Hydro has agreed to a settlement relating to a long-term power purchase agreement (PPA) with Markbygden Ett AB connected to the 653MW Markbygden onshore wind park in Sweden.
In the settlement, Hydro said is entitled to a compensation of up to €248m for its voluntary termination of the PPA.
Hydro Energi AS signed a long-term PPA with Markbygden Ett AB in 2017 for an annual baseload supply of 1.65TWh in the period 2021-2039, it said.
The contract was an enabler for financing and developing the 653MW Markbygden onshore wind park, located west of Piteå, in northern Sweden. The park’s annual production was estimated to be 2.2TWh.
Hydro said due to “significantly lower-than-expected production levels”, Markbygden Ett AB has experienced financial challenges for several years.
The wind park ceased power deliveries to Hydro on February 6, 2023, and entered into a company reorganisation process in November 2023. As of third quarter 2024, non-delivered power since February 2023 amounts to 2.5TWh, said Hydro.
According to the approved plan, Hydro said it is entitled to a total compensation of up to €248m as a settlement of the ongoing dispute relating to the company’s non-performance under the PPA, and as compensation to Hydro for the voluntary cancellation of the deal.
Any compensation to Hydro is subject to a future sale of the park, with the ultimate compensation received depending on the sale proceeds and an agreed value sharing mechanism.
Hydro said it will continue to work constructively with the company towards improved operations and a future sale of the park.
The sourcing situation at Hydro’s Norwegian smelters remains robust through 2030, based on an average annual equity hydropower production of 9.4TWh and a long-term contract portfolio of around 10TWh per year.
It is actively pursuing available alternatives for renewable power sourcing, including onshore wind, to meet the need for cost-competitive power for its industrial operations.
Subject to fulfilment of certain closing requirements, the plan is expected to become effective during November 2024.