Norsk Hydro ASA — M&A Activity 2010

May 2, 2010

Hydro takes over Vale's aluminium business in transforming transaction

NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE

UNITED STATES, AUSTRALIA, CANADA OR JAPAN

(Oslo, May 2, 2010) Norsk Hydro ASA has signed an agreement to take over Vale

S.A's aluminium businesses to form a resource-rich and fully integrated

aluminium company, securing Hydro's bauxite supplies in a 100-year perspective.

Summary

* Hydro has entered into an agreement to combine the majority of Vale's

bauxite, alumina and aluminium assets with Hydro's existing business

* The transaction transforms Hydro into a fully integrated global aluminium

company securing the company's bauxite supplies in 100-year perspective

* Vale will receive a total consideration comprising USD 1.1 billion in cash

and new Hydro shares equivalent to 22 percent ownership of its outstanding

shares.

* As of April 30 and considering assumed net debt, this equates to a total

consideration of USD 4.9 billion

* Following the transaction, Hydro will have a long position in bauxite and

alumina, the key input factors for aluminium production in addition to

energy

* To partly finance the transaction, support the company's investment grade

rating and capacity to implement future projects, Hydro intends to launch a

fully underwritten rights issue of NOK 10 billion (approximately USD 1.75

billion).

The transaction

The transaction will provide Hydro with high-quality assets in Brazil,

comprising full control and ownership of Paragominas, one of the largest bauxite

mines in the world, 91 percent ownership in the world's largest alumina refinery

Alunorte, 51 percent ownership in the Albras aluminium plant and 81 percent

ownership in the CAP alumina refinery project.

The combination will considerably strengthen Hydro's position in bauxite mining

and alumina refining, which, along with energy, are the most important input

factors in aluminium production. The high quality and efficient cost base of the

contributed assets will also significantly improve Hydro's financial position.

Vale will at closing of the transaction contribute 60 percent in Paragominas,

57 percent in Alunorte, 51 percent in Albras and 61 percent in the CAP alumina

refinery project in return for a consideration comprising USD 1.1 billion of

cash and 22 percent of Hydro's outstanding share capital at that time. Hydro

will also assume USD 0.7 billion of net debt within the contributed businesses

as of December 31, 2009. Prior to the combination, Hydro already has 34 percent

ownership in Alunorte and 20 percent ownership in CAP.

Hydro has the right to take over the remaining 40 percent stake in Paragominas

in two installments, in 2013 and 2015 respectively, against a cash payment of

USD 0.2 billion for each installment. In total, around 3,600 Vale employees will

become part of Hydro as a result of the transaction, representing significant

addition of competence, expertise and skills within bauxite, alumina and

aluminium operations.

Vale, the world's second-largest metals and mining company, will receive 22

percent ownership in Hydro as part of the combination, extending the close to

40 years partnership between the two companies from their current joint

ownership in the Alunorte alumina refinery, the MRN bauxite mine and the CAP

alumina refinery project.

The transaction also comprises additional bauxite licenses, a volume off-take

agreement for Vale's 40 percent stake in the MRN bauxite mine, in which Hydro

holds 5 percent ownership, and an alumina sales contract portfolio.

The rights issue and the private placement towards Vale are subject to approval

by Hydro's general meeting of shareholders. The transaction with Vale also needs

the consent of joint-venture partners in Vale assets, as well as regulatory

approvals. Hydro considers the regulatory risks attached to the combination to

be limited.

The closing of the transaction with Vale is expected in fourth quarter 2010.

According to the agreement, Vale cannot increase its ownership in Hydro beyond

the 22 percent contributed as part of the transaction, will retain its shares in

Hydro for at least two years after the transaction closes and following the

two-year period not sell shares constituting more than 10 percent of Hydro's

issued shares to any single buyer or group.

Vale will have one representative on Hydro's Board of Directors, subject to

approval by Hydro's governing bodies prior to closing of the transaction.

Hydro has hedged the majority of the net aluminium price exposure in the

contributed assets until the end of 2011, amounting to 670,000 tonnes with an

expected average price of about USD 2,400 per tonne for the entire period.

"This transforming and value-creating combination takes Hydro to a new league in

the global aluminium industry. The deal will secure Hydro equity bauxite and

alumina ownership and significantly improve our competitive position, making us

more financially robust and well-positioned for growth," said Hydro's President

and CEO Svein Richard Brandtzæg. "Vale is highly recognized for its strong

social and environmental track record and its commitment to transform mineral

resources into sustainable development. Hydro will continue to build on these

high standards," Brandtzæg added.

Projects in Hydro's growth pipeline include the construction of the CAP alumina

refinery and the expansion of the Paragominas bauxite mine in Brazil and a

possible second phase of the Qatalum aluminium plant in Qatar. In Norway, Hydro

will continue to develop the Holsbru hydropower project and the plan for a new

recycling plant at Karmøy.

Rights Issue

Hydro's largest shareholder, the Norwegian state, represented by the Ministry of

Trade and Industry, owns 43.8 percent of the issued shares and is supportive of

the transaction and the rights issue. The Ministry of Trade and Industry will

put forward a parliamentary proposition to participate for its pro rata share of

the rights issue, which is expected to be obtained by mid-June 2010. The

Government Pension Fund Norway (Folketrygdfondet), owner of 5.9 percent of the

issued shares, is supportive of the combination and the rights issue, and has

entered into an agreement to underwrite and subscribe for its pro rata share of

the rights issue.

The remaining share of the rights issue is underwritten by Citi, DnB NOR Markets

and BNP Paribas, subject to customary terms and conditions.

Hydro will call for an extraordinary general meeting, which is expected to be

held towards the end of June 2010, shortly after the expected parliamentary

approval of the rights issue. The subscription price in the rights issue will be

set shortly before the extraordinary general meeting. The subscription period

will commence shortly following the extraordinary general meeting, with the

rights issue targeted for completion in July 2010.

At closing of the combination and following the rights issue, a private

placement to Vale of 22 percent of Hydro's outstanding shares will result in the

Norwegian state's ownership in the company being reduced from 43.8 percent to

approximately 34.5 percent.

Description of contributed assets

Paragominas is the world's third-largest bauxite mine with a current annual

capacity of 9.9 million tonnes. A planed expansion to supply the CAP refinery

will increase Paragominas' capacity to 15 million tonnes.

Alunorte is the world's largest alumina refinery, with a first-decile conversion

cost profile and an annual capacity of 6.3 million tonnes. Hydro already owns

34 percent of Alunorte, and will increase its stake to 91 percent following the

transaction.

Albras is a hydro-powered aluminium plant operating in the second quartile of

the industry cash cost curve, with an annual capacity of 455,000 tonnes. Hydro

will own 51 percent of Albras as a result of the transaction.

The CAP project is an alumina refinery under development, with an initial annual

capacity of 1.86 million tonnes. The project has an expansion potential up to

7.44 million tonnes per year, with bauxite supply primarily from Paragominas.

Hydro already owns 20 percent of CAP, and will increase its ownership to 81

percent following the transaction.

All of the assets to be contributed are located in Brazil

USD million  2007 2008 2009

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Revenues 2 389 2 662 1 871

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EBITDA 887 734 22

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Depreciation -103 -149 -202

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EBIT 784 585 -179

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Income (loss) before

taxes 967 343 141

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Net income 751 283 107

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Net income attributable

to minority shareholders 328 97 86

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Net income attributable

to Hydro shareholders 423 186 21

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USD million December 31,  2007 December 31, 2008 December 31, 2009

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Total assets 5 376 4 854 6 172

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Total liabilities 1 427 1 465 1 608

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Non-controlling interests 1 738 1 470 2 012

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Majority equity 2 212 1 918 2 552

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Total equity 3 949 3 388 4 564

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The financial information for the assumed interests has been derived from Vale's

audited consolidated financial statements, which has been prepared in conformity

with US GAAP. The information represents carve-out combined financial

information for the historical operations, assets and liabilities covered by the

transaction, prepared by Vale management. The condensed combined financial

information is not audited.

Expected timeline

Timing Event

Early June Publication of information memorandum

Late June Extraordinary general meeting in Hydro

Late June Publication of prospectus

July Rights issue completed

End-2010 Transaction closing

Press conference, analysts and investor presentation, conference call

* May 2, 1700 CET: Press conference with webcast (in Norwegian) at Hydro's

Oslo headquarters

* May 3, 0900 CET: Analyst and investor presentation with webcast (in English)

at Hydro's Oslo headquarters

* May 3, 1600 CET: Telephone conference for the international financial

market. Phone-in details will be made available on www.hydro.com

Financial and legal advisors

In connection with the transaction, Citi is serving as Hydro's financial advisor

while law firms Thommessen AS and Latham & Watkins LLP are serving as legal

advisors.

In connection with the rights issue, Citi, DnB NOR Markets and BNP Paribas will

act as joint global coordinators and joint bookrunners to Hydro, while

Thommessen AS and Latham & Watkins LLP will serve as legal advisors.

Press contacts

* Contact: Halvor Molland

Cellular: +47 92979797

E-mail:   Halvor.Molland@hydro.com

* Contact: Erik Brynhildsbakken

Cellular: +47 41751271

E-mail:erik.brynhildsbakken@hydro.com

Investor contact

* Contact: Stefan Solberg

Cellular: +47 91727528

E-mail:   Stefan.Solberg@hydro.com                                   *********

Cautionary note

Certain statements included within this announcement contain forward-looking

information, including, without limitation, those relating to (a) forecasts,

projections and estimates, (b) statements of management's plans, objectives and

strategies for Hydro, such as planned expansions, investments 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, as well as (i) statements preceded by "expected", "scheduled",

"targeted", "planned", "proposed", "intended" or similar statements.

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 aluminium business; 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.

This announcement is not an offer for sale of securities in the United States or

any other country. The securities referred to herein have not been registered

under the U.S. Securities Act of 1933, as amended (the "U.S. Securities Act"),

and may not be sold in the United States absent registration or pursuant to an

exemption from registration under the U.S. Securities Act. Hydro does not intend

to register any portion of the offering of the securities in the United States

or to conduct a public offering of the securities in the United States. Any

offering of securities will be made by means of a prospectus that may be

obtained from Hydro and that will contain detailed information about the company

and management, as well as financial statements. Copies of this announcement are

not being made and may not be distributed or sent into the United States,

Canada, Australia, Japan or any other jurisdiction in which such distribution

would be unlawful or would require registration or other measures.

In any EEA Member State that has implemented Directive 2003/71/EC (together with

any applicable implementing measures in any member State, the "Prospectus

Directive"), this communication is only addressed to and is only directed at

qualified investors in that Member State within the meaning of the Prospectus

Directive.

This announcement is only directed at (a) persons who are outside the United

Kingdom; or (b) investment professionals within the meaning of Article 19 of the

Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the

"Order"); or (c) persons falling within Article 49(2)(a) to (d) of the Order; or

(d) persons to whom any invitation or inducement to engage in investment

activity can be communicated in circumstances where Section 21(1) of the

Financial Services and Markets Act 2000 does not apply.

This information is subject of the disclosure requirements acc. to §5-12 vphl

(Norwegian Securities Trading Act)

[HUG#1410924]