Alunorte’s fuel swap project a key enabler for Hydro’s greenhouse gas reduction by 2030

Norsk Hydro ASA, a Norwegian aluminium manufacturer, has secured a US$200 million sustainability-linked loan to assist its transition from heavy oil to natural gas, a more sustainable fuel that will help meet its greenhouse gas reduction objectives.

Hydro Alunorte, located in the city of Barcarena, State of Pará, is the world's biggest alumina refinery outside of China. The Alunorte alumina refinery in Brazil will be converted as part of the project, which is estimated to reduce CO2 emissions by 700,000 tonnes per year.

“The Alunorte fuel switch project is one of the main enablers to deliver on Hydro’s sustainability ambitions to reduce greenhouse gas emissions by 30% by 2030. The strong relationship with the participating banks has enabled us to create a solution linking profitability and sustainability,” says Pål Kildemo, Executive Vice President and CFO of Norsk Hydro ASA. 

The seven-year loan is designed as a sustainability-linked loan with a fixed rate swapped in. Six of Alunorte's key banks took part in the financing: BNPP, which served as a coordinator and sustainability coordinator, DNB, which served as the facility's agent, and Citi, which served as the swap coordinator. Credit Agricole, ING, and Itau were also present.

Not just for Alunorte, but also for the Brazilian market as a whole, this loan and exchange with a sustainability connection instrument are a first. The Alunorte fuel switch project's sustainability connection was built into the facility and interest rate swap, tying price to success on the greenhouse gas emission reduction objective.

 “Hydro has a track record of utilizing green and sustainable loans to finance activities, and our sustainable financing framework is directly linked to our medium- to long-term sustainability strategy, providing an advantage in terms of access to and cost of capital,” added Kildemo.