Annual report 2020

Hydro's reporting 2020

The enclosed Financial statements and Board of Directors' report, together with the accompanying notes, fulfills Hydro's Norwegian statutory requirements for annual reporting. The remainder of the Annual Report includes additional information about Hydro's business, viability performance, financial and operating performance, shareholder information and corporate governance.

The "Annual report - 2020" is available in PDF-format on our website www.hydro.com in English. The "Financial statements and Board of Directors' report - 2020" is also available in PDF-format as a separate document in both English and Norwegian. All parts of the reports can be downloaded and printed in PDF-format, together with additional, supplementary information. Paper copies of the reports can also be ordered on our website.

Throughout the report, Hydro refers to Norsk Hydro ASA and its consolidated subsidiaries if not otherwise stated.

Content

12 Board of Directors' report

Hydro's Board of Directors' report for 2020 is prepared in accordance with the Norwegian Accounting Act.

40 Business description

Detailed strategy and operating information are provided for each of Hydro's business areas including an overview of industry developments. Key regulatory and taxation information are also included.

74 Performance and targets

Hydro's performance in 2020 and targets going forward.

86 Viability performance

The section describes our materiality analysis, policy, strategy and main results within environmental and social topics as well as innovation.

112 Risk review

Hydro's major risks, with mitigating actions, are described in this section, including financial position, key financial exposures and legal proceedings.

124 Shareholder information

Shareholder information includes share price development, dividend policy, funding and credit rating policy, the Annual General Meeting and the financial calendar for 2021.

130 Corporate governance

Hydro's corporate governance practice is described in relation to regulatory compliance, corporate directives, codes of conduct and governance bodies.

140 Financial statements

Hydro's consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS) are provided, together with the financial statements for the parent company Norsk Hydro ASA prepared in accordance with Norwegian accounting principles.

230 Viability performance statements

The environmental statements include key information about Hydro's environmental performance. The social statements include key information related to Hydro's workforce and interaction with the communities we are part of.

278 Appendices to the Board of Directors' report

Information under the Board of Directors' formal responsibility and exceeding the requirements of the Board of Directors' report includes Alternative Performance Measures; Country by country report; Diversity and Inclusion report; Modern slavery transparency statement; and Norwegian code of practice for corporate governance.

313 Additional information

Terms and definitions.

Yearin brief

Progresstowards profitability and sustainability in an extraordinary year

In 2020, Covid-19 created significant social, operational and market challenges. In response, Hydro focused on providing a healthy and safe work environment, maintaining operations and positioning for the future. Hydro's underlying EBIT increased to NOK 6,051 million from NOK 3,359 million for 2019. Hydro also progressed on sustainability goals throughout the year, with key climate, environmental and social ambitions remaining on track.

Our top priority is the health and safety of our people and the communities where we operate. During the Covid-19 pandemic many plants across our global organization have supported authorities, local NGOs, institutions and organizations to address local needs. One example of our progress on environment and safety relates to the tailings dry backfill project. The application of this approach in Paragominas represents the end of construction of new facilities for storage of bauxite tailings.

Hydro exceeded its improvement target, achieving NOK 4.2 billion for 2020 compared to 2018, supporting the positive cash flow generation for the year. During Capital Markets Day 2020, Hydro announced an extension and higher ambition to the original improvement program.

■ Hydro present

Based in Norway, Hydro has 34,000 employees involved in activities in 40 countries.

Key figures

Amounts in NOK million unless other unit indicated	2020	2019	2018
Revenue	138,118	149,766	159,377

Underlying EBIT
Hydro Bauxite & Alumina	1,806	974	2,282
Hydro Aluminium Metal	1,225	(1,259)	1,762
Hydro Metal Markets	728	983	686
Hydro Rolling	70	413	413
Hydro Extrusions	2,196	2,009	2,390
Hydro Energy	974	1,243	1,846
Other and eliminations	(948)	(1,003)	(310)
Total	6,051	3,359	9,069
Net Income	1,660	(2,370)	4,323
Underlying return on average capital employed (RoaCE), percent	3.7%	1.3%	6.6%
Investments	14,174	10,907	7,614
Total assets	164,408	164,401	164,928
Share price year-end, NOK	39.86	32.64	39.21
Dividend per share, NOK	1.25	1.25	1.25

Number of employees, year-end	34,240	36,310	36,236
Recordable injuries, per million hours worked	2.7	3.0	3.4
Greenhouse gas emissions, million tonnes CO2e	8.95	8.62	8.55

6,051 MNOK

Underlying EBIT

Increased result driven by the ramp-up of Alunorte's production, reduced raw material costs and positive currency effects were partly offset by reduced realized alumina and aluminium prices, and reduced downstream volumes.

7.7 BNOK

Free cash flow

Net cash flow from operations in 2020 amounted to 13.5 BNOK, supported by 2.4 BNOK in net operating capital release. Net investments amounted to 8.3 BNOK.

8.95 mt CO2e

Greenhouse gas emissions

Hydro's main inputs and outcomes 2020

Text in italics reflects mainly negative impacts.

Hydro and theUNSustainable development goals

The UN Sustainable Development Goals (SDGs) embrace a universal approach to the sustainable development agenda. They explicitly call on business to use creativity and innovation to address development challenges and recognize the need for governments to encourage sustainability reporting. Hydro has an impact on all of the 17 development goals, but some more than others. Of the 17, Hydro has chosen eight goals that are the most important to us, that are highlighted throughout the report.

Emerging strongerfrom an extraordinaryyear

The pandemic put us all to the test. It challenged our operations, our employees, our customers and the world around us. Yet, Hydro managed an extraordinary 2020 carefully, emerging stronger and well positioned to deliver on our agenda to become a profitable and more sustainable industry leader.

I'm grateful and impressed by how our organization kept the wheels turning, delivering on the improvement ambitions and positioning Hydro for the future, while at the same time always putting health and safety first.

Our No 1 priority is to ensure our employees come home from work safely. I am happy that our safety performance overall improved in a difficult year. The rate of recordable injuries per million work hours improved to 2.7 in 2020 from 3.0 in 2019. We had no fatalities in our operations, and we have maintained a strong focus on high-risk incidents. We can never rest in our safety work. The ultimate target is an injury-free work environment.

Sadly, we are mourning the loss of eight good colleagues to the Coronavirus in 2020. Our thoughts go to their loved ones, their families, friends and colleagues.

Lifting profitability, driving sustainability

At our investor day in September 2019, we set a new and ambitious agenda for the company to lift profitability and drive sustainability. Earnings had simply been too low for too long time.

We launched several initiatives, including a new ambitious improvement program, a strategic review of the Hydro Rolling business area, a new capital allocation framework, and we set a clear target for profitability to deliver a return on capital of at least 10 percent over the cycle. We also set new sustainability ambitions, including a target to reduce our own CO2 emissions by 30 percent by 2030.

We have made significant progress towards all these ambitions.

We have accelerated our improvement efforts in 2020. Our extended program targets NOK 8.5 billion by 2025 across all business areas and staffs. I am happy that we exceeded our improvement target and achieved savings of NOK 4.2 billion for 2020, amounting to about half of the overall 2025 ambition.

In March 2021, we reached another milestone with the finalization of the strategic review of the Rolling business and with a conclusion to sell the business to the US-based private equity firm KPS Capital Partners. The agreement, expected to be finalized in the second half of 2021, marks

another step towards making Hydro a profitable and more sustainable industry leader – to the benefit of our employees, our customers and our shareholders.

Amid all the challenges, I am impressed by how unexpected events tend to spur a willingness in our organization to go the extra mile. We take inspiration from our ability to mobilize as we face another important transformation: The green transition.

Hydro 2025

In 2020, we established a new strategic direction toward 2025, building on our profitability and sustainability agenda. We will pursue our strategic ambition by capturing opportunities where our capabilities match the global megatrends such as sustainability, electrification and urbanization.

We have a great starting point, with a unique position within renewable energy-based low-carbon aluminum as well as recycled aluminium, and with strong capabilities in renewable energy, built up throughout our 115-year-history.

Based on our capabilities and the megatrends, our strategic direction towards 2025 is based on two pillars: It's about strengthening our position in low-carbon aluminium, while exploring new growth opportunities in areas such as recycling, renewable energy and batteries.

Our ability to deliver on our strategic ambition rests on our ability to ensure robustness and profitability in all business areas, freeing up cash and allocating fresh capital where we see potential for greatest return.

1. Strengthening our position in low-carbon aluminium We will strengthen our position in low-carbon aluminum, and we have a good starting point as 70 percent of the electricity used in Hydro's primary production is based on renewable power. We're sustaining and improving our facilities, ensuring robustness and competitiveness, while reducing our climate footprint across the value chain from bauxite, alumina and aluminium production to recycling, aluminium extrusions and solutions.

We reached an encouraging milestone in 2020 by verifying our Karmøy Technology Pilot in Norway, where we produce primary aluminium with 15 percent lower specific energy consumption and significantly lower greenhouse gas emissions compared with the world average. Many of the same technology elements were implemented in the upgrade at the Husnes aluminium plant in Norway, which is ramping up to full capacity after running at half capacity since the financial crisis in 2009.

Lowering our emissions enables us to further develop our low-carbon aluminium products, and we are seeing promising traction in the market for Hydro REDUXA and Hydro CIRCAL. We expect sales for Hydro REDUXA and Hydro CIRCAL to continue to grow, as customers and consumers are demanding and increasingly willing to pay for low-carbon and circular products and solutions.

2. Diversify and grow in recycling, renewable energy and batteries

As part of our new strategic direction, we will also grow in new areas, including recycling, renewable energy and batteries.

The world needs to produce more for less, making recycling a great potential for us. We will build capability to double postconsumer scrap volumes through organic and inorganic growth, with several promising projects in the pipeline.

We also want to build on our competence, portfolio and more than 100 years of renewable energy development to become an international renewable energy developer. We aim to go from being an energy off-taker of power to an international renewable energy developer and increase our captive production in wind, solar and hydropower in partnership with others.

By merging parts of our hydropower production assets into the new hydropower company, Lyse Kraft DA, in 2020, we secured a crucial part of Hydro's renewable energy sourcing for the future. Hydro is now Norway's third-largest power operator.

We also see potential in the batteries sector. With capabilities and experience in materials, electrochemistry, energy and manufacturing, and a long-term relationship with European automotive producers, we have a unique opportunity to take a lead role in the rapidly growing battery sector.

In 2020 we started construction of a pilot plant for the recycling of electric vehicle batteries, via HydroVolt, a 50/50 joint venture with Swedish Northvolt with a promising future.

With the new strategy towards 2025, Hydro has gone from being one long value chain within aluminum, to now pursuing a strategy built on two pillars: low-carbon aluminium and renewable energy. This is how we will create value going forward.

Leading the way

Based on our DNA as a responsible industrial company for more than a century, Hydro is engaging with a range of international organizations, working to improve industry standards for human rights, transparency and responsible production. Hydro is a signatory to the UN Global Compact and a committed member of the Aluminium Stewardship Initiative (ASI).

We are progressing on our work to strengthen local community relations, communities and business partners through education and empowerment where we operate. We also have high expectations to our pioneer tailings drybackfill method at our Paragominas bauxite mine in Brazil, that will eliminate the need to establish new tailing dams.

As a global energy and aluminium company, Hydro is committed to leading the way by creating more for less. With a new strategic direction, we embark on the next chapter in Hydro's history of building industries that matter and creating value by taking a lead role in the green transition. Building on the same foundation that has made us 115 years old, we will continue to build businesses that matter for generations to come.

"Building on the same foundation that has made us 115 years old, we will continue to build businesses that matter, producing products and solutions for the low-carbon, circular economy."

Hilde Merete Aasheim CEO and President

Board and Management

Board ofDirectors

Dag Mejdell Chair

Irene Rummelhoff Deputy chair

Arve Baade

Rune Bjerke

Liselott Kilaas

Peter Kukielski

Sten Roar Martinsen

Ellen Merete Olstad

Thomas Schulz

Marianne Wiinholt

Governance bodies in Hydro

Corporate Management Board

Hilde Merete Aasheim CEO & President

Einar Glomnes

Eivind Kallevik

Pål Kildemo

Anne-Lene Midseim

Arvid Moss

Hilde Vestheim Nordh

Inger Sethov

John Thuestad

Paul Warton

1) Projects report to EVP Energy

Board of Directors' report

12 Annual Report 2020 Board of Directors' report Hydro

13 Strategic direction and key developments
18 Investor information
20 Financial results
22 Market developments and outlook
24 Risk review
29 Compliance, controls and procedures
29 Research and development
30 Society
33 Environment
35 People
37 Board developments
38 Net income and dividend Norsk Hydro ASA

Quick overview

Hydro aims to lift profitability and drive sustainability, in order to increase long-term value for our stakeholders and contribute to a viable society. Hydro is a leading industrial company committed to a sustainable future and creating industries that matter.

In 2020, Covid-19 created significant social, operational and market challenges. In response, Hydro focused on providing a healthy and safe work environment, maintaining operations and positioning for the future. Hydro exceeded its improvement target, achieving improvements of NOK 4.2 billion for 2020 and took forceful actions to protect its balance sheet throughout the downturn. Hydro also progressed on sustainability goals throughout the year, with key climate, environmental and social ambitions remaining on track.

Despite the challenges of 2020, Hydro has focused on positioning the company for the future.

Strategic direction and key developments

Seizing opportunities where capabilities match megatrends

In 2020, Covid-19 created significant social, operational and market challenges. In response, Hydro focused on providing a healthy and safe work environment, maintaining operations and positioning for the future. Hydro realized NOK 4.2 billion in improvements thereby exceeding its NOK 4.1 billion target for 2020, and took forceful actions to protect its balance sheet throughout the downturn. Hydro also progressed on sustainability goals throughout the year, with key climate, environmental and social ambitions on track.

Despite the challenges of 2020, Hydro has focused on positioning the company for the future. On March 5, 2021, Hydro entered into an agreement to sell its Rolling business. The sale of Rolling will strengthen our ability to deliver on the 2025 strategy, strengthening our position in low-carbon aluminium, while exploring new growth in areas where our capabilities match global megatrends.

Global megatrends such as sustainability, electrification, and urbanization support future demand growth for aluminium and renewable energy. According to CRU1 , aluminium semis demand is expected to grow by 32 million tonnes by 2030 at 3 percent annual growth rate.

In addition, Hydro's political and regulatory landscape supports increasing aluminium demand. The EU has defined aluminium as a critical raw material for the green transition in Europe. In addition, the European Green Deal with a goal of reducing emissions by 55 percent by 2030 is a catalyst for a restructuring of the energy market toward renewable sources.

Hydro is well positioned to extract value from these trends by leveraging our capabilities into green, growing industries. Our track record of renewable, sustainable industrial development, close customer collaboration, combined with an interlinked commercial and sustainability agenda provide a solid foundation for the future. Hydro's strategic direction toward 2025 will focus on two key areas: strengthening the company's position in low-carbon aluminium and growing in recycling, renewable energy and battery storage.

The initiatives within both pillars of Hydro's 2025 strategy support achievement of Hydro's main profitability target of 10 percent RoaCE over the cycle for the group. In addition, all business areas aim for RoaCE above their differentiated cost of capital. Hydro's RoaCE has averaged 5 percent over the past 5 years, negatively impacted by challenging markets and the Alunorte production embargo in 2018-19.

Strengthening position in low-carbon aluminium

Hydro's ambition is to be an industry leader in low-carbon aluminium.

Cost competitive asset base

Hydro's cost competitive asset base is positioned within the first and second quartile upstream, and reduced cost and operational excellence within the asset base remain a priority. Considerable restructuring work is underway in our downstream businesses to optimize that cost base as well. Hydro has extended its improvement program by two years with an overall goal of NOK 8.5 billion2 by 2025.

¹ CRU is an external provider of analysis, prices and consulting in the mining, metals and fertilizer markets.

Strong market and low carbon position

Strong downstream market positions and close customer relationships support Hydro's margins and growth ambitions in key segments. Our innovative solutions are also increasing the substitution potential of aluminium and creating new markets.

Hydro's climate ambition is to reduce CO2 emissions by 30 percent by 2030 and move toward zero emissions by 2050. Achieving a greener energy mix at Alunorte is a key enabler of the 2030 goal. Three initiatives are underway to support this, including replacing heavy fuel oil with liquid natural gas, installing three new electric boilers, and electrifying the remaining coal boilers with power from renewable sources.

Hydro earns additional premiums or volume commitments on its low carbon products, and many customers choose Hydro's aluminium due to its low carbon content. Demand for low carbon products increased in 2020 and is expected to grow in 2021. More than 70 percent of the electricity used in Hydro's primary production is based on renewable power, enabling Hydro to offer low carbon brands, such as Hydro REDUXA, which differentiates our product portfolio from many peers' and supports both margin and volume growth. Hydro will make key capacity investments over the medium term to ensure our recycling portfolio can facilitate the increasing demand for Hydro CIRCAL.

By leveraging Hydro's differentiating positions in attractive markets, Hydro aims to achieve commercial uplift in current businesses of NOK 2.0 billion by 2025. This commercial ambition comes in addition to the NOK 8.5 billion improvement program.

Diversifying into strategic growth areas

Hydro's strategic growth areas look beyond aluminium to diversify the current portfolio where capabilities match the megatrends. Hydro will make strategic investments in highgrowth areas such as recycling, renewables, and batteries. These investments will come in addition to the NOK 2 to 3 billion in return-seeking CAPEX supporting the improvement and commercial ambitions within our current portfolio.

Recycling

2020 Status and targets

Hydro's current recycling portfolio provides a foundation for further growth. Recycling is key to keeping aluminium in the loop, reducing our CO2 footprint, and lowering our hot metal costs. In addition, demand for recycled aluminium is increasing as seen in our volumes of Hydro CIRCAL. Hydro has strong metallurgic and commercial competence, developing products in partnership with customers, like recycling friendly alloys. Hydro currently has a portfolio of 29 recyclers and an annual capacity of 2.6 million tonnes for recycled scrap.

The 2025 ambition includes a doubling of Hydro's current post-consumer scrap utilization, implementation of advanced sorting technology, and an upgrade of existing recycling and recasting capabilities. A strategy has been established across the recycling value chain within Aluminium Metal, Rolling, and Extrusions.

Renewable energy

A new business unit – Renewable Growth – was established in Hydro Energy, which will leverage Hydro's industrial footprint and energy competence to take positions in renewable energy projects, primarily in the Nordics and Brazil within solar and wind. Renewable Growth has a promising project pipeline, with opportunities being matured, in partnership with Scatec, Equinor, and Green Investment Group in Brazil. Renewable Growth targets investments into more than 1 GW in 2021 to feed portfolio repowering requirements. Renewable Growth will also mature business cases for energy storage solutions in Hydro's operations.

Batteries

Hydro has also established a new Battery business unit as part of Hydro Energy. Hydro has already undertaken several successful investments in the battery value chain in recent years, including Corvus Energy in 2017 and NorthVolt in 2019. In addition, Hydro entered two separate joint ventures in 2020. HydroVolt is a 50/50 battery recycling joint venture with NorthVolt, and Hydro has also entered a Memorandum of Understanding (MoU) with Equinor and Panasonic to explore opportunities for establishing a profitable and sustainable European battery business.

	Capitalreturns URoaCE 3.7%1)	Balance sheet FFO/aND 39%2)	Free cash flow 7.7 BNOK3)
Lifting profitability	10% target over the cycle	>40% target over the cycle	Lifting free cash flow
Improvement program 4.2 BNOK4)	Cash effective change in net operating capital 2.4 BNOK release	Capex 6.5 BNOK5)	Shareholder payout 1.25 NOK/share6) 65% average 5-yr payout ratio
2020 target 4.1 BNOK 2021 target 6.0 BNOK 2025 target 8.5 BNOK	Optimizing net operating capital	2020 revised target 7.5-8 BNOK 2021 target 9.5-10 BNOK 2022-2025 target 9-9.5 BNOK	40% payout ratio over the cycle 1.25 NOK/share dividend floor

1) URoaCE Hydro (Annual definition) calculated as underlying EBIT last 4 quarters less Income tax expense adjusted for tax on financial items/ Average capital employed last 4 quarters. 2) Funds from operation LTM/Average LTM adjusted net debt. From 2021, Hydro will replace this measure with a goal of net debt excluding equity accounted investments over uEBITDA < 2x.

3) Free cash flow – operating cash flow less investing cash flow excluding sales/purchases of short-term investments. 4) The original improvement program definition was revised in 2020 with effect from 2019, now focused on cost and efficiency initiatives and excluding market driven initiatives.

5) 2020 capex excluding lease. 2021 target including capex carry-over from 2020.

6) Pending approval from the AGM on May 6, 2021. From 2021 onwards, the policy has been revised to a minimum of 50% payout ratio of underlying net income over the cycle with the dividend floor maintained at 1.25 NOK per share.

* Targets to be revised following the sale of the Rolling business area.

2020 Status and targets

	Safety	Socialresponsibility	Biodiversity
Driving sustainability	TRI rate 2.7 FY 2020	100,000 2018 2030	On track 2020
	Ambition: Zero fatalities and injury free work environment	2030 target: Contribute to education and skills for 500,000 people	Target: rehabilitate available mined areas within two hydrological cycles1)
Climate	Businessintegrity	Greener products Environment
GHG emissions -9% compared to strategy baseline2)3)	76% Integrity culture index Ambition: high employee	16.000 mt CIRCAL produced FY 2020	Tailings dry backfill methodology developed and tested
perception of a culture of 2030 target: 30% reduction business integrity in GHG emissions	combined 2020/21 target: 65,000 mt in total	2030 target: addressing the industry's key environmental challenges

1) This is known as the 1:1 target

2) Baseline emissions 13.3 million metric tonnes CO2 equivalents and includes direct and indirect emissions (scope 1 and 2).

3) About half of the reduction were due to improved performance, especially at the Alunorte refinery. The remaining reduction was due to significant reduced production across Hydro because of the Covid-19 pandemic.

* Targets may be subject to revision following the Hydro Rolling transaction.

2020 Developments

The Covid-19 situation has been a significant challenge to the global economy and continues to cause uncertainty for Hydro's operations and financial performance. Global GDP and industrial production have recovered towards the end of the year, but the Covid-19 situation continues to cause market uncertainty. The global fall in demand and government-imposed restrictions negatively affected sales volumes for Hydro, with Metal Markets' recycling facilities, Extrusions and Rolling being impacted the most. Bauxite & Alumina, Aluminium Metal, and Energy have been operating largely as normal during the year. Supported by government stimulus and softer containment measures the global economy recovered at a faster pace than expected in the second half of the year.

Our top priority is the health and safety of our people and the communities where we operate. Many plants across our global organization have supported authorities, local NGOs, institutions and organizations. They have contributed with, for instance, protective gear or monetary donations to local hospitals, medical centers, local health organizations or local food banks, as well as to funds to support the most vulnerable affected by Covid-19.

Social responsibility programs, initiatives and dialogue in local communities surrounding our operations continued in 2020. Due to Covid-19, all activities have adapted new measures. Where possible, activities have been moved to digital platforms, and prevention protocols are strictly followed for physical activities. During 2020, Hydro has published a revised Human Rights Policy and Supplier Code of Conduct, based on prioritized human rights risks to people.

The number of total recordable injuries rates improved over 2019 levels to a total recordable injury rate of 2.7, from 3.0 in 2019. There were no fatal accidents in our operations, but we tragically lost eight colleagues to Covid-19 during 2020. In addition, we experienced a life changing injury resulting in an amputation of a foot.

In February 2020, the Board proposed a dividend of NOK 1.25 per share for 2019, in accordance with the floor level stated in Hydro's dividend pay-out policy. Following the decision, the outbreak of the Covid-19 pandemic introduced significant uncertainty regarding the financial outlook for the company. The Board was therefore granted an authority at the Annual General Meeting held on 11 May 2020 to resolve distribution of dividends at a later stage at the Board's discretion. The dividend was distributed in November 2020 based on the improved financial situation and positive outlook for the company. Further measures to improve liquidity included a NOK 7 billion bond issue in May 2020 and a freeze of NOK 2 billion on planned 2020 capital expenditure. Capital expenditure was NOK 6.5 billion for the year, around NOK 3 billion lower than the original plan reflecting project postponements and re-prioritization.

Hydro's underlying EBIT for the full year was NOK 6,051 million, compared with NOK 3,359 million in 2019. The ramp-up of Alunorte's production, reduced raw material costs and positive currency effects were partly offset by reduced realized alumina and aluminium prices, and reduced downstream volumes.

Hydro exceeded its improvement target, achieving NOK 4.2

billion for 2020 compared to 2018, supporting the positive cash flow generation for the year. During Capital Markets Day 2020, Hydro announced a new and extended improvement ambition, now aiming to achieve improvements of NOK 8.5 billion by 2025.

The World ex-China alumina market was oversupplied in 2020 with China absorbing the excess production as imports to balance the global market. The Covid-19 pandemic caused temporary production declines in some regions, particularly in China during the first quarter of the year, but the overall impact on annual production was limited. Chinese demand for imported bauxite continued to grow, driven by increased capacity and more expensive domestic bauxite, which remains challenging to source. The increased demand was largely met by the continued growth in imports from Guinea and by increasing Indonesian volumes, while bauxite imports from Australian were stable.

Global primary aluminium demand declined 3.7 percent in 2020 affected by the Covid-19 situation, with World ex. China experiencing a 13.5 percent demand drop. Global supply increased by 2.4 percent, resulting in a global surplus of around 3 million mt. Primary production growth in China increased 4.0 percent year-on-year in 2020 on high smelter profitability due to high aluminium margins. Demand in downstream segments dropped in the second quarter of the year due to lockdowns in Europe and North America but recovered relatively strongly in the subsequent quarters, returning to normal levels by the end of the year and entering 2021 with increasing market optimism.

The European Union has completed the CO2 compensation program for competitive industries in the period 2021-2030. The EU's revised guidelines for CO2 compensation paves the way for continued production of low-carbon aluminum in Norway. For Hydro's renewablebased aluminum production, predictable and robust compensation of the actual CO2 surcharge in power prices will make a very important contribution to being able to maintain and continue operations and strengthens our position to be an industry leader in low carbon aluminum.

Norwegian low-carbon products can play an important role in reducing global CO2 emissions and meeting the growing demand for these low carbon products in several sectors.

The European Commission announced on September 22, 2020, its intention to impose provisional antidumping duties on aluminium extrusions originating in China. The duties are an outcome of an investigation opened in February 2020. The European Commission has now found that Chinese extrusions have been sold in the European Union at prices so low that they can be considered dumping and unfair competition to domestic producers. For Hydro's around 40 extrusion plants in Europe, the antidumping action is a move that will mitigate unfair competition. For Hydro's customers, this will contribute to ensuring Europe continues to have a viable extrusion industry which will still have a high level of competition due to its many competitors.

61 of Hydro's aluminium sites worldwide have achieved certification according to the Aluminium Stewardship

Initiative (ASI)'s Performance Standard. ASI is a global, multi-stakeholder, non-profit standards setting and certification organization. It works toward responsible production, sourcing and the stewardship of aluminium following an entire value-chain approach.

61 Hydro sites certified against ASI

Performance Standard

100%

European production sites certified against ASI Performance Standard

Alunorte and Paragominas certified against ASI Performance and Chain of Custody

Fully owned Primary production facilities and recyclers

On June 20, 2020, three power transmission towers overturned, cutting the power supply to Hydro's Paragominas bauxite mine and temporarily halting production. On August 18, 2020, Hydro halted operation of the pipeline transporting bauxite from Hydro's Paragominas bauxite mine to the Alunorte alumina refinery for extended maintenance, in order to replace a section of the pipeline earlier than scheduled. The extended pipeline maintenance

temporarily halted production at Paragominas and reduced production at Alunorte to 50 percent of full capacity. On October 8, 2020, production at Paragominas resumed, and alumina production at Alunorte was subsequently ramped up, reaching full capacity utilization by the end of 2020.

Hydro Bauxite & Alumina has developed and tested of the "Tailings Dry Backfill" methodology at the Paragominas mine, addressing one of the industry's key challenges. This is an approach to minimize the volume of tailings stored, by excavating dried tailings from the storage facility and returning it to the mined areas before they are rehabilitated. The methodology eliminates the need for continuous construction or upgrade of new permanent tailings facilities. The application of this approach in Paragominas represents the end of construction of new facilities for storage of bauxite tailings. The operating license to implement this new approach was received in December 2020, and it has now been fully adopted into operations at the mine.

Hydro's Technology Pilot at Karmøy, Norway, the HAL4e technology was successfully verified in 2020 after a twoyear internal testing program. The industrial-scale pilot plant produces the world's most climate friendly and energy efficient primary aluminium, operating at around 15 percent lower energy consumption than the world average.

During November 2020, Hydro restarted aluminium production at line B at the Husnes primary plant in Norway, after running the plant for more than a decade at half capacity. The NOK 1.5 billion upgrade project to restart line B will add 95,000 mt of electrolysis capacity and includes technology elements also implemented at the Karmøy technology pilot, lifting operational and environmental performance to world-class standards. The decision to restart Husnes is based on market improvements, combined with expectations that Norway will continue to utilize EU's emissions trading system (ETS) for 2021-2030.

Hydro Extrusions has undergone an optimization of its large asset portfolio to identify ways to streamline and to reduce costs supporting its improvement target. In 2020, some extrusion plants were closed or divested, and in most cases, production volumes were transferred to other facilities.

On December 31, 2020, Hydro and Lyse merged part of their respective hydropower production assets to create a new hydropower company. The new company - Lyse Kraft DA has a normal annual power production capacity of 9.5 TWh, of which Hydro will own 25.6 percent and Lyse 74.4 percent. Following the transaction, Hydro is Norway's third-largest operator of renewable power, with a combined renewables production of 13.6 TWh in a normal year. Based on equity shares, Hydro's annual power production is 9.4 TWh in a normal year.

Sale of Rolling business areas

Hydro launched a strategic review and restructuring of our Rolling business area in 2019, restructuring initiatives have delivered above expectations, with NOK 500 million of NOK 1.1 billion improvement program delivered by end 2020. In order to enable Hydro to deliver on the 2025 strategy, and ensuring full potential development of Rolling, a 100 percent sale to KPS Capital Partners is viewed as a good solution for all stakeholders.

The transaction includes seven plants, including the Neuss primary aluminium plant, one R&D center, global sales offices, and around 5,000 employees, of which 650 employees are in Norway and the remaining mainly in Germany. In 2020, Hydro Rolling contributed approximately NOK 24 billion in revenue, 17 percent of Hydro's total and NOK 1.3 billion in Underlying EBITDA, 9 percent of Hydro's total. The sales volumes amounted to 864,000 tonnes, serving segments including Can, Foil, Lithography, Automotive and General Engineering.

The agreed transaction price of EUR 1,380 million will result in a reduction of EUR 856 million in pension liabilities and EUR 435 million cash proceeds. The transaction is subject to customary approvals from competition authorities and is expected to be completed during second half of 2021. Executive Vice President and Head of Hydro Rolling, Einar Glomnes, will become CEO of the new company after closing.

The Rolling operations will be treated as an asset held for sale and discontinued operations in Hydro's financial reporting from the first quarter of 2021. An impairment of NOK 1.9 billion was recognized in the financial statements for 2020, as the agreed sales price was below the carrying value of the Rolling business.

The sales transaction will impact Hydro's targets and ambitions such as the improvement program, commercial ambitions, recycling growth targets and sustainability goals and targets. Targets included in this report include the Rolling business area and will be adjusted during 2021.

Investorinformation

Hydro's share price closed at NOK 39.86 at the end of 2020. The return ex. dividend for 2020 was NOK 7.22, or 22 percent.

Hydro's Board of Directors proposes to pay a dividend of NOK 1.25 per share for 2020, for approval by the Annual General Meeting on May 6, 2021. The proposed payment demonstrates the company's commitment to provide a predictable dividend to shareholders. In 2020, Hydro had a dividend policy of 40 percent payout ratio of reported net income over the cycle with NOK 1.25 per share considered as floor. This policy has been revised, from 2021 onwards, reflecting Hydro's ambitions to lift performance and cash returns to shareholder over the cycle. The revised dividend policy is to pay out a minimum of 50 percent of underlying net income over the cycle with a NOK 1.25 per share dividend floor.

Financialresults

Underlying financial and operating results

Key financial information	Year	Year
NOK million, except per share data	2020	2019

Revenue	138,118	149,766
Earnings before financial items and tax (EBIT)	7,332	499
Items excluded from underlying EBIT1)	(1,281)	2,860
Underlying EBIT1)	6,051	3,359

Underlying EBIT:
Hydro Bauxite & Alumina	1,806	974
Hydro Aluminium Metal	1,225	(1,259)
Hydro Metal Markets	728	983
Hydro Rolling	70	413
Hydro Extrusions	2,196	2,009
Hydro Energy	974	1,243
Other and eliminations	(948)	(1,003)
Underlying EBIT1)	6,051	3,359

Earnings before financial items, tax, depreciation and	19,465	9,878
amortization (EBITDA)2)
Underlying EBITDA1)	14,316	11,832

Net income (loss)	1,660	(2,370)
Underlying net income (loss)1)	2,718	708

Earnings per share	0.90	(0.88)
Underlying earnings per share1)	1.25	0.52

Financial data:
Investments1)2)	14,174	10,907
Net cash (debt)1)	(7,830)	(11,760)
Adjusted net cash (debt)1)	(22,620)	(25,447)
Underlying Return on average Capital Employed (RoaCE)1)	3.7 %	1.3 %

	Year	Year
Key Operational information	2020	2019

Bauxite production (kmt)3)	8,640	7,360
Alumina production (kmt)	5,457	4,487
Realized alumina price (USD/mt)4)	268	326
Primary aluminium production (kmt)	2,091	2,038
Realized aluminium price LME (USD/mt)	1,685	1,827
Realized USD/NOK exchange rate	9.42	8.74
Rolling sales volumes to external market (kmt)	864	952
Extrusions sales volumes to external market (kmt)	1,099	1,269
Power production (GWh)	11,522	9,150

1) Alternative performance measures (APMs) are described in the appendices to the Board of Directors' report.

2) EBITDA and investments per segment are specified in Note 1.4 Operating and geographic segment information in the financial statements.

3) Paragominas production, on wet basis.

4) Weighted average of own production and third-party contracts. The majority of the alumina is sold linked to either the LME prices or alumina index with one-month delay.

Underlying EBIT for Bauxite & Alumina increased compared to the same period in 2019. The results were driven by positive effects from increased production following the lifting of the production embargo on May 20, 2019, lower raw material prices and positive currency effects, partly offset by lower alumina sales prices.

Aluminium Metals' underlying EBIT increased compared to 2019. Lower raw material cost, positive currency effects, lower fixed cost and depreciation were partly offset by lower all-in metal prices.

Underlying EBIT for Metal Markets decreased compared to 2019, mainly due to lower results from the recyclers and lower results from the sourcing and trading activities, partly offset by positive currency effects.

Underlying EBIT for Rolling decreased compared to 2019. The result from the rolling mills decreased, mainly due to US anti-dumping duties, lower sales volumes, restructuring related costs and increased depreciation. These effects were partly offset by cost reductions from the ongoing improvement program. The Neuss smelter result was higher due to lower raw material costs partly offset by lower all-in metal prices.

Extrusions underlying EBIT increased slightly compared to last year, mainly due to fixed cost reductions following the improvement initiatives and temporary cost reductions, in addition to increased margins. Results were positively impacted by insurance compensation of NOK 496 million related to the cyber-attack in 2019. The positive effects were offset by reduced volumes and temporary plant shut-downs due to the Covid-19 situation.

Compared to the previous year Energy's underlying EBIT decreased, mainly due to lower prices, partly offset by higher production and improved commercial results.

Impairments and transaction gain

Extrusions recognized an impairment of NOK 1.5 billion in 2020, reflecting weaker growth expectations in key market segments driven by the negative macroeconomic effects of Covid-19. Aluminium Metal's majority owned primary aluminium plant, Slovalco recognized an impairment of NOK 0.5 billion in 2020, reflecting the continued weak market environment combined with Slovalco's relatively high cost position. Rolling recognized an impairment of NOK 1.9 billion resulting from the agreement to sell the Rolling business. The agreed sales price was below the carrying value of the business to be sold by an estimated amount of NOK 1.9 billion.

The impairments described above are excluded from underlying EBIT. See Note 2.5: Impairment of non-current assets and the APM section for further information.

On December 31, 2020, Hydro and Lyse merged part of their respective hydropower production assets to create a new hydropower company Lyse Kraft DA. A gain resulting from the transaction of NOK 5.3 billion was recognized in 2020, the gain was excluded from underlying EBIT.

Liquidity, financial position, investments

Hydro's net debt was NOK 7.8 billion at the end of 2020, compared to NOK 11.8 at the end of 2019. Net cash provided by operating activities of NOK 13.5 billion was sufficient to cover net cash used in investing activities of NOK 8.3 billion and dividend payments of NOK 2.6 billion to Norsk Hydro's shareholders.

Hydro's adjusted net cash (debt) to equity ratio was 35 percent, well below its targeted maximum ratio of 55 percent. Funds from operations to average adjusted net cash (debt) ratio was 39 percent, slightly below the targeted minimum of 40 percent over the business cycle. Hydro's management has decided to replace these two ratios with average Adjusted net cash (debt) to underlying EBITDA going forward. See note 7.1 to the financial statements for information on Hydro's capital management measures.

Hydro held NOK 17.6 billion in cash and cash equivalents and NOK 2.5 billion in short-term bank deposits, included in short-term investments, at the end of the year. Short-term bank deposits are normally available at short notice. Norsk Hydro ASA has a USD 1.6 billion revolving multi-currency credit facility with a syndicate of international banks, maturing in December 2025, with one remaining one-year extension option. The facility was undrawn per year-end 2020. The facility will continue to serve primarily as a backup for unforeseen funding requirements. See Note 7.1 Capital management in the Financial statements for additional information.

Reported EBIT and net income

In addition to the factors discussed above, reported earnings before financial items and tax (EBIT) and net income include effects that are disclosed in the table below. Items excluded

from underlying EBIT and underlying net income (loss) are defined and described as part of the Alternative Performance Measures in the Appendices to the Board of Directors' report.

Items excluded from underlying EBIT and net income1)	Year	Year
NOK million	2020	2019

Unrealized derivative effects on LME related contracts	(340)	91
Unrealized derivative effects on power and raw material contracts	171	(99)
Metal effect, Rolling	298	370
Significant rationalization charges and closure costs2)	202	1,484
Impairment charges3)	3,868	906
Alunorte agreements - provision4)	129	80
Transaction related effects 5)	(5,407)	21
Pension6)	-	(62)
Other effects7)	(203)	68
Items excluded from underlying EBIT	(1,281)	2,860
Net foreign exchange (gain)/loss	3,861	1,204
Other finance (income) expense	(128)	-
Calculated income tax effect	(1,393)	(986)
Items excluded from underlying net income	1,059	3,078
Income (loss) tax rate	21%	(52)%
Underlying income (loss) tax rate	46%	72%

1) Negative figures indicate reversal of a gain and positive figures indicate reversal of a loss.

2) Significant rationalization and closure costs include a provision for costs related to reduction of overcapacity, closures and environmental clean-up activities in Hydro Rolling and Hydro Extrusions.

3) Impairment charges for 2020 include assets in Rolling, Slovalco smelter and various assets in Hydro Extrusions. The amount also includes a reversal of previously impaired industrial park in Germany.

4) Alunorte agreements - provision relates to provisions for the TAC and TC agreements with the Government of Parà and Ministèrio Pùblico made on September 5, 2018, including later adjustments for changes in cost estimates, and similar agreements.

5) Transaction related effect in 2020 includes a divestment gain in Hydro Energy of NOK 5,308 million, representing the gain on contributing the Røldal Suldal power assets to Lyse Kraft DA, which is partly owned by Hydro. The gain is net of the unrealized share equal to Hydro's retained ownership interest of 25.6 percent, which is eliminated. The amount also includes divestments of Hydro Extrusions plants and gain on selling a previously impaired property in Germany.

6) Pension include a gain of NOK 62 million due to partially settled pension liabilities in the US in 2019.

7) Other effects include adjustments in Hydro Rolling, Hydro Extrusions and Hydro Aluminium Metal as described in the Alternative Performance Measures section in the appendices to the Board of Directors' report.

Market developments and outlook

Upstream market developments

The World ex-China alumina market was oversupplied in 2020 with China absorbing the excess production as imports to balance the global market. The Covid-19 pandemic caused temporary production declines in some regions, particularly in China during the first quarter of the year, but the overall impact on annual production was muted. Chinese demand for imported bauxite continued growing as the share of domestic bauxite in the refineries decreased and a new refinery on the coast of Guangxi province started production mid-year. Higher demand was largely met by higher imports from Guinea and Indonesia, bauxite imports from Australian were stable.

The Platts alumina price index started the year at USD 275 per mt, ranging from USD 225 – 305 per mt during 2020. The price index increased during the first quarter as logistical challenges in China due to the Covid-19 reduced raw material supply thus restricting alumina production and

transportation. The price index then decreased sharply as Covid-19 slowed economic activity in most regions of the world, falling to the annual low of USD 225 per mt in mid-April. The price index then gradually recovered, reaching its annual high of USD 305 per mt at year-end.

The Platts alumina price index averaged USD 271 per mt for the year, an 18 percent decrease compared to 2019. Prices as a percentage of LME varied, averaging 15.7 percent for the year compared with 18.3 percent in 2019. The price index at the end of 2020 represented 15.4 percent of the three-month aluminium price quoted on LME.

China imported 3.8 million mt (3.7 million mt net of exports) of alumina in 2020 compared to net imports of 1.4 million mt in 2019. Australia accounted for 57 percent of imports followed by Vietnam and Indonesia with 13 percent and 12 percent, respectively.

China imported 111.6 million mt of bauxite in 2020, 11 percent higher than the previous year. Driven by new mines increasing production, imports from Guinea increased 19 percent from 2019 to 52.7 million mt, imports from Indonesia increased 29 percent to 18.2 million mt and imports from Australia increased 3 percent to 37 million mt. These three

countries accounted for 97 percent of China's bauxite imports, compared to 94 percent in 2019. Imports from the Solomon Islands and Malaysia reached 0.8 million mt and 0.2 million mt, respectively.

The price of bauxite imported into China in 2020 decreased to an annual average of USD 45 per mt CIF China compared to USD 51 per mt CIF China in 2019.

Three-month LME prices started the year around USD 1,810 per mt and ended the year at USD 1,980 per mt. Prices dropped to a low of USD 1,462 in May, following the Covid-19 outbreak, before increasing as global economic growth recovered. Prices increased continuously throughout the remainder of the year, reaching a two-year high of USD 2,060 in December.

North American and European standard ingot premiums started the year at USD 320 per mt and USD 140 per mt respectively. European standard ingot premiums declined to USD 92 per mt as the Covid-19 outbreak affected the European market, recovering slowly but steadily as demand recovered. The US Midwest standard ingot premium decreased to USD 177 per mt in May as the Covid-19 outbreak effected the North American market, and the premium recovery was more volatile in the second half of the year as changes to Section 232 tariffs caused uncertainty. North American and European standard ingot premiums ended the year at USD 323 per mt and USD 150 per mt respectively.

Global primary aluminium consumption decreased by 3.7 percent to 62.1 million mt in 2020. Global supply increased by 2.7 percent to 64.9 million mt resulting in global surplus of around 3 million mt. For 2021, global primary aluminium demand is expected to increase by 7-8 percent and aluminium production is expected to increase by 6-7 percent, resulting in a continued but lower global surplus in 2021 compared to 2020.

Demand for primary aluminium outside China decreased by around 13 percent in 2020, while corresponding production increased by 0.5 percent. Overall, production outside China exceeded demand by around 2.4 million mt in 2020. Demand for primary aluminium outside China is expected to increase by around 12-13 percent in 2021. Corresponding production is expected to be up about 4-5 percent, leaving the world outside China in a continued but lower surplus of around 1.4 million mt for 2021.

Demand for primary metal in China increased around 3.5 percent to 37.4 million mt in 2020. Chinese production increased by 4.4 percent in 2020, resulting in a small surplus for the year. Production growth was supported by high prices and several new and expanded smelters starting production. Chinese primary production is expected to increase by 7-8 percent in 2021. Primary demand is estimated to increase by around 5-6 percent, resulting in a surplus of around 0.5 million mt in 2021.

LME stocks decreased slightly in 2020, from 1.47 million mt at the end of 2019 to 1.35 million mt at the end of 2020. After an increase in stocks from beginning to mid-2020 due to lack of global demand, stocks decreased again as demand from China increased. Total global inventories, including unreported inventories, are estimated to have increased by

2.6 million mt in 2020. The total stock level is estimated to be around 13.3 million mt at the end of 2020.

The negative impact of the Covid-19 virus on European economies and industries reduced the demand for extrusion ingot, primary foundry alloys and sheet ingot significantly in 2020 compared to 2019. The consumption of wire rod was less affected and reached a level only slightly below 2019.

Aluminum shipments in the U.S., both extrusion ingots and foundry alloys, began the year at a modest pace, fell sharply with Covid-19 related restrictions on manufacturing activity, but rebounded sharply in the third quarter and ended the year with the fourth quarter stronger than the same period in 2019. In total extrusion ingot and foundry alloy shipments decreased in 2020 compared to 2019.

The Asian market suffered an unprecedented decline in the second quarter due to the Covid-19 pandemic. The extrusion ingot demand for Asia ex. China decreased significantly in 2020 compared to 2019. In automotive, light vehicles production in Asia ex. China decreased about 20 percent y-oy leading to a similar drop of primary foundry alloys consumption in 2020. However, a surprisingly strong recovery was seen in the fourth quarter and is expected to continue into 2021.

Downstream market developments

European demand for flat rolled products declined by 10 percent in 2020 due to the Covid-19 situation. The pandemic led to a steep decline in demand, particularly in the transport and general engineering segments.

The beverage can demand was stable, negative effects from Covid-19 in the second and third quarters were balanced by solid demand in the first and fourth quarters. The market for Foil was stable, benefitting from an increased demand in packaging. CRU expects European demand to grow by 8 percent in 2021.

Demand for extrusions experienced a volatile development throughout 2020 as Covid-19 affected key geographies and segments. Both European and North American demand fell significantly in the second quarter, mainly driven by weaker demand in the transport segment and overall lower industrial activity. Demand improved gradually in the second half of the year supported by improving automotive production and improved market sentiment. The building and construction segment saw a more stable development throughout the year, supported by strong residential demand driven by refurbishing. In total for 2020, demand is estimated to have decreased by 12 percent compared to 2019 in both Europe and North America.

In recent years the European market has seen increasing levels of Chinese imports at low prices. In October 2020, anti-dumping duties on imports of Chinese extrusions into Europe were introduced. Following the imposition, the level of imports from China have moderated substantially during a period with improving demand.

Energy market developments

Nordic electricity prices declined to unusually low levels during 2020, primarily due to a strong hydrology and lower power consumption, due to mild weather and decreased demand. In addition, Nordic wind power production was above normal levels. Nordic electricity prices gradually

recovered towards the end of the year and increased further in early 2021.

In Brazil, strong hydrology and low demand, mainly due to Covid-19 effects, caused prices to fall to low levels for the year through to September. Both increased demand and a delayed wet season caused prices to increase significantly during the fourth quarter, reaching levels close to the regulatory ceiling by November 2020.

Risk review

ERM in Hydro

Hydro has, with active engagement from the Board of Directors, developed and implemented a revised enterprise risk management framework. In accordance with this model, risk factors that are relevant for Hydro's business are continuously identified, analyzed, addressed and monitored. Risk management is an integral part of our business system where responsibility and ownership for incident- and HSE risks mainly resides in the business areas, while strategic risks for the Hydro Group are mainly addressed at Group level.

The main improvements in Hydro's recently revised ERM framework include more granularity in risk descriptions and evaluations, more distinct differentiation between strategic and incident risks, increased focus on evaluation of risk mitigation, including discussions of further and faster risk mitigation and evaluating how this relates to Hydro's risk appetite. Major risks are analyzed and managed according to Hydro's risk appetite through the annual strategy process with a status update provided in the business planning process. Mitigating actions are followed up on an ongoing basis, as part of our internal board review structure.

Risk management is an integral part of our business system and the responsibility of managers at all levels. Hydro's Group functions establish and develop policies and procedures for managing risk and coordinate an annual enterprise risk assessment with a biannual status update. Each manager shall be aware of significant risks within their area of responsibility and ensure that adequate risk mitigation is in place. The business areas ensure that risks within their area are identified, assessed and adequately addressed. Assessment of the main risks and mitigating plans should be well documented and regularly updated. The Corporate Management Board (CMB) is responsible for risk management at Hydro Group level. CMB assists the CEO in ensuring that Hydro has adequate risk management systems in place and that appropriate actions are taken to mitigate undesirable risk exposures. The Board of Directors oversees the risk management framework, including monitoring of the risk picture through biannual assessments of Hydro Group's main risks.

Overview of Hydro'smain risks

Hydro's main risks may affect business operations, reputation, financial condition, and ultimately, the share price. Some of these risks might also have a positive business impact or represent a business opportunity, whereas the focus in the descriptions in this report is on downside risk.

In line with Hydro's ERM framework, the risks are categorized as Strategic-, Incident- and HSE risks. The development in the risk picture may be driven by both changes in the external environment and Hydro's own mitigating activities. Despite Hydro's efforts, our risk mitigating initiatives may fail, be insufficient or prove to be inadequate to mitigate the risks we are facing. As risks will emerge, increase, decrease or change with time and events, the information in this section should be carefully considered by investors. The risk picture described in this report may be impacted by the sale of Hydro Rolling business area to KPS Capital Partners announced in March 2021, and will be reviewed as part of the regular annual ERM update in 2021.

An assessment of Hydro's top Strategic-, Incident- and HSE risks is presented in the table below. By definition, if materialized, the top risks could significantly impact operations, financials, reputation or license to operate with severe consequences to Hydro. The table indicates a likelihood of a risk materializing with the current set of mitigating actions in place, the most affected business area(s), as well as an extent to which Hydro is able to influence a negative risk outcome or its magnitude.

For further details on Hydro's main strategic, incident, and HSE-risks, including description, status and mitigating actions, please see the Risk Review Chapter of the Annual Report.

Description of Hydro's main risks

Hydro's main strategic risks

Risk overview

Strategic risks are emerging risks challenging Hydro's strategic objectives. Mitigation could require long-term and potentially structural changes of the company and is therefore owned by the CEO and CMB. The majority of strategic risks are driven by external developments such as macroeconomics, industry and market environment, competition, changes in regulatory frameworks or political environment, or changes in stakeholder expectations. Strategic risks are normally characterized by:

potential long-term impact on profitability
mitigation often requires longer-term efforts and may involve structural moves or changes in strategic direction
trend-based nature with high uncertainty
potential build-up over time
potential later transformation to incident risks
immediate action is not always required

Hydro
-------

	Strategic risks
1		Increased competition from China and other countries
2	Unfavorable macroeconomic development
3	Value chain concentration
4		Not delivering on sustainability expectations
5		Changes in regulatory framework or political environment
	Incidentrisks
1	Insufficient asset integrity
2		Material CSR-, legal- or non-compliance incident
3		Major cyber-attack on industrial control systems or enterprise IT
4		Discontinued ICMS deferral and increased Qatalum tax rate
5		Pandemic outbreak or other major global events
	HSE risks
1	Fatal or life-changing accidents
2	Security incidents
3		Spills, unlicensed releases or gradual contamination build-up
4		Structural collapse or other major accident
5		Insufficient water supply to meet operational mining demands
	Low Low Medium Medium High High	Hydro Group Hydro Bauxite & Alumina Hydro Aluminium Metal	Hydro Extrusions Hydro Rolling Hydro Energy

The aluminium industry is commodity-driven and procyclical implying a high correlation with the overall macroeconomic situation as well as a market sentiment towards commodities in general. Hydro's earnings are sensitive to aluminum, alumina and raw material prices and are exposed to exchange rate fluctuations. In addition, due to the global nature of the industry with China accounting for more than half of the global aluminium production and demand, developments in China have had a significant impact on the aluminium industry as a whole over the last decade.

Sustainability has become a major topic also in the aluminium industry addressing climate change, environment and social challenges among others. It has gained attention from customers, end-users, regulators, shareholders and other stakeholders. While Hydro is among aluminium producers with the lowest CO2 footprint, the production process as such is still energy- and carbon- intensive. Technological developments may represent an opportunity, while the same breakthrough developed by competitors is a risk to Hydro. The aluminium industry is subject to multiple local and global regulatory frameworks. Climate-related regulations in the EU and mining standards regulations applicable to our Brazilian operations have been particularly relevant lately. The developments in regulatory frameworks may represent both an opportunity and a risk for Hydro.

Hydro's integrated aluminium production chain poses risks related to value chain concentration, where disruptions upstream could impact other parts of the company. Over the last few years, Hydro has experienced challenges running stable operations in Brazil for various reasons, including asset integrity and a complex political and social environment. This has driven a focus on significantly enhancing our robustness in the region.

Risk development

In 2020, the Covid-19 pandemic resulted in an economicdownturn worldwide, reduced demand for our products and affected commodity prices as well as currencies. This impacted Hydro's earnings and created a significant uncertainty for the outlook. Even though the impact of Covid-19 on the macroeconomy has been less dramatic than feared, the risk of an economic slowdown in the near or far future cannot be ruled out.

Global trade disputes and increased geopolitical uncertainties are drivers lowering general economic growth, and this also impacts Hydro, both in terms of demand but also directly as experienced by Hydro Rolling with the imposed US anti-dumping duties. At the same time, the trend towards increased protectionism supports regulations lowering the risk of increased and unfair competition. The EU has put in place anti-dumping duties on some aluminium products, mostly on imports from China.

The underlying risks related to sustainability are trending upwards. The increasing awareness around sustainability is to a large degree positive for Hydro compared to peers. However, regulations are tightening; especially driven by the European authorities. R&D efforts and funds are focused on greener solutions, which will result in increasing competition within sustainable materials. In general, all industries and companies which do have a significant negative sustainability footprint are expected to come under increased scrutiny the coming years.

Brazilian operation experienced several operational disruptions in 2020. On the other hand, progress is made across key sustainability areas, including increased robustness of our operations in Brazil, strengthened community relationships, and reducing environmental impact of our mining operations.

Risk mitigation

As most strategic risks are driven by the external developments and trends, mitigation often requires longerterm efforts and may involve structural moves and strategic shifts. Nevertheless, Hydro takes actions to ensure strong relative positions in the industry compared to peers, closely follows regulatory developments, actively participates in relevant discussions and strives to meet expectations of key stakeholders.

Hydro's top strategic risks were an important backdrop when developing the Hydro 2025 strategic direction. The revised strategy is set out to diversify Hydro's earnings and differentiate through our strong sustainability position. Hydro will work on strengthening its position in low carbon aluminium, and grow businesses where megatrends match capabilities, such as recycling, renewable energy and batteries.

In Brazil, actions have been taken to improve asset integrity, strengthen community relationships, and reduce long-term environmental impact. Progress has been made on long-term targets. Most notably, the dry tailings backfill technology has been licensed and is a significant technological breakthrough eliminating the long-term need for new bauxite tailing dams. Systematic CSR efforts are ongoing including Sustainable Barcarena initiative and TAC/TC commitments. Projects to reduce CO2 emissions in the refinery, such as fuel switch and electrification of boilers, are being developed.

To limit the downside of a severe economic downturn on the back of Covid-19, Hydro implemented significant cash preservation measures in 2020 through cost optimization and reduced investments. This has illustrated the flexibility of Hydro's financial framework. Hydro has also revised its hedging policy, and while the majority of our positions will remain exposed to market fluctuations, Hydro will also utilize hedging instruments, when warranted.

Hydro's main incident risks

Risk overview

Incident risks are often operational in nature, driven by internal factors, and with a potentially sudden occurrence and immediate impact. Risk mitigation is largely within Hydro's control where the benefits must be evaluated against the associated costs. Hydro's main incident risks could influence the whole or multiple parts of the value chain, potentially with a major financial impact. Responsibility and ownership for incident risks mainly resides in the business areas. All main incident risks are addressed with risk mitigation plans and are followed up in our internal board review structure.

Hydro's top incident risks are mainly related to our operations in Brazil, including operational, regulatory and corruption risks. Focus is also currently high on cyber

security, compliance with competition law and on ensuring a favorable tax framework for Qatalum.

Risk development

Throughout 2020, the Covid-19 situation has highlighted Hydro's (and the society's at large) vulnerability during such extreme scenarios. The pandemic has increased the risk of operational disruption due to government-imposed restrictions, social unrest or lack of raw materials. Hydro has sought to limit the operational and financial impact on the company, and wherever possible maintain business as normal activities. Although the impact of the pandemic has been less than feared, preparedness for the future disease outbreaks or other major global events is key.

The risk of a major operational incident in Hydro Bauxite & Alumina remains high. In 2020, Hydro experienced several operational disruptions in Brazil. This includes a fire incident in Albras, extended pipeline maintenance and incidents with the power transmission lines in Paragominas, as well as a crane incident at the Alunorte port.

In June 2020, ICMS deferral was approved by the Brazilian National Council of Finance Policy (CONFAZ), thereby reducing the risk of immediate ICMS deferral removal. The Qatalum tax holiday expired in September 2020 and the future tax rate is not yet concluded. The tax situation for Qatalum is further described in note 3.1 to the financial statements.

The external threat picture for cyber risk remains high with several recent attacks in Norway. The risk of a major breach of competition compliance law remains relatively stable.

Risk mitigation

Progress has been made on mitigating actions related to several of Hydro's main incident risks. Asset integrity programs are being revised and investments are allocated to strengthen asset robustness. Additional measures have been put in place in 2020 to reduce operational risks in Bauxite & Alumina. An external risk and control review study is initiated, the pipeline wear model is being reviewed and a project is looking into differences between historic and current slurry properties. Security in critical areas of the power transmission line is strengthened.

In order to be better equipped to prevent and handle future cyber-attacks, Hydro has taken steps to strengthen its cyber security maturity level. A Cyber Response Program for the period 2020-2022 has been launched and is addressing both the state of the central IT infrastructure and industrial control systems in the business areas.

The main activities to mitigate the operational impact of Covid-19 are based on guidelines and regulations from national authorities such as travel restrictions, social distancing, home offices or even more complete societal lockdowns. Alignment with authorities and associations, including providing input on industry needs, is key to ensure business continuity. Hydro-specific measures include assessments of key risks and vulnerabilities, and preparation and review of plans. To reduce the supply chain risk, minimum stock levels for key raw materials were increased. The financial impact has been mitigated with a set of cashpreservation measures to reduce cost and capital expenditures and ensure sufficient liquidity.

Hydro's Board-sanctioned Code of Conduct requires adherence with laws and regulations as well as global directives and procedures, and is systematically implemented and maintained through our compliance system. Over many years, Hydro has been running training of management and staffs, in combination with e-learning programs and competition compliance guidelines in order to build awareness and basic understanding of the concept of competition law. Hydro has active dialogues with relevant parties affected by our activities. These include unions, works councils, customers, suppliers, business partners, local authorities and non-governmental organizations.

Hydro's main HSE-risks

Risk overview

Hydro's main HSE risks are mostly operational by nature or influenced by operational processes. These are risks with a potentially fatal outcome or risks with a potential major environmental, social or financial impact. Responsibility and ownership for HSE risks mainly resides in the Business Areas. All main HSE risks are addressed with risk mitigation plans and followed up in our internal board review structure and in the CEO HSE committee.

Based on Hydro's processes, risks of fatal or life-changing incidents could include molten metal explosion, mobile equipment interaction and transportation, working at height, energy isolation, overhead cranes, confined space entry, equipment failure, major fires, occupational illness and chemical spills. Security risks such as public violence, robbery or theft is particularly relevant in the Barcarena region in Brazil.

The nature of Hydro's mining and industrial operations implies a potential climate and environmental risk exposure. Hydro is also exposed to risks related to the effects of known and unknown historical and current emissions to air, water and soil around large assets. These risks are usually longterm, and to a large extent related to our Bauxite & Alumina operations in Brazil. Climate change may also have an impact on Hydro's operations. For example, Hydro may be faced with insufficient water supply to meet future operational demands at the Paragominas mine.

Although the likelihood is not considered to be high, there is a risk of major accidents such as collapse of a hydropower dam, tailings storage facilities or bauxite residue storage facilities, collapse of the entire port structure at the Alunorte alumina refinery, or rupture of the bauxite slurry pipeline. If materialized, these accidents would have a significant and potentially lasting impact on the environment as well as health & safety of the employees and nearby communities.

Risk development

The violence in Barcarena and surrounding area remains similar to previous year. There was one significant incident involving our security guards being fired upon while on patrol at one of our Brazilian sites. No security personnel were injured and resulting security mitigation measures were employed to protect personnel and prevent further incidents.

Hydro's main environmental risks have remained stable or been reduced. Mitigating actions and monitoring processes have been identified and implemented to reduce the likelihood of incidents occurring.

Risk mitigation

Hydro's influenceability on its HSE risks is in most cases medium to high. Adequate mitigating actions are planned or in place for all of Hydro's main HSE risks.

Mitigating actions to reduce the likelihood of fatal and lifechanging incidents occurring have been developed and implementation is progressing in all business areas with quarterly updates for the critical 7 fatality prevention procedures.

Hydro Bauxite & Alumina security team closely monitors security risks in areas which Hydro operates and maintains close contact with authorities in specific areas. Security risk assessments and protective measures are in place both at operations and hotels used by Hydro employees.

All sites are required to monitor and maintain a record of known legacies related to their operations and address them according to the agreements made with the relevant regulatory bodies. Where potential legacy risks are more significant, comprehensive environmental monitoring campaigns and proactive remediation activities are in place. A new Environment Global procedure aimed at chemical management has been developed. Risk mitigation related to tailings dams, water dams and pipeline rupture continues. The bauxite pipeline has undergone extended maintenance, while the pipeline wear model and replacement plan are under review. The risk of insufficient landfilling capacity has been addressed with licensing of the dry tailings backfill technology in Paragominas. MRN is an active member of the tailings committee and the possibility of dry tailings backfill is under review.

Hydro is continuously monitoring the HSE-risk development and the impact of its operations. For example, an environmental baseline and effect study is underway in Barcarena to determine the environmental impact of our operations. A similar study is underway in Norway to determine the impact of our smelting operations. Hydro follows the developments in and commits to comply with relevant local and global HSE regulations and standards. Hydro will continue to evaluate current mitigation plans and assess potential additional or alternative mitigations.

Hydro'sfinancial position and key financial exposures

Hydro's main strategy for mitigating risk related to volatility in cash flow is to maintain a strong balance sheet and an investment grade credit rating, while at the same time focusing on reducing the average cost position of production assets, and allocating capital in line with our strategic ambitions. In certain circumstances, derivatives may be used to mitigate financial risk on business area or group level. During 2020, Hydro has performed a review of its risk management strategy, and intends to utilize derivative and non-derivative measures to manage price exposure over slightly longer periods than the practice in recent years. The targeted key financial ratio levels over the business cycle are described in note 7.1 to the financial statements.

Key financial exposures

Hydro's operating results are primarily affected by price developments of our main products, raw materials, margin developments and fluctuations in the most significant currencies for Hydro, which are USD, NOK, EUR and BRL.

To mitigate the impact of exchange rate fluctuations, longterm debt is mainly maintained in currencies reflecting underlying exposures and cash generation. Hydro may also use foreign currency swaps and forward currency contracts to reduce effects of fluctuations in the US dollar and other exchange rates.

The table below shows sensitivities regarding aluminium prices and foreign currency fluctuations for 2020. The table illustrates the sensitivity of earnings, before tax, interest and depreciation (EBITDA) to changes in these factors and is provided to supplement the sensitivity analysis required by IFRS, included in note 8.2 to the financial statements. These sensitivities are on an underlying basis, and do not consider revaluation effects of derivative instruments, which may influence earnings.

Sensitivities with 100% production

Commodity price sensitivity +10%

NOK Million			UEBITDA

Hydro Group
Aluminium			3,530


Currency sensitivities +10%
NOK Million	USD	BRL	EUR

Sustainable effect
EBITDA	3,620	(710)	-

One-off reevaluation effect
Financial items	(240)	680	(3,960)

Annual sensitivities based on normal annual production volumes, LME USD 1 790 per mt, USDNOK 9.13, BRLNOK 1.67, EURNOK 10.47.

Compliance, controls and procedures

Hydro's Code of Conduct requires adherence with laws and regulations as well as internal directives and procedures. It is systematically implemented and followed up through our compliance system. The compliance system is based on four pillars: prevention, detection, reporting and responding. In addition to financial compliance, priority areas are health, safety and environment (HSE), human rights, anticorruption, competition law and data privacy (see the section Society).

Hydro follows the most recent version of Norwegian Code of Practice on Corporate Governance of October 2018. Details on Hydro's compliance with the code are in the section Norwegian Code of Practice on Corporate Governance, in the appendices to this report.

The Board Audit Committee carries out a control function and assists the board in exercising its oversight responsibility with the company's financial reporting and the requirements that extends beyond the financial reporting, covering environmental, social and governance issues.

Research and development

We believe that the key to Hydro's 115-year-long stretch of industrial progress is the combination of production and innovation, where research and development have gone hand in hand with full-scale production.

The greater part of our R&D expenses goes to our in-house research and application development organization, while the remainder supports work carried out at external institutions. Our main R&D centers are in Årdal (smelter technology) and Sunndal (alloys and casting) in Norway, Barcarena in Brazil (bauxite and alumina), and Finspång in Sweden and Detroit in the US (both Extrusions). The R&D unit in Bonn in Germany is included in the Hydro Rolling transaction, see page 18.

Our R&D efforts are concentrated on:

Reducing energy consumption, waste, emissions and carbon footprint in line with Hydro's sustainability agenda
Making products and solutions that promote the use of aluminium and sustainable development
Implementing technology elements from the Karmøy Technology Pilot in order to optimize productivity, energy efficiency and emissions in smelters
Using R&D and technology to ensure optimal operations in existing assets, including cost and HSE
Improving environmental impact in Bauxite & Alumina, such as biodiversity, rehabilitation and utilization of bauxite residue
Developing recycling technology and low-carbon products based on post-consumer scrap, e.g. Circal
Increasing the share of value-added products and tailored solutions in collaboration with the customer
Utilizing the opportunities of Industry 4.0 to improve process stability, productivity, cost and safety

Hydro's Technology Board consists of the members of Hydro's Corporate Management Board. The technology and innovation group meet every quarter to understand and discuss innovations in the business areas, including their value to the company. Innovations include the changes achieved through our continuous improvement work on all organizational levels. Business areas are responsible for their own technology development and for the execution of their respective technology strategies. A corporate technology office is established to ensure a holistic and long-term approach to Hydro's technology strategy and agenda. The Chief Technology Officer leads an internal R&D network with representatives from the business areas, and supports the Hydro Technology Board in developing overall research and technology priorities and strategies.

A major advantage for Hydro from an innovation perspective is our broad knowledge and control of the entire value chain from bauxite mining, alumina refining, electrolysis of primary aluminium and alloy technology to finished products and recycling.

We are now in the process of implementing the technology elements from the Karmøy Technology Pilot in our existing primary aluminium producers, improving performance and financial robustness. This includes the Husnes line B in Norway, which started production in 2020, and as a part of the regular maintenance and relining of the electrolysis cells in all smelters, with emphasis on Sunndal due to its importance in the smelter portfolio. Hydro has also started working on several initiatives to reduce direct CO2 emission in primary aluminium production.

anodes with bio carbon, and while it appears challenging, we are part of two fundamental R&D programs supported by the Norwegian Research Council looking into this. In addition, we are on track with our chloride feasibility project, supported by Gassnova, where we explore a new process based on aluminium chloride with zero CO2 emissions.

Tailings management and bauxite residue is a challenge in our industry. One example of our progress relates to the tailings dry backfill project. The application of this approach in Paragominas represents the end of construction of new facilities for storage of bauxite tailings. Bauxite residue is a challenge due to its alkalinity and large volumes. Hydro participates in international collaboration projects investigating possibilities to use bauxite residue as a resource. Another example is together with the Norwegian University of Technology and Science (NTNU), Sintef, Norcem/Heidelberg and Veidekke to develop a new type of concrete using bauxite residue as a resource to improve quality. We are also working with other aluminium companies through the International Aluminium Institute to solve this industry challenge. In addition, we are investing in R&D to reduce the total alkalinity of the bauxite residue.

An important part of Hydro's overall technology strategy is that our researchers cooperate closely with operators and experts in optimizing operations in existing plants. The competence base in Hydro's technology environments is on a very high level and in core areas it is world-class.

The growing use of aluminium in the automotive industry is being driven by emissions regulations and passenger safety requirements. Aluminium is well suited for all cars, from petrol-powered automobiles to fully electric vehicles and vehicles which use hydrogen fuel cell technology. This is creating new opportunities for Hydro. Hydro is a large supplier to the automotive industry. Customers include major producers in Europe, North America and Asia. In 2020, we opened a new application lab, including automotive test facilities, in Finspång, Sweden.

Society

As a global energy and aluminium company with mining interests, ensuring responsible conduct in relation to society at large is important throughout Hydro's value chain. We have to consider our impact on society, spanning from construction to divestment activity, including risk of human rights violations, within our own operations, the communities we are part of, and in the supply chain.

Our compliance system shall ensure that all persons acting on behalf of Hydro comply with applicable laws and regulations and with the requirements adopted by Hydro. Some of the measures we pursue to ensure integrity and responsible behavior include:

Zero tolerance of corruption in the private and public sector
Ongoing human rights due diligence, including audits of joint ventures and suppliers
Continuous stakeholder engagement linked to existing operations and new projects

Hydro's board-sanctioned Code of Conduct creates the foundation that supports our efforts to do the right things and to always act with integrity throughout our global organization wherever we operate and conduct business on behalf of Hydro. It requires adherence with laws and regulations as well as internal constituting documents and global directives and is systematically implemented and followed up through our compliance system.

Our compliance system is based on a clear governance structure defining roles and responsibilities regarding compliance and all compliance-related activities undertaken throughout the company.

The management of compliance risks, including risks related to corruption and human rights violations, are integrated in our business planning, enterprise risk management and follow-up process, including relevant risk-mitigating actions and key performance indicators. The progress of actions as well as any non-compliance matters is addressed in the quarterly internal board meetings that each business area has with the CEO, and an annual compliance report is submitted to the Board of Directors. The head of Group compliance reports to the Board of Directors through the Board Audit Committee at her own discretion. She meets with the Board of Directors periodically and participates in all Board Audit Committee meetings.

The head of internal audit reports to the company's board of directors through the board audit committee. Every quarter he informs the board audit committee and periodically the corporate management board about matters reported through the AlertLine. Hydro's internal audit has resources in Norway, Brazil and North-America.

We are committed to building a culture of trust where employees are comfortable to ask questions, seek guidance, raise concerns, and report suspected violations. Normally, concerns and complaints should be raised with the employee's superior. However, if the employee is uncomfortable with that, he or she may raise the issue with Human Resources, HSE, a union/safety representative, Compliance, Legal or internal audit. The employee can also use Hydro's whistle-blower channel, AlertLine, where concerns can be reported anonymously. All employees and on-site contractors can use the AlertLine in their own language at all times via tollfree phone numbers, Hydro's intranet or through a dedicated address on the Internet. In certain countries, e.g. Spain, there are legal restrictions on such reporting lines. In 2020, 224 cases were reported through the AlertLine channel. All cases reported through the AlertLine were assessed, and investigations were performed where relevant. In total, 4 people were dismissed as a result of reported breaches of Hydro policy in 2020. The number is limited to cases reported to Hydro's internal audit.

Grievance, or complaint, mechanisms are important to understand the impact of Hydro's operations, and the impact on the rights of individuals and groups affected by our

operations. Grievances may be of any kind, including social and environmental issues, and can be made anonymously. In situations where we identify adverse human rights impact, we work to mitigate, prevent, address and remedy these as recommended in the UN Guiding Principles on Business and Human Rights. Channels for submitting grievances vary depending on local needs and stakeholder groups. In Brazil, the system has several channels, including a phone number, email and dedicated, specially trained field workers.

We encourage, and will not retaliate against, individuals who in good faith raise concerns regarding Hydro's respect for human rights.

Hydro also supports key frameworks that define human rights principles and is committed to following these, including the UN Guiding Principles on Business and Human Rights and ILO's eight core conventions. Hydro's human rights management is based on the OECD Due Diligence Guidance for Responsible Business Conduct.

Hydro is concerned about fundamental labor rights, such as minimum wage requirements and the regulation of working hours, and we support the principle of freedom of association and collective bargaining. We have a long tradition of maintaining a good dialogue with employee organizations. All major sites in Europe and Brazil are unionized. Hydro Extrusions has a major presence in the US, and about 60 percent of our US employees are working at unionized sites. All business areas have a forum for dialogue between the management and union representatives. Hydro's Global Framework Agreement was last updated in 2016. The negotiation of a new agreement has been delayed due to the Covid-19 pandemic.

We recognize that our activities impact communities in which we operate. We have identified Hydro's major risks to people, which according to the UN Guiding Principles Reporting Framework are defined as the human rights salient to our operations and which we are most at risk of impacting. We engage and collaborate with stakeholders both internally and externally when relevant to help inform us about, and evaluate the effectiveness of, our human rights management. This may include NGOs, unions, works councils, local associations, authorities, customers, suppliers, business partners.

Where relevant, and in line with our risk-based approach, we have regular dialogue with communities, and more frequent and structured dialogue in communities with higher risk of

facing adverse human rights impacts. Hydro has significant operations in Barcarena, Brazil, including the Alunorte alumina refinery and Albras aluminium plant. Local social conditions are challenging with high levels of unemployment and general poverty. We have established contact with local authorities and representatives for our neighbors, including dialogue with traditional Quilombola groups in Brazil.

The Brazilian human rights consultancy Proactiva has conducted a thorough human rights due diligence of our operations in Pará state, Brazil. The due diligence covers the alumina refinery Alunorte, primary aluminium plant Albras and the Paragominas bauxite mine, including the bauxite slurry pipeline from Paragominas to Alunorte. An action plan is under implementation, prioritized by severity for implementation by 2023. During 2020, we made progress in several areas. Examples include conducting human rights training for employees and suppliers, and improving human rights in the Bauxite & Alumina's Enterprise Risk Management and procurement processes.

Unresolved issues remain related to identifying individuals directly impacted by the construction of a 244-km-long bauxite pipeline that crosses areas inhabited by traditional Quilombola groups in the Jambuaçu Territory in Pará state, Brazil. As part of an integrated plan to remedy impacts along the pipeline, Hydro reached an agreement in 2020 with 61 families identified as directly impacted by the construction, but not covered under the legal agreement with the former owner. In addition, Hydro is currently working together with different stakeholders including Quilombola communities, Fundação Cultural Palmares, State of Pará and INCRA, to reach an agreement to support six community associations, and establish a fund for social investments for the Jambuaçu Territory that Hydro aims to contribute to. INCRA is the Brazilian agency in charge of land certifications, including Quilombola matters, as part of environmental licenses.

To better understand the perception of Hydro's reputation, the impact of our social initiatives and dialogue, and Hydro's relationship with the communities, a survey was performed in the seven municipalities we operate in in Pará state. The baseline was conducted in early 2020 with a second survey conducted in late 2020. In the second survey, half of the respondents agreed to Hydro's social initiatives as being positive. This is a 13 percent improvement from the baseline survey. The surveys were part of the Corporate Management Board's KPIs in 2020. We will follow up with yearly surveys to monitor the perceived impact of our initiatives.

On February 5, 2021, CAINQUIAMA – Associação dos Cablocos, Indigenas e Quilombolas da Amazônia (an association with office in Barcarena) and nine Brazilian individuals filed a lawsuit with the Rotterdam District Court, in the Netherlands, against Hydro's Dutch entities and Norsk Hydro ASA (Hydro) seeking compensation for alleged financial damages and personal injuries suffered as a result of Alunorte and Albras activities in the municipality of Barcarena. According to the plaintiffs, Hydro's Dutch entities and Hydro are part of Alunorte and Albras' corporate group and, therefore should be liable for the alleged environmental violations caused in the municipality of Barcarena throughout the years.

Hydro's social responsibility ambition is to make a positive difference by strengthening our business partners and the

local communities where we operate. To do this, we target the fundamental drivers of long-term development. In line with stakeholder expectations and needs, and through strong partnerships, we aim to:

Contribute to quality education in our communities
Promote decent work throughout the value and supply chain
Foster economic growth in our communities
Strengthen local communities and institutions through capacity building on human rights and good governance

We have committed to contribute to quality education and capacity building for 500,000 people in our communities and for business partners from 2018 until end of 2030. In 2020, we reached close to 60,000 people. Continuous improvement of current initiatives and development of new high-impact initiatives will be important going forward. Some of our community programs are linked to mining license requirements, while others are voluntary commitments. The programs target education, economic growth, decent work, capacity building and strengthening of institutions. Many social programs have either been put on hold or transferred to digital platforms due to Covid-19 in 2020. Several programs are linked to partnerships.

In Pará state, Brazil, Hydro currently has more than 10 social programs across the seven municipalities where we have operations. For each of these projects, we have an implementation partner. Due to Covid-19, all programs have adapted new measures. Where possible, programs have been moved to digital platforms, and infection prevention protocols are strictly followed for physical activities. For each program we have an implementation partner. In 2020, the implementation partners met digitally to share knowledge and identify synergies to strengthen our partners and contribute towards the common goal of local development.

We initiated the Sustainable Barcarena Initiative in 2018 and have continued developing it in 2020. The initiative is an independent platform for sustainable development in

Barcarena in Pará state. The overall aim is to bring local stakeholders together to discuss challenges and opportunities, strengthen capabilities and ultimately invest in the social initiatives they plan and develop together. In 2019, we established the Hydro Sustainability Fund which serves as a financing mechanism for the Sustainable Barcarena Initiative. Hydro contributes with BRL 100 million to the fund over a 10-year period. In 2020, the fund established partnerships with USAID and the Partnership Platform for the Amazon's Solidarity initiative to strengthen initiatives in the Amazon region.

In Pará state we also engage with regional initiatives to preserve the Amazon. We run several programs that emphasize entrepreneurship and strengthening of traditional livelihoods. This also includes environmental efforts and collaborations such as the Biodiversity Research Consortium Brazil-Norway.

Hydro's supplier and business partner requirements regarding social and environmental responsibility are, as stated in our global directives and procedures, an integral part of all stages of the procurement process. The requirements demand the suppliers and business partners to comply with all applicable laws and regulations relating to corruption and bribery, human rights, working conditions and environment and that they reflect the values and principles that Hydro promotes internally and externally.

Hydro has been included in the Dow Jones Sustainability Indices each year since the index series started in 1999. We are also listed on the corresponding UK index FTSE4Good, and the UN Global Compact 100 stock index.

Hydro support the principles underlying the Universal Declaration of Human Rights, the UN Global Compact and ILO's eight core conventions. We are a member of the International Council on Mining and Metals (ICMM) and are committed to follow their principles and position statements. Hydro has a long-standing partnership with Amnesty International Norway since 2002, and a cooperation agreement with the Danish Institute for Human Rights. We are also a founding member of the Aluminium Stewardship Initiative, a multi-stakeholder process to set standards to improve environmental, social and governance performance across the aluminium value chain. 61 of Hydro's aluminium sites worldwide have achieved certification according to the ASI, covering Hydro's value chain from bauxite mining to finished products.

Hydro uses the GRI Standards for voluntary reporting of sustainable development. We support the Extractive Industries Transparency Initiative (EITI) and comply with the Norwegian legal requirements on country-by-country reporting, we prepare a modern slavery transparency statement according to UK and Australian legislation, and we prepare a diversity and inclusion statement in accordance with Norwegian legal requirements, see the appendices to this report. In addition, we follow the Euronext guidelines to issuers for ESG reporting.

Environment

The most important environmental effects of Hydro's activities relate to climate change, biodiversity, recycling and water and waste management. The main resource inputs are bauxite, energy, water and land use.

Hydro's overarching climate ambition towards 2030 is to reduce the global impact of our value chain through greener sourcing, greener production and greener products. We aim to reduce our own greenhouse gas

emissions by 30 percent in 2030 and explore different paths towards further significant emissions reductions and CO2 free processes by 2050. Through greener sourcing and greener production, we also aim to help our customers in reducing their emissions through providing greener products.

Our strategy puts emphasis on reducing own emissions. Changes in our production portfolio might influence these targets, but our aim is still to reduce our specific emissions. We have set targets to reduce greenhouse gas emissions by 10 percent by 2025 and 30 percent by 2030, based on a 2018 baseline (2017 for Paragominas, Alunorte and Albras due to the production embargo at Alunorte and curtailment at Albras and Paragominas). The baseline emissions equal 13.3 million tonnes CO2 equivalents (CO2e) and includes direct emissions and indirect emissions from electricity generation (scope 1 and scope 2 emissions). The Hydro Rolling transaction will impact the strategy baseline, see page 18.

Greener sourcing refers to Hydro's position as a purchaser of raw materials and energy. Hydro has the opportunity to source less carbon-intensive electricity and cold metal with a lower carbon footprint. We also have the opportunity to increase the use of post-consumer scrap in metal production.

Since 2013, Hydro's ambition has been to be carbon neutral in a life cycle perspective by 2020. This was achieved in 2019. Innovation and technology development are key enablers towards reducing CO2 emissions. We have initiated a significant R&D program towards 2030 to look into different alternatives to achieve CO2-free processes. We will explore different paths such as carbon capture and storage, biomass anodes and carbon-free processes. By 2030 we expect to have a clearer view on a path to further significant emission reductions by 2050.

The goal of our 2030 environmental strategy is to minimize our impact along the aluminum value chain by addressing the industry's key environmental challenges. We aim to do so by driving rehabilitation at our bauxite mine, developing and implementing sustainable management solutions for our tailings and bauxite residue streams whilst reducing our waste to landfill from our downstream operations and significantly reducing our non-GHG emissions to air.

Hydro's only operated mine, the Paragominas bauxite mine, is located in the state of Pará in Northern Brazil, in the Amazon Basin. Due to the nature of mining, Paragominas has an impact upon the landscape, that will affect the

ecosystems and biodiversity that exists there and must be managed in a responsible manner.

To address this impact, Paragominas has set a target to rehabilitate these impacted areas, as soon as practically possible. The rehabilitation target is rolling, aiming to begin the rehabilitation of all available mined areas within two hydrological seasons after their release from operations. This definition takes into account the nature of the mining and rehabilitation cycles, and the time lag necessary to ensure quality rehabilitation to restore biodiversity. It also takes into account that land periodically needs to be set aside for temporary infrastructure, e.g. roads, in order to safely operate the mine. This is what we refer to as our 1:1 rehabilitation target.

We cooperate with academic institutions to increase our knowledge and secure a science -based approach. This includes the formation of the Biodiversity Research Consortium Brazil -Norway (BRC) in 2013.

In addition to land use and biodiversity, the main environmental issues in bauxite extraction and alumina refining include waste disposal and greenhouse gas emissions. Waste production includes significant amounts of mineral rejects (tailings) from the bauxite extraction process and bauxite residue, from the alumina refining process. Tailings are stored in settling ponds. Separated water is clarified and reused in the process. Hydro Bauxite & Alumina has developed and tested out the "Tailings Dry Backfill" methodology at the Paragominas mine. The application of this approach in Paragominas represents the end of construction of new facilities for storage of bauxite tailings. The operating license to implement this new approach was received in December 2020, and it has now been fully adopted into operations at the mine.

In Paragominas, a new tailings system was completed in 2017. The new tailings dams are situated on a plateau where mining has been finalized. The old tailings system is constructed in a shallow valley. When tailings dams are closed, they need to settle for at least five years before being available for rehabilitation. A tailor-made approach will be needed to rehabilitate the closed tailing dams as they differ in nature from the mined areas.

Bauxite residue is a waste product of the alumina refining process. Its disposal is challenging due to large volumes and the alkaline nature of the liquid component of the residue. The residue is washed with water to lower the alkalinity and to recover caustic soda for reuse. Hydro uses an enhanced dry stacking technology for disposing of bauxite residue which allows for residue storage at steeper slopes, reducing the disposal area requirements. This reduces the relative environmental footprint. The new bauxite residue deposit area at Alunorte includes more advanced press filters. These are capable of reducing the residue moisture content to 22 percent, down from 36 percent achieved with the previous drum filter technology.

The dams and deposits are regularly inspected by Hydro and the Brazilian authorities. They have also been reviewed against international standards by external international geotechnical consultants, NGI and Geomecanica, in 2016 and 2019. Based on the output of the 2016 audit, an action plan was created for tailings storage facilities and dams at Paragominas. The recommendations have been addressed, based on priority, and, to date, 54 of the 56 identified actions have been completed, with the remaining two actions expected to be addressed in 2021. In addition, independent third-party audits are performed twice a year, to comply with Brazilian regulations and maintain the stability certifications for each dam.

The tailings storage facilities at Paragominas are raised exclusively using the downstream elevation method, with the exception of one relatively short and low centerline raising at the very top of the dam. The downstream elevation method provides the greatest level of structural integrity and safety. In addition, the tailings stored in our tailings storage facilities are of a higher solids content (ca 55-60 percent solids content) than that generally found in the iron ore industry (e.g. Samarco and Brumadinho).

Alunorte will perform an updated socioeconomic study to assess if there were any significant impacts of the installation of the new bauxite residue storage area (DRS2). If the study indicates such impacts and a need for compensatory measures, such measures shall aim to contribute to sustainable and long-term improvements in potentially affected communities.

Spent potlining (SPL) from electrolytic cells used in primary aluminium production is defined as hazardous waste. We are actively trying to find alternative use of SPL from our operations. We aim to recycle 65 percent of our spent pot lining (SPL) by 2030, and find more sustainable solutions for our waste streams, identifying were they can be utilized as a resource.

Hydro use the WRI Aqueduct water tool to perform an annual review of water withdrawal from water-stressed areas. The mapping of Hydro's sites in 2020 showed that 0.8 percent of our overall fresh-water input came from waterstressed areas, with regard to annual renewable water supply (according to the definition used by WRI).

Operating in water-stressed areas is not considered a material risk for Hydro's key operations. Instead, the more material risks are linked to the management of excess water and the quality of the external bodies into which Hydro discharges process water. As a first step towards implementing risk-based water management targets and increased local stakeholder engagement, Hydro is strengthening current water reporting and management practices. We aim to have implemented industry best practice water reporting by 2021, and as of Hydro's Annual Report 2020 we are in line with the ICMM's minimum water disclosure standard.

Following a mass balance of mercury at Alunorte in Brazil, which was concluded in 2017, Hydro decided to install four mercury condensers on the digestor lines. The first condenser was installed in 2018, as a pilot, and its technical performance is being monitored prior to the installation of the remaining units. The initial timeline was to install the remaining units in 2020, but this has been rescheduled to allow for further performance optimization of the technology.

Engagement with customers and other stakeholders on the environmental impact of our processes and products is an important element of our product stewardship. We perform life-cycle assessments for all major product groups to identify improvement potential. We also assess other aspects such as energy and material consumption, toxicity and recyclability.

Hydro is a large remelter and recycler of aluminium. We remelt process scrap from our own production and from other companies, as well as post-consumer scrap from the market.

During 2020 we performed a strategic review of our recycling activities, and we set a growth ambition to double the postconsumer scrap recycling capacity to more than 600 thousand tonnes per year by 20253 . To deliver on the growth ambition we established a center of excellence for recycling in Hydro Aluminium Metal to bundle competence and develop necessary capacity supporting all business areas in their growth ambitions.

³ Target may be subject to revision following the Hydro Rolling transaction, see page 18

People

Hydro shall be a leading company in our industry in the area of occupational health and safety. Our ambition is to strive for an injury free environment. This will be achieved through the consistent implementation of the management system; committed and visible leadership, and full engagement of all employees.

The number of total recordable injuries and associated rates improved over 2019 levels to a total recordable injury rate of 2.7 from 3.0. There were no life-threatening injuries during the year; however, there was one life changing injury at one of our North American facilities where a worker's right foot was surgically amputated after his foot was crushed when a heavy load fell from the forks of a forklift truck.

Nearly half of the reported injuries in 2020 were related to hands, about 20 percent legs, about 10 percent related to the face, eyes and head and 10 percent arms and shoulders.

We continue to see high-risk incidents with a potential for fatality or permanent injuries or ill health, but at a lower level than previous years. We consider this the main leading indicator for our safety performance. From 2020, our emphasis has also been on the closing rate of actions related to high-risk incidents in our operations in 30 days. For 2020 we achieved a rate above 90 percent. We consider this one of the main leading indicators for our safety performance. The high-risk incident rate improved in 2020.

Our approach to improve occupational health is based on work environment risk assessments covering physical, chemical and psychosocial risks.

Hydro closely monitors the development of Covid-19 and has implemented control measures to help prevent the risk of infection and spread and its impact on employees and operations. Hydro has acknowledged the potential impact of Covid-19 on our employees' mental health and have held several webinars to provide tools to help build resilience and coping mechanisms in line with our mental health and wellbeing programs.

The occupational illness rate in 2020 was 0.3 cases per million hours worked, compared to 0.2 in 2019. Most of the cases related to occupational illness relates to noise. Hydro Extrusions records occupational illness as part of the total recordable injuries. Reporting on occupational illness is challenging due to data privacy requirements.

Hydro had 34,240 permanent employees at the end of 2020, a decrease from 36,310 in 2019. The number of temporary employees was 1,929 compared to 1,647 the year before. Contractor employees represented about 11,800 full-time equivalents during 2020 compared to 12,200 in 2019. The large majority of employees are concentrated in the USA, Brazil, Germany and Norway. Extrusions has a greater extent of seasonal variations than the other business areas in Hydro. This is solved in different ways in different parts of the organization and may include the use of agency workers. We still do not have the full overview of the extent of such use.

Through Hydro's global people processes we ensure the right competence, capabilities and organizational culture to be able to deliver on our overall strategic agenda – lifting profitability, driving sustainability.

Hydro's new people strategy was launched in 2020, setting global strategic priorities and activities, in addition to a defined process for annual update and revision. The global priorities cover learning and competence development, leadership and succession as well as diversity and inclusion. These priorities are supported by every business area with targets and activities based on their specific needs, addressing challenges in regions where they operate.

A new people platform was rolled out in 2020 to enable standardized and digitalized global human resources processes throughout the employee's career path.

Hydro's common process for people performance and development includes an appraisal dialogue, individual development plan and follow up, as well as talent planning and succession management.

In order to have a healthy pipeline of leaders with the required breadth of experience, we strive to rotate leaders so that they gain knowledge from different parts of the organization. Through the succession and talent processes, we work with the leadership and specialist pipeline and identify required development. We have a portfolio of learning programs that supports development for leaders as well as specialists.

Portfolio optimizations, reviews and continuous improvement are essential elements of our business operations. Our aim is to involve employees in such processes at an early stage in order to achieve the best results for individuals and the company.

The annual bonus of Hydro executives shall reflect achievements in relation to pre-defined financial targets and achievements of operational and organizational key performance indicators (KPIs). Targets relating to safety, environment and climate change, social responsibility, compliance and leadership expectations constitute a substantial part of the annual bonus plan. Please see note 9.1 and 9.2 to the consolidated financial statements for more information.

For information about Hydro's approach to diversity and inclusion, including information about our global employee engagement survey Hydro Monitor as well as information about compensation, please see the appendix to The Board of Directors' report 2020, Diversity and inclusion, on page 295.

Board developments

The board of directors has an annual plan for its work. It includes recurring topics such as strategy review, business planning, risk and compliance oversight, financial reporting, people strategy, succession planning as well as health and safety, and sustainability including social responsibility, climate and environment. The Board of Directors is closely following the market and macroeconomic developments relevant for the aluminum industry.

High on the board's agenda in 2020 was the Covid-19 situation and its impact on people and operations as well as the Hydro 2025 strategy process. In addition, the board has spent time on the strategic review of the business area Rolling, Hydro's operations in Brazil, people strategy and succession planning, health and safety developments as well as cyber security improvement initiatives. The board has conducted several deep dives throughout the year, including Hydro's human rights management and the business areas Aluminium Metal and Energy. Extraordinary meetings have been held to handle critical matters, including measures to address the Covid-19 situation.

The board of directors conducts an annual self-assessment of its work competence, and cooperation with management and an assessment of the chairperson. The Board Audit Committee also performs a self-assessment. The review was facilitated by the corporate advisory firm Egon Zehnder. The main conclusions of the assessment were submitted to the nomination committee, which in turn assessed the board`s composition and competence.

The board of directors held 13 meetings in 2020 with an attendance of 96 percent. The compensation and people committee held nine meetings and the audit committee ten meetings.

Net income and dividend – Norsk HydroASA

Norsk Hydro ASA (the parent company) had a net loss of NOK 467 million in 2020 compared with net income of NOK 4,668 million in 2019. The result reflects reduced dividends from subsidiaries in 2020 compared to 2019.

According to section 3-3a of the Norwegian Accounting Act, the board of directors confirms that the financial statements have been prepared on the assumption of a going concern.

Dag Mejdell

Chair

Rune Bjerke

Board member

Sten Roar Martinsen Board member

Marianne Wiinholt Board member

Oslo, March 9, 2021

Irene Rummelhoff Deputy chair

Liselott Kilaas Board member

Ellen Merete Olstad Board member

Arve Baade Board member

Peter Kukielski Board member

Thomas Schulz Board member

Hilde Merete Aasheim President and CEO

Business description

40 Annual Report 2020 Business description Hydro

41 History and development
42 Operating segments
43 Business and operating information
43 Hydro Bauxite & Alumina
49 Hydro Aluminium Metal
55 Hydro Metal Markets
57 Hydro Rolling
61 Hydro Extrusions
65 Hydro Energy
68 Regulation and taxation
72 Other information

Quick overview

Hydro is a leading industrial company that builds businesses and partnerships for a more sustainable future. We develop industries that matter to people and society.

Since 1905, Hydro has turned natural resources into valuable products for people and businesses, creating a safe and secure workplace for our 34,000 employees in more than 140 locations and 40 countries.

Today, we own and operate various businesses and have investments with a base in sustainable industries.

Hydro is through its businesses present in a broad range of market segments for aluminium, renewable energy, metal recycling, renewables and batteries, offering a unique wealth of knowledge and competence

Hydro is committed to leading the way towards a more sustainable future, creating more viable societies by developing natural resources into products and solutions in innovative and efficient ways.

History and development

Norsk Hydro ASA was organized under Norwegian law as a public company in 1905 to utilize Norway's large hydroelectric energy resources for the industrial production of nitrogen fertilizers. Our history, spanning many industries and several continents, has been underpinned by three distinctive strengths: the spirit of entrepreneurship, a dedication to innovation and the careful nurturing of our strengths and values.

An emphasis on industrial research and new business alliances enabled us to expand our fertilizer operations following the First World War. In 1928-29, improved fertilizer technology was introduced at Hydro's first industrial sites in Telemark in Southern Norway. Advancements in electricity transmission technology paved the way for the construction of a new fertilizer plant at Herøya, close to Porsgrunn. This provided us with easier access to important raw materials and ideal harbor conditions.

In the three decades following the Second World War, Hydro rebuilt itself into an industrial conglomerate, expanding into a number of new businesses in Norway. In 1951, we began producing magnesium metal and polyvinyl chloride at Porsgrunn. We constructed the Røldal-Suldal hydroelectric power plant to provide energy for our operations at Karmøy, and opened an aluminium reduction and semi-fabricating plant there in 1967.

An era of diversification

In order to secure stable access to raw materials and energy for our fertilizer operations, we investigated opportunities to participate in oil and gas production in the middle of the 1960s. After several years, Hydro and its partners discovered oil and gas in the Ekofisk and Frigg fields on the Norwegian Continental Shelf. Our experience in the chemical process industry and abundant natural gas liquids resources provided the foundation for investments in the petrochemicals industry in Norway. In 1978, we commenced production of ethylene and vinyl chloride monomer.

During this time, we also pioneered new labor relations practices aimed at democratizing the workplace and increasing the cooperation between management and employees, leading to a spirit of collaboration which continues to define the company today.

Decades of global expansion

Hydro expanded globally in the 1980s. We developed our fertilizer operations into one of the leading suppliers in Europe. We also entered a new era as an oil company, becoming operator of the Oseberg offshore oil field. Research continued to drive our development as we introduced new technologies for deep-water oil and gas production and horizontal drilling. In 1986-87, we acquired the Norwegian state-owned aluminium company, Årdal og Sunndal Verk, in addition to several European aluminium extrusion plants from Alcan and Alcoa, establishing Hydro Aluminium as a major business within Hydro and an important player in the European aluminium industry.

Later, we developed our businesses further through substantial acquisitions, including the German aluminium company VAW in 2002. This was followed by the decision to participate in the construction of the Qatalum smelter in Qatar. In 2007, Hydro completed the first phase of the giant Ormen Lange gas field, considered one of the largest industrial projects ever undertaken in Norway. A significant portion of the expansion of these businesses was financed through the sale of non-core operations.

Restructuring and concentration

In 2004, we demerged our fertilizer business through the creation of Yara, and we merged Hydro's petroleum activities with Statoil in 2007.

During this period, Hydro invested roughly NOK 18 billion in its aluminium and energy businesses in Norway, including NOK 11 billion in its Norwegian smelter system, NOK 2.2 billion upgrading and expanding its hydropower production operations and NOK 3 billion in research, development and production support relating to both its upstream and downstream aluminium operations. As a result, annual electrolysis production in Norway increased from 760,000 mt to about 900,000 mt, including the shutdown of roughly 250,000 mt of older, higher cost and higher emission capacity.

In 2011, Hydro transformed its business through the acquisition of the aluminium assets of Vale SA, securing its position in bauxite and alumina and lifting the company to the top tier in the aluminium industry. Combining Vale Aluminium with Hydro has resulted in a stronger company, fully integrated into bauxite and alumina.

In 2013, Hydro merged its aluminium extrusion, building systems and precision tubing businesses with Orkla ASA's fully owned extrusion company, Sapa, forming a 50/50 percent joint venture. In 2017, Hydro acquired Orkla's 50 percent interest in Sapa, securing full ownership of the global leader in extruded aluminium solutions. The new business area Hydro Extrusions has significant operations in Europe, North America, South America and Asia.

New strategic direction

Hydro's strategic direction toward 2025 will focus on two key areas: strengthening the company's position in lowcarbon aluminium and growing in recycling, renewable energy and battery storage. Hydro will open for a more flexible ownership model and open for value-creating partnerships and joint ventures. The new steps in Hydro's 115-year industrial history will be characterized by diversification and growth into areas where the megatrends match Hydro's capabilities.

On March 5, 2021, Hydro entered into an agreement to sell its Rolling business. The transaction includes seven plants, including the Neuss primary aluminium plant, one R&D center, global sales offices, and around 5,000 employees, of which 650 employees are in Norway and the remaining mainly in Germany. The transaction is subject to customary approvals from competition authorities and is expected to be completed during second half of 2021.

For further information, see www.hydro.com/en/about-hydro/our-history

Business areas

Hydro's activities Bauxite Alumina Energy Primary Rolling Extrusion Recycling Casting Products

Hydro is today a leading industrial company with a base in sustainable industries. Hydro is through its businesses present in a broad range of market segments for aluminium, energy, metal recycling, renewables and batteries, offering a unique wealth of knowledge and competence.

Within the aluminium business Hydro is a fully integrated aluminium company with attractive equity positions in bauxite and alumina, the most important raw materials in the production of primary metal. We are one of the world's largest producers and suppliers of alumina and primary aluminium. Alumina production well in excess of our own requirements gives us a favorable market position. Substantial self-generated hydroelectric capacity in Norway a dedicated gas-fired plant in Qatalum, in addition to long term power contracts, provides secure access to energy.

In the aluminium downstream industry, Hydro is an industry leader for a range of rolled and extruded aluminium products and solutions, in particular the building, packaging, lithographic, precision tubing and automotive sectors. Our ambition is to be recognized as the world's foremost aluminium solutions supplier, working in partnership with our customers and driving our business forward.

Hydro's business is divided into six business areas; Hydro Bauxite & Alumina, Hydro Aluminium Metal, Hydro Metal Markets, Hydro Rolling, Hydro Extrusions and Hydro Energy.

Bauxite & Alumina includes our bauxite mining activities comprised of the Paragominas mine and a 5 percent interest in Mineracao Rio de Norte (MRN)4, both located in Brazil, as well as our 92 percent interest in the Brazilian alumina refinery, Alunorte. These activities also include Hydro's longterm sourcing arrangements and alumina commercial operations.

Aluminium Metal consists of our primary aluminium production, recycling and casting activities at our wholly owned smelters located in Norway, and Hydro's share of the primary production in partly-owned companies located in Slovakia, Qatar, Australia, Canada and Brazil.

Metal Markets includes all sales and distribution activities relating to products from our primary metal plants and operational responsibility for our stand-alone recyclers. Metal Markets also includes metal sourcing and trading activities, which sources standard ingot for remelting in Hydro's recyclers and primary casthouses from third parties and provides operational risk management through LME hedging activities.

Rolling consists of five European rolling mills including our 50 percent interest in the AluNorf rolling mill in Germany. Rolling also includes the Neuss primary aluminium smelter in Germany.

Extrusions consists of our extrusion-based business, located in Europe, the Americas and Asia, which is focused on delivering solutions to the building and construction, transportation, and engineered products industries. Extrusions also includes our aluminium building systems and precision tubing activities.

Energy has more than 100 years of experience in production of renewable energy. Today, we are one of the top three largest operators of hydropower production in Norway and a large power market player in the Nordic region and Brazil. We are responsible for developing new business opportunities for Hydro within both renewable energy and batteries, and we provide support to the rest of Hydro's business areas on contracts, security of supply and energy framework conditions.

⁴ Earnings from our investment in MRN are included in "Financial income."

Business and operating information

The following section includes a description of the industry developments impacting our business and a description of operations for each of our business areas including key revenue and cost drivers.

Hydro Bauxite & Alumina

Industry overview

Bauxite rock is composed mainly of aluminium hydroxidebearing ore minerals, with accompanying minerals commonly containing iron oxides and hydroxides, and silica as clay and/or quartz. The three main ore minerals are gibbsite, boehmite and diaspore. Their relative abundance in a particular bauxite source will determine alumina processing characteristics, and consequently impact the design, capital and operating costs of a related alumina refinery. In general, gibbsitic bauxite is preferred, as it can be digested at lower temperatures and pressure than boehmitic or diasporic bauxites. Most bauxites occur within a lateritic crust formed by intense tropical weathering, as near-surface blanket deposits. Bauxite is typically extracted from open-cut mines, and either processed at nearby alumina refineries or transported to distant alumina refineries, which can add substantial logistical costs. About 80 percent of alumina refining outside of China is based on integrated bauxite mines. In China, approximately 65 percent of alumina refining is based on integrated sources.

Australia, China, Guinea and Brazil accounted for over 80 percent of global bauxite production of 330 million mt in 2019. The five largest mines outside China represented around 46 percent of the Western world's bauxite production of 254 million mt.

Alumina is a significant cost element in the production of aluminium. The alumina market is competitive, but relatively few players hold a long position. China is the largest producing country, representing approximately 56 and 54 percent of the global demand and capacity, respectively.

Alumina pricing

Pricing in the alumina industry has been moving away from fixed percentages of the aluminium price to index pricing. Three commodity price reporting agencies (Platts, Fastmarkets MB and CRU) publish alumina price indices. These reflect the fundamental supply and demand balance of the alumina market and represents the main reference for contracts of various durations. Average annual contract prices have risen from around 12 percent of LME aluminium reference prices in 1990 to about 17 percent in 2015-2020.

Operations

Bauxite from Paragominas is mined using strip-mining technology.Itis then sorted and crushed into sizes suitable for transportation as a slurry, through a pipeline approximately 240 kilometers long,for refining into alumina at Alunorte. Bauxite from MRN is transported to Alunorte by ship.

Alumina processing begins by mixing the bauxite with caustic soda at high temperatures and pressure. The resulting mixture is pumped into a digester, where a chemical reaction dissolves the alumina. This process produces a sodium aluminate solution, which is transferred into tanks to separate impurities through settling and filtration. The cooled sodium aluminate solution is then pumped into large precipitator tanks to grow alumina hydrate crystals, which are classified by size and then transferred to calciners to remove the water of hydration, thus producing pure alumina.

Cost and revenue drivers

The main cost drivers for bauxite are labor, maintenance and consumables, electricity and fuel for mining equipment. These accountfor around 75 percent of the cash cost of mining activities. Labor,the largest costfactor, accounting for about 30 percent, is influenced by Brazilian wage levels and productivity developments. Maintenance and consumables are influenced by inflation and operational efficiency.

The main cost drivers for alumina refining are bauxite, energy and caustic soda. These represent around 85 percent of cash costs. Energy costs are a mix of fuel, coal and electricity and represent around 30 percent of the total costs. Caustic soda represents around 15 percent of cash costs. Bauxite purchases from Paragominas, and those made under offtake agreements from MRN, are based on prices partly linked to LME prices and alumina market prices.

Commercial operations

When operating at full production capacity, Hydro has a long position in bauxite of 3-4 million mt and in alumina of approximately 2-3 million mt. We price bauxite on its own fundamentals to reflect high-quality Brazilian bauxite. As mentioned above, in addition to Paragominas and our equity interests in the MRN bauxite mine, we have volume offtake agreements for Vale's 40 percent interest in MRN, which amounted to 5.2 million mt in 2019. The excess bauxite not consumed by Alunorte is sold to third parties.

In addition to Alunorte, we procure alumina from a number of external sources. Hydro's contract with Rio Tinto Alcan (RTA) represents the main external source, and covers the supply of 900,000 mt of alumina annually until 2030. We also buy and sell alumina to optimize our physical alumina portfolio on a short and medium-term basis. See section later in this report Financial review, Bauxite & Alumina for external volumes of bauxite and alumina purchased and volumes of alumina sold.

Technology and innovation

Hydro's Bauxite & Alumina business area is continuously investing in a portfolio of innovative technology developments and fundamental R&D projects and studies, with the aim of improving our position of sustainability and competitiveness in the industry.

As an example of technological leadership, Alunorte uses an enhanced dry-stacking residue disposal technology, which includes an improved residue filtration step and the in-situ mechanical compaction of the disposed residue. Alunorte is now using press filtration technology before transporting the residue to the disposal area. This technology produces a filtered cake with lower moisture content, which allows for the cake's further mechanical compaction and storage on steeper slopes, thus reducing disposal area requirements and environmental footprint.

The utilization of Alunorte' s bauxite residue is an important ongoing R&D program, involving partnerships with Brazilian and international government and nongovernment entities. Hydro works in

partnership with the national Brazilian entity SENAI (National Service of Industrial Apprenticeship) mineral research area, UFPA (Federal University of Pará) and USP (University of São Paulo). We also work in association with the International Aluminium Institute (IAI) and the International Council of Mining and Metals (ICMM) to accelerate industry technology developments and improve overall industry standards.

Two other R&D programs are directed at minimizing the economic impact of the relatively high kaolinite content of Amazonian bauxite, which requires a high consumption of caustic soda at Alunorte. These programs are designed to improve the solid-to-solid separation processes at the Paragominas beneficiation plant and to modify the bauxite digestion process at Alunorte. The expected result will be a significant reduction in Alunote's future operating cost, and an increase in the amount of Hydro's economically viable bauxite resources. Hydro is developing these programs together with external organizations.

Environment

In Bauxite & Alumina water management and effluents, biodiversity, waste management, air emissions and greenhouse gases controls are the main issues related to environment.

The disposal of bauxite residue at Alunorte is challenging due to large volumes and the alkaline nature of the liquid component of the residue. The residue is washed with 60 percent reused water to lower the alkalinity and to recover caustic soda for reuse. For more information, please see Technology and Innovation.

Air emissions from Hydro's Alunorte refinery relate mainly to steam generation, which relies on coal and heavy fuel oil. During normal operations, the plant emits about 4 million mt of CO2 equivalents per year.

Hydro's bauxite mining at Paragominas involves removing vegetation and a layer of topsoil and overburden to extract bauxite deposits from 8-to-12 meters underground. As a result, mining operations disturb relatively large areas. Hydro's mine is in an area that is normally recognized as the deforestation belt around the central Amazon region. In the municipality of Paragominas, there has been a reduction in forest area of more than 30 percent over a period of almost 20 years. Much of this occurred before the establishment of the Paragominas mine, and the area had been exposed to selective logging and clear cutting before commencement of operations in 2007. Reforestation and wildlife management at Paragominas are core elements of our sustainability strategy.

To address this impact, Paragominas has set a target to rehabilitate these impacted areas, as soon as practically possible. The rehabilitation target is rolling, aiming to begin the rehabilitation of all available mined areas within two hydrological seasons after their release from operations. This definition takes into account the nature of the mining and rehabilitation cycles, and the time lag necessary to ensure quality rehabilitation to restore biodiversity. It also takes into account that land periodically needs to be set aside for temporary infrastructure, e.g. roads, in order to safely operate the mine. The 2020 target of closing the historical rehabilitation gap inherited from the former operator was achieved in 2018.

To increase our knowledge through a science-based approach, the Biodiversity Research Consortium Brazil-Norway (BRC) was established in 2013. Please see Partnerships under Viability Performance in this report for more information.

Solid waste production includes significant amounts of residues from the bauxite beneficiation process (bauxite tailings) and from alumina refining (bauxite residue). Tailings are stored in dams where the particles settle, and the water drained. Separated water is clarified and reused in the process. Dams are systematically inspected by Brazil's national mining agency, environmental agencies including IBAMA, Hydro and third parties, including the Norwegian Geotechnical Institute (NGI). The terms of commitment include new programs, such as Alunorte's solid waste deposit rehabilitation project and new risk assessment studies and action plans.

In Paragominas, a new tailings system was completed in 2017. The new tailings dam is situated on a plateau where mining has been finalized. The old tailings system is constructed in a shallow valley. When tailings dams are closed, they need to settle for at least five years before being available for rehabilitation.

People

Hydro Bauxite & Alumina had around 4,000 employees in its consolidated activities at the end of 2020. We consider a safe working environment to be a fundamental right of all employees. We believe that this, together with an engaged workforce, improves efficiency and results in lower operating costs. Employee development is also an important factor. Our internal performance and development process and employee engagement index are important tools to engage our people and enhance organizational performance and development. See the Viability performance section later in this report for more information.

Our Bauxite & Alumina Business System has been used as the basis for implementing a standardized production system in our operations. The system is based on Hydro Aluminium Metal's Business System and promotes employee empowerment and development, and facilitates the sharing of best practices throughout the organization.

Diversity in all its forms is appreciated and valued throughout our organization. We regularly assess the status of our diversity efforts and priority areas for improvement to reach our diversity targets. Much progress has been made in areas related to competence and cultural background. In our diversity inclusion goals, we strive to improve our representation of females at all levels in the organization through our recruiting strategies and efforts to create a workplace with opportunities that appeal to both genders. We also are working to improve the opportunities in the company for people with disabilities, in accordance to Brazilian legislation.

Society

Bauxite & Alumina's operations are located in the state of Pará, in northern Brazil, one of the least developed regions in the country, in terms of access to basic social assistance. As one of the largest industrial companies in the state, Hydro is striving to make a positive difference by strengthening our business partners and the local communities where we operate. Read more about Hydro's social responsibility strategy in the section Viability Performance, later in this report.

We are working to make our social projects more robust and structuring, balancing short-term actions and long-term sustainable initiatives. The portfolio of social programs and initiatives are ongoing for Barcarena, Paragominas and the areas along the bauxite pipeline from Paragominas to Alunorte supporting quality education, income generation and guarantee to rights access. Over 16,700 people were reached through our initiatives in Brazil contributing to Hydro's global target. In addition, representatives from the communities are welcome to visit the plants and to better understand the operations, environmental and social processes.

The Barcarena region, where the Alunorte alumina refinery and Hydro's Albras smelter is located, ranks low on the Human Development Index (measure of average achievement in key dimensions of human development: a long and healthy life, being knowledgeable and with a decent standard of living), and has one of the highest levels of violence in the world. There is a lack of access to basic services, with the share of people with access to sanitation at less than 30 percent.

To support broad collaboration for social change in Barcarena, Alunorte and Albras jointly committed BRL 100 million for local community investments, in a 10-year period through the new Sustainable Barcarena Initiative. Hydro Sustainability Fund was then established and since then it has promoted a call for community's socio-environmental projects and articulated a humanitarian help during the pandemic. These initiatives are closely linked to our social sustainability strategy, launched in 2017, and our emphasis

on strengthening and enabling local stakeholders to drive change and development.

We have developed a more coherent and effective strategy for community engagement, based on continuous and enhanced dialogue. A new employee volunteering program for employees has increased internal engagement and addressed community needs.

The bauxite pipeline crosses areas inhabited by traditional Quilombola groups in the Jambuacu Territory in Brazil. Hydro has an ongoing dialogue process with representatives of the group and is investing additional resources to improve its interaction with the group, including facilitation around conflict resolution. Still, there are potential conflicts related to certain Quilombola groups.

Hydro's commitment to safe and environmentally sound operations is universal and absolute. Following the rainfall and subsequent flooding of Barcarena in February 2018, Alunorte collaborated with local institutions to provide an emergency response to the neighboring communities and through our social initiatives and dialogues we are closer to the communities building and maintaining our social license to operate. Alunorte voluntarily and as a humanitarian response keep the distribution of water to 1.300 families that don't have access to clean water and sanitation in Barcarena.

The current grievance mechanism for Hydro's activities in Brazil was introduced in 2014. The mechanism was optimized to use it more actively in stakeholder engagement and has been improved as part of the Human Rights agenda.

Within Bauxite & Alumina's supply chain, the most important risks include human rights, corruption, fraud and inappropriate working conditions. Our sustainability metric is comprised of several elements, including promoting local content, mitigating social risk in the supply chain and screening all suppliers as part of a qualification process.

Bauxite extraction and alumina refining in Hydro

HydroAluminium Metal

Industry overview

The basic raw material for aluminium is bauxite, which is refined into alumina. Aluminium smelting is a capitalintensive, technology-driven industry. Energy represents approximately 50 percent of the costs. As the world's largest consumer and producer of aluminium, China has a significant impact on market fundamentals. Global primary production amounted to roughly 65 million mt in 2020. In 2020, China accounted for 51 percent of worldwide primary aluminium consumption and 57 percent of corresponding production. India and the Middle East are also growing in importance in the production of aluminium.

High-quality aluminium products are also derived from the remelting and recycling of aluminium scrap. Aluminium scrap is generated both in the production (pre-consumer) and in the use (post-consumer) of aluminium products. Around 70-75 percent of all aluminium produced since the Hall-Heroult process was invented in 1886 is still in use5 . Aluminium is used in a variety of applications in many industries. The major consumer segments are transportation, building and construction, packaging and foil and electrical applications. The major consuming areas are China, North America, Western Europe, Japan and the rest of Asia.

Demand for aluminium products in mature markets like North America and Europe is normally in line with economic developments, although with greater volatility. However, substitution for steel and other metals by aluminium, in particular for automotive applications, contributes to higher growth levels and is a key driver underlying increasing demand in aluminium markets.

Structural developments

The 10 largest aluminium companies in the world represent close to 50 percent of global aluminium production, and the 10 largest Chinese aluminium companies accounted for around more than one-third of the world's primary production in 2020. Chinese producers focus primarily on supplying the Chinese markets. Private companies such as Hongqiao group, Xinfa and East Hope have grown significantly in the last several years. In recent years, stateowned companies in China such as Chalco have also increased in size, due to restructuring efforts and through incentives for the Chinese state-owned companies. Outside China, the strongest production growth has been among companies active in India, in particular Vedanta, and to a lesser degree in the Middle East.

⁵ The actual share depends on lifetime assumption for aluminium products in different applications and in different regions of the world.

Aluminium price

Primary aluminium is traded on several metal exchanges, but primarily the London Metal Exchange (LME). The Shanghai Futures Exchange (SHFE) has grown in importance for international trade of standard ingots produced in China. LME aluminium prices are heavily influenced by macroeconomic and market developments.

Premiums outside China affect the incentive for Chinese exports, and China's exports of semi-fabricated products have increased in recent years. Arbitrage opportunities are expected to continue to occur in the future and will influence the size of exports of semis from China, and consequently also metal prices going forward. There has been an increase in trade and anti-dumping cases following increases in Chinese exports of semi-fabricated products. Uncertainty remains regarding the implementation of further trade restrictions.

China is still working actively to develop new domestic applications for aluminium, to make use of its properties and to reduce overcapacity, such as applications within transport/railways.

Operations

Hydro's primary aluminium plants have reduction facilities with potlines and casthouses, where liquid and remelted aluminium is cast to form value-added products such as extrusion ingot, primary foundry alloys, sheet ingot and wire rod, in addition to standard ingot.

Cost and revenue drivers

The main cost drivers for the production of primary aluminium include alumina, power and carbon, which together comprised about 75-80 percent of the cash costs of electrolysis metal in 2020. Approximately two metric tonnes of alumina are required to produce one mt of aluminium, representing 35-40 percent of the cash cost of primary aluminium. Energy represents on average 25-30 percent and carbon anodes consumed in the smelting process account for 15-20 percent of cash costs.

Realized aluminium prices are the most important revenue driver. As part of our operational hedging procedure, prices are fixed, on average, one month prior to production. As a result, and due to the hedging of product inventories, Hydro's realized aluminium prices lag LME spot prices by 1-2 months.

Competitive strengths

Worldwide production network of cost-efficient primary aluminium facilities, including the Norwegian plant in Sunndal, which is the largest and most modern primary metal plant in Europe, and Qatalum, our 50 percent-owned world-class smelter in Qatar, which has a competitive position in the first quartile of the industry's cost curve
Competitive position on the industry cash-cost curve
Culture of continuous improvement and solid track record of continually upgrading efficiency of smelter portfolio
Most primary aluminium output is sold in the form of value-added casthouse products
Captive alumina position with more than 100 percent coverage
Robust power position, largely based on hydropower. Substantial coverage of current production until 2030 and beyond
Technological leadership and world-class smelter technology

Aluminium smelter system

Hydro is one of the world's largest producers of primary aluminium, with installed capacity in 10 fully or partly owned plants. In 2020, we produced around 2,1 million mt of primary aluminium, which is around 190 kmt below full capacity, affected by the partial curtailments at the Husnes plant in Norway, the Albras plant in Brazil and the Slovalco plant in Slovakia. During November 2020, Hydro restarted aluminium production at line B at the Husnes primary plant in Norway, after running the plant for more than a decade at half capacity. The restart of Husnes line B will add 95,000 mt of electrolysis capacity and includes technology spin-offs from the Karmøy technology pilot to lift operational and environmental performance to world-class standards.

Internal supply contracts between our hydropower production operations and our aluminium metal business covered about half of the energy consumption of our wholly owned Norwegian smelters in 2019. The remainder was mainly covered by an external supply contract with Statkraft, a Norwegian electricity company. The contract expired at the end of 2020.

To replace the Statkraft contract, Hydro has entered into various new supply contracts, adding up to a total annual supply of 8.6 TWh for the period 2021-2030, of 5.6 TWh for the period 2021-2035, and of 5.4 TWh for the period 2036- 2039. This secures a significant part of the power consumption, in addition to our own hydropower production, that is required by our Norwegian smelters for these periods. The new contracts comprise a mixture of hydropower and wind power.

Electricity for Qatalum is provided by an integrated natural gas-fired plant supplied with gas by Hydro's joint venture partner, Qatar Petroleum. The rest of the global joint ventures are covered under medium to long-term contracts, expiring between end-2021 and end-2030.

Technology and innovation

Technology development and innovation are important pillars for Aluminium Metal to develop future benchmark technology platforms for aluminium production.

The Karmøy technology pilot is operating at full capacity, producing the world's most climate-friendly and energyefficient primary aluminium.

Environment

Primary aluminium production is an energy-intensive process. However, approximately 70 percent of the electricity used in Hydro's aluminium plants is provided by renewables. A substantial portion of the remainder (around 20 percent) is provided by natural gas. On a global basis, hydroelectric power accounts for about 36 percent of the electricity used for aluminium production, with natural gas accounting for 8 percent. The Intergovernmental Panel on Climate Change (IPCC) recognizes natural gas as an important transition fuel that can help reduce global temperature increases.

Aluminium Metal is Hydro's largest consumer of energy and has the largest combined direct and indirect greenhouse gas emissions. The main source of direct CO2 emissions from Hydro's primary aluminium production is the consumption of carbon anodes.

See the Viability Performance section later in this report for more information regarding our climate strategy and how aluminium products can contribute to reduced energy consumption and greenhouse gas emissions.

The production of primary aluminium generates secondary raw materials, by-products and waste. Hydro is continuously working to increase sustainability through reducing material loss and increasing internal reuse and recycling. By cooperating with research and industry partners, Hydro is maintaining and developing sustainable material handling throughout the value chain. Hydro's excess materials have proven valuable for industrial partners manufacturing cement, mineral wool, metals and construction materials.

The Norwegian Environmental Agency has in recent years renewed the environmental permits for Hydro's aluminium plants in Karmøy, Høyanger, Sunndal and Husnes. A new permit for the Årdal plant is expected early 2021.

People

We have a responsibility to provide a safe work environment and believe that this also promotes efficiency and lower operating costs. We drive safety improvements by systematically reducing risks, training personnel and regularly following up by line management and safety delegates. All injuries and high-risk incidents are investigated to find root causes and to share lessons learned between plants. Through deployment of our Work Environment Risk

Assessment (WERA) process, we have reduced employee exposure to hazards within our operations by 5-10 percent annually in the last 10 years. This includes the reduction of exposure to noise, dust, heat, fumes, chemicals and vibration. Aluminium Metal has a certified environmental management system (ISO 14001) to ensure compliance with environmental permits. We investigate environmental incidents and emissions above limits, to avoid reoccurrence.

A learning culture built on our continuous improvement work is essential for developing the competence of our employees. Our strategy for digital transformation as well as the experiences with Covid 19, has increased our work on digital learning initiatives through the year. Safety is a top priority for Hydro Aluminium Metal and our leadership programmes as well as digital learning initiatives for all employees has been deployed this year. We have also included local suppliers in educational activities at production sites like Årdal.

Society

Hydro is one of the most important business enterprises in several of the communities where our aluminium plants are located. We have also included operators from local suppliers and companies in educational activities at production sites like Årdal. Improved apprentice program at Norwegian smelters has been done in close proximity to local secondary schools. A good dialogue with local residents is considered essential for the mutual benefit of our business and the societies in which we operate. For information about what we do to improve social conditions in Barcarena, the location of Hydro's Albras smelter and Alunorte alumina refinery, please see the business description of Bauxite & Alumina.

In Qatar, the large majority of Qatalum's employees are migrant workers. We strive to secure good working conditions for people employed directly and to follow up the conditions for contractor employees.

Hydro's supplier requirements regarding social responsibility form an integral part of our procurement process. Several of the suppliers for our metal production operations are based in developing countries dealing with certain environmental and social issues. We have risk-based mechanisms in place to assess compliance with local regulations and our own requirements, including on-site audits and follow-up actions.

Primary aluminium is produced in reduction plants where pure aluminium is formed from alumina by an electrolytic process. This process is carried out in electrolytic cells, in which the carbon cathode placed in the bottom of the cells forms the negative electrode. Anodes, which are made of carbon, are consumed during the electrolytic process when the anode reacts with the oxygen in the alumina to form CO2. The process requires electric energy, about 14 kWh per kilo aluminium produced in modern production lines.

Plant	Country	Employees (per Dec.31)	Electrolysis capacity (000 mt) 1)2)	Casthouse capacity (000 mt)	Main products	Key characteristics 3)
Karmøy	Norway	516	271	370	extrusion ingot, wire rod	· Two prebake lines · R&D center and rolling mill · Technology Pilot fully ramped-up in 2018
Årdal	Norway	542	202	229	sheet ingot, foundry alloys 4)	· Two prebake lines · Technology and competence center · Substantial anode production
Sunndal	Norway	667	425	525	extrusion ingot, foundry alloys	· Two prebake lines · R&D center metallurgy and casting · Largest and most modern plant in Western Europe
Høyanger	Norway	152	66	120	sheet ingot	· One prebake line
Husnes	Norway	330	195 5)	215	extrusion ingot	· 100% Hydro owned from Nov 2014 · Decision to start-up idle electrolysis capacity (95 kmt)
Slovalco (55.3%)	Slovakia	452 (100% basis)	175 6) (100% basis)	200 (100% basis)	extrusion ingot, foundry alloys	· Joint venture with Penta (Slovakia) · Long-term power contract expiring end of 2021 · One prebake line
Tomago (12.4%)	Australia	971 (100% basis)	74	75	standard ingot, extrusion ingot	· Joint venture with RTA and GAF · Long term power contract expiring in 2028 · Largest producer in Australia · Three prebake lines
Qatalum (50%)	Qatar	1027 (100% basis)	318	335	extrusion ingot, foundry alloys	· Joint venture with Qatar Petroleum · 40 year gas supply contract expiring in 2049 · Among the world's lowest cost smelters · Two prebake lines
Alouette (20 %)	Canada	842 (100% basis)	125	150	standard ingot	· Joint venture with RTA, AMAG and IQ/Marubeni · Long term power contract expiring end of 2030 · Is a first quartile smelter on the global cost curve · Largest producer in North America · Two prebake lines
Albras (50 %)	Brazil	1184 (100% basis)	460 (100% basis)	460 (100% basis)	standard ingot	· Joint venture with NAAC · Long term power contract expiring end of 2024 · Largest producer in South America · 4 prebake lines

1) Production and casthouse capacity for part-owned companies represents our proportional share. Slovalco and Albras are fully consolidated in terms of volumes and financial results. Karmøy includes the new Pilot reduction line.

2) In addition to the production capacity indicated in the table above, Rolling Neuss smelter located in Germany has an annual electrolysis capacity of 235,000 mt.

3) See also discussion regarding power supply for our wholly owned Norwegian smelters and additional information relating to power supply for certain other plants.

4) Curtailment of one foundry alloy line from the middle of 2012. This line is now beining used for producing some incremental volumes of standard ingots.

5) Actual production impacted by curtailment of about 50 percent of capacity in the first quarter of 2009. Restarted November 2020, expected to reach full production during 2021.

6) Actual production impacted by curtailment of about 18 percent of capacity from January 2020.

		Primary aluminium		Casthouse production
Primary aluminium and casthouse production (kmt)	Location	2020	2019	2020	2019

Albras	Brazil	379	327	294	243
Karmøy	Norway	168	257	198	192
Årdal	Norway	202	201	217	219
Sunndal	Norway	109	403	437	426
Høyanger	Norway	65	65	79	91
Husnes	Norway	94	95	95	98
Slovalco	Slovakia	152	175	172	197
Tomago (12.4 %)	Australia	73	73	73	73
Qatalum (50 %)	Qatar	316	314	324	323
Alouette (20 %)	Canada	125	120	124	119
Technology	Norway	10	9
Total production Primary Aluminium		2,091	2,038	2,013	1,982

Hydro Metal Markets

Operations

Metal Markets is responsible for all sales, marketing and distribution activities relating to products from our primary metal plants and our stand-alone recycling plants (recyclers). We operate seven recyclers, which recycle post-consumer scrap into new products. We also market metal products from our part-owned smelters and third parties, and engage in other sourcing and trading activities, including hedging activities on behalf of other business areas in Hydro.

Cost and revenue drivers

Our results are predominantly affected by the operating results of our recyclers, margins on sales of third-party products and results from ingot and LME trading activities.

Revenues for our recyclers are influenced by volumes and product premiums over LME. Costs are driven by the cost of scrap and standard ingot premiums over LME, freight costs to customers and operational costs, including energy consumption and prices.

Our results can be heavily influenced by currency effects6 and ingot inventory valuation effects.1

Competitive strengths

Leading worldwide supplier of extrusion ingot, sheet ingot, foundry alloys and wire rod
High share of value-added products
Scrap conversion services converting customer scrap back into extrusion ingot
Extensive multi-sourcing system, including broad network of primary casthouses, recyclers and partly owned primary sources
Strong recycling capabilities, including world-leading scrap sorting technology
Setting a new standard for low-carbon footprint products with the greener brands CIRCAL and REDUXA
Flexible sourcing system enabling significant, rapid and cost-effective volume adjustments
Strong market position in Europe, the U.S. and Asia, including Qatalum volumes
Commercial expertise and strong risk management competence enabling us to secure manufacturing margins
Leading R&D competence in value-added casthouse products, developing new products, improving our own production processes and supporting our customers in their improvement work

Recycling

Metal Markets Recycling business unit has been mandated by the Corporate Management Board to act as the Center of Excellence (CoE) for aluminium recycling across all the business areas in Hydro. Hydro's ambition is to significantly grow post-consumer scrap recycling while improving its carbon footprint. The CoE has developed an organization that will support all units in reaching their recycling growth ambitions.

The unit has a network of seven recyclers that convert scrap metal and standard ingot into extrusion ingot. There are five plants in Europe and two in the U.S. These plants have total annual capacity of around 0.6 million mt. Production was reduced by approximately 10 percent during 2020 due to Covid-19 related market effects. About two-thirds of the capacity is located in Europe. Our recyclers in Europe are in Luxembourg, the United Kingdom, Germany, Spain and France. In addition, the unit operates the scrap shredding and sorting plant in Dormagen, Germany, with sorting capacity of 36,000 mt per year. Process scrap and postconsumer scrap are purchased from third parties for recycling into extrusion ingot. Standard ingot and alloying metal are added to meet customer specifications. These are procured globally.

Sourcing and trading

To optimize our global standard ingot portfolio, we source standard ingot from third parties for recycling in Hydro's recyclers and primary casthouses, as Hydro's production of standard ingot partly goes to other regions to optimize logistics. We also enter third-party contracts to optimize our total portfolio position and to reduce logistics costs. In addition, we sell standard ingot to external customers.

Our main risk management objectives are to achieve an average LME aluminium price on primary metal production, matching the average customer pricing pattern, and to secure margins in our mid-stream and downstream businesses. Our sourcing and trading operation acts as an internal broker for all LME-hedging transactions by our business areas in order to consolidate Hydro's exposure and reduce transaction costs.7

⁶ Currency effects are comprised of the effects of changes in currency rates on sales and purchase contracts denominated in foreign currencies (mainly U.S. dollars and Euro for our Norwegian operations) and the effects of changes in currency rates on the fair market valuation of dollar denominated derivative contracts (including LME futures) and inventories, mainly translated to Norwegian kroner. These amounts can be very substantial. Hydro manages its

external currency exposure on a consolidated basis in order to take advantage of offsetting positions.

⁷ These hedging activities, which are designed to mitigate cash exposures, can generate significant accounting effects, partly due to asymmetrical accounting treatment.

Markets, products and customers

Most of our aluminium is sold in the form of value-added casthouse products such as extrusion ingot, sheet ingot, foundry alloys and wire rod. Our product with the highest volume is extrusion ingot, which is sold to extruders producing aluminium profiles. The most important end-use segments include the building and construction industry, transport and general engineering. Our key market region for extrusion ingot is Europe. However, the Asian and U.S. markets are also important for our metal-selling units in Qatalum and Tomago. Other important markets for Qatalum include Turkey, the Middle East, Australia and New Zealand.

Foundry alloys are sold to foundries producing cast parts primarily for the automotive industry. Asia is a significant market for this product, in addition to Europe, which is our largest market. Sheet ingot is sold to European rolling mills, with packaging and transportation as the most important end-use segments. Wire rod is sold to wire and cable mills in Europe for power transmission and other electrical applications.

In addition to marketing products from our fully owned plants, we have commercial agreements to market products from part-owned aluminium plants, including full marketing responsibility for all of the casthouse production at the plants in Qatar and Slovakia.

Our regional market teams are key to our customer approach, delivering commercial, technical, logistical and scrap conversion services. Optimized solutions, such as our customer service programs and online customer portal, add further value and help build and reinforce customer relationships.

Technology and innovation

Innovation and development are carried out in close collaboration between our customers, production units and R&D. We emphasize three main areas: the quality of our products, the efficiency of our production system and the development of new alloys. Our casthouse production process is based on our advanced proprietary casting

technology, developed by the fully owned equipment producer Hycast and our R&D organization.

Quality improvements are closely linked to our customer technical service, which addresses customer needs while improving our own casthouse process. We develop new alloys with distinct properties to support the development of new or enhanced applications within industries such as automotive, building and construction, and electronics. This work begins with developing an understanding of metallurgical processes that forms the basis for sample compositions and production methodologies carried out in laboratory or test production facilities. Full-scale testing is often completed with customers and/or end-users.

Recycling post-consumer scrap is an important way we reduce costs, increase capacity utilization and reduce the carbon footprint of our products. Our casting and alloy expertise enables us to produce products that can be recycled and used as raw materials for high quality semi-finished products. Developing products that optimize the use of recycled material is another focus area.

Hydro produces two certified sustainable products for the low-carbon, circular economy:

REDUXA is produced by renewables-based aluminium plants, and has a guaranteed maximum carbon footprint of 4 kg CO2/kg aluminium. This includes emissions from the bauxite/alumina and energy sources as well as the smelter emissions (Scope 1, 2 and 3)
CIRCAL is produced at remelters, and has a guaranteed minimum post-consumer scrap content of 75 percent

Hydro will continue to further increase capacity in this segment.

Environment

Aluminium can be continuously recycled without degradation in quality and requires only 5 percent of the energy necessary for primary aluminium production. Depending on cost and quality differences between standard ingot and aluminium scrap, recycling can be commercially attractive and provides significant environmental benefits. These include conserving energy and other natural resources, reducing greenhouse gas emissions, reducing land encroachment related to bauxite mining and alumina refining, and reducing landfill. However, most of the aluminium produced today is used in long-life products. Most of the raw material for our recycling comes from process scrap from our own production and from our customers.

HydroRolling

Industry overview

The aluminium rolled products industry is characterized by economies of scale, with significant capital investments required to achieve and maintain technological capabilities and to meet customer qualification standards.

The worldwide consumption of rolled products amounted to approximately 27 million mt in 2020. Foil, beverage cans and transport were the largest segments. Europe and North America each account for around 20 percent of world consumption while China, the largest single market, represents around 39 percent. The five largest producers in

Western Europe supply about 67 percent of the European market.

The export of semi-fabricated and fabricated aluminium products from China to the rest of the world has steadily increased over the last several years, driven by production overcapacity as well as by export tax rebates on some semifabricated products. Several countries have initiated, or are considering, anti-dumping measures and duties on imports.

See the Risk review section for the discussion on our exposure to competition from China, and the Regulation and Taxation section for an update of anti-dumping measures and duties.

The slabs are preheated before entering the hot reversing mill. The sheets are then rolled to the intermediate thickness in the finishing mill and cold rolled to the final product thickness.

Operations

The rolling process begins with "hot rolling," where we heat sheet ingots of up to 600 millimeter (mm) to about 500 degrees Celsius, then gradually roll these into thicknesses of 3-13 mm for further processing. Depending on the final product, these sheet ingots are produced with various alloy compositions. An alternative process – continuous casting – converts molten metal directly into coiled strip, typically 4-8 mm thick. Once cool, the thinner metal is further processed in cold rolling mills, producing various types of products for all markets supplied.

Cost and revenue drivers

Rolling is a margin-driven business. It is based on a conversion price where the LME and metal premium cost element is passed on to the customer. Contracts are generally medium-term. The cost structure includes a high proportion of fixed costs, so results are volume-sensitive.

Competitive strengths

Positions in high-end products, including automotive, foil, beverage can and lithographic sheet
Global reach with more than 20 percent export share for high-end markets, serving key customers in the Americas, Africa and the Middle East
Leading R&D facility dedicated to Hydro Rolling
The world's largest rolling mill Alunorf (50 percent), and Grevenbroich, the world's largest multi-product finishing mill
Alunorf, Grevenbroich, the Neuss aluminium plant and R&D Bonn are located in close proximity to each other in Germany, generating significant logistical advantages

Rolling mills

We generate approximately 80 percent of our total sales in Europe. More than half of our production is produced in the Grevenbroich/Alunorf rolling system in Germany, one of the most modern and efficient rolling operations in the world. Grevenbroich is the center of our packaging, lithographic and automotive sheet operations. Our production network mainly comprises so-called "wall-to-wall" processing, including an integrated casthouse combined with both hot and cold rolling mills.

In 2020, around 35 percent of the metal used was sourced internally, based on arm's-length conditions related to LME and applicable premium prices. External supplies of liquid metal, sheet ingots, standard ingots as well as post-consumer and pre-consumer scrap from our customers accounted for around 64 percent of our total requirements last year.

Neuss aluminium plant

Neuss is the largest aluminium plant in Germany, with primary metal capacity of 235,000 mt per year, including one curtailed potline. The Neuss plant also has recycling capacity of 90,000 mt, including a recycling line for used beverage cans (UBC). The plant supplies the nearby Alunorf rolling mill with primary and recycling-based sheet ingots for processing and subsequent fabrication of rolled products in Grevenbroich.

The Neuss plant is an important part of our integrated system and provides significant operating synergies.

Markets, products and customers

Our ambition is to leverage our position as a preferred supplier by focusing on quality, product development, and innovative and sustainable solutions, together with excellent customer service and cost efficiency. To ensure a strong market orientation, our sales function is organized centrally along business lines. This is supported by sales offices in Europe, Brazil, the U.S. and Singapore, where we optimize market contact and sales potential.

Hydro Rolling has five business units, each serving the market segments in which we operate. They are:

Lithography

Hydro is a supplier of lithographic sheet for printing plates, a market characterized by stringent requirements for surface quality, metal characteristics and mechanical properties. We differentiate our products through innovation, consistent high quality, supply chain solutions and extensive service to customers. Key customers in this segment include Agfa and Kodak. Our lithographic production is concentrated at the Grevenbroich plant.

Automotive

We are a major supplier of aluminium sheet and coil to the European automotive market for interior and exterior vehicle body parts, chassis and component applications as well as emobility applications. Key customers include Audi, BMW, Daimler, Jaguar Land Rover, PSA and Renault. Production is concentrated within our Grevenbroich and Hamburg plants. Our new production line in Grevenbroich (Automotive Line 3) has increased our car body capacity.

We also produce a variety of mainly clad strip and sheet used in the manufacture of heat exchangers for passenger and commercial vehicles, as well as other product applications. We are among the top producers in Europe, working with Tier 1 automotive suppliers such as Denso, Linde, Mahle Behr and Modine to develop specially adapted alloys and optimized production techniques to fit their manufacturing processes.

Foil

We serve customer needs in the rigid, semi-rigid and flexible packaging industry, offering plain foil and strip. We provide packaging solutions combining high-quality manufacturing with innovation, cost effectiveness and sound ecological characteristics. We also offer consulting and technical support. We are specialists in thin-gauge foil for flexible packaging, offering foil as thin as 5.0 µm for the packaging of food as well as for technical applications. Amcor Flexibles, Constantia Flexibles and Tetra Pak are key customers. Production of packaging is mainly concentrated in our Grevenbroich rolling mill.

Beverage can

Hydro is a worldwide supplier of body, end and tab stock in the form of rolled coil for the production of aluminium beverage cans. Our modern and efficient production facilities, technical know-how and experienced development support the delivery of high-quality materials to meet the specific requirements of can manufacturers. Our Grevenbroich plant is dedicated to the production of Hydro's quality proprietary can-end stock efficiEND®, which promotes productivity and cost-effective manufacturing to major beverage can manufacturers such as Ardagh, Ball and Crown.

General engineering

The business unit supplies products that are mainly used in the building and construction, transportation, industrial and electrical markets. Products include coil and sheet for wholesalers and end-producers. We operate modern and efficient manufacturing processes, offering quality products and extensive technical support.

In addition, Hydro is one of the leading manufacturers of coated aluminium strip for building and construction applications. Based on decades of experience in the market, we offer customers a portfolio of cost-effective solutions from dedicated production lines in our Holmestrand rolling mill in Norway, including product applications for roofing and cladding, roller shutters, ceilings, composites and other specific applications.

Technology and innovation

Hydro Rolling differentiates its business through innovative products, processes and services that save resources, reduce emissions, increase performance – all which benefit customers. This increases our market share and margin contribution. We cooperate with customers to develop innovative solutions through R&D and our sophisticated technical customer service. Our in-house simulation team utilizes the latest computer-aided process design and alloy development tools.

Supported by our advanced scrap processing and melting concepts, we intend to increase the volume of recycled material used in our production processes. We also focus on optimizing our alloys to make aluminium the material of choice in all our markets.

In many markets, automotive in particular, product design complexity and demands on new high-strength materials are increasing. We constantly develop our range of alloys to use the unique properties of aluminium in the best possible way. We also strive to develop new businesses, e.g. in the emobility sector through the development of various applications such as battery frames or connector plates.

Our R&D center contributes to Hydro's sustainability and profitability strategy by constantly working on product and process developments in all of Hydro Rolling's businesses, such as the latest major process development for the recycling of scrap, laser-induced breakdown spectroscopy (LIBS).

Environment

Aluminium has numerous advantages in terms of energy savings and reduced greenhouse gas emissions in the use phase of the overall life cycle. Our technical customer service department works closely with customers to develop sustainable, innovative and cost-efficient solutions to take advantage of these qualities.

Light-weight aluminium products used in the transportation industry reduce fuel consumption and emissions. Our production of automotive body sheet is one example of how we contribute to reducing greenhouse gas emissions while continuing to grow our business.

Another example is the superior food preservation properties of aluminium packaging. Food packaging utilizing aluminium requires less energy to cool and also reduces food waste.

As remelting only requires 5 percent of the energy used for the production of primary aluminum, we aim at significantly increasing the volume of recycled material in our products through our advanced scrap processing and melting production processes. We also focus on optimizing our alloys to make aluminium the material of choice in all our markets.

Compared to Hydro's upstream operations, Hydro Rolling's environmental footprint is relatively small and mainly within the vicinity of our production sites. The main environmental impacts include greenhouse gas emissions, noise, odor and traffic volume. We follow European policies such as the Water Framework Directive. Our sites conduct selfassessment exercises designed to identify and lower the risks associated with water usage and consumption.

People

Our internal performance and feedback process is an important tool to engage our people and enhance the performance and development of our organization. It is implemented in all Hydro Rolling units with a

participation rate of close to 100 percent. Our employees have provided qualitative feedback showing that this is helpful for their personal development.

We recognize diversity as a key value and performance driver. This is reflected in our internal improvement activities and in our employer branding. The business area's management team has three nationalities and a female share of 27 percent.

Society

As a significant employer in the areas where we have production sites, Hydro Rolling and our employees play an active role in the development of the surrounding communities by supporting local programs aimed at education and community involvement.

Social responsibility also forms an integral part of our procurement process. All of our suppliers are required to undergo a comprehensive selection process, including risk assessments and on-site audits, to ensure continued compliance with local regulations and Hydro's own internal requirements.

Plant	Country	Capacity (000 mt)		Main products	Other characteristics
Grevenbroich	Germany	570		Packaging, lithographic sheet, automotive	· The world's largest multi-product finishing mill · Supplied by nearby AluNorf rolling mill
Alunorf 50%	Germany	800		Packaging, automotive, general engineering	· The world's largest rolling mill · 50/50 joint venture with Novelis · Partly supplied with sheet ingot from nearby Neuss smelter · Integrated casthouse, based on remelting and recycling
Hamburg	Germany	165		General engineering, automotive, heat exchanger	· Integrated casthouse and recycling
Karmøy	Norway		90	General engineering	· Continuous casting
Holmestrand	Norway		90	Building, general engineering	· Integrated casthouse, recycling center
Neuss	Germany	235 primary 40 (UBC)		Liquid metal and sheet ingots	· Integrated casthouse and recycling · One potline curtailed · UBC recycling center
Dormagen	Germany		45	Automotive	· Slitting
Business unit		Shipments in %		Key characteristics

Automotive	15		Serving OEMs and their suppliers with strip and sheet for automotive body, component and chassis applications
Beverage can	24		Beverage Can with leading position in global can market
Foil		10	Foil with leading position in the high value-added liquid packaging market
Lithographic		15		Largest producer in the lithographic sheet market
General engineering		36			High-end General Engineering products mainly used in industrial applications; Coated building products

Hydro Extrusions

Industry overview

The global extrusion industry is characterized by fragmentation, with numerous local suppliers that are well established in their respective markets. Hydro Extrusions is the global market leader and largest player in the industry.

North America

In North America, although a large part of the business is local, the structure of certain markets, such as transportation, automotive, is more often national or even global. Beyond Hydro Extrusions and its larger competitors, the majority of extrusion operations in North America are local, independently owned companies.

The building & construction market, driven by both residential and commercial applications, remains the largest consumer of aluminum extrusions in North America. The automotive industry, however, has experienced the highest growth over the past several years. The increase in automotive demand is mostly due to continued material substitution with the light weighting of vehicles and the rapid growth of the electric vehicle market.

Europe

Proximity is usually important to European customers. However, some extruders that previously served local markets, have expanded their footprint into other countries. There are more than 250 extruders with more than 730 presses in Europe. Despite the overcapacity in Europe, we are seeing new extruders entering selected markets.

The building and construction industry is the largest consumer of aluminium extrusions in Europe, and the market remains fragmented. The market for building systems is largely local or regional and is experiencing consolidation. With the harmonization of building regulations across the EU, vendors are creating systems that are not limited by national borders and are coordinating development, production, purchasing, logistics and marketing. Our Building Systems business unit is taking the same approach.

Asia

After two decades of strong investment-driven GDP growth, the Chinese economy is entering an era of slower consumption-driven growth. With somewhat lower growth rates, especially in the building and construction segment, more extruders are expected to move to the higher-end industrial and automotive segments.

Within the automotive sector, despite the recent slowdown, the Greater China market continues its growth and maturity within lightweight vehicle production. In addition, the Chinese government is heavily facilitating and promoting new energy vehicle (NEV) infrastructure and technology, creating opportunities for new applications in the aluminium tubing business.

Precision Tubing

Precision Tubing is a global industry that is represented in several regions. Consumption of extruded aluminium round tubes, multiport extrusions and welded aluminium tubes is driven by thermal management applications in the automotive market. With electric mobility gradually becoming the go-to technology, additional applications in battery cooling have emerged as potential tubing segments. Another industry that is recognizing the benefits of aluminium is Heating, Ventilation, Air Conditioning and Refrigeration (HVAC&R). In light of stricter legislation and tougher standards for energy efficiency and especially refrigerants, coupled with relatively high copper prices, aluminium represents a viable alternative solution.

Aluminium consumption in the automotive industry is expected to grow, driven largely by the increase in worldwide production of light vehicles, electric and hybrid cars, and higher penetration of air conditioning in emerging markets. In parallel, the HVAC&R market still represents considerable potential in substituting copper with aluminium at current production volumes. Our Precision Tubing business unit is the clear market leader in providing aluminium solutions for heat transfer applications.

1) Total sales in 2020 – Significantly impacted by Covid-19. Total sales in 2019 at 1.3 million mt 2) Permanent employees as of end-2020

Operations

Hydro Extrusions is the leading global supplier of extrusionbased aluminium solutions with a market share of 18 percent in Europe and 21 percent in North America as of 2020. The business area also has a solid foothold in emerging markets with extrusion capacity in South America and Asia. Hydro Extrusions has four business units: Extrusion Europe, Extrusion North America, Precision Tubing and Building Systems. The business units are responsible for their respective value chains, from casthouses, aluminium extrusion and value-adding operations to commercial activities such as product development and sales.

Hydro Extrusions has nine remelt & recycling facilities in both Europe and North America, as well as two in South America. The combined billet production from the recyclers is more than 1 million tonnes on annual basis. The recyclers provide a unique competitive advantage for Hydro Extrusions in enabling flexible, energy-efficient & tailormade metal supply to large network of plants. Being an important contributor to Hydro's overall recycling strategy, Hydro Extrusion has a clear goal of increasing the amount of post-consumers scrap in its recyclers.

Cost and revenue drivers

The extrusion industry is a margin business and the LME aluminium cost element is passed on to the customer. Contracts are typically short to medium-term. Hydro Extrusions will continue to shift its portfolio toward highermargin products.

Competitive strengths

Hydro Extrusions provides some of the most sustainable aluminium products and solutions in the market through the CIRCAL and REDUXA portfolio
Strong technology competence with dedicated R&D centers
Global reach and local presence, increasing flexibility and reliability for customers
Speed in delivery and proximity to customers
Value chain breadth and depth, from extrusion to surface finishing and fabrication, welding and assembly
Strong and agile product development capabilities
Technical leadership in precision tubing, extrusion and building systems

Technology and innovation

Hydro Extrusions' innovation model promotes fast decisions from idea to product. The business area has an R&D organization with main locations in Finspång (Sweden) and Troy (USA), and smaller laboratory hubs in Tonder (Denmark), Rockledge (USA) and Suzhou (China), with key emphasis on Alloy and Process development and Advanced simulation and modelling for product and process innovations.

To deliver better products to the customers faster, and to address specific challenges, Hydro Extrusions collaborates with leading universities such as the Norwegian University of Science & Technology, Michigan Technological University, Massachusetts Institute of Technology and the University of Oxford, as well as with specialized companies.

Innovation, R&D and application development in Extrusion Europe and Extrusion North America is strongly targeted towards growth in automotive and especially the e-mobility BIW structural markets. Additionally, the Commercial Transportation market is a key area of focus.

Building Systems, having its main application center in Toulouse (France), has in addition opened physical showrooms in selected cities in Europe to promote new product developments. Product innovation is vital to success in that market, mainly in Europe, where end-users are demanding more and more advanced and sustainable solutions.

In Precision Tubing, the innovation is focused on developing new aluminium applications for the automotive industry, such as fuel and brake lines. Aluminium substitutes copper and steel, resulting in comparable performance, but lighter products.

Environment

Environmental considerations are embedded in Hydro Extrusions' business planning and decision-making. Designing for recycling and optimizing the products for longer life are important parts of our environmental efforts.

Hydro Extrusions has signed an agreement with Aluminium Metal to source and use CIRCAL in its aluminium building systems. CIRCAL has Hydro's lowest environmental footprint with minimum 75 percent post-consumer recycled aluminium – metal that has been used in other products. This brings the CO2 footprint to a low level, below alternative materials. Hydro Extrusions is also sourcing REDUXA from Primary Metal. REDUXA has a maximum carbon footprint of 4.0 kg CO2 per kg aluminium produced. Our customers are looking for more sustainable materials for their products, and CIRCAL and REDUXA are certified products that help them meet their own climate strategies.

Forty of Hydro's extrusion and fabrication facilities have achieved certification according to the Aluminium Stewardship Initiative's (ASI) Performance Standard. ASI is a global, multi-stakeholder, non-profit standards setting and certification organization. The ASI works toward responsible production, sourcing and stewardship of aluminium following an entire value chain approach.

By the end of 2020, all Hydro Extrusions sites with potential significant environmental impact are ISO 14001 certified.

All our sites are required to set targets for:

• Reducing CO2 and greenhouse gas emissions

Avoiding emission of pollutants to ambient air to the extent possible. The emitted amount of pollutants must not exceed limits specified in permits or in regulatory requirements
Minimizing fresh water usage and waste water discharges, ensuring that discharged water quality is in line with local regulations and does not exceed the established limits
Eliminating or minimizing waste and prioritizing waste recycling. At locations where recycling opportunities exist, the target is to completely eliminate waste to landfill
Conducting and documenting an energy-planning process, leading to activities that continually improve energy performance
Preventing leaks, spills and releases from tanks and chemical storage areas to protect surface and ground waters

Hydro Extrusions had no major environmental incidents in 2020 and reported less noise complaints in 2020 than in 2019. For more information, see note E2 to the Viability performance statements.

People

Hydro Extrusions employs approximately 19,800 people in more than 40 countries. The business area strives for a safe work environment and believes that excellence in Health, Safety and Environment (HSE) will be achieved through consistent implementation of the management system, and through committed and visible leadership and full engagement of all employees in HSE activities.

Hydro Extrusions aims to attract talented people by offering an encouraging and stimulating environment, interesting career opportunities and good working conditions. We have several ongoing global people processes designed toward reaching these ambitions.

Society

As a global extrusion company, with presence in both industrial and emerging regions, Hydro Extrusions has a strong commitment to address social challenges in the local communities where its plants are located. Hydro has an overall long-term social responsibility target of providing quality education and capacity building for 500 000 people by the end of 2030. All Business Units in Hydro Extrusions contribute to this important target with a large variety of local programs.

During 2020, several sites in Hydro Extrusions supported local communities during the Covid-19 crisis, including providing face masks and making donations to hospitals.

In Tønder, Denmark, we are working closely with integration and settlement coordinators from the local municipality. This cooperation creates opportunities for work and housing for newcomers and refugees in Tønder. The refugees work at the plant, which gives them an opportunity to develop a network and learn the culture and language. In addition, these new employees bring essential competence, different backgrounds and perspectives, which is important for the company culture. Hydro Extrusions received the Tønder municipality CSR award for this initiative in 2020 and currently approximately 20 people are included in this program.

In Kuppam, India, Hydro is financing two learning labs, which give children at schools in the village access to enhanced learning opportunities. These innovative learning labs combine digital learning platforms and hands-on games, which let the children learn at their own pace and level. This initiative has enabled the children to improve in several areas, the most important one being their English skills. Higher standard schools require proficient levels of English, and gaining admission to such schools can have positive lifechanging effects for some of these young students. During the Covid-19 lockdown the children have been given access to the learning apps to be used on private tablets and phones so that the training and development can continue although schools are closed.

Social responsibility is an important foundation for procurement and sourcing in Hydro Extrusions. Hydro has worked to promote transparency and sustainability in the supply chain by implementing its supplier declaration and conducting on-site audits of suppliers. Hydro has focused on the largest suppliers in high-risk regions. About 60 percent of total spending is directed toward a relatively small share of our 30,000 suppliers.

The ingots are preheated, extruded through a die and hardened before surface treatment.

Hydro Energy

Industry overview

In the Nordics, a common electricity market has been in place since the late 1990s. Since 2010, the physical power exchange, Nord Pool, has operated a common Nordic-Baltic electricity market. The Nordic system price is calculated in the day-ahead auction in the spot market at Nord Pool. The system price is normally the main reference price for financial contracts traded bilaterally and with the financial power exchange Nasdaq. Area prices are calculated for physical delivery to constrain flows when available transmission capacity would otherwise be exceeded. There are five price areas in Norway, four in Sweden and two in Denmark. Finland, Estonia, Lithuania and Latvia constitute one bidding area each.

A common electricity certificate market for Norway and Sweden was established in 2012 with the objective to support the development of new renewable generation capacity. The certificate system is designed to support an increase in annual renewable generation in the Norwegian/Swedish market of 28.4 TWh by 2021. The Swedish government has decided to prolong the scheme with a new national target between 2020 and 2030.

Electricity generation in the Nordic market is mainly based on hydropower (50 percent), nuclear power (20 percent) and wind power (18 percent). Generation in Norway is almost entirely based on renewables, predominantly hydropower, but with a rising share of wind power entering the market. In 2020, wind power generation in Norway was around 6.4 percent of total power generation. Total annual Nordic consumption is approximately 400 TWh.

The implementation of EU energy and climate regulations has and will continue to have a significant influence on energy prices and energy and climate policy in all EU/EEA countries. Emissions trading has increased electricity prices by up to 50 percent in periods with high emission-allowance costs in Europe, including the Nordic market, where electricity is predominantly generated by non-emitting sources. There is, however, an ongoing EU legislative process aimed at reducing emissions and thereby increasing future allowance prices. To prevent carbon leakage, the EU established guidelines in 2012 allowing national governments to support industries exposed to global competition. Actual compensation schemes, which are dependent on national implementation, have been established in Norway, Germany and Slovakia, with conditions corresponding closely to the EU guidelines. Please see section Regulation and taxation - Aluminium regulation - climate gases later in this report for more information on the matter.

Operations

In Norway, Hydro Energy operates 39 hydropower plants, with a combined installed capacity at the end of 2020 of 2.663 MW. In terms of operations, we are operator of 13.7 TWh renewable electricity production in Norway in a normal year. Adjusted for ownership shares, our captive production is 9.4 TWh in a normal year8.

In addition to the hydropower plants, we also operate Tonstad Windfarm (208 MW/0.7 TWh), from which we purchase all volumes as produced, balancing and optimizing production against our own hydropower production. In addition to that, we purchase more than 9 TWh of renewable power annually in the Nordic Market under long-term contracts.

Lyse Kraft transaction

In October 2020, Hydro and Lyse signed an agreement to merge our power production assets in the south-west region of Norway through the establishment of a new company, to include Hydro's hydropower assets Røldal-Suldal Kraft (RSK) and Lyse's power production portfolio (except two smaller plants). The new company, called Lyse Kraft DA, has a normal annual power production capacity of 9.5 TWh, of which Hydro owns 25.6 percent and Lyse 74.4 percent. Through the agreement, which closed on December 31, 2020, Hydro remains operator of the RSK assets and resumes operator responsibility for Lyse's fully owned hydropower plants.

Cost and revenue drivers

Production volumes and market prices are strongly influenced by hydrological conditions. Seasonal factors affect both supply and demand. Our cost base is relatively stable, although volatile spot volumes and prices may cause significant variations in quarterly revenues. We optimize our total power portfolio in the market and in cooperation with our aluminium plants.

Electricity prices are influenced by fuel costs (including emission allowance costs), meteorological parameters (precipitation, temperature and wind) and exchange transmission possibilities with adjoining markets, as well as by fluctuations in demand. An increase in intermittent generation from solar and wind power capacity has had a significant effect on price volatility in Europe's continental markets and influenced price developments in the Nordic market.

Competitive strengths

Power coverage until 2030
Substantial captive power through equity hydropower in Norway
High share of renewable energy
Low operating costs
Operational and commercial competence
Stable earnings and cash generation

Norwegian power assets

Our operated power plants are located in four main areas - Telemark, Sogn, Røldal-Suldal and Stavanger - and managed from a common operations center at Rjukan in Telemark. We also own the Vigeland power plant in Vennesla, and a 33 percent interest in Skafså Kraftverk ANS in Telemark.

⁸ Annual hydropower production can vary by as much as 20 percent in either direction, depending on variations in hydrological conditions.

Approximately one-third of our normal annual power production in Norway is subject to reversion to the Norwegian state, see "Energy - regulation", for further information on this matter.

Market operations

We optimize power production on a daily basis, according to the market outlook, weather forecasts and the hydrological situation within Hydro's water reservoirs. By utilizing the flexibility of the hydropower plant systems and the volatility in the spot market price, we aim to realize a premium above the average spot price. Our total Norwegian power portfolio, including our own production, is balanced in the market on the Nord Pool Spot power exchange. Spot market sales vary significantly between dry and wet years, with an average of 3.0 TWh.

Exploring growth opportunities

As part of Hydro's strategic ambition to grow in renewable energy and batteries, two new units were established in Hydro Energy in 2020. Renewable Growth and Batteries.

Renewable Growth develops renewable projects and solutions outside Hydro's hydropower portfolio, initially focusing on opportunities in the Nordic region and Brazil. It leverages Hydro's 100+ years of experience in renewable power production, supply and industrial consumption to offer a range of renewable energy solutions to the industry. Renewable Growth aims to offer competitive renewable power from partly owned and operated wind, solar and hydropower projects in Brazil and the Nordics. It also develops behind-the-meter energy management services to reduce or optimize industrial plants' power consumption.

The Batteries business unit develops Hydro's engagement in the battery value chain. Hydro has already made several investments in batteries: We own 21 percent of Corvus Energy, which is the world's largest provider of energy storage solutions for the maritime industry; we own 0.9 percent of the Sweden based Li-Ion battery cell producer Northvolt, and together with Northvolt we have established Hydrovolt (50/50 JV), which will be the first recycling plant

for used batteries from electric vehicles in Norway. In November 2020, we also entered a strategic partnership with Panasonic and Equinor to study the possibilities for establishing a sustainable and cost-competitive European battery business, located in Norway.

Environment

Hydroelectric power is a renewable energy source. However, there are several potential environmental impacts associated with Hydro's operations, including changes in aquatic and terrestrial habitats along the waterways and impact on recreation and tourism. All of our reservoirs are located within or near national parks and other protected areas in mountainous regions in southern Norway, including Hardangervidda and Jotunheimen.

We limit vehicle traffic related to operations and maintenance of reservoirs that are within protected areas, and snowplowing to protect reindeer habitat. We monitor the impact of our operations on aquatic life in rivers connected to catchment areas. In order to mitigate the effects of water regulation on fish populations, we launch around 86,000 fish spawn each year in almost 40 lakes and rivers as part of concession requirements. Rehabilitation projects are also carried out to improve fish habitats and aesthetic qualities. Stone refuse tips from tunnel construction are registered and rehabilitation is performed or planned, except for those that are protected as cultural heritage.

People

Energy had around 280 employees, including apprentices, in its consolidated activities at the end of 2020. We emphasize a safe work environment and believe that we can promote this while also delivering efficiency and low operating costs. We monitor and drive safety improvements through systematic, preventive activities focused on controlling risks and by promoting health, safety and environment, which is central to our culture.

Society

Energy's assets are all located in Norway, and our hydropower operations have limited impact on the communities in which we operate. For safety purposes, Hydro restricts public access to certain areas due to varying water flow into tunnel systems or risk related to unsecure ice conditions on reservoirs and risk of ice throw from wind turbines.

Our supplier requirements regarding corporate responsibility form an integral part of our procurement process, including selecting contractors for project execution.

Normal production1)

Power station area	Power Plants	Hydro Equity Share (TWh)	Hydro Operated (TWh)	Ownership	Key characteristics
Telemark	Tinn: Frøystul Vemork Såheim Moflåt Mæl Svelgfoss Vennesla: Vigelandsfoss	3.7	3.9	100 % ownership, except for Svelgfoss (70,8 % ownership and 100 % operator)	· Reservoir-based Hydropower, except Vigelandsfoss which is run-of-river · No reversion except for Frøystul 50 % 2044, Moflåt and Mæl 2049 · Total catchment area 4 094 km2
Sogn	Fortun: Skagen Herva Fivlemyr Årdal: Tyin Holsbru Mannsberg	3.2	3.2	100 % ownership	· Reservoir-based Hydropower · Concession expiration Tyin 2051 and Fortun 2057 · Total catchment area 803 km2
Røldal-Suldal	Suldal 1 Suldal 2 Røldal Novle Kvanndal Svandalsflona Vasstøl Middyr Midtlæger	0.8	3.3	Ownership through Lyse Kraft DA	· Reservoir-based Hydropower · No reversion following the Lyse Kraft DA transaction · Total catchment area 793 km2 · Hydro owns 25.6 % of Lyse Kraft DA
Stavanger	Lyse plants: Lysebotn 2 Tjodan Flørli Maudal Breiava Oltedal Oltesvik Hjelmeland Sviland Hetland Hauskje Sira-Kvirna (7 plants) Ulla-Førre (4 plants)	1.6	2.6	25,6 % ownership through Lyse Kraft DA	· Reservoir-based Hydropower · No reversion · Hydro operator of Lyse plants and Jørpeland Kraft (0,1 TWh) from 2021, after completing the Lyse Kraft DA transaction in December 2020 · Lyse Kraft DA holds part ownership in Sira-Kvina (41 %) and Ulla-Førre (18 %)
Skafså	Åmdal Osen Skree Gausbu	0.1	-	33 % ownership	· Hydropower · No reversion
Tonstad	Tonstad wind farm	-	0.7	No ownership	· Wind power · Operatorship, commercial handling and PPA-offtake from Hydro
Total		9.4	13.7

1) Normal production from 2021. In 2020, prior to completion of the Lyse Kraft DA transaction, normal equity production was 10.2 TWh and operated production was 10.7 TWh.

Regulation and taxation

Hydro is subject to a broad range of laws and regulations in the jurisdictions in which we operate. These laws and regulations impose stringent standards and requirements and potential liabilities regarding accidents and injuries, the construction and operation of our plants and facilities, air and water pollutant emissions, the storage, treatment and discharge of waste waters, the use and handling of hazardous or toxic materials, waste disposal practices, and the remediation of environmental contamination, among other things. We believe we are in material compliance with currently applicable laws and regulations.

EUTaxonomy

On 12 July 2020, the EU Regulation on the Establishment of a Framework to Facilitate Sustainable Investment (the Taxonomy Regulation) entered into force. The Taxonomy Regulation introduces an EU-wide classification system of environmentally sustainable activities, under which companies may define which of their economic activities are environmentally sustainable. The regulation also mandates certain companies to report on and disclose the extent to which their business activities are aligned with the Taxonomy's definition of sustainable.

Hydro's primary aluminium, recycling and hydropower production will be subject to the taxonomy under certain conditions. The delegated acts on the various climate-related objectives will apply from 1 January 2022 (climate change mitigation and climate change adoption) and 1 January 2023 (the remaining objectives). By the delegated act of 20 November 2020, all Hydro's recycled production as well as primary aluminium based on renewable electricity are assumed to be compliant. While electricity from wind and solar will comply, hydropower production can qualify based on certain requirements. Mining is likely to be included for one or more of the objectives in further development of the taxonomy

From 2022, the Group's turnover derived from taxonomy qualifying activities as well as related capital expenditure and operational expenditure shall be reported as part of the nonfinancial statements.

Aluminium - regulation

Environment

Hydro's aluminium operations are subject to a broad range of environmental laws and regulations in each of the jurisdictions in which they operate. These laws and regulations impose increasingly stringent environmental protection standards regarding, among other things, air emissions, the storage, treatment and discharge of waste water, the use and handling of hazardous or toxic materials, waste disposal practices, and the remediation of environmental contamination. The costs of complying with these laws and regulations can be significant.

Primary aluminium production is an energy-intensive process that has the potential to produce significant environmental emissions, especially air emissions. Carbon dioxide and perfluorocarbons (PFCs), all greenhouse gases, are emitted during primary aluminium production.

In the European Union and other jurisdictions where Hydro operates, various protocols address transboundary pollution controls, including the reduction in emissions from industrial sources of various toxic substances such as polyaromatic hydrocarbons, and the control of pollutants that lead to acidification.

European water legislation

The European Union has adopted legislation to address discharges of dangerous substances to water: The Water Framework Directive (2000/60/EC), as well as specific legislation on bathing waters, drinking water, nitrates in ground and surface waters, and urban wastewater treatment. The European Union has also adopted Directive 2008/105/EC on environmental quality standards in the field of water policy, which sets specific emission limit values for pollutants identified as priority substances and priority hazardous substances (PHS). Among the substances found on the PHS list are polycyclic aromatic hydrocarbons, which are sometimes emitted by the aluminium industry. Any emissions, discharges and losses of such substances (i.e. PHS) must cease in the EU by 2025. Both the Water Framework Directive and the Directive on environmental quality standards were revised in 2013 (Directive 2013/39/EU), notably to expand the list of priority substances and to revise the emission limit values for the period after 2015. Hydro has addressed all the relevant requirements of the Water Framework Directive in cooperation with external consultants and the Norwegian Environment Agency. During 2015, the Norwegian plants implemented new water monitoring programs after review and approval of the Norwegian Environment Agency. This will form the basis for future longer-term water monitoring.

Hydro has facilities that have been operated for several years or have been acquired after operation by other entities. Subsurface contamination of soil and groundwater has been identified at many such sites and may require remediation under the laws of the various jurisdictions in which the plants are located. Hydro has made provisions in its accounts for expected remediation costs relating to sites where contamination has been identified that, based on presently known facts, it believes will be sufficient to cover the cost of remediation under existing laws. Because of uncertainties inherent in making such estimates or potential changes to existing legislation, it is possible that such estimates may prove to be insufficient and will need to be revised and increased in the future. Also, contamination may be determined to exist at additional sites that could require future expenditures. Therefore, actual costs could be greater than the amounts reserved.

European emissions legislation

The European Union's Industrial Emissions Directive (2010/75/EU) is the main EU instrument for regulating pollutant emissions from industrial installations. This directive was adopted in 2010 and entered into force in 2013. It also replaced the earlier EU Directive on Integrated Pollution Prevention and Control (1996/61/EC), which is no

longer in force. To support adoption of the Industrial Emissions Directive, the European Commission issued an update to the BAT Reference Document (BREF) for the Non-Ferrous Metals Industries, in 2016. This BREF document is applicable to aluminum producers and serves as a reference for setting permit conditions. National authorities were required to update permit conditions according to the BREF document by June 2020. The Norwegian authorities have issued new permit conditions to most of Hydro's Norwegian Primary Smelters, but are delayed with Årdal.

European chemical legislation - REACH and CLP REACH (Registration, Evaluation, Authorization and Restriction of Chemicals) is an EU regulation, adopted to improve the protection of human health and the environment and applies to all chemical substances. REACH places the burden of proof on companies, which must identify and manage the risks linked to the substances produced or imported into EU.

Hydro has different roles under REACH as producer, importer and downstream user and follow the requirements including the requirement to register substances produced and/or imported in volumes above 1 ton/year.

The CLP (classification, labeling and packaging) directive is based on the United Nations' Globally Harmonized System (GHS) and its purpose is to ensure a high level of protection of health and environment. CLP is legally binding and requires manufacturers, importers or downstream users of substances to classify, label and package hazardous chemicals appropriately. Hydro is mainly a downstream user of chemicals and follows the requirements including checking the SDS (safety data sheets) to ensure compliance with exposure scenario and safe use.

Greenhouse gas emissions

The aluminium industry was included in the EU CO2 emissions trading system (ETS) in 2013. The system is regulated by the ETS Directive. The aluminium industry is affected by the scheme directly and also indirectly by the pass-through of CO2 allowance costs by power producers into the power prices ("indirect effects").

Aluminium production is qualified as an industrial sector exposed to a significant risk of "carbon leakage" (i.e. risk of European operations losing market share to less carbonefficient installations outside the EU). Aluminium producers therefore receive a higher percentage of free emission allowances compared to sectors not exposed to carbon leakage. The free allocation of emission allowances is agreed until 2020. Hydro is currently close to the benchmark values set for our operations, thus the financial impact of these regulations has been minor. However, the present price increase of EU allowances increases the financial effect. Due to increased production volumes and an annual reduction of free allowances, the need to procure allowances has increased up to 2020. In particular for the years 2019 and 2020. Hydro's annual EU ETS compliance cost has increased both due to reduced free allocation and considerably higher CO2 prices.

Rolling operations are also covered by the ETS regime and are allocated allowances free of charge based on an energy efficiency benchmark. Two of Hydro's remelters are

included, but both are close to the benchmark values for its remelting activities.

The EU is in a process of finalizing the EU ETS for the 2021- 2030 period, based on the trilogue agreement reached between the Parliament, EU Member States and the EU Commission on November 9 2017. However, due the new European Green Deal (EGD), agreed in 2019, the emissions ambition target for industries will increase to 2030. How much in total and further the emission cut target required for each industries will first be finalized in 2022. The EGD agreement emphasizes the importance of giving additional safeguards to European industry with extra protection against the risk of carbon leakage, with a goal to grant 100 percent free allowances up to sector's benchmark level for our direct emissions.

Our primary aluminium production is presently most exposed to indirect EU ETS costs. To mitigate risk of carbon leakage due to indirect CO2-costs, EU allows for national compensation of these costs. EU has agreed on a framework for continuing CO2-compensation in the period 2021-2030, and individual countries will formulate their own national regulations in accordance with the EU framework.

Up to 2020 and except for Sør-Norge Aluminium AS (Husnes), Hydro's fully owned Norwegian smelters do not qualify for indirect carbon cost compensation, as, according to the Norwegian regulations, Hydro's power sourcing (selfgenerated power and old sourcing contracts entered into prior to implementation of the ETS scheme) does not expose those smelters to increased electricity price due to the introduction of ETS. From 2021, Hydro's old power contract expires, resulting in more of Hydro's Norwegian aluminium production being eligible for CO2-compensation from 2021 onwards.

The Paris Agreement reached in December 2015, committed all the 197 signatory nations to keep the increase in the global average temperature "well below 2°C", pursuing 1.5°C, by each signatory nation committing to do their best effort to reduce emissions. Further the Agreement requires a peak in greenhouse gas emissions as soon as possible and "Climate neutrality" by 2050-2100. Such efforts could expose Hydro to additional costs in the various countries it operates.

Trade and Tariffs

Trade policy has a growing impact on Hydro's business both within the political and strategic agenda (regional and bilateral Free Trade Agreements, WTO framework, EU trade policy, US unilateral trade actions etc.) as well as more local factors like tariffs, anti-dumping and other trade measures. An escalation of trade measures between large economies might impact overall GDP.

EU duty rates on imports are 4 percent on the import of alumina, 3 percent on primary unalloyed aluminium , 6 percent on alloyed aluminium, (except import duty for alloyed rolling slabs and alloyed extrusion billets which are 4 percent), and 7.5 percent on the import of the majority of semi-fabricated products. Aluminium metal produced in the EEA (Norway and Iceland) is exempted from any such duty in the EU. There are also import duties on primary and semifinished products in other material markets for Hydro.

The EU has in place anti-dumping duties on some aluminium products like foil, wheels and radiators, mostly on import from China. On 14 October 2020, EU announced preliminary anti-dumping duties of 30.4 - 48 percent on certain extrusion products from China. A final decision is expected in April 2021, which could either maintain, modify or remove these duties. On 14 August 2020, EU announced the opening of investigations on possible anti-dumping duties on certain flat rolled products from China. A preliminary decision is expected in March 2021. On 22 October 2020, EU opened an antidumping investigation into imports of aluminium converter foil from China and on 4 December a parallel antisubsidy investigation into the same product.

The US administration has continued with the tariff of 10 percent on all aluminium imports except imports from Australia, Argentina, Canada and Mexico. With effect of 15 October 2020, the US Department of Commerce (DOC) has imposed preliminary antidumping duties of 352.71 percent on imports of Common Alloy Aluminium Sheet (CAAS) from Hydro Aluminium Rolled Products (HARP) in Germany. On 1 March 2021, the DOC has reduced antidumping duties on CAAS imports from HARP to 242.80 percent. The investigations cover imports of CAAS from 18 different countries. Imports from Norway are not affected. The final decision by the US International Trade Commission is expected in April 2021.

Energy – regulation

The Norwegian regulatory system for hydropower production

The ownership and utilization of Norwegian waterfalls for i.e. hydropower production, other than small-scale power production, requires a concession from the Ministry of Petroleum and Energy. According to legislation passed in 2008, new concessions may no longer be granted to private entities such as Hydro. Moreover, private entities may not acquire nor own more than one-third of the shares or interests in companies that own hydropower plants.

Our waterfall rights and hydropower plants in Norway were acquired and developed under previous legislation that allowed for private ownership. Approximately one-third of our normal annual production in Norway - about 3 TWh per year - was acquired before concession laws were enacted and does not contain any compulsory reversion to the Norwegian state. About two-thirds of our normal annual production, or 6 TWh per year, is subject to concessions granted at the time the waterfall rights were acquired. Such power plants operate under concession terms of Norwegian state reversion, with individual concessions expiring in two main parts around 2022 and 2050. Hydro's power plants at Røldal-Suldal, with a normal annual production of 3.0 TWh, will be the first significant production facilities to revert to the Norwegian state towards the end of 2022. Reversion to the Norwegian state can be avoided if the power plants, or two-thirds or more of the shares of the entity that owns the power plants, are sold to a public entity prior to reversion.

On December 31, 2020, Hydro and Lyse merged part of their respective hydropower production assets to create a new hydropower company. The new company will be called Lyse Kraft DA and have a normal annual power production

capacity of 9.5 TWh, of which Hydro will own 25.6 percent and Lyse 74.4 percent. Following the transaction, Hydro is Norway's third-largest operator of renewable power, with a combined renewables production of 13.6 TWh in a normal year. Based on equity shares, Hydro's annual power production is 9.4 TWh in a normal year. If required concessions are issued for the transaction by the Ministry of Energy and Petroleum, the Røldal-Suldal power plants will not revert to the state. Concessions are expected to be issued during the first half of 2021.

Bauxite andAlumina – regulation

Environmental Regulation

Our operations in Brazil are subject to strict environmental regulations and license requirements. Particular regulations apply to our operations in the Mineracão Paragominas S.A. (Paragominas) mine, due to its location in the Amazônia region.

One such regulation, known as the "Environmental Legal Reserve" requires that 80 percent of a rural property with native forest in the Amazônia region must be preserved, which means that a mine in the region cannot be developed without a sustainable forest management plan in accordance with the regulation. However, in Paragominas the legislation has established 50 percent as minimum requirement for legal reserve. Administrative servitudes (mining servitudes) are not included in the calculation for the legal reserve.

The practical implication is that for each rural property where Paragominas has current or planned mining operations, the Environmental Legal Reserve must be complied with and approved by the Para state environmental agency SEMAS.

Under Brazilian environmental legislation, any activity that has the potential to pollute the environment must obtain an environmental license before the activity can start. Such licenses are generally granted by SEMAS unless the activity is subject to the Federal environmental agency (IBAMA). It is common that licenses granted are subject to a number of conditions to ensure regulatory compliance or to mitigate effects of the operations on the environment or local communities.

Each of our Brazilian operations currently hold several environmental licenses, including environmental installation licenses for respective construction and expansion phases, and environmental operational licenses for their ongoing operations.

Greenhouse gas emissions

In 2015, during the United Nation Climate Change Conference in Paris, Brazil submitted targets to reduce GHG by 37 percent by 2025 and 43 percent by 2030 compared to 2005 levels,

In 2019, the Brazilian government established a National Commission to coordinate, monitor and review emission reductions through mitigating deforestation and forest degradation (National REDD+). In December 2020, Brazil presented its update regarding the National Determined

Compromise - NDC. The Brazilian government informed that the NDC reaffirms the commitment to a 37 percent reduction in GHG by 2025 and 43 percent by 2030 compared to 2005 levels. The updated NDC also states the indicative objective of achieving climate neutrality in 2060.

Mining regulation

Exploration of minerals requires an exploration license from the federal mining agency. The license grants an exclusive right to explore an area, subject to several requirements including compensation to the land owner and payment of an annual exploration fee to the National Mining Agency (ANM). Currently, the annual exploration fee is BRL 3.55 per hectare for the initial term of the license, and BRL 5.33 per hectare for any renewal periods.

If the exploration identifies viable resources, a mining concession is granted by the Ministry of Mining and Energy. The concession includes an obligation to pay royalties to the government and landowners. For bauxite mining, sales royalties are calculated based on gross revenue derived from sales of minerals after certain tax deductions. Consumption royalties are calculated based on the market price or the reference price defined by the federal mining agency. Government royalties on bauxite amount to 3 percent and are allocated between local (currently 60 to 75 percent), state (currently 15 to 30 percent) and federal governments (currently 10 percent).

In December 2018, amendments to the Brazilian Mining Code came into force. The new framework aims at fostering competition in the mining industry and introduces internationally established concepts such as mineral resources and reserves. The rules are further targeted at avoiding the indefinite validity of exploration licenses, e.g. in case of lack of activity from the mining right holder, and improving regulation on current industry issues, such as (re)use of tailings and industrial waste.

The mining sector is overseen by the ANM which is responsible for implementing guidelines, directives and policies for the legal mining framework.

Major incidents in Brazil in recent years (e.g. Samarco and Vale) have increased public awareness and pressure towards authorities and politicians to impose further and stricter regulations and monitoring of the mining industry. In 2018/19 new and stricter requirements were implemented in particular addressing construction, safety and monitoring of mining tailing dams.

Taxation

Global Tax Policy

Hydro is committed to sustainable value-creation for its shareholders, other stakeholders, and the communities where it operates. Hydro's global tax policy regulates the global framework for tax management and governance in the group and is the responsibility of the Chief Financial Officer, and ultimately the Board of Directors. Hydro's global tax policy is publicly available at www.hydro.com. In brief, management of taxes shall be performed in line with local laws and regulations, OECD transfer pricing guidelines, including, but not limited to the arm's length principle, as

well as corporate governance such as Hydro's Code of Conduct and The Hydro Way. Hydro is committed to transparency and accuracy in its tax compliance and reporting, maintaining a constructive and open relationship with the tax authorities and to operate under a principle of openness when dealing with other interested parties outside Hydro and society at large. Hydro falls under the EU Mandatory Disclosure Rules (MDR) regulating disclosures of certain cross border transactions between intermediaries. In 2020, Hydro implemented procedures to ensure compliance.

Taxation of hydropower production in Norway

Profits from Hydro's hydropower production in Norway are subject to ordinary income tax at 22 percent for the income year 2020. Revenue for ordinary income tax purposes is based on realized prices. Dams, tunnels and power stations are, for tax purposes, depreciated on a linear basis over 67 years, and machinery and generators over 40 years. However, such fixed assets are depreciated over the concession period if that is shorter. Transmission and other electrical equipment are depreciated at a 5 percent declining balance.

A natural resource tax of NOK 13 per MWh is currently levied on water-generated electricity. The tax is fully deductible from the ordinary income tax.

In addition, a special resource rent tax, at 37 percent for the income year 2020, is imposed on hydropower production in Norway. Unlike the ordinary income tax, financial costs are not deductible against the basis for the resource rent tax. Uplift is a special deduction in the net income, computed as a percentage of the average tax basis of fixed assets (including intangible assets and goodwill) for the income year. The percentage, which is determined annually by the Ministry of Finance, essentially provides for a certain return on fixed assets above which income becomes subject to the resource rent tax. The percentage used to calculate the uplift for 2020 was 0.3 percent.

Revenue for resource rent tax is, with certain exceptions, calculated based on the plant's hourly production, multiplied by the area spot price in the corresponding hour. However, revenues from sales under certain long-term contracts are valued at contract price. Revenues from power supplied to Hydro's own industrial production facilities is based on the average contract price in long-term power supply contracts delivered to Hydro.

Taxation in Brazil

Federal value added tax (PIS/COFINS) is charged on sales at a rate of 9.25 percent. Buyers are entitled to PIS/COFINS tax credits of 9.25 percent on purchases of relevant input factors (except for import of goods, which is 11.75 percent), which may be used to offset PIS/COFINS or federal income tax

liabilities. Exports are exempt from PIS/COFINS. Because most of Hydro's production in Brazil is exported, we accumulate tax credits. Obtaining cash refunds of tax credits is complex and can take substantial time.

ICMS is a value added tax charged by Brazilian states on circulation of goods, energy and services. ICMS tax rates vary from 7 to 25 percent and the tax base is the gross value of the transaction, including ICMS. Brazil has a general ICMS exemption on exports. Hydro's main operations in Brazil are located in the state of Pará, which has historically granted a deferral of the collection point for ICMS on certain goods and services. In 2015, the state of Pará granted a renewal of the ICMS deferral regime for Hydro Paragominas, Hydro Alunorte and Albras for a 15 -year period. With this regulation, the companies are not entitled to book ICMS credits and the deferred ICMS tax is not due on the exports of goods. This regime is subject to several conditions which Hydro must comply with on an ongoing basis concerning verticalization of the aluminium value chain in Pará, contribution to development in the region and enabling sustainable growth in Pará. In June 2020, ICMS deferral was approved by the Brazilian National Council of Finance Policy (CONFAZ).

Other information

As a public limited company organized under Norwegian law, Hydro is subject to the provisions of the Norwegian Public Limited Companies Act. Our principal executive offices are located at Drammensveien 260, Vækerø, N-0240 Oslo, Norway; telephone number: +47 2253 8100. Hydro's internet site is www.hydro.com

Performance and targets

74 Annual Report 2020 Performance and targets Hydro

75 Lifting profitability

83 Driving sustainability

Quick overview

In line with the "Lifting profitability and Driving sustainability" agenda Hydro is committed to two overarching long-term targets: 1) Lifting RoaCE > 10 percent over- the-cycle; and 2) Reducing Hydro's total CO2 emissions by 30 percent by 2030. In response to the Covid-19 outbreak in 2020, Hydro launched decisive immediate cashpreservation measures, while at the same time strengthening longer-term measures to improve cash generation from current operations. Hydro also focused on positioning the company for the future and defined the most attractive growth areas, where the megatrends match Hydro's capabilities.

Hydro's financial priorities are to create long-term shareholder value by generating capital returns above the cost of capital over-the-cycle supported with clear priorities for capital allocation, while at the same time maintaining a strong balance sheet and ensuring a robust shareholder payout. In the shorter-term, Hydro aims to lift cash flows towards 2025 by supporting earnings with the improvement ambition and commercial initiatives, while also optimizing capex and net operating capital. Finally, in order to reduce risk and lift value potential, Hydro aims to diversify its portfolio and pursue profitable growth opportunities within recycling, renewable energy and batteries.

Our future profitability depends on our ability to operate sustainably. We have quantified a set of ambitions towards 2030 to improve our performance on climate, environment and social responsibility. By reducing risk, emphasizing safety in our operations, improving relations with stakeholders and neighbours, increasing resource efficiency, reducing our own emissions and developing new markets, Hydro's business will be more robust. Complying with laws, regulations, Hydro's steering documents and respecting human rights, is fundamental to Hydro's way of working and are considered key elements to the company's license to operate.

On March 5, 2021, Hydro entered into an agreement to sell its Rolling business. The sales transaction will impact Hydro's targets and ambitions such as the improvement program, commercial ambitions, recycling growth targets and sustainability goals and targets. Targets included in this report include the Rolling business area and will be adjusted during 2021.

Lifting profitability, driving sustainability

Hydro's financial ambition is to lift cash flows and generate capital and shareholder returns through a combination of longer-term financial priorities supported by near-term financial targets. At the same time, Hydro aims to differentiate through its strong sustainability position and to develop businesses where megatrends match Hydro's capabilities.

Supported by an increasing interest from the regulators, customers and financial markets, Hydro firmly believes that leading in sustainability is a strong foundation for long-term license to operate and a key driver for long-term profitability. By emphasizing climate, environment, integrity and social responsibility, as well as by developing greener business and product offerings, Hydro will reduce risks and create new profitable opportunities for the future.

In 2020, the Covid-19 pandemic created significant social, operational and market challenges. The company responded with a number of cash-preservation actions in the short-term and a set of stronger improvement measures until 2025. Despite the challenges in 2020, Hydro has focused on positioning the company for the future reflected in the revised strategy to differentiate with greener products and diversify the business portfolio beyond aluminium. Furthermore, Hydro conducted a review of its key financial metrics and has prioritized those metrics that are most aligned with the financial and strategic agenda. The first chapter describes the 2020 progress on the existing targets and then introduces the revised financial goals towards 2025 and beyond. The second chapter gives an introduction to Hydro's sustainability agenda, ambitions, targets and performance.

Lifting profitability

Description and progressin 2020

Financial priorities

Hydro has developed a framework that establishes clear priorities for uses of cash in order to help guide the company's capital allocation decisions. The Covid-19 outbreak in 2020 has put Hydro's financial framework and its agility to a test. The pandemic introduced significant uncertainty regarding the financial outlook for the company with potential negative implications for Hydro's investment grade credit rating. Hydro responded with a set of cash-preservation measures in order to mitigate the downside scenario. The balance sheet strength

was prioritized, with dividends temporarily suspended and capex reduced by 20 percent compared to plan. Net operating capital optimization, portfolio review and restructuring as well as additional cost reductions were all used as additional sources of cash. The implemented measures illustrate the flexibility of Hydro's financial framework allowing the company to act according to the established financial priorities in an unprecedented situation.

Financial strength and flexibility

Hydro is committed to maintaining a robust balance sheet, strong liquidity and an investment grade credit rating. Hydro considers this crucial in order to navigate the industry cycles and to be able to invest also during cyclical downturns. Up until 2020, two financial ratios were used as indicators of the balance sheet strength: Funds from operations to average Adjusted net cash (debt), with a target to stay above 40 percent over the cycle, and Adjusted net cash (debt) to Equity, with a target to stay below 55 percent over the cycle. Following a review of the key financial metrics used for performance follow-up and managing capital, these two metrics will be replaced by average Adjusted net cash (debt) to underlying EBITDA going forward (see later in this chapter).

Currently, Hydro has a BBB rating with S&P Global and a Baa3 rating with Moody's, both with a stable outlook. The average Funds from operations to Adjusted net cash (debt) ratio was 39 percent in 2020, close to the over-the-cycle target of 40 percent, and an improvement from 27 percent in 2019. The negative impact from the Covid-19 pandemic was partly offset by higher production in Alunorte, improved smelter margins, and a strong cost response throughout the company. The Adjusted net cash (debt) to Equity ratio was 36 percent, within the over-the-cycle ambition to stay below 55 percent. For further details, see Note 7.1 Capital management to the consolidated financial statements.

Financial priorities and targets

Clear principles for capital allocation

Capital allocation framework proactively applied in the covid-19 situation

In order to ensure strong liquidity, Hydro has a NOK 1.6 billion undrawn revolving credit facility that expires in 2025. The margin on the facility is linked to Hydro's CO2 emission reduction target, thereby linking financing costs to the progress on Hydro's main climate target and highlighting the important connection between sustainability and profitability. As a measure to secure funds during the covid-19 situation, Hydro issued bonds amounting to NOK 7 billion in May 2020.

Robust shareholder payout

Hydro aims to offer its shareholders a predictable dividend and a satisfactory yield. Up until 2020, Hydro's ambition was to pay out 40 percent of reported net income to majority shareholders over the cycle, and a dividend floor of NOK 1.25 per share. In response to high uncertainty on the back of the unprecedented covid-19 pandemic, the 2019 dividend was suspended in May 2020. However, the dividend was distributed later, in November 2020, based on the improved financial position and positive outlook for the company.

Hydro's Board of Directors proposed an annual dividend of 1.25 NOK per share for 20209. This represents an average five-year payout ratio of 65 percent of reported net income, and a dividend yield of 3.1 percent at the end of 2020. Effective from 2021, the policy has been revised to a minimum of 50 percent payout ratio of underlying net income over the cycle with the dividend floor maintained at 1.25 NOK per share. The new policy reflects Hydro's ambition to lift performance and cash returns to shareholders over the cycle. Hydro may evaluate share buybacks and additional dividends with due consideration given to the alternative investment opportunities, financial situation and earnings outlook.

Clear principles for capital allocation

Hydro has established clear priorities and guidelines for capital allocation. This is critical in order to deliver on the company's strategic direction and may be an important differentiator for the long-term financial performance. The strategy is to allocate more growth and return-seeking capital to the areas with higher value generation potential, both from a profitability and sustainability perspective. Historic returns on investments, earnings volatility, differentiation potential, and improved sustainability position play a key role in the allocation process. All the business areas have been grouped into different strategic modes. The focus in Bauxite & Alumina and Aluminium Metal is to sustain and improve the current asset base, Extrusions and Energy are in selective growth mode. Rolling was put under restructuring and strategic review in 2019, which was concluded in March 2021 with a sale of the Hydro Rolling business to KPS Capital Partners10. Recycling across the portfolio, renewables and batteries have been identified as the strategic growth areas.

⁹ Pending approval from the AGM on May 6, 2021.

¹⁰ The transaction is subject to customary approvals from competition authorities and is expected to be completed during second half of 2021.

Roadmap to profitability targets

Hydro has a target to achieve an underlying return on average capital employed (RoaCE) of 10 percent over the cycle compared to the group long-term nominal cost of capital of 9 percent. Both the cost of capital and the corresponding return requirements are differentiated for each business area with the ambition to achieve an underlying return on average capital employed above the respective cost of capital. Nominal long-term cost of capital for business areas reflects the risk and volatility of earnings and cash flows. For more cyclical upstream divisions – Bauxite & Alumina and Aluminium Metal – it is set to 10-11 percent, for the downstream divisions with more stable earnings profiles – Extrusions, Rolling and Metal Markets, including recycling – it is 7-8 percent, while in Energy it is 6- 7 percent reflecting a relatively low risk and low earnings volatility.

In 2020, underlying return on average capital employed was 3.7 percent, significantly below the ambition to deliver 10 percent over the cycle, mainly as a result of weak macroeconomic conditions due to the Covid-19 pandemic. This, however, was an improvement from 1.3 percent in 2019 affected by the Alunorte embargo as well as the cyber attack. For more information on the returns on average capital employed, see the Alternative performance measures (APMs) section in the Appendices to the Board of Directors' report.

Return on average Capital Employed (RoaCE)

	Reported		Underlying
	2020	2019	2020	2019

Hydro	7.5 %	(0.9) %	3.7 %	1.3 %
Business areas1)
Bauxite & Alumina	5.4 %	1.9 %	5.9 %	2.5 %
Aluminium Metal	1.9 %	(3.9) %	2.9 %	(2.6) %
Metal Markets	22.5 %	20.7 %	21.4 %	27.3 %
Rolling2)	(12.1) %	(5.0) %	0.4 %	2.4 %
Extrusions	1.3 %	3.8 %	6.2 %	5.7 %
Energy3)	249.5 %	13.4 %	8.7 %	12.9 %

1) Hydro group RoaCE calculated as EBIT last 4 quarters less Income tax expense adjusted for tax on financial items/Average capital employed last 4 quarters. RoaCE at business area level is calculated using 25% tax rate, and 80% tax rate for Energy (also see footnote 2) below).

2) Reported RoaCE for Rolling in 2020 was affected by an impairment loss of NOK 1.9 billion related to the sale of the Rolling business to KPS Capital Partners.

3) Reported RoaCE for Energy in 2020 was affected by a recognized gain of NOK 5.3 billion related to the Lyse Kraft DA transaction (excluded from underlying results). A tax rate of 25% was applied to calculate Energy reported RoaCE in 2020. Energy reported RoaCE 2019 restated to 13.4% from 14.7%, as disclosed in the Annual report 2019, due to change in tax rate in the calculation.

Over the last five years, underlying return on average capital employed averaged 5 percent with high volatility in the returns reflecting that about 60 percent of capital is allocated into cyclical upstream businesses, where returns are to a high degree driven by market prices. The below-target historical RoaCE development indicates a capital-intensive business in an industry that has experienced challenging market fundamentals over the last decade. To address this, Hydro has established a roadmap to reaching the profitability target. Hydro's improvement programs and commercial initiatives are aimed at realizing maximum value potential out of the current asset portfolio. The achievement, however, is dependent on the realized market scenario, as illustrated on the figure below.

In the medium- to long-term Hydro's strategic direction is to diversify earnings and portfolio in order to reduce exposure to the volatile upstream markets, and to grow in the areas that promise attractive returns on capital employed. Hydro will also differentiate from its competitors with its strong sustainability position that is supported with the megatrends and the current regulatory developments. Further, Hydro will continuously review its portfolio in order to identify and manage non-performing and/or non-strategic assets to foster reallocation of capital. These initiatives are expected to provide an upside to the RoaCE potential from the existing asset base visualized on the graph above.

Financial targets

Hydro's performance in the recent years has been affected by the Alunorte embargo in 2018-2019, cyber-attack in 2019, as well as the weakening market outlook further exacerbated by the global pandemic in 2020. The 2023 targets launched in 2019 had been impacted by the Covid-19 situation and were revised early in 2020. To support group cash generation, Hydro has strengthened focus on optimizing the capex profile and managing net operating capital and has extended its improvement efforts towards 2025. This chapter reviews the 2020 status on the targets established in 2019, while the revised goals are described in the next chapter.

Improvement program

Hydro started the year with an accumulated 2020 improvement target of 4.1 BNOK out of the total ambition of 7.3 BNOK by 2023, of which 1 BNOK was realized in 2019. The program consisted of various improvement levers including volume ramp-up in Brazil following the Alunorte embargo, cost, efficiency and procurement initiatives across the business areas and staffs, commercial activities to drive volumes and margins mainly downstream as well as growth ambitions such as Husnes smelter restart in Aluminium

Metal, customer-driven growth in Extrusions and energystorage investments in Energy. About a quarter of the program was based on commercial and growth initiatives that rely on the market support.

The Covid-19 pandemic and the related macroeconomic slow-down with a sudden demand drop as well as a series of lockdowns imposed by the authorities to reduce the spread of the virus significantly impacted the progress on many improvement initiatives exposed to the market. The net EBIT ambition in Extrusions suffered as a result of shrinking demand, and so did portfolio high-grading activities in Rolling. Aluminium Metal adjusted its product and project portfolio in response to the weak demand by postponing the planned Husnes restart, partially curtailing Slovalco and disconnecting electrolysis cells in several Norwegian smelters. Growth initiatives in Energy, in particular Corvus, were also affected by the market situation. Furthermore, performance and ramp-up in Brazil were affected by some operational issues unrelated to covid-19, including extended pipeline maintenance in the Paragominas mine and a fire incident in the Albras smelter. As a result, the realized improvements in 2020 lagged far behind the initial target of 4.1 BNOK for the year.

In response to the challenges, Hydro has revised the improvement program definition in order to exclude marketdriven initiatives affected by covid-19 and to visualize the progress on the initiatives within Hydro's control. This allowed the organization to set realistic targets thereby lifting motivation and created a strong incentive to look for further improvements across Hydro. As a result, Hydro exceeded the re-focused target of 4.1 BNOK accumulated for 2020 and realized 4.2 BNOK in improvements, of which NOK 0.5 billion came from various initiatives in Rolling. The refocused definition has replaced the previous 7.3 BNOK target by 2023 with a new target of 8.5 BNOK by 2025 in cost and efficiency initiatives11. Commercial and growth ambitions will come in addition. The new improvement definitions and targets are described in the next chapter.

Completion of Hydro Rolling strategic review

On March 5, 2021, Hydro entered into an agreement to sell its Rolling business to KPS Capital Partners. The sale of Rolling will enable Hydro to deliver on the 2025 strategy, strengthening our position in low-carbon aluminium, while exploring new growth in areas where our capabilities match global megatrends. The sales transaction will impact Hydro's targets and ambitions such as the improvement program, commercial ambitions, recycling growth targets and sustainability goals and targets. Targets included in this report include the Rolling business area and will be adjusted during 2021.

Optimizing capital allocation

Ensuring disciplined capital allocation is key to deliver on return requirements, with growth projects to be aligned with strategic priorities, and sustaining capex to be maintained at competitive and affordable levels. At the beginning of the year, Hydro guided for a capex level of 9.5-10 BNOK in 2020, of which 6.5-7 BNOK in sustaining investments. However, as described above, capex was reduced by 20% in the midst of the covid-19 situation in order to preserve cash and prepare

for a potential severe downside scenario. This resulted in an updated 2020 guidance of 7.5-8 BNOK, of which 5.5 BNOK in sustaining capex.

Total capex in 2020 ended up at NOK 6.4 billion, excluding lease and excluding periodization effects of NOK (0.1) billion, a further reduction of about 15 percent compared to the already reduced frame. Some projects have been postponed to 2021, while others have been re-prioritized or delayed. Some customer-driven investments, especially in Extrusions, did not materialize in 2020 due to the market situation. In addition, positive currency development, in particular weakening of the BRL vs the NOK, has also contributed to the reduction beyond the targeted levels. The capex reduction compared to the year-end estimate of NOK 7 billion communicated at the Capital Markets Day in December 2020 is largely due to a capex carry-over into the next year and is reflected in the updated 2021 capex guidance.

Projects prioritized in 2020 include critical maintenance activities needed to safeguard Hydro's production assets in every business area. Examples include smelter relining in Aluminium Metal, power plant rehabilitation and upgrades in Energy, various upgrades of presses in Extrusions, rolling mills in Rolling and recyclers in Metal Markets. In addition to those, Bauxite & Alumina accounted for a large share of sustaining investments in 2020. These were mainly related to the bauxite pipeline maintenance, the tailings dry backfill project in Paragominas as well as several investments to improve energy efficiency of the boilers and calciners in the Alunorte refinery.

Growth and return-seeking capex was significantly reduced in 2020 as many growth and customer-driven investments were paused and postponed. The main spend in this category was related to the Husnes smelter upgrade and restart resumed in November and ongoing customer-driven investments in Extrusions.

¹¹ Improvement target to be revised following the sale of the Rolling business area.

Strengthen working capital management

Reflecting the strong focus on cash generation, maintaining an efficient level of working capital is a top priority. The main initiatives include high focus on inventory reduction in all business areas, optimizing material flow from raw materials to finished goods, establishing benchmarking tools and regular follow-up procedures, and tight collaboration between sales and metal purchasing.

Hydro released NOK 2.4 billion of cash-effective net operating capital in 2020, in addition to NOK 5.6 billion released in 2019. On top of a general reduction in net operating capital due to the weak market conditions, the largest contributor were inventory reductions in Rolling and Extrusions, partly offset by higher levels of safety stocks. Average net operating capital in days of revenue (NOC-days) was 59 in 2020, slightly down from 60 days in 2019.

The dashboard below summarizes the 2020 achievement on the key financial priorities and targets.

2020 Status and targets

	Capitalreturns URoaCE 3.7%1)	Balance sheet FFO/aND 39%2)	Free cash flow 7.7 BNOK3)
Lifting profitability	10% target over the cycle	>40% target over the cycle	Lifting free cash flow
Improvement program 4.2 BNOK4) 2020 target 4.1 BNOK	Cash effective change in net operating capital 2.4 BNOK release	Capex 6.4 BNOK5) 2020 revised target 7.5-8 BNOK	Shareholder payout 1.25 NOK/share6) 65% average 5-yr payout ratio 40% payout ratio over the cycle
2021 target 6.0 BNOK 2025 target 8.5 BNOK	Optimizing net operating capital	2021 target 9.5-10 BNOK 2022-2025 target 9-9.5 BNOK	1.25 NOK/share dividend floor

3) Free cash flow – operating cash flow less investing cash flow excluding sales/purchases of short-term investments.

4) The original improvement program definition was revised in 2020 with effect from 2019, now focused on cost and efficiency initiatives and excluding market driven initiatives. 5) 2020 capex excluding lease and excluding periodization effects of NOK (0.1) billion. 2021 target including capex carry-over from 2020.

* Targets to be revised following the sale of the Rolling business area.

Performance targets 2021-2025

In addition to the immediate measures implemented in 2020 in response to the covid-19 situation, Hydro has focused on positioning the company for the future, which resulted in a streamlined strategic direction and further stretched financial ambitions towards 2025. To support the revised agenda, Hydro has also reviewed its key financial measures and has prioritized the ones most aligned with the new ambitions. This chapter describes the updated financial goals towards 2025 and beyond.

Review of key financial metrics

During 2020, Hydro reviewed the key financial metrics used for performance follow-up and managing capital. The goals were to achieve clear communication aligned with industry and peer practice, simplify where possible, and through that support a correct valuation of the Hydro share and debt. This process resulted in Hydro focusing on EBITDA as the main performance measure. Hydro considers EBITDA, in combination with cash effective change in net operating capital and capital expenditures (capex), to be a better support to Hydro's focus on cash generation than EBIT, which also includes consumption of historic investments. EBITDA is also more commonly used among peers and preferred by Hydro's investors and analysts. The review also included the key financial solidity ratios used. Management has decided to replace Adjusted net cash (debt) to Equity and Funds from operations to average Adjusted net cash (debt) with average Adjusted net cash (debt) to underlying EBITDA, which is a more broadly used metric in the industry as well as consistent with the increased focus on EBITDA. Note that Adjusted net cash (debt) will focus on Hydro's debt only, excluding the previously included adjustments for debt in equity accounted investments. Hydro targets, over the business cycle, a ratio of average Adjusted net cash (debt) to underlying EBITDA below 2x. See Note 7.1 Capital management for further information.

Updated financial priorities and targets

Financial priorities

The four financial priorities described earlier in this chapter remain in place, however with some changes. Hydro maintains its capital return target of 10 percent underlying RoaCE over-the-cycle and will continue to actively use the capital allocation framework. Strong balance sheet and liquidity continue to be the top priority, with a target of maintaining average Adjusted net cash (debt) to underlying EBITDA below 2x over the business cycle. For comparison, this ratio was 1.93 and 2.27 in 2020 and 2019, respectively. During 2020, Hydro has performed a review of risk management strategy, and intends to utilize derivative and non-derivative measures to manage price exposure over slightly longer period than the practice in recent years. Finally, Hydro's goal is to create long-term value for its shareholders and to offer robust and predictable payout annually. In addition, Hydro aims to lift performance and cash returns to shareholders over the cycle. To emphasize this commitment, the Board of Directors has increased the dividend payout ratio from 40 percent of Net Income to a minimum of 50 percent of underlying Net Income over the cycle with effect from 2021 onwards.

Financial targets

In order to succeed with its longer-term financial ambitions, Hydro has established a set of targets within the 2025 horizon. The main goal is to lift cash flow generation from current operations and to establish a solid foundation for future cash generation potential through growth. The focus areas include 1) Improvement program and commercial ambitions; 2) New strategic growth initiatives; 3) Capex optimization; 4) Net operating capital optimization.

Targets and ambitions described in this report include the Rolling business area. The sales transaction of Hydro Rolling to KPS Capital Partners announced in March 2021 will impact Hydro's targets and ambitions such as the improvement program, commercial ambitions, recycling growth targets and sustainability goals. These will be reviewed during 2021.

Three levers driving Hydro value creation potential to 2025

strategic initiatives BNOK8.5 Improvement program Maximizing value-creation from current assets/operations • Operational excellence • Commercial excellence in daily operations • Raw material efficiency, procurement • Volume creep and capacity utilization • Fixed cost optimization BNOK2.0 Commercial ambitions Pursuing market and customerdriven growth opportunities • Pricing and share of the wallet • Upgrading and developing product portfolio • Customer-driven incremental growth Initiatives within the current business portfolio, dependent on market conditions Larger changes in business portfolio and/or strategic direction • Recycling: more than doubling postconsumer scrap utilization, creating EBITDA uplift of BNOK 1.0 to 1.5 by 2025 • Renewable Growth: investing into more than 1GW of renewable power projects in 2021 • Battery: Generating pro-rata EBITDA of MNOK 600 - 700 Initiatives outside the current business portfolio or representing a significant

Initiatives focused on influenceable parameters and continuous improvement

Growth and

strategic move

* Targets and ambitions to be revised following the sale of the Rolling business.

The full value creation potential

In order to reflect the full value potential in Hydro, a new framework has been introduced with targets extended until 2025 (as described on figure below) 12. It includes three levers: 1) improvement program focused on the controllable parameters, such as costs and operational excellence; 2) commercial initiatives that cover largely customer-driven initiatives within the current asset portfolio and are dependent on the market support; and lastly 3) strategic and growth initiatives that currently include ambitions within Recycling, Renewable Growth and Batteries. While equally important, these three categories differ in the extent they can be influenced by Hydro, cyclicality and reliance on the market conditions, time horizon, as well as relevant measurements and targets.

Improvement program

Operational excellence is key when it comes to maximizing value creation from current assets; and relies on the culture of continuous improvement and good control over the influenceable parameters. These initiatives are developed consistently throughout the cycle regardless of the macro and market situation. The total EBITDA improvement potential in the period 2019-202513 amounts to NOK 8.5 billion, reflecting the sum of potentials in all the business areas as well as staff functions and procurement. The program is front-loaded and around 70 percent – NOK 6.0 billion – of the total improvements expected to be delivered by end-2021.

The main improvement levers include volume, fixed costs optimization, raw material cost and efficiency, and process and commercial excellence in daily operations.

The Bauxite & Alumina improvement program mainly focuses on ramping-up production at Alunorte and Paragominas to full capacity. This accounts for NOK 2.7 billion out of the total Hydro improvement target by 2025. In 2020, capacity utilization in the refinery averaged 87 percent and is expected to reach the nameplate capacity of 6.3 million tons of alumina in 2021. Other elements include optimization

of the energy mix and consumption as well as fixed costs reduction.

Aluminium Metal target improvements across many categories, including restart of the Husnes smelter and volume ramp-up at Albras in Brazil, debottlenecking, fixed cost reduction including overhead costs, as well as digitalization of processes through soft sensor technology, advanced analytics, and automation.

Improvements in Rolling are to be achieved through organizational right-sizing and de-manning mainly resulting from closure of two foil lines in Grevenbroich, Germany; improving raw material cost with metal cost optimization such as increased use of scrap; and procurement improvements. Restructuring initiatives have delivered above expectations, with NOK 500 million of NOK 1.1 billion improvement program delivered by end 2020. At the same time, Hydro launched a strategic review and restructuring of Rolling in 2019 aiming to evaluate the optimal ownership set up for the business area. The review was concluded with a 100 percent sale of Hydro Rolling to KPS Capital Partners, announced on March 5, 2021. The transaction will enable Hydro to deliver on the 2025 strategy, strengthen our balance sheet and position in low-carbon aluminium, while exploring new growth in areas where our capabilities match global megatrends. See Board of Directors Report for more information on the transaction.

Extrusions have launched an extensive cost improvement program that includes SG&A cost reduction, portfolio review and restructuring as well as procurement initiatives.

Improvements in Energy include commercial and operational handling in Energy's daily operations and realizing synergies related to the Lyse Kraft DA transaction.

Improvements in all business areas include savings related to increased efficiency within staff and support functions, with Global Business Services (GBS) contributing the most. A sizeable share of improvements comes from the Hydro-wide procurement initiative addressing measures within supplier management, demand and specification management and process management across the company.

¹² Targets and ambitions to be revised following the sale of the Hydro Rolling business. 13 The programs use ²⁰¹⁸ as the baseline year for, e.g., operational parameters

and production. As market conditions and prices in 2018 were heavily

influenced by the Alunorte situation, LME, PAX, raw materials and exchange rates have been based on a 3-year average (2016 – 1H-2018).

By end-2020, NOK 4.2 billion was realized compared to the re-focused improvement target of NOK 4.1 billion. The main contributors were Bauxite & Alumina with the continued volume ramp-up and Extrusions with aggressive cost optimization initiatives, including procurement and restructuring. Aluminium Metal and Rolling have also delivered significant cost savings. However, performance in the upstream divisions was behind plan due to several operational issues in Brazil. This was offset with higher than expected cost improvements in both downstream divisions – Extrusions and Rolling.

Commercial initiatives

Commercial initiatives are about pursuing market and customer-driven growth opportunities within the current business portfolio. They drive topline growth and represent an important part of mid to long-term value-creation, especially in the downstream divisions. Execution and success of these initiatives rely on the market support and customer demand, and therefore are less certain. The total EBITDA potential from commercial activities adds up to NOK 2 billion in the period from 2019-202514. This includes new product development in Aluminium Metal, such as growing greener products offering; portfolio high-grading initiatives towards market segments with higher growth and margins, such as automotive, beverage can and battery foil in Rolling; and various efforts, such as plant specialization, to gain market share in dedicated segments and lift margins in new customer projects in Extrusions.

In 2021, commercial initiatives are expected to contribute positively in line with the projected partial recovery following the cyber-attack in 2019 and the covid-19 pandemic in 2020. However, the progress will depend on the market development and customer demand, and full return to the 2018 levels is not expected until 2022-2023.

Growth and strategic initiatives

Growth and strategic initiatives represent larger changes in the business portfolio and/or significant strategic moves within the current portfolio and are key drivers of long-term shareholder value creation. Hydro's strategy is to diversify and grow in recycling, renewable energy and storage solutions – areas, which are supported by the current megatrends and where Hydro can leverage the company's core industrial expertise and footprint to generate returns. The potential is to more than double post-consumer scrap utilization across Hydro with EBITDA uplift of NOK 1.0 to 1.5 billion by 20253 ; and to generate pro-rata EBITDA of NOK 600 – 700 million by 2025 through investments in batteries. In addition, Hydro's expertise within Energy combined with significant power consumption in production processes make Hydro an attractive partner in renewable projects. Already in 2021, Hydro targets to invest in more than 1GW of renewable power projects on a 100 percent basis together with its partners.

In order to lay a strong foundation for successful growth, Hydro's first priority is to build a solid pipeline of attractive and profitable investment opportunities in recycling, renewables, and batteries. The progress will depend on business cases and access to funding, among other factors.

Following the capex cut to a level of 6.4 BNOK in 2020 in response to the Covid-19 situation, Hydro is guiding for the total capex of NOK 9.5-10 billion in 2021, which includes a capex carry-over from 2020 due to the project timing and delays. Sustaining capex in 2021 accounts for NOK 6.5-7 billion out of the total. For the period of 2022-2025, current investment plans add up to an average of NOK 9-9.5 billion per year, of which NOK 6.5-7 billion in sustaining capex, including Rolling3 . In the long-term, sustaining capex needs are estimated to NOK 6-6.5 billion per annum, with the continuous efforts ongoing to ensure long-term competitive sustaining capex level. A certain level of investments in Extrusions, currently classified as return-seeking, is necessary in order to replace completed customer projects and maintain a stable earnings level. These will come on top of the indicated long-term sustaining capex guidance. The main projects requiring sustaining capex in the period 2021- 2025 include investments in Alunorte robustness, opening of a new mining area in Paragominas, pipeline replacement in Bauxite & Alumina, and smelter relining and asset integrity in Aluminium Metal.

Growth and return-seeking guidance reflects NOK 2 to 3 billion that Hydro intends to invest annually through 2025 in order to achieve its cost improvement and commercial ambitions within our current portfolio. The main projects include selected customer-driven growth in Extrusions, recycling and metal cost optimization across Hydro, and the fuel switch project in Bauxite & Alumina.

Larger organic and inorganic investments needed to enable strategic growth in recycling, renewables and batteries are not included in the guidance. In order to achieve the targeted EBITDA uplift in recycling, Hydro estimates additional investments of between NOK 2.5 and 3 billion within 2025 to handle more scrap, implement advanced sorting technology, and upgrade existing recycling and recasting capabilities. To achieve the targeted value uplift within batteries, Hydro and the battery partners intend to invest in attractive areas of the value chain requiring about NOK 2.5-3 billion capex from Hydro's ownership share. The Renewable Growth projects

¹⁴ Targets and ambitions to be revised following the sale of the Hydro Rolling business area.

will be financed through a partnership model with Hydro as an industrial minority partner in funded Special Purpose Vehicles (SPVs) established for each site.

Net operating capital optimization

In order to maximize cash generation and minimize tied-up capital, while giving due consideration to managing supply chain and production risks, Hydro will continue optimizing net operating capital levels both in absolute terms and in days of revenue. Development going forward may be affected by underlying market conditions, changes in prices and exchange rates, as well as shifts in the portfolio mix.

Driving sustainability

Sustainability is an integrated part of lifting Hydro's longterm profitability and the basis for our future positioning. By reducing our footprint, improving relations with stakeholders and neighbors, managing impacts, increasing resource efficiency and developing new markets, Hydro will reduce risk and create new opportunities.

In developing a more holistic approach to sustainability we have quantified a set of ambitions towards 2030 that will improve our performance on climate, environment, business ethics, and social responsibility. We have ambitions to reduce our own environmental impacts and emissions in production, develop greener products, help our customers design more sustainable solutions and continue with our ambition to make a positive difference by strengthening local communities and our business partners. The sales transaction of Hydro Rolling to KPS Capital Partners announced in March 2021 will impact Hydro's targets and ambitions, and these will be reviewed during 2021.

The overarching goal of our climate strategy is to reduce the impact our operations have on the global climate. The climate strategy – "30 by 2030" – calls for a 30 percent reduction of own greenhouse gas emissions throughout the aluminium value chain by 2030. We will do this through greener sourcing and greener production, that will reduce the carbon footprint of the products we deliver to our customers. We have initiated a significant R&D program towards 2030 to look into different alternatives to achieve CO2-free processes. We will explore different paths such as carbon capture and storage, biomass anodes and carbon-free processes. By 2030 we expect to have a clearer view on a path to further significant GHG emission reductions by 2050.

In 2020, we expected no GHG emission reductions due to higher expected production. However, total GHG emissions were reduced by 9.1 percent compared to the climate strategy's baseline. About half of the reduction were due to improved performance, especially at the Alunorte refinery. The remaining reduction was due to significant reduced production across Hydro because of the Covid-19 pandemic.

The environment strategy for 2030 addresses the industry's key environmental challenges. Our goal is to mitigate emissions to land, water and air, conserve and restore biodiversity and reduce waste production. To achieve this, we strive to identify, monitor and reduce environmental risk throughout the lifetime of our operational sites. The

emphasis of the 2030 environmental strategy is continued rehabilitation at our bauxite mine in Pará, Brazil, reducing our tailings and bauxite residue footprints, recycling our spent pot lining and halving our non-greenhouse gas emissions (SO2, NOX and particulate matter) to air.

We recognize that we can only succeed if communities and partners around us succeed. With our social responsibility strategy we aim to make a positive difference by strengthening our business partners and the local communities where we operate. To deliver on this, we will target the fundamental drivers of long-term development and will contribute to education and capacity building for 500,000 people by end of 2030. Community dialogue and stakeholder engagement is the foundation of our work.

Social responsibility programs, initiatives and dialogue with local communities surrounding our operations continued in 2020. Due to Covid-19, all activities have adapted new measures. Where possible, activities have been moved to digital platforms, and infection prevention protocols are strictly followed for physical activities. During 2020, Hydro has approved and started implementing a revised Human Rights Policy and Supplier Code of Conduct, based on prioritized human rights risks to people.

In Hydro, we see diversity as a as a source of competitive advantage, as it encourages innovation, learning and better customer understanding. Through diversity and inclusion, we want all employees to know they are valued for their differences and that they contribute to the success of our business strategy. Hydro has established an ambition to increase the share of women employees to 25 percent by 2025, the share of women employees was 18 percent in 2020.

Our ambition is to prevent all injuries and ill health to avoid human suffering and we will work continually to avoid damage to property and loss of production. We continue to see high-risk incidents with a potential for fatality or permanent injuries or ill health, but at a lower level than previous years. We consider this the main leading indicator for our safety performanceFrom 2020, our emphasis has also been on the closing rate of actions related to high-risk incidents in our operations in 30 days. For 2020 we achieved a rate above 90 percent. We consider this one of the main leading indicators for our safety performance. The high-risk incident rate improved in 2020.

The number of total recordable injuries and associated rates improved over 2019 levels to a total recordable injury rate of 2.7 from 3.0.

Complying with laws, regulations, and Hydro's governing documents, and respecting human rights, is fundamental to Hydro's way of working and are considered key elements to the company's license to operate.

Hydro's certified product brands CIRCAL and REDUXA, set a new standard for low-carbon and recycled aluminium, and commercialize the company's sustainability position. Customer feedback and order intake underline the potential for these types of products that represent exciting opportunities moving forward. Hydro is a founding member of the Aluminium Stewardship Initiative (ASI) and has currently certified 61 sites according to the ASI Performance Standards, covering the value chain from bauxite mining to finished products. ASI sets standards for responsible production throughout the aluminium value chain and covers issues like climate change, biodiversity, human rights etc. Most of the sites are also certified according to the ASI Chain of Custody standard which allows Hydro's sites to sell ASI certified material to our customers. Hydro is currently the aluminium company with most certifications globally, and has certified all fully owned production sites in Europe according to the ASI Performance Standard and the ASI Chain of Custody standard.

For a description of Hydro's policies, commitments, goals and targets, responsibilities, resources, grievance mechanisms related to sustainability, see Viability Performance and Viability Performance Statements. Hydro reports according to the GRI Standards, and the reporting is based on a materiality analysis.

2020 Status and targets

	Safety	Socialresponsibility	Biodiversity
Driving sustainability	TRI rate 2.7 FY 2020	100,000 2030 2018	On track 2020
	Ambition: Zero fatalities and injury free work environment	2030 target: Contribute to education and skills for 500,000 people	Target: rehabilitate available mined areas within two hydrological cycles1)
Climate	Businessintegrity	Greener products	Environment
GHG emissions -9% compared to strategy baseline2)3) 2030 target: 30% reduction in GHG emissions	76% Integrity culture index Ambition: high employee perception of a culture of business integrity	16.000 mt CIRCAL produced FY 2020 combined 2020/21 target: 65,000 mt in total	Tailings dry backfill methodology developed and tested 2030 target: addressing the industry's key environmental challenges

1) This is known as the 1:1 target

2) Baseline emissions 13.3 million metric tonnes CO2 equivalents and includes direct and indirect emissions (scope 1 and 2).

* Targets may be subject to revision following the Hydro Rolling transaction.

Viability performance

87 Viability The Hydro Way
89 Energy and climate change
91 Environmental impact management

86 Annual Report 2020 Viability performance Hydro

95 Integrity and compliance
99 Human rights and community impact
107 Organization and work environment
109 Innovation

Quick overview

This chapter includes relevant information related to Hydro's approach to environmental and social performance as well as innovation.

More quantitative information is included in the Viability performance statements later in this report. It consists of Hydro's environmental and social statements with notes.

We have an integrated approach to our reporting, and our Viability performance should be seen in context with the other parts of Hydro's Annual Report 2020.

Hydro reports in accordance with the GRI Standards' "Core" option. Please see our GRI index at www.hydro.com/gri

Viability - The HydroWay

The Hydro Way is our approach to business. It's an approach that has lived within Hydro since 1905 and guided our development over the years. The Hydro Way originates from our company's identity – our unique set of characteristics – and constitutes a way of doing things that differentiates us from other companies. The Hydro Way was updated in 2018.

The Hydro Way explains how we run our business through:

Our purpose
Our values
Our operating model

These principles help us set priorities and serve as a reference point when questions arise. Our purpose is supported by our values and defines how we conduct our business:

Hydro's purpose is to create a more viable society by developing natural resources into products and solutions in innovative and efficient ways.

In order to ensure a uniform high standard, Hydro's constituting documents and global directives lay down requirements for our operations, see page 131.

All elements of Hydro's viability performance are integrated in Hydro's overall group strategy. In addition, we have specific support strategies e.g. on climate change, environment and people - as described in this section.

Hydro has been listed on the Dow Jones Sustainability Indices (DJSI) each year since the index series started in 1999. We are also listed on the corresponding UK index FTSE4Good, and the UN Global Compact 100 stock index.

Our reporting approach

We have based our viability reporting on The Hydro Way since 2004. Together with risk analysis and an extensive stakeholder dialogue we have defined the main elements of our reporting:

Energy and climate change
Environmental impact management
Ensuring a culture of compliance and integrity
Human rights and community impact
Organization and work environment
Innovation

We use the GRI Standard 101 (2016) in defining which lowerlevel topics and indicators that are material to report upon. The analysis is also based on our continuous stakeholder dialogue with key stakeholders and collected and evaluated by relevant specialists and leaders. The materiality analysis is updated annually, to reflect internal and external developments, and approved by Hydro's Corporate Management Board.

The most material aspects related to our viability performance are all included in the Board of Directors' report, which gives a high-level overview of Hydro's strategic direction, strengths and challenges. This information is further elaborated in other parts of this annual report and in the GRI index at www.hydro.com/gri

The information has been reviewed by Hydro's Corporate Management Board, which has also approved this annual report. The board of directors has approved the complete Board of Directors' report including the country-by-country report and the modern slavery transparency statement. Read more about our reporting principles and materiality process on page 231.

The Viability performance section should be read in context with the other parts of the annual report, in particular:

Letter to shareholders on page 8
Board of Directors' report on page 12
Business description on page 40
Performance and targets on page 74
Risk review on page 112
Corporate governance on page 130

In 2019, Hydro launched a new strategic agenda aiming to lift cash flows and returns with extensive improvement and restructuring efforts across its business areas, while highlighting sustainability as a basis for the company's positioning, see more on page 74.

The underlying details in the reporting are based on different reporting frameworks that are important to us, including the UN Global Compact, the GRI Standards, the International Council on Mining and Metals' (ICMM) 10 principles and Position Statements and the Aluminium Stewardship Initiative's (ASI) 11 principles and underlying criteria. The GRI index at www.hydro.com/gri also shows Hydro's adherence to the UN Global Compact, ICMM and how we relate to ASI, UN Sustainable Development Goals and UN Guiding Principles on Business and Human Rights - and shows how the different frameworks connect with each other.

Hydro's materiality analysis 2020

Influence on

stakeholder

assessment and

decisions

Topics are prioritized in four quadrants, but not prioritized internally in each quadrant

• Conflict minerals (HD) • Employment • Formal labor management relations • Indirect economic impact • Local workforce and wage • Political contributions • Transport	• Anti-competitive behaviour, anti corruption and data privacy • Bauxite residue and tailings management • Biodiversity • Closure planning • Diversity and inclusion • Emergency preparedness and response • Energy, GHG emissions and other emissions • Health, safety and security	• Human and workers' rights • Impact on local communities • Organizational capabilities and culture • Pandemics (HD) • Product quality and liabilities • Innovation (HD) • Supply chain management • Water
• Artisanal and small scale mining • Banned and disputed products	• Customer satisfaction • Effluents and other waste • Materials

Significance on economic, social and environmental impacts

The matrix is based on the GRI Standard 101 Foundation 2016 and has been approved by Hydro's Corporate Management Board. The green topics represent those that are most material to Hydro, while topics that are strikethrough, are considered not material. We have chosen to merge and rename certain aspects in the matrix to make the titles more relevant to Hydro and thus also more intuitive to our stakeholders. An overview of these changes can be found on www.hydro.com/gri

The main changes compared to 2019 are:

• Anti-competitive behavior, Anti-corruption and data privacy have been merged into one topic in the materiality matrix

Bauxite residue, tailing and dam safety renamed Bauxite residue and tailings management, in line with Brazil report
Diversity and equal opportunity renamed Diversity and inclusion
Emergency preparedness and security renamed Emergency preparedness and response
GHG emissions and energy renamed Energy, GHG and other emissions, in line with Brazil report

• Occupational health and safety renamed Health, safety and security to also include community health and security

• Individual and organizational development renamed Organizational capabilities and culture. Topic includes learning, leadership and succession planning. Moved to most material topics.

• Pandemics added as one of the most material topics. The topic also influences topics such as emergency preparedness, impact on local communities, health, safety, security and compliance

• Innovation and design thinking renamed Innovation

• Fines and other sanctions have been removed as material topic as it is a consequence of other topics

• Tax as topic is deemed material, and is part of the broader topic "Indirect economic impact"

Topics marked (HD) are defined by Hydro in addition to the GRI defined topics.

Energy and climate change

Alumina refining and electrolysis of primary aluminium are energy-intensive processes, and constitute the majority of Hydro's greenhouse gas (GHG) emissions. The energy source is a decisive factor for total as well as specific emissions, i.e. emission per tonnes product produced. On the other hand, aluminium can save significant amounts of energy and GHG emissions in the use phase due to its lightweight properties.

Climate change

Hydro's overarching ambition towards 2030 is to reduce the global climate impact of our value chain through greener sourcing, greener production and greener products. We aim to reduce our own emissions by 30 percent in 2030 and explore different paths towards further significant emissions reductions by 2050. Through greener sourcing and greener production, we also aim to help our customers in reducing their emissions through providing greener products.

Our strategy puts emphasis on reducing own emissions. Changes in our production portfolio might influence these targets, but our aim is still to reduce our specific emissions, i.e. per ton produced. We have set targets to reduce greenhouse gas emissions by 10 percent by 2025 and 30 percent by 2030, based on a 2018 baseline (2017 for Paragominas, Alunorte and Albras due to the production embargo at Alunorte and curtailment at Albras and Paragominas). The baseline emissions equal 13.3 million tonnes CO2e and includes direct emissions and indirect emissions from electricity generation (scope 1 and scope 2 emissions). The Hydro Rolling transaction will impact the strategy baseline, see page 18.

In 2019, Hydro signed a USD 1,600 million revolving multicurrency credit facility with the margin linked to Hydro's greenhouse gas emission target. The margin under the facility will be adjusted based on Hydro's progress to meet its target to reduce greenhouse gas emissions by 10 percent by the end of 2025, and is linked to annual reduction targets. In 2020, we expected no emission reductions due to higher expected production. However, total emissions were reduced by 9.1% compared to the climate strategy's baseline, thus meeting the required target for 2020. About half of the reduction were due to improved performance, especially at the Alunorte refinery. The remaining reduction was due to significant reduced production across Hydro because of the Covid-19 pandemic.

Innovation and technology development are key enablers towards reducing CO2 emissions. We have initiated a significant R&D program towards 2030 to look into different alternatives to achieve CO2-free processes. We will explore different paths such as carbon capture and storage, biomass anodes and carbon-free processes. By 2030 we expect to

have a clearer view on a path to further significant emission reductions by 2050.

The element greener sourcing in the climate strategy, refers to Hydro's position as a purchaser of raw materials and energy. Hydro aims to source less carbon-intensive electricity and aluminium metal with a lower carbon footprint. We also aim to increase the use of post-consumer scrap in our metal production.

Hydro's footprint with 70 percent of primary production from renewable electricity and the low carbon aluminium brands Hydro REDUXA and Hydro CIRCAL differentiate our product portfolio from many peers' and support both margin and volume growth. Hydro earns additional premiums or volume commitments on its low carbon products, and many customers choose Hydro's aluminium due to its low carbon footprint.

Demand for low carbon aluminium products increased in 2020 and is expected to grow in 2021. Hydro will make key capacity investments over the medium term to ensure our recycling portfolio can facilitate the increasing demand for Hydro CIRCAL.

Reaching our 2030 climate ambition will result in an even lower carbon footprint from our products. This is reflected in the ambition to deliver REDUXA 2.0 with a carbon footprint of less than 2 tons of CO2 per ton of aluminium by 2030.

Hydro's climate strategy is an integral part of our overall business strategy, aiming at driving improvements and development within the company. Impact on the climate strategy is also a criterion for all significant investment decisions. The strategy includes reducing the climate impact of our operations as well as taking advantage of business opportunities by enabling our customers to do the same.

Since 2013. Hydro's ambition has been to be carbon neutral in a life cycle perspective by 2020. This was achieved in 2019. Please see Hydro's Annual Report 2019 for more information on the previous climate strategy.

Hydro is a signatory to the Task Force on Climate-Related Financial Disclosures (TCFD). See page 274 for more information.

Using viable energy sources,reducing emissions and energy consumption

The overall carbon footprint of primary aluminium is highly dependent on the source of energy used to produce the metal. The energy source available is a determinant for localization of Hydro's investments and for the carbon footprint of the metal produced. More than 70 percent of the electricity used in Hydro's production of primary aluminium is based on renewable power.

In order to ensure continued supply of renewable power to Hydro's operations in Norway, we operate 39 hydropower plants with a combined installed capacity of 2.663 MW. Adjusted for ownership shares, our captive hydropower production is 9.4 TWh in a normal year. On December 31, 2020, Hydro and Lyse merged part of their respective hydropower production assets to create a new hydropower company. The new company - Lyse Kraft DA - has a normal annual power production capacity of 9.5 TWh, of which Hydro owns 25.6 percent and Lyse 74.4 percent. In addition, we operate a windfarm and purchase more than 9 TWh of renewable power annually in the Nordic market under long term contracts. For more information please see Energy in the Business description section in this document.

The Qatalum aluminium plant in Qatar has natural gas as its energy source. The International Panel on Climate Change (IPCC) recognizes natural gas as an important transition fuel that can help reduce global temperature increases. Hydro owns 50 percent of Qatalum. Our share of Qatalum's production represents about 15 percent of our total primary aluminium production capacity.

Energy efficiency is an important part of Hydro's ongoing efforts to reduce costs and air emissions. Our alumina refinery in Brazil, Alunorte, is among the most energyefficient refineries in the world. Switching part of our fuel oil consumption at Alunorte to more cost-efficient natural gas with lower emission is an important enabler to reach our emission reduction targets. The project is on track to reduce emissions by 600 thousand tonnes CO2e by 2025. In addition we are planning to install three electrical boilers, with a potential to reduce emissions by further 400 thousand tonnes of CO2e by 2025.

Average electricity consumption at our consolidated production sites was 14.1 kWh per kilogram primary aluminium produced in 2020. The global average was 14.3 kWh in 2019. The Karmøy technology pilot in Norway is currently testing Hydro's next generation smelter technology with potential electricity consumption reductions of 10-14 percent, see section Innovation, page 109. The Karmøy technology pilot is testing this technology on an industrial scale.

ReducingCO2 emissionsthrough the use of our products

Aluminium has significant carbon footprint benefits in its use phase, especially due to its lightweight properties. As Hydro has limited production of end-consumer goods, the calculation of use-phase benefits can only to some degree be based on product specific data. We therefore use acknowledged, independent LCA (Life Cycle Assessment) studies to calculate the use-phase benefits in combination with product shipment data. Use-phase benefits can best be documented in the automotive sector.

We work closely with customers to develop products that save energy and reduce emissions. Examples include lighter transportation, better packaging to reduce cooling needs and food spoilage, and aluminium façades that lead to lower operating costs and enable buildings to generate as much energy as they use during operation.

In 2019, we launched the two low carbon aluminium brands Hydro REDUXA and CIRCAL which comes with a guarantee of low carbon footprint and high recycled content of postconsumer scrap.

Increasing recycling of aluminium

The inherent properties of aluminium make recycling attractive. It can be recycled infinitely without degradation in quality, and recycling requires 95 percent less energy than primary aluminium production.

Hydro is a large remelter and recycler of aluminium. We remelt process scrap from our own production and from other companies, as well as post-consumer scrap from the market.

During 2020 we performed a strategic review of our recycling activities and set a growth ambition to double the postconsumer scrap recycling capacity to more than 600 thousand tonnes per year by 202515. To deliver on the growth ambition we established a center of excellence for recycling in Hydro Aluminium Metal to bundle competence and develop necessary capacity supporting all business areas in their growth ambitions.

A new recycling line at our Azuqueca plant in Spain was commissioned and ramped up in 2020. It is modelled as a next generation of our recycling facility in Clervaux, Luxembourg. This, in combination with an upgrade at Clervaux and the remelter Deeside, UK, added up to 30,000 tonnes of post-consumer scrap recycling capacity.

We have further improved processes to combine clean scrap with post-consumer scrap recycling. The technology is rolled out to Hydro's remelting and recycling plants. These investments will increase our post-consumer scrap capacity by up to 20 percent at each plant. Hydro's patented technology in scrap shredding and sorting is under further development, making it possible to produce high-quality extrusion and sheet ingot from post-consumer building and automotive scrap. Our Hydro CIRCAL product line offering aluminium with 75 percent post-consumer scrap has among the lowest carbon footprint in the aluminium industry. In 2020, the recycling sites were partly curtailed due to Covid-19, still, the CIRCAL capacity was fully utilized during the periods of operation.

To further develop the sorting process of aluminium scrap into alloys, we installed a pilot line in the R&D center in Bonn, Germany, in 2017. To develop a proven business case for further investments across Hydro's business areas, we installed an industrial pilot line at Hydro's scrap sorting facility St. Peter in Germany. Start of production was delayed due to Covid-19 to June 2020. We are now working on improvements of the pilot LIBS – Laser Induced Breakdown Spectroscopy – sorter to increase throughput and quality. Also, we have started on developing a Hydro LIBS sorting machine that will be more flexible on raw materials with a much higher throughput and more consistent quality of the sorted product. The idea is to sort post-consumer scrap back into its original alloys for remelting in Hydro casthouses.

Environmental impact management

The goal of our 2030 environmental strategy is to minimize our impact along the aluminum value chain by addressing the industry's key environmental challenges. We aim to do so by driving rehabilitation at our bauxite mine, developing and implementing sustainable management solutions for our tailings and bauxite residue streams while reducing our waste to landfill from our downstream operations and significantly reducing our non-GHG emissions to air.

Hydro's bauxite mining and alumina refining activities in Pará in Brazil, in the Amazon basin, include surface mining and the handling of significant amounts of tailings and bauxite residue, the latter also known as red mud. Land and water body conservation and restoration is of particular importance for Hydro's bauxite and alumina operations in Pará state in Northern Brazil and for Hydro's hydropower operations in Norway, please see section Operations – Energy on page 65. Hydro has primary aluminium production in Australia, Brazil, Canada, Germany, Norway, Qatar and Slovakia, where the main environmental impact relates to emissions to air and waste.

In addition to the existing climate and recycling strategies, we prioritize the following areas:

Ecosystems and biodiversity
Water
Waste and efficient resource use
Emissions to air
Product stewardship

¹⁵ Target may be subject to revision following the Hydro Rolling transaction, see page 18

Ecosystems and biodiversity

Hydro's only operated mine, the Paragominas bauxite mine, is located in the state of Pará in Northern-Brazil, in the Amazon Basin. Due to the nature of mining, Paragominas has an impact upon the landscape, that will affect the

ecosystems and biodiversity that exists there and must be managed in a responsible manner.

Area reserved for new tailings ponds is expected to be reduced as a consequence of the new Tailings Dry Backfill methodology.

When tailings dams are closed, they need to settle for at least five years before they will be available for rehabilitation. We will then get a new rehabilitation gap. This will differ from the rehabilitation gap that Hydro adds to on a daily basis as a result of its mining, due to the specific nature of tailings, and will require a tailor-made rehabilitation strategy.

To increase our knowledge and secure a science-based approach to rehabilitation, the Biodiversity Research Consortium Brazil-Norway (BRC) was established in 2013. Learn more about our partnerships on page 98.

Hydro uses three different methods for rehabilitation in Paragominas, based on different needs:

Traditional rehabilitation (plantation)
Natural regeneration of vegetation
Nucleation

Hydro has used nucleation in Paragominas since 2013. Topsoil is unevenly distributed to simulate natural landscape and trap rainwater. Piles of cut wood are distributed, creating shelters for animals and improving growing conditions for some plant species. The ambition is to establish a forest system of the same structure that is typical of the forest in the area and to restore as much biodiversity as possible. The method has been approved for testing in MRN and Paragominas by the relevant environmental authorities and is showing encouraging results.

All of our hydropower reservoirs are located within or in close proximity to national parks and other protected areas in mountainous regions in southern Norway, including Hardangervidda and Jotunheimen. We strive to minimize the potential environmental impacts associated with Hydro's operations including changes in aquatic and terrestrial habitats along the waterways and impact on recreation and tourism. See section Operations – Energy on page 65 for more information.

When developing new projects, we perform an environmental risk analysis as part of our impact assessment, following internationally recognized guidelines, see more on page 97.

Water

Our main interaction with water bodies comes as a result of discharges to the external environment, primarily in Brazil (to rivers) and Norway (to rivers, lakes and fjords). Where the authorities deem it appropriate, these discharges are regulated by relevant permits. Water withdrawal of groundwater from our own wells and through public water works may in addition have an effect on life below water.

Qatalum in Qatar relies on public water supply produced by desalination. Seawater is used for wet cooling towers at the power plant as well as for wet scrubbers at the potline fume treatment plants.

Our alumina refinery Alunorte in Brazil obtains a significant part of its water supply through the bauxite slurry that is transported from Paragominas by pipeline, reusing more than 80% of this water in the refining process. Paragominas' water use was close to their current regulatory limits. However, based on new hydrological studies of the Parariquara river, Paragominas' water extraction permits were revised in 2018. Water collection can still be an issue if a new third-party user requests water extraction from the same watershed. To address this, Paragominas has implemented actions to help increase water recycling within the operation and improve water storage capacity. To learn more, see note E4 to the environmental statements.

For more information about the impact of our water reservoirs related to hydropower production, please see Energy's business description on page 65.

Waste and efficientresource use

Our goal is to minimize the amount of waste produced, and then reuse or recycle it. When this is not possible, we shall deposit it in a secure way to minimize adverse effects to people and the environment.

Tailings and bauxite residue

Tailings from bauxite extraction consist of mineral rejects from the extraction process mixed with water and flocculants. The tailings at Paragominas are stored in dedicated tailings dams, where the particles settle. Run-off water is collected in a separate water pond and reused. The water pond prevents overflow to the river during heavy precipitation. The run-off water is monitored, and the water quality meets the requirements set by the authorities.

Hydro Bauxite & Alumina has initiated tests of the "Tailings Dry Backfill" at the Paragominas mine. This is an approach to minimize the amount of tailings stored, by excavating dried tailings from the storage facility and returning it to the mined areas before they are rehabilitated. The methodology eliminates the need for continuous construction or upgrade of new permanent tailings dams. The application of this approach represents the end of the use of large dams for permanent storage of bauxite tailings. The operating license was received in December 2020, and it has now been fully adopted into operations at the mine.

The dams and deposits are regularly inspected by Hydro and the Brazilian authorities. They have also been reviewed against international standards by external international geotechnical consultants, NGI and Geomecanica, in 2016 and 2019. Based on the output of the 2016 audit, an action plan was created for tailings storage facilities and dams at Paragominas. The recommendations have been addressed, based on priority, and, to date, 54 of the 56 identified actions have now been completed, with the remaining two actions expected to be addressed in 2021. In addition to this, independent third-party audits are performed twice a year, to comply with Brazilian regulations and maintain the stability certifications for each dam.

The tailings storage facilities at Paragominas are raised exclusively using the downstream elevation method, with the exception of one relatively short and low centerline raising at the very top of the dam. The downstream elevation method provides the greatest level of structural integrity and safety. In addition, the tailings stored in our Tailings Storage Facilities are of a higher solids content (ca 55-60 percent solids content) than that generally found in the iron ore industry (e.g. Samarco and Brumadinho).

Safe operations in compliance with regulatory requirements are crucial for Hydro. The Paragominas dams are stable and regularly monitored and audited by external experts. The dams meet all parameters of current environmental and mining legislation.

Hydro is also a 5 percent shareholder in Mineração Rio do Norte (MRN)16, where the tailings disposal process is designed to allow tailings to achieve a final solids content similar to that of Paragominas. MRN is the operator of the mine and is responsible for the management of its tailings system. Hydro works with MRN and the other shareholders through the board of directors and relevant technical committees to require the safe operation of MRN's tailings ponds in accordance with applicable laws and standards.

Hydro's tailings storage facilities and bauxite residue storage areas are operated in line with relevant regulations. For active storage facilities we follow voluntary best practice and audits are conducted by international third parties. Hydro is committed to implement the Global Industry Standard on Tailings Management (GISTM). Tailings facilities operated by Hydro with "Extreme" or "Very high" potential consequences will be in conformance with the Standard by 5 August 2023. Other tailings facilities operated by Hydro not in a state of safe closure will be in conformance with the Standard by 5 August 2025. In addition to the tailings dams at Paragominas and the bauxite residue deposits at Alunorte, Hydro has closed tailings dams in Schwandorf and Stulln in Germany that falls under the GISTM commitment. Hydro is a member of ICMM which is one of the three co-conveners of GISTM alongside UN Environment Program (UNEP) and PRI, an investor initiative in partnership with UNEP Finance Initiative and UN Global Compact.

Hydro participates in international collaboration projects investigating possibilities to use bauxite residue as a resource. See the section Innovation later in this report. Hydro has launched a new target to utilize 10 percent of bauxite residue generated from 2030.

Other waste and by-products

Waste is a by-product of the aluminium production process and is generated at all stages of the value chain. Our waste management approach is based on the mitigation hierarchy: finding ways to avoid, minimize and recycle waste rather than sending it to landfill.

Hydro aim to recycle 65 percent of our spent pot lining (SPL) by 2030, and find more sustainable solutions for our waste streams, identifying where they can be utilized as a resource. We have initiated a research project in collaboration with Alcoa with the aim to material recycle fist cut SPL.

SPL, or cathode waste, is generated from the electrolysis cells used in primary aluminium production. The production of SPL varies with the relining of electrolysis cells, which is normally done every 4-7 years for established aluminium plants. New plants will get relining peaks at the same interval after start-up. For information about SPL production, see note E5.2 to the environmental statements.

Since 2012, some of the anode waste has been used by Norcem cement plant in Brevik, Norway (part of Heidelberg Cement). The carbon material from Hydro is being used as an alternative fuel in the production process, where high temperature incineration ensures safe treatment of any hazardous components.

Hydro has an agreement with a refractory supplier to recycle part of the bricks coming from relining the anode baking furnace.

Qatalum has a temporary solution for handling SPL in cooperation with local cement plants. They are working to find a permanent solution.

¹⁶ Hydro has a 5 percent ownership interest and off-take agreements with Vale for a further 40 percent of the volume produced by MRN.

Albras has a significant stock of SPL. This is being reduced according to the annual plan and target, and being delivered to the cement industry in Brazil.

These agreements are examples of efficient resource use that is sound for the environment by substituting fuel or raw materials while reducing landfill and saving landfill costs.

Dross is a mixture of metallic aluminium, alloy components and metal oxides that is formed on the surface of liquid aluminium. Hydro's casthouses have treatment facilities to recover as much aluminium as possible from hot dross. The residual dross can then be sent to third parties to recover aluminium and reduce the total dross sent to landfill.

Hydro is also involved in the research project BADELand, that looks into recovery of valuable surplus bath components from aluminium electrolysis.

Several projects are in development that will further reduce waste-to-landfill in the medium to long term.

Emissionsto air

Emissions to air are a by-product of the aluminium production process and are generated at all stages of the value chain. Key air emissions from our operations include sulfur dioxide, nitrogen oxides, fluorides, polycyclic aromatic hydrocarbons, and particulates. Emissions to the external environment are minimized through treatment of the effluent gases prior to their release into the environment.

In addition to reducing our greenhouse gas emissions, Hydro has introduced a target to halve non-greenhouse gas emissions from fossil fuels (i.e. NOx, SOx, and particulates) by 2030.

Legacy management

Following 115 years of activities Hydro also has areas that are no longer used for industrial purposes. Managing such areas to safeguard the environment and nearby communities is an important task for us. We are reviewing such areas continuously to identify risks and actions needed.

The proposal to remediate the former Kurri Kurri aluminium smelter site was approved in December 2020 after a rigorous assessment by the New South Wales' Department of Planning, Industry and Environment (DPIE).

The project is primarily for construction of an onsite, engineered containment cell, and the transfer of the contents of an existing approved stockpile of mixed waste generated

during the 1970's and 1980's, the first decades that the smelter was in use. Several pockets of contaminated soil, along with some demolition and other smelter waste that cannot be reused or recycled, will also be placed in the cell.

The reuse of historic SPL as feedstock for cement production is progressing according to the plan.

Hydro has agreed to sell the site to a joint venture of local property and residential land developers Stevens Group and McCloy Group. The Kurri Kurri smelter was formally closed in 2014.

The Norwegian Environment Agency has required Hydro to clean up historical contamination in the Gunnekleiv Fjord by 2023. The work is progressing according to the plan. We are exploring alternative methods in cooperation with the relevant authorities.

For information related to Hydro's tailings storage facilites, please see page 93

Productstewardship

Hydro engages in dialogue with customers and other stakeholders regarding the environmental impact of our processes and products. We perform life-cycle assessments (LCAs) for all major product groups to identify improvement potentials. We also assess other aspects such as energy and material consumption, toxicity and recyclability.

Over the past two decades, Hydro and other aluminium companies have developed a pan-European network of national initiatives to promote and recycle aluminium packaging. Many of these national activities are emphasizing education and have developed projects with primary and secondary schools and universities to stimulate the next generation to make their contribution to a better environment.

Hydro is an active member of the Aluminium Stewardship Initiative. As of publication of this report, 61 production sites have been certified, covering Hydro's value chain from bauxite to finished products, see page 272.

Ensuring a culture of compliance and integrity

Hydro's board-sanctioned Code of Conduct creates the foundation that supports our efforts to do the right things and to always act with integrity throughout our global organization wherever we operate and conduct business on behalf of Hydro. It requires adherence to laws and regulations as well as internal constituting documents and

global directives and is systematically implemented and followed up through our compliance system.

In 2020, we reviewed the content and implemented a new system for all internal global directives to make them easier accessible for our employees and to ensure efficient governance.

Our compliance system is based on a clear governance structure defining roles and responsibilities regarding compliance and all compliance-related activities undertaken throughout the company.

The management of compliance risks, including risks related to corruption and human rights violations, are integrated in our business planning, enterprise risk management and follow-up process, including relevant risk-mitigating actions and key performance indicators. The progress of actions as well as any non-compliance matters are addressed in the quarterly internal board meetings that each business area has with the CEO, and an annual compliance report is submitted to the board of directors. The head of group compliance reports to the board of directors through the board audit committee at her own discretion. She meets with the board of directors periodically and participates in all board audit committee meetings.

Combating corruption and respecting human rights are integral to our supplier requirements, see page 103. Procedures are in place relating to assessing the integrity risk of business partners and detecting fraud. Regular transaction-based screening of customers and suppliers is also carried out, see note S10.5 to the social statements. In 2020, Hydro continued to evaluate its integrity risk management approach to ensure adequate management of relevant risks.

An integrity culture index was introduced in Hydro's employee engagement survey in 2020. The index benchmarked the employee perception of our integrity culture, measuring the tone from the top, within their department, their leaders, the comfort of speaking up and organizational justice, i.e perception of fairness. The overall score of the index was within the first quartile of the defined external benchmark, which was one of the KPI's of the CEO scorecard. The results, which identified strengths and weaknesses, provide us with a good basis for specific and tailored compliance activities going forward.

Hydro strengthened sanctions and trade compliance awareness by e-learning and tailored classroom training for exposed functions, and will continue also in 2021, please see note S10.4 for more information.

Hydro's global data protection procedure constitutes the company's binding corporate rules for data protection and ensures compliance with the EU General Data Protection Regulation (GDPR). It was approved by the relevant EU data protection authorities in May 2018. In 2020, we have continued to strengthen Hydro's data protection work, with a specific emphasis on clarifying roles and responsibilities. Designated data privacy coordinators appointed by and for the respective business areas and staff functions forms part of the data privacy network chaired by the head of data privacy. A special emphasis was given to data privacy as in

the compliance training provided by Group Compliance and Legal in 2020.

We are committed to building a culture of trust where employees are comfortable to ask questions, seek guidance, raise concerns, and report suspected violations. Normally, concerns and complaints should be raised with the employee's superior. However, if the employee is uncomfortable with that, he or she may raise the issue with human resources, HSE (health, safety and environment), a union/safety representative, compliance, legal or internal audit. The employee can also use Hydro's whistle-blower channel, AlertLine, where concerns can be reported anonymously. All employees and on-site contractors can use the AlertLine in their own language at all times via toll-free phone numbers, Hydro's intranet or through a dedicated address on the internet. In certain countries, e.g. Spain, there are, however, legal restrictions on such reporting lines.

In 2020, 224 cases were reported through the AlerLine channel. All cases reported through the AlertLine were assessed, and investigations were performed where relevant. In total, 4 people were dismissed as a result of reported breaches of Hydro policy in 2020, please see note S10.1 for more information.

The head of internal audit reports to the company's board of directors through the board audit committee. Every quarter, he informs the board audit committee and periodically the corporate management board about matters reported through the AlertLine. Hydro's internal audit has resources in Norway, Brazil and North America.

For more information about Hydro's performance on compliance, see note S10 to the Viability performance statements in this report. For information about alterations of certain test records in former Sapa, please see page 123.

Transparency

Transparency is key to creating a global level playing field as well as to safeguard the company's reputation. Hydro supports the Extractive Industries Transparency Initiative (EITI) and, since 2005, we have reported payments to host governments related to exploration and extraction activities for bauxite. We also comply with the Norwegian legal requirements on country-by-country reporting, see page 284. The report has been approved by Hydro's board of directors. In accordance with the UK Modern Slavery Act and Australia Modern Slavery Bill, we publish a transparency statement which is also approved by the board of directors, see page 302. In addition, we follow the Euronext guidelines to issuers for ESG reporting.

Hydro is a long-standing corporate member of Transparency International (TI) Norway and participates regularly in seminars with TI and by providing content to TI publications.

Stakeholder dialogue

Engaging with our stakeholders helps us understand what is expected of us, what is important to them, how we impact them and how we can solve common challenges. As a global company, Hydro participates in a wide range of activities, from local community meetings to national and international multi-stakeholder and industry association discussions. We are committed to interacting with all our stakeholders in an ethical and transparent manner. We strive to demonstrate integrity in everything we do.

Our dialogue and engagement covers a large number of stakeholders and individuals, such as unions, works councils, academia, customers, suppliers, business partners, authorities, industry associations, non-governmental organizations and local communities, including vulnerable groups. See figure on page 98.

We consult with interested and affected parties in the identification, assessment and management of all significant social, health, safety, environmental and economic impacts associated with our activities. For more information regarding stakeholder dialogue and human rights, see page 99.

When planning new projects, we map the environmental and social impact when relevant. Before major developments or large expansions are undertaken, it is a requirement to conduct an impact assessment, in line with internationally accepted standards. Both follow standards such as the International Finance Corporation Performance Standards, Equator principles and UN Guiding Principles on Business and Human Rights. This includes the principle of free, prior and informed consent when indigenous and traditional peoples are involved. The assessments follow the requirements regarding information, consultation and investigation of the project's environmental and social impact, including human rights, as well as action plan and proposed initiatives.

Dialogue with affected groups gives input to plans, detailing our environmental and social responsibilities. We strive to act in an open and credible manner, and gather views from interested parties, aiming for a common understanding of the decisions that are made.

Dialogue with the employees' representatives includes involvement at an early stage in all major processes affecting employees, and we have a tradition for open and successful collaboration between management and unions.

All business areas have a forum for dialogue between the management and union or employee representatives. Hydro's Global Framework Agreement was last updated in 2016. The parties are currently negotiating a new agreement. Grievance, or complaint, mechanisms are important to understand the impact of Hydro's operations, and the impact on the rights of individuals and groups affected by our operations. Grievances may be of any kind, including social and environmental issues, and can be made anonymously to Hydro through various mechanisms. For more information on human rights and grievance mechanisms, see page 99.

Hydro will not tolerate retaliation against anyone who speaks up in good faith to ask a question, raises a concern, reports a suspected violation or participates in an internal company investigation.

Portfolio changes

On March 5, 2021, Hydro entered into an agreement to sell its Rolling business to KPS Capital Partners for EUR 1,380 million (around NOK 14.2 billion) on an enterprise value basis. The sale of Rolling will enable Hydro to deliver on the 2025 strategy, strengthening our position in low-carbon aluminium, while exploring new growth in areas where our capabilities match global megatrends. The transaction includes seven plants, including the Neuss primary aluminium plant, one R&D center, global sales offices, and around 5,000 employees, of which 650 employees are in Norway and the remaining mainly in Germany. Hydro Rolling has been under a strategic review since September 2019. Dialogues with affected groups and stakeholders are part of the process, and employees' representatives are involved in all major processes affecting employees.

Owners Rio Tinto and Hydro have come to the joint decision of starting a consultation process to permanently close Dutch anode producer Aluchemie, as the highly competitive market situation and significant reinvestment needs in the facility make continued operations unviable. The close-down process will include consultation processes with employee representatives and unions, as well as key external stakeholders such as environmental authorities and landowner regarding the site remediation process. The plant is currently expected to close toward the end of 2021 and follows a thorough strategic review to explore alternatives to closing Aluchemie.

Hydro Extrusion has been undergoing an optimization of its large asset portfolio to identify ways to streamline its footprint and reduce costs supporting its improvement targets. During 2020 some extrusion plants were closed or divested, and in most cases, volumes have been transferred to other facilities. In the US, the closure of Belton and Kalamazoo was completed in first quarter 2020. In India, the plant in Pune was closed in June 2020. In Europe, several restructuring projects were completed in 2020, including the divestment of a plant in Romania and Santa Oliva in Spain, as well as the closure of Pinto in Spain. In addition, the sale of the Remscheid plant in Germany was signed in October 2020. Examples of dialogue with affected groups and stakeholders in this process in Europe are between the management and the communication body working committees in the business area, and the local work councils where these are present. In the US, there was a close dialogue between management and the affected parties, according to local terms and conditions. An employee support program was established, providing job opportunities and job search training.

Partnerships

Hydro works through industry and aluminium associations to establish a level playing field for global aluminium production. We support the development of international frameworks on climate change and greenhouse gas emissions and participate actively in organizations such as the World Business Council for Sustainable Development (WBCSD) and the International Emissions Trading Association to provide business solutions to the climate change challenge. In addition, we engage actively in initiatives fostering increased recycling and material stewardship and we are a founding member of the Aluminium Stewardship Initiative (ASI).

The ongoing loss of biodiversity and degradation of ecosystems represent long-term risks for the industry and society at large. We see a need for more sustainable frameworks and participate in several initiatives, including the WBCSD's Ecosystem Program. Hydro is a member of the International Council on Mining and Metals (ICMM), which gives us the opportunity to participate in the development of industry practices on the environment and to share best practices.

To increase our knowledge and secure a science-based approach to rehabilitation, the Biodiversity Research Consortium Brazil-Norway (BRC) was established in 2013. BRC consists of the University of Oslo and its Brazilian partners Museu Paraense Emílio Goeldi, Federal University of Pará and Federal Rural University of the Amazon, in addition to Hydro. The scope of the consortium is to create a research program connected to our mining operations. The aim is to strengthen Hydro's ability to preserve natural biodiversity and to better rehabilitate the areas where we

mine bauxite. Seventeen research projects are progressing, while more projects are in the pipeline.

To join forces in collective action is critical in the fight against corruption. Hydro has had a partnership with Transparency International for many years. Hydro is also a member of the Maritime Anti-Corruption Network (MACN), which provides valuable insight into the maritime industry an important part of our supply chain. Through Alunorte, Albras, Mineração Paragominas and Norsk Hydro Brazil, Hydro has been a signatory of the Business Pact for Integrity and Against Corruption since 2018. The Pact is developed by the Ethos Institute in partnership with global organizations such as the United Nations and the World Economic Forum, seeking to unite companies with the objective of promoting a more ethical market and to eradicate bribery and corruption in Brazil. Hydro is also a signatory to the World Economic Forum's Partnering Against Corruption Initiative (PACI).

Hydro has had a long-standing partnership with Amnesty International Norway since 2002. The partnership is based on human rights education and dialogue meetings on relevant human rights dilemmas. We also cooperate with the Danish Institute for Human Rights for external expertise to further develop, maintain and strengthen our approach to human rights. To contribute to the strengthening of human rights frameworks, we also participate in relevant forums, such as ICMM, ASI and UN Forum on Business and Human Rights.

Hydro is a Signature Partner of UNICEF Norway to contribute to quality education for children and adolescents. In 2020, Hydro supported the UNICEF program Upshift in India. Together with UNICEF, we also celebrated World Children's Day through an internal campaign to encourage children and young people to reimagine their future. For

information about our community investments and social programs, see page 105.

In addition, we cooperate with global and local industry organizations, NGOs and other organizations. See www.hydro.com for an overview of important partnerships. For information about how we collaborate with other institutions within R&D, please see the section Innovation page 109.

Public affairs and lobbying

Given the nature of our industry, Hydro is particularly involved in policies dealing with climate change, recycling, viable production and consumption, trade, energy efficiency, energy markets and infrastructure, health and safety in the workplace, competition and other framework conditions pertaining to our industry.

Hydro recognizes the value of engaging with public authorities and other stakeholders in relation to the development of various policy initiatives that impact our industry. We interact primarily with decision makers in countries in which we have significant operations, such as Norway, Germany, Brazil and the US, as well as with regional structures like the European Union institutions. These interactions are mainly related to securing competitive, stable and predictable industry framework conditions, taxes and legislation that affect our activities.

We promote our views on issues of importance either through direct interaction with public authorities and other stakeholders, or through various industry associations. These include the International Aluminium Institute, European Aluminium, Eurometaux, the Brazilian Aluminium Association, the U.S. Aluminum Association, the WirtschaftsVereinigung Metalle / Bundesverband der Deutschen Industrie, the International Council on Mining and Metals, the World Business Council for Sustainable Development, the Federation of Norwegian Industry, and more, see GRI Standards 102-12 and 102-13 at www.hydro.com/gri

In addition, we participate in think tanks, especially in Brussels, and engage regularly in discussions with various NGOs.

Most resources are dedicated to advocacy activities within the EU, Brazil, the US and Norway, through business associations, and direct dialogue with authorities and decision makers. When relevant, we are in dialogue with applicable tax authorities in Norway, the EU and Brazil. We may also discuss fundamental tax developments and issues with other enterprises.

We support the principles of free and fair trade, and efforts to create a global level playing field. In our advocacy, we also support the climate targets set in the Paris Agreement.

Hydro supports market-based solutions for pricing of carbon emissions, like the EU Emissions Trading System (ETS). A decisive part of the EU regulation is the ability to compensate for the extra cost occurring within the EU, in order to maintain competitiveness for global industries like aluminium.

The European Green Deal was announced by the EU Commission in 2019 and increased European climate protection targets 2030 were decided in December 2020. It is a roadmap on policies to achieve carbon neutrality in the EU by 2050 and includes policies to develop markets for lowcarbon and circular products, in combination with stricter targets for emission reduction. We see interesting opportunities in this roadmap as long as it is combined with competitive framework conditions.

Hydro is working to implement the requirements set out in the EU Taxonomy.

For information on spending on public affairs and lobbying, see note S12 to the Viability performance statements in this report.

According to our Code of Conduct, Hydro may not make financial contributions to political parties.

Human rights and community impact

Respecting human rights

Hydro recognizes that businesses have a responsibility to respect, support and promote human rights. We respect the human rights of all individuals and groups that may be affected by our operations. As an employer, owner and purchaser, an important contribution toward respecting human rights is to secure decent working conditions in our organization, in minority-owned companies and with our suppliers. Information pertaining to Hydro's human rights policies and compliance is regularly discussed with the board of directors, the Corporate Management Board, business area management teams, and relevant parties such as union representatives.

We do not tolerate any form of harassment or discrimination, including but not limited to gender, race, color, religion, political views, union affiliation, ethnic background, disability, sexual orientation or marital status. And we do not tolerate any form of forced labor or child labor abuse. We support the principle of freedom of association and collective bargaining. Hydro also supports key frameworks that define human rights principles and is committed to following these, including the UN Guiding Principles on Business and Human Rights and ILO's eight core conventions. For a full overview, see GRI Standards general disclosure 102-12 and 102-13 at www.hydro.com/gri. Hydro reports according to the UK Modern Slavery Act and Australia Modern Slavery Bill, see the Appendices to Board of Directors report.

Hydro's human rights management is based on the OECD Due Diligence Guidance for Responsible Business Conduct.

As part of the ongoing process to manage and improve Hydro's human rights impacts, we updated our Human rights policy and Supplier Code of Conduct in 2020. We also prioritized Hydro's major risks related to human rights (salient issues) and revised the mapping of risk

to people in our enterprise risk management process. A corporate coordination group was established to improve collaboration on human rights topics across the organization. The improvement work will continue in 2021.

Hydro's human rights management

Hydro's human rights management

Policy commitment and governance

Hydro's Human Rights Policy was last updated in 2020 and outlines the company's commitment to respecting and promoting human rights. The commitment is integrated in key procedures, including supply chain management, new projects, portfolio management, and risk management. The policy is approved by the Corporate Management Board and is available at www.hydro.com/principles

We have identified Hydro's major risks to people, the human rights salient to our operations and which we are most at risk of impacting:

Modern slavery, forced labor and child labor abuse
Principles of freedom of association and collective bargaining
Freedom from discrimination and harassment
Decent working conditions
Right to privacy
Right to health
Right to safety
Rights of vulnerable individuals and groups
Access to information, dialogue and participation
Rightful, respectful and lawful resettlement, relocation and repossession

Implementation of governing documents, processes and procedures that concern the respect for human rights is a line management responsibility. Human rights risk can be addressed in the business areas' Sustainability committees or similar fora. Information pertaining to Hydro's most severe human rights risks is communicated to the board of directors, the Corporate Management Board, business area management teams, and relevant parties such as union representatives.

Human rights responsibilities are part of Hydro's Code of Conduct, which is translated into 19 languages. Training on the Code of Conduct is provided to employees. In addition, more specific training on relevant human rights topics is provided to relevant functions and locations. Elearnings on Hydro's Social responsibility, including human rights, is available to all employees. For more information, see note S10.4 to the Social statements.

Due diligence: Identifying, assessing, acting, monitoring and communicating impacts

Human rights due diligence is integrated in relevant business processes including the enterprise risk management process. Mitigating actions or activity plans are developed and included in business plans in the business areas where relevant. Business plans are monitored, followed up and evaluated through the year in regular internal board meetings. Human rights and other sustainability related issues are discussed when relevant.

In line with our risk-based approach, we aim to conduct more thorough stand-alone human rights impact

assessments with mitigating action plans where there is a higher risk for adverse impacts.

Before new projects, major developments or large expansions are undertaken, we aim to conduct risk-based environmental and social impact assessments, when relevant, which include evaluating risks for adverse human rights impacts. We are guided by The IFC Performance Standards on Environmental and Social Sustainability in doing so. For more information see page 97.

Rightsholder and stakeholder engagement

When relevant, we consult parties that might be significantly impacted by our activities.

We engage and collaborate with stakeholders both internally and externally when relevant to help inform us about, and evaluate the effectiveness of, our human rights management. This may include NGOs, unions, local associations, authorities, etc. For more information about our partnerships, see page 98.

Where relevant, and in line with our risk-based approach, we have regular dialogue with communities, and more frequent and structured dialogue in communities with higher risk of facing adverse human rights impacts. We develop and plan community dialogues in collaboration with affected communities, based on their needs and expectations. Community members close to our sites in Brazil and at several other major sites are invited to plant visits on a regular basis. For more information about stakeholder dialogue, see page 97.

Grievance mechanisms and remediation

To help facilitate informed and effective participation with people who are potentially affected by our operations, we establish or facilitate access to effective grievance mechanisms where relevant. We encourage, and will not retaliate against, individuals who in good faith raise concerns regarding Hydro's respect for human rights. Hydro is committed to not interfere, retaliate or hinder access to judicial or non-judicial grievance mechanisms.

In countries with higher risks for adverse human rights impact to communities, according to our risk-based approach, we aim to have local community-based grievance mechanisms.

In situations where we identify adverse human rights impact that we have caused or contributed to, we work to cooperate in, promote access to and/or provide fair remediation.

We have several grievance mechanisms depending on stakeholder groups. Employees and contractors can use the companywide AlertLine for reporting concerns involving illegal, unethical or unwanted behavior. For more information see page 95.

Grievance mechanisms for community members can have different approaches depending on local needs. At many of our sites, we collect information and complaints through community dialogue. In Brazil, we use several channels, including Canal Direto (toll-free phone number and email) and dedicated, specially trained field workers. Online contact forms are also available and can be used anonymously.

Other stakeholders, including customers, suppliers and other business partners can contact us with complaints through online contact forms. All mechanisms can be used anonymously unless prohibited by local legislation. We are aiming at further improving the accessibility of our grievance mechanisms.

Managing human rights risks

We monitor Hydro's major risks to people and recognize that there are potential risks of adverse impacts concerning our operations, mainly in Brazil and in the Middle East, as well as in our supply chain in general. For more information about sustainability in the supply chain, see page 3. Below are some examples of how we manage human rights risks.

Brazil

Several positive impacts have been identified, including the contribution to direct and indirect job creation in the region, considerable improvements to health and safety at our plants, and healthcare and access to education for our employees. The due diligence points to important groundwork already underway to strengthen systems for anti-discrimination and diversity, strengthen our knowledge related to traditional communities in the municipalities where we operate, and strengthen environmental information to the public. Some of the main suggestions for improvements include better internal implementation and awareness on Hydro's Human rights policy, and strengthening the local grievance mechanism, Canal Direto, and security and dialogue with communities along the pipeline.

We acknowledge that several identified topics are complex and have historical relevance to the region. Some topics date back to before Hydro took over the majority shareholdings in 2011. Examples include the original land appropriation process by the authorities in the 1970s/80s to create the industrial area for Alunorte and Albras and settlements of financial compensation for Quilombolas communities in the Jambuaçu Territory. We are investigating further to understand the history and what influence we may have for

meaningful actions today in accordance with the UN Guiding Principles on Business and Human Rights (UNGP).

An action plan is under implementation, prioritized by severity for implementation by 2023. During 2020, we made progress in several areas. Examples include conducting human rights training for employees and for suppliers and improving human rights in the Bauxite & Alumina's Enterprise Risk Management and procurement processes.

CAINQUIAMA has since 2017 initiated five lawsuits in Brazil against Hydro entities. The matters brought forward by Cainquiama in the Netherlands are similar to the cases that are already ongoing before Brazilian courts and Brazilian authorities and earlier publicly reported by Hydro. The cases are related to allegations following the rainfall in the municipality of Barcarena in February 2018, incidents dating back to 2002, as well as the historic land appropriation process back to the 1970/80s. Hydro became the majority owner of Alunorte, Albras and Paragominas in 2011. For more information about the lawsuits, see note S10.2.

Through a more structured social dialogue we aim at further improving the relationship with local communities, institutions and local traditional communities. Due to Covid-19, dialogues in 2020 have to a large extent been moved to digital platforms, and infection prevention protocols are strictly followed for physical meetings to reduce infection risk. More than 800 dialogue meetings were conducted in 2020 with communities next to our operations in Pará state.

To better understand the perception of Hydro's reputation, the impact of our social initiatives and dialogue, and Hydro's relationship with the communities, a survey was performed in the seven municipalities we operate in. The baseline was conducted in early 2020 with a second survey conducted in late 2020. In the second survey, half of the respondents agreed to Hydro's social initiatives as being positive. This is a 13% improvement from the baseline survey. The surveys were part of the Corporate Management Board's KPIs in 2020. We will follow up with yearly surveys to monitor the perceived impact of our initiatives.

Unresolved issues remain related to identifying individuals directly impacted by the construction of a 244-km-long bauxite pipeline that crosses areas inhabited by traditional Quilombola groups in the Jambuaçu Territory in Pará. These issues relate back to the time before Hydro became owner, and the former owner of the pipeline is still the legal party. Hydro maintains its relations with Quilombola representatives through dedicated staff and is collaborating with Fundação Cultural Palmares to foster the dialogue and

establish a positive agenda within the Quilombola territory. The Fundação Cultural Palmares foundation is the Brazilian agency in charge of Quilombolas affairs.

As part of an integrated plan to remedy impacts along the pipeline, Hydro reached an agreement in 2020 with 61 families identified as directly impacted by the construction, but not covered under the legal agreement with the former owner. In addition, Hydro is currently working together with different stakeholders, including Quilombola communities, Fundação Cultural Palmares, State of Pará and INCRA to reach an agreement to support six community associations, and establish a fund for social investments for the Jambuaçu Territory that Hydro aims to contribute to. INCRA is the Brazilian agency in charge of land certifications, including Quilombola matters, as part of the environmental licenses.

Through the establishment of a fund for social investments, we will continue the Moju Sustainable Territory Program in the Jambuaçu Territory. The program supports local associations along the pipeline to strengthen their legal, administrative and governance structure.

In an area surrounding Hydro's operations in Barcarena and which is regulated for industrial purposes, illegal logging and irregular settlements have accelerated since 2016. We realize that we need to better understand the situation in collaboration with the relevant stakeholders, the municipality and civil organizations. In addition, allegations have been made by local groups about potential environmental impacts. See Note S10.2 Legal Claims to the Viability Performance Statements.

In Barcarena, the Community Environmental Emergency Brigade is part of Hydro's emergency preparedness plan. The brigade includes representatives from local communities hired by Hydro and trained in how to protect and support the community in case of an emergency. They are also trained to help oversee and report on the security and safety of Hydro's assets, especially from the community perspective. In 2020, the brigade also provided information to local communities about infection prevention protocols to help combat Covid-19 and the spread of misinformation related to Covid-19.

In the municipality of Oriximiná in Pará, Brazil, where the MRN bauxite mine is located, there is an ongoing dispute between Quilombola communities and Brazilian authorities regarding title to land owned by the federal government. The territory claimed by these communities encompasses certain areas that are planned to be mined by MRN in the future, but MRN is not a legal party in this conflict.

Concerns have been raised about traditional peoples' rights during the process for the mine expansion. Hydro engages with MRN through its board of directors and committees to request that the scope of the planned environmental and social impact assessment (ESIA) and Quilombola consultation processes for the expansion project comply with local, national and international standards. MRN is currently engaged in understanding and responding to local stakeholder expectations regarding concerns over the impacts of MRN's operations on local communities.

MRN is engaged with stakeholders and supports the Sustainable Territories Program, a social program to promote long-term development of traditional communities in Oriximiná. In 2020, MRN put in place measures to reduce the spread of Covid-19 including providing medical equipment and food to local Quilombola and other traditional communities.

Qatar

At the primary aluminium producer Qatalum, a joint venture where Hydro holds 50 percent, the large majority of employees are migrant workers. Qatalum strives to secure good working conditions for its employees and to follow up the conditions for contracted workers. GIEK (Norwegian Export Credit Guarantee Agency) conducted a review of the social responsibility performance in 2019. Qatalum has followed up on the recommendations identified. Some recommendations have been delayed due to travel restrictions during Covid-19. In 2020, Qatalum put in place measures to limit the spread of Covid-19 among its employees and for contracted workers. This included information campaigns and steps to reduce mobility such as home office, shift changes, etc.

Other countries

We have conducted several social responsibility reviews of contractors in Norway in relation to new construction projects. The purpose has been to ensure basic human rights for the migrant workers employed by contractors in the projects at the primary aluminium producers at Husnes, Karmøy and Sunndal in Norway. The Covid-19 situation required extra attention on routines for quarantine, living conditions for the workers, and their health. No major issues were identified.

In Canada, Hydro's part-owned primary aluminium producer Alouette is in regular dialogue with representatives of the Innu First Nation community in its vicinity.

We also have more limited operations in other countries where there is an increased human rights risk, including China, Mexico and India. We track the human rights developments in these countries and seek ways to mitigate our impact when and where relevant.

Responsible supply chain

Hydro has more than 30,000 active suppliers globally. Most are located in the same countries as our production facilities.

process. The requirements cover issues related to business conduct including anti-corruption and bribery, human rights, health, safety, environment and climate.

The requirements set out in Hydro's Supplier Code of Conduct are based on international standards, including UN Global Compact, the ILO core conventions, UN Guiding Principles on Business and Human Rights and other UN documents and instruments. The Hydro Supplier Code of

Conduct was updated in 2020 to be more specific on several of the requirements than the former version. The changes are based on international standards Hydro is committed to and more requirements have been included, e.g., data privacy, minimum wages, alert line and conflict minerals.

The principles set out in the Hydro's Supplier Code of Conduct are made binding through contractual clauses, to ensure suppliers and business partners reflect the values and principles that Hydro promotes. Standard contracts also include clauses on auditing rights and the supplier's responsibility to actively promote the principles with its own suppliers/contractors and sub suppliers/subcontractors of any tier that have a material contribution to the supply of goods and services to Hydro under the contract.

Hydro's procedure for integrity risk management of business partners includes suppliers and customers, strategic partners and intermediaries/agents. It sets requirements for risk assessments and integrity due diligence when entering into a new business relationship or renewing an existing contract. Implementation is risk-based and takes into consideration contractual value, sector specific risk, human rights risk, corruption risk and more.

Suppliers, customers and other business partners registered in our main accounting systems are screened on a weekly basis against recognized international sanction lists. Furthermore, supplier audits and site visits are performed by Hydro personnel and external auditors based on risk analyses. See note S10.5 "Screening of business partners and supplier audits" to the Viability Performance Statements for more information

A non-compliance with or breach of the principles in Hydro's Supplier Code of Conduct that is not able to be corrected within a reasonable period may lead to termination of the supplier contract. In 2020, the Covid-19 situation had major impact on parts of our supply chain, and we implemented actions to support our suppliers in a challenging situation.

The major risk to people monitored in the supply chain are related to safe and decent working conditions, health, discrimination, freedom of association and collective bargaining. The risk of incidents of child labor abuse, compulsory or forced labor is also monitored. There have rarely been any findings of these severe risks in our supply chain the last years. We do, however, recognize a risk of forced or compulsory labor among suppliers in the Middle East, South America and Asia. This is addressed in our supplier screenings, supplier audits and regular dialogue with the suppliers.

In Norway, Hydro has an offtake agreement with Statkraft on power from the new Fosen wind power installation. The projects at the Fosen peninsula are located within Sami reindeer grazing land. Agreements on mitigating measures and compensation for extra costs during the construction phase have previously been entered into with the two affected reindeer herding groups. It has not been possible to reach agreements with the groups regarding measures and compensation for the operational phase. The High court determined the compensation for the herding groups related to the operational phase of the wind farms in June 2020. The ruling was appealed to and has been allowed for hearing by the Supreme court.

Hydro works to strengthen and improve suppliers' sustainability performance. This may be done through dialogue, sharing of knowledge, innovation processes, incentives or supplier development programs.

In Brazil, suppliers can apply to participate in a comprehensive, year-long supplier development program. In 2020, 21 supplier companies participated in the program totaling over 300 participants.

Hydro's supply chain

The figure shows Hydro's supply chain related to its value chain, and does not reflect the current organizational structure.

Socialresponsibility – strategy and targets

Hydro's social responsibility ambition is to make a positive difference by strengthening our business partners and the local communities where we operate. To deliver on this, we target the fundamental drivers of long-term development. In line with local stakeholder expectations and needs, and through strong partnerships, we aim to:

Contribute to quality education in communities impacted by our activities
Promote decent work throughout the value and supply chain
Foster economic growth in communities impacted by our activities
Strengthen local communities and institutions through capacity building on human rights and good governance

We have committed to contribute to quality education and capacity building for 500,000 people in communities impacted by our activities and for business partners from 2018 until end of 2030.

In 2020, we reached more than 59,000 people - compared to approximately 27,000 in 2019. Continuous improvement of current initiatives and development of new high-impact initiatives will be important going forward.

We have developed a methodology to measure the target to ensure consistency across the company. The insight from measuring the people reached and the impact of our initiatives make us better equipped to select and execute future initiatives with a positive impact.

Community investments and social programs

A key element in Hydro's social responsibility strategy is to strengthen the societies and communities where we operate. The way we do this differs from country to country and from community to community. The main contribution is generated from our operations through production and purchase of goods and services, direct and indirect job creation, and tax payments. We engage in capacity building through targeted programs, and we have partnerships aiming to further enhance the public's knowledge about Hydro and its operations. Hydro has corporate requirements on management of community investments, charitable donations and sponsorships.

Some of our community programs are linked to mining license requirements, while others are voluntary commitments. The programs target education, economic growth, decent work, capacity building and strengthening of institutions.

To support local communities, we organize volunteer programs at many of our production sites. The volunteer activities are based on local customs and needs. Many sites also support local communities through a range of sponsorships and charitable donations. Hydro Extrusions has a broad range of sponsorships and support programs.

Another important contribution is the transfer of competence that takes place through our cooperation with universities and research institutions. This includes the cooperation with three academic institutions in Pará, Brazil, and the University of Oslo through the Biodiversity Research Consortium Brazil-Norway. See page 98 for more information. In addition, we provide scholarships to selected PhD candidates doing research relevant for our business areas. Hydro is also sponsoring professorships in Norway and has several adjunct professors among its own employees. See also page 111 for further information.

Many social programs have either been put on hold or transferred to digital platforms due to Covid-19 in 2020. Several programs are linked to partnerships. See more about our partnerships on page 98. Below are some examples of the programs currently running.

Brazil

Hydro has significant operations in Barcarena, Brazil, including the Alunorte alumina refinery and Albras aluminium plant. Local social conditions are challenging, with high levels of unemployment and general poverty.

In Pará state, Hydro currently has 10 social programs across the seven municipalities where we have operations. Due to Covid-19, all programs have adapted new measures. Where possible, programs have been moved to digital platforms, and prevention protocols are strictly followed for physical activities. For each program we have an implementation partner. In 2020, the implementation partners met digitally to share knowledge and identify synergies to strengthen our partners and contribute towards the common goal of local development. In 2020 we also established initiatives to train community leaders in leadership and administration in the communities where we operate. Furthermore, we started a technical training program for community members along the pipeline to strengthen their job opportunities. See Hydro's Sustainability report for Brazil to learn more about the social programs and initiatives. We initiated the Sustainable Barcarena Initiative in 2018 and have continued developing it in 2020. The initiative is an independent platform for sustainable development in Barcarena in Pará state. The overall aim is to bring local stakeholders together to discuss challenges and opportunities, strengthen capabilities and ultimately invest in the social initiatives they plan and develop together. In 2019, we established the Hydro Sustainability Fund, which serves as a financing mechanism for the Sustainable Barcarena Initiative. Hydro is contributing BRL 100 million to the fund over a 10-year period.

In 2020, the fund established partnerships with USAID and the Partnership Platform for the Amazon's Solidarity initiative to strengthen initiatives in the Amazon region. In response to Covid-19, the fund together with these partners are financing income generation projects for local production of face masks, as well as strengthening of existing social projects for local farmers through the pandemic. In addition, a partnership between the fund, the Mitsui Fund and Instituto Peabiru will invest BRL 1.3 million to microfinance for local family-based manioc processing.

The fund launched its first round of financing in December 2019. Based on set criteria, BRL 765 000 has been allocated to projects that will support local associations, increase the capacity of community businesses and promote cultural events. The implementation is currently on hold due to Covid-19.

To support the preservation of the Amazon region, we run several programs that emphasize entrepreneurship and strengthening of traditional livelihood. This also includes environmental efforts and collaborations such as the Biodiversity Research Consortium Brazil-Norway. See page 98 for more information.

In 2020, over 600 employees participated in the volunteer programs organized at several of our locations in Brazil. The volunteers organized over 50 different activities including organizing food baskets, fundraising, seed planting and training for community leaders.

India

In Kuppam, India, where we have an extrusion plant, we continued developing a local educational program using tablets. We currently support two local learning labs through the program. Due to Covid-19, students have been given access to the learning apps for use on private tablets and phones so that the training and development can continue despite closed schools. A recent pilot to offer tablets to all community members was discontinued due to low participation.

In 2020 we started supporting UNICEF's "Upshift" program, a youth social innovation and social entrepreneurship program designed primarily for marginalized or at-risk young people. We currently support the program for school children in India in Karnataka and in Telangana.

United States

Hydro continued to support FIRST®, a mentor-based program to inspire young people to be leaders and innovators within science and technology. Employees volunteer their time to mentor a team. The teams use parts provided by Hydro to develop innovative solutions. Due to Covid-19, the number of teams participating declined and the material Hydro donated in 2019 covered the need of the program in 2020.

Covid-19 and socialresponsibility

While the health and safety of our employees are crucial in these times, Hydro also plays a role in the local communities where we operate and in the global effort to stop the pandemic and its effects.

Hydro established guidelines for community response to Covid-19 pandemic in March. They set out the importance of engaging with national, regional and local authorities including health authorities to understand how Hydro best can assist. Coordination and monitoring our response in regions with vulnerable health systems is an integrated part of Hydro's emergency response to Covid-19. Some examples of our efforts to date:

Supplying material and products to customers critical to fight Covid-19, including materials for field hospitals, ventilators, medical lighting, medical beds, etc.
Many plants across our global operations have contributed with protective gear or monetary donations to local hospitals, medical centers, local health organizations or local food banks.
Responding to suppliers that potentially are in a critical financial situation and implement actions where needed.
Donated NOK 500 000 towards UNICEF's Humanitarian Action for Children (HAC) Covid-19 appeal to support the most vulnerable affected by the pandemic

The social risk related to Covid-19 in northern Brazil is particularly high. So far, we have donated more than 18 MBRL to support related response initiatives for the local communities in close collaboration with authorities and municipalities. Examples include the construction of field hospitals, procurement of medical equipment and test kits for the municipalities, donation of water to a homeless shelter, and donation of food baskets to vulnerable communities. We have also donated property for field hospitals. Furthermore, we have introduced a range of initiatives to increase awareness and correct information on prevention in the communities with, for instance, support from the Community Environmental Emergency Brigade. We also strengthened the local grievance mechanism to manage concerns over the situation and to provide information on prevention. Also, volunteering activities were redirected to support local communities during the pandemic. We have, to the extent possible, continued social dialogue with communities to understand ongoing needs, and maintained activities linked to social programs through digital platforms. These have been important efforts towards the economic recovery of the communities.

Organization and work environment

A new people platform was rolled out in 2020 to enable standardized and digitalized global human resources processes throughout the employee's career path.

Hydro's common process for people performance and development includes an appraisal dialogue, individual development plan and follow up, as well as talent planning and succession management.

Our philosophy is that 70 percent of competence building is direct on-the-job training, while 20 percent is acquired via networking and mentoring and 10 percent via traditional training. We have a common platform for learning and development for employees. It is also the umbrella for all other faculties and academies in Hydro, such as the business systems, HSE, compliance, digitalization and leadership. One important goal is to make training more visible and easily accessible to leaders and employees. This includes an overview of available training and mandatory training modules that each employee should complete or has completed.

We offer new employees introductory training related to the organization and to their individual work tasks. This includes required knowledge within health, security, safety and environment. The most important development takes place locally, primarily with on-the-job training. A special training course, Hydro Fundamentals, targets leaders and specialists, giving them insight into Hydro's history, values, diversity, competitive landscape and businesses. A digital version is under development to significantly extend the reach of the program.

For information about Hydro's approach to diversity and inclusion, including information about our global employee engagement survey Hydro Monitor as well as information

about compensation, please see the appendix "Diversity & Inclusion" to the Board of Directors report on page 295.

Compensation

All employees shall receive a total compensation that is competitive and aligned with the local industry standard (but not market-leading). The compensation should also be holistic, performance oriented, transparent, fair and objective. Relevant qualifications, such as performance, education, experience and professional criteria, shall be considered when providing training, settling compensation and awarding promotions.

The annual bonus of Hydro executives shall reflect achievements in relation to pre-defined financial targets and achievements of operational and organizational key performance indicators (KPIs). Targets relating to safety, environment, corporate social responsibility, compliance and leadership expectations constitute a substantial part of the annual bonus plan. Please see note 9.1 and 9.2 to the consolidated financial statements for more information.

To learn about gender-related salary differences, see note S2.1 to the social statements. To learn more about Hydro's diversity and inclusion strategy and work, please see the appendix "Diversity & Inclusion" to the Board of Directors report on page 295.

Occupational health and safety

Hydro shall be a leading company in our industry in the area of occupational health and safety. This will be achieved through consistent implementation of the management system, with committed and visible leadership, and full engagement of all employees and others who work with us.

Our ambition is to prevent all injuries and ill health to avoid human suffering and we will work continuously to avoid damage to property and loss of production.

Hydro has developed a comprehensive health and safety management system which is based on Hydro's best practices and compliant with international standards.

We embrace digital tools where possible and have developed an advanced incident management system, self-assessment tools, risk management processes, etc. They are all easily accessible to employees. In addition, we have strengthened our behavioral tools using human performance techniques and the consistent use of peer -to -peer job observations.

The number of total recordable injuries and associated rates improved over 2019 levels to a total recordable injury rate of 2.7 from 3.0.

There were no life -threatening injuries during the year; however, there was one life changing injury at one of our North American facilities where a worker's right foot was surgically amputated after his foot was crushed when a heavy load fell from the forks of a forklift truck. Major incidents and near -misses are investigated, corrective actions implemented, and used in training and communication purposes to secure knowledge sharing.

The deployment of fatality prevention procedures and associated life -saving rules and behaviors continued in 2020 which contributed to a significant reduction in the number and rates of high -risk incidents and this process will continue into 2021.

From 2020, our emphasis has also been on the closing rate of actions related to high -risk incidents in our operations in 30 days. For 2020 we achieved a rate above 90%. We consider this one of the main leading indicators for our safety performance. The high -risk incident rate improved in 2020.

Our approach to improve occupational health is based on work environment risk assessments covering physical, chemical and psychosocial risks.

Hydro closely monitors the development of Covid -19 and has implemented control measures to help prevent the risk of infection and spread and its impact on employees and operations. Hydro has acknowledged the potential impact of Covid -19 on our employees' mental health and have held several webinars to provide tools to help build resilience and coping mechanisms in line with our mental health and wellbeing programs.

The CEO HSE Committee is the strategic decision -making committee for all main HSE -related matters in Hydro. The committee is led by President & CEO Hilde Merethe Aasheim and consists of the members of the Corporate Management Board and the head of HSE.

Security and emergency preparedness

Increased exposure in risk-filled areas and the global volatile risk picture in general have made us intensify our preventive efforts. We are committed to the protection of people, environment, physical assets, data and information and anticipate and prepare for potentially adverse incidents with crisis potential in order to maintain business and operational continuity.

To prepare for and respond to intentional, unintentional and/or naturally caused disasters, and to protect people and critical assets, we adapt and initiate security measures depending on the evolving risk picture. Our emergency preparedness plans enable effective response to high-risk incidents and crises ensuring an effective, cohesive, integrated and timely response to any business disruption, regardless of scale or complexity and its origin.

Security within Hydro is delivered and implemented through a pro-active security risk management process, which has a focus on analysis, to enable appropriate mitigating actions and accurate and timely decision-making. Security guards are employed on a regular basis to protect our personnel and assets. No armed guards are involved in our activities, however, there was one significant incident involving our security guards being fired upon while on patrol at one of our Brazilian sites. No security personnel were injured and resulting security mitigation measures were employed to protect personnel and prevent further incidents.

In 2020, we continued the progression to achieve certification for ISO 18788, a management system for private security operations, requirements and guidance. It is founded upon the Voluntary Principles on Security and Human Rights, and it will benchmark Hydro's security management system against the international standards. The process of certification is progressing with Hydro employed security teams in the USA and Hydro is also supporting our thirdparty security providers to achieve the same level of conformity in Brazil.

Hydro is responsible for infrastructure and functions on local and regional levels that might be critical to society's operability, and we operate large-scale production sites where a crisis could influence community interests and safety in general. Hence, we are subject to control and follow-up by relevant national authorities. We have emergency plans in place at the plant and business area level, and we train with these regularly.

In early 2020, we continued the program of conducting emergency and crisis management workshops with risk mapping at is core. The workshops help to link the process of emergency response, crisis management and recovery from the plant through to business area level and above.

One workshop was conducted before the Covid-19 travel restrictions was imposed. However, remote security and emergency training modules were developed, three of which are now on the companies e-Learning portal for all Hydro personnel. Other more complex remote emergency and crisis management training, incorporating lead and senior management teams is being developed for deployment early in 2021.

Employees are safeguarded through systems for travel planning, risk assessment and emergency preparedness. Our ability to respond quickly to incidents worldwide has increased through risk monitoring, incident-monitoring tools and a continuous development of competence.

Cyber risk assessment is an integrated part of Hydro's enterprise risk management system. This is to facilitate the Business Areas awareness of how cyber risks relate to their critical assets and operations.

Secure information handling is important to ensure Hydro's business continuity and reputation. Crucial computer systems are subject to surveillance and regulations. All personnel with access to sensitive information are bound to secrecy and required to handle information according to corporate guidelines and requirements.

Hydro's IS/IT infrastructure is a critical element in all parts of our operations, covering areas such as process control systems at production sites, central personnel databases and systems for external reporting. Cybercrime is increasing globally, and Hydro is exposed to threats to the integrity, availability and confidentiality of our information and systems. Threats may include attempts to access information, computer viruses, denial of service and other digital security breaches.

Hydro has launched several initiatives to increase the robustness of IS/IT infrastructure against malicious attacks by improving system infrastructure and by educating employees to develop and improve secure work processes and routines, and to understand how these threats can be prevented.

Innovation

Our R&D efforts are concentrated on:

Reducing energy consumption, waste, emissions and carbon footprint in line with Hydro's sustainability agenda
Making products and solutions that promote the use of aluminium and sustainable development
Implementing technology elements from the Karmøy Technology Pilot in order to optimize productivity, energy efficiency and emissions in smelters
Using R&D and technology to ensure optimal operations in existing assets, including cost and HSE
Improving environmental impact in Bauxite & Alumina, such as biodiversity, rehabilitation and utilization of bauxite residue
Developing recycling technology and low-carbon products based on post-consumer scrap, e.g. Circal
Increasing the share of value-added products and tailored solutions in collaboration with the customer
Utilizing the opportunities of Industry 4.0 to improve process stability, productivity, cost and safety

In the mature aluminium industry, the development cycles are long, with a need for highly skilled technology competence. This includes smelter technology, new aluminium alloys with special properties, lighter transportation, better packaging to reduce cooling needs and food spoilage, and aluminium façades that lead to lower operating costs and enable buildings to generate as much energy as they use during operation. At the same time, our downstream activities are continuously developing new solutions, together with customers. More and more, this collaboration reflects design thinking, bridging the gap from idea to solution.

Hydro's Technology Board consists of the members of Hydro's Corporate Management Board. The technology and innovation group meets every quarter to understand and discuss innovations in the business areas, including their value to the company. Innovations include the changes achieved through our continuous improvement work on all organizational levels. Business areas are responsible for their own technology development and for the execution of their respective technology strategies. A corporate technology office is established to ensure a holistic and long-term approach to Hydro's technology strategy and agenda. The Chief Technology Officer leads an internal R&D network with representatives from the business areas and supports the Hydro Technology Board in developing overall research and technology priorities and strategies.

A major advantage for Hydro from an innovation perspective is our broad knowledge and oversight of the entire value chain from bauxite mining, alumina refining, electrolysis of primary aluminium and alloy technology to finished products and recycling.

Our 75,000-tonne-per-year technology pilot at Karmøy (Norway), with the aim of full-scale industrial testing of our proprietary HAL4e technology, went through a complete validation test in 2020. The ambitious targets were successfully reached and operations are stable. The Karmøy Technology Pilot is producing the world's most climate- and energy-efficient primary aluminium.

We are now in the process of implementing the technology elements from the Karmøy Technology Pilot in our existing primary aluminium producers, improving performance and financial robustness. This includes the Husnes line B in Norway, which started production in 2020, and as a part of the regular maintenance and relining of our electrolysis cells in all smelters, where Sunndal presently has strong focus due to its importance in the smelter portfolio. Hydro has also started working on several initiatives to reduce direct CO2 emission in primary aluminium production.

Towards 2050 we are exploring different paths for low or zero carbon technology for aluminium production. We are partnering with several start-ups and academic environments to explore and develop technology for low carbon concentrations, like direct air capture and the emissions from our own primary production facilities. We are looking into projects to replace fossil carbon in our anodes with bio carbon, and while it appears challenging, we are part of two fundamental R&D programs supported by the Research Council looking into this. In addition, we are on track with our chloride feasibility project, supported by Gassnova, where we explore a new process based on aluminium chloride with zero CO2 emissions.

Tailings management and bauxite residue is a challenge in our industry. One example of our progress relates to the tailings dry backfill project. The application of this approach in Paragominas represents, if successful, the end of construction of new facilities for storage of bauxite tailings. Bauxite residue is a challenge in our industry due to its alkalinity and large volumes. Hydro participates in international collaboration projects investigating possibilities to use bauxite residue as a resource. An important example is with the Norwegian University of Technology and Science (NTNU), Sintef, Norcem/Heidelberg and Veidekke to develop a new type of concrete using bauxite residue as a resource to improve quality. We are also working with other aluminium companies through the International Aluminium Institute to solve this industry challenge. In addition, we are investing in R&D to reduce the total alkalinity of the bauxite residue.

Aluminium in automotive

The growing use of aluminium in the automotive industry is being driven by emissions regulations and passenger safety requirements. Aluminium is well suited for automotive due to low weight, good strength and formability, corrosion resistance, recyclability and its energy-absorption properties that can increase safety. Light-weighting is particularly important for electric vehicles with heavy battery packages.

This is creating new opportunities for Hydro. Applications include extruded aluminium frames and sub-frames, body-inwhite components, battery casings and sheet for hang-on parts such as car doors and hoods.

Hydro is a large supplier to the automotive industry. Customers include major producers in Europe, North America and Asia.

Hydro develops aluminium-based material concepts for battery technology from cathode foil to cell housing, up to integrated solutions for thermal management and battery modules.

High level of expertise

An important part of Hydro's technology strategy is to utilize our researchers, operators and other experts in optimizing the operations at our plants. The competence base in Hydro's technology environments is on a high level in general and world-class in several core areas. As a result, we emphasize using this competence in operational improvements. Examples are reduced energy consumption in casting furnaces, new cathode solutions for relining of electrolysis cells, improved blending tools for utilization of recycled materials, reduced emissions, and improvement projects related to quality and productivity.

Upstream, we prioritize our R&D and innovation efforts toward technology development and operational efficiency, while downstream, we concentrate on application and product development. Part of our work downstream is conducted together with customers, reflecting design thinking from idea to solution. Throughout 2020 we have prioritized more resources towards technology development that supports our ambitious sustainability targets on emissions, waste and circularity.

The President's Award aims to energize all employees by recognizing excellent work and best-practice sharing. Awards are presented each year within the areas of HSE, innovation, performance and technology development. Winners should clearly demonstrate the spirit of The Hydro Way, emphasizing Hydro's values. In 2020, Bauxite &

Alumina won the innovation award in the products and processes category for the tailings dry backfill methodology, and Aluminium Metal's planning and optimization tool for scrap blending won the innovation award for technology development.

To promote idea generation and innovation, Hydro's business areas have specific programs in place. For more information about R&D in the individual business areas, please see the section "Business description" in this report.

Cooperation with otherinstitutions

In Norway, we receive support from several public institutions to further develop our smelter and casthouse technology as well as our downstream activities. These include The Research Council of Norway, Enova, Innovation Norway and Prosessindustriens Miljøfond. The majority of the support from The Research Council of Norway is paid directly to projects administered or partnered by Hydro at the Norwegian University of Science and Technology (NTNU), SINTEF or Institute for Energy Technology (IFE). , We are a partner in fours centers for research-based innovation, supported by The Research Council of Norway: SFI Metal Production, SFI Center for Advanced Structural Analysis, SFI Manufacturing and SFI Physical Metallurgy. These are cross-disciplinary R&D programs with a frame of up to eight years. We are also partner in similar centers for environmental-friendly energy (FME). For more information, see note S8 to the Viability performance statements about public funding.

We also participate in other national and EU-funded R&D projects on post-consumer scrap recycling technology, following market demand for products with a low carbon footprint. Our R&D program includes joint projects with external research institutes such as SINTEF, NTNU, IFE and the University of Oslo in Norway, RWTH Aachen in Germany and the University of Auckland in New Zealand.

Hydro has been a partner since 2016 in NAPIC, the NTNU Aluminium Product Innovation Center. Its purpose is to develop new aluminium applications. A consortium that comprises several downstream industries has been established and five different faculties at NTNU are participating. In order to support and speed up the activity, Hydro is sponsoring an NTNU Professor in this area for five years, from autumn 2016.

Another example is participation in the AMAP (Advanced Metals and Processes) Research Cluster at RWTH Aachen, where among others, one BMWi-funded project deals with energy- and resource-efficient recycling of organically contaminated aluminium scrap.

Risk review

113 Major risks
122 Hydro financial position and key financial exposures

112 Annual Report 2020 Risk review Hydro

122 Legal proceedings

Quick overview

Hydro is subject to a range of risks which may affect its business operations and financial condition, and which may cause damages to individuals, assets, reputation and external environment. Hydro's recently revised ERM framework differentiates between strategic-, incident- and HSE-risks.

Risk management in Hydro is based on the principle that risk evaluation and mitigation is an integral part of all business activities. Responsibility and ownership for incident- and HSE-risks mainly resides in the business areas, while Hydro's strategic risks are mainly addressed at Group level. All main risks are followed up and addressed with mitigation plans. Despite Hydro's efforts, the risk mitigating initiatives may fail, be insufficient or prove to be inadequate to mitigate the risks we are facing.

Hydro's main strategic risks include:

Increased competition from China or other countries
Unfavorable macroeconomic development
Value chain concentration
Not delivering on sustainability expectations
Changes in regulatory framework or political environment

Hydro's main incident risks include:

Insufficient asset integrity
Material CSR-, legal- or non-compliance incident
Major cyber-attack on industrial control systems or enterprise IT
Discontinued ICMS deferral or increased Qatalum tax rate
Pandemic outbreak or other major global events

Hydro's main HSE risks include:

Fatal or life-changing accidents
Security incidents
Spills, unlicensed releases or gradual contamination build-up
Structural collapse or other major accident
Insufficient water supply to meet operational mining demands

Majorrisks

ERM in Hydro

Hydro has, with active engagement from the Board of Directors, developed and implemented a revised enterprise risk management framework. In accordance with this model, risk factors that are relevant for Hydro's business are continuously identified, analyzed, addressed and monitored. Risk management is an integral part of our business system where responsibility and ownership for incident- and HSE risks mainly resides in the business areas, while Hydro's strategic risks are mainly addressed at Group level.

Risk management is an integral part of our business system and the responsibility of managers at all levels. Hydro's Group functions establish and develop policies and procedures for managing risk and coordinate an annual risk assessment with a biannual status update. Each manager shall be aware of significant risks within their area of responsibility and ensure that adequate risk mitigation is in place. The business areas ensure that risks within their area are identified, assessed and adequately addressed. Assessment of the main risks and mitigating plans should be well documented and regularly updated. The Corporate Management Board is responsible for risk management at Hydro Group level. CMB assists the CEO in ensuring that Hydro has adequate risk management systems in place and that appropriate actions are taken to mitigate undesirable risk exposures. The Board of Directors oversees the risk management framework, including monitoring of the risk picture through biannual assessments of Hydro Group's main risks.

Overview of Hydro'smain risks

Hydro's main risks may affect business operations, reputation, financial condition, and ultimately, the share price. Some risks may have a positive impact or represent a business opportunity, whereas the focus in this report is on downside risk.

mitigating initiatives may fail, be insufficient or prove to be inadequate to mitigate the risks we are facing. As risks will emerge, increase, decrease or change with time and events, the information in this section should be carefully considered by investors. The risk picture described in this report may be impacted by the sale of Hydro Rolling business area to KPS Capital Partners announced in March 2020, and will be reviewed as part of the regular annual ERM update in 2021.

An assessment of Hydro's top Strategic-, Incident- and HSE risks is presented in the table below. By definition, if materialized, the top risks could significantly impact operations, financials, reputation, or license to operate with severe consequences to Hydro. The table indicates a likelihood of a risk materializing with the current set of mitigating actions in place, the most affected business area(s), as well as an extent to which Hydro is able to influence a negative risk outcome or its magnitude.

Risk development in 2020

Hydro's strategy of lifting profitability and driving sustainability is the main action to address our top strategic risks. Initiatives have been launched across key sustainability areas with special focus on Brazil, including increased robustness of operations, strengthened community relationships, environmental and climate goals. One of the main milestones in 2020 was licensing of the tailings dry backfill technology, which significantly reduces the risk of insufficient landfilling capacity. To mitigate macroeconomic and market risks, Hydro implemented short-term cash preservation measures and has revised its hedging policy. Hydro is seizing high-return opportunities where our capabilities match global megatrends. These include strengthening our position in low carbon aluminium, and growing in recycling and new energy. Hydro supports the principles of free and fair trade, and efforts to create a global level playing field. In recent years, the European market has seen increasing levels of Chinese imports at low prices. The EU has put in place anti-dumping duties on some aluminium products, mostly on import from China, with further evaluations initiated in 2020 regarding certain extrusion and flat rolled products.

Progress has been made on mitigating actions related to several of Hydro's main incident risks. Additional measures have been put in place for the risk related to pipeline incidents in Hydro Bauxite & Alumina. Still, this risk remains high. Other risks related to Hydro's operations in Brazil remain stable. Hydro has launched several initiatives to increase the robustness of its IS/IT infrastructure against malicious attacks by improving system infrastructure and educating employees to develop and improve secure work processes and routines. Concrete initiatives have been implemented and response plans have been further developed for risks related to the effects of the current pandemic. On the regulatory side, the imminent risk of ICMS deferral removal has decreased, while the Qatalum tax framework have still not been concluded. The risk of a breach of competition compliance law remains elevated.

	Strategic risks
1		Increased competition from China and other countries
2	Unfavorable macroeconomic development
3	Value chain concentration
4		Not delivering on sustainability expectations
5		Changes in regulatory framework or political environment
	Incidentrisks
1	Insufficient asset integrity
2		Material CSR-, legal- or non-compliance incident
3		Major cyber-attack on industrial control systems or enterprise IT
4		Discontinued ICMS deferral and increased Qatalum tax rate
5		Pandemic outbreak or other major global events
	HSE risks
1	Fatal or life-changing accidents
2	Security incidents
3		Spills, unlicensed releases or gradual contamination build-up
4	Structural collapse or other major accident
5		Insufficient water supply to meet operational mining demands
	Low Low Medium Medium High High	Hydro Group Hydro Bauxite & Alumina Hydro Aluminium Metal	Hydro Extrusions Hydro Rolling Hydro Energy

Hydro's main safety and security risks have developed positively over the past 12 months with a reduction in the number of Total Recordable Injuries and High-Risk Incidents and corresponding rates. There were no fatal accidents in our operations in 2020, but, unfortunately, one life changing injury resulting in an amputation of a foot. There have been high-risk incidents that had the potential to be fatal, however the number of such incidents has reduced significantly over previous years. Hydro's main environmental risks have remained stable or reduced, including extended maintenance and replacement plans for the bauxite slurry pipeline. Mitigating actions and monitoring processes have been identified and implemented to reduce the likelihood of incidents occurring.

Description of Hydro's main risks

In line with Hydro's ERM framework, the risks are categorized as Strategic-, Incident- and HSE risks. Hydro's main risks within each of these categories are described further in this chapter, including Hydro's risk mitigating initiatives.

Hydro's main strategic risks

Hydro is exposed to risks which may prevent us from reaching our strategic objectives. A core strategy to reduce risks related to weak economic and unfavorable market developments is the continual improvement of our competitive and cost position, differentiated capital allocation, as well as maintaining a solid financial position and strong creditworthiness.

The following are considered Hydro's main strategic risks and are described in more detail in this chapter:

Increased competition from China or other countries
Unfavorable macroeconomic development
Value chain concentration
Not delivering on sustainability expectations
Changes in regulatory framework or political environment

Hydro is exposed to competition from China and other countries, which could have an impact on market prices and demand for our products

China is the world's largest consumer and producer of aluminium, with more than half of the global production capacity. As a result, changes and developments in aluminium supply and demand in China have a significant impact on global market fundamentals.

Hydro is exposed to the development in China broadly on three levels; 1) the risk of Chinese surplus aluminium production (i.e. increased capacity utilization) negatively affects prices outside China, 2) increases in Chinese exports of aluminium semis and fabricated products affect primary demand and demand for semi-fabricated products in the importing regions such as Europe and the US (Hydro core markets) and Asia (Hydro's export markets), and 3) although the explicit effect on Hydro is limited, China's increased demand for imported bauxite and the fulfillment of its requirements affect global bauxite prices.

In past years, China has followed a policy of promoting a balanced internal market for primary aluminium including incentives to discourage the export of primary metal while encouraging domestic production of more labor-intensive semi-fabricated and finished aluminium products. Over the last years, overcapacity in China led to a continued rise in exports in the form of semi-fabricated products. Such exports affect metal prices outside China. Exports from China have varied considerably, driven, amongst other factors, by periodic arbitrage opportunities between Chinese and international metal prices. Exports have increased in volume over the last years. The Chinese central authorities have for several years voiced their concerns regarding the market surplus and inadequate implementation of regulations to discourage further smelter construction. Since 2017, supply-side reform has been enforced across several industries, including aluminium. The target was smelter capacity deemed to be illegal, i.e. not possessing all necessary authorizations. An estimated 3 million tons of capacity has subsequently been closed down. An increase in the oversupply of primary metal in China may lead to higher export of rolled and extruded downstream products, affecting demand for Hydro's metal products.

Chinese alumina refineries and, consequently, aluminium smelters are dependent on imports of bauxite. Imported bauxite has traditionally been sourced from the Pacific region, with Australia, Indonesia and Malaysia as major suppliers. Following export restrictions imposed in Indonesia and Malaysia, increasing bauxite volumes have become available from Guinea to supply Chinese demand since 2016. While the increased export volumes from Guinea have removed the risk of a bauxite supply shortage for China, sourcing from Guinea increases the freight distance and relative costs compared with Pacific supply sources.

Our dedicated improvement programs are the key strategies aimed at maintaining and improving our relative position on the industry cost curve. This is further supported by our focus on producing value-added products and exposure to different parts of the value chain and product segments. In 2019 Hydro launched a new strategic agenda aiming to lift cash flows and returns with extensive improvement and restructuring efforts across its business areas, while highlighting sustainability as a basis for the company's positioning. Hydro has established clear priorities and guidelines for capital allocation. This is critical in order to deliver on the company's strategic direction.

Hydro supports the principles of free and fair trade, and efforts to create a global level playing field. In recent years, the European market has seen increasing levels of Chinese imports at low prices. The EU has put in place anti-dumping duties on some aluminium products like foil, wheels and radiators, mostly on import from China. In October 2020, EU announced preliminary anti-dumping duties on certain extrusion products from China. A final decision is expected in April 2021, which could either maintain, modify or remove these duties. In 2020, EU also announced the opening of several antidumping investigations on certain flat rolled products and converter foil from China. Preliminary decisions on these investigations are expected in 2021.

Despite Hydro's efforts, the targeted cost reductions and improvements may prove to be insufficient to achieve a sustainable level of profitability for our business operations in the event of an extended period of low aluminium prices, stronger local currencies, relatively high costs for key raw

materials or weak market demand, or an extended period of significantly increased aluminium products exports from China.

Hydro is exposed to macroeconomic developments, including price and currency risk, demand/supply balances, and changes in global trade policy framework The aluminium industry is pro-cyclical with demand for products closely linked to economic development. This results in volatility in the market prices for aluminium products in periods of macroeconomic uncertainty or recession. Specific incidents with a macroeconomic impact such as a major epidemic outbreak could also have an impact on Hydro. Macroeconomic development and political instability also drive changes in currency rates, which have a significant effect on Hydro's cost and competitive position. A large share of Hydro's operations has production cost in local currencies, in countries such as Norway, Germany, Brazil, Canada and Australia. If these currencies appreciate against the USD, this will increase cost and may weaken Hydro's global competitive position relative to production from other regions. Aluminium products are traded globally, and therefore affected by the development in global trade flows, trade frameworks, tariffs and anti-dumping legislation.

After the outbreak of the coronavirus (COVID-19), authorities in a number of countries have taken strong measures to reduce the spread of the virus. This has led to reduced global economic activity, including the demand for aluminium, of which the duration still remains uncertain. Currently, markets are recovering, but the macroeconomic situation had an impact on Hydro's operations and finances in 2020, and there is also a risk that this impact will continue in 2021. If the situation continues for an extended period of time, or escalates through new waves of infections, it may have a significant effect on Hydro's financial results.

Hydro is involved in all parts of the aluminium production value chain and therefore exposed to changes in prices of aluminium, alumina and bauxite. In the past decade global aluminium oversupply and high global stock levels, have had a dampening effect on LME prices. Alumina price indices respond to fundamental global supply and demand balances as alumina storage capacity is very limited, in particular outside China. The cost structure of the marginal producers hence drive pricing over the medium term.

Global trade framework and protectionism has been moving higher on the agenda, not least through the role of WTO, the new EU legislation on dumping products, Brexit and the agenda of the US administration. The indirect long-term effects of the tariffs on aluminium in the US or other markets remain uncertain and could have a negative impact on Hydro's business.

The majority of Hydro's upstream, Bauxite, Alumina and Primary aluminium capacity, is located in countries where fluctuations in commodity prices are reflected in their exchange rates such as Norway, Brazil, Canada and Australia. There is a fairly strong historic correlation supporting this relationship, however with a volatility around the trend. If our main cost currencies strengthen going forward, this will increase our operating cost and may weaken our global competitive position relative to production from other regions.

Hydro's core strategy to reduce the risks related to unfavorable economic and market developments is the continuous improvement of our business in terms of operational efficiency, cost reductions, enhanced commercial strategies across the value chain and diversification of business across markets. These efforts help us to partly offset the effects of low market prices and raw material cost increases. Hydro is engaged in a systematic dialogue with politicians and trade and industry associations regarding the global trade framework.

In order to secure financial liquidity, we concentrate on maintaining a strong balance sheet, sufficient undrawn credit facilities, capital discipline and a continued focus on working capital. Hydro has established clear priorities and guidelines for capital allocation. This is critical in order to deliver on the company's strategic direction. The strategy is to allocate more growth and return-seeking capital to the areas that that have a more stable earnings profile and that have delivered returns above their cost of capital in the past. The goal is to run a dynamic capital allocation process that supports financial and investing flexibility, continuous review and reallocation as well as stimulate internal competition for capital, both between and within the business areas. Excess cash flow might be allocated to growth opportunities, or to share buybacks or additional dividend payments as alternative investments. As a specific mitigating action related to the currency risk, Hydro has updated its hedging policy as a tool to help deliver on the strategic ambitions and increase resilience. A part of our foreign exchange exposure is now secured in the short- to mid-term.

However, the cost reductions, improvements and capital allocation that we target may prove to be insufficient to achieve a sustainable level of profitability for our business operations in the event of an extended period of low aluminium prices, significant strengthening of our local currencies, relatively high costs for key raw materials, or weak market demand.

Hydro is exposed to value chain concentration risk and may experience disruption in supply of alumina, anodes or certain alloy materials

Hydro is exposed to risks related to value chain concentration. This includes parts of the supply chain with one or a limited number of suppliers, or where multiple suppliers are concentrated in the same area and where there is a risk of simultaneous supply interruptions. Such interruptions could be a result of changes in regulatory framework, operational disruption, major public health issues etc.

Hydro's assets within Bauxite & Alumina are concentrated in Brazil and include the Paragominas bauxite mine, Alunorte alumina refinery and the 244km bauxite slurry pipeline connecting the two. As Hydro receives almost all of its alumina from Alunorte, these assets are critical for the supply of alumina to the rest of the Hydro Group, both in Brazil and Europe, and Hydro is reliant on their ability to maintain stable operations. Hydro's exposure to supply chain concentration risk also includes risks related to the supply of anodes and certain alloy materials from China.

Hydro's operations and facilities are subject to risks arising from physical climate change, that may impact Hydro's operations. Effects of climate change could include changes in rainfall patterns, flooding, shortages of water or other natural resources, changing sea levels, changing storm patterns and intensities, and changing temperature levels. The changes may be acute and/or chronic. These changes could lead to operational and environmental incidents within our operations, for example by flooding of containment basins, increasing temperatures leading to increased emissions from processes etc. that must be considered in our business strategy.

Operational performance and the occurrence of environmental incidents are also affected by other factors than physical climate change. Mining and processing equipment failures, unexpected maintenance problems and interruptions, and critical failures to infrastructure integrity can lead to environmental spills and danger to surrounding communities.

In order to reduce the risk of disruptions to our operations and potential resulting consequences, we perform regular inspections and maintenance of main equipment. We perform risk assessments and engage in comprehensive emergency preparedness training for key managers and employees, and emergency- and business continuity plans have been developed. We have increased our resilience against power outages, including automation of substations and power generating facilities as well as improved back-up facilities. To reduce the supply chain risk during Covid-19, minimum stock levels for key raw materials are increased. Following the Alunorte embargo, additional alumina suppliers have been qualified. Hydro is engaged in a systematic dialogue with local, state and federal politicians, industry associations, non-governmental organizations and local communities regarding the regulatory challenges facing our operations. Hydro maintains insurance to protect against certain risks in such amounts as it considers reasonable and in accordance with market practice. However, these efforts may fail or prove to be inadequate to avoid the risks associated with our concentrated value chain.

Hydro is exposed to sustainability related risks such as not delivering on increasing expectations, substitution of aluminium with other raw materials or disruptive technological development

Topics such as human rights, local community engagement and supply chain are increasingly addressed by external stakeholders. There is a risk that Hydro is not pursuing sustainability improvements at the same speed as our peers in the aluminium industry. Deviation from external expectations could undermine Hydro's reputation.

The transition to a low-carbon economy has associated technology and market risks. Hydro's technology may not be able to meet the abatement and emissions requirements set by regulatory bodies. Hydro is, directly and indirectly, exposed to increasingly demanding legislation on reducing greenhouse gas emissions, and associated regulatory risk. Hydro's risk exposure mainly relates to, but is not limited to, the cost of CO2 and stricter emissions abatement requirements.

There is also continuous competition between materials, where environmental footprint is becoming more important as a differentiator. Steel, plastics, carbon fiber and copper are aluminium's main competitors. Primary aluminium based on a renewable power source is beneficial, but there is a risk that all aluminium will be treated equally. Increased concern over climate change may lead to changes in consumer behavior, increased demand for low-emission products or substitution of aluminium by other materials. The consequences of aluminium being substituted by other materials could potentially be high. Reputation and consumer perception could be affected and lead to reduced demand and consequently financial impact. All parts of Hydro's aluminium value chain could potentially be affected.

Hydro operates in a highly competitive market where operational excellence in all parts of the value chain is required to reach and maintain a competitive position. This includes each step of the business process from the sourcing of raw materials, to physical operations of each plant, and the commercial optimization of the product portfolio. Disruptive technological development by competitors could threaten Hydro's competitiveness. Failure to create an environment and a competence which enables the organization to continuously achieve increased operational targets will reduce the competitiveness of our business.

Operational performance may also be inhibited by other factors such as the inability to develop necessary technical solutions. Driving improvements and performance is heavily dependent on achieving sufficient capacity and skill in the workforce. Substantial parts of the Brazilian operation are located in remote areas where it has been difficult to attract and retain the competence required to achieve our performance goals for these operations.

A cornerstone in our work to reach operational targets and secure the competitiveness of our operations is the use of standardized Business Systems to structure and formalize continuous improvement work. Improvements are also supported by benchmarking to identify and implement best practices between our business areas. Hydro actively engages with academia, research institutions and industry associations on climate change and other environmental topics, such as the Biodiversity Research Consortium and the Aluminium Stewardship Initiative. These efforts may fail or prove to be inadequate to mitigate Hydro's risks related to disruptive technological development and other climate- and environmental risks we are facing.

Changes in the regulatory framework or political environment in which Hydro operates could have a material effect on the company

Hydro needs competitive and predictable framework conditions. Hydro is subject to a broad range of laws and regulations in the legal jurisdictions in which we operate. These laws and regulations impose stringent standards and requirements and potential liabilities. Some examples include accidents and injuries, the construction and operation of our plants and facilities, taxes and tariffs, air and water pollutant emissions, the storage, treatment and discharge of waste waters, the use and handling of hazardous or toxic materials, waste disposal practices, and the remediation of environmental contamination. Changes in such laws and regulations, or changes in the way these laws and regulations are interpreted or enforced, may impact Hydro's operations.

Mining regulations

Environmental regulations have continued to tighten in various jurisdictions over recent years due to increased national and international environmental targets. Recent major incidents in Brazil (e.g. the failures of the Samarco and Brumadinho tailings storage facilities) have increased public awareness and pressure towards authorities and politicians to impose further and stricter regulations and monitoring of the mining industry, both within Brazil and across the industry as a whole. In particular, we have seen a tightening of regulations pertaining to tailings storage facilities within Brazil and the development of an independent International Standard for Tailings Storage Facilities which aims to drive a step change in the safety of tailings storage facilities worldwide.

Hydro's operations include extracting and refining bauxite resources and utilizing water resources for the generation of power. Such activities have increasingly been subject to local and regional tax regimes which are separate from, and in addition to, national tax regimes such as corporate income tax. Failure to comply with the requirements of the Brazilian National Mining Agency with respect to exploration permits and mining concessions may result in a loss of title. Third parties (including, but not limited to, indigenous persons) may dispute the right to conduct mining or exploration activities. In this context of tightening national regulations and international expectations, additional focus and resources may be needed to ensure our operations continue to meet both regulatory requirements and stakeholder expectations.

Hydro is engaged in a systematic dialogue with local, state and federal politicians, industry associations, nongovernmental organizations and local communities regarding the regulatory challenges facing our operations. The focus of this dialogue is on Hydro's contribution to a sustainable aluminium value chain and underlines the need for competitive and predictable framework conditions for our operations. However, these efforts may fail or prove to be inadequate to avoid changes in laws and regulations, or in the way these are interpreted or enforced, which may impact Hydro's operations.

CO2- and renewable energy regulations

Hydro is, directly and indirectly, exposed to increasingly demanding legislation on reducing greenhouse gas emissions. Hydro is exposed to changes in the CO2e price, the level of free allocation for direct emissions, and the indirect cost of CO2e included in the power price. Hydro has substantial smelter operations located in Europe and other regions as well as alumina refining operations located in Brazil. Aluminium production is an energy-intensive process with significant environmental emissions, especially emissions into the air, including CO2e. An increasing number of countries have introduced, or are likely to introduce in the near future, legislation with the objective of reducing greenhouse gas emissions. Due to the Paris climate accord conference in December 2015, there is a general belief that the political framework for regulating emissions of greenhouse gases will accelerate, as we are gradually witnessing today. There is also expected to be a focus on technology improvements leading to lower emissions.

The new EU directive on emission trading scheme (ETS) for the years 2021-2030 is based on earlier agreed emission targets for 2030. In December 2019, the new EU Commission presented the European Green Deal. This deal includes both a proposal for the European "Climate Law", protecting the 2050 climate neutrality target in legislation, and a

comprehensive plan to increase EU's emission reduction target for 2030. A carbon border tax aimed at shielding energy-intensive industries in the EU against cheaper imports from countries with less strict climate policies is also being discussed.

There is a risk of increased network tariffs for Hydro's smelters in Europe, mainly due to the development of renewable energy sources and upgrades and expansions of transmission systems. Such increases could have a material impact on Hydro's cost of power, which again would have a material impact on Hydro's operating results. As an example, the Norwegian transmission system operator, Statnett SF has changed the grid tariff model for the industry and is carrying out substantial investments in the transmission system which result in increased tariffs for the aluminium industry.

Also, the Norwegian grid tariff model of 2015 is currently subject to a state aid complaint to the EFTA's Surveillance Authority, alleging that certain aspects of the model constitutes unlawful state aid. If a formal investigation is opened, and the complaint is successful, this could lead to a repayment request towards Hydro from the Norwegian state for awarded rebates from 2015.

Hydro has been an active participant in the development of international frameworks on climate change and greenhouse gas emissions supporting the establishment of a level playing field for global aluminium production. We engage in significant R&D activities focused on reducing energy consumption and improving electrolysis efficiency including anode consumption which is the main source of CO2e emissions from our smelter operations. Hydro has the ambition to reduce own emissions of CO2e by 10 percent in 2025 and 30 percent by 2030. However, these efforts may fail or prove to be inadequate to mitigate risks related to changes in regulatory framework.

Waterfall concessions

Our operations, and in particular our aluminium smelters, are dependent upon large volumes of energy. Securing new, competitive energy sources for our business is a key operational target and our business could be materially adversely affected by the inability to replace, on competitive terms, our long-term energy supply contracts when they expire, or our own electricity production, to the extent that concessions revert to the Norwegian state. Hydro has, over the last years, secured several long-term power supply contracts in Norway.

In 2016, an important regulatory change was implemented in Norway that allows for private ownership to waterfalls through companies with liability, often referred to as industrial ownership or ANS/DA, enabling further progress on Hydro's work to re-structure ownership and protect the value of our power assets. In 2020, Hydro and Lyse agreed to merge part of their respective hydropower production to create a stronger joint hydropower company called Lyse Kraft DA. The agreement secures long-term access to renewable power for Hydro's operations in Norway. As a consequence of the transaction, the Røldal-Suldal Kraft (RSK) assets will not revert to state ownership at the end of 2022, meaning Hydro can use its share of the power produced by the new company for aluminium production in Norway.

Hydro is engaged in a number of initiatives to identify and secure competitive energy supplies for our operations and are actively involved in promoting a sustainable energy policy in the regions where we operate. However, we may fail to identify and secure sufficient competitive energy supplies for our operations.

Hydro's main incidentrisks

Incident risks are often operational in nature, driven by internal factors, and with a potentially sudden occurrence and immediate impact. Risk mitigation is largely within Hydro's control. Hydro's main incident risks could influence the whole or multiple parts of the value chain, potentially with a major financial impact. Responsibility and ownership for incident risks mainly resides in the Business Areas. All main incident risks are addressed with risk mitigation plans and are followed up in internal board meetings.

The following are considered Hydro's main incident risks and are described in more detail in this chapter:

Insufficient asset integrity
Material CSR-, legal- or non-compliance incident
Major cyber-attack on industrial control systems or enterprise IT
Discontinued ICMS deferral or increased Qatalum tax rate
Pandemic outbreak or other major global events

Insufficient asset integrity could lead to operational disruptions or other major incidents and Hydro may not be able to maintain sufficient insurance to cover all risks related to its operations

Hydro is exposed to a number of risks and hazards which could result in disruptions to operations. Breakdown of critical equipment, power failures or other events leading to production interruptions in key plants could have a material adverse effect on our financial results and cash flows. Some operations are located in close proximity to sizable communities, and major accidents could result in substantial claims, fines or significant damage to Hydro's profitability, and or reputation.

The potential physical impacts of climate change on our facilities and operations is highly uncertain and may cause disruptions in our operations. Effects of climate changes may include changes in rainfall patterns, flooding, shortages of water or other natural resources, changing sea levels, changing storm patterns and intensities, and changing temperature levels.

Hydro obtains its bauxite from two main sources, the majority is via a 244 km pipeline from Paragominas to Alunorte, the remainder transported by vessel from MRN to Alunorte, any major disruption to this supply of bauxite to Alunorte would have material adverse effects on our operations.

Hydro aim to bring Alunorte up to a new environmental standard. After the rainfall in February 2018, we have been implementing and working with several upgrades to the plant. Three new water basins have increased the water storage capacity by 350 percent, and capacity of the water treatment facility is increased by 50 percent. Alunorte have invested BRL 675 million in improvements in its systems for receiving, controlling, pumping and treating water. In addition to the new basins and the water treatment facility, improvements include new pumping systems and water pipes, new instruments for automation and control and new cameras for monitoring of the basins.

Hydro could be affected by material social responsibility incidents, investigations, legal proceedings, or major non- compliance with laws and regulations Hydro could be negatively affected by criminal or civil proceedings or investigations related to, but not limited to product liability, environment, health and safety, alleged anti-competitive or corrupt practices or commercial disputes. In addition, Hydro is exposed to allegations or perceived failures to behave in a socially responsible manner and to manage social impacts, particularly related to human rights breaches. Infringement of applicable laws and regulations could result in fines or penalties, costs of corrective work, the suspension or shutdown of our operations and damage to the company's reputation.

Hydro is exposed to actual or perceived failures to behave in a socially responsible manner and to manage social impacts, particularly related to human rights breaches. Such failures could result in significant, negative publicity and potential serious harm to Hydro's reputation. Reactions by key stakeholders and communities in which Hydro operates could also interfere or interrupt the operations of our business. Hydro is also exposed to social and human rights risks in the supply chain, joint ventures, and in other parts of the Brazil operations (bauxite mining and transportation).

In order to manage social risks and opportunities, Hydro has several directives, policies and procedures setting out requirements and guiding implementation throughout the company. The social responsibility strategy defines priorities and overall goals. Hydro's Board-sanctioned Code of Conduct requires adherence with laws and regulations as well as global directives and procedures and is systematically implemented and maintained through our compliance system. The Hydro compliance system consists of numerous measures to reduce the risk of non-compliance. The content of such measures differs between relevant compliance risk areas, but can be grouped into four categories: preventing, detecting, reporting and responding.

Hydro's global operations entails a wide array of compliance risks. Mitigation of such risks, both financial and nonfinancial, apply the same system. The compliance risks facing Hydro is continuously monitored and evaluated as part of the Enterprise Risk Management process. Prioritized risk areas are HSE, Financial reporting, anti-corruption, data privacy, the EU General Data Protection Regulation and competition law. Hydro's supply chain is included in the scope of risk mitigation, for instance by procedures for integrity risk management of business partners. Hydro is active in, and has a long tradition for, conducting dialogue with the relevant parties affected by our activities. These include unions, works councils, customers, suppliers, business partners, local authorities and non-governmental organizations. The abovementioned controls and initiatives may, however, be insufficient to mitigate these risks.

Hydro Extrusion Portland, Inc. (HEP) and its U.S. parent company, Hydro Extrusion USA, LLC (Hydro ENA), entered into agreements in April 2019 to resolve certain investigations by the U.S. Department of Justice (DOJ). HEP pled guilty to one charge of mail fraud, received three years of probation, and paid approximately NOK 400 million. Hydro ENA entered into a deferred prosecution agreement (DPA) in which it admitted to mail fraud, but the prosecution of the charge is deferred for three years, subject to its fulfillment of certain obligations. In January 2020, the Oregon Department of Environmental Quality (ODEQ) issued a civil penalty of approximately NOK 11 million against Hydro ENA for air permit violations, including the processing of "unclean" scrap, at The Dalles, Oregon cast house. In October 2020, Hydro ENA learned of an investigation by the U.S. Environmental Protection Agency's Criminal Investigation Division (EPA CID) into the same air quality issues. Hydro ENA is cooperating with both ODEQ and EPA CID, and the risk of serious consequences for the DPA is uncertain at this point. Potential actions could include an extension of the DPA term, which is currently set to expire in April 2022, and the prosecution for the crimes underlying the mail fraud charges in the resolution agreements.

Hydro is exposed to the threat of cyber-attacks which may disrupt its business operations, and result in reputational harm and other negative consequences Hydro's IS/IT infrastructure is a critical element in all parts of our operations, ranging from process control systems at production sites to central personnel databases and systems for external financial reporting. Cyber-crime is increasing globally, and Hydro is exposed to threats to the integrity, availability and confidentiality of systems. Threats may include attempts to access information, ransomware attacks, destructive installation of viruses, denial of service and other digital security breaches.

As part of its revised cyber program, Hydro has launched several initiatives to increase the robustness of its IS/IT infrastructure against malicious attacks by improving system infrastructure and educating employees to develop and improve secure work processes and routines. We have reorganized our security team to better detect and respond to cyber incidents. Further improvements are planned going forward, however, these initiatives may fail to deliver the expected results or prove to be inadequate to prevent cyberattacks or security breaches that manipulate or improperly use our systems or networks.

Discontinued ICMS deferral or increased tax rate for Qatalum may cause material negative effect on Hydro's profitability

In Brazil, the tax system is complex and volatile, with a broad range of direct and indirect taxes levied at the federal, state and municipal levels. Over the past several years, state finances in Brazil have deteriorated, which could lead to mounting pressure to increase tax revenues. In 2018, Public Auditing Prosecutors for the State of Pará initiated a general process before the State Accounting Court to better understand approvals, compliance and transparency of tax incentives established by the State of Pará such as ICMS deferral. In June 2020, ICMS deferral was approved by the Brazilian National Council of Finance Policy (CONFAZ), thereby reducing the risk of immediate ICMS deferral removal. The residual risk is now considered low and of a more strategic character. A tax reform is under discussion, and regulatory changes such as a discontinuation of ICMS deferral may cause material negative effect on Hydro's operating results from its Brazilian operations.

Qatalum, a joint venture which Hydro owns 50/50 with Qatar Petroleum, was established in 2007 and started its first production in December 2009. Qatalum was at the outset granted a ten-year income tax holiday, expiring in September 2020. A tax reform came into effect from 2010, which introduced a generally applicable corporate income tax rate of 10 percent. A tax rate of 35 percent applies to entities with oil and gas operations or where the activities are carried out under an agreement with the government or entities owned by the government, unless such agreement specifies another tax rate. According to the Qatalum joint venture agreement, the generally applicable tax rate will apply after the expiry of the tax holiday. The future tax rate is not yet concluded. It is Hydro's position that the generally applicable income tax rate, currently at 10 percent, shall apply to Qatalum after the expiry of the tax holiday.

Pandemic outbreak or other global events with major impact on society

Covid-19 has highlighted Hydro's, and the society's at large, vulnerability to extreme scenarios such as pandemic outbreaks. Although Covid-19 is unique at the moment, there is a continued risk of future global pandemic outbreaks. In addition to the health-related consequences, such pandemic outbreaks could lead to forced shutdown of parts of Hydro's operations, either due to government-imposed restrictions, insufficient manning level or social unrest. Further, due to disruptions in the supply chain, there is a risk that Hydro, our suppliers or our customers may be inhibited from receiving raw materials, which again may disrupt Hydro's production or sale of products.

Hydro is seeking to limit the operational and financial impact on the company, and wherever possible maintain business as normal during the Covid-19 situation. The main mitigating activities are based on guidelines and regulations from

national authorities such as travel restrictions, social distancing, home offices or even more complete societal lockdowns. Alignment with authorities and associations, including providing input on industry needs, is key to ensure business continuity. Hydro-specific measures include assessments of key risks and vulnerabilities, and preparation and review of plans. To reduce the supply chain risk, minimum stock levels for key raw materials were increased.

The macroeconomic downturn has so far been less dramatic than feared and the worst-case scenarios have not materialized. The financial impact has been mitigated by Hydro's cash-preservation measures as well as reduced costs driven by intensified improvement efforts and lower activitylevel. However, uncertainty remains high and Hydro's ability to influence this risk is limited. If the situation continues for an extended period of time, or escalates through new waves of infections, it may have a significant effect on Hydro's financial results.

Hydro's main HSE risks

Hydro's main HSE risks are mostly operational by nature or influenced by operational processes. These are risks with a potentially fatal outcome, risks which could influence multiple parts of the businesses, or risks with a potential major social or financial impact. Responsibility and ownership for HSE risks mainly resides in the Business Areas. All main HSE risks are addressed with risk mitigation plans and followed up in internal committees.

The following are considered Hydro's main HSE risks and are described in more detail in this chapter:

Fatal or life-changing accidents
Security incidents
Spills, unlicensed releases or gradual contamination build-up
Structural collapse or other major accident
Insufficient water supply to meet operational mining demands

Fatal or life-changing accidents

Hydro is exposed to occupational health, safety and security risks at sites and whilst on travel. Due to its global operations, Hydro is exposed to major public health issues, such as outbreaks of pandemics or epidemics. These risks have the potential to impact Hydro's employees and contractors, operations of assets, and in specific incidences local communities and reputation. Based on Hydro's processes and locations, examples of such incidents and risks include, but are not limited to, molten metal explosion, mobile equipment interaction and transportation, working at height, energy isolation, overhead cranes, confined space entry, equipment failure, major fires, occupational illness and chemical spills.

There were no fatal accidents in our operations in 2020, but we experienced a life changing injury resulting in an amputation of a foot. The deployment of fatality prevention procedures and associated life-saving rules and behaviors continued in 2020 which contributed to a significant reduction in the number and rates of high-risk incidents and this process will continue into 2021. The number of total recordable injuries and associated rates improved over 2019

levels to a total recordable injury rate of 2.66 which is the lowest recorded in Hydro history.

We embrace digital tools where possible and have developed an advanced incident management system, self-assessment tools, risk management processes etc. all easily accessible to employees. In addition, we have strengthened our behavioral tools using human performance techniques and the consistent use of peer-to-peer job observations. From 2020, our emphasis has also been on the closing rate of actions related to high-risk incidents in our operations in 30 days with a rate above 91% achieved. We consider this one of the main leading indicators for our safety performance.

Security incidents

Hydro is exposed to security risks such as public violence, robbery or theft. This risk is particularly relevant in the Barcarena region in Brazil. The consequences of such a security incident could be psychological impact, or in the worst case, serious injury or possible fatality.

Security risks are routinely reviewed, and controls are implemented to mitigate existing and emerging threats. Emergency- and business continuity processes have been developed, and all sites are routinely audited to both determine compliance with corporate requirements and to promote benchmarking between operational sites and business areas.

Spills, unlicensed releases or gradual contamination build-up

Hydro is exposed to risks related to the effects of known and unknown historical and current emissions to air, water and soil around large assets. Hydro is also exposed to physical climate related risks and other environmental risks mainly related to our operations in Brazil. These risks may impact our operational performance or lead to critical failures of equipment or infrastructure that can lead to environmental spills and danger to surrounding communities. Besides the HSE consequences, this could also have legal, financial and reputational consequences for Hydro.

In order to reduce the risks for our operations and potential consequences related to climate change, Hydro performs extensive risk assessments. The assessments include modelling of future weather patterns and their impact on Hydro's facilities based on existing climate models and scenarios from the Intergovernmental Panel on Climate Change (IPCC), and scenarios for policy and legal risk, technology, market and reputation risk. Based on this, Hydro has developed a new climate strategy towards 2030, focusing on greener sourcing, greener production and greener products.

A similar approach is also taken for identifying other environmental risks related to our operations, through Environmental Impact Assessments and continuous review of monitoring procedures, control systems and the application of appropriate management procedures. However, these efforts may fail or prove to be inadequate to mitigate the climate change and other environmental risks we are facing.

Structural collapse or other major accident

Hydro is exposed to the risk of major accidents such as collapse of a hydropower dam, tailings storage facilities or bauxite residue storage facilities. Rupture of the pipeline

between Paragominas and Alunorte or collapse of the entire port structure at the Alunorte port are other potential major accidents. Although the likelihood for such incidents is not considered to be high, the potential consequences are high and could include impact on local communities, financial impact, reputational loss, operational disruption, fines and environmental contamination.

Hydro is continuously seeking to reduce the likelihood of major accidents. Examples of risk mitigating activities include investigating the possibility of tailings dry backfill, reviewing continued integrity, and regular monitoring and auditing of tailings storage facilities. Regular pipeline monitoring and replacement is ongoing. The water storage and treatment capacity at Alunorte has been improved. As a reactive measure, Hydro has emergency plans in place. However, Hydro's risk mitigating initiatives may fail to prevent a major accident, and the consequence could be catastrophic both from an HSE and operational perspective, should this risk materialize.

Insufficient water supply to meet operational mining demands

A significant amount of water is required for the mining operations at Paragominas. The water is used to wash the ore and then transport it via pipeline to Alunorte. Currently, there is one operational water extraction point at Paragominas. Under current conditions, this extraction point is sufficient to meet operational demands. However, there is a risk that this extraction point is not sufficient to meet future operational demands if climate change leads to reduced water in the river, if production at Paragominas is increased or if a new third-party user requests water extraction from the same watershed. If Paragominas is not able to withdraw sufficient water from the river to support operations, then operations at Paragominas, and potentially also Alunorte, would have to be reduced accordingly. This would have both operational and financial consequences.

The water risk at Paragominas is actively addressed. A license is obtained for the construction of a second water extraction point. Paragominas also reuses a large percentage of its water by managing the rainfall runoff and leachate from its tailings storage facilities.

Hydro financial position and key financial exposures

Hydro's main strategy for mitigating risk related to volatility in cash flow is to maintain a strong balance sheet and an investment grade credit rating as well as allocating capital in line with our strategic ambitions. The targeted key financial ratio levels over the business cycle are described in note 7.1 Capital Management.

Hydro's main risk management strategy for upstream operations is to accept exposure to price and exchange rate movements, while at the same time focusing on reducing the average cost position of production assets. In certain circumstances, derivatives may be used to hedge certain revenue and cost exposures on business area or group level. During 2020, Hydro have performed a review of risk

management strategy, and intends to utilize derivative and non-derivative measures to manage price exposure over slightly longer periods than the practice in recent years. Long term, the only true hedge is cost competitive operations, and the only long-term hedge against market volatility is to maintain a low-cost asset base.

Downstream and other margin-based operations are to a certain extent hedged to protect processing and manufacturing margins against price fluctuations. An operational hedging system has been established to protect commercial contracts from aluminium price fluctuations.

Key financial exposures

Hydro's operating results are primarily affected by price developments of our main products, raw materials, margin developments and to fluctuations in the most significant currencies for Hydro, which are the USD, NOK, EUR and BRL.

To mitigate the impact of exchange rate fluctuations, longterm debt is mainly maintained in currencies reflecting underlying exposures and cash generation, while considering attractiveness in main financial markets. Hydro may also use foreign currency swaps and forward currency contracts to reduce effects of fluctuations in the US dollar and other exchange rates.

The table below shows sensitivities regarding aluminium prices and foreign currency fluctuations for 2021. The table illustrates the sensitivity of earnings before tax, interest and depreciation, to changes in these factors and is provided to supplement the sensitivity analysis required by IFRS, included in note 8.2 Financial instruments. These sensitivities are on an underlying basis and do not consider revaluation effects of derivative instruments, which may influence earnings.

Sensitivities with 100% production

Commodity price sensitivity +10%

NOK Million			UEBIT

Hydro Group
Aluminium			3,530


Currency sensitivities +10%
NOK Million	USD	BRL	EUR

Sustainable effect
EBIT	3,620	(710)	-

One-off reevaluation effect
Financial items	(240)	680	(3,960)

Annual sensitivities based on normal annual production volumes, LME USD 1 790 per mt, USDNOK 9.13, BRLNOK 1.67, EURNOK 10.47.

Legal proceedings

The Group is engaged in a large number of legal proceedings and disputes around the world. As of the date of this Annual Report, based on the Company's current assessment, neither the Company nor any other company in the Group are, nor have during the course of the last 12 months, except for the economic consequences of the Alunorte embargos, been involved in any governmental, legal or arbitration proceedings, which may have, or have had in the recent past significant effects on the Company and/or the Group's financial position or profitability.

Shareholder information

124 Annual Report 2020 Shareholder information Hydro

125 Introduction
125 Dividend policy
125 Buyback of shares
125 Funding and credit quality
125 Major shareholders and voting rights
127 Key figures for the Hydro share
128 Information from Hydro
128 Annual General Meeting
128 Change of address
128 Financial calendar 2021

Quick overview

Hydro's share price closed at NOK 39.86 at the end of 2020. The return ex. dividend for 2020 was NOK 7.22, or 22 percent.

Hydro paid its 2019 dividend in November 2020, following the board's decision to delay payment of the dividend due to the uncertain market outlook following Covid-19.

Hydro's Board of Directors proposes to pay a dividend of NOK 1.25 per share for 2020, for approval by the Annual General Meeting on May 6, 2021.

There were 2,068,998,276 issued shares at the end of 2020. A total of 1.9 billion Hydro shares were traded on the Oslo Stock Exchange during 2020 at a value of NOK 52 billion, making Hydro the eighth most traded company on the OSE. The average daily trading volume for Hydro shares on the OSE during 2020 was 7.5 million shares.

Hydro's shares are listed on the Oslo Stock Exchange, while our American Depositary Shares (ADSs) trade on OTCQX International in the US, the premium over-the-counter market tier.

Introduction

Hydro's share price closed at NOK 39.86 at the end of 2020. The return ex. dividend for 2020 was NOK 7.22, or 22 percent.

Hydro paid its 2019 dividend in November 2020, following the board's decision to delay payment of the dividend due to the uncertain market outlook following Covid-19.

Hydro's Board of Directors proposes to pay a dividend of NOK 1.25 per share for 2020, for approval by the Annual General Meeting on May 6, 2021, reflecting Hydro's robust financial position, taking into account the company's ability to recover from a demanding year due to Covid-19.

The proposed payment demonstrates the company's commitment to provide a predictable dividend to shareholders. Hydro has a dividend policy of 40 percent payout ratio of reported net income over the cycle with NOK 1.25 per share considered as floor. The average five-year payout ratio is 68 percent.

Hydro's shares are listed on the Oslo Stock Exchange, while our American Depositary Shares (ADSs) trade on OTCQX International in the US, the premium over-the-counter market tier.

Dividend policy

Long-term return to shareholders should reflect the financial value created by Hydro over time. Total shareholder return consists of dividends and share price development. Over time, value creation should be reflected to a greater extent by share price development rather than by dividends.

In 2020, Hydro had a dividend policy of 40 percent payout ratio of reported net income over the cycle with NOK 1.25 per share considered as floor. This policy has been revised, from 2021 onwards, reflecting Hydro's ambitions to lift performance and cash returns to shareholder over the cycle. The revised dividend policy is to pay out a minimum of 50 percent of underlying net income over the cycle with a NOK 1.25 per share dividend floor.

In setting the dividend for a specific year, Hydro will take into consideration expected earnings, future investment opportunities, the outlook for world commodity markets and our financial position. Share buybacks or extraordinary dividends may supplement ordinary dividends during periods of strong financials, due consideration being given to the commodity cycle and capital requirements for future growth. The total payout should reflect Hydro's aim to provide its shareholders with competitive returns benchmarked against alternative investments in comparable companies.

Hydro's Board of Directors normally proposes a dividend per share in connection with the publication of our fourth quarter results. The Annual General Meeting then considers this proposal in May each year, and the approved dividend is subsequently paid to shareholders in May or June. Hydro pays dividends once each year. For non-Norwegian shareholders, Norwegian tax will be deducted at source in accordance with the current regulations.

Buyback ofshares

In periods when earnings are high, Hydro may consider buying back shares in addition to ordinary or extraordinary dividend payments. This consideration will be made in the light of alternative investment opportunities and our financial situation. In circumstances when share buybacks are relevant, our Board of Directors proposes buyback authorizations to be considered and approved by the Annual General Meeting. Authorizations are granted for a specific time period and for a specific share price interval during which share buybacks can be made.

Funding and credit quality

Maintaining a strong financial position and an investment grade credit rating are viewed as important risk mitigating factors, supporting Hydro's possibilities for strategic development of its businesses. Access to external financial resources is required in order to maximize value creation over time, balanced with acceptable risk exposure. To secure access to debt capital on attractive terms, we aim at maintaining an investment grade credit rating from the leading rating agencies.

Contributing toward this ambition to retain our credit rating, Hydro's targets, over the business cycle, a ratio of average Adjusted net cash (debt) to underlying EBITDA below 2x. For further information, see Note 7.1 Capital Management in the Financial Statements section of this report.

Major shareholders and voting rights

As of December 31, 2020, Hydro had 57,198 registered shareholders as per the Norwegian Central Securities Depository (VPS). The Ministry of Trade, Industry and Fisheries of Norway was the largest of these with a shareholding of 34.26 percent of the total number of ordinary shares authorized and issued, and 34.59 percent of the total shares outstanding. As of the same date, the Government Pension Fund - Norway (Folketrygdfondet) owned 7.73 percent of the total number of ordinary shares issued and 7.81 percent of the total shares outstanding. There are no different voting rights associated with the ordinary shares held by the state.

The Norwegian Ministry of Trade, Industry and Fisheries represents the Norwegian government in exercising the state's voting rights. The state has never taken an active role in the day-to-day management of Hydro and has for several decades not disposed of any of the ordinary shares owned by it, except when participating in the share buyback programs.

JPMorgan Chase Bank NA, as depositary of the ADSs through its nominee company, Morgan Guaranty Trust Company, held interests in 8,705,003 ordinary shares, or 0.42 percent of the outstanding ordinary shares as of December 31, 2020. The interests are on behalf of 275 registered holders of ADSs All shares carry one vote. It is, however, a requirement of Norwegian legislation that a shareholder can only vote and have preferential subscription rights for shares registered in their name. Shares registered with a nominee account must be re-registered in the Norwegian Central Securities Depositary, Verdipapirsentralen (VPS), before the Annual General Meeting in order to obtain voting rights. This requirement also applies to our US-traded ADSs.

All shares carry one vote. It is, however, a requirement of Norwegian legislation that a shareholder can only vote and have preferential subscription rights for shares registered in their name. Shares registered with a nominee account must be re-registered in the Norwegian Central Securities Depositary, Verdipapirsentralen (VPS), before the Annual General Meeting in order to obtain voting rights. This requirement also applies to our US-traded ADSs.

Hydro cannot guarantee that beneficial shareholders will receive the notice for a general meeting in time to instruct their nominees to affect a re-registration of their shares. Hydro is organized under the laws of the Kingdom of Norway. It may be difficult for investors to effect service of process outside Norway upon Hydro or its directors and executive officers, or to enforce against Hydro or its directors and executive officers judgments obtained in other jurisdictions. Norwegian courts are unlikely to apply other than Norwegian law when deciding on civil liability claims under securities laws.

Hydro's 20 largest shareholders, December 31, 2020

Shareholder	Number of shares	Ownership interest

Ministry of Trade, Industry and Fisheries	708,865,253	34.3 %
Folketrygdfondet	160,035,514	7.7 %
The Vanguard Group, Inc.	40,675,950	2.0 %
BlackRock Institutional Trust Company, N.A.	39,400,210	1.9 %
DNB Asset Management AS	29,416,441	1.4 %
Storebrand Kapitalforvaltning AS	28,668,147	1.4 %
KLP Forsikring	27,754,577	1.3 %
Antipodes Partners Limited	22,844,944	1.1 %
Danske Invest Asset Management AS	19,466,222	0.9 %
Wellington Management Company, LLP	19,253,054	0.9 %
Arrowstreet Capital, Limited Partnership	17,934,379	0.9 %
EARNEST Partners, LLC	17,573,414	0.8 %
State Street Global Advisors (US)	17,163,989	0.8 %
SAFE Investment Company Limited	16,497,465	0.8 %
Legal & General Investment Management Ltd.	15,219,327	0.7 %
Assenagon Asset Management S.A.	13,585,384	0.7 %
BlackRock Advisors (UK) Limited	12,137,579	0.6 %
Nordea Funds Oy	11,284,098	0.5 %
Kuwait Investment Office	10,850,000	0.5 %
Oslo Pensjonsforsikring AS	10,500,000	0.5 %

Source: The data is provided by Nasdaq through the Share register Analyses services. The data is obtained through the analysis of beneficial ownership and fund manager information provided in replies to disclosure of ownership notices issued to all custodians on the Hydro share register. Whilst every reasonable effort is made to verify all data, Nasdaq can not guarantee the accuracy of the analysis. For a list of the largest shareholders as of December 31, 2020, from the Norwegian Central Securities Depositary (VPS), see Note 13 in Notes to the financial statements Norsk Hydro ASA. Due to lending of shares, an investor's holdings registered in its VPS account may vary.

Key figures forthe Hydro share

	2020	2019	2018	2017	2016

Share price high, Oslo (NOK)1)	40.74	41.55	62.70	64.15	43.05
Share price low, Oslo (NOK)1)	19.14	26.49	38.69	41.03	26.00
Share price average, Oslo (NOK)	28.09	33.43	48.61	52.27	34.31
Share price year-end, Oslo (NOK)	39.86	32.64	39.21	62.35	41.30
Earnings per share (EPS) (NOK)	1.83	-0.88	2.08	4.3	3.13
Dividend per share (NOK)2)	1.25	1.25	1.25	1.75	1.25
Pay-out ratio3)	68%	-	60%	41%	40%
Dividend growth	-	-	-29%	40%	25%
Pay-out ratio five year average4)	65%	68%	57%	70%	133%
Average Adjusted net cash (debt) including EAI / Equity5)	0.35	0.37	0.32	0.26	0.14
Adjusted net cash (debt) / uEBITDA)6)	1.93	2.27	1.20	0.45	0.69
Credit rating, Standard & Poor's	BBB	BBB	BBB	BBB	BBB
Credit rating, Moody's	Baa3	Baa2	Baa2	Baa2	Baa2
Non-Norwegian ownership, year-end	52%	40%	41%	47%	45%
Outstanding shares, average	2,048,766,546	2,047,057,976	2,045,796,971	2,044,105,404	2,042,481,930
Outstanding shares, year-end	2,049,124,718	2,047,648,790	2,046,302,797	2,044,697,348	2,042,894,116

1) Share price high and low based on intraday, not only closing price

2) 2020 dividend per share proposed by Board of Directors, dependent on approval from the Annual General Meeting May 06, 2021.

3) Dividend per share divided by earnings per share from continuing operations.

4) Dividend per share divided by earnings per share from continuing operations for last five years.

5) Following a review of the key financial metrics used for managing capital, this ratio will be discontinued going forward. See note 7.1 Capital management in the consolidated financial

statements. 6) This ratio replaces the formerly used ratios Adjusted net cash (Debt) to Equity and Funds from operations to average Adjusted net cash (debt). See note 7.1 Capital management in the consolidated financial statements

Information fromHydro

Communicating with the stock market is given high priority, and Hydro aims to maintain an open dialogue with market participants. Our objective is to provide sufficient information on a timely basis to all market participants to ensure a fair valuation of our shares. Information that is considered price sensitive is communicated by news releases and stock exchange announcements. We host regular meetings for investors in Europe and the US. The major brokers in Oslo and London publish equity research reports on Hydro. All information about Hydro is published on our website: www.hydro.com

Our annual and quarterly reports are available on www.hydro.com, and our latest annual reports can also be ordered in printed versions from the website.

Two weeks before the announcement of quarterly results, Hydro practices a "silent period", meaning that contact with external analysts, investors and journalists is limited. This is done to minimize the risk of information leaks and potentially unequal information in the marketplace.

AnnualGeneral Meeting

The Annual General Meeting will be held at the company's offices at Drammensveien 260, Oslo, Norway, on Thursday, May 6, 2021, at 10:00 CET. Shareholders who wish to attend are asked to inform the registrar by 16:00 CET on Monday, May 3:

DNB Bank ASA Registrar's Department P.O.Box 1600 Sentrum N-0021 Oslo, Norway

You may also register electronically on our website www.hydro.com/register or via VPS Investor Services. Any shareholder may appoint a proxy with written authority to attend the meeting and vote on his or her behalf. Voting rights are discussed under "Major shareholders and voting rights". It will also be possible to follow the meeting online.

Change of address

Shareholders registered in the Norwegian Central Securities Depository should send information on changes of address to their registrar and not directly to Hydro.

Financial calendar 2021

April 27	First quarter results
May 6	Annual General Meeting
May 7	Shares traded ex-dividend
May 8	Record date for dividend
May 15	Dividend payment date
July 23	Second quarter results
October 26	Third quarter results

Hydro reserves the right to revise these dates.

Corporate governance

130 Annual Report 2020 Corporate Governance Hydro

131 About Hydro
131 Global directives and Code of Conduct
132 Business planning and risk management
132 Controls and procedures
133 Transparency and communication
133 Management compensation
133 Board of directors
135 Corporate management board
137 Governance bodies

Quick overview

Hydro is a public limited company organized under Norwegian law with a governance structure based on Norwegian corporate law. Our corporate governance has been designed to provide a foundation for value creation and to ensure good control mechanisms. We maintain common requirements in the form of corporate directives that are mandatory for all parts of our organization.

Our corporate directives help ensure that all our employees carry out their activities in an ethical manner and in accordance with current legislation and Hydro standards. The board of directors has approved our Code of Conduct, which applies to all employees throughout the world, as well as to board members of Hydro and its subsidiaries. The code addresses compliance with laws and other matters such as handling of conflicts of interest and a commitment to equal opportunities for all employees. Our defined programs contributes to compliance with anti-corruption and basic human rights, and other relevant governance areas.

Hydro follows the Norwegian code of practice for corporate governance of October 2018.

About Hydro

Hydro is a public limited company organized under Norwegian law with a governance structure based on Norwegian corporate law. Our share listing is on Oslo Børs, which subjects us to Norwegian securities legislation and stock exchange regulations. In the United States the shares are traded on OTCQX International, the premium over-thecounter market tier, in the form of American Depositary Receipts evidencing American Depositary Shares, which carry the same shareholder rights as ordinary shares.

We have developed our governance structure through cooperation between our corporate management board and our superior governance bodies to secure compliance with relevant laws and regulations, Hydro's corporate directives and to reflect business needs. Development of the governance structure is a continuous process.

We follow the Norwegian Code of Practice for Corporate Governance of October 2018, see page 306. A detailed description of how we comply - including deviations - is presented in the Board of Directors' report. Information regarding our shareholder policy can be found on page 124. Hydro's strategic direction is described in the Board of Directors' report, see page 13.

More comprehensive information about our governance practices, policies and requirements can be found at www.hydro.com/governance.

Global directives andCode ofConduct

The Hydro Way represents our framework for leadership, organization and culture and is the foundation of our governance system. See page 87 for further information.

Our system is based on the delegation of responsibility to our business areas and to corporate functions whose duties include finance, tax and accounting, HSE, social responsibility, legal and compliance. In order to maintain uniformly high standards, we set common requirements in the form of constituting documents and global directives. Constituting documents are approved by Hydro's board of directors, the corporate assembly or the general meeting of shareholders, while global directives are approved by the President and CEO. These documents address a number of areas, including health, security, safety and environment (HSE), ethics and social responsibility, strategy and business planning, finance, risk management, and organizational and employee development. This information is made available to all employees.

Hydro's Code of Conduct is a constituting document and applies to all Hydro employees throughout the world, as well as to board members of Hydro and its subsidiaries. See page 95 for more information about Hydro's Code of Conduct, whistleblowing procedure and integrity program, and www. hydro.com/principles for more information regarding our corporate directives. In Hydro, compliance is defined as adherence to applicable laws and regulations as well as Hydro's corporate directives. Specific policies and procedures as well as guidelines have been established to assist line management to adhere to Hydro's compliance requirements. Special emphasis is made on reducing the risk of non-compliance within finance, anti-corruption, competition, health, security, safety and environment.

For legal entities where Hydro holds less than 100 percent of the voting rights, we are working through their boards of directors to promote the principles in Hydro's Code of Conduct and our corporate directives. This includes, but is not limited to, HSE, anti-corruption and human rights.

Governance bodies in Hydro

Business planning and riskmanagement

Hydro's overall goal is to create shareholder value through satisfied customers and motivated and competent employees. We have defined two main processes to ensure that short and long-term targets are achieved.

The portfolio, strategy and business planning process involves strategic and operative planning and results monitoring. The planning, which reflects our ambitions and values, is the basis for the strategies and measures that form the business plans at all levels of our organization. We have defined key performance indicators relevant for each unit, including within finance, human resources, ethics, HSE and climate change, in addition to unit-specific operating targets.

Hydro's people performance and development process is designed to assess and develop our human resources, and includes appraisal dialogue, individual development and follow-up, as well as talent planning and succession management. It aims to promote the potential of individual employees and of our organization as a whole and is integrated with our annual business planning process. Risk management is also an integrated part of our planning and reporting process.

Risk management deals with all aspects of value creation, including strategy, finance, commercial matters, organization, climate change, HSE, reputation, corporate responsibility, regulatory and legal matters. Hydro's board of directors regularly reviews and evaluates the overall risk management systems and environment within Hydro. We carry out risk assessments for defined exposure areas. Exposure to certain risks, particularly those threatening life and health, has been consistently reduced to very low levels. Hydro's Enterprise Risk Management (ERM) process is currently being revised, in order to improve risk management and ensure that mitigating actions corresponds with identified risk. The main improvements include a more detailed risk evaluation and more distinct differentiation between strategic and incident risk. See also the section Risk review on page 24 for a more detailed discussion of Hydro's risk management.

Controls and procedures

Hydro's Internal Control over Financial Reporting (ICFR) framework is primarily designed to provide reasonable assurance to our management and the board of directors regarding the preparation and fair presentation of our Financial Statements.

Hydro's ICFR framework is based on the COSO 2013 Internal Controls Integrated Framework which consists of five interrelated components and 17 relevant principles that must be present and functioning. The five COSO elements are: Control Environment, Risk Assessment, Control activities, Information and Communication, and Monitoring activities.

Our overall control environment for financial reporting is governed by our ICFR Global Directives, and reflects the tone set by the common attitudes, ethics, and values, and competence of top management and management, and all the rest of our employees.

The ICFR framework is implemented through a risk-based and top-down approach, to provide appropriate organization of the financial reporting, ensuring that Hydro's activities, accounts, and management are subject to adequate control.

Hydro's disclosure committee assists the CEO and the CFO in ensuring fairness, accuracy, completeness, and timeliness of Hydro's public reports and disclosures, both financial and extra-financial. The disclosure committee is also an integral component of Hydro's disclosure controls and procedures and assesses Hydro's compliance initiatives pertaining to ICFR. The disclosure committee reports quarterly a summary of its activities to the board audit committee. Through reporting from the disclosure committee and internal audit, the audit committee takes an active role in ensuring the functioning of the ICFR framework. The board of directors meets at least annually with the external auditor without members of the corporate management present. See page 137 and www.hydro.com/governance for additional details.

Pre-approval of audit services

The audit committee has established a pre-approval policy governing the engagement of Hydro's primary external auditors for audit and non-audit services to Hydro or any entity within the group. Under this pre-approval policy, the audit committee has defined and pre-approved subcategories of audit and non-audit services. The audit committee's preapproval policy includes annual monetary frames for each of the following categories of services:

Audit
Audit-related
Tax
Other not related to financial audit and tax

Within the scope of the pre-approval policy, all services shall be pre-approved. The reported amounts for audit, auditrelated, tax and other non-audit-related services are within the monetary frames established by the audit committee.

Hydro's portfolio, strategy and business planning process

Transparency and communication

Hydro's corporate culture embodies the principles of transparency and respect for others. Our ability to operate efficiently in the Norwegian market and internationally requires consistent and professional communication. We adhere, therefore, to the principles of transparency, honesty and accountability when interacting with our stakeholders.

Management compensation

Information concerning remuneration and remuneration policies, share ownership, loans outstanding and loan policy relating to Hydro's board of directors and corporate management board is disclosed in note 9.1-9.4 of the consolidated financial statements.

Board ofDirectors

						No. of
Name	Place of residence	Year of birth	Position	Board committee	Meetings attended	Hydro shares1)	Director since	Term expires

Dag Mejdell2)	Oslo, Norway	1957	Chairperson	Chairperson Compensation and people committee	13	45,000	2012	2022
Irene Rummelhoff	Hafrsfjord, Norway	1967		Deputy Chairperson Compensation and people committee	11	5,000	2014	2022
Arve Baade	Sunndalsøra, Norway	1967	Director		13	5,130	2018	2022
Roelof Ijsbrand Baan3)	Helsinki, Finaland	1957	Director		4	-	2019	2020
Finn Jebsen4)	Oslo, Norway	1950	Director	Audit committee	5	53,4067)	2007	2020
Liselott Kilaas	Oslo, Norway	1959	Director	Audit committee	13	-	2018	2022
Peter Kukielski5)	Vancouver, Canada	1956	Director		12	-	2019	2022
Sten Roar Martinsen	Kopervik, Norway	1962	Director	Compensation and people committee	13	6,869	2005	2022
Tor Egil Skulstad6)	Matrand, Norway	1967	Informal observer		5	1226	2017	2020
Thomas Schulz	Rungsted Kyst, Denmark	1965	Director		12	-	2016	2022
Svein Kåre Sund	Sunndalsøra, Norway	1962	Director	Audit committee	9	6434	2017	2020
Marianne Wiinholt	Klampenborg, Denmark	1965	Director	Chairperson Audit committee	11	-	2016	2022
Rune Bjerke8)	Oslo, Norway	1960	Director	Audit committee	7	15000	2020	2022
Ellen Merete Olstad9)	Oslo, Norway	1963	Director	Audit committee	4	4903	2020	2022

Total number of board meetings were 13.

1) As per 2020-12-31.
2) Including shares owned by Nobel Partners
3) Baan became member of the board as of 2019-05-29. He stepped down as of 2020-02-05.
4) Jebsen became a member of the board as of 2007-11-08. He stepped down as of 2020-05-20.
5) Kukielski became member of the board as of 2019-05-29.
6) Skulstad was an informal observer in the board of directors on behalf of employees in Extruded Solutions. The role was+ temporary and was created effective 2 October 2017 until the election of board members in 2020. He was appointed by the Norwegian Trade Union Confederation. He stepped down as of 2020-04-30.
7) Including shares owned by Fateburet AS.
8) Bjerke became member of the board as of 2020-06-17.
9) Olstad became an employee-elected member of the board as of 2020-09-10. Olstad replaced Svein Kåre Sund as one of the board's three employee representatives.

Dag Mejdell, chairperson

Position: Non-executive Director
Education: Degree in Economics and Business Administration (siviløkonom) from the Norwegian School of Economics (NHH)
Current directorships: Chairperson of Sparebank 1 SR Bank ASA, chairperson of Visolit group of companies, chairperson of International Post Corporation, deputy chairperson of SAS AB and chairperson of Mestergruppen AS

Irene Rummelhoff, deputy chairperson

Position: Executive vice president, Marketing, Midstream and Processing, Equinor ASA, "one of the world's leading energy companies"
Education: Master of Science in Geology/Geophysics (sivilingeniør) from the Norwegian Institute of Technology (NTH)
Current directorships: None

Arve Baade, employee representative

Position: Full-time employee representative representing Industri Energi
Education: Certificate of apprenticeship in process studies
Current directorships: None

Rune Bjerke

Position: Adjunct Executive in Residence, Norwegian School of Economics, previously CEO of DNB (2007-2019), CEO of Hafslund (2000-2006) and CEO of Scancem International (1996-2000)
Education: Bachelor (BSc) in Economics, University of Oslo, Master of Public Administration (MPA), Harvard University
Current directorships: Board member of Fremtind Forsikring AS, Wallenius Wilhelmsen ASA

Liselott Kilaas

Position: Independent advisor
Education: M.Sc Mathematical Statistics, University of Oslo, Master of Business Administation, IMD Lausanne, Switzerland
Current directorships: Kilaas is currently boardmember in Orkla ASA, Folketrygdfondet, Avonova AB, Coala AB, Peab AB, Nobina AB, Ambea AB, implantica Ab, Recover Nordic, IMD

Peter Kukielski

Position: Peter Kukielski is from South Africa and is the CEO of Hudbay Minerals Inc. His previous experience includes Nevsun Resources, Anemka Resources, Arcelor Mittal and Teck Resources. He is currently an executive director of Hudbay Minerals Inc.
Education: Master of Science, Stanford University, California
Current directorships: none

Sten Roar Martinsen, employee representative

Position: Process operator / full-time union official representing the Norwegian Confederation of Trade Unions (LO)
Education: Certificate of apprenticeship in electrochemistry. Work supervisor training
Current directorships: None

Ellen Merete Olstad, employee representative

Position: Hydro Aluminium AS, Metal Sourcing and Trading, Senior Contract Coordinator, Olstad started working in Norsk Hydro in 1986 in the Agricultural Division, Sales and Marketing.
Education: Hartvig Nissen High School, Oslo, High School with focus on language and texts. University in Perpignan, France, French language and culture, Oslo Commercial High School, Marketing, Business economics, jurisprudence, administration. French and English business correspondence. Member of Negotia Club Hydro, Employee Union, manager
Current directorships: None

Thomas Schulz

Position: Group Chief Executive Officer, FL Smidth
Education: PhD Mining & Mineral Processing, Rheinisch-Westfälische Universität Aachen RWTH, Germany
Current directorships: None

Marianne Wiinholt

Position: Executive vice president and Chief Financial Officer, Ørsted A/S
Education: State Authorised public Accountant
Current directorships: Board Member and Chair of the Audit Committee of Hempel A/S until the Annual General Meeting of 29. April 2021, Board Member and Chair of the Audit Committee of Coloplast A/S

Name	Place of Residence	Year of birth	Employed in Hydro since	Current position since	Position	Number of Hydro shares1)
Hilde Merete Aasheim2)	Oslo, Norway	1958	2008	2019	President and Chief Executive Officer	119,946
Einar Glomnes3)	Oslo, Norway	1969	2004	2019	EVP Hydro Rolling	17,692
Egil Hogna4)	Oslo, Norway	1971	2017	2017	EVP Hydro Extrusions	63,470
Eivind Kallevik5)	Oslo, Norway	1967	1998	2013	EVP Hydro Aluminium Metal	72,849
Pål Kildemo6)	Oslo, Norway	1984	2008	2019	EVP and Chief Financial Officer	13,060
Anne-Lene Midseim	Oslo, Norway	1968	1998	2015	EVP Legal and Compliance	33,735
Arvid Moss	Oslo, Norway	1958	1991	201010)	EVP Energy and Corporate Development	173,043
Hilde Vestheim Nordh7)	Oslo, Norway	1969	1995	2019	EVP People & Safety	25,204
Inger Sethov	Høvik, Norway	1970	2005	2015	EVP Communication & Public Affairs	38,125
John Thuestad8)	Oslo, Norway	1960	2017	2018	EVP Hydro Bauxite & Alumina	58,043
Erik Fossum9)	Oslo, Norway	1977	1995	2020	Acting EVP Extruded Solutions	1,920

Corporate Management Board

EVP: Executive vice president

1) As per 2020-12-31.

2) Aasheim became President and CEO as of 2019-05-08. Aasheim also was employed in Hydro 2005-2007 and was EVP for Primary Metal from 2008-2019.

3) Glomnes became member of the Corporate Management Board as of 2019-05-08.

4) Hogna was employed in Hydro 1999-2003. He stepped down as of 2020-12-01.

5) Kallevik became EVP Primary Metal as of 2019-08-15.

6) Kildemo became member of the Corporate Management Board as of 2019-08-15. He was acting member of the Corporate Management Board as of 2019-05-08

7) Vestheim Nordh became member of the Corporate Management Board as of 2019-08-15. She was acting member of the Corporate Management Board as of 2019-01-08.

8) Thuestad was employed in Hydro 1997-1998.

9) Paul Warton became EVP Extruded Solutions as of 2021-02-01. Erik Fossum served as interim EVP from 2020-12-01 to 2020-02-01.

10) Acting as EVP Corporate Development, including responsibility for Technology, Sustainability and Portfolio & Strategy.

Hilde Merete Aasheim, President and CEO

Key experience: 10 years of experience as Executive Vice President Primary Metal in the period 2008-2019, previously Head of Staff Functions and Corporate Services in StatoilHydro. Head of the integration between Statoil and Hydro's oil and gas activities in 2007. Head of Leadership and Culture in Hydro in 2005. 20 years of service in various senior positions in Elkem in the period 1986-2005. In 2002 she was Head of the Silicon Division in Elkem and member of the Corporate Management Board. Aasheim has also work experience from Arthur Andersen & Co.
Education: Master's Degree in Economics and Business Administration (siviløkonom) from the Norwegian School of Economics (NHH). State authorized public accountant, certified from NHH
External directorships: none

Einar Glomnes

Key experience: Senior Vice President and Head of Global Joint Ventures in Primary Metals, General Manager Hydro Aluminium Asia, Vice President Metal Markets/Corporate Strategy/Energy/International Oil&Gas, Lawyer Corporate Legal Department. Prior to Hydro, Glomnes worked as Engagement Manager in McKinsey & Co and as a corporate lawyer in Schjødt law firm
Education: LLM Columbia University School of Law, Cand. jur. University of Oslo
External directorships: Member of Investment Committee Verdane Capital

Egil Hogna

Key experience: President & Chief Executive Officer in Sapa. Head of Downstream in Yara International, CFO in Yara, Head of Mediterranean in Yara. VP Supply Chain Metal Products in Hydro. Consultant at McKinsey & Company
Education: Master of Science degree from the Norwegian university of science and technology (NTNU), and an MBA from INSEAD, France
External directorships: None

Eivind Kallevik

Key experience: Chief Financial Officer, Head of Finance Bauxite and Alumina. In 2011, when Hydro took over Vale`s aluminium activities in Brazil, Kallevik became Head of Finance in Bauxite & Alumina, a positio he held until he was appointed CFO of Norsk Hydro ASA. Previosly he was responsible for integration planning of all functional areas in the Vale deal, Head of Corporate Financial Reporting, Performance and Tax, Head of Finance Aluminium Products, Head of Business Controlling Hydro Aluminium. Prior to Hydro, Kallevik served 6 years of oil and gas financing in Christiania Bank og Kreditkasse in New York and Oslo.
Education: Master of Business Administration from University of San Francisco
External directorships: Member of Eurometaux Management Committee

Pål Kildemo, CFO

Key experience: Executive Vice President and Chief Financial Officer (CFO) of Norsk Hydro ASA and has been member of the Corporate Management Board since May 2019. Kildemo has worked in Hydro since 2008 and has held several key positions in the company, including Head of Investor Relations and latest Head of Finance in Primary Metal. Kildemo was acting Executive Vice President of Primary Metal from May 8, 2019, until he became Chief Financial Officer on August 15, 2019.
Education: Master's degree in Economics and Finance from Heriot-Watt University, Edinburgh, Scotland, 2008 and joined Hydro the same year as trainee in Energy.
External directorships: Board member in Future Leaders Global

Anne-Lene Midseim

Key experience: Company Secretary; Head of Staffs in Bauxite & Alumina; Head of Corporate Social Responsibility; and Legal Counsel in Hydro. Resident Legal Advisor in East-Timor, Oil for development program, Lawyer for Norwegian law firm Vogt & co, Executive Officer in the Ministry of Oil and Energy
Education: Candidate in Jurisprudence (cand. jur.) from University of Oslo
External directorships: Board member Gassco AS. Chairperson of the Board of Industriforsikring AS

Arvid Moss

Key experience: Executive Vice President Energy since 2010 and acting Head of Corporate Strategy and Business Development since 2019. Moss came to Hydro in 1991 and has held several senior management positions among them Project leader for the oil and gas merger agreement with Statoil, Head of Metal Products (2004-2006) and Head of Automotive Structures (1996-2001). Previously State Secretary and Chief of Staff in the Norwegian Prime Minister's office.
Education: Master's Degree in Economics and Business Administration (siviløkonom) from the Norwegian School of Economics (NHH)
External directorships: President of the Confederation of Norwegian Enterprise (NHO) since 2017

Hilde Vestheim Nordh

Key experience: Head of HSE & HR in Energy, HSE manager Karmøy, Cast house manager Karmøy
Education: MSc in Materials Technology, Rheinisch Westfälische Technische Hochschule (RWTH), Aachen
External directorships: None

Inger Sethov

Key experience: Head of Communication & Public Affairs in Hydro and has worked in Hydro Communication since 2005, as SVP of Communication since 2008 and as EVP of Communications & Public Affairs since 2015. Before joining Hydro, Sethov worked as correspondent and journalist for Reuters news agency for nine years and before that as journalist for Dow Jones Newswires and for Fresno Business Journal in California, US.
Education: BA Mass Communication & Journalism, California State University Fresno and International journalism studies at City University of London.
External directorships: None

John Thuestad

Key experience: Head of Extrusion Europe in Hydro. 30 years operational and leadership experience from the aluminium industry.
Education: Master's degree in Metallurgy (sivilingeniør), Norwegian University of Science and Technology (NTNU), MBA Carnegie Mellon University Pittsburgh
External directorships: Thuestad is a member of the Executive committee of International Aluminum Association (IAI) on behalf of Hydro. Board member Yara International ASA

Paul Warton

Key experience: 10 years as global BU President Automotive Structures & Industry at aluminium company Constellium. Prior to that, he has 17 years of experience in the global aluminium extrusion industry with leadership positions in Sapa, Alcoa and Luxfer Group. 10 years manufacturing and commercial leadership positions in tier 1 automotive companies at Federal Mogul and GKN
Education: BSc University of Birmingham, UK and MBA from London Business school
External directorships: None

Helena Nonka has been appointed EVP Corporate Development, and will start in the position April 1, 2020, replacing Arvid Moss who has acted in the position in addition to his responsibility as EVP Energy. Inger Sethov has decided to leave Hydro and will stay on as EVP Communication & Public Affairs until June 30, 2020 at the latest.

Governance bodies

Description	Developments and events during the reporting year	References
General meeting of shareholders
Company shareholders exercise ultimate authority through the general meeting. Shareholders registered in VPS, the Norwegian Central Securities Depository, five working days in advance of the general meeting of shareholders can vote in person or by proxy. Invitations are sent to shareholders or to the shareholder's security deposit bank.	General meeting in May	The protocols can be found at www.hydro.com/governance
The general meeting of shareholders: • Elects the shareholders' representatives to the corporate assembly • Determines the remuneration of the corporate assembly • Elects the external auditor and approves the auditor's remuneration • Approves the statutory report according to Norwegian requirements and financial statements, including the dividend proposed by the board of directors and recommended by the corporate assembly • Elects the nomination committee and determines their remuneration • Deals with any other matters listed in the notice convening the meeting Shareholders may, at least four weeks before an ordinary general meeting, request in writing that proposals for resolutions are submitted to the general meeting, or that items are added to the agenda.
Corporate assembly
Normally eighteen members. Twelve are elected by the general meeting of shareholders, six are elected by and among the group's employees in Norway. The members are elected for a period of up to two years. In accordance with Norwegian law, the corporate assembly: • Elects the board of directors and determines their remuneration	Four meetings. 99 percent meeting attendance. Members: Terje Venold (chairperson), Susanne Munch Thore (deputy chairperson), Berit Ledel Henriksen, Shahzad Abid, Unni Steinsmo, Jorunn Johanne Sætre, Odd Arild Grefstad, Nils M. Huseby, Anne Kverneland Bogsnes, Birger Solberg, Rolf Arnesen, Bjørn Petter Moxnes, Einar Øren, Svein Kåre Sund, Ørjan Norman, Andreas Bakken.	Note 9.4 to the consolidated financial statements for remuneration and share ownership Articles of association §§ 7-8 at www.hydro.com/governance
• Nominates the external auditor to be elected by the general

meeting of shareholders • Based on recommendations from the board of directors,
makes decisions in matters relating to investments that are substantial in relation to Hydro's resources, and when closures and reorganizations will lead to significant changes for the workforce
Provides recommendations to the general meeting of shareholders with respect to approval of the board of directors' proposal regarding the financial statements and dividend

Kjetil Houg and Elisabeth Heggelund Tørstad became new members as of 2020-05-11. Ylva Lindberg stepped down as of 2020-05-11 Nils Bastiansen stepped down as of 2020-05- 11.

Deputy members: Hilde C. Bjørnland, Gisle L. Johansen, Hans Henrik Kloumann, Jon Martin Bratthammer, Lars Kjetil Skeie, Tone Hjelmtvedt, Morten Sundheim Jensen, Rune Guttormsen, Jan Einan. Nils Bastiansen became a new deputy member

Nomination committee

Minimum three and maximum four members appointed by the general meeting of shareholders. The chairperson of the committee and at least one of the other members shall be elected among the shareholder-elected corporate assembly members.

Nominates candidates to the board of directors, the corporate assembly and the nomination committee, and proposes remuneration to the board, its sub-committees, the corporate assembly and the nomination committee.

15 meetings. 100 percent meeting attendance.

as of 2020-05-11.

Members: Terje Venold (chairperson) Morten Strømgren Berit Ledel Henriksen Nils Bastiansen became a new member as of 2020-05-11. Susanne Munch Thore stepped down as of 2020-05-11.

Articles of association § 5A and biographical information can befound at www.hydro.com/governance

Board of directors

The board of directors currently holds 10 members. Seven are elected by the corporate assembly, three elected by and among the company's employees in Norway, for a period of up to two years. In addition, the board has invited an informal observer, representing the former Sapa employees, to attend the board meetings, until the next ordinary election of employee representatives.

In accordance with Norwegian law, the board of directors assumes the overall governance of the company, ensures that appropriate management and control systems are in place and 13meetings. 96 percent meeting attendance.

The Board of Directors is closely following the market and macroeconomic developments relevant for the aluminum industry.

Biographical information on the board members on page 133.

Description	Developments and events during the reporting year	References
supervises the day-to-day management as carried out by the President and CEO.	as cyber security improvement initiatives. The board has conducted several deep dives throughout the year, including Hydro's human rights management and the business areas Aluminium Metal and Energy. Extraordinary meetings have been held to handle critical matters, including measures to address the Covid-19 situation.
	The board of directors conducts an annual self-assessment of its work competence, and cooperation with management and an assessment of the chairperson. Also the Board Audit Committee performs a self-assessment. The review was facilitated by the corporate advisory firm Egon Zehnder. The main conclusions of the assessment were submitted to the nomination committee, which in turn assessed the board`s composition and competence.
All shareholder-elected members are external. No members elected by employees are part of the company's executive management. Employee directors have no other service contractual agreements with the company outside of their employee contracts, though they are subject to their duties as board members. The board of directors has an annual plan for its work. It includes recurring topics such as strategy review, business planning, risk and compliance oversight, financial reporting, people strategy, succession planning as well as HSE and CSR.	All shareholder-elected members were in 2020 deemed to be independent according to the Norwegian standards. None of the company's non-employee board members had any other service contractual agreements with the company. Thomas Schulz is the CEO of the listed company FLSchmidt. Sales and purchases between FLSchmidt and fully owned Hydro subsidiaries totaled DKK 34 741 176 in 2020. Schulz was not directly involved in these transactions.	Note 9.4 to the consolidated financial statements for remuneration, share ownership and loans.
Compensation and people committee
Consists of three of the board of directors' members.	9 meetings. 100 percent meeting attendance.	The mandate can be found at www.hydro.com/governance
The committee reviews the performance of and puts forward proposals regarding the compensation of the President & CEO to the board of directors. The committee assists in evaluating the compensation of the corporate management board and in determining performance-promoting schemes for management.	Members: • Dag Mejdell (chairperson) • Irene Rummelhoff • Sten Roar Martinsen1) 1) Martinsen is employed in Hydro and represents the employees through the Norwegian Confederation of Trade Unions (LO). We believe that such reliance does not adversely affect, in any material
	way, the ability of the compensation committee to act independently or to satisfy the other requirements.
Audit committee
Consists of four of the board of directors' members. The audit committee meets Norwegian requirements regarding independence and competence.	10 meetings. 100 percent meeting attendance. For self-assessment, see information on the Board of directors above.	The mandate can be found at www.hydro.com/governance
The primary function of the Audit committee is to assist the Board in exercising its oversight responsibility, with respect to the integrity of the company's financial statements, the company's financial reporting processes and internal controls, the company's risk assessment and risk management policies, the qualifications, independence of the external auditor, the performance of the company's internal audit function, and the company's compliance system.	Members: • Marianne Wiinholt (chairperson) • Liselott Kilaas • Rune Bjerke • Ellen Merete Olstad2) 2) Olstad is employed in Hydro and represents the employees through the Central Cooperative Council. Olstad became a new member as of	Pre-approval of audit services on page 133
To ensure the independence of the internal audit function, the head of Internal Audit reports functionally to the board through the audit committee. The head of Group Compliance has a dotted reporting line to, and meets regularly, with the audit committee.	2020-09-10 replacing Svein Kåre Sund. We believe that such reliance does not adversely affect, in any material way, the ability of the audit committee to act independently or to satisfy the other requirements.
The audit committee maintains a pre-approval policy governing the engagement of the company's primary and other external auditors to ensure auditor independence.
President & CEO and corporate management board
According to Norwegian corporate law, the President & CEO	30 meetings in 2020	Biographical information on

constitutes a formal governing body that is responsible for the daily management of the company. The division of functions and responsibilities between the President & CEO and the board of directors is defined in greater detail in the rules of procedures established by the board.

The Corporate Management Board (CMB), including the President & CEO, has a shared responsibility for promoting Hydro's objectives and securing the company's property, organization and reputation. Members of the CMB are also Executive vice presidents (EVPs) with responsibility for the respective business areas and corporate staffs.

Paul Warton was appointed EVP Extruded Solutions with effect from 2021-02-01. Egil Hogna stepped down as of 2020-12-01, Erik Fossum acted as interim EVP Extruded Solutions from 2020-12-01-2021-02-01.

page 135

Note 9.1 and 9.2 to the consolidated financial statements for remuneration, share ownership and loans.

Financial statements

140 Annual Report 2020 Consolidated financial statements Hydro

Consolidated financial statements

Notes to the consolidated financial statements

146 Section 1 General information
Note 1.1 Reporting entity and basis of presentation
Note 1.2 Measurement of fair value
Note 1.3 Significant events
Note 1.4 Operating and geographic segment information
Note 1.5 Significant subsidiaries and changes to the consolidated group
155 Section 2 Long-lived assets
Note 2.1 Property, plant and equipment
Note 2.2 Intangible assets
Note 2.3 Goodwill
Note 2.4 Depreciation and amortization expense
Note 2.5 Impairment of non-current assets
Note 2.6 Leases
Note 2.7 Other non-current assets
167 Section 3 Investments in other companies
Note 3.1 Investments in joint arrangements and associates
170 Section 4 Uncertain assets and liabilities
Note 4.1 Uncertain assets and liabilites
174 Section 5 Income and expenses
Note 5.1 Revenue from contracts with customers
Note 5.2 Other income
Note 5.3 Raw material and energy expense
177 Section 6 Specification of working capital related items
Note 6.1 Inventories
Note 6.2 Trade and other receivables
Note 6.3 Trade and other payables
178 Section 7 Capital management, cash and cash management
Note 7.1 Capital management
Note 7.2 Cash
Note 7.3 Short-term investments
Note 7.4 Short and long-term debt
Note 7.5 Financial income and expense
Note 7.6 Shareholders' equity
Note 7.7 Dividends
185 Section 8 Financial risk and financial instruments
Note 8.1 Financial and commercial risk management
Note 8.2 Financial instruments
Note 8.3 Derivative instruments and hedge accounting
197 Section 9 Related parties and remuneration
Note 9.1 Board of Directors' statement on executive management remuneration
Note 9.2 Management remuneration
Note 9.3 Employee remuneration
Note 9.4 Board of Directors and Corporate Assembly
Note 9.5 Employee retirement plans
Note 9.6 Other related party information
206 Section 10 Other
Note 10.1 Income taxes
Note 10.2 Research and development
Note 10.3 Cash flow information
Note 10.4 Auditor's remuneration
Note 10.5 Changes in accounting principles and new pronouncements
Financial statements Norsk Hydro ASA
Notes to the financial statements Norsk Hydro ASA
Responsibility Statement
Independent auditor's report
Statement of the Corporate Assembly

Consolidated financialstatements

Consolidated income statements

Amounts in NOK million (except per share amounts). Years ended December 31	Notes	2020	2019
Revenue	1.4, 5.1	138,118	149,766
Share of the profit (loss) in equity accounted investments	1.4, 3.1	223	241
Other income, net	5.2	7,519	1,000
Total revenue and income		145,861	151,007
Raw material and energy expense	5.3	84,592	97,474
Employee benefit expense	9.3	23,767	24,871
Depreciation and amortization expense	2.4	8,374	8,572
Impairment of non-current assets	2.5	3,879	912
Other expense		17,917	18,678
Total expense		138,529	150,508
Earnings before financial items and tax		7,332	499
Finance income	7.5	290	365
Finance expense	7.5	(5,013)	(2,420)
Finance income (expense), net		(4,723)	(2,055)
Income (loss) before tax		2,609	(1,556)
Income taxes	10.1	(950)	(813)
Net income (loss)		1,660	(2,370)
Net income (loss) attributable to non-controlling interests		(185)	(558)
Net income (loss) attributable to Hydro shareholders		1,845	(1,811)
Basic and diluted earnings per share attributable to Hydro shareholders	7.6	0.90	(0.88)

The accompanying notes are an integral part of the consolidated financial statements.

Consolidated statements of comprehensive income

Amounts in NOK million. Years ended December 31	Notes	2020	2019
Net income (loss)		1,660	(2,370)
Other comprehensive income
Items that will not be reclassified to income statement
Remeasurement postemployment benefits, net of tax	7.6	(926)	(443)
Unrealized gain (loss) on securities, net of tax	7.6, 8.2	(156)	(664)
Total		(1,081)	(1,107)
Items that will be reclassified to income statement
Currency translation differences, net of tax	7.6	(4,689)	(576)
Cash flow hedges, net of tax	7.6, 8.3	120	19
Share of other comprehensive income that will be reclassified to income statement of equity accounted investments, net of tax	7.6	-	32
Total		(4,568)	(526)
Other comprehensive income		(5,650)	(1,633)
Total comprehensive income		(3,990)	(4,003)
Total comprehensive income attributable to non-controlling interests		(867)	(631)
Total comprehensive income attributable to Hydro shareholders		(3,123)	(3,372)

The accompanying notes are an integral part of the consolidated financial statements.

Consolidated balance sheets

Amounts in NOK million, December 31	Notes	2020	2019

Assets
Cash and cash equivalents Short-term investments	7.2 7.3	17,638 4,091	12,286 969
Trade and other receivables	6.2		18,959
Inventories	6.1	18,364	20,816
		19,492
Other current financial assets	8.2	470	635
Total current assets		60,055	53,665
Property, plant and equipment	2.1	64,245	74,243
Intangible assets	2.2, 2.3	9,357	11,501
Investments accounted for using the equity method	3.1	17,288	11,501
Other non-current assets	2.7, 8.2	4,191	4,817
Prepaid pension	9.5	7,064	6,676
Deferred tax assets	10.1	2,207	1,998
Total non-current assets		104,352	110,736

Total assets		164,408	164,401
Liabilities and equity
Bank loans and other interest-bearing short-term debt	7.4	4,748	6,157
Trade and other payables	6.3	18,948	18,692
Provisions	4.1	2,935	3,296
Taxes payable		1,434	1,311
Other current financial liabilities	8.2	983	235
Total current liabilities		29,048	29,691

Long-term debt	7.4	24,811	18,858
Provisions	4.1	5,605	6,515
Pension liabilities	9.5	19,167	17,099
Other non-current financial liabilities	8.2	3,293	2,992
Other liabilities		1,980	2,033
Deferred tax liabilities	10.1	3,059	3,132
Total non-current liabilities		57,916	50,629

Total liabilities		86,964	80,320

Share capital	7.6	2,272	2,272
Additional paid-in capital	7.6	29,106	29,123
Treasury shares	7.6	(662)	(711)
Retained earnings		52,028	52,745
Other components of equity	7.6	(8,464)	(3,496)
Equity attributable to Hydro shareholders		74,279	79,932
Non-controlling interests		3,165	4,148
Total equity		77,444	84,081
Total liabilities and equity		164,408	164,401

The accompanying notes are an integral part of the consolidated financial statements.

Consolidated statements of cash flows

Amounts in NOK million. Years ended December 31	Notes	2020	2019
Operating activities
Net income (loss)		1,660	(2,370)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and impairment	2.4, 2.5	12,253	9,485
Share of profit in equity accounted investments		(223)	(241)
Dividends received from equity accounted investments	3.1	979	222
Deferred taxes		(1,156)	(699)
Loss (gain) on sale of non-current assets		(5,239)	85
Net foreign exchange loss	7.5	3,861	1,204
Net sales (purchases) of trading securities		(38)	98
Capitalized interest	7.5	(14)	(44)
Changes in assets and liabilities that provided (used) cash:
Trade and other receivables		1,091	1,869
Inventories		1,075	5,552
Trade and other payables		253	(1,812)
Derivatives		629	(29)
Other items		(1,616)	(770)
Net cash provided by operating activities	10.3	13,515	12,550
Investing activities
Purchases of property, plant and equipment		(6,287)	(8,726)
Purchases of other long-term investments		(231)	(698)
Purchases of short-term investments		(6,480)	(52)
Proceeds from sales of property, plant and equipment		261	129
Investment grants received		66	60
Proceeds from sales of other long-term investments		361	96
Proceeds from sales of short-term investments		3,985	18
Net cash used in investing activities		(8,325)	(9,173)
Financing activities
Loan proceeds		12,060	15,881
Loan repayments		(8,167)	(10,090)
Net decrease in other short-term debt		(221)	(257)
Proceeds from shares issued		25	26
Dividends paid		(2,628)	(2,649)
Net cash provided by financing activities		1,069	2,911
Foreign currency effects on cash		(907)	3
Net increase in cash and cash equivalents		5,352	6,291
Cash and cash equivalents at beginning of year		12,286	5,995
Cash and cash equivalents at end of year		17,638	12,286

The accompanying notes are an integral part of the consolidated statements.

Consolidated statements of changesin equity

Amounts in NOK million	Notes	Share capital	Additional paid-in capital	Treasury shares	Retained earnings	Other components of equity	Equity attributable to Hydro share holders	Non-control ling interests	Total equity
January 1, 2019		2,272	29,126	(756)	57,114	(1,936)	85,820	4,936	90,756

Treasury shares issued to employees	7.6		(3)	45			42		42
Dividends	7.7				(2,558)		(2,558)	(159)	(2,717)
Capital contribution in subsidiaries								2	2
Total comprehensive income for the year					(1,811)	(1,560)	(3,372)	(631)	(4,003)
December 31, 2019		2,272	29,123	(711)	52,745	(3,496)	79,932	4,148	84,081
Treasury shares issued to employees	7.6		(18)	49			32		32
Non-controlling interest in subsidiaries sold								(54)	(54)
Dividends	7.7				(2,561)		(2,561)	(65)	(2,626)
Capital contribution in subsidiaries								2	2
Total comprehensive income for the year					1,845	(4,968)	(3,123)	(867)	(3,990)
December 31, 2020		2,272	29,106	(662)	52,028	(8,464)	74,279	3,165	77,444

The accompanying notes are an integral part of the consolidated statements.

Oslo, March 9, 2021

Dag Mejdell

Chair

Rune Bjerke

Board member

Sten Roar Martinsen Board member

Marianne Wiinholt Board member

Irene Rummelhoff Deputy chair

Liselott Kilaas Board member

Ellen Merete Olstad Board member

Arve Baade Board member

Peter Kukielski Board member

Thomas Schulz Board member

Hilde Merete Aasheim President and CEO

Notesto the consolidated financialstatements

Section 1 – General information

Note 1.1Reporting entity, basis of presentation and significant accounting policies

The reporting entity reflected in these financial statements comprises Norsk Hydro ASA and consolidated subsidiaries (Hydro). Hydro is headquartered in Oslo, Norway, and the group employs around 34,000 people in about 40 countries. Hydro is a global supplier of aluminium with operations throughout the industry value chain. Operations include power production, bauxite extraction, alumina refining, aluminium smelting, remelting and recycling, rolling activities, and extruded solutions. The Board of Directors and the President and CEO authorized these financial statements for issue on March 9, 2021. Hydro is listed on the Oslo stock exchange, Oslo Børs.

Basis of presentation

The consolidated financial statements of Norsk Hydro ASA and its subsidiaries are prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union (EU) and Norwegian authorities and effective as of December 31, 2020. Hydro also provides the disclosures as specified under the Norwegian Accounting Act (Regnskapsloven).

The financial statements have been prepared on a historical cost basis except for certain assets, liabilities and financial instruments, which are measured at fair value. Preparation of financial statements including note disclosures requires management to make estimates and assumptions that affect amounts reported. Actual results may differ.

The functional currency of Norsk Hydro ASA is the Norwegian krone (NOK). The Hydro group financial statements are presented in NOK.

As a result of rounding adjustments, the figures in one or more columns included in the financial statements may not add up to the total of that column.

Interest rates used for calculating net present values are rounded to the nearest 10 basis points for post-employment benefits, to the nearest 25 basis points for other non-financial assets and liabilities.

Significant estimates and judgement

The application of accounting policies requires that management makes estimates and judgements in determining certain revenues, expenses, assets and liabilities. The following areas involve a significant degree of judgement and complexity, and may result in significant variation in amounts.

Impairment of non-current assets, discussed in note 2.5 Impairment of non-current assets
Uncertain assets and liabilities, discussed in section 4 Uncertain assets and liabilities
Uncertain tax positions, discussed in note 10.1 Income taxes
Business combinations, impacting such items as long-lived assets and uncertain assets and liabilities, discussed in note 1.5 Significant subsidiaries and changes to the consolidated group
Financial instruments, discussed in section 8 Financial risk and financial instruments
Employee retirement plans, discussed in note 9.5 Employee retirement plans

Significant accounting policies

The following description of accounting principles applies to Hydro's 2020 financial reporting, including all comparative figures. The relevant accounting policies for relevant items are described in the specific notes in this set of financial statements.

Income statements and statements of comprehensive income

Hydro has elected to present a separate income statement and a separate statement of comprehensive income, rather than a combined statement. Further, Hydro presents an analysis of expenses based on their nature as a common analysis of expenses through Hydro's value chain. Hydro has elected to present a sub-total Earnings before financial items and tax (EBIT). This measure is also used as a segment profit measure. The share of the profit (loss) in equity accounted investments is included in this sub-total because the majority of such investments are operationally integrated with Hydro's businesses. Results from such investments are managed as part of Hydro's operating activities with significant transactions between the majority of these investments and Hydro. Return on other equity investments is not as closely related to the business activities in Hydro, and hence classification as finance income better reflects the way such investments are managed.

Gains and losses on disposal of non-current assets are presented net, as well as expenditures related to provisions that are reimbursed by a third party. However, insurance compensation and government grants are reported on a gross basis.

Statements of cash flows

Hydro uses the indirect method to present cash flows from operating activities. Interest and dividends received as well as interest paid are included in cash flows from operating activities. Dividends paid are included in cash flows from financing activities.

Basis of consolidation

The consolidated financial statements include Norsk Hydro ASA and subsidiaries, which are entities in which Hydro has the power to govern the financial and operating policies of the entity (control). Control is normally achieved through ownership, directly or indirectly, of more than 50 percent of the voting power. Currently, Hydro has more than 50 percent of the voting power in close to all subsidiaries. Subsidiaries are included from the date control commences until the date control ceases.

Intercompany transactions and balances have been eliminated. Profit and loss resulting from intercompany transactions have been eliminated.

Non-controlling interests

Non-controlling interests represent equity interests in subsidiaries held by other owners than Hydro. Non-controlling interests are reported as a separate section of the Group's equity in accordance with IFRS 10 Consolidated Financial Statements. Results attributed to non-controlling interests are based on ownership interest, or other method of allocation if required by contract.

Transactions between non-controlling shareholders and the group

Sales and purchases of equity interests and equity contributions not resulting in Hydro gaining or losing control of a subsidiary are reported as equity transactions in accordance with IFRS 10. No gain, loss or remeasurement of values of recognized assets, liabilities or goodwill are recognized as a result of such transactions.

Assets held for sale and Income from discontinued operations

Assets held for sale are reported separately in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, provided that the sale is highly probable, which includes the criteria that management is committed to the sale, and that the sale will be completed within one year. Assets held for sale are not depreciated but are measured at the lower of carrying value and the fair value less costs to sell for the asset group. Assets are not reclassified in prior period balance sheets. Immaterial disposal groups are not reclassified.

A discontinued operation is a component of Hydro that is held for sale or has been disposed of. A discontinued operation is a separate major line of business or geographical area of operations. Related cash flows, results of operations and gain or loss from disposal are reported separately as Income (loss) from discontinued operations.

Assets held for sale, liabilities in disposal groups and income and expense from discontinued operations are excluded from specifications presented in the notes unless otherwise stated.

Foreign currency transactions

Transactions in foreign currencies are initially recorded in the functional currency of the transacting entity by applying the rate of exchange as of the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the rate of exchange at the balance sheet date. Currency gains or losses are included in Finance expense.

Foreign currency translation

For consolidation purposes, the financial statements of subsidiaries with a functional currency other than Norwegian kroner (NOK) are translated into NOK. Assets and liabilities, including investment in associates, joint ventures and goodwill, are translated using the rate of exchange as of the balance sheet date. Income, expenses and cash flows are translated using the average exchange rate for the reported period. Goodwill is recognized in the predominant functional currencies in the acquired businesses. Translation adjustments are recognized in Other comprehensive income and accumulated in Currency translation differences in Other components of equity. On disposal of such subsidiary, joint venture or associate, the cumulative translation adjustment of the disposed entity is recognized in the income statement as part of the gain or loss on disposal.

Note 1.2 Measurement of fair value

Hydro measures certain assets and liabilities at fair value for the purpose of recognition or disclosure. Recurring fair value measurement is used primarily for financial instruments, see section 8 Financial risk and financial instruments. Non-recurring fair value measurement is used for transactions, such as business combinations, divestments with non-cash consideration and certain other non-routine transactions. Fair value is estimated using inputs which are to varying degree objectively observable. Certain items are valued on the basis of quoted prices in active markets for identical assets or liabilities (level 1 valuations), others are valued on the basis of inputs that are derived from observable prices (level 2 valuations), while certain positions are valued on the basis of judgmental assumptions that are to a limited degree or not at all based on observable market data (level 3 valuations).

Financial instruments

The estimated fair value of Hydro's financial instruments is based on market prices and valuation techniques. Valuations are made with the objective to include relevant factors that market participants would consider in setting a price, and to apply accepted economic and financial methodologies for the pricing of financial instruments. References for less active markets are carefully reviewed to establish relevant and comparable data. Extrapolations and other accepted valuation techniques are employed in periods with few or no transactions, such as for long-term commodity contracts in markets with few observations beyond the short or mid-term period.

Hydro's estimated credit spread for similar liabilities is used when determining the fair value of financial instruments where Hydro is net liable. Hydro determines the appropriate discount factor and credit spread for financial assets based on both an individual and on a portfolio assessment.

Equity securities

Fair value for unlisted shares is based on commonly accepted valuation techniques utilizing significant unobservable data, primarily cash flow-based models. To the extent there are transactions in such shares, the transaction price is assessed and, to the extent comparable to rights embodied in the investment held by Hydro, used for reference. For investments where share holdings are associated with offtake rights and/or obligations or other specific clauses, those rights and obligations are included in the valuation of the equity securities. Fair value for listed shares is based on quoted market prices as of the balance sheet date.

Debt instruments

Fair value for unlisted debt instruments is estimated primarily through cash flow models using contractual cash flow where relevant, and discount rates reflecting the perceived credit risk and other relevant risks associated with the instrument. Fair value for listed instruments is based on quoted market prices as of the balance sheet date.

Derivatives

Fair value of financial derivatives with a currency or interest rate as underlying is estimated as the present value of future cash flows, calculated by reference to quoted swap price curves and exchange rates as of the balance sheet date. For derivatives covering a period beyond the liquid period of price curves, the curves are extrapolated using unobservable data.

Fair value of commodity derivatives is measured as the present value of future cash flows, calculated using forward curves and exchange rates as of the balance sheet date. Estimates from brokers and extrapolation techniques are applied for non-quoted products and periods to achieve the most relevant forward curve. In addition, when deemed appropriate, correlation techniques between commodities are applied. Options are revalued using option pricing models, and credit spreads are applied where deemed to be significant. Markets are assessed to determine whether they are active for the relevant instruments. Currency and interest markets are considered liquid for the periods used for price references, and thus applied unadjusted. For aluminium contracts priced to observations at the London Metal Exchange (LME), liquidity is considered good for the first few years, with fewer transactions for longer durations. For electricity contracts priced to the electricity exchange Nasdaq OMX, liquidity is considered good for the first two years. For longer durations there are fewer transactions and higher uncertainty. Similar assessment is made for other markets used for price references. For less liquid periods, adjustments to remove outliers and extrapolation techniques are applied.

Embedded derivatives

Hydro measures embedded forward contracts that are separated from the host contract by comparing the forward curve at contract inception to the forward curve as of the balance sheet date. Changes in the present value of the cash flows related to the embedded derivative are recognized in the balance sheet with changes in the fair value recognized in the income statement. Forward curves are established as described above under Derivatives.

Note 1.3 Significant events

The following significant events have impacted Hydro in 2020, or are expected to impact Hydro in 2021:

The Covid 19 pandemic has impacted our markets, our ability to operate plants as normal and our employees. The uncertainty has been high, and visibility limited. As vaccines started to be rolled out towards the end of the year, the economic recovery is expected to come earlier than anticipated early in the pandemic, however, there is still significant uncertainty related both to the development of the pandemic as such and to market recovery.

A strategic review of Hydro Rolling was initiated in May 2019. As part of the review Hydro has considered future ownership strategies for this business. It has been concluded that the business can better be developed outside Hydro, and an agreement to sell the business to KPS Capital Partners was reached on March 5. The criteria for reporting the business as Held for sale and Discontinued operations, as described in note 1.1 Reporting entity, basis of presentation and significant accounting policies was reached short time before the transaction was agreed, and will be reflected in financial reporting for future periods. The sold business comprises the Hydro Rolling segment, and related pension liabilities and certain support functions reported as part of Other activities. The transaction is expected to be completed in the second half of 2021. The review also resulted in rationalization efforts with an estimated cost of NOK 1 billion which was provided for in 2019. Further provisions of about NOK 100 million was recognized in 2020 to cover additional improvement initiatives. A large part of the cost is related to employee compensation for termination of employment and early retirement. A significant share of the cash outflows was made in 2020, and the majority of remaining cash outflows will be made during 2021.

In October 2020 Hydro entered into an agreement with Lyse to combine power production assets. The transaction was completed on December 31, 2020. Hydro contributed its subsidiaries holding the Røldal-Suldal power plants into Lyse Kraft DA, a company owned 25.6 percent by Hydro and 74.4 percent by Lyse. Lyse Kraft DA is a subsidiary of Lyse AS, and an associate for Hydro. The transaction represents sale of subsidiaries and acquisition of an ownership share in an associate. The transaction is accounted for at estimated fair value, resulting in a gross gain of NOK 7.1 billion, of which 25.6 percent was eliminated as unrealized, resulting in a recognized gain of NOK 5.3 billion. Under the agreement, Hydro and Lyse both will receive their relative share of the power produced by Lyse Kraft DA and pay operational expenses incurred by the entity.

Alunorte, an alumina refinery in Brazil which is part of Hydro Bauxite & Alumina was partly curtailed after a court decision in 2018 following an extreme rainfall and alleged harmful spills into surrounding areas. A court decision in March 2018 required Alunorte to limit production to 50 percent of its capacity. In May 2019, the court lifted the embargo, allowing Alunorte to ramp up towards normal production. In September 2019, the court lifted the final embargo related to the new bauxite residue deposit area (DRS2), allowing commissioning activities to resume. The partial embargo significantly impacted alumina production in Hydro Bauxite & Alumina, and also impacted availability and price of alumina in the world market, thus impacted the prices for alumina produced and sold by Hydro Bauxite & Alumina, and the cost for alumina purchased and consumed by Hydro Aluminium Metal. During 2020, ramp-up towards full capacity continued as additional press filter capacity was added, and the production optimization continued. At the end of 2020, Alunorte has reached normal production levels.

Hydro experienced a significant cyber-attack on March 19, 2019. The attack affected the entire organization, with Hydro Extrusions having suffered the most significant operational challenges. The main impact on financial results was lost sales resulting from lost production ability and ability to receive and process sales order mainly in a period in March and April 2019. In addition, costs have been incurred to remediate impacted systems and data. The financial impact is estimated to be around NOK 800 million to NOK 1 billion. Hydro has received a total of NOK 769 million in insurance compensation related to the event, of which NOK 216 million was recognized in 2019 and NOK 553 million was recognized in 2020.

Note 1.4 Operating and geographic segment information

Hydro identifies its reportable segments and discloses segment information under IFRS 8 Operating Segments, which requires Hydro to identify its segments according to the organization and reporting structure used by management. Operating segments are components of a business that are evaluated regularly by the chief operating decision maker for the purpose of assessing performance and allocating resources. Hydro's chief operating decision maker is the President and CEO. Generally, financial information is required to be disclosed on the same basis that is used by the CEO.

Hydro's operating segments represent separately managed business areas with products serving different markets, or distinct elements of the business separately followed up and reported to the chief operating decision maker. Hydro's reportable segments are the business areas Hydro Bauxite & Alumina, Hydro Aluminium Metal, Hydro Rolling, Hydro Extrusions, and Hydro Energy, as well as the Hydro Metal Markets activities which are managed combined with Hydro Aluminium Metal.

Hydro Bauxite & Alumina activities includes bauxite mining activities, production of alumina and related commercial activities, primarily the sale of alumina.

Hydro Aluminium Metal includes primary aluminium production, remelting and casting activities. The main products are comprised of extrusion ingots, foundry alloys, sheet ingot and standard ingot.

Hydro Metal Markets includes all sales activities relating to products from our primary metal plants and operational responsibility for stand-alone remelters as well as physical and financial metal trading activities.

Hydro Rolling includes Hydro's rolling mills and the dedicated primary metal plant in Neuss, Germany. The main products are comprised of aluminium foil, strip, sheet, and lithographic plate for application in such sectors as packaging, automotive and transport industries, building and general engineering, as well as for offset printing plates.

Hydro Extrusions delivers products within extrusion profiles, building systems and precision tubing, and is present in about 40 countries. The products are delivered to such sectors as construction, automotive and heating, ventilation and air conditioning.

Hydro Energy includes operating and commercial responsibility for Hydro's power stations in Norway, a trading and wholesale business in Brazil, and energy sourcing for Hydro's world-wide operations.

Other consist of Hydro's captive insurance company Industriforsikring, its industry parks, internal service providers, and certain other activities. Unallocated corporate activities are reported as part of Other.

Operating segment information

Hydro uses two measures of segment results, Earnings before financial items and tax - EBIT and EBITDA. EBIT is consistent with the same measure for the group, considering the principles for measuring certain intersegment transactions and contracts described below. Hydro defines EBITDA as Income (loss) before tax, financial income and expense, depreciation, amortization and write-downs, including amortization and impairment of excess values in equity accounted investments, less investment grants. Hydro's definition of EBITDA may be different from other companies. The two measures represent results with and without the charge for historic investments in production capacity and other fixed assets and are considered complementary.

Because Hydro manages long-term debt and taxes on a group basis, Income before tax and Net income is presented only for the group as a whole.

Intersegment sales and transfers reflect arm's length prices as if sold or transferred to third parties at the time of inception of the internal contract, which may cover several years. Transfers of businesses or fixed assets within or between Hydro's segments are reported without recognizing gains or losses. Results of activities not considered part of Hydro's main operations as well as unallocated revenues, expenses, liabilities and assets are reported together with Other under the caption Other and eliminations.

The accounting policies used for segment reporting reflect those used for the group. The following exceptions apply for intersegment transactions: Internal commodity contracts may meet the definition of a financial instrument in IFRS 9 or contain embedded derivatives that are required to be reported separately and valued at fair value under IFRS 9. However, Hydro considers these contracts as sourcing of raw materials or sale of own production, and accounts for such contracts as executory contracts. Certain other internal contracts may contain a lease arrangement. However, the segment reporting reflects the responsibility allocated by Hydro's management for those assets, and no internal embedded lease arrangement is identified. Costs related to certain pension schemes covering more than one segment are allocated to the operating segments based either on the premium charged or the estimated service cost. Any difference between these charges and pension expenses measured in accordance with IFRS, as well as pension assets and liabilities are included in Other and eliminations.

The following tables include information about Hydro's operating segments.

Amounts in NOK million	External revenue		Internal revenue		Share of the profit (loss) in equity accounted investments
	2020	2019	2020	2019	2020	2019
Hydro Bauxite & Alumina	13,381	12,255	9,658	10,550	-	-
Hydro Aluminium Metal	7,039	6,141	27,365	29,035	256	270
Hydro Metal Markets	37,893	40,164	8,972	10,287	-	-
Hydro Rolling	23,989	26,179	(86)	152	-	-
Hydro Extrusions	54,542	62,211	(47)	140	-	18
Hydro Energy	1,261	2,808	5,706	5,414	(39)	(29)
Other and eliminations	13	8	(51,568)	(55,577)	7	(18)
Total	138,118	149,766	-	-	223	241

	Depreciation, amortization and impairment1)		Earnings before financial items and tax (EBIT)2)		EBITDA
Amounts in NOK million	2020	2019	2020	2019	2020	2019
Hydro Bauxite & Alumina	2,011	2,509	1,672	749	3,683	3,258
Hydro Aluminium Metal	2,992	3,030	794	(1,838)	3,667	1,081
Hydro Metal Markets	149	129	766	748	913	875
Hydro Rolling	3,097	1,036	(1,965)	(865)	1,132	170
Hydro Extrusions	3,785	2,384	449	1,353	4,225	3,731
Hydro Energy	260	253	6,258	1,291	6,529	1,558
Other and eliminations	(41)	144	(642)	(939)	(683)	(795)
Total	12,253	9,485	7,332	499	19,465	9,878

	Non-current assets		Total assets3)		Investments4)
Amounts in NOK million	2020	2019	2020	2019	2020	2019

Hydro Bauxite & Alumina	23,478	30,565	29,416	37,332	1,685	2,294
Hydro Aluminium Metal	30,249	32,528	42,578	43,756	2,887	4,235
Hydro Metal Markets	1,597	1,413	8,286	7,470	148	173
Hydro Rolling	7,606	9,223	17,138	18,757	851	876
Hydro Extrusions	26,585	28,758	40,558	43,060	1,549	2,914
Hydro Energy	11,815	5,822	12,825	6,975	6,961	313
Other and eliminations	3,023	2,427	13,607	7,051	92	102
Total	104,352	110,736	164,408	164,401	14,174	10,907

1) Amounts include impairment, see note 2.5 Impairment of non-current assets.

2) Total segment Earnings before financial item and tax is the same as Hydro group's total Earnings before financial income and tax. Financial income and financial expenses are not allocated to the segments. There are no reconciling items between segment Earnings before financial items and tax to Hydro Earnings before financial items and tax. Therefore, a separate reconciling table is not presented.

3) Total assets exclude internal cash pool accounts and accounts receivable related to group relief.

4) Additions to property, plant and equipment (capital expenditures) plus long-term securities, intangible assets, long-term advances and investments in equity accounted investments, including amounts recognized in business combinations. Investments in Hydro Energy in 2020 includes the non-cash contribution of businesses to the newly formed associate Lyse Kraft DA by NOK 6,805 million.

The identification of assets, non-current assets and investments is based on location of operation. Included in non-current assets are investments in equity accounted investments; property, plant and equipment (net of accumulated depreciation) and non-current financial assets.

Operating revenues are identified by customer location.

	Revenue		Non-current assets		Investments1)
Amounts in NOK million	2020	2019	2020	2019	2020	2019

Norway	2,006	3,694	32,658	26,266	8,974	3,484
Germany	17,652	20,134	9,514	11,053	903	961
France	7,416	8,298	2,571	2,701	79	150
Poland	5,779	6,010	850	875	24	168
Spain	5,564	5,814	835	801	64	98
Italy	4,719	5,080	580	563	35	47
The Netherlands	2,847	3,815	1,318	1,319	157	84
Austria	2,783	2,843	357	378	22	14
Sweden	2,370	2,547	882	826	68	68
Belgium	2,049	1,975	983	1,167	36	73
Denmark	1,640	1,727	978	915	96	137
Czech Republic	1,508	1,691	1	1	-	-
Portugal	1,086	1,128	140	140	-	19
Hungary	977	1,070	1,161	1,090	107	90
Slovakia	892	851	484	938	101	282
Other	2,920	2,531	198	261	26	30
Total EU	60,201	65,513	20,853	23,028	1,718	2,222
United Kingdom	6,003	6,888	1,346	1,473	64	98
Switzerland	4,999	5,000	199	143	1	4
Turkey	2,429	2,188	4	4	-	-
Other Europe	1,380	1,725	-	-	-	-
Total Europe	77,019	85,008	55,059	50,913	10,757	5,808

USA	27,691	33,326	8,689	10,023	768	1,121
Canada	2,315	3,493	1,940	2,116	163	273
Brazil	6,114	6,244	26,044	33,940	2,302	3,044
Mexico	1,610	2,091	205	221	8	9
Other America	285	825	34	41	5	8
Japan	3,538	3,277	10	12	-	-
Singapore	4,741	3,236	6	7	4	-
China	4,411	2,794	696	658	96	46
Qatar	1,857	2,014	10,457	11,439	-	-
South Korea	1,260	1,334	-	-	-	-
India	1,116	955	151	204	4	12
Thailand	664	896	-	-	-	-
Taiwan	955	811	-	-	-	-
Bahrain	1,249	645	458	512	3	535
Other Asia	2,137	1,850	-	16	-	1
Australia and New Zealand	705	600	604	636	63	49
Africa	452	368	-	-	-	-
Total outside Europe	61,100	64,759	49,293	59,823	3,417	5,098
Total	138,118	149,767	104,352	110,736	14,174	10,907

1) Additions to property, plant and equipment (capital expenditures) plus long-term securities, intangible assets, long-term advances and investments in equity accounted investments, including amounts recognized in business combinations.

Note 1.5 Significantsubsidiaries and changesto the group

Accounting policies for business combinations

Business combinations are accounted for using the acquisition method in accordance with IFRS 3 Business Combinations. Consideration is the sum of the fair values, as of the date of exchange, of the assets given, liabilities incurred or assumed, and equity instruments issued in exchange for control of the acquiree. The fair value of Hydro's pre-existing ownership interest in an acquiree is included in the consideration, with any gain or loss recognized in Other income, net.

The acquiree's identifiable assets, liabilities and contingent liabilities are recognized separately at the acquisition date at their fair value irrespective of any non-controlling interest, and goodwill recognized to the extent the consideration exceeds identified net assets.

The interest of non-controlling shareholders in the acquiree is initially measured as the non-controlling interests' proportion of the fair value of the net assets recognized (partial goodwill method, see note 2.3 Goodwill), or as the non-controlling interests' proportion of the fair value of the acquiree (full goodwill method, see note 2.3 Goodwill). Non-controlling interests are subsequently adjusted for changes in equity of the subsidiary after the acquisition date.

Significant judgment in accounting for business combinations

In a business combination, consideration, assets and liabilities are recognized at estimated fair value, and any excess purchase price included in goodwill. Where Hydro had an existing ownership interest in the acquiree, that interest is also reassessed to determine its acquisition date estimated fair value, resulting in an acquisition date gain or loss. In the businesses Hydro operates, fair values of individual assets and liabilities are normally not readily observable in active markets. Estimation of fair values requires the use of valuation models for acquired assets and liabilities as well as ownership interests. Such valuations are subject to numerous assumptions and are thus uncertain. The quality of fair value estimates may impact periodic depreciation and amortization of fixed assets, and assessment of possible impairment of assets and/or goodwill in future periods.

Subsidiaries with significant non-controlling interests

The Hydro group consists of about 165 companies in about 40 countries. Most subsidiaries, including the large operating units in Norway and Germany, are 100 percent owned, directly or indirectly, by Norsk Hydro ASA. A list of significant subsidiaries is included in note 7 to the separate accounts of Norsk Hydro ASA later in this report. Restrictions in the ability to transfer dividend based on reported results and/or equity in the relevant subsidiaries exist in most countries where we operate. In some countries, including Brazil, there are also legal restrictions in our ability to integrate cash holdings in subsidiaries in the group's cash pool. There are non-controlling interests in some subsidiaries. The more significant ones are described below.

Albras

Hydro holds 51 percent of the shares in the Brazilian aluminium smelter Alumínio Brasileiro S.A. (Albras), which is part of Hydro Aluminium Metal. The non-controlling owner has significant influence on certain decisions in the entity, including operational and investment budgets. The non-controlling interests in Albras amounted to NOK 1,687 million as of December 31, 2020 and NOK 2,171 million as of December 31, 2019. Funds held by the entity are not available to the group through cash pool arrangements. Dividends need to be approved by the shareholders jointly. The shareholder agreement supports transfer of dividend to the extent possible under statutory regulations. The smelter produces standard ingots, which are sold to its shareholders, or the entities appointed by the shareholders, in proportion to ownership interest at a price based on prevailing aluminium prices at the London Metal Exchange and product premiums. In response to the regime for sales taxes in Brazil, an increasing share of the production is sold to domestic customers rather than exported.

Slovalco

Hydro holds 55 percent of the total shares and 60 percent of the voting interest in the Slovac smelter Slovalco a.s, which is part of Hydro Aluminium Metal. The non-controlling owner has significant influence on certain decisions in the entity, including operational and investment budgets. The plant is partly written down as impaired, see note 2.5 Impairment of noncurrent assets. The non-controlling interests in Slovalco amounted to NOK 811 million as of December 31, 2020 and NOK 1,015 million as of December 31, 2019. Funds held by the entity are not available to the group through cash pool arrangements. Dividends need to be approved by the shareholders jointly. The shareholder agreement supports transfer of dividend to the extent possible under statutory regulations. The smelter produces metal products, of which the majority is sold to Hydro at a price based on prevailing aluminium prices at the London Metal Exchange and product premiums.

Alunorte

Hydro holds about 92 percent of the shares in the Brazilian alumina refinery Alumina do Norte do Brasil S.A. (Alunorte), which is part of Hydro Bauxite & Alumina. The non-controlling owners have limited influence on the operational decisions. The non-controlling interests in Alunorte amounted to NOK 597 million as of December 31, 2020 and NOK 810 million as of December 31, 2019. Funds held by the entity are not available to the group through cash pool arrangements. Dividends need to be approved by the shareholders jointly. The shareholder agreement supports transfer of dividend to the extent possible under statutory regulations. The refinery produces alumina, which is sold to its shareholders in proportion to ownership interest at a price based on prevailing alumina prices.

The table below summarizes key figures for Albras, the only subsidiary with non-controlling interests considered material, as included in the group financial statements. Fair value adjustments from Hydro's acquisition of the subsidiary are included. Intercompany transactions and balances are included, and any internal profit and loss in inventory and fixed assets purchased from group companies are not eliminated in the numbers below.

		Albras
	2020	2019
Amounts in NOK million

Internal revenue	3,381	3,098
External revenue	3,135	2,695
Earnings before financial items and tax	326	(1,062)
Net income	81	(720)
Other comprehensive income	87	19
Total comprehensive income	168	(701)

Net cash flows from operating activities	601	(531)
Net cash flows from investing activities	(579)	(641)
Net cash flows from financing activities	151	1,047

Cash and cash equivalents	382	209
Other current assets	1,916	1,940
Non-current assets	3,500	4,624
Current liabilities	(1,639)	(1,603)
Non-current liabilities	(717)	(742)
Equity attributable to Hydro	(1,754)	(2,257)
Equity attributable to non-controlling interests	(1,687)	(2,171)

Share of net income attributable to non-controlling interest	57	(352)
Dividends paid to non-controlling interests	49	65

Section 2 – Long-lived assets

Note 2.1 Property, plant and equipment

Accounting policies for property, plant and equipment

Property, plant and equipment (PP&E) is recognized at acquisition cost. The carrying value of PP&E is comprised of the historical cost less accumulated depreciation and any accumulated impairment losses. The carrying value also includes the estimated value of the asset retirement obligation upon initial recognition of the liability. Hydro uses the cost model for PP&E and investment properties.

Capitalized maintenance

Expenditures for maintenance and repairs applicable to production facilities are capitalized in accordance with IAS 16 Property, Plant and Equipment when such costs are incurred on a scheduled basis with a time interval of greater than one year. Expenditures that regularly occur at shorter intervals are expensed as incurred. Major replacements and renewals are capitalized and any assets replaced are retired.

Stripping cost

Stripping costs incurred during the mining production phase are allocated between cost of inventory produced and the existing mine asset. Stripping costs are allocated as a component of the mine asset in the event they represent significantly improved access to ore. Stripping costs include such activities as removal of vegetation as well as digging the actual pit for mining the ore.

Capitalized interest

Hydro capitalizes borrowing costs on qualifying assets in accordance with IAS 23 Borrowing Costs. Currency gains or losses related to Hydro's foreign currency denominated borrowings are not capitalized.

The main components of Hydro's property, plant and equipment is production related machinery and buildings in Hydro's more than 100 operating plants. PP&E includes leased assets, see note 2.6 Leases.

Amounts in NOK million	Land and buildings	Machinery and equipment	Plant under construction	Total
Cost
December 31, 2018	36,266	99,132	4,885	140,282
Additions	458	3,729	5,702	9,889
Acquisitions through business combinations	73	(17)	-	56
Disposals	(381)	(2,240)	(20)	(2,640)
Transfers1)	533	2,966	(3,616)	(117)
Foreign currency translation effect	(329)	(1,048)	(91)	(1,469)
December 31, 2019	36,619	102,522	6,859	146,001
Additions	457	3,181	3,491	7,129
Disposals	(486)	(2,975)	(3)	(3,463)
Companies sold	(1,065)	(1,084)	(27)	(2,177)
Transfers	1,428	4,146	(5,575)	-
Foreign currency translation effect	(1,993)	(5,726)	(343)	(8,062)
December 31, 2020	34,961	100,064	4,402	139,427
Accumulated depreciation and impairment
December 31, 2018	(13,505)	(52,155)	(252)	(65,912)
Depreciation for the year	(1,517)	(6,514)	-	(8,030)
Impairment losses	(330)	(399)	(30)	(760)
Reversal of impairment losses	9	-	-	10
Disposals	296	1,998	2	2,296
Foreign currency translation effect	120	512	8	640
December 31, 2019	(14,928)	(56,558)	(273)	(71,758)
Depreciation for the year	(1,438)	(6,460)	-	(7,898)
Impairment losses	(280)	(2,593)	(34)	(2,907)
Reversal of impairment losses	160	2		161
Disposals	195	2,655	-	2,851
Companies sold	572	592	1	1,165
Transfers	(14)	(8)	23	-
Foreign currency translation effect	721	2,422	60	3,203
December 31, 2020	(15,011)	(59,949)	(222)	(75,182)
Carrying value
December 31, 2019	21,692	45,964	6,587	74,243
December 31, 2020	19,949	40,116	4,180	64,245

1) Transfer includes reclassification of certain undeveloped mineral rights to intangible assets.

Note 2.2 Intangible assets

Accounting policies for intangible assets

Intangible assets acquired individually or as a group are recognized at cost when acquired. Intangible assets acquired in a business combination are recognized at fair value separately from goodwill when they arise from contractual or legal rights or can be separated from the acquired entity and sold or transferred.

Emission rights

Government granted and purchased CO2 emission allowances expected to be used towards Hydro's own emissions are recognized as intangible assets at nominal value (cost). The amounts are not amortized but are tested for impairment at least annually. Actual CO2 emissions which exceed the level covered by emission rights are recognized as a liability. Any sale of excess emission rights is recognized at the time of sale at the transaction price. CO2 emission allowances purchased for trading are measured and classified as inventory.

Research and development

Research expenditures are expensed as incurred. Development costs are capitalized as intangible assets at cost in accordance with IAS 38 Intangible Assets when the recognition criteria are met, including probable future economic benefit and that the cost can be measured reliably.

Exploration cost

Exploration cost for mineral resources are expensed as incurred. Costs related to acquired exploration rights are allocated to the relevant areas and capitalized. An area represents a unit that may be utilized based on shared infrastructure and may include several licenses. Exploration rights are transferred to mine development cost when development starts. Amortization of transferred mineral rights starts when extraction of the resources starts. Exploration rights related to undeveloped areas remain on the balance sheet as intangible assets (mineral rights) until a development is decided or a decision not to develop the area is made.

Hydro's intangible assets

Hydro holds intangible assets mainly as complementary resources to its physical assets. Waterfall rights are fundamental for production of hydroelectrical power, however, a significant share of such rights was granted to Hydro rather than purchased. A significant share of acquired waterfall rights have indefinite life and are thus not amortized. Mineral rights are undeveloped rights related to Hydro's mining operations in Brazil. Other intangible assets include customer relations, technology and other intangible assets identified in acquisitions, in addition to proprietary technology developed internally, and certain other types of intangible assets.

Amounts in NOK million	Intangible assets under development	Mineral and waterfall rights1)	Software	Technology	Acquired sourcing contracts	Other intangibles assets	Total

Cost
December 31, 2018	148	1,020	1,472	2,084	1,030	1,756	7,510
Additions	169	22	77	-	-	74	341
Acquisitions through business combinations	-	-	1	-	-	499	500
Disposals	-	-	-	(79)	-	(389)	(468)
Transfers3)	(102)	117	92	5	-	6	117
Foreign currency translation effect	-	(22)	(21)	(17)	(29)	(6)	(94)
December 31, 2019	215	1,137	1,621	1,993	1,001	1,940	7,906
Additions	97	14	30	-	-	95	236
Disposals	-	-	(88)	-	-	(99)	(187)
Companies sold	-	(44)	(7)	-	-	(25)	(77)
Transfers	(185)	-	123	74	-	(12)	-
Foreign currency translation effect	-	(201)	(4)	17	(240)	31	(397)
December 31, 2020	127	905	1,675	2,084	761	1,930	7,482
Accumulated amortization and impairment
December 31, 2018	-	(39)	(1,089)	(394)	(540)	(590)	(2,652)
Amortization for the year2)	-	(3)	(212)	(187)	(62)	(141)	(604)
Impairment losses	-	(145)	(4)	-	-	(12)	(161)
Disposals	-	-	4	79	-	334	417
Foreign currency translation effect	-	1	16	4	17	8	45
December 31, 2019	-	(186)	(1,285)	(498)	(585)	(401)	(2,956)
Amortization for the year2)	-	(8)	(116)	(199)	(52)	(153)	(527)
Impairment losses	-	-	(5)	-	-	-	(5)
Disposals	-	-	80	-	-	16	96
Companies sold	-	31	7	-	-	22	59
Transfers	-	-	-	(11)	-	11	-
Foreign currency translation effect	-	35	3	(2)	146	(2)	179
December 31, 2020	-	(129)	(1,316)	(710)	(491)	(507)	(3,154)
Carrying value
December 31, 2019	215	950	336	1,495	415	1,539	4,951
December 31, 2020	127	776	359	1,374	269	1,423	4,328

1) Some assets previously included in Other intangible assets have been concluded to be closely associated with waterfall rights, and thus moved.

2) Amortization of a sourcing contract is reported as Raw material and energy expense in the income statement.

3) Transfer includes reclassification of certain undeveloped mineral rights from property, plant and equipment.

Note 2.3Goodwill

Accounting policies for goodwill

Goodwill is recognized as a part of business combinations. Goodwill is initially measured either as the excess of the consideration over Hydro's interest in the fair value of the acquiree's identifiable net assets (partial goodwill), or as the fair value of 100 percent of the acquiree in excess of the acquiree's identifiable net assets (full goodwill). The method is elected on a transaction-by-transaction basis. Hydro has applied the partial goodwill method for all business combinations completed prior to December 31, 2020. Goodwill is not amortized, but is tested for impairment annually, and more frequently if indicators of possible impairment are observed, in accordance with IAS 36 Impairment of Assets. Goodwill is allocated to the cash generating units or groups of cash generating units expected to benefit from the synergies of the combination and that are monitored for internal management purposes.

Hydro's goodwill

Goodwill allocated to Hydro Extrusions was recognized in the acquisition of Sapa AS in 2017. Goodwill allocated to Hydro Bauxite & Alumina was recognized in the acquisition of certain aluminium businesses from Vale S.A. in 2011. Goodwill allocated to Hydro Metal Markets was recognized in acquisitions undertaken more than 15 years ago.

Amounts in NOK million	Hydro Extrusions	Hydro Bauxite & Alumina	Hydro Metal Markets	Total

Cost
December 31, 2018	3,869	2,312	404	6,584
Acquisitions through business combinations	16	-	-	16
Foreign currency translation effect	12	(65)	3	(50)
December 31, 2019	3,897	2,247	407	6,551
Foreign currency translation effect	35	(538)	(2)	(505)
December 31, 2020	3,932	1,708	405	6,045
Accumulated impairment
Impairment losses	(1,129)	-	-	(1,129)
Foreign currency translation effect	112	-	-	112
December 31, 2020	(1,017)	-	-	(1,017)
Carrying value
December 31, 2019	3,897	2,247	407	6,551
December 31, 2020	2,915	1,708	405	5,029

Note 2.4Depreciation and amortization expense

Accounting policies for depreciation and amortization

Depreciation and amortization expenses are measured on a straight-line basis over the estimated useful life of the asset, commencing when the asset is ready for its intended use. Mine property and development costs in extractive activities are depreciated using the unit-of-production method, using proved and probable reserves. Tangible and intangible assets with an indefinite useful life are not depreciated. Estimated useful life by category is as follows:

Machinery and equipment, initial investment 4-30 years, for power plants up to 75 years
Machinery and equipment, capitalized maintenance 1-15 years
Buildings 20-50 years
Intangible assets with finite lives 3-10 years, for rights related to hydroelectric power production up to 50 years

A component of an item of property, plant and equipment with a significantly differing useful life and a cost that is significant in relation to the item is depreciated separately. At each financial year-end Hydro reviews the residual value and useful life of its assets, with any estimate changes accounted for prospectively over the remaining useful life of the asset.

Specification of depreciation and amortization by asset category

Amounts in NOK million	2020	2019
Buildings	1,438	1,517
Machinery and equipment	6,460	6,514
Intangible assets	476	542
Depreciation and amortization expense	8,374	8,572

Note 2.5 Impairment of non-current assets

Accounting policies for impairment of property, plant and equipment and intangible assets

Property, plant and equipment and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, in accordance with IAS 36 Impairment of Assets. Goodwill and intangible assets with indefinite life are required to be tested for impairment annually, in addition to any tests required when impairment indicators are determined to be present. Hydro has elected to do the annual impairment test of goodwill in the fourth quarter. Exploration cost for undeveloped mining areas are assessed for impairment under IFRS 6 Exploration for and Evaluation of Mineral Resources.

When a Cash Generating Unit (CGU) or an asset is tested for impairment, the recoverable amount is estimated as the higher of the CGU's fair value less cost of disposal, or its value in use. The carrying amount is not recoverable if it exceeds the recoverable amount. An impairment loss is recognized in the amount that the carrying value exceeds its recoverable amount. Losses are reversed in the event of a subsequent increase in the recoverable amount of an impaired asset, however, impairment of goodwill is not reversed.

Significant judgement in accounting for impairment of non-current assets

IAS 36 requires that Hydro assess conditions that could cause an asset or a CGU to become impaired. The identification of CGUs involves judgment, including assessment of where active markets exist, and the level of interdependency of cash inflows. For Hydro, the CGU is either the individual plant, a group of plants that forms an integrated value chain where no independent prices for the intermediate products exist, a group of plants that are combined and managed to serve a common market, or a group of assets where circumstances otherwise indicate significant interdependencies. Assessing which indicators that may cause a CGU to be impaired includes such conditions as Hydro's market capitalization, significant changes in Hydro's planned use of the assets or a significant adverse change in the expected sales volumes or margins, i.e. the combination of product prices, raw material cost and energy cost.

Directly observable market prices rarely exist for our assets. However, fair value may be estimated based on recent transactions on comparable assets, internal models used by Hydro for transactions involving the same type of assets or other relevant information. Calculation of value in use is a discounted cash flow calculation based on continued use of the assets in its present condition, excluding potential exploitation of improvement or expansion potential.

Determination of the recoverable amount involves management estimates on highly uncertain matters, such as commodity prices and their impact on markets and prices for upgraded products, development in demand, inflation, operating expenses and tax and legal systems. We use internal business plans, quoted market prices and our best estimate of long-term development in commodity prices, currency rates, discount rates and other relevant information. A detailed forecast is developed for a period of three to five years with projections thereafter. Hydro does not include a general growth factor to volumes for the purpose of impairment tests, however, cash flows are generally increased by expected inflation and, where market conditions are depressed, we consider whether full or partial market recovery towards previously observed volumes is justified. Estimated cash flows are discounted with a nominal risk adjusted discount rate.

Uncertainty related to world economic development and its impact on demand and prices for Hydro's key products and input factors has been significant during the year, driven by the Covid-19 pandemic. During the second half of the year, the economic activity has increased, and markets have come back faster than more pessimistic estimates in the beginning of the year. The uncertainty in the world economic development led us to conclude that impairment indicators existed for several of our CGUs as of the end of June 2020.

Tests performed in 2020 and 2019

Tests for impairment have been performed for all CGUs with mandatory annual tests and the CGUs where impairment indicators have been identified. The recoverable amount for these units have been determined estimating the Value in Use (VIU) of the asset and/or, if appropriate, its fair value less cost of disposal (FV), and comparing the highest of the two against the carrying value of the CGUs. The calculation of VIU has been based on management's best estimate, reflecting Hydro's business planning process. The discount rates are derived as the weighted average cost of capital (WACC) for a similar business in the same business environment. For Hydro's businesses the pre-tax nominal discount rate is estimated at between 4.75 percent and 14.25 percent (2019: 5.5-16.5 percent). The higher rates are applicable for assets within the Bauxite & Alumina and Aluminium Metal activities in Brazil, while the lower rates are applicable for assets within Extrusion and Rolling in Europe.

Hydro has incurred the following impairment losses during 2020 and 2019:

Amounts in NOK million	2020	2019
Classification by asset category
Impairment losses
Property, plant and equipment	2,907	760
Goodwill	1,129	-
Other intangible assets	5	161
Total impairment of non-current assets	4,040	922
Reversal of impairment non-current assets	(161)	(10)

Total impairment of non-current assets, net 3,879 912

Classification by segment

Impairment losses
Hydro Bauxite & Alumina	-	152
Hydro Rolling	1,900	-
Hydro Aluminium Metal	513	506
Hydro Extrusions	1,627	255
Other activities	(161)	-
Total impairment of non-current assets, net	3,879	912

Goodwill is allocated to CGUs or groups of CGUs as shown in the following table:

Amounts in NOK million	2020	2019

Extrusion North America (Hydro Extrusions)	1,393	2,469
Extrusion Europe (Hydro Extrusions)	824	769
Building Systems (Hydro Extrusions)	549	514
Precision Tubing (Hydro Extrusions)	149	144
Bauxite & Alumina Operations	1,708	2,247
Recycling (Hydro Metal Markets)	405	407
Total goodwill	5,029	6,551

Annual mandatory impairment tests

Hydro Extrusions

Goodwill in Hydro Extrusions is allocated to four groups of CGUs reflecting the way the business is managed to serve the relevant markets. The groups of CGUs are as follows:

Extrusion North America covers production plants, marketing and product development in the US and Canada. The operation consists of 21 production plants, recognized intangible assets and goodwill from Hydro's acquisition.

Extrusion Europe covers production plants, marketing and product development in Europe, mainly within the EU. The operation consists of 32 production plants, recognized intangible assets and goodwill from Hydro's acquisition.

Building Systems covers production plants, product warehouses, marketing and product development facilities, mainly in Europe, and sales and marketing offices covering a wider presence. The operation is present at 61 locations in 28 countries. The asset base consists of a limited number of production plants, several warehouses of differing size and complexity, three brands, other intangible assets and goodwill from Hydro's acquisition.

Precision Tubing covers production plants, marketing and product development on four continents. The operation consists of 10 production plants in South America, Asia, Europe and North America, recognized intangible assets and goodwill from Hydro's acquisition.

The impairment tests for all of the groups of CGUs described above are cash flow models expressed in nominal terms using forecasts for the first five years based on internal business plans approved by management. Margins, volumes and investments are considered highly correlated, as high margin above the metal value is achieved through production of more complex products, requiring higher cost and/or more expensive equipment. We have thus not considered development in margins, cost and volume separately. Cash flows have been projected as terminal values beyond the five-year forecast period with a zero

nominal growth assumed. Key assumptions are development in annual net cash flows, comprising volume and cost development in relevant market segments, as well as the discount rate.

The main assumptions and sensitivities are shown in the tables below. The sensitivities represent a stress test, identifying changes in each parameter which would result in a recoverable amount equal to the carrying amount of the CGU, while keeping all other parameters unchanged. The changed parameter is applied for the entire period, including the terminal value. The decrease in annual cash flows does not represent a reasonably possible scenario developed by Hydro, as changes in the market resulting in significantly reduced cash flows for individual plants or the whole business unit is likely to be mitigated with measures to reduce costs, including sale or closure of production lines or plants similar to what is currently ongoing.

	Extrusion North
Amounts in NOK million	America	Extrusion Europe	Building Systems	Precision Tubing
Carrying value of goodwill	1,393	824	549	149
Carrying value of other assets	6,587	7,663	3,119	2,495
Carrying value of CGU	7,980	8,487	3,668	2,644
Recoverable amount	9,970	19,301	13,922	6,627
Recoverable amount in excess of carrying value	1,991	10,814	10,255	3,984
Key assumptions:
Terminal value growth	0.0%	0.0%	0.0%	0.0%
Discount rate	6.75%	5.25%	5.25%	7.5%
Stress test
Discount rate - % change	23%	117%	247%	124%
Discount rate - % point	8.25%	11.5%	18.25%	16.75%
Annual reduction in net cash flow all years	18%	54%	70%	54%

Hydro Bauxite & Alumina

Goodwill in Hydro Bauxite & Alumina is allocated to a CGU consisting of the Alunorte alumina refinery, the main bauxite source Paragominas and certain related activities.

The recoverable amount has been determined based on a VIU calculation. Alunorte was operating at somewhat lower capacity utilization than the design capacity during 2019 and 2020, partly due to commissioning of the press filters used to prepare residue material for depositing and partly due to extended maintenance for the bauxite slurry pipeline. The plant was operating at nameplate capacity at the end of 2020.

Recoverable amount determined as a VIU calculation amounted to about NOK 19 billion. The value exceeds the carrying value of NOK 17 billion. The calculation used cash flow forecasts in BRL based on internal plans approved by management covering a five-year period. Production volumes have been assumed at a lower level than nameplate capacity reflecting a scenario incorporating the downside risk of production shortfalls. All significant price assumptions are internally derived based on external references. Cash flows have been projected for the following 35 years based on the five-year detailed forecast period using Hydro's long-term assumptions for alumina prices and key raw material prices. The CGU is expected to remain in operation for at least the 40-year period. Improvements expected from certain planned equipment replacements are included. Further improvements are not included in the cash flow forecasts. Cash flows beyond the five-year period are inflated by the expected long-term inflation levels in Brazil and the main western economies.

The main assumptions to which the test is sensitive are shown in the table below:

		Assumptions
	2021	Long-term
Exchange rate BRL/USD	4.61
Alumina price, long-term price represent real terms 2020 (USD/mt)	279	330
Production volume alumina (million mt)	6.1	6.1
Discount rate nominal, pre-tax	14.25%	14.25%

Significant cash flows are denominated in US dollars. These are translated to BRL at a rate of 4.61 for 2021 with a stronger BRL in the period 2022 to 2026, reaching a nominal rate of 4.57 in 2026. For future periods the exchange rate is projected with a rate development reflecting the inflation difference of about 1 percentage point between international inflation and the higher expected Brazil specific inflation.

The parameters presented below represent a stress test, identifying changes in each parameter which would result in a recoverable amount equal to the carrying amount of the CGU, while keeping all other parameters unchanged. The changed parameter is applied for the entire period, including the terminal value. The decrease in annual cash flows does not represent a reasonably possible scenario developed by Hydro. As the key parameters are interdependent, a change in the range indicated would not be expected to continue for the entire period of operation. If one of the key parameters were changed with no changes to the other assumptions, the estimated recoverable amount for the CGU would equal the carrying amount with the following long-term real 2020 assumptions over the entire 40-year period:

	% change	Value
Exchange rate BRL/USD	2%
Alumina price, real term 2020(USD/mt)	(1%)	326
Discount rate (% point)	5%	15.0%

Other mandatory tests

For Hydro Metal Markets the impairment test on goodwill has been based on approved business plan for the next year, managements best estimate of cash flows for the following four years and extrapolated to a 15 years cash flow estimate, providing a VIU exceeding the carrying value.

Hydro also has indefinite life intangible assets of NOK 138 million related to the Vigeland power plant in Norway. This CGU is tested for impairment using a FV approach based on observed transaction values for power production assets in the Nordic region. The recoverable amount, estimated as a post-tax fair value, exceeds the carrying amount significantly.

Impairment tests based on indications of loss in value Hydro Rolling

On March 5, 2021, Hydro agreed to sell the Rolling business, see note 1.3 Significant events. The agreed price was below the carrying value of the business to be sold by an estimated amount of NOK 1.9 billion. The amount is not finally determined, as Hydro will incur certain separation and transaction costs which impacts the recoverable amount, measured as fair value less cost of disposal. Future results of the operations, including in the period until completion of the transaction, will not influence the consideration. The shortfall amount is assumed to be related to production equipment in the sold business. Property, plant and equipment in Hydro Rolling, with a carrying value of about NOK 9.1 billion was thus written down as impaired with the shortfall amount.

The CGUs covering the rolling activities in Germany with a combined carrying value of about NOK 8.3 billion were also tested for impairment at the end of the second quarter. The test concluded with coverage above the carrying value for these units. Key assumptions impacting the conclusion of tests included the volume growth or decline in key market segments as well as margin development. The key drivers are GDP growth, development in specific market sectors such as automotive, packaging and building and construction, and substitution effects with other materials, which currently favors aluminium. The dedicated aluminium smelter in Neuss, Germany, which is managed as part of the Hydro Rolling segment, was impacted by the same factors as the Hydro Aluminium Metal plants, discussed below. In addition, the synergies with the rolling mills were determined to be significant, partly offsetting some of the negative effects of the cost level in Germany.

Hydro Extrusions

The uncertainty in the world economic development led us to conclude that impairment indicators existed for several of our Cash Generating Units (CGUs) as of the end of June 2020. As of July 2020, it was highly uncertain when and to what level economic activity would return. About 75 percent of the carrying values in the Hydro Extrusions segment were tested for impairment. A conclusion that a write-down was required was reached for Extrusion North America, where goodwill was partly impaired. The recoverable amount was estimated at NOK 9.1 billion. Assumed sales volumes and the discount rate were less favorable at the end of June compared to the market conditions at the end of the year, reflecting the partial recovery and lower risk spreads observed in the market. The recoverable amount was estimated as a value in use discounted with a pretax discount rate of 7.25 percent. The test is sensitive to volumes and margins, which are interdependent, and also to the cost level, which is adjusted in response to market conditions and thus fixed over limited periods, however, no restructuring measures beyond what were committed at the time of testing were included in the estimated cash flows.

In addition, three CGUs in Extrusions Europe, and one CGU in Precision Tubing were determined to be impaired. Further, some assets related to one plant in India which was closed in June 2020 and some operations where closure or downsizing was ongoing were written down by a combined amount of about NOK 500 million.

Additional CGUs in Hydro Extrusions with a total carrying amount of about NOK 9 billion were tested for impairment with the conclusion that the recoverable amount exceeded the carrying amount and thus no impairment was present. Although some of these CGUs were experiencing challenging profitability short-term, profitability longer term supported the carrying value. In reaching this conclusion, we assumed several years with negative impact on volumes and/or margins, and for most market segments that sales volumes would reach 2019 levels within a period of about five years. Further, margin pressure was assumed to continue for a significant period. However, we saw that restructuring measures reducing costs which have been implemented during 2019 and 2020 were improving coverage.

During 2019, impairment losses of 255 million were recognized related to announced closure and sale of production facilities in Hydro Extrusions.

Hydro Aluminium Metal

The primary aluminium plant Slovalco, which was partly impaired at the end of 2019, was tested for possible additional impairment in the second quarter of 2020. The recoverable amount was determined as VIU based on Hydro's internal assumptions for production volumes, aluminium prices, raw material prices including energy, currency exchange rates and timing of cash flows. Contract prices are used for raw materials and energy for periods covered by specific contracts with external suppliers. For periods where such consumption is not yet contracted, or where internal supply of such items as alumina is expected, estimated market prices are used. The value in use is calculated as an expected value including a full restart of curtailed capacity, or a partial or full curtailment of the plant for an extended period. The cost position, including energy cost beyond the current contract which expires at the end of 2021, continues to be unfavorable in the current market. The estimated value in use amounted to NOK 292 million using a discount rate of 9.5 percent. The resulting impairment loss amounted to NOK 504 million.

In 2019, Slovalco was written down as impaired with NOK 506 million. The value in use for Slovalco, estimated in the same way as in 2020 with market assumptions as of the end of 2019, including a discount rate of 9.75 percent, resulted in an expected recoverable amount of about NOK 725 million, which was below the carrying value of about NOK 1,225 million.

All other aluminium plants were tested for impairment at the end of June 2020 with the conclusion that the recoverable amount exceeded the carrying amount.

Key assumptions impacting the conclusion of tests during 2020 included the margin on aluminium over key input factors expressed in the functional currency of the smelter. The main elements were the partially mutually dependent assumptions for demand and price for base metals including aluminium, prices on alumina and energy, and currency exchange rates. The main exchange rates impacting relative competitive position for our smelters are the NOK and BRL against USD, which is the currency in which aluminium prices are quoted. We have in our tests assumed that the NOK will remain weak, while the BRL is expected to strengthen somewhat compared to the very weak level observed at the time of testing. We assumed an aluminium price in US-dollars at levels below the nominal prices observed over the last three to five years, and correspondingly lower price levels for such raw materials as alumina and anodes, resulting in a production margin over time reflecting levels somewhat below averages observed over the last ten years. Power prices are set in local, national or regional markets, and may develop differently between regions. Power prices are usually set and denominated in local currencies. In the Nordic region which includes Norway, power prices are quoted in Euro. Where Hydro has contracts for energy supply, contract prices were assumed in the tests for the period covered by contract.

Discount rates used were 9.5 percent for Norway and 15.25 percent for Brazil.

Hydro's investment in the joint venture Qatalum was tested for impairment. The assumptions and method used were similar to what was used for Hydro's aluminium plants, as the underlying business risks are similar. Additional risks relevant for the joint venture includes the regulatory and business climate in Qatar and the Middle East, including trade relations to the rest of the world, and the uncertain tax situation for the company described in Note 3.1 Investments in joint arrangements and associates. The recoverable amount for Hydro's interest in the joint venture marginally exceeded the carrying amount of NOK 12.6 billion. A pre-tax discount rate of 10.75 percent was applied, reflecting business risk, country risk and the time value of money. The impairment test was sensitive to the same elements as Hydro's controlled smelters, primarily margin of aluminium price over production costs, which for Qatalum consists of alumina, energy generated from gas in Qatalum's onsite power plant, and other direct and indirect expenses. The production margin is impacted by such factors as the world's supply and demand balance for aluminium and alumina, and relative competitive position of Qatar. The test was also sensitive to the discount rate. An increase of one percentage-point would reduce the recoverable amount by about NOK 1.3 billion.

Hydro Bauxite & Alumina

The CGU consisting of the Alunorte alumina refinery, the main bauxite source Paragominas and certain related activities, including goodwill, was tested for impairment at the end of the second quarter. The test resulted in a marginal coverage over the carrying amount.

In 2019, certain undeveloped bauxite resources held by Bauxite and Alumina was reviewed for possible future development, and one area was concluded not probable to be developed and thus the carrying value of NOK 145 million was written down as impaired.

Reversal of impairment

A previous impairment write-down of NOK 161 million related to an industrial park in Germany was reversed during 2020. The property was classified as investment property and sold in July 2020.

Note 2.6 Leases

Accounting policies for leases

At inception of a contract, Hydro assesses whether a contract is, or contains, a lease. Leased assets with a remaining lease period of less than 12 months at inception are excluded from lease accounting. Further, leases of assets of a low value (small asset leases), mainly such items as PCs, office equipment and similar, are excluded from lease accounting. When measuring leases, Hydro include fixed lease payments for extension periods reasonably certain to be used. As a practical expedient, nonlease components are not separated from lease contracts for most asset classes. For production facilities and transportation assets, such as vessels used for transportation of material, the operating cost is a significant non-lease component, and is excluded from lease accounting. Variable lease payments, including service elements related to leases which are fully variable amounts, are recognized as operating expenses in the periods incurred.

Right-of-use assets are included in property, plant and equipment, see note 2.1 Property, plant and equipment. Lease liabilities are included in debt, see note 7.4 Short and long-term debt.

Significant judgement in accounting for leasing

Significant judgment is required to determine whether some service contracts conveys the right to control an asset to Hydro, and thus is, or contains, a lease. Hydro has a limited number of such contracts; however, they do exist in some arrangements with service providers for maintenance services, transportation services, and some operational subcontractors. In assessing whether such contracts are leases, Hydro assesses both the share of the supplier's capacity for relevant assets that is available for Hydro as well as how decisions are made.

Judgment is also applied in assessing whether renewal options are reasonably certain to be utilized. In assessing such issues, Hydro considers such factors as the level of operational integration and dependency as well as historic practices for renewals.

For some contracts where all, or close to all, produced products are purchased by Hydro with no or very limited fixed payments, the contract may be deemed a lease with fully variable payments. Currently, Hydro has no significant such contracts.

Hydro's leases

Hydro uses lease contracts primarily where lease or rental contracts provide operational benefits or flexibility compared to owning assets. Leased land and buildings are used for warehouses, office space and certain other arrangements where the need for such space is of a temporary nature or where land and/or buildings are not available for purchase. This is the case in some countries, and also in co-locations with certain other businesses such as in port areas. Further, Hydro has a lease arrangement for its head office in Oslo, Norway, and certain other office locations where the location is independent of production facilities. Production equipment is leased or rented where the access to the specific assets is combined with significant services, for instance seaborn transport operated by the supplier/lessor. Operational services in combination with leasing of assets is also used for such services as maintenance activities, earth-moving operations, and certain other non-core services. Leasing or rental is in some instances also used for equipment operated by Hydro, often under contracts significantly shorter than the assets' useful life.

Hydro determines its incremental borrowing rate by obtaining interest rates from various external financing sources, and makes adjustments for currency and duration to reflect the terms of the lease.

Right-of-use assets

Amount in NOK million	Machinery and equipment	Buildings and land	Total
December 31, 2019	1,810	1,410	3,220
Depreciations and impairment loss	(633)	(297)	(931)
Additions	387	160	547
Disposals	(26)	(32)	(58)
Currency translation	(211)	39	(172)
December 31, 2020	1,326	1,281	2,607

Total cash outflows for leases in 2020 was NOK 939 million (2019: NOK 1.314 million).

Interest expense relating to lease recognized in the income statement for 2020 was NOK 175 million (2019: NOK 206 million).

Leases expensed in the period amounts to NOK 282 million (2019: NOK 319 million) and refers to leases of short term, low value or leases with variable payments.

Hydro has a limited amount of lease contracts not accounted for as right-of-use assets and lease liabilities at the balance sheet because they are exempted as small asset leases or short-term leases. Future minimum lease payments due under noncancellable leases are NOK 82 million (2019: NOK 142 million).

Note 2.7 Other non-current assets

Amounts in NOK million	2020	2019

Equity securities at fair value through other comprehensive income	901	829
Securities at fair value through profit or loss	540	535
Employee loans	10	116
Derivative instruments	120	39
Income taxes, VAT and other sales taxes	1,938	2,535
Other receivables	682	764
Other non-current assets	4,191	4,817

Section 3 – Investmentsin other companies

Note 3.1 Investmentsin joint arrangements and associates

Accounting policies for investments in joint arrangements and associates

Investments in associates and joint ventures

A joint arrangement is an entity, asset or operation that is subject to contractually established joint control. Special voting rights may extend control beyond what is conveyed through the owners' proportional ownership interest. Such rights may take the form of a specified number of board representatives, the right of refusal for important decisions, or the requirement of a qualified majority for important decisions which effectively results in joint control with the specific ownership situation. Joint ventures are joint arrangement which represents a residual interest in the arrangement rather than an interest in assets and responsibility for liabilities.

An associate is an equity investment in which Hydro has the ability to exercise significant influence, which is the power to participate in the financial and operating policy decisions of the entity. Significant influence is assumed to exist when Hydro owns between 20 and 50 percent of the voting rights unless other terms and conditions affect Hydro's influence.

Hydro accounts for investments in associates and participation in joint ventures using the equity method. This involves recognizing Hydro's interest based on its proportional share of the entity's equity, including any excess values and goodwill. Hydro recognizes its share of net income, including depreciation and amortization of excess values and any impairment losses, in Share of the profit (loss) in equity accounted investments. Other comprehensive income derived from associates and joint ventures is included in Hydro's Other comprehensive income. Hydro's proportional share of unrealized profits resulting from transactions with associates and joint ventures, including transfer of businesses, is eliminated. Accounting policies used by associates and joint ventures may differ from the accounting policies adopted by Hydro. Differences in recognition or measurement are adjusted for prior to equity accounting.

Investments in associates and joint ventures are tested for impairment when there are indications of a possible loss in value. An impairment loss is recognized if the recoverable amount, estimated as the higher of fair value less cost of disposal or value in use, is below Hydro's carrying value. Impairment losses are reversed if circumstances change and the impairment situation is no longer deemed to exist.

Hydro is involved in one associate for which the results of operations is taxable profit or loss for the owners rather than the associate, a tax transparent company. Hydro provides for deferred tax on temporary differences in the associate to the extent such temporary differences are expected to reverse within the foreseeable future, or such reversal is not controlled by Hydro. Deferred tax on other temporary differences is not recognized.

Loans to associates and joint ventures are measured under IFRS 9 Financial instruments. Loans where contractual cash flows are only payments of principal and interest on specific dates are measured at amortized cost with expected credit losses provided for. Other loan arrangements are measured at fair value. Loans and receivables to associates and joint ventures are presented as part of other similar loans to unrelated parties. Income and expenses related to loans are included in finance income and expense.

Investments in joint operations and jointly owned assets

Joint operations are arrangements under contractually joint control where the joint operators have an interest in the assets; or benefits from the service potential of the assets; as well as have a direct obligation for the liabilities of the joint arrangement. Joint operations can result from the legal form of the arrangement or other facts and circumstances resulting in an interest in the service potential of the asset and obligation for liabilities. Jointly owned assets are arrangements where Hydro and the other partners have a direct ownership in specifically identified assets, but where joint control is not established. Hydro recognizes its share of assets, liabilities, revenues, if any, and expenses of joint operations and jointly owned assets on a lineby-line basis in the group financial statements.

Hydro is engaged in various arrangements on a joint basis with other companies. In assessing whether joint control exists for these arrangements we evaluate the legal framework and contracts governing the arrangement combined with an assessment of which decisions that significantly influence the return from the arrangement. Arrangements owned on a 50/50 basis and/or governed by unanimous decisions constitute the majority of our joint arrangements.

Most of our joint arrangements are joint production facilities supplying metal and other products for Hydro's value chain. Hydro assesses whether joint arrangements are joint operations where Hydro has a direct interest in the assets and direct liability to settle obligations, directly or indirectly, or a joint venture where we have an interest in the net assets of the joint arrangement. In this assessment we evaluate the contracts governing the arrangement and the legal framework for the type of entity in which the arrangement is operated. Hydro is engaged in both joint arrangements that are considered joint ventures, and arrangements that are concluded to be joint operations.

Hydro's joint operations

Of our joint operations, two are classified as joint operations based on the legal form of the operations. These are Tomago, an aluminium smelter in Australia, and Skafså ANS, a power producer in Norway. Another two arrangements are classified as joint operations based on the contractual arrangements whereby all output is sold to the shareholders in proportion to their ownership interest at a cost based price formula. The major or sole sources of cash inflows for the joint arrangements are the owners, who are legally obliged to cover production costs. These are Aluminium Norf GmbH (Alunorf), a large rolling mill in Germany, and Aluminium & Chemie Rotterdam B.V., Aluchemie, an anode producer in the Netherlands.

Hydro's joint ventures

The following joint venture is considered material for Hydro:

Qatar Aluminium Ltd. (Qatalum) is a primary aluminium smelter with a dedicated power plant located in Qatar. Qatalum has an annual production capacity of about 600,000 mt of liquid metal. Qatalum is owned by Hydro and Qatar Aluminium Manufacturing Company Q.P.S.C. (50 percent each). Qatar Petroleum controls Qatar Aluminium Manufacturing Company, which is listed on the Qatar Stock Exchange. Qatalum was at the outset granted a ten-year income tax holiday, expiring in 2020. A tax reform came into effect from 2010, which introduced a generally applicable corporate income tax rate of 10 percent. A tax rate of 35 percent applies to entities with oil and gas operations or where the activities are carried out under an agreement with the government or entities owned by the government, unless such agreement specifies another tax rate. According to the Qatalum joint venture agreement, the generally applicable tax rate will apply after expiry of the tax holiday in 2020. It is Hydro's position that the generally applicable income tax rate, currently at 10 percent, shall apply to Qatalum after the expiry of the tax holiday.

Hydro is committed to sell fixed quantities of alumina and purchase all products from Qatalum at market prices. Purchases of metal from Qatalum amounted to NOK 11,055 million in 2020 and NOK 11,678 million in 2019. Related payables amounted to NOK 921 million in 2020 and NOK 1,199 million at the end of 2019. Sales from Hydro to Qatalum amounted to NOK 1,944 million in 2020 and NOK 2,110 million in 2019, primarily alumina. Related receivables amounted to NOK 73 million and NOK 131 million at the end of the periods. Qatalum is part of Hydro Aluminium Metal.

Hydro's associates

The following associate is considered material for Hydro:

Lyse Kraft DA is a power producer with head office in Stavanger, Norway operating several power plants in the southwest of Norway, and having ownership interests in two other part-owned arrangements in nearby areas. In total Lyse Kraft DA has an annual production of about 9.5 TWh, which is contributed in kind to the owners. The owners are responsible for paying all costs in the partnership, both for operating costs and future investments. The company was established on December 31, 2020 by contribution of power production assets. Hydro owns 25.6 percent of the company, while Lyse AS owns a controlling 74.4 percent.

Hydro contributed the Røldal Suldal assets as a contribution in kind to Lyse Kraft DA on December 31, 2020 and received a 25.6 percent ownership interest in the company as consideration. The gross value of the ownership interest has been valued at NOK 7.8 billion, resulting in a gross gain of NOK 7.1 billion. The valuation includes significant unobservable inputs, i.e. a level 3 valuation. According to Hydro's accounting policy, the relative share of ownership in the acquiring company, Lyse Kraft DA, is eliminated as an unrealized gain. The recognized gain is thus NOK 5,308 million. The carrying value of Hydro's ownership in Lyse Kraft DA is NOK 6,805 million, with a related deferred tax liability of NOK 831 million related to temporary differences for which reversal of the differences are not controlled by Hydro. These temporary differences are mainly related to depreciable assets recognized at estimated fair value.

Key information about significant investments

The table below summarizes key figures for the joint venture Qatalum for 2020 and 2019. The figures are on the same basis as used for inclusion in the group financial statements. Fair value adjustments from Hydro's contribution of assets to the joint venture are included. Intercompany transactions and balances are included, and internal profit and loss in inventory and fixed assets purchased from group companies are not eliminated in the numbers below. All amounts are for the joint venture on 100 percent basis. Balance sheet amounts are at the end of the years 2020 and 2019.

		Qatalum
		Year/year ended
	2020	2019
Amounts in NOK million

Revenue	11,369	11,971
Depreciation, amortization and impairment	2,282	2,142
Earnings before financial items and tax	1,106	1,094
Financial income (expense), net1)	(537)	(554)
Income tax expense2)	(59)	-
Net income (loss)	510	540
Other comprehensive income	-	45
Total comprehensive income	510	584

Cash and cash equivalents	1,564	2,401
Other current assets	3,948	4,512
Non-current assets	28,630	30,832
Current financial liabilities	-	1,816
Non-current financial liabilities	11,923	11,453
Other liabilities	1,307	1,649
Net assets	20,912	22,828

Hydro's share of net assets	10,456	11,414
Accumulated elimination of internal gain in inventory	1	25
Carrying value of Hydro's equity investment	10,457	11,439

1) Financial income (expense), net includes interest expense for Qatalum with NOK 290 million and NOK 449 million for 2020 and 2019, respectively.

2) Tax expense is based on the tax rate recognized by Qatalum. There is currently uncertainty about the tax rate to be applied.

Hydro held an ownership interest in Technal Middle East W.L.L, a joint venture owned 50 percent each by Hydro and Bahrain Aluminium Extrusion Company B.S.C. In May 2019, Hydro acquired the additional 50 percent in Technal Middel East, now a fully owned subsidiary.

Hydro also holds interests in certain associates accounted for using the equity method, of which the most significant is Corvus Energy Holding AS, a company producing battery solutions for ships in Canada and Norway. The following table provides a summary of changes in carrying value for Hydro's joint ventures and associates.

Amounts in NOK million	Qatalum	Other JVs	Lyse Kraft DA	Associates	Total

December 31, 2018	11,276	252		42	11,570
Hydro's share of net income (loss)	270	18		(15)	274
Hydro's share of other comprehensive income	22				22
Dividends and other payments received by Hydro	(193)	(29)			(222)
Companies acquired/(sold), net				49	49
Amortization		(1)		(14)	(14)
Changes elimination of internal gain in inventory	(39)				(39)
Derecognized at acquisition of control		(232)			(232)
Foreign currency translation and other	104	(8)		(3)	93
December 31, 2019	11,440	1		60	11,501
Hydro's share of net income (loss)	255			(27)	228
Dividends and other payments received by Hydro	(979)				(979)
Companies acquired/(sold), net			6,805	4	6,808
Amortization				(11)	(11)
Changes elimination of internal gain in inventory	(24)				(24)
Foreign currency translation and other	(234)	(1)		1	(234)
December 31, 2020	10,457	-	6,805	27	17,288

Section 4 – Uncertain assets and liabilities

Note 4.1Uncertain assets and liabilities

Accounting policies for uncertain liabilities resulting in provisions, contingent liabilities

Provisions are recognized when Hydro has a present obligation (legal or constructive) as a result of a past event and it is probable (more likely than not) that Hydro will be required to settle the obligation. Uncertain outcomes are measured as the expected value of reasonably possible outcomes. The provision is measured as the present value of the cash flows estimated to settle the obligation. Expected cash flows are discounted with a risk-free interest rate, usually a government bond rate for the duration to expected settlement.

A contingent liability is a possible obligation that arises from a past event, with the resolution of the contingency dependent on uncertain future events, or a present obligation where no outflow is probable. Contingent liabilities are not recognized on the balance sheet, the existence of such contingent liabilities and, if estimable the approximate size, are disclosed unless the possibility of an outflow of economic resources is remote.

Asset retirement obligations

Hydro recognizes liabilities for the estimated fair value of asset retirement obligations (ARO) relating to assets where such obligations exists, in the period incurred in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets. The provision is estimated as the present value of costs relating to the restoration or rehabilitation of industrial or mining sites and/or dismantlement or removal of buildings or other assets. The liability is recognized when an asset is constructed and ready for use or when the obligation is incurred if imposed at a later date. Related asset retirement costs are capitalized and depreciated over the useful life of the asset. Accretion expense is recognized for the change in the present value of the liability and classified as part of Financial expense. Other changes to estimated fair value of ARO are recognized when identified. The increase or reduction to the liability is recognized as an increase or reduction of the value of the asset unless the asset is no longer in use, in which case the change is recognized in operating expenses. Liabilities that are conditional on a future event (e.g. the timing or method of settlement) are recognized when the value of the liability can be reasonably estimated.

Exit and disposal costs

Hydro recognizes a provision in the amount of the direct costs associated with an exit and/or disposal activity when a formal commitment to a detailed exit plan is made and communicated to those affected. A provision for termination benefits to employees is recognized as of the date of notification to individual employees or their representatives.

Accounting policies for uncertain assets

Assets where the existence of an asset or Hydro's control with the resources is less than virtually certain are contingent assets. Contingent assets are not recognized.

Significant judgment in accounting for contingent assets and liabilities, uncertain assets and liabilities

Evaluation of uncertain liabilities and contingent liabilities and assets requires judgment and assumptions regarding the probability of realization and the timing and amount, or range of amounts, that may ultimately be incurred. Such estimates may vary from the ultimate outcome as a result of differing interpretations of laws and facts.

The main judgmental assessment falls into two categories; whether a liability exists, and the amount of a possible liability. The existence or non-existence of a liability is a legal and/or factual assessment. The measurement of a possible liability is more challenging for requirements to remediate or rectify alleged wrong-doing than for monetary claims of compensation. In relation to perceived non-compliance with laws and regulations, authorities, non-governmental organizations, or others may claim that Hydro is responsible for mitigating actions and compensation. The legal basis for such claims as well as cost calculation and other aspects can be difficult to assess.

Hydro's industrial and mining activities are subject to a wide range of environmental laws and regulations, including end-oflife remediation regulations. The extent of site and off-site contamination, the remediation methods and requirements that relevant environmental authorities may impose, are uncertain. The long-term use of sites, with increasing awareness of effects of contamination in society, and generally lower acceptance of contamination in communities over time impacts the content of legal standards and the responsibility of companies involved in such activities. Hydro has started the process of assessing whether the newly issued Global Industry Standard on Tailings Management (GISTM), issued by ICMM17, PRI18 and UNEP19, will require additional effort and costs. Currently, no significant additional liabilities have been identified. Further, changes in remediation methods and requirements and the uncertainty of cost levels for actions to be performed years and decades into the future contribute to the uncertainty in assessing and measuring such obligations. Remediation and closure activities

¹⁷ International Council on Mining and Metals

¹⁸ Principles for Responsible Investment

¹⁹ UN environment programme

expected to be conducted far into the future are less accurately measured than near-term planned activities. Consequently, there is significant uncertainty inherent in the estimates.

Indirect tax regimes are complex in many jurisdictions and cross-border. Basis for such taxes may differ from actual transaction prices. In some jurisdictions, including Brazil, significant credit amounts are generated for use against future indirect and/or income tax payments. Repayment in cash is made subject to a set of conditions, including availability of funds at the tax authorities, and cannot be expected on a regular basis. The value of such credits depends on future generation of taxes. Economic conditions and tax regulations may change and lead to a different conclusion regarding recoverability. Tax authorities may challenge Hydro's calculation of taxes and credits from prior periods. Such processes may lead to changes to prior periods' operating or financial expenses to be recognized in the period of change.

Provisions

	2020			2019
Amounts in NOK million	Short-term	Long-term	Total	Short-term	Long-term	Total
Environmental clean-up and asset retirement obligations (ARO)	695	3,767	4,461	702	4,110	4,813
Employee benefits	1,056	685	1,741	1,142	708	1,851
Indirect taxes	8	249	257	99	379	478
Rationalization and closure cost	511	329	840	705	495	1,200
Other	665	576	1,242	647	822	1,470
Total provisions	2,935	5,605	8,541	3,296	6,515	9,811

The following table includes a specification of changes to provisions for the year ending December 31, 2020.

Amounts in NOK million	Environmental clean-up and ARO	Employee benefits	Indirect taxes	Rationalization and closure cost	Other	Total
Specification of change in provisions
December 31, 2019	4,813	1,851	478	1,200	1,470	9,811
Additions	538	1,282	18	250	635	2,723
Used during the year	(686)	(1,225)	(7)	(648)	(411)	(2,977)
Reversal of unused provisions	(55)	(213)	(154)	(54)	(246)	(722)
Accretion expense and effect of change in discount rate	108	12	-	-	-	120
Foreign currency translation	(256)	35	(78)	92	(206)	(413)
December 31, 2020	4,461	1,741	257	840	1,242	8,541

Provisions for environmental clean-up and asset retirement obligations relate to production facilities currently in operation and facilities that are closed. The obligations relate to such actions as restoration or rehabilitation of industrial or mining sites, disposal of contaminated material and related activities. Hydro has provided for demolition of buildings and installations only where there is a legal or contractual obligation, or a specific decision to demolish, which is the case for few sites. The provision represents the present value of expected outflows at the times of expected payments. There is significant uncertainty both in the timing and amount of these remediation actions, as they are linked to future business decisions as well as decisions and approval by authorities in the jurisdictions we operate. Provisions are based on the current legal framework and remediation standards, where the newly issued Global Industry Standard on Tailings Management (GISTM) may not be fully reflected. No significant changes in cost estimates have been identified.

The most significant provisions relate to the following sites and issues. For Hydro Bauxite & Alumina's mine in Brazil we have obligations to remediate the tailing areas and mining sites, including reforestation of the area and monitoring and maintenance of the site after initial remediation. The process for depositing of mining tailings have been changed during 2020. Such tailings are now brought back to the mine and permanently deposited rather than remaining in dedicated tailing areas. The new method is intended to reduce the cost and risks associated with care and maintenance after the mining activity. For Hydro Bauxite & Alumina's alumina refinery in Brazil we have obligations to remediate bauxite residue deposits, including monitoring the contamination levels and other aspects after initial remediation. Some activities related to these obligations are currently ongoing as integrated processes with ongoing deposit of residues produced in the alumina production. For Hydro Aluminium Metal's closed Kurri Kurri smelter site in Australia we have obligations to remediate certain contaminated areas at the site as well as securing appropriate deposit of spent pot lining and certain other waste material, which is currently ongoing. The plan for remediation has been approved by the authorities. Further, Hydro has provided for various remediation obligations in Hydro Extrusions related to both closed sites, whether previously operated or not, and for some currently active sites. Hydro also has obligations for remediation of contamination on site and in related areas related to historic industrial

activities in Germany and Norway, reported in Other and eliminations. The more significant of these sites are the sites in Schwandorf in Germany and the Grenland area in Norway. The GISTM will impact remediation requirements for some of these sites. For many of these provisions, there are no standard remediation methods available and cost is therefore uncertain. The provision also includes remediation of spent pot lining in all active smelters, site clearance for certain leased land as well as certain liabilities related to Norwegian power plant concessions to be reverted to the Norwegian Government.

Provisions for employee benefits relate to expected short-term performance bonus payments and short and long-term provisions for expected bonus payments that are based on the number of years of service, primarily for our European operations. Such bonuses are expected to be paid in periods between 10 to 50 years of service, or upon termination of employment.

Indirect taxes include taxes not related to taxable income, such as value added taxes, duties and property taxes. Provision for indirect taxes is mainly related to indirect taxes in Brazil.

Rationalization and closure cost include provisions for the improvement program in Hydro Rolling aiming at significant efficiency gains and cost reductions. The main costs with this project are related to employee reductions. About NOK 430 million of severance payments and related costs have been paid related to the about 550 persons who have left the company in 2020. Further, Hydro Extrusions has provided for costs related to plant closures and employee reductions to reduce their footprint in response to challenging market conditions.

Other includes insurance provisions related to insurance contracts issued by Hydro's captive insurance company, Industriforsikring AS, to external parties including associates and joint arrangements, provisions for legal and other disputes, certain liabilities related to representation and warranty provisions related to sale of businesses.

In 2018, Hydro entered into agreements with authorities in Pará, Brazil, in relation to the operations of the alumina refinery, Alunorte. The contracts regulate certain technical studies and improvements of operational security, audits, fines and payments for food cards to families living in the hydrographic area of the Murucupi River. In addition, Hydro has committed to additional efforts and investments related to local societies close to the plant and to the social development of communities in Barcarena. Total remaining provisions related to these obligations are about NOK 420 million as of December 31, 2020.

Contingent liabilities and contingent assets

Hydro is involved in or threatened with various legal and tax matters arising in the ordinary course of business. Where Hydro considers an obligation to be possible, i.e. not probable yet not remote, it is disclosed as a contingent liability.

Hydro is involved in a significant number of tax cases related to various types of taxes. Hydro's businesses in Brazil have a large portfolio of cases disputed by tax authorities, of which the majority relates to indirect taxes. This includes cases in the administrative and legal dispute systems with various background and risk of loss. In total known cases amount to about NOK 3 billion, of which about NOK 2.3 billion is considered possible. A significant share of those amounts is covered by tax indemnifications from acquisition. The final outcome of these cases is not expected until several years into the future, and is highly uncertain. Additional cases may be raised by tax authorities based on tax declarations for periods not yet assessed, or when interpretation of tax regulations change. Hydro has provided for individual tax cases where the risk of loss is considered above 50 percent. Provisions for indirect taxes are included in provisions disclosed above, while provisions for income tax expenses are included in Taxes payable.

Hydro has environmental liabilities related to several sites and issues. Where remediation is acknowledged as Hydro's responsibility or a legal obligation is deemed to exist, a provision for the best estimate of costs to be incurred is established. For many of our industrial sites, in particular sites where operation is expected to continue indefinitely, remediation costs are difficult to assess. The precise need for remediation actions, their timing and cost has not yet been planned, and is thus uncertain. For some sites, the exact level of pollution may also be uncertain as ground and water are not sampled where no indication of contamination is identified. Obligations for historic contamination of sites and surrounding areas in addition to areas provided for may be identified and deemed Hydro's responsibility, whether related to currently owned or used sites, or sites we previously have owned and/or used. The cost of remediation of any additional contamination deemed Hydro's responsibility is uncertain.

Authorities and non-governmental organizations have filed several lawsuits related to the Alunorte incident, claiming a combination of mitigating actions and financial compensation. The argumentation, cost calculation and legal basis for these claims is still highly uncertain. Further claims may still be received. Given the limited information about claimed physical and moral damages to be compensated, and the extent and cost of mitigating actions claimed, or the extent or content of other potential claims and lawsuits, it is not possible at this time to provide a range of possible outcomes or a reliable estimate of potential future exposure for Hydro. It is further not possible to estimate the timing of when such claims may be determined or when any payments may arise.

Hydro is also exposed to increased product warranty and product liability responsibilities, both as result of contractual commitments and caused by liability under background law. Product warranty and product liability may impose significant costs depending amongst other things on the application of the product sold. Similarly, disputes over whether failure to

deliver products under contract are related to force majeure or not occur from time to time, both for Hydro's delivery obligations and rights. Such disputes may involve significant amounts and outcomes may be difficult to assess.

Hydro is exposed to legal cases based on contractual or other basis, including related to contract delivery or purchase obligations or warranties and representations given in relation to sale of businesses. Where a payment is probable, a provision for the likely amount is recognized.

Section 5 – Income and expenses

Note 5.1 Revenue fromcontracts with customers

Accounting policies for revenue recognition

Hydro accounts for revenue in accordance with IFRS 15 Revenue from Contracts with Customers.

IFRS 15 requires us to, for each contract with a customer, identify the performance obligations, determine the transaction price, allocate the transaction price to performance obligations to the extent the contract covers more than one performance obligation, determine whether revenue should be recognized over time or at a point in time, and, finally, recognize revenue when or as performance obligations are satisfied.

A performance obligation is satisfied when or as the customer obtains control with the goods or services delivered.

Revenue from sale of physical products are recognized when control is transferred to the customer, which usually occurs at delivery.

A contract for sale of electricity is considered one performance obligation and recognized as electricity is delivered to customers through the relevant grid.

Margins related to the trading of derivative commodity instruments, including instruments used for risk management purposes, purchase or delivery of physical commodities on a commodity exchange, and physical commodity purchases and sales agreed in combination with a single counterpart, are presented on a net basis in the income statement with trading margins included in revenues.

Significant judgment in accounting for revenue

The significant judgment in applying IFRS 15 for Hydro is related to which contracts that qualify for recognition over time, versus recognition at a point in time; at delivery to customer.

Hydro's main performance obligations can be described as follows:

sale of products, produced independent of customer orders
sale of products, produced to customer order
sale of products made to customer specifications and order
sale of electricity

For products which are not made to the customer's specification, performance obligations are either the individual product, the delivery in total, or an agreed volume of products delivered in more than one delivery. Contracts covering a fixed, committed volume at fixed or determinable prices are relevant for this assessment. Delivery period for such contracts can cover a period of a few weeks, and up to one year. Some contracts cover more than one year, however, these are a declining number. Prices are usually a combination of fixed elements and market references such as the aluminium price at the London Metal Exchange or other market references, at, or prior to, delivery. Revenue related to products that are not made to the customers' specification is recognized at delivery of products to customers. Such contracts accounts for the majority of sales in the segments Hydro Bauxite & Alumina, Hydro Aluminium Metal, Hydro Metal Markets and Hydro Rolling, and a significant share of sales in Hydro Extrusions. Some of these contracts include an element of freight services, which is considered a separate performance obligation under IFRS 15, and related revenue is recognized over the time of journey.

For products made to customer specifications and orders, we have assessed whether the finished product has an alternative use to Hydro, and whether Hydro at all times has an enforceable right to payment for performance completed to date. For contracts where both of these conditions are fulfilled, revenue shall be recognized over time from commencement of production of the specialized product until completion of delivery to the customer. For Hydro's products, the alternative use of customer designed products would, in most cases, be as an input to the production of other products rather than for sale of the product unchanged. We have assessed whether Hydro has an enforceable right to payment for performance completed to date, including a reasonable margin, throughout the production period. The assessment is primarily related to the segment Hydro Extrusions. The main assessment is related to which compensation Hydro would be entitled to in a situation where firm orders are canceled or amended by the customer. Our conclusion is that for close to all contracts we do not have an enforceable right to payment as described in IFRS 15, and revenue is thus recognized at a point in time. However, as our conclusions depends both on legal assessment of a large number of contracts in many countries, and on the understanding of what constitutes an enforceable right to payment under IFRS 15, we might reach a different conclusion in the future for some contracts, or for new contracts covering similar products and customer segments entered into in the future. Also for these contracts, prices are fixed at the time of delivery.

Payment terms for products vary between customer segments and regions. The predominant terms vary between 30 to 60 days, and up to 200 days in some markets.

Hydro's warranty terms vary by product and business segment. Generally, Hydro provides warranty that product complies with specification, and offer repair, replacement or refund of consideration paid for breaches. Such warranties are limited in time, for most products not exceeding 12 months. Individual contracts may include more extensive warranty clauses where Hydro takes responsibility also for some consequential damages, mainly related to more complex products such as certain automotive parts. Warranty liability is to some degree influenced by legal requirements, which may extend the time period for Hydro's liability.

Other information

Sale of electricity, primarily from the Hydro Energy segment, is recognized as electricity is delivered to customers through the relevant grid. Sale of energy from other segments represent excess energy purchased under contracts exceeding the operational needs, and relate to periodic maintenance stops or curtailment. In 2020 and 2019, power sale from other segments than Hydro Energy is related to reduced production in Hydro Aluminium Metal's Albras plant for parts of the years, caused by curtailment in 2019 and a fire in 2020. The power sale amounts to NOK 161 million for 2020 and NOK 337 million for 2019. Revenue from sale of energy includes the revenue from sale of concession power, a legal requirement to deliver a certain part of volume produced in Norway to local authorities at a reduced price. Revenue from concession power amounted to NOK 75 million and NOK 73 million in 2020 and 2019, respectively.

Realized and unrealized changes in fair value of commodity derivatives are also presented as part of revenue. These amounts are measured at fair value as required by IFRS 9 Financial Instruments. The instruments are mainly aluminium and power contracts used for risk management purposes, and are included in Other revenue in the table below.

Hydro's revenue divided by segment and geographic location of the customer is shown in note 1.4 Operating and geographic segment information. Revenue divided by product type for the main product groups sold are as follows:

Amounts in NOK million	2020	2019
Extruded solutions	51,848	58,555
Rolled products	23,642	25,768
Standard ingots	11,808	9,872
Extrusion ingots	18,398	20,118
Other casthouse products	15,037	16,791
Alumina	11,968	10,037
Power	1,230	3,018
Other goods and services1)	4,254	5,170
Total revenue from contracts with customers	138,186	149,328
Other revenue	(68)	438
Total revenue	138,118	149,766

1) Includes sale of bauxite and revenue from allocated freight

Note 5.2 Otherincome

Accounting policies for Other income, net

Transactions resulting in income from activities other than normal production and sales operations are classified as Other income, net. This includes gains and losses resulting from the disposal of PP&E and intangible assets, investments in subsidiaries, associates or joint ventures as well as government grants, insurance compensation, and rental revenue. Other income, net also includes revenue from utilities, which is revenue from contracts with customers accounted for in accordance with IFRS 15.

Government grants

Government grants are recognized in accordance with IAS 20 Accounting for Government Grants and Disclosure of Government Assistance. Grants are recognized when there is a reasonable assurance that Hydro will comply with relevant conditions and that the grants will be received. Government grants are deferred in Other non-current liabilities until the associated activity is performed or expenses recognized. Investment grants are recognized over the period the associated asset is depreciated. All government grants are recognized in Other income, net. Investment grants are included in Investing activities in the statement of cash flows.

Amounts in NOK million	2020	2019

Gain on sale of property, plant and equipment and intangible assets	187	99
Net gain (loss) on sale of subsidiaries, associates and joint ventures1)	5,360	43
Revenue from utilities2)	63	67
Government grants3)	670	329
Other4)	1,238	461
Other income, net	7,519	1,000

1) Recognized gain of NOK 5,308 million relates to the establishment of Lyse Kraft DA, the transaction is described in note 3.1 Investments in joint arrangements and associates.

2) Revenue from utilities includes quay structures, pipe network, tank terminal, process water and grid rental.

3) Government grants includes export grants in Brazil, CO2 compensation and investment grants related to Hydro's pilot facility on Karmøy. About NOK 240 million of government grants relates to Covid 19, mainly in Europe and North America.

4) Other includes insurance compensations.

Note 5.3 Raw material and energy expense

Amounts in NOK million	2020	2019

Raw material expense and production related cost	84,410	95,729
Change in inventories own production	182	1,745
Raw material and energy expense	84,592	97,474

Raw material expense and production related cost include effect of commodity derivative instruments. See note 8.3 Derivative instruments and hedge accounting.

Section 6 – Specification of operating capital elements

Note 6.1Inventories

Accounting policies for inventories

Inventories are valued at the lower of cost, using the first-in, first-out method (FIFO), or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less estimated costs of completion and selling costs. Inventory cost includes direct materials, direct labor and a portion of production overhead (manufactured goods) or the purchase price of the inventory. Abnormal amounts of idle facility expense, freight, handling costs, and wasted materials are recognized as expense in the current period. Inventory write-downs to net realizable value occurs when the cost of the inventory is not recoverable, and is reversed in later periods if there is clear evidence of an increase in the net realizable value.

Amounts in NOK million	2020	2019

Spare parts and raw materials	5,995	5,540
Work in progress	4,062	4,257
Alumina	1,349	1,385
Aluminium casthouse products	4,771	5,776
Fabricated products	3,315	3,858
Inventories	19,492	20,816

Raw materials include purchased raw materials such as bauxite, caustic soda, oil, coal and other input factors used in the production; however, excluding alumina and aluminium intended for use in Hydro's production of other products. All amounts are net of any write-downs.

Note 6.2 Trade and otherreceivables

Accounting policies for trade receivables

Trade receivables are initially recognized at transaction price, subsequently accounted for at amortized cost and are reviewed for impairment on an ongoing basis. Individual accounts are assessed for impairment taking into consideration indicators of financial difficulty and management assessment. Portfolios of trade receivables where expected losses are more than insignificant are reduced for those expected losses. Discounting generally does not have a material effect on trade receivables, however, in special cases discounting may be applied. Hydro's business model for most trade receivable is to hold the receivables to collect the contractual cash flows. For some portfolios of trade receivables, factoring is applied.

Amounts in NOK million	2020	2019

Trade receivables	15,753	15,225
VAT and other sales taxes	723	1,486
Other current receivables	2,367	2,642
Allowance for credit losses	(478)	(394)
Trade and other receivables	18,364	18,959

Of total trade receivables at year end 2020, about 9 percent were past due, with the majority within 30 days. The Hydro Extrusions segment have the majority of overdue receivables.

Note 6.3 Trade and other payables

Amounts in NOK million	2020	2019
Accounts payable	14,456	14,432
Payroll and value added taxes	3,499	3,151
Accrued liabilities and other payables	992	1,109
Trade and other payables	18,948	18,692

Section 7 – Capital management and cash management

Note 7.1 Capitalmanagement

Hydro's capital management policy is to maximize value creation over time, while maintaining a strong financial position and an investment grade credit rating. During 2020 net cash provided by operating activities exceeded net cash used in investing activities plus dividends paid.

Credit rating

To secure access to capital markets at attractive terms and remain financially solid, Hydro aims to maintain an investment grade credit rating from the leading agencies, S&P Global (current rating BBB, stable outlook) and Moody's (current rating Baa3, stable outlook). Hydro's key targets for financial solidity are described below.

Funding

Hydro manages its funding requirements centrally to cover group operating requirements and long-term capital needs. Hydro has an ambition to access national and international capital markets as primary sources for external long-term funding. Hydro has a syndicated USD 1,600 million revolving credit facility maturing in December 2025. The facility was extended one year in 2020 and has one further one-year extension option. The facility was undrawn per year-end 2020.

Funding of subsidiaries, associates and jointly controlled entities

Normally the parent company, Norsk Hydro ASA, extends loans or equity to wholly-owned subsidiaries to fund capital requirements. All financing is executed on an arm's length basis. To the extent Hydro offers loans to part-owned subsidiaries and investments in associates and joint arrangements, the policy is to participate according to Hydro's ownership share, on equal terms with the other owners. Project financing is used for certain funding requirements mainly to mitigate risk while also considering partnership and other relevant factors.

Trade finance products such as factoring and reverse factoring are used to some extent by subsidiaries, mainly to facilitate risk mitigation in specific trade relations or markets. Hydro has internal guidelines limiting the use of such instruments to where it adds commercial value, as these instruments should not be used as a source for funding. Hydro has set a total limit for such arrangements including any type of sales of receivables. The limit is currently NOK 5 billion, but it is not fully utilized.

Shareholder return

Long-term return to shareholders should reflect the value created by Hydro, and consists of dividends and share price development. Hydro aims to provide its shareholders with a competitive return compared with alternative investments in similar companies. Hydro's ambition during 2020 was, in the long term, to pay out, on average, 40 percent of net income as ordinary dividend over the cycle to our shareholders. The dividend policy has a floor of an annual dividend of NOK 1.25 per share. This ambition has increased to, in the long term, to pay out, on average, 50 percent of underlying net income as ordinary dividend over the cycle, with the dividend floor unchanged at NOK 1.25 per share. Dividends for a particular year are based on expected future earnings and cash flow, future investment opportunities, the outlook for world markets and Hydro's current financial position. Share buybacks or extraordinary dividends may be used to supplement ordinary dividends during periods of strong financial results after considering the status of the business cycle and capital requirements for future growth.

Hydro's capital management measures in 2020

Hydro's management used the Adjusted net cash (debt) to Equity ratio to assess the group's financial solidity and ability to absorb volatility in the markets. Net cash (debt) is defined as Hydro's cash and cash equivalents plus short-term investments, less short- and long-term interest-bearing debt. Adjusted net cash (debt) is adjusted for net cash (debt) positions regarded as unavailable for servicing debt and includes pension liabilities and other obligations which are considered debt-like in nature.

The ability to generate cash compared to financial liabilities is another important measure of risk exposure and financial solidity. Hydro's management used Funds from operations and the ratio Funds from operations to average Adjusted net cash (debt) as capital management measures. Funds from operations reflects the cash generation from Hydro's wholly and partly owned operating entities before changes in net operating capital, including the contribution from equity accounted investments, and after current tax expense.

Both financial ratio calculations include adjustments for the indebtedness of Hydro's equity accounted investments. Though Hydro has no financial obligations towards the lenders of its equity accounted investments, the adjustments were considered relevant as the debt and cash flow level in these entities affect Hydro's overall cash generation and financial risk profile.

Review of key financial metrics

During 2020, Hydro reviewed the key financial metrics used for managing capital. The goals were to achieve clear communication aligned with industry and peer practice, simplify where possible, and through that support a correct valuation of the Hydro share and debt.

The review included the key financial solidity ratios used. Management has decided to replace average Adjusted net cash (debt) to Equity and Funds from operations to average Adjusted net cash (debt) with average Adjusted net cash (debt) to underlying EBITDA, which is a more broadly used metric in the industry as well as consistent with the increased focus on EBITDA. Hydro targets, over the business cycle, a ratio of average Adjusted net cash (debt) to underlying EBITDA below 2.

The key financial metrics mentioned above are presented in the following tables.

Adjusted net cash (debt)
	Dec 31	Sep 30	Jun 30	Mar 31	Dec 31	Sep 30	Jun 30	Mar 31
Amounts in NOK million	2020	2020	2020	2020	2019	2019	2019	2019

Cash and cash equivalents	17,638	17,495	15,385	12,160	12,286	10,581	10,590	6,099
Short-term investments	4,091	5,399	5,110	1,641	969	929	1,090	1,274
Bank loans and other interest-bearing short-term debt	(4,748)	(6,915)	(7,094)	(7,728)	(6,157)	(6,074)	(8,177)	(8,913)
Long-term debt	(24,811)	(25,873)	(26,595)	(21,290)	(18,858)	(19,985)	(18,620)	(10,559)
Net cash (debt)	(7,830)	(9,894)	(13,194)	(15,217)	(11,760)	(14,549)	(15,117)	(12,099)
Cash and cash equivalents and short-term investments in captive insurance company1)	(956)	(915)	(898)	(897)	(876)	(899)	(944)	(879)
Net pension obligation at fair value, net of expected income tax benefit2)	(9,868)	(11,569)	(11,127)	(12,385)	(8,601)	(10,282)	(8,757)	(8,414)
Short- and long-term provisions net of expected income tax benefit, and other liabilites3)	(3,966)	(3,712)	(3,865)	(4,328)	(4,209)	(3,876)	(3,087)	(3,001)
Adjusted net cash (debt)	(22,620)	(26,089)	(29,084)	(32,827)	(25,447)	(29,606)	(27,905)	(24,394)

Adjusted net cash (debt) including net debt equity accounted investments (EAI)

Adjusted net cash (debt)	(22,620)	(26,089)	(29,084)	(32,827)	(25,447)	(29,606)	(27,905)	(24,394)
Net debt in EAI4)	(5,286)	(5,542)	(5,564)	(6,488)	(5,537)	(5,376)	(5,386)	(5,737)
Adjusted net cash (debt) including EAI	(27,905)	(31,631)	(34,648)	(39,316)	(30,984)	(34,982)	(33,291)	(30,131)

1) Cash and cash equivalents and short-term investments in Hydro's captive insurance company Industriforsikring AS are assumed to not be available to service or repay future Hydro debt, and are therefore excluded from the measure Adjusted net cash (debt).

2) The expected income tax benefit related to the net pension liability is NOK 2,236 million and NOK 1,821 million, respectively, for 2020 and 2019.

3) Consists of Hydro's short and long-term provisions related to asset retirement obligations, net of an expected tax benefit estimated at 30 percent, and other non-current financial liabilities.

4) Net debt in equity accounted investments is defined as the total of Hydro's relative ownership percentage of each equity accounted investment's short and long-term interest-bearing debt less their cash positions, reduced by total outstanding loans from Hydro to the equity accounted investment. Net debt per individual equity accounted investment is limited to a floor of zero. The adjustments are related to Qatalum.

Adjusted net cash (debt) including EAI / Equity

Amounts in NOK million, except ratio	2020	2019

Adjusted net cash (debt) including net debt EAI	(27,905)	(30,984)
Total Equity	(77,444)	(84,081)
Adjusted net cash (debt) including net debt EAI / Equity	0.36	0.37

Funds from operations / average Adjusted net cash (debt) including EAI

Amounts in NOK million, except ratio	2020	2019
Net income (loss)	1,660	(2,370)
Depreciation, amortization and impairment	12,253	9,485
Deferred taxes	(1,156)	(699)
Loss (gain) on sale of non-current assets	(5,239)	85
Net foreign exchange (gain) loss	3,861	1,204
Capitalized interest	(14)	(44)
Derivatives	629	(29)
Hydro's share of depreciation, amortization and impairment in EAI	1,141	1,071
Funds from operations	13,135	8,703
Average Adjusted net cash (debt) including EAI	(33,375)	(32,347)
Funds from operations / average Adjusted net cash (debt) including EAI	0.39	0.27

Average Adjusted net cash (debt) / underlying EBITDA

2020	2019
	(26,838)
14,316	11,832
1.93	2.27
	(27,655)

Note 7.2 Cash and cash equivalents

Accounting policies for cash and cash equivalents

Cash and cash equivalents in the balance sheet includes cash, bank deposits and all other monetary instruments with a maturity of less than three months from the date of acquisition and are measured at nominal value.

Liquidity management

Hydro manages its liquidity requirements centrally to cover group operating requirements. Hydro operates cash pools in several currencies where wholly owned subsidiaries participate, to the extent permitted by country legislation. Such cash pool arrangements facilitate netting of cash positions within the group, thereby reducing the requirement for external financing, and centralizing management of aggregated positions. At the end of 2020, NOK 3.9 billion of Hydro's cash position of NOK 17.6 billion was outside such group arrangements, mainly in Brazil.

Note 7.3 Short-term investments

Amounts in NOK million	2020	2019

Equity securities	324	293
Debt securities	589	529
Time deposits1)	2,500	35
Collateral accounts and other	677	112
Total short-term investments	4,091	969

1) Time deposits in banks with a maturity of three months or more at inception. Short-term bank deposits are normally available at short notice.

Note 7.4 Short and long-termdebt

Amounts in NOK million	2020	2019

Bank loans and overdraft facilities	1,589	3,560
Other interest-bearing short-term debt	-	248
Current portion of long-term debt	3,159	2,349
Bank loans and other interest-bearing short-term debt	4,748	6,157
Amounts in NOK million	2020	2019
EUR	8,380	7,816
USD	5,308	4,723
NOK	9,983	2,998
SEK	1,047	1,885
Other	13	1
Total unsecured loans	24,730	17,423
Lease liabilities	3,240	3,784
Outstanding debt	27,970	21,207
Less: Current portion	(3,159)	(2,349)
Total long-term debt	24,811	18,858

Long-term debt includes seven bonds in NOK and SEK listed on the Oslo Stock Exchange and two bonds in EUR listed on the Irish Stock Exchange (Euronext Dublin). As of December 31, 2020, the market value of these bonds is approximately NOK 1,000 million higher than the carrying value which is the nominal value.

Reconciliation of liabilities arising from financing activities

		Bank loans and other
Amounts in NOK million	Long-term debt	interest-bearing short-term debt	Total liabilities from financing activities
December 31, 2018	9,342	9,373	18,716
Cash flows	11,089	(5,556)	5,533
Non-cash changes:
Net change in current balance	(2,324)	2,324	-
New leases	519	-	519
Lease debt cancellations	(27)	-	(27)
Business combinations	11	12	23
Amortizations	13	-	13
Foreign currency effects	233	5	238
December 31, 2019	18,858	6,157	25,015
Cash flows	7,943	(4,271)	3,672
Non-cash changes:
Net change in current balance	(3,431)	3,431	-
New leases	543	-	543
Lease debt cancellations	(53)	-	(53)
Divestments	(5)	(5)	(10)
Amortizations	18	-	18
Term extension	452	(452)	-
Foreign currency effects	485	(112)	373
December 31, 2020	24,811	4,748	29,559

Note 7.5 Finance income and expense

Amounts in NOK million	2020	2019

Interest income (amortized cost)	191	295
Dividends received and net gain (loss) on securities	99	70
Finance income	290	365
Interest expense (amortized cost)	(1,013)	(893)
Capitalized interest	14	44
Net foreign exchange gain (loss)	(3,861)	(1,204)
Accretion	(219)	(309)
Other	66	(58)
Finance expense	(5,013)	(2,420)
Finance income (expense), net	(4,723)	(2,055)

Accretion represent the period's interest component for pension obligations, asset retirement obligations and other liabilities measured as present value of future expected payments.

Note 7.6 Shareholders' equity

Share capital

Number of shares	Ordinary shares issued	Treasury shares	Ordinary shares outstanding
December 31, 2018	2,068,998,276	(22,695,479)	2,046,302,797
Treasury shares issued to employees		1,345,993	1,345,993
December 31, 2019	2,068,998,276	(21,349,486)	2,047,648,790
Treasury shares issued to employees		1,475,928	1,475,928
December 31, 2020	2,068,998,276	(19,873,558)	2,049,124,718

The share capital of Norsk Hydro ASA as of December 31, 2020 and 2019 was NOK 2,271,760,107 consisting of 2,068,998,276 ordinary shares at par value of NOK 1.098 per share. All shares have equal rights and are freely transferable.

Treasury shares

The treasury shares may, pursuant to the decision of the General Meeting at the time these shares were acquired, be used as consideration in connection with commercial transactions or share schemes for the employees and representatives of the Corporate Assembly and the Board of Directors.

The treasury shares amount per December 31, 2020 of NOK 662 million was comprised of NOK 22 million share capital and NOK 640 million retained earnings.

Change in Other components of equity

The table below specifies the changes in Other components of equity for 2020 and 2019.

Amounts in NOK million	2020	2019
Items that will not be reclassified to income statement:

Remeasurement postemployment benefits
January 1	(388)	55
Remeasurement postemployment benefits during the year	(1,015)	(128)
Deferred tax offset	89	(315)
December 31	(1,314)	(388)
Unrealized gain (loss) on assets measured at FVOCI
January 1	(509)	155
Period unrealized gain (loss) on FVOCI securities	(156)	(664)
December 31	(665)	(509)
Items that will be reclassified to income statement:
Currency translation differences
January 1	(4,471)	(3,895)
Currency translation differences during the year	(4,667)	(576)
Reclassified to Net income on sale of foreign operation	(22)	-
December 31	(9,160)	(4,471)
Cash flow hedges - See note 8.3 Derivative instruments and hedge accounting
January 1	(30)	(49)
Period gain recognized in Other comprehensive income	90	(108)
Reclassification of hedging gain (loss) to Net income	38	132
Tax expense	(8)	(5)
December 31	90	(30)
Other components of equity in equity accounted investments
January 1	137	105
Period gain (loss) recognized in Other comprehensive income	-	22
Reclassified to Net income on divestment of equity accounted investments	-	9
December 31	137	137
Total other components of equity attributable to Hydro shareholders as of December 31	(8,464)	(3,496)
Total other components of equity attributable to non-controlling interests as of December 31	(2,447)	(1,765)

Earnings per share

Basic and diluted earnings per share is computed using Net income attributable to Hydro shareholders and the weighted average number of outstanding shares in each year. There are no significant diluting elements. The weighted average number of outstanding shares used for calculating basic and diluted earnings per share was 2,048,705,656 for 2020 and 2,047,057,976 for 2019.

Hydro's outstanding founder certificates and subscription certificates entitle the holders to participate in any share capital increase, provided that the capital increase is not made in order to allot shares to third parties as compensation for their transfer of assets to Hydro. These certificates represent dilutive elements for the earnings per share computation.

Note 7.7 Dividends

Hydro's Board of Directors normally proposes a dividend per share in connection with the fourth quarter results that are published in February each year. The Annual General Meeting considers this proposal, normally in May, and the approved dividend is then paid to the shareholders. Dividends are paid once each calendar year, generally occurring in May. For non-Norwegian shareholders, Norwegian withholding tax will be deducted at source in accordance with the applicable Norwegian tax regulations.

For fiscal year 2020 the Board of Directors has proposed a dividend of NOK 1.25 per share to be paid in May 2021. The Annual General Meeting, scheduled to be held May 6, 2021, will consider this dividend proposal. If approved, this would be a total dividend of approximately NOK 2,561 million. In accordance with IFRS, the fiscal year 2020 proposed dividend is not recognized as a liability in the 2020 financial statements.

Dividends declared and paid in 2020 and 2019 for the prior fiscal year, respectively, are as follows:

	Paid in 2020 for fiscal year 2019	Paid in 2019 for fiscal year 2018
Dividend per share paid, NOK	1.25	1.25
Total dividends paid, NOK million	2,561	2,558
Date proposed	February 6, 2020	February 7, 2019
Date approved	November 12, 2020	May 7, 2019
Dividend payment date	November 25, 2020	May 16, 2019

Dividends to non-controlling shareholders in Hydro's subsidiaries are reported as dividends in Consolidated statements of changes in equity.

Section 8 – Financial risk and financial instruments

Note 8.1 Financial and commercialriskmanagement

Hydro is exposed to market risks both in our upstream segments producing bauxite, alumina and aluminium as well as electricity, and in our downstream segments producing mainly rolled and extruded products. The upstream segments Hydro Bauxite & Alumina and Hydro Aluminium Metal are more exposed to risk from fluctuations in the price of commodities bought and sold as well as prices of other raw materials, than our other segments. All segments and the company as a whole are exposed to currency exchange rates and interest rates. Price volatility, which may be significant, can have a substantial impact on Hydro's results. Market risk exposures are evaluated based on a holistic approach in order to take advantage of offsetting positions across the value chain and to manage risk on a net exposure basis. Natural hedging positions are established where possible and economically viable.

Hydro uses financial derivatives and various price clauses in commercial contracts, including fixed prices over longer periods and price links to relevant commodities, to manage financial and commercial risk exposures. Hydro's main policy to manage market volatility is to keep a strong financial position. During 2020, Hydro has reviewed the risk management policy for use of derivative and non-derivative instruments to manage price exposure. Such instruments may be used to a larger extent and over longer time horizons than the practice in recent years, mainly in the upstream segments.

Commodity price risk exposure

Aluminium

Hydro produces primary aluminium and aluminium casthouse products, both based on primary aluminium and recycled aluminium, and fabricated aluminium products. Hydro also engages in sourcing and trading activities to procure raw materials and primary aluminium for internal use and for resale to customers. These activities serve to optimize capacity utilization, reduce logistical costs and strengthen the market positions. Hydro also participates in trading activities within strict volume and risk limits.

Hydro enters into future contracts on the London Metal Exchange (LME) with a maturity of mainly one to three months, primarily for two purposes. The first is to achieve an average LME aluminium price on smelter production. Second, because Hydro's downstream businesses, recycling, and the sale of third-party products are based on margins above the LME price, Hydro seeks to offset the metal price exposure when entering into customer and supplier contracts with corresponding physical or derivative future contracts at fixed prices (back-to-back hedging). Hydro manages these exposures on a portfolio basis, taking LME positions based upon net exposures within given limits. In addition, Hydro enters into derivative forward sale contracts both on the LME and with banks to secure prices on parts of the planned aluminium production for longer periods when considered beneficial, whether based on the market situation or to secure cash flow or margins for specific projects. In these cases, hedge accounting has in some instances been applied when available.

Aluminium price volatility can result in significant fluctuations in earnings as the derivative positions are marked to their market value with changes to market value recognized in the income statement, while any underlying physical metal transactions normally are not marked-to-market, except for those included in trading portfolios.

Hydro's sales of primary aluminium and aluminium casthouse products include a premium above the LME aluminium price. The pricing of these premiums can be volatile, and is related to physical demand and supply, with regional and product-related differences. There are limited possibilities for hedging future premiums, except for standard ingot premiums, for which a forward market exists. Hydro has from time to time entered into contracts for standard ingot premiums to mitigate risk in sales contracts.

Bauxite and alumina

Hydro's production of alumina normally exceeds the alumina consumption in its primary aluminium production. In addition, Hydro has entered into long-term agreements to purchase alumina from third parties. During 2019 and parts of 2020, Hydro's production at Alunorte was limited by production issues and regulatory limitations, leading to temporarily increased external sourcing in the spot market. The majority of purchase and sale contracts are priced with reference to alumina spot price indexes. Alumina forward markets are considered to have limited liquidity.

Hydro is a producer and consumer of bauxite. Hydro's need for bauxite is secured through own production as well as by longterm contracts. The purchasing contracts have links to the LME aluminium price and to the alumina spot price development with a certain time-lag. Hydro has from time to time a limited volume of excess bauxite from long-term sourcing contracts, which is sold under medium and short-term contracts with prices linked to an alumina price index or open price negotiations.

Electricity

Hydro is a large power consumer in several countries and with significant power production in Norway. Hydro's consumption is mainly secured through long-term contracts with power suppliers and through Hydro's own production. Hydro's own production is influenced by hydrological conditions which can vary significantly. The net power position in Norway is

balanced out in the Nordic power market. In order to manage and mitigate risks related to price and volume fluctuations, Hydro utilizes physical contracts and derivatives including future contracts, forwards and options. Hydro also participates in trading activities within strict volume and risk limits.

The longer duration of fixed or linked contracts for purchase of electricity compared to other input factors and sale of products influences the margin risk.

A part of Hydro's power purchase contracts is linked to aluminium prices in order to mitigate market price risk related to the sales of its aluminium products. These contract elements are separated from their host contracts and accounted for as derivatives. Power contracts in Norway are predominantly priced in Euro. There is no consensus that the Euro is a commonly used currency in the relevant market, the Euro price clauses with Norwegian counterparts are thus accounted for separately as currency forwards.

Other raw materials

Hydro is party to both long-term and short-term sourcing agreements for a range of raw materials and services with both fixed and variable prices. Such agreements include pitch, petroleum coke, caustic soda, natural gas, coal, fuel oil and freight. The number of purchasing agreements with prices linked to the price of other commodities such as aluminium is limited and the fair value exposure is considered to be immaterial, however, differences in price development in the markets for such input factors compared to prices for Hydro's main products impacts the margin risk.

Foreign currency risk exposure

The prices of Hydro's upstream products bauxite, alumina and primary aluminium, are mainly denominated in US dollars. Margins for mid- and downstream products are mainly priced in US dollars and Euro. Further, the prices of major raw materials used in Hydro's production processes, are quoted in US dollars in the international commodity markets, while power is predominantly priced in Euro in Europe, including Norway. Hydro also incurs significant local costs related to the production, distribution and marketing of products in a number of different currencies, mainly Norwegian Krone, Brazilian Real, Euro and US dollar.

Hydro's primary operational foreign currency risk is consequently linked to fluctuations in the value of the US dollar and Euro versus the currencies in which significant costs are incurred. In addition, Hydro's results and equity are influenced by value changes for the functional currencies of the individual entities and the Norwegian Krone as the Group's presentation currency.

To mitigate the impact of exchange rate fluctuations, long-term debt is mainly maintained in currencies reflecting underlying exposures, liquidity management and cash generation, while considering attractiveness in main financial markets. To reduce the effects of fluctuations in the US dollar and other exchange rates, Hydro also uses foreign currency swaps and forward currency contracts from time to time.

Foreign currency risk exposure in financial instruments

Short-term receivables and payables are often held in currencies other than the functional currency of the unit. Fluctuations between the functional currency and the currency in which the receivable or payable is denominated are reported in Financial expense.

Borrowings and deposits may be denominated in other currencies than the functional currency of the unit. Fluctuations between the functional currency and the instrument's currencies, both short and long term, impact the recognized value of the liability or asset, and are reported in Financial expense. The majority of exposure in financing arrangements exists in the parent company in Norway and in the part-owned subsidiaries in Brazil.

Embedded currency derivatives in non-financial contracts, including the Euro priced electricity contracts discussed above, contains a currency exposure with changes to the fair value of the embedded derivative included in Financial expenses.

Investments in equity instruments of other entities are often impacted by changes in currency exchange rates. As such investments are carried at fair value, the currency changes are included in the changes of fair value and reported as an integral part of such changes.

Interest rate exposure

Hydro is exposed to changes in interest rates, primarily as a result of financing its business operations and managing its liquidity in different currencies. Cash and other liquid resources, as well as debt, are currently mainly held in Norwegian Krone, Euro, US dollars and Brazilian real. The corresponding interest rate exposures are consequently related to Norwegian Krone, Euro, US dollar and Brazilian real short-term rates.

Financial instruments and provisions, including pension obligations, are also exposed to changes in interest rates in connection with discounting of positions to present value.

Credit risk management

Hydro manages credit risk by setting counterparty risk limits and establishing procedures for monitoring exposures and timely settlement of customer accounts. Credit risk is further limited through use of credit insurance, and, in some markets, sale of receivables to banks. Prepayments or guarantees are required where credit risk is outside the limits set for the relevant counterpart. Hydro is also monitoring the financial performance of key suppliers in order to reduce the risk of default on operations and key projects. Our overall credit risk exposure is reduced due to a diversified customer base representing various industries and geographic areas. Enforceable netting agreements, guarantees, and credit insurance, also contribute to a lower credit risk.

Credit risk arising from derivatives is generally limited to net exposures. Exposure limits are established for financial institutions relating to current accounts, deposits and other obligations. Credit risk related to commodity derivatives is limited by settlement through commodity exchanges such as the London Metal Exchange, Nasdaq OMX, Intercontinental Exchange, and banks. Current counterparty risk related to the use of derivative instruments and financial operations is considered moderate.

Liquidity risk

Volatile commodity prices and exchange rates as well as fluctuating business volumes and inventory levels can have a substantial effect on Hydro's cash positions and borrowing requirements.

To fund cash deficits of a more permanent nature Hydro will normally raise equity, long-term bond or bank debt in available markets. Some suppliers have access to supply chain finance facilities, which allows those suppliers to benefit from Hydro's credit profile. The use of such products is limited and does not extend Hydro's credit period beyond normal commercial terms. Further, all other financial liabilities, such as trade payables, with the exception of derivatives, have a final maturity date within one year.

A summary of Hydro's total contractual obligations and commercial commitments to make future payments is presented below:

Amounts in NOK million	Less than 1 year	1-3 years	3-5 years	Thereafter	Total

Long-term debt including interest (note 7.4)	3,789	10,110	7,505	9,628	31,032
Unconditional purchase obligations 1)	40,373	49,178	45,502	169,988	305,041
Contractual commitments for PP&E	3,099	568	85	-	3,753
Total contractual and non-contractual obligations, undiscounted	47,261	59,856	53,092	179,616	339,826
Present value of short-term and long-term provisions (note 4.1)	2,935	2,038	749	2,819	8,541

1) Unconditional purchase obligations include long-term contracts with equity accounted investees.

Hydro has long-term contractual commitments for the purchase of aluminium, raw materials, electricity, and transportation in addition to long-term sales commitments. The future non-cancellable fixed and determinable obligations under purchase commitments as of December 31, 2020 are shown in the following table:

Amounts in NOK million	Bauxite, alumina and aluminium	Energy related	Other

2021	22,881	13,991	3,501
2022	15,579	6,917	2,236
2023	16,035	6,879	1,532
2024	16,654	6,773	1,082
2025	15,718	4,446	828
Thereafter	123,219	39,812	6,957
Total	210,085	78,818	16,137

Amounts relating to contracts which are entirely or partly linked to market prices such as LME are based on the spot price at the balance sheet date.

The following table specifies Hydro's payment obligations related to investments:

Additional authorized future investments include projects formally approved for development by the Board of Directors or management. General investment frames are excluded from these amounts.

An overview of estimated gross cash flows from derivatives accounted for as liabilities and assets is presented below. Many of these assets and liabilities are offset by cash flows from contracts not accounted for as derivatives.

Risk of significant cash payments or margin calls related to derivative instruments is limited due to strict volume limits, valueat-risk and tenor limits for relevant trading activities.

Expected gross cash flows from derivatives accounted for as financial liabilities and financial assets, respectively, as of end of year:

	December 31, 2020		December 31, 2019
Amounts in NOK million	Liabilities	Assets	Liabilities	Assets

2020			(78)	279
2021	(538)	79	(1)	1
2022	(6)	6
Total	(544)	85	(79)	281

The cash flows above are to a large extent subject to enforceable netting agreements reducing Hydro's exposure substantially.

For additional information on contracts accounted for at fair value, see note 8.3 Derivative instruments and hedge accounting.

Note 8.2 Financial instruments

Accounting policies for financial instruments

Financial assets

Financial assets represent a contractual right by Hydro to receive cash or another financial asset in the future. Financial assets include financial derivatives and commodity derivative contracts, receivables and equity interests, as well as financial instruments used for cash-flow hedges.

Financial assets are recognized in accordance with IFRS 9 Financial Instruments. On initial recognition, a financial asset is classified as measured at amortized cost, at fair value through other comprehensive income (FVOCI) or at fair value through profit or loss (FVTPL). Classification depends on the business model and, for some instruments, the company's choice. Financial assets are derecognized when the rights to receive cash from the asset have expired or when Hydro has transferred the asset.

Trade receivables

Trade receivables are initially recognized at transaction price, subsequently accounted for at amortized cost and are reviewed for impairment on an ongoing basis. Individual accounts are assessed for impairment taking into consideration indicators of financial difficulty and management assessment. Portfolios of trade receivable where expected losses are more than insignificant are reduced for those expected losses. Discounting generally does not have a material effect on accounts receivable, however, in special cases discounting may be applied. Hydro's business model for most trade receivable is to hold the receivables to collect the contractual cash flows. For some portfolios of trade receivables, factoring is applied.

Debt instruments

Debt instruments other than trade receivables include bank deposits and all other monetary instruments with a maturity above three months at the date of purchase, investments in debt securities, and certain other receivables. These instruments are measured at amortized costs, with the exception of instruments where cash flows are not contractually fixed and thus required to be measured at FVTPL.

Short-term debt instruments are included in Short-term investments. Long-term debt instruments are included in Other noncurrent assets.

Equity instruments

Hydro's portfolio of trading securities is measured at FVTPL, and included in Short-term investments. Other equity investments that are not consolidated or accounted for using the equity method are classified as either FVTPL or FVOCI on an individual investment basis. Hydro classifies investments in other entities with strategic or operational purposes, such as getting access to raw materials or in other ways cooperating with those entities, primarily as FVOCI, as Hydro considers this classification to be more relevant. Any dividend received from such investment is recognized in Finance income. On disposal of these investments, no gain or loss will be recognized in the income statement, however, any related accumulated value change will be reclassified from Other components of equity to Retained earnings.

Financial liabilities

Financial liabilities represent a contractual obligation by Hydro to deliver cash in the future, and are classified as either shortor long-term. Financial liabilities include financial derivatives, commodity derivative contracts and other financial liabilities as well as financial instruments used for cash-flow hedges. Financial liabilities, with the exception of derivatives, are initially recognized at fair value, including transaction costs directly attributable to the transaction, and are subsequently measured at amortized cost. Financial liabilities are derecognized when the obligation is discharged through payment or when Hydro is legally released from the primary responsibility for the liability.

Derivative instruments

Derivative instruments are marked-to-market with the resulting gain or loss reflected in the income statement, except when the instruments meet the criteria for cash flow hedge accounting and are designated as hedge instruments. Derivatives, including hedging instruments and embedded derivatives with expected cash flows within twelve months from the balance sheet date, or held solely for trading, are classified as short-term. Instruments with expected cash flows more than 12 months after the balance sheet date are classified as short and long-term based on the timing of the estimated cash flows.

Derivative contracts are presented gross on the balance sheet unless contract terms include the possibility to settle the contracts on a net basis and Hydro has the intention and ability to do so. The ability to settle net is conditional on simultaneous offsetting cash-flows.

Physical contracts for commodities that are readily convertible to cash are evaluated on a portfolio basis. Portfolios are defined based on business purpose, internal mandates and internal responsibilities. If a portfolio of contracts contains contracts of a similar nature that are settled net in cash, or the underlying products are not intended for own use, the entire portfolio of contracts is recognized at fair value and classified as derivatives. Physical commodity contracts that are entered into and continue to be held for the purpose of the receipt or delivery of the commodity in accordance with Hydro's expected purchase, sale or usage requirements (own use) are not accounted for at fair value. Commodity purchase contracts are generally considered to be the primary source for usage requirements. Hydro's own production of such commodities, for instance electricity, alumina and primary aluminium, is considered to be available for use or sale at Hydro's discretion unless relevant concessions contains restrictions for use.

Derivative commodity instruments are marked-to-market with their fair value recorded in the balance sheet as either assets or liabilities. Adjustments for changes in the fair value of the instruments are reflected in revenue and/or raw material cost. Forward currency contracts and currency options are recognized in the balance sheet and measured at fair value at each balance sheet date with the resulting gain or loss recorded in Finance expense. Interest income and expense relating to swaps are netted and recognized as income or expense over the life of the contract.

Hedge accounting is applied when specific hedge criteria are met, including documentation of the hedge relationship. The changes in fair value of the hedging instruments are offset in part or in full by the corresponding changes in the fair value or cash flows of the underlying hedged exposures. Gains and losses on cash flow hedging instruments are recognized in Other comprehensive income and deferred in the Hedging reserve in Other components of equity until the underlying transaction is recognized in the income statement. Deferred gains and losses relating to forecasted hedged transactions that are no longer expected to occur are immediately recognized in the income statement. Any amounts resulting from hedge ineffectiveness are recognized in the current period's income statement.

An embedded derivative is accounted for as a separate financial instrument, provided that the economic characteristics and risks of the embedded derivative are not closely related to those of the host contract, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the host contract is not accounted for at fair value. Embedded derivatives are classified both in the income statement and on the balance sheet based on the risks in the derivatives' underlying.

Financial instruments

Certain commodity contracts are deemed to be financial instruments under IFRS 9 or to contain embedded derivatives which are required to be recognized at fair value, with subsequent changes in fair value impacting the income statement. Determining whether contracts qualify as financial instruments at fair value involves evaluation of markets, Hydro's use of those instruments and historic or planned use of physically delivered products under such contracts. Determining whether

embedded derivatives are required to be separated and accounted for at fair value involves assessing price correlations and normal market pricing mechanisms for relevant products and marketplaces. Where no directly observable market prices exist, fair value is estimated through valuation models which rely on internal assumptions as well as observable market information such as forward curves, yield curves and interest rates. Market stability impacts the reliability of observed prices and other market information, and consequently, the extent of judgment necessary to estimate appropriate market prices for valuation purposes. Volatility also impacts the magnitude of changes in estimated fair value, which can be substantial, in particular on

Financial instruments, and contracts accounted for as such, are in the balance sheet included in several line items and classified in categories for accounting treatment.

long-term contracts. Historically, financial and commodity markets have been highly volatile.

The below specification relates to financial statement line items containing financial instruments. Information is classified and measured in accordance with IFRS 9.

		Derivatives
		identified as	Debt	Financial	Equity	Financial	Non-financial
Amounts in NOK million	Derivatives at FVTPL1)	hedging instruments	instruments at amortized cost	instruments at FVTPL2)	instruments at FVOCI	liabilities at amortized cost	assets and liabilities3)	Total

2020
Assets - current
Cash and cash equivalents	-	-	17,638	-	-	-	-	17,638
Short-term investments	-	-	3,177	913	-	-	-	4,091
Trade and other receivables	-	-	16,621	-	-	-	1,744	18,364
Other current financial assets	200	75	-	-	-	-	195	470
Assets - non-current
Investments accounted for using the equity method	-	-	-	-	-	-	17,288	17,288
Other non-current assets	60	60	692	540	901	-	1,938	4,191
Liabilities - current
Bank loans and other interest-bearing short term debt	-	-	-	-	-	4,748	-	4,748
Trade and other payables	-	-	-	-	-	10,827	8,121	18,948
Other current financial liabilities	727	-	-	-	-	256	-	983
Liabilities - non-current
Long-term debt	-	-	-	-	-	24,811	-	24,811
Other non-current financial liabilities	3,293	-	-	-	-	-	-	3,293
2019
Assets - current
Cash and cash equivalents	-	-	12,286	-	-	-	-	12,286
Short-term investments	-	-	147	822	-	-	-	969
Trade and other receivables	-	-	15,804	-	-	-	3,155	18,959
Other current financial assets	444	-	-	-	-	-	190	634
Assets - non-current
Investments accounted for using the equity method	-	-	3	-	-	-	11,497	11,501
Other non-current assets	39	-	880	535	829	-	2,535	4,817
Liabilities - current
Bank loans and other interest-bearing short term debt	-	-	-	-	-	6,157	-	6,157
Trade and other payables	-	-	-	-	-	10,740	7,952	18,692
Other current financial liabilities	196	38	-	-	-	1	-	235
Liabilities - non-current
Long-term debt	-	-	-	-	-	18,858	-	18,858
Other non-current financial liabilities	2,992	-	-	-	-	-	-	2,992

1) FVTPL is financial instruments at fair value through profit or loss. FVOCI is financial instruments at fair value through other comprehensive income.

2) Financial Instruments at Fair Value Through Profit or Loss (FVTPL) are instruments required by IFRS 9 to be at FVTPL.

3) Includes items that are excluded from the scope of IFRS 7, such as investments accounted for using the equity method, except loans to such entities.

Financial assets, classified as current and non-current, represent the maximum exposure Hydro has towards credit risk as at the reporting date.

Collateral or margin calls are required for some financial liabilities, primarily related to derivative transactions. Such collaterals for financial instruments are reported as part of Short-term investments and Other non-current assets. Margin calls may to a larger extent have longer maturities as derivative instruments may be used over longer time horizons than the practice in recent years.

Impairment of receivables are disclosed in note 6.2 Trade and other receivables. No other financial assets are currently impaired based on credit losses.

Gains and losses

Realized and unrealized gains and losses from financial instruments and contracts accounted for as financial instruments are included in several line items in the income statement. Below is a reconciliation of the effects from Hydro's financial instruments in the income statements:

Amounts in NOK million	Derivatives at FVTPL	Derivatives identified as hedging instruments	Debt instruments at amortized cost	Financial instruments at FVTPL	Equity instruments at FVOCI	Financial liabilities at amortized cost	Non-financial assets and liabilities	Total1)
2020
Income statement line item
Revenue	141	-	-	-	-	-	-	141
Raw material and energy expense	158	(209)	-	-	-	-	-	(51)
Financial income	-	-	-	(74)	(25)	-	-	(99)
Financial expense	379	-	-	-	-	-	-	379
Gain/loss in Other comprehensive income
Recognized in Other comprehensive income (before tax)					156
Removed from Other components of equity and recognized in the income statement					-
2019
Income statement line item
Revenue	(402)	-	-	-	-	-	-	(402)
Raw material and energy expense	10	(91)	-	-	-	-	-	(82)
Financial income	-	-	-	(70)	-	-	-	(70)
Financial expense	808	-	-	-	-	-	-	808
Gain/loss in Other comprehensive income
Recognized in Other comprehensive income (before tax)					664
Removed from Other components of equity and recognized in the income statement					-

1) Amounts indicates the total gains and losses to financial instruments for each specific income statement line.

Currency effects, with the exception of currency derivatives, are not included above. Negative amounts indicate a gain.

Sensitivity analysis

In accordance with IFRS, Hydro has chosen to provide information about market risk and potential exposure to hypothetical loss from its use of derivative financial instruments and other financial instruments and derivative commodity instruments through sensitivity analysis disclosures. The sensitivity analysis depicted in the tables below reflects the hypothetical gain/loss in fair values that would occur assuming a 10 percent increase in rates or prices and no changes in the portfolio of instruments as of December 31, 2020 and December 31, 2019. Effects shown below are largely also representative of reductions in rates or prices by 10 percent, but with the opposite sign convention. Only effects that would ultimately be accounted for in the income statement, or equity, as a result of a change in rates or prices, are included. All changes are before tax.

Gain (loss) from 10 percent increase in

Amounts in NOK million		Foreign currency exchange rates			Commodity prices
	Fair value as of December 311)	USD	EUR	Other	Aluminium	Other	Interest rates	Other
2020
Derivative financial instruments2)	(3,337)	(202)	(2,839)	107	-	-	51	-
Other financial instruments3)	(1,065)	(410)	(537)	32	-	-	1	32
Derivative commodity instruments4)	(423)	49	(4)	-	(844)	43	-	(1)
Financial instruments at FVOCI5)	1,040	149	-	1	-	-	(86)	90
2019
Derivative financial instruments2)	(2,957)	-	(2,659)	-	-	-	85	-
Other financial instruments3)	(5,277)	(575)	(485)	(80)	-	-	2	29
Derivative commodity instruments4)	246	18	12	-	(347)	27	(1)	(2)
Financial instruments at FVOCI5)	791	-	(4)	1	-	9	(85)	78

1) The change in fair value due to price changes is calculated based on pricing formulas for certain derivatives, the Black-Scholes/Turnbull-Wakeman models for options and the net present value of cash flows for certain financial instruments or derivatives. Discount rates vary as appropriate for the individual instruments.

2) Includes forward currency contracts and embedded currency derivatives.

3) Includes cash and cash equivalents, investments in securities, bank loans and other interest-bearing short-term debt and long-term debt. Trade payables and trade receivables are also included.

4) Includes all contracts with commodities as underlying, both financial and physical contracts, such as LME contracts and NASDAQ Nordic Power contracts, which are accounted for at fair value.

5) Includes hedging derivatives.

The above sensitivity analysis reflects sensitivities for the instruments held at the balance sheet dates only. Related offsetting physical positions, contracts, and anticipated transactions are not reflected. The calculations do not take into consideration any adjustments for potential correlations between the risk exposure categories, such as the effect of a change in a foreign exchange rate on a commodity price.

The above discussion about Hydro's risk management policies and the estimated amounts included in the sensitivity analysis relates to the balance sheet position as of December 31. Outcomes at other dates could differ materially based on actual developments in the global markets and Hydro's positions. The methods used by Hydro to analyze risks discussed above should not be considered as projections of future events, gains or losses.

The following is an overview of fair value measurements categorized on the basis of observability of significant measurement inputs. Certain items are valued on the basis of quoted prices in active markets for identical assets or liabilities (level 1 inputs), others are valued on the basis of inputs that are derived from observable prices (level 2 inputs), while certain positions are valued on the basis of judgmental assumptions that are to a limited degree or not at all based on observable market data (level 3 inputs). The level in this fair value hierarchy within which measurements are categorized is determined on the basis of the lowest level input that is significant to the fair value measurement.

Amounts in NOK million	2020	Level 1	Level 2	Level 3	2019	Level 1	Level 2	Level 3

Assets
Commodity derivatives	229	60	155	14	462	223	70	170
Currency derivatives	31	-	31	-	21	21	-	-
Cash flow hedges	135	-	135	-	-	-	-	-
Financial assets at FVTPL	1,453	328	589	535	1,357	293	529	535
Financial assets at FVOCI	901	-	-	901	829	-	-	829
Total	2,750	388	911	1,450	2,669	536	599	1,534
Liabilities
Commodity derivatives	(652)	(503)	(42)	(107)	(211)	(43)	(55)	(112)
Currency derivatives	(3,368)	-	(3,368)	-	(2,977)	(81)	(2,897)	-
Cash flow hedges	-	-	-	-	(38)	-	-	(38)
Total	(4,020)	(503)	(3,410)	(107)	(3,227)	(124)	(2,952)	(151)

The following is an overview in which changes in level 3 measurements are specified:

		Commodity derivatives	Currency derivatives Liabilities	Cash flow hedges	Financial instruments at FVTPL	Equity instruments at FVOCI
Amounts in NOK million	Assets	Liabilities
December 31, 2018	270	(325)	-	(62)	535	1,405
Total gains (losses)
in Income statement	(104)	134	-	-	-	-
in Other comprehensive income	-	-	-	(108)	-	(664)
Purchases	-	-	-	-	-	97
Settlements	-	82	-	132	-	-
Currency translation difference	2	(3)	-	-	-	(8)
December 31, 2019	169	(111)	-	(38)	535	830
Total gains (losses)
in Income statement	(3)	(30)	-	-	-	-
in Other comprehensive income	-	-	-	38	-	(156)
Purchases	-	-	-	-	-	1
Settlements	(171)	62	-	-	-	-
Currency translation difference	18	(27)	-	-	-	227
December 31, 2020	14	(107)	-	-	535	901
Total gains (losses) for the period	(3)	(30)	-	38	-	(156)
Total gains (losses) for the period included in the income statement for assets held at the end of the reporting period	(3)	(30)	-	-	-	-

Gains or losses relating to level 3 commodity derivatives appearing in the table above are included in the income statement in Raw material and energy expense. Changes in fair value for embedded derivatives are reported as gains or losses for the period. Changes in fair value for hedge instruments are reported in Other comprehensive income. Dividends received for equity instruments at fair value through other comprehensive income are included in Financial income.

Exposure to level 3 commodity derivatives is decreasing and the sensitivities relating to commodity derivatives are insignificant as of December 31, 2020.

Note 8.3Derivative instruments and hedge accounting

Derivative instruments, whether physically or financially settled, are accounted for under IFRS 9. All derivative instruments are accounted for at fair value with changes in the fair value recognized in the income statement, unless the instrument is designated as a hedge instrument. Some of Hydro's commodity contracts are deemed to be derivatives under IFRS.

Embedded derivatives

Some contracts contain pricing links that affect cash flows in a manner different than the underlying commodity or financial instrument in the contract. For accounting purposes, these embedded derivatives are in some circumstances separated from the host contract and recognized at fair value. Hydro has separated and recognized at fair value embedded derivatives related to currency, aluminium, inflation and coal links from the underlying contracts.

Commodity derivatives

The following types of commodity derivatives were recorded at fair value on the balance sheet as of December 31, 2020 and December 31, 2019. Contracts that are designated as hedge instruments in cash flow hedges are not included. The presentation of fair values for electricity and aluminium contracts shown in the table below includes the fair value of traditional derivative instruments such as futures, forwards and swaps, physical contracts accounted for at fair value, as well as embedded derivatives.

Amounts in NOK million	2020	2019

Assets
Electricity contracts	25	222
Aluminium futures, forwards and options	203	253
Other	-	51
Netting	-	(64)
Total	229	462
Liabilities
Electricity contracts	(34)	(52)
Coal forwards	-	(140)
Aluminium futures, forwards and options	(613)	(82)
Other	(5)	-
Netting	-	64
Total	(652)	(211)

Embedded derivatives are classified based on the underlying in the contract feature constituting a separable embedded derivative in the table above. Where there is more than one embedded derivative in the same host contract, those embedded derivatives are offset in settlement and thus presented net on the balance sheet.

Changes in the fair value of commodity derivatives are included in operating revenues or cost of goods sold based on classification of host contract for embedded derivatives and on the purpose of the instrument for freestanding derivatives.

Cash flow hedges

Hydro has to a limited extent used cash flow hedge accounting for its risk management positions. Gains and losses on the hedge derivatives are recognized in Other comprehensive income, and accumulated in the hedging reserve in equity and reclassified into operating revenues or cost when the corresponding forecasted sale or consumption is recognized. In 2012 Hydro entered into a hedge arrangement for parts of the power consumption in the Rheinwerk smelter in Germany. The price differential between the German and the Nordic power market was secured through derivative contracts for 150 MW for the period 2013 to 2020. In 2020, Hydro entered into a hedge arrangement for currency in the Alunorte plant in Brazil, to secure the exchange rate between Brazilian Real and US dollar for the period 2021 to 2022. In total, USD 383 million is sold forward for 2021 and 2022 at an average rate of 5.53 Brazilian Real to US dollar.

No ineffectiveness was recognized in the income statement in 2020 or 2019.

The table below gives aggregated numbers related to the cash flow hedges for 2020 and 2019.

Amounts in NOK million	2021	2020	2019

Expected to be reclassified to the income statement during the year (NOK million)	75	(38)	(65)
Reclassified to the income statement from Other components of equity (NOK million)1)		(38)	(132)

1) Deviates from expected reclassifications due to change in market prices throughout the year. Negative amounts indicate a loss.

An asset of NOK 135 million and a liability of NOK 38 million were recognized as the fair value of cash flow hedging instruments for December 31, 2020 and 2019, respectively.

Hydro performs trading operations to reduce currency exposures on commodity positions. The effect of such operations is recognized as a part of Financial expense in the income statement.

For the after tax movement in Hydro's equity relating to cash-flow hedges for 2020 and 2019, please see note 7.6 Shareholders' equity.

Fair Value of Derivative Instruments

The fair value of derivative financial instruments such as currency forwards and swaps are based on quoted market prices. The fair market value of aluminium and electricity futures/forwards and option contracts is based on quoted market prices obtained from the London Metals Exchange and NASDAQ Nordic Power/EEX (European Energy Exchange) respectively. The fair value of other commodity over-the-counter contracts and swaps is based on quoted market prices, estimates obtained from brokers and other appropriate valuation techniques. Where long-term physical delivery commodity contracts are recognized at fair value in accordance with IFRS 9, such fair market values are based on quoted forward prices in the market, and assumptions of forward prices and margins where market prices are not available. Hydro takes credit-spread into consideration when valuating positions when necessary.

For further information on fair values, see note 1.2 Measurement of fair value. See note 8.2 Financial instruments for a specification of the classification of derivative positions according to a fair value hierarchy.

Section 9 – Related parties and remuneration

Note 9.1 Board ofDirectors'statement on executive managementremuneration

The board's statement on executive management remuneration (the "statement") has been prepared in accordance with the provisions of the Norwegian Public Limited Liability Companies Act, the Norwegian Accounting Act and the Norwegian Code of Practice for Corporate Governance. Previous statements have been divided into two sections:

key principles for determining remuneration in the coming financial year, and
the executive management remuneration policy in the previous financial year

Following amendments to the Public Limited Liability Companies Act, i.e. amendment of section 6-16 (a), addition of a new section 6-16 (b), and associated new regulations, the statement is now subject to new and more detailed requirements for determining salaries and other remuneration. From 1 January 2021, the board is required to prepare both guidelines for such determination (section 6-16 (a)) and a report that provides an overview of paid and outstanding remuneration (section 6-16 (b)). The guidelines will be forward-looking and will be adopted by the Annual General Meeting through a binding vote, while the report will be retrospective and will be subject to an advisory vote at the Annual General Meeting. The deadline for adoption of the new guidelines for the company is 1 October 2021, while the deadline for the first presentation of the report is the Annual General Meeting in 2022.

Hydro's board has prepared proposed guidelines for the company's executive remuneration policy in accordance with the provision in the new section 6-16 (a). The proposed guidelines, which provide a broader and deeper introduction to the principles for remuneration to executive management in Hydro, replace the section in the statement concerning the key principles for determining remuneration in the coming financial year, i.e. from 2021 onwards. The new guidelines will be presented to the Annual General Meeting in 2021, where a binding vote on these will be held in accordance with the new regulations. The guidelines will then be available on Hydro's website.

The executive management remuneration report in accordance with the new regulations will be prepared for the first time for the Annual General Meeting in 2022 and will have effect for the financial year 2021. For this reason, the section in the previous statement concerning remuneration policy in the previous financial year is continued by providing information in this note related to the executive management remuneration policy in 2020.

Executive management remuneration policy in 2020

The remuneration policy has been implemented in accordance with the guidelines adopted in 2020, pursuant to Note 9.1 Board of Directors' statement on executive management remuneration to the financial statements for 2019, with the following remarks:

• Members of the Corporate Management Board (CMB) collectively waived their salary adjustments and ordinary bonus earnings (STI and LTI) for the financial year 2020. Executive vice president of the Hydro Rolling business area, Einar Glomnes, was nevertheless awarded STI for 2020 based on his extraordinary and decisive efforts in leading and carrying out the turnaround operation related to the business area.
Executive vice president of the Hydro Bauxite & Alumina business area, John Thuestad, retains his individual retention bonus related to the position in Brazil that he has held since assuming the position in 2018. Thuestad has a net salary contract based on his posting from Norway to Brazil.
Executive vice president of the Hydro Rolling business area, Einar Glomnes, was granted a retention bonus in 2020 related to the restructuring and potential sale of the business area. Glomnes has a net salary contract based on his posting from Norway to Germany.
Executive vice president of the Hydro Extrusions business area, Egil Hogna, resigned his position as of 30 November 2020. In accordance with the regulations for the CMB's share-based LTI scheme, Hogna has repaid the company for LTI shares that were subject to the lock-in obligation as of the date of resignation.
Paul Warton was hired as the new executive vice president of Hydro Extrusions. Warton, who assumed the position on 1 February 2021, is a British citizen and is employed on a British net salary contract based on his posting from the UK to Norway. The agreed terms are mainly based on the market situation for positions at this level in the UK, including his STI potential payment of 75 percent of base salary. Warton also received compensation for the loss of bonus from his previous employer.
Helena Nonka was hired in January 2021 as the new executive vice president of the Corporate Development area. She assumes the position on 1 April 2021. Nonka, who is a Canadian and British citizen, is resident in Switzerland and will for a period work from Switzerland based on a Swiss net salary contract based on her posting from Switzerland to Norway. She will then move to Norway, and the employment relationship will then be based on a Norwegian employment agreement. Nonka will receive compensation for loss of bonus from her current employer, and Hydro will also compensate for tuition fees for her children when she moves to Norway.

• Until Helena Nonka assumes the position of executive vice president of Corporate Development, Arvid Moss will continue to fill this role in addition to his ordinary duties as executive vice president of the Hydro Energy business area. Moss receives special compensation for this additional responsibility.

With the exception of salary adjustments and bonuses (STI and LTI) which were waived for 2020, remuneration to the CEO and other members of the CMB for the financial year 2020 is in accordance with the guidelines adopted for 2020.

Note 9.2 Managementremuneration

Corporate management board members' salaries and other benefits, number of LTI-shares allocated, as well as Hydro share ownership as of December 31, 2020 and 2019 are presented in the table below. Amounts presented for individuals appointed to, or stepping down from, a position in the Corporate Management Board from or to another position in Hydro, includes fixed compensation for the whole year. Unless otherwise stated, Hydro did not have any loans to or guarantees made on behalf of any of the corporate management board members in 2020 and 2019.

Name	Base salary1), 2)	Maximum bonus potential1), 2)	Salary paid1), 3)	Other benefits paid1), 3)	Compen sation pension paid1), 3)	Bonus earned1), 3)	Long-term incentive (LTI) earned1), 3)	Pension benefits1), 4)	LTI-shares allocated3)	Hydro share owner ship5)
2020
Hilde Merete Aasheim	6,710	3,355	6,696	211	-	-	-	2,236	7,363	119,946
Pål Kildemo	2,900	1,160	2,884	262	405	-	-	175	1,436	13,060
John Thuestad6)	6,810	2,231	8,253	517	564	-	-	306	7,419	58,043
Eivind Kallevik	3,685	1,474	3,750	264	51	-	-	1,622	4,783	72,849
Einar Glomnes7)	4,011	1,418	4,125	406	510	868	-	667	2,814	17,692
Egil Hogna8)	5,533	2,029	5,671	245	1,044	-	-	270	7,306	63,470
Arvid Moss9)	3,267	1,307	4,127	193	-	-	-	(1,008)	4,313	173,043
Anne-Lene Midseim	2,614	1,046	2,652	268	115	-	-	984	3,451	33,735
Inger Sethov	2,397	959	2,445	261	153	-	-	949	3,165	38,125
Hilde Vestheim Nordh	2,400	960	2,392	457	317	-	-	282	1,188	25,204
2019
Hilde Merete Aasheim10)	6,710	2,664	5,699	224	-	1,589	407	(6,869)	4,711	94,161
Svein Richard Brandtzæg11)	6,710	1,188	6,838	261	-	562	-	581	9,198	253,323
Pål Kildemo12)	2,900	435	2,319	219	150	280	79	245	-	2,202
John Thuestad6)	6,384	2,115	7,738	1,220	511	1,351	370	395	4,398	25,202
Eivind Kallevik	3,685	1,449	3,816	275	50	801	264	1,708	4,811	62,644
Einar Glomnes13)	4,047	908	3,828	481	343	553	155	1,567	-	4,456
Egil Hogna	5,533	2,213	5,689	286	1,112	1,361	404	609	7,430	50,742
Arvid Moss9)	3,267	1,307	3,457	253	-	772	238	3,268	4,384	158,308
Anne-Lene Midseim	2,614	1,046	2,668	273	112	548	191	1,095	3,506	29,862
Inger Sethov	2,397	959	2,458	273	149	502	175	1,057	3,214	27,538
Hilde Vestheim Nordh14)	2,400	897	2,292	273	130	459	66	1,389	-	16,753
Kjetil Ebbesberg15)	3,866	490	2,938	544	111	-	-	1,410	4,311	58,437

1) Amounts in NOK thousand. Amounts paid by subsidiaries outside Norway have been translated to NOK at average rates for each year.

2) Annual base salary per December 31, or per the date of stepping down from the Corporate Management Board. Maximum bonus potential is for the year presented, and for the period as corporate management board member.

3) Salary is the amount paid to the individual during the year presented, and includes vacation pay. Other benefits is the total of all other cash and non-cash related benefits received by the individual during the year presented and includes such items as the taxable portion of insurance premiums, car and mileage allowances and electronic communication items. For most individuals, compensation pension is the amount paid to compensate for future pension shortfall estimated at the time of transition from Hydro's defined benefit pension plans to the defined contribution plan in line with an arrangement applicable to all affected employees in Norway. For John Thuestad and Egil Hogna, compensation pension is the amount paid to compensate for lower pension benefits in Hydro compared to those of former employer Sapa AS (now Hydro Extruded Solutions AS). Bonus is the amount earned in the year presented, including vacation pay, based on performance achieved as corporate management board member. The LTI plan benefit reflects gross (pre-tax) amounts earned in the year presented, and results in LTI shares allocated in the following year. For corporate management board members on net salary employment contracts, benefits have been converted to estimated gross (pre-tax) amounts.

4) Pension benefits include the estimated change in the value of defined pension benefits, and reflects both the effect of earning an additional year's pension benefit and the adjustment to present value of previously earned pension rights (interest element). It is calculated as the increase in the Defined Benefit Obligations (DBO) calculated with stable assumptions. Pension benefits also include contributions to defined contribution plans.

5) Hydro share ownership is the number of shares held directly by the corporate management board member and any shares held by close family members and controlled entities. Hydro share ownership is as of December 31, or per the date of stepping down from the Corporate Management Board.

6) John Thuestad became member of the Corporate Management Board as of June 1, 2018. From this date, Thuestad has a retention agreement that vests progressively over a 60-month period. Thuestad earned an estimated NOK 1,427 thousand and NOK 1,354 thousand under this agreement in 2020 and 2019, respectively. These amounts are included in column Salary paid in the table above.

7) On November 20, 2020, Einar Glomnes entered into a retention agreement related to the restructuring of the Hydro Rolling business area, and that vests on the date falling 3 months after the closure of the restructuring. Glomnes earned an estimated NOK 114 thousand under this agreement in 2020. This amount is included in column Salary paid in the table above.

8) Egil Hogna stepped down from the Corporate Management Board and left Hydro as of November 30, 2020. Hogna was required to make payment to Hydro for non-vested LTI shares at termination of employment amounting to NOK 618 thousand. This amount is not included in the table above.
9) From November 1, 2019, Arvid Moss was appointed interim EVP and Head of Corporate Development, for which he received an extra remuneration of NOK 900 thousand and NOK 150 thousand in 2020 and 2019, respectively. These amounts are included in column Salary paid in the table above. Moss remains in his position as EVP and Head of Hydro Energy business area. Moss has not used his right to retire from age 62, contributing to a net negative change in pension benefits for 2020.
10) Effective May 8, 2019, Hilde Merete Aasheim superceeded Svein Richard Brandtzæg as President and CEO. Amended terms for Aasheim's early retirement agreement in the age interval 62-65 have resulted in a net negative change in pension benefits for 2019.
11) Effective May 8, 2019, Svein Richard Brandtzæg resigned as President and CEO and stepped down from the Corporate Management Board. Brandtzæg retired at the end of 2019. In addition to the benefits included in the table above, Brandtzæg received vacation pay in 2020 amounting to NOK 862 thousand.
12) Pål Kildemo became member of the Corporate Management Board as of August 15, 2019. From May 8 until August 15, 2019, Kildemo was appointed interim EVP and Head of Hydro Aluminium Metal business area, for which he received an extra remuneration of NOK 323 thousand that is included in column Salary paid in the table above.
13) Einar Glomnes became member of the Corporate Management Board as of May 8, 2019.
14) Hilde Vestheim Nordh became member of the Corporate Management Board as of August 15, 2019. From January 8 until August 15, 2019, Nordh was appointed interim EVP and Head of People and HSE.
15) Kjetil Ebbesberg stepped down from the Corporate Management Board as of May 8, 2019, and left Hydro as of September 30, 2019. In addition to the benefits included in the table above, Ebbesberg received salary and other benefits during a 6 month notice period that started October 1, 2019, amounting to NOK 2,027 thousand. Ebbesberg had no work obligations or permissions in Hydro during this period. Further, from April 1, 2020, Ebbesberg received severance pay for a period of 6 months, amounting to NOK 1,731 thousand. In addition, Ebbesberg received vacation pay in 2020 amounting to NOK 139 thousand. Ebbesberg was not required to make any payments to Hydro for non-vested LTI shares at termination of employment.

In the period December 1, 2020 until January 31, 2021, Head of Precision Tubing Hydro Extrusions Erik Fossum was also assigned as acting Executive Vice President Hydro Extrusions for which he received an additional allowance of NOK 112 thousand per month.

Note 9.3 Employee remuneration

Accounting policies for employee remuneration

Share-based compensation

Hydro accounts for share-based compensation in accordance with IFRS 2 Share-based Payment. Share-based compensation expense is measured at fair value over the service period and includes social security taxes that will be paid by Hydro at the settlement date. All changes in fair value are recognized in the income statement.

Employee benefits

Payments to employees, such as wages, salaries, social security contributions, paid annual leave and bonus agreements are accrued in the period in which the associated services are rendered by the employee.

Employee share purchase plan

Hydro has established a share purchase plan for employees in Norway. The plan payout is based on whether the share price (adjusted for dividend paid) increases with at least 12 percent or not during the performance period. Employees are eligible to receive an offer to purchase shares under this plan if they were 1) employed by Norsk Hydro ASA or a more than 90 percent owned Norwegian subsidiary, and 2) employed as of December 31 through the final acceptance date of the share purchase offer. Employees are invited to purchase shares with a rebate of 50 percent for a value of NOK 15,000 (2019: NOK 12,500) or NOK 30,000 (2019:NOK 25,000), depending on shareholder return. The share purchase is financed through a non-interest bearing loan from the company with a repayment period of 12 months.

Compensation expense related to the 2019 performance measurement period was accrued and recognized over the service period of December 31, 2019 through March 31, 2020, the final acceptance date of the offer. In 2020 and 2019 the participation rates of eligible employees in the employee share purchase plan were 83 and 89 percent, respectively. Details related to the employee share purchase plan are provided in the table below.

Performance measurement period	2020	2019	2018
Total shareholder return performance target achieved	≥12%	<12%	<12%
Employee rebate offered, NOK	15,000	6,250	6,250
Share purchase plan compensation		2020	2019
Award share price, NOK		21.10	30.92
Number of shares issued, per employee		422	361
Total number of shares issued to employees		1,432,690	1,296,351
Compensation expense related to the award, NOK thousand		9,012	17,682

Employee benefit expense

The average number of employees in Hydro for 2020 and 2019 was 34,896 and 36,487, respectively. As of year-end 2020 and 2019, Hydro employed 34,240 and 36,310 people, respectively. Employees in joint operations are not included. The specification of employee benefit expenses, including employee benefits in joint operations, is given in the table below.

Amounts in NOK million	2020	2019

Salary	18,627	19,802
Social security costs	2,919	2,936
Other benefits	1,093	1,086
Pension expense (note 9.5)	1,129	1,047
Total	23,767	24,871

Note 9.4 Board ofDirectors and CorporateAssembly

Board of Directors' remuneration and share ownership

Total board fees and individual board member fees for 2020 and 2019, and board member share ownership as of December 31, 2020 and 2019, are presented in the tables below.

Amounts in NOK thousand	2020	2019
Fees and other remuneration - normal board activities	4,079	4,423
Fees - audit committee	591	617
Fees - compensation committee	302	302
Total fees for board services provided to Hydro during the year	4,971	5,342

	Board fees1)		Number of shares 2)
Board member / observer	2020	2019	2020	2019

Dag Mejdell 3)	807	807	45,000	35,000
Irene Rummelhoff4)	504	504	5,000	5,000
Marianne Wiinholt5)	560	613	-	-
Thomas Schulz	385	477	-	-
Liselott Kilaas6)	498	498	-	-
Peter Kukielski7)	385	326	-	-
Rune Bjerke8)	267	-	15,000
Ellen Merete Olstad9) 10)	136	-	4,903
Arve Baade10)	362	362	5,130	4,708
Sten Roar Martinsen10) 11)	453	453	6,869	6,447
Finn Jebsen12)	238	571	53,406	53,406
Roelof Ijsbrand Baan13)	30	234	-	-
Svein Kåre Sund10) 14)	347	498	6,434	6,012
Tor Egil Skulstad10) 15)	-	-	1,226	804
Total	4,971	5,342	142,968	111,377

1) Amounts in NOK thousand.

2) Number of shares owned as of December 31, 2020 and 2019 for board members as of December 31, 2020 and 2019; otherwise it is the number of shares owned as of the date the individual stepped down from the Board of Directors. Shareholdings disclosed include shares held by close members of family and controlled entities, in addition to shares held directly by the board member.

3) Chariperson of the board and chairperson of the board compensation committee.

4) Deputy chairperson of the board and member of the board compensation committee.

5) Member of the board audit committee until June 17, 2020, and chairperson of the board audit committee as of June 17, 2020.

6) Member of the board audit committee.

7) Member of the board as of May 29, 2019.

8) Member of the board and the board audit committee.as of June 17, 2020.

9) Member of the board as of September 10, 2020 and member of the board audit committee as of October 22, 2020.

10) Employee representative on the board elected by the employees in accordance with Norwegian Company Laws. As such, these individuals are also paid regular salary, remuneration in kind and pension benefits that are not included in the table above.

11) Member of the board compensation committee.

12) Member of the board and chairperson of the board audit committee until May 20, 2020.

13) Member of the board as of May 29, 2019 until February 5, 2020.

14) Member of the board and the board audit committee until September 10, 2020.

15) Observer on the board until April 30, 2020.

The remuneration to the Board of Directors consists of the payment of fees and travel compensation. Travel compensation is paid to members living outside Norway who attend meetings in person, with an amount of NOK 23,000 (2019: NOK 23,000) per meeting. Board members do not have any incentive or share-based compensation. Hydro has not provided any loans to, or made any guarantees on behalf of, any of the board members.

Fees are based on the position of the board members and board committee assignments. Annual fees for 2020 for the chairperson of the board, deputy chairperson and directors are NOK 686,000 (2019: NOK 686,000), NOK 413,000 (2019: NOK 413,000) and NOK 362,000 (2019: NOK 362,000), respectively. The chairperson of the audit committee and the chairperson of the compensation committee receive an additional NOK 209,000 (2019: NOK 209,000) and NOK 120,500 (2019: NOK 120,500) annually in fees, respectively, and audit and compensation committee members receive NOK 136,000 (2019: NOK 136,000) and NOK 90,500 (2019: NOK 90,500) annually, respectively, for their participation on these committees. No fees are paid to the board observer.

Corporate Assembly

Corporate Assembly members owned 71,139 shares as of December 31, 2020. Hydro has not provided any loans to members of the Corporate Assembly as of December 31, 2020.

Note 9.5 Employee retirement plans

Accounting policies for post-employment benefits

Post-employment benefits are recognized in accordance with IAS 19 Employee Benefits. The cost of providing pension benefits under a defined benefit plan is determined separately for each plan using the projected unit credit method. Past service costs are recognized immediately in the income statement. The interest component of the periodic cost is included in Finance expense. Remeasurement gains and losses are recognized in Other comprehensive income.

Contributions to defined contribution plans are recognized in the income statement in the period in which they accrue. Multiemployer defined benefit plans where available information is insufficient to use defined benefit accounting are accounted for as if the plan were a defined contribution plan.

Significant judgement in accounting for post-employment benefits

Measurement of pension expense and obligations under defined benefit plans requires numerous assumptions and estimates that can have a significant impact on the recognized pension cost and obligation, such as discount rates, turnover rate and mortality, as well as future pension increases and salary levels.

Employee retirement plans in Hydro

Hydro provides post-employment benefits covering a substantial portion of employees. Plans and benefit levels vary between companies and countries. In recent years, there has been a shift from traditional final salary defined benefit plans to defined contribution and contribution-oriented plans. Many defined benefit plans have been closed for new entrants, and in some defined benefit plans, large groups of employees have converted to defined contribution arrangements. Still, a number of employees continues to earn benefits under defined benefit plans, but many of these plans are heavily impacted by deferred members and pensioners.

Pension expense

	2020				2019
Amounts in NOK million	Norway	Germany	Other	Total	Norway	Germany	Other	Total
Defined benefit plans	117	162	63	342	129	198	(11)	317
Defined contribution plans	196	-	330	525	196	-	278	474
Multiemployer plans	54	-	4	58	53	-	2	55
Termination benefits and other	48	14	56	118	62	(1)	56	117
Social security cost	52	-	34	86	63	-	21	84
Pension expense	466	176	487	1,129	503	197	347	1,047
Interest expense (income)	(30)	128	20	117	3	164	12	180
Remeasurement (gain) loss in other comprehensive income	71	747	198	1,015	(1,340)	1,234	233	128

Recognized defined benefit asset and liability

		2020					2019
Amounts in NOK million	Norway	Germany	Other	Total	Norway	Germany	Other	Total
Defined benefit obligation major plans	(13,348)	(11,848)	(5,869)	(31,065)	(12,689)	(10,401)	(5,176)	(28,265)
Plan assets	14,927	-	5,420	20,347	14,161	-	4,904	19,066
Reimbursement rights	306	-	-	306	301	-	-	301
Liability other plans	(56)	(143)	(748)	(947)	(54)	(131)	(661)	(845)
Social security cost	(655)	-	(90)	(745)	(602)	-	(77)	(679)
Net defined benefit asset (liability)	1,174	(11,991)	(1,287)	(12,104)	1,118	(10,531)	(1,009)	(10,423)
Recognized prepaid pension	6,474	47	543	7,064	5,997	45	635	6,676
Recognized pension liability	(5,300)	(12,038)	(1,830)	(19,167)	(4,879)	(10,576)	(1,644)	(17,099)
Net amount recognized	1,174	(11,991)	(1,287)	(12,104)	1,118	(10,531)	(1,009)	(10,423)

Other plans include some minor plans in various entities and countries. These plans may be funded or unfunded. None of these plans are considered material, neither individually nor combined.

Change in defined benefit obligation (DBO)

	2020				2019
Amounts in NOK million	Norway	Germany	Other	Total	Norway	Germany	Other	Total

Opening Balance	(12,689)	(10,401)	(5,176)	(28,265)	(12,904)	(9,240)	(5,165)	(27,310)
Current service cost	(112)	(259)	(36)	(407)	(124)	(199)	(28)	(351)
Past service cost and curtailment gain (loss)	-	96	(6)	90	-	-	-	-
Interest expense	(285)	(127)	(111)	(523)	(315)	(162)	(144)	(621)
Actuarial gain (loss) demographic assumptions	-	-	(13)	(13)	-	-	4	4
Actuarial gain (loss) economic assumptions	(971)	(954)	(718)	(2,643)	99	(1,257)	(682)	(1,840)
Experience gain (loss)	123	208	55	385	(16)	39	(41)	(19)
Benefit payments	635	326	233	1,193	609	285	252	1,146
Termination benefits	(48)	-	-	(48)	(36)	-	-	(36)
Settlements	-	-	-	-	-	-	789	789
Foreign currency translation	-	(737)	(97)	(833)	-	134	(161)	(27)
Closing Balance	(13,348)	(11,848)	(5,869)	(31,065)	(12,689)	(10,401)	(5,176)	(28,265)

Change in pension plan assets

Amounts in NOK million	2020					2019
	Norway	Germany	Other	Total	Norway	Germany	Other	Total

Opening Balance	14,161	-	4,904	19,066	12,899	-	4,950	17,849
Interest income	322	-	115	437	319	-	149	468
Return on plan assets above (below) interest income	809	-	559	1,368	1,244	-	552	1,796
Company contributions	70	-	3	73	135	-	7	142
Benefit payments	(435)	-	(198)	(633)	(435)	-	(228)	(663)
Settlements	-	-	-	-	-	-	(727)	(727)
Foreign currency translation	-	-	36	36	-	-	201	201
Closing Balance	14,927	-	5,420	20,347	14,161	-	4,904	19,066

Analysis of the defined benefit obligation (DBO)

	2020				2019
Amounts in NOK million	Norway	Germany	Other	Total	Norway	Germany	Other	Total
Active members	(3,131)	(5,569)	(776)	(9,476)	(3,250)	(5,389)	(697)	(9,336)
Deferred members	(949)	(1,564)	(2,325)	(4,838)	(814)	(870)	(2,195)	(3,879)
Pensioners	(9,268)	(4,714)	(2,768)	(16,751)	(8,625)	(4,142)	(2,283)	(15,051)
Defined benefit obligation	(13,348)	(11,848)	(5,869)	(31,065)	(12,689)	(10,401)	(5,176)	(28,265)
Weighted average duration (years)	12.8	20.0			12.6	19.5

Contributions to pension plans, benefit payments from unfunded pension plans, and social security tax imposed on such contributions and payments amounted to a cash outflow of about NOK 1,400 million for 2020 and about NOK 1,250 million for 2019. Hydro's cash impact is expected to be at the same level in the coming year.

Hydro's main pension plans are offered in Norway and Germany. The plans are described below:

Norway

Hydro has closed the main defined benefit plans for new members, and the majority of employees are now covered by defined contribution plans. The defined benefit plans are both funded and unfunded. The main funded plan is managed by Norsk Hydros Pensjonskasse, a separate, regulated legal entity. Hydro's pension plans complement the public pension schemes in Norway.

Hydro participates in a tariff-based pension plan that entitles the majority of its Norwegian employees life-long supplementary benefits. The benefits are financed through a pooled arrangement by private sector employers (avtalefestet pensjon, AFP) where also the Norwegian state contributes. The plan is a defined benefit plan with limited funding and where plan assets are not segregated. The information required to calculate the share of the plan and account for the plan as a defined benefit plan is not available from the plan administrator. Hydro therefore accounts for the plan as if it were a defined contribution plan. The employer contributions are included in Multiemployer plans.

Significant actuarial assumptions for the main Norwegian defined benefit plans include:

	Benefit obligation	Benefit expense	Benefit obligation	Benefit expense
Assumptions	2020	2020	2019	2019

Discount rate	1.7%	2.3%	2.30%	2.5%
Expected salary increase	2.0%	2.0%	2.0%	2.5%
Expected pension increase	1.25%	1.25%	1.25%	1.5%
Mortality basis	K2013	K2013	K2013	K2013

The discount rate is based on the yield on covered bonds (debt securities backed by cash flows from mortgages) issued in Norway. The market for covered bonds has developed in size and liquidity, and we deem this market to be sufficiently deep to serve as reference for the discount rate for our post-employment benefit plans in Norway.

The sensitivities shown in the table below have been calculated for the main Norwegian plans illustrating the effects of changing one assumption while keeping the other assumptions unchanged. Possible correlation between assumptions is not reflected in the calculations.

Sensitivities decrease (increase) benefit obligation year end Amounts in NOK million, except percent

Discount rate increase 0.5% point	6.3%	844
Salary increase 0.5% point	(0.5%)	(69)
Pension increase 0.5% point	(6.0%)	(804)
One year longer life all members	(4.5%)	(595)

The plan assets in the funded plans provided through Norsk Hydros Pensjonskasse were invested as follows at the end of 2020 and 2019:

Amounts in NOK million, except percent	2020	2020	2019	2019

Cash and cash equivalents	4.8%	700	4.7%	654
Equity instruments Norway	20.8%	3,057	21.9%	3,052
Equity instruments other countries	22.3%	3,282	20.6%	2,865
Debt instruments	27.6%	4,051	29.3%	4,073
Investment funds	8.2%	1,198	6.1%	844
Real estate	16.4%	2,410	17.5%	2,432
Total	100.0%	14,698	100.0%	13,920

Real estate consists of office buildings in the Oslo area. A share of the buildings are leased and occupied by Hydro. Investment funds are primarily private equity funds investing in unlisted companies across various industries in Europe, the US and Asia, and infrastructure funds investing in the UK, continental Europe and the US. Equity instruments are held through liquid funds invested in listed companies in Norway and globally. Debt instruments are mainly bond issues with maturities up to 10 years and investment grade rating.

Germany

In Germany, the majority of plan members are covered by defined benefit plans that offer benefits based on final salary level and the number of years in service. The main plans are unfunded. Hydro's main plans are closed for new entrants, and all new employees are now offered benefits under defined contribution-oriented plans. These plans are unfunded and treated as defined benefit plans for financial reporting purposes.

Significant actuarial assumptions for the main German plans include:

	Benefit obligation	Benefit expense	Benefit obligation	Benefit expense
Weighted-average assumptions	2020	2020	2019	2019

Discount rate	0.6%	1.1%	1.1%	1.8%
Expected salary increase	2.5%	2.4%	2.4%	2.4%
Expected pension increase	1.5%	1.5%	1.5%	1.5%
Mortality basis	RT 2018 G	RT 2018 G	RT 2018 G	RT 2018 G

The sensitivities shown in the table below have been calculated for the main German plans illustrating the effects of changing one assumption while keeping the other assumptions unchanged. Possible correlation between assumptions is not reflected in the calculations.

Sensitivities decrease (increase) benefit obligation year end Amounts in NOK million, except percent

Discount rate increase 0.5% point	9.2%	1,088
Salary increase 0.5% point	(2.1%)	(255)
Pension increase 0.5% point	(7.6%)	(896)
One year longer life all members	(5.8%)	(689)

Other

Other includes Hydro's post-employment benefits outside Norway and Germany. Most employees affected are covered by defined contribution plans. Defined benefit plans relate largely to the UK and the US, where the majority of the benefit obligation is financed and administered through independent pension trusts. Pension expense for 2019 includes a gain of NOK 62 million resulting from settlements of certain benefit obligations in the US. These settlements reduced defined benefit obligations and plan assets with NOK 789 million and NOK 727 million, respectively.

Note 9.6 Other related party information

As of December 31, 2020, The Norwegian state had ownership interests of 34.6 percent of total shares outstanding (2019: 34.6 percent) in Hydro through the Ministry of Trade, Industry and Fisheries. In addition, Folketrygdfondet, which manages the Government Pension Fund – Norway20 held 7.8 percent (2019: 5.4 percent). There are no preferential voting rights associated with the shares held by the Norwegian State. Hydro has concluded that the Norwegian state's shareholding represents a significant interest in Hydro, and that the State thus is a related party.

The Norwegian state has ownership interests in a substantial number of companies. The ownership interests in 74 companies are managed by the ministries and covered by public information from the Ministry of Trade, Industry and Fisheries21. We have not assessed which of these companies that are controlled by the State. Hydro has business transactions with a number of these companies, including purchase of power from Statkraft SF and bank services from DNB ASA. Generally, transactions are agreed independently of the possible control exercised by the State.

A significant share of Hydro's defined benefit post-employment plans is managed by the independent pension trust, Norsk Hydros Pensjonskasse. Employees managing and operating the pension trust are employees of Norsk Hydro ASA. Their salaries and other benefits are reimbursed by the pension trust on a monthly basis, in total NOK 10 million for 2020 and NOK 9 million for 2019. Further, the pension trust is located in Hydro's head office. Office costs, including heating and administrative services, are charged with a total of NOK 1 million for 2020 and 2019.

The pension trust owns some of the office buildings rented by Hydro. The current rental arrangement was entered into in 2015 representing a partial continuation of a rental agreement from 2006, and priced based on market price benchmarks at the time of the agreement in 2006. Hydro has paid a rental of NOK 67 million and NOK 71 million for 2020 and 2019, respectively. The current term of the rental contract expires in February 2022 after exercise of a one-year extension option. The contract includes an extension option for an additional five-year period. In addition, compensation related to cancellation of a previous contract was paid with NOK 87 million and NOK 86 million for 2020 and 2019, respectively. The compensation arrangement expires in 2021. The remaining provision for the compensation arrangement as of December 31, 2020 was NOK 13 million. As of the end of 2020, Hydro's outstanding payables to Norsk Hydros Pensjonskasse was NOK 16 million, receivables amounted to NOK 1 million, all settled during January and February 2021.

The members of Hydro's board of directors during 2020 and 2019 are stated in note 9.4 Board of Directors and Corporate Assembly, where their remuneration and share ownership is outlined. Some of the board members or their close members of family serve as board members or executive directors in other companies. In addition, some members of Hydro's corporate management board or their close members of family serve as board members in other companies. Hydro has transactions with some of those companies; however, have not identified any transactions where the relationship is known to have influenced the transaction. Some close family members of members of Hydro's management are employed in non-executive positions in Hydro.

Hydro's significant joint arrangements and associates; and transactions with those entities are described in note 3.1 Investments in joint arrangements and associates. Hydro's relationship with partners in joint arrangements are generally limited to a combined effort within a limited area. Hydro considers the joint venture partners as competitors in other business transactions, and do not see these relationships as related party relationships.

Transactions with related parties are at arm's length principles.

²⁰ Shareholding is based on information from the Norwegian Central Securities Depositary (VPS) as of December 31, 2020 and 2019. Due to lending of shares, an investor's holdings registered in its VPS account may vary.

²¹ According to information on the Government web site www.regjeringen.no, state ownership.

Section 10 – Otherinformation

Note 10.1Income taxes

Accounting policies for income taxes, current and deferred

Taxes payable is based on taxable profit for the year, which excludes items of income or expense that are taxable or deductible in other years. Taxable profit also excludes items that are never taxable or deductible. Hydro's liability for current tax is calculated using tax rates that have been enacted or substantively enacted as of the balance sheet date.

Deferred income tax expense is calculated using the liability method in accordance with IAS 12 Income Taxes. Deferred tax assets and liabilities are classified as non-current in the balance sheet and are measured based on the difference between the carrying value of assets and liabilities for financial reporting and their tax basis when such differences are considered temporary in nature. For items recognized as an asset and a liability at inception, such as an asset retirement obligation or a lease, temporary differences related to the asset and liability are considered in combination, and deferred tax assets and liabilities are recognized on changes to the temporary differences through the life of the items. Temporary differences related to intercompany profits are deferred using the buyer's tax rate. Deferred tax assets are reviewed for recoverability every balance sheet date, and the amount probable of recovery is recognized.

Deferred income tax expense represents the change in deferred tax asset and liability balances during the year, except for the deferred tax related to items recognized in Other comprehensive income or resulting from a business combination or disposal. Changes resulting from amendments and revisions in tax laws and tax rates are recognized when the new tax laws or rates become effective or are substantively enacted. Uncertain tax positions are recognized in the financial statements based on management's expectations.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities, when they relate to income taxes levied by the same taxation authority, and when the Group intends to settle its current tax assets and liabilities on a net basis.

Deferred taxes are not provided on undistributed earnings of subsidiaries when the timing of the reversal of this temporary difference is controlled by Hydro and is not expected to happen in the foreseeable future. This is applicable for the majority of Hydro's subsidiaries.

Significant judgment in accounting for income taxes

Hydro is involved in a significant number of tax cases related to various types of taxes. Hydro's widespread business operations expose us to several tax regimes and their interaction. We see that tax authorities challenge transfer prices to an increasing degree. Although Hydro currently has no significant transfer price disputes with tax authorities, the long value chain with a large number of internal transactions and business operations covering multiple tax jurisdictions expose us to such disputes, both related to prior and future transactions.

Valuation of deferred tax assets is dependent on management's assessment of future recoverability of the deferred benefit. Expected recoverability may result from expected taxable income in the future, planned transactions or planned tax optimizing measures, all of which may be uncertain. Economic conditions may change and lead to a different conclusion regarding recoverability. Tax authorities in different jurisdictions may challenge Hydro's calculation of taxes payable from prior periods. Such processes may lead to changes to prior periods' taxable income, resulting in changes to income tax expense in the period of change, as well as interest and fines.

Amounts in NOK million	2020	2019

Income (loss) before tax
Norway	4,938	(1,471)
Other countries	(2,329)	(85)
Total	2,609	(1,556)
Current taxes
Norway	758	665
Other countries	1,347	848
Current income tax expense	2,105	1,512
Deferred taxes
Norway	(119)	(57)
Other countries	(1,037)	(642)
Deferred tax expense (benefit)	(1,156)	(699)
Total income tax expense (benefit)	950	813
Components of deferred taxes
Amounts in NOK million	2020	2019
Origination and reversal of temporary differences	(1,617)	(770)
Change in deferred tax asset from tax loss carryforwards	(388)	(430)
Effect of tax rate changes	(31)	(41)
Net change in unrecognized deferred tax assets	846	863
Tax (expense) benefit allocated to Other comprehensive income	34	(320)
Deferred tax expense (benefit)	(1,156)	(699)

Reconciliation of tax expense to Norwegian nominal statutory tax rate

	2019

574	(342)
713	749
(49)	(57)
23	(91)
(1,182)	(33)
509	409
52	45
310	134
950	813
	2020

1) Norwegian nominal statutory tax rate is 22 percent.

2) A surtax of 37 percent is applied to taxable income, with certain adjustments, for Norwegian hydro-electric power plants. The surtax comes in addition to the normal corporate taxation.

3) Tax free income in 2020 includes tax effect on gain related to establishment of Lyse Kraft DA, amounting to NOK 1,168 million.

4) Deferred tax asset not recognized and expired tax loss carryforwards include write off of deferred tax asset in Germany amounting to NOK 473 million in 2020 and NOK 239 million in 2019.

5) The tax effect of impairment of goodwill not deductible for tax purposes, amounts to NOK 239 million in 2020 and 0 in 2019. The amounts are included in Other tax benefits and deductions with no tax benefits, net.

Tax effects of temporary differences and tax loss carryforwards giving rise to deferred tax assets and liabilities

	Assets	Liabilities	Assets	Liabilities
Amounts in NOK million	2020	2020	2019	2019

Inventory valuation	389	(352)	411	(441)
Accrued expenses	1,649	(343)	1,761	(344)
Property, plant and equipment	10,237	(15,044)	10,174	(16,369)
Intangible assets	1,494	(2,184)	1,550	(2,319)
Pensions	3,757	(1,521)	3,233	(1,412)
Derivatives	843	(67)	707	(106)
Other	682	(1,528)	955	(1,115)
Tax loss carryforwards	5,439		5,502
Subtotal	24,490	(21,040)	24,291	(22,105)
Of which not recognized as tax asset	(4,301)		(3,320)
Gross deferred tax assets (liabilities)	20,188	(21,040)	20,971	(22,105)
Net deferred tax assets (liabilities)		(851)		(1,134)

Reconciliation to balance sheets		2020		2019
Deferred tax assets		2,207		1,998
Deferred tax liabilities		3,059		3,132
Net deferred tax assets (liabilities)		(851)		(1,134)

Recognition of net deferred tax asset is based on expected taxable income in the future.

At the end of 2020, Hydro had tax loss carryforwards of NOK 18,951 million, mainly in Brazil, Spain, Australia, Italy and Germany. Of the total, NOK 15,903 million is without expiration. The majority of the tax loss carryforwards with an expiry date expire after 2025. Tax assets are recognized for about 50 percent of the tax losses.

Note 10.2Research and development

Accounting principles for research and development

To the extent development costs are directly contributing to the construction of a fixed asset, the development costs are capitalized as part of the asset provided all criteria for capitalizing the cost are met. Costs incurred during the preliminary project stage, as well as maintenance costs, are expensed as incurred.

Research and development in 2020 and 2019

Total expensed research and development cost was NOK 633 million in 2020 and NOK 625 million in 2019. The objective of research and development activities is to facilitate more efficient production of aluminium including further improvement of the operational and environmental performance of Hydro's electrolysis technology. A significant share of research and development funding is also used for further developing the production processes and products within casting and alloy technology as well as extruded products, rolled products and alumina.

The capitalized development costs were NOK 10 million in 2020 and NOK 19 million in 2019.

Note 10.3Cash flow information

Cash disbursements and receipts included in cash from operations

Amounts in NOK million	2020	2019

Income taxes paid	1,588	2,981
Interest paid	890	829
Interest received	208	295
Dividends received	25	-

In 2020 and 2019, non-cash investing activities for asset retirement costs amounted to NOK 402 million and NOK 580 million, respectively.

Note 10.4Auditor'sremuneration

KPMG is the Group auditor of Norsk Hydro ASA. The following table shows fees to the appointed auditors for 2020 and 2019. For all categories the reported fee is the recognized expense for the year.

Amounts in NOK million	Audit 1)	Audit related services2)	Other services3)	Tax related services	Total

2020
Norway	10	4	2	-	15
Outside Norway	36	1	2	4	43
Total	46	4	4	4	58
2019
Norway	10	1	2	-	14
Outside Norway	39	1	1	5	47
Total	49	3	3	5	60

1) Audit fees of NOK 46 million (2019: NOK 49 million) reflect audit fees from KPMG in the amount of NOK 43 million (2019: NOK 45 million)

2) Audit related fees of NOK 4 million in 2020 were fees to KPMG

3) Other services mainly include KPMG's review of viability performance

Note 10.5Changesin accounting principles and new pronouncements

Changes in accounting principles

Hydro has not implemented any new accounting standards or otherwise made any significant changes to accounting policies during 2020.

New pronouncements

None of the issued, not yet effective, accounting standards or amendments to such standards are expected to have significant effects for Hydro's financial reporting. Further, none of the recently issued IFRS Interpretations Committee agenda decisions are expected to significantly change Hydro's accounting policies or practices.

Financialstatements Norsk HydroASA

Income statements

Amounts in NOK million	Notes	2020	2019

Gain (loss) on sale of subsidiaries, net		11	-
Other income	14	789	227
Total operating income		799	227
Employee benefit expense	2, 3	762	739
Depreciation	4	80	71
Other expenses	14	626	98
Total operating expenses		1,468	908
Operating loss		(669)	(681)
Financial income, net	5	118	5,369
Income before tax		(551)	4,688
Income taxes	6	83	(19)
Net income		(467)	4,668
Appropriation of net income and equity transfers
Dividend proposed		2,561	2,560
Retained earnings		(3,029)	2,109
Total appropriation		(467)	4,668
Statements of comprehensive income

Amounts in NOK million	Notes	2020	2019

Net income		(467)	4,668

Other comprehensive income

Items that will not be reclassified to income statement
Remeasurement postemployment benefits, net of tax		112	478
Other comprehensive income		112	478

Total comprehensive income	13	(356)	5,146

Balance sheets

Amounts in NOK million, December 31	Notes	2020	2019
Assets
Property, plant and equipment and intangible assets	4	583	565
Shares in subsidiaries	7	57,052	57,052
Receivables from subsidiaries	8, 10	14,740	15,813
Prepaid pension, investments and other non-current assets	2, 9	5,897	5,527
Total financial non-current assets		77,689	78,392
Receivables from subsidiaries		6,800	6,305
Prepaid expenses and other current assets	10	72	253
Short-term investments		2,500	-
Cash and cash equivalents		13,779	8,355
Total current assets		23,151	14,914
Total assets		101,422	93,870
Equity and liabilities
Paid-in capital
Share capital	13	2,272	2,272
Treasury shares	13	(22)	(23)
Paid-in premium	13	28,987	28,987
Other paid-in capital	13	118	136
Retained earnings
Retained earnings	13	28,290	31,209
Treasury shares	13	(640)	(688)
Equity	13	59,005	61,893
Long-term provisions	2, 9	3,550	3,478
Long-term debt	12	19,630	12,027
Payables to subsidiaries		6	-
Other long-term liabilities		19,636	12,027
Bank loans and other interest-bearing short-term debt		47	1,538
Dividends payable		2,561	2,560
Payables to subsidiaries		15,706	11,843
Other current liabilities		917	531
Total current liabilities		19,230	16,472
Total equity and liabilities		101,422	93,870

Statements of cash flows

Amounts in NOK million	2020	2019

Net income	(467)	4,668
Depreciation	80	71
Net foreign exchange loss	542	42
Changes in receivables and payables, and other items	(39)	586
Net cash provided by operating activities	116	5,367
Purchases of short-term investments	(6,480)	-
Proceeds from sales of short-term investments	3,985	-
Net purchases of other investments	(132)	(28)
Net cash used in investing activities	(2,627)	(28)
Dividends paid	(2,561)	(2,558)
Proceeds from shares issued	23	24
Other financing activities, net	10,403	2,463
Net cash provided by (used in) financing activities	7,865	(71)
Foreign currency effects on cash	69	103
Net increase in cash and cash equivalents	5,424	5,371
Cash and cash equivalents at beginning of year	8,355	2,984
Cash and cash equivalents at end of year	13,779	8,355

Notesto the financialstatementsNorsk HydroASA

Note 1 Summary ofsignificant accounting policies

The financial statements of Norsk Hydro ASA are prepared in accordance with the Norwegian accounting act and regulation on simplified application of international accounting standards (forskrift om forenklet anvendelse av internasjonale regnskapsstandarder – simplified IFRS).

Financial statement preparation requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses as well as disclosures of contingencies. Actual results may differ from estimates. Interest rates used for calculating net present values are rounded to the nearest 10 basis points for post employment benefits, to the nearest 25 basis points for other non-financial assets and liabilities. As a result of rounding adjustments, the figures in one or more columns included in the financial statements may not add up to the total of that column.

Shares in subsidiaries, associates and joint ventures

Shares in subsidiaries, associates and joint ventures are presented according to the cost method. Group relief received is included in dividends from subsidiaries. Dividend from subsidiaries is recognized in the year for which it is proposed by the subsidiary to the extent Norsk Hydro ASA can control the decision of the subsidiary through its share holdings. Shares in subsidiaries, associates and joint ventures are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may exceed the fair value of the investment. An impairment loss is reversed if the impairment situation is deemed to no longer exist.

Employee retirement plans

Norsk Hydro ASA accounts for employee retirement plans are measured in accordance with IAS 19, see note 9.5 Employee retirement plans to the consolidated financial statements for additional information.

Foreign currency

The functional currency of the company is the Norwegian krone, NOK. Realized and unrealized currency gains or losses on transactions denominated in other currencies than NOK, as well as currency gains or losses on assets and liabilities denominated in a currency other than NOK, are included in Financial income, net.

Cash and cash equivalents

Cash and cash equivalents include cash, bank deposits and all other monetary instruments with a maturity of less than three months at the date of purchase.

Short-term investments

Short-term investments include bank deposits and all other monetary instruments with a maturity between three and twelve months at the date of purchase and current listed equity and debt securities held for trading and valued at fair value. The resulting unrealized holding gains and losses are included in Financial income, net. Investment income is recognized when earned.

Property, plant and equipment

Property, plant and equipment is carried at historical cost less accumulated depreciation and impairment losses. According to IAS 36 Impairment of Assets, such assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The impairment of long-lived assets is recognized when the recoverable amount determined as the higher of fair value less cost to sell or value in use of the asset or group of assets is less than the carrying value. The amount of the impairment is the difference between the carrying value and the recoverable amount. An impairment loss is reversed if the impairment situation is deemed to no longer exist.

Leased assets

Leased assets are recognized as right-of-use assets in accordance with IFRS 16 Leases, with contractually fixed future payments recognized as lease liabilities. When measuring leases, fixed lease payments for extension periods reasonably certain to be used are included. As a practical expedient, non-lease components are not separated from lease contracts. Leases of assets of a low value, manly such items as PCs, office equipment and similar, are excluded from lease accounting. See note 2.6 Leases to the consolidated financial statements for additional information.

Intangible assets

Intangible assets acquired individually or as a group are recognized at fair value when acquired, in accordance with IAS 38 Intangible Assets. Intangible assets are amortized on a straight-line basis over their useful life and tested for impairment whenever indications of impairment are present.

Norsk Hydro ASA accounts for CO2 emission allowances at cost as an intangible asset. The emission rights are not amortized, impairment testing is done on an annual basis. Sale of CO2 emission rights is recognized at the time of sale at the transaction price.

Derivative instruments

Forward contracts and options for purchase or sale of currency or commodities that are considered readily convertible to cash are recognized in the financial statements and measured at fair value at each balance sheet date with the resulting unrealized gain or loss recorded in Financial income, net.

Norsk Hydro ASA has decided to utilize the option in the regulation to exclude embedded derivatives and contracts deemed to be derivatives based on the underlying product being readily convertible to cash and not for own use when the contract is with a subsidiary.

Provisions

Provisions are recognized when Norsk Hydro ASA has a present obligation (legal or constructive) as a result of a past event, it is probable (more likely than not) that Norsk Hydro ASA will be required to settle the obligation, and a reliable estimate can be made of the amount, taking into account the risks and uncertainties. The provision is measured at the present value of the cash flows estimated to settle the obligation. Uncertain outcomes are measured as the expected value of reasonably possible outcomes.

Contingencies and guarantees

Norsk Hydro ASA recognizes a liability for the fair value of obligations it has undertaken in issuing guarantees. Contingencies are recognized in the financial statements when probable of occurrence and reliably estimable.

Share-based compensation

Norsk Hydro ASA accounts for share-based payment in accordance with IFRS 2 Share-Based Payment. See note 9.3 Employee remuneration to the consolidated financial statements for additional information.

Risk management

For information about risk management in Norsk Hydro ASA see note 8.1 Financial and commercial risk management to the consolidated financial statements.

Income taxes

Deferred income tax expense is calculated in accordance with IAS 12 Income Taxes. Under IAS 12, deferred tax assets and liabilities are measured based on the differences between the carrying values of assets and liabilities for financial reporting and their tax basis which are considered temporary in nature. Deferred income tax related to remeasurements of pension obligations are recognized through Other comprehensive income. The tax effect of equity transactions, excluded transfers to owners, is recognized as a part of the equity transaction and do not affect the income tax expense. Other changes in deferred income tax asset and liability balances during the year represent the deferred income tax expense. Changes resulting from amendments and revisions in tax laws and tax rates are recognized when the new tax laws or rates are enacted.

Note 2 Employee retirement plans

Norsk Hydro ASA has closed the main defined benefit plans for new members, and the majority of employees are now covered by a defined contribution plan that is based on salaries up to a maximum level subject to tax deduction. For additional salaries, employees earn retirement benefits in an unfunded contribution based plan. The remaining employees are covered by defined benefit plans that offer benefits based on final salary level and the number of years in service, and include benefits for dependents. The plan providing benefits based on salaries up to a maximum level is funded; all vested benefits are required by law to be funded for such plans. Benefits based on salaries above this level are covered by unfunded plans. The main funded plan is managed by Norsk Hydros Pensjonskasse, an independent pension trust. Hydro's pension plans supplement the public pension schemes in Norway. The plans comply with legal requirements for pension plans in Norway. Plans providing benefits for salary levels above the tax deductible level have been closed for new members from January 1, 2017.

Norsk Hydro ASA participates in a pension plan that entitles the majority of its employees life-long benefits in addition to other pension benefits. The benefits are financed through a pooled arrangement by private sector employers (avtalefestet pensjon, AFP) where also the Norwegian state contributes. The plan is a defined benefit plan with limited funding and where plan assets are not segregated. The information required to calculate the share of the plan and account for the plan as a defined benefit plan is not available from the plan administrator. Hydro therefore accounts for the plan as if it were a defined contribution plan. The employer contributions are included in Multiemployer plans.

Pension cost

Amounts in NOK million	2020	2019

Defined benefit plans	35	36
Defined contribution plans	34	24
Multiemployer plans	6	4
Termination benefits and other	-	1
Social security cost	11	11
Pension expense	86	76
Interest expense (income)	(51)	(36)
Remeasurement (gain) loss in other comprehensive income	(143)	(613)

Recognized defined benefit assets and liability

Amounts in NOK million	2020	2019
Defined benefit obligation major plans	(5,465)	(5,230)
Plan assets	7,919	7,373
Reimbursement rights	306	301
Liability other plans	(3)	(3)
Social security cost	(361)	(336)
Net defined benefit asset	2,396	2,105
Recognized prepaid pension	5,319	4,826
Recognized pension liability	(2,923)	(2,721)
Net amount recognized	2,396	2,105

Change in defined benefit obligation (DBO)

Amounts in NOK million	2020	2019

Opening Balance	(5,230)	(5,306)
Current service cost	(34)	(35)
Interest expense	(117)	(129)
Actuarial gain (loss) economic assumptions	(374)	33
Experience gain (loss)	(21)	(94)
Benefit payments	312	302
Terminations benefits	-	(1)
Closing Balance	(5,465)	(5,230)

Change in pension plan assets

Amounts in NOK million	2020	2019

Opening Balance	7,373	6,699
Interest income	168	166
Return on plan assets above (below) interest income	548	676
Contributions to plans	17	25
Benefit payments	(188)	(193)
Closing Balance	7,919	7,373

Analysis of the defined benefit obligation (DBO)

Amounts in NOK million	2020	2019
Active members	(1,033)	(1,129)
Deferred members	(543)	(476)
Pensioners	(3,889)	(3,625)
Defined benefit obligation	(5,465)	(5,230)

	Benefit obligation	Benefit expense	Benefit obligation	Benefit expense
Assumptions	2020	2020	2019	2019
Discount rate	1.70%	2.30%	2.30%	2.50%
Expected salary increase	2.00%	2.00%	2.00%	2.50%
Expected pension increase	1.25%	1.25%	1.25%	1.50%
Mortality basis	K2013	K2013	K2013	K2013

See note 9.5 Employee retirement plans in notes to the consolidated financial statements for information about sensitivities.

Note 3 Managementremuneration, employee costs and auditorfees

See note 9.2 Management remuneration in the notes to the consolidated financial statements for information and details related to the Corporate Management Board remuneration. Costs for some corporate management board members employed by subsidiaries are charged to Norsk Hydro ASA for services rendered as members of the Corporate Management Board.

See note 9.4 Board of Directors and Corporate Assembly in the notes to the consolidated financial statements for information and details related to the Board of Directors' remuneration.

See note 9.3 Employee remuneration in the notes to the consolidated financial statements for information on the employee share purchase plan.

Partners and employees of Hydro's appointed auditors, KPMG, own no shares in Norsk Hydro ASA or any of its subsidiaries. Audit fees were NOK 5 million and NOK 6 million in 2020 and 2019, respectively. Fees for audit related services were NOK 3 million in 2020. Fees for other services were NOK 2 million in both 2020 and 2019.

The average number of employees in Norsk Hydro ASA was 394 in 2020 as compared to 303 in 2019. As of year-end 2020 and 2019, Norsk Hydro ASA employed 394 and 319 employees, respectively.

Total loans given by Norsk Hydro ASA to Norwegian employees as of December 31, 2020 were NOK 7 million, consisting of unsecured loans related to the employee share purchase plan.

Payroll related expenses are presented in the table below.

Amounts in NOK million	2020	2019

Employee benefit expense:
Salaries	598	593
Social security costs	78	65
Other benefits	1	5
Pension expense (note 2)	86	76
Total	762	739

Note 4 Property, plant and equipment and intangible asset

Leases expensed in the period amounts to NOK 23 million and refers to leases of short term, low value or leases with variable payments.

Amounts in NOK million	Property, plant and equipment	Intangible assets	Total

Cost December 31, 2019	779	72	851
Additions at cost	29	100	129
Disposals at cost	(27)	(14)	(41)
Accumulated depreciation and impairment December 31, 2020	(298)	(58)	(356)
Carrying value December 31, 2020	483	100	583
Depreciation and impairment in 2020	(60)	(20)	(80)

Intangible assets mainly consist of software.

Note 5 Finance income and expense

Amounts in NOK million	2020	2019

Dividends from subsidiaries	551	5,158
Interest from group companies	433	549
Other interest income	84	87
Interest paid to group companies	(33)	(136)
Other interest expense	(441)	(290)
Net foreign exchange gain (loss)	(542)	(42)
Other, net	67	43
Financial income (expense), net	118	5,369

Note 6 Income taxes

The tax effect of temporary differences resulting in deferred tax assets (liabilities) are:

Amounts in NOK million		Temporary differences Tax effect

	2020	2019

Short-term items	22	10
Long-term receivables from subsidiaries	-	(143)
Pensions1)	(527)	(463)
Long-term debt	57	132
Other long-term items	(45)	(65)
Tax loss carryforwards	52	-
Deferred tax assets (liabilities)	(441)	(529)

1) Includes NOK (31) million and NOK (135) million of tax benefit (expense) allocated to equity in 2020 and 2019 respectively.

Taxable temporary differences and deductible temporary differences, which reverse or may reverse in the same period, are netted.

Reconciliation of tax expense

Amounts in NOK million	2020	2019

Income (loss) before taxes	(551)	4,688
Expected income taxes at statutory tax rate	(121)	1,031
Dividend exclusion	-	(1,034)
Permanent differences and other, net	38	22
Income tax expense (benefit)	(83)	19
Components of income taxes
Current income taxes	36	19
Change in deferred taxes	(119)	-
Income tax expense (benefit)	(83)	19

See note 10.1 Income taxes in the consolidated financial statements for further information.

Taxes payable were NOK 55 million per December 31, 2020 and NOK 46 million per December 31, 2019.

Note 7 Sharesin subsidiaries

The following shares in subsidiaries are directly owned by Norsk Hydro ASA.

Company name	Country	Location	Percentage of shares owned by Norsk Hydro ASA	Book value (NOK million)
Hydro Aluminium AS	Norway	Oslo	100.00	51,293
Hydro Energi AS	Norway	Oslo	100.00	5,643
Hydro Aluminium Deutschland GmbH1)	Germany	Grevenbroich	25.04	92
Industriforsikring AS	Norway	Oslo	100.00	20
Hydro Kapitalforvaltning AS	Norway	Oslo	100.00	4
Total				57,052

1) The company is owned 74.96 percent by Hydro Aluminium AS, and 25.04 percent by Norsk Hydro ASA.

Percentage of shares owned equals percentage of voting shares owned. Several of the above-mentioned companies also own shares in other companies.

In addition to the directly owned subsidiaries listed above, Norsk Hydro ASA has the following subsidiaries with significant operational activities. Sales offices, companies mainly serving as holding companies, and dormant companies, as well as companies holding smaller operational activities are not included in the list below. A full list of subsidiaries is available in Hydro's country by country reporting and at www.hydro.com. The companies are listed by the business area in which the majority of their activities are managed.

Company name	Country	Ownership

Hydro Bauxite & Alumina ALUNORTE - Alumina do Norte do Brasil S.A.	Brazil	92.13%
Mineração Paragominas SA	Brazil	100.00%

Hydro Rolling
Hydro Aluminium Rolled Products GmbH	Germany	100.00%
Hydro Aluminium Rolled Products AS	Norway	100.00%
Hydro Aluminium Metal
Hydro Aluminium Australia Pty Limited	Australia	100.00%
ALBRAS - Alumínio Brasileiro SA	Brazil	51.00%
Sør-Norge Aluminium AS	Norway	100.00%
Slovalco a.s.	Slovakia	55.30%

Hydro Metal Markets
Extrusion Services S.a.r.l	France	100.00%
Hydro Aluminium Gießerei Rackwitz GmbH	Germany	100.00%
Hydro Aluminium Clervaux S.A.	Luxembourg	100.00%
Hydro Aluminium Iberia S.A.U	Spain	100.00%
Hydro Aluminium Deeside Ltd.	United Kingdom	100.00%
Hydro Aluminium Metals USA, LLC	United States	100.00%
Hydro Extrusions
Hydro Extrusion Nenzing GmbH	Austria	100.00%
Hydro Building Systems Belgium NV	Belgium	100.00%
Hydro Extrusion Lichtervelde NV	Belgium	100.00%
Hydro Extrusion Raeren SA	Belgium	100.00%
Hydro Precision Tubing Lichtervelde NV	Belgium	100.00%
Hydro Extrusion Brasil S.A.	Brazil	100.00%
Hydro Extrusion Canada Inc.	Canada	100.00%
Hydro Precision Tubing (Suzhou) Co. Ltd.	China	100.00%
Hydro Extrusion Denmark A/S	Denmark	100.00%
Hydro Precision Tubing Tønder A/S	Denmark	100.00%
Hydro Building Systems France Sarl	France	100.00%
Hydro Extrusion Albi SAS	France	100.00%
Hydro Extrusion Lucé/Chateauroux SAS	France	100.00%
Hydro Extrusion Puget SAS	France	100.00%
Hydro Building Systems Germany GmbH	Germany	100.00%
Hydro Extrusion Deutschland GmbH	Germany	100.00%
Hydro Extrusion Offenburg GmbH	Germany	100.00%
Hydro Extrusion Hungary Kft	Hungary	100.00%
Hydro Building Systems Italy S.P.A.	Italy	100.00%
Hydro Extrusion Italy S.r.l.	Italy	100.00%
Hydro Building Systems Atessa s.r.l.	Italy	100.00%
Hydro Extrusion Drunen B.V.	Netherlands	100.00%
Hydro Extrusion Hoogezand B.V.	Netherlands	100.00%
Hydro Extrusion Poland Sp. z.o.o	Poland	100.00%
Hydro Extrusion Slovakia a.s.	Slovakia	100.00%
Hydro Building Systems Spain S.L.U.	Spain	100.00%
Hydro Extrusion Spain S.A.U.	Spain	100.00%
Hydro Extrusion Sweden AB	Sweden	100.00%
Hydro Building Systems UK Ltd.	United Kingdom	100.00%
Hydro Aluminium UK Ltd.	United Kingdom	100.00%
Hydro Extrusion Portland Inc	United States	100.00%
Hydro Extrusion USA LLC	United States	100.00%
Hydro Precision Tubing USA LLC	United States	100.00%

Note 8 Related party information

Norsk Hydro ASA operates the cash pooling arrangements in Hydro. Further, Norsk Hydro ASA extends loans to subsidiaries, associates and jointly controlled entities at terms and conditions reflecting prevailing market conditions for corresponding services, allowing for a margin to cover administration and risk. See note 5 Financial income and expense for information on interest paid to and received from group companies.

Norsk Hydro ASA allocates costs for corporate staff services and shared services to subsidiaries. The total amount allocated was NOK 161 million in 2020 and NOK 138 million in 2019. Receivables related to such costs amounted to NOK 92 million and NOK 107 million per December 31, 2020 and 2019, respectively.

For information on transactions with employees and management, see Note 3 Management remuneration, employee costs and auditor fees and note 9.2 Management renumeration in the notes to the consolidated financial statements. For information on transactions with Board of Directors and Corporate Assembly see note 9.4 Board of Directors and Corporate Assembly in the notes to the consolidated financial statements. See note 9.6 Other related party information in the notes to the consolidated financial statements for identification of related parties and primary relationships with those parties. See note 11 Guarantees for information on guarantees provided on behalf of subsidiaries and jointly controlled entities.

Note 9 Specification of balance sheet items

Amounts in NOK million	2020	2019
Securities	535	535
Prepaid pension	5,319	4,826
Other non-current assets	43	165
Total prepaid pension, investments and other non-current assets	5,897	5,527
Pension liability	2,923	2,721
Deferred tax liabilities	441	529
Other long-term provisions	186	229
Total long-term provisions	3,550	3,478

Other long-term provisions include an onerous contract of office space, see note 9.6 Other related party information in the notes to the consolidated financial statements.

Note 10 Financial instruments

Norsk Hydro ASA offers currency derivatives to subsidiaries using such instruments for risk management. Contracts are recognized at estimated market value, determined by calculating the contractual cash flows using currency rates at the balance sheet date and discounting those cash flows to a present value. At the end of 2020 and 2019, the value of currency forward contracts outstanding with subsidiaries were as follows:

Amounts in NOK million	2020	2019

Currency forward contracts, short-term	(15)	(5)
Currency forward contracts, long-term	(2)	34
Financial income, net	(17)	29

The contracts represent exposure mainly in Euro and US dollars. In addition, there are some contracts with exposure to British pounds, Swiss franc, Danish krone, Swedish krone and Japanese yen, representing lower amounts. The contracts mature no later than 2024.

Note 11Guarantees

Norsk Hydro ASA provides guarantees arising in the ordinary course of business including stand-by letters of credit, performance bonds and various payment or financial guarantees. All commercial guarantees are on behalf of subsidiaries.

Amounts in NOK million	2020	2019
Commercial guarantees	3,491	3,390
Total guarantees not recognized	3,491	3,390

Note 12 Long-term debt

Amounts in NOK million	2020	2019

EUR	8,369	7,801
NOK	9,983	2,998
SEK	1,047	1,885
USD	-	298
Total unsecured loans	19,398	12,982
Lease liabilities	279	337
Outstanding debt	19,677	13,319
Less: Current portion	(47)	(1,292)
Total long-term debt	19,630	12,027

As of December 31, 2020, long-term debt that falls due after 2025 amounted to NOK 7,972 million. See note 7.4 Short and long-term debt in notes to the consolidated financial statements for further information.

Note 13Number ofshares outstanding,shareholders and equity reconciliation

The share capital of Norsk Hydro ASA as of December 31, 2020 was NOK 2,271,760,107 consisting of 2,068,998,276 ordinary shares at NOK 1.098 per share. As of December 31, 2020, Norsk Hydro ASA had purchased 19,873,558 treasury shares at a cost of NOK 662 million. See Consolidated statements of changes in equity and note 7.6 Shareholders' equity for additional information.

The table shows shareholders holding one percent or more of the total 2,049,124,718 shares outstanding as of December 31, 2020, according to information in the Norwegian securities' registry system (Verdipapirsentralen).

Name	Number of shares

The Ministry of Trade, Industry and Fisheries of Norway	708,865,253
Folketrygdfondet	160,035,514
State Street Bank and Trust Comp1)	56,643,925
Banque Pictet & Cie SA1)	33,369,205
HSBC Bank PLC 1)	27,083,316
Euroclear Bank S.A./N.V.1)	24,654,703
JPMorgan Chase Bank, N.A., London1)	23,250,688
State Street Bank and Trust Comp1)	21,532,708
Clearstream Banking S.A.1)	20,902,158

1) Nominee accounts.

Changes in equity
Amounts in NOK million	Paid-in capital	Retained earnings	Total equity

December 31, 2019	31,372	30,521	61,893
Total Comprehensive Income		(356)	(356)
Dividend paid in 2019 not accrued1)		(2)	(2)
Dividend proposed		(2,561)	(2,561)
Treasury shares	(16)	48	31
December 31, 2020	31,355	27,650	59,005

Note 14 Otherincome

Other income in Norsk Hydro ASA includes significant insurance compensation both in 2020 and 2019, mainly related to the cyber-attack in 2019. As the majority of the losses were incurred by subsidiaries, a similar amount is paid to subsidiaries and included in Other expenses. Other income also includes charges for goods and services to subsidiaries.

Responsibility statement

We confirm to the best of our knowledge that the consolidated financial statements for 2020 have been prepared in accordance with IFRS as adopted by the European Union, as well as additional information requirements in accordance with the Norwegian Accounting Act, that the financial statements for the parent company for 2020 have been prepared in accordance with the Norwegian Accounting Act and generally accepted accounting practice in Norway, and that the information presented in the financial statements gives a true and fair view of the assets, liabilities, financial position and result of Norsk Hydro ASA and the Hydro Group for the period. We also confirm to the best of our knowledge that the Board of Directors' Report includes a true and fair review of the development, performance and financial position of Norsk Hydro ASA and the Hydro Group, together with a description of the principal risks and uncertainties that they face, and that the country by country report for 2020 has been prepared in accordance with the Norwegian Accounting Act §3-3d and the Norwegian Security Trading Act §5-5a.

Oslo, March 9, 2021

Dag Mejdell

Chair

Rune Bjerke

Board member

Sten Roar Martinsen Board member

Marianne Wiinholt Board member

Irene Rummelhoff Deputy chair

Liselott Kilaas Board member

Ellen Merete Olstad Board member

Arve Baade Board member

Peter Kukielski Board member

Thomas Schulz Board member

Hilde Merete Aasheim President and CEO

Independent auditor's report

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of Norsk Hydro ASA, which comprise:

The financial statements of the parent company Norsk Hydro ASA (the Company), which comprise the balance sheet as at 31 December 2020, the income statement, statement of comprehensive income and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and
The consolidated financial statements of Norsk Hydro ASA and its subsidiaries (the Group), which comprise the balance sheet as at 31 December 2020, the income statement, statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion:

The financial statements are prepared in accordance with the law and regulations.
The accompanying financial statements give a true and fair view of the financial position of the Company as at 31 December 2020, and its financial performance and its cash flows for the year then ended in accordance with simplified application of international accounting standards according to section 3-9 of the Norwegian Accounting Act ("Simplified IFRS").
The accompanying consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2020, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU ("IFRS").

Basis for Opinion

We conducted our audit in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company and the Group as required by laws and regulations, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Provisions for environmental clean-up costs and asset retirement obligations

Refer to Note 1.1 Reporting entity, basis of preparation and significant accounting policies, and Note 4.1 Uncertain assets and liabilities.

Impairment assessment of goodwill, intangible and non-current assets

Refer to Note 1.1 Reporting entity, basis of preparation and significant accounting policies, Note 2.1. Property, plant and equipment, Note 2.2 Intangible assets, Note 2.3 Goodwill, 2.4 Depreciation and amortization expense, and 2.5 Impairment of non-current assets

How the matter was addressed in our audit
Our audit procedures in this area included:
• Assessing management's process and
results for identification and classification of
CGU's and assessing whether they were
appropriate and in accordance with relevant
accounting standards
• Evaluating management's assessment of
impairment indicators
• Performing retrospective reviews of the
accuracy of management's estimates in
terms of timing of cash outflows and other
assumptions such as long-term pricing
where historical data is available
• Evaluating and challenging the forecasted
cash flows including timing of future cash
flows applied in the models with reference to
historical accuracy and approved business plans

transactions in which the agreed consideration is below the carrying value of the asset or CGU.	• When impairment is caused by a sales transaction, confirming the agreed consideration to the sales and purchase
Certain plants are also sensitive to the uncertainty related to renewal of power contracts expiring within 2 to 5 years.	agreements, as well as re-calculating the impairment charge and relevant adjustments • Testing the sensitivity of movements in key assumptions
Impairment charges of NOK 3,879 million were recognized in 2020 consisting of;	• Evaluating, with assistance from our valuation specialists, key assumptions such as aluminium and alumina prices, inflation
• NOK 513 million in relation to the Slovalco primary aluminium plant • NOK 1.627 million related Goodwill and production facilities in Hydro Extrusions	rates, energy and fuel prices, relevant foreign exchange rates and discount rates by reference to external sources and relevant benchmarks
• NOK 1,900 million related to Property, plant and equipment in Hydro Rolling • Reversal of a previous impairment write	• Testing the mathematical accuracy of the models used to calculate value in use • Assessing the adequacy of the disclosures
down of NOK 161 million related to an industrial park in Germany.	related to impairment
As at 31 December 2020, the Group has goodwill of NOK 5.029 million, Property, plant and equipment of NOK 64,245 million and intangible assets of NOK 4,951 million.

Other information

Management is responsible for the other information. The other information comprises information in the annual report, except the financial statements and our auditor's report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Board of Directors and the President and CEO ("Management") for the Financial Statements

The Board of Directors and the President and CEO ("Management") are responsible for the preparation in accordance with law and regulations, including a true and fair view of the financial statements of the Company in accordance with simplified IFRS, and for the preparation and true and fair view of the consolidated financial statements of the Group in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company's and the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error. We design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's or the Group's internal control.
evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company and the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company and the Group to cease to continue as a going concern.
evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves a true and fair view.
obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Board of Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Board of Directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

Opinion on the Board of Directors' report

Based on our audit of the financial statements as described above, it is our opinion that the information presented in the Board of Directors' report and in the statements on Corporate Governance and Corporate Social Responsibility concerning the financial statements and the going concern assumption is consistent with the financial statements and complies with the law and regulations.

Opinion on Registration and Documentation

Based on our audit of the financial statements as described above, and control procedures we have considered necessary in accordance with the International Standard on Assurance Engagements (ISAE) 3000, Assurance Engagements Other than Audits or Reviews of Historical Financial Information, it is our opinion that management has fulfilled its duty to produce a proper and clearly set out registration and documentation of the Company's accounting information in accordance with the law and bookkeeping standards and practices generally accepted in Norway.

Oslo, 9 March 2021 KPMG AS

Lars Inge Pettersen State Authorised Public Accountant

Note: This translation from Norwegian has been prepared for information purposes only.

Statement of the CorporateAssembly to the Annual general meeting of Norsk HydroASA

The Board of Directors' proposal for the financial statements for the financial year 2020 and the Auditors' report have been submitted to the corporate assembly.

The Corporate Assembly recommends that the directors' proposed financial statements for 2020 for the parent company, Norsk Hydro ASA, and for the Group consisting of Norsk Hydro ASA and its subsidiaries be approved by the annual general meeting, and that the net loss for 2020 of Norsk Hydro ASA be covered as recommended by the directors.

Oslo, March 9, 2021

Terje Venold

Viability performance statements

230 Annual Report 2020 Viability performance statements Hydro

About the reporting
Environmental statements
Notes to the environmental statements
Note E1 Greenhouse gas emissions Note E2 Other emission related indicators Note E3 Energy Note E4 Other resource use Note E5 Waste Note E6 Biodiversity Note E7 Production volumes Note E8 Environmental data for 50/50-owned companies Social statements Notes to the social statements Note S1 Employees Note S2 Remuneration
Note S3 Diversity in management Note S4 Employee Engangement Note S5 Health and safety Note S6 Labor rights Note S7 Current income tax
Note S8 Financial assistance from governments
Note S9 Social responsibility
Note S10 Compliance
Note S11 Spending on local suppliers
Note S12 Public affairs and lobbying
Note S13 Certifications
Note S14 Social data for 50/50-owned companies
GRI Standards
UN Global Compact Communication on progress
UN Sustainable Development Goals
UN Guiding Principles on Business and Human Rights
ICMM
ASI
Task Force on Climate-related Financial Disclosures (TCFD)
Independent auditor's assurance report

About the reporting

Principles for reporting on viability performance

The purpose of Hydro's reporting is to provide stakeholders with a fair and balanced picture of relevant aspects, engagements, practices and results for 2020 at a corporate level. We believe that the reporting in total satisfies this purpose. Our reporting on viability performance is aligned with the main reporting principles of the GRI Standards, core option, and the requirements of the International Council on Mining and Metals (ICMM). The selection of elements reported is based on extensive dialogue with stakeholders. In addition, the reporting builds on processes that are part of our daily operations. Important stakeholders include authorities, investors and financial analysts, employees and their representatives, potential employees, customers, nongovernmental organizations and local communities affected by major development projects or restructuring processes. Reporting is not necessarily the target of the dialogue process, but when relevant, we use the outcome to improve our reporting, see page 97.

We have endeavored to provide information that is in accordance with the principles of sound reporting practice. The absence of generally accepted reporting standards and practices in certain areas may nevertheless make it difficult to compare results with reports compiled by other companies, without the availability of further data, analyzes and interpretations.

Reporting scope and limitation

The scope of Viability performance as included on page 86 in Hydro's Annual Report 2020, is Hydro's global organization for the period January 1 to December 31, 2020. Operations sold or demerged during the year have in general not been included. Health and safety data for all previously consolidated operations are, however, included in the historical data for the period the unit was owned by Hydro. Regarding environmental data (emissions, energy consumption etc.), operations acquired during the reporting year are included for the complete year. Data from operations that have been closed down, are included for the part of the reporting period it was under operation unless otherwise stated. Minority-owned operations are not included in the reported data except from data based on ownership equity (certain greenhouse gas emissions data), certain qualitative information as well as additional data for 50/50-owned companies, see note E8 and S14.

Environmental data relating to acquired operations are included in our statistics, and historical data have been recalculated to reflect current operations. Correspondingly, historical data of divested activities are taken out of our reported data. Employee, safety and work environment data are included from/to the closing date of acquisitions/divestments unless otherwise stated.

Data have been prepared from individual reports in accordance with corporate procedures. Data compiled at each operational unit according to local management systems applicable at the respective operational units are typically based on process data systems, measurements, calculations and/or purchasing data. The data are then aggregated at corporate level, and is not intended to include detailed information that is primarily of significance for individual sites, processes, activities and products.

The reporting is based on input from many units and sources of data. Emphasis has been placed on ensuring that the information is neither incomplete nor misleading. However, the scope of the reporting, and varying certainty of data may result in some inherent uncertainties. Please see "Reporting principles" for the specific note to the environmental or social statements for more details.

Main reporting changes

The main changes to the Viability performance reporting in Hydro's Annual Report 2020 compared to 2019 relate to indirect emissions for our operations in Norway, Canada and the primary aluminum producer Albras in Brazil. These have been updated to reflect the content of renewable power in the power contracts for these installations. Thus, their indirect emissions are set to zero, including for historical emissions. In addition, we have made changes to waste reporting, harmonizing categorization within Hydro based on the common names of key waste streams relevant to our operations to facilitate improved aggregation of data at group level, and avoid use of multiple waste codes for the same waste category. From 2020, reporting on equal opportunities and anti-discrimination has been collected in a new Diversity and inclusion report, included as an appendix to the Board of Directors' Report, to comply with new Norwegian legal requirements.

Assurance principle and scope

We have requested our company auditor to review the Viability performance 2020 in accordance with the international audit standard ISAE 3000 – Assurance Engagements other than Audits or Reviews of Historical Financial Information issued by the International Auditing and Assurance Standards Board (IAASB). For the underlying systems, the reader is referred to Hydro's steering documents as described under Corporate Governance, see page 130 in Hydro's Annual Report 2020. The auditor's limited assurance report is found on page 276.

Environmentalstatements

The table below shows Hydro's main quantitative indicators related to its environmental performance. More detailed information is, when indicated, available in the notes to the environmental statements.

Environmental performance

	Notes	%-change 2019-20	2020	2019	2018	2017	2016	GRI Standards reference 9)

GHG emissions
Direct GHG emissions from consolidated operations (Million tons CO2e) (equal to scope 1)	E1.1	6%	7.34	6.95 8)	6.55 8)	8.23	8.18	305-1
Indirect GHG emissions from consolidated operations (Million tons CO2e) (equal to scope 2)1)	E1.1	-4%	1.60	1.67 8)	1.99 8)	2.07	2.15	305-2
Direct GHG emissions from Hydro's ownership equity (Million tons CO2e) (equal to scope 1)2)	E1.4	5%	7.70	7.37 8)	7.03 8)	8.45	8.45	305-1
Indirect GHG emissions from Hydro's ownership equity (Million tons CO2e) (equal to scope 2)2), 1)	E1.4	-3%	4.15	4.30 8)	4.63 8)	4.57	4.68	305-2
GHG intensity
Alumina refining (mt CO2e per mt alumina)	E1.6	-8%	0.65	0.71 8)	0.79 8)	0.69	0.69	305-4
Electrolysis in Aluminium Metal (mt CO2e per mt aluminium)3)	E1.7	-1%	1.59	1.60 8)	1.60 8)	1.59	1.61	305-4
Energy production and consumption
Energy production (TWh)	E3.1	-1%	9.15	10.69	10.83	11.30	10.90
Energy consumption (TWh)	E3.1	4%	50.26	48.21 8)	46.32 8)	53.18	53.33	302-1/302-4
Energy intensity
Alumina refining (GJ per mt alumina)	E3.2	-7%	7.67	8.20 8)	8.95 8)	7.97	8.07	302-3
Electrolysis process (MWh per mt aluminum)	E3.2	-1%	14.10	14.18	13.90 10)	13.92	13.89	302-3
Other resource use
Alumina (Thousand mt)	E4.1	3%	3315.9	3,230	3,161	3,353	3,331	301-1
Total water withdrawal from water stressed areas (million m3)4)	E4.2	n/a	1.08	0.33	0.38	2.19	2.28	303-1/303-2
Recycling
Recycled post-consumer scrap (Thousand mt)5)	E4.3	11%	195	175	161	152	138	301-2
Total recycled metal (Thousand mt)5)	E4.3	0%	1,262	1,259	1,303	1,257	1,215	301-2
Waste (Thousand mt)
Bauxite tailings	E5.1	17%	3,345	2,871 8)	2,116 8)	4,067	4,117	MM3
Bauxite residue (red mud)	E5.1	25%	4,826	3,871 8)	3,191 8)	5,979	6,426	MM3
Hazardous waste4)	E5.2	-1%	274	276	268	303	282	306-4
Other waste4)	E5.2	27%	406	319	330	403	354	306-2
Hazardous waste to landfill (percent)4)	E5.3	-1 pp6)	27%	27%	28%	33%	33%	306-2
Biodiversity in mining
Accumulated area disturbed (hectares)7)	E6.2	4%	8,237	7,955	7,879	6,613	6,442	MM1
Accumulated area rehabilitated (hectares)	E6.2	6%	2,486	2,339	2,203	1,872	1,689	MM1
Accumulated endangered species observed4)	E6.3	4%	93	89	75	65	57	102-11

1) Indirect emissions for our operations in Norway, Canada and primary aluminum producer Albras in Brazil have been updated to reflect the green power contracts entered into for these installations, and their indirect emissions are set to zero, including historical emissions

2) Combined numbers based on ownership equity

3) Includes fully-owned smelters

4) 2019 and 2020 figures are not comparable to historical figures due to change in methodology

5) Excluding Extrusions

6) Values are given as percentage points

7) Accumulated area disturbed since construction of the mining area started. The mine started its production in 2006

8) Results impacted by the embargo on Alunorte, and curtailment of Albras and Paragominas

9) All GRI references below refers to the GRI Standards except MM1 and MM3 which refer to the GRI G4 Mining and Metals Sector Supplement

10) Result impacted by Albras ramp-up

Notesto the environmentalstatements

Generalreporting standards and principles

Environment, energy and resource data are reported through the corporate data reporting tool HERE on an annual basis covering all consolidated operational units (defined as Hydro's ownership share exceeding 50 percent). Data reported to HERE should be based on specific environmental, energy and resource data reporting processes that have been established for management purposes at site, business unit, business area, and corporate level within Hydro. Data are reported on a 100 percent basis for all consolidated operational units if not otherwise stated. All environmental emissions include historical emissions from current operations and are recalculated annually to reflect Hydro's current portfolio, and secure comparability.

Data reported in HERE are in accordance with Hydro's corporate procedure "Registration of environment, resource and energy data". The procedure provides definitions and factors for estimating emission values. Data are compiled at each operational unit according to local environmental management systems and typically based on process data, measurements, calculations and/or purchasing data.

During 2018, Extrusions historical environmental data has been imported into HERE. We continuously strive to improve data quality and harmonize the reporting between Extrusions and the other business areas in Hydro, and some figures have been updated accordingly. During 2020, we enhanced the waste reporting for sites by harmonizing categorization within Hydro based on the common names of key waste streams relevant to our operations to facilitate improved aggregation of data at group level, and avoid use of multiple waste codes for the same waste category.

Where applicable, we have indicated to which GRI Standards disclosure the different notes or parts of the notes are relevant.

Note E1 – Greenhouse gas emissions

Reporting principles

GHG emissions have been calculated based on the principles of the WRI/WBCSD GHG Protocol. Direct emissions from production in Bauxite & Alumina, metal production and downstream operations as well as from the remelters, are comparable to Scope 1 emissions as defined by the WRI/WBCSD GHG Protocol.

Indirect emissions, emissions from electricity generation, are calculated based on electricity consumption and emissions factors from the IEA CO2 Emissions from Fuel Combustion (2020) and are comparable to scope 2 emissions from purchased electricity. From 2020, we have updated indirect emissions for our operations in Norway, Canada and the primary aluminum producer Albras in Brazil to reflect the green power contracts entered for these installations, and set their emissions to zero, including historical emissions. For Hydro's Annual Report 2019 we have updated the factors back to 2015, and historical figures have been updated accordingly.

We report indirect emissions according to the location-based method in the revised GHG Protocol Scope 2 Guidance. However, we have chosen not to report indirect emissions according to the market-based approach, as this method does not give the correct picture of physical realities.

As Hydro is an integrated company, with ownership along the whole aluminium value chain, the majority of Hydro's emissions are covered within scope 1 and 2 emissions.

Hydro has a long position in alumina, but due to the production embargo at Alunorte in 2018 and 2019, we have sourced more alumina from external sources. Sourced alumina was 3 million metric tons in 2020 and 2.8 million metric tons in 2019, this compares to 4.0 million mt in 2018. As Alunorte's greenhouse gas emissions performance level is quite close to the global average, we have assumed that purchased alumina during this period has a similar GHG intensity as Alunorte.

Scope 3 emissions cover other greenhouse gas emissions from e.g. external transport, purchasing of cold metal and other input materials. As part of Hydro's new climate strategy we are evaluating the size of our scope 3 emissions in order to establish targets on greener sourcing.

E1.1 Total greenhouse gas emissions in consolidated activities

Reporting principles

Greenhouse gas emissions are reported per process step. For information purposes we have indicated in which business area (financial segment) the emissions mainly take place.

Greenhouse gas emissions - consolidated activities

Million tons CO2e	2020	2019	2018	2017	2016

Direct GHG emissions	7.34	6.95	6.55	8.23	8.18
Bauxite & Alumina	3.43	2.99	2.64	4.14	4.16
Primary aluminium production (mainly Hydro Aluminium metal)	3.18	3.15	3.07	3.25	3.19
Rolling	0.13	0.14	0.15	0.16	0.17
Remelters (in Metal Markets and Rolling)	0.11	0.12	0.12	0.13	0.12
Extrusions1)	0.49	0.55	0.57	0.55	0.54
Indirect GHG emissions	1.60	1.67	1.99	2.07	2.15
From electricity generation (mainly primary aluminium production)	1.60	1.67	1.99	2.07	2.15
Total GHG emissions	8.95	8.62	8.55	10.30	10.32

1) Extrusions has some remelters

GRI-reference: GRI Standards 305-1 (2016) and GRI Standards 305-2 (2016)

Hydro's direct greenhouse gas emissions increased in 2020 due to increased production at Hydro's alumina refinery Alunorte. However, specific emissions per ton alumina produced decreased due to improved operational performance. Production at Alunorte was impacted by the embargo in 2018 and 2019, and returned to normal levels during 2020.

To learn more about the embargo imposed on Alunorte in 2018, see Hydro's Annual Report 2018 and the section "The Alunorte situation".

From 2020, we have updated indirect emissions for our operations in Norway, Canada and the primary aluminum producer Albras in Brazil to reflect the green power contracts entered for these installations, and set their emissions to zero, including historical emissions.

E1.2 Total greenhouse gas emissions per country in consolidated activities

Reporting principles

Total greenhouse gas emissions per country in Hydro's consolidated activities (based on 100 percent).

Greenhouse gas emissions per country - consolidated activities

Million tons CO2e	2020	2019	2018	2017	2016

Brazil	4.33	3.81	3.37	5.13	5.13
Direct	4.23	3.73	3.29	5.03	5.00
Indirect	0.10	0.09	0.08	0.11	0.14
Germany	1.35	1.34	1.63	1.67	1.71
Direct	0.43	0.44	0.50	0.49	0.50
Indirect	0.92	0.91	1.13	1.18	1.22
Norway	1.86	1.85	1.81	1.75	1.75
Direct	1.86	1.85	1.81	1.75	1.75
Indirect	-	-	-	-	-
Slovakia	0.56	0.65	0.72	0.72	0.73
Direct	0.28	0.31	0.32	0.32	0.32
Indirect	0.29	0.34	0.40	0.40	0.41
Other	0.85	0.96	1.03	1.03	1.01
Direct	0.55	0.62	0.64	0.64	0.62
Indirect	0.30	0.34	0.39	0.38	0.39
Total GHG emissions	8.95	8.62	8.55	10.30	10.32

GRI-reference: GRI Standards 305-1 (2016) and GRI Standards 305-2 (2016)

To learn more about the embargo imposed on Alunorte in 2018, see Hydro's Annual Report 2018 and the section "The Alunorte situation".

From 2020, we have updated indirect emissions for our operations in Norway and the primary aluminum producer Albras in Brazil to reflect the green power contracts entered for these installations and set their emissions to zero. The update includes historical emissions.

E1.3 Direct GHG emissions per GHG type in consolidated activities

Reporting principles

CO2 emissions are calculated based on anode consumption during the electrolysis process and use of fossil fuels. PFC (perfluorocarbon) emissions consist of the two greenhouse gases CF4 and C2F6 which are formed during anode effect situations in the aluminium electrolytic cells. Anode effect is mainly a result of production instability, e.g. in connection to power outages. Emissions are calculated based on automatic process measurements.

Direct GHG emissions per GHG type - consolidated activities

Million tons CO2e	2020	2019	2018	2017	2016

CO2	7.15	6.71	6.32	8.03	7.95
PFC	0.20	0.24	0.23	0.21	0.23
Total GHG emissions	7.34	6.95	6.55	8.23	8.18

To learn more about the embargo imposed on Alunorte in 2018, see Hydro's Annual Report 2018 and the section "The Alunorte situation".

E1.4 Total greenhouse gas emissions based on ownership equity

Reporting principles

In addition to the GHG emissions referred to in previous notes, we also report GHG emissions based on our ownership equity as per year end. This data includes Hydro's share of emissions from all operations including non-consolidated operations where Hydro has a minority interest. This figure is comparable to scope 1 according to the GHG protocol. Electricity generation covers indirect GHG emissions from purchased electricity and emissions from Hydro's ownership share in the gasfired power plant at Qatalum. This figure is comparable to scope 2 according to the GHG protocol. Emissions from electricity generation are based on electricity consumption and IEA CO2 emissions from Fuel Combustion 2020 factors for indirect emissions.

Hydro's 50/50 joint venture Qatalum has previously double accounted GHG emissions from anode effects from electrolysis process into Hydro's environmental management system. This has been corrected for the years 2012 to 2020, and the emissions from Qatalum has been reduced accordingly.

Greenhouse gas emissions - ownership equity

2020	2019	2018	2017	2016

				8.45
3.17	2.75	2.43	3.81	3.83
3.66	3.65	3.60	3.66	3.64
0.27	0.29	0.31	0.30	0.31
0.11	0.12	0.12	0.13	0.12
0.49	0.55	0.57	0.55	0.54
4.15	4.30	4.63	4.57	4.68
4.15	4.30	4.63	4.57	4.68
11.85	11.66	11.66	13.01	13.13
	7.70	7.37	7.03	8.45

GRI-reference: GRI Standards 305-1 (2016) and GRI Standards 305-2 (2016)

Hydro's production based on ownership equity can be found in Hydro's results for fourth quarter 2020.

To learn more about the embargo imposed on Alunorte in 2018, see Hydro's Annual Report 2018 and the section "The Alunorte situation".

From 2020, we have updated indirect emissions for our operations in Norway, Canada and the primary aluminum producer Albras in Brazil to reflect the green power contracts entered for these installations and set their emissions to zero. The update includes historical emissions.

E1.5 Total greenhouse gas emissions per country based on ownership equity

Reporting principles

Total greenhouse gas emissions per country based on Hydro's ownership equity (see note E1.4 for more information on reporting principles).

Greenhouse gas emissions per country - ownership equity

Million tons CO2e	2020	2019	2018	2017	2016

Australia	0.86	0.86	0.89	0.90	0.91
Direct	0.15	0.15	0.15	0.14	0.14
From electricity generation	0.71	0.71	0.74	0.76	0.77
Brazil	3.68	3.22	2.85	4.36	4.39
Direct	3.58	3.14	2.77	4.26	4.27
From electricity generation	0.09	0.08	0.07	0.10	0.13
Canada	0.25	0.25	0.25	0.26	0.25
Direct	0.25	0.25	0.25	0.26	0.25
From electricity generation	-	-	-	-	-
Germany	1.59	1.61	1.91	1.95	1.99
Direct	0.57	0.59	0.65	0.63	0.63
From electricity generation	1.03	1.02	1.26	1.31	1.35
Norway	1.86	1.85	1.81	1.75	1.75
Direct	1.86	1.85	1.81	1.75	1.75
From electricity generation	-	-	-	-	-
Qatar1)	2.43	2.51	2.49	2.33	2.38
Direct	0.58	0.55	0.55	0.55	0.57
From electricity generation	1.86	1.96	1.94	1.78	1.81
Slovakia	0.31	0.36	0.40	0.40	0.40
Direct	0.15	0.17	0.18	0.18	0.18
From electricity generation	0.16	0.19	0.22	0.22	0.23
Other	0.87	1.00	1.07	1.06	1.06
Direct	0.57	0.66	0.67	0.68	0.67
From electricity generation	0.30	0.34	0.39	0.39	0.39
Total GHG emissions	11.85	11.66	11.65	13.01	13.12

1) Most electricity at Qatalum is generated by Qatalum's fully-owned gas power plant. 6.500 tons CO2e came from net purchased electricity from the national grid in 2020

GRI-reference: GRI Standards 305-1 (2016) and GRI Standards 305-2 (2016)

To learn more about the embargo imposed on Alunorte in 2018, see Hydro's Annual Report 2018 and the section "The Alunorte situation".

From 2020, we have updated indirect emissions for our operations in Norway, Canada and the primary aluminum producer Albras in Brazil to reflect the green power contracts entered for these installations and set their emissions to zero. The update includes historical emissions.

E1.6 GHG intensity – Alunorte alumina refinery

Reporting principles

The GHG intensity is calculated based on total greenhouse gas emissions from Alunorte divided by total alumina production. All alumina refining in Hydro is included.

E1.7 GHG intensity – Electrolysis

Reporting principles

The GHG intensity is calculated based on greenhouse gas emissions from the electrolysis process from Hydro's smelters in the business area Hydro Aluminum Metal. This is an operational target that excludes extraordinary emissions, e.g. during start-up of curtailed capacity. The methodology for calculation is site specific, and historical figures may be subject to change. Emissions from the primary aluminium smelter Neuss in Germany, organized in the business area Rolling, are not included. As the GHG emissions from Neuss are at the average, they will not have a significant impact on the overall figure.

Note E2 – Other emission related indicators

E2.1 Other emissions

Reporting principles

Dust and particles include measured and estimated stack emissions and roof emissions from electrolysis. Other diffuse emissions are not included.

Fluorides cover emissions to air of gaseous and particulate fluorides from production of primary aluminium.

NMVOC (non-methane volatile organic compounds) emissions to air stem primarily from Rolling and Extrusions.

PAH (poly-aromatic hydrocarbons) to air is primarily from anode production. Emissions are monitored according to PAH-16 US EPA or NS 16 PAH to air and water.

Sulfur dioxide to air is primarily from the use of coal as an energy source in Alunorte, Brazil, and from the aluminium electrolysis process where the majority of the total emissions come from Albras in Brazil, Neuss in Germany and Slovalco in Slovakia. SO2 emissions from the Norwegian smelters are considerably lower due to different waste gas treatment techniques used at these plants.

Other Emissions
Metric tons	2020	2019	2018	2017	2016

Dust and particles	3,144	3,240	2,864	4,783	4,347
Fluorides to air	787	813	663	700	684
NM VOC	380	426	430	475	472
Nitrogen oxide	8,433	8,167	7,756	9,793	9,671
PAH to air1)	16	16 2)	14	8	8
PAH to water1)	3	2	3	-	1
Sulphur dioxide (SO2)	21,893	22,817	18,495	32,970	33,344

GRI-reference: GRI Standards 305-7 (2016)

1) Excluding PAH emissions from Albras

2) Significant change due to Sunndal changing from NS 16 PAH and Borneff 6 PAH to US EPA PAH-16

Hydro's emissions of dust and particles, nitrogen oxides and sulphur dioxide decreased significantly in 2018 due to the embargo at Alunorte, and curtailment at Albras and Paragominas. This is partly reversed in 2019 and 2020 due to lifting of the embargo and ramp-up of production.

Hydro uses ozone depleting substances in certain applications in its Brazilian operations, and to some extent also in Extrusions. In 2020, Hydro used in total 5.4 metric tons of such substances in its operations. The reported value corresponds to the purchased amount of such substances and can vary significantly according to the need of refilling existing cooling devices. In Brazil, such substances are registered and reported according to Brazilian legal requirements (GRI 305-6). In Hydro Extrusions, hydrochlorofluorocarbon (HCFC) accounts for around one third of ozone depleting substances.

Methane (CH4) and N2O emissions from Hydro's operations are negligible compared to the other GHG emissions. The emissions of mercury to air has been calculated to be around 3 metric tons at full production.

E2.2 Spillages and leakages

Reporting principles

Spillages and leakages to the external environment (ground, water or air) are registered in Synergi and in IMS, the reporting tools for incidents regarding health, safety, security and environment. According to Hydro's definition, any incident resulting in a spill or leak shall be reported, including significant spillages with short-term reversible damage. Leakages categorized as high severity, i.e. uncontained but reversible impact or uncontained and irreversible impact, and emissions to external environment categorized as high severity, i.e. unintended and sustained, are reported in the table below. A spillage or leakage can be reclassified according to changes in the actual consequence of the spillage or leakage, and historical figures are updated. Several reported incidents can be closely related and therefore classified as the same spillage.

Following a harmonization of reporting on environmental incidents and permit breaches between Extrusions and other business areas in Hydro, we identified a difference in the severity of cases being included. This has been adjusted for in the reporting for 2019.

Spillages and leakages to the external environment

	2020	2019	2018	2017	2016
Spillages, leakages	5	1	71)	1	3

1) The reported incidents mainly relate to leakages to air in Norway

In 2019, we experienced an onsite leakage of inert tailings (400m3) at Paragominas, between the beneficiation area and tailings storage facility. The impact was reversible. In 2019, there was also an accident at the port area in Barcarena, where the caustic soda pipeline was damaged by a truck driver working for a different company. The pipeline was not in use, but the residual caustic soda in the pipe was released into the Para River. Alunorte performed an investigation, in coordination with the authorities, and found no lasting impact on the river. This incident was not our responsibility and we acted beyond our legal obligation to assist the authorities, and thus not included in the statistics above.

Ibama (Brazilian Institute of the Environment and Renewable Natural Resources) and Semas (the Secretary of State for Environment and Sustainability in Pará) concluded there were no overflow or leaks from Alunorte's bauxite residue deposits following the heavy rainfall in February 2018. For more information see the section "The Alunorte situation" in Hydro's Annual Report 2018.

E2.3 Permit breaches

Reporting principles

Permit breaches are based on monthly monitoring, and reported in Synergi and IMS. Hydro's definition of permit breaches, any incident that in any way relates to an environmental permit, is in certain cases more strict than the legal definition. Permit breaches categorized as high severity, requiring regulator contact or permit breaches with possible fine or suspension, are included in the table below. The reported permit breaches may be related to spillages and leakages covered in the table above. Several reported incidents can be related to the same permit and will be reported as one breach. Historical figures may be subject to change due to time lag in administrative procedures.

Following a harmonization of reporting on environmental incidents and permit breaches between Extrusions and other business areas in Hydro, we identified a difference in the severity of cases being included in the report. This has been adjusted for in the reporting for 2019 and onwards.

Permit breaches

	2020	2019	2018	2017	2016

Permit breaches	11	11)	23	252)	1

1) Figures for 2019 are not comparable to previous years due to harmonization of definitions between Extrusions and the other business areas in Hydro.

2) Figures from Extrusions, acquired 2 October 2017, are included for the full year.

In January 2020, the Oregon Department of Environmental Quality (ODEQ) issued a civil penalty of approximately NOK 11 million against Hydro Extrusion North-America for air permit violations, including the processing of "unclean" scrap, at The Dalles, Oregon cast house. In October 2020, Hydro Extrusion North-America learned of an investigation by the U.S. Environmental Protection Agency's Criminal Investigation Division (EPA CID) into the same air quality issues. Hydro Extrusions North America is cooperating with both ODEQ and EPA CID, and the risk of serious consequences is uncertain at this point. In December 2020, ODEQ proposed a reviewed settlement for the penalty comprised of a payment of

approximately NOK 6 million as well as the implementation of certain corrective actions. Resolution of the penalty remains with ODEQ to address.

The 2018 figure also includes in total four permit breaches in Bauxite & Alumina of which three at Alunorte: the use of Canal Velho; rainwater from the roof of a coal shed; and the leakage through a disused pipe. For more information see the section "The Alunorte situation" in Hydro's Annual Report 2018.

E2.4 Provisions for environmental clean-up and future asset retirement obligations

Reporting principles

When Hydro, at acquisition of an asset or start of a business activity, has an obligation to remove, dismantle or remediate the asset or site used, that obligation is included in the cost of the asset with the present value of estimated remediation costs. The same treatment is applied if an obligation to remove, dismantle or remediate the asset is introduced at a later date, through new legislation or other means. For Hydro's accounting policy for provisions and asset retirement obligations, see note 4.1 Uncertain assets and liabilities to the consolidated financial statements.

Note E3 – Energy

E3.1 Energy consumption and energy production

Reporting principles

Energy consumption includes Hydro produced as well as purchased energy in Hydro's consolidated activities. Hydro has a normal nominal production of 12 TWh hydroelectric power (as operator). Hydro's business areas, except from Extrusions, does not purchase heating, cooling or steam, which is produced internally and is reported as "other" energy consumptions. Extrusions purchases steam and heat, but the volumes are minimal. Energy consumption includes energy losses in hydroelectric plants.

Energy consumption per energy carrier - consolidated activities

PJ	2020	2019	2018	2017	2016

Coal	14.0	13.4	13.2	15.2	15.2
Coke	18.0	17.3	17.3	18.5	18.7
Electricity	102.6	100.5	98.5	103.8	104.3
Gasoline	-	-	0.1	0.1	0.2
Natural gas	14.8	16.3	16.5	16.9	16.3
Natural gas liquids	2.3	1.8	1.8	1.6	1.8
Oil	23.7	19.1	15.0	30.7	30.9
Other	5.6	5.1	4.3	4.5	4.5
Total energy consumption in PJ	180.9	173.5	166.7	191.5	192.0
Total energy consumption in TWh	50.3	48.2	46.3	53.2	53.3

Energy consumption per sector - consolidated activities

PJ	2020	2019	2018	2017	2016
Bauxite & Alumina	41.6	35.7	30.2	48.4	48.9
Electrolysis/Carbon/Casting	119.6	116.2	114.2	120.7	121.2
Remelters	2.4	2.4	2.6	2.7	2.6
Rolling	3.9	4.2	4.0	4.3	4.3
Extrusions	13.2	14.9	15.5	15.1	14.7
Other	0.3	0.2	0.2	0.2	0.2
Total energy consumption	180.9	173.5	166.7	191.5	192.0

PJ	2020	2019	2018	2017	2016

Brazil	71.9	61.7	54.0	81.5	81.2
Germany	15.3	15.4	16.6	16.9	16.8
Norway	68.5	67.7	67.0	64.0	65.5
Slovakia	11.1	12.8	12.5	12.5	12.5
Other1)	14.2	15.9	16.6	16.6	16.1
Total energy consumption	180.9	173.6	166.8	191.5	192.0

Energy consumption per country - consolidated activities

GRI Reference: GRI Standards 302-1 (2016)

Hydro's energy consumption decreased significantly in 2018 due to the embargo at Alunorte, and curtailment at Albras and Paragominas. This is partly reversed in 2019 and 2020 due to lifting of the embargo and ramp-up of production.

E3.2 Energy intensity

Reporting principles

Energy intensity in Alunorte is calculated based on total energy consumption in Alunorte divided by total alumina production.

Energy intensity in Hydro's consolidated smelters is direct current consumption in the electrolysis process per kg aluminium.

Note E4 – Otherresource use

E4.1 Materials

Reporting principles

This covers major raw materials used in the alumina refining process and electrolysis process beyond what is included in the energy consumption data.

Alumina and aluminium fluoride are primarily used in the electrolysis process, whilst lime, caustic soda (NaOH), sulfuric acid and flocculants are primarily used in the alumina refining process. Flocculants are also used at Paragominas.

The use of lime, caustic soda and sulfuric acid varies with the production of alumina, see note E7. The use of sulfuric acid depends also on the amount of rainfall and management of caustic soda at Alunorte.

Materials
1 000 metric tons	2020	2019	2018	2017	2016

Alumina	3,316	3,230	3,161	3,353	3,331
Aluminium fluoride	34	33	31	31	32
Lime	45	40	35	62	60
Caustic soda	513	436	353	662	653
Sulphuric acid	23	22	29	28	26
Flocculants	4	4	3	7	6

GRI Reference: GRI Standards 301-1 (2016)

E4.2 Water

Reporting principles

Some water loss to the external environment will occur as evaporation and/or steam. This water loss is included in the figures under water discharge as other (not specified). The quality of fresh-water discharge generally complies with local or sitespecific permits before discharge to local water recipients and is of a high quality, as per ICMM's definition.

The majority of Extrusions sites have a closed loop water management system, and the water use is marginal compared to the rest of Hydro. The majority of water use in Extrusions takes place in Oregon in USA, and in Sweden.

Total water withdrawal by country

million m3	2020	2019	2018	2017	2016

Brazil	43.801)	47.28	50.01	35.85	33.28
Germany	2.38	2.42	2.31	2.25	2.13
Norway	211.87	204.70	204.90	177.95	179.07
Other	7.99	10.91	10.69	10.57	6.74
Total	266.04	265.30	267.92	226.62	221.22

1) Includes 20.68 million m3 of rainwater not used in the process, but it is treated and discharged. Alunorte has improved the monitoring of rainwater, and the figure may not be comparable to historical figures. The figure varies with precipitation.

Total water withdrawal by source

Million m3	High quality	Low	quality Total 2020	Brazil	Germany	Norway		Other Total 2019

Surface water	45.73	5.42	51.15	11.85	-	35.46	3.83	54.66
Seawater	-	175.34	175.34	-	-	175.34	-	168.87
Ground water	12.96	0.08	13.04	11.20	1.61	-	0.24	11.77
Third-party supply	4.11	1.40	5.50	0.07	0.54	1.06	3.84	7.69
Rainwater	20.92	0.08	21.00	20.681)	0.23	-	0.08	22.31
Total water withdrawal	83.71	182.33	266.04	43.80	2.38	211.87	7.99	265.30

GRI-reference: GRI Standards 303-3 (2018)

Almost 80 percent of Hydro's total water withdrawal occurs in Norway from fjords (sea water) and rivers (fresh water) that supply these fjords. These water sources are vast and are not significantly affected by Hydro's operations. All sea water withdrawal in Norway is used in fume treatment plants enabling the primary production smelters to clean dust, SO2 and fluoride emissions to air. Sea water absorbs the pollutants and mitigates the environmental impact from the production process.

Alunorte uses waste-water from another organization, Paragominas. In 2020, waste-water consumed at Alunorte stemming from Paragominas amounted to 7.2 million tons.

In 2020, approximately 75% of Paragominas' water demand was met by recovery of water from the beneficiation process, and 8% from water captured in the reservoirs. There was also a significant improvement in water efficiency within the operation. These actions have all contributed to reducing operational dependency on new water withdrawals from the Parariquara river.

There has been a water tax within the state of Pará since 2015.

Withdrawal from water-stressed areas
Million m3	2020	2019	2018	2017	2016

Total water withdrawal from water-stressed areas1)	0.94	1.08	0.33	0.38	2.19
Number of locations	40

GRI reference: GRI Standards 303-3 (2018)

1) 2018-2016 figures are not comparable to 2019-2020 due to change in methodology

From 2019, Hydro uses the WRI Aqueduct tool to analyze water withdrawal from water stressed areas, and historical data may not be comparable. Baseline water stress measures the ratio of total water withdrawals to available renewable surface and groundwater supplies. Areas categorized as high and extremely high with regard to water stress is included in the figure above.

Overall water risk

Number of Overall water risk locations	Share of total water withdrawal

Extremely High 18	0.4%
High 41	2.5%
Medium - High 24	0.6%
Low – Medium 24	48.5%
Low 19	48%
Grand total 40	100%

Total water discharge by destination

	High	Low	Total
Million m3	quality	quality	2020	Brazil	Germany	Norway		Other Total 2019

River (surface water)	30.84	20.09	50.92	30.75	0.03	17.26	2.88	52.03
Seawater	7.65	202.46	210.11	-	-	210.11	-	202.82
Sewage (third-party water)	1.57	2.23	3.80	0.07	0.13	0.45	3.15	5.71
Cooling water to river	1.60	0.94	2.54	-	1.43	0.06	1.05	2.79
Other (not specified)	6.99	8.69	15.68	12.98	0.53	1.25	0.91	19.28
Total water discharge by destination	48.64	234.40	283.04	43.80	2.13	229.12	7.99	282.63

GRI Reference: GRI Standards 303-4 (2018)

Discharged destination "other (not specified)" includes evaporative losses that are deemed not material and therefore not specified in the table above.

E4.3 Recycling

Reporting principles

Hydro uses a definition for recycling agreed on by the European Aluminium Association. The definition was implemented in Hydro in 2013. The definition divides recycled scrap in two: process scrap, which includes pre-consumer scrap from downstream casthouses, and post-consumer scrap. Reporting of recycling data is drawn from the company's production software and ERP system.

The numbers include Hydro's share of scrap recycled by Alunorf, Germany (owned 50 percent), and also Hydro's share of preconsumer scrap from Qatalum and Slovalco. Qatalum and Slovalco do not have recycling facilities for post-consumer scrap.

Recycling - excluding Extrusions

1 000 metric tons	2020	2019	2018	2017	2016

Recycled post-consumer scrap	195	175	161	152	138
Recycled pre-consumer scrap	1,067	1,084	1,142	1,105	1,078
Total recycled metal	1,262	1,259	1,303	1,257	1,215

While Hydro Extrusions uses significant amounts of remelted pre-consumer scrap, we are still lacking an overview that is comparable with Hydro's definitions. In 2020, Extrusions remelted in total 800 000 tons of external scrap of which an estimated 20 percent was post-consumer scrap. This comes in addition to the figures in the table above.

Note E5 – Waste

Note E5.1 Tailings and bauxite residue

Reporting principles

Tailings from bauxite extraction consist of mineral rejects from the extraction process mixed with water. The tailings at Paragominas are stored in dedicated tailings dams, where the particles settle. Paragominas is Hydro's only consolidated mine.

Bauxite residue, also known as red mud, is a by-product of the alumina refining process. The residue is washed with water to lower the alkalinity, and recovered caustic soda is recycled for use in the production process. Residue is dry-stacked as a claylike substance with a low moisture content (for more information please refer to page 44).

Tailings and bauxite residue
1 000 metric tons1)	2020	2019	2018	2017	2016

Tailings	3,345	2,871	2,116	4,067	4,117
Bauxite residue	4,826	3,871	3,191	5,979	6,426

1) On a dry basis

The significant decrease in 2018 is due to the Alunorte embargo (bauxite residue) and the corresponding Paragominas curtailment (tailings). This is partly reversed in 2019 and 2020 due to lifting of the embargo and ramp-up of production.

The tailings generated in the bauxite's beneficiation process have no hazardous chemical properties, thus it is not necessary to line the tailing dams.

As a control measure, static water pressures within the walls of our tailings dam at Paragominas are monitored through the use of dedicated instrumentation (piezometers).

E5.2 Hazardous waste and other waste

Reporting principles

From 2020, waste is no longer reported according to the European Waste Codes (as defined in the EU Waste Framework Directive). Instead, waste has been reported according to a harmonized categorization within Hydro, based on the common names of key waste streams relevant to our operations (e.g. bauxite residue, SPL, waste caustic soda etc.). This change in reporting was implemented to facilitate aggregation of data at a group level and avoid the use of multiple waste codes for the same waste category. Operations continue maintain more detailed waste registries that align with local requirements and legislation. Aggregated figures presented in the tables below are comparable to previous years, as this change in categorization does not affect the total volumes of waste reported.

Spent potlining (SPL) from the electrolysis cells used in primary aluminium production is defined as hazardous waste. The production of SPL varies with the relining of smelter cells which is normally done every 4-7 years for established smelters. New plants will get a relining peak at the same interval after start-up. See also SPL figures on a five year rolling average under the section on Environment under Aluminium Metal, page 50.

A significant amount of Extrusions hazardous waste is in the form of spent caustic resulting from the die cleaning process with a large proportion of this being recycled.

Hazardous and other waste
1 000 metric tons	2020	2019	2018	2017	2016

Spent potlining	54.0	55.9	42.5	40.4	34.2
Other hazardous waste	220.0	220.4	225.8	263.0	247.9
Total hazardous waste	274.0	276.3	268.2	303.4	282.0
Other waste	405.8	318.6	330.0	403.0	354.4
Total waste	679.7	594.9	598.3	706.4	636.5

GRI Reference: GRI Standards 306-3 (2020)

GRI Reference: G4-MM3

E5.3 Waste treatment

Reporting principles

Waste sorted by treatment includes both external and internal treatment. In many cases waste is managed by a third party, which all are required to adhere to the Hydro Supplier Code of Conduct. A non-compliance with or breach of the principles in Hydro's Supplier Code of Conduct, that is not corrected within a reasonable period, may lead to termination of the supplier contract. All Hydro locations are also required to ensure safe transport of hazardous waste in accordance with global and local regulations and evaluate critical waste receivers and include these in a supplier development system.

Tailings and bauxite residue are deposited in appropriately engineered and managed on-site landfills and are not included in the table below. Combustion without energy recovery is included under Other treatment.

Treatment of hazardous waste

	2020	2019	2018	2017	2016

Energy recovery	6%	7%	8%	7%	7%
Landfill	27%	27%	28%	33%	33%
Other	36%	25%	26%	21%	20%
Reuse/recycling	32%	40%	37%	39%	40%

Treatment of other waste
	2020	2019	2018	2017	2016

Energy recovery	10%	6%	5%	4%	3%
Landfill	6%	25%	27%	45%	37%
Other	24%	14%	16%	14%	19%
Reuse/recycling	60%	55%	53%	37%	41%

GRI-reference: GRI Standards 306-4 and 306-5 (2020)

Note E6 – Biodiversity

E6.1 Overburden moved

Reporting principles

Total volume (in metric tons) of overburden moved in Hydro's mine in Brazil, Paragominas. This is the only mine within Hydro's consolidated operations.

Overburden moved
Million metric tons	2020	2019	2018	2017	2016

Overburden moved	67	45	48	83	83

GRI Reference: G4-MM3

The overburden volume increase from 2019 to 2020 is due to increased production following the lifting of the embargo and ram-up of the production levels.

Hydro uses strip mining in Paragominas, a technique that avoids the formation of an overburden stockpile. Thus, all overburden moved for mining purpose is used to reconstruct the topography of the strip previously mined, prior to rehabilitation of the mined areas. Part of the overburden (laterite) is also used for paving roads and for raising the heights of existing tailing dams and constructing new ones.

The sterile soil is untreated and has no dangerous properties. Leaching potential due to overburden removal is negligible. There is a water resource management program in place to mitigate silting from the plateau areas.

E6.2 Land use and rehabilitation

Reporting principles

Hydro's only consolidated mining operation is in Paragominas in Brazil. Areas are measured using the ArcGIS Platform. The rehabilitation data are reported to ANM (the Brazilian National Mining Agency) and Semas (the Secretary of State for Environment and Sustainability in Pará), as part of the clearing permit renewal process.

In our mining operation we strive for a year-on-year balance between the area that we mine and make available for rehabilitation every year and the area that we succeed in rehabilitating every year. From 2018, this target is a rolling average across two hydrological seasons, and the categories for land-use have been redefined.

The mining cycle is made up of several steps. When a given area of land is to be developed, the first step is clearing, when vegetation and soil are removed. The area is then classified as area cleared for future mining. After an area is mined, it is either classified as tailings dams and other mining infrastructure or area available for rehabilitation. All areas available for rehabilitation will be rehabilitated as soon as possible and subsequently classified as an ongoing rehabilitation area.

When tailings dams are closed, they will become available for rehabilitation after settling for minimum five years. We will then get a significant increase in the tailings dam infrastructure available for rehabilitation. There may be additional movements between different statuses from year to year due to reclassification.

During 2020, we cleared 453 hectares (ha) for future mining. We mined 305 ha of which 155 ha were then dedicated to mining infrastructure. As a result, a total of 150 ha were mined and subsequently made available for rehabilitation during 2020, of which 17 percent was rehabilitated in 2020. This area must be completely rehabilitated by the end of 2022 in order to meet the 1:1 rehabilitation target.

Of the 151 ha made available for rehabilitation in 2017, 88 percent was rehabilitated in 2018. The remaining 12 percent was completed in 2019, and we met the 1:1 rehabilitation target. Of the 113 ha that were made available for rehabilitation in 2018, 98 percent were rehabilitated in 2019, and the remaining two percent was rehabilitated in 2020 and the 1:1 rehabilitation target for 2020 was subsequently met. Of the 90 ha that was made available for rehabilitation in 2019 63 percent is currently rehabilitated.

The clearing, mining and rehabilitation cycles are constantly ongoing and are not synchronized. Clearing and mining are at their peak in the dry season, whilst rehabilitation happens primarily in the wet season. The three cycles are also influenced by different drivers such as permits for the clearing cycle, land available for rehabilitation, and rainfall for the rehabilitation cycle. As a result, there is no direct link between the area cleared each year and the area mined or rehabilitated that same year (e.g. an area cleared in 2017 may be mined late 2018 and then rehabilitated in the 2019 wet season). Due in large part to this complexity, the figures presented above can not be directly deducted from the figures in the land use and rehabilitation table below.

All areas stated in the table below give a snapshot of Paragominas' land use at year end.

Land use and rehabilitation - Paragominas

Hectares given per point in time	2020	2019	2018	2017	2016

Permanent infrastructure1)	2,395	2,397	2,397	2,447	2,446
Tailings dam and other mining infrastructure1)	2,472	2,472	2,472	1,918	1,705
Area cleared for future mining	453	346	380	257	364
Ongoing rehabilitation areas1)	2,486	2,339	2,203	1,872	1,689
Rehabilitation gap	273	317	296	111	238
Historical gap2)	-	-	-	8	-
Mined area available for rehabilitation	158	84	131	-	-
Total area affected	8,237	7,955	7,879	6,613	6,442

1) The definition is updated, and historical data may not be comparable

2) The historical rehabilitation gap refers to the one inherited from Vale. Historical figures are not available

GRI Reference: G4-MM3

The rehabilitation gap is a result of ongoing operations, i.e. areas set aside for infrastructure being reclassified, or missed/failed/poor previous rehabilitation. For 2019, 105 ha were reclassified as failed rehabilitation from areas prepared for rehabilitation in 2015. In 2020, 34 ha of former infrastructure became available for rehabilitation.

The Hydro Paragominas property measures in total 18,763 hectares (ha), while the land use at the end of 2020 was 8,237 ha, including 2,486 ha under rehabilitation.

There are specific closure plan requirements for the Paragominas mine (rehabilitation of mine and tailings ponds). In addition, there is a similar requirement for the bauxite residue disposal areas at Alunorte. Hydro has a dedicated corporate function which oversees legacy issues and addresses closure issues. For the time being such plans are further developed on an ad hoc basis when relevant, and a strategy is under development.

E6.3 Endangered species

Reporting principles

Hydro uses a federal database updated by ICMBio researchers to classify species. The conservation status of species registered in the reference databases can change. As a result, the species list is updated and species added, removed and/or moved from one status to another. Reported species are cumulative and represent all species observed within the premises of Hydro's mining activities in Paragominas, Brazil, since monitoring and registration started in 2003. Some species included in the overview are covered by more than one database and the numbers can therefore not be summed across the columns. In addition, each database is stand alone and they are therefore not comparable.

Endangered species registered within the influence area of Hydro's mining activities (Paragominas)

		MMA 1)		Semas 2)		IUCN 3)
Conservation status	Fauna	Flora	Fauna	Flora	Fauna	Flora

Critically endangered	3	2	2	1	2	1
Endangered	8	1	10	-	3	1
Vulnerable	27	3	12	9	17	16
Threatened	-	-	-	-	-	-
Near threatened	1	1	-	-	14	2
Data deficient	1	-	-	-	3	1
Total according to each red list classification	40	7	24	10	39	21

1) Federal Brazilian red list

2) Pará state red list

3) International Union for Conservation of Nature red list

GRI-reference: GRI Standards 304-4 (2016)

In total 97 different species, including 64 fauna and 33 flora, are observed within the premises of Hydro's mining activities in Paragominas, Brazil. The total number of different species increased by four in 2020 compared to 2019. The new observations include two red listed species for fauna (two bird types) and two new species for flora (two tree types). We are expecting the number of new, unique species to increase going forward as we move into new territory.

Note E7 – Production volumes

Reporting principles

The figures reported below are total production volumes (100 percent) from consolidated activities only (Hydro's ownership share exceeding 50 percent). Alumina production includes Alunorte while primary aluminium production includes 100 percent of production at all Hydro's primary aluminium plants in Norway, Neuss in Germany, Slovalco in Slovakia and Albras in Brazil. These volumes are not directly comparable to the volumes reported in the financial statements.

Alumina and primary aluminium production are by far the most energy and GHG intensive processes in Hydro.

Production volumes
1 000 metric tons	2020	2019	2018	2017	2016

Alumina production	5,457	4,487	3,712	6,397	6,341
Primary aluminium production	1,726	1,675	1,653	1,752	1,744

Production volumes decreased significantly in 2018 due to the embargo at Alunorte (alumina), and curtailment at Albras (primary aluminium). This is partly reversed in 2019 and 2020 due to lifting of the embargo and ramp-up of production.

Hydro's production based on ownership equity can be found in Hydro's results for fourth quarter.

Note E8 – Environmental data for 50/50-owned companies

Hydro has an ownership share of 50 percent in Alunorf and Qatalum. As only operations owned more than 50 percent are included in most of the information in Hydro's viability performance statements, we have chosen to disclose certain environmental information about these companies and their performance. The reporting principles of each indicator might differ from the ones used by Hydro and in between the companies. For information about social data, see Note S14 to the social statements.

Environmental data for 50/50-owned companies

	Main product	Production, 1 000 metric tons	GHG emissions, scope 1, Million tons CO2e	GHG emissions, scope 2, Million tons CO2e	Total energy consumption, TWh	Fresh water used, Million m3	Total waste disposed, metric tons	Total waste recycled, 1 000 tons
Alunorf	Rolling	1,3801)	0.24	0.40	1.93	1.34	1,471	90%2)
Qatalum	Aluminium Metal	631	4.85	0.023	9.50	0.28	6181	85%

1) The tonnage at Alunorf includes 13.2 mt of sheet ingots

2) Recycling degree of total waste

Socialstatements

The table below shows Hydro's main indicators related to social performance. For geographical distribution of total assets, investments and revenues, see note 1.4 to the consolidated financial statements.

Social performance

		% change						GRI Standards
	Notes	2019-20	2020	2019	2018	2017	2016	reference
Employees
Number of permanent employees	S1.1	-6%	34,240	36,310	36,236	34,625	12,911	102-7 (2016)
Share of women	S1.1	-	18%	18%	18%	17%	14%
Number of temporary employees2)	S1.2	17%	1,929	1,647	1,680	1,646	1,266	102-8 (2016)
Women in top 50 management	S3.1	-3 pp1)	29%	32%	33%	28%	29%	405-1 (2016)
Non-Norwegians in top 50 management	S3.1	6 pp1)	43%	37%	39%	37%	32%	405-1 (2016)
Full-time equivalents for contractor employees	S1	12%	11,800	10,500	9,000	9,500	7,700	102-8 (2016)
New employees	S1.3	-31%	3,071	4,466	5,141 4)	760	658	401-1 (2016)
Turnover	S1.3	1 pp1)	14%	13%	12%	4%	5%	401-1 (2016)
Hydro Monitor Employee Engagement Index	S4		72%	N/A	84%	N/A	83%
Payroll (NOK million)	S1.1		17,509	19,005	17,318 4)	7,258	6,681	201-1 (2016)
Health and safety	S5
Sick leave	S5.1	15%1)	4.2 %	3.7 %	3.6 %	3.4 %	4.3 %	403-2 (2018)
Total recordable injuries (TRI) rate3)	S5.1	-13%	2.7	3.0	3.4	2.9	2.6	403-2 (2018)
Employees		-9%	3.0	3.3	3.0	2.5	2.6
Contractors		-24%	1.7	2.2
Number of fatal accidents	S5.1		-	-	1	2	-	403-2 (2018)
Employees			-	-	1	1	-
Contractors			-	5) -	-	1	-
High risk incidents	S5.2	-28%	140	195	202	127	63	403-2 (2018)
Occupational illness rate4)	S5.3	20%	0.3	0.2	0.5	0.3	0.7	403-3 (2018)
Current income tax (NOK million)	S7	39%	2,105	1,512	2,724	2,575	1,988
Research and Development (NOK million)
R&D funds received4)	S8	-6%	34	36	35	62	46	201-4 (2016)
R&D expenses	S8	1%	633	625	594	500	370
Social investments
Community investments, charitable donations and sponsorships (NOK million)4)	S9	-5%	56	59	89	36	28
Compliance	S10
Cases reported through AlertLine	S10.1		224	347	342	302	173	102-3 (2016)
Substantiated instances of corruption	S10.1		1	2	1	-	-	205-3 (2016)
Significant human rights breaches8)	S10.3		7) -	-	-	-	-	406-1/407-/408- 1/409-1 (2016)
Relocation of people	S10.3		-	-	-	-	-	G4-MM9
Training in business ethics Hydro	S10.4	n/a	34,3306)	24,481	3,4904)	3,3314)	4,5614)	412-2/205-2 (2016)
Supplier audits	S10.5	18%	49	98	83	109	123	HDD-01
Potential and existing counter parties screened	S10.5	-38%	8,000	18,172	13,000	6,200	3,700	414-1 (2016)

1) Values are given as percentage points compared to previous year

2) There may be uncertainties related to data from Extrusions, please see section on Uncertainties related to data from Extrusions in About the reporting

3) Per million working hours. The numbers include discontinued operations

4) Excluding Extrusions

5) Contractor fatality in 50/50 JV managed by Qatalum

6) Includes class room and e-learning training on anti-corruption, code of conduct, data privacy, and sanctions and trade compliance

7) Pending final results from the human rights due dilligence of Albras, Alunorte and Paragominas

8) Defined as one or more confirmed case of forced labor, child labor abuse or confirmed breach of ILO 169 caused, contributed or linked to Hydro. The definition also includes municipality/region/area of >100 people irreversibly impacted by confirmed cause, contribution or link to Hydro (e.g. spill, systematic pollution over time, involuntary relocation) The confirmed impact to people in the municipality/region/area is life-long and/or life shortening. Incidents of harassment and discrimination are reported separately from (other) human rights breaches in this note. Occupational health and safety incidents, including fatalities, can be found in note S5.

Notesto the socialstatements

Generalreporting standards and principles

Data relating to occupational health and safety have been prepared by individual reporting units in accordance with corporate procedures. This applies to all Hydro's operations, including consolidated subsidiaries, if not otherwise stated. Such data are based on the corporate reporting system for incident reporting, IMS and Synergi. The units report incidents to the systems on a regular basis in accordance with a corporate procedure on HSE incidents and sick leave data. Employee data are reported based on Hydro's SAP system.

The reporting methodology will follow Hydro's principles, unless otherwise stated.

Where applicable, we have indicated to which GRI Standards disclosure the different notes or parts of the notes are applicable. Please also see the social statements on the previous page for more such information.

Note S1 – Employees

Reporting principles

Data for Hydro's permanent and temporary employees are based on Hydro's human resources SAP system. Data presented represent status at year end, December 31. Payroll is based on Hydro's consolidated financial statements. Payroll, as provided in the table below, does not include pension costs.

Temporary employees include among others apprentices, but exclude contractor employees. Legal requirements and customs may vary from country to country, making direct comparison difficult.

Number of full-time equivalents of contractor employees as included in the social statements is estimated based on the total hours worked by contractor employees (reported in Hydro's incident reporting system Synergi and IMS as basis for calculation of injury frequency) divided by 1,850 working hours per year. Contractor employees represented in total about 11,800 full-time equivalents during 2020. The majority relates to Hydro's Bauxite & Alumina activities.

Extrusion has a greater extent of seasonal variations than the other business areas in Hydro. This is solved in different ways in different parts of the organization and may include the use of agency workers. We still do not have the full overview of the extent of such use.

S1.1 Permanent employees by region, gender and age as well as payroll

Permanent employees by region, gender and payroll

	Number of employees1)							Payroll (NOK million)2) 3)
	2020	2019	2018	2017	2016	2020	2019	2018	2017	2016
Norway	4,048	4,103	4,050	3,962	3,689	3,632	3,684	3,591	3,220	3,001
Women	21%	21%	21%	20%	19%
Men	79%	79%	79%	80%	81%
Germany	4,615	4,967	4,909	4,861	3,555	3,577	4,307	3,265	2,256	2,201
Women	13%	13%	12%	12%	10%
Men	87%	87%	88%	88%	90%
France	1,818	1,894	1,883	1,829	-	917	939	954
Women	16%	16%	16%	16%	0%
Men	84%	84%	84%	84%	0%
Hungary	1,554	1,612	1,675	1,540	-	384	408	541
Women	30%	29%	26%	24%	0%
Men	70%	71%	74%	76%	0%
Other Europe	8,407	9,071	9,338	8,864	735	3,746	3,850	3,678	201	223
Women	22%	22%	22%	21%	11%
Men	78%	78%	78%	79%	89%
Total Europe	20,442	21,647	21,855	21 056	7,979	12,256	13,188	12,029	5,677	5,425
-	-	-	-	-	-
Brazil	6,070	6,108	5,658	5,227	4,743	1,059	1,273	1,158	1,166	986
Women	13%	13%	13%	12%	13%
Men	87%	87%	87%	88%	87%
USA	5,510	6,013	6,291	5,954	-	3,517	3,656	3,348
Women	17%	16%	15%	14%	0%
Men	83%	84%	85%	86%	0%
Rest of the world	2,218	2,542	2,432	2,388	189	677	889	783
Women	19%	18%	18%	18%	23%
Men	81%	82%	82%	82%	77%
Total	34,240	36,310	36,236	34,625	12,911	17,509	19,005	17,318	7,258	6,681
Women	18%	18%	18%	17%	14%
Men	82%	82%	82%	83%	86%

1) Number of employees is based on where the employee actually is stationed, and will in some cases differ from the Country-by-country report, which shows in which legal company she or he is employed.

2) Joint operations (Alunorf and Aluchemie from 2016 to 2019) are excluded from the payroll figures in the table above. Those entities are included in Hydro's financial statements on a lineby-line basis. Please see note 3.1 to the consolidated financial statements for more information about joint operations.

3) Payroll figures for Extrusions is only available from 2018

GRI-reference: GRI Standards 201-1 (2016) and GRI Standards 102-8 (2016)

When Hydro acquired Sapa in October 2017, the number of permanent employees increased by 21,378.

Age distribution permanent employees

Age distribution

	2020	2019	2018	2017	2016

Under 30	14%	15%	15%	15%	12%
30-49	53%	52%	52%	52%	54%
50 +	32%	33%	33%	32%	33%

GRI Reference: GRI Standards 405-1 (2016) and G4-EU15

S1.2 Employees by employment type and part-time employees

Total employees by employment type

Employment category	2020	2019	2018	2017	2016

Permanent - total	34,240	36,310	36,236	34,625	12,911
Temporary - total	1,929	1,647	1,680	1,646	1,266
Women	32%	27%	27%	23%	27%
Men	68%	73%	73%	77%	73%

GRI Reference: GRI Standards 405-1 (2016) and G4-EU15

For gender of permanent employees see Note S1.1

In Brazil the share of women among temporary employees is 35 percent, in Norway 30 percent, the USA 26 percent and Germany 15 percent.

Part-time employees include all persons being employed in positions that are not full-time (less than 100 percent).

Part-time employees

Part-time employees1)	2020	2019	2018	2017	2016

Norway	0.7 %	1.2 %	1.5 %	1.9 %	2.0 %
Women	1.8 %	3.7 %	4.2 %	5.6 %	3.5 %
Men	0.4 %	0.5 %	0.8 %	1.0 %	1.6 %
Total employees	2.0 %	1.3 %	1.3 %	1.6 %	1.2 %
Women	5.9 %	4.9 %	4.9 %	6.2 %	5.7 %
Men	1.1 %	0.5 %	0.5 %	0.6 %	0.6 %

1) Data for 2020 includes 98 percent of Hydro's permanent employees globally.

GRI Reference: GRI Standards 102-8 (2016)

Hydro employees normally work full-time. The opportunity to work part-time is considered a benefit for which a special application must be made.

S1.3 New employees and turnover

New employee hires by age group, gender and country

Age
				2019				2018
		30-49	50+	Total	Under 30	30-49	50+	Total
428	140	264	24	861	337	490	34	1,002
18%	24%	16%	0%	8%	13%	6%	0%	19%
82%	76%	84%	100%	92%	87%	94%	100%	81%
110	43	51	16	194	76	107	11	211
19%	16%	12%	50%	28%	26%	29%	36%	17%
81%	84%	88%	50%	72%	74%	71%	64%	83%
83	22	52	9	143	54	84	5	114
23%	14%	21%	56%	28%	28%	29%	20%	32%
77%	86%	79%	44%	72%	72%	71%	80%	68%
1,292	548	551	193	1,581	634	716	231	1,821
19%	17%	22%	20%	18%	18%	19%	16%	19%
81%	83%	78%	80%	82%	82%	81%	84%	81%
1,158	479	544	135	1,687	657	885	145	1,993
26%	24%	26%	29%	23%	22%	25%	19%	27%
74%	76%	74%	71%	77%	78%	75%	81%	73%
3,071	1,232	1,462	377	4,466	1,758	2,282	426	5,141
22%	20%	22%	24%	19%	19%	20%	17%	22%
78%	80%	78%	76%	81%	81%	80%	83%	78%
		Total Under 30	2020

GRI-references: GRI Standards 401-1 (2016), G4-EU15

Employee turnover by age group, gender and country

		Age
		2020				2019
Region and gender		Total Under 30	30-49	50+	Total	Under 30	30-49	50+	Total
Brazil	8%	8%	7%	13%	9%	10%	7%	15%	11%
Women	7%	12%	6%	0%	11%	11%	10%	18%	15%
Men	8%	8%	8%	14%	8%	9%	7%	15%	11%
Germany	10%	9%	4%	16%	5%	10%	3%	6%	4%
Women	7%	5%	3%	14%	8%	16%	5%	10%	3%
Men	11%	9%	4%	17%	5%	8%	2%	6%	4%
Norway	5%	4%	4%	7%	5%	7%	4%	5%	5%
Women	6%	4%	6%	7%	5%	7%	4%	6%	4%
Men	5%	3%	3%	7%	5%	7%	4%	5%	5%
USA	31%	54%	32%	21%	28%	58%	29%	16%
Women	33%	64%	32%	23%	31%	68%	30%	16%
Men	31%	53%	32%	20%	29%	57%	29%	16%
Other	13%	23%	11%	11%	13%	23%	12%	10%	12%
Women	13%	18%	13%	12%	13%	18%	13%	11%	9%
Men	13%	24%	11%	11%	13%	25%	11%	10%	13%
Grand total	14%	23%	12%	13%	13%	26%	11%	10%	12%
Women	14%	21%	12%	13%	14%	23%	13%	11%	14%
Men	14%	23%	12%	13%	13%	26%	11%	10%	12%

The employee turnover rate includes resignations, retirements and manning reductions of all permanent employees, but excludes closures and divestments.

In the USS we have implemented a variety of improvement actions to reduce total employee turnover and yield better workplace stability, including pilot initiatives at certain plants. These actions include increased hourly wages, enhanced new hire follow-up/onboarding and leadership/supervisor training.

Note S2 – Remuneration

Reporting principles

Data on gender related salary differences is based on local salary systems. Data on "highest paid employee" is based on note 9 in Hydro's consolidated financial statements for Norway, and from local salary systems in Germany and Brazil.

S2.1 Gender related salary differences

All employees shall receive a total compensation that is competitive and aligned with local industry standard (but not market leading). The compensation should also be holistic, performance oriented, transparent, fair and objective. Salaries in the organization are reviewed on a regular basis. There are no significant gender-pay differentials for employees earning collective negotiated wages in Norway, Germany and Brazil.

Following the integration of Extrusions, the USA and Hungary have become significant countries of operations for Hydro. We have looked into the salary differences for all Hydro employees in Hungary, and based on overall figures we find no significant gender related salary differences.

We have looked into the salary conditions for all Hydro employees in the USA, including the remelters, extrusion plants and precision tubing facilities. Based on our initial analysis, on average there are no significant gender related salary differences. In Extrusion North America we have initiated steps to conduct a more thorough analysis to help up identify specific disparity issues that may exist.

S2.2 Highest paid employee

Highest paid employee includes fixed salary, pension, health insurance (Brazil only) and other benefits, but excludes bonuses. Any severance pay is excluded from the highest paid employee calculation to ensure consistency.

Highest paid employee per country

NOK thousand	% change 2019-20	2020	2019	2018

Brazil		-	2,387	5,058
Germany	-2%	3,590	3,663
Norway	-13%	6,696	7,680	12,910

1) Figures reported above excludes expatriates

GRI-reference: GRI Standards 102-38 (2016) and GRI Standards 102-39 (2016)

Please see note 9.1 and 9.2 to the Consolidated financial statements for more information.

S2.3 Standard entry level wage

Entry level wages have been checked for some significant locations of operation. In Brazil, entry level wages are controlled by the labor agreement. We looked into salary differences in 2020, and the ratio compared to national minimum wage was both for women and men 1,82 in Barcarena and 1.7 in Paragominas.

In Germany and Norway the entry level wages are defined by tariff agreements. In the Norwegian operations, minimum entry wage is about 11 percent higher than the tariff minimum. In the German operations, the entry wage is 18 percent higher than the countrywide tariff minimum wage.

For Hydro Extrusions significant location of operations, Hungary, we have reviewed entry level wage. The standard entry level wage compared to national average does not deviate in Hungary. In the USA, the most significant country of operations for Extrusions, we are still working to get the overview.

GRI reference: GRI Standards 202-1 (2016)

Note S3 – Diversity inmanagement

S3.1 Women and non-Norwegians in management

Reporting principles

Diversity data for the board of directors and Corporate Management Board (CMB) for Norsk Hydro ASA are counted per year end. Diversity data for "Top 50 managers" include level 0, 1 and 2 managers, i.e. the members of CMB and the members of the management teams at the level below CMB. For "Top 200 managers", the data include level 0, 1, 2 and 3 managers.

Diversity in management

	Women					Non-Norwegians
	2020	2019	2018	2017	2016	2020	2019	2018	2017	2016

Board of directors (11 members)1)	40%	27%	33%	33%	30%	30%	27%	11%	22%	20%
Corporate assembly	35%	33%	33%	33%	39%	-	-	-	-	-
Corporate Management Board	40%	40%	40%	40%	44%	10%	-	10%	20%	11%
Top 50 managers	29%	32%	33%	28%	29%	43%	37%	39%	37%	32%
Top 200 managers	25%	27%	25%	21%	25%	53%	60%	56%	51%	45%

1) With three women among the seven shareholder-elected members and one woman among the three employee representatives on the Board of Directors and one woman among the three employee representatives, Hydro complies with the Norwegian legal requirements on female representation.

GRI-reference: GRI Standards 405-1 (2016)

S3.2 Local representation in senior management

Reporting principles

Senior management is defined as the management group at each site (site managers and those reporting to them) in addition to business area management teams. Local is defined at country level for Norway, Hungary, USA and Germany, and at state level for Brazil.

Local representation in senior management

Share of senior management hired from local community	2020	2019	2018	2017	2016

Norway
Production sites in Norway	98%	97%	97%	100%	100%
Aluminium Metal management team	80%	77%	91%	90%
Extrusions management team	29%	38%
Germany
Grevenbroich plant	100%	100%	100%	100%	100%
Brazil
Paragominas, Pará	9%	9%	8%	9%	11%
Barcarena, Pará	22%	17%	13%	15%	21%
Bauxite & Alumina management team	0%	0%	0%

GRI-reference: GRI Standards 202-2 (2016)

Of the thirteen members of the Bauxite & Alumina management team in Brazil, seven are Brazilian citizens.

Hydro employs locals when necessary competence and capacity are available and normally uses expatriates only to secure employee development and the transfer of values and competence. Open positions in Hydro are normally posted at hydro.com and in local media. To secure competence transfer, it is important that there are also senior employees with experience from other units. This may also be the case at the blue-collar level, especially during start-up of new plants or equipment.

Note S4 – Employee engagement

Reporting principle

Hydro's employee engagement survey is normally carried out for all employees every second year.

The survey provides an Employee Engagement Index (EEI), a Psychosocial Risk Indicator (PRI) and an Integrity Culture Index (ICI).

EEI measure the extent to which employees are motivated to contribute to organizational success and are willing to apply discretionary effort to accomplishing tasks important to the achievement of organizational goals.

PRI measure work-related stress which affects employee mental health and wellbeing.

ICI measure the employee perception of Hydro's integrity culture.

Hydro changed survey provider in 2020, and the EEI may therefore not be comparable to previous years. The Hydro specific Performance Excellence Index is discontinued.

The long-term ambition is to be among the top 25 percent companies worldwide on EEI.

Hydro Monitor

	2020	2019	2018	2017	2016

Employee Engagement Index (EEI)	72%	N/A	84%	N/A	83%
Women	70%	N/A	86%	N/A	85%
Men	72%	N/A	83%	N/A	82%
Psycosocial Risk Index (PRI)	75%
Women	73%
Men	75%
Integrity Culture Index (ICI)	76%
Women	75%
Men	76%
Performance Excellence Index (PEI) (discontinued)	N/A	N/A	82%	N/A	82%
Response rate	89%	N/A	88%	N/A	89%

The engagement survey is a tool to work with organizational development, therefore the most important part is follow-up of agreed actions.

Note S5 – Health and Safety

Reporting principles

Standardized statistics are prepared and reported to management on a monthly basis. Data covers all organizational units within Hydro, including sales offices and administrative functions.

Workers (own employees and contractor employees as defined in note S5.1) are included during the period they are employed by or otherwise in service for Hydro.

S5.1 Total recordable injuries (TRI), Lost time injury (LTI) and sick leave

Total recordable injuries (TRI) index is calculated as the number of TRI per one million hours worked. TRI include LTI + RWC + MTC.

Lost time injury (LTI) is a personal injury at work leading to unfitness for work and absence beyond the day of the accident.

Restricted work case (RWC) is a personal injury at work that does not lead to absence beyond the day of the accident, because of alternative job assignment.

Medical treatment case (MTC) is treatment, other than first aid, administered by a physician or registered professional personnel under the standing orders of a physician.

Employees are workers under direct supervision of Hydro.

Contractors are workers who are under contract to execute work for Hydro, and who are under the direct supervision of the contractor, but at Hydro premises under Hydro's indirect supervision.

Absenteeism for Hydro globally includes all absence due to injuries, work related and other illness, measured as number of hours lost due to sick leave as percent of number of hours worked plus number of hours lost due to sick leave.

Sick leave, Norway includes all absence due to illness, measured as number of days lost due to sick leave as percent of number of possible working days excluding holidays.

There are challenges in ensuring consistent reporting practice on sick leave across the company due to legislative and cultural differences between countries.

Total recordable injuries, lost-time injuries, fatal accidents and sick leave1)

	2020	2019	2018	20172)	2016

Total recordable injuries (TRI)	224	278	301
Employees	188	229	243
Contractors	36	49	58
Total recordable injuries rate (TRI)3)	2.7	3.0	3.4	2.9	2.6
Employees	3.0	3.3	3.5	3.1	2.6
Contractors	1.7	2.2	3.0	2.54)	2.6
Lost-time injuries (LTI)	119	119
Employees	102	101	118
Contractors	17	18	29
Lost-time injuries rate (LTI)5)	1.4	1.3	1.7	2.1	0.9
Employees	1.6	1.5	1.7	1.4	1.2
Contractors	0.8	0.8	1.5	0.64)	0.6
Total number of fatal accidents	-	-	1	2	-
Employees	-	-	1	1	-
Contractors	-	6) -	-	1	-
Sick leave, percent	4.2 %	3.7 %	3.6 %	3.4 %	4.3 %
Sick leave, Norway	4.5 %	4.5 %	4.0 %	4.0 %4)	4.4 %
Women	5.3 %	5.7 %	4.3 %	4.7 %	4.8 %
Men	4.5 %	4.2 %	3.5 %	3.8 %	4.3 %

1) The numbers include discontinued operations

2) Extrusions are included from 2 October 2017

3) Number of recordable injuries per million working hours

4) Excluding Extrusions. Working hours for Extrusions in 2017 can not be split between employees and contractor workers

5) Number of lost-time injuries per million working hours 6) Contractor fatality in 50/50 JV managed by Qatalum

GRI-reference: GRI Standards 403-9 (2018)

We have deployed fatality prevention protocols and associated lifesaving rules and behaviours across all business areas. We also identified and shared best practices more effectively through a revised HSE auditing process and use of digital tools.

The fatality prevention protocols, also known as the "critical seven", are:

Energy Isolation (Lockout, Tagout and Verify, LOTO etc)
Fall Prevention (working at height, below floor level, falling objects etc)
Mobile Equipment (free moving vehicles such as forklift trucks, traffic management)
Overhead Crane Safety (overhead travelling crane, mobile crane, tower crane etc)
Confined Space Entry (entering tanks, pits etc)
Molten Metal Safety (preventing explosion)
Contractor Management (preventing injury during projects and other work to contractors and those providing contracted services)

Total recordable injuries (TRI) per region 1)

	2020	2019	2018	20172)	2016

Total recordable injuries (TRI) employees	2.7	3.0	3.4	2.9	2.6
Employees	3.0	3.3	3.5	3.1	2.6
Contractors	1.6	2.2	3.0	2.5	2.6
TRI Norway	3.0	3.8	2.9	3.9	3.9
Employees	2.7	3.1	2.3	3.1	3.0
Contractors	7.5	10.2	8.7	7.3	10.0
TRI Germany	5.4	4.5	5.1	4.4	3.9
Employees	5.5	4.3	5.3	4.6	3.5
Contractors	4.3	5.5	3.8	3.2	5.7
TRI Brazil	1.5	1.3	1.8	2.0	1.8
Employees	2.0	1.5	1.5	2.3	1.6
Contractors	1.2	1.2	2.0	1.8	1.9
TRI US	4.0	4.5	4.7
Employees	4.0	4.4	4.6
Contractors	2.6	7.2	7.0

1) Number of recordable injuries per million working hours. The numbers include discontinued operations.

2) Excluding Extrusions for full year 2017

GRI-reference: GRI Standards 403-9 (2018)

The most dominant types of injuries in 2020 were damages to fingers and hands, representing over half of all recorded injuries. Injured legs, knees, ankles and feet represent around 20 percent while arms, elbows, shoulder and wrists represent 12 percent. Damages to face, eyes and head accounted for 11 percent of the recorded injuries. Hydro is not reporting these figures per gender as this can be in conflict with privacy protection considerations.

S5.2 High risk incidents (HRI)

High risk incidents include major accidents and incidents with major potential.

High risk incidents (HRI) rate is calculated as the number of high risk incidents per million hours worked, employees and contractors combined.

		High risk incidents (HRI)
--	--	---------------------------	--

	2020	2019	2018	2017	2016

High risk incidents	140	195	202	127	63
HRI rate	1.66	2.08	2.27	2.53	1.57

GRI-reference: GRI Standards 403-9 (2018)

Read more about the fatality prevention protocols under Note S5.1.

S5.3 Occupational illness rate

Occupational illness rate measures occupational ill health. It is required as a minimum that all potential cases shall be reported. The majority of the reports are from our Norwegian sites, showing that there is room for further improvement in our global reporting. Development is tracked through a corporate reporting tool. Actual occupational illnesses are defined by Hydro as illnesses that

have been confirmed by relevant authorities/insurance companies or doctors (depending on the national system)
have led to any kind of permanent disability, disablement pension, loss of function and/or are a listed occupational disease

Occupational illness rate1)

	2020	2019	2018	2017	2016

Occupational illness rate2)	0.3	0.2	0.5	0.3	0.7

1) Excluding Extrusions

2) Cases per million working hours. The numbers include discontinued operations. Our reporting processes do not yet ensure complete reporting, specifically outside Norway.

GRI-reference: GRI Standards 403-10 (2018)

Hydro Extrusions records occupational illness as part of the total recordable injuries.

Most of the reported cases are related to noise. We use our proactive tool for work environment risk assessment (WERA) to identify health risk and implement risk reducing measures e.g. substitution of hazardous chemicals, noise reduction, personal protective equipment to avoid development of new occupational illness cases. Through the work we have e. g. reduced the frequency of occupational illness cases related to noise and pot room asthma.

S5.4 Wellness

Hydro cares about the health and wellbeing of our employees, and offers a variety of initiatives to promote physical and mental health.

The majority of Hydro's sites offer wellness initiatives, ranging from healthy eating, exercise opportunities, weight management, stop smoking campaigns and work-life balance management. Several sites have access to a social worker or counselor to address psychological health and safety, and health and wellness is also addressed at site Health and safety-day events.

During the Covid-19 pandemic many wellness initiatives have either been put on hold or moved to digital platforms. Wellness topics emphasized in 2020 include mental health and how to create a healthy ergonomic workstation at the home office.

S5.5 Covid-19 pandemic

In order to avoid spread of the virus at Hydro controlled sites a number of actions have been put in place. A corporate emergency team with local teams in all business areas was established to put in place central guidelines for handling the pandemic. The central guidelines covered topics such as hygiene, social distancing and travelling rules and were always aligned, or more stringent, than applicable national rules and guidelines.

Operational changes in shift patterns such as introduction of face masks, restricted access for visitors and physical barriers (e.g. plexiglass) were also introduced at Hydro plants to avoid the spread of the virus. For administrative staff, where home office is a viable alternative, this has been mandatory when recommended by local authorities.

Note S6 – Laborrights

Reporting principles

The vast majority of operational sites within Hydro Aluminum Metal and Energy have established formal joint managementworker health and safety committees covering all employees. At certain sites, also contractor employees are included.

Hydro's major sites in Europe and Brazil are unionized. Extrusions has a major presence in the USA, and about 60 percent of our US employees are working at a unionized site. In total, we estimate that more than 85 percent of all employees work at a unionized site. Learn more about dialogue with the employee representatives under Dialogue with affected parties on page 97.

In regions where unions are not allowed we are striving to establish alternative worker-management relations.

No strikes exceeding one week and no lock-outs took place in 2020.

Note S7 – Current income tax

Reporting principles

Current income tax is based on Hydro's financial statements.

Current income tax
--------------------	--

NOK Million	2020	2019	2018	2017	20161)
Norway	758	665	1,770	1,715	690
Germany	49	38	81	(9)	251
France	112	36	56	10	9
Spain	21	-	26	8	7
The Netherlands	19	30	10	2	(3)
Slovakia	17	6	46	55	36
Sweden	89	23	48	46	-
Poland	48	40	32	22	-
Luxembourg	14	28	24	10	9
Denmark	36	11	22	28	-
Austria	33	39	39	30	-
Hungary	41	41	38	(2)	-
Other	22	16	26	17	5
Total EU	503	307	449	218	315
Switzerland	9	8	22	1	-
Other Europe	-	-	-	-	-
Total Europe	1,270	980	2,241	1,934	1,006
USA	154	167	39	23	16
Canada	92	21	73	150	87
Brazil	540	291	312	424	853
Asia	36	37	52	39	19
Other	13	16	7	4	7
Total outside Europe	835	532	483	641	982
Total	2,105	1,512	2,724	2,575	1,988

1) The joint operations Alunorf, Skafså Kraftverk, Tomago and Aluchemie are included in the figures above, but are not included in the other parts of the social or environmental statements, except for certain information in note E8 and S14. Those entities are included in Hydro's financial statements on a line-by-line basis. Please see note 3.1 to the consolidated financial statements for more information about joint operations.

GRI-reference: GRI Standards 201-4 (2016)

Hydro is subject to income taxes in the countries where we operate. The nominal tax rates typically vary between around 20 and 35 percent. The effective tax rates may differ from the nominal tax rates, among other things as a result of differences in depreciation rates and other tax deductions.

The marginal tax rate for our power production in Norway is 59 percent.
Qatalum, a 50/50 joint venture with Qatar Petroleum, has been granted a 10 year exemption from income taxes in Qatar, expiring in 2020. Thereafter, Qatalum will pay income tax at the generally applicable income tax rate in Qatar. It is Hydro's position that the generally applicable income tax rate, currently at 10 percent, shall apply to Qatalum after the expiry of the tax holiday.
The general corporate income tax rate in Brazil is 34 percent. Hydro's bauxite, alumina and aluminium operations in Brazil have been granted income tax incentives encouraging investments in the northern provinces of Brazil, reducing the tax rate on operating income to between 20 and 34 percent. In addition, Hydro's operations in Brazil are subject to a number of significant indirect taxes.
Hydro is present in some countries with at tax rate below 10 percent. In Switzerland, we have bauxite, alumina and aluminium sales activities, and aluminium sales activities in Singapore, both are taxed at rates of around 10 percent. In addition, Hungary has a tax rate of 9 percent.

Hydro reports according to the Extractive Industries Transparency Initiative and Norwegian legal requirements, see Hydro's Country by country report on page 284. We also report on financial assistance from public organization related to R&D activities, see note S8.

Note S8 – Financial assistance from governments

S8.1 Research & Development (R&D)

Reporting principles

R&D expenses are collected through Hydro's financial reporting, see Hydro's financial statements note 10.2 Research and Development to the consolidated financial statement. R&D funding is gathered from Hydro's corporate technology office and our main R&D centers, located in Årdal (smelter technology) and Sunndal (alloys and casting) in Norway, Bonn in Germany (Rolling) and Brazil (Bauxite & Alumina). The R&D centers in Hydro Extrusions are in Finspång, Sweden, and Detroit, USA. Funding received are actual income received from public research funds, e.g. The Research Council of Norway (Forskningsrådet) and Enova, through the year. See page 98 (Cooperation with other institutions) for more information.

Research & Development

NOK million	2020	2019	2018	2017	2016

Research & Development expenses	633	625	594	500	370
Funding received1)	34	36	35	62	46

1) In addition comes funding to the Karmøy Technology Pilot of NOK 1.6 billion from 2015-2018. Hydro participates in collaborative projects carried out by other research organizations which receive public funding directly. Such funding is not included in the figures above.

GRI-reference: GRI Standards 201-4 (2016)

We have been granted funding amounting to approximately NOK 220 million - to be received in the years to come - provided that certain research projects are carried out. Some funds might already have been received, see page 111.

In addition, Hydrovolt AS, a joint venture between Hydro and Northvolt established to enable recycling of battery materials and aluminium from electric vehicles, has received funding from Enova of NOK 44 million to build a pilot plant for battery recycling.

S8.2 Financial assistance related to Covid-19

Hydro has received about NOK 240 million in government grants related to Covid-19. See note 5.2 to the consolidated financial statements for more information on government grants. The main contribution to our operations are from governments in Canada, Denmark and UK.

Hydro has received financial assistance from government in many of the countries where we operate, e.g. reimbursement schemes for a reduction in social security contributions.

Note S9 – Socialresponsibility

S9.1 Community investments, charitable donations and sponsorships

Reporting principles

All sites, except Extrusions, report annually on all community investments, charitable donations, sponsorship and other related initiatives. The reporting includes monetary amounts and time spent and benefits to the company as well as to the communities. Outcomes for Hydro and the society are also included in the reporting requirements.

Community investments
NOK million	2020	2019	2018	2017	2016

Community investments1)	42	50	29	23	19
Total community investments, charitable donations and sponsorships1)	56	59	89	36	28

1) Excluding Hydro Extrusions

The increase in 2018 includes NOK 35 million related to emergency relief following the extreme rainfall and subsequent flooding in Barcarena in 2018. It also includes around NOK 10 million to foodcards as part of the TAC agreement. See the section "The Alunorte situation" in Hydro's Annual Report 2018.

Extrusions has a magnitude of community investments at its sites. The nature of such projects varies with local customs and business needs. We do no currently have consolidated information about these.

S9.2 Social responsibility target

Reporting principles

Hydro has committed to contribute to quality education, and capacity and competence building for 500,000 people in our communities and for business partners from 2018 until end of 2030.

We have established a framework and methodology for counting the people impacted by our programs and initiatives to ensure consistency across the company.

Education refers to initiatives within the formal educational system, from elementary school to university. Examples of initiatives include training of teachers and external scholarships.

Capacity, or competence, building refers to all training and competence building outside formal educational systems. Examples includes trainees and Hydro's supplier development program established in Brazil.

Social responsibility
1000 people reached	Accumulated	2020	2019	2018

Education and capacity building	108	59	26	23

Due to Covid-19, we saw a decline in people reached for three of our business areas. This was, however, outweighed by an increase in people reached by Bauxite & Alumina and by UNICEF's Upshift project, supported by Hydro.

Continuous improvement of current initiatives and development of new effective, high-impact initiatives will be important going forward. Education, and capacity and competence building initiatives contribute equally to the total.

Note S10 – Compliance

Reporting principles

Compliance data have mainly been collected from Group Internal Audit and Investigations' overview of alerts reported to line management, to supporting staff functions, and Hydro's AlertLine. In addition, compliance data has been obtained from quarterly compliance reporting by business areas, and a self-assessment filled in by each business area at year-end. Some information has also been collected through other sources including Hydro's Legal department and Procurement Network.

S10.1 Reported and confirmed cases of non-compliance

Non-compliance cases are normally reported to line management and/or supporting staff functions including Group Compliance, Group Internal Audit and Investigations, HR, Legal, HSE, Finance and Accounting. Non-compliances can also be reported through Hydro's AlertLine, which offers the possibility of anonymous reporting, unless otherwise prohibited by local law. Although separate reporting statistics have been kept for Extrusion and the rest of Hydro, the figures from 2018 are consolidated.

The number of dismissals due to breach of Hydro policy is limited to cases reported to Hydro's Internal Audit.

In 2020, Hydro received 1900 notices in Canal Direto, the grievance mechanism in Brazil. The majority were related to questions about the food card distribution process. Distribution of food cards is part of the TAC agreement with the Government of Parà and Ministèrio Pùblico in relation to the Alunorte situation in 2018. Food card distribution was put on hold in 2020 due to COVID-19. Combined with increased information about the food cards, we experienced a reduction in the number of notices in Canal Direto in 2020.

A review of the Canal Direto and plans for improvements are underway. We made several improvements to the grievance mechanism in 2020, including human rights training for the third-party reporting consultants, updated procedures and new risk categories.

TAC is an agreement between Alunorte, Ministério Público and the Government of Pará/Semas and regulates certain technical studies and improvements, audits, payments of fines, and payments for food cards to families living in the hydrographic area of the Murucupi river.

	2020	2019	2018	20172)	2016

Number of cases reported through AlertLine (or similar)	224	347	342	302	173
Dismissals due to breaches of Hydro policy	41)	20	14	6	5
Alleged cases of harassment	57	90	116
Alleged cases of discrimination	14	25	11
Alleged cases of discrimination and/or harassment	71	115	127	84	45
Confirmed cases of harassment	18	34	50
Confirmed cases of discrimination	5	7	1
Confirmed cases of discrimination and/or harassment	23	-	-	27	9
Alleged cases of corruption, fraud, corruption and/or conflict of interest	24	48	25	42	21
Substantiated cases of corruption	1	2	1
Confirmed cases of fraud	4	4	-
Confirmed cases of conflict of interest	-	3	3	14	1

Cases reported regarding breaches of Hydro policy

1) Total number of dismissals due to breaches of Hydro policy of which Hydro's Internal Audit is informed

2) Figures for 2017 include Extrusions numbers for all of 2017, not only the months after acquisition. Work has also been conducted following the acquisition to harmonize indicator definitions. 2017 figure also include cases of non-compliance.

GRI-reference: GRI Standards GRI 406-1 (2016) and 205-3 (2016)

S10.2 Legal claims

The legal claims stated below are primarily cases related to Brazil and goes beyond what is covered in the section Legal proceedings page 68. For more information about other legal proceedings in Hydro please see the section Legal proceedings on page 123.

Cases related to the Alunorte

For information related to the Alunorte situation, please see Hydro's Annual Report 2018.

March 16, 2018: CAINQUIAMA – Associação dos Cablocos, Indigenas e Quilombolas da Amazônia (an association with office in Barcarena) filed a lawsuit in the State Court in Belém against Norsk Hydro Brasil, Alunorte and the State of Pará, claiming that chemical waste was intentionally discharged and that the bauxite residue deposits in operation were subject to a fraudulent license granted by the State of Pará. Furthermore, the plaintiff alleged that the bauxite residue deposits (DRS 1 and 2) are located on an ecological reserve. With reference to these allegations the plaintiff requested the defendants to carry out medical examinations of allegedly impacted communities. On March 22, 2018, the State Court partially granted the injunction and determined that the companies cover the cost of health tests on people allegedly affected by the claimed pollution. On August 2, 2019 the companies filed an interlocutory appeal in order to suspend the injunction granted by the State Court. On August 7, 2019 the Court of Appeal granted the companies' request and suspended the effects of the injunction decision until a definitive decision on the case. On February 8, 2021 the Appeal Court Panel judged the interlocutory appeal filed by Alunorte and Norsk Hydro. The Appeal Court understood that the due process of law was not respected and partially granted the interlocutory appeal in order to revoke the injunction decision rendered by the first instance Court and highlighted the need of observing the Procedure Civil Code in order to concede to the companies the opportunity to present their requests and manifestation on the produce of evidence and also to respect the procedure foreseen by the National Health Council. The decision is not published yet and the lawsuit will be referred back to first instance for analyzes and definition of next steps.

March 27, 2018: A collective lawsuit was filed by IBS (Barcarena's Social and Environmental Institute) against Norsk Hydro Brasil, Albras, Alunorte, Imerys, Alubar, the Municipality of Barcarena and the State of Pará to seek remediation of the environment and compensation for material and moral damages. On August 02, 2018, the lawsuit was referred to the Federal Court. The companies filed an appeal which is pending decision by the Court of Appeal.

April 3, 2018: The State of Pará filed a civil class action seeking to recover environmental damages allegedly caused by Alunorte, as well as indemnification for alleged material and moral damages. On April 9, 2018, the court ordered Alunorte to present a guarantee of BRL 150 million. On December 12, 2018, Alunorte and the State of Pará entered into a settlement agreement to end the lawsuit with reference to the Term of Adjusted Conduct (TAC) and Term of Commitment (TC) signed on September 5 2018.In addition, Alunorte agreed to cover the public expenses related to inspections carried out following the heavy rainfall in February 2018. On October 14, 2019 the court issued a decision homologating the agreement and extinguishing the lawsuit. The decision was subject of appeal filed by ADECAM association and is pending a decision.

April 5, 2018: The State and Federal Public Prosecutor's Offices (Ministerio Público) filed a lawsuit against Alunorte, Norsk Hydro Brasil and the State of Pará. As a preliminary injunction, the plaintiffs requested partial suspension of Alunorte's production activities (50 percent reduction) and prohibition of using the bauxite residue deposit DRS2 until the license to operate was obtained, and the company could demonstrate operational stability and efficiency. On April 30, 2018, the Federal Court partially granted the injunction, determining a similar embargo previously granted by a State Criminal Court. The State of Pará and the State Public Prosecutor's Office were excluded from the lawsuit. On May 15, 2019 the Federal Court lifted the production embargo on Alunorte. On September 20, 2019 the Federal Court issued a decision homologating the agreement between Federal Public Prosecutors, Alunorte and Norsk Hydro Brasil to resume DRS2 installation and commissioning activities. The decision was subject of appeal filed by individuals and is pending a decision.

May 15, 2018: A new lawsuit was filed by CAINQUIAMA against Mineração Paragominas (MPSA), Albras, Norsk Hydro Brasil, Alunorte, INMETRO (National Institute of Metrology), BVQI -CERTIFICADORA LTDA; Federal Union of Brasil, National Department of Mineral Production ("DNPM"), in the Federal Court in Paragominas, alleging that MPSA's tailings contain hazardous substances. CAINQUIAMA also claimed that the bauxite residue have been illegally dumped in Alunorte's bauxite residue deposits (DRS1 and DRS2) and that these deposits are located in an ecological reserve requesting an injunction to stop the operation of MPSA. On July 18, 2018 the Federal Court denied the request for injunction. On October 23, 2018, the case was referred to the Federal Court in Belém pending further decisions. On August 30, 2019 the companies filed an interlocutory appeal against the decision that referred the lawsuit to the 9th Federal Court of Belém and requested that the lawsuit stays in Paragominas Federal Court.

September 12, 2018: ADECAM (Association of Education, Culture, Protection and Defense of Consumers, Taxpayers and Environment of Brazil) filed a lawsuit in the Federal Court in Belém against Alunorte, Norsk Hydro Brasil, the Federal Union and Ibama (the Federal Environmental Agency) seeking compensation for alleged collective moral damages to the people of Pará, having the rainfall in February 2018 as the main ground for the claim. The association accuses the companies of pollution, including overflow and leakage of the bauxite residue deposits, discharge of contaminated effluents through clandestine/hidden pipes, in addition to what has already been claimed in other lawsuits involving the February incident. On June 13, 2019 Alunorte and Norsk Hydro Brasil were summoned to present their defenses which they did on July 7, 2019. On August 19, 2019 the Court issued a decision for the defendants to present what evidence they intent to produce. On October

28, 2019 Alunorte and NHB filed a petition informing the evidence already presented and the others that should be produced. On June 17, 2020 the Federal Court issued a decision declaring that has no competence/jurisdiction to rule the lawsuit and referred the case to the State Court. In this same decision the Court excluded IBAMA (environmental federal agency) and the Federal Union as parties of the lawsuit. On July 06, 2020 the companies filed a motion for clarification regarding the decision that declared that the Federal Court has no jurisdiction

October 31, 2018: CAINQUIAMA filed a similar lawsuit as the one filed in March 16, 2018 against Mineração Paragominas (MPSA), Albras, Norsk Hydro Brasil, Alunorte, State of Pará, BVQI - Certificadora Ltda in the State Court of Belem, requesting the suspension of the operation of the companies. On June 17, 2019, the court issued a decision that denied the injunction request and summoned the defendants to present defense which was subjected of appeal by the Association – still pending decision by the Court of Appeal. On September 3rd, 2019 the companies presented their defenses.

On May 3rd, 2019: CAINQUIAMA filed a new lawsuit, with an injunction request, before the 5th Public Treasury Court of Belem against (i) the State of Pará; (ii) Norsk Hydro Brasil.; (iii) Mineração Paragominas; (iv) Alunorte. and (v) Albras. In short, the complaint states that the products used in Brazil in order to refine bauxite are more toxic than the ones used in Norway. Further, it argues that the amount of coal and heavy fuel oil consumed per year by Alunorte released into the atmosphere is harmful to the environment (as it can cause, e.g., acid rain and contamination of soil and water) and to humans (as it can cause respiratory illness and premature death). Lastly, it mentions that the ICMS tax benefit given to defendants must be lifted, because Alunorte has not changed the energy source from fuel oil to natural gas as agreed with the government through one of the commitments in the ICMS agreement. On June 10, 2019 the Court issued a decision that denied the injunction request and summoned the defendants to present defense. On August 1st, 2019 the companies presented their defenses.

On August 1, 2019: The people from Abaetetuba (State of Pará) filed a lawsuit before the Federal Court in Belém against Alunorte, State of Para and Federal Union. The case relates to 2018 rainfall incident. Following this, fourteen other lawsuits were filed (total of 15) by other communities from Barcarena. In total the lawsuits now relate to about 1.500 individuals. The plaintiffs claim that Alunorte contaminated the environment, and due to this they are not able to sustain their livelihoods as farmers and fishermen. For the first cases Alunorte presented manifestation regarding the injunction requests informing that there is no proof of the alleged damages. Furthermore, the urgency was not demonstrated by the plaintiffs to justify the concession of the injunction requests. After that, the Federal Court issued decisions on the cases and referred the cases to the State Court. The State Court issued decisions limiting the number of 10 plaintiffs per lawsuit. Due to that decision, the plaintiffs requested the dismissal of the cases which were granted by the State Court. New plaintiff lawsuits towards the State Court respect the limitation imposed by the Court.

On August 20, 2019, the Agrarian State Public Prosecutor Office issued a "recommendation" alleging that: (i) DRS1 and DRS2 were built in an area designated as "ecological reserve" as defined in the purchase agreement from 1982 and according to environmental legislation; (ii) restoration of agricultural area as defined in the 1982 agreement was not implemented and; (iii) Taua community was wrongfully evicted in the 1980s and later eviction cases, and should be granted land rights. The main requests from the Agrarian State Public Prosecutor Office are: (i) the demolishment of parts of DRS1 and DRS2; (ii) the agricultural area should be re-established; and (iii) Taua community should be recognized as a traditional community and granted their community and land rights. Alunorte and Hydro disagree with the allegations made by Agrarian State Public Prosecutor Office but remain in dialogue in order to seek a solution to the controversy.

B&A Labor cases

March 13, 2014 ("CBB case"): Three similar labour claims were filed before the Labour Court of Paragominas, Pará, against Companhia Brasileira de Bauxita ("CBB"), Alunorte, Albras and 81 other companies by former CBB employees. The plaintiffs claimed that they worked under unhealthy and hazardous conditions, that the employer (CBB) did not provide them with appropriate personal protective equipment, and as consequence, they developed serious illnesses that prevented them from working. They claim payment for moral and material damages. The defendants other than CBB (including Albras and Alunorte), were sued because the alleged toxic materials came from their waste (as processed by CBB). At the hearings held on 20 August 2015, all plaintiffs argued that they started having medical problems after providing services to CBB, but they were not able to identify the type of disease they suffer from. They confirmed that CBB granted personal protection equipment, and they further claimed that they never received any directions from management/employees of Alunorte or Albras.

On December 7, 2015, 16 former employees of CBB filed three new similar lawsuits. Alunorte and Albras were notified on January 22, 2016. On July 19, 2018, the accused presented their defences and on December 16, 2019, the Labor Court of Paragominas determined that medical expert examination was to be carried out, so that it can be evaluated whether the plaintiffs have any disease as result of their working conditions. It was not possible to carry out a medical examination in these cases since the plaintiffs did not attend the designated examination. There are six lawsuits in total, three physical lawsuits and three digital lawsuits. For the physical lawsuits, we are waiting the MPT manifestation and the hearing was scheduled for April 8, 2021. For digital lawsuits, the MPT already filed his manifestation and we are waiting for the decision.

February 2017 ("Commuting Hours Case"): The union at Paragominas filed in February 2017 a claim for all employees to be compensated for hours spent commuting. Following the labor law reform in November 2017, the obligation to compensate for commuting if the place of work is not served by regular public transportation or if the public transportation is not satisfactory to meet the demand is not valid. Due to this change, the period in question is February to November 2017. The case is now

suspended, as the The Labor Court of Appeals and Superior Labour Court of Appeals has different understanding of the subject.

April 2019 ("Night shift case"): Mineração Paragominas ("MPSA") employees Union filed a Collective Labor Lawsuit on behalf of all employees asking for additional salary differences related to night shift work for employees working on rotating shifts (and when the shifts were overnight), as well as weekly rest payments for those working for seven consecutive days. Paragominas changed the calculation for night shift compensation in February 2018, and the period in question is from February 2014 to February 2018. When ruling the case the LCA changed the decision and granted additional pay for night shift and dismissed the claim on weekly rest without analysis of its merits. Both parties filed appeal to the Superior Labor Court and such appeals had their acceptance denied by LCA. A new motion for clarification was filed and is now pending judgement. Afterwards a new appeal to the Superior Labor Court will be filed.

Other cases

From 2008 there is a legal dispute between five of the 120 relocated families and the alumina refinery project CAP in Barcarena in Brazil. Their requests have been denied by the Court. The case is still awaiting a decision from the Court of Appeals.

Following an overflow of storm water from the bauxite residue deposits at Alunorte in 2009, there are still legal issues pending. In 2012, more than 5,400 claims related to the overflow were filed in the local court. By the end of 2019, a total of 4,488 cases have been decided by the first level civil court in Barcarena, Pará, all in Alunorte's favor. 3,321 of these decisions have been appealed to the second level civil court, located in Belem, Pará, which rendered decisions in 2,702 appeal cases, all in favor of Alunorte. The second level civil court upheld the first instance decisions on the basis that there is no evidence that the plaintiffs suffer or have suffered from the alleged damages related to the spillage of bauxite residue and water contamination. As of 31st December 2019, 1,162 plaintiffs have filed appeals to the Superior Court of Justice, with a decision rendered in 42 cases, all in favor of Alunorte.

A civil class action was filed by the Municipality of Ulianópolis against Albras and Alunorte and several other companies in September 2011 to seek remediation of environmental damage and condemnation by the companies and collective moral damages, considering their alleged contribution to environmental damages related to previous disposal of waste through Companhia Brasileira de Bauxita (CBB). Albras and Alunorte are parties in the class action, as both delivered waste to CBB prior to 2003. The class action was filed after an attempt from the Municipality of Ulianópolis together with the State Environmental Agency - Semas, to negotiate a settlement with all the companies involved. Albras and Alunorte did not agree to the terms of the proposed settlement as they had already removed their waste from the site.

The Federal and State Public Prosecutors, in a joint initiative, filed a Public Class Action against Albras, Alunorte, Imerys, Votorantim, Oxbow, Yara (companies located in the industrial district of Barcarena) and the Municipality of Barcarena, the State of Pará and the Federal Union (Brazilian Government). The purpose of the lawsuit is to protect the rights of the local people of Barcarena that allegedly consume contaminated water due to the industrial activities in the municipality.

In 2017, CAINQUIAMA – Associação dos Cablocos, Indigenas e Quilombolas da Amazônia (an association with office in Barcarena), filed a lawsuit against Norsk Hydro Brasil, Alunorte and Albras, the State of Pará, Bureau Veritas Brasil and Inmetro. They claim part of the bauxite residue deposits for Alunorte (DRS1 and DRS2) was established on an area designated as an ecological reserve, and that they have suffered social and environmental damages. On December 12, 2019 the companies (Alunorte, Albras and NHB) filed their defense requesting the dismissal of the lawsuit.

On February 5, 2021, CAINQUIAMA and nine Brazilian individuals filed a lawsuit with the Rotterdam District Court, in the Netherlands, against Hydro's Dutch entities and Norsk Hydro ASA (Hydro) seeking compensation for alleged financial damages and personal injuries suffered as a result of Alunorte and Albras activities in the municipality of Barcarena. According to the plaintiffs, Hydro's Dutch entities and Hydro are part of Alunorte and Albras' corporate group and, therefore should be liable for the alleged environmental violations caused in the municipality of Barcarena throughout the years.

S10.3 Confirmed significant human rights breaches

Reporting principles

We define significant human rights breaches as either one or more confirmed cases of forced labor, child labor abuse, or confirmed breach of ILO 169 caused, contributed or linked to Hydro. We also include cases where a municipality/region/area of >100 people has been irreversibly impacted by confirmed cause, contribution or link to Hydro (e.g. spill, systematic pollution over time, involuntary relocation). The confirmed impact to people in the municipality/region/area is life-long and/or life-shortening.

Relocation of people may at times be necessary in connection with our operations. No voluntary or involuntary relocation of people with legal or prescriptive rights to their dwellings, took place in Hydro's operations in 2020. In Barcarena in Pará, Brazil, in an area surrounding Hydro's operations and regulated for industrial purposes, illegal logging and settlements have accelerated since 2016. We realize that we need to better understand the situation in collaboration with the relevant stakeholders, the municipality and civil organizations.

Hydro did not detect severe human rights impacts in our own operations in 2020, pending final results from the human rights due diligence of Albras, Alunorte and Paragominas.

Incidents of harassment and discrimination are reported separately from (other) human rights breaches in this note (S10.1). Occupational health and safety incidents, including fatalities, can be found in note S5.

S10.4 Compliance training

In Hydro, compliance awareness training is provided on a range of topics and consists of classroom-training, workshops, town hall meetings and various e-learning modules. In 2020, training was provided e.g. on the topics of anti-corruption, Hydro's code of Conduct, competition law, data privacy, trade sanctions and market regulations. In 2020, a special emphasis was given to data privacy. In addition, a management training on human rights was also conducted in 2020. Compliance training is mainly prepared and executed by Group Compliance and Group Legal, but other group functions also contribute.

The various compliance awareness and training modules were in total completed 34,330 times. 14,102 employees completed elearning compliance training.

S10.5 Screening of business partners and supplier audits

As part of the integrity risk management process, approximately 8,000 of Hydro's potential or existing counter-parties were screened for human rights violations, corruption, money-laundering, politically exposed persons and violations relating to sanctions using the RDC integrity risk tool. This mostly relates to suppliers, but also some customers, agents and other business partners were included. New business partners related to most Norwegian and Brazilian operations are screened before registered in our ERP system.

All suppliers, customers and other business partners registered in our main accounting systems are screened on a weekly basis against recognized international sanction lists.

The number of audits significantly reduced in 2020 due to the Covid-19 pandemic. In total 49 supplier audits were conducted in 2020 in Hydro (excluded Extrusion) compared to 98 in 2019. In 2020, 36 of the supplier audits included topics related to health, safety, environment and social responsibility. Around 70 percent of the audits led to action plans, and by the end 2020, all the corrective actions proposed by Hydro were responded to. Extrusions performs audits on suppliers of direct goods, i.e. aluminium billets and components that end up in the final product sent to customers. All audits are risk based emphasizing topics relevant for the suppliers operations, e.g., quality, safety, environmental, social and governance.

Key social responsibility and HSE findings from the audits relate to lack of management systems, environmental awareness, compliance controls and emergency preparedness. A non-compliance with or breach of the principles in Hydro's Supplier Code of Conduct that is not able to be corrected within a reasonable period, may lead to termination of the supplier contract.

S10.6 Cyber security training

Hydro continue to emphasize security awareness for end-users, and provide e-learnings for all users with access to Hydro Academy. Guidelines are published in relevant channels for all users.

In 2020, a new mandatory cyber security training was established for all IT users in all business areas. A total number of 11 000 employees participated in the training, which covered essential topics of cyber security.

Note S11 - Spending on localsuppliers

Reporting principles

Selection of local partners and suppliers/contractors shall be based on competitive bidding to the extent feasible, and in compliance with competition laws and regulations as well as Hydro's requirements. A local supplier is here defined as a supplier situated in the same country as the operational site.

Data on local purchasing is gathered by the business areas Bauxite & Alumina, Aluminum Metal, Energy and Rolling, in addition to Hydro's project organization, and covers consolidated activities. Extrusions business model and regional operations differ from the other business areas, in size and nature. An Extrusions site is normally smaller in size and located in an industrial area, with a group of similar size businesses and plays a part in a regional network. Normally most non-metal spend is sourced from local suppliers. As Extrusions site comprises of more than 100 sites in 40 different countries and the situation varies by site and by region and there is no typical figure for the business area.

For the business areas Bauxite & Alumina, Aluminum Metal, Rolling and Hydro's project organization, Brazil, Norway and Germany are considered the most significant locations of operation based on economic importance.

Spending on local suppliers vary from site to site depending on which goods and services are available. Local spend in our Brazilian Bauxite & Alumina operations was estimated to be 63 percent in 2020. About 58 percent of total spend within Rolling (mainly operations in Germany and Norway), was spent within Germany and Norway. Most of the raw materials used at the aluminum plants in Norway are imported, while electricity and services are sourced locally. In the Norwegian smelters local procurement mainly relates to maintenance services etc. and is about 20 percent in 2020. Hydro's procurement organization for large projects carries out major projects mainly in Brazil and Norway. Local spend in projects carried out in Brazil and the portion of local spend related to hydro power and primary metal projects in Norway is very high. Across the different projects, local spend by Hydro's project organization was 90 percent of total spend.

Note S12 – Public affairs and lobbying

Reporting principles

Data on public affairs and lobbying is gathered from Hydro's Communication & Public Affairs department in Norway, Germany and Brazil, in addition to our office in Brussels that follows up EU affairs. These units cover all consolidated activities.

In total ten full-time equivalents (FTE) are dedicated to public affairs and lobbying. This includes four FTEs in Brazil and three in the EU (Brussels office). In Norway and Germany three FTEs are dedicated to public affairs and lobbying. Within the EU, lobbying activities are publicly reported through the EU Transparency Register. To get a full overview of all Hydro's memberships in different industry associations see Hydro.com.

According to our global directives, Hydro may not make financial contributions to political parties. We have no indications that such contributions took place in 2020.

Reporting principles

According to Hydro's policy, all operational sites shall comply with, but not necessarily be certified according to, ISO 9001 and ISO 14001 and - within 2020 - with OHSAS 18001. Certification according to these standards is a decentralized responsibility based on identified business needs.

Hydro's power plants in Norway have chosen not to be certified. However, they are fulfilling the requirements given in the mentioned standards. In addition, the power plants need to comply with the requirements given by the Norwegian Water Resource and Energy Directorate (NVE), i.e. concessions for operations as well as environmental, third person safety, security and emergency preparedness regulations. The table below shows the distribution of certification of the other operational sites in Hydro.

In addition to the mentioned ISO and OSHAS standards below, a number of sites are also certified according to different sector and customer specific standards. Examples of such certifications are the IATF 16949 for the automotive industry, and the Aluminium Stewardship Initiative.

Share of relevant operational sites certified	ISO 9001	ISO 14001	OHSAS 18001	ASI
Hydro	98%	97%	72%	34%

Of our sites delivering to the automotive industry, 88 percent are certified according to the IATF 16949. Hydro's most energy intensive sites and operations comply with the ISO 50001 Energy Management systems.

Note S14 – Social data for 50/50-owned companies

Reporting principles

Hydro has an ownership share of 50 percent in Alunorf and Qatalum. As only operations owned more than 50 percent are included in most of the information in Hydro's viability performance statements, we have chosen to disclose certain social information about these partly-owned companies and their total performance. The reporting principles of each indicator might differ from the ones used by Hydro and in-between the companies. For information about environmental data, see Note E8 to the environmental statements.

Social data for 50/50-owned companies

	Main product	Number of employees	Share of women	TRI, employees	TRI, contractors	LTI, employees	LTI, contractors	Fatal accidents
Alunorf	Rolling	2,262	4.8 %	1.3	NA	0.6	NA	-
Qatalum1)	Aluminium Metal	1,059	3.3 %	1.7	0.7	0.9	-	-

1) Data from Qatalum relating to number of employees, share of women, LTI contractors are 2018 data.

Partnerships and commitments

GRI Standards

Hydro uses the GRI Standards for voluntary reporting of sustainable development. The guidelines comprise economic, environmental and social dimensions relating to an enterprise's activities, products and services. GRI collaborates with the United Nations Environment Program and UN Global Compact. Hydro has reported according to GRI since 2003.

We believe that our reporting practice is consistent with GRI's reporting principles in all material respects. We report in adherence to "Core" as defined by the GRI Standard 101: Foundation 2016, and include the GRI G4 Mining & Metals sector supplement and certain relevant aspects of the G4 Electric Utilities sector supplement in our reporting.

The report is externally assured by KPMG. The external assurance, as outlined in the Independent Auditor's Assurance report, concludes that the report is presented, in all material respects, in accordance with the GRI Standards, see page 276.

The GRI index, including the full definition of each indicator and references to specific sections in this report as well as additional information, can be found on www.hydro.com/gri

UNGlobal CompactCommunication on progress

We support the principles of the UN Global Compact. Human rights, international labor standards, working against corruption and environmental considerations are fundamental to our approach to corporate responsibility.

Hydro has played an active role in the Global Compact since its formation. Our commitment is expressed by the President & CEO in her letter to shareholders on page 8 of this report. Our Communication on progress (COP) in relation to the Compact's 10 principles is at the Advanced level and thus also reflects the Global Compact's 21 advanced criteria. The consistency of the information in Hydro's Viability Performance reporting 2020 with the information in the Hydro Communication on Progress 2020 has been reconciled by our auditors, see page 276. A complete report can be found at www.hydro.com/globalcompact

UNSustainableDevelopmentGoals

goals, but some more than others. Of the 17, Hydro has chosen eight goals that are the most important to us, that are highlighted throughout the report.

Hydro uses the SDG Compass, a tool built in a partnership between GRI, UN Global Compact and the World Business Council on Sustainable Development, to make a high-level review on how we relate to the UN Sustainability Development Goals. This review is included in the GRI index 2020 and is also included in external auditor's consistency check of Hydro's GRI index 2020.

A more complete overview of Hydro's positive and negative impacts on each of the 17 SDGs, can be found at www.hydro.com

UNGuiding Principles on Business and HumanRights

The United Nations (UN) Guiding Principles on Business and Human Rights (hereafter Guiding Principles) were endorsed by the UN Human Rights Council in June 2011. They have provided a clear, global understanding of governmental duties and corporate responsibilities for human rights. The Guiding Principles articulate that wherever and however a company operates, it must refrain from violating human rights. Companies are expected to be fully aware of their human rights impacts, take concrete steps to address them and implement measures to mitigate negative impacts in the future.

Hydro uses the GRI document "Linking G4 and the UN Guiding Principles" document as basis for how we report on our adherence with the guiding principles, and report on this in the GRI index 2020. This is also included in external auditor's consistency check of Hydro's GRI index 2020. The most salient human rights issues are reported on page 100

Modern slavery, forced labor and child labor abuse
Principles of freedom of association and collective bargaining
Freedom from discrimination and harassment
Decent working conditions
Right to privacy
Right to health
Right to safety
Rights of vulnerable individuals and groups
Access to information, dialogue and participation
Rightful, respectful and lawful resettlement, relocation and repossession

Hydro has nothing to report for 2020 on the guiding principle B4 "Additional severe impacts".

ICMM

Hydro is a member of the International Council on Mining and Metals and reports according to the ICMM requirements. That includes Hydro's reporting in accordance with the GRI Standards, see the section about GRI above. The Viability Performance 2020 reporting is prepared in line with the requirements found in the ICMM 10 principles and position statements. The complete Viability Performance 2020 reporting is – according to the ICMM requirements – assured by our external auditor, please see page 276.

ASI

The Aluminium Stewardship Initiative (ASI) is a global, multi-stakeholder, non-profit standards setting and certification organization. The ASI works toward responsible production, sourcing and stewardship of aluminium following an entire value chain approach.

Hydro is an active member of the Aluminium Stewardship Initiative. ASI's mission is to recognize and collaboratively foster the responsible production, sourcing and stewardship of aluminium. We have been involved at all stages in the multi-stakeholder development of ASI standards to date. We have participated in developing ASI's certification program. The third-party certification platform was launched in December 2017. Until publication of this report, sixty-one production sites have been certified according to the ASI Performance Standard, covering Hydro's value chain from bauxite mining to finished products. Hydro has also certified several sites according to the Chain of Custody standard, and delivered the first ASI certified metal to a customer in July 2019.

Hydro reports in the GRI index 2020 on how we relate to ASI's 11 principles and underlying criteria. This is also included in external auditor's consistency check of Hydro's GRI index 2020. For the full GRI index, see www.hydro.com/gri

TCFD - Task Force onClimate-related Financial Disclosures

Hydro is a signatory to the TCFD recommendations. TCFD was formed by the Financial Stability Board in 2015. The recommendations were made public in June 2017. Hydro launched a new climate strategy in 2019 that that takes into account scenario analysis. These include

New policies: similar to a 2°C scenario in line with the Paris agreement
Current policies: similar to a 4°C scenario and in line with already adopted measures
Physical risks: stress testing of physical risks under a 6°C scenario

The table below shows an overview of Hydro's initial approach to the recommendations. All page references relate to Hydro's Annual Report 2020.

TCFD recommendations

Recommendation	Disclosure	Reference
Governance: Disclose the organization's governance around climate-related risks and opportunities
a) Describe the board's oversight of climate-related risks and opportunities	Board developments Risk review Key developments and strategic direction Performance and Targets	37 112 13 74
Strategy: Disclose the actual and potential impacts of climate-related risks and opportunities on the organization's businesses, strategy, and financial planning where such information is material
a) Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term	Risk review Energy and climate change	24-122 , 113-124 89-91
b) Describe the impact of climate-related risks and opportunities on the organization's businesses, strategy, and financial planning	Risk review Energy and climate change	24-122 , 113-124 89-91
c) Describe the resilience of the organization's strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario	In 2018, Hydro concluded a review of its climate-related risks, including physical, technological, commercial, legal and reputational risk. The review forms the basis for scenario analyses and an update of the climate strategy.	89
Risk management: Disclose how the organization identifies, assesses, and manages climate-related risks
a) Describe the organization's processes for identifying and assessing climate-related risks	Energy and climate change	89-91
b) Describe the organization's processes for managing climate-related risks	Environment Energy and climate change	33 89-91
c) Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organizations' overall risk management	Business planning and risk management	132
Metric and targets: Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material
a) Disclose the metrics used by the organization to assess climaterelated risks and opportunities in line with its strategy and risk management process	Board of Directors' report: Environment Hydro's materiality analysis 2020 Environmental statements Note E1 to the environmental statements: Greenhouse gas emissions Note E3 to the environmental statements: Energy Note E4.2 to the environmental statements: Water Note E4.3 to the environmental statements: Recycling Note E6.2 to the environmental statements: Land use and rehabilitation	33 88 232 233-238 240-241 242- 243 245
b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks	Environmental statements Note E1 to the environmental statements	232 233-238
c) Describe the targets used by the organization to manage climaterelated risks and opportunities and performance against targets	Board of Directors' report Energy and climate change Environmental impact management	91

Independent auditor's assurance report to Norsk HydroASA

We have been engaged by the Corporate Management Board of Norsk Hydro ASA ('Hydro') to provide limited assurance in respect of the Viability performance (pages 86 to 111) and Viability performance statements (pages 230 to 276) sections in the Annual Report 2020 (hereafter Viability performance 2020) of Hydro. The scope excludes future events or the achievability of the objectives, targets and expectations of Hydro and information contained in webpages referred to in the Viability performance 2020 unless specified in this report.

Our conclusion

Our conclusion has been formed on the basis of, and is subject to, the matters outlined in this report. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusions. Based on the limited assurance procedures performed and the evidence obtained, as described below, nothing has come to our attention, to indicate that the Viability performance 2020 is not presented, in all material respects, in accordance with the GRI Standards; Core option and the applied reporting criteria as disclosed in the About the reporting section on page 231.

The Corporate Management Board's responsibility

The Corporate Management Board is responsible for the preparation and presentation of the Viability performance 2020 in accordance with the GRI Standards; Core option and the reporting criteria as described in the About the reporting section on page 231 in the Viability performance statements. It is important to view the information in the Viability performance 2020 in the context of these criteria.

These responsibilities include establishing such internal controls as management determines are necessary to enable the preparation of the information in the Viability performance 2020 that are free from material misstatement, whether due to fraud or error.

Our responsibility

Our responsibility is to provide a limited assurance conclusion on Hydro's preparation and presentation of the Viability performance 2020.

We conducted our engagement in accordance with the International Standard for Assurance Engagements (ISAE 3000): "Assurance Engagements other than Audits or Reviews of Historical Financial Information", issued by the International Auditing and Assurance Standards Board.

ISAE 3000 requires that we plan and perform the engagement to obtain limited assurance about whether the information in the 'Viability performance 2020' is free from material misstatement.

The firm applies International Standard on Quality Control 1 and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

Limited assurance of the Viability performance 2020

The procedures selected depend on our understanding of the Viability performance and other engagement circumstances, and our consideration of areas where material misstatements are likely to arise. Our procedures for limited assurance on the Viability performance 2020 included:

A risk analysis, including a media search, to identify relevant sustainability issues for Hydro in the reporting period;
Interviews with senior management and relevant staff at corporate and selected sites concerning sustainability strategy and policies for material issues, and the implementation of these across the business;
Enquiries to management to gain an understanding of Hydro's processes for determining material issues for Hydro's key stakeholder groups;
Interviews with relevant staff at corporate level responsible for providing the information, carrying out internal control procedures and consolidating the data in the Viability performance 2020;
Remote visits to three production sites to review the source data and the design and implementation of controls and validation procedures at local level;
Reviewing relevant internal and external documentation, on a limited test basis, in order to determine the reliability of the Viability performance 2020;
Reading the Viability performance 2020 to determine whether there are any material misstatements of fact or material inconsistencies based on our understanding obtained through our assurance engagement.
Assessment of Hydro's reporting in relation to Subject Matters 1 to 4 as set out in ICMM Sustainable Development Framework: Assurance Procedure;
Assessment of Hydro's self-declared commitment to the Aluminium Stewardship Initiative's 11 principles and underlying criteria;
Assessment of the GRI index as provided on Hydro's webpages.
Determination of the consistency of the sustainability information in the Hydro Communication on Progress 2020 with the information in the Viability performance 2020.

The procedures performed in a limited assurance engagement vary in nature and timing from, and are less in extent than for a reasonable assurance engagement, and consequently the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained had a reasonable assurance engagement been performed.

Purpose of our report

In accordance with the terms of our engagement, this assurance report has been prepared for Norsk Hydro ASA for the purpose of assisting the Corporate Management Board in determining whether Hydro's Viability performance information is prepared and presented in accordance with the GRI Standards; Core option and the applied reporting criteria as disclosed in the About the reporting section on page 231, and for no other purpose or in any other context.

Oslo, 9 March 2021 KPMG AS

Monica Hansen Anette Rønnov State Authorized Public Accountant Director

Appendices to the Board of Directors' report

278 Annual Report 2020 Appendices to the Board of Directors' report Hydro

279 Alternative Performance Measures (APMs)
284 Country by country report
295 Diversity and Inclusion
302 Modern Slavery transparency statement
306 Norwegian code of practice for corporate governance

Quick overview

This section contains information that is part of the Board of Directors' formal responsibility and exceeding the information required directly in the Board of Directors' report.

All documents are approved by the Board of Directors and included in their signatures to the Board of Directors' Report.

The Country by Country report is also included in the Board of Directors' responsibility statement in the financial statements, as required by the Norwegian Accounting Act §3-3d and the Norwegian Securities Act §5-5a.

Alternative Performance Measures(APMs)

Alternative performance measures, i.e. financial performance measures not within the applicable financial reporting framework, are used by Hydro to provide supplemental information, by excluding items that, in Hydro's view, does not give an indication of the periodic operating results or cash flows of Hydro. Financial APMs are intended to enhance comparability of the results and cash flows from period to period, and it is Hydro's experience that these are frequently used by analysts, investors and other parties. Management also uses these measures internally to drive performance in terms of long-term target setting and as basis for performance related pay. These measures are adjusted IFRS measures defined, calculated and used in a consistent and transparent manner over the years and across the company where relevant. Operational measures such as, but not limited to, volumes, prices per mt, production costs and improvement programs are not defined as financial APMs. To provide a better understanding of the company's underlying financial performance for the relevant period, Hydro focuses on underlying EBIT in the discussions on periodic underlying financial and operating results and liquidity from the business areas and the group, while effects excluded from underlying EBIT and net income (loss) are discussed separately in the section on reported EBIT and net income. Financial APMs should not be considered as a substitute for measures of performance in accordance with the IFRS. Disclosures of APMs are subject to established internal control procedures.

Hydro's financial APMs

EBIT: Earnings before financial items and tax.
Underlying EBIT: EBIT +/- identified items to be excluded from underlying EBIT as described below.
EBITDA: EBIT + depreciation, amortization and impairments, net of investment grants.
Underlying EBITDA: EBITDA +/- identified items to be excluded from underlying EBIT as described below + impairments.
Underlying net income (loss): Net income (loss) +/- items to be excluded from underlying income (loss) as described below.
Underlying earnings per share: Underlying net income (loss) attributable to Hydro shareholders divided by a weighted average of outstanding shares (ref.: note 7.6 to the consolidated financial statements).
Investments: Additions to property, plant and equipment (capital expenditures) plus long-term securities, intangible assets, long-term advances and investments in equity accounted investments, including amounts recognized in business combinations.
Adjusted net cash (debt): Short- and long-term interest-bearing debt adjusted for Hydro's liquidity positions, and for liquidity positions regarded unavailable for servicing debt, pension obligation and other obligations which are considered debt-like in nature.
Adjusted net cash (debt) to equity ratio: Adjusted net cash (debt)/total equity.
Funds from operations to adjusted net cash (debt) ratio: Cash generation from Hydro's wholly and partly owned operating entities before changes in net operating capital, including the contribution from equity accounted investments, and after current tax expense/adjusted net cash (debt).
Adjusted net cash (debt) to underlying EBITDA ratio: Adjusted net cash (debt) / underlying EBITDA
(Underlying) RoaCE: (Underlying) RoACE is defined as (underlying) "Earnings after tax" divided by average "Capital employed". (Underlying) "Earnings after tax" is defined as (underlying) "Earnings before financial items and tax" less "Adjusted income tax expense". Since RoaCE represents the return to the capital providers before dividend and interest payments, adjusted income tax expense excludes the tax effects of items reported as "Finance income (expense), net" and in addition, for underlying figures, the tax effect of items excluded. "Capital employed" is defined as "Shareholders' Equity", including non-controlling interest plus long-term and short-term interest-bearing debt less "Cash and cash equivalents" and "Short-term investments".
Capital expenditure (Capex): "Purchase of property, plant and equipment" plus "Purchase of other Long-term investments", adjusted for elements that are not considered cash effective.
Cash effective change in net operating capital: Changes to "Trade and other receivables" plus/minus changes to "Inventories" plus/minus changes to "Trade and other payables" as reported in the statements of cash flows.
Free cash flow: "Net cash provided by operating activities" less "Net cash used in investing activities", adjusted for "Purchases of short-term investments and "Sales of short-term investments".

Items excluded from underlying EBIT, EBITDA, net income (loss) and earnings per share

Hydro has defined two categories of items which are excluded from underlying results in all business areas, equity accounted investments and at group level. One category is the timing effects, which are unrealized changes to the market value of certain derivatives and the metal effect in Hydro Rolling. When realized, effects of changes in the market values since the inception are included in underlying EBIT. Changes in the market value of the trading portfolios are included in underlying results. The other category includes material items which are not regarded as part of underlying business performance for the period, such as major rationalization charges and closure costs, major impairments of property, plant and equipment, effects of disposals of businesses and operating assets, as well as other major effects of a special nature. Materiality is defined as items with a value above NOK 20 million. All items excluded from underlying results are reflecting a reversal of transactions recognized in the financial statements for the current period, except for the metal effect. Part-owned entities have implemented similar adjustments.

Unrealized derivative effects on LME related contracts include unrealized gains and losses on contracts measured at market value, which are used for operational hedging purposes related to fixed-price customer and supplier contracts, where hedge accounting is not applied. Also includes elimination of changes in fair value of certain internal physical aluminium contracts.
Unrealized derivative effects on power and raw material contracts include unrealized gains and losses on embedded derivatives in raw material and power contracts for Hydro's own use and for financial power contracts used for hedging purposes, as well as elimination of changes in fair value of embedded derivatives within certain internal power contracts.
Metal effect in Hydro Rolling is an effect of timing differences resulting from inventory adjustments due to changing aluminium prices during the production, sales and logistics process, lasting up to five months. As a result, margins are impacted by timing differences resulting from the FIFO inventory valuation method (first in, first out), mainly due to changing aluminium prices during the process. The Neuss smelter is included in the Rolling business. Gains and losses from metal flow between Neuss and other Rolling businesses are eliminated in Hydro Rolling's EBIT but is excluded as part of the metal effect in Underlying EBIT. Decreasing aluminium prices in Euro result in a negative metal effect on EBIT, added back as a positive metal effect on Underlying EBIT, adjusted for inventory volume changes.
Significant rationalization charges and closure costs include costs related to specifically defined major projects, and not considered to reflect periodic performance in the individual plants or operations. Such costs involve termination benefits, dismantling of installations and buildings, clean-up activities that exceed legal liabilities, etc. Costs related to regular and continuous improvement initiatives are included in underlying results.
Impairment charges (PP&E and equity accounted investments) relate to significant write-downs of assets or groups of assets to estimated recoverable amounts in the event of an identified loss in value. Gains from reversal of impairment charges are simultaneously excluded from underlying results.
Alunorte agreements provision refers to the provision recognized in relation to the TAC and TC agreements with the Government of Parà and Ministèrio Pùblico made on September 5, 2018, and certain similar agreements.
Other effects include insurance proceeds covering asset damage, legal settlements, etc. Insurance proceeds covering lost income are included in underlying results.
Pension includes recognition of pension plan amendments and related curtailments and settlements.
Transaction related effects reflect the net measurement (gains) losses relating to previously owned shares in acquired businesses and inventory valuation expense related to the transactions, as well as a net (gain) loss on divested businesses and/or individual major assets.
Items excluded in equity accounted investments reflects Hydro's share of items excluded from underlying net income in Qatalum and are based on Hydro's definitions, including both timing effects and material items not regarded as part of underlying business performance for the period.
Net foreign exchange (gain) loss: Realized and unrealized gains and losses on foreign currency denominated accounts receivable and payable, funding and deposits, embedded currency derivatives in certain power contracts and forward currency contracts purchasing and selling currencies that hedge net future cash flows from operations, sales contracts and operating capital.
Calculated income tax effect: In order to present underlying net income on a basis comparable with our underlying operating performance, the underlying income taxes are adjusted for the expected taxable effects on items excluded from underlying income before tax.
Other adjustments to net income include other major financial and tax related effects not regarded as part of the underlying business performance of the period.

Items excluded from underlying EBIT1) NOK million	Year 2020	Year 2019

Alunorte agreements - provision2)	129	80
Unrealized derivative effects on raw material contracts	5	-
Impairment charges3)	-	145
Hydro Bauxite & Alumina	134	225
Unrealized derivative effects on LME related contracts	(160)	90
Unrealized derivative effects on power contracts	218	(17)
Impairment charges4)	504	506
Other effects5)	(131)	-
Hydro Aluminium Metal	430	579
Unrealized derivative effects on LME related contracts	(38)	235
Hydro Metal Markets	(38)	235
Unrealized derivative effects on LME related contracts	(4)	(82)
Metal effect	298	370
Impairment charges6)	1,900	-
Significant rationalization charges and closure costs7)	14	1,088
Other effects8)	(173)	(99)
Hydro Rolling	2,035	1,277
Unrealized derivative effects on LME related contracts	(129)	(163)
Impairment charges9)	1,625	255
Significant rationalization charges and closure costs10)	187	396
Pension 11)	-	(62)
Transaction related effects 12)	(37)	21
Other effects13)	101	209
Hydro Extrusions	1,747	656
Unrealized derivative effects on power contracts	25	(6)
(Gains)/losses on divestments14)	(5,308)	-
Other effects15)	-	(42)
Hydro Energy	(5,283)	(48)
Unrealized derivative effects on power contracts16)	(76)	(75)
Unrealized derivative effects on LME related contracts16)	(8)	11
Impairment charges17)	(161)	-
(Gains)/losses on divestments17)	(62)	-
Other and eliminations	(307)	(64)
Items excluded from underlying EBIT	(1,281)	2,860

1) Negative figures indicate reversal of a gain and positive figures indicate reversal of a loss.

2) Alunorte agreements - provision relates to provisions for the TAC and TC agreements with the Government of Parà and Ministèrio Pùblico made on September 5, 2018, including later adjustments for changes in cost estimates, and similar agreements.

3) Impairment charges for 2019 in Hydro Bauxite & Alumina include write downs of an undeveloped area in Brazil.

4) Impairment charges in Hydo Aluminium Metal reflect write downs related to the Slovalco smelter.

5) Other effects in Hydro Aluminium Metal relates to an insurance refunds related to property damage at Albras.

6) Impairment charges in Rolling in 2020 were recognized in relation to the agreement entered into in March 2021 to sell the business.

7) Significant rationalization and closure costs include provision for work force reductions, closures costs and environmental clean-up activities in Hydro Rolling initially provided for in the third quarter of 2019. Cost revisions are included in later periods as cost estimates, including pension curtailments, have been updated and scope adjusted.

8) Other effects include partly reversals of the provision recognized in 2017 related to the customs case in Germany with NOK 109 million in 2020 and NOK 99 million in 2019. There is no remaining provision for this case. Other effects also include insurance refunds of NOK 64 million related to property damage received in 2020.

9) Impairment charges include impairments of various assets, including goodwill, in Hydro Extrusions.

10) Significant rationalization and closure costs include provisions for costs related to reduction of overcapacity, closures and environmental clean-up activities in Hydro Extrusions.

11) Pension include a gain of NOK 62 million due to partially settled pension liabilities in the US in 2019.

12) Transaction related effects relate to divestments of Hydro Extrusions plants. In addition the year 2019 include a loss of NOK 35 million related to revaluation of Hydro's pre-transactional 50 percent share in Technal Middle East and to fair value allocated to inventory sold during second quarter.

13) Other effects in Hydro Extrusions in 2020 include an environmental provision related to a closed site of NOK 101 million. Other effects in 2019 include an environmental provision of NOK 170 million related to a closed site and charge of NOK 39 million for adjustments to the value of certain assets in relation to the Sapa acquisition.

14) Divestment gain in Hydro Energy represent the gain on contributing the Røldal Suldal power assets to Lyse Kraft DA, which is partly owned by Hydro. The gain is net of the unrealized share equal to Hydro's retained ownership interest of 25.6 percent, which is eliminated.

15) Other effects in Hydro Energy include a dilution gain of NOK 42 million as the effect of an equity issuance in our associate Corvus, reducing our ownership share from 24.8 percent to 21.1 percent in 2019.

16) Unrealized derivative effects on power contracts and LME related contracts result from elimination of changes in the valuation of embedded derivatives within certain internal power contracts and in the valuation of certain internal aluminium contracts.

17) Impairment charges in 2020 relate to reversal of previously impaired industrial park in Germany, and the gain on selling the property.

Underlying EBITDA	Year	Year
NOK million	2020	2019

EBITDA1)	19,465	9,878
Items excluded from underlying EBIT	(1,281)	2,860
Reversal of impairments2)	(3,868)	(906)
Underlying EBITDA	14,316	11,832

1) See Note 1.4 Operating and geographic segment information in the Financial statements.

2) See the section Reported EBIT and net income in the Board of Directors' report.

Underlying earnings per share	Year	Year
NOK million	2020	2019

Net income (loss)	1,660	(2,370)
Items excluded from underlying net income (loss)1) 2)	1,059	3,078
Underlying net income (loss)	2,718	708
Underlying net income attributable to non-controlling interests	150	(365)
Underlying net income attributable to Hydro shareholders	2,568	1,073
Number of shares	2,049	2,047
Underlying earnings per share	1.25	0.52

1) See Items excluded from underlying net income (loss) in the section Financial results in the Board of Directors' report.

2) Items excluded from underlying net income (loss) consist of the Items excluded from underlying EBIT specified on the previous page and a compensation received of NOK 128 million related to a financial claim for which there has been a legal dispute over several years. These items are net of calculated tax effects, for most items based on a 30 percent standardized tax rate.

Adjusted net cash (debt), adjusted net cash (debt) to equity ratio and funds from operations to adjusted net cash (debt) ratio

Hydro's capital management measures are described in Note 7.1 Capital management in the Financial statements, including reconciliations and comparable information

Underlying Return on average Capital Employed (RoaCE)

Hydro uses underlying RoaCE to measure the performance for the group as a whole and within its operating segments, both in absolute terms and comparatively from period to period. Management views this measure as providing additional understanding of the rate of return on investments over time in each of its capital intensive businesses and in the operating results of its business segments. RoaCE is calculated as (U)EBIT after tax divided by average Capital employed for the respective period.

Earnings after tax						Reported		Underlying
NOK million					2020	2019	2020	2019

EBIT					7,332	499	6,051	3,359
Adjusted Income tax expense1)					(2,366)	(1,430)	(2,640)	(2,055)
Earnings after tax					4,966	(931)	3,411	1,304

Capital Employed NOK million	Dec 31 2020	Sep 30 2020	Jun 30 2020	Mar 31 2020	Dec 31 2019	Sep 30 2019	Jun 30 2019	Mar 31 2019

Current assets2)	38,326	40,109	39,984	48,122	40,410	45,387	46,375	48,895
Property, plant and equipment	64,245	68,657	70,478	77,909	74,243	74,025	73,193	72,882
Other non-current assets	40,108	34,204	35,188	39,400	36,494	36,103	35,729	35,493
Current liabilities3)	(24,300)	(21,524)	(20,414)	(26,329)	(23,534)	(23,811)	(24,702)	(26,819)
Non-current liabilities3)	(33,104)	(34,658)	(33,179)	(36,712)	(31,771)	(32,509)	(29,882)	(28,958)

		Reported	Underlying
Return on average Capital Employed (RoaCE)4)	2020	2019	2020	2019
Hydro	5.4 %	(0.9) %	3.7 %	1.3 %

Capital Employed 85,274 86,789 92,057 102,389 95,841 99,195 100,713 101,494

1) Adjusted Income tax expense is based on reported and underlying tax expense adjusted for tax on financial items.

2) Excluding cash and cash equivalents and short-term investments.
3) Excluding interest-bearing debt.
4) Average Capital Employed measured over the last 4 quarters to reflect the return for the full year.

Capital expenditure (Capex)

Capex is a measure for the cash amount spent on investment activities related to property, plant and equipment and other long-term investments as reported in the consolidated statements of cash flows for the period. Hydro uses this measure to drive optimization of capital allocation. The definition was amended in 2020 to limit adjustments. The adjustments represent a limited change of value for the periods reported. Amounts for 2019 have been restated to be comparable.

NOK million	2020	2019 Restated
Purchase of property, plant and equipment	(6,287)	(8,726)
Purchase of other long-term investments	(231)	(698)
Sum	(6,518)	(9,424)
Adjustments1)	66	60
Capital expenditure	(6,452)	(9,364)

1) Adjusted for investment grants received

Cash effective change in net operating capital

This measure is used by Hydro to monitor and follow up on cash generation and to drive financial performance. Hydro primarily follows up net operating capital elements on a cash basis rather than a balance sheet value basis, as the latter are influenced by non-cash currency translation effects.

NOK million	2020	2019

Change in Trade and other receivables1)	1,091	1,869
Change in Inventories1)	1,075	5,552
Change in Trade and other payables1)		(1,812)
Cash effective change in net operating capital	2,419	5,609

1) See Consolidated statements of cash flows

Free cash flow

Free cash flow is a measure of the net cash generation after investing activities. Hydro uses this measure to drive financial performance.

NOK million	2020	2019

Net cash provided by operating activities1)	13,515	12,550
Net cash used in investing activities1)		(9,173)
Adjusted for Purchases of short-term investments1)		52
Adjusted for Sales of short-term investments1)	(3,985)	(18)
Free cash flow	7,685	3,411

1) See Consolidated statements of cash flows

Country by country report

Hydro's country by country report has been developed to comply with legal requirements as stated in the Norwegian Accounting Act §3-3d and the Norwegian Security Trading Act §5-5a, valid from 2014, and updated in 2017, and replaces our former reporting on payments to host governments according to the Extractive Industries Transparency Initiative (EITI). Our reporting includes, and goes beyond, the EITI requirements. According to the Norwegian Accounting Act, the country-bycountry reporting should be on a project level, and payments should be reported per public authority. Following a thorough evaluation, we have defined "project" as legal entity in the report, and "public authority" as the three levels federal; state(s); and municipality(-ies).

The reporting requirement applies to Hydro as a Norwegian listed company with exploration and extractive activities. Currently, this includes Hydro's consolidated operations in Brazil, through exploration and extractive activities in Paragominas, in the state of Pará. On a voluntary basis, and in line with our EITI reporting since 2005, we also include the alumina refinery Alunorte. Alumina is refined from bauxite and is the commercial product from Hydro's Bauxite & Alumina business area.

Hydro's primary aluminium production facility Albras is also closely linked to the extraction of raw materials in Pará. In order to better illustrate the tax contribution from Hydro's aluminium value chain in Pará, Albras is included on a voluntary basis in the country-by-country report. In addition, Hydro voluntarily report on indirect tax contributions not covered by the requirements in the country by country report.

To comply with the Norwegian country-by-country regulation, Hydro is required to report on certain information at corporate level related to legal entities, where they are registered, number of employees, and interest paid to other legal entities in Hydro within another jurisdiction. From 2017, it is also required to give a short description of each legal entity's activities, revenue, income before tax, tax accrued and paid in the reporting year, and accumulated earnings. For additional reporting in accordance with the GRI 207 Tax standard, please see Hydro's GRI index.

The Country-by-country report is approved by the board of directors and included in their responsibility statement.

Extractive related activities (all in Brazil)1)	Taxes and fees2) NOK million	Royalties NOK million	License fees3) NOK million	Infrastructure, contractual4) NOK million	Infrastructure, voluntary4) NOK million	Investments NOK million	Revenue5) NOK million	Production volume 1 000 mt	Total expenses5) 6) NOK million
Mineracao Paragominas SA, total	176	74	1	8		832	2,820	8,640	2,318
Federal	136	7	1
Pará State	40	22	-
Paragominas municipality	-	45	-
Norsk Hydro Brasil Ltda, total	10	-	-			26	14	-	-
Federal	10	-	-
Rio de Janeiro State	-	-	-
São Paulo Municipality	-	-	-
Alunorte - Alumina do Norte do Brasil SA, total	301	-	-		23	827	14,849	5,457	12,808
Federal	295	-	-
Pará State	6	-	-
Barcarena Municipality	-	-	-
Albras - Alumínio Brasileiro SA, total	69	-	-		1	579	6,516	288	6,433
Federal	68	-	-
Pará State	1	-	-
Barcarena Municipality	-	-	-
Total7)	556	74	1	8	24	2,264	24,198	14,386	21,559

Payments to authorities per project and authority (exploration and extractive activities, alumina refining and aluminium production) in 2020

1) In 2020, Hydro's extractive activities did not have the following types of payments to host authorities:

production entitlements
dividends
signature, findings and production bonuses
stocks, shares or other ownership rights

2) Taxes and fees (income, profit and production) except taxes and fees on consumption such as VAT, withholding taxes on behalf of employees, sales tax. Figures are not directly comparable to the further country by country report.

3) License, lease or access fees or other payments for licenses or commissions

4) Payments on improved infrastructure, either contractual based on exploration or operational licenses, or voluntary is based on Hydro's reporting on social investments, please see note S9 to the social statements in Hydro's Annual Report

5) Including power procurement and sales

6) Costs at Alunorte include purchase of bauxite from Paragominas. Costs at Albras include purchase of alumina from Alunorte.

7) Only figures where a total is presented can be consolidated.

Othertax contributionsto authoritiesin Brazil

The Brazilian tax system is complex and volatile. In addition to the direct taxes reported above on income, profit and production, Brazil has several indirect taxes levied at the federal and state levels, and other taxes levied at the municipal level.

For Hydro, there are three relevant indirect tax mechanisms not covered by the country-by-country requirements, i.e ICMS and PIS/COFINS.

ICMS is a Brazilian state tax on the sale of goods, freight and certain services, similar to VAT. ICMS is intended to be a noncumulative tax, which means that sales are generating ICMS debits with the seller, and purchases are generating ICMS credits with the buyer. However, as export transactions are exempt from ICMS and not generating ICMS debits, exporters accumulate ICMS credits that cannot be offset with any other taxes. As ICMS in an indirect tax, the amounts are reported as expenses in Hydro's financial statements rather than as income tax.

In the state of Pará, Hydro is subject to a tax regime that aims at preventing the accumulation of ICMS recognized credits, and reduces net payable ICMS. From our operations, we generate ICMS tax revenue to Pará when purchasing diesel and fuel oil, when Albras acquires electricity, and also on sales of products to customers located outside the state.

The ICMS regime Hydro is subject to requires Hydro to comply with certain conditions related to vertical integration of aluminium production in Pará. It also requires Hydro to contribute to the development in the region and enable sustainable growth in Pará.

The ICMS deferral is subject to approval by Brazil's National Council of Finance Policy (CONFAZ). In 2018, the Public Auditing Prosecutors for the State of Pará (MP-C/PA) initiated a general process before the State Accounting Court to better understand approvals, compliance and transparency of tax incentives established by the State of Pará.

PIS and COFINS are two social contribution taxes charged on gross income, in most cases at the rate of 9.25 percent. Hydro's group companies in Brazil are charged under a non-cumulative system that resembles VAT. Similar to ICMS, export transactions are not subject to this tax. As a result, Brazilian exporters, like Alunorte and Albras, accumulate credits that can be either reimbursed or offset against debts of other federal taxes.

In addition to the indirect taxes described above, Brazilian municipalities levy a property tax. The property tax, IPTU, is a tax levied on the ownership or possession of urban land and property located in the urban area within the municipality. IPTU is due yearly based on the value of the property, according to rates and conditions foreseen in each municipality's legislation.

The table below includes Hydro entities involved in extractive activities as well as other Hydro entities in the state of Pará.

Other taxes paid to authorities in Brazil⁰

Extractive related activities	ICMS	PIS	COFINS	IPTU	Total contribution
	NOK million	NOK million	NOK million	NOK million	NOK million
Mineracao Paragominas SA, total	30	1	3	-	34
Federal	-	1	3	-	4
Pará State	30	-	-	-	30
Paragominas municipality	-	-	-	-	-
Norsk Hydro Brasil Ltda, total	-	1	6	1	- 8
Federal	-	1	6	-	7
Rio de Janeiro State	-	-	-	1	1
São Paulo Municipality	-	-	-	-	-
					-
Alunorte - Alumina do Norte do Brasil SA, total	440	1	6	15	462
Federal	-	1	6	-	7
Pará State	440	-	-	15	455
Barcarena Municipality	-	-	-	-	-
		-	-	-	-
Albras - Alumínio Brasileiro SA, total	200	4	18	12	234
Federal	-	4	18	-	22
Pará State	200	-	-	12	212
Barcarena Municipality	-	-	-	-	-
		-	-	-	-
Total	670	7	33	28	738

*Tax off-sets are not included

Further country by country information for all consolidated legal entities

The Norwegian country by country reporting requirement as stated in the Norwegian Accounting Act and the Country by Country Regulation also require reporting on certain information at corporate level related to legal entities, as included in the table below.

Hydro's subsidiaries have both external revenue derived from sale to Hydro's end customers, and internal revenue derived from sale to other Hydro entities. In the table below both revenue streams are included per legal entity, but in Hydro's consolidated financial statements all internal transactions have been eliminated to arrive at Hydro's revenue. The sum of the different items for Hydro's subsidiaries will therefore not add up to the respective consolidated figures.

In order to present a Grand Total in the country by country report that is comparable to Hydro's consolidated financial statements, we have included all group eliminations as a separate line. These include, but are not limited to, eliminations of internal revenue and cost, internal receivables and payables, distributed profit such as dividends within the group, goodwill and excess values not attributable to individual legal entities, accumulated profits allocated to non-controlling interests and all joint operations and joint ventures.

Assets and liabilities in subsidiaries that have been acquired have been remeasured to fair value in Hydro's financial statements. This value adjustment, often referred to as excess value, represents the difference between the fair value of the company as paid by Hydro, and the carrying value of assets and liabilities as recognized by the subsidiary at the time of purchase. This premium is not reflected in the subsidiaries local statutory reporting. Due to this, figures reported in Hydro's country by country report are not necessarily comparable to the entities' local statutory reporting. Acquired entities are included from the date of acquisition. As a result of rounding adjustments, the figures in one or more of the columns in the table below may not add up to the total of that column.

The information is included in the independent auditor's assurance report.

Further country by country information for all consolidated legal entities19)

			Ownership	Number of permanent	Number of temporary	Interest paid to Hydro legal entities in another jurisdiction,	Revenue,	Income before tax,	Income taxes,	Income taxes paid,	Retained earnings,
Jurisdiction	Legal entity	Description of the entity's activity	31. dec	employees1)	employees1)	NOK million	NOK million2)	NOK million3)	NOK million4)	NOK million5)	NOK million6)
Argentina	Hydro Extrusion Argentina SA	Precision tubing production	100%	102	2	1	167	11	5	6	33
Total Argentina				102	2	1	167	11	5	6	33
Australia	Hydro Aluminium Australia Pty. Limited7)	Local holding company	100%	-	-	-	1,228	13	-	-	241
	Hydro Aluminium Kurri Kurri Pty. Limited	Real estate	100%	6	-	-	19	-38	-	-	-2,146
Total Australia				6	-		1,247	-26	-	-	-1,906
Austria	Hydro Building Systems Austria GmbH	Sales company	100%	31	-	-	222	-35	-8	-	33
	Hydro Extrusion Nenzing GmbH8)	Extrusion production	100%	395	11	-	1,821	158	39	-	328
	Hydro Holding Austria GmbH	Local holding company	100%	-	-	-	-	152	-1	37	283
Total Austria				426	11	-	2,043	276	30	37	645
Bahrain	Hydro Building Systems Middle East WLL	Building systems production	100%	63	-	-	372	41	-	-	202
Total Bahrain				63	-	-	372	41	-	-	202
Belgium	Hydro Allease NV	Support services	100%	-	-	-	5	-1	-1	4	18
	Hydro Aluminium Belgium BVBA	Support services	100%	-	-	-	-	-	-	-	-
	Hydro Building Systems Belgium NV	Building systems production	100%	213	8	-	503	-25	-1	-	-238
	Hydro Extrusion Lichtervelde NV	Precision tubing production	100%	199	-	-	1,595	15	1	2	409
	Hydro Extrusion Raeren S.A.	Extrusion production	100%	207	1	-	699	17	1	1	177
	Norsk Hydro EU Sprl	Public affairs	100%	2	-	-	5	-	-	-	1
	Hydro Extrusion Eupen SA	Dies production	100%	47	-	-	56	-125	-7	-	-38
	Hydro Precision Tubing Lichtervelde NV	Precision tubing production	100%	187	-	-	563	-55	-15	-	35
	Sapa Precision Tubing Seneffe S.A.	Entity is dormant	100%	-	-	-	-	7	-	-	18
Total Belgium				855	9	1	3,425	-167	-21	6	382
Brazil	ALBRAS - Alumínio Brasileiro SA	Primary aluminium production	51%	1,231	72	-	6,516	164	83	-52	1,478
	ALUNORTE - Alumina do Norte do Brasil S.A.	Alumina refinery	92%	2,088	281	14	14,849	-753	-180	223	967
	Ananke Alumina SA	Local holding company	100%	-	-	-	39	39	13	12	1,256
	Atlas Alumínio SA	Local holding company	100%	-	-	-	543	195	47	50	424
	Calypso Alumina SA	Local holding company	100%	-	-	-	-	-	-	-	-2
	CAP - Companhia de Alumina do Pará SA	Planned alumina refinery	81%	-	-	-	-	-12	-	-	-327
	Hydro Extrusion Brasil S.A.	Precision tubing production	100%	787	14	15	1,205	-106	-37	-	-181
	Mineração Paragominas SA	Bauxite mining	100%	1,573	131	-	2,820	529	208	137	781
	Norsk Hydro Brasil Ltda.	Local holding company	100%	383	41	-	14	21	12	6	-331
	Norsk Hydro Energia Ltda.	Power trading & Energy services	100%	8	2	-	671	8	2	3	11
Total Brazil				6,070	541	29	26,655	83	150	379	4,076
Canada	Hydro Aluminium Canada & Co. Ltd.9)	Local holding company	100%	1	-	-	2,042	113	-17	36	1,372
	Hydro Aluminium Canada Inc.	Local holding company	100%	-	-	-	-	3	1 38	1	28
	Hydro Extrusion Canada Inc.	Extrusion production	100%	557	4	-	2,045	131		12	825
Total Canada				558	4	-	4,087	248	22	50	2,225
China & Hong									12
Kong	Hydro Aluminium Beijing Ltd.	Sales company	100%	6	-	-	2,053	49		4	97
	Hydro Building Systems (Beijing) Co. Ltd.	Sales company	100%	24	-	-	73	-12	-	-	-94
	Hydro Extrusion (Shanghai) Co. Ltd	Extrusion production	100%	219	3	-	433	65	17	14	176
	Hydro Aluminium Fabrication (Taicang) Ltd	Precision tubing production	100%	-	-	-	-	-	-	-	-
	Hydro Precision Tubing (Shanghai) Co. Ltd.	Precision tubing production	100%	47	1	-	116	5	1	-	16
	Hydro Precision Tubing (Suzhou) Co. Ltd.	Precision tubing production	100%	343	-	-	804	42	11	3	23
	Sapa Asia Limited	Entity dissolved 2020	-	-	-	-	-	-	-	-	-

	Hydro Extrusion (Jiangyin) Co. Ltd.	Dormant	100%			-	-	-	-	-	-28
Total China & Hong Kong				639	4		3,481	148	41	21	191
Croatia	Hydro Building Systems Croatia d.o.o.	Building systems production	100%	14	-	-	-	-	-	-	-
Total Croatia				14	-	-	-	-	-	-	-
Czech Republic	Hydro Building Systems Czechia sro	Sales company	100%	8	-	-	-	1	-	-	2
Total Czech
Republic				8	-		-	1	-	-	2
Denmark	Hydro Aluminium Rolled Products Denmark A/S	Sales company	100%	2	-	-	4	1	-	-	8
	Hydro Extrusion Denmark A/S	Extrusion production	100%	282	1	3	1,264	37	8	-	251
	Hydro Holding Denmark A/S	Local holding company	100%	-	-	-	-	5	- 2	- 1	1,522
	Hydro Precision Tubing Tønder A/S	Precision tubing production	100%	400	11	1	1,155	153	34	-	731
Total Denmark				684	12	3	2,423	197	41	- 1	2,512
									1
Estonia	Hydro Extrusion Baltics AS	Extrusion production	100%	14	-	-	87	4		1	17
Total Estonia				14	-		87	4	1	1	17
Finland	Hydro Extrusion Finland Oy	Sales company	100%	10	1	-	139	3	1	1	25
Total Finland				10	1	-	139	3	1	1	25
France	Extrusion Services S.a.r.l	Remelter	100%	42	-	-	532	22	3	- 5	205
	Hydro Aluminium France S.A.S.	Sales company	100%	7	-	-	17	-	1	-	1
	Hydro Aluminium Sales and Trading s.n.c.	Sales company	100%	2	1	-	7	-	-	-	3
	Hydro Building Systems France Sarl	Building systems production	100%	991	45	-	3,052	279	102	18	688
	Hydro Extrusion Albi SAS	Extrusion production	100%	262	1	-	894	40	15	3	144
	Hydro Extrusion Lucé/Châteauroux SAS	Extrusion production	100%	335	6	-	844	-10	- 2	3	2
	Hydro Extrusion Puget SAS	Extrusion production	100%	159	2	1	468	-149	-23	1	-345
	Hydro Holding France SAS	Local holding company	100%	2	-	-	-	101	-21	51	-578
	Hydro Tool Center SAS	Tool and spare parts services	100%	5	-	-	37	-	-	-	5
	Hydro Shared Services France	IT shared services	100%	13	-	-	22	1	1	1	3

Total France				1,818	55	1	5,872	286	75	71	128
Germany	Eugen Notter GmbH	Building systems production	100%	23	-	-	22	- 2	- 1	-	10
							44	-3,194	120	-280	177
	Hydro Aluminium Deutschland GmbH16)	Local holding company	100%	63	1	-			1
	Hydro Aluminium Dormagen GmbH	Value -adding services	100%	24	7	-	37	- 2	-	-	7
	Hydro Aluminium Gießerei Rackwitz GmbH	Remelter	100%	61	6	-	1,043	62		-	37
	Hydro Aluminium High Purity GmbH	High -purity aluminium production	100%	67	5	-	264	-41	- 6	-	63
	Hydro Aluminium Recycling Deutschland GmbH	Recycling Rolling mills and primary	100%	22	7	-	49	- 4	2	-	89
	Hydro Aluminium Rolled Products GmbH	aluminium production	100%	3,128	147	-	19,453	-2,232	-93	15	2,158
	Hydro Building Systems Coating GmbH	Building systems production	100%	3	-	-	73	- 2	- 2	-	27
	Hydro Building Systems Germany GmbH	Building systems production	100%	560	43	11	1,130	27	- 3	2	140
	Hydro Building Systems Extrusion GmbH	Building systems production	100%	-	-	-	585	28		-	5
									- 7
	Hydro Extrusion Deutschland GmbH	Extrusion production	100%	416	22	-	1,485	44	1	-	137
	Hydro Extrusion Offenburg GmbH	Extrusion production	100%	210	1	-	637	31		-	122
	Hydro Holding Offenburg GmbH17)	Local holding company	100%	38	-	-	45	-125	28	- 2	59
	Hydro Precision Tubing Remscheid GmbH	Entity sold 2020	-	-	-	1	110	-124	- 6	-	- 4
	Norsk Hydro Deutschland Verwaltungs GmbH	Entity is in liquidation	100%	-	-	-	-	-	-	-	- 2
	SEGN Standort -Entwicklungs -Gesellschaft Nabwerk mbH	Dormant	100%	-	-	-	-	-	-	-	-
	VAW -Innwerk Unterstützungs -Gesellschaft GmbH	Pension fund	78%	-	-	-	-	- 1	- 1	-	229
Total Germany				4,615	239	12	24,973	-5,537	33	-265	3,253
									-
Greece	Hydro Building Systems A.E.	Entity is in liquidation	100%	-	-	1	-	- 3		-	-41
Total Greece				-	-	1	-	- 3	-	-	-41
Hungary	Hydro Extrusion Hungary Kft	Extrusion production and support services	100%	1,554	-	-	2,811	86	44	40	124
Total Hungary				1,554	-	-	2,811	86	44	40	124

Total India				430	3	-	284	-68	-	-	-510
Italy	Hydro Aluminium Metal Products S.r.l. Hydro Building Systems Atessa s.r.l.	Sales company	100%	2	-	-	9	1	-	-	19
	15)	Building systems production	100%	-	-	-	645	4	-	-	23
	Hydro Building Systems Italy S.P.A.15)	Building systems production	100%	319	6	-	670	7	-2	-1	182
	Hydro Extrusion Italy S.r.l.	Extrusion production	100%	299	6	-	1,263	8	-11	3	346
	Hydro Holding Italy S.P.A.	Local holding company	100%	-	-	-	-	-491	-	1	450
Total Italy				620	12	-	2,587	-472	-13	3	1,020
Japan	Hydro Aluminium Japan KK	Sales company	100%	7	-	-	202	7	2	4	68

Total Japan				7	-		202	7	2	4	68
Lithuania	Hydro Building Systems Lithuania UAB	Sales company	100%	11	-	-	90	5	1	1	21
	Hydro Extrusion Lithuania UAB	Extrusion production	100%	159	2	-	129	14	3	-1	47
Total Lithuania				170	2	-	218	19	3	-	68
Luxembourg	Hydro Aluminium Clervaux S.A.	Remelter	100%	48	7	-	1,049	53	14	13	182
Total									14
Luxembourg				48	7	-	1,049	53		13	182
Mexico	Hydro Aluminium Metals Mexico S. de R.L Hydro Precision Tubing Monterrey S. de R.L. de	Sales company	100%	-	-	-	-	-	- -	-	-
	C.V.	Precision tubing production	100%	127	2	-	4	2		2	121
	Hydro Precision Tubing Reynosa S. de R.L. de C.V. Precision tubing production		100%	209	8	-	84	8	5	3	26
	Hydro Precision Tubing Services Monterrey S. de								2
	R.L. de C.V.	Precision tubing production	100%	-	-	-	38	2		3	-1
Total Mexico				336	10		126	11	7	8	145
Netherlands	Hydro Albras B.V.	Local holding company	100%	-	-	-	-	192	-	-	-10
	Hydro Aluminium Brasil Investment B.V.	Local holding company	100%	-	-	-	-	8	-4	-	971
	Hydro Aluminium Investment B.V.	Local holding company	100%	-	-	-	-	-	-	-	-
	Hydro Aluminium Netherlands B.V.	Local holding company	100%	-	-	-	-	109	-	-	288
	Hydro Aluminium Pará B.V.	Local holding company	100%	-	-	-	-	-	-	-	-133
	Hydro Aluminium Qatalum Holding B.V.	Local holding company	100%	-	-	-	-	979	-	-	1,653
	Hydro Aluminium Rolled Products Benelux B.V.	Sales company	100%	4	-	-	6	1	1	-	1
	Hydro Alunorte B.V.	Local holding company	100%	-	-	-	-	-	-	-	-
	Hydro Building Systems Netherlands B.V.	Building systems production	100%	-	-	-	48	7	-2	-	8
	Hydro CAP B.V.	Local holding company	100%	-	-	-	-	-	-	-	-429
	Hydro Extrusion Drunen B.V.	Extrusion production	100%	387	14	-	1,371	38	5	-	775
	Hydro Extrusion Holding Netherlands B.V.	Real estate	100%	-	-	-	-	14	2	-	-2
	Hydro Extrusion Hoogezand B.V.	Extrusion production	100%	165	-	-	584	34	16	2	237
	Hydro Holding Netherlands B.V.	Entity dissolved 2020	-	-	-	5	-	-6	1	-1	-
	Hydro Paragominas B.V.	Local holding company	100%	-	-	-	-	210	5	-	-2
	Norsk Hydro Holland B.V.	Local holding company	100%	4	-	-	59	1,038	-25	-6	11,549
Total Netherlands				560	14	5	2,067	2,624	-1	-5	14,907
		Development and design of
		casting tecnology and related							4
Norway	Hycast AS	sales	100%	54	-	-	248	17		-	128
	Hydro Aluminium AS	Primary aluminium production	100%	2,270	593	244	44,739	-2,781	401	304	18,057
	Hydro Aluminium Rolled Products AS	Rolling mill	100%	635	50	4	4,454	209	46	-	791
	Hydro Energi AS10)	Power production	100%	188	13	-	6,493	7,563	331	317	5,019
	Hydro Energi Invest AS	Local holding company	100%	-	-	-	-	-1	-	-	-
	Hydro Extruded Solutions AS	Local holding company	100%	43	1	90	-	-117	-38	-8	1,291
	Hydro Extrusion Norway AS	Extrusion production	100%	101	12	-	347	4	1	-	50
									-
	Hydro Kapitalforvaltning AS	Local holding company	100%	-	-	-	11	-		-	-
	Hydro RG Invest AS	Local holding company	100%	-	-	-	-	-	-	-	-
	Hydro Vigelands Brug AS	High-purity aluminium production	100%	35	8	2	107	11	2	-	92
	Hydro Vigelandsfoss AS	Power production	100%	-	-	-	21	-9	10	16	167

	Industriforsikring AS	Insurance	100%	-	-	-	169	- 2	-14	-	512
	Norsk Hydro ASA	Parent company	-	394	14	-	214	-551	-83	33	29,419
	RSK Holding AS11)	Entity sold 2020	-	-	-	-	178	53	27	95	-
	-Suldal Kraft AS11) Røldal	Entity sold 2020	-	-	-	-	197	43	28	115	-
	Svelgfos AS	Power trading	100%	-	-	-	-	-	-	-	1
	Sør -Norge Aluminium AS	Primary aluminium production	100%	328	119	16	1,900	-92	-20	-	1,718
	Vækerø Gård Barnehage ANS	Company kindergarden	100%	-	-	-	-	-	-	-	-
Total Norway				4,048	810	358	59,080	4,348	696	874	57,245
Oman	Hydro Building Systems Middle East (FZC) LLC12)	Sales office	100%	-	-	-	45	25	-	-	45
Total Oman				-	2		45	25	-	-	45
Poland	Hydro Aluminium Rolled Products Polska Sp. z o.o. Sales company		100%	5	-	-	4	1	-	-	3
	Hydro Building Systems Poland Sp. z o.o.	Sales company	100%	51	-	-	80	- 6	- 1	1	-11
	Hydro Extrusion Poland Sp. z o.o.	Extrusion production	100%	1,392	4	1	2,086	131	26	54	887
Total Poland				1,448	4	1	2,169	127	26	54	878
Portugal	Hydro Aluminium Extrusion Portugal HAEP S.A.	Extrusion production	100%	109	17	-	388	3	-	-	70
	Hydro Building Systems Portugal (HBSPT) SA	Building systems production	100%	69	-	1	220	8	9	-	21
Total Portugal				178	17	1	607	11	9	-	91
Romania	Hydro Extrusion S.R.L.	Entity sold 2020	-	-	-	-	30	14	-	-	1
Total Romania				-	-	-	30	14	-	-	1
Singapore	Hydro Aluminium Asia Pte. Ltd.	Trading company	100%	18	-	-	8,279	86	10	6	359
	Hydro Aluminium Asia Rolled Products Pte. Ltd.	Entity dissolved in 2020	0%	-	-	-	-	-	-	-	-
	Hydro Holding Singapore Pte. Ltd.	Sales and local holding company	100%	21	-	-	37	- 8	-	-	-423
Total Singapore				39	-	-	8,316	78	10	6	-64
Slovakia	Hydro Extrusion Slovakia a.s.	Extrusion production	100%	369	3	-	573	22	5	- 4	-18
	Slovalco a.s.	Primary aluminium production	55%	454	-	-	3,070	-526	-76	-	-125
	ZSNP DA, s.r.o.	Transportation	100%	-	-	-	8	-	-	-	-
Total Slovakia				823	3	-	3,651	-504	-72	- 4	-143
South Africa	Technal Systems South Africa (Pty) Ltd.	Entity is in liquidation	100%	-	-	-	-	- 1	-	-	-13
Total South Africa				-	-	-	-	- 1	-	-	-13
Spain	Hydro Aluminium Iberia S.A.U	Remelter	100%	52	7	-	704	45	2	10	347
	Hydro Aluminium Rolled Products Iberia S.L.	Sales company	100%	5	1	-	8	2	-	-	11
	Hydro Building Systems Spain S.L.U.	Building systems production	100%	262	6	-	657	-12	3	6	-20
	Hydro Extruded Solutions Holding S.L.U.	Local holding company	100%	7	-	-	17	-13	21	-	-701
	Hydro Extrusion Spain S.A.U.	Extrusion production	100%	291	31	-	1,012	49	- 4	1	541
Total Spain				617	45		2,398	71	22	16	178
Sweden	Hydro Building Systems Sweden AB	Building systems production	100%	113	3	-	694	76	-	-	14
	Hydro Extruded Solutions AB	Local holding company R&D	100%	804	13	5	62	1,030	81	85	2,722
	Hydro Extrusion Sweden AB	Extrusion production	100%	52	-	8	2,091	-36	2	-16	742
	Hydro China Holding AB	Local holding company	100%	-	-	-	-	53	-	-	55
Total Sweden				969	16	13	2,847	1,123	83	69	3,532
Switzerland	Hydro Aluminium International SA	Sales company	100%	14	-	2	15,607	-504	-67	40	-471
	Hydro Aluminium Walzprodukte AG	Sales company	100%	2	-	-	4	1	-	-	5
	Hydro Building Systems Switzerland AG	Sales company	100%	43	3	-	308	45	10	5	114
Total Switzerland				59	3	2	15,920	-459	-58	45	-352
Turkey	Hydro Yapi Sistem Sanayi VE Ticaret AS	Sales company	100%	23	-	-	48	- 8	- 2	-	16
Total Turkey				23	-		48	- 8	- 2	-	16
									-
Ukraine	Sapa Profiles UA	Entity is in liquidation	100%	-	-	-	-	-	-	-	-
Total Ukraine United Arab				-	-		-	-		-	-
Emirates	Hydro Building Systems Middle East FZE	Sales company	100%	15	-	-	122	14	-	-	62
Total United Arab Emirates				15	-	-	122	14	-	-	62
United Kingdom	Hydro Aluminium Deeside Ltd.	Remelter	100%	45	-	-	690	10	3	-	124

	Hydro Aluminium Rolled Products Ltd.	Sales company	100%	6	-	-	12	3	1	-	8
	Hydro Building Systems UK Ltd.	Building systems production	100%	128	-	-	424	-38	-7	-	293
	Hydro Components UK Ltd.13)	Entity is in liquidation	100%	276	1	6	223	-33	-	-	16
	Hydro Aluminium UK Ltd. 13)	Extrusion production	100%	449	5	2	1,386	-4	-7	-	21
	Hydro Holdings UK Ltd.	Local holding company	100%	-	-	-	1	-60	-	-	-362
Total United Kingdom				904	6	8	2,737	-122	-11	-	101
USA	EMC Ashtabula Inc	Local holding company	100%	-	-	-	-	-104	-24	-	-2,404
	EMC Metals Inc	Local holding company	100%	-	-	-	-	272	3	-	852
	Hydro Aluminium Metals USA, LLC	Local holding company	100%	144	-	-	4,846	39	-31	-	-1,287
	Hydro Building Systems North America Inc	Entity is in liquidation	100%	-	-	-	-	-	-	-	-
	Hydro Building Systems North America LLC	Sales company	100%	3	-	-	13	-17	-1	-	-32
	Hydro Extrusion Portland Holding Inc.	Entity dissolved in 2020	0%	-	-	-	-	-4	-	-	-
	Hydro Extrusion Portland Inc.	Extrusion production	100%	449	33	-	1,648	-109	-6	-	-154
		Extrusion production and							-11
	Hydro Extrusion USA LLC14)	support services	100%	4,747	62	-	18,259	783		-4	125
	Hydro Holding North America Inc.	Local holding company	100%	10	2	1	-	-30	177	128	2,801
	Hydro Precision Tubing Adrian Inc.	Precision tubing production	100%	-	-	-	-	-3	-	-	-214
	Hydro Precision Tubing Louisville Inc.	Precision tubing production	100%	-	-	-	-	-	-	-	26
	Hydro Precision Tubing Monterrey Central LLC	Precision tubing production	100%	-	-	-	-	-	-	-	-
	Hydro Precision Tubing Monterrey LLC	Precision tubing production	100%	-	-	-	372	59	-	-	333
	Hydro Precision Tubing USA LLC	Precision tubing production	100%	157	2	-	903	9	-4	-	-51
Total USA				5510	99	1	26,041	894	104	123	-5
Vietnam	Sapa Ben Thanh Aluminium Profiles Co. Ltd	Entity sold 2020	-	-	-	-	-	-20	-	-	-1
Total Vietnam			-	-	-		-	-20	-	-	-1
	Total Eliminations, non-controlling interests and goodwill and excess values not attributable to specific legal entities			-			-73,093	9	-288	-15	-33,793
	Total joint operations and joint ventures						2,882	-817	-4	50	-3,498
Grand total				34,240	1,931	438	138,118	2,609	950	1,588	52,028

1) Number of employees is based on the legal entity each employee is employed by and represents headcount

2) Revenue consists of external and internal revenue from sales of products and services, and realized and unrealized results from derivatives related to sale of products. Elimination of sale to other Hydro companies is presented on a combined basis in "Eliminations".

Revenue in this report equals revenue in Hydro's consolidated financial statements 3) For the composition of income before tax, please refer to consolidated income statements and related notes

4) For a description and the composition of income taxes, please refer to consolidated income statements and related notes

5) Income taxes paid represents the actual payments made during the year independent of which year the tax relates to. In some tax regimes including Brazil, tax payments include settlement of tax liabilities with tax credits generated from other payments to federal authorities

6) Retained earnings consists of accumulated gains and losses, net of distributed profits from the point of view of the legal entity. Retained earnings existing in the companies at the time of Hydro's acquisition is deducted in "Eliminations". In addition, "Eliminations" consists of

unrealized gains in transactions between Hydro companies 7) Hydro Aluminium Australia Pty Ltd is the owner of Hydro's ownership share in Tomago aluminium smelter (Aluminium Company Pty Limited), a joint operation.

8) Hydro Components Nenzing GmbH was merged into Hydro Extrusion Nenzing GmbH in Q2 2020

9) Hydro Aluminium Canada & Co. Ltd. is is the owner of Hydro's ownership share in Aluminerie Alouette Inc, a jointly owned aluminium smelter

10) Hydro Energy AS includes investment in the two joint vetures Hydro Volt AS and Corvus AS

11) Hydro Energi AS contributed its shares in RSK Holding AS, in turn owning 100% of Røldal Suldal Kraft AS (RSK), in exchange for a 25.6% ownership in Lyse Kraft DA in Q4 2020

12) Hydro Building Systems Middle East (FZC) LLC is filial of Hydro Building Systems Middle East WLL in Bahrain, previously reported together with the parent company

13) Hydro Components UK Ltd transferred assets and liabilities to Hydro Extrusion UK Ltd in Q3 2020. The combined legal unit has been renamed to Hydro Aluminium UK Ltd.

14) Hydro Extruder LLC, Hydro Extrusion Delhi and Hydro Extrusion North America LLC were dissolved into Hydro Extrusions USA LLC in Q1 2020. Hydro Extrusion Portland Holding Inc was dissolved into Hydro Extrusion USA LLC in Q2 2020

15) Hydro Building Systems Italy S.P.A. demerged operational activities of Atessa into a new company named Hydro Building Systems Atessa s.r.l. in Q1 2020

16) Hydro Energy GmbH was merged into Hydro Aluminium Deutschland GmbH in Q4 2020

17) Hydro Building Systems Germany GmbH was demerged into a new legal entity Hydro Building Systems Extrusion GmbH

18) Sapa Germany GmbH was merged into Hydro Holding Offenburg GmbH in Q4 2020

19) Extended table covering GRI 207 tax reporting requirement is published on www.hydro.com

Entity descriptions

In the table above, each company has been given a short description of its main activities. Some of the entities can also have other activities as listed below.

Short description	Main activities
Alumina refining	Refining of bauxite to alumina. Hydro operates the Alunorte alumina refinery
Bauxite mining	Mining of bauxite, the raw material for aluminium productions. Hydro has only one consolidated bauxite mine
Building systems production	Production of building systems where aluminium is used
Company kindergarden	Kindergarden for children of employees or tenants
Dies production	Production of dies for extrusion of aluminium profiles
Energy sourcing	Sourcing of energy for Hydro operations
Fabrication of extruded products	Added value processing of extruded profiles
Extrusion production	Includes one or more extrusion production lines and is normally also responsible for sales and marketing of its products. May also have R&D activities
Recycling	Sorting of alumnium scrap for supply to remelters
High-purity aluminium production	Production of aluminium of minimum 99.99 percent purity
Insurance	In-house (captive) insurance
IT shared services	IT shared services for Hydro operations
Local holding company	Holding & Financing. Holding shares or other equity instruments. Administrative, management or support services
Pension fund	Employee pension fund
Power production	Production of hydro-power
Power trading	Trading of power and energy services
Precision tubing production	Production of extruded aluminium tubes, micro-port aluminium tubes, and welded alumnium tubes
Primary aluminium production	Includes one or more primary aluminium plant(s), and may also include casting, anode production and/or R&D activities
Public affairs	Hydro's Brussels office
Real estate	Property management and development. Owner of land and infrastructure
R&D	Research and development activities
Remelter	Facility remelting standard ingots, process scrap and/or post-consumer scrap
Rolling mill	Production of rolled products
Sales company	Sales, marketing and distribution offices
Support services	Administrative and other support services
Tool and spare parts services	Provides tool and spare parts services, in addition to administrative and management support
Trading company	Sales, marketing and distribution of casthouse aluminium products
Transportation	Transport of raw materials by railway train

Diversity and Inclusion

Hydro's organization around the world represents significant diversity in education, experience, gender, age and cultural background. We see this diversity as a source of competitive advantage, as it encourages innovation, learning and better customer understanding.

Research and experience show that to enable a culture of learning and innovation and improved customer understanding, diverse teams, led by inclusive leaders, are needed. The key is to utilize the potential in the workforce diversity. Different backgrounds, cultures and perspectives are important enablers to deliver on our business strategy and to create sustainable business value.

In order to advance in diversity and inclusion, Hydro continuously works to improve the approach, associated processes and governance. The success is dependent on ownership and accountability from business areas and management, which are in the process of updating roadmaps to support diversity and inclusion targets globally as well as locally.

In solving complex tasks, Hydro's leaders should aim for diverse teams and realize their potential through inclusion, so that our differences become a competitive advantage. Our ambition is to have a high-performing and sustainable work environment, based on inclusion of our differences. We want all employees to know they are valued for their differences and that they contribute to the success of our business strategy.

Hydro's approach to and requirements for diversity and inclusion are based in The Hydro Way, our values Care, Courage and Collaboration, in the board-sanctioned Code of Conduct, and in Hydro's People Directive, approved by the President & CEO.

This report is developed to comply with the requirements on public disclosure in the Norwegian Equality and Anti-Discrimination Act (Likestillings- og diskrimineringsloven). This diversity and inclusion report is approved by the board of directors and included in their signatures to the Board of Directors' Report.

Our approach

In our relationships with each other, we strive to be open, honest and respectful. It is everyone's responsibility to contribute to a supportive work environment, based on mutual trust, transparency and respect. Hydro does not tolerate any form of harassment or bullying in the workplace.

We all have the right to work in an environment that is free from intimidation and harassment and where we can feel safe and comfortable. Harassment in the workplace can take many forms and be experienced differently from one person to another; it can be physical, verbal, sexual or other. We do not tolerate any form of harassment or discrimination, including but not limited to gender, race, color, religion, political views, union affiliation, ethnic background, disability, sexual orientation or marital status. We do not tolerate any form of physical punishment.

Hydro is committed to providing equal employment opportunities and treating all employees fairly and with respect. Hydro's employees and business units shall only use merit, qualifications and other professional criteria as a basis for employee-related decisions, such as recruitment, training, compensation and promotion. We strive to develop programs and actions to encourage a diverse organization based on the principle of equal opportunities. Hydro is committed to the principles of non-discrimination.

Risksfor discrimination

We use the internal grievance mechanism Hydro AlertLine and the employee engagement survey Hydro Monitor as tools to survey the risk level of discrimination in the organization. Cases of alleged and/or confirmed discrimination and harassment are relevant indicators from AlertLine, while in Hydro Monitor we use gender differences in the employee engagement index and the psychosocial risk index as important indicators.

A thorough human rights due diligence of our operations in Pará state, Brazil, have identified areas where we can draw lessons of learning related to risk of discrimination. The due dilligence was performed by the human rights consultancy Proactiva, based in Brazil.

Topics related to diversity and inclusion have not been identified among Hydro's main strategic risks, see page 24.

Inclusion a prerequisite for equal opportunities

Inclusion to Hydro is about creating a work environment where all employees can contribute with their full potential. It is first of all a leadership responsibility, but also a responsibility for each individual employee in their daily work.

While we believe that diversity is a prerequisite to secure the best workforce, inclusion is needed to secure optimal value creation. It is about creating a work environment where all individuals are enabled to contribute, and making their voices heard. It is about making sure our differences and similarities become our strength, with an ambition to enable an open and curious culture of inclusion. Training and competence in inclusive leadership are important criteria for success, in addition to foster an inclusive culture.

Our strategy and ambitions

Through Hydro's global people processes we aim to ensure the right competence, capabilities and organizational culture to be able to deliver on our overall strategic agenda – lifting profitability, driving sustainability. Hydro's global people processes are learning and competence development, leadership and succession, talent management, as well as diversity and inclusion. The ambition is to have a high performing and sustainable work environment based on inclusion of our differences.

In 2020, we started the work to make sure Hydro's diversity and inclusion strategy is relevant and applicable across our business, and to our 34.000 employees across 40 countries. Based on this we are building a roadmap and plan on group level for how to reach the targets set for 2025. The strategy is research-based and draws on the learning and practical experience from other companies.

By applying improved analytics tools and going deeper into our employee engagement survey, Hydro Monitor, we are able to better understand the current state of diversity and inclusion in Hydro. Based on this, we form hypotheses for how to improve diversity, inclusion and belonging, and pilot projects to create a sustainable change in matters important to our employees. We will measure progress through annual surveys and establish actions for further improvements, using the results from Hydro Monitor 2020 as a baseline.

Based on findings from analyses, Hydro aim at improving diversity and inclusion through three main areas:

Foster inclusive leadership and culture for all employees to contribute with their full potential, increasing value creation
Promote the same opportunity for everyone to contribute and succeed, recognizing that individuals have different starting points
Increase relevant diversity, both on overall level, among leaders and on team level

We have worked systematically to increase gender diversity in Hydro's operations for more than twenty years, and we acknowledge the challenges and the obstacles that face both us as a company and our industry. While we to a certain extent have succeeded for staff positions, we still have a challenge related to operators. In 1997, Hydro launched its first action plan to promote female employees and leaders.

The ambition set for the share of women in Hydro is 25 percent by 2025, including permanent and temporary employees. We have a structured approach and will implement concrete actions to meet this.

Research shows inclusive leadership ensures that the different voices within a company are heard, and diverse thinking is appreciated. Through more thorough analyses of Hydro Monitor, a clear finding is that employees desire to be part of an inclusive culture where diverse perspectives are shared and valued. Hence, Hydro focus on developing inclusive leadership to foster an open, curious and safe work environment where everyone is enabled to contribute and generate value. Inclusive leadership, diverse thinking and collaboration will help Hydro as a company to

continuously improve ways of working to drive efficiency
seize new opportunities where our capabilities match global megatrends
attract and retain talent
enhance learning and development.

The success is dependent on ownership and accountability from business areas and management, fostering an inclusive workplace is a responsibility placed on every single Hydro employee.

Opportunitiesfor employees with disabilities

We are continuously adjusting working conditions so that all employees have the same opportunities in their workplace. In Brazil, we are required to employ at least 5 percent employees with disabilities. 4.6 percent of the employees in Paragominas were disabled by the end of 2020, and Alunorte employed 4.5 percent at the end of 2020, while the level at Albras was 4.5 percent. The absolute number for employees with disabilities increased in 2020, compared to 2019. We are working to increase the share of disabled employees. Just as important as achieving the legal requirements, Alunorte, Paragominas and Norsk Hydro Brasil are working on the career development of employees with disabilities. The extrusion sites in Southern-Brazil fulfilled their legal requirements.

Drawing from these experiences, how we can generate opportunities and be an attractive employer for employees with disabilities across our global operations, will be part of our strategy work.

Collaborating with unions and other employee representatives

Through the Global Framework Agreement (see page 30) Hydro is committed to providing equality of opportunity and treatment in recruitment, employment, training and career development, regardless of race, color, gender, membership or affiliation with a trade union, religion, political conviction, nationality or cultural origin, as required by ILO Conventions 100 and 111 respectively. This includes equal remuneration for men and women for work of equal value.

The diversity and inclusion strategy is planned discussed during 2021 in the established business area communication bodies for dialogue between management and unions.

Statusfor equal opportunities

The information in this section are excerpts from the Social statements in Hydro's Annual Report 2020. More information about the reporting principles and the methodology used for data collection and reporting can be found in The Viability Performance Statements in Hydro's Annual Report 2020.

Hydro Monitor

Hydro has a global engagement survey, Hydro Monitor, which is normally run every second year. The last survey took place in 2020 when all permanent employees were invited to participate and 89 percent responded. Hydro Extrusion participated for the first time in 2020 and the methodology was changed from the previous Hydro Monitor which took place in 2018. Thus, the results are not directly comparable.

For more information, see also the section Risk for discrimination above

Hydro Monitor 2020 2019 2018 2017 2016 Employee Engagement Index (EEI) 72% N/A 84% N/A 83% Women 70% N/A 86% N/A 85% Men 72% N/A 83% N/A 82% Psycosocial Risk Index (PRI) 75% Women 73% Men 75% Integrity Culture Index (ICI) 76% Women 75% Men 76% Performance Excellence Index (PEI) (discontinued) N/A N/A 82% N/A 82% Response rate 89% N/A 88% N/A 89%

Share of male/female employees

The share of women was 40 percent in Hydro's Corporate Management Board in 2020. With three women among the seven shareholder-elected members and one woman among the three employee representatives on the Board of Directors, Hydro complies with the Norwegian legal requirements on female representation.

While gender equality is a challenge among operators at most of Hydro's operational sites, women constitute 50 percent of the workforce in Hydro's corporate staffs and 43 percent in Global Business Services. Globally, about 1/3 of employees in staff positions are women.

Compensation

Salaries in the organization are reviewed on a regular basis. There is no significant gender-pay differentials for employees earning collective negotiated wages in Norway, Germany and Brazil.

Following the integration of Extrusions in 2017, the USA and Hungary became significant countries of operations for Hydro. We have looked into the salary differences for all Hydro employees in Hungary, and based on overall figures we found no significant gender related salary differences.

In 2020, we started the integration of compensation data in our people master data system, and a global job architecture framework was developed enabling us to map all employees in Hydro. The mapping and calibration of the positions will be conducted through 2021. Hydro's global job architecture framework is built on Mercer's International position evaluation system IPE. From 2021 we aim to give more detailed information on gender pay using this framework.

Sick leave

Sick leave in Hydro's global organization was 4.2 percent in 2020, compared to 3.7 percent in 2019. In Norway, sick leave was 4.5 percent in 2020 compared to 4.5 percent in 2019. Women in Norway had a sick leave of 5.3 percent, while men had 4.5 percent.

Part-time

Hydro employees normally work full-time. The opportunity to work part-time is considered a benefit for which a special application must be made. Starting in 2021, we will examine if there is involuntary part-time among Hydro employees.

Parental leave

In 2020, a total of 55 women and 107 men took out parental leave in Norway. On average women had 24 weeks of maternity leave and men 10 weeks of paternity leave.

For 2021 we will seek to extend this reporting to cover additional countries.

In Brazil the legal requirement is 120 days of maternity leave and five days of paternity leave. Since 2019, Hydro offers 180 days of maternity leave and 10 days of paternity leave to all employees.

			Number of employees1)			Payroll (NOK million)2) 3)
	2020	2019	2018	2017	2016	2020	2019	2018	2017	2016
Norway	4,048	4,103	4,050	3,962	3,689	3,632	3,684	3,591	3,220	3,001
Women	21%	21%	21%	20%	19%
Men	79%	79%	79%	80%	81%
Germany	4,615	4,967	4,909	4,861	3,555	3,577	4,307	3,265	2,256	2,201
Women	13%	13%	12%	12%	10%
Men	87%	87%	88%	88%	90%
France	1,818	1,894	1,883	1,829	-	917	939	954
Women	16%	16%	16%	16%	0%
Men	84%	84%	84%	84%	0%
Hungary	1,554	1,612	1,675	1,540	-	384	408	541
Women	30%	29%	26%	24%	0%
Men	70%	71%	74%	76%	0%
Other Europe	8,407	9,071	9,338	8,864	735	3,746	3,850	3,678	201	223
Women	22%	22%	22%	21%	11%
Men	78%	78%	78%	79%	89%
Total Europe	20,442	21,647	21,855	21 056	7,979	12,256	13,188	12,029	5,677	5,425
-	-	-	-	-	-
Brazil	6,070	6,108	5,658	5,227	4,743	1,059	1,273	1,158	1,166	986
Women	13%	13%	13%	12%	13%
Men	87%	87%	87%	88%	87%
USA	5,510	6,013	6,291	5,954	-	3,517	3,656	3,348
Women	17%	16%	15%	14%	0%
Men	83%	84%	85%	86%	0%
Rest of the world	2,218	2,542	2,432	2,388	189	677	889	783
Women	19%	18%	18%	18%	23%
Men	81%	82%	82%	82%	77%
Total	34,240	36,310	36,236	34,625	12,911	17,509	19,005	17,318	7,258	6,681
Women	18%	18%	18%	17%	14%
Men	82%	82%	82%	83%	86%

Permanent employees by region, gender and payroll

3) Payroll figures for Extrusions is only available from 2018

GRI-reference: GRI Standards 201-1 (2016) and GRI Standards 102-8 (2016)

Age distribution permanent employees

Age distribution
------------------	--

	2020	2019	2018	2017	2016

Under 30	14%	15%	15%	15%	12%
30-49	53%	52%	52%	52%	54%
50 +	32%	33%	33%	32%	33%

GRI Reference: GRI Standards 405-1 (2016) and G4-EU15

Total employees by employment type

Employment category	2020	2019	2018	2017	2016

Permanent - total	34,240	36,310	36,236	34,625	12,911
Temporary - total	1,929	1,647	1,680	1,646	1,266
Women	32%	27%	27%	23%	27%
Men	68%	73%	73%	77%	73%

GRI Reference: GRI Standards 405-1 (2016) and G4-EU15

Part-time employees

Part-time employees1)	2020	2019	2018	2017	2016

Norway	0.7 %	1.2 %	1.5 %	1.9 %	2.0 %
Women	1.8 %	3.7 %	4.2 %	5.6 %	3.5 %
Men	0.4 %	0.5 %	0.8 %	1.0 %	1.6 %
Total employees	2.0 %	1.3 %	1.3 %	1.6 %	1.2 %
Women	5.9 %	4.9 %	4.9 %	6.2 %	5.7 %
Men	1.1 %	0.5 %	0.5 %	0.6 %	0.6 %

1) Data for 2020 includes 98 percent of Hydro's permanent employees globally.

GRI Reference: GRI Standards 102-8 (2016)

Modern Slavery transparency statement

Hydro's Modern slavery transparency statement has been developed to comply with the legal requirements as stated in the UK Modern Slavery Act 2015, valid to Hydro from 2016, and the Australia Modern Slavery Bill 2018, valid to Hydro from 2020. The reporting requirements apply to Hydro as a supplier of goods with a total turnover of £36 million or more in the UK and more than AUD 100 million in Australia. The statement is valid for Norsk Hydro ASA and its consolidated subsidiaries. These include, but are not limited to, the fullyowned production units Hydro Aluminium Deeside Ltd, Hydro Building Systems UK Ltd., Hydro Components UK Ltd and Hydro Aluminium UK Ltd in the UK and the fully-owned holding company Hydro Aluminium Australia Pty Limited in Australia. The latter is the owner of Hydro's 12.4 percent of the shares in the joint venture Tomago Aluminium Smelter and the Tomago Aluminium Smelter management company Tomago Aluminium Company Pty.

The Modern slavery transparency statement is prepared based on information collected from all consolidated entities in Hydro. In addition, the above-mentioned legal entities have been consulted on the statement itself.

Entities that are not fully owned by, but are controlled by Hydro, can have different policies. We believe that their relevant policies are aligned with the ones of Hydro.

The UK and Australia Modern Slavery transparency statement is approved by the board of directors of the parent company Norsk Hydro ASA and is included in their signatures to the Board of Directors' Report.

Our business and supply chain

Hydro is a fully integrated aluminium company with 34,000 employees in around 40 countries on all continents. In addition to production of primary aluminium, rolled and extruded products and recycling, Hydro also extracts bauxite, refines alumina and generates energy to be the only 360° company in the global aluminium industry. Our operations include one of the world's largest bauxite mines and the world's largest alumina refinery, both located in Brazil. We have primary metal production facilities in Europe, Canada, Australia, Brazil and Qatar. Hydro is a large operator of power production in Norway. Extrusion activities are mainly located in Europe and North America, but we also have significant operations in Asia and Brazil. Hydro is present within all market segments for aluminium, with sales and trading activities throughout the value chain serving more than 30,000 customers. Hydro has more than 30,000 active suppliers globally. Most of these are situated in the same countries as our production facilities.

Hydro's supply chain

The figure shows Hydro's supply chain related to its value chain, and does not reflect the current organizational structure.

Our policies and commitments

Our compliance system shall ensure that all persons acting on behalf of Hydro comply with applicable laws and regulations and with the requirements adopted by Hydro. Information pertaining to Hydro's human rights policies and compliance is regularly discussed with the board of directors, the Corporate Management Board, business area management teams, and relevant parties such as union representatives.

We respect the human rights of all individuals and groups that may be affected by our operations, including freedom from modern slavery. As an employer, owner and purchaser, an important contribution toward respecting human rights is to secure decent working conditions in our organization, in minority-owned companies and with our suppliers.

We do not tolerate any form of harassment or discrimination, including but not limited to gender, race, color, religion, political views, union affiliation, ethnic background, disability, sexual orientation or marital status. And we do not tolerate any form of forced labor or child labor abuse. We support the principle of freedom of association and collective bargaining. Hydro also supports key frameworks that define human rights principles and is committed to following these, including the UN Guiding Principles on Business and Human Rights and ILO's eight core conventions. We are a member of the UN Global Compact and the International Council on Mining and Metals (ICMM) and are committed to following their principles and position statements. We use the GRI Standards for voluntary reporting of sustainable development. Hydro's human rights management is based on the OECD Due Diligence Guidance for Responsible Business Conduct. Human rights responsibilities are part of Hydro's Code of Conduct, which is translated into 19 languages.

As part of the ongoing process to manage and improve Hydro's human rights impacts, we updated our Human Rights policy and Supplier Code of Conduct in 2020. We also prioritized Hydro's major risks related to human rights (salient issues) and revised the mapping of risk to people in our enterprise risk management process. A corporate coordination group was established to improve collaboration on human rights topics across the organization. The improvement work will continue in 2021.

Hydro's new Human Rights Policy outlines the company's commitment to respecting and promoting human rights. The commitment is integrated in key procedures, including supply chain management, new projects, portfolio management, and risk management. The policy is approved by the Corporate Management Board and is available at www.hydro.com/principles.

We have identified Hydro's major risks to people, the human rights salient to our operations and which we are most at risk of impacting:

Modern slavery, forced labor and child labor abuse
Principles of freedom of association and collective bargaining
Freedom from discrimination and harassment
Decent working conditions
Right to privacy
Right to health
Right to safety
Rights of vulnerable individuals and groups
Access to information, dialogue and participation
Rightful, respectful and lawful resettlement, relocation and repossession

We expect our suppliers and business partners to follow the Universal Declaration of Human Rights, ILO's eight core conventions and related UN documents and instruments. The minimum requirements to our suppliers are stated in Hydro's Supplier Code of Conduct. The Hydro Supplier Code of Conduct was updated in 2020 to be more specific on several of the requirements than the former version. The changes are based on international standards Hydro is committed to and more requirements have been included, e.g., data privacy, minimum wages, alert line and conflict minerals.

Implementation of governing documents, processes and procedures that concern the respect for human rights is a line management responsibility. Human rights risk can be addressed in the business areas' sustainability committees or similar fora. Information pertaining to Hydro's most severe human rights risks is communicated to the board of directors, the Corporate Management Board, business area management teams, and relevant parties such as union representatives.

Training and capacity building

Human rights responsibilities are part of Hydro's Code of Conduct, which is translated into 19 languages. The Code of Conduct includes our opposition to all forms of human trafficking and forced or compulsory labor. Training on the Code of Conduct is provided to employees. In addition, more specific training on relevant human rights topics is provided

to relevant functions and locations. E-learnings on Hydro's Social responsibility, including human rights, is available to all employees. For more information, see note S10.4 to the Social statements in Hydro's Annual Report 2020.

We have committed to contribute to quality education and capacity building for 500,000 people in our communities and for business partners from 2018 until end of 2030. In 2020, we reached an additional 59,000 people, accumulating to more than 100,000 since 2018. Continuous improvement of current initiatives and development of new high-impact initiatives will be important going forward.

Hydro works to strengthen and improve suppliers' performance. This may be done through dialogue, sharing of knowledge, innovation processes, incentives or supplier development programs.

Risk assessments of human and laborrights

With more than 30,000 active suppliers, Hydro risks being exposed to human rights violations including modern slavery. Hydro did not detect severe human rights impacts in our own operations in 2020, pending final results from the human rights due diligence of Albras, Alunorte and Paragominas.

In line with our risk-based approach, we aim to conduct more thorough stand-alone human rights impact assessments with mitigating action plans where there is a higher risk for adverse impacts.

We recognize that our activities impact communities in which we operate. We engage and collaborate with stakeholders both internally and externally when relevant to help inform us about, and evaluate the effectiveness of, our human rights management. This may include NGOs, unions, works councils, local associations, authorities, customers, suppliers, business partners.

We are committed to the principles of non-discrimination and to respecting the rights of vulnerable individuals and groups. We aim to include vulnerable individuals and groups in our dialogues and to pay particular attention to these groups in terms of impact and remediation. Dialogue with the employees' representatives includes involvement at an early stage in all major processes affecting employees, and

we have a tradition for open and successful collaboration between management and unions.

Where relevant, and in line with our risk-based approach, we have regular dialogue with communities, and more frequent and structured dialogue in communities with higher risk of facing adverse human rights impacts. Hydro has significant operations in Barcarena, Brazil, including the Alunorte alumina refinery and Albras aluminium plant. Local social conditions are challenging with high levels of unemployment and general poverty. We have established contact with local authorities and representatives for our neighbors, including dialogue with traditional Quilombola groups in Brazil.

The Brazilian human rights consultancy Proactiva has conducted a thorough human rights due diligence of our operations in Pará state, Brazil. The due diligence covers the alumina refinery Alunorte, primary aluminium plant Albras and the Paragominas bauxite mine, including the bauxite slurry pipeline from Paragominas to Alunorte. An action plan is under implementation, prioritized by severity for implementation by 2023. During 2020, we made progress in several areas. Examples include conducting human rights training for employees and for suppliers and improving human rights in the Bauxite & Alumina's Enterprise Risk Management and procurement processes.

Grievance, or complaint, mechanisms are important to understand the impact of Hydro's operations on the rights of individuals and groups affected by our operations. Grievances may be of any kind, including social and environmental issues. To help facilitate informed and effective participation with people who are potentially affected by our operations, we establish or facilitate access to effective grievance mechanisms where relevant. We encourage, and will not retaliate against, individuals who in good faith raise concerns regarding Hydro's respect for human rights. Hydro is committed to not interfere, retaliate or hinder access to judicial or non-judicial grievance mechanisms.

In situations where we identify adverse human rights impact that we have caused or contributed to, we work to cooperate in, promote access to and/or provide fair remediation.

Responsible behavior

We recognize that business can have an important role in supporting the fulfillment of human rights.

Hydro's social responsibility ambition is to make a positive difference by strengthening our business partners and the local communities where we operate. To do this, we target the fundamental drivers of long-term development. In line with stakeholder expectations and needs, and through strong partnerships, we aim to:

Contribute to quality education in our communities
Promote decent work throughout the value and supply chain
Foster economic growth in our communities
Strengthen local communities and institutions through capacity building on human rights and good governance

Some of our community programs are linked to mining license requirements, while others are voluntary

commitments. The programs target education, economic growth, decent work, capacity building and strengthening of institutions. Many social programs have either been put on hold or transferred to digital platforms due to Covid-19 in 2020. Several programs are linked to partnerships.

Through our operations, we contribute to the economic and human development of our employees and the communities in which we operate. We work to ensure informed and effective participation by individuals and groups who are actually or potentially affected by our operations. We respect Indigenous Peoples' rights, including the right to free, prior and informed consent, and the rights of local communities when our activities may affect their lands, territories and livelihoods.

An important contribution toward respecting human rights is to secure decent working conditions in our organization and promote the same standards in jointly operated and minority-owned companies, and with our suppliers. In Qatalum, in Qatar, where Hydro holds a 50 percent share, the large majority of employees are migrant workers. Proper working conditions for them is key to us. GIEK (Norwegian Export Credit Guarantee Agency) conducted a review of the social responsibility performance in 2019. Qatalum has followed up on the recommendations identified although some recommendations have been delayed due to travel restrictions during Covid-19.

All documents listed under References below are also valid for all our subsidiaries subject to the UK Modern Slavery Act and the Australia Modern Slavery Bill.

References

A number of Hydro's constituting documents and global directives are relevant for our work against modern slavery. These include, but are not limited to:

CD07 Hydro's Code of Conduct
GD02 Hydro's People Directive
GD03 Health, Security, Safety and Environment
GD09 Hydro's Social Responsibility
GP09-01 Corporate Social Responsibility in the supply chain
GP09-01 Hydro's Supplier Code of Conduct
GP09-03 Hydro's Human Rights Policy
The Hydro Integrity Program Handbook

All documents are available at www.hydro.com/principles

Board ofDirector'sreport in relation to the Norwegian code of practice for corporate governance

This chapter provides a detailed overview of how Hydro follows the Norwegian Code of Practice for Corporate Governance of 2018. Information that Hydro must provide in accordance with the Norwegian Accounting Act, section 3.3b, is also included. This overview should be seen in context with the general corporate governance report provided in Hydro's annual report for 2020.

The board of Norsk Hydro ASA actively supports sound management principles of corporate governance, and places emphasis on Hydro's compliance with the Norwegian Code of Practice for Corporate Governance and on explaining any deviations.

DeviationsfromtheNorwegian code of practice for corporate governance

In the Board of Directors' assessment, we have deviations from three sections in the code of practice:

Section 6, General Meeting of Shareholders: Hydro has two deviations from this section:

1) "Ensure that the members of the Board of Directors ... are present at the General Meeting": The entire Board of Directors has normally not participated in the General Meeting. Matters under consideration at the General Meeting of Shareholders have not previously required this. The Chair of the Board of Directors is always on hand to present the report and answer any questions. Other board members participate as needed. The Board of Directors considers this to be adequate.

2) "Making arrangements to ensure an independent chairman for the General Meeting": Section 9 in Hydro's articles of association states that the General Meeting is chaired by the Chair of the Corporate Assembly, or, in his or her absence, by the Deputy Chair. This arrangement has been approved by the company's shareholders through resolutions at the General Meeting.

Section 7, Nomination committee:

Hydro has one deviation from this section:

"The company's guidelines for the nomination committee should establish rules for rotation of the members of the nomination committee": The nomination committee has no formal rules on rotation of its members. The nomination committee's mandate expresses, however, the intention to "over the course of time balance the need for continuity against the need for renewal in respect of each governing organ." The Chair of the committee, who is also the Chair of the Corporate Assembly, has been a member of the committee

since 2012, became acting Chair in 2014 and was elected Chair in 2015. The other members were elected to the nomination committee in 2015, 2019 and 2020.

Section 14, Takeovers:

Hydro has one deviation from this section:

"The Board of Directors should establish guiding principles for how it will act in the event of a take-over bid": The Board of Directors has chosen not to prepare explicitly formulated general principles for handling takeover bids. The reason for this is that the Norwegian state, represented by the Ministry of Trade, Industry and Fisheries, owns 34.3 percent of the Hydro shares (as of 31.12.2020) and the Ministry of Trade, Industry and Fisheries has by virtue of the Active Ownership Report (Report to the Storting no. 8 (2019-2020)) expressed a long-term ownership perspective in the company for the purpose of retaining a leading technology and industrial company with head office functions in Norway.

1. Statement of corporate governance

Hydro follows the most recent edition of the Norwegian Code of Practice for Corporate Governance from 2018. Hydro seeks to comply with international best practice standards when preparing steering documents. The board monitors the subject of corporate governance actively and continuously. This statement was adopted at the board meeting of 9 March 2021.

2. Hydro's business

Hydro is a global aluminium company with production, sales and trading activities throughout the value chain, from bauxite, alumina and energy generation to the production of primary aluminium and rolled and extruded products as well as recycling. Based in Norway, the company has 34,000 employees involved in activities in 40 countries on all continents. Rooted in more than a century of experience in renewable energy production, technology development and partnerships, Hydro is committed to strengthening the viability of the customers and communities we serve.

The company's purpose, as stated in section 2 of its articles of association, is to engage in industry, commerce and transport, to utilize energy resources and raw materials, and to engage in other activities connected with this purpose. Its business activities may also be conducted through participation in or in cooperation with other companies.

The Board of Directors evaluates the company's objectives, strategies and risk profile at least annually and reports on it in the Board of Directors' report.

The Hydro Way represents our framework for leadership, organization and culture and is the foundation for our governance system, including our code of conduct. Hydro's Code of Conduct has been approved by the Board of Directors, which also oversees that Hydro has appropriate corporate directives for, among other things, risk management, HSE and corporate responsibility. Sustainability and social responsibility are integrated into the Group's strategy processes and are discussed in more detail in the Group's annual report.

References: Hydro's articles of association are available at www.hydro.com/governance. Learn more about The Hydro Way and Hydro's corporate directives at www.hydro.com/principles, and Board of Directors' Report 2020 in this document.

3. Equity and dividend

In the opinion of the Board of Directors, Hydro's equity capital is appropriate to the company's objectives, strategy and risk profile.

Hydro's dividend policy is in the long term to pay out, on average, 40 percent of net income as ordinary dividend over the cycle to our shareholders. The dividend policy has a floor of NOK 1.25 per share. This policy has been revised, from 2021 onwards, reflecting Hydro's ambitions to lift performance and cash returns to shareholder over the cycle. The revised dividend policy is to pay out a minimum of 50 percent of underlying net income over the cycle with a NOK 1.25 per share dividend floor.

The dividend per share is proposed by the Board of Directors, based on Hydro's dividend policy, and approved by the General Meeting of Shareholders.

At the Annual General Meeting in 2020, it was decided to authorize the board to decide on the distribution of dividends on the basis of the company's financial results for 2019. The authorization was based on the ongoing uncertainty related to the Covid-19 pandemic situation and its impact on Hydro's operations, markets and financial position, and was valid until the Annual General Meeting in 2021. The board decided to pay a dividend of NOK 2.6 billion on 12 November. This is equivalent to a dividend of NOK 1.25 per share.

The Board of Directors may obtain authorization from the General Meeting of Shareholders to buy back Hydro shares in the market. In such cases, the board will normally request that the shares are acquired in the open market, and that the authority lasts no longer than until the next general meeting.

When the General Meeting of Shareholders considers whether or not to authorize the Board of Directors to carry out share capital increases for different purposes, each purpose must be considered separately by the meeting. Such authorization will be limited in time, and will last no longer than until the date of the next general meeting. Authorization granted to the Board of Directors is restricted to specific purposes. Such authorization was last given in 2010 in connection with the Vale transaction.

4. Equal treatment ofshareholders

Hydro has one share class. All the shares have the same rights.

Transactions involving own shares are normally executed on the stock exchange. Buybacks of own shares are executed at the current market rate.

Shareholders who are registered in the Norwegian Central Securities Depository (VPS) may vote in person or by proxy at the General Meeting of Shareholders. Invitations are sent to the shareholders or to the bank/broker where the shareholder's securities account is held.

Sales of shares to employees in Norway are conducted at a discount to market value. See also item 6.

Contact between the Board of Directors and the investors is normally conducted via the management. Under special circumstances the board, represented by the Chair, may conduct dialogue directly with investors.

Regulation of share issues and preemptive rights are described in the company's articles of association.

State ownership

As of December 31, 2020 the Norwegian state, represented by the Ministry of Trade, Industry and Fisheries, owned 34.3 percent of Hydro's issued shares. Hydro holds regular meetings with the Ministry, where topics discussed include Hydro's economic and strategic development, sustainability, and the Norwegian State's expectations regarding results and returns on investments. These meetings are comparable to what is customary between a private company and its principal shareholders. The meetings comply with the provisions specified in Norwegian company and securities legislation, not least with respect to equal treatment of shareholders. As a shareholder, the Norwegian state does not usually have access to more information than what is available to other shareholders. If state participation is imperative and the government must seek approval from the Norwegian parliament (Stortinget), it may be necessary to provide the Ministry with insider information. In such cases, the state is subject to the general rules that apply to the handling of such information.

References: Learn more about major shareholders in the "Shareholder Information" section of Hydro's Annual Report 2020 and sale of the Hydro share to employees in note 9.3 (Employee remuneration) to the consolidated financial statements. Hydro's code of conduct can be found on www.hydro.com/principles. Hydro's articles of association can be found on www.hydro.com/governance. See also note 9.6 (Related party information) to the consolidated financial statements.

5. Freely negotiable shares

The Hydro share is freely negotiable. It is among the most traded shares on the Oslo Stock Exchange and is subject to efficient pricing. As of December 31, 2020 the Norwegian state, represented by the Ministry of Trade, Industry and Fisheries, owned 34.3 percent of Hydro's shares, while the

Government Pension Fund Norway owned 7.7 percent. Shareholding is based on information from the Norwegian Central Securities Depositary (VPS) as of December 31, 2020. Due to lending of shares, an investor's holdings registered in its VPS account may vary.

References: Learn more about Hydro's equity and dividend policy under Shareholder information in Hydro's Annual Report 2020.

6.General Meeting of Shareholders

Shareholders are guaranteed participation through the Annual General Meeting, which is the company's highest governing body. The company's articles of association are adopted here.

In 2020, the Annual General Meeting was held on 11 May, and 58.87% of the total share capital was represented. At the meeting, 1 206 354 649 of a total of 2 068 998 276 shareholders were present or were represented by proxy. The Annual General Meeting was conducted digitally due to the Covid-19 pandemic, with a live webcast and electronic voting on each item.

Notice of a General Meeting of Shareholders with supporting information is normally published on www.hydro.com more than three weeks in advance, and is sent to the shareholders at least three weeks before the meeting is held.

Notice of a General Meeting of Shareholders provides information on the procedures which shareholders must observe in order to participate in and vote at the meetings. Such notice also details:

the procedure for representation by proxy, including the use of a form of proxy
the right of shareholders to propose resolutions for consideration by the General Meeting of Shareholders.
the website where the notice of the meeting and other supporting documents will be made available

The following information is available at www.hydro.com:

information on the right of shareholders to propose matters for consideration by the General Meeting of Shareholders
how to make proposals for resolutions for consideration by the General Meeting or how to comment on matters for which no resolution is proposed
form of proxy

Our aim is that resolution proposals and supporting information that are distributed are sufficiently detailed and comprehensive to enable shareholders to reach decisions on the matters to be considered at the meeting.

The notification deadline for shareholders wishing to attend the General Meeting of Shareholders is no more than five days prior to the meeting.

Shares registered in a nominee account must be re-registered in the Norwegian Central Securities Depository (VPS) and be registered in the VPS on the fifth working day before the General Meeting of Shareholders in order to obtain voting rights.

Shareholders who are unable to attend in person may vote by proxy. Hydro will nominate a person who will be available to vote on behalf of shareholders as their proxy.

The General Meeting of Shareholders votes for each candidate nominated for election to the company's Corporate Assembly and nomination committee.

To the extent possible, the form of proxy will facilitate separate voting instructions for each matter to be considered by the meeting and for each of the candidates nominated for election. It is possible to vote electronically in advance.

The General Meeting of Shareholders is chaired by the Chair of the Corporate Assembly or, in his or her absence, by the Deputy Chair.

The Chair of the Board of Directors, minimum one nomination committee representative, the President and CEO, and the auditor attend the General Meeting.

References: Learn more about the General Meeting of Shareholders at www.hydro.com/investor

Deviations: See the first page of this section.

7.Nomination committee

In accordance with section 5A of Hydro's articles of association, the company must appoint a nomination committee. The main task is to provide a recommendation to the company's Annual General Meeting on the election of members to the Corporate Assembly, and a recommendation to the Corporate Assembly on the election of the shareholders' representatives on the board. In addition, the nomination committee submits proposals for remuneration to the members and deputies of the board and the Corporate Assembly, and carries out an annual evaluation of the board's work.

The nomination committee is comprised of minimum three members, maximum four, who are either shareholders or shareholder representatives. The committee's Chair and members are appointed by the General Meeting of Shareholders. At least two, including the Chair, must be elected from the shareholder-elected representatives in the Corporate Assembly. If the Chair resigns as member of the Nomination Committee during the electoral period, the Nomination Committee shall elect among its members a new Chair for the remainder of the new Chair's electoral period.

The guidelines for the nomination committee have been approved by the General Meeting of Shareholders, which also determines the remuneration of the committee. All shareholders may propose candidates for the nomination committee at any time. In order to be considered at the next ordinary election, proposals must be submitted by the end of November in the year before the election year.

The recommendations of the nomination committee include details on the candidates' background and independence.

The nomination committee ensures that due attention is paid to the interests of the shareholder community and the

company's requirements for competence, capacity and diversity. The nomination committee also takes account of relevant statutory requirements regarding the composition of the company's governing bodies.

According to its mandate, the Nomination Committee shall be receptive to external views and shall ensure that any deadlines for proposals regarding members of the Corporate Assembly, the Nomination Committee and the Board of Directors are published well in advance on the Company's website. In carrying out its duties the Nomination Committee should actively maintain contact with the shareholder community and should ensure that its recommendations are anchored with major shareholders.

All members of the nomination committee are independent of Hydro's Board of Directors, chief executive officer and other executive management staff. As the largest shareholder, the Norwegian state is represented on the nomination committee by Morten Strømgren from the Ministry of Industry and Fisheries and the Government Pension Fund Norway (Folketrygdfondet) by Nils Bastiansen.

References: Hydro's Articles of Association can be found at www.hydro.com/governance. More information about Hydro's nomination committee can be found at the same site. Members of the nomination committee are listed on www.hydro.com/governance. Nominations can be submitted electronically, also from www.hydro.com/governance

Deviations: See the first page of this section.

8. CorporateAssembly and Board of Directors: composition and independence

Detailed information about each board member can be found in the corporate governance chapter in Hydro's Annual report 2020.

All board members, members of the board committees and members of the Corporate Assembly are independent of the company's executive management and material business relationships. One member and one deputy of the Corporate Assembly are dependent of one major Hydro shareholder: Kjetil Houg is CEO of the Government Pension Fund Norway (Folketrygdfondet) and was elected as a member of the Corporate Assembly in 2020. Nils Bastiansen, who is also an employee of the Government Pension Fund Norway, is a deputy member of the Corporate Assembly. There were a few matters where certain board members were disqualified.

Thomas Schulz is the CEO of the listed company FLSchmidt. Sales and purchases between FLSchmidt and fully owned Hydro subsidiaries totaled DKK 13.9 million in 2019. Schulz was not directly involved in these transactions.

Two-thirds of the Corporate Assembly and their deputies are elected by the General Meeting of Shareholders. The nomination committee nominates candidates with a view to obtain a broad representation by the company's shareholders and other relevant stakeholders with competence in, for example, technology, finance, research, and corporate social responsibility.

The Corporate Assembly elects the Board of Directors, including its chair and Deputy Chair.

In compliance with section 5A of Hydro's articles of association, the Board of Directors consists of between nine and 11 members. These are elected for a period of up to two years.

The nomination committee aims to achieve a board composition that protects the interests of the shareholder community and the company's need for expertise, capacity and diversity. Emphasis is placed on the members complementing each other professionally and on the board's ability to function as a collegiate body.

As of December 31, 2020, nine of the board's directors owned a total of 142,968 shares. Hydro has no share purchase program for board members, with the exception of the employee representatives, who are entitled to buy shares through the Norwegian employee share purchase scheme. All share purchase transactions are conducted in compliance with the Securities Trading Act.

References: The Government Pension Fund Norway is a significant shareholder in Hydro. An overview of the members of the Corporate Assembly, the current composition of the Board of Directors and information about their independence in the nomination committee's report, and Hydro's articles of association is available at www.hydro.com

9. The work of the Board ofDirectors

The Board of Directors has established procedures for its own work and that of the company's management, with particular emphasis on clear internal division of responsibilities whereby the board has responsibility for supervising and administrating the company, and the company's management has responsibility for the general operation of the group.

Conflicts of interests and disqualification

Hydro's Code of Conduct contains guidelines for, among other things, how conflicts of interests that may arise should be dealt with. The code applies to all of Hydro's board members and employees. It is the opinion of the Board of Directors that there were no transactions that were material between the group and its shareholders, board members, Corporate Management Board or related parties in 2020, except those described under item 8.

If the Chair of the board is or has been actively involved in a given case, for example in negotiations on mergers, acquisitions etc., another board member will normally lead discussions concerning that particular case.

The board's guidelines also contain rules that any board member holding a key position in a company with competing activities may not participate in the discussion of or decision on matters where competition-sensitive issues are addressed.

The Board of Directors has an annual work plan, with particular emphasis on objectives, strategy and implementation.

Since 2001, Hydro has had an audit committee and a compensation committee. The audit committee has four members and the compensation committee three members. The shareholder-elected members are all independent of the company. In the opinion of the Board of Directors, the audit committee meets the Norwegian requirements regarding independence and competence.

The Board of Directors conducts an annual self-assessment of its work, competence and cooperation with management and a separate assessment of the Chair of the board. In addition, the audit committee performs a self-assessment. The assessment results are submitted to the nomination committee, which in turn assesses the board's composition and competence.

References: See the section Board developments in the Board of Directors' report. Information about the Board of Directors and its committees, and the board members' competence can be found in the chapter Corporate Governance in Hydro's Annual Report 2020. The Board of Directors' mandate can be found at www.hydro.com

10.Risk management and internal controls

The Board of Directors ensures that the company has sound internal controls and appropriate risk management systems through, for example, an annual review of the key risk areas and the company's internal controls. Internal audit corporate reports directly to the Board of Directors, but is for administrative purposes placed under the purview of the chief financial officer.

Hydro's internal control system includes all parts of our corporate directives, including our code of conduct and HSE and corporate social responsibility requirements. A more detailed description of the company's internal controls and risk management systems related to financial reporting can be found at www.hydro.com/governance

References: A review of Hydro's major risks can be found in the section Risk review in the Board of Directors' report.

11.Remuneration of the Board ofDirectors

The board members elected by the shareholders perform no duties for the company other than their board duties.

Remuneration is determined by the Corporate Assembly, based on the recommendation of the nomination committee. The nomination committee recommends compensation with the intention that it should reflect the board's responsibility, competence and time commitment as well as the company's complexity and global activities compared with the general level of directors' fees in Norway. Remuneration of the Board of Directors is based neither on performance nor on shares or share options.

References: All aspects of remuneration of the Board of Directors are described in note 9.4 (Board of Directors and Corporate Assembly) to the consolidated financial statements. See also Hydro's articles of association.

12.Remuneration of the executive management

The Board of Directors establishes guidelines for remuneration of members of the executive management. The guidelines are based on Hydro's remuneration policy, which is that Hydro shall pay its employees a total compensation package that is competitive, but not among the highest, and in line with good industry standards locally. he overall purpose of the remuneration policy is to strengthen the Hydro Group's ability to create value over the long-term by supporting business strategy and long-term interests, and to ensure that the Group is run in a sustainable manner.

Where appropriate the remuneration package should, in addition to the base salary, comprise a performance-based incentive, which should reflect individual performance. The company has share-based long-term incentive programs, but no share option scheme for its executive management.

The Board of Directors' statement on management remuneration has so far been made public through note 9.1 to the consolidated financial statements. Note 9.1 has been sent forward to the General Meeting of Shareholders for advisory vote, however, the part of section of note 9.1 which concerns compensation based on shares has been presented for a binding vote.

Following amendments to the Public Limited Liability Companies Act, there are new and more detailed requirements for determining salaries and other remuneration of the executive management. In accordance with this, the Board of Directors has proposed new guidelines for remuneration to executive management in Hydro, replacing the principles for remuneration of the executive management in note 9.1 to the consolidated financial statements, with effect from 2021.

The new guidelines will be presented to the Annual General Meeting in 2021, where a binding vote on these will be held in accordance with the new regulations. The guidelines will then be available on Hydro's website.

Note 9.1 to the consolidated financial statement for 2020 describes the remuneration policy for 2020. Based on the new requirements in the Public Limited Liability Companies Act, a more comprehensive remuneration description will be presented, and will be prepared for the Annual General Meeting in 2022.

References: The board's guidelines for management remuneration are described in note 9.1 (Board of Directors' statement on executive management remuneration) to the consolidated financial statements. All aspects of remuneration of management are described in note 9.2 (Management remuneration). The employee share purchase plan is described in note 9.3 (Employee remuneration). Hydro's remuneration policy is also described in Hydro's people policy, which can be found at www.hydro.com/principles

13. Information and communication

Hydro has established guidelines for the company's reporting of financial and extra-financial information; that is, requirements that go beyond financial reporting, such as the environment, social conditions and corporate governance. These guidelines are based on transparency and consideration of the requirement for equal treatment of all players in the securities market. This also pertains to contact with shareholders outside of the Annual General Meeting.

Shareholder information is available at www.hydro.com. The financial statements and annual report are sent free of charge to shareholders on request. Notice of General Meeting of Shareholders is sent directly to shareholders with known addresses unless they have consented to receive these documents electronically. All information sent to the shareholders is made available at hydro.com when distributed. Presentation of the quarterly reports as well as the annual shareholder meeting are simultaneously broadcasted through web casts. All relevant information is sent to the Oslo Stock Exchange electronically for public storage.

Hydro has emergency plans in place at the relevant levels in the organization. These plans are exercised regularly. Rules for who can speak on behalf of the company are regulated through Hydro's code of conduct.

References: A financial calendar is available in this report and at www.hydro.com/investor where also more information about web casts and the Hydro share can be found, including key legal information for shareholders in Norsk Hydro ASA. Hydro's code of conduct is available at www.hydro.com/principles

14. Takeovers

The Board of Directors will handle takeover bids in accordance with Norwegian law and the Norwegian Code of Practice for Corporate Governance. There are no defense mechanisms against acquisition offers in our articles of association or in any underlying steering document. We have not implemented any measures to limit the opportunity to acquire shares in the company. See also item 5.

Deviations: See the first page of this section.

15.Auditor

The external auditor annually presents the main features of the audit plan to the audit committee.

The external auditor participates in considering relevant matters in meetings of the audit committee. The minutes from these meetings are distributed to all the board directors. This practice is in line with the EU audit directive. Each year the auditor expresses its opinion on internal control procedures to the audit committee, including identified weaknesses and proposals for improvements.

The external auditor meets with the board of directors when the company's annual financial statements are discussed. In the meetings the auditor reviews material changes in the company's accounting policies, assess material accounting estimates and any other material matters on which the auditor and management may disagree, and identify weaknesses in and suggest improvements to Hydro's internal controls. The board of directors holds meetings with the external auditor without members of the corporate management present.

Hydro places importance on independence and has clear guidelines regarding the use of services from external auditors. All services from the external auditor, including non-audit services, are subject to pre-approval as defined by the audit committee.

Remuneration of the auditor is stated in the annual report. It is also included as a separate agenda item to be approved by the annual general meeting of shareholders.

The new Public Audit Act entered into force on 1 January 2021. Extended tasks related to selection of an external auditor, purchase of audit services and follow-up of the external auditor are handled by the audit committee.

In 2020, the general meeting of shareholders chose KPMG as external auditor for the group with effect from the reporting period 2020in accordance with a tender process. KPMG has been the auditor for Hydro since 2010.

References: Learn more about the external auditor in the sections Corporate Governance and Viability Performance statements in Hydro's Annual Report 2020, note 10.4 (Auditor's remuneration) to the consolidated financial statements.

Additional information

Terms and definitions

ADRs	American Depositary Receipts, evidencing a specified number of ADSs
ADSs	American Depositary Shares, each ADS representing one deposited ordinary share
Alunorf	Aluminium Norf GmbH
Alunorte	The world's largest Alumina refinery outside China, situated in Barcarena in Northern Brazil. Hydro owns 92 percent
AMPS	Aluminium Metal Production System. Hydro's best practice system and standard for world-class production and improvement in our primary metal business
Articles of Association	The articles of association of the Company, as amended and currently in effect
Audit Committee	The audit committee of the Company's Board of Directors
BABS	Bauxite & Alumina's best practice system, based on AMPS (see above) and adjusted to B&A needs
BAT	Best Available Techniques for pollution prevention and control
B&A	Hydro's Bauxite & Alumina business area
CO2 equivalents (CO2e)	A measure used to compare the emissions from various greenhouse gases based upon their global warming potential
Code	The U.S. Internal Revenue Code of 1986, as amended
Company	Norsk Hydro ASA, a Norwegian public company limited by shares, or Norsk Hydro ASA and its consolidated subsidiaries, as the context requires
Compensation Committee	The compensation committee of the Company's Board of Directors
Consolidated Financial Statements	The consolidated financial statements and notes included in the Company's annual report to shareholders
Corporate Assembly	The corporate assembly, a body contemplated by Norwegian companies' law, with responsibility, among other things, for the election of the members of the Company's Board of Directors and nomination of the external auditor
Corporate Management Board	The corporate management board established by the Company's President and Chief Executive Officer to assist him in discharging his responsibilities
CRU	CRU International Limited
Disclosure Committee	The disclosure committee of the Company, comprised of members of senior management, which is responsible for reviewing financial and extra-financial information before it is made public
DRS1	The old bauxite residue deposit area at Alunorte, still being used to deposit bauxite residue, processed by state-of-the-art press filters
DRS2	The new bauxite residue deposit area at Alunorte, which was under commissioning when Barcarena was flooded following extreme rainfalls in February 2018
EEA	European Economic Area
EEA Agreement	The European Economic Area Agreement
EFTA	European Free Trade Association
EU	European Union
GHG	Greenhouse gas emissions
GRI Standards	Globally recognized standards for sustainability reporting
HSE	Health, security, safety and environment
Hydro	Norsk Hydro ASA and its consolidated subsidiaries
Hydro Aluminium	The aluminium business of Hydro, comprising the segments Bauxite & Alumina, Aluminium Metal, Rolling, Extrusions and Energy
Ibama	Brazilian Institute of the Environment and Renewable Natural Resources is a federal environmental agency under the Ministry of Environment
ILO	International Labor Organization
kWh	Kilowatt hour
LME	London Metal Exchange
mm	Millimeter
Mt (or mt)	Metric tonne (1,000 kilograms)
NOK	Norwegian kroner
Nomination Committee	The nomination committee provided for in the Company's Articles of Association and operating under a charter established by the shareholders' representatives in the Corporate Assembly
OSE	Oslo Stock Exchange
Semas	The Secretary of State for Environment and Sustainability is the environmental agency in the state of Pará
TAC	"Term of Adjustment of Conduct" is an agreement between Alunorte, Ministério Público and the Government of Pará/Semas and regulates certain technical studies and improvements, audits, payments of fines, and payments for food cards to families living in the hydrographic area of the Murucupi river
TC	"Term of Commitment" is a social agreement, in addition to TAC, between Alunorte and the Government of Pará. The agreement addresses efforts and investments related to the social development of communities in Barcarena
tonne, mt	One metric tonne (1,000 kilograms or 2,205 pounds)
TWh	Terawatt hour (one billion kilowatt hours)
VPS or VPS System	The Norwegian Central Securities Depository, Verdipapirsentralen
Workers	Person that performs work directly or indirectly for the company. It includes, but is not limited to, employees
WTO	World Trade Organization

Cautionary note

Certain statements included in this announcement contain forward-looking information, including, without limitation, information relating to (a) forecasts, projections and estimates, (b) statements of Hydro management concerning plans, objectives and strategies, such as planned expansions, investments, divestments, curtailments or other projects, (c) targeted production volumes and costs, capacities or rates, start-up costs, cost reductions and profit objectives, (d) various expectations about future developments in Hydro's markets, particularly prices, supply and demand and competition, (e) results of operations, (f) margins, (g) growth rates, (h) risk management, and (i) qualified statements such as "expected", "scheduled", "targeted", "planned", "proposed", "intended" or similar.

Although we believe that the expectations reflected in such forward-looking statements are reasonable, these forward-looking statements are based on a number of assumptions and forecasts that, by their nature, involve risk and uncertainty. Various factors could cause our actual results to differ materially from those projected in a forward-looking statement or affect the extent to which a particular projection is realized. Factors that could cause these differences include, but are not limited to: our continued ability to reposition and restructure our upstream and downstream businesses; changes in availability and cost of energy and raw materials; global supply and demand for aluminium and aluminium products; world economic growth, including rates of inflation and industrial production; changes in the relative value of currencies and the value of commodity contracts; trends in Hydro's key markets and competition; and legislative, regulatory and political factors.

No assurance can be given that such expectations will prove to have been correct. Hydro disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Norsk Hydro ASA NO-0240 Oslo Norway

T +47 22 53 81 00 www.hydro.com

AI assistant

Norsk Hydro ASA — Annual Report 2020

3684_10-k_2021-03-12_fb575891-f7f2-4f5e-921c-57887840f5f5.pdf

Hydro's reporting 2020

Content

12 Board of Directors' report

40 Business description

74 Performance and targets

86 Viability performance

112 Risk review

124 Shareholder information

130 Corporate governance

140 Financial statements

230 Viability performance statements

278 Appendices to the Board of Directors' report

313 Additional information

Yearin brief

Progresstowards profitability and sustainability in an extraordinary year

Key figures

6,051 MNOK

7.7 BNOK

8.95 mt CO2e

Hydro's main inputs and outcomes 2020

Hydro and theUNSustainable development goals

Emerging strongerfrom an extraordinaryyear

Lifting profitability, driving sustainability

Hydro 2025

2. Diversify and grow in recycling, renewable energy and batteries

Leading the way

Board and Management

Board ofDirectors

Corporate Management Board

Board of Directors' report

Quick overview

Strategic direction and key developments

Seizing opportunities where capabilities match megatrends

Strengthening position in low-carbon aluminium

Cost competitive asset base

Strong market and low carbon position

Diversifying into strategic growth areas

Recycling

Renewable energy

Batteries

2020 Status and targets

2020 Developments

Sale of Rolling business areas

Investorinformation

Financialresults

Underlying financial and operating results

Impairments and transaction gain

Liquidity, financial position, investments

Reported EBIT and net income

Market developments and outlook

Upstream market developments

Downstream market developments

Energy market developments

Risk review

ERM in Hydro

Overview of Hydro'smain risks

Description of Hydro's main risks

Hydro's main strategic risks

Risk development

Risk mitigation

Hydro's main incident risks

Risk overview

Risk development

Risk mitigation

Hydro's main HSE-risks

Risk overview

Risk development

Risk mitigation

Hydro'sfinancial position and key financial exposures

Key financial exposures

Sensitivities with 100% production

Commodity price sensitivity +10%

Compliance, controls and procedures

Research and development

Society

Environment

People

Norsk Hydro ASA Annual Report 2020