Contracts with Power-intensive Users

While the energy bill of an aluminum company is considerably more complex than the electricity bill of a household, it is still possible to give a fairly clear picture of Norðurál’s power purchases for its production. Norðurál enters into long-term contracts lasting many years, and in some cases decades. It currently has contracts with three electricity producers. The contracts were signed at different times over the past few decades and have varying terms. Six contracts are currently in force: one with Reykjavík Energy, now Orka náttúrunnar (OR/ON), signed in 2005; two with OR/ON, signed in 2008 and 2025; two with Landsvirkjun, signed in 1997 and 2009; and one with HS Orka, signed in 2025.The new contracts with OR/ON and HS Orka, signed in 2025, took effect on 1 October 2026. The 1997 contract with Landsvirkjun was most recently extended in 2026 and takes effect in 2027. Norðurál also has contracts with Landsnet for the transmission of electricity.

 

 

 

Long-term contracts for buying and selling electric power cover many aspects, including contract duration, volume, pricing formula, take-or-pay obligations, curtailment rights, and the arrangement of transmission fees to Landsnet.

 

 

 

182 MW from Landsvirkjun (1997)

Norðurál’s first power contract was signed with Landsvirkjun on August 7, 1997 (LV 1997), for the delivery of 107 MW over a period of 20 years, for the annual production of 60,000 tonnes of aluminum. The price was linked to the global market price of aluminum. Delivery commenced in July 1998, when Norðurál’s Grundartangi smelter became operational. An amendment for a one-year extension and a total delivery of 161 MW was signed on October 29, 1999, to support an increase in production to 90,000 tonnes per annum. Over the years, further amendments have been made, with the seventh signed on March 23, 2026. It takes effect in January 2027.

 

292 MW from OR and HS Energy (2005)

Norðurál signed a power purchase agreement with Reykjavík Energy and HS Orka (then Hitaveita Suðurnesja) on April 17, 2004. The agreement covered the purchase of 153 MW for 20 years from the start of delivery, to support an increase in annual aluminum production to 180,000 tonnes. The electricity price was linked to the global market price of aluminum. The first amendment was signed on October 28, 2004, increasing the contracted capacity to 222 MW to support annual production of 220,000 tonnes. On April 6, 2005, a revised and updated agreement was signed, increasing the capacity to 292 MW to support annual production of 260,000 tonnes (OR and HS 2005). Deliveries began in February 2006. Under this agreement, deliveries will be phased out between 2026 and 2028.

47.5 MW from OR (2008)

On December 30, 2008, Norðurál and OR signed a contract (OR 2008) for the planned Helguvík aluminum smelter. The contracts provide that this power can also be used for Norðurál’s Grundartangi smelter in light of the uncertainty concerning the construction and launch of the Helguvik smelter at the time of signing. Delivery under this contract began in 2011. Confidentiality was lifted from the agreement in 2021.

 

25 MW from Landsvirkjun (2009)

Norðurál’s contract for delivery of up to 50 MW from Landsvirkjun, from February 25, 2009 (LV 2009), has a term of just over 20 years. The capacity has since been decreased to 25 MW. The price is linked to the global market price of aluminum. The first amendment was signed on 24 February 2021, thereby lifting the confidentiality of the agreement.

150 MW from OR/ON (2025)

When the 2005 agreement with HS Orka and OR/ON was extended, it was divided into separate agreements. On April 16, 2025, an agreement was signed with OR/ON for the delivery of 150 MW. The agreement took effect on October 1, 2026, with deliveries phased in to align with the existing agreement, and remains valid until March 31, 2032.

50 MW from HS Orka (2025)

When the 2005 agreement with HS Orka and OR/ON was extended, it was divided into separate agreements. On September 23, 2025, an agreement was signed with HS Orka for the supply of 50 MW. It took effect on October 1, 2026 and runs until September 30, 2031.

 

All power contracts and amendments of which confidentiality clauses have been lifted are available in PDF format by clicking on the appropriate link in the table below.

*Confidentiality clauses apply to certain contracts and amendments. The scope of confidentiality varies between agreements and may cover provisions other than pricing.

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Glossary

Electricity prices

Electricity prices may be fixed or variable according to a pricing formula. Variable prices may, among other things, be linked to the price of aluminium on the LME or to electricity prices on Nord Pool. The precise structure of the pricing formula depends on the terms of each contract.

Electric energy transmission

The way contracted power transmission costs (i.e., payments to Landsnet) are split between energy providers and buyers differs.

Term and delivery period

The signing date indicates when the agreement was concluded. The agreement may take effect, and electricity deliveries may begin, at a later date and, in some cases, in stages.

Permission to resell energy

A permission to resell energy that the buyer contractually purchases to a third party, e.g., in case of production stoppage or if it becomes uneconomical to contractually use the energy.

Take-or-pay

A percentage of the underlying energy in the contract that the buyer guarantees to pay for at any given time, whether it is put to use or not.

LME

LME stands for London Metal Exchange and is used to indicate the price of aluminum listed there ($/ton of aluminum).

LME cash is the spot price, and LME3M is the three-month price in forward trading.

The LME pricing formula involves multiplying LME’s monthly average for the accounting month ($/t) with a percentage that indicates the share of electric energy cost in the price of aluminum, thereafter dividing that figure by 14,2 (MWh/t) to obtain the price for the specific month in $/MWh.

Click HERE for LME prices for aluminum.

MW and MWh

The unit of measurement for power is called a watt (W). Power applied for a given amount of time is called energy and is measured in watt-hours (Wh). As the units in the power and electric energy consumption of energy-intensive industries are sizeable, units of megawatts (a million watts), gigawatts (a thousand megawatts), or even terawatts (a thousand gigawatts) are usually applied.

14.2 (MWh/t) is the energy required to produce one ton of aluminum. Norðurál’s annual consumption of electric energy amounts to ca 4.6 million MWh.