Hello. I'd like to welcome you all to the ordinary annual general meeting of Norsk Hydro ASA. Together with me on the platform, I have the Chair of the Board, Terje Vareberg, the CEO, Svein Richard Brandtzæg, the CFO, Eivind Kallevik, and the Corporate Secretary, Anne-Lene Midseim. My name is Siri Teigum, and I am the Chair of the Corporate Assembly of Norsk Hydro. The secretariat is in the process of compiling a list of shareholders who are attending with their proxies. The list will be announced as soon as it is completed and presented to the moderator. All the shareholders who are attending the meeting and who are entitled to vote have received ballot slips as they registered. They will be used for any written ballot. If anyone wishes to take the floor during the general meeting, please give a sign and introduce yourself by name.
To facilitate a good implementation of the meeting, we intend to organize comments and questions issue by issue, and those who take the floor will be asked to go to the rostrum. I will come back to this as we move along. Item 1 on the agenda is the approval of the notice of meeting and the agenda. The notification of today's general meeting was made in accordance with Section 5-10 of the Norwegian Public Companies Act and the company's articles of association. The notification was sent out within the deadline to all the shareholders with a known address. The notification, the other documents to which reference is made in the notification, the proposals for decisions on the items on the proposed agenda, as well as the company's articles of association, have, in accordance with Article 10 in the articles of association, been made available on the company's website.
If there are no comments now to the notification and to the agenda, I declare that the general meeting is legally convened. According to Article 10 of the articles of association, it is the chair of the corporate assembly who will be the moderator. For this reason, there will be no election of a person to chair the meeting. Further, I'd like to inform you that the company's accountants, KPMG AS, is represented by state-authorized public accountant, Arne Frogner. Item 2 on the agenda is election of a person to countersign the minutes of the meeting. Pursuant to Section 5-16-3 of the Public Limited Liability Companies Act, the moderator and at least one other person elected by the general meeting shall sign the minutes. We nominate the representative of the Ministry of Trade and Industry, Morten Stranden.
If there are no comments to that, then the motion is carried. We arrive now at item three of the agenda: approval of financial statements and the board's report for the financial year 2012 for Norsk Hydro ASA and the group, including the payment of dividend. This year, the following briefings will be given to the AGM. The Chair of the Board, Terje Vareberg, will review the work of the board in 2012. CEO Svein Richard Brandtzæg will, after that, review the company's progress and financial performance in 2012 and in Q1 2013. After these briefings are given to the AGM, there will be an opportunity to ask questions from the floor.
The financial statements and the report of the board is, in accordance with Article 10 of the articles of association, been made available on the website of the company so will not be read aloud here. I now give the floor to the Chair of the Board, Terje Vareberg.
Moderator, dear general meeting. On behalf of myself and my colleagues in Hydro's board, Deputy Chair Inge K. Hansen, Finn Jebsen, Eva Persson, Liv Monica Stubholt, Dag Mejdell, Pedro Rodrigues, and Victoire de Margerie, and the employee directors, Billy Fredagsvik, Sten Roar Martinsen, and Ove Ellefsen, it is a pleasure for me to present the directors' report for 2012. It is characterized by the fact that Hydro has been through a year where it has had to adapt to demanding market conditions.
In 2012, we achieved our most important goal in the safety work, which is no fatal accidents. Safe operations will always be of utmost importance to us, but unfortunately, we will not reach this goal in 2013. A contractor employee at Hydro's press in Lucé in France died after an accident in the beginning of March 2013. Hydro had 3.4 injuries per million working hours at the end of December 2012. Our main theme for the board and the management of the company in 2012 has been to facilitate a successful merger between Hydro's and Orkla's extrusion activities within a jointly owned joint venture, namely Sapa.
The transaction is expected to increase the global reach of the merged company, create a stronger foothold in North America and several other important growth markets like China and the other countries in Asia, and give annual synergies of around NOK 1 billion. We still hope to be able to close the deal during the first half of the year. One of our main priorities in 2013 will be to secure a successful establishment of the joint venture, Sapa. Comprehensive measure to reduce costs in the group and improve operations have given significant economies that have partially offset the negative impact of the market. One of our most important goals for 2013 is to deliver significant cost reductions in the area of bauxite and alumina in accordance to the improvement program for this area.
The new improvement program From B to A include all major areas of operations and focuses on increased production, improved productivity, lower operations costs, and lower manning, in addition to more efficient procurements and increased commercial earnings. Around half of the total economies and improvements of NOK 1 billion, which are planned, are expected to be achieved before the end of the year 2013. Within Primary Metal, our strategic main focus is to continue the work with continuous improvement of the smelter's efficiency and cost position. Hydro's $300 program has so far given overall economies and improvements of $324 per ton compared to the situation in 2009. The most important priority for 2013 will be to implement the last phase of this program.
In 2012, Hydro decided to close down the production at the smelter in Kurri Kurri in Australia because of the weak markets, low metal prices, and a strong Australian dollar. This process was well dealt with at the local level. In 2012, the costs for research and development was at the level of NOK 247 million compared with NOK 248 million in 2011. The main part of the amount concerns Hydro's internal research organization. The rest is support to work done by external institutions. In Hydro, research and development and full-scale production is done in parallel, and we work continuously to develop technology that we will use in the future.
As part of the new organizational model, we have established a new technology office at corporate level, which will ensure a global and long-term approach to Hydro's strategy and technology agenda. Our technology work, it focuses on three areas. First of all, to develop products that promote the use of aluminum and a sustainable development. Secondly, to develop the best electrolysis technology in the world, which is the core of an aluminum company. And last but not least, leverage on research and development and technology in order to ensure optimal operations. I'd also like to mention the other priorities. As a global company with a rich resource position, Hydro aims at becoming the leading player in this industry, and the priorities will be to secure the results of the company and improve the results within HSE and corporate social responsibility.
We will continue to react on the development in the market in order to improve the operating results, and we will continue to practice capital discipline within the group. We will continue to prioritize improved profitability for our rolled products through the improvement program Climb 10 for this business area, where the target is a return on capital of 10%. Measures aiming at reducing operating costs and cost-effective procurement of raw materials and sourcing will continue in the year to come, in addition to efforts to improve the efficiency of our production systems. Furthermore, our goal is to develop the value of the Norwegian energy activity, and we want to use our competence to secure competitive energy sourcing to our global activities. Hydro will work on keeping the global smelter activities of the company viable, which depends on energy at competitive prices.
In 2012, Søral concluded a new 8-year power contract, and in Germany, we concluded a 5-year agreement. What made this possible was that both Germany and Norway wanted to use the CO₂ compensation scheme in the EU, and also the fact that the price level in the market where it was acceptable. Based on the company's enduring commitment to give its shareholders a cash dividend and the company's strong financial position, the board proposes that the company pays a dividend of NOK 0.75 per share. By way of conclusion, I'd like to say that the frame conditions, financial conditions today is a major challenge for all of the industry when it comes to satisfactory return on capital. Hydro is, however, well-positioned for growth when the global economy picks up.
The board wants Hydro to take advantage of its platform and potential and to continue to develop and create values for the shareholders as a global, company based in Norway. The board wants Hydro to be based on responsibly efficient and safe operations, and that we have an organization that is equipped to tackle the challenge and opportunities that we are facing. On behalf of the board, I want to greet all the employees in the company who are doing an excellent job for Hydro every day. Thank you very much. I'd like now to give the floor to the CEO, Svein Richard Brandtzæg, for his presentation.
Thank you. As Terje told you, health, safety, and the environment are among our most important goals to make sure that the workers get home as safely and well as they were when they turned up for work. We started with accident statistics. We reduced injuries by 10% last year. We hoped for more, but the high-risk accidents were reduced by 35%. We had a fatal accident in Lucé. A contractor was removing a punch press, and things went very wrong, and an operator from the hired firm lost his life in that accident. We still have great tasks ahead. I'm not happy with the developments. So far, we have had two months above the goal of 2.85, and we hope we will get better as time moves on.
Hydro is 107 years old, and we've been through a lot of restructurings for many, many years now. During the last 10 years, we've gone from a conglomerate to a focused, integrated aluminum company. What characterizes us is competence, technology, industrial management, but not least, the ability to change and think long term, and not least, the ambition to create wealth through industrial development. We now have a strong value chain where we have ensured considerable profit on the commodity side. We have 100% ownership in one of the biggest bauxite mines in Brazil. We have ownership in the largest alumina refinery in the world. We have sound aluminum works, a strong position in downstream through the rolled products. With Orkla, we now have 50% of the biggest press system in the world.
We are close to the customer, and we develop new products all the time. Technology and innovation will always be important. If you look at the important incidents in our history since 1905, it's 50 years today since the Alnor agreement was signed, 50 years since Hydro went for development at Karmøy and Norsk Hydro, and that cost us around 80% of the turnover at that time. It was a huge investment, and the merger with ÅSV in 1986 was an important milestone. We have the acquisition of VAW in 2002, and then Qatalum, of course, and the acquisition in Brazil. In 2012, the joint agreement with Orkla, creating the world's leading aluminum solutions provider. What characterizes us is that Hydro has shown through its acquisitions that we can optimize and improve the operations.
Ongoing improvements are the case with all our operations. We have also been able to conduct transactions and consolidate the industry and shape the industry where we have been operating, and we did that in aluminum, too. Important incidents in the past years is especially after the financial crisis, when we had to take out 26% of our capacity, of the primary aluminum capacity, from 2008 to 2009. Only the Chinese could match that. We started our $300 program when we saw that times were tough. We cut costs in our wholly owned aluminum works with $300 per ton, which was the most ambitious improvement program in the industry. Climb 10 was mentioned by Terje, an improvement program within our rolled products, where the system is to achieve at least 10% profitability.
We have an improvement program in bauxite and alumina from B to A. We will improve operations and reduce costs by NOK 1 billion, and half of the program will be delivered by the end of 2013. In Qatalum, we are working at full power, and we are delivering results that are better than what we had expected when it comes to volumes. Excellent operational results. When it comes to the cash cost of Qatalum, it is where it ought to be, and among the best smelters in the world today. In Brazil, we have had a good takeover by our newly hired people. 6,000 new workers that we took over in Brazil, 2,000 part-time, 4,000 full-time, 2,000 contractors. The operations are going well, but we're not happy in Alunorte.
The development has been sideways for the last two quarters, so we are trying to up the volumes now. We want to get to nameplate capacity, which is 6.2-6.3 million tons of alumina. We have advertised the joint venture of Sapa with Orkla, and we are preparing integration. As Terje said, closing and finalizing the transaction will be in the course of the first half year. The results from last year, you've probably seen them, an underlying result of NOK 1.3 billion, characterized by the poor prices for aluminium and alumina, challenging markets. For the Q1, it was less than NOK 1.1 billion. Slightly better prices and better volumes in seasonal effects, of course, because the Q1 one year is usually better than the fourth quarter.
We see now that the Q2, which seasonally should have been a good quarter, was characterized by further reduction in the aluminum prices. The dilemma for our industry is that on the one hand, aluminum is the fastest growing metal, if you compare with copper, zinc, lead, nickel, et cetera. It grows faster than any other. The problem is that the price trends are poorer for aluminum than for any other metal. You may, well, ask why this doesn't seem to make sense. If you look at the development between demand and supply, you see the green part is demand for aluminum, and you see it was reduced during the financial crisis. The graph on the left shows the situation outside China, and on the right-hand side, you see within China.
If you look at the demand for aluminum outside China, we're nearly at the level we were at before the crisis started in 2008, 2009. It's not quite bouncing back yet. In China, the growth has continued, and China is the driving force behind the growth in the world. This affects the alumina bauxite area, especially bauxite, I would say, because China doesn't have enough raw materials, and they are very interested in keeping the prices down because they import so much of these metals. If you look at the effect here and what you need to watch, it's the green graph, which is the price of aluminum, the three-month price, which fluctuates here, you see from 1990 to 2012. The three-month price is a good reference for us.
We have a price trend that depends a lot on the 90% percentile. The works that are among the 10%, the top 10% on the cost graph, I'll show you. I'll go in and plot it. If you do that and you track the price of aluminum, you will see that it lies very close to the cost curve. You see some departures. Sometimes it dips, sometimes it rises. If you look at that departure and look at days in stock, in stocks, there's a correlation between the days in stock and when they go up, and then it's lower at LME than the 10%, the top 10% on the cost graph.
The opposite, when the price is above the 10%, top 10% rather for cost, then it's a situation where the days in stock go down. You can see this against the marginal costs and the metal balance. If you look at surplus and deficit per year, this makes sense. There's a link here. This is a situation where it's not a demand problem in aluminum, it's a supply problem, overcapacity, huge stocks that have been accumulating, and the industry has not adjusted the production to the change in demand over a long period of time. This also characterizes the situation today. LME is now under $1,900 per ton, which is painful for the industry. For the Q1, the price was at $2,043 per ton.
The market price, that was the realized price, the market price was nearly the same, $2,040 per ton. At the level we're at now, we're in again, in a situation where a major part of the industry is not making money at all. That's why it's important that we improve in every area, and we have started cost reduction programs along the whole value chain. I mentioned the $300 Programme. We're going to complete it this year, but that doesn't mean that we're done with cost reductions for Primary Metal. We'll continue. We have embarked on our joint ventures now. We have part ownership in smelters, where we're also running cost-cutting programs. At the bauxite and alumina, we have that, and we have improvement for rolled products and extrusions. This is important. These are things we can affect ourselves.
The improvement programs form an important part of the measures we are putting into place to improve the situation for the company. The joint venture on the extrusion side means that Hydro is really, after this has been finished, more exposed in extrusions. We'll have 50% ownership in an even bigger extrusion company than we had before when we entered into the agreement. The greater exposure, we've had to adapt our re-melting, where there was a flexible part in the company. Re-melting can be moved up and down in a very short space of time, and we had to do that when we cut out 2,000 tons during 2012. Downstream, it's auto and transport where we see the positive developments, and we're in an even stronger position.
Car transport or truck, trucks is the most important export sector outside China today, and we're in a good position. When it comes to the new Sapa, the joint venture in extrusion, this is a company that will have NOK 50 billion turnover, 25,000 employees in more than 30 countries in the world. It'll be number one in Europe, number one in the United States, strong position in South America, and a strong position in Asia, where we see possibilities of growth. The EU have to approve this from a competition point of view, and they are concerned about the situation in Scandinavia. We've had to offer to sell Raufoss out of this with, a precision tubing, company in Holland, in the Netherlands. We still need to see if this is sufficient, but this is our suggestion anyway.
We hope that we'll finalize this during the first half of this year. It's been approved in the United States, and EU remains, and China remains, and that's important. As for developing the value of the company, we have an interesting comparison here that shows you the market cap in green and Hydro compared with Alcoa, Chalco, and Rusal, which are the major companies in aluminum. We have improved, relatively speaking, compared to the competitors in that we have a higher value today than our competitors. It says a lot about the situation in the aluminum industry when Alcoa and Rusal are nearly twice as large as us for aluminum production. Relatively speaking, we are better on the cost curve.
If you analyze it externally and you look at the EBITDA margin per ton, we have a higher EBITDA margin, and we create more wealth, but it's a challenge anyway. We have a strong foundation in our resource and asset base. I mentioned bauxite alumina, where we have strong positions. We have strong aluminum works. We have a good position in rolling. Our rolling part is the second largest in Europe, and in many segments, we are number one. We have a good resource base, but the most important resource base is our employees. We have done a huge job to get an improvement culture in all our operations. If you came to see our aluminum works in along the West Coast in Norway, you will see that they're run in a very different way to what we were doing only 5 or 10 years ago.
The production system is one where our operators and our local management get a handle on the improvement potential and lift the production to a new level. We're among the most energy-effective aluminum works in Western Norway. They were started years ago, but they are still much better operated now than when they were brand new. You see the potential. Once we look at, break down the potential, we discover new potential. When we've finished with the $300 program, we'll continue. We have a good HSE development in most areas. We're not satisfied yet, but more and more plants are running without injuries for longer periods. We have made sure that we have leadership in R&D in the strategically important areas, like Terje Vareberg mentioned.
We have leadership in technology within Primary Metal, which is important, and we are close to the market, close to the customers, and the innovation in the interface between Hydro and our customers is very important for growth in the aluminum consumption. It also makes sure that we can produce complicated products that fit with our profile and competence, and we get more value from every ton we produce of aluminum. These are qualities we will build on and develop further in future. The strategy for the company now for the various business areas, let's start with bauxite and alumina. That's to continue the improvement program and have a stronger commercial approach. We have moved from pricing alumina based on LME, a percentage in relation to LME, to letting the pricing stand on its own two feet and moving it towards index pricing, which is coming on well.
The largest proportion of alumina will be priced on index and not on percentages of LME. Let me mention that a great proportion is bound up by contracts entered into by Vale, and that has tied up our volumes until 2015. From then on, we'll be able to use the index pricing much more widely and get more value from the alumina. Then we have to develop the resource possibilities of Brazil and adapt our capacity building in the right way in Brazil. We will postpone the new alumina refinery because we don't think there's enough capacity at the moment. The cap project will be one of the most attractive, most cost-effective aluminum works in the world in future.
As for Primary Metal, we want to create further robustness, cut the costs, and both the ones that are wholly owned and partly owned, and also use the possibilities of what we have, ingots, wire, et cetera, and the various kinds that we sell to the most demanding customers in the world today. We'll develop our technology further within Primary Metal. I'll revert to that later. We'll have a Primary Metal system that is ready for growth when the world needs more aluminum. Within energy, optimal stable operations, that's important, but we need to be flexible in our operations by selling and producing the energy that we need in the market in an optimal way. Obviously, we also have to source effectively into our primary aluminum system.
Since we have the competence in-house, we need to use the commercial competence within energy also for the rest of the value chain, where there's huge energy contracts that we enter into. We use that in Brazil and in other places where we operate. We are developing some smaller hydropower resources. Last year we announced that we have potentials. Holsbru, the Holsbru project was finished, and we have some small projects that will give us some gigawatt hours in future, and they pay off. As for rolled products, again, we try to reduce the exposure within general engineering, which is a standard product, more towards the automotive industry's needs.
More and more cars are produced in aluminium now, and we want to optimize the portfolio between the different rolling plants, most of them in Germany, two in Norway, and one in Italy. There's one in Malaysia, but we are getting out of that one. It's a small plant. If you look at R&D and innovation, we have an interesting history here as well. Hydro is one of the few companies in this industry that have developed their own technology for electrolysis and in metallurgy and product development for alloys and so on. These are things we want to develop further. We operate the only pipeline that carries bauxite from Paragominas to Alunorte. It's a pipeline that's 250 km long. We have come to the point where we have new electrolysis cells at the R&D center in Odda.
It's a pilot plant. I'll tell you more about the plants we have there. Downstream, we have leading positions in many different fields, as I mentioned. We're the most important supplier to Tetra Pak, who produce flexible packaging, and we supply aluminum in lengths of 300 kilometers in one piece. It's a 2-meter wide strip, and very few can compete with us there. Number one for lithography, for offset printing. It's not for newspapers, it's for magazines and journals in color, and they use aluminum there. It's the surface quality that is important, so it has to have a perfect surface finish at a level where, well, at atomic level, it has to be perfect. Otherwise, the print will be poor. Hydro loves producing demanding products, and we have few competitors in this area.
Of course, automotive is very important, and we have increased there, and we see new possibilities still. As Terje Vareberg mentioned, there's three main areas that we focus on when it comes to technology. First of all, we want to use the development we are working on and use it as soon as possible full scale. We have positioned our research centers wall-to-wall with the full-scale plants. So there's a very short distance between theory and practice, and our smelters benefit from that every day. The $300 program would not have succeeded if R&D hadn't used our technological competence. You can cut costs to a certain point, but you have to also develop competence and technology, or you will not succeed with your cost cuts.
Electrolysis technology, I'll revert to it, but it's a vital area, and we have product solutions and innovation for the most demanding clients. We are close to BMW. We supply half of all the aluminum for BMW. We work closely with Apple, for instance. Tetra Pak, I mentioned them, and many other global players are working closely with us. As for electrolysis technology, I'm sure you've heard about the HAL4e technology, a technology with high current, 450,000 amps, and very effective and low energy consumption. We now have a new program, HAL4e Ultra, super energy-efficient technology, that will take the energy consumption down to the theoretical consumption, where we have electrolysis cells in Årdal, 6 of them, and we see interesting results. We want to get below 12 kWh per kilo aluminum. 13.5-14 is now the world average.
As for metallurgy, we are using nanotechnology, and we go in at atomic level and move things around to get the right physical composition and the characteristics that we need and features we need. We have worked with NTNU and SINTEF. Energy technology are with us, Institute for Energy Technology in Oslo, and scientists are working closely with the people who do basic research. That means that the technology can be transferred very quickly because we have full-scale production next door. Some of the most demanding customers in the world want new alloys with new physical properties, and then they come to us more often because we have the capability to supply this very quickly. It's interesting also to see that Mercedes appeals to men of steel.
You see all the advertisements that compare steel and aluminum, and we have many more products in the building. This is our latest, with aluminum for cabling in e-cars, which will reduce the weight even further in the car. Copper used to be used for cables, and this is an aluminum cable. So the car manufacturers can reduce the weight with 7 kilos or so per car, and that's very interesting to them, actually. We also have a close cooperation with the Powerhouse in Norway. Hydro initiated this with Zero, the environmental organization, and Entra and Skanska are involved, and Snøhetta, the architects. The plan is to build an energy-positive building in Trondheim, and we have already started a refurbishing project in Sandvika. That'll be the first energy-positive refurbished building.
We went for that because there's 1% of the buildings that is new every year, so we need to do something with the existing buildings with Hydro's technology, with our partners. This will be a very interesting project, and I am sure we'll see positive results when it's done. Of course, we see the potential for using more aluminum at sea. We had a seminar recently with 100 participants or more, and there was a lot of interest in increasing the use of aluminum for various maritime purposes, ships, installations in the North Sea. The advantage of aluminum in the north is that it becomes stronger the colder it gets, whereas steel gets weaker in the cold. The northern areas give us a competitive advantage with the use of aluminum.
As for the Norwegian smelters, our ambition is to develop all our smelters in future further. We have strengthened our cost position here through the cost reduction program. We still see possibilities of strengthening our competitiveness in these aluminium works, but it's also because the situation for energy pricing in the Nordic energy market has changed a lot recently. Norway had a program called Norsk Agenda, and we have had it for years now, and we try to get some common ground for the connection between energy producers and energy-intensive industry. We share a fate. In addition to the $300 program, we have also tried to get a CO2 compensation in place, a compensation for a cost of an emission we don't have in Norway. This is the carbon compensation for emissions, and we don't actually have that. We use hydropower in Norway.
There's no carbon emissions, but the cost is built into it in the Nordic energy market. That's in place now. We also have a much better understanding of the situation. The grid strategy and the tariffs is a new area, an important area for us to get into place because we don't want increased grid tariffs and other investments that net is involved in that actually eats into the carbon compensation. We got a climate technology fund into place, which is meant for industrial development projects that may reduce the energy consumption full scale. That's in place. We have partly cleared up the framework conditions, but we still don't know what the carbon costs will be after 2020. That's not been decided by the EU or by Norway yet.
As for commercial energy solutions, this is very important for us because if we are to invest in all our Norwegian aluminum works in future, we need to renegotiate energy contracts that will expire in 2020. Then we have maintenance, upgrading investments for the current works. This is so they can last into the future. We've looked into the possibility of getting energy contracts for new capacity in Norway, and decisions for expansion will come after that. This will take some time because as you saw, there's still surplus of aluminum, so it'll take quite a while before the world needs more capacity in aluminum. We think long-term, and we want to be in position when it comes.
As for the common understanding, the good thing is that a number of public reports from different quarters appeared in the past year, the trade unions, and the employers association, among others. The conclusion is that there's a surplus situation in the energy market. The prices have gone down, and it becomes more interesting for a company like Hydro to work in Norway and invest in Norway compared to five years ago. The CO2 compensation was an important piece in the puzzle, and we worked quite actively. We went to several meetings with different players, and we got it at the very last moment because right after that, we got a new energy contract for Søral, which will run until 2020. It's now competitive internationally, that agreement.
We're also looking at the possibility now of building or using part of the technology fund to get a pilot into place at Karmøy. On the plot where the Søderberg cells were discontinued, we can build a pilot plant, a capacity of 70,000 tons, and we can check tomorrow's electrolysis technology. We have one electrolysis cell working in Årdal, and it's very difficult to verify the technology with one cell. We need to speed up. With the pilot, we imagine that we might have 60 electrolysis cells in place, and that gives us a statistically representative number, so we can verify the technology. This will have the lowest energy consumption in the world, lower than our toughest competitors potentially. Some prerequisites have to be in place.
Profitability is important, and the pilot is the first step in a full-scale development because I think we will succeed, and if we do, then we can extend the pilot, and it will be very favorable to us. The time is ripe when we develop this further. We need energy contracts and prices that are competitive for the pilot and for the next development that will follow naturally. We need Enova to support us. They have given us positive indications, but this has to go through the proper channels. It's an interesting development where we can invest in Norway in contrast to the earlier situation where it was difficult with the high energy prices, even just five years ago.
The company wants to use the competitive advantage we have in Norway, hydropower, and the aluminium production is the most environmentally friendly aluminium production in the world. We have a strong research and development community that we can make use of to produce the next generation of technology and go for another hundred years for the company. Thank you for your attention.
Thank you very much so far. The board has made a proposal for allocation of profits and appropriation of net income and equity transfers for the financial year 2012. You will find this on page F 59 in the annual financial statement. I would like to ask the secretary to refer this. The proposals of the board is that Norsk Hydro ASA, the parent company, had a deficit before tax in 2012 on NOK 276 million compared with a profit before tax in 2011 on NOK 3.386 billion. The annual result was a deficit of NOK 324 million in 2012 compared with a profit of NOK 2.613 billion in 2011.
The non-restricted equity for distribution before dispositions at 31 December 2012 was around NOK 27.6 billion. The proposal of the board is a distribution of 0.75 NOK per share in dividend, and this totals NOK 1.528 billion. Transfer of equity is NOK 1.852 billion. Before we go to vote here, I'll give the floor to Arne Frogner.
Chairman, to the annual shareholders' meeting of Norsk Hydro ASA, independent auditor's report. I am Arne Frogner. I am the responsible partner in KPMG for the audit. As elected auditors, we have given you this report. It falls into two parts. One is a report on the financial statements, and one part is about other circumstances. I will give you the main outline. Part one, we talk about the following parts, the board of directors and the President and CEO's responsibility for the financial statements, the auditor's responsibility, and the conclusion on the consolidated financial statements where we ascertain that it's in accordance with the Accounting Act and sound practices in Norway. We confirm that the consolidated financial statements are in keeping with financial reporting standards as adopted by the EU.
Part two is other legal and regulatory requirements, where we say that as a conclusion, we find that they are consistent with the accounts and in keeping with the legislation. The documentation shows that they have fulfilled their duty to produce proper documentation of the information according to sound accounting practices and the laws of Norway. This is our auditor's report.
According to the rules, the general meeting shall also hear the statement of the corporate assembly on this issue. I'd like the secretary to read this statement. You will find it on page S 75 in the financial statement.
Thank you. Statement of the corporate assembly to the annual general meeting of Norsk Hydro ASA. The board of directors' proposal for the financial statements for the financial year 2012 and the auditor's report have been submitted to the corporate assembly. The corporate assembly recommends that the directors' proposal regarding the financial statements for 2012 for the parent company, Norsk Hydro ASA, and the Group, and that this be appropriated as recommended by the board of directors. Oslo, March 12, 2013.
Thank you very much. Are there any questions regarding these presentations or the annual report and the annual financial statements?
I don't see anyone asking for the floor. My question is the following: Can the AGM approve the financial statements and the directors' report for the financial year 2012 for Norsk Hydro ASA, as proposed by the board and recommended by the corporate assembly, including the proposed dividend of 0.75 NOK per share? I don't see any votes against that motion, so that is carried. Let's go on. The next item is item four on the agenda, the auditor's remuneration. The accountant, KPMG AS, Arne Frogner, has sent the following letter to the company 8 May 2013. Fee, auditors. Auditing fee 2012.
In accordance with the general meeting May 8, 2013, we want to ask for approval of our auditing fee for the NOK 5.939 million. For the other parts, NOK 1.139 million is asked as a auditing fee. The complete total auditing fee for KPMG, inclusive Norsk Hydro ASA, is NOK 27.439 million. The other parts in auditing fee was NOK 2.359 million. KPMG AS, Arne Frogner, state authorized public accountant. This was the letter from KPMG AS. For the sake of good order, I would like to point out that the total auditing fee for the financial year 2012 was NOK 27 million for KPMG.
What the AGM is to approve is the auditing fee for Norsk Hydro ASA. I refer to the letter from KPMG AS, and I propose that the auditing fee for financial year 2012, Norsk Hydro ASA, be adopted as NOK 7,073,000 for KPMG AS. Can the AGM approve that motion? Yes. That motion has been approved. We go on, and the next point is point 5, item 5, which is a statement on the corporate governance. Pursuant to Section 5-6 of the Norwegian Public Limited Liability Companies Act, the AGM shall consider the statement on corporate governance made in accordance with the Accounting Act, Section 3-3 B.
This statement is included in the section entitled Norwegian Code of Practice for Corporate Governance in Norsk Hydro ASA's financial statements and directors' report 2012. The financial statements and the board of directors' report 2012 are, as I mentioned, available on the company's website, and we suppose that the content is known to the attending shareholders. The statement is not subject to a vote during this annual meeting. I give the floor to the chair of the board, who will refer to the main parts of this statement. A more detailed review of Hydro's governance, corporate governance is included in the financial statements and the annual report 2012. I refer to this material, will emphasize the following.
A healthy, transparent governance structure will contribute to better results and better creation of value. At the same time, it builds confidence and provides a foundation for socially responsible behavior. The work with corporate governance is therefore essential to Hydro's development. At Hydro, corporate governance is based on a clear distribution of roles and responsibilities. At corporate level, the board of directors in Norsk Hydro exercises a control function and an administrative function in respect of the group's operations and management. The distribution of roles and responsibilities between the board and the CEO is according to the company's rule of procedure for the board and other governance document. The administrative function requires the board of directors to actively play a part at the executive level in cases of exceptional and great importance, and which surpasses the day-to-day operations.
The board's administrative duties consist inter alia of establishing strategy, budgets, guidelines for the operations. The CEO has established a corporate management board consisting of the heads of the respective business areas, the CFO, and the vice president of HR, legal, and other corporate functions. Hydro's governance system is also based on responsibilities being delegated from the CEO to the business areas and to central operative corporate functions within finances, tax and accounting. In order to ensure a uniform high standard, Hydro's corporate directives lay down common requirements. They are compulsory for all the parts of the organization, and they build on the Hydro Way.
The directive addresses amongst others strategy, business planning, finance, management of risk, organizational and employee development, health, environment and safety, and ethics and CSR. The content is available for all the employees at Hydro's intranet and through the e-learning program, You and Hydro. Hydro complies with the code of practice for corporate governance of October 2012, but has minor departures on the following points. NUES point 6 on general meetings. The code of practice requires that the members of the board and nomination committee be present during the AGM. We have 2 departures to this point. The board is not necessarily all the members present at the AGM. The items that have been considered by the AGM has not so far made this necessary.
The chair of the board is always present to present the report and answer questions, and the other takes part as needed, and we consider that this is sufficient. The other departure is point article ten in Hydro's articles of association, which stipulate that AGM is chaired by the chair of the corporate assembly, in or her absence, the deputy chair. This system has been approved by the general meeting. The other point is point fourteen in the code of practice, which requires that the board of directors should establish guiding principles on how it will act in the event of a takeover bid. For Hydro, the board has chosen not to draw up explicit main principles for dealing with this.
The background for this is that the Norwegian state, represented by the Ministry of Trade and Industry, owns 34.26% of the shares in Hydro at the 31st, December 2012, and has through the Report no. 13 to the Storting, clearly expressed its intention to continue its long-term ownership in the company for the purpose of keeping the company's head office and research activities in Norway. Are there any questions or comments to this statement regarding corporate governance? That doesn't seem to be the case. We will go on. The next item is item six on the agenda, the board's statement on the stipulation of wages and other remuneration to the executive management.
According to the board has to stipulate the guiding principles for wages and other remuneration to the executive members, and this is note ten in the annual report. We are to proceed to an indicative vote on this issue, and this indicative vote concerns the guidelines for the company for stipulation of wages and other remuneration to the management. The declaration about the previous financial year, 2012, is only for your information. I give the floor to the Chair of the Board, Terje Vareberg, who will present the board's guidelines.
The board's statement on the stipulation of wages and other remuneration is as had been sent, included in note ten of the financial statements for 2012.
I refer to this statement, and I'd like to emphasize the following in my review. The board has appointed a separate compensation committee consisting of the board's chairman and two shareholder elected board members, as well as one employee representative. The committee functions as an advisory board to the board and to the CEO and is mainly responsible for making recommendations to the board based on the committee's annual evaluation of the remuneration of the CEO and other members of the corporate management, and the recommendation of the board, and also including the annual basis of bonus payment and the bonuses actually paid, and assist the CEO by consultation on the remuneration to the other members of the corporate management. The committee also functions as a consultative body on other material management and organizational issues.
Hydro's guidelines for the remuneration of the company's CEO and the other members of the corporate management board is based on Hydro's global HR policy, whereby, and I quote, "Hydro shall offer its employees an overall compensation package that is competitive and in line with good industry standard in the country in question. Where appropriate, the compensation package should also include, in addition to base salary, a performance-based part that shall reflect individual and individual performance." End of quote. The board proposes that the following guidelines shall apply to the year 2013 and until the general meeting in 2014.
The remuneration of the corporate management shall at all times reflect the responsibility of the CEO and the other members of the management of Hydro, taking into account the complexity and the broad range of the company's operations, as well as the company's growth and sustainability of the operations. The overall compensation share is based on Hydro's goal of being a competitive rather than a wage leader in the relevant labor markets. The board will therefore pursue the same practice as last year, which is a moderation in the remuneration of the management, which reflects the expectations in this area. Hydro attaches importance to transparency and to ensuring that remuneration arrangements are developed and implemented in accordance with principles of good corporate governance.
The main elements of the total remuneration to the CEO and the other members of the corporate management consist of a fixed remuneration, bonuses with a maximum potential payment of 50% and 40% respectively of the salary for the CEO and the other members of the management. Share-based long-term incentives of respectively 30% and 25% of the annual fixed base salary for the CEO and the other members of the executive management. Other share-based remuneration, the CEO and the other members of the executive management have the possibility to take full part in Hydro's share scheme at same conditions as other entitled employees. We also have pensions and assurance schemes and severance pay for a period of 12 months in addition to the notice period of 6 months.
For persons who have become members of the corporate management in 2012 or later, the severance pay will be paid for a period of six months after a notice period of six months. I refer you to note 12 if you need more details about the different remuneration components. The remuneration to the CEO and the other members of the executive management for the financial year 2012 was based in essence on the same guidelines as those proposed for 2013. Pension is a major complex and topical issue, and I'd like to make a few comments in that respect. In 2010, Hydro implemented an internal pension reform in establishing a defined contribution pension system in Norway.
About 30% of the employees in Norway are members as of first January 2013 of the defined contribution pension. The CEO and the other members of the executive management are, with one exception, members of Hydro's defined benefit pension plan, but with a ceiling on what is considered pensionable earnings. One member in the executive management is a member of the defined contribution system in Norway. The CEO and the members of the executive management also have contractual early retirement agreements which apply after reaching the age of 62 on terms described in note 10.
The established scheme for early retirement between 62 and 65 years does not apply to persons with a contractual right to retiring before they reach the age of 62 or who haven't been members of the corporate management in 2012 or later. Are there any comments to these guidelines? That was a comment that was not in the microphone, so the interpreters were not able to interpret that. That will come back under item eight, apparently. Are there other comments to this item? No. Then we will do an indicative vote on this item. We will now move on to item seven, which is the remuneration to the members of the corporate assembly and the nomination committee. I give the floor to the secretary.
Election committee or nominations committee recommend the following remuneration for the corporate assembly's members from January 1, 2013. The leader, annual remuneration NOK 98,000, up from NOK 95,000, with an addition of NOK 7,100 per meeting where the leader is present. The deputy leader/member/deputy member, NOK 7,100 per meeting where the member is present, up from NOK 6,900. The remuneration was regulated in 2012. Any comments on this proposal? No, I see no comments. Would the general meeting be able to accept the proposed remuneration to members of the corporate assembly? We will go to the vote. 7-2. That is the nominations committee. I give the floor to the secretary.
We recommend that the following remuneration be determined for the members of the nomination committee from January 1, 2013. Leader NOK 6,300 for meetings where the leader is present, up from NOK 6,100. The other members of the nomination committee, NOK 4,800 per meeting where the member is present, up from NOK 4,600. These remunerations were regulated in 2012. Any comments?
I see no one on the list of speakers. The question to the AGM is, can you adopt the nominations committee suggestion for remuneration it was stated, and we vote? That brings us to item eight on the agenda. One shareholder has signed on the list of speakers with a question. I give the floor to Mr. Sverre T. Evensen.
There's no microphone, so the interpreter can't hear him. He needs a handheld mic or he needs to go to a restroom.
Moderator, board of directors, dear ladies and gentlemen, I must say it's been a pleasure to attend this AGM. I only regret there's so few people attending the general meeting. I think that actually ties in with my question to the AGM. If I may strike a personal note here, I have spent 35 years.
I mean, I have an anniversary for my life's work, my striving for a strengthening of shareholder policy in Norway, because I went to Johan Melander in Den norske Creditbank then, and the Norsk Hydro model was started. He understood me. He knew what I wanted to do. I started a shareholders' association, and that's now the Shareholders' Association. I was member number one of that association. I've now devoted 25 years to financial reform. Right from the start, I had the help of Sigmund Kjos . He was a leading director of Norsk Hydro, and he understood investment merchant services, that the financial group model was maybe not the best solution, and investment merchant services was perhaps what was needed in Norway.
As of today, it is a fact that only 3% of the stock exchange ownership is in individual hands, so I really lost on that count. Regarding financial reform, it doesn't look as if Norway is going to do anything about that either. I therefore hang up my boots. I have a foundation for ethics and business, and you will see me there, but not here in years to come. Okay, that brings me on to the subject in hand. I put the same questions last year. You will see them here on my slide from the shareholder. The board and I decided to postpone this until this year.
Before this, I had a meeting with the management, both the secretary of the board and the current secretary, and a very exciting man for the first three questions, and that was Hans-Erik Benthien, the new Director of Technology. I noted that. Well, it will come in 2013, but they did not present here. I mean, this will be at the AGM in 2013. The thing is, you see, they have gone for this innovation center at Karmøy. An R&D center. I hope that they have a co-opting strategy to a great degree. I'm not sure all of you know what that entails. The innovation theory is that it can be achieved through alliances, co-opting, people into a social impact innovation for clients and clients of clients. It's been a pleasure to hear, Mr.
Brandtzæg's presentation, the CEO. He's made it very clear that there's marked improvement. I praised you in 2011, but this is a boost in your presentation of the further development that you have planned for the company. This is on the webcast, but there should have been many, many more people attending. Dürer halfway, they collect 10,000 people, but the Hydro Way should also manage to convene more people. This is a flagship of innovation work, in fact. The first three bullet points are about this. Those of you who have been given my presentation will see some key words about this. The last two questions on my slide are what I announced that I would revert to, it's bullet point four and five. Before I do that, let me tell you one thing.
The partner, the co-opted partner that you have in Sapa is Orkla. Orkla have also some interesting improvements that are interesting to shareholders and innovative development. Let me highlight the fact that Orkla actually issue a sustainability report. Hydro this year, Hydro, published our ethical responsibility and work ethics. I do remember that one of the previous CEOs was very concerned with an interest in this work, and I feel you have a lot of interesting input that you could present like this. The question is whether the presentation should maybe be in English, even if we have a Norwegian headquarters, and even if you have simultaneous interpreters here. This is of interest to a worldwide audience after all, or should be in future. I won't be coming back.
This is my last chance to give you some advice. Let me address my last two bullet points. Orkla implemented. I have the memo here. It was attached with item four on the agenda. They abolished the election of the board by the corporate assembly. Instead, the AGM elected the board directly. That is the main principle in the Public Limited Liability Companies Act. It is just that they have actually delegated the power to the corporate assembly to elect them. You can still use the corporate assembly in future as a body for cooperation. What I would like is for Hydro and the Hydro model to be renewed, both when it comes to shareholder policy and when it comes to governance.
My last bullet point is about a more forward-looking steering committee for financial codetermination and empowerment and common interest. We have or they have developed a share saving scheme for employees. There's no reason why this committee shouldn't make it clear that they are working for all workers and employees in Hydro when it comes to remuneration. I would also ask you to take on board this idea that it's possible to have nothing but a fixed salary for the CEO. I don't think there should be speculation on. What I mean is he's not a short-term man. This is a Vorstand. This is a person who has risen through the corporation. He thinks long-term, so he doesn't need that variable part. That's an old agenda for board work. I would ask you very strongly to simply give the CEO a fixed salary.
This has been on the agenda before when the schemes were much more lucrative and there was a lot of resistance. They have cut back. That's a positive thing. I welcome what has happened regarding the NUES guidelines for corporate governance, regarding remuneration. They have adjusted the pension part as well, which is a good thing. All I have to tell you now is that on 21st May, I have a meeting with the ownership department of the Ministry of Trade and Industry, but that is my future plan. I wish you every success. May I please ask you one thing that I'm a little curious about what happens to Sapa Heat Transfer now? Because isn't that a jewel in the crown that would fit into your presentation that you showed us today?
Thank you for your attention and good luck in the future.
Let's say thank you very much to Sverre Evensen for his kind words to the board and to the CEO, and for three very clear questions, and the chairman of the board will answer his questions. Thank you.
Thank you for the initiative of shedding light on important and topical subjects. As you pointed out, you had meetings with the management and with our new director of technology. On behalf of the management and on his behalf, I appreciate the kind words. You actually pick out a lot of problems that would take the rest of the day if the AGM was to discuss this extensively, and this would go beyond the affairs of an AGM.
I see that you have raised many interesting issues that the board will take along in its work in future. I need to correct you on one point. We have a sustainability report, which is the same as a sustainability report, and it is in place. I also want to mention that our investor relations people have received awards and recognition for our transparent reporting in Norwegian and English to the investor community. Yet, nothing's cast in stone, everything can be improved, and we take on board your views. As for the comment on the work that the board is doing, I can tell you that we review our procedure every year, the structure of the committees, how we organize our work. As for remuneration and wages and salaries, this is a province that is in flux, so to speak.
It's under continual development, and the board has attached importance to the fact that Hydro is a global corporation, but it is rooted in Norwegian reality. I have said in public even that both the board and the owners have to accept that we live in a world of competition, where the fight for the best people will only escalate. And the more important the human capital is for the corporation, the more important it will be to get the smartest, the wisest people on board. As per today, we feel that we have struck a balance, a fair balance between fixed salary and variable components. There's a long-term incentive there, a share buying scheme that is mentioned in the annual report that points out that this makes them long-term.
The CEO and his management have a sum of money to purchase shares with, and they are tied to them for three years. As for the bonus, this is not linked to share prices. All that was removed. External variables are normalized, and it's important for the board that the bonus payments must be linked to the underlying drivers that will create results at a later time. Let me summarize from the board. A lot has happened in recent years. The structural measure with Sapa will become very important. You had a specific question about the elements. I don't think I can answer specific questions. We take your views on board, and we thank you very much for your questions, and we wish you every success in the future.
All right. Also mean they are true.
I also think it's important that the Hydro Way leads the way when it comes to resuming this, shareholder club or shareholder association that Hydro had. Remember at the last meeting in Den Gamle Logen, there were 800 individual shareholders present there. That would support the Hydro Way, that we're different, that we're a pioneering company. CEO Brandtzæg, I have a comment about heat transfer in Sapa. The situation is that Hydro is heavily involved in the transfer area, heat transfer area, and if we had acquired that, we would have got problems with the competition authorities. We are heavy players already in that area. We have a strong position. It's about air conditioning and radiators in cars and so on. So, we have sufficient capacity in that field. Let me tell you one more thing. One last comment?
Yes.
That is, I forgot to mention that you have a much more exciting board than you used to have, and you now have international MDs. This is exciting. Finally, let me say that these are old questions on the slide. Many things have changed in the right direction. I almost regret, but I was faithful to my old questions because the agreement was that I would re-raise them this year, and thank you very much for your attention.
Talk to Sverre Evensen.
Thank you, Mr. Evensen. Does anyone else want the floor? I can't see anyone. In that case, we have come to item nine, which is a review and reading of the results of the voting for the various items on the agenda. I give the floor to the secretary.
The protocol of the shareholders present and the shares present, the total number of shares with voting rights is 1,434,427,639 shares. Of a total number of shares with voting rights, 2,038,789,033 shares with voting rights. We also have the voting results. The results of the vote, sorry. All items have been carried with the necessary majority, and all items except one have been approved and accepted by more than 99% of the votes. The exception is item six on the agenda, which was carried by 95.75% of the votes. The final count will be attached to the protocol or the minutes of the meeting, which will be on the website.
We have covered all the items on the agenda, and within a few days, the minutes from the AGM will be published on the website of the company. They will also be available for inspection at the head office. I thank all the shareholders for attending, and we adjourn the meeting. Enjoy your weekend.