Announcement on the Noral Procject

22. March 2002

Ministry of Industry and Commerce
Joint announcement

The Noral project on building an aluminium plant in the East of Iceland and related power systems has advanced well and in accordance with the aim of meeting the target to conclude all preparations for a final decision by 1 September 2002. Preparations so far have underpinned the feasibility of the project and profitability assessments give encouraging results as well.

Nevertheless, Hydro has informed its partners that the company is not in a position to make a final decision on the project on 1 September 2002 as laid down in a joint announcement attached to the Declaration on the Noral Project1. The reason behind Hydro´s decision is solely that more time is needed to re-evaluate medium to long-term investment plans in the wake of the recent acquisition of the German company VAW. This requirement for strategic re-evaluation has nothing to do with the quality of the Noral project.

In this light the parties to the declaration will continue to work on the project with the aim to define a revised timetable. The participants in the Reydaral smelter have agreed that it would be desirable to add a new partner into the project and thereby reduce the Icelandic ownership share. Further work will therefore include evaluation of a broader ownership structure. The nature of the work ahead demands additional time, which is difficult to predict with accuracy.

This transition period brings to the forefront a dilemma between the parties. The time preferential of the Icelandic authorities and Landsvirkjun is different from the investors in the aluminium plant. Therefore, it is an understanding between the parties behind the Noral Project that the Government and Landsvirkjun have the right to approach new partners for the project during this period of no formally valid declaration between the parties. This does not, however, change the intention of all the parties to establish as soon as possible a framework leading up to a final decision on the Noral Project. To follow up, there will be a meeting early in June to reassess the situation.

Reykjavik March 22nd 2002

1) The Noral Project consists of a primary aluminium plant with a capacity of up to 400 thousand tonnes per annum, hydro-electric power plants and related infrastructure investments. The project was formalised on 24 May 2000 in the form of a declaration between the Ministry of Industry and Commerce on the behalf of the government of Iceland, Landsvirkjun (the National Power Company), Hydro Aluminium as, Reydaral hf (a special purpose company owned 50/50 by Haefi hf and Hydro Aluminium as) and Haefi hf ( a special purpose company owned by a group of Icelandic investors).

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