A mysterious power failure at the Qatalum aluminium plant in Qatar suffered a sudden shutdown of primary aluminium production. the Norwegian aluminium producer Hydro says. The incident will be investigated in cooperation with local authorities. The company’s shares took a nosedive at Oslo Stock Exchange, Tuesday.
“The way the market reacts is a strong overreaction.”
The Qatalum aluminium plant in Qatar suffered a sudden shutdown of primary aluminium production, due to a power outage that occurred at 04:40 hrs on the 9th of August 2010, Hydro says in a short market statement. The company’s share price dropped 3,7% in Oslo, Tuesday.
Power was out for almost five hours, leading to a significant drop in temperature in the reduction cells and making it impossible to resume metal production.
The incident caused no personal injuries or any known uncontrolled emissions, Hydro says.
The cause of the power loss is yet to be determined.
Even though power has been restored, the liquid electrolyte in most of the 444 affected cells in operation at the time of the incident is solidified, and these cells need to be prepared for restart.
The remaining 260 unaffected cells are on track for normal start-up.
The ramp-up of the Qatalum aluminium plant, which was scheduled to be completed in the fourth quarter this year, will be delayed as a result of the incident.
Qatalum is working on a revised start-up plan.
According to the statement, Qatalum will investigate the cause of the incident in cooperation with local authorities.
Qatalum, with a design capacity of 585,000 tonnes of primary aluminium, is a 50/50 joint venture between Qatar Petroleum and Norwegian aluminium company Hydro.
At Oslo Stock Exchange, the Hydro shares (NHY) dropped 3,7%, Tuesday.
“This may cause a delay in production of about one half to two-thirds of production, which is a shame, but the way the market reacts is a strong overreaction,” a Norwegian analyst says to the website DN.no.
Analyst Samir Bendriss of Pareto Securities expects full production in Qatalum will be delayed by one quarter.
“The stock should be falling 1.50 cents on the news. We believe that Hydro has fallen enough, and expect it will gradually come back up. The stock is priced cheap anyway, and has been weak in relation to aluminum prices, so I see an significant upside from these levels,” he says according to the news agency TDN Finans.
Mr. Bendriss emphasizes that the valuation is a rough estimate by calculating a multiple of earnings power.
“Roughly, they will be in full production by the end of the first quarter next year, instead of the end of the this year,” he adds.
Norsk Hydro is now working to identify what has happened, how it could happen, and expects to publish an update later today.
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