##### 



NORSK HYDRO financial review

Total operating revenues for 2002 by area in NOK billion

(TOTAL OPERATING REVENUES CHART)

EBITDA in NOK billion

(EBITDA IN NOK BILLION CHART)

FINANCIAL REVIEW

|                                                  |  |      |          |      |  |      |          |   |  |  |          |  
|------------------------------------------------- |  | ---- | -------- | ---- |  | ---- | -------- | - |  |  | -------- | -
|NOK million                                       |  | 2002 |          | 2001 |  | 2000
|Operating revenues                                |  |      | 162,936  |      |  |      | 152,835  |   |  |  | 156,861  |  
|Operating costs and expenses                      |  |      | (143,095 | )    |  |      | (131,752 | ) |  |  | (128,395 | )
|                                                  |  |      |          |      |  |      |          |   |  |  |          |  
|Operating income                                  |  |      | 19,841   |      |  |      | 21,083   |   |  |  | 28,466   |  
|Non-consolidated investees                        |  |      | 33       |      |  |      | 566      |   |  |  | 672      |  
|Interest income and other
financial income        |  |      | 1,418    |      |  |      | 2,847    |   |  |  | 1,747    |  
|Other income, net                                 |  |      | 219      |      |  |      | 578      |   |  |  | 3,161    |  
|                                                  |  |      |          |      |  |      |          |   |  |  |          |  
|Earnings before interest
expense and taxes (EBIT) |  |      | 21,511   |      |  |      | 25,074   |   |  |  | 34,046   |  
|Interest expense and foreign
exchange gain/(loss) |  |      | 517      |      |  |      | (3,609   | ) |  |  | (3,905   | )
|                                                  |  |      |          |      |  |      |          |   |  |  |          |  
|Income before taxes and
minority interest         |  |      | 22,028   |      |  |      | 21,465   |   |  |  | 30,141   |  
|Income tax expense                                |  |      | (13,278  | )    |  |      | (13,750  | ) |  |  | (16,178  | )
|Minority interest                                 |  |      | 15       |      |  |      | 177      |   |  |  | 18       |  
|                                                  |  |      |          |      |  |      |          |   |  |  |          |  
|Net income                                        |  |      | 8,765    |      |  |      | 7,892    |   |  |  | 13,981   |  
|Earnings per share (NOK)                          |  |      | 34.00    |      |  |      | 30.50    |   |  |  | 53.40    |  
|                                                  |  |      |          |      |  |      |          |   |  |  |          |  

This discussion should be read in conjunction
with the information contained in the Companys
consolidated financial statements and the
related notes included in this annual report. In
order to fully understand the discussion below
pertaining to the Companys business model and
related strategies, the reader is encouraged to
review Hydros annual report on Form 20-F for the year
ended December 31, 2002 filed with the US
Securities and Exchange Commission (the SEC).
The Form 20-F is available directly on the
SECs electronic system (EDGAR) which can be
accessed through the SECs website at
www.sec.gov and also on Hydros internet site.

SUMMARY OF KEY DEVELOPMENTS IN
2002

Norsk Hydros net income improved approximately
11 percent in 2002 compared to the previous
year. The improvement was primarily due to a
significant increase in oil and gas production,
more extensive aluminium operations following
the acquisition of VAW in the first quarter,
unrealized gains in connection with energy
contracts and unrealized gains associated with
the Companys debt due to changes in currency
rates. Lower oil and gas prices, stated in
Norwegian kroner (NOK), difficult market
conditions for the aluminium industry, and the
strengthening of the Norwegian kroner negatively
impacted the results.

Market conditions for the Companys
aluminium operations have been difficult, while
the high price of oil has been a strong positive
factor. There is considerable uncertainty
associated with international economic
development in the future. This implies a large
degree of uncertainty with regards to price
development for Hydros main products in 2003.
Hydro will continue to emphasize efforts to
improve the Companys competitiveness while
maintaining financial strength. In 2002, Hydro
achieved a return on gross investment (CROGI)
which was consistent with established targets
for the year. The debt/equity ratio, defined as
net interest-bearing debt relative to equity,
remains strong despite significant acquisitions,
which reflects a strong cash flow throughout the
year. Productivity improved in all
business areas, particularly in the oil and
energy segment, where a significant production
increase made an important contribution to the
Companys profitability.

Non-GAAP Measures of Financial Performance

Within this discussion, Hydro refers to certain
non-GAAP financial measures, including cash
return on gross investment (CROGI) and EBITDA,
each of which is defined below. Hydros
management makes regular use of these cash
flow-based indicators to measure its
performance, both in absolute terms and
comparatively from period to period. These
measures are viewed by management as providing
a better understanding - for management and
investors - of:



| |  | the rate of return on
investments over time, in each of its
capital intensive businesses, and
|- |  | ---------------------------------------------------------------------------------------------
| 
| |  | the operating results of its business segments                                               

Hydro also measure CROGI based on a long-term
price set. This is in order to not place undue
importance on such variables as historically high or low
prices of its commodity products, and the
effects of changes in currency exchange rates.

52



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##### 



A reconciliation of Operating income to EBITDA for each of Hydros operating
segments is presented in the following table:

Operating income  EBIT  EBITDA Year 2002

|                           |  |               |        |           |  |          |      |           |  |        |       |      |  |          |      |        |  |  |     |   |  |  |        |       |  |  |        |  |  |  |        | 
|-------------------------- |  | ------------- | ------ | --------- |  | -------- | ---- | --------- |  | ------ | ----- | ---- |  | -------- | ---- | ------ |  |  | --- | - |  |  | ------ | ----- |  |  | ------ |  |  |  | ------ | 
|                           |  |               |        |           |  |          |      |           |  |        |       |      |  | Selected |      |        |  |  |     |   |  |  |        | Depr. |  |  |        | 
|                           |  | Operating     |        | Non-cons. |  | Interest |      | financial |  | Other  |       |      |  |          |      | and    |  |  |     |  
|NOK million                |  | income (loss) |        | Investees |  | Income   |      | items     |  | income |       | EBIT |  | amort.   |      | EBITDA
|Exploration and Production |  |               | 14,329 |           |  |          | 31   |           |  |        | 100   |      |  |          | 5    |        |  |  | 77  |   |  |  | 14,542 |       |  |  | 8,790  |  |  |  | 23,332 | 
|Energy and Oil Marketing   |  |               | 1,592  |           |  |          | 148  |           |  |        | 26    |      |  |          | (6   | )      |  |  |    |   |  |  | 1,760  |       |  |  | 222    |  |  |  | 1,982  | 
|Eliminations               |  |               | 26     |           |  |          |     |           |  |        |      |      |  |          |     |        |  |  |    |   |  |  | 26     |       |  |  |       |  |  |  | 26     | 
|                           |  |               |        |           |  |          |      |           |  |        |       |      |  |          |      |        |  |  |     |   |  |  |        |       |  |  |        |  |  |  |        | 
|Hydro Oil and Energy       |  |               | 15,947 |           |  |          | 179  |           |  |        | 126   |      |  |          | (1   | )      |  |  | 77  |   |  |  | 16,328 |       |  |  | 9,012  |  |  |  | 25,340 | 
|                           |  |               |        |           |  |          |      |           |  |        |       |      |  |          |      |        |  |  |     |   |  |  |        |       |  |  |        |  |  |  |        | 
|Metals                     |  |               | 1,690  |           |  |          | (275 | )         |  |        | 19    |      |  |          | 92   |        |  |  |    |   |  |  | 1,526  |       |  |  | 1,177  |  |  |  | 2,703  | 
|Rolled Products            |  |               | (295   | )         |  |          | 7    |           |  |        | 5     |      |  |          | 5    |        |  |  |    |   |  |  | (278   | )     |  |  | 536    |  |  |  | 258    | 
|Extrusion and Automotive   |  |               | 14     |           |  |          | 49   |           |  |        | 18    |      |  |          | (10  | )      |  |  |    |   |  |  | 71     |       |  |  | 1,013  |  |  |  | 1,084  | 
|Other and eliminations     |  |               | 289    |           |  |          |     |           |  |        |      |      |  |          |     |        |  |  |    |   |  |  | 289    |       |  |  |       |  |  |  | 289    | 
|                           |  |               |        |           |  |          |      |           |  |        |       |      |  |          |      |        |  |  |     |   |  |  |        |       |  |  |        |  |  |  |        | 
|Hydro Aluminium            |  |               | 1,698  |           |  |          | (219 | )         |  |        | 42    |      |  |          | 87   |        |  |  |    |   |  |  | 1,608  |       |  |  | 2,726  |  |  |  | 4,334  | 
|                           |  |               |        |           |  |          |      |           |  |        |       |      |  |          |      |        |  |  |     |   |  |  |        |       |  |  |        |  |  |  |        | 
|Hydro Agri                 |  |               | 2,207  |           |  |          | 57   |           |  |        | 206   |      |  |          | 29   |        |  |  | 166 |   |  |  | 2,665  |       |  |  | 1,280  |  |  |  | 3,945  | 
|                           |  |               |        |           |  |          |      |           |  |        |       |      |  |          |      |        |  |  |     |   |  |  |        |       |  |  |        |  |  |  |        | 
|Other activities           |  |               | 13     |           |  |          | 12   |           |  |        | 178   |      |  |          | (271 | )      |  |  |    |   |  |  | (68    | )     |  |  | 1,112  |  |  |  | 1,044  | 
|Corporate and eliminations |  |               | (24    | )         |  |          | 4    |           |  |        | 996   |      |  |          | 26   |        |  |  | (24 | ) |  |  | 978    |       |  |  | 17     |  |  |  | 995    | 
|                           |  |               |        |           |  |          |      |           |  |        |       |      |  |          |      |        |  |  |     |   |  |  |        |       |  |  |        |  |  |  |        | 
|Total                      |  |               | 19,841 |           |  |          | 33   |           |  |        | 1,548 |      |  |          | (130 | )      |  |  | 219 |   |  |  | 21,511 |       |  |  | 14,147 |  |  |  | 35,658 | 
|                           |  |               |        |           |  |          |      |           |  |        |       |      |  |          |      |        |  |  |     |   |  |  |        |       |  |  |        |  |  |  |        | 

Operating Results and EBITDA

The change in EBITDA for the Group in 2002 and
the most important items affecting the change
follow:


|                                                             |  |  |        |  
|------------------------------------------------------------ |  |  | ------ | -
|EBITDA for 2002                                              |  |  | 35,658 |  
|EBITDA for 2001                                              |  |  | 37,757 |  
|                                                             |  |  |        |  
|Change in EBITDA                                             |  |  | (2,099 | )
|                                                             |  |  |        |  
|Prices and currency, Exploration and Production              |  |  | (4,380 | )
|Margin including currency                                    |  |  | (3,610 | )
|Volume                                                       |  |  | 5,280  |  
|Production and exploration costs,
Exploration and Production |  |  | (2,490 | )
|Fixed costs                                                  |  |  | 1,365  |  
|Non-recurring items and Restructuring costs                  |  |  | 365    |  
|Trading and price hedging, Metals                            |  |  | 790    |  
|Unrealized LME effects  Aluminium                           |  |  | 315    |  
|New business 1)                                              |  |  | 2,780  |  
|Non-consolidated investees                                   |  |  | (128   | )
|Interestincome and other financial income                    |  |  | (1,531 | )
|Other income                                                 |  |  | (359   | )
|Other                                                        |  |  | (496   | )
|                                                             |  |  |        |  
|Total change in EBITDA                                       |  |  | (2,099 | )
|                                                             |  |  |        |  



|1) |  | EBITDA contributed by newly acquired VAW and Technal.
|-- |  | -----------------------------------------------------

EBITDA for Oil and Energy was NOK 25,340 million
in 2002, a reduction of 8 percent in relation to
2001. Hydros oil and gas production in 2002
averaged 480,000 barrels of oil equivalents
(boe) per day, an increase of some 14 percent
from 2001. The positive effect of the increased
production was largely offset by lower oil
prices stated in NOK as a result of the strong
appreciation of the NOK against the USD. Average
production for 2003 is estimated at 510,000 boe
per day. Hydros access to new oil and gas
reserves, including the purchase and sale of
field licenses and the effect of production sharing
agreements (PSA) on international fields,
comprised 187 percent of its annual production.
The reserve replacement ratio was 98 percent,
excluding purchases and sales of licenses and
the effect of PSAs on international fields.
Exploration activities in 2002 were
disappointing and approximately NOK 3.6 billion
were expensed for the year.

Aluminium EBITDA for 2002 increased to NOK 4,334
million from NOK 2,543 million primarily as a result
of the VAW and Technal acquisitions which contributed
to EBITDA of NOK 2,485 million. Operations expanded
significantly in 2002 with the integration of these
businesses during the year. Efforts to realize
synergies and other improvement programs continued
according to plan. Aluminiums underlying results
reflected difficult market conditions which impacted
all sub-segments during 2002. In response to the
economic conditions, customers reduced their
inventories which led to a decline in demand for
metal products. As a result, overcapacity in the
markets put pressure on both LME prices and product
margins. The strong Norwegian kroner and high

53





---



##### 



salary and cost levels in Norway contributed
significantly to a weakened competitive position
for Norwegian production units. This, in
combination with low aluminium prices, resulted
in weak results for these Norwegian units.

Agri achieved an EBITDA in 2002 of NOK 3,945 million
compared to NOK 4,402 million in 2001. The
decline was caused by the appreciation of the
NOK relative to the USD and EUR. EBITDA
expressed in USD remained unchanged at
approximately USD 500 million. Agri maintained
its level of earnings from the previous year,
despite a weak fertilizer market during most of
the year. Market shares increased in Europe and
sales volumes outside of Europe increased to a
level greater than sales in the European market.

During 2002, KFK divested substantial parts of
its operations. In addition, Hydro signed an
agreement for the sale of the Flexible Packaging
unit to Alcan Inc., which the EU Commission
announced it would not oppose in late February
2003. In total, Hydro has entered into contracts
for divestments of over NOK 6 billion out of its
total target for 2002-2003 of NOK 10 billion.

Earnings from non-consolidated investees
were 33 million in 2002 compared to NOK 566
million in 2001. Currency losses of NOK 460
million in a non-consolidated investee in Brazil
which produces alumina, was expensed in 2002,
compared to NOK 159 million in 2001.

Hydro Energy has outstanding purchase
contracts for electricity that are primarily
intended to secure the power supply for other
operating segments within Hydro. Accordingly,
Energy has corresponding sales contracts with
other units within the Group. Contracts meeting
certain criteria are deemed to be derivative
contracts and are revalued at market value at
the end of each period. At the end of 2002,
exceptionally high electricity prices in Norway
led to unrealized gains on external derivative
contracts and corresponding losses on related
internal sales contracts for Hydro Energy. Hydro
units account for power contracts with Hydro
Energy as ordinary purchase contracts.
Therefore, such contracts are not revalued at
market value at the end of each period.
Elimination of the effects of the market
valuation on internal contracts resulted in a
positive effect on operating result and EBITDA
of NOK 588 million, and was included in the
Group eliminations. There have been no such
significant effects in previous years. The value
of the energy contracts portfolio will fluctuate
in accordance with changes in market prices and
the size and composition of the portfolio at any
given time. Electricity prices have fallen after
yearend, and the value of these contracts has
been reduced.

Net financial income for 2002 was NOK
1,935 million, including a currency gain of NOK
3,262 million. During the year the US dollar
and closely linked currencies such as the
Canadian dollar weakened considerably against
the Norwegian kroner, the EURO and the
Australian dollar, resulting in unrealized
currency gains on loans and currency forwards
but also currency losses on receivables. Hydro
started the year with an extraordinarily high
cash level which was subsequently used for
funding the VAW acquisition early in the year.
As a result, interest income has been lower in
2002 than in the preceding year. Net
interest-bearing debt at the end of 2002 was NOK
34 billion, an increase of NOK 13 billion
compared to 2001. There has been no new issuance
of debt during the year, however, a certain
amount of the debt assumed as part of the VAW
acquisition remained outstanding at year-end.

The provisions for current and deferred
taxes for 2002 amounted to NOK 13,278 million,
approximately 60 percent of income before tax.
This amount is mainly comprised of current
taxes. The equivalent figures for 2001 were NOK
13,750 million and 64 percent. On February
7, 2003, the Norwegian Supreme Court
unanimously decided to accept Norsk Hydros tax
treatment of Group contribution for the year
1993. Hydro will be reimbursed NOK 177 million
in taxes and NOK 148 million in interest which
will be reported in the first quarter 2003
results.

EBITDA and reconciliation to income before taxes and minority interest

Hydros steering model, Value-Based Management,
reflects Hydros focus on cash flow based
indicators, before and after taxes, to measure
performance in Hydros operating segments.
EBITDA, which Hydro defines as income/(loss)
before tax, interest expense, depreciation,
amortization and write-downs is an approximation
of cash flow from operations before tax. EBITDA
is a measure that includes in addition to
operating income, interest income and other
financial income, results from non-consolidated
investees and gains and losses on sales of
activities classified as Other income, net in
the income statement. It excludes depreciation,
write-downs and amortization, as well as
amortization of excess values in
non-consolidated investees. Hydros definition
of EBIT-DA may differ from that of other
companies.


EBITDA should not be construed as an
alternative to operating income and income
before taxes as an indicator of Hydros results
of operations in accordance with generally
accepted accounting principles. Nor is EBITDA an
alternative to cash flow from operating
activities in accordance with generally accepted
accounting principles.

The EBITDA figures by core business area
are presented in the table below, in addition to
the reconciliation from EBITDA to income before
taxes and minority interest.

54





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##### 



|                                                           |  |      |         |      |  |      |         |   |  |  |         |  
|---------------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  |  | ------- | -
|EBITDA NOK million                                         |  | 2002 |         | 2001 |  | 2000
|Hydro Oil and Energy                                       |  |      | 25,340  |      |  |      | 27,604  |   |  |  | 30,641  |  
|Hydro Aluminium                                            |  |      | 4,334   |      |  |      | 2,543   |   |  |  | 5,501   |  
|Hydro Agri                                                 |  |      | 3,945   |      |  |      | 4,402   |   |  |  | 3,553   |  
|Other                                                      |  |      | 2,039   |      |  |      | 3,208   |   |  |  | 6,914   |  
|                                                           |  |      |         |      |  |      |         |   |  |  |         |  
|Total EBITDA                                               |  |      | 35,658  |      |  |      | 37,757  |   |  |  | 46,609  |  
|                                                           |  |      |         |      |  |      |         |   |  |  |         |  
|Depreciation                                               |  |      | (13,912 | )    |  |      | (12,273 | ) |  |  | (12,538 | )
|Restructing write-down                                     |  |      |        |      |  |      | (261    | ) |  |  |        |  
|Amortization of excess value
of non-consolidated investees |  |      | (235    | )    |  |      | (149    | ) |  |  | (25     | )
|Interest expense                                           |  |      | (3,189  | )    |  |      | (3,721  | ) |  |  | (4,045  | )
|Capitalized interest expense                               |  |      | 607     |      |  |      | 685     |   |  |  | 1,029   |  
|Net foreign exchange
gain/(loss)                           |  |      | 3,262   |      |  |      | (416    | ) |  |  | (655    | )
|Other financial items                                      |  |      | (163    | )    |  |      | (157    | ) |  |  | (234    | )
|                                                           |  |      |         |      |  |      |         |   |  |  |         |  
|Income before taxes and
minority interest                  |  |      | 22,028  |      |  |      | 21,465  |   |  |  | 30,141  |  
|                                                           |  |      |         |      |  |      |         |   |  |  |         |  

Another cash flow based indicator used by Hydro
to measure its performance is cash return on
gross investment (CROGI). CROGI is defined as
gross cash flow after taxes, divided by average
gross investment. Gross cash flow is defined
as EBITDA less total tax expense. Gross
investment is defined as total assets
(exclusive of deferred tax assets) plus
accumulated depreciation and amortization, less
all short-term interest free liabilities except
deferred taxes. CROGI in 2002 was 8.5 percent
compared with 9.4 percent in 2001. In order to
measure the underlying performance development,
CROGI is calculated based on midcycle product
prices and currency rates  socalled normalized
prices. In addition restructuring costs and
gains and or losses on divestments, reported as
Other income, net are excluded. Based on
normalized prices, CROGI in 2002 was
approximately 9 percent compared to
approximately 8 percent in 2001. The normalized
prices used are: an oil price of US dollar 18
per barrel, an aluminium price (London Metal
Exchange) of US dollar 1,500 per tonne, a CAN 27
fertilizer price of US dollar 113 per tonne and
a US dollar  Norwegian kroner exchange rate of
8.00.

The following table presents a
reconciliation of total assets to gross
investment for 2002 and 2001:

CROGI Total Hydro

(CROGI TOTAL HYDRO CHART)

Reconciliation of Operating Income to Gross Cash Flow

|                                                                        |  |      |         |      |  |      |         |   |  |  |         |  
|----------------------------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  |  | ------- | -
|NOK million                                                             |  | 2002 |         | 2001 |  | 2000
|Operating Income                                                        |  |      | 19,841  |      |  |      | 21,083  |   |  |  | 28,466  |  
|+ Equity in net income
non-consolidated investees                       |  |      | 33      |      |  |      | 566     |   |  |  | 672     |  
|+ Interest Income (Note 8)                                              |  |      | 1,515   |      |  |      | 2,762   |   |  |  | 1,803   |  
|+ Net loss on
securities (Note 8)                                       |  |      | (269    | )    |  |      | (113    | ) |  |  | (168    | )
|+ Dividends received (Note 8)                                           |  |      | 172     |      |  |      | 198     |   |  |  | 112     |  
|+ Other Income (Note 9)                                                 |  |      | 219     |      |  |      | 578     |   |  |  | 3,161   |  
|+ Depreciation, depletion
and amortization                              |  |      | 13,912  |      |  |      | 12,273  |   |  |  | 12,538  |  
|+ Restructuring
write-down (Note 6)                                     |  |      |        |      |  |      | 261     |   |  |  |        |  
|+ Amortization of excess value
for non-consolidated
investees (Note 13) |  |      | 235     |      |  |      | 149     |   |  |  | 25      |  
|= EBITDA                                                                |  |      | 35,658  |      |  |      | 37,757  |   |  |  | 46,609  |  
|                                                                        |  |      |         |      |  |      |         |   |  |  |         |  
|- Tax expense                                                           |  |      | (13,278 | )    |  |      | (13,750 | ) |  |  | (16,178 | )
|                                                                        |  |      |         |      |  |      |         |   |  |  |         |  
|Gross Cash Flow                                                         |  |      | 22,380  |      |  |      | 24,007  |   |  |  | 30,431  |  
|                                                                        |  |      |         |      |  |      |         |   |  |  |         |  

Reconciliation of Total Assets to Gross Investments

|                                                                                    |  |      |         |      |  |  |         |  
|----------------------------------------------------------------------------------- |  | ---- | ------- | ---- |  |  | ------- | -
|NOK million                                                                         |  | 2002 |         | 2001
|Total Assets                                                                        |  |      | 207,211 |      |  |  | 197,922 |  
|Deferred Tax Assets                                                                 |  |      | (4,110  | )    |  |  | (3,104  | )
|Other Current Liabilities                                                           |  |      | (38,331 | )    |  |  | (32,245 | )
|Accumulated Depreciation PP&E                                                       |  |      | 99,217  |      |  |  | 95,215  |  
|Accumulated Depreciation
Goodwill and Intangible Assets                             |  |      | 2,284   |      |  |  | 2,357   |  
|Accumulated Amortization of
Goodwill and Excess Value in
Non-consolidated Investees |  |      | 406     |      |  |  | 357     |  
|Other                                                                               |  |      | (1,281  | )    |  |  | (1,663  | )
|                                                                                    |  |      |         |      |  |  |         |  
|Gross Investment                                                                    |  |      | 265,396 |      |  |  | 258,839 |  
|                                                                                    |  |      |         |      |  |  |         |  

The development of Hydros result is primarily
effected by price developments of Hydros main
products oil, aluminium and fertilizer in
addition to foreign currency fluctuation of the
most significant currency, the US dollar,
against the Norwegian krone. For an indication
of the sensitivity regarding prices and foreign
currency fluctuation for 2003, refer to the
table below. The sensitivity analysis is based
on 2003 expected production volumes as well as
normalized prices, shown above. The table
illustrates the Income Statements sensitivity
before and after tax.

55





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Indicative income statement sensitivities

|                                   |  |         |        |           |  |        |        |   |  |  |         | 
|---------------------------------- |  | ------- | ------ | --------- |  | ------ | ------ | - |  |  | ------- | 
|NOK million                        |  |         |        |           |  |        |        |   |  |  |         | 
|Price sensitivity                  |  | Pre tax |        | After tax |  | Change
|Oil price sensitivity O&E          |  |         | 1,300  |           |  |        | 350    |   |  |  | 1 USD   | 
|Oil price sensitivity Agri         |  |         | (110   | )         |  |        | (80    | ) |  |  | 1 USD   | 
|                                   |  |         |        |           |  |        |        |   |  |  |         | 
|Oil price sensitivity              |  |         | 1,190  |           |  |        | 270    |   |  |  | 1 USD   | 
|LME price sensitivity
Aluminium    |  |         | 830    |           |  |        | 580    |   |  |  | 100 USD | 
|CAN price sensitivity Agri         |  |         | 500    |           |  |        | 350    |   |  |  | 10 USD  | 
|USD sensitivity *                 
|USD sensitivity O&E                |  |         | 3,000  |           |  |        | 810    |   |  |  | 1 NOK   | 
|USD sensitivity Aluminium          |  |         | 1,650  |           |  |        | 1,160  |   |  |  | 1 NOK   | 
|USD sensitivity Agri               |  |         | 800    |           |  |        | 560    |   |  |  | 1 NOK   | 
|                                   |  |         |        |           |  |        |        |   |  |  |         | 
|USD sensitivity Hydro              |  |         | 5,450  |           |  |        | 2,530  |   |  |  | 1 NOK   | 
|                                   |  |         |        |           |  |        |        |   |  |  |         | 
|USD sensitivity
Financial Items ** |  |         | (2,440 | )         |  |        | (1,340 | ) |  |  | 1 NOK   | 
|                                   |  |         |        |           |  |        |        |   |  |  |         | 
|USD sensitivity NET                |  |         | 3,010  |           |  |        | 1,190  |   |  |  | 1 NOK   | 
|                                   |  |         |        |           |  |        |        |   |  |  |         | 



|*  |  | USD sensitivity estimates assuming
USD/NOK changes, all other currencies fixed
against NOK                                        
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------
|** |  | Excluding cash flow hedges and equity
hedge of total exposure USD 1,275 million
and USD 400 million debt in USD-based
subsidiaries

Hydros Critical Accounting Policies

In December 2001, the SEC issued Financial
Reporting Release No. 60, Cautionary Advice
Regarding Disclosure About Critical Accounting
Policies, referred to as FR 60, suggesting that
companies provide additional disclosure and
commentary on those accounting policies
considered most critical. FR 60 considers an
accounting policy to be critical if it is
important to a companys financial condition and
results and requires significant judgment and
estimates on the part of management and its
application.


Hydros consolidated financial statements
and supplementary information were prepared in
accordance with generally accepted accounting
principles in the US (US GAAP) and in Norway (N
GAAP). Note 1 in the Notes to the consolidated
financial statements describes Hydros
significant accounting policies. Inherent in
many of the accounting policies is the need for
management to make estimates and judgments in
the determination of certain revenues, expenses,
assets, and liabilities. The following
accounting policies represent the more critical
areas that involve a higher degree of judgment
and complexity which, in turn, could materially
impact Hydros financial statements if various
assumptions were changed significantly. Hydros
senior management has discussed estimates
underlying certain of its critical accounting
policies with its independent auditors.

Hydro believes that the following represents its
critical accounting policies as contemplated by
FR 60.

Oil and Gas Exploration Costs

Hydro uses the successful efforts method of
accounting for oil and gas exploration and
development cost. Oil and gas exploration costs,
excluding exploratory well costs, are charged to
expense as incurred. Drilling costs for USD
exploratory wells are capitalized until a
determination can be made as to whether proved
reserves exist. Costs related to acquisition of
exploration rights are allocated to the relevant
geographic areas and are charged to operating
expense if no proved reserves are determined to
exist. If proved reserves are determined to
exist, the acquisition costs, and cost of
exploration wells are amortized to become part
of the cost of oil and gas produced.
Management interprets geological
information in order to make a judgment on the
existence of proved reserves.


A determination that proved reserves do not exist can result in
a reduction to long-term assets and an increase
in operating costs. The amount of the impact
depends on the level of current drilling
activity and the amount of exploration costs
currently capitalized. During 2002, exploration
activity (expenditures) totalled NOK 2,495
million, of which NOK 430 million was
capitalized during the year. Including
capitalized exploration costs and acquisition
costs from prior periods, NOK 3,558 million was
expensed during the year. At the end of 2002,
NOK 1,398 million of such costs were capitalized
pending the evaluation of drilling results and
planned development, of which NOK 82 million
relates to acquisition costs.

Proved Oil and Gas Reserves

Proved reserves are the estimated quantities of
crude oil, natural gas, and natural gas liquids
which geological and engineering data
demonstrate with reasonable certainty to be
recoverable in future years from known
reservoirs under existing economic and operating
conditions. Reserves are revised as oil and gas
are produced and additional data become
available. Future changes in proved oil and gas
reserves can materially impact
unit-of-production rates for depreciation,
depletion, amortization, decommissioning and
removal provisions as well as for impairment
testing for upstream assets.


Downward revisions in reserve estimates or
decline in oil price can result in higher
depreciation and depletion expense in future
periods. If the changes were significant enough
that the estimated future cash flows from the
remaining reserves were insufficient to recover
the unamortized capitalized costs, a write-down
of the assets book value would result.
Conversely, upward revisions in reserve
estimates can result in lower future
depreciation, depletion and amortization.
Depreciation, depletion and amortization related
to oil and gas producing activities in 2002,
2001 and 2000 were NOK 8,553 million, NOK 7,423
million and NOK 7,596 million, respectively.

56





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Commodity Instruments and Risk
Management Activities
Hydros revenues, operating results, financial
condition and ability to borrow funds or obtain
additional capital depend substantially on
prevailing commodity prices for oil, LME, and
the US dollar exchange rate. The historical
volatility in these commodity prices materially
affects Hydros financial condition, liquidity,
ability to obtain financing, and operating
results. Depressed prices can have a negative
impact on Hydros financial results. The
majority of Hydros oil and aluminium production
is sold at market prices. To mitigate unwanted
price exposure and to protect against
undesirable price developments, Hydro utilizes
physical and financial commodity instruments on a
limited bases. Entering into such positions
requires management to make judgements about
market conditions and future price expectations.
It is important to note that use of such
instruments may prohibit Hydro from being able
to realize the full benefit of a market
improvement. To further understand Hydros
sensitivity to these factors please refer above
to the Indicative income statement
sensitivities table.

Asset Retirement Obligations
Hydro has adopted as of January 1, 2003 SFAS
143, Accounting for Asset Retirement
Obligations. Among other things, SFAS 143
requires significant changes in the accounting
treatment for asset retirement obligations such
as abandonment of oil and gas production
platforms, facilities and pipelines.
Specifically, the fair value of a liability for
an asset retirement obligation is required to be
recorded when incurred. Furthermore, the
liability is to be accreted for the change in
its present value each reporting period.
Determination of the obligation requires
management to make assumptions about the future
costs associated with removal, including which
assets will require removal, the timing and the
method of removal. Moreover, determination of
the fair value of the liability includes
assessing the appropriate discount rate to use
and the useful life of the related long-lived
asset based on comparable market terms. Asset
retirement obligations have the most significant
impact on the property plant and equipment and
long-term liabilities of Oil and Energy.
Revisions of estimates for asset retirement
obligations will influence asset value and
future operating expenses.

Impairment of Long-Lived
Assets
Hydro adopted as of January 1, 2002 SFAS 144,
Accounting for Impairment or Disposal of
Long-Lived Assets. Under SFAS 144, management
is required to assess the conditions that could
cause an asset to become impaired and require a
write-down upon determination of impairment for
long-lived assets held by the Company. These
conditions include whether a significant
decrease in the fair value of the asset(s) has
occurred, changes in the Companys business plan
for the asset(s) have been made,
or whether a significant adverse change in the
local business and legal climate has arisen. The
amount of such an impairment charge is based on
the estimated fair value of the asset compared
to its carrying value. Fair value measurements
include assumptions made regarding future cash
flows associated with the asset under
evaluation.

Impairment charges result in a decrease to
property, plant and equipment on the balance
sheet and an increase in operating costs.

Contingencies and Environmental
Liabilities

Contingencies and environmental liabilities are
recorded when such items are asserted, or are
probable of assertion, and the amount of
potential loss can be reasonably estimated.
Evaluation of contingencies requires management
to make assumptions about the probability that
contingencies will be realized and the amount or
range of amounts that may ultimately be
incurred. Environmental
liabilities require interpretation of scientific
and legal data, in addition to assumptions about
probability and future costs. Changes in these
assumptions can affect the timing and amounts of
recorded liabilities and costs.

Business Combinations

In accounting for the acquisition of VAW
Aluminium AG and Technal, a French building
systems company, Hydro was required to determine
the fair value of assets, liabilities, and
intangible assets at the time of acquisition.
Purchase accounting is subject to a number of
assumptions including useful lives of assets,
discount rates in different environments,
replacement costs and timing of certain future
cash flows.

The purchase price in the VAW
acquisition was EUR 1,911 million (NOK 14.9
million). See Note 2 in Notes to the
consolidated financial statements for a
specification of the allocation of this purchase
price to assets and liabilities acquired. The
purchase price allocation is preliminary and
will be finalized during the first quarter of
2003. Any revisions in the amount allocated to
the assets and liabilities acquired will result
in adjustments to goodwill.

Goodwill and Intangible
Assets
Under SFAS 142, Goodwill and Other Intangible
Assets, goodwill and certain intangible assets are
no longer systematically amortized, but reviewed at
least annually for impairment.

The largest portion of goodwill was recorded in the North America sector of
the Extrusion and Automotive subsegment. Management
assessed the fair value of the sectors goodwill to
the carrying value of the sectors net assets.
Assumptions related to certain cash flow forecasts
and the discount rate was made reflecting the
sectors industry. Total goodwill evaluated for
impairment during 2002 was approximately NOK 1,200
million. An impairment of NOK 52 million was recorded
related to divestment of certain assets.

57





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Intangible assets determined to have indefinite
useful lives are not amortized until a finite
life can be estimated. Such assessment requires
management to look at the legal, regulatory,
competitive, and contractual factors to
determine whether the useful life of the asset
acquired was considered to be indefinite. In
relation to the acquisition of Technal,
management assessed the trademarks acquired
based on such factors and determined that they
had finite useful lives. Goodwill and intangible
assets are included in prepaid pension,
investments, and other non-current assets.

Income Taxes

Hydro calculates deferred income tax expense
based on the difference between the tax assets
carrying value for financial reporting purposes
and their respective tax basis that are
considered temporary in nature. This computation
requires managements interpretation of complex
tax laws and regulations in many tax
jurisdictions where Hydro operates. Valuation of
deferred tax assets is dependent on managements
assessment of future recoverability of the
deferred benefit. Managements judgement may
change and consequently such may effect the
results for each reporting period.

Employee Retirement Plans

Hydros employee retirement plans consist
primarily of defined benefit pension plans.
Measurement of obligations under the plans
requires a number of assumptions and estimates
to be made by management. These include future
salary levels, inflation, discount rates, years
of future service, and rate of return on plan
assets. Changes in these assumptions can
influence the funded status of the plan as well
as the net periodic pension expense.

Business Segment Information

Hydros operating segments consist of the three
core business areas Oil and Energy, Aluminium
and Agri. Each business area is divided into
sub-segments representing different parts of the
value chain follows:

|                |  |                                                                                                                         
|--------------- |  | ------------------------------------------------------------------------------------------------------------------------
|Oil and Energy: |  | Exploration
and Production Energy and Oil Marketing                                                                     
|                |  |                                                                                                                         
|Aluminium:      |  | Metals (Primary Metals and Metal
Products) Rolled Products Extrusion and
Automotive (including the North America sector)
|                |  |                                                                                                                         
|Agri:           |  | Agri (Fertilizer and Industrial Gases and
Chemicals)                                                                    

In addition, Hydro is in the petrochemicals
business and is engaged in other activities. A
discussion of the operating results for each of
the sub-segments within Hydros core business
areas, as well as for Other Activities, follows.

HYDRO OIL AND ENERGY

EBITDA in NOK billion

(EBITDA IN NOK BILLION)

|                    |  |      |         |      |  |      |         |   |  |  |         |  
|------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  |  | ------- | -
|NOK million         |  | 2002 |         | 2001 |  | 2000
|Operating Revenues  |  |      | 51,741  |      |  |      | 52,016  |   |  |  | 55,123  |  
|Operating Income    |  |      | 15,947  |      |  |      | 19,178  |   |  |  | 21,804  |  
|EBITDA              |  |      | 25,340  |      |  |      | 27,604  |   |  |  | 30,641  |  
|Gross Investment    |  |      | 140,119 |      |  |      | 128,705 |   |  |  | 120,608 |  
|CROGI               |  |      | 11.9    | %    |  |      | 13.0    | % |  |  | 14.4    | %
|Number of employees |  |      | 4,039   |      |  |      | 3,891   |   |  |  | 3,912   |  
|                    |  |      |         |      |  |      |         |   |  |  |         |  

Hydro Oil and Energy consists of the
sub-segments Exploration and Production and
Energy and Oil Marketing. Exploration and
Production includes Hydros oil and gas
exploration activities, field development
activities and operation of production and
transportation facilities. Energy and Oil
Marketing includes Hydros commercial operations
in the oil, natural gas and power sectors, the
operation of the Hydros power stations as well
as marketing and sale of refined petroleum
products (gasoline, diesel and heating oil) to
retail customers. Energy and Oil Marketing buys
and/or sells almost all oil production from
Exploration and Production, and sells the equity
gas production on a commission basis. For this
reason, the activities of Energy and Oil
Marketing (excluding power production), is
predominantly a margin dominated business.

Summary of key developments in
2002

Hydro Oil and Energys operating income in 2002
was NOK 15,947 million, a decrease of 17
percent compared to 2001. 2002 EBITDA of NOK
25,340 million was down 8 percent, compared to
the prior year. Operating income showed a
higher decrease than EBITDA because higher
total depreciation costs in 2002, due to higher
oil and gas production, only affected operating
income.

The most significant developments which
influenced Hydro Oil and Energys operating
results in 2002 were as follow:



| |  | Hydros position in core areas on the
Norwegian Continental Shelf (NCS) was
strengthened through the acquisition from
the Norwegian state (the States Direct
Financial Interest or SDFI) of increased
interests in Hydro-operated Oseberg, Tune
and Grane fields, which added 187 million
barrels of oil equivalent (boe)
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|  |  | of reserves, and increased the average annual
production in 2002 by 24,000 boe per day.                                                                                                                                                                                                                                                                                                                                                                                           
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Oil and gas production increased by 14
percent to 480,000 boe per day (boed)
from both fields on the NCS and
internationally. However, the effect of
the increased production on operating
income was to a large extent offset by
lower oil prices, stated in Norwegian
kroner, as a result of the appreciation
of the Norwegian kroner against the US
dollar.                                                                                                                    
| 
| |  | Exploration activity in 2002 reached a
record level of NOK 2,495 million, of which
approximately 74 percent was dedicated to
exploration activity outside the NCS. Total
exploration costs of NOK 3,558 million were
expensed in 2002, mainly due to
disappointing drilling results. This
included the costs of exploration wells and
acquisition cost for exploration rights
capitalized in previous years, amounting to
NOK 1,492 million.                                      
| 
| |  | Including purchase and sale of reserves
and the effect of production sharing
agreements (PSA) on certain international
fields, Hydros reserve replacement ratio
was 187 percent for 2002. The reserve
replacement ratio was 98 percent excluding
purchase and sales of reserves and effects
of PSA.                                                                                                                                                                              
| 
| |  | Operating income from Energy and Oil
Marketing activities increased by 17
percent to NOK 1,592 million, of which
approximately NOK 220 million represented
an unrealized gain resulting from marked to
market valuation of the electricity
contracts portfolio due to the unusually
high Nordic electricity prices at the end
of 2002. Electricity prices have
subsequently declined and it is expected
that the unrealized gain will be partly
reversed over the coming quarters.

The change in 2002 EBITDA compared to the prior
year and the most important items affecting the
change follow:

|                       |  |  |        |   |  |  |        |  
|---------------------- |  |  | ------ | - |  |  | ------ | -
|EBITDA for 2002        |  |  |        |   |  |  | 25,340 |  
|EBITDA for 2001        |  |  |        |   |  |  | 27,604 |  
|                       |  |  |        |   |  |  |        |  
|Change in EBITDA       |  |  |        |   |  |  | (2,264 | )
|                       |  |  |        |   |  |  |        |  
|Prices and currency    |  |  |        |   |  |  |        |  
|- oil                  |  |  | 310    |   |  |  |        |  
|- gas                  |  |  | (1,495 | ) |  |  |        |  
|- currency             |  |  | (3,135 | ) |  |  |        |  
|- putoptions           |  |  | (60    | ) |  |  |        |  
|                       |  |  |        |   |  |  |        |  
|                       |  |  |        |   |  |  | (4,380 | )
|Volume                 |  |  |        |   |  |  | 4,660  |  
|Fixed costs            |  |  |        |   |  |  | 185    |  
|Production costs       |  |  |        |   |  |  | (330   | )
|Exploration costs      |  |  |        |   |  |  | (2,160 | )
|Other income           |  |  |        |   |  |  | (102   | )
|Other                  |  |  |        |   |  |  | (137   | )
|                       |  |  |        |   |  |  |        |  
|Total change in EBITDA |  |  |        |   |  |  | (2,264 | )
|                       |  |  |        |   |  |  |        |  

EXPLORATION AND PRODUCTION

|                    |  |      |         |      |  |      |         |   |  |  |         |  
|------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  |  | ------- | -
|NOK million         |  | 2002 |         | 2001 |  | 2000
|Operating Revenues  |  |      | 34,009  |      |  |      | 33,282  |   |  |  | 35,494  |  
|Operating Income    |  |      | 14,329  |      |  |      | 17,813  |   |  |  | 20,108  |  
|EBITDA              |  |      | 23,332  |      |  |      | 25,768  |   |  |  | 28,656  |  
|Gross Investment    |  |      | 128,486 |      |  |      | 118,563 |   |  |  | 111,021 |  
|CROGI               |  |      | 11.8    | %    |  |      | 13.1    | % |  |  | 14.5    | %
|Number of employees |  |      | 2,838   |      |  |      | 2,724   |   |  |  | 2,628   |  
|                    |  |      |         |      |  |      |         |   |  |  |         |  

The change in 2002 EBITDA compared to the prior year
and the most important items affecting the change follow:

|                       |  |  |        |  
|---------------------- |  |  | ------ | -
|EBITDA for 2002        |  |  | 23,332 |  
|EBITDA for 2001        |  |  | 25,768 |  
|                       |  |  |        |  
|Change in EBITDA       |  |  | (2,436 | )
|                       |  |  |        |  
|Prices and currency    |  |  | (4,380 | )
|Volume                 |  |  | 4,595  |  
|Production costs       |  |  | (330   | )
|Exploration costs      |  |  | (2,160 | )
|Other Income           |  |  | 77     |  
|Other                  |  |  | (238   | )
|                       |  |  |        |  
|Total change in EBITDA |  |  | (2,436 | )
|                       |  |  |        |  

Revenues and market
conditions

Exploration and Productions operating revenues
in 2002 were NOK 34,009 million, an increase of
approximately 2 percent from the previous year.
The main reason for the increase was the higher
level of production of oil and gas in 2002, up
approximately 14 percent compared to 2001. The
effect of the increased production on 2002
operating revenues and income was offset to a
large extent by the lower oil prices, stated in
Norwegian kroner, as a result of the
appreciation of the Norwegian kroner against the
US dollar. In addition realized gas prices were
lower in 2002 compared to 2001. The average
realized oil price in Norwegian kroner was NOK
194 (USD 24.70) per barrel in 2002 compared with
NOK 217 (USD 24.20) in 2001. Hydro realized an
average gas price in 2002 of NOK 0.95 per
standard cubic meter compared to the average
realized gas price in 2001 of NOK 1.21 per
standard cubic meter. The decrease reflects the
decline in oil product prices (gas prices under
long-term contracts primarily follow oil product
price developments with a time lag) and
strengthening of Norwegian kroner against Euro.

Exploration and Productions average total
production of oil and gas in 2002 was 480,000
boed compared to 421,000 boed in 2001. This
includes production limits set by the Norwegian
government of an average of 7,500 boed in the
first half of 2002. Oil production accounted for
77 percent of the total production in 2002,
approximately the same percentage as in 2001.
Gas production increased to a total of 6.4
billion standard cubic meters in
2002 compared to 5.4 billion standard cubic meters in

59





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2001. Oil and gas production reached its peak in
fourth quarter in 2002, with an average
production of 540,000 boed.

Hydro experienced
strong production growth from both Norwegian and
international fields. Production from Norwegian
fields increased partly as a result of the
purchase of SDFI assets, which increased its
interests in the Oseberg fields, and partly due
to increased production from the Snorre B and
Åsgard fields. Outside the NCS increased
production came from the Girassol field in
Angola (production start in December 2001) and
the Terra Nova field in Canada (production start
in January 2002). International production
accounted for 10 percent of the total oil and
gas production, up from 4 percent in 2001.
Maintenance stops in 2002, primarily in the
third quarter, caused production losses (or
delayed production) of approximately 9,000 boed,
compared to approximately 11,000 boed in 2001.

As Energy and Oil Marketing purchases and sells
Hydros Norwegian equity production of oil,
about 67 percent of Exploration & Productions
revenues in 2002 were from internal sales.
Equity production of gas and international oil
production are sold by Energy and Oil Marketing
on behalf of Exploration and Production and
account for the majority of the external
revenues.

Exploration and Production also
derives revenues from ownership interests in the
oil and gas transportation systems on the NCS.
These systems include pipelines and processing
plants. Hydros interests in fields on the NCS
and its interests in the transportation systems
have been fairly closely aligned, such that
tariff revenues and costs largely offset one
another. In 2002, Hydro incurred tariff costs
that exceeded tariff revenues, primarily
reflecting its higher interest in the Oseberg
fields than in the transportation systems used
by these fields.

Operating costs

Operating costs consist of exploration costs,
production costs, net transportation costs,
depreciation and abandonment costs and other
income/cost. In 2002, Hydros total operating
costs was NOK 100 per boe, an increase from the
2001 level mainly due to increased exploration
costs. The 2002 operating costs (excluding
exploration costs) of NOK 79 per boe were in
line with the 2001 operating costs (excluding
exploration costs) of NOK 81 per boe.

Hydros total exploration costs and cost of
appraisal of discoveries amounted to NOK 3,558
million in 2002, compared to NOK 1,400 million
in 2001. Costs related to exploration activity
for 2002 were NOK 2,495 million, compared to NOK
2,018 million in 2001. In 2002, a major part (74
percent) of Hydros exploration activity was
dedicated to areas outside the NCS, mainly in
Angola, Canada, Iran and the Gulf of Mexico.

Exploration activity includes the costs of
exploration wells, geological studies, field
development studies, the purchase of seismic data and studies,
administration of exploration licenses, area
fees and, in certain international areas,
acquisition costs of exploration rights (fees
paid for access to prospective exploration
areas). Exploration activity is accounted for
according to the successful efforts method.
Drilling costs for exploration wells are
capitalized pending the determination of the
existence of proved reserves. If reserves are
not found, the drilling costs are charged to the
operating expense. Costs relating to acquired
exploration rights are allocated to the relevant
areas and charged to operating expense upon
determination that proved reserves will not be
found in the area. All other exploration
activity is expensed as incurred. Well costs and
acquisition costs of exploration rights, that
have been capitalized in previous years, are
expensed if future development is not considered
commercial.

Of a total of 31 exploration wells
that were completed in 2002, 12 proved
successful as of year-end 2002, and 2 remained under evaluation.
Discoveries were made in Angola, Libya, Canada
and Norway, but the overall result from 2002
exploration activity was not satisfactory. Of
Hydros total exploration activities in 2002,
NOK 2,066 million was expensed primarily due to
unsuccessful result mainly in Angola, Gulf of
Mexico, Trinidad and Norway.

In 2002, total exploration costs were
higher than the cost relating to exploration
activity due to expensing of previously
capitalized costs of exploration wells and
acquisition costs in the amount of NOK 1,492
million. This included acquisition costs paid
for accessing prospective exploration areas as
Block 34 in Angola and Gulf of Mexico that were
capitalized in 2001. As a result of
disappointing exploration wells mainly in Angola
and Gulf of Mexico, such costs totaling NOK
1,118 million, together with the well costs,
were expensed during 2002. At the end of 2002,
remaining capitalized acquisition costs of
exploration rights amounted to NOK 82 million.

Hydros average production cost, defined as the
cost of operating fields, including CO2
emissions tax, insurance, gas purchased for
injection, and lease costs for production
installations (but excluding transportation
tariffs, operating cost transportation systems
and depreciation), was NOK 23 per boe in 2002,
compared to NOK 24 per boe in 2001. The cost of
operating fields includes offshore operational
costs, maintenance, onshore technical support,
logistics and administrative support. All
operations are under extensive cost control, and
Hydros operated fields are benchmarked against
other operators. This control and benchmarking
enabled 2002 production costs per boe to remain
at approximately the same level as in the
previous year despite an average increase in
wages in the Norwegian industry of approximately
5 percent in 2002. The increased production
efficiency led to higher production and more
effective operations, and thus lower costs per
boe.

Total depreciation cost increased in 2002
as a result of higher production levels.
Depreciation, including accruals

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for abandonment and well closure costs and
write-downs (but excluding depreciation on
transportation systems), averaged NOK 46 per boe
in 2002, the same level as in 2001. The 2002
depreciation cost figure included a write-down
on the Vale satellite totaling NOK 174 million.
Depreciation and accruals for abandonment and
well closure are accounted for under the unit of
production method under which fields are
depreciated over the production profile of the
proved developed reserves. Costs capitalized for
depreciation include expenditures for platform
and sub-sea installations, productions wells,
inter-field pipelines, capitalized interest and
capitalized exploration. The complexity of
developing fields in deep water requires
considerable expenditures that generally lead to
relatively high depreciation costs per boe.
Depreciation makes up a larger part of Hydros
total operating costs per boe than production
costs. Capital expenditures are subject to
extensive cost control measures in order to
reduce charges over the life of the fields.
Efforts are also aimed at improving recovery and
increasing reserves, which translate into lower
operating costs per boe.

Net transportation
costs include operating costs for transportation
systems, depreciation on transportation systems
(on a linear basis according to the license
period), tariff revenues and tariff costs. Net
transportation costs were NOK 9 per boe in 2002,
the same level as in 2001, but are expected to
increase mainly as a result of higher ownership
interests in fields than in the transportation
system used by these fields. The establishment,
effective as of January 1, 2003, of Gassled, the
new gas transportation joint venture on the NCS,
is not expected to substantially change Hydros
overall net transportation costs.

Operating income and EBITDA

Exploration and Productions operating income in
2002 was NOK 14,329 million, down NOK 3,484
million (20 percent) from the prior year.
Exploration and Productions EBITDA in 2002 was
NOK 23,332 million, down NOK 2,436 million (9
percent) from the prior year. The main
contributor to the decrease in operating income
and EBITDA was the high exploration cost
expensed in 2002. The effect of lower oil and
gas prices in NOK was offset by higher oil and
gas production.

Outlook

Hydro will continue to focus its exploration
and production strategy for the coming years on
growing Hydros exploration and production
activities, balancing the portfolio and
continuing to focus on cost improvements to
improve profitability.

Hydros efforts to expand its exploration
activities and reserve base internationally led
to an extensive drilling program in 2002 that
will continue in 2003, but in accordance with
the original plan at a lower activity level, in
accordance with the original plan, than in 2002.
Hydros total exploration activity in 2003 is estimated
at NOK 1.9 billion, of which approximately 75
percent will be allocated to international
activities. In 2003, Hydro anticipates that the
major part of its international exploration
activity will be allocated to Angola, Iran,
Canada and the Gulf of Mexico. Other areas of
activity include Libya and Russia. On
completion of the planned drilling program,
Hydro will perform an evaluation of its
international exploration entry strategy before
entering into new commitments. Although 2003
will see a low exploration level on the NCS,
Hydro still believes that there are interesting
remaining exploration potential on the NCS.

Hydros objective is to maintain its position as
an efficient operator on the NCS and to maintain
its operating cost (excluding exploration
activities) at approximately the same level as
2002.

As announced in January 2003, Hydro is
making adjustments in the organization as a
result of fewer prospective development tasks
and the transfer of operatorship of the fields
in the Tampen area of the NCS. The total reduction in staffing
is estimated to be around 300 consultants and
permanent employees. Estimated reduction in
staffing is in addition to the 535 employees
that were transferred to Statoil as part of the
transfer of operatorship. Costs associated with
these efforts will be included in the operating
results for 2003 while cost savings are expected
to take effect from 2004.

Hydro expects its oil
and gas production to increase by approximately
8 percent as an annual average during the period
2001-2006 based on its current portfolio. In
2002, Hydros total production grew by 14
percent. In 2003, the total estimated production
is expected to be approximately 510,000 boed, an
increase of 6 percent.
Contributing to the increased production is the
expected start-up of production from the Grane
field as well as the full effect of the
increased interest in the Oseberg fields.

A main focus for Hydro in 2003 is to prepare for
the development of the Ormen Lange gas field on the
NCS. This is the largest undeveloped gas field on the
NCS, at a water depth of 1,000 meters. The Plan for
Development and Operation (PDO) is planned to be
submitted to the authorities for approval in the
fourth quarter of 2003 together with the Plan for
Installation and Operation of the export pipeline
system to the UK. Hydro will be the operator for the
development of the field. Production is scheduled to
begin in 2007. Hydro holds an ownership interest in
the field of approximately 18 percent.

The International Energy Agencys (IEA) demand forecast
for petroleum products in 2003 is 78.0 million
barrels per day, an increase of 1.1 million barrels
per day from 2002. The main reason for the increased
demand in 2003 is the expected recovery of the global
economy. IEA expects an increase in non-OPEC supply
of 1.3 million barrels per day. This indicates that
there can be no increase in OPEC production if prices
are to be kept stable at a high level.

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It is expected that the global oil market in
2003 will continue to be heavily influenced by
the OPEC cartel and the development in the world
economy. In addition, the market developments
are subject to considerable uncertainty given a
possible war in Iraq and the current political
unrest in Venezuela. The effect of a war in Iraq
on the global oil market is largely dependent on
the damage such conflict might inflict on oil
installations in the area. OPEC is capable of
replacing Iraqi supply to the market, but if the
conflict were to escalate to involve the
countries surrounding Iraq, a reduction of
global crude oil supply is possible. For Hydro,
war activities in Iraq may also mean the
postponement of planned drilling activity on the
Hydro-operated Anaran Block in Iran, as the
field is close to the border of Iraq. In
Venezuela, the third-largest crude oil producer
in OPEC, political disturbances are expected to
last well into 2003.

It is expected that market
management by OPEC, together with political
tension in Iraq and Venezuela to keep the
forward Brent Blend market for the first quarter
of 2003 at levels well above the average price
for 2002. The forward market is currently close
to the average price for 2002 for the second
half of 2003, as the market expects reduced
world political tension through the year.

ENERGY AND OIL MARKETING

|                    |  |      |        |      |  |      |        |   |  |  |        |  
|------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  |  | ------ | -
|NOK million         |  | 2002 |        | 2001 |  | 2000
|Operating Revenues  |  |      | 39,780 |      |  |      | 43,959 |   |  |  | 45,500 |  
|Operating Income    |  |      | 1,592  |      |  |      | 1,365  |   |  |  | 1,669  |  
|EBITDA              |  |      | 1,982  |      |  |      | 1,836  |   |  |  | 1,956  |  
|Gross Investment    |  |      | 11,580 |      |  |      | 10,184 |   |  |  | 9,633  |  
|CROGI               |  |      | 12.3   | %    |  |      | 12.2   | % |  |  | 13.2   | %
|Number of employees |  |      | 667    |      |  |      | 678    |   |  |  | 608    |  
|                    |  |      |        |      |  |      |        |   |  |  |        |  

The change in 2002 EBITDA compared to the prior year
and the most important items affecting the change follow:

|                           |  |  |       |  
|-------------------------- |  |  | ----- | -
|EBITDA for 2002            |  |  | 1,982 |  
|EBITDA for 2001            |  |  | 1,836 |  
|                           |  |  |       |  
|Change in EBITDA           |  |  | 146   |  
|                           |  |  |       |  
|Margin, including currency |  |  | (25   | )
|Volume                     |  |  | 65    |  
|Fixed costs                |  |  | 185   |  
|Other
income1)             |  |  | (179  | )
|Other                      |  |  | 100   |  
|                           |  |  |       |  
|Total change in EBITDA     |  |  | 146   |  
|                           |  |  |       |  

|1) |  | Gain on sale of electricity grid assets in 2001.
|-- |  | ------------------------------------------------

Operating Revenues and Market Conditions

Energy and Oil Marketing includes Hydros
commercial operations in the oil, natural gas
and power sectors. Except for the operation of
Hydros power stations, the activities of Energy
and Oil Marketing are predominantly margin-based
sales and trading activities.

Energy and Oil
Marketings operating revenues in 2002 were NOK
39,780 million, a decrease of 10 percent
compared to 2001. Revenues from oil trading and
refinery activities and oil marketing activities
declined primarily due to a reduction in refined
product prices, while revenues from gas sourcing
and marketing activities increased due to
increased gas trading volume. Revenues from
power sourcing and marketing activities declined
due to the unusual situation in the Nordic electricity
market, as described in further detail below
under the caption Operating income and EBITDA.

In 2002, internal sales to other business areas
within Hydro amounted to NOK 3,985 million,
including internal sales to Hydro Agri and Hydro
Aluminiums Metals sub-segments of NOK 1,616
million and NOK 1,532 million respectively.
Internal sales in 2001 were NOK 4,509 million.
All internal sales are at market prices.

Hydros electricity production was
slightly higher in 2002 than the previous year
(10.3 TWh in 2002 compared to 9.8 TWh in
2001).

The oil marketing activities include
marketing and sale of refined petroleum products
(gasoline, diesel and heating oil) to retail
customers in Scandinavia and the Baltic
countries. Hydro owns 100 percent of the
operating unit in Sweden and 50 percent of Hydro
Texaco, an oil marketing company with retail
outlets in Norway, Denmark and the Baltic
countries. Because Hydro Texaco is partly owned,
its results are not reflected in Energy and Oil
Marketings operating revenues, operating costs
or operating income but the net results from
this activity are included in EBITDA.

Operating costs

Energy and Oil Marketings operating costs in
2002 were 10 percent lower than in the prior
year. The primary components of Energy and Oil
Marketings operating costs are purchase costs
of crude oil, natural gas and electricity.
Similar to operating revenues, the operating
cost level is largely a function of volume
traded and the level of prevailing market
prices for these commodities. The decline in
operating costs in 2002 reflected the unusual
situation in the Nordic electricity market
experienced at the end of 2002, described in
further detail under the caption Operating
income and EBITDA.

Other important elements in operating costs
include refining costs, power plant operating
costs and fixed costs. Refining costs per
barrel, comprised of both fixed and variable
processing costs, decreased from NOK 13.0 in 2001
to NOK 11.4 in 2002.

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Power plant operating costs of NOK 610 million
in 2002 remained virtually unchanged compared to
the prior year.

Energys fixed costs in 2002
increased by NOK 88 million compared to the
prior year, primarily as a result of planned
organizational development to better position
Hydro to capture business opportunities in the
changing, increasingly liberalized European gas
market.

Operating income and EBITDA

Energy and Oil Marketings operating income in
2002 was NOK 1,592 million, an increase of 17
percent compared to the prior year. EBITDA for
Energy and Oil Marketing was NOK 1,982 million
in 2002 compared to NOK 1,836 million in 2001,
an increase of 8 percent. EBITDA for 2001
included a NOK 179 million gain on the sale of
electricity grid assets.

Operating income from
the power sourcing and marketing activities was
NOK 1,185 million in 2002, an increase of
approximately 48 percent compared to the
previous year. The increase to a large extent
reflects the substantial net increase in the
fair value of the derivative electricity
contracts portfolio at year-end due to the
unusually high prices in the Nordic electricity
market as a result of very low reservoir levels
resulting from exceptionally low precipitation
and increased consumption due to cold weather.
Additionally, the increase was contributed by
somewhat higher production compared to prior
year. As described above, most of Energy and Oil
Marketings activities are margin-based sales
and trading activities except for the income
from the operation of Hydros power stations.
This explains the power sourcing and marketing
businesss relatively large share of operating
income relative to its contribution to operating
revenues.

Energy is responsible for securing
electricity in the market for Hydros own
consumption, fulfilling delivery commitments to
external parties and reducing the risk of price
fluctuations in the electricity portfolio. This
is accomplished by managing Hydros own
production and entering into contracts in the
electricity markets. As noted above, Nordic
electricity prices were unusually high towards
the end of 2002. Average spot prices for 2002
increased to 20.1 øre per kWh compared to 18.7
øre per kWh in 2001. Spot prices increased
strongly during the last quarter of 2002 and
ended the year at 62.6 øre per kWh. The forward
prices for 2003 were also high at year end 2002.
To compensate for this situation, and the
consequent expected reduction in Hydros own
production of electricity in 2003, Hydro
purchased electricity contracts in the
derivative market for deliveries in 2003.
Contracts meeting certain criteria are deemed to
be derivative contracts and are revalued at the
end of each accounting period. Operating income
for 2002 includes a net unrealized gain of
approximately NOK 220 million relating to such
contracts. Spot and forward electricity prices
have fallen in the early part of 2003 and as a
result, Hydro expects that the net unrealized gain relating to these
contracts will be partly reversed over the
coming quarters.

Operating income for the oil trading and
refining activities was NOK 388 million in 2002,
a decline of approximately 32 percent from the
previous year. Operating income derived from
refining operations was NOK 120 million in 2002,
a decline of NOK 107 million (approximately 47
percent) compared to 2001. Average refining
margins for 2002 were US dollar 2.21 per barrel,
approximately 41 percent lower than in 2001 as
result of lower global demand for refined
products in 2002. The planned 6-week maintenance
shutdown of the Scanraff refinery further
depressed operating income. Operating income in
2002 included inventory gains of approximately
NOK 64 million, reflecting a positive impact of
NOK 163 million due to increase in crude oil
prices and a negative impact of NOK 99 million
due to appreciation of the Norwegian kroner
against the US dollar.

Other oil trading and
refining activities, consisting of crude oil
trading, gas liquids trading and shipping, generated operating
income in 2002 of NOK 261 million, a reduction
of NOK 42 million (approximately 14 percent)
compared to 2001. While income from crude oil
trading in 2002 increased by NOK 88 million
compared to 2001, results from shipping
activities decreased by NOK 109 million due to a
weak shipping market as result of high shipping
capacity.

Operating income from the gas sourcing
and marketing activities decreased to NOK 81
million in 2002. The decrease primarily resulted
from costs related to the planned organizational
developments to capture business opportunities
in the changing European gas market. Operating
results reflected the limited arbitrage
opportunities between the UK and European
continental gas markets in increasingly
integrated European gas markets. An unplanned
4-week shutdown of the gas pipeline
Interconnector between Great Britain and
Belgium in the third quarter of 2002 also
negatively affected operating income.

Operating
income for the oil marketing activities
increased to NOK 68 million in 2002 from a loss
of NOK 32 million in 2001. The increase reflects
improved margins mainly due to lower inventory
losses. In 2002 inventory gains amounted to NOK
46 million, compared to a NOK 55 million loss in
2001.

Hydros share of net income, included in
Energy and Oil Marketings 2002 EBITDA, from
Hydro Texaco was NOK 117 million, up NOK 102
million from the prior year. The main
contributor to the improved result from Hydro
Texaco was the improved margins, including
inventory gains of NOK 45 million, compared to
inventory losses of NOK 117 million during 2001.

63





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Outlook

Reservoir levels were far below average at
year-end 2002, both for Hydro-owned power
stations and in the Nordic market in general. As
a result, Hydros production of power in 2003 is
expected to be below the average level of 8.6
TWh. The low reservoir levels create uncertainty
for the future price level in the Nordic power
market. Spot prices and forward prices for 2003
have fallen rapidly during January 2003. There
is a risk for rationing of power during the
remainder of the winter season due to low
reservoirs and inadequate import capacity. The
situation during the winter 2002/03 has
illustrated the underlying capacity problem in
the Nordic region. Without construction of new
import capacity to the region and/or new power
stations, this problem will increase in line
with increasing demand. The probability of a
recurrence will then increase over time.

The
European refining margins in 2002 were at a low
level at the beginning of the year but trended
slowly upwards throughout 2002 due to a gradual
increase in product demand. The average European
refining margins for 2003 are expected to be
better than in 2002 due to the expected recovery
of the global economy and low global product
inventory as of the beginning of 2003.

The
European continental gas market continues to be
dominated by long-term contracts indexed to oil
product prices. The liberalization process of
the European gas market is expected to lead to a
more liquid and short-term gas market, such as
exists in the UK. New gas trading hubs are
emerging, especially at Zeebrügge in Belgium and
at Emden/Bunde at the German/Dutch border. This
development may influence prices and other terms
and conditions under long-term contracts which
over the next years constitutes most of Hydros
natural gas deliveries. Hydro will continue to
focus on profitable growth of its gas portfolio
both upstream and downstream to capture the
opportunities created by a more flexible and
liquid European gas market.

Oil marketing
activities will continue to be strongly affected
by international oil prices and competitive
conditions in the Scandinavian and Baltic retail
markets. In 2003, Hydro expects the demand for
motor fuel to be stable in the Scandinavian
retail market while the demand for diesel, which
is taking market share from gasoline, is
expected to continue to grow by 2-3 percent
annually. Furthermore, Hydro expects consumption
of heating oil to continue to decline as a
result of competition from other energy sources.

HYDRO ALUMINIUM

EBITDA in NOK billion

(EBITDA IN NOK BILLION CHART)

|                    |  |      |        |      |  |      |        |   |  |  |        |  
|------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  |  | ------ | -
|NOK million         |  | 2002 |        | 2001 |  | 2000
|Operating Revenues  |  |      | 65,051 |      |  |      | 51,083 |   |  |  | 51,130 |  
|Operating Income    |  |      | 1,698  |      |  |      | 185    |   |  |  | 3,336  |  
|EBITDA              |  |      | 4,334  |      |  |      | 2,543  |   |  |  | 5,501  |  
|Gross Investment    |  |      | 63,833 |      |  |      | 42,819 |   |  |  | 44,729 |  
|CROGI               |  |      | 7.1    | %    |  |      | 5.7    | % |  |  | 10.8   | %
|Number of employees |  |      | 27,110 |      |  |      | 16,244 |   |  |  | 16,794 |  
|                    |  |      |        |      |  |      |        |   |  |  |        |  

As of the first quarter of 2002, Hydro
Aluminium is comprised of all of Hydros and
VAW Aluminium AGs (VAW) aluminium and
magnesium activities with the exception of
VAWs Flexible Packaging operations which are
included in Other Activities. Hydro Aluminium
includes the following sub-segments:



| |  | Metals (Primary Metals and Metal Products)                 
|- |  | -----------------------------------------------------------
| 
| |  | Rolled Products                                            
| 
| |  | Extrusion and Automotive (including the North America unit)

Prior year amounts have been restated in
accordance with this reporting structure.

Summary of key developments in 2002

During the first quarter of 2002, Hydro
acquired VAW and the French building systems
company, Technal. Both companies are fully
integrated into Hydro Aluminiums operations.
Hydros consolidated results include the
operating results of VAW as of March 15, 2002
and Technal, as of January 26, 2002.

With the VAW acquisition, Hydro Aluminium
solidified its position as one of the top three
integrated aluminium companies in the world.
Hydro Aluminium is now a more full range
aluminium company with leadership positions in
new market segments (foil and lithography in the
Rolled Products sub-segment), strengthened
extrusion and automotive offering and a greater
presence in North America and Asia. An important
part of realizing the full potential of the
acquisition includes capturing the synergies
available from a larger scale of operations.
This includes streamlining the selling, general
and

64





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administration processes, reducing manning and
sharing best production and other practices to
enhance productivity (revenues) and reduce fixed
and variable costs.

Operating income for 2002 was NOK 1,698
million, an increase of NOK 1,513 million
compared with 2001. Operating income for 2001
included restructuring charges for magnesium of
NOK 961 million, of which NOK 261 million
related to write-down of assets, and losses on
aluminium options and futures of NOK 545
million. The contribution on operating income in
2002 for VAW and Technal was NOK 1,159 million.
Excluding these above mentioned items, operating
income for Hydro Aluminium declined by NOK 1,152
million.

Hydro Aluminiums results reflected the
difficult market conditions that impacted all of
its sub-segments during 2002. In response to the
economic conditions, customers reduced their
inventories leading to a decline in demand for
metal products. As a result, overcapacity put
pressure on both LME prices and product margins.
In total, the margins were reduced by more than
NOK 2 billion in 2002 compared to 2001
(excluding new businesses).

Hydro Aluminium increased its total savings
targets in the fourth quarter of 2002. Cost
reduction targets for the combined savings
programs were increased by NOK 400 million to a
total of NOK 2.5 billion by the end of 2003 to
be achieved with full effect in 2004. These
savings are compared to the cost level of the
combined Hydro Aluminium and VAW businesses in
2001. This included the target for cost savings
of NOK 500 million related to the closure of the
primary production of magnesium in Norway. Total
costs directly related to the implementation of
the improvement programs are expected to be
approximately NOK 1.4 billion, of which NOK 990
million was incurred by the end of 2002.

The cost and manning reduction targets for
2002 for these improvement programs were
achieved. These programs resulted in savings of
approximately NOK 1 billion during 2002 compared
to the base line cost level in 2001 for the
combined Hydro Aluminium and VAW businesses.

Looking ahead, weak economic conditions,
the threat of war in Iraq, and uncertainty about
the level of aluminium exports from China
create the potential, if not the expectation, of
continued weak demand, price and margin pressure
in 2003. Hydro Aluminium is responding to these
market conditions, not only with the improvement
programs mentioned above, but also by a
selective investment strategy principally
focused on two types:



| |  | Plant expansions in the upstream area
(both alumina and primary production),
where the existing infrastructure supports
a larger capacity. This can be done at a
lower investment level than a corresponding
greenfield investment and improves the
operating cost position of the plant (often
to a level comparable to the industry
leaders); thereby, improving Hydro
Aluminiums long-term cost position.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Small efficiency improvement projects,
such as the ongoing program to increase
the amperage in the smelter potrooms
thereby increasing output and improving
productivity with virtually no capital
costs, as well as many projects in Hydro
Aluminiums downstream operations intended
to improve efficiency and reduce
production costs.                                                                    

The change in 2002 EBITDA compared to the prior
year and the most important items affecting the
change follow:

|                                            |  |  |        |  
|------------------------------------------- |  |  | ------ | -
|EBITDA for 2002                             |  |  | 4,334  |  
|EBITDA for 2001                             |  |  | 2,543  |  
|                                            |  |  |        |  
|Change in EBITDA                            |  |  | 1,791  |  
|                                            |  |  |        |  
|Margin                                      |  |  | (2,320 | )
|Volume                                      |  |  | 250    |  
|Fixed costs                                 |  |  | 320    |  
|Trading and hedging                         |  |  | 790    |  
|Unrealized LME-effects                      |  |  | 315    |  
|New business                                |  |  | 2,485  |  
|Non-recurring items and Restructuring costs |  |  | 70     |  
|Other income                                |  |  | 25     |  
|Other                                       |  |  | (144   | )
|                                            |  |  |        |  
|Total change in EBITDA                      |  |  | 1,791  |  
|                                            |  |  |        |  

Margins were reduced by more than NOK 2 billion
mainly due to lower realized aluminium prices
stated in NOK. This negative effect was partly
offset by lower fixed costs and lower
depreciation. EBITDA was negatively impacted by
the currency loss on the Alunorte loan of NOK
460 million in 2002 and NOK 159 million in 2001.
(See discussion below).

Reductions in fixed costs and depreciation
were largely as a result of improvement programs
(primarily the magnesium closure; see further
discussion below) designed to increase Hydro
Aluminiums overall efficiency.
Depreciation, excluding new businesses, was
approximately NOK 320 million lower than in
2001. Of this decline, approximately NOK 100
million represented lower impairment write-downs
of assets (excluding the impairment write-down
of the magnesium plant in Norway).

Operating income and EBITDA for trading and
hedging activities, including unrealized LME, effects
improved principally because of the termination of a
particular strategy resulting in realized and
unrealized losses on aluminium options and futures of
NOK 545 million in 2001. Trading activities realized
results increased by approximately NOK 430 million
while the improvement to hedging activities was
mainly due to the realized losses on the options and
futures strategy of about NOK 340 million in 2001.
Similarly, the positive variance on unrealized LME
effects was largely explained by the unrealized
losses on the same strategy of approximately NOK 205
million in 2001. In 2001, other rationalization costs
not

65





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otherwise specified were NOK 150 million, while
the corresponding costs for 2002 is NOK 90
million related to the closure of an extrusion
plant and offices in the US. Other non-recurring
costs for 2002 related to the integration of VAW
or improvement programs as well as other items
affecting the understanding of Hydro Aluminiums
results include the following (unless otherwise
indicated below, each items impacts both
operating income and EBITDA):



| |  | In connection with the VAW acquisition,
inventories were revalued at fair (market)
value at the time of the acquisition. This
resulted in a non-recurring higher charge
to costs of goods sold of approximately
NOK 200 million during 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | In addition, Hydro Aluminium incurred
approximately NOK 150 million in VAW
integration costs (unrelated to the
improvement programs) in 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| 
| |  | Cost and manning targets in 2002 for the
improvement programs were achieved. This
overall program resulted in savings of
approximately NOK 1 billion during 2002
compared to the base line cost level in
2001 for the combined Hydro Aluminium and
VAW businesses. Closure of the primary
magnesium production in Norway yielded NOK
430 million of the total savings.
Additional programs announced in connection
with the VAW acquisition resulted in the
remaining NOK 560 million in savings
compared to the cost level of the combined
Hydro Aluminium and VAW businesses in 2001.
Staff reductions during 2002 totaled 528
employees in the primary magnesium
operations and 708 employees associated
with other cost reduction initiatives.
| 
| |  | Total costs incurred in 2002 related to
the improvement programs were NOK 300
million, of which NOK 211 million was
expensed in 2002. The remainder was
recorded as a liability in the opening
balance sheet related to the acquisition of
VAW.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| 
| |  | Results from non-consolidated investees
included unrealized currency losses on
USD-denominated loans held by a Brazilian
company, Alunorte, which was NOK 460
million for 2002 an increase of NOK 301
million compared to 2001. Results from
non-consolidated investees are excluded
from operating income.                                                                                                                                                                                                                                                                                                                                                                                                                                       
| 
| |  | Hydro Aluminium economically hedges
certain revenues and raw materials in terms
of LME prices and foreign currency using
commodity and financial instruments with
the purpose of locking in margins on such
transactions. These positions referred to
as price hedges do not qualify for hedge
accounting. Realized gains or losses
related to LME price hedges are included in
the sub-segments revenues or costs while
unrealized effects are included at the
Hydro Aluminium level reported under Other
and eliminations. Related currency effects
are classified as financial items and
excluded from operating income, EBIT and
EBITDA                                                                                                  

METALS

|                    |  |      |        |      |  |      |        |   |  |  |        |  
|------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  |  | ------ | -
|NOK million         |  | 2002 |        | 2001 |  | 2000
|Operating Revenues  |  |      | 39,646 |      |  |      | 31,475 |   |  |  | 30,483 |  
|Operating Income    |  |      | 1,690  |      |  |      | 372    |   |  |  | 2,690  |  
|EBITDA              |  |      | 2,703  |      |  |      | 1,766  |   |  |  | 3,803  |  
|Gross Investment    |  |      | 34,905 |      |  |      | 26,330 |   |  |  | 28,593 |  
|CROGI               |  |      | 7.1    | %    |  |      | 6.0    | % |  |  | 11.2   | %
|Number of employees |  |      | 6,284  |      |  |      | 4,561  |   |  |  | 4,532  |  
|                    |  |      |        |      |  |      |        |   |  |  |        |  

After the acquisition of VAW on March 15, 2002,
Metals includes: Hydros former Aluminium Metal
Products, consisting of production of primary
aluminium, remelt activities in Europe and
magnesium metal activities, as well as the
primary materials and metal products activities
of VAW including the high purity activities.
Similar remelt activities located in North
America are included in the Extrusion and
Automotive sub-segment.

Through the acquisition of VAW, Hydro
Aluminium increased its metal capacity by
approximately 70 percent. This was a step
forward in one aspect of meeting Hydros
ambition to be one of the top three integrated
aluminium companies in the world. However, being
among the top is not only about size but
performance. In order to be cost competitive in
the primary metals industry, a key factor
relates to the scale of production necessary to
achieve cost competitive unit production costs.
Metals principal focus throughout 2002 was on
improving its competitive position.

To streamline operations and improve its
overall cost position, Metals has initiated
several expansion projects. Phase one of the
aluminium plant expansion in Sunndal, Norway
started production in the fourth quarter 2002 as
planned. This replaced an old line (based upon
outdated Søderberg technology) that was no
longer cost competitive and did not meet modern
environmental performance requirements. The
total expansion will be completed in 2004
increasing capacity in total by 173,000 tonnes
to approximately 330,000 tonnes. Furthermore,
Hydro decided to participate in the expansion of
the Alouette smelter in Canada. Total annual
primary aluminium production capacity will
increase by 307,000 to 552,000 tonnes in 2005
making Alouette the largest aluminium smelter in
North America and among the worlds lowest cost
smelters. Hydros share of the production is 20
percent. To strengthen its internal supply of
alumina (raw material), Metals is participating
in an expansion project of the Alunorte alumina
refinery in Brazil. This will increase
Alunortes capacity from 1.5 million to
approximately 2.3 million tonnes per year in
2003. Hydros share of the extended production
is 50 percent. When completed, Alunorte will be
one of the most competitive alumina refineries
in the world with further expansion potential
based on local bauxite sources. During 2002,
Hydro decided not to take part in a new
greenfield aluminium smelter in Iceland.

66





---



##### 



The decisions are consistent with Metals
strategy to selectively invest in high
potential, brownfield expansions with
comparatively low investment cost and a high
overall cost improvement ratio.

In 2001, Hydro Aluminium began
restructuring its Norwegian magnesium business
and NOK 700 million was accrued for the
closure, demolition of the plant and for
related staff reductions. In addition, NOK 261
million related to the write-down of the
magnesium plants net assets was charged to
operating income in 2001. During 2002, fixed
costs and the number of staff were reduced by
approximately NOK 430 million and 528
employees, respectively. Further streamlining
in Metals administration and other functions
has resulted in an additional reduction in
staffing of 208 employees in 2002.

The change in 2002 EBITDA compared to the prior
year and the most important items affecting the
change follow:

|                                            |  |  |        |  
|------------------------------------------- |  |  | ------ | -
|EBITDA for 2002                             |  |  | 2,703  |  
|EBITDA for 2001                             |  |  | 1,766  |  
|                                            |  |  |        |  
|Change in EBITDA                            |  |  | 937    |  
|                                            |  |  |        |  
|Margin                                      |  |  | (2,075 | )
|Volume                                      |  |  | 230    |  
|Fixed costs                                 |  |  | 340    |  
|Trading and price hedging                   |  |  | 790    |  
|New business                                |  |  | 1,520  |  
|Non-recurring items and restructuring costs |  |  | 300    |  
|Other                                       |  |  | (168   | )
|                                            |  |  |        |  
|Total change in EBITDA                      |  |  | 937    |  
|                                            |  |  |        |  

To understand Metals performance in 2002, the
following represents one-time costs incurred
related to the integration of VAW or
improvement programs (unless otherwise
indicated below, each item impacts both
operating income and EBITDA):



| |  | In connection with the acquisition of
VAW, assets (including inventory) and
liabilities were valued at fair market
value as of the acquisition date. The fair
value of inventory (which exceeded
production cost) was included in cost of
goods sold as the inventory was sold. For
Metals, this negatively impacted results
by NOK 78 million in 2002.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Integration costs from the VAW acquisition
were NOK 72 million.                                                                                                                                                                                                                                                                                        
| 
| |  | Expenses of NOK 144 million were
recorded for improvement programs.                                                                                                                                                                                                                                                                                    

In addition, there were other items that
specifically affect the understanding of Metals
results (unless other indicated below, each item
impacts both operating income and EBITDA):



| |  | In 2002 environmental accruals increased
by NOK 65 million as a result of the
completion of a major part of an
environmental review.                                                                                                                                              
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Results from non-consolidated investees
included unrealized currency losses on a
USD-denominated loan held by a Brazilian
company, Alunorte, which increased by NOK
301 million compared to last year. Results
from non-consolidated investees are
excluded from operating income.

Market Conditions

|                   |  |      |        |      |  |          |        |      |  |  |     |    |  |  |        | 
|------------------ |  | ---- | ------ | ---- |  | -------- | ------ | ---- |  |  | --- | -- |  |  | ------ | 
|                   |  | 2002 |        | 2001 |  | % change |        | 2000
|LME 3-month in USD |  |      | 1,365  |      |  |          | 1,454  |      |  |  | (6  | %) |  |  | 1,567  | 
|LME 3-month in NOK |  |      | 10,906 |      |  |          | 13,086 |      |  |  | (17 | %) |  |  | 13,805 | 
|USD/NOK            |  |      | 7.99   |      |  |          | 9.00   |      |  |  | (11 | %) |  |  | 8.81   | 
|EUR/USD            |  |      | 0.945  |      |  |          | 0.896  |      |  |  | 5   | %  |  |  | 0.924  | 
|                   |  |      |        |      |  |          |        |      |  |  |     |    |  |  |        | 

Metals 2002 operating results were adversely
affected by the prevailing unfavorable market
conditions throughout the year. The average
three-month price for primary aluminium on the
London Metal Exchange (LME) decreased by
approximately 6 percent to USD 1,365 per tonne
in 2002 compared to USD 1,454 per tonne in 2001.
The LME price stated in Norwegian kroner
(impacting smelters in Norway) dropped by 17
percent. In addition, the market premiums for
the products fell significantly due to the weak
market situation.

In 2002, growth in demand both in the US,
the worlds largest aluminium consumer, and in
Europe was moderate to low. Shipments from
aluminium smelters in the Western World
increased by close to 500,000 tonnes in 2002
(roughly 2.5 percent). Western World production
increased by about 600,000 tonnes. About 400,000
tonnes of the increased production related to
new capacity and the balance was due to the
restart of idled capacity in Brazil. Worldwide,
production grew between 5 - 6 percent in 2002 to
approximately 26 million tonnes. China has
traditionally been a net importer of aluminium.
However, during 2002 Chinas capacity and
production increased by about 30 percent while
consumption only grew close to 20 percent and
net exports from China in 2002 were estimated at
250,000 tonnes. Over the longer term, Chinas
consumption is expected to utilize more of its
aluminium production.

Registered stocks increased by 280,000
tonnes in 2002. However, taking into account
unreported inventories, the total estimated
increase in primary stocks was approximately
600,000 tonnes. This reflects the low growth in
industrial activity in 2002.

Revenues

Metals operating revenues increased NOK 8,171
million and 26 percent in 2002 mainly as a result of
the VAW acquisition. VAWs contribution to 2002
operating revenues amounted to NOK 12,919 million.
Excluding

67





---



##### 



the revenues generated from VAWs smelter and
remelting production, the decrease in operating
revenues in 2002 was primarily attributable to a
decline of more than 15 percent in the realized
prices, measured in Norwegian kroner, for the
smelters sales volume.

Total smelter production increased from
785,000 tonnes in 2001 to 1,253,000 tonnes in
2002 largely due to the addition of VAW
production of 460,000 tonnes. Production in the
Norwegian smelters decreased by about 1,000
tonnes largely due to the closure of the
Søderberg line in Sunndal, Norway. Metals share
of production from partially owned companies,
Søral (49.9 percent) and Slovalco (20 percent),
increased from 80,000 tonnes in 2001 to 89,000
tonnes in 2002 due to expansion programs.

Total sales volume in 2002, excluding VAW activities
as well as trading and sourcing activities,
increased 6.5 percent from 1,290,000 tonnes in
2001 to 1,374,000 tonnes in 2002 as a result of
new remelting capacity that came on stream in
2002 and higher capacity utilization at the
existing casthouses. External sales for trading
and sourcing activities accounted for NOK 7,371
million in 2002 compared to NOK 9,989 million in
2001. The reduction in revenues was due to lower
LME prices, lower US dollar rates, and lower
trading volumes for alumina and physical metal.
The Metals sub-segment sells a significant
volume of its production internally. Excluding
VAW, sales to other sub-segments amounted to
around NOK 6.7 billion compared to external
sales of over NOK 20.0 billion in 2002.

Operating costs

Total operating costs in 2002 reflected an
increase of more than 25 percent compared to
the prior year, mainly due to the VAW
acquisition. Excluding VAW activities, the
operating costs were down approximately 14
percent due to lower variable costs principally
for raw materials and energy for the primary
aluminium production.

Presently, Hydro Aluminium has secured
approximately 40 percent of its alumina
requirements for primary metal production
through equity investments with production costs
that are largely independent of LME price
developments. The remaining requirements are
covered by medium- to long-term contracts with
price formulas based upon a percentage of the
LME price.

During 2002, electricity prices
remained more or less unchanged for the
Norwegian smelters as a result of long-term
fixed price contracts. For the former VAW
smelters, electricity costs decreased since
power prices of the German and Canadian smelters
are linked to the LME price.

Cast house costs per tonne for the
Norwegian smelters and remelter costs decreased
approximately 11 percent and 7 percent,
respectively, in 2002 from the prior year. This
was due to a 3 percent higher output, lower
alloy costs, and the successful implementation
of the improvement programs.

Fixed costs (excluding higher fixed costs
due to the VAW acquisition and integration)
decreased by approximately 5 percent in 2002
compared to the prior year. The closure of the
magnesium plant in Norway and fixed costs
reductions related to the smelter improvement
programs were the reason for the lower fixed
cost. This more than offsets additional fixed
costs related the new remelter in Spain and
start-up costs for the new potline in Sunndal.

For further information on one-time costs
related to the improvement programs and the
integration of VAWs influence on costs in 2002,
see the discussion above.

Operating income and EBITDA

Metals operating income in 2002 was NOK 1,690
million, compared to NOK 372 million in the
prior year, including NOK 1,015 million for the
VAW activities. EBITDA in 2002 was NOK 2,703
million compared to NOK 1,766 million in the
prior year. VAW accounted for NOK 1,520 million
of the 2002 EBITDA. Results for 2001 were
negatively influenced by the accrual of NOK 700
million for the closure of the Norwegian
magnesium plant. Operating income in 2001 was
also impacted by magnesium impairment
write-downs of NOK 261 million.

Income for investments in non-consolidated investees
(excluded from operating income) declined NOK
472 million in 2002 compared with 2001 mainly
due to losses in Alunorte and a weaker result in
the 49.9 percent-owned aluminium producer,
Søral, resulting from lower LME prices.
Alunorte, a 34 percent-owned alumina producer in
Brazil, has a USD-denominated loan. The
Brazilian real depreciated relative to the USD
in both 2002 and 2001. Metals share of the
unrealized loss on revaluation of the loan into
local currency was NOK 460 million in 2002
compared to NOK 159 million in the prior year.

Operating income, adjusted for the results
from the VAW activities (including fair value of
inventory and integration costs), restructuring
costs and impairment write-downs, decreased by
NOK 508 million from 2001. Excluding the results
from the VAW activities (including fair value of
inventory and integration cost), restructuring
costs and the currency losses for Alunorte,
EBITDA declined NOK 832 million in 2002 compared
to 2001. Results fell mainly due to lower LME
prices and a strong Norwegian kroner exchange
rate. In addition, the market premiums
especially for billets used for extrusion
products were down approximately 20 percent (in
US dollar) due to the weak market situation.
Operating income benefited from lower
depreciation of approximately NOK 115 million
principally due to the closure of the magnesium
plant. EBITDA was negatively impacted by lower
non-consolidated investee results of NOK 171
million (excluding Alunorte).

Adjusting for special items (fair value of
inventory, integration costs, costs in
connection with improvement

68





---



##### 



programs, rationalization costs and the currency
losses for Alunorte), the restated EBITDA would
have been about NOK 3.4 billion for 2002.

The EBITDA for trading activities increased
substantially by NOK 432 million compared to the
prior year due to improved realized results for
all activities. EBITDA improved for hedging
activities by approximately NOK 360 million for
2002 compared to 2001 when the termination of a
particular strategy resulted in realized losses
on aluminum options and futures of about NOK
340 million.

Outlook

The upstream aluminium industry is primarily a
commodity market that is impacted by the world
economic situation. The economic slowdown, which
began in the US, has spread to Europe and Asia,
further eroding consumer and business
confidence. As a result, there is a high degree
of uncertainty around market developments in
2003. Aluminium shipments can only be expected
to increase in 2003 if an economic recovery
materializes.


In China, strong economic growth with a
corresponding high growth in the consumption of
aluminium is expected for 2003. Whether China
remains a net exporter of aluminium will depend
upon how rapidly internal consumption of
aluminium increases to absorb the current
surplus.

Towards the end of 2002 and in early
2003, LME prices have fluctuated around US
dollar 1,380 per tonne. Prices are expected to
remain weak during 2003.
Inventories are expected to increase during
2003 by approximately 500,000 tonnes.

In connection with the expansion project at
the Sunndal Metal Plant, Hydro expects increased
production beginning in 2003. To secure a price
for part of the Companys total production for
the period 2003  2007, approximately 480,000
tonnes have been sold forward at an average
price of approximately US dollar 1,500 per
tonne. In addition, approximately US dollar 720
million have been sold forward to secure the
exchange rate against the US dollar at about NOK
9.3 per US dollar for the same tonnage. Both
hedges are designated as a cash flow hedge
against production. As a result, changes in the
fair value of the contracts are included in
Other Comprehensive Income (OCI). At December
31, 2002 the unrealized gain after tax for both
hedges totaling NOK 185 million is expected to
be reclassified from OCI into earnings for the
next 12 months ended December 31, 2003. Gains
and losses on these contracts included in OCI
will be included in operating revenues for the
periods 2003  2007 when the underlying
designated production is sold in the market
place.

Power contracts for the German smelters
will expire at the end of 2005. New contracts
will be negotiated, but given the present
market situation and political threat of
new eco taxes to be levied on energy producers,
it is not possible to predict the outcome of
such negotiations.

It was recently announced
that the Noranda magnesium plant in Canada, a
player in the magnesium industry, with a
production of approximately 25,000 tonnes would
be temporarily closed. The potential impact on
the magnesium market is not yet foreseeable.

Metals intends to meet the challenging market
conditions by continuing to improve its short
and long-term competitive and cost position
during 2003.

|                        |  |      |        |      |  |      |       |   |  |  |       |  
|----------------------- |  | ---- | ------ | ---- |  | ---- | ----- | - |  |  | ----- | -
|ROLLED PRODUCTS         |  |      |        |      |  |      |       |   |  |  |       |  
|                        |  |      |        |      |  |      |       |   |  |  |       |  
|NOK million             |  | 2002 |        | 2001 |  | 2000
|Operating Revenues      |  |      | 14,790 |      |  |      | 4,228 |   |  |  | 4,221 |  
|Operating Income (loss) |  |      | (295   | )    |  |      | 58    |   |  |  | (3    | )
|EBITDA                  |  |      | 258    |      |  |      | 162   |   |  |  | 86    |  
|Gross Investment        |  |      | 11,937 |      |  |      | 2,626 |   |  |  | 2,369 |  
|CROGI                   |  |      | 3.5    | %    |  |      | 5.8   | % |  |  | 3.8   | %
|Number of employees     |  |      | 4,306  |      |  |      | 766   |   |  |  | 766   |  
|                        |  |      |        |      |  |      |       |   |  |  |       |  

Following the acquisition of VAW, Rolled
Products consists of the business units: Foil,
Litho, Strip and Automotive. The rolling assets
Rolled Products held prior to the VAW
acquisition are now in the Strip business unit.
In the discussion of Rolled Products operating
results that follows, volumes and sales growth
rates are pro forma, assuming that VAWs rolled
activities had been a part of Hydro Aluminium
Rolled Products from January 1, 2002. In view of
Hydro Aluminium Rolled Products marginal rolled
activity prior to the VAW acquisition, this
manner of presentation is considered more
meaningful.

Through the acquisition of VAW, Hydro
Aluminium increased from a rather marginal to a
leading position in the European rolled
products business. Annual sales of flat rolled
products expanded from 133,000 tonnes in 2001
to 834,000 tonnes in 2002.

With the ambition of becoming one of the
top three integrated aluminium companies in the
world, Hydro Aluminium recognized the need to
strengthen its flat rolled products segment
since it represents 50 percent of the worlds
aluminium consumption. As a result of the VAW
acquisition, Hydro has established important
European positions within high margin rolled
products segments such as lithographic
(printing) plates and foil, as well as obtaining
a 50 percent ownership interest in the worlds
largest hotmill, Aluminium Norf GmbH
(Alunorf).

69





---



##### 



The change in 2002 EBITDA compared to the prior
year and the most important items affecting the
change follow:

|                       |  |  |      |  
|---------------------- |  |  | ---- | -
|EBITDA for 2002        |  |  | 258  |  
|EBITDA for 2001        |  |  | 162  |  
|Change in EBITDA       |  |  | 96   |  
|                       |  |  |      |  
|Margin                 |  |  | (30  | )
|Volume                 |  |  | (60  | )
|Fixed costs            |  |  | (115 | )
|New business           |  |  | 470  |  
|Non-recurring items    |  |  | (170 | )
|Other                  |  |  | 1    |  
|                       |  |  |      |  
|Total change in EBITDA |  |  | 96   |  
|                       |  |  |      |  

Rolled Products is a typical margin business
such that profit is derived from the margin
above aluminium price. Rolled Products, as is
the case in the rolling industry generally,
produces a wide variety of products for
different industries with very different product
margins. There are significant spreads in
margins between different products, with the
most attractive products limited in terms of
demand. Rolled Products price its sales based
on LME with an additional product premium
referred to as product margin.

To understand Rolled Products underlying
performance in 2002, the following represents
one-time costs incurred related to the
integration of VAW or improvement programs
(unless otherwise indicated below, each item
impacts both operating income and EBITDA).



| |  | In connection with the acquisition of
VAW, assets (including inventory) and
liabilities were valued at fair market
value as of the acquisition date. The fair
value of inventory (which exceeded
production cost) was included in cost of
goods sold as the inventory was sold. For
Rolled Products, this negatively impacted
results by NOK 125 million in 2002.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Integration costs from the VAW acquisition
were NOK 57 million.                                                                                                                                                                                                                                                                                                  
| 
| |  | Expenses of NOK 41 million were
recorded for improvement programs.                                                                                                                                                                                                                                                                                               

In addition, there were other items that aid in
the understanding of Rolled Products results
(unless otherwise indicated below, each item
impacts both operating income and EBITDA):



| |  | Rolled Products sales prices are based on
a margin over metal prices. The production
process requires a long lead time,
resulting in a normal inventory level
during the process corresponding to between
two and three months production. Therefore,
margins are impacted by variances in
inventory values resulting from changing
metal prices. Falling prices result in
higher cost of goods sold from products
taken from inventories which reduce the
segments margin. In 2002, this
negatively impacted margins by approximately
NOK 200 million.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Rolled Products uses financial instruments
to economically hedge revenues into Euro
and lock in the margin on such
transactions. These positions, referred to
as price hedging, do not qualify for hedge
accounting. Realized currency gains were
approximately NOK 60 million from such
currency hedges. Currency
gains and losses are classified as financial
items and are excluded from operating income,
EBIT, and EBITDA.                                                                                                                        

Revenues and Market Conditions

Rolled Products operating revenues increased
from NOK 4.2 billion in 2001 to NOK 14.8 billion
in 2002, mainly as a result of the VAW
acquisition. Rolled Products major activities
are denominated in Euro and all sales revenues
are economically hedged in terms of LME prices
and foreign currency using commodity or
financial instruments. Realized gains related to
LME price hedges are included in revenues while
currency effects are included in financial
items.


Rolled Products increased sales volume by
over 5 percent for flat rolled products in 2002
while maintaining a stable average product
margin year on year. European total demand for
flat rolled products grew somewhat over the same
period.

Foil and litho are, relative to other rolled
products, the most attractive products in terms
of product margins within the Rolled Products
sectors. Although industry shipments increased
by 4 percent for foil and were stable for the
litho market, Hydros sales volume in the West
European market increased by 11 percent and 8
percent, respectively for foil and litho
products compared to 2001.

Automotive flat rolled products are an
increasingly important market for the rolled
industry because of the attractive growth rates.
Industry sales of flat rolled products in the
West European automotive sector increased by 13
percent during 2002. Hydro is in the process of
building a position in this market and has
increased sales of flat rolled products within
the automotive sector by 2 percent in 2002
compared with the prior year. The driver for the
growth rates for flat rolled products in
automotive is mainly the use of body-in-white
parts, which is a term for applications that are
visible on a finished manufactured vehicle. The
Rolled Products segment intends to grow in this
area, mainly utilizing its current asset base,
in order to maintain its competitive position
and to meet customer demand in this increasingly
important market segment.

A breakdown of 2002 sales volumes sold by
each of Rolled Products business units (pro
forma figures assuming VAW volumes were
included for the entire year) is as follows:

70





---



##### 



|             |  |            |         |   |  |  |     |  
|------------ |  | ---------- | ------- | - |  |  | --- | -
|Sales volume |  | Metric ton |         | %
|Litho        |  |            | 112,000 |   |  |  | 12  | %
|Foil         |  |            | 137,000 |   |  |  | 15  | %
|Strip        |  |            | 534,000 |   |  |  | 59  | %
|Automotive   |  |            | 51,000  |   |  |  | 6   | %
|Wire Rod     |  |            | 75,000  |   |  |  | 8   | %
|             |  |            |         |   |  |  |     |  
|Total        |  |            | 909,000 |   |  |  | 100 | %
|             |  |            |         |   |  |  |     |  

Operating costs

Rolled Products cost structures vary with the
aluminium price and its product mix. The metal
price comprises about 60 percent of total costs.
Compared with 2001, metal prices were lower
reflecting the lower LME price. Other material
costs including, among other things, lacquer for
painted flat rolled products account for about
20 percent of the total costs. Information on
inventory effects is discussed in previous
sections.


An important aspect of the integration of
Hydro and VAW is the strong focus on capturing
synergies. A separate program with defined
actions was established in 2002 to contribute to
an improved cost base for Rolled Products. The
synergies captured are expected to be a mix of
cost savings, optimization of production
systems, capitalization on specific technical
and commercial knowledge, and increased sales
through an extended customer base. Moreover, a
cost improvement program will be launched in
2003 to reduce costs, both within sales and
general administrative functions, in addition to
improving the cost base in the production
system.

Operating income and EBITDA

Operating income in 2002 decreased by NOK 353
million from a profit of NOK 58 million in 2001
to a loss of NOK 295 million in 2002. EBITDA
increased by NOK 97 million from NOK 161 million
in 2001 to NOK 258 million in 2002.


Adjusting
for one-time items (fair value of inventory and
integration/improvement costs), the restated
operating level results would have been an
operating loss of NOK 72 million and an adjusted
EBITDA of NOK 481 million. The main difference
between operating income and EBITDA is
depreciation and amortization that increased as
a result of the VAW acquisition. Weak results
were attributable in part to the negative impact
on margins of approximately NOK 200 million due
to the variance in inventory values resulting
from falling metal prices. In addition to the
items described above, Rolled Products results
were significantly influenced by the loss in
2002 in the Norwegian rolling mill in
Holmestrand, Norway. Holmestrands major source
of aluminium is the European scrap market, which
historically has provided the plant with a
margin comparable to that of primary metal. In
2002, European scrap prices increased relative
to the LME price, reducing the scrap margin in
Holmestrand. Furthermore, the ongoing ramp-up of
the new thin gauge mill resulted in low
productivity in 2002. Due to the strengthening
of the Norwegian kroner against the Euro,
revenues declined since Holmestand exports most
of its production to other European countries.

Outlook

The general softening of the global economy had
a limited effect on demand for Hydros rolled
products in 2002. However, in 2003 it is
expected that there will be increased
competition for a falling demand for most flat
rolled products. The market outlook for 2003 is
moderate at best. Rolled Products will continue
to leverage on its high quality products and
technological services to meet the expected
challenging market in 2003.


EXTRUSION AND AUTOMOTIVE

|                    |  |      |        |      |  |      |        |   |  |  |        |  
|------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  |  | ------ | -
|NOK million         |  | 2002 |        | 2001 |  | 2000
|Operating Revenues  |  |      | 24,245 |      |  |      | 22,487 |   |  |  | 23,031 |  
|Operating Income    |  |      | 14     |      |  |      | (228   | ) |  |  | 650    |  
|EBITDA              |  |      | 1,084  |      |  |      | 632    |   |  |  | 1,612  |  
|Gross Investment    |  |      | 16,846 |      |  |      | 14,011 |   |  |  | 13,818 |  
|CROGI               |  |      | 7.0    | %    |  |      | 4.5    | % |  |  | 11.2   | %
|Number of employees |  |      | 16,520 |      |  |      | 10,917 |   |  |  | 11,496 |  
|                    |  |      |        |      |  |      |        |   |  |  |        |  

Extrusion and Automotive consists of Extrusion
(general extrusion products and building
systems), Automotive (structures including crash
management systems and bumpers, castings mainly
for engine blocks and precision tubing
principally used in radiators, fuel cooler and
liquid lines) and North America (non-automotive
extrusions and remelt plants in the US).

The acquisition of VAW increased activities
within Automotive for engine block castings and
extrusion activities in North America. Technal
strengthened building systems within Extrusion.

The change in 2002 EBITDA compared to the prior
year and the most important items affecting the
change follow:

|                       |  |  |       |  
|---------------------- |  |  | ----- | -
|EBITDA for 2002        |  |  | 1,084 |  
|EBITDA for 2001        |  |  | 632   |  
|                       |  |  |       |  
|Change in EBITDA       |  |  | 452   |  
|                       |  |  |       |  
|Margin                 |  |  | (225  | )
|Volume                 |  |  | 80    |  
|Fixed costs            |  |  | 85    |  
|New business           |  |  | 515   |  
|Non-recurring items    |  |  | (50   | )
|Other income           |  |  | 25    |  
|Other                  |  |  | 22    |  
|                       |  |  |       |  
|Total change in EBITDA |  |  | 452   |  
|                       |  |  |       |  

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The following one-time items and costs
related to the integration of new
activities impacted the performance of
Extrusion and Automotive in 2002 (unless
otherwise indicated below, each item
impacts both operating income and
EBITDA):



|  Integration costs from the VAW
acquisition were NOK 21
million.                                                                    
|--------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                      
|  Expenses of NOK 26 million
were recorded for improvement
programs.                                                                 
|                                                                                                                                      
|  Costs for closure of an
extrusion plant and offices in
North America negatively
impacted results with
approximately NOK 90 million.

By comparison, in 2001 costs for
Automotive for rationalization and plant
closures in the US and UK were
approximately NOK 60 million. In 2002,
plant write-downs, which impacted
operating income, were NOK 22 million
(NOK 113 million in 2001).

Revenues and Market Conditions

Extrusion and Automotives operating
revenues in 2002 increased to NOK 24,245
million compared to NOK 22,487 million
in the previous year. Excluding the
contributions of the new businesses
acquired, the operating revenues were
NOK 18,657 million in 2002.


A break down of the percentage of
2002 operating revenues generated by
each sector within the Extrusion and
Automotive sub-segment is as follows:

|              |  |  |    |  
|------------- |  |  | -- | -
|Extrusion     |  |  | 49 | %
|Automotive    |  |  | 28 | %
|North America |  |  | 23 | %

Excluding new activities, total revenues
for the Extrusion and Automotive
sub-segment decreased compared to 2001.
The revenues from the European activity
reflected a 2 percent increase in
shipments of general extrusions, while
the shipments in building systems
increased by 4 percent. The operating
revenues from the extrusion (including
remelting) activities in North America
declined from 2001, due to lower demand
in the general extrusion and trucking
sectors. Automotive revenues grew
slightly due to the start up of a new
production line for crash management but
this effect was more than offset by the
reduction in revenues due to lower
prices in precision tubing.

In 2001, North America had a
tolling agreement with the Goldendale
smelter, which was closed due to the
power situation in the northwest region
of the US. The termination of this
agreement adversely impacted
2002 operating revenues.
Goldendale reopened one line at the end
of 2002, and this situation is expected
to have a favorable impact on the
operating revenues in 2003.

Despite a relatively flat demand
for extrusion products in Europe,
Hydros extrusion activities increased
sales
volumes while maintaining margins
stated in Euro. During 2002, demand
in many of the extrusion and
building markets showed a downward
trend.

For Automotive, the US market for
light vehicles was highly influenced by
the record incentives offered by the
manufacturers, therefore mitigating the
decline to only 1.9 percent year on
year. The European market also weakened
throughout the year, resulting in a
decline in the light vehicle sales of
2.9 percent compared to 2001.

For North
America poor economic conditions
impacted demand throughout the entire
year while the margins for extruded
products remained relatively stable.

Operating costs

Operating cost development was affected
by the acquisition of VAW and Technal, a
lower LME, change in the Norwegian
kroner exchange rate, and productivity
and cost improvements. Operating cost
per tonne declined for Extrusion sector
as a result of higher productivity,
while for the Automotive sector, it was
due to higher volumes in 2002 compared
to 2001. In the North America sector,
higher operating cost per tonne followed
the lower production volume and
increased costs from the start up of the
new greenfield remelter.


In total, there was a reduction in
staffing of about 430 employees within
the Extrusion and Automotive subsegment
in 2002. This was the main reason for
the reduction of fixed costs of
approximately NOK 85 million in 2002
compared to 2001.

The operating cost and performance
of the sub-segment is dependent upon its
ability to adjust the cost level to weak
market conditions by reducing shifts, as
well as to continuously improve press
productivity by the use of benchmarking
tools and the transfer of best
practices. Both factors have contributed
to improve the underlying cost
performance in the European and North
American extrusion activities.

In North America, press
productivity is currently on a par with
the industry average for US extruders,
but there is a significant productivity
gap compared to Hydros European
extrusion system. Through continued
transfer of competence between Hydro
units it is expected that this gap can
be narrowed.

Operating income and EBITDA

Operating income was NOK 14 million in
2002 compared with a loss of NOK 228
million in the prior year. Adjusted for
the contribution made by VAW and
Technal, operating income was NOK 108
million higher than the prior year. The
main reasons for the improvement were
lower depreciation and amortization and
lower impairment costs than in 2001.
Starting in 2002, amortization of
goodwill was discontinued which
positively impacted amortization between
the periods. EBITDA was NOK 1,084
million in 2002 compared to NOK 632
million in


72





---



##### 



2001. Excluding newly acquired
activities and the variance in one-time
items (integration/improvement costs and
the variance in rationalization costs),
EBITDA was NOK 13 million lower than the
prior year. The decline related
primarily to lower results in the North
America business unit, due to reduced
shipments and lower capacity utilization
which, as noted above, led to the
decision to close one of the extrusion
plants. The Extrusion and Automotive
business units improved their
performance in 2002. Improvements in
Extrusions results were principally due
to higher volumes and improved
productivity. For Automotive, the better
results were largely attributable to
slightly higher volumes and cost
reduction programs.

Outlook

For the European extrusion activity,
absence of growth in the market is
expected in 2003. The German market,
with 23 percent of the total European
extrusion consumption and its role of
fueling the other European economies,
will be particularly important for 2003.
The building and construction markets in
Germany and the UK are expected to
continue to decline, and the French
market is starting to soften from what
has been a good level of activity.


Within Automotive, the level of
anticipated sales in global light
vehicles for 2003 remains uncertain. The
US market is expected to decline if the
high level of incentives offered by the
car manufacturers are either dropped or
reduced. The European markets are also
showing signs of weakness, particularly
in the important German market. The
uncertain political situation pertaining
to the Iraqi situation is expected to
have a considerable negative impact on
new car sales if a war should erupt.

The North American activities face
the challenges of low consumer
confidence and a weak US economy in
2003. One of the major challenges is to
fill the press capacity in 2003 and
further improve press productivity.

Regarding the improvements put in place
by the end of 2002 for the segment as a
whole, the expected annualized savings
is expected to be approximately NOK 275
million. Including targets achieved,
Extrusion and Automotive have total
targets to improve its cost savings of
about NOK 370 million by the end of 2003
(with full effect from 2004). Further
reductions in manning of about 225 are
planned.

HYDRO AGRI

EBITDA in NOK billion

EBITDA IN NOK BILLION GRAPH

|                    |  |  |        |   |  |  |        |   |  |  |        |  
|------------------- |  |  | ------ | - |  |  | ------ | - |  |  | ------ | -
|NOK million         |  |  | 2002   |   |  |  | 2001   |   |  |  | 2000   |  
|Operating Revenues  |  |  | 33,348 |   |  |  | 37,407 |   |  |  | 36,607 |  
|Operating Income    |  |  | 2,207  |   |  |  | 2,114  |   |  |  | 1,303  |  
|EBITDA              |  |  | 3,945  |   |  |  | 4,402  |   |  |  | 3,553  |  
|Gross Investment    |  |  | 30,739 |   |  |  | 36,513 |   |  |  | 40,094 |  
|CROGI               |  |  | 9.4    | % |  |  | 9.6    | % |  |  | 7.8    | %
|Number of employees |  |  | 7,371  |   |  |  | 7,841  |   |  |  | 9,164  |  
|                    |  |  |        |   |  |  |        |   |  |  |        |  

Hydro Agri consists of the former
sub-segments Plant Nutrition and Gas
and Chemicals, for which separate
disclosure was provided in the 2001
annual report. A/S Korn- og Foderstof
Kompagniet (KFK) was also included in
Hydro Agri in the prior year, but in the
2002 annual report KFK is part of Other
Activities. Prior year amounts
reflected in this annual report have
been restated in accordance with this
revised reporting structure.

Summary of key developments in 2002

As explained in greater detail below,
Agris 2002 operating results were
adversely affected by the significant
weakening of the US dollar relative to
the Norwegian
kroner and the EUR during the year. The
pricing of the majority of Agris
products (including those produced at
its European plants) is directly linked
to the USD. Fixed costs in Europe are,
to a large extent, linked to the NOK and
the EUR. Accordingly, changes in
currency exchange rates have a direct
impact on revenues and costs. The
changes in currency exchange rates
during 2002 reduced EBITDA by an
estimated NOK 700 million.


The global fertilizer industry continued
to experience difficult markets throughout most
of 2002 as a result of low international prices
of commodity products such as urea.

In 2002,
European fertilizer prices for all major

nitrogen products were strongly influenced by a
low international urea price. Average prices
for 2002 remained at USD 109 per metric tonne
(fob Middle East) which is considered low on a
historical basis. European Nitrate prices
decreased by approximately 7 percent in 2002
reducing the nitrate margin to a more normal
historical level. The higher nitrogen margin
achieved compared to urea is primarily
determined by competition among European
producers and importers.

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##### 



The relative price of nitrogen is an
important element considered by
customers when choosing between
alternative fertilizer products with
varying nitrogen content.

The average
price for ammonia was USD 110 per metric
tonne (fob Caribbean), down
approximately 20 percent compared to
2001 reflecting lower gas prices in the
US.

Total sales of fertilizer increased
by 1.2 million tonnes in 2002, an
increase of approximately 6 percent
compared to the previous year. The
increase relates to sales outside of
Europe. Sales in Asia, Latin America,
Africa and North America all increased
between 12 and 16 percent during 2002
while European sales showed a small
decline. Sales outside of Europe are
primarily sourced from third parties
(TPP) but also include sales of own
produced product.

The industrial gases
and chemicals operations significantly
improved performance in 2002. EBITDA
increased to almost NOK 800 million, an
improvement of more than NOK 100 million
compared to the prior year. Strong
improvements were achieved within
technical nitrates, nitrogen chemicals
and industrial gases and volume
increased in most major markets.

Ambitious plans and targets aimed
at reducing operating capital were
achieved during 2002 resulting in a
reduction of approximately NOK 1,400
million.
Operating capital declined a further NOK
900 million as a result of price changes
and currency effects.

In November 2002, Agri divested its
joint venture phosphate fertilizer
business, Farmland/Hydro LP, (Florida)
resulting in a negative EBITDA effect of
NOK 82 million. The divestment was
motivated by Agris further strategic
focus on nitrogen business. Agri also
divested several other non-core assets
both within the fertilizer and the
industrial gases and chemicals
activities. In 2002, Agris partnership
with SQM was strengthened through the
establishment of the joint venture
company Nu3 N.V., where SQM is one of
the partners. Significant assets from
Hydro in the Netherlands were
transferred to the new company which
produces water soluble NPK and
speciality liquids.

The change in 2002 EBITDA compared to
the prior year and the most important
items affecting the change follow:

|                           |  |  |        |  
|-------------------------- |  |  | ------ | -
|EBITDA for 2002            |  |  | 3,945  |  
|EBITDA for 2001            |  |  | 4,402  |  
|                           |  |  |        |  
|Change in EBITDA           |  |  | (457   | )
|                           |  |  |        |  
|Margin, including currency |  |  | (1,605 | )
|Volume                     |  |  | 345    |  
|Fixed costs                |  |  | 725    |  
|Non-recurring items        |  |  | (25    | )
|Non-consolidated investees |  |  | (100   | )
|Other income               |  |  | 220    |  
|Other                      |  |  | (16    | )
|                           |  |  |        |  
|Total change in EBITDA     |  |  | (457   | )

Much of Agris business is denominated
in or heavily influenced by the USD. As
a result, currency changes have a direct
impact on revenues and costs. The
pricing of the majority of Agris
products (including its European
operations) is directly linked to the
USD. The depreciation of the USD in 2002
had significant negative effects on
revenues. However, variable cost in the
European plants (mainly energy) also
declined as a result of the weak USD
partly offsetting the reduction in
revenues. Fixed costs in Europe are, to
a large extent, linked to NOK and the
EUR. Excluding cost saving and
efficiency programs, this implies that
an appreciation of the European
currencies against the USD could reduce
the competitiveness of the European
fertilizer business.

In order to better understand the
variances included in the above table,
and the underlying business results of
Agri for 2002, the effects of the USD
depreciation has been calculated and
excluded from the following analysis.
This has been accomplished primarily by
converting dollar values at fixed rates.
EBITDA improved approximately NOK 250
million excluding the currency effects
described above reflecting and overall
underlying improvement in the business.

|                                                             |  |  |      |  
|------------------------------------------------------------ |  |  | ---- | -
|Approximate amount in NOK million                           
|Total change in EBITDA as presented above                    |  |  | (457 | )
|Currency
effects impacting EBITDA1)                          |  |  | 707  |  
|                                                             |  |  |      |  
|Total change in EBITDA calculated with
stable currency rates |  |  | 250  |  
|                                                             |  |  |      |  
|Reductions in energy cost                                    |  |  | 400  |  
|Volume outside of Europe                                     |  |  | 100  |  
|Increased
margins  industrial gases and chemicals           |  |  | 100  |  
|Fixed cost reduction                                         |  |  | 350  |  
|Other
income2)                                               |  |  | 220  |  
|Lower fertilizer prices/margins                              |  |  | (700 | )
|Non-consolidated investees                                   |  |  | (150 | )
|Other                                                        |  |  | (70  | )
|                                                             |  |  |      |  
|Total change in EBITDA calculated with
stable currency rates |  |  | 250  |  
|                                                             |  |  |      |  



|1) |  | Currency effects have been
isolated by applying constant (2002)
exchange rates
|-- |  | ------------------------------------------------------------------------------
|2) |  | Gains/losses on
divestments                                                   
|  

Revenues and market conditions

Agris total operating revenues
declined by approximately 11 percent in
2002 primarily as a result of the
currency changes described above. An
analysis of the operating revenues for
each of the principal
geographical areas and other key
business units in Agri is presented in
the table below:


74





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##### 



|                               |  |  |        |  |  |  |        | 
|------------------------------ |  |  | ------ |  |  |  | ------ | 
|NOK million                    |  |  | 2002   |  |  |  | 2001   | 
|Fertilizer:                    |  |  |        |  |  |  |        | 
|Europe                         |  |  | 12,179 |  |  |  | 14,631 | 
|Outside Europe                 |  |  | 14,165 |  |  |  | 14,904 | 
|Ammonia Trade and Shipping     |  |  | 2,926  |  |  |  | 3,298  | 
|Industrial Gases and Chemicals |  |  | 4,078  |  |  |  | 4,574  | 
|                               |  |  |        |  |  |  |        | 
|Total                          |  |  | 33,348 |  |  |  | 37,407 | 
|                               |  |  |        |  |  |  |        | 

Fertilizer Europe

The decrease in operating revenues for
European fertilizer activities mainly
reflects the effects of currency
changes. Sales volumes were virtually
unchanged at 9.7 million tonnes in 2002
compared to 9.8 million tonnes in the
prior year. Nitrate prices declined
approximately 7 percent during 2002
reflecting the low international urea
prices while NPK prices measured in USD
fell by approximately 2 percent. Plant
closures by competitors in Germany,
Spain and Ireland have improved the NPK
supply/demand balance significantly in
2002.


Although Agris volume remained
basically unchanged, total demand in
Europe was lower. Hydro Agri
strengthened its market position
primarily by gaining market share from
importers. The key customer account
program (increasing focus on Agri as a
reliable partner for selected customers)
and plant closures of non-Hydro plants
were important elements contributing to
the improved market position.

Fertilizer outside Europe

Hydros fertilizer sales outside of
Europe totaled 11.4 million tonnes, an
increase of 1.4 million tons from 2001.
This represented 54 percent of total
sales. Significant growth was achieved
in Asia, Latin America, Africa and North
America, partly due to growing markets
as well as increased market share.


Sales
in Asia increased by 12 percent in 2002
reaching 3.6 million tonnes. Significant
growth was achieved in sales of own
produced NPK premium quality fertilizer.
Sales to the advanced agricultural
segments in Asia generates good margins
and improves the capacity utilization
potential of Agris NPK production site
in Porsgrunn, Norway (the worlds
largest).

Latin American sales increased by
15 percent in 2002 to 3.3 million
tonnes. The increase related mainly to
speciality fertilizer sourced from SQM
and NPK. Brazil, the largest fertilizer
market in the region, accounted for most
of the increase through positive
developments in Adubos Trevo, the
Brazilian fertilizer company acquired by
Agri in 2000.

Volumes in Africa were 2.3 million
tonnes, an increase of approximately 12
percent during 2002. The growth came
mainly in TPP, primarily NPK and urea
while sales of own produced product
remained stable.
South Africa and the Ivory Coast
accounted for most of the increased
volumes.

Sales in North America increased by
16 percent in 2002 reaching 2.2 million
tonnes. Volumes increased for all main
products but primarily for third party
products. Significant growth was
achieved in sale for speciality
fertilizer related to the SQM marketing
agreement.

Sales of own produced
products in markets outside of Europe is
important as it allows for better
capacity utilization of Agris
distribution and production system. It
also smoothens seasonal demands as
overseas market often take products
outside of the European fertilizer
season. This provides optimization
opportunities between geographic markets
enabling Agri to prioritize markets
based on overall profitability. Growing
Agris TPP business (including joint
ventures and blending operations)
enables Agri to better utilize the
capacity of its extensive overseas
marketing and distribution network.
Approximately one third of the
increase in sales were products sourced
under the marketing agreement concluded
with SQM, the Chilean fertilizer
producer in 2001. SQM products are
complementary to Agris product
portfolio and further growth is targeted
in 2003.

Ammonia

Average ammonia prices of USD 110 per
metric tonne (fob Caribbean) were
approximately 20 percent lower than in
2001 reflecting lower natural gas prices
in the US. Ammonia prices are strongly
influenced by the natural gas price in
the US with lower gas prices normally
resulting in higher production of
ammonia. Agris ammonia production and
consumption in Europe is balanced.
However, significant volumes are traded,
partly to optimize logistics and partly
to benefit from market opportunities.
Price changes relating to ammonia sold
from Agris plants in Trinidad and Qatar
have a more direct effect on EBITDA.
Volumes sold in these areas in 2002 were
in line with 2001.


Industrial gases and chemicals

Revenues from industrial gases and
chemicals activities declined
approximately 11 percent in 2002 due to
the stronger NOK and divestment of low
performing non-core activities. Nearly
all of core industrial activities
experienced volume growth and
improvement in 2002.


Strong improvements
were achieved within activities relating
to environmental products, nitrogen
chemicals and technical ammonium
nitrates. Volume of technical ammonium
nitrates for civil explosives increased
by approximately 7 percent compared to
prior year. Lower global coal production
, which represents approximately 70
percent of technical ammonium nitrate
market, reduced the demand for
explosives. However, this was offset by
increased market share and growth in
demand from other mining industries.
Volumes of environmental process
chemicals (i.e., Nutriox for water
treatment and Reduktan for removal of
NOX emission) increased by

75





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##### 



approximately 9 percent. The increase
relates primarily to higher coal
consumption for power generation in
Europe (due to lower coal prices),
increasing the demand for Reduktan and
new installations at existing customers
both for Nutriox and Reduktan.

Sales
volumes for industrial gases, a regional
business focusing mainly on Europe,
increased approximately 3
percent due to higher sales of CO2 to the end user and
wholesale markets for food processing.

Operating costs

Total energy costs declined by
approximately NOK 400 million (excluding
currency effects) in 2002 compared to
the previous year. Natural gas is the
most important raw material used in the
production of ammonia, nitrogen
fertilizer and technical products. Most
of Agris natural gas requirements are
purchased from external suppliers. A
significant part of the gas used is
purchased under long-term contracts with
pricing mechanisms linked to the
development in market prices for gas.
Natural gas prices are closely linked to
developments of the crude oil price.
However, due to contract terms and
Agris distribution system, gas price
changes in Europe are normally reflected
in reported earnings with a timelag of
approximately 4-5 months.


Variable cost
related to the ammonia and urea
production in Trinidad and Qatar is
generally based on long term contracts,
partly linked to the development in the
prices of the finished products.

After
the completion of the Agri Turnaround
program in 2001 (which yielded manning
and fixed cost reductions of
approximately 35 percent), efforts to
achieve further productivity
improvements continue. In addition to
the approximately NOK 2,400 million in
fixed cost reductions realized through
this program, further cost savings and
manning reductions were achieved in
2002. Fixed cost reductions in 2002,
excluding the effect of the exchange
rates, were approximately NOK 350
million, of which approximately
one-third resulted from divestment of
low performing, non-core assets. The
remaining reductions related to
efficiency improvements, mainly within
the production system.

Operating income and EBITDA

Agris operating income in 2002 was NOK
2,207 million, an increase of roughly 4
percent compared to the prior year. The
increase was primarily the result of
lower depreciation charges in 2002, as
well as the charges associated with the
write-down of assets in 2001.


2002 EBITDA of NOK 3,945 million
was down approximately NOK 450 million
(roughly 10 percent). Excluding currency
effects 2002, EBITDA increased
by approximately NOK 250 million
over the prior year. The change in 2002
EBITDA compared to the prior year and
the most important items affecting the
change is presented in the variance
analysis presented above.

Outlook

Market indicators suggest a continued
growth in world demand for fertilizer in
2003. This trend is expected to continue
with growth outside Europe, mainly in
Asia and Latin America.


The fertilizer
industry expects consumption in West
Europe to show a moderately declining
trend for the coming years. This mainly
relates to increased efficiency in the
application of fertilizer, economic
uncertainty relating to the farmers
economy, environmental pressure to
reduce the usage of mineral fertilizers
and developments with the European
Unions (EU) Common Agricultural Policy
(CAP). Since 1999, changes in the CAP
have led to reduced price supports
within the EU, but higher area payments.
The economic
consequence of this policy change may
result in a reduction of agricultural
input factors such as fertilizer. Other
factors, such as increased focus on the
protein content of grain and improved
prices for agricultural products may
have positive effects.

For nitrogen fertilizer, there is
little new capacity expected to come
onstream in 2003 and 2004. In addition,
further closure of capacity could take
place in areas of the world where energy
costs are high, for example in the US
and Mexico. The supply/demand balance
for nitrogen fertilizer is expected to
continue to tighten over the next
several years. High oil prices are
expected to result in high gas costs in
Europe. Due to the time lag discussed
above, Agris energy costs in the first
half of 2003 will be higher than in the
first half of 2002. Positive product
price development towards the end of
2002 have continued into 2003.

Ammonia prices have correlated
strongly with the natural gas price in
the US during the last several years.
The forward market for natural gas (mid
February 2003) indicates that high
prices are expected to continue in the
medium term. This is positive for the
future ammonia prices as well.

The price level for nitrates and
other fertilizers in West Europe is
expected to continue to correlate
strongly with the movements in
international fertilizer prices.

Grain prices, particularly in the
USA, but also elsewhere, increased
substantially through 2002, mainly
because of poor harvests in the US,
Canada and Australia, caused by very dry
weather. On a more fundamental level,
global production of grain lags
consumption and this may not yet be
fully reflected in price developments.
In 2002, grain inventories were also
reduced. The expected need for increased
grain
production is positive for the
demand outlook for fertilizer.

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OTHER ACTIVITIES

|                        |  |      |        |      |  |      |        |   |  |  |        |  
|----------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  |  | ------ | -
|NOK million             |  | 2002 |        | 2001 |  | 2000
|Operating Revenues      |  |      | 21,769 |      |  |      | 22,361 |   |  |  | 24,749 |  
|Operating Income (loss) |  |      | 13     |      |  |      | (341   | ) |  |  | 208    |  
|EBITDA                  |  |      | 1,044  |      |  |      | 1,215  |   |  |  | 2,950  |  
|Gross Investment        |  |      | 21,873 |      |  |      | 22,529 |   |  |  | 24,056 |  
|CROGI                   |  |      | 4.7    | %    |  |      | 4.9    | % |  |  | 9.7    | %
|Number of employees     |  |      | 10,694 |      |  |      | 7,127  |   |  |  | 7,945  |  
|                        |  |      |        |      |  |      |        |   |  |  |        |  

PETROCHEMICALS

Petrochemicals operating revenues
decreased by 21 percent in 2002 compared
to 2001. The reduction was primarily due
to lower average product prices,
particularly caustic soda and suspension
polyvinyl chloride (S-PVC) prices.
Hydros average realized price for
caustic soda and S-PVC was approximately
49 and 6 percent lower, respectively, in
2002 than in 2001. Operating revenues in
2002 decreased by approximately NOK 290
million as a result of the sale of
Hydros share in Singapore Polymer
Corporation (SPC) in October 2001.

Operating Income/(loss) and EBITDA for
2002 were NOK (35) million and NOK 320
million, respectively, compared with NOK
(101) million and NOK 363 million in
2001. The reduction in EBITDA was
primarily due to lower average product
prices which were partly offset by lower
purchased raw material costs,
particularly natural gas liquids and
ethylene. EBITDA for 2001 included
non-recurring costs in the amount of
approximately NOK 225 million and a gain
of NOK 59 million for the sale of SPC.

In general, growth in PVC demand tends
to follow growth in
GDP. Global demand for PVC increased by
approximately 5 percent in 2002. The PVC
consumption in the Western European
countries was stable, while it increased
in North America by approximately 4
percent. Global demand for PVC is
expected to increase by 3 to 4 percent
in 2003. Global PVC margin for 2003 is
expected to be below the historical
average because the global capacity
additions during 2000 and 2001 will
continue to put pressure on prices.

TREKA

Following the sale of its feed and grain
operation, A/S Korn- og Foderstof
Kompagniet was renamed Treka AS. The
sale of the Danish operation was
completed in
the fourth quarter of 2002. The sale of
the operations in Sweden was approved by
the authorities in the fourth quarter
and the transaction was completed in
January 2003. The divestments resulted
in a write-down of KFKs non-current
assets of approximately NOK 150 million
in
the third quarter of 2002. The main
activities remaining in Treka relate
primarily to the Biomar fish feed
operations.

FLEXIBLE PACKAGING

EBITDA for Flexible Packaging in 2002
was NOK 265 million. Results were
included in Hydros operating results
from March 15, 2002. During the fourth
quarter an agreement was signed to sell
the Flexible Packaging operations to
Alcan. The transaction was approved by
regulatory authorities in EU in February
2003. No significant gain or loss
relating to the sale is expected with
the exception of potential currency
translation effects at closing. Currency
changes would have resulted in an
unrealized translation loss of NOK 150
million as of the end of 2002.

LIQUIDITY AND CAPITAL RESOURCES

|                                                 |  |      |         |      |  |      |         |   |  |  |        |  
|------------------------------------------------ |  | ---- | ------- | ---- |  | ---- | ------- | - |  |  | ------ | -
|NOK million                                      |  | 2002 |         | 2001 |  | 2000
|Cash flow provided by (used for):                |  |      |         |      |  |      |         |   |  |  |        |  
|Operations                                       |  |      | 21,785  |      |  |      | 26,172  |   |  |  | 25,626 |  
|Investments                                      |  |      | (36,446 | )    |  |      | (14,681 | ) |  |  | (3,630 | )
|Financing                                        |  |      | (5,995  | )    |  |      | (5,990  | ) |  |  | (8,129 | )
|Increase (decrease) in cash
and cash equivalents |  |      | (21,183 | )    |  |      | 5,382   |   |  |  | 14,331 |  
|Return on Shareholders equity                   |  |      | 12      | %    |  |      | 11      | % |  |  | 21     | %
|CROGI                                            |  |      | 8.5     | %    |  |      | 9.4     | % |  |  | 12.5   | %
|Net
interest bearing debt/equity ratio           |  |      | 0.44    |      |  |      | 0.28    |   |  |  | 0.41   |  
|                                                 |  |      |         |      |  |      |         |   |  |  |        |  

Cash flow

Hydro has historically financed its
operations primarily through cash
generated by operating activities. In
2002, net cash generated by the
Companys operations of approximately
NOK 21.8 billion was not sufficient to
fund the extraordinarily high investing
activities of approximately NOK 36.4
billion and the financing activities of
approximately NOK 6.0 billion. The
residual of approximately NOK 21.2
billion was funded by drawing on the
Companys cash balances and increasing
the Companys net interest bearing debt.


Cash provided by operating activities
was NOK 21,785 million in 2002 a decline
of 17 percent from 2001. The decline was
due to the generally lower prices and
margins experienced in 2002 compared to
2001, especially as a result of the
weakening USD and the strong NOK. In
spite of a 11 percent increase in net
income in 2002 operating cash flow
declined. This was partly due to the
2002 net income includes unrealised
gains which have no cash effect in 2002.

Cash used in investing activities in 2002 was NOK

77





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##### 



36,446 million compared to NOK 14,681
million in 2001. The increase of NOK
21,765 million was due to the purchases
of long-term investments, principally
the VAW and Technal acquisitions, and
the purchase of assets from the
Norwegian States Direct Financial
Interest (SDFI). See the Capital
Expenditures section below for an
analysis of expenditures for property,
plant and equipment and long-term
investments.

In 2002, NOK 5,995 million was used
in financing activities, which was at
the same level as for 2001. Principal
repayments in 2002, which included
prepayments of certain VAW indebtedness,
were higher than in 2001. However, this
was offset by the absence of any
repurchase of ordinary shares in 2002;
in 2001 Hydro used NOK 1,154 million for
that purpose.

Hydro anticipates that
cash from operations, its cash holdings
and short-term credit facilities will be
sufficient to meet its planned capital
expenditures and operational
requirements in 2003. Hydros capital
expenditures for 2003 are estimated to
be approximately NOK 20 billion
(excluding exploration activities).

The
cash and cash equivalents position as of
year-end 2002 was NOK 5,965 million
compared to NOK 27,148 million at
year-end 2001. The main reasons for the
decline were the lower level of cash
provided by operating activities and the
significantly higher level of cash used
for investing activities. However, it is
important to note that Hydro maintained
an unusually high cash position in 2001
which was reduced to a more historically
normal level in 2002.

Short and long-term borrowings

Through the acquisition of VAW, Hydro
assumed interest bearing debt of EUR 703
million (NOK 5,481 million) of which
approximately 75 percent of the amount
was classified, or has been
reclassified, as short-term debt (i.e.
with a maturity of less than a year). A
significant portion of this short-term
debt was repaid during 2002. NOK 400
million was transferred from VAW to
Norsk Hydro ASA.


At year-end 2002,
short-term bank loans and the current
portion of long-term debt in Hydro
amounted to NOK 9,264 million down from
the year-end 2001 level of NOK 10,424
million.

Hydros long-term interest bearing
debt at the end of 2002 was NOK 30,902
million, compared to NOK 37,853 million
at the end of 2001. The main reason for
the reduction in long-term interest
bearing debt, stated in NOK, was the
weakening USD and the strengthening of
NOK. In addition, Hydro repaid maturing
long-term debt of NOK 1,761 million, and
repaid an additional NOK 513 million of
VAW long-term debt in 2002.

Approximately two-thirds of Hydros
long-term debt is denominated in US
dollars. The weighted average interest
rate on all long-term debt was 7.2
percent at year-end
2002. The average maturity of the
Companys outstanding long-term debt was
approximately 14 years, with
approximately 21 percent of the
long-term debt falling due within the
next five years and the remainder
thereafter. (See Note 19 in Notes to the
consolidated financial statements for
more comprehensive information on the
composition of long-term debt).

A
significant part of Hydros indebtedness
is situated in the parent company, Norsk
Hydro ASA. In general, the terms of each
of the debt agreements and indentures
governing the indebtedness contain
cross-default provisions (under which a
default under any other loan,
indebtedness or other obligation for
borrowed money on the part of Hydro
would trigger a default under that debt
agreement or indenture. The
cross-default provisions are generally
limited to borrowing obligations of
Norsk Hydro ASA or any of its Principal
Subsidiaries (defined to mean a company
or other entity (i) which is fully
consolidated in the consolidated balance
sheet of the Company or in which the
Company owns more than 50 percent of the
issued share capital, (ii) the gross
assets of which represent more than 10
percent of the consolidated gross assets
of the Company and its subsidiaries
(taken as a whole) and (iii) which is
incorporated in the Kingdom of Norway)
and require that the indebtedness in
default under another agreement or
indenture be greater than a certain
level (e.g., USD 25 million).

Substantially all of Hydros debt
is unsecured. However, the agreements
and indentures contain provisions
restricting the pledging of assets to
secure future borrowings without
granting equivalent status to existing
lenders. The debt agreements and
indentures contain no financial ratio
covenants and no provisions connected to
Hydros credit rating or value of
underlying assets. None of the
agreements give the lenders a right to
put the loan and demand repayment prior
to its scheduled maturity. However,
certain of the agreements allow for
Hydros early redemption or repayment of
the indebtedness of the outstanding
principal amounts or specified premiums
above such amounts, plus accrued and
unpaid interest.

At December 31, 2002,
Hydros senior unsecured debt was rated
A by Standard & Poors and A2 with
negative outlook from Moodys. In
determining the rating, the rating
agencies have not factored in the
Norwegian States 43.8 percent equity
interest in the Company. The factors
given significant weight in determining
Hydros current credit rating include:
the diversification of the Companys
portfolio; its competitive position in
each of
the businesses (Oil and Energy,
Aluminium and Agri); and sound financial
profile. The ratings also, however,
reflect the commodity characteristics of
most of the Companys products, and
consequently, the exposure to market
price fluctuations and economic
cyclicality.

Net interest bearing debt
(short- and long-term interest bearing
debt, including the current portion of
long-term

78





---



##### 



debt, less cash and cash equivalents) at
the end of 2002 was NOK 34.2 billion,
compared to NOK 21.1 billion at the end
of 2001 The Companys net interest
bearing debt to equity (including
minority interests) ratio was 0.44 at
year-end 2002, which was well within the
stated target of 0.5.

As of December 31, 2002, Hydro had
unused short-term credit facilities
totalling approximately NOK 2,825
million. The Company also has committed
agreements for long-term stand-by credit
facilities totalling USD 1,925 million.
There were no borrowings under these
agreements as of December 31, 2002.
Hydro also has in place a shelf
registration in the US under which it
may raise up to an aggregate of USD 1.5
billion in debt securities. There are no
substantial restrictions on the use of
borrowed funds under Hydros material
credit and debt facilities.

Employee retirement plans

As of December 31, 2002, the projected
benefit obligation (PBO) associated with
Hydros defined benefit plans was NOK
23.7 billion and the fair value of
pension plan assets was NOK 15.1
billion, resulting in a net unfunded
obligation for such plans of NOK 8.6
billion. In addition, termination
benefit obligations and other pension
obligations amounted to NOK 1.5 billion,
leaving the net unfunded pension
obligation at a total of NOK 10.1
billion. For further details see Note 20
to the Notes to the consolidated
financial statements.


In 2002, the net unfunded pension
obligation increased by NOK 8 billion,
of which obligations assumed in business
combinations represented approximately
NOK 3.3 billion. Unrecognized net loss
and prior service cost increased by NOK
4.7 billion from NOK 3.6 billion at the
end of 2001 to NOK 8.3 billion at the
end of 2002. The increase attributable
to the unrecognized net
loss and prior service cost was mainly
due to negative asset returns, actual
compensation increases that exceeded
assumed future compensation rates, and
remeasurement of obligations at year-end
applying a lower discount rate and
higher compensation increase assumptions
than applied in the prior year
valuation.

Hydros net pension cost for 2002
amounted to NOK 1.6 billion. Cash
outflows from operating activities in
2002 regarding pensions amounted to NOK
1.5 billion.

As for 2003 net pension cost and
cash requirements, Hydro expects a
considerable increase from 2002.
Considering uncertainties involved,
especially for the cash requirement
needs, Hydros indicative best estimate
for both the net pension cost and the
cash requirement need in 2003 is NOK 2.4
billion. The main reasons for this
increase are as discussed above in
explaining the
increase in net unfunded pension
obligation and unrecognised net loss and
prior service cost.

The discount rate
Hydro utilizes for determining pension
obligations and pension cost is based on
the yield on a portfolio of long-term
corporate bonds that receive one of the
two highest ratings given by a
recognized rating agency. Hydro provides
defined benefit plans in several
countries and in various economic
environments that will affect the actual
discount rate applied. Approximately
two-thirds of Hydros projected benefit
obligation relates to Norway. In
assessing the weighted average discount
rate of 6.6 percent applied as of
December 31, 2002, it should be noted
that the Norwegian economy in recent
years has remained at a relatively
strong level of activity in oil
revenues. Combined with lower interest
rates outside Norway, this has led to a
widening of the interest rate
differential between Norway and other
countries. The discount rate applied for
Norwegian plans as of December 31, 2002
is 7.0 percent.

Contractual Obligations and Commercial Commitments

A summary of Hydros total contractual obligations and commercial commitments
to make future payments is presented below. For further details see Notes 7,
19, 22 and 23 in Notes to the consolidated financial statements.


|                                   |  |       |        |        |  |                        |       |       |  |       |        |        |  |  |       |  |  |  |        | 
|---------------------------------- |  | ----- | ------ | ------ |  | ---------------------- | ----- | ----- |  | ----- | ------ | ------ |  |  | ----- |  |  |  | ------ | 
|                                   |  |       |        |        |  | Payments Due by Period |       |       |  |      
|Contractual obligations            |  |       |        |        |  | Less than              |       | 1-3   |  | 4-5   |        | There-
|In NOK million                     |  | Total |        | 1 year |  | years                  |       | years |  | after
|Long-term debt                     |  |       | 32,738 |        |  |                        | 1,926 |       |  |       | 3,750  |        |  |  | 1,110 |  |  |  | 25,952 | 
|Capital lease obligations          |  |       | 122    |        |  |                        | 32    |       |  |       | 58     |        |  |  | 32    |  |  |  |       | 
|Operating lease obligations        |  |       | 6,965  |        |  |                        | 1,319 |       |  |       | 2,184  |        |  |  | 1,514 |  |  |  | 1,948  | 
|Unconditional purchase obligations |  |       | 43,805 |        |  |                        | 5,072 |       |  |       | 8,374  |        |  |  | 6,358 |  |  |  | 24,001 | 
|                                   |  |       |        |        |  |                        |       |       |  |       |        |        |  |  |       |  |  |  |        | 
|Total contractual cash obligations |  |       | 83,630 |        |  |                        | 8,349 |       |  |       | 14,366 |        |  |  | 9,014 |  |  |  | 51,901 | 
|                                   |  |       |        |        |  |                        |       |       |  |       |        |        |  |  |       |  |  |  |        | 

In addition, Hydros other commercial commitments include guarantees and
contractual commitments for future investments. Guarantees including letters of
credit, stand-by letters of credit, performance bonds, and payment guarantees
as of December 31, 2002 amounted to NOK 10.2 billion. Contractual commitments
for investments in property, plant and equipment, and other future investments
as of December 31, 2002 amounted to NOK 17.4 billion.

79





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##### 



Minority interest and
Shareholders equity

Minority interest increased by
approximately 9 percent to NOK 1,143
million in 2002. Shareholders equity
was NOK 75,867 million at the end of
2002, an increase of 1 percent compared
to 2001. Net income in 2002 of NOK 8,765
million contributed to increasing
shareholders equity while foreign
currency translation of NOK 7,221
million reduced shareholders equity.
The Norwegian krone appreciated
significantly against other currencies
during 2002, contributing to the
increased foreign currency translation
effects.


Investments

Investments relating to new and existing
fields and transportation systems in
2002 were NOK 14,197 million. The
purchase of assets from SDFI and the
development of the Grane field were the
most important investment projects for
Exploration and Production in 2002. The
largest investments for Hydro Aluminium
included the VAW acquisition, the
expansion activities relating to the
aluminium smelter in Sunndal, Norway and
the alumina refinery in Alunorte in
Brazil.


Investments relating to new and
existing fields and transportation
systems in 2001 were NOK 9,618 million.
Grane, Tune, Snorre Phase 2 and Terra
Nova were the
four most important development projects for
Exploration and Production in 2001. The
largest investments for Metals in 2001
included the expansion activities
relating to the alumina refinery and
ownership interest in Alunorte in
Brazil, the construction activities
related to the remelt plant in Azuqueca,
Spain and the modernization and
expansion activities relating to the
Companys aluminium smelter in Sunndal.
Investments for Extrusion and Automotive
related primarily to the acquisition of
Aldural in Argentina and rationalizing
existing business activities including a
new press in Italy.

In 2000, Hydro
invested NOK 8,322 million in new and
existing fields and transportation
systems. Snorre 2, Oseberg South, Terra
Nova and Åsgard were the four most
important development projects in 2000.
The largest investments for Metals in
2000 were the acquisition of an
ownership interest in Alunorte in Brazil
and a new magnesium facility in China
for conversion of local magnesium to
high quality alloy ingots. Investments
for Extrusion and Automotive related
primarily to the acquisition of Wells
Aluminum Corporation, the construction
of a new remelt plant in Kentucky, and
the
addition of four new extrusion presses
in France, Spain and Italy. A
significant part of the 2000 investment
for Agri related to the acquisition of
Trevo in Brazil.

Investments 1)

|                              |  |      |        |   |  |      |     |   |  |      |        |   |  |  |     |  |  |  |        |  |  |  |     | 
|----------------------------- |  | ---- | ------ | - |  | ---- | --- | - |  | ---- | ------ | - |  |  | --- |  |  |  | ------ |  |  |  | --- | 
|Amounts in NOK million        |  | 2002 |        | % |  | 2001 |     | % |  | 2000 |        | %
|Exploration and Production    |  |      | 14,197 |   |  |      | 31  |   |  |      | 9,618  |   |  |  | 59  |  |  |  | 8,322  |  |  |  | 50  | 
|Energy and Oil Marketing      |  |      | 499    |   |  |      | 1   |   |  |      | 472    |   |  |  | 3   |  |  |  | 186    |  |  |  | 1   | 
|Eliminations                  |  |      |       |   |  |      |    |   |  |      |       |   |  |  |    |  |  |  | 29     |  |  |  |    | 
|                              |  |      |        |   |  |      |     |   |  |      |        |   |  |  |     |  |  |  |        |  |  |  |     | 
|Hydro Oil and Energy          |  |      | 14,696 |   |  |      | 32  |   |  |      | 10,090 |   |  |  | 62  |  |  |  | 8,537  |  |  |  | 51  | 
|                              |  |      |        |   |  |      |     |   |  |      |        |   |  |  |     |  |  |  |        |  |  |  |     | 
|Metals                        |  |      | 12,728 |   |  |      | 28  |   |  |      | 1,872  |   |  |  | 12  |  |  |  | 2,437  |  |  |  | 15  | 
|Rolled Products               |  |      | 7,437  |   |  |      | 16  |   |  |      | 201    |   |  |  | 1   |  |  |  | 249    |  |  |  | 2   | 
|Extrusion and Automotive      |  |      | 5,153  |   |  |      | 11  |   |  |      | 1,454  |   |  |  | 9   |  |  |  | 2,389  |  |  |  | 14  | 
|Other and eliminations        |  |      |       |   |  |      |    |   |  |      |       |   |  |  |    |  |  |  |       |  |  |  |    | 
|                              |  |      |        |   |  |      |     |   |  |      |        |   |  |  |     |  |  |  |        |  |  |  |     | 
|Hydro Aluminium               |  |      | 25,318 |   |  |      | 55  |   |  |      | 3,527  |   |  |  | 22  |  |  |  | 5,075  |  |  |  | 31  | 
|                              |  |      |        |   |  |      |     |   |  |      |        |   |  |  |     |  |  |  |        |  |  |  |     | 
|Hydro Agri                    |  |      | 1,543  |   |  |      | 4   |   |  |      | 797    |   |  |  | 5   |  |  |  | 1,088  |  |  |  | 7   | 
|                              |  |      |        |   |  |      |     |   |  |      |        |   |  |  |     |  |  |  |        |  |  |  |     | 
|Other activities 2)           |  |      | 3,115  |   |  |      | 7   |   |  |      | 1,372  |   |  |  | 8   |  |  |  | 1,807  |  |  |  | 11  | 
|Corporate and eliminations 3) |  |      | 1,044  |   |  |      | 2   |   |  |      | 542    |   |  |  | 3   |  |  |  | 58     |  |  |  |    | 
|                              |  |      |        |   |  |      |     |   |  |      |        |   |  |  |     |  |  |  |        |  |  |  |     | 
|Total                         |  |      | 45,716 |   |  |      | 100 |   |  |      | 16,328 |   |  |  | 100 |  |  |  | 16,565 |  |  |  | 100 | 
|                              |  |      |        |   |  |      |     |   |  |      |        |   |  |  |     |  |  |  |        |  |  |  |     | 



|1) |  | Additions to property, plant and equipment, plus long-term
securities, intangibles, long-term advances and investments in
non-consolidated investees.                                                                            
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2) |  | Other Activities consists of the Petrochemicals, Treka AS (previously A/S
Korn- og Foderstof Kompagniet, KFK), VAW Flexible Packaging, Pronova, the
industrial insurance company, Industriforsikring, and Hydro Business
Partner.
|3) |  | Includes an equity increase in
Norsk Hydro's Independent Pension Trustin
Norway in 2002 of NOK 750 million.                                                                                                                      

80





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Material commitments for capital expenditures

Contractual commitments for investments
in property, plant and equipment
relating to land-based activities and
oil and gas field activities and
transport systems at the end of 2002
were NOK 3,095 million and NOK 14,297
million, respectively. Additional
authorized future investments
representing projects formally approved
by the Board of Directors or management
were NOK 2,395 million relating to
land-based activities and NOK 764
million relating to oil and gas field
activities and transport systems. Hydro
expects that cash flow from operations
and normal financing activities will be
adequate to fund these expenditures.


RESEARCH AND DEVELOPMENT

Hydro engages in research and
development (R&D) in order to maintain
its competitive position and to develop
new products and processes. Hydro spent
approximately NOK 815 million, NOK 796
million and NOK 898 million during 2002,
2001 and 2000 respectively, on such
activities. As part of its R&D
activities, Hydro continues to focus on
ecological issues including life cycle
analyses and energy efficiency studies
relating to products produced by the
Company.

Hydro maintains major research
centers in Porsgrunn and Bergen in
Norway, with a combined staff of
approximately 455 as well as smaller
research groups in several other
locations. The Bergen facility is
dedicated to the Groups oil and gas
activities. Research centers for Hydro
Aluminium are located in Karmøy, Årdal,
Raufoss Sunndal and Porsgrunn in Norway;
in Bonn and Ulm in Germany; in Tønder,
Denmark and in Michigan, US.

The
following highlights major contributors
to total R&D costs incurred in 2002.

Hydro Oil and Energy incurred R&D
costs in 2002 totaling approximately NOK
143 million, mainly by Exploration and
Production. The amount incurred was
primarily aimed at exploration
technology, virtual reality, increased
oil recovery, multiphase transportation,
well technology, deep water technology,
subsea solutions and health, safety and
environment with the purpose of reducing
field development and operating costs.
Hydrogen as a future energy carrier,
renewable energy and reduction of
emissions of carbon dioxide are included
in Hydros R&D programs.

Hydro Aluminium incurred a total of
NOK 408 million in R&D costs in 2002.
Metals, Extrusion and Automotive and
Rolled Products incurred NOK 99 million,
NOK 265 million and NOK 44 million,
respectively. The integration with VAW
has substantially enhanced the R&D
capabilities of Hydro Aluminium,
broadening and deepening its competence
base, strengthening the European
activities and increasing Hydro
Aluminiums
overall global reach. R&D activities in
2002 included process and product
development along the entire value chain
beginning with primary production,
through metal products, extruded
products and rolled products as well as
end products with special focus on
automotive applications.

R&D costs for the Agri business
area were NOK 152 million in 2002.
Activities related to fertilizer
operations included process and
technology development aimed at
optimization and cost reduction as well
as product R&D targeting new, innovative
products and strategies for customers in
selected markets. In addition,
activities relating to industrial
products have been focused on
application and product development
including projects relating to
environmental issues.

Petrochemicals
incurred NOK 27 million in R&D costs in
2002. The main research and development
areas are process improvements in VCM
and PVC technology, aiming at higher
productivity and lower costs and PVC
formulation
developments with a view to
minimizing the environmental impact of
the PVC life cycle.

RISK MANAGEMENT

The following discussion about Hydros
risk management policies and the
estimated amounts generated from the
sensitivity analyses are
forward-looking statements that
involve risks and uncertainties. Actual
results could differ materially from
those projected due to actual
developments in the global markets.
Information related to the financial
results for the commodity and financial
instruments and hedge accounting
strategies as of December 31, 2002 can
be found in Note 24 in Notes to the
consolidated financial statements.

The
methods used by Hydro to analyze risks
discussed below should not be considered
projections of future events or losses.
Risk management in Hydro is based on the
principle that risk evaluation is an
integral part of all business activities
and responsibility is placed at the
business area. Each business area has in
place policies and procedures for
monitoring risks, assessing appropriate
risk levels, and mitigating risk. This
is also assessed at the Corporate group
level, most notably in the following
categories:



| Business strategy  including events that may impact the
Companys reputation and brand;                                       
|---------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                 
| Financial risks  including events that may have impact on
net interest-bearing debt/equity
ratio, liquidity and credit
rating;
|                                                                                                                                 
| Health, security, safety,
environmental issues and
potential impact on
communities;                                            
|                                                                                                                                 
| Commodity price, currency, and
interest rate fluctuations.                                                                     

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The derivative financial and commodity
instruments that Hydro uses to manage
its primary market risks are as follows:

|          |  |                                                                 
|--------- |  | ----------------------------------------------------------------
|Futures:  |  | crude oil, aluminium, electricity                               
|Forwards: |  | crude oil, aluminium, electricity,
natural gas, foreign currency
|Options:  |  | crude oil, aluminium, electricity,
foreign currency             
|Swaps:    |  | crude oil, aluminium, NGLs,
foreign currency, interest rate     

For accounting purposes, unless
otherwise disclosed below, derivative
financial and commodity instruments are
marked-to-market with the resulting gain
or loss reflected in earnings since most
of the instruments do not meet the
criteria for hedge accounting. This can
result in volatility in earnings since
the associated gain or loss on the
related transactions may be reported in
earnings in different periods.

COMMODITY PRICE RISK

A substantial portion of Hydros
revenues is derived from the sale of
commodities such as crude oil,
aluminium, and fertilizers. Hydro also
purchases and sells natural gas and
electricity. The prices of these
commodities can be volatile, creating
fluctuations in Hydros earnings. To
manage this risk, Hydros financial
policy prioritizes financial strength
(i.e., debt/equity ratio of 0.5,
satisfactory liquidity reserves, and
good credit standing). In addition,
Hydro uses commodity derivatives, such
as commodity futures and forwards,
options and swaps, to manage unfavorable
price fluctuations and to participate in
limited speculative trading within
strict limits defined by management. The
following highlights Hydros main
commodity price risks.

Oil

Hydro produces and sells crude oil and
refined petroleum products. Hydro
utilizes futures, physical and financial
swaps and options with international oil
and trading companies. These instruments
are used to mitigate unwanted price
exposure for a portion of its crude oil
portfolio production and certain
inventories of oil or petroleum products
at its partly owned refinery in Sweden.
For the purpose of protecting against
the risk of low oil prices, Hydro has
purchased average rate put options
(Asian options) to sell 10 million
barrels of oil in the first half of 2003
for an average strike price of US dollar
17 per barrel.


Natural gas

Hydro is a producer, consumer, buyer and
seller of natural gas. Through December
31, 2001, the production from
the Norwegian Continental Shelf was sold
through the Gas Negotiating Committee
(GNC). As of January 1, 2002 the GNC
was dismantled, resulting in each
stake-holder on the Norwegian
Continental Shelf being individually
responsible for its natural gas
marketing activities. The consumption of
natural gas is mainly sourced through
long-term contracts with major producers
and distributors. Hydro is mainly
involved in physical over-the-counter
forward contracts traded bilaterally in
the UK and on the European continent
where there exists a liquid market for
such contracts. The main purpose of this
activity is to secure natural gas for
Hydros own production and deliveries to
Hydros customers, to reduce the risk in
the natural gas portfolio against
unfavorable fluctuations in price, and
to participate in
limited speculative trading within
strict limits defined by management.
Activities qualifying as derivatives
under Statement of Financial Accounting
Standards (SFAS) No. 133 Accounting for
Derivative Instruments and Hedging
Activities (SFAS 133) are
marked-to-market with the related
adjustments reflected in operating
income.


Electricity

Hydro is a producer, consumer, buyer and
seller of electricity. In Norway,
Hydros consumption of electricity
exceeds its production. In Europe, only
small-scale production exists and
consumption is considerably higher. This
deficit is principally covered through
long-term purchase contracts with other
producers and suppliers. Hydros demand
and supply balance can also be affected
by other factors, such as seasonal
variations in the level of its
production, which is influenced by
precipitation and reservoir levels.
Hydro utilizes derivative instruments,
such as futures, forwards and options,
and physical contracts that are traded
either bilaterally or over electricity
exchanges such as the Nordic power
exchange, Nord Pool. The main purpose of
this activity is to secure electricity
in the market for Hydros own
consumption and delivery commitments, to
reduce the risk in the electricity
portfolio against unfavorable
fluctuations in price, and to
participate in limited speculative
trading within strict limits defined by
management.


The electricity market was
extremely volatile during the last few
months of 2002. The market trended
upwards since the end of the summer and
the spot price reached an all-time high
towards the end of 2002 due to very low
precipitation levels experienced in
Norway. Activities qualifying as
derivatives under
SFAS 133 are marked-to-market with
the related adjustments reflected in
operating income.

Aluminium

Hydro is a leading producer of primary
aluminium and fabricated aluminium
products. Hydro also has considerable
activities related to physical
aluminium and raw


82





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##### 



material trading aimed at extending
Hydros role as a reliable and long-term
supplier of raw materials and aluminium
products. The objective of this trading
is to optimize capacity utilization,
logistical costs and strengthen market
positions by providing customers with
flexibility in pricing and sourcing. In
addition, Hydro also has considerable
activities relating to remelting and
long-term commercial agreements to
secure sourcing of casthouse products.
The acquisition of VAW adds further
flexibility to Hydros metal system and
strengthens its positions in Europe,
North America, and Asia.

To secure
margins on physical contracts and
achieve an average LME price on smelter
production, Hydro enters into
corresponding future contracts with the
LME. The majority of these contracts
mature within one year. Hydro manages
these hedging activities on a portfolio
basis, often taking LME positions based
upon net exposures. Accordingly, it is
difficult to meet certain hedge
accounting criteria. Therefore,
aluminium price volatility can result in
significant fluctuations in the
marked-to-market adjustments for LME
positions recorded to operating income.
However, the long-term effect of price
changes of future physical metal
purchases and sales is expected to
largely offset the marked-to-market
adjustments for the LME future
contracts.

In addition, Hydro nets
positions internally, then takes them
externally to reduce commissions paid to
the external market. This activity is
defined within strict limits as defined
set by management. Volatility from
market adjustments on these positions
will not have offsetting effects from
other transactions.

As a result of the expansion
project at the Sunndal metal plant,
Hydros exposure to commodity prices
and foreign currency exchange rates has
increased.
Accordingly, Hydro has entered into
short positions using LME future
contracts and US dollar forward
contracts to secure an average aluminium
price of approximately NOK 14,000 per
tonne of a portion of the forecasted
sales of primary metal production per
year for the period 2003 to 2007.
Simultaneously, Hydro secured the US
dollar - NOK exchange rate at about NOK
9.3 for the same tonnage in the same
period. This hedging strategy meets
certain hedging criteria in accordance
with SFAS 133, and has therefore been
designated as a cash flow hedge.

In addition, in 2001 Hydro entered
into short positions using LME future
contracts, designating such contracts as
cash flow hedges under SFAS 133 against
the risk of lower aluminium prices for
forecasted sales of primary metal
production for the period 2001 to 2003.
These positions were closed in 2001 and
the hedges dedesignated.

Hydro also has
a 10-year commitment with Aluvale to
purchase a fixed tonnage of remelt ingot
per year. At the end of 2002, Hydro
entered into short positions using
LME futures to hedge against the
fluctuations in the fair
value of the purchase commitment due to
changes in the LME price of aluminium
over the period of 2003 - 2006.

FOREIGN CURRENCY EXCHANGE RATE RISK

Prices of many of Hydros most important
products, mainly crude oil, aluminium,
natural gas and magnesium, are either
denominated in US dollars or are
influenced by local currency rates
against the US dollar. The cost of raw
materials, including natural gas, NGLs
and alumina, are affected by the US
dollar price of crude oil, and
fluctuations in the US dollar against
local currencies. Hydros primary foreign
currency risk is tied to local currency
fluctuations against the US dollar. To
reduce the long-term effects of
fluctuations in US dollar exchange rates,
Hydro incurs most of its debt in US
dollars (67 percent of Hydros long-term
debt is US dollar denominated). The
remaining long-term debt is denominated
in Norwegian kroner,
Euro, Swedish kroner, and British pounds.
Hydros pre-tax operating income would
most likely increase when the US dollar
appreciates against European currencies,
whereas financial expense, including
interest expense and net foreign currency
losses, is likely to be negatively
affected. In addition, the effects of the
translation of changes in the exchange
rate of local currencies to Norwegian
kroner for subsidiaries outside of Norway
can influence comparative results of
operations.

Hydro primarily employs
foreign currency swaps and forward
currency contracts to modify the currency
exposures for Hydros long-term debt
portfolio. Foreign currency swaps allow
Hydro to raise long-term borrowings in
one currency and swap them into another
with lower funding costs rather than
borrowing directly in the second
currency. Forward currency contracts are
entered into to safeguard cash flows for
forecasted future transactions or to
cover short-term liquidity needs in one
currency through excess liquidity
available in another currency. Short-term
forward currency contracts reduces
funding costs as it is alternative to
drawing a short-term loan in one currency
and investing short-term in another.

In order to further mitigate its
exposure to foreign currency risk, Hydro
has designated a portion of its foreign
denominated long-term debt, including
certain related balances in currencies
arising from foreign currency swaps and
forwards, as hedges of net foreign
investments in subsidiary companies. The
foreign exchange gains and losses on
this debt are recorded as a separate
component of shareholders equity.

INTEREST RATE RISK

Hydro is exposed to changes in interest rates
primarily as a result of borrowing and
investing activities used to

83





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##### 



maintain liquidity and fund its business
operations. Hydro maintains a high ratio
of long-term, fixed-rate debt, as a
proportion of its total debt, with an
even debt repayment schedule and
adequate resources to allow for
financial flexibility. Hydro
periodically uses derivative financial
instruments such as foreign currency and
interest rate swaps to minimize its
exposure to interest rate risks.

CREDIT RISK

Internal policies are established to
limit credit risk through limit setting
for counterparty risks, insurance of
risks, and procedures for monitoring
exposures.
Furthermore, the risk level is reduced
through a diversified customer base
representing various industries and
geographic areas.

Credit risk arising from the
inability of the counterparty to meet
the terms of Hydros derivative
financial instrument contracts is
generally limited to amounts, if any, by
which the counterpartys obligations
exceed the obligations of Hydro. It is
Hydros policy to enter into derivative
financial instruments with various
international banks with established
limits for transactions with each
institution. Therefore, Hydro does not
expect to incur material credit losses
on its risk management or other
derivative financial instruments.

Hydro also has some exposure to
credit risk related to derivative
commodity instruments. However, this
risk is significantly limited because
most instruments are settled through
commodity exchanges. Hydro limits
credit risks relating to other
contracts not traded on exchanges with
internal policies for credit ratings
and limits for counterparties.

SENSITIVITY ANALYSIS

In accordance with applicable
requirements of the US Securities and
Exchange Commission (SEC), Hydro has
chosen to provide information about
market risk and its potential exposure
to hypothetical loss from derivative
financial instruments and other
financial instruments and derivative
commodity instruments through
sensitivity analysis disclosures. Such
disclosures are intended to express the
potential loss in fair values of market
risk sensitive instruments resulting
from one or more selected hypothetical

changes in interest rates, foreign
currency exchange rates, commodity
prices and other relevant market rates
or prices over a selected period of
time.

The sensitivity analysis depicted
in the tables below reflects the
hypothetical loss in fair values
assuming a 10 percent change in rates
or prices and no changes in the
portfolio of instruments as of December
31, 2002 and December 31, 2001, respectively. Hydros
management cautions against relying on
the information presented. This is due
to the arbitrary nature of assumptions
involved, the inability of such a simple
analysis to model reality, continuous
changes to Hydros portfolio and the
exclusion of certain of Hydros
positions necessary to reflect the net
market risk of the Group. Accordingly,
the information does not represent
managements expectations about probable
future losses.

The most significant limitations on
the figures provided are as follows:



| | The tables only include the
effects of the derivative
instruments discussed above and of
certain financial instruments (see
Footnote 2 below). It does not
include
all related physical positions,
contracts, and anticipated
transactions that many of the
derivatives instruments are meant to
secure. A rate or price change of 10
percent will often result in a
corresponding effect to the fair value
of the physical or underlying position
such that the resulting gains and
losses would offset.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| | As allowed by the SEC regulations,
Hydro has excluded accounts payable
and accounts receivable from the
presentation which may have had a
significant effect on the foreign
exchange risk figures provided.                                                                                                                                                                                                                                                                                              
| 
| | The computations, which provide
the most negative effect to Hydro
of either a 10 percent increase or
decrease in each rate or price, do
not take into account correlations
which would be expected to occur
between the risk exposure
categories. For example, the effect
that a change in a foreign exchange
rate may have on a commodity price
is not reflected in the tables.                                                                                                                         
| 
| | It is not probable that all rates
or prices would simultaneously move
in directions that would have
negative effects on Hydros
portfolio of instruments.                                                                                                                                                                                                                                                                                                                                                

The effects of these limitations on
the estimates may be material.

As depicted in the tables below, in
2002 Hydros exposure to foreign
currency and interest rate risks
decreased compared to the prior year.
The reasons for the change include the
following:



| | During 2002, Hydro repaid
long-term loans of NOK 1,761
million and prepaid an additional
NOK 513 million of VAW long-term
loans. Furthermore, the reduction
in long-term interest-bearing debt
calculated in NOK was due to the
weakening of the USD against the NOK.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| | Hydros level of cash and cash
equivalents decreased by
approximately NOK 21 billion. The
primary reason for the change was
the VAW acquisition which was fully
funded by Hydros cash reserves.                                                                     
| 
| | During the course 2002, the
Norwegian kroner appreciated
against the US dollar.                                                                                                                                                                                      

84





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##### 



As of 31 December, 2002Hypothetical loss from +/- 10% change in:

|                                   |  |                      |         |          |  |                  |       |           |  |            |       |       |  |  |     |  |  |  |   |  |  |  |    | 
|---------------------------------- |  | -------------------- | ------- | -------- |  | ---------------- | ----- | --------- |  | ---------- | ----- | ----- |  |  | --- |  |  |  | - |  |  |  | -- | 
|                                   |  | Fair value as of     |         | Interest |  | Foreign currency |       | Commodity |  |            |       |       |  |  |     | 
|NOK million (unaudited)            |  | 31 December, 2002 1) |         | rates    |  | exchange rates   |       | prices    |  | Volatility |       | Other
|Derivative instruments related to: |  |                      |         |          |  |                  |       |           |  |            |       |       |  |  |     |  |  |  |   |  |  |  |    | 
|Commodities                        |  |                      | 1,419   |          |  |                  | 4     |           |  |            | 123   |       |  |  | 684 |  |  |  | 6 |  |  |  |   | 
|Other 2)                           |  |                      | 1,520   |          |  |                  | 59    |           |  |            | 705   |       |  |  |    |  |  |  | 7 |  |  |  |   | 
|Financial instruments 3)           |  |                      | (32,155 | )        |  |                  | 1,353 |           |  |            | 3,197 |       |  |  |    |  |  |  |  |  |  |  | 57 | 
|                                   |  |                      |         |          |  |                  |       |           |  |            |       |       |  |  |     |  |  |  |   |  |  |  |    | 

As of 31 December, 2001Hypothetical loss from +/- 10% change in:

|                                   |  |                      |         |          |  |                  |       |           |  |            |       |       |  |  |     |  |  |  |    |  |  |  |    | 
|---------------------------------- |  | -------------------- | ------- | -------- |  | ---------------- | ----- | --------- |  | ---------- | ----- | ----- |  |  | --- |  |  |  | -- |  |  |  | -- | 
|                                   |  | Fair value as of     |         | Interest |  | Foreign currency |       | Commodity |  |            |       |       |  |  |     | 
|NOK million (unaudited)            |  | 31 December, 2001 1) |         | rates    |  | exchange rates   |       | prices    |  | Volatility |       | Other
|Derivative instruments related to: |  |                      |         |          |  |                  |       |           |  |            |       |       |  |  |     |  |  |  |    |  |  |  |    | 
|Commodities                        |  |                      | 559     |          |  |                  |      |           |  |            | 162   |       |  |  | 825 |  |  |  | 22 |  |  |  |   | 
|Other 2)                           |  |                      | (51     | )        |  |                  | 55    |           |  |            | 1,015 |       |  |  |    |  |  |  | 18 |  |  |  |   | 
|Financial instruments 3)           |  |                      | (16,555 | )        |  |                  | 1,994 |           |  |            | 2,925 |       |  |  |    |  |  |  |   |  |  |  | 93 | 
|                                   |  |                      |         |          |  |                  |       |           |  |            |       |       |  |  |     |  |  |  |    |  |  |  |    | 



|1) |  | The change in fair value due to price changes is calculated based upon pricing formulas for
certain derivatives, the Black-Scholes model for options and the net present value of cash flows for certain
financial instruments or derivatives. Discount rates used vary as appropriate for the individual
instruments.                                                                                                                          
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2) |  | Other mainly includes forward currency contracts, currency swaps and swaptions.                                                                                                                                                                                                                                                                                                                                                                 
|3) |  | Financial instruments include cash and cash equivalents, investments in marketable securities, bank
loans and other interest bearing short-term debt and long-term debt. A substantial portion of the
hypothetical loss in fair value for changes in interest rates relates to Hydros long-term fixed
rate debt. As Hydro expects to hold this debt until maturity, changes in the fair value of debt would
not be expected to affect earnings.

Hydros exposure to commodity price risk
for aluminium decreased in 2002 as
compared to the prior year. This was
mainly due to the acquisition of VAWs
long LME positions in 2002. Inclusion of
VAWs long LME positions more than
offsets existing short LME positions and
reduces Hydros overall net exposure to
increases in commodity prices. Moreover,
due to the strengthening of the NOK
against the USD, the resulting effect is
a decreased exposure in commodity price
risk when expressed in
NOK. Hydros exposure to commodity price
risk for energy increased in 2002 as
compared to the prior year mainly due to
significant changes in market prices
related to electricity contracts. These
effects resulted in an overall increase
in the hypothetical losses in the fair
value of Hydros derivative commodity
instruments. The remaining activities
for 2002 have not materially impacted
the other hypothetical losses in the
fair value for the year ended December
31, 2002.


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NORSK HYDRO ASA and subsidiaries - US GAAP

CONSOLIDATED INCOME STATEMENTS

|                                                           |  |       |           |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|---------------------------------------------------------- |  | ----- | --------- | --- |  | ----- | ------- | ---- |  | ---- | ------ | ---- |  |  | ------- | - |  |  | ------- | -
|Year ended 31 December,                                    |  |       |           |     |  | 2002  |         | 2002 |  | 2001 |        | 2000
|Amounts in million (except per share amounts)              |  | Notes |           | NOK |  | EUR*) |         | NOK  |  | NOK 
|Operating revenues                                         |  |       | 5         |     |  |       | 162,936 |      |  |      | 22,396 |      |  |  | 152,835 |   |  |  | 156,861 |  
|                                                           |  |       |           |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|Raw materials and energy costs                             |  |       |           |     |  |       | 99,607  |      |  |      | 13,691 |      |  |  | 94,537  |   |  |  | 94,082  |  
|Payroll and related costs                                  |  |       | 7, 20     |     |  |       | 20,333  |      |  |      | 2,795  |      |  |  | 17,237  |   |  |  | 14,852  |  
|Depreciation, depletion and amortization                   |  |       | 5, 15, 16 |     |  |       | 13,912  |      |  |      | 1,912  |      |  |  | 12,273  |   |  |  | 12,538  |  
|Other                                                      |  |       | 7,25      |     |  |       | 9,253   |      |  |      | 1,272  |      |  |  | 6,744   |   |  |  | 6,788   |  
|Restructuring costs                                        |  |       | 6         |     |  |       | (10     | )    |  |      | (1     | )    |  |  | 961     |   |  |  | 135     |  
|                                                           |  |       |           |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|Operating costs and expenses                               |  |       |           |     |  |       | 143,095 |      |  |      | 19,669 |      |  |  | 131,752 |   |  |  | 128,395 |  
|                                                           |  |       |           |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|Operating income before financial items
and other income   |  |       | 5         |     |  |       | 19,841  |      |  |      | 2,727  |      |  |  | 21,083  |   |  |  | 28,466  |  
|Equity in net income of non-consolidated investees         |  |       | 5, 13     |     |  |       | 33      |      |  |      | 5      |      |  |  | 566     |   |  |  | 672     |  
|Interest income and other financial income                 |  |       | 8, 24     |     |  |       | 1,418   |      |  |      | 195    |      |  |  | 2,847   |   |  |  | 1,747   |  
|Other income, net                                          |  |       | 5, 9      |     |  |       | 219     |      |  |      | 30     |      |  |  | 578     |   |  |  | 3,161   |  
|                                                           |  |       |           |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|Earnings before interest expense and taxes (EBIT)          |  |       |           |     |  |       | 21,511  |      |  |      | 2,957  |      |  |  | 25,074  |   |  |  | 34,046  |  
|Interest expense and foreign exchange gain (loss)          |  |       | 8, 24     |     |  |       | 517     |      |  |      | 71     |      |  |  | (3,609  | ) |  |  | (3,905  | )
|                                                           |  |       |           |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|Income before taxes and minority interest                  |  |       |           |     |  |       | 22,028  |      |  |      | 3,028  |      |  |  | 21,465  |   |  |  | 30,141  |  
|Income tax expense                                         |  |       | 10        |     |  |       | (13,278 | )    |  |      | (1,825 | )    |  |  | (13,750 | ) |  |  | (16,178 | )
|Minority interest                                          |  |       |           |     |  |       | 15      |      |  |      | 2      |      |  |  | 177     |   |  |  | 18      |  
|                                                           |  |       |           |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|Net income                                                 |  |       | 27        |     |  |       | 8,765   |      |  |      | 1,205  |      |  |  | 7,892   |   |  |  | 13,981  |  
|                                                           |  |       |           |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|Earnings per share                                         |  |       | 3         |     |  |       | 34.00   |      |  |      | 4.70   |      |  |  | 30.50   |   |  |  | 53.40   |  
|                                                           |  |       |           |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME **)       
|Net income                                                 |  |       |           |     |  |       | 8,765   |      |  |      | 1,205  |      |  |  | 7,892   |   |  |  | 13,981  |  
|                                                           |  |       |           |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|Net unrealized gain (loss
on securities available-for-sale |  |       | 3         |     |  |       | (31     | )    |  |      | (4     | )    |  |  | 41      |   |  |  | (3      | )
|Minimum pension liability adjustment                       |  |       | 3         |     |  |       | (323    | )    |  |      | (44    | )    |  |  | (397    | ) |  |  | (95     | )
|Net investment hedge                                       |  |       | 3         |     |  |       | 1,333   |      |  |      | 183    |      |  |  | 89      |   |  |  | (412    | )
|Cash flow hedges                                           |  |       | 3         |     |  |       | 979     |      |  |      | 135    |      |  |  | 136     |   |  |  |        |  
|Net foreign currency translation adjustments               |  |       | 3         |     |  |       | (7,207  | )    |  |      | (991   | )    |  |  | (794    | ) |  |  | 1,010   |  
|                                                           |  |       |           |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|Total other comprehensive income (loss), net of tax        |  |       | 3         |     |  |       | (5,249  | )    |  |      | (721   | )    |  |  | (925    | ) |  |  | 500     |  
|                                                           |  |       |           |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|Comprehensive income, net of tax                           |  |       |           |     |  |       | 3,516   |      |  |      | 483    |      |  |  | 6,967   |   |  |  | 14,481  |  
|                                                           |  |       |           |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  



|*)  | Presentation in euro is a convenience translation based on the
exchange rate at 31.12.2002, which was 7.2754 (unaudited)                                    
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|**) | Changes

in shareholders equity include net income together with other
changes not related to investments by and distribution to shareholders.
(See Note 3)

The accompanying notes are an integral part of the consolidated financial
statements.

86





---



##### 



CONSOLIDATED BALANCE SHEETS

|                                                                                         |  |       |            |     |  |       |         |      |  |      |        |   |  |  |         |  
|---------------------------------------------------------------------------------------- |  | ----- | ---------- | --- |  | ----- | ------- | ---- |  | ---- | ------ | - |  |  | ------- | -
|31 December,                                                                             |  |       |            |     |  | 2002  |         | 2002 |  | 2001
|Amounts in million                                                                       |  | Notes |            | NOK |  | EUR*) |         | NOK 
|ASSETS                                                                                   |  |       |            |     |  |       |         |      |  |      |        |   |  |  |         |  
|Cash and cash equivalents                                                                |  |       |            |     |  |       | 5,965   |      |  |      | 820    |   |  |  | 27,148  |  
|Other liquid assets                                                                      |  |       | 11         |     |  |       | 2,647   |      |  |      | 364    |   |  |  | 2,421   |  
|Accounts receivable, less allowances of 1,102 and 1,138                                  |  |       |            |     |  |       | 25,280  |      |  |      | 3,475  |   |  |  | 23,372  |  
|Inventories                                                                              |  |       | 12         |     |  |       | 17,232  |      |  |      | 2,368  |   |  |  | 15,794  |  
|Prepaid expenses and other current assets                                                |  |       |            |     |  |       | 13,055  |      |  |      | 1,794  |   |  |  | 9,482   |  
|Current deferred tax assets                                                              |  |       | 10         |     |  |       | 2,218   |      |  |      | 305    |   |  |  | 2,106   |  
|                                                                                         |  |       |            |     |  |       |         |      |  |      |        |   |  |  |         |  
|Current assets                                                                           |  |       | 5          |     |  |       | 66,397  |      |  |      | 9,126  |   |  |  | 80,323  |  
|                                                                                         |  |       |            |     |  |       |         |      |  |      |        |   |  |  |         |  
|Non-consolidated investees                                                               |  |       | 13         |     |  |       | 11,499  |      |  |      | 1,581  |   |  |  | 9,687   |  
|Property, plant and equipment, less accumulated
depreciation, depletion and amortization |  |       | 15         |     |  |       | 112,342 |      |  |      | 15,441 |   |  |  | 95,277  |  
|Prepaid pension, investments and other non-current assets                                |  |       | 14, 16, 20 |     |  |       | 15,081  |      |  |      | 2,073  |   |  |  | 11,636  |  
|Deferred tax assets                                                                      |  |       | 10         |     |  |       | 1,892   |      |  |      | 260    |   |  |  | 999     |  
|                                                                                         |  |       |            |     |  |       |         |      |  |      |        |   |  |  |         |  
|Non-current assets                                                                       |  |       | 5          |     |  |       | 140,814 |      |  |      | 19,355 |   |  |  | 117,599 |  
|                                                                                         |  |       |            |     |  |       |         |      |  |      |        |   |  |  |         |  
|Total assets                                                                             |  |       | 5          |     |  |       | 207,211 |      |  |      | 28,481 |   |  |  | 197,922 |  
|                                                                                         |  |       |            |     |  |       |         |      |  |      |        |   |  |  |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                    
|Bank loans and other interest-bearing short-term debt                                    |  |       | 17         |     |  |       | 7,306   |      |  |      | 1,004  |   |  |  | 8,458   |  
|Current portion of long-term debt                                                        |  |       | 19         |     |  |       | 1,958   |      |  |      | 269    |   |  |  | 1,966   |  
|Other current liabilities                                                                |  |       | 18         |     |  |       | 38,331  |      |  |      | 5,269  |   |  |  | 32,245  |  
|Current deferred tax liabilities                                                         |  |       | 10         |     |  |       | 262     |      |  |      | 36     |   |  |  | 324     |  
|                                                                                         |  |       |            |     |  |       |         |      |  |      |        |   |  |  |         |  
|Current liabilities                                                                      |  |       |            |     |  |       | 47,857  |      |  |      | 6,578  |   |  |  | 42,993  |  
|                                                                                         |  |       |            |     |  |       |         |      |  |      |        |   |  |  |         |  
|Long-term debt                                                                           |  |       | 19         |     |  |       | 30,902  |      |  |      | 4,247  |   |  |  | 37,853  |  
|Accrued pension liabilities                                                              |  |       | 20         |     |  |       | 8,385   |      |  |      | 1,152  |   |  |  | 4,215   |  
|Other long-term liabilities                                                              |  |       | 21         |     |  |       | 6,248   |      |  |      | 859    |   |  |  | 5,912   |  
|Deferred tax liabilities                                                                 |  |       | 10         |     |  |       | 36,809  |      |  |      | 5,060  |   |  |  | 31,105  |  
|                                                                                         |  |       |            |     |  |       |         |      |  |      |        |   |  |  |         |  
|Long-term liabilities                                                                    |  |       |            |     |  |       | 82,344  |      |  |      | 11,318 |   |  |  | 79,085  |  
|                                                                                         |  |       |            |     |  |       |         |      |  |      |        |   |  |  |         |  
|Minority shareholders interest in consolidated subsidiaries                             |  |       |            |     |  |       | 1,143   |      |  |      | 157    |   |  |  | 1,051   |  
|                                                                                         |  |       |            |     |  |       |         |      |  |      |        |   |  |  |         |  
|Share capital                                                                            |  |       | 3          |     |  |       | 5,332   |      |  |      | 733    |   |  |  | 5,332   |  
|Additional paid-in capital                                                               |  |       | 3          |     |  |       | 15,088  |      |  |      | 2,074  |   |  |  | 15,070  |  
|Retained earnings                                                                        |  |       | 3          |     |  |       | 63,260  |      |  |      | 8,694  |   |  |  | 57,070  |  
|-Treasury stock                                                                          |  |       | 3          |     |  |       | (3,052  | )    |  |      | (419   | ) |  |  | (3,167  | )
|Accumulated other comprehensive income                                                   |  |       | 3          |     |  |       | (4,761  | )    |  |      | (654   | ) |  |  | 488     |  
|                                                                                         |  |       |            |     |  |       |         |      |  |      |        |   |  |  |         |  
|Shareholders equity                                                                     |  |       | 3, 27      |     |  |       | 75,867  |      |  |      | 10,428 |   |  |  | 74,793  |  
|                                                                                         |  |       |            |     |  |       |         |      |  |      |        |   |  |  |         |  
|Total liabilities and shareholders equity                                               |  |       |            |     |  |       | 207,211 |      |  |      | 28,481 |   |  |  | 197,922 |  
|                                                                                         |  |       |            |     |  |       |         |      |  |      |        |   |  |  |         |  



|*) | Presentation in euro is a convenience translation based on the
exchange rate at 31.12.2002, which was 7.2754 (unaudited)
|-- | ------------------------------------------------------------------------------------------------------------------------



The accompanying notes are an integral part of the consolidated financial
statements.

87





---



##### 



NORSK HYDRO ASA and subsidiaries - US GAAP AND N GAAP1)

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                  |  |       |       |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|--------------------------------------------------------------------------------- |  | ----- | ----- | --- |  | ----- | ------- | ---- |  | ---- | ------ | ---- |  |  | ------- | - |  |  | ------- | -
|Year ended 31 December,                                                           |  |       |       |     |  | 2002  |         | 2002 |  | 2001 |        | 2000
|Amounts in million                                                                |  | Notes |       | NOK |  | EUR*) |         | NOK  |  | NOK 
|Operating activities:                                                             |  |       |       |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|Net income                                                                        |  |       |       |     |  |       | 8,765   |      |  |      | 1,205  |      |  |  | 7,892   |   |  |  | 13,981  |  
|Adjustments to reconcile net income to net cash
provided by operating activities: |  |       |       |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|Depreciation, depletion and amortization                                          |  |       | 5     |     |  |       | 13,912  |      |  |      | 1,912  |      |  |  | 12,273  |   |  |  | 12,538  |  
|Restructuring costs                                                               |  |       | 6     |     |  |       | (10     | )    |  |      | (1     | )    |  |  | 961     |   |  |  | 135     |  
|Equity in net income of non-consolidated investees                                |  |       | 5, 13 |     |  |       | (33     | )    |  |      | (5     | )    |  |  | (566    | ) |  |  | (672    | )
|Dividends received from non-consolidated investees                                |  |       | 13    |     |  |       | 414     |      |  |      | 57     |      |  |  | 472     |   |  |  | 398     |  
|Deferred taxes                                                                    |  |       | 10    |     |  |       | (619    | )    |  |      | (85    | )    |  |  | (313    | ) |  |  | 2,467   |  
|Loss (gain) on sale of non-current assets                                         |  |       |       |     |  |       | 823     |      |  |      | 113    |      |  |  | (937    | ) |  |  | (3,162  | )
|Loss (gain) on foreign currency transactions                                      |  |       | 8     |     |  |       | (3,262  | )    |  |      | (448   | )    |  |  | 416     |   |  |  | 655     |  
|Net sales (purchases) of trading securities                                       |  |       |       |     |  |       | 616     |      |  |      | 85     |      |  |  | (112    | ) |  |  | (115    | )
|Other                                                                             |  |       |       |     |  |       | 450     |      |  |      | 62     |      |  |  | 773     |   |  |  | 377     |  
|Working capital changes that provided (used) cash:                                |  |       |       |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|Receivables                                                                       |  |       |       |     |  |       | (1,959  | )    |  |      | (269   | )    |  |  | 3,627   |   |  |  | (3,149  | )
|Inventories                                                                       |  |       |       |     |  |       | 1,758   |      |  |      | 242    |      |  |  | 1,854   |   |  |  | (2,461  | )
|Prepaid expenses and other current assets                                         |  |       |       |     |  |       | (1,777  | )    |  |      | (244   | )    |  |  | (355    | ) |  |  | (616    | )
|Other current liabilities                                                         |  |       |       |     |  |       | 2,707   |      |  |      | 372    |      |  |  | 187     |   |  |  | 5,250   |  
|                                                                                  |  |       |       |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|Net cash provided by operating activities                                         |  |       |       |     |  |       | 21,785  |      |  |      | 2,994  |      |  |  | 26,172  |   |  |  | 25,626  |  
|                                                                                  |  |       |       |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|Investing activities:                                                             |  |       |       |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|Purchases of property, plant and equipment                                        |  |       |       |     |  |       | (19,573 | )    |  |      | (2,690 | )    |  |  | (14,348 | ) |  |  | (11,943 | )
|Purchases of other long-term investments                                          |  |       |       |     |  |       | (18,104 | )    |  |      | (2,488 | )    |  |  | (1,663  | ) |  |  | (4,348  | )
|Net sales (purchases) of short-term investments                                   |  |       |       |     |  |       | (1,154  | )    |  |      | (159   | )    |  |  | 42      |   |  |  | (15     | )
|Proceeds from sales of property, plant and equipment                              |  |       |       |     |  |       | 908     |      |  |      | 125    |      |  |  | 629     |   |  |  | 1,334   |  
|Proceeds from sales of other long-term investments                                |  |       |       |     |  |       | 1,477   |      |  |      | 203    |      |  |  | 659     |   |  |  | 11,342  |  
|                                                                                  |  |       |       |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|Net cash used in investing activities                                             |  |       |       |     |  |       | (36,446 | )    |  |      | (5,009 | )    |  |  | (14,681 | ) |  |  | (3,630  | )
|                                                                                  |  |       |       |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|Financing activities:                                                             |  |       |       |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|Loan proceeds                                                                     |  |       |       |     |  |       | 707     |      |  |      | 97     |      |  |  | 408     |   |  |  | 993     |  
|Principal repayments                                                              |  |       |       |     |  |       | (4,196  | )    |  |      | (577   | )    |  |  | (2,865  | ) |  |  | (6,328  | )
|Ordinary shares purchased                                                         |  |       | 3     |     |  |       |        |      |  |      |       |      |  |  | (1,155  | ) |  |  | (763    | )
|Ordinary shares issued                                                            |  |       |       |     |  |       | 70      |      |  |      | 10     |      |  |  | 92      |   |  |  | 63      |  
|Dividends paid                                                                    |  |       | 3     |     |  |       | (2,576  | )    |  |      | (354   | )    |  |  | (2,470  | ) |  |  | (2,094  | )
|                                                                                  |  |       |       |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|Net cash used in financing activities                                             |  |       |       |     |  |       | (5,995  | )    |  |      | (824   | )    |  |  | (5,990  | ) |  |  | (8,129  | )
|                                                                                  |  |       |       |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|Foreign currency effects on cash flows                                            |  |       |       |     |  |       | (527    | )    |  |      | (72    | )    |  |  | (119    | ) |  |  | 464     |  
|                                                                                  |  |       |       |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|Net increase (decrease) in cash and cash equivalents                              |  |       |       |     |  |       | (21,183 | )    |  |      | (2,912 | )    |  |  | 5,382   |   |  |  | 14,331  |  
|Cash and cash equivalents at beginning of year                                    |  |       |       |     |  |       | 27,148  |      |  |      | 3,731  |      |  |  | 21,766  |   |  |  | 7,435   |  
|                                                                                  |  |       |       |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|Cash and cash equivalents at end of year                                          |  |       |       |     |  |       | 5,965   |      |  |      | 820    |      |  |  | 27,148  |   |  |  | 21,766  |  
|                                                                                  |  |       |       |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|Cash disbursements were made for:                                                 |  |       |       |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  
|Interest (net of amount capitalized)                                              |  |       |       |     |  |       | 1,363   |      |  |      | 187    |      |  |  | 357     |   |  |  | 1,460   |  
|Income taxes                                                                      |  |       |       |     |  |       | 13,935  |      |  |      | 1,915  |      |  |  | 14,006  |   |  |  | 8,027   |  
|                                                                                  |  |       |       |     |  |       |         |      |  |      |        |      |  |  |         |   |  |  |         |  



|1) | There are no material differences between consolidated
statements of cash flows according to US GAAP and Norwegian
accounting principles (N GAAP).
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------
|*) | Presentation in euro is a convenience translation based on the
exchange rate at 31.12.2002, which was 7.2754. (unaudited)                         

The accompanying notes are an integral part of the consolidated financial statements.

88





---



##### 



NORSK HYDRO ASA and subsidiaries - N GAAP

CONSOLIDATED INCOME STATEMENTS

|                                                   |  |       |           |      |  |      |         |      |  |  |         |   |  |  |         |  
|-------------------------------------------------- |  | ----- | --------- | ---- |  | ---- | ------- | ---- |  |  | ------- | - |  |  | ------- | -
|Year ended 31 December,                            |  |       |           |      |  |      |         |      |  |  |         |   |  |  |         |  
|Amounts in NOK million                             |  | Notes |           | 2002 |  | 2001 |         | 2000
|Operating revenues                                 |  |       | 5         |      |  |      | 162,945 |      |  |  | 152,969 |   |  |  | 156,861 |  
|                                                   |  |       |           |      |  |      |         |      |  |  |         |   |  |  |         |  
|Raw materials and energy costs                     |  |       |           |      |  |      | 101,334 |      |  |  | 93,990  |   |  |  | 95,146  |  
|Change in inventories of own production            |  |       |           |      |  |      | (1,727  | )    |  |  | 547     |   |  |  | (1,064  | )
|Payroll and related costs                          |  |       | 7, 20     |      |  |      | 20,333  |      |  |  | 17,237  |   |  |  | 14,852  |  
|Depreciation, depletion and amortization           |  |       | 5, 15, 16 |      |  |      | 14,073  |      |  |  | 12,273  |   |  |  | 12,538  |  
|Other                                              |  |       |           |      |  |      | 9,124   |      |  |  | 6,924   |   |  |  | 6,773   |  
|Restructuring costs                                |  |       | 6         |      |  |      | (10     | )    |  |  | 961     |   |  |  | 135     |  
|                                                   |  |       |           |      |  |      |         |      |  |  |         |   |  |  |         |  
|Operating costs and expenses                       |  |       | 7         |      |  |      | 143,127 |      |  |  | 131,932 |   |  |  | 128,380 |  
|                                                   |  |       |           |      |  |      |         |      |  |  |         |   |  |  |         |  
|Operating income                                   |  |       | 5         |      |  |      | 19,818  |      |  |  | 21,037  |   |  |  | 28,481  |  
|Equity in net income of non-consolidated investees |  |       | 5, 13     |      |  |      | 23      |      |  |  | 566     |   |  |  | 672     |  
|Interest income and other financial income         |  |       | 8, 24     |      |  |      | 1,418   |      |  |  | 2,847   |   |  |  | 1,747   |  
|Other income, net                                  |  |       | 5, 9      |      |  |      | 219     |      |  |  | 578     |   |  |  | 3,161   |  
|                                                   |  |       |           |      |  |      |         |      |  |  |         |   |  |  |         |  
|Earnings before interest expense and taxes (EBIT)  |  |       |           |      |  |      | 21,478  |      |  |  | 25,028  |   |  |  | 34,061  |  
|Interest expense and foreign exchange gain (loss)  |  |       | 8, 24     |      |  |      | 517     |      |  |  | (3,609  | ) |  |  | (3,905  | )
|                                                   |  |       |           |      |  |      |         |      |  |  |         |   |  |  |         |  
|Income before taxes and minority interest          |  |       |           |      |  |      | 21,995  |      |  |  | 21,419  |   |  |  | 30,156  |  
|Income tax expense                                 |  |       | 10        |      |  |      | (13,328 | )    |  |  | (13,733 | ) |  |  | (16,188 | )
|                                                   |  |       |           |      |  |      |         |      |  |  |         |   |  |  |         |  
|Net income                                         |  |       |           |      |  |      | 8,667   |      |  |  | 7,686   |   |  |  | 13,968  |  
|Minority interest                                  |  |       |           |      |  |      | 15      |      |  |  | 177     |   |  |  | 18      |  
|                                                   |  |       |           |      |  |      |         |      |  |  |         |   |  |  |         |  
|Net income after minority interest                 |  |       | 27        |      |  |      | 8,682   |      |  |  | 7,863   |   |  |  | 13,986  |  
|                                                   |  |       |           |      |  |      |         |      |  |  |         |   |  |  |         |  

Oslo, 28 February, 2003

|                                                                                                                                                                                                                                                                       |  |                                                                      |  |                   
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------- |  | ------------------
|-s-Egil Myklebust, chairman                                                                                                                                                                                                                                            |  | -s-Borger A. Lenth, vice chairman                                    |  | -s-Elisabeth Grieg
|Egil Myklebust, chairman                                                                                                                                                                                                                                               |  | Borger A. Lenth, vice chairman                                       |  | Elisabeth Grieg   
|                                                                                                                                                                                                                                                                       |  |                                                                      |  |                   
|-s-Anne Cathrine Høeg Rasmussen                                                                                                                                                                                                                                        |  | -s-Håkan Mogren                                                      |  | -s-Ingvild Myhre  
|Anne Cathrine Høeg Rasmussen                                                                                                                                                                                                                                           |  | Håkan Mogren                                                         |  | Ingvild Myhre     
|                                                                                                                                                                                                                                                                       |  |                                                                      |  |                   
|-s-Gudmund Per Olsen                                                                                                                                                                                                                                                   |  | -s-Odd Semstrøm                                                      |  | -s-Per Wold       
|Gudmund Per Olsen                                                                                                                                                                                                                                                      |  | Odd Semstrøm                                                         |  | Per Wold          
|                                                                                                                                                                                                                                                                       |  |                                                                      |  |                   
|The accompanying notes are an integral part of the consolidated
financial statements in accordance with Norwegian accounting
principles (N GAAP). See Note 27 for a reconciliation and
explanation of differences in accounting principles between US
GAAP and N GAAP. |  | -s-Eivind Reiten, President and CEO
Eivind Reiten, President and CEO

89





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##### 



NORSK HYDRO ASA and subsidiaries - N GAAP

CONSOLIDATED BALANCE SHEETS

|                                                             |  |       |            |      |  |      |         |   |  |  |         |  
|------------------------------------------------------------ |  | ----- | ---------- | ---- |  | ---- | ------- | - |  |  | ------- | -
|31 December,                                                 |  |       |            |      |  |      |         |   |  |  |         |  
|Amounts in NOK million                                       |  | Notes |            | 2002 |  | 2001
|ASSETS                                                       |  |       |            |      |  |      |         |   |  |  |         |  
|Deferred tax assets                                          |  |       | 10         |      |  |      | 2,184   |   |  |  | 1,892   |  
|Other intangible assets                                      |  |       | 14, 16     |      |  |      | 3,038   |   |  |  | 2,051   |  
|                                                             |  |       |            |      |  |      |         |   |  |  |         |  
|Intangible assets                                            |  |       |            |      |  |      | 5,222   |   |  |  | 3,943   |  
|                                                             |  |       |            |      |  |      |         |   |  |  |         |  
|Property, plant and equipment                                |  |       | 15         |      |  |      | 112,342 |   |  |  | 95,277  |  
|Non-consolidated investees                                   |  |       | 13         |      |  |      | 11,490  |   |  |  | 9,687   |  
|Prepaid pension, investments and other non-current assets    |  |       | 14, 16, 20 |      |  |      | 11,594  |   |  |  | 9,166   |  
|                                                             |  |       |            |      |  |      |         |   |  |  |         |  
|Financial non-current assets                                 |  |       |            |      |  |      | 23,084  |   |  |  | 18,853  |  
|                                                             |  |       |            |      |  |      |         |   |  |  |         |  
|Inventories                                                  |  |       | 12         |      |  |      | 17,232  |   |  |  | 15,794  |  
|Accounts receivable, less allowances of 1,102 and 1,138      |  |       |            |      |  |      | 25,280  |   |  |  | 23,372  |  
|Prepaid expenses and other current assets                    |  |       |            |      |  |      | 12,932  |   |  |  | 9,321   |  
|Other liquid assets                                          |  |       | 11         |      |  |      | 2,647   |   |  |  | 2,421   |  
|Cash and cash equivalents                                    |  |       |            |      |  |      | 5,965   |   |  |  | 27,148  |  
|                                                             |  |       |            |      |  |      |         |   |  |  |         |  
|Current assets                                               |  |       |            |      |  |      | 64,056  |   |  |  | 78,056  |  
|                                                             |  |       |            |      |  |      |         |   |  |  |         |  
|Total assets                                                 |  |       | 5          |      |  |      | 204,704 |   |  |  | 196,129 |  
|                                                             |  |       |            |      |  |      |         |   |  |  |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY                         |  |       |            |      |  |      |         |   |  |  |         |  
|Share capital                                                |  |       | 3          |      |  |      | 5,332   |   |  |  | 5,332   |  
|- Treasury stock                                             |  |       |            |      |  |      | (173    | ) |  |  | (179    | )
|Premium paid-in capital                                      |  |       |            |      |  |      | 15,055  |   |  |  | 15,055  |  
|Other paid-in capital                                        |  |       |            |      |  |      | 33      |   |  |  | 15      |  
|                                                             |  |       |            |      |  |      |         |   |  |  |         |  
|Total paid-in capital                                        |  |       |            |      |  |      | 20,247  |   |  |  | 20,223  |  
|                                                             |  |       |            |      |  |      |         |   |  |  |         |  
|Retained earnings incl. treasury stock                       |  |       | 3          |      |  |      | 54,523  |   |  |  | 54,726  |  
|- Treasury stock                                             |  |       |            |      |  |      | (2,879  | ) |  |  | (2,988  | )
|                                                             |  |       |            |      |  |      |         |   |  |  |         |  
|Total retained earnings                                      |  |       |            |      |  |      | 51,644  |   |  |  | 51,738  |  
|                                                             |  |       |            |      |  |      |         |   |  |  |         |  
|Minority shareholders interest in consolidated subsidiaries |  |       |            |      |  |      | 1,143   |   |  |  | 1,051   |  
|                                                             |  |       |            |      |  |      |         |   |  |  |         |  
|Shareholders equity                                         |  |       | 3, 27      |      |  |      | 73,034  |   |  |  | 73,012  |  
|                                                             |  |       |            |      |  |      |         |   |  |  |         |  
|Accrued pension liabilities                                  |  |       | 20         |      |  |      | 8,385   |   |  |  | 4,215   |  
|Deferred tax liabilities                                     |  |       | 10         |      |  |      | 34,731  |   |  |  | 30,120  |  
|Other long-term liabilities                                  |  |       | 21         |      |  |      | 7,348   |   |  |  | 5,684   |  
|                                                             |  |       |            |      |  |      |         |   |  |  |         |  
|Long-term liabilities                                        |  |       |            |      |  |      | 50,464  |   |  |  | 40,019  |  
|                                                             |  |       |            |      |  |      |         |   |  |  |         |  
|Long-term debt                                               |  |       | 19         |      |  |      | 30,902  |   |  |  | 37,853  |  
|                                                             |  |       |            |      |  |      |         |   |  |  |         |  
|Bank loans and other interest-bearing short-term debt        |  |       | 17         |      |  |      | 7,306   |   |  |  | 8,458   |  
|Current portion of long-term debt                            |  |       | 19         |      |  |      | 1,958   |   |  |  | 1,966   |  
|Dividends payable                                            |  |       |            |      |  |      | 2,709   |   |  |  | 2,576   |  
|Other current liabilities                                    |  |       | 18         |      |  |      | 38,331  |   |  |  | 32,245  |  
|                                                             |  |       |            |      |  |      |         |   |  |  |         |  
|Current liabilities                                          |  |       |            |      |  |      | 50,304  |   |  |  | 45,245  |  
|                                                             |  |       |            |      |  |      |         |   |  |  |         |  
|Total liabilities and shareholders equity                   |  |       |            |      |  |      | 204,704 |   |  |  | 196,129 |  
|                                                             |  |       |            |      |  |      |         |   |  |  |         |  

| |                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The accompanying notes are an integral part of the consolidated financial
statements in accordance with Norwegian accounting principles (N GAAP). See Note 27 for a reconciliation and explanation of differences
in accounting principles between US GAAP and N GAAP.

90





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NORSK HYDRO ASA and subsidiaries

Notes to the consolidated financial statements


1.     SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES

The consolidated financial statements of Norsk
Hydro ASA and its subsidiaries (Hydro) prepared
in accordance with accounting principles
generally accepted in the United States of
America (US GAAP) are included on pages 86 to
88. The consolidated financial statements
prepared in accordance with accounting
principles generally accepted in Norway (N GAAP)
are located on pages 88 to 90. Financial
statement preparation requires 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.

The accompanying notes include disclosures
required by US GAAP as well as disclosures in
accordance with N GAAP and are an integral part
of both sets of financial statements. The
following description of accounting principles
applies to both US GAAP and N GAAP unless
otherwise specified.

Note 27 provides a reconciliation and
explanation of the differences between net
income and shareholders equity for US GAAP and
N GAAP.

CONSOLIDATION

The consolidated financial statements include
Norsk Hydro ASA and subsidiary companies owned
directly or indirectly more than 50 percent. All
significant intercompany transactions and
balances have been eliminated.


Investments in companies (non-consolidated
investees) in which Hydro exercises significant
influence are accounted for using the equity
method. Significant influence normally exists
when Hydro has a substantial ownership interest
of 20 to 50 percent of voting shares.
Participation in joint ventures are accounted
for using the equity method, except for jointly
controlled assets where the partners have an
undivided interest. These and other
participation in joint ventures in the upstream
oil- and gas business are accounted for using
the pro rata method.

BUSINESS COMBINATIONS

Terms and conditions underlying most previous
acquisitions have resulted in purchase
accounting treatment (vs. pooling). See note 2
for a description of significant acquisitions
and disposals during the past three years. All
business combinations initiated after 30. June
2001 are accounted for as acquisitions (purchase
accounting). Purchase accounting involves
recording assets and liabilities of the acquired
company at their fair value at the time of
acquisition. Any excess of purchase price over
fair value is recorded as goodwill. When the
ownership interest in a subsidiary is less than
100 percent, the recorded amount of assets and
liabilities acquired reflect only Hydros
relative share of excess values.


For N GAAP, consolidated assets and liabilities reflect
100 percent of the fair market value at the
purchase date, except for goodwill (There are
currently no acquisitions giving rise to such
differences). The relative portion of any excess
value recorded relating to minority shareholders
is reflected in the total Minority shareholders
interest which is a component of the Groups
equity.

FOREIGN CURRENCY TRANSLATION

The financial statements, including any excess
values, of foreign operations which are not an
integral part of the parent companys operations
are translated using exchange rate at year end
for the balance sheet, and average exchange
rates for the income statement. Translation gains and losses,
including effects of exchange rate changes on
transactions designated as hedges of net foreign
investments, are included in Other comprehensive
income. None of the Companys existing
significant foreign operations are considered to
be an integral part of the parent company for
foreign currency translation purposes.


FOREIGN CURRENCY TRANSACTIONS

Realized and unrealized gains or losses on
transactions, assets and liabilities denominated
in a currency other than the functional currency
which do not qualify for hedge accounting
treatment are included in net income.


REVENUE RECOGNITION

Revenue from sales of products, including
products sold in international commodity
markets, is recognized when ownership passes to
the customer. Generally, this is when products
are delivered. Certain contracts specify price
determination in a later period. In these cases,
the revenue is recognized in the period prices
are determinable. Rebates and incentive
allowances are deferred and recognized in income
upon the realization or at the closing of the
rebate period. In arrangements where Hydro acts
as an agent, such as commission sales, only the
net commission fee is recognized as revenue.


Revenues from the production of oil and gas
are recognized on the basis of the companys net
working interest, regardless of whether the
production is sold (entitlement method). The
difference between Hydros share of produced
volumes and sold volumes is not material.

Trading of physical commodities which are
not net settled is presented on a gross basis in
the income statement. Activities related to the
trading of derivative commodity instruments and
physical commodities where net settlement
occurs, are reported on a net basis, with the
margin included in operating revenues.

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.


91





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NORSK HYDRO ASA and subsidiaries
Notes to the consolidated financial statements

OTHER LIQUID ASSETS

Other liquid assets include bank deposits and
all other monetary instruments with a maturity
between three and twelve months at the date of
purchase and Hydros current portfolio of
marketable equity and debt securities. The
securities in this portfolio are considered
trading securities and are valued at fair value.
The resulting unrealized holding gains and
losses are included in financial income and
expense. Investment income is recorded when
earned.


INVENTORIES

Inventories are valued at the lower of cost,
using the first-in, first-out method (FIFO), or
net realizable value. Cost includes direct
materials, direct labor and the appropriate
portion of production overhead or the price to
purchase inventory.


INVESTMENTS

Investments include Hydros portfolio of
long-term marketable equity securities in which
there is less than 20 percent ownership. The
portfolio is considered available-for-sale
securities and is valued at fair value. The
resulting unrealized holding gains and losses,
net of applicable taxes, are credited or charged
to Other Comprehensive Income and accordingly do
not affect net income. Other investment income
is recorded when earned.


For N GAAP, investments are valued at
the lower of historical cost or market value.
[Note 27].

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is carried at
historical cost less accumulated depreciation,
depletion and amortization. Long-lived assets
are reviewed for impairment whenever events or
changes in circumstances indicate that the
carrying amount may not be recoverable. If
necessary, a write-down (impairment) to fair
value is recorded based upon the criteria in
Statement of Financial Accounting Standards
(SFAS) 144.


Periodic maintenance and repairs
applicable to production facilities are
accounted for on an accrual basis. Normal
maintenance and repairs for all other properties
are expensed as incurred. Major replacements and
renewals that materially extend the life of
properties are capitalized and any assets
replaced are retired.

Capitalized InterestInterest is capitalized as
part of the historical cost of major assets
constructed.

Leased AssetsLeases which provide Hydro with
substantially all the rights and obligations of
ownership are accounted for as capital leases. Such
leases are valued at the present value of minimum
lease payments or fair value if lower, and recorded
as assets under property, plant and equipment. The
liability is included in long-term debt. The assets are subsequently depreciated and the
related liabilities are reduced by the amount
of the lease payments less the effective
interest expense. Other leases are accounted
for as operating leases with lease payments
recognized as an expense over the lease term.

Environmental ExpendituresEnvironmental
expenditures which increase the life, capacity,
or result in improved safety or efficiency of a
facility are capitalized.
Expenditures that relate to an existing
condition caused by past operations are
expensed. Liabilities are recorded when
environmental assessments or clean-ups are
probable and the cost can be reasonably
estimated.

Exploration and Development Costs of Oil and Gas
ReservesHydro uses the successful efforts
method of accounting for oil and gas exploration
and development costs. Exploratory costs,
excluding the costs of exploratory wells and
acquired exploration rights, are charged to
expense as incurred. Drilling costs for
exploratory wells are capitalized pending the
determination of the existence of proved
reserves. If reserves are not found, the
drilling costs are charged to operating expense.
Cost relating to acquired exploration rights are
allocated to the relevant areas, and charged to
operating expense upon determination that proved
reserved will not be found in the area. All
development costs for wells, platforms,
equipment and related interest are capitalized.
Preproduction costs are expensed as incurred.

Depreciation, Depletion and Amortization
Depreciation is determined using the straight
line method with the following rates:

|                        |  |         |        
|----------------------- |  | ------- | -------
|Machinery and equipment |  | 5  25  | percent
|Buildings               |  | 2  5   | percent
|Other                   |  | 10  20 | percent

Producing oil and gas properties are depreciated
as proved developed reserves are produced using
the unit-of-production method calculated by
individual field. Depreciation and depletion
expense includes provisions for future
abandonment and removal costs for offshore
facilities.

INTANGIBLE ASSETS

Intangible assets acquired individually or as a
group are recorded at fair value 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. Intangible assets with finite
useful lives are amortized on a straight line
basis over their benefit period. Intangible
assets determined to have indefinite useful
lives are not amortized until a finite life can
be determined. These intangible


92





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##### 



assets are subject to impairment testing on
an annual basis.

GOODWILL

When a business is acquired, purchase price in
excess of the identified fair value of assets
and liabilities is accounted for as goodwill.
Under SFAS 142, goodwill is no longer
systematically amortized, but reviewed at least
annually for impairment. Goodwill is recorded at
the reporting unit level (for Hydro this is the
sector level). The impairment test requires fair
value of the sector to be compared to the
carrying value of the sector.


For N GAAP, goodwill is amortized over a
period not exceeding 10 years. [Note 27]

OIL AND GAS ROYALTY

Oil and gas revenue is recorded net of royalties payable.


SHIPPING COSTS

Shipping and handling costs are included in
Other operating expenses. Shipping and handling
cost invoiced to customers are included in
Operating revenues.


RESEARCH AND DEVELOPMENT

Research and development costs are expensed as incurred.


OTHER INCOME (EXPENSE), NET

Transactions resulting in income or expense
which are material in nature and from sources
other than normal production and sales
operations are classified as other income and
expense.


INCOME TAXES

Deferred income tax expense is calculated using
the liability method in accordance with SFAS
109. Under this method, 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 expense
represents the change in deferred tax asset and
liability balances during the year except for
deferred tax related to items charged directly
to equity. Changes resulting from amendments and
revisions in tax laws and tax rates are
recognized when the new tax laws or rates become
effective.


Hydro recognizes the effect of
uplift, a special deduction for petroleum surtax
in Norway, at the investment date. Deferred
taxes are not provided on undistributed earnings
of most subsidiaries, as such earnings are
deemed to be indefinitely reinvested.

For N GAAP, Hydro follows the NRS (The
Norwegian Accounting Standards Board) standard
which, like SFAS 109, is based on the
liability method. [Note 27].

DERIVATIVE INSTRUMENTS

Derivative financial instruments are marked to
their market value with the resulting gain or
loss reflected in net financial expense, except
when he instruments meet the criteria for hedge
accounting. See Note 24 for the balance sheet
classification of these instruments.


Forward currency contracts and currency
optionsare marked to their market value at
each balance sheet date with the resulting
unrealized gain or loss recorded in interest
expense and foreign exchange gain (loss).

Interest rate and foreign currency swaps.
Interest income and expense relating to swaps
are netted and recognized as income or expense
over the life of the contract. Foreign currency swaps are translated
into Norwegian kroner at applicable exchange
rates as of the balance sheet date with the
resulting unrealized exchange gain or loss
recorded in interest expense and foreign
exchange gain (loss).

Swaption contracts are marked to their
market value at each balance sheet date with the
resulting unrealized gain or loss reflected in
interest expense and foreign exchange gain
(loss).

Derivative Commodity InstrumentsInstruments are
marked-to-market with their fair value recorded
in the balance sheet as either assets or
liabilities. Adjustments for changes in the fair
value of the instruments are reflected in the
current periods revenues and/or operating
costs, unless the instrument is designated as a
hedge instrument, and qualifies for hedge
accounting.

Hedge accounting is applied when specific
hedge criteria are met. The changes in fair
value of these hedging instruments are offset in
part or in whole by corresponding changes in the
fair value or cash flows of the underlying
exposures being hedged. For cash flow hedges,
gains and losses on the hedging instruments are
deferred in OCI until the underlying transaction
is recognized in earnings. When it is determined
that a forecasted hedged transaction is not
probable to occur, all the corresponding gains
and losses deferred in OCI are immediately
recognized in earnings. Any amounts resulting
from hedge ineffectiveness for both fair value
and cash flow hedges are recognized in current
periods earnings. For fair value hedges, both
the changes in the fair value of the designated
derivative instrument and the changes in the
fair value of hedged item are recognized
currently in earnings.

Contracts that qualify as energy trading
activities under EITF 98-10 Accounting for
Contracts Involved in Energy Trading and Risk
Management Activities are measured at fair
value with unrealized gains and losses
recognized in current period earnings. New
contracts entered into subsequent to 25 October,
2002 are accounted for according to EITF 02-3
Recognition and
Reporting of Gains and Losses on Energy Contracts.

93





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##### 



NORSK HYDRO ASA and subsidiaries
Notes to the consolidated financial statements

This standard requires energy contracts that
meet the definition of a derivative according to
FAS133 Accounting for Derivative Instruments
and Hedging Activities and are held for
trading, be recorded in the balance sheet at
fair value. Changes in the fair value are
recorded to earnings for each period unless
specific hedge criteria are met. Fair values are
based on quoted market prices. Energy contracts
that do not meet the criteria of EITF 02-3 are
recorded at the lower of historical cost and
fair market value. For contracts entered into
before 25 October, 2002, the new regulation will
be applicable from 1 January 2003.

For N GAAP, commodity derivative instruments
that are traded in a regulated, liquid market
are marked-to-market with their fair market
value recorded in the balance sheet as either
assets or liabilities. Unrealized gains and
losses for commodity derivative instruments that
are not traded in a regulated, liquid market are
netted for each portfolio and net unrealized
gains are not recognized. Cash flow hedges with
derivative instruments are not recognized on the
balance sheet or income statement under N GAAP,
until the underlying hedged transactions
actually occur. [Note 27].

Certain derivative commodity instruments
require daily cash settlements, principally
London Metal Exchange (LME) futures and options,
and oil futures. LME options also involve an
initial receipt or payment of a premium and give
rise to delivery of an agreed amount of cash if
the option is exercised. Most other financial
and commodity instruments have a cash effect at
settlement date, which are included in the
Statements of Cash Flows under operating
activities when incurred.

STOCK-BASED COMPENSATION

Hydro accounts for stock based compensation in
accordance with Accounting Principles Board
(APB) Opinion 25 and provides disclosures
required under SFAS 123. For fixed awards,
compensation expense is recorded in the income
statement based on any excess of market price of
the Companys shares over the exercise price of
options granted to employees as of the date of
the grant if both the number of shares to be
granted and the exercise price are known. For
variable awards compensation cost is measured at
the end of each period as the amount by which
the market price of the Companys shares exceeds
the price of the options. For variable awards
where vesting depends on achieving a specified
improvement in Hydros share price, compensation
cost is measured when it is probable the
performance criteria will be met.
Compensation is charged to expense over the
periods the employee performs the related
services.


Hydro also offers treasury shares to
employees at discounted prices to encourage
share ownership. Issuance of treasury shares at
a discount to employees results in a charge to
compensation expense based on the difference
between the market value of the share at the
date of issuance and the price paid by
employees.

EMPLOYEE RETIREMENT PLANS

Pension costs are calculated in accordance with
SFAS 87 and SFAS 88. Prior service costs are
amortized on a straight-line basis over the
average remaining service period of active
participants. Accumulated gains and losses in
excess of 10
percent of the greater of the benefit obligation
or the fair value of assets are amortized over
the remaining service period of active plan
participants.


For N GAAP, the same principle has been
applied which is in accordance with the NRS 6
Pension Cost.

CHANGE IN ACCOUNTING PRINCIPLES

Effective 1 January, 2002, Hydro adopted the
Financial Accounting Standards 141 Business
Combinations (SFAS 141), and Statement 142,
Goodwill and Other Intangible Assets (SFAS
142). Under SFAS 142, goodwill is no longer
systematically amortized but reviewed at least
annually for impairment. Goodwill is allocated
to reporting units (for Hydro this is the
sector level). At transition, impairment tests
comparing the fair value of sectors with
goodwill to the carrying value of the net
assets of the respective sectors were
performed. SFAS 142 continues the requirement
to amortize intangible assets over their
estimated useful life. However, if the useful
life is determined to be indefinite, no
amortization is recognized and the value of the
intangible asset is assessed for impairment
similar to goodwill. See Note 16 for further
information.


For N GAAP the previous regulation
regarding accounting for business combinations,
intangible assets and goodwill is continued.
The implementation of SFAS 141 and 142 results
in differences between US GAAP and N GAAP.

Effective 1 January, 2002, Hydro also
adopted the Financial Accounting Standards No
144 Accounting for Impairment or Disposal of
Long-Lived Assets. This standard supercedes
SFAS 121 Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to
be Disposed Of. SFAS 144 applies to all
long-lived assets, including discontinued
operations. In addition, it expands the scope
for the presentation of discontinued operations
to include all components of an entity with
operations that are distinguishable and will be
eliminated in a disposal transaction

The change is not expected to represent
differences in measurement of transactions
compared to N GAAP.

Effective 1 January, 2001, Hydro adopted
the Financial Accounting Standard No. 133,
Accounting for Derivative Instruments and
Hedging Activities (SFAS 133), as amended by
SFAF 138. See further discussion in Note 24.

For N GAAP there is no change in accounting
principles related to SFAS 133. As result of a
change in the Norwegian

94





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##### 



Accounting Act, quoted commodity instruments
are marked to their market value as from 2001.
Changes in fair market value is recorded in
income. There were no implementation effects
from this change.

RECLASSIFICATIONS

Certain amounts in previously issued
consolidated financial statements were
reclassified to conform with the 2002
presentation.


In 2000, Hydro changed the presentation of
revenues for certain trading activities.
Revenues and related cost for these activities
were previously presented net reflecting only
the related margins in revenues. These
activities are now presented on a gross basis.
This change resulted in an increase of Operating
revenues and Raw materials of NOK 12.7 billion
in 2000 compared to former presentations. The
change has no impact on results or equity.

NEW PRONOUNCEMENTS

Asset Retirement Obligations


In June 2001, FASB issued SFAS 143, Accounting
for Asset Retirement Obligations. This
Statement requires significant changes in the
accounting treatment for asset retirement
obligations such as decommissioning of oil and
gas production platforms, facilities and
pipelines. Specifically, it requires that the
fair value of a liability for an asset
retirement obligation be recorded in the period
it is incurred. Related asset retirement costs
are to be capitalized as part of the carrying
value of the long-lived asset. Furthermore, the
liability is to be accreted for the change in
its present value each reporting period, and the
associated asset retirement costs are to be
depreciated over the useful life of the related
long-lived asset. Hydro will adopt this
Statement on 1 January, 2003. Preliminary
assessments indicates an effect of approximately
NOK 300 million, which will be recognized as
income in Cumulative effect of change in
accounting principles in 2003.


The change is not expected to represent
differences in measurement of transactions
compared to N GAAP. Corresponding change will
be recognized in N GAAP, were the effect is
recorded to equity.

Energy contracts

In October 2002, EITF 02-3 Recognition and
Reporting of Gains and Losses on Energy
Contracts was issued. This standard requires
only energy contracts that meet the definition
of a derivative according to FAS133 Accounting
for Derivative Instruments and Hedging
Activities and are held for trading, be
recorded in the balance sheet at fair value.
Other energy contracts are recorded at the lower
of historical cost and fair market value. This
regulation applies to contracts entered into
after 25 October, 2002. For contracts entered
into before 25 October, 2002, the new regulation
will be applicable from 1 January 2003. The
implementation effect was not material for
Hydros financial statements.


This change is expected to bring the
treatment of energy contracts into closer
alignment with N GAAP.

Exit costs

In June 2002 FASB issued Statement 146 
Accounting for Costs Associated with Exit or
Disposal Activities. The standard supersedes
EITF Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring), and
changes accounting for costs related to closing
and restructuring an activity. SFAS 146
requires that a liability for a cost associated
with an exit or disposal activity be recognized
when the liability is incurred, not at the date
of an entitys commitment to an exit plan.
However, termination benefits for involuntary
termination of employees that are not required
to render services beyond a minimum retention
period are expensed at communication to the
employees.


The change is expected to represent
differences in date of recognition compared to
N GAAP, as N GAAP requires certain costs to be
recognized at commitment to an exit plan.

Guarantees

In November 2002, FASB issued Interpretation
(FIN) 45 Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. This
Interpretation clarifies certain elements
related to measurement and disclosure of
guarantees, including product warranties. The
interpretation clarifies that a guarantor is
required to recognize, at the inception of a
guarantee, a liability for the obligations it
has undertaken in issuing the guarantee,
including its ongoing obligation to stand ready
to perform over the term of the guarantee in the
event that the specified triggering events or
conditions occur. The recognition and
measurement provisions are applicable to
guarantees issued or modified after December 31,
2002. Hydro does not expect the adoption of FIN
45 to materially impact the Groups results of
operations and financial position.


The change is not expected to represent
differences in measurement of transactions
compared to N GAAP.

Consolidation of Variable Interest Entities

Issued in January 2003, FASB Interpretation (FIN) 46
Consolidation of Variable Interest Entities
addresses consolidation of certain entities (variable
interest entities) where the usual conditions for
consolidation, such as control or majority voting
interest, does not apply. Variable interest entities
have commonly been referred to as special purpose
entities. The Interpretation provides guidance on how
to identify variable interest entities and how to
determine which owner is the primary beneficiary of
the variable interest entity, and therefore should
consolidate the entity. The interpretation is to be
applied for variable


95





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##### 



NORSK HYDRO ASAand subsidaries
Notes to the consolidated financial statements

interest entities created after 31 January 2003,
and must be applied by third quarter 2003 to
variable interest entities existing before 31
January 2003. Hydro is currently in the process
of evaluation existing arrangements to determine
if they are variable interest entities.

Preliminary evaluation of the effects of
this Interpretation does indicate material
differences between US GAAP and N GAAP for
Hydros activities.

Impairment of assets

NRS(F) Impairment of Assets is changed,
applicable from 1 January, 2003. Impairment
tests for long-lived assets are, from this date,
required to measure impairment as the difference
between carrying value and fair value of the
asset, either as net selling price or discounted
future cash flows. This will represent a
difference between US GAAP and N GAAP.


2. BUSINESS COMBINATIONS AND DISPOSITIONS

Subsequent to and during the three years ended
31 December, 2002, Hydro entered into the
following significant business combinations and
dispositions.

2002 Acquisitions

On March 19, 2002, Hydro entered into an
agreement with the Norwegian State to purchase
interests in eight oil and gas licenses on the
Norwegian continental shelf. This transaction
increased Hydros interests in the Oseberg, Tune
and Grane fields, where Hydro is operator, to
34, 40 and 38 percent, respectively. The
transaction was completed and is reflected in
Hydros operating results from the acquisition
date of May 10, 2002. The agreement was
effective from January 1, 2002. However, net
cash flows relating to these operations prior to
the acquisition date have been allocated as a
reduction of the purchase price. Hydro has
agreed to pay NOK 3.45 billion for the license
interests.


In January, 2002, Hydro entered into
an agreement to purchase all the outstanding
shares of the German group VAW aluminium AG, a
leading aluminium company in Europe. The
acquisition was completed on March 15, 2002 and
is included in Hydros results from the same
date. VAW had operations in more than 20
countries. The major part of these activities
were located in the EU in addition to important
operations located in North America and the
Pacific region.

The consideration for all outstanding shares, including direct acquisition
costs amounted to EUR 1,911 million (NOK 14.8
billion). In addition, interest bearing debt of
EUR 703 million (NOK 5.5 billion) and pension
commitments of approximately EUR 410 million
(NOK 3.2 billion) was assumed. The acquisition
was financed by Hydros cash holdings.

Assets acquired and liabilities assumed in the
VAW acquisition have been recorded at estimated
fair value. The purchase price allocation is
based on estimates for fair value of assets and
liabilities in VAW, and is substantially
complete. Excess values are for the most part
allocated to tangible fixed assets. The
allocation does not indicate material goodwill
in the transaction. As VAWs inventories have
been recorded at estimated fair values as of the
time of the acquisition, cost of goods sold was
unusually high in the period after acquisition.
The effect was approximately NOK 200 million.

|                                          |  |  |         |  
|----------------------------------------- |  |  | ------- | -
|Amounts
in NOK million                    |  |  |         |  
|Preliminary allocation of purchase price  |  |  |         |  
|Cash and cash equivalents                 |  |  | 410     |  
|Other current assets                      |  |  | 11,597  |  
|Property, plant and equipment             |  |  | 16,592  |  
|Other non-current assets                  |  |  | 6,140   |  
|Short-term liabilities                    |  |  | (9,517  | )
|Long-term liabilities                     |  |  | (10,022 | )
|Minority interests                        |  |  | (356    | )
|                                          |  |  |         |  
|Estimated fair value of net assets of VAW |  |  | 14,844  |  
|                                          |  |  |         |  

Certain information regarding the estimated fair
values of assets and liabilities acquired is
still outstanding and will be finalized in first
quarter 2003.

In November 2001, an agreement was
signed to purchase the French building systems
group Technal for a price of EUR 73 million (NOK
580 million) and the assumption of approximately
NOK 307 million in debt. The acquisition was
completed 25 January, 2002 and is included in
Hydros results from the same date.

2002 DispositionsDuring 2002, Hydro sold
non-core subsidiaries and ownership interests
for a total consideration of NOK 2.9 billion.
The dispositions resulted in a total pretax gain
of NOK 219 million. In September, KFK entered
into agreements to sell its Danish feed and
grain activities for a total consideration of
approximately NOK 2 billion, and its Swedish
feed and grain activities for approximately NOK
450 million. The agreements resulted in
impairment charges of approximately NOK 150
million. The sale of the Danish activities was
completed in forth quarter, while the sale of
the Swedish was completed in January 2003 after
approval from competition authorities. In
December, Hydro entered into an agreement for
the sale of the Flexible Packaging unit for a
total consideration of approximately NOK 3
billion. Flexible Packaging was acquired as part
of the VAW acquisition in first quarter 2002,
and is part of Other activities. The transaction
has received competition authority approval in
EU in February 2003 and is expected to be
completed in second quarter 2003.

96





---



##### 



2001 DispositionsHydro concluded the sale of
Hydro Seafoods activities based in UK, Hydro
Seafood GSP Ltd. The sale resulted in a pretax
gain of NOK 418 million. Hydro sold the
remainder of its electric power grid in Norway,
resulting in a pretax gain of NOK 179 million.

2000 AcquisitionsHydro acquired 100 percent of
the shares in Wells Aluminium Corporation, an
aluminium extruder in the United States of
America. The purchase price was NOK 1,352
million, including debt assumed of NOK 870
million.

In July 2000, Hydro entered into an
agreement to acquire 58 percent of Adubos Trevo,
a Brazilian fertilizer company. As of 31
December 2000, 20.3 percent of the total shares
and 51 percent of the voting shares were
transferred to Hydro. The purchase price for the
total acquisition was NOK 374 million including
assumed debt. Transfer of the remaining shares
was finalized during the first six months of
2001. As of 31 December 2002 Hydros ownership
share is 95,9 percent.

2000 DispositionsDuring 2000, Hydro sold
subsidiaries and ownership interests for a total
consideration of NOK 10.3 billion. The
dispositions resulted in a total pretax gain of
NOK 3,161 million. In April, Hydro entered into
an agreement with a Dutch company, Nutreco
Holding N.V., to sell its salmon production and
sales activities operating as Hydro Seafood AS.
Approximately 80 percent of the total operations
was transferred to Nutreco in November. The
activities based in the United Kingdom were
excluded as a result of objection from the UK
competition authorities.

Hydros activities on the British
Continental Shelf were sold to Conoco UK (now
ConocoPhillips). These activities were acquired
as a part of Hydros acquisition of Saga
Petroleum ASA (Saga) in 1999. In addition, Hydro
disposed of its shares in Dyno ASA and
Autoplastics AB (now Sapa Autoplastics AB).

Pro Forma Information (Unaudited)

The following unaudited pro forma information
has been prepared assuming VAW was acquired as
of the beginning of 2001.


|                       |  |              |         |              |  |  |         | 
|---------------------- |  | ------------ | ------- | ------------ |  |  | ------- | 
|                       |  | 31 December, |         | 31 December,
|Amounts
in NOK million |  |              | 2002    |              |  |  | 2001    | 
|Assets                 |  |              | 207,211 |              |  |  | 216,978 | 
|                       |  |              |         |              |  |  |         | 

|                          |  |           |         |           |  |  |         | 
|------------------------- |  | --------- | ------- | --------- |  |  | ------- | 
|Amounts
in NOK million    |  | Year 2002 |         | Year 2001 | 
|Operating revenues        |  |           | 174,630 |           |  |  | 180,567 | 
|Operating income          |  |           | 20,554  |           |  |  | 22,941  | 
|EBITDA                    |  |           | 36,878  |           |  |  | 40,656  | 
|Net income                |  |           | 9,125   |           |  |  | 8,268   | 
|                          |  |           |         |           |  |  |         | 
|Earnings per share in NOK |  |           | 35.30   |           |  |  | 32.00   | 
|                          |  |           |         |           |  |  |         | 

This pro forma information has been prepared for
comparative purposes only and does not purport
to be indicative of what would have occurred had
the transaction occurred on the date described
above. The pro forma information is based on
Hydros results for 2002 and 2001 and results
for VAW for 2001, presented in accordance with
US GAAP. For the period 1 January 2002 to
Hydros acquisition on 15 March 2002, this pro
forma information is based on internal
management reports for VAW. For the period
previous to Hydros acquisition, some accounting
principles differ from Hydros normal
application. For example, VAW used the LIFO
(last-in-first-out) method for inventory
valuation. In general, uncertainty related to
pro forma information is higher than for
historic accounts.

VAWs results have been translated into
Norwegian kroner at average exchange rates. Pro
forma adjustments are made for fair value
adjustments for assets and liabilities, depreciation and amortization
of these adjustments, finance cost of the
acquisition price, and deferred tax related to
the above mentioned adjustments. However, no
adjustment has been made for the fair valuation
of inventories. Significant sales and
receivables between the companies are
eliminated.

The effect of the remaining acquisitions
and dispositions for 2002 and 2001 is not
significant.

97





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##### 



NORSK HYDRO ASA and subsidiaries
Notes to the consolidated financial statements

3. CONSOLIDATED SHAREHOLDERS EQUITY

|                                                                        |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          |        |   |  |  |        |   |  |  |        |   |  |  |        |   |  |  |        |  
|----------------------------------------------------------------------- |  | ---------------------- | ------- | ---------- |  | ------- | ----- | -------- |  | --------------- | ------ | -------------- |  | ------------- | ------ | -------------- |  | -------- | ------ | - |  |  | ------ | - |  |  | ------ | - |  |  | ------ | - |  |  | ------ | -
|Amounts in NOK million                                                  |  | Ordinary Shares issued |         | Additional |  | Total   |       |          |  |                 |        | Treasury Stock |  | Accumulated   |        | Total         
|except number of shares                                                 |  | Norsk Hydro ASA        |         | paid-in    |  | paid-in |       | Retained |  | Norsk Hydro ASA |        | other compre-  |  | shareholders'
|in thousands                                                            |  | Number                 |         | Amount     |  | capital |       | capital  |  | earnings        |        | Number         |  | Amount        |        | hensive income |  | equity1)
|Balance 31 December, 1999                                               |  |                        | 266,597 |            |  |         | 5,332 |          |  |                 | 15,055 |                |  |               | 20,387 |                |  |          | 39,761 |   |  |  | (4,891 | ) |  |  | (1,564 | ) |  |  | 913    |   |  |  | 59,497 |  
|                                                                        |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          |        |   |  |  |        |   |  |  |        |   |  |  |        |   |  |  |        |  
|Net income 2000                                                         |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          | 13,981 |   |  |  |        |   |  |  |        |   |  |  |        |   |  |  | 13,981 |  
|Dividend declared and paid (NOK 8.00 per share)                         |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          | (2,094 | ) |  |  |        |   |  |  |        |   |  |  |        |   |  |  | (2,094 | )
|Net unrealized loss on securities                                       |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          |        |   |  |  |        |   |  |  |        |   |  |  | (3     | ) |  |  | (3     | )
|Minimum pension liability                                               |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          |        |   |  |  |        |   |  |  |        |   |  |  | (95    | ) |  |  | (95    | )
|Hedge of net investment                                                 |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          |        |   |  |  |        |   |  |  |        |   |  |  | (412   | ) |  |  | (412   | )
|Purchase of treasury stock                                              |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          |        |   |  |  | (2,041 | ) |  |  | (763   | ) |  |  |        |   |  |  | (763   | )
|Treasury stock reissued to employees                                    |  |                        |         |            |  |         |       |          |  |                 | 4      |                |  |               | 4      |                |  |          | (1     | ) |  |  | 322    |   |  |  | 103    |   |  |  |        |   |  |  | 106    |  
|Foreign currency translation                                            |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          |        |   |  |  |        |   |  |  |        |   |  |  | 1,010  |   |  |  | 1,010  |  
|                                                                        |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          |        |   |  |  |        |   |  |  |        |   |  |  |        |   |  |  |        |  
|Balance 31 December, 2000                                               |  |                        | 266,597 |            |  |         | 5,332 |          |  |                 | 15,059 |                |  |               | 20,391 |                |  |          | 51,647 |   |  |  | (6,610 | ) |  |  | (2,224 | ) |  |  | 1,413  |   |  |  | 71,227 |  
|                                                                        |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          |        |   |  |  |        |   |  |  |        |   |  |  |        |   |  |  |        |  
|Net income 2001                                                         |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          | 7,892  |   |  |  |        |   |  |  |        |   |  |  |        |   |  |  | 7,892  |  
|Dividend declared and paid (NOK 9.50 per share)                         |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          | (2,470 | ) |  |  |        |   |  |  |        |   |  |  |        |   |  |  | (2,470 | )
|Net unrealized gain on securities                                       |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          |        |   |  |  |        |   |  |  |        |   |  |  | 41     |   |  |  | 41     |  
|Minimum pension liability                                               |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          |        |   |  |  |        |   |  |  |        |   |  |  | (397   | ) |  |  | (397   | )
|Hedge of net investment                                                 |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          |        |   |  |  |        |   |  |  |        |   |  |  | 89     |   |  |  | 89     |  
|Cash flow hedges                                                        |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          |        |   |  |  |        |   |  |  |        |   |  |  | 136    |   |  |  | 136    |  
|Purchase of treasury stock                                              |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          |        |   |  |  | (2,959 | ) |  |  | (1,155 | ) |  |  |        |   |  |  | (1,155 | )
|Treasury stock reissued to employees                                    |  |                        |         |            |  |         |       |          |  |                 | 16     |                |  |               | 16     |                |  |          |        |   |  |  | 351    |   |  |  | 122    |   |  |  |        |   |  |  | 138    |  
|Treasury stock reissued for acquisition of shares in Hydro Asia Pacific |  |                        |         |            |  |         |       |          |  |                 | (5     | )              |  |               | (5     | )              |  |          |        |   |  |  | 256    |   |  |  | 90     |   |  |  |        |   |  |  | 85     |  
|Foreign currency translation                                            |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          | 1      |   |  |  |        |   |  |  |        |   |  |  | (794   | ) |  |  | (793   | )
|                                                                        |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          |        |   |  |  |        |   |  |  |        |   |  |  |        |   |  |  |        |  
|Balance 31 December, 2001                                               |  |                        | 266,597 |            |  |         | 5,332 |          |  |                 | 15,070 |                |  |               | 20,402 |                |  |          | 57,070 |   |  |  | (8,962 | ) |  |  | (3,167 | ) |  |  | 488    |   |  |  | 74,793 |  
|                                                                        |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          |        |   |  |  |        |   |  |  |        |   |  |  |        |   |  |  |        |  
|Net income 2002                                                         |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          | 8,765  |   |  |  |        |   |  |  |        |   |  |  |        |   |  |  | 8,765  |  
|Dividend declared and paid (NOK 10.00 per share)                        |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          | (2,576 | ) |  |  |        |   |  |  |        |   |  |  |        |   |  |  | (2,576 | )
|Net unrealized gain on securities                                       |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          |        |   |  |  |        |   |  |  |        |   |  |  | (31    | ) |  |  | (31    | )
|Minimum pension liability                                               |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          |        |   |  |  |        |   |  |  |        |   |  |  | (323   | ) |  |  | (323   | )
|Hedge of net investment                                                 |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          |        |   |  |  |        |   |  |  |        |   |  |  | 1,333  |   |  |  | 1,333  |  
|Cash flow hedges                                                        |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          |        |   |  |  |        |   |  |  |        |   |  |  | 979    |   |  |  | 979    |  
|Treasury stock reissued to employees                                    |  |                        |         |            |  |         |       |          |  |                 | 18     |                |  |               | 18     |                |  |          |        |   |  |  | 326    |   |  |  | 116    |   |  |  |        |   |  |  | 134    |  
|Foreign currency translation                                            |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          | 1      |   |  |  |        |   |  |  | (1     | ) |  |  | (7,207 | ) |  |  | (7,207 | )
|                                                                        |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          |        |   |  |  |        |   |  |  |        |   |  |  |        |   |  |  |        |  
|Balance 31 December, 2002                                               |  |                        | 266,597 |            |  |         | 5,332 |          |  |                 | 15,088 |                |  |               | 20,420 |                |  |          | 63,260 |   |  |  | (8,636 | ) |  |  | (3,052 | ) |  |  | (4,761 | ) |  |  | 75,867 |  
|                                                                        |  |                        |         |            |  |         |       |          |  |                 |        |                |  |               |        |                |  |          |        |   |  |  |        |   |  |  |        |   |  |  |        |   |  |  |        |  

| |    |                                                   
| | -- | --------------------------------------------------
| | 1) | See note 27 for a reconciliation to N GAAP equity.

98





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##### 



Components of Accumulated Other Comprehensive Income and Related Tax Effects

|                                             |  |                   |        |                   |  |                   |      |        |  |     |        |     |  |        |      |     |  |     |     |   |  |  |      |   |  |  |       |   |  |  |     |  |  |  |       |  
|-------------------------------------------- |  | ----------------- | ------ | ----------------- |  | ----------------- | ---- | ------ |  | --- | ------ | --- |  | ------ | ---- | --- |  | --- | --- | - |  |  | ---- | - |  |  | ----- | - |  |  | --- |  |  |  | ----- | -
|                                             |  | 31 December, 2002 |        | 31 December, 2001 |  | 31
December, 2000
|Amounts in NOK million                       |  | Pretax            |        | Tax               |  | Net               |      | Pretax |  | Tax |        | Net |  | Pretax |      | Tax |  | Net
|Unrealized gain (loss) on securities         |  |                   | (43    | )                 |  |                   | 12   |        |  |     | (31    | )   |  |        | 58   |     |  |     | (17 | ) |  |  | 41   |   |  |  |      |   |  |  |    |  |  |  |      |  
|Less: Reclassification adjustment            |  |                   |       |                   |  |                   |     |        |  |     |       |     |  |        |     |     |  |     |    |   |  |  |     |   |  |  | (3    | ) |  |  |    |  |  |  | (3    | )
|                                             |  |                   |        |                   |  |                   |      |        |  |     |        |     |  |        |      |     |  |     |     |   |  |  |      |   |  |  |       |   |  |  |     |  |  |  |       |  
|Net unrealized gain (loss) on securities     |  |                   | (43    | )                 |  |                   | 12   |        |  |     | (31    | )   |  |        | 58   |     |  |     | (17 | ) |  |  | 41   |   |  |  | (3    | ) |  |  |    |  |  |  | (3    | )
|                                             |  |                   |        |                   |  |                   |      |        |  |     |        |     |  |        |      |     |  |     |     |   |  |  |      |   |  |  |       |   |  |  |     |  |  |  |       |  
|Net investment hedge                         |  |                   | 1,851  |                   |  |                   | (518 | )      |  |     | 1,333  |     |  |        | 124  |     |  |     | (35 | ) |  |  | 89   |   |  |  | (574  | ) |  |  | 162 |  |  |  | (412  | )
|                                             |  |                   |        |                   |  |                   |      |        |  |     |        |     |  |        |      |     |  |     |     |   |  |  |      |   |  |  |       |   |  |  |     |  |  |  |       |  
|Cash flow hedge                              |  |                   | 1,441  |                   |  |                   | (405 | )      |  |     | 1,036  |     |  |        | 188  |     |  |     | (52 | ) |  |  | 136  |   |  |  |      |   |  |  |    |  |  |  |      |  
|Less: Reclassification of hedging gain       |  |                   | (79    | )                 |  |                   | 22   |        |  |     | (57    | )   |  |        |     |     |  |     |    |   |  |  |     |   |  |  |      |   |  |  |    |  |  |  |      |  
|                                             |  |                   |        |                   |  |                   |      |        |  |     |        |     |  |        |      |     |  |     |     |   |  |  |      |   |  |  |       |   |  |  |     |  |  |  |       |  
|Net cash flow hedge                          |  |                   | 1,362  |                   |  |                   | (383 | )      |  |     | 979    |     |  |        | 188  |     |  |     | (52 | ) |  |  | 136  |   |  |  |      |   |  |  |    |  |  |  |      |  
|                                             |  |                   |        |                   |  |                   |      |        |  |     |        |     |  |        |      |     |  |     |     |   |  |  |      |   |  |  |       |   |  |  |     |  |  |  |       |  
|Minimum pension liability adjustment         |  |                   | (472   | )                 |  |                   | 149  |        |  |     | (323   | )   |  |        | (553 | )   |  |     | 156 |   |  |  | (397 | ) |  |  | (132  | ) |  |  | 37  |  |  |  | (95   | )
|                                             |  |                   |        |                   |  |                   |      |        |  |     |        |     |  |        |      |     |  |     |     |   |  |  |      |   |  |  |       |   |  |  |     |  |  |  |       |  
|Foreign currency translation                 |  |                   | (7,215 | )                 |  |                   |     |        |  |     | (7,215 | )   |  |        | (671 | )   |  |     |    |   |  |  | (671 | ) |  |  | 1,328 |   |  |  |    |  |  |  | 1,328 |  
|Loss (gain) on companies sold                |  |                   | 8      |                   |  |                   |     |        |  |     | 8      |     |  |        | (123 | )   |  |     |    |   |  |  | (123 | ) |  |  | (318  | ) |  |  |    |  |  |  | (318  | )
|                                             |  |                   |        |                   |  |                   |      |        |  |     |        |     |  |        |      |     |  |     |     |   |  |  |      |   |  |  |       |   |  |  |     |  |  |  |       |  
|Net foreign currency translation             |  |                   | (7,207 | )                 |  |                   |     |        |  |     | (7,207 | )   |  |        | (794 | )   |  |     |    |   |  |  | (794 | ) |  |  | 1,010 |   |  |  |    |  |  |  | 1,010 |  
|                                             |  |                   |        |                   |  |                   |      |        |  |     |        |     |  |        |      |     |  |     |     |   |  |  |      |   |  |  |       |   |  |  |     |  |  |  |       |  
|Total accumulated other comprehensive income |  |                   | (4,509 | )                 |  |                   | (740 | )      |  |     | (5,249 | )   |  |        | (977 | )   |  |     | 52  |   |  |  | (925 | ) |  |  | 301   |   |  |  | 199 |  |  |  | 500   |  
|                                             |  |                   |        |                   |  |                   |      |        |  |     |        |     |  |        |      |     |  |     |     |   |  |  |      |   |  |  |       |   |  |  |     |  |  |  |       |  

Norsk Hydro ASA had
authorized and issued
266,596,650 ordinary
shares having a par
value of NOK 20 per
share for the years
ended 31 December, 2002,
2001, and 2000. As of 31
December, 2002,
8,636,118 shares were
treasury stock resulting
in 257,960,532
outstanding ordinary
shares (for 2001
257,634,172 oustanding
ordinary shares). For N
GAAP, the amount for the
treasury stock of NOK
3,052 million was
comprised of NOK 173
million for share
capital and NOK 2,879
million for retained
earnings. Treasury stock
may be used as
consideration in
connection with
commercial transactions
or share schemes for the
employees and
representatives of the
Corporate Assembly and
the Board of Directors.
In 2002, Hydro sold
326,360 shares of its
treasury stock to
employees for NOK 134
million. The weighted
average number of
outstanding shares for
the year ended 31
December, 2002 was
257,799,411. As of 31
December, 2002, the
Norwegian government
ownership interest in
Norsk Hydro ASA was 45.3
percent adjusted for
treasury stock. The
share capital and
paid-in premium in Norsk
Hydro ASAs balance
sheet are not available
for dividend purposes.

4. STOCK-BASED COMPENSATION

Hydro has three
stock-based compensation
plans, the Executive
Share Option Plan
established in 2001, the
Executive Share Option
Plan established in 2002
and a subsidized share
purchase plan for
permanent employees in
the parent company and
Norwegian subsidiaries
owned more than 90
percent by Norsk Hydro
ASA.

The Executive Share
Option Plans are
variable plans that
relates to options
granted to approximately
30 persons in Hydros
top management including
the president and CEO,
persons in the corporate
management board and
others. During 2001,
92,000 options were
granted. The options
vesting schedule is
based on shareholder
return, as defined in
the Plan calculated over
a three-year performance
period beginning in May
2001. During 2002,
111,000 options were
granted. The options
vesting schedule is
based on shareholder
return, as defined in
the Plan calculated over
a three-year performance
period beginning in July
2002. If shareholder
return is less than 12%
none of the options
vest. If the shareholder
return achieved is
between 12% and 20% the
corresponding percentage
of options that vest
increases linearly
between 20% and 100%.
The options are
exercisable for two
years following the
three-year performance
period. All the shares
authorized for both
plans have been granted.

99





---



##### 



NORSK HYDRO ASA and subsidiaries
Notes to the consolidated financial statements

During 1999,
165,000 options were
granted under the 1999
Plan at an exercise
price of NOK 367.50.
This plan expired at the
end of 2002. There were
no options exercised or
cancelled during 1999.
During 2000 there were
no options granted,
exercised or canceled.
During 2001, in addition
to the Executive Share
Option Plan 2001, 3,500
options were exercised
under the 1999 plan.
Activity for 2002 is as
follows:

|                     |  |           |         |          |  |           |        |            |  |  |    | 
|-------------------- |  | --------- | ------- | -------- |  | --------- | ------ | ---------- |  |  | -- | 
|                     |  |           |         |          |  | Strike    |        | Fair value
|Options              |  | Number    |         | price    |  | per share
|outstanding          |  | of shares |         | (in NOK) |  | (in NOK) 
|1 January, 2002      |  |           | 253,500 |          |  |           | 375.80 |            |  |  |   | 
|Granted              |  |           | 111,000 |          |  |           | 361.90 |            |  |  | 60 | 
|Exercised            |  |           | 3,300   |          |  |           | 367.50 |            |  |  |   | 
|Expired              |  |           | 158,200 |          |  |           | 367.50 |            |  |  |   | 
|                     |  |           |         |          |  |           |        |            |  |  |    | 
|31 December, 2002    |  |           | 203,000 |          |  |           | 374.80 |            |  |  |   | 
|                     |  |           |         |          |  |           |        |            |  |  |    | 
|Options exercisable: |  |           |         |          |  |           |        |            |  |  |    | 
|31 December 2001     |  |           | 161,500 |          |  |           | 367.50 |            |  |  |   | 
|31 December 2002     |  |           |        |          |  |           |       |            |  |  |   | 
|                     |  |           |         |          |  |           |        |            |  |  |    | 

The grant date fair
value of the options
granted in 2001 and 2002
was NOK 82 and NOK 60
per option respectively,
which approximated the
market price on the
grant date. There was no
compensation expense
recognized during 2000,
2001 or 2002 related to
these awards.

As of 31 December,
2002, 92,000 options,
related to the Executive
Share Option Plan 2001,
with an exercise price
of NOK 390.40 were
outstanding with a
remaining contractual
life of 3.3 years, none
of which were
exercisable. In addition
111,000 options related
to the Executive Share
Option Plan 2002, with
an exercise price of NOK
361.90 were outstanding
with a remaining
contractual life of 4.5
years, none of which
were exercisable.

In March 2001,
Hydro expanded the
subsidized
share-purchase plan for
employees in Norway.
Under this plan Hydros
employees in Norway
receive a NOK 1,500
share-purchase rebate to
purchase shares of Norsk
Hydro, which corresponds
to a 20% discount from
the market price. If
shareholder return, as
defined by the plan,
meets or exceeds 12% in
the period from 1 June
to 31 May (the
measurement period),
employees receive an
additional rebate of NOK
4,500 for a total of NOK
6,000, which corresponds
to a 50 percent discount
from the market price.
The performance criteria
was met for the
2000-2001 measurement
period. In June 2001,
347,474 shares were
awarded to employees at
a per share price of NOK
196.90. Compensation
expense recognized in
2001 related to this
award was approximately
NOK 68 million.

In 2002, Hydro
modified the measurement
period for the
share-purchase plan for
Norwegian employees so
that the period would
run from 1 January 2002
to 31 December 2002. 2002 was a
transitional year so
that the scheme had the
old scheme running from
1 June 2001 to 31 May
2002 and the new scheme
running from 1 January
2002 to 31 December
2002.

The performance
criteria was met for the
1 June 2001 to 31 May
2002 measurement period.
In July 2002, 323,060
shares were awarded to
employees at a per share
price of NOK 205.15.
Compensation expense
recognized in 2002
related to this award
amounted to NOK 73
million.

At 31 December
2002, the 12 percent
performance target was
not met for the 1
January 2002 to 31
December 2002
measurement period,
consequently the rebate
for this award was NOK
1,500 or 20 percent.

Pro Forma Information (Unaudited)

Statement of Financial
Accounting Standards
(SFAS) 123 requires
disclosure of certain
pro forma information
based on the estimated
fair value of the
options granted if the
intrinsic value method
is used to measure
compensation expense
(See Note 1). Under the
fair value method
defined by SFAS 123,
compensation expense is
measured by using
estimated fair value of
the options at the date
of the grant. For the
pro forma disclosure,
the estimated fair value
is amortized from the
date of the grant until
the options become
exercisable. The
following unaudited pro
forma information is
presented as if the fair
value method of
accounting for
stock-based compensation
had been used.

|                                                           |  |      |       |      |  |      |       |  |  |  |        | 
|---------------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- |  |  |  | ------ | 
|In NOK millions, except for earnings per share (unaudited) |  |      |       |     
|                                                           |  | 2002 |       | 2001 |  | 2000
|Pro forma net income                                       |  |      | 8,761 |      |  |      | 7,890 |  |  |  | 13,974 | 
|Pro forma earnings
per share                               |  |      | 34.00 |      |  |      | 30.50 |  |  |  | 53.40  | 
|                                                           |  |      |       |      |  |      |       |  |  |  |        | 

Hydro uses valuation
model based on the
Black-Scholes
option-pricing model.
The weighted average
assumptions used in the
model for the 2001 plan
are: expected life of 3
years, expected
volatility of 29
percent, a risk-free
interest of 6.7 percent
and a dividend yield of
about 2.5 percent. The
model also includes an
assumption regarding the
probability of meeting
the performance
criteria.

The weighted average
assumptions used in the
model for the 2002 plan
are: expected life of 3
years, expected
volatility of 30
percent, a risk-free
interest of 5.5 percent
and a dividend yield of
about 2.5 percent. The
model also includes an
assumption regarding the
probability of meeting
the performance
criteria.

100





---



##### 



5. OPERATING AND GEOGRAPHIC SEGMENT INFORMATION

Operating segments are components of a business that are
evaluated regularly by dedicated senior management utilizing financial and operational information prepared
specifically for the segment for the purpose of assessing
performance and allocating resources. Generally, financial
information is required to be disclosed on the same basis
that is used internally enabling investors to see the company through the eyes of management.

Hydros operating segments are managed separately
and each operating segment represents a strategic business
area that offers different products and serves different
markets. Hydros operating segments are the three business areas Hydro Oil and Energy, Hydro Aluminium and
Hydro Agri. The business areas are divided into sub-segments representing different parts of the value chain.

Hydro Oil and Energy consists of Exploration and
Production, and Energy and Oil Marketing. Exploration
and Production is responsible for Hydros oil and gas
exploration, field development, and operation of production and transportation facilities. Energy and Oil Marketing includes Hydros commercial operations in the oil,
natural gas and power sectors, the operation of Hydros
power stations as well as marketing and sale of refined
petroleum products (gasoline, diesel and heating oil) to
retail customers. Energy and Oil Marketing buys and/or
markets almost all oil production from Exploration and
Production, and sells the equity gas production on a commission basis.

Hydro Aluminium consists of Metals, Rolled Products and Extrusion and Automotive. Metals activities
include the production of primary aluminium and primary magnesium, aluminium oxide, remelting of metal,
and the international trading of aluminium, aluminium
products and aluminium oxide. Rolled Products delivers
foil, strip, sheet and plate for application in such sectors
as packaging, automotive and transport industries, as well
as for offset printing plates. Extrusion and Automotive is
involved in the manufacture and sale of extruded aluminium products and components for the automotive industry.
 Hydros aluminium activities in North America,
including trading activities, is included in Extrusion and
Automotive.

Hydro Agris main activities are the production and
sale of ammonia and fertilizer products, including nitrate
fertilizer, complex fertilizer and urea. Most of the production takes place in Europe while trading is done worldwide. In addition, Agri markets numerous products for
industrial use which mainly have their origin in Hydros
ammonia and fertilizer production.

Other activities consists of Petrochemicals, Treka AS
(previously A/S Korn- og Foderstof Kompagniet), Flexible
Packaging and certain other activities. Petrochemicals is a
producer of the plastic raw material polyvinyl chloride
(PVC) in Scandinavia and in the UK. Trekas main activity is production and sale of fish feed, after disposing of
activities related to trading of grain, feedstuffs, fertilizers
and other agricultural related products in November 2002
and January 2003.

Operating Segment Information

Hydros steering model referred to as value-based management, reflects managements
 focus on cash flow-based
performance indicators, before and after taxes. EBITDA1) (defined as income/loss before tax, interest expense,
depreciation, amortization, write-downs and certain other
financial items) is an approximation of cash flow from
operations before taxes. EBITDA is considered an important measure of performance for the companys operational
 areas and operating segments. EBITDA, in addition to operating income includes financial income,
results from non-consolidated investee companies as well
as gains and losses on sales of activities classified as Other
Income, net in the income statement. It excludes depreciation, write-downs and amortization, as well as
 amortization of excess values in non-consolidated investee companies.

Hydro also uses cash return on gross investment
(CROGI) as a measure of annual rate of return on assets
employed. CROGI is defined as gross cash flow after
taxes, divided by average gross investment2), while gross
cash flow is defined as EBITDA less total tax expense,
gross investment is defined as total assets plus accumulated depreciation, amortization and write-downs, minus
short-term interest-free debt3). Hydro manages longterm funding and taxes on a group basis. Therefore, segment
 debt is defined as short-term interest free liabilities
excluding short-term deferred tax liabilities.

Certain segment information such as EBITDA and
Gross Investment are non-GAAP measures. Therefore
there is no directly corresponding figure in the financial
statements. A reconciliation to GAAP measures is
included at page 55.

Intersegment sales and transfers reflect arms length
prices as if sold or transferred to third parties. Results of
activities considered incidental to Hydros main operations as well as unallocated revenues, expenses, liabilities
and assets are reported separately under the caption
Corporate and eliminations. These amounts principally
include interest income and expenses, realized and unrealized foreign exchange gains and losses and the net effect
of pension schemes. In addition, elimination of gains and
losses related to transactions between the Areas. The
accounting policies of the operating segments reflect those
described in the summary of significant accounting policies. See Note 1.

| |    |                                                                      
| | -- | ---------------------------------------------------------------------
| | 1) | EBITDA: Earnings before Interest, Tax, Depreciation and Amortization.
| | 2) | Deferred tax assets are not included in gross investment.            
| | 3) | Deferred tax liabilities are not deducted from gross.                

101





---



##### 



NORSK HYDRO ASA and subsidiaries
Notes to the consolidated financial statements

|                           |  |                   |         |                   |  |                             |         |      |  |      |         |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |         |   |  |  |         |   |  |  |         |  
|-------------------------- |  | ----------------- | ------- | ----------------- |  | --------------------------- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- | - |  |  | ------- | - |  |  | ------- | - |  |  | ------- | - |  |  | ------- | -
|                           |  | External revenues |         | Internal revenues |  | Total operating revenues 1)
|Amounts in NOK million     |  | 2002              |         | 2001              |  | 2000                        |         | 2002 |  | 2001 |         | 2000 |  | 2002 |         | 2001 |  | 2000
|Exploration and Production |  |                   | 11,175  |                   |  |                             | 7,848   |      |  |      | 9,436   |      |  |      | 22,834  |      |  |      | 25,434  |   |  |  | 26,058  |   |  |  | 34,009  |   |  |  | 33,282  |   |  |  | 35,494  |  
|Energy and Oil Marketing1) |  |                   | 35,795  |                   |  |                             | 39,450  |      |  |      | 40,837  |      |  |      | 3,985   |      |  |      | 4,509   |   |  |  | 4,663   |   |  |  | 39,780  |   |  |  | 43,959  |   |  |  | 45,500  |  
|Eliminations5)             |  |                   | 26      |                   |  |                             |        |      |  |      |        |      |  |      | (22,074 | )    |  |      | (25,225 | ) |  |  | (25,871 | ) |  |  | (22,048 | ) |  |  | (25,225 | ) |  |  | (25,871 | )
|                           |  |                   |         |                   |  |                             |         |      |  |      |         |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |         |   |  |  |         |   |  |  |         |  
|Hydro Oil and Energy       |  |                   | 46,996  |                   |  |                             | 47,298  |      |  |      | 50,273  |      |  |      | 4,745   |      |  |      | 4,718   |   |  |  | 4,850   |   |  |  | 51,741  |   |  |  | 52,016  |   |  |  | 55,123  |  
|                           |  |                   |         |                   |  |                             |         |      |  |      |         |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |         |   |  |  |         |   |  |  |         |  
|Metals1)                   |  |                   | 26,025  |                   |  |                             | 24,961  |      |  |      | 24,177  |      |  |      | 13,621  |      |  |      | 6,514   |   |  |  | 6,306   |   |  |  | 39,646  |   |  |  | 31,475  |   |  |  | 30,483  |  
|Rolled Products            |  |                   | 14,135  |                   |  |                             | 4,126   |      |  |      | 4,122   |      |  |      | 655     |      |  |      | 102     |   |  |  | 99      |   |  |  | 14,790  |   |  |  | 4,228   |   |  |  | 4,221   |  
|Extrusion and Automotive   |  |                   | 24,186  |                   |  |                             | 21,854  |      |  |      | 22,491  |      |  |      | 59      |      |  |      | 633     |   |  |  | 540     |   |  |  | 24,245  |   |  |  | 22,487  |   |  |  | 23,031  |  
|Other and eliminations4)   |  |                   | 162     |                   |  |                             | 1       |      |  |      | 17      |      |  |      | (13,792 | )    |  |      | (7,108  | ) |  |  | (6,622  | ) |  |  | (13,630 | ) |  |  | (7,107  | ) |  |  | (6,605  | )
|                           |  |                   |         |                   |  |                             |         |      |  |      |         |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |         |   |  |  |         |   |  |  |         |  
|Hydro Aluminium            |  |                   | 64,508  |                   |  |                             | 50,942  |      |  |      | 50,807  |      |  |      | 543     |      |  |      | 141     |   |  |  | 323     |   |  |  | 65,051  |   |  |  | 51,083  |   |  |  | 51,130  |  
|                           |  |                   |         |                   |  |                             |         |      |  |      |         |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |         |   |  |  |         |   |  |  |         |  
|Hydro Agri                 |  |                   | 32,818  |                   |  |                             | 36,809  |      |  |      | 35,756  |      |  |      | 530     |      |  |      | 598     |   |  |  | 851     |   |  |  | 33,348  |   |  |  | 37,407  |   |  |  | 36,607  |  
|                           |  |                   |         |                   |  |                             |         |      |  |      |         |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |         |   |  |  |         |   |  |  |         |  
|Other activities2)         |  |                   | 17,988  |                   |  |                             | 17,713  |      |  |      | 19,911  |      |  |      | 3,781   |      |  |      | 4,648   |   |  |  | 4,838   |   |  |  | 21,769  |   |  |  | 22,361  |   |  |  | 24,749  |  
|Corporate and Eliminations |  |                   | 626     |                   |  |                             | 73      |      |  |      | 114     |      |  |      | (9,599  | )    |  |      | (10,105 | ) |  |  | (10,862 | ) |  |  | (8,973  | ) |  |  | (10,032 | ) |  |  | (10,748 | )
|                           |  |                   |         |                   |  |                             |         |      |  |      |         |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |         |   |  |  |         |   |  |  |         |  
|Total                      |  |                   | 162,936 |                   |  |                             | 152,835 |      |  |      | 156,861 |      |  |      |        |      |  |      |        |   |  |  |        |   |  |  | 162,936 |   |  |  | 152,835 |   |  |  | 156,861 |  
|                           |  |                   |         |                   |  |                             |         |      |  |      |         |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |         |   |  |  |         |   |  |  |         |  

|                               |  |                         |        |                 |  |                              |        |      |  |      |        |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |        |   |  |  |        |   |  |  |        |  
|------------------------------ |  | ----------------------- | ------ | --------------- |  | ---------------------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------- | ---- |  | ---- | ------- | - |  |  | ------- | - |  |  | ------ | - |  |  | ------ | - |  |  | ------ | -
|                               |  | Depreciation, depletion |        | Other operating |  | Operating income (loss)     
|                               |  | and amortization        |        | expenses        |  | before fin. and other income
|Amounts in NOK million         |  | 2002                    |        | 2001            |  | 2000                         |        | 2002 |  | 2001 |        | 2000 |  | 2002 |         | 2001 |  | 2000
|Exploration and Production     |  |                         | 8,785  |                 |  |                              | 7,791  |      |  |      | 8,046  |      |  |      | 10,895  |      |  |      | 7,678   |   |  |  | 7,340   |   |  |  | 14,329 |   |  |  | 17,813 |   |  |  | 20,108 |  
|Energy and Oil Marketing       |  |                         | 221    |                 |  |                              | 229    |      |  |      | 240    |      |  |      | 37,967  |      |  |      | 42,365  |   |  |  | 43,591  |   |  |  | 1,592  |   |  |  | 1,365  |   |  |  | 1,669  |  
|Eliminations                   |  |                         |       |                 |  |                              |       |      |  |      | 2      |      |  |      | (22,074 | )    |  |      | (25,225 | ) |  |  | (25,900 | ) |  |  | 26     |   |  |  |       |   |  |  | 27     |  
|                               |  |                         |        |                 |  |                              |        |      |  |      |        |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |        |   |  |  |        |   |  |  |        |  
|Hydro Oil and Energy           |  |                         | 9,006  |                 |  |                              | 8,020  |      |  |      | 8,288  |      |  |      | 26,788  |      |  |      | 24,818  |   |  |  | 25,031  |   |  |  | 15,947 |   |  |  | 19,178 |   |  |  | 21,804 |  
|                               |  |                         |        |                 |  |                              |        |      |  |      |        |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |        |   |  |  |        |   |  |  |        |  
|Metals                         |  |                         | 1,117  |                 |  |                              | 751    |      |  |      | 837    |      |  |      | 36,839  |      |  |      | 30,352  |   |  |  | 26,956  |   |  |  | 1,690  |   |  |  | 372    |   |  |  | 2,690  |  
|Rolled Products                |  |                         | 496    |                 |  |                              | 104    |      |  |      | 93     |      |  |      | 14,589  |      |  |      | 4,066   |   |  |  | 4,131   |   |  |  | (295   | ) |  |  | 58     |   |  |  | (3     | )
|Extrusion and Automotive       |  |                         | 1,010  |                 |  |                              | 895    |      |  |      | 715    |      |  |      | 23,221  |      |  |      | 21,820  |   |  |  | 21,666  |   |  |  | 14     |   |  |  | (228   | ) |  |  | 650    |  
|Other and eliminations4)       |  |                         |       |                 |  |                              |       |      |  |      |       |      |  |      | (13,919 | )    |  |      | (7,090  | ) |  |  | (6,604  | ) |  |  | 289    |   |  |  | (17    | ) |  |  | (1     | )
|                               |  |                         |        |                 |  |                              |        |      |  |      |        |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |        |   |  |  |        |   |  |  |        |  
|Hydro Aluminium                |  |                         | 2,623  |                 |  |                              | 1,750  |      |  |      | 1,645  |      |  |      | 60,730  |      |  |      | 49,148  |   |  |  | 46,149  |   |  |  | 1,698  |   |  |  | 185    |   |  |  | 3,336  |  
|                               |  |                         |        |                 |  |                              |        |      |  |      |        |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |        |   |  |  |        |   |  |  |        |  
|Hydro Agri                     |  |                         | 1,172  |                 |  |                              | 1,570  |      |  |      | 1,640  |      |  |      | 29,969  |      |  |      | 33,723  |   |  |  | 33,664  |   |  |  | 2,207  |   |  |  | 2,114  |   |  |  | 1,303  |  
|                               |  |                         |        |                 |  |                              |        |      |  |      |        |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |        |   |  |  |        |   |  |  |        |  
|Other activities2)             |  |                         | 1,100  |                 |  |                              | 912    |      |  |      | 945    |      |  |      | 20,656  |      |  |      | 21,790  |   |  |  | 23,596  |   |  |  | 13     |   |  |  | (341   | ) |  |  | 208    |  
|Corporate and Eliminations3)5) |  |                         | 11     |                 |  |                              | 21     |      |  |      | 20     |      |  |      | (8,960  | )    |  |      | (10,000 | ) |  |  | (12,583 | ) |  |  | (24    | ) |  |  | (53    | ) |  |  | 1,815  |  
|                               |  |                         |        |                 |  |                              |        |      |  |      |        |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |        |   |  |  |        |   |  |  |        |  
|Total                          |  |                         | 13,912 |                 |  |                              | 12,273 |      |  |      | 12,538 |      |  |      | 129,183 |      |  |      | 119,479 |   |  |  | 115,857 |   |  |  | 19,841 |   |  |  | 21,083 |   |  |  | 28,466 |  
|                               |  |                         |        |                 |  |                              |        |      |  |      |        |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |        |   |  |  |        |   |  |  |        |  

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1) | Presentation of income from certain trading
activities was in 2000 changed from net
presentation of margin to gross presentation as
operating revenues and raw materials. This
includes metal trading within Aluminium Metal
Products and trading of petroleum products within
Energy. Prior periods have been reclassified to be
presented on a consistent basis.                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | 2) | Other Activities consists of the following: Petrochemicals, Treka AS
(previously A/S Korn- og Foderstof Kompagniet), Flexible Packaging, Pronova, the industrial insurance company, Industriforsikring,
Hydro Business Partner and Seafood.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 3) | Corporate and Eliminations operating income
(loss) and EBITDA includes a net periodic pension
cost of NOK 312 million for 2002, and a credit of
NOK 421 million and NOK 2,263 million in 2001 and
2000, respectively. In 2000, Hydro changed the way
it allocates pension costs to its Norwegian
operations. Previously costs were determined based
on the number of years of service resulting in a
concentration of the total costs towards the end of
the service period. The change resulted in
non-recurring charges to the segments with a
corresponding credit of NOK 2,007 million reflected
in Corporate, which is included in Corporates net
periodic pension credit. Part of these costs have
been charged to external parties resulting in a
positive effect to the Company of NOK 470 million.

102





---



##### 



|                                 |  |                            |        |                   |  |        |        |      |  |      |        |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |        |   |  |  |        |   |  |  |        | 
|-------------------------------- |  | -------------------------- | ------ | ----------------- |  | ------ | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------- | ---- |  | ---- | ------- | - |  |  | ------- | - |  |  | ------ | - |  |  | ------ | - |  |  | ------ | 
|                                 |  | Equity in net income       |        |                   |  |        |        |      |  |      |        |      |  |      |         |      |  |      |         |   |  |  |         |   |  | 
|                                 |  | non-consolidated investees |        | Other income, net |  | EBITDA
|Amounts in NOK million           |  | 2002                       |        | 2001              |  | 2000   |        | 2002 |  | 2001 |        | 2000 |  | 2002 |         | 2001 |  | 2000
|Exploration and Production       |  |                            | 31     |                   |  |        | 35     |      |  |      | 21     |      |  |      | 77      |      |  |      |        |   |  |  | 387     |   |  |  | 23,332 |   |  |  | 25,768 |   |  |  | 28,656 | 
|Energy and Oil Marketing         |  |                            | 148    |                   |  |        | 32     |      |  |      | 15     |      |  |      |        |      |  |      | 179     |   |  |  |        |   |  |  | 1,982  |   |  |  | 1,836  |   |  |  | 1,956  | 
|Eliminations                     |  |                            |       |                   |  |        | (2     | )    |  |      |       |      |  |      |        |      |  |      |        |   |  |  |        |   |  |  | 26     |   |  |  |       |   |  |  | 29     | 
|                                 |  |                            |        |                   |  |        |        |      |  |      |        |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |        |   |  |  |        |   |  |  |        | 
|Hydro Oil and Energy             |  |                            | 179    |                   |  |        | 65     |      |  |      | 36     |      |  |      | 77      |      |  |      | 179     |   |  |  | 387     |   |  |  | 25,340 |   |  |  | 27,604 |   |  |  | 30,641 | 
|                                 |  |                            |        |                   |  |        |        |      |  |      |        |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |        |   |  |  |        |   |  |  |        | 
|Metals                           |  |                            | (275   | )                 |  |        | 196    |      |  |      | 237    |      |  |      |        |      |  |      |        |   |  |  |        |   |  |  | 2,703  |   |  |  | 1,766  |   |  |  | 3,803  | 
|Rolled Products                  |  |                            | 7      |                   |  |        |       |      |  |      |       |      |  |      |        |      |  |      |        |   |  |  |        |   |  |  | 258    |   |  |  | 162    |   |  |  | 86     | 
|Extrusion and Automotive         |  |                            | 49     |                   |  |        | (78    | )    |  |      | 26     |      |  |      |        |      |  |      | (25     | ) |  |  | 122     |   |  |  | 1,084  |   |  |  | 632    |   |  |  | 1,612  | 
|Other and eliminations 4)        |  |                            |       |                   |  |        |       |      |  |      |       |      |  |      |        |      |  |      |        |   |  |  |        |   |  |  | 289    |   |  |  | (17    | ) |  |  |       | 
|                                 |  |                            |        |                   |  |        |        |      |  |      |        |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |        |   |  |  |        |   |  |  |        | 
|Hydro Aluminium                  |  |                            | (219   | )                 |  |        | 118    |      |  |      | 263    |      |  |      |        |      |  |      | (25     | ) |  |  | 122     |   |  |  | 4,334  |   |  |  | 2,543  |   |  |  | 5,501  | 
|                                 |  |                            |        |                   |  |        |        |      |  |      |        |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |        |   |  |  |        |   |  |  |        | 
|Hydro Agri                       |  |                            | 57     |                   |  |        | 330    |      |  |      | 349    |      |  |      | 166     |      |  |      | (53     | ) |  |  |        |   |  |  | 3,945  |   |  |  | 4,402  |   |  |  | 3,553  | 
|                                 |  |                            |        |                   |  |        |        |      |  |      |        |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |        |   |  |  |        |   |  |  |        | 
|Other activities 2)              |  |                            | 12     |                   |  |        | 51     |      |  |      | 20     |      |  |      |        |      |  |      | 477     |   |  |  | 1,698   |   |  |  | 1,044  |   |  |  | 1,215  |   |  |  | 2,950  | 
|Corporate and Eliminations 3) 5) |  |                            | 4      |                   |  |        | 2      |      |  |      | 4      |      |  |      | (24     | )    |  |      |        |   |  |  | 954     |   |  |  | 995    |   |  |  | 1,993  |   |  |  | 3,964  | 
|                                 |  |                            |        |                   |  |        |        |      |  |      |        |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |        |   |  |  |        |   |  |  |        | 
|Total                            |  |                            | 33     |                   |  |        | 566    |      |  |      | 672    |      |  |      | 219     |      |  |      | 578     |   |  |  | 3,161   |   |  |  | 35,658 |   |  |  | 37,757 |   |  |  | 46,609 | 
|                                 |  |                            |        |                   |  |        |        |      |  |      |        |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |        |   |  |  |        |   |  |  |        | 
|                                
|                                 |  | Gross Cash Flow after Tax  |        | Gross Investment  |  | CROGI 
|Amounts in NOK million           |  | 2002                       |        | 2001              |  | 2000   |        | 2002 |  | 2001 |        | 2000 |  | 2002 |         | 2001 |  | 2000
|Exploration and Production       |  |                            | 14,632 |                   |  |        | 15,009 |      |  |      | 16,309 |      |  |      | 128,486 |      |  |      | 118,563 |   |  |  | 111,021 |   |  |  | 11.8   |   |  |  | 13.1   |   |  |  | 14.5   | 
|Energy and Oil Marketing         |  |                            | 1,337  |                   |  |        | 1,212  |      |  |      | 1,276  |      |  |      | 11,580  |      |  |      | 10,184  |   |  |  | 9,633   |   |  |  | 12.3   |   |  |  | 12.2   |   |  |  | 13.2   | 
|Eliminations                     |  |                            | 18     |                   |  |        |       |      |  |      | 20     |      |  |      | 53      |      |  |      | (42     | ) |  |  | (46     | ) |  |  |       |   |  |  |       |   |  |  |       | 
|                                 |  |                            |        |                   |  |        |        |      |  |      |        |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |        |   |  |  |        |   |  |  |        | 
|Hydro Oil and Energy             |  |                            | 15,987 |                   |  |        | 16,221 |      |  |      | 17,605 |      |  |      | 140,119 |      |  |      | 128,705 |   |  |  | 120,608 |   |  |  | 11.9   |   |  |  | 13.0   |   |  |  | 14.4   | 
|                                 |  |                            |        |                   |  |        |        |      |  |      |        |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |        |   |  |  |        |   |  |  |        | 
|Metals                           |  |                            | 2,188  |                   |  |        | 1,651  |      |  |      | 2,992  |      |  |      | 34,905  |      |  |      | 26,330  |   |  |  | 28,593  |   |  |  | 7.1    |   |  |  | 6.0    |   |  |  | 11.2   | 
|Rolled Products                  |  |                            | 258    |                   |  |        | 144    |      |  |      | 86     |      |  |      | 11,937  |      |  |      | 2,626   |   |  |  | 2,369   |   |  |  | 3.5    |   |  |  | 5.8    |   |  |  | 3.8    | 
|Extrusion and Automotive         |  |                            | 1,077  |                   |  |        | 632    |      |  |      | 1,375  |      |  |      | 16,846  |      |  |      | 14,011  |   |  |  | 13,818  |   |  |  | 7.0    |   |  |  | 4.5    |   |  |  | 11.2   | 
|Other and eliminations4)         |  |                            | 289    |                   |  |        | 58     |      |  |      | 2      |      |  |      | 145     |      |  |      | (148    | ) |  |  | (51     | ) |  |  |       |   |  |  |       |   |  |  |       | 
|                                 |  |                            |        |                   |  |        |        |      |  |      |        |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |        |   |  |  |        |   |  |  |        | 
|Hydro Aluminium                  |  |                            | 3,812  |                   |  |        | 2,485  |      |  |      | 4,455  |      |  |      | 63,833  |      |  |      | 42,819  |   |  |  | 44,729  |   |  |  | 7.1    |   |  |  | 5.7    |   |  |  | 10.8   | 
|                                 |  |                            |        |                   |  |        |        |      |  |      |        |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |        |   |  |  |        |   |  |  |        | 
|Hydro Agri                       |  |                            | 3,174  |                   |  |        | 3,669  |      |  |      | 3,071  |      |  |      | 30,739  |      |  |      | 36,513  |   |  |  | 40,094  |   |  |  | 9.4    |   |  |  | 9.6    |   |  |  | 7.8    | 
|                                 |  |                            |        |                   |  |        |        |      |  |      |        |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |        |   |  |  |        |   |  |  |        | 
|Other activities2)               |  |                            | 1,045  |                   |  |        | 1,147  |      |  |      | 2,365  |      |  |      | 21,873  |      |  |      | 22,529  |   |  |  | 24,056  |   |  |  | 4.7    |   |  |  | 4.9    |   |  |  | 9.7    | 
|Corporate and Eliminations5)     |  |                            | (1,638 | )                 |  |        | 485    |      |  |      | 2,935  |      |  |      | 8,832   |      |  |      | 28,273  |   |  |  | 23,059  |   |  |  | (8.8   | ) |  |  | 1.9    |   |  |  | 19.2   | 
|                                 |  |                            |        |                   |  |        |        |      |  |      |        |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |        |   |  |  |        |   |  |  |        | 
|Total                            |  |                            | 22,380 |                   |  |        | 24,007 |      |  |      | 30,431 |      |  |      | 265,396 |      |  |      | 258,839 |   |  |  | 252,546 |   |  |  | 8.5    |   |  |  | 9.4    |   |  |  | 12.5   | 
|                                 |  |                            |        |                   |  |        |        |      |  |      |        |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |        |   |  |  |        |   |  |  |        | 

| |    |                                                                                                                                                                                                                                      
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4) | Other and eliminations includes unrealized gains and losses related to LME
contracts with a gain of NOK 266 million in 2002, a loss of NOK 50 million in 2001 and a gain of NOK 31 million in 2000.                                  
| | 5) | Corporate and eliminations in 2002 includes elimination of unrealized loss
on power contracts between Energy and other units in
Hydro with NOK 588 million. In addition, NOK 26 million is eliminated
within the Oil and Energy Area.

103





---



##### 



NORSK HYDRO ASA and subsidiaries
Notes to the consolidated financial statements

|                           |  |                             |        |                    |  |               |        |      |  |      |         |      |  |  |         |   |  |  |         |   |  |  |         |  
|-------------------------- |  | --------------------------- | ------ | ------------------ |  | ------------- | ------ | ---- |  | ---- | ------- | ---- |  |  | ------- | - |  |  | ------- | - |  |  | ------- | -
|                           |  | Current assets2)            |        | Non-current assets |  | Assets2)     
|Amounts in NOK million     |  | 2002                        |        | 2001               |  | 2002          |        | 2001 |  | 2002 |         | 2001
|Exploration and Production |  |                             | 8,461  |                    |  |               | 8,546  |      |  |      | 73,694  |      |  |  | 70,760  |   |  |  | 82,155  |   |  |  | 79,306  |  
|Energy and Oil Marketing   |  |                             | 15,550 |                    |  |               | 6,563  |      |  |      | 5,695   |      |  |  | 5,443   |   |  |  | 21,245  |   |  |  | 12,006  |  
|Eliminations               |  |                             | (2,459 | )                  |  |               | (1,984 | )    |  |      | 25      |      |  |  | (53     | ) |  |  | (2,434  | ) |  |  | (2,037  | )
|                           |  |                             |        |                    |  |               |        |      |  |      |         |      |  |  |         |   |  |  |         |   |  |  |         |  
|Hydro Oil and Energy       |  |                             | 21,552 |                    |  |               | 13,125 |      |  |      | 79,414  |      |  |  | 76,150  |   |  |  | 100,966 |   |  |  | 89,275  |  
|                           |  |                             |        |                    |  |               |        |      |  |      |         |      |  |  |         |   |  |  |         |   |  |  |         |  
|Metals                     |  |                             | 9,517  |                    |  |               | 8,903  |      |  |      | 19,979  |      |  |  | 10,855  |   |  |  | 29,496  |   |  |  | 19,758  |  
|Rolled Products            |  |                             | 6,451  |                    |  |               | 1,466  |      |  |      | 4,464   |      |  |  | 869     |   |  |  | 10,915  |   |  |  | 2,335   |  
|Extrusion and Automotive   |  |                             | 7,852  |                    |  |               | 6,880  |      |  |      | 9,926   |      |  |  | 7,057   |   |  |  | 17,778  |   |  |  | 13,937  |  
|Other and eliminations     |  |                             | (1,506 | )                  |  |               | (868   | )    |  |      | 22      |      |  |  |        |   |  |  | (1,484  | ) |  |  | (868    | )
|                           |  |                             |        |                    |  |               |        |      |  |      |         |      |  |  |         |   |  |  |         |   |  |  |         |  
|Hydro Aluminium            |  |                             | 22,314 |                    |  |               | 16,381 |      |  |      | 34,391  |      |  |  | 18,781  |   |  |  | 56,705  |   |  |  | 35,162  |  
|                           |  |                             |        |                    |  |               |        |      |  |      |         |      |  |  |         |   |  |  |         |   |  |  |         |  
|Hydro Agri                 |  |                             | 11,473 |                    |  |               | 14,520 |      |  |      | 11,248  |      |  |  | 11,996  |   |  |  | 22,721  |   |  |  | 26,516  |  
|                           |  |                             |        |                    |  |               |        |      |  |      |         |      |  |  |         |   |  |  |         |   |  |  |         |  
|Other activities1)         |  |                             | 10,286 |                    |  |               | 10,032 |      |  |      | 7,508   |      |  |  | 7,068   |   |  |  | 17,794  |   |  |  | 17,100  |  
|Corporate and Eliminations |  |                             | 772    |                    |  |               | 26,265 |      |  |      | 8,253   |      |  |  | 3,604   |   |  |  | 9,025   |   |  |  | 29,869  |  
|                           |  |                             |        |                    |  |               |        |      |  |      |         |      |  |  |         |   |  |  |         |   |  |  |         |  
|Total                      |  |                             | 66,397 |                    |  |               | 80,323 |      |  |      | 140,814 |      |  |  | 117,599 |   |  |  | 207,211 |   |  |  | 197,922 |  
|                           |  |                             |        |                    |  |               |        |      |  |      |         |      |  |  |         |   |  |  |         |   |  |  |         |  
|                           |  | Non-consolidated investees, |        |                    |  |               |        |      |  |      |         |      |  |  |         |   |  | 
|                           |  | investments and advances    |        | Segment debt3)     |  | Investments4)
|Amounts in NOK million     |  | 2002                        |        | 2001               |  | 2002          |        | 2001 |  | 2002 |         | 2001
|Exploration and Production |  |                             | 566    |                    |  |               | 625    |      |  |      | 5,390   |      |  |  | 5,508   |   |  |  | 14,197  |   |  |  | 9,618   |  
|Energy and Oil Marketing   |  |                             | 1,400  |                    |  |               | 1,445  |      |  |      | 12,924  |      |  |  | 4,887   |   |  |  | 499     |   |  |  | 472     |  
|Eliminations               |  |                             | 52     |                    |  |               | 25     |      |  |      | (2,485  | )    |  |  | (1,983  | ) |  |  |        |   |  |  |        |  
|                           |  |                             |        |                    |  |               |        |      |  |      |         |      |  |  |         |   |  |  |         |   |  |  |         |  
|Hydro Oil and Energy       |  |                             | 1,991  |                    |  |               | 2,095  |      |  |      | 15,829  |      |  |  | 8,412   |   |  |  | 14,696  |   |  |  | 10,090  |  
|                           |  |                             |        |                    |  |               |        |      |  |      |         |      |  |  |         |   |  |  |         |   |  |  |         |  
|Metals                     |  |                             | 2,632  |                    |  |               | 2,603  |      |  |      | 4,405   |      |  |  | 4,469   |   |  |  | 12,728  |   |  |  | 1,872   |  
|Rolled Products            |  |                             | 1,428  |                    |  |               |       |      |  |      | 1,602   |      |  |  | 711     |   |  |  | 7,437   |   |  |  | 201     |  
|Extrusion and Automotive   |  |                             | 842    |                    |  |               | 685    |      |  |      | 4,758   |      |  |  | 3,783   |   |  |  | 5,153   |   |  |  | 1,454   |  
|Other and eliminations     |  |                             |       |                    |  |               |       |      |  |      | (1,648  | )    |  |  | (740    | ) |  |  |        |   |  |  |        |  
|                           |  |                             |        |                    |  |               |        |      |  |      |         |      |  |  |         |   |  |  |         |   |  |  |         |  
|Hydro Aluminium            |  |                             | 4,902  |                    |  |               | 3,288  |      |  |      | 9,117   |      |  |  | 8,223   |   |  |  | 25,318  |   |  |  | 3,527   |  
|                           |  |                             |        |                    |  |               |        |      |  |      |         |      |  |  |         |   |  |  |         |   |  |  |         |  
|Hydro Agri                 |  |                             | 2,089  |                    |  |               | 2,519  |      |  |      | 5,948   |      |  |  | 6,001   |   |  |  | 1,543   |   |  |  | 797     |  
|                           |  |                             |        |                    |  |               |        |      |  |      |         |      |  |  |         |   |  |  |         |   |  |  |         |  
|Other activities1)         |  |                             | 1,127  |                    |  |               | 1,296  |      |  |      | 3,221   |      |  |  | 3,394   |   |  |  | 3,115   |   |  |  | 1,372   |  
|Corporate and Eliminations |  |                             | 1,390  |                    |  |               | 489    |      |  |      | (4,430  | )    |  |  | (1,482  | ) |  |  | 1,044   |   |  |  | 542     |  
|                           |  |                             |        |                    |  |               |        |      |  |      |         |      |  |  |         |   |  |  |         |   |  |  |         |  
|Total                      |  |                             | 11,499 |                    |  |               | 9,687  |      |  |      | 29,685  |      |  |  | 24,548  |   |  |  | 45,716  |   |  |  | 16,328  |  
|                           |  |                             |        |                    |  |               |        |      |  |      |         |      |  |  |         |   |  |  |         |   |  |  |         |  

| |    |                                                                                                                                                                                                                                                
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1) | Other Activities consists of the following: Petrochemicals, Treka AS
(previously A/S Korn- og Foderstof Kompagniet), VAW Flexible
Packaging, Pronova, the industrial insurance company, Industriforsikring, Hydro
Business Partner
and Seafood.
| | 2) | Current assets and assets excludes internal cash accounts and accounts
receivable related to group relief.                                                                                                                                     
| | 3) | Segment debt is defined as short-term interest free liabilities excluding
income taxes payable and short-term deferred tax liabilities.                                                                                                        
| | 4) | Additions to property, plant and equipment plus long-term securities,
intangibles, long-term advances and investments in
non-consolidated investees.                                                                                           

104





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##### 



|                          |  |        |         |                   |  |             |         |      |  |      |         |      |  |      |         |      |  |      |         |  |  |  |         |  |  |  |        |  |  |  |        |  |  |  |        | 
|------------------------- |  | ------ | ------- | ----------------- |  | ----------- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- |  |  |  | ------- |  |  |  | ------ |  |  |  | ------ |  |  |  | ------ | 
|                          |  | Assets |         | Long-lived assets |  | Investments
|Amounts in NOK million    |  | 2002   |         | 2001              |  | 2000        |         | 2002 |  | 2001 |         | 2000 |  | 2002 |         | 2001 |  | 2000
|Norway                    |  |        | 95,585  |                   |  |             | 115,838 |      |  |      | 113,375 |      |  |      | 88,558  |      |  |      | 80,871  |  |  |  | 79,931  |  |  |  | 17,294 |  |  |  | 8,630  |  |  |  | 8,080  | 
|                          |  |        |         |                   |  |             |         |      |  |      |         |      |  |      |         |      |  |      |         |  |  |  |         |  |  |  |        |  |  |  |        |  |  |  |        | 
|Great Britain             |  |        | 7,855   |                   |  |             | 6,563   |      |  |      | 6,754   |      |  |      | 1,552   |      |  |      | 1,826   |  |  |  | 2,114   |  |  |  | 272    |  |  |  | 200    |  |  |  | 464    | 
|Germany                   |  |        | 24,926  |                   |  |             | 3,028   |      |  |      | 3,121   |      |  |      | 13,146  |      |  |      | 1,260   |  |  |  | 1,258   |  |  |  | 14,752 |  |  |  | 141    |  |  |  | 63     | 
|France                    |  |        | 6,911   |                   |  |             | 6,221   |      |  |      | 9,260   |      |  |      | 1,617   |      |  |      | 1,531   |  |  |  | 1,595   |  |  |  | 922    |  |  |  | 272    |  |  |  | 122    | 
|Sweden                    |  |        | 8,105   |                   |  |             | 7,394   |      |  |      | 7,364   |      |  |      | 2,079   |      |  |      | 1,949   |  |  |  | 1,985   |  |  |  | 512    |  |  |  | 477    |  |  |  | 256    | 
|Denmark                   |  |        | 6,562   |                   |  |             | 8,516   |      |  |      | 8,391   |      |  |      | 2,182   |      |  |      | 3,428   |  |  |  | 3,054   |  |  |  | 438    |  |  |  | 1,000  |  |  |  | 651    | 
|Italy                     |  |        | 3,660   |                   |  |             | 3,153   |      |  |      | 3,125   |      |  |      | 1,036   |      |  |      | 749     |  |  |  | 790     |  |  |  | 499    |  |  |  | 50     |  |  |  | 120    | 
|Spain                     |  |        | 1,562   |                   |  |             | 920     |      |  |      | 732     |      |  |      | 590     |      |  |      | 300     |  |  |  | 160     |  |  |  | 381    |  |  |  | 197    |  |  |  | 89     | 
|The Netherlands           |  |        | 10,471  |                   |  |             | 6,396   |      |  |      | 6,612   |      |  |      | 1,448   |      |  |      | 1,126   |  |  |  | 2,093   |  |  |  | 410    |  |  |  | 439    |  |  |  | 1,113  | 
|Other                     |  |        | 5,544   |                   |  |             | 4,567   |      |  |      | 4,671   |      |  |      | 819     |      |  |      | 551     |  |  |  | 588     |  |  |  | 483    |  |  |  | 110    |  |  |  | 111    | 
|                          |  |        |         |                   |  |             |         |      |  |      |         |      |  |      |         |      |  |      |         |  |  |  |         |  |  |  |        |  |  |  |        |  |  |  |        | 
|Total EU                  |  |        | 75,596  |                   |  |             | 46,758  |      |  |      | 50,030  |      |  |      | 24,469  |      |  |      | 12,720  |  |  |  | 13,637  |  |  |  | 18,669 |  |  |  | 2,886  |  |  |  | 2,989  | 
|                          |  |        |         |                   |  |             |         |      |  |      |         |      |  |      |         |      |  |      |         |  |  |  |         |  |  |  |        |  |  |  |        |  |  |  |        | 
|Other Europe              |  |        | 1,352   |                   |  |             | 848     |      |  |      | 885     |      |  |      | 908     |      |  |      | 210     |  |  |  | 258     |  |  |  | 642    |  |  |  | 28     |  |  |  | 37     | 
|                          |  |        |         |                   |  |             |         |      |  |      |         |      |  |      |         |      |  |      |         |  |  |  |         |  |  |  |        |  |  |  |        |  |  |  |        | 
|Total Europe              |  |        | 172,533 |                   |  |             | 163,444 |      |  |      | 164,290 |      |  |      | 113,935 |      |  |      | 93,801  |  |  |  | 93,826  |  |  |  | 36,605 |  |  |  | 11,544 |  |  |  | 11,106 | 
|                          |  |        |         |                   |  |             |         |      |  |      |         |      |  |      |         |      |  |      |         |  |  |  |         |  |  |  |        |  |  |  |        |  |  |  |        | 
|USA                       |  |        | 6,949   |                   |  |             | 7,681   |      |  |      | 8,137   |      |  |      | 2,457   |      |  |      | 2,102   |  |  |  | 2,179   |  |  |  | 1,399  |  |  |  | 312    |  |  |  | 1,678  | 
|Asia                      |  |        | 5,611   |                   |  |             | 5,012   |      |  |      | 4,386   |      |  |      | 3,621   |      |  |      | 2,891   |  |  |  | 2,266   |  |  |  | 1,373  |  |  |  | 805    |  |  |  | 456    | 
|Other Americas            |  |        | 5,391   |                   |  |             | 6,584   |      |  |      | 5,785   |      |  |      | 3,792   |      |  |      | 4,286   |  |  |  | 2,742   |  |  |  | 1,290  |  |  |  | 770    |  |  |  | 1,334  | 
|Africa                    |  |        | 5,797   |                   |  |             | 6,126   |      |  |      | 4,164   |      |  |      | 3,506   |      |  |      | 4,176   |  |  |  | 2,484   |  |  |  | 670    |  |  |  | 1,874  |  |  |  | 881    | 
|Canada                    |  |        | 7,411   |                   |  |             | 8,908   |      |  |      | 9,454   |      |  |      | 6,173   |      |  |      | 7,149   |  |  |  | 7,446   |  |  |  | 1,794  |  |  |  | 987    |  |  |  | 1,078  | 
|Australia and New Zealand |  |        | 3, 519  |                   |  |             | 167     |      |  |      | 138     |      |  |      | 2,255   |      |  |      | 144     |  |  |  | 105     |  |  |  | 2,585  |  |  |  | 36     |  |  |  | 32     | 
|                          |  |        |         |                   |  |             |         |      |  |      |         |      |  |      |         |      |  |      |         |  |  |  |         |  |  |  |        |  |  |  |        |  |  |  |        | 
|Total outside Europe      |  |        | 34,678  |                   |  |             | 34,478  |      |  |      | 32,064  |      |  |      | 21,804  |      |  |      | 20,748  |  |  |  | 17,222  |  |  |  | 9,111  |  |  |  | 4,784  |  |  |  | 5,459  | 
|                          |  |        |         |                   |  |             |         |      |  |      |         |      |  |      |         |      |  |      |         |  |  |  |         |  |  |  |        |  |  |  |        |  |  |  |        | 
|Total                     |  |        | 207,211 |                   |  |             | 197,922 |      |  |      | 196,354 |      |  |      | 135,739 |      |  |      | 114,549 |  |  |  | 111,048 |  |  |  | 45,716 |  |  |  | 16,328 |  |  |  | 16,565 | 
|                          |  |        |         |                   |  |             |         |      |  |      |         |      |  |      |         |      |  |      |         |  |  |  |         |  |  |  |        |  |  |  |        |  |  |  |        | 

|                          |  |                    |         |      |  |      |         |  |  |  |         | 
|------------------------- |  | ------------------ | ------- | ---- |  | ---- | ------- |  |  |  | ------- | 
|                          |  | Operating revenues
|Amounts in NOK million    |  | 2002               |         | 2001 |  | 2000
|Norway                    |  |                    | 14,784  |      |  |      | 12,595  |  |  |  | 14,238  | 
|                          |  |                    |         |      |  |      |         |  |  |  |         | 
|Germany                   |  |                    | 19,348  |      |  |      | 18,942  |  |  |  | 18,503  | 
|Great Britain             |  |                    | 18,435  |      |  |      | 20,787  |  |  |  | 19,311  | 
|France                    |  |                    | 14,509  |      |  |      | 12,155  |  |  |  | 16,538  | 
|Sweden                    |  |                    | 10,375  |      |  |      | 11,425  |  |  |  | 13,494  | 
|Italy                     |  |                    | 7,895   |      |  |      | 6,801   |  |  |  | 6,562   | 
|Denmark                   |  |                    | 6,002   |      |  |      | 7,262   |  |  |  | 7,256   | 
|The Netherlands           |  |                    | 5,113   |      |  |      | 3,291   |  |  |  | 3,163   | 
|Spain                     |  |                    | 4,798   |      |  |      | 3,757   |  |  |  | 3,751   | 
|Other                     |  |                    | 10,347  |      |  |      | 9,088   |  |  |  | 8,139   | 
|                          |  |                    |         |      |  |      |         |  |  |  |         | 
|Total EU                  |  |                    | 96,822  |      |  |      | 93,508  |  |  |  | 96,717  | 
|                          |  |                    |         |      |  |      |         |  |  |  |         | 
|Switzerland               |  |                    | 6,529   |      |  |      | 6,063   |  |  |  | 5,550   | 
|Other Europe              |  |                    | 6,799   |      |  |      | 5,529   |  |  |  | 5,434   | 
|                          |  |                    |         |      |  |      |         |  |  |  |         | 
|Total Europe              |  |                    | 124,934 |      |  |      | 117,695 |  |  |  | 121,939 | 
|                          |  |                    |         |      |  |      |         |  |  |  |         | 
|USA                       |  |                    | 14,931  |      |  |      | 16,584  |  |  |  | 16,849  | 
|Asia                      |  |                    | 8,978   |      |  |      | 6,479   |  |  |  | 7,376   | 
|Other Americas            |  |                    | 6,198   |      |  |      | 6,035   |  |  |  | 5,099   | 
|Africa                    |  |                    | 4,088   |      |  |      | 4,156   |  |  |  | 3,811   | 
|Canada                    |  |                    | 3,193   |      |  |      | 1,419   |  |  |  | 1,231   | 
|Australia and New Zealand |  |                    | 614     |      |  |      | 467     |  |  |  | 556     | 
|                          |  |                    |         |      |  |      |         |  |  |  |         | 
|Total outside Europe      |  |                    | 38,002  |      |  |      | 35,140  |  |  |  | 34,922  | 
|                          |  |                    |         |      |  |      |         |  |  |  |         | 
|Total                     |  |                    | 162,936 |      |  |      | 152,835 |  |  |  | 156,861 | 
|                          |  |                    |         |      |  |      |         |  |  |  |         | 

The identification of assets, long-lived assets and investments
 is based upon location of operation. Included in
long-lived assets are investments in non-consolidated
investees; property, plant and equipment (net of accumulated depreciation) and non-current financial assets.

Operating revenues are identified by customer location.

105





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##### 



NORSK HYDRO ASA and subsidiaries
Notes to the consolidated financial statements

6. RESTRUCTURING COSTS

In October of 2001 Hydro decided to discontinue production of
primary magnesium in Norway. As a result Hydro closed the Porsgrunn production facilities in March 2002, and has started the
clean up and dismantling work. Dismantling and clean-up work is
expected to be substantially completed during 2003. As part of the
closure of the plant facilities, restructuring costs totaling NOK
961 million were recognized at the end of 2001. Of this amount
NOK 261 million was charged as an impairment loss on the plant
facilities and NOK 40 million was related to reduction in inventories due to obsolescence. The remaining NOK 660 million of
restructuring costs included termination costs for customers and
supplier agreements, work-force reduction costs, and dismantling
and clean-up costs. Hydro recorded additional restructuring costs
of NOK 59 million related to work-force reduction in the first
quarter of 2002. The initial restructuring accrual was reduced by
NOK 69 million during the third quarter of 2002 due to the
reversal of certain accruals relating to contract termination costs
that were lower than originally anticipated.

The following table summarizes the types and amounts recognized
as accrued expenses for the restructuring together with changes in
the accruals for the twelve-month period ended 31 December,
2002:

|                            |  |         |     |              |  |         |     |      |  |         |      |   |  |  |     | 
|--------------------------- |  | ------- | --- | ------------ |  | ------- | --- | ---- |  | ------- | ---- | - |  |  | --- | 
|Amounts in                  |  | 31 Dec. |     | Additions1)  |  |         |     |      |  | 31 Dec.
|NOK million                 |  | 2001    |     | (Deductions) |  | Payment |     | 2002
|Demolition costs            |  |         | 316 |              |  |         |    |      |  |         | (41  | ) |  |  | 275 | 
|Workforce
severance         |  |         | 130 |              |  |         | 59  |      |  |         | (171 | ) |  |  | 18  | 
|Shutdown cost
of operations |  |         | 98  |              |  |         |    |      |  |         | (98  | ) |  |  |    | 
|Contract
termination        |  |         | 116 |              |  |         | (69 | )    |  |         | (47  | ) |  |  |    | 
|                            |  |         |     |              |  |         |     |      |  |         |      |   |  |  |     | 
|Total                       |  |         | 660 |              |  |         | (10 | )    |  |         | (357 | ) |  |  | 293 | 
|                            |  |         |     |              |  |         |     |      |  |         |      |   |  |  |     | 



|1) |  | Charged to the income statement.
|-- |  | --------------------------------

7. OPERATING COSTS AND EXPENSES

Operating costs include
research and development,
operating lease expense and
payroll and related costs as
follows:

|                                                           |  |      |        |      |  |      |        |  |  |  |        | 
|---------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  |  | ------ | 
|Amounts in NOK million                                     |  | 2002 |        | 2001 |  | 2000
|Research and development expense                           |  |      | 815    |      |  |      | 796    |  |  |  | 898    | 
|                                                           |  |      |        |      |  |      |        |  |  |  |        | 
|Operating lease expense:1)                                 |  |      |        |      |  |      |        |  |  |  |        | 
|Drilling rigs, ships,
office space                         |  |      | 1,715  |      |  |      | 1,489  |  |  |  | 1,636  | 
|Office space leased from Hydros independent pension trust |  |      | 206    |      |  |      | 211    |  |  |  | 200    | 
|                                                           |  |      |        |      |  |      |        |  |  |  |        | 
|Total                                                      |  |      | 1,921  |      |  |      | 1,700  |  |  |  | 1,836  | 
|                                                           |  |      |        |      |  |      |        |  |  |  |        | 
|Payroll and related costs:                                 |  |      |        |      |  |      |        |  |  |  |        | 
|Salaries                                                   |  |      | 15,561 |      |  |      | 13,306 |  |  |  | 12,023 | 
|Social security costs                                      |  |      | 2,398  |      |  |      | 1,927  |  |  |  | 1,609  | 
|Social benefits                                            |  |      | 788    |      |  |      | 503    |  |  |  | 486    | 
|Net periodic pension cost (Note 20)                        |  |      | 1,586  |      |  |      | 1,501  |  |  |  | 734    | 
|                                                           |  |      |        |      |  |      |        |  |  |  |        | 
|Total                                                      |  |      | 20,333 |      |  |      | 17,237 |  |  |  | 14,852 | 
|                                                           |  |      |        |      |  |      |        |  |  |  |        | 

Estimating earnings relating to research and development costs
incurred is considered impracticable for the years ended 31
December 2002, 2001, 2000.



|1) |  | Total minimum future rentals of NOK 6,965 million are due under
non-cancelable operating leases as follows (in NOK million): 2003  1,319;
2004  1,216; 2005  968; 2006  801; 2007  713;
and thereafter  1,948.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8. FINANCIAL INCOME AND EXPENSE

|                                                  |  |      |         |      |  |      |        |   |  |  |        |  
|------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------ | - |  |  | ------ | -
|Amounts in NOK million                            |  | 2002 |         | 2001 |  | 2000
|Interest income                                   |  |      | 1,515   |      |  |      | 2,762  |   |  |  | 1,803  |  
|Net gain (loss) on securities                     |  |      | (269    | )    |  |      | (113   | ) |  |  | (168   | )
|Dividends received                                |  |      | 172     |      |  |      | 198    |   |  |  | 112    |  
|                                                  |  |      |         |      |  |      |        |   |  |  |        |  
|Interest income and other financial income        |  |      | 1,418   |      |  |      | 2,847  |   |  |  | 1,747  |  
|                                                  |  |      |         |      |  |      |        |   |  |  |        |  
|Interest expense                                  |  |      | (3,189) |      |  |      | (3,721 | ) |  |  | (4,045 | )
|Capitalized interest                              |  |      | 607     |      |  |      | 685    |   |  |  | 1,029  |  
|Net foreign exchange gain (loss)                  |  |      | 3,262   |      |  |      | (416   | ) |  |  | (655   | )
|Other, net                                        |  |      | (163    | )    |  |      | (157   | ) |  |  | (234   | )
|                                                  |  |      |         |      |  |      |        |   |  |  |        |  
|Interest expense and foreign exchange gain (loss) |  |      | 517     |      |  |      | (3,609 | ) |  |  | (3,905 | )
|                                                  |  |      |         |      |  |      |        |   |  |  |        |  
|Net financial income (expense)                    |  |      | 1,935   |      |  |      | (762   | ) |  |  | (2,158 | )
|                                                  |  |      |         |      |  |      |        |   |  |  |        |  

106





---



##### 



9. OTHER INCOME AND EXPENSE

Other income of NOK 219 million in 2002 consisted of a
gain on the sale of Hydros interest in the oil company Pelican
AS with NOK 77 million, the remaining NOK 142 million
related primarily to earnings from the divestment of the following activities in the Agri area: KA Rasmussen, parts of the
formate activity and the reorganizing of the Vlaardingen operations in the Netherlands into a new joint venture company.

In 2001, other income and expense of NOK 578 million
consisted of: Gain on sale of Hydro Seafood UK of NOK 418
million, gain on sale of transmission grid assets of NOK 179
million, gain on sale of Singapore Polymer Corporation of
NOK 59 million, loss on sale of Oleochemicals of NOK 53
million and charges of NOK 25 million relating to the sale of
Fundo a.s. in 2000.

Other income in 2000 of NOK 3,161 million consisted of:
NOK 1,609 million for Hydro Seafood, NOK 954 million for
shares in Dyno, NOK 387 million for Saga Petroleum UK,
NOK 89 million for KFKs pet food business BS Pet Products
AS, NOK 72 million for shares in Sapa Autoplastics AB, and
NOK 50 million for Fundo a.s.

10. INCOME TAXES

|                                           |  |      |        |      |  |      |        |   |  |  |        | 
|------------------------------------------ |  | ---- | ------ | ---- |  | ---- | ------ | - |  |  | ------ | 
|Amounts in NOK million                     |  | 2002 |        | 2001 |  | 2000
|Income before taxes and minority interest: |  |      |        |      |  |      |        |   |  |  |        | 
|Norway                                     |  |      | 17,876 |      |  |      | 18,763 |   |  |  | 26,341 | 
|Other countries                            |  |      | 4,152  |      |  |      | 2,702  |   |  |  | 3,800  | 
|                                           |  |      |        |      |  |      |        |   |  |  |        | 
|Total                                      |  |      | 22,028 |      |  |      | 21,465 |   |  |  | 30,141 | 
|                                           |  |      |        |      |  |      |        |   |  |  |        | 
|Current taxes:                             |  |      |        |      |  |      |        |   |  |  |        | 
|Norway                                     |  |      | 12,766 |      |  |      | 13,631 |   |  |  | 12,892 | 
|Other countries                            |  |      | 1,131  |      |  |      | 432    |   |  |  | 819    | 
|                                           |  |      |        |      |  |      |        |   |  |  |        | 
|Current income tax expense                 |  |      | 13,897 |      |  |      | 14,063 |   |  |  | 13,711 | 
|                                           |  |      |        |      |  |      |        |   |  |  |        | 
|Deferred
taxes:                           
|Norway                                     |  |      | (510   | )    |  |      | (576   | ) |  |  | 2,131  | 
|Other countries                            |  |      | (109   | )    |  |      | 263    |   |  |  | 336    | 
|                                           |  |      |        |      |  |      |        |   |  |  |        | 
|Deferred tax expense (benefit)             |  |      | (619   | )    |  |      | (313   | ) |  |  | 2,467  | 
|                                           |  |      |        |      |  |      |        |   |  |  |        | 
|Total income tax expense                   |  |      | 13,278 |      |  |      | 13,750 |   |  |  | 16,178 | 
|                                           |  |      |        |      |  |      |        |   |  |  |        | 

Components of deferred income tax expense

|                                                                 |  |      |      |      |  |      |      |   |  |  |       |  
|---------------------------------------------------------------- |  | ---- | ---- | ---- |  | ---- | ---- | - |  |  | ----- | -
|Amounts in NOK million                                           |  | 2002 |      | 2001 |  | 2000
|Deferred tax expense (benefit), excluding items below            |  |      | 641  |      |  |      | (230 | ) |  |  | 2,567 |  
|Benefits of tax loss carryforwards                               |  |      | (495 | )    |  |      | 2    |   |  |  | (58   | )
|Tax expense (benefit) allocated to other comprehensive income    |  |      | (727 | )    |  |      | 52   |   |  |  | 199   |  
|Effect of tax law changes                                        |  |      | 125  |      |  |      | 78   |   |  |  | 38    |  
|Net change in valuation allowance                                |  |      | (163 | )    |  |      | (215 | ) |  |  | (279  | )
|                                                                 |  |      |      |      |  |      |      |   |  |  |       |  
|Deferred tax expense (benefit)  US GAAP                         |  |      | (619 | )    |  |      | (313 | ) |  |  | 2,467 |  
|                                                                 |  |      |      |      |  |      |      |   |  |  |       |  
|Adjustments to N GAAP:                                           |  |      |      |      |  |      |      |   |  |  |       |  
|Tax effects of differences between US GAAP and N GAAP
 (Note 27) |  |      | 50   |      |  |      | (17  | ) |  |  | 10    |  
|                                                                 |  |      |      |      |  |      |      |   |  |  |       |  
|Deferred tax expense (benefit)  N GAAP                          |  |      | (569 | )    |  |      | (330 | ) |  |  | 2,477 |  
|                                                                 |  |      |      |      |  |      |      |   |  |  |       |  

Reconciliation of Norwegian nominal statutory tax rate to effective tax rate

|                                                                |  |      |        |      |  |      |        |   |  |  |        |  
|--------------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  |  | ------ | -
|Amounts in NOK million                                          |  | 2002 |        | 2001 |  | 2000
|Expected income taxes at statutory tax rate1)                   |  |      | 6,168  |      |  |      | 6,010  |   |  |  | 8,439  |  
|Petroleum surtax2)                                              |  |      | 8,665  |      |  |      | 9,138  |   |  |  | 8,665  |  
|Uplift benefit2)                                                |  |      | (1,034 | )    |  |      | (800   | ) |  |  | (720   | )
|Hydro-electric power surtax3)                                   |  |      | 217    |      |  |      | 190    |   |  |  | 155    |  
|Tax law changes                                                 |  |      | 125    |      |  |      | 78     |   |  |  | 38     |  
|Losses and other deductions with no tax benefit                 |  |      | 517    |      |  |      | 549    |   |  |  | 417    |  
|Non-deductible expenses                                         |  |      | 79     |      |  |      | 28     |   |  |  | 149    |  
|Foreign tax rate differences                                    |  |      | 127    |      |  |      | 62     |   |  |  | 117    |  
|Tax free income                                                 |  |      | (363   | )    |  |      | (395   | ) |  |  | (481   | )
|Dividend exclusion                                              |  |      | (60    | )    |  |      | (22    | ) |  |  | (22    | )
|Losses and other benefits not previously recognized             |  |      | (581   | )    |  |      | (637   | ) |  |  | (962   | )
|Other, net                                                      |  |      | (582   | )    |  |      | (451   | ) |  |  | 383    |  
|                                                                |  |      |        |      |  |      |        |   |  |  |        |  
|Income tax expense  US GAAP                                    |  |      | 13,278 |      |  |      | 13,750 |   |  |  | 16,178 |  
|                                                                |  |      |        |      |  |      |        |   |  |  |        |  
|Effective tax rate  US GAAP                                    |  |      | 60.3   | %    |  |      | 64.1   | % |  |  | 53.7   | %
|                                                                |  |      |        |      |  |      |        |   |  |  |        |  
|Tax effect of differences between US GAAP
 and N GAAP (Note 27) |  |      | 50     |      |  |      | (17    | ) |  |  | 10     |  
|                                                                |  |      |        |      |  |      |        |   |  |  |        |  
|Income tax expense  N GAAP                                     |  |      | 13,328 |      |  |      | 13,733 |   |  |  | 16,188 |  
|                                                                |  |      |        |      |  |      |        |   |  |  |        |  
|Income before taxes  N GAAP                                    |  |      | 21,995 |      |  |      | 21,419 |   |  |  | 30,156 |  
|                                                                |  |      |        |      |  |      |        |   |  |  |        |  
|Effective tax rate  N GAAP                                     |  |      | 60.6   | %    |  |      | 64.1   | % |  |  | 53.7   | %
|                                                                |  |      |        |      |  |      |        |   |  |  |        |  



|1) |  | Norwegian nominal statutory tax rate is 28 percent.                                                                                                                                                                                                                                                                                     
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2) |  | Income from oil and gas activities on the Norwegian Continental Shelf is
taxed according to the Petroleum Tax Law. This stipulates a
surtax of 50 percent after deducting uplift, a special deduction for
surtax, in addition to normal corporate taxation of 28 percent.                                                               
|3) |  | A surtax of 27 percent is applied to taxable income, with certain
adjustments, for Norwegian hydro-electric power plants. The surtax
comes in addition to the normal corporate taxation. Tax depreciation,
including that from the upward revision of basis under the
new law, is deductible for both corporate tax and surtax purposes.

107





---



##### 



NORSK HYDRO ASA and subsidiaries
Notes to the consolidated financial statements

The tax effects of temporary
differences and tax loss carry forwards giving rise to deferred tax assets and liabilities were as follows
as of 31 December, 2002 and 2001.

|                                                  |  |                      |        |             |  |        |         |             |  |  |        |   |  |  |         |  
|------------------------------------------------- |  | -------------------- | ------ | ----------- |  | ------ | ------- | ----------- |  |  | ------ | - |  |  | ------- | -
|                                                  |  | US GAAP Deferred Tax
|                                                  |  | Assets               |        | Liabilities |  | Assets |         | Liabilities
|Amounts in NOK million                            |  | 2002                 |        | 2002        |  | 2001   |         | 2001       
|Short-term:                                       |  |                      |        |             |  |        |         |             |  |  |        |   |  |  |         |  
|Marketable securities                             |  |                      | 93     |             |  |        | (11     | )           |  |  | 18     |   |  |  | (25     | )
|Inventory valuation                               |  |                      | 121    |             |  |        | (273    | )           |  |  | 104    |   |  |  | (291    | )
|Accrued expenses                                  |  |                      | 2,700  |             |  |        | (1,127  | )           |  |  | 1,452  |   |  |  | (453    | )
|Unrealized exchange (gains) losses                |  |                      | 80     |             |  |        | (80     | )           |  |  | 35     |   |  |  | (61     | )
|Uplift benefit                                    |  |                      | 844    |             |  |        |        |             |  |  | 817    |   |  |  |        |  
|Other                                             |  |                      | 41     |             |  |        | (298    | )           |  |  | 1      |   |  |  | (14     | )
|Long-term:                                        |  |                      |        |             |  |        |         |             |  |  |        |   |  |  |         |  
|Unrealized exchange (gains) losses                |  |                      | 63     |             |  |        | (718    | )           |  |  | 58     |   |  |  | (2      | )
|Depreciation                                      |  |                      | 2,346  |             |  |        | (28,423 | )           |  |  | 1,590  |   |  |  | (25,075 | )
|Capitalized interest                              |  |                      |       |             |  |        | (3,665  | )           |  |  |       |   |  |  | (3,619  | )
|Exploration drilling costs                        |  |                      |       |             |  |        | (2,661  | )           |  |  |       |   |  |  | (2,802  | )
|Other non-current assets                          |  |                      | 1,808  |             |  |        | (4,169  | )           |  |  | 1,235  |   |  |  | (530    | )
|Accrued expenses                                  |  |                      | 703    |             |  |        | (1,047  | )           |  |  | 612    |   |  |  | (642    | )
|Pensions                                          |  |                      | 1,543  |             |  |        | (1,486  | )           |  |  | 887    |   |  |  | (1,317  | )
|Deferred (gains) losses on sales                  |  |                      | 161    |             |  |        | (1,632  | )           |  |  | 238    |   |  |  | (1,570  | )
|Uplift benefit                                    |  |                      | 1,545  |             |  |        |        |             |  |  | 1,528  |   |  |  |        |  
|Decommissioning                                   |  |                      | 871    |             |  |        |        |             |  |  | 779    |   |  |  |        |  
|Other                                             |  |                      | 647    |             |  |        | (1,764  | )           |  |  | 208    |   |  |  | (1,445  | )
|Total tax loss carryforwards                      |  |                      | 2,727  |             |  |        |        |             |  |  | 2,265  |   |  |  |        |  
|                                                  |  |                      |        |             |  |        |         |             |  |  |        |   |  |  |         |  
|Subtotal                                          |  |                      | 16,293 |             |  |        | (47,354 | )           |  |  | 11,827 |   |  |  | (37,846 | )
|                                                  |  |                      |        |             |  |        |         |             |  |  |        |   |  |  |         |  
|Total valuation allowance                         |  |                      | (1,900 | )           |  |        |        |             |  |  | (2,305 | ) |  |  |        |  
|                                                  |  |                      |        |             |  |        |         |             |  |  |        |   |  |  |         |  
|Gross deferred tax assets and liabilities         |  |                      | 14,393 |             |  |        | (47,354 | )           |  |  | 9,522  |   |  |  | (37,846 | )
|                                                  |  |                      |        |             |  |        |         |             |  |  |        |   |  |  |         |  
|Adjustments
for N GAAP: (Note 27)                 |  |                      |        |             |  |        |         |             |  |  |        |   |  |  |         |  
|Short and long-term:                              |  |                      |        |             |  |        |         |             |  |  |        |   |  |  |         |  
|Unrealized gains                                  |  |                      |       |             |  |        | 414     |             |  |  |       |   |  |  | 96      |  
|                                                  |  |                      |        |             |  |        |         |             |  |  |        |   |  |  |         |  
|Gross deferred tax assets and
liabilities, N GAAP |  |                      | 14,393 |             |  |        | (46,940 | )           |  |  | 9,522  |   |  |  | (37,750 | )
|                                                  |  |                      |        |             |  |        |         |             |  |  |        |   |  |  |         |  
|Net
- N GAAP                                      |  |                      | 2,184  |             |  |        | (34,731 | )           |  |  | 1,892  |   |  |  | (30,120 | )
|                                                  |  |                      |        |             |  |        |         |             |  |  |        |   |  |  |         |  

Deferred income taxes have not been provided for on undistributed
earnings of foreign subsidiaries, amounting to NOK 12,242 million,
since those earnings are considered to be indefinitely invested. No
deferred income taxes have been recognized on undistributed earnings of Norwegian subsidiary which can be remitted tax-free as dividends.

At the end of 2002, Hydro had tax loss carryforwards of NOK
8,743 million, primarily in Norway, Germany, Canada, Italy,
Jamaica, United Kingdom and Spain. Carry forward amounts expire
as follows:

|                             |  |  |       | 
|---------------------------- |  |  | ----- | 
|Amounts in NOK million       |  |  |       | 
|2003                         |  |  | 305   | 
|2004                         |  |  | 330   | 
|2005                         |  |  | 228   | 
|2006                         |  |  | 394   | 
|2007                         |  |  | 176   | 
|After 2007                   |  |  | 2,898 | 
|Without expiration           |  |  | 4,412 | 
|                             |  |  |       | 
|Total tax loss carryforwards |  |  | 8,743 | 
|                             |  |  |       | 

11. OTHER LIQUID ASSETS

|                             |  |      |       |      |  |  |       | 
|---------------------------- |  | ---- | ----- | ---- |  |  | ----- | 
|Amounts in NOK million       |  | 2002 |       | 2001
|Bank time deposits           |  |      | 1,161 |      |  |  | 10    | 
|Marketable equity securities |  |      | 551   |      |  |  | 869   | 
|Debt securities and other    |  |      | 935   |      |  |  | 1,542 | 
|                             |  |      |       |      |  |  |       | 
|Total other liquid assets    |  |      | 2,647 |      |  |  | 2,421 | 
|                             |  |      |       |      |  |  |       | 

The net change in unrealized gains on securities for the years ended
31 December 2002, 2001 and 2000 was a net loss of NOK 259
million, a net loss of NOK 22 million and a net loss of NOK 358
million, respectively. Total cost of marketable equity securities and
debt securities and other was NOK 1,822 million and NOK 2,484
million as of 31 December, 2002 and 2001, respectively.

12. INVENTORIES

|                       |  |      |        |      |  |  |        | 
|---------------------- |  | ---- | ------ | ---- |  |  | ------ | 
|Amounts in NOK million |  | 2002 |        | 2001
|Finished goods         |  |      | 8,804  |      |  |  | 10,023 | 
|Work in progress       |  |      | 2,734  |      |  |  | 773    | 
|Raw materials          |  |      | 5,694  |      |  |  | 4,998  | 
|                       |  |      |        |      |  |  |        | 
|Total inventories      |  |      | 17,232 |      |  |  | 15,794 | 
|                       |  |      |        |      |  |  |        | 

108





---



##### 



13. NON-CONSOLIDATED INVESTEES

|                                       |  |        |     |          |  |         |     |          |  |       |       |          |  |       |       |         |  |       |      |       |  |  |      |   |  |  |       |   |  |  |     |  |  |  |       |   |  |  |        |  
|-------------------------------------- |  | ------ | --- | -------- |  | ------- | --- | -------- |  | ----- | ----- | -------- |  | ----- | ----- | ------- |  | ----- | ---- | ----- |  |  | ---- | - |  |  | ----- | - |  |  | --- |  |  |  | ----- | - |  |  | ------ | -
|                                       |  | Hydro  |     |          |  |         |     |          |  |       |       |          |  |       |       |         |  |       |      |      
|Amounts in NOK million                 |  | Texaco |     | Scanraff |  | Alunorf |     | Alunorte |  | Søral |       | Meridian |  | Qafco |       | Noretyl |  | Other |      | Total
|Balance 01.01.2001                     |  |        | 869 |          |  |         | 332 |          |  |       |      |          |  |       | 789   |         |  |       | 503  |       |  |  | 697  |   |  |  | 1,033 |   |  |  |    |  |  |  | 2,988 |   |  |  | 7,211  |  
|Investments (sale), net                |  |        |     |          |  |         |     |          |  |       |       |          |  |       | 300   |         |  |       |      |       |  |  | (13  | ) |  |  | 96    |   |  |  |     |  |  |  | 417   |   |  |  | 800    |  
|Change in long-term advances, net      |  |        |     |          |  |         | (19 | )        |  |       |       |          |  |       |       |         |  |       |      |       |  |  |      |   |  |  |       |   |  |  |     |  |  |  | 197   |   |  |  | 178    |  
|Transfers (to) from other investments  |  |        |     |          |  |         |     |          |  |       |       |          |  |       |       |         |  |       |      |       |  |  |      |   |  |  |       |   |  |  | 462 |  |  |  | 986   |   |  |  | 1,448  |  
|Hydros share of net income (loss)     |  |        | 14  |          |  |         |     |          |  |       |       |          |  |       | 31    |         |  |       | 197  |       |  |  | 26   |   |  |  | 167   |   |  |  | 50  |  |  |  | 230   |   |  |  | 715    |  
|Amortization and write-down            |  |        |     |          |  |         |     |          |  |       |       |          |  |       | (28   | )       |  |       |      |       |  |  | (42  | ) |  |  |       |   |  |  |     |  |  |  | (79   | ) |  |  | (149   | )
|Dividends received by Hydro            |  |        | (1  | )        |  |         |     |          |  |       |       |          |  |       |       |         |  |       | (100 | )     |  |  | (15  | ) |  |  | (45   | ) |  |  |     |  |  |  | (311  | ) |  |  | (472   | )
|Foreign currency translation and other |  |        | (28 | )        |  |         | (16 | )        |  |       |       |          |  |       | 78    |         |  |       |      |       |  |  | (25  | ) |  |  | 15    |   |  |  |     |  |  |  | (68   | ) |  |  | (44    | )
|                                       |  |        |     |          |  |         |     |          |  |       |       |          |  |       |       |         |  |       |      |       |  |  |      |   |  |  |       |   |  |  |     |  |  |  |       |   |  |  |        |  
|Balance
31.12.2001                     |  |        | 854 |          |  |         | 297 |          |  |       |      |          |  |       | 1,170 |         |  |       | 600  |       |  |  | 628  |   |  |  | 1,266 |   |  |  | 512 |  |  |  | 4,360 |   |  |  | 9,687  |  
|                                       |  |        |     |          |  |         |     |          |  |       |       |          |  |       |       |         |  |       |      |       |  |  |      |   |  |  |       |   |  |  |     |  |  |  |       |   |  |  |        |  
|Changes in 2002:                       |  |        |     |          |  |         |     |          |  |       |       |          |  |       |       |         |  |       |      |       |  |  |      |   |  |  |       |   |  |  |     |  |  |  |       |   |  |  |        |  
|Investments (sale), net                |  |        |     |          |  |         | 159 |          |  |       | 1,468 |          |  |       | 137   |         |  |       |      |       |  |  | (5   | ) |  |  |       |   |  |  |     |  |  |  | 1,207 |   |  |  | 2,966  |  
|Change in long-term advances, net      |  |        |     |          |  |         | 145 |          |  |       |       |          |  |       |       |         |  |       |      |       |  |  |      |   |  |  |       |   |  |  |     |  |  |  | 964   |   |  |  | 1,109  |  
|Transfers (to) from other investments  |  |        |     |          |  |         |     |          |  |       |       |          |  |       |       |         |  |       |      |       |  |  |      |   |  |  |       |   |  |  |     |  |  |  | (109  | ) |  |  | (109   | )
|Hydros share of net income (loss)     |  |        | 115 |          |  |         |     |          |  |       | 47    |          |  |       | (291  | )       |  |       | 75   |       |  |  | 19   |   |  |  | 121   |   |  |  | 72  |  |  |  | 111   |   |  |  | 269    |  
|Amortization and write-down            |  |        |     |          |  |         |     |          |  |       | (40   | )        |  |       | (21   | )       |  |       |      |       |  |  |      |   |  |  |       |   |  |  |     |  |  |  | (174  | ) |  |  | (235   | )
|Dividends received by Hydro            |  |        | (1  | )        |  |         | (23 | )        |  |       |       |          |  |       |       |         |  |       | (100 | )     |  |  | (5   | ) |  |  | (95   | ) |  |  |     |  |  |  | (190  | ) |  |  | (414   | )
|Foreign currency translation and other |  |        | (49 | )        |  |         | (90 | )        |  |       | (47   | )        |  |       | (459  | )       |  |       |      |       |  |  | (142 | ) |  |  | (290  | ) |  |  |     |  |  |  | (697  | ) |  |  | (1,774 | )
|                                       |  |        |     |          |  |         |     |          |  |       |       |          |  |       |       |         |  |       |      |       |  |  |      |   |  |  |       |   |  |  |     |  |  |  |       |   |  |  |        |  
|Balance
31.12.2002                     |  |        | 919 |          |  |         | 488 |          |  |       | 1,428 |          |  |       | 536   |         |  |       | 575  |       |  |  | 495  |   |  |  | 1,002 |   |  |  | 584 |  |  |  | 5,472 |   |  |  | 11,499 |  
|                                       |  |        |     |          |  |         |     |          |  |       |       |          |  |       |       |         |  |       |      |       |  |  |      |   |  |  |       |   |  |  |     |  |  |  |       |   |  |  |        |  
|Amortization N GAAP                    |  |        |     |          |  |         |     |          |  |       |       |          |  |       |       |         |  |       |      |       |  |  | (9   | ) |  |  |       |   |  |  |     |  |  |  |       |   |  |  | (9     | )
|                                       |  |        |     |          |  |         |     |          |  |       |       |          |  |       |       |         |  |       |      |       |  |  |      |   |  |  |       |   |  |  |     |  |  |  |       |   |  |  |        |  
|Balance 31.12.2002 N GAAP              |  |        | 919 |          |  |         | 488 |          |  |       | 1,428 |          |  |       | 536   |         |  |       | 575  |       |  |  | 486  |   |  |  | 1,002 |   |  |  | 584 |  |  |  | 5,472 |   |  |  | 11,490 |  
|                                       |  |        |     |          |  |         |     |          |  |       |       |          |  |       |       |         |  |       |      |       |  |  |      |   |  |  |       |   |  |  |     |  |  |  |       |   |  |  |        |  

Specification of Non-consolidated
Investees

|                 |  |            |      |                |  |                 |        |      |  |      |       |  |  |  |      |   |  |  |      |  
|---------------- |  | ---------- | ---- | -------------- |  | --------------- | ------ | ---- |  | ---- | ----- |  |  |  | ---- | - |  |  | ---- | -
|                 |  |            |      |                |  | Hydro's current
|                 |  | Percentage |      | Investments in |  | receivable     
|Amounts in       |  | owned      |      | and advances   |  | (payable), net 
|NOK million,     |  | by Hydro   |      | to investees   |  | with investees 
|except ownership |  | 2002       |      | 2002           |  | 2001            |        | 2002 |  | 2001
|Hydro Texaco     |  |            | 50.0 | %              |  |                 | 919    |      |  |      | 854   |  |  |  | (61  | ) |  |  | (45  | )
|Scanraff         |  |            | 25.0 | %              |  |                 | 488    |      |  |      | 297   |  |  |  | 12   |   |  |  | (8   | )
|Alunorte         |  |            | 34.0 | %              |  |                 | 536    |      |  |      | 1,170 |  |  |  | (47  | ) |  |  | (55  | )
|Søral            |  |            | 49.9 | %              |  |                 | 575    |      |  |      | 600   |  |  |  | (103 | ) |  |  | (121 | )
|Meridian         |  |            | 49.0 | %              |  |                 | 495    |      |  |      | 628   |  |  |  | 62   |   |  |  | (57  | )
|Qafco            |  |            | 25.0 | %              |  |                 | 1,002  |      |  |      | 1,266 |  |  |  | (142 | ) |  |  | 42   |  
|Alunorf          |  |            | 50.0 | %              |  |                 | 1,428  |      |  |      |      |  |  |  | (115 | ) |  |  |     |  
|Noretyl          |  |            | 50.0 | %              |  |                 | 584    |      |  |      | 512   |  |  |  | (179 | ) |  |  | (64  | )
|Others           |  |            |      |                |  |                 | 5,472  |      |  |      | 4,360 |  |  |  | (131 | ) |  |  | 346  |  
|                 |  |            |      |                |  |                 |        |      |  |      |       |  |  |  |      |   |  |  |      |  
|Total            |  |            |      |                |  |                 | 11,499 |      |  |      | 9,687 |  |  |  | (704 | ) |  |  | 38   |  
|                 |  |            |      |                |  |                 |        |      |  |      |       |  |  |  |      |   |  |  |      |  

A description of
significant investees
business, majority
owners and the nature
of related party
transactions with Hydro
including amounts if
material follow:

Hydro Texaco a.s operates 881
gasoline stations and
162 diesel stations in
Norway, Denmark and the
Baltics. Hydro and ChevronTexaco Corp. each own 50 percent in
the joint venture. Hydro sells and purchases oil related
products with the joint venture at market prices. Sales
from Hydro Texaco to Hydro amounted to NOK 510
million, NOK 558 million and NOK 900 million in
2002, 2001 and 2000, respectively. Sales from Hydro to
Hydro Texaco amounted to NOK 674 million, NOK
1,194 million and NOK 969 million in 2002, 2001 and
2000, respectively. Hydro Texaco is part of Energy and
Oil Marketing.

Skandinaviska Raffinaderiet AB (Scanraff), part of
Hydro Energy, operates the Scanraff refinery in Lysekil,
Sweden. Hydro paid processing fees to Scanraff for refining of its oil of NOK 195 million, NOK 224 million and
NOK 232 million in 2002, 2001 and 2000, respectively.
The other partner is an unaffiliated company.

Aluminium Norf GmbH (Alunorf) is the world largest
rolling mill located in Germany nearby other Hydro facilities. Alunorf is jointly owned by Hydro and Alcan (50
percent each). Hydros shares in Alunorf were part of the
VAW acquisition in 2002. Each partner supplies Alunorf
with ingots, which are transformed to flat rolled coils and
delivered to the partners. Sales from Alunorf to Hydro in
2002 amounted to NOK 1,941 million. Hydro sells
alloys to Alunorf, operating revenues in 2002 from sales
to Alunorf were not material to Hydro Aluminium.
Alunorf is part of Rolled Products.

Alumina do Norte do Brasil S.A. (Alunorte) is an alumina
refinery located in Brazil. Hydros owner share is at

109





---



##### 



NORSK HYDRO ASA and subsidiaries
Notes to the consolidated financial statements

present 34.0 percent, an increase from 32.3 percent in 2001. Hydro
purchased alumina from Alunorte amounting to NOK 433
million, NOK 734 million and NOK 703 million in 2002,
2001 and 2000, respectively. Alunorte is part of Metals.

Sør-Norge Aluminium AS (Søral), part of Metals, is a Norwegian primary aluminium manufacturer. Søral sells 50 per-
cent of its production to each major owner at current market
prices. The other 50 percent owner of Søral is an unaffiliated
company. Sale of aluminium from Søral to Hydro amounted
to NOK 847 million, NOK 1,018 million and NOK 1,026
million in 2002, 2001 and 2000, respectively. Sales from
Hydro to Søral amounted to NOK 363 million, NOK 350
million and NOK 405 million in 2002, 2001 and 2000,
respectively.

Meridian Technologies Inc. (Meridian), part of Extrusion
and Automotive, is a Canadian company owned 51 percent
by Teksid S.p.A. (a subsidiary of the Fiat group) and 49 percent by Hydro. Meridian provides magnesium die-casting
products to the automobile industry. Meridian purchases
alloyed magnesium from Hydro. Operating revenues in 2002
from sales to Meridian were not material to Hydro Aluminium as a whole.

Qatar Fertiliser Company S.A.Q. (Qafco) owns and
operates a fertilizer complex for which Hydro provides marketing
support and technical assistance. Hydro has a 25 percent
ownership in Qafco, the remaining 75 percent of Qafco is
owned by Qatar Petroleum, which is owned by the State of
Qatar. Qafco operates three separate lines for production of
ammonia and urea, a fourth is currently under construction.
The expansion is scheduled for completion in June 2004.
Hydro purchased urea from Qafco amounting to NOK 944
million, NOK 876 million, NOK 1,030 million in 2002,
2001 and 2000, respectively.

Hydro and Borealis own Noretyl AS as a joint venture
(50-50 percent). Noretyl is part of Petrochemicals. Hydro paid
processing fees to Noretyl for refining NGL of NOK 242
million and NOK 250 million in 2002 and 2001, respectively.

Non-consolidated investees split by segment can be found
in Note 5.

NON-CONSOLIDATED INVESTEES  100 PERCENT BASIS

The following table sets forth summarized unaudited financial
information of Hydros non-consolidated investees on a 100
percent combined basis. Hydros share of these investments,
which is also specified below, is accounted for using the equity method.

Income Statement Data

|                                          |  |      |        |      |  |      |        |  |  |  |        | 
|----------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  |  | ------ | 
|Amounts in NOK million                    |  |      |        |      |  |      |        |  |  |  |        | 
|(unaudited)                               |  | 2002 |        | 2001 |  | 2000
|Operating revenues                        |  |      | 35,204 |      |  |      | 36,772 |  |  |  | 41,080 | 
|Operating income                          |  |      | 4,534  |      |  |      | 6,507  |  |  |  | 5,714  | 
|Income before taxes and
minority interest |  |      | 1,772  |      |  |      | 3,475  |  |  |  | 3,065  | 
|Net income                                |  |      | 1,240  |      |  |      | 2,771  |  |  |  | 2,435  | 
|                                          |  |      |        |      |  |      |        |  |  |  |        | 
|Hydros share of net income               |  |      | 269    |      |  |      | 714    |  |  |  | 697    | 
|                                          |  |      |        |      |  |      |        |  |  |  |        | 

Balance Sheet Data

|                                     |  |      |        |      |  |      |        |  |  |  |        | 
|------------------------------------ |  | ---- | ------ | ---- |  | ---- | ------ |  |  |  | ------ | 
|Amounts in NOK million               |  |      |        |      |  |      |        |  |  |  |        | 
|(unaudited)                          |  | 2002 |        | 2001 |  | 2000
|Current assets                       |  |      | 14,805 |      |  |      | 17,205 |  |  |  | 16,408 | 
|Non-current assets                   |  |      | 38,218 |      |  |      | 40,066 |  |  |  | 30,610 | 
|                                     |  |      |        |      |  |      |        |  |  |  |        | 
|Assets                               |  |      | 53,023 |      |  |      | 57,271 |  |  |  | 47,018 | 
|                                     |  |      |        |      |  |      |        |  |  |  |        | 
|Current liabilities                  |  |      | 9,548  |      |  |      | 11,589 |  |  |  | 12,246 | 
|Non-current liabilities              |  |      | 16,600 |      |  |      | 15,321 |  |  |  | 14,150 | 
|Minority interest                    |  |      | 6      |      |  |      | 27     |  |  |  | 30     | 
|Shareholders equity                 |  |      | 26,869 |      |  |      | 30,334 |  |  |  | 20,592 | 
|                                     |  |      |        |      |  |      |        |  |  |  |        | 
|Liabilities and shareholders equity |  |      | 53,023 |      |  |      | 57,271 |  |  |  | 47,018 | 
|                                     |  |      |        |      |  |      |        |  |  |  |        | 
|Hydros investments and advances     |  |      | 11,499 |      |  |      | 9,687  |  |  |  | 7,211  | 
|                                     |  |      |        |      |  |      |        |  |  |  |        | 

14. PREPAID PENSION, INVESTMENTS AND NON-CURRENT ASSETS

|                                                                      |  |      |        |      |  |  |        |  
|--------------------------------------------------------------------- |  | ---- | ------ | ---- |  |  | ------ | -
|Amounts in NOK million                                                |  | 2002 |        | 2001
|Goodwill for consolidated subsidiaries, less accumulated amortization |  |      | 1,217  |      |  |  | 1,265  |  
|Intangible assets, less accumulated amortization                      |  |      | 1,967  |      |  |  | 786    |  
|                                                                      |  |      |        |      |  |  |        |  
|Total intangible assets                                               |  |      | 3,184  |      |  |  | 2,051  |  
|                                                                      |  |      |        |      |  |  |        |  
|Prepaid pension (Note 20)                                             |  |      | 4,989  |      |  |  | 4,599  |  
|Available-for-sale securities at fair value1)                         |  |      | 19     |      |  |  | 62     |  
|Other investments at cost                                             |  |      | 2,948  |      |  |  | 1,868  |  
|Non-current assets                                                    |  |      | 3,941  |      |  |  | 3,056  |  
|                                                                      |  |      |        |      |  |  |        |  
|Total prepaid pension, investments and non-current assets             |  |      | 11,897 |      |  |  | 9,585  |  
|                                                                      |  |      |        |      |  |  |        |  
|Total - US GAAP                                                       |  |      | 15,081 |      |  |  | 11,636 |  
|                                                                      |  |      |        |      |  |  |        |  
|Total
prepaid pension, investments and non-current assets             |  |      | 11,897 |      |  |  | 9,585  |  
|Adjustments2) (Note 27)                                               |  |      | (303   | )    |  |  | (419   | )
|                                                                      |  |      |        |      |  |  |        |  
|Total
prepaid pension, investments and non-current assets - N GAAP    |  |      | 11,594 |      |  |  | 9,1661 | )
|                                                                      |  |      |        |      |  |  |        |  



|1) |  | As of 31 December, 2002 and 2001, available-for-sale securities
at cost amounted to NOK 4 million. Unrealized holding gain as of
31 December, 2002 and 2001, was NOK 15 million and NOK 58
million, respectively.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2) |  | The difference consists of fair value adjustment for cash flow
hedge instruments, unrealized gain on available for sale securities,
and unrealized gain on freestanding derivatives.                             

110





---



##### 



15. PROPERTY, PLANT AND EQUIPMENT

|                                            |  |                       |       |           |  |           |         |              |  |       |        |        |  |       |        |   |  |  |      |   |  |  |         |   |  |  |         |   
|------------------------------------------- |  | --------------------- | ----- | --------- |  | --------- | ------- | ------------ |  | ----- | ------ | ------ |  | ----- | ------ | - |  |  | ---- | - |  |  | ------- | - |  |  | ------- | --
|                                            |  | Land-based Activities |       |           |  |           |         |              |  |      
|                                            |  |                       |       |           |  |           |         |              |  |      
|                                            |  | Machinery and         |       |           |  |           |         | Plant under  |  |       |        |        |  |       |        |  
|Amounts in NOK million                      |  | Land                  |       | Equipment |  | Buildings |         | construction |  | Other |        | E&P 1) |  | Total
|Cost:                                       |  |                       |       |           |  |           |         |              |  |       |        |        |  |       |        |   |  |  |      |   |  |  |         |   |  |  |         |   
|Cost 31.12.2001                             |  |                       | 912   |           |  |           | 53,883  |              |  |       | 16,079 |        |  |       | 3,149  |   |  |  | 772  |   |  |  | 115,697 |   |  |  | 190,492 |   
|Additions at cost                           |  |                       | 877   |           |  |           | 13,019  |              |  |       | 3,652  |        |  |       | 6,213  |   |  |  | 2    |   |  |  | 14,145  |   |  |  | 37,908  |   
|Retirements                                 |  |                       | (55   | )         |  |           | (4,996  | )            |  |       | (1,891 | )      |  |       | (68    | ) |  |  |     |   |  |  | (2,079  | ) |  |  | (9,089  | ) 
|Transfers                                   |  |                       |      |           |  |           | 1,976   |              |  |       | 307    |        |  |       | (2,323 | ) |  |  |     |   |  |  | 40      |   |  |  |        |   
|Foreign currency translation                |  |                       | (154  | )         |  |           | (4,713  | )            |  |       | (1,130 | )      |  |       | (250   | ) |  |  |     |   |  |  | (1,504  | ) |  |  | (7,751  | ) 
|                                            |  |                       |       |           |  |           |         |              |  |       |        |        |  |       |        |   |  |  |      |   |  |  |         |   |  |  |         |   
|Balance 31.12.2002                          |  |                       | 1,580 |           |  |           | 59,169  |              |  |       | 17,017 |        |  |       | 6,721  |   |  |  | 774  |   |  |  | 126,299 |   |  |  | 211,560 |   
|                                            |  |                       |       |           |  |           |         |              |  |       |        |        |  |       |        |   |  |  |      |   |  |  |         |   |  |  |         |   
|Depreciation:                               |  |                       |       |           |  |           |         |              |  |       |        |        |  |       |        |   |  |  |      |   |  |  |         |   |  |  |         |   
|Balance 31.12.2001                          |  |                       |      |           |  |           | (37,748 | )            |  |       | (9,060 | )      |  |       |       |   |  |  | (263 | ) |  |  | (48,144 | ) |  |  | (95,215 | ) 
|Depreciation, depletion
and amortization 2) |  |                       |      |           |  |           | (4,034  | )            |  |       | (602   | )      |  |       |       |   |  |  | (39  | ) |  |  | (8,553  | ) |  |  | (13,228 | ) 
|Retirements                                 |  |                       |      |           |  |           | 4,420   |              |  |       | 1,239  |        |  |       |       |   |  |  |     |   |  |  | 407     |   |  |  | 6,066   |   
|Foreign currency translation
and transfers  |  |                       |      |           |  |           | 2,427   |              |  |       | 359    |        |  |       |       |   |  |  |     |   |  |  | 373     |   |  |  | 3,159   |   
|                                            |  |                       |       |           |  |           |         |              |  |       |        |        |  |       |        |   |  |  |      |   |  |  |         |   |  |  |         |   
|Balance 31.12.2002                          |  |                       |      |           |  |           | (34,935 | )            |  |       | (8,064 | )      |  |       |       |   |  |  | (302 | ) |  |  | (55,917 | ) |  |  | (99,218 | ) 
|                                            |  |                       |       |           |  |           |         |              |  |       |        |        |  |       |        |   |  |  |      |   |  |  |         |   |  |  |         |   
|Net Book Value:                             |  |                       |       |           |  |           |         |              |  |       |        |        |  |       |        |   |  |  |      |   |  |  |         |   |  |  |         |   
|Balance 31.12.2001                          |  |                       | 912   |           |  |           | 16,135  |              |  |       | 7,019  |        |  |       | 3,149  |   |  |  | 509  |   |  |  | 67,553  |   |  |  | 95,277  | 3)
|Balance 31.12.2002                          |  |                       | 1,580 |           |  |           | 24,234  |              |  |       | 8,953  |        |  |       | 6,721  |   |  |  | 472  |   |  |  | 70,382  |   |  |  | 112,342 | 3)
|                                            |  |                       |       |           |  |           |         |              |  |       |        |        |  |       |        |   |  |  |      |   |  |  |         |   |  |  |         |   



|1) |  | Includes land-based activities for Exploration and Production (E&P).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2) |  | Impairment losses for 2002, 2001 and 2000 were NOK 398 million, NOK 396
million and NOK 141 million, respectively. In 2001 addi-
tional impairment losses of NOK 261 million was recorded as restructuring
cost. The fair value of the impaired asset was generally esti-
mated by discounting the expected future cash flows of the individual
assets. During the three years ended 31 December 2002, impair-
ment was generally indicated as the result of current period cash flow
losses, combined with a history of losses, or a significant change
in the manner in which the asset is to be used.
|3) |  | Includes NOK 173 million and NOK 176 million related to capital leases for
2002 and 2001 respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

16. GOODWILL AND INTANGIBLESIntangible Assets


|                                           |  |        |        |            |  |       |   |  |  |  |        |  
|------------------------------------------ |  | ------ | ------ | ---------- |  | ----- | - |  |  |  | ------ | -
|                                           |  | Finite |        | Indefinite |  |       |   | 
|                                           |  | Useful |        | Useful     |  |       |   | 
|Amounts in NOK million                     |  | Life   |        | Life       |  | Total
|Cost:                                      |  |        |        |            |  |       |   |  |  |  |        |  
|Cost 31.12.2001                            |  |        | 1,889  |            |  |       |  |  |  |  | 1,889  |  
|Additions at cost                          |  |        | 1,560  |            |  |       | 5 |  |  |  | 1,565  |  
|Disposals                                  |  |        | (225   | )          |  |       |  |  |  |  | (225   | )
|Foreign currency translation
and transfers |  |        | 60     |            |  |       |  |  |  |  | 60     |  
|Accumulated amortization
31.12.2002        |  |        | (1,605 | )          |  |       |  |  |  |  | (1,605 | )
|                                           |  |        |        |            |  |       |   |  |  |  |        |  
|Net book value 31.12.2002                  |  |        | 1,679  |            |  |       | 5 |  |  |  | 1,684  |  
|                                           |  |        |        |            |  |       |   |  |  |  |        |  

Amortization of intangibles of NOK 397 million and NOK 294
million were recorded for 2002 and 2001, respectively. Estimated
amortization expense in million NOK for the next five years
is 2003 - 447; 2004 - 399; 2005 - 345; 2006 - 175; 2007 - 145.

Proforma information
The following table reconciles the reported Earnings Before Interest Expenses and Taxes (EBIT), reported net income, and
reported earnings per share to that which would have resulted for the
years ended December 31, 2001 and 2000 assuming SFAS 142
were adopted on January 1, 2000.

|                                                   |  |      |        |      |  |      |        |  |  |  |        | 
|-------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  |  | ------ | 
|NOK million, except per share data                 |  | 2002 |        | 2001 |  | 2000
|Earnings before interest
expenses and taxes (EBIT) |  |      | 21,511 |      |  |      | 25,074 |  |  |  | 34,046 | 
|Goodwill amortization                              |  |      |       |      |  |      | 178    |  |  |  | 238    | 
|Pro forma EBIT                                     |  |      | 21,511 |      |  |      | 25,252 |  |  |  | 34,284 | 
|                                                   |  |      |        |      |  |      |        |  |  |  |        | 
|Net income                                         |  |      | 8,765  |      |  |      | 7,892  |  |  |  | 13,981 | 
|Goodwill amortization (after tax)                  |  |      |       |      |  |      | 178    |  |  |  | 238    | 
|Pro forma net income                               |  |      | 8,765  |      |  |      | 8,070  |  |  |  | 14,219 | 
|                                                   |  |      |        |      |  |      |        |  |  |  |        | 
|Reported earnings per share                        |  |      | 34.00  |      |  |      | 30.50  |  |  |  | 53.40  | 
|Goodwill amortization per share                    |  |      |       |      |  |      | 0.70   |  |  |  | 0.90   | 
|Pro forma earnings per share                       |  |      | 34.00  |      |  |      | 31.20  |  |  |  | 54.30  | 

111





---



##### 



NORSK HYDRO ASA and subsidiaries
Notes to the consolidated financial statements

Goodwill

|                                    |  |               |       |       |       |  |     |   |  |  |       |  
|----------------------------------- |  | ------------- | ----- | ----- | ----- |  | --- | - |  |  | ----- | -
|                                    |  | Extrusion and |       |       |       |  |     |   |  | 
|NOK million                         |  | Automotive    |       | Other | Total
|Balance at December 31, 2001        |  |               | 1,042 |       |       |  | 223 |   |  |  | 1,265 |  
|Goodwill acquired                   |  |               | 200   |       |       |  | 128 |   |  |  | 328   |  
|Impairment loss                     |  |               |       |       |       |  | (52 | ) |  |  | (52   | )
|Currency translation effect         |  |               | (255  | )     |       |  | (20 | ) |  |  | (275  | )
|Other                               |  |               | 31    |       |       |  | (80 | ) |  |  | (49   | )
|                                    |  |               |       |       |       |  |     |   |  |  |       |  
|Balance at December 31, 2002        |  |               | 1,018 |       |       |  | 199 |   |  |  | 1,217 |  
|                                    |  |               |       |       |       |  |     |   |  |  |       |  
|Amortization of goodwill N GAAP     |  |               | (142  | )     |       |  | (19 | ) |  |  | (161  | )
|Foreign currency
translation N GAAP |  |               | 15    |       |       |  |    |   |  |  | 15    |  
|                                    |  |               |       |       |       |  |     |   |  |  |       |  
|Balance at December 31, 2002 N GAAP |  |               | 891   |       |       |  | 180 |   |  |  | 1,071 |  
|                                    |  |               |       |       |       |  |     |   |  |  |       |  

Original cost of goodwill at 31 December 2002 was NOK 1,896
million. Accumulated amortization of goodwill for N GAAP
amounted to NOK 825 million.

Hydro incurred a NOK 52 million goodwill impairment charge
in the Other Activities segment related to KFKs divestment of
its feed and grain activity. Impairment exists when the carrying
amount of goodwill exceeds its fair value. The contract sale price
of KFKs feed and grain activity was lower then the recorded
book value.

17. BANK LOANS AND OTHER INTEREST BEARING
SHORT-TERM DEBT

|                                                             |  |                  |     |      |  |      |     |      |  |  |       |  |  |  |       | 
|------------------------------------------------------------ |  | ---------------- | --- | ---- |  | ---- | --- | ---- |  |  | ----- |  |  |  | ----- | 
|                                                             |  | Weighted Average |     |      |  |      |     |      |  | 
|                                                             |  | Interest Rates   |     |      |  |      |     |      |  | 
|Amounts in NOK million                                       |  | 2002             |     | 2001 |  | 2002 |     | 2001
|Bank loans and
overdraft facilities                          |  |                  | 4.7 | %    |  |      | 6.5 | %    |  |  | 3,011 |  |  |  | 3,428 | 
|Commercial paper                                             |  |                  | 3.5 | %    |  |      | 3.8 | %    |  |  | 20    |  |  |  | 8     | 
|Other                                                        |  |                  | 4.3 | %    |  |      | 4.2 | %    |  |  | 4,275 |  |  |  | 5,022 | 
|                                                             |  |                  |     |      |  |      |     |      |  |  |       |  |  |  |       | 
|Total bank loans and other
 interest-bearing short-term debt |  |                  |     |      |  |      |     |      |  |  | 7,306 |  |  |  | 8,458 | 
|                                                             |  |                  |     |      |  |      |     |      |  |  |       |  |  |  |       | 

As of 31 December, 2002, Norsk Hydro
ASA had unused short term credit facilities with various banks totalling approximately
NOK 2,825 million. The interest rate for withdrawals under
these facilities is based on the interbank interest rate for the relevant currency plus a margin depending on the currency.

18. OTHER CURRENT LIABILITIES

|                                |  |      |        |      |  |  |        | 
|------------------------------- |  | ---- | ------ | ---- |  |  | ------ | 
|Amounts in NOK million          |  | 2002 |        | 2001
|Accounts payable                |  |      | 14,732 |      |  |  | 12,190 | 
|Income taxes payable            |  |      | 8,646  |      |  |  | 7,697  | 
|Payroll and value added taxes   |  |      | 3,106  |      |  |  | 2,622  | 
|Accrued liabilities             |  |      | 8,839  |      |  |  | 8,578  | 
|Other liabilities               |  |      | 3,008  |      |  |  | 1,158  | 
|                                |  |      |        |      |  |  |        | 
|Total other current liabilities |  |      | 38,331 |      |  |  | 32,245 | 
|                                |  |      |        |      |  |  |        | 

19. LONG-TERM DEBT

Substantially all unsecured debenture bonds and unsecured bank
loan agreements contain provisions restricting the pledging of
assets to secure future borrowings without granting a similar
secured status to the existing bondholders and lenders. Certain
of the debenture bond agreements contain provisions allowing
Hydro to call the debt prior to its final redemption date at par or
at certain specified premiums.

Long-term debt payable in various currencies

|                                 |  |          |     |         |  |         |       |      |  |  |        |   |  |  |        |  
|-------------------------------- |  | -------- | --- | ------- |  | ------- | ----- | ---- |  |  | ------ | - |  |  | ------ | -
|                                 |  | Weighted |     | Denomi- |  |         |       |      |  |  |        |  
|                                 |  | Average  |     | nated   |  | Balance
|                                 |  | Interest |     | Amount  |  | in NOK 
|Amounts in million               |  | Rates    |     | 2002    |  | 2002    |       | 2001
|USD                              |  |          | 7.4 | %       |  |         | 2,935 |      |  |  | 20,390 |   |  |  | 26,462 |  
|NOK                              |  |          | 6.9 | %       |  |         | 2,180 |      |  |  | 2,180  |   |  |  | 3,830  |  
|GBP                              |  |          | 7.5 | %       |  |         | 325   |      |  |  | 3,641  |   |  |  | 4,243  |  
|EUR                              |  |          | 6.3 | %       |  |         | 400   |      |  |  | 2,915  |   |  |  | 3,192  |  
|Other                            |  |          |     |         |  |         |       |      |  |  | 17     |   |  |  |       |  
|                                 |  |          |     |         |  |         |       |      |  |  |        |   |  |  |        |  
|Total unsecured debenture bonds: |  |          |     |         |  |         |       |      |  |  | 29,143 |   |  |  | 37,727 |  
|                                 |  |          |     |         |  |         |       |      |  |  |        |   |  |  |        |  
|USD                              |  |          | 6.1 | %       |  |         | 11    |      |  |  | 81     |   |  |  | 193    |  
|SEK                              |  |          | 5.5 | %       |  |         | 1,000 |      |  |  | 795    |   |  |  | 860    |  
|EUR                              |  |          | 3.5 | %       |  |         | 61    |      |  |  | 479    |   |  |  | 23     |  
|Other                            |  |          |     |         |  |         |       |      |  |  | 142    |   |  |  | 263    |  
|                                 |  |          |     |         |  |         |       |      |  |  |        |   |  |  |        |  
|Total unsecured bank loans:      |  |          |     |         |  |         |       |      |  |  | 1,497  |   |  |  | 1,339  |  
|                                 |  |          |     |         |  |         |       |      |  |  |        |   |  |  |        |  
|Capital lease obligations        |  |          |     |         |  |         |       |      |  |  | 122    |   |  |  | 174    |  
|Mortgage loans                   |  |          |     |         |  |         |       |      |  |  | 1,400  |   |  |  | 171    |  
|Other long-term debt             |  |          |     |         |  |         |       |      |  |  | 698    |   |  |  | 408    |  
|                                 |  |          |     |         |  |         |       |      |  |  |        |   |  |  |        |  
|Outstanding debt                 |  |          |     |         |  |         |       |      |  |  | 32,860 |   |  |  | 39,819 |  
|Less: Current portion            |  |          |     |         |  |         |       |      |  |  | (1,958 | ) |  |  | (1,966 | )
|                                 |  |          |     |         |  |         |       |      |  |  |        |   |  |  |        |  
|Total long-term debt             |  |          |     |         |  |         |       |      |  |  | 30,902 |   |  |  | 37,853 |  
|                                 |  |          |     |         |  |         |       |      |  |  |        |   |  |  |        |  

As of 31 December, 2002 the fair value of long-term debt,
including the current portion, was NOK 37,794 million and the
carrying value was NOK 32,860 million.

Foreign currency swaps are not reflected in the table above.
(See Note 24).

112





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##### 



Payments on long-term debt fall due as follows

|                       |  |        |        |       |  |               |       |       |  |  |       |  |  |  |        | 
|---------------------- |  | ------ | ------ | ----- |  | ------------- | ----- | ----- |  |  | ----- |  |  |  | ------ | 
|                       |  | Deben- |        | Bank- |  | Capital lease |       |       |  | 
|Amounts in NOK million |  | tures  |        | loans |  | and other     |       | Total
|2003                   |  |        | 1,720  |       |  |               | 124   |       |  |  | 114   |  |  |  | 1,958  | 
|2004                   |  |        | 1,025  |       |  |               | 45    |       |  |  | 197   |  |  |  | 1,267  | 
|2005                   |  |        | 500    |       |  |               | 443   |       |  |  | 1,597 |  |  |  | 2,540  | 
|2006                   |  |        | 504    |       |  |               | 40    |       |  |  | 120   |  |  |  | 664    | 
|2007                   |  |        | 4      |       |  |               | 423   |       |  |  | 51    |  |  |  | 478    | 
|Thereafter             |  |        | 25,390 |       |  |               | 422   |       |  |  | 141   |  |  |  | 25,953 | 
|                       |  |        |        |       |  |               |       |       |  |  |       |  |  |  |        | 
|Total                  |  |        | 29,143 | 1)    |  |               | 1,497 | 2)    |  |  | 2,220 |  |  |  | 32,860 | 
|                       |  |        |        |       |  |               |       |       |  |  |       |  |  |  |        | 



|1) |  | Of which Norsk Hydro
ASA is responsible for
NOK 29,009 million.
|-- |  | ---------------------------------------------------------------
|2) |  | Of which Norsk Hydro ASA is
responsible for NOK 1,218
million. 

Norsk Hydro ASA has entered
into long-term committed
stand-by credit facility
agreements with several
international banks for a total
amount of USD 1,925 million. Of
this amount, USD 350 million
expires in 2007, and the
remainder in 2009. There are no
borrowings under these
facilities as of 31 December,
2002. Average commitment fee on
these facilities is 0.15
percent.

20. EMPLOYEE RETIREMENT PLANS

PENSION BENEFITS

Norsk Hydro ASA and many of its subsidiaries have defined benefit retirement
 plans which cover substantially all of their employees. Plan benefits
are generally based on years of service and final salary levels. Some subsidiaries have defined contribution or multiemployer plans.

The pension plan assets had the following investment profile at the
end of 2002: equity securities 30 percent, bonds 39 percent, real estate 19
percent and other 12 percent. The corresponding profile at the end of
2001 was: equity securities 41 percent, bonds 32 percent, real estate 17
percent and other 10 percent.

Net periodic pension cost

|                                                                                              |  |  |        |   |  |  |        |   |  |  |        |  
|--------------------------------------------------------------------------------------------- |  |  | ------ | - |  |  | ------ | - |  |  | ------ | -
|Amount in NOK million                                                                         |  |  | 2002   |   |  |  | 2001   |   |  |  | 2000   |  
|Defined benefit plans:                                                                        |  |  |        |   |  |  |        |   |  |  |        |  
|Benefits earned during the year, net of participants contributions                           |  |  | 610    |   |  |  | 543    |   |  |  | 528    |  
|Interest cost on prior period benefit obligation                                              |  |  | 1,314  |   |  |  | 1,087  |   |  |  | 1,004  |  
|Expected return on plan assets                                                                |  |  | (1,265 | ) |  |  | (1,373 | ) |  |  | (1,412 | )
|Recognized loss (gain)                                                                        |  |  | 58     |   |  |  | (11    | ) |  |  | (69    | )
|Amortization of prior service cost                                                            |  |  | 145    |   |  |  | 151    |   |  |  | 258    |  
|Amortization of net
transition asset                                                          |  |  | (58    | ) |  |  | (57    | ) |  |  | (57    | )
|Curtailment loss                                                                              |  |  | 119    |   |  |  | 117    |   |  |  | 19     |  
|Settlement loss (gain)                                                                        |  |  | (4     | ) |  |  | 1      |   |  |  | (48    | )
|                                                                                              |  |  |        |   |  |  |        |   |  |  |        |  
|Net periodic pension cost                                                                     |  |  | 919    |   |  |  | 458    |   |  |  | 223    |  
|Defined contribution plans                                                                    |  |  | 48     |   |  |  | 57     |   |  |  | 51     |  
|Multiemployer plans                                                                           |  |  | 21     |   |  |  | 8      |   |  |  | 14     |  
|Termination benefits and other                                                                |  |  | 598    |   |  |  | 978    |   |  |  | 446    |  
|                                                                                              |  |  |        |   |  |  |        |   |  |  |        |  
|Total net periodic pension cost                                                               |  |  | 1,586  |   |  |  | 1,501  |   |  |  | 734    |  
|                                                                                              |  |  |        |   |  |  |        |   |  |  |        |  
|Change
in the additional minimum pension liability included within other comprehensive income |  |  | 472    |   |  |  | 553    |   |  |  | 132    |  
|                                                                                              |  |  |        |   |  |  |        |   |  |  |        |  

Change in projected benefit obligation (PBO)

|                                                  |  |  |         |   |  |  |         |  
|------------------------------------------------- |  |  | ------- | - |  |  | ------- | -
|Amounts in NOK million                            |  |  | 2002    |   |  |  | 2001    |  
|Projected benefit obligation
at beginning of year |  |  | (17,620 | ) |  |  | (15,660 | )
|Benefits earned during the year                   |  |  | (627    | ) |  |  | (560    | )
|Interest cost on prior period
benefit obligation  |  |  | (1,314  | ) |  |  | (1,087  | )
|Actuarial loss                                    |  |  | (2,722  | ) |  |  | (1,058  | )
|Plan amendments                                   |  |  | 49      |   |  |  | (178    | )
|Benefits paid                                     |  |  | 912     |   |  |  | 728     |  
|Curtailment loss                                  |  |  | (39     | ) |  |  | (10     | )
|Settlements                                       |  |  | 8       |   |  |  | 58      |  
|Special termination benefits                      |  |  | (187    | ) |  |  |        |  
|Business combinations                             |  |  | (2,993  | ) |  |  |        |  
|Divestments                                       |  |  | 6       |   |  |  | 57      |  
|Foreign currency translation                      |  |  | 813     |   |  |  | 90      |  
|                                                  |  |  |         |   |  |  |         |  
|Projected benefit obligation at end of year       |  |  | (23,714 | ) |  |  | (17,620 | )
|                                                  |  |  |         |   |  |  |         |  

113





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NORSK HYDRO ASA and subsidiaries
Notes to the consolidated financial statements

Change in pension plan assets

|                                               |  |      |        |      |  |  |        |  
|---------------------------------------------- |  | ---- | ------ | ---- |  |  | ------ | -
|Amounts in NOK million                         |  | 2002 |        | 2001
|Fair value of plan assets at beginning of year |  |      | 16,876 |      |  |  | 18,372 |  
|Actual return on plan assets                   |  |      | (1,119 | )    |  |  | (755   | )
|Company contributions                          |  |      | 648    |      |  |  | 69     |  
|Plan participants contributions               |  |      | 17     |      |  |  | 17     |  
|Benefits paid                                  |  |      | (686   | )    |  |  | (640   | )
|Settlements                                    |  |      | (8     | )    |  |  | (50    | )
|Divestments                                    |  |      | (9     | )    |  |  | (61    | )
|Foreign currency translation                   |  |      | (597   | )    |  |  | (76    | )
|                                               |  |      |        |      |  |  |        |  
|Fair value of plan assets at end of year       |  |      | 15,122 |      |  |  | 16,876 |  
|                                               |  |      |        |      |  |  |        |  

Status of pension plans reconciled to balance sheet

|                                                    |  |      |        |      |  |  |        |  
|--------------------------------------------------- |  | ---- | ------ | ---- |  |  | ------ | -
|Amounts in NOK million                              |  | 2002 |        | 2001
|Defined benefit plans:                              |  |      |        |      |  |  |        |  
|Funded status of the plans
at end of year           |  |      | (8,592 | )    |  |  | (744   | )
|Unrecognized net loss                               |  |      | 6,854  |      |  |  | 1,903  |  
|Unrecognized prior service cost                     |  |      | 1,398  |      |  |  | 1,708  |  
|Unrecognized net transition asset                   |  |      | (6     | )    |  |  | (64    | )
|                                                    |  |      |        |      |  |  |        |  
|Net prepaid (accrued) pension recognized            |  |      | (346   | )    |  |  | 2,803  |  
|Termination benefits and other                      |  |      | (1,516 | )    |  |  | (1,388 | )
|                                                    |  |      |        |      |  |  |        |  
|Total net prepaid (accrued) pension recognized      |  |      | (1,862 | )    |  |  | 1,415  |  
|                                                    |  |      |        |      |  |  |        |  
|Amounts recognized in the balance sheet consist of: |  |      |        |      |  |  |        |  
|Prepaid pension                                     |  |      | 4,989  |      |  |  | 4,599  |  
|Accrued pension liabilities                         |  |      | (8,385 | )    |  |  | (4,215 | )
|Intangible asset                                    |  |      | 283    |      |  |  | 251    |  
|Accumulated other comprehensive income              |  |      | 1,251  |      |  |  | 780    |  
|                                                    |  |      |        |      |  |  |        |  
|Net amount recognized                               |  |      | (1,862 | )    |  |  | 1,415  |  
|                                                    |  |      |        |      |  |  |        |  

Weighted-average assumptions at end of year:

|                               |  |  |      |   |  |      |     |  
|------------------------------ |  |  | ---- | - |  | ---- | --- | -
|                               |  |  | 2002 |   |  | 2001
|Discount rate                  |  |  | 6.6  | % |  |      | 7.0 | %
|Expected return on plan assets |  |  | 7.7  | % |  |      | 8.0 | %
|Rate of compensation increase  |  |  | 3.4  | % |  |      | 3.0 | %
|                               |  |  |      |   |  |      |     |  

Plans in which the accumulated benefit obligation exceeds plan assets:

|                                     |  |      |        |      |  |  |       | 
|------------------------------------ |  | ---- | ------ | ---- |  |  | ----- | 
|Amounts in NOK million               |  | 2002 |        | 2001
|Projected benefit obligation         |  |      | 11,075 |      |  |  | 4,800 | 
|Accumulated benefit obligation (ABO) |  |      | 9,693  |      |  |  | 3,847 | 
|Plan assets                          |  |      | 3,380  |      |  |  | 1,281 | 
|                                     |  |      |        |      |  |  |       | 

In 2002, Hydro incurred a curtailment loss of NOK 119 million. This
charge includes a curtailment loss resulting from an agreement between
Hydro and an external party, to transfer Hydros operatorship of certain
licenses on the Norwegian continental shelf to the external party,
including the transfer of employment for 535 employees, as of 1 January, 2003.

In 2001, Hydros Norwegian activities incurred termination benefit
costs of NOK 654 million and a curtailment loss of NOK 116 million.
These charges included costs to improve competitiveness for certain
Norwegian operations, and curtailment loss resulting from the termina-
tion of primary production of magnesium in Norway.

Effective 1 January, 2000, certain Norwegian plans amended their
plan benefit formulas as to provide for indexation of pension benefits.
The resulting prior service cost of NOK 1,654 million is being amortized on a straight-line basis over the employees average remaining serv-
ice period.

OTHER RETIREMENT
BENEFITS
Hydro has unfunded retiree medical and life insurance plans for certain
of its employees outside Norway. The net periodic post retirement cost
was NOK 19 million in 2002. In 2001 the net periodic post retirement
cost was NOK 46 million, whilst in 2000 the net periodic post retirement income was NOK 11 million, as a result of a curtailment gain
related to employees in Great Britain. The post retirement liability was
NOK 226 million and NOK 266 million as of 31 December, 2002 and
2001, respectively.

21. CONTINGENCIES AND OTHER LONG-TERM LIABILITIES

Hydro is subject to changing environmental laws and regulations that
in the future may require the company to modernize technology to
meet more stringent emissions standards or to take actions for contaminated areas. As of 31 December, 2002 and 2001, Hydro had accrued
NOK million 795 and NOK 268 million, respectively, for corrective
environmental measures. The corresponding expense was NOK 115
million in 2002 compared to NOK 58 million and NOK 46 million in
2001 and 2000, respectively.

The net present value of Hydros share of the estimated total future
cost of decommissioning and abandonment relating to off-shore installations is NOK 4.6 billion. As of 31 December, 2002, Hydro had
accrued NOK 2,131 million for decommissioning and abandonment
costs using the unit-of-production method. The accrual was NOK
2,110 million as of 31 December, 2001.

Decommissioning
and abandonment expense were NOK 233 million, NOK 365 million and NOK
450 mil-

114





---



##### 



lion in 2002, 2001 and
2000, respectively. Hydros future expenses for these corrective
environmental measures are affected by a number of uncertainties including,
but not limited to, the method and extent of corrective action. Due to
uncertainties inherent in the estimation process, it is at least reasonably
possible that such estimates could be revised in the near term.
In addition, conditions which could require future expenditures may
be determined to exist for various sites, including Hydros major production
facilities and product storage terminals. The amount of such future
costs is not determinable due to the unknown timing and
extent of corrective actions which may be required.

Hydro is involved in or threatened with various other
legal, tax and environmental matters arising in the ordinary course of business. Hydro is of the opinion that
resulting liabilities, if any, will not have a material adverse
effect on its consolidated results of operations, liquidity or
financial position.

|                                               |  |      |       |      |  |  |       |  
|---------------------------------------------- |  | ---- | ----- | ---- |  |  | ----- | -
|Amounts in NOK million                         |  | 2002 |       | 2001
|Other long-term liabilities:                   |  |      |       |      |  |  |       |  
|Insurance premiums and loss reserves           |  |      | 842   |      |  |  | 846   |  
|Accruals abandonment costs Offshore            |  |      | 1,115 |      |  |  | 1,127 |  
|Accruals decommissioning costs Offshore        |  |      | 1,016 |      |  |  | 983   |  
|Postretirement benefits other than pension     |  |      | 226   |      |  |  | 266   |  
|Derivatives                                    |  |      | 336   |      |  |  | 621   |  
|Other                                          |  |      | 2,713 |      |  |  | 2,069 |  
|                                               |  |      |       |      |  |  |       |  
|Total US GAAP                                  |  |      | 6,248 |      |  |  | 5,912 |  
|                                               |  |      |       |      |  |  |       |  
|Adjustment to N GAAP
Cash Flow hedge (Note 27) |  |      | 1,100 |      |  |  | (228  | )
|                                               |  |      |       |      |  |  |       |  
|Total N Gaap                                   |  |      | 7,348 |      |  |  | 5,684 |  
|                                               |  |      |       |      |  |  |       |  

22. SECURED DEBT AND GUARANTEES

|                                 |  |      |        |      |  |  |       | 
|-------------------------------- |  | ---- | ------ | ---- |  |  | ----- | 
|Amounts in NOK million           |  | 2002 |        | 2001
|Amount of secured debt           |  |      | 65     |      |  |  | 255   | 
|                                 |  |      |        |      |  |  |       | 
|Assets used as security:         |  |      |        |      |  |  |       | 
|Plant and equipment, etc.        |  |      | 134    |      |  |  | 131   | 
|Buildings                        |  |      | 280    |      |  |  | 679   | 
|Other                            |  |      | 13     |      |  |  | 16    | 
|                                 |  |      |        |      |  |  |       | 
|Total                            |  |      | 427    |      |  |  | 826   | 
|                                 |  |      |        |      |  |  |       | 
|Guarantees (off-balance sheet):  |  |      |        |      |  |  |       | 
|Contingency for discounted bills |  |      | 160    |      |  |  | 144   | 
|Guarantees of debt               |  |      | 1,315  |      |  |  | 905   | 
|Tax guarantees                   |  |      | 936    |      |  |  |      | 
|Indirect guarantees              |  |      | 8,722  |      |  |  | 5,757 | 
|                                 |  |      |        |      |  |  |       | 
|Total                            |  |      | 11,133 |      |  |  | 6,806 | 
|                                 |  |      |        |      |  |  |       | 

Guarantees of debt include stand-by letters of credit, letters of credit and other direct guarantees of debt. Hydro
could be required to perform in event of the default of
the guaranteed entity. Tax guarantees include guarantees
to tax authorities regarding the non-taxable treatment on
gains on internal sales of assets. The amounts could
become taxable if certain assets are sold outside the group.
Indirect guarantees include payment and performance
guarantees made by parent companies on behalf of their
subsidiaries for the purpose of utilizing Hydros credit
standing in terms with suppliers, customers and lenders.
There are no material recourse provisions related to these
guarantees. The amounts in the table above reflect the
maximum potential amount of future payments.

Following the asset exchange between Hydro and
Petro-Canada in 1996, Hydro guaranteed that the total
recoverable reserves attributable to Petro-Canadas working interest in the Veslefrikk field shall not be less than a
certain quantified amount of crude oil. If less, Hydro has
an obligation to deliver indemnity volumes to Petro-Canada. During 2002 there was a new evaluation of
reserves in accordance with the agreement which resulted
in compensation to Petro-Canada. The agreement was
renegotiated in 2002 and is open for the possibility of re-
evaluating the reserves in 2008, 2014 and at the end of
the fields lifetime. The guarantee does not apply in cases
of force majeure, the failure of the operator to comply
with good oil field practices, etc. As of 31 December,
2002, the remaining guaranteed volume was 1.3 million
Sm3 of crude oil, equivalent to approximately NOK
1,760 million.

115





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##### 



NORSK HYDRO ASA and subsidiaries
Notes to the consolidated financial statements

23. CONTRACTUAL AND OTHER COMMITMENTS FOR FUTURE INVESTMENTS AND OPERATIONS

|                                                                           |  |             |  |            |  |       |       |  |  |  |       |  |  |  |        | 
|-------------------------------------------------------------------------- |  | ----------- |  | ---------- |  | ----- | ----- |  |  |  | ----- |  |  |  | ------ | 
|As of 31 December, 2002:                                                   |  | Investments
|Amounts in NOK million                                                     |  | 2003        |  | Thereafter |  | Total
|Contract commitments
 for investments in property, plant and equipment:    |  |             |  |            |  |       |       |  |  |  |       |  |  |  |        | 
|Land based                                                                 |  |             |  |            |  |       | 2,568 |  |  |  | 527   |  |  |  | 3,095  | 
|Oil and gas fields and transport systems                                   |  |             |  |            |  |       | 5,639 |  |  |  | 8,658 |  |  |  | 14,297 | 
|                                                                           |  |             |  |            |  |       |       |  |  |  |       |  |  |  |        | 
|Total                                                                      |  |             |  |            |  |       | 8,207 |  |  |  | 9,185 |  |  |  | 17,392 | 
|                                                                           |  |             |  |            |  |       |       |  |  |  |       |  |  |  |        | 
|Additional authorized future investments
in property, plant and equipment: |  |             |  |            |  |       |       |  |  |  |       |  |  |  |        | 
|Land based                                                                 |  |             |  |            |  |       | 1,419 |  |  |  | 976   |  |  |  | 2,395  | 
|Oil and gas fields and transport systems                                   |  |             |  |            |  |       | 187   |  |  |  | 577   |  |  |  | 764    | 
|                                                                           |  |             |  |            |  |       |       |  |  |  |       |  |  |  |        | 
|Total                                                                      |  |             |  |            |  |       | 1,606 |  |  |  | 1,553 |  |  |  | 3,159  | 
|                                                                           |  |             |  |            |  |       |       |  |  |  |       |  |  |  |        | 
|Contract commitments for other future investments:                         |  |             |  |            |  |       | 163   |  |  |  | 125   |  |  |  | 288    | 
|                                                                           |  |             |  |            |  |       |       |  |  |  |       |  |  |  |        | 

Additional authorized future investments include projects
formally approved for development by the Board of
Directors or management given the authority to approve
such investments. General investment budgets are excluded from these amounts.

Hydro has entered into take-or-pay and long-term contracts providing for future payments to secure pipeline
and transportation capacity, processing services, raw materials and electricity and steam. In addition, Hydro has
entered into long-term sales commitments to deliver
goods. This principally relates to obligations to deliver gas
from fields on the Norwegian Continental Shelf for a
total amount of NOK 142.1 billion.

The non-cancelable future fixed and determinable obligation as of 31 December, 2002 is as follows:

Take-or-pay and Long-term contracts

|            |  |           |       |           |  |         |       |  |           |  |        |  |  |  |          |  
|----------- |  | --------- | ----- | --------- |  | ------- | ----- |  | --------- |  | ------ |  |  |  | -------- | -
|Amounts in  |  | Transport |       | Raw       |  | Energy  |       |  | Sale com- | 
|NOK million |  | and Other |       | materials |  | related |       |  | mitments  | 
|2003        |  |           | 643   |           |  |         | 3,108 |  |           |  | 1,321  |  |  |  | (10,097  | )
|2004        |  |           | 1,102 |           |  |         | 2,043 |  |           |  | 1,197  |  |  |  | (8,975   | )
|2005        |  |           | 1,059 |           |  |         | 1,795 |  |           |  | 1,178  |  |  |  | (7,867   | )
|2006        |  |           | 868   |           |  |         | 1,329 |  |           |  | 1,452  |  |  |  | (8,381   | )
|2007        |  |           | 809   |           |  |         | 403   |  |           |  | 1,497  |  |  |  | (8,495   | )
|Thereafter  |  |           | 4,770 |           |  |         | 1,239 |  |           |  | 17,992 |  |  |  | (110,594 | )
|            |  |           |       |           |  |         |       |  |           |  |        |  |  |  |          |  
|Total       |  |           | 9,251 |           |  |         | 9,917 |  |           |  | 24,637 |  |  |  | (154,409 | )
|            |  |           |       |           |  |         |       |  |           |  |        |  |  |  |          |  

Terms of certain of these agreements include additional
charges covering variable operating expenses in addition
to the fixed and determinable component shown above.

In addition, Hydro has contracted to purchase 26.3
million tonnes of alumina over the next 12 years with
variable prices referenced to the London Metal Exchange
quoted prices.

The total purchases under the take-or-pay agreements
and long-term contracts were as follows (in NOK million): 2002  4,511; 2001  2,687 and 2000  2,523.

24. DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT

Effective 1 January, 2001, Hydro adopted SFAS 133
Accounting for Derivative Instruments and Hedging
Activities, as amended, which requires that all derivative
instruments be reported on the balance sheet at fair value.
Changes in the fair values of derivative instruments are
recorded to earnings unless specific hedge criteria are met.
The cumulative effect of adopting SFAS 133 did not
result in a material impact to Hydros income statement
or to Other Comprehensive Income (OCI).

Hydro is exposed to market risks from commodity
pricing, currency exchange rates and interest rates. Different market risk exposures are evaluated based on a portfolio view in order to take advantage of offsetting positions
and to manage risk on a net exposure basis. Periodically,
Hydro uses derivative or nonderivative instruments in
order to hedge the companys various net exposures as
well as designating derivative and nonderivative instruments as hedges of specific exposures.

Commodity Price Risk
ExposureHydros revenues are substantially derived from the sale of
commodities such as crude oil, aluminium and fertilizers.
Hydro also buys and sells natural gas and electricity. The
prices in these commodity markets are volatile and create
significant market risk exposures. Hydro uses commodity
derivatives, such as commodity futures or forwards,
options and swaps, to manage unfavorable price fluctuations and also for a limited amount of speculative trading.

Oil
Hydro utilizes futures, physical and financial swaps and
options with international oil and trading companies to
mitigate unwanted price exposure for a portion of its
crude oil portfolio. The fair value of these instruments at
31 December, 2002 and 2001 were NOK 44 million and
NOK 9 million in assets and NOK 32 million and NOK
13 million in liabilities, respectively. Hydro has purchased
average rate put options (Asian options) for a
notional volume of 10 million barrels in the first half of

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2003 with an average strike price of US dollar 17 per
barrel. These options were not designated as hedging instruments and were recorded at fair value; as an asset of NOK
1 million and NOK 114 million in 2002 and 2001,
respectively. Gains and losses on these instruments are recognized in earnings.

Aluminium
Hydro has entered into a number of London Metal
Exchange (LME) futures and currency forward contracts
as part of a cash flow hedge program of forecasted primary aluminium sales in the period 2003-2007. The
intent is to secure an average LME price of approximately
NOK 14,000 per tonne of primary aluminium. As of 31
December, 2002, Hydro had sold forward about 480,000
tonnes (490,000 tonnes in 2001) of primary aluminium
at an average price of approximately US dollar 1,500 per
tonne. In addition Hydro has secured the exchange rate
against the US dollar at about NOK 9.3 per US dollar for
the same tonnage. Gains and losses on these derivatives
are recorded to OCI and are to be reclassified into operating revenues when the corresponding forecasted sale of
aluminium is recognized. No amount of ineffectiveness
was recognized in 2002 and 2001 since the critical terms
of the commodity derivatives and the forecasted aluminium sales are substantially similar. A gain after tax of NOK
37 million is expected to be reclassified from OCI into
earnings during the period ending 31 December, 2003.
No amount was reclassified from OCI to earnings during
2002. As of 31 December, 2002 the maximum length of
time over which the Company is hedging its exposure to
the variability in cash flows is five years. The fair value of
the LME future contracts at 31 December, 2002 was
NOK 380 million. The fair value of these contracts at 31
December, 2001 were recorded as an asset of NOK 254
million and a liability of NOK 36 million. The fair value
of the currency forward contracts at 31 December, 2002
and 2001 were an asset of NOK 1,102 million and a liability of NOK 192 million, respectively.

In 2001, Hydro terminated a hedging program that
included LME future contracts designated as cash flow
hedges of primary aluminium sales for 2001-2003. Hydro
also terminated aluminium call options and written put
options, which were not designated as hedges. Termination of the options resulted in a before tax loss of NOK
545 million charged to operating income. At 31 December, 2001, the after tax gains on the LME futures of
NOK 97 million (USD 13 million) were deferred in
OCI. During 2002 a gain after tax of NOK 57 million
(USD 7 million) was reclassified from OCI to Operating
revenues. As of 31 December, 2002, a deferred gain after
tax of NOK 40 million (USD 6 million) remained in
OCI and is expected to be reclassified to earnings over the
next twelve months.

Hydro has a 10 year commitment with Aluvale to
 purchase remelt ingot. Hydro utilizes LME futures as a fair
value hedge of the firm commitment to buy aluminium
for the period until 2006. Gains and losses on these
futures contracts are recognized in Operating costs and
expenses offsetting the gain and loss recorded for the firm
commitment in the same period. The critical terms of the
LME futures and the related purchase commitments are
essentially the same; as a result no hedge ineffectiveness
was reflected in earnings in 2002 and 2001. The fair value
of the future contracts designated as fair value hedges was
recorded as an asset of NOK 15 million and NOK 22
million in 2002 and 2001, respectively.

Hydro has significant trading
 activities related to aluminium. The risk related to these trading activities are
managed on a portfolio basis and Hydro periodically uses
aluminium futures to provide an economic hedge of net
exposure. Hydro engages in some speculative trading
within strict limits set by management. The fair value of
these future contracts at 31 December, 2002 and 2001
were NOK 543 million and NOK 349 million in assets
and NOK 214 and NOK 10 million in liabilities, respectively.

Other
Hydro uses forward and future contracts to provide an
economic hedge of exposure to commodity price risk
related to purchases and sales of natural gas and electricity. These
 contracts provide an economic hedge for net
exposures, but do not qualify for hedge accounting. Contracts related to natural gas were recorded at fair value at
31 December, 2002 and 2001 of NOK 457 million and
NOK 585 million in assets and NOK 440 million and
NOK 532 million in liabilities, respectively. Gains and
losses on these contracts were recorded in earnings. The
electricity contracts fair value was recorded at 31 December, 2002
and 2001 as an asset of NOK 1,935 million
and NOK 180 million and a liability of NOK 1,123 million and NOK 207, respectively. Hydro also engages in a
limited amount of speculative trading.

Foreign Currency Risk Exposure
A substantial part of Hydros revenue derives
from commodities with prices denominated in US dollar. Hydro
partly manages this exposure to US dollar by maintaining
a large portion of the total debt denominated in US dollar. Hydro also has exposures in many other currencies as
a result of its global operations. Hydro utilizes derivative
instruments, such as currency forward contracts and currency swaps to manage exposure to currency risk.

Aluminium
Hydro has entered into currency forward contracts to sell
US dollar and buy NOK as part of a cash flow hedge of

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NORSK HYDRO ASA and subsidiaries
Notes to the consolidated financial statements

forecasted US dollar revenues on the sale of primary aluminium
 in the period from 2003  2007. The notional
amount of the contracts is approximately US dollar 720
million (750 million in 2001) at a rate of NOK 9.3 per
US dollar. These contracts are entered into in combination
 with selling aluminium future contracts, as discussed
in the preceding section Commodity Price Risk, in
order to lock in the price in NOK of about NOK 14,000
per tonne on future primary aluminium sales. The gains
or losses on these derivatives are recorded to OCI and
subsequently reclassified into operating revenues to match
recognition of the forecasted sales in 2003  2007. The
critical terms of the currency forward contracts and the
forecasted transactions are substantially similar, so no ineffectiveness
 has been recorded in earnings in 2001. A gain
after tax of NOK 148 million is expected to be reclassified
from OCI into earnings during the period ended 31
December, 2003. No amount was reclassified from OCI
to earnings during 2002. As of 31 December, 2002 the
maximum length of time over which the entity is hedging
its exposure to the variability in cash flows is five years.
The fair value of the contracts were recorded as an asset of
NOK 1,102 million in 2002 and a liability of NOK 192
million in 2001.

Net Investment Hedging
In order to further mitigate its exposure to foreign
 currency risk, Hydro has designated a portion of its foreign denominated long-term debt, including certain related
balances in currencies arising from foreign currency swaps
and forwards, as hedges of net foreign investments in subsidiary
 companies. The foreign currency effects of these
hedges reflected in the cumulative translation section of
shareholders equity produced a NOK 1,333 million and
NOK 89 million after-tax gain during the years ended 31
December, 2002 and 2001, respectively; offsetting a foreign
 currency translation loss of NOK 7,027 million and
NOK 794 million in shareholders equity for 2002 and
2001 respectively.

Other
Hydro has also entered into a number of forward currency
contracts that do not meet the hedge accounting criteria
as shown in the table below. In addition the company has
entered into currency swaps and other types of financial
contracts. The contracts mentioned above are utilized to
balance net exposures in certain currencies or to provide
liquidity in one currency in exchange for excess liquidity
in another. The fair value of these contracts at
31 December, 2002 and 2001 were NOK 691 million
and NOK 247 million in assets and NOK 188 million
and NOK 63 million in liabilities, respectively. Currency
swaps and other contracts represented an asset value of
NOK 15 million and NOK 10 million in 2002 and
2001, respectively.

The following
forward currency
contracts listed below
were outstanding as of
31 December, 2002. All
amounts represent the
fair market value of the
contracts in the
respective currencies.
Forward currency
contracts that are
designated as hedging
instruments in cash flow
hedges are not included.

|                   |  |             |       |        |  |      |        |     |  |  |        |  |  |      |  |  |  |  |         |  
|------------------ |  | ----------- | ----- | ------ |  | ---- | ------ | --- |  |  | ------ |  |  | ---- |  |  |  |  | ------- | -
|                   |  | In currency |       | In NOK
|Amounts in million |  |             | Buy   |        |  | Sell |        | Buy |  |  |        |  |  | Sell
|USD                |  |             | 527   |        |  |      | (224   | )   |  |  | 3,530  |  |  |      |  |  |  |  | (1,522  | )
|NOK                |  |             | 5,020 |        |  |      | (603   | )   |  |  | 5,020  |  |  |      |  |  |  |  | (603    | )
|EUR                |  |             | 47    |        |  |      | (135   | )   |  |  | 337    |  |  |      |  |  |  |  | (981    | )
|GBP                |  |             | 55    |        |  |      | (45    | )   |  |  | 613    |  |  |      |  |  |  |  | (502    | )
|SEK                |  |             |      |        |  |      | (2,350 | )   |  |  |       |  |  |      |  |  |  |  | (1,860  | )
|DKK                |  |             |      |        |  |      | (1,340 | )   |  |  |       |  |  |      |  |  |  |  | (1,310  | )
|CAD                |  |             | 194   |        |  |      | (470   | )   |  |  | 790    |  |  |      |  |  |  |  | (2,064  | )
|Other              |  |             |      |        |  |      |       |     |  |  |       |  |  |      |  |  |  |  | (1,330  | )
|                   |  |             |       |        |  |      |        |     |  |  |        |  |  |      |  |  |  |  |         |  
|Total              |  |             |       |        |  |      |        |     |  |  | 10,290 |  |  |      |  |  |  |  | (10,172 | )
|                   |  |             |       |        |  |      |        |     |  |  |        |  |  |      |  |  |  |  |         |  

Interest Rate ExposuresHydros risk management objective for interest rate risk is
to minimize exposure to variability of cash flows arising
from changes in interest rates. Hydro achieves this objective
primarily by maintaining a high ratio of fixed-interest
rate debt to total debt. Derivatives, such as interest rate
swaps and currency swaps, are periodically used to alter
the ratio of fixed-rate to variable-rate debt. No interest
rate derivatives are currently designated as hedging instruments.

Hydro has two interest rate swaps with offsetting
terms. These swaps represented at fair market value, an
asset and a liability of NOK 15 million and NOK 30 million
 for 2002 and 2001, respectively. Furthermore, Hydro
has a sold swaption contract whereby the counterparty has
a right to enter into an interest rate swap under which
Hydro will receive a fixed interest while paying a variable
interest rate. The contract was recorded as an asset of
NOK 1 million in 2002 and as a liability of NOK 16
million in 2001.

As of 31 December, 2002, Hydro has entered into a
sales leaseback agreement on a production floating ship
that stores crude oil. The lease payments contain an inflation
adjustment factor that represents an embedded
derivative. The fair value of the embedded derivative at
31 December, 2002 was recorded as a liability of NOK 24
million.

Credit RiskCredit risk arising from the inability of the counterparty
to meet the terms of Hydros derivative financial instrument
contracts is generally limited to amounts, if any, by
which the counterpartys obligations exceed the
obligations of Hydro. It is Hydros policy to enter into derivative
financial instruments with various international banks
with established limits for transactions with each institu-

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tion. Therefore, Hydro does not expect to incur material
credit losses on its risk management or other derivative
financial instruments.

Hydro also has some exposure to credit risk related to
derivative commodity instruments. However, this risk is
significantly limited because most instruments are settled
through commodity exchanges. Hydro limits credit risks
relating to other contracts with policies for credit ratings
and limits for counterparties.

Concentration of credit risk is not considered
significant since Hydro ́s customers represents various industries
and geographic areas.

The following types of financial and commodity
derivatives were recorded at fair value on the balance sheet as of
31 December, 2002 and 2001:

|                                          |  |      |       |      |  |  |       | 
|----------------------------------------- |  | ---- | ----- | ---- |  |  | ----- | 
|Amounts in NOK million                    |  | 2002 |       | 2001
|Assets:                                   |  |      |       |      |  |  |       | 
|Currency forwards and swaps               |  |      | 691   |      |  |  | 247   | 
|Interest rate swap                        |  |      | 15    |      |  |  | 30    | 
|Swaption contract                         |  |      | 1     |      |  |  |      | 
|Options, crude oil                        |  |      | 1     |      |  |  | 114   | 
|Swaps and futures, crude oil              |  |      | 44    |      |  |  | 9     | 
|Electricity contracts                     |  |      | 1,935 |      |  |  | 180   | 
|Natural gas contracts                     |  |      | 457   |      |  |  | 585   | 
|Aluminium futures, swaps and options      |  |      | 543   |      |  |  | 349   | 
|Fair value hedging instruments, aluminium |  |      | 15    |      |  |  | 22    | 
|Cash flow hedging instruments, aluminium  |  |      | 380   |      |  |  | 254   | 
|Cash flow hedging instruments, currency   |  |      | 1,102 |      |  |  |      | 
|                                          |  |      |       |      |  |  |       | 
|Total                                     |  |      | 5,184 |      |  |  | 1,790 | 
|                                          |  |      |       |      |  |  |       | 

|                                         |  |      |       |      |  |  |       | 
|---------------------------------------- |  | ---- | ----- | ---- |  |  | ----- | 
|Amounts in NOK million                   |  | 2002 |       | 2001
|Liabilities:                             |  |      |       |      |  |  |       | 
|Currency forwards and swaps              |  |      | 188   |      |  |  | 63    | 
|Interest rate swap                       |  |      | 15    |      |  |  | 30    | 
|Swaption contract                        |  |      |      |      |  |  | 16    | 
|Electricity contracts                    |  |      | 1,123 |      |  |  | 207   | 
|Natural gas contracts                    |  |      | 440   |      |  |  | 532   | 
|Embedded derivative                      |  |      | 24    |      |  |  |      | 
|Swaps and futures, crude oil             |  |      | 32    |      |  |  | 13    | 
|Aluminium futures, swaps and options     |  |      | 214   |      |  |  | 10    | 
|Cash flow hedging instruments, aluminium |  |      |      |      |  |  | 36    | 
|Cash flow hedging instruments, currency  |  |      |      |      |  |  | 192   | 
|                                         |  |      |       |      |  |  |       | 
|Total                                    |  |      | 2,036 |      |  |  | 1,099 | 
|                                         |  |      |       |      |  |  |       | 

25. EXTERNAL AUDIT REMUNERATION

Deloitte & Touche AS is the principal auditor of Norsk Hydro ASA. Certain
portions of audits are performed by Ernst
& Young and other firms. The following table shows total audit and non-audit
fees for the fiscal year 2002.

|                         |  |           |        |          |  |          |        |           |  |       |        |  |  |  |        |  |  |  |         | 
|------------------------ |  | --------- | ------ | -------- |  | -------- | ------ | --------- |  | ----- | ------ |  |  |  | ------ |  |  |  | ------- | 
|                         |  |           |        |          |  | Audit    |        | Other     |  |       |        |  |  |  |        | 
|                         |  |           |        |          |  | related  |        | non-audit |  |       |        |  |  |  |        | 
|Amounts in NOK thousand  |  | Audit fee |        | services |  | services |        | Tax fee   |  | Total
|Deloitte & Touche Norway |  |           | 17,472 |          |  |          | 6,986  |           |  |       | 10,157 |  |  |  | 485    |  |  |  | 35,100  | 
|Deloitte & Touche Abroad |  |           | 27,588 |          |  |          | 9,505  |           |  |       | 14,419 |  |  |  | 8,915  |  |  |  | 60,427  | 
|                         |  |           |        |          |  |          |        |           |  |       |        |  |  |  |        |  |  |  |         | 
|Total Deloitte & Touche  |  |           | 45,060 |          |  |          | 16,491 |           |  |       | 24,576 |  |  |  | 9,400  |  |  |  | 95,527  | 
|                         |  |           |        |          |  |          |        |           |  |       |        |  |  |  |        |  |  |  |         | 
|Ernst & Young            |  |           | 15,682 |          |  |          | 405    |           |  |       | 4,213  |  |  |  | 842    |  |  |  | 21,142  | 
|Others                   |  |           | 3,735  |          |  |          | 6,812  |           |  |       | 554    |  |  |  | 200    |  |  |  | 11,301  | 
|                         |  |           |        |          |  |          |        |           |  |       |        |  |  |  |        |  |  |  |         | 
|Total fees               |  |           | 64,477 |          |  |          | 23,708 |           |  |       | 29,343 |  |  |  | 10,442 |  |  |  | 127,970 | 
|                         |  |           |        |          |  |          |        |           |  |       |        |  |  |  |        |  |  |  |         | 

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NORSK HYDRO ASA and subsidiaries

Notes to the consolidated financial statements


26. SUPPLEMENTARY OIL AND GAS INFORMATION (UNAUDITED)

COSTS INCURRED ON OIL AND GAS
PROPERTIES

Exploration costs and costs related
to property acquisition

|                                 |  |        |      |               |  |       |      |      |  |      |       |      |  |      |        |      |  |      |       |   |  |  |      |   |  |  |        |   |  |  |        |   |  |  |        |  
|-------------------------------- |  | ------ | ---- | ------------- |  | ----- | ---- | ---- |  | ---- | ----- | ---- |  | ---- | ------ | ---- |  | ---- | ----- | - |  |  | ---- | - |  |  | ------ | - |  |  | ------ | - |  |  | ------ | -
|                                 |  | Norway |      | International |  | Total
|Amounts in NOK million           |  | 2002   |      | 2001          |  | 2000  |      | 2002 |  | 2001 |       | 2000 |  | 2002 |        | 2001 |  | 2000
|Capitalized at beginning of year |  |        | 977  |               |  |       | 874  |      |  |      | 1,158 |      |  |      | 1,749  |      |  |      | 309   |   |  |  | 254  |   |  |  | 2,726  |   |  |  | 1,183  |   |  |  | 1,412  |  
|Costs incurred during the year   |  |        | 662  |               |  |       | 928  |      |  |      | 916   |      |  |      | 1,833  |      |  |      | 1,090 |   |  |  | 883  |   |  |  | 2,495  |   |  |  | 2,018  |   |  |  | 1,799  |  
|Acquisition cost 1)              |  |        |     |               |  |       |     |      |  |      | 9     |      |  |      | 35     |      |  |      | 1,234 |   |  |  |     |   |  |  | 35     |   |  |  | 1,234  |   |  |  | 9      |  
|Expensed                         |  |        | (649 | )             |  |       | (770 | )    |  |      | (934  | )    |  |      | (2,909 | )    |  |      | (630  | ) |  |  | (767 | ) |  |  | (3,558 | ) |  |  | (1,400 | ) |  |  | (1,701 | )
|Transferred to development       |  |        | (78  | )             |  |       | (52  | )    |  |      | (275  | )    |  |      | (25    | )    |  |      | (125  | ) |  |  | (61  | ) |  |  | (103   | ) |  |  | (177   | ) |  |  | (336   | )
|Disposals                        |  |        | (75  | )             |  |       | (3   | )    |  |      |      |      |  |      | (9     | )    |  |      | (124  | ) |  |  | (8   | ) |  |  | (84    | ) |  |  | (127   | ) |  |  | (8     | )
|Foreign currency translation     |  |        |      |               |  |       |     |      |  |      |      |      |  |      | (113   | )    |  |      | (5    | ) |  |  | 8    |   |  |  | (113   | ) |  |  | (5     | ) |  |  | 8      |  
|                                 |  |        |      |               |  |       |      |      |  |      |       |      |  |      |        |      |  |      |       |   |  |  |      |   |  |  |        |   |  |  |        |   |  |  |        |  
|Capitalized at end of year       |  |        | 837  |               |  |       | 977  |      |  |      | 874   |      |  |      | 561    |      |  |      | 1,749 |   |  |  | 309  |   |  |  | 1,398  |   |  |  | 2,726  |   |  |  | 1,183  |  
|                                 |  |        |      |               |  |       |      |      |  |      |       |      |  |      |        |      |  |      |       |   |  |  |      |   |  |  |        |   |  |  |        |   |  |  |        |  



| | 1)     2001 mainly related to acquisition of exploration rights in Africa and USA.
See Note 2.
| | ----------------------------------------------------------------------------------------------

Costs related to Development,Transportation Systems and Other

|                                    |  |        |        |               |  |       |        |      |  |      |        |      |  |      |        |      |  |      |       |   |  |  |        |   |  |  |        |   |  |  |        |   |  |  |        |  
|----------------------------------- |  | ------ | ------ | ------------- |  | ----- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ----- | - |  |  | ------ | - |  |  | ------ | - |  |  | ------ | - |  |  | ------ | -
|                                    |  | Norway |        | International |  | Total
|Amounts in NOK million              |  | 2002   |        | 2001          |  | 2000  |        | 2002 |  | 2001 |        | 2000 |  | 2002 |        | 2001 |  | 2000
|Net book value at beginning
of year |  |        | 56,711 |               |  |       | 58,472 |      |  |      | 62,324 |      |  |      | 8,117  |      |  |      | 6,360 |   |  |  | 9,650  |   |  |  | 64,828 |   |  |  | 64,832 |   |  |  | 71,974 |  
|Cost
incurred during the year 1)    |  |        | 6,923  |               |  |       | 5,591  |      |  |      | 6,058  |      |  |      | 1,299  |      |  |      | 2,172 |   |  |  | 1,868  |   |  |  | 8,222  |   |  |  | 7,763  |   |  |  | 7,926  |  
|Acquisition
cost 2)                 |  |        | 5,460  |               |  |       |       |      |  |      | (2,383 | )    |  |      |       |      |  |      |      |   |  |  | 1,125  |   |  |  | 5,460  |   |  |  |       |   |  |  | (1,258 | )
|Transferred from exploration cost   |  |        | 78     |               |  |       | 52     |      |  |      | 275    |      |  |      | 25     |      |  |      | 125   |   |  |  | 61     |   |  |  | 103    |   |  |  | 177    |   |  |  | 336    |  
|Amortization                        |  |        | (7,278 | )             |  |       | (7,098 | )    |  |      | (6,883 | )    |  |      | (1,275 | )    |  |      | (326  | ) |  |  | (711   | ) |  |  | (8,553 | ) |  |  | (7,424 | ) |  |  | (7,594 | )
|Disposals
3)                        |  |        | (72    | )             |  |       | (306   | )    |  |      | (919   | )    |  |      | (2     | )    |  |      | 1     |   |  |  | (6,370 | ) |  |  | (74    | ) |  |  | (305   | ) |  |  | (7,289 | )
|Foreign currency translation        |  |        |        |               |  |       |       |      |  |      |       |      |  |      | (1,002 | )    |  |      | (215  | ) |  |  | 737    |   |  |  | (1,002 | ) |  |  | (215   | ) |  |  | 737    |  
|                                    |  |        |        |               |  |       |        |      |  |      |        |      |  |      |        |      |  |      |       |   |  |  |        |   |  |  |        |   |  |  |        |   |  |  |        |  
|Net book value at end of year       |  |        | 61,822 |               |  |       | 56,711 |      |  |      | 58,472 |      |  |      | 7,162  |      |  |      | 8,117 |   |  |  | 6,360  |   |  |  | 68,984 |   |  |  | 64,828 |   |  |  | 64,832 |  
|                                    |  |        |        |               |  |       |        |      |  |      |        |      |  |      |        |      |  |      |       |   |  |  |        |   |  |  |        |   |  |  |        |   |  |  |        |  



|1) |  | In 2002, NOK 508 million, NOK 254 million and NOK 501 million of development
cost related to activities in Angola, Canada and Russia respectively. In 2001, NOK 903 million, NOK 742 million and NOK 441
million of development costs related to activities in Angola, Canada and Russia respectively. In 2000, NOK 966 million and NOK 627
million of development costs related to activities in Canada and Angola respectively. In addition, NOK 100 million and NOK 93
million related to activities in the UK and Russia.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2) |  | In 2002, NOK 5,460 million
relates to the acquisition of shares in SDFI. 2000
includes adjustment to the allocation of purchase price
for Saga of NOK (1,275) million.                                                                                                                                                                                                                                                                                                                                                       
|3) |  | 2000 included the disposals of Hydros activities on the British Continental
Shelf.                                                                                                                                                                                                                                                                                                                                                                                                                                          

120



---



##### 



RESULTS OF OPERATIONS FOR OIL AND
GAS PRODUCING ACTIVITIES

As required by SFAS 69, the revenues and expenses included in the following
table reflect only those relating to the oil and gas producing operations of Hydro.

The results of operations should not be equated to net income since no
deduction nor allocation is made for interest costs, general corporate overhead costs, and other costs. Income tax expense is a
theoretical computation based on the statutory tax rates after
giving effect to the effects of uplift and permanent differences only.

|                                         |  |        |         |               |  |       |         |      |  |      |         |      |  |      |        |      |  |      |       |   |  |  |       |   |  |  |         |   |  |  |         |   |  |  |         |  
|---------------------------------------- |  | ------ | ------- | ------------- |  | ----- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------ | ---- |  | ---- | ----- | - |  |  | ----- | - |  |  | ------- | - |  |  | ------- | - |  |  | ------- | -
|                                         |  | Norway |         | International |  | Total
|Amounts in NOK million                   |  | 2002   |         | 2001          |  | 2000  |         | 2002 |  | 2001 |         | 2000 |  | 2002 |        | 2001 |  | 2000
|Sales to unaffiliated customers          |  |        | 6,693   |               |  |       | 5,486   |      |  |      | 5,581   |      |  |      | 3,520  |      |  |      | 1,133 |   |  |  | 2,468 |   |  |  | 10,213  |   |  |  | 6,619   |   |  |  | 8,049   |  
|Intercompany transfers                   |  |        | 21,532  |               |  |       | 24,915  |      |  |      | 25,791  |      |  |      |       |      |  |      |      |   |  |  |      |   |  |  | 21,532  |   |  |  | 24,915  |   |  |  | 25,791  |  
|                                         |  |        |         |               |  |       |         |      |  |      |         |      |  |      |        |      |  |      |       |   |  |  |       |   |  |  |         |   |  |  |         |   |  |  |         |  
|Total revenues                           |  |        | 28,225  |               |  |       | 30,401  |      |  |      | 31,372  |      |  |      | 3,520  |      |  |      | 1,133 |   |  |  | 2,468 |   |  |  | 31,745  |   |  |  | 31,534  |   |  |  | 33,840  |  
|                                         |  |        |         |               |  |       |         |      |  |      |         |      |  |      |        |      |  |      |       |   |  |  |       |   |  |  |         |   |  |  |         |   |  |  |         |  
|Operating costs and expenses:            |  |        |         |               |  |       |         |      |  |      |         |      |  |      |        |      |  |      |       |   |  |  |       |   |  |  |         |   |  |  |         |   |  |  |         |  
|Production costs                         |  |        | 3,554   |               |  |       | 3,494   |      |  |      | 3,099   |      |  |      | 406    |      |  |      | 206   |   |  |  | 305   |   |  |  | 3,960   |   |  |  | 3,700   |   |  |  | 3,404   |  
|Exploration expenses                     |  |        | 649     |               |  |       | 770     |      |  |      | 934     |      |  |      | 2,909  |      |  |      | 630   |   |  |  | 767   |   |  |  | 3,558   |   |  |  | 1,400   |   |  |  | 1,701   |  
|Depreciation, depletion and amortization |  |        | 6,826   |               |  |       | 6,738   |      |  |      | 6,601   |      |  |      | 1,315  |      |  |      | 360   |   |  |  | 768   |   |  |  | 8,141   |   |  |  | 7,098   |   |  |  | 7,369   |  
|Transportation
systems1)                 |  |        | 1,629   |               |  |       | 1,379   |      |  |      | 1,091   |      |  |      | 139    |      |  |      | 125   |   |  |  | 134   |   |  |  | 1,768   |   |  |  | 1,504   |   |  |  | 1,225   |  
|                                         |  |        |         |               |  |       |         |      |  |      |         |      |  |      |        |      |  |      |       |   |  |  |       |   |  |  |         |   |  |  |         |   |  |  |         |  
|Total expenses                           |  |        | 12,658  |               |  |       | 12,381  |      |  |      | 11,725  |      |  |      | 4,769  |      |  |      | 1,321 |   |  |  | 1,974 |   |  |  | 17,427  |   |  |  | 13,702  |   |  |  | 13,699  |  
|                                         |  |        |         |               |  |       |         |      |  |      |         |      |  |      |        |      |  |      |       |   |  |  |       |   |  |  |         |   |  |  |         |   |  |  |         |  
|Results of operations before taxes       |  |        | 15,567  |               |  |       | 18,020  |      |  |      | 19,647  |      |  |      | (1,249 | )    |  |      | (188  | ) |  |  | 494   |   |  |  | 14,318  |   |  |  | 17,832  |   |  |  | 20,141  |  
|Current and deferred income tax expense  |  |        | (11,733 | )             |  |       | (13,916 | )    |  |      | (15,198 | )    |  |      | 374    |      |  |      | (21   | ) |  |  | (188  | ) |  |  | (11,359 | ) |  |  | (13,937 | ) |  |  | (15,386 | )
|                                         |  |        |         |               |  |       |         |      |  |      |         |      |  |      |        |      |  |      |       |   |  |  |       |   |  |  |         |   |  |  |         |   |  |  |         |  
|Results of operations                    |  |        | 3,834   |               |  |       | 4,104   |      |  |      | 4,449   |      |  |      | (875   | )    |  |      | (209  | ) |  |  | 306   |   |  |  | 2,959   |   |  |  | 3,895   |   |  |  | 4,755   |  
|                                         |  |        |         |               |  |       |         |      |  |      |         |      |  |      |        |      |  |      |       |   |  |  |       |   |  |  |         |   |  |  |         |   |  |  |         |  

|1) |  | In 2002, Hydro has changed presentation of transportation cost and
transportation tariffs to be reported separately. Previous periods are restated
to be compareable.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



PROVED RESERVES OF OIL AND
GAS

Proved reserves are the estimated quantities of crude oil, natural gas, and
natural gas liquids which geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years from
known reservoirs under existing economic and operating
conditions. Proved developed reserves can be expected to be recovered through
existing wells with existing equipment and operating
methods. Proved undeveloped reserves are expected to be recovered from
undrilled production wells on exploration licenses. Reserves
are expected to be revised as oil and gas are produced and additional data
become available. International reserves under PSA con
tracts (production sharing agreement) are shown net of Royalities and
Governments share of Profit Oil.

121





---



##### 



NORSK HYDRO ASA and subsidiaries
Notes to the consolidated financial statements

|                                                |  |         |      |               |  |              |       |             |  |             |       |              |  |         |     |              |  |              |      |   |  |  |      |   |  |  |       |   |  |  |       |   |  |  |       |  
|----------------------------------------------- |  | ------- | ---- | ------------- |  | ------------ | ----- | ----------- |  | ----------- | ----- | ------------ |  | ------- | --- | ------------ |  | ------------ | ---- | - |  |  | ---- | - |  |  | ----- | - |  |  | ----- | - |  |  | ----- | -
|                                                |  | Norway  |      | International |  | Total       
|                                                |  | Oil     |      | Natural gas   |  | Oil          |       | Natural gas |  | Oil         |       | Natural gas 
|                                                |  | mmboe1) |      | billion
Sm3   |  | billion cf2) |       | mmboe1)     |  | billion
Sm3 |       | billion cf2) |  | mmboe1) |     | billion
Sm3) |  | billion cf2)
|As of 31 December, 19996)                       |  |         | 837  |               |  |              | 167.5 |             |  |             | 5,928 |              |  |         | 153 |              |  |              | 6.0  |   |  |  | 211  |   |  |  | 990   |   |  |  | 173.5 |   |  |  | 6,139 |  
|Revisions of previous estimates3)               |  |         | 49   |               |  |              | 4.9   |             |  |             | 173   |              |  |         | (1  | )            |  |              | 0.1  |   |  |  | 7    |   |  |  | 48    |   |  |  | 5.0   |   |  |  | 180   |  
|Purchase (sale)/exchange of
reserves in place4) |  |         | 12   |               |  |              | 0.6   |             |  |             | 22    |              |  |         | (39 | )            |  |              | (5.7 | ) |  |  | (203 | ) |  |  | (27   | ) |  |  | (5.1  | ) |  |  | (181  | )
|Extensions and new discoveries5)                |  |         | 32   |               |  |              | 1.4   |             |  |             | 48    |              |  |         | 52  |              |  |              |     |   |  |  |     |   |  |  | 84    |   |  |  | 1.4   |   |  |  | 48    |  
|Production for the year                         |  |         | (110 | )             |  |              | (4.7  | )           |  |             | (167  | )            |  |         | (9  | )            |  |              | (0.4 | ) |  |  | (15  | ) |  |  | (119  | ) |  |  | (5.1  | ) |  |  | (182  | )
|                                                |  |         |      |               |  |              |       |             |  |             |       |              |  |         |     |              |  |              |      |   |  |  |      |   |  |  |       |   |  |  |       |   |  |  |       |  
|As of 31 December, 20006)                       |  |         | 820  |               |  |              | 169.7 |             |  |             | 6,004 |              |  |         | 156 |              |  |              |     |   |  |  |     |   |  |  | 976   |   |  |  | 169.7 |   |  |  | 6,004 |  
|                                                |  |         |      |               |  |              |       |             |  |             |       |              |  |         |     |              |  |              |      |   |  |  |      |   |  |  |       |   |  |  |       |   |  |  |       |  
|Revisions of previous estimates3)               |  |         | 87   |               |  |              | 0.3   |             |  |             | 11    |              |  |         | 16  |              |  |              |     |   |  |  |     |   |  |  | 103   |   |  |  | 0.3   |   |  |  | 11    |  
|Purchase (sale)/exchange of
reserves in place4) |  |         | (1   | )             |  |              |      |             |  |             |      |              |  |         |    |              |  |              |     |   |  |  |     |   |  |  | (1    | ) |  |  |      |   |  |  |      |  
|Extensions and new discoveries5)                |  |         | 33   |               |  |              | 4.6   |             |  |             | 162   |              |  |         | 27  |              |  |              |     |   |  |  |     |   |  |  | 60    |   |  |  | 4.6   |   |  |  | 162   |  
|Production for the year                         |  |         | (114 | )             |  |              | (5.4  | )           |  |             | (191  | )            |  |         | (6  | )            |  |              |     |   |  |  |     |   |  |  | (120  | ) |  |  | (5.4  | ) |  |  | (191  | )
|                                                |  |         |      |               |  |              |       |             |  |             |       |              |  |         |     |              |  |              |      |   |  |  |      |   |  |  |       |   |  |  |       |   |  |  |       |  
|As
of 31 December, 20016)7)                     |  |         | 825  |               |  |              | 169.2 |             |  |             | 5,986 |              |  |         | 193 |              |  |              |     |   |  |  |     |   |  |  | 1,018 |   |  |  | 169.2 |   |  |  | 5,986 |  
|                                                |  |         |      |               |  |              |       |             |  |             |       |              |  |         |     |              |  |              |      |   |  |  |      |   |  |  |       |   |  |  |       |   |  |  |       |  
|Revisions of previous estimates3)               |  |         | 46   |               |  |              | (0.2  | )           |  |             | (7    | )            |  |         | (19 | )            |  |              |     |   |  |  |     |   |  |  | 27    |   |  |  | (0.2  | ) |  |  | (7    | )
|Purchase (sale)/exchange of
reserves in place4) |  |         | 109  |               |  |              | 12.1  |             |  |             | 428   |              |  |         |    |              |  |              |     |   |  |  |     |   |  |  | 109   |   |  |  | 12.1  |   |  |  | 428   |  
|Extensions and new discoveries5)                |  |         | 20   |               |  |              | 12.7  |             |  |             | 449   |              |  |         | 16  |              |  |              |     |   |  |  |     |   |  |  | 36    |   |  |  | 12.7  |   |  |  | 449   |  
|Production for the year                         |  |         | (117 | )             |  |              | (6.4  | )           |  |             | (227  | )            |  |         | (18 | )            |  |              |     |   |  |  |     |   |  |  | (135  | ) |  |  | (6.4  | ) |  |  | (227  | )
|                                                |  |         |      |               |  |              |       |             |  |             |       |              |  |         |     |              |  |              |      |   |  |  |      |   |  |  |       |   |  |  |       |   |  |  |       |  
|As
of 31 December, 20026)7)                     |  |         | 883  |               |  |              | 187.4 |             |  |             | 6,629 |              |  |         | 172 |              |  |              |     |   |  |  |     |   |  |  | 1,055 |   |  |  | 187.4 |   |  |  | 6,629 |  
|                                                |  |         |      |               |  |              |       |             |  |             |       |              |  |         |     |              |  |              |      |   |  |  |      |   |  |  |       |   |  |  |       |   |  |  |       |  
|Proved developed reserves:                      |  |         |      |               |  |              |       |             |  |             |       |              |  |         |     |              |  |              |      |   |  |  |      |   |  |  |       |   |  |  |       |   |  |  |       |  
|As of 31 December, 1999                         |  |         | 500  |               |  |              | 69.1  |             |  |             | 2,444 |              |  |         | 74  |              |  |              | 6.0  |   |  |  | 211  |   |  |  | 574   |   |  |  | 75.1  |   |  |  | 2,655 |  
|As of 31 December, 2000                         |  |         | 555  |               |  |              | 103.0 |             |  |             | 3,644 |              |  |         | 33  |              |  |              |     |   |  |  |     |   |  |  | 588   |   |  |  | 103.0 |   |  |  | 3,644 |  
|As of 31 December, 2001                         |  |         | 564  |               |  |              | 103.7 |             |  |             | 3,669 |              |  |         | 62  |              |  |              |     |   |  |  |     |   |  |  | 626   |   |  |  | 103.7 |   |  |  | 3,669 |  
|As of 31 December, 2002                         |  |         | 559  |               |  |              | 124.8 |             |  |             | 4,416 |              |  |         | 93  |              |  |              |     |   |  |  |     |   |  |  | 652   |   |  |  | 124.8 |   |  |  | 4,416 |  
|                                                |  |         |      |               |  |              |       |             |  |             |       |              |  |         |     |              |  |              |      |   |  |  |      |   |  |  |       |   |  |  |       |   |  |  |       |  
|                                                |  |         |      |               |  |              |       |             |  |             |       |              |  |         |     |              |  |              |      |   |  |  |      |   |  |  |       |   |  |  |       |   |  |  |       |  

|1) |  | Includes crude oil and NGL/Condensate. All volumes are calculated based
on the Norwegian Petroleum Directorates current conversion
factors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2) |  | cf: cubic feet                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|3) |  | The revision of previous estimates relates to new information from
current years drilling operations and additional data which is now
available. Included is also an PSA effect for the fields in Angola, Libya
and Russia.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|4) |  | In 2002 the change in reserves was
due to acquisition of SDFI assets and
sale of the small field Varg in Norway. The sale of a portion
of the interests in the Brage and Njord fields in Norway in 2002 to
Offshore Engineering Resources AS is not included since the agreement was not closed in 2002. In 2001 the decrease was due to the sale of
Glitne in Norway. In 2000, the decrease in reserves out
side Norway was due to the sale of the UK portfolio. The increase in
Norway was due to increased ownership interest in the Grane
field and purchase of reserves in the Tune field.                                                                                                                                                                                                                                                                                                                            
|5) |  | In 2002, extensions and new discoveries for oil were related to the
Snøhvit and Vigdis fields in Norway, the Hibernia and Terra Nova
fields in Canada, the Murzuq field in Libya and the Jasmim field in
Angola. Extensions and new discoveries for gas were related to the
Snøhvit, Vigdis, Byggve and Skirne fields in Norway. In 2001, extensions
and new discoveries for oil were related to the Kristin, Mikkel
and Sigyn fields in Norway, Rosa/Lirio and Jasmim fields in Angola.
Extensions and new discoveries for gas were also related to the
Kristin, Mikkel and Sigyn fields in Norway. In 2000, extensions and new
discoveries for oil were related to the Fram, Glitne and STUJ
(a neighboring structure to the Tordis field) field in Norway, and the
Dalia field in Angola. Extensions and new discoveries for gas were
related to the Fram and STUJ (a neighboring structure to the Tordis field)
fields.
|6) |  | Reserve estimates in Norway are made before royalties of approximately
1.6, 2.1 and 3.8 million barrels of oil equivalents for 2002,
2001 and 2000, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|7) |  | In 2002, reserve estimates included 172 million barrels of oil
equivalents (boe) outside the Norwegian Continental Shelf, in Canada,
Angola, Russia and Libya. In 2001, reserve estimates included 193 million
barrels of oil equivalents (boe) outside the Norwegian Conti-
nental Shelf, in Canada, Angola, Russia and Libya. The decrease in 2002
is dominated by the PSA effect which represents a reduction
of 22 millions boe for the fields in Angola and Russia.                                                                                                                                                                                                                                                                                                                                                                                                                                                   

122





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##### 



US GAAP STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS AND CHANGES
THEREIN RELATING TO PROVED OIL AND GAS RESERVES

The standardized measure of discounted future net cash flows of Hydros proved
reserves of oil (including natural gas liquids and
condensate) and gas is prepared in compliance with SFAS 69.

Future net cash flows are based on numerous assumptions which may or may
not be realized. The Management of Hydro cautions against relying on the information presented because of the highly
arbitrary nature of assumptions involved and susceptibility of estimates to change as new and more accurate data become available. The
individual components of future net cash flows
shown below were computed using prices, production costs, development costs,
royalty levels, foreign exchange rates, statutory
tax rates and estimated proved reserve quantities at the respective year ends.

|                               |  |      |          |      |  |        |          |      |  |      |          |               |  |       |        |      |  |      |        |   |  |  |        |   |  |  |          |   |  |  |          |   |  |  |          |  
|------------------------------ |  | ---- | -------- | ---- |  | ------ | -------- | ---- |  | ---- | -------- | ------------- |  | ----- | ------ | ---- |  | ---- | ------ | - |  |  | ------ | - |  |  | -------- | - |  |  | -------- | - |  |  | -------- | -
|                               |  |      |          |      |  | Norway |          |      |  |      |          | International |  | Total
|Amounts in NOK million         |  | 2002 |          | 2001 |  | 2000   |          | 2002 |  | 2001 |          | 2000          |  | 2002  |        | 2001 |  | 2000
|Future cash inflows            |  |      | 351,200  |      |  |        | 308,600  |      |  |      | 364,200  |               |  |       | 34,800 |      |  |      | 31,200 |   |  |  | 30,900 |   |  |  | 386,000  |   |  |  | 339,800  |   |  |  | 395,100  |  
|Future production costs        |  |      | (81,000  | )    |  |        | (59,700  | )    |  |      | (63,300  | )             |  |       | (6,400 | )    |  |      | (9,400 | ) |  |  | (7,100 | ) |  |  | (87,400  | ) |  |  | (69,100  | ) |  |  | (70,400  | )
|Future development costs       |  |      | (27,200  | )    |  |        | (22,800  | )    |  |      | (21,400  | )             |  |       | (6,300 | )    |  |      | (7,700 | ) |  |  | (6,600 | ) |  |  | (33,500  | ) |  |  | (30,500  | ) |  |  | (28,000  | )
|Future income tax expense      |  |      | (172,700 | )    |  |        | (160,800 | )    |  |      | (206,800 | )             |  |       | (6,800 | )    |  |      | (3,200 | ) |  |  | (4,300 | ) |  |  | (179,500 | ) |  |  | (164,000 | ) |  |  | (211,100 | )
|Future net cash flows          |  |      | 70,300   |      |  |        | 65,300   |      |  |      | 72,700   |               |  |       | 15,300 |      |  |      | 10,900 |   |  |  | 12,900 |   |  |  | 85,600   |   |  |  | 76,200   |   |  |  | 85,600   |  
|                               |  |      |          |      |  |        |          |      |  |      |          |               |  |       |        |      |  |      |        |   |  |  |        |   |  |  |          |   |  |  |          |   |  |  |          |  
|Less: 10% annual discount for  |  |      |          |      |  |        |          |      |  |      |          |               |  |       |        |      |  |      |        |   |  |  |        |   |  |  |          |   |  |  |          |   |  |  |          |  
|estimated timing of cash flows |  |      | (26,400  | )    |  |        | (27,300  | )    |  |      | (26,500  | )             |  |       | (4,900 | )    |  |      | (4,700 | ) |  |  | (4,900 | ) |  |  | (31,300  | ) |  |  | (32,000  | ) |  |  | (31,400  | )
|                               |  |      |          |      |  |        |          |      |  |      |          |               |  |       |        |      |  |      |        |   |  |  |        |   |  |  |          |   |  |  |          |   |  |  |          |  
|Standardized measure of dis-   |  |      |          |      |  |        |          |      |  |      |          |               |  |       |        |      |  |      |        |   |  |  |        |   |  |  |          |   |  |  |          |   |  |  |          |  
|counted future net cash flows  |  |      | 43,900   |      |  |        | 38,000   |      |  |      | 46,200   |               |  |       | 10,400 |      |  |      | 6,200  |   |  |  | 8,000  |   |  |  | 54,300   |   |  |  | 44,200   |   |  |  | 54,200   |  
|                               |  |      |          |      |  |        |          |      |  |      |          |               |  |       |        |      |  |      |        |   |  |  |        |   |  |  |          |   |  |  |          |   |  |  |          |  

Major Sources of Changes in the Standardized Measure of Discounted Future Net Cash Flows

|                                                                     |  |      |         |      |  |      |         |   |  |  |         |  
|-------------------------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  |  | ------- | -
|Amounts in NOK million                                               |  | 2002 |         | 2001 |  | 2000
|Net changes in prices and production costs                           |  |      | 23,700  |      |  |      | (29,900 | ) |  |  | 43,200  |  
|Sales and transfers of oil and gas produced, net of production costs |  |      | (26,200 | )    |  |      | (27,300 | ) |  |  | (30,300 | )
|Extensions, unitizations, discoveries and improved recovery,         |  |      |         |      |  |      |         |   |  |  |         |  
|net of related costs                                                 |  |      | 5,500   |      |  |      | 5,700   |   |  |  | 8,400   |  
|Purchase/Exchange of interests in fields                             |  |      | 15,900  |      |  |      |        |   |  |  | 1,500   |  
|Sale/Exchange of interests in fields                                 |  |      | (300    | )    |  |      | (200    | ) |  |  | (5,800  | )
|Changes in estimated development costs                               |  |      | (8,300  | )    |  |      | (7,900  | ) |  |  | (6,700  | )
|Development costs incurred during the year                           |  |      | 7,600   |      |  |      | 7,500   |   |  |  | 6,400   |  
|Net change in income taxes                                           |  |      | (13,400 | )    |  |      | 30,200  |   |  |  | (19,900 | )
|Accretion of discount                                                |  |      | 3,700   |      |  |      | 4,700   |   |  |  | 3,100   |  
|Revisions of previous reserve quantity estimates                     |  |      | 1,900   |      |  |      | 7,000   |   |  |  | 6,100   |  
|Other                                                                |  |      |        |      |  |      | 200     |   |  |  |        |  
|                                                                     |  |      |         |      |  |      |         |   |  |  |         |  
|Total change in the standardized measure during the year             |  |      | 10,100  |      |  |      | (10,000 | ) |  |  | 6,000   |  
|                                                                     |  |      |         |      |  |      |         |   |  |  |         |  

AVERAGE SALES PRICE AND PRODUCTION COST PER UNIT

The following table presents the average sales price
(including transfers) and production costs per unit of
crude oil and natural gas, net of reductions in
respect of royalty payments:

|                                    |  |        |        |               |  |       |        |      |  |      |        |      |  |      |        |      |  |      |        |  |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|----------------------------------- |  | ------ | ------ | ------------- |  | ----- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ |  |  |  | ------ |  |  |  | ------ |  |  |  | ------ |  |  |  | ------ | 
|                                    |  | Norway |        | International |  | Total
|Amounts in NOK                      |  | 2002   |        | 2001          |  | 2000  |        | 2002 |  | 2001 |        | 2000 |  | 2002 |        | 2001 |  | 2000
|Average
Sales Price                 |  |        |        |               |  |       |        |      |  |      |        |      |  |      |        |      |  |      |        |  |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|crude oil (per barrel)              |  |        | 194.33 |               |  |       | 217.32 |      |  |      | 248.80 |      |  |      | 193.74 |      |  |      | 215.03 |  |  |  | 219.60 |  |  |  | 194.24 |  |  |  | 217.20 |  |  |  | 246.40 | 
|natural
gas (per Sm3)               |  |        | 0.95   |               |  |       | 1.21   |      |  |      | 1.00   |      |  |      |       |      |  |      |       |  |  |  | 0.78   |  |  |  | 0.95   |  |  |  | 1.21   |  |  |  | 0.98   | 
|Average production cost1)
(per boe) |  |        | 22.50  |               |  |       | 23.60  |      |  |      | 22.20  |      |  |      | 23.10  |      |  |      | 38.00  |  |  |  | 26.10  |  |  |  | 22.60  |  |  |  | 24.10  |  |  |  | 22.50  | 
|                                    |  |        |        |               |  |       |        |      |  |      |        |      |  |      |        |      |  |      |        |  |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 



|1) |  | Average production cost no longer include operating cost transportation
system. Previous calculations are restated according to this.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------

123





---



##### 



NORSK HYDRO ASA and subsidiaries
Notes to the consolidated financial statements

27. SUMMARY OF DIFFERENCES IN
ACCOUNTING POLICIES AND RECONCILIATION OF US GAAP TO N GAAP

The financial statements prepared in accordance with accounting principles
generally accepted in Norway presented
on pages 88-90, differ in certain respects from US GAAP. Currently the
differences are immaterial for Hydro.
A reconciliation of net income and shareholders equity from US GAAP to
Norwegian principles (N GAAP) and a description of these differences follow. The lines with a note reference reflect the variance between the
US GAAP
balance in that note and the N GAAP balance.

Reconciliation of US GAAP to N GAAP

|                                                                     |  |       |    |      |  |      |         |      |  |  |         |   |  |  |         |  
|-------------------------------------------------------------------- |  | ----- | -- | ---- |  | ---- | ------- | ---- |  |  | ------- | - |  |  | ------- | -
|Net income:                                                          |  |       |    |      |  |      |         |      |  |  |         |   |  |  |         |  
|Amounts in NOK million                                               |  | Notes |    | 2002 |  | 2001 |         | 2000
|Operating revenues US GAAP                                           |  |       |    |      |  |      | 162,936 |      |  |  | 152,835 |   |  |  | 156,861 |  
|Adjustments for N GAAP:                                              |  |       |    |      |  |      |         |      |  |  |         |   |  |  |         |  
|Change in unrealized losses (gains) commodity derivative instruments |  |       |    |      |  |      | 9       |      |  |  | 134     |   |  |  |        |  
|                                                                     |  |       |    |      |  |      |         |      |  |  |         |   |  |  |         |  
|Operating revenues  N GAAP                                          |  |       |    |      |  |      | 162,945 |      |  |  | 152,969 |   |  |  | 156,861 |  
|                                                                     |  |       |    |      |  |      |         |      |  |  |         |   |  |  |         |  
|Operating costs and expenses US GAAP                                 |  |       |    |      |  |      | 143,095 |      |  |  | 131,752 |   |  |  | 128,395 |  
|Adjustments for N GAAP:                                              |  |       |    |      |  |      |         |      |  |  |         |   |  |  |         |  
|Change in unrealized gains (losses) commodity derivative instruments |  |       |    |      |  |      | (129    | )    |  |  | 180     |   |  |  | (13     | )
|Amortization goodwill                                                |  |       | 16 |      |  |      | 161     |      |  |  |        |   |  |  |        |  
|Other adjustments                                                    |  |       |    |      |  |      |        |      |  |  |        |   |  |  | (2      | )
|                                                                     |  |       |    |      |  |      |         |      |  |  |         |   |  |  |         |  
|Operating income before financial and other income  N GAAP          |  |       |    |      |  |      | 19,818  |      |  |  | 21,037  |   |  |  | 28,481  |  
|                                                                     |  |       |    |      |  |      |         |      |  |  |         |   |  |  |         |  
|Equity in net income of non-consolidated investees  US GAAP         |  |       |    |      |  |      | 33      |      |  |  | 566     |   |  |  | 672     |  
|Adjustments for N GAAP:                                              |  |       |    |      |  |      |         |      |  |  |         |   |  |  |         |  
|Amortization goodwill non-consolidated investees                     |  |       |    |      |  |      | (10     | )    |  |  |        |   |  |  |        |  
|Interest income and other financial income                           |  |       |    |      |  |      | 1,418   |      |  |  | 2,847   |   |  |  | 1,747   |  
|Other income, net                                                    |  |       |    |      |  |      | 219     |      |  |  | 578     |   |  |  | 3,161   |  
|                                                                     |  |       |    |      |  |      |         |      |  |  |         |   |  |  |         |  
|Earnings before interest expense and taxes (EBIT)  N GAAP           |  |       |    |      |  |      | 21,478  |      |  |  | 25,028  |   |  |  | 34,061  |  
|Interest expense and foreign exchange gain (loss)                    |  |       |    |      |  |      | 517     |      |  |  | (3,609  | ) |  |  | (3,905  | )
|                                                                     |  |       |    |      |  |      |         |      |  |  |         |   |  |  |         |  
|Income before taxes and minority interest  N GAAP                   |  |       |    |      |  |      | 21,995  |      |  |  | 21,419  |   |  |  | 30,156  |  
|                                                                     |  |       |    |      |  |      |         |      |  |  |         |   |  |  |         |  
|Income tax expense  US GAAP                                         |  |       |    |      |  |      | (13,278 | )    |  |  | (13,750 | ) |  |  | (16,178 | )
|Adjustments for N GAAP:                                              |  |       | 10 |      |  |      | (50     | )    |  |  | 17      |   |  |  | (10     | )
|                                                                     |  |       |    |      |  |      |         |      |  |  |         |   |  |  |         |  
|Net income  N GAAP                                                  |  |       |    |      |  |      | 8,667   |      |  |  | 7,686   |   |  |  | 13,968  |  
|                                                                     |  |       |    |      |  |      |         |      |  |  |         |   |  |  |         |  
|Minority interest                                                    |  |       |    |      |  |      | 15      |      |  |  | 177     |   |  |  | 18      |  
|                                                                     |  |       |    |      |  |      |         |      |  |  |         |   |  |  |         |  
|Net income after minority interest  N GAAP                          |  |       |    |      |  |      | 8,682   |      |  |  | 7,863   |   |  |  | 13,986  |  
|                                                                     |  |       |    |      |  |      |         |      |  |  |         |   |  |  |         |  

|                                                                              |  |  |        |  |  |      |        |   |      |  |        |   |      |  |        |  
|----------------------------------------------------------------------------- |  |  | ------ |  |  | ---- | ------ | - | ---- |  | ------ | - | ---- |  | ------ | -
|Shareholders
equity:                                                         |  |  |        |  |  |      |        |   |      |  |        |   |      |  |        |  
|Amounts in NOK million                                                        |  |  | Notes  |  |  | 2002 |        |   | 2001 |  |        |   | 2000 | 
|                                                                              |  |  |        |  |  |      |        |   |      |  |        |   |      |  |        |  
|Shareholders equity  US GAAP                                                |  |  |        |  |  |      | 75,867 |   |      |  | 74,793 |   |      |  | 71,227 |  
|Unrealized gains commodity derivative instruments  current and long-term (a) |  |  |        |  |  |      | 36     |   |      |  | (106   | ) |      |  | (59    | )
|Cash Flow hedge  current and long-term (a)                                   |  |  |        |  |  |      | (1,548 | ) |      |  | (188   | ) |      |  |       |  
|Unrealized gain on securities (b)                                             |  |  | 13     |  |  |      | (15    | ) |      |  | (58    | ) |      |  |       |  
|Accumulated amortization goodwill (c)                                         |  |  | 16, 14 |  |  |      | (154   | ) |      |  |       |   |      |  |       |  
|Deferred tax assets and liabilities  current and long-term (d)               |  |  | 10     |  |  |      | 414    |   |      |  | 96     |   |      |  | 10     |  
|Dividends payable (e)                                                         |  |  |        |  |  |      | (2,709 | ) |      |  | (2,576 | ) |      |  | (2,470 | )
|Minority Interest (f)                                                         |  |  |        |  |  |      | 1,143  |   |      |  | 1,051  |   |      |  | 1,419  |  
|                                                                              |  |  |        |  |  |      |        |   |      |  |        |   |      |  |        |  
|Shareholders equity  N GAAP                                                 |  |  |        |  |  |      | 73,034 |   |      |  | 73,012 |   |      |  | 70,127 |  
|                                                                              |  |  |        |  |  |      |        |   |      |  |        |   |      |  |        |  

124





---



##### 



Explanation of major differences between N GAAP
and US GAAP(a)  Derivative commodity contracts:Under N
GAAP, unrealized gains and losses for commodity derivative instruments that are not hedge designated, and that
are not traded on a liquid, regulated market, are netted
for each portfolio and net unrealized gains are not recognized. For US GAAP, unrealized gains and losses are
recorded to operating revenue for sales contracts or operating cost for purchase contracts. The instruments are
accounted for as assets or liabilities at fair value.

For N GAAP, cash flow hedges with derivative instruments are not recognized on the balance sheet or income
statement, until the underlying hedged transactions actually occur. Under US GAAP, such instruments are
accounted for as assets or liabilities as appropriate, at their
fair value. Gains and losses on the hedging instruments
are deferred in Other Comprehensive Income until the
underlying transaction is recognized in earnings

(b)  Unrealized holding gain (loss) on securities:
Under
N GAAP, long term marketable equity and debt securities
are carried at the lower of historical cost or market value.
Under US GAAP, securities are carried at fair value and
unrealized holding gains or losses are included in other
comprehensive income, net of tax effects, for available
for-sale securities.

(c)  Amortization of goodwill:Goodwill is amortized
under N GAAP. Beginning 1 January, 2002, US GAAP
does not allow amortization of goodwill, but requires that
goodwill must be reviewed at least annually for impairment.

(d)  Deferred taxes:Under N GAAP, deferred taxes
are recorded based upon the liability method similar to US
GAAP. Differences occur primarily because items accounted for differently under US GAAP also have deferred tax
effects. Under N GAAP, deferred tax assets and liabilities
for each tax entity are netted and classified as a long term
liability or asset. A reconciliation of the current and long
term temporary differences giving rise to the N GAAP
deferred tax asset and liability is provided in Note 10.

Classification
between current and long term for US
GAAP is determined by the classification of the related
asset or liability giving rise to the temporary difference.
For each tax entity, deferred tax assets and liabilities are
offset within the respective current or long term groups
and presented as a single amount.

(e)  Dividends payable:For N GAAP, dividends proposed at the end of the year which will be declared and
paid in the following year are recorded as a reduction to
equity and as debt.

For US GAAP, equity is reduced when dividends are
declared.

(f)  Minority Interest:For N GAAP shareholders
equity is
presented including minority interest. In US GAAP share
holders equity is presented excluding minority interest.

125





---



##### 



NORSK HYDRO ASA  N GAAP

|                                                     |  |       |      |      |  |      |         |   |  |  |         |  
|---------------------------------------------------- |  | ----- | ---- | ---- |  | ---- | ------- | - |  |  | ------- | -
|Amounts in NOK million                               |  | Notes |      | 2002 |  | 2001
|INCOME STATEMENTS                                    |  |       |      |      |  |      |         |   |  |  |         |  
|Operating revenues                                   |  |       |      |      |  |      | 2,689   |   |  |  | 4,496   |  
|                                                     |  |       |      |      |  |      |         |   |  |  |         |  
|Raw materials and energy costs                       |  |       |      |      |  |      | 1,201   |   |  |  | 3,100   |  
|Change in inventories of own production              |  |       |      |      |  |      | (2      | ) |  |  | (28     | )
|Payroll and related costs                            |  |       | 2, 3 |      |  |      | 989     |   |  |  | 623     |  
|Depreciation, depletion and amortization             |  |       | 4    |      |  |      | 43      |   |  |  | 74      |  
|Other                                                |  |       |      |      |  |      | 1,732   |   |  |  | 1,674   |  
|                                                     |  |       |      |      |  |      |         |   |  |  |         |  
|Total operating costs and expenses                   |  |       |      |      |  |      | 3,963   |   |  |  | 5,443   |  
|                                                     |  |       |      |      |  |      |         |   |  |  |         |  
|Operating income                                     |  |       |      |      |  |      | (1,274  | ) |  |  | (947    | )
|                                                     |  |       |      |      |  |      |         |   |  |  |         |  
|Financial income, net                                |  |       | 5    |      |  |      | 3,994   |   |  |  | 14,478  |  
|Other income                                         |  |       | 5    |      |  |      | 3,368   |   |  |  |        |  
|                                                     |  |       |      |      |  |      |         |   |  |  |         |  
|Income before taxes                                  |  |       |      |      |  |      | 6,088   |   |  |  | 13,531  |  
|Current tax expense                                  |  |       | 6    |      |  |      | 112     |   |  |  | (174    | )
|Deferred tax benefit                                 |  |       | 6    |      |  |      | 82      |   |  |  | 330     |  
|                                                     |  |       |      |      |  |      |         |   |  |  |         |  
|Net income                                           |  |       |      |      |  |      | 6,282   |   |  |  | 13,687  |  
|                                                     |  |       |      |      |  |      |         |   |  |  |         |  
|Appropriation of net income and equity transfers:    |  |       |      |      |  |      |         |   |  |  |         |  
|Dividend proposed                                    |  |       |      |      |  |      | (2,709  | ) |  |  | (2,576  | )
|Distributable equity                                 |  |       |      |      |  |      | (3,573  | ) |  |  | (11,111 | )
|                                                     |  |       |      |      |  |      |         |   |  |  |         |  
|Total appropriation                                  |  |       |      |      |  |      | (6,282  | ) |  |  | (13,687 | )
|                                                     |  |       |      |      |  |      |         |   |  |  |         |  
|                                                    
|STATEMENTS OF CASH FLOWS                             |  |       |      |      |  |      |         |   |  |  |         |  
|Net income                                           |  |       |      |      |  |      | 6,282   |   |  |  | 13,687  |  
|Depreciation, depletion and amortization             |  |       |      |      |  |      | 43      |   |  |  | 74      |  
|Loss (gain) on sale of non-current assets            |  |       |      |      |  |      | (3,257  | ) |  |  | 38      |  
|Other adjustments                                    |  |       |      |      |  |      | (8,924  | ) |  |  | (5,366  | )
|                                                     |  |       |      |      |  |      |         |   |  |  |         |  
|Net cash provided by (used in) operating activities  |  |       |      |      |  |      | (5,856  | ) |  |  | 8,433   |  
|                                                     |  |       |      |      |  |      |         |   |  |  |         |  
|Investments in subsidiaries                          |  |       |      |      |  |      | (3,386  | ) |  |  | (693    | )
|Sale of subsidiaries                                 |  |       |      |      |  |      | 21,801  |   |  |  | (20     | )
|Net purchases of other investments                   |  |       |      |      |  |      | (1,847  | ) |  |  | (225    | )
|                                                     |  |       |      |      |  |      |         |   |  |  |         |  
|Net cash provided by (used in) investing activities  |  |       |      |      |  |      | 16,568  |   |  |  | (938    | )
|                                                     |  |       |      |      |  |      |         |   |  |  |         |  
|Dividends paid                                       |  |       |      |      |  |      | (2,576  | ) |  |  | (2,470  | )
|Other financing activities, net                      |  |       |      |      |  |      | (30,383 | ) |  |  | 852     |  
|                                                     |  |       |      |      |  |      |         |   |  |  |         |  
|Net cash used in financing activities                |  |       |      |      |  |      | (32,959 | ) |  |  | (1,618  | )
|                                                     |  |       |      |      |  |      |         |   |  |  |         |  
|Foreign currency effects on cash flow                |  |       |      |      |  |      | (196    | ) |  |  | (19     | )
|                                                     |  |       |      |      |  |      |         |   |  |  |         |  
|Net increase (decrease) in cash and cash equivalents |  |       |      |      |  |      | (22,443 | ) |  |  | 5,858   |  
|Cash and cash equivalents 01.01                      |  |       |      |      |  |      | 25,240  |   |  |  | 19,382  |  
|                                                     |  |       |      |      |  |      |         |   |  |  |         |  
|Cash
and cash equivalents 31.12                      |  |       |      |      |  |      | 2,797   |   |  |  | 25,240  |  
|                                                     |  |       |      |      |  |      |         |   |  |  |         |  



|                                                          |  |       |      |      |  |              |         |   |  |  |         |  
|--------------------------------------------------------- |  | ----- | ---- | ---- |  | ------------ | ------- | - |  |  | ------- | -
|                                                          |  |       |      |      |  | 31 December,
|Amounts in NOK million                                    |  | Notes |      | 2002 |  | 2001        
|BALANCE SHEETS                                            |  |       |      |      |  |              |         |   |  |  |         |  
|ASSETS                                                    |  |       |      |      |  |              |         |   |  |  |         |  
|Intangible assets                                         |  |       |      |      |  |              | 2       |   |  |  | 3       |  
|                                                          |  |       |      |      |  |              |         |   |  |  |         |  
|Property, plant and equipment                             |  |       | 4    |      |  |              | 263     |   |  |  | 260     |  
|                                                          |  |       |      |      |  |              |         |   |  |  |         |  
|Shares in subsidiaries                                    |  |       | 7    |      |  |              | 34,200  |   |  |  | 49,430  |  
|Intercompany receivables                                  |  |       |      |      |  |              | 35,502  |   |  |  | 29,819  |  
|Non-consolidated investees                                |  |       | 8    |      |  |              | 988     |   |  |  | 975     |  
|Prepaid pension, investments and other non-current assets |  |       | 2, 9 |      |  |              | 6,806   |   |  |  | 4,976   |  
|                                                          |  |       |      |      |  |              |         |   |  |  |         |  
|Total financial non-current assets                        |  |       |      |      |  |              | 77,496  |   |  |  | 85,200  |  
|                                                          |  |       |      |      |  |              |         |   |  |  |         |  
|Inventories                                               |  |       | 9    |      |  |              | 51      |   |  |  | 238     |  
|Accounts receivable, less allowances of 36 and 54         |  |       |      |      |  |              | 83      |   |  |  | 168     |  
|Intercompany receivables                                  |  |       |      |      |  |              | 29,846  |   |  |  | 34,397  |  
|Prepaid expenses and
other current assets                 |  |       |      |      |  |              | 3,564   |   |  |  | 2,137   |  
|Cash and cash equivalents                                 |  |       |      |      |  |              | 2,797   |   |  |  | 25,240  |  
|                                                          |  |       |      |      |  |              |         |   |  |  |         |  
|Current assets                                            |  |       |      |      |  |              | 36,341  |   |  |  | 62,180  |  
|                                                          |  |       |      |      |  |              |         |   |  |  |         |  
|Total assets                                              |  |       |      |      |  |              | 114,102 |   |  |  | 147,643 |  
|                                                          |  |       |      |      |  |              |         |   |  |  |         |  
|                                                         
|LIABILITIES AND SHAREHOLDERS EQUITY                      |  |       |      |      |  |              |         |   |  |  |         |  
|Paid-in capital:                                          |  |       |      |      |  |              |         |   |  |  |         |  
|Share capital 266,596,650 at NOK 20                       |  |       | 11   |      |  |              | 5,332   |   |  |  | 5,332   |  
|Treasury stock 8,636,118 at NOK 20                        |  |       |      |      |  |              | (173    | ) |  |  | (179    | )
|Paid-in premium                                           |  |       |      |      |  |              | 15,055  |   |  |  | 15,055  |  
|Other paid-in capital                                     |  |       |      |      |  |              | 33      |   |  |  | 15      |  
|Retained earnings:                                        |  |       |      |      |  |              |         |   |  |  |         |  
|Retained earnings                                         |  |       |      |      |  |              | 25,115  |   |  |  | 21,541  |  
|Treasury stock                                            |  |       |      |      |  |              | (2,879  | ) |  |  | (2,988  | )
|                                                          |  |       |      |      |  |              |         |   |  |  |         |  
|Shareholders equity                                      |  |       |      |      |  |              | 42,483  |   |  |  | 38,776  |  
|                                                          |  |       |      |      |  |              |         |   |  |  |         |  
|Deferred tax liabilities                                  |  |       | 6    |      |  |              | 921     |   |  |  | 998     |  
|Other long-term liabilities                               |  |       |      |      |  |              | 2,241   |   |  |  | 1,944   |  
|                                                          |  |       |      |      |  |              |         |   |  |  |         |  
|Long-term liabilities                                     |  |       |      |      |  |              | 3,162   |   |  |  | 2,942   |  
|                                                          |  |       |      |      |  |              |         |   |  |  |         |  
|Intercompany payables                                     |  |       |      |      |  |              | 1,315   |   |  |  | 106     |  
|Other long-term interest-bearing debt                     |  |       |      |      |  |              | 28,457  |   |  |  | 36,843  |  
|                                                          |  |       |      |      |  |              |         |   |  |  |         |  
|Long-term debt                                            |  |       |      |      |  |              | 29,772  |   |  |  | 36,949  |  
|                                                          |  |       |      |      |  |              |         |   |  |  |         |  
|Bank loans and other interest-bearing short-term debt     |  |       | 9    |      |  |              | 3,677   |   |  |  | 3,511   |  
|Dividends payable                                         |  |       |      |      |  |              | 2,709   |   |  |  | 2,576   |  
|Intercompany payables                                     |  |       |      |      |  |              | 27,908  |   |  |  | 58,101  |  
|Current portion of long-term debt                         |  |       |      |      |  |              | 1,770   |   |  |  | 1,779   |  
|Other current liabilities                                 |  |       |      |      |  |              | 2,621   |   |  |  | 3,009   |  
|                                                          |  |       |      |      |  |              |         |   |  |  |         |  
|Current liabilities                                       |  |       |      |      |  |              | 38,685  |   |  |  | 68,976  |  
|                                                          |  |       |      |      |  |              |         |   |  |  |         |  
|Total liabilities and shareholders equity                |  |       |      |      |  |              | 114,102 |   |  |  | 147,643 |  
|                                                          |  |       |      |      |  |              |         |   |  |  |         |  

The accompanying notes are an integral part of the financial statements.

126





---



##### 



NORSK HYDRO ASA notes to the financial statements

1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES

The financial statements of Norsk Hydro ASA
are prepared in accordance with accounting
principles generally accepted in Norway (N
GAAP).

Hydros general accounting policies are
presented in Note 1 to the consolidated financial statements on pages 91-96. See Note 27
on pages 124 and 125 for an additional clarification of the major differences in accordance with N GAAP compared with US GAAP.

Shares in subsidiaries and non-consolidated
investees are in Norsk Hydro ASAs financial
statements presented according to the cost
method. Group relief received is included in
dividends from subsidiaries.

Movements in paid-in capital is described
in Note 3 to the consolidated financial statements.

For information about risk management in
Norsk Hydro ASA see Note 24 in Notes to the
consolidated financial statements and the Risk
Management discussion in the Operating and
Financial Review and Prospects section of
this report. The information given in Note 19
in Notes to the consolidated financial statements on payments on long-term debt also
applies to Norsk Hydro ASA.

Norsk Hydro ASA provides financing to
most of the subsidiary companies in Norway
as well as abroad. All employees working for
Norsk Hydro Produksjon AS are employed by
Norsk Hydro ASA.

2. EMPLOYEE RETIREMENT PLANS

Norsk Hydro ASA is affiliated with the Hydro
Groups Norwegian pension plans that are
administered by Norsk Hydros independent
pension trust. The assets managed by Norsk
Hydros independent pension trust had the
following investment profile at the end of
2002: Equity securities 26 percent, bonds
36 percent, real estate 24 percent and other
14 percent. The corresponding profile at the
end of 2001 was: Equity securities 36 percent, bonds 30 percent, real estate 23 percent and other 11 percent.

Norsk Hydro ASAs employee retirement
plans covered 14,538 participants as of 31
December, 2002 and 14,249 participants as
of 31 December, 2001.

Net periodic pension cost

|                                |                                                  |      |     |      |   |  |     |      |  
|------------------------------- | ------------------------------------------------ | ---- | --- | ---- | - |  | --- | ---- | -
|Amounts in NOK million          |                                                  | 2002 |     | 2001
|Defined benefit plans:          |                                                  |      |     |      |   |  |     |     
|                                | Benefits earned during the year.                 |      |     | 362  |   |  |     | 334  |  
|                                | Interest cost on prior period
benefit obligation |      |     | 620  |   |  |     | 540  |  
|                                | Expected return on plan assets                   |      |     | (674 | ) |  |     | (707 | )
|                                | Recognized net loss                              |      |     | 61   |   |  |     | 45   |  
|                                | Amortization of prior service cost               |      |     | 77   |   |  |     | 83   |  
|                                | Amortization of net transition asset             |      |     | (45  | ) |  |     | (44  | )
|                                | Curtailment loss                                 |      |     | 160  |   |  |     | 116  |  
|                                |                                                  |      |     |      |   |  |     |      |  
|Net periodic pension cost       |                                                  |      | 561 |      |   |  | 367 |     
|Termination benefits and other  |                                                  |      | 218 |      |   |  | 442 |     
|                                |                                                  |      |     |      |   |  |     |      |  
|Total net periodic pension cost |                                                  |      | 779 |      |   |  | 809 |     
|                                |                                                  |      |     |      |   |  |     |      |  

Change in projected benefit obligation (PBO)

|                                                  |  |      |         |      |  |  |        |  
|------------------------------------------------- |  | ---- | ------- | ---- |  |  | ------ | -
|Amounts in NOK million                            |  | 2002 |         | 2001
|Projected benefit obligation
at beginning of year |  |      | (8,509  | )    |  |  | (6,973 | )
|Benefits earned during the year                   |  |      | (362    | )    |  |  | (334   | )
|Interest cost on prior period
benefit obligation  |  |      | (620    | )    |  |  | (540   | )
|Actuarial loss                                    |  |      | (1,800  | )    |  |  | (865   | )
|Plan amendments                                   |  |      | 63      |      |  |  | (150   | )
|Benefits paid                                     |  |      | 334     |      |  |  | 314    |  
|Curtailment loss                                  |  |      | (26     | )    |  |  | (10    | )
|Settlements                                       |  |      | 44      |      |  |  | 49     |  
|Special termination benefits                      |  |      | (170    | )    |  |  |       |  
|                                                  |  |      |         |      |  |  |        |  
|Projected benefit obligation
at end of year       |  |      | (11,046 | )    |  |  | (8,509 | )
|                                                  |  |      |         |      |  |  |        |  

Change in pension plan assets

|                                               |  |      |       |      |  |  |       |  
|---------------------------------------------- |  | ---- | ----- | ---- |  |  | ----- | -
|Amounts in NOK million                         |  | 2002 |       | 2001
|Fair value of plan assets
at beginning of year |  |      | 8,085 |      |  |  | 9,005 |  
|Actual return on plan assets                   |  |      | (614  | )    |  |  | (595  | )
|Company contributions                          |  |      | 500   |      |  |  |      |  
|Benefits paid                                  |  |      | (294  | )    |  |  | (276  | )
|Settlements                                    |  |      | (26   | )    |  |  | (49   | )
|                                               |  |      |       |      |  |  |       |  
|Fair value of plan assets at end of year       |  |      | 7,651 |      |  |  | 8,085 |  
|                                               |  |      |       |      |  |  |       |  

Status of pension plans reconciled to balance
sheet

|                                          |                                   |      |        |       |   |  |       |       |  
|----------------------------------------- | --------------------------------- | ---- | ------ | ----- | - |  | ----- | ----- | -
|Amounts in NOK million                    |                                   | 2002 |        | 2001 
|Defined benefit plans:                    |                                   |      |        |       |   |  |       |      
|Funded status of the plans
at end of year |                                   |      | (3,395 | )     |   |  | (424  | )    
|                                          | Unrecognized net loss             |      |        | 5,103 |   |  |       | 2,076 |  
|                                          | Unrecognized prior service cost   |      |        | 735   |   |  |       | 1,008 |  
|                                          | Unrecognized net transition asset |      |        | (4    | ) |  |       | (48   | )
|                                          |                                   |      |        |       |   |  |       |       |  
|Net prepaid pension recognized            |                                   |      | 2,439  |       |   |  | 2,612 |      
|Termination benefits and other            |                                   |      | (644   | )     |   |  | (792  | )    
|                                          |                                   |      |        |       |   |  |       |       |  
|Total net prepaid
pension recognized      |                                   |      | 1,795  |       |   |  | 1,820 |      
|                                          |                                   |      |        |       |   |  |       |       |  

127





---



##### 



NORSK HYDRO ASA notes to the financial statements

Amounts recognized in the balance sheet consist
of:

|                            |  |  |        |   |  |  |        |  
|--------------------------- |  |  | ------ | - |  |  | ------ | -
|Prepaid pension             |  |  | 3,808  |   |  |  | 3,441  |  
|Accrued pension liabilities |  |  | (2,013 | ) |  |  | (1,621 | )
|                            |  |  |        |   |  |  |        |  
|Net amount recognized       |  |  | 1,795  |   |  |  | 1,820  |  
|                            |  |  |        |   |  |  |        |  

Assumptions at end of year

|                               |  |      |     |      |  |  |     |  
|------------------------------ |  | ---- | --- | ---- |  |  | --- | -
|                               |  | 2002 |     | 2001
|Discount rate                  |  |      | 7.0 | %    |  |  | 7.5 | %
|Expected return on plan assets |  |      | 8.0 | %    |  |  | 8.5 | %
|Expected salary increase       |  |      | 4.0 | %    |  |  | 3.5 | %
|Expected pension increase      |  |      | 3.5 | %    |  |  | 2.5 | %
|                               |  |      |     |      |  |  |     |  

See Note 20 in Notes to the consolidated
financial statements for further information.

3. REMUNERATIONS AND OTHER

Remuneration of the members of the corporate assembly and the board of directors was
NOK 434,000 and NOK 2,271,000, respectively. The presidents salary and other benefits totaled NOK 4,432,000 in 2002 and NOK
3,935,000 in 2001. Remuneration to the
president for 2001 includes remuneration to
Egil Myklebust in the first four months of
2001 as a Board member.

The president is entitled to retire at 62
years of age with a pension benefit representing 65 percent of his salary. The companys employment contract with the president
provides that, in the event that employment
terminates, he has the right to salary and the
accrual of pension rights for a three year
period. The companys obligation can be
reduced by salary received or pension rights
accrued from other sources. His employment
can, at certain conditions continue after
retirement as president.

The present Board Chairman retired as
president in May 2001. He continued to be
employed by the company in accordance with
his employment contract from 1991.Total
salary and other benefits, exclusive of remuneration as Board Chairman, amounted to NOK
3,676,000 for 2002. In addition he has pension rights in accordance with Hydros normal pension
scheme with a 65 year retirement age and a pension based on 65 percent of
basis salary.

On 14 June 2002, the Board approved a
new stock option plan for corporate officers
and certain key employees, in addition to
expanding the existing subsidized share-purchase plan for employees. Refer to note 4 in
Notes to the consolidated financial statements
for a description of stock based compensation.
In addition, there is established a stronger
element of performance rewards in Hydros
compensation system: a bonus linked to
achieving performance goals in the business
plans for various units in Hydro. The bonus is
limited to a maximum of one months salary
per year for employees. For approximately
100 managers with substantial responsibility
for performance, the bonus is limited to a
maximum of two months salary. For top management  around 30 persons  the bonus is
limited to a maximum of three months salary.
For the president the board decided in 2002
to increase the upper limit of the bonus to six
months salary for 2003 with possible payment in 2004. Performance goals established
eliminates effects of price variations of the
companys main products and foreign exchange
fluctuations. It is the actual improvements of
Hydros activities that will be measured and
rewarded. Thorleif Enger, a member of the
Corporate Management Board, received in
2002 a bonus in connection with achieved
performance targets for Agri in 2001. The
bonus amounted to NOK 306,000. No other
senior management received a bonus for
2001. The bonus to the President for 2002,
to be paid in 2003, amounts to NOK 630,000.

Partners and employees of Hydros
appointed independent auditors, Deloitte &
Touche AS, own no shares in Norsk Hydro ASA
or any of its subsidiaries. Fees in 2002 to
Deloitte & Touche AS for ordinary audit were
NOK 4,950,000 for Norsk Hydro ASA and
NOK 12,522,000 for the Norwegian subsidiaries. Fees for audit-related services
were NOK 2,599,000 for Norsk Hydro ASA
and NOK 4,387,000 for the Norwegian subsidiaries. Fees for other services were NOK
1,157,000 for Norsk Hydro ASA and NOK
4,761,000 for the Norwegian subsidiaries.
Deloitte Consulting AS, an affiliate company of
Deloitte & Touche AS in Norway, has provided
services to Hydro in the amount of NOK
4,724,000 of which NOK 800,000 was allocated to Norsk Hydro ASA and the remaining
amount for the Norwegian subsidiaries.

For 2002, the estimated adjustment to the
tax basis (consolidated RISK) of shares for
shareholders in Norsk Hydro ASA is a positive
amount of NOK 14.90 per share.

Members of the board of directors are
elected for two year terms. Their rights and
obligations as board members are solely and
specifically provided for in the companys
articles of association and Norwegian law. The
company has no significant contracts in which
a board member has a material interest.

In 2002, the average number of employees
in the Group was 42,615, compared to
36,867 for 2001. The

128





---



##### 



corresponding figure for the parent company was 8,309 employees
in 2002 versus 9,148 in 2001. A substantial part of the employees in Norsk Hydro ASA
are engaged in activities for other Group
companies. The costs for these employees are
accounted for on a net basis reducing Payroll
and related costs.

|                                            |  |      |        |      |  |  |        |  
|------------------------------------------- |  | ---- | ------ | ---- |  |  | ------ | -
|Amounts in NOK million                      |  | 2002 |        | 2001
|Payroll and related costs:                  |  |      |        |      |  |  |        |  
|Salaries                                    |  |      | 4,974  |      |  |  | 4,888  |  
|Social security costs                       |  |      | 797    |      |  |  | 713    |  
|Social benefits                             |  |      | 201    |      |  |  | 43     |  
|Net periodic pension costs
(Note 2)         |  |      | 779    |      |  |  | 809    |  
|Internal invoicing of payroll related
costs |  |      | (5,762 | )    |  |  | (5,830 | )
|                                            |  |      |        |      |  |  |        |  
|Total                                       |  |      | 989    |      |  |  | 623    |  
|                                            |  |      |        |      |  |  |        |  

Total loans to the companys employees,
members of the corporate assembly and board
of directors as of 31 December, 2002 are
NOK 983 million. All loans are given in
accordance with general market terms. Loans
given to members of the Board and their
number of shares owned as of 31 December,
2002 are:

|                         |  |               |       |                  |  |  |       | 
|------------------------ |  | ------------- | ----- | ---------------- |  |  | ----- | 
|                         |  | Loans         |       |                 
|                         |  | outstanding1) |       | Number
of shares
|Egil Myklebust           |  |               | 2,450 |                  |  |  | 4,244 | 
|Borger A. Lenth          |  |               |       |                  |  |  | 144   | 
|Gudmund Per Olsen        |  |               | 28    |                  |  |  | 791   | 
|Anne Cath.Høeg Rasmussen |  |               |       |                  |  |  | 1,014 | 
|Odd Semstrøm             |  |               | 53    |                  |  |  | 75    | 
|Per Wold                 |  |               |       |                  |  |  | 858   | 
|                         |  |               |       |                  |  |  |       | 

|   |  |                                                                    
|-- |  | -------------------------------------------------------------------
|1) |  | Amounts in NOK thousands. All loans
granted prior to July 30, 2002.



Members, observers and deputy members of the corporate assembly owning ordinary
shares as of 31 December, 2002 are:

|                       |  |                  |        | 
|---------------------- |  | ---------------- | ------ | 
|                       |  | Number of shares
|Erna Flatturn Berg     |  |                  | 155    | 
|Roy Brenden            |  |                  | 31     | 
|Sjur Bøyum             |  |                  | 858    | 
|Anne-Margrethe Firing  |  |                  | 167    | 
|Jan Einar Forsmo       |  |                  | 60     | 
|Solveig Frøynes        |  |                  | 105    | 
|Kjell Furseth          |  |                  | 234    | 
|Geir Hansen            |  |                  | 29     | 
|Westye Høegh           |  |                  | 16,212 | 
|Oddvar Karlsen         |  |                  | 173    | 
|Leena M. Klaveness     |  |                  | 101    | 
|Kjell Kvinge           |  |                  | 145    | 
|Sylvi A. Lem           |  |                  | 150    | 
|Jon-Arne Mo            |  |                  | 176    | 
|Jarle Molde            |  |                  | 120    | 
|Geir Nilsen            |  |                  | 1      | 
|John-Arne Nilsen       |  |                  | 109    | 
|Nils-Egil Nilsen       |  |                  | 29     | 
|Roy Rudberg            |  |                  | 89     | 
|Rune Strande           |  |                  | 34     | 
|Anne Merete Steensland |  |                  | 2,272  | 
|Sven Ullring           |  |                  | 26     | 
|Morten Ødegård         |  |                  | 139    | 
|Kjell Aamot            |  |                  | 30     | 
|Svein Aaser            |  |                  | 1,872  | 
|                       |  |                  |        | 

Loans to senior management as of 31 December, 2002
and their ownership of shares and options (see Note 4,
page 99) are:

|                  |  |                     |     |                 |  |         |        |  |  |  |        | 
|----------------- |  | ------------------- | --- | --------------- |  | ------- | ------ |  |  |  | ------ | 
|                  |  | Loansoutstanding 1) |     | Numberof shares |  | Options
|Eivind Reiten     |  |                     |    |                 |  |         | 6,987  |  |  |  | 20,000 | 
|Alexandra Bech    |  |                     | 269 |                 |  |         | 872    |  |  |  | 9,000  | 
|Thorleif Enger    |  |                     |    |                 |  |         | 16,838 |  |  |  | 14,000 | 
|John O. Otterstad |  |                     | 667 |                 |  |         | 8,184  |  |  |  | 9,000  | 
|Jon-Harald Nilsen |  |                     | 227 |                 |  |         | 216    |  |  |  | 14,000 | 
|Tore Torvund      |  |                     | 460 |                 |  |         | 3,532  |  |  |  | 14,000 | 
|                  |  |                     |     |                 |  |         |        |  |  |  |        | 

|                     |  |                          |     |        |  |            |  |  |     |  |  | 
|-------------------- |  | ------------------------ | --- | ------ |  | ---------- |  |  | --- |  |  | 
|Outstanding          |  |                          |     |        |  |            |  |  |     |  |  | 
|loan particulars: 2) |  | Interest Loan repayments |     | Amount
|Alexandra Bech       |  |                          | 7.0 | %      |  | 5-15 years |  |  | 269 | 
|John O.Otterstad     |  |                          | 7.0 | %      |  | 5-15 years |  |  | 667 | 
|Jon-Harald Nilsen    |  |                          | 7.0 | %      |  | 5-15 years |  |  | 227 | 
|Tore Torvund         |  |                          | 7.0 | %      |  | 5-15 years |  |  | 460 | 
|                     |  |                          |     |        |  |            |  |  |     | 



|   |  |                                                                                                                                                                   
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1) |  | Amounts in NOK thousands. All loans
granted prior to July 30, 2002.                                                                                               
|2) |  | Each member of senior management has, in
addition, minor interest-free loans for shares and/or PC equipment, in accordance with the
companys terms for employees.

129





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##### 



NORSK HYDRO ASA notes to the financial statements

4. PROPERTY, PLANT AND EQUIPMENT

|                                    |  |                |      |           |  |              |      |       |  |             |     |   |  |  |    |  |  |  |      |    
|----------------------------------- |  | -------------- | ---- | --------- |  | ------------ | ---- | ----- |  | ----------- | --- | - |  |  | -- |  |  |  | ---- | ---
|                                    |  |                |      |           |  |              |      |       |  | Plant under |     |   |  |  |    |  |  | 
|Amounts in NOK million              |  | Machinery, etc |      | Buildings |  | construction |      | Other |  | Total      
|Cost 31.12.2001                     |  |                | 306  |           |  |              | 188  |       |  |             | 58  |   |  |  | 19 |  |  |  | 571  |    
|Additions at cost                   |  |                | 57   |           |  |              | 3    |       |  |             | 20  |   |  |  |   |  |  |  | 80   |    
|Retirements                         |  |                | (66  | )         |  |              | (102 | )     |  |             |    |   |  |  |   |  |  |  | (168 | )  
|Transfers                           |  |                | 16   |           |  |              | 17   |       |  |             | (33 | ) |  |  |   |  |  |  |     |    
|Accumulated depreciation 31.12.2002 |  |                | (178 | )         |  |              | (42  | )     |  |             |    |   |  |  |   |  |  |  | (220 | )  
|                                    |  |                |      |           |  |              |      |       |  |             |     |   |  |  |    |  |  |  |      |    
|Net book value 31.12.2002           |  |                | 135  |           |  |              | 64   |       |  |             | 45  |   |  |  | 19 |  |  |  | 263  |    
|                                    |  |                |      |           |  |              |      |       |  |             |     |   |  |  |    |  |  |  |      |    
|Depreciation in 2002                |  |                | (38  | )         |  |              | (3   | )     |  |             |    |   |  |  |   |  |  |  | (41  | )1)
|                                    |  |                |      |           |  |              |      |       |  |             |     |   |  |  |    |  |  |  |      |    



|1) |  | In addition, amortization of intangible assets amounts to NOK 2 million.
|-- |  | ------------------------------------------------------------------------

5. FINANCIAL INCOME AND EXPENSE, AND OTHER INCOME

|                                          |  |      |        |      |  |  |        |  
|----------------------------------------- |  | ---- | ------ | ---- |  |  | ------ | -
|Amounts in NOK million                    |  | 2002 |        | 2001
|Dividends from subsidiaries               |  |      | 3,405  |      |  |  | 14,934 |  
|Dividends from non-consolidated investees |  |      | 61     |      |  |  | 56     |  
|Interest from group companies             |  |      | 3,856  |      |  |  | 4,183  |  
|Other interest income                     |  |      | 781    |      |  |  | 1,880  |  
|Interest paid to group companies          |  |      | (1,432 | )    |  |  | (3,584 | )
|Other interest expense                    |  |      | (2,430 | )    |  |  | (3,161 | )
|Other financial income, net               |  |      | (247   | )    |  |  | 170    |  
|                                          |  |      |        |      |  |  |        |  
|Financial income, net                     |  |      | 3,994  |      |  |  | 14,478 |  
|                                          |  |      |        |      |  |  |        |  

Other income for 2002 was NOK 3,368 million, whereof NOK 3,342 million
relates to the sale of Norsk Hydro Sverige AS to Norsk Hydro Produksjon
AS. There was no Other income in 2001.

6. INCOME TAXES

The tax effect of temporary
differences resulting in the
deferred tax assets (liabilities)
and the change in temporary
differences are:

|                         |  |                       |              |      |        |      |      |      |  |  |      |   |  |  |       |  
|------------------------ |  | --------------------- | ------------ | ---- | ------ | ---- | ---- | ---- |  |  | ---- | - |  |  | ----- | -
|                         |  | Temporary differences
|                         |  |                       | Tax effected |      | Change
|Amounts in NOK million   |  | 2002                  |              | 2001 |        | 2002 |      | 2001
|Short-term items         |  |                       | 36           |      |        |      | 84   |      |  |  | (57  | ) |  |  | (381  | )
|Write-down on shares     |  |                       | (633         | )    |        |      | (652 | )    |  |  | 68   |   |  |  | (17   | )
|Prepaid pension          |  |                       | (1,066       | )    |        |      | (964 | )    |  |  | (356 | ) |  |  | 59    |  
|Pension liabilities      |  |                       | 564          |      |        |      | 454  |      |  |  | 399  |   |  |  | 1,037 |  
|Other long-term          |  |                       | 178          |      |        |      | 80   |      |  |  | 239  |   |  |  | 14    |  
|                         |  |                       |              |      |        |      |      |      |  |  |      |   |  |  |       |  
|Deferred tax liabilities |  |                       | (921         | )    |        |      | (998 | )    |  |  |      |   |  |  |       |  
|Change for year          |  |                       |              |      |        |      |      |      |  |  | 293  |   |  |  | 712   |  
|                         |  |                       |              |      |        |      |      |      |  |  |      |   |  |  |       |  

Change in temporary differences for
2001 includes the effect of the
liquidation of a subsidiary in
Great Britan.

Reconciliation of nominal
statutory tax rate to effective
tax rate.

|                                            |  |      |        |      |  |  |        |   
|------------------------------------------- |  | ---- | ------ | ---- |  |  | ------ | --
|Amounts in NOK million                      |  | 2002 |        | 2001
|Income (loss) before taxes                  |  |      | 6,088  |      |  |  | 13,531 |   
|Expected income taxes
at statutory tax rate |  |      | 1,704  |      |  |  | 3,789  |   
|Tax free income                             |  |      | (1,027 | )    |  |  | (42    | ) 
|Dividend exclusion                          |  |      | (702   | )    |  |  | (3,583 | ) 
|Effect of liquidation subsidiary            |  |      |       |      |  |  | (139   | ) 
|Non-deductible expenses
and other, net      |  |      | (169   | )    |  |  | (181   | ) 
|                                            |  |      |        |      |  |  |        |   
|Income tax expense                          |  |      | (194   | )    |  |  | (156   | ) 
|Effective tax rate                          |  |      | (3.19  | %)   |  |  | (1.15  | %)
|                                            |  |      |        |      |  |  |        |   

See Note 10 in Notes to the
consolidated financial statements
for further information

130





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##### 



7. SHARES IN SUBSIDIARIES

|                  |  |                                         |  |  |       |                 |  |                        |  |  |                  |  |  |  |            |            |  |  |            | 
|----------------- |  | --------------------------------------- |  |  | ----- | --------------- |  | ---------------------- |  |  | ---------------- |  |  |  | ---------- | ---------- |  |  | ---------- | 
|                  |  |                                         |  |  |       | Percentage of   |  |                        |  |  |                  |  |  |  |            | Book value
|                  |  |                                         |  |  |       | shares owned by |  | Total share capital of |  |  | 31.12.2002      
|Company name:     |  |                                         |  |  |       | Norsk Hydro     |  | the
company (1,000s)  |  |  | (in NOK
1,000s)
|Oil and Energy:   |  | Norsk Hydro Kraft OY                    |  |  | 100   |                 |  | EUR                    |  |  | 34               |  |  |  | 269        |           
|                  |  | Norsk Hydro Technology Ventures AS      |  |  | 100   |                 |  | NOK                    |  |  | 6,000            |  |  |  | 70,150     |           
|                  |  | Norsk Hydro Electrolysers As            |  |  | 100   |                 |  | NOK                    |  |  | 4,000            |  |  |  | 4,300      |           
|Aluminium:        |  | Hydro Aluminium AS                      |  |  | 100   |                 |  | NOK                    |  |  | 2,167,001        |  |  |  | 4,866,019  |           
|                  |  | Norsk Hydro Magnesiumgesellschaft mbH1) |  |  | 2     |                 |  | EUR                    |  |  | 512              |  |  |  | 179        |           
|                  |  | Hydro Aluminium Acro
2)                 |  |  | 24.30 |                 |  | BRL                    |  |  | 64,179           |  |  |  | 50,391     |           
|Agri:             |  | Hydro Agri Hellas S.A.                  |  |  | 100   |                 |  | EUR                    |  |  | 264              |  |  |  | 2,277      |           
|                  |  | Djupvasskaia AS                         |  |  | 100   |                 |  | NOK                    |  |  | 1,000            |  |  |  | 9,205      |           
|                  |  | Hydro Agri Argentina S.A                |  |  | 100   |                 |  | USD                    |  |  | 33,012           |  |  |  | 275,199    |           
|                  |  | Hydro Agri Colombia
Ltda.               |  |  | 100   |                 |  | COP                    |  |  | 4,842,549        |  |  |  | 16,749     |           
|                  |  | Hydro Agri Russland
AS.                 |  |  | 100   |                 |  | NOK                    |  |  | 21,200           |  |  |  | 21,200     |           
|                  |  | Hydro Agri Uruguay
S.A.                 |  |  | 100   |                 |  | USD                    |  |  | 1,005            |  |  |  | 7,231      |           
|                  |  | Hydro Agri Venezuela
C.A.               |  |  | 60    |                 |  | VEB                    |  |  | 363,000          |  |  |  | 125        |           
|                  |  | Hydro Nordic, S.A.                      |  |  | 100   |                 |  | GTQ                    |  |  | 8,500            |  |  |  | 24,259     |           
|                  |  | Hydroship a.s                           |  |  | 100   |                 |  | NOK                    |  |  | 280,000          |  |  |  | 280,000    |           
|                  |  | Hydroship Services AS                   |  |  | 100   |                 |  | NOK                    |  |  | 1,039            |  |  |  | 1,039      |           
|                  |  | Norensacados C.A.                       |  |  | 60    |                 |  | VEB                    |  |  | 15,000           |  |  |  | 140        |           
|                  |  | Norsk Hydro Chile S.A.                  |  |  | 100   |                 |  | CLP                    |  |  | 944,820          |  |  |  | 13,071     |           
|                  |  | Norsk Hydro (Far
East) Ltd.             |  |  | 100   |                 |  | HKD                    |  |  | 50               |  |  |  | 60         |           
|                  |  | Ceylon Oxygen Ltd.                      |  |  | 70.85 |                 |  | LKR                    |  |  | 90,000           |  |  |  | 29,575     |           
|                  |  | Okledyh Management AS                   |  |  | 93.20 |                 |  | NOK                    |  |  | 139              |  |  |  | 9,565      |           
|                  |  | Hydro Wax AS                            |  |  | 100   |                 |  | NOK                    |  |  | 3,750            |  |  |  | 3,750      |           
|                  |  | Hydro Gas and Chemicals AS              |  |  | 100   |                 |  | NOK                    |  |  | 15,100           |  |  |  | 49,416     |           
|                  |  | Gellyfeed AS                            |  |  | 100   |                 |  | NOK                    |  |  | 1,500            |  |  |  | 1,515      |           
|                  |  | Hydro Agri Norge AS                     |  |  | 100   |                 |  | NOK                    |  |  | 400,000          |  |  |  | 1,500,000  |           
|                  |  | Hydro Agri Rus Ltd.                     |  |  | 100   |                 |  | RUB                    |  |  | 54,158           |  |  |  | 21,789     |           
|Other
activities: |  | Hydro Pronova AS                        |  |  | 100   |                 |  | NOK                    |  |  | 59,644           |  |  |  | 846,634    |           
|                  |  | Industriforsikring AS                   |  |  | 100   |                 |  | NOK                    |  |  | 20,000           |  |  |  | 20,000     |           
|                  |  | Norsk Bulk AB                           |  |  | 100   |                 |  | SEK                    |  |  | 102              |  |  |  | 2,551      |           
|                  |  | Retroplast AS                           |  |  | 100   |                 |  | NOK                    |  |  | 50               |  |  |  | 18,826     |           
|                  |  | Grenland Industriutvikling AS           |  |  | 100   |                 |  | NOK                    |  |  | 51,750           |  |  |  | 60,950     |           
|                  |  | Hydro Porsgrunn Eiendomsforvaltning AS  |  |  | 100   |                 |  | NOK                    |  |  | 2,500            |  |  |  | 5,500      |           
|Corporate:        |  | Norsk Hydro Plastic Pipe AS             |  |  | 100   |                 |  | NOK                    |  |  | 10,000           |  |  |  | 91,472     |           
|                  |  | Norsk Hydro Asia Pte.
Ltd.              |  |  | 100   |                 |  | SGD                    |  |  | 243,145          |  |  |  | 1,114,364  |           
|                  |  | Norsk Hydro Brasil
Ltda.                |  |  | 100   |                 |  | BRL                    |  |  | 46,976           |  |  |  | 135,544    |           
|                  |  | Norsk Hydro Danmark AS                  |  |  | 100   |                 |  | DKK                    |  |  | 1,002,000        |  |  |  | 4,515,523  |           
|                  |  | Hydro Aluminium Deutschland GmbH        |  |  | 100   |                 |  | EUR                    |  |  | 56,242           |  |  |  | 1,089,938  |           
|                  |  | Norsk Hydros Handelsselskap AS          |  |  | 100   |                 |  | NOK                    |  |  | 1,000            |  |  |  | 1,000      |           
|                  |  | Norsk Hydro Produksjon AS               |  |  | 100   |                 |  | NOK                    |  |  | 200,000          |  |  |  | 18,811,324 |           
|                  |  | Norsk Hydro Russland AS                 |  |  | 100   |                 |  | NOK                    |  |  | 19,000           |  |  |  | 19,000     |           
|                  |  | Norsk Hydro Americas,
Inc.              |  |  | 100   |                 |  | USD                    |  |  | 30,000           |  |  |  | 209,917    |           
|                  |  |                                         |  |  |       |                 |  |                        |  |  |                  |  |  |  |            |            |  | 
|Total             |  |                                         |  |  |       |                 |  |                        |  |  |                  |  |  |  |            |            |  |  | 34,200,016 | 
|                  |  |                                         |  |  |       |                 |  |                        |  |  |                  |  |  |  |            |            |  | 

The foreign currency designation indicates country of domicile.
Percentage of shares owned equals percentage of voting shares owned. A
number of the above-mentioned companies also own shares in other
companies as specified in their annual reports.



| |    |  |                                                                                                                                                             
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1) |  | The company is owned 98 percent by Hydro Aluminium Deutschland GmbH and 2
percent by Norsk Hydro ASA.                                                       
| | 2) |  | The company is owned 68.3 percent by Norsk Hydro Brasil Ltda., 7.4
percent of a subsidiary of Norsk Hydro Produksjon AS and
24.3 percent by Norsk Hydro ASA.

131





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##### 



NORSK HYDRO ASAnotes to the financial statements

8. SHARES IN NON-CONSOLIDATED
INVESTEES

The most significant investments in non-consolidated investees for
Norsk Hydro ASA are (amounts in NOK million):

|                                                     |                        |                  |                   |   |          |                  |       |           |     |  |     |  |     |  |     |  |     |  |     | 
|---------------------------------------------------- | ---------------------- | ---------------- | ----------------- | - | -------- | ---------------- | ----- | --------- | --- |  | --- |  | --- |  | --- |  | --- |  | --- | 
|                                                     |                        | Percentage owned |                   |   |          | Book value as of |       | Long-term |     | 
|Name                                                 | (equals voting rights) | Country          | 31 December, 2002 |   | advances |                  | Total
|Compania Industrial de Resinas Sinteticas - CIRES
SA |                        |                  | 26.2              | % |          | Portugal         |       |           | 100 |  |     |  |    |  |     |  | 100 | 
|Phosyn Plc.                                          |                        |                  | 35.0              | % |          | Great Britain    |       |           | 79  |  |     |  |    |  |     |  | 79  | 
|Hydro Agri Trade Maroc                               |                        |                  | 50.0              | % |          | Marocco          |       |           | 71  |  |     |  |    |  |     |  | 71  | 
|Suzhou Huasu Plastics Co. Ltd.                       |                        |                  | 31.8              | % |          | China            |       |           | 67  |  |     |  | 65  |  |     |  | 132 | 
|Qatar Fertilizer Company (S.A.Q.)                    |                        |                  | 25.0              | % |          | Qatar            |       |           | 43  |  |     |  |    |  |     |  | 43  | 
|Scanraff1)                                           |                        |                  | 21.5              | % |          | Sweden           |       |           |    |  |     |  | 330 |  |     |  | 330 | 
|Other                                                |                        |                  |                   |   |          |                  |       |           |     |  | 93  |  |     |  | 140 |  |     |  | 233 | 
|                                                     |                        |                  |                   |   |          |                  |       |           |     |  |     |  |     |  |     |  |     |  |     | 
|Total                                                |                        |                  |                   |   |          |                  |       |           |     |  | 453 |  |     |  | 535 |  |     |  | 988 | 
|                                                     |                        |                  |                   |   |          |                  |       |           |     |  |     |  |     |  |     |  |     |  |     | 

|1) |  | Indirectly owned by Norsk Hydro ASA.
|-- |  | ------------------------------------

9. SPECIFICATION OF BALANCE SHEET
ITEMS

|                                                           |  |      |       |      |  |  |       | 
|---------------------------------------------------------- |  | ---- | ----- | ---- |  |  | ----- | 
|Amounts in NOK million                                     |  | 2002 |       | 2001
|Prepaid pension, investments and
other non-current assets: |  |      |       |      |  |  |       | 
|Other investments                                          |  |      | 1,054 |      |  |  | 397   | 
|Prepaid pension                                            |  |      | 3,808 |      |  |  | 3,441 | 
|Other non-current assets                                   |  |      | 1,944 |      |  |  | 1,138 | 
|                                                           |  |      |       |      |  |  |       | 
|Total                                                      |  |      | 6,806 |      |  |  | 4,976 | 
|                                                           |  |      |       |      |  |  |       | 
|Inventories:                                               |  |      |       |      |  |  |       | 
|Raw materials                                              |  |      | 3     |      |  |  | 157   | 
|Finished goods                                             |  |      | 48    |      |  |  | 81    | 
|                                                           |  |      |       |      |  |  |       | 
|Total                                                      |  |      | 51    |      |  |  | 238   | 
|                                                           |  |      |       |      |  |  |       | 
|Bank loans and other short-term
interest-bearing debt:     |  |      |       |      |  |  |       | 
|Bank overdraft                                             |  |      | 1,522 |      |  |  | 1,042 | 
|Other interest-bearing debt                                |  |      | 2,155 |      |  |  | 2,469 | 
|                                                           |  |      |       |      |  |  |       | 
|Total                                                      |  |      | 3,677 |      |  |  | 3,511 | 
|                                                           |  |      |       |      |  |  |       | 

10. GUARANTEES

Norsk Hydro ASA provides guarantees
arising in the ordinary course of
business including stand-by letters
of credit, letters of credit,
performance bonds and various
payment or financial guarantees.

|                                |  |      |       |      |  |  |       | 
|------------------------------- |  | ---- | ----- | ---- |  |  | ----- | 
|Amounts in NOK million          |  | 2002 |       | 2001
|Guarantees (off-balance sheet): |  |      |       |      |  |  |       | 
|Guarantees of debt              |  |      | 1,587 |      |  |  | 1,577 | 
|Indirect guarantees             |  |      | 7,616 |      |  |  | 4,513 | 
|                                |  |      |       |      |  |  |       | 
|Total                           |  |      | 9,203 |      |  |  | 6,090 | 
|                                |  |      |       |      |  |  |       | 

11. NUMBER OF SHARES OUTSTANDING,
SHAREHOLDERS, ETC.

The share capital of the company is NOK
5,331,933,000.
It consists of 266,596,650 ordinary shares
at NOK 20 per share. As of 31 December,
2002 the company had purchased 8,636,118
treasury stocks at a cost of NOK 3.1 billion.
For further information on these issues see
Note 3 in Notes to the consolidated financial
statements.

Shareholders holding one percent or more
of the total 257,960,532 shares outstanding
as of 31 December, 2002 are according to
information in the Norwegian securities registry system (Verdipapirsentralen):

|                                  |  |                  |             | 
|--------------------------------- |  | ---------------- | ----------- | 
|Name                              |  | Number of shares
|Ministry of Trade and Industry    |  |                  | 116,832,770 | 
|Morgan
Guaranty Trust Co. of NY1) |  |                  | 16,353,971  | 
|Folketrygdfondet                  |  |                  | 10,625,375  | 
|State Street Bank & Trust2)       |  |                  | 9,920,497   | 
|JP Morgan Chase Bank2)            |  |                  | 9,776,751   | 
|JP Morgan Chase Bank2)            |  |                  | 4,555,000   | 
|Euroclear Bank SA                 |  |                  | 4,385,099   | 
|JP
Morgan Chase Bank 2)           |  |                  | 4,064,000   | 
|JP
Morgan Chase Bank2)            |  |                  | 2,867,859   | 
|                                  |  |                  |             | 

|1) |  | Representing American Depositary Shares.
|-- |  | ----------------------------------------
|2) |  | Client accounts and similar.            

132



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##### 



Independent auditors report

To the annual general meeting of Norsk Hydro ASA

INDEPENDENT AUDITORS REPORT
FOR N GAAP FINANCIAL STATEMENTSWe have audited the financial statements of Norsk Hydro ASA and its subsidiaries as of 31 December 2002, showing a profit of NOK 6,282 million for the parent company and a profit of NOK 8,667 million for the group. We have also audited the information in the Board of
Directors report concerning the financial statements, the going concern assumption, and the
proposal for the allocation of net income. Financial statements comprise the balance sheet, the statement of income, the statement of cash flows, the accompanying notes and the group
accounts. These financial statements, which are presented in accordance with accounting principles generally accepted in Norway, are
the responsibility of the Companys Board of Directors and the Companys President. Our
responsibility is to express an opinion on these financial statements and on certain other information according to the requirements of the
Norwegian Act on Auditing and Auditors.

We conducted our audit in accordance with the
Norwegian Act on Auditing and Auditors and
auditing standards generally accepted in Norway.
Auditing standards generally accepted in Norway
require that we plan and perform the audit to
obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and
disclosures
in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement
presentation. To the extent required by law and
auditing standards generally accepted in Norway,
an audit also comprises a review of the management of the Companys financial affairs
and its accounting and internal control systems.
We believe that our audit provides a reasonable
basis for our opinion.

In our opinion,



| |  | the financial statements, as shown on page 88-90 and page 126, are prepared in accordance
with the law and regulations and present fair-
ly, in material respects, the financial position
of the Company as of 31 December 2002 and
the results
of its operations and its cash flows for the
period ended
31 December 2002, in accordance with
accounting principles generally accepted in
Norway;
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the Companys management has fulfilled its
duty to maintain the Companys accounting
process in such a proper and well-arranged
manner that the accounting process is in accordance with the law and accounting practices
generally accepted in Norway; and                                                                                                                                       
| 
| |  | the information in the Board of Directors
report, as shown on page 30-35, concerning
the financial statements, the going concern
assumption, and the proposal for the allocation
of net income is consistent with the financial
statements and complies with the law and regulations.                                                                                                            

Oslo, Norway, 28 February, 2003
DELOITTE & TOUCHE AS

Ingebret G. Hisdal-State Authorized Public Accountant, (Norway)

To the annual general meeting of Norsk Hydro ASA

INDEPENDENT AUDITORS REPORT FOR US GAAP FINANCIAL STATEMENTS
We have audited the consolidated
balance sheets of Norsk Hydro ASA and
subsidiaries of December 31, 2002 and 2001, and the related consolidated
income statements, statements of comprehensive income, and cash flows for
each of the three years in the period ended December 31, 2002. These financial statements are the responsibility of the companys Management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for
our opinion.

In our opinion, such consolidated financial statements on pages 86-88
present fairly, in all material respects, the financial position of the
Company as of December 31, 2002 and 2001, and the results of its
operations and
its cash flows for each of the three years in the period ended December
31, 2002 in conformity with accounting principles generally accepted in the United
States of America.

As
discussed in Note 1 to the financial statements, the Company changed its
method of accounting for derivatives in 2001 and goodwill and other intangible
assets in 2002 to conform to newly adopted accounting principles.

Oslo, Norway, 28 February, 
2003
DELOITTE & TOUCHE AS

Ingebret G. Hisdal - State Authorized
Public Accountants, (Norway)

133



---



##### 



Corporate assembly

CORPORATE ASSEMBLY

The following were members of Norsk
Hydros
corporate assembly at the end of 2002:

Sven Ullring (chairman)
Svein Steen Thomassen (vice chairman)
Ellen Holanger Andenæs
Kjell Furseth
Aase Gudding Gresvig
Westye Høegh
Idar Kreutzer
Kjell Kvinge
Sylvi A. Lem
Jon-Arne Mo
Jarle Molde
Geir Nilsen
John-Arne Nilsen
Anne Merete Steensland
Rune Strande
Sigurd Støren
Siri Teigum
Kjell Aamot
Svein Aaser

OBSERVERS:
Ingar Aas-Haug
Oddvar Karlsen
Nils-Egel Nilsen

DEPUTY MEMBERS:
Erna Flattum Berg
Roy Brenden
Sjur Bøyum
Anne-Margrethe Firing
Jan Einar Forsmo
Solveig Frøynes
Geir Hansen
Leena Marjatta Klaveness
Karen Helene Midelfart
Roy Rudberg
Sten-Arthur Sælør
Terje Venold
Morten Ødegård

STATEMENT OF THE CORPORATE ASSEMBLY
TO THE ANNUAL GENERAL MEETING OF NORSK HYDRO ASA
The board of directors proposal for
the financial statements for the
financial year 2002 and the
Auditors report have been submitted
to the corporate assembly. The
corporate assembly recommends that
the directors proposal regarding
the
financial statements for 2002 for
the parent company, Norsk Hydro ASA,
and for Norsk Hydro ASA and its
subsidiaries be approved by the
annual general meeting, and that the
net income for 2002 of Norsk Hydro
ASA be appropriated as recommended
by the directors.

Oslo, Norway, 28
February, 2003 Sven Ullring

134



---



##### 



NORSK HYDRO operational data

EXPLORATION AND PRODUCTION

|                                                         |  |                       |                             |              |  |                     |       |           |               |           |    |          |     |           |       |          |     |     |       |       |       |  |       |  |      |  |       |  |           |  |  | 
|-------------------------------------------------------- |  | --------------------- | --------------------------- | ------------ |  | ------------------- | ----- | --------- | ------------- | --------- | -- | -------- | --- | --------- | ----- | -------- | --- | --- | ----- | ----- | ----- |  | ----- |  | ---- |  | ----- |  | --------- |  |  | 
|Proved reserves as of 31 December, 2002 (SEC definition) |  | Hydros share        
|                                                         |  |                       |                             |              |  |                     |       |           |               | Hydro     |    | Total    |     | Oil/NGL   |       | Gas      |     | Gas |       | Prod.
|Field                                                    |  | Block                 |                             | Operator     |  | %-interest          |       | mill. boe |               | mill. boe |    | bill. cf |     | bill.
Sm3 |       | start up
|Troll                                                    |  |                       | 31/2, 31/3, 31/5, 31/6      |              |  | Norsk Hydro/Statoil |       |           | 9.78          |           |    |          | 627 |           |       |          | 67  |     |       |       | 3,254 |  |       |  | 92.0 |  |       |  | 1995/1996 | 
|Oseberg fields                                           |  |                       | 30/6, 30/9                  |              |  | Norsk Hydro         |       |           | 34.00         |           |    |          | 354 |           |       |          | 146 |     |       |       | 1,150 |  |       |  | 32.5 |  |       |  | 1988      | 
|Grane                                                    |  |                       | 25/11                       |              |  | Norsk Hydro         |       |           | 38.00         |           |    |          | 201 |           |       |          | 201 |     |       |       |      |  |       |  |     |  |       |  | 2003      | 
|Åsgard                                                   |  |                       | 6407/2, 6506/11,12, 6507/11 |              |  | Statoil             |       |           | 9.60          |           |    |          | 162 |           |       |          | 69  |     |       |       | 521   |  |       |  | 14.8 |  |       |  | 1999      | 
|Snorre fields                                            |  |                       | 34/4, 34/7, 33/9            |              |  | Norsk Hydro         |       |           | 5.98 - 17.65  |           |    |          | 138 |           |       |          | 128 |     |       |       | 47    |  |       |  | 1.3  |  |       |  | 1992      | 
|Ekofisk fields                                           |  |                       | 2/4, 2/5, 2/7               |              |  | ConocoPhillips      |       |           | 5.81 - 6.65   |           |    |          | 90  |           |       |          | 76  |     |       |       | 79    |  |       |  | 2.2  |  |       |  | 1971      | 
|Visund                                                   |  |                       | 34/8, 34/7                  |              |  | Norsk Hydro         |       |           | 20.30         |           |    |          | 90  |           |       |          | 40  |     |       |       | 277   |  |       |  | 7.8  |  |       |  | 1999      | 
|Sleipner fields                                          |  |                       | 15/6, 15/9, 16/7            |              |  | Statoil             |       |           | 8.85 - 10.00  |           |    |          | 60  |           |       |          | 15  |     |       |       | 246   |  |       |  | 7.0  |  |       |  | 1993      | 
|Kvitebjørn                                               |  |                       | 34/11                       |              |  | Statoil             |       |           | 15.00         |           |    |          | 49  |           |       |          | 13  |     |       |       | 192   |  |       |  | 5.4  |  |       |  | 2004      | 
|Gullfaks fields                                          |  |                       | 34/10, 33/12                |              |  | Statoil             |       |           | 9.00          |           |    |          | 41  |           |       |          | 28  |     |       |       | 72    |  |       |  | 2.0  |  |       |  | 1986      | 
|Kristin                                                  |  |                       | 6406/2, 6506/11             |              |  | Statoil             |       |           | 12.00         |           |    |          | 39  |           |       |          | 24  |     |       |       | 90    |  |       |  | 2.6  |  |       |  | 2005      | 
|Tune                                                     |  |                       | 30/8, 30/5, 30/6            |              |  | Norsk Hydro         |       |           | 40.00         |           |    |          | 32  |           |       |          | 7   |     |       |       | 141   |  |       |  | 4.0  |  |       |  | 2002      | 
|Fram Vest                                                |  |                       | 35/11                       |              |  | Norsk Hydro         |       |           | 25.00         |           |    |          | 23  |           |       |          | 19  |     |       |       | 23    |  |       |  | 0.6  |  |       |  | 2003      | 
|Norne                                                    |  |                       | 6608/10, 6508/1             |              |  | Statoil             |       |           | 8.10          |           |    |          | 22  |           |       |          | 16  |     |       |       | 28    |  |       |  | 0.8  |  |       |  | 1997      | 
|Mikkel                                                   |  |                       | 6407/5,6                    |              |  | Statoil             |       |           | 10.00         |           |    |          | 17  |           |       |          | 7   |     |       |       | 57    |  |       |  | 1.6  |  |       |  | 2003      | 
|Njord                                                    |  |                       | 6407/7,10                   |              |  | Norsk Hydro         |       |           | 22.50         |           |    |          | 8   |           |       |          | 8   |     |       |       |      |  |       |  |     |  |       |  | 1997      | 
|Brage                                                    |  |                       | 31/4, 30/6, 31/7            |              |  | Norsk Hydro         |       |           | 23.20 - 24.44 |           |    |          | 4   |           |       |          | 4   |     |       |       | 1     |  |       |  |     |  |       |  | 1993      | 
|Vale                                                     |  |                       | 25/4                        |              |  | Norsk Hydro         |       |           | 28.53         |           |    |          | 2   |           |       |          | 1   |     |       |       | 6     |  |       |  | 0.2  |  |       |  | 2002      | 
|Snøhvit                                                  |  |                       | 7120/6,7,8,9, 7121/4,5,7    |              |  | Statoil             |       |           | 10.00         |           |    |          | 90  |           |       |          | 13  |     |       |       | 429   |  |       |  | 12.1 |  |       |  | 2005      | 
|Byggve/Skirne                                            |  |                       | 25/5                        |              |  | TotalFinaElf        |       |           | 10.00         |           |    |          | 4   |           |       |          | 1   |     |       |       | 16    |  |       |  | 0.5  |  |       |  | 2004      | 
|                                                         |  |                       |                             |              |  |                     |       |           |               |           |    |          |     |           |       |          |     |     |       |       |       |  |       |  |      |  |       |  |           | 
|Total Norway                                             |  |                       |                             |              |  |                     |       |           |               |           |    |          |     |           | 2,053 |          |     |     | 883   |       |       |  | 6,629 |  |      |  | 187.4 |  |           |  |  | 
|                                                         |  |                       |                             |              |  |                     |       |           |               |           |    |          |     |           |       |          |     |     |       |       |       |  |       |  |      |  |       |  |           | 
|Hibernia                                                 |  | Grand Banks, Canada   |                             | HMDC*        |  |                     | 5.00  |           |               |           | 17 |          |     |           | 17    |          |     |     |      |       |       |  |      |  |      |  | 1997  | 
|Terra Nova                                               |  | Grand Banks, Canada   |                             | Petro-Canada |  |                     | 15.00 |           |               |           | 31 |          |     |           | 31    |          |     |     |      |       |       |  |      |  |      |  | 2002  | 
|Girassol                                                 |  | Block 17, Angola      |                             | TotalFinaElf |  |                     | 10.00 |           |               |           | 32 |          |     |           | 32    |          |     |     |      |       |       |  |      |  |      |  | 2001  | 
|Dalia                                                    |  | Block 17, Angola      |                             | TotalFinaElf |  |                     | 10.00 |           |               |           | 30 |          |     |           | 30    |          |     |     |      |       |       |  |      |  |      |  | 2005  | 
|Jasmim                                                   |  | Block 17, Angola      |                             | TotalFinaElf |  |                     | 10.00 |           |               |           | 5  |          |     |           | 5     |          |     |     |      |       |       |  |      |  |      |  | 2003  | 
|Rosa/Lirio                                               |  | Block 17, Angola      |                             | TotalFinaElf |  |                     | 10.00 |           |               |           | 22 |          |     |           | 22    |          |     |     |      |       |       |  |      |  |      |  | 2006  | 
|Kharyaga                                                 |  | Timan Pechora, Russia |                             | TotalFinaElf |  |                     | 40.00 |           |               |           | 21 |          |     |           | 21    |          |     |     |      |       |       |  |      |  |      |  | 1999  | 
|Mabruk                                                   |  | Sirte Basin, Libya    |                             | TotalFinaElf |  |                     | 25.00 |           |               |           | 9  |          |     |           | 9     |          |     |     |      |       |       |  |      |  |      |  | 1995  | 
|Murzuq                                                   |  | Sirte Basin, Libya    |                             | Repsol       |  |                     | 8.00  |           |               |           | 5  |          |     |           | 5     |          |     |     |      |       |       |  |      |  |      |  | 2004  | 
|                                                         |  |                       |                             |              |  |                     |       |           |               |           |    |          |     |           |       |          |     |     |       |       |       |  |       |  |      |  |       |  |           | 
|Total International                                      |  |                       |                             |              |  |                     |       |           |               |           |    |          |     |           | 172   |          |     |     | 172   |       |       |  |      |  |      |  |      |  |           |  |  | 
|                                                         |  |                       |                             |              |  |                     |       |           |               |           |    |          |     |           |       |          |     |     |       |       |       |  |       |  |      |  |       |  |           | 
|Total                                                    |  |                       |                             |              |  |                     |       |           |               |           |    |          |     |           | 2,225 |          |     |     | 1,055 |       |       |  | 6,629 |  |      |  | 187.4 |  |           |  |  | 
|                                                         |  |                       |                             |              |  |                     |       |           |               |           |    |          |     |           |       |          |     |     |       |       |       |  |       |  |      |  |       |  |           | 

|* |  | HMDC: Hibernia Management Development Company
|- |  | ---------------------------------------------

135



---



##### 



NORSK HYDRO operational data

EXPLORATION AND PRODUCTION

|                               |  |                      |  |            |                 |           |  |           |    |          |         |           |    |              |     |        |    |               |     |  |     |  |     |  |             |  |  |  |             |  |  | 
|------------------------------ |  | -------------------- |  | ---------- | --------------- | --------- |  | --------- | -- | -------- | ------- | --------- | -- | ------------ | --- | ------ | -- | ------------- | --- |  | --- |  | --- |  | ----------- |  |  |  | ----------- |  |  | 
|                               |  |                      |  |            |                 |           |  |           |    |          |         |           |    |              |     |        |    | Hydros share |     |  |     |  |     |  |             | 
|2002 production of oil and gas |  | Hydros              |  | Total      |                 | Oil/NGL   |  | Gas       |    | Gas      |         | Remaining |    | License     
|Field                          |  | Operator             |  | %-interest |                 | mill. boe |  | mill. boe |    | bill. cf |         | bill. Sm3 |    | Prod. Period |     | Period
|Oseberg fields                 |  | Norsk Hydro          |  |            | **34.00 - 40.00 |           |  |           | 42 |          |         |           | 36 |              |     |        | 33 |               |     |  | 0.9 |  |     |  | 2013 - 2018 |  |  |  | 2017 - 2031 | 
|Troll                          |  | Norsk Hydro /Statoil |  |            | 9.78            |           |  |           | 29 |          |         |           | 14 |              |     |        | 89 |               |     |  | 2.5 |  |     |  | 2030        |  |  |  | 2030        | 
|Snorre fields                  |  | Norsk Hydro          |  |            | 5.98 - 17.65    |           |  |           | 24 |          |         |           | 23 |              |     |        | 5  |               |     |  | 0.1 |  |     |  | 2010 - 2019 |  |  |  | 2015 - 2024 | 
|Sleipner fields                |  | Statoil              |  |            | 8.85 - 10.00    |           |  |           | 12 |          |         |           | 4  |              |     |        | 45 |               |     |  | 1.4 |  |     |  | 2008 - 2014 |  |  |  | 2014 - 2018 | 
|Åsgard                         |  | Statoil              |  |            | 9.60            |           |  |           | 12 |          |         |           | 8  |              |     |        | 25 |               |     |  | 0.7 |  |     |  | 2026        |  |  |  | 2027        | 
|Ekofisk fields                 |  | ConocoPhillips       |  |            | 5.81 - 6.65     |           |  |           | 10 |          |         |           | 9  |              |     |        | 9  |               |     |  | 0.2 |  |     |  | 2018 - 2023 |  |  |  | 2028        | 
|Gullfaks fields                |  | Statoil              |  |            | 9.00            |           |  |           | 9  |          |         |           | 8  |              |     |        | 8  |               |     |  | 0.2 |  |     |  | 2011        |  |  |  | 2016        | 
|Norne                          |  | Statoil              |  |            | 8.10            |           |  |           | 6  |          |         |           | 5  |              |     |        | 2  |               |     |  | 0.1 |  |     |  | 2015        |  |  |  | 2026        | 
|Brage                          |  | Norsk Hydro          |  |            | 23.20 - 24.44   |           |  |           | 4  |          |         |           | 3  |              |     |        | 1  |               |     |  |    |  |     |  | 2006        |  |  |  | 2017        | 
|Visund                         |  | Norsk Hydro          |  |            | 20.30           |           |  |           | 3  |          |         |           | 3  |              |     |        |   |               |     |  |    |  |     |  | 2022        |  |  |  | 2023        | 
|Njord                          |  | Norsk Hydro          |  |            | 22.50           |           |  |           | 3  |          |         |           | 3  |              |     |        |   |               |     |  |    |  |     |  | 2006        |  |  |  | 2021 - 2023 | 
|Frigg                          |  | TotalFinaElf         |  |            | 19.99           |           |  |           | 1  |          |         |           |   |              |     |        | 8  |               |     |  | 0.2 |  |     |  |             |  |  |  | 2015        | 
|Varg                           |  | Pertra               |  |            | ***42.00        |           |  |           | 1  |          |         |           | 1  |              |     |        |   |               |     |  |    |  |     |  |             |  |  |  | 2011        | 
|Others (Heimdal
and Vale)      |  | Norsk Hydro          |  |            |                 |           |  |           | 1  |          |         |           |   |              |     |        | 2  |               |     |  | 0.1 |  |     |  | 2009        |  |  |  | 2021        | 
|                               |  |                      |  |            |                 |           |  |           |    |          |         |           |    |              |     |        |    |               |     |  |     |  |     |  |             |  |  |  |             |  |  | 
|Total Norway                   |  |                      |  |            |                 |           |  |           |    |          | 157     |           |    |              | 117 |        |    |               | 227 |  |     |  | 6.4 |  |             |  |  |  |             |  |  | 
|                               |  |                      |  |            |                 |           |  |           |    |          |         |           |    |              |     |        |    |               |     |  |     |  |     |  |             |  |  |  |             |  |  | 
|Girassol                       |  | TotalFinaElf         |  |            | 10.00           |           |  |           | 7  |          |         |           | 7  |              |     |        |   |               |     |  |    |  |     |  | 2018        |  |  |  | 2027        | 
|Terra Nova                     |  | Petro-Canada         |  |            | 15.00           |           |  |           | 6  |          |         |           | 6  |              |     |        |   |               |     |  |    |  |     |  | 2013        |  |  |  | 2093        | 
|Hibernia                       |  | HMDC*                |  |            | 5.00            |           |  |           | 3  |          |         |           | 3  |              |     |        |   |               |     |  |    |  |     |  | 2015        |  |  |  | 2085        | 
|Kharyaga                       |  | TotalFinaElf         |  |            | 40.00           |           |  |           | 1  |          |         |           | 1  |              |     |        |   |               |     |  |    |  |     |  | 2025        |  |  |  | 2031        | 
|Mabruk                         |  | TotalFinaElf         |  |            | 25.00           |           |  |           | 1  |          |         |           | 1  |              |     |        |   |               |     |  |    |  |     |  | 2028        |  |  |  | 2028        | 
|                               |  |                      |  |            |                 |           |  |           |    |          |         |           |    |              |     |        |    |               |     |  |     |  |     |  |             |  |  |  |             |  |  | 
|Total International            |  |                      |  |            |                 |           |  |           |    |          | 18      |           |    |              | 18  |        |    |               |    |  |     |  |    |  |             |  |  |  |             |  |  | 
|                               |  |                      |  |            |                 |           |  |           |    |          |         |           |    |              |     |        |    |               |     |  |     |  |     |  |             |  |  |  |             |  |  | 
|Total                          |  |                      |  |            |                 |           |  |           |    |          | ****175 |           |    |              | 135 |        |    |               | 227 |  |     |  | 6.4 |  |             |  |  |  |             |  |  | 
|                               |  |                      |  |            |                 |           |  |           |    |          |         |           |    |              |     |        |    |               |     |  |     |  |     |  |             |  |  |  |             |  |  | 



|*    |  | HMDC: Hibernia Management Development Company.                                                                                                                                                                                                                                                                               
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|**   |  | Hydros ownership interests in the Oseberg fields ranged from 19.60 to
32.02 percent before the acquisition of SDFI assets on 10 May 2002.
Following the acquisition of SDFI assets, Hydros ownership interests
increased to 34 percent in the Oseberg, Oseberg Sør and Oseberg Øst
fields and 40 percent in the Tune field.
|***  |  | Hydro transferred its ownership interest of 42 percent together with its
operatorship in the Varg field to Pertra on 1 August 2002.                                                                                                                                                                                          
|**** |  | Average daily
production in 2002 was 480,000 boe.                                                                                                                                                                                                                                                                            

136



---



##### 



ENERGY

|                                            |  |      |        |      |  |      |        |  |  |  |        | 
|------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  |  | ------ | 
|                                            |  | 2002 |        | 2001 |  | 2000
|Total power available (Terrawatt hours TWh) |  |      | 19.4   |      |  |      | 20.4   |  |  |  | 19.8   | 
|From own power stations                     |  |      | 10.1   |      |  |      | 9.6    |  |  |  | 11.3   | 
|Lease production                            |  |      | 0.2    |      |  |      | 0.2    |  |  |  | 0.2    | 
|Average spot price NOK/kWh                  |  |      | 0.201  |      |  |      | 0.187  |  |  |  | 0.103  | 
|Oiltrading and refining (thousand tonnes):  |  |      |        |      |  |      |        |  |  |  |        | 
|Crude oil/NGL                               |  |      | 19,068 |      |  |      | 17,507 |  |  |  | 16,307 | 
|Oil products                                |  |      | 2,326  |      |  |      | 2,912  |  |  |  | 2,795  | 
|                                            |  |      |        |      |  |      |        |  |  |  |        | 
|Oiltrading                                  |  |      | 21,394 |      |  |      | 20,419 |  |  |  | 19,102 | 
|                                            |  |      |        |      |  |      |        |  |  |  |        | 
|Gasoline                                    |  |      | 660    |      |  |      | 841    |  |  |  | 956    | 
|Medium destillates                          |  |      | 796    |      |  |      | 897    |  |  |  | 915    | 
|Heavy fuel oil                              |  |      | 550    |      |  |      | 440    |  |  |  | 516    | 
|Other                                       |  |      | 36     |      |  |      | 66     |  |  |  | 59     | 
|                                            |  |      |        |      |  |      |        |  |  |  |        | 
|Refining                                    |  |      | 2,042  |      |  |      | 2,244  |  |  |  | 2447   | 
|                                            |  |      |        |      |  |      |        |  |  |  |        | 

OIL MARKETING

|                             |  |      |       |      |  |      |       |  |  |  |       | 
|---------------------------- |  | ---- | ----- | ---- |  | ---- | ----- |  |  |  | ----- | 
|Marketing (Sales 1,000
m3)1) |  | 2002 |       | 2001 |  | 2000
|Gasoline                     |  |      | 1,476 |      |  |      | 1,500 |  |  |  | 1,534 | 
|Gasoil                       |  |      | 2,074 |      |  |      | 2,084 |  |  |  | 2,042 | 
|                             |  |      |       |      |  |      |       |  |  |  |       | 

|                     |  |        |      |         |  |        |      |   |  |  |      |  
|-------------------- |  | ------ | ---- | ------- |  | ------ | ---- | - |  |  | ---- | -
|Market
share 2002 1) |  | Sweden |      | Denmark |  | Norway
|                     |  |        |      |         |  |       
|Gasoline             |  |        | 10.5 | %       |  |        | 15.6 | % |  |  | 20.0 | %
|Gasoil               |  |        | 14.5 | %       |  |        | 18.0 | % |  |  | 16.2 | %
|                     |  |        |      |         |  |        |      |   |  |  |      |  



|1) |  | Includes 100 percent of Hydro Texaco.
|-- |  | -------------------------------------

ALUMINIUM

|                                                                             |  |      |           |      |  |      |           |  |  |  |         | 
|---------------------------------------------------------------------------- |  | ---- | --------- | ---- |  | ---- | --------- |  |  |  | ------- | 
|Tonnes                                                                       |  | 2002 |           | 2001 |  | 2000
|Production of alumina                                                        |  |      | 1,272,000 |      |  |      | 1,002,000 |  |  |  | 898,000 | 
|Production of primary aluminium:                                             |  |      |           |      |  |      |           |  |  |  |         | 
|Karmøy                                                                       |  |      | 273,000   |      |  |      | 272,000   |  |  |  | 270,000 | 
|Årdal                                                                        |  |      | 206,000   |      |  |      | 206,000   |  |  |  | 204,000 | 
|Rheinwerk                                                                    |  |      | 173,000   |      |  |      |           |  |  |  |         | 
|Sunndal                                                                      |  |      | 153,000   |      |  |      | 156,000   |  |  |  | 154,000 | 
|Kurri-Kurri                                                                  |  |      | 122,000   |      |  |      |           |  |  |  |         | 
|Høyanger                                                                     |  |      | 73,000    |      |  |      | 71,000    |  |  |  | 72,000  | 
|Søral (Hydros ownership interest 49.9 percent)                              |  |      | 67,000    |      |  |      | 62,000    |  |  |  | 62,000  | 
|Elbewerk                                                                     |  |      | 48,000    |      |  |      |           |  |  |  |         | 
|Other                                                                        |  |      | 138,000   |      |  |      | 18,000    |  |  |  | 17,000  | 
|                                                                             |  |      |           |      |  |      |           |  |  |  |         | 
|Total                                                                        |  |      | 1,253,000 |      |  |      | 785,000   |  |  |  | 779,000 | 
|                                                                             |  |      |           |      |  |      |           |  |  |  |         | 
|Remelting                                                                    |  |      | 449,000   |      |  |      | 425,000   |  |  |  | 387,000 | 
|Semi-fabricating:                                                            |  |      |           |      |  |      |           |  |  |  |         | 
|Extruded products                                                            |  |      | 512,000   |      |  |      | 442,000   |  |  |  | 448,000 | 
|Rolled products                                                              |  |      | 693,000   |      |  |      | 133,000   |  |  |  | 134,000 | 
|Wire rod and other                                                           |  |      | 75,000    |      |  |      | 60,000    |  |  |  | 82,000  | 
|Primary aluminium London Metal Exchange 3-month price US
dollar/tonne (avg.) |  |      | 1,365     |      |  |      | 1,454     |  |  |  | 1,567   | 
|                                                                             |  |      |           |      |  |      |           |  |  |  |         | 

137



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##### 



NORSK HYDRO operational data

MAGNESIUM

|                                              |  |      |        |      |  |      |         |  |  |  |         | 
|--------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------- |  |  |  | ------- | 
|Tonnes                                        |  | 2002 |        | 2001 |  | 2000
|Production and remelting of primary magnesium |  |      | 80,000 |      |  |      | 102,000 |  |  |  | 110,000 | 
|                                              |  |      |        |      |  |      |         |  |  |  |         | 

AGRI

|                                                        |  |      |        |      |  |      |        |  |  |  |        | 
|------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  |  | ------ | 
|Thousand tonnes                                         |  | 2002 |        | 2001 |  | 2000
|Consumption
of raw materials                            |  |      |        |      |  |      |        |  |  |  |        | 
|Rock phosphate                                          |  |      | 1,100  |      |  |      | 1,200  |  |  |  | 1,200  | 
|Potassium                                               |  |      | 860    |      |  |      | 830    |  |  |  | 800    | 
|Oil and gas (million toe)                               |  |      | 3.5    |      |  |      | 3.6    |  |  |  | 3.8    | 
|Production of ammonia (NH3)                             |  |      |        |      |  |      |        |  |  |  |        | 
|Hydros own production                                  |  |      | 4,050  |      |  |      | 3,950  |  |  |  | 4,000  | 
|Hydros share of non-consolidated investees production |  |      | 850    |      |  |      | 840    |  |  |  | 830    | 
|Production of fertilizer                                |  |      |        |      |  |      |        |  |  |  |        | 
|Hydros own production                                  |  |      | 11,100 |      |  |      | 11,400 |  |  |  | 12,200 | 
|Hydros share of non-consolidated investees production |  |      | 1,150  |      |  |      | 1,300  |  |  |  | 1,200  | 
|Sales
including third-party products 1)                 |  |      | 21,700 |      |  |      | 20,200 |  |  |  | 22,100 | 
|Europe                                                  |  |      | 10,100 |      |  |      | 10,200 |  |  |  | 12,500 | 
|Outside Europe                                          |  |      | 11,600 |      |  |      | 10,000 |  |  |  | 9,600  | 
|Fertilizer prices - average monthly quotations          |  |      |        |      |  |      |        |  |  |  |        | 
|CAN - cif Germany USD/tonne                             |  |      | 111    |      |  |      | 119    |  |  |  | 103    | 
|DAP - fob US Gulf USD/tonne                             |  |      | 157    |      |  |      | 147    |  |  |  | 154    | 
|Urea - fob Middle East USD/tonne                        |  |      | 109    |      |  |      | 109    |  |  |  | 110    | 
|NH3 - fob Caribbean USD/tonne                           |  |      | 110    |      |  |      | 137    |  |  |  | 148    | 
|                                                        |  |      |        |      |  |      |        |  |  |  |        | 



|1) |  | Sales volume includes fertilizer products and nitrogen products
for technical use.
|-- |  | ----------------------------------------------------------------------------------

PETROCHEMICALS

|                                      |  |      |         |      |  |      |         |  |  |  |         | 
|------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- |  |  |  | ------- | 
|Production in tonnes                  |  | 2002 |         | 2001 |  | 2000
|Base products:                        |  |      |         |      |  |      |         |  |  |  |         | 
|VCM                                   |  |      | 540,000 |      |  |      | 591,000 |  |  |  | 536,000 | 
|Caustic Soda                          |  |      | 262,000 |      |  |      | 279,000 |  |  |  | 271,000 | 
|PVC                                   |  |      | 528,000 |      |  |      | 537,000 |  |  |  | 521,000 | 
|S-PVC                                 |  |      | 458,000 |      |  |      | 465,000 |  |  |  | 445,000 | 
|P-PVC                                 |  |      | 70,000  |      |  |      | 72,000  |  |  |  | 76,000  | 
|PVC-Compounds                         |  |      | 128,000 |      |  |      | 143,000 |  |  |  | 154,000 | 
|Average prices Western Europe:        |  |      |         |      |  |      |         |  |  |  |         | 
|Ethylene - EUR/tonne delivered        |  |      | 518     |      |  |      | 616     |  |  |  | 662     | 
|VCM - Spot Export FOB US dollar/tonne |  |      | 451     |      |  |      | 345     |  |  |  | 562     | 
|S-PVC - EUR/tonne delivered           |  |      | 714     |      |  |      | 656     |  |  |  | 857     | 
|                                      |  |      |         |      |  |      |         |  |  |  |         | 

138



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##### 



General information

ANNUAL GENERAL MEETING

The annual general meeting of Norsk Hydro
ASA will be held at the Radisson SAS
Scandinavia Hotel at Holbergsgt. 30, Oslo,
Norway, on Wednesday, 7 May, 2003 at 4.30
pm CET.

Shareholders who wish to attend the annual
general meeting are asked to inform the following registrar by 4 pm CET on Friday, 2
May, 2003:



| |  | Den norske Bank
Verdipapirservice
Stranden 21, N-0021 Oslo
Telephone:+47 22 48 35 84
Fax.: +47 22 48 11 71
| |  | ----------------------------------------------------------------------------------------------------------

Any shareholder may appoint a proxy with
written authority to attend the meeting and to
vote on his or her behalf. In accordance with
the companys articles of association, notice
of the annual general meeting will be published in Aftenposten,
Dagens Næringsliv and
Dagsavisen.

DIVIDEND PAYMENT
The proposal of the board of directors for
dividend payments will be considered at the
annual general meeting. Provided the proposal
is approved, dividends will be sent on
Wednesday 21 May, 2003, to persons listed
in the register of shareholders of the
Norwegian Registry of Securities (VPS) on 7
May, 2003, or who are authorized by the
shareholder to receive the dividend. In case
of a dividend payment to foreign shareholders,
Norwegian source-tax will be deducted in
accordance with the current regulations. All
shares will be quoted exclusive of
dividend on the Oslo Stock Exchange from and
including Thursday, 8 May, 2003, and on the
New York Stock Exchange from and including
Monday, 5 May, 2003.

QUARTERLY RESULTS
Hydro issues quarterly financial reports. The
dates for publication of the quarterly results
in 2003 are:



| |  | 1st quarter:        28 April
2nd quarter:       21 July
3rd quarter:        20 October
| |  | --------------------------------------------------------------------------------------

The results will be released at
9:30 am CET. The company reserves
the right to change the dates.

INFORMATION FROM THE COMPANY

Hydros annual report and quarterly reports are available in Norwegian and
English. The Company also prepares in English an annual report, Form 20-F, and
quarterly reports, Form 6-K, for the Securities and Exchange Commission in the
US. These reports, together with further information on Hydros activities, can
be obtained on request from the Corporate Communication department at Hydro.
This information is also available on the Internet: www.hydro.com

Norsk Hydro prepares its financial statements in accordance with generally
accepted accounting principles in Norway (N GAAP) and in the United States (US
GAAP). The Comments of the Hydros Board of Directors concerning developments
in the operations of the operating segments are applicable to both sets of
accounting principles, unless otherwise stated. The differences in net income
under N GAAP and US GAAP are immaterial and are presented in note 27 to the
consolidated financial statements.

ADDRESS
Hydros head office has the address:



| |  | Norsk Hydro ASA
Bygdøy allé 2, N-0240 Oslo, Norway
Telephone: +47 22 53 81 00
Fax: +47 22 53 27 25
E-mail: corporate@hydro.com
| |  | ------------------------------------------------------------------------------------------------------------------------------

CHANGE OF ADDRESS
Shareholders registered in the Norwegian Registry of Securities should send
information on changes of address to their registrars and not directly to the
company.

139