly coming from restart of old curtailed or partly curtailed capacities. And that should, and possibly should, create an interesting supply cap towards the early movers who demand low carbon aluminum. And Hydro, of course, should be well positioned to catch that opportunity. The close cooperation we have with our customers does ensure that we stay aligned with this evolving demand, supported by the decarbonization agenda that we have, which is already delivering results. Likewise, the low carbon products we have, Hydro, REDUXA, and CIRCAL, have already made a large impact in the market for certified low carbon materials. Over the years, we've often been asked about the strategic rationale for maintaining a fully integrated company. So for me, this is quite simple.
First of all, it gives us an unmatched ability to operate efficiently and sustainably with every step from mine to component, including energy, under one roof. We can optimize them and control all the levers along the value chain. And in a world where the scope of scrutiny continues to expand, covering emissions, nature impact, social responsibility, and more, the integrated approach allows us to meet all these expectations for traceable actions and gives our customers them a full insight from mine to components. Even further, in today's unpredictable world, supply risks and security concerns are top of mind of most people in the industry. And this integrated model mitigates these risks, ensuring access to all the critical raw materials and a reliable supply chain under any external pressures that you may see. So put simply, we offer our customers more than just aluminium.
We provide certified, traceable, and low carbon metal, along with a stable and predictable supply and offering that delivers real and measurable added value to our customers. So Hydro's strength is then further bolstered by the strategic positions that we have across the entire aluminum chain. Globally, we are a top three player in the third-party bauxite in the aluminum market. In North America, we are leaders in extrusion ingots and recycled extrusion ingots, and we are the top player in extrusions, serving nearly 25% of the North American market. In Europe, we hold a dominant and competitive position. We're number one when it comes to value-added products. We have strong positions when it comes to recycled products, and we have the leading position when it comes to the extrusion market. And to top that off, the presence we have in the Nordic power markets further amplifies our competitive advantage.
If you match that with the technology and the R&D organization that we have, Hydro has the structure, the global presence, and the capabilities to capitalize on the long-term opportunities in the aluminum market. Last year, we launched an ambition to deliver greener earnings uplift in the range of roughly NOK 2 billion by 2030, and I'm really happy to stand here today to say that we are progressing towards that target. For Hydro CIRCAL, we are projected to reach 60,000 tons this year, which is up 20% since 2023. For Hydro REDUXA, we are aiming for sales of roughly 425,000 tons, again reflecting the increasing demand that we have for low carbon products. Remember, this is growth in volumes in Europe, in North America, which structurally has seen a decline compared to 2023 in terms of volumes, a proof point.
This also includes then the first batches of REDUXA 3.0 to Mercedes, and that's just one example of achievement where we can match our competencies in recycling with the primary production. We add post-consumer scrap into one of our smelters in Europe, delivering 3.0 metal to Mercedes. So we are building further capabilities for future contributions across the three main areas. In production, the fuel switch and installation of the alloy list at Alunorte are enabling a lower primary carbon footprint. Likewise, we will also expand the CIRCAL capabilities in Europe and in the US, and we will continue to develop different types of alloys for Hydro REDUXA 3.0 for automotive applications also going forward.
Commercially, extremely happy with the industry-first capacity booking agreement we did with Porsche in July and the new partnership that we will start to talk about with Siemens Trains for Closed Loop Recycling, representing another significant milestone of the greener transition. So these initiatives are setting us on a solid path towards the 2030 ambition, positioning us well to accelerate the greener earnings uplift from an expected growing share of low carbon primary and recycled aluminum expected to bring value in the years to come. So capturing the market opportunities emerging from the green transition was fundamental for the strategic direction we launched last year. So if we look beyond the current market downturn, the long-term trend is clear. The demand for greener materials and renewable energy is expected to remain high.
Hydro today is already a leading player in these markets, and this strategy is all about widening the gap to our competitors for the race as the race for the greener transition and greener positions continues, so to achieve this, we are stepping up and focusing on the growth in recycling, in extrusions, and to capture market opportunities for the green transition, in addition to stepping up investments within renewable power generation as a basis and an enabler for the decarbonization that we do. We will continue to advance the decarbonization technologies and the roadmaps while increasing the efforts to contribute to nature positive and just transition in the world around us, so leveraging these efforts that will shape the market for greener aluminum in partnerships with customers, so if we then have a quick look at how we are progressing.
So if we start with the recycling, there's no question that there are challenges in this market for the time being. But the conviction we have is that the opportunities and the profitability will come back in the recycling market. Recycling in 2024 has really been squeezed on both ends. Low economic activity drives low scrap generation that drives up the price. On the other hand, low economic activities in the market where we operate also leads to a depressed billet premium. So you hit both on the cost side as well as on the pricing side of the material that you produce. Still, when you look forward, we do expect economic activity to come back both in Europe and in the U.S.
Pinning exactly in which quarter that will happen is, of course, incredibly difficult and impossible, but we do suspect and do anticipate that European and U.S. growth will come back, leading to more scrap generation, leading to better premiums. The capabilities we have in sorting and sourcing and utilizing complex scrap is in a continuous advantage when we look for profitable growth. Here we are making good progress towards our 2030 target, supported by a clear roadmap to improve cost efficiency and to capture growth also for the going forward. On the cost side, we do expect to reduce what we call hot metal costs, so the scrap coming in with some $20-$30, and Hanne will come back to this as well, per ton of recycled aluminum produced.
We also expect to deliver some NOK 10 million-15 million in terms of synergies from the Allo Metal acquisition we did last year, and here we are progressing well, and we do expect to deliver the first NOK 4 million-5 million during 2025. Strengthening the scrap sorting capabilities remains a top priority for us. As I said, it helps lowering the metal cost and improves the relative cost position that we have, and then when delivering high PCS content, we can also produce more 75R CIRCAL and create an additional premium of that, and CIRCAL has really been a tremendous success in the market, and moving forward, we will continue to create a focus on diversifying the CIRCAL offering also into other markets within automotive, in addition to where we've been very successful so far within the building and construction market.
By 2030, we are well on the track to achieve the PCS capacity targets, having added significant capacity since 2023, aiming for between 850,000-1.2 million tons of installed capacity by 2030. The recycling EBITDA potential is projected still to increase towards 5-8 billion by 2030, driven by the market normalization, increased installed capacity, and strategic growth initiatives. With the announced growth projects we already have talked about, we are already at the lower end of the 2030 potential, so we are well on the way. If we look to extrusions, despite the growth or the market downturns that we have seen over the last 12 month-18 months, we are continuously improving, modernizing, and optimizing the flexibility of the globally leading extrusion network that we do have. Staying competitive requires focused improvement efforts across the network.
These efforts are centered around automation, operational enhancements, and procurement excellence. In addition, we are continuing to invest in press and fabrication consolidation, which boosts the capacity that we have and also increases our value-added offerings in a market, and we are confident that these investments will reinforce the competitive edge that we have, enabling Hydro to deliver more value and meet the expectations for advanced customers, so to capitalize on this, we are strategically targeting non-commoditized segments. Here we see untapped potential to grow the market share in profitable high-growth areas, so looking ahead, the EBITDA guidance for 2025 is going to be in the range of NOK 4.5 billion-5.5 billion, so not the NOK 8 billion that was estimated some time back based on the current CRU forecast as we see it today.
So to achieve the 2030 target, it will require an additional demand growth of some 30% in North America and 20% in Europe, so bringing us back to more normal levels, if you like, along with the normalization of the remelt margins that we just talked about. Execution towards 2030 is driven by increasing improvement efforts and targeting commercial activities. Additionally, we see further potential uplift from the growth packages that we have announced and those we have in the pipeline. In renewable energy, we are executing well. Hydro Energy is actively upgrading and expanding its hydropower assets. Together with Lyse, we are looking at an investment, adding some 650 megawatts capacity to the portfolio. Here Hydro owns roughly 25%. In addition, we are doing an investment in Illvatn, adding some 48 megawatts of capacity.
Important part of that, it gives us more value from the flexibility in the hydropower assets in a more volatile pricing world for the energy. Following the closing of the transaction with Macquarie, Hydro now is well positioned to continue its profitable growth journey. So far, Hydro Rein has delivered some 1.7 gigawatts of renewable projects, and they have another 8.4 gross gigawatts of development opportunities in the portfolio, which they're working on both in Brazil and in the Nordics. An important clarification is that in the current market environment that we see, the further development of hydrogen and battery materials would require significant capital going forward, in addition to having quite a bit of risk attached to it.
So in alignment with the strategy that we have, which is back to focusing more on the core, we have decided to phase out the green hydrogen business and the battery strategy that Hydro has had, with no new capital being allocated to these businesses going forward. So executing on the roadmap towards 2050 is certainly a key element in Hydro's strategy for 2030. This year, we've hit key milestones to achieve the 2025, 2030, and 2050 targets. Fuel switch at Alunorte, transitioning from heavy fuel oil to natural gas, converting coal boilers to gas boilers gives us significant improvement potentials. By 2030, we also have the opportunity to convert all the seven boilers to gas boilers, which will give us a 70% reduction at Alunorte.
Across the portfolio that we have, we're pushing every lever that we can, whether it's within casting, we're testing plasma, we're testing biomethane, whether it's changing from when we do renew or new PPAs to get to more renewable power than we had in the past in some of our assets. When it comes to hydrogen, we are currently concluding the green hydrogen project in Høyanger. That's probably less to do with the production of green hydrogen. It actually has more to do with how do you introduce hydrogen into an industrial air production facility over time to see how that impacts your equipment and how you're able to continue to operate that safely and measuring impacts on materials.
Longer term, very ambitious agenda going forward, both when it comes to carbon capture and when it comes to the HalZero technology that we develop in Norway. Industrial pilots still planned by 2030. First metal we do expect to be produced at stage two by the end of 2025. The green transition goes beyond carbon. It also has very much to do with social and nature. The strategy that we have very much requests and asks us to contribute to the global nature positive goal, and we have made progress in many areas. We are advancing on the no net loss of biodiversity at Paragominas. This includes the collaboration with leading experts to develop comprehensive strategy, parallel work on creative metrics, which is important to measure progress, as well as the monitoring frameworks.
While Brazil remains very often the focal point of these activities, we are also starting to focus on this in other areas. The first area where we will focus on no net loss outside Brazil is in connection with the Illvatn pump storage capacity or plant upgrade we will do in Luster in Norway. This is also creating interest from our customers, and it's very exciting then to have Mercedes signing up to what we call the CORRIDOR project, which is part of the just transition project that we do along the pipeline in Brazil between Paragominas and Alunorte, together with several of the large and important NGOs in that area, so to be green, the transition also needs to be just.
Hydro is also committed to improving the lives and livelihoods in the communities where we do operate, for workers and for the people around us and our own employees. Our just transition framework consists of four parts. Human rights, of course, is the foundation of the social impact work. Through continuous due diligence, we identify and mitigate potential risks in the operations, value chain, and surrounding communities. We also very much support the local positive developments. In 2024, we launched our own just transition program, engaging employees in more than 40 different projects alongside the ongoing community investments that we do, charitable donations and sponsorships totaling some NOK 123 million in 2023. Education is a key part. We have a target of NOK 500,000, and by the end of this year, we will have surpassed NOK 200,000, an important step forward.
As a significant purchaser, we have the ability to drive change also in the supply chain, setting high standards for human rights, working conditions, and the environmental stewardship in our suppliers. In Brazil, the supply development program over the past five years has focused on HSE, human rights, and supplier support. And this is not only a statement; we, as a management team and I, as the CEO, are also measured in this and will be part of my CEO KPI chart also for 2025 when it comes to human rights and supply chain due diligence. So you can all follow this also when we publish the annual reports going forward.
Finally, collaborating with customers, developing an early market for our leading products is a crucial part of the strategy. For the past years, we've entered into strategic partnerships with some of the world's leading companies, and they are yielding results. We've talked about the Porsche agreement, first of its kind, capacity reservations. They're committing money to this. Mercedes-Benz, we are delivering REDUXA 3.0, and they've signed up to the CORRIDOR project, also participating in the social work that we do. Brompton Bikes, which everybody sees when they are in London, we've signed an agreement with them. So when you buy a new bike today, you can also buy wheel rims, which is based on 100% post-consumer scrap, first wheel rims in the world. Together with VELUX, a well-known Scandinavian company, we're also now exploring a potential long-term commercial opportunities to supply them with low-carbon aluminum globally.
The business areas are on the forefront of what we do, and the cost positions are important. When it comes to Bauxite and Alumina, we are well within the 19th percentile on the cost curve when the fuel switch is fully implemented. In energy, our resource spend is highly competitive compared to our other Norwegian hydropower players. In Aluminium Metal, we maintain a robust cost position with smelter portfolio well within the first quartile. And when you look to extrusions, they all perform most of the peers that we have in terms of EBITDA per ton, and they have done quite an impressive journey in the last few years. All in all, well positioned and on the journey ahead. But the market will be what the market is.
For us, it's important also to talk about the improvement program, and I'm very happy to stand here today to launch a new improvement program. If you look over the last 15 years, we've delivered more than NOK 17 billion in improvements, with NOK 9.9 billion coming from the current program. That is part of the Hydro DNA to continue to focus on what we control ourselves. Now, if we look forward, the new program is designed to be even more effective, but probably also quite a lot more visible and at the bottom line, enabling you to tie back the savings we provide. Reports, the financial figures being reported. We'll have a more focused picture. We will target key value buckets and stop tracking smaller improvements, focusing on areas where we have a large impact.
It will have more detailed insights so you can follow and track the drivers and the impact of the improvements that we do, creating more accountability and transparency of the savings programs. And there will be a stronger link to the P&L bottom line. It will have a baseline for 2024. And quite importantly, it does not include, for instance, the restart of 100,000 tons in Norway. It's not included in the improvement program. It does not include the fuel switch that we're doing in Brazil. So although I've seen in some of the reports early today that it looks like the same number as we've discussed before, actually this is quite a lot more ambitious and should give you a lot more opportunities to track also going forward as we do deliver.
When we deliver on this, that also gives us even more room to focus on the growth areas that we have, which is to continue to grow in recycling, in extrusions, and within renewable energy. And at the same time, it should give us then the opportunity to continue to pay out good and attractive shareholder returns. With that said, I will thank you all for the attention so far, and then let's go through the different business areas and the deep dives and how all of this is tied together. Thank you.
Good morning, ladies and gentlemen. First business area, extrusions. I'm a Brit, clearly, between a Norwegian sandwich here before and after. And of course, the Brits will know that we had a tough weekend. A bit worried about this event and people coming to this event. We had Storm Bert.
Strange name for storm, but that's the name chosen. Storm Bert was vicious, I can tell you. It was a really tough weekend. Lots of damage, lots of floods, lots of illustrations of global climate change. It was pretty tough, but Hydro managed to organize the weather for you to get here safely today, but it's a useful introduction to some storms and headwinds we've had in the extrusions world globally, and these two charts really illustrate this for me and for you. Extrusions Europe, Extrusions North America. Huge adjustments, and I remember one year ago in Oslo, in the Capital Markets Day, having the same discussion, H2 2024 recovery as what I'm going to talk to you about today, because those are the forecasts next year. We will see a recovery, 3% Europe, 5% North America, mainly second half, so a slow first half of 2025. Look at those numbers.
Europe is below 2020 post-COVID recovery, down to levels lower than even the years of COVID when factories shut for weeks and weeks on end. Same in the US, so you look now, volumes we see today are where we were in 2014, so when we talk about performance and missing the big red cross, NOK 8 billion next year, this is the reason we will, sorry to say, miss the NOK 8 billion. These are severe adjustments in our market, but on the right-hand side, you see there where we play the growth forecast to 2030 in those market segments, and remember, extrusions, we seek segments within segments that create high value for us and high growth opportunities for us and the returns that you expect.
So this has been tough, but we remain confident that these growth opportunities will be there for us, especially us as Hydro Extrusions, because of our unique position in our market, fully integrated as a group, but also globally representing our business and able to follow our customers as they develop their solutions, particularly on their decarbonization routes. So very tough at the moment. It will recover, and we're in the markets well positioned to capitalize on that recovery. So here, I've added the EBITDA per ton margin on the left-hand side to show you where we are today versus 2014 when we last worked on this level of activity in our markets. And you see we're 3.5 x more profitable, EBITDA per ton, than where we were in 2014.
So we've really lowered the break-even point in our business and really developed our customers and our markets to be in a much stronger position to deliver return in this global extrusion industry. And even if you adjust the note there for FX, for real value of money, we're still 70% better on margin. So a little bit in the next few slides about how we do that, where we do that, which markets are we going to continue to seek value from. And the first one there, mentioned by Eivind, building and construction. It's not as important as it used to be, certainly in 2014. It's still important for us going forward. And the trends in this market, despite the headwinds, are still strong.
Within our business area, we have one business unit, Hydro Building Systems, that focuses particularly in this unit, mainly European-centric, but also growing around the world, especially Middle East, even in China, also U.S. Of course, Hydro Building Systems have really capitalized on Hydro's low carbon offer, 75R, 75% post-consumer scrap. They have successfully developed a strong position in this business. Frankly, we are short of 75R for our customers because of the opportunities. This business unit is producing very similar volumes this year to one year ago, despite some of their markets being 30% down, especially in Central Europe, especially in Germany. They're making quite similar EBITDA this year to last year. Clear evidence in our building systems business with our product offerings and our low carbon solutions for our customers, we are growing our market share.
Then we talk about copper substitution. And you all know about the trends on copper availability and pricing. And we have more and more opportunities as aluminum extrusion solution suppliers to substitute copper with the customers who are demanding it. And HVAC & R now is certainly one of those markets. And here, especially in North America, with our infrastructure there in precision tubing, even in China, we're really now capturing these opportunities on copper substitution in HVAC & R, but also in automotive as the BEV trend rolls out. Lots of applications now used to be copper becoming aluminum, especially in low voltage, high voltage cabling. And you see there how in precision tubing, their percentage of sales coming from substitution opportunities is increasing to our benefit.
Precision tubing, number two out of four business units, also this year is similar volume to prior year and actually more EBITDA. Again, showing when we're specific about markets and customers and segments and product solutions, we can still perform well despite the headwinds. Then automotive, we are dependent on automotive continuing the growth story. This is a double-digit opportunity for us in extrusions. You know from before we've communicated the extrusions, Ducker's communicated the extrusions content in BEV is 3x more than ICE in a market that is growing. Of course, we can always question these steep curves going upwards on BEV penetration. 2024 was a very tough year, actually negative in Europe on BEV figures. Nobody expected that one year ago, but we still continue. These curves will move in that direction.
There may still be some bumps in the road and some instability, but at the moment, the OEMs have to perform against the emission requirements, and you know the number is building up and up and up on what the penalties will be for these OEMs if they don't comply with 2025 emission regulations, so these curves are going to go up even in North America, and there can be a lot of speculation about that, but we still see BEV penetrating in the markets where we are present. The partners you've heard about, I think the other thing to mention for extrusions globally in automotive, nobody else does what we do. Number one for sure, but strongly represented on casting, extrusion, and particularly value-added components for these OEMs, mainly in three continents, but also even in South America.
And this is important for us and important for our customers, especially as they're rolling out their decarbonization requirements and expectations. We're the only one who can offer the solutions they're looking for. And then the nominations. If you remember last year, these numbers were roughly EUR 1 billion more, lifetime sales nominations with OEMs. You see that is like 90% OEM booked business. And you can do the numbers, EUR 1 billion, how that converts into our EBITDA over time. And as a reminder, this is where we're nominated as sole supplier on typically seven-year platforms. And these are components. These are systems for the OEMs. And we've managed to jointly develop these solutions with the OEMs, plus the low carbon story. And also what's becoming more and more value, not just with automotive, but many of our customers is the transparency, traceability, the CSDDD compliance.
As Hydro, fully integrated, we can really clearly demonstrate certified solutions. That is increasingly valued in the marketplace. It's not all about automotive. Talking about Velux, which was mentioned earlier, I mean, they are frankly onshoring back to Europe, their supply lines. This has typically been in Asia. They want low carbon. Hydro is the partner. We're doing their business in Europe, but also now they challenge us in North America. We know North America is much slower in this decarbonization trend, even in B and C. Increasingly, we're seeing signs that our customers and our customers' customers, this is what they are demanding. Hydro Extrusions can deliver. We will deliver for Velux, North America, low carbon, recycled content solutions for Velux in North America. In the middle there, we try to explain how we differentiate in our marketplace.
This is a program at the moment rolled out in Europe. It's very much copy-pasteable around our other business areas. This is where we take customers from, of course, being partners to being partner plus and to being innovative partners. When you're a Hydro Extrusions and therefore group innovative partner, you have access for everything we can do. As they go for their decarbonization stories, we can help them go faster with this certified transparency, which is important. We have more and more customer migration now moving to this innovative partner solution with us as a key supplier. Then also rail. Rail was very, very slow coming to the table on recycled content, low carbon. But Siemens, you saw earlier, they have their 2050 net zero ambition. Where do they come? They come to us.
And what they need to do in their industry is take responsibility, like many industries now, for end-of-life solutions for their materials and their products. So their problem on Scope 3 is buying new steel, new aluminum for their carriage and train solutions. So with Hydro, we will develop a closed-loop solution at the end-of-life rail carriages to bring that back into our system, probably through HySort sorting, shredding facilities, then into extrusion, then solutions back to the rail customers. And this we see more and more of in the building and construction. We call it window-to-window, where even some customers now, and certainly architects and specifiers, are saying, "Okay, this refurbishment, those windows, you take them back. You physically take them back.
You turn that into new windows for the refurbished development with all the low-carbon certification that comes with it." So this is an increasing trend we see. Even on bikes, reshoring of the bike frame industry to Europe. That's typically been migrated to Asia over time. And for all the reasons you know about, people are reshoring this back to closer to home. And then the final one there, one of our innovative partners in Sweden, LED Lighting, mainly for office retail developments, market leader. And they also want low-carbon extruded solutions from Hydro. So plenty of examples to demonstrate this is where it's going and Hydro's best positioned to deliver on these requirements.
And then, of course, looking closer to home, what are we doing across our 80 locations in 40 countries to do our Scope 1, Scope 2 reductions and Scope 3 on what we purchase externally? And all I'll say here, without going into the details, we're on track to meet those commitments we made some time ago for 2030. And we have to do that. Otherwise, our customers, Scope 3, we will not deliver on. And then a few examples that's in the pack, the green press in Poland with its own solar park, providing extrusions off this press at less than one ton of CO2 per ton of aluminum, best in class. We've got a cast house in Belgium there, Glenn, putting a second wind turbine in to decarbonize our casting operations in Belgium.
The Atessa one in Italy, where one of our investments is to put capacity to do this window-to-window recycling in southern Europe, and here, that's an additional 20,000 tons of CIRCAL capacity that comes on stream in 2026, and again, we need that. We don't have enough today. We will certainly need that at that point in time, so many examples where we are getting our Scope 1, Scope 2 numbers down, and then while we're on the topic of investments, this is what we've been doing in the last few years, not investing in capacity and then chasing business. We invest in extrusion capacity in the middle there in the purple box. You take the Hungary automotive press coming on stream next year, the Tønder press in Denmark coming on stream next year.
These are the presses that will be doing the work you saw earlier on the nomination slide. So they're fully booked. That's important in our marketplace. We're not speculating on capacity. We're only installing modular investments and capacity when the market is there. And in fact, if I look back, last 18 months, we've taken a haircut on our previous CapEx expectations to achieve the 2030 ambition. And until we get the business, we don't do the CapEx. And then finally, I've even referred to improvement programs, cost reductions. This project pipeline we have now on automation to reduce our costs in the business. We're putting more focus into this automation, digitalization in different areas. Two examples here to get the cost down in our business. And these are very strong IRR return projects, not on any creep capacity that we may create by doing this.
This example on the left, we get some of that. This is a Press 19 coming on stream as we speak today in Cressona, Pennsylvania, and this we replaced two presses, can you believe, 80-year-old extrusion presses, so it's about time. They've done their bit, and two presses becomes one state-of-the-art modern extrusion press, and you see there, the labor saving is 40%. The scrap saving is significant. The downtime, the quality, the productivity is all driving these improvement numbers, so we still have plenty of scope within this global network of extrusion and casting facilities to seek value from some of these automation and replacement investments. Same for fabrication cells or anything post-press or surface treatment, robotics, AI, AGVs, guided vehicles to take cost out of our business. Plenty of these opportunities to drive shareholder value.
So, summarizing improvement programs, out of the NOK 6.5 billion , we will contribute between NOK 1.7 billion and NOK 2 billion in those areas you see, commercial, then operations. And also procurement has been a big win for us. And this is not just reducing prices with suppliers. This is redefining those relationships. Like customers do with us, we do it with suppliers. So it's about total cost of ownership, lean operations between suppliers and us as a customer in this case. And this really drives a lot of value in our operations around the globe. So the two slides you really want to focus on, NOK 8 billion 2025. Sorry, Red Cross. We don't like that, but that's where we are. But a little bit about the waterfall on where we are today in the guidance now for 2025.
And then this gap to the NOK 8 billion, because NOK 8 billion will come, but not next year. So first of all, there between 2021 and 2023, in 2023, Europe was down 16%. North America was down 13%. And we still delivered those numbers in 2023, NOK 6.5 billion . And there we were able to compensate for quite a dramatic volume shift, holding on to extrusion margins and also continuing with margins on extrusion ingot on the value-added premium for billet in this case. So that was fine. But as we went into 2024, more volume challenge, another 9% down in Europe at the moment. CRU says 4% down in North America, maybe tougher than that. And yes, we got improvement programs again. And yes, we held on to extrusion margins quite well, but the margin on the value-added premium billet frankly disappeared.
And therefore we have this gap now. NOK 4.5 billion, NOK 5.5 billion, this is where we're looking for next year. The gap, frankly, is the market, the volume. This will come back. I'll come on to that in the next slide. Also normalization of this value-added premium on billet because at the moment it's underwater. The NOK 8 billion will come between now and 2030. This is how we'll get to what we're still declaring as achievable ambition for 2030 in the markets we operate with the forecasts we see, which is 20% up in Europe on extrusions and 30% up in North America, plus the normalization of the billet shape premium. This takes us then into the improvement programs with our NOK 1.7 billion-NOK 2 billion, which we will deliver.
Then finally, the NOK 1.5 billion-NOK 2.5 billion on the returns coming from these growth projects that I've just been summarizing. So to finish, NOK 10 billion-NOK 12 billion is still achievable. NOK 8 billion will appear, and Hydro Extrusions, I hope I've explained how well positioned we are globally with our fully integrated offer within the Hydro group and the way our customers are going to decarbonize their own operations. We are the go-to for their solutions. Thank you very much. So I'll now hand over to my favorite supplier, Hanne Simensen.
Thank you. So hi, good morning. Happy to be here. Happy to be the preferred supplier. My first Capital Markets Day. Looking forward to present to you aluminum metal business and also to have a dialogue with you, some of you afterwards. First of all, aluminum metal right now is delivering very strong EBITDA from upstream operation. But as we heard, we are also facing a dip in the demand for some of our aluminum products in key market segments.
However, the fundamentals for aluminum still stay very strong. The world needs aluminum, and we see that the demand specifically for low carbon aluminum is very strong. So looking at the total market, you see that over the next five years, we do expect an average 20% increase for demand for low carbon aluminum coming globally. Then this will come as primary metal or as recycled metal or as a combination. And I will come back to that. So the low carbon demand we see specifically coming from Europe, from North America, and also from Japan. In total, these markets are demanding approximately 18 million tons of aluminum, whereas nine is coming from Europe. If we then compare to the supply of low carbon, which we're showing on this graph, it depends a little bit how you calculate.
Many of our peers, they're looking at emissions from the process, the electrolysis process in itself, plus the electricity being used, but if you ask our customers, the market, what they are concerned about is the emission in the product in itself, meaning that you have to look from mine to metal, and when we do this calculation, we see that globally, below four, which is what we define as low carbon, we have only a supply of approximately eight million tons, so it will be a scarcity for low carbon aluminum going forward. We believe we are strong positioned and that we have a unique proposition towards the market, so I wanted to say a little bit, how do we go to market? We have, of course, a variety of different aluminum shapes and forms. We are going to different markets with different alloys.
Obviously, all customers are expecting us to deliver the highest, best quality at competitive terms, clearly. But also we see now lately, specifically, that customers are, especially now in the geopolitical situation we are in, also more and more preferring suppliers which could offer reliability and traceability in the value chain. So responsible value chains and traceability. So having transparency in what we do, being able also to come to the market with certified products like we've heard about CIRCAL and REDUXA, and offering a variety of primary and recycled low carbon products where we could be seen as a kind of a one-stop shop, we see is also having a very positive effect in the market. In addition to that, I could also mention competence.
Our R&D and customer technical support people have really been busy at the moment because what we do see is that a number of these end customers. They would like support from us to also see how could they actually implement the right alloys with the right scrap types into their applications. So just a couple of examples, we're working with NKT, a wire rod producer, a market which is growing, to how do we find the best optimal low carbon solutions for wires going forward. Another project is with Mercedes-Benz. We have also worked with other OEMs where we're working alongside with our R&D team and also dedicated team from their side to look into the new applications in the cars. How could you replace higher carbon metals with lower carbon and increasingly also they are interested in recycled metal. So a combination of that.
We're working, for example, with Mercedes-Benz on how to qualify CIRCAL into new applications. Very promising. We are saying that we have a unique value proposition. And this is enabled by our production network, which is actually two complementary business models behind. You have the primary value chain, and then you have the recycling value chain, which is different, although we have a full offering in the market, sometimes with more or less the same products, whereas also in the primary system, we have other products. In recycling, we could offer something else, but it's complementary.
But behind there, on the primary side, it's characterized by big volumes, focus on productivity, is cost-driven, is of course a value chain which starts in the mine. Whereas in recycling, we are close to the customer, so it's local business, it's flexible, it's more complex, and you have a value chain of different suppliers, different scrap types, where you need also competence on the chemistry on those scrap types. And still, this is giving us a lot of flexibility. I mentioned already that we have a full market offering, which is in a way complementing each other, but also it gives us a lot of flexibility in volatile markets. It's about how do we optimize now between prime and recycled? How do we make all these streams of scrap most valuable? And there we have great opportunities having two value chains.
Also, when it comes to growth opportunities, of course we have flexibility now in pursuing growth opportunities where we see it makes sense. So that's the robustness in those two value chains we see as a very good advantage to have it like this. I wanted to go a little bit deeper into the primary production, where the target is to accelerate competitiveness and to maintain our leading position. So the primary system is already in a unique position. We are leading, as I already said, on low carbon offerings, where we have 82% of our primary smelters being delivered with renewable energy. We have a long track record on delivering on our promises when it comes to improvements. I think that's embedded in our culture.
It's a way of working with a business system approach where we also delegate responsibility out in the line to the first operators, making us into a world-class operator, and this means that over time we have been able to move our cost position to the first quartile, and it doesn't stop there. When we are now on the first quartile, we have also opportunities. I will talk about some examples now to further enhance that, and we are delivering a solid return on capital, high cash position, and obviously going forward, we'd like to strengthen our position, further improve, and then also securing a solid cash flow going forward, so I will come a little bit back to that here just to say we are working now on securing the power to our smelters.
I'm very happy that recently we have secured power to ALBRAS, the smelter in Brazil, now almost fully covered to 2030. We're working with our colleagues in Hydro Energy also to secure power for the Nordic system. We have announced three contracts, which is giving us support on the shorter position towards 2035. Continue to work on that. When it comes to strengthen competitiveness, we have a number of different initiatives being now worked on. First category I will talk about is creep. Creep is really about where you increase the amperage and current efficiency in all the pot lines. Over the last 10 years, we have been able to deliver additional 100,000 tons with a quite competitive CapEx. Looking through our full portfolio, we see further potential. 80,000 tons is what we have identified.
So that is really something we look forward now to get out. On the technology side, it's a number of different initiatives. We're talking about battery recycling, we're talking about new pot room control systems, etc. Which is really about increasing the efficiency, taking down the cost, and the CO2 footprint. One concrete example right now is Husnes Hall A, a smelter in Norway. We're now doing a technology upgrade. We used in a way the market dip where we also had some curtailments to use that to do that upgrade. And Husnes is planned to be up in operation now second half next year. Then we have also a number of smaller initiatives, which is in the category digital automation robotization. And specifically, we see great opportunities on maintenance using sensor technology, artificial intelligence, actually to also take down the cost on maintenance work.
More to come on that area. We have heard about how we have a leading position on sustainability. I think that's also a main reason is that we have a quite ambitious roadmap for how we work with that, a number of different initiatives, which is also a key reason why customers want to partner up with us. They want to be part of this journey. So we will hear more about the Alunorte fuel switch, but for me, it means that we get alumina with a lower footprint, which will bring into the Norwegian smelters, and therefore we will have a REDUXA footprint, which is going down, which we will use in the market. So that's very concrete. We have a number of different initiatives on cast-house decarbonization.
It was mentioned that we have biogas coming into Sunndal now any day, and with the potential of maximum 20,000 tons of CO2 reduction. And then we have the hydrogen pilot, which is up running next year. We will test out in industrial scale, and we're also looking at electrification of the cast houses and have R&D project on that as well, like plasma. On the more step change technology development, talking about HalZero, and Ivan mentioned it already, we are now moving from lab scale into building a test facility in Porsgrunn in Norway. And hopefully next year on the same event, I will have the first metal from that operation. The plan is then to go to industrial scale by the end of this decade. Quite promising. Then on, but of course with a lot of technology risk, I must add.
On CCS, we continue to work on a number of different partners and technologies. And unfortunately, we are not as mature as we hope to be today, but we also have some promising development, which means that we hope to announce some development quite soon. And in addition, we are using post-consumer scrap, not only in the recyclers, but also as part of the prime portfolio. So to add PCS is what I mentioned also being worked with customers to add PCS in the products. And therefore, we have invested also in the Norwegian system in Årdal and in Høyanger in recycling facilities. So a number of things ongoing on the primary side. Let's now move to recycling, where the focus is to work on improving the margins and then execution on our growth path and plans. So customer demand for recycling is accelerating.
I think almost all our customers now, even though they are customers of the primary smelters, they ask how much scrap can we possibly get into the products. So this is really a strong trend. And I think we are well prepared for meeting that demand. We have over many years developed the competence, which is about scrap procurement, really about knowing the different scrap types, whether it's soda bar or table, different kinds of chemistry, different opportunities, and mix that with a competence on material management. So it's really about matching the right scrap with the right product. That's how you get out the margins. And then we have also now invested in and developed and invested in sorting capabilities, HySort, which we are now implementing in a number of different plants where we could take that into industrial scale.
And all of that is giving us some good opportunities now to improve the margins going forward. We have increased the PCS usage over the last years, around 200,000 tons from 2020. So we're now at 450, which again have a positive effect on the hot metal cost. And we see opportunities to reach 850, and I will show you why in a few minutes. So by having more PCS into the portfolio, instead of standard ingot, you are also able to take down the hot metal cost. Less linked to LME, the more advanced and complex scrap, the better you could actually remove the cost and therefore increase the margins. And with the PCS in our portfolio, it also means that we could increase the volume of CIRCAL. And I think you heard here that CIRCAL is something where we are sold out. We could have done much more.
So as you see here, we have going from 20,000 in 2020 to 60,000 this year, with a potential now at minimum 250,000 in 2030, and that's what we're working on. The market right now is challenging, and one of the reasons is that the current market is in what we call a cyclical downturn. It's not structural. Because right now we have a weakness in the building and construction, which means that less scrap is being generated, so you have it on the build side, lower demand, and you also see that the scrap prices have gone up. So it has been quite volatile. But if you look at the cycle, you see that the margins for every cycle have increased, and we think that coming through this cycle, we will also see again an increase in the margins. Because the mega trends are clear.
I talked about the customers. The regulators are also clear. And when you look at how now also the society is looking into recycling, we do expect that as the economy matures, the scrap generation, the recovery rates will increase, but also the collection rates, which means that sorting technologies will be developed and will be even more important going forward. And then why do we see the higher scrap prices? Well, there are less scrap available, I already talked about, but we also see that scrap is leaving Europe and leaving the coastal part of North America. It goes mainly to China. And you could say it's a kind of both a push and a pull effect here. The push effect is that in Europe, we haven't really had the sorting capability to utilize that more complex scrap.
In Asia, it's a pull effect in the way that they have been able to take in the scrap and hand sort it. Therefore, we see that unbalance. What we are doing is that we are working, of course, on the technologies around sorting. We do see that over some years, and analysts are showing that in some years, the Chinese will have a more balanced approach because also more scrap will be generated in China. We expect therefore that it will be self-sufficient by 2030. We're also working here with the regulators. As aluminum is being identified as a critical raw material in Europe, why do we see that much scrap leaving Europe? That's a question we have. What are our plans for the roadmap for the next few years? It's a focus on improving the margins.
It's about realizing the full potential of the completed investments, and it's about driving profitable growth. I just have one example here of how we work on improving the margins. I talked about it in the way that all recyclers are facing more or less the same market conditions, and we believe still that we are in a good position. The biggest cost in a recycler is linked to the metal, 80%, and then we have focused on that. In one specific plant in Spain, Azuqueca, they have been working very structured in a way now to take down the hot metal cost by replacing standard ingot, more expensive scrap with a more complex post-consumer scrap, and by doing that, they have been lifting good competence on scrap, on chemistry.
They have been able to match that with more CIRCAL products, which means that Azuqueca right now is the leading plant in our portfolio. This competence, we're now spreading out to all our recyclers, and we're adding also machine learning and building some operational tools, including also some cast-house equipment, which means that we are confident that the hot metal cost, it's a huge potential to reduce that. We have put up a target of $30 by 2030, and we are confident we will reach that. When it comes to strategic growth, so what is guiding our investments? It starts with a customer approach. What is happening with the markets? We see the trends in the U.S., for example, where we are now ramping up Cassopolis, a plant which is more advanced, specialized products into automotive and also CIRCAL.
And we're working with customers to see also what is the specific needs going forward and also with new ways of working, as we heard from extrusion here about this window to window as an example. Focus right now is on scrap sorting. It's about further develop and implement the technologies we have, the HySort as an example, where we have now implemented HySort in the US in a new joint venture we have there with potential also to further grow. And we're using also the HySort in Poland, in Alumetal, in Nowa Sól. So then what's going to happen going forward? It's still about implementing more of these sorting technologies, and it's also about further enhancing our competitive advantages. I talked about the more specialized cast- houses like Cassopolis.
We also have Székesfehérvár, and we see a lot of potential now also with Alumetal, which is the company we acquired and where we see potentials for synergies. We are on track to deliver on those synergies. And you could say that by normalizing, that's what we put in the assumption here, by normalizing the utilization of the recyclers, we have also used the last 10 years' average of the margins, which you could call is a little bit conservative. We will then reach another billion. If we add the newly installed capacity, we can add so then I will round off just again confirming that aluminum metal has a leading market offering, and that is enabled by the value chain transparency, but also the flexibility we have in the two complementary business models. So our focus now is yes.
Yes. I think Jason has a question.
That's Jason Fairclough, Bank of America, Merrill Lynch. Hi, Eivind.
Hi, Jason.
Yep. Thanks for the presentation. First, congratulations on refocusing the business on the core. Glad to see that some of those side projects are being wound down. Just a question about the place of extrusions. And sorry to your British friend there. I mean, bottom line is the returns are lousy. And if we look at most other aluminum companies globally, they've shed the extrusions business. When Sven Rickard bought in the business, a few people really raised eyebrows. And to be honest, it's been okay, but it hasn't been fantastic. So there's a chance here. Are you really committed to extrusions? Do you really want to put growth capital into a business that isn't achieving its cost of capital?
Thanks, Jason. So the short answer is yes, we are committed to extrusions. Let me explain it in two angles. If you look at this from how we approach the sort of value proposition, value chain that they see. So when we do these transactions with the large companies, they don't only look at the embedded footprint. They go to Brazil. They look at the mine that we have. They go through the pipeline all the way to Alunorte. They look at how we operate Alunorte. How do we work with the communities? They look at the smelters that we have, how we operate those. All of that transparency goes into the product that Paul can produce. No other competitors can do that.
That gives us a competitive advantage in the market. So yes, we can look at extrusion in isolation, but you have to look at what this gives us of value in the entirety of the value chain. That, I think, is quite significant. And it's a differentiator in the market. So yes, we're committed to extrusion going forward.
So just as a follow-up then, is it then an issue of transfer pricing? And so ultimately, we have to be a bit more holistic and think about returns in the wider business. So fine extrusion returns look lousy, but oh well, that's the cost for the wider business to sort of deliver the model that you've chosen.
So every part of the value chain, there is a, it's not a subsidized transfer price, so it's a business-related transfer price, right? So they pay according to what the market is. That's what aluminum metal pays to John and B&A. They pay on cost-plus. So when Paul buys aluminum from Hanne, it's also based on whatever market price there is. Of course, these markets don't swing entirely in parallel, right? So it also gives you a little bit of a cash flow protection, and some of these markets also don't move in tandem in terms of profitability. But it's the value chain of totality that gives us what we believe is a preferred market position today as a value chain.
Okay. Thank you.
Hi, Dan Major from UBS. A couple of questions. The first one, just looking at the continuation or the iterations of your improvement kind of programs. I'm looking back at last year's Capital Markets Day presentation, slide 103. You got NOK 8.7 billion of identified improvement targets in 2024 - 2030, split NOK 5.4 billion improvement, NOK 3.3 billion commercial. And then I look at page 79 of today's presentation. It's NOK 6.5 billion . I guess the question is, have you realized all of the difference between the NOK 8.7 billion and the NOK 6.5 billion in the last 12 months? And when we think about how the market looks at these kind of programs, I mean, it feels to me that the sort of cost normal doing business requires continuous improvement. It's not necessarily quite just add NOK 6.5 billion to the EBITDA in 2030, all else equal.
Is that the wrong way of looking at it?
So Trond Olaf will go through a lot on the improvement program in his presentation. In a way, everybody in the business works on improvement programs, and they should. I think one of the big differentiators between us and many of the others is that we work on this continuously. I think what you see in parts of the business is that they start working on it when times are tough.
For us, this is really a key part of the DNA that we are and have been over time in terms of delivering this. There are some differences between the improvement programs that we had and the new one. We've shed some of the smaller activities, shed a lot of the smaller activities, so they are excluded. We don't count those. A lot of the activities that were in the old one were also sort of more ambitions in a way that were not backed by concrete actions. What you will see and what you will hear in the NOK 6.5 billion that we announced today is that they are backed by very concrete actions in what we're doing.
For me, it's important when we do these improvement programs that to the extent that we can show it to the market that there's actually a link between the P&L and the improvement program that we report on, that's where we can create value and create trust that we actually are doing the right things. Because there are, I think in general, too many improvement programs with very high.
Thanks. Again, maybe I hope I'm not front-running the future parts of the presentation, but similar kind of question on the commercial program with specific reference to the green premiums. This time last year, you targeted NOK 2 billion upside by 2030. It's now NOK 2 billion. Does that imply that you've embedded? What have you embedded this year? Is it an upgrade to the number, or have you just not really achieved a huge amount of incremental upside this year because the number is actually the same?
We are progressing quite well. And again, I will let Trond go through the details, but we are progressing quite well as you saw from both my presentation and from Hanne's and Paul's. Despite the challenges in the market in Europe and the U.S., we are selling more CIRCAL, and we're selling more REDUXA 4.0 than we did in 2023. We're selling more REDUXA, more CIRCAL than we did in 2022. There is continued progress despite the challenges in the market in terms of selling more green products. And we do so at an increasingly larger premium. The ambition, and we said last year was an ambition of NOK 2 billion. It wasn't a target. So of course, that's a difference. So still an ambition, and that's what we're working to get to. But there will be a gradual development over time towards 2030.
Okay, thanks. I'll let someone else have a go.
Good morning. Ioannis Masvoulas from Morgan Stanley. Thanks for the presentation. A couple of questions from my side. First, if we look at Norsk Hydro, it's been a leader in extrusions, in greener aluminum. But if we take a step back and we look at what's happening in Europe, a lot of the decarbonization projects and green initiatives are being rolled back. As you indicated today, and we've seen that across the broader industries, customer industries are not as keen to adopt and pay for greener metals, steel, aluminum, at least not yet.
And yet, if we look at your slide deck with the Bridge to 2030, you pretty much reiterated the targets around extrusions and recycling. And if we look at extrusion specifically, half of the delta from the NOK 5 billion midpoint to the NOK 11 billion midpoint is really coming from market normalization. Is there a risk that some of this market normalization doesn't happen because some of the capacity migrates out of Europe? CBAM is being a question mark here. Why wouldn't you come up with more conservative estimates and wait and see how the market recovers? Where is that confidence that the targets from a year or two ago are still valid despite what's happening in the broader European space? And that's the first one.
Do you want to start, Paul?
Yeah, long question. So first of all, on the customer developments on the decarbonization, we still see that as very, very strong. You see all the headlines about the BEV stalling, which it clearly did in 2024. But I still speak to a lot of customers who are still on that journey. They're not softening their own targets on 2050, 2030. They're cautious, of course, on some of the new models, BEVs. So we do see some delays on some of the platform launches, but they're still going to come. So for me, I still see good traction on the - 55 European Green Deal and still momentum in all the markets I'm operating in. The pull is still significant. So yes, some delays, but directionally, it's still going in the same direction for me.
I think to add to that, I mean, if you listen to the voices out of Brussels for the moment, right, with the Draghi report, there was a clean industrial deal coming up 100 days after the new cabinet takes its place in January. There's a lot more talk about competitiveness of Europe. There's a lot more concern around, is Europe going to be competitive or are we going to be squeezed between China on the one side and the U.S. on the other side? So at least there is more focus on it. And then, of course, there's always a chance when does the focus translate into real actions in a way out of Brussels? So we're still confident that it's going to come back. I think parts of the market is probably lost when you look to OEMs, for instance.
It's hard to see that Chinese EVs suddenly are going to leave Europe. They seem to be hovering around 30%-35% market share. That's probably going to stay. We're mostly exposed to the larger, more premium brands of cars than the small to medium-sized. And of course, the bigger brands also use a lot more aluminum per car than the smaller to medium-sized cars. We're still quite confident this will happen. CBAM is a big discussion. There are some quite glaring big loopholes in it, both when it comes to what we define as the scrap loophole, but also when it comes to the product range of products that's under the scrap loophole, under the CBAM, right? Because there is a risk that if they don't update, if they don't expand the product categories, there's also a risk of some industries moving out of Europe due to CBAM.
I don't think that was the intention of the European Commission when they introduced the CBAM. It's in the reporting phase. There are ample opportunities to improve that structure, and we would see where they come now in 2025/26 on this.
Could I add just one thing on demand for greener? What we see over the last couple of years, including now the last 12 months, is an increasing number of customers willing to pay for low carbon. It's not anymore just the frontrunners, even in a weak market.
Thank you very much for the comments. Just a second question on, again, the market backdrop. You showed in the slides that we are below COVID levels when we look at extrusion demand, recycling under a lot of pressure. Typically, this type of environment offers opportunities for players with strong balance sheets and synergistic potential. But you only tend to talk about organic growth. So how does M&A fit into your growth ambitions? And where do you see areas geographically or in terms of products where you could look at inorganic options?
So M&A will always play part of the, at least in the beginning, the internal discussions when we talk about growth. We bought Alumetal June 2023, which was part of entering into a new market for recycled foundry alloys, also giving us very different scrap sorting opportunities than what we had in the portfolio. The whole market for us is predominantly in Europe and the U.S., so that's where we would look for those types of opportunities. And then I think for us, the way we have our strategy, both organically and inorganically, in extrusions and in recycling, these are discrete decisions, right?
It's smaller investments which you can decide to do and not to do. That gives us a lot of CapEx flexibility going forward. And that's probably also how we should think about M&A going forward. Bolt-on acquisitions, certainly something that you would do, but these massive investments or massive M&A transactions is probably not that attractive and certainly a lot more complex to do than the smaller bolt-on discrete decisions.
Very clear. Thank you.
Yeah, morning. It's Amos Fletcher from Barclays. A couple of questions, I suppose. First one for Paul. Quite often when we chat, we're always expecting an improvement in market demand 12 months out. Are there any genuine green shoots visible as yet in any of the end markets?
I'd say certainly recycled content low carbon, yes. And that can be in the markets I described there, B and C.
As I say, to grow your share and do similar volumes this year to prior year, that demonstrates there's a serious market pull for this solution, so yeah, I see one or two shoots, but I'm not confident enough with what I see today, and bear in mind, we're in Q4. We're heading to end of year. People will be closing up shop, reducing their inventory, so now's not the time to see it. I think the real testing time for us on extrusions will be as we come back, mid-January - February. That will really start to tell us if B and C in particular is starting to shape up for the normal building positive cycle in the springtime, so nothing I see today is giving me enough confidence to commit to eyeing it, frankly, in most of the segments we operate in Europe.
In North America, I would be more optimistic. Some of the trends I see there, and of course, some of the regulation people talk about at the moment, I mean, that can be good for our business in North America, whether it's on premiums or whether it's on local demand, this would be a more optimistic area for me.
Okay, thanks. And then as a follow-up, I just wanted to ask, Norsk Hydro is very exposed to the European auto industry and Chinese competition going into that, as you mentioned. Have you got any plans to reduce that over time, for example, to shift more capacity investment towards the U.S. where it's a bit more of a protected market?
On the extrusion side, Paul, do you want to?
Personally, yes. I mean, this is really on the radar screen. There's the global territory at the moment.
I would prefer to spend my investment dollars, especially growth investment. We have a lot of good internal discussions on the opportunities in North America. I don't see enough in Europe to really generate the same enthusiasm on growth investments. Like I say, the automotive press investments we make, that's on nominations. If those nominations come, then I'll put more on the table for sign-off. The haircut I referred to, we haven't signed off an automotive press in Europe, the ones I talked about for two years. Really, in my ambitions for 2030, we would have been talking about one or two additional ones in that last 18 months, two years. North America, I see more prospects for investment dollars there.
Good morning. Good morning. It's Matt Greene from Goldman Sachs. Hanne, maybe perhaps two questions for you, if I may. The first one, you just highlighted 80,000 tons of production creep in the primary business. Over what timeframe is this? And is this just amperage creep across the business, or is this sort of isolated in particular parts? And then secondly, on the secondary recycling, the $30 a ton by 2030, I suspect a big chunk of that is on the success of your HySort technology. But just can you give us a sense as to just how far down the post-consumer scrap chain you can go? I mean, is this allowing you to perhaps take Zorba and upgrade that?
Okay, on the first one, 80,000 tons, I talked about amperage. We have concrete projects using longer anodes, for example, in some of the plants, which will give extra volumes. So the timeline we're talking about here is towards 2030. But there are concrete plans and projects behind 80,000 tons. When it comes to the $30, what kind of scrap? Well, it depends a little bit on the plant and what kind of scrap types and the mix on the products you could offer. Hopefully then, with the technology, with the competence, we could dig really deep into it and therefore also target some Zorba, for example.
But if you look at the example that you mentioned, Hanne, the Azuqueca plant, they do not have the HySort technology. So it's really about understanding which scrap you get in from an experience perspective versus the products that you intend to produce. Today, that's very much sort of a competence sitting in people's hands and heads in some of these plants. So part of the technology enablement that Hanne talks about, it's also how do you transform that personal competence into a digital tool that can be used in more plants? So that's also part of it in addition to the high sort. So again, using technology based on people's competence will enable part of that $30 improvement.
Any further? Ye s.
Hans-Erik Jacobsen, Nordea. Question for Hanne. You mentioned that you're lobbying governments in order to reduce scrap exports out of Europe. How successful do you think you are going to be? And if you are successful, what do you aim for? A total ban or export taxes? Or how do you see this will work out?
Yeah, that's a complicated question. As I said, 2-3 million tons is leaving Europe and the US. And as Europe has identified aluminum as a critical raw material, this is something we at least bring to the attention of our politicians. It's not going to be easy. And I can't promise that we will be the one that actually makes that change the regulations. But it's something we are addressing in different forums through associations, through our contacts, also to make sure that people understand that this is raw ma terial that Europe needs.
Yep. So I sit on the European Aluminum Association, and I can tell you this is a very, very hot topic, not for us as just extruders, but also the recyclers, the rollers, and the upstream. And there's an awful lot of lobbying to find some way of retaining this scrap in Europe. And not just because it's critical raw material, it's stored energy.
So it's much better to use our scarce, expensive energy to recycle scrap than, sorry to say, more primary upstream. So I think there's a lot of momentum, there's a lot of support. It's just moving the politics in Europe. But if the U.S. moves quicker than Europe on this, like they tend to do, especially on anti-dumping tariffs, if they do the same on their scrap exports from the U.S., that's going to be even more important that Europe moves the needle. Otherwise, these Chinese are going to be after even more of the European scrap. So this is a very good question. We work extremely hard on that.
And then I think, I'll say, if you look at the little bit bigger picture, right, because it's not only aluminum that leaves Europe and the US as scrap, it actually leaves in combination with what we call red materials, so copper, for instance. So we have about 800,000 tons of copper that leaves Europe. This would be a very reasonable place to start, both from an energy and from a material perspective.
Thanks.
Any further questions from the room? No. Then we will have a short break. So everyone needs to be back here five minutes past 10:00, and then we continue with the presentations. Thank you. Ja. Då kan vi ta och köra "Edit Mission" och sen hans video. [Foreign Language]
[Foreign Language] .
Aluminium exists in everything around us. This light, durable, infinitely recyclable material has built the modern world. What we make is critical to every emerging technology driving the green transition. And right now, global demand for aluminium is surging. Aluminium production accounts for 2% of global emissions. Since 1990, Hydro has cut emissions in half, while almost doubling our aluminium production. Today, Hydro Aluminium emits about a quarter of the industry average. That's not good enough. By 2030, we'll cut our emissions by 30%. That's a start. By 2050, our production will be net zero, enabled by our technology roadmap. And emissions is just one factor. By rethinking every step of our value chain, we can support a just transition and contribute to a nature-positive future. We can unlock an industrial revolution, creating industries that matter for people.
We are pioneering the green aluminium transition, accelerating growth, value creation, and sustainability to meet the needs of the future.
Okay. We still have a good morning, I hope. So, you know, now we are going to the more exciting part of the value chain. So, you know, we've talked about this Chinese stuff, Paul, but also this red bauxite, then alumina is, to me, an extremely important part of this value chain. And of course, like Eivind have talked about, it's not only about the operational excellence. It's not only about the cost. It's also about social. It's about our footprint on the environment and our footprint on climate. And that's kind of what I think we need to keep in mind, and we are keeping in mind, because last year when I came, I was a bit less optimistic. My financial numbers were not so great.
Market was not so supportive. Today, we see that PAX is at all-time high. You know, the world is smiling to us in the BNA business, but of course, this is something which is flavored of a market situation, you know, which we know over time in our commodity business. This is the first time in my 35 years that I actually had some help from the market. Timing is not so bad because we have actually spent a lot of money to reposition Alunorte and our Bauxite Alumina business. So to have this a bit special situation on Bauxite and Alumina with a PAX price of $800, of course, supports kind of a short-term type of profitability. But if you look more at the fundamentals, I think we are seeing that, you know, the closure of Kwinana, some hardships on Bauxite supply into China and into EGA.
There are elements that we know over time most probably will be reset, and we will have a more normalized development of the price. But we also see that even though we have a special situation on the income side, the income side of materials with caustic oil, coal, and gas is more on a more average, normal average kind of cost level. But that said, I think what we have since last year, we have delivered on those promises that we said we would work on cost improvements. We would reset in a way our energy mix. And you know, what I can say is that we have delivered on that. We are running our operations in Brazil at capacity. And we are doing that even during a transition on the energy mix.
We have implemented a fuel switch change where 13 of our assets are changing from oil to gas, calcination and steam production. We are introducing an electric boiler relative to energy costs going forward. At the same time, we have also improved the asset integrity of the plants to reduce, you know, these surprises that we had. You have seen that, and you have discussed that with us. You know, we have spent quite a bit of cash or sustainable, also CapEx on improving, you know, the operational stability. We have also the tailings system. So we have actually removed creating new tailings dams by actually developing this dry backfill process. That, again, has given us a stable and less invasive kind of situation relative to having to use new areas for tailings dams.
Then on the asset side, we have certified as the first refinery and mine in the world the asset integrity by ISO 55001. It's 33,000 assets that we now have registered, and we know exactly how and when to either replace or maintain. We have also driven this maintenance program by introducing digital transformation, where we have created savings of NOK 200 million on a more stable operation and better maintenance program with new tools. In our industry, generally, even if you have 50 - 80 years of bauxite reserves, it's generally a trend that contained alumina goes a bit down and reactive silica goes a bit up, which also means that you have more overburden. Generally, you move further away from the beneficiation. What we have been able to do in our mine is actually to compensate both the overburden cost increase by actually neutralizing it.
We have also been able to actually compensate cost increases because of these increased volumes by improving the fleet that we are operating in the mine by moving to bigger and more robust equipment and also combining diesel and electric vehicles. This gives both the benefit on carbon emission, but also a safer operations. As an example, one of these trucks is consuming 400 liters of diesel per day. And you know, we see that the cost benefit of electricity or electric vehicles is also a way of modernizing the whole mining area. In Alunorte, like we talked about, the transition to renewable energy and gas has driven a cost improvement of $25 per ton, or between $160-$200 million. And that, I think, combined with the good market situation we have, is showing that we are focusing on what we can affect.
We are driving every day down cost. And on top of that, we also, by introducing the partnership with Glencore, lost two million tons of equity alumina. But our team in Switzerland has then been working this year to reestablish a commercial position similar to the one we had before the partnership, also to drive profitability through knowledge in the industry and trades. So if you then look at, you know, the improvement program is kind of part of a DNA, dedicated teams. We have a program called Connect, where the whole organization is actually engaged. We just did a Hydro Monitor, we call it, a survey among employees. We had 98% participation and 95%, in a way, you know, of the people are in a way happy with the way we are working, in a way Hydro is taking care of both people and the environment, the whole business.
But that means that we also have a huge benefit in involving these guys in the improvement program. So driving these bigger changes with the energy mix, but also the day-to-day stuff and introducing more modern ways of working is giving us, you know, and a procurement program, $0.8 billion of cost improvements as a target for 2030. And we are on the way to deliver on that. And then you also see that by 2025, we will have a movement down to the first decile on the cost curve.
Yes, short-term help from the market, but the DNA of us in BNA and Hydro is work with what you can affect, reduce the consequences of the quality of the bauxite, improve the mining operations, increasing the efficiency of the fleet, and then work on the logistics and transportation, because there's a lot of logistics in mining and refining operations. And then, of course, asset integrity is extremely important because we have, like I said, 33,000 assets. So if you have surprises here, you will also lose your operational stability and your capacity. So that's what we have been focusing on over the last few years, and we are getting reaping the fruits a bit of this now by also improving the competence of the organization. I started out saying that for me, it's safety priority one, two, and three. Then operational excellence.
But we also have this kind of operational license that we need to care about. And we learned our lessons in 2018. So reduce environmental footprint, reduce climate footprint, and increase social reach. But when we then go to the climate part, we are already at a good starting point with a 0.65 tons of carbon per ton of alumina in Alunorte. But by now introducing fuel switch and three electric boilers, we will move down to one of the leading positions in the industry by 0.44 tons of carbon per ton of alumina. And this journey can be continued if the market kind of supports it and people start actually valuing the carbon reductions. Then we can add more electric boilers, reduce dependency on coal, and end up more or less at 0.2 by 2030. And there's no technical challenges.
It's more, you know, whether the market actually appreciates or there's a carbon tax. We are ready to move, and we are ready to deliver on this, but it needs to be jointly with our customers. That also already drives us down to the first decile on the carbon kind of comparison curve in the industry. It's a very good starting point for capturing value. We already do, like both Hanne and Paul have talked about and Eivind, but more to come. If you then move over to the other building blocks, climate is no kind of carbon. It's also SOx, NOx, and particulates, which are kind of being reduced with these initiatives on the energy mix. We have a social focus because I think we learned without the thriving society around the plants we have, you know, Hydro will not succeed in Brazil.
So we have joined partnerships with the government. We have built so-called peace houses. These houses have services from the government. They have doctors, they have education, they have sporting events, they have an array of offers to the people that are less fortunate in a way. And it drives down criminality. And it's more or less than 1,500 people per day going through these facilities. And we have built one in, or we are building one in Paragominas, one in Barcarena, and two smaller ones on the pipeline based on the test we did over the last three, four years in Belém. So this is one of those bigger initiatives.
We also have the Sustainable Barcarena Initiative and the corridor project that I even talked about, which is a big program where we are actually trying to attract also other investors to be part of this journey on just transition and our social journey in Brazil, which is also encompassing, focused on nature and our contribution to nature positive. So it's the people, but it's how people work and live in the region. And on nature, we are also having a very strong focus, like I said, on reducing the footprint. And here we have in the mining area already introduced dry backfill, which means that when we actually take out the bauxite year one, we are already reforesting year three, and we are putting back the tailings into the mine. And that's a new license process that we have been using for the last two, three years.
We are now sharing that in the industry. That gives us no more tailings dams and a reduced footprint. This is also an example of how we are practically translating, you know, our focus on nature positive and trying for the existing dams. We have a strong focus on, you know, following global standards, and we are potentially now one of the first mining companies to be verified following the GISTM standard for tailings monitoring with a third-party verification at the end of this year. In a way, making sure that there's no surprises and that we have good governance and standards for the way we are operating is also key. What we have seen now is that, of course, we don't do this only because we think it's the right.
We also do it to try to differentiate ourselves because we think that we said that this transparency and the value chain is so critical. And now we are becoming one of the few companies that can from bauxite all the way to the end product or the semi-end product actually document that we have human rights, we have, you know, nature contribution to nature positive, all in a setup which is transparent. Mercedes-Benz came and visited. They audited us. And they are one example of saying, "Hey, we like what we see. We know that we depend on the aluminum for the transition and the greener transition." And Hydro has a good solution. So they have signed up to join us in our efforts in the Amazon on our corridor project, which is kind of improving the livelihood of the people in the region.
So this, to me, is also a differentiator that gives us a unique position in the market and creates value. So it's a kind of, sometimes you see this as cost. I see it more as part of doing business, but also as a value differentiator going forward. The other part of this industry is that there is a huge bauxite residue. So you take out the bauxite, it's four units of bauxite, becomes two units of alumina, becomes one unit of aluminum. But the residue then is a big, big challenge. It's 3 billion tons already stored. There's 450 million every year added. So we have introduced a focus on how could we get residue over the next 10-15 years. And here we have a partnership with Lorinvest in Brazil.
They have a company called New Wave, and we have now developed an industrial process to actually extract the pig iron from the bauxite residue. There is between 35%-40% pig iron in that residue, and we have industrially now tested it, and as we speak, we are building an industrial plant in Barcarena for 50,000 tons, which can be scaled and could create a new industry in the region, but would also then give us a product with high value, and whatever's left will actually be an inert building material type of slag, which can also be introduced in different value chains, so I think that shows a bit that as you put focus on something which we saw as a challenge, it starts to become a new opportunity, and hopefully this will also be scalable so you can use it other places in the world.
New Wave, of course, is the one doing it. We are furnishing the ore or giving them the access, setting up the pilot, confirming the industry, also confirming the concept. But and we have an option to be part of it, but this is kind of a bit that we are not going to be pig iron producers, but we are going to try to create a circular opportunity. So all in all, I think that what you see then is that yes, the market is there. Our profitability is better this year than last year. We also foresee that in 2025, we'll have a good start of 2025. We think that most probably during 2025, there will be somewhat of an adjustment and the supply demand might be more normalized.
But so far, I think it shows a bit that by moving down to the first decile on the cost curve, we have repositioned Alunorte and alumina business. Thank you.
Hi and good morning, everyone. Very happy to be here. This is my first Capital Markets Day in Hydro. I joined as EVP of Energy from July 1st this year. Long background in the energy industry, former CEO of Nord Pool, the physical power exchange. And I can tell you what is happening in the energy markets now and what we've seen in the last five years, I would say, is very exciting. The green transition is really happening now. If we look at on a global scale, massive investments are going into this space, and it's double the amount that goes into the fossil fuel space. This is mainly driven by China, Europe, and the U.S. And this growth, this tremendous growth is expected to continue.
According to the International Energy Agency, the world is set to add more than 5,500 GW of new renewable capacity between the years 2024 and 2030. And that is three times the increase we saw in the five previous years. The chart to the right shows solar and wind development in China, U.S., and the E.U. And according to the Chinese government, China will reach their 2030 targets in renewables already this year. And that's six years ahead of schedule. And then China will be home actually to half of the world's total renewable power capacity in the world. China also dominates the key components within renewable technologies, as mentioned by Ivan. A lot of aluminum goes into especially producing Chinese solar panels. But also in the U.S., in E.U., we see rapid growth in renewables, and we expect that to continue.
It's driven by climate, energy security goals, ambitious policy investments, and improved technology, and of course, lower cost levels. The solar module prices have almost decreased in half since early 2023. Looking forward, when looking at the technology we believe will continue, it's solar across all geographies. Moving to Norway. Norway, on the other hand, investments within the renewable space have slowed down. We all know that we're familiar with the onshore wind development that sort of really slowed it down in 2019. But when we look across technologies, we see very little improvement. The Norwegian power balance is weakening, and it will be tight until we have some sizable offshore wind volumes in the mid-30s in the system. And this is a big challenge, and it's a big concern for Norwegian industry.
The demand for renewable power is growing due to electrification of society and decarbonization of existing industry, as well as potential new industries, and this is the desired outcome. Norway wants to be part of this. However, we will not succeed. We will not get to see new investments within this space if we don't have a power surplus and competitive power prices, and we have some amazing hydropower assets in Norway and some of Europe's best wind resources, so if we manage to develop these resources in a sustainable way over the next coming years, we will really get an efficient and balanced power system with competitive prices. The chart to your right shows how the hydropower and wind power play together in the system. This is one week in the price area NO2 in Norway, and just see how perfectly it plays together.
When there's a lot of wind blowing and coming into the system, the hydropower producers take down their production, and vice versa, when there's little wind, the hydropowers can turn up their production. Therefore, this balancing of this intermittent wind power is less costly in the Nordics than in regions with less hydropower. Meaning to balance out the system in the Nordics is less costly, for example, than in Germany, and with all this more wind and solar coming into the system, as well as shutting down the coal and the nuclear, just in the U.K. in September this year, the last coal is out of the system for use for electricity. So even U.K. now, it's no more coal for electricity, but taking out all this nuclear and coal increases volatility, and if you look to the graph, you see that there are some really high spikes.
That's the energy crisis. But also after the energy crisis, we see that a whole different level of volatility in the market than we saw before the energy crisis. And that means that within hours, it can change from abundance to a very tight system, meaning peak prices to zero prices and even a lot of negative prices. This year, we've seen a lot of hours with negative prices in different price areas. And this volatility, it increases the need for flexibility and also the value of flexibility. And there reservoir-based hydropower comes into play because that is an excellent technology to add flexibility at a lower cost than the alternatives. So by investing into hydropower, flexible hydropower, we contribute both to a more efficient power system, but we also get the opportunity to move the flexible production to the right price hours.
In practice, you can say that this flexibility acts as a big battery in the system, shifting energy production between hours and seasons. Analyzing, optimizing, and acting on these markets is key going forward and commercially very interesting. That brings me to our production platform and commercial ambitions. Energy has a strong production platform, and I must say I'm very impressed by seeing the energy organization and how they work and act on continuously making sure that we are industry leader in terms of cost and operational performance within the hydropower operations. The reason why we do this and have this position is we have the standardized processes, we have one control room, we have efficient resource planning, and a strong cost focus. Looking towards 2030, we'll continue to shape our portfolio and organization to deliver on our ambitions.
Today, we also launched a NOK 200 million improvement program as part of Hydro's overall improvement program. This program will target both the restructuring that Ivan mentioned, but also reducing organizational costs. One of Hydro's key priorities toward 2030 is growth in the renewable power generation. We will also shape our organization to fit that agenda. A part of that is also to develop our market organization going forward. As you can see to the right, we have a commercial ambition of NOK 550 million towards 2030. That has to do with monetizing on this volatility that we see in the market. It has to do with short-term operational hedging, and it has to do with long-term trading positions. That closely linked with digital initiatives and investments, including targeted use of AI.
Our market organization is closely linked to our sourcing activities, ensuring a stable supply of power at competitive prices to our aluminum operations. If you look to your left, you can see Hydro's captive power and PPA, so power purchase agreement strategy, that it ensures the robustness and contributes to place Hydro at the lower end of the cost curve for our aluminum business. Here you see the Norwegian smelters. We are one of Norway's largest consumers with an average consumption of 17 TW hours. We have a cap, and then we have our captive power. We're quite well covered towards 2030 with about 50-50 with our captive power and external suppliers with PPAs. We saw during the energy crisis that it was quite challenging to get new PPA deals at the right level. However, now we see things are moving in the right direction.
We just signed a PPA contract with Skellefteå Kraft, which is two TW hours over a seven-year period. And we have several good leads in the pipeline. In Brazil, we are fully covered toward 2028. And this is sourcing from Hydro Rein, solar and wind parks, as well as external suppliers. We are working on several routes to secure power at competitive prices for our aluminum operations. Within our hydropower portfolio, I'd like to mention two projects. One is the last solar upgrade mentioned, I think, by Eivind. This is with our partner, Lyse. This is both to upgrade and expand. So both new annual production of 800 GW hours and a huge increase in capacity, 650 MW. So using that flexibility. So this total investment is estimated at NOK 7 billion-8 billion with a possible construction no earlier than 2027.
Then the other project, Illvatn Pumped Storage, is in Sogn. It's another very interesting project. This is a smaller project. It will generate 84 GW hours of more annual production and 48 megawatts in capacity. Total investment is set to be NOK 1.2 billion . The final investment decision will be later, will be second quarter of 2025 with a construction starting later that year. We're also developing and working hard on developing onshore wind and solar projects in the Nordics and Brazil. Wind projects close to our smelters are fully owned by Hydro, while all other projects in the Nordics and assets in Brazil are owned by the joint venture Hydro Rein. The aim is, of course, to get more renewable power into the market, but also to conclude PPAs between these projects and our industrial activities, all the time preserving prevailing market conditions.
Also, the energy sourcing team in Hydro has a strong track record in continuously being out there in the market, finding price-competitive contracts for the other business areas as well. Just on transfer pricing, note that our internal contracts mirror the external contracts and are thus market-based. Over to Hydro Rein. Hydro Rein is an important contributor to Hydro's renewable growth ambition, and we are very proud of how far they've come in a few years' time. The company has now 1.7 GW in operations, 8.4 GW of gross capacity in the total portfolio, and more than 60 renewable projects across various maturities in the pipeline. They have secured more than 5.0 TW annually of long-term contracts to customers. Also in the energy solutions space, which is behind the meter, looking at energy efficiency, we also are at the operational stage for our first projects there.
We closed the deal with Macquarie in June, and we're very happy about that. We see that their commercial strength and their expertise within working on renewable projects is key to develop Hydro Rein further. Hydro Rein put four projects into operation this year. Stor-Skälsjön in Sweden has a PPA with Telenor. Ventos de São Zacarias powered to supply Hydro's bauxite mine in Paragominas, and also the Alunorte refinery in Barcarena. Then we have Mendibim Solar Park Northeast of Brazil. It's a partnership with Equinor and Scatec. Boa Sorte Southeast in Brazil, a partnership with Atlas. So very good, very good traction here. These are huge projects. They're developed in remote areas with a total of 5,000 workers on site. Having, of course, safety as number one priority, they were completed best in class with HSC indicators on time and budget.
Some of the most notable achievements on the sustainability track record were the aim for no net loss of priority biodiversity features and several programs bringing benefits into the local communities. For example, in the solar project in Brazil, a training program was put in place to hire and educate local women to electrical and mechanical expertise so they could be hired and take part in the projects. Local women were constituting 15% of the workforce in the projects. Going in for landing, energy is pioneering the green aluminum transition across Hydro's value chain. Two examples. If we go to Høyanger, we are maturing a one-TW-hour onshore project with Snøheia together with partners, securing power to our smelter. In the same area, also maturing a five-megawatt hydrogen pilot in Hydro's new recycling facility, building on the test we did in extrusion in Navarra.
In Alunorte, we have, through the solar park Mendibim, it's a 531 MW solar park, so it's huge. It looks like a sea of solar panels. We're supporting BNA on their fuel switch project Alunorte. Summing up, this is how we're creating value toward 2030. Industry leader on HSE performance and sustainable renewable energy development and operations. High performance and profitability ambitions. Energy Classic RoaCE with a 50% over 50% average. The Hydro Rein joint venture platform with an equity IRR 10%-20% and a commercial ambition of NOK 550 million. We have an active sourcing agenda and robust portfolio supporting all business areas. We would like to grow a Nordic captive portfolio with new renewable energy projects within hydropower, wind, and solar. We are upgrading existing hydropower assets to capture this value of flexibility.
And we continue to develop innovative energy solutions and contribute to decarbonizing the full aluminum value chain. Thank you.
So good morning, everyone, also from my side, and thanks a lot, Kari. Very good to see all of you here today. So last year, I had the pleasure of presenting our Hydro 2030 strategy at that time as EVP for corporate development. And this year, I've been very much looking forward to presenting how our strategy translates into financial performance and priorities into my new role as CFO. And this is particularly so now that we have a more focused strategy where we aim to grow in areas where we have strong capabilities and strong market positions. And we see that the global mega trend supports us. The title for my presentation today is Focused Growth and Strong Performance Drive, emphasizing the execution part of our strategy.
So the overall goal for me is to try to summarize everything that we have been through to date and translate that into meaningful figures and numbers into the analysis. But let's begin with the last 12 months. So despite very challenging markets in Europe and North America, Hydro has delivered solid results carried by our upstream operations with positive revenue drivers and also solid performance. In this market environment, our downstream segments have been under pressure, and both extrusions and recycling activities have faced significant challenges in meeting expectations. As a result, Hydro's RoaCE over the last 12 months has fallen below our cost of capital, reaching 7.2%. But nonetheless, we have delivered a five-year average RoaCE of 11.8%, reflecting our commitment to delivering returns above the cost of capital, above the economic cycle.
Over the past 12 months, EBITDA has been bolstered by robust upstream performance, but again, partly offset by the challenges in the downstream segments. Despite these headwinds, we have remained steadfast in our commitments to positioning Hydro for the future. And hence, 40% of our total CapEx has been invested over the last year in growth and return-seeking initiatives to continue to execute on our transformative ambition of pioneering the green aluminum transition. Let's then start looking forward and start with the financial foundation, our resilient financial framework to drive long-term shareholder value. Hydro operates in a cyclical and at times volatile market environment. And hence, we strongly believe that the resilient financial framework is a key foundation to execute on the strategy through the cycles and by that, creating long-term value. Our framework has four components.
Firstly, Hydro has over the years upheld a strong financial position driven by a disciplined approach to debt management, strategic investments, and capital allocation. This prudent financial strategy has positioned the company to navigate market volatility effectively while continuing to invest in high potential growth areas. Furthermore, Hydro's investment credit rating underscores the company's ability to manage financial risks efficiently while also providing access to more favorable financing. Also, to support financial strength in the low part of the cycle, we have the integrated hedging program where we now have secured 25% of our primary production's integrated margins for 2025 and 2026. This strategy supports margins at levels that are accretive to our return ambitions, providing stability in the face of market volatility. Secondly, profitability roadmaps are key guides to drive the company forward.
And the most important new initiative here is the new improvement program aimed at delivering a total of NOK 6.5 billion toward 2030, and more on that later. Thirdly, we remain committed to a clear and disciplined capital allocation. With a more focused strategy, we estimate that 85% of our growth and return-seeking CapEx will be directed towards the strategic growth areas for the period 2024 - 2027. And finally, in parallel with the strategic investments, we are aiming for a robust approach to shareholder payouts. Since 2020, Hydro has distributed a total of NOK 39.1 billion through dividends and buybacks in alignment with our NOK 25 billion debt target. As reflected in our allocations for 2023, we remain committed to this balanced approach, ensuring we can advance our strategic growth initiatives and distribute cash to shareholders in a predictable way.
Now, with the foundation covered, I'm very excited to move on to presenting our new improvement program. As Eivind already has covered, improvement programs have been for many years a key component of our strategy for resilience and for value creation. Since 2009, Hydro has successfully implemented a series of improvement programs, building a strong track record for driving operational efficiency and other improvements. For the existing program, we have exceeded our initial ambition, achieving NOK 9.9 billion in improvements by the end of 2024, surpassing the original target of NOK 7.3 billion. We are now launching a new improvement program towards 2030, which will reinforce strong focus on performance and directly support the successful execution of our strategy. To further elevate our performance agenda, there are several key changes in the new program.
Firstly, the new program will prioritize high-value areas, targeting the initiatives with the largest potential for impact and aligning efforts where they can deliver the most value. Secondly, the program will provide more visibility and transparency into the improvements made, highlighting how these enhancements contribute to specific value drivers across the business, and this approach will allow us to track progress more effectively, and lastly, it will aim to directly tie the improvements to financial and operational outcomes, providing a transparent link between the program's activities and our results. The new program is built around three core pillars: operational improvements, procurement, and commercial excellence. The operational program is focused on driving improvements in key operational metrics with significant potential for value creation, and this will be achieved through a combination of targeted initiatives and our business system that supports continuous improvement.
The expected impact from this program by 2030 is NOK 2.5 billion, reflecting its crucial role in enhancing operational efficiency and delivering long-term growth. The procurement program focuses on maximizing value through targeted procurement initiatives with a potential of NOK 1 billion. This is achieved by driving improvements in procurement processes and sourcing savings. The commercial excellence program focuses on driving top-line growth through enhanced commercial strategies, with a significant portion of this growth supported by the greener product offerings. The total potential here is at approximately NOK 3 billion in total for the commercial excellence program. Digital enablement plays a pivotal role across all our improvement programs, with a strong emphasis on supporting transformation through our dedicated digital transformation office, and this ensures that digital enhancements are seamlessly integrated into our processes, driving efficiency, innovation, and overall value creation throughout the organization.
Notably, initiatives such as predictive maintenance and production optimization are central to this effort, enhancing operational performance and reducing costs. A continuous drive to increase productivity and mitigate cost pressure in operation is at the core of our business. The operational improvement program is targeting improvements in operational metrics, where we see the biggest potential towards 2030. As many of you familiar with the mining industry will recognize, mining operations typically have a structural cost escalation challenge driven by gradually deteriorating ore quality and higher logistics costs. Hence, in our BNA business area, our focus is to more than offset this cost pressure through optimizing the mining fleet and taking steps to manage bauxite quality that John already mentioned. In the aluminum refinery, important initiatives are digital monitoring of assets to support reduced maintenance costs and optimizing the energy mix as well as the process operations.
Hydro is continuously focusing on improved operational efficiency across the portfolio. And an example is in Aluminum Metal, where the primary volume creep program will also reduce energy and raw material consumption. Extrusions are targeting reductions in scrap rates and reduced downtime at the presses. And these improvements will be achieved through a mix of continuous improvement efforts as well as targeted initiatives, where automation and digital initiatives will be important levers. Reduced hot metal costs in the cast assets is another important area, both in Aluminum Metal and Extrusions. And a significant part of the savings will be driven by increased recycling of low-grade scrap. To deliver the savings, it will be important to leverage our expertise in production optimization and scrap sourcing, and where technology and advanced analytics will be key enablers. We also aim to continue improving the efficiency in our support functions.
Improvements in these areas will partly be achieved through consolidation of services into the global business service organization, which allows us to reduce costs through process improvements and digitalization. Part of the cost reductions will also be achieved by optimizing the service offering and application landscape. To the procurement program. Towards 2030, we aim to deliver around NOK 1 billion in savings from procurement activities. The program will include procurement initiatives that offset inflation or reduce the spend, as well as additional value that are created through the procurement activities. The additional value can be related to improved specifications, quality, and services that have an impact on the productivity in the business. To deliver value in the procurement program towards 2030, there will be a strong focus on more cross-plant and cross-functional projects that let us increasingly leverage the size of Hydro to optimize the spend.
Further, we are putting additional emphasis on targeting specific categories where we see potential, and in the following years, we will cover a broad set of categories across maintenance, operations, raw materials, and logistics. Hydro aims to deliver NOK 3 billion in commercial excellence improvements, which include the ambition to achieve an uplift from greener premiums of NOK 2 billion annually by 2030. A significant driver of the commercial impact is to increase the market share in extrusions, which will be supported through greener offerings and high service level. We will also work to leverage our strong market capabilities in the alumina market, as John mentioned, to grow the commercial alumina portfolio where we generate margins through the alumina trading. We have an ambition to increase the value generated from the flexibility of the Hydro Power portfolio, as Kari mentioned.
We will also use our expertise in the power market to increase value from market activities. The potential in the commercial program also includes increasing the commercial value from aluminum metals portfolio, where we aim to, with the main driver, is the new aluminum products like HyForge. Lastly, we have the green premiums ambition of NOK 2 billion in the uplift. Let's then move to 2025 and the sensitivities into 2025 based on our adjusted EBITDA of NOK 22.4 billion delivered over the last 12 months per Q3. Next year, we will get the full impact from the fuel switch project in Alunorte, which will be fully implemented this year in 2024. This effect is around positive NOK 1.6 billion, including Q4 2024. Based on CRU, expectations downstream demand will start to recover next year.
However, the EBITDA impact is expected to be relatively small and up to NOK 1 billion. Based on the current market conditions, ramp-up of the curtailed smelter volumes will start, although the ramp-up profile is highly dependent on the demand development. We also include some changes in the energy contract mix in this bucket, and both elements have an effect of between NOK 0.3 billion-0.5 billion in total. The new improvement program will have a tangible impact on our results already next year, where the estimated impact is NOK 0.6 billion, and this takes us to an estimated adjusted EBITDA for 2025 of approximately NOK 25 billion-26 billion if markets stay as they have been for the last 12 months.
If market prices realize at current forward curve, and we take the last 12 months from Q3 as a starting point, we get a positive market impact of NOK 8 billion, and this takes us to NOK 34 billion, where the main impact is coming from higher aluminum price and more favorable US dollar to NOK currency rate. Also, to note in this scenario, as there is no forward market for alumina, we have derived PAX price based on the current forward LME price and historical relationship to PAX as a proxy for the PAX price. Similarly, market prices at the last five-year average would reduce adjusted EBITDA to NOK 20 billion, and finally, a market scenario based on market prices from CRU would give an adjusted EBITDA on NOK 27 billion.
Yes, we have also illustrated market sensitivities at the bottom of this slide for the main commodity drivers with the LTM Q3 as a base, and there are many moving parts here that are not included here. Furthermore, this is not a guidance, but a high-level sensitivity and tried to cover the largest moving part. Moving on to capital allocation, capital discipline and strategic allocation of resources remain a top priority in my role and the wider Hydro Finance Organization to translate our strategy into action through capital allocation. Our overarching capital allocation framework presented here is consistent with previous years, but our capital allocation priorities have been distinctly refocused towards the most value-creating portfolio opportunities this year, following the establishment of the joint venture, which is set up now with the self-funding ambition from now on, and the announcements regarding batteries and Havran today.
In the upstream segment, we are dedicated to enhancing the stability and resilience of production while advancing our decarbonization efforts that will drive value creation by enabling green premiums throughout the value chain, and despite challenges in the current downstream markets, we continue to see compelling long-term potential in extrusions and recycling. Therefore, these areas receive a significant share of Hydro's growth CapEx, reflecting our confidence in their ability to drive future value. Lastly, it is fundamental to Hydro's ambition of pioneering the green aluminum transition to secure access to renewable energy at competitive prices, and consequently, we are selectively allocating growth capital to bolster our equity power sourcing capabilities, ensuring the resilience and sustainability of our portfolio in the years to come. For 2025, we guide on a total CapEx level of approximately NOK 15 billion in line with the guidance we gave last year.
The sustaining CapEx levels are now stabilizing and also showing a downward trend compared to the increases observed in recent years. In contrast, growth and return-seeking CapEx remains heavily concentrated on the identified strategic growth areas, as illustrated in the pie chart on your right. And this allocation reflects Hydro's clear focus on projects that drive long-term value creation and align with our strategic priorities. Additional growth and return-seeking CapEx may be considered if market conditions are favorable, with a particular emphasis again on extrusions and recycling investments. This demonstrates Hydro's commitment to capitalize on the long-term attractiveness of the downstream segment, which continues to deliver promising potential. The expected internal rate of return for these investments is shown on the right side and remains consistent with previous indications, reflecting steady confidence in the segment's profitability outlook over time.
To give some more meat on this, we have an example here on the Torija recycling project. When discussing the attractiveness of potential and returns, it's essential to base capital allocation decisions on strong proof points. Having a clear measurable basis to support the investment choices not only strengthens the case for those decisions, but also ensures that capital is deployed efficiently in areas that drive the greatest value. A prime example is again these investments in the Torija recycler in Spain. This next-generation extrusion ingot cast house, strategically located in the Iberian market, offers a compelling business case driven by a combination of low carbon offerings, hot metal cost savings, and synergies that significantly enhance margins. The plant is strategically positioned to produce a superior product mix with a high proportion of low carbon advanced products, including those for the automotive sector.
Its low hot metal costs are enabled by a share of scrap, coupled with access to lower-grade scrap in Iberia. And in addition, the synergies with our existing Azuqueca facility in the Iberian portfolio further strengthen the project's economic viability and operational efficiency. And compared to our current portfolio, this investment adds considerable value, aligning with our sustainability and growth targets. Over the last years, Hydro has put a lot of efforts into improving our net operating capital performance in all business areas. And these efforts have paid off. And as a result, we have been able to reduce NOC days from 56 in Q3 2023 to 48 in Q3 2024. And we further estimate to reduce NOC days towards year-end 2024 to 47. In 2025, we will further step up with new targeted stock reduction initiatives, with the aim to take out further two days through 2025.
In the last three to six months, the alumina price has increased to historically high levels, and also providing support to higher aluminum prices and both are impacting Hydro's results positively, but are also increasing the value of the net operating capital and as a result, we have raised our year-end 2024 guidance on net operating capital from NOK 28 billion - NOK 29 billion, largely driven by the high upstream prices and the weaker NOK. For 2025, we are expecting a further net operating capital value increase of NOK 1 billion. And in the forward market price scenario, this results in a net operating capital guidance of 45 days and NOK 30 billion by year-end 2025. Now moving over to our profitability growth roadmaps, where we summarize everything that we have been through today in the roadmaps.
We present three different pricing scenarios for EBITDA, RoaCE, and cash flow for 2030. Those scenarios are not forecasts, but simplified indicative long-term potentials based on sensitivities after we have delivered on the planned improvements programs and growth initiatives. We have three different market price scenarios, namely the current forward market prices, prices last five years, or external price and currency assumptions. We start with the adjusted EBITDA Q3 LTM at 7.2% RoaCE. If we add the planned improvements, commercial ambitions, growth, and greener premium potential, we are at 13%. The RoaCE remains stable at 13% when we adjust to external market expectations. At last five-year average prices, we see a RoaCE of 10%.
However, when we run the sensitivities on the forward prices, we see a RoaCE reaching 15%, indicating satisfactory profitability based on our current ambitions, but still dependent on the market and with a 1% spread on greener premium realization. The cash flow scenarios show the cash flow availability for return-seeking and growth CapEx and shareholder distribution, which range from NOK 15 billion-22 billion in the different scenarios. We see possible further drivers not included into the scenarios, both on the positive and the negative side. On the positive side, we could see some further upside potential due to positive market and macro developments, and we have a higher greener volume potential than visualized here. Declining focus on greener products or unfavorable regulatory frameworks can have a negative impact. And these potential positive and negative drivers could also apply for all the business scenarios that I will present next.
In recent years, profitability in BNA has been challenging, with unsatisfactory returns persisting due to the challenging alumina market, despite the fact that we are operating in the first quartile of the cost curve. However, the situation has shifted fundamentally this year, driven by record high alumina prices nearing $800 per ton, and the implementation of our fuel switch project. These changes have led to a remarkable turnaround, with an LTM RoaCE improving from negative 3% last year to positive 9% this year, and LTM EBITDA rising from NOK 1.4 billion - NOK 6 billion. We remain focused on enhancing BNA's profitability by further improving our cost position, strengthening operational reliability, and advancing on the sustainability performance. BNA also plays a pivotal role as the largest medium-term enabler of low carbon greener products, which are a key driver of Hydro's overall profitability.
As a main enabler of our greener value creation roadmap, BNA is projected to achieve a RoaCE of 15% in 2030, well above its 10% return requirement, aligning with our long-term ambitions for sustainable growth and value creation. In an LME forward-based market scenario, RoaCE reaches 16% and EBITDA of NOK 10 billion, reflecting high alumina prices. Additionally, with the commercial ambitions and projected improvements, free cash flow ranges from NOK 1 billion -NOK 6 billion. Looking at external expectations and the last five-year average market prices, all the metrics are significantly lower. While we have made significant strides in mitigating risks through asset integrity improvements and fostering stronger community relationships, operational and country-specific risks remain, particularly in Brazil's volatile regulatory environment. Managing these challenges effectively will be essential to maintaining BNA's critical role in Hydro's long-term strategy.
This year, we have decided to present aluminium metal and metal markets as separate reporting segments to enhance transparency and provide a clear understanding of their individual contributions to performance, and despite the market volatility we have seen this year, Q3 LTM RoaCE is 13% for the aluminium metal reporting segment. When adding contributions from improvements, restarts of curtailed volumes, and commercial initiatives, including greening premiums, RoaCE will increase to 14%, significantly exceeding the return targets. Q3 LTM EBITDA is at NOK 10 billion, and after ramp-up of curtailed volumes, improvements, and commercial initiatives, we get to NOK 12 billion. Going forward in different price market scenarios, the RoaCE for aluminium metal is ranging between 14% at last five-year prices to 24% using external long-term assumptions, and the free cash flow ranges from NOK 6 billion -NOK 1 0 billion in different scenarios.
There are several further upside drivers for aluminum metal in the coming years, in addition to those I mentioned earlier. Highlighting one, portfolio optimization efforts are expected to unlock further value by refining asset performance and aligning operations with high growth, high return areas. Further potential downside risks include operational and supply chain disruptions that could affect productivity and delivery timelines. This year, metal markets have faced profitability challenges due to the persistently rising scrap prices and subdued demand, and these pressures are evident in the LTM Q3 RoaCE of just 1%, significantly below the target of 8%. However, looking ahead to 2030, as markets normalize, ongoing projects are completed, and green premiums are realized, we anticipate a substantial recovery with a potential RoaCE of 14%.
In the EBITDA bridge, the expected improvements become more apparent, illustrating the increase from the current Q3 LTM EBITDA of NOK 1 billion to projected NOK 4 billion-NOK 5 billion. This trajectory reflects the impact of the ongoing initiatives and market recovery, underscoring the long-term value potential of the recycling activities in metal markets. Further upside potential for metal markets includes increased scrap availability, as well as technology development and deployment. Further downside risks are prolonged market downturn affecting both demand and scrap availability and increased competition. The deteriorating economic conditions have impacted extrusions heavily, with double-digit reductions in demand. For Q3 LTM, extrusions have achieved a RoaCE of 4%. With identified improvement measures, we are expected to lift these figures significantly, targeting a RoaCE of 14%.
We remain confident in achieving our long-term adjusted EBITDA target of NOK 10- NOK 12 billion, with free cash flow projected at NOK 8 billion under this scenario. Further upside potential for extrusions lies in driving higher growth, continuous portfolio optimization, and accelerating the improvement initiatives. Digitalization, in particular, presents substantial opportunities across the extrusion portfolio. On further downside risk, key challenges include inflationary pressure alongside market and operational performance variability. These factors will require careful management to sustain long-term profitability. Finally, moving to our energy business area, where we here have excluded the Rein joint venture, which is reflected in Hydro's financials as an equity-accounted investment. For Q3 LTM, energy excluding Rein joint venture has delivered an EBITDA of NOK 3.4 billion. In the normalization and other categories, higher net spot sales are more than offset by lower gain on price area differences.
After adjusting for improvement program and commercial ambitions, we see EBITDA lifted to NOK 3.5 billion for energy, excluding Hydro Rein joint venture. At last five-year average prices that illustrate an upside with an EBITDA of NOK 3.9 billion and corresponding free cash flow of NOK 1.4 billion, and the main further upside risk drivers are strong energy markets on the back of increasing demand for renewable energy. On downside risk, energy markets remain volatile and are exposed to changes in regulatory framework conditions, including tax. Integration serves as a cornerstone of our strategy, delivering resilient financial results while enhancing access to growth opportunities and elevating the customer experience. Even amid the fluctuations of the business cycles or the performance variability of individual areas, our integrated approach ensures stability and adaptability.
This resilience is further bolstered by dynamic capital allocation, which targets the most compelling opportunities across our value chain, aligning investments with market demands and priorities. By consolidating operations with a unified value chain, we are not only providing unparalleled traceability, but also solidifying our position as a trusted partner on the path to net zero. This approach strengthens our role as a preferred supplier, offering sustainable solutions that resonate with the evolving needs of customers and stakeholders. Moreover, our integrated value chain fosters deep partnerships with customers, enabling collaboration that drives innovation and unlocks transformative opportunities with the green transition. Together, we turn sustainability into a catalyst for growth and shared success. Moving on to our dividend policy. Hydro continues to prioritize competitive shareholder returns, benchmarking our performance against alternative investments in comparable companies.
And distribution for 2024 will be proposed at the release of our Q4 results in February 2025 and approved by the annual general meeting in May 2025. Over the past five years, 2019 to 2023, Hydro has maintained a strong payout ratio, averaging 74%, excluding share buybacks. And when we include the three share buyback programs from 2021 to 2023, the total payout ratio is increasing to 87%. From 2017 to 2022, we have delivered on the policy and returned an average dividend yield over the past seven years of 4.9%. And this is lifted by the yield of 9.9% for 2021 earnings and the yield of 7.7% for 2022 earnings, reflecting significant distributions on top of the 50% adjusted net income. And these distributions also stood out in an industrial context.
Our capital structure policy remains unchanged, with an adjusted net debt target of around NOK 25 billion over the cycle, which continues to include the current year's shareholder distribution. And as of November 20th, 2024, we have repurchased approximately 32% of the share buyback program, further demonstrating our ongoing commitment to enhancing shareholder value. So then closing my part of the presentation. So as I conclude this, I would like to highlight some of the key messages from my side that are central in Hydro's financial strategy. Firstly, we maintain a strong financial position backed by our investment-grade credit rating, which ensures both flexibility and resilience in the face of market fluctuations. Our robust shareholder payout continues in line with the established dividend policy, reaffirming our commitment to value creation and predictable shareholder payouts.
Looking ahead, we aim for strong performance drive, demonstrated by a new improvement program, which targets NOK 6.5 billion in improvements by 2030. This program, along with our profitability roadmaps, supports that we stay on track to deliver sustainable growth and operational excellence. Capital discipline remains a core priority, and we aim to allocate around 85% of our growth and return-seeking CapEx for the period 2024 to 2027 towards our strategic growth areas that align with Hydro's long-term growth objectives. These clear capital allocation priorities will support that we continue to generate attractive returns while maintaining financial flexibility. Together with these elements form the foundation of Hydro's continued success, I'm confident that we are well positioned to achieve our long-term goals and create value for our shareholders.
By that, I conclude my part, and then I would like to welcome Eivind back on stage for the final messages and then our last Q&A.
Thank you, and let me round off this day with some key takeaways from today's presentation. First of all, we are firmly reaffirming the strategy on execution of recycling, extrusions, and renewable growth. As market conditions improve, the investments and strategic initiatives are positioning us for further value creation from these opportunities. Likewise, we are refocusing our efforts back to our core activities in our strategy, facing out both batteries and the green hydrogen efforts, with no more capital to be allocated going forward. Secondly, we are making significant progress towards our decarbonization targets and the net zero targets that we have.
We are on track to deliver the 10% reduction target for 2025, the 30% target in 2030, and towards net zero in 2050. Thirdly, we are launching a new improvement program aimed at enhancing the transparency, focusing on the scope, and ensuring a clear impact on the bottom line. Capital discipline will remain a cornerstone of the strategy that we have. We are allocating and will be allocating 85% of the non-sustaining CapEx to the strategic growth areas with expected returns, as Trond Olaf has said, between 10% and 35% internal rate of return. Progressing on the green earnings is a key fundamental for the strategy we have going forward and a key part of the success in terms of reaching our targets in 2030.
Finally, we are committed to deliver a competitive return to our shareholders, maintaining the solid dividend track record that we have with distribution plans aligned to the policy that remains in place. All of this will be detailed out in the fourth quarter release, as Trond Olaf has said. With that, I would just like to say thank you so much for the attention, for spending the day with us, and then hopefully I'll get to speak to some of you during lunch as well. Thank you so much.
Yes, then it's time for the last Q&A session. So, Trond Olaf, and Kari, and John, welcome back on stage. So raise your hand if you have any questions. Yes.
I'll go with the first one, I guess.
Yes.
It's Jason Fairclough, Bank of America. Thanks for the presentation, folks. Just a question, I guess, on capital allocation and cost of capital. I don't know if it's for Kari or for Trond Olaf, but how do we think about financing renewables out of the cash flows of a metals and mining company? It feels like there's a bit of a disconnect there on cost of capital.
You want to start, Trond Olaf?
Yeah, so I think when it comes to our core captive energy production, that is really the core of Hydro and an integrated part of our total business. When we look at the renewable energy projects that we have in our portfolio, we are, of course, pushing for the high returns. And the Illvatn project that we have announced is, for example, a project significantly above the cost of capital for the energy business area. So I mean, that is the way we are looking at and trying to develop very good projects, of course, in competition with all the other good projects we have in the portfolio.
So I can add to that, Jason, just a second. So we have differentiated cost of capitals, right, between the different business areas. But I think importantly in this connection is the Rein, Hydro Rein joint venture that we have. That's an outright renewables company. They will have their own cost of capital. They will have their own funding on their own balance sheet. And that's why this is a great opportunity and great vehicle for Hydro also to continue to grow as a joint venture partner in the renewable space. And that's where you will see most of the growth projects also coming forward.
Just to follow up, if I could. So I think people like the buyback you did last year, this year. How does buyback sort of figure into your capital allocation framework? Are you going to benchmark every investment against buying back your own shares?
Our buybacks is part of the dividend policy that we use. And we have an ongoing buyback now that was approved at the AGM in May this year. And we have some 30% now already bought, and we will continue to execute on this program.
More buybacks?
We have the program ongoing.
Thank you.
Good morning. It's Liam Fitzpatrick from Deutsche Bank. First question on Alunorte. You sold the stake to Glencore, but we haven't seen any distributions yet. So can you just shed some light on when and how those cash flows are going to be distributed to the minorities?
Yeah, I think there will be strong cash flow now. And we'll start out with actually paying down some debt. As we know, there's high debt levels in Alunorte. We'll pay down some debt. And then gradually, that will be then a discussion among the partners when and how we pay dividends.
Do you think we'll see dividends next year?
Let's come back to that when we pass 2025.
Fair enough. And then just on the aluminum market, obviously very extreme prices at the moment. Any kind of color you can give us in terms of how long you think this could persist for? What could be some of the drivers to see prices normalize?
I think if you look at how it's been going up, it's been kind of we've been waiting to see some adjustments of the capacity. It's been an area with performance relative to financial performance over years. Nowhere, I think there's been an investment. There's been surprises relative to operational stability. You're seeing closures. Now, all of a sudden, there's a shortage of bauxite from Guinea into China. There's a reduced supply with Kwinana going down and also quite a bit of capacity being not curtailed, but not performing in the different refineries. So there's a pretty tight situation for now. What we also see is there is some adjustments to smelter capacity. We just heard in China. We heard in Russia that there is some uncertainty. What we foresee is that will be a good start of the year 2025.
But most probably, when we get into the year, the new capacities in India, Indonesia, and alumina most probably create more of a normal situation going forward. So we are kind of. It's hard to say, but that's kind of where we take a pretty conservative outlook.
Hi, it's Ioannis Masvoulas from Morgan Stanley again. On the same topic around bauxite and alumina, you saw the slide with the market scenarios, and if we ignore the current sort of development, we look at either the five-year average pricing or the CRU forecasts, it's clearly a business that is dilutive to return on capital employed for the overall group. What else do you need to do to get it towards the 7%, 8%, or higher returns structurally? And on the flip side, at peak alumina prices, is there an opportunity to sell potentially another stake to someone else?
I'll leave that last one to you, Eivind. You want to start?
No, I think from a structural perspective, we're quite happy with having 62% to fall on Hydro. That gives us a good coverage internally. It gives us a good security of supply, and it's back to what we talked about earlier today. It gives us very good transparency of the products that we produce and sell to our customers, which can follow then all the way from the mine to a finished component, so that, I think, is quite important from a value perspective, so we're quite happy with that. From a market price perspective, I think it is, as John said, we see elevated prices at the moment. If you look to the market balances assumed next year, I think the analysts talk about a long position of some 4,000-600,000 tonnes and a global market of 140-150 million tonnes.
That's very precise science in a very big market. So let's see where it takes us. It doesn't take a lot of disruption to get back into deficit. It means that all the ducks need to fall in a row to get into a surplus situation. So let's see. The important part for me is that we work on what we control ourselves. And then we're back to the improvement programs. That's what we control. And then when we have a very good cost position on the cost curve, which we do in Alunorte, it also leaves us as one of the most competitive players in that market, irrespective of what the market price is. And then normally, that should give us an adequate return on cost of capital.
And maybe also adding that these no regret moves on the energy mix gives us a unique position on the carbon side. And if you think that this green shift continues with some momentum, there is an upside most probably also on capitalizing on this. But like Eivind says, I think what we do in Alunorte and in Paragominas is to drive what we can affect, and that's cost down. And I think this movement onto the 10% best on the cost position is the best thing we can do.
And remember, there is a structural shift on the cost base when John finishes the fuel switch from fuel oil to LNG. That gives us a $150-$200 million annual cost improvement, which obviously wasn't there in the old days when we didn't have good returns. So $150-$200 million is still a meaningful improvement, which is not part of the improvement program that we talked about of 6.5.
Very clear. Thank you. And a question, I guess, for Trond Olaf Christophersen. The shareholder returns typically in the past, well, the past three CMDs, the company provided a payout range. And then that was confirmed at the full-year results. Why is it different this time? And shall we just assume a 50% payout?
No, so we have decided this year that we stick to the different elements that we have. We confirm the dividend policy that we have. We confirm the capital structure that we have. And then I think you have the pieces to make your assessment and your estimates on the dividends. And of course, then the board will make a final recommendation that we will present at the Q4 results in February.
Thank you.
Hi, Dan Major from UBS. This first one's a slightly different way of asking Liam's question. Within your $25 billion of net debt, how much is sitting in Alunorte?
Yeah, we have quite a share in Alunorte. And I don't think we display or report on the individual debt level in Brazil in total. But at the group level, we have, I believe, around $18 billion in long-term debt at that level. And then we have all the debts around in the company, which then in total is the $25 billion roughly that we reported at Q3.
Okay, so sorry, just to clarify, the $18 billion is at the parent company and then the remainder is at subsidiaries.
That is the long-term debt in terms of bonds, et cetera, in Norsk Hydro ASA.
Okay, that gives us some color. Thanks. And then second question, just looking at the sort of earnings bridge out to 2030, you've got recycling growing from $1.1 billion - $5 billion EBITDA contribution and extrusions from $5 to $10 to $12. How much within the recycling is embedded in the metal markets number that you report to the market? And how much is in other business units? And which business units will that incremental EBITDA be reflected in?
Yeah, so in the bridge as we have presented today, if you look at my part of the presentation, then you will see the metal markets reporting segment. And that is what will be in the recycling business unit. So if you look at that bridge, you will get the $4 billion-$5 billion, which is in the metal markets recycling activity or that business unit. Then in addition, we have in the $5 billion bridge that Hanna showed, you will have part of that in extrusions. And you will have part of that also in aluminum metal that is melted. So that is the difference.
Okay, thanks. And then just final one, you've got 100,000 tonnes of spare capacity to restart in Norway. Is it end demand or the high alumina price that's kind of the main variable that's keeping that capacity off the market as we stand today?
So this has really been about the demand situation. Obviously, we have the power secured for these plants. So they are ready to restart when we believe that there is a firm enough demand for those value-added products. Because what I don't want to do is that we are producing metal which we cannot sell out of the market. I don't want to build an inventory in the parking lot. So we have ramped up some capacity during the second half of 2024. And then we will continue to do so as we see the market evolve in 2025.
Okay, thanks.
Yes, Bengt Jonassen from ABG Sundal Collier. I just wanted to double-check on your improvement program of $6.5 billion, what is included and potentially not included. Does it include the further growth potential within post-consumer scrap from $850 - $1,200 in capacity? And does it include the $1.5 billion-$2.5 billion in uplift from growth projects in extruded solutions?
No, those are not included in the improvement program. So what you will see in the improvement program is the hot metal cost part that is included in the operational improvements. And that will be for the existing operations we have. So the growth in new capacity is a different bucket that we also show in the waterfall.
Okay, good. And that leads me to the CapEx guidance. How much of that potential growth in extruded and post-consumer scrap is included in your $15 billion CapEx guidance by the end of this decade?
Yeah, so to achieve the full potential on the upper level, both in extrusion and recycling, we would need to allocate more than the $15 billion per year. And that's why we show this $1 billion-$2 billion potential on top. So we will need to do that in order to deliver on the top part of that range. But on the lower part, we should be okay with the $15 billion guiding annually.
Thank you.
Any further questions? Amos, yeah.
Thanks very much. I just wanted to ask a question on green premiums in alumina. Has there been any progress thanks to your partnership with your friends in Switzerland on getting those? And are they included? I saw on one of the slides, page 60, what looked like about a $0.6 billion uplift to EBITDA from commercial ambitions in alumina. Is that what they are? And are those included in the $2 billion 2030 target?
Yeah, I think this is in progress. So if you look at how this is all linked, like we said, in the value chain. So I'm getting my fair share of the premiums. But of course, this is a work in progress. So I don't think we have split it out exactly, no.
We haven't split it out between the different business areas. But there would be green premiums on the alumina side as we are able to progress on the REDUXA 3.0 in aluminum metal. And of course, that's an internal pricing. So we will report on what we make as a company. The $0.6 billion in commercial improvement in BNA has much more to do with building the book after we sold about $2 million to Glencore.
Okay, and that $0.6 is included in the $2 billion 2030 target?
That is included in the commercial program. Yeah, all in total three, yes.
Yeah, okay, thanks.
Yeah. Magnus?
Yes, Magnus Rasmussen, SEB. Another question on just a clarification on the dividend policy. You're stating that you will comply with your dividend policy. It seems to me like there's a bit of a conflict between the $25 billion net debt and the 50% minimum distribution of EPS. Can you say anything about how high above $25 billion you might be willing to go in parts of the cycle?
I think for now, we're quite comfortable with where we are and quite comfortable with staying with the 50% of EPS. And then I will not guide for the future where how far can you stretch that rubber band in a way. But we're quite comfortable at the current stage.
So you're comfortable that you can pay 50% of EPS for 2024?
So again, we're not guiding on a range. But I think 50% is a good starting point when you do your evaluation.
Thank you.
Yes.
Hi, I'm Matt Greene at Goldman Sachs. I have a quick couple of questions on your raw material costs at Alunorte. There's been a couple of minor comments on ore quality and silica. You touched on this as an issue in China. We're seeing it in Western Australia. Do you foresee the quality of bauxite materially, whether it's grade or silica, therefore cost or extraction consumption stepping up over the medium term? And then just secondly on bauxite as a cost input, I think we're seeing some numbers out of Guinea spot numbers suggesting bauxite's now exceeded iron ore price for the first time ever. So can you just remind us of the linkage between MRN and Paragominas on your cost base on bauxite into your alumina costs?
Yeah, the bauxite going into Alunorte is a market-based price. And then generally speaking, MRN is working on their cost. And we are working on our cost. And like you said, I think generally all of the bauxite mines are facing a bit of a challenge over time. In our case, it's the overburden part going a bit up. And then a slightly reduction on contained alumina. If you think about in the beginning, you were at 49%-50%. Now you're going down maybe to 48%-47%. And of course, this is a bit a mix because we have some flexibility. And when caustic is low, then you of course try to maximize. So we have a model kind of optimizing the cost levels. So I don't see drastic changes. But it's generally an erosion on the ton. Increased relative silica and reduced alumina.
But not huge, but step by step.
But just on the market price, yes, there is a market price reference. But it doesn't mirror the spot prices that you think you're seeing out of Guinea.
No.
So what does it link to then?
So I don't think we've ever disclosed that price formula. But it's trailing in a way. And it results in, I think for Alunorte, competitive bulk site price, so to speak.
Okay, thank you.
Any further questions? Yes.
Can I just come back to the cost savings program? And maybe it's a bit of a philosophical question here. But I was looking at your historic programs here. And I think in total you've saved $17 billion or $18 billion a year, which on forecast, that's half your profitability on a go-forward basis, right? So your profitability would be 50% lower without these cost savings programs. So I guess my question is, what you've announced today, do we actually see this? Or is this really just offsetting inflation?
I think part of the targets going forward, Jason, is really to ensure that we have transparency on the cost saving programs that we're running. That will be part of how we're going to report on this going forward. Because for us, it's important that all the hard work that we actually put into the improvement program, that that's also actually recognized in the external markets. You will see more transparency on this going forward in terms of what we're doing and how you should sort of be able to find this back into the P&L. This has been a part of the DNA for Hydro for a long, long time. That needs to continue, but with some more transparency going forward than what you necessarily have seen in the past in these big buckets that we presented.
Perfect, thank you.
Any further questions? No? And I think that concludes the Capital Markets Day 2024. Just a friendly reminder that we will have one-to-one meetings starting at 12:30 P.M. for those that have signed up and received schedules for that. And if you have any further questions, please reach out to Investor Relations. Thank you so much for listening today, also on the webcast. And I wish you all a continuous nice day. Thank you.