Norsk Hydro entitled to up to EUR 248m for failed wind PPA in Sweden

Norwegian aluminium producer Norsk Hydro ASA (OSE:NHY) on Tuesday said it is entitled to a compensation of up to EUR 248 million (USD 268m) related to a failed wind power purchase agreement (PPA) in Sweden.

The potential compensation is part of the reorganisation plan of Markbygden Ett AB, which is supported by Hydro and has been approved in Umee District Court. It is expected to become effective next month.

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Hydro Energi AS signed a long-term PPA with Markbygden Ett AB in 2017 for an annual baseload supply of 1.65 TWh over the 2021-2039 period from the 653-MW Markbygden wind park in northern Sweden. The wind farm had an estimated annual output of 2.2 TWh but generation was significantly lower than expected, leading to financial challenges for Markbygden Ett AB, which entered reorganisation in November 2023. The wind farm stopped power deliveries to Hydro on February 6, 2023.

Hydro’s compensation is to settle the dispute over the company's non-performance under the PPA and for voluntarily cancelling the PPA. It is subject to a future sale of the park, with the ultimate amount determined by the sale proceeds and an agreed value sharing mechanism.

According to a previous announcement, Markbygden Ett AB is owned by China General Nuclear Power Group Europe Energy (CGNEE) and BNR Infrastructure, owned by GE Capital and Silk Road Fund China.

(EUR 1 = USD 1.082)