Elkem

Elkem ASA 549300CVBE06T0SH6T76 2021-01-01 2021-12-31 549300CVBE06T0SH6T76 2020-01-01 2020-12-31 549300CVBE06T0SH6T76 2021-12-31 549300CVBE06T0SH6T76 2020-12-31 549300CVBE06T0SH6T76 2019-12-31 549300CVBE06T0SH6T76 2020-01-01 2020-12-31 elk:OtherRetainedEarningsMember 549300CVBE06T0SH6T76 2020-01-01 2020-12-31 ifrs-full:NoncontrollingInterestsMember 549300CVBE06T0SH6T76 2020-01-01 2020-12-31 ifrs-full:RetainedEarningsMember 549300CVBE06T0SH6T76 2020-01-01 2020-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 549300CVBE06T0SH6T76 2020-01-01 2020-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 549300CVBE06T0SH6T76 2020-01-01 2020-12-31 ifrs-full:ReserveOfCashFlowHedgesMember 549300CVBE06T0SH6T76 2020-01-01 2020-12-31 elk:OtherPaidInCapitalMember 549300CVBE06T0SH6T76 2020-01-01 2020-12-31 ifrs-full:AdditionalPaidinCapitalMember 549300CVBE06T0SH6T76 2021-01-01 2021-12-31 elk:OtherRetainedEarningsMember 549300CVBE06T0SH6T76 2021-01-01 2021-12-31 ifrs-full:NoncontrollingInterestsMember 549300CVBE06T0SH6T76 2021-01-01 2021-12-31 ifrs-full:RetainedEarningsMember 549300CVBE06T0SH6T76 2021-01-01 2021-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 549300CVBE06T0SH6T76 2021-01-01 2021-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 549300CVBE06T0SH6T76 2021-01-01 2021-12-31 ifrs-full:ReserveOfCashFlowHedgesMember 549300CVBE06T0SH6T76 2021-01-01 2021-12-31 ifrs-full:IssuedCapitalMember 549300CVBE06T0SH6T76 2021-01-01 2021-12-31 elk:OtherPaidInCapitalMember 549300CVBE06T0SH6T76 2021-01-01 2021-12-31 ifrs-full:AdditionalPaidinCapitalMember 549300CVBE06T0SH6T76 2019-12-31 ifrs-full:IssuedCapitalMember 549300CVBE06T0SH6T76 2019-12-31 elk:OtherPaidInCapitalMember 549300CVBE06T0SH6T76 2019-12-31 ifrs-full:AdditionalPaidinCapitalMember 549300CVBE06T0SH6T76 2019-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 549300CVBE06T0SH6T76 2019-12-31 ifrs-full:ReserveOfCashFlowHedgesMember 549300CVBE06T0SH6T76 2019-12-31 elk:OtherRetainedEarningsMember 549300CVBE06T0SH6T76 2019-12-31 ifrs-full:NoncontrollingInterestsMember 549300CVBE06T0SH6T76 2019-12-31 ifrs-full:RetainedEarningsMember 549300CVBE06T0SH6T76 2019-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 549300CVBE06T0SH6T76 2020-12-31 ifrs-full:IssuedCapitalMember 549300CVBE06T0SH6T76 2020-12-31 elk:OtherPaidInCapitalMember 549300CVBE06T0SH6T76 2020-12-31 ifrs-full:AdditionalPaidinCapitalMember 549300CVBE06T0SH6T76 2020-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 549300CVBE06T0SH6T76 2020-12-31 ifrs-full:ReserveOfCashFlowHedgesMember 549300CVBE06T0SH6T76 2020-12-31 elk:OtherRetainedEarningsMember 549300CVBE06T0SH6T76 2020-12-31 ifrs-full:NoncontrollingInterestsMember 549300CVBE06T0SH6T76 2020-12-31 ifrs-full:RetainedEarningsMember 549300CVBE06T0SH6T76 2020-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 549300CVBE06T0SH6T76 2021-12-31 ifrs-full:IssuedCapitalMember 549300CVBE06T0SH6T76 2021-12-31 elk:OtherPaidInCapitalMember 549300CVBE06T0SH6T76 2021-12-31 ifrs-full:AdditionalPaidinCapitalMember 549300CVBE06T0SH6T76 2021-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 549300CVBE06T0SH6T76 2021-12-31 ifrs-full:ReserveOfCashFlowHedgesMember 549300CVBE06T0SH6T76 2021-12-31 elk:OtherRetainedEarningsMember 549300CVBE06T0SH6T76 2021-12-31 ifrs-full:NoncontrollingInterestsMember 549300CVBE06T0SH6T76 2021-12-31 ifrs-full:RetainedEarningsMember 549300CVBE06T0SH6T76 2021-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember iso4217:NOK iso4217:NOK xbrli:shares A nnual Re por t 202 1 Delivering y our potential W e are E lk em Ad va n c e d m ater i a l solutions sh api ng a be t t e r a n d m o r e su s t ainab l e fu tur e 4 5 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact C onte nt s Elk em history 8 Highlights 10 Lett er from the CEO 14 The business 18 Silicones 20 Silicon Produc ts 22 Carbon Solutions 24 The Elk em shar e 28 Board o f dir ectors ’ r eport 32 Board and managemen t 50 Corporat e gov ernance 52 Statement o f corpora te gov ernance 36 Risk management 68 ESG report 7 4 Intr oduction 76 Envir onment 92 Social 114 Gov ernance 134 Financial statemen ts 150 Consolidated ﬁnancial stat ements 154 Not es to the consolidated ﬁnancial stat ements 160 Financial statemen ts – Elk em AS A 242 Not es t o the ﬁnancial stat ements – Elk em AS A 247 Declaration b y the board o f dir ectors 279 Independent auditor’ s r eport 280 Alternativ e Perf ormance Measur es (APMs ) 286 Silicone s Silicon Products Carbon Solution s E l k e m i n b r i e f W h o w e a r e a n d w h a t w e d o Elk em is one o f the world’ s leading suppliers o f silicon-based advanced material solutions shaping a be tter and mor e sustainable futur e. The company dev elops silicones, silicon pr oducts and carbon solutions by combining natur al raw ma terials, r ene wable ener gy and human ingenuity .Elk em helps its customer scr eate and impr o v e essential innov ations lik e electric mobility , digital communications, health and personal car e as well as smarter and more sustainable cities. With a str ong track r ecor d since 1904, Elk em 's global t eam of mor e than 7 .000 people has a joint commitment to stak eholder s: Delivering y our po tential. In 2021, Elk em obtained a Pla tinum scor e fr om Eco V adis, which rat ed the company among the world' s top 1% on sustainability tr anspar ency , and the company achiev ed an oper ating income of NOK 33. 7 billion. Elk em is listed on the Oslo Stock Ex change (tick er: ELK). Our divisions → 3 3 .7 NOK total operati ng income 23 % EBITD A margin >80 % renew able elec tricity 0 net z ero emissions b y 2 05 0 6 7 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact E l ke m h i s t o r y 1904 1916-1930s 1960s-1970s 1990s- 2000s 1940s-1960s 1970s-1980s 2000s- 2015 2020-Presen t 2015- 2020 Fou n dat io n → Sam Ey de establishes Elk em → Development o f electrome tallurgical pr ocesses Industrial giant → Elkem mer ges with Christiania Spikerv erk → Xinghuo plant is established in 1968 Inno vat ion → Elkem patents the Söderberg electr ode in 1918. → Elkem lis ted on Oslo Børs Expans ion → Producer of aluminium → Partner with Alcoa → Rhöne-Poulenc is established in 1948 Internationa lisation → International e xpantion; steel and ferr oalloys → Acquisition of Union Carbide Growth & specialisation → Rhodia Silicones acquired b y Bluestar in 2007 , renamed Bluestar Silicones International ( BSI) → Elkem acquir ed by Bluestar in 2011 → Merger with BSI in 2015 → Spin-o of Elk em Solar Accelerating t he green tran sition → Elk em Salten 300 GWh ener gy reco very plan t opened → Elk em decision t o build biocarbon pilot plant in Quebec, Canada → Pilot plant for batt ery mat erials opened in Kristiansand, Norwa y and Vianode established → Elk em to test world' s ﬁrst carbon captur e pilot f or smelters in Rana, Norway Portfolio optimisat ion → Sold metal business → Acquisition of Icelandic Alloys → Start-up of Elk em Solar → Elk em acquired b y Orkla and delisted fr om the Oslo Stock Exchange Integration → Becoming a global, integr ated leader in silicon-based adv anced material solutions → Initial public o ering: Re-listing on the Oslo Stock Exchange in 2018 → Integr ated with and acquisition of Xinghuo and Y ongdeng, with succes- ful branch expansion a t Xinghuo incl. planned capacity incr ease 8 9 Annual r eport 2021 Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 1Q-2021 → Elkem announces acquisition o f new plant in L yon, Fr ance for specialised silicones pr oduction → Elk em successfully raised bond ﬁnancing of NOK 1.25 billion in the N orwegian bond mark et 2Q-2021 → Elk em establishes Vianode as a new company and opened the pilo t plant in Kristiansand, N orway dedicated to str ategic gr o wth opportunities f or advanced batt ery mat erials → Strat egic expansion o f NOK 3.8 billion a t Xinghuo silicones plant, China f or incr eased gr owth, str engthened cost position and impr ov ed envir onmental pr oﬁle → Capital increase o f NOK 1.9 billion t o str engthen capacity to inv est in gr owth, opportunities and general corpor ate purposes 3Q-2021 → Opening of Elk em ’ s sta te-of -the-art r esearch and innova tion center , A TRiON, in L yon, Fr ance → Elkem success fully raised bond ﬁnancing of NOK 1.25 billion in the N orwegian bond mark et 4Q-2021 → Elkem ob tained BBB/Stable cr edit ra ting fr om Scope Ratings, r eﬂecting the gr oup 's str ong ﬁnancial pro ﬁle and solid mark et positions. → Elkem in vests NOK 350 million to upgr ade and expand cost compe titive and sustainable pr oduction of silicones at Roussillon, F r ance → Elkem launches global clima te r oadmap to r educe emissions t owar ds net z er o while gr owing supplies to the green transition → Elkem to tes t the w orld’ s ﬁrst carbon cap ture pilo t for smelter s in Rana, Norwa y → Helge Aasen conﬁrmed as new permanen t CEO o f Elkem → Elkem ’ s and Kvit ebjørn Energi’ s NOK 1.2 billion energy r ecov ery plan t opened in Salten, Norw ay by Norwegian prime minist er 10 high light s f r o m 2 0 21 20 21 was t he best ﬁnancial r esult in E lk em ’ s 117 - year h istory . Elk em beneﬁtted from str ong mar k ets in 2 0 21 but the rec ord r esults wer e also based on our strong busi ness model and attrac tive mark et positions . 10 11 Annual report 2021 Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Elkem his tory Highlights L etter from the CEO The business The Elkem shar e Board o f dir ectors ’ report Boar d and management T otal oper ating income Operating income gr owth EBITDA EBITDA mar gin EBIT Pro ﬁt (loss) for the y ear Cash ﬂow fr om operations Reinves tments in % of D& A T otal assets Net inter es t-bearing debt Debt lev erage Equity Equity ratio Return on capital employ ed (ROCE) Earnings per shar e ( ESP ) Number o f employees T otal r ecor dable injury r ate H1+H2 NOx emissions CO 2 emissions ( Scope 1 og 2) Energy consumption 2021 33 717 37% 7 791 23% 5 899 4 664 4 100 91% 41 850 4 827 0.6 19 87 4 47% 30% 7 .49 7 07 4 3 .7 8 932 3.56 6.54 2019 22 668 -10% 2 656 12% 1 189 897 2 140 80% 29 004 5 722 2.2 12 952 45% 7% 1.47 6 370 2.2 6 718 3.02 6.01 2017 20 985 26% 3 188 15% 1 927 1 249 2 337 72% 25 507 8 111 2.5 8 565 34% 13% 2.08 6 113 3 .1 7 109 1. 77 5.28 2016 16 594 1 559 9% 264 -268 627 57% 23 092 9 502 6 .1 5 830 25% 2% ( 0 .52) 6 022 5.3 7 309 1.49 4.40 2018 25 230 20% 5 793 23% 4 522 3 367 4 031 84% 31 129 3 264 0.6 13 722 44% 28% 5 . 74 6 280 2.2 7 068 2.54 6.23 2020 24 691 9% 2 684 11% 957 278 1 522 81% 30 888 8 058 3.0 12 635 41% 5% 0.41 6 856 2.3 6 610 3.29 6.40 Unit NOK million Ratio NOK million Ratio NOK million NOK million NOK million Ratio NOK million NOK million Ratio NOK million Ratio Ratio NOK Number Ratio T onnes Mill tonnes TWh Plants Oces HQ Key ﬁ gu re s * numbers befor e 2018 does not include scope 2. 12 13 Annual report 2021 Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Elkem his tory Highlights L etter from the CEO The business The Elkem shar e Board o f dir ectors ’ report Boar d and management A r ec o r d y ea r w i t h e x traordinarily s trong m ark et s Elkem bene ﬁtted fr om str ong mark ets in 2021. Howe ver , our r ecord results w er e also very much based on str ong cost and marke t positions sy stematically built -up over time thr ough continuous impr o vement and deliberat e stra tegic choices. W e have secur ed predic table access t o low-cost sus tainable input f actors despit e supply chain challenges, and our oper ations ha ve been able to maintain high regularity and quality . W e r emain well positioned f or gr owth with the gr een shift, digitalisation and a rising global middle class. The corona virus pandemic ( Covid-19 ) also continued throughout 2021. As a global company , Elkem has been e xposed to the spread o f the disease and t o evolving governmen t r estrictions in all countries where w e do business. Our primary f ocus has remained on health and sa fe ty , in line with Elkem ’ s zero-harm philosophy . In 2021, Elkem r egistered 342 conﬁrmed cases among our mor e than 7 , 000 employees. Some o f our colleagues ha ve e xperienced serious symptoms, but w e ar e pleased tha t all hav e reco ver ed and ar e doing well. In October , I was ask ed by the board to re turn as permanent CE O of Elk em. I feel both honour ed and privileged to be given the opportunity to work with a div erse and v ery capable t eam t o deliver value f or our customers and other stak eholders globally . I am ex cited and energised b y the task, as we continue to develop Elk em ’ s global team.  Delivering toda y – positioning for tomorr ow Systema tic continuous impr ov ement ov er time by a dedicated or ganisation, combined with an integr ated business model and attr active marke t positions wer e k ey enablers to deliv er recor d-high ﬁnancial perf ormance in 2021. I am impressed b y the team in Elk em and their ability to maintain f ocus on delivering to our customers and driv e str ong perf ormance, while also positioning f or the futur e in line with our long- term strategy .  Global trends to drive gr owth in demand Elkem used 2021 to la y a solid f oundation for pro ﬁtable gr owth and incr eased mark et shar e in the years to come. W e believe that long- term global challenges and megatr ends lik e sustainability , energy demand, urbanisa tion, increased s tandar d of living, population gro wth, and digitalisation will drive gr owth in demand f or advanced ma terials, including silicones, silicon- and carbon solutions. W e Letter fr om the CE O The eco nomi c do wnt urn i n 20 2 0 was f ol lo w ed b y an e xtraord ina r y mark et momen tum in 2 021, ena bli ng E lk em to del iv er r ecor d - hi gh r ev en ues and r esults. Se v eral g lob al tr ends wi ll d riv e dema nd f or Elk em’ s products and hence increase our contributions to a s ustain able fut ur e. Helge Aasen CEO , Elkem A SA 14 15 Annual report 2021 Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Elkem his tory Highlights L etter from the CEO The business The Elkem shar e Boar d of dir ector s’ report Boar d and management coaching t eams in doing twice the work in half the time. W e ar e curren tly w orking on a number o f speciﬁc use-cases, ranging fr om remo te assistance to v alue chain optimisa tion and digital pricing.  Second, Elk em aims to con tribute to shaping a sustainable futur e, and key stak eholders put increasing demands on ESG s tra tegies and performance. An important s tep was made in October when we announced a ne w climate roadmap de tailing how the company plans to r educe emissions in line with the P aris agreemen t of limiting global w arming to w ell below two degr ees. Another new miles tone was r eached in December when we launched our ﬁrs t T CFD report on climate risk s and opportunities. I am proud to s tate that w e have r eceiv ed an A- r ating fr om CDP in 2021, ranking among the world’ s leading companies on climate transpar enc y and action.  Third, or ganisa tional design and developmen t of our people ar e fundamen tal in delivering on the business s trat egy . It is also key in developing a cultur e to le verage critical competencies, div ersity , core values, and behaviour . Our curr ent f ocus is on identifying future compe tence and capacity needs and continuing to dev elop corresponding gap- closing stra tegies.  Green t echnologies and partnerships Elkem is ac tively using its competence to develop ne w sustainable business ar eas. The ongoing projec ts demonstra te our capability to drive the dev elopment of ne w gr een technologies.  Battery M aterials is a unique gr owth opportunity based on gr aphite and silicon. In April, Elk em successfully commissioned the industrial pilot f or battery materials in Kristiansand, Norw ay , starting industrial-scale pilot pr oduction and pr oduct v eriﬁcation with future cus tomers. In Ma y , we established Vianode as a new company and brand dedicated to str ategic gr o wth opportunities in advanced batt ery mat erials. An inves tment decision f or a lar ge-scale battery materials plant is being ev aluated.  Biocarbon replacing f ossil carbon is the main contributor to f ossil CO 2 reductions tow ar ds 2030. W e ar e starting a pilo t f acility in Canada in February in 2022 t o t est a new technology to pr oduce bicarbon pellets fr om wood was te materials. Elk em curr ently uses mor e than 20 percen t biocarbon in our pr oduction and in October , we announced a new goal of 50 percen t biocarbon by 2030 .  Energy reco very r epr esents cir cular solutions for low er emissions and higher eciency . With the opening o f the ne w ener gy r eco very plant at Salten in the northern part o f N orwa y in Nov ember , Elkem ’ s total ener gy r ecov ery capacity is no w appro xima tely 900 G Wh per y ear , repr esenting about 15% o f our to tal energy consumption globally .  I would lik e to thank all Elkem colleagues and stak eholders for their r emarkable e orts and support thr oughout a r ecor d year . W e ha ve deliver ed str ong r esults while also positioning for the future. And we have all the ingr edients in place t o make 2022 ano ther successful year for Elk em while r emaining mindful o f a very dynamic and unpr edictable ext ernal envir onment.  This mindset goes hand in hand with Elk em ’ s mission: T o contribute to a sus tainable futur e by pr oviding advanced silicon, silicones, and carbon solutions, adding value to our stak eholders. Le t’ s do it! are w ell-positioned to beneﬁt and to be part of the solution t o combat climat e change.  Operational e x cellence and increased specialisation Elk em has a vision to pr ovide advanced material solutions shaping the futur e. Our corporat e stra tegy is to gr ow and strengthen our competitive positions thr ough continuously impro ving and dev eloping new pr oducts and remo ving “was te ” in the entir e value chain.  Operational e x cellence and continued produc tivity impr o vement r emain important k eys to pr o ﬁtable gr owth. E ven bef or e the impact of Co vid-19 , we launched a new produc tivity impr o vement pr ogr amme t o enhance the compan y' s cost position and str eamline the or ganisa tion. As announced in 2019 , we had identiﬁed a po tential o f mor e than NOK 350 million in annual impr o vements. At the end o f 2021, the pr ogr amme has r ealised sever al value chain impr o vements r educing run-rat e cost lev el by NOK 395 million.  Our eorts to incr ease specialisation reached a milestone in 2021 with mor e than one million electrical vehicles ( EV s) fea turing our pr oven battery thermal managemen t solutions. The global demand f or EV s is growing fas t, and some analysts no w expect EV s to accoun t f or around a thir d o f ne w car sales by 2030 . China is the w orld’ s lar gest single EV mark et, o ering inter esting opportunities to r ealise Elk em ’ s specialisation str ategy .  Strengthening all our business divisions The stra tegy o f gr owing and str engthening our competitive position is further ampliﬁed in all our business divisions.  Our Silicones division made important steps in 2021 to incr ease pr oﬁtable gr o wth and gro w mark et shar es along with impro ving pr oﬁtability thr ough sys tematic impro vemen t work and specialisation. Our new manufacturing facility in F rance will pr oduce high-quality or gano- functional silicones, and we also plan to upgrade and debo ttleneck our silicone upstr eam plant in Roussillon, F r ance. Construction o f a ne w pr oduction work shop for silicone ﬂuids at the Xinghuo plant in China started in 2021 and we appr o ved a NOK 3.8 billion expansion o f this plan t – repr esenting a step-change for Elk em as a leading supplier in the world’ s fas test -gro wing silicones mark et.  The Silicon Produc ts division has solid mark et positions globally and w as able t o capitalise on the s trong mark et momentum in 2021 while running at high capacity . W e intend to continue f ocusing on impr ov ed pr oﬁtability through s yst ematic impr ov ement work, while selectively pursuing gr owth, jus t lik e we did in 2021 when we ent er ed agreemen ts to study carbon captur e opportunities at our N orwegian smelter s, when we decided to inves t in new infr astructur e to incr ease produc tivity and r educe emissions a t Elkem Rana, and when we opened our new ener gy reco very plant in No vember and positioned Elkem Salt en as one of the world’ s most energy -e ective silicon plan ts.  Our Carbon Solutions division r emains a str ong and highly pr o ﬁtable mark et leader in its segments. Mark et conditions in 2021 w ere good and we maintained str ong pr o ﬁtability . Focus on oper ational e xcellence and selec tive gro wth will be k ey measur es t o maintain our str ong position in the futur e.  Strategic initia tives  Our ability to meet futur e ambitions is supported by thr ee corporat e initiatives in the ﬁelds o f digital tr ansf ormation, ESG, and people.  First, we belie ve that digital technologies can be disruptive, and w e aim t o tak e a leading position in our industry . Our Digital Oce was established in 2020 to driv e a digital transf ormation acr oss the company , We ha ve tr ained managers and leaders on managing digital tr ansf ormation, use-case team members on the methods o f delivering valuable solutions using agile and digital and analytics, and upcoming agile coaches on Helge Aasen, CEO , Elkem A SA 16 17 Annual report 2021 Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Elkem his tory Highlights L etter from the CEO The business The Elkem shar e Boar d of dir ector s’ report Boar d and management → Impro ve and stabilise pro ﬁtability thr ough operational e x cellence and specialisation str ategy . → Strong f ocus on gr owth, particularly in Asia Silicone s New i nitia tives Battery materials (Vianode ) → Attr activ e gro wth opportunity based on sustainably pr oduced synthetic gr aphite and silicon Biocarbon → Po tential br eakthr ough technology f or carbon neutral metal pr oduction Energy reco very → Substantial potential f or increased ener gy ecienc y and power pr oduction → Maintain good pr oﬁtability through oper ational e x cel - lence and str ong mark et positions → Selectively pursue gr owth initiatives Carbon Solution s → Impro ve pr oductivity through oper ational e x cel- lence and well managed portfolio o f specialties . → Selectively pursue gr owth initiatives Silicon Products People & organis ation En vi ron mental, social & go vernance ( ESG ) Digit alisation El k em’ s s tra teg ic dir ection G ro w th th r ou gh o p e ratio nal e x cellence and incr ease d sp ecialisat ion Wh y w e are here El k em ’ s mission is t o pr o vi de adv anced m at eria l solut ions s hapi ng a better a nd mor e sustai nabl e futur e, adding val ue to our stakeholders global ly . Our strat eg y is t o driv e g ro wth throu gh opera ti onal e x cellence and incr eased specialisatio n. Our v al ues : In v olv ement, respect, prec isi on and co nti nuo us im prove m ent . Divisions i n El k em AS A 18 19 Annual report 2021 Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Silicone s F u l ly i nte g r a te d silic on e s m anufa c t urer End mark ets → Paper & ﬁlm r elease → Automotiv e → Silicone rubber → Chemical formulat ors → Personal car e → T extile → Healthcar e → Construction 14 plants China Xinghuo, Shanghai, Zhongshan, Y ongdeng Fr ance Roussillon, Saint -Fons, Salaise-sur Sanne Germany Lübeck Italy Car onno Spain Santa Perpe tua USA Y ork Brazil Join ville India Pune K or ea Gunsan Elkem is a fully integr ated pr oducer fr om silicon metal to upstr eam silo xane and downs tr eam silicone specialties. Silicones can be manufactur ed int o many f orms including solids, liquids, semi-viscous pastes, foams, oils and rubber . They are ﬂe xible and can r esist moistur e, chemicals, heat, cold and ultraviole t radiation. Due t o its wide range o f applica tion ar eas, silicones ar e used in a large number o f pr oducts and industries, including manufactur ed goods, construc tion materials, electr onics and consumer items. Silicones can be encounter ed ev ery da y in a number o f areas, including in per sonal car e pr oducts, in cars, in the gel on a wound dr essing and sealing and insulating mat erials in electrical equipment. The main gro wth drivers ar e the green tr ansition and the rise of middle class worldwide 1 7. 4 NOK billion 52 % of group sales 2021 17 429 3 672 21% 4 395 409 2020 12 800 1 326 10% 4 224 372 2019 11 319 1 486 13% 3 718 336 K ey ﬁgur es T otal operating income (in NOK million) EBITDA (in NOK million) EBITDA mar gin (in %) Number o f employ ees Sales volume (thousands mt) 2018 13 130 3 629 28% 3 677 314 2017 10 165 1 590 16% 3 620 300 Share of group sales from ext ernal customers ex. Other 20 21 Annual report 2021 Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management End mark ets → Silicones → Automotiv e → Solar & wind turbines → Construction/industr al equipment → Electr onics → Specialty st eel → Refr actories → Oil & gas 10 plants Norwa y Salten, Thamshavn, Rana, Bremanger , Bjølvef ossen, Iceland Grundertangi China Shizuishan India Nagpur Paragua y Limpio Canada Chicoutimi Elkem is a leading pr oducer of silicon-based mat erials, including silicon, f err osilicon, specialty allo ys based on ferr osilicon and Micr osilica® . Silicon is used in silicones, aluminium alloys and polysilicon, and has a number of fa vour able chemical and physical pr operties, including sem-conductivity , making it highly v ersitile for numer ous industrial and electr onic applications. F errosilicon is mainly used in the steel industry to r emov e o xygen fr om the s teel and as an alloying element to enhance the quality , including str ength and elasticity . Foundry alloy s are used in the pr oduction o f ir on castings to impr ov e their pr operties such as tensile str ength, ductility and impact pr operties. Micr osilica is a process pr oduct of the silicon and ferr osilicon pr oduction and is used in construction, r efr actory , oilﬁeld and polymer industries. 14 . 8 NOK billion 42 % of group sales Silicon Products G lobal producer o f silico n, f e rr osilico n, f ound r y allo y s and micros ilica 2021 14 783 3 702 25% 1 904 502 2020 10 804 1 221 11% 1 890 479 2019 10 151 994 10% 1 889 445 K ey ﬁgur es T otal operating income (in NOK million) EBITDA (in NOK million) EBITDA mar gin (in %) Number o f employ ees Sales volume (thousands mt) 2018 10 822 1 990 18% 1 875 466 2017 9 679 1 428 15% 1 763 477 Share of group sales from ext ernal customers ex. Other 22 23 Annual report 2021 Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements GHG assurance Con tact Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Carbon Solution s Leadi ng pr oducer o f elec t r ode past e and spe cialt y product s End mark ets → Ferr oalloy s → Silicon → Aluminium → Iron f oundries 6 plants Norwa y Kris tiansand Brazil Serra ( Carboindustrial and Carboderivados) South Africa Emalahlen China Shizuishan Malaysia Bintulu Elkem is a leading pr oducer of specialty carbon pr oducts for v arious metallur gical smelting pr ocesses and primary aluminium industries and the only pr oducer with a global reach. Carbon produc ts ar e used in electric ar c furnaces and b y the aluminium and iron f oundries industries. Søderber g electr ode paste is the most common electr ode s yst em used in submerged ar c furnaces to ensur e that the raw material r eaches the r equir ed process temper atur es. The Søderberg elec tr ode t echnology has mor e than 100 y ears of successful technology leadership. The technology and carbon produc ts ar e used by pr oducers of silicon, f erro- silicon, ferr ochr omium, f err onick el, ferr omanganese, silicomanganese, calcium carbide and copper and platinum matte. 2. 2 NOK billion 6% of group sales 2021 2 176 508 23% 395 294 2020 1 870 438 23% 394 256 2019 1 838 312 17% 420 257 K ey ﬁgur es T otal operating income (in NOK million) EBITDA (in NOK million) EBITDA mar gin (in %) Number o f employ ees Sales volume (thousands mt) 2018 1 895 335 18% 422 289 2017 1 586 277 17% 435 284 Share of group sales from ext ernal customers ex. Other 24 25 Annual report 2021 Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 26 27 Annual report 2021 Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management The E l k e m Shar e El k em aims t o be an a ttractiv e in v estment f or shar eholders, deliveri ng competitiv e ret urn thr ough sustained gr o w th and a consisten t dividend pol ic y . → Elkem ASA is a publi c limited com pany . T he share is lis ted on the Os lo Sto ck Exchan ge and the t icker code i s ELK → Elkem ASA was re-listed o n Oslo S tock E xchange on 22 March 20 18 → Elkem ASA has one s hare clas s with 63 9,441,3 78 ordinar y sha res, eac h with a no minal value of NOK 5 → All sh ares have equal rig hts and are fre ely transferable. Each share grants the hol der one v ot e and there are no structures granti ng dispr opor tiona te voti ng r igh ts → On 26 Ap ril 2021, Elkem ASA c ompleted a p rivate place ment rais ing approximately NO K 1,89 1 million through all ocation of 56 ,45 6,034 new share s at a pric e of NOK 33. 50 per n ew share → Blue star Elkem Intern ational Co. Ltd. SA , own ed by China National Bluestar is the majority shareholder with 5 2.9% → T e n analyst s are covering Elkem, providi ng market updates a nd est imates for Elkem’ s ﬁnancial development Elk em’ s ﬁnancial targets NOK 19 . 1 bn El k em’ s marke t cap as a t 31 December 20 21 NOK 3 . 0 0 dividend per shar e f or 2 021 1 2 , 444 shareholders 6 3 9. 4 million s hares Dividend Elkem in tends to pay dividends r eﬂecting the underlying earnings and cash ﬂo w and will tar get a dividend pa y- out ratio o f 30-50% of the gr oup ’ s proﬁt for the year . The proposed dividend f or 2021, subject to appr ov al fr om the annual general meeting in 2022, is NOK 3. 00 per share, r epresenting 41% of the gr oup ’ s proﬁt for the year . Dividend ov erview Geographical distribution o f shareholder s 2021 As at 31 December 2021 Elk em had 12.444 shar eholders Ye a r 2021 2020 2019 2018 T arget metric Reven ue grow th EB ITDA ma rgin (% ) Re inves tme nt s % of D&A Debt leverage rat io Dividend target Earnings per share 7. 4 9 0. 41 1 .47 5 . 74 T argets 5  10 % 15  20 % 80  9 0% 1.0 x - 2.0 x 30  50 % of gro up pr oﬁt Dividend per share 3.0 0 0.1 5 0.60 2.60 Comments Gr ow fas ter t han m arke t thro ugh s pe cia lis atio n, organic growth and acquisitions T arget av erage margin through the economic cycle Ensure appropriate and disciplined capital allocation following long- term plans Ens ure e ci ent a nd ro bus t ca pit al s tru ctur e Stab le and predictable over time Date proposed 08.02 . 2022 09.02. 202 1 12.0 2. 2020 11.02 . 2019 Date app roved 27 .0 4. 2022 27 .0 4. 2021 08.0 5. 2020 30.0 4. 2019 E x date 28.0 4. 2022 28.0 4. 2021 11.02 . 2020 02.0 5. 2019 31.9% 52.9% 5.6% 4.9% 2.4% 2.3% China Ireland United States United Kingdom Norway Other 28 29 Annual r eport 2021 Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Highest Lowe st V olume T u rnove r 2018 45 .00 21 .07 342 1 07 122 10 50 6 950 75 3 2019 36. 12 20 .1 8 369 5 70 34 6 9 43 8 91 0 7 7 4 2020 29.6 0 11. 20 303 7 29 61 9 6 114 48 7 641 2021 38. 50 25.68 438 7 49 361 14 103 0 01 2 72 The 20 largest shar eholders as at 31 December 2021 Share price de velopment 2018 2020 2021 2019 50 40 30 20 10 0 * The data is pro vided thr ough analysis of beneﬁcial o wnership and fund manager inf ormation pro vided in replies to disclosure o f o wnership notices issued to all custodians on the Elk em share r egister . Whilst e very reasonable e ort is made to verify all data, the accur acy of the analysis cannot be guar anteed. F or a lis t of the lar gest share-holders as at 31 December 2021, from the Norwegian Cen tral Securities Depositary (VPS ) , see Not e 20 in Not es to the ﬁnancial statemen ts Elk em A SA. ** Elkem ASA is owned 52,9% b y Blues tar Elkem In ternational Co. L td S.A., L uxembour g, which is under the con trol o f China National Bluestar ( group) Co. L td ( Bluestar ), a compan y r egister ed and domiciled in China Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Name China National Bluestar Folk etrygdfondet Alfred Berg Kapitalforvaltning Storebrand Asset Managme nt Mu st Inve st A S Nordea F under Arctic Fund Management V anguard Pareto Fo nder DNB Fo nd er Elke m A SA First Fondene KLP Kapitalforvaltning AS Eika Kapitalforvaltning Handelsbanken Fonder BlackRock Forsvarets Personellser vice Alfred Berg F onder Deka I nv estments Allianz Global Inv estors Holding 338 338 536 29 35 3 185 22 413 8 83 13 24 9 859 13 200 000 10 26 9 357 9 282 9 50 8 60 4 039 8 06 8 100 7 4 53 94 4 6 403 7 7 2 5 49 1 4 91 5 382 1 06 5 33 5 725 5 027 02 9 4 53 0 238 2 43 6 600 2 35 7 35 5 2 35 0 978 2 18 1 78 1 S take 52. 91% 4.59% 3 .51 % 2 .07% 2.0 6% 1.6 1% 1 .41% 1.35% 1. 26 % 1 .1 7 % 1.00% 0.86 % 0. 8 4% 0.83 % 0.79 % 0.71% 0.3 8% 0.37 % 0.37 % 0. 3 4% Ch ang e fro m 2020 % → 0% ↑ 27 % ↑ 5 4% ↑ 4% ↑ 224% ↑ 68 % ↑ 21% ↑ 3 4% ↑ 95 % ↓ -2 5%  New ↑ 67 % ↑ 9% ↓ -39 % ↑ 85 % ↑ 21% ↑ 11 4%  New ↑ 358 % ↑ 8% Citizenship China No r way No r way No r way No r way Finland No r way USA No r way No r way No r way No r way No r way No r way Swe den Unite d State s No r way Swe den Germany Germany 30 31 Annual r eport 2021 Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Elkem 's mission is to pr ovide adv anced material solutions shaping a better and mor e sustainable futur e, adding value to stak eholder s globally . The board of dir ector s believe that sa fe and en vir onmentally responsible pr oduction is a prer equisite for v alue crea tion. With a highly compe tent or ganisation, well- inves ted assets, attr active mark et positions and ongoing gro wth initiatives, Elk em is committed to crea ting value f or all s tak eholders. Elkem concluded 2021 with the bes t ﬁnancial result in its 117 -year long history . The ﬁnancial results w er e positively impacted b y incr eased sales volumes, attr active sales prices and s tr ong business performance. Sales v olume incr eased y ear -on- year (Y o Y) f or the second year in a r ow due to good produc tion volume and str ong demand. Sales prices increased to his toric high lev els in the second half o f 2021 due t o supply and demand imbalance and higher raw ma terial costs. Silicon supply fr om China w as negatively impacted b y po wer curtailment limiting silicon produc tion. In addition, ener gy prices incr eased signiﬁcantly in China and E ur ope, r esulting in higher raw ma terial costs. The solid business perf ormance was supported b y dedica ted e orts fr om emplo yees worldwide, ensuring opera tional impr ovemen ts, increased specialisa tion and attr active inv estments, further s tr engthening Elk em’ s competitiveness. The board o f dir ectors is sa tisﬁed with Elk em ’ s business performance supported b y a pr ofessional or ganisation, ecient v alue chains and str ong mark et positions. The board o f dir ectors belie ves that the long- term underlying gro wth pr ospects r emain solid f or Elk em and is of the opinion tha t Elk em has a solid asset base and ﬁnancial capability to support further growth, crea ting value f or all o f the gr oup ’ s stak eholder s. Elkem ’ s consolidated operating income incr eased by 37% Y o Y to NOK 33, 717 million. The EBITDA mar gin was 23% compar ed to 11% in 2020 . The lev erage r atio was 0 . 6x as at 31 December 2021. This is low er than the lever age range tar get o f 1.0x to 2. 0x o ver the cycle and is a direc t consequence of the str ong mark et conditions. Elkem ’ s policy is t o pay a 30-50% dividend of pr o ﬁt for the year . The board o f dir ectors has pr oposed to the annual general meeting a dividend pa yment of NOK 3. 00 per shar e for 2021, which w ould repr esent 41 % of pr oﬁt f or the year . The boar d of dir ect ors ’ view is tha t the pr oposed dividend is appr opriat e based on the curr ent ﬁnancial position, mark et outlook and inves tment plans. Board of d irectors’ report Elk em concluded 20 21 with the best ﬁnancial r esult in i ts 117 -y ea r long hist or y . The underlyi ng demand f or E lk em ’ s products has been strong t hro ughout 2 0 21. The price le v el o f El k em 's k ey products has been at a hi gh le v el, at t he same time as the compa n y has beneﬁt ed fro m its strong busi ness model and attractiv e mar k et posit ion. Operating income NOK million EBITDA 1 Nok million Lev erage 2 ratio Be s t ﬁn ancial res ult in E lk e m’ s 117 - ye a r h i s to r y 1 EBITDA commented under APM section 2 Le verage r atio commented under APM section 8,00 8 000 40 000 7, 0 0 7 000 35 000 6,00 6 000 30 000 5,00 5 000 25 000 4,00 4 000 20 000 3,00 3 000 15 000 2,00 2 000 10 000 1,00 1 000 5 000 2016 2016 2016 2017 2017 2017 2018 2018 2018 2019 2019 2019 2020 2020 2020 2021 2021 2021 - 0% 5% 10% 15% 20% 0 0 32 33 Annual report 2021 Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management T o remain a saf e workplace is still the number one priority at Elk em. A comprehensiv e understanding o f health and saf ety risk s has the highest priority in the company , and the understanding is f ounded on critical process con tr ol combined with a cultur e of pr ecision and continuous impr ov ement. ESG (En vir onmental, Social and Governance ) continues to be essential for Elk em, enabling envir onmentally friendly and socially r esponsible pr oduction o f advanced mat erials. T o combat climate change, Elk em has launched a global climate r oadmap to r educe the pr oduct carbon foo tprint by 39% by 2031 and achiev e carbon-neutral produc tion globally b y 2050 . Social and go vernance principles are adv ocated to support a div erse workfor ce built on respect and inclusive w ork culture and pro tection o f human rights thr oughout the v alue chains. Elk em continued the f ocus on training in anti- corruption and compliance during 2021. K ey business dev elopments 2021 Rev enue gro wth and specialisation supported by step change investmen ts Elkem has the ambition to gr ow r e venue b y 5-10% per year thr ough the c ycle supported b y or ganic gr owth initiatives and bolt -on acquisitions. → In February 2021, Elk em signed an agr eement to acquire a br and-new plant near L yon in Fr ance, custom-designed for pr oducing highly specialised organo- functional silicones ( OFS ) . The acquisition underpins Elk em’ s growth and specialisation stra tegy . → In April 2021, Elkem success fully commissioned its industrial pilot f or battery materials in Kristiansand, Norwa y , starting industrial-scale pilot pr oduction. In May 2021, as the next st ep t owar ds lar ge-scale battery materials pr oduction, Elk em es tablished Vianode as a new company and brand dedica ted to developing and pr oducing sustainable and high- quality activ e anode materials to mee t the demand from the high gr owth in elec tric vehicles ( EV). A possible inves tment decision f or a fast - track plan t construction is e xpected in the ﬁrst half o f 2022. → In April 2021, the boar d o f dir ectors appro ved a NOK 3.8 billion s trat egic expansion o f the Xinghuo Silicones plant in China to str engthen Elk em ’ s position in the fas test -gr owing silicones mark et and support further downs tr eam specialisation. In addition, the pr oject will signiﬁcan tly impr o ve Elkem ’ s overall cost position and en vir onmental pro ﬁle based on sta te-of -the-art t echnology . The projec t will incr ease the plan t’ s pr oduction capacity by mor e than 50% f or high-quality upstr eam produc ts, r educe the ener gy consumption b y 57%, reduce the use o f raw ma terials by 11% and give a 30% r eduction o f solid waste. Impr o ved envir onmental perf ormance was one o f the k ey decision paramet ers for Elk em. → In July 2021, Elkem Silicones announced the opening of its new Resear ch and Inno vation Cen tr e in Saint- Fons in L yon’ s “Chemical V alley” , doubling its space dedicated to r esear ch and innov ation, with particular attention giv en t o collabora tive work and emplo yee saf ety . Laboratories, oces and collabor ativ e spaces branch out fr om a central a trium, the heart of the f acility housing more than 120 dedicat ed R&D pro f essionals. → In October 2021, the boar d appro ved an in vestment in Elkem ’ s silicones plant in Roussillon, Fr ance, amounting to NOK 350 million. This pr oject will expand capacity upstr eam and further enable and str engthen gr owth in Elk em ’ s speciality business in the EMEA & the Americas. The pr oject will be ﬁnalised in the thir d quarter o f 2023. This will also impro ve Elk em ’ s cos t position and envir onmental performance thr ough debottlenecking, be tter energy ecienc y and upgr aded wast ewa ter trea tment. → In Nov ember 2021, Prime Minister Jonas Gahr Stør e opened the ne w ener gy r eco very plant at Elkem Salt en in northern Norwa y . The new ener gy reco very plant will r ecov er appr o ximately 30% of the electrical ener gy used a t Elk em Salten, equal t o the power consumption o f about 15, 000 Norwegian households. The installation positions Elk em Salten as one of the most ener gy-e ectiv e silicon plants in the w orld, in line with the ambitions o f Elk em ’ s climate r oadmap tow ar ds net- zero b y 2050 , further str engthening its competitiveness. → In addition t o the abo ve milest ones, sever al other value-cr eating activities ha ve been accomplished: → increasing the capacity for high purity silicone elastomers, including a ne w site in the US → increased speciality silicones capacity in China → upgrading o f a silicon furnace at the Rana plant in Norwa y giving mor e capacity and r educed NOx emissions → installation o f gas cleaning sys tem at the Carbon Solutions’ plan t in South A frica, and → Biocarbon’ s industrial veriﬁcation of r enew able biocarbon supports Elk em’ s long-term str ategy of contributing to climate-neutr al metal pr oduction. Strategic initia tives to speed up v alue cr eation Sever al initiativ es t o speed up gro wth and cr eate shareholder and stakeholder value ar e ongoing, showing good progr ess and prospects. → Elkem ’ s strategic Digital Oce and Biocarbon initiatives ha ve made pr ogr ess during the y ear . Digital Oce supports a digital tr ansf ormation across the compan y curr ently working on se veral speciﬁc user -cases ranging fr om r emote assis tance to value chain op timisation and digital pricing. Elkem decided to in vest in a ne w biomass pilot plant in Canada in September 2020 . The pilo t will verify rene wable biomass technology and is expec ted to start pr oduction in the ﬁr st half of 2022. Pr oduction of biomass pellets fr om wood w aste mat erials replacing f ossil carbon as a material in silicon produc tion is expec ted to be a k ey contributor to Elkem ’ s CO2 reductions tow ards 2030 . → Elkem success fully raised new bond loans in February and August 2021, totalling NOK 2,500 million f or r eﬁnancing debt ma turities in December 2021. The bond tr ansactions w ere signiﬁcan tly over subscribed. In December 2021, Elk em obtained a BBB/Stable issuer rating fr om Scope Ratings. The rating r e ﬂects Elk em ’ s str ong ﬁnancial pr oﬁle. → In April 2021, Elk em raised NOK 1,891 million o f ne w equity to str engthen the gr owth pla tform further . The subscription price was NOK 33.50 per shar e and determined thr ough book building after the close of trading in Oslo on 26 April 2021. → Elkem has ﬁnalised the pr oductivity impr ovemen t progr amme to r educe personnel costs b y mor e than NOK 350 million per year . The implementation started in the ﬁr st quarter 2020 and w as completed in December 2021. The pr ogramme has r ealised sever al value chain impr o vements in par allel with reducing run-r ate manning cos t lev el by NOK 395 million at the end of 2021. ESG and climate roadmap is essen tial in Elk em People ar e at the cor e o f Elk em, alongside sa fe and sustainable opera tions conducted r esponsibly thr ough operational e x cellence. Elk em shall be an attr active employer and a t the f or efr ont o f en vir onmentally friendly operations within the industry . → In October 2021, Elk em launched a climate r oadmap detailing how the company plans to dev elop its business in line with the aim o f the P aris agr eement. The company aims to r educe its total fossil CO2 emissions by 28% fr om 2020-31 and gr ow the supply o f pr oducts t o gr een tr ansition, r esulting in a 39% impro vemen t of its pr oduct carbon foo tprint in the same period. Elk em’ s long-term goal is net - z er o emissions by 2050. → In December 2021, Elkem launched its ﬁrs t T CFD report (T ask For ce on Climat e-rela ted Financial Disclosures) as an initia tive to addr ess the pot ential ﬁnancial impact of climat e risks and opportunities. The climate risk implementa tion was a k ey input to the climate r oadmap tow ar ds 2031 and 2050. → Elk em receiv ed an A - scor e on climate change and a B- score on w ater security fr om CDP , demonstr ating Elkem ’ s work on climate and sustainability . About Elk em Established in 1904, Elk em is one of the world’ s leading companies in the en vironmen tally r esponsible manufactur e o f metals and advanced ma terials. Elk em is a publicly list ed company on the Oslo St ock Exchange (tick er code: ELK) and is headquarter ed in Oslo , Norwa y . The company has more than 7 ,000 emplo yees, 30 produc tion sites and an e xtensive ne twork of sales oces worldwide. In 2021 Elk em had a to tal opera ting income of NOK 33. 7 billion. T o learn more, please visit www .elk em. com. Elk em is a fully integr ated pr oducer with oper ations throughout the silicon v alue chain fr om quartz to silicon and downstr eam silicone specialities as well as speciality ferr osilicon allo ys and carbon materials. Elk em has organised its oper ations int o thr ee business divisions: Silicones, a fully integr ated silicones pr oducer; Silicon Produc ts, a pr ovider of silicon, f err osilicon, f oundry alloys, Micr osilica and r elat ed speciality pr oducts; and Carbon Solutions, a supplier of electr ode past e and speciality pr oducts to the ferr oallo ys, silicon and aluminium industries. The Silicones division is one of the world' s leading fully integr ated silicone companies, with mor e than 4,500 employees and a global f ootprint. The division has R&D centr es in Eur ope and Asia, sales oces w orldwide and plants in China, F rance, Germany , Italy , Spain, US A, Brazil, India, and South K or ea. The Silicones division is Elk em’ s largest business ar ea and r epr esents 52% of the total oper ating income fr om external cus tomers. The mark et f or Silicones ’ pr oducts is lar ge and gr owing. Demand is driven by a number o f mega tr ends, such as 34 35 Annual report 2021 Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management the green tr ansition, digitalisation and ener gy demand gro wth. Elk em Silicones serves div erse mark ets, fr om electric cars to construc tion, via electr onics, aer ospace, healthcare, per sonal car e, packaging, airbag coa ting and more. Elk em has a comprehensive range o f silicone produc ts (> 5000 stock k eeping units) with leading marke t positions engineering elastomer s f or EV’ s, coatings for pack aging, hygiene and bak ery paper and airbag coatings. The Silicon Products division is a world-leading supplier of silicon, ferr osilicon, foundry alloy s, Micr osilica, and other speciality pr oducts. The Silicon Pr oducts division repr esents appro ximately 42% of to tal operating income from e xternal cus tomers. Silicon Pr oducts has about 1,900 employees and plan ts in Norwa y , Iceland, Canada, England, India, Paragua y and China, and quartz mines in Norwa y and Spain. Silicon has a number of fav ourable chemical and physical pr operties, including semi-conductivity , making it highly v ersatile f or numer ous industrial and electronic applications. As such, it has a wide range o f applications, predominan tly as an allo ying material f or aluminium and in the pr oduction o f silicones and polysilicon f or electr onics and solar cells. Ferr osilicon and foundry alloys ar e used in the st eel industry and ir on f oundry industry , respectively . The Silicon Pr oducts division serves customer s in a number of end mark ets, such as chemicals, aluminium, electr onics, automotiv e, speciality steel segments, solar , construction, r efr actories, and oil/gas. China has been the lar gest gr o wth mark et f or silicon over the last year s and is expec ted to r emain an important gr owth engine for global demand. The Carbon Solutions division is the w orld-leading supplier of electr ode past e, prebak ed electrodes and speciality pr oducts to the ferr oallo ys, silicon, and aluminium industries. The division has appr o ximately 400 employees and plan ts in Norwa y , South Africa, Brazil, Mala ysia, and China. The Carbon Solutions division accounts f or ar ound 6% of Elk em ’ s oper ating income fr om e xternal customer s. The steel and aluminium industries account for a signiﬁcan t portion of non-ener gy carbon end-user applications and, as a result, driv e the demand dynamics in the indus try . Financial performance The consolidated ﬁnancial stat ements ar e pr epared and based on International Financial R eporting Standards (IFRS ) as endorsed by the Eur opean Union ( EU ) and e ective at 31 December 2021. Consolidated pro ﬁt and loss statemen t Consolidated oper ating income for the Elk em gr oup amounted to NOK 33, 717 million compar ed to NOK 24,691million in 2020 . The 37% incr ease w as supported by incr eased sales volumes, positive impac t fr om price increases. The Silicones division saw a 36% increase in operating income support ed by an appr oxima tely 10% increase in sales v olume in addition to price incr eases f or commodities, particularly in AP AC. Oper ating income for the Silicon Pr oducts division incr eased by 37% due to higher sales v olumes of f oundry allo ys, ferr osilicon and silicon in addition t o price increases, particularly in the second half o f 2021. Carbon Solutions ’ operating income increased b y 16%, driven by 15% higher sales volumes. Consolidated EBITD A ended at NOK 7 ,791 million compared to NOK 2, 684 million in 2020 . The corresponding mar gin incr eased fr om 11% in 2020 to 23% in 2021. EBITDA impr ov ed y ear -on-year f or all divisions mainly due to higher sales v olumes supported by good pr oduction and str ong sales prices, counter ed partially b y nega tive curr ency e ect and incr eased raw ma terial costs. Re fer to “Divisions business performance ” f or further analysis. Operating income NOK million 2021 24,691 Silicones 4,630 Silicon Products 3,980 Carbon Solutions 306 Other /Elim 111 2021 33,717 EBITDA NOK million 2021 2,684 Silicones 2,346 Silicon Products 2,481 Carbon Solutions 69 Other /Elim 211 2021 7,791 36 37 Annual report 2021 Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Consolidated oper ating pr oﬁt w as NOK 5, 785 million in 2021 compared to NOK 827 million in 2020 , an incr ease of NOK 4,958 million explained mainly by impr ov ed consolidated EBITD A, partially coun ter ed by incr eased amortisation, depr eciation and impairment losses. Amortisation and depr eciation wer e NOK 1,816 million in 2021 compared to NOK 1, 710 million in 2019. The increase in amortisa tion and depr eciation is attribut ed to high inves tment lev els fr om 2019 to 2021. Impairment losses wer e NOK 76 million in 2021 compared to NOK 17 million in 2020, mainly r elated to a writ e-down o f the Carbon produc tion f acilities in Malay sia. Other items wer e negativ e NOK 114 million in 2021 compared to negativ e NOK 130 million in 2020 . Other items are lar gely r elated to the pr ovision f or r emoving and dismantling of apartments to the r epurposing o f ar eas near the Xinghuo plant in China, in addition to a partial re ver sal of r estructuring e xpenses r elated to the produc tivity impr o vement pr ogr amme. The net impact from the change in fair v alue commodity con tracts, embedded EUR derivativ es in power con tracts and for eign e x change losses amounted to NOK 39 million in 2021 compared to NOK 44 million in 2020 . Consolidated pr o ﬁt bef ore income tax ended at NOK 5,827 million f or the y ear , compared to NOK 584 million in 2020. The share o f pr oﬁt fr om equity-accoun ted ﬁnancial inves tments was NOK 37 million in 2021 compar ed to NOK 15 million nega tive in 2020 . Finance income was NOK 40 million, and f or eign ex change gains wer e NOK 241 million in 2021 compared to NOK 31 million and NOK 17 million in 2020, r espec tively . Finance expenses wer e NOK 276 million compar ed to NOK 278 million in 2020 . The consolidated pr o ﬁt f or the y ear was NOK 4, 664 million, after NOK 1, 163 million in tax expenses. The tax expenses mainly consisted o f tax es on the curren t y ear’s result. In addition, the tax e xpenses included e ects on changes in both non-r ecognised def err ed tax assets and the change in applicable tax r ates fr om 2020 to 2021. The main items r ecognised in the consolida ted statemen t of other comprehensive income r elated to cash ﬂow hedges ( f or eign curr ency hedges and power price hedges) and currenc y tr anslation di erences. These items had a net income o f NOK 1, 078 million for 2021, compared to a ne t expense o f NOK 246 million in 2020. The share o f consolidated pr o ﬁt attributable to shareholder s of Elk em AS A was NOK 4, 628 million, resulting in basic earnings per share NOK 7 .49 per share in 2021 compared to NOK 0 .41 per shar e in 2020 . The t otal compr ehensive income f or the year w as NOK 5, 7 42 million in 2021 compar ed to NOK 32 million in 2020. Divisions business performance The Silicones division had an operating income in 2021 o f NOK 17 ,429 million (NOK 12,800 million in 2020 ). EBITDA was NOK 3, 672 million in 2021 compared to NOK 1,326 million in 2020. The EBITDA incr ease w as caused by higher sales prices and impr oved sales volumes partially counter ed by incr eased ra w material costs and nega tive currenc y e ec ts. Sales prices increased thr oughout the year driven b y tight supply and r aw material constr aints impacting prices globally and China in particular . Sales volumes incr eased by 10% Y o Y fr om 372, 000 metric tons (mt) in 2020 to 409 , 000 mt in 2021. Demand was w eak in 2020 due t o Covid-19 , wher eas the demand impr oved in 2021, resulting in incr eased sales volumes tow ar d all segments in all r egions. The Silicon Produc ts division had an operating income in 2021 of NOK 14, 783 million ( NOK 10 ,804 million in 2020 ) . EBITDA w as NOK 3, 702 million in 2021 compared to NOK 1,221 million in 2020 . The higher EBITDA was mainly attributable to higher sales prices for all pr oducts, particularly in Eur ope, due to good demand and a tigh t supply situation. Supply pr oblems in China, due t o energy curtailments and r aw material availability , led to further upw ar ds price pressur e in addition t o the tight global logis tic situation of materials to Eur ope. In addition to higher sales prices, sales volumes incr eased from 479 ,000 mt in 2020 to 502, 000 mt in 2021 due to str ong demand acr oss sever al end mark ets. Raw ma terial costs and curr ency e ects partially coun ter ed the positive price and sales volume e ects. The Carbon Solutions’ division had an oper ating income in 2021 of NOK 2, 176 million (NOK 1,870 million in 2020 ). EBITDA was NOK 508 million in 2021 compar ed to NOK 438 million in 2020. The improv ed EBITDA is mainly due t o impro ved sales v olumes incr easing by 15% fr om 256,000 m t in 2020 t o 294,000 m t in 2021, in addition to mar gin management and opera tional ex cellence. Cash ﬂow and statemen t of ﬁnancial position Cash ﬂo w fr om oper ating activities was NOK 4,913 million f or the y ear , compared to NOK 2, 111 million in 2020. P ositive cash ﬂow con tribution fr om EBITD A (NOK 7 ,791 million) w as counter ed b y incr eased working capital (NOK 2, 020 million) , higher income tax es ( NOK 423 million), int er est payments ( NOK 242 million) and changes in pro visions, bills r eceivables and o thers ( NOK 88 million) account f or the main negative con tributors. Amortisation, depr eciation and impairment incr eased from 2020 le vels. A signiﬁcant portion o f the incr ease came fr om the Silicones division due to higher inves tment levels fr om 2019 to 2021. The incr eased inves tment level r eﬂects the str ategic ambition to gro w , in particular , in the Silicones division. Changes in working capital wer e negativ e Y o Y mainly due to an incr ease in inven tories. During the y ear , raw material prices soar ed to r ecor d levels impac ting both stock v alues of ra w materials and ﬁnished goods. Management has a high focus on op timising working capital, including care ful r eview and adjus tments to match pr oduction and sales f orecas ts, optimising minimum and maximum stock lev els, active push to sell slow-mo ving stock s, individual f ollow-up o f days to war ds customer s and suppliers, in addition to adjustments o f f actoring arr angements f or the gr oup. Cash ﬂow fr om inv esting activities amount ed t o NOK 3, 185 million for the y ear , compared to NOK 3,262 million in 2020. The cash ﬂow fr om in vesting activities in 2021 is mainly e xplained by inv estment activities in the Silicones division and inves ting activities r elated to Battery Materials and Biocarbon. Elk em invested NOK 1,657 million in main tenance, envir onment, health and saf ety ( EHS ) , and pr oductivity impr ov ement initiatives during the year . In addition, Elkem had NOK 1, 715 million in stra tegic inv estments. The stra tegic inv estments in 2021 wer e primarily r elated to Silicones str ategic inv estments. This included the expansion o f the Xinghuo Silicones plant in China to str engthen Elk em ’ s position in the gr owing silicones mark et and to support the specialisation str ategy further . It also included increased capacity f or high purity silicone qualities and acquisition o f a brand-new plant near L yon in Fr ance, custom-designed to pr oduce highly specialised or gano- functional silicones. Silicon Produc ts and Carbon Solutions carried out multiple stra tegic initiativ es, including a furnace upgr ade in Norwa y Rana to r educe NOx emissions and impr o ve cost position and atomisa tion initiatives. Elk em also continued its inves tments in the Battery Mat erials initiative, and the biomass pilot plan t in Canada. 38 39 Annual report 2021 Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Cash ﬂow fr om ﬁnancing activities was positiv e NOK 2,056 million, compar ed to nega tive NOK 166 million in 2020. The positive cash ﬂow from ﬁnancing activities in 2021 was mainly r elated to capital incr ease ( NOK 1,900 million). In addition, o ther items in cash ﬂow from ﬁnancing activities in 2021 w er e dividends paid t o the owners ( NOK 96 million), ne t purchase o f tr easury shares ( NOK 278 million) , payment o f lease liabilities (NOK 118 million) and paymen t of inter est-bearing loans and borro wings (NOK 3, 180 million) counter ed by new inter est -bearing loans and borr owings ( NOK 3, 177 million) and net changes in bills pay ables and r estricted deposits (NOK 709 million) . Change in cash and cash equivalents w as NOK 3, 784 million for the year . Elkem ’ s ﬁnancial position impro ved during 2021 due to the str ong ﬁnancial r esults. The group ’ s equity ra tio impro ved fr om 40 .9% in 2020 t o 47 .5% at the end of the y ear . The le verage r atio f or the gr oup impr ov ed from 3. 0x in 2020 to 0 . 6x at the end of 2021. The board of dir ector s views the gr oup ’ s underlying competitive positions and the s trong equity r atio as a good basis to support further gr owth o f the group. Net int eres t-bearing deb t 3 amounted to NOK 4,827 million as of 31 December 2021. Cash and cash equivalents amount ed t o NOK 7 , 040 million in addition to NOK 3, 144 million in undrawn credit facilities. T otal inter est -bearing liabilities was NOK 12,476 million as o f 31 December 2021, of which NOK 4,506 million matur es in 2022. Debt maturities in 2022 mainly consist o f short- term loans in China f or local working capital ﬁnancing, in addition t o group bank ﬁnancing. The boar d view s the group ’s cash and ﬁnancial position to be str ong. Going concern The board o f dir ectors vie w tha t the Elkem Gr oup has the ability to continue its business in the for eseeable future and hence con ﬁrms tha t the accounts hav e been prepar ed on a going concern basis and that this assumption is appr opriate a t the da te for the accounts, and tha t the gr oup, a fter the proposed dividend, has sucient equity and liquidity to fulﬁl its obligations. Strategic priorities The board o f dir ectors conduc t an annual r eview o f Elk em’ s strategy . The r e view includes an assessment of str ategic priorities and ﬁnancial scenarios based on industry tr ends, mark et de velopment and o ther framew ork conditions. Elk em’ s main strategic priorities are t o improv e the underlying pro ﬁtability thr ough operational e x cellence and specialisation and to focus on gro wth, particularly within silicones in Asia. The demand f or Elk em ’ s pr oducts is driven b y megatr ends. Focus on en vironmen t and climate, the gravity tow ar ds East and continued tensions a ecting global tr ade ar e particularly importan t t o Elk em’ s stra tegic dir ection. The tar get f or the gr oup is to gener ate an EBITD A margin o f 15- 20% throughout the economic cy cle. Operational e x cellence and principles of lean manufacturing ar e deeply r ooted in Elk em Business System ( EBS ) . EBS is built on Elk em ’ s cor e values and is designed t o involv e every one in impr ov ement activities and promo te a cultur e o f oper ational e x cellence, continuous impr ov ement, and deep learning. The goal is t o ensure tha t Elkem r emains a compe titive pr oducer based on str ong opera tional performance, economies o f scale, and an integr ated value chain fr om r aw materials to advanced end pr oducts. T o achieve this, Elk em f ocuses on developing its employees to iden tify pr oblems and eliminat e the roo t causes. Mo tivat ed and highly skilled people ar e essential f or successful s trat egy implemen tation. In addition, Elk em is f ocusing on digitalisation as a stra tegic measur e to accelera te impr ovemen t activities in the whole v alue chain. The goal is to mak e Elk em an increasingly data-driv en company by implementing digital initiatives to s treamline pr ocesses, op timise resour ce allocation, and develop cultural capabilities and agile working methods. In 2021, Elk em completed a pr oductivity impr ov ement progr amme with the aim t o r each annual cost savings of NOK 350 million, mainly r ela ted to savings in ﬁx ed personnel costs and contr actor s’ cos ts. By year -end 2021, the tar get w as ex ceeded with an annual run r ate o f NOK 395 million. One of Elk em ’ s ﬁnancial tar gets is to r einvest 80-90% of annual amortisations and depr eciation to main tain a high-quality asse t portfolio to ensur e stable and ecient oper ations. Focus on cos t impr ovemen ts is also important when assessing new str ategic in vestmen t projec ts, such as the in vestmen ts in Elk em’ s silicones plants in China and F rance. 3 See APM section 40 41 Annual report 2021 Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Specialisation is a k ey part of Elk em ’ s str ategy to reduce commodity e xposur e and impr ove mar gins. Continued inves tments in R&D will be critical to ensur e technological impr ov ements and the development of new pr oducts and applica tions. In addition, Elkem in tends to do selected bolt -on acquisitions to accelerat e the specialisa tion stra tegy . In 2021, Elkem acquired a ne w plant in L yon f or the pr oduc tion of organo- functional silicones, which will strengthen the developmen t of pr oduct ar eas r equiring highly specialised properties. Elkem aims to con tinue gr owing its supplies of advanced mat erials t o global marke ts by 5-10% per y ear . T o support Elkem ’ s opera tional ex cellence, gr owth and specialisation str ategy , the boar d has appr ov ed two new inv estment pr ojects in 2021, which comprise expansion o f the silicones plan ts in China and Fr ance. The investmen ts will also impr ove the envir onmental performance o f Elk em. The f ocus on ESG and climat e is becoming increasingly important, and Elk em pr esent ed an ambitious climate r oadmap in 2021 to r educe fossil CO2 emissions in line with the P aris agr eement. For more in forma tion about ESG, please r ef er to the ESG report on page 7 4. Research and Inno vation is vital to support and realise Elk em’ s strat egy on gr owth and specialisation Elkem de vo tes considerable e ort and r esour ces to Resear ch and Innov ation (R& I) activities with mor e than 2% of r ev enues dedicated to new pr oduc ts and new processes, including technical support to cus tomers, in 2021. With this inv estment carried b y mor e than 520 resear chers around the world acr oss 12 R&D centr es, the R&I t eams ﬁled mor e than 35 new pa tents. Ne w produc ts less than ﬁv e y ears old r epr esent mor e than NOK 3,500 million in turno ver . T o create and de velop innov ativ e pr oducts f or new marke t needs, R&D e orts ar e k ey and include envir onmentally friendly pr oducts and ener gy-e cient produc tion t echnologies. This global optimisa tion of the value chain is at the heart o f the pr ojects managed b y Elkem R& D and is the cor e o f Elk em stra tegy . Elkem ’ s R&D facilities, within chemistry and new chemicals, new materials and supporting labor atories, play a crucial role in our customers’ successes. Elk em ’ s R&D e orts contribute to the dev elopment of ne w produc ts with tailor ed pr operties f or high-end mark ets, new additives f or pr ocess aids, or rein for ced ma terials and support with critical analysis inf ormation needed for tr oubleshooting. Elk em ’ s R&D f ocus will r emain imperativ e to r each the gr oup ’s ambition r elat ed t o specialisation and gr owth based on global megatr ends. Elkem put in place a pr oactive roadmap to r emain competitive and be mor e r esponsiv e to cus tomer needs and demands, which was implemented ar ound the digitalisation of our R&D fr om data acquisition to formulation op timisation. Open innov ation and collaborativ e mindset With around 30 na tional and Eur opean collabor ative projec ts in partnerships with start -ups, small and medium-sized enterprises, academics and clus ters, Elkem is highly r ecognised for its open and inno vativ e mindset. Thr ough collabora tion, Elk em wants to be a t the f or efr ont o f new technologies e xploring mainly ﬁve essential topics, including: → Energy ecienc y and CO2 emission r eduction b y , for e xample, r eplacing fossil coal with biomass in the produc tion of silicon and ferr osilicon allo ys. → Circular economy mainly on r ecy cling (including waste and end-o f -lif e) and eco-design (pr oducts and processes) . → New mat erials f or 3D printing and additive manufacturing pr ocesses, ba ttery cells and batteries, and lightw eight materials. → R&D digitalisation, pr ocesses and new ma terials modelling t o speed up the cap tur e of value. → T echnology scouting to be tter anticipat e the futur e needs of our customer s and mark ets. Highlights include → Focus on 3D printing → The crea tion of a start -up, 3Deus Dynamics on Silicone 3D printing, matur ed ov er two years bef ore in vesting f or a long- term perspectiv e. → Elkem Silicones w as named a winner in the reno wned worldwide competition o f the 2021 R&D 100 awar ds in the Mechanical Ma terials category with the AMSil™ & AMSil SILBIONE™. → New pr ojects to e valuat e and develop pr ocess rout e(s) f or pow der pr oduction of silicon-based materials tailor ed f or additive manuf acturing. → Focus on cir cular economy → Projec t on chemical r ecycling o f silicones’ wastes r educing CO2 emissions by 65% and waste b y 75%. → Three pr ojects on the valorisation o f side str eam silicon produc tion including slag valorisation. T o maintain and develop this t echnological edge, Elkem is evolving thr ough internal pr ojec ts and the support o f collaborativ e platf orms, such as: → Axel One in L yon, F rance, is one o f the hubs f or smart processes, online analy sis, new mat erials and circular economy . The partnerships with the r egion and the F r ench go vernment hav e cr eated a cen tre of e xcellence ar ound the industry o f the futur e, integr ating envir onmental and socie tal concerns and process op timisation. → The pilot facility at Elk em ’ s corpor ate R&D cen tre in Kristiansand, Norw ay , is an important asset f or both process and pr oduct development. The partnership with the N orwegian Catapult Centr e, F utur e Materials, and ne w collaborativ e pr ojects, national and Eur opean, has further strengthened the position of the centre. R&D initiatives and e xpansion At Elk em ’ s production sites, new applica tions are developed and support ed by laborat ory e xpertise and analysis to ensure tha t the latest technologies and capabilities are implemen ted in prac tice. In addition, the working methodology is used acr oss all segments and marke ts to optimise the customer or mark et inter action. The latest e xample is Elk em’ s battery materials initia tive, Vianode ( winner o f a special awar d, N orway’ s smartes t industrial company 2021) , wher e Elk em and Vianode, in April 2021, opened an indus trial pilot f or s ynthetic graphite to ba ttery anodes, close to the corpor ate R&D centr e in Kristiansand, Norw ay . The ambition is to use experience fr om opera tion and produc tion in the pilo t to establish full-scale pr oduction of ba ttery ma terials. On 1 July 2021, Elkem ’ s new R&D centre A TRiON opened at the Saint-F ons site in L yon, F rance, at the heart o f the so-called “Chemistry V alley” t o rein for ce inno vation within Elk em and Open Innova tion t ogether with external partner s. The stat e-of -the-art R&D centr e is dedicated to the Silicones division and brings together more than 130 r esear chers. Furthermor e, the Silicones division holds a str ong position within R&D and innov ation. The division has resear ch centres worldwide, with L yon Resear ch & Innova tion Centr e as the central hub. As a part of Elk em ’ s specialisation str ategy , the Silicones division has increased R& D personnel by mor e than 20% worldwide in the last four year s, with a clear stra tegy in place to le ver age this capacity worldwide. Sustainability: Envir onmental, social and gov ernance (ESG) Elk em ' s mission is t o “pr ovide adv anced material solutions shaping a better and mor e sustainable futur e, adding value to our stak eholders globally” . Sustainability is an integr ated part o f our business strategy . Elk em aims to be one o f the leaders in the gr een transition. The gr oup believ es that saf e and envir onmentally friendly pr oduction will be ev en more importan t in the futur e and that together with its customers and partner s, the gr oup can cr ea te tomorr ow' s solutions. Elk em is committed to continuous e orts t o maximise the positiv e impact on the envir onment and societies ar ound its oper ations and minimise potential nega tive impact. Elk em’ s four values f orm the f oundation f or the way business is conducted. Dedicat ed employees base their work on inv olvement, r espect, pr ecision, and continuous impro vemen t. Inv olvement ensur es that people ar e committed. Respect is about being f air , open, and honest, trusting colleagues and appr eciating diver sity . Precision e xpr esses itself thr ough our work to de velop and f ollow best pr actice standar ds and sa fe and stable produc tion. Continuous impr o vement means alw ay s looking f or impr ov ement poten tial, k eeping an open mind and alway s being r eady to learn and shar e knowledge. Elk em works to ensur e bes t practices within ESG to secure socially r esponsible and sustainable business practices f or all stak eholders. A materiality assessment is a method to identify and prioritise the mos t important impact f or an or ganisation and its stak eholders. In accordance with the updat ed Global Reporting Initiative ( GRI) r ecommendations, GRI is the most used international sus tainability r eporting frame work. Elk em evalua tes this at least once a year to ensur e that material envir onmental, social and go vernance-r ela ted topics ar e identiﬁed and cov er ed. Prioritised tar ge ts and actions ar e intr oduced to mak e sur e tha t impr ovemen ts are implemen ted. K ey topics that hav e been identiﬁed are CO2 emissions and mitiga tion, health and saf ety , water management, waste management and cir cularity , responsible v alue chain, pr oduct gov ernance, including chemical saf ety , supplying the gr een tr ansition and human rights. 42 43 Annual report 2021 Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management The ESG report de tails our commitment and activities within envir onmental, social and gov ernance and is prepar ed according to the frame work of the GRI – the most used interna tional sustainability r eporting framew ork. The ESG r eport can be f ound on page 7 4. This report is an in tegral part o f the board o f dir ectors report and has been v eriﬁed by a thir d party .  Environmen t, health and safe ty EHS is the backbone o f Elk em’ s business and is always the ﬁrs t priority . Our EHS e orts ar e based on a zer o- harm philosophy , and our EHS management sy stem is sys tematically implemented to work towar ds this goal. The saf ety o f our employ ees is the mos t critical pillar of our philosophy . The gr oup s tr ongly belie ves and has demonstra ted that Elk em ’ s opera tions can be done without harming employees and people. Elk em uses considerable r esour ces to identify hazar ds and implement appr opriate measur es to r educe risk to an acceptable lev el so tha t all employ ees and contrac tors performing w ork at Elk em can leav e work just as healthy as the y w er e when the y arriv ed. Elkem has a s trict r eporting r egime f or injuries and requir es all injuries to be r eported, inves tigated, and mitigated independent o f the se verity . Overall, the total number o f injuries went up in 2021, and we ar e not satis ﬁed with these number s. This show s tha t our health and saf ety w ork can nev er lose f ocus. And we can observe that ther e wer e 0 high-consequence work - rela ted injuries in 2021, down fr om 1 in 2020 and 3 in 2019 . The t otal r ecor dable injury rat e went up fr om 2.3 to 3. 7 , and the lost w orkda y r at e (L WR) was 1.5, up fr om 0.8 in 2020 . There wer e no f atalities a t the Elk em plants in 2021. Mor e detailed inf ormation about Elk em ’ s management sys tem, r eporting, saf ety numbers and how the company f ollow up thr oughout the organisa tion and value chain can be found in the Social chapt er in the ESG report, page 114. Elkem a ec ts the en vir onment and communities ar ound the world ev ery da y . Ther ef or e, Elk em is alway s looking for new and inno va tive wa ys to r educe was te and emissions and increase the yield from r aw mat erials. This means using highly de veloped pr oduction technology and running oper ations with r esour ce- ecient pr ocesses. F or more in forma tion about how Elkem is r educing its environmental foo tprint and increasing the positiv e impact of its pr oducts, see the ESG report under the chapter Envir onmental, page 92. Diversity , inclusion, and equality Elkem is committ ed t o cr eating equal opportunities in a diverse and inclusiv e working envir onment. The group apprecia tes that ev ery individual is unique and v aluable and should be respec ted for their individual abilities. The group e xpect that all colleagues ac t accordingly and promo te the four Elk em v alues. Elkem belie ves that its human capital is its mos t valuable asset. The collective sum of the individual dier ences, lif e experiences, kno wledge, inven tiveness, self -expr ession, unique capabilities, and talent that employees in vest in their work r epr esents a signiﬁcan t part of not only Elk em ’ s cultur e but r eputation and the company’ s r esults. The gr oup has zer o- toler ance f or any form o f harassment or discrimina tion. The company has well-established policies and practices r elat ed t o diversity , equality and inclusion (DEI ). The policies and procedur es include code of conduct, human rights policy , people policy , recruitment, working conditions, pr omotions, de velopment and pro tection agains t harassment. Elkem ’ s DEI vision is to cultiva te a diverse, equitable and inclusive workplace wher e all emplo yees feel engaged, valued and hav e a sense of belonging. Pr omo ting diversity , inclusion, and equality ar e essential in attrac ting and re taining talent to establish and maintain pro ﬁtability , competitive advantage, and sus tained success at Elk em. The gr oup ’ s objective is to cr ea te a culture o f inclusivity where all v oices ar e hear d. As a result, the compan y bene ﬁts fr om people who dar e to ask questions, ar e not a fraid to try ne w appr oaches and bring diverse per spectives to the table. By cr ea ting and sustaining a diver se, equal, and inclusive working cultur e, Elkem aims to incr ease its ability to deliv er mark et- leading produc ts and services t o customers pr oﬁtably . The t otal shar e of w omen in Elk em was 25% in 2021, and women took up 30% of management r oles, an increase fr om 24% in 2020 . The global trainee progr amme has been prioritised as a platf orm to r ecruit women. As a r esult, the shar e of women in the trainee progr amme was 43% in 2021. The f emale shar e of new hir es w as 40%, and the f emale share o f leav ers was 23%. The numbers indicate a positive e ect o f Elk em ' s e orts t o attr act and r etain female emplo yees, as fe wer women r elativ e to men leave the company than ar e hir ed. The f emale shar e of part- time employ ees was 6%, and the female shar e o f temporary hir es was 7%. Par ental leav e was only track ed in Norw ay f or 2021, whereb y eligible women on av erage took 38,5 week s of leav e, and men on aver age took 16 week s of lea ve. The t otal amount o f week s supported by the Norwegian governmen t is 52 week s. For mor e inf ormation about curr ent ac tivities and action plans on diversity , equality and inclusion, please see the 2021 A ctivity and reporting duty r eport.  The age distribution in the company is 16% below 30 years old, 56% be tween 30 and 50 years old and 28% above 50 year s old. The company has seen a small increase in the belo w 30- and above 50- year -old groups since 2020, indica ting tha t a wider age gr oup now work s in the compan y . For mor e inf ormation about e orts to secur e equal opportunities and incr ease the f emale share in the compan y , see the ESG r eport, page 114. Governance The board o f dir ectors r ecognises the importance o f good corporat e governance, and the goal is to ensur e the pro tection o f all shar eholders ’ inter ests and that the company complies with high ethical and social standar ds. Elkem is subjec t t o corpora te gov ernance reporting requir ements under section 3-3b o f the Norw egian Accounting Act and the Norw egian Code of Pr actice f or Corporat e Governance, c f . section 7 o f the con tinuing obligations of s tock ex change-lis ted companies. The A ccounting Act ma y be f ound (in Norwegian) at  .lov data.no. The Norwegian Code of Prac tice f or Corporat e Governance can be f ound at www .nues.no . Elkem ’ s board consist of 10 boar d members as o f 31 December 2021, of which sev en ar e shareholder - elected and thr ee ar e employee-elec ted. Thr ee of the shareholder -elected boar d members r epr esent the majority shar eholder , while the o ther f our shar eholder - elected members ar e independent. Elk em had seven board mee tings in 2021. A detailed ov erview of the board member s’ a ttendance may be found in the Boar d of Dir ector s’ r eport on salary and other r emuner ation to leading personnel in Elk em. 44 45 Annual report 2021 Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management The board o f dir ectors ’ r eport on corpor ate go vernance can be f ound on page 53 in this r eport and is an integral part of the Report of the boar d of dir ect ors. Risk management Elkem ’ s board and management hav e a str ong f ocus on risk management to monitor the gr oup ’ s risk pr o ﬁle t o ensure adequa te risk management pr ocesses ar e in place. Elkem conduc ts a y early risk mapping pr ocess based on interview s with divisions and corporat e sta . Each risk is evalua ted based on internal and e xternal conditions and takes deemed lik elihood, estimated ﬁnancial impact, time horizon and mitigating ac tivities into considera tion. The purpose is t o gain a thor ough under standing of the group ’s risk pr o ﬁle and ﬁnancial risk toler ance. A summary o f the risk analy sis is pr esented on page 68 in this annual report. Ev aluation o f ESG and climate-r elat ed risks and opportunities have become an incr easingly important part of Elk em ’ s ov erall risk management pr ocesses, impacting str ategy , ﬁnancial conditions and all aspects of Elk em ’ s v alue chain fr om r aw materials to ﬁnished pr oduc ts. In 2021, Elk em report ed on climate risk s and opportunities accor ding t o T CFDs reporting recommenda tions. According to T CFD, Elkem conduc ted scenario analyses based on risk s identiﬁed during the internal risk mapping pr ocess with each division. The assessment was based on impac t scenarios as presen ted by the International Ener gy Agency (IEA) and In ter governmen tal Panel on Climat e Change (IPCC ) and concentrated on China and Norw ay , where the majority of Elk em ’ s emissions and r e venue are gener ated. The main risks tha t wer e included in the scenarios wer e the ﬁnancial impact o f climate- rela ted r egulations and ph ysical risks r elated to higher global t emperatur e scenarios. The short-term r esilience stra tegy is incorpor at ed in the clima te r oadmap t o mitigate the short and medium- term risk s with the mos t ﬁnancial impact. Regar dless of how s trong companies ' risk management procedur es are, it is impossible t o prepar e f or every scenario. The ﬁnancial crisis in 2008 and Covid-19 in 2020 wer e such scenarios and could be described as “black swans ” . “Black swans ” demonstr ate the need for general risk pr epar edness and the need f or pr oactive, pro f essional and agile r eaction to unf or eseen and sever e incidents. Elk em r obust business model and str ong ﬁnancial position have sho wn good r esilience during the pre vious crisis scenarios. The main business risks impacting the gr oup ’s ﬁnancial performance r elat e t o sales prices and sales volumes for silicon-r elat ed materials and costs f or k ey raw materials, ener gy and other consumables. The demand for silicon-based mat erials has incr eased, and the gro wth is expec ted to ex ceed the gr owth in global GDP . Demand and prices will, howe ver , ﬂuctua te based on economic cycles and compe tition, and signiﬁcant price and volume changes can be observed depending on the o ver all business sentiment. Elk em is seeking to mitigate and r educe ﬁnancial impact b y inv esting in R&D and capturing specialised mark et positions to reduce commodity price e xposur e. Raw material access and global supply chains ha ve pr ov en challenging during 2021 with sever al incidents, such as limited container capacity , lack of semiconduct ors and pow er disruptions. This is a high att ention ar ea, but Elk em is well-positioned, and this has not cr eat ed any major disruptions in 2021. Regulatory framew ork conditions have also become increasingly important in 2021. Elk em has oper ations in many coun tries and could be exposed to tr ade tensions, changes in anti-dumping duties and e xport limitations. Ther ef or e, a balanced mark et str ategy in terms of r aw material sour cing and mark e t presence is important to r educe exposur e r elat ed t o tr ade barriers and political t ensions. Compliance rela ted risk s such as corruption, br each of compe tition law , br each of sanctions, human rights violations or o ther unethical activities of emplo yees and/ or business r elationships are inher ent risks to a corpor ate. The ﬁnancial impact of such incidents could be substan tial, both in terms of r eputation and ﬁnancial losses. Elk em has a high focus on compliance and int ernal contr ol. Guidelines for ethical conduc t, tr aining of all emplo yees and an accessible channel f or r eporting misconduct ( whistleblower ) ar e in place. Elkem oper at es in an international mark e t and is exposed to a v ariety of ﬁnancial risk f actor s, including currenc y risk, in ter est ra te risk, liquidity risk and counterparty risk. Elk em’ s result, cash ﬂo w and equity are e xposed to ﬂuctuations in curr ency e x change rat es, and Elkem seek s to r educe the impact fr om changes in currenc y e x change ra tes by a pr e-deﬁned cash ﬂow hedging progr amme. The balance sheet risk is mitiga ted by k eeping loans in f or eign curr encies t o match the underlying assets. Elk em opera tes in capital intensiv e industries and is exposed to in ter est r ate ﬂuctuations on its net inter est -bearing debt. Elk em has adopted a ﬂoating in ter est r ate policy , which is deemed to give adequat e pro tection thr ough economic up- and 46 47 Annual report 2021 Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management downturns. F utur e hedging of int eres t-r ate e xposur e may be evalua ted based on e xposure and sensitivity . Liquidity risk r elat es t o the compan y’ s ability to meet ﬁnancial obligations. Elk em has a str ong cash position, good access t o undrawn cr edit facilities and sa tisf actory long-t erm ﬁnancing arr angements. Elk em obtained an external cr edit r ating in 2021 and w as rat ed BBB/Stable from Scope Ra tings. The ra ting r eﬂects Elk em ’ s str ong ﬁnancial pro ﬁle, solid position in the global silicone and advanced mat erials marke ts, as well as the company’ s solid global footprint. Counterparty cr edit risk is managed by close monitoring of the r eceivables portf olio combined with credit insur ance and paymen t conditions. Elk em’ s ﬁnancial tr ansactions and deposits ar e with solid and reputable bank s. Elkem has signed a liability insur ance policy tha t cover s any pas t, pr esent or futur e member of the boar d of direc tors and compan y o cer . The insur ance cov ers pure ﬁnancial losses, including def ense costs, that the insured per sons ar e legally obliged to pa y , resulting fr om, or as a consequence of , a claim. The liability insurance cover s any losses t o the compan y and its subsidiaries due t o securities claims and indemniﬁed claims against the board o f dir ectors and compan y o cers. See note 27 in the ﬁnancial statemen ts f or mor e details on ﬁnancial risk. Financial reporting pr ocess Elkem has routines to ensure tha t the ﬁnancial statemen t is report ed accor ding t o applicable laws and regula tions and in accor dance with adopted accounting policies. These r outines ar e described in internal r eporting manuals, which ar e updated r egularly according to ne w accounting principles. The ﬁnancial r eporting plan includes contr ols and check s reports tha t shall ensure consis tency of the ﬁnancial reporting. The ﬁnancial informa tion is consolidated and contr olled at sev eral le vels within the r espective divisions. The audit committee performs r e views o f the quart erly , half -y ear and annual report with a special f ocus on accounting topics such as pr ovisions and liabilities, estimates and judgemen ts, or issues with a major impact on the ﬁnancial sta tement. The external auditors participat e in these mee tings in addition t o repr esentatives from the management and ﬁnance function of Elk em. Futur e prospects There is alw ay s inher ent uncertainty t o pr ospects, and the ongoing Covid-19 situation is gener ating macr o- economic volatility and uncertainty . The boar d o f direc tors ’ assessment is that the fundamentals and long-t erm pr ospects f or Elk em ar e positive. The demand for Elk em ’ s pr oducts is driv en by global megatr ends such as sustainability , energy demand gr o wth, urbanisation, digitalisation and ageing and gr owing population. The underlying need for silicon r elat ed produc ts r emains attrac tive, with gr owth le vels o f 5- 7% globally . Climate risk and environmen tal regula tions will requir e reduced emissions and more sus tainable solutions, but Elk em is very well positioned based on its high proportion o f electricity consumption fr om rene wable sour ces. The de velopment tow ar ds mor e climate- friendly solutions could also pr ovide attr active gro wth opportunities, particularly since the use o f silicones reduces gr eenhouse gases that ar e nine times larger than the emissions fr om production and end-of - life disposal. Elkem will con tinue t o pursue its main str ategic initiatives f ocusing on specialisation and cost competitiveness. Elk em plans to k eep r einv estments at 80-90% of amortisa tions and deprecia tion in or der to ensur e good and stable opera tional performance. In addition, Elk em’ s strategy is t o gr ow thr ough specialisation, both or ganically and through acquisitions. Inves tment levels will be e valua ted based on the group ’s ﬁnancial position and ﬁnancial perf ormance. Elk em has str ong cost positions and aims to drive con tinuous impro vemen t work throughout the organisation. Elkem ’ s ﬁnancial position is considered to be s tr ong at the end of the y ear with a r obust Equity r atio, lo w Lev erage r atio and str ong Cash ﬂow gener ation and Liquidity position. Elkem ’ s policy is t o pay dividends of 30-50% o f pr oﬁt for the y ear . The boar d o f dir ec tors has pr oposed a dividend payment o f NOK 3. 00 per shar e for 2021, r epr esenting 41% of pr oﬁt f or the period. The board of dir ector s’ vie w is tha t the dividend pr oposal f or the year is appr opria te based on the gr oup ’s ov erall ﬁnancial position and the curren t mark et outlook. The dividend is subject to appro val a t the annual gener al meeting. As part of subsequent e vents, Elk em secur ed 100% ownership o f the Elk em Salten ener gy r ecov ery plan t after acquiring the r emaining 50% shar e in Salten Energigjenn vinning AS fr om K vitebjørn Energi A S on 31 January 2022. The investment in the ener gy reco very plant further str engthens Elk em ' s e orts to ensure en vir onmentally friendly silicon and f err osilicon produc tion with the lo west possible emissions and lowest possible use o f r esour ces. Elk em ASA Elkem ASA is the par ent company o f the Elk em gr oup. The company’ s accounts hav e been pr esented in accordance with the Norw egian Accounting Act and generally accepted accoun ting practices in N orway . The accounts ar e pr epar ed on the basis o f a going concern assumption. For Elk em AS A, the oper ating income amount ed t o NOK 9 , 7 40 million in 2021 compared to NOK 7 ,626 million in 2020. The operating pr oﬁt ended at NOK 1, 799 million in 2021, compared to NOK 449 million in 2020 . The net change in cash and cash equivalen ts amounted to NOK 2,461 million. Cash ﬂo w fr om oper ating activities amounted to positive NOK 1,380 million, count er ed by investing ac tivities of NOK 1, 075 million and positive cash ﬂo w fr om ﬁnancing activities of NOK 2, 156 million. Elk em A SA ’ s equity w as NOK 11,283 million at the end of 2021. The equity r atio ended at 40 %. Pr oﬁt for the year was NOK 1, 773 million. The net in ter est -bearing debt amounted to NOK 3,210 million per 31 December 2021. Cash and cash equivalents amount ed t o NOK 4,260 million. The boar d of dir ector s’ vie w is tha t the dividend proposal f or the y ear is appr opriate based on the gr oup ’ s over all ﬁnancial position and the curr ent mark et outlook. Allocation of 2021 ne t pro ﬁt: The pro ﬁt for the year was NOK 1, 773 million. The board o f dir ectors pr oposes to dis tribute NOK 3,00 per share corr esponding to NOK 1,918 million as dividend distributed fr om other paid-in capital. In total the boar d of dir ector s pr oposes the f ollowing allocation (in NOK million): The board o f dir ectors o f Elk em ASA Oslo, 8 Mar ch 2022 Helge Aasen, CEO , Elkem A SA Zhigang Hao Chair o f the Board Dag Jak ob Opedal Vice chair Marianne Elisabeth Johnsen Board member T erje Andre Hanssen Board member Marianne F ærø yvik Board member Knut Sande Board member Y ougen Ge Board member Anja-Isabel Dotzenr ath Board member Olivier Tille tte de Clermont- T onnerre Board member Grace T ang Board member Dividends from o ther paid- in capital Pro ﬁt for t he yea r to re tai ned e arn ing s - 1 91 8 1 7 73 48 49 Annual r eport 2021 Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Cor pora t e manag emen t 202 1 Marianne F ærø yvik Board member Knut Sande Board member B o a rd of d i r e c to r s 202 1 Zhigang Hao Chair Dag Jak ob Opedal Vice chair Olivier Tille tte de Clermont- T onnerre Board member Y ougen Ge Board member Anja-Isabel Dotzenr ath Board member Grace T ang Board member Marianne Elisabeth Johnsen Board member T erje Andre Hanssen Board member Morten Viga CFO Katja Lehland SVP Human Resour ces Asbjørn Søvik SVP Business Developmen t Håv ard Moe SVP T echnology Louis V ovelle SVP Innov ation and R&D Fr ederic Jacquin SVP Silicones Inge Grubben-Strømnes SVP Silicon Pr oducts Luiz Simao SVP Carbon Solutions Helge Aasen CEO 50 51 Annual r eport 2021 Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management T h e b o a r d o f dir e c t or s’ r ep or t on corpora t e go v erna nce Corporate gov ernance. Good corpora te go v erna nce is import ant t o ensur e con ﬁdence in the c ompan y and val ue crea tio n in the best int erest o f shar eholders, emplo y ees and o ther stak eholders. Go ver nance crit eria are, t oget her with E n vir onmen tal and Socia l crit eria ( ESG ), incr easing ly used t o ev alua t e the performance o f a compan y . This repor t, combined wi th the E SG report, annual r eport and website, d ocument E lk em’ s group activities and results. Elkem is subjec t t o corpora te gov ernance reporting requir ements according t o section 3-3b of the Norw egian Accounting Act and the Continuing obliga tions of st ock ex change list ed companies at Oslo Stock Ex change. Further , Elk em’ s board of dir ector s endorses "The Norwegian Code o f Practice f or Corpor ate Go vernance " (the "Code "), mos t r ecently r e vised on 14 October 2021 and issued by the N orwegian Corpora te Gov ernance Policy Boar d ( NCGB ) . The Code of Pr actice is av ailable at  .nues.no . This report f ollows the sy stem used in the Code, and forms part o f the boar d o f direc tors ’ r eport. 1. Implementation and reporting on corpor ate governance Elkem ’ s corporate gov ernance policy is based on the Code, and as such designed t o establish a basis f or good corporat e governance to support achie vement o f the company’ s cor e objectives, s trat egies, and risk pro ﬁle on behalf o f its shar eholders, including the achiev ement of sustainable pr oﬁtability . Elkem belie ves good corpor ate go vernance inv olves openness and trus tful cooperation be tween all parties involv ed in the gr oup: the shar eholders, the boar d of direc tors and e x ecutive management, emplo yees, cust o- mers, suppliers, public authorities and society in gener al. By pursuing the principles o f corporat e gov ernance, the board o f dir ectors and managemen t contributes to achieving open communication, equal righ ts f or all shareholder s and good contr ol and corpora te governance mechanisms. The board of dir ector s assesses and discusses Elkem ’ s corporate gov ernance policy , strategy , and risk pro ﬁle on a y early basis. Elkem aspir es to comply with the r ecommendations o f the Code. If the Code is de viated fr om, the de viation is described and explained in the r elev ant section o f this statemen t. No deviations fr om the code. 2. Business Elkem ’ s mission is to pr ovide adv anced material solutions shaping a better and mor e sustainable futur e, adding value to our stak eholders globally . Elkem de velops its business in support of the ambitions of the UN Sustain- able Developmen t Goals and the P aris agr eement. Our stra tegy is to driv e gr owth thr ough opera tional ex cellence and increased specialisa tion. Elkem ’ s business scope is clearly described in section 3 of the articles of association: 52 53 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corporate go vernance Risk managment ESG r eport Financial statemen ts ESG assurance Contact The object o f the compan y is to de velop and engage in industry , mining, tr ade and transportation as well as exploration and e xploitation o f natur al resour ces. The company may also dev elop, acquire and exploit pat ents inven tions and technical kno whow . The compan y may participate direc tly or indir ectly or by o ther means in companies engaged in activities outlined abo ve or activities that promo te or support such objects. With a str ong tr ack r ecor d since 1904, Elk em is one of the world’ s leading pr o viders of adv anced material solutions. The company is a fully integr ated pr oducer with operations thr oughout the silicon value chain and develops silicones, silicon pr oducts and carbon solutions by combining natural r aw mat erials, r enewable ener gy , and human ingenuity . Elkem helps its customers cr ea te and impro ve essen tial innova tions lik e electric mobility , digital communications, health, and personal car e as well as smarter and mor e sustainable cities. Elkem is oper ating in capital in tensive and cy clical industries and has 30 pr oduction sites and an e xtensive network o f sales oces ar ound the world. While this gives competitiv e str engths, it also gives e xposur e to a range o f risk f actors. The board of dir ector s has deﬁned goals and stra tegies f or the business and has a clear focus on risk pr o ﬁles and risk management to cr eate value for the company’ s shar eholders. M or e details on the main risk s and risk management principles ar e presen ted in the annual r eport. See also section 10 below . The board has se t out specialisation and continued gro wth as the main stra tegic priorities. Focus on further produc t specialisation thr ough R&D and selected acquisitions is a k ey s tra tegic measur e t o impr ove and stabilise the group ’s pr o ﬁtability . The tar get is also to gro w Elk em ’ s business both or ganically and thr ough acquisitions t o secure and s tr engthen the gr oup ’s attrac tive positions in gr owth mark ets driv en by global mega-tr ends. T o support its strategic goals, Elk em will focus on oper ational e x cellence, digitalisation, people developmen t and ESG (Envir onmen tal, Social and Governance ) . These initiativ es ar e seen as crucial parts of the group ’s s trat egy to secur e pr o ﬁtable and sustainable gro wth. Risk management and internal contr ol systems ar e in place t o manage operational risk s. The company aims to maintain a str ong ﬁnancial pr oﬁle with a r obust capital structur e. The tar get, based on earnings ov er the busiess cycle, is to ha ve a lev erage r atio o f 1. 0x – 2. 0x, deﬁned as net inter est -bearing debt to EBITD A. Sustainability is cen tral in Elk em ’ s business str ategy . Elkem de ﬁnes sustainability work as continuous e orts to maximise the positive impact on the envir onment and societies, as well as to minimise any negativ e impact. Elkem is a signa tory t o the UN Global Compac t and apply sustainability in line with the principles o f the UN Global Compact.Elk em is committed to dev elop its business in support of the ambitions of the Paris clima te agr eement and the UN Sus tainable Developmen t Goals ( SDGs). Elkem is also committ ed t o f ollow the Unit ed Nations Guiding Principles on Human Rights and Business. Elkem ’ s Silicones division is a member of the Responsible Care Global Chart er which is the chemical indus try’ s global initiative to driv e continuous impr ov ement in envir onment, health, saf ety and security . Elkem has implemen ted guidelines and pr ocedur es in accordance with sec tion 3-3c of the Accounting Act, including code of conduct, policy on anti-corrup tion and CSR polices. Elk em ' s ESG r eport is included in the annual report f or 2021. Elkem 's objectiv es, stra tegy , risk proﬁle and ﬁnancial targe ts ar e evalua ted by the boar d of dir ector s on an annual basis. The boar d also re views the gr oup ’s performance in ESG and e valuat es the clima te risks and opportunities and make r egular assessments to ensure compliance and high-quality standar ds. No deviations fr om the Code. 3. Equity and dividends As at 31 December 2021, the group ’s equity was NOK 19 ,87 4 million, which is equivalent to 47% of to tal assets. The t otal issued shar e capital of Elk em amount ed t o NOK 3, 197 ,206,890 divided into 639,441,378 shar es, each with a nominal value o f NOK 5. Elkem aims to main tain an inves tment grade pr o ﬁle and tar gets a le ver age ratio , deﬁned as ne t inter est bearing debt to EBITDA, in the le vel o f 1. 0 - 2. 0x, based on earnings over the business cy cle. As at 31 December 2021, the le ver age ratio w as 0 .6x, which is in line with the group ’s tar get. The leverage ra tio has impr oved compared to 31. December 2020 as a result of higher EBITDA and low er net inter es t-bearing debt, as Elk em has beneﬁtted fr om a str ong business model and impro ved mark e t conditions, as well as the capital injection of NOK 1,891 million in April 2021. The boar d of direc tor’ s tar get is to ensur e a leverage ra tio in line with policy o ver the business cy cle. In addition, Elk em aims to k eep a r obust liquidity reserv e and a smooth ma turity pro ﬁle on its loan portf olio t o mitigate ﬁnancing and liquidity risk. As at 31 December 2021, available cash amounted to NOK 7 ,040 million pr oviding a str ong liquidity position. In addition, Elk em has undr awn cr edit facilities amounting to NOK 3, 144 million. The board o f dir ectors consider s Elk em ’ s capital structur e, including equity and debt structur e, to be appropria te to the company’ s objectiv e, stra tegy and risk pro ﬁle. The company’ s dividend policy is t o aim f or dividends distributions to r eﬂect the underlying earnings and cash ﬂo w of the gr oup and tar gets a dividend pa y- out ratio o f 30-50% of the gr oup ’ s proﬁt for the year . The proposed dividend pa y-out f or the ﬁnancial year ended 31 December 2021 is NOK 1,918 million, which corresponds to NOK 3. 00 per shar e. The pr oposed dividend repr esents 41% of the gr oup ’ s proﬁt for 2021. The board o f dir ectors has no t been gran ted any authorisation to appr ov e distribution of dividends. At the annual gener al meeting on 27 April 2021, the board of dir ector s was gr anted the f ollowing authorisa tions: → In order to give the boar d of directors ﬁnancial ﬂexibility and enable quick access to the mark et 54 55 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corporate go vernance Risk managment ESG r eport Financial statemen ts ESG assurance Contact in the e vent o f an acquisition in r eturn of shar es or f or general corpor ate purposes, the boar d of direc tors w as grant ed an authorisation to incr ease the share capital with an amoun t up t o NOK 291,492,672 corr esponding to 10% o f the curr en t share capital. The authorisation covers shar e capital increases agains t contribution in kind and shar e capital increase in connec tions with mer gers. The shareholder s ’ pre fer en tial rights to new shar es may be deviated fr om. The authorisation is v alid until the annual general meeting in 2022, but no longer than to and including 30 June 2022. Under this authorisation, Elkem has r aised new capital on 26 April 2021 b y issuing 56,456,034 ne w shar es thr ough a priv ate placement amounting to 9 . 7% o f the shar e capital. The gross pr oceeds from the priva te placement amounted to appr o x. NOK 1,891 million. The pre fer en tial rights to new shar es wer e de viated fr om. → The boar d of dir ector s was gr anted an authorisation to incr ease the shar e capital up to NOK 40 , 000 ,000 to be used in connection with the issuance of new shar es under the compan y' s shar e incentive scheme. The authorisation is valid un til the annual general meeting in 2022, but no longer than to and including 30 June 2022. Under this authorisation the board o f dir ectors r esolv ed to issue 1, 675,000 new shar es on 11 February 2021, amounting to 0 .3% of the shar e capital. The subscription price w as NOK 23.53 per shar e. → In order to allow the boar d o f dir ec tors to utilise the mechanisms permitted by the Norwegian Public Limited Liability Companies Act to acquir e own shar es, the board o f dir ectors w as gran ted an authorisation to acquir e own shar es with a total nominal v alue of up to NOK 291,492, 672 corresponding to 10% o f the curr ent shar e capital. The maximum amount that can be paid f or each share is NOK 150 and the minimum is NOK 1. The authorisation is valid un til the annual gener al meeting in 2022, but no longer than to and including 30 J une 2022. Under this authorisation the bord o f dir ectors announced acquisition of 1, 000 ,000 o wn shar es on 16 Mar ch 2021 and 10, 000 , 000 own shar es on 20 July 2021. The average pur chase price per shar e was NOK 36.2892 and NOK 34. 0629 r espectiv ely . P arts of the own shar es acquir ed hav e been sold under the share incen tive pr ogr amme and as at 31 December 2021 Elk em holds 6,403, 772 own shar es. Deviations fr om the Code: The boar d of dir ector s ' authorisation to incr ease the shar e capital with an amount up t o NOK 291,492, 672, corr esponding to 10% o f the curren t shar e capital can be used f or sev eral purposes. Elkem belie ves that this authorisation is importan t in order to allo w the boar d o f dir ectors, in the inter est of time, t o act quickly in connec tion with a tr ansaction or other corpora te ev ents wher e it is in the shar eholders and Elkem 's inter es t t o increase the shar e capital. 4. Equal tr eatment of shareholders All shareholder s shall be trea ted on an equal basis, unless ther e is just cause f or tr eating them dier ently . Elkem incr eased the share capital on 26 April 2021 through the issue o f 56,456,034 ne w shar es at a price of NOK 33.50 per shar e. The decision to waiv e the existing shar eholders’ pr e-emptive righ ts was publicly disclosed in a stock e x change announcement issued in connection with the share issuance. The board was of the opinion that there wer e sucient gr ounds to deviate fr om the pr e-emptive righ ts and tha t the priv ate placement was in compliance with the equal tr eatment requir ements as the structuring o f the transac tion as a privat e placement enabled Elk em t o raise capital in an ecient manner , with a lower discount to the curr ent trading price and with signiﬁcantly low er comple tion risks compar ed to a rights issue. F urther , the number of new shar es that wer e issued in connection with the privat e placement implied a limited dilution o f e xisting shareholder s. The boar d also noted tha t the compan y' s majority shareholder was supportive to the transac tion and the tr ansaction structur e. Elk em decided no t t o conduct a subsequent r epair o ering. Elk em has carried out tr ansactions in its own shar es during 2021. These tr ansactions w ere carried out thr ough the stock e x change and ensured equal tr eatmen t of all shareholder s. Elk em announced the acquisition o f 1,000 , 000 own shar es on 16 Mar ch 2021 and 10 , 000 , 000 own shar es on 20 July 2021. The av erage pur chase price per share w as NOK 36.2892 and NOK 34. 0629 respec tively . Elkem engaged a thir d party to carry out the share buyback s on behalf of the company and the third party managed the pr ogramme and made its tr ading decisions independently o f Elk em. No deviations fr om the Code. 5. Fr eely negotiable shares The shares in Elk em are fr eely negotiable and ther e ar e no res trictions on any party’ s ability to o wn, tr ade or vo te for the shar e in the company . Elkem has only one class of shar es. Each shar e grants the holder one v ote and there ar e no structures gr anting dispr oportionate v oting rights. No deviations fr om the Code. 6. General meetings The board o f dir ectors will ensur e that the company’ s shareholder s can participate in the gener al meeting either thr ough phy sical or electr onic pr esence. How ever , in 2021 physical pr esence w as not permitted due to the Covid-19 pandemic. The gener al meeting in 2021 was held as an electr onic meeting or ganised by DNB Bank ASA, Elk em ’ s r egistr ar in the Central Security Depository , V erdipapirsentr alen ASA ( Eur one xt Securities Oslo ), and its subcontrac tor . Investor s could then a ttend the general meeting fr om their elec tronic de vices and f ollow the liv e audiocast of the meeting and pr esenta tion, submit questions r elating to the items on the agenda and cast their vot es in r eal time. The board o f dir ectors will further ensur e that: → notices for the general mee tings ar e sent to all shareholder s individually , or to their deposit ory banks, at leas t 21 days in adv ance, that all matt ers to be consider ed by the meeting ar e speciﬁed and that r elev ant documents ar e made av ailable on the company’ s website; 56 57 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corporate go vernance Risk managment ESG r eport Financial statemen ts ESG assurance Contact → the resolutions and an y supporting documen tation are sucien tly de tailed, compr ehensive and speciﬁc, allowing shar eholders to unders tand and form a view on all ma tters to be consider ed at the general meeting; → the CEO , the chair of the boar d of dir ect ors and the chair o f the nomination committee att end the general meeting; and → the general meeting is able to elec t an independent chair f or the gener al meeting. The articles of association o f Elk em does not pr ovide for any deadline for the shar eholders to giv e notice o f their attendance at the gener al meeting. The boar d of direc tors ma y s till encourage shar eholders to giv e such notice within a set deadline. Shareholder s who ar e unable t o attend the general meeting will be given the opportunity t o vo te by pr o xy or thr ough written v oting in a period prior to the general meeting. The company will in this r espect pr ovide informa tion on the procedur e and pr epar e a pr o xy f orm/ written vo ting f orm. The Company will nominat e a person to act as pr o xy . All board member s and members o f the nomination committee ar e encouraged, but no t obliged, t o be presen t at the annual general mee ting. Elkem has chosen not to follow the recommenda tion to vote separat ely on each candida te nominated f or the boar d o f direc tors and the nomination committ ee. The pr ocess of the nomination committee is focused on the combined qualiﬁcation and e xperience of the pr oposed members to the board o f dir ectors and the nomination committ ee and the v oting should ther ef or e also be combined. Deviations fr om the code: V oting on members to the board o f dir ectors and the nomina tion committee tak es place as a combined vot e. Pursuant to the Code, the board o f dir ectors should ensur e that all boar d members attend the gener al meeting. Elk em does not r equir e all boar d members to attend. The chair of board w as r epr esented by the pr esence of the vice chair a t the annual general meeting in 2021, due to unavailability o f the chair . 7 . Nomination committee Accor ding t o section 7 of Elk em ’ s articles o f association, the company shall have a nomina tion committee consisting of two or thr ee members in accor dance with the decision of the general mee ting. The members of the nomination committee ar e elect ed by the annual general meeting. The general meeting has also appro ved guidelines f or the duties o f the nomina tion committee, elected the chairperson and de termined the remuner ation o f the member s of the committee Aft er the gener al meeting in 2021 the nomination committee comprises the f ollowing members: → Sverre S. T ysland / Chair / Practicing lawyer / Independent / Re-elect ed in 2021 f or a term of o ce of one ( 1) y ear until 2022; → Zhu Xiaolei / Committee member represen ting the majority shar eholder / Elect ed in 2020 f or a term of oce o f tw o (2 ) years until 2022; and → Anne Kjølseth Ekerholdt / Committee member / Practicing lawy er / Independent / Re-elected in 2021 for a term o f oce o f one ( 1) year until 2022. The members of the nomination committ ee have been elected to tak e into account the int eres ts of shar eholders in general and to consider and ensur e compliance with the guidelines in section 9 of the Code r egar ding the composition and independence of the boar d of dir ector s. The nomination committee does no t include members of the boar d of dir ector s or the e x ecutive management. The nomination committee shall mak e recommenda tions to the general meeting for the election of shar eholder elected boar d member s and members of the nomination committ ee, and the remuner ation o f the boar d o f dir ectors and the nomination committee. When nominating shar eholder repr esentatives to the board of directors, the nomination committee pr esents r elev ant inf ormation about the candida tes, together with an ev aluation o f their independence. In connection with the nomination committee ’ s w ork with proposing candida tes, and to ensur e that the candidates r epr esent a br oad gr oup of the company’ s shareholder s, the nomination committee is in contac t with the boar d o f direc tors, the CE O and major shareholder s. The nomination committee will consider holding individual discussions with each member of the board o f dir ectors, and furthermor e, ensur e that the board o f dir ectors is composed to comply with legal requir ements and the corporat e governance code. The nomination committee hav e justiﬁed its pr oposal for the board o f dir ectors. While the nomination committ ee presen ts r elevan t inf ormation about each candidate separat ely , the nomination committee focuses on the combined qualiﬁcations and e xperience of the pr oposed members of the boar d of dir ect ors when pr esenting its proposal to the gener al meeting. Inf ormation on ho w to propose candida tes is av ailable on Elk em ’ s webpage. Deviations fr om the Code: The nomination committee justiﬁes its pr oposals combined and not separ ately f or each board member . 8. Composition and independence of the board As of 31 December 2021 the board o f dir ector s of Elk em comprises 10 members, of which se ven o f the boar d members, including the chair , are shar eholder elected. The remaining thr ee boar d members ar e elect ed by the company’ s employ ees. As of 31 December 2021, the board o f dir ector s of Elk em comprise the following persons: → Zhigang Hao / Chair / Repr esenting the majority shareholder / Re-elected in 2021 f or a t erm of o ce of two ( 2) year s until 2023; → Dag Jak ob Opedal / Vice chair / Independent / Remaining t erm of o ce of one ( 1) y ear 2022; → Olivier Tillette de Clermont- T onnerre / Board member / Repr esenting the majority shar eholder / Remaining t erm of o ce of one ( 1) y ear until 2022; → Y ougen Ge / Boar d member / Repr esen ting the majority shar eholder / Re-elec ted in 2021 f or a term of oce o f two ( 2) year s until 2023; → Anja-Isabel Dotzenrath / Board member / Independent / Re-elect ed in 2021 f or a term of o ce of one ( 1) y ear until 2022; → Grace T ang / Board member / Independent / Elected in 2021 as new boar d member for a term o f two ( 2) year s until 2023; → Marianne Elisabeth J ohnsen / Boar d member / Independent / Re-elect ed in 2021 f or a term of oce o f tw o (2 ) years until 2023; → T erje Andre Hanssen / Boar d member / Employ ee repr esentative / Remaining term of o ce of one ( 1) year until the annual general mee ting in 2022; → Marianne F ærø yvik / Boar d member / Employ ee repr esentative / Remaining term of o ce of one ( 1) year until the annual general mee ting in 2022 and; → Knut Sande / Board member / Employ ee repr esentative / Remaining term of o ce of one ( 1) year until the annual general mee ting in 2022. Helge Aasen was r e-elect ed as board member f or a term of o ce of one year at the gener al meeting in 2021, but t emporarily r esigned fr om the boar d with e ect fr om 1 July 2021 t o act as Elk em ’ s interim CE O . Helge Aasen was appoint ed permanent CEO on 18 October 2021 and subsequently r esigned fr om the board with permanen t e ect. Follo wing Helge Aasen ’ s resigna tion as boar d member , the boar d of dir ector s has comprised 10 members. The composition of the boar d of dir ector s is consider ed to attend to the common int eres ts of all shar eholders and meet the company' s need for e xpertise, capacity and diversity . Four of the boar d members ar e women, and none of the members o f the company' s executiv e management ar e members o f the boar d o f dir ec tors. The board o f dir ectors is composed so tha t it can act independently o f any special inter ests. The majority of the shareholder elected board members ar e independent of the ex ecutiv e management and material business connections of the company . Further , f our out of the curren t seven shar eholder elec ted boar d members ar e independent of the company’ s majority shar eholder . Further inf ormation on each o f the board member s is presen ted at  .elkem. com and inf ormation on their recor d o f attendance a t board mee tings can be f ound in the boar d o f direc tors ’ r eport on salary and other remuner ation f or leading per sonnel f or 2021. Members o f the boar d o f direc tors ar e encour aged to own shar es in the company , however , with caution not to let this encour age a short- term appr oach which is not in the best inter ests of the company and its shareholder s ov er the longer term. As o f 31 December 2021, the f ollowing boar d members owned shar es in the company: Olivier Tillette de Clermon t- T onnerr e ( 15,517 shares) , Dag Jak ob Opedal (40 , 000 shar es) , Marianne Elisabeth Johnsen ( 15,000 shar es) and Marianne Fær ø yvik ( 4,950 shares). No deviations fr om the Code. 58 59 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corporate go vernance Risk managment ESG r eport Financial stat ements ESG assurance Contact 9. The work of the boar d of dir ector s The board o f dir ectors ' work follo ws an annual plan, with particular f ocus on objectives, s trat egy and implementation. The plan is e valuat ed and appro ved around the beginning o f each calendar y ear . The boar d of dir ector s also annually e valuat es its performance and expertise, the ev aluation is pr esented to the nomination committee. The board o f dir ectors has implemen ted instructions f or the board o f dir ectors and the e x ecutive management, which are f ocused on determining alloca tion of internal r esponsibilities and duties. The objectiv es, responsibilities and functions o f the boar d o f dir ectors and the CE O ar e in compliance with rules and standar ds applicable t o the gr oup and ar e described in the company’ s annual r eport. The boar d of dir ector s have also implemented pr ocedur es to ensur e tha t members of the boar d of dir ector s and ex ecutiv e personnel mak e the company awar e o f an y ma terial inter es ts tha t the y may have in it ems t o be considered b y the boar d o f direc tors. The board of dir ector s will also be chaired by some other member of the boar d if the board is to consider ma tters o f a material char acter in which the chair o f the board is, or has been, personally involv ed. The board o f dir ectors held se ven boar d meetings in 2021. One of the boar d members was absent fr om two board mee tings and one boar d member w as absent from one mee ting. Ex cept for that, all boar d members attended all boar d meetings in 2021. The instructions for the boar d of dir ect ors stat es how agreemen ts with r elated parties shall be handled. In the even t of a not imma terial transaction be tween the company and its shareholder s, a shar eholder' s paren t company , members of the board, e x ecutive management or closely-r elat ed parties of any such parties, the boar d will arr ange f or a valua tion t o be obtained from an independen t thir d party . A greemen ts with rela ted parties will be disclosed in the annual direc tors ’ r eport. The board o f dir ectors has es tablished an audit committee and a r emuneration committ ee. No deviations fr om the Code. The audit committee The board o f dir ectors has es tablished an audit committee which is a working committee f or the board o f dir ectors, pr eparing ma tters and acting in an advisory capacity . The audit committ ee is r esponsible f or over seeing ﬁnancial r eporting and disclosur e and assists the board o f dir ectors with assessmen ts of the integrity of the company’ s ﬁnancial statemen ts, ﬁnancial r eporting processes and in ternal contr ols, risk management and performance o f the e xternal auditor . The board o f dir ectors has issued ins tructions for the work of the audit committee, and the duties and composition of the committee ar e in compliance with the Norwegian Public Limited Liability Companies Act. The members of the audit committee ar e elect ed by and amongst the members of the boar d of dir ect ors for a term of up to two y ears and comprised the follo wing persons as of 31 December 2021: → Dag Jakob Opedal / Chair/ Independen t → Grace T ang / Member / Independen t → Olivier Tillette de Clermon t- T onnerre / Member / Repr esenting the majority shar eholder Marianne Elisabeth Johnsen w as member of the audit committee until 26 October 2021 when she was replaced b y Grace T ang. The committee members hav e the over all competence requir ed to fulﬁl their duties based on the or ganisation and operations o f the group, a t least one member of the audit committee is competen t in respec t of ﬁnance and audit. The majority o f the members ar e independent of the business. The remuner ation committee The board o f dir ectors has appoin ted a r emunera tion committee which comprised the f ollowing persons as of 31 December 2021: → Zhigang Hao / Chairperson / Repr esen ting the majority shar eholder → Anja-Isabel Dotzenr ath / Member / Independent → Marianne Elisabeth Johnsen / Member / Independent Helge Aasen was member o f the r emuner ation committee until his r esignation fr om the board o f direc tors 1 J uly 2021. Upon his permanen t r esignation, Helge Aasen was r eplaced b y Marianne Elisabe th Johnsen with e ect fr om 26 October 2021. The remuner ation committee is a pr eparatory and advisory committee f or the boar d o f dir ectors in questions r elating to the company’ s compensation o f the ex ecutive managemen t. The purpose of the r emunera tion committee is to ensur e thor ough and independen t prepar ation o f matters r elating to compensation to the ex ecutive per sonnel. The r emunera tion committee puts f orth a r ecommendation for the boar d of dir ect ors ’ guidelines f or r emuneration to senior executiv es in accordance with sec tion 6-16a of the Norwegian Public Limited Liability Companies Act. The members of the r emunera tion committee ar e elected by and amongst the members o f the board of dir ector s f or a term of up to two year s and ar e independent of the company’ s e x ecutive management. The board o f dir ectors has issued ins tructions for the work of the r emunera tion committee. No deviations fr om the Code. 10. Risk management and internal contr ol It is ultimately the r esponsibility of the boar d o f dir ectors to ensur e tha t the company has sound and appr opriate internal contr ol sy stems and risk managemen t sys tems re ﬂecting the ext ent and natur e o f the compan y’s 60 61 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corporate go vernance Risk managment ESG r eport Financial statemen ts ESG assurance Contact activities. Sound risk management is an important tool to cr eate trust, ensur e good envir onmen t, health and saf ety s tandar ds and enhance value cr eation. E v aluation of climate r elated risks and opportunities hav e become an increasingly important part o f Elk em ’ s ov erall risk management pr ocesses. As part of this work Elk em has presen ted a global climate r oadmap in 2021 and also report ed on climate risk s and opportunities accor ding to T ask Force on Clima te-r elated Financial Disclosur es (T CFD ) reporting r ecommendations. Elkem complies with all la ws and r egulations that apply to the group ’s business ac tivities. The gr oup ’ s code o f conduct sets out the ov erall ethical guidelines, which apply to all Elk em emplo yees, members o f the boar d o f direc tors as w ell as those ac ting on Elkem ’ s behalf. The company has a comprehensiv e set o f rele vant corporat e manuals and procedur es, which provide detailed descriptions o f pr ocedures co vering all aspec ts of managing the oper ational business. The pr ocedur es and manuals are con tinuously r e vised t o re ﬂect best pr actice derived fr om experience or adopt ed thr ough regulations. The board o f dir ectors conduc ts annual r eviews o f the company’ s most important ar eas o f exposur e to risk and such areas ’ int ernal contr ol arrangemen ts. A summary of the main risks is pr esent ed in the annual r eport. The board o f dir ectors describes the main fea tur es of the company’ s internal contr ol and risk managemen t sys tems connected to the company’ s ﬁnancial r eporting in the compan y’s annual r eport. This cov ers the cultur e of contr ol, risk assessment, con trolling ac tivities and informa tion, communication and follo w-up. The boar d of dir ector s is obligated to ensur e that it is updat ed on the company’ s ﬁnancial situa tion, and t o continuously evalua te whether the company’ s equity and liquidity are adequa te in terms o f the risk fr om, and the scope of , the company’ s activities, and shall immedia tely tak e necessary actions if it is demons trat ed at any time tha t the company’ s capital or liquidity is inadequa te. The company f ocuses on fr equen t and rele vant managemen t reporting to the boar d o f dir ec tors. The r eports contain matters r ela ted to health and saf ety , market de velopment, operations and ﬁnancial perf ormance. The purpose is t o ensure tha t the boar d o f dir ectors has sucient informa tion f or decision-making and is able to r espond quickly to changing conditions or important inciden ts. Board mee tings ar e held r egularly , and managemen t reports ar e provided to the boar d on a monthly basis. No deviations fr om the Code. 11. Remuneration o f the boar d of dir ectors The remuner ation to the boar d of dir ect ors is deter - mined by the shar eholder s at the annual general meeting based on a pr oposal fr om the nomination committee. The lev el of r emuner ation to the board o f direc tors is consider ed to r eﬂec t an international le vel and the boar d o f direc tors ’ r esponsibility , expertise, the complexity of the company and its business, as well as time spent and the level o f activity in both the boar d of direc tors and an y boar d committees. The remuner ation o f the boar d o f dir ectors is no t link ed to the company’ s performance and Elk em does not grant share op tions to its members o f the boar d o f direc tors. The board member s, or companies associated with board member s, have no t been engaged in speciﬁc assignments for the company in addition to their appointments as members o f the boar d o f dir ectors. The remuner ations f or the period fr om May 2021 until the annual general meeting in 2022 ar e as f ollows: Board of director s: → Chair: NOK 787 ,500 → Vice chair: NOK 590 , 625 → Board member s: NOK 393, 750 → Observers: NOK 196,875 Audit committee: → Leader: NOK 141, 750 → Member: NOK 94,500 Remuneration committ ee: → Leader: NOK 141, 750 → Members: NOK 94,500 The t otal compensation to member s of the boar d of direc tors is disclosed in the boar d of dir ect ors ’ r eport on salary and o ther r emuneration f or leading personnel for 2021. No deviations fr om the Code. 12. Remuneration o f e x ecutive personnel The board o f dir ectors pr epar es guidelines f or the remuner ation o f ex ecutiv e management. These guidelines include the main principles f or the compan y’s remuner ation polic y and contribut es t o Elk em ' s commercial s tra tegy , long-term inter es ts and ﬁnancial viability , which align the inter ests o f the shar eholders and the e x ecutive management. The guidelines are communicated to the annual general mee ting and presen ted in a separa te appendix to the agenda f or the general meeting. A r eport on the salary and other remuner ation to the e x ecutive management will be prepar ed in accordance with the rules o f the N orwegian Public Companies Act and r elev ant r egulations. Perf ormance-r elated r emuner ation of the e x ecutive management in the f orm of shar e op tions, bonus progr ammes or similar ar e link ed t o value cr eation f or shareholder s or the compan y’ s pr oﬁt ov er time. Such performance r elat ed r emuneration is subjec t t o an absolute limit. As at 31 December 2021, 20 ,479 , 772 options wer e outstanding to member s of the manage- ment and certain other k ey emplo yees, of which 4,650 , 000 wer e gr anted in 2018, 2,967 ,500 wer e grant ed in 2019, 5,411,272 w er e grant ed in 2020 and 7 ,451,000 wer e gran ted in 2021. Each option gr anted in 2018 gives the option holder the right to subscribe or purchase one shar e in Elk em AS A at an e x ercise price of NOK 38.52, which is equal to the shar e price at closing on 13 September 2018. Each option granted in 2019 gives the option holder the right to subscribe or purchase one shar e in Elk em AS A at an e x ercise price of NOK 23.53, which is equal to the a ver age of the share price a t closing on the ﬁrs t 20 tr ading day s in July 2019 . Each option granted in 2020 gives the op tion 62 63 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corporate go vernance Risk managment ESG r eport Financial statemen ts ESG assurance Contact holder the right to subscribe or purchase one share in Elkem ASA a t an ex er cise price of NOK 19 . 10, which is equal t o the a ver age of the shar e price at closing on the ﬁrst 20 trading da ys in July 2020 . Each option gr anted in 2021 gives the option holder the right to subscribe or purchase one shar e in Elkem ASA at an e x er cise price of NOK 31.20 , which is equal t o the a ver age of the shar e price at closing on the ﬁr st 20 trading day s in July 2021. The options will ves t over a period of thr ee y ears fr om grant with one- thir d ves ting each y ear . Participants may not in any calendar year r ealise a total gain on e x er cise of options which is in e x cess of two times ( four times for the CEO ) the employ ee ' s base salary . No deviations fr om the Code. 13. Information and communica tions Elkem is under an obligation to continuously pr ovide its shareholder s, Oslo Stock Ex change and the ﬁnancial marke ts in general with timely and pr ecise inf ormation about the compan y and its oper ations. Rele vant informa tion is given in the form o f annual r eports, quarterly r eports, pr ess r eleases, no tices t o the s tock ex change and inv estor pr esenta tions in accordance with what is deemed appr opriate fr om time t o time. Elkem main tains an open and pr oactive polic y for inves tor r elations and has given r egular pr esenta tions in connection with annual and quarterly r esults. The goal is tha t Elk em’ s information work shall be in accor dance with best prac tice at all times and all communications with shareholder s shall be in compliance with the pro visions of applicable law s and r egulations and in consideration o f the principle of equal tr eatment o f the company’ s shar eholders. Inves tor contact/inv estor r elations ( IR ) activities ar e conducted in accor dance with the IR policy and by the IR t eam only . The IR team comprises the CEO , the CFO and the VP Finance and Investor r elations. The company publishes an annual, electr onic ﬁnancial calendar with an o vervie w of dat es f or important even ts, such as the annual gener al meeting, int erim ﬁnancial reports, public pr esentations and payment of dividends, if applicable. In addition t o the boar d o f direc tors ’ dialogue with the company’ s shar eholders at gener al meetings, the board o f dir ectors pr omo tes suitable arr angements for shar eholders to communica te with the company at other times. The boar d o f dir ec tors hav e delegated this task to the IR team. Elk em has held r egular electr onic inves tor meetings in connection with each of the quarterly presen tations in 2021 and att ended sever al digital inves tor conf er ences. The IR team has conducted electr onic meetings with bo th domestic and international in vestor s e.g. fr om Gr ea t Britain, United States, Germany , Sweden, Switzerland e tc. The plan is t o arrange r egular inv estor meetings and capital marke t updates when it is consider ed e xpedient in or der to k eep the mark et up-to-dat e about the compan y’ s developmen t, goals and stra tegies. No deviations fr om the Code. 14. T ak e-ov ers Elkem has one major shareholder contr olling 52.9% of the shares as a t 31 December 2021. Elk em has not been subject to any tak eover bids in 2021. In the e vent o f a tak eover bid, the boar d o f dir ec tors and ex ecutive managemen t each have an individual responsibility to ensure tha t the company’s share- holders ar e trea ted equally and tha t ther e ar e no unnecessary int erruptions to the company’ s business activities. The boar d of dir ect ors has a particular responsibility in ensuring that the shar eholders hav e sucient inf ormation and time t o assess the o  er . In the e vent o f a tak e-over pr ocess, the boar d of direc tors shall abide b y the principles o f the Code, and also ensure that the f ollowing tak e place: → the board o f dir ec tors will no t seek t o hinder or obstruct any tak eov er o  er f or the company’ s operations or shar es unless they hav e valid and particular r easons for doing so; → the board o f dir ec tors shall no t ex er cise mandates or pass any r esolutions with the intention o f obs tructing the tak eo ver o er unless this is appr ov ed by the general meeting f ollowing announcement o f the o er; → the board o f dir ec tors shall no t undertake an y actions intended to giv e shar eholders or other s an unreasonable adv antage at the e xpense of o ther shareholder s or the compan y; → the boar d of dir ector s shall not ent er in to an agree-men t with any o er or tha t limits the company' s ability t o arrange o ther o  ers for the company' s shar es, unless it is self -eviden t tha t such an agreemen t is in the common in ter est o f the company and its shareholder s; → the board o f dir ectors and e x ecutive managemen t shall not institut e measures with the int emtion of pro tecting the personal in ter ests o f its member s at the expense o f the in ter ests o f the shar eholders; and → the boar d of dir ector s must be aw are o f the particular duty it has for ensuring that the v alues and inter ests o f the shar eholder s are pr o tected. In the e vent o f a tak e-over o  er , the boar d of direc tors will, in addition to complying with r elev ant legislation and r egulations, seek to comply with the recommenda tions in the Code. This includes obtaining a valuation fr om an independent e xpert. On this basis, the board o f dir ectors will mak e a recommendation as to whether or not the shar eholders should accep t the o er . A tak eo ver pr ocess gives rise to a particular duty of care to disclose in forma tion, wher e openness is an important tool f or the boar d of dir ector s t o ensur e equal trea tment o f all shar eholder s. The boar d of dir ector s shall strive to ensur e that neither inside inf ormation about the compan y , nor any other inf ormation that mus t be assumed t o be rele vant f or shar eholders in a bidding process, r emains unpublished. There ar e no other written guidelines f or pr ocedures to be f ollow ed in the e vent o f a tak eover o er . The company has not found it appr opriat e t o draw up an y explicit basic principles for Elkem’ s conduct in the ev ent of a tak e-over oer , other than the actions described above. The board of dir ector s otherwise concurs with what is stat ed in the Code r egar ding this issue. No deviations fr om the Code. 15. Auditor The board o f dir ectors is r esponsible f or ensuring tha t the board and the audit committee ar e pr o vided with sucient insight into the w ork of the auditor . In this regar d, the boar d of dir ect ors ensur ed that the auditor submitted the main f eatur es o f the plan for the audit of the company to the audit committee in 2021. F urther , the board o f dir ectors in vited the auditor to participate in the board mee ting tha t dealt with the annual accounts. At these meetings, the auditor (i) reports on any ma terial changes in the compan y' s accounting principles and k ey aspec ts of the audit, (ii) comments on any mat erial estimated accoun ting ﬁgur es, and (iii) r eports all mat - erial matters on which ther e has been disagr eement between the auditor and the ex ecutive management of the company . Once a y ear , the boar d of dir ector s r eviews the com- pany' s internal con tr ol procedur es with the auditor , including weaknesses identiﬁed b y the auditor and proposals f or impr ovemen t. In this r egar d, a r evie w of the company' s internal con tr ol procedur es with the auditor , including weaknesses identiﬁed by the auditor and proposals f or impr ovemen t, was carried out by the board o f dir ectors in 2021. In order to ensur e the auditor' s independence o f the company' s e xecutiv e management, the boar d of direc tors has established guidelines in r espect of the use of the auditor by the management for services other than the audit. No deviations fr om the Code. The board o f dir ectors o f Elk em ASA Oslo, 8 Mar ch 2022 Helge Aasen, CEO , Elkem A SA Zhigang Hao Chair o f the Board Dag Jak ob Opedal Vice chair Marianne Elisabeth Johnsen Board member T erje Andre Hanssen Board member Marianne F ærø yvik Board member Knut Sande Board member Y ougen Ge Board member Anja-Isabel Dotzenr ath Board member Olivier Tille tte de Clermont- T onnerre Board member Grace T ang Board member 64 65 Annual r eport 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corporate go vernance Risk managment ESG r eport Financial statements ESG assur ance Contact 66 67 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corporate go vernance Risk managment ESG r eport Financial stat ements ESG assurance Contact Ov er v i e w o f ma i n risk ar eas Elk em’ s board and management ha ve a str ong focus on risk management to monitor the gr oup ’ s risk pr o ﬁle and t o ensure tha t adequate risk management pr oces- ses are in place. The board and management consider risk management to be a k ey part of Elk em ’ s corpor ate governance s tructur e and important to cr eate trust and to enhance value cr eation. Elkem carries out a y early risk mapping pr ocess based on interview s with divisions and corporat e sta funct - ions. The objective is to identify the top ﬁve t o ten risks for each division and corpor ate function. Each risk is evalua ted based internal and e xternal conditions and takes deemed lik elihood, estimated ﬁnancial impact, time horizon and mitigating ac tivities into considera tion. The individual risks ar e then or ganised into cat egories and aggrega ted on gr oup lev el.. The main purpose is to gain a thor ough under standing of the gr oup ’ s risk proﬁle and ﬁnancial risk tolerance. Risks ar e split int o ﬁv e main categories; str ategic risk s, ﬁnancial risks, r aw material risk s, pr oduction and pr ocess risks, and mark et and pr oduc t risks. The risk ca tegories are s tructur ed accor ding t o Elk em’ s value chain. Ev aluation o f ESG and climate r elat ed risks and opp- ortunities have become an incr easingly important part of Elk em ’ s ov erall risk management pr ocesses. ESG and climate ar e integr al parts of the ﬁve risk cat egories, as these f actors will impac t stra tegy , ﬁnancial conditions and all parts of Elk em ’ s value chain fr om ra w materials to ﬁnished pr oduc ts. As part of this work, Elk em has presen ted a global climate r oadmap in 2021 and also report ed on climate risk s and opportunities accor ding to T ask Force on Clima te-r elated Financial Disclosur es ’ reporting r ecommendations. > 7 000 emplo yees 30 plants worldwide presence Strategic risk s Financial risks Production and process risk s Mark et and product risk s Raw material risk ESG risks 68 69 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corporate go vernance Risk managment ESG report Financial sta tements ESG assurance Con tact Risk de scri p t i ons 1. Black Swan 2. Sales vol umes 3. Sale s prices 4. Raw ma ter ial access and supply chain 5. Organic gro w th pro jects and M& A “Black swan ” describes an unpr edict ed event which can cause ca tastr ophic damage t o an economy . Regardless of ho w str ong risk management pr oce- dures companies ha ve, it is impossible to pr epar e for e very scenario. The ﬁnancial crisis in 2008 and Covid-19 in 2020 wer e such scenarios. “Black swans ” demonstr ate the need for gener al risk pr epar edness and the need f or proac tive, pr o fessional and agile r eaction to un for eseen and sev er e incidents. It also shows the importance of gener ally r obust ﬁnancials t o enable compa- nies t o endure une xpect ed changes in marke t conditions. Elk em has a r obust business model with a solid global f ootprin t and well diver siﬁed end-mark ets. The ﬁnancial position is also str ong. Elkem 's sales volumes ma y v ary depending on industry conditions and competitive en vironmen t and constitute one o f the main risk s a ecting the group ’s ﬁnancial perf ormance. Elk em’ s integrated v alue chain pr ovides ﬂexibility to change pr oduction betw een produc t gr oups and between commodities and specialties. This diversiﬁca tion, combined with long- term customer r elationships and div ersiﬁed end-mark et, is e xpected to mitiga te the volume risk e xposur e. The sales prices f or Elk em ' s pr oducts hav e traditionally been volatile, depending on economic cycles and/ or the mark et balance. In commodity marke ts, the sales prices are typically closely correla ted to the demand developmen t. Sales prices are consider ed to be one of the main risks a ecting the group ’s ﬁnancial perf ormance. Increased specialisa tion is expect ed t o r educe price volatility and mitigate the price risk e xposur e. Global supply chains could be e xposed to disruptions due to pandemics, cyber attack s and availability o f tr ansportation. In addition, access to high quality r aw materials is critical to main tain pr oduction, particularly o f high-grade specialty materials. There have been se ver al incidents in 2020 and 2021 causing disruptions in global transportation and supply chains, e.g. blocking of the Suez canal, lack of container capacity , shortages of semi- conductors and po wer disruptions. Incr eased transporta tion costs and/ or loss of sales/ customer s could have signiﬁcan t ﬁnancial impac t. Elkem has thorough sales and planning pr ocesses, a diversiﬁed raw mat erial sourcing stra tegy , and globally connected supply chains t o mitigate risk e xposur e. Elkem has a gr owth strategy based on or ganic gr owth and selected M& A transactions. Lar ge inv estment pr ojects carry an inher ent risk o f e.g. cost overruns, dela ys and underperf ormance. In addition, M&A tr ansactions carry the risk tha t an acquir ed entity does no t deliver pr o ﬁt or syner gies as antici - pated, or that due diligence pr ocesses hav e f ailed to identify poten tial claims or o ther obligations, This could reduce the gr oup ’s pr oﬁtability and impact the liquidity and ﬁnancing position. Elk em seeks to mitiga te the risk by diligent projec t management and thor ough due diligence processes, comprising pro f essional support fr om legal, ﬁnancial, audit and industry expertise. 6. Regulatory frame wo rk conditions Elkem has oper ations in man y countries and ma y be e xposed to changes regula tory fr amework conditions, which could a ec t competitive position and access t o marke ts. The main r egulatory and political risk s f or Elk em include: × changes in CO 2 allowances and CO 2 compensation × changes t o anti dumping duties and e xport tax es × r estrictions and sanctions limiting commer cial trade e.g. be tween China and the US × export con trol or sanctions imposed by countries, r egions or interna tional organisa tions × r estrictions on silicones due to e.g. listing o f D4, D5 and D6 as Substan- ces of V ery High Concern by The E uropean Chemicals Agency Elkem is w orking sy stematically to mitigate these risk s. When it comes t o climate and CO 2 regula tions, Elk em has a str ong position based on r enew- able energy , but also works consis tently t o impr ove the position thr ough a new , ambitious climat e r oadmap. Elk em’ s diverse geographical pr esence and integr ated value chains in E ur ope and Asia pr ovide r elativ ely good r esilience tow ards v arious trade tensions and r estrictions. In or der to meet s tricter requir ements regar ding D4, D5 and D6, Elk em has on-going projec ts and actions in to r educe the r esidual con tent o f these substance and hence address the envir onmental concerns. 70 71 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corporate go vernance Risk managment ESG report Financial sta tements ESG assurance Con tact 8. En vi ron ment and clima t e 9 . Compliance a nd legal risk s Elkem 's pr oduction units ar e subject to en vironmen tal r egulations. Opera ting within these r egula tions will in most cases constitute a license to oper ate. In addition, Elk em’ s industrial activities are e xposed to climate r ela ted risks and opportunities. Climate risk s comprise both r egulat ory , transitional and physical risk s e.g. extr eme weather , drought, ﬂooding, ocean rise e tc. Stricter r equir ements ar e e xpected due to incr eased focus on envir onmen tal and climate e ects. Elk em 's inher ent emissions and dischar ges ar e subject to stricter policies in man y countries. Gener ally , Elkem has pr oduction facilities located close to sea or river , or near cities or local communities. Elkem is w orking consisten tly to limit emissions b y focusing on sus tainable sourcing o f ra w materials, pr oduction based on r enew able ener gy , extensive energy r ecov ery pr ojec ts, investmen ts t o r educe dust and NOx emissions and use of biocarbon as r eductant in smelting pr ocesses. Reduc tion of was te is an important component o f Elk em Business Sy stem ( EBS ) . Unacceptable business beha viour such as corrup tion, br each of competition law , br each o f sanc tions, human rights violation or o ther une thical activities of employ ees and/ or business r elationships ar e inher ent risk s t o a corporat e. Also, litigation in connec tion with contracts and/ or intellectual pr operty could pose risks. The ﬁnancial impact o f such incidents could be substantial, bo th in t erms of r eputation and ﬁnancial losses. Elk em has global opera tions, which include countries with high corruption risk. Elk em has a high focus on compliance and internal contr ol. Guidelines for ethical conduct, training o f all employees and visible and accessible channel f or r eporting misconduct ( whistle blower ) are in place. Insurance co ver is in place for D&O , Emplo yment Practices Liability and Crime. 10 . Cyber and IT risk IT is used f or virtually all business-r elated activities, e.g. sales, pr oduction planning, procur ement, maintenance, ﬁnance and accounting. An IT incident or cyber attack could ther ef or e cause sev ere disrup tions to Elk em ’ s operations. Good IT procedur es with high f ocus on security , up to date equipment and fr equen t softw are upda tes ar e the main actions to mitigate and pre vent these risk s. Elk em has a cyber insurance in place to mitiga te negative ﬁnancial impact. 7 . Health a nd saf et y Elkem 's working en vironmen t includes signiﬁcant inher ent risk o f injuries or even fa talities, and ther e are risks o f catastr ophic ﬁr es and explosions in connection with high tempera ture smelting pr ocesses, molten metals, chemical processes, elec trical equipment and other po tentially hazar dous incidents. The saf ety of our emplo yees and contr actor s is Elkem 's main priority . Elkem uses considerable r esour ces to identify hazar ds and imple- ment appr opriate measur es to av oid incidents and to r educe risk to an acceptable lev el, including saf ety instructions, training, ph ysical pr ot ection and adherence to EBS principles. An insurance progr amme rela ted to property damage, business int erruption and other insur ance lines ar e in place t o mitigate risk s and ﬁnancial e xposur e. 72 73 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corporate go vernance Risk managment ESG report Financial sta tements ESG assurance Con tact ESG report 20 21 Redu cing emi ss ions t o w a r ds n e t z e r o w h i l e g r o w i n g s u p p l i es t o t he gr een tra nsit ion 74 75 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact El k e m ´ s ESG agenda K e y t arget s an d highlight s from 2 0 2 1 Announcements and ev ents → Elkem es tablished Vianode as a new company and opened the pilo t plant in Kristiansand, N orway dedicated to str ategic gr o wth opportunities f or advanced batt ery mat erials → Strat egic expansion o f NOK 3,8 billion a t Xinghuo plant, China announced, f or incr eased gr owth, str engthened cost position and impr ov ed envir onmental pr oﬁle → Opening of Elk em ’ s sta te-of -the-art r esearch and innova tion center , A TRiON, in L yon, Fr ance → Elk em invest ed NOK 350 million to upgr ade and expand cost compe titive and sustainable pr oduc tion of silicones at Roussillon, F r ance → Elk em launched a global climate r oadmap to r educe emissions t owar ds net z er o while gr owing supplies to the green transition → Elkem announced the testing of the world’ s ﬁrst carbon captur e pilot f or smelters in Rana, Norw ay → Elkem published its ﬁrs t T CFD climate risk report → Elkem ’ s and Kvit ebjorn Energi’ s NOK 1.2 billion energy r ecov ery plan t opened in Salten, Norw ay by Norwegian prime minist er → Elkem r eceived the highest r ecognition, Platinum, for sustainability transpar ency fr om Eco V adis, for the ﬁrst time Elk em is one o f the world’ s leading suppliers o f silicon-based advanced material solutions shaping a be tter and mor e sustainable futur e. The company dev elops silicones, silicon pr oducts and carbon solutions by combining natur al raw ma terials, r ene wable ener gy , and human ingenuity . Elk em helps its customer s cr eate and impr o v e essential innov ations lik e electric mobility , digital communications, health, and personal car e as well as smarter and more sustainable cities. A t the cor e of Elkem is people and saf e sustainable oper ations conduct ed r esponsibly and with e xcellence. Elk em shall be an attr active emplo y er and at the for efront o f envir onmentally friendly opera tions within our industry . 22% biocarbon sou rces in produ ction 3 .7 to tal recorda ble injur y rate >80 % of pr oductio n use renew able energy 78 % had an annual dev elo pment discussion 76 77 Annual report 2021 Elkem His tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corporate governance Risk managme nt ESG report Financial sta tements ESG assurance Contact 76 77 Annual report 2021 A more detailed versi on can be f ound on our w ebsit e  The Elk em climat e ro admap E l k e m is c o m m i t t ed t o r educe emis sions and t o c o n t r i b ut e i n l i n e w it h t h e Paris agree m ent Reducing our emissions Supply to the tr ansition Enable circular economics Achieving fully climate neutr al pr oducti- on thr oughout our value chain By 2031: Reducing absolute emissions by 28% fr om 2020-2031 while gr owing the business - delivering 39% impr o- vement in pr oduct f ootprin t By 2050: Achie ving fully carbon neutral production (z er o f ossil emissions) globally More in formation on page 96 Pro viding the adv anced material solutions requir ed to enable the gr een transition Grow supplies o f advanced mat erials to green mark ets such as bett er buildings, electric vehicles and r enewa- ble energy Build new business in green mark ets such as battery ma terials, biomass and energy reco very More in formation on page 80 Enabling more cir cular activities in our operations, pr oducts and mark ets Increase rec ycling in our own operations Increase rec ycling with our customer s Develop the eco-design of innov ative products More in formation on page 82 T o manage clima t e change, it i s impor tant t o understand the compa n y' s cli mat e risk. Elk em has implement ed the cl ima te ri sk frame wo rk T ask f orce on Cli mat e- rela ted Fi nancial Dis closures ( TC FD ) in 20 21, and pub lished the ﬁrst repo r t in December 20 21. In t he report, you can re ad ho w El k em w ork s on go v ernance, stra t egy , risk management a nd monit ors target s and metrics . T ak e a look  Net zero 2020 baseline Biomass in smelters More China renew ables Low-carbon supply chain 2031 target CCS at smelters CCU, r ecycle, other 2050 target D E -39% B C Elkem will r educe fossil CO 2 emissions in line with the Paris agr eement, contributing to limit the long- term tempera ture incr ease to well below 2°C . By 2031, we will: → Reduce absolute emissions* b y 28% - baseline 2020 → Delivering 39% impro vement in pr oduc t f ootprin t → By 2050: Achiev e full carbon-neutr al pr oduction (zer o fossil emissions) globally . * T otal global f ossil CO 2 emissions, scope 1 and 2 ** Main product a ver age f ossil CO 2 emissions, scope 1-3 (to ga te ). Our r oadmap to clima te neutral pr oducts The three p illars o f the cl ima te r oad map A 78 79 Annual r eport 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 78 79 Annual r eport 2021 Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact Our sus tain abilit y ac tion: Supp ly ing the gr een tra nsit ion All the known technological solutions f or the gr een transition r equir es advanced ma terials, and silicones, silicon and carbon solutions are critical enabler s. This is one of the most signiﬁcant w ays f or Elk em t o have an impact; by supplying the gr een tr ansition towar ds a lo w carbon futur e. Ther e for e, one o f the thr ee pillars o f the Elkem clima te r oadmap is to gr ow the mark et shar e in the green tr ansition. The demand for Elk em ’ s pr oducts is driven by global megatr ends such as sus tainability and clean energy demand gr owth, e.g. solutions f or the electriﬁcation o f tr ansportation, incr eased ener gy stor age and batteries, r educing emissions and ener gy consumption, and the r eplacement of oil-based ma terials. Elkem aims to con tinue gr owing our supplies of adv anced materials to global mark ets b y 5-10% per year . The table belo w has identiﬁed some of the ar eas where Elk em provides pr oduct that abat es or r educes emissions, enhances energy ecienc y or o ther applications that enables the gr een tr ansition. In 2022, we will determine further how eligible and aligned Elk em is with the crit eria f or the EU T axonomy . In 2021, 26% of Elk em ’ s r ev enue came fr om pr o- ducts used in low-carbon applications or aba ted emissions in use. used widely in healthcar e applications f or their e x cellent biocompatibility , extreme chemical inertness, h ypo- allergenicity , highly adapt ed physical pr operties and durability in a wide range o f envir onmental conditions. The Si-O-Si bonds tha t mak e up silicone ’ s chemical backbone are e xtr emely str ong, r esulting in the material’ s high dur ability le vels. P artners who serve the healthcare sec tor use a wide range o f silicone produc ts t o mak e medical parts and devices supporting caregiv ers and patien ts in the oper ating r oom. Additional beneﬁts of silicones ar e their ability t o be sterilised with a variety of me thods, their lubricating properties, and their resis tance t o bacteria. Compared to o ther carbon-based materials, silicones are mor e durable and prov ok e less skin irritation, meaning a longer life span o f silicone produc ts and lower r eplacement r ates, ther ef or e contributing to our 3R approach ( rec ycle, r educe, r euse) . F or instance, manufactur er s of pr osthetics de vices choose silicones for their mechanical pr operties and comf ort f or end- users. In addition, silicones ' good durability means it lasts longer , can be washed and r eused over a longer period of time, r educing wast e and impro ving the usability o f such k ey devices for the patients. Silicone and silicones to solar panels 1. 1% Product group Revenue share Foundry products to wind turbines 0.9% Unit % T otal 26% Silicones to EV s 2.5% Silicones to constructions 15% Carbon to aluminium 1. 7% Silicones to aluminium to cars 3. 1% Carbon to silicon 0.4% Microsilica to construction 1.2% Enabling the electrical mobility Vianode is a new company that Elk em established in 2021. The company is dedicated to str ategic gr owth opportunities f or advanced ba ttery ma terials. It aims to become a leading pro vider of anode ma terials ’ solutions to the f ast -gro wing battery industry with the pr oduction of syn thetic graphit e. The synthetic gr aphite business case: Reducing emissions by ~94% t o near zer o and making better battery materials with: → Highly innov ative clean pr ocessing technology and rene wable pow er mix → Advancing r esearch on silicon-gr aphite composites for higher ener gy density → Collaborative e orts to de velop e ectiv e and ecient batt ery ma terials r ecycling. Supplying medical solutions in a sustainable world Pro viding top quality and long-lasting solutions to healthcare pr oducts will be increasingly importan t in a low-carbon world. Medical pr of essionals r equir e equipment and devices that withstand the harsh r ealities o f their envir onment, including the extr eme conditions o f sterilisation pr ocesses. M edical-grade silicones ar e 4 x mo r e silicone produc ts in EV s compared t o ICEV s ≈ 50 % annual gro wth expec ted for EV s 15% anode graphite in battery cell In 2021, xx% Elkem ’ s r evenue came fr om products used in lo w-carbon applications or abate emissions in use. Here is ho w si licones hel p pat ients with Co vi d- 19  80 81 Annual r eport 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 80 81 Annual r eport 2021 Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact Eco-design 80% of a pr oduct´s envir onmental impac t is determined at the design stage. E co-design reduces the amount o f material and ener gy used. Reprocessing Mix & Fix ™ Cent er centr es ar e set up to analyse customer samples to see if they are r eusable or can be repr ocessed. Chemical r ecy cling a projec t f ocused on r ecov ering and r ecycling sillicones in all physical f orms, reducing the carbon f ootprin t up t o 65%. Eco- for ward silicones W e develop per sonal care pr oducts with sustainable and eco- friendly r aw mat erials – lik e PURESIL ™ ORG 01. Four e xamples o f our work: REUSE – Microsilica® Fr om discar ded b y-pr oducts to high-perf ormance material → Silica fume is a discar ded by -pr oduct o f the produc tion of silicon or ferr o-silicon → Considered as a k ey ingr edient in many construction materials to achiev e high-performance rheology , str ength and durability → Building companies are sa ving on cement and wa ter . REC Y CLE – REPOS (REssourcement POlymèr es Silicones) A collabor ativ e pr oject with an objective to r educe w aste and develop a cir cular economy appr oach o f silicones → Setting up a value chain ar ound the r ecy cling of silicone produc ts, r evolving ar ound the tr eatment o f waste and in ternal downgr aded pr oducts → A 3- year -long local collaborativ e pr oject r euniting members of the LPSE ( L yon Polymer Science and Engineering) setting up a ﬂexible, selectiv e, and produc tive unit at lo w t emperatur e for depolymerisation of silicone ma terials → A r eduction of mor e than 65% of w aste and carbon foo tprint is estimat ed on pr eliminary studied perimeter . Reduce Recy cle Reuse Circular e co nom y T o succeed with the Elk em climate r oadmap  , the company needs to enable and cr eate circular economies. T o Elkem, cir cular economy " consists in pr oducing goods and services in a sustainable wa y b y limiting the ex cessive consump tion of r esour ces and the pr oduction of was te. It is about moving fr om a thro waw ay society to a mor e cir cular economic model” . The circular economy is an economic model tha t aims at genera ting sustainable and local activities and employment. While in natur e, e verything work s in a more cir cular way ( food chain, the was te of some is the resour ces of other s), w e hav e dissociated ourselv es from this model with the rise of a “consumer society” in the early 20th century . Thus, leading to a linear model: extr act, manufac tur e, consume, dispose. The circular economy is built in opposition t o this model. Its fundamental principles ar e pr eserving r esour ces, envir onment, and health, allowing the economic and industrial dev elopment of territories, and r educing w aste. At Elk em, the objectiv e is t o incr ease cir cularity . Through close partner ships with customer s and resear ch Elkem’ s goal is to standar dise a 3R appr oach, based on reuse, r educe, and rec ycle . → Reduce: We r educe our envir onmental impact b y designing produc ts tha t use f ew er f ossil r esour ces, are manuf actur ed with less ener gy-in tensive processes or through longer lif e to r educe the need to r eplace → Reuse: We r euse or repurpose subs tances, materials, or pr oducts in and fr om our pr oduction or commer cial cycles that ar e s till functional → Recy cle: W e manage our wast e and the end-o f - life o f our produc ts t o tr ansf orm them into r aw materials for ne w produc ts. Some ex amples that illustr ate Elk em ' s commitment REDUCE – ELSEAL ® T ype G New pr oduct mak es aluminium pr oduction gr eener and saf er b y remo ving harmful e xposur e t o car cinogenic P AH (poly cyclic ar oma tic hydr ocarbon) compounds (classiﬁed as a health hazar d and comply with the handling of was te material) . → No P AH nor other hazar dous substances → No emissions of P AH during use and worker s will not be e xposed t o these po tentially harmful compounds → Pro ven perf ormance under challenging electr olysis conditions wher e the combination o f high t emperatur e and corr osiv e bath is a tough envir onment → Odourless, easy t o handle, impro ved s torage stability and does no t form an y harmful w aste. 82 83 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 82 83 Annual report 2021 Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact ES G repor t ing and go v ernance Elkem aims to be a leading compan y in the transition towar ds a clima te- friendly ma terials industry . Our mission is t o o er advanced mat erial solutions tha t shape a better and mor e sustainable futur e. We have a clear compan y str ategy to str engthen our competitive position thr ough specialisation and gr owth. Envir onmental, social and gov ernance (ESG ) r epr esent a signiﬁcant part of our str ategy . W e belie ve that saf e and envir onmentally friendly pr oduction will be ev en more critical in the futur e, and that together with our customers and partner s we can cr eate tomorr o w' s solutions. Elkem is committ ed t o develop its business in accordance with the UN Sustainable De velopment Goals and the P aris agr eement. This is an important commitment to society at lar ge; we will dev elop produc ts needed f or the gr een tr ansition, and minimising the nega tive envir onmental and social impact of these pr oducts. The world needs or ganisations, such as Elk em, to tak e responsibility for their value chain and elimina te/ r educe their total carbon footprin t to succeed in the transition towar ds a gr eener and mor e just socie ty . Materials Materials should be r ecy clable, long-lasting, and pr oduced with low gr eenhouse gas ( GHG) emissions. Materials should also be produced r esponsibly and ethically . T o achieve this, society needs mor e innov ativ e and ecient solutions. The incr easing demand f or low-carbon technologies and pr oducts such as solar panels, batteries and electric vehicles ar e impacting and incr easing the demand f or sev eral o f Elk em’ s pr oduct segments within silicones, silicon and f err oalloy s. Elkem ’ s products ar e building blocks for the low-carbon society and ar e critical for the gr een transition, e xamples include r enew able energy , energy stor age, mobility solutions, infras tructur e impro vemen ts, digitalisation, and healthcar e. Our ambition is t o cut GHG emissions, while accelerating the developmen t of sustainable solutions thr ough gr owth. T o support this ambitious goal, Elk em launched a global climate r oadmap in 2021 to r educe the company’ s net emissions t o zer o by 2050 . Sustainability r eporting About this report The annual ESG report is part o f Elk em ’ s annual r eport and has been appro ved b y the boar d of dir ect ors. The ESG report also functions as a s tand-alone r eport. If you want to learn mor e about Elk em ’ s business ar eas and stra tegy , you can ﬁnd this in forma tion on pages 18- 25.  Reporting frame work Elkem r eports in accordance with the Global Reporting Initiative ( GRI) Standar ds ( Core option) and consider this report to be our Communication of Pr ogr ess ( COP ) to the United Na tions Global Compact ( UNGC ) . Elkem discloses in forma tion thr ough several r eporting sys tems to incr ease tr anspar ency and ensur e standar dised r eporting. In the las t y ears, the company has f ocused its e orts on the business sustainability rating, E co V adis, and the envir onmental disclosur e sys tem, Carbon Disclosur e Pr oject ( CDP ). In 2021, Elkem, f or the ﬁrs t time, implemen ted and r eported according t o the recommendations fr om the T askfor ce on Climate-r elat ed Financial Disclosures (T CFD ) . PWC has undertak en a limited assurance on the ESG reports alignmen t with the GRI Standar d. The GRI index can be found online and mor e information about the limited assurance can be f ound in the assur ance statemen t.  ECO V ADIS: Platinum T op 1% performer on sus tainability tr ansparenc y . CDP: Leadership A- In 2021, CDP grant ed Elk em an A - on Climate disclosure and B- on W at er disclosure. ESG 100 A- Rating published by the Gov ernance Group: A score sho ws e x cellent ESG r eporting with a clear stra tegy and speciﬁc, quan tiﬁable tar ge ts. ESG and sustainability ar e integrated int o Elk em’ s over all business str ategy , and the r esponsibility sits with the collective boar d. ESG-r elated risk s and opportunities are also part o f boar d meeting agendas. The boar d follo ws up and r eview s the gr oup ’s ESG str ategy on an annual basis as part of the r egular stra tegy pr ocess. In addition, the boar d o f direc tors r eceiv es informa tion about the compan y’s ESG perf ormance and pr ojects through r egular reporting and boar d mee tings. The Chief Financial Ocer ( CFO ) is the most senior management position r esponsible f or ESG r elated topics. The CFO is r esponsible f or managing the ESG steering committee, the corpor ate body r esponsible f or ESG, which consists of member s fr om the corpora te management. The ESG Steering Committee r eports to the Chief Ex ecutive Ocer ( CEO ). Elkem ’ s business strategy and corpora te gov ernance policy ar e approved b y the boar d o f dir ec tors and pro vide the over all framew ork f or the gr oup ’ s str ategic direc tion and gov ernance structur e. In addition, the corporat e management team or the ESG s teering committee will typically appr o ve other policies and procedur es. Elkem adher es to the principles o f “the Norwegian Code of Prac tice f or Corpora te Gov ernance ” issued by the Norwegian Corpor ate Go vernance Boar d ( “NUES” or the “Code ” ). The objective of this Code is that companies listed on r egulated mark ets in Norway will practice corporat e governance that r egulates the division of roles be tween shar eholders, the boar d of dir ect ors and ex ecutive managemen t mor e compr ehensively than is requir ed by legislation. Further inf ormation about our corporate governance can be f ound in the bord o f dir ectors ’ r eport on corpor ate governance in the annual r eport.  Elkem has dedica ted gov erning documents and sev eral tools to ensur e tha t our or ganisation understands our priorities and requir ements in the ar eas of sustainability and social responsibility . For e xample, the Elk em code of conduct was de veloped to ensur e that any person acting on Elkem ’ s behalf does so ethically and according to the standar ds speciﬁed in Elk em’ s employee handbook. It applies t o all Elkem emplo yees. The code of conduct is based on the principles o f honesty and r espect f or other people. The code of conduct is a vailable online her e.  Remuneration The CEO and corpor ate management ha ve performance-based compensa tion based on deﬁned metrics. The metrics ar e de ﬁned according to ar eas o f responsibility . The performance r ela ted incentives ar e limited to 100% of base salary f or CE O and 50% of base salary for the corporate managemen t. If the compan y becomes awar e o f serious wr ongdoing or misconduct, clawback is possible under certain conditions. The clawback pr ovision has been implement ed f or 2022. ESG/ sustainability gov ernance Board of director s General meeting VP EHS AND CSR EGS oce SV P T echnology Chief ﬁnancial ocer SV P Silicones SV P Carbon SVP Human Resources SVP Innova tion and R&D SVP Business Development Chied Executiv e Ocer SVP Silicon Products * functions mark ed in green ar e members of the ESG s teering committee 84 85 Annual r eport 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 84 85 Annual r eport 2021 Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact Strategy Map sustainability/ ESG areas that are important to our business and stak eholders, and prioritise an annual list of impro vements. The Elk em house The Elkem house illus tra tes the building blocks o f Elkem ’ s business model. Our mission and values repr esent the f oundation to support our working practices and r epr esent our cultur e and how w e work. Our mission, values, and working pr actices ar e interlink ed and support our corporat e stra tegy . T arge ts Anchoring with responsible in the organisation, se t targets and de velop plans to improv e. Action Corporate ESG functions support and advises line functions in impro vement work. Reporting T rack progr ess in accordance with targets se t, and communicate transpar ently . Perf ormance Ev aluate performance to be able to map, adjus t and prioritise again. Corpora te stra teg y W orking practices: Va l u e s : Mis sion: Our mission is to pr o vide advanced mat erial solutions shaping a better and more sus tainable future, adding v alue to our stak eholders globally . EBS: EHS: ESG: Elk em Buisness System Respect Inv olvement Precision Continuous impro vement Envir onment Health Safety Envir onment Social Governance Culture Foundation Our appr oach to w orking on ESG The ESG oce r eports to the ESG steering committee and collaborat es closely with business units and divisions, t o re view and addr ess r elev ant sustainability and ESG issues. As part of the Elk em Business System ( EBS ) , it is our philosophy and belief that what gets measur ed gets managed. An essen tial part of this work is to advise on and impr ov e k ey performance indica tors that is r evie wed by corpoora te management. The metrics for the CEO f or 2021 include: → Health and saf ety performance with tar get o f zer o high severity (lif e changing) incidents → Envir onmental perf ormance tar get o f zer o major envir onmental cases → Envir onmental, Social and Gov ernance (ESG ) performance based on impr o ved ra tings fr om deﬁned ESG ra ting agencies. The management bonuses f or 2021 was link ed to ESG-rela ted criteria f ocusing on compliance and sustainability . Criteria include employees ’ completion of compliance training in or der to drive and further develop good compliance cultur e and no substan tiated misconduct cases. Also criteria link ed to ESG performance, based on r atings, embracing a wide range o f clima te and envir onment - , health and safety - , sustainability- and social tar gets wer e included in the corporat e management individual targe ts. T argets rela ted to the climate r oadmap ar e under dev elopment for 2022 and bey ond. Risk management and materiality assessment Risk management pr ocess The board o f dir ectors has the ultima te r esponsibility to ensur e tha t Elk em has appr opriate risk management sys tems that r eﬂect the e xtent and natur e of the group ’s ac tivities and value chain impact. The board and managemen t consider risk management a k ey part of Elk em ’ s corpor ate governance s tructur e, which is important to cr eate trust and to enhance value cr eation. This includes ESG and climate-r elat ed issues. Ev aluating ESG and climat e-r elated risk s and opportunities has become an increasingly important part of Elk em ’ s ov erall risk management pr ocesses. These f actors impac t stra tegy , ﬁnancial conditions, and all aspects of Elk em ’ s v alue chain, fr om r aw materials to ﬁnished pr oduc ts. In 2021, we matur ed our climat e- rela ted risk pr ocess by adopting the T ask For ce on Climate-r elat ed Financial Disclosures. W e will r eport according t o this new framework annually . Elkem conduc ts a y early risk mapping pr ocess based on interview s with divisions and corporat e sta . The purpose is t o understand the gr oup ’ s risk proﬁle thoroughly . Each risk is evalua ted based on internal and external conditions and tak es deemed lik elihood, estimated ﬁnancial impact, time horizon and mitiga ting activities into consider ation. Materiality assessment changes In 2020, Elk em conduc ted a compr ehensive analysis with external and in ternal stak eholders that ar e either impacted by the company’ s opera tions, or whom, in dier ent w ay s, have an impact on the compan y . The stak eholder engagement pr ocess and materiality assessment wer e done in alignment with Global Reporting Initiative ( GRI) frame work and was conduct ed by thir d-party advisors to ensur e objectivity during the analyses. The r esults fr om the s tak eholder dialogue have giv en Elk em valuable insight in to which economic, social, governance and en vir onmental topics that we impact through our operations and should be prioritised based on stak eholder importance. During the fall o f 2021, GRI Standar ds updated their international s tandards and r ecommenda tions f or pursuing materiality analyses. Elk em implemen ted the updated GRI Standar ds based on the materiality assessment fr om 2020 and the pr ocess for identifying ESG risks in the value chain in 2021. The steps to further identify material topics f ollow ed the recommended s teps pr ovided b y GRI: 1. Understand Elk em ’ s sustainability conte xts 2. Identify actual and pot ential impacts 3. Assess the signiﬁcance of the impacts 4. Prioritise the mos t signiﬁcant impacts. Elkem consider s the sustainability thr ough speciﬁcally the business model, sector and the natur e of its impac ts, geographic ar eas, and cultural and legal oper ating conte xt. Actual and pot ential negativ e impacts wer e identiﬁed during the risk assessment based on Elk em ’ s value chain fr om raw ma terials extr action, pr oduction and processes to the mark et and end pr oducts in each division. During the fall o f 2021, Elk em assessed and prioritised the positiv e and negative impac ts in the value chain, along with ev aluating human rights due diligence. The assessment was conduc ted by a third- party int erviewing chosen k ey internal per sonnel who are e xperts in their own division ’ s v alue chain f ocusing on scale, scope, and lik elihood. Based on Elk em’ s deﬁned focus and impac t on human rights, pr oduct gov ernance, including chemical stew ar dship and supplying the green transition, the re viewed ma terial topics for 2021 ev olved fr om 2020 . The material topics and their impacts also r epr esent ﬁnancial risks and opportunities. Mo ving f orw ard in 2022, updating and r eviewing the ma teriality assessmen t will be an extension o f the ongoing risk management process. The dynamic material topics and their impact will be continuously e valua ted by the ESG steering committee and appr ov ed by the boar d o f Elk em annually . 86 87 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 86 87 Annual report 2021 Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact T opics with most positi v e and negat iv e impa cts in Elk em’ s value chai n Dynamic materiality /important topics: Anti-competitiv e Anti-corruption Biodiversity Diversity and equality Emergenc y pr epar edness Energy management End produc t usage Governance Job cr eation and r eten tion Public policy and lobb ying Security and da ta privacy Stakeholder relations Sustainable pr oduct innov ation T raining and dev elopment Material topics in 2021: CO 2 and other emissions to air Health and saf ety Human rights Produc t gov ernance, incl. chemical saf ety Responsible value chain / supply chain management Supplying the green transition Was te management and cir cularity Wa ter management 88 89 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 88 89 Annual report 2021 Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact SDG Impact assessment Elkem ’ s ﬁr st priority is to cr eate a sa fe and z ero harm workpla - ce. W e continuously work t o pro tect our work ers ’ labour and human rights and promo te a saf e and secur e working envir on - ment. Elkem is committ ed to doing business accor ding to the UN Guiding Principles on Business and Human Rights. Our impact: Elk em pr ovides a secur e and saf e work day f or employees and contr actors. It is Elk em ’ s obligation to pr ovide safe jobs and mak e sur e tha t the emplo yees hav e decent and liveable wages and a ﬂexible work -life balance situation. In addition, we can inﬂuence the value chain through our part - nerships, t o make sur e that our suppliers and customer also take this r esponsibility . Our most important tool is the code of conduct f or business partners. Impacted: Elk em opera tes in sever al countries which ar e at risk of child labour and for ced labour . Elkem does not tolera te any use o f childr en or f or ced labour in an y o f our opera tions or facilities. We e xpect the same fr om our suppliers and other s we do business with. While Elk em as a company cannot resolv e all such issues in isolation, we hav e a responsibility to identify human rights risk s in our value chains and mitigate them to the best o f our ability . T arget 8. 7: T ake immedia te and eec tive measures to secure the prohibition and elimina tion of the worst forms o f child labour eradicate for ced labour , and by 2025 end child labour in all its forms including r ecruitment and use of child soldiers. T arget 8.8: Pr otec t labour rights and promo te saf e and secure working envir onments f or all work ers. No report ed events o f child and f orced labour in Elkem. One reported concern in supply chain. No report ed high severity injury . Injury ra te: 3. 7 , up fr om 2.3 in 2020. Introduced human rights e-learning f or all. Employees co ver ed by collective bar gaining agreements: 39% E lk e m’ s c ontr ibu tio n a nd i m p a ct o n t he U N 2 0 30 Agenda The UN Sustainable Dev elopment Goals ( SDGs) wer e established in 2015 by the United Na tions’ to build a mor e sustainable and equal world b y 2030 . The 2030 Agenda acknowledges that the 17 goals ca- nnot be r eached without the active support o f busines- ses worldwide. It calls on companies to use innov ation, technology , and creativity t o addr ess developmen tal challenges and opportunities. Elk em supports the 2030 Agenda, as a signatory to the UN Global Compact. Elkem upda ted the materiality assessment for the company in 2020 . In that pr ocess, the mat eriality w as linked to ho w we ar e impacted b y and can impact the UN SDGs. Although we understand that all goals ar e interlink ed, and work to pr omo te all 17 SDGs, Elk em has identiﬁed three SDGs tha t are mos t material and wher e we can contribute the most. SDG Impact assessment An impro ved understanding o f the envir onmental and social impacts of pr oducts and services is k ey to ensur e sustainable value chain f or the futur e. Ther ef or e, str ong envir onmental management of chemical saf ety , air , and water emission, and minimising the envir onmental foo tprint ar e ke y priorities. Our impact: Our pr oducts and pr oduction hav e an environmen tal footprin t throughout the value chain. Elimination of wast e is one of the k ey str ategies f or successful operations. Our envir onment, health, and saf ety (EHS ) policy co ver actions on ener gy and r esour ce utilisation, environmen tal impact thr ough emission to air and discharge to water and was te r eduction and waste managemen t. Our goal is to r educe the generation o f w aste by good pr ocess contr ol. Circularity is becoming mor e and more critical thr oughout our value chain. Elk em is working with customer s and resear chers across: r educe, r euse, rec ycle and r enewable. F or e xample, increase the use of r ecycled r aw materials in our opera tions by collecting them, r eintr oducing them, and valuing by -produc ts (i.e. Elk em Microsilica ® ). By joining for ces with our customers, we aim t o increase the collection o f end-o f -life pr oducts to recy cle them chemically or mechanically . Impacted: Ther e is an incr eased f ocus on envir onmental and climate- friendly pr oduction from socie ty , employ ees and investor s. In addition, operations ar e subject to envir onmental permits and the risk o f stric ter permits fr om gov ernments and/or other policy changes r equire our att ention t o ensure compliance and successful tr ansition. Climate change mitigation e xposes Elkem to se veral challenges and opportunities. Climate change r esponse and transitioning to more sus tainable solutions will impact our business and ﬁnancial conditions as we adv ance. Elkem published the ﬁr st climate risk r eport accor ding to the T CFD r ecommendations in 2021, and y ou can ﬁnd the full report her e  Our impact: Gr eenhouse gas ( GHG) emissions ( CO 2 ) are inherent to the pr ocess of the silicon, ferr osilicon, and silicones production. W e acknowledge that our climate work is a continuous process. Elk em is well a war e tha t the company must reduce the CO 2 emissions in line with the e xpectations in the Paris agr eement, at the same time as we aim to contribut e positively b y pr oviding solutions to the green transition. Impacted: Climat e change aec ts Elkem in di er ent way s, like technology de velopment, mark et adaption, r eputation, and regula tory limitations. One e xample is r egulat ory mechanisms like emission trading schemes. F or e xample, changes in ET S regula tions may cause a r eduction o f allo wances and higher prices. This will incr ease Elk em ’ s direc t costs which is a curren t risk in our oper ations. Ther efor e, r educing GHG emissions from pr oduction is a str ategic goal. In addition, Elk em is monitoring how phy sical, chronic, and acute clima te change eec ts could aect our locations and business. The UN SDG impact report 2021: By prioritised SDG sub-tar gets The UN SDG impact report 2021: Prioritised SDG sub-targets T arget 12.4: By 2020, achie ve environmen tally sounds management of chemicals and all wastes throughout their life cycle in accor dance with agreed international fr amework and signiﬁcantly r educe their r elease to air , water and soil to minimise their adv erse impact on human health and the envir onment. T arget 12.5: By 2030, substantially r educe w aste generation thr ough prev ention, reduction, r ecy cling and reuse. T arget 13. 1: Strengthen resilience and adaptive capacity to clima te rela ted hazards and na tural disasters in all countries. Have fully implemented environmen t manage- ment sys tem in the organisation, with digital, quarterly r eporting. T otal waste gener ated: 397 ,247 tonnes Informa tion on emissions, see page 101. No signiﬁcant spills of D4/D5 CDP W ater disclosur e: B- T otal waste div erted fr om disposal: 276,483 tonnes Share o f pr ocess was te that was r eused or recy cled: 70% Scope 1: 2.66 mill. tonnes Scope 2: 901 000 tonnes Scope 3 : 8.35 mill. tonnes Biocarbon share : 22% Energy r ecov ery rat e: 14% Increased ambitions announced in 2021: The climate r oad map  CDP Clima te change: A- , showing leadership in disclosure and transpar ency . Ho w El k em supports the SDGs  90 91 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 90 91 Annual report 2021 Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact E n vir onmen t al 92 93 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact With a f ul ly in t egr at ed v a lue cha in f r om upst rea m sil ico n t o do wnst rea m sil ico nes, it is vi tal t o mana ge the en viro nmen tal pr oduct ion f ootpr in t. Elk em’ s targe t is t o mi ni mise t he neg at iv e envi r onmen tal impact throu ghout the val ue chain. En vironmental Introductio n Converting quartz to silicon is a high- temper atur e smelting process tha t consumes vast amounts o f energy . The pr oduction pr ocess uses carbon sour ces lik e f ossil coal, char coal, and wood chips as a r eductant in the chemical con version, r eleasing emissions o f CO 2 , NOx, SO 2 and dust. Reducing our CO 2 emissions is of high priority and stra tegic importance. In addition, processing silicon in to silicones inv olves substan tial quantities of w ater was te tr eated be for e dischar ge to remo ve r esidues such as Chemical Oxy gen Depletion ( COD) subs tances fr om the pr ocess. Reliable w ater management is becoming incr easingly importan t, leading t o Elkem ’ s strategic decision to engage with the CPD W at er disclosur e f or the ﬁrs t time in 2021. Securing a B- score, Elk em will continue improv e internal tools and increase e xternal tr ansparenc y . All envir onmental impacts ar e identiﬁed and documented with measur ements or calculations showing perf ormance compared to go vernmental permits and/ or in ternal impr ov ement targe ts set by Elk em. W e consider all w aste str eams to ha ve value, either by reducing, r ecycling, or r eusing and work continuously to r educe w aste acr oss our oper ations. T oday , we ar e leader s in understanding the complexity of pr oducing carbon pr oducts, silicon, and silicones. Our continued dedication to r esear ch and innov ation mak es our pr oduc tion even sa fer and mor e e cient. Overall, the goal is to r educe gr eenhouse gas emissions, increases ener gy r ecov ery , and facilitates the e cient use of by -pr oducts. The material topics that Elk em has an impact on and is impacted by: → CO 2 emissions and other emissions to air → Water managemen t → Waste managemen t and circularity K ey highlights → Lauch of ne w global climate r oadmap → Full mapping of scope 3 emissions → Energy reco very facility at Salten w ent live, r ecov ering about 30% of the used energy - equal to mor e than 15 000 Norwegian households 22% biocarbon in production >80 % electricty based on renew able energy 70 % of pr ocess wast e is either r ecy cled or re- used 94 95 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact K e y e v ents 20 21 → New climate r oadmap launched in 2021 → Share of bio: 22% → Scope 1+2 emissions: 3.42 million tonnes T arget s → Reduce absolute emissions in scope 1+2 with 28% by 2031 → Reduce the pr oduct carbon foo tprint by 39% by 2031 K e y risk s × Carbon pricing / r egulator disharmon y × Mark et demand for less carbon-in tensive produc ts × Restrictions in the use o f biobased sources Cli ma t e chan ge a  ects us all, an d El k em is commi t t ed t o tak e a leadin g posit ion i n r educi ng t he imp acts of c li mat e chan ge. E lk em 's a mbi tio n is t o r educe t he co mpan y' s f ossi l CO 2 f oot prin t b y incr easing r ene wable ca rbon sour ces and de v elo pin g inn o v a tiv e product ion p roc esses. Carbon sources ar e a key f actor in Elk em ’ s pr oduction, and the smelt ers in the company account f or about 76% of the t otal scope 1 emissions. Ther e for e, r educing our emissions will be k ey . Overall, our fossil CO 2 emissions have incr eased o ver the last f ew year s, due to r easons such as incr eased produc tion and mer gers and acquisitions. As the climate r oadmap details, the pr ogr ess tow ards cutting our emissions will be based on phasing in biocarbon, sourcing changes and po wer mix changes. Although this is at the t op of Elk em ' s agenda, these e orts ar e not quick ﬁx es. W e mus t allow some time t o implement the measures. W e ar e working on a de tailed plan with sever al pr ojects, including plant upgr ades, biocarbon substitution, carbon captur e and st orage and sour cing stra tegy to r ealise the climate r oadmap. Scope 1 The t otal scope 1 emissions wer e 2.52 million tonnes in 2021. During the pas t f ew year s, Elkem has e xpanded its produc tion. Since 2017 , Elkem has incr eased pr oduction with seven smelting furnaces: two in Norw ay , four in China and one in Paragua y . Except for the furnace in Paragua y , all of these e xpansions come fr om acquiring existing capacity . The furnace in P aragua y only uses biocarbon as a raw ma terial r eductant, making its operations (scope 1 + scope 2 ) close to carbon neutr al. The historical incr ease in CO 2 is also connected to the acquisition of upstr eam silicone activities in China, which uses a coal ﬁr ed boiler to pr oduce steam used in the produc tion pr ocess. The incr ease fr om 2020 is due to higher produc tion volumes and mor e categories included in reporting (na tural gas) . Scope 2 Elk em ' s industrial pr ocesses ar e power -intensive, and electricity consump tion is fundamen tal f or opera tions. Scope 2 includes indirec t emissions r elated to purchased elec tricity (incl. s team) wher e Elk em has operations. Elk em 's scope 2 emissions in 2021 was 901 000 t onnes, down 0 .5% fr om 2020 . The location-based emission calculation is based on statistical emissions in forma tion and electricity output aggrega ted and av eraged within a de ﬁned geographic boundary and during a speciﬁed period. Within this boundary , the dier ent ener gy pr oducers utilise a mix of energy r esour ces, wher e f ossil fuels (coal, oil, and gas) result in dir ect GHG emissions. Scope 3 For the last fe w y ears, Elk em has mapped the scope 3 emissions of the company , emissions deﬁned by the GHG pro tocol as all indir ect emissions (no t included in scope 2) that occur in the value chain o f the r eporting company , including upstr eam and downstr eam emissions. This work was an essential part o f the climate str ategy work For 2021, we e xpanded our r eporting to include scope 3 emissions t o ensure w e captur ed the lar gest indir ect sources o f GHG emissions in our value chain. The two larges t categories identiﬁed ar e “ pur chased goods and services” and “ end of life tr eatment” . Scope 3 emissions wer e 8.35 million tonnes in 2021. New E lk em innov a tion pr o ject aims to e liminate CO 2 emissions from silicon production  K ey oppor tunities → Oer pr oducts with a low carbon foo tprint → Resource ecienc y → New mark et access and gr owing gr een demand A mor e comprehensive ov erview o f the clima te risks and opportunities can be found in the T CFD 2021 r eport  Commitment Committed to do business in accor dance with the Paris agr eement, to limit global warming to w ell below 2°C and the long- term commitmen t t o be net - zer o b y 2050. Elk em will do so b y r educing o wn emissions, gro wing its mark et shar e in the gr een tr ansition, and enabling more cir cular economies. Policies → The Elk em climate r oadmap Elk em’ s corporate policies  96 97 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 96 97 Annual report 2021 Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact En vironmental CO 2 emissions and mitigat ion Scope 3 t o gate Scope 3 after gat e The importance of biocarbon A high shar e of biocarbon is essential to r educe our processes ' impact on climate change. As CO 2 is inheren t to the smelting process with curr en t t echnology , total emissions will vary y ear on y ear based on mark et conditions and capacity utilisa tion. One of Elk em ' s main CO 2 stra tegies is to r eplace f ossil carbon with biocarbon in our smelting operations. Elk em 's goal was to incr ease biocarbon usage at Norwegian smelt ers to 20% by 2021. The 2021 goal was r eached, and the the global shar e o f biocarbon rose to 22%. Our ne w ambitious goal is to incr ease the r ene wable, biocarbon share to 50% b y 2031. W e need to continue our work on ﬁnding sus tainable and ﬁnancial viable biocarbon sources. That is why each smelter plan t has developed a r oadmap to r each the 2031-goal and will report on its pr ogress. Elkem is also ac tively involv ed in new technology developmen t and industrial partnerships to achiev e this ambitious tar get. It is a prer equisite for Elk em that r enew able sour ces comply with our en vir onmental and social r equir ements. L CAs and carbon f ootprint Life Cy cle Assessments (L CAs) ar e being performed to quantify the en vir onmental impact o f our products. L CAs support us in reducing our envir onmental foo tprint even further by pr oviding an accur ate o verview o f the envir onmental impact o f our operations. F urthermor e, these assessments incr ease pr oduct transpar ency to assist our customer s in their sus tainability transf ormation. In 2021, Elk em conduc ted assessments of the envir onmental impact o f our pr oducts pr oduced at some of the major plants. These assessmen ts have been undertak en fr om cr adle t o gate, i. e. covering the manufacturing pr ocess o f raw ma terials until the produc ts r each our plant' s gates, with the assistance o f a thir d party . Elkem will continue to perf orm L CAs on major pr oduct groups in 2022. Calculation methodology Elkem r eports the company’ s emissions according to the GHG Pro tocol. 1, 76 million tonnes of the dir ect CO 2 -emissions from our produc tion comes fr om the smelting pr ocess, where carbon ( C ) r eacts with o xygen in quartz to produce silicon/f err osilicon. As this cannot be measur ed direc tly , emissions are calculated based on thir d party certiﬁcates o f carbon con tent (T C) in r aw mat erials (cok e and coal) . CO 2 numbers from o ther sour ces, including heating and fuel, are based on s tandar d conver sion f actors in accor dance with the EU Emissions T rading Sys tems ( EU ETS ) Guidelines. The electricity emission f actors used in the calculation are pr ovided by CEMAsy s, a specialised consultancy ﬁrm, and are based on na tional gr oss electricity produc tion mix es fr om the Interna tional Energy Agency’ s statis tics developed f or 2020 .  Direct - Scope 1 emissions Indirect, elec tricity use - Scope 2 emissions, location based Indirect, elec tricity use - Scope 2 emissions, mark et based Indirect, o ther emissions - Scope 3 emissions Bioshare, Norw ay Bioshare, global Metric Mill tonnes Mill tonnes Mill tonnes Mill tonnes % % 2019 2. 15 0.872 2.24 N /A 18% 17% 2020 2.39 0.906 2. 75 7. 0 20% 19% 2021 2.52 0.901 2.83 8.35 21% 22% % change 2020 - 2021 Up 5.5% Down 0.5% Up 3% Up 19% Up 1% Up 3% KPI s End of life tr eatment Use of pr oducts The colour indicates a positiv e or negativ e developmen t y ear on year . Purchased goods & services Capital goods T ransport Other 98 99 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 98 99 Annual report 2021 Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact En vironmental CO 2 emissions and mitigat ion K e y e v ents 20 21 → Overall incr ease in total emissions, but wide dier ence betw een plants → NOx: T otal emissions in company wen t up, but Norwegian smelter s continue to reduce the emissions T arget s → SO 2 emissions: Reduction o f 3000 tonnes → Dust: 30% reduction b y 2025 K e y risk s × Incr ease in emissions × Changes in r egulatory conditions × No technology development to support cuts in emissions E lk em ' s main em issio ns t o ai r ar e NOx, SO 2 and dust, i n addition to CO 2 . These emissi ons a re ma in ly genera t ed du ri ng the ca rbon ca lci ni ng pr ocess, the s il icon / f err osi li con smel ti ng pr ocess and t he upstr ea m sil ico ne- based p rod ucti on pr ocess. Emission t o air ar e inherent to many of Elk em ' s main produc tion pr ocesses and ar e closely monitor ed to ensure compliance with public permits. A t otal o f 17 paramet ers concerning emission to air ar e r eported by applicable sites quarterly t o corporat e EHS. V ariations in the emission ar e mainly tied t o changes in pr oduction volume as they ar e inher ent to the pr oduction process, but the y can also be a ec ted by the quality o f raw materials, the pr ocess contr ol and inv estment in ﬁlter or scrubber s yst ems. NOx Nitrogen o xides ( NOx) ar e gener ated in Elk em ' s high tempera ture smelting and calcining pr ocesses and can be harmful to ecosy stems and vege tation, as well as human health. Elk em has successfully invest ed substantial funds in R&D and furnace upgrade to r educe NOx emission fr om Silicon smelting furnaces and will continue to do so going f orwar d. The 2021 NOx emission numbers show a to tal incr ease compared to 2020 . This is rela ted to incr eased emissions from furnaces outside of Norw ay tha t have no t yet been r ebuilt f or NO x reduc tion. The Norwegian NO x emissions continue to see a reduc tion in 2021. SO 2 Sulphur dio xide (SO 2 ) is generat ed when using carbon materials in the smelting pr ocess and when calcining coal and cok e in the carbon pr oducts pr ocess. SO 2 emissions can have a nega tive e ect on bo th plant and animal life, as w ell as human health. SO 2 emissions can be reduced thr ough the use of carbon ma terials with low sulfur content, or by o -gas trea tment. F r om 2020, there w as an incr ease in SO2 emissions globally b y 5%. The incr ease was mainly the e ec t of higher sulfur content in r aw materials due to lo w av ailability o f low sulfur coal and coke. T arget: Reduction o f 3000 t onnes of SO 2 emissions. Dust Dust is a major challenge in the produc tion of bo th silicon and carbon produc ts. It is not only a pollutant to the external en vir onment, but also a working envir onmen t health challenge. For both ar eas the main f ocus is t o reduce the gener ation o f dus t in dier ent pr oduc tion processes and incr ease the collection and ﬁltering o f dust that is genera ted so it does not escape out in to the working envir onment. Extr emely high tempera tures and ultra- ﬁne particles that disperse v ery quickly mak e it especially dicult to cap ture dus t genera ted in some of the produc tion pr ocesses. Elkem alloca tes signiﬁcant r esour ces to combat dus t and has a longterm ambition of r educing lev els of dus t in the w orking envir onment to lev els wher e exposur e is acceptable without the use of r espira tory pr otection. For e xternal emissions of the dust the goal is a r eduction of dust emissions b y 30% b y 2025 compar ed to 2015. Unf ortunately dust emissions saw an incr ease o f 8.5% in 2021 showing impr ov ement e orts hav e stagnated. The e orts need rene wed focus to mee t our 2025 tar get. T arget: 30% r eduction by 2025, baseline year 2015. The dust emissions in 2015 was 1,970 tonnes. K ey oppor tunities → Resear ch and developmen t t o reduce emissions → Strong en vir onmental r eporting and management of de viations NOx - Norwa y - Global SO 2 Dust Metric T onnes T onnes T onnes 2019 5 462 6 718 7 280 1 200 2020 4 450 6 610 6 880 1 270 2021 4 332 8 932 7 280 1 379 % chav nge 2020 - 2021 Down 3% Up 35% Up 6% Up 8.5% KPI s The colour indicates a positiv e or negativ e developmen t y ear on year . Commitment Elkem is committ ed t o contr olling and r educing the envir onmental impact o f our produc tion activities to ensure a r esponsible environmental foo tprint. Policies → The Elkem general polic y → EHS policy Elk em’ s corporate policies  100 101 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 100 101 Annual report 2021 Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact En vironmental Other emissions t o air K e y e v ents 20 21 → The completion and commissioning of the Salten ener gy r eco very plant, pr oducing ca. 270 GWh/year fr om wast e heat Mor e inf ormation found her e  → Energy reco very ra te r ose to 14% → Approv al and pr oject start o f the Phoenix projec t in China tha t will give a substan tial reduc tion in ener gy int ensity f or the produc tion of Silo x T arget s → Energy reco very incr ease y ear on year → Energy intensity impr ovemen ts on main produc ts → Improv ed ener gy e ciency in f acilities and equipment K e y risk s × Changing r egulatory fr amework, permits and requir ements Ener gy ecienc y and sustainable sour cin g of ener gy is o f utmo st impor tance t o ensure secu rity o f suppl y , while a t t he same ti me r educi ng E l k em ' s global g r eenhous e gas f oo t pri nt. Parts of Elk em ’ s v alue chain ar e highly ener gy intensiv e, with silicon, f err osilicon and f oundry alloys being produced in high temper atur e electric ar c furnaces. Elkem consumes ar ound 6.5 TWh of electricity per year . In 2021, about 84% of this electricity was pr oduced from r enewable sources. As the per centage is alr eady very high Elk em does not hav e quantitativ e tar ge ts t o further incr ease it. We do ho wev er expec t the a vailability of r enew able energy in China particularly t o incr ease substantially in the coming y ears enabling us to mov e more o f our curr ent Chinese pow er base to r enewable solutions as the y become a vailable, and ther eby increasing the t otal rene wable percentage. Elkem 's thr ee main tar ge ts f or ener gy ar e impr oving the energy ecienc y o f exis ting f acilities and equipment, reducing the ener gy intensity of main pr oducts and increasing ener gy r ecov ery fr om pr ocesses that genera te surplus heat. Elk em was an industrial pioneer in the utilisation of w aste heat, with the ﬁrst ener gy r ecov ery sys tem on a silicon smelting furnace being ins talled already in the 1970s. Recov er ed heat fr om smelting furnaces can be utilised as hot wa ter for distric t heating, steam for o ther pr oduction pr ocesses and t o generat e new electricity . Electricity is sold back to the grid while hot wa ter and steam ar e used bo th internally and externally to supply other companies and communities in the vicinity o f each plant. Our commitment t o impr oving our ener gy f ootprint is part of our general commitmen t t o minimise our envir onmental foo tprint as stat ed in our General Policy . Our EHS managemen t sys tem r equir es all units to implement ener gy managemen t and r eport on consumption, r ecy cling and deviations while working actively tow ards our tar gets. A t corpora te lev el we also have an en vironmen tal manager and a senior corporat e energy specialist coor dinating impr o vement e orts. Envir onmental certiﬁcation is part o f Elk em ' s e orts with energy management. All applicable sites ar e ISO14001 certiﬁed either individually or with umbr ella certiﬁcation and ISO50001 certiﬁcation is under ev aluation for sites with the highes t energy consumption. All environmental deviations and envir onmental indicators including those that ar e ener gy r elat ed ar e regis ter ed and follow ed up in our r eporting and deviation management sys tem Syner gi. Energy consymption T otal gross electricity consumption in Elk em in 2021 was 6,536 GWh, up fr om 6,400 GWh in 2020 . Most o f this change is rela ted to incr eased pr oduction, due to the general global mark et situa tion f or Elk em ’ s main produc ts. About 84% of the total gr oss electricity consumption is based on r enew able power pr oduction. Excep t f or one smelter in China, all smelting furnaces in Elkem run on r enewable electrical energy . In addition to electrical ener gy , Elkem also consumes appr oxima tely 1.2 TWh of o ther types o f ener gy for internal vehicle operation and hea ting/ cooling of facilities and pr ocesses. Most o f this is f ossil-based energy . Elkem does no t hav e an ov erall tar get to r educe it' s total energy consumption as it has a gr o wth stra tegy f ocused on increasing the pr oduction and a vailability of mat erials that ar e essential for the gr een transition and ther eby essential f or our customer s ability to r educe their ener gy consumption. Our targe ts f ocus on using our ener gy base as eciently as possibleand thereb y r educing the energy intensity of our pr oducts. Energy reco very Elkem has a long- term strategy to incr ease ener gy reco very year on year as part o f its clima te pr ogramme. Most o f Elk em' s major pr oduction sites ha ve pr oduction processes tha t generat e surplus heat with high enough tempera tures to be r ecovered. This can be used to K ey oppor tunities → High percen tage (mor e than 80%) o f rene wable ener gy use → Public grants f or implementation o f some energy ecienc y measur es → Continued r oll out of r enew able ener gy in China and Eur ope Commitment Contributing to the green tr ansition by pro viding produc ts with low carbon foo tprint, achiev ed by reducing ener gy consumption and incr easing shar e o f rene wable pow er . Policies Elkem uses Ener gy Management s yst em at r elev ant sites. Our General P olicy mandates minimisa tion of envir onmental impact. Elkem ’ s corporate policies  102 103 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 102 103 Annual report 2021 Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact En vironmental Ener gy manag ment generat e new electricity f or the grid and steam or ho t wat er f or internal or e xternal use in pr oduction or as district heating. The potential f or ener gy r eco very has been mapped at all applicable sites and ener gy reco very has already been implement ed including large o gas boilers at 4 smelter s generating ne w electricity and steam. The la test addition came online at the Elk em Salten plant in 2021 incr easing the t otal r ecov ery capacity with 270 GWh annually o f electrical ener gy , equal to the consumption of mor e than 15 000 Norw egian households. Globally , a total o f 909 G Wh heat and electricity was reco ver ed fr om our plants in 2021, equal to about 56 000 Norwegian households annual electricity consumption. This repr esents 14% of to tal ener gy consump tion, an increase fr om 11% in 2020 . Energy eciency As part of their energy management e orts Elk em sit es are r equired t o have upda ted ener gy in ventories sho wing speciﬁc consumption and the poten tial f or impr oving eciency and thereb y reducing consump tion and saving cost. One ex ample of this is r eplacing old, inecien t electrical motor s with new mot ors with advanced digital energy contr ol. Other e x amples of important pr ojects to impr o ve ener gy eciency can be f ound at Elk em Xinghuo wher e old inecient coal boilers used to gener ate s team for the produc tion pr ocess ar e being replaced with ne w co- generation technology that will pr oduce both s team and electricity with a subs tantially lower consumption o f coal. The second projec t is a major expansion o f silo x capacity with signiﬁcantly lo wer ener gy in tensity . Energy consumption - electricity Consumption of pur chased or acquired electricity , renewable Consumption of pur chased or acquir ed electricity , non- renew able Renewable shar e of electricity consumption Energy reco very Energy reco very of t otal consumption Consumption of fuel ( e xcluding feedstock) non-r enew able Consumption of fuel ( e xcluding feedstock) r enew able Consumption of pur chased or acquired hea t Consumption of pur chased or requir ed steam, r enew able Consumption of pur chased or requir ed steam, non-r enew able T otal energy consumption Metric GWh GWh GWh % GWh % GWh MWh MWh MWh MWh GWh 2019 6 010 4 847 1 163 83% 698 12% 1,39 0 0 0 48 936 7 457 2020 6 399 5 153 1 246 80,5% 711 11% 0,32 0 0 0 54 000 6 773 2021 6 536 5 488 1 047 84% 909 14% 44 0 0 0 58 750 7 023 % change 2020 - 2021 Up 2% Up 6.5% Down 16% Up 3.5% Up 28% Up 3% The large change in number is pr obably due to impro ved data gathering. Up 8.8% Up 3. 7% KPI s The colour indicates a positiv e or negativ e developmen t y ear on year . 104 105 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 104 105 Annual report 2021 Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact En vironmental Ener gy manag ment E lk em’ s env ir onm ental po lic y i s t o min im ise t he en vi r onmen tal imp act o f its pr oducti on. As the pr od uctio n req ui res v ast quan t iti es o f vir gi n ra w ma t eri als t ranspo r ted o ver l ong distances i t is o f th e upmo st impor tance t o fully ut il ise a nd no t wa ste a n y o f t hese ma t eri als. I n addi ti on, E lk em’ s business sy st em bui lds on a z ero- waste ph ilo soph y focu sin g on the red uctio n o f al l kinds o f waste t hr oug hout t he v al ue cha in wit h a hig h f ocus o n the e cien t ut il isa tio n o f al l res our ces, red uctio n o f w aste ge nera ti on, and on r eus e, rec y cling o r sales o f res idua l wa ste. Elkem ’ s value chain includes numerous pr ocess ﬂows, including mining, high-t emperatur e calcining, high- tempera ture smelting, and chemical pr ocessing. Major w aste str eams fr om our pr ocess ﬂow s are: → T ailings and o -spec fr om mining activities → Degraded raw ma terials and o -spec from calsining and smelting → Spent synthesis mass, ﬁltr ation cak es and spent solvents fr om chemical pr ocessing. → Dust and sludges fr om air and wa ter trea tment f acilities → Dirty packaging. Management and utilisation: Sever al pr ocesses have been put in place to r educe w aste. The f ocus is mainly on pr ocess improvemen ts t o avoid generating w aste and to r educe consump tion of ra w materials and int ermediates in the dier ent processes, in addition t o reuse and r ec ycling: → Reduce waste gener ation → Reuse and recy cle (spent mass neutr alisation and packaging) → Incineration with and without ener gy r eco very . Any r esidual waste left after other e orts is disposed o f in accordance with local r egula tions, including limited landﬁlling in appro ved landﬁlls. 70% o f pr ocessed wast e generat ed in 2021 was either r eused or r ecycled. The value chain for Elk em ’ s pr oducts consis ts of four main types o f production , each with speciﬁc po tential waste s tr eams: Quartz is f ound both as r ock forma tions in mountain seams and as stones in pr ehistoric riv erbeds. The extr action pr ocess includes the use of e xplosives for mountain seam extr action or diggers to r emo ve topsoil for riv erbed extr action. Quartz is then further pr ocessed with washing, crushing and sizing. No hazar dous chemicals are used in the pr ocess. Main w aste str eams from the pr ocess ar e tailings fr om the e xtraction or washing and o  -spec (quality or siz e) fr om crushing and sizing. Most o f the w aste str eams ar e utilised to res tor e open-pit mines or sold as by -pr oducts (sands and grav els to the construction industry ) , while some ar e landﬁlled in connection with the res tora tion of mining sites. Elk em is also developing alt ernative usages f or sands in agriculture and sports. Was te in connection with shipmen t : It is usually in bulk with no speciﬁc packaging. Hazar d classiﬁcation: As quartz is a naturally occurring mineral ther e ar e no hazardous w astes in the pr ocess. Carbon produc tion consists of high- temper atur e trea tment o f an thracite and pe tr oleum coke. And the mixing of these with binders cr eates di er ent types o f paste used for electr odes, ﬁll materials and additives in the me tallurgical smelting indus try . Major was te str eams ar e degraded r aw materials and o  -spec produc tion. Most o f this can be r epr ocessed sa fely back into new ba tches of pr oduct. The remaining wast e is deliver ed to appr ov ed suppliers for hazar dous was te trea tment. Ne w , non-hazar dous (gr een) binders are under de velopment to r educe the use of Coal T ar Pitch High T emperatur e ( CTPHT). Was te in connection with shipmen t: The primary r aw materials ar e r eceived in bulk, elimina ting packaging. Finished produc ts ar e deliver ed to customer s in big- bags or on palle ts, giving customer s a poten tial source of was te. How ever , the packaging mat erials ar e of good enough quality and can be r eused multiple times. Hazar d classiﬁcation: Degraded ra w materials and o  - spec produc tion can contain binders consisting o f C TPHT which is listed as a substance o f very high concern. K e y e v ents 20 21 → 70% of pr ocess w aste gener ated in 2021 was either r eused or r ecycled → Circularity was intr oduced as one o f three k ey pillars in the climate r oadmap, see page 78  K e y risk s × Cost risk: Incr eased cost o f hazardous waste handling s torage and disposal with tightening local legislation × Restrictions in use o f biobased sour ces K ey oppor tunities → Cost / proﬁt opportunity with less raw material cost and mor e sellable pr oducts → Climate opportunity with less r aw material transportation and incr eased cir cularity Commitment All physical w aste str eams ha ve v alue, and it is our goal to r ealise that value and av oid disposal or destruction. T o enable circular economies, in our operations and with partners. Policies → Elk em’ s General policy → EHS policy Elk em’ s corporate policies  106 107 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 106 107 Annual report 2021 Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact En vironmental W aste ma nagement Silicon smelting consists of a high- temper atur e chemical reac tion tha t transf orms quartz and carbon (coal, char coal, or w ood chips) into silicon. In addition, alloying, crushing, and sizing opera tions ar e used t o tailor the pr oduct to cus tomer needs in the electr onics, foundry , and chemical industries. Major wast e str eams ar e degraded r aw materials, slag from smelting, particles in o  -gas emissions and ﬁnes generat ed during crushing and sizing operations. In the early 1970s, Elk em pioneer ed o  -gas captur e and utilisation by dev eloping necessary bag ﬁlter technology to captur e o  -gas fr om smelting furnaces and other technologies to turn it into a valuable pr oduc t used in hundreds of products t oday . This technology turns ov er 150, 000 tonnes o f wast e into pr oducts ev ery y ear . The other was te str eams hav e historically been sold as low-value o  -gr ade or landﬁlled on sit e. T eams of dedicated pr o fessionals ha ve work ed on incr easing the utilisation of these str eams for many y ears now tr eating them as valuable r aw materials that can either be r e- intr oduced t o Elk em ' s dier ent production pr ocesses or sold as value added pr oducts to cust omers. As a r esult of this work Elk em harves ts mor e than 100 , 000 tonnes of pr ocess pr oducts ev ery year , reducing costs at our plants and genera ting new solutions f or our cust omers. Was te in connection with shipmen t: Excep t f or char coal, which is supplied in big-bags and alloying mat erials which are o ften shipped in smaller container s, most raw ma terials ar e supplied in bulk r educing the need f or packaging. Finished pr oducts ar e also shipped either in bulk or in big-bags on palle ts that can be r eused. Hazard classiﬁcation: N one of the major was te str eams are de ﬁned as hazar dous. Some alloying mat erials and chemicals used t o process silicon a fter smelting ar e hazardous, but do no t r epr esent major was te str eams. These are alw ay s deliver ed to certiﬁed thir d party suppliers f or disposal. Silicone formula tion consists of many di er ent chemical processes and r eactions that r esult in specialty produc ts closely tailor ed to customer needs. A number of di er ent wast e str eams, both hazar dous and non- hazardous ar e gener ated thr oughout and betw een the dier ent pr oduction pr ocesses. Main waste str eams include acid wat er , used solvents, hydr oly sis, sludge and waste masses. W ast e reduc tion is included in discussion on annual objectives and impr o vement plans conducted by the pr oduction teams and our r esear ch and innova tion departments. Was te in connection with shipmen t: Substantial amounts of pack aging is needed f or raw ma terials, intermedia tes, and ﬁnished pr oducts. W aste r educ tion e orts f ocus on reuse ( IBCs, pallets and drums) and r ec ycling. Hazar d classiﬁcation: A lar ge part o f the w aste generat ed during the pr oduction pr ocesses is hazardous waste. All hazardous waste is either tr eat ed on-site (incineration, neutr alisation, r euse ) or sent to certiﬁed service pro viders for destruction. Generic waste str eams: Elkem also has generic was te str eams such as used oil fr om v ehicles and equipment, and packaging mat erials fr om sour ced goods. Each site has dedicated sy stems to sort w aste on site and deliv er waste to appr o ved service pr o viders that will r ecycle or re-use it whene ver possible. T otal waste gener ated Non-hazardous w aste to landﬁll Hazardous w aste to landﬁll Non-hazardous wast e to destruction Hazardous w aste to destruction T otal waste dir ected to disposal Byproducts to r ecy cling/sale e x. microsilica Oils and chemicals to r ecy cling Scrap, packaging, e tc. t o recy cling Microsilica T otal waste div erted from disposal (reused or recy cled) Mining activities * Metric T onnes T onnes T onnes T onnes T onnes T onnes T onnes T onnes T onnes T onnes T onnes T onnes 2019 - - - - - - - - - - - - 2020 356 156 48 077 6 031 2 399 62 004 118 544 94 690 1 945 4 687 136 322 237 645 308 263 2021 397 247 58 465 5 200 15 660 38 791 118 116 137 998 69 4 491 136 573 279 131 320 687 Comment Includes both onsite and o site landﬁlls Deliver ed to appr ov ed sites Includes incineration bo th with and without energy reco very Includes incineration bo th with and without energy reco very 30% of to tal waste gener ated Raw materials, slag and pr oduction ﬁnes O-gas fume pr ocessed t o sales product 70% of to tal waste gener ated T ailings and crushing residue (natural rock without chemical pr ocessing) from mining. % change 2020 - 2021 Up 12% Up 22% Down 14% ** Down 37% Down 0.3% Up 46% ** Down 4% Up 17% Up 4% KPI s The colour indicates a positiv e or negativ e developmen t y ear on year . * All of the waste in the mining activities was re turned t o the mining sites f or further use in mining activities or as part of our pr ogramme to refurbish mining site for re turn t o farming or to their natur al state. ** The major changes in number is due t o changes in classiﬁcation as the reporting structur e in Elk em is impro ving. W e continue to work internally to impro ve the quality o f the data. Ho w does El k em Sil icones Divisi on tackle the clima t e change do wn the va lue chain ? Find out more here 108 109 Annual r eport 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 108 109 Annual r eport 2021 Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact En vironmental W aste ma nagement W a t er r epr esen ts a crit ical i npu t in man y o f El k em ' s main pr oducti on pr ocesses. E lk em is also i ndi r ectly d ependen t on wa t er as mo re o f 80% of its elect ric ity is h y dr o -po wer . It is ther e f or e o f the u tmost i mpor tance t o ensu r e tha t ou r w at er f oo tpr in t is sustai nable. W at er r ela t ed cha llen ges v ar y str ong ly acr oss E lk em ' s va lue c hai n and a re ma in ly cen t er ed ar oun d pre v en tin g hazar dous dischar ge. W ater consumption and scar city Elkem ackno wledges the importance of ste war ding wat er as a shar ed r esour ce. Thus, w e have implemen ted progr ammes to monitor and r educe wa ter withdra wal, consumption, and dischar ge. The primary utilisa tion of fresh wat er is split in to four ar eas: → Wa ter as a ra w material for pr oduction → Wa ter used to cool pr oduction equipment and produc ts → Wa ter used for cleaning, and → Wa ter used for emer gency pr epar edness. The ﬁrs t two r epr esent the majority o f all wat er usagenand requir e good quality to a void pr oduct contamination, equipment corr osion and clogging, and contamination o f w ater infrastructur e. Wa ter consumption ( dischar ge and withdra wals) ar e monitor ed depending on availability and sour ce and report ed t o corporat e every quarter . Some water withdraw als ar e measured dir ectly with in-line water meters f or continuous measur ement, while other s ar e calculated b y capacity r eﬂecting actual oper ational time. Figures on w ater withdr awals in ar eas with water scarcity ar e gener ally contr olled b y thir d party as wat er is purchased b y an external supplier . Discharge v olumes of pr ocess w ater ar e r eported quarterly to corpor ate managemen t. Discharge o f cooling wat er , returned to the sour ce of e xtraction at similar quality as the r aw wa ter extr acted, is no t monitor ed dir ectly as the v olume and quality equals withdrawn w ater . The cooling wat er is only subject to heat ex change and most of the cooling sy stems ar e closed avoiding e xtensiv e evapor ation. L oss of cooling wat er in open cooling to wers is no t measur ed. Many of Elk em ' s pr oduction sit es ar e subject to regula tions r equiring permits f or dischar ge t o wat er . Speciﬁc paramet ers ar e included in each plant' s permit and report ed minimum annually . A t otal o f 17 w ater discharge par ameter s ar e also measur ed or calcula ted and report ed quarterly t o corporat e fr om applicable plants. Almost all of Elk em ’ s pr oduction units ar e loca ted in areas with ample access to w ater and no signiﬁcan t water stress issues. This is not only important f or our produc tion pr ocesses, but also f or our electricity base which is mainly based on h ydr opower . A small number of sites ar e locat ed in ar eas with long-t erm or periodic water scarcity (north-eas t China, South A frica, India) , but not wa ter str ess. In these ar eas, Elk em ' s wa ter withdraw als ar e low due to the natur e of the actual produc tion. W a ter management measur es hav e been implemented in all ar eas including sy stematic risk assessments (including those done in connection with T CFD ), and measur es to limit withdra wal. All sites hav e readily av ailable potable w ater fr ee of charge and unlimit ed f or all employ ees and contrac tors working on site. Sanitary f acilities, including toilets and hand/face washing f acilities, ar e also available acr oss all sites. In addition, shower s and changing r ooms ar e available acr oss all sites wher e employees need to shower aft er work. W orking uniforms f or this type o f work ar e also pr ovided and cleaned b y the company fr ee of char ge. Indirec t use in the v alue chain outside of Elk em has not yet been fully evalua ted e x cept discussions ar ound water availability for hydroelectric po wer that is deemed critical as an energy sour ce for most o f Elk em ' s smelter s. W ater management While most wa ter consumption issues r epr esent low risk as produc tion sites with high consumption ar e K e y e v ents 20 21 → Elkem disclosed its CDP W ater rating f or the ﬁrst time. Received a B- rating → Elkem did not ha ve any signiﬁcant envir onmental wa ter spills T arget s → Full water dischar ge permit compliance → Zer o spills of D4/D5 → New wat er consump tion targe ts will be announced in 2022 K e y risk s × W ater av ailability × Water quality (contamina tion and discharge ) × W ater -relat ed regulatory fr amework and permits × Stak eholder conﬂict × Biodiversity and ecosy stems K ey oppor tunities → Strong envir onmental managemen t sys tems → Improv ements o f w ater handling particularly the pr oduction e xpansion projec t at the Xinghou plan t in China Commitment Elkem is committ ed t o ecient and s trong management of w ater r esour ces, focusing on sustainable pr oduction and emission and dischar ge contr ol. In addition, Elk em is committed to full regula tory compliance in all ar eas we opera te. Policies → EHS policy → General policy Elk em’ s corporate policies  110 111 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 110 111 Annual report 2021 Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact En vironmental W at er mana gement located in ar eas with ample wa ter supply , environmental issues connected to wa ter dischar ge ar e mor e critical. Most o f our major pr oduction sites ar e located close to lar ge bodies of wa ter (both fr esh and saltwa ter basins) where uncon tr olled discharge could ha ve lasting negative en vironmen tal impact. W ater management is ther e for also focused on fully understanding the envir onmental e ect o f all wat er dischar ges in connection with our pr oduction and ensuring sy stems are in place f or e ective w ater monitoring and trea tment to ensur e compliance with public dischar ge permits and impro vemen t tar gets to r educe dischar ge of harmful substances. Enablers to meet these strategic tar gets, speciﬁcally f or wat er -r ela ted issues, ar e: → Substitution of raw ma terials → Good housekeeping prac tices → Development o f ne w pr ocesses and produc tion technology → An advanced contr ol pr ogramme, including envir onmental monitoring → Waste wat er tr eatmen t and r eduction by rec ycling or r euse → T ransparenc y ( CDP W ater ) . Discharge to w ater and w ater tr eatment Many of Elk em ' s pr oduction sit es ar e subject to regula tions r equiring permits f or dischar ge t o wat er . Speciﬁc paramet ers ar e included in each plant' s permit and report ed minimum annually . A t otal o f 17 w ater discharge par ameter s ar e measur ed or calcula ted and report ed quarterly t o corporat e EHS fr om applicable plants. The thr ee most critical dischar ges to w ater ar e or ganic substances that can a ect o xygen concen tration in wat er ( Chemical Oxygen Demand) , Silicone Cyclics ( D4, D5 and D6 ) and Poly cy clic aroma tic hydr ocarbon ( P AH). The tw o ﬁr st ar e an inher ent part of ups tream and intermediat e silicones produc tion while the thir d is found in the carbon pas te pr oduction. Chemical o xygen demand ( COD ) indica tes the amount of o xygen consumed b y r eactions in a measur ed solution, which is used t o quantify the number o f organics in the w ater . The poten tial impact of higher COD levels in w ater is r elat ed t o r educed levels o f dissolved o xygen ( DO ). A r eduction of DO can lead to anaerobic conditions, which is harm ful t o ﬁsh and bio ta. There for e, compliance is ensur ed thr ough e xtensive monitoring to minimize the genera tion of or ganic was te in produc tion pr ocesses, infras tructur e maintenance to pre vent leak age fr om produc tion units and pipelines and optimal opera tions of on-site w ater tr eatment to ensur e puriﬁcation bef or e dischar ge. D4, D5 and D6 are important int ermediates in the produc tion of Silicones and hav e been deﬁned in the EU as Substances of V ery High Concern ( SVHC) . D4 is categorised as P ersisten t, Bioaccumulative and T oxic (PB T) and D5 and D6 ar e categorised as v ery P ersis tent, very Bioaccumulative ( vPvB ) substances. Internal spills may cause adverse en vironmen tal e ects if they enter sewage s ystems tha t cannot tr eat and r emov e D4/ D5 residues, but the main concern is no t in our own produc tion. The main concern is r esidual amounts that may r emain in our customer' s consumer w ash-o produc ts and enter sew age sys tems during ﬁnal use. This may adversely a ect the marine envir onments because of low biodegr adability and the risk o f bioaccumulation. The compounds ar e, how ever , easily degraded by pho too xidation. Elkem 's str ategy to r educe the risk of harm with D4/ D5/D6 is thr ee fold. The ﬁrst part inv olves a high focus on process con tr ol and on avoiding spills and leak ages in our o wn pr oduction pr ocesses. The second part is dedicated R&D e orts toge ther with our customers to reduce r esidual D4/D5/D6 in their pr oducts. The third part includes substantial inv estments in China, bo th in upstr eam and downstr eam pr oduction, to r eplace cy clic materials such as D4, D5, and D6 with linear mat erials. PA H discharges origina te when coal- tar pitch is used as a binder in the pr oduction o f carbon pr oducts including smelting furnace electr odes which is one o f the main produc ts in Elk em Carbon Solutions. P AH is typically bound t o particles and not easily biologically a vailable, but it is still strictly r egulated as it is de ﬁned as SVHC by the EU . P AHs have modera te to high acute to xicity t o aquatic lif e and birds and can ha ve adv erse long- term e ects including tumours, r epr oduction, dev elopment, and immunity . Compliance with discharge permits is ensured thr ough pr ocess contr ol and e xtensive water trea tment on-site to limit the amount o f P AH in discharges to w ater . Elk em has also inves ted substantial funds in R&D activities and holds a leading position in the developmen t of alternativ e binders without P AH. Impro vement plan launched in 2021 Strengthen tr anspar ency by adoption to CDP W ater . Impro ve descrip tions of wa ter risk assessments, measures, and con tr ol pr ogrammes. Impro ve r eporting on run o  wat er fr om plant ar eas. Status 2022 Disclosed with B- rating. In 2021, Elk em disclosed comprehensiv e data on the groups w ater managemen t according to the CDP W a ter r eporting r egime. This include ﬁgur es on annual wat er withdr aw al, consumption and discharges, including business-r ela ted wa ter risks. New tar gets on wa ter consumption will be disclosed in 2022. Perf ormance in 2021 There w er e no signiﬁcant spills into w ater in 2021, deﬁned as those tha t have a las ting envir onmental impact, or signiﬁcant envir onmental inciden ts. Withdrawal T otal fresh water withdrawal Fr esh surface w ater , including rainwater , water from w etlands, rivers, and lak es Groundw ater - r enewable Third party sources Discharge Discharge o f cooling w ater Discharge o f pr ocess wa ter Fr esh surface w ater Brackish surface w ater /seaw ater Third-party destinations COD ﬂow T otal water dischar ge T otal water consumption Metric Megaliters Megaliters Megaliters Megaliters Megaliters Megaliters Megaliters Megaliters Megaliters Thousand kg Megaliters Megaliters 2019 - - - - - - - - - - - - 2020 86 900 46 644 613 39 913 59 000 16 500 5 000 43 000 11 000 263 75 500 30 000 2021 85 654 46 698 581 38 391 52 925 7 020 4 936 54 883 126 202 59 945 25 709 KPI s En vironmental W at er mana gement For m ore in f orma tion a bout ho w Elk em handles SV CH, see the product go ver nance chapt er 112 113 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 112 113 Annual report 2021 Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact So cial 114 115 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 114 115 Annual report 2021 Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact Social Introduc tion Sa f e opera t ions a re a lw a ys our ﬁ rst prio rity . W e bel ie v e that a ll i ncide nts can a nd shou ld be pre ven t ed, and a z ero- har m phi loso ph y guides ou r e v er y da y w ork. W e co nsider a ski ll ed, enga ged, and div erse wor k f or ce th e k ey t o ou r con ti nued su ccess. T oday’s oper ations ar e built on opera tional ex cellence and continuous impr ov ement and dev elopment. Elk em ' s global t eam of mor e than 7000 people have a shar ed commitment to our stak eholders: to deliv er our and y our potential. Our employees are our most valuable resour ce. As such, Elk em tak es r esponsibility f or all activities on Elkem ’ s properties and is committed to ensuring that employees and con tract ors working on Elk em sites can do so without being harmed. Elk em is also committed t o inﬂuence our suppliers and business partners. Overall, the to tal number of injuries wen t up in 2021, and we ar e not sa tisﬁed with that. This just sho ws that our health and saf ety w ork can nev er lose f ocus. The on-going Covid-19 pandemic has shown us the dier ences in social disparity between di er ent countries and continents. A t Elk em, we belie ve a sustainable futur e depends on our ability to r educe disparities and crea te social pr osperity . Elkem is committ ed t o build a cultur e tha t r educes inequality and r espects cultur al dier ences. Ther ef or e, pro viding a saf e and healthy work envir onmen t where employees ar e sa feguar ded is a k ey priority . In addition, it is important that individual inv olvement is pr omo ted. As part of our commitment to a saf e work en vir onment, Elkem also consider s the pro tection and pr omo tion of human rights, work ers ’ rights, decen t living wages, and equal opportunities vital t o our oper ations. The material topics that Elk em has an impact on and is impacted by: → Health and safe ty → Human rights K ey highlights → Launching the Elk em people policy → Launching the human rights eL earning course → No high consequence injuries 78 % had de v elopment discussions 25% fema le share 3 .7 to tal recorda ble inju r y rate 116 117 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 116 117 Annual report 2021 Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact Social Health and sa f ety K e y e v ents 20 21 → T otal r ecor dable injury rat e, employees: 3. 7 → T otal r ecor dable injury rat e, contract ors: 3.5 → Zer o high - consequence injuries T arget s → Zer o r ecor dable injuries – employees and contrac tors → Zer o cases of serious occupational illness K e y risk × Major risks r ela ted to Elk em ’ s pr oduction and processes include ﬁr e, e xplosion, t o xic chemical exposur e, and contac t with heavy industrial vehicles and equipment. Comprehensiv e risk assessment and mitigation is done for all pr ocesses and work opera tions thr oughout Elk em with broad participa tion of emplo yees at all levels. Managemen t of Change and r outine re view o f assessmen ts and measur es are an in tegra ted part of Elk em ’ s risk management. A ro bust healt h and sa f e ty cult ur e is th e essence o f ou r lic ence t o opera t e. Ou r en vi r onmen t, heal th a nd sa f ety ( E HS ) e or ts ar e based on a z ero- har m phi loso ph y and our E H S managemen t sy st em is implemen t ed t o w ork s yst ema tica lly t o w ar ds th is goa l. E v en th oug h the n umber o f record able in ju ries a nd the t otal r ecor dabl e in ju r y rat e ( TRI R ) inc rea sed fr om 2 0 2 0 t o 20 21, ther e w er e no fa tal it ies and n o hi gh conseq uence i nj ur ies. Management approach Elkem ’ s production activities inv olve inher ent danger s, exposur es and emissions that ma y cause substan tial harm as operations include high temper atur e smelting (>2,000°C ) and advanced processing o f hazar dous chemicals. A z er o-harm philosophy and an or ganisation that is fully committed to giving the health and saf ety of employ ees and contr actors w orking on site their ﬁrs t priority is par amount to our success and licence to opera te. Ev en though Elk em bears the full r esponsibility f or ensuring a saf e and healthy w orkplace we also e xpect our emplo yees, and con tract ors working on Elk em property to be fully committ ed t o a saf e and healthy workplace and to do their part in achieving this. Elk em works con tinuously to pr o vide our employees and contract ors with the right skills and tools to unders tand and deal with any risks they may meet in our workplace. Elkem has de veloped compr ehensiv e sys tems f or risk management that ar e acr oss at all Elk em sites worldwide. W e show our commitment by: → Having clearly de ﬁned responsibilities and accep ting accountability f or Health and Saf ety at all lev els of the organisa tion → Always prioritising individual health and sa fety when making decisions → Setting ambitious goals and striving f or continuous impro vemen t in Health and Saf ety → Using the same EHS sy stems, tools, and me thods, and having the same expec tations to EHS performance wher ev er we oper ate worldwide. Elkem has a s trict r eporting r egime f or injuries and requir es all injuries to be r eported, inves tigated, and mitigated independent o f severity . Overall, the to tal number o f injuries went up in 2021, and w e ar e not satisﬁed with that. This just shows tha t our health and saf ety w ork can nev er lose f ocus. W e observe that ther e wer e no high-consequence work -related injuries in 2021, down fr om 1 in 2020 and 3 in 2019. T otal recor dable injury r ate w ent up fr om 2.3 to 3. 7 , and lost work day rat e (L WR) was 1.5, up fr om 0 .8 in 2020 . Ther e wer e no fatalities a t the Elk em plants in 2021. In addition t o recor dable injuries, a to tal of 190 high potential w ork -related incidents ( High Risk Incidents) wer e identiﬁed at Elk em sites in 2021, up fr om 147 in 2020. The main increase in numbers is connected to increased f ocus on r eporting this type o f incident at more sit es t o be able t o ﬁnd causes and implemen t measures be for e r eal harm happens. All r ecor dable injuries and high-potential inciden ts ar e fully inves tigated, and measur es ar e implemented to pr e vent similar inciden ts fr om happening in the futur e. Detailed informa tion is also shar ed with other sites to ensur e implementation o f learnings fr om the incidents at all applicable Elk em sites. EHS management sy stem and auditing Elkem has a compr ehensive in-house developed corporat e EHS management sy stem called FOKUS (after the Norwegian w or d f or “focus ” , implying the need f or signiﬁcant att ention on the organisa tion ' s EHS issues) tha t applies t o all sites and activities worldwide. The sys tem is built ar ound r ecognised international standar ds f or EHS management and co vers r elev ant EHS t opics identiﬁed through e xtensiv e risk assessment at all sites. The sys tem ’ s r equir ements and pr ovisions co ver all Elkem emplo yees and all con tract ors working on Elkem pr operty. In addition, supplier s of r aw materials and goods are ask ed to comply with basic EHS rules and regula tions as part of contr actual pur chasing agreemen ts. Elkem ’ s EHS management system de ﬁnes EHS as a line management r esponsibility wher e manager s at all levels o f the or ganisa tion ar e accountable f or the EHS performance in their or ganisations and locations. Commitment Elkem is committ ed t o a 100% saf e workplace with zer o-harm and zer o injuries. Our commitment to EHS cover s all employ ees and contract ors. Policies → General policy → EHS policy Elk em’ s corporate policies  118 119 Annual r eport 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 118 119 Annual r eport 2021 Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact T o ensure the line managemen t' s ability to fulﬁl this responsibility , each site has an EHS or ganisation based on the siz e of the or ganisation and the lev el of risk. Elkem ’ s corporate Vice Pr esident for EHS is r esponsible for Elk em ’ s EHS management s yst em. Compliance with the s yst em is internally audited at the site b y corporat e and divisional resour ces routinely . The internal corpora te EHS audit pr ogramme aims to audit all produc tion sites minimum ev ery o ther y ear . The tar get f or 2021 was 24 audits including a backlog from 2020 because o f Covid-19 tr avel r estric tions. As trav el r estrictions continued in 2021, only 8 o f these wer e done during the y ear covering mos t of Eur ope. In addition, alternative digital f ollow-up has been initiat ed pending trav el permission. Incidents management General r equir ements for r ecor ding, no tiﬁcation and classiﬁcation of injuries and incidents ar e based on criteria fr om US OSHA which ar e r elev ant for our type of industry . Elkem has a compr ehensiv e digital incident management sy stem and e xpects all employ ees to r eport any injuries, incidents, unsaf e conditions, deviations and non-compliances. All r eports ar e subject to inves tigation, mitigation and sharing wher e appropria te for learning and impr o vement. Serious incidents ar e subject to compr ehensive r oo t cause analysis. Recor dable injuries and high-risk incidents are pr esented for corpor ate managemen t on a weekly basis f or discussion. In addition to r eporting, incident management also includes emer gency prepar edness. All sites hav e emergenc y plans and emer gency r esour ces tailored to their lev el of risk. This varies fr om simple ﬁr st aid and ﬁr e e xtinguishing equipment, to fully equipped in-house emergenc y r esponse teams. Covid-19 management Fr om the start o f the Covid-19 pandemic Elk em has established Crisis Management T eams at all sites ar ound the world under the coordina tion of the Corpora te Crisis Management team and VP for EHS and CSR. All sites hav e updated emer gency and contingency plans to pr otec t employee health and k eep production and business activities running. Sites r eport weekly inf ection and quarantine number s t o corporat e. Appro xima tely 450 employees ha ve test ed positive to Covid-19 fr om the start in early 2020 . With a fe w ex cep tions ther e have been no se ver e illnesses among employ ees and no substantial pr oduction disrup tions. Health and saf ety training Elkem emplo yees r eceiv e compr ehensive documented EHS tr aining to ensur e a complete under standing of hazards in the workplace and ho w they can a void harm during daily oper ations. T raining activities include: → Basic training in Elk em ’ s EHS management s yst em FOKUS mandat ory for all employees → Speciﬁc work -r elated tr aining f or each work operation and each tool emplo yees ar e r equir ed to use t o ensure the y ha ve necessary competence to do the job in a sa fe and health manner → Awar eness training to ensur e each employ ee understands how their personal beha viour can a ect the health and saf ety o f themselves and o thers → T raining needs and completed training ac tivities ar e re viewed annually thr ough developmen t discussions with each employee and documen ted at site le vel. Contractor health and saf ety on site Elkem ’ s zero-harm philosophy applies also to all contract ors working on sit e and contrac tors ar e subject to the same health and saf ety r equirements as Elk em employees when w orking on Elk em pr operty . Contractor companies are scr eened befor e being contract ed, and contract or employ ees receiv e speciﬁc EHS training fr om Elkem be for e they ar e allo wed to work at Elk em plants. For mor e compr ehensive in formation  Social Health and sa f ety Work -related injuries Fatalities High-consequence work -r elated injuries Lost work day injuries Other r ecor dable injuries T otal recor dable injuries Hours work ed Work -related injuries Fatalities High-consequence work -r elated injuries Lost work day injuries Other r ecor dable injuries T otal recor dable injuries Hours work ed Metric Absolute numbers Rate Absolute no. Rate Absolute no. Rate Absolute no. Rate Absolute no. Rate Number Metric Absolute numbers Rate Absolute no. Rate Absolute no. Rate Absolute no. Rate Absolute no. Rate Number 2019 1 0.1 1 0.1 14 1 .1 14 1 .1 28 2.2 13 037 309 2019 0 0 0 0 7 2.0 9 2.6 16 4.6 2020 0 0 1 0.1 10 0.8 19 1.5 29 2.3 13 097 248 2020 0 0 0 0 6 2.2 7 2.5 13 4 .7 2 761 047 2021 0 0 0 0 21 1.5 30 2.2 51 37 13 706 429 2021 0 0 0 0 7 1.5 10 2 .1 17 3.5 4 797 159 % change 2020 - 2021 No change No change Rate: Up 88% Rate: Up 47% Rate: Up 61% Up 5% % change 2020 - 2021 No change No change Rate: Down 32% due to mor e hours work ed Rate: Down 16% due to mor e hours work ed Rate: Down 26% due to mor e hours work ed Up 7 4% KPIs Employ ees Contractor s 2021 employ ee injury br eak down → Zer o f atalities and high consequence w ork - rela ted injuries → 21 out of 35 plan ts with zer o lost w orkda y recor dable injuries → A total o f 51 r ecor dable injuries, up fr om 29 in 2020 - T otal recor dable injuries include lost w ork day , medical tr ea tment, and r estricted w ork injuries, where main types o f injuries wer e lacera tions, bone fractur es, burns and spr ains/s trains. The colour indicates a positiv e or negativ e developmen t y ear on year . 120 121 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 120 121 Annual report 2021 Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact Social Human right s K e y e v ents 20 21 → Established a cross- functional human rights working gr oup with r epr esentativ es from Compliance, EHS , ESG Oce, HR, Supply Chain, and the labour unions → Launched a human rights e-Learning course, av ailable f or all employ ees T arget s → In 2022, we will conduct a compa- ny-wide human righ ts risk and impact assessment with support fr om e xternal experts → We will also pr omot e our newly launched Human Rights eLearning to ke y emplo yee tar get gr oups K e y risk × The 2022 risk assessment will pr ovide an updated ov erview o f the human righ ts and labour rights risk pictur e of Elk em. This will be presen ted in the ESG r eport 2022. El k em is an i mpor tant comm unity pla y er in se v eral o f the l ocati ons where sit es and plants are based. Communit y dialogue helps understand the role the compan y pla y s. More in f orma tion abou t our commun ity inv olv ement can be fou nd on our w ebsit e.  El k em belie v es tha t compan ies tha t act responsi bly and cr eat e v alue b y secu ring sustainable economi c gr owth will be successful in t he long t erm. A saf e and health y working en vi ron ment and pr omo tion o f labou r righ ts are k ey prior ities. In additi on t o the gr o wing genera l acceptanc e of busi ness’ duty to respect human righ ts, there has been a rise i n count ries consi dering and p assing huma n righ ts law s tha t regu lat e business acti vities. Such la w s are f ound i n man y cou ntr ies where E lk em operates, e.g., Ca nada, F ranc e, the Net herlands, German y , Nor wa y , the Un ited Kingd om, and the Un ited States ( Cal if ornia ). As an international compan y , Elkem operat es in a global marke t, both as a pr oducer o f materials and pr oducts 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 viola tions. W e have a long his tory o f encouraging and ensuring employee r epr esenta tion, and we hav e demonstr ated a str ong EHS f ocus in all our opera tions. How ever , we also have a wide-r anging, multi- tier ed supply chain where it is dicult to achie ve full transpar ency on labour conditions. In addition, we opera te in countries wher e human rights ar e under pr essure. As a company , we cannot r esolve all these issues. Still, we r ecognise our r esponsibility to identify human rights risks in our v alue chains and mitigate them to the best of our ability . Human rights Respect is one o f Elk em ’ s v alues. The gr oup is fully committed to av oid complicity in human rights abuses, and t o respec t, pr otect and pr omote human rights throughout our operations. Elkem ’ s Modern Slavery Act statement  In the Elk em-spirit o f continuous impr ov ements, we have s trengthened our framework to sa feguar d human rights. In 2021 we established a cr oss- functional human rights working gr oup with r epr esentativ es fr om Compliance, EHS, ESG Oce, HR, Supply Chain, and the labour unions. Elkem r ecognises that r especting human rights begins with understanding what human righ ts ar e and how our business activities may impact them. That is wh y w e also launched a new human rights e-Learning cour se in 2021. The e-Learning course will be pr omo ted to the broader Elkem organisa tion in 2022. As we gr ow and ent er ne w and challenging mark ets, we see the need t o tak e a mor e s ystema tic appr oach to our human rights str ategy . In 2022, we will conduct a company-wide human righ ts risk - and impact assessment (HRIA) with support fr om e xternal experts. Based on the HRIA, w e will identify Elk em’ s human rights priorities and launch a human rights action plan. Labour righ ts Elkem ackno wledges all employ ees’ righ t t o f orm and join tr ade unions of their own choice. W e hav e a long tradition o f including and in volving emplo yees and their unions and believe this impr ov es decision-making processes. In 2021 the r eported number of employ ees that ar e part of collectiv e bargaining agr eemen ts are 39%, down fr om 64%. As this is a major gap, w e ar e looking into the r eported data accur acy of pr evious year s and continuously de velop and unders tand the deﬁnitions and reporting frames of this topic. What is important to Elk em is a good and construc tive dialogue between the employ ees and the leadership. Elkem r ecognises and respects the fr eedom o f association and the right to collective bar gaining in accordance with local, na tional legislation and prac tices. In countries wher e the local la ws, prac tice or tr aditions Commitment Elkem is committ ed t o the UN Declar ation and International Con ventions on Human Rights, the OECD Guidelines for Multina tional Enterprises, the IL O Declaration on Fundamental Principles and Rights at W ork, IL O’s cor e conv entions and r elev ant local legislations in the countries wher e we oper ate. W e are a member o f the United Nations Global Compact and f ollow the Unit ed Nations Guiding Principles on Business and Human Rights. Policies → Code of conduc t → Human rights policy → Code of conduc t f or business partners → People policy Elk em’ s corporate policies  122 123 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 122 123 Annual report 2021 Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact Social Human right s do not support this, Elk em encourage channels and arenas wher e the employees ar e inf ormed about the company’ s status and allo wed to get inf ormation, r aise concerns, and inﬂuence decisions a ecting them. The level o f tr ade union cov erage v aries fr om coun try to country . In some countries the opera tors ar e or ganised under one collec tive bar gaining agr eement. In o ther countries there ar e no unions r epr esent ed in Elk em’ s entities. A t sites wher e ther e are no f ormalised labour unions, local management is encouraged to se t up channels and arenas f or collaboration wher e employees are in formed about the company’ s s tatus and allowed to raise concerns and inﬂuence decisions that a ec t them. The EBS t ools and culture supports this as inv olvemen t in decisions is part of the management sy stem. Elkem complies with local s tatutory r equir ements regar ding fr eedom of associa tion in all countries wher e we ar e pr esent. Pursuant to the Norw egian Companies Act pr ovisions, emplo yees hav e thr ee repr esentatives and tw o observers on the boar d of Elk em AS A. Elk em also has a Eur opean W orks Council ( EWC ), which is in accordance with the E uropean U nion Dir ective 2009/38/EC . The meetings tak e place annually . W orking hours shall be in accor dance with local law or agreemen ts. Wher e the oper ation of the business makes it necessary to devia te fr om this, measur es shall be tak en to secur e sucient time for rest between each working period, and the actual working hours shall be in line with the in tentions abov e. Employees ar e en titled t o medical tr eatmen t cov ered by the compan y in the ev ent o f sickness or injury resulting dir ectly fr om their work at Elk em. In the ev ent of work -relat ed disablement or death, employ ees or their surviving immediate family member(s) will r eceive insurance paymen ts and/ or pension. In addition, employees shall be pr o tected fr om being dismissed due to pr egnancy or responsibility for ne w-born childr en, consistent with local cus toms and laws. Child and for ced labour Elkem s tr ongly condemns human tr acking as a br each of fundamental human rights. Employmen t in Elk em shall alway s be on a voluntary basis and without any form o f thr ea ts, f or ce, or unlawful r ecruitment. Elkem has oper ations in parts o f the w orld wher e ther e is a risk of child labour and for ced labour , such as parts of Asia, South America, and Africa. W e tak e this risk seriously , and we will not toler ate the use o f child or for ced labour in any o f our oper ations and facilities. W e expect the suppliers and con tract ors with whom we do business t o uphold the same s tandards and codify this through our code of conduct f or business partners. Mor e informa tion about our sustainable supplier management practices can be f ound in the supply chain management chapter on page 142.  There w er e no conﬁrmed incidents o f child or f or ced labour in Elk em in 2021. The human rights policy pr otec ts the rights o f the employees and the stak eholder s tha t ar e speciﬁcally vulnerable to our activities. The age limit for working in Elkem is 18 y ears, with the ex cep tion of vaca tion substitutes and voca tional students, wher e the limit is 16 y ears. V acation substitutes under 18 y ears old and students ar e only allowed to do light and simple work that is deemed saf e and does not con ﬂict with school participation. Elk em does not allo w children below the age of 16 to be employ ed in our opera tions. Appren ticeships or other pr ogrammes ar e accep ted for children under 16, but only if this enhances the child’ s education. Some supplier produc tion sites or some of our own plants ar e consider ed high-risk work and must be done only b y tr ained and qualiﬁed people. Sever al measur es are in place to ensur e compliance with these pr ocedur es and our human righ ts policy . Elkem has strict r outines to ensur e tha t all ocial permits and r egistr ations ar e in accordance with local la w , and that all employ ees hav e written employment con tracts or o ther documentation in line with local legal requir ements, insurance cover age and correc t tax pa yments. EHS audits ar e r egularly conducted at all plan ts, with speciﬁc f ocus on these topics f or plants in high-risk ar eas. Employees co ver ed by collec tive bar gaining agreements Human rights impact assessment to identify operations and suppliers at signiﬁcant risk for incidents o f child and for ced labour Reported conﬁrmed cases o f child or f or ced labour Metric % Status Number 2019 61% 0 2020 64% 0 2021 39% Decided 0 Comment Se comment on page 123 Will be conducted in 2022 KPI s 124 125 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 124 125 Annual report 2021 Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact Social Diversity , equality and inclusion K e y e v ents 20 21 → Appointed a dedicated global DEI r esour ce → Development o f a global DEI stra tegy for Elk em T arget s → Kick -o DEI str ategy implementa tion with the corpor ate managemen t → Launch awar eness tr aining f or all employees → Develop inclusive leader ship assessment → Review of all HR policies & pr ocesses in light of DEI K e y risk s × Legal challenges as a r esult o f non- compliance × Poor a ttraction & r eten tion of top talent × Impact of lo w inclusion on continuous impro vemen t and innova tion K ey oppor tunities → Attrac t and re tain diver se talent → T ap into diver se perspectiv es leading t o better continuous impr o vement and innova tion → Reduce employee turnov er costs A t Elk em, we beli e v e t ha t our peo ple ar e ou r most va lua ble asset. The collect iv e su m o f th e ind ivid ual d i ere nces, li f e e xper iences, kn o wledg e, in ven ti v eness, self -e xpr ession, uni que ca pabi li ti es, and talen t t hat o ur emp lo yees i n v est i n thei r w or k no t onl y rep rese nts a sig ni ﬁcan t part of our c ult u re, but als o our r eputa ti on an d comp an y' s achi e v emen ts. By embrac ing eq ual o ppor t uni ti es, and a di v erse a nd incl usiv e compa n y cult ur e, E lk em aims t o increas e our ca pab ili ti es within i nno va ti on, cus t omer centricity , cultural a w areness, and compliance. Elkem will pr ovide equal employment opportunities and trea t all our employ ees – and job seeker s – f airly . All Elkem emplo yees ar e e xpected to pr omo te and act in accordance to the Elk em v alues of r espect, inv olvement, precision, and con tinuous impr ovemen t. Diversity , equality & inclusion (DEI) Our DEI vision is to cultiv ate a div erse, equitable and inclusive workplace wher e all emplo yees feel engaged, valued and a sense o f belonging. Div ersity , equality , and inclusion are k ey pillars in our people str ategy . They repr esen t the collec tive sum o f the individual dier ences, lif e experiences, kno wledge, innov ation, and unique capabilities tha t our employees o  er and inves t in their w ork. Diversity Diversity is the conscious act of in tentionally seeking t o employ a workf orce tha t consists of individuals with a range o f char acteris tics such as: gender , religion, race, national or ethnic origin, cultur al back ground, social group, disability , sexual orienta tion, marital status, age, and political opinion as outlined in our code of conduct. Equality Equality is about cr eating f air access, opportunity , and advancement f or all emplo yees. Inclusion Inclusion means inviting and welcoming emplo yee ideas, knowledge, perspectiv es, appr oaches and styles into the discussion t o lever age continous impr ov ements, innov a- tion and maximise business success. Promo ting diver sity , equality , and inclusion are essen tial in attrac ting and re taining our talen t, incr easing pro ﬁtability , maintaining competitive advan tage and sustaining success in Elk em. Our objective is to cr ea te a culture o f inclusivity where all v oices ar e valued. W e know that our company beneﬁts fr om employees who f eel saf e to ask questions, challenge the wa y w e do things, ar e alway s looking f or continuous impr o vements, activ ely learn fr om their successes and f ailur es, and bring diver se perspectives to the table. By cr eating and sustaining a diverse, equal and inclusiv e work cultur e, Elk em aims to increase our ability to pr o vide advanced mat erial solutions shaping a better and mor e sustainable futur e f or all o f our stak eholders. At Elk em, w e believe that in tegrity is a competitive advantage. W e striv e t o be open, honest and r espectful in our r elationships with each other . W e believe that w e all have the right to w ork in an open and saf e envir onment free fr om bullying, har assment, and discrimination. Ev ery y ear , Elkem deliver s mandatory Global Compliance training for all emplo yees. Our code o f conduc t tr aining includes t opics such as reporting, r e taliation and discrimination in the workplace. W e use our Speak Up whistle blowing channel to ensur e ev eryone has the opportunity to r eport any misconduct or po tential non- compliance. Elkem 's griev ance mechanism is targe ted towar ds s tak eholders who hav e f eedback or concerns rela ted to our plants, pr ojects, or o ther business activities worldwide. It is a channel to pr esent issues to the leaders of these activities, coor dinated b y Elk em 's ESG oce. We belie ve that our leader s are the driv ers of cultur al change. Their commitment and r ole model behaviour is Commitment Elkem is committ ed t o cr eating equal opportunities for all emplo yees working in a div erse and inclusive envir onment. W e appr eciate that e very individual is unique and valuable and should be r espected f or their individual abilities. W e ha ve z ero toler ance for any form o f harassment or discrimina tion. Our responsibility to our people, customer s, stak eholders, and communities is to acceler ate equality f or all. Policies → Code of conduct → Speak up policy → People policy → Global recruitmen t pr ocedur e Elk em’ s corporate policies  126 127 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 126 127 Annual report 2021 Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact k ey to our success. Elkem has consciously intr oduced diversity & inclusion into our leadership de velopment progr am to pr ovide our leader s with the tools and techniques they need t o incorporat e DEI within their teams and throughout Elk em. In 2021, Elk em appointed a global DEI Lead. Elk em also established a targe ted plan to further support global and local DEI goals t o promo te div ersity , equality , and inclusion. For mor e inf ormation on our curr ent activities and ac tion plans please see 2021 Activity and reporting duty r eport (ARP ) .  Board of director s and management Elkem ’ s board of dir ector s consists of 11 member s fr om Germany , France, China and N orway . Three out o f eight shareholder elected board members ar e women, per the Norwegian Public Limited Liability Companies Act. Furthermor e, one out o f the thr ee employ ee elected repr esentatives, is f emale. The female shar e o f the boar d is 36%. One of the eleven boar d member s ar e in the age group 30–50 y ears old. The r est o f the member s ar e 51 years or older . The corporat e management team of Elk em consists of nine people fr om Fr ance, Norw ay , and Brazil. The management team consists o f eigh t men and one woman. One of the members is in the age gr oup o f 30 t o 50 y ears old and the r est ar e 51 y ears or older , and this is the same as in 2020 . The female shar e o f management teams ar e at 30%, an incr ease from 24% in 2020. As the female shar e in the company is at 25%, this is a welcoming dev elopment. How ever , there ar e grea t dier ences within the or ganisation. A t some sites women account for o ver 50% o f the site managemen t whilst at o ther locations, there ar e no women in the management team. Age distribution The age distribution is an indicator o f experience and backgr ound. The tracking indicat es some changes in the demography the last years, wher e the company now has more y ounger (<30 ) and older (>50 ) employees than pre viously . Female share Female shar e in company Female shar e in management Female shar e in leadership pr ogramme Female leaders o verall Female shar e in tr ainee progr amme Female shar e of part time w orker s Female shar e of t emporary employees Female shar e white collar Female shar e blue collar Gender pa ys dier ences Par ental leave - a verage w omen (Norw ay only ) Par ental leave - a verage men ( Norwa y only ) Age distribution, employ ees < 30 years 30-50 years >50 years Age distribution, management teams < 30 years 30-50 years >50 years Salary: CEO to median employee ( NOR ) wage Metric % % % % % % % % % Status Week s Week s % % % % % % Ratio 2019 25% 23% 32% 24% - - - 34% 18% N /A 16% 59% 25% 2020 25% 24% 19% 25% 58% 60% 18% 34% 21% N /A 38. 7 18.5 14% 60% 26% 3% 64% 33% 11:1 2021 25% 30% N /A 24% 43% 45% 29% 36% 17% Started 38 16 16% 56% 28% 6% 60% 34% 7:1 % change 2020 - 2021 No change Up 6% Not or ganised due t o Covid-19 tra vel restrictions Down 1% Down 15% Down 15% Up 11% Up 2% Down 4% Initial project s tarted, mapping organisation in Iceland and Norwa y Down 0. 7 weeks Down 2.5 week s KPI s Social Diversity , equality , and inclusi on The colour indicates a positiv e or negativ e developmen t y ear on year . El k em publ ished its first e qua lity statemen t in 2 021. The r epor t is a vai lable onli ne 128 129 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 128 129 Annual report 2021 Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact Social Human de v elopment K e y e v ents 20 21 → Launch of Elk em people policy → T urnover ra te: 8.4% → Employees that has had dev elopment discussions: 78% T arget → 100% of emplo yees o f all positions and locations shall hav e an annual developmen t discussion with their leader K e y risk s × Ability to a ttract necessary r esour ces – both the competencies and necessary capacity - in the remo te locations o f the Elk em plants × Lack of developmen t opportunities and follow-up (r ef. de velopment discussion implementation r ate ) may r esult in demotiv ated employees and a high turno ver ra te × Restrictions on trav elling due to the pandemic make it challenging to e x change best practises and cr eat e good t eamwork K ey oppor tunities → As an attractive emplo yer and indus try leader worldwide, Elk em can r etain and attrac t highly skilled and mo tivat ed employees tha t support the shared stra tegic goals → Global operations o er e xciting developmen t opportunities t o all employees Product v alue chai n W orld class quality products ↑ Requires ↓ W orld cl ass per for mers People v alue chai n Sup por ted b y a stro ng and c onsist en t compa n y cult ur e, E lk em con ti nuou sly w or ks t o be a s a f e and a ttracti v e empl o yer f or o ur cur ren t and f ut ur e empl o y ees . De v elo pin g the o rga nisa t ion t o enable stra t egy im plementa tio n, and sy stema t ic compe ten ce de v elopmen t and per f orma nce manag ement o f each empl o y ee, ar e k ey t o ensu r e the suc cessful a nd sustaina ble g ro w th o f t he compan y . Our people ar e our most important inv estment. Elkem 's human r esour ce str ategy , organisation and developmen t are v ehicles to dev elop the cultur e to lever age the organisa tion ' s critical competencies, cor e values, and behaviour . It is also a vehicle to deliver on the business stra tegy . Our critical position planning process is designed to iden tify gaps, futur e competence and capacity needs and gap closing str ategies, including organisation models, to ensure that the necessary capability and capacity ar e in place when and where w e need it. Elkem 's global people policy was launched in 2021 and established principles r elated to the people pr ocesses and the company' s obligation to handle emplo yment matter s consistently , supporting the employees thr oughout their employment lif e cy cle with Elkem. The people policy aims to cov er k ey ma terial issues for emplo yees globally . Elk em business sy stem (EBS ) – our common culture EBS is Elk em ' s business sys tem and leadership philosophy tha t carries our common culture, language, and pro vides working- and continuous impr o vement methods for all emplo yees. EBS is a k ey component to achieve oper ational e x cellence acr oss of our value chain. Building on our values; r espect, inv olvement, pr ecision, and continuous impr ov ement, EBS is the f oundation of Elk em ’ s company cultur e. A t the heart o f EBS is the dedication to inv olve all employ ees in impr ov ement work and Elk em tak es grea t pride in empowering our employees as e xperts in their own r esponsibility areas. We consider delegated and decentralised decision- making t o be a str ength and k ey element of our business culture. The EBS principle of empo wering people is k ey to understanding Elk em ’ s vie w on labour rights and employee in volvemen t. We seek to achie ve incr eased eciency in the produc t value chain thr ough the people value chain in a team-based structur e with orderly working and wage conditions, pr o viding a wide range o f opportunities f or personal dev elopment. Developing a shar ed language and cultur e tak es time. When Elkem es tablishes or acquir es a new or ganisation, the priority is alw ays to implemen t our EHS and EBS standar ds and sys tems, r egar dless of the location or pre vious or ganisation of the site. Some Elk em sites ar e at the beginning of this journey , while other entities hav e come a long way . Commitment Elkem is committ ed t o empowering people to become experts in their own r esponsibility areas thr ough inv olvement, r espec t, continuous impro vemen t, and precision. All contract ors ar e subject to the same saf ety standar ds as our own employ ees and r eceive training and follow-up t o ensure this. Policies → Elk em people policy → Elk em code of conduct Elk em’ s corporate policies  130 131 Annual r eport 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 130 131 Annual r eport 2021 Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact EBS assessments to pr omote in volvemen t and continuous impr ov ement includes: → A corporat e EBS t eam biannually assesses all sites through observ ations and discussions to e valuat e the progr ession, involvement, and impr ov ements and encourage further development → The assessment's topics ar e divided into thr ee main parts: i) Daily oper ations r elated to w ork t eams and daily management, 5S visual managemen t and problem-solving, ii) s yst ematic impr ov ements rela ted to ﬂow and contr ol and capability and iii) sponsorship, str ategy , learning and competence developmen t → Across all lev els, Elkem 's leadership f ocuses on involv ement, knowledge and inf ormation sharing and on the managemen t' s commitment to empowering their emplo yees thr ough continuous impr o vement and shared goals and tools. Over the last years, Elk em has e xpanded its pr esence globally , particularly in China. Our pr evious e xperience from China sho ws that cultur al and maturity dier ences hav e not pr e vented the implementa tion and developmen t of EBS. W e ar e continuously hiring and tr aining new local employ ees and conducting assessments to ﬁnd the gaps and impr ov ement ar eas to further develop our or ganisation. Ev ery emplo yee shall kno w their tar gets and plan together with their leaders what support and r esour ces they need t o meet them, t o develop further and perform w ell. All emplo yees ar e e xpected to contribut e to a performance cultur e that driv es continuous impro vemen t. It shall be saf e f or all employ ees t o challenge the s tatus quo to drive a cultur e o f innova tion. This requir es that all employ ees receiv e r egular constructive f eedback on their perf ormance and contribution to the working environment. At Elk em, this is done thr ough f ormal and inf ormal channels, starting with the individual' s job description and the annual De velopment Discussion ( DD ). In the DD , individual tar ge ts are agr eed upon, perf ormance is discussed, and f eedback is given. This is done to support changing work priorities aligned with str ategic goals. In addition, and as part of the DD , the leader also receiv es feedback fr om the employee to enhance bo th individual performance and cooper ation. All employees ar e r esponsible for their per sonal and pro f essional developmen t, utilising Elk em ' s internal and external compe tency dev elopment o ering. Elk em is committed to ensur e tha t the en tir e workf orce ha ve access t o learning and developmen t opportunities and resour ces to develop their skills and knowledge to be competent in their r oles. Leader s ar e responsible for supporting all emplo yees to attain, build and demonstra te the Elk em values, skills, and compet encies needed t o succeed in their r oles. The DD is used to agree on a plan f or the curr en t competencies r equir ed to be successful and pr epar es employ ees f or the futur e by ensuring r elevan t competencies. W e encourage and support our employees to acquir e r elev ant and formal education if needed f or the curr ent position or dev elop into other future r oles. Elkem o  ers a wide range o f internal tr aining. The o ering is continuously evalua ted and further developed. In addition, the incr eased use o f digital channels enables fast er and broader roll-out of competenc y de velopment. Elkem encour ages employ ees to tak e on new challenges and job responsibilities to de velop themselves and to contribute to the company' s cultur e o f sharing and cr oss- divisional - functional and -geographic learning. Elk em o ers good conditions to support employ ees on such developmen t steps if a change includes a r elocation. Elkem 's global tar get is for 100% o f emplo yees acr oss The Elk em competenc y de v elopment model : 10% developmen t through classr oom/ online based tr aining activities 70 % developmen t through taking input from classr oom/ online training and putting it int o practice as part o f the daily work with supervisor , colleagues, mentors, and impr o vement w ork in improv ement teams 20 % developmen t through taking on new challenges all locations and lev els t o have an annual de velopment discussion with their leader . In 2021, 78% of Elk em employees had a DD , a decrease fr om 85% in 2020 . Achieving 100% during the pandemic has been challenging. Also, when acquiring new plants and entities, the ﬁrs t priority is to ensur e the saf ety of our new colleagues and t o start the implementation o f EBS . Flexibility and work -life balance T o reach Elk em ' s ov erar ching goals, the company needs t o develop an or ganisational cultur e based on participation, teamwork, and people empo werment. Elkem is committ ed t o pr oviding ﬂexibility in working hours and -location in accor dance with local laws and regula tions. Such ﬂe xibility can be o er ed by the company at the employee ’s r equest, pr ovided that ﬂe xible working hours or -location does no t in any wa y pr ev ent or hinder the emplo yee in perf orming his/her job task s. Managing pr of essional and personal lif e can be challenging. Acr oss the whole compan y , working terms must allow emplo yees to combine working and family life. Elk em r ecognises that a bett er work -life balance can impro ve emplo yee mo tivation, perf ormance, and produc tivity , and reduce str ess. Ther ef or e, we w ant to support employees to achie ve a bett er balance between work and their other priorities, such as: dependent car e responsibilities, special lea ve needs, leisur e activities, further learning and o ther inter es ts. T urnover Elkem s trives to r etain e xisting emplo yees and attr act new ones. The turnov er rat e indicates the attr activeness of Elk em as an employ er and how well Elk em manages to k eep employ ees on board. The total turnov er ra te in the Elkem gr oup was 8,4% in 2021. The f emale share o f new hir es was o verall 27% and the f emale share o f leav ers was 23%, indicating a positiv e tr end f or the compan y , meaning tha t over time we will incr ease the f emale shar e and diversity in the workf or ce. Changes t o the or ganisation, number of people and needed competencies can happen bo th as increase and reduc tion. When it is necessary to r educe the workf or ce, the process shall alw ay s comply with r ele vant legisla tion and agreemen ts. Furthermor e, the management shall involv e employees and their r epr esenta tives early t o run a tr anspar ent and constructiv e pr ocess, both for the employees who lea ve the company and those who continue. Ther ef or e, change management is an essential part of leadership de velopment activities in Elk em. Contractor s and tempor ary hir es All Elkem emplo yees shall ha ve a written emplo yment contrac t or o ther written documenta tion f or employment complying with local legislation. This also applies for contrac tors and tempor ary hir es. Elkem in vests in people and thus aims to o er permanen t employment and limit non-r egular employmen t. How ever , during peak times, con tracted and tempor ary work can be considered f or time-limit ed pr ojects or pr ojects in need of specialised, non-cor e competencies. Elk em is committed to f air compensation and priority rights to potential permanen t employment in such cases. Contrac tors ar e subject to the e xact same EHS requir ements as our employ ees, and all contrac tors receiv e full training and follow-up t o ensure that they work in a saf e and healthy envir onment. The number o f contrac ted employ ees (non-Elk em employees w orking full-time f or mor e than thr ee months as a subs titute f or hired emplo yees) a t Elk em was 433 in 2021. T otal employees T urnover r ate Female shar e of new hir es Female shar e of leaver s Blue collar / opera tors White collar / sta  Contractor s Eur ope Asia America Africa T emporary hir e ra te (%) t o permanent employment Part time w orker s rat e (%) to permanent emplo yment Development discussions Metric Number % % % % % Number Number Number Number Number % % % 2019 6 370 8% 30% 17% 67% 33% 882 327 155 157 0 - - 65 2020 6 856 6% 26% 23% 65% 35% 420 115 265 40 0 6% 3% 85 2021 7 07 4 8.4% 27% 23% 55% 45% 433 159 238 36 0 7% 6% 78 % change 2020 - 2021 Up 3% Up 2.4% Up 1% No change Up 1% Up 3% Down 7% KPI s Social Human de v elopment The colour indicates a positiv e or negativ e developmen t y ear on year . 132 133 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 132 133 Annual report 2021 Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact G o v erna nce 134 135 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management 134 135 Annual report 2021 Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact G ove rn an ce Introduc tion Sustaina bi lity is cen tra l t o E lk em’ s business stra t egy , and t he comp an y wor ks p ro acti v ely t o ensure in t egri ty and respons ibi li ty in all opera t ions. E l k em belie ves th at c ompa ni es tha t act r esponsi bl y and cre at e v a lue b y securi ng pr oduct ion w ith t he lo west possibl e en vi r onmen tal i mpact wi ll be su ccessful i n the lo ng t erm. Elkem is committ ed t o develop its business in accordance with the UN Sustainable De velopment Goals and the P aris agr eement. As a member of the United Na tions Global Compact, Elk em aims t o ensur e that our business is aligned with the t en UN Global Compact principles. Elk em is committed to follo wing the United Na tions Guiding Principles on Business and Human Rights. Elkem ’ s operations a ect sev eral stak eholder gr oups, such as employees, cus tomers, suppliers, and local communities. Elk em works pr oac tively t o ensure sa fe and healthy w orking conditions and high integrity tow ards all stak eholder gr oups. W e consider trust and partner ships k ey to success and long- term value crea tion. Elkem has implemented policies, pr ocedur es, and training to ensur e a str ong compliance cultur e acr oss the gr oup to secur e good corporat e governance. F or a complete o vervie w of the governance s tructur e and how the company’ s ESG work is or ganised, please see “Sustainability governance ” in the in troduc tion chapter . Elkem seek s to obtain a sa tisf actory r egulatory framew ork f or all its opera tions. W e are committed to do so in accor dance with our Code of conduct, with complete transpar enc y and no hidden agenda. There for e, w e participate in r elev ant industry organisa tions and tak e lobby positions when needed. A full list o f the organisa tions we participate in can be found under membership or ganisa tions overvie w her e.  The material topics that Elk em has an impact on and is impacted by: → Product go vernance, including chemical saf ety → Responsible value chain / supply chain managemen t → Supplying the gr een transition How does our commitment to UN Global Compact impact our work? Read mor e  K ey highlights → Implementation of the T CFD framew ork and publishing the ﬁrst T CFD report → Signiﬁcantly str enght ened internal compliance function → An internal produc t governance pr ojec t was launched, aiming t o coordina te initiativ es and set new targe ts 92 % new sup pliers sub ject to assessment a nd pre- qualiﬁc ation scree ning 2 8 m i n a v erage compl iance training 96 % emplo y ees tha t ha v e signed the code of conduct Governing t ools and policies are a vai lable onli ne 136 137 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact G ove rn an ce Product go v ernance K e y e v ent 2 021 → In 2021 Elkem launched a pr oduct governance pr ojec t t o coordina te and communicate the cross-divisional initiatives within the pr oduct governance and s tew ardship T arget → Identify ar eas o f k ey priority and se t valid KPIs. The KPIs will be de veloped in 2022 Pr oduct st e w ar dshi p is th e respo nsib le and pr o activ e mana gement o f health, sa f ety , and en vir onmen tal aspects o f a pr oduct th r ough out its li f ec y cle. E l k em is in a uni que pos iti on wher e it co vers t he ent ir e v al ue cha in f ro m the ra w mat eria l quart z via meta llu rg ica l sil ic on t o specia lty sili cones. Henc e, al l aspects of pr od uct ste w ar dshi p ap ply t o t he v ari ous pr odu ctio n steps. Belo w you ca n ﬁnd so me k ey aspects o f pr oduct go v ernance i n El k em. Renew able raw mat erials and bio-based products Biocarbon is a stra tegic ra w material for the sustainable produc tion of Elk em ’ s silicon and ferr osilicon pr oducts and include wood chips, char coal, and biocarbon agglomerat es. Elk em is committed to sustainable and ethical ra w material sour cing in accor dance with internationally accept ed principles and standar ds, e.g. FSC ( Forr est Ste war dship Council) and PEFC (Pr ogr amme f or the Endorsement o f Forr est Certiﬁcation) . Elkem ’ s sourcing contrac ts as well as Elkem ’ s corporate standar ds comply with the highes t level o f sustainability and r esponsible sourcing o f natur al raw ma terials. Mining activities and biodiversity Elkem has a s tr ong commitment to e xclude pr o tected areas fr om mining activities. Elk em ’ s mining activities are s trictly coordina ted with the national mining authorities. Since quartz is a common mineral and no t of envir onmental concern, Elk em can sear ch f or sour cing of its ra w material solely fr om non-pr o tected ar eas. Elkem mak es environmental risk and impact assessments part of the mandatory st eps when applying f or mining permits, including the consultation with biodiversity e xperts. During mining operations, emissions t o water and air ar e monitor ed as f or eseen, as well as the impact on soil, vege tation, and the landscape. All activities ar e audited by the national mining authorities. As a mitigation measur e, annual pro visions ar e made, earmark ed f or the r estor ation of the mine after end activity . Elkem has r eceived awar ds in Spain ev en r eceived aw ar ds f or sustainable developmen t and good envir onmental prac tices of its quartz mining activities. As a member of IMA -Eur ope ( Industrial Minerals Association) , Elkem commits to the mining industry’ s sustainability chart er: Biodiversity and Envir onment | IMA E ur ope.  Elkem is committ ed t o r esponsible sour cing of minerals, so as not to support any possible conﬂict with human rights abuses or envir onmental degr adation. Read our conﬂict miner al statemen t here.  T ransport safety The tr ansport of hazar dous goods is heavily r egulated internationally , e.g. thr ough UN T ransport Regulations or the International M aritime Organiza tion (IMO ) that r esult in a number of standar ds for pack ed mat erial (IMDG ) , transport o f solid bulk car goes ( IMSBC ) and tr ansport of liquids in bulk (IBC ). All tr ansport is pr ovided b y pr o fessional tr ansport companies tha t f ollow these standar ds and r egulations. At the plant sit es, tr ansport of hazar dous goods by truck occurs, and strict pr ocedur es ha ve been implemented for each hazar dous substance to ensur e the saf e transport, including loading, unloading and handling. Checklists cov ering the condition o f the vehicles and equipment, as well as speed and alcohol contr ol, ar e standar d r outines at plant site. All plants ar e ISPS ports (Int ernational Ship and P ort f acility Security ) with res tricted access. All personnel mus t under go saf ety training, and transport companies participa te in saf ety drills with the plan t’ s own ﬁr e brigade. Hazardous substances management It is Elk em’ s policy t o assess saf er alternativ es f or hazardous subs tances of concern and pr omoting its substitution and r eduction. The duty to substitute hazardous chemicals is part o f the national Labour Law , and it is practised in all our labor atories and plants, Commitment Proac tive management o f use of chemicals and the pr o tection o f the en vironmen t and the human health are fundamental pr e-r equisites f or conducting our business and securing our license t o operat e. Policies → Produc t stew ar dship policy → Procur ement policy → Responsible sour cing of biocarbon Elk em’ s corporate policies  138 139 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact G ove rn an ce Product go v ernance whenever technically possible. D4, D5, D6 are importan t intermediat es in the produc tion of downs tr eam Silicones. These ar e classiﬁed as Substances of V ery High Concern ( SVHC) and closely contr olled thr oughout the pr oduction, stor age, and shipping processes. While a subs titution is not possible, pr oduction pr ocesses ar e constantly impro ved to r educe the r esidual amount in the downstr eam pr oducts. Coal tar pitch is ano ther SVHC-substance and lis ted on ECHA ’ s authorisation list. It is an importan t raw ma terial in the pr oduction o f Søderber g electr ode paste and other pastes. Elk em Carbon has successfully substituted coal tar pitch with non-hazar dous and gr een alterna tives for a number o f pas tes and intends to subs titute for Søderberg electr odes, too. The Eur opean chemicals legislation REA CH r equir es suppliers of articles (manuf actur ers or importer s) to inf orm its Eur opean downs tream user s about the presence o f substances o f very high concern ( SVHC ) when their concentr ation e x ceeds 0 . 1% (w/w ). Elk em regularly monitor s its pr oduct portfolio f or SVHC substances that ar e subject to e xisting or futur e regula tory r estrictions or that ar e associated with particular concerns. W e r evie w our management plans regularly deﬁning the speciﬁc risk s associated with each identiﬁed SVHC substance. W e r evie w all possible options to mitigate iden tiﬁed risks including possible substitution wher e possible, phasing-out any substance posing an unacceptable risk to human health and/ or the envir onment or limiting the exposur e o f the S VHC substance if substitution is not deemed possible. In addition t o complying with all chemical produc tion regula tions, the Silicones division is a signatory of the Responsible Car e Global Charter of the Interna tional Council of Chemical Associations ( ICCA) . Thr ough participation in the Responsible Car e pr ogramme, Elk em is committed to manage chemicals saf ely thr oughout the life cy cle. This includes bo th proac tively identifying and managing chemical risks and concerns thr oughout our oper ations and r eplacing substances in the portf olio that pose unacceptable risk to human health, sa fe ty and envir onment. Product saf ety progr am The saf ety o f Elk em ’ s pr oducts is ensur ed by two main pillars, i.e. the chemical saf ety assessment thr ough the Eur opean chemicals legislation REA CH and the mandatory saf ety data sheets ( SDS) as a hazar d communication tool f or our valued cus tomers, as w ell as our o wn employ ees. Elkem ’ s management commits to a zer o-harm policy . This includes detailed standar d opera ting pr ocedur es ( SOP ), the duty to f amiliarize with r ele vant sa fe ty da ta sheets, and saf e job analyses. Speciﬁc da tabases (Inosa) stor e the formal r equir ements and mak e them traceable. Incident inves tigation and corr ectiv e actions ar e part of the corpora te EHS standar d and supported by a dedicated so ftwar e tool ( Syner gi) . Auditing is an import process in Elk em’ s saf ety pr ogram and includes both auditing of Elk em ’ s suppliers and contr actor s as well as internal audits and audits by our cust omers. This is part of Elk em ’ s ISO 9001 and ISO 14001 certiﬁcations. Chemical safe ty Compliance with chemical produc t r egulations include produc t r egistra tions, pr oduct authorisations, saf ety data sheets and pr oduct labels. There ar e also industry speciﬁc regula tions that Elk em complies with, f or ex ample f or pr oducts that ar e in contact with f ood and water (packaging) or health car e (band aid/wound car e ) . With a portfolio o f mor e than 4, 000 di er ent pr oducts that ar e used in a multitude of applications, r egulatory and produc t compliance is k ey f or Elk em. The document management sy stem OSCAR has been implement ed in the Silicones division and ensur es that compliance, certiﬁcates, and r egulat ory sta tements ar e easily available f or distribution to customer s. Elkem is committ ed t o comply with in ternational regula tory r equiremen ts and pr ovides saf ety data shee ts ( SDS ) for all pr oducts in accor dance with UN Globally Harmonized Sy stem o f Classiﬁca tion and Labelling of Chemicals ( GHS) . In all mark ets wher e Elk em ’ s produc ts ar e pr omoted, the pr oducts must mee t speciﬁc requir ements and comply with certain technical, regula tory , health and environmental s tandar ds. K ey even ts in 2021 f or chemical saf ety: → As signatories o f the CEFIC impr o vement plan Elkem Silicones has committ ed t o pr oactively r eview and update all its REA CH dossiers by 2027 → Elkem Silicones comple ted all necessary pr e- regis tra tions in T urk ey under KKDIK r egulation b y late 2020 and submitted all r ele vant no tiﬁcations under UK REA CH in October 2021 → Successful submissions and e xemp tions of se veral PL C (polymers of lo w concerns) under K or ea- REACH → Met the EU Poison Cen ter No tiﬁcations ( PCN) requir ements for pr o fessional and consumer uses that went in to f or ce early 2021 → Supported ov er 2500 non-standar d customer reques ts in 2021 needing str ong PSRA support. Animal testing policy Elkem commits to abs tain fr om animal tes ting ex cept where legally r equir ed. All to xicological necessary vertebr ate animal studies conduc ted by Elk em Silicones are v alidated and coor dina ted centr ally via an Elk em to xicologist. Centr al coordina tion ensur es tha t the produc t stew ar dship t eam is awar e o f all existing and rele vant da ta supporting pr oduct saf ety and cov ering global regula tory needs.All studies ar e in compliance with Eur opean cosmetic r egulations. Policy on emer ging technologies Elk em is awar e o f risk s and contr o versies associa ted with the use o f emer ging t echnologies. Elkem does not use GMO ( genetically modiﬁed or ganisms) and has no resear ch activities within stem cells or gene tic engineering. Elk em does howev er utilise nanof orms o f e xisting produc ts because the y ar e k e y enabler s f or sustainable constructions ( Elk em Micr osilica® ) and for battery technology (silicon) . Elk em is committed to assess risks r elat ed t o the use o f nanoparticles, and t o implement measur es t o r educe potential e xposur e as it is f or eseen by national occupational h ygiene legislation. Furthermor e, nano forms r equir e a speciﬁc chemical saf ety assessmen t under the E ur opean REACH legislation to ensur e their sa fe use. Elk em f ollows an in ternal pr ocedur e f or the assessment of new pr oducts (incl. nano f orms) thr ough the corpora te produc t stewar dship team. 140 141 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact G ove rn an ce Supply chain management K e y e v ents 20 21 → 83% of ne w business partners signed code of conduct → 92 % of ne w raw ma terial suppliers pre-qualiﬁed and pr e-assessed T arget s → All new raw mat erial suppliers subject to assessment and pr e-qualiﬁcation screening → All new suppliers of ra w material subject to supplier audit → All new suppliers t o sign Elk em’ s code of conduct for business K e y risk s × Violations o f human righ ts in the supply chain, mainly child labour and for ced labour × Carbon material ( coal) r equir ed f or smelting processes × Limited av ailability o f sustainable biocarbon × Unsustainable land use f or quartz mining and biocarbon produc tion, and biodiversity loss K ey oppor tunities → Increase shar e of biocarbon and biochemicals → Prof essional partner with str onger envir onmental and social standar ds Respons ible so ur ci ng is a stra t eg ic pr iori ty for E l k em . E lk em’ s t ota l glo bal pr ocu r ement s pend is app ro xima t ely NO K 16 b il lio n per y ear , co v ering su ppli es o f ra w ma t eria ls, ener gy , goods, ser vices a nd log istics. The act iv e su pply b ase cons ists of a bout 18, 000 su ppli ers globa lly . The number of ra w ma t eria l suppl iers is rel at iv ely lo w whi le th e num ber o f supp liers o f other g oods and s er vic es are high . As one of the world’ s leading supplier s of advanced silicon-based materials with oper ations thr oughout the value chain fr om quartz t o speciality silicones, Elk em continuously s trives to impr ov e how we sour ce our supplies. The pr ocur ement or ganisation is r esponsible for r aw material supply , logistics, goods, and services requir ed for Elk em ’ s opera tions. Elk em’ s procur ement organisa tion is decentralised, with pr ocur ement functions at corpor ate, t divisional and plant le vel. W e further di er entia te between pr ocur ement o f major raw materials, and indir ect ma terials. Suppliers o f major raw materials ar e alwa ys consider ed critical suppliers, and suppliers of indir ect ma terials may be r egar ded as critical, depending on an independent assessment. The corpor ate supply chain has the ov erall global r esponsibility f or developing and main taining Elkem ’ s procur ement and logistics str ategy , and Elkem ’ s int ernational pr ocur ement policies and procedur es. Supplier con tracts ensur e that risk assessmen ts and audits can be conducted bef or e pr equaliﬁcation and at any s tage of the supplier contr act. The business partner code sets out Elk em ’ s expec tations to suppliers r egar ding ethics, labour rights and social and envir onmental issues. W e r equir e all suppliers to endorse the business partner code and maintain their commitment thr oughout the relationship. The business partner code is consider ed an integral part of any agreemen t tha t r egulates the r elationship betw een Elk em and a supplier . Supplier due diligence and scr eening The procur ement function is r esponsible f or carrying out pre-qualiﬁca tion and risk assessments o f supplier s based on corporat e requir ements within environment, health and saf ety , social responsibility , anti-corruption and compliance with laws and r egulations. In 2021 a new contr act lifec ycle management ( CLM) sy stem w ent live. In 2022, Elk em plans to implement a new supplier rela tionship management ( SRM ) sy stem and pr ocess for supplier pr equaliﬁcation. In parallel, Elkem will implemen t the “Dow Jones ” compliance tool, a thir d-party risk management tool pr oviding support to unders tand compliance risk and tak e mitiga ting actions. All new suppliers o f raw ma terials ar e scr eened against envir onmental and social criteria aligned with the expecta tions of the Global Reporting Initiativ e ( GRI). F or high-risk suppliers, additional due diligence assessments are perf ormed (int egrity due diligence ) . The new sy stem will enable a more uniﬁed pr ocess for scr eening and vetting o f suppliers acr oss all divisions and jurisdictions, tracking and monitoring supplier s’ compliance throughout the contr act lif ecycle, as w ell as identifying and managing supplier risk. Regular audits ar e performed by plant personnel or corpor ate personnel, f ocusing on supplies tha t ar e associated with risk. Elk em is also using external partner s t o perform audits on their behalf . Commitment Elkem is committ ed t o consider ethics, labour rights, social and envir onmental issues when sourcing pr oducts and services across all procur ement categories and across all oper ations. Policies Elkem has policies and pr ocedures in place t o ensure and govern r esponsible sour cing. This includes: → Procur ement policy , outlining Elkem ’ s procedur es for pr equaliﬁcation and management of suppliers. → Policy f or sour cing of bio-carbon, outlining Elkem ’ s commitment to sustainable f ores t management and the requir emen ts f or pr ocuring bio-based reduc tants in Elk em. Elkem ’ s corporate policies  142 143 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact G ove rn an ce Supply chain management Supplier due diligence and scr eening under the pandemic Historically has Elk em done 100% audits on their ne w raw ma terial suppliers. Due to the limitations giv en by the pandemic we hav e not been able to k eep this lev el in 2021. The tar ge t is t o get back on a high lev el when the res trictions ar e lifted. There w as one r eported concern r egar ding adverse human rights in the supply chain in 2021. EHS in the supply chain Elkem has de veloped de tailed requir ements for high- risk suppliers and contr actors r egar ding health, saf ety , and envir onmental standar ds for mining, tr ansportation, stor age, and loading operations. In addition, Elk em is actively inv olved in pr omoting and monit oring saf e and decent working conditions. This includes health and saf ety tr aining and pr oviding corr ect personal pr otection equipment f or suppliers ’ employ ees when necessary . Elkem also carries out age con tr ol t o pr even t child labour and ensure r esponsible working conditions for young employees. Elk em r equir es suppliers and con tract ors to engage their emplo yees with writt en contracts on fair terms and give them inf ormation about their right to or ganise and collectively bar gain with management where this is legally possible. Elkem ’ s requir ements ar e r egularly discussed in meetings with suppliers. High-risk suppliers mus t demonstra te their understanding o f legal requir emen ts and hazards in their oper ations and pr esent plans showing how risk will be eliminat ed or contr olled while working for Elk em. Elk em perf orms audits and inspections, in connection with r outine visits for quality , technical and business follo w-up, and as unannounced site visits. External auditor s also conduct supplier audits on Elkem ’ s behalf. Violations o f Elk em’ s requir ements are r egister ed and addr essed with verbal or written w arnings in addition t o reques ts f or impro vemen ts when necessary . R epeated violations may lead t o requir ements for speedy implementation o f impro vemen t plans, ﬁnancial penalties, or termination o f contrac ts with immediate e ect. Our pr ocess for r esponsible sourcing Updated pr ocess and sys tem f or supplier management Share o f ne w raw mat erials suppliers subjected to assessment and pr e-qualiﬁcation scr eening in 2021 Share o f ne w raw mat erial suppliers subjected to supplier audit in 2020 Adverse human rights concerns in supply chain reported Share o f ne w suppliers who have signed El - kem ’ s code of conduct for business partners Metric Project s tatus % % Number % 2019 In progr ess 100% 100% 0 - 2020 In progr ess 100% >90% 0 90% * 2021 Implemented 92% 19% 1 83% Comment/ % change 2020 - 2021 Down 8% The last two years, it has been hard to conduct audits due to Covid-19 Down 7% KPI s Risk management Audit a nd corre ction acti on plan ( CAP ) Cap foll ow -up and supplier dev elopmen t Specify business → needs T ender → ( Sustainability criteria in tenders ) Contract The colour indicates a positiv e or negativ e developmen t y ear on year . new suppliers fr om second half o f the y ear , when tracking s tarted. 144 145 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact G ove rn an ce Compliance K e y e v ents 20 21 → Elkem has signiﬁcantly inv ested in str engthening its internal compliance function. P art of the inves tment included hiring a new Chief Compliance Ocer and Senior Compliance Ocer → Elkem also str engthened its legal function by engaging with a specialist company f ocused on antitrust and export contr ol → Number o f emplo yees that ha ve signed the code of conduct: 96% T arget → Fully implement a TPRM solution f or screening o f intermediaries, cus tomers, and suppliers → Strengthen our compliance capacity in China and Fr ance → Deliver and implement a new se t of group policies, pr ocedures, and internal contr ol K e y risk s × High-risk mark ets × High-value inv estments × Gov ernment inter actions × Licenses and permits × Business partners K ey oppor tunities → T o empower emplo yees and partners through tar ge ted training and awareness activities → T o r educe ﬁnancial and r eputational risk through e ec tive implementa tion of a compliance progr am → T o build stak eholder trust thr ough transpar ent disclosur e o f compliance performance El k em considers good corporate go v ernance a prer equisit e t o bui ld tr ust and v alu e cr eat io n. The reg ula t ory requi re ments and stak eholder e x pectati ons t o establ ish e ecti v e com pli ance prog rammes cont inuously i ncrease and r equir e orga nisat ions t o ha v e a positiv e cultu r e and good i n t ernal p roc edur es t o pr e v ent non-compl iance, misconduct, corruption, and fraud. Compliance training Elkem is committ ed t o pr oviding r elev ant and engaging compliance tr aining. How ever , in 2021, trav el r estrictions and social distancing measur es made f ace- to- f ace training mor e challenging to conduct. Ther e for e, our focus s witched to enhancing the online tr aining pr ogram with new ethics, anti-bribery and corruption, and antitrust modules. The eL earning pr ogramme w as made available in multiple languages and is manda tory f or all employees in the deﬁned tar get gr oups. T raining is supported b y writt en commitment by employees to our k e y policies. The training and signing is ongoing and the tar get is 100% co ver age of commitment. Anti-competitive pr actices Elkem is committ ed t o avoiding an ti-competitive practices acr oss its entir e oper ation. The compe tition law compliance policy outlines what behaviour is considered accep table and not. Elk em also conducts anti-competitiv e practice risk assessments to iden tify high-risk jurisdictions and employ ee gr oups tha t are the most exposed to an ti-competitive pr actices. Additional assessments ar e made t o identify red ﬂags and mitigat e any gaps. Anti-bribery and corrup tion Elkem has a z er o- tolerance polic y agains t corruption. Elkem has multiple oper ations acr oss jurisdictions and in sever al high-risk countries. Elk em also inter acts with governmen t ocials for permits and other administra tive issues. Elkem tak es a risk -based approach to its compliance work, and the risk assessments pr ovide vital inf ormation to maintain and further develop our an ti-bribery and corruption pr ogramme. Our risk -based approach is applied across the gr oup, i. e. when entering new marke ts and intr oducing new pr oducts. T o read our full anti-corruption policy , visit Elkem ’ s website.  W orking with business partners We kno w that bribery cases, human rights br eaches, envir onmental disaster s and EHS scandals oft en involv e business partners, such as agents, consultants, suppliers, joint v entur e partners and distributor s. It is important to Elk em t o work with business partners o f high ethical integrity . In 2021, Elkem in troduced a ne w screening tool to f acilitate bett er vetting and con tinuous monitoring of business partners agains t sanction lists and adverse media. The functionality o f the tool will be expanded to enable risk based due diligence, audit targe t identiﬁcation and monitoring o f business partners throughout their lifecy cle. Speak up / whistleblo wing Elkem encour ages all o f its emplo yees and e xternal parties t o report possible dishones t or illegal conduct in the business t o HR or the legal/ compliance department without carrying the risk o f adverse r eac tions. Elk em has established griev ance mechanisms and channels for r eporting misconduct. The speak up channel can be used t o report misconduc t and non-compliance with Elkem ’ s code of conduct and is a vailable to all employees and e xternal s takeholder s. It allows f or anonymous r eporting in all Elk em languages with clear Commitment Elkem bases its ac tivities on the principles o f hone- sty and r espect for o ther people. W e will mee t the same ethical standar ds, r especting the laws, cultu- res, dignity , and rights of individuals ev erywher e we operat e. W e ha ve a z ero- t olerance policy tow ar ds any f orm of corrup tion and conduct our business in accordance with applicable an ti-money laundering and antitrust law s. Policies → Code of conduc t → Speak up policy → Investigation pr ocedur e → International trade sanc tions global procedur e and tool → Competition law compliance policy and manual Elk em’ s corporate policies  146 147 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact Due to or ganisational and reporting changes in 2020 and 2021, the reported categories have changed from 2020 . The t able reﬂec ts the current r eporting structur e in the compan y . 2021 training included eLearning courses concerning e thics and Elkem ’s code of conduc t, anti-bribery , and corruption, and antitrus t. The courses wer e distributed to dier ent risk -based targe t groups. ** In this conte xt, corruption is de ﬁned as in GRI 205 and includes practices such as bribery , facilitation paymen ts, fr aud, extortion, col- lusion, and money laundering; the o er or receip t of gifts, loans, fees, rewar ds, or o ther advant ages as an inducement to do something that is dishonest, illegal, or represen ts a breach o f trust. It can also include practices such as embezzlemen t, trading in in ﬂuence, abuse o f func ti- on, illicit enrichment, concealment, and obs tructing justice. guidance on reporting concerns. A report er will not be requir ed to leave a name or con tact inf ormation. Elk em has also developed a pr ocedur e to escalat e sever e matters to managemen t, the audit committ ee, and the external audit or t o ensure tha t issues of concern r each top management. The speak up channel and the speak up polic y ar e available and communica ted thr ough Elkem ’ s intranet site, and corpora te website. The channel and policy are also pr omoted during employee training and ar e accessible via physical pos ters and handouts at plan ts and oces. Misconduct r eports ar e handled by corporat e compliance and in accordance with applicable legislation on misconduct r eporting. Elk em has a zer o tolerance f or re taliation against those who r eport a concern and will sanction those who re taliate. Av erage minutes o f compliance training per employee * T otal number and na ture o f misconduct reports Number o f con ﬁrmed cases of corruption ** and fraud Number o f con ﬁrmed incidents in which employees wer e dismissed or disciplined f or corruption ** Public legal cases regar ding corruption ** brought agains t the or ganisation or its employ - ees Conﬁrmed incidents when contr acts with busi - ness partners wer e t erminated or not r enewed due to viola tions rela ted t o corruption ** T otal number o f cases reported thr ough the grievance mechanism Employees with conﬁrmed commitmen t to the code of conduct Employees with conﬁrmed commitmen t to anti-bribery and anti-corrup tion policy Employees with conﬁrmed commitmen t to competition law policy Metric Minutes / em - ployee Number Number Number Number Number Number % % % 2019 TBC - - - - - - 100% 100% 100% 2020 54 minutes 11 → Corruption and fr aud: 11 3 2 0 0 - 98% 51% 74 % 2021 28 minutes 13 → Company / professional code violation: 1 → EHS violation: 1 → Corruption and fraud: 1 → Human rights violation: 1 → Conﬂicts of inter est: 1 → Inappropriate workplace behaviour: 7 → Sanctions violation: 1 0 0 0 0 2 → Both cases were r esolved 96% 78% 89% The Elk em speak up polic y  Our tax strateg y can be f ound onl ine  KPI s 148 149 Annual r eport 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corporate go vernance Risk managm ent ESG report Financial stat ements ESG assurance Contact Finan cial S tat ements 202 1 150 151 Annual r eport 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Financial statements Consolidated sta tement o f pr o ﬁt or loss 154 Consolidated sta tement o f compr ehensiv e income 155 Consolidated sta tement o f ﬁnancial position 156 Consolidated sta tement o f cash ﬂow s 157 Consolidated sta tement o f changes in equity 158 General inf ormation Note 1 General inf ormation and basis of pr esenta tion 160 Note 2 Basis for pr eparing the consolidated ﬁnancial statemen ts 160 Note 3 Accounting estimat es 162 Group structur e Note 4 Composition of the gr oup 162 Note 5 Investmen ts in equity accoun ted companies 167 I nformation about s tatement of pro ﬁt or loss Note 6 Operating segments 170 Note 7 Operating income 17 4 Note 8 Grants 177 Note 9 Employee bene ﬁts 178 Note 10 Share-based payments 183 Note 11 Other opera ting expenses 185 Note 12 Other items 186 Note 13 Finance income and expenses 187 Note 14 T axes 188 Information about s tatement of ﬁnancial position Note 15 Property , plant and equipment 194 Note 16 Leases 197 Note 17 Intangible assets 200 Note 18 Goodwill 203 Note 19 Impairment assessment 204 Note 20 Invent ories 206 Note 21 T rade r eceivables 207 Note 22 Other assets 209 Note 23 Inter est -bearing assets and liabilities 211 Note 24 Provisions and o ther liabilities 215 Note 25 Financial assets and liabilities 217 Note 26 Hedging 225 Other in formation Note 27 Financial risk 228 Note 28 Capital management 236 Note 29 Number o f shar es 236 Note 30 Earnings per shar e 237 Note 31 Supplemental informa tion to the consolidat ed 238 statemen t of cash ﬂows Note 32 Related parties 238 Note 33 Pledge of asse ts and guarant ees 240 Note 34 Ev ents after the r eporting period 241 C onte nt 152 153 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Consol ida t ed stat emen t o f pr o ﬁt or lo ss Amounts in NOK million 1 J anuary - 31 December Revenue Other oper ating income Share o f pro ﬁt (loss) from equity accounted companies T otal opera ting income Raw materials and ener gy f or produc tion Employee bene ﬁt expenses Other oper ating e xpenses Amortisation and depr eciation Impairment losses Operating pr o ﬁt (loss) befor e o ther items Other it ems Operating pr oﬁt (loss ) Share o f pro ﬁt (loss) from equity accounted ﬁnancial inv estments Finance income For eign ex change gains (losses) Finance expenses Proﬁt (loss ) bef ore income tax Income tax ( e xpense) beneﬁt Proﬁt (loss ) for the y ear Attributable t o: Non-contr olling inter ests ' shar e of pr o ﬁt (loss) Owners of the par ent' s shar e of pr oﬁt (loss) Earnings per shar e in NOK: Basic Diluted Note 7 7 5 6 9 11 15, 16, 17 15, 16, 17 12 5 13 13 13, 16 14 30 30 2021 33 083 586 49 33 717 (15 861) (4 530) (5 536) (1 816) (76) 5 899 (114) 5 785 37 40 241 (276) 5 827 (1 163) 4 664 36 4 628 7.49 7.44 2020 24 025 631 35 24 691 (12 858) (4 028) (5 121) (1 710) (17) 957 (130) 827 (15) 31 17 (278) 584 (306) 278 39 239 0.41 0.41 Consolid at ed stat ement o f com prehensi v e inco me Amounts in NOK million 1 J anuary - 31 December Proﬁt (loss ) for the y ear Remeasur ement of deﬁned bene ﬁt pension plans T ax eec ts on remeasur emen t of deﬁned beneﬁt pension plans Change in f air v alue of equity instruments Share o f other compr ehensive income (loss) from equity accounted companies T otal items tha t will not be reclassiﬁed to pro ﬁt or loss Currenc y tr anslation dier ences Hedging of net in vestment in f oreign oper ations T ax eec ts hedging of net inv estment in for eign oper ations Cash ﬂow hedges T ax eec ts on cash ﬂo w hedges Share o f other compr ehensive income (loss) from equity accounted companies T otal items tha t may be reclassiﬁed t o proﬁt or loss in subsequent periods Currenc y tr anslation dier ences Cash ﬂow hedges T ax eec ts on cash ﬂo w hedges T otal r eclassiﬁcation adjustments for the period Other compr ehensive income (loss ) for the year , net of tax T otal compr ehensive income for the y ear Attributable t o: Non-contr olling inter ests ' shar e of compr ehensive income Owners of the par ent' s shar e of compr ehensive income T otal compr ehensive income for the y ear Note 9 14 5 14 26 14 5 26 14 2021 4 664 69 (10) 3 - 62 358 130 (29) 1 103 (243) 13 1 333 - (407) 89 (317) 1 078 5 742 36 5 706 5 742 2020 278 (55) 13 7 - (35) 46 (168) 37 (818) 180 (11) (734) - 670 (147) 523 (246) 32 40 (8) 32 154 155 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Amounts in NOK million Assets Property , plant and equipment Right-o f -use assets Other in tagible assets Goodwill Deferr ed tax assets Invest ements in qeuity accoun ted companies Derivativ es Other asse ts T otal non-curr ent assets Invent ories T rade receiv ables Derivativ es Other asse ts Restricted deposits Cash and cash equivalents T otal curr ent assets T otal assets Equity and liabilites Paid-in capital Retained earnings Non-contr olling inter ests T otal equity Inter est -bearing liabilities Deferr ed tax liabilities Employee bene ﬁt obligations Derivativ es Pro visions and other liabilities T otal non-curr ent liabilities T rade payables Income tax payables Inter est -bearing liabilities Bills payable Employee bene ﬁt obligations Derivativ es Pro visions and other liabilities T otal curr ent liabilites T otal equity and liabilities Note 15, 19 16, 19 17, 19 18, 19 14 5 25, 26 22 20 21 25, 26 22 23 23 29 16, 23 14 9 25, 26 24 16, 22 23 9 25, 26 24 31.12.2021 15 722 1 017 1 602 941 48 241 304 478 20 353 7 716 4 297 283 1 551 609 7 040 21 497 41 850 8 097 11 692 86 19 874 8 409 505 611 18 182 9 724 4 614 914 1 972 2 096 976 23 1 657 12 252 41 850 31.12.2020 14 131 875 1 319 919 96 183 59 432 18 015 5 241 2 796 148 1 212 322 3 154 12 873 30 888 6 296 6 232 108 12 635 7 189 336 679 252 326 8 782 3 157 65 3 292 1 053 740 101 1 064 9 471 30 888 Consol ida t ed stat emen t o f ﬁna ncia l posit io n Amounts in NOK million Operating pr o ﬁt (loss) Amortisation, depr eciation and impairment losses Changes in working capital Equity accounted companies Changes f air value o f derivativ es Changes in pro visions, bills r eceivable and o ther Inter est pa yments r eceived Inter est pa yments made Income taxes paid Cash ﬂow from oper ating activities Inves tments in pr operty , plant and equipment and intangible assets Received inv estment gr ants Proceeds fr om sale o f pr operty , plant and equipment Acquisition of subsidiaries, net o f cash acquir ed Paymen t of contingent consider ation r elat ed t o acquisitions (IFRS 3 ) Acquisition of and capital contribution to join t ventur es Other investmen ts / sales Cash ﬂow from in vesting activities Dividends paid t o non-contr olling inter ests Dividends paid t o owners o f the par ent Capital increase Net sale (pur chase ) of tr easury shar es Net changes in bills pa yable and r estrict ed deposits Paymen t of lease liabilities New int eres t-bearing loans and borr owings Paymen t of inter es t-bearing loans and borr owings Cash ﬂow from ﬁnancing ac tivities Change in cash and cash equivalents Currenc y tr anslation dier ences Cash and cash equivalents opening balance Cash and cash equivalents closing balance Note 15, 16, 17 5 15, 16, 17 8 15, 16, 17 4, 31 4, 24 5 29 29 23 16, 23 23 23 23 2021 5 785 1 892 (2 020) (15) (9) (88) 34 (242) (423) 4 913 (3 266) 138 31 - (78) - (10) (3 185) (58) (96) 1 900 (278) 709 (118) 3 177 (3 180) 2 056 3 784 101 3 154 7 040 2020 827 1 727 232 (7) (196) (69) 28 (239) (192) 2 111 (2 346) 145 12 (1 032) - (40) (2) (3 262) (29) (349) - - 113 (104) 1 636 (1 433) (166) (1 317) (24) 4 496 3 154 Consol ida t ed stat emen t o f cash ﬂo ws Y ougen Ge Marianne Elisabeth Johnsen T erje Andre Hanssen Olivier Tillett e de Clermont- T onnerrev Anja-Isabel Dotzenra th Knut Sande Zhigang Hao Chairman of the Boar d Grace T ang Oslo, 8 Mar ch 2022 Helge Aasen CEO Marianne Fær øyvik Dag Jakob Opedal 1) See note 6 Oper ating segments for deﬁnition o f working capital 156 157 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Amounts in NOK million Opening balance Pro ﬁt (loss) for the y ear Other compr ehensiv e income f or the year T otal compr ehensive income for the y ear Share-based pa yments (not e 10 ) Capital increas (no te 29 ) Net mov ement tr easury shar es (not e 29 ) Dividends to equity holders (no te 28 ) Closing balance Amounts in NOK million Opening balance Pro ﬁt (loss) for the y ear Other compr ehensiv e income f or the year T otal compr ehensive income for the y ear Share-based pa yments (not e 10 ) Dividends to equity holders (no te 28 ) Closing balance 2021 2020 Share Capital 2 907 - - - - 291 - - 3 197 Share Capital 2 907 - - - - - 2 907 Other paid-in captial 3 389 - - - 28 1 610 (32) (96) 4 899 Other paid-in captial 3 709 - - - 29 (349) 3 389 T otal paid-in capital 6 296 - - - 28 1 900 (32) (96) 8 097 T otal paid-in capital 6 616 - - - 29 (349) 6 296 For eign curr ency translation reserv e 806 - 460 460 - - - - 1 266 For eign curr ency translation reserv e 891 - (85) (85) - - 806 Consol ida t ed stat emen t o f cha nges i n equi ty Cash ﬂow hedge reserv e (189) - 544 544 - - - - 355 Cash ﬂow hedge reserv e (73) - (116) (116) - - (189) Other r etained earning 5 615 4 628 75 4 703 - - (246) - 10 071 Other r etained earning 5 422 239 (46) 193 - - 5 615 Non-contr olling inter ests 108 36 (0) 36 - - - (58) 86 Non-contr olling inter ests 96 39 1 40 - (29) 108 T otal 12 635 4 664 1 078 5 742 28 1 900 (278) (154) 19 874 T otal 12 952 278 (246) 32 29 (378) 12 635 T otal r etained earning 6 232 4 628 1 079 5 706 - - (246) - 11 692 T otal r etained earning 6 240 239 (247) (8) - - 6 232 T otal owner share 12 527 4 628 1 079 5 706 28 1 900 (278) (96) 19 789 T otal owner share 12 855 239 (247) (8) 29 (349) 12 527 158 159 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Consol ida t ed stat emen t o f ﬁna ncia l posit io n Elkem ASA is a limited liability company locat ed in Norwa y and whose shar es ar e publicly tr aded on Oslo Børs. Elk em ASA is o wned 52.9% by Bluestar Elk em International Co . L td S .A., Luxembour g, which is under the contr ol of Sinochem Holdings Co ., L td ( Sinochem), a company regis ter ed and domiciled in China. Elkem is one o f the world’ s leading pr ovider s of advanced mat erial solutions shaping a better and mor e sustainable futur e. The company develops silicones, silicon produc ts and carbon solutions by combining natural r aw mat erials, rene wable ener gy and human ingenuity . Elkem helps its customers cr ea te and impr ov e essential innov ations lik e electric mobility , digital communications, health and personal car e as well as smarter and mor e sustainable cities. With a str ong track r ecor d since 1904, its global team of mor e than Compliance The consolidated ﬁnancial stat ements ar e pr epared and based on International Financial R eporting Standards (IFRS ) as endorsed by the Eur opean Union ( EU ) and e ective at 31 December 2021. All subsidiaries ar e using accounting policies consisten t within the gr oup. Relev ant ﬁnancial r eporting principles ar e described in each note to the consolidat ed ﬁnancial sta tements. Prepar ation of consolida ted ﬁnancial statements The consolidated ﬁnancial stat ements ar e pr epared on a historical cost basis, with the e x ception of derivative ﬁnancial instruments and ﬁnancial assets av ailable f or sale, which are measur ed at fair value. The presen tation curr ency of Elk em is Norw egian Krone ( NOK) . All ﬁnancial in forma tion is presen ted in NOK million, unless o therwise stat ed. As a result o f rounding adjus tments, the amounts shown in one or more columns included in the consolida ted ﬁnancial statemen ts, may not add up to the total. In t ext, the curr ent year' s ﬁgur es ar e pr esented outside paren theses, follo wed by the compara tive ﬁgur es presen ted in par entheses. 1. General infor mati on items. Curr ency e ects r ecognised in ﬁnance income and expenses ar e only r elated to ﬁnancing activities such as loans, lease liabilities, long-t erm placements and dividends. For eign curr ency dier ences ar e r ecognised in o ther comprehensiv e income for the f ollowing items: → a ﬁnancial asset or liability designated as a hedging instrument in a cash ﬂow hedge, to the ext ent that the hedge is e ective → loans in for eign curr encies designat ed as hedging instruments in a hedge o f a ne t inves tment in a for eign oper ation Consolidated ﬁnancial statements In consolidation of the sta tement o f pr o ﬁt or loss and the statemen t of ﬁnancial position, separat e gr oup entities with other functional curr ency than the gr oup 's presen tation curr ency , are transla ted dir ectly into the presen tation curr ency as f ollow s: → Assets and liabilities are transla ted using the ex change r ate at the end o f the r eporting period → Income and expenses ar e tr anslated using an aver age ex change r ate per mon th → Equity transac tions, ex cept f or pr oﬁt or loss for the period, are tr anslated using the transaction date r ates All resulting e x change di er ences are book ed as a separat e component in other compr ehensiv e income ( OCI) Any goodwill arising on acquisition o f a for eign oper ation and any f air value adjustmen t t o the carrying amoun t of assets and liabilities arising on the acquisition, ar e trea ted as assets and liabilities o f the f or eign operations. On disposal of a for eign entity , the de ferr ed cumulativ e amount r ecognised in other compr ehensive income rela ting to that particular f or eign opera tion, is r ecognised in the s tatement o f pr oﬁt or loss. Statement of cash ﬂow s The statemen t of cash ﬂows is pr epar ed under the indirec t method. Cash inﬂo ws and outﬂows ar e shown separat ely f or in vesting and ﬁnancing activities, while operating ac tivities include both cash and non-cash e ect items. Inter es t r eceived and paid and other ﬁnancial expenses, such as bank guar antee e xpenses, 7 ,000 people has a joint commitment to stak eholder s: Delivering your pot ential. In 2021, Elk em achiev ed an operating income o f NOK 33, 717 million. Following changes in Elk em 's internal r eporting to management the composition of Elk em ' s oper ating and reporting segmen ts has changed as of the ﬁr st quarter of 2021. Segment inf ormation f or prior periods has been res tated to align with the new segment pr esentation. For further informa tion see Not e 6 Operating segmen ts. The consolidated ﬁnancial stat ements f or Elk em ASA (herea fter Elk em/the gr oup ), including no tes, for the year 2021 wer e appr ov ed by the Boar d of Dir ector s of Elkem ASA on 8 Mar ch 2022 and will be pr oposed to the Annual General Mee ting on 27 April 2022. The consolidated ﬁnancial stat ements hav e been prepar ed based on the going concern assumption. For eign currency transla tion Separat e ﬁnancial statements Each entity in the gr oup det ermines its functional currenc y based on the economic envir onmen t in which it operat es, and items included in the ﬁnancial statemen ts of each entity ar e measur ed using tha t functional curr ency . When pr eparing the ﬁnancial statemen ts of each individual gr oup entity , transac tions in currencies o ther than the en tity' s func tional currenc y are r ecognised in the functional curr ency , using the transaction da te ’ s curr ency ra te. Monetary items denominat ed in f or eign curr encies are tr anslated using the closing ra te at the end o f the reporting period, and an y gains (losses) ar e r eported in the statemen t of pr oﬁt or loss. N on-monetary items that ar e measur ed at fair v alue in a f or eign curr ency are tr anslated using the e x change rat e at the date when the f air value w as measured. Curr ency gains (losses) rela ted to opera ting activities, i.e. r eceivables, payables, bank accounts f or oper ating purposes including curr ent intragr oup balances, ar e r ecognised as a part o f o ther are r eported as a part of oper ating activities. N et currenc y gains or losses r ela ted to ﬁnancing ac tivities are r eported as part of ﬁnancing activities. Dividends receiv ed from join t ventur es and associa tes tha t do not operat e within Elk em ' s main business ar eas ar e included in inves ting activities. Dividend to shareholders Dividend is recognised as a liability when the shareholder s right to paymen t is established which is the time o f Annual General Mee ting. Changes in accounting policies and correction o f material error s Changes in accounting policies and corr ection of ma terial error s ar e r ecognised re tr ospectively by r esta ting the comparativ e amounts for the prior period pr esented, including the opening balance o f the prior year . Elkem has pr eviously r ecognized the y early cos t of purchased CO2 quo tas as other oper ating e xpenses from the period the need to pur chase quotas occurr ed. Fr om 2021 the cost o f pur chased CO2 allowances ar e recognised as part o f ra w materials and ener gy f or produc tion and is distributed linearly ov er the year . It is deemed tha t the change in principle will pr o vide more r eliable and relevan t informa tion about the cost of CO2 quotas. The change in principle does not have a material impact on the annual accounts but will impac t the recognition o f cost betw een quarters. F urther , the change in principle does not impact compar able ﬁgur es as Elkem had a surplus o f quotas in 2020 and ther ef or e no quota cost. F or mor e inf ormation see not e 8 Grants. New and r evised s tandard- adop ted New or r evised accoun ting standar ds and interpr eta tions implemented as o f 1 January 2021 are among o thers COVID-19-Rela ted Rent Concessions (Amendments to IFRS 16 ) and Int eres t Rate Benchmark Re form – Phase 2 (Amendments to IFRS 9 , IFRS 7 , IFRS 4 and IFRS 16 ) . The new or r evised accounting s tandards and interpr eta tions do not r epr esent a signiﬁcant impact to Elkem 's accounting policies. New standar ds, int erpr etations and amendments - not ye t eectiv e The consolidated ﬁnancial stat ements will be a ected by futur e changes in IFRS . No standar ds, interpr etations or amendmen ts published at the balance sheet dat e ar e expect ed t o have signiﬁcan t e ect on the group. 2 . Basis for pr eparin g the consoli dat ed ﬁnancial statemen ts 160 161 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact During a measuremen t period of maximum one year pro visional amounts r ecognised at the acquisition dat e are adjus ted to r eﬂect ne w inf ormation obtained about facts and cir cumstances tha t exist ed on the da te of acquisition. Any adjus tments of iden tiﬁed assets or liabilities in the acquisition ar e o set b y a corr esponding increase / decr ease in goodwill. Business combinations under common control Business combinations inv olving entities under common contr ol ar e accounted for on a his torical cost basis. This means applying book value accounting, which is applied in the following manner: → Assets and liabilities of the combining entities ar e re ﬂected a t their carrying amounts. → No new goodwill is r ecognised as a r esult of the combination. → The statemen t of pr oﬁt or loss r e ﬂects the result o f the combining entities f or the full y ear , irrespective of when the combination took place. → Comparativ e ﬁgur es ar e r esta ted. → The purchase price is book ed against equity at the acquisition date. Judgements and estimat es Business combinations Elkem uses v aluation models as a basis f or the measuremen t of the f air value o f net identiﬁable value o f tr ansf err ed assets and liabilities in a business combination. F air values ar e normally not r eadily observable in an activ e mark et for individual assets and liabilities in the business which Elk em oper ates. Property , plant and equipment is valued using the cost appr oach and by estimating the curr ent cos t to pur chase or r eplace the asse t, at today’ s curr ent condition. Intangible assets ar e identiﬁed and v alued based on a relie f fr om r o yalty method and multi-period ex cess earnings method, wher eb y; the r elief fr om royalty method considers the discounted es timated r oy alty payments that ar e e xpected to be a voided as a r esult of the patents being o wned, and the multi-period e x cess earnings method considers the pr esent v alue of net cash ﬂow s expec ted to be genera ted by the customer rela tionships, by ex cluding an y cash ﬂow s rela ted to contributory assets. V aluations are subject to numer ous assumptions, the fair value es timates ma y impac t assessment of possible impairment of assets and / or goodwill in futur e periods. The prepar ation o f the consolida ted ﬁnancial statemen ts according to IFRS r equir es management to mak e judgments, estimat es and assumptions that a ect the application of accounting policies and the r eported amounts of assets, liabilities, income and e xpenses. When management mak es estimat es and assumptions concerning the future, the resulting accounting estimates will, b y de ﬁnition, seldom equal the actual outcome. Estimates and judgemen ts are con tinually e valuat ed and are based on his torical e xperience and other fact ors, including expec tations o f futur e ev ents that are belie ved to be r easonable under the cir cumstances. Revisions o f r eported estimates ar e recognised in the period in which the es timates ar e r evised and in an y future period a ec ted. Changes in accounting estima tes are r ecognised prospectively by including them in the statemen t of pr oﬁt or loss in the period o f the change and futur e periods, if the change a ects both. Principle Consolidation The consolidated ﬁnancial stat ements include the ﬁnancial statemen ts of Elk em ASA and entities contr olled dir ectly or indirectly b y Elkem ASA. The group con tr ols an entity when the gr oup is e xposed to, or has righ ts t o, v ariable r eturns fr om its involvement with the en tity and has the ability t o a ect those re turns through its po wer ov er the entity . Subsidiaries are fully consolidated fr om the da te on which the gr oup obtains contr ol, and ar e deconsolidated fr om the da te that contr ol ceases. Pro ﬁt or loss and each component o f OCI are a ttributed to the equity holders o f the par ent of the gr oup and to non-contr olling inter ests, pr esent ed on separat e lines in the ﬁnancial statements. All intra-gr oup assets and liabilities, equity , income and expenses and gains and losses ar e eliminat ed in full on consolidation. The estimates and assump tions tha t hav e a signiﬁcant risk of causing a material adjus tment to the carrying amounts of assets and liabilities within the ne xt ﬁnancial year ar e addr essed in the di er ent no tes. Informa tion about judgements, assumptions and estimation uncertainties a t 31 December 2021 tha t have the most signiﬁcant e ects on the amounts r ecognised in the ﬁnancial sta tements is included in the f ollowing notes: → Note 4 Composition o f the gr oup → Note 8 Gr ants → Note 9 Emplo yee bene ﬁts → Note 14 T ax es → Note 15 Pr operty, plan t and equipment → Note 16 L eases → Note 17 In tangible assets → Note 18 Goodwill → Note 19 Impairmen t assessment → Note 24 Pr ovisions and other liabilities → Note 25 Financial asse ts and liabilities Business combinations Business combinations ar e accounted f or using the acquisition method in accor dance with IFRS 3. The consideration tr ansf err ed in a business combination is measured a t f air value, and goodwill is measur ed as the ex cess o f the sum o f consideration tr ansf err ed, and net identiﬁable fair v alue of trans ferr ed asse ts and liabilities. Elk em ' s contingent consider ation is classiﬁed as a ﬁnancial liability and measur ed at fair v alue at the acquisition date. The liability is subsequently measur ed at fair value a t each r eporting date, with changes recognised in o ther items in the stat ement of pr o ﬁt or loss. A cquisition-r elated costs ar e e xpensed as incurr ed. Acquisitions of non-contr olling in ter ests ar e accounted for as transac tions with owners in their capacity as owners, and ther ef or e no goodwill is r ecognised as a result. Adjustments to non-con trolling in ter ests arising from tr ansactions that do not in volv e the loss o f contr ol, are based on a pr oportionate amount of the net assets of the subsidiary . 3. Accounting estimat es 4. Composition of the gr oup 162 163 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Company Elkania D A Elkem (Thailand) Co ., L td. Elkem Carbon ( China) Co., L td. Elkem Carbon AS Elkem Carbon M alaysia Sdn. Bhd. Elkem Carbon Singapor e Pte. L td. Elkem Chart ering Holding AS Elkem Digital Oce AS Elkem Dis tribution Center B. V . Elkem Dr onﬁeld L td. Elkem E gypt for Industry , Contracting & T rading S .A.E. Elkem Ferr oveld JV Elkem F oundry ( China) Co., L td. Elkem Gmb H Elkem Iberia S .L. U Elkem International AS Elkem In ternational T rade ( Shanghai) Co., Ltd. Elkem Ísland eh f . Elkem J apan K.K. Elkem K orea Co., L td. Elkem L td. Elkem M adencilik Metalurji Sanayi V e Ticar et L td. S TI Elkem M aterials, Inc. Elkem M aterials Delaw are, Inc. Elkem M aterials Pr ocessing (Tianjin) Co., L td. Elkem M aterials Pr ocessing Services BV Elkem M aterials South America L tda. Elkem M etal Canada Inc. Elkem Milling Services Gmb H Elkem Nor dic A.S. Elkem Oilﬁeld Chemicals FZ CO L td. Elkem P aragua y S .A. Elkem P articipaçòes Indústria e Comér cio Limitada Elkem S .a.r .l. Elkem S .r .l. Company Elkem Silicon M aterials ( Lanzhou) Co., L td. 1) Elkem Silicon Pr oduct De velopment AS Elkem Siliconas España S .A. U Elkem Silicones ( UK) L td. Elkem Silicones Br asil L tda. Elkem Silicones Canada Corp Elkem Silicones Cz ech Republic, s.r .o. Elkem Silicones Finland O Y Elkem Silicones F r ance SAS Elkem Silicones German y GmbH Elkem Silicones Guangdong Co ., L td. 2) Elkem Silicones H ong K ong Co., L td. Elkem Silicones K orea Co., L td. Elkem Silicones M aterial Zhongshan Co., L td. 3) Elkem Silicones M éxico S . De R.L. De C. V . Elkem Silicones P oland sp. z o. o. Elkem Silicones Scandina via AS Elkem Silicones Services S .à.r .l. Elkem Silicones Shanghai Co ., L td. Elkem Silicones US A Corp. Elkem Siliconi Italia S .r .l. Elkem Singapor e Ma terials Pte. L td. Elkem South Asia Priv ate Limited Elkem UK Holdings L td. Elkem U ruguay S.A. Eur o Nor dic Logistics B V Eur o Nor dic Netherlands B V Explotación de Rocas Industriales y Minerales S.A. ( ERIMSA) Iniconce, S.L Jiangxi Bluestar Xinghuo Silicones Co ., L td. NEH LL C Nor enoComercial Importada e Exportadora Limitada Norsil, S .A. Tifwer T rade S.A. Vianode AS 4) Func tional currency NOK THB CNY NOK MYR SGD NOK NOK EUR GBP USD ZAR CNY EUR EUR NOK CNY NOK JPY KRW GBP EUR USD USD CNY EUR BRL CAD EUR DKK AED USD BRL EUR EUR Func tional currency CNY NOK EUR GBP BRL CAD CZK EUR EUR EUR CNY HKD KRW CNY MXN PLN NOK EUR CNY USD EUR SGD INR GBP USD EUR EUR EUR EUR CNY USD BRL EUR USD NOK Country o f incorporation Norwa y Thailand China Norwa y Malaysia Singapore Norwa y Norwa y Netherlands United Kingdom Egypt South Africa China Germany Spain Norwa y China Iceland Japan Republic of K or ea United Kingdom T urkey USA USA China Netherlands Brazil Canada Germany Denmark UAE Paragua y Brazil Fr ance Italy Country o f incorporation China Norwa y Spain United Kingdom Brazil Canada Czech Republic Finland Fr ance Germany China Hong K ong Repulic of K or ea China Mexico Poland Norwa y Fr ance China USA Italy Singapore India United Kingdom Uruguay Netherlands Netherlands Spain Spain China USA Brazil Spain Uruguay Norwa y 31. 12.2021 Equity inter est 50% 100% 100% 100% 100% 100% 80% 100% 100% 100% 100% 50% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 51% 100% 100% 100% 100% 31. 12.2021 Equity inter est 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 80% 80% 100% 100% 100% 100% 100% 100% 100% 100% 31. 12.2020 Equity inter est 50% 100% 100% 100% 100% 100% 80% 100% 100% 100% 100% 50% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 51% 100% 100% 100% 100% 31. 12.2020 Equity inter est 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 80% 80% 100% 100% 100% 100% 100% 100% 100% 100% Owner Elkem A SA Elkem A SA Elkem Carbon Singapore Pte. L t d. Elkem A SA Elkem Carbon AS Elkem Carbon AS Elkem A SA Elkem A SA Elkem A SA Elkem UK Holdings L td. Elkem International AS Elkem Carbon AS Elkem A SA Elkem A SA Elkem A SA Elkem A SA Elkem International AS Elkem A SA Elkem A SA Elkem A SA Elkem UK Holdings L td. Elkem International AS NEH LL C Elkem M aterials, Inc. Elkem A SA Elkem A SA Elkem M aterials, Inc. Elkem A SA Elkem A SA Elkem A SA Elkem A SA Elkem A SA 5) Elkem Carbon AS Elkem A SA Elkem A SA Owner Elkem A SA Elkem A SA Elkem A SA Elkem UK Holdings L td. Elkem A SA Elkem A SA Elkem A SA Elkem A SA Elkem A SA Elkem A SA Elkem A SA Elkem A SA Elkem A SA Elkem Silicones Guangdong Co., L td. Elkem A SA Elkem A SA Elkem A SA Elkem A SA Elkem A SA Elkem A SA Elkem A SA Elkem A SA Elkem A SA Elkem A SA Elkem A SA Elkem Chart ering Holding AS Eur o Nor dic Logistics B V Elkem A SA Explotación de Rocas Industriales y Minerales S .A. Elkem A SA Elkem A SA Elkem P articipaçòes Indústria e Comér cio Limitada Iniconce, S.L Elkem U ruguay S.A. Elkem A SA Elk em ASA and the following subsidiaries and join t operations mak e up the composition o f the gr oup and are included in the consolida ted ﬁnancial statement: 1) Previously Bluestar Silicon Mat erial Co., L td. 2) Previously Guangdong Polysil T echnology Co. L td. 3) Previously Zhongshan Jucheng Chemical Material Co., L td. 4) Previously Elk em A dvanced Battery Materials AS 5) Ownership changed in 2021 thr ough debt con version; Elk em A SA o wns 79% and Elk em Uruguay S.A owns 21% 164 165 Annual r eport 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Changes in composition of the group in 2021, business combination No business combinations hav e tak en place in 2021. Changes in composition of the group in 2020 , business combination In 2020 Elk em invest ed NOK 1, 032 million to acquir e two new subsidiaries (business combinations) . The amount comprises cash consideration tr ansf err ed, reduced b y cash and cash equivalents o f the acquir ee, see no te 31 Supplemental inf ormation to the consolidated s tatement of cash ﬂows. Acquisition-r ela ted costs o f NOK 22 million is recognised in o ther items in the stat ement of pro ﬁt or loss, wher eof NOK 6 million in 2019 and NOK 16 million in 2020 as at 31 December . In December 2019 Elkem en ter ed into an agr eement to acquir e all of the shar es in Guangdong Poly sil T echnology Co. L td. (ne w name 2021) and its subsidiary (herea fter P olysil) . Poly sil is a leading Chinese silicone elastomer & r esins material manuf actur er with str ong positions in baby car e and f ood grade silicones, as w ell as silicone produc ts f or the electr onics and medical Part of the pur chase price is among other factor s contingent on P olysil’ s EBITD A performance in 2020 and 2021, similar as deﬁned in not e 6 Operating segments. The nominal range o f outcomes ar e betw een CNY 0 million and CNY 210 million ( NOK 0 million to NOK 27 4 million), as a maximum. Based on Poly sil’ s performance a fter pur chase date, the estimat ed value of the contingent consider ation is set to maximum. Adjusted f or discoun ting e ects the f air value o f the contingent consider ation as at 31 December 2020 is NOK 261 million. The contingent consideration is due in instalments. As at 31 December 2020 NOK 77 million is recognised as curr ent and NOK 184 million is r ecognised as non-curren t pr ovisions and other liabilities. In 2021 NOK 78 million o f the contingent considera tion is paid and as at 31 December 2021 NOK 40 million is recognised as curr ent and NOK 163 million is r ecognised as non-curren t pr ovisions and other liabilities. The ex cess v alue f or other intangible asse ts is r elated to technology with NOK 257 million and cust omer rela tionships with NOK 253 million, see note 17 Intangible assets and no te 18 Goodwill. marke ts. Poly sil and Elk em ’ s complementary pr oduct and marke t positions pr ovide a solid platf orm for further specialisation and gr owth in China and globally . The parties have agr eed an ent erprise value for Polysil of up t o CNY 941 million, including poten tial earn-out depending on pre-agr eed criteria. The transac tion was completed 1 April 2020 . The table below summarise the total consideration and the amoun ts recognised f or assets acquir ed and liabilities assumed in the business combina tion. The goodwill of NOK 506 million is attributable to the know-how in the acquir ed business and syner gies for the Silicones segment. The f air value o f acquired r eceiv ables is NOK 171 million, of which NOK 8 million is expec ted to be uncollectable at the date o f acquisition. Fr om da te of acquisition to 31 December 2020 P olysil has contributed NOK 592 million to the operating income and NOK 124 million to the pr o ﬁt (loss) f or the year . If the acquisition had tak en place on 1 January 2020, the oper ating income of Elk em w ould have increased with NOK 148 million and the pr oﬁt w ould have incr eased with NOK 29 million. Consideration Cash tr ansf erred on acquisition Deferr ed and contingen t consideration Agr eed enterprise value Net debt and w orking capital adjustment T otal considera tion Polysil gr oup 792 549 1,341 179 1,520 Amounts in NOK million Property , plant and equipment Right-o f -use assets Other in tangible assets Deferr ed tax assets Invent ories T rade receiv ables Other asse ts, curren t Cash and cash equivalents Deferr ed tax liabilities T rade payables Employee bene ﬁts obligations, curr ent Pro visions and other liabilities, curr ent T otal identiﬁable net asse ts Non-contr olling inter ests Goodwill T otal r ecognised Carrying amount 113 26 0 2 101 171 5 178 - (5 8) (1 0) (1 3) 516 - - 516 Excess v alue 50 25 510 - - - - - (8 8) - - - 498 - 506 1 004 Fair v alue 163 52 510 2 101 171 5 178 (8 8) (5 8) (1 0) (1 3) 1 014 - 506 1 520 Principle Joint arrangemen ts Inves tments in joint arrangemen ts ar e classiﬁed as either joint opera tions or join t ventur es, depending on the contrac tual rights and obligations o f each in vest or . Joint ven tur es are accoun ted for using the equity method. Under the equity me thod, the investmen t is initially r ecognised at cos t, and the carrying amoun t is increased or decreased t o recognise Elk em' s shar e of the pr oﬁt or loss, and o ther compr ehensive income of the inves tee after the date of acquisition. In cases where a join t ventur e 's loss or other compr ehensiv e income ex ceed the initially r ecognised cost the carrying amount is pr esented to r eﬂec t Elk em ' s liability to ﬁnance the joint ventur e only to the ext ent that Elk em has an obligation to fund the in vestees oper ations. Any liability to ﬁnance a join t ventur e is pr esent ed either as part of pro visions and other liabilities, curr ent, or netted against Elkem 's r eceivables to war ds the joint ven ture. The group ' s inter est in joint oper ations is r ecognised in rela tion to its inter ests in the joint oper ation: → Assets, including its shar e of any assets held join tly → Liabilities, including its share o f any liabilities incurred join tly → Revenue fr om the sale of its shar e o f the output arising fr om the joint oper ation → Expenses, including its share o f any expenses incurred join tly Investmen ts in associates Associates ar e those entities in which the gr oup has signiﬁcant inﬂuence, but no contr ol o ver the ﬁnancial and operating policies. Signiﬁcan t inﬂuence is pr esumed to exist when the gr oup holds betw een 20% and 50% of the voting po wer o f ano ther entity . Investments in associa tes are accoun ted for using the equity method. Under the equity method, the in vestment is initially r ecognised at cost, and the carrying amount is incr eased or decr eased to r ecognise the in vest or’s shar e o f the pr o ﬁt or loss and other compr ehensive income o f the in vest ee after the date o f acquisition. In cases wher e an associates' loss or o ther compr ehensive income e x ceed the initially recognised cos t the carrying amoun t is pr esented to 5. In v estments in equity accoun ted compa nies Assets acquired and liabilities assumed 166 167 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact re ﬂect Elkem ' s liability to ﬁnance the associate only to the exten t tha t Elk em has an obligation to fund the in vest ees operations. An y liability to ﬁnance an associate is presen ted either as part of pr o visions and other liabilities, curren t, or netted against Elk em' s r eceivables to war ds the associate. The gr oup ’s inv estments in associat es includes goodwill identiﬁed on acquisition. Upon disposal of an associa te that r esults in the gr oup losing signiﬁcant inﬂuence ov er that associate, an y re tained inves tment is measur ed at fair v alue at that dat e. The share o f equity inter ests is equal to Elk em ' s v oting rights. Of the en tities above, Salt en Ener gigjenvinning AS ( SEAS ) is classiﬁed to not oper ate within Elk em ' s main business areas. Elkem has on 31 January 2022 enter ed into agr eement to pur chase the r emaining 50% o f the shares in Salt en Elk em has interes ts in the follo wing joint arrangements and associat es Share of pro ﬁt from in vestments in associat es and joint ventur es Share o f pr oﬁt (loss) fr om inv estments in associat es and joint ventur es is r ecognised in the sta tement o f pr o ﬁt or loss depending on the purpose o f the in vestmen ts. Inves tments tha t ar e closely r ela ted to the group 's main activities ar e r ecognised as shar e of pr oﬁt fr om equity accounted companies, included in oper ating income. Inves tments in associates and joint v entur es that do not oper ate within Elk em ' s main business ar eas ar e recognised as shar e of pr oﬁt fr om equity accounted ﬁnancial inves tments. Energigjen vinning AS. See no te 34 E ven ts after the reporting period. There is no quo ted mark et price f or the in vestmen ts. See note 32 Rela ted parties for commitments and transactions r elat ed t o SEAS and the other joint ventur es and associat es. Name of entity Elkem Ferr oveld JV Elkania D A Klaﬁ ehf North Sea Container Line AS North-Sea Management AS Salten Energigjenvinning AS Welderma te AS GIE Osiris 1) Combined Cargo War ehousing BV EPB Chartering AS Eur o Nordic Agencies Belgium NV Eur o Partnership B V Futur e Materials AS Business oce Ferr obank Emalahleni Hauge i Dalane Grundartangi, Akranes Haugesund Haugesund Oslo Oslo Roussillon Moer dijk Oslo Antwerpen Moer dijk Grimstad Country South Africa Norwa y Iceland Norwa y Norwa y Norwa y Norwa y Fr ance Netherlands Norwa y Belgium Netherlands Norwa y Principal actvities Electr ode paste produc tion Micro ﬁne weighting material T ransportation / harbour services Shipping services Shipping services Energy pr oduction Robot welding s ystems Business supplies and equipment War ehousing Deep sea charter services Ship agencies services Ship management services Mark eting of resear ch f acilities Classiﬁcation Joint opera tion Joint opera tion Joint ven ture Joint ven ture Joint ven ture Joint ven ture Joint ven ture Associate Associate Associate Associate Associate Associate % equity interests 2021 50 % 50 % 50 % 50 % 50 % 50 % 50 % 25 % 33 % 25 % 50 % 50 % 20 % % equity inter ests 2020 50 % 50 % 50 % 50 % 50 % 50 % - 25 % 33 % 25 % 50 % 50 % 20 % 1) Elkem pur chased an additional 7% of the shar es in GIE Osiris in December 2020. The shares w ere pre viously classiﬁed as o ther shares. Amounts in NOK million Opening balance Acquisition of shar es and capital contributions Change in equity int eres ts Dividend receiv ed Share o f pro ﬁt (loss) from equity accounted companies Share o f pro ﬁt (loss) from equity accounted ﬁnancial inv estments Part of o ther compr ehensiv e income Currenc y tr anslation dier ences Closing balance Recognised in inves tments in equity accoun ted companies Recognised in pr ovisions and other liabilities, curr ent (no te 24 ) Amounts in NOK million Klaﬁ ehf North Sea Container Line AS North-Sea Management AS Salten Energigjenvinning AS Welderma te AS GIE Osiris Combined Cargo W ar ehousing BV EPB Chartering AS Eur o Nor dic Agencies Belgium NV Eur o Partnership B V Futur e Materials AS T otal Joint ventur es 74 - - (28 ) 19 37 12 1 115 115 - 2021 Share of proﬁt (1 ) 19 1 37 - - 1 18 (0) 11 - 86 Joint ventur es 54 40 - (2 0) 27 (1 5) (1 1 ) (0) 74 77 (3) 2020 Share o f pro ﬁt (1) 27 1 (1 5) - - 1 (4) 1 10 - 20 Associates 106 - - (7) 31 - - (4) 126 126 - 31. 12.2021 Carrying amount 1 65 3 46 0 44 5 36 2 39 0 241 Associates 58 - 46 (8) 8 - - 2 106 106 - 31. 12.2020 Carrying amount 1 74 2 (3) - 46 5 18 2 35 0 181 T otal 181 - - (3 4) 49 37 12 (3) 241 241 - T otal 112 40 46 (2 8) 35 (1 5) (1 1 ) 2 181 183 (3) Mov ements in equity accoun ted inves tments Share of proﬁt and carrying amoun t for equity accounted companies 2021 2020 168 169 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Amounts in NOK million Curren t assets, including cash and cash equivalents NOK 92 million ( NOK 97 million) Non-curr ent assets Curren t liabilities, including curren t ﬁnancial liabilities NOK 0 million (NOK 0 million) Non-curr ent liabilities, including non-curr ent ﬁnancial liabilities NOK 651 million ( NOK 377 million) Net assets/ equity Elkem 's carrying amount T otal oper ating income T otal e xpenses, including depr eciation and amortisation NOK 5 million (NOK 7 million) and o ther it ems Financial income, including inter est income NOK 0 million (NOK 0 million) Financial expenses, including int eres t expenses NOK 11 million (NOK 4 million) T ax expense T otal pr oﬁt for the y ear Other compr ehensiv e income T otal compr ehensive income Elkem 's share o f pr oﬁt for the y ear Elkem 's share o f other compr ehensive income Amounts in NOK million T otal oper ating income T otal e xpenses T otal pro ﬁt for the year Other compr ehensiv e income T otal compr ehensive income Elkem 's share o f pr oﬁt for the y ear Elkem 's share o f other compr ehensive income Net assets/ equity Elkem 's carrying amount 2021 234 817 112 710 229 115 777 (715) 125 ( 76) (0) 110 24 134 55 12 2021 152 (5 3) 99 - 99 31 - 417 126 2020 226 689 116 651 149 74 632 ( 598 ) 1 (1 1 ) 1 24 (22) 2 12 (1 1 ) 2020 120 ( 113 ) 8 - 8 8 - 345 106 Summary o f ﬁnancial informa tion for joint ven tures Summary o f ﬁnancial informa tion for associates Revenues are, in addition, disaggr egated by geogr aphical marke t based on the location of the cust omer . Non-curr ent assets b y geogr aphical ar eas ar e based on the location of the entity owning the assets. The segment r eporting is based on the accoun ting policies applied f or the group, e x cept f or internal commodity contr acts that mee t the de ﬁnition of a ﬁnancial instrument in IFRS 9 Financial instrumen ts or contain embedded derivativ es that ar e r equir ed to be r eported separa tely and measured a t f air value under IFRS 9 . In the segment r eporting these con tracts are r ecognised in their en tire ty on deliv ery , similar to contracts tha t meet the own use e xemp tion in IFRS 9 . The accounting e ect betw een r ecognising the contracts in accor dance with the own use e x emption in IFRS 9 and as a ﬁnancial instrumen t, ar e r eported in Other . Realised eects fr om the gr oup ' s po wer and f or eign ex change hedging pr ogr amme, including embedded derivativ es, on the di er ent gr oup segments are speciﬁed in separ ate table belo w . Lease paymen ts under in ternal lease agr eements ar e recognised as oper ating e xpenses on a str aight-line basis over the lease term. Elk em ' s operating segments Elkem has thr ee r eportable segments; Silicones, Silicon Produc ts and Carbon Solutions. The Silicones division produces and sells a r ange of silicone-based produc ts acr oss various sub-sect ors including release coa tings, engineering elastomer s, healthcare pr oducts, specialty ﬂuids, emulsions and resins. The Silicon Produc ts division pr oduces various gr ades of metallur gical silicon, ferr osilicon, f oundry allo ys and microsilica f or use in a wide range o f end applications. Principle Elkem iden tiﬁes its segments accor ding to the organisa tion and r eporting structur e as decided and follo wed up by gr oup management. Opera ting segments are componen ts of a business that ar e ev aluated regularly b y the chief oper ating decision mak er , deﬁned as the CE O , for the purpose o f assessing perf ormance and allocating r esour ces. Elk em ' s opera ting segments repr esent separately managed business areas with unique produc ts serving dier ent mark ets. The Carbon Solutions division produces carbon electr ode materials, lining ma terials and specialty carbon produc ts f or metallur gical pr ocesses for the produc tion of a r ange of metals. Other comprise Elk em group management and centralised functions within ﬁnance, logistics, pow er purchase, technology , digital oce and str ategic projec ts such as biocarbon and battery pr ojects. Eliminations comprise inter segment sales and pr oﬁt. Elkem f ollows in ternationally accepted principles f or transactions be tween r elated parties within the gr oup. In general, Elk em seek s t o use tr ansaction-based methods (compar able uncontr olled price, transactional ne t margin me thod, cost plus and r esale price method) in order t o set the price for the tr ansaction. In the ﬁrs t quarter of 2021, Elk em changed its internal reporting to managemen t, impacting the composition of Elk em ’ s opera ting and r eporting segments. T o further str eamline opera tions in China, Elkem Silicon M aterial (Lanzhou) Co ., L td. (Y ongdeng Silicon) is included in Silicones division fr om 1 January 2021, pr eviously report ed in Silicon Pr oducts division. Compara tive ﬁgures ar e restated. In the thir d quarter o f 2020 , Elk em changed its int ernal reporting to managemen t, impacting the composition of Elkem ’ s operating and reporting segmen ts. The Silicon Materials division and F oundry Pr oduc ts division wer e merged and ar e no w r eported combined. Centralised sales functions ar e alloca ted to r espective divisions. Pre viously sales functions w er e included in Other . Strat egic projec ts, such as biocarbon and battery projec ts ar e r eported separa tely and included in Other . Pre viously these pr ojects w er e included in Foundry Produc ts and Carbon Solutions r espectively . Major cus tomers Elkem has a r ange o f cus tomers, but no single cust omer amounts to 10% or mor e of total oper ating income. Segment performance is e valua ted based on EBITDA and operating pr o ﬁt (loss) bef or e other items ( EBIT) , see deﬁnitions below . Elkem ' s ﬁnancing and income tax are managed on gr oup basis and are not allocat ed to operating segmen ts. T ransactions be tween opera ting segments ar e conducted on an arm ' s length basis in a manner similar to transac tions with third parties. 6. Operati ng segments 170 171 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Amounts in NOK million Revenue fr om sale of goods (not e 7) Other r e venue (not e 7) Other oper ating income (no te 7) Share o f pro ﬁt from equity accounted companies (no te 5 ) T otal oper ating income fr om e xternal customer s Operating income fr om other segments T otal opera ting income Operating e xpenses EBITDA Operating pr oﬁt (loss ) befor e other items (EBIT) Cash ﬂow fr om operations Working capital Capital employed Reinves tments Strategic in vestmen ts Mov ement CAPEX payables Amounts in NOK million Revenue fr om sale of goods (n ot e 7) Other r e venue (not e 7) Other oper ating income (no te 7) Share o f pro ﬁt from equity accounted companies (no te 5 ) T otal oper ating income fr om e xternal customer s Operating income fr om other segments T otal opera ting income Operating e xpenses EBITDA Operating pr oﬁt (loss ) befor e other items (EBIT) Cash ﬂow fr om operations Working capital Capital employed Reinves tments Strategic in vestmen ts Mov ement CAPEX payables Amounts in NOK million Revenue fr om sale of goods, Curr ency (note 26 ) Operating e xpenses, Po wer (note 26 ) T otal r ealised eects hedge accounting Amounts in NOK million Revenue fr om sale of goods, Curr ency (note 26 ) Operating e xpenses, Po wer (note 26 ) T otal r ealised eects hedge accounting Main items by operating segmen t 2021 Main items by operating segmen t 2020 Realised eec ts from hedging progr ams by operating segment 2021 Realised eec ts from hedging progr ams by operating segment 2021 Silicones 17 206 43 117 0 17 366 63 17 429 ( 13 758 ) 3 672 2 528 1 448 2 517 12 960 Silicones (res tated) 12 558 37 162 - 12 757 43 12 800 ( 11 47 4 ) 1 326 269 499 1 229 10 414 Silicones - - - Silicones - - - Silicon Produc ts 13 557 96 422 (1) 14 07 4 710 14 783 ( 11 081 ) 3 702 3 154 2 273 3 487 7 932 Silicon Produc ts (res tated) 9 699 146 380 (1) 10 224 580 10 804 ( 9 582) 1 221 685 889 2 557 6 806 Silicon Produc ts 27 295 322 Silicon Produc ts (4) ( 397) ( 401 ) Carbon Solutions 1 917 21 5 - 1 943 234 2 176 ( 1 669 ) 508 360 376 276 945 Carbon Solutions 1 917 21 5 - 1 943 234 2 176 ( 1 669 ) 508 360 376 276 945 Carbon Solutions - 2 2 Carbon Solutions - - - Other 64 179 41 51 335 398 733 (777) (4 4) (9 7) 3 ( 518 ) 308 Other (217 ) 161 83 36 64 412 476 (7 43) (267 ) ( 312) (208 ) ( 439 ) 255 Other 65 17 82 Other (216 ) (5 3) (269 ) Eliminations - - - - ( 1 404 ) ( 1 404 ) 1 358 (4 6) (4 6) - (9 0) (9 0) Eliminations (res tated) ( 1 258 ) ( 1 258 ) 1 224 (3 4) (3 4) 0 (4 4) (4 4) Eliminations Eliminations T otal 32 7 43 340 586 49 33 717 - 33 717 (25 926 ) 7 791 5 899 4 100 5 673 22 055 ( 1 657) ( 1 717) 245 ( 3 128 ) T otal 23 665 360 631 35 24 691 - 24 691 (22 007) 2 684 957 1 522 3 536 18 329 ( 1 387) ( 835) 22 (2 201) T otal 92 315 407 T otal (220 ) ( 450 ) ( 670 ) Cash ﬂow fr om inves tments in pr operty , plan t and equipment and intangible assets, including r eceived in vestment gr ants Cash ﬂow fr om inves tments in pr operty , plan t and equipment and intangible assets, including r eceived in vestment gr ants Deﬁnitions EBITDA is deﬁned as Elk em ’ s pr o ﬁt (loss) f or the period, less income tax ( e xpense) bene ﬁt, ﬁnance e xpenses, for eign e x change gains (losses), ﬁnance income, shar e of pr oﬁt fr om equity accounted ﬁnancial inves tments, other items, impairment losses and amortisa tion and deprecia tion. EBIT , also re ferr ed to as operating pr o ﬁt (loss) bef or e other items is de ﬁned as Elkem ’ s proﬁt (loss) for the period, less income tax ( e xpense) bene ﬁt, ﬁnance expenses, for eign exchange gains (losses) , ﬁnance income, share o f pr oﬁt fr om equity accoun ted ﬁnancial inves tments and other items. Cash ﬂow fr om operations is EBITDA including rein vestmen ts, changes in working capital and equity accounted companies. Reinves tments generally consist o f capital expenditur e to maintain e xisting activities or that inv olve in vestments designed t o impro ve health, sa fe ty or the envir onment. Strat egic inves tments generally consist o f investmen ts which result in capacity incr eases at Elk em ’ s e xisting plants or tha t involv e an inv estment made to meet demand in a new geographic or pr oduct ar ea. Working capital is de ﬁned as accounts r eceivable, invent ory , other curr ent asse ts, accounts pay able, employee bene ﬁt obligations ( curr ent) and other curren t liabilities. Accounts r eceivables ar e de ﬁned as trade r eceivables less bills r eceiv able. Other curr ent assets ar e deﬁned as o ther curren t assets less curr ent receiv ables to r elated parties, curr ent in ter est -bearing receiv ables, tax r eceivables, gr ants r eceivable, assets at f air value thr ough pr o ﬁt or loss and accrued in ter est income. A ccounts pay able ar e deﬁned as trade pa yables less CAPEX pa yables. Other curr ent liabilities ar e deﬁned as pr ovisions and o ther curr ent liabilities less curren t pr ovisions, contingent consider ations, contr act obligations and liabilities to r elated parties. Capital employed consis ts of working capital as de ﬁned above, pr operty , plant and equipment, inves tments in equity account ed companies, grants pa yable, accounts payable and pr epa yments r elated to pur chase o f non- curren t assets. Elkem 's deﬁnitions ma y be di er ent fr om other companies. 172 173 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Amounts in NOK million Norwa y Other N ordic coun tries United Kingdom Germany Fr ance Italy Poland Spain Other E ur opean countries Europe Africa USA Canada Brazil Other South American countries America China Japan South K orea Other Asian countries Asia Rest of the world T otal r ev enue bef ore hedging e ects Realised e ects fr om hedging progr ams (note 26 ) T otal r evenue Amounts in NOK million Norwa y Other N ordic coun tries United Kingdom Germany Fr ance Italy Poland Spain Other E ur opean countries Europe Africa USA Canada Brazil Other South American countries America China Japan Other Asian countries Asia T otal non-curr ent assets T otal r evenue b y geogr aphic marke t based on customer location Non-current asse ts by geographical areas based on entity location 2021 814 1 637 1 094 2 903 791 1 27 4 511 765 2 791 12 579 217 3 451 368 1 046 326 5 191 10 534 1 197 549 2 624 14 904 99 32 991 92 33 083 2021 4 606 528 37 49 3 535 126 1 281 70 9 232 89 710 523 255 436 1 924 8 411 3 343 8 757 20 001 2020 843 779 791 2 347 531 888 457 531 2 106 9 273 154 2 755 244 871 214 4 084 7 301 998 400 1 938 10 637 97 24 245 (220 ) 24 025 2020 4 122 503 31 93 3 248 131 0 270 74 8 471 69 567 425 153 444 1 590 7 287 4 438 7 730 17 859 Non-curr ent assets ar e pr esent ed less derivativ es and def erred tax assets. Principle Operating income consis ts of: a. Revenue b. Other oper ating income c. Share o f pr oﬁt (loss) fr om equity accoun ted companies (note 5 ) (a) Rev enue Revenue is measur ed based on the consideration speciﬁed in a contrac t with a customer . Elkem recognises r evenue when Elkem tr ansf ers contr ol ov er a goods or service to a cus tomer . contracts, normally within one month, co ver deliv ery o f an agreed v olume at mark et price a t the da te the or der is placed. These types o f contr acts ar e most common for commodity pr oducts, such as sales o f f err osilicon and silicones and sales t o customers in China. The long-term contracts co ver a period o f a f ew months and up to one year , where the prices normally ar e ﬁx ed within a volume range. Elk em has for sale o f metallur gical silicon some contracts tha t cover a period longer than one year . In these contrac ts the prices ar e normally negotia ted on an annual basis. Some of Elk em ' s sales contr acts include an element of fr eight services, see separa te section belo w for accounting policies. Rev enue is recognised when con tr ol of the goods is transf err ed to the customer , at an amount that r eﬂec ts the consideration to which Elk em e xpects to be entitled in ex change for those goods. Contr ol is trans ferr ed to the buyer , according to the agr eed delivery term for each sale. Delivery t erms ar e based on Incoterms 2021 issued by International Chamber o f Commer ce, and the main terms ar e "F" t erms, where the buy er arranges and pay s f or the main carriage. The risk is tr ansf err ed to the buyer when the goods are handed to the carrier engaged b y the buyer . "C" t erms, where the gr oup arr anges and pays f or the main carriage but without assuming the risk o f the main carriage. The risk is trans ferr ed t o the buyer when the goods are handed o ver to the carrier engaged by the seller . "D" t erms, where the gr oup arr anges and pays f or the carriage and re tains the risk of the goods until delivery at the agreed des tination. The o wnership is transf err ed to the buyer upon arrival a t the agr eed des tination, usually the purchaser' s warehouse. The goods are normally sold with standar d w arranties that the goods comply with the agr eed-upon speciﬁcations. These standar d w arranties ar e account ed for using IAS 37 Pr o visions, Contingent Liabilities and Contingent Assets. Elk em does no t have an y o ther signiﬁcant obligations for r e turns or r efunds. A ﬁv e-step pr ocess is applied bef or e r evenue can be recognised: → identify con tracts with cus tomers → identify the separ ate perf ormance obligation → determine the tr ansaction price of the contract → allocate the tr ansaction price to each of the separate performance obliga tions, and → recognise the r ev enue as each perf ormance obligation is satis ﬁed. Sale of goods Elk em ' s main performance obliga tion is r elated to sale o f goods where the obliga tion is t o deliver agr eed volume of pr oducts within the agr eed speciﬁcation. Elk em has both short -t erm and long- term contr acts. Short- term Fr eigh t services included in sale of goods Fr eigh t components included in sale of goods on incoterms "C" terms ar e consider ed as a separ ate performance obliga tion and recognised o ver the period the service is performed. Shipping and handling services that occur bef or e the cus tomer tak es contr ol of the goods f or sales on "D" terms ar e consider ed t o be part of fulﬁlling the sale o f the goods. Sale of pow er and re venue connect ed t o energy reco very Sale of electric pow er and r evenue connec ted to ener gy reco very , mainly heat supply in the f orm o f s team and hot wa ter , el-certiﬁcates and el- tax, ar e r ecognised in income based on volume and price agr eed with the customer . Revenue connec ted to ener gy r eco very is mainly based on long- term con tracts wher e the prices are r egulated yearly based on changes in CPI or go vernmen t regula ted prices, e x cept for the el- certiﬁcates wher e the price is based on the observable marke t price at dat e of delivery . Rev enue fr om sale o f services Rev enue fr om sale o f services is r ecognised when the services have been pr o vided. Sale of services ar e mainly rela ted to management agr eements with r ela ted parties based on a cost plus a mar gin and sale of shipping and handling rela ted services. (b ) Other oper ating income Insurance settlemen ts Income fr om insur ance settlements ar e r ecognised as other opera ting income when it is virtually certain that the group will r eceive the compensation. Expect ed cash ﬂo ws fr om cr edit insur ance contrac ts wher e such contracts ar e deemed to be an integr al part of the sale tr ansactions is pr esented ne t against impairment losses assets / r eceivables, included in o ther opera ting expenses. See no te 21 T rade receiv ables. Grants See note 8 Gr ants 7 . Operating inc ome 1 74 175 Annual r eport 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Amounts in NOK million Sale of goods, Silicones Sale of goods, Silicon Pr oducts Sale of goods, Carbon Solutions Revenue fr om ener gy r ecov ery and o ther energy r elated income Service agreemen ts with rela ted parties (note 32 ) Other r e venue fr om con tracts with cust omers T otal r ev enue fr om contr acts with customer s Rental income Realised curr ency hedging e ects (no te 26 ) T otal r evenue Amounts in NOK million Sale of goods, Silicones Sale of goods, Silicon Pr oducts Sale of goods, Carbon Solutions Revenue fr om ener gy r ecov ery and o ther energy r elated income Service agreemen ts with rela ted parties (note 32 ) Other r e venue fr om con tracts with cust omers T otal r ev enue fr om contr acts with customer s Rental income Realised curr ency hedging e ects (no te 26 ) T otal r evenue Amounts in NOK million Gain on disposal of ﬁx ed assets Insurance settlements Grants (no te 8 ) Other T otal other opera ting income Details of r ev enue from contr acts with customers 2021 Details of r ev enue from contr acts with customers 2020 Details of o ther oper ating income Silicones 17 111 94 - 19 2 21 17 247 2 - 17 249 Silicones (res tated) 12 479 79 - - 6 30 12 594 1 - 12 595 Silicon Produc ts - 13 529 - 32 8 55 13 624 1 27 13 652 Silicon Produc ts (res tated) 9 703 - 28 4 111 9 846 2 (4) 9 845 Carbon Solutions - - 1 917 1 12 7 1 937 - - 1 937 Carbon Solutions - - 1 625 2 12 2 1 640 0 - 1 640 2021 0 27 554 5 586 Other - - - 57 50 71 178 1 65 244 Other - - - 32 106 23 160 1 (216 ) (5 5) T otal 17 111 13 623 1 917 108 73 155 32 987 4 92 33 083 T otal 12 479 9 782 1 625 62 128 166 24 241 5 (220 ) 24 025 2020 1 46 560 25 631 Principle Grants ar e r ecognised when it is r easonably assur ed tha t Elkem will comply with the conditions attached to them and the gr ants will be r eceived. T ax credits r elat ed t o R&D pr ojects ar e classiﬁed as gov ernment gran ts if the y ultimately ar e settled with cash, tax cr edits settled only via tax es ar e classiﬁed as tax allow ances. Grants ar e r ecognised in the stat ement of pr o ﬁt or loss as other opera ting income, ov er the periods necessary to match them with the cost they ar e intended to compensate. Gr ants r elating to cost o f pr oduction of goods ar e r ecognised in pr oﬁt or loss when the produced goods ar e sold. Grants rela ting t o property , plant and equipment ( ﬁx ed assets) and intangible assets ar e deducted fr om the carrying amount of the asset and r ecognised in pr oﬁt or loss as a r eduction o f the deprecia tion char ge over the lifetime o f the asse t. A f or givable loan fr om governmen t is tr ea ted as a governmen t grant when it is r easonable assur ed that the entity will mee t the terms f or f or giveness. The beneﬁt of gov ernment loan at a belo w-mark et ra te of in ter est is trea ted as gov ernment gr ant. 8. Grants Amounts in NOK million R&D grants fr om the N orwegian gov ernment R&D grants fr om the F r ench gov ernment Other R& D grants CO2 compensation fr om the Norwegian En vironmen t Agency Energy r ecovery r elated gr ants Other go vernment gr ants Covid-19 gran ts T otal go vernment gr ants Norwegian NOx fund f or r educed emission of NOx Other gr ants T otal gr ants fr om o ther than go vernments T otal gran ts Grants r eceivable r ela ted t o ﬁx ed ( F A) and intangible asse ts (IA) (no te 22) Grants r eceivable r ela ted t o income (note 22 ) Grants pa yable (not e 24 ) Grants, de ferr ed income (not e 24 ) Other operating income 59 59 14 367 - 53 2 553 - 1 1 554 Other operating income 63 60 8 340 - 67 19 556 - 4 4 560 Deduction of carrying amount F A 5 - - - 18 17 - 40 134 - 134 173 97 585 (1 5) (21) Deduction of carrying amount F A /IA 15 - - - 14 43 - 72 31 - 31 103 63 633 ( 15) (1 8) Details of gr ants 2021 2020 176 177 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact CO 2 allowances CO2 emission allowances alloca ted fr om the governmen t ar e classiﬁed as grants, measur ed at nominal value (zer o). The CO2 allo wance scheme pertains t o the gr oup 's plants in E ur ope. If actual emissions ex ceed the number of allocat ed allowances, additional allowances mus t be purchased. The cost of pur chased CO2 allow ances are r ecognised as part of ra w materials and ener gy f or pr oduction and is distributed linearly ov er the year as the number o f allocated allow ances will not be r e vised unless ther e is a substantial change in the pr oduction lev el at the plants. Any gain on sale of CO2 allow ances is classiﬁed as re venue. The previous scheme for allocation o f fr ee CO2 allowances fr om the authorities lasted until 2020 . The allocation of fr ee allow ances f or the period 2021- 2025 is appro ved b y the EFT A surv eillance authority , with no major changes to the s tructur e, but is y et to be ﬁnally decided b y the national authorities. Elk em e xpect the allocation of allo wances to continue in accor dance pre vious periods with an incr eased r eduction in the allocation of 2.2% annually . As o f 31 December 2021, Elkem gr oup had a surplus of appr o ximately 400, 000 allo wances measur ed at nominal v alue zer o. The estimated f air v alue of these allow ances is NOK 320 million. For Elk em AS A the surplus is z er o. Cost of additional allow ances needed t o settle the quota obligation for 2021 is accrued for , based on the marke t prices as at 31 December 2021. The ﬁnal decision on the allow ance allocation for 2021- 2025 is expect ed bef or e the se ttlement deadline f or 2021, 30 April 2022. CO 2 compensation The Norwegian go vernment has since 2013 had a CO2 compensation scheme to compensate f or CO2 costs included in the po wer price for the manufac turing industry . The compensation scheme is based on a corresponding scheme f or EU and is appr oved b y the EFT A surveillance authority ESA. The pr e vious CO2 compensation scheme ended 31 December 2020 and a new scheme f or 2021- 2025 is appr ov ed f or EU but has y et to be implemented in to Norwegian r egula tion. Howe ver , a continuation o f the CO2 compensa tion is included in a proposed N orwegian r egulation and pro visions ar e included in the Norwegian national budget for 2021. The CO2 compensa tion scheme applies f or Elk em ' s Norw egian Silicon and Ferr osilicon plants and the percen tage of the costs compensat ed was appr o ximately 75% in 2020 . The compensation is based on the mark e t price of CO2 allow ances and will as such vary with the price de velopment. Elk em has recognised CO2 compensa tion f or 2021, at the same level as f or 2020. The estimated compensation is based on the terms and conditions in the pr oposed r egulation and supported by the pr ovision in the National budget . As the gr ant compensat es power costs, which ar e cos ts recognised as part o f the cost price of in ventory during the produc tion pr ocess, the compensa tion is r ecognised in the s tatement o f pr oﬁt or loss when the pr oduced goods are sold. Covid-19 Due t o the Co vid-19 outbr eak, sever al gov ernment bodies implemented temporary measur es in 2021 to help businesses a ected by the outbr eak. Elk em has receiv ed NOK 2 million (NOK 19 million) in Co vid-19 rela ted gran ts r ecognised as other oper ating income in the statemen t of pr oﬁt or loss. NOx Fund The industry in N orwa y pa ys a fee for their emission of NOx to a public founda tion run by 15 industry and commerce associa tions. The founda tion is self - ﬁnanced by the f ees and the purpose is to support pr ojec ts tha t reduces NO x emissions fr om the industry in Norw ay . Other The remaining gr ants ar e mainly r elated to R&D and energy r ecov ery pr ojec ts. Curren t beneﬁts consist o f wages and salaries, bonuses, holiday payments and o ther short- term bene ﬁts tha t are e xpect ed t o be settled within 12 months aft er the balance sheet date. N on-curr ent beneﬁts consist mainly of jubilee and long-service beneﬁts, pos t-emplo yment beneﬁts and post -r etir ement beneﬁts, no t e xpected to be wholly se ttled within the ne xt twelve mon ths. Deﬁned contribution plans Deﬁned contribution plans comprise o f arrangements whereb y the compan y mak es monthly contributions to the employees ' pension plans, and where the future pensions ar e determined by the amount o f the contributions and the re turn on the individual pension plan asset. The contributions ar e e xpensed as incurred and ther e is no further obligation r elated to the contribution plans. Pr epaid contributions ar e r ecognised as an asset. Deﬁned beneﬁt plans Deﬁned beneﬁt plans ar e r ecognised at pr esent value o f futur e liabilities consider ed r etained at the end of the r eporting period, calculated separ ately f or each plan. Plan assets ar e measur ed at fair v alue and deducted in calculating the net pension obliga tion. Actuarial assumptions ar e used to measur e bo th the Principle Employ ee beneﬁts Employee bene ﬁts ar e all f orms of consider ations given by an entity in e xchange f or service r endered b y employees or f or t ermination of emplo yment. obligation and the expense and e ects o f changes in estimates due to ﬁnancial and actuarial assump tions are r ecognised as other compr ehensive income. Service costs ar e r ecognised as part of employ ee beneﬁt expenses and ne t inter est on pension liabilities / asse ts are r ecognised as a part of ﬁnance expenses. P ast service costs arising due to amendments in beneﬁt plans are e xpensed as incurr ed. Multi-employer de ﬁned beneﬁt plans wher e av ailable informa tion is insucient to be able to calculate each participant' s obligation, ar e account ed f or as contribution plans. Judgements and estimat es Estimation uncertainty is mainly r elated to deﬁned beneﬁt pension plans, wher e the calculation of pension obligations is based on ﬁnancial and actuarial assumptions, such as discount r ates, futur e salary and pension adjustments, e xpected turnov er and mortality . Deviations between applied assumptions and actual r esults in futur e periods will ha ve e ects on the calculated obligation. See in forma tion about sensitivity on pension obligations based on changes in main actuarial assumptions below . Employee bene ﬁts include both curr ent and non-curr ent beneﬁts, and ar e expensed as incurr ed, toge ther with any social security tax es applicable. 9 . Emplo yee beneﬁts Amounts in NOK million Salaries, holiday pa y and v ariable compensation Employer' s na tional insurance contributions / social security tax Pension e xpenses Share-based pa yments (not e 10 ) Other pa yments / beneﬁts T otal emplo yee beneﬁt e xpenses Av erage number of full- time equivalents Amounts in NOK million Fixed compensa tion V ariable compensation - S TI V ariable compensation - L TI Other bene ﬁts Pension beneﬁts T otal management r emuneration Remuneration pr o vided t o the boar d of dir ector s Remuneration pr o vided t o the committee r emuner ation Employ ee beneﬁt e xpenses Remuneration to management 2021 ( 3 459 ) (727) ( 137) (28 ) ( 179 ) ( 4 530 ) 7 178 2021 ( 31) (29 ) (9) (1 ) (5 ) ( 76) (5 ) (0) 2020 ( 3 122) ( 654 ) ( 121 ) (2 9) ( 102 ) ( 4 028 ) 6 931 2020 (3 0) (1 4) (1 0) (2) (5) (6 1 ) (4) (0) 178 179 Annual r eport 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Amounts in NOK million Pension contribution fund (note 22 ) Employee pr epaymen ts etc. T otal emplo yee beneﬁt asse ts Salaries, holiday pa y and v ariable compensation Social security tax / contributions Pension plan obligations, ne t Other bene ﬁt plans T otal emplo yee beneﬁt obliga tions 31. 12.2021 1 - 1 - - 492 119 611 31. 12.2021 2 8 10 761 203 - 12 976 31. 12.2020 3 10 13 547 177 - 16 7 40 31. 12.2020 3 - 3 - - 554 125 679 Employ ee beneﬁt assets and obligations Non-current 2021 31. 12.2021 Current 2020 31. 12.2020 (a) Salaries, holiday pay and v ariable compensation The obligations ar e r elated to incurr ed emplo yee beneﬁts, not paid. (b ) Pension plans The group has bo th deﬁned contribution and de ﬁned beneﬁt plans. For deﬁned contribution plans the cost is equal to the gr oup ' s contribution to the employee ' s pension savings during the period. For deﬁned bene ﬁt plans the cos t is calculated based on actuarial v aluation methods, taking assumptions related to the employee 's salary , turnover , mortality , discount rate, etc. in to consideration. Deﬁned contribution plans Deﬁned contribution plans ar e the main pension plan for Elk em ' s N orwegian entities, wher e the contribution to each individual pension plan is 5% of annual salary up t o 7 . 1G and 15% of annual salary between 7 . 1-12G. 1G re fer s to the N orwegian national insur ance scheme ' s basic amount, which is NOK 106 399 as at 1 May 2021. Pension on salary abov e 12G is not supported b y external service pr o viders and is ther ef or e handled as a separat e plan and included under deﬁned beneﬁt plans. In addition, a Norwegian multi-emplo yer early re tir ement scheme called AFP , wher e sucient inf ormation to calculate each participan t' s pension obligation is not av ailable, is accounted f or as it is a de ﬁned contribution plan in accor dance with the Minis try o f Finance ' s conclusion. The participants in the pension plan are join tly r esponsible f or 2/3 o f the plan ' s pension obligation, the governmen t is r esponsible f or the remaining part. The pension premium in 2021 is 2.5% of the employees ' salary between 1 and 7 . 1G, cov ering this year' s pension paymen ts and contribution to a security fund f or futur e pension obliga tions. The y early premium for 2022 is set to 2. 6%. Deﬁned beneﬁt plans Deﬁned beneﬁt plans ar e pension plans wher e the gr oup is responsible f or paying pensions at a certain le vel, based on employees ' salaries when retiring. The gr oup has funded and unfunded bene ﬁt plans in Norwa y , Fr ance, Germany , UK, Canada, J apan and South Africa, distributed as follo ws: Norw ay 19%, F rance 44%, other Eur ope 17%, Canada 18%, other countries 2%, based on net pension obligation per 31 December 2021. In Canada pro visions ar e also made f or medical insur ance as well as pension beneﬁt plans. The Norwegian pension plans ar e unfunded and comprise pension on salaries above 12G, wher e the expense is 15% o f annual base salary that e x ceeds 12G plus inter est on the individual calculated pension obligation, and some individual r etir ement schemes that are closed. Net int eres t is calculated based on ne t pension obligations at the start o f the period, multiplied b y the discount ra te. Any dier ence be tween actual r eturn on pension assets and the inter est income calcula ted as a part of the net inter est, will be recognised dir ectly in OCI. Inter est on net pension obliga tions ar e pr esented as a part of ﬁnance expenses. Amounts in NOK million Curren t service expenses Administra tion expenses Net pension e xpenses, deﬁned beneﬁt plans Deﬁned contribution plans Early r etir ement scheme AFP ( Norwa y) T otal pension e xpenses In addition, inter est e xpenses on net pension liabilities are r ecognised as a part of ﬁnance e xpenses Amounts in NOK million Presen t value of funded pension obligations Fair v alue of plan assets Net funded pension obligations Presen t value of unfunded pension obliga tions Net v alue of funded and unfunded obligations Break down o f net pension e xpenses Net deﬁned bene ﬁt obligations 2021 (4 0) (1 ) (4 0) ( 78) (1 8) ( 137) (8) 2021 ( 509 ) 487 (22) ( 470 ) ( 492) 2020 (3 4) (1) (3 5) (6 9) (1 7 ) ( 121 ) (7) 2020 ( 510 ) 460 (5 0) ( 504 ) ( 554 ) Amounts in NOK million Opening balance Curren t service expenses incl. social contribution tax Inter est ( expenses) income Administra tion expenses Remeasur ement gains (losses) Contributions fr om employer Beneﬁts paid Other changes Currenc y tr anslation dier ences Closing balance Amounts in NOK million Cash, cash equivalents and money mark et inv estments Bonds Shares Property Other plan asse ts 1) T otal pension plan assets Actual re turn on plan assets Deﬁned beneﬁt obligations ( 1 014 ) (4 0) (1 8) - 59 - 40 - (5 ) ( 978 ) Deﬁned beneﬁt obligations (9 08) (3 4) (2 0) - (77) - 38 2 (1 5) ( 1 014) Distribution% 13 % 13 % 31 % 1 % 42 % 100 % 8. 1% Net pension plan obligations ( 554 ) (4 0) (8) (1 ) 69 15 17 - 10 ( 492) Fair v alue of plan assets 55 95 185 148 4 487 19 878 Net pension plan obligations (4 74 ) (3 4) (7) (1) (5 5) 14 19 2 (1 8) ( 554 ) Deﬁned beneﬁt plan assets 460 - 10 (1 ) 9 15 (23 ) - 16 487 Distribution% 11 % 19 % 38 % 30 % 1 % 100 % 4.3 % Deﬁned beneﬁt plan assets 434 - 12 (1) 23 14 (1 9) (0) (3) 460 Fair v alue of plan assets 58 60 142 5 195 460 34 987 Mov ements in the deﬁned bene ﬁt obligations and plan assets Break down o f pension plan assets 1) Includes insurance contr acts (Buy in policies and Annuity insured con tracts) In addition, some Norwegian entities ha ve pension contribution funds, mainly based on e x cess pension assets from se ttlement of the deﬁned bene ﬁt plans in 2010. The pension contribution funds ar e classiﬁed as non-curren t pension funds, e x cept ne xt year' s e xpected contributions which ar e classiﬁed as curr ent (see not e 22 Other asse ts) For mor e details on the r emunera tion t o management see "Report on salary and o ther r emuneration to leading personnel in Elk em ASA f or the ﬁnancial year 2021" . 180 181 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Amounts in NOK million Curren t part of contribution fund Non-curr ent part of contribution fund T otal pension funds Discount rat e Expected ra te of salary incr ease Annual regula tion of pensions paid Amounts in NOK million 2021: E ect on the pension liability in NOK million 2020: E ect on the pension liability in NOK million Amounts in NOK million Contribution t o be paid t o deﬁned pension plans next year Weigh ted aver age dura tion of the deﬁned beneﬁt obligations Pension assets, de ﬁned beneﬁts and contribution plans Pension assets, de ﬁned beneﬁts and contribution plans Assumption Expected contribution for the pension plans ne xt year and aver age duration f or the main deﬁned beneﬁt plans 31. 12.2021 2 1 3 Norwa y 2.0% ( 1.4%) na (na) 1.5% ( 1.3%) 0.5% increase (6 3) (6 2 ) Fr ance 0.9% ( 0.5%) 2. 1% (2. 1%) na (na) 0.5% decrease 71 76 Canada 3.0% ( 2.5%) 3,5% ( 3.5%) na (na) 1 year increase 25 27 Norway 5 13 years Germany 1.0% ( 0.8%) 3.0% ( 3. 0%) 2.0% ( 2. 0%) 1 year decrease (25) (27) Fr ance 35 11 years UK 1.6% ( 1.3%) na (na) na (na) 0.5% increase 24 28 Canada 18 17 years 0.5% decrease (22) (2 0) Germany 3 14 years UK 5 14 years 31. 12.2020 3 3 6 Assumptions r egar ding futur e mortality ar e based on actuarial advice in accor dance with published statistics and experience in each country . Sensitivity on pension obligations based on changes in main actuarial assumptions The deﬁned beneﬁt pension schemes e xpose the gr oup to actuarial risk such as inv estment risk, int er est ra te risk, salary gr owth risk, mortality risk and longevity risk. A decr ease in corporate bond yields, a rise in in ﬂation or an increase in lif e e xpectancy would r esult in an incr ease to plan liabilities. ( c) Other beneﬁt plans Other emplo yee bene ﬁts consist of pr o visions r elated to jubilee and long-service beneﬁts, and post -employment beneﬁts to be paid until or dinary re tir ement age for for - mer emplo yees in Elk em ’ s Chinese en tities. Of to tal non-curr ent pr ovisions, NOK 7 4 million (NOK 7 4 million) rela te to jubilee and long-service beneﬁts in the Silicones segment, mainly in F r ance. Estimat ed duration of the obligation is 12 years. N on-curr ent pr ovisions for other employ ee beneﬁts for Elk em ’ s Chinese en tities, in As the gr oup 's main pension plans ar e de ﬁned contribution plans, there ar e no gr oup policies f or funding of the deﬁned beneﬁt plans. This is managed locally , based on the terms and s tatus for the individual plan. The sensitivity analy sis below shows es timated e ec ts in the de ﬁned pension liabilities based on r easonable changes in the main assump tions. The calculations ar e based on a change in one assumption while holding all other assump tions constant. Nega tive amounts sho w an expect ed decr ease in the ne t pension liability . the Silicones segment, ar e calculated to NOK 30 million (NOK 36 million) , mainly consis ting of post -employment beneﬁts. The beneﬁts ar e r ela ted to employ ees laid o due t o reor ganisa tion, no further obligations ar e expected to incur and the es timated r emaining dur ation is 17 years. A pr oﬁt-sharing plan is applicable f or F r ench entities with more than 50 emplo yees, wher e the bonus liability mus t be calculated based on pr o ﬁt after tax, using a speciﬁc formula giv en by the authorities. There ar e no incurr ed beneﬁts r elated to such plans a t the r eporting da te. Discount rate Life e xpectancy Salary gr owth Principle The f air value o f options gran ted under the share-based payment pr ogr amme is recognised as an emplo yee beneﬁt e xpense with a corresponding incr ease in equity for equity settled awar ds. The to tal amount to be expensed is de termined by r ef er ence t o the f air v alue of the options gr anted. The to tal expense is r ecognised over the v esting period, which is the period over which all of the speciﬁed vesting conditions ar e to be sa tisﬁed. At the end o f each period, the en tity r evises its es timates of the number of options that ar e expected t o vest based on the non-mark e t vesting and service conditions. It recognises the impact o f the r evision to original estimates, if an y , in the sta tement o f pro ﬁt or loss, with a corresponding adjus tment to equity . Social security contributions pa yable in connection with an option gran t ar e considered an in tegral part o f the grant itself and the char ges ar e tr ea ted as cash-settled transactions. Judgements and estimat es Estimating fair v alue f or shar e based payment transactions r equir es det ermination of the most appropria te valua tion model and assumptions to the valuation model. The fair value a t the gr ant dat e is determined using the Black -Scholes option pricing model, which tak es int o account the ex er cise price, the life o f the op tion, the curr ent price of the underlying shares, the e xpected v olatility of the shar e price, any dividends expect ed on the shar es and risk -fr ee int eres t rat e f or the life o f the op tion. The e xpected shar e price volatility is based on historical v olatility f or a selection o f comparable list ed companies adjusted with a pr emium taking into account the maturity of the peers compar ed to the Group. The risk- free inter est r ate is based on Norwegian go vernment bonds with same maturity as the option. Elk em ' s share option scheme The Group has gr anted shar e op tions t o management and selected k ey employ ees. Each option giv es the righ t to acquir e one shar e in Elk em A SA on e x ercise. The share op tions ves t annually in equal tranches o ver a three- year period f ollowing the date o f grant, with one- third v esting each year . The options will e xpir e tw o y ears after ves ting, in total 5 year s after the date o f gran t. No option holder may in any calendar y ear r ealise a t otal gain on ex er cise o f op tions which is in ex cess o f the two times the op tion holder' s base salary in the same calendar y ear , provided ho wev er tha t the maximum gain f or Elk em ' s CE O shall be f our times the CE O' s base salary . See "Report on salary and other r emunera tion t o leading personnel in Elk em ASA f or the ﬁnancial year 2021" f or description o f the op tion pr ogramme and options gran ted to Elk em ' s corpor ate management. When the op tions ar e ex er cised, the corr esponding number o f shar es ar e tr ansf err ed to the employee. The proceeds r eceived fr om the e x er cise of the options (net of an y dir ectly attributable tr ansaction costs) ar e credit ed dir ectly to equity . 10 . Share-based pa yment 182 183 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Amounts in NOK million Share-based pa yment Social security contribution T otal e xpenses relat ed to share-based pa yments Amounts in NOK million Loss on disposal of ﬁx ed assets Fr eight and commission e xpenses Leasing short- term and lo w value contr acts (not e 16 ) Machinery , equipmen t, spare parts and oper ating mat erials External services 1) Insurance e xpenses Impairment losses tr ade and other r eceivables Other oper ating e xpenses 2) 3) T otal other opera ting expenses Components of shar e-based payments emplo yee bene ﬁt expenses Details of oper ating e xpenses Components of shar e-based payments emplo yee bene ﬁt expenses Outstanding instruments Quantity and w eighted av erage prices 2021 (28 ) (1 6) (4 4) 2021 (5 ) ( 1 661) (5 6) ( 1 336 ) (2 051) ( 106 ) 9 ( 330 ) ( 5 536 ) 2020 (2 9) (7) (3 6) 2020 (1 5) ( 1 413 ) (4 2 ) ( 1 285 ) ( 1 949 ) (9 7) (1 6) ( 304 ) ( 5 121) Amounts in NOK million Quantity gr anted Date o f Gr ant Exer cise price ( NOK) Share price ( NOK) Expected lif etime * V olatility Inter est ra te * Dividend FV per instrumen t V esting conditions Amounts in NOK million 2018 progr amme 2019 progr amme 2020 progr amme 2021 progr amme T otal outstanding Amounts in NOK million Outstanding options 1 January Granted during the year Exer cised during the year 2) Forf eited during the year Expired during the year Outstanding options 31 December Of which e xer cisable ( ves ted) Av erage shar e price at e x ercise da te (NOK per shar e) 2021 7 451 000 29 Jul 2021 31.20 32.90 3.34 34.4 % 0.9 % 6.5 % 5. 19 Service Exer cise price 38.52 23.53 19. 10 31.20 Number o f instruments 22 767 000 7 451 000 ( 6 271 228 ) ( 900 000 ) (2 567 000 ) 20 479 772 5 728 772 2020 8 000 000 29 Jul 2020 19. 10 17 . 19 3. 12 46.0 % 0.2 % 6.5 % 2.95 Service Number o f instruments outstanding 4 650 000 2 967 500 5 411 272 7 451 000 20 479 772 Weigh ted aver age ex er cise price 26. 76 31.20 22. 16 21. 16 38.52 28.55 35.30 34.00 2019 8 000 000 29 Jul 2019 23.53 24.66 3. 12 35.8 % 1.3 % 6.5 % 4.08 Service Remaining contractual lif e 1.21 2.37 2.94 3.58 2. 70 Number o f instruments 14 767 000 8 000 000 - - - 22 767 000 7 417 000 2018 7 850 000 18 Sep 2018 38.52 38. 16 3.01 31.4 % 1.3 % 6.5 % 4.85 Service Number o f instruments outstanding 7 267 000 7 500 000 8 000 000 - 22 767 000 Remaining contractual lif e 1.69 2.58 3.58 - 2.64 Weigh ted aver age ex er cise price 30.91 23.53 - - - 26. 76 33.47 - Weight ed average parame ters o f instrumen ts *Weight ed average parame ters o f instrumen ts 1) Including services from audit or , see speciﬁcation below 2) Including changes in inven tories o f ﬁnished goods and work in progr ess of positive NOK 1 million (positive NOK 26 million) 3) Including capitalised salary on ﬁxed asse t projects o f positiv e NOK 114 million (positiv e NOK 99 million) 11. Other operat ing e xpenses Research and de velopment During 2021, Elk em expensed NOK 716 million ( NOK 548 million) as resear ch and development r elated to process, pr oduct and business development, including technical customer support and impr o vement pr ojects. In addition, Elk em capitalised development e xpenses o f NOK 300 million ( NOK 162 million). Grants r elating to r esearch and developmen t amount t o NOK 132 million ( NOK 130 million) and ar e r ecognised in other opera ting income. In addition NOK 15 million (NOK 5 million) is r ecognised as a r eduction o f intangible assets. Audit fees KPMG is the gr oup auditor of Elk em. 31. Desember 2021 31. Desember 2020 31. Desember 2021 31. Desember 2020 184 185 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Amounts in NOK million KPMG Audit fee Other assur ance services T ax services Other services Other audit ﬁrms Audit fee Other assur ance services T ax services Other services T otal f ees to KPMG and other audit ﬁrms Amounts in NOK million Changes in f air v alue commodity con tracts (no te 25 ) 1) Embedded EUR derivativ es power contr acts, inter est elemen t (note 25 ) Ineec tiveness on cash ﬂow hedges (note 26 ) Net for eign e xchange gains (losses) - f orwar d currenc y con tracts Operating for eign e x change gains (losses) T otal o ther gains (losses) Dividends fr om other shar es Change in f air v alue fr om o ther shares measur ed at fair v alue thr ough pr o ﬁt or loss Gains (losses) on disposal of subsidiaries Restructuring e xpenses (note 24 ) 2) Dismantling and envir onmental e xpenses (note 24 ) 3) Other 4) T otal o ther income ( e xpenses) T otal other items Fees t o KPMG and other audit ﬁrms Details of o ther it ems 2021 (1 9) (1 ) (0) - (2) (0) (1 ) (1 ) (24 ) 2021 (1 ) 3 3 14 20 39 3 2 - 41 ( 181) (1 7 ) ( 153 ) ( 114 ) 2020 (1 8) (2) (0) (1) (2) (0) (2) (2) (27) 2020 ( 144 ) 234 (1 2 ) 49 (8 3) 44 1 0 - ( 158 ) - (1 8) (1 74 ) ( 130 ) Fees to auditors are r eported ex clusive o f V A T . 1) Mainly fair v alue changes of the 30-øringen po wer contrac t, see note 25 Financial asse ts and liabilities. Due t o changes in the price struc ture of the "30-øringen " contract fr om 2021, the con tract is designated as a hedging ins trument from 1 January 2021. This means that fair value changes from 1 January 2021 is recognised as r aw materials and energy for produc tion in statemen t of pro ﬁt or loss in the same period(s) as the hedged objects aects the pro ﬁt or loss. 2) Elkem launched a gr oup wide pr oductivity impr ovemen t progr amme in ﬁrst quart er o f 2020 . The amount includes r estructuring and dir ect related expenses. 3) Includes NOK 171 million r elated to expenses in connection with relocation o f work ers buildings located in pro ximity to the Silicones Xinghuo plant, as requir ed by the authorities. 4) Mainly r elated t o business projects / acquisitions Principle Other gains (losses ) Other gains (losses) consists of changes in fair v alue of ﬁnancial instruments that ar e not designa ted as a part of a hedging r elationship, any ine ectiv e part of hedging rela tionships and f or eign e xchange gains (losses) r elated to opera ting activities such as trade r eceivables, tr ade payables, bank accoun ts / ov erdr afts. F or eign ex change gains (losses) rela ted to ﬁnancing activities, mainly inter est -bearing liabilities and gr oup loans, ar e classiﬁed as a part of ﬁnancial income and expenses. Other income ( expenses) Other income and ( e xpenses) consists o f tr ansactions and even ts tha t ar e rela ted to acquisition of business, gains / (losses) on disposal of businesses, r estructuring progr amme and pr oﬁt and loss e ec ts fr om o ther shares. In addition, performance incentiv es f or Elk em employ ees rela ted to such items. Cost r elated to liquidat ed / wound- Principle Inter est income is r ecognised on an accrual basis and is classiﬁed as ﬁnance income. For eign e x change gains (losses) rela ted to ﬁnancing activities including gr oup loans ar e classiﬁed as a part of ﬁnancial income and expenses, and f oreign e x change gains (losses) rela ted to opera tions ar e classiﬁed as a part of other it ems. Inter est e xpenses ar e r ecognised on an accrual basis using the e ec tive inter es t method and ar e classiﬁed as ﬁnancial e xpenses. Inter est is capitalised as a part up businesses, costs of public r equir ements or upda ted regula tions r elated to e vents / periods be for e pur chase o f the business, e.g., envir onmental measur es, ar e included in other income and e xpenses. Acquisition r elated costs ma y include bo th costs r elat ed to acquisitions done, not comple ted and cancelled projec ts. Inves tments in equity instruments with an ownership below 20% ar e normally classiﬁed as other shares. Dividends fr om such shar es ar e r ecognised when shareholder s ' right to r eceive dividends is determined b y the shar eholder' s meeting. F air value changes in other shar es r elated to lis ted companies are r ecognised as other income ( expenses) . When the options ar e ex er cised, the corr esponding number of shares ar e transf err ed to the employee. The proceeds receiv ed from the e x er cise of the options (net o f any direc tly a ttributable tr ansaction costs) ar e cr edited direc tly t o equity . of the carrying amount of a self -constructed item of property , plant and equipment when the construction period tak es a subs tantial period of time, meaning mor e than 9-12 months, depending on the t otal amount, and borro wing costs ar e being incurr ed. Financial expenses also include int er est on net pension liabilities, unwinding of discount ed pro visions and contingent liabilities, and inter est on lease liabilities. 12. O ther it ems 13. Finance i ncome and e xpenses 186 187 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Amounts in NOK million Inter est income on loans and r eceivables Other ﬁnancial income T otal ﬁnance income Net for eign e xchange gains (losses) 1) Inter est e xpenses on inter est -bearing liabilities measured a t amortised cost Inter est e xpenses fr om other items measur ed a t amortised cost 2) Capitalised inter est e xpenses Inter est e xpenses on lease liabilities Unwinding of discount ed liabilities Inter est e xpenses on net pension liabilities Other ﬁnancial expenses T otal ﬁnance expenses Net ﬁnance income ( e xpenses) Amounts in NOK million Pro ﬁt (loss) bef or e income tax Curren t taxes Deferr ed tax es T otal income tax ( e xpense ) beneﬁt Amounts in NOK million Remeasur ement of deﬁned bene ﬁt pension plans Hedging of net in vestment in f oreign oper ations Cash ﬂow hedges T otal tax charged to OCI Details of ne t ﬁnance income ( expenses ) Income tax recognised in pr oﬁt or loss Income tax es recognised in other compr ehensive income ( OCI) 2021 34 6 40 241 (206 ) (23 ) 5 (26 ) (8) (8) (1 0) (276 ) 6 2021 5 827 ( 1 145) (1 8) ( 1 163 ) 2021 (1 0) (29 ) ( 153 ) ( 192) 2020 27 4 31 17 (22 1) (22) 4 (1 7 ) (1 0) (7) (4) (278 ) (229 ) 2020 584 (234 ) (72) ( 306 ) 2020 13 37 33 82 1) Some / part of loans are designated as a hedging ins trument, hence the unrealised part o f net for eign ex change gains (losses) are recognised against OCI, see no te 26 Hedging. 2) Inter est expenses from o ther items measur ed at amortised cost mainly consist o f int erest on bills pay able and fac toring agreemen ts. Principle Income tax es Curren t tax asse ts and liabilities ar e measur ed at the amount expec ted to be r ecov er ed fr om or paid to the tax authorities. Curren t tax pa yables includes an y adjustment to tax pay able in r espect of pr evious year s. Income tax is r ecognised in the sta tement o f pr o ﬁt or loss ex cept to the e xtent that it r elat es t o items recognised dir ectly in equity or in o ther compr ehensive income. The gr oup includes deductions for uncertain tax positions when it is probable tha t the tax position will be sustained in a tax re view . The gr oup r ecords pr ovisions rela ting to uncertain or disputed tax positions at the amount expec ted to be paid. The pr ovision is r e versed if the disputed tax position is settled in f av our of the gr oup and can no longer be appealed. Penalties and int eres t r elated to income tax es ar e recognised as income tax e xpense in the statemen t of pr oﬁt or loss. Accrued penalties and in ter est ar e recognised in the sta tement o f ﬁnancial position in income tax pa yable and pr ovisions f or the curr ent and non-curren t portions r espectively . Def erred tax asse ts are r e viewed a t each reporting date and ar e r educed to the ext ent tha t it is no longer probable tha t the r elat ed tax bene ﬁt will be r ealised; such reduc tions ar e r ever sed when the pr obability of future tax able pr oﬁts impr ov es. Judgements and estimat es Part of the basis for r ecognising de ferr ed tax assets is based on applying the loss carried f orwar d against future tax able income in the gr oup, which requires use o f estimates f or calculating future tax able income. Def err ed Deferr ed tax Def erred tax assets and liabilities ar e calculated using the liability method with full allocation o f all temporary di erences be tween the tax base and the carrying amount of assets and liabilities in the ﬁnancial statemen ts, including tax losses carried f orwar d. Def erred tax r elating to it ems outside statemen t of pro ﬁt or loss ar e r ecognised in corr elation with the underlying tr ansaction either in other comprehensive income or dir ectly in equity . De ferr ed tax assets and liabilities are no t r ecognised if the tempor ary dier ence arises fr om the initial r ecognition of goodwill. De ferr ed tax assets ar e r ecognised in the s tatement o f ﬁnancial position t o the e xtent that it is mor e lik ely than not that the tax asse ts will be utilised against def err ed tax liabilities or futur e taxable income. De ferr ed tax assets arising from tax losses ar e r ecognised when there is con vincing evidence o f r ecoverability . The tax rat es substantively enact ed at the end of the r eporting period and undiscounted amounts ar e used. Def err ed tax assets and liabilities ar e o set if there is a legally enfor ceable right to o set curr ent tax liabilities and assets, and Elk em intends to se ttle curren t tax liabilities and assets on a net basis, or to r ealise the tax assets and settle the liabilities simultaneously . tax assets ar e not r ecognised for start-up projec ts and entities with longer periods of losses unless ther e is convincing evidence o f reco ver ability . Elkem r ecognises a pre viously unr ecognised de ferr ed tax asset to the exten t tha t it has become pr obable tha t futur e taxable pro ﬁt will allow the def err ed asset to be r eco ver ed. For ex ample, when start up pr ojects becomes pr o ﬁtable or the mark e t condition has changed so the entity has longer periods with historic taxable pr o ﬁts and futur e for ecast ed taxable pro ﬁts. 1 4 . Ta x e s 188 189 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Amounts in NOK million Pro ﬁt (loss) bef or e income tax Expected income taxes, 22% o f pr oﬁt bef or e tax ( 22%) T ax eec ts of: Dier ence in tax rat es f or each individual jurisdiction Pre fer ential tax rat es Permanent di er ences T ax eec ts of income fr om N orwegian contr olled f or eign companies (NOKUS ) T ax eec ts share o f pr oﬁt (loss) from equity accounted companies T ax eec ts non-deductible expenses T ax relie f based on v alue of equity T ax eec ts non-tax able income Other e ects T ax eec ts of changes in unr ecognised def erred tax assets T ax credits utilised Other curr ent tax es paid Pre vious year tax adjustment T otal income tax ( e xpense ) beneﬁt E ective tax rate Amounts in NOK million Derivativ es including cash ﬂow hedges Property , plant and equipment and Intangible assets Pension liabilities T rade receiv ables Invent ories Pro visions Other di er ences Debt waiv er T ax losses carried f orwar d Gross def erred tax asse ts Unr ecognised deferr ed tax assets for tax loss carried forwar d Unr ecognised debt waiv er Unr ecognised deferr ed tax assets o ther items Recognised def erred tax assets Netting Net def erred tax assets Derivativ es including cash ﬂow hedges Property , plant and equipment and intangible assets Invent ories Other di er ences Gross de ferr ed tax liabilities Netting Net def erred tax liabilities Net def erred tax (liabilities) assets r ecognised Reconciliation of income tax ( expense ) beneﬁt Deferr ed tax assets and de ferr ed tax liabilities 2021 5 827 ( 1 282) (9 4) 12 (8) 19 (24 ) 18 76 157 - ( 35) 15 ( 1 163 ) 20 % Deductible temporary dier ence 17 795 465 89 639 208 302 595 2 353 5 463 ( 1 960 ) ( 595) ( 1 361) 1 548 560 2 734 210 243 3 7 48 Deductible temporary dier ence 378 1 015 525 130 164 257 377 595 2 986 6 426 (2 623 ) ( 595) ( 1 198 ) 2 010 220 2 685 166 96 3 168 2020 584 ( 128 ) (8) 41 (7) 5 (1 8) - 44 ( 186 ) 11 (4 6) (1 2 ) ( 306 ) 52 % Deferr ed tax 4 198 121 16 157 53 68 161 582 1 359 ( 486 ) ( 161) ( 340 ) 372 ( 324 ) 48 123 610 46 50 828 ( 324 ) 505 ( 457) Deferr ed tax 83 155 148 22 39 56 83 169 821 1 576 (6 9 9) (1 6 9) ( 197 ) 511 ( 414 ) 96 48 644 37 21 751 ( 414 ) 336 (240 ) Three companies in China ar e taxed under the regula tions f or "High and new technology company" which mean that the tax ra te is 15% compared to the regular 25%. The companies hav e t o conﬁrm to the authorities every other year that the y fulﬁl the conditions for "High and new technology company" in or der to apply the pre fer ential tax ra te. Unr ecognised def err ed tax asse ts other items, ar e mainly r elated to Pr operty , plant and equipment. T ax eects of non- tax able income is mainly due to additional R&D deduction and non- taxable R& D grants that are settled through the tax able pro ﬁt. Other current tax es paid r elates mainly to tax es that are indir ectly calculated based on pr oﬁt (loss) be for e income tax and withholding tax es on dividends. 31. 12.2021 31. 12.2020 Amounts in NOK million Opening balance Recognised in pr oﬁt or loss f or the y ear E ect of business combination Recognised in other compr ehensive income Currenc y tr anslation dier ences Closing balance Mov ements in net def erred tax assets and def erred tax liabilities 2021 (240 ) (1 8) 0 ( 192) (7) ( 457) 2020 ( 178 ) (72) (8 1) 82 10 (240 ) 190 191 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Amounts in NOK million Fr ance China Brazil Malaysia Paragua y Canada Mexico T otal tax losses to carried forw ard Amounts in NOK million Fr ance China Brazil USA United Kingdom Norwa y Malaysia Paragua y India Mexico Iceland T otal tax losses to carried forw ard Amounts in NOK million 2020 2021 2022 2023 2024 > 2024 Without maturity T otal tax losses carried forwar d T ax losses carried forwar d 31 December 2021 T ax losses carried forwar d 31 December 2020 T ax losses carried forwar d by e xpiry dat e Gross tax losses carried forw ard 1 602 183 170 96 298 3 1 2 353 Gross tax losses carried forw ard 1 702 637 181 33 10 9 41 259 7 2 105 2 986 T otal unr ecognised losses - - - (29 ) - - ( 458 ) ( 486 ) Unrecognised tax losses ( 347) (2 8) (5 8) (2 3) (2 9) (1) (0) ( 486 ) Unrecognised tax losses ( 462 ) ( 138 ) (6 1 ) - - - (1 0) (2 6) (2) - - (6 9 9) T otal unr ecognised losses 0 (3 9) - (4 0) - - ( 620 ) (6 9 9) Net tax losses carried forw ard 431 39 58 23 29 1 0 582 Net tax losses carried forw ard 552 138 61 7 2 2 10 26 2 1 21 821 T otal r ecognised losses - - - - - 11 84 95 Recognised def erred tax losses carried forwar d 84 11 - - - - - 95 Recognised def erred tax losses carried forwar d 90 - - 7 2 2 - - - - 21 122 T otal r ecognised losses - - - - - - 122 122 31. 12.2021 31. 12.2020 Pending tax issues with tax authorities The Norwegian T ax Oce decided in February 2021 t o increase Elk em ASA ’s tax able income for the ﬁscal y ears 2016- 2019 by in t otal NOK 781 million, which lead to an increase in the income tax ( expense ) beneﬁt b y NOK 181 million. The r eassessments r elate to loan arr angements / debt waiv er agr eements acquir ed by Elk em ASA in 2016 thr ough the cr oss-bor der par ent-subsidiary merger with Blues tar Silicones International Sarl. Elk em is of the opinion tha t the reassessmen t is unf ounded and will appeal. Based on legal advice, Elkem ’ s assessment is that the def ence against the action will be successful, and the incr ease in tax able income is there for e no t r ecognised in pr oﬁt or loss. The amount was paid in ﬁrst quarter o f 2021 and a corr esponding receiv able for the paid income tax is r ecognised in 2021, see note 22 Other assets. Debt waiv er Elkem Silicones F rance SAS has f our Elk em internal debt waiv er agr eements wher e internal loans w ere converted to equity and the conv erted amounts wer e trea ted as taxable income. Elk em Silicones F r ance SAS can only utilise the agreements t o the extent that the company has an accoun ting pr oﬁt accor ding to IFRS. All debt that is r epaid under the agr eements can be deducted against tax able income. Nominal value o f the agreemen ts as of 31 December 2021 ar e NOK 595 million (NOK 595 million) corr esponding to EUR 64 million (EUR 64 million) . The amount is included in tax e ect of changes in unr ecognised def err ed tax assets in the reconcilia tion of income tax ( expense ) beneﬁt abo ve and as illustra ted below . Elkem Silicones F rance SA S has repaid NOK 0 million ( NOK 0 million) tha t gives a tax credit o f NOK 0 million (NOK 0 million) . Amounts in NOK million Gross v alue of debt w aiver Utilised 2021 T otal debt that can be r e versed Deferr ed tax asset unr ecognised 1) The respec tive agr eements e xpire in Amounts in NOK million Gross v alue of debt w aiver Utilised 2020 T otal debt that can be r e versed Deferr ed tax asset unr ecognised 1) The respec tive agr eements e xpire in Debt waiv er 31 December 2021 Debt waiv er 31 December 2020 2010 54 - 54 15 4 years 2010 54 - 54 15 5 years 2012 186 - 186 50 6 years 2012 186 - 186 53 7 years 2013 149 - 149 40 7 years 2013 149 - 149 42 8 years 2014 207 - 207 56 8 years 2014 207 - 207 59 9 years T otal 595 - 595 161 T otal 595 - 595 169 1) Based on tax rate 27 .0% ( 28.4% ) , which is applicable in F rance. 192 193 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Principle Property , plant and equipment ( PPE) ar e stated in the consolidated sta tement o f ﬁnancial position at cos t less accumulated depr eciation and accumula ted impairment losses. PPE acquired in business combina tions ar e recognised a t f air value a t the acquisition da te. PPE acquired in a business combina tion under common contr ol ar e r eﬂected a t their carrying amoun ts. Asse ts in the cour se of construc tion are carried a t cost less any recognised impairmen t loss. Such assets ar e classiﬁed to the appropria te cat egories of PPE when completed and ready for the int ended use. When signiﬁcan t parts of an item o f PPE have di er ent useful liv es, they ar e accounted for as separ ate items. Initial cost includes expenditur es that ar e dir ectly attributable to the acquisition of the asset, cost o f materials, dir ect labour , any other costs dir ectly attributable to bringing the assets to working condition for their intended use and es timated dismantling or remo val char ges. Subsequent costs ar e included in the asset' s carrying amount or r ecognised as a separat e asset, as appropria te, when futur e beneﬁts ar e pr obable and the cost can be measur ed r eliably . The carrying amount of the r eplaced part is der ecognised. Major periodic maintenance that is carried out less fr equently than every year , is capitalised and deprecia ted ov er the Capitalised inter est is NOK 5 million in 2021. The weighted a ver age cost of capital f or capitalisa tion of loan inter est in 2021 is in the range o f 2.5% and 3. 1% per annum. Elkem has decided to tr ansf er the pr oduction at Elkem Carbon Malay sia to o ther Elk em Carbon Solutions produc tion sites. An impairment loss o f NOK 60 million is recognised in 2021 due to the trans fer , of which NOK 55 million is rela ted to impairment o f pr operty , plan t and equipment and NOK 5 million t o right-o f -use assets. The impairment loss of PPE is mainly r elated to plant, machinery , equipment and motor v ehicles and buildings and other pr operty . period until the next periodic maint enance is performed. All other r epairs and maint enance ar e charged to the statemen t of pr oﬁt or loss when incurr ed. Deprecia tions ar e calculated based on estima ted useful lif e and expect ed r esidual value for each item of PPE and ar e r ecognised in the statemen t of pr oﬁt or loss using the s traight -line method. The es timated useful lives, r esidual v alues (if any ) and depr eciation method ar e r eview ed, and if necessary adjust ed, at least annually . Depreciation commences when the assets ar e ready for their intended use. An item of PPE is der ecognised upon disposal or when no futur e economic beneﬁts ar e e xpected to arise fr om the continued use of the asset. Any gain or loss arising on disposal or re tir ement of PPE, de termined as the dier ence betw een the sales pr oceeds and the carrying amount of the asset, is r ecognised under o ther operating income or other opera ting expenses in the sta tement o f pro ﬁt or loss. Accounting principle for impairment o f assets, see No te 19 Impairment assessment. Judgements and estimat es Estimated use ful lives, r esidual values (if an y ) included in calculation of depr eciation o f PPE ar e r eview ed and, if necessary , adjusted at least annually . 15. Property , plant and equipment Amounts in NOK million Cost Opening balance Additions T ransf erred fr om CiP Reclassiﬁcation Disposals Currenc y tr anslation dier ences Closing balance Accumulated depr eciation Opening balance Additions Reclassiﬁcation Disposals Currenc y tr anslation dier ences Closing balance Impairment losses Opening balance Additions Reclassiﬁcation Disposals Currenc y tr anslation dier ences Closing balance Carrying amount Closing balance Original cost of asse ts fully depr eciated but still in use Estimated use ful life Deprecia tion plan Details of pr operty , plant and equipment 2021 Land 184 17 21 - (0) (5) 217 (1 1 ) - - - 0 (1 1 ) 206 0 Indeﬁnite Buildings and other property 7 47 4 55 344 7 (21) 205 8 064 (2 738 ) (236 ) (6) 17 (3 7) (2 999 ) ( 384 ) (9) - 0 (25) ( 419 ) 4 646 1 368 5–50 years Straight -line Plant, machinery , equipment and motor vehicles 21 720 67 1 122 1 (290 ) 423 23 043 ( 11 929 ) ( 1 211 ) (2) 228 ( 171 ) ( 13 085 ) (2 162 ) (5 4) (0) 35 ( 134 ) (2 315 ) 7 644 6 455 3–50 years Straight -line Oce and other equipment 582 132 186 (1 4) (1 2 ) (8) 866 ( 377) (76 ) 9 10 4 ( 430 ) (0) (1) 0 0 (0) (1) 435 126 3–20 y ears Straight -line Construction in progr ess 1 799 2 762 ( 1 67 4 ) ( 105 ) (6) 42 2 819 (2 6) (3) - 2 (2) (2 8) 2 790 - T otal 31 759 3 033 - ( 110 ) ( 328 ) 656 35 009 ( 15 043 ) ( 1 523 ) 1 255 (203 ) ( 16 514 ) (2 584 ) (6 7 ) - 38 ( 160 ) (2 77 4) 15 722 7 950 194 195 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Capitalised inter est is NOK 4 million in 2020 . The weighted a ver age cost of capital f or capitalisa tion of loan inter est in 2020 is 1.9% per annum. See note 33 Pledge o f assets and guaran tees for lev el of pledge PPE. Amounts in NOK million Cost Opening balance Additions T ransf erred fr om CiP Reclassiﬁcation Business combinations (note 4 ) Disposals Currenc y tr anslation dier ences Closing balance Accumulated depr eciation Opening balance Additions Reclassiﬁcation Disposals Currenc y tr anslation dier ences Closing balance Impairment losses Opening balance Additions Disposals Currenc y tr anslation dier ences Closing balance Carrying amount Closing balance Original cost of assets fully depr ecia ted but still in use Estimated use ful life Deprecia tion plan Details of pr operty , plant and equipment 2020 Land 178 0 - (0) - - 6 184 (1 1 ) - - (1) (1 1 ) 172 - Indeﬁnite Buildings and other property 6 908 16 335 3 114 (1 5) 113 7 47 4 (2 494 ) (238 ) (0) 13 (1 8) (2 738 ) ( 378 ) (1) 1 (7) ( 384 ) 4 352 890 5–50 years Straight -line Plant, machinery , equipment and motor vehicles 20 245 28 1 297 (3 5) 49 (270 ) 406 21 720 ( 10 837 ) ( 1 140 ) 16 225 ( 192 ) ( 11 929 ) (2 103 ) (1 6) 26 (6 9) (2 162 ) 7 629 4 633 3–50 years Straight -line Oce and other equipment 523 4 41 33 0 (2 4) 3 582 ( 338 ) (4 3) (1 6) 23 (5) ( 377) (0) - 0 (0) (0) 205 62 3–20 y ears Straight -line Construction in progr ess 1 583 1 963 ( 1 673 ) (21) - (5 5) 3 1 799 (75) (0) 52 (3) (26 ) 1 773 - T otal 29 437 2 011 - (21) 163 ( 364 ) 532 31 759 ( 13 668 ) ( 1 421) - 261 (215) ( 15 043 ) (2 567) (1 7 ) 79 (8 0) (2 584 ) 14 131 5 585 Principle Right-o f -use assets ar e pr esent ed separat ely in the statemen t of ﬁnancial position, whereas lease liabilities are r ecognised in in ter est -bearing liabilities. Right-of -use-assets Elkems polic y in gener al is to own critical assets r ela ted to the produc tion cycle, including pr oduction buildings and land where this is no t contr olled by the local governmen t or other parties. The gr oups main lease contracts comprise o ce buildings and machinery / stor age assets to be used at pr oduction sites. The less signiﬁcant lease contrac ts comprise employ ee cars, machinery and equipment. Elkem assesses a t contrac t inception whether a con tract is, or con tains, a lease. That is, if the contrac t conve ys the right to contr ol the use of an identiﬁed asse t f or a period of time in ex change for consideration. Elkem applies single r ecognition and measurement approach f or all leases, ex cep t f or: → Lease contr acts f or which the lease term ends within 12 months as of the date o f initial application are no t capitalised (short- t erm leases). Elk em ' s short- term lease commitments ar e mainly r elated to ren tal of equipment in connec tion with maintenance or ins tallation o f ne w equipment. → Lease contr acts f or which the underlying asset is of lo w value, mainly oce equipment, are no t capitalised. → Lease of in tangible assets ar e not capitalised. → Lease payments on con tracts that ar e no t capitalised are r ecognised as o ther opera ting expenses on a straigh t-line basis ov er the lease t erm. Elkem r ecognise right-of -use assets a t the commencement date o f the lease (i. e., the date the underlying assets is av ailable f or use) . Right -of -use assets ar e measur ed at cost, less an y accumulat ed deprecia tion and impairment losses, and adjusted for any r emeasur ement o f lease liabilities. The cost of right -of -use assets includes the amount of lease liabilities recognised, initial dir ec t costs incurr ed, and lease payments made at or befor e the commencement date less any lease incentiv es r eceived. Right -of -use assets ar e depr eciated on a str aight -line basis fr om the commencement date to the earlier of the lease term and the r emaining use ful life o f the righ t-o f -use asset for assets wher e Elk em does not ob tain ownership o f the leased asset at the end of the lease term. Depr eciation expense on the right -of -use asset is presented as deprecia tion in the statemen t of pr oﬁt or loss. Righ t-o f - use assets ar e subject to impairment assessments as described in note 19 Impairment assessmen t. Lease liabilities At the commencement da te of a lease, Elk em r ecognise lease liabilities measured a t the presen t value o f the lease payments to be made o ver the lease t erm. The lease payments include ﬁx ed payments (less an y lease incentives r eceiv able) , variable lease pa yments that depend on an index or a r ate, and amounts e xpected to be paid under r esidual value guar antees. Non- lease components lik e insurance, electricity and o ther property -r elated e xpenses to be paid to landlor d ar e ex cluded fr om the lease commitmen t f or oces. The lease payments also include the e xer cise price o f a purchase op tion r easonably certain to be e x er cised by Elkem and pa yments o f penalties f or t erminating the lease, if the lease term r eﬂec ts ex er cising the option to terminate. V ariable lease payments that do no t depend on an index or a r ate ar e r ecognised as e xpenses in the period in which the e vent or condition that triggers the payment occurs. Elk em uses the incremen tal borro wing rat e at the lease commencement date if the inter est rate implicit in the lease canno t be r eadily de termined. The incremen tal borr owing ra te is based on the r espective country' s risk - fr ee rate for the term corresponding t o the lease t erm, adjusted for o wn credit risk. U pdated incremen tal borr owing ra tes ar e applied to new lease contrac ts recognised on a quart erly basis. Lease liability is remeasur ed upon the occurrence of certain ev ents lik e change in the lease t erm, lease payments or r eassessment o f options which in gener al implies a change in the carrying amoun t of the right- of -use asse t. If an y changes to the contr actual terms and conditions; lik e increase o f scope Elk em needs to assess whether the change implies a separat e lease if the change has a standalone price. The existing right-o f -use asset is adjus ted if the incr ease of scope does not indicat e a standalone price or f or any other modiﬁcations . 16. Leases 196 197 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Judgements and estimat es The lease t erm is determined as the non-cancellable period of a lease, together with any periods co ver ed by an option to e xtend the lease if Elk em is reasonably certain t o ex er cise that option and an y periods co ver ed by an option to terminate the lease if the lessee is reasonably certain no t t o ex er cise that option. Elk em 's main rene wal op tions rela te to lease of buildings f or oce and pr oduction purpose, included in Plant, buildings and other pr operty , and lease of land and it is reasonably certain that the r enew al option will be used. Elkem r eassesses the lease term if ther e is a signiﬁcant even t or change in cir cumstances that is within its contr ol and a ects its ability t o ex er cise, or not to ex er cise, the option to renew . Amounts in NOK million Cost Opening balance Additions/lease modiﬁcations Reclassiﬁcation Partial or full termination o f agr eements Currenc y tr anslation dier ences Closing balance Accumulated depr eciation Opening balance Additions/lease modiﬁcations Reclassiﬁcation Partial or full termination o f agr eements Currenc y tr anslation dier ences Closing balance Impairment losses Opening balance Additions Currenc y tr anslation dier ences Closing balance Carrying amount Closing balance Estimated use ful life Deprecia tion plan Amounts in NOK million Cost Opening balance Additions/lease modiﬁcations Reclassiﬁcation Business combinations (note 4 ) Partial or full termination o f agr eements Currenc y tr anslation dier ences Closing balance Accumulated depr eciation Opening balance Additions/lease modiﬁcations Reclassiﬁcation Partial or full termination o f agr eements Currenc y tr anslation dier ences Closing balance Carrying amount Closing balance Estimated use ful life Deprecia tion plan Details of righ t-of -use assets 2021 Details of righ t-of -use assets 2020 Land 415 0 (0) - 17 432 (5 1) (4) (7) - (3) (6 6) - - - - 366 1–99 years Straight -line Land 239 123 - 52 (1) 2 415 (4 2 ) (8) (1) 1 (1) (5 1) 363 1–99 years Straight -line Buildings and other property 529 239 0 (4 1 ) 2 730 ( 105 ) (77) (0) 40 (1) ( 143 ) - (1) (0) (1) 586 1–25 y ears Straight -line Buildings and other property 357 197 - - (25) (0) 529 (5 2) (70 ) - 13 4 ( 105 ) 424 1–25 y ears Straight -line Plant, machinery , equipment and motor vehicles 134 18 0 (1 0) (5) 138 (5 3) (3 4) 0 9 2 (75) - - - - 62 2–5 y ears Straight -line Plant, machinery , equipment and motor vehicles 99 47 - - (1 7 ) 5 134 (27) (3 6) - 10 0 (5 3) 82 1–10 years Straight -line Oce and other equipment 10 2 (1) - (0) 11 (3) (2) 0 - 0 (5) - (4) (0) (4) 2 3-6 years Straight -line Oce and other equipment 8 2 - - - (0) 10 (1) (2) - - 0 (3) 6 1-5 years Straight -line T otal 1 087 260 - ( 51) 14 1 310 (212) ( 116 ) (7) 49 (2) (288 ) - (5 ) (0) (5 ) 1 017 T otal 702 369 - 52 (4 3) 7 1 087 ( 123 ) ( 115) (1 ) 24 3 (212) 875 Amounts in NOK million Opening balance Additions / lease modiﬁcations 1) Payments Inter est e xpenses on lease liabilities Currenc y tr anslation dier ences Closing balance (note 23 ) Carrying amounts of lease liabilities and the movemen ts during the period 2021 663 258 ( 144 ) 26 (2) 801 2020 407 350 ( 120 ) 17 9 663 1) Elkem has a limit ed number o f lease con tracts with extension and termination op tions, wher e the op tions are no t expected to be e xer cised and hence where no liability is recognised. The maturity analysis of lease liabilities is disclosed in note 23 Int er est-bearing asse ts and liabilities 198 199 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Amounts in NOK million Deprecia tion of right -of -use assets Inter est e xpenses on lease liabilities (note 13 ) Leasing expenses, short - term leases (not e 11) Leasing expenses, lo w value assets (no te 11 ) Leasing expenses, v ariable lease payments (no te 11 ) T otal amount r ecognised in consolidated statemen t of pr oﬁt or loss Amounts recognised in consolidat ed statement of pro ﬁt or loss 2021 ( 116 ) (26 ) (4 4) ( 11) (2) ( 199 ) 2020 ( 115 ) (1 7 ) (3 0) (9) (4) (1 74 ) Principle Intangible assets ar e sta ted in the consolidated ﬁnancial statemen ts at cost less accumulat ed amortisation and accumulated impairment losses. In tangible assets acquired in business combina tions ar e r ecognised at fair value a t the acquisition date. Intangible asse ts with a ﬁnite use ful life ar e amortised, using the str aight -line method, commencing when the asset is av ailable f or use. Asse ts that ar e an integr al part of a gr oup o f asse ts are amortised fr om the date the r elated asse t gr oup as a whole is ready for its in tended use. Such assets ar e impairment test ed annually . The estimated use ful lives ar e r evie wed at the end of each reporting period. An intangible asset is der ecognised on disposal, or when the gr oup e xpects no futur e economic beneﬁts to be derived fr om its use. Gain or loss arising fr om derecognition o f an intangible asset, measur ed as the dier ence betw een the ne t disposal pr oceeds and the carrying amount of the asset, is r ecognised in o ther operating income or o ther operating e xpenses in the statemen t of pr oﬁt or loss. Expenditure on r esearch activities is r ecognised as an expense in the period in which it is incurr ed. An intangible asset arising fr om an internal dev elopment projec t is r ecognised in the s tatement o f ﬁnancial position if the gr oup can demonstr ate technical feasibility of comple ting the in tangible asset, has the intention to comple te it, ability to use it, can demonstra te that it will genera te pr obable futur e economic beneﬁts and the cost can be r eliably measured. Expenditur es related to r esear ch and developmen t activities, see note 11 Other operating expenses. Accounting principle for impairment o f assets, see No te 19 Impairment assessment. Judgements and estimat es Estimated use ful lives ar e used in calculation o f amortisation of intangible asse ts, these are r eviewed, and if necessary adjust ed, at least annually . 17 . Intangible assets Amounts in NOK million Cost Opening balance Additions 2) T ransf erred fr om CiP Reclassiﬁcation Disposals Currenc y tr anslation dier ences Closing balance Accumulated amortisation Opening balance Additions Reclassiﬁcation Disposals Currenc y tr anslation dier ences Closing balance Impairment losses Opening balance Additions Disposals Currenc y tr anslation dier ences Closing balance Carrying amount Closing balance Estimated use ful life Amortisation plan Details of in tangible assets 2021 Land use rights 108 - - - - (5) 103 (5 6) (1) - - 3 (5 5) (1) - - 0 (1) 47 3–10 years Straight -line T echnology and licences 836 1 2 8 - (1 9) 828 ( 487 ) (4 1 ) - - 15 ( 513 ) - - - - - 315 3–15 years Straight -line Softwar e 469 16 6 81 (9) 4 567 ( 349 ) (5 0) (1) 5 (3) ( 398 ) - (4) 4 - - 169 3–10 years Straight -line Other intangible 1) 322 - - - (0) 12 335 (5 5) (3 1) - 0 (1) (8 7) - - - - - 248 3–10 years Straight -line Development 714 - 80 - - (1 9) 775 ( 486 ) (5 3) - - 21 ( 519 ) - - - - - 256 3–16 years Straight -line Intangible assets under construction 305 324 (8 7) 29 - (2) 568 - - - - - 568 T otal other intangible assets 2 753 342 - 118 (9) (28 ) 3 175 ( 1 433 ) ( 177) (1 ) 5 35 ( 1 572) (1 ) (4) 4 0 (1 ) 1 602 1) Other intangible asse ts consists mainly of customer relationships. 2) A dditions in 2021 consists mainly o f capit alisation of developmen t projects o f NOK 300 million o f which NOK 228 million is related to Elk em ' s biocarbon initiative and battery pr ojects. 200 201 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Amounts in NOK million Cost Opening balance Additions 1) T ransf erred fr om CiP Reclassiﬁcation Business combinations (note 4 ) Disposals Currenc y tr anslation dier ences Closing balance Accumulated amortisation Opening balance Additions Reclassiﬁcation Disposals Currenc y tr anslation dier ences Closing balance Impairment losses Opening balance Currenc y tr anslation dier ences Closing balance Carrying amount Closing balance Estimated use ful life Amortisation plan Details of in tangible assets 2020 Land use rights 101 - - - - - 6 108 (5 0) (3) - - (3) (5 6) (1) (0) (1) 51 3–10 years Straight -line T echnology and licences 557 2 - 0 257 - 20 836 ( 419 ) (4 4) - - (2 4) ( 487 ) - - - 349 3–15 years Straight -line Softwar e 421 17 6 22 0 (2) 5 469 ( 304 ) (4 2 ) - 2 (6) ( 349 ) - - - 120 3–10 years Straight -line Other intangible 1) 92 0 0 0 253 - (2 3) 322 (2 9) (2 6) - - 0 (5 5) - - - 268 3–10 years Straight -line Development 663 - 29 0 - (4) 25 714 ( 407 ) (6 0) - 2 (21) ( 486 ) - - - 227 3–16 years Straight -line Intangible assets under construction 152 188 (3 5) (0) - (1) 0 305 - - - 305 T otal other intangible assets 1 987 207 - 22 510 (7) 33 2 753 ( 1 209 ) (1 74 ) - 4 (5 4) ( 1 433 ) (1 ) (0) (1 ) 1 319 1) Other intangible asse ts consists mainly of customer relationships 2) A dditions in 2020 consists mainly o f capit alisation of developmen t projects o f NOK 162 million. Principle Goodwill is initially measur ed as the e xcess o f the cost of an acquisition ov er the gr oup' s share of the f air values of the acquir ed entity' s net identiﬁable asse ts at the acquisition date. If the f air value o f the gr oup ’s int er est in the net assets o f the acquir ed subsidiary ex ceeds the cost of the acquisition (negative goodwill) , the di erences ar e recognised dir ectly in the s tatement o f pr oﬁt or loss as other items. Goodwill is carried at cos t less accumulated impairment losses. Goodwill is tested f or impairmen t annually , or more fr equently when ther e is an indication of impairment. An impairment loss r ecognised for goodwill is not r ev ersed in subsequent periods. Accounting principle for impairment o f assets, see No te 19 Impairment assessment. Judgements and estimat es The f air value o f an acquired en tity' s net identiﬁable assets used to initially measur e goodwill are dependent on assumptions such as future cash ﬂow s and discount ra te. Judgments and estima tes f or impairment o f assets, see Not e 19 Impairment assessment. 18. G oodwill Amounts in NOK million Opening balance Business combinations (note 4 ) Currenc y tr anslation dier ences Closing balance Details of goodwill 2021 919 - 22 941 2020 466 506 (5 3) 919 Amounts in NOK million Elkem Silicones Guangdong Co ., L td. Elkem Silicones K orea Co., L td Elkem Silicones Elkem Rana AS Elkem Oilﬁeld Chemical FZ CO Elkem M aterials Pr ocess Services BV Elkem N agpur Elkem Dr onﬁeld L td. Ferr ov eld JV Elkem P artiçipacòes Indústria e Comér cio Limitada Elkem Carbon ( China) Co., L td. NEH LL C T otal goodwill Origin of goodwill per CGU 31 December 2021 Silicon Produc ts - - - 40 21 0 37 16 - - - 83 197 Silicones 485 119 76 - - - - - - - - - 680 Carbon Solutions - - - - - - - - 41 7 1 15 64 T otal 485 119 76 40 21 0 37 16 41 7 1 98 941 202 203 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Amounts in NOK million Elkem Silicones Guangdong Co ., L td. Elkem Silicones K orea Co., L td Elkem Silicones Elkem Rana AS Elkem Oilﬁeld Chemical FZ CO Elkem M aterials Pr ocess Services BV Elkem N agpur Elkem Dr onﬁeld L td. Ferr ov eld JV Elkem P artiçipacòes Indústria e Comér cio Limitada Elkem Carbon ( China) Co., L td. NEH LL C T otal goodwill Origin of goodwill per CGU 31 December 2020 Silicon Produc ts - - - 40 20 0 37 16 - - - 80 192 Silicones 455 126 80 - - - - - - - - - 661 Carbon Solutions - - - - - - - - 43 7 1 15 66 T otal 455 126 80 40 20 0 37 16 43 7 1 95 919 Principle Impairment exis ts when the carrying v alue of an asse t or cash generating unit ( CGU) e x ceeds its r ecov erable amount, which is the higher o f its fair value less cos ts of disposal and its value in use. The fair value less cos t of disposal calculation is based on da ta fr om binding sales tr ansactions, conducted a t arm ’ s length f or similar assets or observable mark e t prices less incremen tal costs of disposing the asset. The value in use calculation is based on a DCF model. The cash ﬂows ar e derived from the budge t f or the next ﬁve year s and do not include res tructuring activities that Elk em is no t y et committed to or signiﬁcant future in vestmen ts tha t will enhance the perf ormance of the assets o f the CGU being t ested. A long- term gr owth r ate is calcula ted and applied to project futur e cash ﬂows after the ﬁfth y ear . A CGU is the smallest gr oup of assets that gener ates cash inﬂows fr om continuing use that ar e lar gely independent of the cash inﬂo ws of o ther assets. Indicators o f impairment will typically be changes in t echnological developmen t, changes in marke t conditions and changes in the compe titive situation. Impairment loss and r ever sal of pr evious impairmen t losses are r ecognised as impairment losses in the statemen t of pr oﬁt or loss. Judgements and estimat es The reco ver able amounts o f asse ts of CGUs subjec t to impairment testing ar e det ermined based on value- in-use calculations, which ar e to a lar ge exten t based on estimated futur e cash ﬂows. These calcula tions requir e the use of estimat es f or cash ﬂo ws, the choice of discount ra te bef or e tax f or discounting the cash ﬂo ws, and to determine the CGU. (a) Impairment test o f goodwill Discounted cash ﬂow models ar e applied to determine the value in use for the cash-genera ting unit. K ey assumptions used in the calculation o f v alue in use ar e gro wth ra te, EBITDA le vels, capital e xpenditur e and discount ra tes. Gro wth ra tes The expect ed gr owth ra tes for a cash-gener ating unit conver ge fr om its curr ent lev el experienced o ver the last f ew year s, to the long-t erm gr owth lev el in the marke t in which the entity oper ates. The growth r ates used t o extr apolate cash ﬂow pr ojections be yond the explicit for ecast period are based on management’ s past experience, assump tions in terms of mark et shar e and expecta tions f or the mark et dev elopment in which the entity oper ates. Gr o wth rat e used in Elk em’ s DCF models is 2.0% ( 1.5%). EBITDA lev els EBITDA lev el r epr esents the operating pr o ﬁt (loss) bef ore depr ecia tion and amortisation. The k ey assumptions used in r eaching the f or ecast ﬁgur es are sales prices, v olume mix, opera ting costs and produc tivity tar gets. Sales prices, volume and pr oduct mix: The 2022 budge t is used as a basis f or the f or ecast the next f our y ears. Elkem has seen an incr ease in sales prices for most of Elk em ’ s pr oducts in 2021 and prices ar e curr ently very f av ourable for Elk em. F or Elk em ' s Silicones business the sales prices in China ha ve been very volatile in 2021. In the impairment assessment Elk em has assumed sales prices will normalise and the price assumptions ar e below the curr ent mark et situa tion. There ar e no observable long-term mark et prices f or Elkem ’ s products, but ther e ar e external independen t sources such as CRU f or the Silicon Pr oducts market that ar e used as a basis f or the budget. Elk em work s continuously to impr o ve the specialty ratio and this is re ﬂected in the impairment models. Sales v olumes ar e adjusted for necessary maintenance s tops. Goodwill Goodwill arising fr om a business combination is allocated to CGUs or gr oups o f CGUs that ar e expec ted to beneﬁt fr om the s yner gies of the combination. Goodwill is t ested for impairment annually , or more frequen tly when ther e is an indication o f impairment. An impairment loss r ecognised f or goodwill is not r e versed in subsequent periods. Intangible assets, pr operty plant and equipmen t and right-of -use assets Intangible assets with indeﬁnit e useful lives ar e tes ted for impairment annually , or mor e fr equently when there is an indica tion of impairment. F or the other non- ﬁnancial assets Elk em assess, at each r eporting date, whether ther e is an indication that an asse t may by impair ed. A previously recognised impairmen t loss is re ver sed only if ther e has been a change in the assumptions used to determine the asse t’ s r ecover able amount since the last impairment loss was r ecognised. The re ver sal is limited so that the carrying amount of the asset does not e x ceed its r ecov erable amount, nor e x ceed the carrying amount that would ha ve been determined, net o f depr eciation, had no impairment loss been recognised f or the asse t in prior y ears. Raw materials and energy for smelting: Most o f Elk em ’ s plants hav e long t erm energy contr acts that cov ers their futur e need o f po wer . For Elk em ’ s spot e xposur e observable mark et prices ar e used adjust ed f or CPI. Raw material prices ar e based on 2022 budget and ar e adjusted to r eﬂec t expect ed volume / mix changes. Other operating costs: These are estimated based on the curren t level and adjus ted for committed oper ational eciency pr ograms. Changes to the outcome o f these initiatives ma y a ec t futur e estima ted EBITDA le vels. Capital expenditur e ( “Capex”) A normalised cape x is assumed in the long run and ar e based on t oday’ s maintenance le vel and technology . Estimated capital e xpenditur es do not include capital expenditur es that signiﬁcantly enhance the curr ent performance, as such e ects gener ally are no t included in the cash ﬂow pr ojections. Currenc y r ates and in ﬂation The value-in-use calculation is perf ormed in the functional curr ency f or the CGU. The currency rat es ar e based on ocial forw ar d rat es fr om Reut ers. The long- term inﬂation ( CPI) ar e based on e xternal pr edictions and re ﬂect the CPI which each CGU is located. Discount ra tes The requir ed rate of r eturn is calcula ted by the W A CC method. The cost o f a company' s equity and liabilities, weighted to r e ﬂect its capital structur e o f 50:50, respec tively , derive fr om its weigh ted av erage cost of capital. The W ACC r ates used in discoun ting the future cash ﬂow s ar e based on Norwegian 10- year risk - free in ter est r ate. The r ates ar e adjust ed f or inﬂa tion dier ential and coun try risk pr emium. The discoun t rat es also tak e in to account the debt pr emium, mark et risk premium, corpor ate tax r ate and asse t beta. Goodwill acquired thr ough business combination ar e allocated to Silicones, Silicon Pr oducts and Carbon Solutions, which are also oper ating and r eportable segments. The follo wing give an ov erview o f carrying amount of goodwill allocat ed t o each of the CGUs including pre- tax discount. The pr e- tax discount r ates in the table ar e conv erted to a NOK cash ﬂo w rat es f or comparison purposes. 19 . Imp airment a ssessments 204 205 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Amounts in NOK million Silicones Silicon Produc ts Carbon Solutions Goodwill Amounts in NOK million Raw materials Semi-ﬁnished goods Finished goods Operating ma terials and spar e parts T otal inv entories Cash Generating Units Details of in ventory Carrying amount 31. 12.2021 WAC C 31. 12.2020 31 December 2020 661 192 66 919 Provision ( 74 ) ( 41) (6 3) (23 ) (202) Pro vision (1 0) (1 1 ) (71) (2 3) ( 115 ) 31 December 2021 680 197 64 941 Cost price 2 767 343 4 198 610 7 918 Cost price 1 202 417 3 159 578 5 356 31 December 2021 9.2% 8.5% 9.6 % Net total 2 693 302 4 135 586 7 716 Net total 1 192 406 3 088 555 5 241 31 December 2020 9.1 % 8.9% 11. 1% Sensitivity for test of goodwill → An increase o f 4% points in W ACC , for each CGU’ s WA CC , will not r esult in impairment for the CGUs. → A gr owth rate equal to zer o , f or the cash- ﬂows f or each CGU will not r esult in impairment for the CGUs. → A decr ease in the f or ecasted EBITD A levels o f 30% for the cash- ﬂows f or each CGU will not r esult in impairment for the CGUs. (b ) Impairment test f or Intangible assets, pr operty plant and equipment and right-o f-use asse ts For the assets with impairment indica tors the r ecov era- ble amount was de termined estimating the v alue in use of the assets, see the goodwill section abov e f or as- sumption used. In 2021 Elk em has identiﬁed impairment indicators f or one of its CGUs, belo w . The CGU w as not assessed t o be impaired, as the r eco verable amoun t ex ceed the carrying amount for the CGUs. In 2020 Elk em identiﬁed impairment indicator s f or Silicones, Elk em Rana (within Elk em ASA) , Elk em Island and Bluestar Silicon Material (Y ongdeng) combined with Jiangxi Bluestar Xinghuo Silicones. With the e x ception o f Silicones, the thr ee other CGU's have perf ormed bett er in 2021 than the for ecas ts applied in last y ear' s models, and no new impairment indicat ors ar e identiﬁed. Silicones Elkem has iden tiﬁed impairment indicator s within the Silicones segment, Silicones ex cluding Jiangxi Bluestar Xinghuo Silicones, Elk em Silicon Materials ( Lanzhou) , Elkem Silicones K orea and Poly sil, which ar e t ested separat ely . The total carrying amount o f the CGU is NOK 5,356 million. The impairment indicator s ar e lar gely due to incr easing raw ma terial prices and a signiﬁcant por - tion of the sales on annual contrac ts with ﬁx ed prices. A price incr ease was communicated t o the mark e t in Q2 and e orts on price increase sho w r esult in Q4 with impro ved r esults. The assumptions applied follo w the assump tions as ap- plied f or the goodwill, see section abov e. It is assumed sales prices based on the cos t level e xpected f or 2022 and stable pr oduction. Pr e- tax discount ra te used in the DCF calcula tion f or the CGU is 9 .2%. An incr ease of 4% points in WA CC or a gr owth r ate used to e xtrapola te the cash- ﬂows aft er ﬁv e y ears equal to z ero or a decrease in for ecast ed EBITDA o f 30% poin ts, will not r esult in an impairment for the CGU. Principle Invent ories ar e measur ed at the lower o f cost and net realisable v alue. Inv entory consists of r aw mat erials, semi- ﬁnished goods and ﬁnished goods, in addition to operating ma terials and spar e parts that do not mee t the deﬁnition of pr operty , plant and equipment. Raw materials, and oper ating materials and spar e parts, ar e recognised a t cost o f pur chase including tr ansport and handling t o their pr esent loca tion. Finished and Principle T rade and bills r eceivables ar e initially recognised at transaction price, which in mos t cases corresponds to their nominal amoun t. The carrying amount is subsequently measur ed a t amortised cost using the e ective int er est ra te method, less any pr ovision f or expect ed cr edit losses. Curren t r eceivables with no stated in ter est ra te ar e r ecognised at their nominal amount. A bill r eceivable is a document where the customer formally agr ees to pay f or deliver ed goods or services at maturity date and ar e normally guaran teed by a ﬁnancial institution. A bill r eceivable is trans fer able and can be used t o pay tr ade pay ables (endor sed) or settled in cash with a ﬁnance institution ( discounted) . The bills receiv ables-document e ectiv ely r eplaces, f or the speciﬁed amount, the open debt e xchanged f or the bill. Bills receiv ables ar e mainly used b y Elkem 's Chinese Cost of goods sold is r ecognised in di er ent lines in the s tatement o f pr oﬁt or loss based on natur e; raw ma terials and ener gy f or pr oduction, employee beneﬁts and other oper ating e xpenses. Cost o f conver sion rela ted to goods sold is r eported net o f cost of conv ersion for goods produced as ‘Changes in invent ories of ﬁnished goods and work in pr ogr ess ’ , included in other opera ting expenses. Entities within the group sell goods to o ther gr oup entities, consequently ﬁnished goods fr om one entity semi- ﬁnished goods are measur ed a t cost of r aw materials, ener gy f or pr oduction and cost o f conver sion up t o the ac tual completion stage. Cost o f conver sion comprise operating e xpenses dir ectly r elated to produc tion of the pr oducts and an allocation o f dir ect ﬁxed oper ating e xpenses. Net r ealisable v alue r epr esents the estimated selling price f or invent ories less estimat ed costs of comple tion and variable selling e xpenses. entities, towar ds ﬁnancial institutions, and the dura tion is normally belo w six months. T rade r eceivables ar e derecognised when settled or when tr ansf err ed t o a thir d party and the gr oup has no further risk rela ted to the r eceivables. Bills r eceivables are der ecognised when they ar e se ttled on due date or when the risk and r ew ar d ar e tr ansf err ed to a third party . T ransf err al t o a thir d party can be done by discounting a bill receiv able bef or e due date or b y endor sing the bill receiv able, meaning that it is accept ed by the supplier as payment for goods or services receiv ed. Elk em calculates the expec ted cr edit losses (E CL) for trade r eceivables in accor dance with the simpliﬁed approach. All expected cash ﬂo ws, including cash ﬂows from cr edit insurance contracts wher e such contr acts are deemed to be an in tegral part o f the tr ansactions, into consider ation. The assessment is based on become raw ma terials or semi- ﬁnished goods f or another gr oup entity . The classiﬁca tion of goods in the group ' s statemen t of ﬁnancial position is based on the separat e entity' s classiﬁcation. Judgement and estimat es The assessment of net r ealisable value for the inv entory is based on estimated mark e t prices in the period the invent ory is e xpected to be sold. The actual market price will dier fr om the es timates used. 20. Inve nt or ie s 21. T rade receivables This y ear' s change in pr ovision for impairmen t of invent ory , a loss of NOK 87 million ( gain of NOK 3 million), is r ecognised as a part o f raw ma terials and energy f or production. 206 207 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact historical e xperienced losses adjusted for forwar d- looking estimates on changes in risk / pr obability that credit losses will occur for the dier ent cus tomer gr oups /segmen ts where applicable. Judgements and estimat es Judgement is applied when det ermining expect ed cr edit loss on tr ade r eceivables. The judgemen t is based on experienced losses in the past and e xpectations about Elkem has en ter ed into fac toring agr eements o f a to tal of EUR 126.5 million, NOK 1,265 million, wher eof EUR 25 million is extended in 2021 compar ed to 2020 . The agreemen ts include a r ecourse clause for maximum 5% of the f ace value o f the individual r eceivables sold under the agr eement. 95% o f the receiv ables under the agreemen t ar e der ecognised and the r ecourse amoun t is recognised as a curr ent liability . As at 31 December 2021 NOK 1, 039 million ( NOK 962 million) is der ecognised and NOK 57 million ( NOK 51 million) is r ecognised as curren t liability (see no te 24 Pr ovisions and o ther liabilities) under the agr eement. In addition Elk em has enter ed into a f actoring agr eement for a limited number future economic conditions f or the di er ent cust omer groups / business ar eas. Calculation o f e xpect ed credit losses tak es int o account cash ﬂo ws fr om cr edit insurance contr acts when such contr acts ar e deemed to be an integr al part of the transaction. Elk em gener ally secures its tr ade r eceivables by cr edit insur ance fr om a reputable cr edit insurance company , see no te 27 Financial risk. of its customer s. The fact oring agreemen t is without recour se and as at 31 December 2021 NOK 42 million (NOK 17 million) is der ecognised under the agr eement. Bills receiv able consist o f NOK 989 million ( NOK 917 million) bank acceptance bills and NOK 2 million (NOK 4 million) commercial accep tance bills. A to tal of NOK 4,253 million ( NOK 4, 104 million) in unmatur ed bills r eceivables ar e discounted or endorsed. These bills are der ecognised as there ar e no r emaining credit risk r elated to discount ed bills, and the cr edit risk for endorsed bills ar e assessed to be insigniﬁcan t. Amounts in NOK million T rade receiv ables T rade receiv ables, r elated parties (no te 32) Allowance for e xpected cr edit losses Bills receiv able T otal trade r eceivables Amounts in NOK million Not due Over due by: 1–30 days 31–60 days 61–90 days Mor e than 90 da ys T otal trade r eceivables 1) Amounts in NOK million Opening balance Business combinations (note 4 ) Realised losses during the year / Receiv ed on earlier losses Pro vision f or expec ted cr edit losses Rever sal of earlier pr ovisions Currenc y tr anslation dier ences Closing balance Amounts in NOK million Not due Over due by: 1–30 days 31–60 days 61–90 days Mor e than 90 da ys T otal allow ance for e xpected credit losses Details of trade r eceivables Analysis of gross tr ade receiv ables by age, present ed based on the due date Mov ements in allow ance for expec ted credit losses Analysis of allowance f or expect ed credit losses, presen ted based on related trade receiv ables 31. 12.2021 3 343 33 (6 9) 990 4 297 31. 12.2021 2 883 352 48 27 66 3 376 2021 ( 92) - 12 (1 0) 24 (4) (6 9) 31. 12.2021 (1 4) (1 ) (0) (4) (5 0) (6 9) 31. 12.2020 1 931 36 (9 2) 920 2 796 31. 12.2020 1 552 295 28 16 77 1 967 2020 (76 ) (8) 5 (3 3) 20 1 (9 2) 31. 12.2020 (7) (2) (0) (9) (73 ) (9 2) 1) Bills receiv able is not included in the ageing t able Principle Other shar es Inves tments in equity ins truments with an ownership below 20% ar e normally classiﬁed as o ther shar es and recognised in o ther non-curr ent assets in the sta tement of ﬁnancial position. Other shares consis t of equity inves tments in both list ed and unlisted companies. Shares in lis ted companies ar e measur ed at fair v alue through pr oﬁt or loss. Inv estments in equity instruments that do not ha ve a quo ted mark et price in an activ e marke t ar e classiﬁed as ﬁnancial asse ts measur ed at fair value thr ough o ther comprehensiv e income ( OCI). Changes in f air values r ecognised in OCI cannot be subsequently r ec ycled to sta tement o f pr o ﬁt or loss. Dividends fr om such inv estments ar e r ecognised as other items in the sta tement of proﬁt or loss. Financial assets A ﬁnancial asset is r ecognised in the sta tement o f ﬁnancial position when Elk em becomes party to a contract. Assets to be acquir ed as a r esult of a ﬁrm commitment to sell goods or services ar e r ecognised at the time Elk em has perf ormed under the agr eement. At initial r ecognition, the ﬁnancial assets ar e carried in the statemen t of ﬁnancial position at fair value plus an y transaction cos ts direc tly a ttributable t o the acquisition or issue o f the asset. Financial assets ar e der ecognised once the righ t t o futur e cash ﬂows ha ve e xpir ed or been transf err ed to a thir d party , once Elk em has tr ansf erred substantially all the risk and r e war ds of contr ol of these assets. Any rights or obligations r etained in an y transf err ed assets ar e book ed separ ately as assets or liabilities. Financial assets with a maturity ex ceeding one year are classiﬁed as non-curren t ﬁnancial asse ts. Short- term inves tments tha t do not mee t the de ﬁnitions of a cash equivalent, and ﬁnancial assets with a maturity o f less than one y ear , are classiﬁed as curr ent ﬁnancial assets. Loans and receiv ables Loans and r eceivables ar e non-deriv ative ﬁnancial assets with ﬁxed or de terminable payments tha t are no t quot ed in a r egulated mark et. A fter initial recognition, the y ar e r ecognised at amortised cos t using the e ective int er est method. Gains and losses ar e 22 . Other assets 208 209 Annual r eport 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact recognised in the sta tement o f pr oﬁt or loss when the loans and receiv ables ar e der ecognised or impair ed, as well as thr ough the amortisa tion process. If ther e is objectiv e evidence o f impairmen t, or if there is a risk tha t the gr oup ma y no t r ecover the contractual amoun ts at the contr actual maturity dates, an impairment loss is r ecognised in the s tatement o f pro ﬁt or loss. The pr ovision is equal to the di er ence between the carrying amount and the estimat ed futur e reco ver able cash ﬂows. Current asse ts Curren t r eceivables ar e initially r ecognised at f air value, which in most cases corr esponds t o their nominal amount. The carrying amount is subsequently measur ed Restricted deposits mainly consist o f r estricted deposits rela ted to the ongoing tax litiga tion in Elk em ' s business in Brazil o f NOK 14 million ( NOK 15 million), see no te 24 Pro visions and other liabilities, and deposit f or pension guarantee, r elated to unfunded pension liabilities f or salaries above 12G, o f NOK 27 million (NOK 24 million) . Other receiv ables includes NOK 87 million (NOK 0 million) rela ted to settlemen t of pow er deriv ativ es. at amortised cost using the e ectiv e inter est r ate method, less any pr ovision for expected cr edit losses. Curren t r eceivables with no sta ted inter est r ate ar e recognised a t their nominal amoun t. Judgements and estimat es Judgement is applied when assessing the value o f shares in unlis ted companies. For estimates rela ted to valua tion of ﬁnancial assets, see not e 25 Financial assets and liabilities. Judgement is applied when det ermining the es timated expect ed cr edit loss on other r eceivables and prepa yments. The judgement is based on e xperienced losses in the pas t and expecta tions about futur e economic conditions f or the dier ent coun terparties. Corporat e income tax r eceiv able partly consis ts of Elk em A SA 's pending tax issues with tax authorities (see note 14 T axes) . Elk em’ s assessment is that the def ence against the action will be successful, but that the case consideration migh t tak e up to 3 year s. Parts o f Elk em' s income tax r eceiv ables is corr espondingly e xpected to be settled later than one year . Amounts in NOK million Other shar es Restricted deposits Other deposits Pension assets, de ﬁned beneﬁts and contribution plans (no te 9 ) Prepa yments f or construction o f ﬁx ed assets Prepa yments f or goods and equipment Prepa yments f or other e xpenses Prepa yments to r elated parties (no te 32) Receivables fr om rela ted parties, inter est -bearing (note 32 ) Receivables fr om rela ted parties, inter est fr ee (note 32 ) Grants r eceivable (no te 8 ) V alue added tax Corporate income tax Inter est r eceivables Other r eceiv ables Assets at fair value thr ough pr oﬁt or loss Other asse ts T otal other assets Pro vision f or impairment included in total o ther assets Details of o ther asse ts Current Non-current 31. 12.2021 - - - 2 - 169 87 18 - 1 493 361 237 1 155 14 14 1 551 (6 9) 31. 12.2020 27 39 14 3 67 - 44 - 1 - 157 36 - - 8 - 36 432 31. 12.2021 32 41 34 1 24 - 72 - 1 - 202 47 - - 8 - 15 478 31. 12.2020 - - - 3 - 78 81 5 - 0 525 367 105 1 43 - 3 1 212 (5 9) Principle Interes t-bearing liabilities The liabilities are initially r ecognised at fair value of the amount r equir ed t o settle the associated obligation, net of pr epaid costs dir ec tly a ttributable to the liability . Subsequently and inso far , as they are no t designated as liabilities at fair value thr ough pr o ﬁt or loss, such liabilities are r ecognised at amortised cost using the e ective int er est ra te method. Financial assets ar e der ecognised when the righ ts t o receiv e cash ﬂows fr om the asse ts have e xpir ed or hav e been tr ansf err ed t o a thir d party . Financial liabilities are derecognised when the y ar e e xtinguished. Bills pay able A bill pa yable is a documen t where the buy er f ormally agrees to pa y f or pur chased goods or services at maturity date and ar e normally guarant eed by a ﬁnancial institution. The bills pay able ar e initially r ecognised when the supplier accep ts the bill o f ex change and is recognised at the amount equal to the trade payables it replaces. Bills pa yable ar e used b y Elk em ' s Chinese entities, and the duration is normally below six mon ths. When the bill pa yable is guar anteed b y a ﬁnancial institution it is normally r equired t o deposit a certain per centage of the nominal value o f the bill payable in to a res tricted bank account. All bills pa yable in Elk em ar e bank acceptance bills. Cash and cash equivalents Cash and cash equivalents ar e held for the purpose of meeting short- t erm ﬂuctua tions in liquidity . Deposits with a t erm of 3 months or less on acquisition ar e included. Bank over dr afts ar e pr esented within in ter est - bearing curren t liabilities in the s tatement o f ﬁnancial position. Restricted deposits ar e presented separa tely in the s tatement o f ﬁnancial position and e x cluded from cash and cash equivalents pr esent ed in the s tatement o f cash ﬂows. Lease liabilities See note 16 L eases f or accounting policies for righ t-o f - use assets and lease liabilities. 23. Interes t -bea ring asset s and liabilities 210 211 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Amounts in NOK million Inter est -bearing liabilities Lease liabilities (not e 16 ) Loans fr om e xternal parties, other than bank Bank ﬁnancing Accrued inter est T otal inter est-bearing liabilities T otal bills pay able T otal inter est-bearing liabilities including bills pa yable Inter est -bearing assets Cash and cash equivalents Restricted deposits bills pa yable Other r estric ted deposits Receivables fr om rela ted parties Loans to ext ernal parties Accrued inter est income T otal inter est-bearing assets Net inter est-bearing assets / (liabilities) Amounts in NOK million EUR USD NOK CNY Other curr encies T otal inter est-bearing liabilities Amounts in NOK million Lease liabilities Loans fr om e xternal parties, other than bank Bank ﬁnancing Bills payable Accrued inter est T otal int eres t-bearing liabilities e xcluding pr epaid loan fees Prepaid loan fees T otal inter est-bearing liabilities Amounts in NOK million Lease liabilities Loans fr om e xternal parties, other than bank Bank ﬁnancing Bills payable Accrued inter est T otal int eres t-bearing liabilities e xcluding pr epaid loan fees Prepaid loan fees T otal inter est-bearing liabilities Details of in terest -bearing assets (liabilities) Interest -bearing liabilities by currenc y Maturity o f inter est-bearing liabilities 31 December 2021 Maturity o f inter est-bearing liabilities 31 December 2020 Current 31. 12.2020 Non-current 31. 12.2021 31. 12.2021 116 1 264 572 20 1 972 2 096 4 067 7 040 601 8 - - 1 7 650 3 583 Currenc y amount 677 9 2 122 1 663 - 31. 12.2020 566 1 996 4 627 - 7 189 - 7 189 - - 39 1 8 - 48 (7 140 ) NOK 6 083 38 3 038 3 240 77 12 476 31. 12.2021 685 3 125 4 599 - 8 409 - 8 409 - - 41 1 8 - 50 ( 8 359 ) Currenc y amount 608 4 3 038 2 333 - 2022 116 1 264 572 2 096 20 4 067 2021 97 2 407 762 1 053 27 4 345 2023 101 7 4 398 4 506 2022 82 1 327 70 1 479 2024 80 1 118 206 1 404 2023 56 15 4 566 4 638 2025 64 1 000 3 1 067 2024 48 392 4 444 2026 53 500 3 557 2025 39 262 4 304 2027 and later 387 500 4 891 2026 and later 340 - 8 348 T otal 801 4 389 5 186 2 096 20 12 492 (1 6) 12 476 T otal 663 4 403 5 414 1 053 27 11 559 (25) 11 534 31. 12.2020 97 2 407 762 27 3 292 1 053 4 345 3 154 315 6 - - 1 3 477 ( 869 ) NOK 7 094 77 2 122 2 169 73 11 534 Loan agreements The main non-curren t loan agr eements as of 31 December 2021 are a term loan o f EUR 400 million (EUR 400 million) , a term loan of EUR 5 million ( EUR 11 million), issued bond loans o f a t otal o f NOK 2,500 million (NOK 0 million) and a series o f loans issued in the Sculdschein mark et of EUR 61 million ( NOK 135 million). The main loan agreemen ts ar e grant ed t o Elkem ASA. One of the loans issued in the Schuldshein mark et (EUR 15 million) is a ﬁx ed ra te loan with a ﬁx ed r ate o f 1.8160%. Given the mark et conditions as at 31 December 2021 the loan w ould have been appr o ximat ely EUR 0 .2 million higher , due to the dier ence be tween ﬁx ed and marke t ra te. The bond loans are lis ted on Oslo Børs. There ar e no covenan ts r elated to the bond loan. Ther e ar e no material di er ences between fair value of the bond loan and book values. The loan f acilities ar e unsecur ed, but part of the loans has ﬁnancial co venants r elat ed t o them, see belo w . Credit f acilities As of 31 December 2021 the gr oup is grant ed credit facilities o f NOK 3, 144 million. The cr edit f acilities ar e undrawn a t 31 December 2021. As of 31 December 2020 the gr oup is grant ed credit facilities o f NOK 3,250 million wher e o f NOK 16 million are dr awn at 31 December 2020. The main re volving cr edit facilities ar e gr anted to Elk em ASA, but the facilities can be utilised b y Elk em AS A and its subsidiaries. The main f acilities amount to EUR 250 million (NOK 2,465 million) and NOK 250 million respec tively . See note 27 Financial risk, section ( c) liquidity risk for more informa tion. Hedging Some / part of loans ar e designat ed as a hedging instrument, see no te 26 Hedging. Loan cov enant Elkem has ﬁnancial co venants r elat ed t o its main bank ﬁnancing and parts of loans fr om external parties, other than bank ( Schuldshein) , in Norwa y . The inter es t- bearing loans in China have no connec ted ﬁnancial covenan ts. In addition t o the co venants on these loan facilities in Norw ay there ar e loan co venants r ela ted to the credit f acilities in Elk em Metal Canada Inc o f CAD 2 million. Elk em and Elk em Metal Canada Inc. ar e compliant with their co venan ts at the end of 2021 and 2020. The covenan ts f or the inter est -bearing loan f acilities in Norwa y r elat e t o the ﬁnancial perf ormance of Elk em and are as speciﬁed in the table below . 212 213 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Amounts in NOK million T otal E quity T otal Assets Equity r atio EBITDA Net inter es t payable Interest co ver ra tiov Covenan t Elkem r elated to drawn loan o f NOK 5,971 million (NOK 6, 607 million) in Elk em ASA 31. 12.2020 12 635 30 888 41 % 2 684 234 11.47 31. 12.2021 19 87 4 41 850 47 % 7 791 209 37 .33 NOK NOK NOK NOK Loan cov enant > 30% > 4.00 Amounts in NOK million Lease liabilities Loans fr om e xternal parties, other than bank Bank ﬁnancing T otal mov ements non-curr ent Lease liabilities Loans fr om e xternal parties, other than bank Bank ﬁnancing T otal mov ements curr ent T otal mov ements Amounts in NOK million Lease liabilities Loans fr om e xternal parties, other than bank Bank ﬁnancing T otal mov ements non-curr ent Lease liabilities Loans fr om e xternal parties, other than bank Bank ﬁnancing T otal mov ements curr ent T otal mov ements Mov ements in inter est-bearing liabilities Mov ements in inter est-bearing liabilities Non-cash changes Non-cash changes Cash ﬂows Cash ﬂows Additions and lease modiﬁcation 258 - - 258 - - - 258 Additions and lease modiﬁcation 350 - - 350 - - - - 350 Currenc y translation dier ences (1) (6 9) ( 164 ) (233 ) (1) (3 6) 31 (6) (239 ) Currenc y translation dier ences 6 133 278 418 3 31 1 35 453 Receipts/ Payments - 2 464 132 2 596 ( 118 ) (2 373 ) (226 ) (2 717 ) ( 122 ) Receipts/ Payments - - 356 356 ( 104 ) 44 ( 197 ) (257 ) 99 31. 12.2020 566 1 996 4 652 7 214 97 2 407 762 3 266 10 479 31. 12.2019 323 3 928 4 089 8 340 85 266 887 1 237 9 577 Reclassiﬁcation ( 138 ) ( 1 266 ) (5) ( 1 409 ) 138 1 266 5 1 409 - Reclassiﬁcation ( 114 ) (2 066 ) (71) (2 251 ) 114 2 066 71 2 251 - 31. 12.2021 685 3 125 4 615 8 425 116 1 264 571 1 952 10 376 31. 12.2020 566 1 996 4 652 7 214 97 2 407 762 3 266 10 479 Principle Pro visions A pr ovision is recognised when the gr oup has a pr esent obligation (legal or constructiv e) and it is pr obable that an outﬂow o f resour ces is required to se ttle the obligation. The amount r ecognised is the best estima te of the considera tion requir ed to se ttle the obliga tion, taking into account the risk s and uncertainties surrounding the obliga tion, known at the end of the reporting period. Pr ovisions are measur ed at pr esent value, unless the time value is assessed to be immaterial. Contract obligations Contract obliga tions ar e liabilities assumed in business combinations, liabilities r elated to cancella tion of contracts and con tracts tha t includes guarantees for losses. Other liabilities The liabilities are initially r ecognised at fair value of the amount r equir ed t o settle the associated obligation, ne t of pr epaid costs dir ectly attributable to the liability . Contingent liabilities Contingent liabilities ar e liabilities which ar e not recognised because the y ar e possible obligations that hav e not yet been con ﬁrmed, or the y ar e pr esent obligations wher e an outﬂow o f r esources is not probable. Any signiﬁcant contingent liabilities ar e disclosed in the no tes. C ontingent assets Contingent assets ar e no t r ecognised but disclosed in the notes if pr obable. Judgements and estimat es Elkem has se ver al types of pr ovisions due to its operations. Such liabilities ar e normally uncertain in timing and amoun t, and recognised amoun ts ar e estimates based on a vailable inf ormation a t the end o f the reporting period. The estimated liability is based on expect ed cash ﬂo ws necessary t o settle the obligation, adjusted for an y r elat ed risk and discounted b y using the pre- tax interest applicable f or the speciﬁc entity . The estimates ar e upda ted when new or updat ed informa tion is available, or a t a minimum at each r eporting date. The actual outcome will di er fr om the estimat e. 24. Provisions and other li abilites Amounts in NOK million Employee withholding tax es and other public taxes V alue added tax Prepa yments Prepa yments fr om r elat ed parties (note 32 ) Liabilities to r ela ted parties (note 32 ) Pro visions Contract obliga tions power Contract obliga tions equity account ed ﬁnancial inv estments (no te 5 ) Contingent considera tion acquisition of subsidiaries (not e 4 ) Accrued expenses Grants, de ferr ed income (not e 8 ) Grants pa yable (not e 8 ) Recourse liability f actoring agr eement (not e 21) Other liabilities T otal pr ovisions and other liabilities Details of pr ovision and o ther liabilities Current Non-current 31. 12.2021 133 223 375 10 32 287 4 - 163 320 18 - 57 35 1 657 31. 12.2020 - - - - - 127 - - 184 - - 15 - - 326 31. 12.2021 - - - - - 127 - - 40 - - 15 - - 182 31. 12.2020 95 111 223 27 64 205 3 3 77 139 21 - 51 44 1 064 The contingent consider ation acquisition of subsidiaries rela tes to the acquisition of P olysil on 1 April 2020 , see note 4 Composition o f the gr oup. 214 215 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Amounts in NOK million Opening balance Initial f air v alue of contingen t consideration (no te 4 ) Fair v alue adjustment of contingen t consideration upon pa yment Unwinding Payments Currenc y tr anslation dier ences Closing balance Mov ements in contingent considera tion 2021 261 - 1 6 ( 78) 13 203 2020 - 549 - 9 (239 ) (5 8) 261 Amounts in NOK million Opening balance Additional pr ovisions r ecognised Used during the year Rever sal of pr ovisions r ecognised Currenc y tr anslation dier ences Closing balance Her eof non-curr ent Her eof curr ent Closing balance Amounts in NOK million Opening balance Additional pr ovisions r ecognised Used during the year Rever sal of pr ovisions r ecognised Currenc y tr anslation dier ences Closing balance Her eof non-curr ent Her eof curr ent Closing balance Mov ements in pro vision 2021 Mov ements in pro vision 2020 Envir onmental measures 94 16 - - (0) 109 55 54 109 Envir onmental measures 97 1 (2) (5) 2 94 50 44 94 Customers 9 0 (5) - (0) 4 - 4 4 Customers 10 4 (3) (2) 0 9 - 9 9 Site res tora tion 31 2 (0) - (0) 32 32 0 32 Site res tora tion 29 1 - - 0 31 31 - 31 Restructuring 127 - (1 7 ) (4 1 ) 1 70 - 70 70 Restructuring - 199 (25) (4 0) (6) 127 - 127 127 Litigations 60 10 (1) - (3) 66 40 26 66 Litigations 69 7 (4) - (1 3) 59 39 21 60 Other pro visions 12 171 (4 7 ) - (2) 134 0 134 134 Other pro visions 12 3 (3) - 1 12 8 4 12 T otal provisions 332 199 (72) ( 41) (4) 415 127 287 415 T otal provisions 217 215 (3 7) (4 7 ) (1 6) 332 127 205 332 Restructuring The pro vision is r elated to Elk em 's gr oup wide produc tivity impr o vement pr ogr amme launched in ﬁr st quarter of 2020 . See not e 12 Other items Site rest oration The site r estor ation pr ovisions ar e r elat ed t o the necessary site r emedia tion work that Elk em will hav e t o undertak e in respec t of its quartz mines. Environmen tal measures Elkem has w orldwide opera tions r epresen ting poten tial exposur e tow ar ds envir onmental consequences. Elkem has es tablished clear pr ocedur es t o minimise envir onmental emissions, well within public emission limits. The pr ovisions r elate to clean up cos ts f or a closed down pr oduction site and landﬁlls, mainly in Canada and Norwa y , and also estimated cost f or clean- up cost of polluted soil and fjor d in r elation to pr oduction sites in Norwa y and F r ance. Litigations The pro visions due to litigations ar e mainly r elated to tax cases in the Carbon division in Br azil. T ax cases in Brazil can tak e a substantial amoun t of time bef ore r esolution b y the tax authorities, hence the time of settlement is uncertain. Pr ovisions are made for each case based on the es timated amount e xpected to be paid, including inter est and penalties. In accor dance with Brazilian r egulations, agr eed amounts ha ve been transf err ed to r estrict ed bank accounts and ar e adjusted for int er est. The r estrict ed cash is recognised in o ther non-curren t assets, see not e 22 Other assets. Customers The pro visions ar e r elated to cust omer complaints, mainly in the Silicones division. Other pr ovisions Consist mainly o f a pr ovision r elat ed t o r elocation of work ers buildings locat ed in pr oximity to the Silicones Xinghuo plant, r equir ed by the authorities. Contingent liabilities Due t o its operations Elk em could be included in criminal or civil proceedings r ela ted to, among o thers, produc t liability , environment, health and sa fety , anti- competitive, an ti-corruption, trade sanctions or o ther similar laws or r egulations or o ther f orms of commer cial disputes which could hav e a material adver se e ect on Elkem. See sec tion litigation abov e for ongoing cases and see note 14 T axes for ongoing tax audits by authorities. Principle Financial assets A ﬁnancial asset or a ﬁnancial liability is r ecognised in the statemen t of ﬁnancial position when Elk em becomes party to a contr act. Assets to be acquir ed and liabilities to be incurred as a r esult of a ﬁrm commitment to pur chase or sell goods or services ar e r ecognised a t the time one of the parties has performed under the agr eement. At initial r ecognition, the ﬁnancial assets ar e carried in the statemen t of ﬁnancial position at fair value plus an y transaction cos ts direc tly a ttributable t o the acquisition or issue of the asset. Financial assets ar e der ecognised when the righ t t o futur e cash ﬂows ha ve e xpir ed or been tr ansf err ed t o a thir d party , once the gr oup has tr ansf err ed substantially all the risk and r ewar ds of contr ol o f these asse ts. An y righ ts or obligations re tained in any tr ansf err ed assets ar e book ed separ ately as assets or liabilities. Financial assets with a maturity ex ceeding one year are classiﬁed as non-curren t ﬁnancial asse ts. Short- term inves tments tha t do not mee t the de ﬁnitions of a cash equivalent, and ﬁnancial assets with a maturity o f less than one y ear , are classiﬁed as curr ent ﬁnancial assets. Financial liabilities Non-deriva tive ﬁnancial liabilities include inter est - bearing liabilities, bills payable and tr ade payables. The liabilities are initially r ecognised at fair value of the amount r equir ed t o settle the associated obligation, net of pr epaid costs dir ec tly a ttributable to the liability . Subsequently and inso far , as they are no t designated as liabilities at fair value thr ough pr o ﬁt or loss, such liabilities are r ecognised at amortised cost using the e ective int er est ra te method. Financial liabilities are der ecognised when they are e xtinguished. 25. Fin ancial as sets and liabilities 216 217 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Derivativ es Derivativ e ﬁnancial asse ts and liabilities include ﬁnancial instruments or contr acts wher e the value changes in response to the change o f a speciﬁed rat e, price or index and commodity contr acts within the scope of IFRS 9 . Derivativ es ar e initially r ecognised at f air value at the date when the deriva tive contr acts ar e enter ed int o. T ransaction cos ts tha t ar e direc tly a ttributable t o the acquisition of ﬁnancial assets or liabilities at fair v alue through pr oﬁt or loss, ar e r ecognised immediately in the statemen t of pr oﬁt or loss. Subsequen tly the deriva tives are r emeasured t o their fair v alue at the end of each reporting period. The resulting gain or loss is r ecognised in the s tatement o f pr oﬁt or loss immediat ely , unless the derivativ e is designated and is e ectiv e as a hedging instrument, in which case the change in f air value is recognised in s tatement o f pr oﬁt or loss in the same period(s) as the hedged objec ts a ects the pro ﬁt or loss. Derivativ es ar e pr esented as curr ent assets or liabilities, unless the y ar e e xpected to be r ealised mor e than 12 months after the r eporting period. In that case, they ar e classiﬁed as non-curren t assets or liabilities. Embedded derivativ es An embedded derivativ e is a component of a h ybrid instrument that also includes a non-deriv ative hos t contract with the e ect tha t some of the cash ﬂo ws of the combined instrument v ary in a w ay similar t o a stand-alone deriva tive. Deriva tives embedded in ﬁnancial liability o f a non- ﬁnancial host ar e separa ted from the host and accoun ted for as separ ate deriv atives if; the economic char acteris tics and risks ar e not closely rela ted to the host, a separa te instrumen t with the same t erms as the embedded deriv ative w ould meet the deﬁnition of a deriv ative and the h ybrid contract is not measur ed at fair v alue through pr oﬁt and loss. Elkem has long- term power con tracts se ttled in other currencies than the entity’ s functional currency . The currenc y portion o f these contracts is an embedded derivativ e and is r ecognised and pr esented as an independent deriva tive, see section deriv atives abo ve. Commodity contr acts within the scope o f IFRS 9 Non- ﬁnancial commodity con tracts wher e the r elev ant commodity is r eadily convertible to cash and wher e the contrac ts are no t for own use, f all within the scope of IFRS 9 Financial instruments - r ecognition and measuremen t. The gr oup curr ently has energy contr acts in Norwa y that do no t meet the own use criteria, since the power under the contr acts is deliver ed in ano ther grid area to wher e the plants ar e loca ted. T ransfer betw een dier ent grid ar eas is assessed to be ne t settlement and considered to be tw o dier ent tr ansactions. Such contrac ts are ther ef or e measur ed at fair v alue thr ough pro ﬁt or loss and classiﬁed as deriva tives, unless they ar e designated as hedging instrumen ts. Judgements and estimat es Estimates ar e used f or ﬁnancial assets and liabilities where ther e ar e no list ed prices or dir ect observable prices. Calculation of fair value is in such cases based on observable prices for similar contr acts, as far as possible. For contr acts with a dura tion bey ond the period of observable prices, the assump tions are deriv ed based on the la test observ able data. See assumptions used at the balance sheet da te in chapter (a) F air value measur ement belo w , and sensitivity o f the main po wer contr acts in not e 27 Financial risk. Amounts in NOK million Derivativ es, non-curren t Other asse ts, non-curren t T rade receiv ables Derivativ es, curren t Other asse ts, curren t Restricted deposits Cash and cash equivalents T otal Assets by category 31 December 2021 Assets at fair value - hedging instruments 308 - - 286 - - - 593 Loans and receiv ables at amortised cost - 84 4 297 - 157 609 7 040 12 187 Assets at fair value thr ough pro ﬁt or loss 6 6 - (1 2 ) 14 - - 14 Note 22 21 22 23 23 Assets at fair value through o ther comprehensiv e income - 27 - - - - - 27 Non- ﬁnancial assets - 362 - - 1 381 - - 1 7 43 T otal 314 478 4 297 2 74 1 551 609 7 040 Amounts in NOK million Inter est -bearing liabilities, non-curren t 1) Derivativ es, non-curren t 2) Pro visions and other liabilities, non-curr ent T rade payables Inter est -bearing liabilities, curren t 1) Bills payable Derivativ es, curren t 2) Pro visions and other liabilities, curr ent T otal Amounts in NOK million IInter est -bearing liabilities, non-curren t 1) Derivativ es, non-curren t 2) Pro visions and other liabilities, non-curr ent T rade payables Inter est -bearing liabilities, curren t 1) Bills payable Derivativ es, curren t 2) Pro visions and other liabilities, curr ent T otal Amounts in NOK million Derivativ es, non-curren t Other asse ts, non-curren t T rade receiv ables Derivativ es, curren t Other asse ts, curren t Restricted deposits Cash and cash equivalents T otal Liabilities by category 31 December 2021 Liabilities by category 31 December 2020 Assets by category 31 December 2020 Liabilities at fair value - hedging instruments 3 88 - - 8 - 40 - 138 Liabilities at fair value - hedging instruments 15 313 - - 8 - 67 - 403 Assets at fair value - hedging instruments 41 - - 120 - - - 161 Non- ﬁnancial liabilities - - 142 - - - - 1 047 1 189 Non- ﬁnancial liabilities - - 142 - - - - 685 827 Loans and receiv ables at amortised cost - 62 2 796 - 44 322 3 154 6 378 Non- ﬁnancial assets - 343 - - 1 168 - - 1 511 Liabilities at fair value through pro ﬁt or loss - (71) 40 - - - (1 6) 163 116 Liabilities at fair value through pro ﬁt or loss - (6 1 ) 184 - - - 34 77 234 Assets at fair value thr ough pro ﬁt or loss 18 4 - 28 - - - 51 Note 23 24 23 23 24 Note 23 24 23 23 24 Note 22 21 22 23 23 Liabilities at amortised cost 8 406 - - 4 614 1 964 2 096 - 448 17 527 Liabilities at amortised cost 7 173 - - 3 157 3 285 1 053 - 301 14 969 Assets at fair value through o ther comprehensiv e income - 23 - - - - - 23 T otal 8 409 18 182 4 614 1 972 2 096 23 1 657 T otal 7 189 252 326 3 157 3 292 1 053 101 1 064 T otal 59 432 2 796 148 1 212 322 3 154 1) In addition to the hedging instruments speciﬁed belo w , currenc y e ect o f EUR loan is designat ed as a hedging instrument in a cash ﬂow hedge of highly probable future sales. See no te 26 Hedging. 2) The group applies hedge accounting for certain con tracts and certain parts o f po wer contrac ts. The negative v alue reported as asse ts and liabilities at fair value is represen ting the value o f parts o f po wer contr acts wher e hedge accounting is no t applied. 218 219 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact There ar e no material dier ences between fair value and the carrying amount f or ﬁnancial liabilities and ﬁnancial assets at amortised cost. Lev el 1 inputs ar e quoted prices ( unadjusted) in ac tive mark ets f or identical assets or liabilities that the entity can access at the measur ement date. Lev el 2 inputs ar e inputs, other than quoted prices included within le vel 1, that ar e observ able f or the asset or liability , either direc tly or indir ectly . Lev el 3 inputs ar e unobservable inputs for the asset or liability . Lev el 1: Financial assets measur ed at lev el 1 apply to e xternal quoted shar es, which ar e measur ed based on the quoted prices. Dividends fr om the e xternal shar es ar e classiﬁed as other items. Lev el 2: Financial assets and liabilities measur ed at lev el 2 applies t o f orwar d curr ency contr acts, commodity contracts and embedded curr ency derivativ es. The contrac ts are measur ed a t f air value b y es timating the future cash ﬂows. Lev el 3: The ﬁnancial asse ts and liabilities at f air value thr ough pro ﬁt or loss measur ed at lev el 3 consist o f power contracts and shar es in unlisted companies. The po wer contracts ar e assessed to be settled net in cash and ar e there for e within the scope o f IFRS 9 and recognised as ﬁnancial instruments. When valuing the power con tracts observ able data is used, such as power price, curr ency ra tes, CPI and CfD , when available. The power prices f or long- term electricity contrac ts in Norwa y ar e no t dir ectly OCI. Changes in f air value up to 31 December 2012 wer e booked in the s tatement o f pr oﬁt or loss, classiﬁed as other items. Re versal o f unr ealised e ects from the contract will be o se t by r ealised e ects, only the inter est element will a ec t the s tatement o f pr oﬁt or loss. Swap contr acts with Statkr aft ar e book ed accor ding t o hedge accounting principles fr om 1 January 2016. Pow er contrac t "30-øringen " "30-øringen " power contr act lasts un til 31 December 2030 and the po wer from the contr act is r estric ted t o be used at Elk em ASA plants. F or the y ears 2019 - 2020 the price under the contr act is ﬁx ed ex cep t if the spo t price at the r elevan t grid points ex ceeds a certain thr eshold, in which case the price equals the spo t price. For the last 10 y ears o f the con tract, s tarting 1 January 2021, the price is ﬁx ed based on the av erage spo t price the preceding ﬁv e year s, adjusted for inﬂation. The ﬁxed price and the thr eshold price ar e based on a start dat e and ther ea fter adjusted with inﬂa tion annually . Changes in f air value for the "30-øringen " contr act ar e classiﬁed as other items. Due to the change in the contact' s price structur e of the instrumen t fr om 2021, the contr act is designated as a hedging instrumen t fr om 1 January 2021. This means tha t f air value changes fr om 1 January 2021 is recognised as r aw mat erials and ener gy for produc tion in statemen t of pr o ﬁt or loss in the same period(s) as the hedged objec ts a ects the pro ﬁt or loss. Pow er contrac t with Salten Ener gigjenvinning AS Elkem ASA has agr eed to pur chase all pow er produced from Salt en Ener gigjenvinning AS at a ﬁx ed price per year , f or 15 y ears fr om start-up da te, 1 July 2021. Elk em owns 50% of Salten Ener gigjen vinning AS, hence the (a) Fair v alue measuremen t Elkem 's ﬁnancial instruments measur ed to fair v alue are categorised int o thr ee le vels based on the inputs t o the valuation techniques used to measur e fair v alue. observable in the mark et for the whole contr act length. Pow er prices ar e observable until 2031, CfD prices ar e only observ able f or a short time period and curr ency rat es are observ able until 2026. V aluation of the contrac ts f or the r emaining periods are based on the latest observ able data adjust ed f or CPI, if r elevan t. Overview o f contr acts and the assumptions used f or assessment of f air value f or the lev el 3 contrac ts Contrac ts with Statkra ft Pow er contrac ts with Statkra ft consist o f one con tract bought fr om N orsk e Sk og in 2010 , tha t lasts until 31 December 2020, and s wap contr acts that lasts un til 31 December 2021. The usage of pow er fr om the contr act bought fr om N orsk e Sk og is r estricted to indus trial purposes. Elk em pays ﬁx ed power prices to Sta tkraft, speciﬁed f or each contr act / year . There ar e no e ec ts from this contr act in 2021. As of 1 January 2013, the Statkra ft contrac t bought from N orsk e Sk og has been designated as a hedging instrument in a cash ﬂow hedge o f highly pr obable future pur chases, hence changes in fair value for the power contr act ar e fr om the same da te book ed against informa tion below r elat es to the 50% o f the con tract that is against the e xternal part. The contr act has been designated as a hedging instrumen t in a cash ﬂow hedge of highly pr obable futur e need for power . Changes in f air value o f the po wer contr act ar e fr om the same date book ed against OCI. Elk em has on 31 J anuary 2022 enter ed into agr eemen t to pur chase the remaining 50% of the shar es in Salten Ener gigjenvinning AS . See note 34 E v ents after the r eporting period. Assumptions for v aluation of the contr acts → Discount ra te: 3,5% (2.8%) p.a. f or contrac t with Salten Ener gigjenvinning AS and for the "30-øringen " power contr act, and 1. 68% ( 1.68%) f or contrac ts with Statkra ft. The assumptions ar e based on the es timated risk o f the contr act, including credit risk. → Inﬂation: 2% ( 1.5%) p.a. → Pow er prices: Mark et prices per 31 December 2021 until 2031. → CfDs: 4-year average historic CfD prices based on Nor d Pool prices. → Exchange r ate EUR: Observ able ra tes for the ne xt 5 y ears, ther eafter calculat ed rat es based on long- term inter est r ates. → V olume for the contr act with Salten Energigjen vinning AS: estimat ed pr oduction volume based on concept study and similar pr oduction facilities. For e xternal shar es measur ed at lev el 3, book value o f equity adjust ed f or e xcess v alues at pur chase dat e is used as an appro xima tion of fair v alue. See note 24 Pr o vision and other liabilities for v alue of contingent liabilities. Amounts in NOK million Financial assets at fair value thr ough pr oﬁt or loss Derivativ es designated in a hedging r elationship Assets at fair value thr ough other compr ehensive income T otal assets Financial liabilities at f air value thr ough pro ﬁt or loss Derivativ es designated in a hedging r elationship T otal liabilities Assets and liabilities measured at f air value 31. 12 Lev el 3 (3 1) 418 27 414 203 - 203 Lev el 1 4 - - 4 - - - Lev el 2 39 175 - 214 (8 7) 138 51 Lev el 1 6 - - 6 - - - T otal 2021 14 593 27 634 116 138 254 T otal 2020 51 161 23 235 234 403 637 Lev el 2 46 161 - 207 ( 105 ) 371 266 Lev el 3 - - 23 23 339 31 371 Amounts in NOK million Opening balance Acquisition / business combinations T ransf er to in vestment in equity accounted companies Change in f air v alue r ecognised in OCI, cash ﬂo w hedges Settlement / r ealised e ects Other changes in fair v alue thr ough pr o ﬁt or loss, unr ealised Currenc y tr anslation dier ences Closing balance Mov ements in fair v alue measurement le vel 3 2021 ( 348 ) - - 737 ( 157) (9) (1 3) 212 2020 90 ( 549 ) (4 6) ( 453 ) 721 ( 113 ) 2 ( 348 ) 220 221 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Purchase currenc y CAD NOK NOK NOK NOK NOK USD NOK NOK T otal fair value 3) Purchase currenc y NOK CAD CAD NOK NOK NOK NOK NOK USD NOK NOK T otal fair value 3) (b ) Details of ﬁnancial instruments Details of currency e x change contracts 31 December 2021 Details of currency e x change contracts 31 December 2020 Sale ccy million 32 120 0 1 844 6 256 45 102 69 371 Sale ccy million 1 2 10 141 8 4 014 6 093 33 43 61 372 Currenc y deal rate 1,2549 10,2303 11,6549 0, 0916 0, 0984 8,6557 0, 0088 10,3355 10,8877 Currenc y deal rate 6,8522 1,5291 1,3259 10,8328 12, 1595 0, 0940 0, 0949 9,4234 0, 0095 10,2001 10, 7675 Sale currenc y USD EUR GBP JPY JPY USD JPY EUR EUR Sale currenc y CAD EUR USD EUR GBP JPY JPY USD JPY EUR EUR Purchase ccy million 40 1 231 2 169 615 392 1 709 4 039 Purchase ccy million 5 3 14 1 523 92 377 578 314 0 621 4 007 T ype of instrument Fwd Fwd Fwd Fwd Fwd Fwd Fwd Embedded 2) Embedded 2) T ype of instrument Fwd Fwd Fwd Fwd Fwd Fwd Fwd Fwd Fwd Embedded 2) Embedded 2) Notional amount 1) NOK 284 1 203 2 141 479 399 8 686 3 709 Notional amount 1) NOK 5 23 89 1 472 88 332 504 284 4 638 3 896 Due 2022 2022 2022 2022 2023-2026 2022 2022 2022 2023-2034 Due 2021 2021 2021 2021 2021 2021 2022- 2025 2021 2021 2021 2022- 2034 Fair v alue NOK (4) 20 (0) 27 112 (9) 0 1 (1 8) 129 Fair v alue NOK (0) (1) 4 44 4 44 59 30 (0) (3 6) ( 190 ) ( 42) 1) No tional v alue of the con tracts, based on curr ency rates 31 December . 2) Embedded EUR derivatives in own use po wer contrac ts. 3 ) The spot elemen t of forw ard currenc y con tracts with duration more than 3 mon ths are designated as hedging instrumen ts in a cash ﬂo w 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' abo ve. The inter est elemen t of these con tracts and con tracts o f dur ation < 3 months are classiﬁed as ' Assets/liabilities at fair value thr ough pro ﬁt or loss ' . 1) No tional v alue of underlying asset at the end of reporting period, calculated as volume * price * currenc y r ate as 31 December (if o ther currencies than NOK). 2) Certain power con tracts and part o f pow er con tract St atkraft are designated as hedging ins truments, the remaining con tracts / parts o f contrac ts are classiﬁed as ' Assets/liabilities at fair value through pro ﬁt and loss ' . 3 ) V olume is not changed from las t year due to delayed con tract commencemen t date. Amounts in NOK million Forwar d pow er contracts ﬁnancial institutions Forwar d pow er contracts ﬁnancial institutions Pow er con tract "30-øringen " Pow er con tract "30-øringen " Pow er con tract with Salt en Energigjen vinning A S (note 32 ) 3) Pow er con tract with Salt en Energigjen vinning A S (note 32 ) 3) Equity warran ts Platinum Commodity contr acts Platinum T otal f air v alue contracts within scope o f IFRS 9 2) Amounts in NOK million Forwar d pow er contracts ﬁnancial institutions Forwar d pow er contracts ﬁnancial institutions Pow er con tract "30-øringen " Pow er con tract "30-øringen " Pow er con tracts Sta tkraft, s wap Pow er con tract with Salt en Energigjen vinning A S (note 32 ) Pow er con tract with Salt en Energigjen vinning A S (note 32 ) Commodity contr acts Platinum T otal f air v alue contracts within scope o f IFRS 9 2) Details of po wer contracts and o ther commodity contr acts within the scope of IFRS 9 31 December 2021 Details of po wer contracts and o ther commodity contr acts within the scope of IFRS 9 31 December 2020 Fair v alue 23 4 167 163 35 22 3 0 417 Fair v alue (3) (3) (2 9) (3 2) (2 0) (2) (27) 12 ( 103 ) V olume GWh / Oz 98 44 501 4 011 124 1 733 8 954 V olume GWh / Oz 91 44 501 4 512 201 124 1 733 7 87 4 Notional amount 1) 52 15 157 1 378 32 555 3 7 Notional amount 1) 28 15 150 1 454 69 30 568 36 Due 2022 2023 2022 2023-2030 2022 2023-2036 2022 2022 Due 2021 2022 2021 2022- 2030 2021 2021 2022- 2035 2021 222 223 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Amounts in NOK million Pow er con tracts including embedded deriv atives Forwar d curr ency contrac ts T otal Amounts in NOK million Pow er con tracts including embedded deriv atives Forwar d curr ency contrac ts T otal Amounts in NOK million Pow er con tracts including embedded deriv atives Forwar d curr ency contrac ts T otal Amounts in NOK million Forwar d curr ency contrac ts T otal ( c) O setting Financial assets 31 December 2021 Financial liabilities 31 December 2021 Financial liabilities 31 December 2020 Financial assets 31 December 2020 Net amounts of ﬁnancial assets recognised / presen ted 414 170 585 Net amounts of ﬁnancial liabilities presen ted 17 24 41 Net amounts of ﬁnancial liabilities presen ted 342 11 353 Net amounts of ﬁnancial assets recognised / presen ted 195 195 Cash collateral pledged - - - Cash collateral pledged - - - Cash collateral pledged - - - Cash collateral pledged - - Gross amoun t of ﬁnancial liabilities set o in the statement of ﬁnancial position - - - Gross amoun t of r ecognised ﬁnancial assets set o in the statement of ﬁnancial position - - - Gross amoun t of r ecognised ﬁnancial assets set o in the statement of ﬁnancial position - - - Gross amoun t of ﬁnancial liabilities set o in the statement of ﬁnancial position - - Gross amount of ﬁnancial assets 414 170 585 Gross amount of recognised ﬁnancial liabilities 17 24 41 Gross amount of recognised ﬁnancial liabilities 342 11 353 Gross amount of ﬁnancial assets 195 195 Financial instruments not set o in the statement of ﬁnancial position - 16 16 Financial instruments not set o  in the statement of ﬁnancial position - 16 16 Financial instruments not set o  in the statement of ﬁnancial position - (1 0) (1 0) Financial instruments not set o  in the statement of ﬁnancial position (1 0) (1 0) Net amount 414 186 601 Net amount 17 40 57 Net amount 342 0 343 Net amount 185 185 Principle Hedge accounting Elkem has pr eviously applied IAS 39 for its hedging rela tionships, based on a policy choice in IFRS 9 . F rom 1 April 2020, IFRS 9 is applied also f or hedge accounting. The change in policy has no t r esulted in any accounting e ects. Accor ding t o the gr oup' s policy derivativ es can be designated as hedging instrumen ts f or f air value hedges and cash ﬂow hedges. A t the incep tion of the hedge r elationship, the entity documents the rela tionship between the hedging instrumen t and the hedged item, along with its risk management objectiv es and its stra tegy f or undertaking various hedge transactions. i) Fair v alue hedges Changes in the fair value of derivativ es tha t ar e designated and qualify as hedging instruments in fair value hedges, ar e recognised in the s tatement o f pro ﬁt or loss immediately , t ogether with any changes in the fair value of the hedged asse t or liability that ar e attributable to the hedged risk. ii) Cash ﬂo w hedges The e ective portion o f changes in the f air v alue of derivativ es tha t ar e designated and qualify as cash ﬂow hedges, ar e r ecognised in other compr ehensive income and accumulated under the heading of cash ﬂow hedging r eserve. The gain or loss r ela ting to the ine ective portion is r ecognised immediat ely in the statemen t of pr oﬁt or loss. R ealised e ects ar e recognised thr ough sta tement o f pro ﬁt or loss, in the same line item as the hedged objects. iii) Net inv estment hedges Hedges of net in vestmen ts in f or eign operations ar e accounted for similarly t o cash ﬂo w hedges. Any gain or loss on the hedging instrumen t r elating to the e ective portion o f the hedge is r ecognised in o ther comprehensiv e income and included in f or eign curr ency translation r eserv e in equity . The gain or loss r elating to the ineec tive portion is r ecognised immediately in the statemen t of pr oﬁt or loss within o ther items. Gains and losses accumulated in equity ar e reclassiﬁed to the statemen t of pr oﬁt or loss when the for eign opera tion is partially disposed o f or sold. When a hedging instrument e xpir es or is sold, or when a hedge no longer mee ts the crit eria f or hedge accounting, any cumulative gain or loss e xisting in comprehensiv e income at that time r emains in equity and is recognised in the sta tement o f pr o ﬁt or loss when the f or ecast transaction is ultima tely r ecognised in the statemen t of pr oﬁt or loss. When a for ecast tr ansaction is no longer e xpect ed to occur , the cumulative gain or loss report ed in equity is immedia tely tr ansf erred to the statemen t of pr oﬁt or loss. Elk em ' s hedging instruments Cash ﬂow hedge Elkem has f orwar d curr ency contrac ts, embedded EUR derivativ es in power contr acts and a EUR loan amounting to EUR 11 million (EUR 16 million) wher e the spot element is designa ted as hedging instruments and Elkem 's highly pr obable futur e r evenue in corr esponding currencies is designa ted as the hedging objects in this hedging rela tionship, deﬁned as a cash ﬂow hedge. In 26. Hedging 224 225 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact addition certain power commodity contrac ts, deﬁned as ﬁnancial instrumen ts, ar e designated as hedging instruments in a cash ﬂow hedge o f price ﬂuctua tions f or highly pr obable futur e pur chases. Hence, the e ective part of changes in fair v alue of the ﬁnancial ins truments is booked agains t OCI, and r ecycled to pr o ﬁt or loss as an adjustment o f r e venue and pow er cost (included in raw ma terials and ener gy f or pr oduction) when realised. Net inv estment hedge Elkem en ter ed in 2017 into a bank loan amoun ting t o EUR 275 million. In 2018 the bank loan o f EUR 275 million was r e- ﬁnanced and incr eased to EUR 400 million. The spot r ate o f the initial loan amoun t, EUR As at 31 December 2021 ﬁnancial po wer contr acts designated in a hedging r elationship comprise 24% o f expect ed consumption in 2022 and about 20% in the period 2023 - 2030. Of to tal changes in fair value o f power contracts designated as hedging instrumen ts NOK 0 million (negative NOK 9 million) is r ecognised in pr oﬁt or loss, and classiﬁed as other items (see no te 12 Other items) , In addition, Elk em applies hedge accounting principles rela ted to curr ency risk fr om a ne t inves tment in f or eign operation, see no te 23 Inter est-bearing assets and liabilities. 1) Hedge accoun ting is applied f or cert ain contrac ts and for parts o f con tracts. 2) Subscription SAFE ( Simple Agreemen t f or F uture E quity ) 275 million, has been designated as a hedge o f the ne t inves tment in the gr oup’ s subsidiaries with EUR as functional curr ency . The fair v alue and carrying amount of the borr owing at 31 December 2021 w as NOK 2, 7 49 million (NOK 2,880 million) . The f or eign e x change gain of NOK 130 million (a loss of NOK 168 million) on tr anslation o f the borr owing fr om EUR to NOK at the end of the r eporting period is r ecognised in other comprehensiv e income and accumulated in the for eign currenc y tr anslation r eserve in the sta tement o f changes in equity . Ther e was no ine ectiv eness to be r ecorded from ne t inves tment hedges. See note 27 Financial risk f or Elk em' s hedging policy . Elkem has hedged appr oximately 15% of the expec ted re venues in EUR and appr o ximat ely 8% o f expect ed re venues in USD f or 2022. F or the y ears 2023- 2034 EUR is hedged at 31 December 2021, at a r ange of 3 - 6%. due t o ine ectiveness in the hedging r elationship. E ects fr om recognition of ineectiv eness fr om forw ar d currenc y con tracts ar e nega tive NOK 3 million (negative NOK 3 million) . Amounts in NOK million Forwar d curr ency contrac ts Pow er con tracts ﬁnancial institutions Pow er con tract "30-øringen " Pow er con tracts Sta tkraft s wap Pow er con tract Salt en Energigjen vining A S Pow er con tracts embedded deriv atives Currenc y e ect loan EUR T otal hedging instruments Less non-curr ent portion: Forwar d curr ency contrac ts Pow er con tracts ﬁnancial institutions Pow er con tract "30-øringen " Pow er con tracts Sta tkraft s wap Pow er con tract Salt en Energigjen vining A S Pow er con tracts embedded deriv atives Currenc y e ect loan EUR Current portion o f hedging instrument s Cash ﬂow hedging instruments, b y type 31. 12.2020 Assets fair value 161 - - - - - - 161 41 - - - - - - 120 31. 12.2021 Assets fair value 146 27 364 - 58 - - 593 102 4 180 - 22 - - 285 31. 12.2020 Liabilities fair value 10 6 - 3 29 332 23 403 - 3 - - 27 283 15 75 31. 12.2021 Liabilities fair value 18 - - - - 110 10 138 - - - - 88 5 45 Amounts in NOK million Forwar d curr ency contrac ts Embedded EUR derivativ es Pow er con tracts Warr ants 2) Commodity contr acts Platinum T otal 1) EUR loan designed as cash ﬂow hedging ins trument T otal Amounts in NOK million Forwar d curr ency contrac ts Embedded EUR derivativ es Pow er con tracts Commodity contr acts Platinum T otal 1) EUR loan designed as cash ﬂow hedging ins trument T otal Financial instruments 31 December 2021 Financial instruments 31 December 2020 Net f air value 146 (1 7 ) 414 3 0 547 ( 107 ) Net f air value 184 (227 ) ( 116 ) 12 ( 146 ) ( 168 ) Within 1 year 25 (21) 242 - 0 245 (5) 240 Within 1 year 109 (4 9) (7) - 53 (8) 45 Her eof recognised in OCI 127 ( 110 ) 448 - 0 465 (1 0) 455 Her eof recognised in OCI 150 ( 332) (3 7) - (219 ) (2 3) (242 ) Within 4 years or mor e 49 (4 8) 117 - - 118 - 118 Within 4 years or mor e 28 ( 183 ) (21) - ( 176 ) 0 ( 176) Within 2 years 24 (21) 57 - - 60 (5) 54 Within 2 years 6 (5 0) (5) - (4 9) (8) (5 7) Within 3 years 29 (1 9) 32 - - 42 - 42 Within 3 years 7 (5 0) (4) - (4 7 ) (8) ( 55) E ects t o be r ecycled fr om OCI E ects t o be r ecycled fr om OCI Amounts in NOK million Realised e ects fr om forw ard curr enc y contr acts, r ecognised in r evenue Realised e ects fr om embedded deriv atives EUR, r ecognised in r ev enue Realised e ects fr om EUR loans, r ecognised in r ev enue Realised e ects fr om pow er contracts, r ecognised in r aw materials and ener gy f or pr oduction T otal r ealised eects hedge accounting Realised eec ts hedge accounting, rec ycled fr om OCI 31. 12.2021 127 ( 31) (4) 315 407 31. 12.2020 ( 164 ) (4 5 ) (1 1 ) ( 450 ) ( 670 ) 226 227 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Amounts in NOK million Hedging of future sales, f orwar d curr ency con tracts Hedging of future need f or po wer , contracts with ﬁnancial institutions Hedging of future need f or po wer , contract "30-øringen " 3) Hedging of future need f or po wer , contracts with Statkr aft (sw ap) 2) Hedging of future need f or po wer , contract with Salten Ener gigjenvinning Hedging of future sales, embedded EUR deriv ativ es in own use power contr acts 2) Hedging of future sales, curr enc y e ects EUR loan Hedging of future sales, pla tinum contrac ts 3) T otal (bef ore tax) Amounts in NOK million Hedging of future sales, f orwar d curr ency con tracts Hedging of future need f or po wer , contracts with ﬁnancial institutions Hedging of future need f or po wer , contract with Statkr aft 1) Hedging of future need f or po wer , contracts with Statkr aft (sw ap) 2) Hedging of future need f or po wer , contract with Salten Ener gigjenvinning Hedging of future sales, embedded EUR deriv ativ es in own use power contr acts 2) Hedging of future sales, curr enc y e ects EUR loan T otal (bef ore tax) Mov ements in OCI relat ed to hedging instruments 2021 Mov ements in OCI relat ed to hedging instruments 2020 Reclassiﬁed to P&L ( 127 ) (3 3) (262 ) (1 2 ) (8) 31 4 - ( 407) Reclassiﬁed to P&L 164 23 394 33 - 45 11 670 Opening balance 150 (6) - (3) (2 9) ( 332) (2 3) - (242) Opening balance 22 (4) (72) 28 45 (9 5) (1 8) (94) Closing balance 127 27 364 0 58 ( 110 ) (1 0) 0 455 Closing balance 150 (6) (0) (3) (2 9) ( 332) (2 3) (242) Net change in fair value 104 65 625 15 94 191 8 0 1 103 Net change in fair value (3 5) (2 4) ( 322) (6 4) ( 74 ) (282 ) (1 7 ) (8 18) 1) Hedge accoun ting fr om 2013. 2) Hedge accounting from 2016. 3 ) Hedge accounting from 2021. Elkem is exposed to ﬁnancial risks fr om ﬂuctua tions in marke ts prices f or ﬁnished goods, raw ma terials, currenc y e x change ra tes and inter es t rat es ( (a) Mark et risk). In addition, Elk em is e xposed to ﬁnancial risk s rela ted to (b ) Counterparty cr edit risk and ( c) Liquidity risk. This may hav e considerable impact on Elk em ’ s ﬁnancial performance. Elkem ’ s principle is to or ganise r esources close to the value chain. Risk management is an int egrat ed part of Elk em ’ s business activities, included in the line management’ s r esponsibility . Financial risks, including ﬁnancing, liquidity , currency , interest r at es, and counterparty risks ar e gener ally managed cen trally by Group Finance and T reasury . Elkem has ﬁnancial risk policies in place, appro ved b y the boar d of dir ect ors. For the main upstr eam pr oducts and r aw materials Elkem seek s to r educe the risk exposur e b y en tering sales and purchase con tracts f or corr esponding time periods and volumes. The goal is to partly o set changes in sales prices thr ough changes in r aw material cos ts. A signiﬁcan t part of Elk em ' s sales consis t of specialised produc ts. These pr oducts hav e generally mor e stable pricing. Elk em’ s integrated v alue chain mitigates the supply chain and pricing risk s and also give ﬂe xibility to r ealise value at v arious lev els thr ough the v alue chain. Elk em aims to ensur e sales volumes and raw material supply by entering int o long- term customer rela tionships. Power Electric power is a k e y input fac tor and Elk em enter s into long- term pow er contrac ts t o r educe the futur e exposur e to changes in pow er prices, particularly in Norwa y wher e electricity prices based on hy dr o power tend to hav e dier ent pricing dynamics than for Elk em ’ s produc ts and other r aw materials. Normally all plan ts have co ver ed their future need f or power b y ent ering into pow er contrac ts, classiﬁed as own use contr acts accor ding t o IFRS 9 , hence such contracts ar e o-balance. F or plants locat ed in Norwa y , Elkem’ s policy is that minimum 80% of the expect ed power consump tion shall be cover ed b y ﬁxed price con tracts f or curr ent and next year . For the follo wing periods, the r atio e xtends until 4 year s ahead, declining with 10%-point per y ear ending at 50%. Elk em curren tly fulﬁls this minimum hedge policy , and also Elkem ’ s ﬁnancial risk exposur e and business performance ar e ev aluated r egularly , and the main risks ar e analysed in terms o f impact, lik elihood and correla tion. Based on the over all risk ev aluation Elk em may accept or seek to further r educe the risks arising from oper ational activities. (a) Mark et risk (i) Price risk Commodity prices Elkem is e xposed to ﬂuctuations in mark e t prices f or ﬁnished goods and raw ma terials. The mark et risk assessment is based on a holistic appr oach as prices for Elk em ’ s pr oducts tend to ﬂuctuat e with underlying macroeconomic conditions. The same dynamics tend to apply to prices for the main raw mat erials, giving Elk em a certain degree o f natur al hedging. has a substantial amount o f contrac ts at ﬁxed price for the later years. Optimisa tion of 24-hour - , seasonal- and capacity utilisa tion variations ar e solv ed thr ough utilising ﬁnancial and ph ysical contr acts that ar e traded bilater ally . The purpose of the hedging activities is to reduce v olatility in the power cost and to incr ease the predic tability o f the cos t base. F air value o f commodity contrac ts is especially sensitiv e f or futur e changes in energy prices. Changes in f air value o f commodity contr acts, classiﬁed as ﬁnancial instrumen ts, r eﬂect unr ealised gains or losses, and are calcula ted as the dier ence be tween mark et price and contr act price, discounted to pr esent value. V aluations are based on mark e t informa tion where this is a vailable, if not, v aluations ar e based on estimated mark e t price f or non-observable par ameter s. V aluation o f the po wer con tracts The assumptions for the fair value measur ement of power contr acts is described in no te 25 Financial assets and liabilities. Sensitivity analy sis - power con tracts Sensitivity on the "30-øringen " contr act is as follo ws (ﬁgur es in NOK million) 27 . Financ ial risks Amounts in NOK million Discount rat e (used 3.5%) Discount rat e (used 3.5%) CPI (used 2. 0%) CPI (used 2. 0%) Pow er price Pow er price "30-øringen" con tract Fair v alue 31. 12.2021 330 330 330 330 330 330 Adjusted NPV 360 319 379 279 166 494 change to 0% change to 5% change to 1% change to 3% decrease -10% increase + 10% 228 229 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact (ii) Currenc y risk Elkem has r evenues and operating costs in v arious currencies. The prices of ﬁnished goods ar e to a lar ge exten t determined in int ernational mark ets, primarily denominated in US dollar , Chinese yuan and E uro . This is partly o set b y pur chases o f raw ma terials denominated in the same curr encies. Elk em aims t o establish natur al hedging positions if this is possible and economically viable. Financial deriv atives ar e then used to hedge the remaining ne t curr ency risk exposur es. Elkem has ne t positive oper ating cash ﬂows in mainly Eur o, US dollar , Chinese yuan and Br azilian r eal. Due to the location of its plants, Elk em has net cost positions in certain other curr encies, mainly Norwegian kr one, but also Canadian dollars and Icelandic kr ona. Elkem 's policy is to hedge the net positive cash ﬂow s in f or eign curr encies against the func tional currenc y NOK to e ven out ﬂuctuations in r esult and cash ﬂow . The tar get is to hedge e xpect ed net cash ﬂo w f or 0–3 months on a 90% hedging ra tio. Expected ne t cash ﬂow f or 4–12 months should be hedged on a r olling Currency e xposure a ecting sta tement of pro ﬁt or loss The tables sho w carrying amount of asse ts and liabilities denominated in for eign curr encies di er ent from the entities functional curr ency , where changes in currenc y r ates will a ec t pr oﬁt and loss. The basis tar geting a 45% hedging r atio . The hedging ratio f or 4–12 months may vary subject to int ernal appro val. Chinese yuan ( CNY) is not included in the hedging progr amme. Elk em has hedged Japanese yen until 2026, r elated to a long- term cus tomer contrac t. Elkem uses hedge accoun ting f or all cash ﬂow hedges over 3 mon ths. Embedded EUR derivativ es in power contrac ts are included in the for eign exchange hedging progr amme. T o ensure an e ec tive hedge, accor ding to the hedge accounting principles, the spot element o f the f orwar d curr ency contr acts is designated as hedging instruments and highly pr obable futur e r ev enue as hedging object in a hedging r elationship, cov ering the exposur e bey ond 3 months. Elkem r ealised a gain of NOK 92 million fr om hedging progr amme (loss of NOK 220 million) . Elkem aims to mitiga te the balance sheet risk by keeping in ter est -bearing debt in the same curr encies as the group ’s asse ts. Elk em has mainly int er est-bearing debt in Eur o , Chinese yuan and N orwegian kr one. tables include notional amount o f curr ency e x change contrac ts (note 25 Financial assets and liabilities) . Amounts ar e pr esented in NOK based on curr ency rat es as at 31 December . Amounts in NOK million Net for eign e xchange gains (losses) - f orwar d currenc y con tracts - r ecognised in other items Operating for eign e x change gains (losses) - recognised in o ther items Net for eign curr ency ex change gains (losses) on ﬁnancing activities - r ecognised in f or eign ex change gains (losses) Currenc y transla tion dier ences - r ecognised in other compr ehensive income Hedging of net in vestment in f oreign oper ations - r ecognised in other compr ehensive income Amounts in NOK million USD EUR CNY CAD Currency e ects recognised in ﬁnancial sta tement, ex cluding e ects from cash ﬂo w hedging Currency e xposure The amounts in the tables belo w ar e based on ex change-r ates against NOK per 31 December . Exchange r ates against NOK per 31 December 2021 14 20 241 358 130 2021 8,8242 9,9978 1,3891 6,9449 2020 49 (8 3) 17 46 ( 168 ) 2020 8,5285 10,4713 1,3045 6,6937 Amounts in NOK million Other non-curr ent asse ts T rade receiv ables Other asse ts Restricted deposits Cash and cash equivalents T otal monetary assets Inter est -bearing liabilities Other liabilities T rade payables Bills payable T otal monetary liabilities Derivativ es, notional value Net curr ency e xposur e ﬁnancial position Amounts in NOK million Other non-curr ent asse ts T rade receiv ables Other asse ts Restricted deposits Cash and cash equivalents T otal monetary assets Inter est -bearing liabilities Other liabilities T rade payables Bills payable T otal monetary liabilities Derivativ es, notional value Net curr ency e xposur e ﬁnancial position 31 December 2021 31 December 2020 Other - 98 - - 387 485 - - 56 - 56 631 (202 ) Other - 62 - - 146 208 - - 33 - 33 924 (750 ) CNY - - - - 80 80 - - 3 - 3 - 77 CNY - - - - 0 0 - - 9 - 9 - (9) CAD - - - - (9 5) (9 5) - - 0 - 0 - (9 5) CAD - 0 - - (1 7 ) (1 7 ) - - 0 - 0 5 (22) USD - 927 - - 1 172 2 100 - - 442 - 442 399 1 258 USD - 399 - - 161 560 - - 115 - 115 284 161 T otal - 1 483 - - 1 570 3 052 4 023 - 620 - 4 644 6 629 ( 8 220 ) T otal - 483 - - 1 220 1 702 4 214 - 289 - 4 503 7 220 ( 10 020 ) NOK - 0 - - 0 0 - - 2 - 2 - (1) NOK - - - - (0) (0) - - 20 - 20 - (2 0) EUR - 457 - - 25 482 4 023 - 117 - 4 141 5 598 ( 9 257) EUR - 22 - - 929 952 4 214 - 113 - 4 327 6 006 ( 9 381) 230 231 Annual r eport 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Sensitivity on pr oﬁt and loss fr om ﬁnancial assets and liabilities The sensitivity r elat ed t o ﬁnancial ins truments on Elkem 's pr oﬁt or loss, is based on a strengthening / weak ening of all curr encies b y 10% agains t the Norwegian kr one, which is the pr esentation curr ency for Elk em. If the Norwegian kr one is str engthened by 10% against all other curr encies, the isolated e ec t on ﬁnancial assets and liabilities would ha ve been an e ect on pro ﬁt bef or e tax of appr o ximately NOK 821 million ( NOK 1, 000 million), wher eo f NOK 424 million (NOK 389 million) will be book ed against Sensitivity on sta tement of ﬁnancial position from ﬁnancial assets and liabilities The sensitivity r elat ed t o ﬁnancial ins truments on Elkem 's sta tement o f ﬁnancial position, is based on a weak ening / str engthening o f all currencies b y 10% against the Norwegian kr one, which is the pr esentation currenc y f or Elk em. If the Norw egian kr one is str engthened by 10% against all o ther curr encies, the isolated e ect on ﬁnancial assets and liabilities w ould have giv en a r educed equity o f NOK 432 million ( NOK 546 million). This eect comes in addition to the e ects from the sensitivity on pr oﬁt or loss as calcula ted abov e. (iii) Inter est r ate risk Elkem 's inter es t rat e risk arises fr om int er est-bearing liabilities grant ed by external ﬁnancial institutions. Elkem 's liabilities ar e mainly drawn in E uro , Chinese yuan and Norwegian kr one. OCI. E ects book ed against OCI ar e r ecy cled thr ough pro ﬁt bef or e tax when the hedged it ems ar e realised, ose tting an opposite e ect fr om the hedged objec ts. Currency e xposure a ecting curr ency tr anslation dier ences / equity The table sho ws Elk em ' s to tal assets and liabilities denominated in the gr oup 's main curr encies tr anslated to NOK at the curr ency r ates a t 31 December and gives an overvie w of the gr oup 's total curr ency e xposur e tha t will a ect curr ency tr anslation di er ences both in the consolidated sta tement o f comprehensiv e income and / or pr oﬁt and loss. Elk em has a ﬂoating in ter est r ate policy and is hence exposed to ﬂuctuating in ter est ra tes. Prices and sales volumes for Elk em ' s core produc ts t end t o corr elate with general economic conditions. A ﬂoating inter est rat e policy is ther ef or e seen as appr opriate fr om a ﬁnancial risk perspectiv e. Inter est r ates hav e sta yed low f or a number o f y ears due to a low-r ate economic envir onment. Ho wev er , many centr al banks ha ve inﬂation tar gets and intend to adjus t inter est r ates to contr ol a general rise in the price lev el. With ﬂoating inter est r ates the gr oup will normally be in a position to beneﬁt fr om lower int er est ra tes in an economic downturn, but a ﬂoating r ate policy will also leav e the group e xposed to futur e inter est r ate hik es. Amounts in NOK million Other non-curr ent asse ts T rade receiv ables Other asse ts Restricted deposits Cash and cash equivalents T otal monetary assets Asset non-monetary items T otal assets Inter est -bearing liabilities Other liabilities T rade payables Bills payable T otal monetary liabilities Liabilities non-monetary it ems T otal liabilities Amounts in NOK million Other non-curr ent asse ts T rade receiv ables Other asse ts Restricted deposits Cash and cash equivalents T otal monetary assets Asset non-monetary items T otal assets Inter est -bearing liabilities Other liabilities T rade payables Bills payable T otal monetary liabilities Liabilities non-monetary it ems T otal liabilities 31 December 2021 31 December 2020 Other 31 497 134 - 647 1 308 1 423 2 731 77 235 186 - 498 184 683 Other 31 397 102 - 538 1 067 1 245 2 312 72 119 128 - 319 164 482 CNY 43 1 549 262 604 1 448 3 906 11 162 15 068 1 144 469 1 705 2 096 5 414 606 6 020 CNY 65 1 414 189 317 74 0 2 724 8 37 4 11 098 1 116 319 1 035 1 053 3 523 302 3 825 CAD - 21 12 - 221 254 837 1 092 - 25 95 - 121 188 308 CAD - 9 9 - 12 30 650 680 - 28 60 - 88 160 248 USD 47 1 387 20 2 1 438 2 894 1 864 4 758 38 39 567 - 644 139 782 USD 36 679 27 2 660 1 404 1 541 2 946 77 47 201 - 324 90 414 T otal 478 4 297 1 551 609 7 040 13 976 27 87 4 41 850 10 380 1 657 4 614 2 096 18 7 47 3 228 21 976 T otal 432 2 796 1 212 322 3 154 7 916 22 972 30 888 10 481 1 064 3 157 1 053 15 754 2 498 18 253 NOK 72 184 939 3 3 066 4 264 7 710 11 97 4 3 038 664 1 011 - 4 714 1 403 6 117 NOK 69 111 695 3 18 896 6 700 7 597 2 122 369 786 - 3 277 1 124 4 401 EUR 285 660 185 - 219 1 349 4 878 6 227 6 083 225 1 049 - 7 357 709 8 065 EUR 231 185 190 - 1 186 1 793 4 462 6 255 7 094 182 947 - 8 223 659 8 882 Amounts in NOK million Inter est -bearing liabilities Inter est -bearing assets Net e xposure Elkem has the follo wing interest -bearing assets and liabilities 31 December 2021 Fixed 150 - 150 T otal 12 476 7 700 4 776 Floating 12 326 7 700 4 626 232 233 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Sensitivity The inter est r ate sensitivity is based on a parallel shift in the in ter est ra tes that Elk em is e xposed t o. If inter es t rat es had been 50 basis points higher f or a full y ear , based on net debt as a t 31 December 2021, with all o ther variables held constan t, the pr o ﬁt (loss) f or the y ear would hav e been NOK 33 million ( NOK 31 million) lower . An overvie w of Elk em ' s deb t portfolio is pr esent ed in note 23 Int er est-bearing asse ts and liabilities. (b ) Counterparty credit risk Credit risk is the risk o f ﬁnancial losses to the gr oup if a customer or counterparty fails to meet con tractual obligations. For Elk em this arises mainly t o tr ade receiv able and ﬁnancial tr ading counterparties. T rade r eceivables ar e generally secur ed by cr edit insurance fr om a r eputable credit insur ance company . For cust omers wher e cr edit insurance canno t be obtained, other me thods ar e generally used t o secur e the sales proceeds, such as pr epayment, letter of cr edit, documentary cr edit or guar antees. In particular , when sales are made in coun tries with a high political risk, or to r emote cus tomers, trade ﬁnance pr oducts ar e used to reduce the cr edit risk. Of Elk em ' s r ev enue outside China 85% - 95% is cover ed b y cr edit insur ance or other trade ﬁnance tools. Elkem r ealised credit losses of NOK 12 million (NOK 5 million) tr ade r eceivables. The maximum e xposur e to cr edit risk f or trade r eceiv ables f or the group is NOK 4,306 million per 31 December 2021 ( NOK 2,804 million). Please also r ef er to no te 21 T rade r eceivables. Ev aluation o f ﬁnancial count erparties is based on external cr edit r atings fr om Moody' s and / or Standar d and Poor' s. The general policy is that ﬁnancial counterparties should hav e a ra ting equal t o, or higher than, A - (or the equiv alent) fr om the r ating agencies, but ex ceptions ma y be made on a case-b y-case basis, mainly for local banks in emerging mark ets. Elk em has not had any losses in 2021 or 2020 r elated to ﬁnancial counterparties. The table belo w analyses the gr oup 's ﬁnancial liabilities and assets into r ele vant ma turity gr oupings based on the remaining period a t the date o f the sta tement o f ﬁnancial position t o the con tractual ma turity dat e. ( c) Liquidity risk Liquidity risk is the risk that the gr oup will encounter diculty in mee ting the obliga tions associated with its ﬁnancial liabilities. Elk em is e xposed to liquidity risk rela ted to its opera tions and ﬁnancing. Elkem 's cash ﬂow will ﬂuctuate due to economic conditions and ﬁnancial perf ormance. In or der t o assess its futur e oper ational liquidity risk, short- term and long- term cash ﬂo w f or ecasts ar e pr ovided. The short-t erm for ecast is upda ted each week, and the long- term cash ﬂow pr ojection is updat ed each quarter . In order to mitiga te the operational liquidity risk, Elk em has cash and re volving cr edit facilities with bank s. As at 31 December 2021 Elkem has unr es tricted cash o f NOK 7 ,040 million (NOK 3, 154 million). In addition, r ev olving credit f acilities amount to NOK 3, 144 million (NOK 3,250 million), o f which NOK 3, 144 million is undrawn ( NOK 3,234 million). The external loan agr eemen ts contain two ﬁnancial covenan ts. The ra tio of EBITD A to consolida ted Net int eres t pay able, as deﬁned her ein, f or each measuremen t period, wher e the period is calcula ted as the 12 mon ths ending on the las t day of a ﬁnancial quarter , must ex ceed 4. Additionally , the ra tio of to tal equity to to tal assets must be mor e than 30% at all times. Elk em complies with these co venants as o f 31 December 2021 and also complied with the co venants as of 31 December 2020 , see note 23 In ter est -bearing assets and liabilities. The policy is to ha ve cash and a vailable cr edit facilities to cov er known capital needs and generally not less than 10% of annual total oper ating income. In addition, the policy is to ensur e that the main cr edit facilities ha ve a remaining ma turity o f at least 12 mon ths. The maturity pro ﬁle o f the cr edit facilities per 31 December 2021 for Elkem is sho wn in the table belo w . The amounts disclosed in the table ar e the contr actual undiscounted cash ﬂows, and the amounts ar e including inter est pa yments. Amounts in NOK million T otal amount o f credit facilities Y ear / maturity 2023 2 499 T otal 3 144 2022 645 Amounts in NOK million T rade receiv ables Derivativ e assets T rade payables Derivativ e liabilities Lease liabilities Loans fr om e xternal parties, other than bank Bank ﬁnancing Bills payable Amounts in NOK million T rade receiv ables Derivativ e assets T rade payables Derivativ e liabilities Lease liabilities Loans fr om e xternal parties, other than bank Bank ﬁnancing Bills payable 31 December 2021 31 December 2020 2027 and later - 154 - 8 427 509 4 - 2026 and later - - - 69 385 - 8 - Carrying amount 4 297 588 4 614 41 801 4 389 5 186 2 096 Carrying amount 2 796 207 3 157 353 663 4 403 7 918 1 053 2024 - 37 - (1) 99 1 17 4 214 - 2023 - 14 - 54 75 23 4 641 - 2025 - 54 - 4 80 1 037 4 - 2024 - 15 - 46 65 400 4 - 2022 4 297 269 4 614 23 116 1 334 671 2 096 2021 2 796 148 3 157 102 97 2 466 863 1 053 T otal 4 297 594 4 614 43 912 4 637 5 37 4 2 096 T otal 2 796 207 3 157 372 779 4 506 5 665 1 053 2026 - 18 - 7 68 519 4 - 2025 - 19 - 47 53 265 4 - 2023 - 62 - 2 123 64 4 477 - 2022 - 11 - 55 103 1 351 146 - 234 235 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Elkem f ocuses on having a balanced capital struc tur e, which seeks to r eﬂec t the r e turn requir ements for the shareholder s and the need f or a str ong ﬁnancial position t o f acilitate the gr oup ’ s strategy f or gr owth and specialisation. The tar get is to hav e a lever age between 1. 0x and 2. 0x ov er a cycle. The leverage ra tio is deﬁned as net int er est-bearing asse ts, less non-curr ent inter est -bearing assets (see no te 23 Inter est -bearing assets and liabilities) , divided by EBITDA, as de ﬁned in the APM section. Elkem is managing its ﬁnancing and liquidity position to r educe liquidity risk and to ensur e that the company can meet its ﬁnancial obliga tions at all times. Elk em has centralised the r esponsibility f or gr oup ﬁnancing and liquidity handling. The policy is t o raise ﬁnancing at par ent company level ho wev er , country speciﬁc ex ceptions may be made due t o local legislation or curr ency r estrictions. Loan maturities ar e subject to liquidity and r eﬁnancing risk and the compan y aims to ha ve a long- term and smooth maturity pr oﬁle on its loan portf olio. Cash pooling is used t o secure a vailability and access to cash acr oss the gr oup. Due to local legisla tion, not all subsidiaries are able to participa te in interna tional cash pooling arrangements. In these cases, r epatria tion of e xcess cash is mainly e x ecuted thr ough dividend payments and int er -company deposits, while liquidity needs are co ver ed thr ough capital injections and inter -company loans. Liquidity f or ecasts ar e pr epar ed In the annual gener al meeting held on 27 April 2021, the board o f dir ectors w as gran ted an authorisation to repur chase the company’ s own shar es within a total nominal value o f up to NOK 291,492, 672. The maximum amount that can be paid f or each shar e is NOK 150 and the minimum is NOK 1. The authorisation is valid until the annual general meeting in 2022, but no t later than 30 June 2022. The authorisation can be used to acquir e shares as the boar d o f dir ec tors deems appr opriat e, pro vided howe ver , tha t acquisition of shar es shall not be by subscription. In the annual gener al meeting held on 27 April 2021, the board o f dir ectors w as gran ted an authorisation to increase the compan y’s shar e capital with an amoun t up to NOK 291,492,672 - corr esponding to 10 per cent o f the curren t shar e capital. The authorisation is v alid until the annual general meeting in 2022, but no t later than 30 June 2022. The authorisation can be used to co ver share capital incr eases against contribution in kind and in connection with mer gers. The developmen t in share capital and o ther paid- in equity is se t out in the consolida ted stat ement of Principle The calculation of basic earnings per shar e ( EPS ) has been based on pro ﬁt attributable to or dinary shareholder s and weight ed-aver age number of or dinary shares outs tanding. The calculation o f diluted EPS has and updated on a r egular basis. The short - term for ecasts ar e upda ted weekly . The gr oup ’s cash position is report ed on a daily basis and tr ack ed against respec tive for ecas ts. The policy is tha t available liquidity reserv es, deﬁned as cash and cash equiv alents and available long- term cr edit facilities, should ex ceed 10% of total oper ating income. Financial covenan ts ar e applicable in some of Elk em ’ s loan agreemen ts. Financial cov enants, if r equired, ar e standar dised acr oss all loan agreemen ts. Financial covenan ts and other ﬁnancial policy tar gets ar e monitor ed monthly and included in the compan y’s management r eports. The company intends to pay dividends r eﬂecting the underlying earnings and cash ﬂo w . Elk em envisages a dividend pay-out r atio o f 30 - 50% b ased on pro ﬁt for the year . When deciding the annual dividend lev el, the group ’s le ver age, capital expenditur e plans and ﬁnancing requir ements will be tak en into consider ation. Focus will also be on maintaining appr opria te str ategic ﬂexibility . For the y ear 2020 Elkem dis tributed NOK 0. 15 per shar e in dividends and for the y ear 2021 the proposed dividend is NOK 3. 00 per shar e. As at 31 December 2021, Elk em ' s equity was NOK 19 .87 4 million, including minority int er ests of NOK 86 million. The equity r atio was 47%. In the annual gener al meeting held on 27 April 2021, the board o f dir ectors w as gran ted an authorisation to increase the shar e capital b y up to NOK 40 , 000, 000 to be used in connection with the issuance of new shar es under share incen tive scheme. The authorisa tion is valid until the annual general meeting in 2022, but no t later than 30 June 2022. The authorisation does no t cov er capital increases agains t contribution in kind or capital increases in connec tion with mer gers. The share capital w as incr eased with the issuance of 1 675 000 new shar es on 15 February 2021 with pr oceeds of NOK 39 million. On 30 April 2021 the shar e capital was incr eased by issuing 56 456 034 new shar es r aising proceeds o f NOK 1,891 million. At 31 December 2021, Elk em share capital ar e NOK 3 197 206 890 , comprising in t otal 639 441 378 shar es, each with a nominal value of NOK 5. Net e xpenses aft er tax r elat ed t o the capital increases amoun t t o NOK 30 ,260 ,816 r esulting in total share capital incr ease of NOK 1,900 ,429 ,073. changes in equity . The lar gest shar eholders ar e list ed in note 21 to the ﬁnancial statemen t of Elk em AS A. been based pro ﬁt attributable to or dinary shar eholders and weighted-a ver age number of or dinary shar es outstanding after adjus tment f or the e ects o f all dilutive pot ential or dinary shar es. 28. Capi tal managment 29 . Number of shares 30 . Earningsper shar e Beginning of the year Capital increase Increase in tr easury shar es End of the year Number o f shares in million shar es T reasury shares - - 6 403 772 6 403 772 T reasury shares - - - - T otal issued shares 581 310 344 58 131 034 - 639 441 378 T otal issued shares 581 310 344 - - 581 310 344 Shares outstanding 581 310 344 58 131 034 ( 6 403 772) 633 037 606 Shares outstanding 581 310 344 - - 581 310 344 Weigh ted aver age number of shar es outstanding E ects of dilution W eighted av erage number of shar es outstanding - diluted Owners of the parent' s shar e of pr oﬁt (loss ) (NOK million) Earnings per shar e ( NOK) Diluted earnings per share ( NOK) 2021 618 160 299 3 876 305 622 036 604 4 628 7 .49 7 .44 2020 581 310 344 94 282 581 404 626 239 0.41 0.41 2021 2020 236 237 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact 31. Supplemental in for mati on to t he consolida ted stat ement of cash ﬂo w s Liquidity e ects of acquisitions Liquidity e ects of contingent considerations 2021 - - - - - - - - Amounts in NOK million Cash tr ansf erred on acquisition Preliminary net deb t and working capital adjustment Adjustment amount f or ﬁnal net deb t and working capital adjustment Settlement o f de ferr ed and contingent consider ation Discounting element on settlement o f def erred and con tingent considera tion For eign ex change gains (losses) fr om date o f con trol Cash and cash equivalents o f the acquir ee T otal acquisition of subsidiaries net of cash acquired Amounts in NOK million Settlement o f de ferr ed and contingent consider ation Discounting element on settlement o f def erred and con tingent considera tion Fair v alue adjustment on settlement o f contingent consider ation For eign ex change gains (losses) fr om date o f con trol T otal pa yment of contingen t consideration r elated to acquisitions (IFRS 3 ) 2020 792 161 18 267 2 (3 0) ( 178 ) 1 032 2020 - - - - - Related parties ' r ela tionships are de ﬁned to be entities outside Elk em group that ar e under contr ol ( either direc tly or indir ectly ) , joint contr ol or signiﬁcant inﬂuence by the owners o f Elk em. Elkem ASA is o wned 52.9% by Bluestar Elk em International Co . L td S .A., Luxembour g, which is under contr ol of Sinochem Holdings Co ., L td ( Sinochem), a company regis ter ed and domiciled in China. All companies under contr ol by Sinochem ar e consider ed to be r elated parties, including among o thers RE C Solar N orwa y AS and China Blue Chemicals L td. On 30 Nov ember 2021 Sinochem sold REC Solar Norw ay AS and tr ansactions ar e from tha t date no t considered to be rela ted party transac tions. The Group also consider equity accounted companies as rela ted parties. The structur e of Elk em gr oup is disclosed in no te 4 Composition of the gr oup and note 5 In vestments in equity account ed companies. 32. Re lat ed par ti es Amounts in NOK million Bluestar Elk em International Co . L td S.A. Joint ven tures and associa tes Related parties within Sinochem Other r elat ed parties T otal Amounts in NOK million Bluestar Elk em International Co . L td S.A. Joint ven tures and associa tes Related parties within Sinochem Other r elat ed parties T otal T ransactions with related parties 2021 T ransactions with related parties 2020 Purchase of goods - ( 158 ) ( 414 ) (1 8) ( 591) Purchase of goods - - ( 486 ) (5) ( 491) Inter est income - 0 - - 0 Inter est income - - - - - Sale of services 1) - 32 41 - 73 Sale of services 2) - 82 46 - 128 Financial expenses - - - - - Financial expenses 1) - - (1) - (1 ) Sale of goods - - 581 0 581 Sale of goods - - 454 4 458 Purchase o f services - ( 184 ) ( 153 ) (1 6) ( 354 ) Purchase o f services - (1 5 9) (5 4) (1 3) (226 ) 1) Including sub-lease 1) See no te 33 Pledge of assets and guar antees 2) Including sub-lease Amounts in NOK million Receivables fr om joint ventur es and associat es, inter est -bearing Receivables fr om rela ted parties within Sinochem, inter est fr ee Liabilities to r ela ted parties within Sinochem, inter est fr ee T rade receiv ables, r elated parties within Sinochem T rade receiv ables, joint ven tur es and associates T rade payables, Blues tar Elkem In vestment Co . L td. S.A T rade payables, r ela ted parties within Sinochem T rade payables, join t ventur es and associat es T rade payables, o ther r elated parties Prepa yments to r elated parties within Sinochem Prepa yments fr om r elat ed parties within Sinochem Prepa yments fr om join t ventur es and associates Financial power contr act with joint ven tures and associa tes Net balances with r elated parties Balances with related parties Current Non-current 31. 12.2021 - 1 ( 32) 17 16 (5 ) (5 6) (4 3) - 18 - (1 0) 35 (6 0) 31. 12.2020 1 - - - - - - - - - - - (27) (26 ) 31. 12.2021 1 - - - - - - - - - - - 22 23 31. 12.2020 - 0 (6 4) 27 9 (5) (8 5) (25) - 5 (1 7 ) (1 1 ) (2) ( 166 ) 2021 83 3 1 (9) 78 238 239 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Outstanding balances at year -end are unsecur ed, and the curren t r eceivables and pay ables ar e inter est - fr ee, with an ex ception o f the non-curr ent r eceivables. The inter est r ate for the non-curren t receiv ables to the joint ventur es and associat es ar e curren tly 2.5%. Informa tion about main transactions with rela ted parties: Related parties within Sinochem → Sale of management and technology services to REC Solar Norw ay AS → Sale of ra w materials to RE C Solar Norwa y A S → Sub-lease of business pr emises to REC Solar Norwa y AS (no te 16 ) → Sale of silicone to China Bluestar Int ernational Chemical L td and other companies within Sinochem → Purchase o f ra w materials fr om companies within Sinochem Equity accoun ted companies Salten Energigjenvinning AS The group has en ter ed into a cash se ttled ﬁnancial agreemen t t o pur chase all the po wer pr oduced fr om Salten Energigjenvinning AS to a ﬁxed price for the ﬁr st 15 y ears of oper ations. See no te 25 Financial assets and liabilities. Elkem has on 31 January 2022 enter ed into agr eement to pur chase the r emaining 50% o f the shares in Salt en Energigjen vinning AS. See no te 34 E ven ts after the reporting period. Other equity account ed companies → Purchase o f short and deep sea transport fr om North Sea Containerline AS and EPB Chartering AS → Purchase o f war ehousing for Combined Cargo War ehousing B V There ar e no other contingent liabilities or commitments rela ted to the joint ven tur es and associates. K ey management personnel and boar d of director s Informa tion on transactions with k e y management personnel, see not e 9 Employee bene ﬁts and "Report on salary and o ther r emuneration to leading per sonnel in Elkem ASA f or the ﬁnancial year 2021" . Pledges The main part of Elk em ' s int eres t-bearing liabilities are no t pledged. Details o f liabilities tha t have pledged assets or guaran tees r elated to them ar e stat ed below . Elkem mak es limited use of guar antees, see speciﬁcation below . 33. Pledge o f assets and guarant ees Guaranteed liabilities Book value pledged asse ts Pledged liabilities 31. 12.2021 - 31. 12.2021 28 0 57 31. 12.2021 79 Amounts in NOK million Guaranteed liabilities Amounts in NOK million Building Machinery and plan t Other asse ts Amounts in NOK million Pledged liabilities 31. 12.2020 - 31. 12.2020 30 0 51 31. 12.2020 416 - Guarantee commitments 31. 12.2021 40 15 Amounts in NOK million Guarantee commitmen t KLIF ( Climate and Pollution Agenc y) Guarantee commitmen t tax cases Br azil 31. 12.2020 40 15 Principle Ev ents aft er the r eporting period r elat ed t o the gr oup ’s ﬁnancial position at the end of the r eporting period, are consider ed in the ﬁnancial sta tements. E ven ts after the reporting period tha t have no e ect on the gr oup ’s ﬁnancial position at the end of the r eporting period, but will have e ec t on futur e ﬁnancial position, ar e disclosed if the futur e e ect is material. Elkem secur ed 100% ownership of the Elk em Salten energy r ecov ery plan t after acquiring the r emaining 50% share in Salt en Ener gigjenvinning AS fr om K vitebjørn Energi A S on 31 January 2022. The investmen t in the ener gy r ecov ery plan t further str engthens Elk em ' s e orts to ensur e envir onmentally friendly silicon and f errosilicon pr oduc tion with the lo west possible emissions and lowest possible use o f r esour ces. The energy r ecov ery plan t has been built in partnership between Elk em and K vitebjørn Energi. The to tal inves tment in the ener gy r ecov ery plan t has amounted to ar ound NOK 1, 163 million, ﬁnanced thr ough a NOK 350 million grant fr om Enov a, signiﬁcant e xternal debt and some equity . The book v alue of Elk em ' s 50% share w as NOK 46 million at 31 December 2021. Salten Energigjen vinning AS sells the r ecover ed ener gy fr om Elkem Silicon Pr oducts Salten plant to Elk em and has estimated oper ating e xpenses including amortisation and deprecia tions of NOK 29 million in 2021. The purchase price alloca tion f or the business combination is not ﬁnalised at the date Elk em ’ s ﬁnancial stat ement is authorised f or issue. F urther in forma tion about the business combination will be pr ovided at a la ter stage. 34. E v ents after the repo r ti ng period 240 241 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Financial statements Income statemen t 244 Balance sheet 245 Cash ﬂow statement 246 Genereal inf ormation Note 1 General inf ormation 247 Note 2 Signiﬁcant accounting policies 247 Note 3 Accounting estima tes 253 Income statement Note 4 Operating income 253 Note 5 Grants 254 Note 6 Employee bene ﬁt expenses 256 Note 7 Employee r etir ement beneﬁts 256 Note 8 Other opera ting expenses 257 Note 9 Operating lease 258 Note 10 Other gains (losses) rela ted to opera ting activities 258 Note 11 Finance income and e xpenses 259 Note 12 T axes 259 Balance sheet Note 13 Property , plant and equipment 262 Note 14 Intangible assets 263 Note 15 Investment in subsidiaries 264 Note 16 Investment in joint v entur es 266 Note 17 Invent ories 267 Note 18 T rade receiv ables 267 Note 19 Other assets 269 Note 20 Equity 269 Note 21 Shareholders 270 Note 22 Interes t-bearing assets and liabilities 271 Note 23 Pro visions and other liabilities 273 Note 24 Financial instruments 27 4 Other in formation Note 25 Related parties 276 Note 26 Pledge of assets and guar antees 278 Note 27 Events a fter the reporting period 279 C onte nt 242 243 Annual r eport 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Inco me statemen t - E lk em ASA Balance sheet Amounts in NOK million 1 J anuary - 31 December Revenue Other oper ating income T otal opera ting income Raw materials and ener gy f or produc tion Employee bene ﬁt expenses Other oper ating e xpenses Other gains (losses) r elat ed t o operating ac tivities Amortisation and depr eciation Impairment losses T otal opera ting expenses Operating pr oﬁt (loss ) Income from subsidiaries Income (loss) fr om joint v entur es Finance income For eign ex change gains (losses) Finance expenses Proﬁt (loss ) bef ore income tax Income tax ( e xpenses) beneﬁt Proﬁt (loss ) for the y ear Amounts in NOK million Assets Property , plant and equipment Goodwill Intangible assets Investmen ts in subsidiaries Investmen ts in joint ventur es Derivativ es Other asse ts T otal non-curr ent assets Invent ories T rade receiv ables Derivativ es Other asse ts Cash and cash equivalents T otal curr ent assets T otal assets Equity and liabilites Paid-in capital Retained earnings T otal equity Inter est -bearing liabilities Deferr ed tax liabilities Pension liabilities Derivativ es Pro visions and other liabilities T otal non-curr ent liabilities T rade payables Income tax payables Inter est -bearing liabilities Derivativ es Dividend Pro vision and other liabilities T otal curr ent liabilities T otal equity and liabilites Note 4 4, 5 6 ,7 8,9 10 13, 14 13, 14 15 16 11 11 11 12 Note 13 14 14 15 16 24 19 17 18 24 19 22 20, 21 20 22 12 7 24 23 12 22 24 20 23 2021 9 309 431 9 7 40 ( 4 268 ) ( 1 257) (2 172) 129 ( 359 ) (1 4) (7 941) 1 799 126 37 134 377 ( 198 ) 2 27 4 ( 501) 1 773 31. 12.2021 3 003 20 111 11 982 46 301 3 322 18 785 1 677 1 739 283 1 136 4 260 9 095 27 880 6 178 5 104 11 283 7 292 306 85 18 109 7 810 1 553 446 3 945 23 1 918 902 8 788 27 880 2020 7 198 428 7 626 ( 3 728 ) ( 1 237 ) ( 1 857 ) 83 ( 435 ) (3) (7 177) 449 522 (1 5) 157 ( 178 ) (222 ) 713 (298 ) 416 31. 12.2020 2 941 24 115 11 002 - 59 3 652 17 792 1 473 707 136 802 1 799 4 917 22 709 6 208 3 012 9 220 6 346 128 91 252 252 7 069 910 181 4 509 101 87 632 6 420 22 709 Y ougen Ge Marianne Elisabeth Johnsen T erje Andre Hanssen Olivier Tillett e de Clermont- T onnerrev Anja-Isabel Dotzenra th Knut Sande Zhigang Hao Chairman of the Boar d Grace T ang Oslo, 8 Mar ch 2022 Helge Aasen CEO Marianne Fær øyvik Dag Jakob Opedal 244 245 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Cash ﬂo w s tat emen t - E lk em AS A No t es t o the ﬁ nanc ial sta te ment - E l k em ASA Amounts in NOK million 1 J anuary - 31 Desmeber Operating pr o ﬁt (loss) Changes fair value ﬁnancial instruments Amortisation, depr eciation and impairment losses Changes in working capital 1) Changes in pro visions, pension obligations and other Inter est paymen ts receiv ed Inter est paymen ts made Income taxes paid Cash ﬂow from oper ating activities Investmen ts in property , plant and equipment and intangible assets Received inv estment gr ants Proceeds fr om sale of pr operty , plant and equipment Cash eec t fr om mer ged companies Acquisition and capital incr ease in subsidiaries Acquisition of and cash contributions to joint v entur es Increase / decr ease in loans to subsidiaries Dividends and group con tributions Other in vestments / sales Cash ﬂow from in vesting activities Dividend paid to o wners Capital increase Net sale (pur chase) o f tr easury shar es New inter est -bearing loans and borr owings Repayment o f inter est -bearing loans and borro wings Cash ﬂow from ﬁnancing activities Change in cash and cash equivalents Currenc y tr anslation dier ences Net change in cash and cash equiv alents Cash and cash equivalents opening balance Cash and cash equivalents closing balance Note 13, 14 13, 14 5 13 15 16 22 15 20 20 22 22 2021 1 799 6 373 ( 481) 2 63 ( 170 ) (213 ) 1 380 ( 467) 90 0 - ( 481) - ( 451) 234 0 ( 1 075) (9 6) 1 900 (278 ) 2 500 ( 1 870 ) 2 156 2 461 (0) 2 461 1 799 4 260 2020 449 ( 187 ) 438 86 (9 1) 68 ( 173 ) (4 0) 549 ( 666 ) 109 0 - ( 1 245 ) (4 0) (21 1) 171 2 ( 1 881 ) ( 349 ) - - 340 ( 373 ) ( 382) ( 1 714 ) 0 ( 1 714 ) 3 512 1 799 1) W orking capital is de ﬁned as trade r eceivables, in ventory , other curren t assets, trade payables and o ther current liabilities. Other curr ent assets is deﬁned as o ther current asse ts less curren t receivables to relat ed parties, current in teres t-bearing r eceivables, tax receivables, gr ants receivable and accrued in terest income. Accoun ts payable is deﬁned as trade pay ables less accounts payable r elated t o purchase o f non-current asse ts. Other curr ent liabilities is de ﬁned as other curren t liabilities less pro visions. Elkem ASA is a limited liability company locat ed in Norwa y , whose shares are publicly traded on Oslo Bør s. The main activities ar e r elated to pr oduction and sale of silicon materials, f err osilicon, specialty allo ys for the foundry industry and micr osilica. Elk em ASA is owned 52.9% by Bluestar Elk em Interna tional Co. L td S .A., Luxembour g, which is under the contr ol o f Sinochem Holdings Co., L td (Sinochem) , a company r egister ed and domiciled in China. The ﬁnancial sta tements ha ve been pr epar ed in accordance with the Norw egian Accounting Act and generally accepted accoun ting principles in Norwa y . The accounts ar e pr epar ed based on a going concern assumption. Changes in accounting policies Changes in accounting policies ar e r ecognised dir ectly in equity and the opening balance is adjusted as if the new accounting policy had alway s been applied. Last year' s ﬁgures ar e changed correspondingly , f or comparativ e purposes. Elkem has pr eviously r ecognised the yearly cost o f purchased CO2 quo tas as other oper ating e xpenses in the period the need to pur chase quotas occurr ed. Fr om 2021 the cost o f pur chased CO2 allowances ar e recognised as part o f ra w materials and ener gy f or produc tion and is distributed linearly ov er the year . It is deemed tha t the change in principle will pr o vide more r eliable and relevan t informa tion about the cost of CO2 quotas. The change in principle does not have a material impact on the annual accounts but will impac t the recognition o f cost betw een quarters. F urther , the change in principle does not impact compar able ﬁgur es as Elkem had a surplus o f quotas in 2020 and ther ef or e no quota cost. F or mor e inf ormation see not e 5. Accounting estimat es In the e vent o f uncertainty , the best estima te is applied, based on the in forma tion available when the ﬁnancial statemen ts are pr epared. Estimates and underlying assumptions ar e r eview ed on an ongoing basis. Revisions The presen tation curr ency of Elk em AS A is Norwegian Krone ( NOK) . All ﬁnancial in forma tion is presen ted in NOK million, unless o therwise stat ed. As a result o f rounding adjus tments, the amounts shown in one or more columns included in the ﬁnancial stat ements may not add up to the to tal. In text the current y ear' s ﬁgur es are pr esented outside parantheses, f ollow ed by the comparativ e ﬁgur es pr esent ed in par entheses. to accounting estima tes ar e r ecognised in the period in which the es timates ar e r evised and in an y futur e periods a ected. See not e 3 Accounting estima tes. For eign currency transla tion Elkem ASA 's functional curr ency is Norwegian Kr one (NOK) . T ransactions in currencies o ther than the entity' s functional curr ency are tr anslated using the transaction da te ' s curr ency ra te. Mone tary items in for eign curr encies ar e pr esented a t the e x change ra te applicable on the balance shee t date. Non-mone tary items measur ed at fair v alue in a f or eign curr ency are translat ed using the e x change ra te at the date f air value is measured. If the curr ency e xposure o f a transaction is designated as a part o f a hedging r elationship, realised e ects fr om the associat ed hedging instrument is classiﬁed in the same line in the ﬁnancial stat ements as the hedged tr ansaction. Curr ency gains (losses) r elated to opera ting activities, i.e. r eceiv ables, payables, bank accounts f or oper ating purposes, ar e classiﬁed as a part of other gains (losses) r ela ted to opera ting activities. Currenc y e ec ts included in ﬁnance income and expenses ar e r elat ed t o loans and dividends. Rev enue recognition Sale of goods Revenue is r ecognised when it is probable tha t transactions will gener ate futur e economic beneﬁts for the company and the r evenue can be measur ed reliably . Revenue is measur ed at the f air value o f the consideration r eceiv ed or r eceivable, net o f any tax es, reba tes and discounts. Re venue and e xpenses that r elate to the same tr ansaction ar e r ecognised simultaneously . 1. General infor mati on 2 . Signiﬁcant accounting policies 246 247 Annual r eport 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact When produc ts ar e sold with warr anties, the e xpect ed warran ty amoun ts are r ecognised as expenses at the time of the sale, and ar e subsequently adjus ted for an y changes in estimates or ac tual outcome. Revenue fr om sale o f goods is r ecognised when the signiﬁcant risk and r ewar d o f the o wnership of the goods has passed t o the buy er , according to the agr eed delivery t erm f or each sale. Delivery terms ar e based on Incoterms 2021 issued b y In ternational Chamber o f Commerce, and the main terms ar e "F" t erms, where the buy er arranges and pay s f or the main carriage. The risk and r ewar d is passed to the buyer when the goods ar e handed over to the carrier engaged by the buy er . "C" t erms, where the gr oup arr anges and pays f or the main carriage but without assuming the risk o f the main carriage. The risk and r ewar d is passed to the buyer when the goods ar e handed o ver to the carrier engaged by the seller . "D" t erms, where the gr oup arr anges and pays f or the carriage and re tain the risk and re war d of the goods until delivery at agr eed destination. The risk is transf err ed to the buyer upon arrival a t agr eed destination, usually the purchaser' s warehouse. Sale of pow er and re venue connect ed t o energy r ecov ery Sale of electric pow er and r evenue connec ted to ener gy reco very , mainly heat supply in form o f steam and hot wa ter , el-certiﬁcates and el- tax, ar e r ecognised in income based on volume and price agr eed with the customer . Revenue connec ted to ener gy r eco very is mainly based on long- term con tracts wher e the prices are r egulated yearly based on changes in CPI or governmen t regula ted prices, e x cept for the el- certiﬁcates wher e the price is based on the observable marke t price at dat e of delivery . Revenue fr om sale o f services Revenue fr om sale o f services is r ecognised when the services have been pr o vided. Sale of services ar e mainly rela ted to management agr eements with r ela ted parties, based on cost plus a mar gin. Other Income fr om insur ance settlements ar e r ecognised when it is virtually certain that the gr oup will r eceive the compensation, and is r ecognised as other oper ating income. Cash ﬂo ws fr om cr edit insur ance contrac ts where such con tracts ar e deemed to be an in tegral for using the gr oss method, meaning that the company' s share o f the income, expense, asse ts and liabilities are recognised. Elk em ASA combines its shar e o f the joint ventur es ' individual income and e xpenses, assets and liabilities and cash ﬂo ws on a line-by -line basis with similar items in the ﬁnancial sta tements. Elkem ASA 's int er ests in joint contr olled entities, which do not oper ate within Elk em AS A 's main business ar eas, are accoun ted for using the equity method. Under the equity me thod, the in vestment is initially r ecognised at cost, and the carrying amount is incr eased or decr eased to r ecognise the in vest or’s shar e o f the pr o ﬁt or loss and other compr ehensive income o f the in vest ee after the date o f acquisition. In cases wher e a joint ventures ' loss increases the initially r ecognised cost, the carrying amount is pr esented to r eﬂec t Elk em ' s liability to ﬁnance the joint ventur e. An y liability to ﬁnance a join t ventur e is presen ted either as part of pr o visions and other liabilities, curren t, or netted against Elk em' s r eceivables tow ards the joint v entur e. Impairment of in vestment in subsidiaries, associa tes and jointly con trolled entities Impairment loss is r ecognised if the carrying amoun t ex ceeds the r ecov erable amount and the impairment is not consider ed to be temporary . The r ecover able amount is the higher o f fair value less cos ts t o sell, or its value in use. V alue in use is the pr esent value o f the future cash ﬂow e xpect ed to be deriv ed from the asse t or the cash gener ating unit to which it belongs, aft er taking into account all o ther r elevan t informa tion. The impairment is r ever sed if the basis f or the writ e-down is no longer presen t. Intangible assets Intangible assets ar e sta ted in the balance sheet at cost less subsequent accumulat ed amortisation and subsequent accumulated impairmen t losses. Intangible assets with a ﬁnite useful lif e ar e amortised, using the straigh t-line method. The estimated useful lif e and amortisation method is r evie wed at the end o f each reporting period. An intangible asset is der ecognised on disposal, or when no futur e economic beneﬁts fr om its use ar e e xpected to be derived. Gain or loss arising fr om der ecognition of an intangible asset, measur ed as the dier ence be tween the net disposal pr oceeds and the carrying amount of the asset, is r ecognised in the income statemen t. Expenditure on r esearch activities is r ecognised as an expense in the period in which it is incurr ed. An intangible part of the sale tr ansactions is pr esent ed as reduc tion of net agains t impairment losses assets / r eceiv ables, included in other opera ting expenses. In ter est income is recognised on accrual basis. Dividends ar e recognised when shareholder s ' right to r eceive dividends is determined b y the shar eholders ' meeting. Grants Grants ar e r ecognised when it is r easonably assur ed that the company will comply with the conditions attached to them and the gr ants will be r eceived. Grants ar e r ecognised in the income stat ement ov er the periods necessary to match them with the cost they are in tended to compensate. Gr ants r elating to cos t of pr oduction o f goods ar e recognised in pro ﬁt or loss when the pr oduced goods ar e sold. Gr ants r elating to property , plant and equipment and intangible asse ts are deducted fr om the carrying amoun t of the asset, and recognised in the income sta tement o ver the life time of a depreciable asse t by r educing the depr eciation charge. Grants r elat ed t o expenses ar e classiﬁed as o ther operating income. Investmen t in subsidiaries, associates and jointly controlled entities Subsidiaries are companies in which Elk em ASA has contr olling inter ests, normally obtained when Elk em ASA owns mor e than 50% o f the shar es. Associates ar e those entities in which Elk em ASA has signiﬁcant inﬂuence, but no contr ol, o ver the ﬁnancial and operating policies. Signiﬁcan t inﬂuence is pr esumed to exis t when Elk em ASA holds betw een 20% and 50% of the vo ting power o f another entity . J ointly con tr olled entities ar e those en tities ov er whose ac tivities Elk em ASA has joint con trol, es tablished by contrac tual agreemen t and r equiring unanimous consent f or stra tegic ﬁnancial and oper ating decisions. Subsidiaries Inter ests in subsidiaries ar e r ecognised at cos t less any write-down f or impairment. Associates Inves tments in associates ar e v alued at cost less any write-down for impairmen t. Dividends receiv ed from associated companies ar e included in the income statemen t. Joint ven tur es Elkem ASA 's int er ests in jointly contr olled entities, which operat es within Elk em A SA 's main business ar eas (silicon materials and foundry pr oducts) , ar e accounted asset arising from an in ternal dev elopment pr oject is recognised if the company can demonstr ate technical feasibility of comple ting the in tangible asset, has intention to comple te it, ability to use it, can demons trat e that it will genera te pr obable futur e economic bene ﬁts and the cos t can be reliably measur ed. Property , plant and equipment Property , plant and equipment is pr esented a t cost, less accumulated depr eciations and an y accumula ted impairment losses. Construction in pr ogr ess is carried at cost, less any r ecognised impairment loss. Such assets ar e classiﬁed to the appropria te class of pr operty , plant and equipment when complet ed and ready for its intended use. Signiﬁcant parts o f an item of pr operty , plant and equipment which hav e dier en t useful lif e, are accoun ted for as separ ate items. Depr ecia tion commences when the asse ts ar e ready for their intended use. Initial cost includes expenditur es that ar e dir ectly attributable to the acquisition of the asset, cost o f materials, dir ect labour , any other costs dir ectly attributable to bringing the assets to working condition for their intended use and es timated dismantling or remo val char ges, and capitalised borr owing cos ts. Subsequent costs ar e included in the asset' s carrying amount or r ecognised as a separat e asset, as appropria te, when futur e beneﬁts ar e pr obable and the cost can be measur ed r eliably . The carrying amount of the r eplaced part is der ecognised. Major periodic maintenance that is carried out less fr equently than every year , is capitalised and deprecia ted ov er the period until the next periodic maint enance is performed. All other r epairs and maint enance ar e charged to the income statemen t when incurred. Deprecia tion is r ecognised using the s traight -line method. The estima ted useful lif e, r esidual values and deprecia tion method is r evie wed at the end of each reporting period. An item of pr operty , plant and equipment is derecognised upon disposal or when no future economic beneﬁts ar e expec ted to arise from the continued use of the asset. Any gain or loss fr om disposal or re tir ement is determined as the di er ence between the sales pr oceeds and the carrying amount of the asset, and is r ecognised in the income statemen t. 248 249 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Impairment of tangible and intangible assets At the end o f each reporting period, the carrying amounts of tangible and intangible assets ar e reviewed to determine whe ther ther e is an y indication o f impairment. If any such indication e xists, the reco ver able amount of the individual asset is es timated in or der to determine the e xtent o f the impairmen t loss. If it is not possible to estima te the reco ver able amount o f the individual asset, the r ecover able amount o f the lowest possible cash gener ating unit, to which the asset belongs, is estimat ed. The r ecov erable amount is the higher o f f air value less costs to sell, or its value in use. V alue in use is the presen t value o f the futur e cash ﬂow s expec ted to be derived fr om use of the cash generating unit, a fter taking into account all o ther rele vant in forma tion. If an impairment loss f or assets other than goodwill is r ecognised in a pr evious period, the entity assesses whe ther ther e ar e indica tions tha t the impairment may hav e decreased or no longer exis ts. If so , the impairment loss is r ev ersed, based on an updated estima te of the r ecov erable amount, but no t ex ceeding the carrying amount that would ha ve been determined had no impairment loss been r ecognised f or the asset. Any impairment o f goodwill is no t r ever sed. Leasing Leases ar e classiﬁed as ﬁnancial leases whene ver the terms of the lease trans fer substan tially all the risk s and re war ds o f o wnership to the lessee. All other leases are classiﬁed as oper ating leases and e xpenses ar e recognised as incurr ed. Assets held under ﬁnance leases ar e initially recognised as assets at the pr esent v alue of the minimum lease payment. The corr esponding liability to the lessor is included in the ﬁnancial sta tements as a ﬁnance lease obligation. Each lease payment is alloca ted betw een the liability and ﬁnance char ges so as t o achieve a cons tant rat e on the obliga tion. Non-deriva tive ﬁnancial assets and liabilities A ﬁnancial asset or a ﬁnancial liability is r ecognised in the balance sheet when the entity becomes party to a contract. Assets to be acquir ed and liabilities to be incurred as a r esult of a ﬁrm commitment to pur chase or sell goods or services are r ecognised a t the time one o f the parties has performed under the agr eement. Financial assets ar e initially r ecognised in the balance sheet at fair v alue plus any tr ansaction costs dir ec tly attributable to the acquisition or issue of the asset. Financial assets ar e der ecognised once the righ t t o future cash ﬂow s has expir ed or when substan tial all when the deriv ative is designa ted and is e ectiv e as a hedging instrument. If the derivativ e is designated as a hedging instrument, timing of r ecognition in the income statemen t depends on the na tur e of the hedging rela tionship. Commodity contr acts that do no t qualify as hedging instruments ar e book ed at the low er of cost and fair v alue. Embedded derivativ es ar e separat ed fr om the host contract and book ed at fair v alue, as an independent derivativ e. Contracts f or the en tity' s own use ar e contr acts which are en ter ed into and con tinue to be held f or the purpose of the r eceipt o f a non- ﬁnancial item according to the company' s usage requir ements. This applies t o power pur chase contr acts intended f or use in the plan t’ s pr oduction pr ocesses. Such contr acts ar e booked in the balance shee t at cost and in the income statemen t on realisa tion. Hedge accounting Elkem ASA ma y designa te certain deriva tives as hedging instruments for fair value hedges and cash ﬂow hedges. At the inception o f the hedging r elationship, the entity documen ts the r ela tionship between the hedging instrument and the hedged item, along with its risk management objectives and its s trat egy f or undertaking various hedge transactions. Fair v alue hedges Changes in the fair value of derivativ es tha t ar e designated as hedging instrumen ts in f air value hedges, are r ecognised in the income statement immedia tely together with any changes in the f air value o f the hedged asset or liability tha t are a ttributable t o the hedged risk. Cash ﬂow hedges The e ective portion o f changes in the f air v alue of derivativ es tha t ar e designated and qualify as cash ﬂow hedges, are r ecognised in the equity and accumulat ed under the heading o f cash ﬂo w hedging r eserve. The gain or loss rela ting t o the ine ec tive portion is recognised immedia tely in the income s tatement. Gains / losses r ecognised in equity ar e r eclassiﬁed into the income statemen t in the same period(s) as the hedged assets / liabilities. When a hedging instrument e xpir es or is sold, or when a hedge no longer meets the criteria f or hedge accounting, any cumulative gain or loss existing in the risks and r ew ar ds rela ted to contr ol o f the asse ts ar e transf err ed to a third party . Financial assets with a maturity ex ceeding one year are classiﬁed as non-curr ent ﬁnancial assets. Short- term inves tments that do not mee t the deﬁnitions of a cash equivalent and ﬁnancial assets with a maturity of less than one y ear ar e classiﬁed as curr ent ﬁnancial assets. Non-curr ent ﬁnancial assets ar e r ecognised and subsequently measur ed a t cost less any impairment loss, if the impairment is assessed no t to be temporary . Loans and receiv ables Loans and r eceivables ar e non-deriv ative ﬁnancial assets with ﬁxed or de terminable payments tha t are no t quot ed in a r egulated mark et. They ar e recognised a t amortised cost using the e ective inter est method. Gains and losses ar e recognised in the income statemen t when the loans and r eceiv ables are der ecognised or impaired, as w ell as through the amortisation pr ocess. An impairment loss is r ecognised when the carrying amoun t ex ceeds the estimat ed reco ver able amount. The category includes tr ade r eceivables, deposits, guarant ees and loans. These assets ar e classiﬁed in the balance sheet as either other non-curr ent asse ts or o ther curr ent assets. Other curr ent asse ts ar e receiv ables with maturity less than one y ear . T rade and o ther receiv ables ar e r ecognised at nominal value less pr ovisions f or doubtful accounts. Cash and cash equivalents Cash and cash equivalents ar e held for the purpose of meeting short- t erm ﬂuctua tions in liquidity , rather than for inv estment purposes. Cash and cash equiv alents comprise cash funds and short - term deposits with a term of 3 months or less on acquisition. Bank o ver dr afts are sho wn within curr ent inter es t-bearing liabilities in the balance sheet. Elk em ASA 's deposits and dr awings within the gr oup cash pool ar e nett ed by o setting deposits against withdra wals. The subsidiaries ' deposits and drawings ar e classiﬁed as curren t assets / liabilities. Derivativ e ﬁnancial instruments Derivativ es ar e initially r ecognised at f air value on the date the deriva tive contr acts ar e enter ed int o, and ar e subsequently r emeasur ed to their fair value a t the end of the r eporting period. The r esulting gain or loss is recognised in the income sta tement immedia tely , unless equity a t tha t time r emains in equity until the f or ecast transaction is ultima tely r ecognised in the income statemen t. When a f or ecast transaction is no longer expect ed t o occur , the cumulative gain or loss that was report ed in equity is immedia tely tr ansf err ed t o the income statemen t. Invent ories Invent ories ar e r ecognised at the lowest o f cost and net r ealisable value. The cost of in ventory comprises o f the costs incurr ed in bringing the goods to their curr ent condition and location, such as ra w materials, ener gy for pr oduction, dir ect labour , other dir ect cos ts and produc tion ov erhead costs based on normal capacity . Net r ealisable value r epresents the estimated selling price f or inven tories less estimat ed costs o f comple tion and variable selling e xpenses. Cost of goods sold is included in di er ent lines in the income statemen t based on natur e; raw ma terials and energy for pr oduction, emplo yee bene ﬁts and other operating e xpenses, for the r emaining part. T axa tion Income taxes Curren t tax asse ts and liabilities ar e measur ed at the amount expec ted to be r ecov er ed or paid to the tax authorities. Curren t tax pa yable includes an y adjustmen t to tax payable in r espec t of pr evious year s. Income tax is recognised in the income sta tement e x cept to the e xtent that it r elates to it ems recognised dir ec tly in equity . Income tax r ela ting t o items r ecognised dir ectly in equity is recognised in equity . Uncertain tax positions are included when it is pr obable that the tax position will be sus tained in a tax r e view , and pro visions ar e made r elating to uncertain or disputed tax positions at the amount expec ted to be paid. The pr ovision is r ev ersed when the disputed tax position is settled in fav our of Elk em and can no longer be appealed. Def erred tax Def erred tax asse ts and liabilities are calcula ted using the liability method with full allocation for all temporary di erences be tween the tax base and the carrying amount of assets and liabilities in the ﬁnancial statemen ts, including tax losses carried f orwar d. Def erred tax items ar e r ecognised in corr elation to the underlying tr ansaction either in the income stat ement or direc tly in equity . 250 251 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Def erred tax assets ar e r ecognised in the balance sheet to the exten t it is mor e likely than not that the tax assets will be utilised. The enacted tax r ate at the end of the r eporting period and undiscounted amounts are used. De ferr ed tax assets arising fr om tax losses are r ecognised when ther e is convincing e vidence of reco ver ability . Deferr ed tax asse ts and liabilities items are o se t if ther e is a legally enf orceable righ t t o o set curren t tax liabilities and asse ts. Employ ee beneﬁts Employee bene ﬁts consist of w ages and salaries, bonuses, holiday payments, shar e-based paymen ts and other considera tions paid in ex change for services render ed fr om employ ees, and ar e expensed as incurr ed together with any social security tax applicable. Employ ee re tirement bene ﬁts Deﬁned contribution plans Deﬁned contribution plans comprise arr angements whereb y the compan y mak es monthly contributions to the employees ' pension plans, and wher e the future pensions ar e de termined by the amount of the contributions and the re turn on the individual pension plan asset. Pa yments r elated to the contribution plans are e xpensed as incurr ed, as a part of emplo yee beneﬁt e xpenses. Deﬁned beneﬁt plans Deﬁned beneﬁt plans ar e r ecognised at pr esent v alue of future liabilities consider ed r e tained at the end of the reporting period, calcula ted separa tely f or each plan. Social security tax r elated to pension pa yments is included in estimated pension liability . Plan assets are measur ed a t f air value and deduct ed in calculating the net pension obligation. Actuarial assump tions ar e used t o measure bo th the obligation and the expense and e ects of changes in estima tes due to ﬁnancial and actuarial assumptions that ar e r ecognised in equity . Service costs ar e classiﬁed as part of employ ee beneﬁt expenses and net in ter est on pension liabilities / assets are pr esen ted as a part of ﬁnance expenses. P ast service cost arising due to amendments in beneﬁt plans ar e expensed as incurr ed. Multi-employer de ﬁned beneﬁt plans wher e av ailable informa tion is insucient to be able to calculate each participant' s obligation, ar e accounted f or as contribution plans. Share-based pa yment The f air value o f options gran ted under the share-based payment pr ogr am is recognised as an emplo yee bene ﬁt expense with a corr esponding incr ease in equity . The total amount to be e xpensed is det ermined by r ef erence to the f air value o f the op tions grant ed. The total expense is r ecognised o ver the vesting period, which is the period o ver which all o f the speciﬁed v esting conditions are to be sa tisﬁed. A t the end of each period, the entity r e vises its estimates o f the number of options that ar e expec ted to ves t based on the non-mark e t vesting and service conditions. It r ecognises the impact of the r evision to original estima tes, if any , in the income statemen t, with a corresponding adjus tment to equity . Social security contributions pa yable in connection with an option gran t ar e considered an in tegral part o f the grant itself and the char ges ar e tr ea ted as cash- settled transac tions. Pro visions A pr ovision is recognised when a pr esent obligation exists and it is pr obable that an outﬂow o f r esour ces is requir ed to settle the obligation. The amount recognised is the best es timate o f the consider ation requir ed to settle the obligation, taking into account the risks and uncertainties surr ounding the obligation, known at the end of the r eporting period. Pr ovisions are measur ed at present v alue, unless the time value is assessed t o be immaterial. Contingent assets and liabilities Contingent liabilities ar e liabilities which ar e not recognised because the y ar e possible obligations that hav e not yet been con ﬁrmed, or the y ar e pr esent obligations wher e an outﬂow o f r esources is not probable. Con tingent assets ar e no t recognised. Any signiﬁcan t contingent assets and liabilities ar e disclosed in the no tes. Ev ents after the r eporting period Ev ents aft er the r eporting period r elat ed t o Elk em ASA 's ﬁnancial position at the end of the r eporting period, ar e considered in the ﬁnancial stat ement. E vents a fter the reporting period tha t have no e ect on the compan y' s ﬁnancial position at the end of the r eporting period, but will have e ec t on futur e ﬁnancial position, ar e disclosed if the futur e e ect is material. In the e vent o f uncertainty the bes t estimate is applied, based on the in forma tion available when the annual accounts ar e pr epar ed. Property , plant and equipment The estimated use ful lives, r esidual values (if an y ) and deprecia tion method ar e r eview ed, and if necessary adjusted, at leas t annually . Financial instruments Elkem ASA holds ﬁnancial instruments such as f orwar d currenc y con tracts and commodity contr acts, which are book ed at fair v alue. For commodity contrac ts denominated in EUR, the embedded EUR deriva tive is separat ed fr om the host contr act and book ed at f air value. Hedge accoun ting is applied f or these con tracts. Commodity contr acts that do no t qualify as hedging instruments ar e book ed at the low er of cost and fair value. F air value f or the contr acts is based on observ able prices and assumptions derived fr om observable prices f or comparable ins truments. For assump tions applied in f air value measur ement o f the con tracts see details in not e 25 Financial assets and liabilities in the consolidated ﬁnancial statement. Net book v alue of contr acts book ed at fair v alue as at 31 December 2021 is in to tal positive NOK 544 million (negative NOK 158 million) , see note 24 Financial instruments. 3. Accounting estimat es 4. Operating in come Amounts in NOK million Revenue fr om sale of goods Revenue fr om sale of goods to r elated parties Other oper ating r ev enue Other oper ating r ev enue t o rela ted parties T otal r ev enue Sale of ﬁx ed assets Insurance settlement Grants (no te 5 ) T otal o ther oper ating income T otal opera ting income 2021 7 269 1 465 118 457 9 309 - 25 406 431 9 7 40 2020 5 397 1 380 137 285 7 198 0 29 398 428 7 626 Operating income b y type 252 253 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Amounts in NOK million Nor dic countries United Kingdom Germany Fr ance Italy Poland Spain Netherlands Other E ur opean countries Eur ope Africa North America South America America China Japan South K orea Other Asian countries Asia The res t of the world T otal opera ting income 2021 1 681 633 1 753 802 522 179 319 74 1 382 7 345 35 565 41 606 284 696 113 642 1 734 20 9 7 40 2020 1 483 396 1 088 630 394 171 205 102 897 5 366 16 615 44 660 207 555 196 608 1 567 17 7 626 Operating income b y geogr aphic mark et 5. G rants Amounts in NOK million R&D grants fr om the N orwegian gov ernment CO2 Compensation fr om the Norwegian En vironmen t Agency Energy r ecovery r elated gr ants Other go vernment gr ants T otal go vernment gr ants Norwegian NOx fund f or r educed emission of NOx Other gr ants T otal o ther gr ants T otal gran ts Grants r eceivables r ela ted t o ﬁx ed and intangible assets (no te 19 ) Grants r eceivables r ela ted t o income (note 19 ) Grants, de ferr ed income (not e 23 ) Other operating income 39 367 - - 406 - - - 406 Other operating income 54 340 - - 394 - 4 4 398 Deduction of carrying amount F A - - 3 - 3 134 - 134 136 95 365 (2) Deduction of carrying amount F A - - 6 - 6 31 - 31 37 42 364 (5 ) 2021 2020 CO2 allowances CO2 emission allowances alloca ted fr om the governmen t ar e classiﬁed as grants, measur ed at nominal value (zer o). The CO2 allo wance scheme pertains t o the gr oup 's plants in E ur ope. If actual emissions ex ceed the number of allocat ed allowances, additional allowances mus t be purchased. The cost of pur chased CO2 allow ances are r ecognised as part of ra w materials and ener gy f or pr oduction and is distributed linearly ov er the year as the number o f allocated allow ances will not be r e vised unless ther e is a substantial change in the pr oduction lev el at the plants. Any gain on sale o f CO2 allow ances is classiﬁed as re venue. The previous scheme for allocation o f fr ee CO2 allowances fr om the authorities lasted until 2020 . The allocation of fr ee allow ances f or the period 2021-2025 is appro ved b y the EFT A surv eillance authority , with no major changes to the s tructur e, but is y et to be ﬁnally decided by the na tional authorities. Elk em expect the allocation of allo wances to continue in accor dance with pre vious periods with an incr eased r eduction f actor in the allocation of 2.2% annually . Elkem AS A has a zer o surplus of allow ances and cost of additional allo wances needed t o settle the quota obligation f or 2021 is accrued for , based on the mark e t prices as at 31 December , 2021. The ﬁnal decision on the allow ance allocation for 2021- 2025 is expect ed bef or e the se ttlement deadline f or 2021, 30 April 2022. CO2 compensation The Norwegian go vernment has since 2013 had a CO2 compensation scheme to compensate f or CO2 costs included in the po wer price for the manufac turing industry . The compensation scheme is based on a corresponding scheme f or EU and is appr oved b y the EFT A surveillance authority ESA. The pr e vious CO2 compensation scheme ended 31 December 2020 and a new scheme f or 2021- 2025 is appr ov ed f or EU but has y et to be implemented in to Norwegian r egula tion. Howe ver , a continuation o f the CO2 compensa tion is included in a proposed N orwegian r egulation and pro visions ar e included in the Norwegian national budge t for 2022. The CO2 compensa tion scheme applies for Elk em ' s N orwegian Silicon and Ferr osilicon plan ts and the per centage o f the costs compensated w as appro xima tely 75% in 2020. The compensation is based on the mark e t price of CO2 allow ances and will as such vary with the price de velopment. Based on the pr oposed regula tion and the pro vision in the National budget Elkem has r ecognised CO2 compensation for 2021, at the same level as f or 2020. As the gr ant compensates power costs, which ar e cos ts recognised as part o f the cost price of inv entory during the pr oduction pr ocess, the compensation is r ecognised in the statemen t of pro ﬁt or loss when the pr oduced goods ar e sold. Covid-19 Due t o the Co vid-19 outbr eak, governmen t bodies implemented temporary measur es in both 2021 and 2020 t o help businesses a ected by the outbr eak. Elkem is a ec ted by r eduction in social security taxes in 2020. The estimated value o f this arr angement is NOK 0 million (NOK 8 million) and is included in Employ ee beneﬁt e xpenses. NOx Fund The industry in N orwa y pa ys a fee for their emission of NOx to a public founda tion run by 15 industry and commerce associa tions. The founda tion is self - ﬁnanced by the f ees and the purpose is to support pr ojec ts tha t reduces NO x emissions fr om the industry in Norw ay . Other The remaining gr ants ar e mainly r elated to R&D and energy r ecov ery pr ojec ts. 254 255 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact 6. Emplo yee beneﬁt e xpenses Amounts in NOK million Salaries, holiday pa y and v ariable compensation Employer' s na tional insurance contributions / social security tax Pension e xpenses (note 7 ) Share-based pa yments Other pa yments / beneﬁts T otal emplo yee beneﬁt e xpenses Av erage number of full time equiv alents Amounts in NOK million Deﬁned beneﬁt plans Deﬁned contribution plans Early r etir ement scheme (AFP ) T otal pension e xpenses Amounts in NOK million Discount rat e 1) Annual regula tion of pensions paid 1) The discount rat e is based on high quality corporat e bonds reﬂec ting the timing of the bene ﬁt payments. Amounts in NOK million Presen t value of pension obliga tions Fair v alue of plan assets Net v alue pension liabilities Active participan ts in pension scheme f or salary abov e 12G Retir ed participants Changes in actuarial gains / (losses) r ecognised in equity / def err ed tax Amounts in NOK million External distribution e xpenses Commission expenses sales Machinery , t ools, ﬁxtures and ﬁttings Repair , maintenance and other operating e xpenses Other e xternal e xpenses (f ees, transport, IT services, et c.) Energy and fuel e xpenses Leasing expenses (no te 9 ) T ravel e xpenses Loss on trade r eceivables Miscellaneous manufacturing, administr ation and selling e xpenses T otal other opera ting expenses Miscellaneous manufacturing, administr ation and selling e xpenses include: Capitalisation of salary on ﬁx ed assets ( employ ee beneﬁt e xpenses are pr esent ed gr oss in note 6 ) Changes in invent ories of ﬁnished and semi- ﬁnished goods 2021 ( 1 024 ) ( 126 ) ( 74 ) (1 8) ( 15) ( 1 257) 1 295 2021 (4) ( 55) (1 6) ( 74 ) 2021 2,0 % 1,5 % 31. 12.2021 ( 85) - ( 85) 49 50 3 2021 ( 531) ( 91) ( 432) ( 159 ) ( 404 ) ( 103 ) (5 8) (9) 4 ( 389 ) (2 172) 10 (4) 2020 ( 1 005 ) ( 114 ) (77) (2 9) (1 2 ) ( 1 237 ) 1 325 2020 (3) (5 7) (1 7 ) (77) 2020 1,4 % 1,3 % 31. 12.2020 (9 1) - (9 1) 50 60 (1 8) 2020 ( 521) (6 3) ( 363 ) ( 157 ) ( 360 ) ( 101 ) (4 5 ) (1 3) (4) (229 ) ( 1 857 ) 15 (27) For inf ormation concerning r emuner ation to management and shar e-based payments, see "Report on salary and o ther r emuneration to leading per sonnel in Deﬁned contribution plans Pension for emplo yees in Elk em AS A are mainly co ver ed by pension plans tha t ar e classiﬁed as contribution plans. Elkem ASA ' contributions to the employ ees individual pension plan assets constitutes 5% o f base salary up to 7 . 1G and 15% between 7 . 1 and 12G. G ref ers to the national insurance scheme 's basic amount in Norw ay , amounting to NOK 106,399 as at 1 May 2021. P ension on salary abo ve 12G is not support ed by ext ernal service pro viders and is ther ef or e handled as a separa te plan and included under deﬁned beneﬁt plans. Elkem ASA participa tes in the early r etir ement scheme AFP . This is as a multi-employ er plan accounted for as a deﬁned contribution plan, in accor dance with the Ministry o f Finance ' s conclusion. The participants in the pension plan are join tly r esponsible f or 2/3 o f the plan ' s pension obligation, the governmen t is r esponsible f or the remaining part. The yearly pension pr emium in 2021 is 2.5% of the employ ee ’ s salary be tween 1 and 7 . 1G, Elkem ASA for the ﬁnancial year 2021" , not e 9 Employee beneﬁts and not e 10 Share-based pa yment in the consolidated ﬁnancial statement. covering this year’ s pension paymen ts and contribution to a security fund for futur e pension obligations. The premium in per cent of salary for 2022 is will be 2. 6%. Deﬁned beneﬁt plans The deﬁned beneﬁt pension plans ar e unfunded and comprise pension on salaries above 12G, wher e the expense is 15% o f annual base salary that e x ceeds 12G plus inter est on the individual calculated pension obligation, and some individual r etir ement schemes. The individual re tir ement schemes ar e closed. Net int eres t is calculated based on pension liability at the start of the period multiplied by the discount r ate and is presen ted as a part of ﬁnance e xpenses. Remeasur ements of the deﬁned bene ﬁt plans ar e recognised dir ectly in equity . The company' s r etir ement schemes mee t the minimum requir ement of the Norw egian Act of M andatory Occupational Pension. 7 . Emplo y ee ret iremen t beneﬁts 8. Other operati ng e xpenses Break down o f pension e xpenses Principal assumptions used for the ac tuarial valuation 256 257 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact During 2021, Elk em A SA e xpensed NOK 82 million ( NOK 124 million) as resear ch and development r elated to process, pr oduct and business development, including technical customer support and impr o vement pr ojects. For eign e x change gains (losses) in 2021 and 2020 are mainly r elat ed t o the bank loans in EUR and gr oup loans in EUR and CNY . Futur e leasing obligations ar e mainly relat ed t o r ental of oce buildings. The rental agr eement contains an extension op tion f or 5+5 years f or one of the leases. The futur e obligation f or the e xtension op tion is appro xima tely NOK 125 million. Grants r eceiv ed r elated to r esear ch and dev elopment amount to NOK 39 million (NOK 54 million) and ar e included in other opera ting income. Amounts in NOK million Audit fee Other assur ance services T ax services Other services T otal f ees to auditor Amounts in NOK million Leasing expenses, curr ent year (no te 8 ) Minimum future lease pa yments due Within one year Within two years Within three y ears Over thr ee years Amounts in NOK million Realised curr ency gains (losses) fr om f orwar d curr ency contrac ts Unr ealised currenc y gains (losses) fr om f orwar d curr ency contracts Other curr ency gains (losses) opera tional Realised e ects other ﬁnancial instruments (no te 24 ) Unr ealised eec ts other ﬁnancial instruments Ineec tiveness on cash ﬂow hedges T otal other gains (losses ) related to operating ac tivities Amounts in NOK million Inter est income Inter est income from r ela ted parties (note 25 ) Other ﬁnancial income T otal ﬁnance income Net for eign e xchange gains (losses) Inter est e xpenses Inter est e xpenses to r ela ted parties (note 25 ) Inter est on net pension liabilities Other ﬁnancial expenses T otal ﬁnance expenses Net ﬁnance income ( e xpenses) Amounts in NOK million Curren t tax expenses Pre vious year tax adjustment Deferr ed tax Other tax es T otal income tax ( e xpense ) beneﬁt 2021 (5 ) (1 ) - - (6) 2021 (5 8) (26 ) (25) (22) ( 196 ) 2021 158 (3 8) 8 (5 9) 60 - 129 2021 3 129 2 134 377 ( 179 ) ( 11) (3) (5 ) ( 198 ) 313 2021 ( 452) (6) (22) (21) ( 501) 2020 (6) (1) - - (7) 2020 (4 5 ) (2 4) (22) (2 0) ( 160 ) 2020 ( 131 ) 143 5 (9 9) 1 74 (9) 83 2020 6 149 3 157 ( 178 ) ( 193 ) (25) (2) (1) (222 ) (243 ) 2020 - ( 186 ) (8 3) (2 9) (298 ) Audit and other services 2021 Income tax recognised in income s tatement 9 . Operati ng lease 10 . Other gains ( losses ) related t o operat ing activ it es 11. Financ e income and e xpenses 1 2 . Ta x e s 258 259 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Amounts in NOK million Derivativ es Property , plant, equipment and intangible assets Pension liabilities T rade receiv able Invent ory Pro visions Other di er ences T ax loss carry forw ard Net def erred tax assets (liabilities) Amounts in NOK million Opening balance Charged to pr oﬁt (loss) Changes in deferr ed tax hedges char ged t o equity Change in actuarial gains/losses char ged to equity E ect of transaction with r elat ed party , pooling-o f -inter ests me thod Currenc y tr anslation dier ences Closing balance 31. 12.2021 ( 191) ( 184 ) 18 2 (26 ) 3 73 - ( 306 ) 2021 ( 128 ) (21) ( 156 ) (1 ) - 0 ( 306 ) 31. 12.2020 35 ( 168 ) 20 3 (2 6) 5 1 2 ( 128 ) 2020 ( 123 ) (8 3) 75 4 (2) (0) ( 128 ) Deferr ed tax assets and de ferr ed tax liabilities Mov ement in net de ferr ed tax assets (liabilities ) 1) Elk em ASA has f our deb t w aiver agreements with Elk em Silicones Fr ance SAS. Nominal value o f the agreemen ts as of 31 December 2021 is NOK 595 million ( NOK 595 million), corr esponding to EUR 64 million ( EUR 64 million), book value NOK 0. Elk em Silicones F rance SAS has repaid NOK 0 million (NOK 0 million) under this agr eement in 2021. Elk em has pre viously assessed that the eec t of repaymen t is tax ex empted. See pending tax issues with tax authorities belo w . 2) Of the amount NOK 181 million relates to an ongoing tax issue with tax authorities, see pending tax issues with t ax authorities below . Pending tax issues with tax authorities The Norwegian T ax Oce (NT O ) decided in February 2021 t o increase Elk em ASA 's taxable income f or the ﬁscal y ears 2016- 2019 by in total NOK 781 million, which increased the income tax e xpenses by NOK 181 million in 2020. The reassessments r elate to loan arrangements / debt waiver agr eements acquir ed by Elkem ASA in 2016 thr ough the cr oss-border par ent - subsidiary mer ger with Bluestar Silicones Int ernational Sarl. Elk em is of the opinion tha t the r eassessment is unfounded and will appeal. Based on legal advice, Elkem ’ s assessment is that the def ence against the action will be successful. Accor ding to a decision b y the Supreme Court in N orwa y r elat ed t o interpr eta tion of Norw egian A ccounting Standar ds, Elk em needs t o be virtually certain that the decision by the NT O will be overruled b y the T ax Appeal Boar d, if the decision is not to be r eﬂect ed in the ﬁnancial sta tements. Due to the complexity of the case, Elk em is not curr en tly able to r each a conclusion with tha t high lev el of certainty and made a pro vision of NOK 181 million in Elk em AS A ’s 2020 ﬁnancial sta tements. The amount was paid in the ﬁrst quarter o f 2021. Amounts in NOK million Pro ﬁt befor e tax Applicable tax r ate Norw ay T ax expense at applicable tax r ate Permanent di er ences T ax eec t of income fr om N orwegian contr olled f or eign companies (NOKUS ) Dividend within the T ax exemp tion method Debt waiv er 1) T ax eec ts other permanent di er ences Other e ects Pre vious year tax adjustment 2) T ax eec t change in tax r ate Other curr ent tax paid T otal income tax ( e xpenses) bene ﬁt E ective tax rate 2021 2 27 4 22 % ( 500 ) 2 27 - (2) (6) - (22) ( 501) 22 % 2020 713 22 % ( 157 ) (1 0) 89 - (5) ( 186 ) - (2 9) (298 ) 42 % Reconciliation of income tax ( e xpense) bene ﬁt 260 261 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Amounts in NOK million Opening balance Additions Disposals T ransf erred t o/from CiP Reclassiﬁcations Impairment losses Deprecia tion Closing balance Historical cost Accumulated depr eciation Accumulated impairment losses Closing balance Estimated use ful life Deprecia tion plan Construction in progr ess 409 472 - ( 377) - - - 504 504 - - 504 Plant, machinery , equipment and motor vehicles 1 7 46 0 (0) 301 (9) (3) (264 ) 1 771 4 806 (2 970 ) (6 4) 1 771 3-30 years Straight -line Land 7 - - - (0) - - 7 7 - (0) 7 Indeﬁnite T otal 2 800 472 (0) - 0 (3) ( 329 ) 2 941 7 032 ( 4 022) ( 7 0) 2 941 Oce and other equipment 29 - - 8 - - (8) 30 97 (6 7 ) (0) 30 3-20 y ears Straight -line Buildings and other pr opert 609 - - 68 10 (0) (5 7) 629 1 619 ( 985) (5) 629 5-40 years Straight -line 2020 Amounts in NOK million Opening balance Additions Disposals T ransf erred fr om CiP Impairment losses Amortisation Closing balance Historical cost Accumulated amortisation Closing balance Estimated use ful life Amortisation plan Amounts in NOK million Opening balance Additions T ransf erred fr om CiP Reclassiﬁcations Impairment losses Amortisation Closing balance Historical cost Accumulated amortisation Closing balance Estimated use ful life Amortisation plan Other intangible assets 16 - - - - (3) 13 29 (1 5) 13 3-10 years Straight -line Other intangible assets 99 - - - - (8 3) 16 29 (1 3) 16 3-10 years Straight -line Goodwill 24 - - - - (4) 20 40 (2 0) 20 10 years Straight -line Goodwill 28 - - - - (4) 24 40 (1 6) 24 10 years Straight -line T otal intangible assets 115 22 (0) - (4) (22) 111 283 ( 172) 111 T otal intangible assets 193 25 - (0) - ( 103 ) 115 268 ( 152) 115 Intangible assets under construction 40 14 - (5) - - 48 48 - 48 Intangible assets under construction 21 24 (5) (0) - - 40 40 - 40 Softwar e 59 8 (0) 5 (4) (1 9) 50 206 ( 156 ) 50 3-10 years Straight -line Softwar e 73 1 5 - - (2 0) 59 199 ( 140 ) 59 3-10 years Straight -line 2021 2020 14. In tangable assets Amounts in NOK million Opening balance Additions Disposals T ransf erred t o/from CiP Reclassiﬁcations Impairment losses Deprecia tion Closing balance Historical cost Accumulated depr eciation Accumulated impairment losses Closing balance Estimated use ful life Deprecia tion plan Construction in progr ess 504 405 - ( 379 ) - (2) - 528 528 - - 528 Plant, machinery , equipment and motor vehicles 1 771 - - 346 (2) (8) (267 ) 1 840 5 099 ( 3 191) (6 9) 1 840 3-30 years Straight -line Land 7 - - 2 - - - 9 9 - (0) 9 Indeﬁnite T otal 2 941 406 0 - - (1 0) ( 333 ) 3 003 7 363 ( 4 286 ) ( 74 ) 3 003 Oce and other equipment 30 0 - 3 3 - (8) 27 97 (70 ) (0) 27 3-20 y ears Straight -line Buildings and other pr operty 629 0 - 28 (1) - (5 7) 599 1 629 ( 1 025 ) (5) 599 5-40 years Straight -line 2021 13. Pro per ty , plant, and equipment 262 263 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact 15. In v estments in subsidia ries Investmen t in subsidiaries of Elk em AS A Elkem Carbon AS Elkem Chart ering Holding AS Elkem Digital Oce AS Elkem Dis tribution Center B. V . Elkem F oundry ( China) Co., L td. Elkem Gmb H Elkem Iberia S .L. U Elkem International AS Elkem In ternational T rade ( Shanghai) Co. Ltd. 1) Elkem Ísland eh f . Elkem J apan K.K Elkem K orea Co. L td. Elkem M adencilik Metalurji Sanayi V e Ticare t L td. S TI 1) Elkem M aterials Pr ocessing (Tianjin) Co., L td. Elkem M aterials Pr ocessing Services BV Elkem M etal Canada Inc. Elkem Milling Services Gmb H Elkem Nor dic A.S. Elkem Oilﬁeld Chemicals FZ CO L td. Elkem P aragua y S .A. 1) Elkem S .a.r .l. Elkem S .r .l. Elkem Silicon M aterials ( Lanzhou) Co., L td. 2) Elkem Silicon Pr oduct De velopment AS Elkem Siliconas España S .A. U Elkem Silicones Br asil L tda. Elkem Silicones Canada Corp. Elkem Silicones Cz ech Republic, s.r .o. Elkem Silicones Finland O Y Elkem Silicones F r ance SAS Elkem Silicones German y GmbH Elkem Silicones Guangdong Co ., L td. 3) Elkem Silicones H ong K ong Co., L td. Elkem Silicones K orea Co., L td. Elkem Silicones M éxico S . De R.L. De C. V . Elkem Silicones P oland sp. z o. o. Elkem Silicones Scandina via AS Country Norwa y Norwa y Norwa y Netherlands China Germany Spain Norwa y China Iceland Japan Republic of K or ea T urkey China Netherlands Canada Germany Denmark UAE Paragua y Fr ance Italy China Norwa y Spain Brazil Canada Czech Republic Finland Fr ance Germany China Hong K ong Republic of K or ea Mexico Poland Norwa y Owner shar e V ote rights (%) 100 % 80 % 100 % 100 % 100 % 100 % 100 % 100 % 11 % 100 % 100 % 100 % 1 % 100 % 100 % 100 % 100 % 100 % 51 % 79 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % Carrying amount 31. 12.2021 122 1 8 0 66 1 0 5 1 784 0 1 0 1 1 7 12 5 13 498 - 6 1 033 8 125 214 6 2 5 2 160 130 1 543 102 219 5 4 15 Carrying amount 31. 12.2020 119 1 8 0 66 1 0 5 1 784 0 1 0 1 1 6 12 5 13 - - 6 1 033 8 125 145 6 2 5 2 156 130 1 542 102 219 5 4 15 Investmen t in subsidiaries of Elk em AS A Elkem Silicones Services S .à.r .l Elkem Silicones Shanghai Co ., L td. Elkem Silicones US A Corp. Elkem Siliconi Italia S .r .l. Elkem Singapor e Ma terials Pte. L td. Elkem South Asia Priv ate Limited Elkem (Thailand) Co ., L td. Elkem UK Holdings L td. Elkem U ruguay S.A. Explotación de Rocas Industriales y Minerales S.A. ( ERIMSA) Jiangxi Bluestar Xinghuo Silicones Co ., L td. NEH LL C Vianode AS 4) T otal Country Fr ance China USA Italy Singapore India Thailand United Kingdom Uruguay Spain China USA Norwa y Owner shar e V ote rights (%) 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 % Carrying amount 31. 12.2021 4 109 261 24 0 34 3 78 33 80 4 153 98 1 11 982 Carrying amount 31. 12.2020 3 108 261 24 0 34 2 78 33 80 3 751 98 0 11 002 1) Elkem ASA and a subsidiary own 100% o f Elk em Int ernational T rade (Shanghai) Co. L td., Elkem Madencilik Metalurji Sanayi V e Ticare t L td and Elkem Par aguay S.A. 2) Previously Bluestar Silicon Mat erial Co., L td. 3) Previously Guangdong Polysil T echnology Co. L td. 4) Previously Elk em A dvanced Battery Materials AS Impairment For mor e details see no te 19 Impairment assessment in the consolidated ﬁnancial stat ement. Amounts in NOK million Dividends and group con tributions fr om subsidiaries T otal income fr om subsidiaries 2021 126 126 2020 522 522 Income from inv estments in subsidiaries 264 265 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Elkania D A Salten Energigjenvinning AS Owner shar e V oting rights 2020 50 % 50 % Country Norwa y Norwa y Accounting method Gross me thod Equity Owner shar e V oting rights 2021 50 % 50 % Company address Hauge i Dalane Oslo 16. In v estments in j oint v ent ures Main ﬁgur es f or the in vestments accoun ted for b y equity method. The ﬁgur es show Elk em ASA 's portion. Elkem ASA and its subsidiary Elk em Carbon AS hav e enter ed into a f actoring agr eement o f EUR 70 million, NOK 700 million. The agreement includes a r ecourse clause f or maximum 5% of the face v alue of the individual receiv ables sold under the agr eement. 95% of the receiv ables under the agr eement ar e der ecognised and the r ecour se amount is book ed as a curr ent liability . As at 31 December 2021 NOK 625 million (NOK 517 million) is der ecognised and NOK 33 million (NOK 27 million) is r ecognised as curr ent liability (see note 23 Pr o visions and other liabilities) under the agreemen t. In addition Elk em has enter ed into a f actoring agr eement f or a limited number of its customers. The factoring agr eemen t is without recour se and as at 31 December 2021 NOK 42 million (NOK 17 million) is derecognised under the agreemen t. Main ﬁgures f or investmen ts accounted for using the gross method, sho wing Elk em AS A ' s portion 1) Negative amount r ecognised in No te 23 Pro vision and other liabilities, curren t Amounts in NOK million Opening balance Acquisition of and cash contributions to joint v entur es Share o f pro ﬁt / (loss) Share o f other compr ehensive income Closing balance 1) Amounts in NOK million Curren t assets Non-curr ent assets Curren t liabilities Non-curr ent liabilities Net assets T otal r ev enue T otal e xpenses Financial items Ta x T otal pr oﬁt / (loss ) for the year Amounts in NOK million Curren t assets Non-curr ent assets Curren t liabilities Non-curr ent liabilities Net assets T otal r ev enue T otal e xpenses Financial items Ta x T otal pr oﬁt / (loss ) for the year Amounts in NOK million Finished goods Semi-ﬁnished goods Raw materials Operating ma terials and spar e parts T otal inv entories Pro visions f or write down o f in vent ories Amounts in NOK million T rade receiv ables T rade receiv ables, r elated parties Pro vision f or doubtful accounts T otal trade r eceivables T otal interests in joint v entures 2021 (3) - 37 12 46 Elkania D A 26 18 14 8 21 44 (2 6) (0) - 18 Elkania D A 17 5 11 8 3 23 (1 5) (0) 0 8 31. 12.2021 684 185 547 261 1 677 2 31. 12.2021 1 008 74 0 (1 0) 1 739 2020 (1 7 ) 40 (1 5) (1 1 ) (3) T otal 2021 26 18 14 8 21 44 (26 ) (0) - 18 T otal 2020 17 5 11 8 3 23 (1 5) (0) 0 8 31. 12.2020 719 187 329 239 1 473 8 31. 12.2020 284 438 (1 6) 707 17 . Inve nto r ie s 18. T rade receiv ables 266 267 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Amounts in NOK million Not due 1 - 30 days 31 - 60 days 61 - 90 days Mor e than 90 da ys T otal trade r eceivables Amounts in NOK million Opening balance Losses during the year New pr ovisions Rever sed pro visions Closing balance Amounts in NOK million Not due Over due by: 1 - 30 days 31 - 60 days 61 - 90 days Mor e than 90 da ys T otal pr ovisions for doubtful accoun ts 31. 12.2021 850 141 9 2 6 1 008 31. 12.2021 (1 6) 2 (3) 7 (1 0) 31. 12.2021 (2) (0) (0) (0) (7) (1 0) 31. 12.2020 203 52 5 4 19 284 31. 12.2020 (1 1 ) - (8) 4 (1 6) 31. 12.2020 (1) (0) - (0) (1 4) (1 6) Analysis of gross trade receiv ables b y age, presented based on the due date Mov ements in pro visions for doub tful accounts 2021 Analysis of ageing of trade r eceivables wher e allow ance for e xpected credit losses ar e made Elkem applies f or cr edit insurance for all customers when this can be ob tained. In cases wher e cr edit insurance cov erage is r e fused, other methods o f securing the sales income ar e used. Other methods used for securing the sales ar e, among other s, prepa yment, letter o f cr edit, documen tary cr edit, guar antee et c. The share capital o f Elk em ASA is NOK 3, 197 ,206,890 divided on 639 ,441,378 shares o f NOK 5 par value. Of this amount Elk em A SA held 6,403, 772 tr easury shares. The number of shar es incr eased by 58, 131,034 share in 2021 in r elation to the capital incr ease. For more in forma tion, see note 29 Number o f shar es in the consolidated ﬁnancial statements. For the y ear 2021 NOK 3.0 per share corresponding to NOK 1,918 million has been alloca ted for the distribution of dividends to the shar eholders. In addition an incr eased amount of NOK 9 million was alloca ted for distribution of dividends for 2020 , in 2021. This because the right to dividends allocated as based on the ﬁnancial s tatemen t of 2020 , also applies to the new shar es distributed in 2021, bef ore the dat e of the general assembly . Amounts in NOK million Shares in associa ted companies Other shar es Restricted deposits Other deposits Pension assets, de ﬁned beneﬁts and contribution plans (no te 7) Prepa yments Receivables fr om rela ted parties, inter est -bearing (note 25 ) Receivables fr om rela ted parties, inter est fr ee (note 25 ) Grants r eceivable (no te 5 ) V alue added tax Corporate income tax Inter est r eceivables Inter est r eceivables fr om rela ted parties (not e 25) Other r eceiv ables Other asse ts T otal other assets Amounts in NOK million Opening balance Cash ﬂow hedge Share o f items book ed against equity fr om joint ven tures Remeasur ement pension obligations gains (losses) Currenc y tr anslation dier ences Share-based pa yments Net mov ement tr easury shar es Capital increase Dividends Pro ﬁt for the year Closing balance 31. 12.2021 9 7 27 1 0 0 3 269 - - - - - - 8 0 3 322 Share capital 2 907 - - - - - - 291 - - 3 197 31. 12.2021 - - - - 1 43 447 10 406 88 - - 17 120 5 1 136 T otal paid in capital 6 208 - - - - 28 (3 2) 1 900 ( 1 927 ) - 6 178 31. 12.2020 9 6 24 1 0 - 3 604 - - - - - - 8 0 3 652 Other paid in capital 3 302 - - - - 28 (3 2) 1 610 ( 1 927 ) - 2 981 31. 12.2020 - - - - 2 34 21 111 460 126 - - 33 14 - 802 Retained earnings 3 012 552 12 3 (0) - (246 ) - - 1 773 5 104 T otal equity 9 220 552 12 3 (0) 28 (278 ) 1 900 ( 1 927) 1 773 11 283 19 . Other assets 20. E qu it y Non-current Current 268 269 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact 2020 Interes t-bearing liabilities by curr ency Amounts in NOK million Opening balance Cash ﬂow hedge Share o f items book ed against equity fr om joint ven tures Share-based pa yments Remeasur ement pension obligations gains (losses) Currenc y tr anslation dier ences Mer ger Dividends Pro ﬁt for the year Closing balance Share capital 2 907 - - - - - - - - 2 907 T otal paid in capital 6 267 - - 29 - - - (8 7) - 6 208 Other paid in capital 3 360 - - 29 - - - (8 7) - 3 302 Retained earnings 2 883 (268 ) (1 1 ) 0 (1 4) 0 6 - 416 3 012 T otal equity 9 150 (268 ) ( 11) 29 (1 4) 0 6 (8 7) 416 9 220 The table sho ws shar eholders holding one per cent or more o f the t otal 639 ,441,378 shar es outstanding as of 31 December 2021, accor ding t o inf ormation in the N orwegian ' securities ' r egistry sy stem (V erdipapirsentr alen). The table belo w analyses the ﬁnancial liabilities in to rele vant ma turity gr oupings based on the r emaining period at the date o f the s tatement o f ﬁnancial position to the contractual ma turity da te. The amounts disclosed in the table are discounted. 1) Nominee accoun ts Amounts in NOK million Bluestar Elkem In ternational Co ., L td. S.A. Folk etry gdfondet Must Invest AS V erdipapirfondet Alfr ed Ber g Gambak The Bank of New Y ork M ellon SA/NV 1) Par eto Ak sje Norge V erdipapirfond V erdipapirfondet Stor ebr and Nor ge Elkem A SA T otal shar eholders with ownership gr eater than 1% Number o f Shares 338 338 536 28 970 924 13 200 000 11 946 530 8 561 586 8 068 100 7 887 370 6 403 772 423 376 818 Ownership 52,9 % 4,5 % 2, 1 % 1,9 % 1,3 % 1,3 % 1,2 % 1,0 % 66,2 % 21. Shareholders Amounts in NOK million Inter est -bearing liabilities Loans fr om r elat ed parties (note 25 ) Loans fr om e xternal parties, other than bank Bank ﬁnancing Accrued inter est T otal inter est-bearing liabilities Inter est -bearing assets Cash and cash equivalents Restricted deposits Receivables fr om rela ted parties (note 25 ) Loans to ext ernal parties Inter est r eceivables fr om rela ted parties (not e 25) Inter est r eceivables fr om external parties T otal inter est-bearing assets Net inter est-bearing assets / (liabilities) Amounts in NOK million EUR USD NOK Other curr encies T otal inter est-bearing liabilities 31. 12.2021 145 3 110 4 037 - 7 292 - 27 3 269 8 - - 3 304 ( 3 988 ) Currenc y amount 6 74 46 3 622 - 31. 12.2021 2 618 1 256 53 19 3 945 4 256 3 447 - 17 - 4 723 778 Currenc y amount 731 71 2 517 - 31. 12.2020 118 1 953 4 275 - 6 346 - 24 3 604 8 - - 3 636 (2 710 ) NOK 6 7 40 408 3 622 467 11 237 31. 12.2020 2 036 2 050 397 25 4 509 1 796 3 21 - 33 - 1 853 (2 655 ) NOK 7 659 606 2 517 73 10 855 22 . Inters t -bearing asset s and liab ilities Non-current 31. 12.2021 Current 31. 12.2020 270 271 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Maturity of int erest-bearing liabilities 31 December 2021 Maturity of int erest-bearing liabilities 31 December 2020 Amounts in NOK million Loans fr om r elat ed parties Loans fr om e xternal parties, other than bank Bank ﬁnancing Accrued inter est T otal Prepaid loan fees T otal inter est-bearing liabilities Amounts in NOK million Loans fr om r elat ed parties Loans fr om e xternal parties, other than bank Bank ﬁnancing Accrued inter est T otal Prepaid loan fees T otal inter est-bearing liabilities 2022 2 618 1 256 53 19 3 945 2021 2 036 2 050 397 25 4 509 2024 - 1 110 - - 1 110 2023 - - 4 244 - - 2026 - 500 - - 500 2025 - 262 - - 262 2023 145 - 4 053 - 4 198 2022 - 1 314 56 - 1 370 2025 - 1 000 - - 1 000 2024 - 377 - - 377 2027 and later - 500 - - 500 2026 and later 118 - - - 118 T otal 2 763 4 366 4 106 19 11 253 (1 6) 11 237 T otal 2 154 4 003 4 697 25 10 880 (25) 10 855 Loan agreements The main non-curren t loan agr eements as of 31 December 2021 are a term loan o f EUR 400 million (EUR 400 million), a term loan o f EUR 5 million ( 11 million) , issued bond loans of a total o f NOK 2,500 million (NOK 0 million) and a series of loans issued in the Sculdschein marke t of EUR 61 million ( NOK 135 million). One of the loans issued in the Schuldshein mark et (EUR 15 million) is a ﬁx ed ra te loan with a ﬁx ed r ate o f 1.8160%. Given the mark et conditions as at 31 December 2021 the loan w ould have been appr o ximat ely EUR 0 .2 million higher , due to the dier ence be tween ﬁx ed and marke t ra te. The bond loans are lis ted on Oslo Børs. There ar e no material di er ences between fair value of the bond loan and book values. The loan f acilities ar e unsecur ed, but part of the loans have ﬁnancial cov enants r elated to them, see below . Credit f acilities Elkem ASA is gr anted cr edit facilities o f EUR 250 million (NOK 2,499 million) and NOK 250 million, a total o f NOK 2, 7 49 million in gr anted cr edit facilities. Bo th facilities r emained undra wn at 31 December 2021 and 31 December 2020. Cov enants The credit f acilities and the bank ﬁnancing in Elk em AS A contain ﬁnancial co venants based on the consolida ted ﬁnancial statemen ts of Elk em gr oup. In addition parts of the loans fr om e xternal part, o ther than bank, contain ﬁnancial co venants. The ﬁnancial covenan ts ar e identical towar ds the di er ent parties and r emain equal to pr evious year' s co venants. In to tal drawn loans o f NOK 5,971 million ( NOK 6, 607 million) have co venants as described below . Elk em AS A is compliant with its covenan ts at the end of 2021 and 2020 . Covenan ts Elk em group Mov ements in pro vision 2021 Amounts in NOK million T otal E quity T otal Assets Equity r atio EBITDA Net inter es t payable Interest co ver ra tio Amounts in NOK million Opening balance Additional pr ovisions r ecognised Used during the year Rever sal of pr ovisions r ecognised Currenc y tr anslation dier ences Closing balance Her eof non-curr ent Her eof curr ent Closing balance NOK NOK NOK NOK Restructuring 13 - (9) - - 3 - 3 3 31. 12.2020 12 635 30 888 41 % 2 684 234 11.47 Envir onmental measures 5 0 - - - 6 2 4 6 31. 12.2021 19 87 4 41 850 47 % 7 791 209 37 .33 Site r estora tion 29 2 - - - 31 31 - 31 Loan cov enant > 30% > 4.00 T otal pr ovisions 47 2 (9) - - 40 33 7 40 Amounts in NOK million Employee withholding tax es, soc. sec. tax and other public taxes V alue added tax Prepa yments fr om customers Prepa yments fr om r elat ed parties (note 25 ) Pay ables t o rela ted parties (note 25 ) Pro visions Contract obliga tions power Contract obliga tions equity account ed inves tment (note 16 ) Obligation to ﬁnance subsidiary Contingent considera tion rela ted to pur chase of subsidiary Accrued expenses Employee bene ﬁts Deferr ed income, go vernment gr ants Recourse liability f actoring agr eement (not e 18 ) Other liabilities T otal pr ovisions and other liabilities 31. 12.2021 - - - - - 33 - - 37 40 - - - - - 109 31. 12.2021 48 81 51 6 43 7 - - - 163 194 269 5 33 2 902 31. 12.2020 - - - - - 31 - - 37 184 - - - - - 252 31. 12.2020 45 39 27 25 41 16 - 3 - 77 86 244 2 27 - 632 23. Provisions and other liabilities Non-current Current 272 273 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Restructuring Elkem launched a gr oup-wide productivity impr o vement progr amme in the ﬁr st quarter o f 2020 . The amount includes res tructuring and r elated pr oduc tivity impro vemen t expenses. Site rest oration The site r estor ation pr ovisions ar e r elat ed t o the necessary site r emedia tion work that Elk em ASA will have to undertak e in r espect o f its quartz mines. Environmen tal measures Elkem ASA has na tionwide operations r epresenting potential e xposur e tow ar ds envir onmental consequences. Elk em A SA has established clear procedur es to minimise envir onmental emissions, well within public emission limits. The estimat ed pro visions rela te to estima ted clean-up costs in connection with closed landﬁlls. Derivativ es ar e initially r ecognised at f air value at the date on which the contr act is enter ed int o and ar e subsequently r emeasur ed a t their fair value. The me thod of r ecognising the r esulting gain or loss depends on whether the derivativ e is designated as a hedging instrument, and if so, the natur e o f the hedging. Currency e x change contracts Elkem ASA 's T reasury department enter s into forw ar d currenc y con tracts to mitiga te Elk em gr oup 's f or eign currenc y e xposur e. Hedge accounting is no t applied, the contracts ar e classiﬁed as held for trading and book ed at fair value in the income s tatement. Elk em AS A ' s T r easury department also o ers int ernal curr ency hedging f or major pur chase / sale-contr acts enter ed int o by the subsidiaries. Such contrac ts cannot be designated in a hedging rela tionship, hence the changes in f air value ar e r ecognised in the income statemen t. Ther e are no curr ency contracts agains t subsidiaries as at 31 December 2021. Embedded EUR derivativ es in power con tracts ar e designated as hedging instrumen ts in a cash ﬂo w hedge to hedge curr ency ﬂuctua tions in highly pr obable futur e sales, fr om 1 January 2016. Unr ealised e ects ar e fr om that date book ed agains t equity and la ter r eclassiﬁed to r evenue when r ealised. R ealised hedging e ects from such deriv ativ es in 2021 ar e a loss of NOK 31 million (loss of NOK 45 million). See no te 10 Other gains (losses) rela ted to opera ting activities for inf ormation on contrac ts classiﬁed as held f or tr ading. 1) The currenc y e xchange con tracts ar e measured at fair value based on the observed forwar d ex change rate f or contrac ts with a corresponding maturity term, on the balance sheet date. 2) Notional value o f underlying asse t, based on currency rates at 31 December . 3 ) Embedded EUR derivatives in own use po wer contrac ts. Pow er contracts r ecognised at f air value Elkem ASA ent ers into po wer contr acts to meet its need for pow er at the plants. Certain contr acts ar e designated as hedging instruments in a cash ﬂow hedge to mitigat e price ﬂuctua tions in highly pr obable futur e need f or power . The f air value o f these con tracts is based on observable nominal values f or similar contrac ts, adjusted for int er est e ects. In addition, Elk em ASA holds power contracts book ed at fair v alue. The e ective part o f change in f air value o f contracts designated in hedging r elationships is book ed temporarily in equity , and recy cled t o the income statemen t when the hedged it ems are r ealised. Realised e ects fr om the hedging o f futur e need for po wer ar e a gain of NOK 315 million (loss of NOK 56 million) is included in raw ma terials and ener gy f or pr oduction. Any ine ec tive part o f the hedging r elationship is recognised as a part o f other gains (losses) r elat ed t o operating ac tivities, see note 10 Other gains (losses) rela ted to opera ting activities. 24. Financial ins truments Details of currency e x change contracts 31 December 2021 Details of currency e x change contracts 31 December 2020 Purchase currenc y CAD NOK NOK NOK NOK NOK NOK NOK T otal f air v alue Purchase currenc y NOK CAD CAD NOK NOK NOK NOK NOK NOK NOK T otal f air v alue Amounts in NOK million Amounts in NOK million Purchase ccy million 40 1 231 2 169 615 392 709 4 039 Purchase ccy million 5 3 14 1 523 92 377 578 314 621 4 007 Currenc y rate 1,255 10,230 11,655 0,09 2 0,09 8 8,656 10,336 10,888 Currenc y 6,852 1,529 1,326 10,833 12, 160 0,09 4 0,09 5 9,423 10,200 10, 768 Sale ccy million 32 120 0 1 844 6 256 45 69 371 Sale ccy million 1 2 10 141 8 4 014 6 093 33 61 372 Fair value 1) (4) 20 (0) 27 112 (9) 1 (1 8) 129 Fair value 1) (0) (1) 4 44 4 44 59 30 (3 6) ( 190 ) ( 42) Sale currenc y USD EUR GBP JPY JPY USD EUR EUR Sale currenc y CAD EUR USD EUR GBP JPY JPY USD EUR EUR Due 2022 2022 2022 2022 2023-2026 2022 2022 2023-2034 Due 2021 2021 2021 2021 2021 2021 2022- 2025 2021 2021 2022- 2034 T ype of instrument Fwd Fwd Fwd Fwd Fwd Fwd Embedded 2) Embedded 2) T ype of instrument Fwd Fwd Fwd Fwd Fwd Fwd Fwd Fwd Embedded 2) Embedded 2) Notional value 2) 284 1 203 2 141 479 399 686 3 709 Notional value 2) 5 23 89 1 472 88 332 504 284 638 3 896 2 74 275 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Details of power contr acts book ed at f air v alue 31 December 2021 Details of power contr acts book ed at f air v alue 31 December 2020 Amounts in NOK million Forwar d contr acts ﬁnancial institutions Forwar d contr acts ﬁnancial institutions Commodity contr act "30-øringen " 1) Commodity contr act "30-øringen " 1) Pow er con tract with Salt en Energigjen vinning A S (note 25 )" 2) Pow er con tract with Salt en Energigjen vinning A S (note 25 )" 2) T otal f air v alue Amounts in NOK million Forwar d contr acts ﬁnancial institutions Forwar d contr acts ﬁnancial institutions Commodity contr act "30-øringen " 2) Commodity contr act "30-øringen " 2) Commodity contr act Statkr aft, sw ap Pow er con tract with Salt en Energigjen vinning A S (note 25 ) Pow er con tract with Salt en Energigjen vinning A S (note 25 ) T otal f air v alue V olume GWh 98 44 501 4 011 124 1 733 V olume GWh 91 44 501 4 512 201 124 1 733 Fair v alue 23 4 167 163 35 22 414 Fair v alue (3) (3) (2 9) (3 2) (2 0) (2) (27) ( 116 ) Due 2022 2023 2022 2023-2030 2022 2023-2036 Due 2021 2022 2021 2022- 2030 2021 2021 2022- 2035 Notional amount 1) 52 15 157 1 378 32 555 Notional amount 1) 28 15 150 1 454 69 30 568 1) Notional value based on currenc y r ates at 31 December . 2) V olume is not changed from las t year due to delayed con tract commencemen t date. Elkem ASA is o wned 52.9% by Bluestar Elk em International Co . L td S .A., Luxembour g, which is under contr ol of Sinochem Holdings Co ., L td ( Sinochem), a company regis ter ed and domiciled in China. The structur e of the Elk em gr oup is disclosed in not es t o the consolidated ﬁnancial stat ement; note 4 Composition o f the group and in no te 5 Inv estments in equity accounted companies. Details of tr ansactions between Elk em AS A and the par ent compan y , subsidiaries, joint ventur es and associates and r elat ed parties within Sinochem are disclosed below . 25. Related parties 2021 2020 Balances with related parties Amounts in NOK million Bluestar Elkem In ternational Co ., L td. S.A. Related parties within Sinochem Subsidiaries Joint ven tures and associa tes T otal Amounts in NOK million Bluestar Elkem In ternational Co ., L td. S.A. Related parties within Sinochem Subsidiaries Joint ven tures and associa tes T otal Purchase of services - (0) ( 498 ) ( 124 ) ( 623 ) Purchase of services - (9) (262 ) ( 123 ) ( 393 ) Purchase of goods - ( 154 ) ( 664 ) - (8 18) Purchase of goods - (8 8) ( 627 ) - (715) Inter est expenses - - (1 1 ) - ( 11) Inter est expenses - - (25) - (25) Sale of goods - 5 1 461 - 1 465 Sale of goods - 2 1 378 - 1 380 Inter est income - - 129 - 129 Inter est income - - 149 - 149 Sale of services - 20 424 13 457 Sale of services - 28 229 28 285 Amounts in NOK million T rade receiv ables, Bluestar Elk em Inves tment Co. L td. S .A T rade receiv ables, r elated parties within Sinochem T rade receiv ables, subsidiaries T rade receiv ables, joint ven tur es and associates Receivables fr om subsidiaries, inter est -bearing Receivables fr om joint ventur es and associat es, inter est -bearing Inter est r eceivable fr om subsidiaries Receivables fr om subsidiaries, inter est -fr ee Loans fr om subsidiaries, int er est-bearing Other pa yables to r elated parties within Sinochem, in ter est fr ee Other pa yables to subsidiaries, inter es t fr ee T rade payables, Blues tar Elkem In vestment Co . L td. S.A T rade payables, r ela ted parties within Sinochem T rade payables, subsidiaries T rade payables, join t ventur es and associates Prepa yments fr om r elat ed parties within Sinochem Prepa yments fr om subsidiaries Prepa yments fr om join t ventur es and associates Financial power contr act with joint ven tures and associa tes 31. 12.2021 - - - - 3 269 - - - ( 145) - - - - - - - - - 22 31. 12.2021 - - 734 6 447 - 17 10 (2 618 ) - (4 3) (5 ) - ( 534 ) 12 - (0) (6) 35 31. 12.2020 - - - - 3 604 - - - ( 118 ) - - - - - - - - - (27) 31. 12.2020 - 10 428 0 21 - 33 111 (2 036 ) - (4 1 ) (5) (1 4) ( 190 ) (1) (1 4) (0) (1 1 ) (2) Non-current Current 276 277 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact T ransactions with ke y management personnel Informa tion on transactions with k e y management personnel is included in "Report on salary and other remuner ation to leading per sonnel in Elkem ASA for the ﬁnancial y ear 2021" and note 9 Emplo yee beneﬁts in the consolidated ﬁnancial statement. Commitment with relat ed parties Elkem has on 31 January 2022 enter ed into agr eement to pur chase the r emaining 50% o f the shares in its joint ventur e; Salt en Energigjen vinning AS. See no te 27 Ev ents aft er the r eporting period. Information about transactions be tween rela ted parties Elkem f ollows in ternationally accepted principles f or transactions be tween r elated parties. In gener al, Elk em seeks to use transac tion based methods ( comparable uncontr olled price, cost plus and r esale price method) in order t o set the price for the tr ansaction. The majority o f the tr ansactions between r ela ted parties rela te to pr oducts inv olving: → Raw materials ( quartz) fr om quarries t o plants → Metallur gical silicon to Silicones → Electr ode paste fr om Carbon plants to FeSi and Silicon plants → Surplus raw ma terials between plan ts → Ad-hoc supplies of ﬁnished goods to Elk em ’ s internal distribut ors → Purchase o f short and deep-sea transport → Sale of management and technology services → Rent o f plan t f acilities and r elated services → Financial power contr act against Salt en Energigjen vinning AS Elkem ’ s set-up f or sales is based on an agent struc tur e, rather than a distribution ne twork. Elk em also owns companies sourcing k ey raw ma terials and other supplies fr om select ed suppliers world-wide. In bo th activities above, the transac tion between the related parties is a deliver ed service, either sales-service or sourcing-service. Additionally , Elk em has internal help chains tha t ar e established to serve se veral oper ating units more e ciently . Elkem ASA has bo th non-curr ent r eceivables and non- curren t pay ables t o rela ted parties. The gr oup loans are normally int eres t-bearing and in ter est is calculated based on interbank r ates ( for e xample NIBOR ) and a margin. As part of the f actoring agr eement parts o f Elk em ' s trade r eceivables ar e pledged (see no te 18 T rade receiv ables) . The book value o f the pledged asse ts and liability is NOK 33 million ( NOK 27 million) . 26 . Pledge o f assets and guarant ees 27 . E v ents after the r eporting period Guarantee commitments Elkem secur ed 100% ownership of the Elk em Salten energy r ecov ery plan t after acquiring the r emaining 50% share in Salt en Ener gigjenvinning AS fr om K vitebjørn Energi A S on 31 January 2022. The inves tment in the energy r ecov ery plan t further str engthens Elkem ' s e orts t o ensure en vir onmentally friendly silicon and f err osilicon pr oduction with the lowes t possible emissions and lowest possible use o f r esour ces. The inves tment in Salten Ener gigjenvinning AS will be reclassiﬁed fr om joint v entur es to inves tment in subsidiaries after the acquisition. Amounts in NOK million Guarantees giv en on behalf of the operating plants r egar ding envir onmental obliga tions Guarantees giv en on behalf of subsidiaries r egarding ﬁnancing 31. 12.2021 40 576 31. 12.2020 40 375 Declara t ion b y the Boa rd o f Direct ors W e conﬁrm that, to the best of our knowledge, the ﬁnancial statemen ts f or the period fr om 1 January to 31 December 2021 have been pr epar ed in accor dance with applicable standar ds and give a true and f air view o f the group and the compan y’s asse ts, liabilities, ﬁnancial position and results o f opera tions. We con ﬁrm that the Board o f Dir ectors ' report pr ovides a true and f air view of the dev elopment and perf ormance of the business and the position o f the gr oup and the company , together with a descrip tion of the k ey risks and uncertainty fact ors that they are f acing. Y ougen Ge Marianne Elisabeth Johnsen T erje Andre Hanssen Olivier Tillett e de Clermont- T onnerrev Anja-Isabel Dotzenra th Knut Sande Zhigang Hao Chairman of the Boar d Grace T ang Oslo, 8 Mar ch 2022 Helge Aasen CEO Marianne Fær øyvik Dag Jakob Opedal 278 279 Annual r eport 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact KPMG AS Sørkedal sveien 6 Postboks 70 00 Majorst uen 0306 Osl o Telephon e +47 45 40 40 63 Fax Internet www.kpm g.no Enterpris e 935 1 74 627 MVA To the Gener al Meetin g of Elkem ASA Independent Aud itor’s Report Report o n the Audi t of the Fin ancial S tatem ents Opin ion We have a udited the fi nancial state ments of Elkem ASA, wh ich compris e: • The financ ial statemen ts of the par ent company Elkem ASA ( the Company ), which c omprise the balanc e sheet as at 31 Decemb er 2021, the income s tatement an d cash flow statement for the year t hen ended, an d notes to t he financial s tatements, i ncluding a su mmary of s ignificant accounting policies, a nd • The conso lidated fina ncial stateme nts of E lkem ASA and i ts subsidiari es (the Gro up), which comprise t he statement of financia l position as at 31 Dec ember 2021, t he statem ent of profi t or loss , state ment of c omprehens ive income, s tatemen t of changes in equity an d statement of cash flows f or the year then ended, and notes to the financ ial stateme nts, includin g a summary of s ignificant accounting policies. In our opi nion: • the financial stat ements co mply with ap plicable stat utory r equirements, • the financial stat ements giv e a true and fa ir view of the financial p osition of t he Company as at 31 Decemb er 2021, and its financ ial perform ance and its cash flows for the year then ended in accordanc e with the N orwegian Acc ounting Ac t and acc ounting standar ds and pra c tices generally accepted in N orway, and • the financial stat ements giv e a true and fa ir view of the financial p osition of t he Group as at 31 December 2021, and its financial p erformanc e and its cash flows for the year th en ended in accordanc e with Intern ational Financ ial Repor ting Stan dards as adopt ed by the EU. Our opini on is consisten t with our additional re port to the Au dit Comm ittee. Basis f or Opin ion We conducte d our audit in accordanc e with Intern ational Standards on Auditing (I SAs). Our responsib ilities under those st andards are furt her desc ribed in the Auditor’s Res ponsibiliti es for the Audit of th e Financial Statements s ection of o ur report. We are indepe ndent of the Company and t he Group as req uired by laws and re gulations and t he Inter national Eth ics Standar ds Board for Accountants ’ Internati onal Code of Ethics for Professi onal Accounta nts (includ ing Internati onal Independenc e Standar ds) (IESB A Code), and w e have fulf illed our ot her ethical responsib ilities in accordanc e with these r equirements . We believ e that the a udit evidenc e we have obtained is s ufficient and appro priate to prov ide a basis f or our opi nion. To the best o f our know ledge and b elief, no pr ohibited non - audit serv ices referred to in the Aud it Regulation (537/2014) Article 5 .1 have been provided. We have b een the audit or of the C ompany for 6 years fr om the elect ion by the ge neral meeting o f the shareholder s on 20 A pril 2016 for t he account ing year 2016 . Independent A uditor's Report - Elke m ASA 2 Key Audit M atters Key audit ma tters are t hose matter s that, in our pr ofessional j udgment, w ere of mo st significance in our audit of the financ ial statements of the curren t period. T hese matter s were addr essed in the context of our audit of the financial s tatements as a whole, and in formin g our opin ion thereon, and we do not provi de a separ ate opinion on these mat ter s. Assess ment of impairme nt indicators of the c arrying value of property p lant and e quipment Refer to Not e 3 Account ing estim ates and Note 19 Impairme nt assess me nts The key au dit matter How the m atter was ad dressed in our a udit As at 31 Dec ember 20 21 the Group has reported Pr operty, plan t and equipme nt of NOK 15,722 mi llion across several cash - generatin g units (CGUs ). For Proper ty, plant and equipment Manageme nt assess , at each reporti ng date, w hether there is a trigger i ndicating that the carr ying amount of an asset may not be rec overable. Due to th e potential imp act on th e Group's consolidat ed financia l statements g iven the s ize of the bala nce and unc ertainty relat ed to the future econo mic environ ment, and t he auditor judgment req uired when evaluating w hether management' s assumpt ions are reas onable and supportabl e, the asses sment of im pairment indicators of the carry ing value of Property, plant and equip ment was cons idered to be a key audi t matter. One CGU w ithin the Si licones s egment (Silicones ) excluding J iangxi Bl uestar Xingh uo Silicones, Elkem Silic on Materia ls (Lanzhou), Elkem Sil icones Korea a nd Polysil, w hich are tested se parately for impairment tr iggers, with a carrying v alue of NOK 5,356 million w as identifie d to have impair ment indica tors due to increased raw material costs and pres sure on sales prices . As the rec overable amo unt exceeded the carrying v alue, the CGU was ass essed not to be im paire d. Our audit pr ocedures p erformed t o assess impairment indicators included : • As sessing mana gement's process and results for ident ification and c lassificat ion of CGUs t o ensure they were appr opriate an d in accordanc e with releva nt accountin g standards; • O btaining an un derstandin g of manage ment’s process and testing d esign and implement ation of the m anagements c ontrol around th e impairment tr igger ass essment; • Ev aluating manag ement’s impa irment trigger assess ment and assess ing any ad ditional potential ind i cators of i mpairment thr ough external an d internal tr igger ind icators; When imp airment trigg ers were iden tified, our procedures f or the relev ant CGUs included: • Ev aluating and challenging the forecas ted cash flows including t iming of fut ure cash flows app lied in the m odels with reference to historica l accuracy an d approv ed business plans; • Ev aluating key assumption s such as forecasted s ales pric es, raw mat erial prices , inflation r ates, energy pr ices and r elevant foreign exc hange rates c ompared ag ainst exter nal s ources; • As sessing, with the assist ance of KPMG valuation s pecialists , the mathemat ical and methodolo gical integr ity of manage ment's impairment models and the reasona bleness of discount r ates applied w ith referenc e to market data; and • Ev aluating the adequacy a nd appropriate ness of the dis closures in th e financia l statements related to the carrying v alue of pr operty, plant and equipment . 280 281 Annual r eport 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Independent A uditor's Report - Elke m ASA 3 Other Infor mation The Board of Directors and the Managing Dir ector (ma nagement) ar e responsi ble for the informatio n in the Board of Director s’ report an d the other information ac company ing the finan cial statements . The other infor mation compr ises inform ation in the annual report, but does not inclu de the financ ial statements and our au ditor’s r eport thereon. O ur opinion on the financi al statement s does not c over the informat ion in the Board of Directors’ report nor the oth er informati on accomp anying the fi nancial statements . In connec tion with our a udit of th e financial s tatements, our respons ibility is to read the Boar d of Directors ’ report and t he other in formation acc ompanying the financi al statements . The purpos e is to consider if there is mat erial incons istency betw een the Board of Direc tors’ report and the other informat ion accompany in g the financ ial statement s and the f inancial stat ements or our knowledge obtained i n the audit, or whether t he Board of Directors ’ report and the oth er accompany ing informat ion otherwise appears to be materially misstated. We are req uired to repo rt if there is a material m isstatement in the Boar d of Director s’ report or the other inf ormation ac companying the financial s tatements. We have nothi ng to repor t in this regard. Based on our knowledge obtained in the audit, it is our opi nion that the Board of D irectors’ r eport • is consis tent with the f inancial st atements and • contains the informa tion require d by applicab le legal requ irements. Our opini on on the Boar d of Director ’s report applies cor respondingly to the boar d of direct ors’ report on C orporate G overnanc e and the Env ironmenta l, Social and Governance report . Responsibi lities of M anagement for the Financ ial Statements Management is respons ible for the preparation of financ ial statements t hat give a t rue and fa ir view in accordanc e with the Nor wegian Accou nting Act an d accounti ng standar ds and prac tices general ly accepted in Norway, and for the pre paration an d true and fa ir view of t he consolid ated financi al statements of the Group in accordanc e with Intern ational Financ ial Repor ting Stan dards as adopt ed by the EU, and for such internal cont rol as mana gement det ermines is nec essary to en able the preparatio n of financi al statemen ts that are fre e from mater ial miss tatement, whe ther due to fr aud or error. In preparin g the financ ial statem ents, manage ment is r esponsible for assessin g the Company ’s and the Group’s ability to c ontinue as a going concer n, disclos ing, as app licable, matte rs related to going concern. The financial s tatements o f the Compa ny use the g oing concer n basis of ac counting insof ar as it is not likely that th e enterpr ise will ceas e operatio ns. The conso lidated fin ancial state ments of th e Group use t he going co ncern basis of accountin g unless management eith er intends t o liquidate th e Group or t o cease opera tions, or has n o realistic alternative but to do s o. Auditor’s Responsibil ities for the Audit of th e Financial Stat ements Our objec tives are to o btain reasona ble assuranc e about wh ether the fin ancial stat ements as a w hole are free fr om materia l misstatement, whether d ue to fraud or er ror, and to issue an auditor’s re port that includes o ur opinion. R easonable assurance is a high level of assur ance, but is n ot a guarante e that an audit c onducted in accordance w ith ISAs will always detect a material misstate ment when it ex ists. Misstatemen ts can ar ise from frau d or error and are cons idered materi al if, indivi dually or in a ggregate, they cou ld reasonably b e expected t o influence the economic d ecisions of us ers taken o n the bas is of these fina ncial stateme nts. As part of a n audit in ac cordance with ISAs, we ex ercise pr ofessional j udgment and m aintain professio nal scepticis m throughout the audit. We a lso: • identify and assess t he risks of mat erial miss tatement of the financ ial statement s, whether due to fraud or er ror. We des ign and per form audit pr ocedur es responsive t o those risk s, and obtain aud it evidence th at is s ufficient and a ppropriate to provide a basis for o ur opinion . The risk of not detecting a material mis statement r esulting fr om fraud is hig her than for one Independent A uditor's Report - Elke m ASA 4 resulting fro m error, as fraud may involve col lusion, for gery, intentio nal omissions , misreprese ntations, or the over ride of intern al contro l. • obtain an u nderstanding of internal c ontrol relev ant to the a udit in order to design audit procedures t hat are a ppropriate in t he circumstanc es, but not f or the purp ose of ex pressing an opinion o n the effective ness of the Company's or the G roup's inter na l control. • evaluate the appropria teness of accounting po licies us ed and the re asonableness of accounting estimates a nd related disclosures made by man agement. • conclude on the appropri ateness of managemen t’s use of the going conc ern basis of accounting, a nd , based o n the audit ev idence obtai ned, whether a material u ncertainty exists related to events or c onditions that may cast sign ificant doubt on the Com pany and the Group's ab ility to conti nue as a goin g concern. If w e conclude t hat a materi al uncert aint y exists, we ar e required to draw atte ntion in our auditor’s report to the re lated disc losures in the financial s tatements or , if such dis closures ar e inadequate, to modify our opinion. Our conclusio ns are based on the audit ev idence obt ained up to the date of our auditor ’s report. However, f uture events or conditi ons may caus e the Company and the Gr oup to ceas e to continue as a going conc ern. • evaluate the overall pres entation, s tructure an d content of the financ ial statements , includ ing the disclos ures, and w hether the f inancial sta tements r epresent the und erlying tra nsactions and events in a manner t hat achiev es a true an d fair view. • obtain suffic ient appro priate audit evidence re garding the f inancial infor mation of t he entities or business activities wi thin the G roup to express an opinion on the cons olidated fin ancial statements . We are res ponsible for the directi on, super vision and per formance of the group audit. We re main solely r esponsible for our au dit opinion. We commu nicate with t he Board of D irectors reg arding, am ong other m atters, the plann ed scope a nd timing of t he audit and s ignificant audit findin gs, includi ng any sign ificant defic iencies in internal contr ol that we iden tify durin g our audit. We also pr ovide the A udit Committ ee with a stat ement that we have com plied wit h relevant eth ical requireme nts regardin g independenc e, and to c ommunicate with them all relations hips and other matters t hat may reaso nably be th ought to bear on our ind ependence, a nd where app licable, rel ated safeguards . From the ma tters comm unicated w ith the Board of Director s, we determ ine those matters that were of most signif icance in the audit of th e financia l statemen ts of the curr ent period and are theref ore the key audit ma tters. We d escribe thes e matters in our auditor’s report unles s law or r egulation prec ludes public dis closure abo ut the matter or when, in extremely rare circums tances, we d etermine that a matter shou ld not be com municated in our rep ort because the adverse co nsequenc es of doing s o would reaso nably be ex pected to ou tweigh the public interes t benefits of such co mmunication. 282 283 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Independent A uditor's Report - Elke m ASA 5 Report o n Other L egal and Regul atory R equir ements Report on c ompliance w ith Regulat ion on Europe an Single E lect ronic Format (ESEF) Opinion We have p erformed an as surance e ngagement to obtain reaso nable ass urance that th e financial statements with file n ame “ 549300C VBE06T0SH6T 76 - 2021 - 12 - 31 - en ” have been prepare d in accordanc e with Sect ion 5 - 5 of the N orwegia n Securiti es Trading Act ( Verdipapirh andelloven) and the accompany ing Regulati on on Europ ean Single Electronic F ormat (ESEF) . In our opini on, the fin ancial stateme nts have be en prepared, in all mater ial respect s, in accorda nce with the re quirements of ESEF. Manage men t’s Responsi bilities Management is respons ible for prep aring, tagg ing and pub lishing the fin ancial st atements in t he single electronic reporting for mat requir ed in ESEF. Th is respons ibility com prises an ad equate proces s and the intern al control proc edures which manage ment deter mines is nec essary for th e preparati on, tagging an d publicat ion of the fina ncial stateme nts. Auditor’s R esponsibilities Our respons ibility is t o express an opinion on w hether the f inancial state ments hav e been prepare d in accordan c e with ESEF. We conducte d our work in accordance with the Inter national Sta ndard for Assurance E ngagemen ts (ISAE) 3000 – “Assuranc e engagem ents other th an audits or r eviews of historica l financial infor mation”. The standard r equires us to plan and perf orm proc edures to obt ain reasonable assurance t hat the financ ial stateme nts have bee n prepared in accordanc e with the European S ingle Electr onic Format. As part of o ur work, we performed pr ocedures to o btain an u nderstanding of the company ’s proces ses for prepar ing its financ ial statem ents in the European Sin gle Electro nic Format. We evaluate d the complete ness and acc uracy of the i XBRL tagging and ass essed manageme nt’s use of j udgement. O ur work compr ised reconci liation of the financial st atements tagg ed under t he Europe an Single Elec tronic Format with the audit ed financial s tatements i n human - readable format . We belie ve that the ev idence we have obt ained is suff icient and a ppropriate t o provide a b asis for our op inion. Oslo , 9 March 2022 KPMG AS Øyvind Skor gevik State Auth orised Publ ic Accounta nt 284 285 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Appendix - Alter nat iv e P er f or mance Measures ( AP Ms ) An APM is de ﬁned as a ﬁnancial measur e of hist orical or future ﬁnancial performance, ﬁnancial position, or cash ﬂow s, other than a ﬁnancial measur e deﬁned or speciﬁed in the applicable ﬁnancial r eporting framew ork (IFRS ). Elkem uses EBITD A and EBITDA mar gin to measure oper ating perf ormance at the gr oup and segment lev el. In particular , Management regar ds EBIT and EBITDA as use ful performance measur es at segment lev el because income tax, ﬁnance e xpenses, for eign e x change gains (losses), ﬁnance income and other items ar e managed on a gr oup basis and ar e not allocat ed t o each segment. Elk em uses cash ﬂo w from oper ations to measur e the segments cash ﬂow performance, this measur e is e xcluding it ems tha t ar e managed on a group le vel. Elk em uses ROCE, or r eturn on capital employed as measur es o f the de velopment of the gr oup ’ s r eturn on capital. Elk em relies on these measures as part o f its capital allocation str ategy . Elkem uses net inter est -bearing debt less non-curr en t inter est - bearing assets / EBITD A as le ver age ra tio f or measuring the group ' s ﬁnancial ﬂexibility and ability f or step- change gro wth and acquisitions. The APMs pr esented herein ar e not measur emen ts of performance under IFRS or o ther gener ally accepted accounting principles and should not be consider ed as a substitute for measur es o f performance in accor dance Elk em’ s ﬁnancial APMs, Cash ﬂow from oper ations → Cash ﬂow fr om oper ations is deﬁned as cash ﬂow from oper ating activities, less income tax es paid, inter est pa yments made, inter est pa yments r ecei- ved, changes in pr ovision, pension obliga tions and other changes in fair v alue commodity contr acts, other items ( fr om the s tatemen t of pr oﬁt or loss) and including rein vestmen ts. → Reinves tments generally consist o f maintenance capital expenditur e to maintain e xisting activities or tha t involv e inves tments designed to impr ov e health, saf ety or the envir onment. 1) Periodisations reﬂec ts the dier ence between paymen t date and accounting date o f the inv estment. with IFRS. Because companies calculat e the APMs presen ted her ein dier ently , Elk em’ s presentation o f these APMs may not be comparable to similarly titled measures used b y other companies. Elk em’ s ﬁnancial APMs, EBITDA and EBIT → EBITDA is deﬁned as Elk em ’ s proﬁt (loss) for the year , less income tax ( e xpenses) beneﬁts, ﬁnance expenses, for eign exchange gains (losses) , ﬁnance income, share o f pr oﬁt fr om equity accoun ted ﬁnan- cial investmen ts, other items, impairmen t loss and amortisation and depr eciation. → EBITDA mar gin is deﬁned as EBITD A divided by total oper ating income. → EBIT , also re ferr ed to as operating pr o ﬁt (loss) bef ore o ther items is deﬁned as Elk em’ s pr oﬁt (loss) for the year , less income tax ( e xpenses), ﬁnance expenses, for eign exchange gains (losses) , ﬁnance income, share o f pr oﬁt fr om equity accoun ted ﬁnan- cial investmen ts and other items. Below is a r econciliation o f EBIT and EBITDA → Strategic in vestmen ts generally consist o f in vest - ments which r esult in capacity incr eases a t Elkem ’ s existing plan ts or tha t involv e an inves tment made to meet demand in a new geogr aphic or produc t ar ea. Below is a split of the items included in in vestment in property , plant and equipment and intangible asse ts Amounts in NOK million Pro ﬁt (loss) f or the y ear Income tax ( e xpense) beneﬁt Finance expenses For eign ex change gains (losses) Finance income Share o f pro ﬁt from equity accounted ﬁnancial inves tments Other it ems EBIT Impairment losses Amortisa tion and deprecia tion EBITDA Amounts in NOK million Pro ﬁt (loss) for the y ear Income tax ( e xpense) beneﬁt Finance expenses For eign ex change gains (losses) Finance income Share o f pro ﬁt from equity accounted ﬁnancial inves tments Other it ems EBIT Impairment losses Amortisa tion and deprecia tion EBITDA 2021 2020 Silicon Produc ts 3 154 3 702 Silicon Produc ts 685 1 221 Eliminations (4 6) (4 6) Eliminations (3 4) (3 4) Carbon Solutions 360 508 Carbon Solutions 349 438 Elkem 4 664 1 163 276 (241) (4 0) (3 7) 114 5 899 76 1 816 7 791 Elkem 278 306 278 (1 7 ) (3 1) 15 130 957 17 1 710 2 684 Silicones 2 528 3 672 Silicones 269 1 326 Other (9 7) (4 4) Other ( 312) (267 ) 2021 ( 1 657) ( 1 717) 245 ( 3 128 ) Amounts in NOK million Reinves tments Strategic in vestmen ts Periodisations 1) Investmen ts in property , plant and equipment and intangible assets 2020 ( 1 387 ) ( 835) 22 (2 201 ) 286 287 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Elk em’ s ﬁnancial APMs, ROCE → ROCE, Return on capital employ ed, is deﬁned as EBIT divided by the aver age capital employ ed, where capital emplo yed comprises w orking capital, property , plant and equipment, right -of -use assets, investmen ts equity accoun ted companies and trade payables and pr epa yments r elated to pur chase o f non-curren t assets. → W orking capital is deﬁned as accounts r eceivable, invent ory , other curr ent asse ts, accounts pay able, employee bene ﬁt obligations and other current liabilities. Accounts r eceivable ar e de ﬁned as tr ade receiv ables less bills r eceivable. Other curr ent assets ar e deﬁned as o ther curren t assets less curren t r eceivables to r elated parties, curr ent inter est -bearing r eceivables, tax r eceivables, gr ants receiv able, assets a t f air value thr ough pr oﬁt or loss and accrued inter est income. Accoun ts payable are de ﬁned as trade pay ables less trade pa yables rela ted to pur chase of non-curr ent asse ts. Other curren t liabilities ar e deﬁned as pr ovisions and o ther curren t liabilities less curr ent pr ovisions, contingen t considerations, con tract obliga tions and liabilities t o rela ted parties. → Capital employed consis ts of working capital as deﬁned abov e, pr operty , plant and equipment, right-o f -use assets, in vestmen ts equity account ed companies, grants pa yable, trade pa yables and prepa yments r elat ed to pur chase of non-curr ent assets. → Av erage capital emplo yed is deﬁned as the a verage of the opening and ending balance of capital employed f or the r ele vant r eporting period. Below is a r econciliation o f w orking capital and capital employed, which ar e used to calcula te ROCE: 31. 12.2021 7 716 4 297 ( 990 ) 3 307 1 551 - (1 ) ( 493 ) (237) (1 4) (1 ) 806 4 614 ( 605) 4 008 976 1 657 ( 454 ) ( 32) 1 172 5 673 15 722 1 017 241 ( 15) ( 581) 22 055 Amounts in NOK million Invent ories T rade receiv ables Bills receiv able Accounts receiv able Other asse ts, curren t Inter est -bearing receiv ables Other r eceiv ables t o rela ted parties inter est fr ee Grants r eceivables T ax receiv able Assets at fair value thr ough pr oﬁt or loss Accrued inter est Other curr ent assets included in w orking capital T rade payables T rade payables r ela ted t o purchase o f non-curren t assets Accounts pay ables included in working capital Employ ee beneﬁt obligations Pro visions and other liabilities, curr ent Pro visions, contingent consider ations and contr act obligations Liabilities to r ela ted parties Other curr ent liabilities included in working capital W orking capital Property , plant and equipment Right-o f -use assets Investmen ts equity account ed companies Grants pa yable T rade payables- and pr epa yments r elated to pur chase of non-curr ent assets Capital employ ed 31. 12.2020 5 241 2 796 ( 920 ) 1 875 1 212 - (0) ( 525) ( 105 ) - (1) 581 3 157 ( 448 ) 2 709 74 0 1 064 (287 ) (6 4) 713 3 536 14 131 875 183 (1 5) ( 381) 18 329 Capital employ ed and working capital 2021 4 913 423 242 (3 4) 88 9 114 ( 1 657) 4 100 Amounts in NOK million Cash ﬂow fr om operating activities Income taxes paid Inter est paymen ts made Inter est paymen ts receiv ed Changes in pro visions, bills r eceivables and other Changes in f air v alue commodity con tracts Other it ems Reinves tments Cash ﬂow from oper ations 2020 2 111 192 239 (2 8) 69 196 130 ( 1 387 ) 1 522 288 289 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Elk em’ s ﬁnancial APMs, Lev erage ra tio → Net int eres t-bearing deb t tha t is used to measur e lever age ra tio is ex cluding non-curr ent o ther res tricted deposits, r eceiv ables fr om r elat ed parties, loans t o external parties and accrued in ter est income. These assets ar e not easily av ailable to be used t o ﬁnance the gr oup 's opera tions. Below a calculation of Elk em ' s leverage ra tio. Lever age ratio 31. 12.2021 ( 4 776 ) ( 41) (1 ) (8) (1 ) ( 4 827) 7 791 0,6 Amounts in NOK million Net inter es t-bearing assets / (liabilities) Other r estric ted deposits, non-curr ent Receivables fr om rela ted parties Loans to ext ernal parties Accrued inter est income Net inter est-bearing assets / (liabilities) less non-curr ent inter est-bearing assets EBITDA Lever age ratio 31. 12.2020 ( 8 009 ) (3 9) (1) (8) (1) ( 8 058 ) 2 684 3,0 290 291 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact Pricewater houseCoopers AS, Postboks 748 Sentrum, NO-0106 Oslo T: 02316 , org. no.: 987 009 713 MVA, www.p wc.no Statsautoriserte revisorer, medlemmer av Den norske R evisorforening og autorisert regnskapsfør erselskap To the Board of Directors in Elkem ASA Independent auditor’s statement We have undertaken a limited assuranc e engagement on Elkem ASA’s GRI Index for 2021 and key performance indicators for t he material topics presented in the GRI index. • Elkem's GRI Index for 2021 is an overview of which sustainability top ics Elkem considers material to its business an d which key performance indicators Elkem uses to measure and report its sustainability perf ormance, together with a reference to where material s ustainability information is reported. E lkem’s GRI Index for 2021 is availab le at https://www.elkem.com/sus tainability/esg-rep orting . We have exam ined whether Elkem has developed a GRI Index for 2021 and whether mandato ry disclosures are presented ac cording to the Standards published by the Global Reporting Initiat ive ( www.globa lreporting.org/standards ) (criteria). • Key performance indicators for sustainability are available and inc luded in Elkem’s ESG report for the period ending 31 De cember 2021, specifically in the sec tions "CO2 emissions and mitigation", "Other emissio ns to air", "Energy man agement" and "Waste mana gement and circularity", “Water manage ment”, “Health and safety”, “Human Rights”, “Product governance” and “Supply chain manage ment” of the chapter titled “ESG re port”. The indicators are also available in Elkem’s GRI In dex for 2021 . Elkem has defined the key figures and explained how they are measured in t he qualitative disclosures prese nted alongside the indicators in the annual report (criteria). We have examined the basis fo r the measurements and checked the calculations of the m easurements reported in th e ESG report. Tasks and responsibilities of manage me nt Management is responsib le for Elkem ’s sustainability r eporting and for ensurin g that it is prepared in accordance with the criteria described above. Their res ponsibility includes d esigning , implementing and maintaining internal co ntrols that ensure t he development and reporting of th e GRI Index and key performance indicators for sustainabi lity . Our independence and quality control We are independent of the company in accordance with appl icable laws and regulations and the Co de of Ethics for Professional Accountants (IESBA Code) and w ith the ethical requirements that are relevant to our independent statement, and we have fulfilled ou r ethical obligations in accordance with these requirements and IE SBA Code. We use ISQC 1 - Quality Control for Firms that Perform Audits and Reviews of Financial S tatements, and Other Assurance a nd Related Services Engagemen ts a nd maintains a compre hensiv e quality control sy stem including documented policies and procedures of the ethical standards, profe ssional standards and applic able legal and regulatory claim . T he Auditor ’ s responsibilitie s Our task is to express a limited assurance conclusio n on Elkem ’s sustainability reporting b ased on the procedures we have perf ormed and the evidence we hav e obtained. We have performed our work and will issue our statement in accordance with the Standard on Assurance En gagements ISAE 3000: (2) “Assurance engagements o ther than audits or review of histor ical financial information". A limited assurance engagement is substantially less in scope th an a reasonable assurance engagemen t in relation to both the risk ass essment procedures, including an understanding of internal control, and the procedures performed in response to the assess ed risks. Our work involves perfor ming actions to obtain eviden ce that Elk em 's GRI Index for 202 1 and key performance indicators for sustainability are dev eloped in accordance with the St andards published by the Global Reporting In itiative and the criteria for repor ting and measurement that are ex plained in relation to the key performanc e indicators for sustaina bility. The procedures s elected depend on our judgment, including ass essments of the risks that the s ustainability reporting contains ma terial misstatement, whether du e to fraud or error. In makin g those risk assessments, w e take into account the internal control that is r elevant for the prepar ation of the sustainability reporti ng. The purpose is to design control procedures t hat are appropriate in the ci rcumstances, but not to express an op inion on the effectiveness of interna l control. Our procedures include an assessment of whether the crit eria us ed are appropriate, as well as an assessment of the overall p resentation of the sustainability rep orting. Our procedures include meetings with representat ives from Elke m who are responsible for t he material sustainability top ics covered by the susta inability reporting; review of internal con trol and routines for reporting key performance indicators for sustainability; obtaining and rev iewing relevant information that sup ports the preparation of key perfo rmance indicators for sustainability; ass essment of completeness and accuracy of the sustainab ility reporting; and controlling the ca lculations of key performance in dicators for sustainability based o n an assessment of the risk of error. We believe that the eviden ce we have obtained is sufficient and a ppropriat e to provide a basis for our conclusion. Limited Assurance Co nclusion Based on the procedures we have performed and the evidence we have obtained, not hing has come to our attention that causes us to believe that • Elkem ’s G RI Index for 2021 is not, in a ll material respects, developed and prese nted in accordance with the requ irements of the Standards published by The Global Reporting Initiative; • Elkem ’s k ey performance indicators are n ot, in all material aspects, devel op ed, m easured and reported in accordance wit h the definitions and explanations provided in relation to the key performance indicators. Oslo, 11 March 20 2 2 PricewaterhouseCoopers AS Anders Ellefsen State authorized public acc ountant (Norway) 292 293 Annual report 2021 Elkem his tory Highlights L etter from the CEO The business The Elk em shar e Board o f dir ectors’ r eport Boar d and management Corpo ra te g ov erna nce Risk managment ESG report Financial sta tements ESG assurance Con tact El k em AS A Visiting address: Drammensv eien 169 , 0277 Oslo, Norw ay Postal addr ess: P . O . Bo x 334 Sk øy en, NO-0213 Oslo T: +47 22 45 01 00 F: +47 22 45 01 55  .elk em.no 294

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