Eivind Reiten at Oslo's Polytechnical Society: Journey of industrial progress to continue

November 29, 2005, 19:00 CET

A century ago Hydro's founder, Sam Eyde, outlined his vision of the emergence of a new Norwegian industry at a meeting of the Polytechnical Society in Oslo. On Tuesday 29 November 2005, Hydro's CEO Eivind Reiten spoke at the same venue and presented the company's visions for the next 100 years.

When Sam Eyde completed his speech 100 years ago, his audience stood to sing "Sons of Norway". They raised their punch goblets to toast Norway's new King and the emergence of the country's new industry; the evening was then brought to a resounding conclusion with a rendition of "Ja, vi elsker", Norway's national anthem.

"As head of Hydro, it's not surprising that I welcomed this opportunity to speak, nearly 100 years to the day later, to the Polytechnical Society about Hydro's visions for the future – though I am not suggesting that I expect the audience to react in similar fashion this time!" quipped Eivind Reiten. He left those present in no doubt about the humility and pride he felt.

"Hydro was founded on the concept of utilizing science, technological insight and human creativity – an overwhelming idea that we transformed into a journey of industrial progress and the building of viable communities. Just thinking about the magnitude of the enterprise, and of all those who made a contribution during the past 100 years, makes me feel humble in speaking of Hydro's visions for the future. But my humility is tinged with pride related to Hydro's 100th birthday, and the even more significant certainty that we have a unique opportunity to continue our journey of industrial progress for another 100 years," he said.

Breaking barriers

"When Sam Eyde spoke here 100 years ago, he was primarily relying on visions and will. While these remain important driving forces for us, we have now become an experienced organization, based on our competency and solid financial platform," stated Reiten.

He went on to describe how Hydro's first major project aroused considerable international interest at the time and added that the company's projects were still breaking barriers, pointing out that Hydro has half-way completed what is perhaps its biggest project in Norway ever – the Ormen Lange development.

Reiten explained that Hydro is currently a leading industrial company with operations in nearly 40 countries – a major oil company and the third biggest aluminium company in the world, with roughly 35,000 employees and an annual turnover of nearly NOK 180 billion.

He demonstrated how closely Hydro’s development has been formed by the closely inter-acting forces of industry-shaping and nation-building. He declared that Hydro has helped create enormous value by means of its operations, technologies, employment opportunities and revenues:

"If we exclude the public sector, Hydro's current turnover is equivalent to 10 percent of aggregate production in Norway. Between 10 and 20 percent of investments annually in Norwegian land-based industry have been made by Hydro. In addition there are the company’s significant investments on the Norwegian continental shelf. During the past five years, Hydro has paid more than NOK 100 billion in taxes in Norway; in our centennial year we will probably pay more than NOK 30 billion."

Challenges

In his speech, Reiten also touched upon the major challenges Hydro faces when it comes to globalization, energy and the environment.

"Globalization impacts on almost all our operations. Almost 300,000 hours on the Ormen Lange project were delivered by Indian engineers. Our aluminium operation currently employs 7,000 people in Germany. Energy price increases resulting from a lack of liberalization and a C02 regime with unforeseen consequences are forcing us to close our least efficient production, resulting in job losses. On top of this we have to produce more, but with fewer employees, in our remaining operations. This is no easy message to convey when unemployment in Germany exceeds the ten percent mark."

"Those who maintain that restructuring is unnecessary, have not sufficiently grasped the fundamental driving forces that now determine the global division of labor. On the basis of our long experience, it is our view that restructuring is best undertaken while one still has the means and financial muscle to complete it in a responsible manner."

"The other major issue is the energy challenge. In every year since 1985, except in 1991, the world has consumed more oil and gas than new deposits have been proven. Up until now the oil industry has managed to supply sufficient energy to meet demand growth, but this capacity has now largely been exhausted. This situation has driven energy prices upwards."

"The energy challenge is going to increase. New IEA statistics reveal that global energy demand will increase by almost 50 percent during the next 25 years. Fossil fuels will continue to dominate the picture. Addressing this energy challenge is a colossal task. Our most effective way of doing so will be to develop and fully utilize our skills and technologies."

Meanwhile, Reiten underlined that the way in which the world is currently meeting its energy needs is not sustainable. He mentioned global climatic changes in particular.

"How do we meet global energy demand without destroying our planet? What role will energy nation Norway play in these developments? How will we, as an international company, tackle the many dilemmas confronting us; choices between profit and distribution, growth and conservation, between national interests and international opportunities?"

"Environmental considerations will represent an ever more important limitation, but also industrial opportunities for those who manage to utilize them. We intend to number among these."

Still two strong business areas

Reiten acknowledged it is not surprising that questions are raised concerning Hydro's structure – given two such differing business areas as aluminium and oil. Extraordinary high earnings in oil and energy, and the cost challenges coupled with low profitability in aluminium, intensify the focus on structure.

"While the operational synergies between the two areas are limited, we do make use of shared, wide-reaching international experience and presence in many countries. The most recent example of this is our acquisition of a license in a major oilfield off Brazil – a country we know well from our aluminium business. Project expertise in the company is just as relevant for land-based projects as it is for offshore ones – whether they be in Sunndal, Qatar, the Ormen Lange project or Russia. Sound steering of complex projects is a core competence that has been one of Hydro's trademarks for 100 years."

"Our strategy is to continue to develop both of these business areas in the years ahead. Long-term industrial considerations will otherwise impact on any change of strategy we implement in the future. For we cannot face the next 100 years with a rigid and inflexible portfolio."

Reiten summed up his vision of the future in the following way:

"We shall continue to grow and set high profitability requirements. Our owners will be proud of us. Our projects will attract international interest, because we take on tasks others deem impossible and help find answers to demanding questions. We shall continue to create great value in Norway, and play a steadily more significant role in the international arena. We shall be respected for important breakthroughs in new energy forms and industrial solutions. We shall be a company Norwegians can take pride in. We shall continue to break barriers. We shall continue to ask ourselves the question: Why not? And we shall demonstrate that great ideas are also conceived in small countries."