Investor presentation February

Transcription

1 Investor presentation February

2 Cautionary note in relation to certain forwardlooking statements Certain statements contained in this announcement constitute forward-looking information within the meaning of Section 27A of the US Securities Act of 1933, as amended, and Section 21E of the US Securities Exchange Act of 1934, as amended. In order to utilize the safe harbors within these provisions, Hydro is providing the following cautionary statement. Certain statements included within this announcement contain (and oral communications made by or on behalf of Hydro may 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, drilling activity 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 Hydro believes 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 Hydro s 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, world economic growth and other economic indicators, including rates of inflation and industrial production, trends in Hydro s key markets, and global oil and gas and aluminium supply and demand conditions. For a detailed description of factors that could cause Hydro s results to differ materially from those expressed or implied by such statements, please refer to the risk factors specified under Risk, Regulation and Other Information Risk Factors on page 92 of Hydro s Annual Report and Form 20-F 2005 and subsequent filings on Form 6-K with the US Securities and Exchange Commission. 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. Use of non-gaap financial measures/ Cautionary note in relation to oil and gas reserves With respect to each non-gaap financial measure Hydro uses in connection with its financial reporting and other public communications, Hydro provides a presentation of what Hydro believes to be the most directly comparable GAAP financial measure and a reconciliation between the non-gaap and GAAP measures. This information can be found in Hydro's earnings press releases, quarterly reports and other written communications, all of which have been posted to Hydro's website ( The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this presentation material, such as expected recoverable resources, that the SEC s guidelines strictly prohibit us from including in filings with the SEC. Investors are urged to consider closely the disclosure in our Form 20-F, SEC File No , available from us at our Corporate Headquarter: Norsk Hydro, N-0240 Oslo, Norway. You can also obtain this form from the SEC by calling SEC

3 Table of contents A brief review - Q4 results Investor presentation - Executive summary - Strategy new Hydro - Oil & Energy - Hydro priorities Additional Information -Finance -Aluminium - Oil & Energy Investor Relations in Hydro - Contact information

4 A brief review Fourth quarter 2006 results 4

5 Highlights 2006 Strategic decision to merge oil and gas activities with Statoil Record 2006 results Q4 hit by US Gulf of Mexico write-downs and unrealized effects Strong results in Aluminium Significant restructuring and repositioning of Aluminium Continued strong market conditions 5

6 Consolidated income statements NOK million Q Q Q Operating revenues Operating income Non-consolidated investees Financial income (expense), net Other income (loss), net Income continuing operations before tax and minority interest Income tax expense Minority interest (741) (9 786) (185) Income from continuing operations Net income (4 287) 22 Income from discontinued operations (79) (579) (6 411) Earnings per share from continuing operations - NOK Earnings per share NOK For calculation of EPS, Q4 2006: , Q3 2006: , Q4 2005: shares. Previously reported earnings per share and total number of outstanding shares have been adjusted to reflect the 5-for-1 stock split effective 10 May

7 Operating income NOK million Q Q Q Exploration and Production Energy and Oil Marketing Eliminations (556) Oil & Energy Aluminium Metal Aluminium Products Other Activities Corporate and Eliminations 849 (499) 707 (2 130) (202) (1 124) (98) 34 Total

8 Oil & Energy highlights Realized oil price: USD 57.8 per bbl in Q4 Oil and gas production: boe in Q4, boe in new discoveries in Q4 Ormen Lange/Langeled on track 91 percent complete end of 2006 US Gulf of Mexico impairment of NOK 3.4 billion after tax 8

9 Oil & Energy key figures Operational data 2006 Q Q Oil and gas production (1 000 boe/day) Realized oil price, USD/boe Realized oil price, NOK/boe Realized gas price, NOK/Sm³ Exploration expense, NOK million Operating income, NOK million 2006 Q Q Exploration and Production Energy and Oil Marketing Eliminations Oil & Energy (556)

10 High exploration activity in wells completed 26 discoveries - Norway: 6, US GoM: 8, Libya: 7, Other:5 5 wells drilling by end of year Activity of NOK 5.9 billion 10

11 Oil & Energy prospects 2007 production target of boed Ormen Lange start-up Peregrino plan for development and operation first half 2007 High exploration activity Proposed merger of Hydro s oil and gas activities with Statoil 11

12 Aluminium activities key figures Operational data 2006 Q Q Realized aluminium price, USD/ton Realized aluminium price, NOK/ton Primary aluminium production, tons Operating income, NOK million 2006 Q Q Aluminium Metal Aluminium Products Eliminations (83) (98) 849 (499) (1 124) 13 Aluminium (1 099) Special items Adjusted operating income

13 Aluminium Metal highlights Financial performance at record level in EBITDA NOK 9.1 billion - Operating income NOK 6.4 billion - RoaCE 18.7 percent Increased raw material and energy costs Realized aluminium price USD per ton in Q4 Q4 negatively impacted by unrealized effects on LME and power contracts 13

14 Aluminium Metal operating income Adjusted for special items NOK million Adjusted operating income Reported operating income

15 Aluminium Metal prospects Continued high aluminum prices 80 percent of expected Q1 production sold at USD/ton - Including full effect of strategic hedges Qatalum progressing toward investment decision mid

16 Aluminium Products highlights Weak results, restructuring continues Exit of automotive business ongoing - Divestment of Castings and Meridian signed - Structures sales process continues - Magnesium closure costs NOK 384 million in Q4 Improved volumes and margins in Rolled Products and Extrusion 16

17 Aluminium Products operating income Adjusted for special items NOK million Rolled Products Volumes improving, seasonal 197 reduction in Q4 compared to Q3 - Slight increase in margins Extrusion - Margin and volume improvement (77) Adjusted operating income Reported operating income (370) (83) Automotive - Continued weak margins and volumes - Excluding Castings (discontinued operations) Focus on cash generation in EBITDA NOK million - Investments NOK million 17

18 Aluminium Products prospects Portfolio restructuring to be completed in 2007 Strong margins in Extrusion continues Improved margins in Rolled Products European market for Rolled Products, Extrusion and Building Systems to remain strong 18

19 Investor presentation - Executive summary 19

20 Financial overview 2006 NOK billion Revenues*: 201 Adj. EBITDA: 77 Operating income: 52 4 % 3 % 2 % 12 % 2 % 12 % 25 % 49 % 22 % 83 % 86 % Net Income: 17 Investments: 27 Capital Employed: 96 5 % 5 % 2 % 7 % 16 % 6 % 32 % 63 % 86 % 25% 53 % Oil & Energy Aluminium Metal Aluminium Products * Divisional external revenues Other 20

21 Consolidated income statements NOK million Operating revenues Operating income Non-consolidated investees Financial income (expense), net Other income, net Income from continuing operations before tax and minority interest Income tax expense Minority interest (37 598) (202) Income from continuing operations Income from discontinued operations Net income Earnings per share from continuing operations NOK Earnings per share NOK (1 889) (30 271) (118) For calculation of EPS, 2006: shares, 2005: shares Previously reported earnings per share and total number of outstanding shares have been adjusted to reflect the 5-for-1 stock split effective 10 May

22 Income from continuing operations By quarter* NOK million US GoM impairment Gains from divestments Accumulated * Automotive Casting only reported as discontinued operations in 2005 and

23 Adjusted EBITDA NOK million Accumulated

24 Earnings per share NOK* * Continuing operations. Recalculated to reflect 5 for 1 share split 10 May

25 RoaCE by business area Oil & Energy Aluminium Metal Aluminium Products 23.4% 26.2% 16.2% 17.4% 18.7% 7.7% 7.9% 3.3% 1.7% 3.7% -3.2% -1.3%

26 Return on capital employed RoaCE 16.6% 14.9% 12.9% 8.4%

27 Adjusted net debt/equity ratio Interest-bearing debt + net pension liability (tax adjusted) + operating lease commitments (discounted) cash and cash equivalents other liquid assets divided by shareholders equity + minority interest 27

28 Dividends NOK/share Recalculated to reflect 5 for 1 share split effective 10 May

29 Payout to shareholders : NOK 37 billion NOK million Dividend Buyback Dividend allocated to the year for which the dividend was paid. The (actual) payment of the dividend is done the year after. Buyback allocated to the year when the buyback transactions were executed. 29

30 Dividend policy 30% payout ratio over time 1 Year 5 year Target 33 % 31 % 26 % 44 % 35 % 36 % Dividend policy for new Hydro to be defined by Board of Directors in 2007 High commodity prices have supported current payout per share level 18 %

31 Strategy for new Hydro 31

32 Strong results for new Hydro businesses in 2006 NOK billion Operating revenues Adjusted EBITDA Depreciation Operating income Investments Aluminium Metal (1.7) Aluminium Products (1.7) (0.1) 1.3 Power (0.1) Polymers (0.4)

33 Transaction background The Boards of Hydro and Statoil have agreed to recommend a merger of Hydro s oil & gas activities with Statoil to form a new oil and gas company For Hydro s shareholders this means: - They will hold 32.7 percent of the new company and receive shares in the new company for each Hydro share that they hold upon closing of the transaction - They will retain their shares in Hydro Hydro continues as the world s third largest integrated aluminium company - Attractive investment opportunities - Experienced management team and highly competent workforce - Financially strong 33

34 Net debt development Net interest bearing debt - Hydro s oil and gas activities: NOK 1 billion at year end New Hydro: NOK 0.5 billion at year end Hydro s oil and gas activities to fund proposed 2006 dividend NOK 6.1 billion - NOK 5.00 per share - New Hydro to fund repurchase of the Norwegian State s proportionate share of the 2006 buyback authorization - NOK 2.7 billion Net pension liability of NOK 11.8 billion - NOK 7.5 billion new Hydro preliminary pre-tax estimate New Hydro and Hydro s oil and gas activities will have separate cash flows from 1 January 2007 Proceeds from divestment of Automotive Castings and Meridian in NOK 4.3 billion will be received by new Hydro 34

35 Key milestones 18 December 2006 Transaction announced 20 February preliminary results March 2007 Prospectus (F-4) to SEC 8 May 2007 Annual General Meeting Second quarter 2007 Extraordinary General Meeting Third quarter 2007 Expected closing 35

36 Hydro going forward One of the world's three leading integrated aluminium companies Norway's second largest power producer employees of which in Norway Annual turnover more than NOK 100 billion Operating income 2006 NOK 8.5 billion* Operations in more than 30 countries * Excluding corporate costs 36

37 Development in market capitalization NOK billion Hydro Yara "New'' Hydro Oil & Energy * * 16 February 2007 close. Aluminium and Oil & Energy based on transaction equation adjusted for dividend payments 37

38 Competitive share price development 1 January 2002 to 31 December January 2006 to 16 February 2007 Hydro 314 % Hydro 56% Statoil 302 % BG Group 40% BG Group 231 % ExxonMobil 34% ENI 172 % Alcan 34% ConocoPhillips 139 % Chevron 25% RepsolYPF 137 % Alcoa 18% Total 105 % ENI 15% ExxonMobil 95 % ConocoPhillips 14% Chevron 64 % Statoil 13% Shell 48 % RepsolYPF 12% BP 44 % Total 11% Alcan 36 % Shell 2% Alcoa -16 % BP -2% -20 % 30 % 80 % 130 % 180 % 230 % 280 % 330 % -10% 0% 10% 20% 30% 40% 50% 60% Source: Yahoo Finance, NYSE, USD 38

39 Strategy for long-term growth Building on a leading, global position in aluminium metal production Pursuing new, attractive opportunities in alumina and primary aluminium Leveraging strong platforms in Extrusion, Precision Tubing, Building Systems and Rolled Products Power production is a strategic asset Solar power: Exciting growth prospects 39

40 Strong aluminium industry position Integrated Emerging Market Mining & Metal Manufacturing Primary Rolled Extrusions Other Production in tonnes in Alcoa¹ Alcan Hydro United Rusal Chalco Hindalco BHP Billiton 1. Alcoa pro forma for SAPA JV on extrusion. 2. Pro forma figures for acquisition of Corus Aluminium s rolled and extrusions businesses 3. Pro forma figures for acquisition of Novelis rolled businesses Rio Tinto CVRD Novelis/ Hindalco 3 3 Aleris 2 Sapa/ Alcoa JV 40

41 Competitive return on capital RoaCE 16% 14% Peer range * Aluminium 12% 10% 8% 6% 4% 2% 0% * Alcoa and Alcan Source: Bloomberg return on capital methodology. 12 month rolling Q Q Hydro figures are approximations to Bloomberg methodology. 41

42 Strong Aluminium cash flow NOK billion Accumulated EBITDA Accumulated investments

43 Aluminium value chain 2006 Million tons Bauxite* % Bauxite equity coverage Equity production 2.2 million tons annually MRN: 0.9 mill tons - Brazil Alumina** Alpart: 1.3 mill tons - Jamaica 55% Alumina equity coverage Aluminium Metal Primary aluminium 1.8 Equity production: 1.9 million tons annually Alunorte: 1.3 mill tons - Brazil Alpart: 0.6 mill tons - Jamaica Metal products Aluminium Products Equity Long term contracts Remelt Third party sales Automotive*** * Bauxite volume relative to equivalent primary aluminium volume: Approx. 4.5 tons bauxite per ton primary aluminium ** Alumina volume relative to equivalent primary aluminium volume: Approx. 2 tons alumina per ton aluminium *** Excluding Automotive Castings and Magnesium Castings volumes Divestments 43

44 Aluminium Metal 44

45 Aluminium Metal Strong focus on return on capital Restructuring on track Operational excellence and production creep Long-term profitable growth Financials Operating revenues* NOK 68.4 billion - Adjusted EBITDA NOK 9.1 billion - Investments NOK 2.0 billion * Including internal sales to Aluminium Products of NOK 24.7 billion. External revenues NOK 43.7 billion. 45

46 China driving the demand for primary aluminium 4 percent annual growth rate Million ton China Other 35% 50 34% 40 31% 30 13% 22% % 78% 69% 66% 65% E 2015E 2020E Source: CRU

47 Aluminium price remains historically high USD per ton LME (3-month avg.) LME forward Primary aluminium LME Q average Q end USD/ton Q average Q end Q average Q end Q average Q end Average Average Per 16 February 2007, weekly average 47

48 Upstream aluminium positioned for growth Bauxite Alumina Primary aluminium Casthouse products 25 percent equity bauxite position 55 percent equity alumina position at low cash cost 1.7 million tons annually primary production in 2007, target 2 million tons annually 2010 Global leader in casthouse technology and products 48

49 Restructuring executed improved cost position Restructuring on track closing tonnes Restructuring costs below NOK 1 billion Improving average cash cost USD/tonne 49

50 Further capacity creep in existing plants Increased primary production in tons per year* Low capital expenditures per ton - Debottle-necking - Increased amperage Strong profitability EBITDA contribution in NOK 500 million * All prebake lines excl. Stade E E 50

51 Production volumes * tons E 2010E * Including closed or to-be-closed capacity of Hamburg, Stade and Søderberg at Årdal, Høyanger. Qatalum in full production from mid

52 Repositioning enhances smelter portfolio Smelter geography Smelter size Europe Outside Europe Above tons Below tons % 33% 29% 43% % 83% 67% 100% 71% 57% E E All figures in tons per year 52

53 Industry costs rising Hydro s position improved Significant shift in industry cost curve* Cost (USD/ton) Hydro s 2006 position Hydro s 2003 position average average Alumina - Two thirds of cost increase - Coming down from peak Energy - Oil and gas prices - Coal prices - CO 2 emission trading - Supply/demand for electricity Other raw materials 0 0 % 25 % 50 % 75 % 100 % Cumulative production Freight * Source: CRU (Corporate operating cost definition) 53

54 Increase in smelting cost Cost per tonne for Hydro s smelter capacity Index 2005=100* 150 Other Alumina Power Cost development NOK 1.2 billion total power cost increase** - New contracts and increased grid cost Norway and Germany - Alumina cost increase - 60 percent equity position - 40 percent contracts linked to LME Outlook Power cost expected to increase - Approx. NOK 0.3 billion in Germany and Norway** - Stable alumina cost E 2007E Longer term - Improved alumina equity position - Satisfactory power position LME USD/tonne * Liquid metal cash cost (CRU definition). Excluding Hamburg. Equity alumina at cash production cost ** For ongoing operations 54

55 Long-term power contracts ensure predictable cost levels going forward Contract portfolio Norway* Australia Canada 14 TWh 3.5 TWh 1.6 TWh Power supply and price secured Norway: gradual increase in power price until 2010 as new contracts replace old Slovakia Germany** 1.0 TWh 3.3 TWh Germany: moderately increasing power prices Other portfolio: stable real prices Power figures indicate Hydro ownership share of power consumption * excl. Søral ** excl. Stade 55

56 Alunorte alumina refinery key asset in repositioning Targeting 6.5 million ton production by 2009 Hydro stake 34 percent of world s largest refinery First-quartile investment costs and highly competitive conversion costs Platform for pursuing new opportunities in Brazil and other bauxite rich areas 56

57 Qatalum project profitable mega-smelter in key region tons annually expansion potential to 1.2 million tons annually First quartile operating cost captive gas power 50/50 joint venture between Hydro and Qatar Petroleum Final cost estimate and build decision summer

58 Qatalum profitable mega smelter in key region World production 2006, tons Cost 2006* (USD/tons) /50 Hydro/Qatar Petroleum ton per year, expansion potential to 1.2 million tons Low operating cost captive power Qatalum 1 st quartile High efficiency and creep potential 500 Attractive logistics for alumina and products Hydro to market the products * Source: CRU, Liquid metal cost definition, September

59 Competence and technology provide basis for growth Distinct project management skills Proprietary technology opens doors for new business opportunities Next-generation smelter cell technology being developed Value-added primary products attractive to partners 59

60 Primary production will grow in new areas Metal opportunities Bauxite/ Alumina opportunities Business development office location 60

61 Aluminium Products 61

62 Aluminium Products Strong momentum in restructuring - Solid platform for good returns in Extrusion - Rolled Products improving, market still challenging Strong record in delivering innovative aluminium solutions Financials 2006* - Operating revenues NOK 49.8 billion - Adjusted EBITDA NOK 1.7 billion - Investments NOK 1.3 billion * Excluding Automotive Castings and Meridian 62

63 Adjusted profitability 2006 and capital employed RoaCE 10% Signed divestments Remaining Capital Employed ~NOK 16.6 billion Capital employed - total NOK 19 billion Extrusion 1) Rolled Products Automotive 2) Magnesium 1) Including Extrusion Europe, Extrusion Overseas, Building Systems and Precision Tubing 2) Including Automotive Castings and Meridian. Signed divestments NOK 4.3billion representing Capital Emplyed of NOK 3.4 billion. Automotive Structures in process of being divested. 63

64 Restructuring Aluminium Products Closures - Magnesium Porsgrunn, Magnesium Canada, extrusion capacity UK Divestments NOK 4.3 billion - Aluminium Castings, enterprise value NOK 3.7 billion - Meridian magnesium casting, enterprise value NOK 0.6 billion Divestments in process - Automotive Structures, Magnesium remelters and smaller businesses 64

65 High-grade portfolio of downstream assets Building Systems Extrusion Precision Tubing Proven business model in Extrusion - Close to customer, innovative solutions, added value activities Global leader in Precision Tubing - Well positioned for global customers Building Systems leading brands - Wicona, Technal, Domal 65

66 Extrusion key figures 2006 Revenues by region* NOK 22.7 billion Volume split* tons North America 21 % Other 6 % Europe 73 % Extrusion Americas 24 % Precision Tubing 11 % Building Systems 13 % Extrusion Europe 52 %** * Revenues include Extrusion and Precision Tubing, internal sales not eliminated. Volumes include soft alloys ** External sales (in addition comes the sales to Building Systems) 66

67 Extrusion peer group comparison relative size tons North America Europe Alcoa Hydro Sapa Indalex Alcan Kaiser Bonnell Corus (now Aleris) Metra Figures show soft alloys, internal estimates 2005 Market size sources are CRU and EAA 67

68 Extrusion peer group comparison market shares Europe Market size 2.7 million tons North America Market size 2 million tons Hydro 14 % Alcoa 10 % Other 38% Alcoa 24% Other 60 % Sapa 9 % Metra 2 % Alcan 5 % Sapa 3% Bonnell 6% Kaiser 7% Hydro 8% Indalex 14% Figures show soft alloys, internal estimates 2005 Market size sources are CRU and EAA 68

69 Rolled Products - portfolio evaluation concluded Well invested Leading rolled products assets in Europe Excellent market position Strong organization Main challenges: European industry structure and China 69

70 Rolled Products key figures 2006 Revenues by region NOK 23 billion Volume split 1 million tons North America 8 % Other 12 % Litho 17 % Europe 80 % Foil 16 % Strip 67 % 70

71 Rolled Products peer group comparison - relative size tons Total Other North America Europe Novelis - Hindalco * Alcoa** Hydro *12 Feb 07: Hindalco agreement to acquire Novelis for USD 6bn: Chart incl. Hindalco rolled products production of tons per year. Rolled products production only for Novelis Hindalco at million tons ** Alcoa annual report 2006: Third party Aluminium shipments, flat-rolled products 71

72 Rolled Products peer group comparison - market shares European market 4.4 million tons North American market 5.3 million tons 16% Hydro 16 % 470 Hydro 1 % 59% 25% 76% 1% Novelis 23% 23 % Other 59 % Novelis 25 % Other 76 % Market sources are CRU and EAA 72

73 Power 73

74 Power a solid foundation Environmentally friendly Norway s second largest hydroelectric power producer - Average annual production 9 TWh (7-11 TWh) ~ 7.5 % of Norway s total production - Low production costs and investments Financials Operating revenues NOK 10.8 billion - Adjusted EBITDA NOK 1.3 billion - Operating income NOK 1.2 billion 74

75 Hydroelectric power production and concessions Installed capacity MW Average annual production of 9 TWh TWh with no reversion TWh subject to reversal in * TWh subject to reversal in 2022 * Includes the Fortun plants (1.6 TWh) where the current concession expires in Hydro has applied for renewal of the concession and it is expected that the new concession will expire in

76 Well-developed production assets Hydro installations Top ten Hydro power stations Production Consumption Tyin Skagen Vemork Såheim Suldal I Høyanger Karmøy Røldal/ Suldal Sunndal Årdal Sogn Telemark Grenland Røldal Suldal II Svelgfoss Share Salten Mæl Sogn Telemark Røldal-Suldal Other GWh/yr

77 Production plants Tyin Fortun Rjukan SKS Produksjon AS Neverdalsåga Røldal-Suldal* Svelgfoss Vrangfoss Skafså Eidsfoss * Røldal Suldal: Hydro interest percent 100% owned Partly owned Hydro has a contractual right to a share of annual production 77

78 The power portfolio is flexible Long-term purchase contracts of power until 2020 (~7 TWh) The market value of the power portfolio is optimized continuously Actual spot exposure will vary from hour to hour based on own production ~2 TWh exposed to prevailing spot prices 78

79 Hydroelectric power provides stable income long term Power production - TWh Operating revenues* - NOK million EBITDA - NOK million Depreciation - NOK million Operating income - NOK million Investments** - NOK million * Operating revenues are influenced by trading volumes and amount of power sourced on behalf of Aluminium. ** Higher investments in 2003 and 2004 related to Tyin development

80 Hydro Polymers 80

81 Hydro Polymers - Europe s fourth largest PVC producer Solid turnaround delivered Production sites in Norway, Sweden and the UK employees Competitive upstream integration in ethylene Global vinyl positioning through JV s in China, Qatar and Portugal Positive outlook List or sell Polymers mid

82 From raw materials to industrial products Salt & oil Caustic soda PVC resin PVC compound Recycled PVC 82

83 European PVC capacity per company tons EVC Solvin AtoFina Hydro Polymers Vinnolit LVM Shinetsu Vestolit Cires Aragonesas Hellenic Petrol 83

84 Business locations NORETYL QVC RAFNES SUZHOU HUASU PORSGRUNN CIRES STENUNGSUND HELSINGBORG AYCLIFFE 84

85 High quality assets Chlorine production at Rafnes was successfully upgraded in two steps during 2005 and Investments of NOK 1.7 billion The Rafnes chlorine process is based on the best available membrane technology The investment has made the Hydro Polymers operation self-supplied with chlorine A main study to replace the mercury based chlorine technology in Stenungsund by end of 2010 has been initiated - Expected investment approx. NOK 700 million 85

86 Hydro Polymers key figures EBITDA EBITDA margin 23% % 20% % 15% % 321 9% % % 5% NOK million Operating revenues EBITDA Depreciation Operating income Investments (8) 428 0% 86

87 Oil & Energy Executive summary 87

88 Profitable production growth boe/day Historical performance Target Expected 2007 target boed expected boed - Capacity constraints lead to project delays Growth from high-quality portfolio 400 Improved growth prospects beyond E 2010E 88

89 New fields on stream Start year Field name Hydro share at peak rate Country Type Operator 2007 Ormen Lange Norway Gas/Cond Hydro Rosa Angola Oil Total Independence Hub Area US GoM Gas Hydro, Dominion, Anadarko Vilje Norway Oil Hydro Njord Gas Norway Gas Hydro Volve Norway Oil/Gas Statoil Rimfaks/Skinfaks Norway Oil/Gas Statoil Murzuk NC-186: B & H field TBD Libya Oil Repsol 2008 Oseberg Delta Norway Oil/Gas Hydro Gimboa Angola Oil Sonangol/Hydro technical Oseberg East Drilling Norway Oil Hydro Tune South Norway Oil/Gas Hydro Alve Norway Gas/Cond Statoil 2009 Tyrihans Norway Oil Statoil Thunder Hawk US GoM Oil Murphy 2010 Vega Norway Gas/Oil Hydro 89

90 Discoveries Exploration Q Q Q Q Exploration wells completed Discoveries Success rate percent 51% 64% 39% 54% 57% 55% Discoveries by area Norway 1) US Gulf of Mexico 2) Libya 3) Canada 4) Angola 5) Iran 6) Denmark * wells drilling by end of ) Norway: 6 discoveries Apollo, Morvin, Valemon, Gamma Main Stat., Astero, Trost 2) US GoM: 8 discoveries whereof 2 deepwater and 6 shelf discoveries Deepwater Thunder Hawk and Thunder Bird, Shelf High Island 165,, West Cameron 130 #3, West Cameron 72 #3, West Cameron 39, Vermillion 408 A-5, West Cameron 132 3) Libya: 7 discoveries NC 186 Murzuq 4) Canada: 2 discoveies Hibernia MM1, West Bonne Bay F-12 5) Angola: 2 discoveries Block 17 Orchidea 2 Appraisal well, Violeta 2 Appraisal well 6) Iran: 1 discovery Anaran Changuleh West * Spinnaker Exploration discoveries 2005 prior to Hydro acquisition for information only in order to compare 2005 and 2006 exploration activity levels 90

91 Proved reserves of oil and gas SEC definition Reserves 31 December 2005 million boe Reserve revisions New reserves Production 2006 Reserves 31 December 2006 million boe (209) Reserve replacement ratio and reserve life Reserve replacement ratio 2006 Reserve replacement ratio 3-year average Reserve life Oil Gas 38% 40% 9 years 5 years 17 years 91

92 Production costs per barrel NOK/boe Production in million boe

93 Hydro - priorities 93

94 Hydro priorities Execute proposed demerger of oil and gas activities and ensure successful integration planning with Statoil Launch new Hydro Strong return on capital Operational excellence Qatalum capital investment decision mid-2007 Solid financial position 94

95 Additional information 95

96 Preliminary carve-out statements NOK billion Operating revenues Depreciation, depletion and amortization Other operating cost Operating income Non-consolidated investees Financial income (expense), net Income before tax and minority interest Income tax expense Minority interest Net income First nine months ended 30 September (0.1) 8.9 (3.0) (0.2) 5.7 NOK billion 30 September 2006 Total current assets Total non current assets Total assets Total current liabilities Total long term liabilities Minority interest Shareholders equity Total liabilities and shareholders equity

97 Indicative price and currency sensitivities 2007 NOK million Income before tax Net income Change Oil price per barrel USD Aluminium price per tonne USD NOK million Income before tax Net income Change USD Oil & Energy NOK USD Aluminium Metal NOK USD Aluminium Products (90) (60) 1 NOK USD before financial items USD financial items (3 600) USD Net income (2 500) NOK 1 NOK 1 NOK Based on approximate average 2006 prices and expected business volumes for 2007: Oil 65 USD/bbl Aluminium USD/ton NOK/USD 6.45 USD sensitivity for Oil & Energy and Aluminium business areas includes both USD revenues and USD costs Total USD sensitivity of financial positions is NOK million negative and consists of assets and liabilities in various financial instruments. Positive net working capital of USD million reduces the total sensitivity to NOK million. 97

98 Consolidated balance sheets NOK million 31 December September December 2005 Cash and cash equivalents Short-term investments Receivables and other current assets Inventories Current assets held for sale Non-current assets Total assets Short-term interest-bearing debt Current portion of long-term debt Other current liabilities Current liabilities in disposal group Long-term interest-bearing debt Other long-term liabilities Deferred tax liabilities Long-term liabilities in disposal group Minority interest Shareholders' equity Total liabilities and shareholders' equity

99 Statement of cash flows NOK million Operating activities: Net income Depreciation, depletion and amortization Other adjustments (828) Net cash provided by operating activities Investing activities: Purchases of property, plant and equipment (18 580) Purchases of other long-term investments (4 060) Purchases of short-term investments (22 650) Proceeds from sales of property, plant and equipment 481 Proceeds from sales of other long-term investments Proceeds from sales of short-term investments Net cash used in investing activities (31 727) Financing activities: Loan proceeds 85 Principal repayments (1 841) Ordinary shares purchased (3 949) Ordinary shares issued 59 Dividend paid (5 506) Net cash used in financing activities (11 152) Foreign currency effect on cash 315 Net cash provided by discontinued operations 181 Net increase (decrease) in cash and cash equivalents (3 656) Cash and cash equivalents reclassified to assets held for sale (47) Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period (4 382) (17 270) (17 259) (15 162) (24 062) (2 102) (1 589) 71 (5 021) (6 797) (172) 120 (3 903)

100 Pensions NOK million Defined benefit plans: Benefits earned during year, net of participants contributions Interest cost on prior period benefit obligation Expected return on plan assets Recognized net loss 1) Amortization of prior service cost 1) Curtailment loss (1 080) (1 003) Net periodic pension cost Defined contribution plans Multiemployer plans Termination benefits and other Total net periodic pension cost Total net unfunded pension obligation 2) Unfunded pension obligation not recognized on balance sheet 3) (11 750) - Weighted-average assumptions at end of year: Discount rate 4.5% Expected return on plan assets 5.9% Rate of compensation increase 3.5% (13 529) (8 249) 4.1% 5.6% 3.1% 1. Significantly reduced amortizations in IFRS in New US GAAP accounting rules as of end 2006 Total net unfunded pension obligation reflected on balance sheet 3. Updated estimate for split of net unfunded pension obligation: approx. NOK 7.5 billion to remain with new Hydro (pre-tax) 100

101 Adjusted income 2006 NOK million Reported income Adjustments Adjusted income Exploration and Production Energy and Oil Marketing Eliminations (1 323) Oil & Energy Aluminium Metal Aluminium Products Other activities Corporate and eliminations (83) (1 584) (591) (1 348) Total operating income Non-consolidated investees Financial income (expense), net Other income (loss), net (1 057) (53) Income continuing operations before tax and minority interest Income tax expense Minority interest (37 598) (202) *(1 422) (39 020) (202) Income from continuing operations * Estimated actual tax effect on income statement adjustments using a tax rate of 36.4 % 101

102 Special items impacting income statement 2006 NOK million Unrealized (gains)/losses on oil and gas derivatives, Spinnaker Exploration & Production (222) Impairment loss Gulf of Mexico Exploration & Production Unrealized (gains)/losses on gas contracts Exploration & Production (25) Unrealized (gains)/losses on gas contracts Energy and Oil Marketing (137) Unrealized (gains)/losses on power contracts Energy and Oil Marketing 257 Business combination acquisition cost adjustment Energy and Oil Marketing (70) Unrealized (gains)/losses on gas and power contracts Eliminations Oil & Energy (1 323) Closure costs Aluminium Metal 559 Unrealized (gains)/losses on LME contracts Aluminium Metal (597) Unrealized (gains)/losses on power contracts Aluminium Metal 270 Inventory (gains)/losses Rolled Products (261) UK defined pension plan Rolled Products 15 Impairment loss Extrusion Ellenville operations Extrusion 116 UK defined pension plan Extrusion 340 Rationalization costs UK and US Extrusion 103 Closure costs Magnesium Automotive 462 UK defined pension plan Automotive 25 Impairment losses Automotive 133 Rationalization costs Automotive 29 Unrealized (gains)/losses on LME contracts Other and Eliminations 102 Unrealized (gains)/losses on power contracts in Polymers Other Activities (380) Reversal of insurance loss provision Other Activities (211) Unrealized (gains)/losses on power and NGL contracts Corporate and Eliminations 681 Elimination of demanning costs Magnesium operations Porsgrunn Corporate and Eliminations (65) Elimination of UK defined pension plan Corporate and Eliminations (380) Net impact operating income Hydro

103 Special items impacting income statement 2006 NOK million Net impact operating income Hydro Non-cons. investees - unrealized currency (gains)/losses Alunorte Aluminium Metal (94) Non-cons. investees - unrealized (gains)/losses on LME contracts Alunorte Aluminium Metal 143 Non-cons. investees - unrealized (gains)/losses power contracts Aluminium Metal 24 Non-cons investees - write-down Meridian Technologies Inc Automotive 239 Non-cons investees - write-down Cires Other Activities 43 Other income - gains on divestments Other Activities (53) Net foreign exchange (gains)/losses Hydro (1 057) Net impact on income continuing operations before tax and minority interest Hydro Marginal tax rate Hydro 36.4% Calculated tax Hydro *(1 422) Total effect income from continuing operations Hydro * Estimated actual tax effect on income statement adjustments using a tax rate of 36.4 % 103

104 Adjusted income 2005 NOK million Reported income Adjustments Adjusted income Exploration and Production Energy and Oil Marketing Eliminations (719) Oil & Energy Aluminium Metal Aluminium Products Other activities Corporate and eliminations (370) (2) (1 545) (1 081) Total operating income Non-consolidated investees Financial income (expense), net Other income (loss), net 593 (1 889) (990) Income continuing operations before tax and minority interest Income tax expense Minority interest (30 271) (118) (1 101) (31 372) (118) Income from continuing operations * Estimated actual tax effect on income statement adjustments using a tax rate of 31.0 % 104

105 Special items impacting income statement 2005 NOK million Unrealized (gains)/losses on oil and gas derivatives, Spinnaker Exploration & Production 440 Unrealized (gains)/losses on gas contracts Exploration & Production 187 Unrealized (gains)/losses on gas contracts Energy and Oil Marketing 41 Unrealized (gains)/losses on gas and power contracts Eliminations Oil & Energy 719 Rationalization and demanning costs Aluminium Metal 6 Unrealized (gains)/losses on LME contracts Aluminium Metal Inventory (gains)/losses Rolled Products (138) Reversal inventory provision Rolled Products (116) Settlement Malaysia Rolled Products (40) Write-down Spanish rolled products plant Rolled Products 154 Rationalization and demanning Leeds Automotive 68 Pension charge Leeds Automotive 154 Rationalization cost Extrusion 50 Impairment loss magnesium operation Automotive Unrealized (gains)/losses on LME contracts Other and Eliminations (173) Insurance loss provision Other Activities 242 Unrealized (gains)/losses on power contracts Corporate and Eliminations (1 391) Elimination of pension charge Leeds Corporate and Eliminations (154) Net impact operating income Hydro

106 Special items impacting income statement 2005 NOK million Net impact operating income Hydro Non-cons. investees - unrealized currency (gains)/losses Alunorte Aluminium Metal (106) Non-cons. investees - unrealized (gains)/losses on LME contracts Alunorte Aluminium Metal 9 Non-cons. investees - closure costs Aluminium Metal 149 Other income - gains on divestments Energy and Oil Marketing (65) Other income - gains on divestments Other Activities (926) Net foreign exchange (gains)/losses Hydro Net impact on income continuing operations before tax and minority interest Hydro Marginal tax rate Hydro 31.0% Calculated tax Hydro *(1 101) Total effect income from continuing operations Hydro * Estimated actual tax effect on income statement adjustments using a tax rate of 31.0 % 106

107 Aluminium Additional information 107

108 Primary aluminium 2006 production Global market 35 million tons Geography Company Latin America 7 % Middle East 6 % Other 18 % North America 16 % Western Europe 13 % CIS 13 % Other 56 % Alcoa 12 % Alcan 10 % Rusal 9 % Hydro 6 % China 27 % BHP Billiton 4 % Chalco 3 % 2005 primary aluminium production: 32 million tons Source: CRU, HAM 108

109 Primary aluminium production per quarter tons Slovalco consolidated from Q

110 Hydro primary aluminium production tons Smelter site Country Interest Sunndal Norway 100.0% Karmøy Årdal Neuss Slovalco 1) Kurri-Kurri Alouette Høyanger Søral 2) Norway Norway Germany Slovakia Australia Canada Norway Norway 100.0% 100.0% 100.0% 20.0% 100.0% 20.0% 100.0% 49.9% Tomago Australia 12.4% Stade 3) HAW 4) Total Germany Germany 100.0% 33.3% ) Full consolidation of Slovalco from 2004, introduced 100% from Interest increased to 55% in Q ) Operated by Alcan 3) Closed end ) Closed end

111 Aluminium operational data Volumes and prices * Q Q Q Q Q Q Q Q Primary production (1 000 tons) LME 3 month average LME realized (USD/ton) including hedges NOK/USD realized including hedges ** LME realized (NOK/ton) including hedges LME realized (USD/ton) excluding hedges NOK/USD realized excluding hedges ** LME realized (NOK/ton) excluding hedges Total metal products sales excluding trading (1 000 tons) Rolled Products external shipment (1 000 tons) Extrusion order intake (indexed, 1996=100) * Certain historical figures have been adjusted to be consistent with the Q figures ** Difference between realized exchange rate and spot rate at the transaction date is reported as currency gain/loss and not included in EBITDA (except currency hedges where hedge accounting is applied) 111

112 Aluminium Metal hedge programs 1) program volume ton 2) program LME price USD/ton program (Sunndal) volume ton 3) program (Sunndal) LME price USD/ton program (Sunndal) LME price NOK/ton Hedged volume in percent of primary aluminium production volume 13 % 16 % n.a - 1) All hedges are designated as cash flow hedges of forecasted sales of primary metal production. Realized gains and losses on the hedges are recognized in earnings when the actual sales are made. All unrealized gains and losses on the hedges are booked directly to shareholders equity. 2) Volumes are spread evenly throughout the year, except for 2006 when the volumes are spread from second to fourth quarter. The hedge program is aimed at mitigating the effects of higher power prices. 3) Volumes are spread evenly throughout the year. The Sunndal hedge program was implemented in connection with the Sunndal metal plant expansion which was completed in

113 Alumina 2006 production Global market 69 million tons Geography Africa Eastern Europe1 % 1 % Company CIS 10 % North America 7 % Other Asia Western 4 % Europe 7 % China 20 % Australia 29 % Latin America 21 % Hydro 3 % CVG 3 % Rio Tinto 6 % Alcan 8 % Alcoa/WMC 20 % UC Rusal 6 % Chinese owned 19 % BHP Billiton 6 % 2005 alumina production: 61 million tons. Only 5% of Alumina market traded spot mainly to China Source: and Company data 113

114 Alumina spot price Percentage of aluminium LME 3-month price* USD/ton 800 Spot alumina price % of LME 3-month aluminium price Percent * Jan 2007: Alumina spot approximately 350 USD/ton Source: LME, Metal Bulletin, Macquarie Research, Hydro estimates, end Q and Jan

115 Increasing alumina equity coverage for Hydro Relative to primary aluminium Alumina equity coverage (bars) Percent 100% Equity alumina production (line) million tons % 75% % % 43% % 23% % E

116 Bauxite equity coverage for Hydro Relative to primary aluminium Bauxite equity coverage (bars) Percent 100% Equity bauxite production (line) million tons % % 55% % 27% 26% 25% 1.0 0% E * Equity production: (i) Mineracao Rio do Norte (MRN) Brazil 5% share and (ii) Alpart, Jamaica 35% share. Non-equity bauxite from Companiha Vale do Rio Doce (CVRD)evergreen contracts. 116