Quarter 2023 presentation and Q&A. Our CEO, Hilde Merete Aasheim, will start off presenting key highlights for the quarter, together with a strategic update. We will also be joined today by our Executive Vice President of Energy, Arvid Moss, who will have a walkthrough of the recently announced transaction with Macquarie Asset Management. Lastly, our CFO, Pål Kildemo, will take you to the financials for the quarter. After presentations, we will run a Q&A session. As normal, you will be able to ask questions directly to Hilde, Arvid, and Pål, and we will use the chat that you see to the right on your screen as a queue. So if you want to ask a question, you can write your name in the chat. I will get back to more instructions on this later. And with that, I leave the floor to you, Hilde.
Thank you, Martine, and good morning, and welcome from me as well. Let me begin with what is the most important in Hydro. The health and safety of our people and everybody who works for Hydro is always our top priority. Nothing is more important than that. Last week, we experienced a painful reminder of why this is so important to us, and I got the phone call I feared the most twice in one week. Two young men working within our fences lost their lives. One in our joint venture in Qatar, Qatalum, the other in Alunorte, Brazil. I am deeply saddened that these two young men, who came to work in our plants, did not come home to their loved ones. Our heartfelt condolences go to the family, friends, and affected colleagues.
We are now ensuring thorough investigations of the incidents to find the root causes and to learn from them. Fatalities are a stark reminder of how immensely important it is to keep health and safety at the top of our agenda, in everything we do, always. Our target is zero incidents, and we will continue to work throughout the whole Hydro organization to avoid any incident to happen. The world around us is in a state of upheaval, with increased rivalry, increased conflicts, and increasing unpredictability affecting all parts of the economy. This unpredictability, combined with rapid monetary tightening, pressures household spending and consumer behavior, and in turn, demand for aluminium. For the third quarter, we report an EBITDA of NOK 3.9 billion, while free cash flow came in at - NOK 0.14 billion.
We have had a strong release in operating capital in the quarter, offset by high investments. Weaker results this quarter are much driven by lower sales prices and volumes, but also from some one-off effects related to reduced CO2 compensation and provisions for donations supporting our long-term social ambitions, accounted for this quarter. Demand for primary aluminium in the world outside China continued to decline throughout the third quarter. In downstream, we observed consistent weakness in residential building and construction, as well as in the industrial segments. However, demand towards segments supporting the green transition continued to be robust. This macro environment requires us to address these challenges by swiftly mitigating where we can, adjusting capacity to market demand, and also utilizing our portfolio flexibility. Our efforts to strengthen robustness and competitiveness continues at full force, with improvement efforts ahead of plan, freeing up cash where possible.
But while addressing the short-term volatility, we are also positioning ourselves towards expected growth in demand for low-carbon aluminium in the longer term. Growing in Recycling is important to serve the market for greener aluminium, and we have made good progress here also this quarter. As you will recall, on July seventh, the share purchase for Alumetal S.A. was settled, and synergies have been confirmed and under execution, with a potential EBITDA uplift ranging from EUR 10-15 million by 2027. We continue our strategic growth in E xtrusions, with three new presses added to our portfolio in China, Austria, and Poland. While the market in itself is strengthening demand for low-carbon aluminium, the anticipated demand growth is also supported by regulatory developments. The EU Green Deal is progressing at high pace, with legislation overall supporting aluminium and renewable energy.
However, the Norwegian state budget proposal, presented on October 6, introduced disappointing changes to important framework conditions for the industry, as well as the power sector in Norway. Finally, this morning, we were very pleased to announce that we have finalized the capital raise for Hydro Rein, signing an agreement with Macquarie Asset Management to further develop and grow Hydro Rein capital light. This transaction marks a very important milestone for the execution of our strategy of growing in new renewable energy. Hydro is responding to the short-term market uncertainties by adjusting to demand developments and utilizing the flexibility we have in our portfolio, which we have developed over the last decade. In Aluminium Metal, we are benefiting from our casting flexibility, shifting volumes between product segments in order to avoid building inventories.
We're also using the flexibility in our recycling system to mitigate short-term volatility and to keep inventories as low as possible. The same flexibility is also being used in our recycling system in extrusion. And in extrusion, we are also shifted extrusion capacity between product segments. This, together with reducing production through reducing number of shifts and other manning reductions in Europe, ensures that we are maintaining margins despite large volume decreases. The strong focus on inventory and capacity management has contributed to a year-to-date release of working capital of more than NOK 4 billion. In the medium term, we are constantly delivering and identifying new improvements, and I'm pleased to report also this quarter that both our improvement program and commercial ambitions are ahead of plan for 2023.
Another way to secure robustness is strategic hedging, and we continue to lock in strong aluminium margins for up to 25% of our primary portfolio when the LME price allows it, and we currently have 440,000 tons hedged for 2024 at a level of $2,500 and 300,000 in 2025 at $2,400. Speaking about robustness, this has been one of our main focus areas during the last years. We have made strong efforts in making Hydro a more robust and resilient company, which includes strong improvement drive, delivering billions on the bottom line, and driving down our position on the cost curve. Locking in low-cost renewable energy for a large part of our portfolio until 2030 and even into 2040.
Also, improving our carbon footprint and increasing premiums through greener products, but then also allowing, allocating capital to strategic growth areas like high return, margin-based Recycling and Extrusion. This increased resilience give us the room to maneuver and to handle the short-term challenges without losing sight of the long-term opportunities, progressing with determination on our strategic agenda. This quarter has included several milestone in our strategy execution, and now also the partnership with Macquarie, which we announced this morning. And now I will introduce, Executive Vice President of Hydro Energy, Arvid, Arvid Moss, which will now run you through the partnership with Macquarie and what it entails for Hydro Rein's growth journey going forward. Please, Arvid.
Thank you, Hilde, and good morning, everyone. As Hilde said, this transaction marks an important milestone for execution upon our strategy in growing in the new renewable energy. Today, I'm really proud to present a groundbreaking partnership. Hydro is joining forces with one of the largest renewable energy investors in the world, Macquarie Asset Management, to accelerate the exciting journey of Hydro Rein and the decarbonization that we're going to do in the industry with green power. We have spent quite some time on this process, and we have spent the time well to find the right partner. Macquarie Asset Management and Hydro have worked together on renewable energy projects back since 2017, so we know each other quite well, and we share the drive to reduce industrial emissions. We meet a highly competent Macquarie Asset Management that is focused on performance and profitability.
I believe that Macquarie, with their financial and commercial strength, and also their leading expertise now in renewables, really match very well with Hydro's very competent organization in this area, and that together, we can accelerate our joint ambitions to decarbonize industries in a profitable way. So a little bit to the transaction details. Through an investment of $332 million, Macquarie Asset Management will acquire 49.9% of Hydro Rein. Hydro will own the remaining 50.1%, and we will develop Hydro Rein together as a JV. This transaction values Hydro Rein at $333 million per thirtieth of June this year on an equity basis. With the capital from Macquarie Asset Management, Hydro Rein is expected to be self-funded in the medium term, with no further equity injections from Hydro in the coming years.
The transaction is subject to standard regulatory approvals and transaction terms required by both sides. This includes several conditions present on both Hydro and Macquarie Asset Management, which needs to be satisfied, including related to funding of the transaction. Subject to satisfaction, closing on the transaction is expected to come second quarter 2024. All of Hydro Rein's assets are included in this deal, with an exception of onshore wind projects located close to the Hydro smelters in Norway. And for example, the Snøheia Industrikraft that we announced in December last year is the only current project of that kind, and it differs also from other renewable projects in several ways. It's really very close to our smelter. It's intended directly to go to the smelter and use there for continuing the green aluminium production and for industrial companies in the region.
It's very closely developed with Aluminium Metal and the local community, and it's really something that we do together to really create the basis for good development of the Høyanger smelter going forward. This project, the Snøheia project, is at an early development stage. If we get support from local municipalities, and we decide to move forward with this project, potential capital spending will come towards the end of this decade. Now, let's move to where we are with Hydro Rein after three years of growth. The ambition of Hydro Rein is to become a preferred supplier of renewable energy solutions to our industrial customer base with Brazil and Nordics as our core markets. We have two business segments in Rein: renewable energy, which is a big majority, and we have energy solutions.
We have already made significant progress with four wind and solar projects in construction, for a total of 1.7 GW. If we include the project, Vista Alegre in Brazil, it's actually 2.6 GW, gross. This is a significant pipeline, and we see also that we have a long pipeline of projects that we can work on over the next years, particularly in the Nordics. The three projects we have in construction in Brazil. We have one project in Brazil, that we actually are doing together with Macquarie, and that is the Feijão project. Altogether, in the four projects, we have now 4,000 people working on the sites, and when we come to the Capital Markets Day, we will give more insight on where we are on this project.
And in Sweden, actually, in Stor-Skälsjön , we have already started production from the first turbines, and all turbines are expected to be in operation by year-end. So things are moving forward. Energy solutions is gaining pace. This is a less mature market. We have a growing number of energy storage and efficiency projects in construction and operation across Norway, Sweden, and Germany, including a total of eight battery projects. But as you see, going forward now, this with energy efficiency and also inside fence solutions, will be more important. This is how we are building up Hydro Rein, step by step. Let me also share with you a little bit update compared to what we said on the Capital Markets Day last year and where we are now.
Last year, we communicated the 2026 targets as that we should have a 3 GW gross portfolio in operation and construction in 2026. We had an ambition to add more than 500 MW annually, gross capacity, and that the four projects that we have in construction should give an estimated EBITDA between NOK 400 million-NOK 450 million when they were in operation. Where are we now? As of Q3 2023, we have the 1.7 GW in operation and construction. We have added 1.5 GW total in the pipeline over the last 12 months. We are also estimating to spend approximately NOK 3 billion in equity, in CapEx, in these projects that we have in construction.
We have estimated now the contribution from these four projects to be between around NOK 410 million annually. So we are on track. So where do we see this business going forward? This is a business where we think we can deliver good returns for our investors. We are targeting an equity internal rate of return of 10%-10% annually for the whole Rein platform value going forward. And as I said, the value creation starts with thorough screening, identifying attractive assets where we can utilize our core strengths. And both Hydro and Macquarie have strong track record from scaling projects and businesses, which is a clear advantage in growing renewable energy markets. And we will capitalize on synergies both across projects and operations. And we will lever on our competence when it comes to also the market side.
I think that we have a special good relation now to really develop industrial partnerships with industrial customers. That brings me to the PPAs. I think we have shared this more, with you also earlier, but we target with the Hydro Rein to have 60%-70% PPA coverage. And here on this page, you can see an overview of the current PPAs and the coverage we have. And also going forward, we want to secure that our projects are, let's say, well, linked to PPA, so that we can take down risk and create a good foundation for also debt financing. But let me also show how this works with Hydro, the rest of the activity.
Hydro's captive power and PPA strategy ensure robustness and contribute to place Hydro at the lower end of the cost curve for primary aluminium producers, as you see on the figure to the left. As important, it enables us to produce aluminium in Norway with a low carbon footprint and less, 75% less than the global average. Also in Brazil, we have enabled, through Rein, the fuel switch to oil boilers in Alunorte, and that will take down the CO2 emissions substantially. As you see to the right there now, we are facing a new round of sourcing for upstream Hydro, and that is really one of the thoughts behind Rein when we established this three years back in time. Because, one, we saw the value potential in renewables.
We also saw that we need to take an active owner role to make things happen at speed and with the right quality throughout the life cycle. We see that Hydro Rein can contribute with risk mitigation for Hydro in a challenging energy market. We also see that we create a long-term cost advantage for both bauxite, alumina, and metal. There are four reasons why we think this is really a good value proposition for Hydro. It is important to recognize that getting to profitable build decisions have become more challenging in most countries. Being able to be a good developer and owner has become more important. Staying in, just not flip and sell, has become more important, and here, Hydro Rein can really benefit from Hydro's long tradition in many local societies around the world.
So these days, going out and just pick a PPA is not as easy as before for industrial customers, but with Hydro Rein in the family, we can really build values in both end, both as a renewable producer and industrial consumer, and in between, optimizing on an early basis in the markets. But Hydro, as a very large consumer, will source from several suppliers, so it will not only be from Rein, and vice versa, Hydro Rein will also support other industrial customers with power supply and other energy solutions. But I think that the strong industrial match, the strong industrial approach in Hydro Rein makes it a very good match for the rest of the Hydro family. So to summarize, with Macquarie Asset Management coming in as a co-owner in Hydro Rein, the company is uniquely positioned for long-term valuation.
Hydro Rein aims to become the preferred supplier of renewable energy for industrial clients in its core markets. The company has already shown to be a key enabler for decarbonization of Hydro, and more industrial customers will follow. We have established a strong presence in Brazil, but going forward, the company will focus on growing in the Nordics and selected markets in Europe. With Hydro's strong industrial presence in Europe and Macquarie as a partner, Hydro Rein is in an excellent position to grow further. Well, I have to say at the end, together with Macquarie, we really have got a partner that will help us also to drive performance and profitability through this setup, and I really look forward to deliver also good results going forward from Hydro Rein.
With that, I'll leave it back to you, Hilde.
Thank you, Arvid. I continue my strategic update. The green transition is progressing with full force. Toward 2030, we expect strong growth in demand for aluminium as an enabler for the transition toward electrical vehicles and renewable energy, and infrastructure supporting electrification. In the automotive segment, the shift toward electrical vehicles is accompanied by a new and rapidly growing value chain being established within our core markets. For extrusions, it's exciting to see the average use of aluminium profiles per car is expected to increase from 15 kg in a fossil fuel car to up to 40 kg in an electrical vehicle. That's an exponential growth. Likewise, broader adoption of new production method for structural components, such as giga casting, will strengthen demand for foundry alloys. We are seeing significant deployment of solar capacity in several regions, driving demand for aluminium frames and mounting structures.
Looking forward, we anticipate aluminium demand in the solar segment in the EU alone to grow by some 15%-20% annually towards 2030. However, what is becoming increasingly evident is that the most ambitious players in the market are now looking beyond aluminium's material properties. Carbon content, nature impact, and social profile of the manufacturer are becoming increasingly important. The past two years, Hydro has entered into strategic partnerships with a range of ambitious companies. End consumers, society at large, and regulators are becoming increasingly focused on the full value chain emissions in the products that enter the market. Customers are turning to the materials market to find providers who not only can deliver aluminium with the lowest possible emission today, but also to have credible pathways towards the ultimate target, zero.
We have recently spoken a lot about our automotive partnerships, where ambitious players like Mercedes-Benz, Polestar, and Porsche have teamed up with Hydro to decarbonize their future vehicle production. These are exciting companies to work with. These partnerships represent a new business model, where the traditional supplier-purchaser relationship has evolved into a strategic operation on common objectives. However, three pioneers do not make a movement. Hydro has also partnered with smaller, yet equally pioneering companies, who are aiming to transform their markets with low and ultimately zero-carbon products. And for Hydro, this results in a growing share of earnings from greener products. All that we sell in terms of REDUXA and CIRCAL, we get the premium. In Extrusion, we are growing with the market.
This quarter, we have opened three new presses in Zhuzhou in China, in Tczew in Poland, and in Nenzing in Austria, strengthening our portfolio of state-of-the-art extrusion capacity, supporting important segments like automotive, electrical vehicles, and building and construction. The growth agenda in Extrusion is focused on growing with high-growth market segments, supported by the green transition, like automotive and solar. We are growing, but also lifting margins on the portfolio as a whole. This is enabled by our product quality and on-time delivery, but also by a growing greener product offering, as our customers are increasing their demand for low carbon content. To give you one example, this has resulted in an increasing share of long-term contracts with automotive customers.
Over the last quarters, we have generated more than EUR 2 billion worth of multi-year contracts with premium car producers, increasing our margin robustness in the coming years. As industries and application mature, customers are also demanding more developed solutions rather than commodities. Here, Hydro Extrusions is at the forefront with value-added offerings and new R&D-driven solutions developed together with the customers. Lastly, having the size and the geographical coverage and advanced capabilities to be relevant in different segments is key to success, and our extrusion business is uniquely positioned here as a global leader. Despite falling markets, Hydro Extrusions continues to display margin robustness through portfolio development, dedicated improvement efforts, and strong margin management, and we continue to work towards mitigating falling short-term market. Recycling is another important part of our ambition of strengthening our position in low carbon aluminium.
In the current market environment, Recycling margins are under pressure as premiums are falling more than the scrap price. In response, we will continue to focus on growing the share of post-consumer scrap and turn the PCS into low carbon, high quality products sold at a premium pricing, making our margins more robust. Our strategy for growth in Recycling, therefore, includes increasing PC, PCS usage by around 500,000 tons by 2027 compared to 2020, with an estimated run rate out of 2023 of 60%. This contributes to our NOK 3.5 billion EBITDA target from Recycling in 2027. And achievements until end of this year implies an additional NOK 1.3 billion EBITDA uplift on normalized margins compared to 2020.
This quarter, we opened the new HyForge casting line in Rackwitz in Germany, increasing our capacity to serve the automotive industry with low carbon recycled aluminium based on post-consumer scrap. This investment is a direct response to the automotive industry's increasing demand for low carbon aluminium components. But we are also growing for our American automotive customers, and our new Recycling plant in Cassopolis in Michigan is progressing according to plan, with first metal expected by early November this year. We expect the ramp-up of the plant to extend into Q1, being fully operational by the second quarter next year. Finally, the acquisition of Alumetal, which was finalized this summer, is an important step in strengthening Hydro's position in the foundry alloy Recycling space.
The acquisition of Alumetal strengthens Hydro's Recycling position in the European market and widens our product offering in the low carbon and scrap-based foundry alloy market. Alumetal will add 275,000 tons of recycled capacity to our portfolio, of which 150,000 tons are based on post-consumer scrap, strengthening our position as the leading aluminium recycler in Europe. Their close partnership with the automotive industry, representing 80% of their customer base, combined with their expertise and capacity in scrap sourcing, sorting, and Recycling, is a perfect match for Hydro. Utilizing Alumetal's metal and casting capabilities will expand Hydro's greener product range and capture market volumes and margins.
To support these ambitions, we announced an investment of approximately NOK 200 million in modernizing and expanding the Alumetal recycling plant in Kęty in Poland, adding around 30,000 tons of foundry alloy capacity, further enhancing our presence in the automotive market. The integration process is well underway now, and we are addressing five main synergy clusters, targeting EUR 10-15 million in annual synergies towards 2027. In addition to the investment in the Hydro Kęty plant, some of the potentials identified are, first of all, to utilize excess melting and casting capacity, which can be used to produce recycled ingot without additional investments that Hydro purchase externally at higher cost today, to be used at our Norwegian centers to improve the carbon footprint and final offering to our customers.
We also see opportunities for Alumetal to replace third-party dross handling, improving metal yield and retaining a margin in the internal value chain. We also see opportunities leveraging Hydro's experience in selling green products to automotive customers willing to pay for a CO2 reduction, and we also see opportunities combining now Alumetal's state-of-the-art sorting line with Hydro's advanced LIBS sorting technology. But moving forward, we will continue to actively identify additional synergy initiatives with this, acquisition. Let me also give an update on our decarbonization roadmap. I'm happy to report that we are well on track to deliver on our commitment of reducing greenhouse gas emissions by 30% by 2030. Our ultimate target is zero, and every step towards zero counts in our long value chain.
As we have said before, the most important initiative for the 30% reduction by 2030 is the fuel switch in Alunorte. Replacing heavy fuel oil with natural gas not only reduces emissions, it also delivers a $160 million annual cost improvement effect. First gas is expected to be delivered by the end of this year, and all assets are expected to be converted by the first half of 2024. Representatives from my BNA team recently visited Singapore to inspect the retrofitting of the FSRU, and they confirmed that the ship is on track to dock in Barcarena at the end of the year. The second key area in our decarbonization program is to get the carbon out of our electrolysis process, and here we are pursuing two paths.
The first is carbon capture and storage, where we are making good progress in our test program for the capture solution, supported by our technology partner, Verdox. A test installation has been built at our plant in Sunndal, where work is ongoing now to prepare the off gas for capture. Hopefully, we should be able to confirm that we are able to capture CO2 from our low CO2 concentration of gases by the end of this year. That will be a major milestone on the path towards industrializing the full process towards 2030. The second technology path is our HalZero program. I recently visited our technology center in Porsgrunn, where they up to now have been testing the technology at lab scale. We are now preparing to build a test facility to test the different steps in the process in a combined way.
The ambition is to bring the technology to an industrial pilot stage demonstration within 2030. Finally, our path to zero, we need to decarbonize also our cast houses, and here we are testing several alternative fuels. In June, Hydro Havrand and Extrusion casted the first batch of aluminium in the industry, in the aluminium industry, using green hydrogen as a fuel source. In August, Aluminium Metal signed a letter of intent with Havila to collaborate on using biomethane to replace natural gas at the Sunndal Cast House and annual production. Having the whole value chain under one roof and being able to go to market with full value transparency also caters for exciting new commercial opportunities, such as the REDUXA 3.0 partnership with Mercedes. In December last year, you will know that we announced that we have entered a long-term strategic partnership with Mercedes-Benz.
Together, we aim to develop aluminium solutions approved for the automotive applications with a CO2 footprint below 3 kg per kilo aluminium. I should remind that the industry average is between 16 and 17. To approach the partnership is also to work together to approach net zero solutions within 2030. In April this year, the first shipment of REDUXA 3.0 left Årdal, bound for Stuttgart, and we are now making regular deliveries of this unique product. REDUXA 3.0 is an example of how technologists from Hydro, together with technologists from Mercedes, collaborated to accelerate the reduction in carbon content, while at the same time meeting the product specifications. However, this partnership also extends beyond carbon.
When we entered into the partnership, Mercedes made it very clear that they had high expectations also to how our conduct, to how we conduct our business. I was very proud in June, when I was invited to Stuttgart to receive their prestigious supplier award in the sustainability category in front of 400 of their most important suppliers. This is an acknowledgment of the effort, that we have been doing over years, but also an important reminder that in today's world, green goes beyond low carbon. Leading the way in terms of carbon emissions is only part of the equation. To be a sustainability leader, we need to deliver on the expectations from all stakeholders in terms of climate, nature, and social responsibility at the same time. Materials are made with a footprint.
Our objective is to eliminate our carbon footprint, minimize our footprint on nature, and extend our social footprint. Nature is becoming even more important on the global sustainability agenda. The expectation now is to regenerate rather than just extracting from a planet that is at a tipping point. Minimizing our footprint on nature has been high on Hydro's agenda for a long time, and we will present updated ambitions on this at our Capital Markets Day in November. But the societal impact becomes more and more important. Being a positive force in the communities where we operate is simply our license to operate. I would say that Hydro has, since we were founded, always fostered a close relationship with the communities around our plants. The philosophy was that what happened outside the fence had a strong impact on performance inside the fence.
Investing in society has been a priority for Hydro since day one, and Hydro is determined to contribute to economic and social development in all communities where we operate, with a social ambition to improve the life and livelihoods where we operate. This goes for all locations in Hydro, but naturally, due to socioeconomic factors, the largest and most visible effort are made in Brazil. Here we have more than 10 community development programs in the state of Pará. The program range from education and skills to quality of life and biodiversity, and this is an important part of our license to operate in the region. This is also why we have supported and contributed to the TerPaz program. TerPaz are community centers providing underdeveloped communities a combination of basic health services and services targeted at providing opportunities for youth in the community.
We have now decided to support the next phase of this project with a one-off investment of NOK 500 million over the next three years, bringing the TerPaz to Barcarena, Paragominas, and four other communities along our 240 km bauxite pipeline. We are convinced that this concept is a good match with our ambition of being a good neighbor and well aligned with our social ambition of improving the lives and livelihoods where we operate. On the regulatory side, EU policy is contributing favorably to low carbon and ultimately zero-carbon aluminium, a space where Hydro is well positioned. EU is now identifying aluminium as a critical raw material, recognizing EU's important import dependency and the criticality of this material in the green transition.
Likewise, the EU is tightening the screw when it comes to sustainability requirements through legislation like the Corporate Sustainability Due Diligence, and also Green Claims Directives. These policies support Hydro's focus on value chain transparency and carbon footprint, positioning Hydro favorably as a front runner, front runner among peers. Another regulation is End-of-Life Vehicles regulation, which is set to shape the market for recycling of cars, again, supporting Hydro's recycling agenda. And finally, increased EU targets for renewable energy production contributes both to secure competitive energy prices for Hydro's operations, as well as being a driver on the aluminium demand side from the renewable segment. And all this support contributes favorably. But unfortunately, I would also like to mention the current implementation regulation for CBAM, which is designed to support European industry's competitiveness against regions with less ambitious climate policies.
But this new regulation assigns zero emissions to re-melted process scrap when imported to the EU as an aluminium billet or product. This creates a loophole in the CBAM, where aluminium products made from high carbon process scrap completely avoid CBAM costs, putting European low-carbon aluminium at a competitive disadvantage. We strongly disagree with this definition because it undermines the intention behind CBAM, and we, and here we will continue to be vocal and push for closing this greenwashing loophole in CBAM. With that, I will end my presentation and hand over, over the work to our CFO, Pål Kildemo, for the financial update. Please, Pål .
Thank you, Hilde, and a very good morning from my side also. In the third quarter of 2023, economic growth faced hurdles due to rapid monetary tightening, pressuring household spending and also business investments. This also impacts the global aluminium markets, where the development has been further deteriorating since we reported our second quarter results, with demand expectations for primary aluminium further declining year-over-year. For the third quarter, external sources estimate the total surplus for 2023 to be between 0.7 and 1.2 million tons. Harbor estimates a surplus in both World ex China and China, while CRU estimates a global surplus in World ex China of 1.3 million tons, but a deficit in China of 600,000 tons.
It is in China that, contrary to the lack of convention, we have seen demand performing stronger than expected, driven by strong demand in the renewables and electric vehicle segments. While building and construction has been struggling for some time now in China, the boom in solar production has led to a strong increase in demand. China has installed a record number of solar panels this year, 100 GW as of July, while at the same time exporting a lot of panels to other regions, for instance, Europe, which further increases demand within China. Other green transition sectors have also contributed to a fairly strong demand situation, like electric vehicle production, ultra-high voltage cable installations, and also high-speed train constructions. If we then move downstream, then extrusion demand remained challenging in both Europe and North America in the third quarter.
European demand for extrusions in the third quarters decreased by 20% compared to the same quarter last year, and 21% compared to the second quarter for 2023, but this is largely driven by seasonality. Demand for residential building and construction and industrial segments have remained weak in the third quarter, impacted by macro factors, including weak industrial sentiment and activity. Demand for automotive remains the bright spot, supported by increased share of electric vehicles as share of total auto registrations. CRU estimates that European demand for extruded products will decrease by 17% in 2023 compared to 2022, mainly driven by the continued softness in building and construction and industrial segments.
If we look into 2024, the expectations is for flat year-on-year growth compared to 2023, with the same overarching trends: year-over-year declines in Q1 and Q2, and then a pickup in Q3 and Q4. As we move over to North America, extrusion demand is estimated to have decreased 17% during the third quarter compared to the same quarter last year, and 6% compared to the second quarter of 2023. Also here, demand continues to be weak in the residential building and construction and industrial segments, and automotive build rates have also recently slowed and could be further impacted into the fourth quarter by the continuation of the United Auto Workers strike. Moreover, constrained consumer spending may pressure automotive demand going forward. However, total auto sales and productions are still below pre-COVID levels.
CRU estimates that the North American demand for extruded products will decrease 6% in the fourth quarter of 2023 compared to the same quarter last year, mainly due to continued weak development in B&C and industrials. Overall, extrusion demand is estimated to decrease by 13% in 2023 compared to 2022, and if we look into 2024, then the expectation is for a slight increase in demand of around 1% compared to 2023, and we expect demand increase in North America next year across all segments, but with electrical and building and construction being the strongest. Also here, Q1 and Q2 are expected to decline year-over-year and the pickup to materialize from Q3. If we look at our volumes, then Hydro Extrusion saw a 14% decrease in sales volumes compared to the third quarter of 2022.
Also, for us, sales are still weak in Building and Construction, Distribution and Industrial segments, but HVAC& R has shown growth for the third quarter on average. Automotive segment developed sidewards for Extrusions Europe, while Extrusions North America has seen a negative development versus last year. For the fourth quarter of 2023, we expect slightly lower volume development in our North American extrusion business than the market in general, but largely in line with the market in Europe. So for total in 2023, we estimate to be roughly in line with overall market in both Europe and North America. For 2024, we are targeting market share growth in both Europe and North America, and this is partly driven by new capacity ramping up, particularly in the EU market. Let's then dive into the detailed results.
When we're looking at the results and developments for Q3 versus Q2, we saw a significant decline in adjusted EBITDA of NOK 3.2 billion. Results are negatively impacted by NOK 1.1 billion in lower realized aluminium and alumina prices, and NOK 900 million due to lower extrusions and Recycling volumes and also Recycling margins, as well as NOK 400 million due to lower energy prices and volumes. We had a net negative currency effect of around NOK 300 million compared to the second quarter. Extrusion margins have remained stable during the quarter, and on the positive side, we saw a decline in raw material costs, contributing with NOK 600 million in Bauxite & Alumina and Aluminium Metal in total.
Furthermore, our results were negatively impacted by the one-off provision for donations supporting our long-term social ambitions in Brazil of around NOK 500 million, as well as reduced CO2 compensation as a result of recently announced Norwegian state budget, amounting to a - NOK 800 million quarter-over-quarter. If we then move to the key financials, when compared with the last quarter, we saw a decline in revenue of 15% to NOK 44.7 billion for the third quarter, and compared with the second quarter this year, we saw a 17% decrease, driven by overall lower sales prices and volumes and also negative currency effects.
For the quarter, there was around NOK 1.9 billion effects adjusted out of EBITDA, which includes mainly unrealized derivative effects from the higher LME price at the end of the quarter, impacting our strategic hedging positions of around NOK 2 billion, resulting in an adjusted EBITDA of NOK 3.9 billion. Moving on, we recorded adjusted depreciation and amortization of around NOK 2.3 billion in the quarter, which ends up in an adjusted EBIT of NOK 1.6 billion. Financial income of NOK 378 million for the third quarter includes NOK 538 million in a Forex gain, primarily reflecting a gain from a stronger NOK versus euro, affecting energy contracts and liabilities, but partly offset by a loss from a weaker BRL versus dollar, negatively impacting dollar borrowing in Brazilian entities.
Then we have an income tax expense for the quarter, amounting to NOK 680 million, which exceeds the period's income before tax, and the quarter was mainly impacted by power surtax due to production increase, but also losses in Brazil, where our deferred tax assets are not recognized. Overall, this provides a negative net income of NOK 625 million, down from NOK 6.7 billion in the same quarter last year and down from NOK 5.1 billion in the second quarter. Adjusted net income was +NOK 345 million , which readjusted resulted in an adjusted EPS of 0.27 NOK per share. Let's then move to the business areas, starting with Bauxite & Alumina.
Adjusted EBITDA for Bauxite & Alumina decreased from NOK 633 million in Q3 2022 to NOK 93 million in Q3 2023, which is driven by the provision for donations to build six peace houses in the state of Pará. This will be done over the next three years, but it's recognized as a one-off in the third quarter. The results were also impacted by lower alumina price and stronger BRL against dollars, which was partly offset by lower raw material costs, mainly energy. Compared to the second quarter of 2023, the adjusted EBITDA decreased from NOK 817 million, impacted by the same past donations, and in addition, realized alumina sale prices declined 6% compared to last quarter, and the stronger BRL contributed negatively.
This was partly offset by around NOK 250 million lower raw material cost, which is slightly less than we guided for, as fuel oil prices have increased during the quarter. Fixed costs also increased compared to the second quarter, but this was lower than what we guided for, and in total, around NOK 100 million, which was also positively impacted by tax credits in the quarter. Alunorte production came out slightly lower than expected due to the power outage in Brazil earlier this quarter. For the fourth quarter, Alunorte is expected to be around nameplate capacity, and we expect continued lower raw material prices, which gives a cost release of around NOK 150 million, with caustic contributing positively, but bauxite and energy costs cooling down, also much impacted by the higher fuel oil prices, which we are experiencing at the moment.
The current dollar-BRL rate should also impact our results positively if it remains at the spot level of today. Fixed and other costs are expected to increase around NOK 300 million in the fourth quarter due to plant and delayed maintenance, which was supposed to come in, in Q3, and the TerPaz provision will, of course, not impact Q4. If we move on to Aluminium Metal, then this quarter's adjusted EBITDA decreased from NOK 6.5 billion in the third quarter last year to NOK 1.4 billion this quarter. The decrease is mainly driven by lower all-in metal prices, with both LME and premiums under pressure, reduced CO2 compensation, as well as lower contribution from power sales. The decline was partially offset by lower alumina and carbon costs and also positive currency effects.
The CO2 compensation effect year- over- year is amounting to a - NOK 1.7 billion. Last year, we had a positive catch-up effect following changes then introduced for the 2023 national state budget, giving a net CO2 compensation of NOK 1.9 billion for the third quarter in 2022 in total, whereof NOK 1.4 billion was driven by the catch-up from introduced changes. This year, as a result of the national state budget proposal for 2024, introducing an increased price floor, the negative effect for Q1 through Q3 this year is recognized in the third quarter, giving a net CO2 compensation in the quarter of NOK 200 million.
Compared to the second quarter of 2023, adjusted EBITDA for Aluminium Metal decreased from NOK 3.4 billion—NOK 3.2 billion, sorry, due to lower all-in metal prices, reduced CO2 compensation of approximately NOK 750 million, lower contribution from power sales of another NOK 570 million, as well as negative currency effects. This was partly offset by lower raw material costs of NOK 350 million, where both alumina and carbon contributed positively. This was also slightly lower than guided, but with the current market developments and due to the different inherent lags and contract structures in Aluminium Metal, we expect a continued cost realization coming into the next quarter. On the flip side, fixed costs were stable, slightly lower than expected, as more activity has been moved into the fourth quarter, resulting in total cost developments being in line with guidance.
Aluminium Metal also had around $100 million in provisions at Albras related to the multi-year social donations, which we will not carry with us in EBITDA going forward. That brings us over to the guidance for the next quarter. We continue to see pressure on both LME and especially value-added premiums for the coming quarter. For the fourth quarter, Aluminium Metal has booked around 69% of primary production at the price of $2,084 per ton. Furthermore, we have booked 49% of the premiums affecting Q3 at $422 per ton, and we expect a range for Q4 realized premiums between $325 and $375 per ton.
With respect to the CO2 compensation, our guidance is changing due to the new floor price introduced by the Norwegian government, and we see our quarterly initial guidance decrease by NOK 250 million to a level of NOK 550 million-NOK 650 million per quarter. We also expect further reduction in raw material costs of around NOK 400 million-NOK 500 million, again, mainly driven by carbon and alumina. However, this is partly offset by increase in fixed cost of around NOK 150 million. So overall, we expect a net reduction in costs of around NOK 250 million-NOK 350 million kroners.
We do not foresee any restart of the curtailed volumes coming next quarter, and as the buyback contract between Aluminium Metal and Energy was finalized in Q3, the remaining long power position of Aluminium Metal of around 400 MWh will be sold in spot. This means that the next quarter power sales will be dependent on the energy price level in NO2, and basing this on the current NO2 price of around 700 NOK per MWh, the power sale is estimated at approximately NOK 300 million for next quarter, which is a relative flat development Q on Q.
Adjusted EBITDA for Metal Markets increased in the third quarter from NOK 534 million last year to NOK 568 million, and this is mainly driven by positive contributions from sourcing and trading activities, partly offset by lower results from recyclers and negative inventory valuation and currency effects. If we exclude the currency and inventory valuation effects, the results for the quarter was NOK 566 million, up from NOK 398 million in Q3 2022. If we compare the results to the second quarter of 2023, then adjusted EBITDA for Metal Markets increased from NOK 334 million, mainly due to increased results from sourcing and trading activities.
For the business unit Recycling, lower sales and weakening sales premiums for full price business was partially offset by reduced scrap prices and also lower energy costs. The outlook for the next quarter is, as always, characterized by volatile trading results and also currency effects. We expect challenging markets ahead, with potential for further curtailments in the recycler, and we also see premiums continue to decline, driven by the softer market and deteriorating economic conditions. We expect a lower, but still positive contribution from sourcing and trading activities for the next quarter. And I would also like to remind you that our guiding for full-year EBITDA of NOK 1.3 billion-NOK 1.5 billion does not include the volatile inventory valuation and currency effects, and that, previous guiding did not include the Alumetal acquisition, so this will come on top of that.
As of Q3, the year-to-date adjusted EBITDA, excluding currency and inventory valuation effects, is NOK 1.4 billion, and the full-year guidance is NOK 1.5-1.7 billion, depending a lot on developments in sourcing and trading results. In Extrusions, the adjusted EBITDA is slightly lower compared to the same quarter last year. Lower sales volumes and higher costs were close to offset by higher sales margin and positive currency effects. Despite weaker markets, we see that Extrusions continue to strengthen margins on a favorable product mix. In addition, the results for the third quarter was influenced by positive metal effects and a NOK 80 million one-off effect, which in total gives special effects of NOK 250 million. If we compare this to the second quarter, the adjusted EBITDA decreased due to lower sales volumes, partly compensated by lower fixed cost.
When we look into the fourth quarter, we should look towards the same quarter last year to capture the seasonal developments in extrusions. Compared to last year, we continue to expect higher extrusion and fabrication margins and positive currency effects. On the other side, we expect continued market uncertainty, soft extrusion markets in Europe and North America, which results in lower sales volumes compared to last year. Destocking, increased price pressure, automotive strikes in U.S., and weak demands in most category globally are expected to impact added value services and fabrication activities more in Q4 than what we have experienced earlier in the year. Also here, remelt margins are under increasing pressure. So if we combine this with higher fixed and variable costs, we expect this to more than offset the positive margin development that we're seeing in the fourth quarter.
We also expect around NOK 50-100 million lower year-on-year metal effect than what we have in Q3. So if you sum that all together, we expect a year-over-year development, which is similar to as we saw between Q3 last year and Q3 this year when adjusting for the NOK 250 million in one-offs. The final business area is Energy, where the adjusted EBITDA for the third quarter increased to NOK 762 million, compared to NOK 275 million same quarter last year. The main drivers behind the stronger results were higher production of 900 GWh, resulting in a slight positive net spot sales. Those effects were offset mainly by lower prices and NOK 2.1 billion lower gain on area price differences.
Compared to the second quarter, adjusted EBITDA decreased, decreased by NOK 92 million from NOK 854 million, mainly due to lower production, lower prices, and NOK 200 million in lower price area differences, partly offset by reduced loss on the buyback contract with Aluminium Metal on lower volume and price, amounting to a + NOK 330 million quarter-over-quarter. In the third quarter, external power sourcing volumes were affected by a disrupted delivery of volume from a long-term power purchase agreement in the northern part of the Nord Pool area, and the non-delivered volumes were 0.2 TWh in the quarter, amounting to 0.8 TWh year to date. If we then look into Q4, the price and volume uncertainty is, as always, large, and production and prices will depend on hydrological conditions.
Power prices in Southern Scandinavia are expected and are increasing with seasonality into the winter. However, the above normal hydrological balance and also some nuclear capacity coming back online from maintenance might limit the upside. Furthermore, we foresee somewhat lower gains from the NO2, NO3 spread differential, and at current spot prices, the estimate negative delta Q on Q is approximately NOK 50-NOK 100 million, but that will move with spot prices. In addition, there will be no more losses on the Aluminium Metal buyback contract as the contract was finalized in September. When it comes to the developments in net debt, it increased by NOK 2.6 billion from the second quarter, driven mainly by NOK 7.5 billion in investments.
If we base on the starting point of NOK 11.3 billion in net debt from Q2, the positive contributions for third quarters were the NOK 3.9 billion in adjusted EBITDA, as well as a total release of net operating capital of NOK 2.3 billion. While investments are increasing from a cash perspective, it is good to be able to free up operating capital, and we have seen continued good improvements in the work being done here during the quarter. Improvements are mainly coming on the inventory side due to both lower raw material prices and a mix of lower price and volumes in extrusion. Part of the release is also driven by the change in CO2 compensation scheme, reducing accruals by around NOK 0.5 billion. Net investments were NOK 7.5 billion, and the largest share here was related to Alumetal of NOK 3.3.
Furthermore, we had further investments of NOK 2.7 billion upstream, NOK 1 billion in Recycling and Extrusion, and NOK 600 million in energy. As a result, we had a negative free cash flow from operations of NOK 1.4 billion in Q3. Furthermore, we have also finalized last year's share buyback program by repurchasing seven hundred million worth of shares from the Norwegian state, representing the state's proportional ownership, which have been rebalanced. We have also started our new NOK 2 billion buyback program, which we got approved at our annual general meeting in May.
We also had a - NOK 0.5 billion in other, mainly resulting from the acquisition of Alumetal, which impacted net debt by a - NOK 700 million, and also lease expenses, partly offset by currency and NOK 0.4 billion of cash put on escrow accounts, which impacts adjusted net debt for the decarbonization investments in Brazil, which I mentioned last quarter. If we then move to adjusted net debt, we start by adjusting for the following items. As LME prices increased quite a lot during the quarter, our collateral increased by around NOK 0.9 billion, and together with cash on escrow accounts just mentioned, this results in NOK 1.6 billion in intangibles, up from NOK 1.4 billion-up NOK 1.4 billion from last quarter. With the current market environment, that will have been more than reversed.
Pension decreased NOK 0.5 billion to NOK 0.3 billion, driven by long-term adjustments in Norway, partially offsets by higher long-term interest in Germany. And finally, we have NOK 5.2 billion in other liabilities, which are stable from last quarter. With these adjustments, we end up with an adjusted net debt position of NOK 20.4 billion at the end of the quarter, and with that, I would like to give the word back to Hilde.
Thank you, Pål . Let me then finish off with some final reflections on our priorities, going forward. The health and safety of our people is our utmost priority. Last week's tragic fatalities are a stark reminder of how important this is. We are in the midst of a more unpredictable and volatile macro environment, but we are addressing this forcefully, meeting the weak market with firm measures and a more robust and resilient portfolio, following the strategic measures undertaking the latter years. At the same time, we are not losing sight of the long-term opportunities for low-carbon aluminium. Every day, we see potential for further value creation in this space, as our customers' appetite for greener aluminium at premium prices continues to grow.
To meet this demand, we are determined to push forward and deliver on our growth ambitions for Recycling and Extrusions, all while advancing our renewable energy portfolio, now also with the investment from Macquarie, supporting our decarbonization agenda. And with that said, thank you, and over to you, Martine.
Thank you, so much, Hilde, Pål, and Arvid. Then we are ready for our Q&A session. I see we already have several questions in the chat, so I will start by reading up these out loud. So first one we have from Yannis, regarding Rein: You indicate no further equity injections from Hydro in Rein. How much have you injected so far?
Well, hello, Yannis, and thank you for the question. So far, we have injected around NOK 3.1 billion in equity into Hydro Rein, as of H1 2023.
And then we have a second question from Yannis: Do you see any risks around possible further changes to Norway's CO2 compensation scheme in coming years?
Thank you for that question. We obviously have a work to do in terms of, let's say, supporting or explaining the legitimacy of the CO2 compensation scheme as a way of securing the competitiveness of our industry in Europe, where we don't have a fair level playing field. And that is a dialogue that we now will have with the government in terms of avoiding that we get further reductions.
Then we have a question from Liam Fitzpatrick regarding Alunorte. Can you provide an update on the stake sale and how this will impact the balance sheet from a year-end and capital return perspective, both in cash-in and reduction in liabilities?
Yeah. So at the moment, we are awaiting competition approvals to be able to go ahead with the transaction. When those are received, we will receive the payment, which has been announced, that will impact our positive balance sheet quite positively, around the tune of NOK 8 billion with the current currencies. And what we've stated is that this goes into the annual dividend discussion, which has a targeted balance sheet structure of NOK 25 billion adjusted net debt at the end of the year, when accounting for dividend in the given year.
Then we have a question from Sri from HSBC. Despite aluminium price spiking in the year-end, there was a working capital release of NOK 2.3 billion. Can you please provide some color on this and the expectations for quarter four?
Of course. As we have discussed earlier, we had a somewhat too high inventory situation coming out of 2022, and we have been working structurally to try and build this down. Building down inventories is not easier while markets are falling, but there is full focus in both the extrusion and the Aluminium Metal on this, which resulted in a quite significant release for the quarter. And if you look at the year as a whole, we started our initial guidance on NOK 4 billion in release. We took it down to NOK 2 billion, given the pricing we saw at the start of the year.
Now you will see that we are right north of NOK 4 billion, where around NOK 0.5 billion of it comes from the CO2 changes, and we expect this now to be more flattish towards the end of the year, given that there is still risk, given the uncertain market environment. But that's how we're seeing things now, flat working capital development in Q4.
And then we have another question from Sri. There were two fatalities reported recently. Where are the key safety gaps in your view, and what are the steps taken to fix these gaps? Thank you.
Well, obviously, we are devastated by the two fatalities that we experienced last week. Now our focus is to get a thorough investigations of what happened in order to learn, and we have our best people in the investigation teams ongoing as we speak, in Qatar as well as in Brazil, and I would be happy to report on that when we have the investigations done, in order for us to learn and to mitigate that this could happen again. But it's too early, and I don't want to speculate on the causes of the fatalities at this point.
And then the last question from Sri. Aluminium unit costs have remained flat quarter over quarter, despite realized prices coming down by roughly $130 per ton. Quarter four cost reduction guidance looks light as well. Are there any lag effects of lower costs, and what are the key cost pressures?
There is definitely a lag effect on the cost side, and we released a bit less in Q3 than what we had estimated on the raw material side. But then we spent less fixed cost than planned. So in total, our cost release for the quarter was pretty much in line with guidance. When you look into Q4, we expect around NOK 400 million-NOK 500 million in release in Aluminium Metal, and this is partly driven by alumina, but quite a lot from carbon also. So carbon markets have been coming down quite significantly, both pitch and pet coke. But there is some month delay here.
So with the downwards trend that we're seeing, we should expect impact in both Q4 and also Q1 to reduce the cost base.
We have a question from Morten Normann. In B&A and Aluminium Metal, you expect lower raw material costs and higher fixed costs in quarter four. Can you please quantify this?
I guess that's partly what I did for Aluminium Metal now. If you look at Bauxite & Alumina , then there's NOK 150 million estimated release in the fourth quarter. But on the fixed cost side, we see up towards NOK 300 million in increase in the fourth quarter for Bauxite & Alumina . That was driven a lot by a lower cost this quarter than what we had expected. If you look into Aluminium Metal, then we expect a fixed cost increase of around NOK 150 million for the fourth quarter.
Then we have a question from Olav Rødevand. How will the decrease in income Q3 affect the Norwegian factories?
Well, if the question relates to capacity, we have already taken out 130,000 tons of the Norwegian capacity from partly Husnes and partly Karmøy. We are using all the measures we have in terms of changing products to other product segments to reduce Recycling, and at this point, we have the measures in place to adjust for the demand, but that is a continuous evaluation we have to do in terms of how the market is evolving.
We have a question from Daniel Major. Your estimate of $160 per $10 million saving from fuel switch, what is the base for this run rate on quarter three?
The base for $160 million is the full year 2023. We can get back to the Q3 run rate in the conference call later today.
Then we have a question from Amos Fletcher regarding the Rein sell down. Over what time frame will the $332 million equity contributions be made?
That is too early to say. First of all, at closing, there will be then a payment to cover up for the funding from then first of July this year until the closing date, and then the remaining part will then be injected into Hydro Rein, when there's a cash need in Hydro Rein, to fund then CapEx or development cost in Rein. So that will be dependent how the portfolio develops in the coming years. But let's say within a few years' time, of course, this will be paid.
We have another question from Daniel. What is your updated fiscal year 2023 target for working capital change after the working capital release we've seen in quarter three?
Well, to reconfirm, it will be what you've seen year to date, as we expect a flatter operating capital development in Q4.
Another question from Amos. Will Hydro Rein be able to deliver the 4.4 GW and develop pipeline without Hydro making further equity contributions?
You know, this pipeline is dynamic. First of all, it's early projects, early leads, so it's something that goes into the portfolio, out of the portfolio, and we will select those projects that are most profitable and materialize those. Then the funding need will be dependent on both the CapEx, the farm down, and also the percentage we in the end want to sit with. So, this is something that we'll optimize now together with our new partner. How much of this is profitable to build out with a certain funding frame? So, it's a very important metrics for us to ensure that, let's say, in some years, Hydro Rein will be self-funded, be able to turn money around and do farm downs to realize premiums and invest those into new projects.
And then we have a question from Daniel. Can you give us a steer on next quarter extrusion EBITDA versus last year, up, down, flat?
That's a good question. I think if we take into account what we see in the marketplace, currently, then as you've seen over several quarters now, we are able to mitigate the falling volumes, the higher raw material cost, and also the inflation on the fixed cost base with higher margins. Not 100%, but to a large extent. We expect that development to continue into Q4. If you look at the Q3 and you take out the special effects relating to metal effect, or a tax compensation of around NOK 80 million, then you are a couple of 100 million down year-over-year.
If you look at the Q4, we expect a similar trend again, adjusting for these one-off items. I would just like to say that in current market environment, there is quite a risk both to upside and downside if the pickup was to materialize faster than we thought. But that's how we see the world today.
Another question from Daniel: Based on current carbon price and the new CO2 compensation, what will be the estimated 2024 compensation?
Well, you know, the estimated 2024 compensation is based on the CO2 price for 2023. So let me quickly run that sensitivity and get back to you after the call.
Then we have a question from Kenneth. Curtailed smelters, any thoughts on potential restarts given current market outlook?
Yeah, well, I think that when we look into the energy market for this coming winter and also the projection for energy prices, so I guess we believe that there is not a sentiment for ramp-ups and, but not... I mean, the industry has curtailed quite a lot in Europe. So, it depends really on the support also from the governments to keep the smelters going. It is still a challenging situation for the European aluminium industry, and so we have to follow that carefully.
And then we have a question from Sri. What is the duration of the new energy contract between Aluminium Metal and Energy Division?
Well, I guess it's not a new contract now between Aluminium Metal and Energy Division. I, I assume you ask about the, the pricing between the captive production we have in, in Norway and Aluminium Metal. That was entered into some years ago based on the, as a reference to the external pricing we have, and the pricing we have agreed last until end of 2030.
We have a question from Bengt. Booked loss on internal energy contract in third quarter in the Energy Division was NOK 250 million as guided or?
Largely as guided.
Another question from Bengt: How much of fixed cost increase quarter-over-quarter in Q4 will be reversed in first quarter 2024 due to maintenance and seasonality?
Well, we typically do have, as you say, a higher maintenance cost and a seasonal pressure, especially in aluminium, partly at the recyclers and also sometimes at the extruders, using the end of a year period. It swings a bit from year to year, but seeing it be between NOK 100 million and NOK 300 million, you could easily expect.
Then we have a question from Hans-Erik Jacobsen. Can you comment on the aluminium capacity utilization in Europe? Any recent changes?
Yes, we can comment on it and to-
Mm-hmm
... to follow up on Hilde's comment, that there hasn't been a lot of changes. We're still below that 50% mark, and if you look at the spot LME, spot energy, spot raw material prices with the decline you've seen on the billet side, it doesn't make economically sense to restart a smelter on spot unless you have some sort of support or subsidy.
And then we have another question from Yannis. The realized LME price for quarter four looks quite a bit lower than the lagged average spot price and below the hedge price. Can you elaborate on this, please?
Well, there is no special effects in the LME price. If you see that it deviates a bit from the lag effect, also including the hedge, taking into account that we also have a hedged currency on that, which contributes a bit negatively in the current environment, then it's timing of shipments and the like. As you know, the price has been very volatile intra-quarter with several hundred dollars range, and depending a bit on where you price, you could have a development outside of the pure average with the likes with the lagged pricing. But I expect it might be just as much impacted by the fact that we hedge our strategic position in LME and NOK. With the NOK development we have seen now, we get negative effects on those hedges, which reduces the realized LME price in dollar terms.
And then we have a question from Memore Mo Panem. Will you move more capacity away from Europe?
If you think about moving capacity out of Europe, they- we, we, we had to curtail our Slovakian electrolysis simply because the en- we, we did not have affordable energy prices as well as no CO2 compensation. And that is why we fight also for the Norwegian capacity. They are well-positioned today, well-invested, and are well-positioned on the cost curve, based on the fact that we have affordable power prices and also a CO2 compensation scheme that support us while we are working to get the CO2 out of the processes. So, that is sort of the basis for the smelter operation in Europe. That's to have affordable power prices.
That's why we work hard to actively develop a more renewable energy, and that we have a stable frame conditions. When it comes to extrusion, we are well positioned, very close to the customers in Europe, and we see the strong benefit from this today.
And then one last question before we need to round it off. Hydro Rein is targeting equity internal rate of return of 10%-20%, versus 10%-12% communicated at Capital Markets Day in 2022. What explains this?
Two different figures. The 10%-12% was on a project-by-project basis, and that we, when we measure what to invest into. The 10%-20% here now is the development of the total platform. So the net asset value of the total system in Hydro Rein, that we going to build together with with Macquarie. And I really think that, together with Macquarie, we will be able to drive this profitability also in a good way going forward.
So then we need to round it off. Seems to be no further questions as well, so a good timing. So thank you all for joining us today, and if you have any further questions, please reach out to Investor Relations. I wish you all a continuous nice day. Thank you.