IAS 10 para 21, non-adjusting post balance sheet event, regional flooding, partial suspension of operations

Norsk Hydro ASA – Annual report – 31 December 2017

Note 43 – Subsequent events (extract)

In February 2018, extreme rainfall in Barcarena in the state of Pará, Brazil, lead to regional flooding. Due to concerns over possible water contamination from Alunorte during this flooding, authorities have taken several measures against the alumina refinery. These include orders to reduce production by 50 percent and halt operations at its DRS2 bauxite residue deposit, which is currently under commissioning. In addition, suspending operations on one of two tailing dams at the Paragominas bauxite mine. All of these requirements have been fulfilled. Hydro issued a force majeure notice towards its alumina and alumina hydrate customers due to the production cuts and current lack of clarity into what measures it would take to return to normal operations.

Measures are being implemented to resolve the situation at Alunorte, including establishing an internal taskforce to conduct a review of Alunorte and commissioning an independent external review of Alunorte. Hydro has also decided to initiate a NOK 500 million investment to the water treatment system at Alunorte. This aims at increasing the water treatment capacity by 50 percent and improving the robustness of the plant to withstand future extreme weather conditions. So far, no spills or leakages have been detected from Alunorte’s bauxite residue deposits after the extreme rain event.

Regardless of the cause of contamination, Hydro collaborates with local institutions on humanitarian relief to assist communities in Barcarena within health and water. For neighboring communities Vila Nova, Burajuba and Bom Futuro, Hydro commits to working with local partners and investing in proper water supply. Hydro further commits to work with community, civil society and government to clarify the sources of water pollution and other water-related issues in the Barcarena region.

Fines of about NOK 50 million have been issued to Hydro by Brazilian federal authorities. As the period of reduced production and measures required to resume full production is not yet known and potential additional negative effects might materialize, we are not in a position to estimate the financial impact of the incident.

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