Changing the
aluminium game,
the Hydro way
Integrated annual report 2023
February 13, 2024
Introduction
3
Our 2023 highlights
4
Letter to stakeholders
7
Key events
8
Table of contents
Hydro’s Annual Report 2023
The enclosed Annual Report and Financial statements, together with the
accompanying notes, fulfill Hydro’s Norwegian statutory requirements for annual
reporting. The Annual Report 2023 is available in Norwegian on our website
Hydro.com.
Throughout the report, Hydro refers to Norsk Hydro ASA and its consolidated
subsidiaries if not otherwise stated.
© Hydro 2024
3
Our 2023
highlights
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Our 2023 highlights
2023 has seen megatrends continue to push for the green transition
and drive demand for low-carbon aluminium, and Hydro expects an
annual value creation potential from green premiums towards 2030 of
upwards to NOK 2 billion. Consequently, Hydro is facing a new reality
in which the company is uniquely positioned to create value and
pioneer the green aluminium transition by utilizing its integrated value
chain to deliver low-carbon products with provenance and a strong
sustainability profile.
Hydro’s large portfolio of profitable growth projects within Recycling
and Extrusions, combined with Hydro’s detailed decarbonization
roadmap which is aimed at taking the company to net-zero CO
2
by
2050, is designed to capture growth opportunities by expanding and
growing the greener offerings, giving Hydro the opportunity to
strengthen its robust position by strategically allocating growth capital
to selected parts of its integrated value chain.
Hydro’s low position on the cost curve, strong track record on
shareholder value creation and long-term renewable power contracts
ensures Hydro’s ability to capitalize on long-term opportunities during
periods of short-term market downturns. And by entering into strategic
partnerships, Hydro aims at shaping the market for greener aluminium,
while supporting the pathway to net-zero aluminium products.
Purpose
Create a more viable
society by developing natural
resources into products
and solutions in innovative
and efficient ways
443,760
tonnes
1
post-consumer
scrap recycled in 2023,
38 percent up compared
to 2022
22.3
billion NOK
Adjusted EBITDA
7.1 %
Adjusted
RoaCE
Our strategy
Pioneering the green aluminium
transition, powered by renewable
energy
197 000
people reached
with education
and capacity building
initiatives since 2018
1) Including Alumetal full year
Improvements, NOK billion
Bauxite & Alumina
Aluminium Metal
Extruded Solutions
Energy and staff
initiatives
8.8
NOK billion in
improvements
2.1
1.66
1.36
0.8
0.7
3.0
2.7
3.3
2.4
2.4
2019 2020 2021 2022 2023
Incidents per million hours worked
High risk incidents (HRI) Total recordable injuries (TRI)
© Hydro 2024
4
Letter to
stakeholders
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Letter to stakeholders
Shifting gear to capture opportunities in a new
reality
In 2023 we saw a year marked by the consequences of wars,
geopolitical rivalry and the battle against inflation, which led to
challenging markets and weaker financial results. However, while
managing the uncertainty in the short-term, we are strengthened
in our conviction about the long-term commercial opportunities
arising from the green transition and the key role aluminium is
set to play.
The green transition is progressing with full force and aluminium
demand from sectors supporting it remains robust. To realize the low-
carbon circular economy is not easy and requires bold moves, but we
consider the green transition a fundamental megatrend on which we
will build. Hydro is determined to pioneer the green aluminium
transition, powered by renewable energy.
Our People
Hydro’s most important asset is our 33,000 colleagues across 40
different countries who make Hydro stronger and better positioned in a
fast changing world. Throughout the company our people, driven by
their dedication and determination, use their skills and experience, to
deliver on our ambitious strategic agenda. Nurturing a diverse and
inclusive workplace environment is critical to reach our targets of
constantly improving our greener product ranges and practices, better
cost positions, and improved market positions.
Health and safety is our top priority. Over the past years, Hydro’s
safety performance has improved significantly, with lower injury rates
and fewer high-risk incidents. Sadly, October 2023 represented a large
setback for us, as we experienced one fatality involving a contractor at
our alumina refinery in Brazil and one fatality involving a contractor at
our joint venture Qatalum in Qatar. Although the fatality in Brazil is not
concluded as work related and investigations of root cause are on
going, two young men did not return home from work. These incidents
are a stark reminder that good safety results can never be taken for
granted. Safety is and must be on the top of the agenda, every day
and hour in our operations, including contractors working for us. Our
ultimate target is an injury free environment, for our own employees
and our contractors.
Robustness and resilience
In 2023, we delivered an adjusted EBITDA of NOK 22,258 million,
down from the record year of 2022, as metal prices fell on 4 percent
lower primary demand in the world outside China, resulting from the
current macroeconomic turmoil. In European markets for extruded
products, demand fell by 17 percent year over year. Even with these
changes, Hydro Extrusions delivered their second highest adjusted
EBITDA of NOK 6,480 million, as growth in high-margin segments
offset a large share of the volume decline.
We have worked actively on strategic capital allocation over the past
years. In 2023, we made significant reallocations within the portfolio as
we sold a 30 percent share of our Alunorte alumina refinery to
Glencore, freeing up financial resources to be allocated into Hydro’s
ambition to grow in Recycling and Extrusions. This includes the
acquisition of the Polish aluminium recycling company, Alumetal,
strengthening our recycling position in Europe. We were also pleased
to finalize the capital raise for Hydro Rein, partnering with Macquarie
Asset management for further renewables growth.
Hydro launched its improvement program in 2019, with the ambition to
deliver NOK 7.3 billion by 2023. In 2020, we launched our commercial
ambition which aimed to achieve commercial uplift of NOK 2 billion by
2025. The programs comprise all business areas and reflect our
continuous focus on operational excellence, cost competitiveness,
strong market positions, and differentiation in sustainable products.
The original improvement program target was achieved in 2022, and
we continue raise to our ambitions and identify new improvement
opportunities.
In 2023, our improvement program achieved accumulated
improvements amounting to NOK 8.8 billion annually compared with
2018 baseline. We launched a new ambition in November last year to
reach NOK 14 billion in accumulated improvements by 2030.
Our commercial ambition aiming to improve results by NOK 3 billion by
2027, compared with 2018 is on track, reaching NOK 2.4 billion as of
2023. Positive developments in the markets for greener products has
led us to lift the ambition to reach NOK 6.1 billion in accumulated
improvements by 2030.
Within both alumina and primary aluminium production, we have low
and robust cost positions in the first quartile, with ambitions to further
improve.
All of the above, has supported an adjusted return on average capital
employed (ARoaCE) of 11 percent over the last five years, above our
target of 10 percent over the cycle. Reflecting the current volatile
market environment, and a year with high growth and return seeking
investments, the ARoaCE for 2023 was 7.1 percent.
© Hydro 2024
5
Letter to
stakeholders
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Improved earnings allow for competitive shareholder returns, and
since 2019, we have distributed NOK 30.7 billion to shareholders, with
a proposal to pay out an additional NOK 5 billion for 2023, 59 percent
of adjusted net income per share, and NOK 2 billion of share
buybacks.
Greener aluminium stands out in the markets
The market for greener aluminium is growing at a high pace.
Combined with the roadmap we have set out towards 2030 to pioneer
the green aluminium transition, we believe in a significant value
creation potential for Hydro. Our ability to utilize our integrated value
chain delivering low-carbon products with a strong sustainability
profile, will create value for our customers and shareholders alike.
The green transition is driving the need for critical materials like
aluminium. Even in weaker markets there is a strong pull for more
aluminium in segments like automotive, buildings and construction,
and renewable energy infrastructure. Political and regulatory priorities
in the major economies underpin demand for low-carbon solutions and
renewable energy.
While aluminium helps reducing emissions in the use-phase, it also
matters how aluminium is produced. What is becoming increasingly
evident, is that the most ambitious players in the market are now
looking beyond aluminium’s material properties. Carbon content,
nature impact, and social profile of the manufacturer, are becoming
more and more important.
End consumers, society at large and regulators are becoming
increasingly concerned about the full value chain emissions in the
products entering the market. Customers are turning to the materials
market to find providers who not only can deliver aluminium with the
lowest possible emissions today, but also have credible pathways
towards net-zero.
Shifting the gear, changing the game for
aluminium
Hydro is already a front runner offering market leading low-carbon
products. Our new 2030 strategy has several paths leading towards
net-zero by 2050 or earlier, stepping up our efforts to decarbonize our
value chain, changing the game for aluminium.
These include clear targets and tangible milestones addressing
climate, nature, and social impacts from mining, refining, and energy
generation to electrolysis and extrusions as well as ambitious targets
to increase our use of post-consumer scrap beyond the original target
of doubling by 2025.
We are expanding in recycling in Europe and the U.S.
The acquisition of Alumetal, completed in July, supports our recycling
strategy in Europe by increasing the post-consumer scrap (PCS)
usage by approximately 150,000 tonnes per year.
Our greenfield Cassopolis recycling plant in Michigan opened in
November 2023, and will supply the U.S. market with 120,000 tonnes
of recycled extrusion ingot per year, including introducing large-scale
supply of Hydro CIRCAL to the U.S. market.
Similar projects are being built in Hungary, Germany and Spain,
increasing Hydro’s recycling capacity further. In addition to
investments in capacity, we are investing in developing our scrap
sorting technology to be able to dig deeper into the scrap pile. This will
allow us to recycle even more low-grade scrap and enhance margins
while doing it.
We are expanding in aluminium extrusions
The green transition is creating unforeseen market opportunities that
were not apparent just a few years ago. This includes the
comprehensive transformation of the entire automotive supply chain to
serve the transition towards electric mobility, and the growing solar
sector where aluminium is preferred for mounting systems and frames.
We are positioning ourselves towards expected growth in demand for
low-carbon aluminium solutions. Our ambition is to turn our portfolio
from general extrusions to strengthen our supply in high end segments
of extruded aluminium, increasing investments accordingly.
The acquisition of the German company Hueck, completed last March,
strengthens Hydro Extrusions’ offerings in the European market for
building systems and extruded solutions. Additionally, our investments
in new presses in Nenzing, Austria and Rackwitz, Germany, last year
further strengthens our position in the market.
We are stepping up ambitions within renewable energy
With more than 70 percent of our primary aluminium production
covered by renewable power, we have a very good starting point for
low-carbon aluminium. Renewable energy at competitive cost is the
most important enabler for our low-carbon aluminium position. Having
the capabilities to develop, operate, and manage renewable power
production at scale, in-house, is a significant advantage for Hydro.
Towards 2030 we will expand and upgrade some of our existing
hydropower plants in Norway, and also look into new projects,
including pumped power stations, to seize peak prices and capitalize
on the growing value of capacity for flexible power production. In
Norway, we have initiated new land based wind and solar projects in
partnership with other renewable energy developers through Hydro
Energy.
Hydro Rein is our main vehicle to ensure the development of
renewable energy for decarbonizing our own and other industries at
affordable cost. Over the past years, Hydro Rein has developed a
significant portfolio of renewable energy projects and contracts with
industrial off takers. The Hydro Rein partnership with Macquarie Asset
Management secures a USD 300 million capital raise to finance and
accelerate projects in the Hydro Rein pipeline. The current 6.9 GW
portfolio pipeline in the joint venture (gross capacity) consists of
renewable energy projects from projects both under construction and
in early stage development in the Nordics and Brazil.
We are executing our ambitious decarbonization roadmaps and
stepping up to contribute to nature positive and just transition
Going forward, we will continue on our path towards net-zero, chasing
the carbon out of our processes with full force. Simultaneously, we will
step up our contribution to a nature-positive future and a just transition.
Towards 2030 Hydro maintains our ambition of 30 percent reduction in
GHG emissions, targeting net-zero by 2050 or earlier. An important
milestone on this journey will be to demonstrate emission free smelting
technologies that can produce near-zero aluminium at an industrial
pilot scale by 2030.
In Bauxite & Alumina, we are executing on our fuel switch project in
Brazil. Liquified natural gas will replace fuel oil, reducing CO
2
e
emissions by 700,000 tonnes a year. The transition to gas will take
place during the first half of 2024. The next step is to replace coal fired
boilers with electric heating. The first electric-boiler is in operation and
the next two will be operational by the end of 2024, reducing CO
2
e
emissions by an additional 400,000 tonnes a year.
The most challenging part is to get the carbon out of our electrolysis
processes. Here we are pursuing two paths. The first path is to test
technology for capturing CO
2
from our low-concentration off-gas with
the goal of first CO
2
capture by 2024 and demonstrating this in
industrial pilot scale by 2030.
The second path is to develop a new smelter technology. Our own
HalZero technology project aims to eliminate carbon emissions from
both electrolysis and anode baking in primary aluminium production,
keeping CO
2
in a closed loop to avoid emissions. In December, Hydro
took a bold decision to construct a test facility for the zero-emission
HalZero technology, with the aim to produce first metal by 2025.
© Hydro 2024
6
Letter to
stakeholders
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Our decarbonization efforts are addressing all sources of emissions,
also in the casting process.
• On a trial basis, we have started using more recycled
material as “cold metal” to lower the carbon footprint in
casted products.
• To further reduce casthouse emissions, in Sunndal, Norway,
we are testing the use of biomethane to replace fossil
energy.
• Also, in Sunndal, Hydro is testing plasma technology to
replace fossil fuel with electric heating in the casting
process.
• In Navarra, Spain, Hydro Havrand ran a successful pilot
using green hydrogen as the source of process heating.
Sustainability is more than climate. Nature and social responsibility
have become increasingly important, with expectations from all
stakeholders on the rise.
In August 2023, Hydro announced its conformance with the Global
Industry Standard on Tailings Management (GISTM) in line with the
company’s commitment to implement the standard. At Paragominas,
the Tailings Dry Backfill method puts dried leftovers from bauxite
mining back in mined areas before they are rehabilitated and
reforested. This eliminates the need to build new permanent tailings
dams and supports our ambitions to protect biodiversity.
In Hydro, we are committed to improving lives and livelihoods in the
local communities where we operate. We respect and promote human
rights through continuous dialogue as well as due diligence processes
to identify and mitigate potential human rights risks. Our community
surveys show continuous improvement following a number of social
initiatives in the local communities.
In 2023, we started to implement our Just Transition framework.
Supporting and respecting human rights is at the core of this
framework, so is education. Long-term support to initiatives
strengthening people's basic rights like Sustainable Barcarena
Initiative (SBI), TerPaz (local community centers) and building a
technical school in Barcarena, are all examples of how we contribute
to improve lives and livelihoods locally. Our target is to upskill 500,000
people by 2030 through community programs and partnerships. As of
2023, more than 197,000 people have benefitted from education and
training programs supported by Hydro.
Working to improve industry standards for human rights, transparency
and responsible production, we are engaging with a range of
international organizations. Hydro is a signatory member of the UN
Global Compact and a committed member of the Aluminium
Stewardship Initiative (ASI).
Receiving the Mercedes-Benz sustainability supplier award in June
2023 is an important recognition of our sustainability work from a high-
end customer, renowned for setting strict human rights and
sustainability requirements for their suppliers.
Hydro is committed to applying ethical business practices and
compliance throughout its organization and supply chain. In 2023,
Hydro’s score improved further on several important ratings related to
Environmental, Social and Governance (ESG).
We are shaping the markets for greener aluminium
During the past two years ambitious players like Mercedes-Benz,
Polestar, Porsche and Volvo Group have teamed up with Hydro to
decarbonize their future vehicle production. These partnerships
represent a new business model where the traditional supplier and
purchaser relationship has evolved into a strategic cooperation on
common objectives.
Hydro is in a unique position because we are one of very few fully
integrated aluminium companies in the world. With the full aluminium
value chain in-house, we can provide our customers with full
traceability and transparency from when the bauxite is mined until the
finished extruded solution. We are already in the market with leading
renewable energy based low-carbon aluminium, and recycled
offerings. This is not going unnoticed among our customers where we
are experiencing a systemic shift, with a pull to secure ultralow-carbon
materials, accompanied by an increasing willingness to pay a
premium for best-in-class materials. Based on these developments
and our determination to take a leading role, we have set an ambition
to deliver an additional NOK 2 billion in greener earnings uplift by
2030.
In November, Hydro joined the First Movers Coalition to accelerate the
green aluminium transition. The idea behind the initiative is to use the
member’s purchasing power to create early markets for innovative
clean technologies across hard to abate sectors, which will help
suppliers overcome what is currently a major hurdle for the green
transition by softening the most serious risks and costs of innovating
and investing. This is a practical example of how it is possible to
enable competition based on sustainability credentials rather than just
cost.
Hydro has a unique position to succeed in a new reality
At our Capital Markets Day last November, we launched our updated
strategy with the ambition of making Hydro the industry front runner in
the greener aluminium transition. Hydro is in a robust position. We are
low on the cost and emission curves compared to our peers.
Combined with our long-term renewable power contracts, we are able
to handle the short-term market downturn, without losing sight of the
long-term opportunities.
Supported by a solid financial framework, ensuring financial strength
and flexibility, we can do just this, while at the same time enabling
competitive shareholder distribution, remaining true to our dividend
policy and capital structure target.
We have delivered strong relative shareholder returns since 2020, and
we are confident that Hydro is uniquely positioned to continue
generating value in this new reality. We look forward to continuing our
legacy of building industries that matter by pioneering the green
transition and creating value for all our stakeholders.
© Hydro 2024
7
Key events
2023
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Key events 2023
February
April
June
August
October
December
Hydro and Wave Aluminium to
recover minerals from bauxite
residue. Read more
Porsche and Hydro unite to further
decarbonize the supply chain of
sports cars. Read more
World’s first batch of recycled
aluminium using hydrogen fueled
production. Read more
Hydro receives Mercedes-Benz
sustainability award. Read more
Hydro in conformance with the Global
Industry Standard on Tailings
Management. Read more
One of the most modern extrusion lines
in Europe has been successfully put
into operation at Hydro Nenzing. Read
more
Hydro Rein and Macquarie Asset
Management become partners to
develop more renewable energy
for industries. Read more
Fatality at the Alunorte refinery in
Brazil. Read more
Fatality at Hydro’s joint venture
partner Qatalum in Qatar. Read
more
Hydro completes sale of assets in
Brazil to Glencore. Read more
Hydro and Volvo Group join forces to
accelerate net-zero transportation.
Read more
Hydro reports impairment losses of
approximately NOK 4.9 billion. Read
more
March
May
July
September
November
Hydro delivers first near-zero
aluminium for European building and
construction market. Read more
Hydro’s HalZero technology reaches
a new milestone. Read more
Hydro completes the acquisition of
Hueck building systems and
extrusion business. Read more
Hydro and Saint-Gobain Glass
partner to decarbonize building
facades. Read more
Hydro completes acquisition of
Alumetal, strengthening recycling
position in Europe. Read more
Hydro reaches ASI certification
milestone in the United States and
Canada. Read more
New casting line opens in Rackwitz
to meet growing demand for low-
carbon aluminium. Read more
Hydro opens new aluminium
recycling plant in Cassopolis,
Michigan. Read more
Hydro joins the First Movers Coalition
to accelerate the green aluminium
transition. Read more
© Hydro 2024
8
Table of contents
1. Introduction
2. Our business
3.
3. Our performance
4.
4. Our governance
03
Our 2023 highlights
10
About Hydro
28
Key performance measures
36
Corporate governance
04
Letter to our Stakeholders
11
Hydro’s main inputs and outcomes
29
Financial performance
45
Risk review
07
Key events 2023
12
Business areas
31
Sustainability performance
63
The Hydro share
08
Content
17
2030 strategic direction
33
Other performance measures
66
Regulations
19
Our targets and ambitions
34
Key financial exposures
20
Financial targets and ambitions
23
Sustainability targets and ambitions
24
Managing uncertainty
25
Market development and outlook
5. Sustainability statements
6.
6. Financial statements
7.
7. Appendices
68
General information
164
Consolidated financial statements
244
Alternative performance maeasures (APM)
73
Climate change
223
Financial statements Norsk Hydro ASA
248
Country-by-country reporting
87
Pollution
235
Statement from the Board and the CEO
258
The Norwegian Code of Practice for Corporate Governance
91
Water resources
237
Responsibility statement
265
Production capacity and volumes
95
Biodiversity and ecosystems
238
Independent auditors report
268
Task force on climate-related financial disclosures (TCFD) Index
104
Resource and circular economy
269
Sustainable development goals (SDG) index
109
EU Taxonomy
271
Profitability roadmap assumptions
116
Legacy
118
Human rights
122
Own workforce
141
Workers in the value chain
146
Affected communities
151
Consumers and end users
153
Business Conduct
161
Limited assurance report
© Hydro 2024
9
Our Business
Unique position in a new reality
10
About Hydro
11
Hydro’s main inputs and outcomes
12
Business areas
17
2030 strategic direction
19
Our targets and ambitions
20
Financial targets and ambitions
23
Sustainability targets and ambitions
24
Managing uncertainty
25
Market development and outlook
© Hydro 2024
10
About Hydro
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
About Hydro
Innovative and sustainable processing of natural resources has
defined Hydro since its establishment in 1905. It started in Notodden,
Telemark with the use of hydropower to extract nitrogen from the air
for production of mineral fertilizer needed to feed a growing population.
Today, Hydro mine and refine raw materials, produce renewable
energy to make low-carbon primary aluminium, and develop advanced
and sustainable aluminium solutions for customers. Hydro also
develops recycling technologies to bring as much as possible of the
infinitely recyclable aluminium back into the aluminium loop, after
serving a life in use.
Hydro’s history has always been about producing useful products that
the world needs, about human creativity and harnessing what nature
has to offer, about the ability to see possibilities and to realize
limitations. Hydro’s history is characterized by a vital drive, created by
people who care for each other and the world around them. More
information on Hydro’s history is available on Hydro’s website.
Hydro owns and operates its fully integrated global aluminium value
chain through its four business areas:
• Hydro Bauxite & Alumina represents the first two links of
the aluminium value chain through bauxite mining and
alumina refining.
• Hydro Energy is a major renewables producer, market
operator and developer of businesses for the energy
transition.
• Hydro Aluminium Metal is a leading supplier of extrusion
ingots, sheet ingots, foundry alloys, wire rods and high
purity aluminium with a global production network.
• Hydro Extrusions delivers tailored aluminium components
and solutions to customers around the world.
Uniting experts is the best way of creating innovation and developing
aluminium solutions for the future. Hydro is continuously striving to
bring out the best of our people and organization, and to add lasting
value through collaboration and partnerships with customers and
societies we are part of.
Our presence and values
Hydro owns and operates various businesses and has investments with a base in sustainable industries across the globe creating a safe
and secure workplace for 33,000 employees in more than 140 locations and 40 countries.
Hydro’s values of care, courage and collaboration, reflect how the company aims at interacting with its employees, local communities,
customers and suppliers.
Care
We act with respect for
people and the environment,
and place safety at the heart
of our operations.
Courage
We break new ground and
take measured risks with
agility, accountability, and
foresight.
Collaboration
We work as partners internally
and externally to unite
competencies and create win-win
opportunities.
© Hydro 2024
11
Hydro’s main
input and outcome
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
RECYC LING
1) Negative environmental impact
Hydro’s main inputs and outcomes
Main
inputs and
enablers
Robust balance sheet | Competent workforce, technology and R&D | Environmental, social and economic context
BAUXIT E
ALUM IN A
ENERG Y
PRIMA RY
CASTING
EXTRU SION
PRODUCT S
• Bauxite resources
• Water
• Land clearance
• Bauxite pipeline
• Bauxite
• Caustic soda
• Lime
• Water
• Coal
• Oil
• Land use
• Water reservoirs
• Alumina
• Energy
• Aluminium fluoride
• Coke
• Pitch
• Water
• Primary aluminium
• Process scrap
• Post-consumer scrap
• Natural gas
• NGLs
• Extrusion ingot
• Electricity
• Extruded products
• Standard, sheet and
extrusion ingots
• Primary foundry alloys
and wire rod
• Hydro CIRCAL
• Hydro REDUXA
Main
outputs and
outcomes
• Bauxite
• Rehabilitated land
• Tailings
1
• Biodiversity impact
1
• Alumina
• Bauxite residue
1
• GHG emissions
1
• SO
2
emissions
1
• NO
X
emissions
1
• Hydropower
• Flood control
• Regulated watersheds
1
• Biodiversity impact
1
• Primary aluminium
• GHG emissions
1
• SO
2
emissions
1
• Spent potlining
1
• Standard, sheet and
extrusion ingots
• Primary foundry alloys
and wire rod
• Forge stock
• NO
X
emissions
1
• Dross
1
• A more viable society by
developing natural
resources into products
and solutions in
innovative and efficient
ways
• Extruded solutions for
building- and automotive
industries, consumer
goods etc.
• Environmental impact
1
Income and shareholder value | Salaries, taxes and supplier income | Community and industry impact | Full value chain provenance
© Hydro 2024
12
Business
areas
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Business Areas
Operations
Hydro Bauxite & Alumina covers Hydro’s bauxite mining activities in
Paragominas and the company’s 62 percent interest in the Brazilian
alumina refinery, Alunorte, both located in Pará State, North of Brazil.
Hydro mines bauxite from Paragominas using stripmining technology
where bauxite is sorted and crushed before being transported as a
slurry through a 244-kilometer long pipeline to its refinery Alunorte,
before being refined into alumina.
Alunorte is the biggest alumina refinery in the world outside China,
with nameplate capacity of 6.3 million tonnes per year. Alunorte also
processes bauxite from Mineracão Rio do Norte (MRN), which is
transported to the plant by ship. In 2023, Hydro signed an agreement
with Glencore, who will acquire 30 percent of Alunorte and Hydro’s 5
percent ownership in MRN. Glencore acquired an additional 40
percent stake in MRN, previously owned by Vale. The bauxite
agreement between Vale and Hydro was terminated on November 30,
2023, and Glencore will continue to supply approximately 30 percent
of Alunorte’s long-term bauxite requirements from MRN.
Cost and revenue drivers
The main cost drivers in bauxite production are labor, maintenance
and consumables, electricity and fuel for mining equipment, which
account for around 75 percent of mining cash cost. Labor, the largest
cost factor, accounting for about 30 percent of cash cost, is influenced
by Brazilian wage levels, inflation 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, where
caustic soda normally represents around 21 percent of cash costs.
Energy costs are a mix of fuel, coal and electricity, and account for
about 35 percent of the total costs. Bauxite purchases from
Paragominas, and those supplied from MRN agreements, are based
on prices partly linked to the London Metal Exchange’s (LME) prices
and to alumina market prices.
Hydro Bauxite & Alumina aims to further strengthen their position on
the alumina cost curve, through delivering NOK 4.9 billion in
operational and commercial improvements by 2030, against the 2018
baseline. Hydro Bauxite & Alumina targets an adjusted return on
average capital employed (ARoaCE) at 12 percent in 2030 based on
an external market scenario as described on the financial
ambitions section.
Strengthen low-carbon aluminium position
Hydro Bauxite & Alumina is working continuously to improve its
position on the alumina industry cost and carbon curves, with Alunorte
targeting to move from the first quartile of alumina refineries in terms
of carbon intensity, to the first decile by 2025.
To reach the targets for greenhouse gas emissions reductions, Hydro
is replacing fuel oil with liquid natural gas at the Alunorte alumina
refinery, and installing two more electrical boilers that use renewable
electricity. This will enable the growth in sales of low-carbon alumina
and aluminium, at an expected growing premium. See the section on
Climate Change for more details.
Hydro’s bauxite mine is located in an area comprising primary and
secondary forest and agricultural land in Pará State. To minimize and
restore the impacts of mining activities on biodiversity, including local
fauna and flora species, Hydro has developed a reforestation program
to mitigate forest removal, and we work to rehabilitate mined areas
that are released for rehabilitation within two hydrological seasons. In
2023, Hydro increased its No Net Loss ambition for biodiversity for the
bauxite mine. In addition to achieving No Net Loss for the future
expansion of the mine, Hydro will also include impacts that have
occurred since 2020 for the existing mining footprint. Hydro also
renewed the Biodiversity Research Consortium Brazil-Norway for a
further five years, to secure a science based approach to biodiversity
management and forest rehabilitation.
To reduce the environmental impact of its operations, Hydro has
developed the Tailings Dry Backfill methodology at the Paragominas
mine, which eliminates the need for new permanent tailings storage
facilities and permits rehabilitating areas affected by mining operations
faster.
Hydro also supports social and economic development in the
communities where it operates. Read more about the skills
development, community investments and efforts to support just
transition in the sections on Affected communities and Human rights.
Hydro
Bauxite &
Alumina
4,480
6.2
Employees
Million tonnes
alumina production
80,000
71 %
People assisted by
social programs since
2018
Reduction in Alunorte
CO
2
emissions by
2030
1
1) Against 2017 baseline
© Hydro 2024
13
Business
areas
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Operations
Hydro Energy is one of the three largest operators of hydropower
production in Norway, and a large power market player in the Nordic
region and Brazil. As Hydro’s energy competence center, Hydro
Energy provides support to the company’s business areas on large
and complex industrial projects, market analytics, power contracts,
supply security and energy framework conditions. Hydro’s new energy
ventures within renewables, such as wind and solar, battery materials
and green hydrogen, are driven by Hydro Energy.
In Norway, Hydro Energy operates 40 renewable power plants, with
combined installed capacity of 2.8 GW. In a normal year, Hydro
Energy operate 13.7 TWh production, of which 9.4 TWh is captive
power. This includes Tonstad windfarm (208 MW/0.7 TWh), where
Hydro Energy purchases all volumes, and power assets owned by
Lyse Kraft DA in Røldal-Suldal and the Stavanger region. In addition,
Hydro Energy purchases more than 9 TWh of renewable power
annually in the Nordic market, mainly under long-term power purchase
agreements (PPAs) resulting in a total market portfolio of 18 TWh per
year in the Nordics in a normal year.
Hydro has a long-term power purchase agreement (PPA) with
Markbygden Ett AB, which has not been able to deliver on expected
production levels and Swedish authorities has accepted the
company’s request to enter a reorganization process. The security of
supply to Hydro’s Norwegian smelters will not be affected and Hydro
will seek compensation for the non-delivered volumes.
Hydro Energy enables achievement of Hydro’s strategic ambitions in
renewable energy through growth initiatives such as Rein, Havrand
and Batteries.
Cost and revenue drivers
Production volumes are strongly influenced by hydrological conditions.
Seasonal factors affect both supply and demand. Hydro Energy is
industry leader on cost and operational performance with a cost base
that is relatively stable. Volatile spot volumes and prices may however
cause significant variations in quarterly revenues. Hydro Energy
optimizes its power portfolio in the market every day.
Electricity prices are influenced by fuel costs (including emission
allowance costs), meteorological parameters and exchange
transmission possibilities with adjoining markets, as well as by
fluctuations in demand. Rising intermittent generation from solar and
wind power is increasing price variations across power markets.
Hydro Energy estimates to deliver NOK 0.7 billion in commercial
improvements by 2030, giving a normalized EBITDA of NOK 4.7 billion
in 2030 for Hydro Energy including Hydro Rein.
Powering the green aluminium transition
Hydro Energy’s captive renewable energy production, competitive
sourcing of renewable power and energy solutions enable Hydro and
other industrial companies to succeed in the transition to a net-zero
society. The carbon footprint of aluminium is highly dependent on the
source of energy, and Hydro Energy enables the production of low-
carbon aluminium.
Hydro Rein offers renewable energy solutions for more sustainable
industries. In October 2023, Hydro signed an agreement with
Macquarie Asset Management for the sale of 49.9 percent of Hydro
Rein. The Hydro Rein JV with Macquarie enables further development
of renewable power production and pursuit of profitable renewable
power projects.
The Batteries unit’s ambition is to empower the future of green mobility
with sustainable battery materials through successful execution of
current investments in Hydrovolt, Vianode, E-magy, Lithium de
France, Northvolt and Corvus.
Energy supports Hydro’s strategic objectives of developing renewable
energy solutions and decarbonizing the industry while aiming to limit
impacts to nature and creating a positive outcome for the communities
where Energy operates.
Hydro
Energy
466
9.7 TWh
Employees
Hydropower
production
2.6 GW
9.6 TWh
Solar and onshore
wind projects
1
External power
sourcing in 2023
1) Gross production
© Hydro 2024
14
Business
areas
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Operations
Hydro Aluminium Metal is the world’s (excluding China) sixth largest
producer and supplier of primary aluminium and value added
casthouse products. The business area consists of 5 wholly owned
aluminium metal plants in Norway, 5 partly owned plants in Qatar,
Brazil, Canada, Australia and Slovakia in addition to several advanced
R&D facilities. Hydro’s total annual primary aluminium capacity is
about 2.1 million tonnes.
Hydro’s casthouses extracts aluminium from aluminium oxide
(alumina) by way of electrolysis to produce liquid aluminium, which
can be tapped from cells and converted to products. Two-thirds of
Aluminium Metal’s primary aluminium production is based on
renewable energy, and about 16,000 tonnes of post-consumer scrap is
used in the Norwegian aluminium metals plants today. The plants
produce standard ingot and value-added products, such as extrusion
ingot, primary foundry alloys, sheet ingot and wire rod.
Cost and revenue drivers
The main cost drivers for the production of primary aluminium include
alumina, power and carbon, which together comprised about 80-85
percent of the cash costs of electrolysis metal in 2023. Hydro use
approximately two tonnes of alumina to produce one tonne of
aluminium, representing 35-40 percent of the cash cost of primary
aluminium. Energy represents on average 20-25 percent of cash
costs, and carbon anodes consumed in the smelting process account
for 25-30 percent. Realized aluminium prices and casthouse product
premiums are the most important revenue drivers.
Access to competitive renewable power is the foundation of delivering
low-carbon aluminium at competitive cost in the long term and enables
Hydro’s first quartile placement on the global primary aluminium cost
curve in 2023. More than 70 percent of the electricity used for Hydro’s
primary aluminium capacity is based on renewable power.
Aluminium Metal has a history of continuous improvements, covering
all relevant earnings drivers, placing Hydro’s primary production
competitively on the global primary aluminium cost curve. Aluminium
Metal aims to strengthen its position further, through delivering NOK
4.3 billion in operational and procurement improvements by 2030,
against the 2018 baseline, in addition to contributing to the NOK 2
billion in greener premium and NOK 0.4 billion in other commercial
improvements. Aluminium Metal targets an adjusted return on average
capital employed (ARoaCE) at around 23 percent, based on an
external market scenario as described in the financial ambitions
section.
Strengthen low-carbon aluminium position
Hydro’s presence in the primary value chain combined with access to
renewable power are important enablers on Hydro’s decarbonization
pathway and key in delivering its low-carbon aluminium Hydro
REDUXA. Hydro REDUXA offers customers a fully transparent value
chain and a certified carbon footprint below 4 kg CO2e per kg
aluminium, corresponding to just one quarter of the world average. By
entering into strategic partnerships with leading customers in the
automotive, buildings and construction, electricity and consumer
goods markets, Hydro Aluminium Metal works to decarbonize the
industries where aluminium is used.
Hydro Aluminium Metal has an ambitious sustainability strategy with
dedicated roadmaps to address decarbonization, energy efficiency,
impact on nature and circular economy. Aluminium Metal’s
decarbonization roadmap aims to create multiple pathways towards
net-zero and to decarbonize both our casthouses through the use of
direct electrification, hydrogen or bio-methane, and the electrolysis
process through carbon capture and storage or the development in
Hydro’s new proprietary zero-emission process, HalZero.
Read more about Hydro’s pathways to net-zero in the section on
Climate change.
Hydro
Aluminium
Metal
5,140
2.0
Employees
Million tonnes
primary production
17
30 %
Locations
Reduction in GHG
emissions by 2030
1
1) For Hydro whole and against 2018 baseline, includes logistics ambition in Metal Markets.
© Hydro 2024
15
Business
areas
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Operations
Hydro Metal Markets, which is organized as part of the business area
Aluminium Metal, consists of the Recycling and Commercial business
units.
Recycling
The Recycling Business Unit consists of 12 recyclers with a total
annual capacity of 995,000 tonnes. The 4 Alumetal plants acquired in
2023 are located in Hungary and Poland, contributing with 275,000
tonnes. About 260,000 tonnes
2
of post-consumer scrap was used in
Metal Market’s 2023 recycling operations.
Hydro also owns two scrap sorting facilities with a total annual
capacity of 136,000 tonnes, where 36,000 tonnes comes from the
Dormagen facility and 100,000 tonnes from the Alumetal Nowa Sol
facility. In 2023, Hydro and the U.S. based scrap yard operator
Padnos, established a scrap sorting joint venture, Alusort with a total
planned capacity of 36,000 tonnes. The recycling plants provide
customers with high quality, value added casthouse products.
Commercial
Metal Markets supplies Hydro’s value added products to a global
market through a wide range of product offerings and services,
including low-carbon aluminium products. Hydro’s portfolio of
production plants allows for a flexible, multi-sourcing system that
enables significant, rapid and cost effective volume adjustments for
customers. Hydro possesses leading research and development
competence in value added casthouse products, supporting customers
in achieving their goals and in developing new products. Commercial
activities include sourcing and trading of standard ingots from third
parties for remelt in Hydro’s recyclers and primary casthouses, and to
secure margins through execution of Hydro’s strategic hedge
program.
Cost and revenue drivers
The results in Metal Markets consist of the operating results of the
recyclers, margins on sales of third party products, and results from
ingot and LME trading activities. Revenues for Hydro’s recyclers are
influenced by volumes, the LME price and product premiums. Costs
are driven by the cost of scrap and standard ingot premiums, freight
costs to customers and operational costs, including energy
consumption and prices. Hydro’s results can be heavily influenced by
currency effects and ingot inventory valuation effects.
Hydro Metal Market’s 2030 commercial and improvement ambitions
are part of Aluminium Metal’s targets, described in our targets and
ambitions.
Strengthen low-carbon aluminium position
Aluminium recycling requires 95 percent less energy than primary
aluminium production, and aluminium can be recycled infinitely without
degradation in quality. Metal Markets supplies a range of low-carbon
and recycled products to the market, including Hydro REDUXA from
the Norwegian primary portfolio and Hydro CIRCAL, with a carbon
footprint of 1.9 kg CO
2
per kg aluminium, from the Recycling business
unit.
Going forward, Hydro Metal Markets will grow the portfolio of lower-
carbon aluminium products, demanding higher premium pricing. This
is supported by Hydro’s recycling ambitions to materially increase the
use of post-consumer scrap usage from 444 kt in 2023
2
towards 850
kt to 1,200 kt and overall earnings contribution in the range of NOK 5-8
billion by 2030.
In 2023, Hydro completed construction of a new recycling plant in
Cassopolis, Michigan, USA with 130,000 tonnes capacity. In addition,
Recycling has several greenfield and brownfield projects under
construction. Hydro has with the 2023 Alumetal acquisition, increased
its capabilities in low-carbon recycled foundry alloys. The increased
sorting capabilities acquired through the Alumetal transaction, and the
Alusort JV in the USA will increase Hydro’s capability to deliver a wider
variety of products with a high content of post-consumer scrap and
lower-carbon footprint.
Hydro
Metal
Markets
856
2.7
Employees
Million tonnes
sales
14
30 %
Countries
Reduced CO
2
emissions
from logistics by 2030
1
1) Against 2018 baseline
2) Including Alumetal full year
© Hydro 2024
16
Business
areas
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Operations
Hydro Extrusions operates the world’s largest extrusion based
solutions for aluminium in the world, counting 71 production sites in 40
countries, through a combination of local expertise, a global network,
and advanced research and development capabilities. An annual
extrusions capacity of 1.3 million tonnes served a market share of 17
percent in Europe and 20 percent in North America in 2023, while
maintaining solid positions in South America and Asia.
Hydro Extrusions operates 21 recycling facilities in total in Europe,
North America and South America. The combined annual capacity of
these facilities is approximately 1.4 million tonnes. About 167,000
tonnes of post-consumer scrap is used in Extrusion’s recycling
operations today.
The business area is organized in four business units: Extrusion
Europe, Extrusion North America, Precision Tubing and Building
Systems. These units are responsible for their respective value chains,
from recycling, aluminium extrusion and value adding operations to
commercial activities such as product development and sales.
Cost and revenue drivers
The main cost drivers are aluminium and labor, where aluminium cost
is tied to the LME and labor cost to inflation, wage levels and
productivity. Both elements comprise about 80 – 90 percent of the
cash cost. LME volatility is absorbed by customers via contracts,
which are typically short to medium term. Customers in certain
industries, like Automotive, are trending towards longer term contracts.
The price of products and solutions in the extrusion business is
determined by the value it creates for each individual customer. Hydro
Extrusions will continue to shift its portfolio towards delivering more
advanced, innovative and sustainable products and solutions, thus
increasing overall value and generated revenue.
Through growth in attractive regions and segments, a strong
sustainability platform, customer partnerships and commercial focus
as well as portfolio optimization and cost reductions. Hydro Extrusions
is targeting NOK 6.7 billion in operational and commercial
improvements by 2030, against the 2018 baseline. Hydro Extrusions is
targeting an EBITDA result of NOK 11 billion in 2030, yielding a 16
percent adjusted return on average capital employed (ARoaCE), in
normalized markets after improvements.
Strengthen low-carbon aluminium position
Sustainability is an integrated part of the business and Hydro
Extrusions is working closely with customers across most industries to
deliver products and solutions that help its customers reduce their
carbon footprint, and improve sustainability and transparency in their
supply chain. This includes the Hydro EcoDesign process which helps
customers create better products with increased functionality and a
lower-carbon footprint.
Hydro Extrusions is adding recycling, and the use of post-consumer
scrap, capacity in Europe and North America through investments in
capacity upgrades of existing facilities. A new recycling facility in
Hungary is also being added, supporting Hydro’s overall ambition of
growing within Recycling and the use of post-consumer scrap.
Hydro Extrusions applies additional levers to reduce its carbon
footprint, including sourcing aluminium with a carbon footprint that is
lower than the average, increased use of recycled post-consumer
scrap and reducing the emissions from own operations. See the
section on Climate change for more details on how the recycling
sourcing strategy can reduce upstream greenhouse gas emissions
and the carbon footprint of products.
In 2023, Hydro produced the world’s first successful batch of recycled
aluminium using green hydrogen as an energy source at Hydro
Extrusions’ recycling operation in Navarra, Spain. Several of Hydro
Extrusions’ plants have installed or are considering installation of on-
site renewable power generation, while others have signed power
purchase agreements with renewable power producers.
Hydro
Extrusions
21,080
1.1
Employees
Million tonnes
sales
40
27 %
Countries
Reduced CO
2
emissions by 2030
1
1) On extrusion billets against 2018 baseline
© Hydro 2024
17
2030 Strategic
direction
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
2030 strategic direction
Pioneering the green aluminium transition,
powered by renewable energy
Hydro is a leading aluminium and renewable energy company
committed to a sustainable future and creating industries that matter.
Hydro’s purpose is to create more viable societies by developing
natural resources into products and solutions in innovative and
efficient ways. With more than a century of industrial experience,
Hydro is enabling the green transition through innovation,
technological advances and a strong commercial mindset aiming to
deliver strong shareholder value creation. Hydro supplies low-carbon
aluminium products to customers worldwide, supported by a low-cost
integrated value chain, powered by renewable energy.
With this unique starting point, Hydro now sets an ambition towards
2030 to leverage its position to change the aluminium landscape,
pioneering the green aluminium transition, powered by renewable
energy.
Aluminium is a key enabler of the green transition
Aluminium is a key enabler for the green transition, and towards 2030,
Hydro sees increasing demand for low-carbon aluminium especially
from electrical vehicles, solar power and electricity systems. In
addition, there is a demand for aluminium as a lighter, less expensive
and more sustainable substitute for copper. Attention is now turning to
how this aluminium is produced and the embedded emissions in the
materials used to produce these transformative technologies. Low-
carbon aluminium is a key enabler to reduce Scope 3 emissions for
these industries.
In addition, the political and regulatory landscape supports aluminium
demand. Governments across the world have set ambitious
renewables targets, while in the EU alone regulations on energy
efficient buildings and reduction of fluorinated gases, drive the further
use of aluminium in building facades and refrigeration.
While total demand for aluminium is set to grow by around 3 percent
annually through 2030, demand for low-carbon primary aluminium is
expected to grow by approximately 20 percent and recycled aluminium
by 5-6 percent annually. Hydro is uniquely positioned to succeed in
this new reality and can utilize the integrated value chain to deliver
low-carbon aluminium products, complete with traceability and
transparency at every step from mine to component.
Hydro’s strategic direction towards 2030 focuses on the following four
key levers:
© Hydro 2024
18
2030 Strategic
direction
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Shifting gear to capture opportunities in a new
reality
1. Step up growth investments in Recycling and Extrusions to
take lead in the market opportunities emerging from the
green transition
Hydro will step up growth ambitions within Recycling and Extrusions to
capture the market opportunities emerging from the green transition.
The move to electric mobility is one such example, which will
transform the entire automotive manufacturing process and supply
chain. Two areas which will grow in line with the EV transition are
aluminium extrusions and large castings, ideal for recycled post-
consumer content.
Extruded aluminium is also widely used within the growing solar
sector, in particular for mounting systems and frames. Hydro is well
positioned to meet and shape this demand, and will increase
investments accordingly. Within Extrusions, Hydro will grow capacity
and capabilities in fabrication and value added services, raising
ambitions to deliver EBITDA in the range of NOK 10 – 12 billion in
2030. Hydro also sets targets to increase capacity within Recycling,
aiming to double the use of post-consumer scrap – from 520 – 670kt in
2025 to 850 – 1200kt in 2030. This represents an EBITDA ambition in
the range of NOK 5 – 8 billion, depending on market developments
and capital availability. The EBITDA-target for recycling is part of the
total EBITDA-target for Extrusions, also supported by the recycling
business in Metal Markets.
2. Step up ambitions within renewable power generation
The green aluminium transition requires renewable energy and Hydro
will step up ambitions within renewable power generation, ensuring the
development of renewable energy for the aluminium value chain at
affordable cost. Hydro has the capabilities to develop, operate and
manage renewable power production in house, also capturing the
growing value of flexible production to balance intermittent renewables
such as wind and solar. Hydro’s renewables joint venture, Hydro Rein,
will continue to take an active role in developing renewable energy
opportunities for Hydro and others. Hydro intends to deliver EBITDA
from the Energy business area in the region of NOK 4 – 5 billion in
2030, including 0.5 billion pro-rata share of Rein EBITDA.
3. Execute on ambitious decarbonization and technology road
map, and step up to contribute to nature positive and a just
transition
Hydro continues its determined execution of its decarbonization and
technology roadmap, while stepping up its contributions to a nature
positive future and supporting a just transition for society. Hydro has
had a greenhouse gas emissions target in place since 2019, aiming for
a 30 percent reduction by 2030 (baseline 2018). In spite of changes in
the Hydro portfolio since this target was set, Hydro maintains this
overall ambition and has identified additional initiatives to support this
commitment. By 2030 is also the target for the demonstration of key
technologies that can produce near-zero emissions aluminium at an
industrial pilot scale, an important milestone in Hydro’s target of
reaching net-zero by 2050, and for the aluminium industry as a whole.
Hydro is also very conscious that sustainability is more than carbon
emissions, and therefore will step up efforts within its nature and social
programs. Hydro already has an advanced nature agenda with clear
commitments to biodiversity, waste management and non-green-
house gas emissions in its operations. These will be further
strengthened and broadened as part of Hydro’s contribution to a
nature positive future. Within the social sphere, Hydro is committed to
improving the lives and livelihoods in local communities. To support
this ambition, a Just Transition framework has been developed to
guide Hydro’s contribution to creating and safeguarding thriving
societies.
4. Shape the market for greener aluminium in partnership with
customers
Hydro will leverage its position to take the lead in shaping the market
for greener aluminium. This portfolio transition will enable Hydro to
deliver an earnings uplift potential of NOK 2 billion in 2030. Hydro will
utilize its key capabilities: high share of renewables, global presence,
both primary and recycling volumes, concrete decarbonization
roadmap, customer co-innovation, together with its integrated value
chain advantage to pioneer the green aluminium transition.
Within the Hydro low-carbon portfolio, we have a wide range of
products and aim to deliver industrial scale pilot volumes based on
emission free smelting technology by 2030, while additional capacity
and demand from new sectors such as automotive sees the share of
recycled metal growing. Hydro is already building this foundation,
working with a select number of strategic partners which are leaders
within their own fields and look to Hydro to deliver unique and more
sustainable aluminium solutions with full control of the value chain.
© Hydro 2024
19
Our targets
and ambitions
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Our targets and ambitions
Key performance measures
Financial
Targets and ambitions
Adjusted RoaCE
Profitability target of > 10 percent over-the-cycle
Improvement program
NOK 14.0 billion accumulated improvements by 2030 against 2018 baseline
Commercial ambitions
NOK 6.1 billion accumulated improvements by 2030 against 2018 baseline
Pay-out ratio
1)
≥ 50 percent of adjusted net income over-the-cycle
Adjusted net cash (debt)
NOK 25.0 billion over-the-cycle
Environmental
Total greenhouse gas emissions)
30 percent reduction by 2030 against 2018 baseline, and net-zero by 2050
Indirect Scope 3 GHG emissions
2)
30 percent reduction per tonne aluminium by 2030 against 2018 baseline
Non-greenhouse gas emissions (SO
2
, NO
X
og PM)
50 percent reduction in material non-GHG emissions by 2030 against 2017 baseline
Recycled post-consumer scrap
850 – 1,200 thousand tonnes per year by 2030
Waste generation and waste recycling
Eliminate landfill of recoverable waste by 2040, <35 percent of spent pot linings to landfill by 2030
Biodiversity impact target no. 1
No net loss of biodiversity for our bauxite mine, from a 2020 baseline
Biodiversity impact target no. 2
1-to-1 rehabilitation of mined areas in Paragominas, Brazil, within two hydrological cycles
Biodiversity impact target no. 3
No net loss of biodiversity in new projects
Social
Number of fatal accidents
Zero fatal accidents
Total recordable injuries
3)
Zero life-changing injuries
Persons empowered with skills and education
Provide quality education and capacity building for 500,000 people by 2030
Share of women employees
4)
25 percent share of women by 2025
Share of women leaders
4)
25 percent share of women leaders by 2025
Employee inclusion index
78 percent inclusion index score
1) Adjusted net income to Hydro shareholders. Dividend floor of NOK 1.25 per share.
2) By ownership equity. Comprises material upstream Scope 3 categories. See note E1.3 for more information
3) Includes both employees and contractors. See note S5 for more information
4) In permanent and temporary positions
© Hydro 2024
20
Our targets
and ambitions
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Financial targets and ambitions
Lifting cash flow, delivering higher returns
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 increasing interest from 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.
Hydro has developed a framework that establishes clear priorities to
lift cash flows and returns.
Profitability roadmaps
Adjusted return on average capital employed
Hydro has a target to achieve an adjusted return on average capital
employed (ARoaCE) of 10 percent over the course of a business cycle
due to industry cyclicality. Short-term ARoaCE targets includes an
additional stretch on top of the 10 percent ARoaCE target in strong
markets.
Cost of capital and ARoaCE targets are differentiated for each
business area as risk and volatility of earnings, and cash flows in the
underlying business activities differ.
Hydro’s main efforts to realize targeted capital returns includes three
levers all underpinned by Hydro’s sustainability agenda: the
improvement program, commercial ambitions and strategic growth
initiatives.
Improvement program
By the end of 2023, Hydro realized NOK 8.8 billion in improvements
from the 2018 baseline, exceeding the target of NOK 8.4 billion for the
year. In 2023, Hydro has further increased its improvement program
target by NOK 0.5 billion to NOK 10.5 billion by 2025 and by NOK 1.0
billion to NOK 12.0 billion by 2027, against the 2018 baseline. Hydro
also extended its improvement program to 2030 with a target of NOK
14 billion against the 2018 baseline, which includes digitalization
initiatives of NOK 1.0 billion.
Improvement programs across the business areas are focused on
operational excellence, procurement savings and fixed cost
reductions. 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. Fixed cost reductions are targeted through efficiency
improvements from robotization and automation as well as energy
efficiency improvements.
The group procurement program was a NOK 400 million initiative
launched in 2019 with ambition to deliver by 2023. Between 2019 to
2023 the procurement program has been stretched continuously, and
has delivered NOK 1.6 billion by end of 2023, and is targeting
additional NOK 1.5 billion towards 2030. Improvements in all business
areas include savings related to increased efficiency within staff and
support functions, with Global Business Services (GBS) contributing
the most. GBS are benchmarked to have world class staff cost levels,
which has been enabled by geographical footprint, scale, analytics,
and automation. Hydro has in 2023, completed a companywide full
potential exercise for digitalization, with an improvement potential of
more than NOK 3 billion. Approximately NOK 2 billion is already
captured in existing improvement efforts, which leaves NOK 1 billion
that is added as to the 2030 improvement ambition.
Commercial ambitions
The commercial ambitions focus on market and customer driven
growth opportunities within the current portfolio. Hydro realized NOK
2.4 billion
1
by the end of 2023 from the 2018 baseline. Hydro has set a
commercial ambition to deliver NOK 2.6 billion by 2025 and NOK 3.0
billion by 2027, against the 2018 baseline. In 2023, Hydro extended its
commercial ambition to 2030, with an additional ambition of NOK 0.4
billion. On top of this, commercial potential is also targeted from
Hydro’s greener premiums and commercial activities in Energy, where
there is an ambition to deliver NOK 2.0 billion and NOK 0.7 billion,
respectively, by 2030.
Execution and success rely on market support and customer demand,
and are therefore less certain. The commercial initiatives include new
product development in Aluminium Metal, market share gain and gross
margin improvement in Extrusions through optimized product mix,
increased sales of green products and higher production capacity, as
well as commercial activities in B&A to achieve higher premiums on
alumina and hydrate.
1) Excludes new scope related to Energy commercial impact, which is not included in the
2025 target. The 2023 Energy commercial impact was NOK 0.4 billion.
© Hydro 2024
21
Our targets
and ambitions
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Strategic growth initiatives
Growth initiatives represent larger changes in the business portfolio.
Hydro’s strategy is to diversify and grow within the areas of recycling
and extrusions (described in chapter 2.4, “Our strategy”). These areas
are supported by the current megatrend of green transition as well as
by Hydro’s core industrial expertise.
Hydro 2030 profitability roadmap
When Hydro is able to deliver on its improvement program targets,
commercial ambitions and strategic growth initiatives, 2030 potential
ARoaCE and adjusted EBITDA could be around 17 percent and NOK
41 billion, respectively, based on an external market scenario. This
scenario is not a forecast, but shows simplified indicative long-term
potential from sensitivities based on the financial result as of third
quarter 2023 last twelve months adjusted for market prices, foreign
currency rates and other short-term effects impacting the period’s
result. For further information on the assumptions for the market
scenario, see Hydro 2030 profitability roadmap assumptions in the
appendices.
Financial strength and flexibility
Hydro’s main strategy for mitigating risk related to volatility in cash flow
is to maintain a strong balance sheet, investment grade credit rating
and strong liquidity. At the same time, reducing the average cost
position of production assets and allocating capital in line with the
company’s strategic ambitions remain a key priority. Hydro considers
this crucial to navigate the industry cycles, enabling investments
during cyclical downturns and access the capital markets at attractive
terms. In certain circumstances, derivatives may be used to mitigate
financial risk in the business area or group levels.
Currently, Hydro has a BBB rating with stable outlook at S&P Global
and a Baa3 rating with positive outlook at Moody’s.
Hydro uses the ratio Adjusted net debt (cash) to adjusted EBITDA as
the key indicator of balance sheet strength and the ability to absorb
volatility in the markets. The target is to stay below 2.0 over the cycle,
which aligns with the company’s ambition to maintain an investment
grade credit rating. Hydro has a guidance on targeted Adjusted net
debt of around NOK 25 billion over-the-cycle. Given historical industry
cyclicality, this means that the Adjusted net debt will be below the
target in the stronger parts of the cycle, to be able to absorb the
impact from industry cycle downturns and maintain financial flexibility
in periods of adverse market conditions.
A strong liquidity position is considered critical to support operations
and investments through the industry cycle. In addition to a robust
cash position, Hydro’s liquidity is supported by revolving credit
facilities, overdraft facilities and short-term liquidity lines.
Hydro’s strategic hedge program is aimed at further strengthening the
company’s financial flexibility and robustness. Using financial
derivatives, the program seeks to lock in strong upstream margins and
secure cash flows. For further details, see note 7.1 Capital
Management.
Clear principles for capital allocation
Hydro has clear priorities and guidelines for capital allocation.
Investments are evaluated using different scenarios for macro and
market development to support robustness in investment decisions.
Hydro also uses differentiated return requirements to reflect the
underlying risk and exposures in each project. Hydro divides capital
expenditures into three categories: sustaining, return seeking, and
growth. 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. In addition, all the business
areas have been grouped into different strategic modes, which
impacts the capital allocation.
Investments are generally funded by Hydro cash generation or debt,
with each subsidiary being capitalized to serve its own activity.
Hydro achieved its target to release NOK 4 billion in operating capital
by end of 2023. Hydro will continue to optimize net operating capital
levels both in absolute terms and in days of revenue, with due
consideration given to the balance between capital release and supply
chain robustness.
© Hydro 2024
22
Our targets
and ambitions
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Robust shareholder distribution
Hydro aims to provide its shareholders with a predictable dividend and
a competitive return compared with alternative investments in similar
companies. Hydro’s ambition is to distribute a minimum of 50 percent
of adjusted net income attributable to Hydro shareholders as ordinary
dividend over the cycle, with a dividend floor of NOK 1.25 per share.
The average pay-out ratio over the last five years is 74 percent. Share
buybacks or extraordinary dividends will supplement dividends during
periods of strong financials, where Adjusted net debt is below the NOK
25 billion target, with due consideration being given to the commodity
cycle and capital requirements for future growth.
© Hydro 2024
23
Sustainability
targets and
ambitions
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Sustainability targets and
ambitions
Sustainability is an integrated part of Hydro’s strategy to lift long-term
profitability and positioning in the market. By reducing Hydro’s
environmental footprint, improving relations with stakeholders and
neighbors, managing impacts, increasing resource efficiency,
producing products needed for the green shift and improving lives and
livelihoods wherever we operate, Hydro aims to reduce risk and create
business opportunities. Hydro has quantified ambitions towards 2030
and 2050 that will improve the company’s performance on climate,
environment, and social responsibility.
Climate change
Net-Zero products, net-zero company and net-
zero society by 2050
Nature and biodiversity
Protect biodiversity and reduce our environmental footprint, 1:1
rehabilitation of available mined areas within two years
Just transition
Improve lives and livelihoods wherever we operate. Empower
500,000 people with education and skills development by 2030
Climate ambitions
Hydro’s target is to be a net-zero company by 2050 or earlier,
delivering net-zero products and enabling a net-zero society. Based on
a 2018 baseline, Hydro targets 30 percent reduction of total scope 1
and 2 emissions, and 15 percent reduction in upstream scope 3
emissions by 2030. Hydro also targets 30 percent reduction in
upstream scope 3 emissions per tonne aluminium delivered to market
by 2030.
Social ambitions
Hydro aims to improve lives and livelihoods wherever it operates by
contributing to the protection of human rights and access to equal
opportunities, resilient local communities in a changing world, and
development of skills and jobs for the future low-carbon economy.
Hydro has a target to equip 500,000 people with new skills and
education by 2030.
Hydro targets zero fatal accidents and life changing injuries.
Hydro targets 25 percent women employees in permanent and
temporary positions, and 25 percent women in leadership positions, by
2025.
Environmental ambitions
Hydro has a range of targets to protect nature and biodiversity, and to
reduce waste. Hydro has a 1-to-1 rehabilitation target for areas
suppressed by its bauxite mining activities in Paragominas, Brazil,
within two hydrological cycles. Hydro also targets no net-loss of
biodiversity for its bauxite mine from a 2020 baseline, and no net-loss
of biodiversity in new projects.
The company has an 850-1200 kTonnes target for post-consumer
scrap recycling capacity by 2030, an increase compared to our 2025
target of 520-670 kTonnes. Hydro aims to eliminate landfilling of all
recoverable waste by 2040, to eliminate the need for new bauxite
residue storage areas by 2050, and to utilize 10 percent of generated
bauxite residue from 2030.
Hydro also has a target of 50 percent reduction in material non-GHG
emissions by 2030, against a 2017 baseline.
Sustainability reporting
Our sustainability reporting in the integrated annual report is prepared
in compliance with the Norwegian Accounting Act and other applicable
regulations. We report in accordance with the GRI Standards and the
requirements of the International Council on Mining and Metals
(ICMM). Please see our GRI index at Hydro.com/gri.
In 2023, we have changed and restructured our sustainability
disclosures based on the EU Corporate Sustainability Reporting
Directive (CSRD) and the applicable European Sustainability
Reporting Standards (ESRS). See the section on reporting changes in
the sustainability statement for an overview of what these changes
entail. We will report in compliance with the implementation schedule
of the CSRD and applicable ESRS in the 2024 integrated annual
report.
© Hydro 2024
24
Managing
uncertainty
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Managing uncertainty
Risk management
Hydro manages uncertainty in the achievement of long-term objectives
through development and application of a robust risk management
framework based on international standards, and operated through a
lines of defense governance model. Hydro’s 2023 detailed risk review
is included in this report.
Key actions and initiatives to mitigate uncertainty on the path to
creating more viable societies by developing natural resources into
products and solutions in innovative and efficient ways are:
• Physical control measures aimed at reducing the likelihood of
fatal and life changing incidents have been developed and
implemented in all business areas across all geographical
locations. Hydro’s fatality prevention procedures are well
established and continuously improved.
• Maintaining robust and stable operations, a strong balance sheet,
high focus on operational and commercial improvements,
competitive power contracts and strategic hedging to support
Hydro’s robust positioning during potential downturns.
• Ability to flex and adapt production abilities to maximize short-
term profitability in situations of changing demand.
• Execution of in-house research and development and
participation in joint partnerships and projects with other leading
industrial companies, universities and research institutions
combined with close monitoring of external developments.
• Identification and execution of a number of technology-based
roadmaps to produce aluminium with near-zero to zero footprint
including recycling of post-consumer scrap, carbon capture and
storage as well as CO2-free primary production through a
chloride-based process we call HalZero.
• Hydro has conducted comprehensive climate risk assessments to
better understand and mitigate the potential consequences of
climate related physical events on our operations. In 2023, the
company has updated the physical climate risk assessments and
are committed on integrating the findings and management of
such risks at an operational level.
• In order to manage transition risks, Hydro’s climate strategy,
advocacy work on future climate-related legislation, technology
and market strategies aim to be consistent with a 1.5-degree
scenario. Our long-term positioning, operational and financial
planning reflect our assessment of related transition risks.
• Hydro is engaged in systematic dialogue with political,
governmental, non-governmental and local communities
regarding the social and regulatory challenges facing our
operations and the communities in which we operate.
Hydro’s capabilities and positioning within renewable energy, low-
carbon alumina and aluminium products, sorting and recycling, as well
as the ambitious decarbonization roadmap, position us well to benefit
from the transition to a low-carbon economy and drive value-creation.
Scenarios and financial modelling
Hydro is using a range of different financial scenarios as part of
managing uncertainty. Sensitivity analysis is an integral part of Hydro’s
financial planning and is used to make informed decisions on matters
such as investment capacity, capital structure and hedging. As
described during the 2023 Capital Markets Day, Hydro has used four
scenarios to analyze potential 2030 adjusted EBITDA (AEBITDA) and
adjusted return on average capital employed (ARoaCE) under the
assumption that the company deliver on its improvement program
targets, commercial ambitions and strategic growth initiatives:
• Based on prices and foreign currency rates as of third quarter
2023 last twelve months, 2030 ARoaCE and AEBITDA could
potentially be around 15 percent and NOK 37 billion, respectively
• Based on five-year average prices and foreign currency rates,
2030 ARoaCE and AEBITDA could potentially be around 13
percent and NOK 34 billion.
• Based on forward prices and foreign currency rates around the
time of the 2023 Capital Markets Day, 2030 ARoaCE and
AEBITDA could potentially be around 15 percent and NOK 38
billion.
• Finally, using an external scenario based on prices and foreign
currency rates from CRU and S&P Global, 2030 ARoaCE and
AEBITDA could potentially be around 17 percent and NOK 41
billion.
These four scenarios are not forecasts but show simplified indicative
long-term potential from sensitivities based on the financial result as of
third quarter 2023 last twelve months adjusted for market prices,
foreign currency rates and other short-term effects impacting the
period’s result. The market sensitivities are based on the expected
Hydro market exposures for 2024. For further information on the
market scenarios see Hydro 2030 profitability roadmap assumptions in
the appendices.
To further inform Hydro’s strategic positioning towards 2030, several
megatrends were explored through the means of identifying risks and
opportunities beyond market prices and currency. Cross-cutting
themes like increased geopolitical and national political uncertainty,
increasing sustainability expectations, weakening Nordic power
balance, general aluminium market dynamics and impact from the
green transition, were taken into consideration. These themes
amongst others have provided key insights on how Hydro should
navigate in an uncertain world where resilience against multiple
outcomes is essential, as well as facilitated the development of the
2030 strategic direction.
© Hydro 2024
25
Market
development
and outlook
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Market development and
outlook
The global economy faced a number of challenges in 2023 arising
from continued high inflation and subsequent monetary tightening, and
slower growth in China than forecasted. However, unemployment
remained low and inflation began to fall in the second half of the year,
and overall the global economy avoided recession with the U.S. in
particular showing significant resilience.
Bauxite & Alumina
The World ex-China alumina market was oversupplied in 2023 with
China absorbing the excess production as imports to balance the
global market. World ex-China production was essentially flat year
over year as lower production in Australia and Western Europe was
offset by higher production in Asia and South America. Chinese
alumina production increased 3 percent from 2022 driven by the ramp-
up of several new greenfield refineries, mostly using imported bauxite
which in turn contributed to a 13 percent increase in bauxite imports;
imports from Guinea continued to gain market share, representing 70
percent in 2023.
The Platts alumina price index started the year at USD 330 per mt,
ranging between USD 325 to 371 per mt during 2023. The price
reached the annual high in mid-February, driven by capacity
curtailment at a refinery in Western Australia because of natural gas
supply constraints. The price drifted down in the following months,
trading in a relatively narrow range essentially reflecting Chinese
alumina price trends. In the last trading days of the year the price
increased on news of refinery curtailments in China and concerns
around bauxite shipments from Guinea following an explosion at the
main fuel depot of the country in Conakry. Against a backdrop of
relatively stable demand, greenfield alumina capacity ramp-up kept
Chinese alumina prices under pressure throughout the year.
The Platts alumina price index averaged USD 343 per mt for the year,
a 5 percent decrease compared to 2022 (USD 362 per mt). Prices as
a percentage of three-month aluminium price quoted on LME varied,
averaging 15.1 percent for the year compared with 13.4 percent in
2022. The price index at the end of 2023 represented 14.7 percent of
the three-month aluminium price quoted on LME.
China imported 1.8 million mt of alumina in 2023 compared to 2.0
million mt in 2022. Australia accounted for 46 percent of imports
followed by Indonesia and Vietnam with 33 percent and 12 percent,
respectively. China exported 1.1 million mt of alumina to Russia in
2023 compared to 0.8 million mt in 2022. China net alumina imports
thus decreased to 0.6 million mt in 2023 from 1.0 million mt in 2022.
China imported 142 million mt of bauxite in 2023, 13 percent higher
than the previous year. Imports from Guinea increased 41 percent
from 2022 to 99 million mt and a 2 percent increase of imports from
Australia to 35 million mt. Indonesia imposed a bauxite export ban
from June 2023, driving China’s imports from Indonesia down 90
percent to 2 million mt in 2023. These three countries accounted for 96
percent of China’s bauxite imports, compared to 98 percent in 2022.
For the first time since 2019, China imported bauxite from Brazil being
1 million mt of their import.
The price of bauxite imported into China in 2023 increased to an
annual average of USD 61 per mt CIF China compared to USD 58 per
mt CIF China in 2022.
Energy market developments
In 2023 Nordic and Continental power prices declined from the record
high level in 2022. Europe was able to handle the loss of gas from
Russa with a combination of increased import of gas from other
sources as well as lowering demand. In addition to a more balanced
gas market, the hydrology strengthened both in the Nordic region and
in Europe, while the problems related to the French nuclear power
supply appear to be resolved. The price area differences in the Nordic
area remained significant in 2023, however at a lower level than in
2022. The price area differences arise due to limitations in
transmission capacity between the Northern and Southern part of the
NordPool area.
During 2023, prices in the Brazilian power market decreased
significantly to an annual average level last seen in 2011. The main
driver for this development was hydrology further strengthened by
lower power demand.
Primary Aluminium
Global primary aluminium demand increased 0.9 percent in 2023 due
to a weaker macro environment in world ex. China, while Chinese
demand grew more strongly. Global supply increased by 2.1 percent,
resulting in market surplus of 400 thousand tonnes in 2023. Primary
production in China increased 2.9 percent year-on-year in 2023 as
many smelters that curtailed production in 2022 were restarted and
new capacity was put into operation. Supply in world. ex. China
increased by 0.9 percent in 2023 driven by the restarts of some
production in South America. Demand in downstream segments
decrease throughout 2023 in most sectors, especially in building and
construction, while demand from automotive held up well.
Three month LME prices started the year around USD 2,378 per mt
and ended the year at USD 2,384 per mt. Prices remained somewhat
stable throughout the year with a short period of prices reaching USD
2,600 per mt at the beginning of the year when renewed hope for a
recovery of the Chinese economy emerged.
© Hydro 2024
26
Market
development
and outlook
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
For most of the year prices remained in a range between USD 2,100
per mt and USD 2,300 per mt as weakening demand, especially from
the building and construction sector, kept prices capped on the upside,
while the general cost picture for smelters capped prices on the
downside. Chinese SFHE prices were often higher than LME due to
the strong demand from China incentivizing imports of primary
aluminium.
US and European standard ingot premiums started the year at USD
490 per mt and at USD 262 per mt respectively. European standard
ingot premiums improved throughout the first months and peaked at in
May at USD 325 per mt, followed by a drop to as low as USD 187 per
mt towards the end of the year as physical demand was decreasing
strongly and supply was abundant.
The U.S. Midwest standard ingot premium had a similar development
and peaked at a high of USD 662 per mt in January, followed by a
correction to USD 415 per mt by year-end and subsequent
stabilization around that level. Average U.S. Midwest standard ingot
premium decreased USD 145 per mt compared to 2022, while
corresponding standard ingot premiums in Europe decreased about
USD 190 per mt.
Global primary aluminium consumption increased by 0.9 percent to
69.9 million mt in 2023. Global supply increased by 2.3 percent to 70.3
million mt resulting in global surplus of around 0.4 million mt. For 2024,
global primary aluminium demand is expected to increase by around
2-3 percent and aluminium production is expected to increase by ca. 2
percent, resulting in a global surplus of around 0.1 million mt in 2024.
Demand for primary aluminium outside China decreased by around
3.6 percent in 2023, while corresponding production increased by 0.9
percent. Overall, supply outside China exceeded demand by around
1.5 million mt in 2023. Over 1.2 million mt of primary imports into
China have decreased the world ex. China surplus for the year.
Demand for primary aluminium outside China is expected to increase
by around 2.2 percent in 2024. Corresponding production is expected
to be up about 1-2 percent, leaving the world outside China in a
surplus in 2024. Imports of primary metal into China are expected to
be around the same level in 2024 compared to 2023.
Demand for primary metal in China increased around 4.0 percent to
42.4 million mt in 2023. Chinese production increased by 2.9 percent
in 2023, resulting in a deficit of 1.1 million tonnes for the year.
Production growth was supported by an overall better energy situation
in the country and hence significant restarts of previously curtailed
capacity. Chinese primary production is expected to increase by 2
percent in 2024. Primary demand is estimated to increase by around
2-3 percent, resulting in a deficit in 2024.
LME stocks increased in 2023 on the back of a surplus market, from
0.45 million mt at the end of 2022 to 0.55 million mt at the end of 2023.
Stocks stayed fairly stable throughout the year, with occasional larger
inflows and withdraws. The composition of stocks, however, changed
dramatically. The share of Russian stocks increased from 40 percent
in the beginning of 2023 to 90 percent at the end of the year. Total
global inventories, including unreported inventories, are estimated to
have increased by 0.4 million mt in 2023. The total stock level is
estimated to be around 9.5 million mt at the end of 2023.
The European demand for sheet ingot, primary foundry alloys and wire
rod increased in 2023. The consumption of extrusion ingot was
negatively affected by weakness in the building and construction
sector leading to a reduced demand in 2023 compared to 2022.
In Asia, the weakening of the extrusion ingot demand picked up
momentum in the second half of 2023, with high inventory reported in
the market. On the other hand, PFA demand held firmly, likely due to
pent up demand caused by semiconductor and logistics supply
disruption in the previous year.
Extrusion ingot consumption in the U.S. grew throughout the first half
of 2023, but moderated toward the end of the year as higher interest
rates slowed industrial activity. Meanwhile, foundry alloy demand
steadily picked up throughout the year as automobile and light truck
production rebounded with improvements in deliveries of
semiconductors.
Extruded Products
Extrusion demand continued to face headwinds in key market
segments Europe and North America in 2023 amid higher inflation and
interest rates. The building and construction segment experienced the
weakest development in 2023, decreasing 25 percent in Europe and
20 percent in North America in 2023 compared to 2022. Weak
consumer spending and industrial activity negatively impacted
extrusion demand in industrial segments, decreasing 26 percent in
Europe and 15 percent in North America in 2023 compared to 2022.
The automotive segment however improved in 2023 as automotive
producers increased production amid easing of supply chain issues,
particularly production of electric vehicles. Extrusion demand in the
transport segment increased 4 percent in Europe in 2023, while North
American transport demand decreased 3 percent, as demand in
commercial truck and trailer moderated.
Overall, European demand is estimated to have decreased by 17
percent in 2023 compared to 2022. CRU estimates that European
extrusion demand will further decrease by 1 percent in 2024 compared
to 2023, with growth picking up in the second half of the year. North
American demand is estimated to have decreased 13 percent in 2023
compared to 2022. CRU estimates that North American extrusion
demand will increase by 2 percent in 2024 compared to 2023.
© Hydro 2024
28
Key performance
measures
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Key performance measures
Key financial performance
Ambitions and targets
2023
2022
2021
Adjusted RoaCE
1)
Profitability target of > 10 percent over-the-cycle
7.1%
22.2%
18.6%
Improvement program
NOK 14.0 billion accumulated improvements by 2030 against 2018 baseline
8.8
7.8
6.3
Commercial ambitions
NOK 6.1 billion accumulated improvements by 2030 against 2018 baseline
2.4
1.8
1.5
Pay-out ratio
2)
≥ 50 percent of adjusted net income over-the-cycle
2)
59%
53%
101%
Adjusted net cash (debt)
1)
NOK 25.0 billion over-the-cycle
(18.0)
(6.0)
(7.0)
Environmental performance
Ambitions and targets
2023
2022
2021
Total greenhouse gas emissions
3)
30 percent reduction by 2030 against 2018 baseline, and net-zero by 2050
(6.5%)
(2.6%)
4.7%
Indirect Scope 3 GHG emissions
4)
30 percent reduction per tonne aluminium by 2030 against 2018 baseline
(32%)
(27%)
(18%)
Non-greenhouse gas emissions – sulfur dioxide (SO
2
) emissions
50 percent reduction in SO
2
emissions by 2030 against 2017 baseline
(30%)
(31%)
(12%)
Non-greenhouse gas emissions – nitrogen oxide (NO
X
) emissions
50 percent reduction in NO
X
emissions by 2030 against 2017 baseline
(20%)
(13%)
(8%)
Non-greenhouse gas emissions – particulate matter (PM) emissions
50 percent reduction in PM emissions by 2030 against 2017 baseline
(15%)
(20%)
(13%)
Recycled post-consumer scrap – thousand tonnes
850 – 1,200 thousand tonnes per year by 2030
444
5)
321
335
Waste generation and waste recycling – share of total waste directed to landfill
Eliminate landfill of recoverable waste by 2040
15%
18%
16%
Waste generation and waste recycling – landfilling of SPL
Less than 35 percent of spent pot linings to landfill by 2030
33%
29%
34%
Biodiversity impact - percentage of land released prior to 2022 that has been
rehabilitated
Rehabilitate land released from mining areas within two hydrological cycles
100%
100%
100%
Social performance
Ambitions and targets
2023
2022
2021
Number of fatal accidents
Zero fatal accidents
1
6)
0
0
Total recordable injuries - recorded injuries per million hours
7)
Zero life-changing injuries
2.4
2.4
2.7
Persons empowered with skills and education - thousand persons reached
Provide quality education and capacity building for 500,000 people by 2030
197
157
129
Share of women employees
8)
25 percent share of women by 2025
23%
22%
20%
Share of women leaders
8)
25 percent share of women leaders by 2025
20%
19%
18%
Employee inclusion index
78 percent inclusion index score
74%
76%
76%
Governance and compliance indicators
Ambitions and targets
2023
2022
2021
Substantiated claims of corruption
Zero substantiated claims of corruption
0
0
0
1) Alternative performance measures (APMs) are described in the appendices
2) Actuals refers to pay-out ratio, dividend per share divided by adjusted earnings per share from continuing operations.
3) By ownership equity. Comprises Scope 1 and Scope 2 GHG emissions
4) By ownership equity. Comprises material upstream Scope 3 categories. See note E1.3 for more information
5) Including recycling volumes for the full year at the four recycling units acquired Hydro acquired from Alumetal in 2023.
6) One contractor fatality in consolidated operations. The incident is still under investigation for work relatedness and root causes. In addition, there was one fatality involving a contractor at our joint venture, Qatalum, which is not included in the statistics for consolidated activities.
7) Includes both employees and contractors. See note S5 for more information
8) In permanent and temporary positions combined
© Hydro 2024
29
Financial
performance
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Financial performance
Adjusted EBITDA
1)
Adjusted EBITDA for the full year of 2023 decreased compared to the
same period last year. Lower aluminium and alumina sales prices,
lower Extrusions and recycling volumes, higher fixed costs, and lower
contributions from sale of power negatively impacted results, partly
offset by lower raw material costs, higher Extrusion margins and
currency.
Net income
Net income from continuing operations amounted to NOK 2,804 million
in 2023, compared to NOK 24,381 million in 2022. In addition to the
factors described above, net income from continuing operations
included an impairment loss of NOK 4,421 million, a net foreign
exchange gain of NOK 2,084 million, a NOK 887 million unrealized
loss on power and raw material contracts, and a NOK 1,530 million
unrealized gain on LME related contracts.
Adjusted return on average capital employed (ARoaCE)
1)
All business areas, except Bauxite & Alumina, delivered returns above
their cost of capital in challenging markets during 2023. The adjusted
RoaCE ended at 7.1 percent over the year, heavily influenced by
challenging alumina market conditions, as well as high growth and
return-seeking investments in the year. Over the last 5 years, the
adjusted RoaCE has been 11 percent, above our target of 10 percent
over the cycle.
Cash effective change in net operating capital
1)
Hydro has continued the strong focus on reducing inventories and
releasing cash, and cash effective change in net operating capital from
continuing operations amounted to NOK 6.9 billion during 2023,
compared to NOK (8.8) billion during 2022. Supply chain efficiency
improvements and metal balance optimization and decreasing activity
and price levels as market demand has cooled off during 2023, have
all contributed. Further, the closing balance in 2023 were influenced by
some transitional effects or one-offs taking down operating capital.
Capex
1)
Total capex in 2023 ended up at NOK 21.1 billion, up from NOK 11.5
billion in 2022. The 2023 investments include a relatively large share
of return-seeking and growth projects in our strategic growth areas
Recycling and Extrusions, including the remelt facility in Hungary, new
extrusions line in Nenzing and the recycling plant in Cassopolis, as
well as the acquisition of Hueck and Alumetal. In addition, Hydro
invested in renewable projects in Hydro Rein, mainly solar and wind
projects, supporting Hydro’s strategy to step up ambitions within
renewable power generation. Other projects prioritized in 2023,
include critical maintenance activities needed to safeguard Hydro’s
production assets in every business area. Examples also include
smelter relining in Aluminium Metal, bauxite pipeline section
replacement in Paragominas, power plant rehabilitation and upgrades
in Energy, various upgrades of presses in Extrusions and recyclers in
Metal Markets, and investments in battery materials in Hydro Energy.
Hydro’s investment level in 2023 was supported by the sale of shares
in Alunorte to Glencore.
Free cash flow
1)
Free cash flow from continuing operations ended at NOK (0.2) billion
in 2023, down from NOK 14.0 billion in 2022. The net cash outflow in
2023 was mainly driven by increased capex and a relatively high level
of shareholder distributions that offset the effects of the EBITDA
results, and net operating capital release. The sale of shares in
Alunorte to Glencore is not included in the free cash flow definition.
Dividend
Hydro’s ambition is to pay attractive dividends to shareholders.
Considering Hydro’s strong financial performance, and reflecting our
robust balance sheet, the Board of Directors has proposed to
distribute NOK 5 billion in dividends, which represents 59 percent of
2023 adjusted net income per share and a dividend of NOK 2.5 per
share. The final shareholder distribution for 2023 is subject to approval
by the Annual General Meeting on May 7, 2024.
Adjusted EBITDA, NOK billion
Adjusted RoaCE per business area
1) For further details, see the Alternative Performance Measures (APM)
11.8
14.3
28.0
39.7
22.3
2019 2020 2021 2022 2023
7.1 %
22.2 %
18.6 %
-2.5%
1.8 %
12.0 %12.0 %
29.5 %
25.4 %
13.8 %
35.4 %
28.3 %
10.7 %
31.0 %
23.9 %
8.8 %
11.4 %
10.3 %
2023 2022 2021
Hydro Bauxite & Alumina Energy Aluminium Metal Metal Markets Extrusions
© Hydro 2024
30
Financial
performance
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Net cash (debt)
1)
Hydro’s net debt was NOK (8.2) billion at the end of 2023, compared
to net cash of NOK 1.3 billion at the end of 2022. The net cash
reduction was driven by a slightly negative free cash flow combined
with shareholder distributions, partly offset by the sale of shares in
Alunorte to Glencore.
Adjusted net cash (debt)
1)
Hydro’s adjusted net cash (debt) was NOK (18.0) billion at the end of
2023, compared to NOK (6.0) billion at the end of 2022. The adjusted
net cash (debt) decrease was mainly driven by decreased net cash
(debt) combined with increased other liabilities and pension
obligations.
Adjusted net (cash) debt to adjusted EBITDA ratio
2)
Hydro’s average adjusted net (cash) debt to adjusted EBITDA was
0.7, well below the targeted maximum ratio of 2.0 over the cycle.
Liquidity
Hydro held NOK 24.6 billion in cash and cash equivalents and NOK
0.6 billion in time deposits at the end of the year. Short-term bank
deposits are normally available at short notice. Norsk Hydro ASA has
two revolving multi-currency credit facility with a syndicate of
international banks. The first is a USD 1.6 billion facility maturing in
December 2026, and the second is a USD 1.3 billion short-term facility
maturing in April 2024. Both facilities were undrawn per year-end
2023. Overdraft facilities and liquidity lines also provide access to
additional short-term liquidity.
Improvement program
By the end of 2023, Hydro realized NOK 8.8 billion in improvements
from the 2018 baseline, exceeding the target of NOK 8.4 billion for the
year. The following table illustrate the distribution of improvements
across our business areas:
During the year, Hydro increased the improvement program target for
2027 by NOK 1 billion and extended the program to 2030 with a target
of NOK 14 billion against the 2018 baseline. The 2030 target includes
NOK 1 billion in additional digitalization initiatives, which was identified
as part a companywide full potential exercise for digitalization. The
main driver of the strong 2023 performance is Aluminium metal, who
has delivered strong operational performance across the portfolio. In
Extrusions the main improvements are coming from the Procurement
program, which has delivered above target. In Bauxite & Alumina the
main improvements are related to new operational initiatives. Hydro’s
target for 2024 is to achieve NOK 9.5 billion in accumulated
improvements, against the 2018 baseline.
Commercial ambition
Hydro realized NOK 2.4 billion
3)
in commercial initiatives by the end of
2023 from the 2018 baseline, which is good progress toward the 2025
target of NOK 2.5 billion, set in 2021. During the year, the commercial
program was extended to 2030 with an ambition to deliver NOK 6.1
4)
billion against the 2018 baseline, which includes our ambition to
deliver NOK 2 billion
5)
from greener premiums. The 2023 commercial
impact in Extrusions is mainly driven by market share gains. Bauxite &
Alumina achieved higher price than their performance benchmark on
alumina sales, mainly driven by hydrate sales. Finally, in Aluminium
Metal the main commercial improvements were driven by new
products and greener premiums.
Moody’s
Baa3
S&P
BBB
8.8
NOK billion
in improvements,
exceeding 2023 target
0.7
Average adjusted net
cash (debt) /
adjusted EBITDA
8.8
3.25
2.8
2.6
0.15
0 2 4 6 8
Hydro Group
Bauxite & Alumina
Aluminium metal
Extruded Solutions
Energy and staff initiatives
Dividend NOK/share
1)
2019
2020
2021
2022
2023
Dividend yield
2)
3.8%
3.1%
9.9%
7.7%
3.7%
Dividend payout ratio
3)
240%
95%
101%
53%
59%
1) Pending approval from the Annual General Meeting, May 7, 2024
2) Based on share price at year end.
3) Average dividend per share divided by average adjusted earnings per share from
continued operations.
4) 2021 extraordinary dividend of NOK 2 per share May 11, 2022, and NOK 1.45 per
share September 21, 2022
1) For further details, see note 7.1 Capital management
2) For further details, see the Alternative Performance Measures (APM)
3) Excludes Energy commercial impact, which is not included in the 2025 target
4) 2030 target includes new scope in Energy commercial with impact of NOK 0.7 billion. The 2023 Energy commercial impact was NOK 0.4 billion.
5) Based on 2030 EU ETS cost and relative CO2 reduction vs Hydro REDUXA 4.0 at current industry traded upcharge.
1.25 1.25
3.4
5.65
2.5
3.45
2019 2020 2021 2022 2023
Ordinary dividend Extraordinary dividend
© Hydro 2024
31
Sustainability
performance
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Sustainability performance
Environmental performance
Climate change and net zero transition
Hydro’s target is to be a net-zero company by 2050 or earlier,
delivering net-zero products and enabling a net-zero society. Based on
a 2018 baseline, Hydro targets 30 percent reduction of total scope 1
and 2 greenhouse gas (GHG) emissions and 15 percent reduction in
upstream scope 3 emissions by 2030. Hydro also targets 30 percent
reduction in upstream scope 3 emissions per tonne aluminium
delivered to market, by 2030. In 2023, Hydro’s total scope 1 and 2
emissions were 6.5 percent lower than the 2018 climate strategy
baseline.
Other emissions
Hydro targets 50 percent reduction in material non-GHG emissions by
2030, including sulphur dioxide (SO
2
), nitrogen oxide (NO
X
), and
particulate matter (PM). In 2023, total emissions of SO
2
, NO
X
and
particulate matter were reduced by 30 percent, 20 percent, and 15
percent, respectively, compared to the 2017 baseline.
Recycling
Hydro targets 850-1200 thousand tonnes of post-consumer scrap
(PCS) recycling capacity by 2030, an increase compared to our 2025
target of 520-670 thousand tonnes. In 2023, Hydro recycled 444
thousand tonnes
2
of post-consumer aluminium scrap, a 38 percent
increase from 2022. We also sold 51,000 tonnes of Hydro CIRCAL,
our brand of recycled aluminium with a minimum of 75 percent
recycled post consumer scrap and a carbon footprint of 1.9 kg CO2
per kg aluminium.
Waste management and utilization
Hydro aims to eliminate landfill of all recoverable waste by 2040, and
to landfill less than 35 percent of spent pot linings (SPL) by 2030. In
2023, Hydro landfilled 20 percent of its waste and 38 percent of our
SPL.
In 2023, Hydro announced a commercial research partnership with
WAVE Aluminium to investigate the possibilities to use bauxite residue
as a resource. Using a new combination of disruptive technologies, a
bauxite residue processing plant will be built at Alunorte, which will
initially have the capacity to process 50,000 tonnes per year of bauxite
residue to produce pig iron.
Continuing efforts within ESG performance
1
17.8 (Low risk)
#3 in sector (3/224)
AA rating
“Leading initiatives to achieve
carbon-free aluminium”
69%
Europe Index Inclusion
DJSI inclusion since 1999
75/100
97th percentile
73/100
B rating
Corporate
rating: Prime Status
1) ESG rating as of 31.12.2023
2) Including Alumetal full year
Total greenhouse gas emissions by ownership equity
(Scope 1 and 2)
Post-consumer scrap (PCS) inflows
Greenhouse gas emissions were lower in 2019 and 2020 due to production embargo at
Alunorte and curtailed production at Albras and Paragominas. Emissions have decreased since
2021 mainly due to shut down of primary production at our Slovalco plant, and implementation
of emission reduction efforts described in the Climate change chapter.
Annual development of post-consumer scrap recycling against 2030 target of 850 – 1,200
thousand tonnes. See the Resource use chapter for more information.
5.91
6.15
6.68
6.31
5.98
3.87
3.58
3.78
3.43
3.37
0
2
4
6
8
10
2019 2020 2021 2022 2023
Million mt CO2e
Direct GHG emissions Indirect GHG emissions
52%
38%
39%
12%
12%
2023
2022
2021
2020
2019
© Hydro 2024
32
Sustainability
performance
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
No Net Loss ambition
Hydro targets no net-loss of biodiversity for its bauxite mine in
Paragominas, Brazil, from a 2020 baseline, and No Net Loss of
biodiversity in new projects. Hydro has established a partnership with
Brazilian NGOs, Imazon and IPAM, which have a long-standing
presence within the State of Pará and are actively engaged in the
conservation and sustainable development of the Brazilian Amazon.
Hydro also has a 1-to-1 rehabilitation target for mined areas in
Paragominas, within two hydrological cycles. All suppressed land that
has been released for rehabilitation prior to 2022, has been
rehabilitated within the target of two years hydrological cycles, and a
total of 244 hectares started rehabilitation in 2023.
Social performance
Towards a just transition
Hydro aims to improve lives and livelihoods wherever it operates by
contributing to the protection of human rights and access to equal
opportunities, resilient local communities in a changing world, and
development of skills and jobs for the future low carbon economy. In
2023, Hydro updated its Human rights policy, continued to map salient
human rights risks across the countries where Hydro operates or that
are part of its value chain, and prioritized the follow-up of human rights
risks in Brazil, China, the Nordics, and Qatar. In 2023, Hydro invested
NOK 123 million in its local communities including community
investments, TerPaz (local community centres), donations and
sponsorships, and developed a program to increase funding to
projects aligned with Hydro’s just transition priorities in the
communities where it operates. The program will be launched in 2024.
Hydro also progressed towards its target to equip 500,000 people with
skills and education for the future low carbon economy by 2030,
reaching more than 40,000 people in 2023. In total, 197,000 people
have benefitted from Hydro’s education and skills initiatives since
2018.
Health and safety
Hydro values human life above all other considerations and will not
compromise the health and safety of those working for Hydro or that
are affected by the company’s activities. Hydro targets zero fatal
accidents and life changing injuries. In 2023, the total recordable injury
(TRI) rate was 2.4 per million hours worked by employees and
contractors, with the majority of injuries relatively minor.
While this continues the positive trend from 2022, which saw the same
injury rate and Hydro’s best TRI result to date, there was one fatality
involving a contractor at our Alunorte alumina refinery. At the time of
publishing, the incident is still under investigation for work relatedness.
Moreover, Hydro registered one life-changing injury where an
employee had all toes amputated after a load on a mobile trolley
tipped over the employee’s the foot. In addition, there was also one
fatal accident at Hydro’s joint venture, Qatalum, in Qatar.
Gender balance
Hydro targets 25 percent women employees in permanent and
temporary positions combined and 25 percent women in leadership
positions, by 2025. Hydro’s overall gender balance improved one
percentage point from 2022, with 23 percent of the Hydro workforce
comprising women at the end of 2023. The share of women in
management has increased by one percentage point in the same
period, with 20 percent of leadership positions in Hydro comprising
women at the end of 2023.
Transparency and reporting
Sustainability is fully integrated in Hydro’s strategy and has been
reported on for three decades. Hydro reports on its sustainability
performance in accordance with GRI Standards. Please see the GRI
index at hydro.com/gri. The preparation to fully implement the EU
Corporate Sustainability Directive (CSRD) is a work in progress, and.
Hydro continues to work to improve ESG performance against several
internationally recognized ESG rating systems.
High risk incidents (HRI) and total recordable injuries (TRI)
Incidents per million hours worked by employees and contractors
Total people reached with skills and education
towards 2030 target of 500,000
Thousand people
2.1
1.66
1.36
0.8
0.7
3.0
2.7
3.3
2.4
2.4
2019 2020 2021 2022 2023
HRI TRI
197
157
132
111
51
0 100 200 300 400 500
2023
2022
2021
2020
2019
People reached (cumulative)
© Hydro 2024
33
Other performance
measures and
adj. to EBIT
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Other performance measures and adjustments to EBIT
Other performance measures
NOK million, except per share data
2023
2022
2021
Revenue
193,619
207,929
149,654
Earnings before financial items, tax, depreciation and amortization (EBITDA)
23,291
39,536
26,050
Adjustments to EBITDA
1)
(1033)
128
1,959
Adjusted EBITDA
1)
22,258
39,664
28,010
Hydro Bauxite & Alumina
1,828
3,122
5,336
Hydro Energy
3,146
4,926
3,790
Hydro Aluminium Metal
10,502
22,963
13,500
Hydro Metal Markets
1,533
1,673
867
Hydro Extrusions
6,480
7,020
5,695
Other and eliminations
(1231)
(39)
(1178)
Adjusted EBITDA
1)
22,258
39,664
28,010
Earnings before financial items and tax (EBIT)
2)
9,592
30,715
17,887
Adjusted EBIT
1)
12,983
31,179
20,786
Net income (loss) from continuing operations
2,804
24,381
13,930
Adjusted net income (loss) from continuing operations
1)
7,835
23,145
14,905
Net income (loss) from discontinued operations
-
36
12
Earnings per share from continuing operations
1.77
11.76
5.92
Adjusted earnings per share from continuing operations
1)
4.26
10.70
6.77
Financial data
Investments
1)2)
25,647
13,391
8,589
Net cash (debt)
1)
(8191)
1,310
3,213
Key Operational information
Bauxite production (kmt)
10,897
11,012
10,926
Alumina production (kmt)
6,185
6,193
6,305
Realized alumina price (USD/mt)
359
382
313
Primary aluminium production (kmt)
2,031
2,137
2,244
Realized aluminium price LME (USD/mt)
2,218
2,599
2,364
Realized USD/NOK exchange rate
10.37
9.52
8.55
Extrusions sales volumes to external market (kmt)
1,090
1,251
1,296
Power production (GWh)
9,697
7,664
9,055
1)
Alternative performance measures (APMs) are described in the appendices
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
Adjusting items to EBITDA, EBIT and net income
Reported earnings before financial items and tax (EBIT) and net income (loss) include effects that are
disclosed in the table below. Adjusting items to EBIT and adjusted net income (loss) are defined and
described as part of the Alternative Performance Measures in the Appendices.
NOK million
1)
2023
2022
2021
Unrealized derivative effects on LME related contracts
(1,530)
(3,003)
5,088
Unrealized derivative effects on power and raw material contracts
887
3,352
(3,083)
Significant rationalization charges and closure costs
2)
265
152
377
Community contributions Brazil
3)
25
32
217
Transaction related effects
4)
120
(119)
(304)
Net foreign exchange (gain)/loss
5)
(883)
(318)
(79)
Other effects
6)
83
32
(257)
Adjusting items to EBITDA
(1,033)
128
1,959
Impairment charges
7)
4,424
335
426
Depreciation
8)
-
-
513
Adjusting items to EBIT
3,391
464
2,899
Net foreign exchange (gain)/loss
2,084
(2,192)
(1,404)
Other finance (income) expense
-
-
Calculated income tax effect
(445)
492
(520)
Adjusting items to net income
5,031
(1,236)
976
Income (loss) tax rate
57%
25%
24%
Adjusted income (loss) tax rate
35%
24%
25%
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 Aluminium Metal and Hydro Extrusions.
3)
Community agreements includes provisions for the TAC and TC agreements with the Government of Parà and Ministèrio Pùblico made in
September 2018, including later adjustments for changes in cost estimates, and similar agreement.
4)
Transaction related effect inculdes gains(losses) of divestments as described in the Alternative Performance Measures section in the
appendices.
5)
Realized currency gains and losses from risk management contracts and embedded currency derivatives in physical
power and raw material prices
6)
Other effects include adjustments as described in the Alternative Performance Measures section in the appendices.
7)
Impairment charges for 2023, 2022 and 2021 include goodwill and property, plant and equipment in the operating plants
in Bauxite and Alumina, Tomago and Slovalco smelter in Aluminium Metal and various sites and assets in Hydro
Extrusions.
8)
Excess depreciation related to the anode producer Aluchemie which closed in 2021
© Hydro 2024
34
Key financial
exposures
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Key financial exposures
Hydro’s operating results are primarily affected by price developments of Hydro’s main products, raw
materials, margin developments and fluctuations in the most significant currencies for Hydro, which are
USD, NOK, EUR. and BRL.
Hydro enters into derivative forward sale contracts both on the LME and with banks to secure prices on
parts of the planned aluminums production as part of securing a margin level for periods up to about three
years when considered beneficial. To mitigate the impact of exchange rate fluctuations, long-term debt is
mainly maintained in currencies reflecting underlying exposures and cash generation.
The table shows sensitivities regarding aluminium prices and foreign currency fluctuations for 2024. The
table illustrates the sensitivity of adjusted 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 to the financial statements. These sensitivities are on an adjusted basis, and do not
consider revaluation effects of derivative instruments, which may influence earnings. The sensitivities
include the impact from financial risk management contracts per December 31, 2023.
Sensitivities with 100 percent production
Commodity price sensitivity +10%
NOK million
Adjusted EBITDA
Aluminium
3,220
Currency sensitivities +10%
NOK million
USD
BRL
EUR
Sustainable effect
AEBITDA
4,250
(1,020)
(100)
One-off reevaluation effect
Financial items
(590)
1,390
(4,370)
Annual sensitivities based on normal annual production volumes and reflecting strategic hedge positions. LME USD 2,120 per mt, USDNOK
10.91, BRLNOK 2.19, EURNOK 11.66.
© Hydro 2024
36
Corporate
governance
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Corporate governance
Governing bodies
Group compliance
Reference: Business conduct
section
General Meeting of Shareholders
References: NUES section 6 and Hydro.com
Annual General Meeting held May 10 in 2023 and is scheduled May 7 in 2024
Approves Hydro's Articles of Association; Elects members to and resolves on
remuneration for the Board of Directors; Elects external auditor and approves
auditor remuneration; Elects members to and resolves on remuneration for the
Nomination Committee; Approves annual accounts and the report of the Board
of Directors; Approves dividend proposal; Deals with other matters listed in the
notice convening the meeting.
Approves rules of procedures for Board of Directors and sub-committees;
Ensure adherence to governance principles; Approves strategy, business
plans and budgets; Oversees operations, accounts, asset management;
Appoints Board sub-committees; Reviews and approves integrated annual
report. See Rules of Procedures for Board of Directors.
Board of Directors
References: NUES sections 6 and 9 and Hydro.com
18 meetings held in 2023 with 100 percent attendance
KPMG is Hydro’s responsible auditor.
External auditor
Reference: NUES section 14
Supports the Board in supervision of internal control, internal
audit, compliance and system of risk management;
Oversees integrity of financial statement, sustainability
statement, reporting processes, internal control and risk
management; Oversees qualification and independence of
external auditor; Oversee performance of internal audit
functions. See also the Board Audit Committee mandate.
Audit Committee
References: NUES section 9 and Hydro.com
9 meetings in 2023, 100 percent attendance
Prepare and recommend proposal for the compensation for
the President & CEO, and the other members of the
Corporate Management Board; Oversees strategic people
processes, including succession, leadership and talent, and
diversity and inclusion. See also the Board Compensation
and People committee mandate.
People and Compensation Committee
References: NUES section 9 and Hydro.com, 8 meetings in
2023 97 percent attendance
Recommends members for the Board of Directors to be
elected by shareholders at general meeting of shareholders;
Recommends members of the Nomination Committee;
Recommends remuneration of the board members and
nomination committee. The Nomination Commitee's
mandate is approved by the General Meeting of
Shareholders. See also the Nomination Committee mandate.
Nomination Committee
References: NUES section 7 and Hydro.com
28 meetings in 2023, 100 percent attendance
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.
Corporate Management Board
Reference: Hydro.com
21 meetings held in 2023
Internal Audit provides independent assurance to
management and the Board of Directors by evaluating
whether Hydro’s risk management, control, and governance
processes are adequate and contribute to the achievement
of the company’s objectives.
Internal audit
References: NUES section 9 and Business conduct section
Supports the organization in developing compliance
awareness and skills to comply with the requirements set out
by relevant rules and regulations as well as Hydro's
governance documents.
Group compliance
Reference: Business conduct section
© Hydro 2024
37
Corporate
governance
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
General information
Hydro is a public limited liability company organized with a governance
structure based on Norwegian corporate law. Hydro’s corporate
governance provides a foundation for value creation and good control
mechanisms in the form of global directives that describe mandatory
requirements for all parts of our organization.
Hydro follows the most recent Norwegian Code of Practice for
Corporate Governance (NUES) dated October 14, 2021. The Board of
Directors’ report in relation to the Code can be found in the appendix.
Information regarding shareholder policy can be found in the Hydro
Share section of the Our Performance chapter. Hydro’s strategic
direction is described in the Our business chapter.
Global directives and Code of Conduct
Hydro’s governance structure is based on applicable laws and
regulations, and Hydro’s corporate directives, with delegation of
responsibility to the business areas and to corporate functions whose
duties include finance, tax and accounting, social responsibility,
environment, governance, legal and compliance. To maintain
uniformly high standards, Hydro sets common requirements in the
form of constituting documents and global directives. Constituting
documents are approved by Hydro’s Board of Directors or the general
meeting of shareholders, while global directives are approved by the
President & CEO. This information is made available to all employees.
Hydro’s governing documents and global directives help ensure that
all employees carry out their activities in an ethical manner and in
accordance with current legislation and Hydro standards. The Code of
Conduct addresses compliance with laws and matters, such as
handling of conflicts of interest and a commitment to equal
opportunities for all employees. The defined programs contribute to
compliance with anti-corruption and basic human rights, and other
relevant governance areas. 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. For legal
entities where Hydro holds less than 100 percent of the voting rights,
Hydro’s representatives in the boards of directors or in other governing
bodies, shall act in compliance with Hydro’s Code of Conduct and
endeavor to implement the principles as laid down therein.
For information about Hydro’s Code of Conduct, other constituting
documents and global directives see Hydro.com/principles. For
information about Hydro’s whistleblowing procedures, see Business
Conduct in the sustainability statement.
Governing bodies
General Meeting of Shareholders
Hydro’s shareholders exercise ultimate authority through the general
meeting. Persons who own shares on the fifth business day prior to
the general meeting are entitled to attend and vote at the general
meeting, either in person or by proxy.
The General Meeting of Shareholders elects the shareholders
representatives of the Board and determines the remuneration of the
Board. It elects the company’s external auditor and approves the
auditor’s remuneration. It also approves the integrated annual report
and the statutory report according to Norwegian requirements,
including the dividend proposed by the Board. It elects the Nomination
Committee and determines their remuneration and 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.
Nomination Committee
The Nomination Committee consists of three to four members who
shall be shareholders or shareholder’s representatives. The members
and its chairperson are elected by the general meeting of shareholders
for periods of up to two years at a time. The committee makes its
recommendation to the general meeting of shareholders regarding the
election of shareholder elected members on the board of directors,
remuneration to the members and deputies of the Board, the election
of the members and chairperson of the committee, and remuneration
to the members of the committee. The guidelines for the Nomination
Committee are adopted by the general meeting of shareholders and
include Hydro’s requirements for independence, shareholder interests,
competence, capacity and diversity.
Board of Directors
The Board held 11 members as of December 31, 2023. Seven are
elected by the general meeting of shareholders, four are elected by
and among the company’s employees in Norway. All shareholder
elected board members are elected for a period of up to two years.
The employee representatives on the Board each have a personal
deputy. In accordance with Norwegian law, the Board assumes the
overall governance of the company, ensures that appropriate
management and control systems are in place, and supervises the
day-to-day management as carried out by the President & CEO.
The Board works to ensure that sustainability is considered in the
company’s activities and value creation. The Board oversees that
Hydro has appropriate global directives for issues including risk
management, health and safety, people management, social
Hydro board competency
Level of competency
Industry relevant experience
Industry experience GICS 1510
Materials: upstream related
1)
●●●●●●●
Industry experience GICS 1510
Materials: downstream related
1)
●●●●●●●
Industry experience GICS 5510
Materials: utilities
1)
●●●●●●●
Supply chain
●●●●●●●
Customer and markets
●●●●●●●
General experience
CEO / large scale leadership
●●●●●●●
CFO, finance and audit
committee
●●●●●●●
Corporate governance / legal and
public affairs
●●●●●●●
Mergers and acquisitions
●●●●●●●
Risk management
●●●●●●●
Strategy
●●●●●●●
HR / remuneration
1)
●●●●●●●
Workers and human rights
1)
●●●●●●●
IT and cybersecurity
●●●●●●●
Digitalization
●●●●●●●
Environment and climate
1)
●●●●●●●
● Practiced competence
● Familiarity
The Board has asked the consultancy Spencer Stuart to assist them in evaluating the
competency within certain competence areas for all shareholder-elected board members.
The definitions used are:
• Practiced competence: experience from executive career
• Familiarity: expertise from non-executive career (boards, other)
1) Employee representatives bring significant experience
© Hydro 2024
38
Corporate
governance
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
responsibility and human rights. Sustainability, including environment
and climate change, social responsibility, diversity, health, safety and
compliance, are integrated into the group’s risk management and
strategy processes and are at the center of the Board’s considerations
and decision making throughout the year.
All shareholder elected members were in 2023, 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. No members elected by
and among the employees, are part of the company’s executive
management. Employee elected 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.
All new board members receive introduction to Hydro to understand its
industries, operating model, risk management and sustainability
approach, including its Code of Conduct- Regular orientations and
discussions are performed in the board on the same topics.
The Board normally conducts an annual self-assessment of its work,
competence, and cooperation with management. This assessment
normally also includes an assessment of the chairperson.
Board People and Compensation Committee
The committee consists of four members of the Board of Directors.
The committee shall assist the Board in exercising its oversight
responsibility in relation to compensation matters pertaining to the
President & CEO and other members of the Corporate Management
Board (CMB), other compensation issues of principal importance, and
strategic people processes in the company such as succession
planning, leadership and talent, and diversity and inclusion.
The committee shall regularly consider the appropriateness and
competitiveness of the remuneration arrangements for the President &
CEO and other members of the CMB.
Board Audit Committee
The Board Audit committee consists of four of the Board members and
meets the Norwegian requirements for independence and
competence. The committee assists the Board in exercising its
oversight responsibility with respect to the integrity of the company’s
financial statements and sustainability reporting, the financial and
sustainability reporting processes, internal controls, systems of risk
management, and the compliance system. In addition, the committee
oversees qualifications, independence and performance of the
external auditor and Hydro’s internal audit function. As part of
overseeing the external auditor’s independence and performance, the
audit committee maintains a pre-approval policy governing the
external auditor’s engagement.
The Board Audit Committee performs an annual self-assessment. To
ensure the independence of the internal audit function, the Chief Audit
Executive reports to the Board through the audit committee, and
meets with the Board of Directors for approval of the audit plan and
annual report. The Chief Compliance Officer has a dotted reporting
line too, and meets regularly with the audit committee.
President & CEO and the Corporate Management Board (CMB)
According to Norwegian corporate law, the President & CEO
constitutes a formal governing body responsible for the day-to-day
management of the company. The President & CEO leads Hydro with
the assistance of the Corporate Management Board. The division of
functions and responsibilities between the President & CEO and the
Board is defined in greater detail in the rules of procedures for the
Board of Directors, which is a governing document established and
approved by the Board.
The 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.
The CMB oversees the management of Hydro, including governance
processes, controls and procedures to monitor sustainability related
impacts, risks and opportunities. Sustainability related impacts and
risks are considered in all major business decisions, including new
projects and major changes to existing facilities. Hydro’s corporate
directives and procedures delegate responsibility for sustainability due
diligence, and managing sustainability related impacts, risks, and
opportunities to corporate staff and line management in the business
areas. Corporate staff and business areas report on Hydro’s
performance against targets and KPIs on a quarterly basis.
Management and Board remuneration
Please refer to the Remuneration report for information concerning
remuneration and remuneration policies, share ownership, loans
outstanding and loan policy relating to Hydro’s Board of Directors and
Corporate Management Board.
© Hydro 2024
39
Corporate
governance
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Board of Directors
Dag Mejdell
Chair
Rune Bjerke
Deputy Chair
Arve Baade
Director
Petra Einarsson
Director
Kristin Fejerskov Kragseth
Director
Position
Position
Position
Position
Position
Non-executive director
Adjunct Executive in Residence,
Norwegian School of Economics
Employee representative representing
the Norwegian union Industri Energi
Non-executive director
CEO of Petoro
Education
Education
Education
Education
Education
MSc in Economics and
Business Administration
(siviløkonom), Norwegian
School of Economics (NHH)
Exam. Oecon., University
of Oslo; Master of Public
Administration (MPA), Harvard
University, Massachusetts USA
Certificate of Apprenticeship
in Process Studies
BSc in Business Administration and
Economics with Specialization in
Managerial Economics, Uppsala
University
M. Eng, Ocean Engineering,
Texas A&M University, USA; Engineer
Marine, Høgskulen på Vestlandet;
ExxonMobil Management Program;
INSEAD Management Program
Current directorships
Current directorships
Current directorships
Current directorships
Current directorships
Chair of SpareBank 1 SR Bank ASA,
Chair of Mestergruppen AS, Chair of
Elopak ASA
Chair of Reitan Retail AS, Chair
of Merkantilbygg Holding AS; Chair of
Dinnergruppen Holding AS; Deputy
Chair of Schibstedt ASA; Board
member of Kronprinsparets Fond;
Chair of Wallenius Wilhelmsen ASA
Chair of Sunndal Chemical Union
Board member and Chair of the Audit
Committe of Biokraft, Board member
and member of the Remuneration
Committee Alimak Group AB, Board
member, Chair of the Audit Committe
and member of the Remuneration
Committe of SSAB
Chair of Stavanger Sandnes
Skøyteklubb, Deputy Board
member of ONS (Offshore
Nothern Seas)
© Hydro 2024
40
Corporate
governance
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Peter Kukielski
Director
Philip Graham New
Director
Marianne Wiinholt
Director
Bjørn Petter Moxnes
Director
Torleif Sand
Director
Margunn Sundve
Director
Position
Position
Position
Position
Position
Position
CEO of Hudbay Minerals
Inc.
Non-executive director
Chief Financial Officer,
WS Audiology, Denmark
Employee representative
Employee representative
representing the Norwegian
union Industri Energi
Union representative
representing the Norwegian
union Industri Energi
Education
Education
Education
Education
Education
Education
MSc Civil Engineering,
Stanford University, USA
MA PPE, University of Oxford,
UK
State-Authorized Public
Accountant, Copenhagen
Business School, Cand. Merc.
Aud, Copenhagen
Business School, Bachelor
communication, Copenhagen
Business School
MSc in Chemical Engineering,
NTH, Trondheim, Norway; MSc
Technology management,
NTNU, Trondheim and MIT,
USA
Upper secondary school
with vocational subjects
Certificate of Apprenticeship
in Process Studies,
Vocational School in HSE
Current directorships
Current directorships
Current directorships
Current directorships
Current directorships
Current directorships
Board member Hudbay
Minerals Inc.
Non-executive Director ReNew
Energy Global PLC; Non-
executive Director Fotowatio
Renewable Ventures S.L.; Non-
executive Director, Almar Water
Solutions BV; Fellow, Institute of
Energy; Council member, World
Economic Forum Global Future
Council; Advisory Board, UK
Faraday Battery Challenge;
Council Member, UK Auto
Council. Chair Trustmark
Research and Innovation Ltd.
Board member and Chair of the
Audit Committee of Coloplast
A/S
Group leader
(konserngruppeleder)
Tekna-P Norsk Hydro, SSR
leader Norsk Hydro (Tekna,
Nito, Negotia, Lederne)
Chair, Årdal Chemical
Union; Board member,
Aluminiumsindustriens
Miljøsekreteriat; Member of the
National Board of Industri Energi
Chair of Alnor Chemical
Union (AKF); Chair of AKF
Hydroklubben; Member
of the National Board of Industri
Energi
© Hydro 2024
41
Corporate
governance
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Name
Place of residence
Year of birth
Position
Board committee
Meetings
attended
Number of
Hydro
Shares
1)
Director
since
Term
expires
2)
Dag Mejdell
Oslo, Norway
1957
Chairperson
Chairperson, compensation and
people committee
18
45,000
3)
2012
2024
Rune Bjerke
Oslo, Norway
1960
Deputy Chair
Compensation and people
committee
18
4)
20,500
2020
2024
Arve Baade
Sunndalsøra, Norway
1967
Employee representative
Compensation and people
committee
18
6,506
2018
2025
Petra Einarsson
Torsåker, Sweden
1967
Director
Audit committee
18
0
2022
2024
Kristin Fejerskov Kragseth
Stavanger, Norway
1967
Director
Compensation and people
committee
18
1,200
2022
2024
Peter Kukielski
Vancouver, Canada
1956
Director
Audit committee
5)
18
8,000
6)
2019
2024
Philip Graham New
Oxford, United Kingdom
1962
Director
Audit committee
7)
18
799
8)
2022
2024
Marianne Wiinholt
Klampenborg, Denmark
1965
Director
Chairperson Audit committee
18
9)
0
2016
2024
Bjørn Petter Moxnes
Sunndalsøra, Norway
1960
Employee representative
Audit committee
18
728
2022
2025
Torleif Sand
Øvre Årdal, Norway
1967
Employee representative
18
1
2022
2025
Margunn Sundve
Haugesund, Norway
1971
Employee representative
18
997
2022
2025
The number of board meetings were 18.
1) As per December 31, 2023.
2) Following decision from the Norwegian Labor Inspection Authority (“Tvisteløsningsnemda”), all employee elected board members will be on election in 2025. Norsk Hydro, in agreement with the employee elected board members, applied for an extension of the current elective period of one (1)
year. Following the election in 2025, the employee elected members will – in line with applicable regulation – be on election every second year. This one-time prolongation of the election period will cater for diverging election years of shareholder elected board members and employee elected
board members, respectively, going forward.
3) Including shares owned by Nobel Partners, a private equity investment firm.
4) Absent four hours in BoD meeting April 27.
5) Member of Audit Committee until June 14.
6) American Depositary Shares purchased via OTCQX. Includes ADRs purchased via Cynthia Kukielski Spousal Trust.
7) Appointed new member of Audit Committee from June 15.
8) Including shares owned by a holding in XLOM.
9) Absent two hours in BoD meeting April 27.
© Hydro 2024
42
Corporate
governance
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Corporate Management Board
Hilde Merete Aasheim
President and Chief Executive Officer
Pål Kildemo
EVP and Chief Financial Officer
Responsible for performance management, capital
deployment, tax, risk management, accounting and
ESG reporting, IT and cybersecurity, procurement,
insurance.
Hilde Vestheim Nordh
EVP People & HSE
Responsible for people strategy, including health,
safety, security, and environment
John Thuestad
EVP Hydro Bauxite & Alumina
Eivind Kallevik
EVP Hydro Aluminium Metal
Key experience
Key experience
Key experience
Key experience
Key experience
Ten years of experience as Executive
Vice President Hydro Primary Metal
from 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. Senior positions in
Elkem from 1986-2005. In 2002 she
was Head of the Silicon Division in
Elkem and member of the Corporate
Management Board. Aasheim also
has work experience from Arthur
Andersen & Co.
Executive Vice President and Chief
Financial Officer (CFO) of Norsk
Hydro ASA and as a member of the
Corporate Management Board since
May 2019. Kildemo has held several
key positions in the company,
including Head of Investor Relations
and Head of Finance in Primary
Metal. Kildemo also served as acting
Executive Vice President of Primary
Metal just prior to becoming Chief
Financial Officer.
Executive Vice President People and
HSE since 2019. Hilde joined Hydro in
1995 and has held roles of Head of
HSE & HR in Energy, HSE manager
Karmøy, and casthouse manager at
Karmøy.
Executive Vice President, Hydro
Bauxite & Alumina. Senior Vice
President, Hydro Extruded Solutions;
Executive Vice President, SAPA; EVP
Group President Primary Metals,
Alcoa; CEO, Elkem; CEO/EVP
Primary Aluminium, Elkem Aluminium.
In Hydro since 1998 and held several
senior positions in the corporate
center and in Business areas, in
Norway and internationally. Head of
Aluminium Metal since 2019. CFO
and Executive Vice President (2013-
2019). CFO for the Business areas
Bauxite and Alumina and Aluminium
Products. Head of Corporate
Financial Reporting, Performance and
Tax, Assistant VP and Relationship
Manager, Christiania Bank &
Kredittkasse (1993-1998).
Education
Education
Education
Education
Education
MSc in Business Administration
(Siviløkonom), the Norwegian School
of Economics (NHH); State-
authorized public accountant, certified
from NHH.
Master’s degree in Economics and
Finance from Heriot-Watt University,
Edinburgh, Scotland.
MSc in Materials Technology,
Rheinisch Westfälische Technische
Hochschule (RWTH), Aachen,
Germany.
MSc in Metallurgy (Sivilingeniør),
Norwegian University of Science and
Technology (NTNU) Trondheim,
Norway; MBA Carnegie Mellon
University, Pittsburgh, USA.
Master of Business Administration
from University of San Francisco,
USA; Bachelor of Business
Administration from Norwegian
Business School, Norway.
External directorships
External directorships
External directorships
External directorships
External directorships
Member of ERT (European Round
Table) and member of ICMM
(International Council of Metal and
Mining).
Board position in Future Leaders
Global since 2020; Board member,
ZNL Energy since 2023.
None.
Member of the Executive Committee
of International Aluminum Association
(IAI) on behalf of Hydro. Board
member Yara International ASA since
2014.
Board Member Norsk Industri.
© Hydro 2024
43
Corporate
governance
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Anne-Lene Midseim
EVP Compliance, IP & General
Counsel
Responsible for Hydro’s governance system and
compliance processes.
Arvid Moss
EVP Energy
Trond Olaf Christophersen
EVP Corporate Development
Responsible for strategy, sustainability,
technology, and shaping and safeguarding
portfolio.
Paul Warton
EVP Hydro Extrusions
Therese Rød Holm
EVP communication & public Affairs
Key experience
Key experience
Key experience
Key experience
Key experience
Executive Vice President Hydro
Energy since 2010. Acting Head of
Corporate Strategy and Business
Development from 2019 to 2021.
Moss joined Hydro in 1991 and has
held several senior management
positions including 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.
Extensive and broad experience in
Hydro since joining in 1997.
Head of Business Unit Recycling,
Head of Commercial, and Plant
Manager at the Karmøy smelter
(Aluminium Metal, 2013 – 2022)
Senior positions in the business area,
including Head of Energy Markets
(Energy, 2007-2013) Several
management positions in the former
Oil & Energy Business Area and the
Aluminium Business Area including
asset management and business
development (1997-2007).
Executive Vice President for Hydro
Extrusions. Warton previously served
as global president Automotive
Structures & Industry for Constellium.
Prior to that, he worked for 17 years in
the global aluminium extrusion
industry with leadership positions in
Sapa, Alcoa and Luxfer Group. He
also worked for 10 years in
manufacturing and commercial
leadership positions in Tier 1
automotive companies at Federal
Mogul and GKN.
Extensive experience, including
several senior positions in Hydro and
other large companies across all main
disciplines of communication and
public affairs. She joined Hydro in
2014 and has held several leadership
roles, both in Hydro Group and in
Hydro Extrusions. Prior to Hydro,
Holm was communication manager in
Marine Harvest, now Mowi, from
2003-2011. Later she worked for
Posten Norge, as responsible for
internal communication in the Mail
division.
Executive Vice President Compliance, IP
& General Counsel since 2019. EVP
CSR, Legal and Compliance, since
2015. Midseim has worked in Hydro
since 1998, with senior positions as
Company Secretary, and as Head of
Non-Financial Staffs in Bauxite &
Alumina. Midseim was Resident Legal
Advisor in East-Timor, Oil for
development program (2006-2007),
Associate Lawyer in Norwegian law firm
Vogt & co (1996-1998), and Executive
Officer in the Ministry of Oil and Energy
(1994-1996).
Education
Education
Education
Education
Education
Candidate in Jurisprudence (Cand.
Jur.), University of Oslo.
MSc in Economics and Business
Administration (Siviløkonom),
Norwegian School of Economics
(NHH).
Master of Management, BI Norwegian
Business School; MSc Mechanical
Engineering, University of Bath, UK /
MSc Mechanical Engineering, NTNU,
Trondheim, Norway.
BSc in Production Engineering,
University of Birmingham, UK; MBA in
Finance, London Business School,
UK.
MSc in Economics and Business
Administration (Siviløkonom),
Norwegian School of Economics
(NHH).
External directorships
External directorships
External directorships
External directorships
External directorships
Board member Gassco AS since
2019, Chair of the Board of
Industriforsikring AS.
Chair of the Board in National Export
Strategy Council since 2021. Board
Member in NEL ASA since May,
2023.
Member of Eurometaux, Management
Committee.
Member (Treasurer) of the Executive
Committee of European Aluminum on
behalf of Hydro.
None.
© Hydro 2024
44
Corporate
governance
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Name
Place of residence
Year of birth
Position
Employed in
Hydro since
Current position
since
Number of
Hydro Shares
1)
Hilde Merete Aasheim
Oslo, Norway
1958
President and Chief Executive Officer
2008
2019
141,292
Pål Kildemo
Bærum, Norway
1984
EVP and Chief Financial Officer
2008
2019
24,472
Hilde Vestheim Nordh
Asker, Norway
1969
EVP People & HSE
1995
2019
35,367
2)
John Thuestad
Asker, Norway
1960
EVP Hydro Bauxite and Alumina
2017
2018
75,423
3)
Eivind Kallevik
Oslo, Norway
1967
EVP Hydro Aluminium Metal
1998
2019
85,382
Anne-Lene Midseim
Oslo, Norway
1968
EVP Compliance, IP & General Counsel
1998
2015
42,419
Arvid Moss
Oslo, Norway
1958
EVP Energy
1991
2010
184,357
Trond Olaf Christophersen
Oslo, Norway
1972
EVP Corporate Development
1997
2022
5,772
Paul Warton
Tibshelf, United Kingdom
1961
EVP Hydro Extrusions
2021
2021
16,431
Therese Rød Holm
Bærum, Norway
1975
EVP Communication & Public Affairs
2014
2022
1,277
EVP: Executive Vice President. All EVPs are members of the company’s Corporate Management Board (CMB)
1) As per December 31, 2023.
2) Including shares owned by spouse
3) Including shares owned through Jothur AS, a private equity investment firm.
© Hydro 2024
45
Risk review
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Risk Review
Enterprise Risk Management in Hydro
Risk management is an integral part of all Hydro’s business activities
and decisions.
The Board of Directors (BoD) sets expectations, oversees Hydro’s
system of risk management and reviews key risks through biannual
updates which serve as an important foundation for the strategy and
business planning processes. In addition, specific risk topics are
subject to more frequent updates. Progress on risk mitigation is
reflected in the remuneration schemes of the Chief Executive Officer
(CEO) and Corporate Management Board (CMB). The Board Audit
Committee supports the BoD’s supervisory role. The CMB is
responsible for Hydro’s risk management framework at group level
and assists the CEO in its execution. The framework is based on
international standards, and Hydro more specifically applies the
Committee of Sponsoring Organizations of the Treadway
Commission’s ‘COSO Internal Control – Integrated Framework’ (2013)
with respect to Financial Reporting.
The further attribution of risk management roles in Hydro is supported
by the development of a three lines of defense (3LoD) governance
model.
Risk management is an integral part
of all our business activities and
decisions.
The first line of defense resides with managers at all levels. Business
areas and group functions have the responsibility for and ownership of
incident and HSE risks. They ensure that risks within their respective
areas of accountability are identified, analyzed, adequately mitigated,
documented and reported. The frequency of updates is dependent on
the nature of each risk as well as the pace of internal or external
change.
The second line comprises governance owners and subject matter
experts on different risk areas as well as an Enterprise Risk
Management (ERM) function. They assess the need for, develop
policies and procedures for managing risk as well as coordinate
biannual risk updates. More broadly, the second line supports,
challenges and monitors the first line of defense.
The third line comprises Group Internal Audit & Investigation. This
department independently evaluates whether Hydro’s risk
management, control and governance processes, as designed and
implemented by management, are adequate and contribute to the
achievement of the organization’s objectives.
Through the 3LoD model, major risks are managed according to
Hydro’s risk appetite and consolidated at group level through the
annual strategy process, with a status update provided in the business
planning process, while mitigating plans progress on an ongoing basis.
An overview of key risks, including developments during the last 12
months and related mitigating actions, is included below. This
overview is derived from Hydro’s risk matrix which facilitates risk
oversight and prioritization.
Overall, Hydro has seen an evolution of the company’s risk profile
rather than a material change, with emphasis on the new strategic
direction in a context of increasing sustainability expectations as well
as an uncertain geopolitical and regulatory landscape. Despite Hydro’s
best efforts, the risk-mitigating initiatives may fail or prove to be
inadequate to mitigate all risks. As risks increase, decrease or change
and new risks emerge over time, the information contained in this
section should be carefully considered by investors.
Risk process
A. Strategic and business level objectives are clearly
communicated to and well understood by managers at
all levels
B. Upside and downside risks within each business or
functional area, as well as interconnected risks are
identified and assigned to risk owners
C. Significant risks are further analyzed using a variety of
risk assessment techniques to articulate key attributes
and establish their materiality
D. Mitigating strategies are selected and evaluated
based on their cost benefit
E. Risk outcomes are recorded and reported within
business areas and corporate functions, as well as
further aggregated at group level
F. Risk information is reviewed and monitored on an
ongoing basis, considering the pace of internal and
external change
© Hydro 2024
46
Risk review
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Strategic risks
Influenceability
Likelihood
Trend
1)
1. Complex and evolving sustainability landscape
M
M
2. Value chain concentration
H
H
→
3. Macro-economic developments, geopolitical tensions, protectionism and trade disruptions
L
M
4. Regulatory & policy framework uncertainty
L
H
5. Technological breakthroughs
L
M
→
6. Climate change
L
M
→
Incident risks
7. Insufficient asset integrity
H
M
→
8. Material legal or compliance incident
H
L
→
9. Major breach of cyber security
M
M
10. Failure to meet social performance expectations
M
M
→
11. Pandemic
L
M
→
12. Material tax change
L
M
→
HSE risks
13. Fatal or life changing accident
M
M
14. Security incident
L
M
→
15. Impact on the environment
M
M
→
16. Structural collapse or other major accident
M
M
→
1) Indicates whether the likelihood of the risk and/or the severity of its consequences have increased, decreased, or remained stable since 2022.
Although Hydro maintains insurance to protect against certain risks in such amounts as it considers reasonable and in accordance with market practice, its insurance may not cover all the potential
risks associated with its operations, and therefore any material disruptions (especially if not covered by Hydro’s insurance) could have a material adverse impact on its business and financial condition.
Hydro’s risk categories
Strategic risks
Strategic risks are emerging challenges to the achievement of
Hydro’s strategic objectives. They could have a significant
upside and are characterized by their large scale and potential
long-term impact on sustainability and profitability. They are
generally influenced by structural shifts in the external
business environment.
Incident risks
Incident risks are mainly operational or influenced by
operational processes. They will often, but not always,
materialize suddenly and with immediate impact. Short-term
mitigation is typically within Hydro’s control. Hydro’s main
incident risks could impact several parts of the value chain
with a broad range of consequences.
HSE risks
HSE risks relate to health, safety, security and/or
environmental events. They are often operational or
influenced by operational processes. Hydro’s main HSE risks
could influence multiple parts of the business. In addition to
their HSE related consequences, these risks may also result
in major legal, social, reputational and financial impacts.
Influenceability
Likelihood
Trend
L
Low
L
Low
Decreasing
M
Medium
M
Medium
→
Stable
H
High
H
High
Increasing
© Hydro 2024
47
Risk review
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Strategic risk > 1. Complex and evolving sustainability landscape
Influenceability: M Likelihood: M Trend:
Description
Stakeholder expectations on Hydro’s sustainability performance continue to evolve. While Hydro’s CO2
footprint is among the lowest of aluminium producers, the production process remains energy and carbon
intensive. In addition, key stakeholders are increasingly looking beyond carbon and focusing on the
overall sustainability footprint, including nature, social factors and their trade-offs.
Developments
Global awareness and attention toward sustainability continue to accelerate. Regulatory changes are
reacting to and driving decarbonization pressure, while consumers are taking a wider sustainability
perspective. Increasingly, the focus is shifting to include the impact of human activities and the climate
crisis on nature and social development, as well as transparency and traceability along the entire value
chain.
Sustainability requirements are increasing in terms of scale, scope and complexity due to growing
interdependencies with trade policies. Investments in research and development toward greener
solutions are growing, which increases the drive to deliver sustainable materials. In general, all
geographies, industries and companies are expected to come under increased scrutiny.
Consequences
A failure to deliver on expectations could negatively impact Hydro’s license to operate, damage Hydro’s
reputation and increase the risk of substitution away from aluminium.
Mitigation
At the Capital Markets Day in November 2023, Hydro presented its 2030 strategy ‘Pioneering the green
aluminium transition, powered by renewable energy.’ While Hydro already has a strong sustainability
position, the strategy steps-up efforts within recycling and renewable power generation to further reduce
the carbon footprint of its products as key enablers for the green transition.
Hydro is committed to reduce its greenhouse gas (GHG) emissions by 30 percent by 2030. This will be
achieved through projects to reduce CO2 emissions in the value chain such as a fuel switch to liquid
natural gas (LNG) from the beginning of 2024, and the electrification of boilers at Alunorte, together with
the increased use and recycling of post-consumer scrap.
In 2023, Hydro made several investments to further reduce the footprint of its products, including the
acquisition of the recycling company Alumetal S.A. and the new recycling facility at Cassopolis in the US.
Moreover, Hydro produced the world’s first batch of recycled aluminium using hydrogen fueled production
in June 2023. This enables Hydro’s growing portfolio of low-carbon aluminum products, sold at a
premium.
Hydro is working on various options to reduce direct emissions from primary aluminium production.
These contribute towards the company’s longer-term technology roadmap to decarbonize main
processes, supporting the overall ambition to become carbon neutral by 2050.
Hydro is also working with the International Council for Mining and Metals (ICMM) on an industry
approach to contributing towards the Nature Positive goal. Hydro launched its own related targets at the
Capital Markets Day, alongside its Just Transition framework. Progress is made on specific
environmental areas such as biodiversity, waste and water as well as stronger community relationships,
particularly in Brazil. Initiatives to improve Hydro’s social and environmental impact are monitored,
communicated, and reported on a regular basis.
© Hydro 2024
48
Risk review
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Strategic risks > 2. Value chain concentration
Influenceability: H Likelihood: H Trend: →
Description
Hydro sources almost all alumina from operations owned in Brazil, whereby the bauxite mine at
Paragominas supplies the majority of raw materials to the Alunorte alumina refinery through a 244
kilometer long pipeline.
Hydro experienced in the past some challenges with respect to its operations in Brazil due to a
combination of factors involving physical climate incidents, asset integrity as well as a complex political
and social environment. In response, Hydro has made significant efforts over several years to enhance
the robustness of its operations in the region.
Developments
The past three years have seen stable operations. Hydro continues to invest significantly in community
relations, including the building of a technical school and peace houses in Brazil. Hydro’s mapping of
sustainability trends and expectations indicates that in and outside Brazil, the interconnectedness and
complexity between nature, environment and social themes will only increase.
A hearing regarding legal aspects on the ongoing Cainquiama lawsuit was held on October 13, 2023, and
a decision is now expected during the first quarter of 2024.
Consequences
Hydro’s integrated aluminium value chain offers advantages in terms of end-to-end management and
product traceability. Value chain concentration also has downside risk where upstream disruptions in
bauxite and alumina production could negatively impact metal production.
Mitigation
Initiatives are ongoing to improve asset integrity, strengthen community relationships and reduce Hydro’s
long-term environmental impact in Brazil. Systematic social responsibility efforts continue, including the
Sustainable Barcarena initiative and commitments stemming from the agreement with the Government of
Pará and Ministério Público. Hydro is engaged in a systematic dialogue with political, governmental, non-
governmental and local communities regarding the social and regulatory challenges facing Hydro’s
operations and the communities in which it operates.
The physical adaptation of assets and supply chain robustness are important mitigating factors against
the risks posed by climate change related incidents such as floods, landslides, droughts, the implications
these may have on the local environment as well as Hydro’s ongoing ability to operate safely, and access
raw materials and markets. Commercial activities for alumina and other raw materials provide access to
key markets and additional sources as tools to manage the risk of supply disruption. The sale of 30
percent of Alunorte and 5 percent of MRN to Glencore in 2023 results in a more balanced portfolio
between alumina production and demand from Hydro’s smelters.
© Hydro 2024
49
Risk review
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Strategic risks > 3. Macro developments, geopolitical tensions, protectionism and trade disruptions
Influenceability: L Likelihood: M Trend:
Description
The aluminium industry is pro-cyclical with demand for products closely linked to overall economic
conditions.
Protectionism is the process by which countries impose barriers to free trade with the intention of
protecting national interests. Geopolitical tensions are often the underlying cause of such actions. Trade
and supply chain disruptions can impact the access to and cost of raw materials.
Developments
Macroeconomic and geopolitical dynamics have been increasingly volatile during the period. The ongoing
invasion of Ukraine continues to impact the geopolitical and geoeconomic picture, and the Israel-Hamas
conflict exacerbates tensions within the Middle East and between global superpowers. The further
escalation of geopolitical pressures adds to regionalization trends and the push for strategic autonomy.
Economic growth remains fragile as central banks aim to balance the lagged impact of monetary
tightening with remaining inflationary pressures and tight labor markets. The Eurozone entered a mild
recession and there is a residual risk of recession in the U.S. during 2024. Disturbances in the Middle
East and any resulting rise in oil prices may exert additional downward pressure on economic growth.
Demand within some of Hydro’s customer segments has softened, yet the longer-term trends still point to
a favorable role for aluminium within the green transition where Hydro is well placed with its low-carbon
aluminium products.
There are continued heightened trade tensions between the main economic powers, particularly in areas
of strategic importance such as microprocessors between the U.S. and China. The EU has opened anti-
subsidy probe into Chinese EV imports, with potential impacts for the automotive industry and its supply
chain both within and outside Europe.
Consequences
Protectionism may directly affect Hydro’s ability to access certain markets and trade competitively. It also
leads to lower economic growth, which could indirectly affect the demand for Hydro’s products.
Higher import duties and trade barriers increase costs, impacting the quantity, quality, and price of
internationally traded goods, which Hydro requires to run its operations.
Periods of macroeconomic uncertainty or recession can increase the price volatility for aluminium
products, affecting Hydro’s ability to deliver stable returns. Macroeconomic developments also drive
changes in currency rates, which may have a significant adverse effect on Hydro’s cost and competitive
position. At industry level, changing dynamics in major aluminium producing countries, such as China,
may see large volumes of aluminium enter the market, reducing global price levels.
In the long-term, renewable energy scarcity and high supply costs in countries where Hydro operates
could affect the company’s competitiveness.
Mitigation
Robust and stable operations, a strong balance sheet, high focus on operational and commercial
improvements, competitive power contracts and strategic hedging support Hydro’s robust positioning
during potential downturns.
However, actions may still be needed in response to market conditions. Hydro has initiated mitigating
measures within Hydro Extrusions and recycling, where current production flexibility and adaptation
abilities are being utilized to maneuver given falling demand, while further curtailments are evaluated
considering market conditions.
In general, Hydro is well positioned to handle challenges arising from protectionism and regionalization.
The majority of Hydro’s network of aluminium metal plants are located within large, well established
markets. Hydro’s downstream operations have a strong local presence in both Europe and North
America. Hydro also actively participates in organizations aiming to promote and foster fair trade, such as
European Aluminium and the U.S. Aluminum Association.
The supply chain risk is managed through a combination of physical inventory build-ups for key raw
materials, selective hedging, long-term agreements with approved suppliers and commercial activities in
the marketplace.
For further information on Hydro’s mitigating financial measures, please refer to the Performance review
section Key financial exposures and Note 8.1 Financial and commercial risk management.
© Hydro 2024
50
Risk review
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Strategic risks > 4. Regulatory & policy framework uncertainty
Influenceability: L Likelihood: H Trend:
Description
The aluminium industry is subject to a broad range of local and global regulatory frameworks, including
mining regulations, tariffs, labor laws and power industry regulations. Additionally, EU climate related
regulations such as the implementation of national and regional CO
2
taxes and increased attention on
similar regulations in the U.S. are at the forefront of the current uncertainty. The growing pressure to
meet climate goals is driving the pace of new regulations and their increased scope regarding all aspects
of sustainability.
Developments
The growing pressure to meet climate goals is driving the pace of new regulations and their expanded
scope regarding all aspects of sustainability. This is increasingly aligned with a push towards
strengthening regional sustainable supply chains, reducing the dependence on global markets for key
raw materials and energy sources. However, industrial policy is rising on the political agenda both in
Europe and the U.S., with more emphasis towards the security of raw materials supply, domestic
production, and industrial competitiveness.
Within the EU Green Deal Package, the EU adopted in 2023, an updated Emissions Trading System (EU
ETS) and new Carbon Border Adjustment Mechanism (CBAM). As a result, the free allocation of
emission allowances for aluminium production will be phased out from 2026 to 2034, and replaced by a
CBAM fee on imported goods.
The CBAM transitional period commenced on October 1, 2023, yet questions remain on its practical
application and how potential loopholes will be addressed, with the majority of the CBAM secondary
legislation still to be finalized. By the end of 2025, the European Commission will publish an assessment
of CBAM, decide if the indirect CO
2
cost compensation scheme should be replaced by a CBAM on
indirect emissions, as well as whether the product scope of CBAM should be extended.
In Norway, the 2024 state budget introduced reversals and changes to tax regimes on hydropower and
wind, as well as increased the floor on CO
2
compensation, adding to uncertainty around long-term
investment frameworks.
As a part of its industrial policy, the EU will adopt in 2024, the Critical Raw Materials Act, which includes
both aluminium and synthetic graphite as strategic raw materials, as well as the Net Zero Industry Act
that sets targets for the domestic production of green technology.
In the U.S., the Inflation Reduction Act continued to attract and support businesses, enabling the green
transition.
Consequences
Sustainability driven developments in regulatory frameworks largely represent an opportunity for Hydro.
There might, however, be unintended consequences arising from complexity, the uneven impact of and
increased emphasis on legislation, potentially impacting aluminium’s competitiveness versus other
materials, the economic viability of Hydro’s operations and/or ability to conduct business in certain
markets.
A failure to comply with such laws across multiple local and global regulatory frameworks could expose
Hydro to investigations, criminal and civil sanctions such as fines, penalties or loss of licenses, materially
impacting the financial results. In addition, there could be other adverse consequences such as
reputational damage.
Mitigation
Hydro continues to actively engage with regulators and industry associations, where appropriate, to
ensure that aluminium’s position is taken into consideration. Hydro has been involved in the development
of international frameworks on climate change and greenhouse gas emissions, as well as raw materials
policies supporting the establishment of a level playing field for the industry.
For power industry regulations, Hydro engages in various activities to support and promote sustainable
energy policies in the regions in which it operates, in addition to securing competitive energy supplies for
Hydro’s own operations.
© Hydro 2024
51
Risk review
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Strategic risks > 5. Technological breakthroughs
Influenceability: L Likelihood: M Trend: →
Description
Hydro is exposed to disruptive technological developments by its direct competitors, or competing
materials and industries. Technology that reduces the sustainability footprint of competing materials could
provide a significant advantage and challenge aluminium in key application areas.
Developments
The increasing emphasis on sustainability is part of a long-term trend which is expected to continue.
Hydro sees research and development activities across relevant industries concerning CO2 free
production methods and competing materials, such as production of steel using hydrogen. Within the
aluminium industry, several research initiatives are looking into inert anode technology to reduce direct
process emissions.
Consequences
The successful industrialization of competing materials with lower sustainability footprints could increase
the risk of substitution and potentially lower demand for aluminium.
The successful commercialization of breakthrough technological developments such as inert anodes
would impact Hydro’s comparative advantage as an aluminium producer with one of the lowest CO2
footprints.
Mitigation
Hydro views technology as a key enabler in delivering on the dual profitability and sustainability strategy.
Hydro conducts research and development in-house, and participate in joint partnerships and projects
with other leading industrial companies, universities and research institutions. Hydro also follows external
developments closely.
Hydro has identified and is executing a number of technology based roadmaps to producing aluminium
with near-zero to zero footprint, including recycling of post-consumer scrap, carbon capture and storage
as well as CO
2
free primary production through a chloride based process Hydro calls HalZero.
A number of important milestones have been achieved for HalZero, including securing external funding
from ENOVA and the approval to start construction of a new test facility in Porsgrunn, which is expected
to be operational by 2025.
This technology was central in Hydro’s recognition by the COP28 UAE Presidency as an Energy
Transition Changemaker for pioneering the green aluminium transition at the 2023 Climate Change
Conference in Dubai.
© Hydro 2024
52
Risk review
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Strategic risks > 6. Climate change
Influenceability: L Likelihood: M Trend: →
Description
Climate change related risks comprise climate related physical events that may impact the integrity of
Hydro’s assets (physical risks), as well as strategic challenges arising from climate related policies,
regulations and customers' demand for zero or low-emission solutions (transition risks).
Physical risks could result from climate related acute and/or chronic changes in rainfall patterns, flooding,
shortages of water or other natural resources, variations in sea levels, storm patterns and intensities as
well as temperatures.
Transition risks could result from an increased demand for low-carbon products and solutions, higher
costs for greenhouse gas emissions and production inputs, as well changes to market prices for
aluminium based products.
Developments
Physical climate risks are on the rise, evidenced by the increased occurrence of climate events such as
floods, drought, and forest fires. Hydro is exposed to such physical climate risks through its global
footprint, although there was no significant impact to Hydro’s operations over the course of 2023.
Transition risks are reflected in the increased demand for low-carbon aluminium in Hydro’s markets. The
sales of Hydro REDUXA and Hydro CIRCAL have increased accordingly as Hydro continues to attract
strategic partners aiming to decarbonize the supply chains. The sustainability strategy puts Hydro in a
leading position to supply low-carbon aluminium to the market. Hydro also sees a growing interest among
its customers and end-users regarding its decarbonization roadmap and ability to deliver near-zero
products well before 2030.
Consequences
The consequences of physical risks on Hydro’s facilities and operations are highly uncertain, and could
include the flooding of containment basins, interruptions to production processes, infrastructure failures
and the potential for major accidents.
Transition risks could positively affect the demand for and valuation of Hydro’s low-carbon products and
portfolio, while also requiring the implementation of additional low-emission solutions throughout the
value chain. Current technologies may not be able to meet abatement and emissions requirements,
necessitating the development of new solutions to reduce Hydro’s carbon footprint.
Mitigation
Hydro has conducted comprehensive climate risk assessments to better understand and mitigate the
potential consequences of climate related physical events on its operations. Hydro modelled future
weather patterns and their potential impact on its sites based on climate models and scenarios from the
Intergovernmental Panel on Climate Change (IPCC). The physical climate risk assessments were
updated in 2023, and Hydro is now working on further integrating the findings and management of such
risks at an operational level, where the physical adaptation of assets and supply chain robustness are the
subject of ongoing attention.
In order to manage transition risks, Hydro’s climate strategy, advocacy work on future climate related
legislation, technology and market strategies aim to be consistent with a 1.5-degree scenario. Hydro’s
long-term positioning, operational and financial planning reflect the company’s assessment of related
transition risks. Hydro’s capabilities and positioning within renewable energy, low-carbon alumina and
aluminium products, sorting and recycling, as well as the ambitious decarbonization roadmap, position
the company well to benefit from the transition to a low-carbon economy.
© Hydro 2024
53
Risk review
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Incident risks > 7. Insufficient asset integrity
Influenceability: H Likelihood: M Trend: →
Description
Hydro is exposed to a range of risks and hazards including critical equipment breakdowns, power
failures, climate events and natural catastrophes that could result in disruptions to operations across its
business areas.
Developments
The risk of a major operational disruption remains a subject of ongoing attention. There was no significant
interruption to activities at the mine, refinery, smelters, energy and extrusion sites over the course of
2023. Long-term risks are expected to gradually reduce with planned investments to sustain and replace
equipment across sites. Two acquisitions were completed during the course of the year involving the
recycler Alumetal and Hueck building systems and extrusions, for which integration activities are
underway.
Consequences
Operational disruptions might reduce or interrupt production at key plants for significant periods of time,
materially affecting Hydro’s financial results and cash flows.
In Brazil, Hydro operates an integrated mine, pipeline, and refining system meaning that a disruption at
Paragominas could adversely affect Alunorte and other downstream operations.
Some operations are located close to sizable communities where operational events could also result in
significant and potentially lasting impacts on the health and safety of employees, contractors, nearby
communities as well as the environment. In addition, Hydro might be subject to claims, fines and further
damage to its profitability or reputation.
Mitigation
The asset integrity of Hydro’s operations continues to be preserved and improved through historically
high sustaining capital expenditure. ISO 55001 Asset Management certifications have been renewed
across a large portfolio of sites including Paragominas, Alunorte, and fully owned smelters. Extensive
repairs and maintenance along the Paragominas bauxite pipeline continue to progress with an additional
stretch of 30 kilometers planned for 2024.
The back-up power line between Paragominas and Tomé-Açu has been completed, and discussions are
ongoing to transfer its operation to a private operator.
Hydro Aluminium Metal made good progress on projects to replace or update critical equipment such as
rectifiers, pot control systems and baking furnaces. In response to the last year’s pot freeze at Albras, a
comprehensive review of busbars has been conducted across the portfolio of smelters including joint-
ventures and new busbar by-pass solutions were developed.
Hydro performs regular inspections and maintenance activities, conducts comprehensive emergency
preparedness training with key personnel and maintains a range of business continuity plans across sites
to best prevent and mitigate operational disruptions. Hydro’s resilience against power outages is
enhanced, where appropriate, by automated substations, power generating facilities and back-up
facilities.
© Hydro 2024
54
Risk review
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Incident risks > 8. Material legal or compliance incident
Influenceability: H Likelihood: L Trend: →
Description
Hydro has a strong commitment to act in compliance with applicable laws and regulations. However, the
company could still be negatively affected by investigations, and criminal or civil proceedings into alleged
non-compliance related to anti-competitive or corrupt practices, product quality, environment, health and
safety, data privacy, market regulation, or trade sanctions.
Developments
Hydro’s exposure to legal and compliance risks are considered to be relatively stable. All business units
regularly map and evaluate such risks to implement corresponding mitigating measures. Risks arising
from regulatory developments within the various compliance areas are mitigated by continuous
improvements of Hydro’s compliance structures and processes. For instance, the risk of potentially
breaching economic sanctions has been given special attention since the invasion of Ukraine.
One compliance incident involving a U.S. subsidiary is still in progress. Hydro Extrusion USA, LLC
executed a plea agreement under which it admitted to a federal misdemeanor violation of the Clean Air
Act at its cast house in The Dalles, Oregon. The company appeared in court to enter its guilty plea on
January 24, 2023, with judgment and conviction occurring at a sentencing hearing held in December.
The company entered into a three-year Administrative Agreement with the U.S. Environmental Protection
Agency Suspension and Debarment Division with respect to this matter.
Consequences
There could be material adverse effects on Hydro’s business if its controls and initiatives prove to be
insufficient to mitigate the risk of non-compliance with applicable laws and regulations. Potential
consequences range from fines, litigation and reputational risk, the withdrawal of licenses and
suspension, or operational shutdowns thereby causing material adverse impacts on Hydro’s operating
results, cash flow, and financial condition.
Mitigation
Hydro’s Code of Conduct requires adherence to laws and regulations, as well as global directives and
procedures. This is systematically implemented and maintained through Hydro’s compliance system,
which is based on a clear governance structure defining roles and responsibilities to manage the relevant
compliance risks.
Business Areas have a clear responsibility to act in a compliant manner, while being supported by Group
Compliance and competent staff in other functions. The system includes controls and activities to
prevent, detect, report and respond to compliance failures, with core focus on the prevention of non-
compliance incidents. In addition to policies, guidelines and procedures, Hydro maintains an extensive
training program adapted to the company’s risks and profile to continuously build and maintain a strong
culture of compliance and integrity. Hydro also actively promotes a whistleblower hotline to allow
employees and external third parties to report concerns 24 hours a day, 7 days a week, in multiple
languages via toll-free telephone or online. Reporting which, is either anonymous or identified, is
supported by information on Hydro’s website and strong anti-retaliation protection.
© Hydro 2024
55
Risk review
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Incident risks > 9. Major breach of cyber security
Influenceability: M Likelihood: M Trend:
Description
Hydro’s Information and Technology (I&T) infrastructure is critical to all its operations, ranging from
process control systems at production sites to central personnel databases and systems for external
reporting.
Cybercrime is increasing globally, exposing Hydro to a range of threats to the integrity, availability and
confidentiality of its systems. Threats may include attempts to access information, ransomware attacks,
destructive installation of viruses, denial of service and other digital security breaches.
Developments
The underlying cyber security risk to industrial control systems continues to be sustained at a high level,
reflecting the geopolitical context and high rate of cybercrime.
External threats relating to cyber security are developing as malicious actors continue to innovate and
change their techniques to increase their success rate, requiring organizations to adapt quickly.
Consequences
A breach of cyber security could result in a broad range of impacts including HSE events, operational
disruptions and the leakage of private or confidential data.
Mitigation
Hydro remains vigilant to the unstable geopolitical situation in Europe and other continents where the
company operates with possible spillover effects on governmental organizations and companies around
the world.
This risk continues to receive attention through the continuous improvement and close monitoring of
compliance-with and effectiveness-of existing security capabilities. Security controls will be further refined
over 2024, with a focus on protecting Hydro against the most relevant threat actors and their specific
tactics and techniques. Hydro has adopted a risk based approach where new security measures will be
prioritized based on continuous evaluation of the dynamic threat landscape.
© Hydro 2024
56
Risk review
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Incident risks > 10. Failure to meet social performance expectations
Influenceability: M Likelihood: M Trend: →
Description
Hydro is committed to behaving in an ethical and socially responsible manner. However, the company
could still be exposed to allegations or perceived failures to act in an ethical or socially responsible
manner, particularly related to human rights and legacy issues which could influence our social license to
operate.
Developments
Social performance related risks continue to be jointly influenced by increased customer and civil society
expectations, scrutiny, as well as legislative development in Norway, Brazil, Germany and the coming EU
Due Diligence Directive.
Hydro believes that transparent communication with regards to sustainability claims including social
performance is critical to gain trust. Hydro is increasingly engaged by customers and civil societies to
verify its ethical sourcing and social footprint across the value chain from bauxite mining and scrap supply
to finished products.
In a context of increasing geopolitical uncertainty and polarization, Hydro is likely to see more instances
where social conditions are less than optimal in some areas where Hydro operates and parts of the
supply chain.
Consequences
A deterioration of Hydro’s social license to operate may impact the company’s ability to maintain optimal
productivity at certain sites, would Hydro no longer be perceived as a responsible company. Loss of
public trust could affect Hydro’s reputation both in the short and long term, impacting its ability to attract
capital and ultimately result in a loss of market share.
Unrest in local communities may impact safety and security, as well as cause logistical and transportation
challenges.
Other potential consequences range from fines or penalties, contractual, litigation, the withdrawal of
licenses and suspension, or operational shutdowns, thereby causing a material adverse impact to
Hydro’s operating results, cash flow, and financial condition.
Mitigation
As part of Hydro’s social responsibility strategy, the company has defined priorities and overall goals, and
implemented these through specific directives, policies, procedures, and social development programs to
manage social risks and opportunities throughout the company.
Hydro continues to implement Human Rights due diligence in its business processes, including own
operations, procurement activities and projects, as well as building its internal competence on human
rights management based on the OECD Guidelines on Responsible Business Conduct and the UN
Guiding Principles on Business and Human Rights.
Hydro collaborates on industry initiatives and invests in partnerships for supporting human rights and
positive social development, such as through the ICMM membership as well as partnership with Amnesty
International in Norway.
The Aluminium Stewardship Initiative (ASI) certification of sites across Hydro’s value chain provides
stakeholders with a third party verification that Hydro conducts its business according to globally
accepted good practices.
See the chapter on Human Rights, Workers in the value chain and Affected communities for further
information.
© Hydro 2024
57
Risk review
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Incident risks > 11. Pandemic
Influenceability: L Likelihood: M Trend: →
Description
Hydro’s vertically integrated value chain and global footprint are exposed to rapidly evolving and
spreading communicable diseases.
The actions Hydro takes in anticipation of and response to a pandemic may affect its ability to maintain
stable operations across business areas and corporate functions.
Developments
Hydro’s global footprint includes two production sites in China. When the country saw a spike in cases
between December 2022 and early 2023, following its departure from the zero-covid policy, Hydro was
able to operate without any major disruptions through the ongoing adoption of rules set by relevant local
authorities together with Hydro specific measures.
Hydro continues to give due emphasis on the mental health of its staff, some of which might still be
impacted by long term effects of the global Covid-19 outbreak and encourage vaccination according to
the guidelines set by authorities in countries where it operates.
Consequences
High transmission rates among employees, contractors, stakeholders and communities may lead to the
prolonged shutdown of operations, either due to government imposed restrictions, insufficient manning,
social unrest or Hydro’s inability to provide a safe environment. The inbound and outbound supply chains
of Hydro, its suppliers, and customers could also face constraints, further disrupting production and sales.
On a broader scale, a global pandemic may cause acute, short-term fiscal shocks as well as longer-term
damage to economic growth, significantly affecting demand for Hydro’s products and causing a material
adverse impact on operating results, cash flow and financial condition.
Mitigation
Hydro’s strategy to prepare for future pandemics continues to be based on full cooperation with local
authorities and compliance with rules complemented by a flexible range of Hydro specific responses,
robust emergency preparedness and business continuity plans.
Where applicable, guidelines and regulations from national authorities such as those pertaining to travel
restrictions, social distancing, home office or complete societal lockdowns, have been reflected in Hydro’s
internal policies and procedures. Hydro evaluates its key pandemic related risks and vulnerabilities
through security and business resilience assessments, which support the preparation and review of
business continuity plans.
Additional measures that have been used and could be reinstated, include stock level increases for raw
materials to reduce Hydro’s exposure to supply chain disruptions as well as cash preservation measures
to reduce cost, capital expenditures and to ensure adequate liquidity to face the financial impact of
potential shutdowns.
© Hydro 2024
58
Risk review
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Incident risks > 12. Material tax change
Influenceability: L Likelihood: M Trend: →
Description
Hydro is committed to pay equitable taxes where the economic value is created. Hydro’s global reach
involves complexity and potential volatility linked to regulatory changes on direct and indirect taxes as
well as to OECD/EU initiatives such as the Global Tax Reform. In addition, multiple changes often occur
in local tax regulations, constantly shifting a global tax landscape, which is challenging to predict and
navigate.
Developments
In Brazil, the tax system remains complex and volatile, with a broad range of direct and indirect taxes
levied at federal, state and municipal levels, including the Imposto Sobre Circulação de Mercadorias e
Serviços (ICMS), which is an indirect tax charged on circulation of goods and services. Brazil has a
general ICMS exemption on exports. Under a 15 year framework agreed in 2015 with the state of Pará,
Hydro’s local operations are under certain conditions, entitled to a deferral of ICMS payments. A potential
discontinuation of the ICMS deferral would materially adversely affect Hydro’s financial results from its
Brazilian operations.
Over the last years, local authorities have showed increased interest towards ICMS, requesting that
Hydro demonstrates compliance with commitments under the ICMS agreement. Brazil has launched both
a consumption tax reform, affecting the ICMS reporting longer term, as well as new transfer pricing rules.
Analysis of the new regulations and requests is ongoing. So far, no notable disadvantage has been
detected for Hydro.
Hydro is involved in many tax disputes pertaining to the Group’s business in Brazil.
Temporary safe harbor rules for 2024-26 will simplify the initial tax compliance for Hydro in Norway under
the OECD’s global minimum tax initiative (Pillar Two).
The slight trend towards a more unpredictable tax framework in Norway the last couple of years, such as
the temporary increase in employer social security contribution on higher salaries, may cause
inefficiencies and potential increased tax costs for groups head quartered in Norway.
Consequences
Changes to tax regulations can occur suddenly and materially impact Hydro’s financial results, as well as
influence decisions with regards to future investment.
Mitigation
Hydro is engaged in a systematic dialogue with local, state and federal politicians, authorities as well as
industry associations regarding the fiscal regulatory challenges which could impact Hydro’s operations.
The main topic of this dialogue concerns Hydro’s contribution to a sustainable aluminum value chain and
underlines the need for competitive and predictable framework conditions for its operations.
Hydro continuously monitors and responds to relevant regional and national regulatory initiatives and
changes, including the draft corporate tax framework (BEFIT proposal) and transfer pricing directives in
the EU.
© Hydro 2024
59
Risk review
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
HSE risk > 13. Fatal or life-changing accident
Influenceability: M Likelihood: M Trend:
Description
Hydro’s operations range from mining in Brazil, primary aluminum production in Norway and Brazil,
extrusions in Europe, the U.S., South America and China, the recycling of used metal in Europe and the
U.S., as well as renewable power production. Associated activities may pose serious safety risks that, if
not controlled, could cause serious injuries or fatalities.
Despite Hydro’s best efforts, high-risk incidents do occur. All such incidents are treated seriously and
investigated to their root causes to prevent recurrence.
Developments
High-risk incidents with the potential for a fatality or life-threatening injury continue to decrease in both
number and rate, whereas the total recordable incident rate for contractors went up in 2023, in relation to
increased levels of projects involving construction activities.
One contractor related fatality occurred at Alunorte in October 2023, for which investigations are ongoing
to determine work relatedness and root causes. In addition, there was one fatal accident involving a
contractor at Hydro’s joint venture, Qatalum, in Qatar. There was also one contractor related life-
changing injury in 2023. Initiatives rolled-out during the period include self-assessment systems for all
business areas as well as traffic and asset management improvements.
Consequences
Workplace related loss of life has a traumatic and long lasting psychological effect on relatives, close
friends and colleagues.
Life-changing injuries affect the quality of life of the injured person and often require significant
adjustments at home and work. This could be associated with long lasting psychological impacts on the
injured person and family, together with the need for ongoing financial support. Police or health and
safety agencies might impose sanctions, which include imprisonment and fines. In addition, Hydro might
need to shut down its operations and be subjected to legal disputes, sanctions, and reputational damage.
Civil action could result in compensation claims.
Mitigation
Safety is Hydro’s number one priority. Hydro’s robust approach to HSE and Security includes committed
and highly visible leaders on the factory floor, well developed HSE management systems, together with
employees and contractors who are actively engaged in day-to-day HSE risk management activities such
as work permitting, risk assessments and root cause analysis.
Control measures aimed at reducing the likelihood of fatal and life-changing incidents occurring have
been developed and implemented in all business areas. Hydro’s fatality prevention procedures are well
established and continuously improved.
High-risk actions and completion rates are critically reviewed to ensure robust processes and learning
across all sites. Frequent health, safety, security and environment network meetings connect specialists
from all business areas to discuss preventative control measures following high-risk incidents as well as
share best practices and innovative solutions. Machinery safety and asset integrity incidents are receiving
particular attention to further prevent failures and constitute an area for further improvement.
© Hydro 2024
60
Risk review
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
HSE risks > 14. Security incident
Influenceability: L Likelihood: M Trend: →
Description
Hydro is exposed to security risks such as public violence, robbery or theft. This risk is particularly
relevant in the Barcarena region in Brazil, but also present in other areas such as Mexico (Reynosa and
Monterrey).
Developments
Firearm related incidents and robberies continued to occur in 2023 in relation to Hydro’s operations in
Paragominas, Alunorte, Mexico and Extrusion North America. Violence in Barcarena and surrounding
areas remains comparable to previous years, at a concerning level. The frequency of truck hijacking
incidents related to the transport of extruded materials in Sao Paulo reduced this year. The security
situation in Reynosa and Monterrey, while not impacting business operations, remains problematic and is
monitored closely.
The war in Ukraine and associated increase in international political tensions elevates the potential risk of
sabotage. In addition, the Israeli/Hamas conflict and tension in the Middle East may exacerbate the
potential for terror incidents.
Consequences
The outcome of security incidents could be psychological impact, a serious injury, single or multiple
fatalities. The risk of kidnapping and subsequent ransom demands is also present.
Security incidents could potentially be associated with environmental incidents through attacks on the
Paragominas bauxite pipeline and result in business interruptions
Mitigation
Hydro’s Bauxite & Alumina security team closely monitors security risks and maintains close contact with
security authorities in operational areas. Training for Brazil’s security team is being revised. Weekly
security calls are held to monitor and track incidents and responses. Improvements to perimeter fencing
monitoring, access controls and CCTV at Alunorte constitute a better deterrent and have increased
Hydro’s ability to respond to incidents.
Group Security closely monitors security risks in Brazil and maintains close contact with both plants in
Mexico through monthly security calls to ensure security mitigation measures are aligned with
developments and threats.
The review of security and business resilience risk assessment along with emergency preparedness
procedures and contingency plans is ongoing to counteract threats to Hydro businesses related to the
Russian war on Ukraine and rising tensions in the middle east.
© Hydro 2024
61
Risk review
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
HSE risks > 15. Impact on the environment
Influenceability: M Likelihood: M Trend: →
Description
Hydro’s mining and industrial operations are exposed to potential risks that could have a negative impact
on the environment. Such risks are usually long-term, and may relate to the effects of known and
unknown, historical and current emissions to the air, water and soil around Hydro’s operations.
Many operational sites have some form of environmental legacy that eventually needs to be remediated
prior to site closure. Examples include areas with contaminated ground and landfills that could potentially
impact the environment if there is a route of exposure, such as a spread to the food chain via
groundwater.
Developments
Chemical usage and waste production are present at all sites, with an inherent risk of spills and leakages.
Aluminum Metal and Bauxite & Alumina are the business areas most exposed to potential impacts on the
environment due to the volumes and nature of hazardous materials used in operations and locations of
large sites. There is a reduction in the number of environmental incidents reported across Hydro in 2023,
compared to the previous year.
Although bauxite mining in the Amazon region requires removal of overburden as well as vegetation
clearing activities, the strip mining method allows for progressive rehabilitation of the mined areas. Hydro
Paragominas has a robust rehabilitation process in place, with key support from the Biodiversity
Research Consortium (BRC), Hydro is pursuing its own Nature Positive related ambitions to supplement
the ongoing 1:1 rehabilitation practice.
Consequences
Related events could have a significant and potentially lasting negative impact on the aquatic life, flora,
fauna and may pose health and safety risks to nearby communities if, for example, ground water
becomes contaminated. They could also potentially lead to operational shutdowns, fines or legal
disputes, negative reputational impacts as well as a material impact on financial results and cash flow.
Mitigation
All Hydro sites are required to have action plans in place for known legacies. These are agreed with
relevant regulatory bodies. While legacy remediation plans are suitable for known risks, potential
investigations may uncover unknown risks.
Hydro performs extensive risk assessments to reduce the risks to its operations. These include
environmental studies and the modelling of future weather patterns together with their impact on Hydro’s
facilities based on existing climate models from the Intergovernmental Panel on Climate Change (IPCC),
as well as scenarios for policy, legal, technology, market and reputational risks.
The Tailings Dry Backfill technology allows new tailings from bauxite mining to be returned to open and
mined areas before the rehabilitation process, instead of being deposited in separate, permanent storage
areas. BRC related activities continuously improve rehabilitation at Paragominas. The roadmap for No
Net Loss has also matured significantly in 2023, and seeks to mitigate residual impacts to biodiversity. All
sites are required to follow Group standards on chemical and waste management to mitigate the inherent
risk of storing, handling and disposing hazardous materials. Chemical management and controls set to
prevent spills are included in business area internal audit programs. Hydro has conducted analysis on
fluoride emissions from its smelters in Norway and established plans to mitigate their effect on the local
deer population.
© Hydro 2024
62
Risk review
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
HSE risks > 16. Structural collapse or other major accident
Influenceability: M Likelihood: M Trend: →
Description
Hydro is exposed to the risk of major accidents such as the collapse of a hydropower dam, an incident at
its tailings storage at Paragominas or bauxite residue storage facilities at Alunorte and Schwandorf, the
collapse of the entire port structure at the Alunorte alumina refinery or a rupture of the bauxite slurry
pipeline between Paragominas and Alunorte.
Developments
Extensive repairs, inspections and maintenance to the pipeline took place in 2023. There has not been
any incidents involving crane failures or other significant defects in other structures during the year.
The ongoing implementation of the Global Industry Standard on Tailings Management (GISTM) in Hydro
reduces the potential risk of failure at tailings storage facilities (Paragominas) and bauxite residue storage
facilities (Alunorte).
Consequences
Any occurrence of such incidents could have a significant and potentially lasting adverse impact on the
environment as well as the health and safety of employees, contractors and nearby communities. In
addition, Hydro might need to shut down its operations and may be subjected to fines, legal disputes and
reputational damage thereby causing a material adverse impact on operating results, cash flow and
financial condition.
Mitigation
Hydro continuously seeks to reduce the likelihood of major accidents through risk mitigating activities.
Hydro has committed to comply with the Global Industry Standard on Tailings Management within
applicable deadlines together with additional initiatives such as the Tailings Dry Backfill technology to
contribute towards the reduction of long-term risks at Paragominas. At closed tailings facilities, the risk of
failure under varying conditions, including extreme weather and seismic events (defined as events with a
statistical return period of 1:10000), is under investigation. Hydropower dams are managed according to
the high standards of regulation set by the competent authorities in Norway.
The Paragominas bauxite pipeline’s extensive repairs and maintenance program is ongoing, while
security concerns associated with the pipeline’s length and remote location are addressed through a
robust and well embedded fatal risk management approach.
Harbor structural inspections performed in 2023, highlighted the need to maintain or replace wharf pillars
at Vila do Conde port. An action plan is now being developed by the harbor owner CDP.
© Hydro 2024
63
The Hydro
share
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
The Hydro share
Introduction
Hydro’s share price closed at NOK 68.4 at the end of 2023. The return
ex. dividend for 2022 was a negative NOK 4.9, or a negative 6.7
percent. Hydro paid its 2022 dividend of 5.65 NOK per share in May
2023. In addition, a NOK 2 billion share buyback program was
approved by the General Meeting in May 2023. As of December 31,
2023, approximately 44 percent of the share buyback program had
been completed. The total shareholder return for 2023 ended at 1
percent.
Hydro’s Board of Directors proposes to pay a dividend of NOK 2.50
per share for 2023, and a share buyback program of NOK 2 billion for
approval by the Annual General Meeting on May 7, 2024, reflecting
Hydro’s strong financial position. The proposed payment demonstrates
the company’s commitment to provide a predictable and competitive
dividend.
The average five-year pay-out ratio is 74 percent. There were
2,041,208,621 shares issued at the end of 2023. A total of
933,072,753 Hydro shares were traded on the Oslo Stock Exchange
(OSE) during 2023 at a value of NOK 64.76 billion, making Hydro the
third most traded company on the OSE. The average daily trading
volume for Hydro shares on the OSE during 2023 was 3,659,109
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.
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. Hydro’s dividend policy is in
the long term to pay out minimum 50 percent of adjusted net income
as ordinary dividend over the cycle to our shareholders. The dividend
policy has a floor of NOK 1.25 per share.
When determining 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. Hydro
targets an adjusted net debt of around NOK 25 billion over the cycle.
Share buybacks or extraordinary dividends may supplement ordinary
dividends during periods of strong financial results, due consideration
being given to the commodity cycle and capital requirements for future
growth. The total pay-out should reflect Hydro’s aim to provide its
Se main shareholder list on Hydro’s website
© Hydro 2024
64
The Hydro
share
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
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 ordinary dividends once each year. For non-Norwegian
shareholders, Norwegian tax will be deducted at source in accordance
with the current regulations.
Buyback of shares
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, in accordance with applicable regulation.
Common share data
2023
2022
2021
2020
2019
Share price high, Oslo (NOK)
1)
84.04
89.95
71.46
40.74
41.55
Share price low, Oslo (NOK)
1)
56.63
51.49
36.99
19.14
26.49
Share price average, Oslo (NOK)
68.85
69.34
55.94
28.09
33.43
Share price year-end, Oslo (NOK)
68.40
73.32
69.52
39.86
32.64
Earnings per share from continuing operations
1.77
11.76
5.92
1.99
0.52
Adjusted earnings per share from continuing operations
2)
4.26
10.70
6.77
1.32
0.52
3)
Dividend per share (NOK)
4)
2.50
5.65
6.85
10)
1.25
1.25
Pay-out ratio
5)
59%
53%
101%
95%
240%
Dividend growth
-56%
(18%)
448%
-
-
Pay-out ratio five year average
6)
74%
74%
81%
65%
54%
Adjusted net cash (debt) / Adjusted EBITDA
7)
0.7
0.2
0.36
1.95
8)
2.27
9)
Credit rating, Standard & Poor's
BBB
BBB
BBB
BBB
BBB
Credit rating, Moody's
Baa3
Baa3
Baa3
Baa3
Baa2
Non-Norwegian ownership, year-end
49%
53%
52%
52%
40%
Outstanding shares, average
2,029,080,722
2,050,779,399
2,050,818,686
2,048,766,546
2,047,057,976
Outstanding shares, year-end
2,041,208,621
2,068,998,276
2,051,475,662
2,049,124,718
2,047,648,790
1) Share price high and low based on intraday, not only closing price
2) Alternative performance measures (APMs) are described in the appendices
3) Amounts are as disclosed for the individual years reflecting the accounting policies applied for those years and Hydro’s definition of APMs applied for the relevant years.
4 ) 2023 dividend per share proposed by Board of Directors, dependent on approval from the Annual General Meeting May 7, 2024
5) Dividend per share divided by adjusted earnings per share from continuing operations.
6) Average dividend per share divided by average adjusted earnings per share from continuing operations for last five years.
7) 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
8) Restated
9) Adjusted net cash (debt) / Adjusted EBITDA
10) Includes NOK 1.45 per share extra dividend distributed.
© Hydro 2024
65
The Hydro
share
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
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. Access to external
financial resources is required in order to maximize value creation over
time, within an acceptable risk exposure.
To secure access to debt capital on attractive terms, Hydro aims at
maintaining an investment grade credit rating from the leading rating
agencies. Contributing towards this ambition, Hydro’s targets, over the
business cycle, a ratio of average Adjusted net cash (debt) to adjusted
EBITDA below 2x, and an adjusted net debt of around NOK 25 billion.
For further information, see note 7.1 Capital management in the
Financial Statements section of this report.
American Depository Shares
JPMorgan Chase Bank NA, as depositary of the ADSs through its
nominee company, Morgan Guaranty Trust Company, held interests in
20,208,514 ordinary shares, or 1.0 percent of the outstanding ordinary
shares as of December 31, 2023. The interests are on behalf of 237
registered holders of ADSs.
Major shareholders and voting rights
As of December 31, 2023, Hydro had 56,324 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 34.76 percent of the total
shares outstanding. As of the same date, the Government Pension
Fund - Norway (Folketrygdfondet) owned 6.21 percent of the total
number of ordinary shares issued and 6.30 percent of the total shares
outstanding. There are no different voting rights associated with the
ordinary shares held by the Norwegian 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. All shares carry one vote. It is 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.
Information from Hydro
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. Hydro hosts
regular meetings for investors in Europe and the US. The major
brokers in Oslo and London publish equity research reports on Hydro.
Previous annual and quarterly reports and Hydro’s Investor relations’
policy are available on Hydro.com.
Annual General Meeting
The Annual General Meeting of the company will be held May 7, 2024.
Notice to the Annual General Meeting, including information on
participation and relevant appendices will be distributed to the
company’s shareholders at least three weeks prior to the Annual
General Meeting.
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 2024
1)
24. April
Results first quarter
07. May
Annual General Meeting
23. July
Results second quarter
24. October
Results third quarter
1)
Hydro reserves the right to revise these dates
See updated calendar on Hydro.com.
© Hydro 2024
66
Regulation
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Regulations
Hydro is subject to a broad range of laws and regulations in the
jurisdictions in which it operates. These laws and regulations impose
stringent standards and requirements, and potential liabilities relating
to 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. Some of the laws and regulations
deemed most material to Hydro’s type of operations are elaborated
below. Tax regulations are covered in the Country by Country report.
Bauxite & Alumina regulations
Environmental Regulation
Hydro’s operations in Brazil are subject to strict license and
environmental regulations requirements.
Under Brazilian law, an environmental license is required for any
activity that has the potential to pollute, and such license is often made
subject to conditions to ensure regulatory compliance or to mitigate
effects on the environment or local communities. Hydro’s Brazilian
operations hold several environmental licenses.
Particular regulations apply to our operations in the Mineracão
Paragominas S.A. mine, due to its location in the Amazônia region.
The Brazilian Forest Code requires that a percentage of a rural
property with native forest in the Amazônia region must be preserved
as an Environmental Legal Reserve, implying that a mine cannot be
developed without a sustainable forest management plan.
Greenhouse gas emissions
In 2023, Brazil announced the commitment to a 48.4 percent reduction
in greenhouse gas emissions by 2025 and 53.1 percent by 2030
compared to 2005 levels, returning to the levels as first submitted as
targets at the 2015 Climate Change Conference in Paris. An indicative
long-term goal of climate neutrality (net-zero emissions) by 2050 has
also been established.
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 various requirements including compensation to the
landowner and payment of an annual exploration fee to the National
Mining Agency.
If the exploration identifies viable resources, a mining concession is
granted, including an obligation to pay royalties to the government and
landowners.
Energy regulations
Hydro’s main production assets are hydropower based and situated in
Norway. The ownership and utilization of large Norwegian waterfalls
for hydropower production is subject to various laws and regulatory
requirements, including a requirement for concession from the Ministry
of Energy. EU regulations of power markets as well as the EU Water
Framework Directive are by and large implemented in Norwegian law.
Approximately one-third (3 TWh) of Hydro’s normal annual production
is subject to concession terms requiring Hydro to transfer (“revert”) the
production assets to the Norwegian state when the concession
expires. The majority of concessions will expire around 2050.
Reversion 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.
Wind, solar and hydrogen projects, which Hydro is pursuing through
Hydro Rein and Hydro Havrand, are also subject to various regulatory
matters, such as license requirements, grid access requirements, land
and zoning regulations, and HSE. The renewable energy and
hydrogen industries are fairly new, and regulations are currently under
development in several jurisdictions.
Aluminium regulations
Environment
Hydro’s aluminium operations are subject to a broad range of
environmental laws and regulations, both inside and outside the EU.
These laws and regulations impose stringent environmental protection
standards related to air emissions, water management, hazardous
materials and waste management.
Greenhouse gas emissions
The aluminium industry is included in the EU Emissions Trading
System (ETS). The aluminium industry is affected by the scheme
directly and indirectly by the pass through of CO
2
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 carbon-efficient installations outside the
EU). Aluminium producers therefore receive a higher percentage of
free emission allowances compared to sectors not exposed to carbon
leakage. Aluminium producers are also eligible to apply for indirect
carbon cost compensation for the indirect effects of ETS in the power
prices under the state aid guidelines adopted according to the ETS
Directive.
In spring 2023, the EU Commission adopted a revised ETS Directive
and the new carbon leakage mechanism known as the Carbon Border
Adjustment Mechanism (CBAM) Regulation. These updates aim for a
55 percent emissions cut by 2030 (v. 1990 levels), up from the
previous 40 percent. For CBAM-covered sectors, ETS free allowances
will phase out from 2026 to 2034. CBAM reporting obligations began in
October 2023, with charges applying from 2026.
Trade and Tariffs
The international trade framework has a significant impact on Hydro’s
business through political developments (EU-U.S.-China relations), the
strategic agenda of key trading blocs (regional and bilateral free trade
agreements, developments at the WTO, etc.), and technical
instruments such as tariffs, anti-dumping duties and other trade
measures.
The EU tariff rates on imports of alumina, primary and semi-finished
aluminium products vary from 3 to 7.5 percent, excluding aluminium
metal produced in the EEA and other countries the EU has a free
trade agreement with. Since 2020, the EU has in place anti-dumping
duties on aluminium extrusions from China, currently in the range of
21.2-32.1 percent. The EU also has specific anti-dumping duties on
certain aluminium products such as flat rolled products, foil, wheels
and radiators imported from China. In December 2022, the UK
decided anti-dumping duties to be applied on imports of certain
aluminium extrusion from China to UK in the range between 0 percent
and 35 percent.
The U.S. currently has a tariff of 10 percent on aluminium imports,
excluding imports from Australia, Argentina, Canada and Mexico. In
October 2021, the EU and the U.S. reached a temporary agreement
regarding U.S. Section 232 tariffs on aluminium by replacing duties
with a tariff-rate quota until December 31, 2025. This agreement
covers imports from the EU to the U.S. while exports from Norway and
Qatar will still be exposed to the tariffs.
As of April 2023 U.S. imposed a 200 percent import duty on aluminium
articles that have any amount of primary metal from Russia.(on top of
the 70 percent duty through the revocation of most favored nation
trading status) In December 2023 EU imposed an import band on
Russian aluminium in the form of profiles, wire, bars, rods, plates,
sheet tubes and foil. This is covering about 12 percent of the Russian
imports into EU.
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Sustainability
statements
68
116
Legacy impact
74
118
Human rights
87
122
Own workforce
91
141
Workers in the value chain
95
General information
Climate change
Pollution
Water Resources
Biodiversity and ecosystems
146
104
Resource use and circular economy
151
Affected communities
Consumers and end users
109
EU taxonomy
153
Business conduct
161
Independent Limited Assurance Report
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information
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
General information
The sustainability statement presents Hydro’s governance and
performance related to material sustainability topics, including
detailed performance indicators (sustainability metrics).
This general information section presents identified material
sustainability related impacts, risks, and opportunities, and Hydro’s
principles for sustainability reporting which form the basis for
preparation of the sustainability statements.
Principles for sustainability reporting
The purpose of Hydro's reporting is to provide stakeholders with a
fair and balanced picture of relevant aspects, engagements,
practices, and results for 2023. The sustainability statement is
prepared on the same consolidated basis as the financial statements.
The basis for preparation of sustainability information that relates to
business relationships in non-consolidated entities, including Hydro’s
upstream or downstream value chain, is clearly identified as such.
The sustainability statement is approved by the Board of Directors.
Statutory reporting and reporting standards
Hydro’s sustainability statement is prepared in compliance with the
Norwegian Accounting Act and other applicable regulations.
Disclosures required by the Norwegian Equality and Anti-
Discrimination Act are included in Own workforce. Disclosures
required by the Australian Modern Slavery Act 2018, the UK Modern
Slavery Act 2015 and the Norwegian Transparency Act 2021 are
provided in the chapters Human Rights, Own Workforce, Workers in
the value chain and Affected communities.
Hydro reports in accordance with the GRI Standards and the
requirements of the International Council on Mining and Metals
(ICMM). Please see the GRI index at Hydro.com/gri.
In 2023, Hydro has changed and restructured its sustainability
disclosures based on the EU Corporate Sustainability Reporting
Directive (CSRD) and the applicable European Sustainability
Reporting Standards (ESRS). See the section on Reporting changes
on this page for an overview of what these changes entail. Hydro will
report in compliance with the implementation schedule of the CSRD
and applicable ESRS in the 2024 annual report.
Reporting scope and disclosures in relation to
specific circumstances
The sustainability statement covers the period January 1 to
December 31, 2023. Operations sold or demerged during the year
are not included, unless specified. Health and safety, and headcount
metrics for previously consolidated operations are included in the
historical data for the period the unit was owned by Hydro. Climate
and environmental metrics for new operations or operations acquired
during the reporting year are included for the year in full as well as in
historical data unless otherwise mentioned. Data from discontinued
or closed down operations are included for the part of the reporting
period it was under operation, unless otherwise stated. Minority
owned operations are not included in the consolidated metrics.
Reporting systems
Metrics for climate change, energy, pollution, water, resource use
and waste, and certain data on biodiversity are collected using
Hydro’s environmental reporting system on an annual basis. Metrics
for health and safety of Hydro’s own workforce are collected using
the reporting systems for incident reporting, IMS and Synergi.
Diversity and other metrics relating to Hydro’s own workforce are
collected from Hydro’s SAP system and Hydro’s employee
engagement survey, Hydro Monitor. Data for workers in the value
chain and affected communities are based on Hydro’s due diligence
processes and data collected from the business areas, procurement
teams, and Group Internal Audit, and Investigations’ overview of
alerts reported to line management, supporting staff functions, and
Hydro’s AlertLine. Data for consumers and end users are based on
customer satisfaction studies, including product quality, on-time
delivery, and concession and claims statistics. Additional metrics are
calculated by corporate functions based on third party data.
Basis for preparation and limitations
The basis for calculation and presentation of sustainability metrics is
described in the notes to the respective metrics, including information
on whether the metrics are measured directly or estimated based on
sources such as third-party data or sector averages. Metrics are
collected from Hydro’s operational units relying on local management
systems and are typically based on process data systems,
measurements, calculations, and purchasing data. Controls are
performed to ensure that the information is complete and accurate.
However, the scope of the sustainability statement and the absence
of generally accepted reporting standards and practices for certain
data may result in uncertainties in the reported information. The
notes to the chapters on each material sustainability topic includes
information on sources of estimation or outcome uncertainty.
Reporting changes and prior reporting errors
Hydro’s sustainability disclosures in the Annual Report 2023 has
been restructured based on the CSRD and ESRS. The changes
include:
• Updated materiality assessment: Hydro’s assessment of
material sustainability topics was updated in 2023 based on the
ESRS. See the Materiality assessment section for more detail.
• Restructuring the sustainability disclosures: Sustainability
disclosures are included in a dedicated sustainability statement
in the annual report. The sustainability statement follows the
structure required by the ESRS.
• Introducing this section on general information, corresponding to
the structure and disclosure requirements in the ESRS 2
standard.
• Reporting on ESRS topical standards: A summary of Hydro’s
assessment of material impacts, risks and opportunities (IRO) in
relation to each ESRS topical standard is included in this
general information section. Details on identified IROs for each
material sustainability topic, including related due diligence and
stakeholder engagement activities, are presented under the
heading “why it matters” in the chapter corresponding to each
material sustainability topic. The chapter on each material
sustainability topic includes a section on “our approach,” which
presents Hydro’s policies, strategy, actions, targets and metrics
in relation to the sustainability topic.
• Including sustainability metrics in the management report:
Material sustainability metrics and indicators that were
presented in the appendix to the 2022 annual report, are now
included in the sustainability statement as part of Hydro’s
management report, which is approved by the Board of
Directors.
• Including a content index with ESRS Disclosure Requirements
alongside our GRI index, available at Hydro.com/gri.
Several minor changes that are not directly related to the ESRS,
have also been made to the sustainability statement. This primarily
comprises increased disclosures and the addition of more
sustainability metrics, including:
• The sustainability chapters corresponding to material
sustainability topics identified in 2022 have been reorganized
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2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
and integrated into the sections corresponding to ESRS topic
standards and Hydro specific material topics.
• More information on climate-related transition risks.
• Information on sources of non-GHG emissions and actions to
reduce emissions in each business area.
• Assessment of the materiality of biodiversity and ecosystems in
Hydro’s operations and value chain based on the LEAP
approach (locate, evaluate, assess, prepare), initiatives to
minimize biodiversity and ecosystem impacts in Hydro’s
operations, and metrics related to potential biodiversity impacts.
• Assessment of taxonomy eligibility, and alignment of Hydro’s
activities associated with manufacture and use of hydrogen.
• More detail on human rights impacts related to own workforce,
workers in the value chain, and affected communities.
• More information related to Hydro’s customers and end-users.
No material errors in prior periods have been identified, but some
minor corrections have been made in individual metrics. Such
corrections are described in the note to the respective metrics.
Incorporation of ESRS requirements by
reference to other sections of the annual report
and the remuneration report
The description of Hydro’s strategy, business model and value chain,
inputs, outputs, outcomes and the integration of sustainability matters
and sustainability-related goals (SBM-1), is presented in the Our
Business and Our Performance chapters. Hydro’s identified material
sustainability topics are presented in the Materiality assessment
section on the next page. Information on how Hydro’s business
model adapts to manage material sustainability related impacts, risks
and opportunities (SBM-3) is presented alongside the disclosures
provided in relation to each material sustainability topic. Number of
employees by geographical are reported in the Own workforce
chapter. Revenue by IFRS 8 segments is presented in Note 1.4 to
the financial statement.
The description of Hydro’s governance bodies (GOV-1) and their
work to address sustainability matters (GOV-2) are included in the
Governance chapter. The integration of sustainability in performance
incentive schemes (GOV-3) is described in the Remuneration report.
Payment and warranty terms in Note 5.1 to the financial statement,
includes information on our payment practices (G1-6).
A content index with the ESRS Disclosure Requirements that are
covered by the sustainability statement (IRO-2), is included alongside
Hydro’s GRI index, available at Hydro.com/gri.
Risk management and internal controls over
sustainability reporting
Hydro regularly assesses risk and controls over its sustainability
reporting process. The risks are discussed with the Board Audit
Committee, and also discussed with Hydro’s external auditors who
provide limited assurance over the sustainability statement. The
external assurance process is risk based, and the external auditors
provide feedback on their assessment of risks to the Board Audit
Committee and Hydro’s management. The auditors also provide
feedback to the Board of Directors in relation to the Board’s review
and approval of the annual report.
Hydro is exposed to risks associated with incomplete or inconsistent
reporting on sustainability topics, including risks associated with
greenwashing. There are also risks related to the accuracy of data
inputs and manual errors in the reporting process from aggregating
data from multiple systems into the corporate disclosure
management system. Hydro has implemented controls based on
their assessment of risks in the sustainability statements, including
review controls for quantitative and qualitative data in the
sustainability statements by business area, group functions and
Hydro’s disclosure committee, as well as access controls and
automated input controls in sustainability reporting systems.
Hydro’s external auditors perform testing on Hydro’s sustainability
reporting as part of the limited assurance provided over the
company’s sustainability statement in the annual report. The
assurance activities performed by the external auditor are described
in the assurance statement.
Interests and views of stakeholders
Engaging with Hydro’s stakeholders helps the company understand
what is expected of it, what is important to them, how Hydro impacts
them and how Hydro can solve common challenges. Hydro consults
affected stakeholders to identify, assess, and manage material
social, health, safety, environmental, and economic impacts
associated with our activities and business relationships. Dialogue
with affected stakeholders gives input to action plans to manage
Hydro’s impacts, and the views of affected stakeholders are
integrated in the reporting on sustainability topics to Hydro
management. Hydro strives to act in an ethical and transparent
manner, and gather views from interested parties, aiming for a
common understanding of the decisions that are made so that Hydro
can act with integrity in everything it does.
Hydro’s engagement covers representatives of affected
stakeholders, such as unions, works councils, local community
groups and non-governmental organizations, suppliers, business
partners, customer representatives, and industry associations. Hydro
also engages and partners with sustainability experts from academia,
and actively engage users of Hydro’s sustainability statement such
as authorities, banks and investors on Hydro’s sustainability
commitments and progress toward Hydro’s sustainability goals.
Information on Hydro’s engagement of affected stakeholders is
described in the individual chapters Own workforce, Workers in the
value chain, Affected communities, and Customers and end users.
For information regarding stakeholder engagement and human
rights, see the Human rights chapter.
Stakeholder engagement is organized both at the corporate level and
in the business areas through local community meetings, bilateral
engagement of individual stakeholders, national, and international
multi-stakeholder meetings, and through industry associations. All
business areas have a forum for dialogue between management and
union or employee representatives.
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2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Stakeholder dialogue in Hydro
Market
Owners
• Commodity and stock
exchanges
• Competitors
• Customers
• End users
• Insurers and banks
• Partners and joint ventures
• Suppliers
• Other business relations
• Owners and shareholders
• The Norwegian government
• Financial markets
• Analysts
• Traders
• Brokers
• Ratings agencies
Society
Internal
• Academia
• Authorities
• Industry associations
• Lobby groups
• Local communities
• Media
• National and international
unions
• NGOs
• Politicians
• Public offices
• R&D funding bodies
• Board of Directors
• Employee representatives
• Employees
When planning new projects, Hydro maps 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. In both
cases, Hydro follows 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, and include an action plan with proposed initiatives.
Sustainability due diligence
All identified material sustainability topics are considered in the
definition of Hydro’s overall strategy. The overall strategy is
supported by specific strategies on climate change, environment and
people. Requirements for sustainability due diligence and risk
management, in line with Hydro’s sustainability strategies, are
embedded in business processes through Hydro’s policies, directives
and procedures, including Hydro’s human rights policy, Hydro’s Code
of Conduct and Supplier Code of Conduct, as well as Hydro’s global
procedures for biodiversity and ecosystem services, sustainability in
the supply chain, environmental management, water stewardship,
HSE risk management, social responsibility, and sustainability in new
projects and major changes to existing facilities.
The sustainability statement section corresponding to each material
sustainability topic provides an overview of risk assessment and due
diligence processes in relation to each sustainability topic, as well as
Hydro’s assessment of identified adverse impacts, Hydro’s actions to
address identified impacts, and the results of these efforts.
Materiality assessment
Hydro assesses material sustainability related impacts, risks and
opportunities according to the ESRS concept and requirements of
double materiality. The assessment is validated by Hydro’s
disclosure committee and approved by the Board of Directors.
The materiality assessment is based on input from Hydro’s
sustainability and subject matter experts in group functions for
climate, environment, social responsibility, health and safety,
compensation and benefits, diversity, inclusion and belonging,
compliance, and enterprise risk management, as well as input from
risk management and sustainability functions in each business area.
Involvement of the risk management resources in the materiality
assessment process supports the identification and further evaluation
of sustainability related impacts and risks.
The views of Hydro’s stakeholders are integrated in the materiality
assessment that is updated every year. Hydro’s group functions and
business areas summarize input provided to them through their
engagement with affected stakeholders, and their interaction with
external sustainability experts and users of Hydro’s sustainability
statement.
Impact materiality is assessed in terms of actual and potential
sustainability impacts from Hydro’s own activities and/or business
relationships in the upstream and downstream value chain, as well
as an assessment of actual and potential positive sustainability
impacts The assessment of impacts is in accordance with the GRI
Standards and OECD Due Diligence Guidance for Responsible
Business Conduct.
Financial materiality is assessed in terms of risk of negative
reputational, financial, or commercial consequences for Hydro that
are associated with sustainability topics, as well as potential
sustainability related upside risks, or opportunities, for Hydro.
All identified sustainability related impacts, risks and opportunities
that are considered material for affected stakeholders or users of
Hydro’s sustainability statement are presented in the graphical
representation of material sustainability topics on the next two pages,
and described in the sustainability statement. However, not all
sustainability related risks in the sustainability statement are
specifically highlighted in Hydro’s aggregate risk profile described in
the Risk review section.
Hydro’s sustainability statement includes separate chapters on all
material sustainability topics covered by ESRS. In addition, Hydro
has included separate chapters on two Hydro specific sustainability
topics: Human rights, and Legacy impact. The chapter for each
material sustainability topic includes a description of Hydro’s
sustainability context and dependencies (“why it matters”), a
description of material impacts, risks and opportunities in relation to
the topic, and corresponding disclosures on governance, strategy,
policies, metrics and targets.
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1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Impact materiality: Hydro’s potential and actual impact on sustainability topics across the value chain
Drivers of positive impact
1. Renewable energy generation
2. Low-carbon primary aluminium production
3. Recycling post-consumer aluminium scrap
4. Flood control from regulated watersheds
5. Secure employment, adequate wages, social protection,
career development, and an inclusive work environment
6. Job creation and engagement on standards for decent
work, human and workers’ rights across the value chain.
7. Local community value creation
8. Providing customers transparent, quality information on
traceable value chain
9. Engagement on business conduct, compliance, anti-
corruption, and other sustainability topics.
Drivers of potential negative impacts
A. Fossil fuel and non-renewable electricity use
B. GHG Process emissions from primary aluminium
production
C. Emissions to water in relation to wastewater discharges
to waterbodies
D. Emissions to air from fossil fuel use, electrolysis process
and certain recycling operations
E. Water use change from hydropower
F. Biodiversity and ecosystem pressure from water use
change
G. Biodiversity and ecosystem pressure from greenhouse
gas emissions and potential incidents of pollution
H. Biodiversity and ecosystem pressure from land use
change
I. Primary resource use in alumina refining and primary
aluminium production
J. Resource outflows, including tailings, bauxite residue
and waste generation
K. Potential health and safety incidents affecting own
workforce
L. Potential health and safety incidents and impact on
human rights for workers in the value chain
M. Potential impact on human rights in local communities
N. Potential incidents impacting health and safety of
consumers and end users
Bauxite
Alumina
Energy
Primary
Extrusion
Recycling
E1 Climate change
1
2
3
A, B
A, B
A, B
A, B
E2 Pollution
C, D
C, D
C, D
C, D
C, D
E3 Water and marine resources
4
E
E4 Biodiversity and ecosystems
G, H
G, H
F, H
G
G
G
E5 Resource use and circular economy
3
I, J
I, J
I, J
J
S1 Own workforce
5
5
5
5
5
5
K
K
K
K
K
K
S2 Workers in the value chain
6
6
6
6
6
6
L
L
L
L
L
L
S3 Affected communities
7
7
7
7
7
7
M
M
M
M
M
M
S4 Consumers and end users
8
8
8
8
8
N
G1 Business conduct
9
9
9
9
9
9
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2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Financial materiality: Hydro’s exposure to sustainability related risks and opportunities
Potential sustainability related opportunities for Hydro
1. Production of lower-carbon inputs for aluminium
production
2. New renewable energy development
3. Market premiums from lower carbon products
4. Integrated value chain with traceable, secure material
supply, including recycled aluminium
5. Circular production models integrated in value chain
6. Being an attractive employer offering safe and secure
jobs, adequate wages, social protection, career
development, and inclusive work environment
7. Being a cornerstone company that contributes to local
community value creation
8. Providing customers transparent, quality information on
traceable value chain
Potential sustainability related risks for Hydro
A. Regulatory, technology, and market risks associated
with the transition to net-zero GHG emissions
B. Climate change related changes in rainfall patterns,
flooding, water shortage, sea levels, storm patterns and
intensities, and temperatures
C. Increased cost of non-GHG emissions and compliance
with new regulations
D. Potential incidents of pollution
E. Climate change related changes in water availability
affecting electricity generation, cooling, operations or
transport/logistics
F. Impact on drivers of biodiversity loss, including land use
change, water use, climate change and pollution
G. Dependency on ecosystem services for water flow, flood
and storm protection, mass stabilization and erosion
control
H. Supply of raw materials in a concentrated value chain
I. Potential health and safety incidents
J. Potential impact on health, safety, workers’ rights, and
human rights across the value chain
K. Potential impact on health, safety, and human rights of
people in affected communities across the value chain
L. Events of non-compliance with regulations, standards,
or stakeholder expectations
Bauxite
Alumina
Energy
Primary
Extrusion
Recycling
E1 Climate change
1
1
2
3
3
3
A, B
A, B
B
A, B
A, B
B
E2 Pollution
C, D
C, D
C, D
C, D
C, D
E3 Water and marine resources
E
E
E
E
E
E
E4 Biodiversity and ecosystems
F, G
F, G
F, G
F, G
G
G
E5 Resource use and circular economy
4
4
4
4
5
H
G
H
H
S1 Own workforce
6
6
6
6
6
6
I
I
I
I
I
I
S2 Workers in the value chain
J
J
J
J
J
J
S3 Affected communities
7
7
7
7
7
7
K
K
K
K
K
K
S4 Consumers and end users
8
8
8
8
8
G1 Business conduct
L
L
L
L
L
L
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3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Notes to the sustainability statement
Environmental information
Climate change
74
Resource use and circular economy
104
Affected communities
146
E1.1
Total greenhouse gas emissions in consolidated
activities
E5.1
Resource inflows
S3.1
Community investments, donations, and
sponsorships
E1.2
Total greenhouse gas emissions based on
ownership equity
E5.2
Resource outflows – Products and materials
S3.2
Social responsibility target
E1.3
Indirect (scope 3) greenhouse gas emissions
E5.3
Resource outflows – Waste
Consumers and end users
151
E1.4
Direct greenhouse gas emissions by GHG type
E5.4
Resource outflows from 50/50 joint ventures
S4.1
Customer satisfaction
E1.5
Greenhouse gas emissions intensity
S4.2
Certifications
E1.6
Energy consumption
Social and governance information
E1.7
Renewable energy consumption
Own workforce
122
Business conduct
153
E1.8
Energy intensity
S1.1
Permanent employees per region, gender and payroll
G1.1
Non-compliance with business conduct
standards
E1.9
GHG emissions and energy in 50/50 joint ventures
S1.2
Full time and part time employees by region and
gender
G1.2
Non-compliance with laws and regulations
Pollution
87
S1.3
New employees and turnover
G1.3
Compliance training
E2.1
Non-GHG emissions
S1.4
Total employees by Business Area
G1.4
Current income tax
E2.2
Spills and leakages
S1.5
Training and development
G1.5
Partnerships and commitments
E2.3
Environmental permit breaches
S1.6
Gender related salary differences
G1.6
ICMM Performance Expectations
Water resources
91
S1.7
Gender and compensation in Norway
E3.1
Water interaction
S1.8
Diversity in management
E3.2
Water interaction in water stressed areas
S1.9
Local representation
E3.3
Water interaction in 50/50 joint ventures
S1.10
Employee engagement
S1.11
Diversity and inclusion
Biodiversity and ecosystems
95
S1.12
Injuries and lost time
E4.1
Aluminium value chain
S1.13
High risk incidents
E4.2
Assets with proximity to protected areas
S1.14
Occupational illness and sick leave
E4.3
Threatened species within Hydro’s area of
influence
S1.15
Social data for 50/50 joint ventures
E4.4
Land use and rehabilitation in Paragomnias
Workers in the value chain
141
E4.5
Overburden moved in paragomnias
S2.1
Supplier metrics
E4.6
Land use in Hydro Energy
S2.2
Supplier due diligence
Content
Climate change
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Climate change
Why it matters
Hydro's industrial processes depend on energy and material inputs
that are associated with greenhouse gas (GHG) emissions that
contribute to climate change. The aluminium Hydro produces is a
strategically important input material to many technologies that enable
the transition to a net-zero GHG emissions economy, including the
development of renewable energy.
Aluminium is an enabler for the transition away from fossil fuels and
other activities that generate greenhouse gases. Aluminium demand in
sectors such as renewable power production, transport and
electrification are expected to grow as companies, states and society
work to reach its commitments to reduce GHG emissions. Aluminium
can save significant amounts of energy and GHG emissions in the use
phase due to its lightweight properties, and building facades in
aluminium can lead to lower operating costs and enable buildings to
generate as much energy as they use during operation.
However, the production of aluminium must become emission free
across the entire value chain to reach the global reduction targets set
by the Paris climate agreement. To do so, Hydro must collectively
decarbonize energy systems, produce for circularity and recycle
resources already in use.
Climate change related risks can also impact the integrity of Hydro’s
assets. There are transition risks that can result from an increased
demand for low-carbon products and solutions, higher costs for
greenhouse gas emissions and production inputs, as well as changes
to market prices for aluminium based products. Physical risks could
result from climate related acute or chronic changes in rainfall
patterns, flooding, shortages of water or other natural resources,
variations in sea levels, storm patterns, and intensities as well as
temperature changes.
Our approach
Hydro has a significant contribution on climate change mitigation
through its production of renewable energy, low-carbon primary
aluminium, and recycled aluminium of post-consumer scrap. In
addition, Hydro aims to enable other sectors to decarbonize and
transform to a low-carbon economy by utilizing its industrial and
energy competence to develop batteries, green hydrogen, and other
renewable energy sources such as wind and solar.
At the same time, the alumina refining and primary aluminium
production are fossil and electric energy intensive processes resulting
in significant GHG emissions. The electrolysis process in primary
aluminium production generates process emissions which can have a
potential negative impact on climate change. Hydro is also associated
with indirect Scope 3 GHG emissions from purchased goods and
services, fuel and energy related activities, and upstream transport
and distribution.
Hydro identifies and measures impacts on climate change by
calculating and managing its GHG emissions from all its operations
and from material parts of its value chain. Hydro’s methodologies are
aligned with international standards including the Greenhouse Gas
Protocol and industry standards from the International Aluminium
Institute (IAI). Hydro also engages with a broad set of stakeholders on
climate related issues, including industry organizations, international
standard setters, and local stakeholders in countries where it has
significant operations, such as Norway, Brazil and the U.S., as well as
with regional structures like the European Union.
Strategy and transition plan
Hydro’s climate strategy and transition plan is an integral part of its
overall business strategy. Hydro’s net-zero ambitions are based on a
successful transition to a 1.5-degree economy, and are in line with
climate science and the Paris agreement. Hydro’s climate strategy
consists of three pillars to reduce the climate impact of its operations
and create business opportunities by enabling its customers and
society to do the same:
• Net-zero Hydro: reduce Scope 1 and 2 GHG emissions by 30
percent by 2030 and become a net-zero Hydro by 2050 or earlier
• Net-zero products: deliver net zero products to Hydro’s customers
• Net-zero society: use Hydro’s industrial and energy competence
to contribute to the transition to a net-zero society
The climate strategy is integrated in the Corporate Management
Board’s remuneration and followed up as a quarterly KPI on the CEO’s
balanced scorecard. All significant investment decisions are assessed
for their impact on Hydro’s climate strategy according to Hydro’s
policies addressing climate change mitigation.
and from material parts of its value chain. Hydro’s methodologies are
Protocol and industry standards from the International Aluminium
Institute (IAI). Hydro also engages with a broad set of stakeholders on
climate related issues, including industry organizations, international
standard setters, and local stakeholders in countries where it has
significant operations, such as Norway, Brazil and the U.S., as well as
with regional structures like the European Union.
Strategy and transition plan
Hydro’s climate strategy and transition plan is an integral part of its
overall business strategy. Hydro’s net-zero ambitions are based on a
successful transition to a 1.5-degree economy, and are in line with
climate science and the Paris agreement. Hydro’s climate strategy
consists of three pillars to reduce the climate impact of its operations
and create business opportunities by enabling its customers and
society to do the same:
• Net-zero Hydro: reduce Scope 1 and 2 GHG emissions by 30
percent by 2030 and become a net-zero Hydro by 2050 or earlier
• Net-zero products: deliver net zero products to Hydro’s customers
• Net-zero society: use Hydro’s industrial and energy competence
to contribute to the transition to a net-zero society
The climate strategy is integrated in the Corporate Management
Board’s remuneration and followed up as a quarterly KPI on the CEO’s
balanced scorecard. All significant investment decisions are assessed
for their impact on Hydro’s climate strategy according to Hydro’s
policies addressing climate change mitigation.
Targets and ambitions
Net-zero
Scope 1 and 2 GHG emissions by 2050 or earlier
30%
Reduction in Scope 1 and 2 GHG emissions by 2030
10%
Reduction in Scope 1 and 2 GHG emissions by 2025
30%
Reduction upstream Scope 3 GHG emissions per
tonne aluminium by 2030
Performance
9.35
Million tonnes Scope 1 and 2 GHG emissions by
ownership equity (6.5% reduction from baseline
1
)
0.61
Tonnes Scope 1 and 2 GHG emissions per tonne
alumina refined
1.54
Tonnes Scope 1 GHG emissions per tonne
aluminium from the electrolysis process
11.95
Million tonnes upstream Scope 3 emissions by
ownership equity (32% reduction from baseline
1
)
1)
From an 2018 baseline and 2017 for Paragominas, Alunorte and Albras due to the production embargo at Alunorte and curtailment at Albras and Paragominas in 2018.
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Net-zero Hydro
Net-zero Hydro is the company’s ambition to reduce emissions from its
own operations and reach net-zero GHG emissions in 2050 or earlier.
Hydro has also established a roadmap to reduce its direct and indirect
GHG emissions by 10 percent by 2025 and 30 percent by 2030, based
on a 2018 baseline
1)
.
Changes in Hydro’s production portfolio might influence these targets,
but the aim is still to reduce Hydro’s specific emissions, defined as
emissions per metric tonne of aluminium produced. The 2018 baseline
emissions currently equal 10 million tonnes CO
2
equivalents (CO2e),
including direct emissions and indirect emissions from electricity
generation (Scope 1 and 2 emissions). The baseline emissions have
been recalculated following the Alunorte and MRN transaction in 2023
with Glencore. Read more about this in the chapter Our Business.
The new baseline composition of Hydro’s sources of greenhouse gas
emissions can be divided into four main categories:
• Fossil fuel consumption at Alunorte alumina refinery, which
constitute around 35 percent of Hydro’s total emissions.
• GHG emissions from generating the electricity we purchase, so-
called scope 2 emissions, which constitute around 35 percent.
• Process emissions from the electrolysis process constitutes
around 30 percent of Hydro’s total emissions and are the hardest
to abate.
• Natural gas used in Hydro’s casthouses, for recycling and
remelting aluminium, extrusion processes and anode production,
constitute around 10 percent of Hydro’s total emissions.
Through Hydro’s technology roadmap the company has set a
transition plan for climate change mitigation and reaching net-zero
GHG emissions. Within primary aluminium production, Hydro is
working on various methods to reduce direct emissions, while also
targeting an increased use of post-consumer scrap, thereby reducing
total energy usage and metal waste. This is also key to meeting
Hydro’s sustainability ambitions and delivering on Hydro’s strategic
direction and financial planning.
The technology roadmap is approved by the Corporate Management
Board. Hydro has a technology board consisting of members from
Hydro’s Corporate Management Board. The technology board meets
regularly to set direction and priorities in the technology area.
Business areas are responsible for their own technology development
and for the execution of their respective technology strategies. Hydro’s
corporate technology office ensures a holistic and long-term approach
to Hydro’s technology strategy and agenda.
Hydro has taken part in the International Aluminium Institute’s (IAI)
work to develop greenhouse gas pathways toward 2050 consistent
with the Paris Agreement. These pathways are in line with the
International Energy Agency’s (IEA) 1.5-degree scenario, combined
with IAI’s analysis of demand in the aluminium market and material
flows. Hydro’s net-zero ambitions are based on a successful transition
to a 1.5-degree economy and are in line with climate science and the
Paris agreement. Hydro’s ambitions are therefore science based.
When the Science Based Target Initiative (SBTi) has developed a
sectoral decarbonization approach (SDA) for the aluminium sector,
Hydro will consider verifying our climate strategy against SBTi.
Technology roadmap towards net-zero emissions in 2050
Despite a reduction in total exposure to GHG
emissions (scope 1 and 2) by 47% from 2018
to 2030 after the Glencore transaction, Hydro
maintains the 30% target by 2030. Hydro’s
ambitions and ability to deliver low-carbon or
near zero aluminium remain thus unchanged.
The GHG baseline and progress towards our
climate strategy has been recalculated based
on Hydro’s current equity share of historical
emissions from the portfolio.
1) 2017 for Paragominas, Alunorte and Albras due to the production embargo at Alunorte and curtailment at Albras and Paragominas in 2018.
IAI emission projection pathways toward 2050
Tonnes CO2e/t primary aluminium
Source: International Aluminium Institute (IAI), Hydro analysis
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Emission reduction activities
The majority of Hydro’s direct GHG emissions are associated with
alumina production, mainly energy and fossil fuel combustion for the
heat intensive calcination process and steam generation, and the
electrolysis process for primary aluminium, which is harder to abate.
Hydro is working on several initiatives and actions to implement the
transition plan and decarbonize the company’s process along its value
chain.
Hydro’s alumina refinery in Alunorte is among the most energy-
efficient refineries in the world. An ongoing effort to reach Hydro’s
reduction target is the fuel switch project in Alunorte which is about
switching fuel oil consumption used for calcination to liquid natural gas
with lower GHG emissions. This will reduce emissions by 700,000
tCO2e when completed. Additionally, this project contributes to
develop critical infrastructure that can benefit the entire region.
By 2030, the aim is to fully decarbonize all processes at Alunorte,
except the calcination process. Hydro has installed one electrical
boiler for steam generation at Alunorte, and plan to install two more
electrical boilers by the end of 2025. Electrification of the three boilers
has a potential to reduce emissions by 400,000 tonnes of CO2e.
Between 2025 and 2030, Hydro plans to install furthermore boilers.
The fuel switch project and the el-boilers will together reduce GHG
emissions at Alunorte by 70 percent by 2030. For detailed emission
data, see Note E1.
Hydro is also testing new technologies for decarbonization at existing
aluminium plants. In 2021, Hydro teamed up with Verdox to test
different carbon capture and storage technologies at the Sunndal
aluminium plant as an important part of Hydro’s roadmap to become a
net-zero company.
In 2023, Hydro has also implemented actions to replace fossil energy
in the casthouses and the anode production with biomethane at
Sunndal, which will cut emissions by 20,000 tonnes of CO2e each
year.
In addition, Hydro will be testing emission-free plasma technology at
Sunndal. This will enable electrification of the remelting process in
casthouses, by using the same renewable energy that powers Hydro’s
primary smelters.
Energy efficiency is also an important part of Hydro’s ongoing efforts
to reduce costs and air emissions. During 2023, Hydro has
implemented several actions to increase energy efficiency and reduce
emissions at its five aluminium smelters in Norway, including replacing
older lighting systems with LED lights in Hydro’s large electrolysis
halls. A system that regulates lighting based on needs and movement
will as well be implemented. These actions can provide up to 90
percent energy savings compared to traditional lighting and save more
than 100 GWh of electricity annually. In addition to reduced energy
consumption, it will provide better light quality, which is important for
both the working environment and safety.
In Hydro Extrusions, the sites are working on different initiatives and
actions to lower their GHG emissions associated with energy and
electricity consumption. As an alternative to purchasing the standard
electricity mix from the grid, some plants have entered into power
purchasing agreements (PPAs) with renewable power producers. The
sites are also working to improve energy efficiency through
benchmarking, process improvements and investing in new
equipment. Many plants are also working with partners and
governments to evaluate the possibilities of installing their own on-site
renewable power generation, such as solar panels and windmills.
Toward 2050, Hydro is exploring different paths for zero-carbon
technology in aluminium production. Hydro is partnering with several
start-ups and academic environments to explore and develop CO
2
capture technology for low-carbon concentrations, like direct air
capture and the emissions from Hydro’s own primary production
facilities. Hydro is looking into projects to replace fossil carbon in its
anodes with bio carbon, and while it appears challenging, Hydro is part
of two R&D programs supported by the Norwegian Research Council
looking into this. In addition, Hydro is on track with its HalZero
technology development project where the company explores a new
process for production of primary aluminium with zero CO
2
emissions.
A feasibility project has been supported by Gassnova and Hydro has
also submitted an application to ENOVA for the first pilot step of
HalZero.
Hydro aims for utilizing opportunities of digitalization to improve
process stability, productivity, cost and safety. Hydro’s 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 Troy, Michigan, in the U.S. (both Extrusions).
Hydro also has a 75,000-tonne-per-year technology pilot at Karmøy in
Norway, which shows stable and excellent performance, and produces
the world’s most climate and energy efficient primary aluminium.
Hydro is now in the process of implementing technology elements
from the Karmøy Technology Pilot in its existing primary aluminium
smelters, 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 Hydro’s
electrolysis cells in all smelters, presently at Sunndal.
In terms of potential locked-in GHG emissions related to Hydro’s value
chain, this might be relevant where coal or other fossil fuel sources are
used in Hydro’s energy production. This can be relevant at Hydro’s
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joint venture in Qatalum where electricity is provided by an integrated
natural gas fired plant. The fuel switch project where Hydro replaces
fuel oil with natural gas is an intermediate step towards full
decarbonization of Alunorte by 2040, and we do therefore not consider
this as a long-term lock-in effect on GHG emissions.
Power is a significant input in the aluminium industry and critical to
meet global climate targets. To reduce emissions, aluminium must be
produced using cleaner energy solutions like renewable power
throughout the value chain. More than 70 percent of the electricity
used in Hydro’s production of primary aluminium is based on
renewable power. While Hydro's refinery in Brazil is transitioning to
more sustainable fuel sources to mitigate emissions in upstream
operations, our primary aluminium production in Norway is powered by
100 percent renewable energy.
In order to ensure continued supply of renewable power to Hydro’s
operations in Norway, the company operates 40 hydropower plants
with a combined output of 13.7 TWh renewable electricity in a normal
year. Adjusted for ownership shares, Hydro’s captive hydropower
production is 9.4 TWh in a normal year. In addition, Hydro operates a
wind farm and purchase more than 9 TWh of renewable power
annually in the Nordic market under long-term contracts.
In addition, Hydro’s new energy ventures, Hydro Rein, Hydro Havrand
and Hydro Energy’s Batteries unit can play an important role in
enabling our net zero ambitions. See the Net-zero Society section for
more information.
Sustainable financing in Hydro
Hydro’s sustainability position enables profitable growth and a cost of capital advantage. To access favourable financing, Hydro published a
green and sustainability linked financing framework in 2022. This Framework was established to support the issuance of Green Financing
Instruments in line with the EU taxonomy, as well as Sustainability-Linked Financial products. The financial products use, respectively, the EU
Taxonomy and Hydro’s climate strategy as basis for the financial products, with KPIs linked to GHG emissions and recycling of post-consumer
scrap. CICERO Shades of Green has provided a Second Party Opinion on the Framework and rated it Excellent on Governance and “medium
green” overall.
Per December 31, 2023, Hydro has not issued green financing instruments, but report taxonomy-aligned CapEx and other Taxonomy KPIs in the
disclosures pursuant to Article 8 of Regulation 2020/852.
Hydro established a Euro Medium Term Note (EMTN) programme on November 7, 2022, approved by Euronext Dublin and the Central Bank of
Ireland. The EMTN programme provides a framework for issuance of euro medium term notes up to an aggregate amount of EUR 5 billion.
Hydro’s first NOK 3 billion sustainability-linked bonds under the new framework and EMNT programme were issued on November 30, 2022, with
a potential redemption premium (a financial penalty) applicable if targets for reduced GHG emissions and increased recycling of post-consumer
scrap are not met. This makes Hydro the first investment grade Norwegian company to issue sustainability-linked bonds. The transaction is split
between two tranches, a 6 year NOK 1,500 million with a floating rate of 3m Nibor + 2.000% p.a., and a 6 year NOK 1,500 million with a fixed
rate of 5.257% p.a.
Hydro Alunorte signed a USD 200 million sustainability-linked loan in 2022. The seven-year loan facility is structured as a sustainability linked
loan, swapped to fixed rate. The sustainability link was incorporated in the facility and interest rate swap, linking pricing to performance on the
GHG emission reduction target to be achieved through the Alunorte fuel switch project.
In 2019, Hydro signed a USD 1.6 billion revolving multicurrency credit facility with the margin linked to Hydro’s GHG emissions target. The
margin under the facility will be adjusted based on Hydro’s progress to meet its annual targets to reduce GHG emissions by 10 percent by the
end of 2025.
In 2023, Hydro’s GHG emissions were 6.5 percent lower than the 2018 climate strategy baseline. Hydro is on track to reach the target of 10
percent emissions reductions by 2025.
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Net-zero Products
Net-zero Products is Hydro’s ambition to deliver net-zero carbon
aluminium products and solutions to its customers, as well as
increasing circularity in the value chain. The demand for low-carbon
aluminium products is increasing and is expected to continue growing.
Due to the aluminium value chain, Hydro can deliver net-zero products
to its customers before Hydro as a company reach net-zero emissions.
Hydro works closely with customers and partners early in the product
cycle to develop products that save energy, reduce emissions and
enable them to reach their sustainability targets.
Innovation and technology development are key enablers for reaching
net-zero GHG emissions from Hydro’s operations in 2050, and the
ambition is to take the lead in delivering industrial scale zero-carbon
aluminium by 2030.
Hydro differentiates its product portfolio from its peers with using
renewable electricity on about 70 percent of Hydro’s primary
aluminium production and providing two low-carbon aluminium brands
through Hydro CIRCAL and Hydro REDUXA products. In addition to
this, Hydro has initiated a significant R&D program to achieve net-zero
operations and to assess options for zero-carbon processes
throughout the aluminium value chain. A great part of Hydro’s R&D
expenses and efforts to deliver net-zero products are concentrated
along three strategic pathways:
1. Carbon capture and storage (CCS) – decarbonizing
existing operations
To speed decarbonization of the aluminium industry and make Hydro’s
existing aluminium smelters fit for the future, Hydro is developing
carbon capture and storage (CCS) solutions that can be retrofitted into
aluminium plants already in operation. Through capturing off-gases at
Hydro’s existing smelters, the company aims to reduce emissions from
the electrolysis process. In addition, and as a supplement, Hydro is
exploring options for direct air capture (DAC) units at its smelters. For
some capture technologies, this has the advantage that process heat
can be recovered for use in the DAC unit, lowering power demand and
operational costs.
In 2021, Hydro teamed up with Verdox to test different carbon capture
and storage technologies. Hydro has evaluated more than 50 CCS
technologies and developed a roadmap for testing and piloting the
most promising up to industrial scale. The most likely outcome will be
a combination of off-gas capture and direct air capture to eliminate 100
percent of the emissions.
2. HalZero chloride process – decarbonizing new smelter
capacity
HalZero is a new production process for primary aluminium that emits
oxygen instead of carbon dioxide (CO
2
). In the HalZero process,
alumina is chlorinated and becomes aluminium chloride in a process
that also produces carbon dioxide. Instead of releasing the CO
2
to the
atmosphere, it is sent back into the process and reused in the
chemical reaction in a closed loop. This makes the electrolysis
process completely greenhouse gas emission free.
The HalZero process differs significantly from the current production of
primary aluminium and is being developed for use in new production
facilities. In late 2023, construction of an HalZero test facility was
approved, moving the project from lab-scale test phase to small-scale
industrial testing. Hydro has developed a roadmap to bring this to a full
industrial scale pilot before 2030. The results of the initial test phase
were promising, and the process design studies have shown that an
industrial-scale HalZero plant will have about the same power
consumption and operating expenditure as current electrolysis
technology. Capital expenditure is expected to be comparable to new
conventional smelter capacity. The HalZero process will be applicable
for greenfield aluminium plants or brownfield replacement of obsolete
potlines, where the smelter infrastructure can be re-used. This way
Hydro can fully decarbonize the smelting process by eliminating
emissions for both electrolysis and anode baking. Hydro’s HalZero
technology will be relevant for new production capacity and Hydro is
on track to produce the first pilot volumes by the end of 2025.
3. Zero aluminium through scaling up volumes of post-
consumer scrap (PCS)
Aluminium recycling requires 95 percent less energy than the
production of primary aluminium while still offering high-quality
aluminium. Hydro is developing recycling technology and low-carbon
products based on post-consumer scrap, and plan to improve its
recycling capacity to sort and utilize more difficult PCS aluminium.
Hydro has already produced Hydro CIRCAL which is a certified
recycled and low-carbon product of more than 75 percent post-
consumer scrap. Hydro CIRCAL has a market leading CO
2
footprint of
1.9 kg of CO2e/kg aluminium, down from previous being 2.3 kg of
CO2e/kg. This is done through advances in sourcing, sorting and
traceability of post-consumer aluminium scrap. At Hydro’s recycling
plant in Clervaux in Luxembourg, the company has also produced 130
tonnes of near-zero carbon aluminium with 100 percent post-
consumer aluminium scrap, Hydro CIRCAL 100R, with a carbon
footprint below 0.5 kg CO2e per kg aluminium.
Hydro will make key capacity investments over the medium term to
ensure its recycling portfolio can facilitate the increasing demand for
Hydro CIRCAL and invest in technologies to increase usage of end-
consumer scrap while securing access to scrap. Hydro has also
strengthened its recycling position by the acquisition of Alumetal in
Emissions reduction pathway by Carbon Capture and Storage
Tonnes CO2e per tonne aluminium
Emissions reduction pathway by HalZero Chloride process
Tonnes CO2e per tonne aluminium
Emissions reduction pathway by Post-Consumer Scrap (PCS)
Tonnes CO2e per tonne aluminium
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Poland and purchasing land in Torija in Spain for building an
aluminium recycling plant. In November 2023, Hydro also opened a
new aluminium recycling plant in Cassopolis in Michigan, which will
produce 120,000 metric tonnes of recycled aluminium annually.
Please see the Resource use and circular economy chapter for more
information about recycling.
Hydro REDUXA is Hydro’s other brand of low-carbon aluminium using
renewable energy from water, wind and solar in the production phase.
This can reduce the carbon footprint per kg of aluminium to 4.0
kgCO2e per kilo aluminium, which is less than a quarter of the global
average of 16.6. The production capacity for near-zero carbon
aluminium will be developed in line with market demand for this near
zero-carbon aluminium. This is also reflected in the ambition to deliver
Hydro REDUXA 2.0 with a carbon footprint of less than 2 tonnes of
CO2e per mt of aluminium by 2030. Hydro CIRCAL and Hydro
REDUXA supports 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.
Greener sourcing and scope 3 emissions
Hydro is a large purchaser of raw materials and energy, including
aluminium and the metal required for alloys. The aluminium Hydro
purchases externally supplies its recyclers and extrusion plants, and
the greenhouse gas emissions associated with production of this raw
material makes up the majority of Hydro’s scope 3 emissions.
Scope 3 emissions refer to indirect emissions from purchased raw
materials and services. It is divided between upstream scope 3
emissions and downstream scope 3 emissions. While upstream scope
3 emissions are under the influence of the company, downstream
scope 3 emissions are generally outside of a company’s influence.
The GHG Protocol has defined a total of 15 categories for scope 3
reporting. However, a materiality assessment by the International
Aluminium Institute (IAI) has shown that only 5 categories are material
for scope 3 reporting in the aluminium industry: purchased goods and
services, fuel and energy related activities, upstream transportation
and distribution, downstream transportation and distribution and
processing of sold products.
The baseline emissions related to scope 3 have been recalculated
following the Alunorte and MRN transaction in 2023 with Glencore.
Read more about the transaction in the chapter Our Business. This
resulted in significantly lower downstream scope 3 emissions from
Bauxite & Alumina from processing of sold products and transportation
and distribution, due to reduced exposure to external sales of alumina.
Hydro purchases a lot of metal and aluminium scrap from external
providers. As Hydro regards the carbon footprint of process scrap as
equal to its metal origin, Hydro’s upstream scope 3 emissions are
significant when including externally sourced metal. Hydro aims to
source aluminium metal with a lower-carbon footprint and use less
carbon-intensive energy in its production. Hydro also aims to increase
the use of post-consumer scrap in its metal production.
Hydro’s total scope 3 emissions in 2023 was 13.41 million tonnes of
CO2e, split between upstream emissions of 11.95 million tonnes
CO2e and downstream emissions of 1.46 million tonnes CO2e.
Upstream emissions are dominated by metal purchase and
downstream emissions are dominated by external processing of metal.
In 2022, Hydro set emissions reduction targets for upstream scope 3
emissions to reduce total upstream scope 3 emissions by 15 percent
by 2030, and to reduce upstream scope 3 emissions per ton
aluminium delivered to the market by 30 percent by 2030. Both targets
refer to a 2018 baseline. Downstream scope 3 emissions were not
included in the targets as these emissions are outside of Hydro’s
influence and control. The 2023 results shows that Hydro has reduced
its total upstream scope 3 emissions by 36 percent in 2023, compared
to the 2018 baseline. Per tonne aluminium delivered to market, Hydro
has already reduced its emissions by 32 percent. The reductions are
mainly due to more conscious sourcing of aluminium metal, but also
due to less sourcing of metal in general. Going forward, upstream
scope 3 emissions may increase, both in total and per tonne, due to
higher activity and thus more external metal input.
Net-zero Society
Net-zero Society is a part of Hydro’s strategic direction to use its
competence and capabilities to enable for a net-zero society. To move
to a net-zero society the world needs more renewable electricity
generation, and mechanisms to store that energy. Hydro is investing in
growth initiatives and energy solutions, including more renewable
electricity generation and mechanisms to store that energy.
Hydro Rein
Hydro Rein is a leading provider of renewable energy solutions to
industrials. Hydro Rein supports Hydro and other industrial companies
to decarbonize through large renewables energy projects in addition to
onsite generation, energy efficiency, energy storage and flexibility
management. Hydro Rein currently has a diversified portfolio of more
than 30 renewable energy projects under development in core markets
in the Nordics and Brazil, in addition to a significant pipeline of Energy
Solutions projects in Europe and North America. The company has an
ambition of 3 GW in construction or operation (gross) by 2026.
During Q3 2023, Hydro Rein and Macquarie Asset Management
became partners to further accelerate Hydro Rein's growth in
renewable energy. The two companies are currently partners in a
large-scale onshore wind farm which is under construction in the
northeast of Brazil. Through Power Purchase Agreements (PPAs), this
project will supply electricity to Hydro’s bauxite mine in Paragominas
and its alumina refinery in Alunorte in order to reach Hydro’s GHG
reduction target. Hydro and Macquarie have also worked together on
wind farm projects in Sweden in 2017 and 2018, contributing to the
development of the Nordic market for long-term PPAs.
Hydro Havrand
Not all processes can be directly electrified and need other
alternatives to fossil fuel. The high temperature processes in the
aluminium casthouses are an example of this. To address these
emissions, Hydro is working to develop green hydrogen, which is
hydrogen made from renewable energy as a fuel to replace natural
gas.
Hydro Energy has a hydrogen research and competence center,
Havrand, which is running a technology qualification of the fuel switch
from natural gas to hydrogen in casthouses. In 2023, Hydro Havrand
produced the world’s first successful batch on industrial scale of
recycled aluminium using green hydrogen as an energy source. The
test was carried out at a casthouse in Navarra in Spain and is a key
step towards carbon-free aluminium. The next step in the technology
qualification is a pilot in Høyanger aiming for the first green hydrogen
production in the beginning of 2025.
Batteries
The Batteries business unit in Hydro Energy aims to develop leading
battery businesses through active investments in the battery value
chain. Since the first investment in 2017, Hydro Batteries has engaged
in selected companies, in the pursuit of developing more sustainable
battery materials with a significantly lower environmental footprint
compared to current commercially available alternatives.
Batteries’ growth investments include Hydrovolt, a leading battery
recycling company; Vianode, a low-carbon anode materials business;
E-magy, a next-generation anode materials start-up; and Lithium de
France, a lithium producer. The portfolio holdings include the battery
cell manufacturer Northvolt, and Corvus, which is a leader in marine
energy storage solutions.
To contribute to decarbonizing society, Hydro must also strengthen its
ambitions regarding a just and fair transition towards carbon neutrality.
The chapter on Human rights and Affected communities describes
Hydro’s approach to a just transition.
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Addressing climate related risks and
opportunities
Climate related physical risks
Physical risks could result from climate related acute and/or chronic
changes in rainfall patterns, flooding, shortages of water or other
natural resources, variations in sea levels, storm patterns and
intensities as well as temperatures. Such risks could result in flooding
of facilities, interruptions to production processes, infrastructure
failures and potential accidents.
To understand and mitigate climate related physical risks for Hydro’s
operations, the company has performed several climate risk
assessments. In 2018, Hydro modelled future weather patterns and
their impact on its facilities based on climate models and scenarios
from the Intergovernmental Panel on Climate Change (IPCC). In 2023,
Hydro updated the physical climate risk assessment, including
modelling the risk of climate related events in the current situation, in
addition to RCP 4.5 and RCP 8.5 in a 2030, 2040 and 2050 scenario.
Hydro is working to assess potential consequences and necessary
mitigating actions, and has started to integrate the findings from the
assessment and identified risk into its risk management system to
develop plans for climate change adaptation. Several of Hydro’s
assets have already undertaken significant upgrades to manage
climate related risks such as the effects of increased precipitation and
associated flood risks.
Climate related transition risks
Climate change adaptation and the transition to a 1.5-degree economy
poses both opportunities and risks to Hydro. The company has
assessed scenarios for technology risk, regulatory, policy, market and
reputation risk consistent with a 1.5-degree scenario. The outcome of
this is integrated to Hydro’s climate strategy, the advocacy work on
future climate related legislation, and the technology and market
strategies. As a result, Hydro’s long-term positioning, operational and
financial planning reflect the company’s assessment of transition risks
in a 1.5-degree scenario.
The transition may lead to stricter regulations and more ambitious
climate targets may drive costs within parts of Hydro’s asset base. The
overall portfolio will likely benefit from such trends, as they will also
affect demand for and valuation of Hydro’s low-carbon products and
portfolio. Hydro is also a signatory to the Task Force on Climate-
Related Financial Disclosures (TCFD) since 2017.
Aluminium is widely acknowledged as an enabler for the green
transition, and the low-carbon aluminium Hydro produces is a key
lever to reduce scope 3 emissions for customers across several
industry sectors. Hydro is well positioned to benefit from the transition
to net-zero GHG emissions and generates significantly lower GHG
emissions than the industry average. The average carbon intensity of
Hydro’s aluminium production is below the 2030 and 2035 targets in
the 1.5 degree scenario that the International Aluminium Institute has
defined for the aluminium industry.
The carbon footprint of aluminium production is highly dependent on
the source of electricity used to produce the metal. Hydro’s footprint
reflects the fact that the majority of its primary production facilities use
electricity from renewable sources.
Technology risks
New technology must be developed and implemented for production of
primary aluminium in a zero GHG emission economy. Hydro is
developing new, emission free, technology for use in future aluminium
production facilities. To achieve near-zero emission production at
existing aluminium smelters and preserve their value, Hydro is
assessing carbon capture solutions. For Hydro to retain the strategic
benefit of lower-carbon emissions, developing technology that can be
fitted to existing production facilities at an affordable price is important.
In other parts of Hydro’s value chain, the company can achieve net-
zero emissions with existing technologies, provided sufficient
renewable energy is available at competitive prices in the regions.
Regulatory risk
As the aluminium and alumina markets are global markets, relative
competition between countries and regions influence which production
sites that will be viable in the future. In general, Hydro will benefit from
globally aligned initiatives placing a price on CO
2
emissions and/or
regulatory or market-based incentives to use renewable energy. Hydro
will also benefit from regulatory initiatives whereby emission free or
low emission energy is made available in sufficient quantities where
Hydro’s existing production facilities are situated, at prices competitive
to energy cost in other regions of the world where competing
production is or may be placed.
In the opposite scenario, Hydro will have a disadvantage if significant
carbon taxes are placed on emissions in countries or regions where
Hydro’s production is placed, while similar regulation is not introduced
in competing regions. Situations with severe limitations in availability of
GHG emission free electricity in areas where Hydro’s production
facilities are situated will be a disadvantage for the company’s
aluminium related assets.
Hydro’s energy producing assets are renewable only, with the majority
being hydropower in Norway. Hydro is also engaged in production of
power from solar and wind resources, currently mainly in partnership
with others and where the majority of the projects are in development
phase. These assets will benefit from tighter policies on CO
2
emissions. However, specific regulations might impact
competitiveness and value of individual facilities.
Market risk
Hydro will benefit from increased demand for low-carbon aluminium,
as its customers aim to decarbonize their value chains. The demand
for low-carbon aluminium is expected to grow at a greater pace than
the overall demand for aluminium. In parallel, demand for (low-carbon)
aluminium could strengthen further as aluminium substitutes steel,
copper or other metals, in sectors such as production of renewable
energy and thermal technologies, transport, construction, and real
estate.
In an opposite scenario, the demand for aluminium could decline if
Hydro does not succeed with the decarbonization of its value chain in
line with its technology roadmap for net-zero GHG emissions by 2050.
If Hydro fails to develop and implement HalZero, or other electrolysis
technology while competing industries succeed in their
decarbonization efforts, this could result in decreased demand for
aluminium as steel or other metals substitute aluminium. Similar risks
apply if Hydro does not succeed with carbon capture at existing
facilities, which could impact the value of its existing aluminium
smelters.
Internal carbon pricing
A large amount of Hydro’s aluminium operations fall within scope of
the EU Emissions Trading System (EU ETS). Hydro purchases and
surrenders allowances (EUAs) to fulfil the company’s compliance
obligations under the EU ETS. Hydro also receives a proportion of free
EUAs. The amount of EUAs that the company purchases, as well as
the amount of free EUAs it receives, is publicly available information
which is made available at a national level by the respective local EU
ETS authorities.
Hydro uses the EU ETS carbon price in internal decision making
processes inside and outside of the EU/EEA, and the cost of carbon is
integrated in financial and operational decisions. By including a carbon
price in Hydro’s analysis, costs related to CO
2
emissions become a
variable operational cost at plant level and CO
2
price expectations
influence future investment decisions.
Hydro's part-owned primary aluminium producer, Alouette, is also
subject to carbon market compliance obligations (under the Québec
cap-and-trade system which is part of the Western Climate Initiative
(WCI)).
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E1 Notes on Climate change
E1.1 Total greenhouse gas emissions in consolidated activities
Reporting principles
Total direct and indirect (scope 1 and scope 2) GHG emissions in Hydro consolidated activities. The
emissions are reported per segment and per country. GHG emissions have been calculated based on
the principles of the WRI/WBCSD GHG Protocol according to the operational control principle.
Direct GHG emissions (scope 1) are calculated based on anode consumption during the electrolysis
process and use of fossil fuels. PFC (perfluorocarbon) emissions are calculated based on automatic
process measurements. PFC emissions comprise 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. The reported direct emissions are
comparable to Scope 1 emissions as defined by the GHG protocol. All GHG emissions reported have
been converted to CO
2
equivalents (CO
2
e).
Indirect GHG emissions (scope 2) are calculated based on Hydro’s consumption of electricity. Reported
indirect emissions cover GHG emissions from purchased electricity and emissions from Hydro’s
ownership share in the gas-fired power plant at Qatalum. The reported indirect emissions are
comparable to scope 2 emissions according to the GHG protocol. We report indirect emissions
according to the location-based method in the revised GHG Protocol Scope 2 Guidance, based on
emissions factors from the International Energy Agency (IEA). For our operations in Canada and the
primary aluminum producer Albras in Brazil, indirect emissions reflect the regional grid mix. For Hydro’s
Annual Report 2023 we have updated the factors back to 2019, and historical figures have been
updated accordingly. We do not to report indirect emissions according to the market-based approach.
GRI reference: GRI Standards 305-1 (2016) and 305-2 (2016).
Greenhouse gas emissions per business segment - consolidated activities
Million tonnes CO2e
2023
2022
2021
2020
2019
Direct GHG emissions
6.79
7.15
7.63
6.94
6.52
Bauxite & Alumina
3.50
3.58
3.77
3.43
2.99
Primary aluminium production
2.70
2.95
3.20
2.89
2.85
Remelters (in Metal Markets)
0.12
0.12
0.13
0.11
0.12
Extrusions
1)
0.47
0.50
0.53
0.50
0.56
Indirect GHG emissions
1.16
1.23
1.81
1.40
1.53
Electricity consumption (mainly primary
aluminium production)
1.16
1.23
1.81
1.40
1.53
Total GHG emissions
7.95
8.39
9.44
8.33
8.05
1)
Includes GHG emissions from remelt activities in Extrusions
Hydro’s direct emissions decreased in 2023 compared to 2022. The emissions reductions in primary
aluminium is primarily linked to the primary production stop at our Slovalco plant in 2022. The
implementation of electric boilers for steam generation at Alunorte and process improvements resulted in
improvements to specific emissions (ie. emissions per tonne product produced) since 2021, while the
emissions in 2019-2020 were lower due to production embargo at Alunorte and curtailed production at
Albras and Paragominas. To learn more about the embargo imposed on Alunorte in 2018, see Hydro’s
Annual Report 2018 and the section “The Alunorte situation”.
Greenhouse gas emissions per country - consolidated activities
Million tonnes CO2e
2023
2022
2021
2020
2019
Brazil
5.04
5.00
5.69
4.92
4.36
Direct
4.37
4.40
4.64
4.23
3.73
Indirect
0.67
0.61
1.05
0.69
0.63
Norway
1.94
2.19
2.16
1.97
2.01
Direct
1.78
2.02
2.05
1.84
1.82
Indirect
0.16
0.17
0.11
0.13
0.19
Other
0.96
1.19
1.60
1.45
1.68
Direct
0.63
0.74
0.94
0.87
0.97
Indirect
0.33
0.45
0.66
0.58
0.70
Total GHG emissions
7.95
8.39
9.44
8.33
8.05
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E1.2
Total greenhouse gas emissions based on ownership equity
Reporting principles
Total direct and indirect (Scope 1 and Scope 2) GHG emissions in Hydro, based on ownership equity.
The emissions are reported per segment, and by country. GHG emissions have been calculated based
on the principles of the WRI/WBCSD GHG Protocol according to the equity share principle.
GHG emissions based on ownership equity are calculated based on our ownership share as per year
end 2023. The reported emissions includes Hydro’s share of emissions from all operations including
non-consolidated operations where Hydro has a minority interest.
GRI reference: GRI Standards 305-1 (2016) and 305-2 (2016).
Greenhouse gas emissions per segment - ownership equity
Million tonnes CO2e
2023
2022
2021
2020
2019
Direct GHG emissions
5.98
6.31
6.68
6.15
5.91
Bauxite & Alumina
2.21
2.26
2.37
2.16
1.88
Primary aluminium production
3.19
3.43
3.65
3.38
3.36
Remelters (mostly Metal Markets)
0.12
0.12
0.13
0.11
0.12
Extruded solutions
1)
0.47
0.50
0.53
0.50
0.56
Indirect GHG emissions
3.37
3.43
3.78
3.58
3.87
Electricity consumption (mainly primary
aluminium production)
3.37
3.43
3.78
3.58
3.87
Total GHG emissions
9.35
9.74
10.47
9.73
9.78
1) Includes GHG emissions from remelt activities in Extrusions.
The baseline emissions have been recalculated following the Alunorte and MRN transaction in 2023 with
Glencore. Read more about the transaction in the chapter Our Business. This resulted in significantly
lower direct and indirect emissions from the Bauxite & Alumina business area.
Greenhouse gas emissions per country - ownership equity
Million tonnes CO2e
2023
2022
2021
2020
2019
Australia
0.78
0.77
0.82
0.85
0.89
Direct
0.15
0.15
0.15
0.15
0.15
From electricity consumption
0.63
0.63
0.67
0.71
0.74
Brazil
3.04
3.02
3.40
2.95
2.61
Direct
2.67
2.68
2.82
2.58
2.26
From electricity consumption
0.37
0.34
0.58
0.38
0.35
Canada
0.46
0.46
0.47
0.46
0.48
Direct
0.25
0.26
0.26
0.25
0.25
From electricity consumption
0.20
0.20
0.21
0.21
0.22
Norway
1.94
2.19
2.16
1.97
2.01
Direct
1.78
2.02
2.05
1.84
1.82
From electricity consumption
0.16
0.17
0.11
0.13
0.19
Qatar
1)
2.21
2.25
2.29
2.28
2.37
Direct
0.54
0.55
0.59
0.58
0.55
From electricity consumption
1.67
1.70
1.70
1.70
1.82
Slovakia
0.02
0.15
0.35
0.31
0.37
Direct
0.01
0.08
0.17
0.15
0.17
From electricity consumption
0.00
0.07
0.18
0.16
0.20
Other
0.90
0.90
0.98
0.91
1.05
Direct
0.58
0.58
0.65
0.61
0.70
From electricity consumption
0.33
0.32
0.33
0.29
0.35
Total GHG emissions
9.35
9.74
10.47
9.73
9.78
1)
Most electricity at Qatalum is generated by Qatalum's fully-owned gas power plant. 39.000 tonnes CO2e came from net purchased
electricity from the national grid in 2023.
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E1.3 Indirect (scope 3) greenhouse gas emissions
Reporting principles
Hydro’s indirect emissions based on ownership equity.
Indirect (Scope 3) GHG emissions are reported for emissions related to purchased goods and services,
fuel and energy related activities, upstream transportation and distribution, downstream transportation
and distribution, and processing of sold products. The calculation and reporting of our Scope 3
emissions are based on the IAI Scope 3 Calculation Tool Guidance.
Hydro presented our Scope 3 emissions for the first time in 2021, with 2018 as a baseline. We do
therefore not include Scope 3 emissions for 2020 and 2019.
GRI reference: GRI Standards 305-3 (2016).
Scope 3 Greenhouse gas emissions
Million tonnes CO2e
2023
2022
2021
2020
2019
2018
Upstream scope 3 emissions
11.95
13.30
14.88
19.64
Purchased goods and services
10.99
12.34
13.90
18.60
Fuel and energy related activities
0.70
0.69
0.70
0.73
Upstream transportation and distribution
0.26
0.27
0.28
0.31
Downstream scope 3 emissions
1.46
1.45
1.45
1.46
Downstream transportation and distribution
0.06
0.06
0.06
0.06
Processing of sold products
1.40
1.40
1.40
1.40
Total GHG emissions
13.41
14.75
16.33
21.10
The baseline emissions related to Scope 3 have been recalculated following the Alunorte and MRN
transaction in 2023 with Glencore. Read more about the transaction in the chapter Our Business. This
resulted in significantly lower downstream Scope 3 emissions from processing of sold products and
transportation and distribution due to reduced exposure to external sales of alumina. Some historical
numbers have also been updated due to improved data models and better granularity of data.
The reduction in upstream scope 3 emissions is mainly due to more conscious sourcing of aluminium metal,
as well as less sourcing of metal in general and lower production of primary aluminium.
Hydro’s upstream Scope 3 emissions are dominated by emissions from cold metal and aluminium scrap
provided from external suppliers. Hydro regards the carbon footprint of process scrap as equal to its metal
origin, Hydro’s Scope 3 upstream emissions are significant when including externally sourced metal.
Industry players who do not take the inherent carbon footprint of process scrap input into account will
report significantly lower Scope 3 emissions. Hydro believes that this method of accounting is inaccurate,
as it accounts for process scrap being carbon neutral, when in reality the process scrap has the same
inherent carbon footprint as its metal origin. Hydro believes that we need to focus on what drives real
change towards the green transition and we need to exercise our role as a responsible supplier and
customer to influence the right development. If Hydro were to regard process scrap as carbon neutral,
Hydro’s upstream Scope 3 emissions would be significantly lower.
Hydro’s downstream Scope 3 emissions are dominated by processing of sold metal. As this processing
happens outside of Hydro’s control, our ability to influence these emissions are limited. Nevertheless,
reporting of these emissions contributes to give a holistic perspective on the total emissions of the value
chain of our sold products.
Hydro’s total reduction target on scope 3 emissions only includes upstream scope 3 emissions, as
downstream scope 3 emissions are beyond Hydro’s control. Hydro’s reduction target for upstream Scope
3 GHG emissions per tonne aluminium is calculated based on upstream scope 3 emissions from
purchased metal in the aluminium metal and extrusions business areas.
Alumetal and Hueck Lüdenscheid which were acquired during 2023 have not yet been included in the
calculations.
E1.4 Direct greenhouse gas emissions by GHG type
Reporting principles
Breakdown of reported direct GHG emissions in consolidated activities, by greenhouse gas type.
Direct GHG emissions per GHG type - consolidated activities
Million tonnes CO2e
2023
2022
2021
2020
2019
CO
2
6.67
7.00
7.36
6.73
6.29
PFC (perfluorocarbon)
0.12
0.15
0.27
0.20
0.24
Other
0.00
0.00
0.00
0.00
0.00
Total
6.79
7.15
7.63
6.94
6.52
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E1.5 Greenhouse gas emissions intensity
Reporting principles
GHG intensity of our alumina refining at the Alunorte alumina refinery and GHG intensity of the
electrolysis process from Hydro’s smelters, based on ownership equity, which are operational
performance indicators in Hydro. We also report GHG intensity based on net revenue, which is an
ESRS requirement, but not an operational target as this value varies based on market prices.
GHG intensity of alumina refining is calculated based on the total GHG emissions and production
volumes at our Alunorte alumina refinery. The reported GHG intensity covers all alumina refining in
Hydro.
GHG intensity of the electrolysis process is calculated based on greenhouse gas emissions and
production volumes in Hydro’s smelters, based on ownership equity. This is an operational target that
excludes extraordinary emissions resulting from e.g. start-up of curtailed capacity. The methodology for
calculation is site specific, and historical figures may be subject to change.
GHG intensity based on net revenue is calculated based on total Scope 1 and Scope 2 emissions,
divided by total revenue as reported in the consolidated income statement.
GRI Reference: GRI Standards 305-4 (2016).
GHG intensity - Alumina refining at Alunorte alumina refinery
2023
2022
2021
2020
2019
metric ton (mt) CO2e per mt alumina
0.61
0.62
0.63
0.65
0.71
The implementation of electric boilers for steam generation at Alunorte and process improvements have
resulted in an improvement in emissions per tonne alumina refined compared to previous years.
GHG Intensity - Electrolysis, based on ownership equity
2023
2022
2021
2020
2019
metric ton (mt) CO2e per mt aluminium
1.54
1.57
1.64
1.59
1.60
For the GHG intensity per tonne aluminium from the electrolysis process, Slovalco was excluded in 2022
due to production curtailment, and Albras excluded from 2019 due to extraordinary emissions during the
start-up of curtailed capacity.
GHG Intensity - consolidated emissions per revenue
mt/NOK million
2023
2022
2021
2020
2019
metric ton (mt) CO2e per NOK million
41.1
40.3
63.1
60.3
53.8
GHG intensity based on net revenue is an ESRS reporting requirement but not an operational target for
Hydro, as the value will vary depending on market prices. The value is calculated based on total GHG
emissions and net revenue from consolidated activities. See Note 1.4 to the consolidated financial
statement for information on revenues by segment.
E1.6 Energy consumption
Reporting principles
Total energy consumption in Hydro’s consolidated activities, reported by energy carrier, sector use and
country of consumption.
Energy consumption includes energy generated by Hydro operations as well as purchased energy.
Energy consumption includes energy losses in hydroelectric plants. Other energy sources reported
includes heating, cooling and steam generated in Hydro operations as well as purchased steam and
heat in the Extrusions business area.
GRI Reference: GRI Standards 302-1 (2016).
Energy consumption per energy carrier - consolidated activities
1)
Petajoule (PJ)
2023
2022
2021
2020
2019
Coal
11.4
13.4
13.1
14.0
13.4
Coke
13.8
15.0
16.1
15.9
15.4
Electricity
93.1
99.2
102.2
97.9
95.7
Gasoline
0.0
0.0
0.0
0.0
0.0
Natural gas
12.0
12.1
12.9
12.1
13.4
Natural gas liquids
0.9
0.9
0.9
2.0
1.4
Oil
27.4
26.1
28.9
23.7
19.1
Other
6.1
5.8
5.9
5.0
4.6
Total energy consumption in PJ
164.6
172.4
180.1
170.6
162.9
Total energy consumption in TWh
45.7
47.9
50.0
47.4
45.3
1) With the sale of Hydro Rolling in 2021, we have excluded historical figures on energy consumption associated with the business area.
Energy consumption per sector - consolidated activities
1)
Petajoule (PJ)
2023
2022
2021
2020
2019
Bauxite & Alumina
47.6
47.2
47.1
41.6
35.7
Electrolysis/Carbon/Casting
100.6
108.6
115.6
113.0
109.6
Remelters
2.5
2.6
2.7
2.4
2.4
Extruded Solutions
12.7
13.8
14.4
13.4
15.0
Other
1.2
0.3
0.3
0.3
0.2
Grand Total
164.6
172.4
180.1
170.6
162.9
1) With the sale of Hydro Rolling in 2021, we have excluded historical figures on energy consumption associated with the business area.
All fully-owned smelters, 6 remelters and 19 Extrusion sites are also certified according to the ISO 50001
Energy Management systems, representing 62 percent of Hydro's total electricity consumption.
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Energy consumption per country - consolidated activities
Petajoule (PJ)
2023
2022
2021
2020
2019
Brazil
81.4
79.0
79.9
71.9
61.7
Norway
66.4
72.1
71.7
72.5
71.5
Slovakia
1.2
5.6
12.0
11.1
12.8
Other
15.6
15.8
16.5
15.2
16.8
Total energy consumption
164.6
172.4
180.1
170.6
162.9
The reduction in total energy consumption in 2023 is due to lower energy consumption at the Norwegian
smelters, in addition to the stop in primary aluminium production at Slovalco, in Slovakia.
E1.7 Renewable energy consumption
Reporting principles
Renewable energy consumption is estimated based on total energy consumption by energy carrier and
data on country specific energy mix in the electricity grid from the International Energy Agency (IEA).
Electricity derived from biofuels, waste, hydro, geothermal, solar, wind and tide are considered
renewable.
GRI Reference: GRI Standards 302-1 (b) (2016).
Renewable energy as a share of total energy consumption in Hydro’s consolidated activities is estimated
to 41.4 percent in 2023, compared to 40.7 percent in 2022.
E1.8 Energy intensity
Reporting principles
Energy intensity of the alumina refining at Alunorte is calculated based on total energy consumption at
Alunorte divided by total alumina production.
Energy intensity in Hydro’s consolidated smelters is calculated based on direct current consumption in
the electrolysis process per kg aluminium.
Energy intensity based on net revenue is calculated based on total energy consumption in Hydro’s
consolidated activities, divided by total revenue as reported in Hydro’s consolidated income statement.
GRI Reference: GRI Standards 302-3 (2016).
Energy intensity - Alumina refining
2023
2022
2021
2020
2019
GJ per mt alumina
7.97
7.97
7.56
7.67
8.20
Energy intensity - Electrolysis process
2023
2022
2021
2020
2019
MWh per mt aluminium
14.03
13.88
14.00
14.07
14.15
Total energy consumption in consolidated activities per revenue
MWh/NOK million
2023
2022
2021
2020
2019
MWh per NOK million
236.03
230.37
334.10
343.18
302.47
Energy intensity based on net revenue is an ESRS reporting requirement but not an operational target for
Hydro, as the value will vary depending on market prices. The value is calculated based on total energy
consumption and net revenue from consolidated activities, since the Hydro group is classified as operation
in a high climate impact sector, even if significant portion of total revenues are associated with activities in
non-high climate impact sectors, such as renewable energy. See Note 1.4 to the consolidated financial
statement for information on revenues by segment.
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E1.9 GHG emissions and energy use in 50/50 joint venture Qatalum
Reporting principles
Direct GHG emissions (scope 1) is reported on 100 basis, including emissions from Qatalum’s on-site
natural gas use for electricity generation.
Indirect GHG emissions (scope 2) is reported on 100 basis and calculated based on electricity use from
the grid and IEA emission factors for the Qatari grid mix.
Power consumption for liquid metal production is calculated based on total liquid metal production at
Qatalum in 2023 and the average power consumption per kg of liquid metal produced.
Total power consumption is calculated based on total consumption of electricity, gasoil and natural gas.
GHG emissions and energy use in 50/50 joint venture Qatalum
2023
2022
2021
2020
2019
Direct GHG emissions (Scope 1), million
metric tonnes of CO2e
4.63
4.62
4.74
4.75
4.80
Indirect GHG emissions (Scope 2), million
metric tonnes of CO2e
0.03
0.08
0.01
0.01
0.15
Power consumption for liquid metal
production, TWh
1)
8.73
9.64
9.38
9.50
9.33
Total energy consumption, TWh
25.53
24.23
24.07
23.93
24.68
1) 2023 numbers are not direcly comparable to previous years due to change in reporting methodology.
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5. Sustainability
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Pollution
Why it matters
Hydro’s industrial processes carry an inherent risk of pollution, linked
to direct operational emissions to air and water, and accidental spills
or leakages. Such emissions can have a negative impact on the local
environment and local communities if not managed correctly. Hydro’s
business activities are subject to emissions regulations, including
local emission permits, as well as regional and international
regulation of emissions.
Stricter regulations related to emissions and pollution could impose
new requirements on Hydro’s operations and value chain, which in
turn could affect cash flow or impose capital investments to reduce
the emissions from Hydro’s activities in the medium and long-term.
Incidents resulting in spills, leakages and other non-compliance with
emission permits can result in fines and remediation costs that have
an impact on Hydro’s financial performance. Pollution linked to
historical activities, at both existing operations and legacy sites, may
also require active intervention and remediation. Actual or perceived
pollution impacts on local communities can result in operational
shutdown, legal disputes and negative reputational impacts that have
a material impact on cash flow and financial results.
Our approach
Hydro monitors and reports on a number of material emissions to air
and water from its operations. These emissions are potential
pollutants and typically subject to regulatory controls such as
emission limits and monitoring. These regulations are reflected in the
operational licenses and will differ depending on the type of activity
and applicable regulatory frameworks.
Hydro’s most significant emissions to air are linked to fossil fuel
consumption in alumina refining and process emissions linked to
primary aluminium production. The largest non-GHG emissions are
sulfur dioxide (SO
2
), nitrogen oxide (NO
x
), particulate matter (PM)
and fluoride (F). SO
2
and NO
x
emissions to air are primarily from the
use of coal and Heavy Fuel Oil (HFO) as energy sources in Alunorte,
Brazil. Another large contributor to Hydro’s total sulfur dioxide to air is
related to the aluminium electrolysis process where the majority of
the total emissions come from Albras in Brazil and Slovalco in
Slovakia. SO
2
emissions from the Norwegian smelters are
considerably lower due to the use of seawater fed scrubbers for gas
treatment at these plants. The largest emission to water is the sulfur
captured by these seawater scrubbers. See Note E2.1 for an
overview of emissions to air and water.
Hydro’s Global Procedure on Environmental Management requires
that all operational sites, that are fully owned or operated by Hydro,
identify, control, and appropriately monitor potential sources of
AlertLine as a communication tool to report environmental and social
issues concerning Hydro operations. See Business Conduct chapter
for more information about AlertLine.
With respect to managing pollution risk from accidental spills,
leakages, or other unplanned events, all sites are required to have
performed risk assessments and establish action plans and controls
to manage the risk, such as spill kits, secondary containment,
storage basins etc.
In 2024, Hydro will join World Economic Forum’s Alliance for Clean
Air, a cross sector initiative to the social and environmental benefits
Hydro will work with the Stockholm Environment Institute to develop
value chain inventories and baselines of material air pollutants. This
data will be used as input for future disclosures and target setting,
with the goal of reducing air pollutant emissions linked to Hydro’s
value chain.
Targets and actions to reduce pollution risk
Hydro has established a target to halve material non-GHG emissions
(i.e. SO
2
, NO
x
and PM) by 2030, from a 2017 baseline. These
emissions are primarily linked to fossil fuel consumption in Hydro’s
operations and, primarily, the consumption of coal and HFO at
Hydro’s alumina refinery, Alunorte. To achieve this target, sites are
required to decarbonize their processes where feasible. For more
information about Hydro’s efforts to decarbonize and reduce
emissions, see chapter on Climate change. In 2023, total emissions
of SO
2
, NO
x
and PM were reduced by 30%, 20% and 15%,
respectively, from the 2017 baseline.
In 2023, Hydro also established a target to reduce fluoride emissions
to below 0.35 kg F / tonne Al, at its fully owned smelters, by 2030.
This is equivalent to the EU regulatory emission limit for new
smelters and will reduce the localized pollution pressure on flora and
fauna. This target will be achieved through investments in upgrades
to existing gas treatment centers and operational controls to improve
performance.
Elemental Mercury is emitted to air in the refining process at
Alunorte. Through a mass balance approach, this is estimated to be
ca. 2 metric tonnes per year, at full production. To reduce emissions
of mercury to air, Hydro has initiated a project to install four non-
condensable gases units (condensers) on Alunorte’s eight digestor
lines. The first condenser was installed in 2018, as a pilot, and its
Targets and ambitions
50%
Reduction in material non-GHG emissions by 2030 against 2017 baseline
Performance
30%
Reduction in SO
2
against baseline
20%
Reduction in NO
x
against baseline
15%
Reduction in particulate matter
emissions against baseline
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technical performance has been monitored prior to the installation of
the remaining units. The initial timeline to install the remaining units
was rescheduled to allow for further performance optimization of the
technology. As of yearend 2023, a second condenser has been
installed and will enter into operation in early 2024. Based on current
project schedule, installation of the final two condenser units is in
progress and will begin operation during 2024.
environmental performance standards, could potentially result in
material pollution. To minimize the risk of material pollution,
operational sites are required to implement controls such as
secondary containment and ensure spill kits are readily available and
employees trained to use them. Spill response drills are performed at
least annually, and results are documented. In the events of an
actual spill, incidents are assessed and classified according to the
severity of impact. Spills and leakages are reported and categorized
as severe or major if the leakage is uncontained, but the impact of
the leakages is reversible, or where the leakage is uncontained, and
the impact is irreversible. See Note E2.2 for reported spills and
leakages characterized as severe or major. Permit breaches are
reported when an incident occurs that in any way relates to an
environmental permit. See Note E2.3 for information on
environmental permits.
Target emissions and mitigating actions in the aluminium value chain
Activity
Target emissions
Mitigating actions
Bauxite mining
Water discharges to environment: suspended
solids
Clarification basins
Alumina refining
Water discharges to environment: pH and
suspended solids
pH adjustment and clarification
SO
2
, NO
x
and PM emissions to air
Alunorte fuel switch project to replace HFO with
LNG by 2025, and coal with electricity by 2030
Fugitive PM emissions to air in dry season
Water spraying of roads and open areas to limit
dust
Mercury emissions to air and water
Mercury condensers
Primary Aluminium production
Water discharges to environment
Wastewater treatment plants, oil separators,
containment basins
Fluoride emissions to air
Alumina-fed dry scrubbers
SO
2
and PM emissions to air
Seawater-fed wet scrubbers (fully owned
smelters)
Other emissions to air – casthouse and anode
baking furnaces
Bag filters
Aluminium recycling
Other emissions to air - casthouse
Bag filters (where legally required)
Extruded products
Water discharges to environment (where
applicable*)
Wastewater treatment plants, oil separators,
containment basins
* Many Extrusion sites discharge process water to third-party sewer systems for collection and treatment.
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E2 Notes on Pollution
E2.1 Non-GHG emissions
Reporting principles
Total reported non-GHG emissions in Hydro consolidated activities
Emissions to air are monitored differently, depending on the nature of emission and source. At a
minimum, a site’s environmental permits will dictate the monitoring locations, frequency and
methodology and legal reporting requirements. If there are additional emissions data needed for
disclosure, beyond the legal requirements, these are also included in a site’s monitoring plan. Total
annual emissions data presented here are typically based on an extrapolation from one or more
sampling campaigns conducted at a site level or calculated based on emission factors related to the
emission source.
Dust and particles include measured and estimated stack emissions and roof emissions from alumina
refining and aluminium 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 Extrusions.
PAH (poly-aromatic hydrocarbons) to air and water are primarily from anode production. Emissions to
air are monitored according to PAH-16 US EPA and emissions to water are monitored according to
PAH-16 US EPA.
Hydro uses ozone depleting substances in certain applications in its Brazilian operations, and to some
extent also in Extrusions. In 2023, Hydro used in total 8.3 tonnes 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. In Hydro Extrusions, hydrochlorofluorocarbon
(HCFC) accounts for around one third of ozone depleting substances.
Acid Mine Drainage (AMD) is not a material risk for Hydro. The chemical content of the ore is the
primary cause of AMD and is typically associated with sulfur-bearing metals, which is not present in
bauxite mines in Brazil.
GRI reference: GRI Standards 305-6 (2016) and 305-7 (2016).
Non-GHG emissions
Metric tons
2023
2022
2021
2020
2019
Dust and particles
3,974
3,730
4,037
3,009
3,110
Fluorides to air
652
615
687
772
790
NM VOC
149
338
225
159
193
Nitrogen oxide
7,438
8,138
8,539
7,896
7,562
PAH to air
1)
12
13
10
16
16
PAH to water
1)
1
1
1
3
2
Sulphur dioxide (SO
2
)
22,042
21,702
27,519
22,332
22,871
1) Excluding PAH emissions from Albras
Non-GHG emissions per activity
Metric tons
Bauxite
mining
Alumina
refining
Primary
aluminium
Recycling
Extrusions
1)
Total
Sulphur dioxide (SO
2
)
124
10,887
11,005
2
24
22,042
Nitrogen oxide (NO
x
)
78
6,135
509
268
449
7,438
Particulate Matter
-
2,199
1,733
39
2
3,974
Flurides to air (F)
-
-
652
-
-
652
NM VOC
-
-
-
5
143
149
PAH to air (EPA 16 PAH)
-
-
12
-
-
12
Sulphur (S) to Water
-
-
6,947
-
-
6,947
Suspended solids
-
149
337
4
0
489
Fluoride (F) to water
-
0
197
-
0
197
Aluminium (Al) to water
-
17
-
-
0
17
PAH to water (EPA 16 PAH)
-
-
1
-
-
1
1) Extrusion includes some recycling activities
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E2.2 Spills and leakages
Reporting principles
Total reported severe and major leakages from Hydro consolidated activities.
Spillages and leakages to the external environment (soil, water or air) are registered in Synergi and/or
in IMS, our reporting tools for incidents regarding health, safety, security and environment. Spills and
leakages reported in Note E2.2 comprise incidents that have resulted in emissions to the external
environment that are categorized as severe or major, i.e. unintended and sustained spills and leakages.
A spillage or leakage can be reclassified according to changes in the actual consequence of the
spillage or leakage, and historical figures are updated accordingly. Several reported incidents can be
closely related and therefore classified as the same spillage.
GRI-reference: GRI Standards 306-3 (2016).
Spills and leakages to the external environment
2023
2022
2021
2020
2019
Spills, leakages
1
1)
1
0
5
1
1) The 2023 incident relates to a spill of sulfuric acid at our Extrusions site in Cheltenham, UK. The case was classified as severe due to its
potential consequences, not due to actual damage to the environment.
E2.3 Environmental permit breaches
Reporting principles
Total reported severe and major permit breaches from Hydro consolidated activities.
Environmental permit breaches are reported when an incident occurs that in any way relates to an
environmental permit. This definition is in certain cases stricter than the legal definition, i.e. not all
reported incidents are related to breach of legal criteria in an environmental permit. For other cases of
non-compliance, see Note G1 to the Business conduct chapter. The reported cases are based on
monthly monitoring and reported in Synergi and/or in IMS. Permit breaches reported in Note E2.3
comprise breaches that are classified as severe or major, which mean the incidents require regulator
contact and/or have led to permit breaches with possible fine or suspension. The reported permit
breaches may be related to spillages and leakages covered in Note E2.2. 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.
Permit breaches
2023
2022
2021
2020
2019
Permit breaches
0
3
2
11
1
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Water resources
Why it matters
Hydro depends on the supply of water as an ecosystem service and
withdraws large volumes of water for beneficiation and pumping at its
Paragominas mining operations, steam-generation in the Bayer
process at the Alunorte alumina refinery, and for cooling in Hydro’s
primary aluminium, downstream, and recycling processes. There is
also a significant influence from Hydro’s hydropower operations on
the water catchments where they are located.
Hydro follows standards for measuring and reporting its water
interaction and the quality of its water discharges, to minimize the
potential for water related impacts on nature and local communities.
The main water related risks for Hydro are physical risks, such as
changes in the availability and quality of freshwater, and natural
hazards like flooding. Climate change can exacerbate the scale and
frequency of these risks further. Climate change can result in more
frequent events of heavy rainfall, exposing Hydro to water related
risks like flooding and landslides. Seasonal drought risks can cause
disruptions in the availability of water for electricity generation,
cooling, operations or shipping routes, infrastructure, and logistics
services in Hydro’s value chain.
Our approach
Hydro’s Global Procedure for Water Stewardship requires that all
operational sites, that are fully owned or operated by Hydro, evaluate
water related risks and opportunities at a catchment scale and
develop management plans and context-relevant targets to address
any material risks identified. Operational sites must also maintain a
sufficiently detailed water balance account to reflect the site’s water
risk exposure and comply with the International Council on Mining &
Metals’ (ICMM’s) requirements for water reporting. Furthermore, it
must also manage the quality of water discharges and run-off to fulfil
legal permit limits and mitigate potential negative impacts to the
environment and harm to the health and livelihoods of affected
communities, within the operation’s area of influence.
Aluminium value chain
Hydro uses the WRI Aqueduct tool to analyze Hydro’s freshwater
footprint in water stressed areas, defined as locations with high or
extremely high baseline water stress. The majority of Hydro’s water
withdrawal occurs in fjords and rivers in Norway, from abundant
water resources that are not materially impacted by Hydro’s
operations. Approximately 1 percent of Hydro’s freshwater
withdrawals are related to operational assets located in water
stressed areas, so over exploitation of natural water resource
availability is not considered material for Hydro today. With future
climate change scenarios, location specific changes to the availability
of water resources may occur. Such risks were evaluated in the
physical climate risk assessment that was updated in 2023,
described in the climate change chapter.
Regarding water related risks, priority is given to managing the
quality of discharges to the external environment and ensuring that
Hydro operates within the relevant permit limits and regulatory
frameworks. In addition, and due to seasonal heavy rainfall in
Northern Brazil, managing flood risk is also a priority for both the
mining operation and alumina refinery.
Hydropower
Hydro’s hydropower operations can affect water resources in the
catchment area of the hydropower plants. This includes both positive
impacts on flood control and water flow, and the potential negative
impacts on water based ecosystems in the catchment areas that are
described in the biodiversity and ecosystems chapter. Flood control
is an important positive impact of the regulation of water bodies for
hydropower production. Hydro monitors and simulates water levels
and adapts the production, which helps mitigating consequences of
extreme weather events, particularly flooding.
The water regulation in Norway is based on the EU Water
Framework Directive, which aims for “good ecological status or
potential” for all water resources within 2027. This is followed up by
the authorities and formalized in regional water management plans
(WMP). The WMPs sets targets for water bodies and establishes
required mitigating actions for water bodies with poor status. It is the
main contributing activity/actor that has the responsibility to
implement improvement activities. The WMPs are the main tool for
authorities to follow-up improvements in Norwegian water bodies,
and are established with inputs from different stakeholders, including
hydropower producers. New WMPs (2022-2027) were approved by
the Norwegian Government in October 2022. The WMPs will be an
important basis for authorities’ follow-up of the concessionaires in the
future.
Actions and resources related to water resources
Hydro undertakes a number of mandatory and voluntary actions to
reduce risks related to water resources, depending on the activity
and geographic location. For actions related to emissions to water,
refer to the Pollution chapter.
Aluminium value chain
Around 75 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 seawater withdrawal in Norway is
used in gas treatment centers, enabling the primary production
smelters to reduce dust, SO
2
and fluoride emissions to air.
To mitigate risks related to water availability, Hydro has implemented
actions to reduce operational dependency on surface water
withdrawals at our mining and refining operations in Brazil, by
increasing rainwater capture and storage and reuse of process
water, and water use efficiency programs in our Extrusion business
to reduce overall water withdrawal intensity.
In 2023, 28 percent of Hydro’s surface water withdrawals was
rainwater, primarily captured at Alunorte and Paragominas.
Approximately 74 percent of Paragominas’ water demand was met
by recovery of water from the beneficiation process, and 9 percent
34
65.4 million m
3
Number of sites in water stressed
areas
Performance
1.4 million m
3
Freshwater withdrawals in water
stressed areas
Water recycled or reused
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from water captured in the reservoirs, significantly reducing
dependency on water withdrawals from the Parariquara river.
Alunorte receives a large volume of water, entrained in the bauxite
product that it receives from Paragominas, through the pipeline. In
2023, Alunorte received 11.6 million m
3
of freshwater from
Paragominas. Alunorte is reusing more than 49 percent of this water
in the refining process,
Hydro is working to adapt to the physical risks of climate change
through several actions. To mitigate risks related to climate driven
flood risk, due to increased rainfall, at our alumina refinery, Hydro
invested in water management infrastructure and wastewater
treatment capacity in 2019 increasing the water storage capacity to
274,000 cubic meters and treatment capacity to 14,500 cubic meters
per hour.
Hydropower
Hydro’s Norwegian hydropower operations are covered by
concessions that includes site specific requirements for upgrades
and implementing environmental improvement actions. Hydro
continuously works with rehabilitation and restoration measures in
the waterways that are affected by its hydropower operations. From
2017 to 2022, Hydro Energy restored parts of the river Måna in
Rjukan, Norway. Due to the historical regulation of the river, it was
previously dry for most of the year. Now the river has been re-
established, with a target to maintain a good flood management and
improve the environmental conditions for anadromous fish. Hydro
also works with initiatives to reduce the risk of erosion and
sedimentation around our reservoirs, such as reinforcement of
reservoir edges with stones and gravel.
In 2023, Hydro established an overview of the water bodies that are
impacted by its hydropower operations. Some of these water bodies
have been allocated less stringent environmental objectives by the
Norwegian authorities than those defined by the EU Water
Framework Directive. Hydro will continue to develop its
understanding of how to improve the status of water bodies that are
impacted by its hydropower operations and establish an
environmental management system for each location.
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E3 Notes on Water resources
E3.1 Water interaction
Reporting principles
Total water withdrawal by country and water interaction in Hydro consolidated activities.
discharge (by quality and destination), consumption (by type) and the percentage of the operational
water demand met by water reuse and /or recycling, if applicable. Methods for calculating these values
is site-specific. Where operational sites receive their water supply from third-parties, like the municipal
water infrastructure, the quantities are based on invoiced volumes across the year. In operations that
manage their own water extraction and discharges, the data can be directly measured using flow
meters, or inferred from pumping capacity and run times. Hydro does have instances of “Other
Managed Water” (i.e., water that needs to be actively managed by does not enter the operational water
system used to supply the operational water demand), so this parameter is not included in our
consolidated reporting.
We monitor water use in the construction and development of new energy projects, including water for
construction processes and human consumption. Water consumption in Hydro Rein’s projects are not
material in volume compared to consumption in other activities. All water use in construction and
development of new energy projects is supplied by third parties.
GRI reference: GRI Standards 303-3, 303-4 and 303-5 (2018).
Total water withdrawal, by country
Million m
3
2023
2022
2021
2020
2019
Norway
212.6
218.0
216.1
224.8
218.4
Brazil
1)
63.4
62.0
67.1
54.5
58.7
United States
3.9
4.5
4.8
4.2
5.0
Rest of the world
3.8
4.2
4.7
3.9
5.2
Total water withdrawal
283.7
288.7
292.8
287.5
287.3
1) Includes 17 million m3 of rainwater that is treated and discharged. The figure varies with precipitation.
Total water interaction
Million m
3
High
quality
Low
quality
2023
2022
2021
2020
2019
Number of locations
117
112
115
119
119
Water withdrawal, by source
Surface water withdrawal
73.7
16.3
90.0
94.6
100.7
87.3
92.9
- Surface water (river, stream, lake)
48.4
16.3
64.7
68.8
72.0
66.5
70.9
- Rainwater capture
25.3
0.0
25.3
25.8
28.7
20.8
22.1
Ground water
1.2
12.2
13.4
12.4
12.4
12.1
11.2
Seawater
0.0
164.7
164.7
165.6
163.2
173.2
166.8
Third-party Supply (e.g. municipal)
3.9
11.8
15.7
16.1
16.5
14.9
16.4
Total Water withdrawal
78.8
204.9
283.7
288.7
292.8
287.5
287.3
Water discharges, by destination
Surface water (river, stream, lake)
39.1
15.5
54.6
64.7
68.9
60.9
61.4
Ground water
0.0
0.1
0.1
0.1
0.0
0.0
0.0
Seawater
9.0
186.2
195.2
198.0
196.4
205.9
198.7
Third-party Supply (e.g. municipal)
0.9
15.7
16.6
15.6
16.6
14.5
16.6
Total Water discharges
49.1
217.5
266.6
278.3
282.0
281.3
276.7
Water consumption, by type
Evaporation
0.9
2.7
3.6
3.9
1.1
0.9
1.7
Entrainment in product
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Entrainment in waste
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Process loss
0.0
0.0
0.0
0.0
0.0
0.1
0.1
Other
0.1
13.4
13.5
6.4
9.7
5.3
8.9
Total Water consumption
1.0
16.2
17.2
10.3
10.8
6.3
10.6
Water Reuse/Recycle
Reuse/recycle
65.4
0.0
65.4
64.7
67.2
53.0
54.8
Total Water Reuse/Recycle
65.4
0.0
65.4
64.7
67.2
53.0
54.8
The ESRS require companies to report the water intensity per revenue. This was 0.0001 m
3
per million
NOK in 2023.
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E3.2 Water interaction in water stressed areas
Water interaction in water-stressed areas
Million m
3
High
quality
Low
quality
2023
2022
2021
2020
2019
Number of locations
34
34
34
34
33
Water withdrawal, by source
Surface water withdrawal
0.0
0.0
0.0
0.0
0.0
0.0
0.0
- Surface water (river, stream, lake)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
- Rainwater capture
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Ground water
0.0
0.1
0.1
0.1
0.1
0.0
0.1
Seawater
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Third-party supply
0.1
1.2
1.3
1.4
1.4
1.2
1.3
Total Water withdrawal, by source
0.1
1.3
1.4
1.5
1.5
1.3
1.4
Water discharges, by destination
Surface water
0.0
0.1
0.1
0.1
0.1
0.0
0.1
Ground water
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Seawater
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Third-party supply
0.9
0.1
1.0
1.0
1.1
1.0
1.0
Total water discharges
0.9
0.2
1.0
1.1
1.1
1.0
1.0
Water consumption, by type
Evaporation
0.0
0.3
0.3
0.3
0.3
0.2
0.2
Entrainment in product
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Entrainment in waste
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Process loss
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Other
0.0
0.1
0.1
0.1
0.1
0.1
0.1
Total Water consumption, by type
0.0
0.3
0.4
0.4
0.4
0.3
0.3
Water Reuse/Recycle
Reuse/recycle
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Total Water Reuse/Recycle
0.0
0.0
0.0
0.0
0.0
0.0
0.0
E3.3 Water interaction in 50/50 joint venture Qatalum
Reporting principles
Water interaction in Qatalum is calculated based on total seawater withdrawal for cooling in the
casthouse and power plant operations at Qatalum.
Water interaction in 50/50 joint venture Qatalum
2023
2022
2021
2020
2019
Seawater withdrawal for cooling, million m3
87.9
88.8
87.8
92.6
90.1
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2. Business
3. Performance
4. Governance
5. Sustainability
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7. Appendices
Content
Biodiversity and ecosystems
Why it matters
As a global aluminium and energy company, Hydro recognizes the
negative impact that its global operations, and their associated value
chain, can have on biodiversity and ecosystem services. Hydro’s
activities are relevant to four of the main drivers of nature loss:
• Land and water use change
• Climate change
• Pollution
• Introduction of invasive, alien species
Hydro’s operations are also dependent upon ecosystem services
provided by nature, including the provision of water, regulation of
climate and protection from physical hazards, like floods and
landslides. Aluminium production, specifically, is also dependent on
the supply of energy, raw materials and other services that can
impact biodiversity and ecosystems at the local, regional and global
level. It is therefore Hydro’s responsibility to manage the risks
associated with these impacts and dependencies where they occur in
the company’s operations and business activities.
Stricter regulations related to impacts on biodiversity and ecosystems
could impose new requirements on Hydro’s operations and value
chain, which in turn could have a financial or reputational effect on
Hydro, and could impose capital investments to reduce the impact of
the company’s activities in the medium and long-term. Expectations
from customers, investors, and banks could affect Hydro’s financial
performance, cost of capital or access to finance in the medium or
long-term. The effects could be both positive and negative for Hydro,
depending on the development of stakeholders’ expectations and the
impact of Hydro’s activities relative to our peers.
Our approach
Hydro has implemented a Global Procedure for Biodiversity and
Ecosystem Services, which covers all wholly owned or operated
assets. The procedure establishes minimum requirements for
biodiversity risk management in operations, new project development,
and merger and acquisition processes. The first requirement is to
conduct an assessment to identify potential impact on biodiversity and
ecosystem services, within the operation’s area of influence, and
assess the materiality of these impacts to the operation, environment
and affected communities. This assessment shall also identify and
describe any priority biodiversity features or ecosystem services that
occur within the operation’s area of influence and consider the full
lifecycle of the operation, including closure.
Identified impacts
Hydro can directly impact upon biodiversity and ecosystem services
through its contribution to land use change resulting from its mining
operations and construction projects of new energy or industrial
projects, as well as the company’s water use, greenhouse gas
emissions, and other emissions to air and water.
Targets and ambitions
No Net Loss
1:1
of biodiversity for our bauxite mine, from a 2020
baseline
Rehabilitation of mined areas within two hydrological
cycles
Performance
3,149
100%
Total accumulated area in hectares undergoing
rehabilitation
Of the mining area released for rehabilitation in 2021 has
undergone rehabilitation
Driver of
nature loss
Relevance for Hydro
Strategic response
Land/Water-
use change
Bauxite mining and renewable
energy production are both
land-use intensive activities, and
can often impact upon natural
habitat or habitats that support
threatened and/or endemic
species
See Integrating nature in
Hydro’s strategy and
business model.
Direct
exploitation of
organisms
Hydro does not directly depend
on organisms in its economic
activities. However, Hydro does
depend on natural resources,
including water supply, that
should be managed responsibly
See the Resource use and
circular economy and Water
chapter.
Climate
Change
Aluminium production has a
high embedded carbon footprint.
Renewable energy production
can contribute to decarbonising
industries
See the Climate change
chapter.
Pollution
Aluminium production has a
number of associated non-GHG
emissions that can lead to air,
water and soil pollution if not
responsibly managed.
See the Pollution chapter.
Introduction
of invasive
species
With a global value chain
footprint, there is a risk of
invasive species introduction
through the movement of supply
chain materials and products
Global governance on risk
related to invasive species,
that requires operations to
implement effective
management to avoid the
introduction of invasive
species. If an introduction
does occur, operations must
implement an effective
management to remove it.
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5. Sustainability
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7. Appendices
Content
Aluminium value chain
The total land use footprint of Hydro’s aluminium value chain
operations is ca. 26,500 ha. This footprint intersects with nine
different biome types. The majority of Hydro’s land footprint, ca.
25,000 ha, relates to its upstream Bauxite and Alumina activities, and
is located within the “Tropical and Subtropical Moist Broadleaf
Forest” biome type.
Within Hydro’s aluminium value chain operations, therefore, the most
material impact on biodiversity through land-use change occurs at
Hydro’s bauxite mine, located in the municipality of Paragominas, in
the State of Pará, Brazil. This region is located within the Brazilian
Amazon, in an area defined as the “Arc of Deforestation,” and is
characterized by extensive deforestation for cattle ranching and soy
production.
Hydro’s mine covers an area of ca. 18,500 ha., which, prior to the
mine, was a mixture of primary and secondary forest, and agricultural
land. The remaining primary forest, although considered natural
habitat, has been historically impacted by selective logging to remove
the tallest, commercially valuable trees from the area. Despite this
history of human impacts on the area, the remaining forest is still
representative of a very specific biome in the Amazon, called the
Belem Endemism Centre (BEC), and supports a number of
threatened fauna and flora species, some of which are endemic to
the region. It is critical, then, that Hydro takes measures to minimize
and restore impacts to these biodiversity features within the mine’s
environmental management strategy.
As a preliminary evaluation of the impacts caused by other pressures
on biodiversity, Hydro used the ReCiPe2016 (Huijbregts et al. 2017)
life cycle impact assessment model to estimate the relative
contribution of GHG, SO
2
and NO
x
emissions and water withdrawals,
in Hydro’s aluminium operations, to a theoretical, overall decline in
biodiversity, expressed in the aggregated unit called species.year.
This assessment was based on data published in Hydro’s 2022
Annual Report. Based on this modelling exercise, Hydro’s GHG
emissions, after land-use change, is likely to be the second largest
pressure on biodiversity, through its contribution to climate change.
Impacts of SO
2
emissions on soil acidification is estimated to be the
next largest contributor. Water withdrawals and photochemical ozone
formation, caused by NO
x
emissions, have a very minor contribution.
Specific information about GHG emissions, other emissions to air and
interactions with water, including strategy and targets, can be found in
the Climate change, Pollution and Water chapters.
Hydropower operation and development
In general, hydropower development and operation can significantly
alter both aquatic and terrestrial ecosystems. To varying degrees, the
habitat connectivity of all adjacent landscapes and ecosystems
around hydropower operations will have been affected.
For aquatic biodiversity, threats to anadromous fish are complex and
involves impacts from other industries, such as salmon farming. The
main species impacted by hydropower in Norway are Atlantic salmon
(and its food sources), sea trout, and three-spined stickleback. For
terrestrial biodiversity, the riparian vegetation and habitats are
continuously impacted by the regulated flow regimes. In Hydro’s
regulated river basins, there is a great potential for habitat
improvements for anadromous fish species, and aquatic fauna and
flora.
Many of Hydro’s hydropower reservoirs are located within or near
national parks and other protected areas in mountainous regions in
southern Norway, including Hardangervidda and Jotunheimen. Some
of our operations are also inside habitats for wild reindeers,
hereunder in the areas Setesdal, Ryfylket, Breheimen, Jotunheimen,
Hardangervidda. Wild reindeers are considered a threatened species
(IUCN Global Red List Vulnerable), and Norway has a particular
mandate in protecting this species. Potential impact on reindeers can
be attributed to the human activity in the area of Hydro’s operations,
which are enabled by the roads that were established during
hydropower project construction. Some of these roads are still in use
to facilitate necessary maintenance and accordingly make certain
areas more accessible for tourists and other human activity. The
accessibility of the roads is normally subject to conditions in the
concessions, and the concrete conditions are defined by the
authorities. Occasional release of water from hydropower reservoirs
during winter may also impact mitigating wild reindeer.
Wind and solar energy development
Hydro Rein, Hydro’s renewable energy venture, acknowledges that
large areas of land are needed to accommodate renewable energy
infrastructure, and that in general, wind and solar farms can pose
significant pressure to biodiversity and ecosystems.
Construction of solar and wind onshore farms can cause negative
impacts on biodiversity and ecosystem services. The significance of
impacts will vary depending on the current land use and level of
Aluminium Production and Recycling
Renewable Energy
Bauxite
Mining
Alumina
Refining
Primary
Aluminium
Aluminium
Recycling
Aluminium
Extrusion
Hydropower
Wind
Impacts
Land or water-use change
Freshwater withdrawal
GHG emissions
Non-GHG air emissions
Water pollutants
Soil pollutants
Solid waste
Dependencies
Surface water
Ground water
Water flow maintenance
Climate regulation
Natural hazard protection
Inherent material impact or dependency for the sector activity.
Inherent material impact or dependency for sector, but not relevant to Hydro operations.
No inherent material impact or dependency for the sector but considered relevant for Hydro’s operations.
The table summarizes of the general nature-related impacts and dependencies, relevant for Hydro’s value chain activities. The categories are aligned with those presented in Science
Based Targets Network’s (SBTN) Materiality Screening Tool and ENOCRE’s database for sector dependencies.
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Content
degradation of the previous habitat and the geographic location, and
in some circumstances may be positive
The most important impacts include habitat conversion, degradation
and fragmentation. Both onshore wind and ground mounted solar
also create barrier effects to biodiversity movement. Specific
examples of such biodiversity pressures include:
• Collisions of birds of prey and bats with wind turbines, solar
panels and transmission lines.
• Electrocution of birds and bats on transmission lines.
• Disturbance and displacement of fauna due to noise, dust and
vibration from construction activities
• Developments of roads and infrastructure increase fauna road
kills.
Integrating nature in Hydro’s strategy and
business model
As already discussed in this chapter, Hydro’s current business model
has several impacts and dependencies on nature and the ecosystem
services it provides. Based on the materiality of these impacts and
dependencies, and the risks and opportunities that they present for
Hydro, the company has developed a nature strategy that seeks to
mitigate risks, safeguard its business, and improve its resilience to an
evolving regulatory and market framework. Hydro has developed this
strategy to also align with the 2030 objective and targets of the
Global Biodiversity Framework agreement and address the four main
drivers of nature loss most relevant to its business model. By doing
so, Hydro aims to contribute meaningfully to the global effort to
achieve a nature positive future.
The primary focus of the nature strategy is in relation to Hydro’s
direct operations and their interface with nature. Here the company
has the greatest level of control and influence on nature-related risks.
For specific actions, targets and commitments related to pollution,
climate change and waste management, please refer to the relevant
chapter within the annual report.
As announced in 2023, Hydro will be broadening the scope of this
strategy to address indirect nature related risks in its value chain and
the wider landscapes where it operates. This includes establishing an
inventory and baseline for material air pollutants in Hydro’s supply
chain (see Pollution chapter for more information), and a partnership
with civil society and leading aluminium customers to develop
positive nature outcomes for Paragominas municipality, where
Hydro’s bauxite mine is located.
Group wide targets and commitments related to
biodiversity and ecosystems
To avoid impacts to areas of especially high biodiversity value, Hydro
has committed to not develop new projects in UNESCO World
Heritage Sites and legally protected areas that are classified as IUCN
Protected Area Management Categories I-IV. Hydro will also not
develop new projects in other legally protected areas, if the project
will cause irreversible impacts to the biodiversity values for which the
legal protection has been assigned.
Hydro has also established a minimum requirement for new projects
and major changes to existing operations, that risk impacting natural
and critical habitat, to establish a biodiversity action plan that
documents a credible No Net Loss (NNL) strategy for the biodiversity
features at risk. This strategy must align with the biodiversity
mitigation hierarchy and be designed to deliver the NNL outcome
within the project’s lifetime or sooner.
Actions to mitigate and compensate for mining
impacts on biodiversity
Hydro’s only operated mine, Mineração Paragominas S.A. (MPSA,
referred to as Hydro Paragominas) is located within the municipality
of Paragominas, in the state of Pará, northern Brazil. Within the
Hydro Paragominas property are the Legal Forest Reserve (ARL)
and Permanent Preservation Area (PPA), which are two types of
conservation instruments under the Brazilian Forest Code that apply
to private landholdings. ARLs are forest areas that are set aside by
the landowner to preserve remnants of native vegetation. PPAs are
areas of vegetation that have been designated for protection
because they are considered important for the preservation of
essential ecosystem services, such as water supply or natural hazard
protection, or contain certain types of geographical features, such as
riverbanks, springs, lakes or mangroves, and must be left intact. In
Hydro Paragominas, the company has an ARL and PPAs that
contain riverbanks, as indicated in the map showing Parasomnias
site use.
Biodiversity mitigation hierarchy
Land use at Hydro Paragominas
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To access the bauxite deposits in Hydro Paragominas, which are
located 8 to 12 meters underground, the overlying vegetation, topsoil
and overburden must first be removed. Since taking ownership of the
mine in 2011, Hydro has developed a strong reforestation program
that seeks to mitigate the impact of forest removal through timebound
targets to replant and reforest the areas. Currently, Hydro works to
progressively rehabilitate mined areas available for reforestation and
replant these areas within two complete hydrological seasons,
referred to as Hydro’s 1:1 rehabilitation target.
The mining cycle is made up of several steps. When a given area of
land is to be mined, it must first be cleared of vegetation, and the
topsoil and overburden removed to access the layer of bauxite ore.
Once an area is mined, it may be set aside for temporary and/or
permanent infrastructure, like roads or storage areas, or released for
mining operations for rehabilitation. If an area is to be rehabilitated,
the overburden is returned, along with dried bauxite tailings. See the
Resource use chapter for information on tailings management.
Topsoil is then carefully distributed across the area and, where
needed, enriched with fertilizer. Finally, one of the three rehabilitation
techniques is applied.
1. Natural Regeneration: The area is allowed to recover
naturally, based on the seeds already found within the
topsoil.
2. Plantation: Seedlings, grown in Hydro’s own plant nursery,
are replanted in the area. The species composition closely
matches what was there before mining. Hydro grows over
100 different native tree species and produces up to 300,000
individual plants every year.
3. Nucleation: This is similar to the plantation method, but the
soil is first shaped into small mounds and enriched with
branches and other plant material to encourage water
retention and create habitat for small mammals and insects
that can boost recovery rates.
In addition to rehabilitating mined areas, there is also a need to
eventually rehabilitate long-term infrastructure, like the tailings
storage facilities, when no longer required to support operations. In
the case of tailings storage facilities, the tailings must first be allowed
to settle before rehabilitation can begin. Due to the clay like nature of
the tailings material, a specialized rehabilitation technique must be
developed. Hydro has ongoing research into developing this
technique, with some promising results at pilot scale.
To increase Hydro’s knowledge and secure a science based
approach to biodiversity management and forest rehabilitation, the
Biodiversity Research Consortium Brazil-Norway (BRC) was first
established in 2013 and renewed in 2023 for a further 5 years. 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 an environmental 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. Twenty-six research projects have
been funded to date, and a new research program was developed in
2023 to support the renewed BRC agreement.
Announced in 2023, Hydro will also increase its No Net Loss
ambition for biodiversity for the bauxite mine. In addition to achieving
No Net Loss for the future expansion of the mine, Hydro will also
include impacts that have occurred since 2020 for the existing mining
footprint as well. As part of delivering on this No Net Loss roadmap,
Hydro has established a partnership with two Brazilian NGOs;
Imazon and IPAM. Both organizations have a long-standing
presence within the State of Pará and are actively engaged in the
conservation and sustainable development of the Brazilian Amazon.
The partnership will explore how all parties can collaborate on
supporting Hydro’s No Net Loss roadmap for the mine and identify
further nature positive outcomes that support the sustainable
development of Paragominas municipality. This can include
additional gains for nature, climate mitigation and social value
creation and will align the agendas of all three parties within the
partnership.
For quantitative information on land use and rehabilitation in
Paragominas, see Note E4.4. 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. Read more about closure
management in the Legacy impact chapter and bauxite residue
disposal in Resource use and circular economy.
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Actions to minimize impacts in hydropower
operations
Hydro Energy works actively together with energy industry
associations, nationally and internationally, to address negative
impacts on nature for new projects and operations. The company is a
member of the International Hydropower Association (IHA), and the
association Renewables Norway’s sustainability network. The
company takes a scientific approach to managing its biodiversity
impacts through its established long-term collaboration with the
Norwegian Institute for Nature Research (NINA). NINA supports
Hydro Energy with a better understanding of its impacts and
guidance on implementing the biodiversity mitigation hierarchy in
new renewable energy projects in Norway.
In operations, the company always follow relevant concessions and
requirements from the authorities and implement mitigation
measures where this is required according to the competent
authority. Monitoring, follow-up of potential damage, as well as
identifying improvement potentials, is also a part of daily routines and
operations. In relation to renewal of concessions, rehabilitation
projects are carried out in rivers and lakes to improve fish habitats
and aesthetic qualities. The company also monitors the impact of its
operations on aquatic life in rivers connected to catchment areas.
As per end of 2023, Hydro Energy has two ongoing revisions of the
concessions. Fortun-Granfasta concession renewal is ongoing, and
all necessary studies have been carried out and filed at The
Norwegian Water Resource and Energy Directorate (NVE). Under
the concession renewal, Hydro Energy has proposed several
restoration and improvement activities targeting aquatic biodiversity.
A concession process has also been requested for Vigelandsfoss,
owned by Hydro Rein, and work has started with getting an overview
of necessary studies related to biodiversity impacts.
Hydro Energy is currently performing independent biodiversity risk
assessments for all its majority owned and operated hydropower-
and wind power portfolio in Norway. The risk assessments are
carried out by a third party, to identify main risks to priority
biodiversity features impacted by our operations. The company aims
to finalize the assessments for all of Hydro Energy’s majority owned
operations by 2025. Following the completion of these assessments,
the company plans to establish Biodiversity Action Plans to establish
mitigation activities for its operations, based on the highest risks to
biodiversity.
Wild reindeer are particularly vulnerable during spring when the
reindeers have their calves. As part of operation and project execution,
there are always mitigating activities undertaken to avoid impacts to
reindeer, such as investigating the reindeer herd position before any
activities. In 2023, the company contributed to a project to facilitate
localization of the reindeer herds by GPS marking of individuals. In
addition, the company participated in the establishment of national
action plans to reduce impacts to wild reindeer.
Actions to minimize impacts in development of
wind- and solar power
For Hydro Rein projects, the company applies the biodiversity
mitigation hierarchy as early as possible in project development to
minimize project impact upon biodiversity and ecosystems as much
as is practically and technically feasible. Hydro Rein is currently
developing biodiversity action plans to align existing projects to
international standards (IFC Performance Standards and Equator
Principles), using the projects’ fauna and flora monitoring campaigns
to enable the identification of significant residual impacts to priority
biodiversity features. Additional impacts on biodiversity caused
during the construction and operation phase of the project, are
addressed and mitigated as part of the construction activity.
To support the company’s biodiversity ambitions, the company works
with project partners and qualified specialists to perform additional
biodiversity studies, such as Collision Risk Modelling, Critical Habitat
Assessment and Ecosystem Services Assessments in project areas
and surroundings, so the company can define its project specific
biodiversity strategies.
During vegetation removal in Hydro Rein’s Brazilian projects, there is
continuous monitoring of the activities, with the support from local
fauna biologists, botanicals, and a veterinary specialist. Additionally,
all Brazilian projects in Rein’s construction portfolio have explicit
vegetation compensation commitments, compliant with local
regulation, that includes the operation of seedling nurseries and
reforestation action in project area and surroundings.
All projects have end-of life strategies for restoration of land in
compliance with national regulations as well as international
standards of No Net Loss of natural habitats.
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5. Sustainability
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Content
E4 Notes on Biodiversity and ecosystems
E4.1 Aluminium value chain footprint
Reporting principles
The aluminium value chain footprint is based on the area of the site property. The table includes
consolidated as well as non-operated joint ventures.
GRI reference: GRI Standards 304-1 (2016).
Value chain footprint per activity
Hectars
Mining
Refinery
Smelters
Recyclers
Extrusion
1)
Total
Footprint
18,753
5,625
1,458
56
639
26,530
1) Extrusion includes some recycling activities
E4.2 Assets with proximity to protected areas
Reporting principles
Table summarizing Hydro locations that are within 1 km distance of an Internationally Recognized Area
(IRA) of high biodiversity value, including legally protected areas (PA) and Key Biodiversity Areas (KBA.
The list includes consolidated as well as non-operated joint ventures.
The list includes sites that are certain to impact biodiversity and ecosystems or that are associated with
activities that could potentially impact biodiversity and ecosystems in nearby areas (marked as
“Unknown” in the table). Sites associated with business activities that have a low likelihood of potentially
impacting biodiversity or ecosystems in nearby areas, are excluded from the list.
GRI reference: GRI Standards 304-1 (2016).
Hydro operations in proximity to protected areas
Business area
Country
Loaction name
ownership
eq.
#PAs
#KBA
Impact
Hydropower
Norway
Svelgfoss
70%
20
0
Potential
Hydropower
Norway
Skafsa
26%
16
0
Potential
Hydropower
Norway
Telemark
100%
14
0
Potential
Hydropower
Norway
Fortun
100%
8
0
Potential
Hydropower
Norway
RSK
26%
7
0
Potential
Hydropower
Norway
Tyin
199%
5
0
Potential
Mining
Brazil
Paragominas
100%
0
1
Certain
Recycling (Extrusions)
Norway
Vetlanda
100%
4
0
Potential
Recycling (Extrusions)
Italy
Paglieta
100%
1
0
Potential
Recycling (Extrusions)
France
Puget
100%
1
0
Potential
Recycling (Extrusions)
Italy
Feltre
100%
1
2
Potential
Recycling (Extrusions)
USA
Saint Augustine
100%
1
0
Potential
Recycling (Extrusions)
Netherlands
Drunen
100%
1
1
Potential
Recycling (Extrusions)
Italy
Atessa Buildex
100%
1
0
Potential
Recycling (Extrusions)
Belgium
Ghlin
100%
0
1
Potential
Recycling (Metal
Markets)
Germany
St Peter
100%
2
0
Potential
Recycling (Metal
Markets)
Germany
Rackwitz Remelt
100%
1
0
Potential
Recycling (Metal
Markets)
Luxemburg
Clervaux
100%
1
0
Potential
Recycling (Metal
Markets)
Spain
Azuqueca
100%
0
1
Potential
Smelters
Canada
Alouette*
20%
2
0
Potential
Special products
Germany
Grevenbroich (High Purity)
100%
1
0
Potential
Total
87
6
* Non-controlled associate or joint venture
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E4.3 Threatened species within Hydro’s area of influence
Reporting principles
Threatened species within the influence area of Hydro’s mining activities are classified using federal
database updated by ICMBio researchers, the regional database maintained by SEMAS, and the global
IUCN Red List database. The conservation status of species registered in the reference databases can
change. As a result, the species list is updated and species can be 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 2011. Some species included in the
mining activities 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.
Other aluminium value chain activities with significant overlap with threatened and/or endemic species
ranges are summarized in the second table. This table displays all aluminium value chain locations
(excluding the Paragominas mine) that have a significant overlap with ranges of threatened and/or
endemic species based on the publicly available IUCN Global Red List database and not on direct
observations. Endemic species and threatened species are not mutually exclusive and the numbers can
therefore not be summed across the columns.
GRI reference: GRI Standards 304-2 and 304-4 (2016).
Threatened species registered within the area of Hydro's mining activities (Paragominas), 2011-2023
1)
National/Federal list
2)
Regional/State list
3)
IUCN Red list
4)
Conservation status
Fauna
Flora
Fauna
Flora
Fauna
Flora
Critically endangered
4
0
2
0
1
2
Endangered
6
5
10
1
3
6
Vulnerable
24
11
12
11
18
11
Total according to each red list classification
34
16
24
12
22
19
1) 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.
2) Federal Brazilian red list
3) Pará state red list
4) International Union for Conservation of Nature red list
As of year-end 2023, the revised accumulated number of unique threatened species observed within the
premises of Hydro’s mining activities in Paragominas, since 2011, is 73, of which 47 are fauna and 26 are
flora.
Other aluminium value chain activities with significant overlap with threatened and/or endemic
species ranges, according to the IUCN Global Red List
Business Area
Country
Location Name
# threatened
species
# endemic
species
# unique
priority species
Aluminium Metal
Brazil
Albras
0
8
8
Aluminium Metal
Norway
Årdal
1
2
2
Aluminium Metal
Norway
Høyanger
1
2
2
Aluminium Metal
Norway
Husnes
1
1
1
Aluminium Metal
Norway
Karmøy
1
1
1
Aluminium Metal
Norway
Sunndal
1
2
2
Aluminium Metal
Norway
Vigeland (High Purity)
2
3
3
Bauxite & Alumina
Brazil
Alunorte
0
8
8
Extrusions
Italy
Aielli
2
3
3
Extrusions
France
Albi
0
1
1
Extrusions
Italy
Atessa Buildex
1
2
2
Extrusions
Portugal
Avintes
2
2
2
Extrusions
UK
Bedwas Fabrication
0
1
1
Extrusions
France
Chateauroux
0
1
1
Extrusions
Poland
Chrzanow
1
1
1
Extrusions
USA
City of Industry
0
1
1
Extrusions
France
Courmelles
0
1
1
Extrusions
USA
Delhi
0
1
1
Extrusions
Italy
Feltre
0
1
1
Extrusions
Brazil
Itu
1
1
2
Extrusions
Poland
Lodz
1
1
1
Extrusions
France
Luce
0
1
1
Extrusions
Mexico
Monterrey
0
1
1
Extrusions
Spain
Navarra
0
2
2
Extrusions
Italy
Ornago
0
1
1
Extrusions
USA
Phoenix
1
5
5
Extrusions
USA
Phoenix Fabrication
1
1
2
Extrusions
USA
Portland
0
1
1
Extrusions
France
Puget
3
3
5
Extrusions
France
Puget Sur Argens
1
2
2
Extrusions
USA
Rockledge
2
2
2
Extrusions
USA
Spanish Fork
2
0
2
Extrusions
China
Suzhou
1
0
1
Extrusions
China
Taicang
1
0
1
Extrusions
USA
The Dalles Cast
1
1
2
Extrusions
UK
Tibshelf
0
1
1
Extrusions
France
Toulouse
0
1
1
Extrusions
France
Toulouse Extrusion
0
1
1
Extrusions
Poland
Trzcianka
1
1
1
Extrusions
Brazil
Utinga
9
8
12
Hydropower
Norway
Fortun Power System
1
2
2
Recycling
Spain
Azuqueca
1
1
2
Recycling
USA
Commerce
0
2
2
Recycling
UK
Deeside
1
1
1
Recycling
France
Luce (Metal Markets)
0
1
1
Windpower
Norway
Tonstad Vindpark
2
4
4
The total number of species, across operations, is indicative only and maintain double counting of species
that may be present at multiple locations.
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ecosystems
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
E4.4 Land use and rehabilitation in Paragominas
Reporting principles
The rehabilitation data are reported to ANM (the Brazilian National Mining Agency) and SEMAS (the
Secretary of State for Environment and Sustainability in the state of Pará where Paragominas is
situated), as part of the suppression permit renewal process.
The suppression, mining and rehabilitation cycles are constantly ongoing and are not synchronized.
Suppression 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
suppression 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 suppressed in 2018 may be mined late 2019 and then rehabilitated in the 2020 wet
season).
Land use - Paragominas
Hectares given per point in time
2023
2022
2021
2020
2019
Total MPSA Property
1)
18,763
18,764
18,764
18,764
18,764
- Long-term infrastructure
236
236
202
193
193
- Tailings storage facilities
2,397
2,450
2,472
2,472
2,472
- Current mining operations
2,119
1,921
1,697
1,455
1,149
- Area under ongoing rehabilitation
3,149
2,905
2,646
2,486
2,339
- Legal reserves (ARL and PPA)
2)
3,680
3,680
3,714
2,870
2,870
- Remainder of property
7,182
7,572
8,033
9,287
9,741
Total affected area within property
1)
7,902
7,512
7,017
6,607
6,153
Total pipeline easement track3
)
489
489
489
489
489
Total transmission line track
3)
1,893
1,893
1,893
1,893
1,893
Area suppressed, in reporting year
544
507
427
459
348
Area mined, in reporting year
450
411
389
306
215
Area starting rehabilitation, in reporting year
244
259
167
152
331
1) Total impacted area within property = Long-term infrastructure + TSFs + Current mining operations + Area under ongoing rehabilitation
2) ARL: Área de reserva legal; PPL: Plano pluriannual Lei No 1070/2021.
3) There is a spatial overlap between the easement tracks of the pipeline and transmission line of ca. 102 ha
Land rehabilitation of mined areas - Paragominas
Hectares given per point in time
2023
2022
2021
2020
2019
Area released from mining operation in reporting year
249.0
181.7
150.3
150.2
90.6
Area undergoing rehabilitation to date
0.0
140.6
150.3
150.2
90.6
Area remaining to complete target
249.0
41.0
0.0
0.0
0.0
% complete to-date
0%
77%
100%
100%
100%
E4.5 Overburden moved in Paragominas
Reporting principles
Total volume (in metric tons) of overburden moved in mine within consolidated operations.
GRI Reference: GRI Standards 303-4 (2018) and G4-MM3.
Overburden moved
Million metric tons
2023
2022
2021
2020
2019
Overburden moved
87
82
79
67
45
The overburden volume increase in 2023 is considered within normal annual variation and the level of
bauxite production in 2023. The increase from 2019 to 2020 is due to increased production following the
lifting of the embargo and ramp-up of the production levels. Hydro uses strip mining in Paragominas, a
technique that avoids the formation of an overburden stockpile. 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.
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Biodiversity and
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2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
E4.6 Land use in Hydro Energy
Reporting principles
The direct footprint of operation is defined as the total surface area altered/managed by the organization.
For hydropower this is the total sum of surface of regulated water bodies within concession area. For
reservoirs, this is estimated based on HRV (highest regulated water level). All hydropower operations are
in Norway. For wind and solar projects, the direct footprint is based on the vegetation suppression area
from project plans. The direct footprint estimated during project development and construction of wind-
and solar power parks may change (be reduced) in actual operation.
The total area of influence for our hydropower operation is defined as the total sum of surface area within
the given concession- or catchment area (where the water flow is used by several power producers to
produce power). This metric represents the surface area assumed to be indirectly impacted by Hydro
operations.
Impacted area in wind and solar projects is the surface area controlled or the area assumed to be
indirectly impacted by the operations. It is defined as the direct footprint area plus a 3 and 5 km circular
buffer zone.
The reported impacted area from Hydro Energy’s hydropower, wind and solar projects is based on
actual footprint of the constructions and is not based on equity share.
Hydropower footprint
Røldal-
Suldal
(RSK)
Skafsaa
Sogn:
Fortun
Sogn: Tyin
Stavanger
Telemark
(incl.
Svelgfoss)
Vigelandsfoss
Total
Ownership equity
25.6 %
33.3 %
100.0 %
100.0 %
25.6 %
100.0 %
100.0 %
Spatial footprint (ha)
Direct footprint of
operation
7,500
3,282
2,000
4,185
3,200
14,532
15
34,714
Total area of influence
91,000
36,000
52,000
42,000
41,700
342,000
217
604,917
Infrastructure
Number of dams
45
12
23
21
50
10
4
165
Tunnels (km)
78
15
69.4
49
62
34
0
307
Canals (km)
5
1
0.3
2
0
2
-
10
Transmission lines (km)
152
132
94
30
172
589
7
1168
Wind and solar projects footprint
1)
Boa Sorte,
Brazil
Mendubim,
Brazil
Stor-Skälsjön,
Sweden
Tonstad
2)
,
Norway
Ventos de São
Zacarias, Brazil
Ownership equity
30.0 %
33.3 %
25.0 %
0.0 %
49.9 %
Spatial footprint (ha)
Direct footprint of operation
2)
880
990
340
4
950
Impacted area 3k buffer zone
21,400
12,200
19,300
120
52,400
Impacted area 5k buffer zone
37,300
21,900
31,600
217
86,200
1)
Boa Sorte and Mendubim are solar power sites, while Ventos de São Zacarias, Stor-Skälsjön and Tonstad are wind power sites. These
sites are under constrction, under responsibility of Hydro Rein.
2)
Ownership equity at Tonstad is 0%, however Hydro is the operator.
© Hydro 2024
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Resource use and
circular economy
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2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
1) Including Alumetal full year
Resource use and circular economy
Why it matters
Hydro’s industrial manufacturing processes are resource intensive
and depend on non-renewable resources. Hydro’s operations also
generate significant resource outflows, including different waste
streams.
Aluminium’s inherent properties of durability, lightweight and
recyclability makes the metal well positioned for the transition to a
more circular economy. Hydro’s technology roadmap and strategic
focus on metal recycling aims to contribute to a more fair and circular
economy.
Hydro’s integrated value chain, including captive renewable energy
generation, traceable, secure material supply and integrated
recycling operations, position Hydro for commercial and financial
opportunities in the transition to a more circular and less resource
intensive economy.
Our approach
Hydro identifies and measures resource use by calculating and
managing its inflows and outflows from all operations, including
energy use and key materials needed for its industrial and
commercial processes. The company also measures and reports
waste generated from its operations by how it is treated, and whether
the waste is directed to or from disposal methods like landfilling.
Please see Note E5 for more information.
Hydro’s alumina refining and primary aluminium production depend
on resource inflows such as bauxite, lime, caustic soda, sulfuric acid
and flocculants in the alumina refining; coke and pitch for production
of carbon anodes; aluminium fluoride and metal alloys in aluminium
casting; and sulfuric acid for anodizing aluminium profiles. Hydro’s
reporting on resource inflows covers the most material raw materials
and inputs used in our industrial processes.
Hydro’s material outflows are the alumina and aluminium products,
and the waste associated with production. Hydro’s bauxite mining
operations generate tailings, and its alumina refining generates
bauxite residue, which are managed in dedicated storage facilities.
Hydro’s aluminium production processes generate waste in the form
of spent pot linings (SPL) and anode butts from the electrolysis
process, dross from metal casting and other categories of waste.
Increasing recycling of aluminium and
developing more circular solutions
Recycling is an important concept in Hydro’s 2030 strategy to
strengthen the company’s position in low-carbon aluminium.
Aluminium is light, strong, and resistant to corrosion and cracking in
itself and the inherent properties of aluminium make recycling
attractive. It can be recycled infinitely without degradation in quality
and recycling consumes 95 percent less energy than primary
aluminium production.
Hydro is a large remelter and recycler of aluminium. The company
remelts process scrap from its own production and from other
companies, and recycles post-consumer scrap from the market. The
carbon footprint of recycled pre-consumer scrap or process scrap is
dependent on its metal origin. Therefore, process scrap from
aluminium produced by coal power comes with a much higher
footprint than process scrap from hydropower based aluminium.
Post-consumer scrap, however, comes with no historical carbon
footprint, as this metal is entering its next lifecycle.
One of the main challenges related to recycling of post-consumer
scrap is to make sure that the quality of the metal is preserved in the
recycling process, and to identify the alloys and properties of the
properly sorted, before being recycled back to high quality products.
Hydro’s patented technology in scrap shredding and sorting is under
further development in making it possible to produce high-quality
products from post-consumer building and automotive scrap. The
Hydro CIRCAL product line, offering aluminium with 75 percent post-
consumer scrap, has among the lowest environmental footprints in
the aluminium industry.
Another challenge when recycling post-consumer scrap is metal loss
when the pieces are too small or thin which can lead to dross. To
address this issue, Hydro has developed a “screw extruder” to
handle thin gauge scrap such as chips, swarf, or shredded material.
The screw will compact the scrap and the larger metal pieces which
will reduce dross generation in the recycler. Hydro has ambitions to
industrialize this technology, and the focus has been to further
develop and improve parts of the equipment to be able to run
continuous compaction of different types of scrap. In 2023, Hydro
has invested in some technological upgrades in the Trondheim lab
extruder and is working systematically on erasing potential
showstoppers for industrial application of the technology.
Hydro has increased its ambition for recycling post-consumer scrap
from 520,000-670,000 tonnes in 2025 to 850,000-1,200,000 tonnes
by 2030. To reach its ambitions, Hydro is improving its processes to
combine process scrap with post-consumer scrap recycling. The
technology is being rolled out to Hydro’s remelting and recycling
plants. These investments will increase the company’s post-
consumer scrap capacity by up to 20 percent at each plant.
Targets and ambitions
850 – 1200 kt
Eliminate
<35%
post-consumer scrap recycling
capacity by 2030
landfill of all recoverable waste, by 2040
of SPL to landfill by 2030
Performance
444 kt
1
15%
33%
Recycled post-consumer scrap
of total waste directed to landfill
SPL to landfill
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Resource use and
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3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Waste management
Waste management is part of Hydro’s Global Procedure for
Environmental management. Hydro’s goal is to first minimize the
amount of waste produced in its operations, and then reuse or
recycle it. When this is not possible, the company 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. Hydro’s Tailings
Dry Backfill technology at the Paragominas mine allows tailings to
dry in shallow areas before being excavated and returned to the
mined strip from where they originated. The mined strip is then
reshaped, and rehabilitation initiated with the ambition of returning it
to original conditions. By continuously backfilling the dry tailings, the
methodology eliminates the need for new permanent tailings storage
facilities (TSFs), including the need to raise existing facilities further.
The operating license for this technology was received in December
2020, and it has now been fully adopted into operations at the mine.
Bauxite residue is a waste product of the alumina refining process.
Its disposal is challenging due to large volumes and its alkaline
nature. The residue is washed with water to lower the alkalinity and
to recover caustic soda for reuse. Hydro's state-of-the art press filter
technology allows for storage at steeper slopes. This is done by
pressing the residue through 74 plates with filtrating fabric
membranes, resulting in a more compact residue, thus reducing the
relative environmental footprint. The residual moisture content has
been reduced to 22 percent.
To address the long-term legacy of bauxite residue generation and
storage, Hydro has set a 2050 ambition to eliminate the need for new
permanent bauxite residue storage areas and a target to utilize 10
percent of bauxite residue generation from 2030.
In 2023, Hydro announced a commercial research partnership with
WAVE Aluminium to investigate the possibilities to use bauxite
residue as a resource. Using a new combination of disruptive
technologies, a bauxite residue processing plant will be built at
Alunorte, which will initially have the capacity to process 50,000
tonnes per year of bauxite residue to produce pig iron.
Hydro is also engaged in several other R&D projects connected to
bauxite residue management and utilization. This includes a
partnership with NTNU, SINTEF, Norcem/Heidelberg and Veidekke,
where we are working to develop a new type of concrete that is made
using bauxite residue to improve quality. In Brazil, Hydro cooperates
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). Hydro is also working with
other aluminium companies through the International Aluminium
Institute to solve this industry challenge.
The bauxite tailings facilities and bauxite residue deposits are
regularly inspected by Hydro and the Brazilian authorities. To ensure
best practice tailings management, the company has implemented
the Global Industry Standard on Tailings Management (GISTM) for
all its tailings facilities in the highest consequence classes. In
addition, independent third-party audits are performed twice a year,
to comply with Brazilian regulations and maintain the stability
certifications for each TSF. For more information about tailing
management and bauxite residue, please refer to the legacy impact
chapter and Hydro’s full tailings disclosure forms available at our
website.
Other waste and by-products
Hydro has set a target to eliminate landfilling of all recoverable waste
by 2040, and to landfill less than 35 percent of generated SPL by
2030. SPL, or cathode waste, is generated from the electrolysis cells
used in primary aluminium production. Qatalum has a temporary
solution for handling SPL in cooperation with local cement plants and
they are working to find a permanent solution. Albras had a
significant stock of SPL that have been progressively reduced
according to an annual plan and target and is delivered to the
cement industry in Brazil. Hydro has also initiated a research project
in collaboration with Alcoa with the aim to recycle first-cut SPL.
A large portion of the anode waste from Hydro’s smelting activities in
Norway is being used by Norcem cement plant in Brevik, Norway.
The carbon material from Hydro is being used as an alternative fuel
in the production process, which ensures safe treatment of any
hazardous components. Hydro also has an agreement with a
refractory supplier to recycle part of the bricks coming from relining
the anode baking furnace.
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 and residual dross can also be sent to
third parties for further treatment. 100 percent of the dross produced
in Hydro is recycled, either through onsite or offsite recovery
treatment processes. Hydro is also involved in a Norwegian research
project, that is evaluating the recovery of valuable surplus bath
components from aluminium electrolysis.
Partnerships for circular economy
Hydro engages a broad set of stakeholders on circular economy
issues. Hydro has strategic partnerships with many customers to
design and develop more sustainable products. The company
engages industry associations, standard setters, and local
stakeholders in countries where it has significant operations, as
well as with regional structures like the European Union, on topics
related to the environmental and social impacts of resource use.
Read more about collaboration and eco-design in our Recycling
White Paper.
Aluminium life-cycle
Aluminium production
New consumer products
Pre-consumer scrap
Post-consumer scrap
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1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
E5 Notes on Resource use and circular economy
E5.1 Resource inflows
Reporting principles
Resource inflows are the key raw materials used in the alumina refining process, the electrolysis
process for primary aluminium production, and the remelt processes for aluminium recycling in Hydro’s
consolidated activities.
Virgin material inflows are calculated based on the reported resource use in the Bauxite & Alumina,
Aluminium Metal, Recycling and Extrusions business areas. Aluminium inflows include cold metal
bought by AM and Extrusions and AM’s primary aluminium production.
Aluminium scrap inflows are reported based on the amount of pre- and post-consumer aluminium scrap
used in Recycling and Extrusions’ remelters. Hydro uses a definition for recycling agreed on by the
European Aluminium Association. The definition was implemented in Hydro in 2013 and divides
recycled scrap in two: process scrap, which includes pre-consumer scrap from downstream casthouses,
and post-consumer scrap purchased from third-parties for recycling into extrusion ingot.
GRI reference: GRI Standards 301-1 and 301-2 (2016).
Resource use per material
1 000 metric tonnes
2023
2022
2021
1)
2020
2019
Virgin material inflows
Alumina
2,866
3,122
3,346
3,048
2,954
Aluminium
3,939
3,927
4,103
3,478
3,880
Aluminium fluoride
29
28
32
32
31
Alloying metals
54
46
50
44
49
Lime
42
42
45
45
39
Sodium hydroxide
673
615
591
513
435
Sulphuric acid
16
19
22
22
21
Thickener
6
6
6
4
4
Petroleum coke
377
412
441
437
421
Pitch
79
81
93
96
90
Aluminium scrap inflows
Post-consumer scrap
2)
444
321
335
104
98
Pre-consumer scrap
1,055
963
1,018
317
340
Total aluminium scrap
1,499
1,285
1,353
421
438
1) 2021 is the first year we have consolidated recycling data from Hydro Extrusions, making the 2021 results not directly comparable to
previous years' data
2) 2023 including Alumetal full year
Lime, caustic soda (NaOH), sulfuric acid and flocculants (thickener) are primarily used in the alumina
refining process. Flocculants are also used at our Bauxite mine at Paragominas. Alumina and aluminium
fluoride are primarily used in the electrolysis process. We follow strict procedures and policies related to
storing, usage and handling of the materials. Reporting of material use is based on direct measurements
through our internal systems. The inclusion of new recycling units from the Alumetal acquisitions
contributed to increased volumes of aluminium scrap inflows compared to last year.
E5.2 Resource outflows – Products and materials
Reporting principles
Products and materials include production and sales volumes from Hydro’s consolidated activities.
Bauxite production is calculated based on produced bauxite at Hydro’s mine in Paragominas, Brazil.
Alumina production is based on production volumes at Hydro’s alumina refinety, Alunorte, in Brazil.
Primary aluminium production is calculated based on casthouse products produced in Hydro’s primary
aluminium plants. The volumes include production based on inputs from Hydro’s own primary
aluminium production, purchased cold metal and alloying metals, and aluminium scrap inflows at
casthouses in Hydro’s primary aluminium plants. These volumes are not directly comparable to the
volumes reported in the financial statements, which is based on sold volumes.
Recycling casthouse production is casthouse products produced in Hydro’s recyclers in the Metal Markets
business area and total volumes produced in Hydro’s casthouses at remelters in the Extrusions business
area. The volumes include production based on aluminium scrap inflows, as well as cold metal and
alloying metals. Recycled pre- and post-consumer scrap account for more than 80% of the reported
production.
Hydro REDUXA is calculated based on sales volumes for our low-carbon aluminium, Reduxa By using
renewable energy sources like hydro and wind power during production, Hydro has reduced the carbon
footprint per kg of aluminium to just 4.0 kg (less than a quarter of the global average).
Hydro CIRCAL is calculated based on sales volumes for our range of aluminium products made with a
minimum of 75 percent recycled, post-consumer scrap aluminium, Circal. By using recycled post-
consumer scrap, Hydro drastically reduces energy use and our CO
2
footprint in the production phase,
while still offering high quality aluminium.
Extruded products is calculated based on production of extruded and pressed products from the
extrusions business area, including pole products, welded tubes and other aluminium components, but
excluding output from casting of extrusion ingot production in the Extrusions business area.
© Hydro 2024
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Resource use and
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5. Sustainability
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Content
Production volumes
1 000 metric tons
2023
2022
2021
2020
2019
Bauxite production
10,897
11,012
10,926
8,640
7,360
Alumina production
5,626
5,586
5,894
5,142
4,118
Primary aluminium production
1,732
1,805
1,915
1,579
1,532
Hydro REDUXA
349
421
Recycling casthouse production
1,787
1,664
Hydro CIRCAL
51
50
Extruded products
1,492
1,670
1,687
1,435
1,633
E5.3 Resource outflows – Waste
Reporting principles
Waste generated by Hydro’s consolidated activities, reported by composition, and by waste category
and treatment.
Waste is measured and 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). This facilitates aggregation of data at a group level and avoids the use of multiple waste
codes for the same waste category. Operations maintain more detailed waste registries that align with
local requirements and legislation. Note that a lack of standardized methodologies for classifying,
measuring and reporting waste across jurisdictions, industries and waste handling operations is a
significant source of measurement uncertainty. Changing methodologies over time also creates
challenges in comparing consolidated waste data from one year to another.
Hazardous waste includes SPL from the electrolysis cells used in primary aluminium production. 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. A significant
amount of hazardous waste from the Extrusions business area is in the form of spent caustic resulting
from the die cleaning process, with a large proportion of this being recycled.
Waste treatment includes both onsite and offsite treatment. In many cases waste is managed by a third
party, which is 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 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 from bauxite extraction consist of mineral rejects from the extraction process mixed with water.
Bauxite residue 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
GRI reference: GRI Standards 306-3, 306-4 and 306-5 (2020).
Waste by composition
1)
1 000 metric tons
Waste diverted
from disposal
Waste directed to
disposal
2023
2022
2021
2020
2019
Anode butts
152
11
163
197
208
157
-
Dross
131
-
131
87
94
81
-
Fly & bottom ash
-
43
43
49
38
26
-
SPL
25
16
41
71
73
50
-
Spent caustic soda
24
2
26
33
34
30
-
Other waste
214
97
311
268
269
257
-
Total waste
548
168
716
705
715
601
499
1) Due to a reclassification of waste categories in 2020, we are not able to map the data before this time.
The 2023 decrease in anode butts is related to reduced primary aluminium production. The Curtailment at
Slovalco is a contributing factor to the reduction in SPL generation, in addition to improvement in process
efficiency, leading to extended pot lifetime, and fewer pots requiring relining in 2023, due to the cyclic
nature of relining. The increase in dross is related to growth in recycling following the acquisition of
Alumetal in 2023. Variations in other waste is primarily driven by changes in reporting methodologies and
more robust data capture on certain waste streams.
Waste directed to disposal, by disposal operation
1 000 metric tons
Onsite
Offsite
2023
2022
2021
2020
2019
Hazardous waste
Incineration with energy recovery
0.3
9
10
17
16
13
17
Incineration without energy recovery
-
1
1
2
2
2
0.4
Landfilled
0.0
31
31
40
46
51
55
Other disposal operation
0.0
3
3
2
2
11
59
Total Hazardous waste
0.4
44
45
61
66
77
132
Non-Hazardous waste
Incineration with energy recovery
0.0
44
44
46
41
37
17
Incineration without energy recovery
-
1
1
1
1
1
2
Landfilled
49
29
78
89
71
58
79
Other disposal operation
0.0
0.3
0.3
2
8
4
17
Total Non-Hazardous waste
49
75
123
137
121
99
115
Grand Total
49
119
168
197
187
177
247
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108
Resource use and
circular economy
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Waste diverted from disposal, by recovery operation
1 000 metric tons
Onsite
Offsite
2023
2022
2021
2020
2019
Hazardous waste
Preparation for reuse
-
0
0
-
-
-
-
Recycling
30
133
163
150
158
137
97
Other recovery operation
-
0
0
0
0
0
-
Total Hazardous waste
30
133
163
150
158
138
97
Non-Hazardous waste
Preparation for reuse
25
-
25
-
-
-
-
Recycling
131
228
359
357
370
287
157
Other recovery operation
-
0
0
0
-
-
-
Total Non-Hazardous waste
156
228
384
357
370
287
157
Grand Total
186
362
548
508
528
424
254
Variations in waste treatment and disposal categories are driven by changes in reporting methodologies
and more robust data capture on certain waste streams.
Tailings and bauxite residue
1 000 metric tons
1)
2023
2022
2021
2020
2019
Bauxite tailings
4,521
4,451
4,239
3,345
2,871
Bauxite tailings to Plateau
3,396
2,943
-
-
-
Bauxite tailings to Valley
1,125
1,509
4,239
3,345
2,871
Bauxite residue
5,571
5,303
5,384
4,827
3,871
1)
On a dry basis
The tailings at Paragominas are stored in dedicated tailings facilities, where the particles settle.
Paragominas is Hydro’s only consolidated mine. In the Plateau tailings storage facility, the tailings
undergo a drying cycle that can take approximately 30 or 60 days, during the dry and rainy season,
respectively. After the drying process, the material has a minimum of 60 percent solid content and is then
excavated and deposited back into the mined areas. This method is what Hydro refers to as “Tailings Dry
Backfill”. In 2023, 5.10 million cubic meter of dried material was reclaimed and returned to the mined
areas.
Net change in volume for tailings stored in Plateau Tailinga Storage Facility
Million m3
2023
2022
2021
Tailings stored at the start of reporting year
5.22
6.00
3.73
Tailings deposited during reporting year
3.54
3.07
3.67
Tailings excavated for tailings dry backfill during reporting year
5.10
3.84
1.40
Tailings stored at the end of reporting year
3.66
5.22
6.00
Net change in tailings volume stored during reporting year
-1.56
-0.78
2.27
E5.4 Resource outflows from 50/50 joint venture Qatalum
Reporting principles
Aluminium production is reported on 100 percent basis and calculated based on the casthouse solid
metal production at Qatalum.
Process waste includes waste ouflows from Qatalum’s aluminium production, reported on 100 percent
basis.
Resource outflows from 50/50 joint venture Qatalum
1 000 metric tonnes
2023
2022
2021
2020
2019
Aluminium production
677
666
662
653
653
Total process waste 1)
18
7
17
6
10
1) 2023 process waste reported for Qatalum is not directly comparable to previous years due to change in how this is reported in the Hydro
annual report.
© Hydro 2024
109
EU taxonomy
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Statement on EU taxonomy for sustainable economic activities
As a non-financial company Hydro reports on revenue (turnover),
capital expenditure and operating expenses that are associated with
Taxonomy-eligible and Taxonomy-aligned economic activities, in
accordance with regulation EU (2020/852) and the supplementing
delegated acts.
Identifying eligible activities
Hydro has identified five Taxonomy-eligible activities:
Manufacture of primary aluminium (CCM 3.8)
The manufacture of primary aluminium in Hydro is an eligible and
transitional activity according to the EU Taxonomy. The technical
screening criteria refer to the production of liquid aluminium through
electrolysis of alumina. However, liquid aluminium is rarely sold to
third parties due to logistical challenges.
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.
When cast into these products, alloying metals and externally
purchased cold metal is added. The amount of cold metal added
varies with market circumstances and available casthouse capacity.
Hydro has five fully owned primary aluminium production facilities in
Norway, aluminium production facilities operated by part-owned
subsidiaries in Slovakia and Brazil, and part-ownership in facilities in
Australia and Canada, all included in the scope of taxonomy. Hydro
also has a part-ownership in a primary aluminium producer in Qatar,
reported as a joint venture and therefore outside the scope of
Hydro’s reporting.
To make a substantial contribution to climate change mitigation,
primary aluminium production facilities must be based on electricity
for the electrolysis that have an average carbon intensity below 100g
CO
2
equivalents per kWh, and the electricity consumption for the
manufacturing process must not exceed 15.5 MWh per ton
Aluminium.
Manufacture of secondary aluminium (CCM 3.8)
The manufacture of secondary aluminium is an eligible and
transitional activity according to the taxonomy. Process scrap and
post-consumer scrap are purchased from third parties for recycling
into extrusion ingot. Standard ingot and alloying metal are added to
meet customer specifications. Hydro has a portfolio of stand alone
recyclers, in addition to recyclers located wall-to-wall alongside its
extrusion plants.
All manufacturing of secondary aluminium is defined by the
taxonomy as making a substantial contribution to climate change
mitigation.
Electricity generation from hydropower (CCM 4.5)
Operation of facilities that generate electricity from hydropower is an
eligible activity under the taxonomy. Hydro operates 40 hydropower
plants in Norway, with a combined production of 13.7 TWh in a
normal year. The purpose of Hydro’s hydropower assets is to secure
a stable power supply to its primary aluminium plants located in
Norway, which means the hydropower is mainly generated and used
for internal consumption.
To make a substantial contribution to climate change mitigation,
hydropower production must either be a run-of-river plant that does
not have an artificial reservoir, or be a reservoir based power plant
that either has a power density of the electricity generation above 5
W per m2, or have a life-cycle GHG emissions below 100g CO
2
equivalents per kWh.
Manufacture of hydrogen (CCM 3.10)
Manufacture of hydrogen is an eligible activity according to the EU
Taxonomy. Hydro’s Havrand has activated capital expenditure for
procurement and engineering of equipment for manufacture
hydrogen based on renewable energy sources. To make a
substantial contribution to climate change mitigation, hydrogen
production must have life-cycle GHG emissions lower than 3 tonnes
CO
2
equivalents per tonne hydrogen.
Manufacture of equipment for the production and use of
hydrogen (CCM 3.2)
Manufacture of equipment for the production and use of hydrogen is
a Taxonomy-eligible economic activity. Hydro has invested in
equipment for the use of hydrogen at its Høyanger aluminium
recycling plant.
Manufacture of equipment for production and use of hydrogen is
classified as an enabling activity that makes a substantial
contribution to climate change mitigation as long as it enables the
production or use of hydrogen or hydrogen-based synthetic fuels that
meet the criteria for CCM 3.10, described above.
End-use contribution from Hydro’s activities
A range of the products Hydro manufactures contribute to climate
change mitigation as constituent parts of technologies, infrastructure
and complex products needed in a low-carbon society. Examples are
battery casings used in the manufacture of electric vehicles, window
frames contributing to energy-efficient buildings, and aluminium
frames for solar panels. The taxonomy does not provide clear
guidance on how to define eligibility in the supply chain of taxonomy-
eligible activities. Consequently, Hydro has chosen to report for 2023
based on the taxonomy-eligible activities of primary and secondary
aluminium production, rather than on end-use of the aluminium we
produce.
Determining whether eligible activities are
aligned with the Taxonomy criteria
Manufacture of primary aluminium and manufacture of
secondary aluminium
Hydro’s primary aluminium production that is based on renewable
electricity will meet the substantial contribution criteria for
manufacture of aluminium that relate to the smelters’ energy
efficiency (below 15.5 MWh/t Al), and the carbon intensity for the
electricity used (below 100g CO2e/kWh).
All aluminium remelting activity qualifies for substantial contribution
under the taxonomy’s manufacture of secondary aluminium activity.
Operations in Europe meet the DNSH criteria for all environmental
objectives as long as they are within normal, lawful operations,
comply with emission permits to air and water, have performed
environmental impact assessments and taken necessary action
required. Hydro’s major production sites have performed a climate
risk and vulnerability assessment.
For Hydro’s operations outside of Europe it is more challenging to
determine if the DNSH criteria are met as they reference EU law.
Based on Hydro’s assessment, the most challenging criteria to meet
is the DNSH criteria for pollution prevention and control. Primary
smelters outside of Europe does not meet the BAT-AEL ranges of
the BREF standard, and remelters without a bag house filter do not
meet the criteria for pollution prevention and control. The remaining
DNSH criteria are met for the two remelters with bag houses.
Electricity generation from hydropower
In 2023, Hydro Energy estimated GHG emission from 10 reservoirs
within own operation, by using the G-res tool, carried out by an
© Hydro 2024
110
EU taxonomy
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
independent third party. For the other reservoirs within operation, the
net emissions were estimated based on up or downscaling the
results from the third party analysis. All electricity generation from
Hydro’s hydropower operations with a reservoir are below the criteria
of 100 g CO2e per kWh. In addition, Hydro Vigelandsfoss is a run-of-
river hydropower facility without an artificial reservoir, which therefore
also complies with the criteria for substantial contribution to climate
change mitigation.
Hydro’s hydropower operations have been included in Hydro’s
climate risk and vulnerability assessment and comply with the DNSH
criteria for climate change adaptation. No significant harm on water
and marine resources is assessed based on concessions and
requirements from regional water basin management plans
(“regionale vannplaner”). Hydro has carried out a systematic review
of all relevant concessions as well as requirements to improvement
activities based on appendices in the regional water management
plans for all its power locations, to check that requirements given in
concessions and appendices to regional water basin management
plans, where improvement measures are required for a water body,
are implemented. All of Hydro Energy’s new projects follow the EIA
directive regulations to do no significant harm on biodiversity and
ecosystems. For existing power production, the company does not
have any open requirements for environmental improvement
measures.
Manufacture of hydrogen
Hydro Havrand’s investments in hydrogen production will employ
electrolysis based on renewable electrical power to transform water
into oxygen and hydrogen. The life cycle GHG emissions of the
hydrogen manufactured using the technology has been estimated by
a third party study based on a combination of ISO 14067 (ISO
2018b) and the renewable energy directive (RED). For a direct
hydropower scenario, the lifecycle GHG emissions of the hydrogen
manufactured will be 22 g CO
2
equivalents/kg hydrogen. A scenario
employing the Norwegian electricity market mix, the result will be 653
g CO
2
equivalents/kg hydrogen. Both scenarios are aligned with the
criteria for significant contribution to climate change mitigation.
Hydro Havrand’s hydrogen production will be based on water and
electric power and will not consume or discharge any types of
pollution. The investments are therefore considered aligned with the
criteria for no significant harm on pollution. An Environmental Impact
Assessment (EIA) or screening has not been determined relevant by
the competent authority, since the hydrogen producing asset will be
sited on an existing industrial site with no impacts on areas other
than already modified areas. The hydrogen production will withdraw
water from the municipal waterworks during operation, and
degradation risks related to preserving water quality and avoiding
water stress are therefore very limited without impact on the
achieving good water status and good ecological potential in the
area. The Høyanger site of the hydrogen investments is included in
Hydro’s climate risk and vulnerability assessment.
Manufacture of equipment for the production and use of
hydrogen
Hydro’s investments to use hydrogen at the Høyanger recycling plant
will support the use of green hydrogen manufactured by Hydro
Havrand, in line with the alignment criteria for climate change
mitigation. The employed technologies include considerations for
durability, waste management and substances of concern and meet
the other DNSH criteria as described above.
Compliance with criteria for minimum
safeguards
Hydro’s activities are carried out in compliance with the minimum
safeguards. Please refer to the following sections for information on
Hydro’s processes and outcomes related to minimum safeguards:
• Human rights, including workers rights, consumer rights
and the rights of communities: Refer to the chapter on
Human Rights.
• Bribery and corruption: Refer to the chapter on Business
conduct.
• Taxation: Refer to Hydro’s Country-by-country report,
which also describes and links to Hydro’s global tax policy,
as well as Note 10.1 on income tax to our consolidated
financial statements.
• Fair competition: Refer to the chapter on Business
conduct, which includes information on non-compliances
and compliance training.
Note on exposure to nuclear and fossil gas related activities
Row
Nuclear energy related activities
1
The undertaking carries out, funds or has exposures to
research, development, demonstration and deployment of
innovative electricity generation facilities that produce energy
from nuclear processes with minimal waste from the fuel cycle.
No
2
The undertaking carries out, funds or has exposures to
research, development, demonstration and deployment of
innovative electricity generation facilities that produce energy
from nuclear processes with minimal waste from the fuel cycle.
No
3
The undertaking carries out, funds or has exposures to safe
operation of existing nuclear installations that produce
electricity or process heat, including for the purposes of district
heating or industrial processes such as hydrogen production
from nuclear energy, as well as their safety upgrades.
No
Row
Fossil gas related activities
4
The undertaking carries out, funds or has exposures to
construction or operation of electricity generation facilities that
produce electricity using fossil gaseous fuels.
Yes
5
The undertaking carries out, funds or has exposures to
construction, refurbishment, and operation of combined
heat/cool and power generation facilities using fossil gaseous
fuels.
No
6
The undertaking carries out, funds or has exposures to
construction, refurbishment and operation of heat generation
facilities that produce heat/cool using fossil gaseous fuels.
No
All economic activity referred to in row 4 of Template 1 (above), is
related to Hydro’s exposure to the operation of the fossil gas based
power plant at the 50/50 owned joint venture, Qatalum. All revenue,
capex and opex associated with this economic activity is classified as
taxonomy-non-eligible in the taxonomy KPIs.
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EU taxonomy
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Measuring performance
Hydro’s activities are linked to the boundaries of the reporting entity
as defined by IFRS and described in the group financial statements,
See Hydro’s consolidation principles in Note 1.1 to the Financial
statements.
In combination, the below indicators are intended by the taxonomy to
express the company’s activities that qualify as environmentally
sustainable.
Revenue (turnover)
Revenue represents Hydro’s total revenue from contracts with
customers as specified in Note 5.1 to the Financial statements. This
amount excludes income (loss) from realized and unrealized
changes in fair value of derivative instruments which is considered
not eligible activities under the taxonomy.
Revenue associated with eligible activities comprises the following
elements from external revenues:
• Revenue from sale of liquid metal
• Revenue from sale of casthouse products to customers
• The metal value of revenue from sale of extruded products
• Revenue from sale of electricity
Hydro’s eligible activities are primary aluminium production,
secondary aluminium production and production of electricity. The
output from these activities is partly sold directly to customers, partly
upgraded to more advanced products for sale to customers through
further processes not described in the taxonomy, and partly
consumed in the production process.
Revenue from sale of liquid metal is the direct output from the
production of primary metal. No adjustments are made to the prices
agreed with customers. The amount is limited as liquid metal cannot
be stored or transported over longer distances.
Revenue from the sale of casthouse products to customers is the
most directly associated commercial product resulting from
aluminium production, whether primary or secondary. The majority of
the value of a casthouse product results from its aluminium content,
while most products also contain alloying material to achieve the
intended properties for use.
The metal value of revenue from sale of extruded products is
included to reflect the similar value as for casthouse products. The
metal value is calculated the same way as for casthouse products by
8% Non-aligned
Capex
NOK billion
21.8
23% Non-aligned
Revenue
NOK billion
193.6
10% Non-aligned
Eligible
Non eligible
Opex
NOK billion
9.7
li i le activ ities
on eli i le activ ities
Primary
aluminium
production
Secondary
aluminium
production
Manufacture
of hydrogen
Manufacture of equipment
for the use of hydrogen
Renewable
energy
production
Mining and
alumina refining
Extrusion
activities
Commersial
avtivities
Eligible activities
Non-eligible activities
Performance
29% Aligned
35% Non-aligned
17% Aligned
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1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
using internal sales data associated with casthouse products sold
from Hydro’s primary aluminium plants and aluminium recyclers to
extrusion plants. These internal sales accounted for 29% of the
reported eligible revenues and 27% of aligned revenues associated
with manufacture of aluminium, in 2023. If we exclude this metal
value of revenue from sale of extruded products from Hydro’s eligible
activities, Hydro’s eligible revenues would be 38% of total revenues
(as compared to the 52% reported), and taxonomy aligned revenues
would be 22% (as compared to the 29% reported).
Alloying material varies from less than 1% up to around 11%. The
value of alloying materials is considered an integral part of the
product and its value thus included in revenue from eligible activities.
In production of casthouse products, for recycling of post-consumer
scrap, cold metal with a known purity is added to achieve the
intended properties of the casthouse product. Purchased standard
ingot is the primary source for this purpose. As this element is neither
manufacture of primary nor secondary aluminium, the revenue is
adjusted for the share of aluminium added on a tonnage basis to
exclude the value of the cold metal added. The eligible share of
revenue from sale of casthouse products only covers the sale of
aluminium produced by Hydro. Cold metal that is sourced internally is
also excluded, to avoid double counting of revenues associated with
casthouse products that are sold internally. Metal purchased for
resale, including metal produced by the joint venture Qatalum, is also
excluded.
The value of upgrading the casthouse products through such
processes as extruding profiles for customers’ application, further
fabrication of those profiles, surface treatment and other processes
that might apply, is also excluded.
Revenue from sale of electricity consists of revenue from spot sales
of daily excess production from Hydro’s power plants in Norway
above what is consumed in Hydro’s own activities. To the extent
Hydro sells power purchased from other producers, that revenue is
excluded from the eligible share together with any revenue from
power trading.
Capital expenditure
CapEx comprises additions to property, plant and equipment,
represented by the gross amount of purchase, development or lease
as specified in Note 2.1 to the Financial statements. It also includes
the gross amount of purchase or development of intangible assets as
specified in Note 2.2 Intangible assets.
Any amount of gross additions to property, plant and equipment or
intangibles resulting from business combinations is included in
CapEx under this metric. Further, any lease capitalized is included
with the addition (or reduction) required by IFRS.
Short-term leases and small asset leases as well as variable lease
payments are not recognized as fixed assets and are thus not
included in this indicator. Any goodwill recognized in a business
combination is not included in the indicator. Further, financial
investments, including capital injections in associated companies and
joint ventures, are excluded from the metric.
Additions to property, plant and equipment and to intangible assets
for eligible activities include both sustaining investments in existing
plants engaged in eligible activities and expansions or new facilities
within such activities. As a starting point, entire plants including
associated and supporting functions are included. However, several
of our aluminium smelters have on-site production of anodes, an
activity that is not described in the taxonomy. Where a smelter has
an associated anode production facility, these are excluded from
investments in a smelter. For extrusion plants, the eligible share of
CapEx covers the recycling facilities as such including furnaces and
casthouse equipment. Extrusion presses, other facilities and support
facilities mainly serving the extrusion activities are fully excluded from
eligible CapEx.
Investments in activities that are not aligned at the time of
investment, and where the activity as such will not become aligned,
is not included as an aligned investment. That includes investments
with the purpose of reducing the environmental footprint of activities,
but not covered by the taxonomy. Such investments may cover
significant reductions of CO
2
or other emissions, but are excluded
from the Taxonomy Capex indicator because the investments are not
related to Taxonomy-eligible activities.
Operating expenditure
OpEx comprises Hydro’s total expenses from the specified functions
represent a sub-set of expenses presented, primarily in the line items
Employee benefit expense and Other expenses in Hydro’s income
statements. Operating expenditure is described as a share of the
expenses included in the sub-total EBIT in the income statement.
The regulation requires us to report on expenses that represent
direct non-capitalized costs that relate to the following functions:
• research and development
• building renovation measures
• short-term lease
• maintenance and repair, and any other direct expenditures
relating to the day-to-day servicing of assets of property,
plant and equipment that are necessary to ensure the
continued and effective functioning of such assets.
Research and development costs cover projects that do not meet the
specific criteria for capitalization as intangible assets. Expenses
include such items as employee benefits, use of research facilities
including operating expenses and depreciation of property, plant and
equipment, and external services both for specific services to
projects managed internally, for outsourced projects managed by
external parties as well as financing of initiatives conducted jointly
with other companies or industry associations.
Building renovation measures are currently of limited relevance to
Hydro, as there are no significant such projects ongoing.
Short-term leases and leases for low value assets are described in
Note 2.6 to the consolidated financial statements.
Maintenance and repair expenses include Hydro’s maintenance and
repair cost not qualifying for capitalization as part of the relevant
asset. The maintenance expenses are only partly captured in Hydro’s
financial reporting, as Hydro presents its operating expenses by
nature of expenses and not by function. Repair and maintenance
activities consist of employee expenses, consumables and spare
parts, and various services. The total expenses related to these
activities have been estimated based on management reporting in
units and business areas, which is not necessarily fully consistent.
Management considers the amounts to be a reasonable expression
of such expenses in Hydro.
Hydro’s total estimated expenses from the specified functions
represent primarily the maintenance and day-to-day servicing costs
for assets used in the eligible activities. In addition, research and
development projects with the aim of improving production methods
for primary and secondary aluminium are included as eligible
activities.
Research and development activities aiming at improving mining
methods, production methods for alumina and improved application
of aluminium products, and which may have significant impact on
reducing direct and indirect negative environmental impacts, is
excluded from the metric as these processes are not currently
covered in the taxonomy.
There is no CAPEX or OPEX related to the purchase of output from
Taxonomy-aligned economic activities and to individual measures
enabling the target activities to become low-carbon or to lead to
greenhouse gas reductions as well as individual building renovation
measures included in the numerators of our reported CaPex or OpEx
KPIs.
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EU taxonomy
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Proportion of turnover from products or services associated with Taxonomy-aligned economic activities - disclosure covering year 2023 1)
Financial year N
2023
Substantial Contribution Criteria
DNSH criteria ('Does Not Significantly Harm') (h)
Economic activities (1)
Code(s) (2)
Turnover (3)
Proportion of
turnover year N (4)
Climate change
mitigation (5)
Climate change
adaptation (6)
Water (7)
Pollution (8)
Circular economy
(9)
Biodiversity and
ecosystems (10)
Climate change
mitigation (11)
Climate change
adaptation (12)
Water (13)
Pollution (14)
Circular economy
(15)
Biodiversity and
ecosystems (16)
Minimum
safeguards (17)
Proportion of
Taxonomy
aligned (A.1.)
or eligible
(A.2.)
turnover, year
N-1 (18)
Category
enabling
activity (19)
Category
transitional
activity
(20)
MNOK
%
Y; N;
N/EL
(b) (c)
Y; N;
N/EL
(b) (c)
Y; N;
N/EL
(b) (c)
Y; N;
N/EL
(b) (c)
Y; N;
N/EL
(b) (c)
Y; N;
N/EL
(b) (c)
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
%
E
T
A. TAXONOMY ELIGIBLE ACTIVITIES
A.1. Environmentally sustainable activities (Taxonomy-aligned)
Manufacture of aluminium
CCM
3.8
52,822
27%
Y
N
N/EL
N/EL
N/EL
N/EL
-
Y
Y
Y
N/A
Y
Y
27%
T
Electricity generation from hydropower
CCM
4.5
4,070
2%
Y
N
N/EL
N/EL
N/EL
N/EL
-
Y
Y
N/A
N/A
Y
Y
2%
Turnover of environmentally sustainable activities
(Taxonomy-aligned) (A.1)
56,892
29%
29%
0%
0%
0%
0%
0%
29%
Of which Enabling
0%
0%
0%
0%
0%
0%
0%
0%
E
Of which Transitional
27%
27%
27%
T
A.2 Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)
EL;
N/EL
(f)
EL;
N/EL
(f)
EL;
N/EL
(f)
EL;
N/EL
(f)
EL;
N/EL
(f)
EL;
N/EL
(f)
Manufacture of aluminium
CCM
3.8
43,847
23%
EL
N/EL
N/EL
N/EL
N/EL
N/EL
25%
Turnover of Taxonomy-eligible but not
environmentally sustainable activities (not
Taxonomy-aligned activities) (A.2)
43,847
23%
23%
0%
0%
0%
0%
0%
25%
A. Turnover of Taxonomy eligible activities
(A.1+A.2)
100,738
52%
52%
0%
0%
0%
0%
0%
55%
B. TAXONOMY-NON-ELIGIBLE ACTIVITIES
Turnover of Taxonomy-non-eligible activities
92,881
48%
TOTAL
193,619
100%
1) If the metal value of sale of extruded products that is associated with Hydro’s manufacture of aluminium is excluded, eligible revenues would be 38% of total revenues (as compared to 52% reported), and aligned revenues would be 22% (as compared to 29% reported).
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EU taxonomy
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Proportion of CapEx from products or services associated with Taxonomy-aligned economic activities - disclosure covering year 2023
Financial year N
2023
Substantial Contribution Criteria
DNSH criteria ('Does Not Significantly Harm') (h)
Economic activities (1)
Code(s) (2)
CapEx (3)
Proportion of
CapEx year N (4)
Climate change
mitigation (5)
Climate change
adaptation (6)
Water (7)
Pollution (8)
Circular economy
(9)
Biodiversity and
ecosystems (10)
Climate change
mitigation (11)
Climate change
adaptation (12)
Water (13)
Pollution (14)
Circular economy
(15)
Biodiversity and
ecosystems (16)
Minimum
safeguards (17)
Proportion of
Taxonomy
aligned (A.1.)
or eligible
(A.2.) CapEx,
year N-1 (18)
Category
enabling
activity (19)
Category
transitional
activity
(20)
MNOK
%
Y; N;
N/EL
(b) (c)
Y; N;
N/EL
(b) (c)
Y; N;
N/EL
(b) (c)
Y; N;
N/EL
(b) (c)
Y; N;
N/EL
(b) (c)
Y; N;
N/EL
(b) (c)
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
%
E
T
A. TAXONOMY ELIGIBLE ACTIVITIES
A.1. Environmentally sustainable activities (Taxonomy-aligned)
Manufacture of aluminium
CCM
3.8
7,270
33%
Y
N
N/EL
N/EL
N/EL
N/EL
-
Y
Y
Y
N/A
Y
Y
24%
T
Electricity generation from hydropower
CCM
4.5
258
1%
Y
N
N/EL
N/EL
N/EL
N/EL
-
Y
Y
N/A
N/A
Y
Y
1%
Manufacture of hydrogen
CCM
3.10
36
0%
Y
N
N/EL
N/EL
N/EL
N/EL
-
Y
Y
N/A
N/A
Y
Y
-
Manufacture of equipment for production and
use of hydrogen
CCM
3.2
38
0%
Y
N
N/EL
N/EL
N/EL
N/EL
-
Y
Y
N/A
N/A
Y
Y
-
E
CapEx of environmentally sustainable activities
(Taxonomy-aligned) (A.1)
7,601
35%
35%
0%
0%
0%
0%
0%
25%
Of which Enabling
0%
0%
0%
0%
0%
0%
0%
-
E
Of which Transitional
33%
33%
24%
T
A.2 Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)
EL;
N/EL
(f)
EL;
N/EL
(f)
EL;
N/EL
(f)
EL;
N/EL
(f)
EL;
N/EL
(f)
EL;
N/EL
(f)
Manufacture of aluminium
CCM
3.8
1,716
8%
EL
N/EL
N/EL
N/EL
N/EL
N/EL
15%
CapEx of Taxonomy-eligible but not
environmentally sustainable activities (not
Taxonomy-aligned activities) (A.2)
1,716
8%
8%
0%
0%
0%
0%
0%
15%
A. CapEx of Taxonomy eligible activities (A.1+A.2)
9,317
43%
43%
0%
0%
0%
0%
0%
40%
B. TAXONOMY-NON-ELIGIBLE ACTIVITIES
CapEx of Taxonomy-non-eligible activities
12,346
56%
TOTAL
21,783
100%
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1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Proportion of OpEx from products or services associated with Taxonomy-aligned economic activities - disclosure covering year 2023
Financial year N
2023
Substantial Contribution Criteria
DNSH criteria ('Does Not Significantly Harm') (h)
Economic activities (1)
Code(s) (2)
OpEx (3)
Proportion of OpEx
year N (4)
Climate change
mitigation (5)
Climate change
adaptation (6)
Water (7)
Pollution (8)
Circular economy
(9)
Biodiversity and
ecosystems (10)
Climate change
mitigation (11)
Climate change
adaptation (12)
Water (13)
Pollution (14)
Circular economy
(15)
Biodiversity and
ecosystems (16)
Minimum
safeguards (17)
Proportion of
Taxonomy
aligned (A.1.)
or eligible
(A.2.) OpEx,
year N-1 (18)
Category
enabling
activity (19)
Category
transitional
activity
(20)
MNOK
%
Y; N;
N/EL
(b) (c)
Y; N;
N/EL
(b) (c)
Y; N;
N/EL
(b) (c)
Y; N;
N/EL
(b) (c)
Y; N;
N/EL
(b) (c)
Y; N;
N/EL
(b) (c)
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
%
E
T
A. TAXONOMY ELIGIBLE ACTIVITIES
A.1. Environmentally sustainable activities (Taxonomy-aligned)
Manufacture of aluminium
CCM
3.8
1,501
16%
Y
N
N/EL
N/EL
N/EL
N/EL
-
Y
Y
Y
N/A
Y
Y
13%
T
Electricity generation from hydropower
CCM
4.5
140
1%
Y
N
N/EL
N/EL
N/EL
N/EL
-
Y
Y
N/A
N/A
Y
Y
2%
OpEx of environmentally sustainable activities
(Taxonomy-aligned) (A.1)
1,641
17%
17%
0%
0%
0%
0%
0%
15%
Of which Enabling
0%
0%
0%
0%
0%
0%
0%
0%
E
Of which Transitional
16%
16%
13%
T
A.2 Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)
EL;
N/EL
(f)
EL;
N/EL
(f)
EL;
N/EL
(f)
EL;
N/EL
(f)
EL;
N/EL
(f)
EL;
N/EL
(f)
Manufacture of aluminium
CCM
3.8
944
10%
EL
N/EL
N/EL
N/EL
N/EL
N/EL
10%
OpEx of Taxonomy-eligible but not
environmentally sustainable activities (not
Taxonomy-aligned activities) (A.2)
944
10%
10%
0%
0%
0%
0%
0%
10%
A. OpEx of Taxonomy eligible activities (A.1+A.2)
2,585
27%
27%
0%
0%
0%
0%
0%
25%
B. TAXONOMY-NON-ELIGIBLE ACTIVITIES
OpEx of Taxonomy-non-eligible activities
7,095
73%
TOTAL
9,680
100%
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Legacy impact
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Legacy impact
Why it matters
Operations that are conducted in compliance with regulatory
requirements and in line with best industry practices and available
technologies can still have legacies. Examples of legacies are
tailings facilities which require continuous management and
emergency preparedness, waterbodies and land areas that have
been contaminated by past operations, impacted land and vegetation
that must be restored, and legacy sites which are sites where the
operations have been terminated and measures to comply with
closure obligations are being implemented. Legacies typically require
management and funding many years after the industrial activity that
created them ceased.
Inevitably Hydro’s 118-year history of industrial activities has resulted
in environmental and social legacies. In addition, legacies have been
transferred into Hydro’s portfolio through mergers & acquisitions.
Managing legacies is an important responsibility for Hydro to protect
the environment and human health. The history of Hydro’s industry
has shown that inferior tailings facility management can in the worst-
case compromise public safety. Over the last decade there have
been several tailings facility failures in the global mining industry,
causing fatalities and severe environmental and social damage.
Managing the potential impact of Hydro’s industrial legacy on local
communities and the environment is therefore key to building trust
and to managing sustainability related risks in Hydro.
Best practice legacy management is not only important from an HSE
and sustainability perspective, but also from a financial perspective.
Tailings facility failures that have occurred elsewhere in the mining
industry have had significant financial impact on the owners and the
society.
In addition to incident risks, legacies represent a financial uncertainty
to Hydro because the timing, scope and cost of remediation and
closure obligations is unpredictable. See Note 4.1 to the financial
statement for details on uncertain assets and liabilities, including
asset retirement obligations. Environmental authorities have a large
room for judgement when it comes to enforcing the environmental
laws and it is difficult to foresee far in advance what will be required.
In general, requirements tend to increase over time as more
knowledge about the environmental issues and its impacts becomes
available, and as new or improved remediation techniques are being
developed. Going forward, the risk of extreme weather events due to
climate change is expected to be a driver for increased legacy
management requirements.
In countries with a large mining sector, there is an increasing concern
that legacies from mining operations represent a financial risk to the
society since there have been several cases where mining
companies have gone bankrupt prior to fulfilling their remediation or
closure obligations.
Our approach
Hydro is currently implementing a proactive approach to legacy
management. Through Hydro’s legacy and closure management
program, the company aims to avoid or minimize the creation of
additional legacies as well as to minimize impacts of legacies from
the past. Hydro manages risks and opportunities throughout all
phases of an asset’s life cycle, including investment
(design/construction or acquisition), operation, closure, and post-
closure.
Overall, the main risk related to legacy management is failure to
identify legacy risks and opportunities early enough, which could
result in negative HSE impacts, unnecessary cost, and reputational
damage. By implementing a proactive approach to legacy
management, Hydro aims to identify risks and opportunities at an
earlier stage to enable the development and implementation of
robust and cost-efficient solutions which are in line with stakeholder
expectations.
Failure to identify legacy impacts and costs in the design/construction
phase of a new asset or in acquisition processes could lead to future
remediation and closure costs which are disproportionate in size to
the benefit of the investment. Hydro has updated the internal
governance documents to mitigate this risk. Going forward Hydro will
continue to deploy the new guidelines throughout the company.
Management of legacies
Several decades ago, Hydro’s operations at Herøya in Norway
caused contamination of the nearby fjord, Gunneklevfjorden. In 2018,
the Norwegian Environmental Agency (NEA) ordered Hydro to
remediate the fjord by capping it with clean geologic materials. After
several years of thorough mapping, investigations, testing and
planning, the execution of the remediation project started in 2023.
The aim of the project is to isolate the environmental toxins to
prevent them from spreading and to prevent uptake in the food chain.
The project is estimated to cost around NOK 230 million and is
expected to be completed in 2024.
At Stulln in Germany, Hydro continued to execute a structured
remediation and reclamation plan in collaboration with authorities at
the former fluorspar mines dated back to the 1920s in Germany. The
project involves securing of underground mining structures and
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Legacy impact
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
reshaping and closure of tailings facilities to mitigate potential risk to
the public and to the environment. Regulatory closure was achieved
for the mine named Grube Gisela.
At the legacy bauxite residue facilities at Schwandorf in Germany,
Hydro announced that it will invest in a new water treatment plant.
The water treatment plant project started in 2023 and is expected to
be completed in 2024.
The Aluchemie anode producer, which is a joint venture company
owned by Hydro (47 percent) and Rio Tinto (53 percent), located
near Rotterdam in the Netherlands, closed its operation at the end of
2021. In 2023, the demolition of buildings and infrastructure
progressed according to the schedule. Site remediation strategy was
discussed and defined with the relevant authorities. The property is
owned by the Rotterdam Port Authority and Aluchemie is required to
return the site to the same condition existing in 1962, before the plant
was constructed. The remediation program is expected to be
completed in 2025.
At the Kurri Kurri legacy site in Australia, the construction of an
onsite, engineered containment cell continued in 2023. Historic waste
and contaminated soil that cannot be reused or recycled are being
placed in the cell. The expected completion is estimated to be early
2024. The reuse of historic spent potlining (SPL) as feedstock for
cement production was completed in 2023.
At the Ashtabula, Ohio legacy site in the U.S., several activities were
carried out throughout 2023, including further work on the closure of
settlement ponds, remediation of localized PCB impacted soil, work
on a state certified voluntary action plan and other site closure
activities. Further environmental remediation and permitting activities
continue to be assessed and alternatives evaluated.
At the Albras site in Brazil, in alignment with the Secretary of
Environment and Sustainability of the state of Pará (Semas),
additional monitoring wells were installed as part of environmental
assessment in the inactive waste disposal area ADRS, which was
deactivated in 2010. This action is part of the company's approach
for controlling and managing legacies.
Tailings management
Failure to manage tailings facilities properly could compromise the
safety of workers and the local community as well as cause
significant environmental, social, and financial damage.
Hydro’s definition of tailings facility is an asset that is designed and
managed to contain the tailings produced by the mining process or
the bauxite residue produced by the alumina refining process.
Tailings facilities refer to facilities that contain tailings or bauxite
residue in open pit mines or on the surface. Tailings facilities are
higher than 2.5 meters measured from the elevation of the crest to
the elevation of the toe of the structure or have a combined water
and solids volume more than 30,000 m3. Hydro’s methodology for
tailings dry-back fill in Paragominas is not defined as tailings
facilities. Hydro owns four tailings facilities at Paragominas and
Alunorte in the state of Pará in Brazil and six smaller tailings facilities
at legacy sites in Schwandorf and Stulln in Germany.
Hydro’s objective for tailings management is zero failures that may
lead to loss of life or life-changing injuries, material negative
socioeconomic impact or material environmental damage throughout
the tailings facility lifecycle, from design to post closure.
Hydro commits to best practice tailings management to protect the
health and safety of people, host communities and the environment.
Hydro plans, designs, constructs, operates, maintains, closes, and
relinquishes its tailings facilities in accordance with regulatory
compliance requirements, internal company standards, the
International Council on Mining and Metal (ICMM) framework, and
the Aluminium Stewardship Initiative (ASI) practices. Furthermore,
Hydro is committed to implement the Global Industry Standard on
Tailings Management (GISTM), requiring that tailings facilities
operated by Hydro with Extreme or Very high potential
consequences conform to the standard by August 5, 2023, while
other tailings facilities operated by Hydro not in a state of safe
closure, will conform to the standard by August 5, 2025
1)
. 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.
In August 2023, Hydro declared that all of its tailings facilities with
Very high potential consequences in the event of a failure are in
conformance with GISTM in line with the company’s commitment to
implement the standard. See textbox for more information. This
applies to two tailings facilities in Alunorte and one in Paragominas.
Hydro does not have any tailings facilities in the Extreme category.
As part of the GISTM implementation, the following key milestones
were accomplished in 2023:
• A new Tailings Management Policy, approved by the Board of
Directors, was published
• Hydro’s governance structure for tailings management was
defined. The governance structure starts at Hydro’s Board of
Directors
• Independent reviews by the Independent Tailings Review Board
(ITRB) were carried out for tailings facilities at Alunorte and
Paragominas.
• Disclosure in line with GISTM requirement 15.1 was published in
August 2023. The disclosure report, which was updated in
January 2024, can be found on Hydro.com.
Implementation of best available technologies and methods is key to
reduce impacts and risks further. At Alunorte, Hydro has invested in
press filters and are implementing progressive closure (as opposed
to end-of-life closure) to: i) minimize possible negative impacts on the
environment, such as dust; ii) demonstrate the closure method early;
and iii) avoid that the entire closure burden is shifted to the end of
operations. In Paragominas Hydro is implementing the dry backfilling
method. The company also has a comprehensive R&D program
aiming to transform the tailings materials into by-products such as
materials for the construction sector. See also the chapter on
Resource use and circular economy, which describes tailings and
bauxite residue in more detail, including how we are pursuing
reduction, reuse, and remediation technologies and methodologies to
minimize impacts from tailings.
ICMM and GISTM
In accordance with ICMM’s Validation Guidance, the conformance
of each tailings facility has been assessed and confirmed through
a self-assessment in line with the GISTM Conformance Protocol.
The Conformance Protocol maps to GISTM’s 77 requirements
using 219 clear and concise criteria, allowing conformance with
GISTM to be robustly assessed. For each of the 77 applicable
requirements, Hydro has verified that the relevant systems and/or
practices related to the requirement have been implemented and
there is sufficient evidence to demonstrate that the requirement is
being met. Hydro recognizes that implementing and maintaining
the GISTM is an ongoing process of continuous improvements,
integrated thinking, action, collaboration, and learning.
On that note, GISTM requirements 1.3; 3.1; 5.8; 6.1; 6.2; 9,3;
13.4; 14.2; 14.3; 14.4; 14.5; 15.2, and 15.3 represent continuous
processes. Therefore, their implementation is supported and
evidenced by Plan-Do-Check-Act systems and processes and will
be followed up as appropriate. On July 20, 2023, Hydro’s
President and CEO, Hilde Merete Aasheim, who holds the role as
Accountable Executive under GISTM, signed off on the self-
assessment confirming that all tailings facilities with a “very high”
consequence classification are in conformance with all appliable
GISTM requirements. In 2024, a third-party validation will be
undertaken for these tailings facilities to confirm the assertions
made in the self-assessments.
1) Consequence classifications are not ratings of the condition of a facility or the likelihood of failure; instead, they rate the potential consequence if they were to fail.
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Human rights
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Human rights
Why it matters
Respecting and promoting human rights is at the heart of Hydro’s just
transition framework, which sets out how Hydro as a company shall
contribute to a future that is not only greener, but also socially just.
While Hydro’s ambition of improving lives and livelihoods wherever it
operates goes beyond respecting human rights, the positive impact
Hydro seeks to achieve can only be created when the rights of
people affected by the company’s operations and value chain are
respected. As a global aluminium and energy company with mining
interests, Hydro must consider its impact on society and on people’s
rights, spanning from construction to closure, in the company’s own
operations, the local communities it is part of, and in its value chain.
Our approach
Hydro’s operations have a positive impact on many people. Hydro’s
own employees and workers in its value chain get access to decent
jobs, income and develop their skills and competence. Hydro
contributes with taxes in the communities where it operates that the
countries and people in the communities where it operates benefit
from.
As part of Hydro’s human rights due diligence process, the company
identifies salient human rights risks, which it is the most at risk of
impacting through its business activities. The salient human rights
risks have been identified through Hydro’s annual human rights risk
assessment process and additional processes for new projects and
investments, drawing on internal and third-party human rights
assessments, internal and external expertise, and other relevant
sources. They have been prioritized based on the highest severity
and likelihood of a potential adverse impact on people.
Hydro maps salient human rights risks across the countries where it
operates or that are part of its value chain. Based on a review of the
type of operations or sourcing Hydro conducts in the country, the
company has prioritized the mapping and follow-up of human rights
risks in the following countries in 2023: Brazil, China, the Nordics,
Qatar.
Hydro’s human rights commitment and management is embedded at
the heart of its Just Transition framework. Please see the chapter
Affected Communities for a more detailed description of the
framework.
Hydro’s approach to human rights is based on key frameworks that
define human rights principles for businesses:
• UN Guiding Principles on Business and Human Rights
• OECD Guidelines for Multinational Enterprises on Responsible
Business Conduct
• OECD Due Diligence Guidance for Responsible Business
Conduct
• The UN Global Compact’s Ten Principles
Human rights commitment
Hydro’s commitment to respecting human rights is set out in the
company’s Human Rights Policy. Hydro respects the human rights of
all individuals and groups that may be affected by its operations. This
includes, but is not limited to, employees, contractors, suppliers,
employees working for its suppliers (including contracted and agency
workers and sub-suppliers), agencies, partners, communities,
children and future generations, and those affected by the use and
disposal of its products. As an employer, owner and purchaser, an
important way to respect human rights is to secure decent working
conditions in the company’s organization, in minority-owned
companies and with suppliers. Hydro’s commitment to respect
human rights is guided by internationally recognized human rights
and labor standards, including those contained in the International
Bill of Human Rights and the ILO Declaration on Fundamental
Principles and Rights at Work (Core Labor Standards). Hydro is a
member of the International Council on Mining and Metals (ICMM)
and are committed to following their principles and position
statements.
Risk based approach
In line with the UN Guiding Principles on Business and Human Rights, the OECD Guidelines for Multinational Enterprises on Responsible
Business Conduct and the OECD Due Diligence Guidance for Responsible Business Conduct, we prioritize due diligence according to the
following framework:
Factors for prioritization
For own operations and joint ventures this translates to
For suppliers and contractors this translates to
1)
Size of business
Number of employees and/or cornerstone employer
Expenditure
Nature of operations
Footprint on environment, including water resources,
emissions, etc.
Suppliers’ industry. See graph on supplier due dilligence
Context of operation
Risks of human rights violations in country of operation (see
Human rights country risk map)
Risks of human rights violations in country of supplier (see
Human rights country risk map)
Severity and probability of
impact
Hydro’s prioritized human rights areas
Supplier risk levels
1) Read more about responsible supply chain and supplier risk levels in Workers in the value chain chapter.
© Hydro 2024
119
Human rights
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Hydro’s human rights management
Hydro’s human rights management is a four-step approach based on
the UN Guiding Principles on Business and Human Rights and the
OECD Guidelines for Multinational Enterprises on Responsible
Business Conduct.
1. Policy commitment and governance
Hydro’s Human Rights Policy outlines the company’s commitment to
respect and promote 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 Hydro.com.
The Human Rights Policy is reviewed biannually, in consultation with
internal and external stakeholders, including expert human rights
organizations. The Human Rights Policy was revised in 2023. The
revision did not include major changes, but slight adjustments to
Hydro’s salient risks, including merging risks to health and safety and
integrating privacy risks with other salient risks. Hydro has also
emphasized its responsibility to conduct human rights due diligence
in the value chain. The review process also included discussions with
external human rights organizations.
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.
For companies where Hydro holds less than 100 percent of the
voting rights, Hydro’s Code of Governance sets out that Hydro
representatives in the boards of directors shall endeavor to
implement the ambitions and principles in Hydro’s global governance
documents, including our governance documents on human rights.
Hydro’s Human Rights Forum (HuRF) has been established to align
and regularly share knowledge on human rights topics across the
company. HuRF is comprised of representatives from each business
area and representatives from Compliance, Legal, Sustainability,
Procurement, HR, and ESG Reporting. For more information on
policy and governance across our business and with our suppliers,
see Hydro’s Human Rights Policy.
2. Rightsholder and stakeholder engagement
Hydro engages and collaborates with stakeholders internally and
externally to understand and evaluate the effectiveness of the
company’s human rights management. This includes NGOs, unions,
local associations, authorities, and other relevant stakeholders.
Hydro has had a partnership with Amnesty International Norway
since 2002. The partnership is based on human rights education and
dialogue meetings on relevant human rights topics. Hydro is also an
active member of the Nordic Business Network for Human Rights
coordinated by the Danish Institute for Human Rights. Hydro also
engages actively in working groups on human rights coordinated by
ASI, ICMM and IAI. For more information, see the section on Hydro’s
partnerships in the Business conduct chapter.
Engagement with stakeholders who may be affected by Hydro’s
activities are a particularly important part of Hydro’s human rights
work. The type of dialogue conducted with affected stakeholders
depends on the human rights risks identified and the needs and
expectations of those potentially affected. Hydro is committed to the
principles of non-discrimination and to respecting the rights of
vulnerable individuals and groups.
Employee representatives are involved in dialogue at an early stage
in all major processes affecting employees. Hydro has a tradition for
open and successful collaboration between management and
unions. For more information, see the section on collaborating with
unions and employee representatives in the Own workforce chapter.
Where relevant, and in line with Hydro’s risk-based approach, Hydro
has regular dialogue with communities, and more frequent and
structured dialogue in communities with higher risk of facing adverse
human rights impacts. Hydro develops and plans community
dialogues in collaboration with affected communities, based on their
needs and expectations. Community members close to Hydro’s sites
in Brazil and at several other major sites are invited to visit plants on
a regular basis. Please see the General information chapter for more
information about Hydro’s stakeholder dialogues.
3. Grievance mechanisms and remediation
Grievance, or complaint, mechanisms are important tools to inform
Hydro of its impact on individuals and groups. Grievances may be of
any kind, including social and environmental issues.
To support affected stakeholders or others in raising concerns
related to Hydro’s operations, the company establish or facilitate
access to grievance mechanisms. Hydro has several grievance
mechanisms depending on stakeholder groups. The whistle-blower
channel AlertLine can be publicly accessed through Hydro.com to
report concerns involving illegal, unethical, or unwanted behavior.
See the Business conduct chapter for more information. Grievance
mechanisms for community members have different approaches
depending on local needs. At many of Hydro’s sites, the company
collects information and complaints through community dialogue. In
Brazil, Hydro uses several channels, including Canal Direto (toll-free
phone number and email) and dedicated, trained field workers.
Please see Note G1.1 on Reported and confirmed cases of non-
compliance for more information.
In situations where Hydro identifies adverse human rights impact that
the company has caused or contributed to, Hydro works to cooperate
in, promote access to and/or provide remediation.
4. Ongoing human rights due diligence: Identifying, assessing,
acting on, monitoring, and communicating risks and impacts
Hydro’s human rights due diligence is integrated in relevant business
processes, including the enterprise risk management (ERM) process.
Representatives from all Business Areas and consolidated entities in
Hydro are involved in an annual human rights risk assessment
process where we assess potential adverse human rights risks.
If the annual human rights risk assessment identifies new risks,
mitigating action plans are developed and included in the business
plans in the business areas where relevant. If there is an identified
need to adjust an existing corrective action plan, the business area
updates this accordingly. Business plans are monitored, followed up
and evaluated throughout the year in regular board meetings.
The annual human rights risk assessment is conducted in Q1 each
year as part of the ERM process. Hydro also has a review of the risks
and processes in Q3 to identify any major changes. Further, if
significant changes occur throughout the year, for instance Hydro
Review and monitor
Identif y
risks
Ev aluate
mitigation
plans
Analy se
strategic
objectiv es
Analy se
risks
Act on
adverse
impacts
Monitor and
track
Communicate
1.Policy commitment
and governance
Identify
adverse
impacts
2.Stakeholder engagement
Assess
adverse
impacts
3. Grievance mechanism
and remediation
4. Ongoing due diligence
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commencing operations in a new high-risk country or region, the
company will identify and assess any new risks that may result.
In line with Hydro’s risk-based approach, the company conducts
more thorough human rights impact assessments or reviews with
mitigating action plans where there is a higher risk of adverse
impacts.
Before new projects, major developments or large expansions are
undertaken, Hydro conducts risk-based environmental and social
impact assessments (ESIAs) when relevant, which include evaluating
the risk of adverse human rights impacts. Hydro is guided by The IFC
Performance Standards on Environmental and Social Sustainability
in doing so.
Modern Slavery Statement and statement under
the Norwegian Transparency Act
The chapters on Human rights, Own workforce, Workers in the value
chain and Affected communities have been developed to comply with
the legal requirements as stated in the Norwegian Transparency Act
2021, the UK Modern Slavery Act 2015, and the Australia Modern
Slavery Act 2018. In addition, Hydro’s Human Rights Policy and
further information about the company’s human rights management
approach is available on hydro.com/principles. The Code of Conduct
sets out Hydro’s position on human rights in all operations, including
the company’s opposition to all forms of modern slavery.
The reporting requirements apply to Hydro as an enterprise resident
in Norway with total assets of more than NOK 35 million combined
with, on average, more than 50 full time employees, a supplier of
goods with a total turnover of GBP 36 million or more in the UK, and
more than AUD 100 million in Australia.
The sections are prepared based on information collected from all
consolidated entities in Hydro. Entities that are not fully owned by,
but are controlled by Hydro, can have different policies. We expect
that their relevant policies are aligned with the ones of Hydro.
The Modern Slavery Transparency Statement is approved and
signed by the Board of Directors of the parent company Norsk Hydro
ASA in the responsibility statements.
For a full overview of Hydro’s operations, business activities,
organization structure and supply chain, see the Our business
chapter.
Human rights training and capacity building
Internal capacity building on human rights, such as through training and tools, is important to ensure the effectiveness of our human rights
management system. Human rights responsibilities are part of Hydro’s Code of Conduct, which is translated into 19 languages. Code of
Conduct trainings are provided to all employees. In addition, more specific training on relevant human rights topics is provided to relevant
functions and locations. E-learning on Hydro’s social responsibility, including human rights, is available to all employees. In 2023, the
Business Areas organized trainings on human rights relevant topics for their respective areas. See Note G1.3 on Compliance Training and
the Affected communities chapter for more information.
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Salient human rights risks
As part of Hydro’s human rights due diligence process, the company
identifies salient human rights risks, which it is the most at risk of
impacting through its business activities. The salient human rights
risks have been identified through Hydro’s annual human rights risk
assessment process and additional processes for new projects and
investments, drawing on internal and third-party human rights
assessments, internal and external expertise, and other relevant
sources. They have been prioritized based on the highest severity
and likelihood of a potential adverse impact on people.
Hydro uses human rights risk levels per country in the countries
where Hydro is present to help guide its human rights management.
The risk levels are based on a range of independent human rights
sources, such as Global Slavery Index, Heidelberg Conflict
Barometer and Human Development Index. The following countries
where Hydro has operations or joint ventures were in 2023
considered to have a high inherent human rights risk: Bahrain, Brazil,
China, India, Mexico, Qatar, Turkey and Saudi Arabia. Hydro uses a
more extensive list of country human rights risk levels for its suppliers
and for other relevant processes, including investment decisions.
The nature of Hydro’s operations in each high-risk country
determines whether it is included in the list of prioritized countries for
2023. In addition, some countries that are not classified as high-risk
are included among Hydro’s prioritized countries in 2023 due to the
companies assessment of human rights risks relevant to Hydro’s
operations. In 2023, Hydro has prioritized the mapping and follow-up
of human rights risks in the following countries: Brazil, China, the
Nordics, Qatar.
Please see more information about salient human rights risks and
impact related to Hydro’s own employees in the Own Workforce
chapter. For more information about salient human rights risks and
impact to workers in Hydro’s value chain, please see the Workers in
the value chain chapter. Please see the Affected Communities
chapter for more information about salient human rights risks and
impact in the communities in which we operate.
Salient human rights risk
Hydro employees
Employees working for
our suppliers
People in our local
communities
Forced labor, modern slavery and child labor
abuse
⚫
Discrimination and harassment
⚫
⚫
⚫
Freedom of association and collective bargaining
⚫
Decent working conditions
⚫
Health and safety
⚫
⚫
⚫
Access to information and participation in
dialogue
⚫
⚫
Land rights and resettlement
⚫
Vulnerable individuals and groups
⚫
⚫
⚫
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Own workforce – our people and work environment
Why it matters
Hydro has a responsibility to provide a safe and inclusive work
environment for all workers, including own employees, temporary
employees, agency workers and contractors. Hydro values human
life above all other considerations and will not compromise the health
and safety of those working for the company or affected by its
activities. Hydro has a responsibility to provide a safe work
environment and believes that this also promotes efficiency and
lower operating costs.
Hydro depends on a safe, healthy, competent and motivated
workforce to deliver quality and efficiency in all operations.
Safeguarding the rights, health and safety of Hydro’s workforce and
building a culture for learning and equal treatment and opportunities
will help attract and develop a talented workforce and help the
company deliver better results. Hydro’s organizational culture and
strategy for talent acquisition, learning and competence
development, leadership and succession, and diversity and inclusion
help the company deliver on its strategic priorities.
In parallel, an adverse psychosocial work environment or accidents
that affect the health and safety of Hydro’s workforce can result in
disruption of business operations, legal proceedings, fines or other
financial consequences, negative reputation and loss of trust in the
short, medium and long-term. Failure to comply with applicable
regulations for working conditions, equal treatment and/or reporting
on workforce related issues could also result in fines and negative
reputation.
Hydro has a positive impact on employees through the provision of
secure employment, training and career development, adequate
wages and social protection in an inclusive work environment.
Potential negative impacts are primarily linked to unintended
incidents of discrimination or harassment or accidents resulting in
injury, illness or fatal consequences of an employee or contractor.
As a global aluminium and renewable energy company with
operations in more than 40 countries, Hydro’s workers are exposed
to a variety of safety risks that, if not controlled, could result in
injuries or fatalities. The inherent risks of negative impacts on health
and safety are higher when performing non-routine work such as
building and construction projects, and in work related to energy,
work at height, mobile equipment, overhead cranes, confined space,
molten metal and projects. Mining and engineering-related
disciplines are typically associated with lower rates of women
participation in the workforce, which can make it challenging to meet
Hydro’s diversity targets.
Our approach
Hydro identifies and monitors its impact on own employees and
contractors according to the same standards and Code of Conduct.
Health and safety standards are aligned with ISO standards, and
incidents and high-risk events are subject to root cause reviews to
ensure learning across all operations. Employees are engaged on
health and safety issues through frequent health and safety network
meetings in business areas, and engagement on diversity and
inclusion issues is primarily done through employee reviews and the
range of initiatives sponsored by members of the corporate
management board. Incidents involving discrimination or harassment
are identified through different reporting channels and Hydro’s Alert
Line. Impacts on diversity, inclusion and belonging are identified and
monitored through our employee engagement survey.
Occupational health and safety
Hydro shall be a leading company in its 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 the company. The CEO HSE
Committee is the strategic decision making committee for all main
HSE related matters for the Hydro group. The committee is led by the
President & CEO and consists of the members of the Corporate
Management Board and the head of global HSE.
Hydro’s health and safety activities are governed by the company’s
HSE policy and the Global HSE Directive. Hydro’s ambition is to
provide safe and healthy workplaces, promote health and wellbeing,
and prevent work-related injuries and ill-health. Hydro drives 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 our sites.
Hydro works continuously to avoid damage to property and loss of
production. Hydro has developed a comprehensive health and safety
management system and the company’s manufacturing sites are
certified to internationally recognized health and safety standards.
Hydro embraces digital tools where possible and has developed an
advanced incident management system, self-assessment tools, risk
management processes, e-learning training modules, etc., all easily
accessible to employees. In addition, Hydro has strengthened its
Targets and ambitions
0
25%
78%
fatalities or life-changing injuries
women overall and
in leadership positions
score on the Inclusion Index by 2025
Performance
1 / 1
23% / 20%
74%
fatality
1)
/ life-changing injury
in consolidated operations
women overall / in leadership positions
score on the Inclusion Index
1) One contractor fatality in consolidated operations. The incident is still under investigation for work relatedness and root causes. In addition, there was one fatal accident involving a contractor at
our 50/50 joint venture, Qatalum in Qatar, which is not included in statistics for consolidated operations.
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behavioral tools using human performance techniques and the
consistent use of peer-to-peer job observations.
The number of total recordable injuries rate in 2023 was 2.4 per
million hours worked, the same as in 2022. An improvement is seen
in the amount of injuries occurred to own employees, but an increase
is seen in accidents to contractors. The majority of injuries were
relatively minor. However, there was one fatality involving a
contractor at Hydro’s Alumina refinery Alunorte. The incident is still
under investigation to determine root causes and work relatedness.
In addition, there was one fatal accident involving a contractor at
Hydro’s joint venture, Qatalum in Qatar. There was also one life-
changing injury in 2023, when an employee had all toes amputated
after a load on a mobile trolley fell over, crushing the foot.
The deployment of fatality prevention procedures and associated life-
saving rules and behaviors continued in 2023, which contributed to a
continued reduction in the number and rates of high-risk incidents
with the potential to be fatal or life changing. Key initiatives include a
self-assessment process for critical programs, monthly deep-dive
incident data analyses to support continuous improvement through
root cause and use identification, and defining actions to prevent
incidents from recurring. Quarterly health, safety, security and
environment network meetings are used to connect specialists from
all business areas to discuss findings and actions taken from high-
risk incidents, and to share best practice and innovative solutions.
Hydro also increased its emphasis on installing engineering controls
to prevent High Risk Incidents from occurring.
Hydro’s approach to continual improvement of physical and chemical
occupational health is based on work environment risk assessments
(WERA) and implementation of risk-reduction measures followed up
through an associated key performance indicator. WERA provides a
systematic approach for evaluating the exposure of similar exposure
groups, identifying the most exposed work operations and measures
can be implemented before ill-health occurs. The Group online HSE
tool, IMS provides a WERA module to facilitate the work process and
ensure transparency.
The focus on mental health and wellbeing has continued with
numerous initiatives during the year to raise awareness, including
mental health webinars, quarterly wellbeing topics addressing stress
management, sleep hygiene, healthy eating and physical activity. In
addition, two pilot projects were run in two regions together with
Human Resources and HSE managers to increase the competence
related to stress and wellbeing. To ensure a systematic approach to
the psychosocial work environment, Hydro has established a new
psychosocial risk indicator (PRI) as part of its employee engagement
survey, Hydro Monitor. A process for follow-up of the PRI has been
developed, including guidelines and tools.
Our people strategy
Hydro needs competence, capabilities and organizational culture to
deliver on its strategy. Hydro’s people strategy sets the global
strategic priorities for learning, competence development and talent
acquisition, leadership and succession, and diversity, inclusion and
belonging (DIB). The priorities are supported by targets and activities
based on the specific needs and challenges of our business areas.
Hydro believes its value proposition, purpose, and growth
opportunities are important to attract and retain talent in a
challenging labor market. In 2023, Hydro deployed new assessment
tools for personality and ability to ensure the right candidates are
employed. Hydro invests in skills and development in line with both
business and individual needs to deliver on its business strategy and
to be an attractive employer. Hydro’s goal is to have a culture of
continuous learning to ensure that the current and future workforce is
prepared to deliver on its growth agenda and improve its business.
Learning and competence development is offered through a
combination of on-the-job training, social initiatives like networking,
mentoring and peer-to-peer learning, and formal learning initiatives.
Hydro’s learning platform supports learning and competence
development by providing content from learning providers and well-
known universities. All employees have a yearly dialogue with their
leader where goals, development needs and activities are discussed
and documented. See Note S1.5 for metrics related to completed
training activities in 2023.
Leadership is a prioritized organizational lever for Hydro. Hydro’s
ambition has been to develop a leadership framework of
competencies based on valid research, but also reflecting what is
unique to Hydro and therefore what the company needs from its
leaders to deliver its business strategy and live its values. The
framework serves as a fundament for Hydro’s leadership processes,
development programs and tools. In 2023, Hydro has continued to
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deploy the leadership framework through its people processes.
Selection, development and succession of leaders is supported by
Hydro’s leadership criteria.
Leader development and succession planning for critical positions
are among the strategic people priorities towards 2025. To have a
solid pipeline of leaders with the required breadth of experience,
Hydro aims to rotate leaders so that they gain knowledge from
different parts of the organization and provide programs that support
the development needs of leaders and specialists. Through the
succession and talent processes, Hydro works with the leadership
and specialist pipeline to identify and develop its future leaders.
Hydro believes Diversity, Inclusion and Belonging (DIB) are key
enablers for the people strategy. Hydro’s DIB processes are centered
around three pillars:
• Diversity: Seeking multiple perspectives and competencies
when solving tasks and meeting customer needs. This includes
increasing relevant diversity across seniority levels, including
improved gender balance.
• Equity: Promoting equitable opportunities for everyone to thrive,
contribute and succeed, adjusting for the fact that different
individuals have different starting points.
• Inclusion: Fostering inclusive leadership and an inclusive culture
for all employees to contribute with their full potential.
Hydro aims to increase value creation and foster a culture of
belonging in a high-performing and sustainable work environment
based on inclusion of the company’s differences. Hydro’s DIB
strategy promotes an inclusive culture, inclusive leadership, equity
for underrepresented groups, improvements in team diversity,
increased gender balance, and ensures a diverse talent pool.
Business areas and corporate staff functions have developed
roadmaps to ensure targeted actions are implemented across all
areas. To be more data driven, Hydro has developed reports,
dashboards and analytics for the business areas to track progress
and improvements in the business areas’ employee engagement,
turnover, gender balance, and diversity and inclusion training
metrics.
Hydro Monitor is the company’s global employee engagement
survey, sent to all permanent employees every other year. It is
complimented with shorter pulse surveys on different levels in the
organization on a more frequent basis. The purpose of the survey is
to measure key drivers of engagement within Hydro by giving
employees a method to have their voices heard and provide valuable
feedback. This feedback is developed into focused action plans and
roadmaps for improvement.
Diversity, inclusion, and belonging metrics
Diversity
2023
2022
2021
Gender balance – women overall
23%
22%
20%
Gender balance – women leaders
20%
19%
18%
Inclusion
Inclusion Index overall score
75%
76%
76%
Equity
Inclusion Index – minorities
68%
72%
68%
Psychosocial risk indicator
N/A
76%
76%
The inclusion and equity results in 2021 and 2023 are based on a
shorter pulse survey and not directly comparable to the results in
2022, which are based on the full, biennial Hydro Monitor survey.
Living wage
Hydro has a commitment to improve the lives and livelihoods
wherever it operates and to ensure that the company has a
transparent compensation with due regard to the basic needs of the
worker. At the beginning of 2023, Hydro partnered with FairWage
Network to assess compensation in the company, targeting to ensure
sustainable compensation for its employees. With the external
provider Hydro has identified a methodology for defining living wage
and has gotten access to a trustworthy dataset that serves as
benchmark for living wage in the markets where Hydro operates.
The first phase of the project was initiated together with the
operations in nine of Hydro’s largest countries by headcount,
representing 80 percent of all its permanent employees. The project
assumed an average family size (based on national average fertility
rate) and adjusted for the average number of income earners per
family in the country. The cost of living was considered by choosing
the city nearest to where Hydro operates. In Hydro’s first round of
assessment 198 individuals out of 24,158 (0,8 percent) were
identified to have an earning below what is considered a “decent
living” covering the basic needs of the worker. Hydro is working to
close this gap.
Collaborating with unions and employee
representatives
Through the Global Framework Agreement, Hydro is committed to
providing equality of opportunity and treatment 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 was approved in 2021 and
communicated through the business area communication bodies for
dialogue between management and union representatives.
2023 saw the last production of primary aluminium at Slovalco in
Slovakia, after the primary production closed in January. In total, 300
employees were affected. Different means were offered in
collaboration with the unions to assist the redundant employees,
including offering above-standard severance pay, up to 17 months'
salary for the longest-serving employees. Slovalco will continue to
operate the remelting center for processing of process aluminium
scrap, which Slovalco commissioned in June 2022, as well as an
anode plant serving other Hydro customers.
Labor rights
Hydro engages with its workers on labor rights through a variety of
channels, including meetings with labor unions, works councils, and
joint management-worker committees. Hydro has a Global
Framework Agreement in place since 2011, and its European
Workscouncil agreement was revised in 2022. Topics discussed with
employee representatives include Hydro’s people strategy, policies
and procedures, health and safety, standards for decent work,
human rights and labor rights, and applicable regulations in the
country of operations.
Hydro’s major sites in Europe and Brazil are unionized. Extrusions
has a major presence in North America, and about 60 percent of its
U.S. and Canadian employees are working at a unionized site. In
total, Hydro estimates that around 70 percent of all employees are
unionized. Non-organized workers in Norway in general will receive
the same results negotiated on industry level when adjusting
compensation. In addition, workers on individual agreement can be
adjusted based on company and individual results, external
benchmark analysis, and individual performance. In regions where
unions are not allowed, Hydro is striving to establish alternative
worker-management relations.
No strikes exceeding one week and no lock-outs took place in 2023.
Production of certain aluminum products and around 20 employees
were affected by a sympathy strike in Hydro Extrusions, Sweden,
starting in December 2023. The sympathy strike was identified by the
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Swedish union IF Metal, affecting members working in Hydro’s
extrusion plant in Vetlanda, Sweden.
Security and emergency preparedness
Hydro is committed to the protection of people, environment, physical
assets, data and information. Hydro anticipates and prepares for
potentially adverse incidents with crisis potential to maintain business
and operational continuity.
To prepare for and respond to intentional, unintentional and/or
naturally occurring disasters, and to protect people and critical
assets, Hydro adapts and initiates security measures depending on
the evolving risk picture. Hydro’s 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 origin, scale or complexity. Hydro
has emergency preparedness plans in place that are regularly
exercised against known and identified hazards.
Security in Hydro includes a proactive security risk management
process, based on analysis, to enable appropriate mitigating actions
and accurate and timely decision-making. Security guards are
employed on a regular basis to protect Hydro’s personnel and
assets. No armed personnel are used in Hydro’s operations.
Firearm related incidents and robberies continued to occur in 2023 in
relation to Hydro’s operations in Paragominas, Alunorte, Mexico and
Extrusion North America. No Hydro personnel were injured in these
events and resulting security mitigation measures were employed to
further protect personnel and prevent against other incidents.
The war in Ukraine and associated increase in international political
tensions elevates the potential risk of sabotage. And because of the
Israeli/Hamas conflict, added tension in the Middle East will
exacerbate possible terror incidents.
Group Security closely monitors the security risks in Brazil and
maintains close contact with both plants in Mexico with a monthly
security call implemented to ensure security mitigation measures are
aligned with the developments and threat. Regular security updates
are disseminated to all Hydro business areas with information and
advice provided on any associated travel, security or emergency
mitigation measures which may be required due to the war in Ukraine
and the conflict in the Middle East.
During 2023, Hydro 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, helping to demonstrate an
ethical approach to the delivery of security services, and it will
benchmark Hydro’s security management system against the
international standards. Hydro’s security teams have achieved
conformity to the requirements in the U.S. and are now preparing for
full accreditation and certification.
Hydro is responsible for infrastructure and functions on local and
regional levels that might be critical to society’s operability, and the
company operates large-scale production sites where a crisis could
influence community interests and safety in general. Hence, Hydro is
subject to control and follow-up by relevant national authorities.
Hydro has emergency plans in place by site, business area and at
group level, and the company exercises and validates these plans
regularly.
Seventeen emergency and crisis management workshops, with risk
mapping at their core, were held in 2023, planned and exercised by
Group HSE. Based on evolving complex scenarios these workshops
were conducted at department, plant, business unit, business area
and Corporate Emergency Team (CET) levels. They help to link the
process of security and emergency response, crisis management
and recovery from the plant through to business area level and
above. In addition, all sites are required to exercise emergency
preparedness and response training as a minimum on an annual
basis or more frequently based on identified hazards and risks or as
stipulated by local laws and regulations.
Hydro’s strategy to prepare for future pandemics is based on
cooperation with local authorities and compliance with rules
complemented by a flexible range of Hydro-specific responses,
robust emergency preparedness and business continuity plans.
Where applicable, guidelines and regulations from national
authorities such as those pertaining to travel restrictions, social
distancing, home office or complete societal lockdowns, have been
reflected in Hydro’s internal policies and procedures. Hydro
evaluates its key pandemic-related risks and vulnerabilities through
security and business-resilience assessments, which support the
preparation and review of business-continuity plans.
Measures that have been used and could be reinstated include stock
level increases for raw materials to reduce Hydro’s exposure to
supply chain disruptions and cash-preservation measures to reduce
cost, capital expenditures and ensure adequate liquidity to face the
financial impact of potential shutdowns.
Just Transition
The green transition will create new employment opportunities as
well as changes to existing ones. Innovations in Hydro’s production
methods and advancement of technologies risks the automation of
jobs. Additionally, Hydro’s focus on decarbonization must not
exacerbate social inequalities or discrimination. Hydro has developed
a framework for supporting a just transition, through which the
company seeks to contribute to positive development in the societies
where we operate, including for our own workforce. The framework is
focused around three key outcomes: People have human rights
protected and have access to equal opportunities; Local communities
are resilient in a changing world; People have the necessary skills
and jobs for the future low-carbon economy.
Hydro contributes towards these outcomes in its own workforce by
respecting and promoting human rights, supporting positive local
development in the local communities where its employees live and
work, and through developing skills and jobs relevant to the future
low-carbon economy. In 2023, Hydro continued to develop and
deliver learning and competence development for all our employees.
Hydro also works to increase inclusiveness among Hydro employees
and track the perception of inclusiveness in the Hydro Inclusion
Index, which is part of the biannual Hydro Monitor survey. In the most
recent survey, from 2022, 76 percent of employees have a positive
perception of inclusion in Hydro. See Note S1.10 for Hydro employee
engagement metrics.
Salient human rights risks in own workforce
As part of Hydro’s human rights due diligence, the company maps
salient human rights risks across the countries where it operates.
Below Hydro provides further descriptions of salient risks and
mitigation. The company also provides information on countries that
it identifies as having a high inherent risk for human rights, and
where it has operations, but where it has not identified salient human
rights risks for Hydro due to the nature of its operations. Please see
the chapter Human Rights for a more detailed description of Hydro’s
human rights due diligence process.
Salient human rights risk in own workforce
Discrimination and harassment
Health and safety
Vulnerable individuals and groups
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Bahrain
In Bahrain, the Building Systems business unit of Hydro, has their
head office for the Middle East. Hydro employs close to 80 people in
Bahrain. While Hydro assesses the inherent human rights risk in
Bahrain to be high, the company considers the human rights risks to
Hydro’s employees as low as this is a sales office.
Brazil
While Hydro has assessed the human rights risks to its own
workforce to be low, topics related to discrimination and harassment
in the workplace have been evaluated as relevant risks at Hydro’s
operations in B&A and Albras. Hydro invests significantly in initiatives
and strategies to develop and embrace diversity, inclusion and
belonging (DIB), especially in recruitment processes. There have
been implemented several mitigation actions to manage this risk,
including anti-discrimination and anti-harassment policies and
campaigns, trainings related to DIB topics, unconscious bias,
LGBTQIA+ and people with disabilities. Hydro measures the effect of
the actions by tracking statistics and progress related to diversity
metrics, including diversity in gender and ethnicity, in addition to
reporting incidents, resolution for harassment cases, workplace
safety, participation in training and compliance with legal
requirements related to harassment prevention. See Note S1.5 for
training metrics and Note G1.1 for metrics related to non-
compliances.
China
Hydro has offices and manufacturing plants in China, employing
about 800 persons in total.
Due to the limited state protection of human rights as well as
restrictions on access to information, Hydro assesses the inherent
risk of human rights impacts in China to be high. In Hydro’s own
workforce it considers these risks to be well mitigated through its HR
processes, which include e.g. frequent site contact and visits.
In 2023, Hydro conducted a human rights assessment of its
operations and value chain in China. The project was led by an
external human rights expert company, with the goal of identifying
risks, and reviewing the effect of Hydro’s current due diligence
processes.
The process was executed through a combination of document
reviews, on-site visits and interviews with managers and workers.
Findings were triangulated with detailed desktop research.
The assessment did not identify any negative findings related to
Hydro’s own workforce. However, a potential risk of late salary
payments for a few contracted workers was identified. This will be
followed closely.
India
Hydro has sales and service offices in India, employing about 235
people. While Hydro identifies India as a high-risk country regarding
human rights, it considers the risks associated with its own workforce
to be low.
Mexico
Hydro is present in Mexico with two manufacturing plants. Hydro
employs about 500 people in these two locations, with a majority
being permanent employees. More than half of Hydro’s workforce in
Mexico has an operator position. Hydro identifies Mexico as high-risk
country regarding human rights. However, Hydro has no indications
of salient risks for the workforce at its own sites.
Saudi Arabia
In 2023, Building Systems opened a regional office in Saudi Arabia.
This commercial office has the intention to hire employees in the
future and will offer aluminium windows, doors and facades to the
Saudi market under the brand Technal.
While Hydro assesses the inherent human rights risk in Saudi Arabia
to be high due to the nature of Hydro’s operations in the country, the
company assesses the human rights risks to its own workforce as
low.
Turkey
Hydro has two sales offices in Turkey with a total of 26 employees,
supporting its building systems market in the region. Hydro has
identified Turkey as a high-risk country regarding human rights,
however, due to the nature of Hydro’s operations in the country, it
assesses the human rights risks to its own workforce as low.
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Content
Disclosures pursuant to the Norwegian Equality and Anti-Discrimination Act
The following sections provide information on the status of diversity
and inclusion in Hydro, and the activities being undertaken to identify
and analyze risk of discrimination and to take action to improve our
DIB performance, in accordance with the requirements in the
Norwegian Equality and Anti-Discrimination Act. This diversity and
inclusion report and its references, are approved by the Board of
Directors.
Our diversity, inclusion and belonging (DIB) program
Hydro values diverse perspectives as essential to delivering on its
long-term strategic agenda. Diversity allows Hydro to think, approach
challenges and solve problems differently.
Hydro is committed to providing equitable employment opportunities
and treating all employees fairly and with respect regardless of
primary or secondary diversity characteristics. Hydro’s employees
and business areas shall only use merit, qualifications and other
professional criteria as a basis for employee-related decisions, such
as recruitment, training, performance, compensation and promotion.
Hydro strives to develop programs and actions to encourage a
diverse organization based on the principle of equitable
opportunities. Hydro is committed to the principles of non-
discrimination and does not tolerate any form of harassment or
bullying in the workplace.
Identifying and mitigating DIB risks
Hydro uses its employee engagement surveys, Hydro Monitor and
pulse surveys, to identify and monitor risks relating to diversity,
inclusion and belonging in Hydro. Hydro also uses the internal
grievance mechanism AlertLine to assess the risk of discrimination
and harassment in the organization and track relevant employee data
from its core employee system. Hydro Monitor also allows the
company to assess employee engagement and psychosocial risk
indicators across different demographics, including gender, age, role,
minority status, and caretaking needs.
Since 2021, Hydro has measured inclusion through its inclusion
index. The index consists of eight questions related to diversity,
inclusion and belonging, obtained through the Hydro monitor and
pulse survey. The inclusion index score forms one of the CEO KPIs
from 2023 measured on an annual basis as an improvement score
and is also a KPI in Hydro’s long-term Just Transition Sustainability
roadmap.
Hydro has developed tools and guidelines to assess risk of
discrimination towards underrepresented groups. The business areas
are expected to develop targets, act on the findings from the risk
assessments, develop roadmaps, ensure responsibility is taken, and
report progress to eliminate discrimination. The tools include digital
and anonymous focus groups trying to understand root causes and
actions, unconscious bias testing and training, and group guidelines
for employee resource groups.
As a mitigating action, Hydro’s DIB Policy has been further
implemented in 2023. The policy explains Hydro’s commitment to
diversity, inclusion and belonging and outlines the principles of DIB.
Hydro’s Corporate Management Board owns the DIB agenda and is
accountable for DIB across Hydro. A global DIB core team drives
execution of the DIB agenda on behalf of the Corporate Management
Board, comprising Hydro’s DIB Lead and a DIB responsible for each
business area.
The Corporate Management Board, HR leaders and DIB core team
members receive DIB safeguarding dashboards each quarter for
Hydro overall and for the respective business areas. The dashboards
use HR reporting data and employee surveys for quarterly tracking of
metrics on gender balance, diversity in the succession pool, inclusive
culture, wellbeing, psychological safety and diversity leadership. The
quarterly measurements are used to develop action plans and make
continuous improvements and reported on in internal board meetings
for each business area.
To mature Hydro’s work on diversity, inclusion and belonging, the
company is continuously implementing actions at all levels in the
organization across its strategic pillars. DIB is embedded in all
people processes, including recruitment, onboarding, and succession
planning, and is included in all Hydro’s global employee and
leadership development programs.
Five diversity days are celebrated in Hydro to raise awareness and
improve inclusion of underrepresented groups: International
Women’s Day, International Day for the Elimination of Racial
Discrimination, Pride, World Mental Health Day, and International
Day of People with Disabilities. These days each have a sponsor
from the top management. Employee resource groups have been set
up in several areas, including the Hydro Rainbow LGBTQI+ network,
and Women’s networks in Operations, Finance, and in many of the
business areas and headquarters.
DIB achievements 2023
• Diversity, inclusion and belonging training completed and letter
of commitment signed by finance teams, and several of the
business area management teams.
• Inclusion Index as KPI on CEO and baseline for improvement is
75 percent (employees’ perception of inclusion in Pulse Survey
2023).
• Continuation of the DIB core team collaborating across Hydro
with sponsors from the Corporate Management Board.
• Safeguarding process for DIB ongioing with quarterly
dashboards to measure improvements.
• Mandatory online DIB training provided to all new employees.
DIB as part of the Hydro Fundamentals course and including
deep dive learning pathways and workshop material provided to
all.
• Several employee-resource groups initiated and developed (e.g.
womens networks in many business areas, as well as globally
for women in operations, women in finance, LGBTQI+ Rainbow
Network).
• Integration of compensation data in our people master data
system.
• Global engagement for the five diversity days.
Targets and performance
Hydro has worked systematically to increase gender balance in
Hydro’s operations since its first action plan to promote women
employees and leaders was adopted in 1997. While Hydro has seen
successes in improving gender balance at staff positions, challenges
remain for operator and leadership positions.
Hydro’s goal for the share of women in Hydro is 25 percent by 2025,
including permanent and temporary employees. In 2023, Hydro
achieved 23 percent. For more information about temporary
employees see the Note S1.2 on Employees by employment type.
The share of women in Hydro’s Board of Directors was 36 percent in
2023. 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 women representation. The
proportion of women on Hydro's Corporate Management Board was
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40 percent in 2023. For further information about gender balance,
see the Notes S1.1 and S1.8.
While gender balance is a challenge among operators at most of
Hydro’s operational sites, women constitute 51 percent of the
workforce in Hydro’s corporate staffs and 43 percent in Global
Business Services. Globally, about one-third of employees among
non-operators are women.
Hydro recognizes the importance of a good balance between work
and other aspects of life. For example, Aluminium Metal, which is
Hydro’s largest business area in Norway, has implemented
procedures to ensure a predictable work schedule for operators, and
opportunities for flexible working hours for non-operator employees.
Opportunities for people with disabilities
Hydro seeks to generate opportunities and become an attractive
employer for employees with disabilities, across our global
operations. To foster an environment and culture where people of
different physical, cognitive and mental health abilities can feel
supported and be successful, Hydro has developed a global guide for
inclusion of people with disabilities. Hydro is continuously adjusting
working conditions so that all employees have the same
opportunities in their workplace.
Hydro is required to employ at least 5 percent employees with
disabilities in Brazil. At the end of 2023, 5 percent of employees in
Paragominas were people with disabilities, 5.1 percent at Alunorte,
and 5.1 percent at Albras. The number of employees with disabilities
increased in 2023 compared to 2022, and Hydro is working to
increase the share of disabled employees further. The Hydro
Extrusions sites in southern Brazil also fulfilled their legal
requirements.
Pay equality and compensation
Hydro is committed to provide equal employment opportunities for all
its employees. Hydro will continuously work to ensure pay equality
for the same or similar jobs, regardless of gender. Hydro’s global
compensation principles state that all employees shall receive total
compensation that is competitive and aligned with the local industry
standard. The compensation should 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.
A global job architecture framework enables us to map all employees
in Hydro in a consistent way. Hydro’s global job architecture
framework is built on Mercer’s International position evaluation
system (IPE). Hence, Hydro’s architecture consists of two main
elements: a job family structure and a job level structure.
The activities and competency requirements determine which family
a job belongs to, and it is the job that an individual holds that is
mapped, not the individual person. The jobs are mapped in the family
structure. Hydro maps employee positions in a level structure based
on the complexity of each job. The job level structure consists of nine
levels from operators, specialists to managers. Levels 1 to 3 typically
cover operators in our plants, levels 5 and 6 jobs require higher
education, e.g. bachelor or master with typically 1-5 years of
experience. Levels 6 and 7 are jobs that require extensive
experience in their area of expertise and levels 8 and 9 cover our
most senior specialist and management positions.
The ratio of highest base salary and the median base salary for all
employees in Norway was 11.2 in 2023. See the remuneration report
for more information on highest paid salary.
See Note S1.7 for the pay gap analysis for Norwegian employees
according to the Norwegian Equality and Anti Discrimination Act and
the gender gap analysis for a selection of our other countries.
Wellness
Hydro cares about the health and wellbeing of its employees and
offers 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 counsellor to address
psychological health and safety, and health and wellness is also
addressed at site Health and safety-day events.
Following a stress management pilot in 2022, Hydro has continued
in-depth stress risk assessments, and a number of tools have been
developed to support future stress risk assessments such as E-
learning training aimed at general awareness and for leaders,
management competency tool and guidelines. Hydro also celebrated
the World Mental Health Day with a campaign focused on well-being.
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S1 Notes on Own workforce
S1.1 Permanent employees by region, gender and payroll
Reporting principles
Employees by gender are classified based on the employees’ self-reported gender as registered in our
SAP system. For a very limited number of employees, we do not have gender information; the total
number of employees without registered gender information is insufficient to affect the reported gender
balance statistics.
Permanent and temporary employees are based on data from Hydro's human resources SAP system.
Data presented represent status at year end, December 31.
Payroll is based on Hydro’s consolidated financial statements. Reported payroll does not include
pension benefits.
Temporary employees include apprentices, but exclude contractor employees. Legal requirements and
customs may vary from country to country, making direct comparison difficult.
Part-time employees include all persons being employed in positions that are not full-time (less than
100 percent).
GRI Reference: GRI 2-7 (2021).
Age distribution permanent employees
2023
2022
2021
2020
2019
Under 30
14%
14%
12%
14%
15%
30-49
53%
53%
53%
52%
52%
50 +
33%
33%
35%
34%
33%
* Age distribution data does not cover employees in recycling plants acquired from Alumetal in 2023.
Permanent employees by region, gender and payroll
Number of employees
1)
Payroll (NOK million)
2)
2023
2022
2021
2020
2019
2023
2022
2021
2020
2019
Norway
3,828
3,672
3,493
4,048
4,103
4,178
3,799
3,654
3,632
3,684
Women
24%
23%
22%
21%
21%
Men
76%
77%
78%
79%
79%
Germany
2,000
1,543
1,460
4,615
4,967
1,454
1,074
805
3,577
4,307
Women
21%
21%
21%
13%
13%
Men
79%
79%
79%
87%
87%
France
1,761
1,823
1,790
1,818
1,894
1,088
916
951
917
939
Women
18%
18%
16%
16%
16%
Men
82%
82%
84%
84%
84%
Hungary
1,854
1,726
1,650
1,554
1,612
682
493
436
384
408
Women
30%
32%
31%
30%
29%
Men
70%
68%
69%
70%
71%
Other Europe
8,552
8,620
8,570
8,407
9,071
4,496
4,150
3,813
3,746
3,850
Women
24%
24%
23%
22%
22%
Men
76%
76%
77%
78%
78%
Total Europe
17,995
17,384
16,963
20,442
21,647
11,898
10,432
9,658
12,256
13,188
Brazil
6,407
6,241
6,182
6,070
6,108
1,742
1,541
1,140
1,059
1,273
Women
20%
17%
14%
13%
13%
Men
80%
83%
86%
87%
87%
USA
5,964
6,120
5,856
5,510
6,013
5,250
4,745
3,803
3,517
3,656
Women
19%
19%
18%
17%
16%
Men
81%
81%
82%
83%
84%
Rest of the world
2,358
2,269
2,263
2,218
2,542
974
886
711
677
889
Women
22%
21%
18%
19%
18%
Men
78%
79%
82%
81%
82%
Total
32,724
32,014
31,264
34,240
36,310
19,864
17,605
15,312
17,509
19,005
Women
22%
21%
20%
18%
18%
Men
78%
79%
82%
82%
82%
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 are excluded from the payroll figures in the table above. 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.
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S1.2 Full time and part time employees by region and gender
Reporting principles
Total reported full time and part time employees in Hydro consolidated activities, by gender in significant
locations of operation.
GRI Reference: GRI 2-7 (2021), 405-1 (2016).
Full-time and part-time employees by region and gender
1)
Full-time employees
Part-time employees
2023
2022
2023
2022
Norway
3,796
3,939
32
545
Women
24%
23%
41%
42%
Men
76%
77%
59%
58%
Germany
1,793
1,504
207
187
Women
17%
19%
58%
47%
Men
83%
81%
42%
53%
France
1,729
1,845
32
34
Women
18%
18%
53%
53%
Men
82%
82%
47%
47%
Hungary
1,817
1,693
37
33
Women
29%
31%
95%
91%
Men
71%
69%
5%
9%
Other Europe
8,308
8,606
244
265
Women
23%
23%
51%
49%
Men
77%
77%
49%
51%
Total Europe
17,443
17,587
552
1,064
Brazil
6,397
6,806
10
19
Women
20%
20%
20%
16%
Men
80%
80%
80%
84%
USA
5,951
6,133
13
32
Women
19%
19%
38%
38%
Men
81%
81%
62%
63%
Rest of the world
2,357
2,291
1
2
Women
22%
21%
0%
0%
Men
78%
79%
100%
100%
Total
32,148
32,817
576
1,117
Women
21%
21%
55%
46%
Men
79%
79%
45%
54%
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 is based on which legal entity the employee is formally employed by.
Temporary employees by region and gender
1)
Number of temporary employees
2023
2022
2021
2020
2)
2019
Norway
855
813
752
Women
39%
35%
34%
30%
Men
61%
65%
66%
70%
Germany
95
148
Women
22%
26%
Men
78%
74%
France
78
56
Women
45%
32%
Men
55%
68%
Hungary
23
-
Women
35%
Men
65%
Other Europe
158
247
Women
33%
24%
Men
67%
76%
Total Europe
1,209
1,264
Brazil
508
586
461
Women
69%
49%
44%
35%
Men
31%
51%
56%
65%
USA
29
44
76
Women
28%
34%
14%
26%
Men
72%
66%
86%
74%
Rest of the world
24
23
Women
29%
30%
Men
71%
70%
Total
1,770
1,917
1,799
1,929
1,647
Women
46%
37%
34%
32%
27%
Men
54%
63%
66%
68%
73%
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 is based on which legal entity the employee is formally employed by.
2) In 2020, Hydro did not report total temporary employees disaggrigated by country. Only gender distribution was reported this year.
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S1.3 New employees and turnover
Reporting principles
New employees and turnover by employment type in Hydro consolidated activities and significant
location of operation.
Employee turnover rate includes resignations, retirements and manning reductions of all permanent
employees, but excludes closures and divestments.
Voluntary employee turnover rate includes permanent employees who voluntarily resigned in the
reporting period.
GRI references: GRI Standards 401-1 (2016)
New permanent employee hires by age group, gender and country
2023
2022
2021
Total
Under
30
30-49
50+
Total
Under
30
30-49
50+
Total
Norway
284
69
184
31
279
76
177
26
131
Women
33%
38%
33%
29%
32%
30%
32%
35%
23%
Men
67%
62%
67%
71%
68%
70%
68%
65%
77%
Germany
123
23
70
30
123
31
69
23
115
Women
29%
26%
29%
33%
28%
29%
25%
35%
25%
Men
71%
74%
71%
67%
72%
71%
75%
65%
75%
France
114
30
69
15
115
27
74
14
-
Women
35%
13%
38%
67%
38%
11%
43%
64%
-
Men
65%
87%
62%
33%
62%
89%
57%
36%
-
Hungary*
239
42
118
32
248
68
145
35
-
Women
33%
31%
47%
38%
40%
31%
48%
29%
-
Men
67%
69%
53%
63%
60%
69%
52%
71%
-
Other Europe*
838
245
384
150
976
339
472
165
-
Women
27%
26%
33%
23%
27%
24%
32%
21%
-
Men
73%
74%
67%
77%
73%
76%
68%
79%
-
Total Europe
1,598
409
825
258
1,741
541
937
263
-
-
Brazil
582
221
334
27
508
204
274
30
539
Women
44%
56%
38%
11%
49%
60%
45%
17%
22%
Men
56%
44%
62%
89%
51%
40%
55%
83%
78%
USA
824
233
420
171
1,496
518
732
246
1,393
Women
23%
14%
25%
30%
22%
16%
25%
27%
20%
Men
77%
86%
75%
70%
78%
84%
75%
73%
80%
Rest of the world
372
108
248
16
468
166
280
22
1,560
Women
26%
24%
27%
19%
25%
20%
29%
18%
29%
Men
74%
76%
73%
81%
75%
80%
71%
82%
71%
Total
3,376
971
1,827
472
4,213
1,429
2,223
561
3,738
Women
30%
30%
32%
28%
29%
26%
32%
26%
24%
Men
70%
70%
68%
72%
71%
74%
68%
74%
76%
* 106 new hires in the recyclers that Hydro acquired from Alumetal in 2023 lack age data, causing a discrepancy in the total number of new
hires vs sum of hires per age group in Hungary and "other Europe".
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Total employee turnover by age group, gender and country
2023
2022
Total
Under 30
30-49
50+
Total
Under 30
30-49
50+
Norway
5%
5%
4%
7%
6%
6%
5%
6%
Women
4%
5%
4%
5%
5%
6%
7%
4%
Men
5%
5%
4%
7%
6%
6%
5%
6%
Germany
7%
13%
8%
5%
7%
16%
7%
6%
Women
7%
6%
9%
7%
9%
17%
8%
6%
Men
7%
16%
8%
5%
7%
15%
6%
5%
France
8%
14%
7%
9%
6%
12%
6%
6%
Women
8%
21%
6%
7%
9%
28%
8%
7%
Men
9%
13%
7%
9%
6%
9%
5%
6%
Hungary*
13%
25%
10%
11%
16%
36%
13%
14%
Women
13%
18%
9%
16%
17%
35%
15%
13%
Men
13%
28%
10%
9%
15%
36%
12%
15%
Other Europe*
14%
24%
13%
13%
14%
28%
13%
12%
Women
14%
23%
12%
13%
11%
23%
10%
9%
Men
15%
25%
14%
13%
15%
30%
14%
12%
Brazil
8%
9%
7%
12%
9%
9%
8%
10%
Women
8%
10%
8%
12%
9%
6%
10%
5%
Men
8%
8%
7%
12%
8%
10%
8%
11%
United States**
33%
65%
37%
16%
41%
83%
42%
22%
Women
37%
69%
44%
18%
47%
103%
48%
27%
Men
32%
64%
35%
16%
39%
80%
41%
21%
Rest of the world
15%
35%
12%
11%
29%
63%
26%
14%
Women
15%
22%
12%
17%
19%
48%
13%
11%
Men
15%
40%
12%
10%
31%
67%
30%
14%
Total
15%
27%
14%
12%
17%
36%
16%
12%
Women
15%
22%
14%
12%
17%
32%
15%
12%
Men
15%
29%
14%
12%
18%
37%
16%
12%
* Turnover at the recyclers that Hydro acquired from Alumetal in 2023 lack age data, causing a discrepancy between the total turnover and
turnover by age group in Hungary and "other Europe".
** The US turnover follows the local market trend and our numbers are lower than industry benchmark. Most of the US turnover are in entry-level
positions (low-skilled manual work). For skilled workers and white-collars the numbers are closer to Hydro global average.
Voluntary employee turnover by age group, gender and country
2023
2022
Total
Under 30
30-49
50+
Total
Under 30
30-49
50+
Norway
3%
5%
3%
1%
3%
5%
5%
1%
Women
2%
5%
2%
0%
4%
5%
6%
0%
Men
3%
5%
4%
1%
3%
5%
5%
1%
Germany
4%
7%
5%
2%
4%
11%
4%
1%
Women
5%
2%
7%
3%
5%
13%
5%
2%
Men
4%
9%
5%
2%
3%
10%
4%
1%
France
4%
12%
4%
2%
3%
8%
3%
1%
Women
4%
13%
3%
3%
4%
17%
5%
1%
Men
4%
12%
5%
1%
3%
7%
3%
1%
Hungary
8%
17%
6%
5%
10%
22%
9%
7%
Women
7%
11%
6%
8%
12%
23%
10%
6%
Men
8%
21%
6%
4%
9%
21%
8%
7%
Other Europe
5%
13%
6%
3%
7%
16%
8%
3%
Women
4%
10%
5%
2%
7%
14%
7%
3%
Men
5%
14%
6%
3%
7%
17%
8%
3%
Brazil
3%
5%
3%
1%
5%
5%
5%
5%
Women
5%
7%
5%
0%
5%
3%
6%
2%
Men
2%
4%
2%
1%
4%
6%
4%
5%
United States
18%
39%
20%
7%
25%
53%
27%
12%
Women
20%
41%
25%
8%
30%
65%
33%
14%
Men
17%
38%
19%
7%
24%
51%
26%
12%
Rest of the world
12%
30%
10%
4%
13%
34%
11%
5%
Women
10%
17%
10%
5%
14%
32%
10%
8%
Men
12%
34%
10%
4%
13%
34%
12%
5%
Total
7%
17%
7%
3%
10%
22%
10%
5%
Women
7%
13%
8%
4%
11%
21%
11%
5%
Men
7%
18%
7%
3%
9%
23%
9%
5%
* Turnover at the recyclers that Hydro acquired from Alumetal in 2023 lack age data, causing a discrepancy between the total turnover
and turnover by age group in Hungary and "other Europe".
** The US turnover follows the local market trend and our numbers are lower than industry benchmark. Most of the US turnover are in
entry-level positions (low-skilled manual work). For skilled workers and white-collars the numbers are closer to Hydro global average.
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S1.4 Total employees by Business Area
Reporting principles
The below table provides information on the number and distribution of permanent and temporary
employees across Hydro’s business areas.
Total employees by Business Area
Total permanent and temporary employees
2023
Percentage
share 2023
2022
Percentage
share 2022
Corporate Management
307
0.9 %
297
0.9 %
Global Business Services
1,518
4.5 %
1,406
4.1 %
Hydro Aluminium Metal
6,037
17.8 %
5,995
17.7 %
Hydro Bauxite and Alumina
4,480
13.2 %
4,415
13.0 %
Hydro Energy
466
1.4 %
399
1.2 %
Hydro Extrusions
21,080
62.2 %
21,419
63.1 %
Total
33,888
100.0 %
33,931
100.0 %
S1.5 Training and development
Reporting principles
Training and development statistics is based on training that is completed and registered by Hydro
employees in our human resources systems. Training, education and career development activities that
are not registered by the individual employee, as well as on-the-job training activities, are not captured
by the reported metrics. Instructor-led courses that are conducted locally are not always registered and
thus not included in the reported metrics.
The metrics include both mandatory and voluntary training. See also Note G1.3 on compliance-related
training, specifically.
Training and development
2023
2022
Training hours completed by Hydro employees
262,647
217,958
Courses completed
15,323
16,680
of which, male
11,211
of which, female
4,112
Avg. training hours per participant
17.1
13.1
Avg. training hours per employee
8.2
6.8
Avg. training hours, male employees
8.0
7.1
Avg. training hours, female employees
8.7
5.7
* Training statistics do not cover employees at the four recyclers acquired from Alumetal in 2023
Top five training types by number of participants
#
2023
2022
2021
1
HSSE
Compliance
Cyber security
2
Administrative systems
HSEE
All lifecycle
3
Compliance
Sustainability
IT systems training
4
Human resources
Human resources
IT
5
Sustainability
Employee lifecycle
Human resources
In 2023, 52 percent of the conducted training that are registered as completed were conducted online,
while 25 percent was instructor-led. The most common categories of mandatory training were HSSE,
compliance, human resources and sustainability. HSSE and compliance are also among the top
categories for completed courses of voluntary training. Other common categories of voluntary training are
administrative systems, team leadership and self leadership.
Training initiatives can vary from year to year based on business needs and initiatives.
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S1 Notes on remuneration
S1.6 Gender related salary differences
Reporting principles
Data on gender related salary differences is based on local payroll systems, and calculated based on
median salary for employees at different job levels. Salary per employee is based on nominal salary for
each employee at the end of the reporting year.
The job level structure consists of nine levels from operators, specialists to managers. Levels 1 to 3
typically cover operators in our plants, levels 4 and 5 jobs require higher education, e.g. bachelor or
master with typically 1-5 years of experience. Levels 6 and 7 are jobs that require extensive experience
in their area of expertise and levels 8 and 9 cover our most senior specialist and management positions.
Gender related salary differences for employees is reported in certain locations of operation and
countries where we have large presence. In our ongoing commitment to transparency, Hydro presents
its third annual report on gender-related salary differences in key operational locations, including Brazil
for the first time. Hydro works to ensure that every employee should receive competitive compensation
aligned with local industry standards (but not market leading), embracing a holistic, performance-
oriented, transparent, fair, and objective approach. Salaries in the organization are reviewed on a
regular basis.
GRI-reference: GRI Standards 405-2 (2016)
Median ratio of women's ase salary compared to men’s ase salary for 2023 )
Job level
Belgium
Brazil
Denmark
France
Italy
Norway
Spain
Sweden
United
Kingdom
Level 1
85%
97%
117%
100%
81%
Level 2
97%
91%
100%
95%
100%
89%
97%
90%
Level 3
88%
101%
95%
103%
108%
88%
99%
92%
Level 4-5
89%
91%
81%
92%
107%
108%
86%
100%
109%
Level 6-7
112%
94%
80%
90%
81%
98%
88%
95%
83%
Level 8-9
87%
99%
1) The data is based on annual base salary for permanent employees. Levels with less than five employees are not reported.
We have investigated the salary conditions for all Hydro employees in the US, including the remelters,
extrusion plants and precision tubing facilities. Based on the analysis, on average there are no significant
gender related differences in North America.
S1.7 Gender and compensation in Norway
Reporting principles
Number of employees per gender per job level is based on number of employees that received a salary
in 2023. Total employees in this note will therefore differ from number of employees in other notes,
which are based on number of employees at year end.
Data on gender pay gaps are based on local payroll systems, and the average salary per gender per
job level is calculated based on real paid out amount through 2023. The gender pay gaps reported in
this note are based on requirements in the Norwegian equality and anti-discrimination act, and will
differ from the gaps reported for Norway in Note S1.6, which is based on median salary per gender on
each job level, and calculated based on the nominal salary of each employee at year end.
GRI-reference: GRI Standards 405-2 (2016).
Gender proportion 2023
Women's ase salary compared to men’s
base salary for 2023
Job level
Women
Men
Total
Annual salary
Total compensation
Level 1
31%
69%
298
99%
96%
Level 2
19%
81%
1,739
97%
93%
Level 3
27%
73%
151
102%
92%
Level 4-5
27%
73%
1,069
104%
98%
Level 6-7
29%
71%
628
98%
95%
Level 8-9
37%
64%
144
97%
93%
Total
24%
76%
4,029
106%
101%
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S1 Notes on diversity, inclusion, belonging
S1.8 Diversity 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 in management is reported for levels 0, 1, 2 and 3. Level 0 refers to the CEO, level 1 refers to
Corporate Management Board (CMB), level 2 refers to persons reporting to CMB, and level 3 refers to
persons that report to level 2.
GRI-reference: GRI Standards 405-1 (2016)
Share of women and non-Norwegians in management
Women
Non-Norwegians
2023
2022
2021
2020
2019
2023
2022
2021
2020
2019
Board of directors (11 members)
1)
36%
36%
40%
40%
27%
27%
27%
30%
30%
27%
Corporate Management Board
40%
40%
44%
44%
40%
10%
10%
20%
10%
-
Management, levels 0-2
37%
37%
35%
31%
32%
29%
29%
34%
43%
37%
Management, levels 0-3
36%
35%
36%
32%
27%
44%
44%
41%
53%
60%
1) With four 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.
In addition to the groups above, Hydro also monitors gender distribution across additional staffing
categories. In women leadership positions, with at least one person is reporting directly to them, we have
a target of 25 percent by 2025. We also monitor women in white-collar staff positions. For this group the
data include level 0, 1, 2, 3, 4 and 5 managers. We have set a target of 35% by 2025 in this category.
S1.9 Local representation
Reporting principles
Local representation in senior management for significant sites of operation.
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 and at state level for Brazil.
GRI-reference: GRI standards 202-2 (2016)
Local representation in senior management
Share of senior management hired from local
community
2023
2022
2021
2020
2019
Norway
Production sites in Norway
100%
94%
88%
98%
97%
Aluminium Metal management team
91%
80%
80%
80%
77%
Extrusions management team
50%
43%
14%
29%
38%
Brazil
Paragominas, Pará
14%
0%
15%
9%
9%
Barcarena, Pará
25%
9%
17%
22%
17%
Bauxite & Alumina management team
0%
9%
0%
0%
0%
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S1.10 Employee engagement
Reporting principles
Data on inclusion and belonging is primarily based on Hydro’s employee engagement survey, which
comprises four dimensions of inclusion and belonging. The dimensions are described below. The
survey is normally carried out for all employees every second year and was conducted in 2022.
The Employee engagement Index (EEI) measures the extent to which employees are engaged and
motivated to contribute to organizational success and are willing to apply discretionary effort to
accomplishing tasks important to the achievement of organizational goals.
The Psychosocial Risk Indicator (PRI) measures drivers of work-related stress which affects employee
mental health and wellbeing.
The Integrity Culture Index (ICI) measures the employee perception of Hydro’s integrity culture.
The inclusion Index (II) measures perception of inclusion among Hydro employees. The index consists
of eight questions related to diversity, equity, inclusion and belonging.
Hydro Monitor
2022
2020
2018
Employee Engagement Index (EEI)
76%
72%
84%
Women
76%
70%
86%
Men
76%
72%
83%
Psycosocial Risk Index (PRI)
76%
75%
Women
75%
73%
Men
76%
75%
Integrity Culture Index (ICI)
78%
76%
Women
78%
75%
Men
78%
76%
Inclusion Index (II)
76%
Women
75%
Men
76%
Response rate
87%
89%
88%
The long-term ambition is to be among the top 25 percent companies worldwide on EEI. Engagement has
improved from 2020. In 2018, Extruded Solutions was not part of the survey, and the results are thus not
directly comparable. Engagement has improved and is now on par with the industry benchmark.
The engagement survey is a tool to work with organizational development, therefore the most important
part is that teams discuss the results, implement actions and follow-up results.
S1.11 Diversity and inclusion for Norwegian subsidiaries
Reporting principles
This note provides quantitative information required by the Norwegian Equality and Anti-Discrimination
Act (Likestillings og diskrimineringsloven) for the following subsidiaries: Hydro Aluminium AS, Hycast
AS, Sør-Norge Aluminium, Hydro Energi AS, Hydro Extruded Solutions AS, Hydro Extrusion Norway
AS.
For a description of our approach and work related to diversity and inclusion in Hydro, the activities
being undertaken to identify and analyze risk of discrimination, see Our people strategy and the section
on Disclosures pursuant to the Norwegian Equality and Anti-Discrimination Act.
We report on pay equality and involuntary part-time every two years, in accordance have the Norwegian
Equality and Anti-Discrimination Act.
Part-time employees normally work full time. The opportunity to work part time is considered a benefit
for which a special application must be made. In 2023, we reviewed if there were any cases of
involuntary part-time work in our Norwegian activities. The review confirmed that all employees working
part time had applied for reduced working hours.
In December 2023 Hydro agreed on a global parental leave policy for all employees. The global
parental leave policy set a minimum standard, which gives 4 months fully paid leave for primary
caregiver and one month fully paid leave for secondary caregiver. The global parental leave policy will
be rolled out in 2024, however where local standard already has a more beneficial scheme, this will
supersede the global plan. Local deviation to the global plan can also be maid if this is required by local
law and/or regulations applicable in the jurisdiction.
In our employee engagement survey, we track perceptions of healthy balance between work and spare
time and found stress level as important indicators for a sustainable work environment.
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Hydro Monitor results for Norwegian subsidiaries 2022
Employee
Engagement In
dex (EEI)
Psycosocial
Risk Index
(PRI)
Integrity
Culture Index
(ICI)
Inclusion Index
All Hydro employees in Norway
74%
75%
75%
76%
Women
75%
74%
77%
79%
Men
73%
74%
75%
75%
Hydro Aluminium AS
71%
72%
72%
72%
Women
76%
76%
77%
74%
Men
71%
73%
72%
71%
Hycast AS
48%
58%
55%
81%
Women
40%
48%
47%
81%
Men
49%
61%
57%
81%
Sør-Norge Aluminium
73%
74%
74%
81%
Women
72%
73%
71%
81%
Men
73%
74%
74%
81%
Hydro Energy AS
80%
81%
86%
76%
Women
83%
76%
83%
76%
Men
79%
82%
86%
76%
Hydro Extruded Solutions AS
92%
92%
92%
76%
Women
97%
96%
96%
75%
Men
90%
85%
85%
76%
Hydro Extrusion Norway AS
63%
78%
71%
76%
Women
62%
70%
63%
75%
Men
62%
81%
73%
76%
Summary statistics 2023 - Norwegian entities
Number of employees
Parental leave
in weeks
Permanent
employees in
part time
Temporary
employees on
part time
Permanent
Temporary
All Hydro employees in Norway
3828
855
2823
32
558
Women
24%
39%
1432
41%
43%
Men
76%
61%
1391
59%
57%
Hydro Aluminium AS
2439
662
1717
14
396
Women
18%
37%
860
50%
42%
Men
82%
63%
857
50%
58%
Hycast AS
65
5
21
2
2
Women
17%
60%
-
50%
50%
Men
83%
40%
21
50%
50%
Sør-Norge Aluminium
284
147
381
2
136
Women
20%
48%
182
0%
49%
Men
80%
52%
199
100%
51%
Hydro Energy AS
357
10
164
4
7
Women
31%
10%
49
0%
0%
Men
69%
90%
115
100%
100%
Hydro REIN AS
52
81
1
1
Women
48%
0%
20
0%
0%
Men
52%
100%
61
100%
100%
Hydro Extruded Solutions AS
45
2
86
2
2
Women
31%
0%
67
0%
0%
Men
69%
100%
20
100%
100%
Hydro Extrusion Norway AS
104
4
NA*
1
1
Women
23%
25%
0%
0%
Men
77%
75%
100%
100%
* Data omitted due to limited sample size
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S1 Notes on health and safety
S1.12 Injuries and lost time
Reporting principles
Health and safety data are prepared and reported to management on a monthly basis, based on data
registered in Synergi and IMS, the reporting tools for health, safety, security and environmental
incidents. The data covers employees and contractors at all consolidated units within Hydro, including
sales offices and administrative functions.
Employees are workers under direct supervision of Hydro. For the purpose of recording health and
safety statistics, employees include agency workers. Health and safety statistics for employees are
included for the period they are employed by or otherwise in service for Hydro.
Contractors are workers who are under contract to execute work for Hydro, who are under the direct
supervision of the contractor and operate at Hydro premises under Hydro’s indirect supervision.
Contractors are included during the period they are employed by or otherwise in service for Hydro.
Total recordable injuries (TRI) is calculated as the sum of lost time injuries (LTI) + restricted work cases
(RWC) + medical treatment cases (MTC). LTI is a personal injury at work leading to unfitness for work
and absence beyond the day of the accident. RWC is a personal injury at work that does not lead to
absence beyond the day of the accident, because of alternative job assignment. MTC is treatment,
other than first aid, administered by a physician or registered professional personnel under the standing
orders of a physician.
TRI rate is calculated based on TRI per one million hours worked.
Fatal accidents comprise all fatalities resulting from a work-related incident.
GRI reference: GRI Standards 403-9 (2018).
Total recordable injuries, lost-time injuries, and fatal accidents
1)
2023
2022
2021
2020
2019
Total recordable injuries (TRI)
237
227
299
224
278
Employees
174
186
254
188
229
Contractors
63
41
45
36
49
Total recordable injuries (TRI) rate
2)
2.4
2.4
3.3
2.7
3.0
Employees
2.8
3.0
3.9
3.0
3.3
Contractors
1.8
1.3
1.8
1.7
2.2
Lost-time injuries (LTI)
128
115
156
119
119
Employees
95
90
126
102
101
Contractors
33
25
30
17
18
Lost-time injuries (LTI) rate
3)
1.3
1.2
1.7
1.4
1.3
Employees
1.5
1.4
2.0
1.6
1.5
Contractors
0.9
0.8
1.2
0.8
0.8
Total number of fatal accidents
1
0
0
0
0
Employees
0
0
0
0
0
Contractors
1
0
0
0
0
1)
The numbers include discontinued operations
2)
Number of recordable injuries per million working hours
3)
Number of lost-time injuries per million working hours
The reported fatal accident in 2023 involved a contractor at our Alumina refinery, Alunorte, in Brazil. At the time of preparing the annual report,
the incident is still under investigation to determine work relatedness and root cause. In addition to the statistics for our consolidated units,
there was one fatality involving a contractor at our 50/50 joint venture Qatalum, in Qatar. In 2023, there was also one fatality involving a
contractor at our previously part-owned MRN bauxite mine, and one fatality involving a contractor at the Vista Allegre solar power project in
Brazil, which Hydro has exercised a call option to be an off taker from.
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Total recordable injuries (TRI) per region
1)
2023
2022
2021
2020
2019
Total recordable injuries (TRI) employees
2.4
2.4
3.3
2.7
3.0
Employees
2.8
3.0
3.9
3.0
3.3
Contractors
1.8
1.3
1.8
1.6
2.2
TRI Norway
3.0
3.2
4.7
3.0
3.8
Employees
1.9
2.1
3.6
2.7
3.1
Contractors
9.5
12.9
15.0
7.5
10.2
TRI Germany
3.3
2.6
6.0
5.4
4.5
Employees
3.6
2.8
5.8
5.5
4.3
Contractors
0.0
0.0
8.5
4.3
5.5
TRI Brazil
1.3
1.0
1.7
1.5
1.3
Employees
1.5
1.6
2.6
2.0
1.5
Contractors
1.2
0.7
1.2
1.2
1.2
TRI US
4.3
4.5
5.8
4.0
5.8
Employees
4.0
4.6
5.9
4.0
5.9
Contractors
7.2
2.0
1.9
2.6
7.2
1)
Number of recordable injuries per million working hours. The numbers include discontinued operations.
S1.13 High risk incidents
Reporting principles
High risk incidents (HRI) in Hydro’s consolidated activities. HRI include major accidents and incidents
with major potential. HRI rate is calculated as the number of high risk incidents per million hours
worked.
GRI Reference: 403-9 (2018).
High risk incidents (HRI)
2023
2022
2021
2020
2019
High risk incidents
67
75
122
140
190
HRI rate
0.69
0.80
1.36
1.66
2.08
S1.14 Occupational illness rate and sick leave
Reporting principles
Occupational illness rate in Hydro’s consolidated activities.
Occupational illness rate is calculated as incidents of occupational ill health per million working hours.
All potential cases shall be reported. Actual occupational illnesses are defined by Hydro as either
illnesses that have been confirmed by relevant authorities/insurance companies or doctors (depending
on the national system); or that have led to any kind of permanent disability, disablement pension, loss
of function and/or are a listed occupational disease. The figure includes instances associated with
discontinued operations.
Sick leave includes all absence due to illness, measured as number of days lost due to sick leave as a
percentage of possible working days excluding holidays. Sick leave is recorded based on local
definitions which may differ between countries.
GRI reference: GRI Standard 403-10 (2018)
Occupational illness rate
1)
and sick leave
2023
2022 *
2021
2020
2019
Occupational illness rate
2)
0.2
0.3
0.3
0.3
0.2
Sick leave, percent
3.5 %
4.1 %
3.8 %
4.2 %
3.7 %
Sick leave, Norway
4.5 %
4.7 %
4.9 %
4.5 %
4.5 %
Women
5.2 %
5.5 %
6.5 %
5.3 %
5.7 %
Men
4.3 %
4.4 %
4.5 %
4.5 %
4.2 %
* 2022 sick leave reported for Norway in the 2022 annual report was incorrect and based on the December 2022 data, not the annual total sick
leave in 2022. This has been corrected in the 2023 annual report.
1)
2021 includes all Hydro sites, earlier years did not include Extrusions
2)
Cases per million working hours. The numbers include discontinued operations.
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Own workforce
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
S1.15 Social data for 50/50 joint venture Qatalum
Reporting principles
Number of employees and share of women is based on total manning at Qatalum per 31. December
2023.
TRI rate and fatal accidents are reported for the calendar year in full.
Social data for 50/50-owned Joint Venture Qatalum
2023
2022
2021
2020
2019
Number of employees
999
1,064
1,060
1,059
1,137
Share of women
0
3.2%
3.3%
3.3%
3.6%
TRI rate, incidents per million hours worked
0.6
1)
0.6
0.3
1.7
0.7
TRI rate, (contractors)
-
3.0
1.4
0.7
0.7
Fatal accidents
1
-
-
-
1
1) 2023 TRI rate for employees and contrators under Qatalum supervision, combined. Previous years include employees only.
The reported fatal accident in 2023 involved a contractor. There was also one fatal accident involving a contractor, in 2019.
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3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Workers in the value chain
Why it matters
With more than 30,000 suppliers in over 40 countries and 30,000
customers worldwide, Hydro has a significant indirect impact on
society and the environment through its value chain. Ensuring a
responsible value chain is an essential element of Hydro’s Just
Transition framework, which sets out how Hydro as a company shall
contribute to a future that is not only greener, but also socially just.
Hydro may indirectly impact workers positively through the creation
of jobs. By setting high standards for suppliers on human and
workers’ rights, and engaging, influencing, and collaborating with
Hydro’s suppliers to improve their human rights commitments and
management, the business may indirectly contribute to a high
number of people having access to decent work, where their rights
are respected.
However, Hydro’s procurement includes raw materials, products and
services from industries and geographies with an inherent risk to
workers’ rights. Potentially negative impacts in Hydro’s value chain
could relate to workers not having their rights respected, accidents or
unintended incidents that result in injuries, ill health, or death.
Through Hydro’s human rights due diligence process, the company
has identified salient human rights risks for its business that have the
potential to impact workers in its value chain (see list to the right).
Our approach
Hydro’s work to ensure a responsible supply chain is an integrated
part of its Just Transition framework. Please see the chapter Affected
Communities for further details about the framework.
Transparency and traceability of key sustainability data for Hydro’s
products is an important foundation for Hydro’s work to ensure a
responsible supply chain, and Hydro’s goal is to have the blueprint
for a digital product passport on sustainability data in place by year-
end 2025. In 2023, Hydro started a group wide project to build a
common approach and model that supports the transfer of data along
the value chain after a proof of concept in 2022. Hydro has
established a roadmap which puts the company in a position to
deliver this to customers and users by the end of 2025. The risk of
negative impact to workers in the value chain is managed through
Hydro’s human rights due diligence. Please see the Human Rights
chapter for further details about Hydro’s human rights commitment
and management. Hydro’s approach to responsible sourcing is
based on the UN Guiding Principles on Business and Human Rights
and the OECD Guidelines for Multinational Enterprises on
Responsible Business Conduct and can be summarized in three
steps:
1. Mapping of risks
All suppliers are subject to a qualification process, including a
screening for risks related to human rights and workers’ rights. As
part of creating a common and consistent approach to supply chain
management, Hydro has entered into agreement with the
sustainability rating company EcoVadis. All suppliers that have a
medium or high inherent risk, based on Hydro’s risk categorization,
are subject to further screening, using either EcoVadis or an
alternative self-assessment form combined with desktop research. If
Hydro identifies any concerns, the company conducts a more
comprehensive review or audit of the potential supplier to clarify if the
supplier meets Hydro’s requirements before any agreements are
signed. Following the initial supplier risk assessment, comprehensive
assessments, including visits and audits or reviews, of suppliers with
a high inherent sustainability risk shall be conducted regularly. The
mandatory process for due diligence of all suppliers is described in
the company-wide procedure, Sustainability in the supply chain, and
is based on three levels of inherent sustainability risk levels.
Salient human rights risk for workers in the value chain
Forced labor, modern slavery and child labor abuse
Discrimination and harassment
Vulnerable individuals and groups
Freedom of association and collective bargaining
Access to information and participation in dialogue
Decent working conditions
Health and safety
Targets and ambitions
Transparency and traceability of key sustainability data for our products by 2025 or earlier
Performance
10,446
1,095
Suppliers screened in 2023
High sustainability-risk suppliers
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4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
2. Clear expectations
Hydro’s Supplier Code of Conduct sets out the minimum
sustainability requirements for all its suppliers. The code is based on
internationally recognized standards such as the Universal
Declaration of Human Rights and the ILO Core Conventions.
The principles set out in Hydro’s Supplier Code of Conduct are made
binding through contractual clauses. Hydro’s Supplier Code of
Conduct requires suppliers to conduct due diligence in their own
supply chain, and sustainable procurement expectations are
reflected in Hydro’s supplier self-assessments, which is specified in
its contracts and assessed in visits and audits.
3. Support and development
Hydro builds its relationship with its suppliers on mutual trust and
development. Hydro works to strengthen and improve its suppliers’
sustainability performance through efforts such as dialogue,
knowledge-sharing, innovation processes, incentives, and supplier
development programs. Hydro actively discusses and promotes
human and workers’ rights.
While failure to comply with Hydro’s Supplier Code of Conduct may
as a last resort result in a termination of the contract, Hydro always
seeks to work with its suppliers with intention of continuous
improvement as long as it considers this to be in the best interest of
the people in its supply chain.
As a part of Hydro’s work to strengthen its procurement processes,
the company has also incorporated living wage requirements.
According to the supplier Code of Conduct, wages and benefits paid
for a standard working week shall as a minimum meet national legal
or industry standards, whichever is higher. Wages should be
sufficient to cover basic needs and provide some discretionary
income.
Hydro engages and collaborates with stakeholders internally and
externally when relevant, to help inform and evaluate the
effectiveness of its approach to responsible sourcing. See the section
on Partnerships for more information.
Due diligence of customers
Hydro follows closely regulations for sanctions or restrictions on
countries and specific companies. Hydro regularly screens its list of
customers and business partners for any potential sanctions.
In addition to this, Hydro conducts a sustainability due diligence
process before it enters new sales contracts with partners in
countries with identified high human rights risks.
In 2023, new business opportunities were stopped due to the limited
opportunity to influence and mitigate potential adverse human rights
impacts related to the project and country of operation.
Through 2023, Hydro has been engaged in several external network
meetings to better understand how to implement human rights due
diligence downstream in its value chain. Hydro plans to do a more
comprehensive mapping of impacts in its downstream value chain in
2024.
Supplier and business partner screening
As part of the integrity risk management process, more than 10,000
potential or existing counterparties were screened for human rights
violations, corruption, money-laundering, politically exposed persons,
and violations relating to sanctions using the RDC integrity risk tool
during 2023. New business partners related to most operations are
screened before registered in our ERP system. Hydro’s operations in
North America also use the denied-parties risk tool MK Denial to
screen suppliers against 16 official sanction lists multiple times a
year. In 2023, approximately 5,300 customers and suppliers were
screened in MK Denial.
All suppliers, customers and other business partners registered in
Hydro’s main accounting systems are screened on a weekly basis
against recognized international sanction lists. Hydro has developed
a spend cube to visualize external spend, measure procurement
initiatives, and manage supply chain risk.
Please see Note S2.1 for metrics related to supplier screening and
due diligence activities.
Supplier due diligence process
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3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Hydro’s supply chain
Most of Hydro’s suppliers are located in the same countries as
Hydro’s production facilities. Beyond Hydro’s direct suppliers,
Hydro’s value chain cuts across a number of countries.
Hydro’s Supplier Code of Conduct was revised in 2023, incorporating
an explicit requirement for suppliers to conduct human rights due
diligence in their own operations and value chain, in accordance with
the United Nations Guiding Principles on Business and Human
Rights and the OECD Guidelines for Multinational Enterprises on
Responsible Business Conduct.
Throughout the year, Hydro continued the process to implement the
procedure on sustainability in the supply chain to ensure a common
approach across Hydro. Hydro established a cross-departmental
taskforce, working to identify areas in its supply chain management
where further measures may be needed to quality assure that our
practice and guidelines is fully aligned with the OECD Guidelines.
The taskforce will develop an improvement plan based on a currently
ongoing mapping exercise. This plan will also be of aid when it
comes to prioritizing Hydro’s internal resources within this area.
Through regular assessment, follow-up and collaboration with
selected high-risk suppliers Hydro contributes to continuous
development. Hydro conducted 141 supplier audits in 2023 including
topics related to human rights, working conditions and HSE.
Key findings from the audits relate to lack of management systems,
environmental awareness, compliance controls and emergency
preparedness. Around 30 percent of the audits led to action plans,
and by the end of 2023, almost 100 percent of the corrective actions
proposed by Hydro resulted in improved performance.
Hydro is an active member of the Aluminium Stewardship Initiative
(ASI) and promote ASI’s certification program to its aluminium
suppliers for the sustainable development of their operations. Hydro
also cooperates with other external stakeholders, such as unions and
industry associations, to develop and implement supplier
development programs.
Salient human rights risks affecting workers in
the value chain
The following section will provide further descriptions of the salient
human rights risks and impact related to workers in Hydro’s value
chain, including how the company works to mitigate these. Value
chain risks and impacts related to land rights and resettlement are
covered in the chapter Affected communities. Please see the chapter
Human Rights for a more detailed description of our human rights
due diligence process.
Brazil
In Brazil, potential risks within the supply chain include business
integrity and human rights, particularly related to working conditions.
To identify and address these risks, both existing and potential
suppliers undergo a thorough "Supplier Diagnosis" process.
The human rights risks are assessed for category and country. The
category assessment considers 54 categories, covering 95 percent
Hydro’s supply chain inputs
BAUXITE
ALUMINA
ENERGY
PRIMARY ALUMINIUM
CASTING
EXTRUSIONS
• Diesel
• Floccutants
• Coals (South America, USA)
• Fuel oil/diesel (Brazil)
• Caustic soda (USA)
• Bauxite (Brazil)
• Lime (Brazil)
• Sulphuric Acid (Brazil)
• 10 TWh captive hydropower
production in Norway
• 6 TWh gas power in Qatar
• Remaining power (local)
• Alumina (Brazil, Australia,
Europe, Jamaica)
• Anodes (Local, Europe, China)
• Coke (USA, China, Middle East,
Europe, Norway)
• Pitch (Australia, China Europe,
India)
• Alloying metals (China, other
Asia)
• Gas (local)
• Scrap metal (traders, local,
global)
• Cold metal ( EU/EEC, Americas)
• Liquid metal (local)
• Extrusion ingot (South America,
North America, Europe, Middle
East, Asia)
Labor, transport/logistics, catering, maintenance & security (mainly local) / Project related services, equipment, and materials (local and worldwide)
Hydro’s tier 1 sourcing countries*
*Data is based on Hydro’s Spend Cube, covering most of our spend. Our tier 1
data includes the head office locations of our traders. Spend cube is still under
development and does not encompass 100% of our spend.
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5. Sustainability
6. Financials
7. Appendices
Content
material spend and 100 percent of services. The country risk
assessment considers the following topics: forced labor, freedom of
association, child labor, rule of law, living standards, civil and political
rights.
In addition to human rights risk assessments, suppliers undergo
scrutiny against the national "Labor Compliance List," maintained by
the Federal Labor Ministry. This list identifies companies in Brazil
accused of subjecting workers to conditions analogous to slavery.
To maintain a high standard, existing suppliers undergo continuous
monitoring and may be subject to human rights audits when deemed
necessary. Suppliers may also apply to participate in a
comprehensive supplier development program. In 2023, 30 supplier
companies were invited to participate in the 4th edition of the
program, which this year had a deep-dive on human rights and ethics
in business.
China
Due to the limited state protection of human rights as well as
restrictions on access to information, Hydro assesses the inherent
risk of human rights impacts in China to be high.
The serious government sanctioned human rights violations in and
outside Xinjiang against Uyghurs and other Muslim minorities is a
particularly severe risk that Hydro monitors closely. While Hydro
does not source material and alloys from the Xinjiang region, the
company still has a number of alloy and raw material suppliers
elsewhere in the country.
In 2023, Hydro conducted a human rights assessment of its
operations and value chain in China, as an addition to its existing
human rights supplier assessments programs. The project was led
by an external human rights expert company, with the goal of
identifying risks and reviewing Hydro’s current due diligence
processes.
Based on Hydro’s salient risk review, suppliers were evaluated for
forced labor risk (also beyond tier 2), health and safety risks; poor
conditions of worker facilities and dormitories; risk of delayed wage
payments or workers not receiving required overtime pay; differences
between conditions for employees and subcontracted workers; and
lack of access to grievance mechanisms and freedom to report
issues.
The process was executed through a combination of document
reviews, on-site visits and interviews with managers and workers at
different supplier sites. Findings were triangulated with detailed
desktop research.
The review did not identify any indications of forced labor at supplier
sites. However, certain risk factors were identified and will be
followed closely.
The issue of forced labor in the solar sector, particularly related to
polysilicon production in the Xinjiang region, has been the subject of
numerous reports and articles. Hydro Rein is currently participating in
two large-scale solar projects through Joint Ventures (Mendubim and
Boa Sorte). In both projects, the Joint Venture partner has led the
procurement process and Hydro Rein has requested relevant
information and measures before approving a contract, including
mitigation plans to tackle forced labor risks.
To address the risks identified, Hydro Rein established a taskforce in
2023, which has worked on mapping and implementing good
practice. This has e.g. included extensive supply chain mapping and
collaboration with industry associations, including through the Solar
Stewardship Initiative (SSI).
Qatar
At the primary aluminium producer Qatalum, a joint venture where
Hydro holds 50 percent, close to 75 percent of the roughly 1,350
workers are employed directly by Qatalum. The remaining 25 percent
are temporary workers that are supervised by a Qatalum employed
manager. Qatalum strives to secure good working conditions for all
employees, and work continuously to assess, safeguard and improve
the conditions of contracted workers.
Qatalum became a member of the Aluminium Stewardship Initiative
(ASI) in 2021 and in 2022, Qatalum received its Performance and
Chain of Custody standard certificates, a recognition that it is aligned
with globally accepted standards on ESG. In 2023 Qatalum was
audited by DNV against the new version of the Performance
standard, and we aim to continue to work with Qatalum in addressing
relevant findings and observations in the audit.
In 2023, Hydro continued its discussions with local stakeholders and
organizations present in Qatar to address and discuss common
challenges related to the recruitment of migrant workers, as well as
sharing knowledge and good practice related to working conditions in
Qatar.
Human rights country risk map
The map illustrates country-specific human rights risk scores, which
are used by Hydro to assess the inherent sustainability risk of
suppliers. The input data for this map was provided by the
independent research organization Nomogaia and adjusted for Hydro
specific factors.
Battery production
Hydro Batteries aims to develop leading sustainable battery
materials businesses in Europe, by active investments in the battery
value chain. This is part of Hydro’s strategic direction towards 2025
to diversify and explore new opportunities in renewable energy. The
potential human rights impact of battery production has been
documented by a number of sources (see e.g. Amnesty
International’s “Powering Change or Business as Usual” detailing the
impact of cobalt and copper mining on local communities in the
DRC).
Hydro Batteries owns 24,1 percent of the company Corvus, which
makes battery systems and has around 110 suppliers globally,
including battery manufacturers. The batteries value chain is
exposed to human rights risks in relation to the extraction and
processing of minerals.
Corvus has identified the risk of child labor and modern slavery to be
particularly high in the cobalt, tin and gold supply chains. We work
closely with Corvus to support their human rights in the supply chain
work, and have conducted trainings, workshops and seminars. We
sit on their Sustainability Advisory Board and have included Corvus’
supply chain in China in an ongoing human rights assessment.
Hydro Batteries also owns 0,6 percent of Swedish cell manufacturer
Northvolt, which has similar risks in their supply chains.
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4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
S2 Notes on Workers in the value chain
S2.1 Supplier metrics
Reporting principles
The data for the supplier metrics are retrieved from Hydro Spend Cube, which covers most of Hydro’s
spend on suppliers.
Total number of suppliers is based on vendor identity. A single supplier to Hydro may constitute multiple
vendors if Hydro has purchased from multiple locations by the same supplier. Hydro estimates that the
number total unique suppliers is approximately 30,000.
Local suppliers are defined as suppliers situated in the same country as the site making the purchase.
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.
Supplier metrics
2023
Total number of suppliers
41,589
Total spend on suppliers (NOK million)
142,833
% spent on local suppliers
65%
S2.2 Supplier due diligence
Reporting principles
Data on supplier screenings is collected from each procurement team.
Suppliers screened is based on the number of screenings done using different screening tools,
including RDC integrity risk tool, the MK Denial sanctions screening tool, screenings using supplier self-
assessment questionnaires, EcoVadis ESG screenings, and desktop assessments. The reported
number is based on the total screenings performed using RDC, which is the most frequently used
screening tool. The total number of screenings conducted is higher, as a single supplier is often
screened multiple times using different screening tools.
Supplier audits is based on on-site audits conducted by either Hydro, or onsite audits conducted by a
third party on behalf of Hydro.
GRI reference: GRI Standards 308-2 (2016) and 414-2 (2016).
Supplier due diligence
2023
Total suppliers screened
10,446
Total number of high sustainability risk suppliers
1,095
Supplier audits conducted
141
Supplier audits that lead to a corrective action plan for the supplier
50
Supplier contracts terminated due to sustainability risks
3
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Affected
communities
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Affected communities
Why it matters
The large-scale and fast-paced changes that need to take place as
part of the green transition will impact the communities in which
Hydro operates. It is widely recognized that vulnerable communities
will be the most affected unless these impacts are managed as part
of the process. The 2015 Paris Agreement includes a clear
recognition that the green transition must also be just, a recognition
which has been further established and operationalized by the UN’s
2030 Agenda “Leave No One Behind.”
Hydro can only succeed as a company if the communities around
also succeed. As a global aluminium and energy company extracting
natural resources, operating in more than 40 countries, Hydro
depends on local institutions and infrastructure. Trust and good
relationships with local communities and the people living there are
of key importance to Hydro operations.
Hydro’s Just Transition framework has been established to ensure
that Hydro’s business contributes to a transition that is both green
and just. By acting on this framework, Hydro’s aim is to contribute to
positive development in the societies where it operates.
Our approach
Hydro has developed a framework for supporting a just transition,
through which the company seeks to contribute to positive
development in the societies where it operates. The framework is
focused around three key outcomes: People have human rights
protected and have access to equal opportunities; Local communities
are resilient in a changing world; People have the necessary skills
and jobs for the future low-carbon economy. Hydro contributes
towards these outcomes by respecting and promoting human rights,
supporting positive local development, and investing in education.
Hydro’s business activities impact a large number of people in local
communities positively through job creation and local value creation.
Hydro contributes to the societies to which it belongs by offering
decent jobs, buying local goods and services, paying taxes and fees,
establishing and maintaining infrastructure and supporting social
programs and investments. The scale of Hydro’s positive impact is
linked to the scale of its operations in the local communities. Hydro
contributes to greater local value creation in the communities near its
larger plants.
Hydro’s business also has the potential to adversely impact local
communities. Hydro recognizes that the impact of its operations on
land and water resources can affect local communities in which it
operates. The management of such impacts is a key element of
Hydro’s sustainability agenda and of central importance in the
company’s stakeholder engagement in local communities.
Through Hydro’s human rights due diligence process, the company
has identified salient human rights risks for its business that have the
potential to impact affected communities. These are listed in the table
to the right.
Hydro recognizes the importance of its relationship with local and
affected communities. Hydro is a global company, but its presence is
ultimately local, and its approach towards society is reflected by this.
Hydro’s Just Transition framework is an example of how the
company adjusts its role in affected communities as a result of
Hydro’s deeper understanding of what the journey towards a net-zero
world means. The need for rapid development of renewable energy
coupled with digitization has a profound impact on a wide range of
the communities Hydro is located in, and the Just Transition
framework has been developed in response to these impacts.
Salient human rights risk in affected communities
Health and safety
Discrimination and harassment
Access to information and participation in dialogue
Land rights and resettlement
Vulnerable individuals and groups
Just Transition definition:
“An economy-wide process that produces the plans, policies
and investments that lead to a future where all jobs are green
and decent, greenhouse gas emissions are at net-zero, poverty
is eradicated, and communities are thriving and resilient.”
Source: Just Transition Centre (part of the International Trade Union
Confederation)
Targets and ambitions
Improve lives and livelihoods wherever we operate by contributing to
Protection of human rights and access
to equal opportunities
Resilient local communities in a changing world
Skills and jobs for the future
low carbon economy
Performance
411
NOK 123 million
40,000
Stakeholder dialogues conducted
Community investments, charitable donations and
sponsorships, including TerPaz (local community centres)
People reached
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Affected
communities
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Protection of human rights and access to equal
opportunities
Respecting and promoting human rights is at the heart of Hydro’s
Just Transition work. While Hydro’s ambition of improving lives and
livelihoods wherever it operates goes beyond respecting human
rights, the positive impact Hydro seeks to achieve can only be
created when the rights of people affected by the company’s
operations and in its value chain are respected. Hydro’s commitment
to respecting the human rights in affected communities is set out in
the company’s Human Rights Policy.
Hydro identifies impact on local communities by mapping the local
sustainability context and transition challenges where it operates,
with reference to the Human Development Index, TI Corruption
Perception Index, and salient human rights risks in the local
communities. Hydro also engages in stakeholder dialogue to
understand what is expected of the company, what is important to
local communities, how Hydro impacts them and how the company
can solve common challenges.
Potential human rights impacts on local communities are managed
through the human rights due diligence process, as described in the
Human Rights chapter. In the section on salient human rights risks in
affected communities, Hydro describes the salient human rights risks
identified in relation to the local communities where it operates or that
is part of its value chain, as well as social programs implemented to
mitigate these risks.
Resilient local communities in a changing world
A key element in Hydro’s Just Transition framework is to strengthen
the societies and communities where it operates. The way Hydro
does this differs from country to country and between communities.
The main contribution is generated from the company’s operations
through production and purchase of goods and services, direct and
indirect job creation, and tax payments. Hydro also engages in
capacity building through targeted programs, to develop the
competence of groups as well as individuals.
In developing Hydro’s Just Transition framework, the company has
looked at the communities where it has the largest presence, as well
as communities which are uniquely exposed to Just Transition
challenges to prioritize Hydro’s work. Some of these communities’
face challenges related to poverty and inequality, physical climate
change and challenges related to decarbonization efforts changing
the nature of jobs and required skills. While Hydro’s approach to
supporting resilience varies depending on the local context, a
common factor is the partnership approach, working with local
partners with strong knowledge of the local context, as well as strong
engagement with local community representatives.
Hydro has a number of social programs aimed at building local
community resilience. Some of its community investments and
programs are linked to for example mining license requirements in
Brazil and regulated watersheds in Norway, while others are
voluntary commitments. The programs target education, economic
growth, decent work, entrepreneurship, capacity building and the
strengthening of institutions.
In 2023, Hydro spent around NOK 123 million in total on community
investments, charitable donations, sponsorships and TerPaz (local
community centres). Excluding TerPaz, there is a 26 percent
increase compared to the prior year, mainly due to our increased
community efforts in Pará. Please see the Note S3.1 for more
information.
In 2023, Hydro also developed a program to increase funding to
projects aligned with the Just Transition priorities in the communities
where it operates. The program will be launched in 2024.
Hydro also supports local communities through the transfer of
competence that takes place through the company’s 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. In
addition, Hydro provides scholarships to selected PhD candidates
doing research relevant for its business areas. Hydro is also the
sponsor of a professorship in Norway and has several adjunct
professors among its own employees. See the section on
partnerships in the Business Conduct chapter for more information.
Skills and jobs for the future low carbon
economy
A risk associated with decarbonization efforts is that social
inequalities increase as new technologies introduce the need for a
different type of skillset or bring other changes to the labor market.
To address this, Hydro’s Just Transition framework includes a focus
on ensuring that people have the necessary skills and jobs for the
future low-carbon economy.
Hydro’s ambition is to equip 500,000 people with essential skills for
the future economy by 2030. The insight from measuring the people
reached and the impact of its initiatives make Hydro better equipped
to select and execute future initiatives with a positive impact. In 2023,
Hydro reached more than 40,000 people, which sets the total number
reached to 197,000 people since 2018. Hydro is still on track to reach
500,000 by year-end 2030. Continuous improvement of current
initiatives and the development of new high impact initiatives are
important areas.
Salient human rights risks in affected
communities
The following section provides further descriptions of the salient
human rights risks and impacts in affected communities, including
how Hydro works to mitigate these.
Hydro systematically monitors the impact of its mitigating actions.
This involves regular data collection, performance evaluations, and
stakeholder feedback. By using key performance indicators and
collaborating with external partners, Hydro ensures its initiatives align
with its mission and contribute positively to the communities where it
operates.
Brazil
Hydro’s Bauxite & Alumina activities are located in the Amazon, in
the state of Pará where Hydro is operating a mine, a pipeline, and a
alumina refinery, and has an ownership share of 51 percent in the
aluminium smelter Albras. This region presents socio-economic
challenges similar to other areas in the Amazon, affecting the well-
being of its residents. Specifically, Paragominas, the location of the
mine, and Barcarena, where the refinery and a smelter are situated,
experience relatively low to middle income rates. Additionally, the
cities along the bauxite pipeline, namely Tome-Açú, Moju,
Abaetetuba, Acará, and Ipixuna do Pará, experience lower income
generation. On average, these seven municipalities have a poverty
rate of 39 percent, with approximately 40 percent of residents lacking
access to sanitation.
Hydro’s operations are neighbor to 28 Quilombola communities.
Hydro does not operate in any legally demarcated indigenous land or
territory.
Respect for human rights is at the core of Hydro’s social license to
operate and the context of its operations in Pará makes it important
that Hydro takes a community approach to its human rights work.
Hdryo’s human rights due diligence process is informed by its social
risk management and itsr social projects in the community
emphasize active stakeholder involvement in addressing social
challenges.
Human Rights Action Plan
In 2020, Norsk Hydro Brasil began the implementation of a Human
Rights Action Plan to mitigate risks in the operations (Alunorte,
Albras and Mineração Paragominas, including the pipeline) for the
period 2020 to 2023. The implementation progress is currently at 94
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communities
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2. Business
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5. Sustainability
6. Financials
7. Appendices
Content
percent of the initiatives for Bauxite and Alumina completed,
including the following activities:
• Conducting human rights training for management, other
employees and suppliers, including our grievance
mechanism partner.
• Developing policies on anti-discrimination and harassment,
and on traditional communities.
• Detailed mapping of traditional communities along the 244-
km-long bauxite pipeline as well as advancements on the
Quilombola study
1)
.
• Implementation of social initiatives and strengthening social
dialogue with traditional communities.
• Enhance the incorporation of the Voluntary Principles for
Security and Human Rights in security providers’ contracts.
• Strengthening effectiveness criteria for grievance
mechanisms.
A human rights consultancy will be hired to conduct a new thorough
cycle of human rights due diligence of our operations in the state of
Pará.
Social risk
Social risk management is handled by a dedicated team operating
across various support areas. This specialized team is committed to
managing and anticipating risks, ensuring a proactive approach to
prevent potential challenges.
Social projects
Hydro has implemented a structured approach for effective and
inclusive engagement with diverse communities in the region.
Since 2018, Hydro has supported the Sustainable Barcarena
Initiative (SBI) to enhance community participation. This is an
independent forum to support sustainable development in Barcarena.
The overall aim is to bring local stakeholders together to discuss
challenges and opportunities, strengthen capabilities and decide
about the main social investments supported by the Hydro
Sustainability Fund (HSF). In 2023, about 137 community leaders
participated in meetings, dialogues or programs organized by the
initiative.
SBI also plays an important role coordinating the financing rounds of
Hydro Sustainability Fund (HSF) to ensure Hydro’s social
investments meet the local community’s needs. In 2023, HSF
supported 22 community based projects, including initiatives such as
the installation of solar panels and the development of a beekeeping
project in Quilombola traditional communities.
Aligned with Hydro’s Just Transition framework, Hydro ran several
social programs across the seven municipalities where it operates.
These initiatives aim to contribute to the sustainable development of
the territory, promoting a Just Transition through a particular focus
education and skills, job and income generation, biodiversity and
quality of life.
In addition, Hydro has a volunteering program for employees to
increase internal engagement and address community needs. In
2023, over 1,500 employees participated in the volunteer programs
in Brazil. The volunteers organized over 70 different activities,
including food baskets donations, fundraising, seed planting and
training for community leaders. The activities reached approximately
18,000 people.
Education and skills
In 2023, Hydro continued its efforts to provide educational activities
and capacity building projects throughout the potentially affected
communities where it operates. These initiatives aim to empower
individuals and communities with the knowledge and skills necessary
to enhance their economic well-being, fostering sustainable
development and resilience against socio-economic challenges.
In 2023, Hydro’s initiatives in Brazil promoted education and skills to
22,244 people, building up capacity in communities, including
traditional Quilombolas along the bauxite pipeline to strengthen their
job opportunities.
Among the initiatives, Hydro initiated in 2023, the “Synapse Network
Program” in collaboration with the Brazilian National Development
Bank (BNDES), focusing on training teachers to improve the teaching
and learning of Portuguese and Mathematics in children’s literacy
cycle. The project is aligned with the Brazilian National Common
Curricular Base (BNCC) and built to be effective in vulnerable and
extreme-poverty regions. The project covers 38 Brazilian
municipalities, and the Hydro partnership began operating in the city
of Acará, one out of the 7 municipalities crossed by the pipeline. Our
ambition is to expand the project to two additional municipalities
along the pipeline in 2024.
In 2023, Hydro started supporting “Itinerários Amazônicos,” an
educational program focusing on training public teachers. The
program discusses sustainable development, climate change, and
traditional knowledge, using the Amazon as an example. The aim is
to create teaching materials, drawing references from the forest.
Public high school networks from eight states in the Legal Amazon
region took part: Acre, Amapá, Amazonas, Maranhão, Mato Grosso,
Pará, Roraima and Tocantins. The program has been carried out by
the Iungo and Reúna Institutes and by the Amazon Concertation
Network, in partnership with the Brazilian National Development
Bank (BNDES), Arapyaú Institute and Movimento Bem Maior.
Among Hydro’s educational projects, the company maintained the
“Território do Saber” Project. It provides educational activities to
illiterate adults and training for public teachers in Paragominas. This
project has reached more than 18,000 people since 2018.
To support professional qualification, Hydro completed the
construction of a technical school in Barcarena in 2022, where the
Alunorte refinery and the Albras aluminum factory are located. In
2023, Hydro has continued to support the local government in the
planning to start the operations of the facility, scheduled to begin in
February 2024.
Hydro promoted professional qualification courses for residents of six
communities, three of which are Quilombolas, in partnership with
SENAI (National Service of Industrial Apprenticeship), offering
professional courses. Additionally, Hydro continued its partnership
with the Casa Familiar Rural, the main educational institution in the
Quilombola do Jambuaçu Territory.
In addition to this, Hydro also continued its training program for
women in partnership with SENAI to increase the number of women
working in its operations.
Job and income generation
Hydro continues programs to support livelihoods, particularly to
promote income generation, such as traditional family farming. In
Barcarena and Tomé-Açu, Hydro has provided training in
agroecology practices for family farmers. In addition, Hydro sustained
efforts to promote the marketing of products from local family
producers, focusing on community agri-food entrepreneurship by the
“Tiptix” project run by Hydro Sustainability Fund.
Biodiversity
Preserving biodiversity is an important element of Hydro’s human
rights approach. Hydro recognizes the vital link between healthy
ecosystems and community well-being.
To support the preservation of the biodiversity in the Amazon region,
Hydro runs several programs. This includes environmental efforts
and collaborations such as the Biodiversity Research Consortium
Brazil-Norway. In 2023, Hydro renewed the partnership for five more
years. Since 2013, Hydro has invested approximately BRL 15 million
through the partnership, supporting 26 research projects and 60
published scientific articles. For more information on this, please see
our Biodiversity and ecosystems chapter.
1) Quilombola study is a formal procedure for engagement with traditional communities in
the environmental licensing process in Brazil, developed according to the ILO 169
guidelines.
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7. Appendices
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Quality of life
To contribute to local development and Quality of Life, Hydro also
strengthened its community investments through partnerships with
public authorities. In 2023, Hydro completed the delivery of three
TerPaz local community centers, which are local community centers
capable of accommodating about 1,500 people per day for cultural,
educational, and medical assistance. To continue this effort, in 2023,
Hydro signed a partnership for the construction of an additional six
TerPaz local community centers in the municipalities where it
operates along the pipeline.
In an area adjacent to Alunorte’s and Albra’s operations in Barcarena
which is regulated for industrial purposes, illegal logging and irregular
settlements have accelerated since 2016. Hydro is constantly
engaging with competent authorities to find a social assistance plan
for vulnerable families. In 2023, an Alunorte owned plot in the urban
area of Barcarena, with no operational activities, was illegally
occupied. Hydro engaged public authorities, who conducted the
eviction process, ensuring respect for human rights. The case is
under discussion in the Brazilian court.
Wind and solar projects in Brazil
Hydro Rein is currently engaged in three major projects in Brazil,
Ventos de São Zacarias (VSZ), a wind project in the northeast of
Brazil; Mendubim, a solar project in the northeast of Brazil; and Boa
Sorte, a solar project in the southeast of Brazil.
In Ventos de São Zacarias, Rein has Green Investment Group as
partner. There are two Quilombola communities in the vicinity of the
project. A joint venture team, including environmental and social
professionals from both investors, are responsible for following up
identified environmental and social impacts throughout the project
construction, including the potential impact on members of the two
Quilombola communities. In 2023, two families were resettled, in line
with a Resettlement Action Plan. A Livelihood Restoration Plan is
being executed and the impact on the families is being monitored by
VSZ’s team for at least three years.
In Mendubim, Rein has Equinor and Scatec as partners, Scatec
being responsible for building and operating the project.
In Boa Sorte, Rein has Atlas Renewables as partner. They are
responsible for the building and operation of the project, including the
execution of all environmental and social programs. Boa Sorte did
not involve resettlements nor traditional communities.
Rein works with its business partners to ensure the implementation
of IFC Performance Standards and the Equator Principles.
Canada
In Canada, Hydro’s part-owned primary aluminium producer Alouette
is in the vicinity of the Innu First Nation community. Alouette
assesses, mitigates, and reports to Alouette Board of Directors on
human rights risks as part of its risk management procedure,
including risks impacting the local communities where it operates.
There have been implemented relevant mitigating actions and
engagement with Innu First Nation and provincial organizations and
stakeholders on its commitments. As a result of this, Alouette has
improved diversity in its organization by increasing the Innu First
Nation workforce share, and increased community engagement on
social issues. This is being measured through defined targets and
reported to the Alouette Board of Directors.
Guinea
Hydro does not source bauxite directly from Guinea, but some of the
alumina Hydro sources in Europe and a part of the primary metal
sourced externally could have their bauxite origin in Guinea. The
country’s bauxite industry is associated with a high risk of human
rights impact on communities, in particular related to land rights.
There are also concerns related to the health and safety of
communities in the vicinity of mining operations. Due to small
volumes and the indirect nature of Hydro’s sourcing activities, Guinea
has not been a country prioritized in the company’s human rights due
diligence in 2023. However, Hydro continued following the
complaints process related to the expansion of the CBG mine raised
to the Compliance Officer in CAO (the Compliance Advisor
Ombudsman for the International Finance Corporation).
Norway
In Norway, Hydro has an offtake agreement with Nordic Wind Power
DA for delivery of power from the new Fosen wind power installation.
Nordic Wind Power is a minority owner of Fosen Vind DA. The
projects on the Fosen peninsula are located within Sami reindeer
grazing land. Agreements on mitigating measures and compensation
for extra costs during the construction phase were previously entered
into with the two affected reindeer herding groups.
In October 2021, the Norwegian supreme court determined that the
construction of the wind park had not sufficiently taken into account
the rights of the Sami population. The consequences of the verdict
are being assessed by the ministry responsible. Hydro is monitoring
the situation closely and is following up with the shareholders of
Fosen Vind DA. In December 2023, the Sør-Fosen Sijte reindeer
herding district and Fosen Vind entered into an agreement. Sør-
Fosen Sijte will be granted access to additional land for winter
grazing and will receive financial support for reindeer herding. Fosen
Vind is allowed to continue using the area at Storheia for wind power
production throughout the concession period. There has not yet been
reached any agreement between the Nord-Fosen Siida and the wind
company Roan Vind.
Sweden
The wind farm project Stor-Skjälsjön is located near Sundvall in the
northern part of Sweden where there is a Sami community. Hydro
Rein has 25 percent ownership of the project. An adjacent Sami
community will be impacted by the wind farm, as the areas are in
some periods used for reindeer herding.
A review of environmental and social risks has been conducted. No
known non-compliances with regulatory requirements or Hydro’s
policies have been identified. Legal agreements on cooperation
between the Sami community and the wind farm during construction
and operation have been signed and regular consultations held.
Eolus, Rein’s Swedish partner, is responsible for the development
and stakeholder management. The impacts of the wind farm will be
minimized through mitigative actions proposed by the community.
Indigenous peoples and traditional
communities
Hydro respects the rights of indigenous people and traditional
communities and acts in alignment with the UN Declaration on the
Rights of Indigenous Peoples as well as the Indigenous and Tribal
Peoples Convention (ILO Convention 169) in engagement with
indigenous people and traditional communities. We recognize their
rights to self-determination, to lands which they traditionally occupy,
to their customs, traditions and institutions, and to free, prior and
informed consent (FPIC).
Hydro does not own any mining and/or exploration concessions in
indigenous lands.
Please see the chapter about Human Rights for further information
about Hydro’s human rights due diligence process.
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communities
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
S3 Notes on Affected communities
S3.1
Community investments, donations, and sponsorships
Reporting principles
Community investments include monetary amounts and time spent to benefit the company as well as the
communities. Community investments relate to long-term strategic involvement in, and partnership with,
community organizations to address a limited range of social issues chosen by Hydro to protect its long-
term shareholder and stakeholder interests.
Charitable donations include one-off or occasional support to good causes in response to the needs and
appeals of charitable and community organizations, requests from employees or in reaction to external
events such as emergency relief situations.
Sponsorships include business-related activities in the community to directly support the success of the
company, promoting its corporate and brand identities and other policies, in partnership with charities and
community-based organizations.
TerPaz (local community centres) include Hydro’s contributions to public initiatives in the state of Pará,
Brazil, focusing on the social development of the local communities. The initiatives includes construction
of social centers or peace houses that provide residents with access to services such as medical and
legal services, training and professional courses.
All Hydro sites report annually on all community investments, charitable donations, sponsorships, and
other related initiatives.
Community investments, charitable donations and sponsorships
NOK million
2023
2022
2021
2020
2019
Community investments
1)
48
51
30
42
50
Charitable donations and Sponsorships
1)
48
25
25
14
9
TerPaz (local community centres)
27
179
Total
123
255
55
56
59
1) In 2021 we included Hydro Extrusions in the reported numbers for the first time.
In addition to the above, Hydro spent 521,000 NOK on the technical school in Barcarena, which was
completed in 2022.
The increase in charitable donations and sponsorships is mainly due to an increase in charitable donations
in B&A. The numbers are not directly comparable to historical figures due to different practices in collecting
the information. In addition to this, the 2022 numbers for Hydro Extrusions have been updated.
S3.2 Social responsibility target
Reporting principles
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 refer to all training and competence building outside formal educational
systems. Examples include trainees and Hydro’s supplier development program established in Brazil.
We have developed a framework and methodology for counting people impacted by our programs and
initiatives to ensure consistency in how we measure progress across the company. The methodology
covers initiatives related to education and capacity building and can be accessed on our webpage.
Social responsibility taget
1,000 people reached
Accumulated
since 2018
2023
2022
2021
2020
2019
Education and capacity building
197
40
25
21
60
28
All business areas are contributing in line with the original ambition setting of reaching 500,000 people with
our education and capacity building programs.
Based on the total number in 2023, 80% are related to education and 20% are related to capacity building.
The increase in the 2023 number compared to 2022 is primarily driven by one major program in B&A in
Brazil. This is a partnership with other organizations, but due to Hydro's pivotal role we count the complete
number of people reached instead of just the equity share. Hydro B&A had a role both in the initial planning
and structuring phase of the program as well as being the first fund provider which was a critical role in
garnering interest from other investors to the program, fostering a collaborative and diverse financial support
system.
Note that the 2020 results were significantly higher due to one particular initiative in India, reaching close to
30,000 people.
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Consumers
and end users
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Consumers and end users
Why it matters
Hydro is committed to delivering high quality products and managing
product related liabilities. Delivering on Hydro’s customers’
expectations is crucial to build strong partnerships and to deliver on
its commercial ambitions and targets.
Hydro can have a commercial and financial upside from providing
customers with transparent, quality information on the product quality
it delivers, with a traceable value chain. On the other hand, failure to
deliver on the expectations from its customers and end users can
result in loss of business, litigation and negative reputation that could
affect Hydro’s cash flow and financial results.
Our approach
Hydro continuously works to improve the traceability of its value
chain so that it can provide its customers with transparent, quality
information on provenance and the product quality it delivers.
Hydro is an important material supplier for many of its customers. If
Hydro fails to deliver on product quality specifications, this may have
a negative impact on end users of the products produced by Hydro's
customers. Hydro follows strict procedures for managing health,
safety, and environment aspect of its products throughout its total life
cycle.
Hydro identifies and measures its impacts on customers and end
users by tracking customer satisfaction, engaging in partnerships and
direct dialogue with its customers, and by monitoring complaints and
incidents reported to Hydro. See our Note S4.1 on Customer
satisfaction, as well as the Note G1.1 on cases reported in the
Business conduct chapter.
Product quality and liabilities
Product quality comprises quality specifications in the use phase of
Hydro’s products as well as criteria for carbon footprint and
environmental impact of our products. To meet customer
expectations for product quality and responsible value chain, Hydro
is working to certify its production sites according to the Aluminium
Stewardship Initiative (ASI). Hydro is an active ASI member, and 79
of its production sites have been certified, covering Hydro’s value
chain from bauxite to finished products. Hydro’s certifications are
summarized in Note S4 Certifications. See also Hydro’s information
on compliance in the Business conduct chapter.
Product stewardship
Product stewardship is the responsible and ethical management of
the health, safety and environmental aspects of a product throughout
its total life cycle. Hydro engages in dialogue with customers and
other stakeholders regarding the environmental impact of its
processes and products. Hydro performs life-cycle assessments
(LCAs) for all major product groups to identify improvement potential.
With other aluminium producers, Hydro has developed a pan-
European network of national initiatives to promote and recycle
aluminium packaging.
Hydro’s products are subject to compliance declarations according to
different EU and US legislations. In the EU, this includes registration,
evaluation, authorisation and restriction of chemicals (REACH),
restriction of hazardous substances (RoHS), sourcing data in line
with the Conflict Minerals Regulation, and information in relation to
the End-of-Life Vehicle (ELV) Directive for Hydro’s customers in the
automotive segment. In the US, this includes the compliance with the
Toxic Substances Control Act and California’s proposition 65. This
gives Hydro’s customers assurance that its aluminium profiles do not
contain the prohibited substances above the defined limits.
Collaborating on product quality
Innovation and development initiatives are carried out in close
collaboration between Hydro’s production units, R&D organization
and customers. Hydro emphasizes three main areas: the quality of its
products, the efficiency of its production system and the development
of new alloys.
Quality improvements are closely linked to Hydro’s customer
technical service, which addresses customer needs while improving
its own casthouse process. Hydro develops 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.
In the Extrusion Europe and Extrusion North America business units
in Hydro’s Extrusion business area, innovation, R&D and application
development is predominantly targeted toward the growth in
automotive and especially the e-mobility BIW structural markets. The
commercial transportation market is another key area. For the
Precision Tubing business unit in Hydro’s Extrusions business area,
innovation targets new aluminium applications, such as fuel and
brake lines, with aluminium replacing copper and steel, resulting in
lighter products with comparable performance. Moreover, Hydro
develops aluminium based material concepts for battery components
and integrated solutions for thermal management and battery
modules.
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and end users
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
S4 Notes on Consumers and end users
S4.1 Customer satisfaction
Reporting principles
As a commercial company facing the business-to-business market, Hydro has a strong focus on customer
satisfaction, with a defined KPI for Hydro’s CEO. We measure customer satisfaction based on on-time
delivery (OTD) statistics, equally weighted between the two business areas Aluminium Metal (AM) and
Extrusions (HE); and customer satisfaction as measured through a study in AM.
The customer satisfaction study in AM covers more than 100 participants comprising both external
customers and internal customers in HE. Customers are interviewed on several quality aspects such as
specifications conformity, extrudability, billet surface quality, technical service and support and
professionalism. The measurement is the relative value which assesses AM’s performance from the
customers point of view and relative to its competitors on quality (product, service and image), and price.
On-time deilvery (OTD)
Percent (%)
2023
2022
2021
2020
Aluminimum Metal
93
91
92
95
Extruded solutions
93
90
84
93
Average
93
90.5
88
94
Hydro was ranked number 1 among its competitors in the AM customer satisfaction study in 2023. The
score is based on relative percieved price and relative percieved quality, from the customers point of view.
S4.2 Certifications
Reporting principles
According to Hydro’s policy, all operational sites shall comply with, but not necessarily be certified according
to ISO 9001, ISO 14001 and ISO 45001. Certification according to these standards is a decentralized
responsibility based on identified business needs. OHSAS 18001 is discontinued and has been replaced by
ISO 45001.
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, several 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 (ASI). In 2023, 29 new sites received the ASI certification.
Share of relevant operational sites certified
ISO 9001
ISO 14001
ISO 45001
ASI
Eligible
96
94
91
91
Certified
89
89
72
79
Percentage certified
93%
95%
79%
87%
IATF 16949 is fully aligned with the structure and requirements of ISO 9001 and is required by customers
that produce service parts or parts for car assembly. Of our sites delivering to the automotive industry, 86
percent are certified according to the IATF 16949.
All fully-owned smelters, 6 remelters and 19 Extrusion sites are also certified according to the ISO 50001
Energy Management systems, representing 62 percent of Hydro's total electricity consumption.
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Business conduct
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Business conduct
Why it matters
As a global aluminium and renewable energy company with
operations in more than 40 countries, interaction with large number
of business partners, including more than 30,000 suppliers, Hydro
depends on transparency, trust, ethical conduct and compliance
throughout its organization and value chain.
Compliance with applicable laws, regulations and Hydro’s policies,
procedures and guidelines can help mitigate a range of risks,
including those associated with corruption, competition, economic
sanctions, human rights, security, health, safety, environment, data
privacy, and corporate reporting requirements.
Failure to comply with applicable regulations and expectations for
responsible business conduct can result in loss of license to operate
and could expose Hydro to investigations, criminal and civil sanctions
such as fines and penalties, materially impacting financial results. In
addition, there could be adverse consequences for individuals and
reputational damage for the company.
Our approach
Hydro can have a positive impact and contribute to responsible
business conduct by acting with integrity, operating according to high
ethical standards, and by requiring its business partners to comply
with the same standards of conduct.
Hydro aims to have a positive impact on the fight against bribery,
corruption, and human rights breaches through its partnerships, and
actively engage with public authorities and other stakeholders on
these issues.
Hydro monitors business conduct incidents through cases reported
to line management, supporting staff functions, Hydro’s grievance
mechanisms, AlertLine, quarterly and year-end compliance reporting
from its business areas, and information collected from Hydro’s legal
and compliance departments.
Hydro is committed to applying ethical business practices and
compliance throughout its organization and supply chain. Hydro’s
board sanctioned Code of Conduct creates the foundation that
supports its efforts to do the right things, and to always act with
integrity throughout its global organization, wherever it operates and
conducts business, on behalf of Hydro.
In Hydro, compliance is defined as adherence to applicable laws and
regulations as well as Hydro’s governance documents. 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 financial reporting, anti-corruption, competition,
data privacy, economic sanctions, human rights, security, health,
safety and environment. Read more about Hydro’s human rights
management in the Human Rights chapter.
Hydro’s compliance system is based on a clear governance structure
defining roles and responsibilities regarding compliance and all
compliance related activities undertaken throughout the company.
For legal entities where Hydro holds less than 100 percent of the
voting rights, Hydro is working through their boards of directors to
promote the principles in Hydro’s Code of Conduct and its
governance documents. In 2023, Hydro continued to strengthen the
compliance program through various updates and improvements.
The management of compliance risks are integrated in Hydro’s
business planning, enterprise risk management and follow up
process, including relevant risk-mitigating actions and relevant 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 chief
compliance officer reports to the Board of Directors through the
board audit committee at his own discretion. In addition, he
participates in all board audit committee meetings and provides
quarterly compliance updates to the audit committee. He also meets
with the board of directors periodically.
An integrity culture index was introduced in Hydro’s employee
engagement survey in 2020, benchmarking the employee perception
of its integrity culture. The overall score of the index was within the
first quartile of the defined external benchmark, which was one of the
KPIs of the CEO scorecard. The results provided Hydro with a good
basis for specific and tailored compliance activities which were
undertaken since. In 2023, the integrity culture index was measured
again and the scores showed a positive trend since 2020. The KPI
will again be on the CEO KPI scorecard in 2024.
Hydro is committed to building a culture of trust where employees are
comfortable to ask questions, seek guidance, raise concerns, and
report suspected violations to our Code of Conduct, applicable laws
or regulations or Hydro’s obligations. Concerns and complaints can
be raised with local management, but employees may also raise the
issue directly with Human Resources, HSE, union representatives,
Compliance or Legal. Employees, on-site contractors, and others
may also use Hydro’s confidential reporting channel, the AlertLine,
where concerns can be reported to Group Internal Audit &
Investigation. The AlertLine allows anonymous reporting, is available
in applicable languages and reports can be made online or via toll-
free phone numbers listed at Hydro’s intranet or on Hydro.com. For
further information about the use of our global grievance mechanism
and the AlertLine, please see the Human Rights chapter and Note
G1.
Targets and ambitions
Commitment to building a culture of integrity and trust
Performance
651
Cases reported through AlertLine
21,213
Compliance awareness and training modules
completed
78
Integrity culture index
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The Chief Audit Executive (CAE) reports to Hydro’s Board of
Directors and the Board Audit Committee. The CAE participates in all
Board Audit Committee meetings and provides quarterly updates to
the Committee and Corporate Management on matters reported
through the AlertLine. Hydro’s Group Internal Audit & Investigation
has resources in Norway, Brazil and North America.
Data protection and cybersecurity
Hydro’s global data protection constitutes the company’s binding
corporate rules for data protection (BCR) and ensures compliance
with the EU General Data Protection Regulation (GDPR). Designated
data privacy coordinators for all business areas and staff functions
form part of the data privacy network chaired by the head of data
privacy. We are continuously working on the robustness of the data
privacy network, which is seen as a key point for a well-functioning
data privacy program. With a program established in 2018, Hydro
has also worked on several data privacy program improvements in
procedures and supporting processes to ensure continuous fit to the
business.
Cybercrime is increasing globally, exposing Hydro to a range of
threats to the integrity, availability and confidentiality of our systems.
Threats may include attempts to access information, ransomware
attacks, destructive installation of viruses, denial of service and other
digital security breaches.
A breach of cyber security could result in a broad range of impacts
including HSE events, financial and reputational, operational
disruptions and the leakage of private or confidential data.
Hydro’s CFO is the executive sponsor and owner of Hydro’s group
wide multiyear cyber security improvement program following the
cyber attack on Hydro in 2019. Further, the Board Audit Committee
exercises oversight over Hydro’s aggregated risk profile, including
cyber risk, and has had a deep dive session on cyber security in
2023.
Cyber security risk assessment is an integrated part of Hydro’s
enterprise risk management system, in order to facilitate the
business areas’ awareness on cyber security risk to their critical
assets and operations. Critical assets both in plants and in the
enterprise IT platform are subject to security monitoring as well as
internal and external requirements to security. All personnel with
access to sensitive information are bound to secrecy and required to
handle information according to corporate guidelines and
requirements.
Hydro’s enterprise IT platform provides services as digital
collaboration, enterprise resource planning, personnel databases
and systems for external reporting. This platform is being modernized
to withstand the developing cyber security threats and also
segregated from plant industrial control systems. Ethical hacking and
security testing of the enterprise IT platform as well as critical assets
in the plants is also executed on a regular basis.
Driving security awareness and cultural change with Hydro personnel
is an important measure for cyber risk mitigation, with yearly training
plans with yearly training plans for all 13000 IT users and role
specific training within Industrial Control System security and other
areas. Training of crisis management relating to cyber security
incident scenarios is conducted at regular intervals on group level.
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 2023, training was
provided on topics in anti-corruption, Hydro’s code of Conduct,
competition law, data privacy, trade sanctions, human rights, integrity
and market regulations. Compliance training is mainly carried out by
Group Compliance and Group Legal, but other group functions and
compliance professionals in the business areas also carry out
compliance training. See Note S1.5 for metrics on training activities
completed by Hydro’s employees in 2023.
Management of relationships with suppliers
Combating corruption and respecting human rights are integral to
Hydro’s supplier requirements. See the Workers in the value chain
chapter for information about Hydro’s supply chain and how the
company screens its suppliers and business partners.
Transparency
Transparency is key to creating a global level playing field as well as
to safeguard the company’s reputation. Hydro reports in accordance
with the GRI Standards and supports the Extractive Industries
Transparency Initiative (EITI). Since 2005, Hydro has reported
payments to host governments related to exploration and extraction
activities for bauxite. Hydro also complies with the Norwegian legal
requirements on country-by-country reporting. In accordance with the
Norwegian Transparency Act, the UK Modern Slavery Act and the
Australia Modern Slavery Act, Hydro publishes a transparency
statement and an account of due diligence assessments, see the
Human Rights chapter. In addition, Hydro follows the Euronext
guidelines to issuers for Environmental, Social and Governance
(ESG) reporting.
Partnerships
Hydro works through industry and aluminium associations to improve
the ESG standards within its industry and to establish a level playing
field for global aluminium production. Hydro is a member of the
International Council on Mining and Metals (ICMM), which gives the
company the opportunity to participate in the development of industry
practices on the environmental and social issues and to share best
practices. Hydro is also a founding member of the Aluminium
Stewardship Initiative (ASI). To increase Hydro’s knowledge and
secure a science-based approach to rehabilitation, the Biodiversity
Research Consortium Brazil-Norway (BRC) was established in 2013.
Please see the chapter on Biodiversity and ecosystems for more
information on BRC.
Joining forces in collective action is critical in the fight against
corruption. Hydro has had a partnership with Transparency
International Norway for many years. Hydro is also a member of the
Integrity and compliance
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Maritime Anti-Corruption Network (MACN), which provides valuable
insight into the maritime industry – an important part of Hydro’s
supply chain. Through Alunorte, Albras, Mineração Paragominas and
Norsk Hydro Brasil, 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 companies in Brazil had improvements in their integrity results
reported in the Integrity Ethos Indicators.
In Norway, Hydro received support from several public institutions to
further develop its smelter and casthouse technology as well as its
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 four 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. Hydro is also a partner in similar centers
for environment-friendly energy (FME).
Hydro also participates 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. Hydro’s
R&D program includes joint projects with external research institutes
such as SINTEF, NTNU, IFE and the University of Oslo in Norway
and the University of Auckland in New Zealand.
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. Hydro is also an active member of the Nordic Business
Network for Human Rights coordinated by the Danish Institute for
Human Rights. To contribute to the development and strengthening
of the human rights management and procedures, Hydro participates
in other 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. For information about
Hydro’s community investments and social programs, see the
Community investments and social programs in Note S3.
In addition, Hydro cooperates with global and local industry
organizations, NGOs and other organizations. See Note G1.5 and
Hydro.com more information on partnerships.
Public affairs and lobbying
Hydro recognizes the value of engaging with public authorities and
other stakeholders in relation to the development of various policy
initiatives that impact its industry. Hydro interacts primarily with
decision makers in countries where it has significant operations, such
as Norway, Brazil and the U.S., 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 Hydro’s
activities. Hydro’s public affairs activities are generally focused on
issues related to energy, climate, sustainability, and trade.
Hydro promotes its views on issues of importance either through
direct interaction with public authorities and other stakeholders, or
through various industry associations. See GRI Standards 2-29 in
our GRI Index at Hydro.com/gri.
In addition, Hydro participates 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 U.S. and Norway, through business associations, and to
direct dialogue with authorities and decision makers. When relevant,
Hydro is in dialogue with applicable tax authorities in Norway, the EU
and Brazil. Hydro may also discuss fundamental tax developments
and issues with other enterprises.
Hydro supports the principles of free and fair trade, and efforts to
create a global level playing field. In our advocacy, Hydro also
supports 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. Pricing of emissions from imported
products through a Carbon Border Adjustment Mechanism (CBAM) is
scheduled to replace existing carbon leakage measures with a
phase-in starting in 2026. The reporting period started on October 1,
2023. For the aluminium industry it’s important that CBAM is
reviewed and tested both before final implementation and
continuously during the live phase, that loopholes in the mechanism
are closed and that indirect cost compensation remains as an
important carbon leakage instrument.
The European Green Deal was announced by the EU Commission in
2019, increased European climate protection targets 2030 were
decided in December 2020, and the EU presented in July 2021 their
Fit-for-55 proposal to enable greenhouse gas reductions in the next
decade. It is a roadmap on policies to achieve carbon neutrality in the
EU by 2050, and includes policies to develop markets for low-carbon
and circular products, in combination with stricter targets for emission
reduction. Hydro is seeing interesting opportunities in both this
roadmap, and in the Commission’s initiatives on Circular Economy
and Critical Raw Materials, as long as it is combined with competitive
framework conditions. Most regulatory proposals under the Green
Deal have been adopted during 2023. Additional initiatives under the
Green Deal Industrial Plan, such as the Critical Raw Materials Act
and Net Zero Industry Act should be finally adopted in 2024.
The EU agenda on energy markets and renewable energy has
continued through 2023. Hydro’s main view is that Europe first and
foremost needs more renewable energy production capacity, and
that market interventions should be temporary and targeted at
alleviating costs for vulnerable consumers. In the long term, markets
should be allowed to function to provide the right pricing signals for
investments in renewable energy production.
In 2023, the EU and the U.S. have negotiated on a Global
Arrangement on Sustainable Steel and Aluminium (GASSA). Hydro
has followed this process closely with a view to securing proper
definitions of what should be considered sustainable. The
negotiations are set to continue until sometime in 2024.
The Norwegian government has presented revised framework
conditions for development of onshore wind power, and for the CO
2
-
compensation mechanism. Hydro is advocating for framework
conditions enabling development in new renewable power,
supporting Hydro’s long term industrial ambitions and decarbonizing
agenda, and continuation of the CO
2
-compensation mechanism in
Norway to secure competitive energy cost and avoid carbon leakage.
In 2023, a total of 15 full-time equivalents (FTE) were dedicated to
public affairs and lobbying. This includes eight FTEs in Brazil and
four in the EU (Brussels office) and three in Norway. 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 Hydro’s global directives, Hydro may not make financial
contributions to political parties. Hydro has no indications that such
contributions took place in 2023.
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Non-compliance with business conduct
standards
Non-compliance cases are normally reported to line management
and/or supporting staff functions including Group Compliance, Group
Internal Audit and Investigations, Human Resources, 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, or Canal Direto,
the grievance channel designed for external stakeholders in Brazil.
See Note G1.1 for further information.
Non-compliances with laws and regulations
Significant non-compliance cases are defined as all material pending
or threatened litigation and claims to which a consolidated Hydro
company is party. Instances of non-compliance with laws or
regulations that have resulted in a fine of NOK 1 million, as well as
instances that could have a material effect on Hydro's reputation or
commercial outlook, are reported below.
In 2023, Hydro registered two new non-compliances with laws and
regulations that resulted in significant fines. See Note G1.2 for more
information.
Regarding the previously reported case related to air and water
environmental compliance issues in Hydro’s casthouse The Dalles,
Oregon, U.S., civil matters were resolved by paying 765,000 USD in
2021. In relation to criminal proceedings for the same case, Hydro
executed a plea agreement in which Hydro admitted to a federal
misdemeanor charge of negligent endangerment in violation of the
Clean Air Act and agreed to pay a criminal fine of 550,000 USD, as
well as restitution to any victims (to be determined later). Hydro
formally pled guilty during an in-person hearing on January 24, 2023.
On December 11, 2023, a U.S. federal district court formally
sentenced Hydro to an agreed-upon criminal fine of USD 550,000 for
the Clean Air Act violations. Hydro has worked to improve the
monitoring, operating, and recordkeeping efforts of The Dalles facility
and invested approximately USD 36 million to upgrade the facility
with a new casting line, natural gas melting furnace, and emissions
control system. Following the completion of these investments, the
site’s air quality permit was updated in December 2023, allowing the
facility to process a broad range of aluminum scrap.
No material incidents of non-compliance with regulations and
voluntary codes concerning the impacts of our products and services
on children’s health and safety, were reported in 2023.
Lawsuits related to the 2018 Alunorte rainfall
event
The cases below are developments in 2023 related to lawsuits filed
after the 2018 Alunorte Rainfall event by associations or public
entities. For an overview of the Alunorte rainfall event, please see
Hydro’s Annual Report 2018.
On August 1, 2019: About 100 Individuals from Abaetetuba and
Barcarena (State of Pará) filed a lawsuit against Alunorte. The case
relates to the 2018 rainfall incident and claims that Alunorte
contaminated the environment, and due to this, the plaintiffs are not
able to sustain their livelihoods as farmers and fishermen and are
requesting material and moral compensation. Currently there are 102
lawsuits filed by several individuals with the same allegations and
requests. From the total of 142 cases, in 102 cases the Court issued
a decision to stay the cases while final decision under the Instituto
Barcarena Socioambiental (IBS) call action is rendered. The
remaining 40 cases are ongoing and awaiting a decision on the stay
request in the lower Court.
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, Brazil. According to the plaintiffs, Hydro’s
Dutch entities and Hydro are part of Alunorte and Albras’ corporate
group and therefore should be liable for alleged environmental
violations caused in the municipality of Barcarena throughout the
years. The lawsuit is ongoing and an interim judgement on the formal
aspects of the lawsuits, including on how and if the case will continue
is expected to take place during the first half of 2024.
Besides the lawsuit filed with the Rotterdam District Court, five
lawsuits were previously filed by Cainquiama and other associations
in Brazil after the 2018 rainfall event alleging pollution from Alunorte,
Albras and Hydro Paragominas, as well as impact on the
communities located in Barcarena and surroundings. All the lawsuits
are pending at the lower court.
Other cases
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 lawsuits related to the overflow were filed by
individuals with the local court. Of the 5,400 lawsuits, only four are
still ongoing pending final decision. All the other lawsuits were closed
with favorable decision to Alunorte. Besides these cases, there are
also two class actions filed by local associations under which
unfavorable decisions were issued against Alunorte. The decisions
understood that Alunorte was liable for damages caused to the
claimants and, therefore, compensation should be paid. The cases
are pending appeal with the Superior Court of Justice. In addition, a
criminal lawsuit was also filed by the Federal Public Prosecutor
Office (MPF) on this same event. According to MPF, Alunorte should
be liable for 3 alleged crimes: (i) Simple pollution due to the
undersizing of spillways and free edges of the DRS 1 that did not
withstand the high rainfall, resulting in the overflow of the basin and
consequent pollution in the Murucupi River, as provided for in art. 54,
caput of the Environmental Crimes Law; (ii) Qualified pollution due to
the release of untreated effluents into the Pará River, as provided for
in art. 54, §2, item V of the Environmental Crimes Law and; (iii)
Obstructing and hindering the inspection of an environmental agency
(IBAMA) provided for in art. 69 of the Environmental Crimes Act.
Related to the alleged crimes “i” and “iii”, the Court redered a
decision recognizing the statute of limitation. The case is currently
pending decision related to the alleged crime of pollution to Pará
River (“ii”).
In respect of the alleged inappropriate disposal of waste in
Ulianópolis Municipality, in September 2011, a civil class action was
filed by the Municipality of Ulianópolis against Albras and Alunorte
and several other companies. The plaintiff seeks remediation of
environmental damage and compensation for 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 class action is
currently suspended due to the execution of an Adjustment Conduct
Commitment (CAC) by the group of companies which Alunorte and
Albras are part of.
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G1 Notes on Business conduct
G1.1 Non-compliance with business conduct standards
Reporting principles
Non-compliance cases are normally reported to line management and/or supporting staff functions
including Group Compliance, Group Internal Audit and Investigations, Human Resources, Legal, HSE,
Finance and Accounting. Non-compliances can also be reported through Hydro’s confidential reporting
channel, the AlertLine. Every report made through the AlertLine is classified as a case, meaning that
several cases could be related to the same issue.
The number of dismissals due to breach of Hydro policy is limited to cases reported to Hydro’s Internal
Audit.
Cases reported regarding breaches of Hydro policy
2023
2022
2021
2020
2019
Number of cases reported through AlertLine (or similar)
Total cases reported
651
433
273
224
347
Dismissals due to breaches of policy
1)
8
17
5
4
20
Alleged cases of harassment
63
56
51
57
90
Alleged cases of discrimination
43
41
13
14
25
Alleged cases of discrimination and/or harassment
Total cases
106
97
64
71
115
Confirmed cases of discrimination and/or harassment
Total cases
37
35
16
23
41
Confirmed cases of harassment
19
25
12
18
34
Confirmed cases of discrimination
18
10
4
5
7
Alleged cases of corruption, fraud, corruption and/or conflict of interest
Total cases
36
22
26
24
48
Confirmed cases of corruption, fraud, corruption and/or conflict of interest
Total cases
2
5
3
5
9
Confirmed cases of corruption
0
0
0
1
2
Confirmed cases of fraud
0
2
2
4
4
Confirmed cases of conflict of interest
2
3
1
0
3
1)
Total number of dismissals due to breaches of Hydro policy of which Hydro's Internal Audit is informed
In 2023, we have had several awareness raising campaigns about AlertLine, which might be a reason for
the significant increase in total number of cases reported in 2023. The increase in the number of
confirmed cases of discrimination is partly a result of certain cases being reported several times by the
same person or by several persons. There was no significant increase in the severity of the cases in 2023.
In addition to the reported cases in the table above, Hydro received 468 notices in Canal Direto in 2023,
the grievance channel designed for external stakeholders in Brazil. Out of the total, 8% were submitted
anonymously. The majority of the entries, 91,23%, relate to information request ranging from supplier
registration, contracts and human resources. The majority of notices received were registered through our
toll-free number (0800), while 20% came from email and 29% through Hydro website. A set of
improvements were performed in Canal Direto along 2023: the third-party service supplier team was
trained on ways to improve service quality as well as on human rights related aspects.
G1.2 Non-compliance with laws and regulations
Reporting principles
Significant non-compliance cases are defined as all material pending or threatened litigation and claims
to which a consolidated Hydro company is party. Instances of non-compliance with laws or regulations
that have resulted in a fine of NOK 1 million, as well as instances that could have a material effect on
Hydro's reputation or commercial outlook, are reported below.
Cases are reported by the compliance and legal functions in each business area.
Total fines received are calculated based on the monetary value of fines issued in the reporting year.
Fines issued in the reporting year may be paid in full, or may be subject to further consideration by a
court or other legal body.
Non-compliance with laws and regulations
2023
1)
2022
2021
2020
2019
Number of significant non-compliances with laws and regulations
Total non-compliance cases
3
0
2
0
1
Number of fines received
2
0
2
0
1
Non-monetary sanctions
1
0
0
0
0
Total fines received in the reporting year for non-compliance with laws and regulations (NOK 1000)
Fines for non-compliance
4,178
0
0
0
0
1)
Numbers not directly comparable to previous years due to lower threshold for what is considered a material non-compliance case
A total of NOK 4,2 million in fines were received in 2023. Both cases resulting in fines are related to
alleged irregularities in the payment of Unemployment Guarantee Fund for Hydro’s Albras and Alunorte
operations. The companies have appealed administratively for a review of the fines.
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G1.3 Compliance training
Reporting principles
Compliance training includes e-learning courses and classroom training related to compliance and
business conduct. Compliance training is reported based on training modules completed; one employee
may complete several e-learning modules related to the same topic and/or participate in both classroom
training and e-learning courses on the same topic.
See Note S1.5 for information on other mandatory and voluntary training in Hydro.
Compliance training
2023
2022
2021
Completed training modules, by topic
Anti-corruption
6,697
20,495
6,470
Code of Conduct
4,615
19,232
7,990
General integrity
1,509
994
317
Competition
1,372
1,743
1,207
Human rights
3,599
1,881
182
Data privacy
9,916
9,385
9,110
Trade sanctions
795
1,869
239
Market regulations
710
917
194
Total modules completed
29,213
56,516
25,709
In 2022, we had a Group-wide e-learning campaign on anti-corruption and several campaigns categorized
under “Code of Conduct” as a risk area. This explains the relatively high numbers in 2022 for those topics.
G1.4 Current income tax
Reporting principles
Current income tax for Hydro’s consolidated activities and significant locations of operation is based on
Hydro’s financial statements. See Note 10.1 Income taxes to the consolidated financial statement for
more information.
Current income tax 1)
NOK Million
2023
2022
2021
2020
2019
Norway
3,371
3,678
1,990
709
665
Germany
3
(69)
81
12
38
France
80
130
161
112
36
Spain
40
62
44
21
(0)
The Netherlands
81
50
30
19
30
Slovakia
81
644
114
17
6
Sweden
68
(11)
57
89
23
Poland
8
54
57
48
40
Luxembourg
39
119
34
14
28
Denmark
(1)
0
30
36
11
Austria
43
62
55
33
39
Hungary
78
62
72
41
41
Belgium
33
60
14
5
7
Other EU
72
54
34
17
10
Total EU
626
1,217
782
466
307
Switzerland
87
14
6
9
8
Other Europe
2
49
8
-
-
Total Europe
4,086
4,959
2,786
1,184
980
USA
307
424
53
154
167
Canada
141
296
384
92
21
Brazil
136
1,145
1,238
540
291
Asia
75
69
80
36
37
Other
45
(1)
23
13
16
Total outside Europe
704
1,933
1,779
835
532
Total
4,790
6,891
4,565
2,019
1,512
1)
Includes joint operations that 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.
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G1.5 Partnerships and commitments
Reporting principles
Information on Hydro’s most important partnerships and commitments.
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 multistakeholder 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, 65 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’s GRI index provides an overview of how Hydro reporting on ASI’s 11 principles and underlying
criteria. The mapping of ASI principles in the GRI index is included in the external auditor’s consistency
check of Hydro’s GRI index.
Global Reporting Initiative and the GRI Standards
Hydro uses the GRI Standards for voluntary reporting of sustainable development. 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 is in accordance with GRI’s reporting principles in all material respects as
defined by the GRI Universal Standards (2021). Hydro’s GRI Content Index 2023 can be found at
Hydro.com/gri.
The sustainability reporting’s adherence to the GRI Standards is subject to limited assurance by our
external auditors, KPMG. The 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.
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 reporting is also prepared in line with the requirements found in the ICMM 10
principles and position statements for the consolidated group. In addition, we have updated a self-
assessment of the fulfillment of the performance expectations for Hydro Paragominas, Alunorte and
Albras, all in Brazil, and Hydro’s five fully-owned primary aluminium production plants, all in Norway,
please see Note G1.6.
UN Global Compact Communication of 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 Chair of the Board of directors and the CEO in their letter to stakeholders. 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 annual report 2023 with the information in the Hydro Communication on Progress 2023 has been
reconciled by our auditors. See Hydro.com for more information. United Nations (UN) Guiding Principles
on Business and Human Rights The United Nations (UN) Guiding Principles on Business and Human
Rights (hereafter UNGPs) 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 UNGPs 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.
Companies are also expected to communicate any impacts or risks of impacts, and mitigating actions.
Hydro is committed to transparency, including through this annual report.
Hydro reports on our adherence with the UNGPs in the GRI index. This is also included in external
auditor’s consistency check of Hydro’s GRI index. We also report according to relevant laws that are
based on the UNGPs, including the Norwegian Transparency Act 2021, the UK Modern Slavery Act 2015,
and the Australia Modern Slavery Act 2018. The most salient and prioritized human rights issues are
reported the Human rights chapter.
UN Sustainable 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. For an assessment
of how Hydro’s activities impacts each of the 17 SDGs, see the SDG Index.
TCFD - Task Force on Climate-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 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 TCFD index shows an overview of Hydro’s reporting on the TCFD recommendations. All page
references relate to Hydro’s Annual Report.
© Hydro 2024
160
Business conduct
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
G1.6 ICMM Performance Expectations
Reporting principles
Through our membership in the International Council on Mining and Metals (ICMM), we are committed to comply with ICMM’s Performance Expectations. For 2023, we have made a self-assessment of our fulfillment
of the performance expectations for Hydro Paragominas, Alunorte and Albras, all in Brazil, and Hydro’s four fully-owned primary aluminium production plants, all in Norway.
All applicable operations are certified according to the ASI Performance and Chain of Custody standards. ICMM indicators that are aligned with ASI indicators are, according to the ICMM methodology, regarded as
externally validated. Remaining indicators have been subject to a self-assessment. The self-assessments of Paragominas and Alunorte have been reviewed by our external auditor KPMG as part of their limited
assurance of Hydro’s ESG reporting 2023. See KPMG's report for more information. For Paragominas and Alunorte, KPMG has made a third-party validation of the indicators not covered by ASI certifications.
In accordance with ICMM requirements, we also need to prioritize the self-assessments of each operation for third party validation required from the financial year 2023 within a three year cycle. Our prioritization is
risk based (industry and geography) and in the following order:
1. Bauxite & Alumina (Paragominas and Alunorte) in Brazil – third party validation performed for 2023
2. Primary aluminium production in Brazil (Albras)
3. Primary aluminium production in Norway (Husnes, Høyanger, Karmøy, Sunndal, Årdal).
Site
Activity
Ownership
share
ASI certified
indicators
KPMG
validated
indicators
Self-assessed
indicators -
fully met
Self-assessed
indicators -
partially met
Not applicable
indicators
Total
Comments
Paragominas
Bauxite mining
100%
23
13
-
0
2
36
Alunorte
Alumina refining
62%
23
13
-
0
2
36
Albras
Primary aluminium
production
51%
23
0
9
2
4
32
Albras partially meets the performance expectation 6.2. In 2023, Albras has had progress
on its roadmap for full adherence including water management improvement.
Performance expectation 6.5 is also partially met. The planned fuel switch project, aligned
with the expectation, is still under development. The project will reduce CO, CO
2
and SO
X
emissions. The project also provides control systems, easier to operate, less downtime, no
need of compressed air, and improved energy efficiency.
Husnes
Primary aluminium
production
100%
23
0
11
0
4
34
Høyanger
Primary aluminium
production
100%
23
0
11
0
4
34
Karmøy
Primary aluminium
production
100%
23
0
11
0
4
34
Sunndal
Primary aluminium
production
100%
23
0
11
0
4
34
Årdal
Primary aluminium
production
100%
23
0
11
0
4
34
© Hydro 2024
164
Consolidated
financial
statements
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Consolidated financial statements
Consolidated income statements
Amounts in NOK million (except per share amounts). Years ended December 31
Notes
2023
2022
Revenue
1.4
3.1
193,619
207,929
Share of the profit (loss) in equity accounted investments
1.4
3.1
492
1,337
Other income, net
5.2
4,152
4,406
Total revenue and income
198,263
213,672
Raw material and energy expense
5.3
123,538
129,373
Employee benefit expense
9.2
25,931
22,886
Depreciation and amortization expense
2.4
9,394
8,593
Impairment of non-current assets
2.5
4,421
336
Other expenses
25,387
21,769
Total expenses
188,671
182,957
Earnings before financial items and tax
9,592
30,715
Interest and other finance income
7.5
1,302
619
Foreign currency exchange gain (loss)
7.5
(2,084)
2,192
Interest and other finance expense
7.5
(2,264)
(1,161)
Finance income (expense), net
(3,046)
1,649
Income (loss) before tax
6,546
32,365
Income taxes
10.
1
(3,742)
(7,984)
Income (loss) from continuing operations
2,804
24,381
Income (loss) from discontinued operations
1.5
-
36
Net income (loss)
2,804
24,417
Net income (loss) attributable to non-controlling interests
(778)
263
Net income (loss) attributable to Hydro shareholders
3,583
24,154
Basic and diluted earnings per share from continuing operations
7.6
1.77
11.76
Basic and diluted earnings per share from discontinued operations
7.6
-
0.02
Basic and diluted earnings per share attributable to Hydro shareholders
7.6
1.77
11.78
The accompanying notes are an integral part of the consolidated financial statements.
© Hydro 2024
165
Consolidated
financial
statements
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Consolidated statement of other comprehensive income
A
Amounts in NOK million. Years ended December 31
Notes
2023
2022
Net income (loss)
2,804
24,417
Other comprehensive income
Items that will not be reclassified to income statement
Remeasurement post-employment benefits, net of tax
7.6
(805)
784
Unrealized gain (loss) on securities, net of tax
7.6, 8.2
(135)
40
Total
(940)
824
Items that will be reclassified to income statement
Currency translation differences, net of tax
7.6
5,138
8,428
Currency translation differences, net of tax, divestment of foreign operation
7.6
(4)
(4)
Cash flow hedges, net of tax
7.6, 8.3
272
624
Share of other comprehensive income that will be reclassified to income
statement of equity accounted investments, net of tax
7.6
(3)
6
Total
5,403
9,054
Other comprehensive income
4,463
9,878
Total comprehensive income
7,267
34,295
Total comprehensive income attributable to non-controlling interests
(311)
1,252
Total comprehensive income attributable to Hydro shareholders
7,578
33,043
The accompanying notes are an integral part of the consolidated financial statements.
© Hydro 2024
166
Consolidated
financial
statements
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Consolidated balance sheets
Amounts in NOK million, December 31
Notes
2023
2022
Assets
Cash and cash equivalents
7.2
24,618
29,805
Short-term investments
7.3
2,641
4,173
Trade and other receivables
6.2
25,404
23,988
Inventories
6.1
25,449
30,035
Other current financial assets
8.2
1,900
1,127
Total current assets
80,012
89,128
Assets held for sale
1.5
3,685
-
Property, plant and equipment
2.1
74,981
62,656
Intangible assets
2.2, 2.3
8,447
9,280
Investments accounted for using the equity method
3.1
21,228
21,222
Other non-current assets
2.7, 8.2
6,389
5,596
Prepaid pension
9.3
8,664
8,573
Deferred tax assets
10.1
3,055
2,163
Total non-current assets
122,764
109,490
Total assets
206,462
198,618
Amounts in NOK million, December 31
Notes
2023
2022
Liabilities and equity
Bank loans and other interest-bearing short-term debt
7.4
7,111
6,746
Trade and other payables
6.3
26,232
24,374
Provisions
4.1
4,000
3,005
Taxes payable
3,822
5,888
Other current financial liabilities
8.2
2,727
2,794
Total current liabilities
43,892
42,807
Liabilities in disposal group
1.5
141
-
Long-term debt
7.4
28,978
26,029
Provisions
4.1
5,867
5,289
Pension liabilities
9.3
9,222
8,252
Other non-current financial liabilities
8.2
4,045
1,817
Other liabilities
2,417
1,831
Deferred tax liabilities
10.1
4,717
4,796
Total non-current liabilities
55,245
48,013
Total liabilities
99,279
90,820
Share capital
7.6
2,241
2,272
Additional paid-in capital
7.6
29,283
29,217
Treasury shares
7.6
(1,381)
(1,229)
Retained earnings
60,877
70,360
Other components of equity
7.6
9,559
1,835
Equity attributable to Hydro shareholders
100,579
102,455
Non-controlling interests
6,604
5,343
Total equity
107,182
107,798
Total liabilities and equity
206,462
198,618
The accompanying notes are an integral part of the consolidated financial statements.
© Hydro 2024
167
Consolidated
financial
statements
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Consolidated statements of cash flows
Amounts in NOK million. Years ended December 31
Notes
2023
2022
Operating activities
Net income (loss)
2,804
24,417
Adjustments to reconcile net income to net cash provided by operating
activities
Loss (income) from discontinued operations
-
(36)
Depreciation, amortization and impairment
2.4, 2.5
13,815
8,929
Share of profit in equity accounted investments
(492)
(1,337)
Dividends received from equity accounted investments
3.1
1,044
1,237
Deferred taxes
(1,048)
1,093
Loss on sale of non-current assets
6
20
Net foreign exchange (gain) loss
7.5
2,084
(2,192)
Net sales (purchases) of trading securities
(39)
1,398
Changes in assets and liabilities that provided (used) cash
Trade and other receivables
1,017
(980)
Inventories
7,155
(6,269)
Trade and other payables
(1,293)
(1,532)
Derivatives
(2,105)
(250)
Collateral for derivatives and other liabilities
1,617
3,187
Other items
(2,345)
1,708
Net cash provided by continuing operating activities
10.3
22,220
29,393
Amounts in NOK million. Years ended December 31
Notes
2023
2022
Investing activities
Purchases of property, plant and equipment
(13,638)
(9,604)
Purchases of other long-term investments
(7,535)
(1,971)
Purchases of short-term investments
(659)
(1,250)
Proceeds from sales of property, plant and equipment
139
187
Investment grants received
105
35
Proceeds from sales of other long-term investments
76
542
Proceeds from sales of short-term investments
753
1,500
Net cash used in continuing investing activities
(20,759)
(10,561)
Financing activities
Loan proceeds
7.4
9,242
8,963
Loan repayments
7.4
(9,750)
(7,158)
Net decrease in other short-term debt
7.4
(393)
(241)
Repurchases of shares
(2,157)
(661)
Proceeds from shares issued
568
48
Dividends paid
(12,574)
(14,179)
Other cash transfers from (to) non-controlling interests
8,364
(19)
Net cash used in continuing financing activities
(6,700)
(13,247)
Foreign currency effects on cash
240
1,353
Net cash used in discontinued operations
-
(56)
Net increase (decrease) in cash and cash equivalents
(4,999)
6,882
Cash and cash equivalents classified as Assets held for sale
(188)
-
Cash and cash equivalents at beginning of year
29,805
22,923
Cash and cash equivalents at end of year
24,618
29,805
The accompanying notes are an integral part of the consolidated financial statements.
© Hydro 2024
168
Consolidated
financial
statements
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Consolidated statements of changes in 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
December 31, 2021
2,272
29,156
(584)
60,112
(6,892)
84,064
4,316
88,380
Treasury shares issued to employees
7.6
61
36
97
97
Treasury shares acquired
7.6
(681)
(681)
(681)
Dividends
7.7
(14,060)
(14,060)
(215)
(14,275)
Acquisition of non-controlling interest
154
(163)
(9)
9
-
Capital repayment in subsidiaries
(19)
(19)
Total comprehensive income for the year
24,154
8,889
33,043
1,252
34,295
December 31, 2022
2,272
29,217
(1,229)
70,360
1,835
102,455
5,343
107,798
Treasury shares issued to employees
7.6
66
45
111
111
Treasury shares acquired
7.6
(1,512)
(1,512)
(1,512)
Cancellation treasury shares
7.6
(20)
1,315
(1,295)
-
-
Redeemed shares
7.6
(10)
(637)
(648)
(648)
Dividends
7.7
(11,501)
(11,501)
(1,073)
(12,574)
Capital contribution in subsidiaries
(131)
147
15
503
519
Sale of shares in subsidiary to non-controlling shareholder
1.5
1,787
2,293
4,080
2,141
6,221
Disposal of equity securities at fair value through other comprehensive income
(1,288)
1,288
-
-
Total comprehensive income for the year
3,583
3,996
7,578
(311)
7,267
December 31, 2023
2,241
29,283
(1,381)
60,877
9,559
100,579
6,604
107,182
The accompanying notes are an integral part of the consolidated statements.
Oslo, February 13, 2024
Dag Mejdell
Chair
Rune Bjerke
Deputy chair
Bjørn Petter Moxnes
Board member
Margunn Sundve
Board member
Arve Baade
Board member
Petra Einarsson
Board member
Marianne Wiinholt
Board member
Phillip Graham New
Board member
Torleif Sand
Board member
Kristin F. Kragseth
Board member
Peter Kukielski
Board member
Hilde Merete Aasheim
President and CEO
© Hydro 2024
169
Consolidated
financial
statements
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Notes to the consolidated
financial statements
Section 1 – General information
170
Note 1.1 Reporting entity, basis of presentation, significant
accounting estimates and judgment
170
Note 1.2 Measurement of fair value
172
Note 1.3 Significant events
173
Note 1.4 Operating and geographic segment information
174
Note 1.5 Significant subsidiaries and changes to the group
176
Section 2 – Long-lived assets
179
Note 2.1 Property, plant and equipment
179
Note 2.2 Intangible assets
180
Note 2.3 Goodwill
181
Note 2.4 Depreciation and amortization expense
181
Note 2.5 Impairment of non-current assets
182
Note 2.6 Leases
185
Note 2.7 Other non-current assets
186
Section 3 – Investments in other companies
187
Note 3.1 Investments in joint arrangements and associates
187
Section 4 – Uncertain assets and liabilities
190
Note 4.1 Uncertain assets and liabilities
190
Section 5 – Income and expenses
193
Note 5.1 Revenue from contracts with customers
193
Note 5.2 Other income
194
Note 5.3 Raw material and energy expense
195
Section 6 – Specification of operating capital elements
196
Note 6.1 Inventories
196
Note 6.2 Trade and other receivables
196
Note 6.3 Trade and other payables
197
Section 7 – Capital management and cash management
198
Note 7.1 Capital management
198
Note 7.2 Cash and cash equivalents
200
Note 7.3 Short-term investments
200
Note 7.4 Short and long-term debt
200
Note 7.5 Finance income and expense
201
Note 7.6 Shareholders’ equity
202
Note 7.7 Dividends
203
Section 8 – Financial risk and financial instruments
204
Note 8.1 Financial and commercial risk management
204
Note 8.2 Financial instruments
207
Note 8.3 Derivative instruments and hedge accounting
213
Section 9 – Related parties and remuneration
215
Note 9.1 Related party information
215
Note 9.2 Employee remuneration
216
Note 9.3 Employee retirement plans
216
Section 10 – Other information
219
Note 10.1 Income taxes
219
Note 10.2 Research and development
221
Note 10.3 Cash flow information
222
Note 10.4 Auditor’s remuneration
222
Note 10.5 Changes in accounting principles and new
pronouncements
222
© Hydro 2024
170
Consolidated
financial
statements
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Section 1 – General information
Note 1.1 Reporting entity, basis of presentation, significant accounting
estimates and judgment
The reporting entity reflected in these financial statements comprises Norsk Hydro ASA and consolidated
subsidiaries (Hydro). Hydro is headquartered in Drammensveien 264, Oslo, Norway, and the group employs
around 33,000 people in about 40 countries. Hydro is a global supplier of aluminium with operations
throughout the industry value chain and engages in development and production of renewable energy.
Operations include power production, bauxite extraction, alumina refining, aluminium smelting, recycling,
and extruded solutions. The Board of Directors and the President and CEO authorized these financial
statements for issue on February 13, 2024. 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 IFRS ® Accounting Standards as adopted by the European Union (EU) and Norwegian authorities,
effective as of December 31, 2023. 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, and to the nearest 25 basis points for other non-financial assets and liabilities.
Significant judgment and estimates
Judgment is applied in assessing how to account for some business transactions and events. The more
judgmental accounting policies include:
• New business models for developing projects or businesses in co-operation with others are applied
for such business activities as renewable energy projects and technology development. Contracts
used in such projects may introduce complexity related to how to assess control and influence for
part-owned companies, including whether Hydro has control, joint control or significant influence over
such companies as further discussed in note 3.1 Investments in joint arrangements and associates.
• Renewable energy projects introduce complex accounting judgment related to contract structures
including which of these contracts that represent financial instruments to be recognized at fair value
and how to measure such contracts with entity specific features as further discussed in note 8.2
Financial instruments.
Estimation risks in determining the amounts to recognize or disclose are associated with different phases
of operation and sources of uncertainty. We have identified the following important sources of estimation
risks, which impacts accounting estimates in different ways:
• Changing business environment, including changes driven by the green shift and physical climate
changes already present or expected in the near future, impacting such estimates as remaining
useful life for existing assets and whether assets are impaired due to shorter useful life, higher cost,
or regulatory constraints of operations. These aspects of estimation are further discussed below and
in note 2.4 Depreciation and amortization expense and note 2.5 Impairment of non-current assets.
• Exiting and remediating sites used for historic activities represent both risks of costs and liabilities,
and opportunity for value creation, and involves estimation of extent and cost of remediation effort as
well as assessment of the value of land, building and other assets historically used for industrial
purposes.
The following areas of accounting involve a significant degree of estimation uncertainty and complexity
and may result in significant variation in amounts. Estimation uncertainty in these areas are partly related
to the sources of uncertainty identified above and partly related to other sources of uncertainty discussed
in the individual notes.
• 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 and transactions with non-controlling shareholders, 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
Climate risk and opportunities
Aluminium is widely acknowledged as an enabler for the transition away from fossil fuels and other
activities that generate greenhouse gases, to which companies, states and society at large are committed,
among other through the Paris agreement. However, production of aluminium is resource intensive and
requires significant quantities of energy. The production process itself also results in direct emission of
CO
2
.
Hydro is well positioned to benefit from the transition to net zero GHG emissions. Hydro generates
significantly lower GHG emissions than the industry average, and the average carbon intensity of Hydro’s
aluminium production is below the 2030 and 2035 targets in the 1.5 degree scenario that the International
Aluminium Institute has defined for the aluminium industry. The carbon footprint of aluminium production
is highly dependent on the source of energy used to produce the metal. Hydro’s footprint reflects the fact
that the majority of our primary production facilities use renewable energy.
© Hydro 2024
171
Consolidated
financial
statements
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
In the near term, Hydro is expected to benefit from increased demand for low carbon aluminium, as our
customers aim to decarbonize their value chains. The demand for low carbon aluminium is expected to
grow at a greater pace than the overall demand for aluminium.
However, Hydro is still exposed to significant transition risks to achieve net zero emissions by 2050,
including technology risks, regulatory risks, and market risks.
Sufficient renewable energy must be available for our production sites at a cost that is achievable for use
in production of alumina and aluminium, for recycling of aluminium and for production of aluminium
products.
As the aluminium and alumina markets are global markets, relative competition between countries and
regions influences which production sites that will be viable in the future. In general, Hydro will benefit
from globally aligned initiatives placing a price on CO
2
emissions and/or regulatory or market-based
incentives to use low emission, and eventually zero emission, energy. Hydro will also benefit from
regulatory initiatives whereby emission free or low emission energy is made available in sufficient
quantities at places where our existing production facilities are situated, at prices competitive to energy
cost in other regions of the world where competing production is or may be placed.
In the opposite scenario, Hydro will have a disadvantage if significant carbon taxes are placed on
emissions in countries or regions where Hydro’s production is placed while similar regulation is not
introduced in competing regions. Situations with severe limitations in availability of emission free energy in
areas where our production facilities are situated will be a disadvantage for our aluminium related assets.
New technology must be developed and implemented for production of primary aluminium. Hydro is
aiming to develop new, emission free technology for use in new aluminium production facilities referred to
as HalZero. To achieve near zero emission production and preserve the value of our existing aluminium
smelters, we are assessing carbon capture solutions. For Hydro to retain the strategic benefit of a lower
carbon emission, developing technology that can be fitted to existing production facilities at an affordable
price is important. Similar issues exist in other parts of our value chain, however, as the emissions from
production of aluminium and energy production and consumption represent the majority of our total GHG
footprint, these elements will be the most influential to achieving our targets and retaining the value of our
assets.
In parallel, demand for low carbon aluminium could strengthen as aluminium substitutes steel, copper or
other metals, in sectors such as production of renewable energy and thermal technologies, transport,
construction and real estate.
In an opposite scenario, the demand for aluminium could decline if we do not succeed with the
decarbonization of our value chain in line with our technology roadmap for net zero GHG emissions by
2050. If we fail to develop and implement HalZero or other electrolysis technology while competing
industries succeed in their decarbonization efforts, this could result in decreased demand for aluminium
as steel or other metals substitute aluminium. Similar risks apply if we do not succeed with carbon capture
at existing facilities, which could impact the value of our exiting aluminium smelters and alumina refinery.
Hydro’s energy producing assets are renewable only, with the majority being hydro power in Norway.
Hydro is also engaged in production of power from solar and wind resources, currently mainly in
partnership with others and where the majority of the projects are in development phase. These assets
will benefit from the tighter politics on CO
2
emissions, however, specific regulations might impact
competitiveness and value of individual facilities.
Significant accounting policies
The following description of accounting principles relevant for presentation and consolidation applies to
Hydro's 2023 financial reporting, including comparative figures. The accounting policies for items covered
by specific note disclosures are described in the relevant 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 a significant share 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.
© Hydro 2024
172
Consolidated
financial
statements
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
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, and for contracts with variability or contingencies which are not present in
observable markets.
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. When 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 or regularly traded 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 financial derivatives with equity instruments
as underlying is estimated using valuation techniques as described for equity securities as input to an option
pricing model, which also utilizes other inputs which to varying degree are observable.
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. For
electricity contracts linked to specific production facilities, variability in production profile and price patterns
are included in the valuation models. 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. Forward curves are
established as described above under Derivatives.
© Hydro 2024
173
Consolidated
financial
statements
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Note 1.3 Significant events
The following significant events have impacted Hydro in 2023, or are expected to impact Hydro in 2024:
During 2023, economic growth faced challenges due to rapid monetary tightening, pressuring household
spending and business investments. Demand for primary aluminium declined, with uneven development
between market segments and regions. Hydro has reduced production at various sites to adjust to market
demand, while continuing planned investment programs.
In October 2023, Hydro signed an agreement with Macquarie Asset Management who will acquire 49.9
percent of Hydro’s renewable energy company, Hydro Rein. The agreed governance structure will give
Hydro and Macquarie Asset Management joint control over Rein from completion of the transaction,
expected in the second quarter of 2024. Based on this, Hydro Rein’s assets and liabilities are reported
separately as Assets held for sale and Liabilities in disposal group in the balance sheet as of December 31,
2023.
In April 2023, Hydro signed an agreement with Glencore, for Glencore to acquire 30 percent of the Brazilian
alumina refinery Hydro Alunorte. The transaction was completed on December 1, 2023. Hydro continues to
hold a controlling interest in Alunorte after the transaction, and therefore continues to consolidate Alunorte
with no changes to how its assets and liabilities are measured. The fair value of the agreed price is
accounted for as equity contribution for the Group.
© Hydro 2024
174
Consolidated
financial
statements
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
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
Energy, Hydro Aluminium Metal and Hydro Extrusions, 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. Alumina purchased and produced is both used internally
for production of aluminium and sold to external customers.
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. Energy is
also responsible for Hydro’s hydrogen initiatives managed by Hydro Havrand and the battery initiatives.
Hydro’s initiatives within other renewable energy production such as wind and solar managed by Hydro
REIN, which is held for sale pending completion of the agreement to establish a joint venture, is also part of
Energy.
Hydro Aluminium Metal includes primary aluminium production 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 in
Aluminium Metal and operational responsibility for stand-alone recyclers as well as physical and financial
metal trading activities. Aluminium produced by Aluminium Metal and Metal Markets is both used internally
for production of extruded products and sold to external customers.
Hydro Extrusions delivers products within extrusion profiles, building systems and precision tubing, and is
operating several recycling facilities, both integrated with its extrusion plants and separate plants. Hydro
Extrusions is present in about 40 countries. The products are delivered to such sectors as construction,
automotive and heating, ventilation and air conditioning.
Other consist of Hydro's captive insurance company Industriforsikring, 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 EBIT plus depreciation,
amortization and impairment of tangible and intangible fixed assets, less investment grants received.
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 our estimate of 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. Premiums for lower
carbon footprint was introduced in the product price for aluminium for 2023, and increasing into 2024
reflecting pricing strategies to customers. From 2024, premiums for lower carbon footprints is also
introduced for alumina. 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 Financial
Instruments 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 internal 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 lease
arrangement is identified.
The following tables include information about Hydro's operating segments.
External revenue
Internal revenue
Share of the profit (loss) in
equity accounted investments
Amounts in NOK million
2023
2022
2023
2022
2023
2022
Hydro Bauxite & Alumina
23,069
21,649
12,452
12,303
-
-
Hydro Energy
4,564
5,467
6,993
7,148
(293)
(180)
Hydro Aluminium Metal
12,649
13,087
45,726
52,396
733
1,549
Hydro Metal Markets
70,690
76,821
10,625
14,147
-
-
Hydro Extrusions
82,635
90,892
10
284
5
-
Other and eliminations
13
13
(75,806)
(86,278)
47
(32)
Total
193,619
207,929
-
-
492
1,337
Depreciation, amortization
and impairment
1)
EBIT
2)
EBITDA
Amounts in NOK million
2023
2022
2023
2022
2023
2022
Hydro Bauxite & Alumina
6,614
2,496
(5,222)
471
1,392
2,967
Hydro Energy
196
190
2,406
4,621
2,602
4,810
Hydro Aluminium Metal
3,353
2,664
9,125
20,292
12,386
22,866
Hydro Metal Markets
368
161
835
1,621
1,198
1,780
Hydro Extrusions
3,171
3,297
3,206
3,699
6,359
6,982
Other and eliminations
113
121
(758)
11
(645)
132
Total
13,815
8,929
9,592
30,715
23,291
39,536
1)
Depreciation, amortization and impairment. Amounts include impairment, see note 2.5 Impairment of non-current assets.
2)
Total segment Earnings before financial items and tax is the same as Hydro group's total Earnings before financial items 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.
© Hydro 2024
175
Consolidated
financial
statements
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Non-current assets
Total assets
3) 4)
Investments
5)
Amounts in NOK million
2023
2022
2023
2022
2023
2022
Hydro Bauxite & Alumina
32,246
27,531
41,868
38,570
8,345
3,799
Hydro Energy
13,377
14,056
20,529
15,837
3,351
1,920
Hydro Aluminium Metal
36,117
34,439
58,856
61,851
4,413
3,387
Hydro Metal Markets
7,075
2,541
19,550
15,615
4,451
969
Hydro Extrusions
28,041
24,851
47,076
44,993
5,011
3,223
Other and eliminations
5,907
6,073
18,583
21,752
78
92
Total
122,764
109,490
206,462
198,618
25,647
13,391
3)
Total assets exclude internal cash pool accounts and accounts receivable related to group relief.
4)
In 2023, total assets in Hydro Energy includes NOK 3,685 million classified as Assets held for sale.
5)
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. The table includes investments in
continuing operations only.
Amounts in NOK million
EBIT
Depreciation,
amortization
and impairment
Investment
grants
EBITDA
EBIT - EBITDA 2023
Hydro Bauxite & Alumina
(5,222)
6,614
-
1,392
Hydro Energy
2,406
196
-
2,602
Hydro Aluminium Metal
9,125
3,353
(93)
12,386
Hydro Metal Markets
835
368
(5)
1,198
Hydro Extrusions
3,206
3,171
(19)
6,359
Other and eliminations
(758)
113
-
(645)
Total
9,592
13,815
(116)
23,291
Amounts in NOK million
EBIT
Depreciation,
amortization
and impairment
Investment
grants
EBITDA
EBIT - EBITDA 2022
Hydro Bauxite & Alumina
471
2,496
-
2,967
Hydro Energy
4,621
190
(1)
4,810
Hydro Aluminium Metal
20,292
2,664
(91)
22,866
Hydro Metal Markets
1,621
161
(2)
1,780
Hydro Extrusions
3,699
3,297
(14)
6,982
Other and eliminations
11
121
-
132
Total
30,715
8,929
(108)
39,536
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
Investments
1)
Amounts in NOK million
2023
2022
2023
2022
2023
2022
Norway
7,363
9,010
32,555
34,939
3,694
2,428
Germany
21,038
21,723
4,005
2,876
834
366
France
9,042
9,278
2,332
2,248
222
122
Spain
7,787
8,868
1,172
866
64
127
Poland
7,316
7,652
3,413
792
2,587
111
Italy
5,972
7,983
632
569
124
70
Sweden
4,149
3,575
1,735
1,185
617
531
Austria
4,060
4,487
786
487
339
197
Czech Republic
2,425
2,167
2
-
2
-
The Netherlands
2,414
2,822
796
625
217
11
Belgium
1,970
2,691
780
738
92
28
Portugal
1,935
2,060
136
121
22
23
Denmark
1,434
1,795
805
793
125
86
Hungary
1,079
1,029
2,212
1,168
1,185
298
Finland
891
1,100
4
2
3
1
Slovakia
881
699
381
393
76
154
Other EU
2,952
2,672
235
226
34
30
Total EU
75,346
80,600
19,424
13,089
6,544
2,155
United Kingdom
5,063
8,283
927
1,162
126
124
Switzerland
8,461
6,220
81
162
11
6
Turkey
3,358
3,537
2
1
2
1
Other Europe
498
773
-
-
-
-
Total Europe
100,090
108,423
52,990
49,353
10,377
4,714
USA
44,088
48,334
12,449
10,571
3,015
1,954
Canada
6,943
6,524
2,237
2,172
413
307
Brazil
10,407
9,621
40,961
32,780
11,440
6,021
Mexico
2,917
2,372
207
157
46
10
Other America
575
569
30
42
28
18
China
5,746
5,096
938
846
208
267
Japan
5,955
5,729
4
5
-
-
Singapore
1,602
6,215
11
5
11
-
South Korea
2,054
2,513
-
-
-
-
Qatar
2,277
2,278
12,448
12,438
-
-
Bahrain
2,527
1,870
422
449
12
16
Taiwan
884
1,417
-
-
-
-
India
1,632
1,834
12
11
2
1
Thailand
1,030
1,099
-
-
-
-
Other Asia
2,412
1,856
-
-
-
-
Australia and New Zealand
1,449
1,641
56
660
97
82
Africa
1,032
538
-
-
-
-
Total outside Europe
93,530
99,507
69,774
60,137
15,270
8,676
Total
193,619
207,929
122,764
109,490
25,647
13,391
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. The table includes investments in
continuing operations only.
© Hydro 2024
176
Consolidated
financial
statements
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Note 1.5 Significant subsidiaries and changes to the group
Significant accounting policies
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.
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 on a monthly
basis. 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.
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 transferred, 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). Non-controlling interests are subsequently adjusted for changes in equity of the subsidiary after
the acquisition date.
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.
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 150 companies in about 40 countries. Most subsidiaries, including the
large operating units in Norway, are 100 percent owned, directly or indirectly, by Norsk Hydro ASA. A list of
significant subsidiaries is included in note 7 Shares in subsidiaries 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.
Alunorte
As of the end of 2023, Hydro holds 62 percent of the shares in the Brazilian alumina refinery Alumina do
Norte do Brasil S.A. (Alunorte), which is part of Hydro Bauxite & Alumina. Non-controlling owners have
significant influence on certain decisions in the entity, including operational and investment budgets. The
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Content
non-controlling interests in Alunorte amounted to NOK 2,620 million as of December 31, 2023 and NOK 517
million as of December 31, 2022. 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.
In December 2023, Hydro sold 30 percent of the shares in Alunorte to Glencore. Other non-controlling
shareholders increased their ownership from 6 percent to 8 percent during 2023. Hydro’s 62 percent
ownership represents control with Alunorte, which continues to be a consolidated subsidiary. The sale is
accounted for as an equity contribution from a non-controlling shareholder whereby the fair value of the
consideration received, net of contingent elements which may be payable from Hydro depending on
development in certain variables, as well as transaction costs amounting to NOK 176 million, increases the
Group’s equity. No assets or liabilities were remeasured, and no gain or loss were recognized as result of
this transaction. As part of the transaction, Hydro also sold its equity interests in Mineracão Rio do Norte
(MRN), a bauxite producer in the same region. The shares were accounted for as a FVOCI investment, see
note 8.2 Financial instruments.
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 2,918 million as of December 31, 2023 and NOK 2,711 million as of December 31, 2022.
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.
Slovalco
Hydro holds 55 percent of the total shares and 60 percent of the voting interest in the Slovac aluminium
plant 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
written down as impaired, see note 2.5 Impairment of non-current assets. The non-controlling interests in
Slovalco amounted to NOK 1,060 million as of December 31, 2023 and NOK 2,111 million as of December
31, 2022. 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 plant currently produces casthouse products and
anodes.
The table below summarizes key figures for Alunorte and Albras as included in the group financial
statements. Fair value adjustments from Hydro’s acquisition of the subsidiaries 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.
Alunorte
Albras
Amounts in NOK million
2023
2022
2023
2022
Revenue
22,073
21,126
11,834
11,233
Earnings before financial items and tax
(4,932)
(2,569)
(820)
856
Net income
(4,677)
(3,441)
(585)
804
Other comprehensive income
903
2,239
690
1,228
Total comprehensive income
(3,774)
(1,203)
105
2,032
Net cash flows from operating activities
(513)
(1,881)
617
898
Net cash flows from investing activities
(5,528)
(2,065)
(1,515)
(1,204)
Net cash flows from financing activities
5,454
4,196
1,394
260
Cash and cash equivalents
961
1,548
769
273
Other current assets
4,481
4,776
3,331
3,614
Non-current assets
22,422
18,230
7,540
5,332
Current liabilities
(8,759)
(7,376)
(3,632)
(2,049)
Non-current liabilities
(12,212)
(8,997)
(2,048)
(1,639)
Equity attributable to Hydro
(4,281)
(7,686)
(3,039)
(2,820)
Equity attributable to non-controlling interests
(2,612)
(495)
(2,921)
(2,711)
Share of net income attributable to non-controlling interest
(383)
(267)
(287)
409
Dividends paid to non-controlling interests
-
-
-
119
Assets held for sale
On October 24, 2023, Hydro entered into an agreement with Macquarie Asset Management who will acquire
49.9 percent of Hydro’s renewable energy company, Hydro Rein. Hydro will own 50.1 percent of the
company, which is determined to be a joint venture based on the governance structure. The transaction is
subject to customary regulatory approvals and some other conditions, including that Macquarie Asset
Management may withdraw from the transaction should it not be able to fund the transaction. Closing of the
transaction is expected in the second quarter of 2024.
All of Hydro Rein’s investments in Brazil, Denmark and Sweden, and all energy solutions projects, will be
included in the joint venture. Hydro Rein’s projects in Norway will also be included in the joint venture,
except for potential onshore wind projects located in the regions close to Hydro’s smelters, such as Snøheia
Industrikraft. These projects will continue to be developed and owned by Hydro together with local partners.
Hydro Rein’s organization will support Hydro in developing these projects through service agreements.
From date of settlement, Hydro will no longer control Hydro Rein. Rein’s assets and liabilities are therefore
presented as Assets held for sale. Assets held for sale are excluded from specifications presented in the
notes unless otherwise stated.
Hydro Rein is part of Hydro Energy.
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2. Business
3. Performance
4. Governance
5. Sustainability
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Content
Assets held for sale
NOK million
Notes
2023
Current assets
263
Investments accounted for using the equity method
3.1
3,089
Other non-current assets
333
Assets held for sale
3,685
Liabilities in disposal group
(141)
Other components of equity associated with assets held for sale
28
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2. Business
3. Performance
4. Governance
5. Sustainability
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7. Appendices
Content
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 any 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.
Hydro’s property, plant and equipment
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, 2021
30,006
78,324
3,975
112,305
Additions
495
3,557
7,370
11,421
Disposals
(101)
(2,090)
(379)
(2,570)
Companies sold
(77)
(109)
(1)
(187)
Transfers
742
2,449
(3,191)
-
Foreign currency translation effect
2,533
7,951
522
11,007
December 31, 2022
33,598
90,082
8,296
131,976
Additions
1,333
5,234
11,688
18,255
Acquisitions through business combinations
922
1,110
57
2,089
Disposals
(429)
(4,209)
(3)
(4,641)
Reclassified to Assets held for sale
(3)
(11)
(94)
(109)
Transfers
1,744
4,427
(6,170)
-
Foreign currency translation effect
1,464
4,610
342
6,416
December 31, 2023
38,628
101,242
14,116
153,986
Accumulated depreciation and impairment
December 31, 2021
(13,830)
(43,649)
(222)
(57,701)
Depreciation for the year
(1,402)
(6,762)
-
(8,163)
Impairment losses
(5)
(297)
(29)
(331)
Disposals
31
1,945
211
2,187
Companies sold
15
80
-
95
Transfers
(129)
103
27
-
Foreign currency translation effect
(1,095)
(4,275)
(37)
(5,406)
December 31, 2022
(16,415)
(52,854)
(51)
(69,319)
Depreciation for the year
(1,528)
(7,352)
-
(8,880)
Impairment losses
(367)
(1,488)
(349)
(2,204)
Disposals
396
4,053
24
4,473
Reclassified to Assets held for sale
1
1
-
2
Transfers
(13)
(16)
30
-
Foreign currency translation effect
(651)
(2,434)
4
(3,081)
December 31, 2023
(18,576)
(60,087)
(342)
(79,005)
Carrying value
December 31, 2022
17,183
37,228
8,245
62,656
December 31, 2023
20,052
41,155
13,774
74,981
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4. Governance
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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 CO
2
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. Actual CO
2
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. CO
2
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.
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.
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.
Significant judgment in accounting for research and development
In assessing whether activities should be accounted for as research expenditures or capitalized as
development costs, significant judgment is applied in evaluating the technical feasibility of completing the
intangible asset and how the intangible asset will generate probable future economic benefits.
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.
Technology Includes technology identified in acquisitions and internally developed proprietary technology.
Other intangible assets include customer relations and other intangible assets identified in acquisitions.
See note 10.2 Research and development for information regarding expensed research expenditures.
Amounts in NOK million
Intangible
assets under
development
Mineral and
waterfall
rights
Software
Technology
Acquired
sourcing
contracts
Other
intangible
assets
Total
Cost
December 31, 2021
66
875
1,121
2,022
718
1,937
6,740
Additions
45
4
22
-
-
112
182
Disposals
-
(10)
(49)
(15)
-
(115)
(189)
Transfers
(49)
-
48
1
-
-
-
Foreign currency translation effect
4
131
87
154
156
163
695
December 31, 2022
67
999
1,230
2,162
874
2,096
7,427
Additions
77
1
29
-
-
164
271
Acquisitions through business
combinations
16
-
28
17
-
1,104
1,165
Disposals
-
-
(2)
-
-
(73)
(76)
Transfers
(70)
5
65
-
-
-
-
Reclassified to Assets held for sale
(8)
-
(4)
-
-
-
(12)
Foreign currency translation effect
2
73
59
114
88
76
413
December 31, 2023
85
1,079
1,404
2,293
962
3,367
9,190
Accumulated amortization and
impairment
December 31, 2021
-
(126)
(789)
(847)
(508)
(640)
(2,910)
Amortization for the year
1)
-
(3)
(87)
(186)
(109)
(153)
(537)
Impairment losses
-
-
(4)
-
-
-
(4)
Disposals
-
-
40
14
-
19
73
Transfers
-
-
-
-
-
-
-
Foreign currency translation effect
-
(23)
(67)
(68)
(112)
(56)
(327)
December 31, 2022
-
(152)
(907)
(1,087)
(729)
(830)
(3,705)
Amortization for the year
1)
-
(4)
(99)
(206)
(74)
(205)
(588)
Impairment loss
-
-
-
-
-
-
-
Disposals
-
-
10
-
-
6
16
Transfers
-
-
-
-
-
-
-
Reclassified to Assets held for sale
-
-
1
-
-
-
1
Foreign currency translation effect
-
(17)
(45)
(50)
(72)
(32)
(217)
December 31, 2023
-
(173)
(1,041)
(1,343)
(875)
(1,061)
(4,493)
Carrying value
December 31, 2022
67
847
322
1,075
145
1,266
3,722
December 31, 2023
85
906
364
950
86
2,306
4,697
1) Amortization of a sourcing contract is reported as Raw material and energy expense in the income statement.
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2. Business
3. Performance
4. Governance
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7. Appendices
Content
Note 2.3 Goodwill
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, 2023. 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,
mainly in Brazil, in 2011. Goodwill allocated to Hydro Metal Markets was recognized in acquisitions
undertaken more than 20 years ago.
Amounts in NOK million
Hydro
Extrusions
Hydro
Bauxite &
Alumina
Hydro Metal
Markets
Total
Cost
December 31, 2021
3,916
1,612
409
5,937
Foreign currency translation effect
399
351
44
793
December 31, 2022
4,315
1,963
453
6,730
Foreign currency translation effect
169
197
16
381
December 31, 2023
4,484
2,159
469
7,112
Accumulated impairment
December 31, 2021
(1,042)
-
-
(1,042)
Foreign currency translation effect
(131)
-
-
(131)
December 31, 2022
(1,173)
-
-
(1,173)
Impairment losses
-
(2,220)
-
(2,220)
Foreign currency translation effect
(29)
60
0
32
December 31, 2023
(1,202)
(2,159)
0
(3,361)
Carrying value
December 31, 2022
3,142
1,963
453
5,557
December 31, 2023
3,282
-
469
3,751
Note 2.4 Depreciation 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.
Significant judgment in accounting for depreciation and amortization expense
Significant judgment is applied in the assessment of the useful life of the assets in Hydro’s operations.
Useful life may be shorter than technical remaining life. Expected life is influenced by technology
development, including when new technology with lower or zero emissions becomes available and when
such technologies may make existing assets obsolete. Our estimate is that phasing in of new technology
will not significantly impact producing assets until after 2030, when we expect lower emission
technologies to become available at industrial scale.
Physical climate risk such as changes to weather patterns and severity of rain, wind, flooding, and other
events may impact our assessment. Hydro has not identified material assets expected to have a
significantly shorter life due to climate-related risks.
Specification of depreciation and amortization by asset category
Amounts in NOK million
2023
2022
Buildings
1,528
1,402
Machinery and equipment
7,352
6,762
Intangible assets
515
429
Depreciation and amortization expense in continuing operations
9,395
8,593
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3. Performance
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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 is 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 judgment 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 the macroeconomic environment impacting
prices, supply and demand, significant changes in Hydro's planned use of the assets or expected changes
to technology, regulations, or other frame conditions. All of these changes may impact the combination of
product prices, raw material cost and energy cost, resulting in changes to the production margin to cover
the carrying value of net assets in the CGU. Expected or reasonably possible climate and environmental
changes as well as regulatory changes responding to such changes, impacts the assessment of financial
viability and remaining useful life. Such factors are assessed in the same way as uncertain market prices
for input factors and products, impacting cash flow estimates used for the tests.
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 their present condition, excluding potential exploitation
of improvement or expansion potential, and including certain entity specific synergies or other positions.
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, external market and industry analysis and our best estimate of long-term development in
commodity prices and production margins, currency rates, discount rates and other relevant information.
Hydro’s long-term assumptions for key prices and rates, such as prices on aluminium, alumina and key
energy carriers, macroeconomic development and certain other key factors for our production facilities is
important input to the analysis. This set of assumptions reflects megatrends such as the green transition
and Hydro’s view on relative strength of our products compared to alternative materials, development in
prices and cost, growth expectations and other relevant factors. These planning assumptions are
consistent with Hydro’s strategy and the aim to limit global warming to 1.5 degrees Celsius as expressed
in the Paris agreement. Our assumptions are one set of possible financial effect of achieving this goal.
Other alternative paths may be more or less beneficial to Hydro’s businesses.
A detailed forecast of net cash flows is developed for a period of five to ten years with projections
thereafter, reflecting our view of the business cycle. Certain replacement investments are specifically
modelled based on individual assets’ expected useful life. 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 specific for the business activity and country. Uncertainty related to world economic
development, inflation rates, interest rates, and competitiveness of Hydro’s products are impacting
demand and prices for Hydro’s key products and input factors, for which assumptions are incorporated in
the estimated cash flows for assets and CGUs tested for impairment.
Tests performed in 2023 and 2022
Tests for impairment have been performed for all CGUs with mandatory annual tests and the CGUs where
impairment indicators have been identified. The recoverable amounts 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, on an over-the-business-cycle view, using 10 years government bond rates, a US
equity risk premium, credit spreads and country risk premiums. Beta estimates are reviewed from time to
time, considering actual Hydro share observations versus different market indices, analysis of selected
peers and external views. Credit spreads are based on Hydro’s credit spreads, while country risk is based
on the premiums published by the Swedish Export Credit Agency EKN. The post-tax rates are converted to
pre-tax rates using the nominal tax rates in the relevant countries. For Hydro's businesses the pre-tax
nominal discount rate is estimated at between 9.0 percent and 16.5 percent (2022: 8.0-17.0 percent). The
higher rates are applicable for assets within the Bauxite & Alumina activities in Brazil, while the lower rates
are applicable for assets within Extrusions in Europe.
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2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Hydro has incurred the following impairment losses during 2023 and 2022:
Amounts in NOK million
2023
2022
Classification by asset category
Impairment losses
Property, plant and equipment
2,201
331
Goodwill
2,220
-
Other intangible assets
-
4
Total impairment of non-current assets
4,421
336
Classification by segment
Impairment losses
Hydro Bauxite & Alumina
3,773
-
Hydro Aluminium Metal
625
77
Hydro Extrusions
23
258
Total impairment of non-current assets
4,421
336
Goodwill is allocated to CGUs or groups of CGUs as shown in the following table:
Amounts in NOK million
2023
2022
Extrusion North America (Hydro Extrusions)
1,646
1,607
Extrusion Europe (Hydro Extrusions)
881
824
Building Systems (Hydro Extrusions)
589
552
Precision Tubing (Hydro Extrusions)
165
159
Bauxite & Alumina Operations
-
1,963
Recycling (Hydro Metal Markets)
469
453
Total goodwill
3,751
5,557
Annual mandatory impairment tests
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 as of the end of November 2023.
The calculation used cash flow forecasts in BRL based on internal plans approved by management covering
a ten-year period. Production volumes have been assumed close to nameplate capacity reflecting the
measures taken to mitigate downside risk of production shortfalls, including recent and approved
investments in asset integrity. All significant price assumptions are internally derived based on external
references, reflecting both price assumption used for planning purposes and updated market observations at
year-end. Price assumptions reflects conditions specific to the plant such as its product quality, distance to
relevant markets with price observations and other relevant factors. Cash flows have been projected for the
following 30 years based on the ten-year detailed forecast period using Hydro's long-term assumptions for
alumina prices and key raw material prices. Investments to replace equipment with a shorter expected life
than the total structure is estimated based on internal plans. The CGU is technically capable of remaining in
operation for at least a 40-year period. Improvements expected from certain initiated equipment
replacements are included. This includes the near final investment facilitating the change in energy supply
replacing coal with natural gas at the alumina refinery Alunorte, which is expected to reduce expenses and
carbon emissions. Further possible and/or planned improvements are not included in the cash flow
forecasts. Cash flows beyond the ten-year period are inflated by the expected long-term inflation levels in
Brazil and the main western economies.
VIU was estimated at NOK 24.9 billion, which is below the carrying value of NOK 28.7 billion at the date of
testing. We have no indication that fair value less costs of disposal would be higher than VIU. As a
consequence, an impairment loss of NOK 3.8 billion was recognized for the CGU.
The main assumptions to which the test is sensitive are shown in the table below:
Assumptions
2024
Long-term
Exchange rate BRL/USD
5.00
Alumina price, long-term price represent real terms 2023 (USD/mt)
1)
371
385
Production volume alumina (thousand mt)
6,178
6,315
Discount rate nominal, pre-tax
16.50%
16.50%
1) Alumina price is based on PAX with adjustments for Atlantic differential and quality premium.
Significant cash flows are denominated in US dollars. These are translated to BRL at a rate of 5.00 for 2024
with a weaker BRL in the period 2025 to 2031, reaching a nominal rate of 5.49 in 2032. For future periods
the exchange rate is projected with a rate development reflecting the inflation difference of 0.9 to 1.1
percentage points between international inflation and the higher expected Brazil specific inflation.
The sensitivities presented below indicates how changes in key parameters impact value in use. In the case
of a negative change in key parameters, the negative impact is largely the same. The changed parameter is
applied for the entire period, while keeping all other parameters unchanged. The increase in annual cash
flows is reasonably possible, at least for shorter periods. As the key parameters are interdependent, a
change in the indicated range would not be expected to continue for the entire period of operation without
impacting other parameters, however, changes in a combination of parameters may result in similar impact
for the test. For instance, the indicated change in alumina price is indicative for the change in margin
between alumina price and prices of input factors such as energy, caustic soda and to the extent not
produced by the CGU, bauxite. The table below shows the change in VIU, if one of the key parameters were
changed with no changes to the other assumptions, with the following long-term real 2024 assumptions over
the entire 40-year period:
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4. Governance
5. Sustainability
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Content
Change in
assumption
Value 2024
Change in
VIU (NOK
million)
Exchange rate BRL/USD
5%
5.25
8,043
Alumina price, real term 2023 (USD/mt)
10
381
5,802
Cash flow from operating activities
5%
2,660
Production volume alumina (thousand mt)
(100)
6,078
(2,350)
Discount rate (% point)
(1%-point)
15.50%
2,562
A positive deviation in VIU would result in a reversal of the impairment loss related to property, plant and
equipment up to the total impairment loss of NOK 1,553 million. The recognized impairment loss on goodwill
is not subject to reversal.
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 33 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 59 locations in 26 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.
Amounts in NOK million
Extrusion
North America
Extrusion
Europe
Building
Systems
Precision
Tubing
Carrying value of goodwill as of December 31, 2023
1,646
881
589
165
Carrying value of other assets as of December 31, 2023
8,163
8,254
2,933
2,616
Carrying value of CGU as of December 31, 2023
9,809
9,135
3,522
2,781
Recoverable amount as of November 1, 2023
13,488
19,524
8,064
6,230
Recoverable amount in excess of carrying value
39%
113%
122%
106%
Key assumptions:
Terminal value growth
0.0%
0.0%
0.0%
0.0%
Discount rate
11.25%
9.00%
9.00%
11.00%
Stress test
Discount rate - % change
37%
102%
118%
104%
Discount rate - % point
15.40%
18.20%
19.60%
22.40%
Annual reduction in net cash flow all years
28%
53%
55%
51%
Other mandatory tests
For Hydro Metal Markets the impairment test on goodwill has been based on approved business plan for the
next year, management’s 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.
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Impairment tests based on indications of loss in value
Hydro Aluminium Metal
Hydro’s ownership share of 12.4 percent in the primary aluminium plant Tomago was tested for impairment
as of the end of November 2023 due to uncertainty regarding future power prices beyond current power
price agreements expiring in 2028. The recoverable amount was determined as VIU based on Hydro’s
internal assumptions for production volumes, raw material prices, currency exchange rates and timing of
cash flows. The power price assumption was based on a combination of external and internal sources,
including the forward market. The estimated VIU was slightly below zero using a discount rate of 13.5
percent. The resulting impairment loss amounted to NOK 625 million.
During 2022, an impairment loss of NOK 77 million was recognized for the primary aluminium plant Slovalco
following the decision to curtail smelter production and an adjustment of asset retirement obligations.
The primary aluminium plant Albras was tested for impairment in 2022 due to high and volatile inflation rates
and raw material prices, as well as uncertainty regarding replacement of power purchase agreements.
Hydro Extrusions
During 2022, an impairment loss of NOK 204 million was recognized for the CGU Precision Tubing Brazil
due to deteriorating financial performance and expectations to long-term pressure on profitability in a
challenging market situation. Another impairment loss of NOK 54 million was recognized following an
announcement of intended closure and sale of parts of the production facilities at a European plant.
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 includes fixed lease
payments for extension periods reasonably certain to be used. As a practical expedient, non-lease
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 judgment 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
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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, 2021
1,473
946
2,419
Depreciations and impairment loss
(895)
(258)
(1,153)
Additions
855
350
1,205
Disposals
(30)
(3)
(33)
Foreign currency translation effect
238
46
284
December 31, 2022
1,641
1,081
2,722
Depreciations and impairment loss
(969)
(309)
(1,278)
Additions
2,240
225
2,465
Disposals
(9)
(9)
(19)
Acquisitions through business combinations
12
23
35
Foreign currency translation effect
199
45
244
Reclassified to Assets held for sale
-
(3)
-
December 31, 2023
3,114
1,053
4,167
Total cash outflows for leases in 2023 was NOK 1,970 million (2022: NOK 1,486 million).
Interest expense relating to lease recognized in the income statement for 2023 was NOK 440 million (2022:
NOK 177 million).
Leases expensed in the period amounts to NOK 357 million (2022: NOK 289 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 non-cancellable leases are NOK 125 million (2022: NOK 75 million).
Note 2.7 Other non-current assets
Other non-current assets includes financial instruments, see note 8.2 Financial instruments.
Amounts in NOK million
2023
2022
Derivative instruments
684
1,398
Long-term collateral for liabilities
638
106
Equity securities at fair value through other comprehensive income
955
904
Securities at fair value through profit or loss
88
21
Income taxes, VAT and other sales taxes
3,344
2,533
Employee loans
9
12
Other receivables
672
622
Other non-current assets
6,389
5,596
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2. Business
3. Performance
4. Governance
5. Sustainability
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7. Appendices
Content
Section 3 – Investments in other companies
Note 3.1 Investments in 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 line-by-line basis in the group financial statements.
Significant judgment in accounting for joint arrangements and associates
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.
Some of our associates are owned by more than one reporting segment. Assessment of whether Hydro
has significant influence is made for the combined investment from a group perspective. The equity
method is applied for Hydro’s total investment when Hydro determines that it has significant influence.
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 Kraftverk ANS, a power producer in
Norway. The anode producer Aluminium & Chemie Rotterdam B.V., Aluchemie, in the Netherlands, is
classified as a joint operation based on contractual arrangements. The operation was closed at the end of
2021 and closure and remediation of the site is ongoing.
Tomago and Aluchemie is part of Hydro Aluminium Metal, while Skafså Kraftverk ANS is part of Hydro
Energy.
Hydro’s joint ventures
The following joint venture is considered material for Hydro:
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5. Sustainability
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7. Appendices
Content
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 Energy, previously
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. There has
been a long period of uncertainty with regards to the applicable tax rate for Qatalum after the expiry of the
tax holiday in 2020. It has been Hydro’s consistent position that the generally applicable tax rate, currently at
10 percent, should apply to Qatalum after the expiry of the tax holiday. However, the joint venture partners
have not been able to agree on a common interpretation of the applicable tax law, and Qatalum filed its
2020 tax return applying a 35 percent tax rate on June 30, 2021. Hydro is pursuing alternative measures to
protect its financial interest in this matter.
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 17,675 million in 2023 and NOK 20,237 million
in 2022. Related payables amounted to NOK 1,609 million in 2023 and NOK 2,277 million at the end of
2022. Sales from Hydro to Qatalum amounted to NOK 2,472 million in 2023 and NOK 2,630 million in 2022,
primarily alumina. Related receivables amounted to NOK 69 million and NOK 99 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, a power producer headquartered in Stavanger, operates power plants in the southwest of
Norway and holds ownership interests in two arrangements in nearby areas. Hydro owns 25.6 percent of the
company, while Lyse AS holds a controlling ownership share of 74.4 percent.
The annual production of Lyse Kraft DA amounts to about 9.5 TWh, which is contributed in kind to the
owners corresponding to ownership share. The owners are responsible for paying all costs in the
partnership, both for operating costs and future investments, which for Hydro amounted to expenses of NOK
183 million and related accounts payable of NOK 0 million for the year 2023. Hydro sells or consumes the
received power in accordance with its operating needs for power. Hydro is also the operator of the power
plants and is compensated for all costs incurred in this respect. Sales of services from Hydro amounted to
NOK 367 million and related receivables amounted to NOK 63 million.
Recognized deferred tax liability in the consolidated statements was NOK 1,185 million as of December 31,
2023 and NOK 1,150 million as of December 31, 2022, related to temporary differences for which reversal of
the differences are not controlled by Hydro.
Lyse Kraft DA is part of Hydro Energy.
Key information about significant investments
The table below summarizes key figures for the joint venture Qatalum for 2023 and 2022. The figures are on
the same basis as used for inclusion in the group financial statements, reflecting Hydro’s accounting
policies. 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 2023 and 2022.
Qatalum
Year/year ended
Amounts in NOK million
2023
2022
Revenue
18,327
21,032
Depreciation, amortization and impairment
2,624
2,275
Earnings before financial items and tax
3,000
5,276
Financial income (expense), net
1)
(665)
(474)
Income tax expense
(884)
(1,705)
Net income (loss)
1,450
3,097
Other comprehensive income
626
2,887
Total comprehensive income
2,076
5,984
Cash and cash equivalents
4,378
4,696
Other current assets
5,992
7,038
Non-current assets
30,094
30,601
Current financial liabilities
584
264
Non-current financial liabilities
13,373
13,482
Other liabilities
1,638
3,720
Net assets
24,870
24,870
Hydro's share of net assets
12,435
12,435
Accumulated elimination of internal gain in inventory
13
4
Carrying value of Hydro's equity investment
12,448
12,438
1) Financial income (expense), net includes interest expense for Qatalum with NOK 848 million and NOK 415 million for 2023 and 2022,
respectively.
Hydro also holds interests in other associates and joint ventures accounted for using the equity method. The
most significant interests are part of the business units Hydro Rein and Hydro Batteries, which are parts of
Hydro’s growth strategy within renewable energy in the segment Hydro Energy.
Associates in Hydro Rein are presented as Assets held for sale, see additional information in note 1.5
Significant subsidiaries and changes to the group.
The batteries business unit in Hydro Energy aims to develop leading sustainable battery businesses in
Europe, by investments in the battery value chain. The interests held by Batteries consist of the joint venture
Vianode, and the associates Corvus and Hydrovolt. The portfolio includes projects under development that
will require further capital contributions as well as technical and commercial development before reaching
operational phase.
For 2023, Hydro has delivered services to these associates and joint ventures amounting to NOK 38 million
with a corresponding accounts receivable of NOK 7 million. Long-term loans to other associates and joint
ventures amount to NOK 64 million.
The following table provides a summary of changes in carrying value for Hydro's joint ventures and
associates.
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2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Amounts in NOK million
Qatalum
Other JVs
Lyse Kraft DA
Other
associates
Total
December 31, 2021
10,704
4
6,768
467
17,942
Hydro's share of net income (loss)
1,548
(49)
(64)
(35)
1,400
Dividends and other payments received by
Hydro
(1,237)
-
-
-
(1,237)
Companies acquired/(sold), net
1)
-
-
-
(145)
(145)
Capital increase
-
410
59
1,317
1,787
Amortization
-
(2)
(17)
(20)
(40)
Changes elimination of internal gain in
inventory
(21)
-
-
-
(21)
Foreign currency translation and other
2)
1,444
-
97
(4)
1,536
December 31, 2022
12,438
363
6,842
1,578
21,222
Hydro's share of net income (loss)
725
(105)
(62)
(34)
524
Dividends and other payments received by
Hydro
(1,038)
(6)
-
-
(1,044)
Companies acquired/(sold), net
-
11
-
(4)
7
Reclassified to Assets held for sale
-
-
-
(3,089)
(3,089)
Capital increase
-
428
103
2,809
3,341
Amortization
-
(13)
(17)
(49)
(79)
Changes elimination of internal gain in
inventory
9
-
-
-
9
Foreign currency translation and other
313
-
-
23
336
December 31, 2023
12,448
679
6,866
1,234
21,228
1) A gain of NOK 65 million was recognized in 2022 following the sale of 24% of the ownership share in wind power project Stor-Skälsjön.
2) Following a change in legal structure in the associate Lyse Kraft DA, a tax liability was transferred to Hydro consolidated.
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1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Section 4 – Uncertain assets and liabilities
Note 4.1 Uncertain assets and liabilities
Accounting policies for uncertain liabilities resulting in provisions or 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. Provisions are based on
the current legal framework and remediation standards. 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, rather, 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. Cash flows are estimated based on known obligations and estimated cost levels,
inflated to the time of expected retirement and discounted using a risk-free interest rate. 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.
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.
Uncertain cash flows in settlement of financial assets or liabilities are incorporated in the measurement of
those instruments, and not included here. See disclosures in Section 8 Financial risk and financial
instruments for information about variability in financial instruments, including derivative instruments.
Significant judgment in accounting for contingent 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 assessments 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-of-life 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. 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 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. 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.
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2. Business
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4. Governance
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7. Appendices
Content
Provisions
2023
2022
Amounts in NOK million
Short-term
Long-term
Total
Short-term
Long-term
Total
Environmental clean-up and asset
retirement obligations (ARO)
1,144
4,168
5,312
716
3,880
4,596
Employee benefits
1,613
513
2,126
1,482
435
1,917
Indirect taxes
65
242
307
37
281
318
Rationalization and closure cost
236
65
301
231
48
279
Other
942
879
1,821
540
645
1,185
Total provisions
4,000
5,867
9,867
3,005
5,289
8,294
The following table includes a specification of changes to provisions for the year ending December 31, 2023.
Amounts in NOK million
Environ-
mental
clean-up
and ARO
Employee
benefits
Indirect
taxes
Rationaliza
tion and
closure
cost
Other
Total
Specification of change in provisions
December 31, 2022
4,596
1,917
318
279
1,185
8,294
Additions
894
1,979
78
214
1,196
4,361
Used during the year
(614)
(1,654)
(23)
(202)
(448)
(2,941)
Reversal of unused provisions
(12)
(162)
(114)
(10)
(189)
(487)
Accretion expense and effect of change in
discount rate
222
8
6
-
(5)
231
Reclassified to Assets held for sale
-
(24)
-
-
-
(24)
Foreign currency translation
226
62
44
19
83
434
December 31, 2023
5,312
2,126
307
301
1,821
9,867
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 remediation, 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. 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 method, timing and cost has not yet been planned, and
hence the cost is uncertain. The provision represents the present value of expected outflows at the times of
expected payments. The timing and amount of these remediation actions 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 standards. Hydro is in the process of assessing whether the
Global Industry Standard on Tailings Management (GISTM), issued by ICMM
1
, PRI
2
and UNEP
3
, will require
additional effort and costs. Currently, no significant additional obligations have been identified. The GISTM
framework may not be fully reflected in the remediation standards used for estimating actions and cost. 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. 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 performed as integrated processes with ongoing deposit of residues produced in
the alumina production. For Hydro Aluminium Metal we have provisions related to contaminated material in
use in aluminium smelters such as pot lining. 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 areas related to
historic industrial activities, mainly 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. Project
for remediation of the Gunneklev fjord in Grenland has started in 2023. The GISTM may impact remediation
requirements for some of the sites in Germany. For many of these provisions, there are no standard
remediation methods available and cost is therefore uncertain. Hydro also has provisions for certain
environmental issues related to Norwegian smelters. The provision also includes remediation of spent pot
lining and certain other process related waste in all active smelters, remediation of certain known landfills
and removal of limited contaminated material as well as site clearance for certain leased land. Provisions
also exist for 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.
1) International Council on Mining and Metals
2) Principles for Responsible Investment
3) UN environment programme
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Content
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 operations in Brazil.
Rationalization and closure cost include provisions in Hydro Extrusions for costs related to plant closures
and employee reductions to reduce their footprint in response to challenging market conditions. The
provision also includes costs related to the closure of Hydro’s joint operation Aluchemie.
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, community donations and other contributions committed, certain liabilities
related to representation and warranty provisions related to sale of businesses.
Hydro has entered into several agreements with authorities at local and state levels in Pará, Brazil, requiring
Hydro to improve operational security and to make additional efforts and investments related to local
societies close to the plants and to the social development of communities in Pará. In 2023, provisions were
made related to the TerPaz (local community centres) program in Brazil. Hydro has made a commitment to
build six community centers to promote opportunities in cultural, educational, economic and human rights
areas.
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. Disputes include cases in the administrative and legal dispute systems with various background and
risk of loss. In total known cases amount to about NOK 5 billion, of which losses are considered possible in
cases amounting to about NOK 4.2 billion. 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. Hydro may be deemed liable for
remediation that is not acknowledged as Hydro's responsibility, and therefore not provided for. For some
impacted areas it is not yet known whether remediation will be required. This may depend on the pace of
any natural attenuation, and development in what the environmental authorities judge to be reasonable
remediation requirements. For some areas, the exact extent of pollution may be uncertain. If an
environmental risk assessment has concluded that the current risk is acceptable, a detailed sampling
program may not have been carried out. Obligations for historic contamination of sites and surrounding
areas in addition to areas provided for may be identified and deemed Hydro's responsibility in the future,
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.
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4. Governance
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7. Appendices
Content
Section 5 - Income and expenses
Note 5.1 Revenue from contracts 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 few contracts cover more than one year. 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 and Hydro Metal Markets, 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 and warranty terms
Payment terms for products vary between customer segments and regions. The predominant terms vary
between 30 to 90 days, and up to 210 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 revenue 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. 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 59 million and NOK 77 million in 2023 and 2022,
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
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Content
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
2023
2022
Standard ingots
1)
21,716
19,824
Extrusion ingots
30,691
37,293
Foundry alloys
16,214
15,957
Sheet ingots
7,471
8,838
Other casthouse products
5,872
6,534
Extruded profiles
62,469
71,676
Building system products
11,383
10,744
Precision tubing products
5,711
5,132
Alumina
21,601
20,315
Power
4,089
4,744
Other goods and services
2)
5,214
4,731
Total revenue from contracts with customers
192,430
205,789
Other revenue
3)
1,189
2,140
Total revenue
193,619
207,929
1)
Standard ingots are sold in the segments Hydro Metal Markets and Hydro Aluminium Metal.
2)
Includes sale of bauxite, revenue from allocated freight and conversion services for customers’ scrap.
3)
Other revenue includes realized and unrealized changes in the fair value of derivative instruments, mainly used for risk management
purposes with a gain of NOK 466 million in 2023 and a gain of NOK 1.677 million in 2022, mainly related to aluminium contracts. In
addition, other revenue includes realized effects from hedge accounting, with a gain of NOK 723 million in 2023, and NOK 231 million in
2022.
Note 5.2 Other income
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.
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.
Significant judgment in accounting for government grants
Government grants are to varying degree governed by objectively determinable terms. For some
government grants, such as the CO
2
compensation scheme in Norway, the framework for receiving grants
is determined in firm regulations, while the actual aid intensity is politically determined as part of the state
budget for the year of payment, which is determined at the end of the year of earning. Hydro estimates the
grant to be received for interim periods with updates to the estimates as new information becomes
available. Similar mechanisms exist for other grants, for some not concluded at the end of the year of
earning. None of these other grant programs are material to Hydro for 2023 or 2022.
Amounts in NOK million
2023
2022
Gain on sale of property, plant and equipment and intangible assets
106
117
Net gain (loss) on sale of subsidiaries, associates and joint ventures
(2)
131
Government grants
1)
3,672
3,207
Insurance compensation
10
659
Other
366
292
Other income, net
4,152
4,406
1)
Government grants includes CO
2
compensation and investment grants related to Hydro's pilot facility on Karmøy.
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Content
CO
2
compensation regime in Norway
Hydro is entitled to apply for compensation for indirect costs associated with CO
2
emittance. The
compensation scheme in Norway for the period 2021 to 2030 represents a firm structure governed by a
regulation for the entire period, which was approved in 2022. The compensation level is approved by the
Parliament in the annual state budget for the year of payment. Hydro earns compensation during the year
through consumption of electricity to produce aluminium. The precise amount is approved and paid in the
following year. Hydro recognizes estimated entitled CO
2
compensation as earned based on the approved
regulation and expected compensation level in relation to energy consumed. Receivable CO
2
compensation
impacts the cost of inventory produced. During 2022, Hydro recognized about NOK 900 million for
aluminium produced and sold in 2021, and about NOK 2,100 million for aluminium produced and sold in
2022. For 2023, Hydro has recognized about NOK 115 million for aluminium produced and sold in 2022, and
has accrued about NOK 2,900 million of expected, not approved CO
2
compensation for aluminium produced
in 2023, of which NOK 212 million is subject to approval in the revised state budget during 2024.
Note 5.3 Raw material and energy expense
Amounts in NOK million
2023
2022
Raw material expense and production related cost
122,261
135,194
Change in inventories own production
1,277
(5,821)
Raw material and energy expense
123,538
129,373
Raw material expense and production related cost include effect of commodity derivative instruments. See
note 8.3 Derivative instruments and hedge accounting.
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Section 6 - Specification of operating capital elements
Note 6.1 Inventories
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
2023
2022
Aluminium standard ingot
1,957
2,075
Aluminium casthouse products
5,608
8,351
Fabricated aluminium products
3,028
3,343
Alumina
1,936
1,888
Aluminium scrap
1,445
1,350
Work in progress
3,430
3,857
Other raw materials
5,145
6,735
Spare parts
2,899
2,437
Inventories
25,449
30,035
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 other receivables
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.
Significant judgment in accounting for receivables
In some jurisdictions, including Brazil, significant tax 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.
Other current receivables
2023
2022
Trade receivables
16,797
18,154
VAT and other sales taxes
2,287
1,585
Other current receivables
6,735
4,687
Allowance for credit losses
(415)
(439)
Trade and other receivables
25,404
23,988
Of total trade receivables at year end 2023, about 11 percent were past due, with the majority within 30
days. The Hydro Extrusions segment have the majority of overdue receivables.
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Content
Note 6.3 Trade and other payables
Amounts in NOK million
2023
2022
Accounts payable
18,680
18,803
Payroll and value added taxes
3,966
3,320
Accrued liabilities and other payables
3,586
2,250
Trade and other payables
26,232
24,374
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Section 7 - Capital management and cash management
Note 7.1 Capital management
Hydro's capital management policy is to maximize value creation over time, while maintaining a strong
financial position, an investment grade credit rating, and strong liquidity. During 2023 net cash provided by
operating activities exceeded net cash used in investing activities.
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, positive outlook). Hydro’s key targets for financial solidity are described
below.
Funding and liquidity
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.
As of December 31, 2023, Hydro held NOK 24.6 billion in cash and cash equivalents. In addition, NOK 0.6
billion were held as time deposits, classified as short-term investments. These instruments are managed as
part of Hydro’s liquidity management, aiming to optimize the return on cash positions. Hydro’s policy is that
the maturity of such positions shall be shorter than 12 months. Time deposits are normally available at
shorter notice, subject to bank approval and potential break costs. Hydro has a syndicated USD 1,600
million revolving credit facility maturing in December 2026, including a USD 1,500 million swingline as a sub-
facility to cover short-term liquidity needs. An additional syndicated revolving credit facility of USD 1,300
million to support potential short-term liquidity needs expires in April 2024 and will be refinanced prior to
maturity. Both facilities were undrawn per year-end 2023. In addition, Hydro has access to overdraft facilities
and liquidity lines which provide additional short-term liquidity.
Funding of subsidiaries, associates and jointly controlled entities
Normally the parent company, Norsk Hydro ASA, extends loans or equity to fully-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 5.5 billion but was not fully utilized at year-end.
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 is to pay out, on average, a minimum 50
percent of adjusted net income from continuing operations attributable to Hydro shareholders
1
as ordinary
dividend over the cycle, with a dividend floor of NOK 1.25 per share. Dividends for a particular year are
based on that year’s performance, Hydro’s targeted capital structure, expected future earnings and cash
flow, future investment opportunities and the outlook for world markets. Share buybacks or extraordinary
dividends may be used to supplement ordinary dividends.
Hydro's capital management measures
Hydro's management uses the Adjusted net cash (debt) to adjusted EBITDA ratio to assess the group’s
financial solidity and ability to absorb volatility in the markets. Hydro targets, over the business cycle, a ratio
of average Adjusted net cash (debt) to adjusted EBITDA below 2 supported by a target for Adjusted net
cash (debt) of around NOK 25 billion. At year-end, the Adjusted net cash (debt) level will normally be below
this target in anticipation of coming dividend payment. Hydro continuously evaluates the efficiency of the
capital structure and takes this into account when proposing shareholder distribution.
Net cash (debt) is defined as Hydro's cash and cash equivalents plus short-term investments and cash
collateral for long-term liabilities, less short- and long-term interest-bearing debt. Adjusted net cash (debt)
excludes cash positions regarded as unavailable for servicing debt, and adds other obligations which are
considered debt-like in nature.
Hydro considers the definition of Net cash (debt) to be a relevant metric for valuation purposes, while the
Adjusted net cash (debt) definition is a better indicator of Hydro’s financial position at the balance sheet
date.
The tables below present the calculation of Net cash (debt), Adjusted net cash (debt) and the Adjusted net
cash (debt) to adjusted EBITDA ratio.
1) See the Alternative Performance Measures section later in this report for more information.
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2. Business
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7. Appendices
Content
Adjusted net cash (debt)
Amounts in NOK million
Dec 31
2023
Sep 30
2023
Jun 30
2023
Mar 31
2023
Dec 31
2022
Sep 30
2022
Jun 30
2022
Mar 31
2022
Cash and cash equivalents
24,618
19,105
22,453
30,873
29,805
25,852
24,507
21,161
Short-term investments
1)
2,641
2,101
1,158
2,696
4,173
2,511
1,882
8,588
Short-term debt
(7,111)
(5,764)
(5,271)
(5,899)
(6,746)
(11,085)
(7,796)
(7,072)
Long-term debt
(28,978)
(29,944)
(29,756)
(29,615)
(26,029)
(20,790)
(21,054)
(21,073)
Collateral for long-term liabilities
638
660
122
195
106
367
767
3,545
Net cash (debt)
(8,191)
(13,843)
(11,294)
(1,749)
1,310
(3,145)
(1,693)
5,149
Collateral for short-term and long-term liabilities
2)
(1,610)
(1,642)
(209)
(1,892)
(2,563)
(1,243)
(1,718)
(9,653)
Cash and cash equivalents and short-term investments in captive insurance company
3)
(1,142)
(1,107)
(1,090)
(1,073)
(1,000)
(995)
(1,020)
(1,050)
Net pension obligation at fair value, net of expected income tax benefit
4)
(884)
333
828
(116)
(270)
959
1,446
993
Short- and long-term provisions net of expected income tax benefit, and other liabilites
5)
(6,344)
(4,133)
(4,125)
(3,671)
(3,466)
(3,381)
(3,274)
(3,183)
Adjusted net cash (debt) in Assets held for sale and Liabilities in disposal group
6)
149
-
-
-
-
-
-
-
Adjusted net cash (debt)
(18,022)
(20,391)
(15,890)
(8,501)
(5,989)
(7,806)
(6,260)
(7,745)
1)
Hydro's policy is that the maximum maturity for cash deposits is 12 months. Bank deposits with original maturities beyond three months are classified as investing activities and included in short-term investments on the balance sheet.
2)
Collateral provided as cash, mainly related to derivatives used for risk management.
3)
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).
4)
The expected income tax liability related to the net pension liability is NOK 325 million and NOK 591 million, respectively for 2023 and 2022.
5)
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.
6)
Adjusted net cash (debt) in Hydro Rein which is included in Assets held for sale on the balance sheet.
Average Adjusted net cash (debt) / adjusted EBITDA
Amounts in NOK million, except ratio
2023
2022
Average Adjusted net cash (debt)
(15,701)
(6,950)
Adjusted EBITDA
22,258
39,664
Average Adjusted net cash (debt) / adjusted EBITDA
0.71
0.18
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2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
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. Hydro recognizes cash received when amounts are available on Hydro’s bank account.
Similarly, Hydro recognizes cash payments to settle liabilities when the payment is initiated by Hydro and
the amount paid is no longer available.
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 2023, NOK 5.3 billion of Hydro's cash position of NOK 24.6 billion was outside such
group arrangements, mainly in Brazil and Slovakia.
Note 7.3 Short-term investments
Amounts in NOK million
2023
2022
Equity securities
357
335
Debt securities
733
637
Time deposits
1)
586
750
Collateral accounts and other
965
2,451
Total short-term investments
2,641
4,173
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-term debt
Amounts in NOK million
2023
2022
Bank loans and overdraft facilities
954
196
Current portion of long-term debt
6,156
6,549
Bank loans and other interest-bearing short-term debt
7,111
6,746
Amounts in NOK million
2023
2022
Unsecured loans
30,018
28,998
Lease liabilities
5,117
3,580
Outstanding debt
35,134
32,578
Less: Current portion
(6,156)
(6,549)
Total long-term debt
28,978
26,029
The majority of long-term loans are held by the parent company. There are no financial covenants for those
loans. Some loans held by part-owned subsidiaries have financial covenants as part of the terms.
As of December 31, 2023, long-term debt includes six bonds in NOK listed on the Oslo Stock Exchange
(Euronext Oslo) and two bonds in EUR listed on the Irish Stock Exchange (Euronext Dublin). As of
December 31, 2023, the market value of these bonds is approximately NOK 0.2 billion lower than the
carrying value which is the amortized cost.
Information about payment schedule for long-term debt is included in note 8.1 Financial and commercial risk
management under Liquidity risk.
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2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Reconciliation of liabilities arising from financing activities
Amounts in NOK million
Long-term
debt
Bank loans
and other
interest-
bearing short-
term debt
Other
Total liabilities
from financing
activities
December 31, 2021
21,989
6,428
-
28,418
Cash flows
8,225
(6,706)
44
1,564
Non-cash changes:
Net change in current balance
(6,467)
6,467
-
-
New leases
1,208
-
-
1,208
Lease debt cancellations
(19)
-
-
(19)
Amortizations and other
22
-
-
22
Foreign currency effects
1,070
557
-
1,628
December 31, 2022
26,029
6,746
45
32,819
Cash flows
8,368
(9,270)
2
(900)
Non-cash changes:
Net change in current balance
(8,430)
8,430
-
-
New leases
2,457
-
-
2,457
Lease debt cancellations
(34)
-
-
(34)
New financial liabilities for non-cash investments and
financing activities
-
-
2,323
2,323
Business combinations
24
832
-
856
Amortizations and other
27
(1)
(6)
21
Foreign currency effects
537
374
(81)
830
December 31, 2023
28,978
7,111
2,284
38,372
Note 7.5 Finance income and expense
Significant accounting policies
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.
Amounts in NOK million
2023
2022
Interest income (amortized cost)
1,267
652
Dividends received and net gain (loss) on securities
35
(33)
Interest and other finance income
1,302
619
Foreign currency exchange gain (loss)
(2,084)
2,192
Interest expense (amortized cost)
(2,054)
(1,090)
Accretion
(280)
(170)
Other
71
99
Interest and other finance expense
(2,264)
(1,161)
Finance income (expense), net
(3,046)
1,649
Accretion represent the period's interest component for pension assets and obligations, asset retirement
obligations and other liabilities measured as present value of future expected payments.
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2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Note 7.6 Shareholders' equity
Share capital
Number of shares
Ordinary shares
issued
Treasury shares
Ordinary shares
outstanding
December 31, 2021
2,068,998,276
(17,522,614)
2,051,475,662
Treasury shares issued to employees
1,070,211
1,070,211
Treasury shares acquired
(10,141,000)
(10,141,000)
December 31, 2022
2,068,998,276
(26,593,403)
2,042,404,873
Treasury shares issued to employees
1,355,525
1,355,525
Treasury shares acquired
(22,191,847)
(22,191,847)
Shares cancelled
(27,789,655)
18,268,564
(9,521,091)
December 31, 2023
2,041,208,621
(29,161,161)
2,012,047,460
The share capital of Norsk Hydro ASA as of December 31, 2023 was NOK 2,241,247,066 consisting of
2,041,208,621 ordinary shares at par value of NOK 1.098 per share, all fully paid. The share capital as of
December 31, 2022 was NOK 2,271,760,107 consisting of 2,068,998,276 ordinary shares at par value of
NOK 1.098 per share, all fully paid. All shares have equal rights and are freely transferable.
Treasury shares
On September 20, 2022, the Extraordinary General Meeting authorized buyback of shares in the market in
the price interval of NOK 20 to NOK 150 per share. The authorization applied from September 20, 2022,
until September 20, 2023. The repurchased shares were to be used for cancellation through capital
reduction. The Ministry of Trade, Industry and Fisheries agreed to participate in a redemption of a
proportional number of shares in order to leave its ownership interest unchanged. Including the share
redemption, a total of 100 million shares could be cancelled. The cancellation of these shares, the
redemption of shares held by the Ministry of Trade, Industry and Fisheries, and closure of the program was
approved by Annual General Meeting on May 10, 2023. On June 30, 2023, all 18,268,564 shares acquired
under this program were cancelled. In addition, 9,521,091 shares representing the Ministry of Trade,
Industry and Fisheries relative ownership were redeemed in the amount of NOK 648 million and cancelled.
On May 10, 2023, Annual General Meeting authorized buyback of shares in the market in the price interval
of NOK 20 to NOK 150 per share, with the intention to cancel the shares. The authorization applies until
June 30, 2024. In total, 100 million shares may be cancelled, including redemption of shares held by the
Ministry of Trade, Industry and Fisheries, retaining the relative ownership share of the Ministry at 34.26
percent. Total number of shares purchased in 2023 under this program was 14,064,283. Buyback of shares
under the program was completed on January 31, 2024.
The remaining 15,096,878 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 Board of Directors.
Per December 31, 2023, treasury shares amounted to NOK 1,381 million, comprised of NOK 32 million
share capital and NOK 1,349 million retained earnings.
Change in Other components of equity
The table below specifies the changes in Other components of equity for 2023 and 2022
Amounts in NOK million
2023
2022
Items that will not be reclassified to income statement:
Remeasurement postemployment benefits
January 1
3,481
2,697
Remeasurement postemployment benefits during the year
(989)
968
Deferred tax offset
184
(184)
December 31
2,676
3,481
Unrealized gain (loss) on assets measured at FVOCI
January 1
(740)
(779)
Period unrealized gain (loss) on FVOCI securities
(135)
40
Disposal of equity securities at FVOCI
1,288
-
December 31
414
(740)
Items that will be reclassified to income statement:
Currency translation differences
January 1
(2,690)
(11,114)
Currency translation differences during the year
7,542
8,428
Reclassified to Net income on divestment of foreign operation
(4)
(4)
Reallocation of equity upon sale of shares to non-controlling interest
(2,405)
-
December 31
2,444
(2,690)
Cash flow hedges - See note 8.3 Derivative instruments and hedge accounting
January 1
340
(284)
Period gain (loss) recognized in Other comprehensive income
1,120
781
Reclassification of hedging gain (loss) to Net income
(723)
(238)
Tax expense
(125)
81
December 31
612
340
Other components of equity in equity accounted investments
January 1
6
-
Period gain (loss) recognized in Other comprehensive income
(3)
6
December 31
2
6
Total other components of equity attributable to Hydro shareholders as of December 31
9,559
1,835
Total other components of equity attributable to non-controlling interests as of December 31
(3,411)
(1,438)
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 2,029,080,722 for 2023 and 2,050,779,399 for 2022.
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
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2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
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 proposes a dividend per share in connection with the approval of the annual
result in February. The Annual General Meeting considers this proposal, normally in May, and the approved
dividend is then paid to the shareholders. Dividends are usually 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 2023 the Board of Directors has proposed a dividend of NOK 2.50 per share to be paid in
May 2024. The Annual General Meeting, scheduled to be held May 7, 2024, will consider this dividend
proposal. If approved, this would be a total dividend of approximately NOK 5,030 million. In accordance with
IFRS, the fiscal year 2023 proposed dividend is not recognized as a liability in the 2023 financial statements.
Dividends declared and paid in 2023 and 2022 for the prior fiscal year, respectively, are as follows:
Paid in 2023
for fiscal year 2022
Paid in 2022
for fiscal year 2021
Dividend per share paid, NOK
5.65
6.85
Total dividends paid, NOK million
11,501
14,060
Date proposed
February 13, 2023
February 21 and July 21, 2022
Date approved
May 10, 2023
May 10 and September 20, 2022
Dividend payment date
May 23, 2023
May 20 and September 30, 2022
Dividends to non-controlling shareholders in Hydro's subsidiaries are reported as dividends in Consolidated
statements of changes in equity.
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2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Section 8 - Financial risk and financial instruments
Note 8.1 Financial and commercial risk management
Hydro is exposed to market risks related to the prices of products produced and sold, and the input factors
purchased and used, as well as currency risk. Risks may differ short-term and long-term. Short-term risks
are to a large extent related to global and regional market volatility. Longer term risks are also impacted by
megatrends such as the green shift and relative competition strength for countries and regions.
Hydro’s products, both aluminium and renewable energy, are important for the green shift. With CO
2
intensity well below the industry average and aluminium products with low emissions attracting a premium
above generic metal prices we believe we have a competitive advantage, see also discussion in note 1.1
Reporting entity, basis of presentation, significant accounting estimates and judgment. To retain and
improve this advantage, we are dependent on succeeding in planned initiatives to further reduce CO
2
intensity in our products, such as developing new technology and sourcing sufficient renewable energy.
Further, continued market preference for low carbon aluminium will benefit Hydro. Changes in regulatory
conditions, such as global or regional carbon prices will impact the competitive landscape. Depending on
how and where such carbon prices are introduced, Hydro may benefit from changes, while it is also a risk
that some of the plants will experience cost disadvantages during the transition period.
Short- and medium-term price risks are managed based on the margin between sales prices and cost of raw
materials and energy cost. Margin risks are managed partly at segment level and partly combined for the
group.
Hydro’s main strategy for managing volatility in the markets is to maintain strong liquidity, a strong balance
sheet and an investment grade credit rating. In addition, a combination of financial and physical contracts,
including derivatives, is used to manage margin risk.
Hydro’s sales contracts mainly cover periods for up to one year, supplemented with frame arrangements
that can cover several years. Prices are usually determined with reference to observed market prices or
fixed, negotiated prices determined no more than one year prior to delivery. Raw materials are purchased
with prices fixed for periods varying between a few months up to three years. Some key raw materials,
including bauxite and alumina, is purchased under long-term contracts with prices linked to observable
market prices on the same or related products. Energy, in particular electricity for use in aluminium smelters,
is purchased at long-term contracts with duration up to 20 years, mainly at fixed prices. Energy for other
production facilities, including natural gas, fuel oil and coal, is purchased under contracts where prices are
fixed for shorter intervals. Hydro secures access to most key input factors through contracts covering at
least four months, for many raw materials longer periods. Price risks for raw materials and energy are
managed mainly through price clauses in the relevant contracts, supplemented with derivatives where
considered beneficial. The main purpose is to manage risks related to market volatility in a period of up to
four years. Hydro is also exposed to risks related to availability of products. These risks are managed by
monitoring the operational and financial performance of key suppliers in order to reduce the risk of default on
operations and key projects, and by keeping in constructive dialogue with relevant contract parties.
Prices for products sold and raw material and energy are denominated in various currencies which exposes
Hydro to currency risk. Where production margin is subject to significant currency risks, and such risks are
not offset across the group, currency derivatives are to some extent used to mitigate unwanted risks.
Commodity price risk exposure
Aluminium
Regional market places for aluminium sold as standard ingot exists several places. London Metal Exchange
(LME) is the most important to Hydro, and is the point of reference in many contracts, both for sale and
purchase of products and for derivatives. Hydro produces and recycles aluminium, which is partly sold as
casthouse products and partly consumed in production of upgraded industrial products in Hydro Extrusions.
Hydro also purchases aluminium for use in Extrusions and for recycling. Hydro engages in limited trading
activities to optimize capacity utilization, reduce logistical costs and strengthen the market positions, in
addition to some speculative trading activities within strict volume and risk limits.
Short-term price risk for aluminium relates to time difference in pricing of purchases of aluminium for use in
production of upgraded product or for resale, compared to sale of aluminium. Hydro enters into aluminium
future contracts on LME with a maturity of mainly one to three months to mitigate unwanted price risk short
term. The main purpose is to achieve an average LME aluminium price on smelter production. In addition,
Hydro seeks to mitigate timing risk in the pricing patterns for sale of upgraded products, purchase of
aluminium for recycling, and purchase of third-party products (back-to-back hedging). Hydro manages these
exposures on a portfolio basis, taking derivative positions based upon net exposures.
Long-term price risk for aluminium is managed with the aim to achieve a reasonable production margin
measured as the difference between the aluminium price and the prices of key raw materials alumina, pitch,
petroleum coke, anodes, and energy. Prices for raw materials and energy are to a limited extent linked to, or
correlated with, the aluminium price. Hydro enters into derivative forward sale contracts both on the LME
and with banks to secure prices on parts of the planned aluminium production as part of securing a margin
level for periods up to about three years combined with locking in prices for a part of raw materials through
fixed-price sourcing contracts or derivatives when considered beneficial, whether based on the market
situation or to secure cash flow for specific projects.
Hydro's sales of primary aluminium and aluminium casthouse products include a premium above the quoted
price on LME. 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 long-term agreements to purchase alumina from third parties. The
majority of purchase and sale contracts are priced with reference to alumina spot price indexes, however,
some long-term contracts with links to the aluminium price on LME exists. Prices for aluminium and alumina
have historically been correlated over longer periods, however, price development may differ significantly
short term. 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 long-term contracts. The purchasing contracts have links to the LME aluminium price and to
the alumina spot price development with a certain time-lag.
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2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Energy
Hydro is a large consumer of energy in several countries. Energy is consumed as electrical power, natural
gas, fuel oil and coal, with power as the main energy carrier. Hydro also has significant power production in
Norway. Hydro's power consumption is mainly secured through long-term contracts with power suppliers,
including project companies with a limited production portfolio, and through Hydro's own production. Energy
production and prices are to an increasing degree volatile, both from the increased volume of renewable
energy from solar and wind for which available volume fluctuates with weather conditions, from initiatives to
reduce CO
2
emissions through market mechanisms such as cap-and-trade schemes and other regulatory
initiatives, as well as the energy shortage in Europe caused by geopolitical uncertainty.
Transition to net zero GHG emissions represents both potential advantages and risks to Hydro, see
discussion in note 1.1 Reporting entity, basis of presentation, significant accounting estimates and judgment.
Hydro's own electricity production is influenced by hydrological conditions which can vary significantly, and
where production short-term is managed to match physical need and market prices. The net power position
in Norway is balanced out in the Nordic power market through hourly sales and purchases.
Hydro is engaged in development projects for new renewable energy, mainly solar and wind power projects
in Brazil and Scandinavia. The majority of these projects are in REIN, which is presented as Assets held for
sale, see note 1.5 Significant subsidiaries and changes to the group.
Hydro also uses fossil energy carriers, mainly fuel oil and coal in the alumina refinery Alunorte and natural
gas for casthouses and other industrial processes. The use of fuel oil and coal is expected to be significantly
reduced and replaced with natural gas and electricity towards 2025.
In order to manage risks related to price and volume fluctuations, Hydro utilizes mainly physical contracts
securing purchase of power at fixed prices or with relevant price links, for some contracts to the aluminium
price. Fossil fuels are mainly purchased on contracts with a duration of up to four years or contracts priced
to observable market prices. Physical sourcing contracts are supplemented with derivatives such as future
contracts, forwards and options. Hydro also participates in trading activities within strict volume and risk
limits.
Foreign currency risk exposure
The prices of Hydro's upstream products bauxite, alumina and primary aluminium, are mainly denominated
in US dollars, while sale of 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,
and in these currencies 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. Commodity derivatives are entered
into in various currencies, mainly US dollar, Euro and Norwegian Krone, to reflect currency exposures in the
relevant unit.
Foreign currency risk exposure in receivables, payables and loans
Short-term receivables and payables are often held in currencies other than the functional currency of the
unit, predominantly in US dollars and Euro. Borrowings and deposits may be denominated in other
currencies than the functional currency of the unit. The majority of exposure in financing arrangements
exists in the parent company in Norway and in the part-owned subsidiaries, mainly in Brazil.
Embedded currency derivatives in non-financial contracts, including the Euro priced electricity contracts in
Norway, contains a currency exposure which is separately recognized.
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, and carries short-term interest rates.
Financial instruments and provisions are also exposed to changes in interest rates in connection with
valuation and 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 counterparties in order to reduce both operational and financial risk. 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, and through margin arrangements. 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.
Margin calls for derivative contracts varies with positions. The risk is managed at group level to balance the
commodity price risk and liquidity risk, and secure that sufficient funding to meet contractual obligations are
available.
To fund cash deficits of a more permanent nature Hydro will normally raise equity, long-term bond or bank
debt in available markets as described in note 7.1 Capital management. 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.
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Consolidated
financial
statements
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
A summary of Hydro's total contractual obligations and commercial commitments to make future payments
is presented below:
Amounts in NOK million
2024
2025
2026
2027-2028
Thereafter
Total
Long-term debt including interest (note
7.4)
7,150
12,330
6,155
7,380
5,887
38,902
Unconditional purchase obligations
1)
69,177
43,883
37,883
73,338
222,983
447,264
Contractual commitments
6,613
2,931
75
15
18
9,652
Short-term and long-term provisions
(note 4.1)
4,000
1,596
493
949
3,655
10,693
Total contractual and non-
contractual obligations,
undiscounted
86,940
60,740
44,606
81,682
232,543
506,511
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. The future non-cancellable fixed and determinable obligations under purchase commitments
as of December 31, 2023 are shown in the following table:
Amounts in NOK million
Bauxite,
alumina and
aluminium
Energy
related
Other
2024
40,609
16,484
12,084
2025
28,682
9,880
5,321
2026
24,362
10,067
3,455
2027
24,596
9,611
2,758
2028
24,457
9,867
2,049
Thereafter
120,322
96,722
5,939
Total
263,028
152,631
31,606
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:
Amounts in NOK million
Total
Contract commitments for investments in property, plant and equipment
9,638
Additional authorized future investments in property, plant and equipment
6,300
Venturer's share of capital commitments of the joint ventures themselves
55
Contract commitments for other future investments
15
Total
16,008
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 managed within set
volume limits, value-at-risk and tenor limits for relevant activities.
Expected gross cash flows from derivatives accounted for as financial liabilities and financial assets,
respectively, as of end of year:
2023
2022
Amounts in NOK million
Liabilities
Assets
Liabilities
Assets
2023
(2,658)
903
2024
(2,866)
3,786
(408)
290
2025
(1,896)
1,608
(304)
102
2026
(92)
29
(603)
625
Thereafter
(327)
480
Total
(5,181)
5,903
(3,973)
1,920
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.
© Hydro 2024
207
Consolidated
financial
statements
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
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 contractual
terms, 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 cost, with the exception of instruments
where cash flows are not contractually fixed and/or consists of other elements in addition to interest and
repayments; 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 non-current assets.
Equity instruments
Hydro’s portfolio of trading securities is measured at FVTPL and included in Short-term investments.
Other equity investments in companies 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 short- or 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,
when Hydro has irrevocably initiated payment, or when Hydro is legally released from the primary
responsibility for the liability.
Derivative instruments
Derivative instruments are measured at fair value through profit and loss, 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.
Power Purchase Agreements (PPAs) are carefully considered. Hydro purchases significant quantities of
power, the majority purchased on baseload contacts where the same quantity is delivered and received
each hour during the contract period. These contracts are well aligned with Hydro’s need for production
facilities such as aluminium smelters running on an ongoing basis throughout the year with no planned
shutdown periods. Some contracts are for energy sources such as wind and solar power. For these
sources, where production quantities vary with weather and other non-controlled conditions, contracts
whereby a relative share of the actual produced quantity is delivered is more frequent. Hydro is exposed
to such contracts in sourcing for the smelter portfolio in Norway. For Hydro’s activity in Norway, the
variability is absorbed in combination with the hydropower production facilities owned and managed by
Hydro. Purchased power is considered for own use assuming that Hydro’s consumption of power
exceeds the quantities purchased. Net spot sales balancing out excess power is derived from Hydro’s
production of power.
Hydro considers the Nordic power market an integrated market. Power purchase at one point in the grid
is considered physically received and used for own consumption needs even though the consumption
may be from a different point in the integrated grid, and power is being transported between the
connection points by the grid operator.
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Consolidated
financial
statements
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
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
contain restrictions for use.
For commodity contracts with certain contingencies such as dependence on a planned production facility,
the contracts are evaluated to determine at which time the arrangement represents a firm commitment
and thus potentially is a contract in scope of IFRS 9. Generally, Hydro consider arrangements relying on
production in a specific facility not yet existing and for which the final construction decision is not made,
not to represent a derivative under IFRS 9.
Derivative commodity instruments are marked-to-market with their fair value recorded in the balance
sheet as either assets or liabilities. Valuation models take into consideration uncertainties and variability
in volumes to be delivered or received where not contractually fixed. 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, and contracts accounted for as such, are in the balance sheet included in several
line items and classified in categories for accounting treatment.
Significant judgment in accounting for financial instruments
Determining whether contracts qualify as financial instruments at fair value or as contracts for own use
involves evaluation of markets, Hydro's use of similar contracts and historic or planned use of physically
delivered products under such contracts. The assessment includes considerations of production volume,
sales volumes and the need for raw materials and energy over the period covered by the contract.
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 and liquidity 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 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.
© Hydro 2024
209
Consolidated
financial
statements
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Amounts in NOK million
Derivatives at
FVTPL
1)
Derivatives
identified as
hedging
instruments
Debt
instruments at
amortized
cost
Financial
instruments at
FVTPL
2)
Equity
instruments at
FVOCI
Financial
liabilities at
amortized
cost
Non-financial
assets and
liabilities
3)
Total
2023
Assets - current
Cash and cash equivalents
-
-
24,618
-
-
-
-
24,618
Short-term investments
-
-
1,551
1,090
-
-
-
2,641
Trade and other receivables
-
-
20,077
-
-
-
5,327
25,404
Other current financial assets
890
825
-
-
-
-
185
1,900
Assets - non-current
Investments accounted for using the equity method
-
-
-
-
-
-
21,228
21,228
Other non-current assets
574
110
1,319
88
955
-
3,343
6,389
Liabilities - current
Bank loans and other interest-bearing short-term debt
-
-
-
-
-
7,111
-
7,111
Trade and other payables
-
-
-
-
-
12,513
13,719
26,232
Other current financial liabilities
1,424
2
-
817
-
484
-
2,727
Liabilities - non-current
Long-term debt
-
-
-
-
-
28,978
-
28,978
Other non-current financial liabilities
2,932
-
-
1,062
-
51
-
4,045
2022
Assets - current
Cash and cash equivalents
-
-
29,805
-
-
-
-
29,805
Short-term investments
-
-
3,201
972
-
-
-
4,173
Trade and other receivables
-
-
20,644
-
-
-
3,344
23,988
Other current financial assets
691
264
-
-
-
-
172
1,127
Assets - non-current
Investments accounted for using the equity method
-
-
-
-
-
-
21,222
21,222
Other non-current assets
1,133
265
739
21
904
-
2,533
5,596
Liabilities - current
Bank loans and other interest-bearing short-term debt
-
-
-
-
-
6,746
-
6,746
Trade and other payables
-
-
-
-
-
13,892
10,482
24,374
Other current financial liabilities
2,786
-
-
-
-
8
-
2,794
Liabilities - non-current
Long-term debt
-
-
-
-
-
26,029
-
26,029
Other non-current financial liabilities
1,758
15
-
-
-
45
-
1,817
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 Financial Instruments: Disclosures, such as investments accounted for using the equity method, except loans to such entities.
© Hydro 2024
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Consolidated
financial
statements
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
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 made in the form of cash deposits, and reported as part of Short-
term investments and Other non-current assets. As of December 31, 2023, short-term collateral was NOK 1 billion while long-term collateral was NOK 638 million. Corresponding amounts as of December 31, 2022 were
NOK 2.5 billion and NOK 106 million, respectively.
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
Total
1)
2023
Income statement line item
Revenue
(566)
(723)
-
-
-
-
-
(1,289)
Raw material and energy expense
236
-
-
-
-
-
-
236
Financial income
55
-
-
(93)
-
-
-
(38)
Financial expense
(13)
-
-
-
-
-
-
(13)
Currency effects
2,203
-
-
-
-
-
-
2,203
Gain/loss in Other comprehensive income
Recognized in Other comprehensive income (before tax)
135
135
Removed from Other components of equity and recognized in the income statement
2022
Income statement line item
Revenue
(1,851)
(231)
-
-
-
-
-
(2,082)
Raw material and energy expense
(1,856)
-
-
-
-
-
-
(1,856)
Financial income
-
-
-
31
-
-
-
31
Financial expense
(158)
-
-
-
-
-
-
(158)
Currency effects
(1,266)
-
-
-
-
-
-
(1,266)
Gain/loss in Other comprehensive income
Recognized in Other comprehensive income (before tax)
(40)
(40)
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.
© Hydro 2024
211
Consolidated
financial
statements
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
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 held in Hydro’s continuing operations as of December 31, 2023 and December 31, 2022. 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
Foreign currency exchange rates
Commodity prices
Amounts in NOK million
Fair value as of
December 31
1)
USD
EUR
Other
Aluminium
Other
Interest-rates
Other
2023
Derivative financial instruments
2)
(2,015)
(305)
(1,924)
-
-
-
85
-
Other financial instruments
3)
(2,288)
(224)
(389)
149
-
-
7
36
Derivative commodity instruments
4)
(877)
(37)
(156)
19
(2,556)
115
11
3
Financial instruments at FVOCI
5)
1,902
(895)
-
1
-
-
2
65
2022
Derivative financial instruments
2)
(638)
(464)
(2,087)
116
-
-
34
81
Other financial instruments
3)
8,652
(119)
(144)
118
-
-
6
34
Derivative commodity instruments
4)
(2,082)
7
(185)
-
(3,080)
246
1
19
Financial instruments at FVOCI
5)
1,430
(614)
-
1
-
-
(5)
91
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). Bilateral contracts with reference to observable prices are considered to be level 2 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.
© Hydro 2024
212
Consolidated
financial
statements
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Amounts in NOK million
2023
Level 1
Level 2
Level 3
2022
Level 1
Level 2
Level 3
Assets
Commodity derivatives
1,247
346
561
339
1,539
287
541
711
Currency derivatives
48
-
48
-
80
-
80
-
Cash flow hedges
935
-
935
-
529
-
529
-
Financial assets at FVTPL
1,178
370
733
74
993
346
637
10
Financial assets at FVOCI
955
-
-
955
904
14
-
890
Other
169
-
169
-
204
-
129
75
Total
4,532
717
2,447
1,368
4,250
647
1,916
1,686
Liabilities
Commodity derivatives
(2,124)
(488)
(812)
(824)
(3,621)
(266)
(2,284)
(1,070)
Currency derivatives
(2,232)
-
(2,232)
-
(922)
-
(828)
(95)
Other financial liabilities
(1,879)
-
-
(1,879)
-
-
-
-
Cash flow hedges
(2)
-
(2)
-
(15)
-
(15)
-
Total
(6,237)
(488)
(3,046)
(2,703)
(4,558)
(266)
(3,127)
(1,165)
Gains or losses relating to level 3 commodity derivatives 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, 2023.
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2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Note 8.3 Derivative instruments and hedge accounting
Accounting policies for classification of embedded derivatives
Embedded derivatives are classified based on the underlying in the contract feature constituting a
separable embedded derivative in the table below. 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 underlying risk for embedded derivatives and on the purpose of the
instrument for freestanding derivatives. Currency derivatives, whether embedded derivatives or separate
instruments, are classified as Finance expense
Significant judgment for embedded derivatives
Some non-financial contracts contain pricing links that affect cash flows in a manner different than the
underlying commodity or other product in the contract. For accounting purposes, these embedded
derivatives are separated from the host contract and recognized at fair value for links not closely related
to the product in the host contract. Which price links that are closely related requires judgment, assessing
common pricing patterns and market development over time. Hydro has separated and recognized at fair
value embedded derivatives related to currency and aluminium links from the underlying contracts,
mainly in energy contracts.
Commodity derivatives
The following types of commodity derivatives, including embedded derivatives, were recorded at fair value
on the balance sheet as of December 31, 2023 and December 31, 2022. Contracts that are designated as
hedge instruments in cash flow hedges are not included. Hydro’s risk management, including use of
derivative instruments, is discussed in note 8.1 Financial and commercial risk management.
Fair values for derivative instruments in the table below includes 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
2023
2022
Assets
Electricity contracts
425
709
Aluminium futures, forwards and options
756
549
Other
66
281
Total
1,247
1,539
Liabilities
Electricity contracts
(699)
(1,098)
Aluminium futures, forwards and options
(1,165)
(2,443)
Other
(260)
(81)
Total
(2,124)
(3,621)
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. Hydro has continued its hedge arrangements for currency in
the Alunorte plant and the Albras plant, both in Brazil, to secure the exchange rate between Brazilian Real
and US dollar. As of 31 December 2023, an amount of USD 1,205 million is sold forward for 2024-2026 at
an average rate of 5.78 Brazilian Real to US dollar.
No ineffectiveness was recognized in the income statement in 2023 or 2022.
The table below gives aggregated numbers related to the cash flow hedges for 2023 and 2022.
Amounts in NOK million
2024
2023
2022
Expected to be reclassified to the income statement during the year (NOK million)
826
264
(176)
Reclassified to the income statement from Other components of equity (NOK million)
1)
723
231
1) Deviates from expected reclassifications due to change in market prices throughout the year. Negative amounts indicate a loss.
An asset of NOK 934 million and NOK 515 million were recognized as the fair value of cash flow hedging
instruments for December 31, 2023 and 2022, 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 2023 and 2022, please see
note 7.6 Shareholders' equity.
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2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
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. Where
volumes, delivery profile or other elements are uncertain or contingent on variables outside the parties’
control, management’s best estimate of such factors and the range of reasonably possible outcomes is
reflected in the valuation. 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.
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2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Section 9 – Related parties and remuneration
Note 9.1 Related party information
As of December 31, 2023, The Norwegian state had ownership interests of 34.8 percent of total shares
outstanding (2022: 34.7 percent) in Hydro through the Ministry of Trade, Industry and Fisheries. In addition,
Folketrygdfondet, which manages the Government Pension Fund – Norway
1)
held 6.3 percent (2022: 6.0
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.
Hydro’s share buyback program authorized at the extraordinary general meeting in September 2022 had as
a prerequisite for buybacks and subsequent cancellation of shares that these transactions would not result
in a change to the ownership interest of 34.26 percent of issued shares of the Ministry of Trade, Industry and
Fisheries. Share redemptions from the Norwegian state was carried out at the same price terms as for the
buybacks via the stock exchange. The share buyback program authorized at the ordinary general meeting in
May 2023 has the same prerequisite for buybacks and subsequent cancellation of shares that these
transactions do not result in a change to the ownership interest of 34.26 percent of issued shares of the
Ministry of Trade, Industry and Fisheries. Share redemptions from the Norwegian state will be carried out at
the same price terms as for the buybacks via the stock exchange.
The Norwegian state has ownership interests in a substantial number of companies. The ownership
interests in 69 companies are managed by the ministries and covered by public information from the Ministry
of Trade, Industry and Fisheries
2)
. 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 and bank services from DNB. 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 12 million for 2023 and NOK 11 million for 2022. 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 both 2023 and 2022. The pension trust provides services to Hydro for
administration of unfunded pension plans with NOK 5 million for 2023 and NOK 4 million for 2022.
The pension trust owns some of the office space 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 86 million
and NOK 74 million for 2023 and 2022, respectively. The current term of the rental contract expires in
February 2027. A new contract for premises in the same office complex covering a ten-year period with
options for two additional five-year periods from 2026 was entered into during 2023. Hydro also sold
electricity to the pension trust for its operational needs at the same office site for a total amount of NOK 8
million in 2023 and NOK 20 million in 2022. As of the end of 2023, Hydro’s outstanding receivables on Norsk
Hydros Pensjonskasse were NOK 1 million, while Hydro’s payable to Norsk Hydros Pensjonskasse
amounted to NOK 56 million, all settled in early 2024.
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.
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.
Transactions with related parties are at arm’s length principles.
Executive management remuneration is disclosed in the table below. The members of Hydro’s Corporate
Management Board and the members of Hydro's board of directors during 2023 and 2022 and their
individual remuneration is reported in Norsk Hydro ASA Report on executive remuneration 2023.
Amounts in NOK thousand
2023
2022
Salary paid
52,484
45,151
Other short-term benefits
18,226
20,009
Pension benefits
9,650
6,270
Long-term incentive
13,692
11,432
Total Corporate Management Board
94,052
82,862
Fees Board of Directors
6,780
6,293
Total
100,832
89,155
1)
Shareholding is based on information from the Norwegian Central Securities Depositary (VPS) as of December 31, 2023 and
2022. Due to lending of shares, an investor’s holdings registered in its VPS account may vary.
2)
According to information on the Government web site www.regjeringen.no, state ownership.
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1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Note 9.2 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. Eligible employees are invited to purchase shares with a rebate of 50 percent for a
value of NOK 15,000 or NOK 30,000, depending on shareholder return. Details related to the employee
share purchase plan are provided in the table below.
Performance measurement period
2023
2022
2021
Total shareholder return performance target achieved
<12%
≥12%
≥12%
Employee rebate offered, NOK
7,500
15,000
15,000
Share purchase plan compensation
2023
2022
Award share price, NOK
81.94
90.48
Number of shares issued, per employee
388
340
Total number of shares issued to employees
1,277,684
1,044,820
Compensation expense related to the award, NOK thousand
55,349
48,548
Employee benefit expense
The average number of employees in Hydro for 2023 and 2022 was 32,580 and 31,770, respectively. As of
year-end 2023 and 2022, Hydro employed 32,724 and 32,014 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
2023
2022
Salary
20,254
17,947
Social security costs
3,065
2,626
Other benefits
1,483
1,272
Pension expense (note 9.3)
1,130
1,041
Total
25,931
22,886
Note 9.3 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 judgment 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, mortality, and 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 to new entrants, and in some defined benefit plans, large groups of employees have
converted to defined contribution arrangements. Still, a declining number of employees continues to earn
benefits under defined benefit plans.
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1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Pension expense
2023
2022
Amounts in NOK million
Norway
Other
Total
Norway
Other
Total
Defined benefit plans
71
66
137
87
77
164
Defined contribution plans
257
488
745
216
413
630
Multiemployer plans
60
-
60
52
-
52
Termination benefits and other
52
53
105
69
57
126
Social security cost
52
30
82
51
19
70
Pension expense
493
637
1,130
475
566
1,041
Interest expense (income)
(110)
101
(9)
(61)
39
(22)
Remeasurement (gain) loss in
other comprehensive income
528
461
989
(84)
(884)
(968)
Recognized defined benefit asset and liability
2023
2022
Amounts in NOK million
Norway
Other
Total
Norway
Other
Total
Defined benefit obligation major plans
(12,706)
(6,309)
(19,016)
(11,556)
(5,814)
(17,370)
Plan assets
16,078
3,556
19,634
15,142
3,497
18,639
Reimbursement rights
280
-
280
262
-
262
Liability other plans
(53)
(714)
(767)
(74)
(518)
(591)
Social security cost
(680)
(10)
(689)
(605)
(14)
(619)
Net defined benefit asset (liability)
2,919
(3,478)
(558)
3,171
(2,849)
321
Recognized prepaid pension
8,416
248
8,664
8,064
509
8,573
Recognized pension liability
(5,497)
(3,725)
(9,222)
(4,893)
(3,359)
(8,252)
Net amount recognized
2,919
(3,478)
(558)
3,171
(2,849)
321
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)
2023
2022
Amounts in NOK million
Norway
Other
Total
Norway
Other
Total
Opening Balance
(11,556)
(5,814)
(17,370)
(12,696)
(8,110)
(20,806)
Current service cost
(70)
(35)
(105)
(83)
(49)
(132)
Interest expense
(359)
(269)
(627)
(235)
(131)
(366)
Actuarial gain (loss) demographic
assumptions
-
78
78
-
(5)
(5)
Actuarial gain (loss) economic
assumptions
(817)
(146)
(963)
1,019
2,514
3,534
Experience gain (loss)
(558)
(133)
(691)
(176)
(155)
(331)
Benefit payments
704
432
1,136
687
368
1,054
Termination benefits
(77)
-
(77)
(71)
-
(71)
Reclassified to Assets held for
sale
26
-
26
-
-
-
Foreign currency translation
-
(422)
(422)
-
(248)
(248)
Closing Balance
(12,706)
(6,309)
(19,016)
(11,556)
(5,814)
(17,370)
Change in pension plan assets
2023
2022
Amounts in NOK million
Norway
Other
Total
Norway
Other
Total
Opening Balance
15,142
3,497
18,639
16,051
5,353
21,404
Interest income
479
194
673
302
109
411
Return on plan assets above
(below) interest income
897
(265)
632
(800)
(1,877)
(2,677)
Company contributions
23
71
94
35
6
41
Benefit payments
(463)
(222)
(685)
(446)
(193)
(639)
Foreign currency translation
-
281
281
-
100
100
Closing Balance
16,078
3,556
19,634
15,142
3,497
18,639
Analysis of the defined benefit obligation (DBO)
2023
2022
Amounts in NOK million
Norway
Other
Total
Norway
Other
Total
Active members
(1,977)
(780)
(2,757)
(2,079)
(748)
(2,827)
Deferred members
(898)
(1,472)
(2,370)
(801)
(1,471)
(2,273)
Pensioners
(9,831)
(4,058)
(13,889)
(8,676)
(3,595)
(12,271)
Defined benefit obligation
(12,706)
(6,309)
(19,016)
(11,556)
(5,814)
(17,370)
Weighted average duration (years)
11.3
11.2
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2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
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 1,550 million for
2023 and about NOK 1,300 million for 2022. Hydro's cash impact is expected to increase along a similar
trend pattern in the coming year.
Hydro's main pension plans are offered in Norway. 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
2023
2023
2022
2022
Discount rate
3.3%
3.2%
3.2%
1.9%
Expected pension increase
2.50%
1.75%
1.75%
1.25%
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
2023
2023
Discount rate increase 0.5% point
5.4%
684
Pension increase 0.5% point
(5.6%)
(718)
One year longer life all members
(4.6%)
(590)
The plan assets in the funded plans provided through Norsk Hydros Pensjonskasse were invested as
follows at the end of 2023 and 2022:
Amounts in NOK million, except percent
2023
2023
2022
2022
Cash and cash equivalents
3.6%
565
4.4%
652
Equity instruments Norway
18.5%
2,941
19.2%
2,867
Equity instruments other countries
21.5%
3,412
21.6%
3,220
Debt instruments
25.1%
3,985
24.6%
3,675
Investment funds
14.1%
2,241
12.9%
1,918
Real estate
17.2%
2,731
17.4%
2,592
Total
100.0%
15,875
100.0%
14,925
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 Europe (EEA, Switzerland, and
in the UK). 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.
Other
Other includes Hydro's post-employment benefits outside Norway. Most employees affected are covered by
defined contribution plans. Defined benefit plans relate largely to Germany, the UK and the US. In Germany,
most of the defined benefit plans are unfunded. In the UK and the US, most of the defined benefit plans are
financed and administered through independent pension trusts.
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2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Section 10 - Other information
Note 10.1 Income 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
2023
2022
Income (loss) before tax
6,546
32,365
Current income tax expense
4,790
6,891
Deferred tax expense (benefit)
(1,048)
1,093
Total income tax expense (benefit)
3,742
7,984
Components of deferred taxes
Amounts in NOK million
2023
2022
Origination and reversal of temporary differences
(1,011)
1,038
Change in deferred tax asset from tax loss carryforwards
(968)
(874)
Effect of tax rate changes
(40)
36
Net change in unrecognized deferred tax assets
912
1,383
Tax (expense) benefit allocated to Other comprehensive income
59
(491)
Deferred tax expense (benefit)
(1,048)
1,093
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financial
statements
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Reconciliation of tax expense to Norwegian nominal statutory tax rate
Amounts in NOK million
2023
2022
Expected income taxes at statutory tax rate
1)
1,440
7,120
Hydro-electric power surtax
2)
1,514
251
Equity accounted investments
(98)
(305)
Foreign tax rate differences
3)
(336)
566
Deferred tax asset not recognized and expired tax loss carryforwards
3)
615
787
Tax effect of impairment of goodwill
479
-
Prior year adjustments
4)
(4)
(346)
Other tax effects
130
(89)
Income tax expense (benefit)
3,742
7,984
1)
Norwegian nominal statutory tax rate is 22 percent. The table is based on this tax rate.
2)
A surtax of a certain percentage is applied to taxable income, with certain adjustments, for Norwegian hydro-electric power plants. The
effective tax rate is 45%. The surtax comes in addition to the normal corporate taxation. The surtax for 2022 includes a positive effect of
the legal restructuring of the associate Lyse Kraft DA, resulting in lower power surtax of about NOK 550 million related to change in surtax
basis in year of restructuring which was expensed as part of cost of power purchased from the associate.
3)
Deferred tax assets are not fully recognized for losses in certain subsidiaries, maninly in Brazil, Spain and Germany. The unrecognized
deferred tax asset has increased in Brazil in both 2023 and 2022, while the unrecognized part of deferred tax assets was reduced in Spain
and Germany in 2023. The effect is included with 22 percent of the loss in the line Deferred tax asset not recognized, while the difference
between the units' tax rates and 22 percent is included in the line Foreign tax rate differences.
4)
Prior year adjustments in 2022 include effects of favorable tax settlements in Germany amounting to NOK 156 million and Brazil
amounting to NOK 146 million.
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
2023
2023
2022
2022
Inventory valuation
566
(284)
530
(327)
Accrued expenses
2,381
(194)
2,105
(268)
Property, plant and equipment
9,695
(13,874)
8,546
(12,747)
Intangible assets
1,054
(1,903)
1,564
(2,290)
Pensions
1,638
(1,963)
1,467
(1,875)
Derivatives
971
(689)
978
(598)
Other
1,682
(2,834)
1,052
(2,628)
Tax loss carryforwards
7,571
6,171
Subtotal
25,558
(21,741)
22,413
(20,733)
Of which not recognized as tax asset
(5,479)
(4,312)
Gross deferred tax assets (liabilities)
20,079
(21,741)
18,101
(20,733)
Net deferred tax assets (liabilities)
(1,662)
(2,632)
Reconciliation to balance sheets
2023
2022
Deferred tax assets
3,055
2,163
Deferred tax liabilities
4,717
4,796
Net deferred tax assets (liabilities)
(1,662)
(2,632)
Recognition of net deferred tax asset is based on expected taxable income in the future.
At the end of 2023, Hydro had tax loss carryforwards of NOK 24,460 million, mainly in Brazil, Spain,
Australia and Italy. Of the total, NOK 23,441 million is without expiration. The majority of the tax loss
carryforwards with an expiry date expire after 2028. Tax assets are recognized for about 35 percent of the
tax losses.
Pillar Two legislation has been enacted or substantively enacted in certain jurisdictions where Hydro
operates. The legislation will be effective for Hydro’s financial year beginning January 1, 2024. Hydro is in
scope of the enacted legislation and has performed an assessment of the potential exposure to Pillar Two
income taxes.
The assessment of the potential exposure to Pillar Two income taxes is based on the most recent tax filings,
country-by-country reporting to the tax authorities, and financial statements for the entities in the Group.
Based on the assessment, the Pillar Two effective tax rates in most of the jurisdictions in which Hydro
operates are above 15 percent. However, there are a limited number of jurisdictions where the transitional
safe harbor relief does not apply, and the Pillar Two effective tax rate is close to 15 percent. The Group does
not expect a material exposure to Pillar Two income taxes in those jurisdictions.
IFRS has introduced a mandatory temporary exception to the requirements of IAS 12 under which a
company does not recognise or disclose information about deferred tax assets and liabilities related to the
Base Erosion and Profit Shifting (BEPS) Pillar Two model rules, which Hydro applies as of December 31,
2023.
© Hydro 2024
221
Consolidated
financial
statements
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Note 10.2 Research and development
Accounting principles for 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. See note 2.2 Intangible
assets for further information.
Research and development in 2023 and 2022
Hydro carries out its main research and development activities through research centres in the business
areas. Total expensed research and development cost was NOK 786 million in 2023 and NOK 655 million in
2022. The greater part of the expensed research and development costs relates to in-house research and
application development organizations, while the remainder represents work carried out by external
institutions. Government grants have been received on basis of some of the projects, recognized as other
income, i.e. are not deducted in the amounts mentioned above.
Hydro undertakes research and development activities to deliver on its strategic direction, including meeting
its sustainability ambitions. Hydro is committed to achieving net-zero emissions in terms of Scope 1 and 2 by
2050 and expects to have initiatives in place for cutting own carbon emissions by 30 percent by 2030. To
deliver on this commitment, new technologies enabling the delivery of net zero products and net zero
operations are needed, to which research and development activities have been initiated. The activities are
carried out throughout the value chain of Hydro.
Alumina
Bauxite residue is a leftover material from the process of refining bauxite into alumina at the Alunorte
refinery. Hydro and Senai Institute of Innovation in Mineral technologies (ISI-TM) have continued their
partnership to develop methods and processes for the reuse of bauxite residues, including industrial
application and extraction of other minerals from the residues, and opportunities for applying the residue as
a soil conditioner in local agriculture.
Development projects also include development of methods for replacing coal fired boilers with electrical
boilers at the alumina refinery Alunorte with the aim of reducing greenhouse gas emissions. Projects aimed
at replacing coal fired boilers with additional electric boilers are also undertaken.
Primary aluminium production
Aluminium production is an industry with hard-to-abate emissions, requiring development and maturement of
technologies to reduce emissions. Hydro is pursuing technology pathways toward near zero aluminium. To
secure the value of existing primary aluminium plants, Hydro is developing carbon capture and storage
(CCS) solutions that can be retrofitted into the existing plants. Hydro is planning to test and pilot the most
promising CCS technology, up to industrial scale pilot by 2030.
Another pathway more suited for greenfield aluminium plants is Hydro’s proprietary HalZero technology.
This technology converts alumina to aluminium chloride prior to electrolysis in a process where chlorine and
carbon are kept in closed loops, resulting in a fully decarbonized process. Hydro has been working over
some years on lab-scale development of this technology. In late 2023, construction of an HalZero test facility
was approved, moving the project from lab-scale test phase to small-scale industrial testing. Hydro has
developed a roadmap to bring this to a full industrial scale pilot before 2030.
Aluminium recycling
Zero-carbon aluminium can also be achieved by recycling more post-consumer scrap. Using only post-
consumer scrap, Hydro will be able to produce a near-zero carbon product at a competitive cost. Hydro has
patented aluminium sorting technology, and regularly seek to improve and further develop technology and
processes, including sorting technology for post-consumer scrap.
Hydro is also preparing to test casthouse decarbonization technology for the recycling and primary plants to
reach net-zero. Hydrogen based processes is developed and planned to be tested at pilot scale for
furnaces. In addition, Hydro will be testing emission-free plasma technology, which will enable electrification
of the remelting process in casthouses, using the same renewable energy that powers Hydro’s primary
smelters.
Extrusion
Hydro Extrusions is engaged in development projects in close cooperation with its customers, applying
material science competence and modelling capabilities for the solution offering. Many projects aim at
improving the design and usability of the products, and reducing their carbon footprint, targeting markets like
automotive, building and construction and renewables. The technology and production processes are also
regularly improved through development projects involving both the research and development centres and
the production plants.
Energy
Hydro’s green hydrogen unit, Hydro Havrand, is working to prove the technology replacing natural gas with
green hydrogen in the high temperature processes of aluminium casting. Hydro Havrand and Hydro
Aluminium Metal are developing a hydrogen pilot project at Hydro’s Høyanger smelter in Norway. Other
hydrogen projects are in early phases.
© Hydro 2024
222
Consolidated
financial
statements
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Note 10.3 Cash flow information
Cash disbursements and receipts included in cash from continuing operations
Amounts in NOK million
2023
2022
Income taxes paid
7,177
5,312
Interest paid
1,959
1,034
Interest received
1,267
652
In 2023 and 2022, non-cash investing activities for asset retirement costs amounted to NOK 727 million and
NOK 276 million, respectively. In 2023 and 2022, non-cash investing activities for leased assets amounted
to NOK 2,457 million and NOK 1,208 million, respectively.
Note 10.4 Auditor's remuneration
KPMG is the Group auditor of Norsk Hydro ASA. The following table shows fees to the appointed auditors
for 2023 and 2022. For all categories the reported fee is the recognized expense for the year.
Amounts in NOK million
Audit
1)
Audit related
services
2)
Other
services
3)
Tax related
services
Total
2023
Norway
14
3
3
-
20
Outside Norway
42
1
1
3
47
Total
56
3
4
3
67
2022
Norway
9
3
2
-
14
Outside Norway
33
1
4
3
41
Total
42
3
6
3
55
1)
Audit fees of NOK 56 million (2022: NOK 42 million) reflect audit fees from KPMG in the amount of NOK 50 million (2022: NOK 39 million)
2)
Audit related fees of NOK 3 million in 2023 were fees to KPMG
3)
Other services 2023 include KPMG's assurance over Hydro’s sustainability statement
Note 10.5 Changes in accounting principles and new pronouncements
Changes in accounting principles
Hydro has not implemented any new accounting standards or otherwise made any changes to accounting
policies during 2023.
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 practises.
© Hydro 2024
223
Financial
statements
Norsk Hydro ASA
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Financial statements Norsk Hydro ASA
Income statements
Amounts in NOK million
Notes
2023
2022
Other income
14
165
219
Total operating income
165
219
Employee benefit expense
2, 3
739
751
Depreciation
4
89
82
Other expenses
8
1,934
1,538
Expenses recharged to subsidiaries
8
(1,913)
(1,487)
Total operating expenses
849
883
Operating loss
(684)
(665)
Financial income, net
5
15,898
5,786
Income before tax
15,214
5,121
Income taxes
6
(150)
(225)
Net income
15,064
4,896
Appropriation of net income and equity transfers
Dividend proposed
5,030
11,540
Retained earnings
10,034
(6,643)
Total appropriation
15,064
4,896
© Hydro 2024
224
Financial
statements
Norsk Hydro ASA
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Statements of comprehensive income
Amounts in NOK million
Notes
2023
2022
Net income
15,064
4,896
Other comprehensive income
Items that will not be reclassified to income statement
Remeasurement postemployment benefits, net of tax
2
(6)
44
Other comprehensive income
(6)
44
Total comprehensive income
13
15,058
4,941
© Hydro 2024
225
Financial
statements
Norsk Hydro ASA
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Balance sheet
Amounts in NOK million, December 31
Notes
2023
2022
Assets
Property, plant and equipment and intangible assets
4
518
514
Shares in subsidiaries
7
57,052
57,052
Receivables from subsidiaries
8, 10
15,360
15,720
Prepaid pension, investments and other non-current assets
2, 9
6,636
6,301
Total financial non-current assets
79,049
79,073
Receivables from subsidiaries
8
7,592
3,304
Prepaid expenses and other current assets
252
193
Short-term investments
500
750
Cash and cash equivalents
19,340
21,770
Total current assets
27,684
26,016
Total assets
107,250
105,603
Amounts in NOK million, December 31
Notes
2023
2022
Equity and liabilities
Paid-in capital
Share capital
13
2,241
2,272
Treasury shares
13
(32)
(29)
Paid-in premium
13
28,987
28,987
Other paid-in capital
13
295
230
Retained earnings
Retained earnings
13
18,187
10,053
Treasury shares
13
(1,349)
(1,200)
Equity
13
48,330
40,313
Long-term provisions
2, 9
3,909
3,640
Long-term debt
12
16,879
17,320
Payables to subsidiaries
10
4
-
Other long-term liabilities
16,883
17,320
Bank loans and other interest-bearing short-term debt
1,066
2,305
Dividends payable
5,030
11,540
Payables to subsidiaries
8, 10
31,046
29,345
Other current liabilities
987
1,140
Total current liabilities
38,129
44,330
Total equity and liabilities
107,250
105,603
© Hydro 2024
226
Financial
statements
Norsk Hydro ASA
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Statements of cash flows
Amounts in NOK million
2023
2022
Net income
15,064
4,896
Depreciation
89
82
Net foreign exchange (gain) loss
1,176
(745)
Net sales of trading securities
-
1,407
Changes in receivables and payables, and other items
(2,243)
(934)
Net cash provided by operating activities
14,086
4,706
Purchases of short-term investments
(500)
(1,250)
Proceeds from sales of short-term investments
750
1,500
Net purchases of other investments
(6)
(24)
Net cash provided by investing activities
244
226
Dividends paid
(11,501)
(14,060)
Repurchases of shares
(2,157)
(661)
Proceeds from shares issued
49
48
Other financing activities, net
(2,956)
12,667
Net cash used in financing activities
(16,565)
(2,006)
Foreign currency effects on cash
(195)
580
Net increase (decrease) in cash and cash equivalents
(2,430)
3,506
Cash and cash equivalents at beginning of year
21,770
18,264
Cash and cash equivalents at end of year
19,340
21,770
© Hydro 2024
227
Financial
statements
Norsk Hydro ASA
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Notes to the financial
statements Norsk Hydro ASA
Note 1
Summary of significant accounting policies
228
Note 2
Employee retirement plans
229
Note 3
Management remuneration and employee costs
230
Note 4
Property, plant and equipment and intangible assets
231
Note 5
Finance income and expense
231
Note 6
Income taxes
231
Note 7
Shares in subsidiaries
232
Note 8
Related party information
233
Note 9
Specification of balance sheet items
233
Note 10
Financial instruments
233
Note 11
Guarantees
233
Note 12
Long-term debt
234
Note 13
Number of shares outstanding, shareholders and equity reconciliation
234
Note 14
Other income
234
© Hydro 2024
228
Financial
statements
Norsk Hydro ASA
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Note 1 Summary of significant 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
recoverable amount 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 in accordance with IAS 19 Employee Benefits.
See note 9.3 Employee retirement plans to the consolidated financial statements for description of the
accounting policies.
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, mainly such items as
PCs, office equipment and similar, are excluded from lease accounting. Right-of-use assets are included in
Property, plant and equipment, and lease liabilities are included in Long-term debt. 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.
Derivative instruments
Forward contracts and options for purchase or sale of currency or interest are recognized in the financial
statements and measured at fair value at each balance sheet date. The resulting unrealized gain or loss is
presented 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 from fair value accounting when the contract is with a subsidiary, i.e. such features are not
separated from the host contract.
Loans and other financial liabilities
Loans and other financial liabilities include issued bonds, bank loans and similar. Loans are measured at
amortized cost.
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.
© Hydro 2024
229
Financial
statements
Norsk Hydro ASA
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
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 9.2 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.
Legislation implementing Pillar Two legislation requiring Norsk Hydro ASA to pay additional taxes in Norway
in the event subsidiaries pay less than the minimum tax as defined in the OECD/G20 framework on Base
Erosion and Profit Shifting was enacted in Norway in January 2024. The regulation will be effective as of
January 1, 2024. Hydro expects no or limited additional taxes resulting from this regulation. IFRS has
introduced a mandatory temporary exception to the requirements of IAS 12 under which a company does
not recognise or disclose information about deferred tax assets and liabilities related to the proposed
OECD/G20 BEPS Pillar Two model rules, which Hydro applies as of December 31, 2023.
Note 2 Employee retirement plans
Most employees in Norsk Hydro ASA are covered by a defined contribution plan. Norsk Hydro ASA has
closed the main defined benefit plans. The defined benefit plans are funded for benefits earned on salaries
up to 12G, where G equals the base amount in the National Insurance Scheme. Benefits earned on salaries
above 12G, and early retirement and termination benefits are unfunded. The plans comply with legal
requirements for occupational pensions in Norway.
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
2023
2022
Defined benefit plans
18
28
Defined contribution plans
38
37
Multiemployer plans
6
6
Termination benefits and other
(2)
6
Social security cost
7
9
Pension expense
68
86
Interest expense (income)
(118)
(65)
Remeasurement (gain) loss in other comprehensive income
10
(57)
Recognized defined benefit assets and liability
Amounts in NOK million
2023
2022
Defined benefit obligation major plans
(4,899)
(4,676)
Plan assets
8,753
8,260
Reimbursement rights
280
262
Liability other plans
(1)
(5)
Social security cost
(340)
(316)
Net defined benefit asset
3,793
3,525
Recognized prepaid pension
6,547
6,080
Recognized pension liability
(2,754)
(2,554)
Net amount recognized
3,793
3,525
© Hydro 2024
230
Financial
statements
Norsk Hydro ASA
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Change in defined benefit obligation (DBO)
Amounts in NOK million
2023
2022
Opening Balance
(4,676)
(5,212)
Current service cost
(17)
(27)
Interest expense
(139)
(96)
Actuarial gain (loss) economic assumptions
(299)
395
Experience gain (loss)
(244)
(49)
Benefit payments
318
314
Terminations benefits
(3)
(1)
Settlements
162
-
Closing Balance
(4,899)
(4,676)
Change in pension plan assets
Amounts in NOK million
2023
2022
Opening Balance
8,260
8,587
Interest income
259
162
Return on plan assets above (below) interest income
541
(306)
Benefit payments
(184)
(182)
Settlements
(124)
-
Closing Balance
8,753
8,260
Analysis of the defined benefit obligation (DBO)
Amounts in NOK million
2023
2022
Active members
(594)
(725)
Deferred members
(495)
(439)
Pensioners
(3,810)
(3,512)
Defined benefit obligation
(4,899)
(4,676)
Benefit
obligation
Benefit
expense
Benefit
obligation
Benefit
expense
2023
2023
2022
2022
Assumptions
Discount rate
3.30%
3.20%
3.20%
1.90%
Expected pension increase
2.50%
1.75%
1.75%
1.25%
Mortality basis
K2013
K2013
K2013
K2013
See note 9.3 Employee retirement plans in notes to the consolidated financial statements for information
about sensitivities.
Note 3 Management remuneration and employee costs
See Norsk Hydro ASA Remuneration report 2023 for information and details related to the Corporate
Management Board remuneration and Board of Directors’ 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 9.2 Employee remuneration in the notes to the consolidated financial statements for information on
the employee share purchase plan.
The average number of employees in Norsk Hydro ASA was 357 in 2023 as compared to 390 in 2022. As of
year-end 2023 and 2022, Norsk Hydro ASA employed 368 and 405 employees, respectively.
Total loans given by Norsk Hydro ASA to Norwegian employees as of December 31, 2023 were NOK 13
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
2023
2022
Employee benefit expense:
Salaries
578
580
Social security costs
93
82
Other benefits
-
2
Pension expense (note 2)
68
86
Total
739
751
© Hydro 2024
231
Financial
statements
Norsk Hydro ASA
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Note 4 Property, plant and equipment and intangible assets
Leases expensed in the period amounts to NOK 17 million and refers to leases of short term, low value or
leases with variable payments.
Property,
plant and
equipment
Intangible
assets
Total
Amounts in NOK million
Cost December 31, 2022
791
169
960
Additions at cost
88
9
97
Disposals at cost
(8)
(15)
(23)
Accumulated depreciation and impairment December 31, 2023
(428)
(88)
(516)
Carrying value December 31, 2023
444
74
518
Depreciation and impairment in 2023
(75)
(13)
(89)
Intangible assets mainly consist of software.
Note 5 Finance income and expense
Amounts in NOK million
2023
2022
Dividends from subsidiaries
17,080
5,025
Interest from group companies
1,195
591
Other interest income
578
265
Interest paid to group companies
(1,090)
(282)
Other interest expense
(803)
(619)
Net foreign exchange gain (loss)
(1,176)
745
Other, net
114
61
Financial income (expense), net
15,898
5,786
Note 6 Income taxes
The tax effect of temporary differences resulting in deferred tax assets (liabilities) are:
Temporary differences
Tax effect
Amounts in NOK million
2023
2022
Short-term items
44
80
Long-term receivables from subsidiaries
(468)
(372)
Pensions
1)
(834)
(776)
Long-term debt
337
226
Other long-term items
(80)
(47)
Deferred tax assets (liabilities)
(1,001)
(888)
1)
Includes NOK 2 million and NOK (13) million of tax benefit (expense) allocated to equity in 2023 and 2022 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
2023
2022
Income (loss) before taxes
15,214
5,121
Expected income taxes at statutory tax rate
3,347
1,127
Dividend exclusion
(3,124)
(924)
Permanent differences and other, net
(73)
22
Income tax expense (benefit)
150
225
Components of income taxes
Current income taxes
46
20
Change in deferred taxes
104
205
Income tax expense (benefit)
150
225
See note 10.1 Income taxes in the consolidated financial statements for further information.
Taxes payable were NOK 64 million per December 31, 2023 and NOK 27 million per December 31, 2022.
In addition, Norsk Hydro ASA has a tax receivable of NOK 111 million per December 31, 2023, regarding a
favorable tax settlement, reported in the balance sheet as Prepaid expenses and other current assets.
© Hydro 2024
232
Financial
statements
Norsk Hydro ASA
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Note 7 Shares in 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
51,293
Hydro Energi AS
Norway
Oslo
100
5,643
Hydro Aluminium Deutschland GmbH
1)
Germany
Grevenbroich
25
92
Industriforsikring AS
Norway
Oslo
100
20
Hydro Kapitalforvaltning AS
Norway
Oslo
100
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
62%
Mineração Paragominas S.A.
Brazil
100%
Hydro Aluminium Metal
Hydro Aluminium Australia Pty Limited
Australia
100%
ALBRAS - Alumínio Brasileiro S.A.
Brazil
51%
Sør-Norge Aluminium AS
Norway
100%
Slovalco a.s.
Slovakia
55%
Hydro Metal Markets
Extrusion Services Sarl
France
100%
Hydro Aluminium Gießerei Rackwitz GmbH
Germany
100%
Alumetal Group Hungary Kft
Hungary
100%
Hydro Aluminium Clervaux S.A.
Luxembourg
100%
Alumetal Poland Sp. z o.o
Poland
100%
Hydro Aluminium Iberia S.A.U
Spain
100%
Hydro Aluminium Deeside Ltd.
United Kingdom
100%
Hydro Aluminium Metals USA, LLC
United States
100%
Hydro Extrusions
Hydro Extrusion Nenzing GmbH
Austria
100%
Hydro Building Systems Belgium NV
Belgium
100%
Hydro Extrusion Lichtervelde NV
Belgium
100%
Hydro Extrusion Raeren SA
Belgium
100%
Hydro Extrusion Brasil S.A.
Brazil
100%
Hydro Extrusion Canada Inc.
Canada
100%
Hydro Aluminium Fabrication (Taicang) Co. Ltd
China
100%
Hydro Precision Tubing (Suzhou) Co. Ltd.
China
100%
Hydro Extrusion Denmark A/S
Denmark
100%
Hydro Precision Tubing Tønder A/S
Denmark
100%
Hydro Building Systems France Sarl
France
100%
Hydro Extrusion Albi SAS
France
100%
Hydro Extrusion Lucé/Chateauroux SAS
France
100%
Hydro Extrusion Puget SAS
France
100%
Hydro Building Systems Germany GmbH
Germany
100%
Hydro Extrusion Deutschland GmbH
Germany
100%
Hydro Extrusion Offenburg GmbH
Germany
100%
Hydro Building Systems Extrusion GmbH
Germany
100%
Hueck Extrusion GmbH & Co. KG
Germany
100%
Hydro Extrusion Hungary Kft
Hungary
100%
Hydro Building Systems Italy S.p.a.
Italy
100%
Hydro Extrusion Italy S.r.l.
Italy
100%
Hydro Building Systems Atessa S.r.l.
Italy
100%
Hydro Extrusion Drunen B.V.
Netherlands
100%
Hydro Extrusion Hoogezand B.V.
Netherlands
100%
Hydro Extrusion Norway AS
Norway
100%
Hydro Extrusion Poland Sp. z.o.o
Poland
100%
Hydro Aluminium Extrusion Portugal HAEP S.A.
Portugal
100%
Hydro Extrusion Slovakia a.s.
Slovakia
100%
Hydro Building Systems Spain S.L.U.
Spain
100%
Hydro Extrusion Spain S.A.U.
Spain
100%
Hydro Extrusion Sweden AB
Sweden
100%
Hydro Aluminium UK Ltd.
United Kingdom
100%
Hydro Building Systems UK Ltd.
United Kingdom
100%
Hydro Extrusion Portland Inc
United States
100%
Hydro Extrusion USA LLC
United States
100%
Hydro Precision Tubing Monterrey LLC
United States
100%
Hydro Precision Tubing USA LLC
United States
100%
© Hydro 2024
233
Financial
statements
Norsk Hydro ASA
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Note 8 Related party information
Norsk Hydro ASA employs key management personnel, including the majority of the Corporate
Management Board and central staffs managing and safeguarding key processes such as business
planning and performance follow-up, financial reporting, financing and payment services, IT infrastructure,
policy and security, HR processes, legal framework and governance, and other group-wide processes.
Costs incurred for employees and purchased goods and services are charged to subsidiaries to the extent
the subsidiaries benefit from those processes. Such corporate costs are charged based on the actual cost of
the corporate processes and as such reflects a cost coverage rather than revenue from contracts with
customers. Costs associated with servicing shareholders are not recharged to subsidiaries. Total corporate
costs charged to subsidiaries amounted to NOK 1,013 million and NOK 734 million in 2023 and 2022,
respectively.
Norsk Hydro ASA also operates shared services in Norway, offering services within accounting, HR and
IS/IT operation. These day-to-day services are charged based on usage of the services at prices reflecting
the actual cost rather than agreed prices for such services, and as such are not considered revenue from
contracts with customers. Total charges for shared services charged to subsidiaries based on incurred costs
amounted to NOK 899 million and NOK 753 million in 2023 and 2022, respectively.
Receivables related to corporate costs and shared services amounted to NOK 118 million and NOK 68
million per December 31, 2023 and 2022, respectively.
Further, until December 31, 2022, Norsk Hydro ASA offered project services to its subsidiaries and certain
affiliated companies including associates and joint ventures. Services included project planning and
management and were offered at agreed prices for services under similar terms to internal and external
customers. Such services were charged to subsidiaries with NOK 58 million in 2022, presented as revenue.
In addition, certain other services were invoiced to subsidiaries with NOK 7 million in 2022.
Norsk Hydro ASA owns the power production facilities at Notodden, Norway. The power production is
managed by the subsidiary Hydro Energi AS who purchases all power produced under a long-term contract
at fixed price entered into in 2019. Total consideration was NOK 145 million and NOK 104 million in 2023
and 2022, respectively.
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. Short-
and long-term receivables from subsidiaries and short-term payables to subsidiaries shown in the balance
sheet relates to these activities, and also covers some derivative instruments shown in note 10 Financial
instruments, as well as receivables related to internal charges. See note 5 Financial income and expense for
information on interest paid to and received from group companies.
For information on transactions with employees and management, see note 3 Management remuneration
and employee costs and Norsk Hydro ASA Report on executive remuneration 2023. See note 9.1 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.
Audit fees were NOK 6 million and NOK 5 million in 2023 and 2022, respectively. Fees for other services
were NOK 4 million and NOK 2 million in 2023 and 2022, respectively.
Note 9 Specification of balance sheet items
Amounts in NOK million
2023
2022
Securities
10
10
Prepaid pension
6,547
6,080
Other non-current assets
80
212
Total prepaid pension, investments and other non-current assets
6,636
6,301
Pension liability
2,754
2,554
Deferred tax liabilities
1,001
888
Other long-term provisions
154
198
Total long-term provisions
3,909
3,640
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 2023 and 2022, the value of currency forward contracts outstanding with subsidiaries were as follows:
Amounts in NOK million
2023
2022
Currency forward contracts, short-term
(17)
(7)
Currency forward contracts, long-term
-
(1)
Sum currency forward contracts
(17)
(8)
The contracts represent exposure mainly in Euro, Swedish krone and US dollars. In addition, there are some
contracts with exposure to British pounds, Japanese yen and Danish krone representing lower amounts.
The contracts mature no later than 2024.
Note 11 Guarantees
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
2023
2022
Commercial guarantees
2,464
2,455
Total guarantees not recognized
2,464
2,455
© Hydro 2024
234
Financial
statements
Norsk Hydro ASA
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Note 12 Long-term debt
Amounts in NOK million
2023
2022
NOK
8,739
10,985
EUR
8,989
8,395
Total unsecured loans
17,728
19,381
Lease liabilities
217
244
Outstanding debt
17,944
19,625
Less: Current portion
(1,066)
(2,305)
Total long-term debt
16,879
17,320
As of December 31, 2023, long-term debt that falls due after 2028 amounted to NOK 4,384 million. See note
7.4 Short and long-term debt in notes to the consolidated financial statements for further information. For a
description of Hydro’s policies for funding and liquidity, see note 7.1 Capital management in notes to the
consolidated financial statements.
Note 13 Number of shares outstanding, shareholders and equity
reconciliation
The share capital of Norsk Hydro ASA as of December 31, 2023 was NOK 2,241,247,066 consisting of
2,041,208,621 ordinary shares at NOK 1.098 per share. As of December 31, 2023, Norsk Hydro ASA had
purchased 29,161,161 treasury shares at a cost of NOK 1,381 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 2,012,047,460 shares outstanding as
of December 31, 2023, according to information in the Norwegian Central Securities Depository
(Verdipapirsentralen).
Name
Number of shares
The Ministry of Trade, Industry and Fisheries of Norway
699,344,162
Folketrygdfondet
126,827,416
State Street Bank and Trust Comp
1)
49,773,736
Citibank, N.A.
1)
46,042,273
State Street Bank and Trust Comp
1)
42,830,912
JPMorgan Chase Bank, N.A., London
1)
32,891,917
J.P. Morgan SE
1)
28,821,878
State Street Bank and Trust Comp
1)
28,488,772
JPMorgan Chase Bank, N.A., London
1)
27,892,587
Clearstream Banking S.A.
1)
27,875,303
State Street Bank and Trust Comp
1)
26,281,308
State Street Bank and Trust Comp
1)
23,729,286
The Bank of New York Mellom SA/NV
1)
20,753,129
1)
Nominee accounts.
Changes in equity
Amounts in NOK million
Paid-in
capital
Retained
earnings
Total equity
December 31, 2022
31,460
8,853
40,313
Total Comprehensive Income
-
15,058
15,058
Accrued dividend 2022 not paid in 2023
-
38
38
Dividend proposed
-
(5,030)
(5,030)
Treasury shares
1)
32
(2,081)
(2,049)
December 31, 2023
31,492
16,838
48,330
1) For details on movements in treasury shares, see Consolidated statement of changes in equity for the group and note 7.6 Shareholders'
equity.
Note 14 Other income
Other income in Norsk Hydro ASA includes charges for goods and services to subsidiaries. The main part
represents sale of energy produced at the parent company’s power plant to the subsidiary Hydro Energi AS.
In addition, government grants supporting research and development activities are included. In 2022, the
parent company was responsible for the group’s internal engineering group, offering project execution
services, mainly to subsidiaries, but also to associates and joint ventures, and occasionally to other
companies.
© Hydro 2024
235
Statement
from the Board
and the CEO
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Statement from the Board and the CEO of Norsk Hydro ASA
Norsk Hydro ASA (the parent company) had a net income of NOK 15,064 million in 2023 compared to NOK 4,896 million in 2022. The result reflects increased dividends from subsidiaries in 2023 compared to 2022.
Hydro’s Board of Directors proposes to pay a dividend of NOK 2.5 per share and an additional NOK 2.0 billion in share buyback for 2023, for approval by the Annual General Meeting on May 7, 2024. The proposed
payment demonstrates the company’s commitment to provide a predictable dividend to shareholders. Hydro’s dividend policy reflects our ambitions to lift performance and cash returns to shareholders over the cycle. The
dividend policy is to pay out a minimum of 50 percent of adjusted net income over the cycle with a NOK 1.25 per share dividend floor.
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.
Oslo, February 13, 2024
Dag Mejdell
Chair
Rune Bjerke
Deputy chair
Margunn Sundve
Board member
Arve Baade
Board member
Marianne Wiinholt
Board member
Torleif Sand
Board member
Kristin F. Kragseth
Board member
Peter Kukielski
Board member
Bjørn Petter Moxnes
Board member
Phillip Graham New
Board member
Petra Einarsson
Board member
Hilde Merete Aasheim
President and CEO
© Hydro 2024
236
Statement
from the Board
and the CEO
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
The below listed parts of the Hydro Annual report 2023 constitute the Report of the Board of Directors
Regulation
Content
Annual Report Chapter Reference
Page reference
Norwegian accounting act
Section 3-3a, 1st para
Information regarding the nature and location of the business, including information on any branch offices.
Letter to stakeholders
About Hydro
Our business
4-6
10
9-26
Section 3-3a, 2nd para
Review of the development and results of the company’s operations and position together with a description of the
key risks and uncertainty factors facing the company, hereunder also information on research and development
activities.
Our performance
Risk review
Climate change
27-34
45-62
73-86
Section 3-3a, 5th para
A description that provides a basis for assessing the company’s further outlook, including whether the results for
the year agree with previously stated target results and expected developments and give reason for any
discrepancy.
Letter to stakeholders
Business areas
Our performance
4-6
12-16
27-34
Section 3-3a, 6th para
Information regarding any financial risk that is significant to the evaluation of the company’s assets, liabilities,
financial position and results.
Managing uncertainty
Key financial exposures
Risk review
24
34
45-62
Section 3-3a, 7th para, cfr. Section 4-5
Information regarding the going concern assumption.
Statement from the Board and the CEO
235
Section 3-3a, 8th para
Proposal for the allocation of profit or settlement of loss.
Financial income statement Norsk Hydro ASA
223
Section 3-3a, 9th para
Information about the work environment, along with an overview of implemented measures relevant to the working
environment and including information on injuries, accidents and sick leave rates.
Own workforce
122-140
Section 3-3a, 10th para
Information on matters relating to the business, hereunder its factor inputs and products, which may result in a not
insignificant impact on the external environment. The environmental impact each aspect of the business has or
may have, as well as measures implemented or planned implemented to prevent or reduce any negative
environmental impacts, shall be stated.
Our business
Risk review
Sustainability
9-26
45-62
67-162
Section 3-3a, 11th para
Information on whether insurances covering the board members’ and CEO’s potential liabilities towards the
company and third parties are maintained, including information on the relevant insurance coverage.
Norwegian Code of Practice for Corporate Governance -
Chapter 2
258-264
Section 3-3a, 12th para, cfr. Securities Trading
Act, Section 5-8a (1)
Shareholders information: A description of any provisions in the articles of association that restrict the right to
trade in the shares of the company.
Not applicable
-
Section 3-3a, 12th para, cfr. Securities Trading
Act, Section 5-8a (2)
Shareholders information: A description of who exercises the rights connected to shares in any employee share
schemes where authority is not exercised directly by the employees covered by the scheme.
Not applicable
-
Section 3-3a, 12th para, cfr. Securities Trading
Act, Section 5-8a (3)
Shareholders information: Any agreements between shareholders which are known to the company and which
restrict the possibilities of trading in or exercising voting rights connected to the shares.
Not applicable
-
Section 3-3a, 12th para, cfr. Securities Trading
Act, Section 5-8a (4)
Shareholders information: Any significant agreements to which the company is a party, the terms of which take
effect, alter or terminate as a result of a takeover bid, and a description of those terms.
Not applicable
-
Section 3-3b
Report on corporate governance.
Our governance
Norwegian Code of Practice for Corporate Governance
35-66
258-264
Section 3-3c, first para
Report on social responsibility.
Sustainability
67-162
Section 3-3d
Report on payments to the authorities, etc. (Country-by-country reporting).
Country-by-country reporting
247-260
Equality and Anti-Discrimination Act
Section 26a
Accounting for the factual status of gender equality, equal pay and diversity, and actions taken to fulfill
requirements.
Own workforce
122-140
Norwegian Companies Act
ASA 6-16 a and b
Management remuneration.
Report on executive remuneration
Hydro.com
UK Modern Slavery Act 2015
Australia Modern Slavery Act 2018
Norwegian transparency Act 2021
Information regarding steps taken to ensure that modern slavery is not taking place in Hydro’s operations or its
supply chain.
Sustainability
Human rights
Own workforce
Workers in the value chain
Affected communities
118-121
122-140
141-145
146-150
© Hydro 2024
237
Responsibility
statement
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Responsibility statement
We confirm to the best of our knowledge that the consolidated financial statements for 2023 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 2023 have been prepared in accordance with the Norwegian Accounting Act the regulation on simplified
application of international accounting standards (FOR-2008-01-21-57), 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 Integrated Annual Report includes a true and fair view 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, that the integrated 2023 report meets the information requirements of the Norwegian accounting act with
regard to the Report of the Board of Directors and statements on corporate governance and corporate social responsibility and that the country by country report for 2023 has been prepared in accordance with the
Norwegian Accounting Act §3-3d and the Norwegian Security Trading Act §5-5a.
Oslo, February 13, 2024
Dag Mejdell
Chair
Rune Bjerke
Deputy chair
Margunn Sundve
Board member
Arve Baade
Board member
Marianne Wiinholt
Board member
Torleif Sand
Board member
Kristin F. Kragseth
Board member
Peter Kukielski
Board member
Bjørn Petter Moxnes
Board member
Phillip Graham New
Board member
Petra Einarsson
Board member
Hilde Merete Aasheim
President and CEO
© Hydro 2024
243
Appendices
244
Alternative performance measures (APMs)
248
Country-by-country report
258
The Norwegian Corporate Governance Board (NUES)
265
Production capacity and volumes
268
Task force on climate-related financial disclosures (TCFD) index
269
UN Sustainable Development Goals index
271
Hydro 2030 profitability roadmap assumptions
© Hydro 2024
244
Alternative
performance
measures
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
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, or should
be assessed in a different context than its classification according to its nature. 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 adjusted EBITDA in the discussions on periodic underlying financial and
operating results and liquidity from the business areas and the group, while adjusting effects to adjusted
EBITDA, EBIT and net income (loss) are discussed separately. 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.
• Adjusted EBIT: EBIT +/- identified adjusting items to EBIT as described below.
• EBITDA: EBIT + depreciation, amortization and impairments, net of investment grants.
• Adjusted EBITDA: EBITDA +/- identified adjusting items to EBITDA as described below.
• Adjusted net income (loss) from continuing operations: Net income (loss) from continuing operations +/-
adjusting items to net income (loss) as described below.
• Adjusted earnings per share from continuing operations: Adjusted net income (loss) from continuing
operations attributable to Hydro shareholders divided by 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 for continuing operations.
• Net cash (debt): Short- and long-term interest-bearing debt adjusted for Hydro's liquidity positions.
• Adjusted net cash (debt): Net cash (debt) adjusted 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 adjusted EBITDA ratio: Adjusted net cash (debt) / adjusted EBITDA
• (Adjusted) RoACE is defined as (Adjusted) Earnings after tax for the prior 12 months divided by average
Capital employed for the four most recent quarters. (Adjusted) Earnings after tax is defined as (adjusted)
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 adjusted
figures, the tax effect of adjusting items.
• 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, Sales of short-term investments and net cash received
or paid for short- and long-term collateral.
Adjusting items to EBITDA, EBIT, net income (loss) and earnings per share
Hydro has defined two categories of items which are adjusted to 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. When realized, effects of changes in the
market values since the inception of the instrument are included in adjusted EBITDA and adjusted
EBIT. Changes in the market value of the trading portfolios are included in adjusted 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, effects of disposals of businesses and
operating assets, major impairments of property, plant and equipment, as well as other major effects of a
special nature, and realized effects of currency derivatives entered into for risk management
purposes. Materiality is defined as items with a value above NOK 20 million. All adjusting items to results are
reflecting a reversal of transactions recognized in the financial statements for the current period, with the
exception of realized foreign exchange gain (loss). 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 future expected
sales and purchase transactions, both fixed-price customers and supplier contracts and transactions at
not yet determined market prices. 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 physical
and financial power contracts used for managing price risks and volume changes. Unrealized derivative
effects on certain power contracts in a business model with the combined aim to manage hydrological risk
in own production, differences in power needs in existing and new business activities in Hydro as well as
supporting development of new renewable energy projects are also adjusted for. Adjustments also
comprise elimination of changes in fair value of embedded derivatives within certain internal power
contracts.
• 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.
• Significant community contributions Brazil refers to the provision recognized in relation to the TAC and TC
agreements with the Government of Parà and Ministèrio Pùblico made in 2018, including later cost
adjustments and certain similar agreements.
• Other effects include insurance proceeds covering asset damage, legal settlements, etc. Insurance
proceeds covering lost income in the same or a previous period are included in adjusted results.
© Hydro 2024
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Alternative
performance
measures
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
• Pension includes recognition of pension plan amendments and related curtailments and settlements.
• Transaction related effects reflect the (gains) losses on divestment of businesses and individual assets,
the net remeasurement (gains) losses related to previously owned shares in acquired businesses,
inventory valuation expense related to acquisitions as well as acquisition costs.
• Adjusted items in equity accounted investments reflects Hydro's share of adjusting items from adjusted
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.
• 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 also adjusted for.
• Depreciation relate to excess depreciation for assets with significantly reduced expected useful life related
to a decision to close the plant or similar significant changes.
• Realized foreign exchange gain (loss) on risk management instruments represents such items as foreign
currency derivatives entered into and managed to mitigate currency risk in the production margin, i.e. the
difference between sales price for products such as aluminium or alumina versus the cost of raw materials
and energy used in production. Realized embedded currency derivatives in certain power contracts in
Norway denominated in Euro are also adjusted for. Such currency effects are included in currency gains
and losses in finance expense in the income statement, and included in adjusted EBITDA and adjusted
EBIT.
• 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, with the exception of the realized
foreign currency exchange gain (loss) on risk management instruments mentioned above.
• Calculated income tax effect: In order to present adjusted net income on a basis comparable with our
adjusted operating performance, the adjusted income taxes include adjustments for the expected taxable
effects on adjusted items to income before tax.
• Other adjustments to net income from continuing operations include other major financial and tax related
effects not regarded as part of the underlying business performance of the period.
© Hydro 2024
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Alternative
performance
measures
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Adjusting items to EBITDA and EBIT per operating segment and for Other
and eliminations
1)
NOK million
2023
2022
Unrealized derivative effects on raw material contracts
412
(40)
Community contributions Brazil
2)
25
32
Other effects
3)
-
162
Hydro Bauxite & Alumina
437
155
Unrealized derivative effects on power contracts
401
170
(Gains)/losses on divestments
4)
-
(65)
Net foreign exchange (gain)/loss
5)
(20)
11
Other effects
6)
164
-
Hydro Energy
544
116
Unrealized derivative effects on LME related contracts
(1,667)
(2,990)
Unrealized derivative effects on power contracts
7)
103
3,218
Significant rationalization charges and closure costs
8)
-
46
Net foreign exchange (gain)/loss
5)
(320)
(108)
Other effects
9)
-
(69)
Hydro Aluminium Metal
(1,884)
97
Unrealized derivative effects on LME related contracts
215
(107)
Transaction related effects
10)
120
-
Hydro Metal Markets
335
(107)
Unrealized derivative effects on LME related contracts
(34)
59
Unrealized derivative effects on power contracts
(28)
3
Significant rationalization charges and closure costs
11)
265
106
(Gains)/losses on divestments and other transaction related effects
12)
25
(54)
Other effects
13)
(107)
(76)
Hydro Extrusions
121
38
Unrealized derivative effects on LME related contracts
14)
(43)
36
(Gains)/losses on divestments
(25)
-
Net foreign exchange (gain)/loss
5)
(543)
(221)
Other effects
15)
26
15
Other and eliminations
(585)
(170)
Adjusting items to EBITDA
(1,033)
128
Impairment charges
Hydro Bauxite & Alumina
16)
3,773
-
Hydro Aluminium Metal
17)
628
77
Hydro Extrusions
18)
23
258
Adjusting items to EBIT
3,391
464
1)
Negative figures indicate reversal of a gain and positive figures indicate reversal of a loss.
2)
Community contributions includes provisions for the TAC and TC agreements with the Government of Parà and Ministèrio Pùblico made
in September 2018, including later adjustments for changes in cost estimates, and similar agreements.
3)
Other effects in Hydro Bauxite & Alumina in 2022 includes derecognized engineering cost related to a project on hold.
4)
Divestment gain in Hydro Energy in 2022 relates to the partial sale of a project company involved with a wind power project in Sweden,
held by Hydro REIN.
5)
Realized currency gains and losses from risk management contracts and embedded currency derivatives in physical power and raw
material prices.
6)
Other effects in Energy includes a provision for potential project-related costs in relation to regulatory compliance.
7)
Unrealized derivative effects on power contracts includes the effect of settling some such contracts in Slovalco net through selling power
in 2021 and thereby meeting the requirement for recognizing contracts in the same contract portfolio at fair value. The effects of
consuming power under contracts recognized at fair value were included for 2022.
8)
Rationalization and closure costs in Hydro Aluminium Metal in fourth quarter 2022 related to curtailment cost in the Slovalco smelter, and
reduction in 2022 related to Aluchemie.
9)
Other effect in Hydro Aluminium Metal in 2022 relates to insurance compensation for the power outage in Albras in the first quarter of
2022.
10)
Transaction effects in Metal Markets includes acquisition costs related to Alumetal and realization of revalued inventory in the third
quarter 2023 with lower margin.
11)
Significant rationalization and closure costs include provisions for costs related to reduction of overcapacity, closures and environmental
clean-up activities in Hydro Extrusions.
12)
Divestments of Hydro Extrusions plants, including adjustments of sales price, as well as acquisition costs.
13)
Other effects in Hydro Extrusions relates to a tax related dispute concluded in 2023 and insurance compensation in 2022, both for cost
incurred prior to Hydro's acquisition of the business affected.
14)
Unrealized derivative effects on LME related contracts result from elimination of changes in the valuation of certain internal aluminium
contracts.
15)
Other effects relates to environmental provision for closed sites in Norway and Germany.
16)
Impairment charges in Hydro Bauxite & Alumina in fourth quarter 2023 relates to impairment of goodwill and property, plant and
equipment in the operating plants.
17)
Impairment charges in Hydro Aluminium Metal in 2023 reflects write down of Hydro's ownership interest in the Tomago smelter in
Australia, while the charge in 2022 reflect write downs related to the Slovalco smelter.
18)
Impairment charges in 2023 and 2022 in Hydro Extrusions include impairments of various individual sites and assets.
Adjusted EBITDA
NOK million
2023
2022
EBIT
9,592
30,715
Depreciation, amortization and impairment
13,815
8,929
Investment grants
(116)
(108)
EBITDA
23,291
39,536
Adjusting items to EBITDA
(1,033)
128
Adjusted EBITDA
22,258
39,664
Adjusted earnings per share from continuing operations
NOK million
2023
2022
Net income (loss) from continuing operations
2,804
24,381
Adjusting items to net income (loss) from continuing operations
1) 2)
5,031
(1,236)
Adjusted net income (loss) from continuing operations
7,835
23,145
Adjusted net income from continuing operations attributable to non-controlling interests
(799)
1,205
Adjusted net income from continuing operations attributable to Hydro shareholders
8,634
21,941
Number of shares
2,029
2,051
Adjusted earnings per share from continuing operations
4.26
10.70
1)
See Other performance measures and adjustments to EBIT in the section Financial results in Performance Review section
2)
Adjusting items to net income (loss) consist of the Adjusting items to EBIT specified on the previous page, and realized and unrealized
currency gains and losses. These items are net of calculated tax effects, for most items based on a 30 percent standardized tax rate.
© Hydro 2024
247
Alternative
performance
measures
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Adjusted net cash (debt) and adjusted net cash (debt) to adjusted EBITDA ratio
Hydro’s capital management measures are described in Note 7.1 Capital management in the Financial
statements, including reconciliations and comparable information.
Adjusted Return on average Capital Employed (ARoaCE)
Hydro uses adjusted 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. (Adjusted) RoaCE is calculated
as (Adjusted) EBIT after tax divided by average Capital employed for the respective period.
EBIT after tax
Reported
Adjusted
NOK million
2023
2022
2023
2022
EBIT
9,592
30,715
12,983
31,179
Adjusted income tax expense
1)
(4,656)
(7,489)
(4,475)
(7,654)
EBIT after tax
4,937
23,226
8,508
23,525
Capital Employed
NOK million
Dec 31
2023
Sep 30
2023
Jun 30
2023
Mar 31
2023
Dec 31
2022
Sep 30
2022
Jun 30
2022
Mar 31
2022
Current assets
2)
52,753
55,761
59,091
59,869
55,149
64,723
65,122
55,912
Property, plant and equipment
74,981
74,367
72,985
67,827
62,656
62,369
58,920
56,599
Other non-current assets
3)
47,145
53,266
52,697
49,935
46,728
51,007
46,876
45,932
Current liabilities
4)
(36,781)
(35,954)
(35,123)
(36,443)
(36,061)
(38,356)
(39,880)
(37,666)
Non-current liabilities
4)
(26,267)
(25,850)
(26,516)
(25,079)
(21,984)
(23,502)
(24,309)
(26,418)
Assets held for sale
3,685
-
-
-
-
-
-
-
Liabilities in disposal group
(141)
-
-
-
-
-
-
-
Capital Employed
115,374
121,591
123,135
116,108
106,488
116,241
106,728
94,360
Return on average Capital Employed (RoaCE)
Reported
Adjusted
2023
2022
2023
2022
Hydro
4.1 %
21.9 %
7.1 %
22.2 %
1) Adjusted Income tax expense is based on reported and adjusted tax expense adjusted for tax on financial items.
2) Excluding cash and cash equivalents and short-term investments.
3) Excluding long-term collateral related to strategic and operational hedging activities.
4) Excluding interest-bearing debt.
5-year average adjusted Return on average Capital Employed
Hydro has provided a five-year average adjusted RoaCE to reflect adjusted RoaCE for a longer period than
annual observations. Adjusted RoaCE for 2019, 2020 and 2021 are provided in the Alternative Performance
Measures (APM) sections in the respective annual reports. The reconciliations for the years 2021 and 2020
are available in the annual report for 2021. The reconciliation for 2020 and 2019 is available in the annual
reports for 2020.
5 year average adjusted Retun on average Capital Employed
2023
2022
2021
2020
2019
5 year average
Adjusted RoaCE
7.1 %
22.2 %
18.6 %
3.7 %
1.3 %
10.6 %
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 values include continuing
operations only.
NOK million
2023
2022
Purchase of property, plant and equipment
(13,638)
(9,604)
Purchase of other long-term investments
(7,535)
(1,971)
Sum
(21,173)
(11,575)
Investment grants received
105
35
Capital expenditure (continuing operations)
(21,068)
(11,540)
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. The values
include continuing operations only.
NOK million
2023
2022
Change in Trade and other receivables
1)
1,017
(980)
Change in Inventories
1)
7,155
(6,269)
Change in Trade and other payables
1)
(1,293)
(1,532)
Cash effective change in net operating capital (continuing operations)
6,879
(8,781)
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. Hydro uses financial derivatives for risk management purposes, the definition of
free cash flow therefore excludes the impact from changes in collateral. In addition, an adjustment is made
for the cash effect from net sales (purchases) of trading securities, as these are related to liquidity
management activities and do not reflect the underlying cash generation from business activities. Hydro
believes this is a better illustration of the underlying cash generation in the group. The values include
continuing operations only.
NOK million
2023
2022
Net cash provided by operating activities
1)
22,220
29,393
Adjusted for changes in collateral
2)
(1,617)
(3,187)
Adjusted for net (sales) purchases of trading securities
3)
39
(1,398)
Net cash used in investing activities
1)
(20,759)
(10,561)
Adjusted for purchases of short-term investments
1)
659
1,250
Adjusted for sales of short-term investments
1)
(753)
(1,500)
Free cash flow (continuing operations)
(211)
13,997
1) See Consolidated statements of cash flows.
2) Collateral provided as cash, mainly related to strategic and operational hedging activities (see Adjusted net cash (debt) APM).
3) Securities used for liquidity management purposes, available at short notice. Changes to these funds do not reflect the underlying cash
generation from business activities.
© Hydro 2024
248
Country
by country
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
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-by-country 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. 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 reports 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. 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.
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, is frequently updated in response to regulatory changes and in
dialogue with internal and external stakeholders. Most recent update in 2022 was approved by Hydro Board
of Directors in May 2022 and is published on Hydro.com. Hydro is committed to transparency and accuracy
in its tax management and it is based on the principle that equitable taxes shall be paid where the economic
value is generated.
In addition to this section, tax related disclosures are found in Note G1.4 income tax and in the Risk section.
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 2023. 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, is imposed on hydropower production in Norway. For income year
2023 the effective tax rate is 45 percent, unchanged from 2022. All new investments and
upgrade/maintenance cost can be expensed/excluded from the basis for the resource rent tax. Marginal tax
rate for 2023 67 percent, unchanged from 2022.
From 28. September 2022 a high price contribution for hydropower related income for power prices above
0,7 NOK/KWh was introduced. The effect was marginal for Hydro since the main part of our production are
sold at contract prices below the threshold. The high price contribution regime was discontinued with effect
from October 1st, 2023.
Taxation in Brazil
Payments to authorities per project and authority (exploration and extractive activities, alumina refining and
aluminium production) in 2023 is presented in the first table below.
© Hydro 2024
249
Country
by country
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Payments to authorities per project and authority (exploration and extractive activities, alumina refining and aluminium production) in 2023
Extractive related activities (all in Brazil)
1)
Taxes and fees
2)
Royalties
License fees
3)
Infrastructure,
contractual
4)
Infrastructure,
voluntary
4)
Investments
Revenue
5)
Production volume
Total expenses
5) 6)
NOK million
NOK million
NOK million
NOK million
NOK million
NOK million
NOK million
1 000 mt
NOK million
Mineracao Paragominas SA, total
233
133
1
12
30
2,810
4,354
10,897
4,064
Federal
182
13
-
-
-
-
-
-
-
Pará State
50
40
-
-
-
-
-
-
-
Paragominas municipality
-
80
-
-
-
-
-
-
-
Norsk Hydro Brasil Ltda, total
-
-
-
-
-
21
12
-
10
Federal
-
-
-
-
-
-
-
-
-
Rio de Janeiro State
-
-
-
-
-
-
-
-
-
São Paulo Municipality
-
-
-
-
-
-
-
-
-
Alunorte - Alumina do Norte do Brasil SA, total
-
-
-
4
15
5,528
22,073
6,185
27,024
Federal
-
-
-
-
-
-
-
-
-
Pará State
-
-
-
-
-
-
-
-
-
Barcarena Municipality
-
-
-
-
-
-
-
-
-
Albras - Alumínio Brasileiro SA, total
-
-
-
2
6
1,515
11,834
355
12,777
Federal
-
-
-
-
-
-
-
-
-
Pará State
-
-
-
-
-
-
-
-
-
Barcarena Municipality
-
-
-
-
-
-
-
-
-
Total
7)
233
133
1
17
51
9,874
38,273
17,438
43,875
1)
In 2023, 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 S3.1 to the social statement.
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.
© Hydro 2024
250
Country
by country
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Other tax contributions to authorities in 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 main indirect tax mechanisms not covered by the country-by-country
requirements, i.e., ICMS and PIS/COFINS.
ICMS is a Brazilian indirect state tax on the sale of goods, freight, and certain services. ICMS is intended
a non-cumulative 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 is 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 an ICMS deferral aiming to prevent accumulation of ICMS credits,
and to reduce net payable ICMS. Hydro’s operations in Pará generates ICMS tax revenue to the state
mostly on local purchases of electricity (Albras), diesel and fuel oil, on sale of goods to customers residing
outside the state.
In 2015, the state of Pará granted a renewal of the ICMS deferral until 2030 for Hydro Paragominas,
Hydro Alunorte and Albras. The ICMS deferral is conditional upon Hydro’s fulfilment of multiple
obligations. All obligations are related to verticalization of the aluminium value chain in the state of Pará,
contribution to development in the region and enabling sustainable growth in the state.
For more information about ICMS deferral, see risk review No 12, Material tax change.
PIS and COFINS are two federal social contribution taxes charged on gross income, in most cases at a
rate of 9.25 percent. Hydro entities in Brazil are charged under a non-cumulative system that resembles
VAT. Like for ICMS, export transactions are exempt. As a result, Brazilian exporters, like Alunorte,
accumulate credits that can be either reimbursed or offset against debts of other federal taxes.
The following table includes Hydro entities operating in the state of Pará.
Other taxes paid to authorities in Brazil
1)
Extractive related activities
ICMS
PIS
COFINS
IPTU
Total
contribution
NOK million
NOK million
NOK million
NOK million
NOK million
Mineracao Paragominas SA, total
75
1
4
0
80
Federal
-
1
4
-
5
Pará State
75
-
-
-
75
Paragominas municipality
-
-
-
0
0
Norsk Hydro Brasil Ltda, total
1
2
9
0
12
Federal
-
2
9
-
11
Rio de Janeiro State
1
-
-
-
1
São Paulo Municipality
-
-
-
0
0
Alunorte - Alumina do Norte do
Brasil SA, total
1,329
2
10
78
1,419
Federal
-
2
10
-
12
Pará State
1,329
-
-
-
1,329
Barcarena Municipality
-
-
-
78
78
Albras - Alumínio Brasileiro SA,
total
445
1
5
46
498
Federal
-
1
5
-
7
Pará State
445
-
-
-
445
Barcarena Municipality
-
-
-
46
46
Total
1,850
6
29
124
2,009
1) Tax off-sets are not included
© Hydro 2024
251
Country
by country
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
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.
© Hydro 2024
252
Country
by country
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Further country by country information for all consolidated legal entities
Jurisdiction
Legal entity
Description of the entity's activity
Ownership
31. dec
Number of
permanent
employees
Number of
temporary
employees
Interest paid to
Hydro legal
entities in
another
jurisdiction,
NOK million
Revenue,
NOK million
Income
before tax,
NOK million
Income
taxes,
NOK million
Income
taxes paid,
NOK million
Retained
earnings,
NOK million
Argentina
Hydro Extrusion Argentina SA
Extrusion Production
100%
98
-
2,439
473
32
-
9
46
Hydro Building Systems France SARL (Branch)
Building Systems Production
-
-
-
-
(1)
-
-
(2)
Total Argentina
98
-
2,439
473
31
-
9
44
Australia
Hydro Aluminium Australia Pty. Limited
7)
Holding Company
100%
-
-
-
1,836
(611)
18
-
57
Hydro Aluminium Kurri Kurri Pty. Limited
Real Estate
100%
5
-
-
2
6
(17)
-
(1,895)
Total Australia
5
-
-
1,839
(605)
1
-
(1,839)
Austria
Hydro Building Systems Austria GmbH
Sales and Marketing
100%
31
-
-
304
6
1
-
13
Hydro Extrusion Nenzing GmbH
Extrusion Production
100%
442
6
5
2,298
181
42
-
519
Hydro Holding Austria GmbH
Holding Company
100%
-
-
-
-
114
-
102
247
Hueck Aluminium GmbH
Sales and Marketing
100%
18
-
0.04
98
1
2
-
47
Total Austria
491
6
5
2,701
302
45
103
826
Bahrain
Hydro Building Systems Middle East WLL
Building Systems Production
100%
75
-
0
469
183
-
-
245
Total Bahrain
75
-
-
469
183
-
-
245
Belgium
Norsk Hydro EU Sprl
Public Affairs
100%
3
1
-
5
-
-
-
1
Hydro Extrusion Lichtervelde NV
Extrusion Production and Remelt
100%
225
-
-
2,163
42
8
31
287
Hydro Allease NV
Business Management
100%
-
-
-
-
4
1
1
197
Hydro Building Systems Belgium NV
Building Systems Production
100%
147
8
1,551
537
(93)
1
-
(363)
Hydro Extrusion Eupen SA
Dies Production
100%
42
2
41
73
(9)
(7)
-
(44)
Hydro Extrusion Raeren S.A.
Extrusion Production
100%
218
10
-
1,038
40
13
12
137
Total Belgium
635
21
1,592
3,817
(16)
16
45
215
Bosnia-Herzegovina
Hueck Service d.o.o.
Sales and Marketing
100%
17
-
-
-
-
-
-
1
Total Bosnia-Herzegovina
17
-
-
-
-
-
-
1
Brazil
ALBRAS - Alumínio Brasileiro SA
Primary Aluminium Production
51%
1,297
92
-
11,834
(843)
(258)
92
3,031
ALUNORTE - Alumina do Norte do Brasil S.A.
Alumina Refinery
62%
2,205
192
-
22,073
(4,924)
(247)
34
(6,149)
Hydro Alumina Holdings Ltda
Holding Company
100%
-
-
-
38
(13)
-
11
(8)
Ananke Alumina SA
Holding Company
0%
-
-
-
52
58
21
22
(1)
Atlas Alumínio SA
Holding Company
100%
-
-
-
1,094
310
106
117
644
CAP - Companhia de Alumina do Pará SA
Planned Alumina Refinery
100%
-
-
-
-
(32)
-
-
(663)
Hydro Extrusion Brasil S.A.
Extrusion and Precision Tubing
Production
100%
799
40
20,645
2,082
255
(9)
1
(283)
Mineração Paragominas SA
Bauxite Mining
100%
1,633
150
-
4,354
459
44
259
2,675
Norsk Hydro Brasil Ltda.
Holding Company
100%
436
31
-
12
(115)
-
13
(583)
Norsk Hydro Energia Ltda.
Power Trading & Energy Services
100%
20
3
-
953
76
26
4
61
Hydro Enrein Ltda.
Power Trading & Energy Services
0%
0
0
-
2
3
-
-
2
Hydro Rein Brasil Soluções Renováveis Ltda
Renewable Energy
100%
17
-
-
67
14
18
-
(50)
Total Brazil
6,407
508
20,645
42,559
(4,753)
(299)
554
(1,324)
Canada
Hydro Aluminium Canada & Co. Ltd.
8)
Holding Company
100%
-
-
609
3,402
357
120
168
1,512
Hydro Aluminium Canada Inc.
Holding Company
100%
2
-
-
-
2
1
1
27
Hydro Extrusion Canada Inc.
Extrusion Production
100%
549
12
155
3,467
217
58
50
686
Hydro REIN Energy Solutions Canada Ltd.
Renewable Energy
100%
-
-
-
-
-
-
-
-
Total Canada
551
12
764
6,869
576
180
219
2,225
China & Hong Kong
Hydro Aluminium Beijing Ltd.
Sales and Marketing
100%
8
-
-
1,842
9
5
3
103
Hydro Building Systems (Beijing) Co. Ltd.
Sales and Marketing
100%
19
-
-
83
1
-
-
(122)
Hydro Aluminium Fabrication (Taicang) Ltd
Precision Tubing Production
100%
371
4
-
1,004
187
46
45
335
Hydro Precision Tubing (Suzhou) Co. Ltd.
Precision Tubing Production
100%
430
-
-
1,381
40
8
16
141
Sapa Extrusion (Jiangyin) Co. Ltd.
Extrusion Production
100%
-
-
-
-
-
-
-
(29)
Hycast Technology Shanghai Co., Ltd
Research & Development
100%
2
-
-
19
-
-
-
(1)
Total China & Hong Kong
830
4
-
4,330
236
59
64
427
© Hydro 2024
253
Country
by country
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Croatia
Hydro Building Systems Croatia d.o.o.
Building Systems Production
100%
11
-
17
-
-
-
-
2
Total Croatia
11
-
17
-
-
-
-
2
Czech Republic
Hydro Building Systems Czechia sro
Sales and Marketing
100%
6
-
-
-
1
-
-
3
Hueck s.r.o
Sales and Marketing
100%
4
-
0.002
-
-
-
-
2
Total Czech Republic
10
-
0.002
-
1
-
-
6
Denmark
Hydro Extrusion Denmark A/S
Extrusion Production
100%
284
-
7,952
1,896
56
13
-
412
Hydro Holding Denmark A/S
Holding Company
100%
-
-
157
-
-
(3)
(6)
1,633
Hydro Precision Tubing Tønder A/S
Precision Tubing Production
100%
407
21
5,671
1,724
(157)
(37)
-
534
Hydro Rein Solar Holding DK 1 ApS
Holding Company
100%
-
-
-
-
-
-
-
-
Hydro Rein Solar BidCo DK 1 ApS
Renewable Energy
100%
-
-
-
-
-
-
-
-
Hydro Rein Solar General Partner DK 1 ApS
Renewable Energy
100%
-
-
-
-
-
-
-
-
Hydro Rein Solar 1 K/S
Renewable Energy
100%
-
-
-
-
(6)
(1)
-
(5)
Hydro Rein Solar Holding DK 2 ApS
Holding Company
100%
-
-
-
-
-
-
-
-
Hydro Rein Solar BidCo DK 2 ApS
Renewable Energy
100%
-
-
-
-
-
-
-
-
Hydro Rein Solar General Partner DK 2 ApS
Renewable Energy
100%
-
-
-
-
-
-
-
-
Hydro Rein Solar 2 K/S
Renewable Energy
100%
-
-
-
-
-
-
-
-
Total Denmark
691
21
13,781
3,620
(107)
(29)
(6)
2,574
Estonia
Hydro Extrusion Baltics AS
Sales and Marketing
100%
10
-
16
144
6
1
1
27
Total Estonia
10
-
16
144
6
1
1
27
Finland
Hydro Extrusion Finland Oy
Sales and Marketing
100%
11
-
-
137
4
1
1
34
Total Finland
11
-
-
137
4
1
1
34
France
Extrusion Services S.a.r.l
Recycling
100%
47
1
-
897
54
13
-
293
Hydro Building Systems France Sarl
Building Systems Production
100%
983
41
-
4,110
210
61
5
700
Hydro Extrusion Albi SAS
Extrusion Production
100%
250
10
-
1,197
85
18
2
146
Hydro Extrusion Lucé/Châteauroux SAS
Extrusion Production
100%
303
15
714
1,023
(65)
(3)
-
(101)
Hydro Extrusion Puget SAS
Extrusion Production
100%
159
11
69
854
(24)
6
-
34
Hydro Holding France SAS
Holding Company
100%
3
-
-
-
316
(25)
133
(400)
Hydro Tool Center SAS
Tool and Spare Parts Services
100%
5
-
1,335
40
(1)
-
-
5
Hydro Shared Services France
Shared Services
100%
11
-
-
-
1
1
-
4
Total France
1,761
78
2,119
8,121
577
71
140
682
Germany
Hydro Extrusion Deutschland GmbH
Extrusion Production
100%
426
49
-
2,241
42
(22)
-
141
Hydro Building Systems Extrusion GmbH
Building Systems Production
100%
109
5
-
842
38
-
-
1
Hydro Extrusion Offenburg GmbH
Extrusion Production
100%
258
2
-
947
55
(3)
-
101
Hueck Extrusion GmbH & Co. KG
Extrusion Production and Remelt
100%
225
-
-
691
(160)
(13)
-
(166)
Hydro Building Systems Germany GmbH
Building Systems Production
100%
341
17
2,370
1,881
(30)
4
-
158
Hydro Extrusion Lüdenscheid GmbH
Holding Company
100%
-
-
-
-
-
-
-
3
Eugen Notter GmbH
Building Systems Production
100%
27
1
-
29
-
-
1
11
Eduard Hueck GmbH & Co. KG
Parent Company
100%
-
-
-
23
(3)
(53)
-
50
Hydro Aluminium Deutschland GmbH
Holding Company
100%
77
-
-
(16)
172
(325)
105
3,604
Eduard Hueck Beteiligungs GmbH
Parent Company
100%
-
-
-
-
4
-
-
-
Hueck Geschäftsführungsgesellschaft mbH
Parent Company
100%
-
-
-
-
1
2
-
7
Hydro REIN Energy Solutions Germany Gmbh
Renewable Energy
100%
-
-
-
-
(3)
-
-
(3)
Hydro Holding Offenburg GmbH
Holding Company
100%
44
1
-
38
(35)
(11)
60
512
Hueck Service GmbH & Co. KG
Shared Services
100%
24
-
-
56
2
(3)
-
4
Hueck System GmbH & Co. KG
Sales and Marketing
100%
208
1
-
787
(145)
1
-
(172)
Hydro Building Systems Lüdenscheid GmbH
Parent Company
100%
0
0
-
-
-
-
-
-
Hydro Building Systems Coating GmbH
Building Systems Production
100%
91
3
-
98
(1)
-
-
30
SEGN Standort-Entwicklungs-Gesellschaft
Nabwerk mbH
Business Management
100%
-
-
-
-
-
-
-
-
Hydro Aluminium Gießerei Rackwitz GmbH
Recycling
100%
81
7
-
1,448
66
(4)
-
96
Hydro Aluminium High Purity GmbH
High-Purity Aluminium Production
100%
62
5
2,300
421
74
15
-
51
VAW-Innwerk Unterstützungs-Gesellschaft
GmbH
Pension Fund
78%
-
-
-
-
10
46
-
186
Hydro Aluminium Recycling Deutschland GmbH
Recycling
100%
27
4
-
385
(14)
1
-
90
Total Germany
2,000
95
4,670
9,872
73
(366)
166
4,704
Greece
Hydro Building Systems A.E.
In Liquidation / Under termination
100%
-
-
-
-
-
-
-
(44)
Total Greece
-
-
-
-
-
-
-
(44)
© Hydro 2024
254
Country
by country
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Hungary
Hydro Extrusion Hungary Kft
Extrusion Production and Shared
Services
100%
1,752
21
30,111
3,501
187
75
87
286
Alumetal Group Hungary Kft
Recycling
100%
102
2
-
518
(75)
(3)
4
205
Total Hungary
1,854
23
30,111
4,019
112
71
91
492
India
Hydro BS India Private Limited
Shared Services and Building
Systems
100%
252
1
-
93
14
-
-
(369)
Total India
252
1
-
93
14
-
-
(369)
Italy
Hydro Aluminium Metal Products S.r.l.
Sales and Marketing
100%
2
-
-
5
1
-
-
22
Hydro Building Systems Italy S.P.A.
Building Systems Production
100%
169
3
-
1,236
156
18
12
(219)
Hydro Extrusion Italy S.r.l.
Extrusion Production
100%
269
8
19
1,941
130
43
23
217
Hydro Building Systems Atessa s.r.l.
Building Systems Production
100%
155
2
-
1,282
66
-
5
191
Total Italy
595
13
19
4,464
353
62
40
209
Japan
Hydro Aluminium Japan KK
Sales and Marketing
100%
4
-
-
142
6
2
7
73
Total Japan
4
-
-
142
6
2
7
73
Lithuania
Hydro Building Systems Lithuania UAB
Sales and Marketing
100%
10
-
-
-
3
1
1
32
Hydro Extrusion Lithuania UAB
Extrusion Production
100%
164
2
2
135
(6)
(1)
(1)
50
Total Lithuania
174
2
2
135
(3)
-
1
82
Luxembourg
Hydro Aluminium Clervaux S.A.
Recycling
100%
61
1
-
2,066
146
40
45
297
Total Luxembourg
61
1
-
2,066
146
40
45
297
Mexico
Hydro Aluminium Metals Mexico S. de R.L
Sales and Marketing
100%
-
-
-
-
-
-
-
-
Hydro Precision Tubing Monterrey S. de R.L. de
C.V.
Precision Tubing Production
100%
167
-
28
153
(1)
9
7
110
Hydro Precision Tubing Reynosa S. de R.L. de
C.V.
Extrusion and Precision Tubing
Production
100%
328
7
3,238
210
12
5
3
59
Total Mexico
495
7
3,266
362
10
14
10
169
Morocco
Hydro Building Systems France Sarl (Branch)
Building Systems Production
100%
-
-
0
-
-
-
-
(6)
Total Morocco
-
-
-
-
-
-
-
(6)
Netherlands
Hydro Alunorte B.V.
Holding Company
0%
-
-
0.1
-
(13,237)
-
-
(215)
Hydro Aluminium Brasil Investment B.V.
Holding Company
100%
-
-
-
-
(1,339)
(2)
-
(299)
Hydro Albras B.V.
Holding Company
100%
-
-
-
-
725
-
-
29
Hydro REIN Feijão Solar Holding B.V.
Holding Company
100%
-
-
-
-
(1)
-
-
(1)
Norsk Hydro Holland B.V.
Holding Company
100%
9
-
16
36
(13,830)
14
22
2,936
Hydro Aluminium Qatalum Holding B.V.
Holding Company
100%
-
-
-
-
1,039
(1)
-
1,859
Hydro REIN Feijão Holding B.V
Renewable Energy
100%
-
-
-
-
139
-
-
(5)
Hydro REIN Irupé Holding B.V.
Renewable Energy
100%
-
-
-
-
-
-
-
-
Hydro REIN Netherlands B.V.
Renewable Energy
100%
3
-
-
-
(20)
1
-
(23)
Hueck Aluminium Profieltechniek Benelux B.V.
Sales and Marketing
100%
3
-
-
-
(1)
-
-
4
Hydro Aluminium Investment B.V.
Holding Company
100%
-
-
-
-
15
2
1
13
Hydro Rein Vista Alegre Holding B.V.
Holding Company
100%
-
-
-
-
-
-
-
-
Hydro Paragominas B.V.
Holding Company
100%
-
-
-
-
272
-
-
5
Hydro Extrusion Holding Netherlands B.V.
Holding Company
100%
-
-
-
-
(1)
-
(1)
26
Hydro Extrusion Drunen B.V.
Extrusion Production
100%
412
21
-
2,315
145
38
28
1,165
Hydro Building Systems Netherlands B.V.
Building Systems Production
100%
9
-
-
-
8
2
-
6
Hydro Extrusion Hoogezand B.V.
Extrusion Production
100%
176
1
-
965
100
26
-
456
Hydro Aluminium Netherlands B.V.
Holding Company
100%
-
-
-
-
351
-
-
388
Hydro Aluminium Pará B.V.
Holding Company
100%
-
-
-
-
-
-
-
459
Hydro REIN Boa Sorte Holding B.V.
Holding Company
100%
-
-
-
-
7
-
-
(6)
Total Netherlands
612
22
16
3,316
(25,629)
79
50
6,798
Norway
Hycast AS
Research & Development
100%
65
5
-
463
16
2
-
191
Hydro Aluminium AS
Primary Aluminium Production
100%
2,440
662
564,395
70,472
16,946
2,351
2,484
30,865
Hydro Energi AS
Hydro Power Production
100%
357
10
6,243
11,073
682
1,052
1,227
8,443
Hydro Energi Invest AS
Holding Company
100%
-
-
619
2
(230)
(14)
-
(180)
Hydro Extruded Solutions AS
Holding Company
100%
45
2
394,429
-
1,084
45
27
84
Hydro Extrusion Norway AS
Extrusion Production
100%
104
4
-
538
27
6
5
113
Hydro Kapitalforvaltning AS
Holding Company
100%
-
-
-
13
-
-
-
1
Hydro Vigelands Brug AS
High-Purity Aluminium Production
100%
33
6
3,322
208
11
2
-
138
Hydro REIN AS
Renewable Energy
100%
52
1
63,550
187
9
25
47
286
Industriforsikring AS
Insurance
100%
5
-
-
194
164
24
32
836
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1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Norsk Hydro ASA
Parent Company
100%
368
18
-
153
15,214
150
(30)
21,139
Hydro REIN Invest AS
Renewable Energy
100%
-
-
393
34
(22)
(4)
-
47
Hydro Rein Offshore Wind AS
Renewable Energy
100%
-
-
-
-
(9)
(2)
-
-
Hydro REIN Energy Solutions AS
Renewable Energy
100%
-
-
117
2
(36)
(8)
-
-
Svelgfos AS
Power Trading & Energy Services
100%
-
-
-
-
-
-
-
1
Sør-Norge Aluminium AS
Primary Aluminium Production
100%
361
147
65,164
5,937
1,634
361
591
2,936
Hydro HAVRAND AS
Hydrogen
100%
-
-
22
4
(115)
(25)
-
-
Total Norway
3,830
855
1,098,254
89,281
35,375
3,965
4,383
64,900
Oman
Hydro Building Systems Middle East (FZC) LLC
Building Systems Production
99%
-
-
-
-
7
-
-
23
Total Oman
-
-
-
-
7
-
-
23
Poland
Hydro Building Systems Poland Sp. z o.o.
Building Systems Production
100%
44
-
2
85
3
1
-
(5)
Hydro Extrusion Poland Sp. z o.o.
Extrusion Production
100%
1,393
1
3
3,006
93
-
42
1,141
Alumetal Poland Sp. z o.
Recycling
100%
502
-
-
2,431
65
6
8
1,512
Alumetal S.A
Recycling
100%
-
-
-
21
(45)
(9)
-
1,585
T+S Sp. z o.o.
Recycling
100%
-
-
-
5
-
-
-
16
Total Poland
1,437
1
5
5,548
117
(1)
50
4,249
Portugal
Hydro Aluminium Extrusion Portugal HAEP S.A.
Extrusion Production
100%
102
-
-
595
45
10
-
156
Hydro Building Systems Portugal (HBSPT) SA
Building Systems Production
100%
65
1
-
281
32
17
11
72
Total Portugal
669
1
-
876
77
27
11
228
Serbia
Hydro Building Systems Beograd d.o.o.
Sales and Marketing
100%
3
-
-
-
-
-
-
-
Total Serbia
3
-
-
-
-
-
-
-
Singapore
Hydro Aluminium Asia Pte. Ltd.
Trading
100%
18
-
-
12,153
96
12
9
326
Hydro Holding Singapore Pte. Ltd.
Holding Company
100%
28
-
460
57
183
-
-
(330)
Total Singapore
46
-
460
12,211
279
12
9
(4)
Slovakia
Hydro Extrusion Slovakia a.s.
Extrusion Production
100%
380
1
-
901
10
2
19
57
Slovalco a.s.
Recycling
55%
199
-
-
983
(93)
128
763
123
ZSNP DA, s.r.o.
Transportation
55%
-
-
-
2
-
-
-
1
Total Slovakia
579
1
-
1,887
(82)
130
782
181
South Africa
Technal Systems South Africa (Pty) Ltd.
In Liquidation / Under termination
100%
-
-
-
(1)
-
-
(13)
Total South Africa
-
-
-
-
(1)
-
-
(13)
Spain
Hydro Aluminium Iberia S.A.U
Recycling
100%
71
1
-
1,659
126
(116)
44
962
Hydro Building Systems Spain S.L.U.
Building Systems Production
100%
265
5
-
852
3
(1)
(2)
(9)
Hydro Extrusion Spain S.A.U.
Extrusion Production
100%
354
14
-
1,782
116
(122)
5
1,112
Hydro REIN Energy Solution Spain
Renewable Energy
100%
-
-
-
-
-
-
-
-
Total Spain
690
20
-
4,293
244
(240)
48
2,064
Sweden
Hydro Building Systems Sweden AB
Building Systems Production
100%
118
7
30
834
56
1
1
11
Hydro Extruded Solutions AB
Holding Company and R&D
100%
47
1
409
79
849
68
51
3,400
Hydro Extrusion Sweden AB
Extrusion production
100%
829
9
19
3,249
164
4
11
(490)
Hydro Rein Energy Services AB
Renewable Energy
100%
1
-
-
-
(3)
(1)
-
(3)
Hydro REIN Solar Holding AB
Holding Company
100%
0
-
-
-
-
-
-
-
Hydro REIN Solar 1 AB
Renewable Energy
100%
0
-
-
-
(7)
(1)
-
(6)
Hydro REIN Solar 2 AB
Renewable Energy
100%
0
-
-
-
(12)
(2)
-
(9)
Total Sweden
995
17
458
4,161
1,047
69
63
2,903
Switzerland
Hydro Aluminium International SA
Sales and Marketing
100%
15
-
7,298
24,532
1,500
170
(1)
1,325
Hydro Building Systems Switzerland AG
Sales and Marketing
100%
41
3
-
434
80
12
8
103
Hueck (swiss) AG
Sales and Marketing
50%
-
-
-
-
(1)
-
-
9
Total Switzerland
56
3
7,298
24,966
1,579
182
7
1,438
Turkey
Hydro Yapi Sistem Sanayi VE Ticaret AS
Sales and Marketing
100%
26
-
2,488
109
(6)
(1)
2
1
Total Turkey
26
-
2,488
109
(6)
(1)
2
1
United Arab Emirates
Hydro Building Systems Middle East FZE
Sales and Marketing
100%
-
1
-
-
-
-
-
-
Total United Arab Emirates
-
1
-
-
-
-
-
-
United Kingdom
Hydro Aluminium Deeside Ltd.
Recycling
100%
57
1
-
1,427
69
17
-
494
Hydro Building Systems UK Ltd.
Building Systems Production
100%
116
1
3,196
559
(11)
(3)
-
270
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1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Hydro Components UK Ltd.
Dormant
100%
-
-
-
-
-
-
-
-
Hydro Aluminium UK Ltd.
Extrusion Production
100%
592
2
-
2,139
(104)
(28)
-
211
Hydro Holdings UK Ltd.
Holding Company
100%
1
-
-
1
2
1
18
(400)
Hueck UK Ltd.
Sales and Marketing
100%
5
-
1
-
-
-
-
(2)
Total United Kingdom
771
4
3,197
4,126
(44)
(12)
18
572
USA
EMC Ashtabula Inc
Dormant
100%
-
-
-
-
2
(1)
-
(2,844)
EMC Metals Inc
Dormant
100%
-
-
-
-
(22)
7
-
930
Hydro Aluminium Metals USA, LLC
Recycling and Sales
100%
210
-
-
8,728
287
64
-
(846)
Hydro Building Systems North America LLC
Sales and Marketing
100%
1
-
-
41
-
-
-
(40)
Hydro Extrusion Portland Inc.
Extrusion Production
100%
275
1
-
1,650
(90)
(31)
-
(313)
Hydro Extrusion USA LLC
Extrusion Production
100%
5,225
27
-
27,952
938
(168)
(8)
1,454
Hydro Holding North America Inc.
Holding Company
100%
-
-
1,148
-
354
318
294
3,471
Norsk Hydro USA LLC
Public Affairs
100%
-
-
-
-
-
-
-
-
Hydro Precision Tubing Louisville Inc.
Dormant
100%
-
-
-
-
(1)
1
-
(249)
Hydro Precision Tubing Monterrey LLC
Precision Tubing Production
100%
-
-
-
644
37
(9)
-
653
Hydro Precision Tubing USA LLC
Precision Tubing Production
100%
253
-
-
2,114
13
(20)
-
(563)
Total USA
5,964
28
1,148
41,129
1,519
162
286
1,653
Total Eliminations, non-controlling interests, goodwill and excess values not attributable to specific legal entities
(94,516)
(4,669)
(497)
(22)
(28,265)
Total joint operations and joint ventures
-
(416)
-
-
(5,604)
Total Hydro including discontinued operations
32,724
1,745
1,192,770
193,619
6,546
3,742
7,177
60,877
Discontinued operations
-
-
-
-
-
Total Hydro from continuing operations
193,619
6,546
3,742
7,177
60,877
1)
Number of employees is based on the legal entity each employee is employed by. This might differ from number of employees by country of work, which is reported in the Notes on Own workforce.
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 payments include settlement of tax liabilities with tax credits generated from other payments to federal authorities
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 used to report Hydro portion of operations for Tomago Aluminium Company Pty Limited, a joint operation.
8)
Hydro Aluminium Canada & Co. Ltd. Is used to report Hydro portion of operations for Aluminerie Alouette Inc, a joint venture
9)
Extended table covering GRI 207 tax reporting requirement is published on www.hydro.com
© Hydro 2024
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1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Entity description
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 Refinery
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
Business Management
Coordination and organization of Hydro's business activities
Dies Production
Production of dies for extrusion of aluminium profiles
Dormant
Hydro operations without business activities in the reporting period
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
High-Purity Aluminium Production
Production of aluminium of minimum 99.99 percent purity
Holding Company
Holding & Financing. Holding shares or other equity instruments. Administrative, management or support services
Hydro Power Production
Production and operation of hydro power
Hydrogen
Developing of hydrogen based on renewable energy
In Liquidation / Under termination
Operations in liquidation or under termination
Insurance
In-house (captive) insurance
Parent Company
A parent company is a company that has a controlling interest in another company
Pension Fund
Employee pension fund
Power Trading & Energy Services
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
Recycling
Recycling of post- and pre-consumor scrap
Renewable Energy
Planned and ongoing renewable energy productions
Research & Development
Research and development activities
Sales and Marketing
Sales, marketing and distribution offices
Shared 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
Sales, marketing and distribution of casthouse aluminium products
Transportation
Transport of raw materials by railway train
© Hydro 2024
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1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Board of Directors’ report in relation to the Norwegian Code of Practice for Corporate Governance
This chapter provides a detailed overview of how Norsk Hydro ASA
(“Hydro” or the “company”) follows the Norwegian code of practice for
corporate governance (“Norsk Anbefaling for Eierstyring og
Selskapsledelse”) (the “Code of Practice”) dated October 14, 2021
(the “NUES Report” or “Report”). Information that Hydro must provide
in accordance with the Norwegian Accounting Act, Section 3-3b is also
included. This NUES Report should be reviewed together with the
general corporate governance report.
The Board of Directors of Hydro (the “Board”) actively supports sound
management principles of corporate governance. The Code of
Practice covers 15 topics, and this Report covers each of these topics
and describes Hydro’s adherence to the Code of Practice.
Shareholders and other interested parties may note that although the
Report aims to provide an overview of how the Company has
organized its corporate governance, the Report may refer to more
detailed information elsewhere in the annual report or on the
Company’s website. Relevant references are included throughout, as
and if applicable.
More detailed information can be found on the company’s website.
Deviations from the Code of Practice
Adherence to the Code of Practice is based on a comply or explain
principle, meaning that any deviation from the Code of Practice shall
be justified and explained. This includes to explain what alternative
solution the company has selected. To the Board’s best assessment,
the company has in total three deviations from the Code of Practice.
This includes one deviation from Section 6, one from section 8 and
one from Section 14. Each deviation is explained below and under the
relevant section of this Report.
Section 6, General Meeting of Shareholders:
Hydro has one deviation from this section:
“Ensure that the members of the Board of Directors ... are present at
the General Meeting:”
The entire Board has normally not participated in the general meeting.
Matters under consideration at the general meeting of shareholders
have not previously required this. Chair of the Board is always
attending to present the annual report and answer any questions from
shareholders. All board members are encouraged to attend the Annual
General Meetings of the company, either physically or electronically.
Section 8, Board of directors: composition and independence
Hydro has one deviation from this section: “The general meeting
should elect the chairman of the board of directors.”
It is stated in the Public Limited Liability Companies Act,
“Allmennaksjeloven”, section 6-1(2) that the board of directors shall
always elect its chair if it has been agreed that the company shall not
have a corporate assembly. The Board of Hydro elects its chair for
periods of until two years at a time.
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
takeover bid:”
The Board 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 34.26 percent of the Hydro shares (as of 31.12.2023)
and the Ministry of Trade, Industry and Fisheries has by virtue of the
Active Ownership Report (Report to the Storting no. 6 (2022-2023))
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, c.f. the Active Ownership Report
(Report to the Storting no. 6 (2022-2023)) p. 44.
1. Implementation and reporting on corporate governance
Hydro follows the most recent edition of the Norwegian code of
practice for corporate governance dated October 14, 2021. Hydro
seeks to comply with international best practice standards when
preparing its constituting documents and global directives, and the
Board monitors the subject of corporate governance actively and
continuously. The Board believes that there is a clear link between
high-quality governance and the creation of long-term shareholder
value.
The Board has the overriding responsibility for the stewardship of the
company and shall conduct supervision of the company’s day to day
management and the company’s activities in general. The Board
believes that sound corporate governance is vital to ensure the
greatest possible sustainable value creation over time in the best
interests of Hydro’s employees, shareholders and other key
stakeholders, and is committed to maintaining a high standard of
corporate governance across the group. The Board approved this
Report in a Board meeting held on February 13, 2024, through the
signing of the Annual Report.
2. Hydro’s usiness
Hydro is a global aluminium and energy company with production,
sales and trading activities throughout the value chain, from bauxite,
alumina and energy generation to the production of primary aluminum
and extruded products as well as recycling. Based in Norway, the
company has approximately 33,000 employees involved in activities in
40 countries on all continents. A more detailed description of Hydro’s
business is found in the Annual Report section Our Business.
The company’s objective, 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. Hydro is committed to creating
value by taking a lead role in the green transition. Through this, the
company works to strengthen local community relations, communities
and business partners through education and empowerment. Hydro’s
target is to ensure the safety of our employees and have an injury-free
work environment. The company’s business activities may also be
conducted through participation in or in cooperation with other
companies.
The Board of Directors is responsible for the company’s value creation
and sets and monitors the company’s objectives, strategies and risk
profiles. The company’s objectives, strategies and risk profiles are
evaluated at least yearly. The Board’s strategic planning and decisions
provide a basis for the company’s executive management to prepare
and carry out investments and structural measures.
The Board also oversees that Hydro has appropriate global directives
for, among other things, risk management, HSE, people management
and social responsibility and human rights. Sustainability, including
environment and climate change, social responsibility, diversity,
health, safety and work environment and compliance is integrated into
the group’s risk management and strategy processes and are at the
center of the Board’s considerations and decision-making throughout
the year. The approach is discussed in more detail in the group’s
annual report as applicable, and reference is made to the
Sustainability statement.
Hydro’s articles of association are available at Hydro.com/governance.
3. Equity and dividend
In the opinion of the Board, Hydro’s equity capital is appropriate to the
company’s objectives, strategy and risk profile.
© Hydro 2024
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1. Introduction
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3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Hydro’s dividend policy reflects Hydro’s ambitions to lift performance
and cash returns to shareholders over the cycle. The dividend policy is
to pay out a minimum of 50 percent of adjusted net income over the
cycle with a NOK 1.25 per share dividend floor. Hydro has a target for
adjusted net debt of around NOK 25 billion over the cycle. In the
Board’s opinion, the dividend policy in combination with the capital
structure target is clear and predictable. See also Note 7.1 to the
financial statements for more information on Capital management and
cash management.
The dividend per share is proposed by the Board, based on Hydro’s
dividend policy, and approved by the general meeting of shareholders.
In 2023, the Board proposed a cash dividend of NOK 5.65 per share at
the Annual General Meeting May 10, 2023, which was approved.
In line with applicable regulation, the Board may obtain authorization
from the general meeting of shareholders to buy back Hydro shares in
the market or to increase the share capital. Mandates granted to the
Board to increase the company’s share capital or to purchase own
shares will normally be intended for a defined purpose, in line with
statutory regulation, and limited in time to no later than the date of the
next Annual General Meeting.
Authorization to the Board to acquire the company’s own shares was
granted to the Board of Directors at the Annual General Meeting of the
Company on May 10, 2023. The authorization was granted in
accordance with applicable laws and regulations and the authorization
is registered at the Norwegian Register of Business Enterprises.
The authorization granted by the Annual General Meeting allows the
Board to acquire shares in Norsk Hydro ASA with a nominal value of
up to NOK 109,800,000 in the market and from the Ministry of Trade,
Industry and Fisheries, divided into up to 100,000,000 shares. The
shares will be subject to subsequent cancellation. It is a prerequisite
for all buybacks and subsequent deletion of shares that these
transactions do not result in a change to the ownership interest of
34.26 percent of the Ministry of Trade, Industry and Fisheries. The
acquisition of shares is subject to terms and conditions set by the
Board at all times, and the minimum and maximum amounts that can
be paid per share is NOK 20 and NOK 150, respectively. The
authorization granted by the Annual General Meeting is valid from May
10, 2023 until the Annual General Meeting in 2024, but no later than
June 30, 2024.
At the company’s Annual General Meeting in May 2024, the
company’s shareholders will be presented with the content of the
current authorization and be given a status on the buyback program.
Transactions conducted as part of the current share buy-back program
are executed on Oslo stock exchange, with on-going disclosure via
stock exchange releases and the company’s web page. See also
NUES item 4 on Equal treatment of shareholders.
The notice, appendices and minutes of meeting from the Annual
General Meeting are available at Hydro.com/generalmeeting.
References: Learn more about Hydro’s equity and dividend policy in
the Shareholder information section.
4. Equal treatment of shareholders
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.
Transactions conducted as part of the current share buy-back
program, with authorization granted to the Board from the Annual
General Meeting May 10, 2023, are executed on Oslo stock exchange,
with on-going disclosure via stock exchange releases and the
company’s web page. Share redemptions from the Norwegian State
are carried out at the same price terms as for the buybacks carried out
via the stock exchange. Hydro is executing the buybacks via an
external bank mandate and in accordance with the EU Market Abuse
Regulation (EU 596/2014 (MAR)) art. 5.
Persons who own shares five business days prior to the general
meeting are entitled to attend and vote at the general meeting.
Sales of shares to employees in Norway are conducted at a discount
to market value. See also Item 6.
Contact between the Board and the investors is normally conducted
via company management. Under special circumstances the Board,
represented by the chair, may conduct dialogue directly with investors.
Regulation of share issues and pre-emptive rights are described in the
company’s Articles of Association.
For the company’s related party transactions, the mandatory
regulations in the Norwegian Public Limited Companies Act §§3-9 and
3-10 following are supplemented by IFRS (International Financial
Reporting Standards) standards. See also section 9.
State ownership
As of December 31, 2023, the Norwegian state, represented by the
Ministry of Trade, Industry and Fisheries, owned 34.26 percent of
Hydro’s total 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 as a main rule does not 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 (No: Stortinget), it may be
necessary to provide the Ministry with “inside information”, c.f. the EU
Market Abuse Regulation (EU 596/2014). Whether this is required will
always be carefully evaluated on a case-by-case basis. In such event
the state is subject to the rules and regulations regarding the handling
of such information.
References: Learn more about major shareholders in the Shareholder
information section and sale of the Hydro share to employees in Note
9.2 Employee remuneration to the consolidated financial statements.
Hydro’s Code of Conduct can be found on Hydro.com/principles.
Hydro’s articles of association can be found on
Hydro.com/governance. See also Note 9.1 Related party information
to the consolidated financial statements.
5. Freely negotiable shares
The Hydro share is freely negotiable, and there are no voting
restrictions linked to the shares. It is among the most traded shares on
the Oslo Stock Exchange and is subject to efficient pricing. As of
December 31, 2023, the Norwegian state, represented by the Ministry
of Trade, Industry and Fisheries, owned 34.26 percent of Hydro’s
shares, while the Government Pension Fund Norway owned 6.21
percent. Shareholding is based on information from the Norwegian
Central Securities Depositary (VPS) as of December 31, 2023. 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.
6. General meeting of shareholders
The general meeting of shareholders, to which all shareholders are
invited, is the company’s highest governing body. The company’s
Articles of Association are adopted by the general meeting. Company
shareholders exercise ultimate authority through the general meeting.
Persons who own shares on the fifth business day prior to the general
meeting are entitled to attend and vote at the general meeting, either
in person or by proxy.
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The general meeting of shareholders elects the shareholders
representatives of the Board and determines the remuneration of the
Board. Further it elects the company’s external auditor and approves
the auditor’s remuneration. It also approves the statutory report
according to Norwegian requirements and financial statements,
including the dividend proposed by the Board. Moreover, it elects the
nomination committee and determines their remuneration, and, finally,
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.
The Annual General Meeting was held on May 10, 2023, as a physical
meeting in the company’s head offices at Vækerø (Oslo, Norway) with
electronic voting and with the shareholders having the possibility to
attending digitally. In total, 57.97 percent of the total voting share
capital was represented.
Notice to a general meeting with supporting information is normally
published on Hydro.com and via stock exchange notice at least three
weeks in advance and distributed to the shareholders at least three
weeks prior to the meeting.
Notice to a general meeting provides information on the procedures
which shareholders must follow to participate in and vote at the
meeting. 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 Hydro’s website:
•
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
The Board’s aim is that resolutions and supporting information
distributed are sufficiently detailed, comprehensive and specific to
enable shareholders to reach decisions on the matters to be
considered at the meeting.
Owners of nominee registered shares that wish to attend the general
meeting must notify the company in advance. Such notification must
be received by the company at the latest two working days prior to the
general meeting, c.f. the Public Limited Liability Companies Act
section 5-3. Shareholders who are unable to attend in person may
vote by proxy. The Board will nominate a person who will be available
to vote on behalf of shareholders as their proxy, normally this is chair
of the Board.
The general meeting votes for each candidate nominated for election
to the company’s Board and nomination committee. To the extent
possible, the form of proxy will facilitate separate voting instructions for
each matter to be considered, and for each of the candidates
nominated for election. It is possible to vote electronically in advance.
The general meetings of the company are chaired by an independent
chair. On the Annual General Meeting, May 10, 2023, the meeting was
chaired by attorney-at-law Hedvig Bugge Reiersen from the law firm
Wikborg Rein. Hedvig Bugge-Reiersen is by the Board deemed
independent of the company.
Chair of the Board, the chair of the nomination committee, the
President and CEO, the CFO and the company’s auditor attend all
general meetings. All board members are encouraged to attend the
Annual General Meeting, either physically or digitally.
The minutes of meeting from general meeting of shareholders are
published via stock exchange notice and on
Hydro.com/generalmeeting as soon as possible after the meeting.
References: Learn more about the general meeting of shareholders at
Hydro.com/investor.
Deviations: See the first page of this Report.
7. Nomination committee
The company has a nomination committee. The members, including
its chair, are elected by the general meeting of shareholders for
periods of up to two years at a time, c.f. the company’s Articles of
Association section 5A. The chair of the nomination committee has the
overall responsibility for the work of the committee.
The main task of the nomination committee is to provide a
recommendation to the company’s general meeting of shareholders on
the election of shareholder elected members to the Board and the
nomination committee, to ensure that the best possible preparations
are made for the general meeting’s decisions. In addition, the
nomination committee recommends the remuneration to the members
and deputies of the Board and the nomination committee.
The nomination committee consists of minimum three members,
maximum four, who are either shareholders or shareholder
representatives. 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 electoral period, c.f. the company’s Articles of Association
section 5A.
The guidelines for the nomination committee have been approved by
the general meeting of shareholders, and set out how elections to the
nomination committee are to be prepared, the criteria for eligibility, the
number of members, the term of office for which members are elected
etc. The guidelines for the nomination committee are available at the
company’s website.
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 and justifies separately
why it is proposing each candidate. The recommendations of the
nomination committee are normally made available together with the
notice to the annual general meetings of the company.
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 nomination committee and the Board are
published well in advance on the company’s website. In carrying out
its duties the nomination committee actively maintains contact with the
shareholder community and strives to ensure that its
recommendations are anchored with major shareholders.
Shareholders may contact the nomination committee via an electronic
form available at the company’s website. The nomination committee
regularly has discussions with members of the Board.
All members of the nomination committee are independent of Hydro’s
Board of Directors, CEO and other executive management staff. As
the largest shareholder the Norwegian state is represented on the
nomination committee by Muriel Bjørseth Hansen (replacing Morten
Strømgren as of May 10, 2023) from the Ministry of Trade, Industry
and Fisheries. The Government Pension Fund Norway
(Folketrygdfondet) is represented by Karl Mathisen (replacing Nils
Bastiansen as of May 10, 2023). Further information on the
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composition of the company’s nomination committee is available at the
company’s website.
References: Information on Hydro’s articles of association, the
nomination committee and its members can be found on
Hydro.com/governance. This is also where nominations to the
committee can be submitted electronically.
8. Board of Directors - composition and independence
Detailed information about each board member can be found in the
Corporate governance section.
All board members are to the Board’s best assessment independent of
the company’s executive management and material business
relationships.
In compliance with Section 5 of Hydro’s articles of association, the
Board consists of between nine and twelve members. The
shareholder-elected board directors are elected by the general
meeting of shareholders for periods of up to two years at a time, c.f.
said provision. The employee-elected board directors are elected by
and among the company’s employees in Norway. The general meeting
of shareholders resolves on the remuneration to the board members
and deputies.
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
the Board’s ability to function as a collegiate body.
As of December 31, 2023, the Board of Directors held 11 members.
Seven are elected by the general meeting of shareholders, four are
elected by and among the company’s employees in Norway. All
shareholder elcted board members are elected for a period of up to
two years. 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. All
shareholder elected members were in 2023, 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.
All board members are encouraged to own shares in the company.
The 11 members of the Board of Directors owned a total of 83,731
shares in Norsk Hydro ASA. Hydro does not have a 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 Norwegian Securities Trading
Act and appurtenant regulations.
At the Annual General Meeting of the company, May 10, 2022, the
Annual General Meeting resolved to discontinue the corporate
assembly. More information on the discontinuation of the corporate
assembly may be found at hydro.com. It is stated in the Public Limited
Liability Companies Act (No: “Allmennaksjeloven”) section 6-1(2) that
the board of directors shall always elect its chair if it has been agreed
that the company shall not have a corporate assembly. The Board of
Hydro adheres to this statutory requirement. The Board of Hydro
elects its chair (and as applicable, its deputy chair) for periods of until
two years at a time.
References: An overview of the members of the Board of Directors
and information about their independence is disclosed in the
Corporate governance section, and in Hydro’s articles of association
which are available on Hydro.com.
Deviations: See the first page of this Report.
9. The work of the Board of Directors
The Board of Directors of Norsk Hydro ASA (the “Board”) is
responsible for the company’s value creation, and sets and monitors
the company’s objectives, strategy and risk profile. The Board is
focused on ensuring that considerations of sustainability are closely
linked to the company’s activities and value creation.
The Board also oversees that Hydro has appropriate global directives
for, among other things, risk management, HSE, people management
and social responsibility and human rights. Sustainability, including
environment and climate change, social responsibility, diversity,
health, safety and work environment and compliance is integrated into
the group’s risk management and strategy processes and are at the
centre of the Board’s considerations and decision-making throughout
the year. The approach is discussed in more detail in the group’s
annual report as applicable.
The Board has established procedures for its own work. These are set
out in the Rules of Procedures for the Board of Directors of Norsk
Hydro ASA. The Rules of Procedures has a particular emphasis on
clear internal allocation of responsibilities and duties vis-à-vis the
Board and the President and CEO.
It is stated in the Rules of Procedures that the Board represents and
are accountable to all shareholders of the company. Pursuant to the
Public Limited Liability Companies Act section 6-12 and 6-13, the
Board has the overriding responsibility for the stewardship of the
company and shall conduct supervision of the company’s day to day
management and the company’s activities in general.
The Board has an annual work plan with particular emphasis on
objectives, strategy and implementation. 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 is closely following
the market and macroeconomic developments relevant for the
aluminum industry. Since 2001, Hydro has had a board audit
committee and a board people and compensation committee. Each
committee consist of four board members. The shareholder-elected
members are all independent of the company. In the opinion of the
Board, the audit committee meets the Norwegian requirements
regarding independence and competence.
Matters to be considered by the Board are prepared by the President
and CEO in collaboration with the chair of the Board. The chair of the
Board carries a particular responsibility for ensuring that the work of
the Board is conducted with high quality, is well organized and that it
functions efficiently. Emphasis is placed on creating a board
environment of open and constructive dialogue and discussion.
Hydro has purchased and maintains a Directors and Officers Liability
Insurance on behalf of the members of the Board and the CEO. The
insurance also covers any employee acting in a managerial capacity
and includes controlled subsidiaries. The insurance policy is issued by
a reputable insurer with an appropriate rating.
In accordance with the Board of Directors Rules of Procedures section
6, the Board has established a Board People and Compensation
Committee and a Board Audit Committee:
Board People and Compensation Committee
The committee consists of four members of the Board of Directors.
The committee shall assist the Board in exercising its oversight
responsibility, in particular related to compensation matters pertaining
to the President & CEO and other members of the Corporate
Management Board (CMB), other compensation issues of principal
importance, and strategic people processes in the company, in
particular related to succession, leadership and talent, and diversity
and inclusion.
The committee shall regularly consider the appropriateness and
competitiveness of the remuneration arrangements for the CEO and
other members of the CMB.
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Members: Dag Mejdell (chairperson), Kristin Fejerskov Kragseth,
Rune Bjerke and Arve Baade.
References: The mandate for the Board People and Compensation
Committee can be found at Hydro.com/governance.
Board Audit Committee
The audit committee consists of four of the Board members and meets
the Norwegian requirements for independence and competence. The
audit committee assists the board in exercising its oversight
responsibility with respect to the integrity of the company’s financial
statements and sustainability reporting, the financial and sustainability
reporting processes, internal controls, systems of risk management,
and the compliance system. In addition, the committee oversees
qualifications, independence and performance of the external auditor
and Hydro’s internal audit function.
As part of overseeing the external auditor’s independence and
performance, the audit committee maintains a pre-approval policy
governing the external auditor’s engagement. The policy governs 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
pre-approval 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, audit-related, tax and other
non-audit-related services are within the monetary frames established
by the audit committee.
To ensure the independence of the internal audit function, the Chief
Audit Executive reports to the board through the audit committee and
meets with the Board of Directors for approval of the audit plan and
annual report. The Chief Compliance Officer has a dotted reporting
line to, and meets regularly with, the audit committee.
1
Moxnes is employed in Hydro and represents the employees through the Central
Cooperative Council. We believe that such reliance does not adversely affect, in any material
Members: Marianne Wiinholt (chair), Petra Einarsson, Peter Kukielski
(January – June 2023), Philip Graham (from June 2023), and Bjørn
Petter Moxnes.
1
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 handled with. The
code applies to all of Hydro’s board members and employees. It is the
opinion of the Board that there were no transactions that were material
between the group and its shareholders, board directors, Corporate
Management Board or related parties in 2023, 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 or acquisitions, another
board member will normally lead discussions concerning that
particular case.
The Rules of Procedures also contain provisions 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. Further, the Rules of
Procedures state that each board member has a duty to continually
assess whether there are any circumstances which could undermine
the general confidence in his or her independence, and how the Board
shall handle transactions with closely related parties.
Board self-assessment
The Board normally conducts an annual self-assessment of its work,
competence and cooperation with management and a separate
assessment of the board’s chairperson. In addition, the audit
committee performs a self-assessment. The results are submitted to
the nomination committee, which in turn evaluates the Board’s
composition and competence. This assessment is normally conducted
by an external facilitator. The 2023 self-assessment was facilitated by
the corporate advisory firm Spencer Stuart.
References: Information about the Board of Directors and its
committees, and the board members’ competence can be found in the
Corporate governance section. The Board of Directors’ mandate can
be found at Hydro.com/governance.
10. Internal Control over Financial Reporting and Risk
Management
way, the ability of the audit committee to act independently or to satisfy the other
requirements.
The Board of Directors is responsible for sound internal controls and
appropriate risk management systems. This is exercised by follow-up
and deep dives according to the Board Audit Committee (BAC) annual
wheel and consists of reviews of the key risk areas throughout the
company’s internal controls and risk management systems.
Hydro’s internal control system includes all Hydro’s corporate
directives, including the company’s code of conduct and HSE and
corporate social responsibility requirements. A more detailed
description of the company’s internal controls and risk management
systems can be found at Hydro.com/governance.
The Chief Audit Executive reports directly to the Board of Directors but
is for administrative purposes placed under the purview of the chief
financial officer (CFO). Hydro’s internal audit function is described in
the Business conduct chapter.
10.1 Internal Control over Financial Reporting
Hydro’s internal control over financial reporting (ICFR) is aligned with
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 elements are: Control
Environment, Risk Assessment, Control Activities, Information and
Communication, and Monitoring Activities.
Hydro’s overall control environment for financial reporting is governed
by Hydro’s Global Directives, and reflects the tone set by the board
and executive management. This includes a common set of attitudes,
ethics, and values shared by all employees.
Group Accounting and Reporting (GAR) has on behalf of the CFO, the
governing responsibility for processes across Hydro related to periodic
financial reporting and ICFR. Hydro’s 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.
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.
A financial reporting risk assessment is conducted annually as part of
Hydro’s ICFR annual wheel. This is based on identified internal and
external factors impacting the financial reporting and results in
identification of Hydro’s Financial Reporting Risks (HFRR) which are
reported to the CFO and Board Audit committee. The risk assessment
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is dynamic and updated continuously as changes in risk factors are
identified. A set of control activities has been designed and
implemented at multiple levels within the organization to mitigate risks
in accordance with HFRR. Control design is considered effective when
the inherent risks identified in the HFRR process are addressed and
mitigated by one, or more, controls. This includes a mix of
implemented controls related to IT and application controls (ITGC),
process level controls, review controls, and entity-level controls.
Remedial actions are taken if risks are not fully mitigated, and such
remedial actions might be implementation of new controls, redesign of
current controls and/or exclusion of obsolete controls from the ICFR
design.
Monitoring the appropriateness of ICFR control design and operational
effectiveness occurs through a combination of self-assessments,
testing of controls according to a global monitoring plan, and
evaluation of deficiencies identified through the financial reporting
process.
Hydro’s disclosure committee assists the President & CEO and the
CFO in ensuring fairness, accuracy, completeness, and timeliness of
Hydro’s public reports and disclosures. The disclosure committee is
also an integral component of Hydro’s disclosure controls and
procedures and assesses Hydro’s effectiveness, identifies deficiencies
and 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, the
audit committee takes an active role in ensuring the functioning of the
ICFR framework. The Board of Directors meets regularly with the
external auditor without members of the corporate management
present.
10.2 Enterprise Risk Management
A review of Hydro’s major risks can be found in the section Enterprise
risk management in Hydro. More information about Hydro’s corporate
directives can be found at Hydro.com/principles.
11. Remuneration of the Board of Directors
The shareholder elected board members perform no duties for the
company other than their board duties.
Remuneration to the Board is determined by general meeting of
shareholders, 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 is based neither
on performance nor on shares or share options.
References: All aspects of remuneration of the Board of Directors are
described in the Management remuneration report. See also Hydro’s
Articles of association.
12. Remuneration of the executive management
The Board of Directors has established a remuneration policy for
remuneration of members of the executive management. The
remuneration policy states that Hydro shall pay members of the
executive management a compensation package that is competitive,
but not market leading, and in line with good industry standards
locally.
Where appropriate, compensation packages should also include a
performance-based component. The performance-based incentive
schemes shall support Hydro’s business strategy and long-term
interests and shall also contribute to ensuring that the company is run
in a sustainable manner. Performance based compensation has been
capped in accordance with the Norwegian government’s guidelines on
executive remuneration.
The company’s long-term incentive program is share based with a
lock-in period of three years. Hydro has no share option scheme.
The remuneration policy was first approved by the shareholders at the
Annual General Meeting in 2021. A revised policy was approved by
the Annual General Meeting on May 10, 2022. The policy is available
on Hydro’s website. A management remuneration report for 2023 will
be presented to the Annual General Meeting in 2024 for an advisory
vote.
References: Hydro’s remuneration policy is available on Hydro.com.
All aspects of remuneration of management are described in the
Management remuneration report. The employee share purchase plan
is described in Note 9.2 Employee remuneration to the financial
statement.
13. Information 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. Hydro therefore adheres to the principles of
transparency, honesty and accountability when interacting with our
stakeholders.
Hydro has established a global directive for accounting and financial
reporting. Our principles for sustainability reporting are presented in
General information section of the sustainability statement. Our
approach to reporting is 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
general meetings of shareholders.
Shareholder information is available on Hydro.com. 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 on Hydro.com when distributed. Presentation of the quarterly
reports as well as the annual general meeting are simultaneously
broadcasted through webcasts. 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 Hydro’s annual
reports and at Hydro.com/investor where also more information about
webcasts and the Hydro share can be found, including key legal
information for shareholders in Norsk Hydro ASA. Hydro’s code of
conduct is available on 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 the company’s 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 all meetings of the audit
committee. The minutes from these meetings are distributed to all
board directors. This practice is in line with the EU audit directive.
Each year the auditor presents the main elements of the audit,
including uncorrected audit misstatements and internal control
weaknesses.
The external auditor meets with the Board of Directors when the
company’s annual financial statements are approved. In the meeting,
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the auditor provides an overview over the main elements of the audit,
identified weaknesses in and suggestions for 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 in accordance
with the EU Audit reform and IESBA independence rules. All services
from the external auditor, including non-audit services, are subject to
pre-approval as defined by the audit committee. The pre-approval
process for non-audit services ensure that no services prohibited by
law is delivered to Hydro or any controlled subsidiaries. The external
auditor provides the audit committee with an annual written
confirmation of independence, and a summary of all non-audit
services provided to Hydro during the year.
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. In 2020, the annual general meeting chose to retain
KPMG as external auditor for the group, in accordance with a tender
process. KPMG has been the auditor for Hydro since 2010. Lead Audit
Partner has been part of the audit team since 2017. The lead Audit
partner rotates every 7 years.
References: See Note 10.4 Auditor’s remuneration to the
consolidated financial statements.
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Production capacity and volumes
Production capacity Hydro Energy
Power station area
Power Plants
Hydro Equity Share (TWh)
1)
Hydro Operated (TWh)
Ownership
Key characteristics
Telemark
Tinn: Frøystul, Vemork, Såheim, Moflåt, Mæl
og 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 og Fivlemyr. Årdal:
Tyin, Holsbru og 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 og 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 24.37 % of Lyse Kraft DA.
Stavanger
Lyse plants: Lysebotn 2, Tjodan, Flørli,
Maudal, Breiava, Oltedal, Oltesvik,
Hjelmeland, Sviland, Hetland og Hauskje. Sira-
Kvirna 7 anlegg og Ulla-Førre 4 anlegg
1.6
2.6
25.6 % ownership through Lyse
Kraft DA
Reservoir-based Hydropower. No reversion. Lyse Kraft DA
holds part ownership in Sira-Kvina (41 %) and Ulla-Førre (18
%).
Skafså
Åmdal, Osen, Skree og Gausbu
0.1
0
33 % ownership
Hydropower. No reversion.
Tonstad
Tonstad wind farm
0
0.7
No ownership
Wind power. Operatorship, commercial handling and PPA-
offtake from Hydro
Total
9.4
13.7
1) Normal capasity
© Hydro 2024
266
Country
by country
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Production capacity Hydro Aluminium Metal
Plant
Country
Employees (per Dec.31)
Electrolysis capacity (000 mt)
1)
Casthouse capacity (000 mt)
Main products
Key characteristics
Karmøy
Norway
546
274
320
extrusion ingot, wire rod
Two prebake lines. R&D center.
Årdal
Norway
543
203
300
sheet ingot, foundry alloys
Two prebake lines. Technology and competence center.
Substantial anode production.
Sunndal
Norway
674
428
525
extrusion ingot, foundry
alloys
Two prebake lines. R&D center metalurgy and casting.
Largest plant in Western Europe.
Høyanger
Norway
182
67
120
sheet ingot
One prebake line.
Husnes
Norway
361
199
220
extrusion ingot
Two prebake lines.
Slovalco (55.3%)
Slovakia
195
3)
175
2)
(100% basis)
250 (100% basis)
75 (2023)
2)
,100 (2024)
2)
extrusion ingot, foundry
alloys
Joint venture with Penta (Slovakia). One prebake line.
Tomago (12.4%)
Australia
1001
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
999
325
340
extrusion ingot, foundry
alloys
Joint venture with Qatar Petroleum. 40 year gas supply
contract expiring in 2049. Is a first quartile smelter on the
global cost curve. Among the world’s lowest cost
smelters. Two prebake lines.
Alouette (20 %)
Canada
1008
128
150
standard ingot
Joint venture with RTA, AMAG and IQ/Marubeni. Long
term power contract expiring end of 2029. Is a first
quartile smelter on the global cost curve. Largest
producer in North America. Two prebake lines.
Albras (51 %)
Brazil
1,297
460 (100% basis)
460 (100% basis)
standard ingot, foundry
alloys, sale of liquid
Joint venture with NAAC. Long term power contract
expiring end of 2024. Largest producer in South
America. Four 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.
2) Electrolysis production curtailed to 5% of capacity in Aug 2022. Complete closure in Feb 2023. Casthouse to remain operational, with lower capacity due to the electrolysis curtailment.
3) Manning reduced following curtailment
© Hydro 2024
267
Country
by country
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Primary aluminium and casthouse production (kmt)
Primary aluminium
Casthouse production
Primary aluminium and casthouse
production (kmt)
Location
2023
2022
2023
2022
Albras
Brazil
450
405
372
332
Karmøy
Norway
208
247
189
224
Årdal
Norway
192
203
207
223
Sunndal
Norway
428
426
458
452
Høyanger
Norway
67
67
92
98
Husnes
Norway
150
186
159
185
Slovalco
Slovakia
-
72
56
121
Tomago (12.4 %)
Australia
73
73
73
72
Qatalum (50 %)
Qatar
322
319
335
333
Alouette (20 %)
Canada
127
126
126
126
Technology
Norway
13
13
Total production Primary Aluminium
2,030
2,137
2,067
2,166
For more production volumes see note E5.3 resource outflows - product and materials.
© Hydro 2024
268
TCFD index
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Task force on climate-related financial
disclosures (TCFD) index
Governance: Disclose the organization's governance around climate-related risks and opportunities
a) Describe the board's oversight of climate-related risks and opportunities. See:
• Risk review
• Our business
• Our performance
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. See:
• Risk review
• Climate change
b) Describe the impact of climate-related risks and opportunities on the organization's businesses, strategy,
and financial planning. See:
• Risk review
• Climate change
c) Describe the resilience of the organization's strategy, taking into consideration different climate-related
scenarios, including a 2°C or lower scenario. See:
• Climate change
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. See:
• Climate change
b) Describe the organization's processes for managing climate-related risks. See:
• Climate change
c) Describe how processes for identifying, assessing, and managing climate-related risks are integrated into
the organizations' overall risk management. See:
• Risk review
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 climate-related risks and opportunities in line with
its strategy and risk management process. See:
• General information
• Climate change
• Water resources
• Biodiversity and ecosystems
• Resources use and circular economy
b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the
related risks. See:
• Note E1 on Climate change
c) Describe the targets used by the organization to manage climate-related risks and opportunities and
performance against targets. See:
• Our performance
• Climate change
© Hydro 2024
269
SDG index
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Sustainable Development Goals
(SDG) index
End poverty in all its forms everywhere
Target: 1.2, 1.4 and 1.5
See the Own workforce and Workers in the value chain chapters for
information about Hydro’s initiatives to promote a living wage for
workers in Hydro and in Hydro’s value chain.
See the Affected communities chapter for more information about
Hydro’s support for local initiatives that enable economic development,
skills and job development.
See the Country-by-Country report in the Appendix for more
information about Hydro’s tax contributions in different jurisdictions.
End hunger, achieve food security and
improved nutrition and promote sustainable
agriculture
Target: 2.4 and 2.5
See the Affected communities chapter for more information about
Hydro’s support for local initiatives that enable economic development,
skills and job development, including projects related to agriculture.
See the Biodiversity and ecosystems chapter for information on
Hydro’s initiatives to minimize negative impact on nature and
biodiversity.
Ensure healthy lives and promote wellbeing
for all at all ages
Target: 3.5 and 3.9
See the Own workforce chapter for information about Hydro’s
initiatives to promote mental health and wellbeing and to manage risks
related to communicable diseases.
See the Pollution chapter and Legacy impact chapter for more
information about our initiatives to reduce pollution and contamination
that could be a threat to public health.
Ensure inclusive and equitable quality
education and promote lifelong learning
opportunities for all
Target: 4.4, 4.6 and 4.7
See the Affected communities chapter for more information about
Hydro’s support for local initiatives that enable learning and skills
development, including our education and skills development targets
See the Own workforce chapter for information about our people
strategy and initiative to support learning and leadership development.
Achieve gender equality and empower all
women and girls
Target: 5.1, 5.2 and 5.5
See the Own workforce chapter for information about our people
strategy, including initiatives to promote diversity, inclusion and
belonging, promoting gender equality and female leaders, and ending
discrimination of all forms.
See the Human rights chapter for information about initiatives to
safeguard human rights, including those related to equality and safety.
Ensure availability and sustainable
management of water and sanitation for all
Target: 6.3, 6.4 and 6.5
See the Pollution and Legacy impact chapters for information about
our initiatives to reduce pollution and contamination that could have a
negative impact on waterways and water sources.
The Water resource chapter also includes our water use statistics and
a description of our strategy to promote responsible water use and
water use efficiency and initiatives to restore and protect rivers and
waterways in our hydropower operations.
Ensure access to affordable, reliable,
sustainable, and modern energy for all
Target: 7.2 and 7.3
See the Our business chapter for information about Hydro’s renewable
power production and new energy solutions.
See the Climate change chapter for information about our initiatives
and collaborations aiming to increase the use of renewable power as a
share of total power consumption in our value chain.
Promote sustained, inclusive and
sustainable economic growth, full and
productive employment and decent work
for all
Target: 8.3, 8.4, 8.5, 8.6, 8.7 and 8.8
See the Human rights, Own workforce and Workers in the value chain
for information about Hydro’s initiatives to promote a living wage for
workers in Hydro and in Hydro’s value chain and to promote decent
work and protection of human rights for all.
See the Own workforce chapter for information about Hydro’s
occupational health and safety initiatives. The Affected communities
chapter contains information about our initiatives to support local
growth, learning opportunities and training.
The Country-by-Country report in in the appendix provides transparent
reporting on our tax and value creation in different jurisdictions.
See the Resource use and circular economy chapters for information
on initiatives that contribute towards resource efficiency in production
and decoupling of economic growth from environmental degradation.
Build resilient infrastructure, promote
inclusive and sustainable industrialization
and foster innovation
Target: 9.4 and 9.5
The Climate change and Resource use and circular economy chapters
provide information on Hydro’s initiatives to make our industry more
resource efficient and environmentally sound.
The Resource use and circular economy and Biodiversity and
ecosystems chapters describes our initiatives and collaborations
aimed at enhancing research and developing more efficient and
environmentally sound industrial processes.
© Hydro 2024
270
SDG index
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Reduce inequality within and among
countries
Target: 10.1, 10.2, 10.3 and 10.4
See the Own workforce and Workers in the value chain chapters for
information about Hydro’s initiatives to promote a living wage for
workers in Hydro and in Hydro’s value chain. Affected communities
chapter also describes our contributions to socio-economic
development.
The Own workforce chapter describes our work to promote inclusion,
equal opportunity and equality, and to eliminate discrimination.
Make cities and human settlements
inclusive, safe, resilient, and sustainable
Target: 11.5
The Own workforce chapter describe our work to promote resilience
and prepare for emergencies and disasters
The Legacy impact chapter describe our work to prevent disasters and
contribute to public safety, in relation to the management of tailings
produced by the mining process or the bauxite residue produced by
the alumina refining process.
Ensure sustainable consumption and
production patterns
Target: 12.2, 12.4, 12.5, 12.6 and 12.7
See the Resource use and circular economy chapter for information
about Hydro’s initiatives to promote recycling and more circular
solutions in our value chain and how we manage waste.
See the Pollution chapter for information about how we reduce
emissions to air, water and soil.
The Workers in the value chain chapter describes our focus on
sustainability in Hydro’s procurement practices.
Take urgent action to combat climate
change and its impacts
Target: 13.1, 13.2 and 13.3
See the Climate change chapter for information about Hydro’s strategy
and initiatives to reduce greenhouse gas emissions, our research and
initiatives to develop technologies that enable greenhouse gas
emissions reductions in our value chain and information on how we
work to evaluate and address exposure to climate change related
risks.
Conserve and sustainably use the oceans,
seas, and marine resources for sustainable
development
Target: 14.1
See the Pollution chapter for information about how we work to reduce
emissions to air, water and soil.
See the Legacy impact chapter for information on how we manage the
impact of our industrial legacy and assets on the ocean and other
ecosystems.
Protect, restore and promote sustainable
use of terrestrial ecosystems, sustainably
manage forests, combat desertification, and
halt and reverse land degradation and halt
biodiversity loss
Target: 15.1, 15.2, 15.5 and 15.9
See the Biodiversity and ecosystems chapter for information on our
land and forest restoration initiatives and how we manage our impact
on nature and biodiversity.
See the Legacy impact chapter for information on how we manage the
impact of our industrial legacy and assets on the land, water, and
related ecosystems.
Promote peaceful and inclusive societies
for sustainable development, provide
access to justice for all and build effective,
accountable and inclusive institutions at all
levels
Target: 16.1, 16.2, 16.3 and 16.5
See the Human rights, Own workforce and Workers in the value chain
chapters for information about Hydro’s initiatives to safeguard human
rights and reduce risk of abuse, exploitation, and discrimination in
Hydro and in Hydro’s value chain.
See the Business conduct chapter for information about our
commitment to ethical business practices, compliance with applicable
laws and regulations, including anti-corruption.
Strengthen the means of implementation
and revitalize the global partnership for
sustainable development
Target: 17.1, 17.3, 17.14 and 17.17
The Country-by-Country report in the appendix provides transparent
reporting on our tax and value creation in different jurisdictions.
See the Affected communities chapter for more information about
Hydro’s support for local initiatives that enable economic development,
skills and job development.
See the Business conduct chapter for information about our public
affairs and lobbying efforts, including our positions on sustainability
related topics such as carbon pricing and energy markets, and our
R&D partnerships
© Hydro 2024
271
SDG index
1. Introduction
2. Business
3. Performance
4. Governance
5. Sustainability
6. Financials
7. Appendices
Content
Hydro 2030 profitability roadmap assumptions
Indicative 2030 potential RoaCE and EBITDA scenarios shown in the Hydro 2030 profitability roadmap section in Our ambitions are based on simplified assumptions and a sensitivity analysis based on the financial result as
of Q3 2023 last twelve months adjusted for market prices, foreign currency rates and other short-term effects impacting the period’s result. The actual earnings, cash flows and returns will be affected by other factors not
included in the scenarios, including, but not limited to production volumes, other raw material prices, downstream margin developments, premiums, inflation, other foreign currency rates, depreciation, taxes, investments,
interest expense, competitors’ cost positions and other. The external market scenario is mainly based on CRU price and premium assumptions and S&P Global foreign currency rate assumptions, with certain adjustments.
These assumptions are republished under license from CRU International Ltd. and S&P Global.
Assumptions used in scenarios
Q3 2023 LTM
Last 5 year average
Forward, real 2023
External market scenario, real 2023
LME, USD/mt
2,240
2,180
2,300
2,560
Realized premium, USD/mt
490
430
380
570
PAX, USD/mt
350
330
340
380
Caustic soda, USD/mt
650
430
320
410
Coal, USD/mt
150
130
100
100
Pitch, EUR/mt
1,260
840
970
920
Pet coke, USD/mt
610
450
470
500
NO2, NOK/MWh
1,150
840
650
650
Nordic system, NOK/MWh
850
620
400
400
USDNOK
10.41
9.28
10.38
8.15
EURNOK
11.11
10.35
12.25
9.58
BRLNOK
2.06
1.93
2.15
1.47
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272
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.
© Hydro 2024
273
Norsk Hydro ASA
NO-0240 Oslo
Norway
T +47 22 53 81 00
www.hydro.com
© Hydro 2024
Hydro is a leading aluminium and renewable energy company committed to
a sustainable future. Our purpose is to create more viable societies by
developing natural resources into products and solutions in innovative and
efficient ways.