Elkem

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& green leadership Delivering your potential We are Elkem Advanced silicon-based materials shaping a better and more sustainable future Elkem in brief Who we are and what we do 45.9 NOK billion total operating income 28% EBITDA margin >80% renewable electricity 0 net zero emissions by 2050 Elkem is one of the world’s leading suppliers of advanced silicon-based materials shaping a better and more sustainable future. The company develops silicones, silicon products and carbon solutions by combining natural raw materials, renewable energy and human ingenuity. Elkem helps its customers create and improve essential innovations like electric mobility, digital communications, health and personal care as well as smarter and more sustainable cities. With a strong track record since 1904, Elkem's global team of more than 7,300 people has a joint commitment to stakeholders: Delivering your potential. Elkem is listed on the Oslo Stock Exchange (ticker: ELK) where it is part of the OBX® ESG Index, a selection of 40 blue-chip companies demonstrating best Environmental, Social and Governance (ESG) practices. Our divisions Silicones Silicon Products Carbon Solutions Table of contents Elkem's history Highlights Elkem’s value chain 8 10 14 Letter from the CEO 16 The Elkem way Silicones 20 22 Silicon Products 24 Carbon Solutions 26 The Elkem share 30 Board of directors’ report Board and management Corporate governance Overview of main risk areas 34 50 52 68 Risk descriptions 70 ESG report Introduction 74 76 The Elkem climate roadmap ESG management Environmental 80 84 96 Social 120 Governance 136 Third party veriﬁcation Taxonomy report 154 156 Financial statements 160 Consolidated ﬁnancial statements 164 Notes to the consolidated ﬁnancial statements 170 Financial statements – Elkem ASA 254 Notes to the ﬁnancial statements – Elkem ASA 259 Declaration by the board of directors Independent auditor’s report Alternative Performance Measures (APMs) 291 292 298 Elkem's history Foundation → Sam Eyde establishes Elkem → Development of electrometal- lurgical processes 1904 Innovation → The Fiskaa Verk, Norway site is purchased in 1917 for experimental and research purposes → Elkem patents the Söderberg electrode in 1918 → Elkem listed on Oslo Stock Exchange Expansion → Producer of aluminium → Partner with Alcoa → Rhöne-Poulenc is established in 1948 1950 Industrial giant → Elkem merges with Christiania Spigerverk to become one of Norway's largest companies → Xinghuo plant is established in 1968 Internationalisation → International expantion; steel and ferroalloys → Acquisition of Union Carbide Portfolio optimisation → Sold metal business → Acquisition of Icelandic Alloys → Start-up of Elkem Solar → Elkem acquired by Orkla and delisted from the Oslo Stock Exchange Growth & specialisation → Rhodia Silicones acquired by Bluestar in 2007, renamed Bluestar Silicones International (BSI) → Elkem acquired by Bluestar in 2011 → Merger with BSI in 2015 → Spin-oﬀ of Elkem Solar 2000 Integration → Becoming a global, integrated leader in silicon-based advanced material solutions → Initial public oﬀering: Re-listing on the Oslo Stock Exchange in 2018 → Integrated with and acquisition of Xinghuo and Yongdeng, with successful branch expansion at Xinghuo 2020 Dual-play growth and green leadership → Record ﬁnancial results in 2021 and 2022 → Solid balance sheet enables attractive dividend and growth investments → Well-positioned for global megatrends like green transition and digitalisation → Good portfolio balance between East and West – and upstream and downstream → Awarded double A- scores from CDP on climate and forests → Aiming to be one of the winners in the green transition → Vianode, with Elkem as largest shareholder, investing NOK 2 billion in battery materials plant 10 highlights from 2022 In 2022, Elkem delivered its best ﬁnancial result in the company's 118-year history. Elkem beneﬁtted from its robust business model and high market prices. 1Q-2022 → Elkem was awarded a platinum rating on sustainability transparency from EcoVadis, one of the world’s largest and most trusted providers of sustainability ratings → Elkem announced a partnership with Hydro and Altor to accelerate the growth of Vianode. Hydro and Altor to have 30% ownership each, while Elkem retained 40% ownership → Elkem made a decision to invest NOK 150 million in a ﬂagship R&I centre in Shanghai, China to meet the growing demand for advanced silicone products and technologies 2Q-2022 → Elkem signed a new credit facilities agreement of EUR 1,000 million. The facilities agreement includes sustainability performance targets linked to health and safety and reduction of the group’s product carbon footprint → Elkem entered into new 7-year power contract in Norway starting from 2027 with an aggregate volume of 2.5 TWh 3Q-2022 → In September, Elkem celebrated the opening of its new specialised silicones facility in York, S.C., USA for production of high purity silicone materials to medical implantable and pharmaceutical applications → Elkem Silicones was declared 2022 R&D 100 Awards winner in Mechanical Materials category for safety and reliability for silicone solutions for electric vehicle thermal management → Supported by Elkem, Hydro and Altor, Vianode made the decision to build the ﬁrst phase production plant for advanced battery materials at Herøya, Norway 4Q-2022 → Elkem successfully placed a series of ﬂoating rate loans in the Schuldschein market, amounting to EUR 200 million → Inauguration of the world’s ﬁrst carbon capture pilot for smelters in Rana, Norway, with main goal to verify the technology on industrial gases from smelters and other process industries → Elkem awarded double A- scores from CDP for eﬀorts on climate and forests, and B score on water security Plants Oﬃces HQ Key ﬁgures Unit 2022 2021 2020 2019 2018 2017 2016 Total operating income NOK million 45 898 33 717 24 691 22 668 25 230 20 985 16 594 Operating income growth Ratio 36% 37% 9% -10% 20% 26% EBITDA NOK million 12 925 7 791 2 675 2 656 5 793 3 188 1 559 EBIT NOK million 10 898 5 899 948 1 189 4 522 1 927 264 Proﬁt (loss) for the period NOK million 9 642 4 664 278 897 3 367 1 249 -268 Cash ﬂow from operations NOK million 9 551 4 100 1 513 2 133 4 031 2 336 627 Reinvestments in % of D&A Ratio 84% 91% 81% 80% 84% 72% 57% Total assets NOK million 52 781 41 850 30 888 29 004 31 129 25 507 23 092 Net interest-bearing debt NOK million 2 615 4 827 8 058 5 722 3 264 8 111 9 502 Debt leverage Ratio 0.2 0.6 3.0 2.2 0.6 2.5 6.1 Equity NOK million 28 773 19 874 12 635 12 952 13 722 8 565 5 830 Equity share Ratio 55% 47% 41% 45% 44% 34% 25% Return on capital employed (ROCE) Ratio 40% 26% 5% 7% 26% 12% 2% Earnings per share (EPS) NOK 15.09 7.49 0.41 1.47 5.74 2.08 (0.52) Number of employees Number 7 372 7 074 6 856 6 370 6 280 6 113 6 022 Total recordable injury rate H1+H2 Ratio 3.2 3.7 2.3 2.2 2.2 3.1 5.3 NO emissions x Tonnes 6 519 8 932 6 610 6 718 7 068 7 109 7 309 Total CO emissions (Scope 1, 2 and 3) 2 Mill tonnes 10.74 11.60 10.27 Energy consumption TWh 6.54 6.54 6.40 6.01 6.23 5.28 4.40 * Total scope not reported before 2020. Elkem’s value chain Low cost sustainable input factors Quartz Coal Biocarbon Renewable power High temperature/chemical production processes Silicones Silicon Products Carbon Solutions Examples of applications and markets Mobility and Science and Healthcare transportation chemicals Digital Smart cities and Energy communication construction and power Personal care and Advanced consumer goods manufacturing and industrial Letter from the CEO All-time high results in an extraordinary year The unprecedented market momentum continued into 2022, enabling Elkem to deliver all-time high revenues and ﬁnancial results. We also continued to position for the future by launching an updated corporate strategy focusing on our integrated business model and green leadership. Elkem continued to beneﬁt from exceptionally strong markets in 2022. However, the all-time high results were also largely a result of strong cost and market positions, built-up over time through continuous improvement and strategic choices. We have secured access to low-cost and sustainable input factors and been able to maintain and deliver high productivity and quality, despite supply chain challenges and trade restrictions. Our record results and current solid balance sheet will enable an attractive dividend to shareholders and secure continued investments in growth, driven by global megatrends like the green transition and digitalisation. Good operational performance I am impressed by how our entire global team in Elkem has delivered excellent operational performance throughout a challenging year. The restrictions related to the coronavirus pandemic (Covid-19) continued but were eased signiﬁcantly in most countries during the year. Russia’s invasion of Ukraine has signiﬁcantly inﬂuenced market dynamics, primarily through the impact on energy prices. At the outbreak, Elkem did not have any manufacturing or own employees in Ukraine or Russia and these countries accounted for a very limited part of our revenue. We continuously monitor and comply with all sanctions on Russia relevant to our operations. At the end of the year, we decided to partially curtail production at two plants in Norway due to high power prices. This enabled us to optimise value creation and contribute to increased ﬂexibility in a tight power market for households and businesses in Norway. Focus on safety improvement Regrettably, we have had two high-severity incidents involving contractors during the year, and in general experienced a setback during the pandemic with a high number of low-severity incidents both in 2021 and 2022. A new and reinforced system for Health, Safety and the Environment (HSE) improvement is now being rolled out globally in Elkem in order to reverse the trend. Prepared for the future In the near term, we expect a slowdown in global economic activity and that market prices will come down to more normal levels. However, there is signiﬁcant uncertainty on how macro- economic development and inﬂationary pressure will impact demand, and continued volatility in our markets is likely. In the longer term, global megatrends remain strong, and the critical raw materials are increasingly important in building a sustainable future. Helge Aasen CEO, Elkem ASA Strong growth in Asia combined with re- industrialisation in the western part of the world will create opportunities for Elkem. In the green transition, we have a particular focus on the fast- growing electric mobility segment. An electric vehicle typically contains four times more silicones than a conventional car. Geopolitical tensions are on the rise, and increasing trade barriers create risks, but also opportunities. Elkem is among very few companies with complete and integrated value chains in diﬀerent regions, making us less vulnerable to disruptions in supply chains and trade ﬂows. A strategy of dual-play growth and green leadership It is on this basis we have set out speciﬁc growth ambitions for Elkem: We aim to become among the top three players in the silicones industry worldwide, and to be the number one player in silicon products and carbon solutions in the West. This means growing not just with the markets we are in, but faster. We aim to grow by more than ﬁve per cent per year, but also to do so proﬁtably, with an EBITDA margin of at least ﬁfteen per cent per year. We have a good balance between Eastern and Western markets, with around 60% of our revenues in the West and 40% in the East. This balance provides more stability in revenue and earnings. As we have seen during the pandemic, weakness in one region has largely been oﬀset by a more positive development in other regions. In addition, the pandemic showed the vulnerability of global supply chains. We have experienced that Elkem’s integrated value chain provides signiﬁcant competitive advantage and margin protection. Green leadership: One of the winners in the green transition Elkem aims to be part of the solution to combat climate change – and to be one of the winners in the green transition. We will do this through three key levers: → Reducing our emissions: we already have a strong position with 83% of our energy consumption being renewable. Our target is to reduce overall CO 2 emissions by 28% within 2031. In December, Elkem was awarded double A- scores from CDP for the company’s eﬀorts on climate and forests. → Supplying to the transition: Elkem aims to grow its supplies of advanced materials to green markets such as better buildings, electric vehicles and renewable energy. Our largest single customer across Elkem globally is now a globally recognised producer of electric vehicles. → Enabling circular economies: we continue to work closely with customers and researchers to increase recycling within our own operations, as well as developing the eco- design of innovative products. Unprecedented volatility – but also opportunity For us in Elkem, and our entire global team, across geographies and divisional lines, from top management to front-line workers, we are aligned around a clear mission: To provide advanced silicon-based materials shaping a better and more sustainable future. This describes what we do, but also why we do it and why it is so important. I have been in Elkem’s top management for twenty- two years, and now more than twelve years as CEO. I have never seen such volatility in markets combined with inﬂationary pressure and uncertainty regarding future economic activity as now. At the same time, I also see an unprecedented opportunity for Elkem given our diversity geographically and culturally, our broad product range, and good positions to take part in the green transition. This gives me conﬁdence that we will be able to continue to deliver value for all our stakeholders – in line with our purpose: Delivering your potential. Not just in 2022, which has been an exceptional year, but in many years to come. Helge Aasen, CEO, Elkem ASA Who we are, how we work and why we are here The Elkem way We are Elkem → A leading global provider of silicon-based advanced materials Our mission → Elkem’s products are critical input factors to a vast number of applications Advanced silicon-based that are necessary in sustainable solutions enabling renewable energy, materials shaping a better energy storage, mobility solutions, infrastructure improvements and digital communications and more sustainable → Elkem develops its business in accordance with the UN Sustainable future, adding value to Development Goals and the Paris agreement stakeholders globally → It is our belief that companies that act responsibly and create value by securing sustainable economic growth with a limited environmental footprint will be successful in the long term Our purpose → Elkem’s purpose is in our commitment to stakeholders: Delivering Delivering your potential your potential → We believe that the long-term megatrends – like sustainability, energy demand, urbanisation, increased standard of living, ageing and growing population, and digitalisation – will continue → This will drive growth in demand for advanced materials, including silicones, silicon and carbon solutions → We in Elkem are a team of professionals powered by passion for people. We bring agile and innovative solutions to our customers and our other stakeholders, because we care Our values → Involvement commits people. We know that only people can identify Involvement problems and opportunities and ﬁnd solutions. By involving colleagues, Respect customers and other stakeholders, and by being transparent and committed to teamwork, we increase our ability to learn and develop new solutions Precision → We respect the law, the environment, our employees, colleagues, Continuous improvement customers, suppliers, owners, local communities and diﬀerent cultures. Respect is about being fair, open and honest, trusting your colleagues and partners and appreciating diversity → Commitment to precision expresses itself through our work to develop and follow standards of best practice and safe and stable production. By establishing work and safety standards, we can measure and continuously improve our performance → We know that the value chain can always be improved. We do this through experimenting, using new technology and looking for ways to eliminating waste. Continuous improvement means that we are always looking for improvement potential, keeping an open mind and always ready to learn and share our knowledge Our growth ambitions → Top 3 in silicones worldwide → Number 1 in silicon products and carbon solutions in the West Our corporate strategy Dual-play growth → Balanced between geographic regions (East & West) → Balanced across the value chain (Upstream & Downstream) >5% Growth per year >15% EBITDA margin per year Dual-play growth and green leadership Green leadership → Strengthening position as best in the industry on low CO 2 → Growing supplies to green transition and creating green ventures -28% Reduce CO 2 (2020-2031) 0 net zero emissions by 2050 Silicones → Balanced geographical growth → Improve cost position → Higher degree of specialisation Silicon Products Selective growth Secure leading cost positions Lower carbon emissions → → → Carbon Solutions → Selective growth → Sustainable low-cost position → Preferred supplier with high quality Silicones Strong growth potential with green shift and global middle-class rising 19.3 NOK billion in total operating income 42% of group sales Share of group sales from external customers ex. Other End markets → Construction → Automotive → Chemical formulators → Personal care → Healthcare → Paper and ﬁlm release → Silicone rubber → Textile Elkem is a fully integrated producer from silicon metal to upstream siloxane and downstream silicone specialties. Silicones can be manufactured into many forms including solids, liquids, semi-viscous pastes, foams, oils and rubber. They are ﬂexible and can resist moisture, chemicals, heat, cold and ultraviolet radiation. Due to its wide range of application areas, silicones are used in a large number of products and industries, including manufactured goods, construction materials, electronics, consumer and medical items. Silicones can be encountered every day in a number of areas, including in personal care products, in cars, in the gel on a wound dressing and in sealing and insulating materials in electrical equipment. The main growth drivers are the green transition and the rise of middle class worldwide to serve markets such as electriﬁcation of transportation, electronics, and healthcare. The division’s key strategic focus is on balanced geo- graphical growth between the main markets in the Eastern and Western world, improve the cost position through new investments in France and China, and to focus on R&D and further specialisation of the products portfolio. 14 main plants China Xinghuo, Shanghai, Zhongshan , Yongdeng (silicon) France Roussillon, Saint-Fons, Salaise-sur Sanne Germany Lübeck Italy Caronno Spain Santa Perpetua USA York Brazil Joinville India Pune Korea Gunsan Key ﬁgures 2022 2021 2020 2019 2018 Total operating income (in NOK million) 19 288 17 429 12 800 11 319 13 130 EBITDA (in NOK million) 2 022 3 672 1 326 1 486 3 629 EBITDA margin (in %) 10% 21% 10% 13% 28% Number of employees 4 637 4 395 4 224 3 718 3 677 Sales volume (thousands metric tonnes) 394 409 372 336 314 Silicon Products Global leader in silicon-based materials and solutions 24.5 NOK billion in total operating income 50% of group sales Share of group sales from external customers ex. Other End markets → Automotive → Construction/industrial equipment → Electronics → Specialty steel → Solar and wind turbines → Refractories → Oil and gas Elkem is a leading producer of silicon-based materials, including silicon, ferrosilicon, specialty alloys based on ferrosilicon and Microsilica ® . Silicon is used in silicones, aluminium alloys and polysilicon, and has a number of favourable chemical and physical properties, including semi-conductivity, making it highly versatile for numerous industrial and electronic applications. Ferrosilicon is mainly used in the steel industry to remove oxygen from the steel and as an alloying element to enhance the quality, including strength and elasticity. Foundry alloys are used in the production of iron castings to improve their properties such as tensile strength, ductility and impact properties. Microsilica is a process product of the silicon and ferrosilicon production and is used in construction, refractory, oilﬁeld and polymer industries. The main markets are automotive, construction, electronics, and renewable energy. Elkem has low-cost positions based on scale and operational excellence, as well as strong market positions in specialty niches based on deep application knowledge and close customer relationships. The division’s strategy is based on selective growth opportunities, securing leading cost positions, and to lower the carbon emissions. 10 main plants Norway Salten, Thamshavn, Rana, Bremanger, Bjølvefossen, Iceland Grundertangi China Shizuishan India Nagpur Paraguay Limpio Canada Chicoutimi Key ﬁgures 2022 2021 2020 2019 2018 Total operating income (in NOK million) 24 457 14 783 10 804 10 151 10 822 EBITDA (in NOK million) 10 224 3 702 1 212 994 1 990 EBITDA margin (in %) 42% 25% 11% 10% 18% Number of employees 1 958 1 904 1 890 1 889 1 875 Sales volume (thousands metric tonnes) 490 502 479 445 466 Carbon Solutions Market leader in electrode paste and specialty products to metallurgical industries 3.8 NOK billion in total operating income 8% of group sales Share of group sales from external customers ex. Other End markets → Ferroalloys → Silicon → Aluminium → Iron foundries Elkem is a leading producer of specialty carbon products for various metallurgical smelting processes and primary aluminium industries and the only producer with a global reach. Carbon products are used in electric arc furnaces and by the aluminium and iron foundries industries. Søderberg electrode paste is the most common electrode system used in submerged arc furnaces to ensure that the raw material reaches the required process temperatures. The Søderberg electrode technology has more than 100 years of successful technology leadership. The technology and carbon products are used by producers of silicon, ferrosilicon, ferrochromium, ferronickel, ferromanganese, silicomanganese, calcium carbide and copper and platinum matte. The main market drivers are linked to the production of steel and ferroalloys and high-quality electrodes are critical for the customer’s productivity. The division's strategy is based on selective growth opportunities, sustainable low-cost positions and high- quality products giving status as preferred supplier. 6 main plants Norway Kristiansand Brazil Serra (Carboindustrial and Carboderivados) South Africa Emalahleni China Shizuishan Malaysia Bintulu Key ﬁgures 2022 2021 2020 2019 2018 Total operating income (in NOK million) 3 752 2 176 1 870 1 838 1 895 EBITDA (in NOK million) 1 166 508 437 312 335 EBITDA margin (in %) 31% 23% 23% 17% 18% Number of employees 401 395 394 420 422 Sales volume (thousands metric tonnes) 302 294 256 257 289 The Elkem share Elkem aims to be an attractive investment for shareholders, delivering competitive return through sustained growth and a consistent dividend policy. NOK 22.5 bn Elkem’s market cap as at 31 December 2022 NOK 6.00 dividend per share for 2022 12,874 shareholders 639.4 million shares → Elkem ASA is a public limited company. The share is listed on the Oslo Stock Exchange and the ticker code is ELK → Elkem ASA was re-listed on Oslo Stock Exchange on 22 March 2018 → Elkem ASA has one share class with 639,441,378 ordinary shares, each with a nominal value of NOK 5 → All shares have equal rights and are freely transferable. Each share grants the holder one vote and there are no structures granting disproportionate voting rights → Bluestar Elkem International Co. Ltd. SA, owned by China National Bluestar is the majority shareholder with 52.9% → Nine analysts are covering Elkem, providing market updates and estimates for Elkem’s ﬁnancial development Elkem’s ﬁnancial targets Target metric Targets Comments Revenue growth (%) 5 - 10% Grow faster than market through specialisation, organic growth and acquisitions EBITDA margin (%) 15 - 20% Target average margin through the economic cycle Reinvestments % of D&A 80 - 90% Ensure appropriate and disciplined capital allocation following long-term plans Debt leverage ratio 1.0x - 2.0x Ensure eﬃcient and robust capital structure Dividend target 30 - 50% of group proﬁt Stable and predictable over time Dividend overview Pay-out ratio (%) 50% 25% 0% 2018 2019 2020 2021 2022 Dividend yield (%) 20% 10% 0% 2018 2019 2020 2021 2022 Elkem intends to pay dividends reﬂecting the underlying earnings and cash ﬂow. The company will target a dividend pay-out ratio of 30-50% of the group's proﬁt for the year. The proposed dividend for 2022, subject to approval from the annual general meeting in 2023, is NOK 6 per share, representing 40% of the group’s proﬁt for the year. Year Earnings per share Dividend per share Date proposed Date approved Ex date Pay-out ratio Dividend yield (%) 2022 15.09 6.00 08.02.2023 28.04.2023 02.05.2023 40% 17% 2021 7.49 3.00 09.02.2022 27.04.2022 28.04.2022 40 % 9 % 2020 0.41 0.15 09.02.2021 27.04.2021 28.04.2021 37 % 1 % 2019 1.47 0.60 12.02.2020 08.05.2020 11.02.2020 41 % 2 % 2018 5.74 2.60 11.02.2019 30.04.2019 02.05.2019 45 % 8 % Share price development since listing 50 45 40 35 30 25 20 15 10 5 0 2018 2019 2020 2021 2022 Common share data 2022 2021 2020 2019 2018 Share price high (NOK) 43.70 38.50 29.60 36.10 45.00 Share price low (NOK) 27.30 25.70 11.20 20.20 21.00 Share price avg (NOK) 35.60 32.20 20.40 25.10 34.00 Share price year-end (NOK) 35.20 29.80 28.40 24.80 22.20 Volume 290 206 422 438 749 361 303 729 619 369 570 346 342 107 122 Turnover 10 324 893 777 14 103 001 272 6 114 487 641 9 438 910 774 10 506 950 753 EPS (NOK) 15.09 7.49 0.41 1.47 5.74 Market cap. year-end (NOK billion) 22.50 19.10 16.50 14.40 12.90 Shares outstanding for 2022 634 476 985 633 037 606 581 310 344 581 310 344 581 310 344 Shares issued 639 441 378 639 441 378 581 310 344 581 310 344 581 310 344 Geographical distribution of shareholders As of 31 December 2022 Elkem had 12,874 shareholders 10.7% 1.2% 1.6% 5.3% China Norway United States Sweden Finland 28.3% 52.9% Other The 20 largest shareholders as of 31 December 2022 Rank Name Holding Stake Change from 2021 % Citizenship 1 China National Bluestar 338 338 536 52.9 % ∙ - China 2 Folketrygdfondet 27 621 555 4.3 % ↓ -6 % Norway 3 Alfred Berg Kapitalforvaltning 23 394 407 3.7 % ↑ 4 % Norway 4 Must Invest 14 000 000 2.2 % ↑ 6 % Norway 5 Storebrand Asset Management 13 588 521 2.1 % ↑ 3 % Norway 6 Pareto Asset Management 9 841 226 1.5 % ↑ 22 % Norway 7 Vanguard 9 512 660 1.5 % ↑ 11 % United States 8 Arctic Fund Management 7 800 305 1.2 % ↓ -16 % Norway 9 Nordea Fonder 7 317 911 1.1 % ↓ -29 % Norway 10 JP Morgan Asset Management 7 170 463 1.1 % ∙ New United States 11 BlackRock 5 399 562 0.9 % ↑ 19 % United States 12 Elkem ASA 4 964 393 0.8 % ↓ -22 % Norway 13 DNB Asset Management AS 4 193 580 0.7 % ↓ -44 % Norway 14 SEB Fonder 4 145 695 0.6 % ∙ New Sweden 15 Handelsbanken Fonder 4 062 771 0.6 % ↓ -19 % Sweden 16 Eika Kapitalforvaltning 3 568 893 0.6 % ↓ -33 % Norway 17 First Fondene 3 559 529 0.6 % ↓ -35 % Norway 18 KLP Kapitalforvaltning AS 3 243 825 0.5 % ↓ -40 % Norway 19 Forsvarets Personellservice 3 179 000 0.5 % ↑ 30 % Norway 20 Dimensional Fund Advisors 2 782 495 0.4 % ∙ New United States Total 20 largest shareholders 497 685 327 77.8 % Board of directors’ report The best ﬁnancial result in Elkem’s 118-year history In 2022, Elkem recorded its best ﬁnancial result ever, underlining Elkem’s robust business model and strong cost positions. The underlying demand for Elkem’s products has generally been good, with high prices for silicon and ferrosilicon products in particular. Elkem's mission is to provide advanced silicon-based materials shaping a better and more sustainable future, adding value to stakeholders globally. The board of directors believe that safe and environmentally responsible operations is a prerequisite for value creation. With a highly competent organisation, well-invested assets, attractive market positions and ongoing growth initiatives, Elkem is committed to creating value for all stakeholders. Elkem concluded 2022 with the best ﬁnancial result in its 118-year history. The ﬁnancial results were positively impacted by strong operational performance and attractive sales prices. The strong business performance has beneﬁtted from Elkem’s global footprint with competitive value chains from raw material sourcing to attractive end-market positions worldwide. Silicon Products’ sales prices were at high levels in 2022, impacted by the energy crisis in Europe and capacity curtailments among other silicon and ferrosilicon producers. The good ﬁnancial results were supported by dedicated eﬀorts from all employees worldwide, ensuring operational improvements, increased specialisation and attractive investments, further strengthening Elkem’s competitiveness. Towards the end of 2022, the global economy was characterised by rapid inﬂation, increasing interest rates and a slowdown in economic activity. However, the board of directors believes that the long- term underlying growth prospects remain positive for Elkem and is of the opinion that Elkem has a solid asset base and ﬁnancial capability to support further growth, creating value for all of the group’s stakeholders. Elkem’s consolidated operating income increased by 36% Year-over-Year (YoY) to NOK 45,898 million in 2022. The EBITDA 1 margin was 28% compared to 23% in 2021. The leverage 2 ratio was 0.2x as at 31 December 2022. This is below the leverage target of 1.0x to 2.0x over the cycle and is a consequence of the strong result for the year. Elkem’s policy is to pay a dividend of 30-50% of the proﬁt for the year. The board of directors has proposed a dividend payment of NOK 6.00 per share for 2022, subject to approval at the annual general meeting, which would represent 40% of proﬁt for the year. The board of directors believes the proposed dividend is appropriate based on the strong ﬁnancial result and solid ﬁnancial position, while also taking weaker market outlook and investment plans into consideration. Adjusted for the proposed dividend for 2022, leverage ratio would be 0.5x at 31 December 2022. To remain a safe workplace is always the ﬁrst priority for Elkem. A reinforced Health, Safety and Environment (HSE) system is now being rolled out globally. A comprehensive understanding of health and safety risks has the highest priority in the company, and the understanding is founded on critical process control combined with a culture of precision and continuous improvement. Environmental, Social and Governance (ESG) is essential for Elkem, enabling environmentally friendly and socially responsible production of advanced silicon-based materials. Elkem aims to take a green leadership and be part of the solution to combat climate change by reducing our emissions, supplying the green transition, and enabling circular economies. Elkem is continuously pursuing its global climate roadmap to reduce the average product group carbon footprint by 39% by 2031 and achieve carbon-neutral production globally by 2050. 1 EBITDA commented under APM section 2 Leverage ratio commented under APM section Total operating income NOK million EBITDA 1 NOK million Leverage 2 ratio Furthermore, social and governance principles are advocated to support a diverse workforce built on respect and inclusive work culture, and protection of human rights throughout the value chains. Key business developments 2022 Investments supporting growth and specialisation Elkem’s ambition is to grow revenue by 5-10% per year through the cycle supported by organic growth initiatives and acquisitions. Key investment projects in 2022 include: → Silicones capacity expansion projects in France and China. The projects are progressing according to plan, targeting upstream capacity increase of 25% in France and 50% in China. These landmark investments will strengthen Elkem’s cost positions for upstream silicones, while supporting downstream expansions that meet attractive customer growth in key geographies. → In January 2022, Elkem secured 100% ownership of the Elkem Salten energy recovery plant through acquiring the remaining 50% stake from Kvitebjørn Energi. The plant recovers 28% of the electrical energy used at Elkem Salten, equal to the power consumption of about 15,000 Norwegian households. The transaction provides increased strategic ﬂexibility to Elkem. → In April 2022, Elkem made a decision to invest NOK 150 million in a ﬂagship R&I centre in Shanghai, China. The new R&I centre will house several application centres addressing the development trends in key industries such as high-performance silicone products for EVs, medical devices, cosmetics, coating materials for textile, leather and airbags, and products for 3D printing. → In June 2022, Elkem acquired KeyVest Belgium S.A. a specialist company in sourcing of materials and production of metal powders to the refractory industry and other segments including advanced ceramics. This will expand Elkem’s product portfolio, enabling further growth within specialised silicon products, and improved service level and processing capabilities. → In September 2022, Elkem celebrated the opening of its new specialised silicones facility in York, SC in the US. The facility will produce high purity silicone materials meeting the strict requirements in medical implantable and pharmaceutical applications. Elkem aims to be a leading silicone supplier to the healthcare industry and the new facility opens a potential high-margin market of more than NOK 3 billion in annual revenue. Strategic initiatives for continued value creation Key initiatives to ensure growth and create shareholder value have been implemented during the year, providing a solid basis for value creation. → In 2022, Elkem announced a partnership with Hydro and Altor to accelerate the growth of Vianode, a producer of sustainable battery materials. Hydro and Altor Equity Partners have each acquired 30% ownership in Vianode, while Elkem retains the remaining 40% ownership. Vianode, with the backing of its owners, has decided to invest in the ﬁrst industrial-scale plant for sustainable battery materials at Herøya in Norway. The investment for this phase 1 investment amounts to around NOK 2 billion. → In 2022, Elkem signed a new loan facilities agreement of EUR 1,000 million. The facilities agreement includes sustainability performance targets linked to health and safety and reduction of the group’s product carbon footprint. In addition, Elkem successfully placed a series of ﬂoating rate loans in the Schuldchein market, amounting to EUR 200 million. → Access to renewable power at competitive terms is a key requirement for sustainable upstream production of silicon and ferrosilicon. In the second quarter, Elkem entered into a new 7-year power contract in Norway starting from 2027 with an aggregate volume of 2.5 TWh. Elkem has hedged approximately 80% of its power consumption in Norway until 2026 at competitive rates. ESG and climate roadmap is essential in Elkem People and safety are at the core of Elkem, alongside sustainable operations conducted responsibly through operational excellence. Elkem shall be an attractive employer and aims to be one of the winners in the green transition, taking its part to combat climate change. → In February 2022, Elkem was awarded the Platinum rating on sustainability transparency from EcoVadis, one of the world’s largest and most trusted providers of business sustainability ratings. This positions Elkem among the top 1% of the companies evaluated worldwide. → In June 2022, Elkem entered into long-term contracts for two climate-friendly ships for North Sea operation, enabling the use of green methanol as fuel, featuring high safety standards and backed by a strong business case. Both vessels are expected to be in operation from the second half of 2024. → In December 2022, Elkem was awarded double A- scores from CDP for the company’s eﬀorts on climate and forests. The company achieved a B score on water security. To earn an A score from CDP, organisations must show environmental leadership. Companies that score a B have addressed the environmental impacts of their business and ensure good environmental management. → Elkem aims to reduce its total fossil CO 2 emissions by 28% from 2020-31 and increase the supply of products to green transition, resulting in a 39% improvement of its average product carbon footprint in the same period. Elkem’s long-term goal is net-zero emissions by 2050. About Elkem Established in 1904, Elkem is one of the world's leading providers of advanced silicon-based materials shaping a better and more sustainable future. Elkem is a publicly listed company on the Oslo Stock Exchange (ticker code: ELK) and is headquartered in Oslo, Norway. The company has more than 7,300 employees, 30 production sites and an extensive network of sales oﬃces worldwide. In 2022 Elkem had a total operating income of NOK 45.9 billion. To learn more, please visit .elkem.com. ↗ Elkem is a fully integrated producer with operations throughout the silicon value chain from quartz to silicon and downstream silicone specialities as well as speciality ferrosilicon alloys and carbon materials. Elkem has organised its operations into three business divisions: Silicones, a fully integrated silicones producer; Silicon Products, a provider of silicon, ferrosilicon, foundry alloys, Microsilica and related speciality products; and Carbon Solutions, a supplier of electrode paste and speciality products to the ferroalloys, silicon and aluminium industries. The Silicones division is one of the world's leading fully integrated silicone companies, with more than 4,600 employees and a global footprint. The division has R&I centres in Europe and Asia, sales oﬃces worldwide, and plants in China, France, Germany, Italy, Spain, USA, Brazil, India, and South Korea. The Silicones division represents 42% of the Group total operating income. The markets for the Silicones division’s products are large and growing. Demand is driven by a number of megatrends, such as the green transition, digitalisation and energy demand growth. The Silicones division serves diverse markets, from electric cars to construction, via electronics, aerospace, healthcare, personal care, packaging, airbag coating and more. Elkem has a comprehensive range of silicone products (> 5000 stock keeping units) with leading market positions in engineering elastomers for EV’s, coatings for packaging, hygiene and bakery paper and airbag coatings. The Silicon Products division is a world-leading supplier of silicon, ferrosilicon, foundry alloys, Microsilica, and other speciality products. The Silicon Products division represents 50% of the Group operating income. Silicon Products has about 1,900 employees and has plants in Norway, Iceland, Canada, India, Paraguay and China, and quartz mines in Norway and Spain. Silicon has a number of favourable chemical and physical properties, including semi-conductivity, making it highly versatile for numerous industrial and electronic applications. As such, it has a wide range of applications, predominantly as an alloying material for aluminium and in the production of silicones and polysilicon for electronics and solar cells. Ferrosilicon and foundry alloys are used in the steel industry and iron foundry industry, respectively. The Silicon Products division serves customers in a number of end markets, such as chemicals, aluminium, electronics, automotive, speciality steel segments, solar, construction, refractories, and oil & gas. China has been the largest growth market for silicon over the last years and is expected to remain an important growth engine for global demand. The Carbon Solutions division is the world-leading supplier of electrode paste, prebaked electrodes and speciality products to the ferroalloys, silicon, and aluminium industries. The division has approximately 400 employees and plants in Norway, South Africa, Brazil, Malaysia, and China. The Carbon Solutions division accounts for approximately 8% of Elkem’s operating income from external customers. The steel and aluminium industries account for a signiﬁcant portion of the division’s end-user applications and, as a result, drive the demand dynamics in the industry. Financial performance The consolidated ﬁnancial statements are prepared and based on International Financial Reporting Standards (IFRS) as endorsed by the European Union (EU) and eﬀective at 31 December 2022. Consolidated proﬁt and loss statement Consolidated operating income for the Elkem group amounted to NOK 45,898 million compared to NOK 33,717 million in 2021. The 36% increase was driven by higher prices in all divisions. The Silicones division saw an 11% increase in operating income supported by increased prices for specialities, in addition to good commodity prices in the APAC region during the ﬁrst half of the year. Sales volumes decreased compared to 2021 mainly due to weaker demand in Europe and the US. Operating income for the Silicon Products division increased by 65% due to favourable silicon, ferrosilicon, and foundry prices throughout the year, in addition to improved specialities sales volume. Carbon Solutions’ operating income increased by 73%, driven by higher prices countering higher raw material and energy prices in addition to higher sales volumes. Operating income NOK million 1 576 -928 45 898 9 674 1 859 33 717 2021 Silicones Silicon Carbon Other 2022 Products Solutions /Elim Consolidated EBITDA ended at NOK 12,925 million compared to NOK 7,791 million in 2021. The corresponding margin increased from 23% in 2021 to 28% in 2022. EBITDA improved YoY supported by strong EBITDA from Silicon Products and Carbon Solutions primarily driven by higher sales prices, increased specialities sales volumes and attractive cost positions. Silicones delivered weaker EBITDA due to higher raw material cost. We refer to “Divisions business performance” for further descriptions. EBITDA NOK million 659 -397 12 925 6 522 7 791 -1 650 2021 Silicones Silicon Carbon Other 2022 Products Solutions /Elim Consolidated operating proﬁt was NOK 12,414 million in 2022 compared to NOK 5,785 million in 2021, an increase of NOK 6,629 million explained mainly by improved consolidated EBITDA, partially countered by increased amortisation, depreciation and impairment losses. Amortisation and depreciation were NOK 1,999 million in 2022 compared to NOK 1,816 million in 2021. The increase in amortisation and depreciation is attributed to higher investment levels from 2020 to 2022. Impairment losses were NOK 28 million in 2022 compared to NOK 76 million in 2021. Other items were positive NOK 2,151 million in 2022 compared to positive NOK 10 million in 2021. Other items are largely related to the net impact from the change in fair value of commodity contracts related to power in Norway, embedded EUR derivatives in power contracts, foreign exchange gains, and gains from the sale of shares in Vianode AS. This was partially countered by restoration expenses related to business in Canada and business projects and acquisitions expenses. Consolidated proﬁt before income tax ended at NOK 12,236 million for the year, compared to NOK 5,827 million in 2021. Net ﬁnancial items were NOK 178 million negative in 2022 compared to NOK 42 million positive in 2021. The share of proﬁt from equity-accounted ﬁnancial investments was negative NOK 17 million in 2022 compared to positive NOK 37 million in 2021. Finance income was NOK 67 million and foreign exchange gains were NOK 85 million in 2022 compared to NOK 40 million and NOK 241 million in 2021 respectively. Finance expenses were NOK 313 million compared to NOK 276 million in 2021. The consolidated proﬁt for the year was NOK 9,642 million, after NOK 2,594 million in tax expenses. The tax expenses mainly consisted of taxes on the current year’s result. In addition, the tax expenses included eﬀects on changes in both non-recognised deferred tax assets and the change in applicable tax rates from 2021 to 2022. The main items recognised in the consolidated statement of other comprehensive income are related to cash ﬂow hedges (foreign currency hedges and power price hedges) and currency translation diﬀerences. These items had a net income of NOK 1,234 million for 2022, compared to a net income of NOK 1,078 million in 2021. The share of consolidated proﬁt attributable to shareholders of Elkem ASA was NOK 9,561 million, resulting in basic earnings per share NOK 15.09 per share in 2022 compared to NOK 7.49 per share in 2021. The total comprehensive income for the year was NOK 10,876 million in 2022 compared to NOK 5,742 million in 2021. Divisions’ business performance The Silicones division had an operating income in 2022 of NOK 19,288 million (NOK 17,429 million in 2021). EBITDA was NOK 2,022 million in 2022 compared to NOK 3,672 million in 2021. The EBITDA decrease was caused by signiﬁcantly higher raw material costs particularly for silicon in both France and China. This was only partially countered by higher realised sales prices of specialities and positive currency eﬀects. From attractive levels in the ﬁrst half of 2022, commodity sales prices in China decreased to weak levels towards the end of the year driven by oversupply and negative demand impact from the Covid-19 situation. Sales volumes decreased by 4% YoY from 409,000 metric tonnes (mt) in 2021 to 394,000 mt in 2022. The Silicon Products division had an operating income in 2022 of NOK 24,457 million (NOK 14,783 million in 2021). EBITDA was NOK 10,224 million in 2022 compared to NOK 3,702 million in 2021. The record high EBITDA was mainly attributable to good operations and higher sales prices for all products, particularly for silicon and ferrosilicon, in addition to higher sales prices and sales volumes of foundry alloys and attractive cost positions. The energy crisis in Europe and capacity curtailments among silicon and ferrosilicon producers resulted in a tight supply situation in Europe. Sales volumes decreased from 502,000 mt in 2021 to 490,000 mt in 2022. The positive sales price impact was only partially oﬀset by higher raw material cost of reduction materials such as coal and coke. The Carbon Solutions division had an operating income in 2022 of NOK 3,761 million (NOK 2,176 million in 2021). EBITDA was record high at NOK 1,166 million in 2022 compared to NOK 508 million in 2021. The improved EBITDA was mainly due to higher prices that countered increased raw material cost, strong operational excellence and sales volumes increasing by 3% from 294,000 mt in 2021 to 302,000 mt in 2022. Cash ﬂow and statement of ﬁnancial position Cash ﬂow from operating activities was NOK 9,314 million for the year, compared to NOK 4,913 million in 2021. Positive cash ﬂow contribution from EBITDA (NOK 12,925 million) was countered by increased working capital (NOK 1,583 million), gains from equity accounted companies (NOK 108 million), changes in fair value of derivatives (NOK 1,139 million), changes in provisions, bills receivable and other (NOK 539 million), gains on disposal of subsidiaries (NOK 159 million), interest payments (NOK 319 million) and higher income taxes paid (NOK 1,345 million). Amortisation, depreciation and impairment increased in 2022. The increase is attributed to higher investment levels during the past few years, particularly in Silicones in China, but also considerable investments in Europe and the Americas, underlining the dual-play growth strategy and green leadership ambition. Changes in working capital were negative YoY mainly due to an increase in inventories. Higher inventories were explained by higher raw material prices, impacting the value of raw materials and ﬁnished goods, and higher volumes of critical raw materials. Management continues the high focus on optimising working capital. Optimisation actions include a careful review and adjustments to match production and sales forecasts, optimising minimum and maximum stock levels, an active push to sell slow- moving stocks, individual follow-up of credit days towards customers and suppliers, in addition to adjustments of factoring arrangements for the group. Cash ﬂow from investing activities amounted to NOK 4,404 million for the year, compared to NOK 3,185 million in 2021. Elkem invested NOK 1,682 million in maintenance, environment, health and safety (EHS), and productivity improvement initiatives during the year. In addition, Elkem had NOK 2,797 million in strategic investments. The cash ﬂow from investing activities in 2022 is mainly explained by investments in the Silicones division, investments in Vianode AS and a pilot for biogenic reduction materials in Canada. Cash ﬂow from ﬁnancing activities was negative NOK 2,899 million, compared to positive NOK 2,056 million in 2021 supported by capital increase. The negative cash ﬂow from ﬁnancing activities in 2022 was mainly related to dividends paid to the owners (NOK 1,900 million). In addition, other items in cash ﬂow from ﬁnancing activities in 2022 that were net negative include changes in bills payables and restricted deposits (NOK 218 million), payment of lease liabilities (NOK 116 million) and payment of interest-bearing loans and borrowings (NOK 7,237 million) countered by new interest-bearing loans and borrowings (NOK 6,648 million). Change in cash and cash equivalents was NOK 2,011 million for the year. Elkem’s ﬁnancial position improved during 2022 due to the strong ﬁnancial results. The group’s equity ratio improved from 47% in 2021 to 55% at the end of the year. The leverage ratio for the group was reduced from 0.6x in 2021 to 0.2x at the end of 2022. The board of directors views the group’s underlying competitive positions and the strong equity ratio as a good basis to support further growth of the group. Total interest-bearing liabilities was NOK 12,278 million as of 31 December 2022, of which NOK 1,946 million matures in 2023. Debt maturities in 2023 mainly consist of short-term loans in China for local working capital ﬁnancing. Cash and cash equivalents amounted to NOK 9,255 million in addition to NOK 6,356 million in undrawn credit facilities. Net interest-bearing debt 3 amounted to NOK 2,615 million as of 31 December 2022. The board views the group’s cash and ﬁnancial position to be strong. Going concern The board of directors is of the opinion that the Elkem Group has the ability to continue its business in the foreseeable future and hence conﬁrms that the accounts have been prepared on a going concern basis and that thi assumption is appropriate at the date for the accounts, and that the group, after the proposed dividend, has suﬃcient equity and liquidity to fulﬁl its obligations. Strategic priorities The board of directors conducts an annual review of Elkem’s strategy. This review includes an assessment of strategic priorities and ﬁnancial scenarios based on industry trends, market development and other framework conditions. In the near term, there is macroeconomic uncertainty, and we expect a slowdown in global economic activity. Geopolitical tensions are on the rise and increasing trade barriers create risks. Elkem is among very few companies with complete and integrated value chains in diﬀerent regions, making us less vulnerable to disruptions in suppl chains and trade ﬂows. In the longer-term, global megatrends remain strong and are expected to drive demand for Elkem’s products. Growth in Asia, combined with re-industrialisation in the West, will also create opportunities for Elkem, based on the company’s geographic presence. Elkem aims to grow by more than 5% per year, with an EBITDA margin over the cycle of at least 15%. The main strategic priorities are dual-play growth and green leadership. Dual-play growth means that Elkem will target balanced growth between geographic regions (Eas and West), and balanced growth across the value chain (Upstream and Downstream). Green leadership means that Elkem aims to be part of the solution to combat climate change by reducing our emissions, supplying the green transition, and enabling circular economies. The target is to reduce overall CO 2 emissions by 28% within 2031. Elkem aims to grow its supplies of advanced materials to green markets such as better buildings, electric vehicles and renewable energy. In addition, we continue to work closely with customers and researchers to increase recycling within our own operations, as well as developing the eco- s y t design of innovative products. 3 See APM section The focus on a higher degree of product specialisation through R&I and selected acquisitions remain a key strategic measure to improve and stabilise the group’s proﬁtability through the business cycle. To support its strategic goals, Elkem will focus on operational excellence, digitalisation, people development and ESG. In addition, Elkem’s divisions will focus on developing and maintaining sustainable low-cost positions. Together, these initiatives comprise the group’s strategic and operational goals to secure proﬁtable and sustainable growth. Our experience is that Elkem’s integrated value chain provides signiﬁcant competitive advantage and margin protection. Operational excellence and the principles of lean manufacturing are deeply rooted in Elkem Business System (EBS). EBS is built on Elkem’s core values and is designed to involve everyone in improvement activities and promote a culture of operational excellence, continuous improvement, and deep learning. The goal is to ensure that Elkem remains a competitive producer based on strong operational performance, economies of scale, and an integrated value chain from raw materials through to advanced end products. To achieve this, Elkem focuses on developing its employees to identify problems and eliminate their root causes. Motivated and highly skilled people are essential for successful strategy implementation. In addition, Elkem is focusing on digitalisation as a strategic measure to accelerate improvement activities in the whole value chain. The goal is to make Elkem an increasingly data-driven company by implementing digital initiatives to streamline processes, optimising resource allocation, and developing cultural capabilities and agile working methods. Research and innovation is vital to support and realise Elkem’s strategy on sustainable growth and specialisation Elkem devotes considerable eﬀort and resources to Research and Innovation (R&I) activities with more than 2.5% of 2022 revenues dedicated to new products and new processes, including technical support to customers. With this investment, carried by more than 550 researchers around the world across 14 R&I and application centres, the R&I teams ﬁled more than 35 new patents during the year. New products introduced less than ﬁve years old represent more than 20% of Elkem’s turnover. R&I eﬀorts are key to create and develop innovative products for new market needs R&I and include environmentally friendly products and energy-eﬃcient production technologies. This global optimisation of the value chain is at the heart of the projects managed by Elkem and is a key part of Elkem’s strategy. Elkem’s R&I facilities within chemistry and new chemicals, new materials and supporting laboratories, play a crucial role in our customers’ successes. Elkem’s R&I eﬀorts contribute to the development of new products with tailored properties for high-end markets, new additives for process aids, or reinforced materials and support with critical analysis information needed for troubleshooting. Elkem’s R&I focus remains imperative to reach the group’s ambition related to specialisation and growth based on global megatrends. During 2022, Elkem put in place a proactive roadmap to remain competitive and be more responsive to customer needs and demands, which was implemented around the digitalisation of our R&I from data acquisition to formulation optimisation. Open innovation and collaborative mindset With around 30 national and European collaborative projects in partnerships with start-ups, small and medium-sized enterprises, academics and clusters, Elkem is highly recognised for its open and innovative mindset. Through collaboration, Elkem wants to be at the forefront of new technologies exploring mainly ﬁve essential topics, including: → Energy eﬃciency and CO 2 emission reduction by, for example, replacing fossil coal with biomass in the production of silicon and ferrosilicon alloys. → Circular economy, mainly on recycling (including waste and end-of-life) and eco-design (products and processes). → New materials, for instance in 3D printing and additive manufacturing processes, battery cells and batteries, and lightweight materials. → R&I digitalisation, processes and new materials modelling to speed up the capture of value. → Technology scouting to better anticipate the future needs of our customers and markets. Highlights include: → Focus on 3D printing → 3Deus Dynamics, a Silicones 3D printing start-up in which Elkem has invested with a long-term perspective, has just been awarded by the European Innovation Council (EIC accelerator) funding of more than 2.5 million euros to develop the medicine of the future. → Focus on new materials → Elkem Silicones was named a winner in the renowned worldwide competition of the 2022 R&I 100 awards in the Mechanical Materials category with the BLUESIL™ RT Foam Range with Silicone Solutions for Electric Vehicle Thermal Management. → “Cast the Future”, Elkem Silicon Products received the highly coveted “Best Paper Gold Award Technology” for the superb paper outlining the performance of specialised cerium inoculants to produce high integrity ductile iron castings. → Focus on climate strategy and circular economy → A global roadmap includes the carbon management including CO 2 modelling, methodology for climate reporting, the carbon capture initiatives and the development in the future of new silicon processes (SiCaLo project in collaboration with Norwegian University of Science and Technology and SINTEF). → Project on chemical recycling of silicones’ wastes reducing CO 2 emissions by 65% and waste by 75% (project in collaboration with University of Lyon and start-ups). To maintain and develop this technological edge, Elkem is evolving through internal projects and the support of collaborative platforms, such as: → Axel One in Lyon, France, is one of the hubs for smart processes, online analysis, new materials and circular economy. The partnerships with the region and the French government have created a centre of excellence around the industry of the future, integrating environmental and societal concerns and process optimisation. → The pilot facility at Elkem’s corporate R&I centre in Kristiansand, Norway, is an important asset for both process and product development. The partnership with the Norwegian Catapult Centre, Future Materials, and new collaborative projects, national and European, has further strengthened the position of the centre. R&I initiatives and expansion At Elkem’s production sites, new applications are developed and supported by laboratory expertise and analysis to ensure that the latest technologies and capabilities are implemented in practice. In addition, the working methodology is used across all segments and markets to optimise the customer or market interaction. In 2021, Elkem’s new R&I centre ATRiON opened at the Saint-Fons site in Lyon, France, at the heart of the so-called “Chemistry Valley” to reinforce innovation within Elkem and Open Innovation together with external partners. The state- of-the-art R&I centre is dedicated to the Silicones division and brings together more than 130 researchers. In 2022, Elkem announced a plan to invest more than RMB 100 million to enlarge its Flagship Asia-Paciﬁc R&I Center in Shanghai. The centre will be created to help Elkem Silicones’ customers in the Asia-Paciﬁc region improve their innovation capabilities, accelerate the development of new products and applications and seize emerging opportunities. As a part of Elkem’s specialisation strategy, the Silicones division has increased R&I personnel by more than 20% worldwide in the last four years, with a clear strategy in place to leverage this capacity worldwide. Sustainability: Environmental, social and governance (ESG) Elkem is a signatory to the UN Global Compact and is committed to develop the business in line with the UN Sustainable Development Goals and the Paris agreement. The group believes that safe and environmentally friendly production will be even more important in the future and that together with its customers and partners, the group can create both today’s and tomorrow's solutions. Elkem works to ensure best practices within ESG to ensure socially responsible and sustainable business practices for all stakeholders. Elkem evaluates the sustainability materiality at least once a year in accordance with the widely used reporting framework Global Reporting Initiative (GRI). Prioritised targets and actions are introduced to make sure that improvements are implemented. The key topics that have been identiﬁed as material according to the updated GRI 2021 materiality assessment, the material topics for Elkem in 2022 are CO 2 and other GHG emission reductions, including energy management, local emissions, biodiversity, water management, waste management and circularity, health and safety on site, environmental and social due diligence in the supply chain, responsible economic practices, product governance and supplying the green transition. More information about our response to the material topics is found in the ESG report, which details our commitments and activities within environmental, social and governance and is prepared according to GRI framework. The ESG report can be found on page 74. This report is an integral part of the annual report and has been independently veriﬁed by a third party. ↗ Health, Safety and Environment HSE is the backbone of Elkem’s business and is always the ﬁrst priority. Our HSE eﬀorts are based on a zero- harm philosophy and our HSE management system is systematically implemented to work towards this goal. The safety of our employees is the most critical pillar of our philosophy. The group strongly believes, and has demonstrated, that Elkem’s operations can be done without any harm to employees and people. Elkem uses considerable resources to identify hazards and to implement appropriate measures to reduce risk to an acceptable level so that all employees and contractors performing working at Elkem can leave work just as healthy as they were when they arrived. In 2023 we will be rolling out a new safety management system called FORUS to enhance this work. The system is aligned to global best practice related to HSE (Health, Safety and Environment) and will be used to improve our overall HSE performance. Elkem has a strict reporting regime for injuries and requires all injuries to be reported, investigated, and mitigated independently of the severity. Unfortunately, Elkem experienced two subcontractor fatalities at our sites in 2022. In addition, there was one high-consequence work- related injury for our own employees. This shows that our health and safety work must be maintained and improved and that we can never lose focus. The total recordable injury rate went down from 3.7 in 2021, to 3.2 in 2022, and the lost workday rate (LWR) was 0.9, down from 1.5 in 2021. More detailed information about Elkem’s management system, reporting, safety numbers and how the company follows up throughout the organisation and value chain can be found in the Social chapter in the ESG report, page 120. In addition to a safe and healthy working environment, secure labour rights and respect for internationally recognised human rights in our own operations and the value chains are key priorities for Elkem. For more information about how the company assesses and addresses human and labour rights risks, please see the Social chapter in the ESG report, page 128. Elkem aﬀects the environment and communities around the world. Therefore, Elkem is always looking for new and innovative ways to reduce waste and emissions and to increase the yield from raw materials. This means using highly developed production technologies and running operations with resource-eﬃcient processes. For more information about how Elkem is reducing its environmental footprint and increasing the positive impact of its products, see the ESG report under the chapter Environmental, page 98. In accordance with the Transparency Act section 5, Elkem reports on human rights due diligence as part of our annual ESG report. The relevant account can be found in the chapters on “Human rights” (pp. 128-131) and “Responsible value chain management” (pp. 148-149). The ESG report is made available on Elkem’s website. Diversity, inclusion, and equality Elkem is committed to creating equal opportunities in a diverse and inclusive working environment. The group appreciates that every individual is unique and valuable and should be respected for their individual abilities. Elkem expects that all colleagues act accordingly and promote the four Elkem values. Elkem believes that its human capital is its most valuable asset. The collective sum of the individual diﬀerences, life experiences, knowledge, inventiveness, self-expression, unique capabilities, and talent that employees invest in their work represent a signiﬁcant part of not only Elkem’s culture but its reputation and the company’s results. The group has zero-tolerance for any form of harassment or discrimination. The company has well-established policies and practices related to diversity, equality, and inclusion (DEI). The policies include the code of conduct, human rights policy, people policy, and the global standard procedures cover processes such as, recruitment, working conditions, promotions, development, on- and oﬀ-boarding, and protection against harassment. Elkem’s DEI vision is to cultivate a diverse, equitable and inclusive workplace where all employees feel engaged, valued, and have a sense of belonging. Promoting diversity, inclusion, and equality are essential in attracting and retaining talent to establish and maintain proﬁtability, competitive advantage, and sustained success at Elkem. The group’s objective is to create a culture of inclusivity where all voices are heard. As a result, the company beneﬁts from people who dare to ask questions, are not afraid to try new approaches and bring diverse perspectives to the table. By creating and sustaining a diverse, equal, and inclusive working culture, Elkem aims to increase its ability to deliver market-leading products and services to customers proﬁtably. In 2022 Elkem conducted its ﬁrst global employee engagement survey and both the high response rate and the overall high engagement score (above industry standard) provide good conditions for the company to continue its improvement work in all parts of the value chain. Please see the Activity and reporting duty report for updated 2022 information. ↗ Governance The board of directors recognises the importance of good corporate governance, and the goal is to ensure the protection of all shareholders’ interests and that the company complies with high ethical and social standards. Elkem is subject to corporate governance reporting requirements under section 3-3b of the Norwegian Accounting Act and the Norwegian Code of Practice for Corporate Governance, cf. section 7 of the continuing obligations of stock exchange-listed companies. The Accounting Act may be found (in Norwegian) at .lovdata.no. The Norwegian Code of Practice for Corporate Governance can be found at .nues.no. Elkem’s board consist of 11 board members as of 31 December 2022, of which eight are shareholder- elected and three are employee-elected. Four of the shareholder-elected board members represent the majority shareholder, while the other four shareholder- elected members are independent. Elkem had seven board meetings in 2022. A detailed overview of the board members’ attendance may be found in the board of directors’ report on salary and other remuneration to leading personnel in Elkem. The board of directors’ report on corporate governance can be found on page 53 in this report and is an integral part of the Report of the board of directors. Risk management Elkem’s board and management have a strong focus on risk management to monitor the group’s risk proﬁle, ensuring that adequate risk management processes are in place. Elkem conducts a yearly risk mapping process based on interviews with divisions and corporate staﬀ. Each risk is evaluated based on internal and external conditions and takes deemed likelihood, estimated ﬁnancial impact, time horizon and mitigating activities into consideration. The purpose is to gain a thorough understanding of the group’s risk proﬁle and ﬁnancial risk tolerance. A summary of the risk analysis is presented on page 68 in this annual report. The evaluation of climate-related risks and opportunities has become an increasingly important part of Elkem’s overall risk management processes. In 2021, Elkem implemented reporting on climate risks and opportunities according to TCFD. This framework has been further developed in 2022 and climate risks have become an integrated part of the risk mapping process. Large crises can sometimes be triggered by events that are unexpected and unpredictable. Such events are often referred to as “black swans”. Recent examples include Covid-19, the war in Ukraine and the energy crisis in Europe. “Black swans” demonstrate the need for general risk preparedness and the need for proactive, professional and agile reaction to unforeseen and severe incidents. Elkem’s robust business model and strong ﬁnancial position have shown good resilience during the previous crisis scenarios. The main business risks impacting the group’s ﬁnancial performance relate to sales prices and sales volumes for silicon-related materials and costs for key raw materials, energy and other consumables. The demand for silicon- based materials has increased, and the growth is expected to exceed the growth in global GDP. Demand and prices will, however, ﬂuctuate based on economic cycles and competition, and signiﬁcant price and volume changes can be observed depending on the overall business sentiment. Particularly in commodity markets, the sales prices are impacted by supply and demand developments. Elkem is seeking to mitigate and reduce the ﬁnancial impact by investing in R&I and capturing specialised market positions to reduce commodity price exposure. In addition, Elkem’s integrated value chain provides ﬂexibility to change production between product groups and between commodities and specialties. Combined with diversiﬁed end-markets and long-term customer relationships, this is expected to reduce the market risk exposure. Sanctions and regulatory framework conditions have also become increasingly important over the past years. Elkem has operations in many countries and could be exposed to trade tensions, sanctions and other changes in regulatory framework conditions. This could impact access to raw materials sourcing, as well as access to attractive end-markets. Breach of sanctions could also have severe consequences, for example on the group’s ﬁnancing arrangements or business activities. Elkem maintains a tight monitoring of the prevailing sanction lists and trade related restrictions to ensure compliance. Our integrated business model also means that Elkem is among very few companies with complete and integrated value chains in diﬀerent regions. Elkem operates in an international market and is exposed to a variety of ﬁnancial risk factors, including currency risk, interest rate risk, liquidity risk and counterparty risk. Elkem’s results, cash ﬂow and equity are exposed to ﬂuctuations in currency exchange rates, and Elkem seeks to reduce the impact from changes in currency exchange rates by a pre-deﬁned cash ﬂow hedging programme. The balance sheet risk is mitigated by keeping loans in foreign currencies to match the underlying assets. Elkem operates in capital intensive industries and is exposed to interest rate ﬂuctuations on its net interest-bearing debt. Elkem has adopted a ﬂoating interest rate policy, which is deemed to give adequate protection through economic up- and downturns. Future hedging of interest-rate exposure may be evaluated based on exposure and sensitivity. Liquidity risk relates to the company’s ability to meet ﬁnancial obligations. Elkem has a strong cash position, good access to undrawn credit facilities and satisfactory long-term ﬁnancing arrangements. In 2022, Elkem raised new loan facilities of EUR 1,000 million and EUR 200 million in the bank and Schuldschein markets. The transactions have improved the group’s maturity proﬁle and liquidity position. Elkem has a credit rating from Scope and the rating of BBB/Stable was aﬃrmed in 2022. The rating reﬂects Elkem’s strong ﬁnancial proﬁle, solid position in the global silicone and advanced materials markets, as well as the company’s solid global footprint. Counterparty credit risk is managed by close monitoring of the receivables portfolio combined with credit insurance and payment conditions. Elkem’s ﬁnancial transactions and deposits are with solid and reputable banks. Elkem has signed a liability insurance policy that covers any past, present or future member of the board of directors and company oﬃcer. The insurance covers pure ﬁnancial losses, including defence costs, that the insured persons are legally obliged to pay, resulting from, or as a consequence of, a claim. The liability insurance covers any losses to the company and its subsidiaries due to securities claims and indemniﬁed claims against the board of directors and company oﬃcers. See note 27 in the ﬁnancial statements for more details on ﬁnancial risk. Financial reporting process Elkem has routines to ensure that the ﬁnancial statement is reported according to applicable laws and regulations and in accordance with adopted accounting policies. These routines are described in internal reporting manuals, which are updated regularly according to new accounting principles. The ﬁnancial reporting plan includes controls and checks of reports to ensure consistency of the ﬁnancial reporting. The ﬁnancial information is consolidated and controlled at several levels within the respective divisions. The audit committee performs reviews of the quarterly, half-year and annual report with a special focus on accounting topics such as provisions and liabilities, estimates and judgements, or issues with a major impact on the ﬁnancial statement in addition to reviews of Elkem’s ESG and climate related reporting. The external auditors participate in these meetings in addition to representatives from the management and ﬁnance function of Elkem. Future prospects The past two years have been characterised by unprecedented societal impact related to Covid-19 and supply chain disruptions. The recent volatility in markets related to the energy crisis, combined with inﬂationary pressures, adds to the uncertainty regarding economic activity. The board of directors’ assessment is that the fundamentals and long-term prospects for Elkem are positive. Elkem has a dedicated and competent global organisation, cost competitive integrated business model and a solid ﬁnancial position at the end of 2022, providing a solid starting point to execute on the dual- play growth strategy and green leadership. Elkem aims to grow both in the Western and Eastern world while focusing on sustainability and the green transition. Potential geopolitical polarisation could lead to trade barriers creating opportunities for dual-play providers. Climate risk and environmental regulations will require reduced emissions and more sustainable solutions, and Elkem is well positioned based on its high proportion of renewable electricity and targeted climate ambitions. Elkem will continue to pursue its main strategic initiatives to become top 3 in silicones worldwide and number 1 in silicon products and carbon solutions in the West. Elkem’s ﬁnancial position is considered to be strong at the end of the year with a robust equity ratio, low leverage ratio and strong cash ﬂow generation and liquidity position. Elkem ASA Elkem ASA is the parent company of the Elkem group. The company’s accounts have been presented in accordance with the Norwegian Accounting Act and generally accepted accounting practices in Norway. The accounts are prepared on the basis of a going concern assumption. For Elkem ASA, the operating income amounted to NOK 16,455 million in 2022 compared to NOK 9,740 million in 2021. The operating proﬁt ended at NOK 7,543 million in 2022, compared to NOK 1,799 million in 2021. The net change in cash and cash equivalents amounted to NOK 1,056 million. Cash ﬂow from operating activities amounted to positive NOK 5,314 million, countered by investing activities of NOK 3,089 million and negative cash ﬂow from ﬁnancing activities of NOK 1,169 million. Elkem ASA’s equity was NOK 14,009 million at the end of 2022. The equity ratio ended at 40%. Proﬁt for the year was NOK 5,990 million. The net interest-bearing debt amounted to NOK 2,301 million per 31 December 2022. Cash and cash equivalents amounted to NOK 5,316 million. The board of directors’ view is that the dividend proposal for the year is appropriate based on the group’s overall ﬁnancial position and the current market outlook. Allocation of 2022 net proﬁt: The proﬁt for the year was NOK 5,990 million. The board of directors proposes to distribute NOK 6,00 per share corresponding to NOK 3,813 million as dividend distributed from other paid-in capital and retained earnings. In total the board of directors proposes the following allocation (in NOK million): Dividends from other paid-in capital -2 716 Dividends from retained earnings -1 097 Proﬁt for the year to retained earnings 5 990 The board of directors of Elkem ASA Oslo, 8 March 2023 Zhigang Hao Chair of the Board Dag Jakob Opedal Vice chair Olivier Tillette de Clermont-Tonnerre Board member Yougen Ge Board member Jingwan Wu Board member Grace Tang Board member Nathalie Brunelle Board member Marianne Elisabeth Johnsen Board member Terje Andre Hanssen Board member Marianne Færøyvik Board member Thomas Eggan Board member Helge Aasen, CEO, Elkem ASA Board of directors 2022 Zhigang Hao Chair Dag Jakob Opedal Vice chair Marianne Elisabeth Johnsen Board member Olivier Tillette de Clermont-Tonnerre Board member Yougen Ge Board member Jingwan Wu Board member Nathalie Brunelle Board member Grace Tang Board member Marianne Færøyvik Board member Terje Andre Hanssen Board member Thomas Eggan Board member For more information, please see Elkem.com ↗ Corporate management 2022 Helge Aasen Morten Viga Katja Lehland Asbjørn Søvik CEO CFO SVP Human Resources SVP Green Ventures & Digital Håvard Moe Louis Vovelle F rederic Jacquin SVP Technology SVP Innovation and R&D SVP Strategy & Business Development Larry Zhang Inge Grubben-Strømnes Luiz Simao SVP Silicones SVP Silicon Products SVP Carbon Solutions For more information, please see Elkem.com ↗ Corporate governance The board of directors’ report on corporate governance Good corporate governance is important to ensure conﬁdence in the company and value creation in the best interest of shareholders, employees and other stakeholders. Governance criteria are, together with Environmental and Social criteria (ESG), increasingly used to evaluate the performance of a company. This report, combined with the ESG report, annual report and website, document Elkem’s group activities and results. Elkem is subject to corporate governance reporting requirements according to section 3-3b of the Norwegian Accounting Act and the Continuing obligations of stock exchange listed companies at Oslo Stock Exchange. Further, Elkem’s board of directors endorses "The Norwegian Code of Practice for Corporate Governance" (the "Code"), most recently revised on 14 October 2021 and issued by the Norwegian Corporate Governance Policy Board (NCGB). The Code of Practice is available at .nues.no. This report follows the system used in the Code, and forms part of the board of directors’ report. Elkem generally follows the recommendations set out in the Code, but has deviations in the following sections: → Section 3. The board of directors' authorisation to increase the share capital corresponding to 10% of the current share capital can be used for several purposes, to ensure ﬂexibility and ability to act quickly. Pursuant to the Code, such authorisation should be intended for a deﬁned purpose. → Section 6. Voting on members to the board of directors and the nomination committee takes place as a combined vote, reference to section 7. Pursuant to the Code the shareholders should be able to vote on each individual candidate nominated for election. Due to unavailability of the chair, the board was represented by the presence of the vice chair at the annual general meeting in 2022. → Section 7. The nomination committee justiﬁes its proposals combined, and not separately for each board member pursuant to the Code. The nomination committee focuses on the combined qualiﬁcations and experience, as well as diversiﬁcation on background and gender. 1. Implementation and reporting on corporate governance Elkem’s corporate governance policy is based on the Code, and as such designed to establish a basis for good corporate governance to support achievement of the company’s core objectives, strategies, and risk proﬁle on behalf of its shareholders, including the achievement of sustainable proﬁtability. Elkem believes good corporate governance involves openness and trustful cooperation between all parties involved in the group: the shareholders, the board of directors and executive management, employees, customers, suppliers, public authorities and society in general. By pursuing the principles of corporate governance, the board of directors and management contributes E a b o 2 f a d m p 3 d p t p l a p a to achieving open communication, equal rights for all shareholders and good control and corporate governance mechanisms. The board of directors assesses and discusses Elkem’s corporate governance policy, strategy, and risk proﬁle on a yearly basis. Elkem aspires to comply with the recommendations of the Code. If the Code is deviated from, the deviation is described and explained in the relevant section of this statement. A summary of the deviations is also provided above. No deviations from the code. 2. Business Elkem’s mission is to provide advanced silicon-based materials shaping a better and more sustainable future. Elkem develops its business in support of the ambitions of the UN Sustainable Development Goals and the Paris agreement. Our strategy is focused on dual play growth, which means that growth should be balanced both geo- graphically and across the value chain. Green leadership is a key part of Elkem’s new strategy, with focus on low CO 2 emissions, and supplies to the green transition and creating green ventures. Operational excellence, a higher degree of specialisation, and securing sustainable low-cost positions are key strategic goals on divisional level. Elkem’s business scope is clearly described in section 3 of the articles of association: → The object of the company is to develop and engage in industry, mining, trade and transportation as well as exploration and exploitation of natural resources. The company may also develop, acquire and exploit patents inventions and technical knowhow. The company may participate directly or indirectly or by other means in companies engaged in activities outlined above or activities that promote or support such objects. With a strong track record since 1904, Elkem is one of the world’s leading providers of advanced material solutions. The company is a fully integrated producer with operations throughout the silicon value chain and develops silicones, silicon products and carbon solutions by combining natural raw materials, renewable energy, and human ingenuity. Elkem helps its customers create and improve essential innovations like electric mobility, digital communications, health, and personal care as well as smarter and more sustainable cities. Elkem is operating in capital intensive and cyclical industries and has 30 production sites and an extensive network of sales oﬃces around the world. While this gives competitive strengths, it also gives exposure to a range of risk factors. The board of directors has deﬁned goals and strategies for the business and has a clear focus on risk proﬁles and risk management to create value for the company’s shareholders. In the past two years several incidents have caused signiﬁcant market disruptions, for example the Covid-pandemic, the war in Ukraine, shortages of semi-conductors and power disruptions. Elkem has independent and fully integrated value chains both in the East and West and has managed well through these challenging conditions. More details on the main risks and risk management principles are presented in the annual report. See also section 10 below. In 2022, the board has revised Elkem’s strategy and set out dual play growth and green leadership as the main strategic priorities. Dual play growth means that Elkem will target balanced growth between geographic regions (East and West), and balanced growth across the value chain (upstream and downstream). Green leadership means that Elkem will work to strengthening the position as best in the industry on low CO 2 and growing supplies to green transition and creating green ventures. Focus on a higher degree of product specialisation through R&D and selected acquisitions is a key strategic measure to improve and stabilise the group’s proﬁtability through the business cycle. To support its strategic goals, Elkem will focus on operational excellence, digitalisation, people development and ESG (Environmental, Social and Governance). In addition, Elkem’s divisions will focus on developing and maintain sustainable low-cost positions. Together these initiatives comprise the group’s strategic and operational goals to secure proﬁtable and sustainable growth. Risk management and internal control systems are in place to manage operational risks. The company aims to maintain a strong ﬁnancial proﬁle with a robust capital structure. The target, based on earnings over the business cycle, is to have a leverage ratio of 1.0x - 2.0x, deﬁned as net interest-bearing debt to EBITDA. Sustainability is central in Elkem’s business strategy. Elkem deﬁnes sustainability work as continuous eﬀorts to maximise the positive impact on the environment and societies, as well as to minimise any negative impact. Elkem is a signatory to the UN Global Compact and applies sustainability in line with the principles of the UN Global Compact. Elkem is committed to develop its business in support of the ambitions of the Paris climate agreement and the UN Sustainable Development Goals (SDGs). Elkem is also committed to follow the United Nations Guiding Principles on Human Rights and Business. Elkem’s Silicones division is a member of the Responsible Care Global Charter which is the chemical industry’s global initiative to drive continuous improvement in environment, health, safety and security. Elkem has implemented guidelines and procedures in accordance with section 3-3c of the Accounting Act, including code of conduct, policy on anti-corruption and CSR polices. Elkem's ESG report is included in the annual report for 2022. Elkem's objectives, strategy, risk proﬁle and ﬁnancial targets are evaluated by the board of directors on an annual basis. The board also reviews the group’s performance in ESG and evaluates the climate risks and opportunities and makes regular assessments to ensure compliance and high-quality standards. No deviations from the Code. 3. Equity and dividends As at 31 December 2022, the group’s equity was NOK 28,773 million, which is equivalent to 55% of total assets. The total issued share capital of Elkem amounted to NOK 3,197,206,890 divided into 639,441,378 shares, each with a nominal value of NOK 5. lkem aims to maintain an investment grade proﬁle nd targets a leverage ratio, deﬁned as net interest earing debt to EBITDA, in the level of 1.0 - 2.0x, based n earnings over the business cycle. As at 31 December 022, the leverage ratio was 0.2x. The leverage ratio has urther strengthened compared to 31. December 2021 as result of higher EBITDA and lower net interest-bearing ebt, as Elkem has beneﬁtted from a strong business odel and attractive market positions. Adjusted for the roposed dividend payment for 2022, the leverage as at 1 December 2022 would have been 0.5x. The board of irector’s target is to ensure a leverage ratio in line with olicy over the business cycle. In addition, Elkem aims o keep a robust liquidity reserve and a smooth maturity roﬁle on its loan portfolio to mitigate ﬁnancing and iquidity risk. As at 31 December 2022, available cash mounted to NOK 9,255 million providing a strong liquidity osition. In addition, Elkem has undrawn credit facilities mounting to NOK 6,342 million. In 2022, Elkem signed a new credit facilities agreement of EUR 1,000 million with its bank group. The credit facilities agreement consists of a revolving credit facility in the amount of EUR 500 million and a term loan facility in the amount of EUR 500 million. The facilities agreement also includes certain sustainability performance targets linked to health and safety and reduction of the group’s carbon footprint. In addition, Elkem placed a series of ﬂoating rate loans amounting to EUR 200 million in the Schuldschein market. These transactions provide a solid ﬁnancing position for the group. The board of directors considers Elkem’s capital structure, including equity and debt structure, to be appropriate to the company’s objective, strategy and risk proﬁle. The company’s dividend policy is to aim for dividends distributions to reﬂect the underlying earnings and cash ﬂow of the group and targets a dividend pay-out ratio of 30-50% of the group’s proﬁt for the year. The proposed dividend pay-out for the ﬁnancial year ended 31 December 2022 is NOK 3,813 million, which corresponds to NOK 6.00 per share. The proposed dividend represents 40% of the group’s proﬁt for 2022. The board of directors has not been granted any authorisation to approve distribution of dividends. At the annual general meeting on 27 April 2022, the board of directors was granted the following authorisations: → In order to give the board of directors ﬁnancial ﬂexibility and enable quick access to the market in the event of an acquisition in return of shares or for general corporate purposes, the board of directors was granted an authorisation to increase the share capital with an amount up to NOK 319,720,689 corresponding to 10% of the current share capital. The authorisation covers share capital increases against contribution in kind and share capital increase in connections with mergers. The shareholders’ preferential rights to new shares may be deviated from. The authorisation is valid until the annual general meeting in 2023, but no longer than to and including 30 June 2023. This authorisation was not utilised in the ﬁnancial year ended 31 December 2022. → The board of directors was granted an authorisation to increase the share capital up to NOK 40,000,000 to be used in connection with the issuance of new shares under the company's share incentive scheme. The authorisation is valid until the annual general meeting in 2023, but no longer than to and including 30 June 2023. This authorisation was not utilised in the ﬁnancial year ended 31 December 2022. → In order to allow the board of directors to utilise the mechanisms permitted by the Norwegian Public Limited Liability Companies Act to acquire own shares, the board of directors was granted an authorisation to acquire own shares with a total nominal value of up to NOK 319,720,689 corresponding to 10% of the current share capital. The maximum amount that can be paid for each share is NOK 150 and the minimum is NOK 1. The authorisation is valid until the annual general meeting in 2023, but no longer than to and including 30 June 2023. Under this authorisation the board of directors announced the acquisition of 5,000,000 own shares on 21 July 2022. The average purchase price per share was NOK 38.46. Parts of the own shares acquired have been sold under the share incentive programme and as at 31 December 2022 Elkem holds 4,964,393 own shares. Deviations from the Code: The board of directors' authorisation to increase the share capital with an amount up to NOK 319,720,689, corresponding to 10% of the current share capital can be used for several purposes. Elkem believes that this authorisation is important in order to allow the board of directors, in the interest of time, to act quickly in connection with a transaction or other corporate events where it is in the shareholders and Elkem's interest to increase the share capital. 4. Equal treatment of shareholders All shareholders shall be treated on an equal basis, unless there is just cause for treating them diﬀerently. Elkem has carried out transactions in its own shares during 2022. These transactions were carried out through the stock exchange and ensured equal treatment of all shareholders. Elkem announced the acquisition of 5,000,000 own shares on 21 July 2022. The average purchase price per share was NOK 38.46. Elkem engaged a third party to carry out the share buybacks on behalf of the company and the third party managed the programme and made its trading decisions independently of Elkem. No deviations from the Code. 5. Freely negotiable shares The shares in Elkem are freely negotiable and there are no restrictions on any party’s ability to own, trade or vote for the share in the company. Elkem has only one class of shares. Each share grants the holder one vote and there are no structures granting disproportionate voting rights. No deviations from the Code. 6. General meetings The board of directors will ensure that the company’s shareholders can participate in the general meetings. The annual general meeting in 2022 was held as a hybrid meeting. Shareholders had the option to either attend the general meeting physically or digitally by following the live audiocast of the meeting, submit questions relating to the items on the agenda and cast their votes in real time. The digital meeting was organised by DNB Bank ASA, Elkem’s registrar in the Central Security Depository, Verdipapirsentralen ASA (Euronext Securities Oslo), and its subcontractor. The board of directors will further ensure that: → notices for the general meetings are sent to all shareholders individually, or to their depository banks, at least 21 days in advance, that all matters to be considered by the meeting are speciﬁed and that relevant documents are made available on the company’s website; → the resolutions and any supporting documentation are suﬃciently detailed, comprehensive and speciﬁc, allowing shareholders to understand and form a view on all matters to be considered at the general meeting; → the CEO, the chair of the board of directors and the chair of the nomination committee attend the general meeting; and → the general meeting is able to elect an independent chair for the general meeting. The articles of association of Elkem does not provide for any deadline for the shareholders to give notice of their attendance at the general meeting. The board of directors may still encourage shareholders to give such notice within a set deadline. Shareholders who are unable to participate in the general meeting will be given the opportunity to vote by proxy or through written voting in a period prior to the general meeting. The company will in this respect provide information on the procedure and prepare a proxy form/ written voting form. The Company will nominate a person to act as proxy. All board members and members of the nomination committee are encouraged, but not obliged, to participate in the annual general meeting. The chair of board was represented by the presence of the vice chair at the annual general meeting in 2022, due to the unavailability of the chair. Elkem has chosen not to follow the recommendation to vote separately on each candidate nominated for the board of directors and the nomination committee. The process of the nomination committee is focused on the combined qualiﬁcation and experience of the proposed members to the board of directors and the nomination committee, and the voting should therefore also be carried out as a combined vote. Deviations from the code: Voting on members to the board of directors and the nomination committee takes place as a combined vote. 7. Nomination committee According to section 7 of Elkem’s articles of association, the company shall have a nomination committee consisting of two or three members in accordance with the decision of the general meeting. The members of the nomination committee are elected by the annual general meeting. The general meeting has also approved guidelines for the duties of the nomination committee, elected the chairperson and determined the remuneration of the members of the committee. After the general meeting in 2022 the nomination committee comprises the following members: → Sverre S. Tysland / Chair / Practicing lawyer / Independent / Re-elected in 2022 for a term of oﬃce of one (1) year until 2023; → Zhu Xiaolei / Committee member representing the majority shareholder / Re-elected in 2022 for a term of oﬃce of one (1) years until 2023; and → Anne Kjølseth Ekerholdt / Committee member / Practicing lawyer / Independent / Re-elected in 2022 for a term of oﬃce of one (1) year until 2023. The members of the nomination committee have been elected to take into account the interests of shareholders in general and to consider and ensure compliance with the guidelines in section 9 of the Code regarding the composition and independence of the board of directors. The nomination committee does not include members of the board of directors or the executive management. The nomination committee shall make recommendations to the general meeting for the election of shareholder elected board members and members of the nomination committee, and the remuneration of the board of directors and the nomination committee. When nominating shareholder representatives to the board of directors, the nomination committee presents relevant information about the candidates, together with an evaluation of their independence. In connection with the nomination committee’s work with proposing candidates, and to ensure that the candidates represent a broad group of the company’s shareholders, the nomination committee is in contact with the board of directors, the CEO and major shareholders. The nomination committee will consider holding individual discussions with each member of the board of directors, and furthermore, ensure that the board of directors is composed to comply with legal requirements and the corporate governance code. The nomination committee have justiﬁed its proposal for the board of directors. While the nomination committee presents relevant information about each candidate separately, the nomination committee focuses on the combined qualiﬁcations and experience of the proposed members of the board of directors when presenting its proposal to the general meeting. Information on how to propose candidates is available on Elkem’s webpage. Deviations from the Code: The nomination committee justiﬁes its proposals combined and not separately for each board member. 8. Composition and independence of the board As of 31 December 2022 the board of directors of Elkem comprises 11 members, of which eight members, including the chair, are shareholder elected. The remaining three members are elected by and among the company’s employees. As of 31 December 2022, the board of directors of Elkem comprise of the following persons: → Zhigang Hao / Chair / Representing the majority shareholder / Re-elected in 2021 for a term of oﬃce of two (2) years until 2023; → Dag Jakob Opedal / Vice chair / Independent / Re- elected in 2022 for a term of oﬃce of two (2) years until 2024; → Olivier Tillette de Clermont-Tonnerre / Board member / Representing the majority shareholder / Re- elected in 2022 for a term of oﬃce of two (2) years until 2024; → Nathalie Brunelle / Board member / Independent / Elected in 2022 as new board member for a term of two (2) years until 2024; → Yougen Ge / Board member / Representing the majority shareholder / Re-elected in 2021 for a term of oﬃce of two (2) years until 2023; → Jingwan Wu / Board member / Representing the majority shareholder / Elected in 2022 as new board member for a term of two (2) years until 2024; → Grace Tang / Board member / Independent / Elected in 2021 as new board member for a term of two (2) years until 2023; → Marianne Elisabeth Johnsen / Board member / Independent / Re-elected in 2021 for a term of oﬃce of two (2) years until 2023; → Terje Andre Hanssen / Board member / Employee representative / Elected for a term of oﬃce until the annual general meeting in 2024; → Marianne Færøyvik / Board member / Employee representative / Elected for a term of oﬃce until the annual general meeting in 2024 and; → Thomas Eggan / Board member / Employee representative / Elected for a term of oﬃce until the annual general meeting in 2024. Anja-Isabel Dotzenrath did not seek re-election at the annual general meeting in 2022 and resigned from the board. Dotzenrath was replaced by Nathalie Brunelle. Jingwan Wu was elected new board member to ﬁll the vacant position after Helge Aasen’s resignation in 2021, following which the board comprised 10 members. In addition, Thomas Eggan has replaced Knut Sande as employee representative. The composition of the board of directors is considered to attend to the common interests of all shareholders and meet the company's need for expertise, capacity and diversity. Four of the board members are women, and none of the members of the company's executive management are members of the board of directors. The board of directors is composed so that it can act independently of any special interests. The majority of the shareholder elected board members are independent of the executive management and material business connections of the company. Further, four out of the current eight shareholder elected board members are independent of the company’s majority shareholder. Further information on each of the board members is presented at .elkem.com and information on their record of attendance at board meetings can be found in the board of directors’ report on salary and other remuneration for leading personnel for 2022. Members of the board of directors are encouraged to own shares in the company, however, with caution not to let this encourage a short-term approach which is not in the best interests of the company and its shareholders over the longer term. As of 31 December 2022, the following board members owned shares in the company: Olivier Tillette de Clermont-Tonnerre (15,517 shares), Dag Jakob Opedal (40,000 shares), and Marianne Færøyvik (4,950 shares). No deviations from the Code. 9. The work of the board of directors The board of directors' work follows an annual plan, with a particular focus on objectives, strategy and implementation. The plan is evaluated and approved around the beginning of each calendar year. The board of directors also annually evaluates its performance and expertise, the evaluation is presented to the nomination committee. The board of directors has implemented instructions for the board of directors and the executive management, which are focused on determining allocation of internal responsibilities and duties. The objectives, responsibilities and functions of the board of directors and the CEO are in compliance with rules and standards applicable to the group and are described in the company’s annual report. The board of directors have also implemented procedures to ensure that members of the board of directors and executive personnel make the company aware of any material interests that they may have in items to be considered by the board of directors. The board of directors will also be chaired by some other member of the board if the board is to consider matters of a material character in which the chair of the board is, or has been, personally involved. The board of directors held seven board meetings in 2022. Two board members were absent from one meeting. Except for that, all board members attended all board meetings in 2022. The instructions for the board of directors states how agreements with related parties shall be handled. In the event of a not immaterial transaction between the company and its shareholders, a shareholder's parent company, members of the board, executive management or closely related parties of any such parties, the board will arrange for a valuation to be obtained from an independent third party. Agreements with related parties will be disclosed in the directors’ annual report. The board of directors has established an audit committee and a remuneration committee. No deviations from the Code. The audit committee The board of directors has established an audit committee which is a working committee for the board of directors, preparing matters and acting in an advisory capacity. The audit committee is responsible for overseeing ﬁnancial reporting and disclosure and assist the board of directors with assessments of the integrity of the company’s ﬁnancial statements, ﬁnancial reporting processes and internal controls, risk management and performance of the external auditor. In 2022, the audit committee also assumed responsibility for preparatory work and supervision related to the board’s management of sustainability and non-ﬁnancial reporting, internal control over sustainability and non-ﬁnancial reporting, and sustainability-related risk management. The board of directors has issued instructions for the work of the audit committee, and the duties and composition of the committee are in compliance with the Norwegian Public Limited Liability Companies Act. The members of the audit committee are elected by and amongst the members of the board of directors for a term of up to two years and comprised the following persons as of 31 December 2022: → Dag Jakob Opedal / Chair/ Independent → Grace Tang / Member / Independent → Jingwan Wu / Member / Representing the majority shareholder The committee members have the overall competence required to fulﬁl their duties based on the organisation and operations of the group, at least one member of the audit committee is competent in respect of ﬁnance and audit. The majority of the members are independent of the business. The remuneration committee The board of directors has appointed a remuneration committee which comprised the following persons as of 31 December 2022: → Zhigang Hao / Chairperson / Representing the majority shareholder → Olivier Tillette de Clermont-Tonnerre / Member / Representing the majority shareholder → Marianne Elisabeth Johnsen / Member / Independent The remuneration committee is a preparatory and advisory committee for the board of directors in questions relating to the company’s compensation of the executive management. The purpose of the remuneration committee is to ensure thorough and independent preparation of matters relating to compensation to the executive personnel. The remuneration committee puts forth a recommendation for the board of directors’ guidelines for remuneration to senior executives in accordance with section 6-16a of the Norwegian Public Limited Liability Companies Act. The members of the remuneration committee are elected by and amongst the members of the board of directors for a term of up to two years and are independent of the company’s executive management. The board of directors has issued instructions for the work of the remuneration committee. No deviations from the Code. 10. Risk management and internal control It is ultimately the responsibility of the board of directors to ensure that the company has sound and appropriate internal control systems and risk management systems reﬂecting the extent and nature of the company’s activities. Sound risk management is an important tool to create trust, ensure a good environment, health and safety standards and enhance value creation. Evaluation of climate related risks and opportunities have become an increasingly important part of Elkem’s overall risk management processes. As part of this work Elkem has presented a global climate roadmap in 2021 and also reported on climate risks and opportunities according to Task Force on Climate-related Financial Disclosures (TCFD) reporting recommendations. The TCFD framework has been implemented as an integrated part of Elkem’s yearly risk assessment. Elkem complies with all laws and regulations that apply to the group’s business activities. The group’s code of conduct sets out the overall ethical guidelines, which apply to all Elkem employees, members of the board of directors as well as those acting on Elkem’s behalf. The company has a comprehensive set of relevant corporate manuals and procedures, which provide detailed descriptions of procedures covering all aspects of managing the operational business. The procedures and manuals are continuously revised to reﬂect best practice derived from experience or adopted through regulations. In 2022, Elkem has made an extensive review and update of its governing documents. The board of directors conducts annual reviews of the company’s most important areas of exposure to risk and such areas’ internal control arrangements. A summary of the main risks is presented in the annual report. The focus on climate related risk has increased and is an integrated part of this assessment. The board of directors describes the main features of the company’s internal control and risk management systems connected to the company’s ﬁnancial reporting in the company’s annual report. This covers the culture of control, risk assessment, controlling activities and information, communication and follow-up. The board of directors is obligated to ensure that it is updated on the company’s ﬁnancial situation, and to continuously evaluate whether the company’s equity and liquidity are adequate in terms of the risk from, and the scope of, the company’s activities, and shall immediately take necessary actions if it is demonstrated at any time that the company’s capital or liquidity is inadequate. The company focuses on frequent and relevant management reporting to the board of directors. The reports contain matters related to health and safety, market development, operations and ﬁnancial performance. The purpose is to ensure that the board of directors has suﬃcient information for decision-making and is able to respond quickly to changing conditions or important incidents. Board meetings are held regularly, and management reports are provided to the board on a monthly basis. No deviations from the Code. 11. Remuneration of the board of directors The remuneration to the board of directors is determined by the shareholders at the annual general meeting based on a proposal from the nomination committee. The level of remuneration to the board of directors is considered to reﬂect an international level and the board of directors’ responsibility, expertise, the complexity of the company and its business, as well as time spent and the level of activity in both the board of directors and any board committees. The remuneration of the board of directors is not linked to the company’s performance and Elkem does not grant share options to its members of the board of directors. The board members, or companies associated with board members, have not been engaged in speciﬁc assignments for the company in addition to their appointments as members of the board of directors. The remunerations for the period from May 2022 until the annual general meeting in 2023 are as follows: Board of directors: → Chair: NOK 819,000 → Vice chair: NOK 614,250 → Board members: NOK 409,500 → Observers: NOK 204,750 Audit committee: → Leader: NOK 147,420 → Member: NOK 98,280 Remuneration committee: → Leader: NOK 147,420 → Members: NOK 98,280 The total compensation to members of the board of directors is disclosed in the board of directors’ report on salary and other remuneration for leading personnel for 2022. No deviations from the Code. 12. Remuneration of executive personnel The board of directors prepares guidelines for the remuneration of executive management. These guidelines include the main principles for the company’s remuneration policy and contributes to Elkem's commercial strategy, long-term interests and ﬁnancial viability, which align the interests of the shareholders and the executive management. The guidelines are communicated to the annual general meeting and presented in a separate appendix to the agenda for the general meeting. A report on the salary and other remuneration to the executive management will be prepared in accordance with the rules of the Norwegian Public Companies Act and relevant regulations. Performance-related remuneration of the executive management in the form of share options, bonus programmes or similar are linked to value creation for shareholders or the company’s proﬁt over time. Such performance related remuneration is subject to an absolute limit. No deviations from the Code. 13. Information and communications Elkem is under an obligation to continuously provide its shareholders, Oslo Stock Exchange and the ﬁnancial markets in general with timely and precise information about the company and its operations. Relevant information is given in the form of annual reports, quarterly reports, press releases, notices to the stock exchange and investor presentations in accordance with what is deemed appropriate from time to time. Elkem maintains an open and proactive policy for investor relations and has given regular presentations in connection with annual and quarterly results. The goal is that Elkem’s information work shall be in accordance with best practice at all times and all communications with shareholders shall be in compliance with the provisions of applicable laws and regulations and in consideration of the principle of equal treatment of the company’s shareholders. Investor contact/investor relations (IR) activities are conducted in accordance with the IR policy and by the IR team only. The IR team comprises the CEO, the CFO and the VP Finance and Investor relations. The company publishes an annual, electronic ﬁnancial calendar with an overview of dates for important events, such as the annual general meeting, interim ﬁnancial reports, public presentations and payment of dividends, if applicable. In addition to the board of directors’ dialogue with the company’s shareholders at general meetings, the board of directors promotes suitable arrangements for shareholders to communicate with the company at other times. The board of directors have delegated this task to the IR team. Elkem has held regular investor meetings in connection with each of the quarterly presentations in 2022 and attended several investor conferences. In addition, Elkem arranged a Capital Markets Update in 2022 in connection with the company’s results presentation for the third quarter. The IR team has conducted physical and electronic meetings with both domestic and international investors from for example Great Britain, United States, Germany, France and Switzerland. The plan is to arrange regular investor meetings and capital market updates when it is considered expedient in order to keep the market up to date about the company’s development, goals and strategies. No deviations from the Code. 14. Take-overs Elkem has one major shareholder controlling 52.9% of the shares as of 31 December 2022. Elkem has not been subject to any takeover bids in 2022. In the event of a takeover bid, the board of directors and executive management each have an individual responsibility to ensure that the company’s shareholders are treated equally and that there are no unnecessary interruptions to the company’s business activities. The board of directors has a particular responsibility in ensuring that the shareholders have suﬃcient information and time to assess the oﬀer. In the event of a take-over process, the board of directors shall abide by the principles of the Code, and also ensure that the following take place: → the board of directors will not seek to hinder or obstruct any takeover oﬀer for the company’s operations or shares unless they have valid and particular reasons for doing so; → the board of directors shall not exercise mandates or pass any resolutions with the intention of obstructing the takeover oﬀer unless this is approved by the general meeting following announcement of the oﬀer; → the board of directors shall not undertake any actions intended to give shareholders or others an unreasonable advantage at the expense of other shareholders or the company; → the board of directors shall not enter into an agreement with any oﬀeror that limits the company's ability to arrange other oﬀers for the company's shares, unless it is self-evident that such an agreement is in the common interest of the company and its shareholders; → the board of directors and executive management shall not institute measures with the intention of protecting the personal interests of its members at the expense of the interests of the shareholders; and → the board of directors must be aware of the particular duty it has for ensuring that the values and interests of the shareholders are protected. In the event of a take-over oﬀer, the board of directors will, in addition to complying with relevant legislation and regulations, seek to comply with the recommendations in the Code. This includes obtaining a valuation from an independent expert. On this basis, the board of directors will make a recommendation as to whether or not the shareholders should accept the oﬀer. A takeover process gives rise to a particular duty of care to disclose information, where openness is an important tool for the board of directors to ensure equal treatment of all shareholders. The board of directors shall strive to ensure that neither inside information about the company, nor any other information that must be assumed to be relevant for shareholders in a bidding process, remains unpublished. There are no other written guidelines for procedures to be followed in the event of a takeover oﬀer. The company has not found it appropriate to draw up any explicit basic principles for Elkem’s conduct in the event of a take-over oﬀer, other than the actions described above. The board of directors otherwise concurs with what is stated in the Code regarding this issue. No deviations from the Code. 15. Auditor The board of directors is responsible for ensuring that the board and the audit committee are provided with suﬃcient insight into the work of the auditor. In this regard, the board of directors ensured that the auditor submitted the main features of the plan for the audit of the company to the audit committee in 2022. Further, the board of directors invited the auditor to participate in the board meeting that dealt with the annual accounts. At these meetings, the auditor (i) reports on any material changes in the company's accounting principles and key aspects of the audit, (ii) comments on any material estimated accounting ﬁgures, and (iii) reports all material matters on which there has been disagreement between the auditor and the executive management of the company. Once a year, the board of directors reviews the company's internal control procedures with the auditor, including weaknesses identiﬁed by the auditor and proposals for improvement. In this regard, a review of the company's internal control procedures with the auditor, including weaknesses identiﬁed by the auditor and proposals for improvement, was carried out by the board of directors in 2022. In order to ensure the auditor's independence of the company's executive management, the board of directors has established guidelines in respect of the use of the auditor by the management for services other than the audit. No deviations from the Code. The board of directors of Elkem ASA Oslo, 8 March 2023 Zhigang Hao Chair of the Board Dag Jakob Opedal Vice chair Olivier Tillette de Clermont-Tonnerre Board member Yougen Ge Board member Jingwan Wu Board member Grace Tang Board member Nathalie Brunelle Board member Marianne Elisabeth Johnsen Board member Terje Andre Hanssen Board member Marianne Færøyvik Board member Thomas Eggan Board member Helge Aasen, CEO, Elkem ASA Overview of main risk areas >7,300 30 employees worldwide plants presence Elkem’s board and management have a strong focus on risk management to monitor the group’s risk proﬁle and to ensure that adequate risk management processes are in place. The board and management consider risk management to be a key part of Elkem’s corporate governance structure and important to create trust and to enhance value creation. Elkem carries out a yearly risk mapping process based on interviews with divisions and corporate staﬀ functions. The objective is to identify the top ﬁve to ten risks for each division and corporate function. Each risk is evaluated based internal and external conditions and takes deemed likelihood, estimated ﬁnancial impact, time horizon and mitigating activities into consideration. The individual risks are then organised into categories and aggregated on group level. The main purpose is to gain a thorough understanding of the group’s risk proﬁle and ﬁnancial risk tolerance. Risks are split into ﬁve main categories; strategic risks, ﬁnancial risks, raw material risks, production and process risks, and market and product risks. The risk categories are structured according to Elkem’s value chain. Climate risk has become an increasingly important part of Elkem’s overall risk management processes. Climate risks could for example aﬀect Elkem’s strategic positioning, raw material supply, end-markets, and ﬁnancial performance. In 2021, Elkem implemented reporting on climate risks and opportunities according to Task Force on Climate- related Financial Disclosures’ reporting recommendations (TCFD). In the risk assessment for 2022, climate risk has been treated as an integrated part of the risk mapping process. In addition, Elkem has made a study on physical climate risks based on Elkem’s speciﬁc locations to gain an understanding of where Elkem is materially exposed. The results of this study are presented in Elkem’s updated TCFD report for 2023. Strategic risks Raw material risk Production and Market and process risks product risks Financial risks ESG and climate Risk descriptions 1. Black Swan “Black swan” describes an unpredicted event which can cause dramatic changes to economies and societies. Despite comprehensive risk management procedures, it is impossible to prepare for every scenario. Recent examples are Covid-19, the war in Ukraine and the energy crisis in Europe. “Black swans” demonstrate the need for general risk preparedness and the need for proactive, professional and agile reaction to unforeseen and severe incidents. It also shows the importance of generally robust ﬁnancials and supply chains to enable companies to endure unexpected changes in market conditions. Elkem has a robust business model with a solid global footprint and well diversiﬁed end- markets. The ﬁnancial position is also strong. 2. Market risk (prices Elkem's sales prices and sales volumes may vary depending on industry and volumes) conditions and competitive environment. This constitutes one of the main risks aﬀecting the group’s ﬁnancial performance. In commodity markets, the sales prices are generally impacted by supply and demand development, while specialties tend to have more stable pricing over the business cycle. Elkem’s strategy is to increase the sales of specialised products, but the group is also attractively positioned in commodity markets based on strong cost positions. Elkem’s integrated value chain provides ﬂexibility to change production between product groups and between commodities and specialties. Combined with diversiﬁed end-markets and long-term customer relationships, this is expected to reduce the market risk exposure. 3. Sanctions and trade Sanctions and trade restrictions have increased over the past years. This could related restrictions negatively impact Elkem's trade ﬂows and access to raw materials and/or attractive end-markets. Any breach of sanctions could have severe consequences, for example on the group’s ﬁnancing arrangements or business activities. Elkem keeps tight monitoring of prevailing sanction lists and trade related restrictions to ensure compliance. This is to avoid that Elkem or third parties engage in business activities with sanctioned entities or individuals. 4. Regulatory frame- Elkem has operations in many countries and could be exposed to changes work conditions in regulatory framework conditions. This could negatively aﬀect the group’s competitive position and market access. Examples of such regulatory and political framework conditions are; CO 2 emission schemes, other environmental or product- related requirements, changes in anti-dumping duties and export taxes, export control or sanctions, and regulations and availability of electric power. Elkem seeks to take a proactive approach to reduce these risks. In addition, the group’s diverse geographical presence and integrated value chains in Europe and Asia could reduce the negative impact from various trade tensions and restrictions. 5. Performance Elkem has a growth strategy based on organic growth and selected mergers and and payback on acquisitions (M&A) transactions. Large investment projects carry an inherent risk of capex projects delays, cost overruns, and underperformance. In addition, M&A transactions carry the risk that an acquired entity does not deliver the expected proﬁt or synergies, or that due diligence processes have failed to identify potential claims or other obligations. Elkem seeks to mitigate such risks by diligent project management and thorough due diligence processes, comprising professional support from legal, ﬁnancial, audit and industry expertise. 6. Health and safety Elkem's working environment includes signiﬁcant inherent risk of injuries or even fatalities, and there are risks of large ﬁres and explosions in connection with high temperature smelting processes, molten metals, chemical processes, electrical equipment and other potentially hazardous incidents. The safety of our employees and contractors is Elkem's main priority. Elkem uses considerable resources to identify hazards and implement appropriate measures to avoid incidents and to reduce risk to an acceptable level, including safety instructions, training, physical protection and adherence to Elkem Business System (EBS) principles. Insurance and risk survey programmes are in place to mitigate risks and ﬁnancial exposure. 7. Raw material Global supply chains could be exposed to disruptions due to trade regulations access and and restrictions, pandemics, cyber-attacks, availability of transportation, and supply chain potential impact of climate change. In the past two years several incidents have caused disruptions in global transportation and supply chains, for example covid related interruptions worldwide, the war in Ukraine, low water levels in rivers and channels in Europe, lack of container capacity, shortages of semi-conductors and power disruptions. Elkem has thorough sales and planning processes, a diversiﬁed raw material sourcing strategy, and globally connected supply chains to mitigate risk exposure. Elkem's integrated value chain has managed well through recent challenges. 8. Environment Elkem has global operations exposed to environmental regulations, and potential and climate impact of climate change. Climate risks comprise both regulatory, transitional and physical risks, for example. extreme weather, drought, ﬂooding, wind, and ocean rise. Many of Elkem's production facilities are located close to sea or river, or in close proximity to cities or local communities. In addition, Elkem's integrated supply chain depends on access to stable inbound and outbound transportation. Elkem has high attention to secure assets and avoid business interruptions and seeks to ensure a sustainable business model by reducing emissions and ensuring compliance with environmental regulations. 9. Cyber and IT risk IT is used for virtually all business-related activities, including sales, production planning, procurement, maintenance, ﬁnance and accounting. An IT incident or cyber-attack could therefore cause severe disruptions to Elkem’s operations. Good IT procedures with high focus on security, training of employees, up to date equipment, frequent software updates and segmentation of networks are the main actions to mitigate and prevent these risks. Elkem has a cyber insurance in place to mitigate negative ﬁnancial impact. 10. Compliance and Elkem has operations in many countries, of which some are in regions known for legal risks high risk related to for example corruption and human rights violations. This gives an inherent chance of unacceptable business behaviour either through corruption, breach of competition law, breach of sanctions, breach of human rights, or other unethical activities, either by employees or by business partners. There is also legal and litigation risks in connection with contracts and/or intellectual property. Elkem has a high focus on compliance and internal control and has strengthened its compliance function and internal control systems over the past years. Guidelines for ethical conduct, training of all employees and visible and accessible channel for reporting misconduct (whistle blower) are in place. Insurance cover is in place for directors and oﬃcers, employment practices liability and crime. ESG report 2022 Reducing emissions towards net zero while growing supplies to the green transition Delivering your potential ESG report content The ESG report contains Elkem’s most important communication on material Environmental, Social and Governance topics. The report covers the key strategy of the company, how the company manages sustainability and climate change issues, and how we progress on each topic. In the 2022 ESG report you will ﬁnd the following: The Elkem climate roadmap 80 ESG management: People and organisation 84 ESG management: Sustainability and ESG governance 90 Environmental material topics 96 Social material topics 120 Governance material topics 136 UN SDG reporting 150 ESG third party assurance 154 Operations: 30 plants world-wide and more than 7,300 employees Operating income 2022: 45.9 billion NOK Total scope 1+2+3 emissions 2022: 10.74 million tonnes >80% of production based on renewable electricity ESG highlights in 2022 → In 2022, Elkem launched an updated corporate strategy on dual-play growth and green leadership → Elkem was awarded the platinum rating on sustainability transparency from EcoVadis, one of the world’s largest and most trusted providers of sustainability ratings, ranking Elkem as top 1% performer → Elkem was awarded double A- scores from CDP for eﬀorts on Climate and Forests, and B score on Water security → Elkem signed its ﬁrst sustainability linked credit facilities agreement of EUR 1,000 million. The facilities agreement includes sustainability performance targets linked to health and safety and reduction of the group’s product carbon footprint → Elkem Silicones was declared 2022 R&D 100 Awards winner in Mechanical Materials category for safety and reliability for silicone solutions for electric vehicle thermal management → The world's ﬁrst carbon capture pilot for smelters was inaugurated in Rana, Norway, with main goal to verify the technology on real industrial gases from smelters and other process industries → Elkem announced a partnership with Hydro and Altor to accelerate the growth of sustainable battery material provider Vianode → Elkem commissioned two climate-friendly ships for North sea operations Elkem's ESG agenda Elkem’s products are building blocks for the low-carbon society and critical for the green transition. Examples include renewable energy, energy storage, mobility solutions, infrastructure improvements, digitalisation, and healthcare. Our people and safe sustainable operations, conducted responsibly and with excellence, are the core of Elkem. Our mission: Advanced silicon-based materials shaping a better and more sustainable future, adding value to stakeholders globally Our commitment: To develop our business in accordance with the UN SDGs and Paris agreement Our values: Respect Precision Involvement Continuous improvements Sustainability foundation: Material topics Elkem follows the principles, requirements, and guidelines of the GRI 2021 Standards to identify the material sustainability topics for the group. Environmental Climate action → CO 2 and other GHG emission reductions, including energy management → Biodiversity → Local emissions to air → Waste management and circularity → Water management Social Safety ﬁrst → Health and safety on site → Human rights, including labour rights Governance Responsible business partner → Environmental and social due diligence in supply chain → Supplying the green transition → Product governance, including chemical safety → Responsible eco- nomic practices Sustainability reporting About this report The annual ESG report is part of Elkem’s annual report, approved by the board. The company deﬁnes the organisational boundaries on an operational control basis. All the numbers in the report covers 100% of operations. The ESG report also functions as a stand-alone report. For more information on Elkem’s business areas and strategy, see page 14 and onwards in the annual report. ↗ Reporting framework Elkem reports in accordance with the Global Reporting Initiative (GRI) Standards 2021 and consider this report to be our Communication of Progress (COP) to the United Nations Global Compact (UNGC). Elkem discloses information through several reporting systems to increase transparency and ensure standardised reporting. The GRI index can be found online, and includes references to the World Economic Forum’s stakeholder capitalism initiative to standardise sustainability metrics. ↗ Assurance PwC has undertaken a limited assurance on the ESG reports alignment with the GRI Standard. Further information about the limited assurance can be found in the assurance statement. ↗ ESG transparency and reporting acknowledgements 2022 Ecovadis: Platinum Top 1% out of more than 90,000 global companies, on sustainability transparency and action. CDP: A- Responding to all three scopes of the CDP for the ﬁrst time in 2022, and recognised with A- on Climate and Forests, and a B score on Water security. S&P Global CSA: Top 90 percentile With a score of 53, Elkem is rated in the top 90 percentile in the chemical industry, in the S&P Global Corporate Sustainability Assessment for 2022. The rating focuses on both industry-speciﬁc and ﬁnancially material topics for companies. ESG 100: A Top score for ESG reporting in 2022, in an assessment of top 100 listed companies on the Scandinavian stock exchanges, from Position Green. A is awarded for companies with excellent reporting in line with best practice, clear strategy, and quantiﬁable targets. The Elkem climate roadmap Elkem is committed to reduce emissions and to contribute in line with the Paris agreement Elkem announced its global climate roadmap in 2021, which is closely linked to the corporate strategy of green leadership. ↗ The climate roadmap sets out the direction for how Elkem will contribute to limit global warming caused by climate change, and has three key pillars: Reducing our emissions Achieving fully climate neutral production throughout our value chain By 2031: Reducing absolute emissions by 28% from 2020-2031 while growing the business – delivering 39% improvement in product footprint By 2050: Achieving fully carbon neutral production (zero fossil emissions) globally Supplying to the transition Providing the advanced material solutions required to enable the green transition Grow supplies of advanced materials to green markets such as better buildings, electric vehicles and renewable energy Build new business in green markets such as battery materials, biomass and energy recovery Enabling circular economies Enabling more circular activities in our operations, products and markets Increase recycling in our own operations Increase recycling with our customers Develop the eco-design of innovative products During the last year, Elkem has been involved in a carbon capture project, testing new technology at our plant in Rana, Norway. This is part of the long-term ambition to achieve net zero emissions by 2050. The pilot for carbon capture is the ﬁrst project of its kind within the silicon industry. ↗ Our roadmap to climate neutral products -39% Net zero 2020 Biomass More China Low-carbon 2031 CCS at Other 2050 baseline in smelters renewables supply chain target smelters initiatives target Status – delivering on the roadmap Metric 2022 2021 2020 Total GHG emissions (CO e) 2 Mill tonnes 10.74 11.60 10.27 Scope 1 Mill tonnes 2.42 2.35 2.40 Scope 2 Mill tonnes 0.94 0.90 0.91 Scope 3 Mill tonnes 7.38 8.35 6.96 Product group carbon footprint CO e/kg 2 6.9 7.4 N/A * CO 2 equivalents per kg of produced material For a more detailed overview and explanation of the emissions development, see the CO 2 and GHG emissions chapter ↗ The total GHG emissions went down by 7.5% in 2022, compared to 2021. Both scope 1 and 2 saw an increase of 3-4%. Elkem's scope 3 upstream emissions were reduced by 18%. The reduction was mainly explained by sourcing from lower carbon suppliers, in combination with purchasing fewer raw materials externally. The Elkem climate roadmap Supplying the green transition The corporate strategy is to take green leadership, by being in the forefront of reducing emissions and focus on markets and products that are essential in the green transition. Silicon metal is listed by the EU as a critical raw material th is economically and strategically important to the Europea market. These raw materials are essential for nearly all electronics, health care and green technologies and will be pillars for enabling the transition to a low carbon society, both in Europe and the rest of the world. The demand for Elkem’s products is driven by global megatrends such as sustainability and clean energy demand growth, such as solutions for the electriﬁcation of transportation, increased energy storage and batteries, reducing emissions and energy consumption, and the replacement of oil-based materials. Elkem aims to continu growing the supplies of advanced materials to global markets by 5-10% per year. In the 2021 climate roadmap, Elkem launched an ambition to grow the supplies of advanced materials to the green transition markets by 5-10% per year. Elkem is currently working to deﬁne the KPIs, to be able to track this ambitio towards 2031. In addition, the company has worked on understanding the green criterias of the EU Taxonomy that are relevant for Elkem. This will become mandatory reporting from 2023. Elkem's statement on the EU Taxonomy for sustainable economic activities are available on page 156 in the annual report. ↗ at n e n Vianode is built upon technological advancements and decades of industrial experience in Elkem and was formally established in 2021. Vianode’s range of synthetic graphite products oﬀers unique performance characteristics and are produced with signiﬁcantly lower CO 2 emissions than today's standard battery materials – supporting the ambitions of leading battery cell and automotive manufacturers. More information on Vianode. ↗ In 2022, approximately 45% of Elkem's revenue came from products that are EU Taxonomy eligible. The Elkem climate roadmap Circular economy 2022 was a milestone year for the development of Elkem’s circular economy with a strong emphasis put on our current projects and the launch of new promising ones. Of note last year was also the consolidation of a global roadmap that has both the establishment of a common circular mindset and the development of our open innovation ecosystem on circular economy at its core. Highlights from 2022 → Elkem developed a methodology, materialised by the “circular economy wheel” below, which we use to position our current and future products, processes and technologies. Placing eco- design at the heart of this wheel and as a preliminary step to a virtuous circular economy will enable us to better manage the end of life of our products. → Elkem strongly believes that anyone, regardless of their position or ﬁeld of expertise, can contribute to the development of a circular economy. In 2022, a global innovation contest was held internally, fuelling projects and building common understanding of circular economy. The four winning ideas, amongst more than a hundred, beneﬁt from a strong sponsorship and recognition from the corporate management. The success of this competition is not only acknowledged by the number of new projects, but also by the way people with diﬀerent backgrounds got together to impact the future of the company. Elkem launched collaborative projects to develop our own network of competences and to develop new solutions faster ﬁtting both with regulations and customer needs. These collaborative projects involve partners all along the value chain with the aim to make this ecosystem more circular, allowing us to produce goods and service in a sustainable way by limiting the excessive consumption of resources and the production of waste. → Safe chemistry Technology contributes and regulations to at least one of the life cycle criteria Be cautious of 12 principles of impact transfer green chemistry Design Ensure a new product has lower impact than the previous one Processing Transport and Distrubution End of life Handprint Raw materials Figure: The circular economy wheel ESG management People and organisation A strong and consistent company culture, fair treatment of all employees and a safe, inclusive and motivating working environment are the foundations for making Elkem an attractive employer for our current and future employees. Continuously developing the organisation to enable strategy implementation, as well as systematic competency development and performance management of each employee, are key to ensure successful and sustainable growth of the company. Commitment Elkem is committed to empowering people to become experts in their own areas of responsibility through involvement, respect, continuous improvement and precision. Targets → 100% of employees have an annual development discussion → 100% of the mandatory training is completed by the assigned target group Key events 2022 → Global employee engagement survey → Turnover rate: 6% → Employees that have had development discussions: 89% Key risks × Ability to attract necessary resources – both the competencies and necessary capacity – in the remote locations of the Elkem plants × Lack of development opportunities and follow-up may result in demotivated employees and a high turnover rate × Restrictions on travelling due to the pandemic have made it challenging to exchange best practises and create good teamwork across entities Key opportunities → As an attractive employer and industry leader worldwide, Elkem can retain and attract highly skilled and motivated employees that support the shared strategic goals → Global operations oﬀer exciting development opportunities to all employees → Further development of good leaders oﬀers the opportunity to enhance employee performance globally Our people are Elkem’s most valuable asset. Elkem's human resource strategy, the way the company is organised and the continuous investment in developing our people are the vehicles to deliver on the business strategy. Focusing on leadership development at all levels in the organisation, strengthening the culture fundamentals and the Elkem Way, ensuring critical competencies where and when they are needed, as well as investing in the individual development of all employees are the main building blocks of the HR strategy. Elkem oﬀers a wide range of internal training, which is continuously evaluated and further developed. The increased use of digital channels enables faster and broader roll-out of competency development. Leadership development Elkem provides three global standard leadership development programmes targeting ﬁrst level, mid-level and senior level leadership accordingly. Our ﬁrst level leadership programme, referred to as Elkem’s Leadership Essentials program, targets middle management, team leaders, shift leaders, new leaders or any employees with personnel responsibility. It aims to create a one Elkem culture by developing a baseline of eﬀective people leaders in alignment with our purpose, values and mission. At the second tier, we oﬀer a mid-level leadership programme, Elkem Leadership programme targeted to our high potentials and more senior leaders. The programme runs for one year and consists of ﬁve modules aiming to increase knowledge about Elkem through working in interdisciplinary team projects. Elkem’s Leadership program also oﬀers the participants individual coaching and evaluations. Candidates to this programme are nominated from Elkem worldwide and ﬁnally selected by the corporate management of Elkem. At the third level of leadership, we provide Elkem Excellence Program. This programme is oﬀered to the most senior level of leaders in Elkem, who have already concluded the Elkem Leadership program, leaders at division management level and leaders leading other leaders. Competency development All Elkem internal training oﬀering is available for the employees on the company intranet Learn-pages. The information displays the available training oﬀering to the diﬀerent groups of employees ranging from the operators to the diﬀerent groups of white collar employees. As part of the annual development discussion (DD) the individual development plans, including mandatory training, is discussed and reviewed with each employee. The mandatory training categories include: → Compliance → HSE → Intellectual Property → Technical safety → Leadership development → IT security → Elkem Onboarding Program (EOP) We also oﬀer a wide range of optional trainings in the following categories: → Digital → EBS → Innovation → IP → Legal We aim, through easy access and a wide availability of courses to serve and engage our employees to take charge of their own learnings and to continuously grow and develop. Development discussion (DD) Every employee shall know their targets and plan together with their leaders what support and resources they need to meet them, to develop further and perform well. All employees are expected to contribute to a performance culture that drives continuous improvement. It shall be safe for all employees to challenge the status quo to drive a culture of innovation. This requires that all employees receive regular constructive feedback on their performance and contribution to the working environment. At Elkem, this is done through formal and informal channels, starting with the individual's job description and the DD, where individual annual targets are agreed upon, performance is discussed, and mutual feedback is given. This is done to support changing work priorities aligned with strategic goals. As part of the DD, the leader also receives feedback from the employee to enhance both individual performance and cooperation. Elkem encourages employees to take on new challenges and responsibilities to develop themselves and to contribute to the company's culture of sharing and cross-divisional, -functional and -geographic learning. Elkem oﬀers good conditions to support employees on such development steps if a change includes a relocation. Elkem's global target is for 100% of employees across all locations and levels to have an annual development discussion with their leader. In 2022 89% of all Elkem employees had their DD, the highest percentage in the past ﬁve years. We continue to work systematically towards our target of 100% and are pleased with the development in 2022. People policy and survey Elkem's global people policy establishes the principles for the people processes and the company's obligation to handle employment matters consistently and supporting the employees throughout their employment with Elkem. The people policy aims to cover key material issues for employees globally. In 2022, Elkem conducted its ﬁrst global employee engagement survey. The survey was well received by the employees and revealed a high level of engagement globally "above industry benchmarks". This allows the company to focus on maintaining the topics with good feedback from the organisation, and in the spirit of continuous improvement, establish good programmes for the areas the employees pointed to as improvement areas. Elkem Business System (EBS) – our common culture EBS is Elkem's business system and leadership philosophy, which embodies our common culture, language and provides working- and continuous improvement methods for all employees. EBS is a key to achieve operational excellence across the value chain. Building on our values; respect, involvement, precision, and continuous improvement, EBS is the foundation of Elkem’s company culture. At the heart of EBS is the dedication to involve all employees in improvement work and Elkem takes great pride in empowering our employees as experts in their own responsibility areas. Elkem considers delegated and decentralised decision- making to be a strength and key element of its business culture. The EBS principle of empowering people is key to understanding Elkem’s view on labour rights and employee involvement. Elkem seeks to achieve increased eﬃciency in the product value chain through the people value chain. Elkem employs a team-based structure with orderly working and wage conditions, providing a wide range of opportunities for personal development. Developing a shared language and culture takes time. When Elkem establishes or acquires new entities, the priority is always to implement our HES and EBS standards and systems, regardless of the location or previous organisation of the site. Some Elkem sites are at the beginning of this journey, while other entities have come a long way. EBS assessments to promote involvement and continuous improvement include: → A corporate EBS team assesses all sites biannually through observations and discussions to evaluate the progression, involvement, and improvements and encourage further development. → The assessment's topics are divided into three main parts: i) Daily operations related to work teams and daily management, 5S visual management and problem-solving, ii) systematic improvements related to ﬂow, control, and capability and iii) sponsorship, strategy, learning and competence development. → Across all levels, Elkem's leadership focuses on involvement, knowledge and information sharing and on the management's commitment to empowering their employees through continuous improvement and shared goals and tools. During the last years, Elkem has expanded its presence globally, particularly in China. Elkem’s previous experience from China shows that cultural and maturity diﬀerences have not prevented the implementation and development of EBS. We are continuously hiring and training new local employees and conducting assessments to ﬁnd the gaps and improvement areas to further develop our organisation. Flexibility and work-life balance To reach Elkem's overarching goals, the company needs to develop an organisational culture based on participation, teamwork, and people empowerment. Elkem is committed to providing ﬂexibility in working hours and -location in accordance with local laws and regulations. Such ﬂexibility can be oﬀered by the company at the employee’s request, provided that it does not in any way prevent or hinder the employee in performing his/her job tasks. Across the whole company, working terms must allow employees to combine working and family life. Elkem recognises that a better work-life balance can improve employee motivation, performance, and productivity, and reduce stress. Therefore, the company wants to support employees to achieve a better balance between work and their other priorities. Products World class quality products require world People class performers Figure: The double value chain Turnover Elkem strives to retain existing employees and attract new ones. The turnover rate indicates the attractiveness of Elkem as an employer and how well Elkem manages to keep its employees. The total turnover rate in the Elkem group was 6% in 2022, down from 8,4% in 2021. The female share of leavers was 27% and of new hires the same level. Elkem is working systematically to increase the female share, but that has proven to be challenging. In 2022, in Norway, the share of female applicants to all open positions was 24%. Changes to the organisation The required number of people and competencies in diﬀerent areas of Elkem's business can both increase and decrease for various reasons. When it is necessary to reduce the workforce, the process shall always comply with relevant legislation and agreements. Furthermore, the management shall involve employees and their representatives early to run a transparent and constructive process, both for the employees who leave the company and those who remain. Therefore, change management is an essential part of leadership development activities in Elkem. Contractors and temporary hires All Elkem employees shall have a written employment contract or other written documentation of employment that complies with local legislation. This also applies to contractors and temporary hires. Elkem invests in people and thus aims to oﬀer permanent employment and limit non-regular employment. However, during peak times, contracted and temporary work can be considered for time-limited projects or projects in need of specialised, non-core competencies. Elkem is committed to fair compensation and priority rights to potential permanent employment in such cases. Contractors are subject to the exact same HES requirements as our own employees, and all contractors receive full training and follow-up to ensure that they work in a safe and healthy environment. The number of contracted employees (non-Elkem employees working full-time for more than three months as a substitute for hired employees) at Elkem was 331 in 2022. KPIs Metric 2022 2021 2020 Comment Total employees Number 7 372 7 074 6 856 Europe Number 2 953 2 898 Asia Number 3 632 3 433 America Number 758 716 Africa Number 28 27 Turnover rate % 6% 8% 6% -2% Female share of new hires % 26% 27% 26% Female share of leavers % 27% 23% 23% +4% Blue collar / operators % 59% 55% 65% White collar / staﬀ % 41% 45% 35% Total contractors Number 331 433 420 Europe Number 125 159 115 Asia Number 171 238 265 America Number 35 36 40 Africa Number 0 0 0 Temporary hire rate (%) to permanent employment % 5% 7% 6% -2% Part time workers rate (%) to permanent employment % 1% 6% 3% -5% Development discussions % 89% 78% 85% +11% The colour indicates a positive or negative development year on year. ESG management Sustainability and ESG governance Elkem manages a complex value chain. All parts of the value chain, such as the supply of raw materials, access to highly competent employees, and the timely delivery of products to customers impact the ability to reach the company’s strategic goals. The company strategy of dual- play growth and green leadership leans on a strong ESG (environmental, social and governance) governance. There is an increased expectation of companies to manage their value chain in a responsible manner and to mitigate sustainability-related impacts through the value chain across environmental, social and governance aspects. In particular, the world needs businesses to take responsibility to reduce their total carbon footprints to succeed in the transition towards a more green and just society, governed in an ethical way. Materials should be recyclable, long-lasting, and produced with low greenhouse gas (GHG) emissions. Materials should also be produced responsibly and ethically, with a precautionary approach to both the people and the environment. To achieve this, society needs more innovative and eﬃcient solutions. Increasing demand for low-carbon technologies and products, such as solar panels, batteries and electric vehicles, is impacting and increasing demand for several of Elkem’s product segments within silicones, silicon, and ferroalloys. The board ESG and sustainability are integrated into Elkem’s overall business strategy, and the responsibility sits with the collective board. ESG related risks and opportunities are also part of board meeting agendas. The board follows up and reviews the group’s ESG strategy on an annual basis as part of the regular strategy process. In addition, the board of directors receives information about the company’s ESG performance and projects through regular reporting and board meetings. In 2022, the board of directors assigned the responsibility for preparatory work related to sustainability and non- ﬁnancial reporting to the audit committee. The audit committee prepares the board of directors' follow-up and review and internal control of the sustainability and non-ﬁnancial reporting. The committee also supervises sustainability-related risk management and the company’s sustainability ratings performance. The audit committee works to ensure that the board has good procedures and internal control over sustainability and non-ﬁnancial reporting. The board shall evaluate its performance, competence and expertise annually. As part of this, the board shall evaluate the composition and the way its members function, both individually and as a group. The board shall evaluate its performance and work, including agenda, topics, and preparations for board meetings. The board shall also evaluate its competence in relation to the existing and new objectives and requirements set out for its work. Management and operational level The Chief Financial Oﬃcer (CFO) is the most senior management position responsible for ESG related topics. The CFO is responsible for managing the ESG steering committee, the management body responsible for ESG, which consists of members from the corporate management. The ESG steering committee reports to the Chief Executive Oﬃcer (CEO). Elkem’s business strategy and corporate governance policy are approved by the board of directors and provide the overall framework for the group’s strategic direction and governance structure. Governing documents Elkem´s governing documents deﬁne the principles for how the group’s business should be conducted. The foundation for Elkem´s corporate governing documents is the code of conduct and the Governance policy. The code of conduct provides a framework for what Elkem regards as responsible conduct. It sets clear ethical standards in critical areas and explains how Elkem representatives are expected to conduct themselves when acting on behalf of the company. The code of conduct is supported by several group policies, procedures, and supporting documents. Group policies are approved by the Compliance Committee. These provide directions for common objectives, commitments and behaviours, deﬁne the 36% 50% 3 women in the independent employee board directors representatives ESG and sustainability governance structure SVP SVP Human Chief Financial SVP SVP Strategy SVP SVP Silicon SVP SVP Green Technology Resources Oﬃcer Innovation & Business Silicones Products Carbon Ventures & and R&D Development Solutions Digital VP HSE ESG oﬃce General meeting Board of directors Audit committe Chief Executive Oﬃcer * Functions marked in green are members of the ESG steering committee principles and commitments for the governing processes within Elkem, and allocate roles and responsibilities of the group’s functions. The group governing documents contain requirements that are mandatory for all Elkem group companies and operational units, regardless of division and geography. To ensure that commitments for responsible business conduct are embedded in all business activities and relationships, all company governing documents must be consistent with the code of conduct. Over the past year, Elkem has invested signiﬁcant eﬀorts in restructuring and improving the group governing documents and in making sure that they are easily available to all employees by publishing them in a common document library available on the Elkem intranet. A global information campaign towards all employees uses intranet articles, direct email and leadership webinars to ensure a baseline knowledge of the governing documents. Simultaneously, the owner of each policy prepares an implementation plan for their respective areas. These plans are tailored to speciﬁc target groups determined by roles and responsibilities. Several of Elkem’s policies and procedures are available online under “Governing documents and tools”. ↗ Elkem adheres to the principles of “the Norwegian Code of Practice for Corporate Governance” issued by the Norwegian Corporate Governance Board (“NUES” or the “Code”). The objective of this Code is to ensure that companies listed on regulated markets in Norway practice corporate governance that regulates the division of roles between shareholders, the board of directors and executive management more comprehensively than is required by legislation. Further information about our corporate governance can be found in the bord of directors’ report on corporate governance in the annual report. ↗ Remuneration The CEO and the corporate management have performance-based compensation based on predeﬁned metrics. The metrics are deﬁned according to the areas of responsibility. The performance-related short-term incentives (STI) are limited to 100% of the base salary for the CEO and 50% of the base salary for the corporate management. The Company has the option of reclaiming, in full or in part, awarded short-term incentive (STI) remuneration in certain situations (“claw back”), including where incentive remuneration was awarded or paid out based on information subsequently proven to be incorrect. The clawback provision was implemented in 2022. The metrics for the CEO for 2022 include: → Health, safety, and environmental performance with target of zero major incidents with high severity consequences. → Zero substantiated misconduct cases with a potential of causing ﬁnancial or reputational harm to the company. → Deﬁne the roadmap of 39% reduction of the carbon footprint of main products within 2031, in line with the Elkem climate strategy and deliver on the 2022 targets. The corporate management bonus for 2022 was linked to the same criteria as the CEO metrics, focusing on compliance and sustainability. Criteria also include the employees’ completion of compliance training to drive and further develop good compliance culture and to avoid substantiated misconduct cases. For more information about the remuneration management, please see the board of directors' report on salary and other remuneration for leading personnel for 2022. The Elkem house The Elkem house illustrates the building blocks of Elkem’s business model. Our mission and values represent the foundation to support our working practices, our culture and how we work. Our mission, values, and working practices are interlinked and support our corporate strategy. Risk management and materiality assessment Risk management process The board of directors has the ultimate responsibility for ensuring that Elkem has appropriate risk management systems that reﬂect the extent and nature of the group’s activities and value chain impact. The board and management regard risk management as a key part of Elkem’s corporate governance structure, which is important to create trust and to enhance value creation. This includes ESG and climate-related issues. Evaluating ESG and climate-related risks and opportunities has become an increasingly important part of Elkem’s overall risk management processes. These factors impact strategy, ﬁnancial conditions, and all aspects of Elkem’s value chain, from raw materials to ﬁnished products. Elkem conducts an annual risk mapping process based on interviews with divisions and corporate staﬀ. The purpose is to thoroughly understand the group’s risk proﬁle. Each risk is evaluated based on internal and external conditions and takes into consideration the deemed likelihood, estimated ﬁnancial impact, time horizon and possible mitigating activities. The ﬁnancial impact is based on how a risk factor may impact Elkem's EBIT, cash ﬂow and equity position. In addition, the frequency or likelihood for each risk is evaluated. A frequency of more than 5 years or a probability below 20% is deﬁned as low, between 1-5 years or a probability of 20-60% is deﬁned as medium and more than 1 per year or a probability of more than 60% deﬁned as high. ESG approach – continuous improvements Strategy Map sustainability/ The main coordinator of ESG in the organisation is the ESG areas that are ESG oﬃce. The ESG oﬃce reports to the ESG steering important to our business committee and collaborates closely with business and stakeholders, and prioritise an annual list of units and divisions, to review and advise on relevant improvements. sustainability and ESG issues – to set targets and Performance Targets improve systematically. As part of the Elkem Business Evaluate performance to Anchoring with those responsible in the System (EBS), it is our philosophy and belief that what be able to map, adjust and prioritise again. organisation, set targets and gets measured gets managed. An essential part of develop plans to improve. this work is to advise and improve key performance indicators that are reviewed by corporate management. Reporting Action Track progress in Corporate ESG accordance with targets functions support and set, and communicate advise line functions in transparently. improvement work. Corporate strategy Working practices: EBS: Elkem HSE: Health ESG: Environmental Business Safety Social System Environment Governance Values: Continuous Respect Involvement Precision improvement Mission: Our mission is to provide advanced silicon-based materials shaping a better and more sustainable future, adding value to stakeholders globally Culture tion ounda F Figure: The Elkem house Climate risk The assessment of climate related risks and opportunities is an integrated part of Elkem’s risk management processes. Elkem follows the framework from The Task Force on Climate-Related Financial Disclosures (TCFD) and includes an assessment of both transitional and physical climate risks. The risk management processes considering climate risks are not only limited to substantive risks. Risks that today are perceived to have limited ﬁnancial impact or frequency could increase going forward due to climate change. In particular, such risks include acute and chronic physical risks such as extreme weather events like ﬂooding, storms, sandstorms and high temperatures. In the past, such events have not had substantial ﬁnancial impact on the company, but Elkem is monitoring such eﬀects to evaluate the possible impact on future raw material accessibility, transportation and pricing. A complete risk overview can be found in the risk overview in the annual report. ↗ And an updated TCFD report for 2023 is available online. ↗ Materiality assessment changes Elkem followed the principles, requirements and guidelines of the GRI 2021 Standards to identify the material topics for Elkem’s ESG report 2022. To ensure best practice it has been necessary to conduct a new impact-based materiality assessment. In the new GRI framework impacts are deﬁned as the sole parameter to assess materiality. The aim is to facilitate objective and balanced reporting. The process of identifying Elkem’s most signiﬁcant impacts started with a mapping of all production locations across the three business divisions: Silicones, Silicon Products, and Carbon Solutions. Diﬀerences in the value chains between these divisions imply diﬀerent potential impacts. Activities and business relationships for each business area were mapped out. This information was then used to establish Elkem’s sustainability context on a local level, as well as on a global level. Guidance and input were provided by relevant stakeholders and experts. In addition, independent research on sectors and locations was used as the basis for the identiﬁcation and ranking of impacts. The impacts were evaluated based on acute or potential impact, scale and scope of severity and likelihood. Elkem aknowledges that there are inherent risks connected to its operational activities, due to the sector and geographical locations that the company operates within. The identiﬁcation and assessment of potential impacts has been made based on general risks that are relevant to Elkem’s operations. Elkem’s approach and actions to limit the potential risks have not been taken into consideration. The impact assessment resulted in the following material topics: → CO 2 and other GHG emission reductions, including energy management → Local emissions to air → Biodiversity → Water management → Waste management and circularity → Health and safety on site → Human rights, including labour rights → Environmental due diligence in the supply chain → Social due diligence in the supply chain → Responsible economic practices → Product governance, including chemical safety → Supplying the green transition The positive and negative impacts comprised in the material topics are the ones that were deemed the most signiﬁcant for Elkem’s global operations and value chains. The main focus will be on impacts directly connected to Elkem’s own activities, because Elkem can manage these directly. However, Elkem also acknowledges potential negative impacts throughout its value chains. Consequently, ‘’Social due diligence in value chain’’ and ‘’Environmental due diligence in value chain’’ were established as material topics in 2022. Civil society Investors and Political shareholders authorities Employees Regulatory and unions authorities Customers and suppliers Figure: Key stakeholders More information on stakeholder issues and ways of dialogue, see this article on our website ↗ E Environmental Social Governance Environmental Introduction With a fully integrated value chain from raw materials and production of upstream silicon to downstream silicones, it is vital to manage the environmental footprint from cradle to grave. It is Elkem’s target to minimise the negative environmental impact throughout the value chain. Converting quartz to silicon is a high-temperature smelting process that consumes vast amounts of energy. The production process uses carbon sources like fossil coal, charcoal, and wood chips as a reductant in the chemical conversion, releasing emissions of CO 2 , NO x (Nitrogen Oxides), SO 2 (Sulphur Oxides) and dust. Reducing our CO 2 emissions is of high priority and strategic importance. In addition, processing silicon into silicones involves substantial quantities of wastewater treated before discharge to remove residues such as Chemical Oxygen Depletion (COD) substances from the process. Reliable water management is becoming increasingly important, and water related challenges vary strongly across Elkem’s value chain. Moreover, the impact on nature and the management of biodiversity have become increasingly important issues for the process industry, as for the rest of the world. Although managing the impact on life on land and life under water is not a new area for Elkem, we are currently working to better understand how we inﬂuence the biodiversity threats. Environmental issues are managed and reported to the corporate management monthly and managed through the HSE (Health, safety, and environment) management system. All Elkem units are required to develop and manage their own HSE management systems in line with the corporate standard. All environmental impacts are identiﬁed and documented with measurements or calculations showing performance compared to governmental permits and/or internal improvement targets set by Elkem. Elkem considers waste streams to have value, either by reducing, recycling, or reusing and we work continuously to reduce waste across our operations. Today, Elkem is a leader in understanding the complexity of producing carbon products, silicon, and silicones. The company’s continued dedication to research and innovation makes our production even safer and more eﬃcient. The environmental topics material to Elkem are: → CO 2 and other GHG (Greenhouse Gas) emission reductions, incl. energy management → Local emissions to air → Biodiversity → Water management → Waste management and circularity Key highlights → Answered all three CDP disclosures for the ﬁrst time, securing two A-, Climate and Forests, and one B score, Water security → First time publishing a full scope 3 methodology report ↗ → First sustainability linked loan agreement, with product group carbon footprint as one of two KPIs Key KPI Metric 2022 2021 2020 Total CO emissions: Scope 1 + scope 2 + scope 3 2 Mill tonnes 10.74 11.60 10.27 Biocarbon share % 20% 22% 19% Product group carbon footprint CO e/kg 2 6.9 7.4 N/A product Energy consumption from renewables % 81% 84% 81% Waste re-used, recycled, or diverted from landﬁll % 70% 70% 67% Water consumption Megaliters 27 439 25 709 30 000 Environmental CO 2 and other GHG emission reductions Elkem is committed to taking a leading industry position in reducing fossil CO 2 emissions by increasing renewable carbon sources and developing innovative production processes. The total GHG emissions went down with 7.5% in 2022. Key events 2022 → Published scope 3 methodology report → Deﬁned baseline for Elkem’s product group carbon footprint (PGCF) → Established sustainability-linked bank facilities agreement for EUR 1 000 million with targets linked to reduction of CO 2 emissions → Included climate roadmap target into top management bonus scheme → Commissioned a pilot plant in Canada to produce biogenic reduction materials → Implemented a new sourcing strategy in China based on low carbon silicon metal for the silicones production Targets → Reduce absolute emissions in scope 1+2 by 28% by 2031 → Reduce the product group carbon footprint by 39% by 2031 Key risks × Carbon pricing and regulatory disharmony between countries and regions × Market demand for less carbon- intensive products × Restrictions on the use of biobased sources × Reputational risk with stakeholders if emissions are not reduced × Physical risk, in particular the risks related to heatwave, as well as risks related to extreme weather variability in the form of acute precipitation increases Key opportunities → Oﬀer products with a low carbon footprint → Resource eﬃciency → New market access and growing green demand A more comprehensive overview of the climate risks and opportunities can be found in the TCFD 2023 report. ↗ Key numbers 2022 Scope 1 Scope 2 Scope 3 Biocarbon share Product group carbon footprint 2.42 million tonnes 941 656 tonnes 7.38 million tonnes 20% 6.9 kg CO 2 / kg produced Commitment Elkem’s commitment is to develop the business in accordance with the Paris agreement, to limit global warming to well below 2°C and achieve the long- term commitment to be net-zero by 2050. Elkem will do so by reducing own emissions, growing its market share in the green transition, and enabling more circular solutions. Policies → The climate change commitment has its foundation in the climate roadmap and the HSE policy. Elkem’s corporate policies ↗ Elkem uses carbon sources as a reduction material in the production of silicon and ferrosilicon. Carbon sources such as coal, coke and biocarbon are key input factors in Elkem’s production and result in CO 2 emissions. The smelters account for about 70% of Elkem’s total scope 1 emissions. Elkem currently uses 20% biocarbon in the production to reduce fossil CO 2 emissions. As outlined in the climate roadmap, progress towards reducing emissions will be based on the increased use of biocarbon, the sourcing of materials with lower carbon footprints and changes in the power mix toward more renewables. Elkem is working on a detailed plan to implement these measures, including plant upgrades, biocarbon substitution, carbon capture and storage and sourcing strategy to realise our ambitions. Elkem reports the company’s scope 1, 2 and 3 emissions according to the GHG Protocol and deﬁnes the organisational boundaries on an operational control basis. All CO 2 emission numbers are CO 2 equivalents if not stated otherwise. Scope 1 The scope 1 emissions in Elkem mainly come from the production processes, and account for about 95%. The remaining 5% are fuels and methane emissions. Most of the direct CO 2 emissions come from the smelting processes (1.7 million tonnes CO 2 e), where carbon (C) reacts with oxygen in quartz to produce silicon/ferrosilicon. GHG emissions are calculated based on third party certiﬁcates of carbon content in raw materials (coke and coal). CO 2 emissions from other sources, including heating and fuel, are calculated based on standard conversion factors in accordance with the EU Emissions Trading Systems (EU ETS) Guidelines. The total scope 1 emissions were 2.42 million tonnes in 2022. Since 2017, Elkem has increased production using seven additional smelting furnaces: two in Norway, four in China and one in Paraguay. Except for the furnace in Paraguay, all these expansions have come from acquiring existing capacity. The furnace in Paraguay only uses biocarbon as a raw material reductant, making its operations (scope 1 + scope 2) close to carbon neutral. The historical increase in CO 2 emissions is also connected to the acquisition of upstream silicone activities in China, which uses a coal-ﬁred boiler to produce steam used in the production process. The increase from 2021 is due to volume eﬀect. Scope 2 Elkem's industrial processes are power-intensive, and electricity consumption is fundamental for operations. Scope 2 emissions are deﬁned as indirect GHG emissions associated with the consumption of electricity, steam, heat, or cooling. The electricity emission factors used in the reporting are based on data provided by the International Energy Agency for 2020. These data are available on a national level only. Due to the large size of the power system in China and the considerable regional diﬀerences in CO 2 intensity and regional diﬀerences in the plans to decarbonise the power system, Elkem uses data for the regional emission intensity for China. The emission factors for China are based on data provided by an external consultant. Elkem's scope 2 emission in 2022 was 941,656 tonnes, an increase from 901,059 tonnes in 2021. The increase is mainly due to increased production volumes in China, where the power mix has higher CO 2 emissions compared to other places Elkem operate. Scope 3 Scope 3 is the term used to describe the indirect GHG emissions resulting from activities in the value chain, but outside of our operational control, according to the GHG protocol. There are 15 categories of scope 3 emissions. The full scope 3 emissions were reported for the ﬁrst time in the 2021 report. Environmental CO 2 and other GHG emission reductions Elkem has expanded our reporting to ensure we capture the largest and most material indirect sources of GHG emissions in our value chain. The two largest categories identiﬁed are “purchased goods and services” and “end of life treatment”. Scope 3 emissions were 7.38 million tonnes in 2022, a 12% reduction from 2021. The split between the scope 3 categories Scope 3 upstream Scope 3 downstream Purchased goods and service Capital goods Transport Other End of life treatment Use of products s Biocarbon As the use of carbon sources are essential to the production of silicon and ferrosilicon, it is critical to increase the share of biocarbon to reduce fossil CO 2 emissions. Based on current technology and availability of carbon sources, the total emissions will vary year by year, based on production volumes. To reduce the fossil CO 2 emissions, Elkem's main strategy is to replace fossil coal with biocarbon in our smelting operations. The target is to increase the biocarbon share at the smelters to 50% by 2031. The biocarbon share of Elkem's CO 2 emissions was 20% in 2022, a small decrease from 2021. However, the runrate varies a lot (discarding Paraguay that run with more than 95% at all times), and at some of the smelters it was as high as 45%. Undersupply of biocarbon is a key challenge. Elkem will continue the work on ﬁnding sustainable and ﬁnancially viable biocarbon sources. Each of the plants has developed a roadmap to reach the 2031-goal and will report on their progress. To secure suﬃcient supply, Elkem is developing new technologies for biocarbon production in Canada, based on residues from sawmills and not on virgin timber. Elkem is also actively involved in new technology development and industrial partnerships. It is a prerequisite for Elkem that renewable sources comply with our environmental and social requirements. Elkem reported to the CDP Forest for the ﬁrst time in 2022, and was rewarded with an A- score, highlighting the focus on developing sustainable sourcing of biocarbon and preventing deforestation. LCAs Life Cycle Assessments (LCAs) are being performed to quantify the environmental impact of our products. LCAs support Elkem in reducing its environmental footprint even further by providing an accurate overview of the environmental impact of the operations. Furthermore, these assessments increase product transparency to assist our customers in their sustainability transformation. In 2022, Elkem conducted third party assessments of the environmental impact of the products produced at some of the major plants. These assessments have been undertaken on a cradle to gate basis, i.e. covering the manufacturing process of raw materials until the products reach our plant's gates. Elkem will continue to perform LCAs on additional major product groups in 2023. Product group carbon footprint (PGCF) Elkem has a target of reducing the absolute CO 2 emissions by 28% by 2031 (scope 1+2), despite expecting its business volumes to rise in the same period due to its strong product ﬁt with the green transition. Accordingly, the company has set a target of reducing the carbon footprint of its products, deﬁned as reducing the Product Group Carbon Footprint (PGCF) by 39% by 2031. Although the absolute CO 2 reduction is imperative, the relative reduction in Product Group Carbon Footprint is also relevant in assessing the group’s performance. Elkem has deﬁned two main product categories in the carbon footprint reduction target, representing Elkem’s main product segments with 93 % of total operating income in 2021 (the baseline year). The scope of the PGCF includes i) upstream production of silicones (i.e. silox) and ii) tapped silicon and ferrosilicon metal, deﬁned as CO 2 e (scope 1+2+3 to gate) per kilogram of product produced. Silicon produced by Elkem in Europe has a low CO 2 footprint compared to silicon delivered by other producers, mainly due to: → Renewable hydro-power electricity. → The use of bio-based reductants. → Good operational performance with high yields, eﬃcient capacity utilisation and limited waste/oﬀ- spec volumes. The baseline year of the PGCF target has been set to 2021. Silicones and Silicon Products business areas are relatively similar in terms of volume and operating income and the average PGCF is thus calculated as the arithmetic average of the two. CO2 CH4 N2O HFCs PFCs SF6 NF3 Downstream activities Reporting company Upstream activities Purchased goods and services Upstream leased assets Scope 3 Indirect Employee commuting Business travel Capital goods Scope 2 Indirect Purchased electricity, steam, heating and cooling for own use Company facilities Company vehicles Scope 1 Direct Scope 3 Indirect Upstream leased assets Franchises Use of sold products End-of-life treatment of sold products Investments Processing of sold products Fuel and energy related activities Upstream transportation and distribution Downstream transportation and distribution Waste generated in operations Figure: GHG scope deﬁnition KPIs 2021 Product group Weight 2022 (baseline year) Avg. silicones PGCF 50% 8.8 10.0 kg CO e/kg 2 Avg, silicon alloys PGCF 50% 5.0 4.9 kg CO e/kg 2 Elkem average PGCF 100% 6.9 7.4 kg CO e/kg 2 Metric 2022 2021 2020 Comment Scope 1 – direct emissions Mill tonnes 2.42 2.34 2.39 +3% Scope 2 – Indirect emissions, electricity use, location based Mill tonnes 0.94 0.90 0.91 +5% Scope 2 – Indirect emissions, electricity use, market based Mill tonnes 2.64 2.77 2.64 -5% Scope 3 – indirect emissions, total Mill tonnes 7.38 8.35 6.95 -12% Upstream Mill tonnes 4.06 4.92 3.72 -18% Downstream Mill tonnes 3.33 3.43 3.23 -3% Biocarbon share % 20% 22% 19% -2% All numbers in the above table are CO equivalents. 2 The colour indicates a positive or negative development year on year. Environmental Energy management Energy eﬃciency and sustainable sourcing of energy is of utmost importance to ensure security of supply, while at the same time reducing Elkem's global greenhouse gas footprint. Key events 2022 → Electricity consumption based on renewable energy: 81% → Approval and project start of the Phoenix project in China that will give a substantial reduction in energy intensity for the production of silicones Key risks × Changing regulatory framework, permits and requirements × Volatility of energy prices Targets → Energy recovery increase year on year → Energy intensity improvements on main products → Improved energy eﬃciency in facilities and equipment Key opportunities → High percentage (more than 80%) of renewable energy use → Public grants for implementation of some energy eﬃciency measures → Continued roll out of renewable energy in China and Europe Commitment Contributing to the green transition by providing products with low carbon footprint, achieved by reducing energy consumption and increasing share of renewable power. Policies Elkem uses an Energy management system at all energy intensive sites. Elkem’s corporate policies ↗ In 2022, we witnessed events that indirectly and directly may impact Elkem’s business and the energy supply to the production. In EU; The war in Ukraine combined with several other factors led to a constrained energy supply situation. Elkem naturally takes the responsibility to reduce the energy intensity, in line with our previous engagements. → The French government responded to the situation by launching a plan to reduce the energy consumption of France by 10% within 2024. For the chemical industry this implies intensifying the work on energy eﬃciency. In Elkem France, the major energy consuming site, Elkem Roussillon, has ISO 50001 energy management certiﬁcation since 2016 and has considerably reduced its energy intensity over the years. The eﬀorts at all our French sites are now being intensiﬁed. → Elkem’s operations in other EU countries are considerably less energy intensive, but are also increasing the eﬀorts to reduce energy consumption. For instance, the Elkem site in Lübeck is ISO 50001 certiﬁed. In China: The Chinese government launched its 14th ﬁve-year plan for the period 2021-2025 with a target of reducing energy intensity (energy consumption per GDO) by 13.5% by 2025 as compared to 2020. This translates into requirements for Elkem’s Chinese production sites to reduce their energy intensity correspondingly. Parts of Elkem’s value chain are highly energy intensive, with silicon, ferrosilicon and foundry alloys being produced in high temperature electric arc furnaces. Elkem consumes around 6.5 TWh of electricity per year, and in 2022 about 81% of this electricity was produced from renewable sources. As the percentage is already very high Elkem does not have quantitative targets to further increase it. Elkem does however expect the availability of renewable energy in China to increase substantially in the coming years, which will enable the company to move more of our current Chinese power base to renewable solutions. Elkem's three main targets within energy are a. improving the energy eﬃciency of existing facilities and equipment, b. reducing the energy intensity of main products, and c. increasing energy recovery from processes that generate surplus heat. Elkem was an industrial pioneer in the utilisation of waste heat, with the ﬁrst energy recovery system on a silicon smelting furnace being installed already in the 1970s. Recovered heat from smelting furnaces can be utilised as hot water for district heating, steam for other production processes and to generate new electricity. Electricity is sold back to the grid while hot water and steam are used both internally and externally to supply other companies and communities in the vicinity of each plant. Elkem’s commitment to improving our energy footprint is part of our general commitment to minimise the environmental footprint, as stated in the Elkem General policy. The HSE management system requires all units to implement energy management and to report on consumption, recycling and deviations while working actively towards our targets. At the corporate level Elkem also has an environmental manager and a senior corporate energy specialist coordinating improvement eﬀorts. Environmental certiﬁcation is part of Elkem's eﬀorts within energy management. All applicable sites are ISO14001 certiﬁed either individually or with umbrella certiﬁcation, and it has been decided to initiate energy management ISO50001 certiﬁcation at ﬁve plants in 2023. All environmental deviations and environmental indicators including those that are energy related are registered and followed up in the company’s reporting and deviation management system Synergi. Energy consumption Total gross electricity consumption in Elkem in 2022 was 6,542 GWh, the same level as 2021. Most of this change is related to increased production. About 80% of the total gross electricity consumption is based on renewable power Environmental Energy management production. Except for one smelter in China, all smelting furnaces in Elkem run on renewable electrical energy. In addition to electrical energy, Elkem also consumes approximately 1.4 TWh of other types of energy for internal vehicle operation and heating/cooling of facilities and processes. Most of this is fossil-based energy. Elkem does not have an overall target to reduce its total energy consumption, due to the growth strategy focused on increasing the production and availability of materials that are essential for the green transition. Elkem’s targets therefore focus on using our energy base as eﬃciently as possible and thereby reducing the energy intensity of the products. Energy recovery Elkem has a long-term strategy to increase energy recovery annually as part of its climate programme. Most of Elkem's major production sites have production processes that generate surplus heat with high enough temperatures to be recovered. This heat can be used to generate new electricity for the grid, as well as steam or hot water for internal or external use in production or as district heating. The potential for energy recovery has been mapped at all applicable sites and energy recovery has already been implemented, including large oﬀgas boilers at four smelters, generating new electricity and steam. The latest addition came online at the Elkem Salten plant in 2021 increasing the total recovery capacity by 270 GWh annually of electrical energy, equal to the consumption of more than 15,000 Norwegian households. Globally, a total of 892 GWh of heat and electricity were recovered from Elkem’s plants in 2022, equal to about 55,000 Norwegian households’ annual electricity consumption. This represents 11% of total energy consumption, a decrease from 13% in 2021, due to lower production at some major facilities equipped with energy recovery. Energy eﬃciency As part of their energy management eﬀorts, Elkem sites are required to have updated energy inventories showing speciﬁc consumption and the potential for improving eﬃciency, thereby reducing consumption and cost. One example of this is replacing old, ineﬃcient electrical motors with new eﬃcient motors with variable frequency drives. Other examples of important projects to improve energy eﬃciency can be found at Elkem Xinghuo where old ineﬃcient coal boilers used to generate steam for the production process are being replaced with new co- generation technology that produce both steam and electricity with a substantially lower consumption of coal. The second project is a major expansion of silox capacity with signiﬁcantly lower energy intensity. KPIs Metric 2022 2021 2020 Comment Energy consumption – electricity GWh 6 542 6 536 6 399 0% Consumption of purchased or acquired electricity, renewable GWh 5 397 5 488 5 153 -2% Driven by reduced consumption in Norway Consumption of purchased or acquired electricity, non- renewable GWh 1 144 1 047 1 246 +9% Driven by increased consumption in China Renewable share of electricity consumption % 81% 84% 81% -3% Energy recovery GWh 892 909 711 -2% Due to reduced production at facilities equipped with energy recovery Energy recovery of consumption total % 11% 13% 10% -2% Driven by the inclusion of Xinghuo coal consumption in the total energy consumption Consumption of fuel (excluding feedstock) non-renewable GWh 1 438 44 0 Including for 2022 Xinghuo coal consumption in the reporting scope Consumption of fuel (excluding feedstock) renewable MWh 0 0 0 Consumption of purchased or acquired heat MWh 0 0 0 Consumption of purchased or required steam, renewable MWh 0 0 0 Consumption of purchased or required steam, non-renewable MWh 53 59 54 -9% Total energy consumption GWh 8 033 7 023 6 773 +14% Driven by the inclusion of Xinghuo coal consumption in the reporting scope The colour indicates a positive or negative development year on year. Environmental Biodiversity Elkem’s value chain includes numerous process ﬂows, including mining, high-temperature calcining, high- temperature smelting processes, and chemical production. Mining and chemical processing are activities that could have signiﬁcant impact on biodiversity. Key events 2022 → Responded to the CDP Forest for the ﬁrst time in 2022, focusing on deforestation. Score: A- → Established a cross-divisional biodiversity mapping project, to increasingly understand the biodiversity impact of the company Erimsa quartz mines wins environmental award ↗ Elkem deﬁnes biodiversity as the variability among living organisms from all sources including terrestrial, marine, and other aquatic ecosystems and the ecological complexes of which they are part; this includes diversity within species, between species and of ecosystems, in line with the recommendations from newly established Taskforce on Nature-related Financial Disclosures (TNFD). Biodiversity is an integrated part of the group's environmental management system, and closely linked to other sustainability impacts followed up by VP HSE. It is vital for Elkem to uphold our responsibility for limiting our environmental impact from our operations and Elkem supports the conservation of biodiversity and promotes sustainable management practices. Elkem is committed to preserving biodiversity and ecosystems around our facilities. The commitment is outlined in Elkem’s HSE policy, which is approved by the compliance committee. Elkem recognises the importance of considering relevant environmental aspects, including consideration of water quality, water use, soil conditions, habitats, vegetation, and the physical stability of landforms and decommissioned structures. Areas of particular exposure to Elkem Mining Mining is associated to relatively high biodiversity-related risks, connected to water use and terrestrial ecosystem use. Additionally, there are biodiversity-related risks connected to GHG emissions, non-GHG air pollutants, water pollutants, soil pollutants and solid waste. Elkem solely mines quartz, that has less stress on the ecosystem compared to other forms of mining. Given that quartz is a common mineral, Elkem can source raw material from non-protected areas. Elkem’s mining activities are strictly coordinated with the national mining authorities. Elkem makes environmental risk and impact assessments part of the mandatory steps when applying for mining permits, including consultation with biodiversity experts and local stakeholders. During mining projects, emissions to water and air are monitored, as well as the impact on soil, vegetation, and the landscape. All activities are audited by the national mining authorities. Elkem also prioritises mineral side streams utilisation to reduce the impact of the mining process. As a mitigation measure, annual provisions are made, earmarked for the restoration of the mine after the activities are ended. Commitment Elkem is committed to preserving biodiversity and ecosystems around our facilities, including water quality, water use, soil conditions, habitats, vegetation, deforestation challenges and the physical stability of landforms and decommissioned structures. Elkem is committed to implement locally driven biodiversity activities at plant level based on the principles of avoid, reduce, restore, and regenerate and transform. Policies HSE policy All policies are available on Governing documents and tools ↗ Elkem is a member of IMA-Europe (Industrial Minerals Association). Together with several other European companies, the organisation enables conditions for positive change for biodiversity. Biocarbon Elkem’s smelters use a combination of quartz, a carbon source and electricity to produce silicon and ferrosilicon. Elkem’s ambition is to increase the renewable share of the carbon source, by replacing fossil coal with biocarbon. The increased need for biocarbon requires the company to ensure that the biomass (i.e. wood chips and charcoal) are sourced from sustainable forestry. Elkem is committed to minimising the impact of our biocarbon strategy for existing forestry and does not accept deforestation in our supply chain. Only sustainably and legally produced biomass shall be used in Elkem’s production. Elkem is committed to sustainable and ethical raw material sourcing in accordance with internationally accepted principles and standards. Ethical and sustainable biocarbon sourcing is based on three main principles: → Acceptable wood resources for the production of biocarbon. → Acceptable working conditions and respect for basic human rights during the production and logistics process. → Zero tolerance for corruption and legal non-compliance. Chemicals The speciality chemicals industry is related to high biodiversity risk connected to water use, terrestrial ecosystem use, GHG emissions, non-GHG air pollutants, water pollutants, soil pollutants and solid waste. Elkem uses chemical compounds in the production process of silicones. Solid waste, non-GHG air pollutants, water use, and water pollutants are closely monitored to reduce impacts on biodiversity. Elkem’s chemical processing activities are strictly coordinated with the national and local authorities. Elkem conducts assessments of biodiversity risks when deciding on a new plant for chemical processing. Elkem collaborates with local governments and experts to reduce impacts on biodiversity. Elkem’s Silicones division is a member of the Responsible Care Global Charter which is the global chemical industry’s unifying commitment to the safe management of chemicals throughout their life cycle, while promoting their role in improving quality of life and contributing to sustainable development. Water represents a critical input in many of Elkem's main production processes and is covered in more depth in the Water management chapter on page 110. ↗ KPIs KPIs will be evaluated in the biodiversity mapping project in 2023. Environmental Water management Water represents a critical input in many of Elkem's main production processes. Elkem is also indirectly dependent on water as more than 80% of its electricity is hydropower. It is therefore important to ensure that our water footprint is sustainable. Water related challenges vary strongly across Elkem's value chain and are mainly centred around preventing hazardous discharge. Key events 2022 → Water withdrawals in water stressed areas in 2022 were reduced by 160,000 m 3 or 23% compared to 2020 (base year) → Water intensity related to silicone production have increased from 87,3 to 87,9 litres per tonne or 0.7% in 2022 compared to 2022 (base year) → CDP Water: B, up from B- in 2021 Key risks × Water availability × Water quality (contamination and discharge) × Water-related regulatory framework and permits × Stakeholder conﬂict × Biodiversity and ecosystems Targets → 20% reduction of water withdrawals in water stressed areas by 2031 from a 2020 base year. The target covers the following Elkem plants: Yongdeng (China), Elkem Carbon China, Ferroveld (South Africa) , Elkem Foundry China, Nagpur (India) → 12% reduction per unit of produced silicones by 2031 from a 2020 base year. Production of silicones accounts for 90% of Elkem’s total water consumption Key opportunities → Strong environmental management systems → Improvements of water handling, particularly the production expansion project at the Xinghou plant in China Water withdrawal in water stressed areas is a burden both to the local societies and the environment at Elkem Yongdeng (China), Elkem Carbon China, Ferroveld (South Africa), Elkem Foundry China, Nagpur (India). Water consumption related to silicone production primarily aﬀect the environment due to water discharges from the production sites (COD and Cu). Silicone production accounts for 90% of Elkem’s total water consumption. Water consumption and scarcity Elkem acknowledges the importance of stewarding water as a shared resource. Thus, we have implemented programmes to strengthen corporate water management, including monitoring of water withdrawal, consumption, and discharge. The primary utilisation of freshwater is split into four areas: → Water as a raw material for production. → Water used to cool production equipment and products. → Water used for cleaning. → Water used for emergency preparedness. The ﬁrst two represent the majority of all water usage and require good quality to avoid product contamination, equipment corrosion and clogging, and contamination of water infrastructure. Water consumption (discharge and withdrawals) are monitored depending on availability and source and reported to corporate every quarter. Some water withdrawals are measured directly with in-line water meters for continuous measurement, while others are calculated by capacity reﬂecting actual operational time. Figures on water withdrawals in areas with water scarcity are generally controlled by third parties as water is purchased by an external supplier. Discharge volumes of process water are reported quarterly to corporate management. Discharge of cooling water, returned to the source of extraction at similar quality as the raw water extracted, is not monitored directly as the volume and quality equals withdrawn water. The cooling water is only subject to heat exchange and most of the cooling systems are closed avoiding extensive evaporation. Loss of cooling water in open cooling towers is not measured. Many of Elkem's production sites are subject to regulations requiring permits for discharge to water. Speciﬁc parameters are included in each plant's permit and reported annually as a minimum. A total of 17 water discharge parameters are also measured or calculated and reported quarterly to corporate from applicable plants. Almost all of Elkem’s production units are located in areas with ample access to water and no signiﬁcant water stress issues. This is not only important for our production processes, but also for our electricity, which is mainly based on hydropower. A small number of sites are located in areas with long-term or periodic water scarcity (north-east China, South Africa, India), but not water stress. In these areas, Elkem's water withdrawals are low due to the nature of the actual production. Water management measures have been implemented in all areas including systematic risk assessments (including those done in connection with TCFD), and measures to limit withdrawal. All sites have readily available potable water free of charge and unlimited for all employees and contractors working on site. Sanitary facilities, including toilets and hand/ face washing facilities, are also available across all sites. In addition, showers and changing rooms are available across all sites where employees need to shower after work. Working uniforms for this type of work are also provided and cleaned by the company free of charge. Environmental Water management Indirect use in the value chain outside of Elkem has not yet been fully evaluated except discussions around water availability for hydroelectric power that is deemed critical as an energy source for most of Elkem's smelters. Water management Most water consumption issues represent low risk as production sites with high consumption are in areas with ample water supply, but the environmental issues connected to water discharge are more critical. Most of our major production sites are located close to large bodies of water (both fresh and saltwater basins) where uncontrolled discharge could have lasting negative environmental impact. Therefore, water management is also focused on fully understanding the environmental eﬀect of all water discharges in connection with our production and ensuring that systems are in place for eﬀective water monitoring and treatment to ensure compliance with public discharge permits and improvement targets to reduce discharge of harmful substances. Enablers to meet these strategic targets, speciﬁcally for water-related issues, are: → Substitution of raw materials. → Good housekeeping practices. → Development of new processes and production technology. → An advanced control programme, including environmental monitoring. → Wastewater treatment and reduction by recycling or reuse. → Transparency (CDP Water). Discharge to water and water treatment Many of Elkem's production sites are subject to permits for water discharge . Speciﬁc parameters are included in each plant's permit and reported anually as a minimum. A total of 17 water discharge parameters are measured or calculated and reported quarterly to corporate HSE from applicable plants. The three most critical discharges to water are organic substances that can aﬀect oxygen concentration in water (Chemical Oxygen Demand), Silicone Cyclics (D4, D5 and D6) and Polycyclic aromatic hydrocarbon (PAH). The two ﬁrst are an inherent part of upstream and intermediate silicones production while the third is found in the carbon paste production. Chemical oxygen demand (COD) indicates the amount of oxygen consumed by reactions in a measured solution, which is used to quantify the number of organics in the water. The potential impact of higher COD levels in water is related to reduced levels of dissolved oxygen (DO). A reduction of DO can lead to anaerobic conditions, which is harmful to ﬁsh and biota. Therefore, compliance is ensured through extensive monitoring to minimize the generation of organic waste in production processes, infrastructure maintenance to prevent leakage from production units and pipelines and optimal operations of on-site water treatment to ensure puriﬁcation before discharge. D4, D5 and D6 are important intermediates in the production of Silicones and have been deﬁned in the EU as Substances of Very High Concern (SVHC). D4 is categorised as Persistent, Bioaccumulative and Toxic (PBT) and D5 and D6 are categorised as very Persistent, very Bioaccumulative (vPvB) substances. Internal spills may cause adverse environmental eﬀects if they enter sewage systems that cannot treat and remove D4/ D5 residues, but the main concern is not in our own production. The main concern is residual amounts that may remain in our customer's consumer wash-oﬀ products and enter sewage systems during ﬁnal use. This may adversely aﬀect the marine environments because of low biodegradability and the risk of bioaccumulation. The compounds are, however, easily degraded by photooxidation. Elkem's strategy to reduce the risk of harm with D4/ D5/D6 is threefold. The ﬁrst part involves a high focus on process control and on avoiding spills and leakages in our own production processes. The second part is dedicated R&D eﬀorts together with our customers to reduce residual D4/ D5/D6 in their products. The third part includes substantial investments in China, both in upstream and downstream production, to replace cyclic materials such as D4, D5, and D6 with linear materials. PAH discharges originate when coal-tar pitch is used as a binder in the production of carbon products including smelting furnace electrodes which is one of the main products in Elkem Carbon Solutions. PAH is typically bound to particles and not easily biologically available, but it is still strictly regulated as it is deﬁned as SVHC by the EU. PAHs have moderate to high acute toxicity to aquatic life and birds and can have adverse long-term eﬀects including tumours, reproduction, development, and immunity. Compliance with discharge permits is ensured through process control and extensive water treatment on-site to limit the amount of PAH in discharges to water. Elkem has also invested substantial funds in R&D activities and holds a leading position in the development of alternative binders without PAH. There were no signiﬁcant D4/D5 or PAH spills in 2022. KPIs Metric 2022 2021 2020 Withdrawal Total freshwater withdrawal Fresh surface water, including rainwater, water from wetlands, rivers, and lakes Groundwater – renewable Third party sources Megaliters Megaliters Megaliters Megaliters 89 587 46 509 452 42 716 85 654 46 698 581 38 391 86 900 46 644 613 39 913 Discharge Discharge of cooling water Discharge of process water Fresh surface water Brackish surface water/seawater Third-party destinations COD ﬂow Total water discharge Total water consumption Megaliters Megaliters Megaliters Megaliters Megaliters Thousand kg Megaliters Megaliters 54 542 7 605 4 489 56 437 1 210 183 62 145 27 439 52 925 7 020 4 936 54 883 1 260 202 59 945 25 709 59 000 16 500 5 000 43 000 1 100 263 75 500 30 000 Environmental Waste management and circularity Elkem’s business system builds on a zero-waste philosophy focusing on the reduction of all kinds of waste throughout the value chain with a high focus on the eﬃcient utilisation of all resources, reduction of waste generation and on reuse, recycling, or sales of residual waste. Targets → Hazardous waste to landﬁll: Reduction of 10% → Waste to disposal: Reduction of 10% → Waste recycled: Increase by 10% Key risks × Cost risk: Increased cost of hazardous waste handling storage and disposal with tightening local legislation × Restrictions in use of bio-based sources Key opportunities → Cost / proﬁt opportunity with less raw material cost and more sellable products → Climate opportunity with less raw material transportation and increased circularity Commitment All physical waste streams have value and it is our goal to realise that value and avoid disposal or destruction, enabling circular economies in our operations and with partners. Policies → HSE policy Elkem’s corporate policies ↗ Elkem’s value chain includes numerous process ﬂows, including mining, high-temperature calcining, high temperature smelting, and chemical processing. Major waste streams from our process ﬂows are: → Tailings and oﬀ-spec materials from mining activities. → Degraded and oﬀ-spec raw materials from calcining and smelting. → Spent synthesis mass, ﬁltration cakes and spent solvents from chemical processing. → Dust and sludges from air and water treatment facilities. → Dirty packaging. Management and utilisation: Several processes have been put in place to reduce waste. The focus is mainly on process improvements to: → Reduce waste generation. → Reuse and recycle (spent mass neutralisation and packaging). → Incineration with and without energy recovery. Any residual waste left after other eﬀorts is disposed of in accordance with local regulations, including limited landﬁlling in approved landﬁlls. Over 70% of processed waste generated in 2022 was either reused or recycled. The value chain for Elkem’s products consists of four main types of production, each with speciﬁc potential waste streams: Quartz is found both as rock formations in mountain seams and as stones in prehistoric riverbeds. The extraction process includes the use of explosives for mountain seam extraction or diggers to remove topsoil for riverbed extraction. Quartz is then further processed with washing, crushing and sizing. No hazardous chemicals are used in the process. Main waste streams from the process are tailings from the extraction or washing and oﬀ-spec qualities or sizes from crushing and sizing. Most of the waste streams are utilised to restore open-pit mines or sold as by-products (sands and gravels to the construction industry), while some are landﬁlled in connection with the restoration of mining sites. Elkem is also developing alternative usages for sands in agriculture and sports. Waste in connection with shipment: It is usually in bulk with no speciﬁc packaging. Hazard classiﬁcation: As quartz is a naturally occurring mineral there are no hazardous wastes in the process. Carbon production consists of high-temperature treatment of anthracite and petroleum coke. The mixing of these with binders creates diﬀerent types of paste used for electrodes, ﬁll materials and additives in the metallurgical smelting industry. Major waste streams are degraded raw materials and oﬀ-spec production. Most of this can be reprocessed safely back into new batches of product. The remaining waste is delivered to approved suppliers for hazardous waste treatment. New, non-hazardous (green) binders are under development to reduce the use of high temperature coal tar pitch (CTPht). Waste in connection with shipment: The primary raw materials are received in bulk, eliminating packaging. Finished products are delivered to customers in big bags or on pallets, giving customers a potential source of waste. However, the packaging materials are of good enough quality and can be reused multiple times. Hazard classiﬁcation: Degraded raw materials and oﬀ- spec production can contain binders consisting of CTPHT which is listed as a substance of very high concern. Environmental Waste management and circularity Silicon smelting consists of a high-temperature chemical reaction that transforms quartz and carbon (coal, charcoal, or wood chips) into silicon. In addition, alloying, crushing and sizing operations are used to tailor the product to customer needs in the electronics, foundry and chemical industries. Major waste streams are degraded raw materials, slag from smelting, particles in oﬀ-gas emissions and ﬁnes generated during crushing and sizing operations. In the early 1970s, Elkem pioneered oﬀ-gas capture and utilisation by developing necessary bag ﬁlter technology to capture oﬀ-gas from smelting furnaces and other technologies to turn it into a valuable product used in hundreds of products today. This technology turns over 150,000 tonnes of waste into products every year. The other waste streams have historically been sold as low-value oﬀ-grade products or landﬁlled on site. Teams of dedicated professionals have worked on increasing the utilisation of these streams for many years now, treating them as valuable raw materials that can either be reintroduced to Elkem's diﬀerent production processes or sold as value-added products to customers. As a result of this work, Elkem harvests more than 100,000 tonnes of process products every year, reducing costs at our plants and generating new solutions for our customers. Waste in connection with shipment : Except for charcoal, which is supplied in big bags, and alloying materials, which are often shipped in smaller containers, most raw materials are supplied in bulk, reducing the need for packaging. Finished products are also shipped either in bulk or in big bags on pallets that can be reused. Hazard classiﬁcation: None of the major waste streams are deﬁned as hazardous. Some alloying materials and chemicals used to process silicon after smelting are hazardous, but do not represent major waste streams. These are always delivered to certiﬁed third party suppliers for disposal. Silicone formulation consists of many diﬀerent chemical processes and reactions that result in specialty products closely tailored to customer needs. A number of diﬀerent waste streams, both hazardous and non-hazardous are generated throughout and between the diﬀerent production processes. Main waste streams include acid water, used solvents, hydrolysis by-products, sludge, and waste masses. Waste reduction is included in the discussion on annual objectives and improvement plans conducted by the production teams and our research and innovation departments. Waste in connection with shipment: Substantial amounts of packaging is needed for raw materials, intermediate and ﬁnished products. Waste reduction eﬀorts focus on reuse (IBCs, pallets, and drums) and recycling. Hazard classiﬁcation: A large part of the waste generated during the production processes is hazardous waste. All hazardous waste is either treated on-site (incineration, neutralisation, reuse) or sent to certiﬁed service providers for destruction. Generic waste streams: Elkem also has generic waste streams such as used oil from vehicles and equipment, and packaging materials from sourced goods. Each site has dedicated systems to sort waste on site and deliver waste to approved service providers that will recycle or re-use it whenever possible. KPIs Metric 2022 2021 2020 Comment Total waste generated Tonnes 462 745 397 247 356 156 16% ** Non-hazardous waste to landﬁll Tonnes 45 273 58 465 48 077 -23 % ** Hazardous waste to landﬁll Tonnes 6 301 5 200 6 031 21% ** Non-hazardous waste to Tonnes 2 485 15 660 2 399 -84 % ** destruction Hazardous waste to destruction Tonnes 67 166 38 791 62 004 73% ** Total waste directed to disposal Tonnes 121 225 118 116 118 544 3% Approx. 30% of total waste generated Byproducts to recycling/sale ex. microsilica Tonnes 129 318 137 998 94 690 -6% ** Oils and chemicals to recycling Tonnes 9 398 69 1 945 ** Scrap, packaging, etc. to recycling Tonnes 65 386 4 491 4 687 ** Microsilica Tonnes 137 418 136 573 136 322 1% Total waste diverted from disposal (reused or recycled) Tonnes 341 520 279 131 237 645 22% Approx. 70% of total waste generated Mining activities Tonnes 354 456 320 687 308 263 11% Tailings and crushing residue (natural rock without chemical processing) from mining. All of the waste in the mining activities was returned to the mining sites for further use in mining activities or as part of our programme to refurbish mining site for return to farming or to their natural state. ** The major changes in number is due to changes in classiﬁcation as the reporting structure in Elkem is improving. We continue to work internally to improve the quality of the data. Environmental Local emissions to air Local emissions to air are inherent to many of Elkem's main production processses and are therefore deamed material to the company. As local emissions to air, such as NO x , SO 2 and dust, aﬀect air quality, measures to control and reduce the emissions are therefore priority areas of improvement. Targets → Dust: 30% reduction by 2025 baseline year 2015 (1,970 tonnes) Key risks × Increased levels of sulphur (S) in available raw materials × Increased emissions due to volume expansions Key opportunities → Reduction of dust, NO x and SO 2 by substitution of old boilers at Xinghou with eﬃcient Co-Gen Technology (2024) → New emission abatement at Elkem Carbon China (2022) will signiﬁcantly reduce both dust and SO 2 emissions → Elkem biocarbon strategy will reduce SO 2 emissions by approx. 2,000 tonnes per year towards 2030 KPIs Metric 2022 2021 2020 Comment Dust Thousand tonnes 1 204 1 379 1 270 -13% SO Thousand tonnes 2 7 229 7 280 6 880 NO Thousand tonnes 6 519 8 932 6 610 -27% x The colour indicates a positive or negative development year on year. Commitment Elkem is committed to a zero-harm, ie. ambient air quality well below applicable standards. Policies → HSE policy Elkem’s corporate policies ↗ Local emissions to air are are closely monitored to ensure compliance with public permits. A total of 17 parameters concerning emission to air are reported by applicable sites quarterly to corporate HSE. Variations in the emission are mainly tied to changes in production volume as they are inherent to the production process, but they can also be aﬀected by the quality of raw materials, the process control and investment in ﬁlter or scrubber systems. These emissions are regulated in public permits. Emissions from SO 2 were stable in 2022 compared to 2021. Both dust and NO x emissions were reduced in 2022, compared to 2021. NO x Nitrogen oxides (NO x ) are generated in Elkem's high temperature smelting and calcining processes and can be harmful to ecosystems and vegetation, as well as human health. Elkem has successfully invested substantial funds in R&D and furnace upgrade to reduce NO x emission from Silicon smelting furnaces and will continue to do so going forward. The 2022 NO x emissions numbers show a signiﬁcant reduction compared to 2021 (-27%). This was both related to volume eﬀects from the temporary shut down of furnaces in 2022 and eﬀects of low-NO x furnace design at several silicon smelters. More than 80% of reported NO x emissions are based on online monitoring and reporting. The approximately 20% remaining is based on industrial emission factors. SO 2 Sulphur dioxide (SO 2 ) is generated when using carbon materials in the smelting process and when calcining coal and coke in the carbon products process. SO 2 emissions can have a negative eﬀect on both plant and animal life, as well as human health. SO 2 emissions can be reduced through the use of carbon materials with low sulfur content, or by oﬀ-gas treatment. The SO 2 emissions in 2022 were at the same level as 2021. An slight increase in sulphur content in raw materials have been mitigated by temporary shut down of several silicon furnaces in 2021. A majority of the reported SO 2 emissions are based on mass balance, i.e. analysis of sulfur in raw materials. A few plants have digital monitoring. Target: Reduction of 3,000 tonnes of SO 2 emissions. Dust Dust is a major challenge in the production of both silicon and carbon products. It is not only a pollutant to the external environment, but also a working environment health challenge. For both areas the main focus is to reduce the generation of dust in diﬀerent production processes and increase the collection and ﬁltering of dust that is generated so it does not escape out into the working environment. Extremely high temperatures and ultra-ﬁne particles that disperse very quickly make it especially diﬃcult to capture dust generated in some of the production processes. Elkem allocates signiﬁcant resources to combat dust and has a longterm ambition of reducing levels of dust in the working environment to levels where exposure is acceptable without the use of respiratory protection. For external emissions of the dust the goal is a reduction of dust emissions by 30% by 2025 compared to 2015. Target: 30% reduction by 2025, baseline year 2015. The dust emissions in 2015 was 1,970 tonnes. In 2022, the dust emissions where almost 40% down from 2015. Dust emission calculations are based on multiple quantiﬁcation strategies, including continuous monitoring in stacks, estimates on fugitive emissions and third party control. S Environmental Social Governance Social Introduction Safe operations for all people at our sites are always our ﬁrst priority. Elkem believes that all incidents can and should be prevented and a zero-harm philosophy guides our everyday work. To be able to deliver on this ambition, a skilled, engaged and diverse workforce is the key. This also represents the foundation to maintain our continued success and achieve strategic priorities. Elkem’s strategy of growth and green leadership is built on operational excellence and continuous improvements. Our employees are the single most important factor for success. Elkem's global team of more than 7,300 people have a shared commitment to our stakeholders: To deliver our and your potential. Our employees are Elkem’s most valuable resource. Therefore, Elkem takes responsibility for all activities on Elkem’s properties and is committed to ensuring that employees and contractors working on Elkem sites can do so without suﬀering any harm. Elkem is also committed to inﬂuence its suppliers and business partners to have the same focus on health and safety. Unfortunately, Elkem experienced two fatalities in 2022, one in India and one in China. The investigations showed that necessary safety measures were not followed, showing that the health and safety work can never lose focus. For more information see the HSE chapter. ↗ After several years of Covid-19 pandemic hardship, the organisation has continued to manage the impacts at local levels in 2022, where necessary. Travel restrictions have been partly lifted, making it possible for the HSE audits and -training to get back to the pre-pandemic level. In addition, it is important that individual involvement is promoted. As part of our commitment to a safe work environment, Elkem also considers the protection and promotion of human rights, workers’ rights, decent living wages, and equal opportunities as being vital to Elkem’s operations. At Elkem, we believe a sustainable future depends on our ability to reduce disparities and create social prosperity. Elkem is committed to build a culture based on equality and respect for cultural diﬀerences. Elkem has engaged external subject matter experts to conduct a human rights impact assessment, covering the company’s overall risk exposure, as well as taking deep dives on selected countries and operations. The ﬁnal report contains ﬁndings and recommendations that will guide Elkem’s priorities for strengthening the human rights program going forward. The social topics material to Elkem are: → Health and safety on site → Human rights, including labour rights In addition to the material topics, Elkem outlines its commitment and work on diversity, equality and inclusion (DEI) in the ESG report as part of the stakeholder expectations. Pursuant to Norwegian legislation requirements, Elkem makes available the annual Activity and reporting duty-report. ↗ Key highlights in 2022 → Elkem’s ﬁrst global employee engagement survey was conducted → Human rights impact assessment carried out → Review of all HR policies & procedures in light of DEI → Developed 360 inclusive leadership feedback assessment tool → New upgraded HSE training programme FORUS developed Key KPI 2022 2021 2020 Total recordable injury rate 3.2 3.7 2.2 Reported conﬁrmed cases of child or forced labour 0 0 0 Employees covered by collective bargaining agreements 40% 39% N/A Female share 25% 25% 25% Social Health and safety on site A robust health and safety culture is the essence of our licence to operate. Elkem’s Health, Safety and Environment (HSE) eﬀorts are based on a zero-harm philosophy and our HSE management system is implemented to work systematically towards this goal. Total recordable injury rate decreased in 2022, but there were several high-consequence injuries. Health and safety management Elkem’s production activities involve inherent dangers, exposures and emissions that may cause substantial harm as operations include high temperature smelting (>2,000°C) and advanced processing of hazardous chemicals. A zero-harm philosophy and an organisation that is fully committed to giving ﬁrst priority to the health and safety of employees and contractors working on site is paramount to our success and our licence to operate. Even though Elkem bears the full responsibility for ensuring a safe and healthy workplace, the company also expects its employees and contractors working on Elkem property to be fully committed to a safe and healthy workplace and to do their part in achieving this. To safeguard the line management's ability to fulﬁl this responsibility, each site has an HSE organisation based on the size of the organisation and the level of risk. Elkem’s corporate Vice President for HSE is responsible for Elkem’s HSE management system. Compliance with the system is internally audited on a routine basis at the site by corporate and divisional resources. The internal corporate HSE audit programme aims to audit all production sites a minimum of every other year. There were 22 audits in 2022 and there are 20 audits planned for 2023. With the implementation of the safety management system FORUS, each site starts with internal self-assessments, followed up with divisional and corporate audits. Elkem works continuously to provide the employees and contractors with the right skills and tools to understand and deal with any risks they may face in our workplace. Elkem has developed comprehensive systems for risk management that are applicable across all Elkem sites worldwide. We show our commitment by: → Having clearly deﬁned responsibilities and accepting accountability for health and safety at all levels of the organisation. → Always prioritising individual health and safety when making decisions. → Setting ambitious goals and striving for continuous improvement in health and safety. → Using the same HSE systems, tools, methods, and having the same expectations to HSE performance wherever Elkem operates worldwide. Elkem has a strict reporting regime for injuries and requires all injuries to be reported, investigated, and mitigated, independently of severity. Overall, the total number of injuries went down in 2022, with most being low-consequence injuries. Unfortunately, Elkem experienced one subcontractor fatality in India and one subcontractor fatality in China. The investigations showed that necessary safety measures were not followed. In addition, there was one high consequence injury among our employees, up from zero in 2021. This just shows that the health and safety work can never lose focus, for all working at Elkem’s facilities. The total recordable injury rate went down from 3.7 to 3.2 and the lost workday rate was 0.9, down from 1.5 in 2021. All recordable injuries and high-potential incidents are fully investigated and measures are implemented to prevent similar incidents from happening in the future. Detailed information is also shared with other sites to ensure implementation of learnings from the incidents at all applicable Elkem sites. Commitment Elkem is committed to providing a 100% safe workplace with zero harm and zero injuries. Our commitment to HSE covers all employees and contractors. Policies → Code of conduct → HSE policy Elkem’s corporate policies ↗ HSE management system and auditing Elkem has for many years used a comprehensive in-house developed corporate HSE management system called FOKUS (from the Norwegian word for “focus”, implying the need for signiﬁcant attention on the organisation's HSE issues) that applies to all sites and activities worldwide. The system is built around recognised international standards for HSE management and covers relevant HSE topics identiﬁed by extensive risk assessment at all sites. It has been decided to implement a new safety system built around the ISRS system of safety management with the name of FORUS. The system name is derived from the goal to be a leader (Forerunner System) in safety. The basis of the system continues to be risk-based. It consists of a manual, safety procedures and protocols as well as a full auditing system. The system’s requirements and provisions cover all Elkem employees and all contractors working on Elkem property. In addition, suppliers of raw materials and goods are asked to comply with basic HSE rules and regulations as part of contractual purchasing agreements. Elkem’s HSE management system deﬁnes HSE as a line management responsibility where managers at all levels of the organisation are accountable for the HSE performance in their organisations and locations. Incidents management General requirements for recording, notiﬁcation and classiﬁcation of injuries and incidents are based on criteria from US OSHA, which are relevant for Elkem’s type of industry. Elkem has a comprehensive digital incident management system and expects all employees to report any injuries, incidents, unsafe conditions, deviations, and non-compliances. All reports are subject to investigation, mitigation sharing and, where appropriate, for learning and improvement. Serious incidents are subject to comprehensive root cause analysis. Recordable injuries and high-risk incidents are presented for corporate management on a weekly basis for discussion. In addition to reporting, incident management also includes emergency preparedness. All sites have emergency plans and emergency resources tailored to their level of risk. This varies from simple ﬁrst aid and ﬁre extinguishing equipment, to fully equipped in-house emergency response teams. Covid-19 management After several years of Covid-19 pandemic hardship, the organisation has continued to manage the impacts at local levels where necessary in 2022. Travel restrictions have been lifted in most countries, making it possible for Elkem’s HSE audits and training to get back to the level before the pandemic. However, China has continued with a strict policy regarding Covid-19 and travelling to China remains problematic. Hence, the local teams have taken on more of the role of auditing and training. Social Health and safety on site Health and safety training Elkem employees receive comprehensive documented HSE training to ensure a complete understanding of hazards in the workplace and how they can avoid harm during daily operations. Training activities include: → Basic training in Elkem’s HSE management system FORUS mandatory for all employees. → Speciﬁc work-related training for each work operation and each tool employees are required to use to ensure they have necessary competence to do the job in a safe and health manner. → Awareness training to ensure each employee understands how their personal behaviour can aﬀect the health and safety of themselves and others. → Training needs and completed training activities are reviewed annually through development discussions with each employee and documented at the site level. Contractor health and safety on site Elkem’s zero-harm philosophy applies also to all contractors working on site and contractors are subject to the same health and safety requirements as Elkem employees when working on Elkem property. Contractor companies are screened before being contracted, and contractor employees receive speciﬁc HSE training from Elkem before they are allowed to work at Elkem plants. The two fatalities in 2022 shows the need to keep training all own employees and contracted employees. For more comprehensive information ↗ KPIs Employees Work-related injuries Metric 2022 2021 2020 Comment Fatalities Absolute numbers Rate 0 0 0 0 0 0 No change High-consequence work-related injuries Absolute no. Rate 1 0.1 0 0 1 0.1 Number up 100% Lost workday injuries Absolute no. Rate 13 0.9 21 1.5 10 0.8 Number down by 38% Other recordable injuries Absolute no. Rate 31 2.2 30 2.2 19 1.5 Number up by 3% Total recordable injuries Absolute no. Rate 44 3.2 51 3.7 29 2.2 Number down by 14% Hours worked Number 13 936 109 13 706 429 13 097 248 Up 2% Contractors Work-related injuries Metric 2022 2021 2020 Comment Fatalities Absolute numbers Rate 2 0.3 0 0 0 0 Number up by 200% High-consequence work-related injuries Absolute no. Rate 2 0.3 0 0 0 0 Number up by 200% Lost workday injuries Absolute no. Rate 14 2.4 7 1.5 6 2.2 Number up by 100% Other recordable injuries Absolute no. Rate 8 1.4 10 2.1 7 2.5 Number down by 14% Total recordable injuries Absolute no. Rate 22 3.8 17 3.5 13 4.7 Number up by 29% Hours worked Number 5 722 932 4 797 159 2 761 047 Up 20% The colour indicates a positive or negative development year on year. Social Human rights, including labour rights Elkem promotes decent working conditions and respect for human rights in our operations and value chains. There is a growing general acceptance of business’ duty to respect human rights. Key events 2022 → Conducted a company-wide human rights risk- and impact assessment with support from external experts → Formalised functional ownership of human rights with Corporate Compliance → Integrated human rights considerations into several group governing documents Key risks The areas where Elkem’s operations, activities and value chain pose the highest risk to people are identiﬁed as: × Risk of unsafe, hazardous work environment and safety concerns related to Elkem’s own production and processes or our supply chain × Risk of unfavorable working conditions (speciﬁcally working hours, wage and overtime payment) among Elkem’s suppliers × Risk of forced or involuntary labour occurring in Elkem’s supply chain × Risk of negatively impacting the living conditions and livelihoods of the local community through Elkem’s own production and processes or our supply chain Targets → Improve performance in accordance with human rights action plan → Make human rights eLearning mandatory for key employee target groups → Further strengthen framework for human rights due diligence in the supply chain The chapters Human rights Responsible value chain management, and Responsible economic practices have been developed to comply with the legal requirements as stated in the Norwegian Transparency Act 2021 and the UK Modern Slavery Act 2015. Commitment Elkem is committed to the UN Declaration and International Conventions on Human Rights, the OECD Guidelines for Multinational Enterprises, the ILO Declaration on Fundamental Principles and Rights at Work, ILO’s core conventions and relevant local legislations in the countries where we operate. We follow the United Nations Guiding Principles on Business and Human Rights. Policies → Code of conduct → Code of conduct for business partners → Human rights program → People policy Elkem’s corporate policies ↗ The group is fully committed to avoiding complicity in human rights abuses, and to respect, protect and promote human rights throughout our operations. Our commitment is expressed in our code of conduct, which is approved by the board of directors. The commitments and how we operationalise them are further elaborated on in our Human rights program. Both documents were updated in 2022 and apply to all employees (including temporary personnel) and directors in Elkem ASA and subsidiaries, corporate aﬃliates, and joint ventures that are majority owned or controlled by Elkem (individually and collectively). Our expectations to suppliers, distributors, agents, traders/resellers and joint venture partners are codiﬁed in our code of conduct for business partners. As an international company, Elkem operates in a global market, both as a producer of materials and products and as a buyer of commodities and services. It is important to acknowledge that this global footprint puts us at risk of being complicit in human rights violations. We have a long history of encouraging and ensuring employee representation, and we have demonstrated a strong HSE focus in all our operations. However, we also have a wide-ranging, multi- tiered supply chain where it is diﬃcult to achieve full transparency on labour conditions. In addition, we operate in countries where human rights are under pressure. There has been a rise in countries considering and passing human rights laws that regulate business activities. New laws took eﬀect in for example Norway, the United States and the Netherlands in 2022, and further legislative developments are expected in 2023-2024. While we as a company cannot resolve all human rights issues in isolation, we have a responsibility to identify human rights risks in our value chains and mitigate them to the best of our ability. We are continuously taking steps to strengthen our human rights framework. Human rights Human rights risks are present across the company’s activities, operations and functions, and human rights considerations must therefore be an integrated part of multiple processes. In 2022 we revised our governing documents and developed the Human rights program. ↗ This describes how Elkem operationalises its commitment to respect and support internationally recognised human rights, and references the most relevant policies, procedures and other resources that support the implementation of the human rights program. In parallel, internal subject matter experts have reviewed governing documents for functions such as HR and supply chain to ensure our group policies and procedures integrate a human rights risk assessment and mitigation eﬀorts in core operations. Elkem recognises that respecting human rights begins with understanding what human rights are and how our business activities may impact them. An eLearning course is available to all Elkem employees and will be made mandatory for relevant groups of employees in 2023. As we grow and enter new and challenging markets, we see the need to take a more systematic approach to our human rights strategy. In 2022, we conducted a company-wide human rights risk- and impact assessment with support from external experts. An action plan will be developed in 2023 based on the ﬁndings and recommendations. Progress on the action plan will be reported to the ESG steering committee. Labour rights Elkem acknowledges all employees’ right to form and join trade unions of their own choice. We have a long and strong tradition of including and involving employees and their unions and believe this improves our decision- making processes. Social Human rights, including labour rights It is important in Elkem to have a good, regular and constructive dialogue between the employees and the management. Elkem recognises and respects the freedom of association and the right to collective bargaining in accordance with local, national legislation and practices. In countries where the local laws, practice or traditions do not support this, Elkem encourage channels and arenas where the employees are informed about the company’s status and allowed to get information, raise concerns, and inﬂuence decisions aﬀecting them. Collective bargaining agreements: In 2022, 40% of all Elkem employees globally were covered by collective bargaining agreements. In Norway and most other countries where Elkem operates, the collective agreements are generalised. The generalisation of a collective agreement means that all employees who work in a profession or business that falls under the scope of the generalised collective agreement have, as a minimum, a claim to the pay and working conditions that appear in the collective agreement that has been generalised. The purpose of the generalisation is to ensure that all workers receive pay and working conditions that are equal and fair and protect for example foreign workers against unreasonable or unacceptable pay and working conditions. The level of trade union coverage varies from country to country. In some countries the operators are organised under one collective bargaining agreement. In other countries there are no unions represented in Elkem’s entities. At sites where there are no formalised labour unions, local management is encouraged to set up channels and arenas for collaboration where employees are informed about the company’s status and allowed to raise concerns and inﬂuence decisions that aﬀect them. The EBS tools and culture supports this as involvement in decisions is part of the management system. Elkem complies with local statutory requirements regarding freedom of association in all countries where we are present. Pursuant to the Norwegian Companies Act provisions, employees have three representatives and two observers on the board of Elkem ASA. Elkem also has a European Works Council (EWC), which is in accordance with the European Union Directive 2009/38/EC. The meetings take place annually. For employees who are not members of trade unions and in countries where collective bargaining agreements are in place, Elkem determines their working conditions and terms of employment based on the collective bargaining agreements that cover the organised employees in order to ensure equality. In countries and for groups of employees who are not covered by collective bargaining agreements, the local HR-function is always involved in determining the working conditions and terms of employment to ensure fair and equal treatment of all employees. The HR-function together with the local line management are responsible for full compliance with local laws to ensure the labour rights. Working hours shall be in accordance with local law or agreements. Where the operation of the business makes it necessary to deviate from this, measures shall be taken to secure suﬃcient time for rest between each working period, and the actual working hours shall be in line with the intentions above. 2022 Human rights impact assessment: As we grow and enter new and challenging markets, we see the need to take a more systematic approach to our human rights strategy. In 2022, we conducted a company-wide human rights risk and impact assessment. The assessment was supported by external experts employing methodology based on OECD due diligence guidance for responsible business conduct, focusing on risk to people. The assessment combined desktop research into country-, sector- and company speciﬁc risks with a review of Elkem’s current human rights risk management framework and interviews with key internal stakeholders across Elkem’s global locations and business areas. Deep-dives were conducted into certain locations selected on the basis of size and nature of Elkem's operations and inherent country risk. The purpose of this assessment was to identify, assess, and prioritise existing and emerging human rights risks for Elkem, and make recommendations for further risk-mitigating actions and improvements to how we manage human rights risks. The results of the assessment serve as the starting point for improved human rights management in Elkem in accordance with our commitments and regulatory requirements. An action plan will be developed in 2023 based on the ﬁndings and recommendations. Progress on the action plan will be reported to the ESG steering committee. Employees are entitled to medical treatment covered by the company in the event of sickness or injury resulting directly from their work at Elkem. In the event of work- related disablement or death, employees or their surviving immediate family member(s) will receive insurance payments and/or pension. In addition, employees shall be protected from being dismissed due to pregnancy or responsibility for new-born children, consistent with local customs and laws. Child and forced labour Elkem strongly condemns human traﬃcking as a breach of fundamental human rights. Employment in Elkem shall always be on a voluntary basis and without any form of threats, force, or unlawful recruitment. Elkem has operations in parts of the world where there is a risk of child labour and forced labour, such as parts of Asia, South America, and Africa. We take this risk seriously, and we will not tolerate the use of child or forced labour in any of our operations and facilities. We expect the suppliers and contractors with whom we do business to uphold the same standards. Our expectations are codiﬁed in our code of conduct for business partners, which was updated in 2022 to include clearer language on respect for human- and labour rights including prohibition on forced or involuntary labour. More information about our sustainable supplier management practices can be found in the supply chain management chapter on page 148. ↗ There were no conﬁrmed incidents of child or forced labour in Elkem in 2022. The people policy and the code of conduct for business partners protects the rights of the employees and the stakeholders that are speciﬁcally vulnerable to our activities. The age limit for working in Elkem is 18 years. There are two exceptions to this; i). vacation substitutes and vocational students, where the age limit is 16 years, are only allowed to do light and simple work that is deemed safe and does not conﬂict with school participation, and ii). apprenticeships or other programmes are accepted for children under 16, but only if this enhances the child’s education. Some supplier production sites or some of our own plants are considered high-risk work only allowed to be performed by trained and qualiﬁed people. Several measures are in place to ensure compliance with these procedures and our human rights policy. Elkem has strict routines to ensure that all oﬃcial permits and registrations are in accordance with local law, and that all employees have written employment contracts or other documentation in line with local legal requirements, insurance coverage and correct tax payments. HSE audits are regularly conducted at all plants, with speciﬁc focus on these topics for plants in high-risk areas. All Elkem work procedures and HSE rules and training requirements apply for own employees as well as contractors. All incident reporting and follow-up also includes contractors. Grievance mechanism Elkem’s grievance mechanism, accessible from the company website, is targeted towards stakeholders who have feedback or concerns related to our plants, projects, or other business activities worldwide. Concerns received through the grievance mechanism are conﬁdentially handled and coordinated by the ESG Oﬃce, together with the relevant parts in the organisation. The aim of the dialogue with the complainer is to resolve and/or clarify the concern. Elkem has also established a secure speak up channel which is available to internal and external parties. More information can be found in the chapter on Responsible economic practices, on page 140. ↗ KPIs Metric 2022 2021 2020 Comment Employees covered by collective bargaining agreements % 40% 39% 64% Human rights impact assessment Status Completed Decided N/A Reported conﬁrmed cases of child or forced labour Number 0 0 0 Number of cases reported through the grievance mechanism 6 2 N/A All cases reported were resolved Social Diversity, equality and inclusion (DEI) At Elkem, we believe that our people are our most valuable asset. The collective sum of the individual diﬀerences, not only represents a signiﬁcant part of our culture, but also our reputation and achievements. By embracing equal opportunities, and a diverse and inclusive company culture, Elkem aims to increase our customer centricity, cultural awareness, compliance and innovation. Key events 2022 → Global employee engagement survey → Conducted DEI workshop in the corporate management team → Review of all HR policies and procedures to actively support DEI → Developed inclusive leadership assessment tool Key risks × Legal challenges as a result of non-compliance × Poor attraction and retention of top talent × Impact of low inclusion on ability to deliver continuous improvement and innovation Targets → DEI awareness training for the senior leadership in the company → Develop and incorporate value-based competencies and behaviours in HR processes & procedures → Work with senior leadership to adopt and role-model the values-based behaviors → Develop & implement DEI training for recruitment, promotion and talent management purposes Key opportunities → Attract, retain and engage diverse talent → Tap into diverse perspectives, leading to better continuous improvement and innovation → DEI delivers a positive impact on performance Commitment Elkem is committed to actively participating in, supporting and sponsoring programmes that increase diversity and promote inclusion and equality. Policies → Code of conduct → Speak up policy → People policy Elkem’s corporate policies ↗ In 2022, Elkem worked on several DEI intiatives including corporate management DEI workshop, the deployment of Elkem's ﬁrst ever global employee engagement survey, design and deployment of a new Leadership Essentials program, development of an inclusive leadership 360 feedback assessment, and a review of all HR policies, procedures and processes to actively support DEI. Cultural diversity Overall, Elkem has good multi-cultural spread in the organisation. This is measured by the distribution of employees that belong to nationalities outside the country in which they work. In Norway, Elkem has 36 diﬀerent nationalities represented in the workforce. In France, 15 and in the US, 9 nationalities. In several smaller entities in Europe and South America there are also 5 or more diﬀerent nationalities represented. Moving forward, the company will continue to assess the diversity needs and to attract cultural diversity in its operations. In total in Elkem there are employees of 65 diﬀerent nationalities. The largest groups are Chinese, Norwegian, French, American, Icelandic and Spanish. Age diversity 16% of the total workforce is under the age of 30, 56% between 30 and 50 years of age and 28% above 50. Among the management, 59% of the leaders are in the 30-50 years category. We follow up the age structure of our workforce and we work systematically to further develop, maintain and transfer knowledge and critical competencies from senior to more junior employees. Gender diversity The gender diversity is very stable in Elkem, with the proportion of female to male employees being 25% to 75%. In the management teams (corporate, division and plants) the female share is 30% globally and among all leaders who have personnel responsibility 23%. Moving forward, we continue our eﬀorts to increase female share through our recruitment, retention and promotion processes. We believe that a diverse, equitable and inclusive workplace, that mirrors the markets we serve, is a strategic business priority, and critical to our success. The diverse perspectives and experiences of our employees are essential to our ability to achieve excellence in research, innovation and continous learning. We also understand that to foster such a climate, requires a sustained and long-term commitment to DEI, and acknowledge that sometimes engaging in diversity is also challenging. With this in mind, our future focus will be to strengthen the awareness about DEI in Elkem, as well as further develop our company culture by reinforcing core behaviors in line with the Elkem values. Leadership We believe that the commitment and accountability of our leaders are of utmost importance. The way our leaders communicate and interact with their teams, what they communicate and emphasise, their vision for the future, what they celebrate and recognise, what they expect, how they make their decisions, the extent to which they are trusted and the beliefs and perceptions that they reinforce are all critical in impacting a diverse and inclusive culture in the workplace. Our leadership development programmes focus on developing and equipping Elkem's leaders with the people skills needed to engage and empower their employees to perform at their best. The golden thread of DEI has been deliberately interwoven into the programmes, in modules and topics such as: Inclusive leadership, unconscious bias, psychological safety, managing self and managing teams. Social Diversity, equality and inclusion (DEI) Mission, vision, values, and behaviours Our culture based on the Elkem Business System (EBS) is our character and the personality of our organisation. It's what makes our business unique and is the sum of the purpose, mission, values and behaviours. At Elkem, all employees are expected to act in accordance with and role model our values of: respect, involvement, precision, and continuous improvement. We strive to collaborate and work well together, independent of our diversity dimensions, by building trust through transparency, open and direct communication and willingness to listen, that enable us to collaborate productively and be open to new perspectives. Policies, procedures and supplementary material In an eﬀort to work more strategically with DEI, we have taken a more holistic approach, beginning with analyzing the systems, processes and procedures we currently have in place, through a DEI lens. We reviewed and re-designed our HR People policies, procedures, and supplementary material in light of our DEI policies, ensuring equal opportunities for all, as well as committing to equity as a company. Our focus has been on sustaining wellbeing, ﬂexibility and fairness in the workplace. The way ahead As we move forward in our DEI journey, we will focus on the following initiatives in 2023: → Culture – increase the awareness of DEI and develop value-based competencies. → Recruitment – of diverse candidates. → Succession planning and promotions – actively support DEI in processes and procedures. → Branding – to create Elkem's DEI identity and promote and show our commitment. Board of directors and management Elkem's board of directors consists of 11 members from China, France and Norway. Three out of eight shareholder elected board members are women, per the Norwegian Public Limited Liability Companies Act. Furthermore, one out of the three employee elected representatives, is female. The female share of the board is 36%. One of the eleven board members are in the age group 30-50 years old. The rest of the members are 51 years or older. The corporate management team of Elkem consists of ten people from China, France, Norway and Brazil. The management team consists of nine men and one woman. One of the members is in the age group of 30 to 50 years old and the rest are 51 years or older, unchanged from 2021. The female share in the management teams in general is 30%, whereas the overall female share in the company is 26%. There are diﬀerences within the organisation – in some units female leaders account for over 50% of the site management whilst at other locations, there are no women in the management team. For more information on our current activities and action plans please see the 2022 Activity and reporting duty report (ARP). ↗ KPIs Metric 2022 2021 2020 Comment Female share Female share in company Female share in management Female share in leadership programme Female leaders overall, with personell responsibility Female share in trainee programme Female share of part time workers Female share of temporary employees Female share white collar Female share blue collar Parental leave – average women (Norway only) Parental leave – average men (Norway only) % % % % % % % % % Weeks Weeks 25% 30% 36% 22% 38% 31% 25% 35% 17% 38.3 17.5 25% 30% N/A 24% 43% 45% 29% 36% 17% 38 16 25% 24% 19% 25% 58% 60% 18% 34% 21% 38.7 18.5 Downwards trend -5% -14% -4% Age distribution, employees < 30 years 30-50 years >50 years % % % 16% 56% 28% 16% 56% 28% 14% 60% 26% Age distribution, management teams < 30 years % 30-50 years % >50 years % Salary: CEO to median employee (NOR) wage Ratio The colour indicates a positive or negative development year on year. 3% 59% 38% 10:1 6% 60% 34% 7:1 3% 64% 33% 11:1 +4% G Environmental Social Governance Governance Introduction Elkem believes that companies that act responsibly and create value by ensuring production with the lowest possible environmental impact will be successful in the long term. Sustainability is central to Elkem’s business strategy, and the company works proactively to ensure integrity and responsibility in all operations. Elkem’s operations aﬀect several stakeholder groups, such as employees, customers, suppliers, and local communities. Elkem works proactively to ensure safe and healthy working conditions and high integrity towards all stakeholder groups. We consider trust and partnerships key to our success and long-term value creation. Elkem has implemented policies, procedures and training to ensure a strong compliance culture across the group to ensure good corporate governance. For a complete overview of the governance structure and how the company’s sustainability and ESG work is organised, please see ESG management: Sustainability and ESG governance chapter. Elkem is committed to developing its business in accordance with the UN Sustainable Development Goals and the Paris agreement. As a signatory of the United Nations Global Compact, Elkem aims to ensure that the business is aligned with the ten UN Global Compact principles. Elkem seeks to obtain a satisfactory regulatory framework for all its operations, and are committed to do so in accordance with our code of conduct, with complete transparency and no hidden agendas. Therefore, we participate in relevant industry organisations and take lobby positions when needed. A full list of the organisations Elkem participates in can be found under “membership organisations overview” here. ↗ A selection of Elkem’s governing tools and policies are available online. ↗ The governance topics material to Elkem are → Environmental due diligence in the supply chain → Social due diligence in the supply chain → Responsible economic practices → Product governance, including chemical safety → Supplying the green transition Key highlights in 2022 Update of group governing documents During the past year, Elkem has invested signiﬁcant eﬀorts in restructuring and improving the group governing documents and making sure that they are easily available to all employees by publishing them in a common document library available on the intranet. Launch of revised code of conduct The code of conduct has been revised and updated in 2022, with several new chapters and more information on existing topics. It has also been translated and is now available online in nine languages: English, Chinese, French, Icelandic, Japanese, Korean, Norwegian, Portuguese, and Spanish. Strengthened internal control function Established new role; Corporate internal control manager. The function will support the implementation and monitoring of requirements codiﬁed in the group governing documents, enabling Elkem to address weaknesses and ensure continuous improvement. Mapping physical climate-related risks Conducted a project to improve the understanding of acute and chronical physical climate-risks to the company. Human rights due diligence in supply chain In 2022, Elkem has laid the foundations for systematic social due diligence in the supply chain by conducting a company-wide human rights impact assessment. Key KPIs Metric 2022 2021 2020 New raw material suppliers subjected to assessment Number 100% 92% 100% and pre-qualiﬁcation Compliance training Minutes / employee 31 28 54 Employees with signed code of conduct % 94% 96% 98% Number of signiﬁcant ﬁnes due to non-compliance Number 0 0 0 with law or environmental deviations Governance Responsible economic practices Elkem considers good corporate governance to be a prerequisite for value creation and trustworthiness. The regulatory requirements and stakeholder expectations for establishing eﬀective compliance programmes are continuously increasing and require organisations to have adequate cultures and procedures in place to ensure responsible economic practices and prevent non- compliance, misconduct, corruption and fraud. Key events 2022 → In 2021, Elkem set the target to strengthen its compliance capacity in China and France. In 2022, the company strengthened both its compliance and internal control functions, adding resources in China, France, and Norway with specialist competence in data protection, internal audit and internal control. These organisational improvements enabled us to reach our goal of developing a new set of group policies, procedures, and internal controls. All group governing documents were revised in 2022, forming the basis for systematic implementation, monitoring and reporting of key requirements and associated controls. → Within the compliance area, new procedures for high-risk processes such as conﬂicts of interest, gifts and hospitality, sponsoring and donations, and third- party risk management were developed to provide better guidance to employees and leaders. New supporting tools improve transparency and traceability. Target → Finalise and implement a robust sanctions compliance programme → Develop and start implementing a robust data protection compliance programme → Develop methodology for holistic compliance risk assessment Key risks × High risk markets × High value investments × Government interactions × Licenses and permits × Business partner Key opportunities → Empower employees and partners through targeted training and awareness activities → Reduce ﬁnancial and reputational risk through eﬀective compliance program implementation → Build stakeholder trust through transparent disclosure of compliance performance Commitment Elkem bases its activities on the principles of honesty and respect for other people. We will meet the same ethical standards, respecting the laws, cultures, dignity, and rights of individuals everywhere we operate. We have a zero-tolerance policy towards any form of corruption and conduct in our business in accordance with applicable anti- money laundering and antitrust laws. Policies → Code of conduct → Code of conduct for business partners → Compliance policy → Speak up and investigation procedure → Anti-corruption compliance program → Conﬂict of interest procedure → Gifts and hospitality procedure → Sponsoring and donations procedure → Third-party risk management procedure → GDPR compliance policy → Competition law procedure Elkem’s corporate policies ↗ Compliance training Elkem is committed to providing relevant and engaging compliance training. Elkem made signiﬁcant enhancements to the 2021-2022 online training programme, launching new ethics, anti-bribery and corruption and antitrust modules. The training programme is available in multiple languages and is mandatory for all employees within the deﬁned target groups. Anti-competitive practices Elkem is committed to avoid anti-competitive practices across all operations. The competition law procedure outlines what behaviour is considered acceptable or not and was updated in 2022. Elkem conducts anti- competitive practice risk assessments to identify high- risk jurisdictions and employee groups that are most exposed to anti-competitive practices. In addition, Elkem provides both general eLearning and targeted trainings for competition law compliance and makes ad hoc assessments to identify red ﬂags and mitigate any gaps. Anti-bribery and corruption Elkem has a zero-tolerance policy against corruption. Elkem has multiple operations across jurisdictions and in several high-risk countries. Elkem also interacts with government oﬃcials for permits and other administrative issues. Elkem takes a risk-based approach to its compliance work and risk assessments provide important information to maintain and further develop our anti-bribery and corruption programme. Our risk-based approach is applied to all we do, that is to say when entering new markets and introducing new products. Our anti-corruption compliance programme was updated in 2022 and can be found on Elkem’s website. ↗ Working with business partners We know that bribery cases, human rights breaches, environmental disasters and scandals often involve business partners, such as agents, consultants, suppliers, joint venture partners and distributors. It is important for Elkem to work with business partners of high ethical integrity. In 2021, Elkem introduced a new screening tool to facilitate better vetting and continuous monitoring of business partners against sanction lists. In 2022, the tool was integrated with our customer relationship management platform to enable eﬃcient screening and monitoring of new and existing customers. Going forward, data from the tool will be used to enable risk based due diligence, audit target identiﬁcation and monitoring of business partners throughout their lifecycle. The code of conduct for business partners forms part of contracts and agreements with Elkem’s business partners and was updated in 2022 to include clearer requirements on issues such as sanctions compliance, human rights and Elkem’s speak up channel. Speak up / Whistleblowing Elkem encourages all employees and external parties to report possible dishonest or illegal conduct without carrying the risk of adverse reactions. Elkem has established a secure speak up channel which can be used to report misconduct and non-compliance with Elkem’s Governance Responsible economic practices code of conduct. The speak up channel is available to all employees and external stakeholders. It allows for anonymous reporting via web or telephone in all Elkem languages with clear guidance on how to report concerns. Elkem has also developed a procedure to escalate severe matters to the management level, the audit committee and the external auditor to ensure that issues of concern reach top management. The speak up channel and the speak up policy are available and communicated through Elkem’s intranet site and corporate website. The channel and policy are also promoted during employee training and are accessible via physical posters and handouts at plants and oﬃces. Misconduct reports are handled by Corporate Compliance and in accordance with applicable legislation on misconduct reporting. Elkem has zero tolerance for retaliation against those who report a concern and will sanction those who retaliate. Tax strategy Elkem is fully committed to complying with tax laws in each jurisdiction in which we operate. Our approach to tax is based on transparency and we cooperate with tax authorities to ensure full compliance and it is based on the business ethics outlined in the code of conduct. Our objective is to comply with all relevant laws, rules, regulations, reporting and disclosure requirements in all countries in which the group operates. Elkem has a low risk tolerance in matters concerning tax. Where tax law is unclear or subject to interpretation, our tax position will always be conservative. Hence, we will not pursue any form of aggressive tax planning arrangements, but only engage in tax planning activities that support our business and reﬂect commercial and economic activity. The tax approach in Elkem is anchored with the board of directors on an annual basis. The group tax function is organised under and reports regularly to the CFO. The group tax function is responsible for tax governance and tax management in the group and works closely with other functions in order to ensure that risks are identiﬁed and mitigated at entity level. Group tax sets the governing procedures related to tax which the units in our group must follow. Tax compliance is always a responsibility of the local units. The tax strategy shares the same approach to risk as Elkem's overall strategy and there will be continuous reviews to ensure that the level of tax risk is in line with Elkem’s overall risk appetite. Elkem’s primary tax risk is that of not being compliant with applicable tax laws and regulations and therefore not paying the correct amount of tax. Elkem manages this risk by operating eﬀective tax governance and ensuring tax decisions are made by senior staﬀ with appropriate skills and experience. In addition, Elkem uses third party advisors where necessary to ensure compliance with applicable laws and regulations. Group tax has procedures in place to identify, measure, manage, monitor and report on tax risks. Tax risk is managed in line with Elkem’s internal control framework where identiﬁed risks are being assessed and appropriate mitigating actions are being established. We seek an open and transparent relationship with all of the tax authorities we deal with. Our dealings shall be undertaken in a consistent, timely and professional fashion and we are committed to providing tax authorities with any information they should require in order to comply with tax laws and regulations. In line with Elkem's goal of transparency we will report the country-by-country information for the Elkem group, meaning Elkem ASA and all directly or indirectly controlled subsidiaries, joint ventures and permanent establishments where Elkem holds an ownership of more than 50%. Non-compliance There were no signiﬁcant instances of non-compliance with laws and regulations during 2022 that resulted in signiﬁcant ﬁnes or non-monetary sanctions. Elkem deﬁnes signiﬁcance by environmental deviations, long- and short-term damage on the environment, production stops and economic impact. In 2021, Elkem received an environmental ﬁne of CNY 122,000 at the Chinese plant Yongdeng, due to lack of dust gathering systems. The plant was upgraded accordingly. An overview of country-by- country reporting on tax can be found in online ↗ KPIs Metric 2022 2021 2020 Average minutes of compliance training per employee Minutes / employee 31 28 54 Total number and nature of misconduct reports Number 14 → → → → Corruption and fraud: 6 Conﬂicts of interest: 3 Inappropriate workplace behaviour and harassment: 4 Privacy violation: 1 13 → → → → → → → Company / professional code violation: 1 HSE violation: 1 Corruption and fraud: 1 Human rights violation: 1 Conﬂicts of interest: 1 Inappropriate workplace behaviour: 7 Sanctions violation: 1 11 → Corruption and fraud: 11 Number of conﬁrmed cases of corruption and fraud Number 5 0 3 Number of conﬁrmed incidents in which employees were dismissed or disciplined for corruption Number 2 0 2 Public legal cases regarding corruption brought against the organisation or its employees Number 0 0 0 Conﬁrmed incidents when contracts with business partners were terminated or not renewed due to violations related to corruption Number 5 0 0 Employees with conﬁrmed commitment to the code of conduct % 94% 96% 98% 2022 training included eLearning courses concerning ethics and Elkem’s code of conduct, anti-bribery, and corruption, and antitrust. The courses were distributed to diﬀerent risk-based target groups. ** In this context, corruption is deﬁned as in GRI 205 and includes practices such as bribery, facilitation payments, fraud, extortion, collusion, and money laundering; the oﬀer or receipt of gifts, loans, fees, rewards, or other advantages as an inducement to do something that is dishonest, illegal, or represents a breach of trust. It can also include practices such as embezzlement, trading in inﬂuence, abuse of function, illicit enrichment, concealment, and obstructing justice. Governance Product governance including chemical safety Elkem is in a unique position in covering the entire value chain from quartz as a raw material via metallurgical silicon to specialty silicones. Hence, all aspects of product stewardship apply to the various production steps. Product governance hierarchy in Elkem Product governance Policies and management responsibilities Product stewardship Regulations and standards, product safety (PS), advocacy, life cycle analyses Product compliance Safety Data Sheets, Compliance certiﬁcates, REACH, product registrations, emission permits There are a number of rules and regulations to comply with for products that Elkem manufactures and markets, such as safety data sheets, transport regulations, REACH registrations, etc. Ensuring that a product fulﬁls all legal requirements can be described as product compliance . One level above product compliance is product stewardship . Elkem deﬁnes product stewardship as an integrated business process for managing and minimising the health, safety, environmental and regulatory risks of a product’s life in the best interest of society. One level above product stewardship is product governance. Product governance deﬁnes the overall policies for Elkem’s products and covers topics such as ethical obligations, animal testing policy, policy on emerging technologies, sustainability of raw material sourcing, biodiversity policy, and targets for the reduction of CO 2 emissions. In this chapter you will ﬁnd some key aspects of product governance in Elkem. Renewable raw materials and biobased products Biocarbon is a strategic raw material for the sustainable production of Elkem’s silicon and ferrosilicon products and include wood chips, charcoal and biocarbon agglomerates. Elkem is committed to sustainable and ethical raw material sourcing in accordance with internationally accepted principles and standards, such as FSC (Forest Stewardship Council) and PEFC (Programme for the Endorsement of Forest Certiﬁcation). Elkem’s sourcing contracts, as well as Elkem’s corporate standards, comply with the highest level of sustainability and responsible sourcing of natural raw materials. Mining activities and biodiversity Elkem has a strong commitment to exclude protected areas from its mining activities. Elkem’s mining activities are rigorously coordinated with the national mining authorities. Since quartz is a common mineral and not of environmental concern, Elkem is able to source its raw material solely from non-protected areas. Commitment Proactive management of the use of chemicals and the protection of the environment and the human health are fundamental pre-requisites for conducting Elkem’s business and securing our license to operate. Policies Elkem’s corporate policies ↗ Elkem makes environmental risk and impact assessments as part of the mandatory steps when applying for mining permits, including the consultation with biodiversity experts. During mining operations, emissions to water and air are monitored, as well as the impact on soil, vegetation, and the landscape. All activities are audited by the respective national mining authorities. As a mitigation measure, annual provisions are made, earmarked for the restoration of the mine after end of activity. Elkem has received awards in Spain for sustainable development and good environmental practices of its quartz mining activities. As a member of IMA-Europe (Industrial Minerals Association), Elkem commits to the mining industry’s sustainability charter: Biodiversity and Environment | IMA Europe. Elkem is committed to responsible sourcing of minerals, to avoid any possible conﬂict with human rights abuses or environmental degradation. Read our conﬂict mineral statement here. ↗ Transport safety The transport of hazardous goods is heavily regulated internationally, such as through UN Transport Regulations or the International Maritime Organization (IMO). These result in a number of standards for packed material (IMDG), transport of solid bulk cargoes (IMSBC) and transport of liquids in bulk (IBC). All transport is provided by professional transport companies that follow these standards and regulations. At the plant sites, transport of hazardous goods by truck occurs, and strict procedures have been implemented for each hazardous substance to ensure the safe transport, including loading, unloading and handling. Checklists covering the condition of the vehicles and equipment, as well as speed and alcohol control, are standard routines at plant sites. All plants are ISPS ports (International Ship and Port facility Security) with restricted access. All personnel must undergo safety training, and transport companies participate in safety drills with the plant’s own ﬁre brigade. Hazardous substances management It is Elkem’s policy to assess safer alternatives for hazardous substances of concern and to promote its substitution and reduction. The company reviews the options to mitigate identiﬁed risks, including possible substitution, phasing-out any substance posing an unacceptable risk to human health and/or the environment or limiting the exposure of the SVHC substance if substitution is deemed not possible. The assessment of alternative solutions for hazardous chemicals is practised in all Elkem laboratories and plants. Governance Product governance including chemical safety The main hazardous substances of concern used in Elkem’s operations are: → In carbon products: High temperature coal tar pitch (CAS no. 65996-93-2) is used as an intermediate in the production of Söderberg electrode paste. → In silicones: D4, D5, D6 are key intermediates in the production of silicones-based polymers that are classiﬁed as Substances of Very High Concern (SVHC). They are used under strict conditions in a limited number of products and closely controlled throughout the production, storage, and shipping processes. While substitution is not possible, production processes are constantly improved to reduce the residual amount in the downstream products. → In silicon products and ferroalloys: These are made from natural raw materials such as quartz, coal, and iron oxide that often contain trace amounts of heavy metals. Cadmium and lead are listed as SVHC but their concentrations in Elkem’s products are far below the generic threshold limit value of 0.1 % w/w and do not trigger regulatory action. The European chemicals legislation REACH requires suppliers of articles (manufacturers or importers) to inform their European downstream users about the presence of substances of very high concern (SVHC) when their concentration exceeds 0.1% (w/w). Elkem regularly monitors its product portfolio for SVHC substances that are subject to existing or future regulatory restrictions or that are associated with particular concerns. The management plans are reviewed regularly, deﬁning the speciﬁc risks associated with each identiﬁed SVHC substance. Elkem reviews all possible options to mitigate identiﬁed risks, including possible substitution where possible, phasing-out any substance posing an unacceptable risk to human health and/or the environment or limiting the exposure of the SVHC substance if substitution is not deemed feasible. In addition to complying with all chemical production regulations, the Silicones division is a signatory of the Responsible Care Global Charter of the International Council of Chemical Associations (ICCA). Through Responsible Care, Elkem commits to improving performance, engaging with stakeholders to understand their concerns about industry operations and products and extending the Responsible Care ethic throughout the value chain. The key principles of the charter is: → Promoting transparency to build trust with stakeholders. → Safeguarding people and the environment by continuously improving environmental, health and safety performance. → Driving continuous improvement in chemical product safety and stewardship throughout the supply chain. → Strengthening chemicals management systems by participating in the development and implementation of lifecycle-oriented, sound-science and risk-based chemical safety legislation and best practices. Product safety programme The safety of Elkem’s products is ensured by two main pillars, a) the chemical safety assessment through the diﬀerent operative chemicals legislation and b) the mandatory safety data sheets (SDS) that work as a hazard communication tool to ensure a safe and informed handling of the products by the company’s customers and own employees. The product stewardship team gathers expertise on key end-markets the company is working with. Being involved from the very ﬁrst stage of product development is critical to make sure the correct regulatory context is included. Elkem’s management commits to a zero-harm policy. This includes detailed standard operating procedures (SOP), the duty to familiarise oneself with relevant safety data sheets and safe job analyses. Speciﬁc databases (Inosa) store the formal requirements and make them traceable. Incident investigation and corrective actions are part of the corporate HSE standard and supported by a dedicated software tool (Synergi). Auditing is an import process in Elkem’s safety programme and includes both auditing of Elkem’s suppliers and contractors, as well as internal audits and audits by our customers. This is part of Elkem’s ISO 9001 and ISO 14001 certiﬁcations. Chemical safety Compliance with chemical product regulations include product registrations, product authorisations, safety data sheets and product labels. There are also industry speciﬁc regulations that Elkem complies with, for example for products that are in contact with food and water (packaging) or health care (band aid/wound care). With a portfolio of more than 4,000 diﬀerent products that are used in a multitude of applications, regulatory and product compliance is key for Elkem. A document management system has been implemented in the Silicones division and ensures that compliance, certiﬁcates, and regulatory statements are easily available for the distribution to customers. Elkem is committed to comply with international regulatory requirements and provides safety data sheets (SDS) for all products in accordance with UN Globally Harmonized System of Classiﬁcation and Labelling of Chemicals (GHS). In all markets where Elkem’s products are promoted, the products must meet speciﬁc requirements and comply with certain technical, regulatory, health and environmental standards. Elkem is involved in regional and international trade associations that help us understand and anticipate new regulations and standards that may impact Elkem’s industry or that of its customers. Key events in 2022 for chemical safety: → As signatories of the CEFIC improvement plan, Elkem Silicones is proactively reviewing its REACH dossiers, with the task planned to be completed by 2027. → Elkem Silicones is actively working on its REACH- Turkey (KKDIK regulation) obligations to meet the registration deadline of 31/12/2023. → Elkem Silicones is actively working to meet the EU Poison Center Notiﬁcations (PCN) requirements for industrial uses by the end of 2023. → Elkem Silicones completed its content review of EU Safety Data Sheets (> 2500 products) in 2022 → Supported over 2000 non-standard customer requests in 2022 needing strong PSRA support. Animal testing policy Elkem commits to refrain from animal testing, except where legally required. All necessary toxicology studies on vertebrate animals, conducted by Elkem Silicones, are validated and coordinated centrally via an Elkem toxicologist. Central coordination ensures that the product stewardship team is aware of all existing and relevant data, supporting product safety and covering global regulatory needs. All studies are compliant with European cosmetic regulations. Policy on emerging technologies Elkem is aware of risks and controversies associated with the use of emerging technologies. Elkem does not use GMO (genetically modiﬁed organisms) and has no research activities within stem cells or genetic engineering. Elkem does however utilise nanoforms of existing products because they are key enablers for sustainable constructions (Elkem Microsilica®) and for battery technology (silicon). Elkem is committed to assess risks related to the use of nanoparticles, and to implement measures to reduce potential exposure, as it is required by national occupational hygiene legislation. Furthermore, nanoforms require a speciﬁc chemical safety assessment under the European REACH legislation to ensure their safe use. Elkem follows an internal procedure for the assessment of new products (incl. nanoforms) through the corporate product stewardship team. There were no material incidents of non-compliance concerning the health and safety impacts of products and services, to Elkem's knowledge. Governance Responsible value chain management Responsible sourcing is a strategic priority for Elkem. Elkem’s total global procurement spend is approximately NOK 25 billion per year, covering supplies of raw materials, energy, goods, services, and logistics. The active supply base consists of about 18,000 suppliers globally. The number of raw material suppliers is relatively low, while the number of suppliers of other goods and services is high. Target → All new raw material suppliers subject to assessment and pre-qualiﬁcation screening → All new suppliers of raw material subject to supplier audit → All new suppliers to sign Elkem’s code of conduct for business partners Responsible sourcing and the supply chain As one of the world’s leading suppliers of silicon-based advanced materials with operations throughout the value chain from quartz to specialty silicones, Elkem continuously strives to improve the way we source our supplies. The procurement organisation is responsible for raw material supply, logistic services, goods, and services required for Elkem’s operations. Elkem’s procurement organisation is decentralised, with procurement functions both at the corporate, divisional and plant level. We further diﬀerentiate between procurement of major raw materials, and procurement of indirect materials. Suppliers of major raw materials are always considered critical suppliers, and suppliers of indirect materials may be considered critical. The corporate supply chain has the overall global responsibility for developing and maintaining Elkem’s procurement and logistics strategy, as well as Elkem’s global procurement policies and procedures. Elkem has policies and procedures in place to ensure and govern responsible sourcing. This includes: → Procurement policy, outlining Elkem’s procedures for prequaliﬁcation and management of suppliers. → Policy for sourcing of biocarbon, outlining Elkem’s commitment to sustainable forest management and the requirements for procuring bio-based reductants in Elkem. Contracts with suppliers ensure that risk assessments and audits can be conducted both prior to pre-qualiﬁcation and at any stage of the supplier contract. Elkem has a code of conduct for business partners, which is included in all procurement contracts. The business partner code sets out Elkem’s expectations to suppliers with regards to ethics, labour rights and social and environmental issues. Supplier due diligence and screening The procurement function is responsible for carrying out pre-qualiﬁcation and risk assessments of suppliers, based on corporate requirements within environment, health and safety, social responsibility, anti-corruption and compliance with laws and regulations. All new suppliers of raw materials are screened against environmental and social criteria. For high-risk suppliers, additional due diligence assessments are performed, such as integrity due diligence. We are continuously investing in technology to support and improve upon these processes. In 2021 a new contract lifecycle management (CLM) system went live. In 2022, Elkem conducted a pilot to test a third-party risk management tool. In 2023, Elkem plans to implement a new supplier relationship management system. The new system will enable a more uniﬁed process for screening and vetting of suppliers across all divisions and jurisdictions, tracking and monitoring suppliers’ compliance throughout the contract lifecycle, as well as identifying and managing supplier risk. The learnings captured from the pilot will be used to design the process ﬂow for supplier prequaliﬁcation. Supplier due diligence and screening under the pandemic Historically, Elkem has done 100% audits on their new raw material suppliers. Due to the limitations given by the pandemic, we have we not been able to keep this level in 2022 on an overall basis. The target is to get back on a high level when the restrictions in all regions are lifted. Responsible supply chain management Elkem has developed detailed requirements for high- risk suppliers and contractors regarding health, safety, and environmental standards for operations like mining, transportation, storage, and loading, and is actively involved in the promotion and monitoring of safe and decent working conditions. This includes health and safety training and providing correct personal protection equipment for suppliers’ employees when necessary. Age control to prevent child labour and ensure responsible working conditions for young employees is also carried out. Elkem requires suppliers and contractors to engage their employees with written contracts on fair terms, and to give them information about their right to organise and collectively bargain with management where this is legally possible. Elkem’s requirements are regularly discussed in meetings with suppliers. High-risk suppliers must demonstrate their understanding of legal requirements and hazards in their operations and present plans showing how risk will be eliminated or controlled while working for Elkem. Elkem performs audits and inspections, both in connection with routine visits for quality, technical and business follow- up, and as unannounced site visits. External auditors also conduct supplier audits on Elkem’s behalf. Violations of Elkem’s requirements are addressed with warnings in addition to requests for improvements when necessary. Repeated violations may lead to requirements for speedy implementation of improvement plans, ﬁnancial penalties, or termination of contracts. KPIs Metric 2022 2021 2020 Comment Share of new raw materials suppliers subjected to assessment and pre-qualiﬁcation screening % 100% 92% 100% +8% Share of new raw material suppliers subjected to supplier audit % 19% >90% The last two years, it has been hard to conduct audits due to Covid-19 Adverse human rights concerns in supply Number chain reported 0 1 0 The colour indicates a positive or negative development year on year. Elkem’s impact and contribution to the 2030 Agenda for Sustainable Development Our mission: Advanced silicon-based materials shaping a better and more sustainable future, adding value to stakeholders globally. As a signatory to the UN Global Compact, Elkem supports the 2030 Agenda and is committed to develop our business in accordance with the framework. The UN Sustainable Development Goals (SDGs) were established in 2015 by the United Nations (UN) to build a more sustainable and equal world by 2030. The 2030 Agenda acknowledges that the 17 goals cannot be reached without the active support of businesses worldwide. It calls on companies to use innovation, technology, and creativity to address developmental challenges and opportunities. Elkem connected the UN SDGs to the materiality assessment for the first time in 2020 and linked the materiality to how the company impacts and is impacted by the 2030 Agenda. The updated materiality assessment for 2022, in line with GRI standards 2021, builds on this analysis. Although we understand that all goals are interlinked, Elkem has identified three SDGs that are most material and where we can contribute the most. Below is an explanation on how we impact and are impacted by the SDGs. How Elkem supports the SDGs ↗ SDG Impact analysis Elkem’s highest priority is to create a safe and zero harm workplace. We work tirelessly in the whole organisation to make sure that all people leave our sites as healthy as they arrived, creating a safe and secure working environment. In addition, we continuously work to protect our workers’ labour and human rights and promote a harassment-free working environment. Elkem is committed to doing business according to the UN Guiding Principles on Business and Human Rights. Our impact: Elkem must provide a secure and safe workday for all employees and contractors. We are aware and have experienced that working at our facilities may lead to health and safety risks. It is Elkem’s obligation to provide safe jobs and make sure that the employees have decent and liveable wages and a ﬂexible work-life balance situation. When a serious accident happens, a full investigation takes place to make sure that all causes are uncovered and that it will not happen again. In addition, we inﬂuence the supply chain through our partnerships to make sure that our suppliers and customers also take up this responsibility. Our most important tool is the code of conduct for business partners. On site, contractors get HSE training aligned with what the employees of the company has. Impacted by: As we grow and enter new and challenging markets, we see the need to take a more systematic approach to our human rights strategy. Elkem operates in several countries which are at risk of child labour and forced labour. Elkem does not tolerate any use of children or forced labour in any of our operations or facilities. We expect the same from our suppliers and others we do business with. While Elkem as a company cannot resolve all such issues in isolation, we have a responsibility to identify human rights risks in our value chains and to mitigate them to the best of our ability. Prioritised SDG sub- targets Elkem reports on Target 8.7: Take immediate and eﬀective measures to secure the prohibition and elimination of the worst forms of child labour eradicate forced labour, and by 2025 end child labour in all its forms including recruitment and use of child soldiers. Target 8.8: Protect labour rights and promote safe and secure working environments for all workers. 2021 No reported events of child and forced labour in Elkem One reported concern in supply chain No reported high severity injury Injury rate: 3.7, up from 2.3 in 2020 Introduced human rights e-learning Employees covered by collective bargaining agreements: 39% 2022 No reported events of child and forced labour in Elkem One sub- contractor fatality in India. One subcontractor fatality in China Injury rate: 3.2, down from 3.7 in 2021 Human rights impact assessment conducted Employees covered by collective bargaining agreements: 40% SDG Impact analysis Climate change mitigation exposes Elkem to Target 13.1: Strengthen Scope 1: Scope 1: several challenges and opportunities. Climate resilience and adaptive 2.34 mill. 2.42 million change response and the transitioning to more capacity to climate related tonnes tonnes sustainable solutions will impact our business hazards and natural and ﬁnancial conditions as we move forward. disasters in all countries. Scope 2: Scope 2: 901 000 942 000 Elkem has published an updated TCFD report tonnes tonnes in March 2023, with improved scenario and ﬁnancial impact assessment. The full report is Scope 3: Scope 3: available here. ↗ 8.35 mill. 7.38 mill. tonnes tonnes Our impact: Greenhouse gas (GHG) emissions (CO 2 ) are inherent to the process of the Biocarbon Biocarbon silicon, ferrosilicon, and silicones production. share: 22% share: 20% Therefore, the industrial process and the whole value chain (scope 1, scope 2 and scope Energy Energy 3) are part of the climate change challenge. recovery recovery We acknowledge that our climate work is a rate: 14% rate: 11% continuous process. Elkem understands that the company must reduce the CO 2 emissions Increased Carbon group in line with the Paris agreement. Meanwhile, ambitions footprint: we aim to contribute positively by providing announced 6.9 kg CO / materials and solutions that are beneﬁcial to 2 in the climate kg produced combating climate change. Products needed roadmap in the low carbon society include the materials that Elkem provide, so it is the company's CDP Climate CDP responsibility to deliver these products with a change: Climate: A- low carbon footprint. A-, showing CDP leadership in Forests: A- Impacted by: Climate change aﬀects Elkem in disclosure and diﬀerent ways, like technology development, transparency market adaption, reputation, and regulatory limitations. One example is regulatory mechanisms like emission trading schemes. For example, changes in ETS regulations may cause a reduction of allowances and higher prices. This will increase Elkem’s direct costs which is a current risk in our operations. Therefore, reducing GHG emissions from production is a strategic goal. In addition, Elkem is monitoring how physical, chronic, and acute climate change eﬀects could aﬀect our locations and business. Prioritised SDG sub- targets Elkem reports on 2021 2022 SDG Impact analysis An improved understanding of the Target 12.4: By 2020, Have fully Update on environmental and social impacts of achieve environmentally implemented environmental products and services is key to ensure sound management of environment management sustainable value chain for the future. chemicals and all waste management system Therefore, strong environmental throughout their life cycle, system in the management of chemical safety, air, and in accordance with agreed organisation, water emissions, and minimising the international framework with digital, environmental footprint are key priorities. and signiﬁcantly reduce quarterly their release to air, water reporting Our impact: Our products and production and soil to minimise have an environmental footprint throughout their adverse impact on Total waste Total waste the value chain. Elimination of waste is one of human health and the generated: generated: the key strategies for successful operations. environment. 397,247 462,745 Our health, safety, and environment (HSE) tonnes tonnes policy covers actions on energy and resource utilisation, environmental impact through No signiﬁcant No signiﬁcant emissions to air and discharge to water and spills of spills of waste reduction and waste management. D4/D5 D4/D5 Our goal is to reduce the waste generation by good process control. Circularity is becoming CDP Water: B- CDP Water: B more and more critical throughout our value chain. Elkem is working with customers and researchers across the topics of reduce, reuse Total waste Total waste and recycle. For example, increase the use Target 12.5: By 2030, diverted diverted of recycled raw materials in our operations substantially reduce from disposal: from disposal: by collecting them, reintroducing them, and waste generation through 276,483 341,520 valuing by-products (such as Elkem Microsilica prevention, reduction, tonnes tonnes ®). By joining forces with our customers, we recycling and reuse. aim to increase the collection of waste to Share of Share of recycle them chemically or mechanically. process process waste that waste that Impacted by: There is an increased focus was reused or was reused or on environmental and climate-friendly recycled: 70% recycled: 70% production from society, employees, and investors. In addition, operations are subject to environmental permits and the risk of stricter permits from governments and/or other policy changes require our attention to ensure compliance and successful transition to a society with lower carbon and environmental footprint. Prioritised SDG sub- targets Elkem reports on 2021 2022 To the Board of Directors of Elkem ASA Independent statement regarding Elkem’s sustainability reporting We have examined whether Elkem ASA has prepared a GRI Index for 2022 and measurements and reporting of key performance indicators for sustainability (sustainability reporting) for the year ending 31 December 2022. Our assurance engagement was conducted to obtain limited assurance. ● Elkem's GRI Index for 2022 is an overview of which sustainability topics Elkem considers material to its business and which key performance indicators Elkem uses to measure and report its sustainability performance, together with a reference to where material sustainability information is reported . Elkem’s GRI Index for 2022 is available at https://www.elkem.com/sustainability/policies-and-statements/policies- and-reports/. We have examined whether Elkem has developed a GRI Index for 2022 and whether mandatory disclosures are presented according to the Standards published by the Global Reporting Initiative (www.globalreporting.org/standards) (criteria). ● Elkem has defined key performance indicators for sustainability in their ESG report for 2022. The measurement of the indicators is determined by topic-specific disclosure requirements from GRI or own disclosures as specified by Elkem and explained in the ESG report (criteria). “ Supplying the green transition ” is based on the criteria as defined in EU Taxonomy. For the following KPIs we have examined the basis for 2022 and examined whether the KPIs are calculated, estimated and reported in accordance with the criteria: o "CO2 and other GHG emission reductions, incl. energy management " (see KPIs presented on page 103 and 107) o "Local emissions to air" (see KPIs presented on page 118) o “Water management" (see KPIs presented on page 113) o "Waste management and circularity" (see KPIs presented on page 117) o “Health and safety on site” (see KPIs presented on page 127) o “Environmental due diligence in the supply chain” (see first KPI presented on page 149) o “Social due diligence in the supply chain” (see first KPI presented on page 149) o “Responsible economic practices, including anti -corruption and tax strategy ” (see first four KPIs presented on page 143) o “Supplying the green transition” (see KPIs presented on page 159) In addition, as part of the key performance indicators in this statement we have examined the indicator product group carbon footprint (PGCF) for 2021 (page 103). Management’s responsibility Management is responsible for Elkem’s sustainability reporting and for ensuring that it is prepared in accordance with the criteria described above. Their responsibility includes designing, implementing and maintaining internal controls that ensure the development and reporting of the GRI Index and key performance indicators for sustainability. Our independence and quality control We are independent of the company in accordance with the law and regulations and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), and we have fulfilled our ethical obligations in accordance with these requirements. We use ISQM 1 - Quality management for firms that perform audits or reviews of financial statements, or other assurance or related services engagements and maintain a comprehensive system of quality control including documented guidelines and procedures regarding compliance with ethical requirements, PricewaterhouseCoopers AS, Postboks 748 Sentrum, NO-0106 Oslo T: 02316, org. no.: 987 009 713 MVA, www.pwc.no Statsautoriserte revisorer, medlemmer av Den norske Revisorforening og autorisert regnskapsførerselskap professional standards and applicable legal and regulatory claim. Auditor’s responsibilities Our responsibility is to express a limited assurance conclusion on Elkem’s sustainability reporting based on the procedures we have performed and the evidence we have obtained. We conducted our work in accordance with the Standard on Assurance Engagements ISAE 3000: “Assurance engagements other than audits or review of historical financial information". A limited assurance engagement in accordance with ISAE 3000 involves assessing the suitability in the circumstances of management's use of the criteria as the basis for the preparation of the sustainability reporting, assessing the risks of material misstatement of the sustainability reporting whether due to fraud or error, responding to the assessed risks as necessary in the circumstances, and evaluating the overall presentation of the sustainability reporting. A limited assurance engagement is substantially less in scope than a reasonable assurance engagement in relation to both the risk assessment procedures, including an understanding of internal control, and the procedures performed in response to the assessed risks. The procedures we performed were based on our professional judgement and, among others, included an assessment of whether the criteria used are appropriate, as well as an assessment of the overall presentation of the sustainability reporting. Our procedures also included meetings with representatives from Elkem who are responsible for the material sustainability topics covered by the sustainability reporting; review of internal control and routines for reporting key performance indicators for sustainability; obtaining and reviewing relevant information that supports the preparation of key performance indicators for sustainability; assessment of completeness and accuracy of the sustainability reporting; and controlling the calculations of key performance indicators for sustainability based on an assessment of the risk of error. The procedures performed in a limited assurance engagement vary in nature and timing from, and are less in extent than for, a reasonable assurance engagement. Consequently, the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained had we performed a reasonable assurance engagement. Accordingly, we do not express a reasonable assurance opinion about whether the sustainability reporting has been prepared, in all material respects, in accordance with the criteria. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion. Conclusion Based on the procedures we have performed and the evidence we have obtained, nothing has come to our attention that causes us to believe that ● Elkem’s GRI Index for 202 2 is not, in all material respects, developed and presented in accordance with the requirements of the Standards published by The Global Reporting Initiative; ● Elkem’s key performance indicators are not, in all material aspects, developed, measured and reported in accordance with the definitions and explanations provided in relation to the key performance indicators. Oslo, 8 March 2023 PricewaterhouseCoopers AS Anders Ellefsen State authorized public accountant (Norway) (2) Taxonomy report Statement on the EU Taxonomy for sustainable economic activities The EU Taxonomy is a classiﬁcation system that is part of the European Union’s policy measures to reach the EU’s Green deal, which was launched in 2019. The EU Taxonomy classiﬁes environmental performance of economic activities across a wide range of industries and sets technical requirements that corporate activities must meet in order to be considered sustainable. Purpose The main purpose of the EU Taxonomy regulation is to help investors and companies in making informed investment decisions on environmentally sustainable economic activities. It establishes criteria for determining whether an economic activity qualiﬁes as environmentally sustainable. For the purpose of the EU Taxonomy Regulation, the following are deﬁned as environmental objectives: → Climate change mitigation. → Climate change adaptation. → The sustainable use and protection of water and marine resources. → The transition to a circular economy. → Pollution prevention and control. → The protection and restoration of biodiversity and ecosystems. Scope The EU Taxonomy climate and reporting delegated acts were published in June and July 2021, respectively, while the ﬁrst mandatory year of reporting for non-ﬁnancial companies in Norway will apply from January 2024, for the ﬁscal year 2023. Elkem is in scope of the EU Taxonomy regulation, on the basis that the regulation covers large, listed companies with more than 500 employees. Although the EU Taxonomy has not entered into force in Norwegian law as of end year 2022, Elkem provides voluntary disclosures on the ﬁnancial year of 2022 based on expected interest and knowledge of the reporting requirements. As preparation to the mandatory taxonomy report in 2024 for the ﬁscal year 2023, Elkem has decided in this report to disclose the share of its eligible economic activities against the taxonomy. Hence, this report does not include alignment ﬁgures of eligible economic activities and Elkem will continue to assess the technical screening criteria for these activities in 2023, in order to report on these ﬁgures in 2024. EU has prioritised the economic activities that can make the most relevant contribution to EU’s climate and energy targets. Prioritised activities are subject to technical screening criteria set out in the taxonomy delegated acts. Given the current status of the regulatory process, silicones are within the scope of EU Taxonomy eligible activities, as silicones fall within the deﬁnition of Manufacture of Plastics in Primary form. Silicon and ferrosilicon activities are currently not deﬁned with speciﬁc criteria in the EU Taxonomy. Elkem has therefore undertaken the assessment based on available information and guidance. Changes to the factual circumstances as well as the regulatory landscape, may lead to a diﬀerent assessment of our economic activities under the Taxonomy Regulation in the future. The three stages of the EU Taxonomy There are three stages that all activities need to pass in order to be considered for the EU Taxonomy. First, the activity must substantially contribute to at least one of the six environmental objectives as deﬁned in the Regulation. What qualiﬁes as signiﬁcant is deﬁned within the technical criteria of the Regulation. The second stage is that the activity must not do any signiﬁcant harm to the other deﬁned environmental objectives. The third stage is that the company behind the economic activity must comply with a set of minimum social safeguards. Identiﬁed taxonomy-eligible activities for Elkem A taxonomy-eligible economic activity means an activity that is deﬁned in the Delegated Act (EU) 2021/2139, supplementing the Taxonomy Regulation, irrespective of whether that economic activity meets any or all of the technical screening criteria. Taxonomy-eligible activities to be disclosed for FY2022 only refer to the environmental objectives of climate change mitigation and climate change adaptation. A Delegated Act for the remaining four environmental objectives has not been published, and thus, is not yet eﬀective. A Taxonomy non-eligible economic activity is any activity that is not covered by the Taxonomy to date. Elkem has identiﬁed the following economic activities as being taxonomy-eligible under the ﬁrst two environmental objectives: 3.1 Manufacture of renewable energy technologies. 3.4 Manufacture of batteries. 3.5 Manufacture of energy eﬃciency equipment for buildings. 3.6 Manufacture of other low carbon technologies. 3.17 Manufacture of plastics in primary form. Manufacture of renewable energy technologies with highly specialised applications can be deﬁned as eligible under the EU Taxonomy. Ferrosilicon and foundry alloys are highly specialised products for wind power equipment and therefore comply with the taxonomy deﬁnition for this activity. Silicones is also a highly necessary product to secure long maturity for solar panels and is therefore deﬁned as eligible. Substaintially contribute To at least one of the six environmental objectives as deﬁned in the Regulation Do no signiﬁcant harm To any of the other ﬁve environmental objectives as deﬁnes in the proposed Regulation Comply with Minimum safeguards Manufacture of batteries is deﬁned as activities that explicitly includes manufacturing of respective components for batteries, such as battery cells, casings, and electronic components. Silicon and silicone products used in batteries have been evaluated as a key component in the battery pack. Manufacture of energy eﬃciency equipment for buildings are insulation products and their key components for application in buildings. Elkem has evaluated that the silicones products that are used in energy eﬃciency equipment serve as an important insulator component in buildings, and is therefore eligible within this category. Manufacture of other low carbon technologies that aim to substantially reduce GHG emissions in use, can qualify under this category. Microsilica has signiﬁcant and direct low carbon impact, such as reduced use of cement and longevity, when used in cement, compared to conventional cement production. Manufacture of plastics in primary form is an eligible activity under the EU Taxonomy. Although silicones are not deﬁned within the general terms of plastics (from oil), this activity gathers all Elkem's silicones products that have generic applications. The description of this economic activity in the Taxonomy refers to NACE code C20.16, which includes silicones. Silicones are used in several products that are critical to the green transition. This includes products for more energy eﬃcient technologies, where silicones bring unmatched performances. Studies show that for every ton of CO 2 emitted from silicones production and end-of-life disposal, the use of silicones allows for 9 times greater GHG emissions savings. Measuring the activity and performance Turnover: The turnover KPI is calculated as the part of net turnover associated with Taxonomy eligible activities divided by the total net turnover. The total net turnover equals the external revenue, ref note 7 in the consolidated ﬁnancial statements. Revenue associated with eligible activities Elkem's total revenue from the sale of products and services Capital expenditures: The CapEx KPI is deﬁned as the CapEx related to assets or developments associated with Taxonomy eligible activities divided by total CapEx as deﬁned in IFRS standards IAS 16, IAS 36 and IFRS 16, and can be found as “additions” in note 15, 16 and 17 in the consolidated ﬁnancial statements. CapEx related to a plan to expand Taxonomy-eligible activities has been evaluated not to be relevant expenditures to Elkem in the case of eligibility reporting. CapEx related to the purchase of output from Taxonomy-eligible economic activities and individual measures has also so far been excluded from the CapEx numerator due to low economic materiality of these expenditures. Given the nature of Elkem’s production processes, CapEx projects impacts both eligible and non-eligible activities. Since Silicones is deﬁned as eligible, we have used the revenue split of Silicones division as a proxy for the allocation of CapEx from the silicones activities. For other eligible activities we have used the total revenue split as proxy. Operating expenses: The OpEx KPI is deﬁned as operational expenses related to Taxonomy eligible assets or processes divided by the direct non-capitalised cost related to research and development and any other direct expenses relating to the day-to-day maintenance of ﬁxed assets. OpEx related to a CapEx plan to expand taxonomy- eligible activities has been evaluated not to be relevant expenses to Elkem in the case of eligibility reporting. OpEx related to the purchase of output from Taxonomy-eligible economic activities and individual measures has also so far been excluded from the OpEx numerator due to low economic materiality of these expenses. Other operating expenses directly linked to activities with turnover and activities related to selling, general, and administration are not considered as applicable for the calculation of the OpEx KPI. Assessment of Taxonomy-eligibility table Estimated EU Taxonomy-eligible economic activities in Elkem´s Revenue, CapEx and OpEx in 2022. Given the nature of Elkem’s production processes, OpEx projects impacts both eligible and non-eligible activities. We have therefore used the total revenue split of the eligible activities as a proxy for the allocation of OpEx to these activities. The total operating expenditures included in the OpEx KPI are expenses coming from following functions: → Research and development → Building renovation measures → Short-term leases → Maintenance and repair Research and development costs cover MNOK 526, related to employee beneﬁts. Building renovation measures are currently of limited relevance to Elkem, as there is no ongoing signiﬁcant project related to this subject Short term leases cover MNOK 70, described in note 16. Maintenance and repair expenses include Elkems maintenance and repair cost not qualifying for capitalization as part of the relevant asset. Repair and maintenance activities consist of MNOK 1 344. Turnover CapEx OpEx NOK millions, except percentages Economic activities Absolute % Absolute % Absolute % 3.17 Manufacture of plastics in primary form 17 229 38% 3 025 66% 708 38% 3.1 Manufacture of renewable energy technologies 791 2% 93 2% 33 2% 3.4 Manufacture of batteries 1471 3% 176 4% 61 3% 3.5 Manufacture of energy eﬃciency equipment for buildings 381 1% 67 1% 16 1% 3.6 Manufacture of other low carbon technologies 548 1% 10 0% 23 1% Total taxonomy-eligible activities 20 421 45% 3 371 73% 879 45% Total taxonomy non-eligible activities 24 642 1 239 1 060 Total 45 063 4 609 1 939 Financial Statements 2022 Contents Financial statements Consolidated statement of proﬁt or loss 164 Consolidated statement of comprehensive income 165 Consolidated statement of ﬁnancial position 166 Consolidated statement of cash ﬂows 167 Consolidated statement of changes in equity 168 General information Note 1 General information and basis of presentation 170 Note 2 Basis for preparing the consolidated ﬁnancial statements 170 Note 3 Accounting estimates 172 Group structure Note 4 Composition of the group 172 Note 5 Equity accounted investments and joint operation 178 Information about statement of proﬁt or loss Note 6 Operating segments 182 Note 7 Operating income 187 Note 8 Grants 189 Note 9 Employee beneﬁts 190 Note 10 Share-based payments 196 Note 11 Other operating expenses 198 Note 12 Other items 199 Note 13 Finance income and expenses 200 Note 14 Taxes 201 Information about statement of ﬁnancial position Note 15 Property, plant and equipment 206 Note 16 Leases 209 Note 17 Other intangible assets 212 Note 18 Goodwill 215 Note 19 Impairment assessment 216 Note 20 Inventories 219 Note 21 Trade receivables 220 Note 22 Other assets 222 Note 23 Interest-bearing assets and liabilities 224 Note 24 Provisions and other liabilities 228 Note 25 Financial assets and liabilities 230 Note 26 Hedging 237 Other information Note 27 Financial risk 241 Note 28 Capital management 248 Note 29 Number of shares 248 Note 30 Earnings per share 249 Note 31 Supplemental information to the consolidated 250 statement of cash ﬂows Note 32 Related parties 250 Note 33 Pledge of assets and guarantees 252 Note 34 Change in presentation 253 Note 35 Events after the reporting period 253 APM Alternative Performance Measures 298 Consolidated statement of proﬁt or loss Amounts in NOK million Note 2022 2021 Restated 1) 1 January - 31 December Revenue Other operating income Share of proﬁt (loss) from equity accounted investments Total operating income 7 7 5 6 45 018 746 135 45 898 33 083 586 49 33 717 Raw materials and energy for production Employee beneﬁt expenses Other operating expenses Amortisation and depreciation Impairment losses Operating proﬁt (loss) before other items 9 11 15, 16, 17 15, 16, 17 (21 976) (4 918) (6 714) (1 999) (28) 10 263 (15 985) (4 530) (5 536) (1 816) (76) 5 775 Other items 12 2 151 10 Operating proﬁt (loss) 12 414 5 785 Share of proﬁt (loss) from equity accounted ﬁnancial investments Finance income Foreign exchange gains (losses) Finance expenses Proﬁt (loss) before income tax 5 13 13 13, 16 (17) 67 85 (313) 12 236 37 40 241 (276) 5 827 Income tax (expense) beneﬁt Proﬁt (loss) for the year 14 (2 594) 9 642 (1 163) 4 664 Attributable to: Non-controlling interests' share of proﬁt (loss) Owners of the parent's share of proﬁt (loss) 80 9 561 36 4 628 Earnings per share in NOK: Basic Diluted 30 30 15.09 15.04 7.49 7.44 1) See note 34 Change in presentation Consolidated statement of comprehensive income Amounts in NOK million Note 2022 2021 Restated 1) 1 January - 31 December Proﬁt (loss) for the year 9 642 4 664 Remeasurement of deﬁned beneﬁt pension plans Tax eﬀects on remeasurement of deﬁned beneﬁt pension plans Change in fair value of equity instruments Total items that will not be reclassiﬁed to proﬁt or loss 9 14 146 (33) (4) 109 69 (10) 3 62 Currency translation diﬀerences Hedging of net investment in foreign operations Tax eﬀects hedging of net investment in foreign operations Cash ﬂow hedges Tax eﬀects on cash ﬂow hedges Share of other comprehensive income (loss) from equity accounted companies Total items that may be reclassiﬁed to proﬁt or loss in subsequent periods 14 26 14 5 765 (142) 31 992 (218) 15 1 443 358 130 (29) 979 (215) 13 1 236 Share of other comprehensive income (loss) from equity accounted companies Cash ﬂow hedges Tax eﬀects on cash ﬂow hedges Total reclassiﬁcation adjustments for the period 26 14 13 (424) 93 (317) - (282) 62 (220) Other comprehensive income (loss) for the year, net of tax 1 234 1 078 Total comprehensive income for the year 10 876 5 742 Attributable to: Non-controlling interests' share of comprehensive income Owners of the parent's share of comprehensive income Total comprehensive income for the year 86 10 790 10 876 36 5 706 5 742 Consolidated statement of ﬁnancial position Amounts in NOK million Note 31.12.2022 31.12.2021 Assets Property, plant and equipment Right-of-use assets Other intangible assets Goodwill Deferred tax assets Equity accounted investments Derivatives Other assets Total non-current assets 15, 19 16, 19 17, 19 18, 19 14 5 25, 26 22 19 520 779 1 385 984 151 1 039 1 562 716 26 136 15 722 1 017 1 602 941 48 241 304 478 20 353 Inventories Trade receivables Derivatives Other assets Restricted deposits Cash and cash equivalents Total current assets 20 21 25, 26 22 23 23 10 325 4 248 711 1 698 408 9 255 26 645 7 716 4 297 283 1 551 609 7 040 21 497 Total assets 52 781 41 850 Equity and liabilities Paid-in capital Retained earnings Non-controlling interests Total equity 29 6 228 22 412 134 28 773 8 097 11 692 86 19 874 Interest-bearing liabilities Deferred tax liabilities Employee beneﬁt obligations Derivatives Provisions and other liabilities Total non-current liabilities 16, 23 14 9 25, 26 24 10 331 1 123 489 - 232 12 175 8 409 505 611 18 182 9 724 Trade payables Income tax payables Interest-bearing liabilities Bills payable Employee beneﬁt obligations Derivatives Provisions and other liabilities Total current liabilities 16, 23 23 9 25, 26 24 5 335 1 903 204 1 742 994 109 1 545 11 832 4 614 914 1 972 2 096 976 23 1 657 12 252 Total equity and liabilities 52 781 41 850 Oslo, 8 March 2023 Zhigang Hao Chair Dag Jakob Opedal Vice chair Olivier Tillette de Clermont-Tonnerre Board member Yougen Ge Board member Jingwan Wu Board member Grace Tang Board member Marianne Elisabeth Johnsen Board member Nathalie Brunelle Board member Thomas Eggan Board member Terje Andre Hanssen Board member Marianne Færøyvik Board member Helge Aasen CEO Consolidated statement of cash ﬂows Amounts in NOK million Note 2022 2021 Operating proﬁt (loss) 12 414 5 785 Amortisation, depreciation and impairment losses 15, 16, 17 2 027 1 892 Changes in working capital 31 (1 583) (2 020) Equity accounted investments 5 (108) (15) Changes in fair value of derivatives (1 139) (9) Changes in provisions, bills receivable and other (539) (88) (Gains) losses on disposal of subsidiaries 12 (159) - Interest payments received 66 34 Interest payments made (319) (242) Income taxes paid (1 345) (423) Total cash ﬂow from operating activities 9 314 4 913 Investments in property, plant and equipment and intangible assets 15, 17 (4 213) (3 266) Received investment grants 8 156 138 Proceeds from sale of property, plant and equipment 15, 17 70 31 Acquisition of subsidiaries, net of cash acquired 4 (108) - Disposal of subsidiaries, net of cash 4 151 - Payment of contingent consideration related to acquisitions (IFRS 3) 24, 31 (176) (78) Acquisition of and capital contribution to joint ventures 5 (292) - Other investments / sales 9 (10) Total cash ﬂow from investing activities (4 404) (3 185) Dividends paid to non-controlling interests (38) (58) Dividends paid to owners of the parent (1 900) (96) Capital increase 29 - 1 900 Net sale (purchase) of treasury shares 29 (38) (278) Net changes in bills payable and restricted deposits 23 (218) 709 Payment of lease liabilities 16, 23 (116) (118) New interest-bearing loans and borrowings 23 6 648 3 177 Payment of interest-bearing loans and borrowings 23 (7 237) (3 180) Total cash ﬂow from ﬁnancing activities (2 899) 2 056 Change in cash and cash equivalents 2 011 3 784 Currency translation diﬀerences 205 101 Cash and cash equivalents opening balance 7 040 3 154 Cash and cash equivalents closing balance 23 9 255 7 040 Consolidated statement of changes in equity 2022 Amounts in NOK million Share capital Other paid-in capital Total paid-in capital Foreign currency translation reserve Cash ﬂow hedge reserve Other retained earnings Total retained earnings Total owners share Non-controlling interest Total Closing balance 31 December 2021 Changes in accounting policy (note 2) Opening balance 1 January 2022 3 197 - 3 197 4 899 - 4 899 8 097 - 8 097 1 266 - 1 266 355 - 355 10 071 (24) 10 047 11 692 (24) 11 668 19 789 (24) 19 764 86 - 86 19 874 (24) 19 850 Proﬁt (loss) for the year Other comprehensive income for the year Total comprehensive income for the year - - - - - - - - - - 661 661 - 444 444 9 561 124 9 685 9 561 1 228 10 790 9 561 1 228 10 790 80 6 86 9 642 1 234 10 876 Share-based payments (note 10) Capital increase (note 29) Net movement treasury shares (note 29) Dividends to equity holders (note 28) Closing balance - - - - 3 197 24 - 7 (1 900) 3 030 24 - 7 (1 900) 6 228 - - - - 1 927 - - - - 798 - - (46) - 19 686 - - (46) - 22 412 24 - (38) (1 900) 28 639 - - - (38) 134 24 - (38) (1 938) 28 773 2021 Amounts in NOK million Share capital Other paid-in capital Total paid-in capital Foreign currency translation reserve Cash ﬂow hedge reserve Other retained earnings Total retained earnings Total owners share Non-controlling interest Total Opening balance 2 907 3 389 6 296 806 (189) 5 615 6 232 12 527 108 12 635 Proﬁt (loss) for the year Other comprehensive income for the year Total comprehensive income for the year - - - - - - - - - - 460 460 - 544 544 4 628 75 4 703 4 628 1 079 5 706 4 628 1 079 5 706 36 (0) 36 4 664 1 078 5 742 Share-based payments (note 10) Capital increase (note 29) Net movement treasury shares (note 29) Dividends to equity holders (note 28) Closing balance - 291 - - 3 197 28 1 610 (32) (96) 4 899 28 1 900 (32) (96) 8 097 - - - - 1 266 - - - - 355 - - (246) - 10 071 - - (246) - 11 692 28 1 900 (278) (96) 19 789 - - - (58) 86 28 1 900 (278) (154) 19 874 Notes to the consolidated ﬁnancial statements 1. General information Elkem ASA is a limited liability company located in Norway and whose shares are publicly traded on Oslo Børs. Elkem ASA is owned 52.9% by Bluestar Elkem International Co. Ltd S.A., Luxembourg, which is under the control of Sinochem Holdings Co., Ltd (Sinochem), a company registered and domiciled in China. Elkem is one of the world’s leading providers of advanced material solutions shaping a better and more sustainable future. The company develops silicones, silicon products and carbon solutions by combining natural raw materials, renewable energy and human ingenuity. Elkem helps its customers create and improve essential innovations like electric mobility, digital communications, health and personal care as well as smarter and more sustainable cities. With a strong track record since 1904, its global team of more than 7,000 people has a joint commitment to stakeholders: Delivering your potential. In 2022, Elkem achieved an operating income of NOK 45,898 million. The consolidated ﬁnancial statements for Elkem ASA (hereafter Elkem/the group), including notes, for the year 2022 were authorised for issue by the Board of Directors of Elkem ASA on 8 March 2023. 2. Basis for preparing the consolidated ﬁnancial statements Compliance The consolidated ﬁnancial statements are prepared and in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union (EU) and eﬀective at 31 December 2022. All accounting policies are used consistently by all subsidiaries in the consolidated ﬁnancial statement. Relevant ﬁnancial reporting principles are described in each note to the consolidated ﬁnancial statements. Preparation of consolidated ﬁnancial statements The consolidated ﬁnancial statements are prepared on a historical cost basis, with the exception of derivative ﬁnancial instruments and other ﬁnancial assets measured at fair value. The presentation currency of Elkem is Norwegian Krone (NOK). All ﬁnancial information is presented in NOK million, unless otherwise stated. As a result of rounding adjustments, the amounts shown in one or more rows and columns included in the consolidated ﬁnancial statements, may not add up to the total. In text, the current year's ﬁgures are presented outside parentheses, followed by the comparative ﬁgures presented in parentheses. The consolidated ﬁnancial statements have been prepared based on the going concern assumption. Foreign currency translation Each entity in the group determines its functional currency based on the economic environment in which it operates, and items included in the ﬁnancial statements of each entity are measured using that functional currency. When preparing the ﬁnancial statements of each individual group entity, transactions in currencies other than the entity's functional currency are recognised in the functional currency, using the transaction date’s currency rate. Monetary items denominated in foreign currencies are translated to each entity's functional currency using the closing rate at the end of the reporting period, and any gains (losses) are reported in the statement of proﬁt or loss. Non- monetary items that are measured at fair value in a foreign currency are translated using the exchange rate at the date when the fair value was measured. Currency gains (losses) related to operating activities, i.e. receivables, payables, bank accounts for operating purposes including current intragroup balances, are recognised as a part of other items. Currency eﬀects recognised in ﬁnance income and expenses are only related to ﬁnancing activities such as loans, lease liabilities, long-term placements and dividends. Foreign currency diﬀerences are recognised in other comprehensive income for the following items: → a ﬁnancial asset or liability designated as a hedging instrument in a cash ﬂow hedge, to the extent that the hedge is eﬀective → loans in foreign currencies designated as hedging instruments in a hedge of a net investment in a foreign operation In consolidation of the statement of proﬁt or loss and the statement of ﬁnancial position, separate group entities with other functional currency than the group's presentation currency, are translated directly into the presentation currency as follows: → Assets and liabilities are translated using the exchange rate at the end of the reporting period → Income and expenses are translated using an average exchange rate per month → Equity transactions, except for proﬁt or loss for the period, are translated using the transaction date rates All resulting exchange diﬀerences are booked as a separate component in other comprehensive income (OCI) Any goodwill arising on acquisition of a foreign operation and any fair value adjustment to the carrying amount of assets and liabilities arising on the acquisition, are treated as assets and liabilities of the foreign operations. On disposal of a foreign entity, the deferred cumulative amount recognised in other comprehensive income relating to that particular foreign operation, is recognised in the statement of proﬁt or loss. Statement of cash ﬂows The statement of cash ﬂows is prepared under the indirect method. Cash inﬂows and outﬂows are shown separately for investing and ﬁnancing activities, while operating activities include both cash and non-cash eﬀect items. Interest received and paid and other ﬁnancial expenses, such as bank guarantee expenses, are reported as a part of operating activities. Net currency gains or losses related to ﬁnancing activities are reported as part of ﬁnancing activities. Dividends received from joint ventures and associates that do not operate within Elkem's main business areas are included in investing activities. Dividend to shareholders Dividend is recognised as a liability when the shareholders' right to payment is established, which is when the dividend is approved by the General Meeting. Changes in accounting policies and correction of material errors Changes in accounting policies and correction of material errors are recognised retrospectively by restating the comparative amounts for the prior period presented, including the opening balance of the prior year. Changes in accounting policy The IFRS Interpretations Committee (IFRIC) published an agenda decision in April 2021 “Conﬁguration or Customisation Costs in a Cloud Computing Arrangement (IAS 38 Intangible Assets)”, conﬁrming that a cloud computing customer should expense the costs of conﬁguring or customising a supplier’s application software in a Software as a Service arrangement. From 1.1.2022 Elkem has applied this policy for costs related to the implementation of cloud computing. Following the accounting policy change NOK 24 million was adjusted towards opening balance of equity in second quarter of 2022. Due to materiality comparable ﬁgures are not restated. Change in presentation Presentation of realised hedge ineﬀectiveness is changed from raw materials and energy for production to other items in the statement of proﬁt and loss. The change is done to present realised eﬀects together with unrealised eﬀects from ineﬀectiveness. The impact from realised ineﬀectiveness has not been material in previous years. Comparable ﬁgures are restated. See note 34 Changes in accounting policies. New and revised standards - adopted New or revised accounting standards and interpretations implemented as of 1 January 2022 are among others Onerous Contracts – Costs of Fulﬁlling a Contract (Amendments to IAS 37) and Proceeds before Intended Use (Amendments to IAS 16 Property, plant and equipment). The new or revised accounting standards and interpretations do not represent a signiﬁcant impact to Elkem's accounting policies. New standards, interpretations and amendments - not yet eﬀective The consolidated ﬁnancial statements will be aﬀected by future changes in IFRS. No standards, interpretations or amendments published at the balance sheet date are expected to have signiﬁcant eﬀect on the group. 3. Accounting estimates The preparation of the consolidated ﬁnancial statements according to IFRS requires management to make judgments, estimates and assumptions that aﬀect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. When management makes estimates and assumptions concerning the future, the resulting accounting estimates will, by deﬁnition, seldom equal the actual outcome. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions of reported estimates are recognised in the period in which the estimates are revised and in any future period aﬀected. Changes in accounting estimates are recognised prospectively by including them in the statement of proﬁt or loss in the period of the change and future periods, if the change aﬀects both. The estimates and assumptions that have a signiﬁcant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next ﬁnancial year are addressed in the diﬀerent notes. Information about judgements, assumptions and estimation uncertainties at 31 December 2022 that have the most signiﬁcant eﬀects on the amounts recognised in the ﬁnancial statements is included in the following notes: → Note 14 Taxes → Note 15 Property, plant and equipment → Note 19 Impairment assessment → Note 24 Provisions and other liabilities → Note 25 Financial assets and liabilities 4. Composition of the group Principle Consolidation The consolidated ﬁnancial statements include the ﬁnancial statements of Elkem ASA and entities controlled directly or indirectly by Elkem ASA. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to aﬀect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which the group obtains control, and are deconsolidated from the date that control ceases. Proﬁt or loss and each component of OCI are attributed to the equity holders of the parent of the group and to non- controlling interests, presented on separate lines in the ﬁnancial statements. All intra-group assets and liabilities, equity, income and expenses and gains and losses are eliminated in full on consolidation. Business combinations Business combinations are accounted for using the acquisition method in accordance with IFRS 3. The consideration transferred in a business combination is measured at fair value, and goodwill is measured as the excess of the sum of consideration transferred, and net identiﬁable fair value of transferred assets and liabilities. Elkem's contingent consideration is classiﬁed as a ﬁnancial liability and measured at fair value at the acquisition date. The liability is subsequently measured at fair value at each reporting date, with changes recognised in other items in the statement of proﬁt or loss. Acquisition-related costs are expensed as incurred. Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners, and therefore no goodwill is recognised as a result. Adjustments to non-controlling interests arising from transactions that do not involve the loss of control, are based on a proportionate amount of the net assets of the subsidiary. During a measurement period of maximum one year provisional amounts recognised at the acquisition date are adjusted to reﬂect new information obtained about facts and circumstances that existed on the date of acquisition. Any adjustments of identiﬁed assets or liabilities in the acquisition are oﬀset by a corresponding increase / decrease in goodwill. Business combinations under common control Business combinations involving entities under common control are accounted for on a historical cost basis. This means applying book value accounting, which is applied in the following manner: → Assets and liabilities of the combining entities are reﬂected at their carrying amounts. → No new goodwill is recognised as a result of the combination. → The statement of proﬁt or loss reﬂects the result of the combining entities for the full year, irrespective of when the combination took place. → Comparative ﬁgures are restated. → The purchase price is booked against equity at the acquisition date. Judgements and estimates Business combinations Elkem uses valuation models as a basis for the measurement of the fair value of net identiﬁable value of transferred assets and liabilities in a business combination. Fair values are normally not readily observable in an active market for individual assets and liabilities in the business which Elkem operates. Property, plant and equipment is valued using the cost approach and by estimating the current cost to purchase or replace the asset, at today’s current condition. Intangible assets are identiﬁed and valued based on a relief from royalty method and multi-period excess earnings method, whereby; the relief from royalty method considers the discounted estimated royalty payments that are expected to be avoided as a result of the patents being owned, and the multi-period excess earnings method considers the present value of net cash ﬂows expected to be generated by the customer relationships, by excluding any cash ﬂows related to contributory assets. Valuations are subject to numerous assumptions, the fair value estimates may impact assessment of possible impairment of assets and / or goodwill in future periods. Elkem ASA and the following subsidiaries and joint operations make up the composition of the group and are included in the consolidated ﬁnancial statement Company Functional currency Country of incorporation 31.12.2022 Equity interests 31.12.2021 Equity interests Owner Elkania DA (Joint operation) NOK Norway 50 % 50 % Elkem ASA Elkem (Thailand) Co., Ltd. THB Thailand 100 % 100 % Elkem ASA Elkem Carbon (China) Co., Ltd. CNY China 100 % 100 % Elkem Carbon Singapore Pte. Ltd. Elkem Carbon AS NOK Norway 100 % 100 % Elkem ASA Elkem Carbon Malaysia Sdn. Bhd. MYR Malaysia 100 % 100 % Elkem Carbon AS Elkem Carbon Singapore Pte. Ltd. SGD Singapore 100 % 100 % Elkem Carbon AS Elkem Chartering Holding AS NOK Norway 80 % 80 % Elkem ASA Elkem Digital Oﬃce AS NOK Norway 100 % 100 % Elkem ASA Elkem Distribution Center B.V. EUR Netherlands 100 % 100 % Elkem ASA Elkem Dronﬁeld Ltd. GBP United Kingdom 100 % 100 % Elkem UK Holdings Ltd. Elkem Egypt for Industry, USD Egypt 100 % 100 % Elkem International AS Contracting & Trading S.A.E. Elkem Ferroveld JV (Joint operation) ZAR South Africa 50 % 50 % Elkem Carbon AS Elkem Foundry (China) Co., Ltd. CNY China 100 % 100 % Elkem ASA Elkem GmbH EUR Germany 100 % 100 % Elkem ASA Elkem Iberia S.L.U EUR Spain 100 % 100 % Elkem ASA Elkem International AS NOK Norway 100 % 100 % Elkem ASA Elkem International Trade (Shanghai) Co., Ltd. CNY China 100 % 100 % Elkem International AS Elkem Ísland ehf. NOK Iceland 100 % 100 % Elkem ASA Elkem Japan K.K. JPY Japan 100 % 100 % Elkem ASA Elkem Korea Co., Ltd. KRW Republic 100 % 100 % Elkem ASA of Korea Elkem Ltd. GBP United Kingdom 100 % 100 % Elkem UK Holdings Ltd. Elkem Madencilik Metalurji Sanayi EUR Turkey 100 % 100 % Elkem International AS Ve Ticaret Ltd. STI Elkem Materials, Inc. USD USA 100 % 100 % NEH LLC Elkem Materials Delaware, Inc. USD USA 100 % 100 % Elkem Materials, Inc. Elkem Materials Processing (Tianjin) Co., Ltd. CNY China 100 % 100 % Elkem ASA Elkem Materials Processing Services BV EUR Netherlands 100 % 100 % Elkem ASA Elkem Materials South America Ltda. BRL Brazil 100 % 100 % Elkem Materials, Inc. Elkem Metal Canada Inc. CAD Canada 100 % 100 % Elkem ASA Elkem Milling Services GmbH EUR Germany 100 % 100 % Elkem ASA Elkem Nordic A.S. DKK Denmark 100 % 100 % Elkem ASA Elkem Oilﬁeld Chemicals FZCO Ltd. AED UAE 51 % 51 % Elkem ASA Elkem Paraguay S.A. USD Paraguay 100 % 100 % 3) Elkem ASA Elkem Participaçòes Indústria e Comércio Limitada BRL Brazil 100 % 100 % Elkem Carbon AS Elkem Processing Services S.A. 1) EUR Belgium 100 % - Elkem ASA Elkem S.à r.l. EUR France 100 % 100 % Elkem ASA Elkem S.r.l. EUR Italy 100 % 100 % Elkem ASA Company Functional currency Country of incorporation 31.12.2022 Equity interest 31.12.2021 Equity interest Owner Elkem Silicon Materials (Lanzhou) Co., Ltd. CNY China 100 % 100 % Elkem ASA Elkem Silicon Product Development AS NOK Norway 100 % 100 % Elkem ASA Elkem Siliconas España S.A.U EUR Spain 100 % 100 % Elkem ASA Elkem Silicones (UK) Ltd. GBP United Kingdom 100 % 100 % Elkem UK Holdings Ltd. Elkem Silicones Brasil Ltda. BRL Brazil 100 % 100 % Elkem ASA Elkem Silicones Canada Corp. CAD Canada 100 % 100 % Elkem ASA Elkem Silicones Czech Republic, s.r.o. CZK Czech Republic 100 % 100 % Elkem ASA Elkem Silicones Finland OY EUR Finland 100 % 100 % Elkem ASA Elkem Silicones France SAS EUR France 100 % 100 % Elkem ASA Elkem Silicones Germany GmbH EUR Germany 100 % 100 % Elkem ASA Elkem Silicones Guangdong Co., Ltd. CNY China 100 % 100 % Elkem ASA Elkem Silicones Hong Kong Co., Ltd. HKD Hong Kong 100 % 100 % Elkem ASA Elkem Silicones Korea Co., Ltd. KRW Republic of Korea 100 % 100 % Elkem ASA Elkem Silicones Material Zhongshan Co., Ltd. CNY China 100 % 100 % Elkem Silicones Guangdong Co., Ltd. Elkem Silicones México S. De R.L. De C.V. MXN Mexico 100 % 100 % Elkem ASA Elkem Silicones Poland sp. z o.o. PLN Poland 100 % 100 % Elkem ASA Elkem Silicones Scandinavia AS NOK Norway 100 % 100 % Elkem ASA Elkem Silicones Services S.à r.l. EUR France 100 % 100 % Elkem ASA Elkem Silicones Shanghai Co., Ltd. CNY China 100 % 100 % Elkem ASA Elkem Silicones USA Corp. USD USA 100 % 100 % Elkem ASA Elkem Siliconi Italia S.r.l. EUR Italy 100 % 100 % Elkem ASA Elkem Singapore Materials Pte. Ltd. SGD Singapore 100 % 100 % Elkem ASA Elkem South Asia Private Limited INR India 100 % 100 % Elkem ASA Elkem UK Holdings Ltd. GBP United Kingdom 100 % 100 % Elkem ASA Elkem Uruguay S.A. USD Uruguay 100 % 100 % Elkem ASA Euro Nordic Logistics BV EUR Netherlands 80 % 80 % Elkem Chartering Holding AS Euro Nordic Netherlands BV EUR Netherlands 80 % 80 % Euro Nordic Logistics BV Explotación de Rocas Industriales y EUR Spain 100 % 100 % Elkem ASA Minerales S.A. (ERIMSA) Iniconce, S.L. EUR Spain 100 % 100 % Explotación de Rocas Industriales y Minerales S.A. Jiangxi Bluestar Xinghuo Silicones Co., Ltd. CNY China 100 % 100 % Elkem ASA NEH LLC USD USA 100 % 100 % Elkem ASA NorenoComercial Importada e BRL Brazil 100 % 100 % Elkem Participaçòes Exportadora Limitada Indústria e Comércio Limitada Norsil, S.A. EUR Spain 100 % 100 % Iniconce, S.L Tifwer Trade S.A. USD Uruguay 100 % 100 % Elkem Uruguay S.A. Vianode AS 2) NOK Norway - 100 % Elkem ASA 1) Previously KeyVest Belgium S.A. 2) See Loss of control. 3) Elkem ASA owns 79% and Elkem Uruguay S.A owns 21% Changes in composition of the group in 2022, business combinations 31 January 2022 Elkem increased its ownership in Salten Energigjenvinning AS (SEAS) from 50% to 100% by acquisition from Kvitebjørn Energi AS. Salten Energigjenvinning AS operates the Elkem Salten energy recovery plant. The investment in the energy recovery plant further strengthens Elkem's eﬀorts to ensure environmentally friendly silicon and ferrosilicon production with the lowest possible emissions and lowest possible use of resources. Salten Energigjenvinning AS was merged with Elkem ASA in 2022 and is presented within the Silicon products operating segment. The energy recovery plant has been built in partnership between Elkem and Kvitebjørn Energi. The total investment in the energy recovery plant has amounted to around NOK 1,180 million, ﬁnanced through a NOK 350 million grant from Enova, external debt and some equity. The book value of Elkem's 50% equity accounted joint venture was NOK 47 million at 31 January 2022. The diﬀerence between the fair value and the book value of the 50% share results in a fair value gain of NOK 75 million. This gain is partially oﬀset by a loss on pre-existing relationships of NOK 58 million related to delivery of heat from Elkem ASA to Salten Energigjenvinning AS and a loss of NOK 13 million related to the cash ﬂow hedge reserve from an interest rate hedge in SEAS which has been reclassiﬁed from other comprehensive income to other items in proﬁt and loss as a result of the transaction (see note 12 Other items). If the company had been part of the group from 1 January 2022 revenue would have increased with NOK 1 million and proﬁt after tax would have decreased with NOK 6 million. 20 June 2022 Elkem acquired Elkem Processing Services S.A (formerly KeyVest Belgium S.A), a specialist company in the sourcing of materials and production of metal powders to the refractory industry and other segments including advanced ceramics. With the acquisition of Elkem Processing Services S.A Elkem will enable further growth by providing additional specialised products to our current customers, improve service level and processing capabilities and grow in adjacent segments. The acquisition will expand Elkem's product portfolio and create a platform for further growth. The production facility and related inventory amounts to around NOK 30 million. After the acquisition date revenues of NOK 37 million and proﬁt after tax of NOK 1 million from the company has been included in consolidated statement of comprehensive income. If the company had been part of the group from 1 January 2022 revenue and proﬁt after tax would have increased with NOK 96 million and NOK 16 million respectively, including a NOK 5 million gain from bargain purchase. Elkem Processing Services S.A is presented within the Silicon Products operating segment. Net cash outﬂow 2022 Cash transferred on acquisition (156) Cash and cash equivalents of the acquiree 48 Acquisition of subsidiaries, net of cash acquired (108) The table below summarise the total consideration and the provisional amounts recognised for assets acquired and liabilities assumed after the business combination: Consideration 2022 Cash transferred on acquisition 156 Fair value of 50% pre-transaction ownership in SEAS 122 Total consideration 278 Assets acquired and liabilities assumed Amounts in NOK million Carrying amount Excess value Fair value Property, plant and equipment Other intangible assets Deferred tax assets Inventories Trade receivables Other assets, current Cash and cash equivalents Deferred tax liabilities Interest-bearing liabilities, non-current Derivatives, non-current Trade payables Income tax payables Interest-bearing liabilities, current Provisions and other liabilities, current Total identiﬁable net assets 823 0 7 29 10 13 48 - (650) (87) (7) (3) (10) (46) 128 119 6 - - - - - (28) - - - - - - 97 942 6 7 29 10 13 48 (28) (650) (87) (7) (3) (10) (46) 225 Loss on pre-existing relationship Gain on bargain purchase 1) Total recognised - - 128 - - 97 58 (5) 278 1) After the transaction process started, KeyVest delivered better than expected results. This was not fully reﬂected in the ﬁnal purchase price, resulting in a bargain purchase. Acquisition-related costs of NOK 2 million is recognised in other items in the statement of proﬁt or loss in 2022. Loss of control 6 April 2022 Elkem, Hydro and Altor (Altor Fund V) announced a partnership with the intention to accelerate the growth of Elkem ASA's subsidiary Vianode AS, a producer of sustainable battery materials. The ﬁnal regulatory approvals for the transaction were received on the 14 September 2022 upon which Elkem lost of control of Vianode. Elkem has recognised a gain of NOK 150 million in the third quarter resulting from the loss of control. The entire gain is attributable to the fair value measurement of Elkem's retained investment in Vianode. Following the transaction Elkem will classify the remaining investment as a joint venture and measure the investment using the equity method of accounting. The value of the investment on initial recognition was NOK 576 million including the ﬁrst tranche of capital injection on loss of control, NOK 134 million. Vianode had a negative overdraft position at the transaction date resulted in a positive cash eﬀect for the group on disposal of NOK 151 million. Net cash inﬂow 2022 Cash received on disposal - Cash and cash equivalents of the subsidiaries 151 Disposal of subsidiaries, net of cash 151 Changes in composition of the group in 2021, business combination No business combinations took place in 2021. 5. Equity accounted investments and joint operations Principle Joint arrangements Investments in joint arrangements are classiﬁed as either joint operations or joint ventures, depending on the contractual rights and obligations of each investor. Joint ventures are accounted for using the equity method. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise Elkem's share of the proﬁt or loss, and other comprehensive income of the investee after the date of acquisition. In cases where a joint venture's loss or other comprehensive income exceed the initially recognised cost the carrying amount is presented to reﬂect Elkem's liability to ﬁnance the joint venture only to the extent that Elkem has an obligation to fund the investees operations. Any liability to ﬁnance a joint venture is presented either as part of provisions and other liabilities, current, or netted against Elkem's receivables towards the joint venture. The group's interest in joint operations is recognised in relation to its interests in the joint operation: → Assets, including its share of any assets held jointly → Liabilities, including its share of any liabilities incurred jointly → Revenue from the sale of its share of the output arising from the joint operation → Expenses, including its share of any expenses incurred jointly Investments in associates Associates are those entities in which the group has signiﬁcant inﬂuence, but no control over the ﬁnancial and operating policies. Signiﬁcant inﬂuence is presumed to exist when the group holds between 20% and 50% of the voting power of another entity. Investments in associates are accounted for using the equity method. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of the proﬁt or loss and other comprehensive income of the investee after the date of acquisition. In cases where an associates' loss or other comprehensive income exceed the initially recognised cost the carrying amount is presented to reﬂect Elkem's liability to ﬁnance the associate only to the extent that Elkem has an obligation to fund the investees operations. Any liability to ﬁnance an associate is presented either as part of provisions and other liabilities, current, or netted against Elkem's receivables towards the associate. The group’s investments in associates includes goodwill identiﬁed on acquisition. Upon disposal of an associate that results in the group losing signiﬁcant inﬂuence over that associate, any retained investment is measured at fair value at that date. Share of proﬁt from investments in associates and joint ventures Share of proﬁt (loss) from investments in associates and joint ventures is recognised in the statement of proﬁt or loss depending on the purpose of the investments. Investments that are closely related to the group's main activities are recognised as share of proﬁt from equity accounted companies, included in operating income. Investments in associates and joint ventures that do not operate within Elkem's main business areas are recognised as share of proﬁt from equity accounted ﬁnancial investments. Elkem has interests in the following joint arrangements and associates Name of entity Business oﬃce Country Principal actvities Classiﬁcation % equity interests 2022 % equity interests 2021 Elkem Ferroveld JV Ferrobank South Africa Electrode paste Joint 50 % 50 % Emalahleni production operation Elkania DA Hauge i Dalane Norway Microﬁne weighting Joint 50 % 50 % material operation North Sea Container Line AS Haugesund Norway Shipping services Joint venture 50 % 50 % North-Sea Management AS Haugesund Norway Shipping services Joint venture 50 % 50 % Salten Energigjenvinning AS Oslo Norway Energy production Joint venture - 50 % Klaﬁ EHF Grundartangi, Iceland Transportation / Joint venture 50 % 50 % Akranes harbour services Weldermate AS Oslo Norway Robot welding systems Joint venture 50 % 50 % Vianode AS Oslo Norway Battery materials Joint venture 40 % - Jiangxi Guoxing Intelligence Yangjialing China Energy production Joint venture 35 % - Energy Co. Ltd Euro Partnership BV Moerdijk Netherlands Ship management services Associate 50 % 50 % Combined Cargo Moerdijk Netherlands Warehousing Associate 33 % 33 % Warehousing BV Euro Nordic Agencies Antwerpen Belgium Ship agencies services Associate 50 % 50 % Belgium NV EPB Chartering AS Oslo Norway Deep sea charter services Associate 25 % 25 % GIE Osiris Roussillon France Business supplies and equipment Associate 25 % 25 % Future Materials AS Grimstad Norway Marketing of research facilities Associate 20 % 20 % The share of equity interests are equal to Elkem's voting rights, with the exception of Elkem's investments in Vianode AS where the parties in accordance with the shareholder agreement have 33,33% ownership inﬂuence. The shareholder agreements for Jiangxi Guoxing Intelligence Energy Co. Ltd requires a two-third majority in order to approve a majority of business decision on behalf of the entity, making Elkem together with one other party in control of the business. Of the entities above, Salten Energigjenvinning AS (SEAS) and Vianode AS is classiﬁed to not operate within Elkem's main business areas. There is no quoted market price for the investments. 31 January 2022 Elkem increased its ownership in Salten Energigjenvinning AS (SEAS) from 50% to 100% by acquisition from Kvitebjørn Energi AS. The total investment in the energy recovery plant has amounted to around NOK 1,180 million, ﬁnanced through a NOK 350 million grant from Enova, external debt and some equity. The book value of Elkem's 50% share was NOK 47 million at 31 January 2022. The diﬀerence between the fair value and the book value of the 50% share results in a fair value gain of NOK 75 million. This gain is partially oﬀset by a loss on pre-existing relationships of NOK 58 million and a loss of NOK 13 million related to the cash ﬂow reserve from an interest rate hedge in SEAS which has been reclassiﬁed from other comprehensive income to other items in proﬁt and loss as a result of the transaction (see note 12 Other items). If the company had been part of the group from 1 January 2022 revenue would have increased with NOK 1 million and proﬁt after tax would have decreased with NOK 6 million. 6 April 2022 Elkem, Hydro and Altor (Altor Fund V) announced a partnership with the intention to accelerate the growth of Elkem ASA's subsidiary Vianode AS, a producer of sustainable battery materials. The ﬁnal regulatory approvals for the transaction were received on the 14 September 2022 upon which Elkem lost of control of Vianode. Elkem has recognised a gain of NOK 149 million in the third quarter resulting from the loss of control. The entire gain is attributable to the fair value measurement of Elkem's retained investment in Vianode. Following the transaction Elkem classiﬁed the remaining investment as a joint venture and measure the investment using the equity method of accounting. The value of the investment on initial recognition was NOK 576 million including the ﬁrst tranche of capital injection on loss of control, NOK 134 million. Elkem has also committed to cover its proportion of total capital injections in Vianode AS. Elkem's proportion is NOK 534.5 million, whereof NOK 267 million is paid as of 31 December 2022. At the end of 2022 Elkem invested in Jiangxi Guoxing Intelligence Energy Co. Ltd (Jinangxi Energy) an entity established to build a cogeneration production facility near Elkem's plant Silicones Xinghuo. Elkem has committed to cover its proportion of total estimated capital injections in Jinangxi Energy of CNY 48.7 million, whereof CNY 17.5 million is paid as of 31 December 2022. In addition Elkem has committed to sell the land, buildings and equipment needed to establish the cogeneration facility and when the facility is up and running committed to supply excess steam from production. See note 32 Related parties for commitments and transactions related to the joint ventures and associates. Movements in equity accounted investments 2022 2021 Joint Joint Amounts in NOK million ventures Associates Total ventures Associates Total Opening balance 115 126 241 74 106 181 cquisition of and capital contribution to joint ventures A 292 - 292 - - - hange in equity interest, in relation to business combinations C (47) - (47) - - - hange in equity interest, in relation to disposal of subsidiaries C 443 - 443 - - - ividend received D (13) (14) (26) (28) (7) (34) hare of proﬁt (loss) from equity accounted companies S 42 93 135 19 31 49 hare of proﬁt (loss) from equity accounted ﬁnancial investments S (17) - (17) 37 - 37 art of other comprehensive income P 7 7 15 12 - 12 urrency translation diﬀerences C 0 5 5 1 (4) (3) Closing balance 822 217 1 039 115 126 241 Share of proﬁt and loss and carrying amount for equity accounted investments 2022 31.12.2022 2021 31.12.2021 Amounts in NOK million Share of proﬁt Carrying amount Share of proﬁt Carrying amount North Sea Container Line AS 42 95 19 65 North-Sea Management AS (0) 2 1 3 Salten Energigjenvinning AS (6) - 37 46 Klaﬁ EHF (0) 1 (1) 1 Weldermate AS (0) 0 - 0 Vianode AS (11) 699 - - Jiangxi Guoxing Intelligence Energy Co. Ltd - 25 - - Euro Partnership BV 10 44 11 39 Combined Cargo Warehousing BV 1 6 1 5 Euro Nordic Agencies Belgium NV 1 4 18 36 EPB Chartering AS 80 117 (0) 2 GIE Osiris - 46 - 44 uture Materials AS F - 0 - 0 Total 117 1 039 86 241 Cash-ﬂow from operations, equity accounted investments Amounts in NOK million 2022 2021 Share of proﬁt (loss) from equity accounted investments (135) (49) Dividend received 26 34 Equity accounted investments (108) (15) Summary of ﬁnancial information for joint ventures on a 100% basis Amounts in NOK million Vianode AS 1) Other Total 2022 Other Total 2021 Current assets, including cash and cash equivalents NOK 784 million (NOK 92 million) Non-current assets Current liabilities, including current ﬁnancial liabilities NOK 0 million (NOK 0 million) Non-current liabilities, including non-current ﬁnancial liabilities NOK 0 million (NOK 651 million) Net assets/equity 729 783 120 127 1 265 269 92 94 - 268 998 875 214 127 1 533 234 817 112 710 229 234 817 112 710 229 Excess value Elkem's carrying amount Total revenue Total expenses, including depreciation and amortisation NOK 31 million (NOK 5 million) and other items Financial income, including interest income NOK 0 million (NOK 0 million) Financial expenses, including interest expenses NOK 4 million (NOK 11 million) Tax expense Total proﬁt for the year 193 699 0 (33) 5 (0) 0 (28) - 123 907 (834) 3 (4) (0) 71 193 822 907 (867) 8 (4) (0) 43 - 115 777 (715) 125 (76) (0) 110 - 115 777 (715) 125 (76) (0) 110 Other comprehensive income Total comprehensive income - (28) (14) 57 (14) 29 24 134 24 134 Elkem's share of proﬁt for the year Elkem's share of other comprehensive income (11) - 36 7 24 7 55 12 55 12 1) The ﬁgures for Vianode AS is based on preliminary ﬁgures for 2022 Summary of ﬁnancial information for associates on a 100% basis Amounts in NOK million Total 2022 Total 2021 Total operating income 1 785 152 Total expenses (1 437) (53) Total proﬁt for the year 347 99 Other comprehensive income 29 - Total comprehensive income 377 99 Elkem's share of proﬁt for the year 93 31 Elkem's share of other comprehensive income 7 - Net assets/equity 768 417 Elkem's carrying amount 217 126 6. Operating segments Principle Elkem identiﬁes its segments according to the organisation and reporting structure as decided and followed up by group management. Operating segments are components of a business that are evaluated regularly by the chief operating decision maker, deﬁned as the CEO, for the purpose of assessing performance and allocating resources. Elkem's operating segments represent separately managed business areas with unique products serving diﬀerent markets. Segment performance is evaluated based on EBITDA which is the primary segment result and operating proﬁt (loss) before other items (EBIT), see deﬁnitions below. Elkem's ﬁnancing and income tax are managed on group basis and are not allocated to operating segments. Transactions between operating segments are conducted on an arm's length basis in a manner similar to transactions with third parties. Revenues are, in addition, disaggregated by geographical market based on the location of the customer. Non-current assets by geographical areas are based on the location of the entity owning the assets. The segment reporting is based on the accounting policies applied for the group with the exception of: Realised eﬀects from hedge ineﬀectiveness and from the discontinuation of hedging is included in other items in Elkem's statement of proﬁt and loss, but included in operating expenses in the segment reporting. This is because management follows up the operating segments including the impact of the realised eﬀects from power contracts. Elkem has previously included realised eﬀects from discontinuation of hedging in other items for both group and operating segments. The change in presentation does not impact comparable ﬁgures for 2021. Lease payments under internal lease agreements are recognised as operating expenses on a straight-line basis over the lease term. Elkem's operating segments Elkem identiﬁes its segments according to the organisation and reporting structure used by group management. Elkem has three reportable segments; Silicones, Silicon Products and Carbon Solutions. The Silicones division produces and sells a range of silicone- based products across various sub-sectors including release coatings, engineering elastomers, healthcare products, specialty ﬂuids, emulsions and resins. The Silicon Products division produces various grades of metallurgical silicon, ferrosilicon, foundry alloys and microsilica for use in a wide range of end applications. The Carbon Solutions division produces carbon electrode materials, lining materials and specialty carbon products for metallurgical processes for the production of a range of metals. Other comprise Elkem group management and centralised functions within ﬁnance, logistics, power purchase, technology, digital oﬃce and strategic projects such as biocarbon and battery projects. The battery technology company Vianode AS was de-consolidated in the third quarter of 2022 and is now classiﬁed as a joint venture. Eliminations comprise intersegment sales and proﬁt. Elkem follows internationally accepted principles for transactions between related parties within the group. In general, Elkem seeks to use transaction-based methods (comparable uncontrolled price, transactional net margin method, cost plus and resale price method) in order to set the price for the transaction. The main related party transactions between operating segments in Elkem can be divided as follows: → Silicon Products sale of metallurgical silicon to Silicones. Sales prices are based on sale to external customers and CRU prices. → Carbon Solutions sale of electrode paste and lining material to Silicon Products. Sales prices are based on prices to external customers. → Other sale of management services e.g., logistics, procurement, ﬁnancial services, technical support and R&D services. Prices are based on cost plus. Major customers Elkem has a range of customers, but no single customer amounts to 10% or more of total operating income. Main items by operating segment 2022 Silicon Carbon Amounts in NOK million Silicones Products Solutions Other Eliminations Total Revenue from sale of goods (note 7) 18 994 22 361 3 393 (87) - 44 660 Other revenue (note 7) 66 72 21 199 - 358 Other operating income (note 7) 150 542 5 48 - 746 Share of proﬁt from equity accounted companies (note 5) - (0) (0) 135 - 135 Total operating income from external customers 19 210 22 974 3 419 295 - 45 898 Operating income from other segments 78 1 483 333 395 (2 289) - Total operating income 19 288 24 457 3 752 690 (2 289) 45 898 Operating expenses (17 266) (14 233) (2 586) (921) 2 032 (32 973) EBITDA 2 022 10 224 1 166 (231) (257) 12 925 EBIT 743 9 630 1 063 (281) (257) 10 898 Cash ﬂow from operations 1 271 7 802 620 (156) 14 9 551 Working capital 2 449 5 467 739 (648) (371) 7 637 Capital employed 16 762 11 304 1 597 1 018 (371) 30 310 Reinvestments (1 682) Strategic investments (2 797) Movement CAPEX payables 421 Cash ﬂow from investments in property, plant and equipment and intangible assets, including received investment grants (4 058) Main items by operating segment 2021 Amounts in NOK million Silicones Silicon Products Carbon Solutions Other Eliminations Total Revenue from sale of goods (note 7) Other revenue (note 7) Other operating income (note 7) Share of proﬁt from equity accounted companies (note 5) Total operating income from external customers 17 206 43 117 - 17 366 13 557 96 422 (1) 14 074 1 917 21 5 - 1 943 64 179 41 51 335 - - - - 32 743 340 586 49 33 717 Operating income from other segments Total operating income 63 17 429 710 14 783 234 2 176 398 733 (1 404) (1 404) - 33 717 Operating expenses (13 758) (11 081) (1 669) (777) 1 358 (25 926) EBITDA 3 672 3 702 508 (44) (46) 7 791 EBIT 2 528 3 154 360 (97) (46) 5 899 Cash ﬂow from operations 1 448 Working capital 2 517 Capital employed 14 678 Reinvestments Strategic investments Movement CAPEX payables Cash ﬂow from investments in property, plant and equipment and intangible assets, including received investment grants 2 273 3 487 8 169 376 276 1 003 3 (518) 839 0 (90) (90) 4 100 5 673 24 599 (1 657) (1 717) 245 (3 128) Deﬁnitions Segments performance are evaluated based on EBITDA and EBIT. Elkem's deﬁnition of EBITDA may be diﬀerent from other companies. EBITDA is deﬁned as Elkem’s proﬁt (loss) for the period, less income tax (expense) beneﬁt, ﬁnance expenses, foreign exchange gains (losses), ﬁnance income, share of proﬁt from equity accounted ﬁnancial investments, other items (except realised gains and losses from hedge ineﬀectiveness and discontinuation of hedging), impairment losses and amortisation and depreciation. EBIT is deﬁned as Elkem’s proﬁt (loss) for the period, less income tax (expense) beneﬁt, ﬁnance expenses, foreign exchange gains (losses), ﬁnance income, share of proﬁt from equity accounted ﬁnancial investments and other items (except realised gains and losses from hedge ineﬀectiveness and discontinuation of hedging). Cash ﬂow from operations is EBITDA including reinvestments, changes in working capital and equity accounted companies. Reinvestments generally consist of capital expenditure to maintain existing activities or that involve investments designed to improve health, safety or the environment. Strategic investments generally consist of investments which result in capacity increases at Elkem’s existing plants or that involve an investment made to meet demand in a new geographic or product area. Working capital is deﬁned as accounts receivable, inventory, other current assets, accounts payable, current employee beneﬁt obligations and other current liabilities. Accounts receivables are deﬁned as trade receivables less bills receivable. Other current assets are deﬁned as other current assets less current receivables to related parties, current interest-bearing receivables, tax receivables, grants receivable, assets at fair value through proﬁt or loss and accrued interest income. Accounts payable are deﬁned as trade payables less CAPEX payables. Other current liabilities are deﬁned as provisions and other current liabilities less current provisions, contingent considerations, contract obligations and liabilities to related parties. Capital employed consists of working capital as deﬁned above, property, plant and equipment, right-of-use assets, other intangible assets, goodwill, equity accounted investments, grants payable, trade payables and prepayments related to purchase of non-current assets. The deﬁnition was changed in 2022 to include right-of-use assets, goodwill and other intangible assets. Comparable ﬁgures are restated. Elkem's deﬁnitions may be diﬀerent from other companies. Below is a reconciliation of proﬁt (loss) for the year against EBIT and EBITDA: 2022 Silicon Carbon Amounts in NOK million Silicones Products Solutions Other Eliminations Elkem Proﬁt (loss) for the year 9 642 Income tax (expense) beneﬁt 2 594 Finance expenses 313 Foreign exchange gains (losses) (85) Finance income (67) Share of proﬁt from equity accounted ﬁnancial investments 17 Other items (2 151) Operating proﬁt (loss) before other items 10 263 Realised eﬀects from hedge ineﬀectiveness and discontinuation of hedging 635 EBIT 743 9 630 1 063 (281) (257) 10 898 Impairment losses 28 Amortisation and depreciation 1 999 EBITDA 2 022 10 224 1 166 (231) (257) 12 925 2021 Silicon Carbon Amounts in NOK million Silicones Products Solutions Other Eliminations Elkem Proﬁt (loss) for the year 4 664 Income tax (expense) beneﬁt 1 163 Finance expenses 276 Foreign exchange gains (losses) (241) Finance income (40) Share of proﬁt from equity accounted ﬁnancial investments (37) Other items (10) Operating proﬁt (loss) before other items 5 775 Realised eﬀects from hedge ineﬀectiveness and discontinuation of hedging 124 EBIT 2 528 3 154 360 (97) (46) 5 899 Impairment losses 76 Amortisation and depreciation 1 816 EBITDA 3 672 3 702 508 (44) (46) 7 791 The table below show realised eﬀects from Elkem's power and foreign exchange hedging programme, including embedded derivatives and realised eﬀects from hedge ineﬀectiveness and discontinuation of hedging, on the diﬀerent group segments. 2022 Silicon Carbon Amounts in NOK million Silicones Products Solutions Other Eliminations Elkem Revenue from sale of goods (note 26) 0 37 - (86) (49) Operating expenses (note 26) - 982 44 (15) 1 012 Total realised eﬀects from derivatives included in EBITDA 0 1 019 44 (100) 963 2021 Silicon Carbon Amounts in NOK million Silicones Products Solutions Other Eliminations Elkem Revenue from sale of goods (note 26) - 27 - 65 92 Operating expenses (note 26) - 295 2 17 315 Total realised eﬀects from derivatives included in EBITDA - 322 2 82 407 Total revenue by geographic market based on customer location Amounts in NOK million 2022 2021 Norway Other Nordic countries United Kingdom Germany France Italy Poland Spain Other European countries Europe Africa USA Canada Brazil Other South American countries America China Japan South Korea India Other Asian countries Asia Rest of the world 1 342 1 545 1 354 5 394 1 566 1 719 869 1 066 3 238 18 093 345 5 470 770 1 854 548 8 643 10 849 2 153 501 1 485 2 792 17 780 206 814 1 637 1 094 2 903 791 1 274 511 765 2 791 12 579 217 3 451 368 1 046 326 5 191 10 534 1 197 549 989 1 635 14 904 99 Total revenue before hedging eﬀects 45 067 32 991 Realised eﬀects from hedging programs (note 26) Total revenue (49) 45 018 92 33 083 Non-current assets by geographic areas based on entity location Amounts in NOK million 2022 2021 Norway 5 744 4 606 Other Nordic countries 1 528 United Kingdom 38 37 Germany 97 49 France 4 133 3 535 Italy 134 126 Poland 0 1 Spain 324 281 Other European countries 177 70 Europe 10 647 9 232 Africa 112 89 USA 882 710 Canada 643 523 Brazil 357 255 Other South American countries 494 436 America 2 376 1 924 China 10 930 8 411 Japan 2 3 South Korea 230 222 India 79 71 Other Asian countries 48 49 Asia 11 288 8 757 Total non-current assets 24 423 20 001 Non-current assets are presented less derivatives and deferred tax assets. 7. Operating income Principle Operating income consists of: a. Revenue b. Other operating income c. Share of proﬁt (loss) from equity accounted investments (note 5) (a) Revenue Revenue is measured based on the consideration speciﬁed in a contract with a customer. Elkem recognises revenue when Elkem transfers control over a goods or service to a customer. A ﬁve-step process is applied before revenue can be recognised: → identify contracts with customers → identify the separate performance obligation → determine the transaction price of the contract → allocate the transaction price to each of the separate performance obligations, and → recognise the revenue as each performance obligation is satisﬁed. Sale of goods Elkem's main performance obligation is related to sale of goods where the obligation is to deliver agreed volume of products within the agreed speciﬁcation. Elkem has both short-term and long-term contracts. Short-term contracts, normally within one month, cover delivery of an agreed volume at market price at the date the order is placed. These types of contracts are most common for commodity products, such as sales of ferrosilicon and silicones and sales to customers in China. The long-term contracts cover a period of a few months and up to one year, where the prices normally are ﬁxed within a volume range. Elkem has for sale of metallurgical silicon some contracts that cover a period longer than one year. In these contracts the prices are normally negotiated on an annual basis. Some of Elkem's sales contracts include an element of freight services, see separate section below for accounting policies. Revenue is recognised when control of the goods is transferred to the customer, at an amount that reﬂects the consideration to which Elkem expects to be entitled in exchange for those goods. Control is transferred to the buyer, according to the agreed delivery term for each sale. Delivery terms are based on Incoterms 2020 issued by International Chamber of Commerce, and the main terms are: "F" terms, where the buyer arranges and pays for the main carriage. The risk is transferred to the buyer when the goods are handed to the carrier engaged by the buyer. "C" terms, where the group arranges and pays for the main carriage but without assuming the risk of the main carriage. The risk is transferred to the buyer when the goods are handed over to the carrier engaged by the seller. "D" terms, where the group arranges and pays for the carriage and retains the risk of the goods until delivery at the agreed destination. The ownership is transferred to the buyer upon arrival at the agreed destination, usually the purchaser's warehouse. The goods are normally sold with standard warranties that the goods comply with the agreed-upon speciﬁcations. These standard warranties are accounted for using IAS 37 Provisions, Contingent Liabilities and Contingent Assets. Elkem does not have any other signiﬁcant obligations for returns or refunds. Freight services included in sale of goods Freight components included in sale of goods on incoterms "C" terms are considered as a separate performance obligation and recognised over the period the service is performed. Shipping and handling services that occur before the customer takes control of the goods for sales on "D" terms are considered to be part of fulﬁlling the sale of the goods. Sale of power and revenue connected to energy recovery Sale of electric power and revenue connected to energy recovery, mainly heat supply in the form of steam and hot water, el-certiﬁcates and el-tax, are recognised in income based on volume and price agreed with the customer. Revenue connected to energy recovery is mainly based on long-term contracts where the prices are regulated yearly based on changes in CPI or government regulated prices, except for the el-certiﬁcates where the price is based on the observable market price at date of delivery. Revenue from sale of services Revenue from sale of services is recognised when the services have been provided. Sale of services are mainly related to management agreements with related parties based on a cost plus a margin and sale of shipping and handling related services. (b) Other operating income Insurance settlements Income from insurance settlements are recognised as other operating income when it is virtually certain that the group will receive the compensation. Expected cash ﬂows from credit insurance contracts where such contracts are deemed to be an integral part of the sale transactions is presented net against impairment losses trade and other receivables, included in other operating expenses. See note 21 Trade receivables. Grants See note 8 Grants Details of revenue from contracts with customers 2022 Silicon Carbon Amounts in NOK million Silicones Products Solutions Other Total Sale of goods, Silicones Sale of goods, Silicon Products Sale of goods, Carbon Solutions Revenue from energy recovery and other energy related income Service agreements with related parties (note 32) Other revenue from contracts with customers 18 954 39 - 2 14 48 - 22 324 - 38 1 31 - - 3 393 0 - 21 - (1) - 52 14 133 18 954 22 362 3 393 92 30 232 Total revenue from contracts with customers 19 057 22 395 3 413 197 45 063 Rental income 2 1 0 1 4 Realised hedging eﬀects (note 26) Total revenue 0 19 060 37 22 432 - 3 414 (86) 112 (49) 45 018 Details of revenue from contracts with customers 2021 Silicon Carbon Amounts in NOK million Silicones Products Solutions Other Total Sale of goods, Silicones Sale of goods, Silicon Products Sale of goods, Carbon Solutions Revenue from energy recovery and other energy related income Service agreements with related parties (note 32) Other revenue from contracts with customers 17 111 94 - 19 2 21 - 13 529 - 32 8 55 - - 1 917 1 12 7 - - - 57 50 71 17 111 13 623 1 917 108 73 155 Total revenue from contracts with customers 17 247 13 624 1 937 178 32 987 Rental income 2 1 - 1 4 Realised currency hedging eﬀects (note 26) Total revenue - 17 249 27 13 652 - 1 937 65 244 92 33 083 Details of other operating income Amounts in NOK million 2022 2021 Gain on disposal of ﬁxed assets 0 0 Insurance settlements 19 27 Grants (note 8) 717 554 Other 10 5 Total other operating income 746 586 8. Grants Principle Grants are recognised when it is reasonably assured that Elkem will comply with the conditions attached to them and the grants will be received. Grants are recognised in the statement of proﬁt or loss as other operating income, over the periods necessary to match them with the cost they are intended to compensate. Tax credits related to R&D projects are classiﬁed as government grants in other operating income if they ultimately are settled with cash, tax credits settled only via taxes are classiﬁed as tax allowances. Grants relating to cost of production of goods are recognised as other operating income when the produced goods are sold. Grants relating to property, plant and equipment (ﬁxed assets) and intangible assets are deducted from the carrying amount of the asset and recognised in proﬁt or loss as a reduction of the depreciation charge over the lifetime of the asset. Details of grants 2022 2021 Other Deduction Other Deduction Amounts in NOK million operating income of carrying amount FA/IA operating income of carrying amount FA/IA R&D grants from the Norwegian government 59 - 59 15 R&D grants from the French government 71 - 59 - Other R&D grants 13 - 14 - CO compensation from the Norwegian Environment Agency 2 Energy recovery related grants 497 - - - 367 - - 14 Other government grants 72 93 54 43 Total government grants 712 93 553 72 Norwegian NO x Other grants fund for reduced emission of NO x 1 3 64 - - 1 31 - Total grants from other than governments 5 64 1 31 Total grants 717 157 554 103 Grants receivable related to ﬁxed and intangible assets (note 22) 64 63 Grants receivable related to income (note 22) 862 633 Grants payable (note 24) Grants, deferred income (note 24) (16) (8) (15) (18) CO 2 allowances CO 2 emission allowances allocated from the government are classiﬁed as grants, measured at nominal value (zero). The CO 2 allowance scheme pertains to the group's plants in Europe. If actual emissions exceed the number of allocated allowances, additional allowances must be purchased and the cost is inclued as a part of production cost of inventory. The allocation of free allowances for the period 2021-2025 has been decided by the national authorities. CO 2 compensation The Norwegian government has since 2013 had a CO 2 compensation scheme to partially compensate for CO 2 costs included in the power price for certain industries. The compensation scheme is based on a corresponding scheme for EU and are approved by the EFTA surveillance authority ESA. The previous CO 2 compensation scheme ended 31 December 2020 and a new scheme for 2021-2025 has been approved by ESA and implemented into Norwegian regulation. The CO 2 compensation scheme applies for Elkem's Norwegian Silicon and Ferrosilicon plants. The compensation is based on the market price of CO 2 allowances and will as such vary with the price development. As the grant compensates power costs, which are costs recognised as part of the cost price of inventory during the production process, the compensation is recognised in the statement of proﬁt or loss when the produced goods are sold. NO x Fund The industry in Norway pays a fee for their emission of NO x to a public foundation run by 15 industry and commerce associations. The foundation is self-ﬁnanced by the fees and the purpose is to support projects that reduces NO x emissions from the industry in Norway. Other The remaining grants are mainly related to R&D and energy recovery projects. 9. Employee beneﬁts Principle Employee beneﬁts Employee beneﬁts are all forms of considerations given by an entity in exchange for service rendered by employees or for termination of employment. Employee beneﬁts include both current and non-current beneﬁts, and are expensed as incurred, together with any social security taxes applicable. Current beneﬁts consist of wages and salaries, bonuses, holiday payments and other short-term beneﬁts that are expected to be settled within 12 months after the reporting period. Non-current beneﬁts consist mainly of jubilee and long-service beneﬁts, post-employment beneﬁts and post- retirement beneﬁts, not expected to be wholly settled within the next 12 months. Deﬁned contribution plans Deﬁned contribution plans comprise of arrangements whereby the company makes monthly contributions to the employees' pension plans, and where the future pensions are determined by the amount of the contributions and the return on the individual pension plan asset. The contributions are expensed as incurred and there is no further obligation related to the contribution plans. Prepaid contributions are recognised as an asset. Deﬁned beneﬁt plans Deﬁned beneﬁt plans are pension plans where Elkem is responsible for paying pensions at a certain level, based on employees' salaries when retiring. Deﬁned beneﬁt plans are recognised at present value of future liabilities considered retained at the end of the reporting period, calculated separately for each plan. Plan assets are measured at fair value and deducted in calculating the net pension obligation. Pension plans with a net asset and no oﬀsetting rights are presented as a part of other assets. Actuarial assumptions are used to measure both the obligation and the expense and eﬀects of changes in estimates due to ﬁnancial and actuarial assumptions are recognised as other comprehensive income. Past service costs arising due to amendments in beneﬁt plans are expensed as incurred. Service costs are recognised as part of employee beneﬁt expenses. Net interest is calculated based on net pension obligations at the start of the period, multiplied by the discount rate. Any diﬀerence between actual return on pension assets and the interest income calculated as a part of the net interest, will be recognised directly in other comprehensive income. Interest on net pension obligations are presented as a part of ﬁnance expenses. Multi-employer deﬁned beneﬁt plans where available information is insuﬃcient to be able to calculate each participant's obligation, are accounted for as contribution plans. Judgements and estimates Estimation uncertainty is mainly related to deﬁned beneﬁt pension plans, where the calculation of pension obligations is based on ﬁnancial and actuarial assumptions, such as discount rates, future salary and pension adjustments, expected turnover and mortality. Deviations between applied assumptions and actual results in future periods will have eﬀects on the calculated obligation. See information about sensitivity on pension obligations based on changes in main actuarial assumptions below. Employee beneﬁt expenses Amounts in NOK million 2022 2021 Salaries, holiday pay and variable compensation (3 755) (3 459) Employer's national insurance contributions / social security tax (787) (727) Pension expenses (168) (137) Share-based payments (note 10) (24) (28) Other payments / beneﬁts (185) (179) Total employee beneﬁt expenses (4 919) (4 530) Average number of full-time equivalents 7 592 7 178 Remuneration to corporate management Amounts in NOK million 2022 2021 Fixed compensation (33) (31) Variable compensation - STI (20) (29) Variable compensation - LTI (31) (9) Other beneﬁts (2) (1) Pension beneﬁts (4) (4) Total remuneration to corporate management (90) (75) Remuneration provided to the board of directors (5) (5) Remuneration provided to the committee remuneration (1) (0) For more details on the remuneration to corporate management see "Report on salary and other remuneration to leading personnel in Elkem ASA for the ﬁnancial year 2022". The report is published on Elkem's website. ↗ Shares and options granted to corporate management and board members 2022 2021 Number Number of Number Number of Name Position of shares options of shares options Helge Aasen CEO 46 206 101 000 46 206 101 000 Morten Viga CFO 46 896 408 380 46 896 800 000 Katja Lehland SVP Human Resources - 400 000 - 800 000 Asbjørn Søvik SVP Green Ventures & Digital 10 000 400 000 10 000 900 000 Håvard Moe SVP Elkem Technology 110 000 600 000 60 000 900 000 Louis Vovelle SVP Innovation R&D 6 896 425 140 6 896 800 000 Frédéric Jacquin SVP Business development 81 551 408 380 6 551 850 000 Inge Grubben-Strømnes SVP Silicon Products 35 189 676 526 35 189 900 000 Luiz Simao SVP Carbon Solutions 20 000 350 000 10 000 650 000 Larry Zhang SVP Silicones - 250 000 500 000 Zhigang Hao 1) Chair - - - - Dag Jakob Opedal Vice chair 40 000 - 40 000 - Olivier de Clermont-Tonnerre 1) Board member 15 517 - 15 517 - Yougen Ge 1) Board member - - - - Marianne Johnsen Board member - - 15 000 - Grace Tang Board member - - - - Nathalie Brunelle (from May) Board member - - - - Jin Wang Johnny Wu (from May) 1) Board member - - - - Terje Andre Hanssen Board member (employee representative) - - - - Marianne Færøyvik Board member (employee representative) 4 950 - 4 950 - Thomas Eggan (from July) Board member (employee representative) - - - Heidi Feldborg Observer (employee representative) - - - - Jan Harald Karlsen (from July) Observer (employee representative) - - - Anja Isabel Dotzenrath (until Apr) Board member - - - - Knut Sande (until June) Board member (employee representative) - - - - Per Roar Aas (until June) Observer (employee representative) - - - - 1) Representatives for the majority shareholder. Employee beneﬁt assets and obligations Non-current Current Amounts in NOK million 31.12.2022 31.12.2021 31.12.2022 31.12.2021 Pension plan assets, net Pension contribution fund (note 22) Employee prepayments etc. Total employee beneﬁt assets 40 1 - 41 - 1 - 1 - 2 5 7 - 2 8 10 Salaries, holiday pay and variable compensation Employer's national insurance contributions / social security Pension plan obligations, net Other beneﬁt plans Total employee beneﬁt obligations tax - - 370 119 489 - - 492 119 611 752 226 - 16 994 761 203 - 12 976 (a) Salaries, holiday pay and variable compensation The obligations are related to incurred employee beneﬁts, not paid. A proﬁt-sharing plan is applicable for French entities with more than 50 employees, where the bonus liability must be calculated based on proﬁt after tax, using a speciﬁc formula given by the authorities. As at 31 December 2022 EUR 2 million (EUR 0 million) is accrued related to the agreement. (b) Pension plans The group has both deﬁned contribution and deﬁned beneﬁt plans. For deﬁned contribution plans the cost is equal to the group's contribution to the employee's pension savings during the period. For deﬁned beneﬁt plans the cost is calculated based on actuarial valuation methods, taking assumptions related to the employee's salary, turnover, mortality, discount rate, etc. into consideration. Deﬁned contribution plans Deﬁned contribution plans are the main pension plan for Elkem's Norwegian entities, where the contribution to each individual pension plan is 5% of annual salary up to 7.1G and 15% of annual salary between 7.1-12G. 1G refers to the Norwegian national insurance scheme's basic amount, which is NOK 111 477 as at 1 May 2022. Pension on salary above 12G is not supported by external service providers and is therefore handled as a separate plan and included under deﬁned beneﬁt plans. In addition, a Norwegian multi-employer early retirement scheme called AFP, where suﬃcient information to calculate each participant's pension obligation is not available, is accounted for as it is a deﬁned contribution plan in accordance with the Ministry of Finance's conclusion. The participants in the pension plan are jointly responsible for 2/3 of the plan's pension obligation, the government is responsible for the remaining part. The pension premium in 2022 is 2.6% of the employees' salary between 1 and 7.1G, covering this year's pension payments and contribution to a security fund for future pension obligations. The yearly premium for 2023 is set to 2.6%. Deﬁned beneﬁt plans Deﬁned beneﬁt plans are pension plans where the group is responsible for paying pensions at a certain level, based on employees' salaries when retiring. The group has funded and unfunded beneﬁt plans in Norway, France, Germany, UK, Canada, Japan and South Africa. The pension scheme in UK and two of Canada's schemes are overfunded and are net in an asset position. The schemes that are underfunded and are net in a liability position as at 31 December 2022 are distributed as follows Norway 23%, France 51%, Canada 9%, other Europe 14%, other countries 3%. In Canada provisions are also made for medical insurance as well as pension beneﬁt plans. The Norwegian pension plans are unfunded and comprise pension on salaries above 12G, where the expense is 15% of annual base salary that exceeds 12G plus interest on the individual calculated pension obligation, and some individual retirement schemes that are closed. Breakdown of net pension expenses Amounts in NOK million 2022 2021 Current service expenses (43) (40) Administration expenses (1) (1) Net pension expenses, deﬁned beneﬁt plans (45) (40) Deﬁned contribution plans (102) (78) Early retirement scheme AFP (Norway) (21) (18) Total pension expenses (168) (137) In addition, interest expenses on net (9) (8) pension liabilities are recognised as a part of ﬁnance expenses Net deﬁned beneﬁt obligations Amounts in NOK million 2022 2021 Present value of funded pension obligations (384) (509) Fair value of plan assets 425 487 Net funded pension obligations 40 (22) Present value of unfunded pension obligations (370) (470) Net value of funded and unfunded obligations (329) (492) Movements in the deﬁned beneﬁt obligations and plan assets 2022 2021 Deﬁned Deﬁned Net Deﬁned Deﬁned Net beneﬁt beneﬁt plan pension plan beneﬁt beneﬁt plan pension plan Amounts in NOK million obligations assets obligations obligations assets obligations Opening balance (978) 487 (492) (1 014) 460 (554) Current service expenses (43) - (43) (40) - (40) Interest (expenses) income (22) 13 (9) (18) 10 (8) Administration expenses - (1) (1) - (1) (1) Remeasurement gains (losses) 237 (91) 146 59 9 69 Contributions from employer - 32 32 - 15 15 Beneﬁts paid 85 (33) 52 40 (23) 17 Other changes 3 - 3 - - - Currency translation diﬀerences (36) 18 (19) (5) 16 10 Closing balance (754) 425 (329) (978) 487 (492) Breakdown of pension plan assets 31.12.2022 31.12.2021 Amounts in NOK million Fair value of Distribution% plan assets Fair value of Distribution% plan assets Cash, cash equivalents and money market investments Bonds Shares Property Other plan assets 1) Total pension plan assets 12 % 15 % 36 % 35 % 3 % 100 % 52 62 152 147 12 425 11 % 19 % 38 % 30 % 1 % 100 % 55 95 185 148 4 487 1) Includes insurance contracts (Buy in policies and Annuity insured contracts) Actual return on plan assets -16.0 % (78) 4.3 % 20 In addition, some Norwegian entities have pension contribution funds, mainly based on excess pension assets from settlement of the deﬁned beneﬁt plans in 2010. The pension contribution funds are classiﬁed as non-current pension funds, except next year's expected contributions which are classiﬁed as current (see note 22 Other assets) Principal assumptions used for the actuarial valuations in 2022 (2021) Norway France Canada Germany UK Discount rate 4.2% (2.0%) 3.0% (0.9%) 5.0% (3.0%) 3.9% (1.0%) 5.1% (1.6%) Expected rate of salary increase na (na) 3.0% (2.1%) 3.5% (3.5%) 3.0% (3.0%) na (na) Annual regulation of pensions paid 1.9% (1.5%) na (na) na (na) 2.0% (2.0%) na (na) Assumptions regarding future mortality are based on actuarial advice in accordance with published statistics and experience in each country. Sensitivity on pension obligations based on changes in main actuarial assumptions The deﬁned beneﬁt pension schemes expose the group to actuarial risk such as investment risk, interest rate risk, salary growth risk, mortality risk and longevity risk. A decrease in corporate bond yields, a rise in inﬂation or an increase in life expectancy would result in an increase to plan liabilities. The sensitivity analysis below shows estimated eﬀects in the deﬁned pension obligation based on reasonable changes in the main assumptions. The calculations are based on a change in one assumption while holding all other assumptions constant. Negative amounts show an expected decrease in the net pension liability. Assumption Discount rate Life expectancy Salary growth 0.5% 0.5% 1 year 1 year 0.5% 0.5% Amounts in NOK million increase decrease increase decrease increase decrease 2022: Eﬀect on the pension obligation (38) 42 14 (15) 10 (10) 2021: Eﬀect on the pension obligation (63) 71 25 (25) 24 (22) As the group's main pension plans are deﬁned contribution plans, there are no group policies for funding of the deﬁned beneﬁt plans. This is managed locally, based on the terms and status for the individual plan. Expected contribution for the pension plans next year and average duration for the main deﬁned beneﬁt plans Amounts in NOK million Norway France Canada Germany UK Contribution to be paid to deﬁned pension plans next year 5 18 19 3 5 Weighted average duration of the deﬁned beneﬁt obligations 6 years 14 years 17 years 11 years 11 years (c) Other beneﬁt plans Other employee beneﬁts consist of provisions related to jubilee and long-service beneﬁts, and post-employment beneﬁts to be paid until ordinary retirement age for former employees in Elkem’s Chinese entities. Of total non-current provisions, NOK 64 million (NOK 74 million) relate to jubilee and long-service beneﬁts in the Silicones segment, mainly in France. Estimated duration of the obligation is 13 years. Non-current provisions for other employee beneﬁts for Elkem’s Chinese entities, in the Silicones segment, are calculated to NOK 35 million (NOK 30 million), mainly consisting of post-employment beneﬁts related to employees laid oﬀ due to reorganisation. No further obligations are expected to incur however in 2022 an addition of NOK 13 million has incurred related to update of estimate for future health insurance premiums. The estimated remaining duration for these two obligations is 16 years. 10. Share-based payment Principle The fair value of options granted under the share-based payment programme is recognised as an employee beneﬁt expense with a corresponding increase in equity for equity settled awards. The total amount to be expensed is determined by reference to the fair value of the options granted. The total expense is recognised over the vesting period, which is the period over which all of the speciﬁed vesting conditions are to be satisﬁed. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if any, in the statement of proﬁt or loss, with a corresponding adjustment to equity. Social security contributions payable in connection with an option grant are considered an integral part of the grant itself and the charges are treated as cash-settled transactions. Judgements and estimates Estimating fair value for share based payment transactions requires determination of the most appropriate valuation model and assumptions to the valuation model. The fair value at the grant date is determined using the Black-Scholes option pricing model, which takes into account the exercise price, the life of the option, the current price of the underlying shares, the expected volatility of the share price, any dividends expected on the shares and risk-free interest rate for the life of the option. The expected share price volatility is based on historical volatility for a selection of comparable listed companies adjusted with a premium taking into account the maturity of the peers compared to the Elkem. The risk-free interest rate is based on Norwegian government bonds with same maturity as the option. Elkem's share option scheme The group has in 2018 - 2021 granted share options to corporate management and selected key employees. Each option gives the right to acquire one share in Elkem ASA on exercise. In 2022 the Board decided to terminate the option scheme and replace it with a new Long-term Bonus Scheme (LTBS). Please refer to the "Report on salary and other remuneration to leading personnel in Elkem ASA for the ﬁnancial year 2022" for description of the new bonus scheme. The previous granted options are still exercisable over the exercise period. The share options vest annually in equal tranches over a three- year period following the date of grant, with one-third vesting each year. The options will expire two years after vesting, in total 5 years after the date of grant. No option holder may in any calendar year realise a total gain on exercise of options in excess of twice the option holder's base salary in the same calendar year, however provided that the maximum gain for Elkem's CEO shall be four times the CEO's base salary. See note 9 Employee beneﬁts for an overview of options granted to Elkem's corporate management. When the options are exercised, the corresponding number of shares are transferred to the employee. The proceeds received from the exercise of the options (net of any directly attributable transaction costs) are credited directly to equity. Components of share-based payments employee beneﬁt expenses Amounts in NOK million 2022 2021 Share-based payment (24) (28) Social security contribution (9) (16) Total expenses related to share-based payments (33) (44) Parameters connected to share options granted in years respectively Amounts in NOK million 2021 2020 2019 Number of options granted 7 451 000 8 000 000 8 000 000 Date of Grant 29 Jul 2021 29 Jul 2020 29 Jul 2019 Exercise price (NOK) 31.2 19.1 23.5 Share price (NOK) 32.9 17.2 24.7 Expected lifetime* 3.34 3.12 3.12 Volatility* 34.4 % 46.0 % 35.8 % Interest rate* 0.9 % 0.2 % 1.3 % Dividend* 6.5 % 6.5 % 6.5 % FV per instrument* 5.19 2.95 4.08 Vesting conditions Service Service Service *Weighted average parameters of instruments Outstanding instruments 31 December 2022 31 December 2021 Number of Number of Grant instruments Remaining instruments Remaining Amounts in NOK million Exercise price outstanding contractual life outstanding contractual life 2018 programme 38.52 2 300 000 0.72 4 650 000 1.21 2019 programme 23.53 612 688 1.57 2 967 500 2.37 2020 programme 19.10 2 945 140 2.38 5 411 272 2.94 2021 programme 31.20 5 778 375 2.85 7 451 000 3.58 Total outstanding 11 636 203 2.24 20 479 772 2.70 Quantity and weighted average prices 31 December 2022 31 December 2021 Overview of outstanding options Amounts in NOK million Number of instruments Weighted average exercise price Number of instruments Weighted average exercise price Outstanding options 1 January 20 479 772 28.55 22 767 000 26.76 Granted during the year - - 7 451 000 31.20 Exercised during the year (6 443 569) 23.97 (6 271 228) 22.16 Forfeited during the year (200 000) 30.01 (900 000) 21.16 Expired during the year (2 200 000) 38.52 (2 567 000) 38.52 Outstanding options 31 December 11 636 203 29.18 20 479 772 28.55 Of which exercisable (vested) 4 368 870 32.47 5 728 772 35.30 Average share price at exercise date (NOK per share) 37.64 34.00 11. Other operating expenses Details of operating expenses Amounts in NOK million 2022 2021 Loss on disposal of ﬁxed assets (2) (5) Freight and commission expenses (2 395) (1 661) Leasing short-term and low value contracts (note 16) (70) (56) Machinery, equipment, spare parts and operating materials (1 344) (1 336) External services 1) (2 441) (2 051) Insurance expenses (137) (106) Impairment losses trade and other receivables (2) 9 Other operating expenses 2) 3) (324) (330) Total other operating expenses (6 714) (5 536) 1) Including services from auditor, see speciﬁcation below 2) Including changes in inventories of ﬁnished goods and work in progress of positive NOK 288 million (positive NOK 1 million) 3) Including capitalised salary on ﬁxed asset projects of positive NOK 125 million (positive NOK 114 million) Research and development During 2022, Elkem expensed NOK 1,000 million (NOK 716 million) related to research and innovation activities, which includes product and business development, technical customer support and improvement projects. In addition, Elkem capitalised development expenses of NOK 312 million (NOK 300 million). Grants relating to research and development amount to NOK 143 million (NOK 132 million) and are recognised in other operating income. In addition NOK 91 million (NOK 15 million) is recognised as a reduction of intangible assets. Audit fees KPMG is the group auditor of Elkem. Fees to KPMG and other audit ﬁrms Amounts in NOK million 2022 2021 KPMG Audit fee (19) (19) Other assurance services (1) (1) Tax services - (0) Other services - - Other audit ﬁrms Audit fee (2) (2) Other assurance services (0) (0) Tax services (2) (1) Other services (0) (1) Total fees to KPMG and other audit ﬁrms (25) (24) Fees to auditors are reported exclusive of VAT. 12. Other items Principle Other gains (losses) Other gains (losses) consists of changes in fair value of ﬁnancial instruments that are not designated as a part of a hedging relationship, any ineﬀective part of hedging relationships, eﬀects from discontinuation of hedging and foreign exchange gains (losses) related to operating activities such as trade receivables, trade payables, bank accounts / overdrafts. Foreign exchange gains (losses) related to ﬁnancing activities, mainly interest-bearing liabilities and group loans, are classiﬁed as a part of ﬁnancial income and expenses. Other income (expenses) Other income and (expenses) consists of transactions and events that are related to acquisition of business, gains / (losses) on disposal of businesses, restructuring programme and proﬁt and loss eﬀects from other shares. In addition, performance incentives for Elkem employees related to such items. Cost related to liquidated / wound-up businesses, costs of public requirements or updated regulations related to events / periods before purchase of the business, e.g., environmental measures, are included in other income and expenses. Acquisition related costs may include both costs related to acquisitions done, not completed and cancelled projects. Investments in equity instruments with an ownership below 20% are normally classiﬁed as other shares. Dividends from such shares are recognised when shareholders' right to receive dividends is determined by the shareholder's meeting. Fair value changes in other shares related to listed companies are recognised as other income (expenses). Details of other items Amounts in NOK million 2022 2021 Changes in fair value commodity contracts (note 25) Net gains (losses) on embedded EUR derivatives power contracts (note 25) Ineﬀectiveness on cash ﬂow hedges (note 26) Net foreign exchange gains (losses) - forward currency contracts Operating foreign exchange gains (losses) (2) 218 1 471 9 387 (1) 3 127 14 20 Total other gains (losses) 2 084 163 Dividends from other shares Change in fair value from other shares measured at fair value through proﬁt or loss Gains (losses) on acquisition and disposal of subsidiaries Restructuring expenses (note 24) Dismantling and environmental expenses (note 24) 1) Other 2) 4 1 159 26 (72) (50) 3 2 - 41 (181) (17) Total other income (expenses) 67 (153) Total other items 2 151 10 1) 2022 includes NOK 70 million in restoration expense related to decommissioned business in Canada. 2021 Includes NOK 171 million related to expenses in connection with relocation of workers buildings located in proximity to the Silicones Xinghuo plant, as required by the authorities. 2) Mainly expenses related to business projects and acquisitions 13. Finance income and expenses Principle Interest income is recognised on an accrual basis and is classiﬁed as ﬁnance income. Foreign exchange gains (losses) related to ﬁnancing activities including group loans are classiﬁed as a part of ﬁnancial income and expenses, and foreign exchange gains (losses) related to operations are classiﬁed as a part of other items. Interest expenses are recognised on an accrual basis using the eﬀective interest method and are classiﬁed as ﬁnancial expenses. Interest is capitalised as a part of the carrying amount of a self-constructed item of property, plant and equipment when the construction period takes a substantial period of time, meaning more than 9-12 months, depending on the total amount, and borrowing costs are being incurred. Financial expenses also include interest on net pension liabilities, unwinding of discounted provisions and contingent consideration acquisition of subsidiaries, and interest on lease liabilities. Details of net ﬁnance income (expenses) Amounts in NOK million 2022 2021 Interest income on loans and receivables 65 34 Other ﬁnancial income 1 6 Total ﬁnance income 67 40 Net foreign exchange gains (losses) 1) 85 241 Interest expenses on interest-bearing liabilities measured at amortised cost (229) (206) Interest expenses from other items measured at amortised cost 2) (50) (23) Capitalised interest expenses 20 5 Interest expenses on lease liabilities (note 16) (30) (26) Unwinding of discounted liabilities (10) (8) Interest expenses on net pension liabilities (note 9) (9) (8) Other ﬁnancial expenses (5) (10) Total ﬁnance expenses (313) (276) Net ﬁnance income (expenses) (161) 6 1) Some / part of loans are designated as a hedging instrument, hence the unrealised part of net foreign exchange gains (losses) are recognised against OCI, see note 26 Hedging. 2) Interest expenses from other items measured at amortised cost mainly consist of interest on bills payable and factoring agreements. 14. Taxes Principle Income taxes Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the tax authorities. Current tax payables includes any adjustment to tax payable in respect of previous years. Income tax is recognised in the statement of proﬁt or loss except to the extent that it relates to items recognised directly in equity or in other comprehensive income. The group includes deductions for uncertain tax positions when it is probable that the tax position will be sustained in a tax review. The group records provisions relating to uncertain or disputed tax positions at the amount expected to be paid. The provision is reversed if the disputed tax position is settled in favour of the group and can no longer be appealed. Penalties and interest related to income taxes are recognised as income tax (expense) beneﬁt in the statement of proﬁt or loss. Accrued penalties and interest are recognised in the statement of ﬁnancial position in income tax payable and provisions for the current and non-current portions respectively. Deferred tax Deferred tax assets and liabilities are calculated using the liability method with full allocation of all temporary diﬀerences between the tax base and the carrying amount of assets and liabilities in the ﬁnancial statements, including tax losses carried forward. Deferred tax relating to items outside statement of proﬁt or loss are recognised in correlation with the underlying transaction either in other comprehensive income or directly in equity. Deferred tax assets and liabilities are not recognised if the temporary diﬀerence arises from the initial recognition of goodwill. Deferred tax assets are recognised in the statement of ﬁnancial position to the extent that it is more likely than not that the tax assets will be utilised against deferred tax liabilities or future taxable income. Deferred tax assets arising from tax losses are recognised when there is convincing evidence of recoverability. The tax rates substantively enacted at the end of the reporting period and undiscounted amounts are used. Deferred tax assets and liabilities are oﬀset if there is a legally enforceable right to oﬀset current tax liabilities and assets, and Elkem intends to settle current tax liabilities and assets on a net basis, or to realise the tax assets and settle the liabilities simultaneously. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax beneﬁt will be realised; such reductions are reversed when the probability of future taxable proﬁts improves. Judgements and estimates Part of the basis for recognising deferred tax assets is based on applying the loss carried forward against future taxable income in the group, which requires use of estimates for calculating future taxable income. Deferred tax assets are not recognised for start-up projects and entities with longer periods of losses unless there is convincing evidence of recoverability. Elkem recognises a previously unrecognised deferred tax asset to the extent that it has become probable that future taxable proﬁt will allow the deferred asset to be recovered. For example, when start up projects becomes proﬁtable or the market condition has changed so the entity has longer periods with historic taxable proﬁts and future forecasted taxable proﬁts. When estimating uncertain tax positions the most probable amount, including interests and penalties, is used because in most cases the outcome of the tax review is binary. Income tax recognised in proﬁt or loss Amounts in NOK million 2022 2021 Proﬁt (loss) before income tax Current taxes Deferred taxes Total income tax (expense) beneﬁt 12 236 (2 234) (360) (2 594) 5 827 (1 145) (18) (1 163) Income taxes recognised in other comprehensive income (OCI) Amounts in NOK million 2022 2021 Remeasurement of deﬁned beneﬁt pension plans (33) (10) Hedging of net investment in foreign operations 31 (29) Cash ﬂow hedges (125) (153) Total tax charged to OCI (127) (192) Reconciliation of income tax (expense) beneﬁt Amounts in NOK million 2022 2021 Proﬁt (loss) before income tax Expected income taxes, 22% of proﬁt before tax (22%) Tax eﬀects of: Diﬀerence in tax rates for each individual jurisdiction Preferential tax rates Permanent diﬀerences Tax eﬀects of income from Norwegian controlled foreign companies (NOKUS) Tax eﬀects share of proﬁt (loss) from equity accounted companies Tax eﬀects non-deductible expenses Tax relief based on value of equity Tax eﬀects gains (losses) on acquisition and disposal of subsidiaries Tax eﬀects non-taxable income Other eﬀects Tax eﬀects of changes in unrecognised deferred tax assets Tax eﬀects of change in tax rate Other current taxes paid Previous year tax adjustment Total income tax (expense) beneﬁt 12 236 (2 692) (99) 61 (16) 24 (12) 19 34 134 (32) - (10) (5) (2 594) 5 827 (1 282) (94) 12 (8) 19 (24) 18 - 76 157 (19) (35) 15 (1 163) Eﬀective tax rate 21 % 20 % Three companies in China are taxed under the regulations for "High and new technology company" which mean that the tax rate is 15% compared to the regular 25%. The companies have to conﬁrm to the authorities every year that they fulﬁl the conditions for "High and new technology company" in order to apply the preferential tax rate. Tax eﬀect of non-taxable income is mainly related to R&D, additional R&D deduction and non-taxable R&D grants, and additional deduction on investments in ﬁxed assets equipment. Other current taxes paid relates mainly to taxes that are indirectly calculated based on proﬁt (loss) before income tax and withholding taxes on dividends. Deferred tax assets and deferred tax liabilities 31.12.2022 31.12.2021 Amounts in NOK million Temporary diﬀerence Deferred tax Temporary diﬀerence Deferred tax Derivatives including cash ﬂow hedges Property, plant and equipment and intangible assets Pension liabilities Trade receivables Inventories Provisions Other diﬀerences Debt waiver Tax losses carried forward Gross deferred tax assets - 412 325 92 998 364 458 595 2 901 6 145 - 69 79 7 222 72 93 161 648 1 351 17 795 465 89 639 208 302 595 2 353 5 463 4 198 121 16 157 53 68 161 582 1 359 Unrecognised deferred tax assets for tax loss carried forward Unrecognised debt waiver Unrecognised deferred tax assets other items (2 398) (595) (1 264) (520) (161) (190) (1 960) (595) (1 361) (486) (161) (340) Recognised deferred tax assets 1 888 480 1 548 372 Netting (329) (324) Net deferred tax assets 151 48 Derivatives including cash ﬂow hedges Property, plant and equipment and intangible assets Inventories Other diﬀerences 2 162 3 451 284 683 476 775 62 139 560 2 734 210 243 123 610 46 50 Gross deferred tax liabilities 6 580 1 452 3 748 828 Netting (329) (324) Net deferred tax liabilities 1 123 505 Net deferred tax (liabilities) assets recognised (972) (457) Unrecognised deferred tax assets other items, are mainly related to property, plant and equipment and inventories. The tax assets are not recognised due to uncertainty regarding future taxable income and the long period for which the tax asset shall be amortised. Movements in net deferred tax assets and deferred tax liabilities Amounts in NOK million 2022 2021 Opening balance (457) (240) Recognised in proﬁt or loss for the year (360) (18) Eﬀect of business combination (20) - Disposal of subsidiaries 2 - Recognised in other comprehensive income (127) (192) Currency translation diﬀerences (10) (7) Closing balance (972) (457) Tax losses carried forward 31 December 2022 Gross tax losses Net tax losses Unrecognised tax Recognised deferred tax Amounts in NOK million carried forward carried forward losses losses carried forward France 1 803 451 (337) 114 China 490 74 (73) - Brazil 175 59 (59) - Paraguay 295 30 (31) - Malaysia 61 15 (14) - US 56 14 - 14 Canada 18 5 (5) - Mexico 3 1 (1) - Total tax losses to carried forward 2 901 649 (520) 128 Tax losses carried forward 31 December 2021 Gross tax losses Net tax losses Unrecognised tax Recognised deferred tax Amounts in NOK million carried forward carried forward losses losses carried forward France 1 602 431 (347) 84 China 183 39 (28) 11 Brazil 170 58 (58) - Malaysia 96 23 (23) - Paraguay 298 29 (29) - Canada 3 1 (1) - Mexico 1 0 (0) - Total tax losses to carried forward 2 353 582 (486) 95 Tax losses carried forward by expiry date 31.12.2022 31.12.2021 Total Total Total Total unrecognised recognised unrecognised recognised Amounts in NOK million losses losses losses losses Loss car.forw.which exp. within 1 year (3) - - - Loss car.forw.which exp. within 2 years (5) - - - Loss car.forw.which exp. within 3 years (9) - - - Loss car.forw.which exp. within 4 years (10) - (29) - Loss car.forw.which exp. within 5 years (70) - - - Loss car.forw.which exp. within 5-10 years (7) - - 11 Without maturity (416) 128 (458) 84 Total tax losses carried forward (520) 128 (486) 95 Pending tax issues with tax authorities The Norwegian Tax Oﬃce decided in February 2021 to increase Elkem ASA’s taxable income for the ﬁscal years 2016-2019 by in total NOK 781 million, which would have lead to an increase in the income tax expense of NOK 181 million. The reassessments relate to loan arrangements / debt waiver agreements acquired by Elkem ASA in 2016 through the cross-border parent- subsidiary merger with Bluestar Silicones International Sarl. Elkem is of the opinion that the reassessment is unfounded and will appeal. Based on legal advice, Elkem’s assessment is that the defence against the action will be successful, and the increase in taxable income is therefore not recognised in proﬁt or loss. The amount was paid in ﬁrst quarter of 2021 and a corresponding receivable for the paid income tax is recognised in 2021, see note 22 Other assets. Debt waiver Elkem Silicones France SAS has four Elkem internal debt waiver agreements where internal loans were converted to equity and the converted amounts were treated as taxable income. Elkem Silicones France SAS can only reinstate the loans to the extent that the company has an accounting proﬁt according to IFRS. All debt that is reinstated under the agreements can be deducted against taxable income. The gross taxable value of the agreements as of 31 December 2022 is NOK 595 million (NOK 595 million). Elkem Silicones France SAS has not reinstated any loan amounts in 2022 or 2021 and correspondingly no tax credit is recognised in 2022 or 2021. Debt waiver 31 December 2022 Amounts in NOK million 2010 2012 2013 2014 Total Gross value of debt waiver 54 186 149 207 595 Utilised 2022 - - - - - Total debt that can be reversed 54 186 149 207 595 Deferred tax asset unrecognised 1) 15 50 40 56 161 The respective agreements expire in 3 years 5 years 6 years 7 years Debt waiver 31 December 2021 Amounts in NOK million 2010 2012 2013 2014 Total Gross value of debt waiver 54 186 149 207 595 Utilised 2021 - - - - - Total debt that can be reversed 54 186 149 207 595 Deferred tax asset unrecognised 1) 15 50 40 56 161 The respective agreements expire in 4 years 6 years 7 years 8 years 1) Based on tax rate 27.0% (28.4% ), which is applicable in France. 15. Property, plant and equipment Principle Property, plant and equipment Property, plant and equipment (PPE) are stated in the consolidated statement of ﬁnancial position at cost less accumulated depreciation and accumulated impairment losses. PPE acquired in business combinations are recognised at fair value at the acquisition date. PPE acquired in a business combination under common control are reﬂected at their carrying amounts. Assets in the course of construction are carried at cost less any recognised impairment loss. Such assets are classiﬁed to the appropriate categories of PPE when completed and ready for the intended use. When signiﬁcant parts of an item of PPE have diﬀerent useful lives, they are accounted for as separate items. Initial cost includes expenditures that are directly attributable to the acquisition of the asset, cost of materials, direct labour, any other costs directly attributable to bringing the assets to working condition for their intended use and estimated dismantling or removal charges. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, when future beneﬁts are probable and the cost can be measured reliably. The carrying amount of the replaced part is derecognised. Major periodic maintenance that is carried out less frequently than every year, is capitalised and depreciated over the period until the next periodic maintenance is performed. All other repairs and maintenance are charged to the statement of proﬁt or loss when incurred. Depreciations are calculated based on estimated useful life and expected residual value for each item of PPE and are recognised in the statement of proﬁt or loss using the straight- line method. The estimated useful lives, residual values (if any) and depreciation method are reviewed, and if necessary adjusted, at least annually. Depreciation commences when the assets are ready for their intended use. An item of PPE is derecognised upon disposal or when no future economic beneﬁts are expected to arise from the continued use of the asset. Any gain or loss arising on disposal or retirement of PPE, determined as the diﬀerence between the sales proceeds and the carrying amount of the asset, is recognised under other operating income or other operating expenses in the statement of proﬁt or loss. Accounting principle for impairment of assets, see Note 19 Impairment assessment. Judgements and estimates Estimated useful lives, residual values (if any) included in calculation of depreciation of PPE are reviewed and, if necessary, adjusted at least annually. Details of property, plant and equipment 2022 Amounts in NOK million Land Buildings and other property Plant, machinery, equipment and motor vehicles Oﬃce and other equipment Construction in progress Total Cost Opening balance Additions Transferred from CiP Reclassiﬁcation Business combinations (note 4) Disposal of subsidiaries (note 4) Disposals Currency translation diﬀerences 217 1 2 - 1 - (0) 13 8 064 13 475 1 185 - (10) 229 23 043 34 1 271 1 749 - (384) 691 866 5 181 (6) 0 - (9) 40 2 819 4 091 (1 929) (40) 7 (29) (12) 116 35 009 4 143 - (43) 942 (29) (415) 1 088 Closing balance 233 8 957 25 406 1 078 5 022 40 696 Accumulated depreciation Opening balance Additions Reclassiﬁcation Disposals Currency translation diﬀerences (2 999) (263) 0 8 (68) (13 085) (1 293) (1) 306 (365) (430) (137) 1 6 (20) (16 514) (1 693) 0 321 (453) Closing balance (3 322) (14 437) (580) (18 339) Impairment losses Opening balance Additions Reclassiﬁcation Disposals Currency translation diﬀerences (11) - - - (1) (419) (10) 6 0 (13) (2 315) (13) (6) 44 (68) (1) (0) (0) 0 (0) (28) (5) - 4 (1) (2 774) (28) (0) 48 (82) Closing balance (11) (435) (2 358) (1) (30) (2 836) Carrying amount Closing balance 222 5 200 8 610 497 4 991 19 520 Original cost of assets fully depreciated but still in use Estimated useful life Depreciation plan 0 Indeﬁnite 2 738 5–50 years Straight-line 6 592 3–50 years Straight-line 252 3–20 years Straight-line - 9 583 Capitalised interest is NOK 20 million in 2022. The weighted average cost of capital for capitalisation of loan interest in 2022 is in the range of 2.5% and 3.7% per annum. Details of property, plant and equipment 2021 Amounts in NOK million Land Buildings and other property Plant, machinery, equipment and motor vehicles Oﬃce and other equipment Construction in progress Total Cost Opening balance Additions Transferred from CiP Reclassiﬁcation Business combinations (note 4) Disposals Currency translation diﬀerences 184 17 21 - - (0) (5) 7 474 55 344 7 - (21) 205 21 720 67 1 122 1 - (290) 423 582 132 186 (14) - (12) (8) 1 799 2 762 (1 674) (105) - (6) 42 31 759 3 033 - (110) - (328) 656 Closing balance 217 8 064 23 043 866 2 819 35 009 Accumulated depreciation Opening balance Additions Reclassiﬁcation Disposals Currency translation diﬀerences (2 738) (236) (6) 17 (37) (11 929) (1 211) (2) 228 (171) (377) (76) 9 10 4 (15 043) (1 523) 1 255 (203) Closing balance (2 999) (13 085) (430) (16 514) Impairment losses Opening balance Additions Reclassiﬁcation Disposals Currency translation diﬀerences (11) - - - 0 (384) (9) - 0 (25) (2 162) (54) (0) 35 (134) (0) (1) 0 0 (0) (26) (3) - 2 (2) (2 584) (67) - 38 (160) Closing balance (11) (419) (2 315) (1) (28) (2 774) Carrying amount Closing balance 206 4 646 7 644 435 2 790 15 722 Original cost of assets fully depreciated but still in use Estimated useful life Depreciation plan 0 Indeﬁnite 1 368 5–50 years Straight-line 6 455 3–50 years Straight-line 126 3–20 years Straight-line - 7 950 Capitalised interest is NOK 5 million in 2021. The weighted average cost of capital for capitalisation of loan interest in 2021 is in the range of 2.5% and 3.1% per annum. Elkem has decided to transfer the production at Elkem Carbon Malaysia to other Elkem Carbon Solutions production sites. An impairment loss of NOK 60 million was recognised in 2021 due to the transfer, of which NOK 55 million is related to impairment of property, plant and equipment and NOK 5 million to right-of-use assets. The impairment loss of PPE is mainly related to plant, machinery, equipment and motor vehicles and buildings and other property. 16. Leases Principle Right-of-use assets are presented separately in the statement of ﬁnancial position, whereas lease liabilities are recognised in interest-bearing liabilities. Right-of-use-assets Elkems policy in general is to own critical assets related to the production cycle, including production buildings and land where this is not controlled by the local government or other parties. The groups main lease contracts comprise oﬃce buildings and machinery / storage assets to be used at production sites. The less signiﬁcant lease contracts comprise employee cars, machinery and equipment. Elkem assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identiﬁed asset for a period of time in exchange for consideration. Elkem applies single recognition and measurement approach for all leases, except for: → Lease contracts for which the lease term ends within 12 months as of the date of initial application are not capitalised (short-term leases). Elkem's short-term lease commitments are mainly related to rental of equipment in connection with maintenance or installation of new equipment. → Lease contracts for which the underlying asset is of low value, mainly oﬃce equipment, are not capitalised. → Lease of intangible assets are not capitalised. → Lease payments on contracts that are not capitalised are recognised as other operating expenses on a straight- line basis over the lease term. Elkem recognise right-of-use assets at the commencement date of the lease (i.e., the date the underlying assets is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis from the commencement date to the earlier of the lease term and the remaining useful life of the right-of- use asset for assets where Elkem does not obtain ownership of the leased asset at the end of the lease term. Depreciation expense on the right-of-use asset is presented as depreciation in the statement of proﬁt or loss. Right-of-use assets are subject to impairment assessments as described in note 19 Impairment assessment. Lease liabilities At the commencement date of a lease, Elkem recognise lease liabilities measured at the present value of the lease payments to be made over the lease term. The lease payments include ﬁxed payments (less any lease incentives receivable), variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. Non-lease components like insurance, electricity and other property-related expenses to be paid to landlord are excluded from the lease commitment for oﬃces. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by Elkem and payments of penalties for terminating the lease, if the lease term reﬂects exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses in the period in which the event or condition that triggers the payment occurs. Elkem uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease cannot be readily determined. The incremental borrowing rate is based on the respective country's risk-free rate for the term corresponding to the lease term, adjusted for own credit risk. Updated incremental borrowing rates are applied to new lease contracts recognised on a quarterly basis. Lease liability is remeasured upon the occurrence of certain events like change in the lease term, lease payments or reassessment of options which in general implies a change in the carrying amount of the right-of-use asset. If any changes to the contractual terms and conditions; like increase of scope Elkem needs to assess whether the change implies a separate lease if the change has a standalone price. The existing right- of-use asset is adjusted if the increase of scope does not indicate a standalone price or for any other modiﬁcations. Judgements and estimates The lease term is determined as the non-cancellable period of a lease, together with any periods covered by an option to extend the lease if Elkem is reasonably certain to exercise that option and any periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option. Elkem's main renewal options relate to lease of buildings for oﬃce and production purpose, included in Plant, buildings and other property, and lease of land and it is reasonably certain that the renewal option will be used. Elkem reassesses the lease term if there is a signiﬁcant event or change in circumstances that is within its control and aﬀects its ability to exercise, or not to exercise, the option to renew. Details of right-of-use assets 2022 Buildings Plant, machinery, and other equipment and Oﬃce and other Amounts in NOK million Land property motor vehicles equipment Total Cost Opening balance 432 730 138 11 1 310 Additions / lease modiﬁcations / remeasurements 4 105 21 0 131 Disposal of subsidiaries (note 4) (118) (145) - - (264) Partial or full termination of agreements (0) (46) (15) (9) (71) Currency translation diﬀerences 9 15 7 1 31 Closing balance 326 659 150 2 1 138 Accumulated depreciation Opening balance (66) (143) (75) (5) (288) Additions (8) (79) (32) (1) (119) Disposal of subsidiaries (note 4) 8 10 - - 18 Reclassiﬁcation (3) (7) - - (10) Partial or full termination of agreements 0 32 15 5 53 Currency translation diﬀerences (2) (6) (4) (0) (12) Closing balance (70) (191) (96) (1) (359) Impairment losses Opening balance - (1) - (4) (5) Disposals - 1 - 4 5 Currency translation diﬀerences - (0) - (0) (0) Closing balance - (0) - - 0 Carrying amount Closing balance 256 468 55 1 779 Estimated useful life 8–99 years 2–25 years 2–6 years 3-4 years Depreciation plan Straight-line Straight-line Straight-line Straight-line Details of right-of-use assets 2021 Amounts in NOK million Land Buildings and other property Plant, machinery, equipment and motor vehicles Oﬃce and other equipment Total Cost Opening balance Additions / lease modiﬁcations / remeasurements Reclassiﬁcation Partial or full termination of agreements Currency translation diﬀerences 415 0 (0) - 17 529 239 0 (41) 2 134 18 0 (10) (5) 10 2 (1) - (0) 1 087 260 - (51) 14 Closing balance 432 730 138 11 1 310 Accumulated depreciation Opening balance Additions Reclassiﬁcation Partial or full termination of agreements Currency translation diﬀerences (51) (4) (7) - (3) (105) (77) (0) 40 (1) (53) (34) 0 9 2 (3) (2) 0 - 0 (212) (116) (7) 49 (2) Closing balance (66) (143) (75) (5) (288) Impairment losses Opening balance Additions Currency translation diﬀerences - - - - (1) (0) - - - - (4) (0) - (5) (0) Closing balance - (1) - (4) (5) Carrying amount Closing balance 366 586 62 2 1 017 Estimated useful life Depreciation plan 1–99 years Straight-line 1–25 years Straight-line 2–5 years Straight-line 3-6 years Straight-line Carrying amounts of lease liabilities and the movements during the period Amounts in NOK million 2022 2021 Opening balance 801 663 Additions / lease modiﬁcations / remeasurements 124 260 Partial or full termination of agreements (6) (2) Disposal of subsidiaries (238) - Payments (146) (144) Interest expenses on lease liabilities 30 26 Currency translation diﬀerences 13 (2) Closing balance (note 23) 578 801 The maturity analysis of lease liabilities is disclosed in note 23 Interest-bearing assets and liabilities Amounts recognised in consolidated statement of proﬁt or loss Amounts in NOK million 2022 2021 Depreciation of right-of-use assets (119) (116) Interest expenses on lease liabilities (note 13) (30) (26) Leasing expenses, short-term leases (note 11) (56) (44) Leasing expenses, low value assets (note 11) (13) (11) Leasing expenses, variable lease payments (note 11) (2) (2) Total amount recognised in consolidated statement of proﬁt or loss (219) (199) 17. Other intangible assets Principle Intangible assets are stated in the consolidated ﬁnancial statements at cost less accumulated amortisation and accumulated impairment losses. Intangible assets acquired in business combinations are recognised at fair value at the acquisition date. Intangible assets with a ﬁnite useful life are amortised, using the straight-line method, commencing when the asset is available for use. Assets that are an integral part of a group of assets are amortised from the date the related asset group as a whole is ready for its intended use. Such assets are impairment tested annually. The estimated useful lives are reviewed at the end of each reporting period. An intangible asset is derecognised on disposal, or when the group expects no future economic beneﬁts to be derived from its use. Gain or loss arising from derecognition of an intangible asset, measured as the diﬀerence between the net disposal proceeds and the carrying amount of the asset, is recognised in other operating income or other operating expenses in the statement of proﬁt or loss. Expenditure on research activities is recognised as an expense in the period in which it is incurred. An intangible asset arising from an internal development project is recognised in the statement of ﬁnancial position if the group can demonstrate technical feasibility of completing the intangible asset, has the intention to complete it, ability to use it, can demonstrate that it will generate probable future economic beneﬁts and the cost can be reliably measured. Expenditures related to research and development activities, see note 11 Other operating expenses. Accounting principle for impairment of assets, see Note 19 Impairment assessment. Judgements and estimates Estimated useful lives are used in calculation of amortisation of intangible assets, these are reviewed, and if necessary adjusted, at least annually. Details of intangible assets 2022 Intangible Land use Technology Other assets under Amounts in NOK million rights and licences Software Development intangible 1) construction Total Cost Opening balance Additions 2) 103 - 828 - 567 24 775 1 335 0 568 310 3 175 335 Transferred from CiP - - 5 58 - (63) - Reclassiﬁcation - 3 43 - (1) 7 53 Business combinations (note 4) - 0 - - 6 - 6 Disposal of subsidiaries (note 4) - - - - - (460) (460) Disposals - - (30) - - (3) (33) Currency translation diﬀerences 5 36 18 46 11 18 134 Closing balance 108 868 627 880 350 377 3 209 Accumulated amortisation Opening balance (55) (513) (398) (519) (87) (1 572) Additions (2) (41) (54) (57) (33) (186) Reclassiﬁcation - - (1) - 1 (0) Disposals - - 8 - - 8 Currency translation diﬀerences (3) (26) (12) (30) (3) (74) Closing balance (59) (579) (457) (606) (122) (1 824) Impairment losses Opening balance (1) - - - - - (1) Currency translation diﬀerences (0) - - - - - (0) Closing balance (1) - - - - - (1) Carrying amount Closing balance 48 288 170 273 228 377 1 385 Estimated useful life 3–10 years 3–15 years 3–10 years 3–16 years 3–10 years Amortisation plan Straight-line Straight-line Straight-line Straight-line Straight-line 1) Other intangible assets consists mainly of customer relationships. 2) Additions in 2022 consists mainly of capitalisation of development projects of NOK 312 million of which NOK 230 million is related to Elkem's biocarbon initiative and battery projects. Details of intangible assets 2021 Intangible Land use Technology Other assets under Amounts in NOK million rights and licences Software Development intangible 1) construction Total Cost Opening balance Additions 2) 108 - 836 1 469 16 714 - 322 - 305 324 2 753 342 Transferred from CiP - 2 6 80 - (87) - Reclassiﬁcation - 8 81 - - 29 118 Business combinations (note 4) - - - - - - - Disposals - - (9) - (0) - (9) Currency translation diﬀerences (5) (19) 4 (19) 12 (2) (28) Closing balance 103 828 567 775 335 568 3 175 Accumulated amortisation Opening balance (56) (487) (349) (486) (55) (1 433) Additions (1) (41) (50) (53) (31) (177) Reclassiﬁcation - - (1) - - (1) Disposals - - 5 - 0 5 Currency translation diﬀerences 3 15 (3) 21 (1) 35 Closing balance (55) (513) (398) (519) (87) (1 572) Impairment losses Opening balance (1) - - - - - (1) Additions - - (4) - - - (4) Disposals - - 4 - - - 4 Currency translation diﬀerences 0 - - - - - 0 Closing balance (1) - - - - - (1) Carrying amount Closing balance 47 315 169 256 248 568 1 602 Estimated useful life 3–10 years 3–15 years 3–10 years 3–16 years 3–10 years Amortisation plan Straight-line Straight-line Straight-line Straight-line Straight-line 1) Other intangible assets consists mainly of customer relationships. 2) Additions in 2021 consists mainly of capitalisation of development projects of NOK 300 million of which NOK 228 million is related to Elkem's biocarbon initiative and battery projects. 18. Goodwill Principle Goodwill Goodwill is initially measured as the excess of the cost of an acquisition over the group's share of the fair values of the acquired entity's net identiﬁable assets at the acquisition date. If the fair value of the group’s interest in the net assets of the acquired subsidiary exceeds the cost of the acquisition (negative goodwill), the diﬀerences are recognised directly in the statement of proﬁt or loss as other items. Goodwill is carried at cost less accumulated impairment losses. Goodwill is tested for impairment annually, or more frequently when there is an indication of impairment. An impairment loss recognised for goodwill is not reversed in subsequent periods. Accounting principle for impairment of assets, see Note 19 Impairment assessment. Judgements and estimates The fair value of an acquired entity's net identiﬁable assets used to initially measure goodwill are dependent on assumptions such as future cash ﬂows and discount rate. See note 4 Composition of the group. Judgments and estimates for impairment of assets, see Note 19 Impairment assessment. Details of goodwill Amounts in NOK million 2022 2021 Opening balance 941 919 Currency translation diﬀerences 43 22 Closing balance 984 941 Origin of goodwill per CGU 31 December 2022 Amounts in NOK million Silicones Silicon Products Carbon Solutions Total Elkem Silicones Guangdong Co., Ltd. 499 - - 499 Elkem Silicones Korea Co., Ltd 126 - - 126 Elkem Silicones 80 - - 80 Elkem Rana AS - 40 - 40 Elkem Nagpur - 38 - 38 Elkem Oilﬁeld Chemical FZCO - 23 - 23 Elkem Dronﬁeld Ltd. - 16 - 16 Elkem Materials Process Services BV - 0 - 0 Ferroveld JV - - 43 43 Elkem Partiçipacòes Indústria e Comércio Limitada - - 8 8 Elkem Carbon (China) Co., Ltd. - - 1 1 NEH LLC - 93 17 110 Total goodwill 705 209 69 984 Origin of goodwill per CGU 31 December 2021 Amounts in NOK million Silicones Silicon Products Carbon Solutions Total Elkem Silicones Guangdong Co., Ltd. 485 - - 485 Elkem Silicones Korea Co., Ltd 119 - - 119 Elkem Silicones 76 - - 76 Elkem Rana AS - 40 - 40 Elkem Nagpur - 37 - 37 Elkem Oilﬁeld Chemical FZCO - 21 - 21 Elkem Dronﬁeld Ltd. - 16 - 16 Elkem Materials Process Services BV - 0 - 0 Ferroveld JV - - 41 41 Elkem Partiçipacòes Indústria e Comércio Limitada - - 7 7 Elkem Carbon (China) Co., Ltd. - - 1 1 NEH LLC - 83 15 98 Total goodwill 680 197 64 941 19. Impairment assessments Principle Impairment exists when the carrying value of an asset or cash generating unit (CGU) exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less cost of disposal calculation is based on data from binding sales transactions, conducted at arm’s length for similar assets or observable market prices less incremental costs of disposing the asset. The value in use calculation is based on a DCF model. The cash ﬂows are derived from the budget for the next ﬁve years and do not include restructuring activities that Elkem is not yet committed to or signiﬁcant future investments that will enhance the performance of the assets of the CGU being tested. A long- term growth rate is calculated and applied to project future cash ﬂows after the ﬁfth year. A CGU is the smallest group of assets that generates cash inﬂows from continuing use that are largely independent of the cash inﬂows of other assets. Indicators of impairment will typically be changes in technological development, changes in market conditions and changes in the competitive situation. Impairment loss and reversal of previous impairment losses are recognised as impairment losses in the statement of proﬁt or loss. Goodwill Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to beneﬁt from the synergies of the combination. Goodwill is tested for impairment annually, or more frequently when there is an indication of impairment. An impairment loss recognised for goodwill is not reversed in subsequent periods. Intangible assets, property plant and equipment and right-of-use assets Intangible assets with indeﬁnite useful lives are tested for impairment annually, or more frequently when there is an indication of impairment. For the other non-ﬁnancial assets Elkem assess, at each reporting date, whether there is an indication that an asset may by impaired. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Judgements and estimates There is signiﬁcant judgment required to determine the CGU for impairment testing. For goodwill the determination of the CGU is based on the level where synergies are expected to be realised following a business combination. The CGU for impairment testing of goodwill is determined to be the operating segments as presented in note 6 Operating segments. For impairment testing of ﬁxed, intangible and right of use assets the CGU the lowest level that generates ingoing cash ﬂows. This can be both a single plant or a combination of plants depending on the facts and circumstances. The recoverable amounts of assets of CGUs subject to impairment testing are determined based on value-in-use calculations, which are based on estimated future cash ﬂows. The uncertainty in the cash ﬂows relates to future prices for both key input factors in the production and market prices for the sale of Elkem's products. There is uncertainty regarding these factors both for the next 12 months and for the rest of the forecast period. The estimated future cash ﬂows are discounted using a discount rate before tax. The estimation uncertainty in the discount rate relates to the determination of the risk free rate and the beta. Elkem have performed sensitivity analysis in the impairment test to reﬂect the uncertainty in the estimates. (a) Impairment test of goodwill Discounted cash ﬂow models are applied to determine the value in use for the cash-generating unit. Key assumptions used in the calculation of value in use are growth rate, EBITDA levels, capital expenditure and discount rates. Growth rates The expected growth rates for a cash-generating unit converge from its current level experienced over the last few years, to the long-term growth level in the market in which the entity operates. The growth rates used to extrapolate cash ﬂow projections beyond the explicit forecast period are based on management’s past experience, assumptions in terms of market share and expectations for the market development in which the entity operates. Growth rate used in Elkem’s DCF models is 1.5% (2.0%). EBITDA levels EBITDA level represents the operating proﬁt (loss) before depreciation and amortisation. The key assumptions used in reaching the forecast ﬁgures are sales prices, volume mix, operating costs and productivity targets. Sales prices, volume and product mix: The 2023 budget is used as a basis for the forecast the next four years. Elkem experienced an increase in sales prices for most of Elkem’s products in the ﬁrst part of the year, but prices declined in the latter part of 2022. For Elkem's Silicones business the sales prices in China have been very volatile in 2022. In the impairment assessment Elkem has assumed sales prices will normalise and the price assumptions are below the current market situation for Silicon Products and Carbon Solutions. For Silicones the assumption is an increase in volume and prices compared to the current level, especially within specialty products. There are no observable long-term market prices for Elkem’s products, but there are external independent sources such as CRU for the Silicon Products market that are used as a basis for the budget. Elkem works continuously to improve the specialty ratio and this is reﬂected in the impairment models. Sales volumes are adjusted for necessary maintenance stops. Raw materials and energy for smelting: Most of Elkem’s plants have long term energy contracts that covers their future need of power. The contract prices is used in the estimate of future cash ﬂows. For Elkem’s spot exposure observable market prices are used adjusted for CPI. Raw material prices are based on 2023 budget and are adjusted to reﬂect expected volume / mix changes. Climate related risk: The calculation of value in use reﬂects the expected development in both the cost of CO 2 quotas and the income from CO 2 compensation going forward in line with the current regulatory framework. Outside of this no climate related legislation has been passed at the current time that will impact the group. However, there is an expectation that any increase in cost due to new legislation will be covered by increased sales prices, full or partial compensation by incentive schemes or increased eﬀectiveness resulting in limited impact on operating cash ﬂows. Other operating costs: These are estimated based on the current level and adjusted for committed operational eﬃciency programs. Changes to the outcome of these initiatives may aﬀect future estimated EBITDA levels. Capital expenditure (“Capex”) A normalised capex is assumed in the long run and are based on today’s maintenance level and technology. Estimated capital expenditures do not include capital expenditures that signiﬁcantly enhance the current performance, as such eﬀects are not included in the cash ﬂow projections. Currency rates and inﬂation The value-in-use calculation is performed in the functional currency for the CGU. The currency rates used to translate future incomes and expenses in other currencies than the functional currency are based on oﬃcial forward rates from Reuters. The long-term inﬂation (CPI) are based on external predictions and reﬂect the CPI which each CGU is located. Discount rates The required rate of return is calculated by the WACC method. The cost of a company's equity and liabilities, weighted to reﬂect its capital structure of 50:50, respectively, derive from its weighted average cost of capital. The WACC rates are based on 10-year risk-free interest rate for the relevant currency of the CGU. The rates are adjusted for inﬂation diﬀerential and country risk premium. The discount rates also take into account the debt premium, market risk premium, corporate tax rate and asset beta. The WACC are adjusted for tax to determine a pre-tax rate that is used for discounting the estimated future cash ﬂows. Goodwill acquired through business combination are allocated to the operating segments Silicones, Silicon Products and Carbon Solutions. Impairment testing of goodwill is done for a group of CGUs that is included in the respective operating segments. The following table give an overview of carrying amount of goodwill allocated to each of the operating segments. The table also includes the pre-tax discount rate for each operating segment. Cash Generating Units Carrying amount Pre-tax discount rate Amounts in NOK million 31 December 2022 31 December 2021 31 December 2022 31 December 2021 Silicones 705 680 10.5 % 9.2% Silicon Products 209 197 10.1 % 8.5% Carbon Solutions 69 64 10.2 % 9.6% Goodwill 984 941 Sensitivity for test of goodwill → An increase of 4% points in discount rate, for each operating segment's discount rate, will not result in impairment. → A growth rate equal to zero for the terminal period, for the cash-ﬂows for each operating segment will not result in impairment. → A decrease in the forecasted EBITDA levels of 30% for the cash-ﬂows for each operating segment will not result in impairment. (b) Impairment test for intangible assets, property plant and equipment and right-of-use assets For the assets with impairment indicators the recoverable amount was determined estimating the value in use of the assets, see the goodwill section above for assumption used. In 2022 Elkem has identiﬁed impairment indicators for one of its CGUs, see below. The CGU was not assessed to be impaired, as the recoverable amount exceed the carrying amount for the CGUs. In 2021 Elkem identiﬁed impairment indicators within the Silicones segment, Silicones excluding Jiangxi Bluestar Xinghuo Silicones, Elkem Silicon Materials (Lanzhou), Elkem Silicones Korea and Elkem Silicones Guangdong, which are tested separately. The CGU have performed better in 2022 than in 2021, and no new impairment indicators are identiﬁed. Elkem Silicones Guangdong Elkem has identiﬁed impairment indicators within Elkem Silicones Guangdong. The total carrying amount of the CGU is NOK 187 million. The impairment indicators are largely due to deterioration of EBITDA margins in 2022 due to signiﬁcantly increased raw material prices and limited pass-through opportunities for the specialty part of their sales portfolio. Raw material prices have come down and is expected to remain at a lower level with stable sales prices ensuring improved margins going forward. The assumptions applied follow the assumptions as applied for the goodwill, see section above. It is assumed stable production and sales prices and somewhat reduced cost in 2023 compared to 2022. The contribution margin for the following years are on the same level as for 2022. Pre-tax discount rate used in the DCF calculation for the CGU is 9.5%. An increase of 4% points in discount rate, a growth rate used to extrapolate the cash-ﬂows after ﬁve years equal to zero or a decrease in forecasted EBITDA of 30% points, will not result in an impairment for the CGU. 20. Inventories Principle Inventories are measured at the lower of cost and net realisable value. Inventory consists of raw materials, semi-ﬁnished goods and ﬁnished goods, in addition to operating materials and spare parts that do not meet the deﬁnition of property, plant and equipment. Raw materials, and operating materials and spare parts, are recognised at cost of purchase including transport and handling to their present location. Finished and semi-ﬁnished goods are measured at cost of raw materials, energy for production and cost of conversion up to the actual completion stage. Cost of conversion comprise operating expenses directly related to production of the products and an allocation of direct ﬁxed operating expenses. The cost of CO 2 allowances that Elkem needs to purchase in addition to allowances received from the government (note 8), are based on estimated production / emissions for the year. The cost is allocated to cost of conversion proportionally over the year as the number of allocated allowances will not be revised unless there is a substantial change in the production level at the plants. Net realisable value represents the estimated selling price for inventories less estimated costs of completion and variable selling expenses. Cost of goods sold is recognised in diﬀerent lines in the statement of proﬁt or loss based on nature; raw materials and energy for production, employee beneﬁts and other operating expenses. Actual cost of conversion related to goods sold is reported net of change in cost of conversion in inventory and is included in other operating expenses. Entities within the group sell goods to other group entities, consequently ﬁnished goods from one entity become raw materials or semi-ﬁnished goods for another group entity. The classiﬁcation of goods in the group's statement of ﬁnancial position is based on the separate entity's classiﬁcation. Judgements and estimates The assessment of net realisable value for the inventory is based on estimated market prices in the period the inventory is expected to be sold. The actual market price will diﬀer from the estimates used. Details of inventory 31.12.2022 31.12.2021 Amounts in NOK million Cost price Provision Net total Cost price Provision Net total Raw materials 3 322 (12) 3 310 2 767 (74) 2 693 Semi-ﬁnished goods 402 (41) 361 343 (41) 302 Finished goods 6 035 (142) 5 893 4 198 (63) 4 135 Operating materials and spare parts 792 (31) 761 610 (23) 586 Total inventories 10 550 (226) 10 325 7 918 (202) 7 716 This year's change in provision for impairment of inventory, a loss of NOK 14 million (loss of NOK 87 million), is recognised as a part of raw materials and energy for production. 21. Trade receivables Principle Trade and bills receivables are initially recognised at transaction price, which in most cases corresponds to their nominal amount. The carrying amount is subsequently measured at amortised cost using the eﬀective interest rate method, less any provision for expected credit losses. Current receivables with no stated interest rate are recognised at their nominal amount. A bill receivable is a document where the customer formally agrees to pay for delivered goods or services at maturity date and are normally guaranteed by a ﬁnancial institution. A bill receivable is transferable and can be used to pay trade payables (endorsed) or be settled in cash with a ﬁnance institution (discounted). The bills receivables-document eﬀectively replaces, for the speciﬁed amount, the trade receivable exchanged for the bill. Bills receivables (mainly bank acceptance bills that are guaranteed by a ﬁnancial institution) are primarily used by Elkem's Chinese entities and the duration is normally below six months. Trade receivables are derecognised when settled, replaced by bills receivable or when transferred to a third party and the group has no further risk related to the receivables. Bills receivables are derecognised when they are settled on due date or when the risk and reward are transferred to a third party. Transferral to a third party can be done by discounting a bill receivable before due date or by endorsing the bill receivable, meaning that it is accepted by the supplier as payment for goods or services received. Elkem calculates the expected credit losses (ECL) for trade receivables and bills receivables in accordance with the simpliﬁed approach. All expected cash ﬂows, including cash ﬂows from credit insurance contracts where such contracts are deemed to be an integral part of the transactions, is taken into consideration. The assessment is based on historical experienced losses adjusted for forward-looking estimates on changes in risk / probability that credit losses will occur for the diﬀerent customer groups /segments where applicable. Judgements and estimates Judgement is applied when determining expected credit loss on trade receivables. The judgement is based on experienced losses in the past and expectations about future economic conditions for the diﬀerent customer groups / business areas. Calculation of expected credit losses takes into account cash ﬂows from credit insurance contracts when such contracts are deemed to be an integral part of the transaction. Elkem generally secures its trade receivables by credit insurance from a reputable credit insurance company, see note 27 Financial risk. Details of trade receivables Amounts in NOK million 31.12.2022 31.12.2021 Trade receivables 3 208 3 343 Trade receivables, related parties (note 32) 19 33 Allowance for expected credit losses (65) (69) Bills receivable 1 086 990 Total trade receivables 4 248 4 297 Elkem has entered into factoring agreements with a credit limit of a total of EUR 162 million (EUR 127), NOK 1,698 million (NOK 1,265 million), to sell on continuing basis trade receivables that meet speciﬁc conditions. The agreements include a recourse clause for maximum 5% -10%, depending on the agreement, of the face value of the individual receivables sold. The non-recourse amount of the receivables sold is derecognised and the recourse amount is recognised as a current liability when the title to the receivables is transferred. As of 31 December 2022, NOK 106 million (NOK 57 million) is recognised as current liability (see note 24 Provisions and other liabilities). In addition, Elkem has entered into factoring agreements without recourse for some speciﬁc customers. Receivables that are sold without recourse are derecognised in its entirety when the title is transferred, as there is no remaining credit risk after transfer. As at 31 December 2022 NOK 1,777 million (NOK 1,467 million) of Elkem’s trade receivables are derecognised under these agreements. Bills receivable consist of NOK 1,086 million (NOK 989 million) bank acceptance bills and NOK 0 million (NOK 2 million) commercial acceptance bills. A total of NOK 4,033 million (NOK 4,253 million) in unmatured bills receivables are endorsed to a third party where the ﬁnal payment of the bill is guaranteed by a highly rated ﬁnancial institution. Elkem will only suﬀer losses on an endorsed bill if the bank that have issued the bill or all companies that have endorsed the bill before Elkem goes bankrupt. These bills are derecognised as there is very low remaining credit risk related to endorsed bills. Analysis of gross trade receivables by age, presented based on the due date Amounts in NOK million 31.12.2022 31.12.2021 Not due 2 392 2 883 Overdue by: 1–30 days 527 352 31–60 days 92 48 61–90 days 124 27 More than 90 days 91 66 Total trade receivables 1) 3 227 3 376 1) Bills receivable is not included in the ageing table Movements in allowance for expected credit losses Amounts in NOK million 2022 2021 Opening balance (69) (92) Business combinations (note 4) - - Realised losses during the year / Received on earlier losses 5 12 Provision for expected credit losses (27) (10) Reversal of earlier provisions 29 24 Currency translation diﬀerences (2) (4) Closing balance (65) (69) Analysis of allowance for expected credit losses, presented based on related trade receivables Amounts in NOK million 31.12.2022 31.12.2021 Not due (13) (14) Overdue by: 1–30 days (1) (1) 31–60 days (0) (0) 61–90 days (3) (4) More than 90 days (48) (50) Total allowance for expected credit losses (65) (69) 22. Other assets Principle Other shares Investments in equity instruments with an ownership below 20% are normally classiﬁed as other shares and recognised in other non-current assets in the statement of ﬁnancial position. Other shares consist of equity investments in both listed and unlisted companies. Shares in listed companies are measured at fair value through proﬁt or loss. Investments in equity instruments that do not have a quoted market price in an active market are classiﬁed as ﬁnancial assets measured at fair value through other comprehensive income (OCI). Changes in fair values recognised in OCI cannot be subsequently recycled to statement of proﬁt or loss. Dividends from such investments are recognised as other items in the statement of proﬁt or loss. Financial assets A ﬁnancial asset is recognised in the statement of ﬁnancial position when Elkem becomes party to a contract. Assets to be acquired in relation to a ﬁrm commitment to sell goods or services are recognised at the time Elkem has performed under the agreement. At initial recognition, the ﬁnancial assets are carried in the statement of ﬁnancial position at fair value plus any transaction costs directly attributable to the acquisition or issue of the asset. Financial assets are derecognised once the right to future cash ﬂows have expired or been transferred to a third party, and Elkem has transferred substantially all the risk and rewards of control of these assets. Any rights or obligations retained in any transferred assets are booked separately as assets or liabilities. Financial assets with a maturity exceeding one year are classiﬁed as non-current ﬁnancial assets. Short-term investments that do not meet the deﬁnitions of a cash equivalent, and ﬁnancial assets with a maturity of less than one year, are classiﬁed as current ﬁnancial assets. Loans and receivables Loans and receivables are non-derivative hold to collect ﬁnancial assets with ﬁxed or determinable payments that are not quoted in a regulated market. After initial recognition, they are recognised at amortised cost using the eﬀective interest method. Gains and losses are recognised in the statement of proﬁt or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process. If there is objective evidence of impairment, or if there is a risk that the group may not recover the contractual amounts at the contractual maturity dates, an impairment loss is recognised in the statement of proﬁt or loss. The provision is equal to the diﬀerence between the carrying amount and the estimated future recoverable cash ﬂows. Current assets Current receivables are initially recognised at fair value, which in most cases corresponds to their nominal amount. The carrying amount is subsequently measured at amortised cost using the eﬀective interest rate method, less any provision for expected credit losses. Current receivables with no stated interest rate are recognised at their nominal amount. Judgements and estimates Judgement is applied when assessing the value of shares in unlisted companies. For estimates related to valuation of ﬁnancial assets, see note 25 Financial assets and liabilities. Judgement is applied when determining the estimated expected credit loss on other receivables and prepayments. The judgement is based on experienced losses in the past and expectations about future economic conditions for the diﬀerent counterparties. Details of other assets Non-current Current Amounts in NOK million 31.12.2022 31.12.2021 31.12.2022 31.12.2021 Other shares Restricted deposits Other deposits Pension assets, deﬁned beneﬁts and contribution plans (note 9) Prepayments for construction of ﬁxed assets Prepayments for goods and equipment Prepayments for other expenses Prepayments to related parties (note 32) Receivables from related parties, interest-bearing (note 32) Receivables from related parties, interest free (note 32) Grants receivable (note 8) Value added tax Corporate income tax Interest receivables Other receivables Assets at fair value through proﬁt or loss Other assets Total other assets 24 46 10 41 99 - 77 - 1 - 306 64 - - 8 - 39 716 32 41 34 1 24 - 72 - 1 - 202 47 - - 8 - 15 478 - - - 2 - 150 90 15 - 7 620 418 338 0 47 - 11 1 698 - - - 2 - 169 87 18 - 1 493 361 237 1 155 14 14 1 551 Provision for impairment included in total other assets, mainly prepayments. (75) (69) Restricted deposits mainly consist of restricted deposits related to the ongoing tax litigation in Elkem's business in Brazil of NOK 15 million (NOK 14 million), see note 24 Provisions and other liabilities, and deposit for pension guarantee, related to unfunded pension liabilities for salaries above 12G, of NOK 31 million (NOK 27 million). Other receivables includes NOK 12 million (NOK 87 million) related to settlement of power derivatives. Corporate income tax receivable partly consists of Elkem ASA's pending tax issues with tax authorities (see note 14 Taxes). Elkem’s assessment is that the defence against the action will be successful, but that the case consideration might take up to 3 years. Parts of Elkem's income tax receivables is correspondingly expected to be settled later than one year. 23. Interest-bearing assets and liabilities Principle Interest-bearing liabilities The liabilities are initially recognised at fair value of the amount required to settle the associated obligation, net of prepaid costs directly attributable to the liability. Subsequently and insofar, as they are not designated as liabilities at fair value through proﬁt or loss, such liabilities are recognised at amortised cost using the eﬀective interest rate method. Financial assets are derecognised when the rights to receive cash ﬂows from the assets have expired or have been transferred to a third party. Financial liabilities are derecognised when they are extinguished. Bills payable A bill payable is a document where the buyer formally agrees to pay for purchased goods or services at maturity date and are normally guaranteed by a ﬁnancial institution. The bills payable are initially recognised when the supplier accepts the bill of exchange and is recognised at the amount equal to the trade payables it replaces. Bills payable are used by Elkem's Chinese entities, and the duration is normally below six months. When the bill payable is guaranteed by a ﬁnancial institution it is normally required to deposit a certain per centage of the nominal value of the bill payable into a restricted bank account. All bills payable in Elkem are bank acceptance bills which is guaranteed by a ﬁnancial institution. Cash and cash equivalents Cash and cash equivalents are held for the purpose of meeting short-term ﬂuctuations in liquidity. Deposits with a term of 3 months or less on acquisition are included. Bank overdrafts are presented within interest-bearing current liabilities in the statement of ﬁnancial position. Restricted deposits are presented separately in the statement of ﬁnancial position and excluded from cash and cash equivalents presented in the statement of cash ﬂows. Lease liabilities See note 16 Leases for accounting policies for right-of-use assets and lease liabilities. Details of interest-bearing assets / (liabilities) Non-current Current Amounts in NOK million 31.12.2022 31.12.2021 31.12.2022 31.12.2021 Interest-bearing liabilities Lease liabilities (note 16) Loans from external parties, other Bank ﬁnancing Accrued interest than bank 475 3 697 6 160 - 685 3 125 4 599 - 103 10 74 17 116 1 264 572 20 Total interest-bearing liabilities 10 331 8 409 204 1 972 Total bills payable - - 1 742 2 096 Total interest-bearing liabilities including bills payable 10 331 8 409 1 946 4 067 Interest-bearing assets Cash and cash equivalents Restricted deposits bills payable Other restricted deposits Receivables from related parties Loans to external parties Accrued interest income - - 46 1 8 - - - 41 1 8 - 9 255 395 12 - - 0 7 040 601 8 - - 1 Total interest-bearing assets 55 50 9 663 7 650 Net interest-bearing assets / (liabilities) (10 276) (8 359) 7 717 3 583 Interest-bearing liabilities by currency 31.12.2022 31.12.2021 Amounts in NOK million Currency amount NOK Currency amount NOK EUR 630 6 620 608 6 083 USD 3 31 4 38 NOK 2 753 2 753 3 038 3 038 CNY 1 963 2 809 2 333 3 240 Other currencies - 66 - 77 Total interest-bearing liabilities 12 278 12 476 Maturity of interest-bearing liabilities 31 December 2022 2028 Amounts in NOK million 2023 2024 2025 2026 2027 and later Total Lease liabilities 103 74 57 47 40 257 578 Loans from external parties, other than bank 10 916 1 234 942 500 105 3 706 Bank ﬁnancing 74 9 39 63 5 335 755 6 276 Bills payable 1 742 1 742 Accrued interest 17 17 Total interest-bearing liabilities excluding prepaid loan fees 1 946 1 000 1 330 1 052 5 875 1 117 12 320 Prepaid loan fees (42) Total interest-bearing liabilities 12 278 Maturity of interest-bearing liabilities 31 December 2021 2027 Amounts in NOK million 2022 2023 2024 2025 2026 and later Total Lease liabilities 116 101 80 64 53 387 801 Loans from external parties, other than bank 1 264 7 1 118 1 000 500 500 4 389 Bank ﬁnancing 572 4 398 206 3 3 4 5 186 Bills payable 2 096 2 096 Accrued interest 20 20 Total interest-bearing liabilities excluding prepaid loan fees 4 067 4 506 1 404 1 067 557 891 12 492 Prepaid loan fees (16) Total interest-bearing liabilities 12 476 Loan agreements The main non-current loan agreements as of 31 December 2022 are a term loan of EUR 500 million (EUR 400 million), a term loan of EUR 0 million (EUR 5 million), issued bond loans of a total of NOK 2,500 million (NOK 2,500 million) and a series of loans issued in the Schuldschein market of EUR 113 million (EUR 61 million). The main loan agreements are granted to Elkem ASA. In addition Elkem Silicones Xinghuo ﬁnancing is parts of its upgrade of property, plant and equipment with a unsecured term loan of CNY 650 million (CNY 0 million). The interest rates for the non-current loan agreements are in the range of 4.38% to 4.78% for the bond loans, 1.82% to 4.5% for the loans in the Schuldschein market and 3.45% to 3.95% for the PPE loans. For the term loan the interest rate is 3.44%. Elkem placed EUR 200 million in the Schuldschein market on 4 and 6-year tenors in December 2022, where of EUR 52 million was disbursed in December 2022, while EUR 148 million was disbursed in January 2023. In June Elkem signed new bank facilities with a term loan of EUR 500 million and a credit facility of EUR 500 million, reﬁniancing the term loan of EUR 400 million from prior year. Later in 2022 the facilities was linked to two sustainability KPIs, KPI 1 Lost Time Injury Rate and KPI 2 – Product Group Carbon Footprint. The margin of the RCF and term loan shall be reduced by 0.025% if both KPIs are met, and increased by 0.025% if none of the KPIs are met. If one KPI is met there shall be no change to the margin. The sustainability KPIS will ﬁrst be tested for 2023 with eﬀect from 2024. One of the loans issued in the Schuldschein market (EUR 15 million), is a ﬁxed rate loan with a ﬁxed rate of 1.8160%. Given the market conditions as at 31 December 2022 the loan would have been approximately EUR 0.7 million lower, due to the diﬀerence between ﬁxed and market rate. The bond loans are listed on Oslo Børs. There are no covenants related to the bond loans. There are no material diﬀerences between fair value of the bond loans and book values. The loan facilities are unsecured, but part of the loans has ﬁnancial covenants related to them, see below. Credit facilities As of 31 December 2022 the group is granted credit facilities of NOK 6,356 million. At 31 December 2022 NOK 14 million is drawn. As of 31 December 2021 the group is granted credit facilities of NOK 3,144 million. The credit facilities are undrawn at 31 December 2021. The main revolving credit facilities are granted to Elkem ASA, but the facilities can be utilised by Elkem ASA and its subsidiaries. The main facilities amount to EUR 500 million, CNY 199 million, CNY 300 million and NOK 250 million respectively. See note 27 Financial risk, section (c) liquidity risk for more information. Hedging Some / part of loans are designated as a hedging instrument, see note 26 Hedging. Loan covenant Elkem has ﬁnancial covenants related to its main bank ﬁnancing and parts of loans from external parties, other than bank (Schuldschein), in Norway. The interest-bearing loans in China have no connected ﬁnancial covenants. In addition to the covenants on these loan facilities in Norway there are loan covenants related to the credit facilities in Elkem Metal Canada Inc of CAD 2 million. Elkem and Elkem Metal Canada Inc. are compliant with their covenants at the end of 2022 and 2021. The covenants for the interest-bearing loan facilities in Norway relate to the ﬁnancial performance of Elkem and are as speciﬁed in the table below. Covenant Elkem related to drawn loan of NOK 6,501 million (NOK 5,971 million) in Elkem ASA Amounts in NOK million 31.12.2022 31.12.2021 Loan covenant Equity ratio 55 % 47 % > 30% Interest cover ratio 58.38 37.33 > 4.00 Movements in interest-bearing liabilities 2022 Cash ﬂows Non-cash changes Additions, lease modiﬁcations, Acquisition Currency Receipts/ remeasurements / Disposal of translation Amounts in NOK million 31.12.2021 Payments and terminations subsidiaries Reclassiﬁcation diﬀerences 31.12.2022 Lease liabilities 685 - 118 (218) (117) 8 475 Loans from external parties 3 125 547 - - (9) 34 3 697 Bank ﬁnancing 4 615 902 - 650 (189) 223 6 202 Total movements non-current 8 425 1 449 118 432 (315) 266 10 374 Lease liabilities 116 (116) - (20) 117 5 103 Loans from external parties 1 264 (1 328) - - 9 64 10 Bank ﬁnancing 572 (710) - 10 189 13 74 Total movements current 1 952 (2 153) - (9) 315 82 187 Total 10 376 (704) 118 423 - 348 10 561 Movements in interest-bearing liabilities 2021 Cash ﬂows Non-cash changes Additions, lease modiﬁcations, Currency Receipts/ remeasurements translation Amounts in NOK million 31.12.2020 Payments and terminations Reclassiﬁcation diﬀerences 31.12.2021 Lease liabilities 566 - 258 (138) (1) 685 Loans from external parties 1 996 2 464 - (1 266) (69) 3 125 Bank ﬁnancing 4 652 132 - (5) (164) 4 615 Total movements non-current 7 214 2 596 258 (1 409) (233) 8 425 Lease liabilities 97 (118) - 138 (1) 116 Loans from external parties 2 407 (2 373) - 1 266 (36) 1 264 Bank ﬁnancing 762 (226) - 5 31 572 Total movements current 3 266 (2 717) - 1 409 (6) 1 952 Total movements 10 479 (122) 258 - (239) 10 376 24. Provisions and other liabilites Principle Provisions A provision is recognised when the group has a present obligation (legal or constructive) and it is probable that an outﬂow of resources is required to settle the obligation. The amount recognised is the best estimate of the consideration required to settle the obligation, taking into account the risks and uncertainties surrounding the obligation, known at the end of the reporting period. Provisions are measured at present value, unless the time value is assessed to be immaterial. Contract obligations Contract obligations are liabilities assumed in business combinations, liabilities related to cancellation of contracts and contracts that includes guarantees for losses. Other liabilities The liabilities are initially recognised at fair value of the amount required to settle the associated obligation, net of prepaid costs directly attributable to the liability. Contingent liabilities Contingent liabilities are liabilities which are not recognised because they are possible obligations that have not yet been conﬁrmed, or they are present obligations where an outﬂow of resources is not probable. Any signiﬁcant contingent liabilities are disclosed in the notes. Contingent assets Contingent assets are not recognised but disclosed in the notes if probable. Judgements and estimates Elkem has several types of provisions due to its operations. Such liabilities are normally uncertain in timing and amount, and recognised amounts are estimates based on available information at the end of the reporting period. The estimated liability is based on expected cash ﬂows necessary to settle the obligation, adjusted for any related risk and discounted by using the pre-tax interest applicable for the speciﬁc entity. The estimates are updated when new or updated information is available, or at a minimum at each reporting date. The actual outcome will diﬀer from the estimate. Details of provision and other liabilities Non-current Current Amounts in NOK million 31.12.2022 31.12.2021 31.12.2022 31.12.2021 Employee withholding taxes and other public taxes - - 160 133 Value added tax - - 137 223 Prepayments - - 356 375 Prepayments from related parties (note 32) - - 17 10 Liabilities to related parties (note 32) - - 30 32 Provisions 216 127 102 287 Contract obligations power - - - 4 Contingent consideration acquisition of subsidiaries - 40 42 163 Accrued expenses - - 516 320 Grants, deferred income (note 8) - - 8 18 Grants payable (note 8) 16 15 - - Recourse liability factoring agreement (note 21) - - 106 57 Other liabilities - - 72 35 Total provisions and other liabilities 232 182 1 545 1 657 The contingent consideration acquisition of subsidiaries relates to the acquisition of Polysil on 1 April 2020. The payments of the contingent consideration was due in installements and the payments have not diﬀered signiﬁcantly from the maximum that was recognised intially. Movements in contingent consideration Amounts in NOK million 2022 2021 Opening balance 203 261 Fair value adjustment of contingent consideration upon payment (0) 1 Unwinding 4 6 Payments (176) (78) Currency translation diﬀerences 12 13 Closing balance 42 203 Movements in provision 2022 Amounts in NOK million Restructuring Site restoration Environmental measures Litigations Customers Other provisions Total provisions Opening balance Additional provisions recognised Used during the year Reversal of provisions recognised Currency translation diﬀerences Closing balance 70 - (31) (26) 3 17 32 2 (0) - 0 34 109 83 (2) (1) 0 190 66 7 (17) (1) 7 62 4 6 (1) (1) 1 9 134 0 (127) - 0 7 415 99 (180) (28) 12 318 Hereof non-current Hereof current Closing balance - 17 17 34 - 34 131 58 190 50 12 62 - 9 9 1 6 7 216 102 318 Movements in provision 2021 Amounts in NOK million Restructuring Site restoration Environmental measures Litigations Customers Other provisions Total provisions Opening balance Additional provisions recognised Used during the year Reversal of provisions recognised Currency translation diﬀerences Closing balance 127 - (17) (41) 1 70 31 2 (0) - (0) 32 94 16 - - (0) 109 60 10 (1) - (3) 66 9 0 (5) - (0) 4 12 171 (47) - (2) 134 332 199 (72) (41) (4) 415 Hereof non-current Hereof current Closing balance - 70 70 32 0 32 55 54 109 40 26 66 - 4 4 0 134 134 127 287 415 Restructuring The provision is related to Elkem's group wide productivity improvement programme launched in ﬁrst quarter of 2020. Site restoration The site restoration provisions are related to the necessary site remediation work that Elkem will have to undertake in respect of its quartz mines. Environmental measures Elkem has worldwide operations representing potential exposure towards environmental consequences. Elkem has established clear procedures to minimise environmental emissions, well within public emission limits. The provisions relate to clean up costs for a closed down production site and landﬁlls, mainly in Canada and Norway, and also estimated cost for clean-up cost of polluted soil and fjord in relation to production sites in Norway and France. The additional provision recognised in 2022 includes NOK 70 million in restoration expense related to decommissioned business in Canada. Litigations The provisions due to litigations are mainly related to business tax cases in the Carbon division in Brazil. Tax cases in Brazil can take a substantial amount of time before resolution by the tax authorities, hence the time of settlement is uncertain. Provisions are made for each case based on the estimated amount expected to be paid, including interest and penalties. In accordance with Brazilian regulations, agreed amounts have been transferred to restricted bank accounts and are adjusted for interest. The restricted cash is recognised in other non-current assets, see note 22 Other assets. Customers The provisions are related to customer complaints, mainly in the Silicones division. Other provisions Consist mainly of a provision related to relocation of workers buildings located in proximity to the Silicones Xinghuo plant, required by the authorities. The provision was settled in 2022. Contingent liabilities Due to its operations Elkem could be included in criminal or civil proceedings related to, among others, product liability, environment, health and safety, anti-competitive, anti- corruption, trade sanctions or other similar laws or regulations or other forms of commercial disputes which could have a material adverse eﬀect on Elkem. See section litigation above for ongoing cases and see note 14 Taxes for ongoing tax audits by authorities. 25. Financial assets and liabilities Principle Financial assets A ﬁnancial asset or a ﬁnancial liability is recognised in the statement of ﬁnancial position when Elkem becomes party to a contract. Assets to be acquired and liabilities to be incurred as a result of a ﬁrm commitment to purchase or sell goods or services are recognised at the time one of the parties has performed under the agreement. At initial recognition, the ﬁnancial assets are carried in the statement of ﬁnancial position at fair value plus any transaction costs directly attributable to the acquisition or issue of the asset. Financial assets are derecognised when the right to future cash ﬂows have expired or been transferred to a third party, once the group has transferred substantially all the risk and rewards of control of these assets. Any rights or obligations retained in any transferred assets are booked separately as assets or liabilities. Financial assets with a maturity exceeding one year are classiﬁed as non-current ﬁnancial assets. Short-term investments that do not meet the deﬁnitions of a cash equivalent, and ﬁnancial assets with a maturity of less than one year, are classiﬁed as current ﬁnancial assets. Financial liabilities Non-derivative ﬁnancial liabilities include interest-bearing liabilities, bills payable and trade payables. The liabilities are initially recognised at fair value of the amount required to settle the associated obligation, net of prepaid costs directly attributable to the liability. Subsequently and insofar, as they are not designated as liabilities at fair value through proﬁt or loss, such liabilities are recognised at amortised cost using the eﬀective interest rate method. Financial liabilities are derecognised when they are extinguished. Derivatives Derivative ﬁnancial assets and liabilities include ﬁnancial instruments or contracts where the value changes in response to the change of a speciﬁed rate, price or index and commodity contracts within the scope of IFRS 9. Derivatives are initially recognised at fair value at the date when the derivative contracts are entered into. Transaction costs that are directly attributable to the acquisition of ﬁnancial assets or liabilities at fair value through proﬁt or loss, are recognised immediately in the statement of proﬁt or loss. Subsequently the derivatives are remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in the statement of proﬁt or loss immediately, unless the derivative is designated and is eﬀective as a hedging instrument, in which case the change in fair value is recognised in statement of proﬁt or loss in the same period(s) as the hedged objects aﬀects the proﬁt or loss. Derivatives are presented as current assets or liabilities, unless they are expected to be realised more than 12 months after the reporting period. In that case, they are classiﬁed as non- current assets or liabilities. Embedded derivatives An embedded derivative is a component of a hybrid instrument that also includes a non-derivative host contract with the eﬀect that some of the cash ﬂows of the combined instrument vary in a way similar to a stand-alone derivative. Derivatives embedded in ﬁnancial liability of a non-ﬁnancial host are separated from the host and accounted for as separate derivatives if; the economic characteristics and risks are not closely related to the host, a separate instrument with the same terms as the embedded derivative would meet the deﬁnition of a derivative and the hybrid contract is not measured at fair value through proﬁt and loss. Elkem has long-term power contracts settled in other currencies than the entity’s functional currency. The currency portion of these contracts is an embedded derivative and is recognised and presented as an independent derivative, see section derivatives above. Commodity contracts within the scope of IFRS 9 Non-ﬁnancial commodity contracts where the relevant commodity is readily convertible to cash and where the contracts are not for own use, fall within the scope of IFRS 9 Financial instruments - recognition and measurement. The group currently has energy contracts in Norway that do not meet the own use criteria, since the power under the contracts is delivered in another grid area to where the plants are located. Transfer between diﬀerent grid areas is assessed to be net settlement and considered to be two diﬀerent transactions. Such contracts are therefore measured at fair value through proﬁt or loss and classiﬁed as derivatives, unless they are designated as hedging instruments. Judgements and estimates Estimates are used for ﬁnancial assets and liabilities where there are no listed prices or direct observable prices. Calculation of fair value is in such cases based on observable prices for similar contracts, as far as possible. For contracts with a duration beyond the period of observable prices, the assumptions are derived based on the latest observable data. Due to the current market situation in the energy market with very high prices and high volatility there is signiﬁcant uncertainty in the estimation of forward power prices with direct impact on the value of the power contracts classiﬁed as ﬁnancial instruments. The estimated value of the power contracts can be impacted by the changes in the power prices both within the next 12 months, but also in the period beyond 12 months. There is also uncertainty related to the discount rate used for discounting future cash ﬂows and the expectation to the development in the consumer price index going forward. See assumptions used at the balance sheet date in chapter (a) Fair value measurement below, and sensitivity of the main power contracts in note 27 Financial risk. Assets by category 31 December 2022 Assets at fair value Assets at fair Assets at fair through other Loans and Non- value through value - hedging comprehensive receivables at ﬁnancial Amounts in NOK million Note proﬁt or loss instruments income amortised cost assets Total Derivatives, non-current 822 740 - - - 1 562 Other assets, non-current 22 7 - 18 65 627 716 Trade receivables 21 - - - 4 248 - 4 248 Derivatives, current 284 427 - - - 711 Other assets, current 22 - - - 54 1 644 1 698 Restricted deposits 23 - - - 408 - 408 Cash and cash equivalents 23 - - - 9 255 - 9 255 Total 1 113 1 167 18 14 030 2 271 Liabilities by category 31 December 2022 Liabilities at fair value Liabilities at fair through value - hedging Liabilities at Non-ﬁnancial Amounts in NOK million Note proﬁt or loss instruments amortised cost liabilities Total Interest-bearing liabilities, non-current 1) 23 - - 10 331 - 10 331 Provisions and other liabilities, non-current 24 - - - 232 232 Trade payables - - 5 335 - 5 335 Interest-bearing liabilities, current 1) 23 - 8 196 - 204 Bills payable 23 - - 1 742 - 1 742 Derivatives, current 2) (27) 136 - - 109 Provisions and other liabilities, current 24 42 - 724 779 1 545 Total 15 144 18 329 1 011 Assets by category 31 December 2021 Assets at fair value Assets at fair Assets at fair through other Loans and value through value - hedging comprehensive receivables at Non-ﬁnancial Amounts in NOK million Note proﬁt or loss instruments income amortised cost assets Total Derivatives, non-current (4) 308 - - - 304 Other assets, non-current 22 6 - 27 84 362 478 Trade receivables 21 - - - 4 297 - 4 297 Derivatives, current 2) (2) 285 - - - 283 Other assets, current 22 14 - - 157 1 381 1 551 Restricted deposits 23 - - - 609 - 609 Cash and cash equivalents 23 - - - 7 040 - 7 040 Total 14 593 27 12 187 1 743 Liabilities by category 31 December 2021 Liabilities at fair value Liabilities at fair through value - hedging Liabilities at Non-ﬁnancial Amounts in NOK million Note proﬁt or loss instruments amortised cost liabilities Total Interest-bearing liabilities, non-current 1) 23 - 3 8 406 - 8 409 Derivatives, non-current 2) (71) 88 - - 18 Provisions and other liabilities, non-current 24 40 - - 142 182 Trade payables - - 4 614 - 4 614 Interest-bearing liabilities, current 1) 23 - 8 1 964 - 1 972 Bills payable 23 - - 2 096 - 2 096 Derivatives, current 2) (16) 40 - - 23 Provisions and other liabilities, current 24 163 - 448 1 047 1 657 Total 116 138 17 527 1 189 1) In addition to the hedging instruments included in derivatives, currency eﬀect of EUR loan is designated as a hedging instrument in a cash ﬂow hedge of highly probable future sales. See note 26 Hedging. 2) The group applies hedge accounting for certain currency contracts and certain parts of power contracts. The negative value reported as assets and liabilities at fair value is representing the value of parts of power contracts where hedge accounting is not applied. There are no material diﬀerences between fair value and the carrying amount for ﬁnancial liabilities and ﬁnancial assets at amortised cost. (a) Fair value measurement Elkem's ﬁnancial instruments measured to fair value are categorised into three levels based on the inputs to the valuation techniques used to measure fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2 inputs are inputs, other than quoted prices included within level 1, that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. Assets and liabilities measured at fair value 31.12 Amounts in NOK million Level 1 Level 2 Level 3 Total 2022 Level 1 Level 2 Level 3 Total 2021 Financial assets at fair value through proﬁt or loss Derivatives designated in a hedging relationship Assets at fair value through other comprehensive income Total assets 7 - - 7 287 (55) - 233 819 1 222 18 2 058 1 113 1 167 18 2 297 6 - - 6 39 175 - 214 (31) 418 27 414 14 593 27 634 Financial liabilities at fair value through proﬁt or loss Derivatives designated in a hedging relationship Total liabilities - (27) - 144 - 117 42 - 42 15 144 159 - (87) - 138 - 51 203 - 203 116 138 254 Level 1: Financial assets measured at level 1 apply to external quoted shares, which are measured based on the quoted prices. Dividends from the external shares are classiﬁed as other items. Level 2: Financial assets and liabilities measured at level 2 applies to forward currency contracts, commodity contracts and embedded currency derivatives. The contracts are measured at fair value by estimating the future cash ﬂows. Level 3: The ﬁnancial assets and liabilities at fair value through proﬁt or loss measured at level 3 consist of power contracts, contingent consideration and shares in unlisted companies. The power contracts are assessed to be settled net in cash and are therefore within the scope of IFRS 9 and recognised as ﬁnancial instruments. When valuing the power contracts observable data is used, such as power price, currency rates, CPI and CfD, when available. The power prices for long-term electricity contracts in Norway are not directly observable in the market for the whole contract length. Power prices are observable until 2031, CfD prices are only observable for a short time period and currency rates are observable until 2026. Valuation of the contracts for the remaining periods are based on the latest observable data adjusted for CPI, if relevant. Overview of contracts and the assumptions used for assessment of fair value for the level 3 contracts Power contract "30-øringen" "30-øringen" power contract lasts until 31 December 2030 and the power from the contract is restricted to be used at Elkem ASA plants. For the years 2019 - 2020 the price under the contract was ﬁxed except if the spot price at the relevant grid points exceeds a certain threshold, in which case the price equals the spot price. For the last 10 years of the contract, starting 1 January 2021, the price is ﬁxed based on the average spot price the ﬁve years preceding 1 January 2021, adjusted for inﬂation. The ﬁxed price and the threshold price are based on a start date and thereafter adjusted with inﬂation annually. Changes in fair value for the "30-øringen" contract was classiﬁed as other items before 1 January 2021. Due to the change in the contact's price structure of the instrument from 2021, the contract is designated as a hedging instrument from 1 January 2021. This means that fair value changes from the eﬀective part of the hedging relationship from 1 January 2021 is recognised as raw materials and energy for production in statement of proﬁt or loss in the same period(s) as the hedged objects aﬀects the proﬁt or loss. The ineﬀective part of the hedging relationship is recognised in other items. Power contract with Salten Energigjenvinning AS On 31 January 2022 entered into agreement to purchase the remaining 50% of the shares in Salten Energigjenvinning AS. The company was subsequently merged into Elkem ASA. The power contract was therefore de-recognised at the date of the merger. Assumptions for valuation of the contracts → Discount rate: 4,87% (3.5%) p.a. for the "30-øringen" power contract. The assumptions are based on the estimated risk of the contract, including credit risk. → Inﬂation: 2% (2%) p.a. → Power prices: Market prices per 31 December 2022 until 2031. → CfDs: 4-year average historic CfD prices based on Nord Pool prices. → Exchange rate EUR: Observable rates for the next 5 years, thereafter calculated rates based on long-term interest rates. For external shares measured at level 3, book value of equity adjusted for excess values at purchase date is used as an approximation of fair value. See note 24 Provision and other liabilities for value of contingent liabilities. Movements in fair value measurement level 3 Amounts in NOK million 2022 2021 Opening balance 212 (348) Acquisition / business combinations (58) - Transfer to / from other levels 3 - Change in fair value recognised in OCI, cash ﬂow hedges 1 227 737 Hedge ineﬀectiveness 1 391 - Disposal (5) - Settlement / realised eﬀects (735) (157) Other changes in fair value through proﬁt or loss, unrealised (7) (9) Currency translation diﬀerences (12) (13) Closing balance 2 016 212 (b) Details of ﬁnancial instruments Details of currency exchange contracts 31 December 2022 Notional Purchase Purchase Sale Sale Type of Currency Fair value amount 1) currency ccy million currency ccy million instrument deal rate Due NOK NOK CAD 40 USD 31 Fwd 1,3101 2023 (9) 301 NOK 1 750 EUR 170 Fwd 10,2788 2023 (44) 1 790 NOK 189 JPY 2 014 Fwd 0,0938 2023 36 151 NOK 426 JPY 4 242 Fwd 0,1005 2024-2026 88 317 NOK 764 USD 79 Fwd 9,6767 2023 (10) 780 USD 1 JPY 123 Fwd 0,0072 2023 (0) 9 NOK 719 EUR 69 Embedded 2) 10,4520 2023 (22) 723 NOK 3 688 EUR 335 Embedded 2) 11,0169 2024-2034 42 3 520 Total fair value 3) 80 Details of currency exchange contracts 31 December 2021 Notional Purchase Purchase Sale Sale Type of Currency Fair value amount 1) currency ccy million currency ccy million instrument deal rate Due NOK NOK CAD 40 USD 32 Fwd 1,2549 2022 (4) 284 NOK 1 231 EUR 120 Fwd 10,2303 2022 20 1 203 NOK 2 GBP 0 Fwd 11,6549 2022 (0) 2 NOK 169 JPY 1 844 Fwd 0,0916 2022 27 141 NOK 615 JPY 6 256 Fwd 0,0984 2023-2026 112 479 NOK 392 USD 45 Fwd 8,6557 2022 (9) 399 USD 1 JPY 102 Fwd 0,0088 2022 0 8 NOK 709 EUR 69 Embedded 2) 10,3355 2022 1 686 NOK 4 039 EUR 371 Embedded 2) 10,8877 2023-2034 (18) 3 709 Total fair value 3) 129 1) Notional value of the contracts, based on currency rates 31 December. 2) Embedded EUR derivatives in own use power contracts. 3) The spot element of forward currency contracts with duration more than 3 months are designated as hedging instruments in a cash ﬂow hedge of highly probable future sales, hence this part is classiﬁed as "Derivatives used for hedging" in the table "Assets and liabilities classiﬁed by category" above. The interest element of these contracts and contracts of duration < 3 months are classiﬁed as "Assets/liabilities at fair value through proﬁt or loss". Details of power contracts and other commodity contracts within the scope of IFRS 9 31 December 2022 Notional Amounts in NOK million Volume GWh / Oz Due Fair value amount 1) Forward power contracts ﬁnancial institutions 44 2023 43 15 Power contract "30-øringen" 501 2023 608 158 Power contract "30-øringen" 3 510 2024-2030 1 430 1 199 Equity warrants 2023 3 3 Commodity contracts Platinum 2 380 2023 1 7 Total fair value contracts within scope of IFRS 9 2) 2 085 Details of power contracts and other commodity contracts within the scope of IFRS 9 31 December 2021 Notional Amounts in NOK million Volume GWh / Oz Due Fair value amount 1) Forward power contracts ﬁnancial institutions 98 2022 23 52 Forward power contracts ﬁnancial institutions 44 2023 4 15 Power contract "30-øringen" 501 2022 167 157 Power contract "30-øringen" 4 011 2023-2030 163 1 378 Power contract with Salten Energigjenvinning AS (note 32) 124 2022 35 32 Power contract with Salten Energigjenvinning AS (note 32) 1 733 2023-2036 22 555 Equity warrants 2022 3 3 Commodity contracts Platinum 8 954 2022 0 7 Total fair value contracts within scope of IFRS 9 2) 417 1) Notional value of underlying asset at the end of reporting period, calculated as volume * price * currency rate as at 31 December (if other currencies than NOK). 2) Certain power contracts are designated as hedging instruments, the remaining contracts / parts of contracts are classiﬁed as "Assets/ liabilities at fair value through proﬁt and loss". (c) Oﬀsetting Financial assets 31 December 2022 Amounts in NOK million Gross amount of ﬁnancial assets Gross amount of ﬁnancial liabilities set oﬀ in the statement of ﬁnancial position Net amounts of ﬁnancial assets recognised / presented Financial instruments not set oﬀ in the statement of ﬁnancial position Cash collateral pledged Net amount Power contracts including embedded derivatives Forward currency contracts Total 2 123 147 2 269 (1) - (1) 2 122 147 2 268 - 21 21 - - - 2 122 168 2 289 Financial liabilities 31 December 2022 Amounts in NOK million Gross amount of recognised ﬁnancial liabilities Gross amount of recognised ﬁnancial assets set oﬀ in the statement of ﬁnancial position Net amounts of ﬁnancial liabilities presented Financial instruments not set oﬀ in the statement of ﬁnancial position Cash collateral pledged Net amount Power contracts including embedded derivatives Forward currency contracts Total 23 86 109 (1) - (1) 22 86 108 - 21 21 - 22 - 108 - 129 Financial assets 31 December 2021 Amounts in NOK million Gross amount of ﬁnancial assets Gross amount of ﬁnancial liabilities set oﬀ in the statement of ﬁnancial position Net amounts of ﬁnancial assets recognised / presented Financial instruments not set oﬀ in the statement of ﬁnancial position Cash collateral pledged Net amount Power contracts including embedded derivatives Forward currency contracts Total 414 170 585 - - - 414 170 585 - 16 16 - - - 414 186 601 Financial liabilities 31 December 2021 Amounts in NOK million Gross amount of recognised ﬁnancial liabilities Gross amount of recognised ﬁnancial assets set oﬀ in the statement of ﬁnancial position Net amounts of ﬁnancial liabilities presented Financial instruments not set oﬀ in the statement of ﬁnancial position Cash collateral pledged Net amount Power contracts including embedded derivatives Forward currency contracts Total 17 24 41 - 17 - 24 - 41 - 16 16 - 17 - 40 - 57 26. Hedging Principle Hedge accounting Elkem has applied IFRS 9 for hedge accounting. According to Elkem's policy, derivatives can be designated as hedging instruments for fair value hedges and cash ﬂow hedges. At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. i) Cash ﬂow hedges The eﬀective portion of changes in the fair value of derivatives that are designated and qualify as cash ﬂow hedges, are recognised in other comprehensive income and accumulated under the heading of cash ﬂow hedging reserve. The gain or loss relating to the ineﬀective portion is recognised immediately in the statement of proﬁt or loss and classiﬁed as other items. Realised eﬀects are recognised through statement of proﬁt or loss, in the same line item as the hedged objects. ii) Net investment hedges Hedges of net investments in foreign operations are accounted for similarly to cash ﬂow hedges. Any gain or loss on the hedging instrument relating to the eﬀective portion of the hedge is recognised in other comprehensive income and included in foreign currency translation reserve in equity. The gain or loss relating to the ineﬀective portion is recognised immediately in the statement of proﬁt or loss within other items. Gains and losses accumulated in equity are reclassiﬁed to the statement of proﬁt or loss when the foreign operation is partially disposed of or sold. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in comprehensive income at that time remains in equity and is recognised in the statement of proﬁt or loss when the forecast transaction is ultimately recognised in the statement of proﬁt or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss reported in equity is immediately transferred to the statement of proﬁt or loss. Elkem's hedging instruments Cash ﬂow hedge Elkem has forward currency contracts, embedded EUR derivatives in power contracts and a EUR loan amounting to EUR 5 million (EUR 11 million) where the spot element is designated as hedging instruments and Elkem's highly probable future revenue in corresponding currencies is designated as the hedging objects in this hedging relationship, deﬁned as a cash ﬂow hedge. In addition certain power commodity contracts, deﬁned as ﬁnancial instruments, are designated as hedging instruments in a cash ﬂow hedge of price ﬂuctuations for highly probable future purchases. Hence, the eﬀective part of changes in fair value of the ﬁnancial instruments is booked against OCI, and recycled to proﬁt or loss as an adjustment of revenue and power cost (included in raw materials and energy for production) when realised. The ineﬀective part of changes in the fair value of the ﬁnancial instrument is recognised in other items in the statement of proﬁt and loss. Net investment hedge Elkem entered in 2017 into a bank loan amounting to EUR 275 million. In 2018 the bank loan of EUR 275 million was re- ﬁnanced and increased to EUR 400 million. In 2022 the loan was reﬁnanced again and increased to EUR 500 million. The spot rate of the initial loan amount, EUR 275 million, has been designated as a hedge of the net investment in the group’s subsidiaries with EUR as functional currency. The fair value and carrying amount of the borrowing at 31 December 2022 was NOK 2,891 million (NOK 2,749 million). The change foreign exchange gain of NOK 142 million (a gain of NOK 130 million) on translation of the borrowing from EUR to NOK at the end of the reporting period is recognised in other comprehensive income and accumulated in the foreign currency translation reserve in the statement of changes in equity. There was no ineﬀectiveness to be recorded from net investment hedges. See note 27 Financial risk for Elkem's hedging policy. Cash ﬂow hedging instruments, by type Amounts in NOK million 31.12.2022 Assets fair value 31.12.2022 Liabilities fair value 31.12.2021 Assets fair value 31.12.2021 Liabilities fair value Forward currency contracts Power contracts ﬁnancial institutions Power contract "30-øringen" Power contract Salten Energigjenvinning AS Power contracts embedded derivatives Currency eﬀect loan EUR Commodity contracts Platinum Total hedging instruments 110 28 1 235 - (207) - 1 1 167 80 - - - 56 8 - 144 146 27 364 58 - - - 593 18 - - - 110 10 - 138 Less non-current portion: Forward currency contracts Power contracts ﬁnancial institutions Power contract "30-øringen" Power contract Salten Energigjenvinning AS Power contracts embedded derivatives Currency eﬀect loan EUR Commodity contracts Platinum Current portion of hedging instruments 87 - 861 - (207) - - 427 - - - - - - - 144 102 4 180 22 - - - 285 - - - - 88 5 - 45 As at 31 December 2022 ﬁnancial power contracts designated in a hedging relationship comprise 15% of expected consumption in Norway in 2023 and about 14% in the period 2024 - 2030. Elkem has hedged approximately 19% of the expected revenues in EUR and approximately 7% of expected revenues in USD for 2023. For the years 2024-2034 EUR is hedged at a range of 1 - 5%. Financial instruments 31 December 2022 Eﬀects to be recycled from OCI Hereof Within Net fair recognised Within Within Within 4 years Amounts in NOK million value in OCI 1 year 2 years 3 years or more Forward currency contracts 60 30 (57) 33 46 7 Embedded EUR derivatives 20 (263) (56) (51) (49) (108) Power contracts 2 080 1 263 402 229 167 464 Warrants 2) 3 - - - - - Commodity contracts Platinum 1 1 1 - - - Total 1) 2 164 1 031 291 211 165 364 EUR loan designed as cash ﬂow hedging instrument (56) (8) (8) - - - Total 1 023 283 211 165 364 Financial instruments Eﬀects to be recycled from OCI 31 December 2021 Hereof Within Net fair recognised in Within Within Within 4 years Amounts in NOK million value OCI 1 year 2 years 3 years or more Forward currency contracts 146 127 25 24 29 49 Embedded EUR derivatives (17) (110) (21) (21) (19) (48) Power contracts 414 448 242 57 32 117 Warrants 2) 3 - - - - - Commodity contracts Platinum 0 0 0 - - - Total 1) 547 465 245 60 42 118 EUR loan designed as cash ﬂow hedging instrument (107) (10) (5) (5) - - Total 455 240 54 42 118 1) Hedge accounting is applied for certain contracts and for parts of contracts. 2) Subscription SAFE (Simple Agreement for Future Equity) Of total changes in fair value of power contracts designated as hedging instruments NOK 1,471 million (NOK 124 million) is recognised in proﬁt or loss, and classiﬁed as other items (see note 12 Other items), due to ineﬀectiveness in the hedging relationship and discontinuation of hedging. The ineﬀectiveness on cash ﬂow hedges relates to Elkem's hedges of future power purchase. The ineﬀectiveness is caused by the extraordinary developments in the Norwegian power market with signiﬁcant diﬀerences in prices between the diﬀerent price areas. Consequently, the cumulative change in fair value of some of the hedging instruments are higher than the cumulative changes in the present value of the hedge objects from the inception of the hedge. The diﬀerence between the two is the recognised as ineﬀectiveness. Of the NOK 1,471 million recognised in 2022, NOK 1,422 million relates to hedge ineﬀectiveness caused by these price diﬀerences. The remaining gain of NOK 49 million is related to discontinuation of power hedging caused by furnace closures in Norway. For 2021 the entire ineﬀectiveness of NOK 124 million is caused by price diﬀerences. Eﬀects from recognition of ineﬀectiveness from forward currency contracts are NOK 0 million (NOK 3 million). Realised eﬀects hedge accounting Amounts in NOK million 31.12.2022 31.12.2021 Realised eﬀects from forward currency contracts, recognised in revenue (14) 127 Realised eﬀects from embedded derivatives EUR, recognised in revenue (29) (31) Realised eﬀects from EUR loans, recognised in revenue (5) (4) Realised eﬀects from platinum contracts, included in Revenues 0 - Realised eﬀects from power contracts, recognised in raw materials and energy for production 377 190 Realised eﬀects hedge discontinuation, recognised in other items 38 - Realised eﬀects Salten Energigjenvinning, business combination (note 4) 58 - Total realised eﬀects hedge accounting 424 282 In addition, Elkem applies hedge accounting principles related to currency risk from a net investment in foreign operation, see note 23 Interest-bearing assets and liabilities. Movements in OCI related to hedging instruments 2022 Opening Net change Reclassiﬁed Closing Amounts in NOK million balance in fair value to P&L balance Hedging of future sales, forward currency contracts 127 (112) 14 30 Hedging of future need for power, contracts with ﬁnancial institutions 27 57 (56) 28 Hedging of future need for power, contract "30-øringen" 2) 364 1 230 (359) 1 235 Hedging of future need for power, contract Salten Energigjenvinning, business combination (see note 4) 58 0 (58) - Hedging of future sales, embedded EUR derivatives in own use power contracts 1) (110) (182) 29 (263) Hedging of future sales, currency eﬀects EUR loan (10) (3) 5 (8) Hedging of future sales, platinum contracts 2) 0 2 (0) 1 Total (before tax) 455 992 (424) 1 023 Movements in OCI related to hedging instruments 2021 Amounts in NOK million Opening balance Net change in fair value Reclassiﬁed to P&L Closing balance Hedging of future sales, forward currency contracts Hedging of future need for power, contracts with ﬁnancial institutions Hedging of future need for power, contract "30-øringen" 2) Hedging of future need for power, contracts with Statkraft (swap) 1) Hedging of future need for power, contract with Salten Energigjenvinning Hedging of future sales, embedded EUR derivatives in own use power contracts 1) Hedging of future sales, currency eﬀects EUR loan Hedging of future sales, platinum contracts 2) Total (before tax) 150 (6) - (3) (29) (332) (23) - (242) 104 65 501 15 94 191 8 0 979 (127) (33) (138) (12) (8) 31 4 - (282) 127 27 364 0 58 (110) (10) 0 455 1) Hedge accounting from 2016. 2) Hedge accounting from 2021. 27. Financial risk Elkem is exposed to ﬁnancial risks from ﬂuctuations in market prices for ﬁnished goods, raw materials, currency exchange rates and interest rates (a) Market risk. In addition, Elkem is exposed to ﬁnancial risks related to (b) Counterparty credit risk (c) Liquidity risk and (d) Climate risk. This may have considerable impact on Elkem’s ﬁnancial performance. Elkem’s principle is to organise resources close to the value chain. Risk management is an integrated part of Elkem’s business activities, included in the line management’s responsibility. Financial risks, including ﬁnancing, liquidity, currency, interest rates, and counterparty risks are generally managed centrally by Group Finance and Treasury. Elkem has ﬁnancial risk policies in place, approved by the board of directors. Elkem’s ﬁnancial risk exposure and business performance are evaluated regularly, and the main risks are analysed in terms of impact, likelihood and correlation. Based on the overall risk evaluation Elkem may accept or seek to further reduce the risks arising from operational activities. (a) Market risk (i) Price risk Commodity prices Elkem is exposed to ﬂuctuations in market prices for ﬁnished goods and raw materials. The market risk assessment is based on a holistic approach as prices for Elkem’s products tend to ﬂuctuate with underlying macroeconomic conditions. The same dynamics tend to apply to prices for the main raw materials, giving Elkem a certain degree of natural hedging. For the main upstream products and raw materials Elkem seeks to reduce the risk exposure by entering sales and purchase contracts for corresponding time periods and volumes. The goal is to partly oﬀset changes in sales prices through changes in raw material costs. A signiﬁcant part of Elkem's sales consist of specialised products. These products have generally more stable pricing. Elkem’s integrated value chain mitigates the supply chain and pricing risks and also give ﬂexibility to realise value at various levels through the value chain. Elkem aims to ensure sales volumes and raw material supply by entering into long-term customer relationships. Power Electric power is a key input factor and Elkem enters into long- term power contracts to reduce the future exposure to changes in power prices, particularly in Norway where electricity prices based on hydro power tend to have diﬀerent pricing dynamics than for Elkem’s products and other raw materials. Normally all plants have covered their main future need for power by entering into power contracts, primarily classiﬁed as own use contracts according to IFRS 9, hence such contracts are oﬀ-balance. In addition to the own use contracts certain ﬁnancial power contracts are classiﬁed as derivatives and designated in a cash ﬂow hedging relationship in accordance with IFRS (see notes 25 and 26). For plants located in Norway, Elkem’s policy is that minimum 80% of the expected power consumption shall be covered by ﬁxed price contracts for current and next year. This includes both own use and derivative contracts at fair value. For the following periods, the ratio extends until 4 years ahead, declining with 10%-point per year ending at 50%. Elkem currently fulﬁls this minimum hedge policy, and also has a substantial amount of contracts at ﬁxed price for the later years. Optimisation of 24-hour-, seasonal- and capacity utilisation variations are solved through utilising ﬁnancial and physical contracts that are traded bilaterally. The purpose of entering into long term power contracts is to reduce volatility in the power cost and to increase the predictability of the cost base. Fair value of commodity contracts is especially sensitive for future changes in energy prices. Changes in fair value of commodity contracts, classiﬁed as ﬁnancial instruments, reﬂect unrealised gains or losses, and are calculated as the diﬀerence between market price and contract price, discounted to present value. Valuations are based on market information where this is available, if not, valuations are based on estimated market price for non- observable parameters. Valuation of the power contracts The assumptions for the fair value measurement of power contracts are described in note 25 Financial assets and liabilities. Sensitivity analysis - power contracts Sensitivity on the "30-øringen" contract is as follows. "30-øringen" contract 31.12.2022 31.12.2021 Amounts in NOK million Fair value Adjusted NPV Fair value Adjusted NPV Discount rate (used 4.9% (3.5%)) change with -3.5 %-point 2 037 2 239 330 360 Discount rate (used 4.9% (3.5%)) change with +3.5 %-point 2 037 1 869 330 319 CPI (used 2.0%) change to 1% 2 037 2 084 330 379 CPI (used 2.0%) change to 3% 2 037 1 988 330 279 Power price decrease -10% 2 037 1 721 330 166 Power price increase + 10% 2 037 2 353 330 494 (ii) Currency risk Elkem has revenues and operating costs in various currencies. The prices of ﬁnished goods are to a large extent determined in international markets, primarily denominated in US dollar, Chinese yuan and Euro. This is partly oﬀset by purchases of raw materials denominated in the same currencies. Elkem aims to establish natural hedging positions if this is possible and economically viable. Financial derivatives are then used to hedge the remaining net currency risk exposures. Elkem has net positive operating cash ﬂows in mainly Euro, US dollar, Chinese yuan and Brazilian real. Due to the location of its plants, Elkem has net cost positions in certain other currencies, mainly Norwegian krone, but also Canadian dollar and Icelandic krona. Elkem's policy is to hedge the net positive cash ﬂows in foreign currencies against NOK to even out ﬂuctuations in result and cash ﬂow. The target is to hedge expected net cash ﬂow for 0–3 months on a 90% hedging ratio. Expected net cash ﬂow for 4–12 months should be hedged on a rolling basis targeting a 45% hedging ratio. The hedging ratio for 4–12 months may vary subject to internal approval. Chinese yuan (CNY) is not included in the hedging programme. Elkem has hedged Japanese yen until 2026, related to a long-term customer contract. Elkem uses hedge accounting for all cash ﬂow hedges over 3 months. Embedded EUR derivatives in power contracts are included in the foreign exchange hedging programme. To ensure an eﬀective hedge, according to the hedge accounting principles, the spot element of the forward currency contracts is designated as hedging instruments and highly probable future revenue as hedging object in a hedging relationship, covering the exposure beyond 3 months. Elkem realised a loss of NOK 49 million from hedging programme (gain of NOK 92 million). Elkem aims to mitigate the currency risk in the statement of ﬁnancial position by keeping interest-bearing debt in the same currencies as the group’s assets. Elkem has mainly interest- bearing debt in Euro, Chinese yuan and Norwegian krone. Currency eﬀects recognised in total comprehensive income for the year, excluding eﬀects from cash ﬂow hedging Amounts in NOK million 2022 2021 Net foreign exchange gains (losses) - forward currency contracts - recognised in other items 9 14 Operating foreign exchange gains (losses) - recognised in other items 387 20 Net foreign currency exchange gains (losses) on ﬁnancing activities - recognised in foreign exchange gains (losses) 85 241 Currency translation diﬀerences - recognised in other comprehensive income 765 358 Hedging of net investment in foreign operations - recognised in other comprehensive income (142) 130 Total 1 104 764 Currency exposure The amounts in the tables below are translated to NOK using exchange-rates against NOK per 31 December. Exchange rates against NOK per 31 December 2022 2021 USD 9.8714 8.8242 EUR 10.5130 9.9978 CNY 1.4309 1.3891 CAD 7.2879 6.9449 Currency exposure aﬀecting statement of proﬁt or loss The tables show carrying amount of assets and liabilities denominated in foreign currencies diﬀerent from the entities functional currency, where changes in currency rates will aﬀect proﬁt and loss. The tables include notional amount of currency exchange contracts (note 25 Financial assets and liabilities). Amounts are presented in NOK based on currency rates as at 31 December. 31 December 2022 Amounts in NOK million USD EUR CNY CAD NOK Other Total Other non-current assets - - - - - - - Trade receivables 662 98 - - - - 759 Other assets - - - - - - - Restricted deposits - - - - - - - Cash and cash equivalents 1 658 3 124 489 (265) 0 459 5 466 Total monetary assets 2 320 3 222 489 (265) 0 459 6 225 Interest-bearing liabilities - 6 505 - - - - 6 505 Other liabilities - - - - - - - Trade payables 592 232 - - - 37 862 Bills payable - - - - - - - Total monetary liabilities 592 6 738 - - - 37 7 367 Derivatives, notional value 780 6 033 - - - 468 7 281 Net currency exposure ﬁnancial position 948 (9 549) 489 (265) 0 (46) (8 423) 31 December 2021 Amounts in NOK million USD EUR CNY CAD NOK Other Total Other non-current assets - - - - - - - Trade receivables 927 457 - - 0 98 1 483 Other assets - - - - - - - Restricted deposits - - - - - - - Cash and cash equivalents 1 172 25 80 (95) 0 387 1 570 Total monetary assets 2 100 482 80 (95) 0 485 3 052 Interest-bearing liabilities - 6 773 - - - - 6 773 Other liabilities - - - - - - - Trade payables 442 117 3 0 2 56 620 Bills payable - - - - - - - Total monetary liabilities 442 6 890 3 0 2 56 7 393 Derivatives, notional value 399 5 598 - - - 631 6 629 Net currency exposure ﬁnancial position 1 258 (12 006) 77 (95) (1) (202) (10 969) Sensitivity on proﬁt and loss from ﬁnancial assets and liabilities The following tables demonstrate the sensitivity to a reasonable possible change in EUR and USD exchange rates by 5%, with all other variables held constant. The impact on Elkem’s proﬁt before tax is due to changes in the fair value of monetary assets and liabilities including foreign currency derivatives and embedded derivatives not designated for hedging. The impact on Elkem’s pre-tax equity is due to changes in the fair value of forward exchange contracts designated as cash ﬂow hedges and net investment hedges. The impact on pre-tax equity would be booked against OCI and recycled through proﬁt before tax, when the hedged items are realised. In addition the proﬁt and loss will be aﬀected by translation diﬀerences on intra group balances, mainly in EUR, USD and CNY. Currency 31.12.2022 31.12.2021 Amounts in NOK million Change in FX rate Eﬀect on proﬁt Eﬀect on before tax pre-tax equity Eﬀect on proﬁt Eﬀect on before tax pre-tax equity EUR 5 % (46) (431) (194) (410) EUR -5 % 46 431 194 410 USD 5 % 79 (31) 70 (16) USD -5 % (79) 31 (70) 16 Currency exposure aﬀecting currency translation diﬀerences / equity The table shows Elkem's total assets and liabilities denominated in the group's main currencies translated to NOK at the currency rates at 31 December and gives an overview of the group's total currency exposure that will aﬀect currency translation diﬀerences both in the consolidated statement of comprehensive income and / or proﬁt and loss. 31 December 2022 Amounts in NOK million USD EUR CNY CAD NOK Other Total Other non-current assets 64 399 113 40 67 34 716 Trade receivables 1 451 452 1 644 29 3 668 4 248 Other assets 64 215 236 32 938 213 1 698 Restricted deposits 7 0 400 - - 1 408 Cash and cash equivalents 2 017 3 363 2 083 (60) 998 854 9 255 Total monetary assets 3 603 4 429 4 476 41 2 006 1 771 16 325 Asset non-monetary items 2 828 5 917 12 311 1 278 12 264 1 858 36 455 Total assets 6 431 10 345 16 787 1 319 14 270 3 628 52 781 Interest-bearing liabilities 31 6 620 1 066 - 2 753 66 10 535 Other liabilities 25 193 334 36 605 351 1 545 Trade payables 778 1 277 2 341 96 630 212 5 335 Bills payable - - 1 742 - - - 1 742 Total monetary liabilities 834 8 090 5 485 132 3 988 628 19 158 Liabilities non-monetary items 169 694 310 391 3 080 204 4 849 Total liabilities 1 004 8 785 5 794 524 7 069 832 24 007 31 December 2021 Amounts in NOK million USD EUR CNY CAD NOK Other Total Other non-current assets 47 285 43 - 72 31 478 Trade receivables 1 387 660 1 549 21 184 497 4 297 Other assets 20 185 262 12 939 134 1 551 Restricted deposits 2 - 604 - 3 - 609 Cash and cash equivalents 1 438 219 1 448 221 3 066 647 7 040 Total monetary assets 2 894 1 349 3 906 254 4 264 1 308 13 976 Asset non-monetary items 1 864 4 878 11 162 837 7 710 1 423 27 874 Total assets 4 758 6 227 15 068 1 092 11 974 2 731 41 850 Interest-bearing liabilities 38 6 083 1 144 - 3 038 77 10 380 Other liabilities 39 225 469 25 664 235 1 657 Trade payables 567 1 049 1 705 95 1 011 186 4 614 Bills payable - - 2 096 - - - 2 096 Total monetary liabilities 644 7 357 5 414 121 4 714 498 18 747 Liabilities non-monetary items Total liabilities 139 782 709 8 065 606 6 020 188 308 1 403 6 117 184 683 3 228 21 976 (iii) Interest rate risk Elkem's interest rate risk arises from interest-bearing liabilities granted by external ﬁnancial institutions. Elkem's liabilities are mainly drawn in Euro, Chinese yuan and Norwegian krone. Elkem has a ﬂoating interest rate policy and is hence exposed to ﬂuctuating interest rates. Prices and sales volumes for Elkem's core products tend to correlate with general economic conditions. A ﬂoating interest rate policy is therefore seen as appropriate from a ﬁnancial risk perspective. Interest rates have stayed low for a number of years due to a low-rate economic environment. During 2022 the interest rate has increased as many central banks have inﬂation targets and have adjusted interest rates to control a higher rise in the price level than targeted. With ﬂoating interest rates the group will normally be in a position to beneﬁt from lower interest rates in an economic downturn, but a ﬂoating rate policy will also leave the group exposed to futhure interest rate hikes. Elkem has the following interest-bearing assets and liabilities 31 December 2022 Amounts in NOK million Floating Fixed Total Interest-bearing liabilities 12 120 158 12 278 Interest-bearing assets 9 718 - 9 718 Net exposure 2 402 158 2 559 Sensitivity The interest rate sensitivity is based on a parallel shift in the interest rates that Elkem is exposed to. If interest rates had been 100 basis points higher for a full year, based on net debt as at 31 December 2022, with all other variables held constant, the proﬁt (loss) for the year would have been NOK 20 million (NOK 38 million) lower. An overview of Elkem's debt portfolio is presented in note 23 Interest-bearing assets and liabilities. (b) Counterparty credit risk Credit risk is the risk of ﬁnancial losses to the group if a customer or counterparty fails to meet contractual obligations. For Elkem this arises mainly to trade receivable and ﬁnancial trading counterparties. Trade receivables are generally secured by credit insurance from a reputable credit insurance company. For customers where credit insurance cannot be obtained, other methods are generally used to secure the sales proceeds, such as prepayment, letter of credit, documentary credit or guarantees. In particular, when sales are made in countries with a high political risk, or to remote customers, trade ﬁnance products are used to reduce the credit risk. Of Elkem's revenue outside China 85% - 95% is covered by credit insurance or other trade ﬁnance tools. Elkem realised credit losses of NOK 5 million (NOK 12 million) trade receivables. The maximum exposure to credit risk for trade receivables for the group is NOK 4,257 million per 31 December 2022 (NOK 4,306 million). Please also refer to note 21 Trade receivables. Evaluation of ﬁnancial counterparties is based on external credit ratings from Moody's and / or Standard and Poor's. The general policy is that ﬁnancial counterparties should have a rating equal to, or higher than, A- (or the equivalent) from the rating agencies, but exceptions may be made on a case-by-case basis, mainly for local banks in emerging markets. Elkem has not had any losses in 2022 or 2021 related to ﬁnancial counterparties. (c) Liquidity risk Liquidity risk is the risk that the group will encounter diﬃculty in meeting the obligations associated with its ﬁnancial liabilities. Elkem is exposed to liquidity risk related to its operations and ﬁnancing. Elkem's cash ﬂow will ﬂuctuate due to economic conditions and ﬁnancial performance. In order to assess its future operational liquidity risk, short-term and long-term cash ﬂow forecasts are provided. The short-term forecast is updated each week, and the long-term cash ﬂow projection is updated each quarter. In order to mitigate the operational liquidity risk, Elkem has cash and revolving credit facilities with banks. As at 31 December 2022 Elkem has unrestricted cash of NOK 9,255 million (NOK 7,040 million). In addition, revolving credit facilities amount to NOK 6,356 million (NOK 3,144 million), of which NOK 6,342 million is undrawn (NOK 3,144 million). The external loan agreements contain two ﬁnancial covenants. The ratio of EBITDA to consolidated Net interest payable, as deﬁned herein, for each measurement period, where the period is calculated as the 12 months ending on the last day of a ﬁnancial quarter, must exceed 4. Additionally, the ratio of total equity to total assets must be more than 30% at all times. Elkem complies with these covenants as of 31 December 2022 and also complied with the covenants as of 31 December 2021, see note 23 Interest-bearing assets and liabilities. The policy is to have cash and available credit facilities to cover known capital needs and generally not less than 10% of annual total operating income. In addition, the policy is to ensure that the main credit facilities have a remaining maturity of at least 12 months. The maturity proﬁle of the credit facilities per 31 December 2022 for Elkem is shown in the table below. Year / maturity Amounts in NOK million 2023 2027 Total Total amount of credit facilities 1 100 5 257 6 356 The table below analyses the group's ﬁnancial liabilities and assets into relevant maturity groupings based on the remaining period at the date of the statement of ﬁnancial position to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash ﬂows, and the amounts are including interest payments. 31 December 2022 Amounts in NOK million 2023 2024 2025 2026 2027 2028 and later Total Carrying amount Trade receivables Derivative assets Total assets 4 248 698 4 946 - 434 434 - 346 346 - 306 306 - 287 287 - 482 482 4 248 2 554 6 802 4 248 2 273 6 521 Trade payables Derivative liabilities Lease liabilities Loans from external parties, other Bank ﬁnancing Bills payable Total liabilities than bank 5 335 109 103 103 140 1 742 7 532 - 8 101 1 009 73 - 1 191 - - 79 1 299 102 - 1 480 - - 65 979 125 - 1 169 - - 55 518 5 395 - 5 968 - - 291 105 827 - 1 223 5 335 117 695 4 014 6 661 1 742 18 564 5 335 109 578 3 706 6 276 1 742 17 747 31 December 2021 Amounts in NOK million 2022 2023 2024 2025 2026 2027 and later Total Carrying amount Trade receivables Derivative assets Total assets 4 297 269 4 567 - 62 62 - 37 37 - 54 54 - 18 18 - 154 154 4 297 594 4 891 4 297 588 4 885 Trade payables Derivative liabilities Lease liabilities Loans from external parties, other Bank ﬁnancing Bills payable Total liabilities than bank 4 614 23 116 1 334 671 2 096 8 854 - 2 123 64 4 477 - 4 666 - (1) 99 1 174 214 - 1 486 - 4 80 1 037 4 - 1 124 - 7 68 519 4 - 597 - 8 427 509 4 - 948 4 614 43 912 4 637 5 374 2 096 17 675 4 614 41 801 4 389 5 186 2 096 17 127 (d) Climate risk Climate-related issues represent important risk factors to the business, as well as attractive business opportunities since our products can be key enablers for lower greenhouse gas emissions through amongst other things renewable energy, energy storage and electriﬁcation of transportation. Elkem's board of directors and management conduct regular reviews of the group's strategy, which includes processes for identifying, assessing, and responding to climate-related risks and opportunities. Climate-risk assessments are also integrated into our multi-disciplinary company-wide risk management process and each year a mapping is performed to identify the top risks for each division and corporate function. The individual risks are then organised into categories and aggregated on group level. The process for identifying climate risks are part of the annual risk mapping. 28. Capital managment Elkem focuses on having a balanced capital structure, which seeks to reﬂect the return requirements for the shareholders and the need for a strong ﬁnancial position to facilitate the group’s strategy for growth and specialisation. The target is to have a leverage between 1.0x and 2.0x over a cycle. The leverage ratio is deﬁned as net interest-bearing assets, less non-current interest-bearing assets (see note 23 Interest- bearing assets and liabilities), divided by EBITDA, as deﬁned in the APM section. Elkem is managing its ﬁnancing and liquidity position to reduce liquidity risk and to ensure that the company can meet its ﬁnancial obligations at all times. Elkem has centralised the responsibility for group ﬁnancing and liquidity handling. The policy is to raise ﬁnancing at parent company level however, country speciﬁc exceptions may be made due to local legislation or currency restrictions. Loan maturities are subject to liquidity and reﬁnancing risk and the company aims to have a long-term and smooth maturity proﬁle on its loan portfolio. Cash pooling is used to secure availability and access to cash across the group. Due to local legislation, not all subsidiaries are able to participate in international cash pooling arrangements. In these cases, repatriation of excess cash is mainly executed through dividend payments and inter- company deposits, while liquidity needs are covered through capital injections and inter-company loans. Liquidity forecasts are prepared and updated on a regular basis. The short- term forecasts are updated weekly. Elkem's cash position is reported on a daily basis and tracked against respective forecasts. The policy is that available liquidity reserves, deﬁned as cash and cash equivalents and available long-term credit facilities, should exceed 10% of total operating income. Financial covenants are applicable in some of Elkem’s loan agreements. Financial covenants, if required, are standardised across all loan agreements. Financial covenants and other ﬁnancial policy targets are monitored monthly and included in the company’s management reports. Elkem intends to pay dividends reﬂecting the underlying earnings and cash ﬂow. Elkem envisages a dividend pay- out ratio of 30 - 50% based on proﬁt for the year. When deciding the annual dividend level, Elkem's leverage, capital expenditure plans and ﬁnancing requirements will be taken into consideration. Focus will also be on maintaining appropriate strategic ﬂexibility. For the year 2021 Elkem distributed NOK 3.00 per share in dividends and for the year 2022 the proposed dividend is NOK 6.00 per share. As at 31 December 2022, Elkem's equity was NOK 28,773 million, including minority interests of NOK 134 million. The equity ratio was 55%. 29. Number of shares The development in share capital and other paid-in equity is set out in the consolidated statement of changes in equity. The largest shareholders are listed in note 21 to the ﬁnancial statement of Elkem ASA. Number of shares 2022 2021 Shares Treasury Total issued Shares Treasury Total issued outstanding shares shares outstanding shares shares Opening balance 633 037 606 6 403 772 639 441 378 581 310 344 - 581 310 344 Capital increase - - - 58 131 034 - 58 131 034 Increase in treasury shares (5 000 000) 5 000 000 - (6 403 772) 6 403 772 - Sale of treasury shares 6 439 379 (6 439 379) - Closing balance 634 476 985 4 964 393 639 441 378 633 037 606 6 403 772 639 441 378 The share capital of Elkem ASA is NOK 3,197,206,890 divided on 639,441,378 shares of NOK 5 par value. Of this amount Elkem ASA held 4,964,393 treasury shares, 0.7% of total issued shares. Elkem has in 2022 acquired 5,000,000 own shares that will be used as settlement in Elkem's share option scheme. Total transaction value was NOK 192 million. Elkem has in 2022 sold 6,439,379 shares in connection with Elkem's share option scheme. Total consideration was NOK 154 million. In the annual general meeting held on 27 April 2022, the board of directors was granted an authorisation to repurchase the company’s own shares within a total nominal value of up to NOK 319,720,689. The maximum amount that can be paid for each share is NOK 150 and the minimum is NOK 1. The authorisation is valid until the annual general meeting in 2023, but not later than 30 June 2023. The authorisation can be used to acquire shares as the board of directors deems appropriate, provided however, that acquisition of shares shall not be by subscription. In the annual general meeting held on 27 April 2022, the board of directors was granted an authorisation to increase the company’s share capital with an amount up to NOK 319,720,689 - corresponding to 10 per cent of the current share capital. The authorisation is valid until the annual general meeting in 2023, but not later than 30 June 2023. The authorisation can be used to cover share capital increases against contribution in kind and in connection with mergers. In the annual general meeting held on 27 April 2022, the board of directors was granted an authorisation to increase the share capital by up to NOK 40,000,000 to be used in connection with the issuance of new shares under share incentive scheme. The authorisation is valid until the annual general meeting in 2023, but not later than 30 June 2023. The authorisation does not cover capital increases against contribution in kind or capital increases in connection with mergers. 30. Earnings per share Principle The calculation of basic earnings per share (EPS) has been based on proﬁt attributable to ordinary shareholders and weighted-average number of ordinary shares outstanding. The calculation of diluted EPS has been based proﬁt attributable to ordinary shareholders and weighted-average number of ordinary shares outstanding after adjustment for the eﬀects of all dilutive potential ordinary shares. 2022 2021 Weighted average number of shares outstanding 633 563 574 618 160 299 Eﬀects of dilution 2 025 138 3 876 305 Weighted average number of shares outstanding - diluted 635 588 712 622 036 604 Owners of the parent's share of proﬁt (loss) (NOK million) 9 561 4 628 Earnings per share (NOK) 15.09 7.49 Diluted earnings per share (NOK) 15.04 7.44 31. Supplemental information to the consolidated statement of cash ﬂows The following table gives an detailed overview of changes in working capital in the statement of cash ﬂow. Working capital is deﬁned as accounts receivable, inventory, other current assets, accounts payable, current employee beneﬁt obligations and other current liabilities. Accounts receivable are deﬁned as trade receivables less bills receivable. Other current assets are deﬁned as other current assets less current receivables to related parties, current interest-bearing receivables, tax receivables, grants receivable, assets at fair value through proﬁt or loss and accrued interest income. Accounts payable are deﬁned as trade payables less trade payables related to purchase of non-current assets. Other current liabilities are deﬁned as provisions and other current liabilities less current provisions, contingent considerations, contract obligations and liabilities to related parties. Changes in working capital Amounts in NOK million 2022 2021 Changes in accounts receivable 324 (1 374) Changes in inventory (2 258) (2 358) Changes in other current assets 99 (205) Changes in accounts payable 134 1 213 Changes in other current liabilities including employee beneﬁt obligations 118 704 Total (1 583) (2 020) Liquidity eﬀects of contingent considerations Amounts in NOK million 2022 2021 Settlement of contingent consideration 160 83 Discounting element on settlement of contingent consideration 12 3 Fair value adjustment on settlement of contingent consideration (0) 1 Foreign exchange gains (losses) from date of control 4 (9) Total payment of contingent consideration related to acquisitions (IFRS 3) 176 78 32. Related parties Related parties' relationships are deﬁned to be entities outside Elkem group that are under control (either directly or indirectly), joint control or signiﬁcant inﬂuence by the owners of Elkem. Elkem ASA is owned 52.9% by Bluestar Elkem International Co. Ltd S.A., Luxembourg, which is under control of Sinochem Holdings Co., Ltd (Sinochem), a company registered and domiciled in China. All companies under control by Sinochem are considered to be related parties, including among others China Blue Chemicals Ltd and Jiangxi Xinghuo spaceﬂight New Material Co., Ltd.. On 1 February 2022 Elkem purchased the remaining shares in Salten Energigjenvinning AS and transactions from that date are eliminated. Elkem also consider equity accounted companies as related parties. On 14 September 2022 Elkem lost control of Vianode AS and transactions are from that date considered to be related party transactions. The structure of Elkem group is disclosed in note 4 Composition of the group and note 5 Equity accounted investments and joint operation. Transactions with related parties 2022 Sale of Purchase Sale of Purchase of Interest Financial Amounts in NOK million goods of goods services 1) services income expenses Bluestar Elkem International Co. Ltd S.A. - - - - - - Joint ventures and associates - (280) 15 (191) 0 - Related parties within Sinochem 336 (434) 14 (126) - - Other related parties - (21) - (18) - - Total 336 (735) 30 (335) 0 - 1) Including sub-lease Transactions with related parties 2021 Sale of Purchase Sale of Purchase of Interest Financial Amounts in NOK million goods of goods services 1) services income expenses 1) Bluestar Elkem International Co. Ltd S.A. - - - - - - Joint ventures and associates - (158) 32 (184) 0 - Related parties within Sinochem 581 (414) 41 (153) - - Other related parties 0 (18) - (16) - - Total 581 (591) 73 (354) 0 - 1) Including sub-lese Balances with related parties Non-current Current Amounts in NOK million 31.12.2022 31.12.2021 31.12.2022 31.12.2021 Receivables from joint ventures and associates, interest-bearing 1 1 - - Receivables from related parties within Sinochem, interest free - - 7 1 Liabilities to related parties within Sinochem, interest free - - (30) (32) Trade receivables, related parties within Sinochem - - 4 17 Trade receivables, joint ventures and associates - - 15 16 Trade payables, Bluestar Elkem Investment Co. Ltd. S.A - - (5) (5) Trade payables, related parties within Sinochem - - (79) (56) Trade payables, joint ventures and associates - - (71) (43) Prepayments to related parties within Sinochem - - 15 18 Prepayments from joint ventures and associates - - (17) (10) Financial power contract with joint ventures and associates - 22 - 35 Net balances with related parties 1 23 (161) (60) Outstanding balances at year-end are unsecured, and the current receivables and payables are interest-free, with an exception of the non-current receivables. The interest rate for the non-current receivables to the joint ventures and associates are currently 3.0% (2.5%). Information about main transactions with related parties: Related parties within Sinochem → Sale of silicone to China Bluestar International Chemical Ltd, Jiangxi Xinghuo Spaceﬂight New Material Co., Ltd and other companies within Sinochem → Purchase of raw materials from companies within Sinochem Equity accounted companies Vianode AS The group has entered into a investment agreement and committed to cover its proportion of total estimated capital injections in Vianode AS. Elkem's proportion is NOK 534.5 million, whereof NOK 267 million is paid as of 31 December 2022. Jiangxi Guoxing Intelligence Energy Co. Ltd Elkem has committed to cover its proportion of total estimated capital injections in Jinangxi Energy of CNY 48.7 million, whereof CNY 17.5 million is paid as of 31 December 2022. In addition Elkem has committed to sell the land, buildings and equipment needed to establish the cogeneration facility and when the facility is up and running committed to supply steam. Other equity accounted companies → Purchase of short and deep sea transport from North Sea Containerline AS and EPB Chartering AS → Purchase of warehousing for Combined Cargo Warehousing BV → Purchase of services related to shared infrastructure such as laboratory analysis, IT and telephone, warehousing and purchase of basic chemistry products such as gas, nitrogen, compressed air from GIE Osiris There are no other contingent liabilities or commitments related to the joint ventures and associates. Key management personnel and board of directors Information on transactions with key management personnel, see note 9 Employee beneﬁts and "Report on salary and other remuneration to leading personnel in Elkem ASA for the ﬁnancial year 2022". 33. Pledge of assets and guarantees Pledges The main part of Elkem's interest-bearing liabilities are not pledged. Details of liabilities that have pledged assets or guarantees related to them are stated below. Pledged liabilities Amounts in NOK million 31.12.2022 31.12.2021 Pledged liabilities 125 79 Book value pledged assets Amounts in NOK million 31.12.2022 31.12.2021 Building 30 28 Machinery and plant 0 0 Other assets 106 57 Elkem makes limited use of guarantees, see speciﬁcation below. Guarantee commitments Amounts in NOK million 31.12.2022 31.12.2021 Guarantee commitment KLIF (Climate and Pollution Agency) 40 40 Guarantee commitment tax cases Brazil 38 15 34. Change in presentation Presentation of realised hedge ineﬀectiveness is changed from raw materials and energy for production to other items in the statement of proﬁt or loss. The impact on comparable ﬁgures in the statement of proﬁt or loss are shown in the tables below. The change in presentation will not aﬀect accounting policies for operating segments, see note 6 Operating segments. Consolidated statement of proﬁt or loss 2022 2022 before After Amounts in NOK million change Impact change Raw materials and energy for production (21 378) (597) (21 976) Other items 1 554 597 2 151 Operating proﬁt (loss) 12 414 - 12 414 Consolidated statement of proﬁt or loss 2021 Financial Impact 2021 Amounts in NOK million statement of change Restated Raw materials and energy for production (15 861) (124) (15 985) Other items (114) 124 10 Operating proﬁt (loss) 5 785 - 5 785 35. Events after the reporting period Principle Events after the reporting period Events after the reporting period related to the group’s ﬁnancial position at the end of the reporting period, are considered in the ﬁnancial statements. Events after the reporting period that have no eﬀect on the group’s ﬁnancial position at the end of the reporting period, but will have eﬀect on future ﬁnancial position, are disclosed if the future eﬀect is material. No events have taken place after the reporting period that would have had a material impact on the ﬁnancial statements or any assessments carried out. Contents Financial statements Income statement 256 Balance sheet 257 Cash ﬂow statement 258 Genereal information Note 1 General information 259 Note 2 Signiﬁcant accounting policies 259 Note 3 Accounting estimates 264 Income statement Note 4 Operating income 264 Note 5 Grants 265 Note 6 Employee beneﬁt expenses 266 Note 7 Employee retirement beneﬁts 267 Note 8 Other operating expenses 268 Note 9 Operating lease 269 Note 10 Other gains (losses) related to operating activities 269 Note 11 Finance income and expenses 270 Note 12 Taxes 270 Balance sheet Note 13 Property, plant and equipment 272 Note 14 Intangible assets 273 Note 15 Investment in subsidiaries 274 Note 16 Investment in joint ventures 275 Note 17 Inventories 277 Note 18 Trade receivables 277 Note 19 Other assets 278 Note 20 Equity 279 Note 21 Shareholders 280 Note 22 Interest-bearing assets and liabilities 280 Note 23 Provisions and other liabilities 283 Note 24 Financial instruments 284 Other information Note 25 Financial Risk 286 Note 26 Related parties 286 Note 27 Pledge of assets and guarantees 288 Note 28 Merger 288 Note 29 Change in presentation 289 Income statement - Elkem ASA Amounts in NOK million Note 2022 2021 Restated 1) 1 January - 31 December Revenue Other operating income Total operating income 4 4, 5 15 912 543 16 455 9 309 431 9 740 Raw materials and energy for production Employee beneﬁt expenses Other operating expenses Other gains (losses) related to operating activities Amortisation and depreciation Impairment losses Total operating expenses 6,7 8,9 10 13,14 13,14 (6 183) (1 348) (2 684) 1 712 (407) (3) (8 912) (4 392) (1 257) (2 172) 253 (359) (14) (7 941) Operating proﬁt (loss) 7 543 1 799 Income from subsidiaries Income (loss) from joint ventures Finance income Foreign exchange gains (losses) Finance expenses Proﬁt (loss) before income tax 15 16 11 11 11 229 (17) 166 (62) (267) 7 593 126 37 134 377 (198) 2 274 Income tax (expenses) beneﬁt Proﬁt (loss) for the year 12 (1 603) 5 990 (501) 1 773 1) See note 29 Changes in presentation Balance sheet - Elkem ASA Amounts in NOK million Note 31.12.2022 31.12.2021 Assets Property, plant and equipment Goodwill Intangible assets Investments in subsidiaries Investments in joint ventures Derivatives Other assets Total non-current assets 13 14 14 15 16 24 19 4 098 16 81 12 604 639 1 559 4 278 23 275 3 003 20 111 11 982 46 301 3 322 18 785 Inventories Trade receivables Derivatives Other assets Cash and cash equivalents Total current assets 17 18 24 19 22 2 753 1 582 709 1 786 5 316 12 145 1 677 1 739 283 1 136 4 260 9 095 Total assets 35 420 27 880 Equity and liabilites Paid-in capital Retained earnings Total equity 20, 21 20 3 493 10 515 14 009 6 178 5 104 11 283 Interest-bearing liabilities Deferred tax liabilities Pension liabilities Derivatives Provisions and other liabilities Total non-current liabilities 22 12 7 24 23 9 074 741 80 - 82 9 977 7 292 306 85 18 109 7 810 Trade payables Income tax payables Interest-bearing liabilities Derivatives Dividend Provision and other liabilities Total current liabilities 12 22 24 20 23 1 353 1 330 3 903 108 3 813 927 11 435 1 553 446 3 945 23 1 918 902 8 788 Total equity and liabilities 35 420 27 880 Oslo, 8 March 2023 Zhigang Hao Chair Dag Jakob Opedal Vice chair Olivier Tillette de Clermont-Tonnerre Board member Yougen Ge Board member Jingwan Wu Board member Grace Tang Board member Marianne Elisabeth Johnsen Board member Nathalie Brunelle Board member Thomas Eggan Board member Terje Andre Hanssen Board member Marianne Færøyvik Board member Helge Aasen CEO Cash ﬂow statement - Elkem ASA Amounts in NOK million Note 2022 2021 Restated 1) 1 January - 31 Desmeber Operating proﬁt (loss) Changes fair value ﬁnancial instruments Amortisation, depreciation and impairment losses Changes in working capital 2) Changes in provisions, pension obligations and other Interest payments received Interest payments made Income taxes paid Cash ﬂow from operating activities 13, 14 7 543 (1 042) 410 (875) (94) 91 (269) (450) 5 314 1 799 6 373 (481) 2 63 (170) (213) 1 380 Investments in property, plant and equipment and intangible assets Received investment grants Proceeds from sale of property, plant and equipment Cash eﬀect from merged companies Acquisition and capital increase in subsidiaries Acquisition of and cash contributions to joint ventures Increase in loans to subsidiaries Re-payment on loans to subsidiaries Dividends and group contributions Other investments / sales Cash ﬂow from investing activities 13, 14 5 13 28 15 16 22,26 22,26 15 (619) 42 5 38 (913) (267) (1 848) 334 138 0 (3 089) (467) 90 0 - (481) - (291) 201 234 0 (714) Dividend paid to owners Capital increase Net sale (purchase) of treasury shares New interest-bearing loans and borrowings Repayment of interest-bearing loans and borrowings New cash deposits to / from subsidiaries Repayment of cash deposits to / from subsidiaries Cash ﬂow from ﬁnancing activities 20 20 20 22 22 22,26 22,26 (1 900) - (38) 5 702 (6 131) 1 578 (380) (1 169) (96) 1 900 (278) 2 500 (2 426) 910 (715) 1 795 Change in cash and cash equivalents 1 056 2 461 Currency translation diﬀerences Net change in cash and cash equivalents 0 1 056 (0) 2 461 1 799 Cash and cash equivalents opening balance 22 4 260 4 260 Cash and cash equivalents closing balance 22 5 316 1) See note 29 Changes in presentation 2) Working capital is deﬁned as trade receivables, inventory, other current assets, trade payables and other current liabilities. Other current assets is deﬁned as other current assets less current receivables to related parties, current interest-bearing receivables, tax receivables, grants receivable and accrued interest income. Accounts payable is deﬁned as trade payables less accounts payable related to purchase of non- current assets. Other current liabilities is deﬁned as other current liabilities less provisions. Notes to the ﬁnancial statement - Elkem ASA 1. General information Elkem ASA is a limited liability company located in Norway, whose shares are publicly traded on Oslo Børs. The main activities are related to production and sale of silicon materials, ferrosilicon, specialty alloys for the foundry industry and microsilica. Elkem ASA is owned 52.9% by Bluestar Elkem International Co. Ltd S.A., Luxembourg, which is under the control of Sinochem Holdings Co., Ltd (Sinochem), a company registered and domiciled in China. The presentation currency of Elkem ASA is Norwegian Krone (NOK). All ﬁnancial information is presented in NOK million, unless otherwise stated. As a result of rounding adjustments, the amounts shown in one or more columns included in the ﬁnancial statements may not add up to the total. In text the current year's ﬁgures are presented outside parentheses, followed by the comparative ﬁgures presented in parentheses. 2. Signiﬁcant accounting policies The ﬁnancial statements have been prepared in accordance with the Norwegian Accounting Act and generally accepted accounting principles in Norway. The accounts are prepared based on a going concern assumption. Changes in accounting policies Changes in accounting policies are recognised directly in equity and the opening balance is adjusted as if the new accounting policy had always been applied. Last year's ﬁgures are changed correspondingly, for comparative purposes. Change in presentation Presentation of realised hedge ineﬀectiveness is changed from raw materials and energy for production to other gains (losses) related to operations in the statement of proﬁt and loss. Comparable ﬁgures are restated. See note 29 Changes in presentation. Elkem has changed from net to gross presentation of cash ﬂows from loans and deposits against subsidiaries. Comparable ﬁgures are restated. See note 29 Changes in presentation. Accounting estimates In the event of uncertainty, the best estimate is applied, based on the information available when the ﬁnancial statements are prepared. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods aﬀected. See note 3 Accounting estimates. Foreign currency translation Elkem ASA's functional currency is Norwegian Krone (NOK). Transactions in currencies other than the entity's functional currency are translated using the transaction date's currency rate. Monetary items in foreign currencies are presented at the exchange rate applicable on the balance sheet date. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rate at the date fair value is measured. If the currency exposure of a transaction is designated as a part of a hedging relationship, realised eﬀects from the associated hedging instrument is classiﬁed in the same line in the ﬁnancial statements as the hedged transaction. Currency gains (losses) related to operating activities, i.e. receivables, payables, bank accounts for operating purposes, are classiﬁed as a part of other gains (losses) related to operating activities. Currency eﬀects included in ﬁnance income and expenses are related to loans and dividends. Revenue recognition Sale of goods Revenue is recognised when it is earned and the revenue can be measured reliably. Revenue is measured at the fair value of the consideration received or receivable, net of any taxes, rebates and discounts. Expenses are recognised in the same period as the related revenue. When products are sold with warranties, the expected warranty amounts are recognised as expenses at the time of the sale, and are subsequently adjusted for any changes in estimates or actual outcome. Revenue from sale of goods is recognised when the signiﬁcant risk and reward of the ownership of the goods has passed to the buyer, according to the agreed delivery term for each sale. Delivery terms are based on Incoterms 2020 issued by International Chamber of Commerce, and the main terms are: "F" terms, where the buyer arranges and pays for the main carriage. The risk and reward is passed to the buyer when the goods are handed over to the carrier engaged by the buyer. "C" terms, where the group arranges and pays for the main carriage but without assuming the risk of the main carriage. The risk and reward is passed to the buyer when the goods are handed over to the carrier engaged by the seller. "D" terms, where the group arranges and pays for the carriage and retain the risk and reward of the goods until delivery at agreed destination. The risk is transferred to the buyer upon arrival at agreed destination, usually the purchaser's warehouse. Sale of power and revenue connected to energy recovery Sale of electric power and revenue connected to energy recovery, mainly heat supply in form of steam and hot water, el-certiﬁcates and el-tax, are recognised in income based on volume and price agreed with the customer. Revenue connected to energy recovery is mainly based on long-term contracts where the prices are regulated yearly based on changes in CPI or government regulated prices, except for the el-certiﬁcates where the price is based on the observable market price at date of delivery. Revenue from sale of services Revenue from sale of services is recognised when the services have been provided. Sale of services are mainly related to management agreements with related parties, based on cost plus a margin. Other Income from insurance settlements are recognised when it is virtually certain that the group will receive the compensation, and is recognised as other operating income. Cash ﬂows from credit insurance contracts where such contracts are deemed to be an integral part of the sale transactions is presented as reduction of net against impairment losses assets / receivables, included in other operating expenses. Interest income is recognised on accrual basis. Dividends are recognised when shareholders' right to receive dividends is determined by the shareholders' meeting. Grants Grants are recognised when it is reasonably assured that the company will comply with the conditions attached to them and the grants will be received. Grants are recognised in the income statement over the periods necessary to match them with the cost they are intended to compensate. Grants relating to cost of production of goods are recognised in proﬁt or loss when the produced goods are sold. Grants relating to property, plant and equipment and intangible assets are deducted from the carrying amount of the asset, and recognised in the income statement over the lifetime of a depreciable asset by reducing the depreciation charge. Grants related to expenses are classiﬁed as other operating income. Investment in subsidiaries, associates and jointly controlled entities Subsidiaries are companies in which Elkem ASA has controlling interests, normally obtained when Elkem ASA owns more than 50% of the shares. Associates are those entities in which Elkem ASA has signiﬁcant inﬂuence, but no control, over the ﬁnancial and operating policies. Signiﬁcant inﬂuence is presumed to exist when Elkem ASA holds between 20% and 50% of the voting power of another entity. Jointly controlled entities are those entities over whose activities Elkem ASA has joint control, established by contractual agreement and requiring unanimous consent for strategic ﬁnancial and operating decisions. Subsidiaries Interests in subsidiaries are recognised at cost less any write- down for impairment. Associates Investments in associates are valued at cost less any write- down for impairment. Dividends received from associated companies are included in the income statement. Joint ventures Elkem ASA's interests in jointly controlled entities, which operates within Elkem ASA's main business areas (silicon materials and foundry products), are accounted for using the gross method, meaning that the company's share of the income, expense, assets and liabilities are recognised. Elkem ASA combines its share of the joint ventures' individual income and expenses, assets and liabilities and cash ﬂows on a line- by-line basis with similar items in the ﬁnancial statements. Elkem ASA's interests in joint controlled entities, which do not operate within Elkem ASA's main business areas, are accounted for using the equity method. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of the proﬁt or loss and other comprehensive income of the investee after the date of acquisition. In cases where a joint ventures' loss increases the initially recognised cost, the carrying amount is presented to reﬂect Elkem's liability to ﬁnance the joint venture. Any liability to ﬁnance a joint venture is presented either as part of provisions and other liabilities, current, or netted against Elkem's receivables towards the joint venture. Impairment of investment in subsidiaries, associates and jointly controlled entities Impairment loss is recognised if the carrying amount exceeds the recoverable amount and the impairment is not considered to be temporary. The recoverable amount is the higher of fair value less costs to sell, or its value in use. Value in use is the present value of the future cash ﬂow expected to be derived from the asset or the cash generating unit to which it belongs, after taking into account all other relevant information. The impairment is reversed if the basis for the write-down is no longer present. Intangible assets Intangible assets are stated in the balance sheet at cost less subsequent accumulated amortisation and subsequent accumulated impairment losses. Intangible assets with a ﬁnite useful life are amortised, using the straight-line method. The estimated useful life and amortisation method is reviewed at the end of each reporting period. An intangible asset is derecognised on disposal, or when no future economic beneﬁts from its use are expected to be derived. Gain or loss arising from derecognition of an intangibl asset, measured as the diﬀerence between the net disposal proceeds and the carrying amount of the asset, is recognised in the income statement. Expenditure on research activities is recognised as an expense in the period in which it is incurred. An intangible asset arising from an internal development project is recognised if the company can demonstrate technical feasibility of completing the intangible asset, has intention to complete it, ability to use it, can demonstrate that it will generate probable future economic beneﬁts and the cost can be reliably measured. Property, plant and equipment Property, plant and equipment is presented at cost, less accumulated depreciations and any accumulated impairment losses. Construction in progress is carried at cost, less any recognised impairment loss. Such assets are classiﬁed to the appropriate class of property, plant and equipment when completed and ready for its intended use. Signiﬁcant parts of an item of property, plant and equipment which have diﬀerent useful life, are accounted for as separate items. Depreciation commences when the assets are ready for their intended use. Initial cost includes expenditures that are directly attribut- able to the acquisition of the asset, cost of materials, direct labour, any other costs directly attributable to bringing the assets to working condition for their intended use and estimated dismantling or removal charges, and capitalised borrowing costs. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, when future beneﬁts are probable and the cost can be measured reliably. The carrying amount of the replaced part is derecognised. Major periodic maintenance that is carried out less frequently than every year, is capitalised and depreciated over the period until the next periodic maintenance is performed. All other repairs and maintenance are charged to the income statement when incurred. Depreciation is recognised using the straight-line method. The estimated useful life, residual values and depreciation method is reviewed at the end of each reporting period. An item of property, plant and equipment is derecognised upon disposal or when no future economic beneﬁts are expected to arise from the continued use of the asset. Any gain or loss from disposal or retirement is determined as the diﬀerence between the sales proceeds and the carrying amount of the asset, and is recognised in the income statement. Impairment of tangible and intangible assets At the end of each reporting period, the carrying amounts of tangible and intangible assets are reviewed to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount of the individual asset is estimated in order to determine the extent of the impairment loss. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the lowest possible cash generating unit, to which the asset belongs, is estimated. The recoverable amount is the higher of fair value less costs to sell, or its value in use. Value in use is the present value of the future cash ﬂows expected to be derived from use of the cash generating unit, after taking into account all other relevant information. If an impairment loss for assets other than goodwill is recognised in a previous period, the entity assesses whether there are indications that the impairment may have decreased or no longer exists. If so, the impairment loss is reversed, based on an updated estimate of the recoverable amount, but not exceeding the carrying amount that would have been determined had no impairment loss been recognised for the asset. Any impairment of goodwill is not reversed. Leasing Leases are classiﬁed as ﬁnancial leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classiﬁed as operating leases and expenses are recognised as incurred. Assets held under ﬁnance leases are initially recognised as assets at the present value of the minimum lease payment. The corresponding liability to the lessor is included in the ﬁnancial statements as a ﬁnance lease obligation. Each lease payment is allocated between the liability and ﬁnance charges so as to achieve a constant rate on the obligation. Non-derivative ﬁnancial assets and liabilities A ﬁnancial asset or a ﬁnancial liability is recognised in the balance sheet when the entity becomes party to a contract. Assets to be acquired and liabilities to be incurred as a result of a ﬁrm commitment to purchase or sell goods or services are recognised at the time one of the parties has performed under the agreement. Financial assets are initially recognised in the balance sheet at fair value plus any transaction costs directly attributable to the acquisition or issue of the asset. Financial assets are derecognised once the right to future cash ﬂows has expired or when substantial all risks and rewards related to control of the assets are transferred to a third party. Financial assets with a maturity exceeding one year are classiﬁed as non-current ﬁnancial assets. Short-term investments that do not meet the deﬁnitions of a cash equivalent and ﬁnancial assets with a maturity of less than one year are classiﬁed as current ﬁnancial assets. Non-current ﬁnancial assets are recognised and subsequently measured at cost less any impairment loss, if the impairment is assessed not to be temporary. Loans and receivables Loans and receivables are non-derivative ﬁnancial assets with ﬁxed or determinable payments that are not quoted in a e regulated market. They are recognised at amortised cost using the eﬀective interest method. Gains and losses are recognised in the income statement when the loans and receivables are derecognised or impaired, as well as through the amortisation process. An impairment loss is recognised when the carrying amount exceeds the estimated recoverable amount. The category includes trade receivables, deposits, guarantees and loans. These assets are classiﬁed in the balance sheet as either other non-current assets or other current assets. Other current assets are receivables with maturity less than one year. Trade and other receivables are recognised at nominal value less provisions for doubtful accounts. Cash and cash equivalents Cash and cash equivalents are held for the purpose of meeting short-term ﬂuctuations in liquidity, rather than for investment purposes. Cash and cash equivalents comprise cash funds and short-term deposits with a term of 3 months or less on acquisition. Bank overdrafts are shown within current interest- bearing liabilities in the balance sheet. Elkem ASA's deposits and drawings within the group cash pool are netted by oﬀsetting deposits against withdrawals. The subsidiaries' deposits and drawings are classiﬁed as current assets / liabilities. Derivative ﬁnancial instruments Currency derivatives are initially recognised at fair value on the date the derivative contracts are entered into, and are subsequently remeasured to their fair value at the end of the reporting period. The resulting gain or loss is recognised in the income statement immediately, unless when the derivative is designated and is eﬀective as a hedging instrument. If the derivative is designated as a hedging instrument, timing of recognition in the income statement depends on the nature of the hedging relationship. The part of commodity derivative contracts that do not qualify as hedging instruments and are not held for trading are booked at the lower of cost and fair value. Embedded currency derivatives are separated from the host contract and booked at fair value, as an independent derivative. Contracts for the entity's own use are contracts which are entered into and continue to be held for the purpose of the receipt of a non-ﬁnancial item according to the company's usage requirements. This applies to power purchase contracts intended for use in the plant’s production processes. Such contracts are booked in the balance sheet at cost and in the income statement on realisation. Hedge accounting Elkem ASA may designate certain derivatives as hedging instruments for fair value hedges and cash ﬂow hedges. At the inception of the hedging relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Elkem ASA applies IFRS 9 for all hedge accounting. Cash ﬂow hedges The eﬀective portion of changes in the fair value of derivatives that are designated and qualify as cash ﬂow hedges, are recognised in the equity and accumulated under the heading of cash ﬂow hedge reserve. Gains / losses recognised in equity are reclassiﬁed into the income statement in the same period(s) as the forcasted transaction occurs. The unrealised gains / loss relating to the ineﬀective portion is recognised immediately in the income statement. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in the equity at that time remains in equity until the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement. Inventories Inventories are recognised at the lowest of cost and net realisable value. The cost of inventory comprises of the costs incurred in bringing the goods to their current condition and location, such as raw materials, energy for production, direct labour, other direct costs and production overhead costs based on normal capacity. Net realisable value represents the estimated selling price for inventories less estimated costs of completion and variable selling expenses. Cost of goods sold is included in diﬀerent lines in the income statement based on nature; raw materials and energy for production, employee beneﬁts and other operating expenses, for the remaining part. The cost of CO 2 allowances that Elkem needs to purchase in addition to allowances received from the government (note 5), are based on estimated production / emissions for the year. The cost is allocated to cost of producing semi-ﬁnished and ﬁnished goods proportionally over the year, as the number of allocated allowances will not be revised unless there is a substantial change in the production level at the plants. Taxation Income taxes Current tax assets and liabilities are measured at the amount expected to be recovered or paid to the tax authorities. Current tax payable includes any adjustment to tax payable in respect of previous years. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity. Income tax relating to items recognised directly in equity is recognised in equity. Uncertain tax positions are included when it is virtually certain that the tax position will be sustained in a tax review, and provisions are made relating to uncertain or disputed tax positions at the amount expected to be paid. The provision is reversed when the disputed tax position is settled in favour of Elkem and can no longer be appealed. Deferred tax Deferred tax assets and liabilities are calculated using the liability method with full allocation for all temporary diﬀerences between the tax base and the carrying amount of assets and liabilities in the ﬁnancial statements, including tax losses carried forward. Deferred tax items are recognised in correlation to the underlying transaction either in the income statement or directly in equity. Deferred tax assets are recognised in the balance sheet to the extent it is more likely than not that the tax assets will be utilised. The enacted tax rate at the end of the reporting period and undiscounted amounts are used. Deferred tax assets arising from tax losses are recognised when there is convincing evidence of recoverability. Deferred tax assets and liabilities items are oﬀset if there is a legally enforceable right to oﬀset current tax liabilities and assets. Employee beneﬁts Employee beneﬁts consist of wages and salaries, bonuses, holiday payments, share-based payments and other considerations paid in exchange for services rendered from employees, and are expensed as incurred together with any social security tax applicable. Employee retirement beneﬁts Deﬁned contribution plans Deﬁned contribution plans comprise arrangements whereby the company makes monthly contributions to the employees' pension plans, and where the future pensions are determined by the amount of the contributions and the return on the individual pension plan asset. Payments related to the contribution plans are expensed as incurred, as a part of employee beneﬁt expenses. Deﬁned beneﬁt plans Deﬁned beneﬁt plans are recognised at present value of future liabilities considered retained at the end of the reporting period, calculated separately for each plan. Social security tax related to pension payments is included in estimated pension liability. Plan assets are measured at fair value and deducted in calculating the net pension obligation. Actuarial assumptions are used to measure both the obligation and the expense and eﬀects of changes in estimates due to ﬁnancial and actuarial assumptions that are recognised in equity. Service costs are classiﬁed as part of employee beneﬁt expenses and net interest on pension liabilities / assets are presented as a part of ﬁnance expenses. Past service cost arising due to amendments in beneﬁt plans are expensed as incurred. Multi-employer deﬁned beneﬁt plans where available information is insuﬃcient to be able to calculate each participant's obligation, are accounted for as contribution plans. Share-based payment The fair value of options granted under the share-based payment program is recognised as an employee beneﬁt expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options granted. The total expense is recognised over the vesting period, which is the period over which all of the speciﬁed vesting conditions are to be satisﬁed. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity. Social security contributions payable in connection with an option grant are considered an integral part of the grant itself and the charges are treated as cash-settled transactions. Provisions A provision is recognised when a present obligation exists and it is probable that an outﬂow of resources is required to settle the obligation. The amount recognised is the best estimate of the consideration required to settle the obligation, taking into account the risks and uncertainties surrounding the obligation, known at the end of the reporting period. Provisions are measured at present value, unless the time value is assessed to be immaterial. Contingent assets and liabilities Contingent liabilities are liabilities which are not recognised because they are possible obligations that have not yet been conﬁrmed, or they are present obligations where an outﬂow of resources is not probable. Contingent assets are not recognised. Any signiﬁcant contingent assets and liabilities are disclosed in the notes. Events after the reporting period Events after the reporting period related to Elkem ASA's ﬁnancial position at the end of the reporting period, are considered in the ﬁnancial statement. Events after the reporting period that have no eﬀect on the company's ﬁnancial position at the end of the reporting period, but will have eﬀect on future ﬁnancial position, are disclosed if the future eﬀect is material. 3. Accounting estimates In the event of uncertainty the best estimate is applied, based on the information available when the annual accounts are prepared. Property, plant and equipment The estimated useful lives, residual values (if any) and depreciation method are reviewed, and if necessary adjusted, at least annually. Financial instruments Elkem ASA holds ﬁnancial instruments such as forward currency contracts and commodity contracts, which are booked at fair value. For commodity contracts denominated in EUR, the embedded EUR derivative is separated from the host contract and booked at fair value. Hedge accounting is applied for these contracts. Commodity contracts that do not qualify as hedging instruments are booked at the lower of cost and fair value. Fair value for the contracts is based on observable prices and assumptions derived from observable prices for comparable instruments. For assumptions applied in fair value measurement of the contracts see details in note 25 Financial assets and liabilities in the consolidated ﬁnancial statement. Net book value of contracts booked at fair value as at 31 December 2022 is in total positive NOK 2,160 million (positive NOK 544 million), see note 24 Financial instruments. 4. Operating income Operating income by type Amounts in NOK million 2022 2021 Revenue from sale of goods, Silicon Products 12 227 7 269 Revenue from sale of goods to related parties 2 985 1 465 Other operating revenue 134 118 Other operating revenue to related parties 565 457 Total revenue 15 912 9 309 Sale of ﬁxed assets 1 - Insurance settlement 12 25 Grants (note 5) 530 406 Total other operating income 543 431 Total operating income 16 455 9 740 Operating income by geographic market Amounts in NOK million 2022 2021 Nordic countries United Kingdom Germany France Italy Poland Spain Netherlands Other European countries 2 569 795 3 408 2 166 677 224 445 85 1 759 1 681 633 1 753 802 522 179 319 74 1 382 Europe 12 129 7 345 Africa 29 35 North America South America 1 458 51 565 41 America 1 509 606 China Japan South Korea Other Asian countries 397 1 040 126 1 207 284 696 113 642 Asia 2 770 1 734 The rest of the world 18 20 Total operating income 16 455 9 740 5. Grants 2022 2021 Other Deduction Other Deduction Amounts in NOK million operating income of carrying amount FA operating income of carrying amount FA R&D grants from the Norwegian government 28 - 39 - CO Compensation from the Norwegian Environment Agency 2 Energy recovery related grants 497 - - - 367 - - 6 Other government grants 2 - - - Total government grants 527 - 406 6 Norwegian NO x Other grants fund for reduced emission of NO x 1 1 64 - - - 31 - Total other grants 3 64 - 31 Total grants 530 64 406 37 Grants receivables related to ﬁxed and intangible assets (note 19) 64 42 Grants receivables related to income (note 19) 489 364 Grants, deferred income (note 23) (7) (5) CO 2 allowances CO 2 emission allowances allocated from the government are classiﬁed as grants, measured at nominal value (zero). If actual emissions exceed the number of allocated allowances, additional allowances must be purchased. The allocation of free allowances for the period 2021-2025 has been decided by the Norwegian government. CO 2 compensation The Norwegian government has since 2013 had a CO 2 compensation scheme to partially compensate for CO 2 costs included in the power price for certain industries. The compensation scheme is based on a corresponding scheme for EU and are approved by the EFTA surveillance authority ESA. The previous CO 2 compensation scheme ended 31 December 2020 and a new scheme for 2021-2025 has been approved by ESA and implemented into Norwegian regulation. The CO 2 compensation scheme applies for Elkem's Silicon and Ferrosilicon plants. The compensation is based on the market price of CO 2 allowances and will as such vary with the price development. As the grant compensates power costs, which are costs recognised as part of the cost price of inventory during the production process, the compensation is recognised in the statement of proﬁt or loss when the produced goods are sold. Other The remaining grants are mainly related to R&D and energy recovery projects. 6. Employee beneﬁt expenses Amounts in NOK million 2022 2021 Salaries, holiday pay and variable compensation (1 090) (1 024) Employer's national insurance contributions / social security tax (141) (126) Pension expenses (note 7) (78) (74) Share-based payments (24) (18) Other payments / beneﬁts (15) (15) Total employee beneﬁt expenses (1 348) (1 257) Average number of full time equivalents 1 308 1 295 For information concerning remuneration to management and share-based payments, see "Report on salary and other remuneration to leading personnel in Elkem ASA for the ﬁnancial year 2022", note 9 Employee beneﬁts and note 10 Share-based payment in the consolidated ﬁnancial statement. 7. Employee retirement beneﬁts Deﬁned contribution plans Pension for employees in Elkem ASA are mainly covered by pension plans that are classiﬁed as contribution plans. Elkem ASA' contributions to the employees individual pension plan assets constitutes 5% of base salary up to 7.1G and 15% between 7.1 and 12G. G refers to the national insurance scheme's basic amount in Norway, amounting to NOK 111,477 as at 1 May 2022. Pension on salary above 12G is not supported by external service providers and is therefore handled as a separate plan and included under deﬁned beneﬁt plans. Elkem ASA participates in the early retirement scheme AFP. This is as a multi-employer plan accounted for as a deﬁned contribution plan, in accordance with the Ministry of Finance's conclusion. The participants in the pension plan are jointly responsible for 2/3 of the plan's pension obligation, the government is responsible for the remaining part. The yearly pension premium in 2022 is 2.6% of the employee’s salary between 1 and 7.1G, covering this year’s pension payments and contribution to a security fund for future pension obligations. The premium in per cent of salary for 2023 will be 2.6%. At 31 December there is 1,544 participants below the age of 61 years in the scheme. Deﬁned beneﬁt plans The deﬁned beneﬁt pension plans are unfunded and comprise pension on salaries above 12G, where the expense is 15% of annual base salary that exceeds 12G plus interest on the individual calculated pension obligation, and some individual retirement schemes. The individual retirement schemes are closed. Net interest is calculated based on pension liability at the start of the period multiplied by the discount rate and is presented as a part of ﬁnance expenses. Remeasurements of the deﬁned beneﬁt plans are recognised directly in equity. The company's retirement schemes meet the minimum requirement of the Norwegian Act of Mandatory Occupational Pension. Breakdown of pension expenses Amounts in NOK million 2022 2021 Deﬁned beneﬁt plans (4) (4) Deﬁned contribution plans (57) (55) Early retirement scheme (AFP) (18) (16) Total pension expenses (78) (74) Amounts in NOK million 31.12.2022 31.12.2021 Present value of pension obligations (80) (85) Net value pension liabilities (80) (85) Active participants in pension scheme for salary above 12G 49 49 Retired participants 45 50 Changes in actuarial gains / (losses) recognised in equity / deferred tax 6 3 Principal assumptions used for the actuarial valuation Amounts in NOK million 2022 2021 Discount rate 1) 4.2 % 2.0 % Annual regulation of pensions paid 1.9 % 1.5 % 1) The discount rate is based on high quality corporate bonds reﬂecting the timing of the beneﬁt payments. 8. Other operating expenses Amounts in NOK million 2022 2021 External distribution expenses Commission expenses sales Machinery, tools, ﬁxtures and ﬁttings Repair, maintenance and other operating expenses Other external expenses (fees, transport, IT services, etc.) Energy and fuel expenses Leasing expenses (note 9) Travel expenses Loss on trade receivables Miscellaneous manufacturing, administration and selling expenses Total other operating expenses (707) (138) (381) (246) (600) (70) (51) (26) (1) (463) (2 684) (531) (91) (432) (159) (404) (103) (58) (9) 4 (389) (2 172) Miscellaneous manufacturing, administration and selling expenses include: Capitalisation of salary on ﬁxed assets (employee beneﬁt expenses are presented gross in note 6) Changes in inventories of ﬁnished and semi-ﬁnished goods 10 74 10 (4) During 2022, Elkem ASA expensed NOK 193 million (NOK 82 million) as research and development related to process, product and business development, including technical customer support and improvement projects. Grants received related to research and development amount to NOK 28 million (NOK 39 million) and are included in other operating income. Audit and other services Amounts in NOK million 2022 2021 Audit fee (6) (5) Other assurance services (1) (1) Tax services - - Other services - - Total fees to auditor (7) (6) 9. Operating lease Amounts in NOK million 2022 2021 Leasing expenses, current year (note 8) (51) (58) Minimum future lease payments due in accordance with non-cancellable operating lease contracts: Within one year (27) (26) Within two years (25) (25) Within three years (25) (22) Over three years (227) (196) Future leasing obligations are mainly related to rental of oﬃce buildings. The rental agreement contains an extension option for 5+5 years for one of the leases. The future obligation for the extension option is approximately NOK 125 million. 10. Other gains (losses) related to operating activites Amounts in NOK million 2022 2021 Realised currency gains (losses) from forward currency contracts (17) 158 Unrealised currency gains (losses) from forward currency contracts (86) (38) Other currency gains (losses) operational 134 8 Realised eﬀects other ﬁnancial instruments 1) 640 65 Unrealised and reversal of unrealised eﬀects other ﬁnancial instruments 2) 1 041 60 Total other gains (losses) related to operating activities 1 712 253 1) Of the realised eﬀects other ﬁnancial instruments, a gain of NOK 597 million (gain NOK 124 million) relates to realised ineﬀectivenes on power derivatives designated as hedging instruments. Se note 24 ﬁnancial instruments. 2) Of the amount NOK 817 million (NOK 0 million) relates to unrealised ineﬀectivenes on power derivatives designated as hedging instruments. The remainng part relates mainly to movements in the value of the part of embedded currency derivatives that are not designated as hedging instrument. Se note 24 ﬁnancial instruments. 11. Finance income and expenses Amounts in NOK million 2022 2021 Interest income 29 3 Interest income from related parties (note 26) 130 129 Other ﬁnancial income 7 2 Total ﬁnance income 166 134 Net foreign exchange gains (losses) (62) 377 Interest expenses (215) (179) Interest expenses to related parties (note 26) (48) (11) Interest on net pension liabilities (3) (3) Other ﬁnancial expenses (2) (5) Total ﬁnance expenses (267) (198) Net ﬁnance income (expenses) (163) 313 Foreign exchange gains (losses) in 2022 and 2021 are mainly related to the bank loans in EUR and group loans in EUR and CNY. 12. Taxes Income tax recognised in income statement Amounts in NOK million 2022 2021 Current tax expenses (1 330) (458) Deferred tax (270) (22) Other taxes (3) (21) Total income tax (expense) beneﬁt (1 603) (501) Reconciliation of income tax (expense) beneﬁt Amounts in NOK million 2022 2021 Proﬁt before tax 7 593 2 274 Applicable tax rate Norway 22 % 22 % Tax expense at applicable tax rate (1 670) (500) Permanent diﬀerences Tax eﬀects of income from Norwegian controlled foreign companies (NOKUS) (16) (8) Tax eﬀects share of proﬁt (loss) from joint ventures (4) 9 Dividend within the Tax exemption method 31 27 Gain on realised shares 20 - Tax eﬀects other permanent diﬀerences 19 (2) Other eﬀects Previous year tax adjustment 20 (6) Other current tax paid (3) (22) Total income tax (expenses) beneﬁt (1 603) (501) Eﬀective tax rate 21 % 22 % Pending tax issues with tax authorities Elkem ASA has four debt waiver agreements with Elkem Silicones France SAS. The gross taxable value of these agreements as of 31 December 2022 is NOK 595 million (NOK 595 million), book value NOK 0. Elkem Silicones France SAS has not repaid anything under this agreement in 2022 or 2021. Elkem has previously assessed that the eﬀect of repayment is tax exempted. The Norwegian Tax Oﬃce (NTO) decided in February 2021 to increase Elkem ASA's taxable income for the ﬁscal years 2016-2019 by NOK 781 million, which increased the income tax expenses by NOK 181 million in 2020. The amount was paid in the ﬁrst quarter of 2021. The reassessments relate to the debt waiver agreements acquired by Elkem ASA in 2016 through the cross-border parent-subsidiary merger with Bluestar Silicones International Sarl. Elkem is of the opinion that the reassessment is unfounded and will appeal. Based on legal advice, Elkem’s assessment is that the defence against the action will be successful. According to a decision by the Supreme Court in Norway related to interpretation of Norwegian Accounting Standards, Elkem needs to be virtually certain that the decision by the NTO will be overruled by the Tax Appeal Board, in order for the decision not to be reﬂected in the ﬁnancial statements. Due to the complexity of the case, Elkem is not currently able to reach a conclusion with that high level of certainty and the paid amount concerning this case is not reﬂected in the balance sheet. Deferred tax assets and deferred tax liabilities Amounts in NOK million 31.12.2022 31.12.2021 Derivatives (475) (120) Property, plant, equipment and intangible assets (244) (184) Pension liabilities 17 18 Trade receivable 2 2 Inventory (42) (26) Provisions (0) 3 Other diﬀerences 1 1 Net deferred tax assets (liabilities) (741) (306) Movement in net deferred tax assets (liabilities) Amounts in NOK million 2022 2021 Opening balance (306) (128) Charged to proﬁt (loss) (270) (21) Changes in deferred tax hedges charged to equity (146) (156) Change in actuarial gains (losses) charged to equity (1) (1) Eﬀect of merger (19) - Currency translation diﬀerences - 0 Closing balance (741) (306) 13. Property, plant, and equipment 2022 Amounts in NOK million Land Buildings and other property Plant, machinery, equipment and motor vehicles Oﬃce and other equipment Construction in progress Total Opening balance Additions Disposals Transferred from CiP Reclassiﬁcations Merger Impairment losses Depreciation Closing balance 9 1 - 0 - - - - 10 599 8 (0) 79 - 183 - (64) 805 1 840 4 (0) 401 1 748 (2) (309) 2 683 27 0 - 6 - - - (8) 25 528 539 (5) (486) (7) 7 (1) - 575 3 003 552 (5) - (6) 938 (3) (381) 4 098 Historical cost Accumulated depreciation Accumulated impairment losses Closing balance 10 - (0) 10 1 894 (1 084) (5) 805 6 136 (3 385) (68) 2 683 101 (75) (0) 25 575 - - 575 8 716 (4 544) (73) 4 098 Estimated useful life Depreciation plan Indeﬁnite 5-40 years Straight-line 3-30 years Straight-line 3-20 years Straight-line 2021 Amounts in NOK million Land Buildings and other property Plant, machinery, equipment and motor vehicles Oﬃce and other equipment Construction in progress Total Opening balance Additions Disposals Transferred from CiP Reclassiﬁcations Impairment losses Depreciation Closing balance 7 - - 2 - - - 9 629 0 - 28 (1) - (57) 599 1 771 - - 346 (2) (8) (267) 1 840 30 0 - 3 3 - (8) 27 504 405 - (379) - (2) - 528 2 941 406 - - (0) (10) (333) 3 003 Historical cost Accumulated depreciation Accumulated impairment losses Closing balance 9 - (0) 9 1 629 (1 025) (5) 599 5 099 (3 191) (69) 1 840 97 (70) (0) 27 528 - - 528 7 363 (4 286) (74) 3 003 Estimated useful life Depreciation plan Indeﬁnite 5-40 years Straight-line 3-30 years Straight-line 3-20 years Straight-line 14. Intangable assets 2022 Amounts in NOK million Goodwill Software Other intangible assets Intangible assets under construction Total intangible assets Opening balance Additions Disposals Transferred from CiP Reclassiﬁcations Impairment losses Amortisation Closing balance 20 - - - - - (4) 16 50 0 - 3 6 - (19) 40 13 - - - 0 - (3) 11 48 0 (16) (3) - - - 30 111 1 (16) - 6 - (22) 81 Historical cost Accumulated amortisation Closing balance 40 (24) 16 216 (177) 40 28 (17) 11 30 - 30 274 (193) 81 Estimated useful life Amortisation plan 10 years Straight-line 3-10 years Straight-line 3-10 years Straight-line 2021 Amounts in NOK million Goodwill Software Other intangible assets Intangible assets under construction Total intangible assets Opening balance Additions 24 - 59 8 16 - 40 14 115 22 Disposals Transferred from CiP Reclassiﬁcations - - - (0) 5 - - - - - (5) - (0) - - Impairment losses Amortisation Closing balance - (4) 20 (4) (19) 50 - (3) 13 - - 48 (4) (22) 111 Historical cost 40 206 29 48 283 Accumulated amortisation Closing balance (20) 20 (156) 50 (15) 13 - 48 (172) 111 Estimated useful life Amortisation plan 10 years Straight-line 3-10 years Straight-line 3-10 years Straight-line 15. Investments in subsidiaries Carrying Carrying Owner share amount amount Investment in subsidiaries of Elkem ASA Vote rights (%) Country 31.12.2022 31.12.2021 Elkem Carbon AS 100 % Norway 125 122 Elkem Chartering Holding AS 80 % Norway 1 1 Elkem Digital Oﬃce AS 100 % Norway 8 8 Elkem Distribution Center B.V. 100 % Netherlands 0 0 Elkem Foundry (China) Co., Ltd. 100 % China 66 66 Elkem GmbH 100 % Germany 1 1 Elkem Iberia S.L.U 100 % Spain 0 0 Elkem International AS 100 % Norway 5 5 Elkem International Trade (Shanghai) Co. Ltd. 1) 11 % China 1 1 Elkem Ísland ehf. 100 % Iceland 785 784 Elkem Japan K.K 100 % Japan 0 0 Elkem Korea Co. Ltd. 100 % Republic of Korea 19 1 Elkem Madencilik Metalurji Sanayi Ve Ticaret Ltd. STI 1) 1 % Turkey 0 0 Elkem Materials Processing (Tianjin) Co., Ltd. 100 % China 1 1 Elkem Materials Processing Services BV 100 % Netherlands 1 1 Elkem Metal Canada Inc. 100 % Canada 7 7 Elkem Milling Services GmbH 100 % Germany 12 12 Elkem Nordic A.S. 100 % Denmark 5 5 Elkem Oilﬁeld Chemicals FZCO Ltd. 51 % UAE 13 13 Elkem Paraguay S.A. 1) 79 % Paraguay 498 498 Elkem Processing Services S.A. 2) 100 % Belgium 34 - Elkem S.a.r.l. 100 % France - - Elkem S.r.l. 100 % Italy 6 6 Elkem Silicon Materials (Lanzhou) Co., Ltd. 100 % China 1 033 1 033 Elkem Silicon Product Development AS 100 % Norway 8 8 Elkem Siliconas España S.A.U 100 % Spain 125 125 Elkem Silicones Brasil Ltda. 100 % Brazil 214 214 Elkem Silicones Canada Corp. 100 % Canada 6 6 Elkem Silicones Czech Republic, s.r.o. 100 % Czech Republic 2 2 Elkem Silicones Finland OY 100 % Finland 5 5 Elkem Silicones France SAS 100 % France 2 163 2 160 Elkem Silicones Germany GmbH 100 % Germany 130 130 Elkem Silicones Guangdong Co., Ltd. 100 % China 1 543 1 543 Elkem Silicones Hong Kong Co., Ltd. 100 % Hong Kong 102 102 Elkem Silicones Korea Co., Ltd. 100 % Republic of Korea 219 219 Elkem Silicones México S. De R.L. De C.V. 100 % Mexico 5 5 Elkem Silicones Poland sp. z o.o. 100 % Poland 4 4 Elkem Silicones Scandinavia AS 100 % Norway 15 15 Elkem Silicones Services S.à.r.l 100 % France 5 4 Elkem Silicones Shanghai Co., Ltd. 100 % China 109 109 Investment in subsidiaries of Elkem ASA Carrying Carrying Owner share amount amount Vote rights (%) Country 31.12.2022 31.12.2021 Elkem Silicones USA Corp. USA 100 % 261 261 Elkem Siliconi Italia S.r.l. Italy 100 % 24 24 Elkem Singapore Materials Pte. Ltd. Singapore 100 % 0 0 Elkem South Asia Private Limited India 100 % 34 34 Elkem (Thailand) Co., Ltd. Thailand 100 % 3 3 Elkem UK Holdings Ltd. United Kingdom 100 % 78 78 Elkem Uruguay S.A. Uruguay 100 % 33 33 Explotación de Rocas Industriales y Minerales S.A. (ERIMSA) Spain 100 % 80 80 Jiangxi Bluestar Xinghuo Silicones Co., Ltd. China 100 % 4 716 4 153 NEH LLC USA 100 % 98 98 Vianode AS 3) Norway - - 1 Total 12 604 11 982 1) Elkem ASA and a subsidiary own 100% of Elkem International Trade (Shanghai) Co. Ltd., Elkem Madencilik Metalurji Sanayi Ve Ticaret Ltd and Elkem Paraguay S.A. 2) Elkem ASA acquired Elkem Processing Services S.A. (then KeyVest Belgium S.A.) in June 2022 3) Elkem ASA sold 60% of the shares in Vianode AS in September 2022, reducing its ownership from 100% to 40% Impairment For more details see note 19 Impairment assessment in the consolidated ﬁnancial statement. Income from investments in subsidiaries Amounts in NOK million 2022 2021 Dividends and group contributions from subsidiaries 138 126 Net income on disposal of subsidiary 92 - Total income from subsidiaries 229 126 16. Investments in joint ventures Owner share Owner share Company Voting rights Voting rights Accounting address Country 2022 2021 method Elkania DA Hauge i Dalane Norway 50 % 50 % Gross method Vianode AS 1) Oslo Norway 40 % - Equity Salten Energigjenvinning AS 2) Oslo Norway - 50 % Equity 1) The share of ownership are equal to Elkem's voting rights, with the exception of Elkem's investments in Vianode AS where the parties have 33,33% ownership inﬂuence. Elkem ASA sold 60% of the shares in Vianode AS in September 2022, reducing its ownership from 100% to 40% 2) The remaining shares was purchased on 31 January 2022 and the company was followingly merged with Elkem ASA. Main ﬁgures for the investments accounted for by equity method. The ﬁgures show Elkem ASA's portion. Total interests in joint ventures Amounts in NOK million 2022 2021 Opening balance 46 (3) Acquisition of shares and capital contributions 267 - Change in equity interest, to subsidiary (47) - Change in equity interest 383 - Share of proﬁt / (loss) (17) 37 Share of other comprehensive income 7 12 Closing balance 639 46 Main ﬁgures for investments accounted for using the gross method, showing Elkem ASA's portion. Amounts in NOK million Elkania DA Total 2022 Current assets Non-current assets Current liabilities Non-current liabilities Net assets 47 24 18 8 45 47 24 18 8 45 Total revenue Total expenses Financial items Tax Total proﬁt / (loss) for the year 53 (29) (0) - 24 53 (29) (0) - 24 Amounts in NOK million Elkania DA Total 2021 Current assets Non-current assets Current liabilities Non-current liabilities Net assets 26 18 14 8 21 26 18 14 8 21 Total revenue Total expenses Financial items Tax Total proﬁt / (loss) for the year 44 (26) (0) - 18 44 (26) (0) - 18 17. Inventories Amounts in NOK million 31.12.2022 31.12.2021 Finished goods 1 206 684 Semi-ﬁnished goods 228 185 Raw materials 1 012 547 Operating materials and spare parts 307 261 Total inventories 2 753 1 677 Provisions for write down of inventories 2 2 18. Trade receivables Amounts in NOK million 31.12.2022 31.12.2021 Trade receivables 518 1 008 Trade receivables, related parties 1 075 740 Provision for doubtful accounts (11) (10) Total trade receivables 1 582 1 739 Elkem ASA and its subsidiary Elkem Carbon AS has entered into a factoring agreement with a credit limit of EUR 100 million, NOK 1,051 million, to sell on continuing basis trade receivables that meet speciﬁc conditions. The agreement includes a recourse clause for maximum 5 %, of the face value of the individual receivables sold. The non-recourse amount of the receivables sold is derecognised and the recourse amount is recognised as a current liability when the title to the receivables is transferred. As of 31 December 2022, NOK 50 million (NOK 33 million) is recognised as current liability (see note 23 Provisions and other liabilities). In addition, Elkem has entered into factoring agreements without recourse for some speciﬁc customers. Receivables that are sold without recourse are derecognised in its entirety when the title is transferred, as there is no remaining credit risk after transfer. As at 31 December 2022 NOK 1,235 million (NOK 1,053 million) of Elkem ASA’s trade receivables are derecognised under these agreements. Analysis of gross trade receivables by age, presented based on the due date Amounts in NOK million 31.12.2022 31.12.2021 Not due 269 850 1 - 30 days 204 141 31 - 60 days 6 9 61 - 90 days 23 2 More than 90 days 16 6 Total trade receivables 518 1 008 Elkem applies for credit insurance for all customers when this can be obtained. In cases where credit insurance coverage is refused, other methods of securing the sales income are used. Other methods used for securing the sales are, among others, prepayment, letter of credit, documentary credit, guarantee etc. Movements in provisions for doubtful accounts Amounts in NOK million 31.12.2022 31.12.2021 Opening balance Losses during the year New provisions Reversed provisions Closing balance (10) 0 (3) 1 (11) (16) 2 (3) 7 (10) Analysis of ageing of trade receivables where allowance for expected credit losses are made Amounts in NOK million 31.12.2022 31.12.2021 Not due Overdue by: 1 - 30 days 31 - 60 days 61 - 90 days More than 90 days Total provisions for doubtful accounts (2) (1) (0) (0) (8) (11) (2) (0) (0) (0) (7) (10) 19. Other assets Non-current Current Amounts in NOK million 31.12.2022 31.12.2021 31.12.2022 31.12.2021 Shares in associated companies 9 9 - - Other shares 8 7 - - Restricted deposits 31 27 - - Other deposits 1 1 - - Pension assets, deﬁned beneﬁts and contribution plans (note 7) - 0 1 1 Prepayments 1 0 30 43 Loans and deposits to related parties, interest-bearing (note 26) 4 221 3 269 1 074 447 Receivables from related parties, interest free (note 26) - - - 10 Grants receivable (note 5) - - 553 406 Value added tax - - 75 88 Corporate income tax - - - - Interest receivables - - - - Interest receivables from related parties (note 26) - - 26 17 Other receivables 8 8 19 120 Other assets 0 0 6 5 Total other assets 4 278 3 322 1 786 1 136 20. Equity 2022 Share Other paid Total paid Retained Total Amounts in NOK million capital in capital in capital earnings equity Opening balance 3 197 2 981 6 178 5 104 11 283 Cash ﬂow hedge - - - 516 516 Share of items booked against equity from joint ventures - - - 20 20 Remeasurement pension obligations gains (losses) - - - 5 5 Currency translation diﬀerences - - - 0 0 Share-based payments - 24 24 - 24 Net movement treasury shares - 7 7 (46) (38) Merger (note 28) - - - 4 4 Dividends - (2 716) (2 716) (1 079) (3 795) Proﬁt for the year - - - 5 990 5 990 Closing balance 3 197 296 3 493 10 515 14 009 The share capital of Elkem ASA is NOK 3,197,206,890 divided on 639,441,378 shares of NOK 5 par value. Of this amount Elkem ASA held 4,964,393 treasury shares. For the year 2022 NOK 6.0 per share corresponding to NOK 3,813 million has been allocated for the distribution of dividends to the shareholders. In addition an decreased amount of NOK 18 million was allocated for distribution of dividends for 2021, in 2022. 2021 Share Other paid Total paid Retained Total Amounts in NOK million capital in capital in capital earnings equity Opening balance 2 907 3 302 6 208 3 012 9 220 Cash ﬂow hedge reserve - - - 552 552 Share of items booked against equity from joint ventures - - - 12 12 Remeasurement pension obligations gains (losses) - - - 3 3 Currency translation diﬀerences - - - (0) (0) Share-based payments - 28 28 - 28 Net movement treasury shares - (32) (32) (246) (278) Capital increase 291 1 610 1 900 - 1 900 Dividends - (1 927) (1 927) - (1 927) Proﬁt for the year - - - 1 773 1 773 Closing balance 3 197 2 981 6 178 5 104 11 283 21. Shareholders The table shows shareholders holding 1% or more of the total 639,441,378 shares outstanding as of 31 December 2022, according to information in the Norwegian 'securities' registry system (Verdipapirsentralen). Number of Shares Ownership Bluestar Elkem International Co., Ltd. S.A. 338 338 536 52.9 % Folketrygdfondet 26 475 551 4.1 % Must Invest AS 14 000 000 2.2 % Verdipapirfondet Alfred Berg Gambak 11 946 530 1.9 % Pareto Aksje Norge Verdipapirfond 9 761 626 1.5 % State Street Bank and Trust Comp 1) 8 989 837 1.4 % Verdipapirfondet Storebrand Norge 8 173 294 1.3 % 1) The Bank of New York Mellon SA/NV 7 400 041 1.2 % 1) Euroclear Bank S.A./N.V. 6 419 487 1.0 % Total shareholders with ownership greater than 1% 431 504 902 67.5 % 1) Nominee accounts Information on shares held by key management personnel is included in "Report on salary and other remuneration to leading personnel in Elkem ASA for the ﬁnancial year 2022" and note 9 Employee beneﬁts in the consolidated ﬁnancial statement. 22. Interest-bearing assets and liabilities Non-current Current Amounts in NOK million 31.12.2022 31.12.2021 31.12.2022 31.12.2021 Interest-bearing liabilities Deposits from related parties (note 26) Loans from external parties, other than bank Bank ﬁnancing Accrued interest Total interest-bearing liabilities 171 3 688 5 214 - 9 074 145 3 110 4 037 - 7 292 3 831 1 56 16 3 903 2 618 1 256 53 19 3 945 Interest-bearing assets Cash and cash equivalents Restricted deposits Loans to related parties (note 26) Deposits to related parties (note 26) Loans to external parties Interest receivables from related parties (note 26) Interest receivables from external parties Total interest-bearing assets - 31 4 221 - 8 - - 4 260 - 27 3 269 - 8 - - 3 304 5 316 - 801 272 - 26 - 6 416 4 256 3 24 422 - 17 - 4 723 Net interest-bearing assets / (liabilities) (4 814) (3 988) 2 512 778 Interest-bearing liabilities by currency 31.12.2022 31.12.2021 Currency Currency Amounts in NOK million amount NOK amount NOK EUR 710 7 469 674 6 740 USD 106 1 045 46 408 NOK 4 137 4 137 3 622 3 622 Other currencies - 326 - 467 Total interest-bearing liabilities 12 977 11 237 The table below analyses the ﬁnancial liabilities into relevant maturity groupings based on the remaining period at the date of the statement of ﬁnancial position to the contractual maturity date. The amounts disclosed in the table are discounted. Maturity of interest-bearing liabilities 31 December 2022 Amounts in NOK million 2023 2024 2025 2026 2027 2028 and later Total Deposits from related parties Loans from external parties, other Bank ﬁnancing Accrued interest than bank 3 831 1 56 16 171 908 - - - 1 234 - - - 942 - - - 500 5 257 - - 105 - - 4 002 3 689 5 313 16 Total 3 903 1 079 1 234 942 5 757 105 13 019 Prepaid loan fees Total interest-bearing liabilities (42) 12 977 Maturity of interest-bearing liabilities 31 December 2021 Amounts in NOK million 2022 2023 2024 2025 2026 2027 and later Total Deposits from related parties Loans from external parties, other Bank ﬁnancing Accrued interest than bank 2 618 1 256 53 19 145 - 4 053 - - 1 110 - - - 1 000 - - - 500 - - - 500 - - 2 763 4 366 4 106 19 Total 3 945 4 198 1 110 1 000 500 500 11 253 Prepaid loan fees Total interest-bearing liabilities (16) 11 237 Loan agreements The main non-current loan agreements as of 31 December 2022 are a term loan of EUR 500 million (EUR 400 million), a term loan of EUR 0 million (EUR 5 million), issued bond loans of a total of NOK 2,500 million (NOK 2,500 million) and a series of loans issued in the Schuldschein market of EUR 113 million (EUR 61 million). The interest rates for the non-current loan agreements are in the range of 4.38% to 4.78% for the bond loans and 1.82% to 4.5% for the loans in the Schuldschein market. For the term loan the interest rate is 3.44%. Elkem placed EUR 200 million in the Schuldschein market on 4 and 6-year tenors in December 2022, where of EUR 52 million was disbursed in December 2022, while EUR 148 million was disbursed in January 2023. In June Elkem signed new bank facilities with a term loan of EUR 500 million and a credit facility of EUR 500 million, reﬁniancing the term loan of EUR 400 million from prior year. Later in 2022 the facilities was linked to two sustainability KPIs, KPI 1 Lost Time Injury Rate and KPI 2 – Product Group Carbon Footprint. The margin of the RCF and term loan shall be reduced by 0.025% if both KPIs are met, and increased by 0.025% if none of the KPIs are met. If one KPI is met there shall be no change to the margin. The sustainability KPIS will ﬁrst be tested for 2023 with eﬀect from 2024. One of the loans issued in the Schuldschein market (EUR 15 million) is a ﬁxed rate loan with a ﬁxed rate of 1.8160%. Given the market conditions as at 31 December 2022 the loan would have been approximately EUR 0.7 million lower, due to the diﬀerence between ﬁxed and market rate. The bond loans are listed on Oslo Børs. There are no material diﬀerences between fair value of the bond loan and book values. The loan facilities are unsecured, but part of the loans have ﬁnancial covenants related to them, see below. Credit facilities Elkem ASA is granted credit facilities of EUR 500 million (NOK 5,257 million) and NOK 250 million, a total of NOK 5,507 million in granted credit facilities. Both facilities remained undrawn at 31 December 2022 and 31 December 2021. Covenants The credit facilities and the bank ﬁnancing in Elkem ASA contain ﬁnancial covenants based on the consolidated ﬁnancial statements of Elkem group. In addition parts of the loans from external part, other than bank, contain ﬁnancial covenants. The ﬁnancial covenants are identical towards the diﬀerent parties and remain equal to previous year's covenants. In total drawn loans of NOK 6,501 million (NOK 5,971 million) have covenants as described below. Elkem ASA is compliant with its covenants at the end of 2022 and 2021. Covenants Elkem group Amounts in NOK million 31.12.2022 31.12.2021 Loan covenant Equity ratio 55 % 47 % > 30% Interest cover ratio 58.38 37.33 > 4.00 23. Provisions and other liabilities Non-current Current Amounts in NOK million 31.12.2022 31.12.2021 31.12.2022 31.12.2021 Employee withholding taxes, soc. sec.tax and other public taxes - - 103 85 Value added tax - - 29 81 Prepayments from customers - - 24 51 Prepayments from related parties (note 26) - - - 6 Payables to related parties (note 26) - - 60 43 Provisions 45 33 3 7 Obligation to ﬁnance subsidiary 37 37 - - Contingent consideration related to purchase of subsidiary - 40 42 163 Accrued expenses - - 358 194 Employee beneﬁts - - 248 232 Deferred income, government grants - - 7 5 Recourse liability factoring agreement (note 18) - - 50 33 Other liabilities - - 5 2 Total provisions and other liabilities 82 109 927 902 The contingent consideration related to purchase of subsidiaries relates to the acquisition of Polysil on 1 April 2020. Movements in provision 2022 Amounts in NOK million Restructuring Site restoration Environmental measures Total provisions Opening balance Additional provisions recognised Used during the year Reversal of provisions recognised Closing balance 3 - (3) - - 31 1 - - 32 6 11 (1) (0) 16 40 13 (4) (0) 48 Hereof non-current Hereof current Closing balance - 32 - - - 32 13 3 16 45 3 48 Site restoration The site restoration provisions are related to the necessary site remediation work that Elkem ASA will have to undertake in respect of its quartz mines. Environmental measures Elkem ASA has nationwide operations representing potential exposure towards environmental consequences. Elkem ASA has established clear procedures to minimise environmental emissions, well within public emission limits. The estimated provisions relate to estimated clean-up costs in connection with closed landﬁlls. 24. Financial instruments Currency exchange contracts Elkem ASA enters into forward currency contracts to mitigate Elkem group's foreign currency exposure. Hedge accounting is not applied, the contracts are classiﬁed as held for trading and booked at fair value in the income statement. Elkem ASA's Treasury department also oﬀers internal currency hedging for major purchase / sale-contracts entered into by the subsidiaries. Such contracts cannot be designated in a hedging relationship, hence the changes in fair value are recognised in the income statement. There are no currency contracts against subsidiaries as at 31 December 2022. Embedded EUR derivatives in power contracts where the spot element is designated as hedging instruments in a cash ﬂow hedge to hedge currency ﬂuctuations in highly probable future sales, from 1 January 2016. Unrealised eﬀects are from that date booked against equity and later reclassiﬁed to revenue when realised. Realised hedging eﬀects from such derivatives in 2022 are a loss of NOK 29 million (loss of NOK 31 million). See note 10 Other gains (losses) related to operating activities for information on contracts classiﬁed as held for trading. Details of currency exchange contracts 31 December 2022 Purchase Purchase Sale Sale Type of Currency Fair Notional currency ccy million currency ccy million instrument rate Due value 1) value 2) CAD 40 USD 31 Fwd 1,310 2023 (9) 301 NOK 1 750 EUR 170 Fwd 10,279 2023 (44) 1 790 NOK 189 JPY 2 014 Fwd 0,094 2023 36 151 NOK 426 JPY 4 242 Fwd 0,101 2024-2026 88 317 NOK 764 USD 79 Fwd 9,677 2023 (10) 780 NOK 719 EUR 69 Embedded 2) 10,452 2023 (22) 723 NOK 3 688 EUR 335 Embedded 2) 11,017 2024-2034 42 3 520 Total fair value 80 Details of currency exchange contracts 31 December 2021 Purchase Purchase Sale Sale Type of Currency Fair Notional currency ccy million currency ccy million instrument rate Due value 1) value 2) CAD 40 USD 32 Fwd 1,255 2022 (4) 284 NOK 1 231 EUR 120 Fwd 10,230 2022 20 1 203 NOK 2 GBP 0 Fwd 11,655 2022 (0) 2 NOK 169 JPY 1 844 Fwd 0,092 2022 27 141 NOK 615 JPY 6 256 Fwd 0,098 2023-2026 112 479 NOK 392 USD 45 Fwd 8,656 2022 (9) 399 NOK 709 EUR 69 Embedded 2) 10,336 2022 1 686 NOK 4 039 EUR 371 Embedded 2) 10,888 2023-2034 (18) 3 709 Total fair value 129 1) The currency exchange contracts are measured at fair value based on the observed forward exchange rate for contracts with a corresponding maturity term, on the balance sheet date. 2) Notional value of underlying asset, based on currency rates at 31 December. 3) Embedded EUR derivatives in own use power contracts. Power contracts recognised at fair value Elkem ASA enters into power derivative contracts to meet its need for power at the plants. These contracts are designated as hedging instruments in a cash ﬂow hedge to mitigate price ﬂuctuations in highly probable future need for power. The fair value of these contracts is based on observable nominal values for similar contracts, adjusted for interest eﬀects. The eﬀective part of change in fair value of contracts designated in hedging relationships is booked temporarily in equity, and recycled to the income statement when the hedged items are realised. Realised eﬀects from the hedging of future need for power are a gain of NOK 377 million (gain of NOK 190 million) which is included in raw materials and energy for production. The ineﬀective part of change in fair value of contracts designated in hedging relationships is recognised as a part of other gains (losses) related to operating activities, see note 10 Other gains (losses). In addition, Elkem ASA holds power contracts which are entered into and continue to be held for the purpose of the receipt of power. These contracts are booked at the lower of cost and fair value. As at 31 December 2022 the fair value of these contracts is higher than cost (zero). Details of fair value of power derivative contracts 31 December 2022 Amounts in NOK million Volume GWh Due Fair value Notional amount 1) Forward contracts ﬁnancial institutions 44 2023 43 15 Commodity contract "30-øringen" 1) 501 2023 608 158 Commodity contract "30-øringen" 1) 3 510 2024-2030 1 430 1 199 Total fair value 2 080 Details of fair value of power derivative contracts 31 December 2021 Amounts in NOK million Volume GWh Due Fair value Notional amount 1) Forward contracts ﬁnancial institutions 98 2022 23 52 Forward contracts ﬁnancial institutions 44 2023 4 15 Commodity contract "30-øringen" 1) 501 2022 167 157 Commodity contract "30-øringen" 1) 4 011 2023-2030 163 1 378 Power contract with Salten Energigjenvinning AS (note 26)" 2) 124 2022 35 32 Power contract with Salten Energigjenvinning AS (note 26)" 2) 1 733 2023-2036 22 555 Total fair value 414 1) Notional amount based on currency rates at 31 December. 2) Elkem ASA merged with its subsidiary Salten Energigjenvinning AS in 2022. 25. Financial risk Financial risk management in Elkem ASA is described in note 27 Financial risk and capital management policies are described in note 28 Capital management in the consolidated ﬁnancial statement. Elkem ASA's use of derivative instruments are described in note 24 Financial instruments. See note 22 Interest-bearing assets and liabilities for details of credit facilities and maturity proﬁle of interest-bearing liabilities. The exposure to credit risk is represented by the carrying amount of each class of ﬁnancial assets, including derivative ﬁnancial instruments, recorded in the balance sheet. 26. Related parties Elkem ASA is owned 52.9% by Bluestar Elkem International Co. Ltd S.A., Luxembourg, which is under control of Sinochem Holdings Co., Ltd (Sinochem), a company registered and domiciled in China. The structure of the Elkem group is disclosed in notes to the consolidated ﬁnancial statement; note 4 Composition of the group and in note 5 Equity accounted investments and joint operation. Details of transactions between Elkem ASA and the parent company, subsidiaries, joint ventures and associates and related parties within Sinochem are disclosed below. 2022 Sale of Purchase Sale of Purchase Interest Interest Amounts in NOK million good of goods services of services income expenses Bluestar Elkem International Co., Ltd. S.A. - - - - - - Related parties within Sinochem - - - - - - Subsidiaries 2 985 (1 148) 554 (540) 130 (48) Joint ventures and associates - - 12 (145) - - Total 2 985 (1 148) 565 (685) 130 (48) 2021 Sale of Purchase Sale of Purchase Interest Interest Amounts in NOK million goods of goods services of services income expenses Bluestar Elkem International Co., Ltd. S.A. - - - - - - Related parties within Sinochem 5 (154) 20 (0) - - Subsidiaries 1 461 (664) 424 (498) 129 (11) Joint ventures and associates - - 13 (124) - - Total 1 465 (818) 457 (623) 129 (11) Balances with related parties Non-current Current Amounts in NOK million 31.12.2022 31.12.2021 31.12.2022 31.12.2021 Trade receivables, subsidiaries - - 1 068 734 Trade receivables, joint ventures and associates - - 6 6 Loans to subsidiaries, interest-bearing 4 221 3 269 801 24 Deposits from subsidiaries, interest-bearing - - 272 422 Interest receivable from subsidiaries - - 26 17 Receivables from subsidiaries, interest-free - - - 10 Deposits from subsidiaries, interest-bearing (171) (145) (3 831) (2 618) Other payables to subsidiaries, interest free - - (60) (43) Trade payables, Bluestar Elkem Investment Co. Ltd. S.A - - (5) (5) Trade payables, subsidiaries - - (412) (534) Trade payables, joint ventures and associates - - 30 12 Prepayments from subsidiaries - - - (0) Prepayments from joint ventures and associates - - - (6) Financial power contract with joint ventures and associates - 22 - 35 Transactions with key management personnel Information on transactions with key management personnel is included in "Report on salary and other remuneration to leading personnel in Elkem ASA for the ﬁnancial year 2022" and note 9 Employee beneﬁts in the consolidated ﬁnancial statement. Commitment with related parties Elkem has entered into a investment agreement and committed to cover its proportion of total estimated capital injections in Vianode AS. Elkem's proportion is NOK 534.5 million, whereof NOK 267 million is paid as of 31 December 2022. Information about transactions between related parties Elkem follows internationally accepted principles for transactions between related parties. In general, Elkem seeks to use transaction based methods (comparable uncontrolled price, cost plus and resale price method) in order to set the price for the transaction. The majority of the transactions between related parties relate to products involving: → Raw materials (quartz) from quarries to plants → Metallurgical silicon to Silicones → Electrode paste from Carbon plants to FeSi and Silicon plants → Surplus raw materials between plants → Ad-hoc supplies of ﬁnished goods to Elkem’s internal distributors → Purchase of short and deep-sea transport → Sale of management and technology services → Rent of plant facilities and related services → Purchase of management services for the Silicones segment Elkem’s set-up for sales is based on an agent structure, rather than a distribution network. Elkem also owns companies sourcing key raw materials and other supplies from selected suppliers world-wide. In both activities above, the transaction between the related parties is a delivered service, either sales- service or sourcing-service. Additionally, Elkem has internal help chains that are established to serve several operating units more eﬃciently. Elkem ASA has both non-current receivables and non-current payables to related parties. The group loans are normally interest-bearing and interest is calculated based on interbank rates (for example NIBOR) and a margin. 27. Pledge of assets and guarantees Guarantee commitments Amounts in NOK million 31.12.2022 31.12.2021 Guarantees given on behalf of the operating plants regarding environmental obligations 40 40 Guarantees given on behalf of subsidiaries regarding ﬁnancing 681 576 As part of the factoring agreement parts of Elkem's trade receivables are pledged (see note 18 Trade receivables). The book value of the pledged assets and liability is NOK 50 million (NOK 33 million). 28. Merger Elkem ASA merged with its subsidiary Salten Energigjenvinning AS in 2022. Salten Energigjenvinning AS operates a energy recovery plant in connection to the Salten plant in Norway. Following the purchase of the remaining 50% of the shares giving Elkem ASA a 100% ownership in Salten Energigjenvinning AS, the merger was eﬀective from 21 November 2022 with Elkem ASA as transferee entity. The merged entitys total carrying amounts is based on group book value and the continuity accounting method is applied. For accounting purposes the merger was eﬀective from 1 February 2022. Net assets Amounts in NOK million Note Total Property, plant and equipment Investments in subsidiaries Total non-current assets 13 938 (182) 756 Inventories Trade receivables Other current assets Cash and cash equivalents Total currents assets 1 2 2 38 44 Non-current interest-bearing liabilities Deferred tax liabilities Derivatives Total non-current liabilities (650) (19) (87) (756) Trade payables Other current liabilities Total current liabilities 5 (45) (40) Net assets / equity contributed in the merger 20 4 29. Changes in presentation Presentation of realised hedge ineﬀectiveness is changed from raw materials and energy for production to other gains (losses) related to operating activities in the inomce statement. The impact on comparable ﬁgures in the inomce statement are shown in the tables below. Income statement 2022 2022 Amounts in NOK million before change Impact After change Raw materials and energy for production Other gains (losses) related to operating activities (5 585) 1 115 (597) 597 (6 183) 1 712 Operating proﬁt (loss) 7 543 - 7 543 Income statement 2021 Impact 2021 Amounts in NOK million Financial statement of change Restated Raw materials and energy for production Other gains (losses) related to operating activities (4 268) 129 (124) 124 (4 392) 253 Operating proﬁt (loss) 1 799 - 1 799 Elkem has changed from net to gross presentation of cash ﬂows from loans and deposits against subsidiaries. Cash ﬂows from repayment and new cash deposits are presented as ﬁnancing activities. Comparable ﬁgures are restated. Cash ﬂow statement 2022 Impact 2022 Amounts in NOK million Before change of change After change Increase in loans to subsidiaries - (1 848) (1 848) Re-payment on loans to subsidiaries - 334 334 Increase /decrease in loans to subsidiaries (316) 316 - Cash ﬂow from investing activities (1 891) (1 198) (3 089) New cash deposits to / from subsidiaries - 1 578 1 578 Repayment of cash deposits to / from subsidiaries - (380) (380) Cash ﬂow from ﬁnancing activities (2 367) 1 198 (1 169) Change in cash and cash equivalents 1 056 - 1 056 Cash ﬂow statement 2021 Financial Impact 2021 Amounts in NOK million statement of change Restated Increase in loans to subsidiaries - (291) (291) Re-payment on loans to subsidiaries - 201 201 Increase /decrease in loans to subsidiaries (451) 451 - Cash ﬂow from investing activities (1 075) 361 (714) Repayment of interest-bearing loans and borrowings (1 870) (555) (2 426) New cash deposits to / from subsidiaries - 910 910 Repayment of cash deposits to / from subsidiaries - (715) (715) Cash ﬂow from ﬁnancing activities 2 156 (361) 1 795 Change in cash and cash equivalents 2 461 - 2 461 Declaration by the Board of Directors We conﬁrm that, to the best of our knowledge, the ﬁnancial statements for the period from 1 January to 31 December 2022 have been prepared in accordance with applicable standards and give a true and fair view of the group and the company’s assets, liabilities, ﬁnancial position and results of operations. We conﬁrm that the Board of Directors' report provides a true and fair view of the development and performance of the business and the position of the group and the company, together with a description of the key risks and uncertainty factors that they are facing. The board of directors of Elkem ASA Oslo, 8 March 2023 Zhigang Hao Chair Dag Jakob Opedal Vice chair Olivier Tillette de Clermont-Tonnerre Board member Yougen Ge Board member Jingwan Wu Board member Grace Tang Board member Nathalie Brunelle Board member Marianne Elisabeth Johnsen Board member Terje Andre Hanssen Board member Marianne Færøyvik Board member Thomas Eggan Board member Helge Aasen, CEO, Elkem ASA KPMG AS Sørkedalsveien 6 P.O. Box 7000 Majorstuen N-0306 Oslo Telephone +47 45 40 40 63 Internet www.kpmg.no Enterprise 935 174 627 MVA To the General Meeting of Elkem ASA Independent Auditor’s Report Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Elkem ASA, which comprise: • the financial statements of the parent company Elkem ASA (the Company), which comprise the balance sheet as at 31 December 2022, the income statement and cash flow statement for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and • the consolidated financial statements of Elkem ASA and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at 31 December 2022, the consolidated statement of profit or loss, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion • the financial statements comply with applicable statutory requirements, • the financial statements give a true and fair view of the financial position of the Company as at 31 December 2022, and its financial performance and its cash flows for the year then ended in accordance with Norwegian Accounting Act and accounting standards and practices generally accepted in Norway, and • the consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2022, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU. Our opinion is consistent with our additional report to the Audit Committee. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company and the Group as required by relevant laws and regulations in Norway and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. To the best of our knowledge and belief, no prohibited non-audit services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided. We have been the auditor of the Company for 7 years from the election by the general meeting of the shareholders on 20 April 2016 for the accounting year 2016. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Assessment of impairment indicators of the carrying value of property plant and equipment Refer to Note 3 Accounting estimates and Note 19 Impairment assessments The key audit matter As at 31 December 2022 the Group has reported Property, plant and equipment of NOK 19,520 million across several cash-generating units (CGUs). For Property, plant and equipment management assess, at each reporting date, whether there is a trigger indicating that the carrying amount of an asset may not be recoverable. Due to the potential impact on the Group's consolidated financial statements given the size of the balance and uncertainty related to the future economic environment, and the auditor judgment required when evaluating whether management's assumptions are reasonable and supportable, the assessment of impairment indicators of the carrying value of Property, plant and equipment was considered to be a key audit matter. One CGU within the Silicones segment, Elkem Silicones Guangdong with total carrying value of NOK 187 million was identified to have impairment triggers mainly due to significant increase in raw material prices and limited pass- through opportunities for the specialty part of their sales portfolio. As the recoverable amount exceeded the carrying value, the CGU was assessed not to be impaired. How the matter was addressed in our audit Our audit procedures performed to assess impairment indicators included: • Assessing management's process and results for identification and classification of CGUs to ensure they were appropriate and in accordance with relevant accounting standards; • Obtaining an understanding of management’s process and testing design and implementation of management’s control around the impairment trigger assessment; • Evaluating management’s impairment trigger assessment and assessing any additional potential indicators of impairment through external and internal trigger indicators; When impairment triggers were identified, our procedures for the relevant CGUs included: • Evaluating and challenging the forecasted cash flows including timing of future cash flows applied in the models with reference to historical accuracy and approved business plans; • Evaluating key assumptions such as forecasted sales prices, discount rates, growth rates and EBITDA margin; • Assessing, with the assistance of KPMG valuation specialists, the mathematical and methodological integrity of management's impairment models and the reasonableness of discount rates applied with reference to market data; and • Evaluating the adequacy and appropriateness of the disclosures in the financial statements related to the carrying value of Property, plant and equipment. 2 Other Information The Board of Directors and the Managing Director (management) are responsible for the information in the Board of Directors’ report and the other information accompanying the financial statements. The other information comprises information in the annual report, but does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the information in the Board of Directors’ report nor the other information accompanying the financial statements. In connection with our audit of the financial statements, our responsibility is to read the Board of Directors’ report and the other information accompanying the financial statements. The purpose is to consider if there is material inconsistency between the Board of Directors’ report and the other information accompanying the financial statements and the financial statements or our knowledge obtained in the audit, or whether the Board of Directors’ report and the other information accompanying the financial statements otherwise appear to be materially misstated. We are required to report if there is a material misstatement in the Board of Directors’ report or the other information accompanying the financial statements. We have nothing to report in this regard. Based on our knowledge obtained in the audit, it is our opinion that the Board of Directors’ report • is consistent with the financial statements and • contains the information required by applicable statutory requirements. Our opinion on the Board of Director’s report applies correspondingly to the board of director’s report on Corporate Governance and the ESG report. Responsibilities of Management for the Financial Statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway, and for the preparation and true and fair view of the consolidated financial statements of the Group in accordance with International Financial Reporting Standards as adopted by the EU, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company’s and the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern. The financial statements of the Company use the going concern basis of accounting insofar as it is not likely that the enterprise will cease operations. The consolidated financial statements of the Group use the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error. We design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. 3 • obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's and the Group's internal control. • evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's and the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company and the Group to cease to continue as a going concern. • evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves a true and fair view. • obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the Board of Directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on Other Legal and Regulatory Requirements Report on Compliance with Requirement on European Single Electronic Format (ESEF) Opinion As part of the audit of the financial statements of Elkem ASA we have performed an assurance engagement to obtain reasonable assurance about whether the financial statements included in the annual report, with the file name 549300CVBE06T0SH6T76-2022-12-31-en, have been prepared, in all material respects, in compliance with the requirements of the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) and regulation pursuant to Section 5-5 of the Norwegian Securities Trading Act, which includes requirements related to the preparation of the annual report in XHTML format, and iXBRL tagging of the consolidated financial statements. In our opinion, the financial statements, included in the annual report, have been prepared, in all material respects, in compliance with the ESEF regulation. 4 Management’s Responsibilities Management is responsible for the preparation of the annual report in compliance with the ESEF regulation. This responsibility comprises an adequate process and such internal control as management determines is necessary. Auditor’s Responsibilities Our responsibility, based on audit evidence obtained, is to express an opinion on whether, in all material respects, the financial statements included in the annual report have been prepared in compliance with ESEF. We conduct our work in compliance with the International Standard for Assurance Engagements (ISAE) 3000 – “Assurance engagements other than audits or reviews of historical financial information”. The standard requires us to plan and perform procedures to obtain reasonable assurance about whether the financial statements included in the annual report have been prepared in compliance with the ESEF Regulation. As part of our work, we have performed procedures to obtain an understanding of the Company’s processes for preparing the financial statements in compliance with the ESEF Regulation. We examine whether the financial statements are presented in XHTML-format. We evaluate the completeness and accuracy of the iXBRL tagging of the consolidated financial statements and assess management’s use of judgement. Our procedures include reconciliation of the iXBRL tagged data with the audited financial statements in human-readable format. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Oslo, 17 March 2023 KPMG AS Øyvind Skorgevik State Authorised Public Accountant 5 Appendix - Alternative Performance Measures (APMs) An APM is deﬁned as a ﬁnancial measure of historical or future ﬁnancial performance, ﬁnancial position, or cash ﬂows, other than a ﬁnancial measure deﬁned or speciﬁed in the applicable ﬁnancial reporting framework (IFRS). Elkem uses EBITDA and EBITDA margin to measure operating performance at the group and segment level. In particular, Management regards EBIT and EBITDA as useful performance measures at segment level because income tax, ﬁnance expenses, foreign exchange gains (losses), ﬁnance income and other items are managed on a group basis and are not allocated to each segment. Elkem uses cash ﬂow from operations to measure the segments cash ﬂow performance, this measure is excluding items that are managed on a group level. Elkem uses ROCE, or return on capital employed as measures of the development of the group’s return on capital. Elkem relies on these measures as part of its capital allocation strategy. Elkem uses net interest-bearing debt less non- current interest-bearing assets / EBITDA as leverage ratio for measuring the group's ﬁnancial ﬂexibility and ability for step- change growth and acquisitions. The APMs presented herein are not measurements of performance under IFRS or other generally accepted accounting principles and should not be considered as a substitute for measures of performance in accordance with IFRS. Because companies calculate the APMs presented herein diﬀerently, Elkem’s presentation of these APMs may not be comparable to similarly titled measures used by other companies. Elkem’s ﬁnancial APMs, EBITDA and EBIT → EBITDA is deﬁned as Elkem’s proﬁt (loss) for the period, less income tax (expense) beneﬁt, ﬁnance expenses, foreign exchange gains (losses), ﬁnance income, share of proﬁt from equity accounted ﬁnancial investments, other items (except realised gains and losses from hedge ineﬀectiveness and discontinuation of hedging), impairment losses and amortisation and depreciation. → EBITDA margin is deﬁned as EBITDA divided by total operating income. → EBIT is deﬁned as Elkem’s proﬁt (loss) for the period, less income tax (expense) beneﬁt, ﬁnance expenses, foreign exchange gains (losses), ﬁnance income, share of proﬁt from equity accounted ﬁnancial investments and other items (except realised gains and losses from hedge ineﬀectiveness and discontinuation of hedging). Below is a reconciliation of EBIT and EBITDA. 2022 Amounts in NOK million Silicones Silicon Products Carbon Solutions Other Eliminations Elkem Proﬁt (loss) for the year Income tax (expense) beneﬁt Finance expenses Foreign exchange gains (losses) Finance income Share of proﬁt from equity accounted ﬁnancial investments Other items Realised eﬀects from hedge ineﬀectiveness and discontinuation of hedging EBIT 743 9 630 1 063 (281) (257) 9 642 2 594 313 (85) (67) 17 (2 151) 635 10 898 Impairment losses Amortisation and depreciation EBITDA 2 022 10 224 1 166 (231) (257) 28 1 999 12 925 2021 Amounts in NOK million Silicones Silicon Products Carbon Solutions Other Eliminations Total Proﬁt (loss) for the year Income tax (expense) beneﬁt Finance expenses Foreign exchange gains (losses) Finance income Share of proﬁt from equity accounted ﬁnancial investments Other items Realised eﬀects from hedge ineﬀectiveness and discontinuation of hedging EBIT 2 528 3 154 360 (97) (46) 4 664 1 163 276 (241) (40) (37) (10) 124 5 899 Impairment losses Amortisation and depreciation EBITDA 3 672 3 702 508 (44) (46) 76 1 816 7 791 Elkem’s ﬁnancial APMs, Cash ﬂow from operations → Cash ﬂow from operations is deﬁned as cash ﬂow from operating activities, less income taxes paid, interest payments made, interest payments received, changes in provision, (gains) losses on disposal of subsidiaries, changes in provisions, bills receivable and other, changes in fair value of derivatives, other items (from the statement of proﬁt or loss), realised eﬀects from hedge ineﬀectiveness and discontinuation of hedging and including reinvestments. → Reinvestments generally consist of maintenance capital expenditure to maintain existing activities or that involve investments designed to improve health, safety or the environment. → Strategic investments generally consist of investments which result in capacity increases at Elkem’s existing plants or that involve an investment made to meet demand in a new geographic or product area. Below is a split of the items included in investment in property, plant and equipment and intangible assets. Amounts in NOK million 2022 2021 Reinvestments (1 682) (1 657) Strategic investments (2 797) (1 717) Periodisations 1) 421 245 Investments in property, plant and equipment and intangible assets (4 058) (3 128) 1) Periodisations reﬂects the diﬀerence between payment date and accounting date of the investment. Amounts in NOK million 2022 2021 Cash ﬂow from operating activities 9 314 4 913 Income taxes paid 1 345 423 Interest payments made 319 242 Interest payments received (66) (34) (Gains) losses on disposal of subsidiaries 159 - Changes in provisions, bills receivables and other 539 88 Changes fair value of derivatives 1 139 9 Other items (2 151) (10) Realised eﬀects from hedge ineﬀectiveness and discontinuation of hedging 635 124 Reinvestments (1 682) (1 657) Cash ﬂow from operations 9 551 4 100 Elkem’s ﬁnancial APMs, ROCE → ROCE, Return on capital employed, is deﬁned as EBIT divided by the average capital employed. → Working capital is deﬁned as accounts receivable, inventory, other current assets, accounts payable, current employee beneﬁt obligations and other current liabilities. Accounts receivable are deﬁned as trade receivables less bills receivable. Other current assets are deﬁned as other current assets less current receivables to related parties, current interest-bearing receivables, tax receivables, grants receivable, assets at fair value through proﬁt or loss and accrued interest income. Accounts payable are deﬁned as trade payables less trade payables related to purchase of non-current assets. Other current liabilities are deﬁned as provisions and other current liabilities less current provisions, contingent considerations, contract obligations and liabilities to related parties. → Capital employed consists of working capital as deﬁned above, property, plant and equipment, right- of-use assets, other intangible assets, goodwill, equity accounted investments, grants payable, trade payables and prepayments related to purchase of non-current assets. The deﬁnition was changed in 2022 to include right-of-use assets, goodwill and other intangible assets. Comparable ﬁgures are restated. → Average capital employed is deﬁned as the average of the opening and ending balance of capital employed for the relevant reporting period. Below is a reconciliation of working capital and capital employed, which are used to calculate ROCE: Capital employed and working capital Amounts in NOK million 31.12.2022 31.12.2021 Inventories 10 325 7 716 Trade receivables Bills receivable Accounts receivable 4 248 (1 086) 3 162 4 297 (990) 3 307 Other assets, current Other receivables to related parties interest free Grants receivables Tax receivable Assets at fair value through proﬁt or loss Accrued interest Other current assets included in working capital 1 698 (7) (620) (338) - (0) 733 1 551 (1) (493) (237) (14) (1) 806 Trade payables Trade payables related to purchase of non-current assets Accounts payables included in working capital 5 335 (1 117) 4 219 4 614 (605) 4 008 Employee beneﬁt obligations 994 976 Provisions and other liabilities, current Provisions, contingent considerations and contract obligations Liabilities to related parties Other current liabilities included in working capital 1 545 (144) (30) 1 371 1 657 (454) (32) 1 172 Working capital Property, plant and equipment Right-of-use assets Other intangible assets Goodwill Equity accounted investments Grants payable Trade payables- and prepayments related to purchase of non-current assets Capital employed 7 637 19 520 779 1 385 984 1 039 (16) (1 018) 30 310 5 673 15 722 1 017 1 602 941 241 (15) (581) 24 599 Elkem’s ﬁnancial APMs, Leverage ratio → Net interest-bearing debt that is used to measure leverage ratio is excluding non-current other restricted deposits, receivables from related parties, loans to external parties and accrued interest income. These assets are not easily available to be used to ﬁnance the group's operations. Below a calculation of Elkem's leverage ratio. Leverage ratio Amounts in NOK million 31.12.2022 31.12.2021 Net interest-bearing assets / (liabilities) (2 559) (4 776) Other restricted deposits, non-current (46) (41) Receivables from related parties (1) (1) Loans to external parties (8) (8) Accrued interest income (0) (1) Net interest-bearing assets / (liabilities) less non-current interest-bearing assets (2 615) (4 827) EBITDA 12 925 7 791 Leverage ratio 0,2 0,6 Elkem ASA Visiting address: Drammensveien 169, 0277 Oslo, Norway Postal address: P.O. Box 334 Skøyen, NO-0213 Oslo T: +47 22 45 01 00 F: +47 22 45 01 55 .elkem.no

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