Did Tomago’s Long-Term Power Deal and A$1b Plan Just Shift Norsk Hydro's (OB:NHY) Investment Narrative?

• The Australian and New South Wales Governments, together with Tomago Aluminium, have recently agreed a partnership to secure long-term, competitively priced power for the Tomago smelter beyond 2028, underpinned by plans for at least A$1.00 billion in capital projects and major maintenance over the next decade.
• As a significant shareholder in Tomago Aluminium, Norsk Hydro gains improved visibility on the smelter’s operational continuity and decarbonisation pathway, which could influence how investors view the resilience and quality of its aluminium portfolio.
• We’ll now examine how locking in Tomago’s long-term operations and decarbonisation plans may influence Norsk Hydro’s cost-efficiency and low-carbon growth narrative.

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Norsk Hydro Investment Narrative Recap

To own Norsk Hydro, you need to believe in its integrated, low carbon aluminium model and its ability to keep costs competitive through cycles. The Tomago power deal improves visibility on a key smelter and modestly supports the near term catalyst of growing low carbon volumes, but it does not remove core risks around global oversupply and weaker downstream demand.

This development ties in closely with Hydro’s decision to invest NOK 2.5 billion in the Illvatn pumped storage hydropower plant, which is intended to secure more renewable, stable power for Norwegian smelters from 2030. Together, Illvatn and Tomago’s long term energy arrangements reinforce Hydro’s energy sourcing story, an important backdrop for its cost saving measures and its push to grow greener aluminium premiums.

Yet while the power outlook improves, investors should be aware that oversupply in global alumina and aluminium markets could still...

Read the full narrative on Norsk Hydro (it's free!)

Norsk Hydro's narrative projects NOK208.1 billion revenue and NOK15.0 billion earnings by 2028. This requires a 1.1% yearly revenue decline and an earnings increase of NOK5.4 billion from NOK9.6 billion today.

Uncover how Norsk Hydro's forecasts yield a NOK74.13 fair value, in line with its current price.

Exploring Other Perspectives

Eight members of the Simply Wall St Community currently see fair value for Norsk Hydro between NOK 46.03 and NOK 79.56, reflecting very different expectations. You can weigh these against the risk that global alumina and aluminium oversupply pressures pricing and earnings, and consider how that might shape Hydro’s longer term performance.

Explore 8 other fair value estimates on Norsk Hydro - why the stock might be worth 39% less than the current price!

Build Your Own Norsk Hydro Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Norsk Hydro research is our analysis highlighting 4 key rewards that could impact your investment decision.
• Our free Norsk Hydro research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Norsk Hydro's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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