Adjustments in long-term prices for future investments and normalization
Hydro has a requirement for a 10 percent real rate of return on investments after tax, but has now amended its long-term prices to be used when evaluating future investments.
The long-term oil price has been adjusted from USD 16 to USD 25 per barrel. The aluminium price has been adjusted from USD 1400 to USD 1500 per tonne. In the opposite direction, the long-term USD/NOK exchange rate has been adjusted downwards from 8 to 7.
Developments in recent years, combined with expectations of future prices, provide a sound basis for making this adjustment. All projects meeting the required rate of return will be tested using an oil price of USD 20 per barrel, and USD 1400 per tonne of aluminium, as part of a thorough quality assurance procedure.
The new long-term prices will also be used when calculating normalized results and Return on average Capital Employed, RoaCE.