Dear all, welcome to the conference call. We are happy today to announce that we have found a long term effective solution Vazalore RSK hydropower assets in Norway and that we're up for a version in 2022. I'm here with presenters of today, President and CEO, Hilde Metzel Ofein and EVP of Energy, Avismos. Paul Shildemou, our CFO is also present. Through this presentation, we will explain the rationale for the transaction and how it creates value for Hesal and our shareholders.
Please turn to the next slide. With that, I turn the microphone over to you, Ilder.
Thank you, Lina, and welcome from me as well. I would like to first take you through the strategic rationale for this deal. The deal protects and enhance values for Hydro's shareholders and secure a solid platform for Hydro's industrial activity in Norway. I have with me EVP of Energy in Hydro. I will also go through some more details of the transaction with Lise and also provide some more background of the strategic agenda in Hydro's Energy Business Area.
Next slide please. So today, I'm very happy that we can announce that we have signed a deal with Liiseberg to merge almost all of their power assets with Hydro Power Plants in Roald Dahl, where we produce approximately 3 terawatt hour. In terms of production volume, Hydro is currently Norway's 3rd largest production company with a normal production of around 10 terawatt hour per year. It is important to note that the Hydro power assets owned by Hydro in Telemark and Son of some 7 SEVERO are not part of this deal and will still be owned 100% by Hydro. Lise is today the 6th largest hydropower producer in Norway measured in production volume, with 11 fully owned hydropower plants as well as part ownership in the power producers Ulla Fedje and Sirafina.
Vistra was founded in 1998 by energy companies in Southern Orugaland on the West Coast of Norway, which has roots dating back to 190 9. Vriese is owned by 14 local municipalities, cities like Savanger and Sandnes being the biggest owner. Combined with Hydro's 150 years of Hydro Power history, these two companies represent more than 2 centuries of industrial Hydro Power experience in Norway. So in that sense, this is a historic event. Next slide, please.
The deal delivers on 3 main targets that we have had. Firstly, we secure asset value as the transaction removes uncertainty by solving the reversion issue of Ares Core, which all else equal would have happened by the end of 2022. After the transaction, reversion will no longer be an issue since Lise, which is publicly owned, controls more than 2 thirds of the joint company that we are establishing, Lise KjerfDA. Basically, we convert our shares from public to private evergreen shares that Hydro owns and can be sold to private owners after a lockup period. And although we reduced our volumetric equity position through this deal, this is compensated by higher quality assets with flexibility to produce at the highest price of the year, a larger tax shield through well invested assets and synergies both in the new company but also for Hydro on a stand alone basis.
Secondly, it's a good idea it's a good deal for Hydro because this secures long term industrial ownership of equity Hydro Power assets and we maintain a robust foundation for long term operation in aluminum in Norway. And last but not least, this strengthened our ability to grow in attractive segments connected to renewables and storage because it gives us scale and a good platform for future opportunities. Next slide please. We consider this to be an industry shaping deal. Hydro and LiTE are merging parts of their respective hydropower production portfolios to create a strong hydropower player and to ensure long term industrial access to renewable power.
We are now establishing a new part owned company called Lisekraf DA, which will manage a total power portfolio of 9.5 terawatt hours. In terms of ownership, this company will become the 3rd largest hydro power company in Norway. For this portfolio, Lise will be responsible for market operations, while Hydro will be responsible for operations in both Aresco and Lisa's currently fully owned power plant. This means that Hydro's operator role, including wind power, will increase from today's 11 terawatt hours to 13.6 terawatt hours. We expect the deal to close in Q4 pending approval from the Norwegian competition authorities.
We also see significant synergy potential through this agreement both for Lise Craft TA and for Hydro. Next slide please. The transaction is supporting Hydro's strategic direction. For 115 years, the foundation of our company has been to develop natural resources into products and solutions that the world needs, creating value for people, partners and society. Today, we produce low carbon aluminum based on the high share of hydropower and wind in our power mix.
What we have seen over many years already is that the global megatrends are pointing in a direction that fits well with our foundation and our capabilities. These megatrends include decarbonization, electrification, urbanization, strict climate regulations, increased focus on recycling and awareness about climate issues. In some, it means that consumers will seek to make greener choices. In Hydro, we see this as an opportunity and that is why our strategic direction towards 2025 will be to strengthen our position in low carbon aluminum and to diversify and grow in recycling and new energy positions. The deal with Liisa supports both pillars of our strategic direction.
Next slide, please. Energy is the central business area of Hydro for several reasons. First, around 50% of the up to and midstream business operating costs for aluminum is energy related. Secondly, power cost is a major competitive element for smelters in the worldwide competition in the aluminum industry. And 3rd, energy sourcing mix is by far the most important factor for the carbon footprint of aluminum products.
Next slide. The carbon footprint of our production is increasingly becoming a competitive advantage in the aluminum marketplace. Hydro wants to differentiate and we work with the customer for greener solutions. Worldwide, more than 70% of Hydro's primary aluminum production is based on renewable power. And in Norway, we now produce more than 1,000,000 tonnes of aluminium, which is entirely based on hydropower and wind power.
Because of this, we are able to offer customers aluminium products with less than 25% of the carbon footprint of the aluminium global average, which is the case for our product family, Hizoradryduxa. With that, I will leave the word to EVP of Energy, Avin Nos, and as I said, who will go through some more details of the transaction with Lisa and also provide some more background of the strategic agenda in Hydro's Energy Business Area. Next slide, please, I will.
Thank you, Gilde. And let's take a look at some more details of the agreement. As you see from the overview on the left, we will take our 95.2% share of Redal Surdal and merge it with the Easter Craft DA. These vessels from their side merged in their fully owned Hydrofo assets and also their shares in 2 hydropower companies, and Sirag Vina. And for those of you who are familiar, the Norwegian power business, Sirag Vina are really the jewels in the crown in the Norwegian reservoir based power system.
In total, Liseklaft DA's power portfolio will be 9 point 5 terawatt hour in a normal year, which makes us, as Inder said, the 3rd largest producer in Norway. Lisekraft and Lisekraft DA will be responsible for water management and market operations. Filho will, on the other hand, continue to be operator of Erla Surla and also take on the operator role for the fully owned plants in Nusikraft DA. As a consequence, 34 employees will be transferred from Liisa to Hydro Energy AS. Norwegian legislation prohibits private companies to own more than 1 third of waterfall after concession expires.
With this solution, we transform our 100 percent interest in RSK that could not continue after 2022 into a 25% private ownership that we can own forever. The deal builds on the DA model, which means shared ownership. The DA model gives owners the possibility to take out dividend from Lisekraft in terms of physical power instead of cash. That means we pay the operating cost per over share and get over share of the income from the power sale. This is a model that Norwegian government opened for back in 2016, and I would like to give credit to the authorities for securing this possibility.
Gaining access to physical power provides important shows the main changes in our hydropower portfolio before and after the transaction. The captive production in a normal year is reduced by approximately 0 point 8 terawatt hours from 10.2 terawatt hours, as you can see top left, to 9.4 terawatt hours. This is mainly due to compensation for quality of assets and conversion of shares subject to reversion to private Evergreen shares. I will come back to the commercial details on next pages. On the other hand, the position as operator for Hydro is expanded as we will become the operator of also leases fully on plants, and it will increase our operatorship within hydro power from approximately 10.5 to 12.9 terawatt hours.
Next page, please. So to values. I'm pleased to inform you that we have been able this year to run a competitive process to explore solutions with good strategic fit. It has been a thorough process within the framework of the Norwegian reversal regime. Our main objective has been: 1, to secure asset values 2, to maintain our strong captive position on hydropower and 3, to strengthen the potential to grow attractive green businesses in Hydro.
We are very satisfied to see that the deal with Liisa meets all our criteria. The Leesa deal is now strengthening the strategic road map for new energy business. Although we have some lower captive volume post transactions, the 0.8 terawatt hours I mentioned on previous page, this is outweighed by several value elements, and I will walk you through the graph to the right. Asset quality, in wide respect, are mainly different due to their relative tax positions and difference in flexibility to rent plans when prices are high. I will come back to that on the next page.
But in short, Rellasurdal, Hidos plant here has lower value due to depreciated assets from tax perspective, and Liisa's portfolio is more flexible and achieves higher prices and margins per gigawatt hour produced. So when we merge with Liuse, we buy into better assets. So even if we lose some 300 gigawatt hours due to lower asset value in what we bring in, we will on average own better assets. Value of owning these better assets has a net present value of approximately NOK 1,000,000,000 for Hydro, and that represents also approximately 300 gigawatt hour if you translate it to that. So it means that out of the 800 gigawatt hour we'll use, 300 gigawatt hour is purely, let's say, due to the mix change.
So there is no net change to the bottom line after tax. The remaining volume loss, which is approximately 500 Gigawatt hour, is a result of that we buy into shares that are freely traded, hence more valuable, and lease to sell these shares to us and get more volume instead as compensation. But as mentioned, the private evergreen shares we get are not subject to reversion as a higher value for us. So we will see when we lose these volumes, we will have lower reported results quarterly, but the value we get from these free trade shares are approximately as much as we lose in volume. So what is the bottom line effect that you can expect to see?
Well, there are many things affecting this. But if you have a power price at around NOK 300 per megawatt hour as an illustration, we will have approximately NOK 50,000,000 after tax lower income annually. But this is just a rough indication, all other things equal. Some were on private shares versus public shares. When the legislation was changed in 2,008, preventing further licensing to non public entities, but allowing for everlasting minority private ownership up to 1 One implication among others was that the value differentiation between public shares and private shares of a heater company.
The main rationale for the private premium are: number 1, the private shares can be freely traded to any type of investor offering a liquidity premium compared to public shares 2, the value uplift from public to private conversion can only be realized once and hence represents a valuable option of the future. And 3, limited access to a large scale flexible hydropower for private investors combined with strong appetite for renewable power indicates attractive premiums. The level of private premium is debatable. However, our analysis shows that private shares are traded with a premium in the range of NOK500 to NOK1.5 per kilowatt hour on top of the base Last on Synodys. In total, we have identified Synodys and avoided dis synergies, typical scale functions like operational center, etcetera.
But in total, these synergies and dis synergies are in the range of NOK 50,000,000 for hedging. This is expected to be realized in a 5 year period. Of this, approximately NOK 50,000,000 is in the lease of DA, and we have agreed the program how to realize that. The remaining $30,000,000 to $35,000,000 is fifty-fifty split between avoided dis synergies and scale effect of operations in Hydro. As these synergies are being realized over the next years, you will find the realized synergies on the bottom line.
Next slide, please. Flexible assets are typically characterized by large reservoirs relative to yearly inflow with significant influence on water management. The flexibility impacts EBITDA through higher at yield prices as you can produce at the best price levels. You produce power in a dry year, you produce more power during winter, you produce more power mainly during daytime, and you also can get income from alternative physical markets, and you can avoid flooding. But then you need bigger reservoirs and high peak production capacity right, we see price pattern over the years to come as it looks now, which is the green line and the green shaded area and how it's expected to look in 2,040, the red line and area.
And you see here that it's expected that the variation over the year will increase and also within the months and within the days. To be able to produce when prices are high becomes more and more important. And here is the difference between Lise system and Redal Sur Dam. Lise has larger reservoirs in average and run only 3,000 to 3,000 to 5,000 hours annually, while we in Rettasulla run approximately 5,500 hours per year on average. So the lease assets can optimize production when prices are higher in average.
The flexibility factor is then measured by how much the realized power price is compared to the average of the market. If the market price is NOK 300 per megawatt hour and your flexibility factor is 105%, you beat the average market by 5% and that is NOK 15 per megawatt hour. On a 2.4 terawatt hour portfolio, like we have in Lusik FDA, this equals NOK 40,000,000 per anno or approximately a net present value of NOK 400,000,000. If then the flex factor increases to 10%, we will get another NOK 40,000,000 or another NOK 400,000,000 in net present value at no extra production costs. Therefore, flexible assets are valuable and expected to be even more valuable in the future power markets.
There are there's more solar and wind coming in. We have the interconnectors to the continent, etcetera. Over time, this could be an even higher benefit to Hydro than indicated to be part owner in these assets. So in addition, as also you know, these assets, these power stations are placed in the NO2 price area, the south area, with close proximity to power cables, the U. K.
And the continent. And the graph to the bottom right there, you see the expected price levels over the coming decades. To the left for every year is South Norway, the mid column is Mid Norway and the right is North Norway. So these are external analysis that we just put in for reference, but it's really both these two graphs show really that we can expect this to be very interesting assets to be owner of. Next slide, please.
The deal with Liza will strengthen the Energy business area going forward and the growth direction set out towards 2025. Next page please. In Israel's 115 years of history, energy has been the red thread in our purpose to develop natural resources and create via viable societies. Our business objectives can enlarge this number right in 3. Our first objective is to deliver value from strong performance in the power industry.
This is where our power operations and market operations play a vital part. In power operations, we run one of the market's most cost effective operations and with excellent HCC results and we look forward to take on the lease of plants. In market terms, we are a significant player in the Nordics and in Brazil. And in Norway, we currently have a total market portfolio of 18 terawatt hours under commercial management, including 15 long term power contracts on both hydropower and wind power on behalf of primary business area. The second objective is our strategy is to be Hydro's energy competence center, providing competitive sourcing and optimal energy system solutions to the rest of Hydro.
And thirdly, it is our 3rd objective is to build complementary new businesses in the renewable energy to create and capture new value for Hydro. And one example, we are the only player of scale in Norway and Sweden that at the same time is a large producer, a large market actor and a large industrial consumer. The Energy business area is in a growth mode and strategic direction with focus on new energy. The energy system insights and commercial and business development competence that we have built from that industrial base I've just talked through is the foundation for new growth. We have a scalable platform in Norway where we can take on new businesses at low cost as we have done now taking over the operatorship of the Tonsdav in park, which is 700 gigawatt hours, and now we take our leases power stations, a scalable platform.
We can do more with that one. It's really about scale, operator and industry experience, project experience and also regulatory insight and positioning. With the deal with Liza, all this strong platform is not only maintained, but it is strengthened as scalable platform has become even stronger. Next slide please. Our growth strategy is to expand the engagement in the renewable sector because we have the capabilities to do so in a profitable way and today's deal adds to the strength.
If we work from the left to the right, as you all know, there is an enormous growth in renewables as the world needs to decarbonize. 2nd, the business area energy has over the last 5 years systematically expanded its capabilities and taken on new roles inside and outside Norway. We are a trusted industrial partner, and we see how our competencies are used in new businesses. The market insight is translated into business decision, such as entering into a number of attractive PPAs in the Nordics. Thirdly, we have a scale and we have platform suited for further growth and in cooperation with partners, external partners, we can build business cases that are attractive.
The strategic backdrop for the 2 business units that we now have established, Renewable Growth and Batteries, is future strategy towards 2025 to grow in areas where megatrends match our capabilities, as Hilde also talked about, delivering on profitability, driving sustainability. Next slide, please. When thinking about ISRO's energy operations, some get the idea that there is a power line connecting our hydrobulk plants to the smelters in our portfolio. The reality is much more sophisticated. Israel's current portfolio in Norway consists of around 10 terawatt hour hydro power and 0.7 wind power and 8 terawatt hour of PPAs under commercial management.
All this power is optimized in the marketplace on an hour by hour day by day basis. You take out what the market can get more value from it. We have also established a unit in Brazil 5 years ago where energy matters are a very important part of Hydro's operations down there. The plan is now with our new BU renewable growth and batteries to engage systematically. And especially in renewable growth, we will focus on Brazil to engage in wind and solar projects to get attractive supply of renewables to our operations down there.
We work with many partners, and we will continue also to work in Norway and Sweden on interesting growth projects. Next page, please. Summarizing the Energy business area and our strategic ambitions, we have 3 pillars that we base our strategy around. 1, we should be on the podium in terms of operational excellence, that means safety cost and digital solutions. 2, we should have the best energy competence in any aluminum company with lower sourcing costs, lower risk and more renewables in Hydro's energy mix as a target and 3, last, we should have a competence cluster on new business opportunities in the energy sphere where we seek attractive returns, high value potential for our shareholders and lowered risk for the Hydro Group.
Next page. So to summarize, the business area of Energy will consist of 3 units going forward. It's energy, power operations and market handling optimization and being also energy service provider to the rest of the industry portfolio in Hydro. We now have then 7 terawatt hours in Norway that is 100% owned and 25% owned in the Liza Dea. 2nd, the Renewable Growth Business Unit, where the target is to identify and develop business cases in renewable energy, including from current pipeline.
And focus area are wind and solar in Brazil and the Nordic region. And 3, batteries engaged in the battery space where we expect significant growth potential based on Hesos' current positions and on developing new projects. As you know, we have a few interesting ownership positions, and we will explore opportunities as we go forward. Next slide, please. And with that, I give the word back to you, Hilde.
Thank you, Alvid. The deal with the lease is an important milestone for Hydro, and we are truly excited about finally securing a solution to the Rylanda Surdahl reversal issue. As I said earlier, the deal delivers on our main targets that we've had protect and enhance value for our shareholders, secure long term taxi power base for our aluminum activity in Norway and in addition strengthened the growth potential in attractive green businesses for Hydro in line with our strategic direction towards 2025.
Thank you, Hilde and Omid. Operator, we are now ready for questions. Thank you. And we will take our first question. Thank you.
Hi, yes. Hi, good morning and congratulations on the deal. Thanks for taking my questions. This is Ioannis Mosbylas from Morgan Stanley. Just a couple of questions from my side.
If I look at your power mix, it seems to be shifting away from just hydro and a great proportion towards wind even before today's transaction as you had a number of PPA agreements signed in the past couple of years. So what is the potential here for a greater wind power in your mix over the medium term. And so that would be useful to get some idea on the relative attraction, hydro versus wind and whether solar could play a role? And then secondly, just on from an accounting point of view, since you are operator of part of those assets, are you going to consolidate the entire footprint or just your equity shares? Thank you.
I can answer the first one. We have signed, as you rightly said, a number of PPAs with the wind project in Norway and Sweden over the last years. As we see it now, we are with this deal and with the captive we have in Hydro and the PPAs we have, we are pretty well sourced in Norway for the smelters in Norway. But we will continue to look at if there are any, let's say, attractive opportunities to grow into also in wind in the Nordics. But I think the main focus now for, let's say, looking at new wind and solar projects will be Brazil because there we have a large sourcing need over time for the smelter and also for Alunorte.
And the second point, Paul, maybe you can take that one. Yes. No, as you know, these Alunorte assets have been consolidated in so far. But going forward, this will most likely be treated as an equity accounted investment, meaning that we'll take in our share of net income similar to Kapalup.
Understood. And on the remaining 7 terawatt hour footprint, that remains consolidated?
Yes, that continues to be the same as before.
Great. Thank you very much.
Thank you.
It seems we have no further questions at this time over the phone. Thank you. Okay. Thank you everyone for joining today. And if there are any more other questions, please don't hesitate to contact us in Investor Relations.
Thank you.
Thanks,