##### 








---



##### 








---



##### 



ContentAnnual Report 2006
 01:
    
    Business description
    
    
    602:
    
    Operational review
    
    
    2003:
    
    Financial performance
    
    
    6404:
    
    Viability performance
    
    
    10605:
    
    Risk review
    
    
    13206:
    
    Shareholder information
    
    
    14407:
    
    Corporate governance
    
    
    15408:
    
    Financial statementsAppendixTerms and definitions
    
    
    T1Cross reference to Form 20-F
    
    
    C1
 Hydros reporting 2006




---



##### 



01
  Business description
 Our business
    
    
    8Strategic direction
    
    
    8Organization chart
    
    
    9The Hydro Way
    
    
    9Employees
    
    
    9Oil & Energy
    
    
    10Aluminium Metal
    
    
    14Aluminium Products
    
    
    16History and development
    
    
    18Other information
    
    
    19




---



##### 



Geographical
distributionof operating revenues
 
 Our business
    Strategic direction




---



##### 



The Hydro Way
   
    
    An ability to develop source businesses
 
    
    A drive to optimize
 
    
    An instinct to commercialize
 
    
    A passion for social commerce
  Employees
  A more focused portfolio
  Net book valueof assets 31 Dec 2006
    
    Oil & Energy
    
    Aluminium Metal
    
    Aluminium Products
    
    OtherGrowth
    
    NOK 55 billionUpstream
repositioning and
growth
    
    
    
    NOK 26 billionCash generation and
divestments
    
    
    
    
    
    NOK 17 billion
    
    NOK (2) billion




---



##### 



Oil & Energy
  
    
    Exploration and Production consists of our oil and gas exploration activities, field
development activities and production of oil and gas.
 
    
    Energy and Oil Marketing consists of our commercial operations within oil, natural gas and
power, the operation of our hydroelectric power stations, management of our interest in the
gas transportation system on the Norwegian Continental Shelf (NCS) and the marketing and
sales of refined petroleum products such as gasoline, diesel and heating oil. Energy and Oil
Marketing also includes our new energy business activities.
 EXPLORATION AND PRODUCTION
   Total oil and gas production
from Hydro operated fields
 
 
 Exploration
and production core
areas
 
 
 ENERGY AND OIL MARKETING




---



##### 



11
 Top 2005 producing countries globally
    
    Powerplants(CHART)
    
    (MAP)
   
 Well
positioned in gas infrastructure




---



##### 



12
 STRATEGY  Exploration and Production
  Delivering strong production growth based
on a broad portfolio of well-defined and profitable projects
  Continued
Production growth
 
 Building the basis for future, long-term production
  Capturing the opportunities on the NCS




---



##### 



13
 Continuing to pursue cost improvements in exploration and
production activities
  Energy and Oil Marketing
  Enhancing the value of our natural gas portfolio
  Building on our crude oil marketing competencies
  Optimizing our power activities
  Pursuing opportunities in new energy
  Well placed to extract market value in Northwest Europe
    
    Strong NCS gas base in volatile markets(PICTURE)
    
    (GRPAH)
 Where we are and what
we are striving to achieve
 2006 targets
 
    
    615,000 boe per day
 
    
    Operator in all our geographical core areas
 
    
    Ormen Lange 85 percent completed
 
    
    No fatal accidents. Total recordable injuries per million hours down by 20 percent
 2006 results
 
    
    573,000 barrels of oil equivalents per day
 
    
    Operator in all geographical core areas except Russia and Angola
 
    
    Ormen Lange 91 percent completed
 
    
    No fatal accidents. Total recordable injuries per million hours 3.0. The target was
2.1
 2007
 
    
    605,000 barrels of oil equivalents per day
 
    
    Ormen Lange completed on time and budget
 
    
    PDO for Peregrino field approved by Brazilian authorities
 
    
    No fatal accidents. Total recordable injuries per million hours down by 20 percent
 2010
 
    
    700,000 barrels of oil equivalents per day
 
    
    Our project expertise applied in all geographical core areas
 
    
    The Peregrino field on stream
 
    
    No serious injuries




---



##### 



14
 Aluminium Metal
  Introduction
     Hydros smelter geography
1,000 tonnes per year
    
    Hydros smelter size
All figures in 1,000 mt per year(GRPAH)
    
    (GRPAH)




---



##### 



15
  Strategy
  Reposition primary metal capacity
   Increase low-cost equity alumina coverage
   Alumina equity coverage
 
 Focus on growth
  Operational excellence, incremental production growth
 1)
 
 1)
    
    TRI rate is defined as total recordable injuries per million hours
worked. Where we are and what we are striving to achieve
 2006 targets
 
    
    Aluminium split in two business areas
 
    
    1,720,000 mt primary aluminium after closures
 
    
    Phase 2 of Alunorte alumina expansion
 
    
    No fatal accidents. Total recordable injuries per million hours down by 20 percent
 2006 results
 
    
    Aluminium split in Aluminium Metal and Aluminium Products
 
    
    1,799,000 mt primary aluminium
 
    
    Phase 2 of Alunorte alumina expansion came on stream
 
    
    Successful advancement on Qatalum
 
    
    No fatal accidents. Total recordable injuries per million hours reduced by 20 percent to 6.2
 2007
 
    
    Metal repositioning  final investment decision on Qatalum
 
    
    1,730,000 mt primary aluminium after closures
 
    
    Successful advancement on Alunorte phase 3 alumina expansion
 
    
    No fatal accidents. Total recordable injuries per million hours down by 20 percent
 2010
 
    
    Metal production repositioned
 
    
    2,000,000 mt primary aluminium
 
    
    75 percent equity production of alumina
 
    
    Ramp up to full production in Qatalum
 
    
    Project competence from Qatalum transferred to new smelter projects
 
    
    No serious injuries




---



##### 



16
 Aluminium Products
  
    
    Rolled products consists of our rolling mills located primarily in Europe. Rolled products
also includes our 50 percent interest in the AluNorf hot rolling mill located in Germany.
 
    
    Extrusion consists of our extruded products business focused mainly on the building,
construction and transportation industry sectors. Our building systems activities are included
in this sub-segment.
 
    
    Automotive consists of our precision tubing, structures and
casting
operations2)primarily serving the automotive industry. The automotive sub-segment also includes our
magnesium operations.
 Introduction
    
 2)
    
    See discussion included in section Financial performance  Financial review 
Discontinued operations for information on our accounting and disclosure relating to our
Automotive castings operations. Global semis consumption by end use




---



##### 



17
   Aluminium consumption per region
 
 Strategy
  Maintain high performance in extrusion and building system activities
  Develop and improve position in rolled products
  Restructuring our business portfolio
  Plant rationalization and performance improvement
  Where we are and what
we are striving to achieve

2006 targets
 
    
    Aluminium split in two business areas
 
    
    Initiate restructuring of the Aluminium Products area business portfolio
 
    
    No fatal accidents. Total recordable injuries per million hours down by 20 percent
 2006 results
 
    
    Aluminium split in Aluminium Metal and Aluminium Products
 
    
    Sold Automotive Castings and 49 percent stake in Meridian Technologies Inc.
 
    
    Decision to close primary Magnesium plant in Becancour, closing process initiated
 
    
    Divestment process under evaluation relating to Automotive structures and other entities
defined as non-core
 
    
    Plant rationalizations undertaken and improvement programs initiated
 
    
    One fatal accident. Total recordable injuries per million hours reduced by 23 percent to
4.1
 2007
 
    
    Restructuring process completed
 
    
    Long-term business strategy defined
 
    
    No fatal accidents. Total recordable injuries per million hours down by 20 percent
 2010
 
    
    Sustainable profitability level
 
    
    Profitable growth
 
    
    No serious injuries




---



##### 



18
 Focus on cash generation
  History and development




---



##### 



19
  Demerger of Hydros oil and gas operations
  Other information




---



##### 



Operational review
 Oil & Energy
    
    
    22Exploration and Production
    
    
    24Energy and Oil Marketing
    
    
    40Aluminium Metal
    
    
    42Aluminium Products
    
    
    50Rolled Products
    
    
    51Extrusion
    
    
    53Automotive
    
    
    53Other activities
    
    
    54Regulation and taxation
    
    
    56




---



##### 



22
 Oil & Energy
 INDUSTRY OVERVIEW
 High crude oil price levels
  High oil price driven by supply concerns
 
 Exploration becoming increasingly important
   Access to world
proven oil reserves,
end 2005
 
 The NCS  a maturing oil province
 3




---



##### 



Operational review  23
   World oil supply by source
 
 Strategic review of EU environmental and energy policy
  European gas supply and demand
 
 Growth in European natural gas demand




---



##### 



24
  Continued focus on renewable energy
    EXPLORATION AND PRODUCTION
 Exploration activity
 Norway
     Angola




---



##### 



Operational review  25
  Canada
  Libya
   Iran
  US Gulf of Mexico
    Nigeria
  Brazil




---



##### 



26
  Denmark
  Madagascar
  Morocco
  Mozambique
  Cuba
  Drilling information




---



##### 



Operational review  27
 
 Drilling activity
 Norway
    
    
    
    
    
    
    
    
    
    
    International
    
    
    
    
    
    
    
    
    
    
    Total2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004Exploratory wellsProductive 1)
    
    Gross 3)
    
    
    4
    
    
    
    4
    
    
    
    2
    
    
    
    19
    
    
    
    7
    
    
    
    9
    
    
    
    23
    
    
    
    11
    
    
    
    11Net 4)
    
    
    0.63
    
    
    
    1.32
    
    
    
    0.33
    
    
    
    4.87
    
    
    
    1.8
    
    
    
    1.8
    
    
    
    5.50
    
    
    
    3.12
    
    
    
    2.13Dry 2)
    
    Gross 3)
    
    
    4
    
    
    
    3
    
    
    
    4
    
    
    
    18
    
    
    
    2
    
    
    
    2
    
    
    
    22
    
    
    
    5
    
    
    
    6Net 4)
    
    
    0.65
    
    
    
    0.84
    
    
    
    1.05
    
    
    
    6.03
    
    
    
    0.4
    
    
    
    0.45
    
    
    
    6.68
    
    
    
    1.24
    
    
    
    1.5Under evaluation 5)
    
    Gross 3)
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    Net 4)
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.5
    
    
    
    Exploration extensions of production wellsProductive 1)
    
    Gross 3)
    
    
    2
    
    
    
    2
    
    
    
    3
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    2
    
    
    
    3Net 4)
    
    
    0.48
    
    
    
    0.44
    
    
    
    0.47
    
    
    
    0.75
    
    
    
    
    
    
    
    
    
    
    
    1.23
    
    
    
    0.44
    
    
    
    0.47Dry 2)
    
    Gross 3)
    
    
    3
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    3
    
    
    
    2
    
    
    
    Net 4)
    
    
    0.52
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    0.52
    
    
    
    0.7
    
    
    
    Under evaluation 5)
    
    Gross 3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net 4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total exploration targets drilledProductive 1)
    
    Gross 3)
    
    
    6
    
    
    
    6
    
    
    
    5
    
    
    
    20
    
    
    
    7
    
    
    
    9
    
    
    
    26
    
    
    
    13
    
    
    
    14Net 4)
    
    
    1.11
    
    
    
    1.76
    
    
    
    0.8
    
    
    
    5.62
    
    
    
    1.8
    
    
    
    1.8
    
    
    
    6.73
    
    
    
    3.56
    
    
    
    2.6Dry 2)
    
    Gross 3)
    
    
    7
    
    
    
    4
    
    
    
    4
    
    
    
    18
    
    
    
    3
    
    
    
    2
    
    
    
    25
    
    
    
    7
    
    
    
    6Net 4)
    
    
    1.17
    
    
    
    1.24
    
    
    
    1.05
    
    
    
    6.03
    
    
    
    0.7
    
    
    
    0.45
    
    
    
    7.2
    
    
    
    1.94
    
    
    
    1.5Under evaluation 5)
    
    Gross 3)
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    Net 4)
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.5
    
    
    
    
 1)
    
    A productive well is an exploratory well deemed to be commercially viable.2)
    
    A dry well is an exploratory well found to be incapable of producing either oil or gas in
suffi cient quantities to justify completion as an oil or gas well.3)
    
    A gross well is a well in which a whole or fractional working interest is owned.4)
    
    A net well is the sum of the whole or fractional working interest in gross wells. A gross
well equals one.
 In process drilling activity
 As of 31 December 2006
    
    Norway
    
    
    International
    
    
    TotalExploratory
    
    Gross
    
    
    2
    
    
    
    3
    
    
    
    5Net
    
    
    0.49
    
    
    
    1
    
    
    
    1.49




---



##### 



28
 Developed and undeveloped acreage
  
 Developed and undeveloped acreage
 As of 31 December 2006
    

Developed acreage1) in square kilometres
    
    

Undeveloped acreage2) in square kilometresGross3)
    
    
    Net3)
    
    
    Gross3)
    
    
    Net3)NCS
    
    
    8,035
    
    
    
    1,571
    
    
    
    28,699
    
    
    
    12,692Denmark
    
    
    1
    
    
    
    
    
    
    
    2,506
    
    
    
    733Angola
    
    
    324
    
    
    
    32
    
    
    
    12,398
    
    
    
    2,926Canada
    
    
    365
    
    
    
    32
    
    
    
    9,586
    
    
    
    4,211Gulf of Mexico
    
    
    981
    
    
    
    463
    
    
    
    7,184
    
    
    
    4,105Cuba
    
    
    
    
    
    
    
    
    
    
    11,279
    
    
    
    3,384Brazil
    
    
    
    
    
    
    
    
    
    
    535
    
    
    
    267Nigeria
    
    
    
    
    
    
    
    
    
    
    4,887
    
    
    
    669Libya
    
    
    5,562
    
    
    
    660
    
    
    
    33,784
    
    
    
    2,678Iran
    
    
    
    
    
    
    
    
    
    
    3,200
    
    
    
    2,400Russia
    
    
    100
    
    
    
    40
    
    
    
    70
    
    
    
    28Morocco
    
    
    
    
    
    
    
    
    
    
    6,663
    
    
    
    3,248Mozambique
    
    
    
    
    
    
    
    
    
    
    13,402
    
    
    
    12,062Total
    
    
    15,366
    
    
    
    2,799
    
    
    
    134,192
    
    
    
    49,403
 1)
    
    Developed acreage is acreage spaced or assignable to productive wells.2)
    
    Undeveloped acreage is the acreage on which wells have not been drilled or completed to a point
that would permit the production of commercial quantities of oil or gas, regardless of whether or
not such acreage contains proved reserves.3)
    
    Gross acreage includes the total number of square kilometres in which the company has an
interest. Net acreage is the sum of the companys fractional interests in gross acreage.
 
 Reserve information
    
 Oil and gas reserves
 Oil in millions of boe
    
    
    
    
    
    2006
    
    
    
    
    
    
    
    
    
    
    2005
    
    
    
    
    
    
    
    
    
    
    2004Gas in billions of cubic feet (bcf)
    
    Norway
    
    
    Int'l1)
    
    
    Total
    
    
    Norway
    
    
    Int'l 1)
    
    
    Total
    
    
    Norway
    
    
    Int'l 1)
    
    
    TotalProved oil reserves, developed and undeveloped 2)
    
    
    607
    
    
    
    141
    
    
    
    748
    
    
    
    693
    
    
    
    160
    
    
    
    853
    
    
    
    749
    
    
    
    156
    
    
    
    905Of which developed
    
    
    474
    
    
    
    94
    
    
    
    568
    
    
    
    576
    
    
    
    93
    
    
    
    669
    
    
    
    607
    
    
    
    97
    
    
    
    704Proved gas reserves, developed and undeveloped 2)
    
    
    6,429
    
    
    
    182
    
    
    
    6,611
    
    
    
    6,571
    
    
    
    190
    
    
    
    6,761
    
    
    
    6,626
    
    
    
    
    
    
    
    6,626Of which developed
    
    
    4,244
    
    
    
    61
    
    
    
    4,305
    
    
    
    4,551
    
    
    
    58
    
    
    
    4,609
    
    
    
    4,197
    
    
    
    
    
    
    
    4,197Proved oil and gas reserves, developed and undeveloped 2)
    
    
    1,745
    
    
    
    171
    
    
    
    1,916
    
    
    
    1,854
    
    
    
    192
    
    
    
    2,046
    
    
    
    1,920
    
    
    
    156
    
    
    
    2,076Of which developed
    
    
    1,224
    
    
    
    105
    
    
    
    1,329
    
    
    
    1,380
    
    
    
    103
    
    
    
    1,483
    
    
    
    1,350
    
    
    
    97
    
    
    
    1,447




---



##### 



Operational review  29
 
 Proved reserves
 As of 31 December 2006
    
    
    
    
    
    
    
    
    
    Hydro's shareHydro's
    
    
    Total
    
    
    Oil/NGL
    
    
    Gas bill.
    
    
    Gas bill.
    
    
    Prod.Field
    
    Block
    
    Operator
    
    %-interest
    
    
    mill. boe
    
    
    mill. boe
    
    
    Scf
    
    
    Sm3
    
    
    Start upTroll
    
    31/2, 31/3, 31/5, 31/6
    
    Hydro / Statoil
    
    
    9.78
    
    
    
    461
    
    
    
    38
    
    
    
    2,446
    
    
    
    69.2
    
    
    
    1995
1996Oseberg fields
    
    30/6, 30/9
    
    Hydro
    
    
    34.00
    
    
    
    278
    
    
    
    65
    
    
    
    1,183
    
    
    
    33.4
    
    
    
    1988Ormen Lange
    
    6304/9 6305/1, 2, 4,5, 7, 8
    
    Hydro / Shell1)
    
    
    18.07
    
    
    
    234
    
    
    
    14
    
    
    
    1,239
    
    
    
    35.0
    
    
    
    2007Grane
    
    25/11
    
    Hydro
    
    
    38.00
    
    
    
    129
    
    
    
    129
    
    
    
    
    
    
    
    
    
    
    
    2003Åsgard
    
    6407/2, 6506/11, 12, 6507/11
    
    Statoil
    
    
    9.61
    
    
    
    112
    
    
    
    47
    
    
    
    367
    
    
    
    10.4
    
    
    
    1999Ekofi sk fields
    
    2/4, 2/5, 2/7
    
    ConocoPhillips
    
    
    5.81 - 6.65
    
    
    
    92
    
    
    
    81
    
    
    
    58
    
    
    
    1.6
    
    
    
    1971Snorre fields
    
    34/4, 34/7, 33/9
    
    Statoil
    
    
    5.98 - 17.77
    
    
    
    80
    
    
    
    79
    
    
    
    7
    
    
    
    0.2
    
    
    
    1992Kvitebjørn
    
    34/11
    
    Statoil
    
    
    15.00
    
    
    
    64
    
    
    
    18
    
    
    
    248
    
    
    
    7.0
    
    
    
    2004Visund
    
    34/8, 34/7
    
    Statoil
    
    
    20.30
    
    
    
    56
    
    
    
    17
    
    
    
    219
    
    
    
    6.2
    
    
    
    1999Kristin
    
    6406/2, 6506/11
    
    Statoil
    
    
    14.00
    
    
    
    39
    
    
    
    24
    
    
    
    86
    
    
    
    2.4
    
    
    
    2005Gullfaks fields
    
    34/10, 33/12
    
    Statoil
    
    
    9.00 - 17.90
    
    
    
    37
    
    
    
    24
    
    
    
    75
    
    
    
    2.1
    
    
    
    1986Sleipner fields
    
    15/6, 15/9, 16/7
    
    Statoil
    
    
    8.85 - 10.00
    
    
    
    37
    
    
    
    10
    
    
    
    150
    
    
    
    4.2
    
    
    
    1993Tyrihans
    
    6407/1
    
    Statoil
    
    
    12.00
    
    
    
    31
    
    
    
    17
    
    
    
    77
    
    
    
    2.2
    
    
    
    2009Fram
    
    35/11
    
    Hydro
    
    
    25.00
    
    
    
    19
    
    
    
    12
    
    
    
    41
    
    
    
    1.2
    
    
    
    2003Vega
    
    35/8, 35/11
    
    Hydro
    
    
    25.00 - 40.00
    
    
    
    17
    
    
    
    3
    
    
    
    73
    
    
    
    2.1
    
    
    
    2010Njord
    
    6407/7,10
    
    Hydro
    
    
    20.00
    
    
    
    16
    
    
    
    5
    
    
    
    58
    
    
    
    1.6
    
    
    
    1997Mikkel
    
    6407/5,6
    
    Statoil
    
    
    10.00
    
    
    
    12
    
    
    
    5
    
    
    
    43
    
    
    
    1.2
    
    
    
    2003Norne/Urd
    
    6608/10, 6508/1
    
    Statoil
    
    
    8.10 -13.50
    
    
    
    12
    
    
    
    9
    
    
    
    13
    
    
    
    0.4
    
    
    
    1997Heimdal fields
    
    25/4, 25/5
    
    Hydro / Total
    
    
    10.00 - 28.85
    
    
    
    6
    
    
    
    2
    
    
    
    22
    
    
    
    0.6
    
    
    
    1985Volve
    
    15/9
    
    Statoil
    
    
    10.00
    
    
    
    6
    
    
    
    5
    
    
    
    3
    
    
    
    0.1
    
    
    
    2007Tune
    
    30/8, 30/5, 30/6
    
    Hydro
    
    
    40.00
    
    
    
    4
    
    
    
    
    
    
    
    20
    
    
    
    0.6
    
    
    
    2002Ringhorne Øst
    
    25/8
    
    Esso
    
    
    11.70
    
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    2006Brage
    
    31/4, 30/6, 31/7
    
    Hydro
    
    
    20.00
    
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    1993Total Norway
    
    
    
    
    
    
    
    
    
    
    1,745
    
    
    
    607
    
    
    
    6,429
    
    
    
    181.7Terra Nova
    
    Grand Banks, Canada
    
    Petro-Canada
    
    
    15.00
    
    
    
    32
    
    
    
    32
    
    
    
    
    
    
    
    
    
    
    
    2002Dalia 5)
    
    Block 17, Angola
    
    Total
    
    
    10.00
    
    
    
    28
    
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    2006Eastern Gulf
    
    Gulf of Mexico
    
    Anadarko /Dominion Resources/Hydro
    
    
    18.33 - 50.00
    
    
    
    18
    
    
    
    
    
    
    
    106
    
    
    
    3.0
    
    
    
    2007Kharyaga 5)
    
    Timan Pechora, Russia
    
    Total
    
    
    40.00
    
    
    
    15
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    1999Hibernia
    
    Grand Banks, Canada
    
    HMDC4)
    
    
    5.00
    
    
    
    14
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    1997GoM, Shallow water
    
    Gulf of Mexico
    
    2)
    
    
    
    
    
    
    12
    
    
    
    2
    
    
    
    61
    
    
    
    1.7
    
    
    
    2000Rosa 5)
    
    Block 17, Angola
    
    Total
    
    
    10.00
    
    
    
    12
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    2007Girassol/
Jasmim 5)
    
    Block 17, Angola
    
    Total
    
    
    10.00
    
    
    
    9
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    2001Thunder Hawk
    
    Gulf of Mexico
    
    Murphy Oil
    
    
    25.00
    
    
    
    8
    
    
    
    7
    
    
    
    6
    
    
    
    0.2
    
    
    
    2009Mabruk 5)
    
    Sirte Basin, Libya
    
    Total
    
    
    25.00
    
    
    
    7
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    1995Murzuq 5)
    
    Murzuq Basin, Libya
    
    Repsol
    
    
    8.00
    
    
    
    7
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    2003Front Runner
    
    Gulf of Mexico
    
    Murphy Oil
    
    
    25.00
    
    
    
    6
    
    
    
    6
    
    
    
    2
    
    
    
    
    
    
    
    2004Other deepwater
fields 6)
    
    Gulf of Mexico
    
    3)
    
    
    
    
    
    
    2
    
    
    
    1
    
    
    
    6
    
    
    
    0.2
    
    
    
    2003Lorien
    
    Gulf of Mexico
    
    Noble Energy
    
    
    30.00
    
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    2006Total International
    
    
    
    
    
    
    
    
    
    
    171
    
    
    
    141
    
    
    
    182
    
    
    
    5.1Total
    
    
    
    
    
    
    
    
    
    
    1,916
    
    
    
    748
    
    
    
    6,611
    
    
    
    186.8
 1)
    
    Hydro is operator for the field development. Shell is operator for the field operation2)
    
    Several operators including Hydro3)
    
    Several operators4)
    
    HMDC: Hibernia Management Development Company5)
    
    Fields with production sharing agreements (PSA)6)
    
    Includes Constitution, Seventeen hands and Zia fields




---



##### 



30  Operational review
 Development
    Fields under development
 Production
    
    
    Total estimated
    
    
    Investment in-
    
    
    HydrosApproved for
    
    
    scheduled to
    
    
    investment 1)
    
    
    curred to date 1)
    
    
    equityField
    
    Type of field
    
    Operator
    
    development
    
    
    commence
    
    
    (in NOK billion)
    
    
    (in NOK billion)
    
    
    shareNorwayVega/Vega Sør
    
    Gas/condensate
    
    Hydro
    
    
    2006
    
    
    
    2010
    
    
    
    6.5
    
    
    
    0.1
    
    
    
    40%/ 25
    %Ormen Lange 2)
    
    Gas/condensate
    
    Hydro
    
    
    2004
    
    
    
    2007
    
    
    
    54.5
    
    
    
    26.2
    
    
    
    18.07
    %Vilje
    
    Oil
    
    Hydro
    
    
    2005
    
    
    
    2007
    
    
    
    2.58
    
    
    
    1.59
    
    
    
    29
    %Alve
    
    Gas
    
    Statoil
    
    
    2007
    
    
    
    2008
    
    
    
    2.5
    
    
    
    0.1
    
    
    
    10
    %Tyrihans
    
    Oil/gas
    
    Statoil
    
    
    2006
    
    
    
    2009
    
    
    
    14.5
    
    
    
    1.8
    
    
    
    12
    %Volve
    
    Oil
    
    Statoil
    
    
    2005
    
    
    
    2007
    
    
    
    2.3
    
    
    
    0.8
    
    
    
    10
    %InternationalRosa
    
    Oil
    
    Total
    
    
    2004
    
    
    
    2007
    
    
    
    16.1
    
    
    
    10.5
    
    
    
    10
    %Gimboa
    
    Oil
    
    Sonangol
    
    
    2006
    
    
    
    2008
    
    
    
    2.7
    
    
    
    0.3
    
    
    
    20
    %Eastern Gulf 3)
    
    Gas
    
    Dominion/Anadarko/Hydro
    
    
    2004
    
    
    
    2007
    
    
    
    3.2
    
    
    
    2.1
    
    
    
    18.33-50
    %Thunder Hawk
    
    Oil
    
    Murphy
    
    
    2006
    
    
    
    2009
    
    
    
    4.5
    
    
    
    0.3
    
    
    
    25
    %
 1)
    
    Totale estimated investment and investment incurred to date amounts are as of 31 December
2006. These amounts represent the total estimated investment based on the PDO or current cost
estimate and total incurred investment for the applicable field, respectively. All amounts are in
nominal values (i.e, not discounted to present value). The exchange rate used for the international
fields was NOK/USD 6.26 as of 31 December 2006.2)
    
    The total estimated investment for Ormen Lange excludes the cost of the Langeled gas export
pipeline.3)
    
    Includes the San Jacinto (Hydros share 26.67 percent), Spiderman (Hydros share 18.33
percent), and Q fields (Hydros share 50 percent).
 
 Production
  
 Productive oil and gas wells
 Type of well
    
    
    
    Norway
    
    
    International
    
    
    Total 1)Crude oil
    
    Gross
    
    
    544
    
    
    
    200
    
    
    
    744Net
    
    
    75.06
    
    
    
    34.39
    
    
    
    109.45Natural gas
    
    Gross
    
    
    137
    
    
    
    51
    
    
    
    188Net
    
    
    15.25
    
    
    
    20.57
    
    
    
    35.81
 1)
    
    Includes 72 wells with multiple completions (i.e., more than one formation producing into
the same well bore). If one of the multiple completions in a well is an oil completion, the well
is classified as an oil well.




---



##### 



Operational review  31
 
 Hydros share of average daily production
 Hydros share of average daily production in 2006
    
    
    Hydros share of average daily production in 2005Total in thousands
    
    
    Oil in thousands of
    
    
    Gas in millions of
    
    
    Total in thousands
    
    
    Oil in thousands
    
    
    Gas in millions ofField
    
    of boe
    
    
    boe (1)
    
    
    cubic feet
    
    
    of boe
    
    
    of boe
    
    
    cubic feetNorwayOseberg fields 2)
    
    
    94.5
    
    
    
    71.0
    
    
    
    128.0
    
    
    
    102.4
    
    
    
    80.7
    
    
    
    117.6Grane
    
    
    82.7
    
    
    
    82.7
    
    
    
    
    
    
    
    67.5
    
    
    
    67.5
    
    
    
    Troll
    
    
    71.2
    
    
    
    20.8
    
    
    
    290.4
    
    
    
    71.5
    
    
    
    25.6
    
    
    
    264.8Snorre fields 3)
    
    
    43.2
    
    
    
    41.5
    
    
    
    9.0
    
    
    
    48.5
    
    
    
    46.2
    
    
    
    12.6Åsgard
    
    
    33.1
    
    
    
    17.3
    
    
    
    88.7
    
    
    
    35.9
    
    
    
    19.0
    
    
    
    94.9Sleipner fields 4)
    
    
    31.7
    
    
    
    8.7
    
    
    
    125.9
    
    
    
    35.3
    
    
    
    10.3
    
    
    
    136.6Ekofisk fields 5)
    
    
    27.2
    
    
    
    23.0
    
    
    
    22.6
    
    
    
    27.8
    
    
    
    23.5
    
    
    
    22.8Kvitebjørn
    
    
    24.1
    
    
    
    9.4
    
    
    
    82.2
    
    
    
    18.2
    
    
    
    7.3
    
    
    
    61.3Gullfaks fields 6)
    
    
    23.5
    
    
    
    17.1
    
    
    
    36.0
    
    
    
    28.3
    
    
    
    21.6
    
    
    
    38.2Tune
    
    
    20.0
    
    
    
    2.5
    
    
    
    93.7
    
    
    
    25.0
    
    
    
    3.5
    
    
    
    114.2Kristin
    
    
    15.8
    
    
    
    9.8
    
    
    
    34.2
    
    
    
    1.1
    
    
    
    0.7
    
    
    
    2.4Norne/Urd
    
    
    12.4
    
    
    
    11.7
    
    
    
    4.1
    
    
    
    9.4
    
    
    
    8.1
    
    
    
    7.3Visund
    
    
    8.3
    
    
    
    5.0
    
    
    
    18.4
    
    
    
    5.4
    
    
    
    4.2
    
    
    
    6.7Fram
    
    
    7.0
    
    
    
    7.0
    
    
    
    
    
    
    
    7.8
    
    
    
    7.8
    
    
    
    Mikkel
    
    
    5.5
    
    
    
    2.7
    
    
    
    15.6
    
    
    
    5.9
    
    
    
    2.8
    
    
    
    17.4Heimdal fields 7)
    
    
    5.0
    
    
    
    1.5
    
    
    
    19.0
    
    
    
    4.1
    
    
    
    1.1
    
    
    
    16.5Njord
    
    
    4.8
    
    
    
    4.8
    
    
    
    
    
    
    
    6.3
    
    
    
    6.3
    
    
    
    Brage
    
    
    4.5
    
    
    
    4.1
    
    
    
    2.6
    
    
    
    5.8
    
    
    
    5.4
    
    
    
    2.4Ringhorne Øst
    
    
    1.9
    
    
    
    1.9
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    Total Norway
    
    
    516.4
    
    
    
    342.5
    
    
    
    970.8
    
    
    
    506.2
    
    
    
    341.7
    
    
    
    915.8InternationalGoM, Shallow water
    
    
    11.0
    
    
    
    1.7
    
    
    
    55.3
    
    
    
    0.7
    
    
    
    0.1
    
    
    
    3.0Girassol/Jasmim/Dalia
    
    
    10.7
    
    
    
    10.7
    
    
    
    
    
    
    
    20.0
    
    
    
    20.0
    
    
    
    Hibernia
    
    
    8.9
    
    
    
    8.9
    
    
    
    
    
    
    
    9.9
    
    
    
    9.9
    
    
    
    Terra Nova
    
    
    5.6
    
    
    
    5.6
    
    
    
    
    
    
    
    14.9
    
    
    
    14.9
    
    
    
    Kharyaga
    
    
    5.3
    
    
    
    5.3
    
    
    
    
    
    
    
    6.4
    
    
    
    6.4
    
    
    
    Frontrunner
    
    
    4.0
    
    
    
    3.7
    
    
    
    1.8
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    Lorien
    
    
    3.7
    
    
    
    3.0
    
    
    
    4.2
    
    
    
    
    
    
    
    
    
    
    
    Murzuq
    
    
    3.4
    
    
    
    3.4
    
    
    
    
    
    
    
    3.0
    
    
    
    3.0
    
    
    
    Mabruk
    
    
    2.3
    
    
    
    2.3
    
    
    
    
    
    
    
    2.1
    
    
    
    2.1
    
    
    
    Other deepwater fields 8)
    
    
    1.3
    
    
    
    0.2
    
    
    
    6.5
    
    
    
    
    
    
    
    
    
    
    
    Total International
    
    
    56.2
    
    
    
    44.8
    
    
    
    67.8
    
    
    
    57.1
    
    
    
    56.6
    
    
    
    3.0Total
    
    
    572.6
    
    
    
    387.3
    
    
    
    1,038.6
    
    
    
    563.3
    
    
    
    398.2
    
    
    
    918.8
 1)
    
    Includes crude oil and NGL/condensate2)
    
    Includes Oseberg, Oseberg Vest, Oseberg Sør
and Oseberg Øst fields3)
    
    Includes Snorre, Tordis, Vigdis, Statfjord
Øst and Sygna fields4)
    
    Includes Sleipner Vest, Sleipner Øst, Gungne
and Sigyn fields5)
    
    Includes Ekofisk, Eldfisk, Embla and Tor
fields6)
    
    Includes Gullfaks, Gullfaks Sør and Gimle
fields7)
    
    Includes Heimdal, Vale and Skirne fields8)
    
    Includes Constitution, 17-hands and Zia
fields




---



##### 



32  Operational review
 
 2006 production of oil and gas
 Hydros shareHydros
    
    
    Total
    
    
    Oil/NGL
    
    
    Gas bill.
    
    
    Gas bill.
    
    
    Remaining
    
    
    LicenseField
    
    Operator
    
    %-interest
    
    
    mill. boe
    
    
    mill. boe
    
    
    scf
    
    
    Sm3
    
    
    prod. period
    
    
    periodOseberg fields
    
    Hydro
    
    
    34.00
    
    
    
    34
    
    
    
    26
    
    
    
    47
    
    
    
    1.3
    
    
    
    2013-2025
    
    
    
    2031Grane
    
    Hydro
    
    
    38.00
    
    
    
    30
    
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    2022
    
    
    
    2030Troll
    
    Hydro/Statoil
    
    
    9.78
    
    
    
    26
    
    
    
    8
    
    
    
    106
    
    
    
    3.0
    
    
    
    2030
    
    
    
    2030Snorre fields
    
    Statoil
    
    
    5.98-17.77
    1)
    
    
    16
    
    
    
    15
    
    
    
    3
    
    
    
    0.1
    
    
    
    2009-2022
    
    
    
    2015-2024Åsgard
    
    Statoil
    
    
    9.61
    2)
    
    
    12
    
    
    
    6
    
    
    
    32
    
    
    
    0.9
    
    
    
    2024
    
    
    
    2027Sleipner fields
    
    Statoil
    
    
    8.85-10.00
    
    
    
    12
    
    
    
    3
    
    
    
    46
    
    
    
    1.3
    
    
    
    2009-2016
    
    
    
    2014-2018Ekofisk fields
    
    ConocoPhillips
    
    
    5.81-6.65
    
    
    
    10
    
    
    
    8
    
    
    
    8
    
    
    
    0.2
    
    
    
    2018-2028
    
    
    
    2028Kvitebjørn
    
    Statoil
    
    
    15.00
    
    
    
    9
    
    
    
    3
    
    
    
    30
    
    
    
    0.8
    
    
    
    2019
    
    
    
    2031Gullfaks fields
    
    Statoil
    
    
    9.00-17.90
    
    
    
    9
    
    
    
    6
    
    
    
    13
    
    
    
    0.4
    
    
    
    2016
    
    
    
    2016Tune
    
    Hydro
    
    
    40.00
    
    
    
    7
    
    
    
    1
    
    
    
    34
    
    
    
    1.0
    
    
    
    2007
    
    
    
    2032Kristin
    
    Statoil
    
    
    14.00
    
    
    
    6
    
    
    
    4
    
    
    
    12
    
    
    
    0.4
    
    
    
    2021
    
    
    
    2027-2033Norne/Urd
    
    Statoil
    
    
    8.10-13.5
    
    
    
    4
    
    
    
    4
    
    
    
    2
    
    
    
    
    
    
    
    2016
    
    
    
    2026Visund
    
    Statoil
    
    
    20.30
    
    
    
    3
    
    
    
    2
    
    
    
    7
    
    
    
    0.2
    
    
    
    2023
    
    
    
    2023Fram
    
    Hydro
    
    
    25.00
    
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    2016
    
    
    
    2024Mikkel
    
    Statoil
    
    
    10.00
    
    
    
    2
    
    
    
    1
    
    
    
    6
    
    
    
    0.2
    
    
    
    2022
    
    
    
    2020-2022Heimdal fields
    
    Hydro/Total
    
    
    10.00-28.85
    
    
    
    2
    
    
    
    1
    
    
    
    7
    
    
    
    0.2
    
    
    
    2009-2011
    
    
    
    2021-2025Njord
    
    Hydro
    
    
    20.00
    
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    2012
    
    
    
    2021-2023Brage
    
    Hydro
    
    
    20.00
    
    
    
    2
    
    
    
    2
    
    
    
    1
    
    
    
    
    
    
    
    2008
    
    
    
    2015-2017Ringhorne Øst
    
    Exxon Mobil
    
    
    11.70
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    2021
    
    
    
    2030Total Norway
    
    
    
    
    
    
    
    
    189
    
    
    
    125
    
    
    
    354
    
    
    
    10.0
    
    
    
    
    
    
    
    GoM, Shallow water
    
    3)
    
    
    
    
    
    
    4
    
    
    
    1
    
    
    
    20
    
    
    
    0.6
    
    
    
    2007-2017
    
    
    
    Girassol/Jasmim/Dalia
    
    Total
    
    
    10.00
    
    
    
    4
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    2016-2022
    
    
    
    2019-2024Hibernia
    
    HMDC 4)
    
    
    5.00
    
    
    
    3
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    2026
    
    
    
    2085Terra Nova
    
    Petro-Canada
    
    
    15.00
    
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    2017
    
    
    
    2093Kharyaga
    
    Total
    
    
    40.00
    
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    2031
    
    
    
    2031Front Runner
    
    Murphy Oil
    
    
    25.00
    
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    2017
    
    
    
    Lorien
    
    Noble Energy
    
    
    30.00
    
    
    
    1
    
    
    
    1
    
    
    
    2
    
    
    
    
    
    
    
    2008
    
    
    
    Murzuq
    
    Repsol
    
    
    8.00
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    2028
    
    
    
    2028Mabruk
    
    Total
    
    
    25.00
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    2028
    
    
    
    2028GoM, Other deepwater fields 5)
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    2
    
    
    
    0.1
    
    
    
    2012-2017
    
    
    
    Total International
    
    
    
    
    
    
    
    
    20
    
    
    
    16
    
    
    
    25
    
    
    
    0.7
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    209
    
    
    
    141
    
    
    
    379
    
    
    
    10.7
    
    
    
    
    
    
    
    
 1)
    
    A redetermination of the Snorre Unit equity shares led to an increase of Hydros share from
17.65 percent to 17.77 percent, effective from 1 May 2006.2)
    
    A redetermination of the Åsgard Unit equity shares led to an increase of Hydros share from
9.60 percent to 9.61 percent, effective from 1 August 2006.3)
    
    Several operators including Hydro4)
    
    HMDC: Hibernia Management Development Company5)
    
    Several operators




---



##### 



Operational review  33
 Field descriptions
 NCS fields under development
 Vega/Vega Sør
 Ormen Lange.
 Vilje.
 Alve
 Tyrihans
 Volve




---



##### 



34  Operational review
 
 NCS fields in operation
  Oseberg Area Unit.
   Tune Sør.
 Troll Field.




---



##### 



Operational review  35
  Fram Field.
 Grane Field.
 Ekofisk Fields.
  Gullfaks Fields.
 Gimle Field
 Åsgard Field.




---



##### 



36  Operational review
 Sleipner Fields.
 Kvitebjørn Field.
 Snorre Fields.
 Visund Field.
 Njord Field.
 Norne Field.
 Kristin Field.
 Ringhorne Øst Field.
 International fields under development
 Rosa.
 Gimboa.




---



##### 

(

Operational review  37
 
 Eastern Gulf.
 Thunder Hawk.
 International fields in operation
 Angola.
 Canada.
 Libya.




---



##### 



38  Operational review
  Russia.
 Gulf of Mexico.
    Transportation of oil and gas
 Norway




---



##### 



Operational review  39
   
 Pipeline
 Hydros percentageEnd point
    
    Length (km)
    
    
    interestGassled (gas)
    
    From the NCS to Germany, Belgium, France and the U.K.
    
    
    7,720
    
    
    
    11.620
    1)Tampen Link (gas)
    
    St. Fergus via FLAGS (UK)
    
    
    23
    
    
    
    10.5Norpipe Oil A/S (oil)
    
    Ekofisk  Teesside (U.K.)
    
    
    354
    
    
    
    3.50Oseberg Transport System (OTS) (oil)
    
    Oseberg  Sture (Norway)
    
    
    115
    
    
    
    22.23Frostpipe (oil)
    
    Frigg  Oseberg (Norway)
    
    
    82
    
    
    
    13.75Sleipner Øst NGL pipeline (NGL)
    
    Sleipner  Kårstø (Norway)
    
    
    245
    
    
    
    10.00Troll Oil 1 & 2 (oil)
    
    Troll  Mongstad (Norway)
    
    
    165
    
    
    
    9.73Grane Oil Pipeline (oil)
    
    Grane  Sture (Norway)
    
    
    212
    
    
    
    24.40Grane Gas Pipeline (gas)
    
    Grane  Heimdal (Norway)
    
    
    50
    
    
    
    38.00Norne Gas Transport (gas)
    
    Norne  Åsgard (Norway)
    
    
    130
    
    
    
    8.10Vestprosess (NGL)
    
    Kollsnes/Sture  Mongstad (Norway)
    
    
    56
    
    
    
    17.00
 1)
    
    For further information please see below.
 
 International




---



##### 



40
 ENERGY AND OIL MARKETING
 Oil trading
   
 Oil tradingSales (thousands of tonnes)
    
    2006
    
    
    2005
    
    
    2004Crude oil/NGL
    
    
    16,943
    
    
    
    17,877
    
    
    
    20,096
 
 Gas activities
       
 
 Gas production(in bcm)
    
    2006
    
    
    2005
    
    
    2004Equity natural gas production
    
    
    10.7
    
    
    
    9.4
    
    
    
    8.8Sales of non-equity gas
    
    
    3.1
    
    
    
    4.1
    
    
    
    3.9
 
 Power activities




---



##### 



41
 3)
   
 Power production(in TWh)
    
    2006
    
    
    2005
    
    
    2004Power production
    
    
    8.3
    
    
    
    10.8
    
    
    
    8.1Acquired under long-term contracts for Hydros industrial use
    
    
    7.3
    
    
    
    7.0
    
    
    
    7.0
 
    Oil Marketing activities




---



##### 



42
 
 Oil marketingVolumes (thousands of m3)
    

20061)
    
    
    2005
    
    
    2004Gasoline
    
    
    1,167
    
    
    
    1,471
    
    
    
    1,487Gasoil
    
    
    1,883
    
    
    
    2,541
    
    
    
    2,266
 
 1)
    
    Volumes from Hydro Texaco is 100% of sales in 9 months.
   Aluminium Metal
 Industry overview
  China
driving global demand
 primary aluminium
    
    Primary
aluminium production* 2006(BAR CHART)
    
    (BAR CHART)
 Structural developments
  Growth in aluminium consumption




---



##### 



43
   Aluminium price developments
    Developments in aluminium inventories
  Global
production increase
    
    Aluminium
price in USD/tonne(BAR CHART)
    
    (BAR CHART)
 Industry
smelter cost
    
    World
smelter
average power price(BAR CHART)
    
    (BAR CHART)




---



##### 



44
 
 Primary aluminium production




---



##### 



45
 
 Primary aluminium production (tonnes)Smelter
    
    Country
    
    
    2006
    
    
    2005
    
    
    2004Karmøy
    
    Norway
    
    
    288,000
    
    
    
    277,000
    
    
    
    278,000Årdal
    
    Norway
    
    
    232,000
    
    
    
    233,000
    
    
    
    222,000Sunndal
    
    Norway
    
    
    357,000
    
    
    
    362,000
    
    
    
    306,000Høyanger 1)
    
    Norway
    
    
    60,000
    
    
    
    78,000
    
    
    
    76,000Søral (49.9% share)
    
    Norway
    
    
    82,000
    
    
    
    81,000
    
    
    
    82,000Slovalco
    
    Slovakia
    
    
    158,000
    
    
    
    159,000
    
    
    
    157,000Neuss
    
    Germany
    
    
    226,000
    
    
    
    225,000
    
    
    
    223,000Stade 2)
    
    Germany
    
    
    54,000
    
    
    
    60,000
    
    
    
    69,000HAW (33.3% share) 3)
    
    Germany
    
    
    
    
    
    
    40,000
    
    
    
    44,000Kurri Kurri
    
    Australia
    
    
    164,000
    
    
    
    152,000
    
    
    
    155,000Tomago (12.4% share)
    
    Australia
    
    
    64,000
    
    
    
    63,000
    
    
    
    60,000Alouette (20% share)
    
    Canada
    
    
    114,000
    
    
    
    96,000
    
    
    
    48,000Total
    
    
    
    
    
    
    1,799,000
    
    
    
    1,826,000
    
    
    
    1,720,000
 1)
    
    Shutdown of Høyanger Søderberg production line completed end of February 20062)
    
    Shutdown of Stade production completed end of 20063)
    
    Shutdown of HAW production completed end of 2005
 
   Primary aluminium smelters
  Karmøy, Norway.




---



##### 



46
 Årdal, Norway.
 Sunndal, Norway.
 Høyanger, Norway.
 Neuss, Germany.
 Stade, Germany.
 Kurri Kurri, Australia.
  Slovalco, Slovakia (55.3 percent share).




---



##### 



47
  Søral, Norway (49.9 percent share).
 Tomago, Australia (12.4 percent share).
 Alouette, Canada (20 percent share).
 Raw materials




---



##### 



48
   
 Casthouse products and remelt activities




---



##### 



49
 Sales, distribution and trading activities
   High purity aluminium
  
 Projects
 Qatalum
  Qatalum
 profitable mega
smelter in key region




---



##### 



50
 Aluminum
semi-fabrication
 
   Other project developments
   Aluminium Products
 Industry overview
  Industry structure
  Developments within the flat rolled products industry




---



##### 



51
  Developments within the extruded products industries
    
 Aluminium Products sales volumesTonnes to external market (1,000 mt)
    
    2006
    
    
    2005
    
    
    2004Aluminium extrusions*
    
    
    640
    
    
    
    600
    
    
    
    635Aluminium flat rolled products
    
    
    1,000
    
    
    
    950
    
    
    
    945Magnesium
    
    
    86
    
    
    
    103
    
    
    
    101
 *
    
    Includes extrusion volumes in Extrusion, Precision Tubing and Structures
 
 Rolled Products
  Flat
rolled productsconsumption Europe 2006




---



##### 



52
 
 Rolled Products production sitesOwnership
    
    
    2006 salespercentage
    
    
    volume (1,000 mt)Norf/Grevenbroich, Germany
    
    
    50/100
    
    
    
    575Hamburg, Germany
    
    
    100
    
    
    
    150Slim, Italy
    
    
    100
    
    
    
    80Inasa, Spain
    
    
    100
    
    
    
    25AISB, Malaysia
    
    
    81
    
    
    
    15Karmøy, Norway
    
    
    100
    
    
    
    70Holmestrand, Norway
    
    
    100
    
    
    
    85Total, excluding internal sales
    
    
    
    
    
    
    1,000
 
 
 Rolled Products sales volumesTonnes to external market (1,000 mt)
    
    2006
    
    
    2005
    
    
    2004Lithography
    
    
    165
    
    
    
    165
    
    
    
    150Foil
    
    
    155
    
    
    
    155
    
    
    
    155Strip
    
    
    680
    
    
    
    630
    
    
    
    640Total flat rolled products
    
    
    1,000
    
    
    
    950
    
    
    
    945
 
 Global flat rolled products
consumption 2006
    
    Hydros flat rolled
product sales 2006(PIE CHART)
    
    (PIE CHART)




---



##### 



53
   Extrusion
  
 Extrusion sales volumesTonnes to external market (1,000 mt)
    
    2006
    
    
    2005
    
    
    2004General Extrusion Europe
    
    
    305
    
    
    
    270
    
    
    
    285Building Systems
    
    
    80
    
    
    
    75
    
    
    
    75Extrusion Americas
    
    
    145
    
    
    
    145
    
    
    
    140Total extrusions
    
    
    530
    
    
    
    490
    
    
    
    500
 
 Extrusion consumption
Europe and North America
    
    Global Extrusion consumption(PIE CHART)
    
    (PIE CHART)
 Hydros extrusion
sales per segment
    
    Hydros
extrusion sales 2006(PIE CHART)
    
    (PIE CHART)
 General extrusion and value-added activities
    Building systems
  
 Automotive




---



##### 



54
 
 Automotive sales volumes1,000 tonnes to market
    
    2006
    
    
    2005
    
    
    2004Precision Tubing
    
    
    65
    
    
    
    60
    
    
    
    70Structures
    
    
    40
    
    
    
    50
    
    
    
    65Magnesium
    
    
    85
    
    
    
    100
    
    
    
    100
 
    Other activities
  Polymers




---



##### 



55
   Raw materials and production
  S-PVC
price
 
 
 Petrochemicals production (in tonnes)2006
    
    
    2005
    
    
    2004Base productsVCM
    
    
    645,000
    
    
    
    566,000
    
    
    
    541,000Caustic soda
    
    
    406,000
    
    
    
    306,000
    
    
    
    260,000PolymersS-PVC
    
    
    543,000
    
    
    
    484,000
    
    
    
    496,000P-PVC
    
    
    97,000
    
    
    
    85,000
    
    
    
    82,000Total polymers
    
    
    640,000
    
    
    
    569,000
    
    
    
    578,000PVC compounds
    
    
    129,000
    
    
    
    120,000
    
    
    
    132,000




---



##### 



56
 
 Average market quoted prices in Northwest Europe2006
    
    
    2005
    
    
    2004Ethylene  euro/tonne delivered
    
    
    862
    
    
    
    732
    
    
    
    629VCM  Spot export fob USD/tonne
    
    
    843
    
    
    
    748
    
    
    
    722S-PVC  euro/tonne delivered
    
    
    952
    
    
    
    847
    
    
    
    853
 
 Sales and distribution
   Industriforsikring
  Other
    Regulation and taxation
 Oil and energy  regulation  Norwegian licensing system




---



##### 



57




---



##### 



58
 Organization of Norwegian gas sales and transportation
  Environmental regulations
  Oil and gas  taxation
 Norway
 Ordinary
taxes.
   Special petroleum tax.




---



##### 



59
   Taxation outside Norway
  Production sharing agreements.
   Income tax regimes.
 Canada.




---



##### 



60  Operational review
  United States, Gulf of Mexico.
 Russia.
 Libya.
 Angola.
 Power activities  taxation
 Ordinary income taxes




---



##### 



Operational review  61
  Resource rent tax on hydroelectric power plants
    Aluminium  regulation
 Environmental matters




---



##### 



62  Operational review
    Oslo and Paris Commission (OSPAR)
  Integrated pollution prevention and control
  Climate gases
 2




---



##### 



Operational review  63
   EU aluminium tariffs
   Energy taxation
  Chemicals legislation  REACH
    Other activities 
environmental regulations




---



##### 



Financial performance
 Financial performance
 Selected financial data
    
    
    67Financial review
    
    
    68Oil &
Energy overview
    
    
    69Aluminium
Metal overview
    
    
    73Aluminium Products overview
    
    
    75Oil & Energy
    
    
    79Exploration and Production
    
    
    81Energy and Oil Marketing
    
    
    83Aluminium Metal
    
    
    85Aluminium Products
    
    
    88Rolled Products
    
    
    90Extrusion
    
    
    91Automotive
    
    
    92Other activities
    
    
    93Liquidity and capital resources
    
    
    95Critical accounting policies
    
    
    100




---



##### 



Financial performance  67
 Selected financial data
  
 Income statement data
 Year ended 31 DecemberNOK million (except per share data)
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Operating revenues
    
    
    196,234
    
    
    
    171,231
    
    
    
    151,026
    
    
    
    129,434
    
    
    
    130,574Depreciation, depletion and amortization
    
    
    22,164
    
    
    
    15,752
    
    
    
    16,581
    
    
    
    13,619
    
    
    
    12,520Other operating costs
    
    
    121,845
    
    
    
    109,242
    
    
    
    102,670
    
    
    
    94,163
    
    
    
    100,484Operating income
    
    
    52,224
    
    
    
    46,237
    
    
    
    31,796
    
    
    
    21,651
    
    
    
    17,580Equity in net income on non-consolidated investees
    
    
    962
    
    
    
    593
    
    
    
    597
    
    
    
    606
    
    
    
    (44
    )Financial income (expense), net
    
    
    1,785
    
    
    
    (1,889
    )
    
    
    121
    
    
    
    146
    
    
    
    1,815Other income (loss), net
    
    
    53
    
    
    
    990
    
    
    
    169
    
    
    
    (1,253
    )
    
    
    77Income from continuing operations before tax and minority interest
    
    
    55,024
    
    
    
    45,932
    
    
    
    32,682
    
    
    
    21,150
    
    
    
    19,428Income tax expense
    
    
    (37,598
    )
    
    
    (30,271
    )
    
    
    (21,181
    )
    
    
    (12,928
    )
    
    
    (12,429
    )Minority interest
    
    
    (202
    )
    
    
    (118
    )
    
    
    (106
    )
    
    
    151
    
    
    
    26Income from continuing operations
    
    
    17,224
    
    
    
    15,542
    
    
    
    11,394
    
    
    
    8,373
    
    
    
    7,026Income from discontinued operations
    
    
    167
    
    
    
    174
    
    
    
    1,166
    
    
    
    2,314
    
    
    
    1,740Income before cumulative effect of change in accounting principle
    
    
    17,391
    
    
    
    15,716
    
    
    
    12,560
    
    
    
    10,687
    
    
    
    8,765Cumulative effect of change in accounting principle
    
    
    
    
    
    
    (78
    )
    
    
    
    
    
    
    281
    
    
    
    Net income
    
    
    17,391
    
    
    
    15,638
    
    
    
    12,560
    
    
    
    10,968
    
    
    
    8,765Basic and diluted earnings per share from continuing operations (in NOK)
1)2)
    
    
    13.90
    
    
    
    12.40
    
    
    
    9.00
    
    
    
    6.50
    
    
    
    5.50Basic and diluted earnings per share from discontinued operations (in NOK)
    
    
    0.10
    
    
    
    0.10
    
    
    
    0.90
    
    
    
    1.80
    
    
    
    1.30Basic and diluted earnings per share before change in accounting principles (in NOK)
1)2)
    
    
    14.00
    
    
    
    12.50
    
    
    
    
    
    
    
    0.20
    
    
    
    Basic and diluted earnings per share (in NOK)
    
    
    14.00
    
    
    
    12.50
    
    
    
    9.90
    
    
    
    8.50
    
    
    
    6.80Weighted average number of outstanding shares (million)
    
    
    1,241
    
    
    
    1,254
    
    
    
    1,272
    
    
    
    1,288
    
    
    
    1,289
 1)
    
    Basic earnings per share are computed using the weighted average number of
ordinary shares outstanding. There were no diluting elements.2)
    
    Previously reported earnings per share and total number of outstanding shares have
been adjusted to reflect the 5-for-1 stock split effective 10 May 2006.




---



##### 



68  Financial performance
 Oil
price in US/bbl
    
    Aluminium price in USD/tonne(GRAPH)
    
    (GRAPH)
 Financial review 4)
      4)
    
    The following financial review should be read in conjunction with the consolidated financial
statements and the related notes contained elsewhere in this report. The financial review is
based upon Hydros financial statements prepared in accordance
with US GAAP We present certain
non-GAAP measures in this financial review that management believes facilitate the
understanding of the underlying business performance and improves the comparability of results
for the periods covered. Further explanation of these measures and why management believes
they are useful in understanding the results of operations can be found in the section Use of
non-GAAP financial measures appearing later in this report. Certain of the matters discussed
in this financial review are forward-looking statements. Such statements are subject to risks,
uncertainties and other factors, which could cause our actual results to differ materially
from those expressed or implied by the statements.




---



##### 



Financial performance  69
 Financial
results for 2006
 
 Operating
income (loss)
 NOK million
    
    2006
    
    
    2005
    
    
    2004Oil & Energy
    
    
    46,253
    
    
    
    43,451
    
    
    
    31,144Aluminium Metal
    
    
    6,362
    
    
    
    2,694
    
    
    
    785Aluminium Products
    
    
    (83
    )
    
    
    (370
    )
    
    
    1,072Other activities
    
    
    1,277
    
    
    
    (2
    )
    
    
    312Corporate and eliminations
    
    
    (1,584
    )
    
    
    464
    
    
    
    (1,517
    )Total
    
    
    52,224
    
    
    
    46,237
    
    
    
    31,796
 
  Oil
& Energy overview




---



##### 



70  Financial performance
        Operating income
  5)
 5)
    
    Average oil price realized by Oil & Energys Exploration and Production sub-segment.




---



##### 



Financial performance  71
 
 Operating income (loss)
 NOK million
    
    2006
    
    
    2005
    
    
    2004Exploration and Production
    
    
    41,352
    
    
    
    40,594
    
    
    
    28,363Energy and Oil Marketing
    
    
    3,578
    
    
    
    3,575
    
    
    
    2,650Eliminations
    
    
    1,323
    
    
    
    (719
    )
    
    
    132Total
    
    
    46,253
    
    
    
    43,451
    
    
    
    31,144
 Operating statistics
 2006
    
    
    2005
    
    
    2004Oil and gas production (thousands boe/d)
    
    
    573
    
    
    
    563
    
    
    
    572Oil production (thousands boe/d)
    
    
    387
    
    
    
    398
    
    
    
    417Gas production (thousands boe/d)
    
    
    186
    
    
    
    165
    
    
    
    155Realized oil price (USD/bbl)
    
    
    63.10
    
    
    
    53.10
    
    
    
    37.30Realized gas price (NOK/Sm3)
    
    
    1.93
    
    
    
    1.52
    
    
    
    1.09
 
 Production
costs per barrel*
 
 *
Excluding gas injection costs
   6)
   6)
    
    Production cost is comprised of the cost of operating fields,
including CO2
emission tax, insurance, gas purchased for injection, and lease costs for production
installations, but excluding transportation and processing tariffs, operation costs for
transportation systems and depreciation.




---



##### 



72  Financial performance
 Outlook
    2
 Aluminium activities
 7)
   
 Aluminium activities
 Operating income (loss)
 NOK million
    
    2006
    
    
    2005
    
    
    2004Aluminium Metal
    
    
    6,362
    
    
    
    2,694
    
    
    
    785Aluminium Products 1)
    
    
    (83
    )
    
    
    (370
    )
    
    
    1,072Eliminations
    
    
    (98
    )
    
    
    (8
    )
    
    
    (103
    )Total
    
    
    6,181
    
    
    
    2,316
    
    
    
    1,754
 1)
    
    The specifications are based on continuing operations.See discussion pertaining to Non-GAAP financial measures included later in this report.
 
 7)
    
    Unrealized gains and losses previously included as part of Aluminium Other and eliminations have been allocated
between the two new business areas and are included in the operating income and adjusted EBITDA amounts above.




---



##### 



Financial performance  73
 Aluminium Metal overview
        Operating income




---



##### 



74  Financial performance
 
 Operating income
 NOK million
    
    2006
    
    
    2005
    
    
    2004Aluminium Metal
    
    
    6,362
    
    
    
    2,694
    
    
    
    785
 Operating statistics
 2006
    
    
    2005
    
    
    2004Primary aluminium production (1 ,000 mt) 1)
    
    
    1,799
    
    
    
    1,826
    
    
    
    1,720Realized aluminium price LME (USD/mt) 2)
    
    
    2,352
    
    
    
    1,812
    
    
    
    1,629Realized aluminium price LME (NOK/mt) 3)
    
    
    15,371
    
    
    
    11,813
    
    
    
    11,403Realized NOK/USD exchange rate
    
    
    6.54
    
    
    
    6.52
    
    
    
    7.00
 1)
    
    Includes Søral and HAW volumes (non-consolidated
investees)2)
    
    Includes the effect of strategic and operational
LME hedges3)
    
    Includes the effect of strategic currency
hedges
 
    1)
 Outlook




---



##### 



Financial performance  75
   8)
 Aluminium Products overview
     8)
    
    We use financial derivatives to manage and hedge unfavorable
fluctuations in prices in order to minimize
the exposure of LME price fluctuations on our net margins. Certain contracts are marked-to-market
value in the balance sheet with unrealized gains and losses reflected in operating results for the period or
deferred if certain hedge accounting criteria are met. Offsetting gains and losses on physical contracts within
Hydros total portfolio that are not marked-to-market value are recognized when realized
(i.e., when the contractual volumes are sold). This can result in significant deviations between results from
physical positions and contracts and off-setting results from derivative hedges in any given period.




---



##### 



76  Financial performance
  Operating income
   
 Operating income (loss)
 NOK million
    
    2006
    
    
    2005
    
    
    2004Rolled Products
    
    
    782
    
    
    
    754
    
    
    
    626Extrusion
    
    
    231
    
    
    
    275
    
    
    
    606Automotive
    
    
    (1,006
    )
    
    
    (1,579
    )
    
    
    (400
    )Other and eliminations
    
    
    (90
    )
    
    
    180
    
    
    
    241Total
    
    
    (83
    )
    
    
    (370
    )
    
    
    1,072
 During fourth quarter 2006 Hydro entered agreements to divest its castings business. As a result, the castings business was reclassifled as an asset held for sale and reported as a discontinued operations and is excluded
from the operating results of Aluminium Products for the current and all prior periods in the report.
 
 Outlook




---



##### 



Financial performance  77
   Earnings from non-consolidated investees
  
 Financial income (expense), net
 NOK million
    
    2006
    
    
    2005
    
    
    2004Interest income
    
    
    1,076
    
    
    
    895
    
    
    
    973Dividends received / net gain (loss) on securities
    
    
    347
    
    
    
    338
    
    
    
    190Interest income and other financial income
    
    
    1,424
    
    
    
    1,233
    
    
    
    1,163Interest expense
    
    
    (1,870
    )
    
    
    (1,743
    )
    
    
    (2,075
    )Capitalized interest
    
    
    1,231
    
    
    
    867
    
    
    
    648Net foreign exchange gain (loss)
    
    
    1,058
    
    
    
    (2,157
    )
    
    
    1,348Other
    
    
    (58
    )
    
    
    (89
    )
    
    
    (963
    )Interest expense and foreign exchange gain/(loss)
    
    
    361
    
    
    
    (3,122
    )
    
    
    (1,043
    )Net financial income (expense)
    
    
    1,785
    
    
    
    (1,889
    )
    
    
    121
   Other income and expense net




---



##### 



78  Financial performance
 Income tax expense
     Discontinued operations
    Return
on averagecapital employed
 
 Return
on average capital employed (RoaCE) 9)
 101
 Adjusted
EBITDA 11)
   9)
    
    RoaCE is defined as Earnings after tax divided by average Capital Employed. See also
discussion pertaining to non-GAAP financial measures included later in this report.10)
    
    2006: Impairment write-downs and divestment of castings business. 2005: The acquisition of
Spinnaker in December and the impairment loss within our aluminium business. 2004: Impairment losses
within our aluminium business, together with the effect of a change in Norwegian tax legislation.11)
    
    See discussion relating to Segment Measures included in note 5  Operating and geographic
segment information -to Hydros consolidated financial statements included later in this report.




---



##### 



Financial performance  79
  
 Operating income  adjusted EBIT  adjusted EBITDA Year 2006
 SelectedOperating
    
    
    Non-cons.
    
    
    Interest
    
    
    financial
    
    
    Other
    
    
    Adjusted
    
    
    Depr.
    
    
    AdjustedNOK million
    income (loss)
    
    
    Investees
    
    
    Income
    
    
    income
    
    
    income
    
    
    EBIT
    
    
    and amort.
    
    
    EBITDAExploration and Production
    
    
    41,352
    
    
    
    7
    
    
    
    24
    
    
    
    5
    
    
    
    
    
    
    
    41,387
    
    
    
    17,417
    
    
    
    58,804Energy and Oil Marketing
    
    
    3,578
    
    
    
    218
    
    
    
    63
    
    
    
    35
    
    
    
    53
    
    
    
    3,947
    
    
    
    880
    
    
    
    4,827Eliminations
    
    
    1,323
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,321
    
    
    
    2
    
    
    
    1,323Oil& Energy
    
    
    46,253
    
    
    
    223
    
    
    
    87
    
    
    
    40
    
    
    
    53
    
    
    
    46,655
    
    
    
    18,299
    
    
    
    64,954Aluminium Metal 1)
    
    
    6,362
    
    
    
    837
    
    
    
    6
    
    
    
    159
    
    
    
    
    
    
    
    7,364
    
    
    
    1,770
    
    
    
    9,134Aluminium Products 1)
    
    
    (83
    )
    
    
    (179
    )
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    (245
    )
    
    
    1,960
    
    
    
    1,715Other activities
    
    
    1,277
    
    
    
    72
    
    
    
    86
    
    
    
    130
    
    
    
    
    
    
    
    1,566
    
    
    
    528
    
    
    
    2,094Corporate and eliminations
    
    
    (1,584
    )
    
    
    8
    
    
    
    880
    
    
    
    19
    
    
    
    
    
    
    
    (677
    )
    
    
    (1
    )
    
    
    (678
    )Total
    
    
    52,224
    
    
    
    962
    
    
    
    1,076
    
    
    
    347
    
    
    
    53
    
    
    
    54,663
    
    
    
    22,556
    
    
    
    77,219
 1)
    
    Effective 1 February 2006, Hydro decided to split Aluminium into two business areas, Aluminium Metal and Aluminium Products. Aluminium Metal consists of the previous Metals sub-segment. Aluminium Products consists of the
previous Rolled Products and Extrusion and Automotive sub-segments. Prior periods have been restated to be comparable.
 
 Net income and dividend
   OIL & ENERGY
 Market conditions
  12)
 13)
 12)
    
    Due to a negative price differential on oil from the
Grane field, which is heavier than Brent blend and therefore sold at lower average prices, our realized oil price was
USD 2 less than average Brent dated in 2006.13)
    
    Realized gas prices include both spot market prices and
long-term contract prices. In 2006 approximately
70 percent of the natural gas produced from fields in which
Hydro has an equity interest is sold under longterm contracts.




---



##### 



80  Financial performance
 
 Oil & Energy
 NOK million
    
    2006
    
    
    2005
    
    
    2004Operating revenues
    
    
    100,743
    
    
    
    86,475
    
    
    
    69,146Operating costs
    
    
    54,491
    
    
    
    43,024
    
    
    
    38,002Operating income
    
    
    46,253
    
    
    
    43,451
    
    
    
    31,144Adjusted EBITDA
    
    
    64,954
    
    
    
    54,339
    
    
    
    41,777RoaCE
    
    
    17.4
    %
    
    
    26.2
    %
    
    
    23.4
    %Number of employees
    
    
    4,394
    
    
    
    3,715
    
    
    
    3,527
 Operating statistics
 2006
    
    
    2005
    
    
    2004Oil and gas production (thousands boe/d)
    
    
    573
    
    
    
    563
    
    
    
    572Oil production (thousands boe/d)
    
    
    387
    
    
    
    398
    
    
    
    417Gas production (thousands boe/d)
    
    
    186
    
    
    
    165
    
    
    
    155Power production (TWh)
    
    
    8.30
    
    
    
    10.70
    
    
    
    8.00Realized oil price (USD/bbl)
    
    
    63.10
    
    
    
    53.10
    
    
    
    37.30Realized oil price (NOK/bbl)
    
    
    404.00
    
    
    
    342.20
    
    
    
    251.30Realized average liquids price (USD/bbl)
    
    
    61.50
    
    
    
    52.00
    
    
    
    36.90Realized gas price (NOK/Sm3)
    
    
    1.93
    
    
    
    1.52
    
    
    
    1.09Exploration expense (NOK million)
    
    
    4,986
    
    
    
    1,839
    
    
    
    1,264
 Market statistics
 2006
    
    
    2005
    
    
    2004Brent dated oil price (USD/bbl)
    
    
    65.10
    
    
    
    54.50
    
    
    
    38.30WTloil price (USD/bbl)
    
    
    66.00
    
    
    
    56.60
    
    
    
    47.50NBP spot price (NOK/Sm3)
    
    
    1.75
    
    
    
    1.67
    
    
    
    1.10NBP spot price (pence/therm)
    
    
    39.30
    
    
    
    37.70
    
    
    
    23.60Henry Hub (USD/mmbtu)
    
    
    7.00
    
    
    
    9.00
    
    
    
    6.20Nordic spot electricity price (NOK/Mwh)
    
    
    391.40
    
    
    
    234.80
    
    
    
    242.66NOK/USD exchange rate
    
    
    6.40
    
    
    
    6.44
    
    
    
    6.74
  Oil and
gas production
    
    Oil
price(BAR CHART)
    
    (BAR CHART)
 Key development activities




---



##### 



Financial performance  81
 Operating
Income Oil & Energy
 
 
 Exploration and Production
 NOK million
    
    2006
    
    
    2005
    
    
    2004Operating revenues
    
    
    76,948
    1)
    
    
    64,201
    
    
    
    48,962Operating costs
    
    
    35,597
    
    
    
    23,606
    
    
    
    20,599Operating income
    
    
    41 ,352
    
    
    
    40,594
    
    
    
    28,363Adjusted EBITDA
    
    
    58,804
    
    
    
    50,601
    
    
    
    38,168Number of employees
    
    
    3,740
    
    
    
    3,067
    
    
    
    2,821
 1)
    
    As of 1 April 2006 the presentation of certain internal buy/sell arrangements is presented on a net basis to better represent revenue on transactions
within the sub-segments in Oil & Energy. Previously released first quarter 2006 figures (included in the year-to-date 2006 figures) are reclassified on a net
basis. Total revenue for first quarter 2006 was reduced by NOK 865 million. 2005 figures have not been netted.
 Variance analysis Exploration and Production
 NOK millionOperating income 2006
    
    
    41 ,352Operating income 2005
    
    
    40,594Change
    
    
    757Prices and currency
    
    
    12,515Volume
    
    
    190Depreciation
    
    
    (2,575
    )Production costs
    
    
    (1,515
    )Exploration costs
    
    
    (2,785
    )Infrequent items
    
    
    (5,240
    )Other
    
    
    170Total change in operating income
    
    
    757
 Exploration and Production
 Operating revenues
     Operating costs




---



##### 



82  Financial performance
 14
  15)
  Operating income
  16
 Reserves
   14)
    
    Production cost is comprised of the cost of operating fields,
including CO2
emission tax, insurance, gas
purchased for injection, and lease costs for production installations, but excluding
transportation and
processing tariffs, operation costs for transportation systems and depreciation.15)
    
    See discussion included in Financial statements  note 2. Business combinations,
dispositions and
demerger included later in this report. In accordance with our accounting policies, all expenses
related
to exploration, with the exception of the cost of drilling exploratory wells, are expensed as
incurred. As a
result, any fair value allocated to such costs relating to acquired assets must be expensed.16)
    
    Hydro has hedged the majority of the oil and gas production from Spinnakers portfolio for
the period
2006-2008. Under the hedging program, crude oil prices (WTI) have been secured between US dollar
45 per boe and US dollar 71.45 per boe using zero cost collar options. Hydro has secured the gas
price
(Henry Hub reference) by purchasing put options for the same period with a strike price of US
dollar 7.5
per mmbtu. These derivatives are included in the balance sheet at fair value, with changes in the
fair
value recognized in the income statement.




---



##### 



Financial performance  83
 
 Reserves in million boe
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Proved reserves at beginning of year
    
    
    2,046
    
    
    
    2,076
    
    
    
    2,288
    
    
    
    2,225
    
    
    
    2,073New reserves
    
    
    34
    
    
    
    59
    
    
    
    23
    
    
    
    265
    
    
    
    118Revisions of reserves
    
    
    45
    
    
    
    64
    
    
    
    39
    
    
    
    (6
    )
    
    
    23Net purchase and sales
    
    
    
    
    
    
    52
    
    
    
    (65
    )
    
    
    (2
    )
    
    
    186Production
    
    
    (209
    )
    
    
    (206
    )
    
    
    (209
    )
    
    
    (194
    )
    
    
    (175
    )Proved reserves at end of year
    
    
    1,916
    
    
    
    2,046
    
    
    
    2,076
    
    
    
    2,288
    
    
    
    2,225
 
  Adjusted EBITDA
  Energy and Oil Marketing
  Operating revenues
   Operating costs
  
 Energy and Oil Marketing
 NOK million
    
    2006
    
    
    2005
    
    
    2004Operating revenues
    
    
    81,073
    1)
    
    
    72,440
    2)
    
    
    57,319
    2)Operating costs
    
    
    77,495
    
    
    
    68,865
    
    
    
    54,670Operating income
    
    
    3,578
    
    
    
    3,575
    
    
    
    2,650Ajusted EBITDA
    
    
    4,827
    
    
    
    4,456
    
    
    
    3,478Number of employees
    
    
    654
    
    
    
    648
    
    
    
    706
 1)
    
    As of 1 April 2006 the presentation of certain internal buy/sell arrangements is presented on a net basis to better represent revenue on transactions within the subsegments in Oil & Energy. Previously released first quarter 2006
figures (included in the year-to-date 2006 figures) are reclassified on a net basis. Total revenue for first quarter 2006 was reduced by NOK 865 million. 2005 figures have not been netted.2)
    
    Certain internal revenues within the Oil &
Energy business area were inadvertently reported as intersegment revenues in prior periods. Prior periods have been amended to correct the error.




---



##### 



84  Financial performance
 
 Variance analysis Energy and Oil Marketing
 NOK millionOperating income 2006
    
    
    3,578Operating income 2005
    
    
    3,575Change
    
    
    3Margin
    
    
    1,095Volume
    
    
    (565
    )Fixed costs
    
    
    (335
    )Depreciation
    
    
    (200
    )Other
    
    
    10Total change in operating income
    
    
    3
 Operating income
 NOK million
    
    2006
    
    
    2005
    
    
    2004Power activities
    
    
    1,173
    
    
    
    1,109
    
    
    
    732Gas transport
    
    
    1,895
    
    
    
    1,764
    
    
    
    1,496Gas trading
    
    
    814
    
    
    
    392
    
    
    
    337Oil trading activities
    
    
    215
    
    
    
    299
    
    
    
    188Oil marketing
    
    
    (267
    )
    
    
    91
    
    
    
    104Other 1)
    
    
    (252
    )
    
    
    (80
    )
    
    
    (207
    )Total
    
    
    3,578
    
    
    
    3,575
    
    
    
    2,650
 
 1)
    
    Other mainly consists of new energy activities. 
 Operating income
    17)
 18)
 
 17)
    
    Contracts for delivery on the highly liquid UK gas market
are accounted for as derivatives and therefore
reflected at market values in the balance sheet while many
contracts for delivery on the less liquid
continental market are not.18)
    
    Our external oil sales are
denominated in US dollars while our internal purchases are
based on Norwegian kroner. As a result, changes in the USD/NOK currency
exchange rates impact the development in our margins.




---



##### 



Financial performance  85
  Adjusted EBITDA
  Eliminations Oil & Energy
  ALUMINIUM METAL
 
 Aluminium Metal 1)
 NOK million
    
    2006
    
    
    2005
    
    
    2004Operating revenues
    
    
    68,405
    
    
    
    54,579
    
    
    
    51,957Operating costs
    
    
    62,043
    
    
    
    51,885
    
    
    
    51,172Operating income
    
    
    6,362
    
    
    
    2,694
    
    
    
    785Adjusted EBITDA
    
    
    9,134
    
    
    
    4,821
    
    
    
    5,297RoaCE
    
    
    18.7
    %
    
    
    7.9
    %
    
    
    3.3
    %Number of employees
    
    
    5,286
    
    
    
    5,558
    
    
    
    6,447
 
 1)
    
    Effective 1 February 2006, Hydro decided to split Aluminium into two business areas, Aluminium Metal and Aluminium Products. Aluminium
Metal consists of the previous Metals sub-segments. Prior periods have been restated to be comparable. Variance analysis Aluminium Metal
 NOK millionOperating income 2006
    
    
    6,362Operating income 2005
    
    
    2,694Change
    
    
    3,668Margin
    
    
    3,665Volume
    
    
    80Fixed costs
    
    
    (270
    )Depreciation
    
    
    (40
    )Trading & price hedging 1)
    
    
    (1,175
    )Unrealized LME effects
    
    
    1,800Infrequent items
    
    
    (495
    )Other
    
    
    105Total change in operating income
    
    
    3,668
 
 1)
    
    Includes realized effects from the strategic hedge program.




---



##### 



86  Financial performance
 
 Market statistics
 2006
    
    
    2005
    
    
    2004LME three month average (USD/mt)
    
    
    2,594
    
    
    
    1,900
    
    
    
    1,721LME three month average (NOK/mt)
    
    
    16,628
    
    
    
    12,236
    
    
    
    11,600Global production of primary
aluminium (1,000 mt)
    
    
    33,800
    
    
    
    32,000
    
    
    
    29,900Global consumption of primary
aluminium (1,000 mt)
    
    
    34,200
    
    
    
    31,900
    
    
    
    2,880Reported primary aluminium
inventories (1,000 mt)
    
    
    2,720
    
    
    
    2,930
    
    
    
    (670
    )
 Operating
Income Aluminium Metal
 
 Market conditions
    Key development projects
   Plant closures
   Operating revenues




---



##### 



Financial performance  87
 
 Operating statistics
 2006
    
    
    2005
    
    
    2004Primary aluminium production (1,000 mt) 1)
    
    
    1,799
    
    
    
    1,826
    
    
    
    1,720Realized aluminium price LME (USD/mt) 2)
    
    
    2,352
    
    
    
    1,812
    
    
    
    1,629
 1)
    
    Includes Søral and HAW volumes (non-consolidated investees).2)
    
    Includes the effect of strategic and operational LME hedges.
  Metal effects and unrealized gains (losses)
 2006
    
    
    2005
    
    
    2004LME futures contracts, realized
(strategic hedges) 1)
    
    
    (929
    )
    
    
    (231
    )
    
    
    (107
    )US dollar forward contracts, realized (strategic hedges) 1)
    
    
    430
    
    
    
    485
    
    
    
    383LME future contracts, unrealized
(operational hedges) 2)
    
    
    597
    
    
    
    (1,204
    )
    
    
    (75
    )
 1)
    
    Strategic hedge programs (hedge accounting) will continue to impact reported results during
2007. The LME future contracts and US dollar forward contracts underlying the hedge in the
Sunndal program were priced at approximately US dollar 1,500 and NOK/USD 9.4, respectively,
for the remainder of the program. An additional hedge program was implemented during the
first quarter of 2006, for the period 2006  2008. The program consists of LME contracts, sold
at an average price of approximately US dollar 2,225 (power prices are fixed for corresponding
production volumes by contracts evaluated at market value). The remaining hedged volumes for
2007 2008 amounted to 371,000 mt at the end of the fourth quarter of 2006, of which 290,000
mt relates to the program entered into during the first quarter of 2006.2)
    
    Changes in the market value of open LME derivative contracts relate mainly to operational
hedges. Offsetting changes to the value of the hedged contracts, which are not marked to their
market value, are not reflected in the results until realized.
 
   Operating costs
  Operating income
  Production
of primary aluminum
    
    Aluminum price(BAR GRAPH)
    
    (BAR GRAPH)




---



##### 



88  Financial performance
 Industry
cost rising
 
 19)
 Adjusted EBITDA
    ALUMINIUM PRODUCTS
 Market conditions 20)
     19)
    
    Marked-to-market adjustments on LME contracts entered into by Hydros sourcing and trading
operating unit are excluded from the results reported for this operating unit. These effects are
evaluated for the business area as a whole and not on an individual operating unit basis. When
realized, gains and losses on LME contracts are included in the various units results. In addition,
the results exclude gains and losses on currency contracts purchased to hedge currency positions
resulting from operations, which are included in financial items.20)
    
    Industry statistics have been derived from analyst reports, trade associations and other public
sources unless otherwise indicated.




---



##### 



Financial performance  89
 
 Aluminium Products 1)
 NOK million
    
    2006
    
    
    2005
    
    
    2004Operating revenues
    
    
    49,844
    
    
    
    42,477
    
    
    
    43,533Operating costs
    
    
    49,927
    
    
    
    42,847
    
    
    
    42,461Operating income
    
    
    (83
    )
    
    
    (370
    )
    
    
    1,072Adjusted EBITDA
    
    
    1,715
    
    
    
    2,670
    
    
    
    3,058RoaCE
    
    
    (1.3
    %)
    
    
    (3.2
    %)
    
    
    3.7
    %Number of employees
    
    
    19,370
    
    
    
    18,997
    
    
    
    19,520
 1)
    
    Effective 1 February 2006, Hydro decided to split Aluminium into two business areas,
Aluminium Metal and Aluminium Products. Aluminium Products consists of the previous Rolled
Products and Extrusion and Automotive sub-segments. Prior periods have been restated to be
comparable.During fourth quarter 2006 Hydro entered agreements to divest its castings business. As a result,
the castings business was reclassified as an asset held for sale and reported as a discontinued
operations and is excluded from the operating results of Aluminium Products for the current and all
prior periods in the report.
 Metal effects and unrealized gains (losses)
 2006
    
    
    2005
    
    
    2004Metal effect 1)
    
    
    264
    
    
    
    138
    
    
    
    154Unrealized results operational LME hedges 2)
    
    
    (101
    )
    
    
    171
    
    
    
    249
 1)
    
    Rolled Products sales prices are based on a margin over the metal price. The production and
logistic process of Rolled Products lasts two to three months. As a result, margins are
impacted by timing differences resulting from the FIFO (first in, first out) inventory
valuation method, due to changing aluminium prices during the production process. Decreasing
aluminium prices in Euro results in a negative metal effect, while increasing prices have a
positive effect on margins.2)
    
    Unrealized gains and losses result from marked-to-market valuation of open LME derivative
contracts related to operational hedges, which are reported as part of eliminations for
various units in Aluminium Products utilizing derivatives to mitigate their LME price
exposure. Gains and losses on the LME contracts are included in the various units results
when realized. Offsetting changes to the value of the hedged contracts, which are not marked
to their market value, are not reflected in the results until realized.
 
   Operating
incomeAluminum Products
 
 Key development activities
   Plant closures




---



##### 



90  Financial performance
   Rolled Products
 Operating revenues
    Operating costs
  
 Rolled Products
 NOK million
    
    2006
    
    
    2005
    
    
    2004Operating revenues
    
    
    23,227
    
    
    
    19,490
    
    
    
    20,288Operating costs
    
    
    22,445
    
    
    
    18,735
    
    
    
    19,663Operating income
    
    
    782
    
    
    
    754
    
    
    
    626Adjusted EBITDA
    
    
    1,354
    
    
    
    1,565
    
    
    
    1,361Number of employees
    
    
    4,090
    
    
    
    3,981
    
    
    
    4,013
 Variance analysis Rolled Products
 NOK millionOperating income 2006
    
    
    782Operating income 2005
    
    
    754Change
    
    
    27Margin
    
    
    190Volume
    
    
    270Fixed costs
    
    
    (630
    )Depreciation
    
    
    95Infrequent items
    
    
    100Total change in operating income
    
    
    27




---



##### 



Financial performance  91
   Operating income
  Adjusted EBITDA
  Extrusion
 Operating revenues
   
 Extrusion
 NOK million
    
    2006
    
    
    2005
    
    
    2004Operating revenues
    
    
    20,418
    
    
    
    16,826
    
    
    
    17,137Operating costs
    
    
    20,186
    
    
    
    16,551
    
    
    
    16,531Operating income
    
    
    231
    
    
    
    275
    
    
    
    606Adjusted EBITDA
    
    
    887
    
    
    
    867
    
    
    
    1,152Number of employees
    
    
    9,635
    
    
    
    9,430
    
    
    
    10,000
 Variance analysis Extrusion
 NOK millionOperating income 2006
    
    
    231Operating income 2005
    
    
    275Change
    
    
    (44
    )Margin
    
    
    195Volume
    
    
    455Fixed costs
    
    
    (195
    )Depreciation
    
    
    70Infrequent items
    
    
    (535
    )Other
    
    
    (35
    )Total change in operating income
    
    
    (44
    )




---



##### 



92  Financial performance
 Operating costs
  Operating income
  Adjusted EBITDA
  Automotive
 Operating revenues
  Operating costs
  
 Automotive
 NOK million
    
    2006
    
    
    2005
    
    
    2004Operating revenues
    
    
    6,463
    
    
    
    6,423
    
    
    
    7,363Operating costs
    
    
    7,469
    
    
    
    8,002
    
    
    
    7,763Operating income
    
    
    (1,006
    )
    
    
    (1,579
    )
    
    
    (400
    )Adjusted EBITDA
    
    
    (436
    )
    
    
    67
    
    
    
    304Number of employees
    
    
    5,460
    
    
    
    5,586
    
    
    
    5,507
 Variance analysis Automotive
 NOK millionOperating income 2006
    
    
    (1,006
    )Operating income 2005
    
    
    (1,579
    )Change
    
    
    573Margin
    
    
    (520
    )Volume
    
    
    120Fixed costs
    
    
    190Depreciation
    
    
    160Infrequent items
    
    
    635Other
    
    
    (10
    )Total change in operating income
    
    
    573




---



##### 



Financial performance  93
  Operating income
  Adjusted EBITDA
  Other and eliminations
   OTHER ACTIVITIES
  
 
 Other Activities
 Operating income (loss)
 YearNOK million
    
    2006
    
    
    2005
    
    
    2004Polymers
    
    
    1,029
    
    
    
    69
    
    
    
    254Other
    
    
    248
    
    
    
    (71
    )
    
    
    58Total
    
    
    1,277
    
    
    
    (2
    )
    
    
    312
 Adjusted EBITDA
 YearNOK million
    
    2006
    
    
    2005
    
    
    2004Polymers
    
    
    1,542
    
    
    
    564
    
    
    
    774Other
    
    
    551
    
    
    
    1,316
    
    
    
    589Total
    
    
    2,094
    
    
    
    1,880
    
    
    
    1,363
 
 Polymers




---



##### 



94  Financial performance
     Other
   Corporate and eliminations




---



##### 



Financial performance  95
  Liquidity and capital resources
 Cash flow
  Operating activities
  Investing activities
  
 
 Liquidity and capital resources
 NOK million
    
    2006
    
    
    2005
    
    
    2004Cash flow provided by (used for):Operations
    
    
    38,727
    
    
    
    27,008
    
    
    
    27,185Investments
    
    
    (31,727
    )
    
    
    (24,062
    )
    
    
    (23,488
    )Financing
    
    
    (11,152
    )
    
    
    (6,797
    )
    
    
    (13,579
    )Decrease in cash and
cash equivalents
    
    
    (3,656
    )
    
    
    (3,903
    )
    
    
    (507
    )Return on shareholders equity
    
    
    18.1
    %
    
    
    17.2
    %
    
    
    14.4
    %RoaCE
    
    
    14.9
    %
    
    
    16.6
    %
    
    
    12.9
    %Adjusted net debt/equity ratio 1)
    
    
    0.22
    
    
    
    0.31
    
    
    
    0.11
 1)
    
    Adjusted net interest-bearing debt divided by shareholders equity plus minority interest,
adjusted for unfunded pension obligation (after tax) and present value of future obligations
on operating leases.
 Balance sheet data
 As of 31 DecemberNOK million
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Cash, cash equivalents and short-term investments
    
    
    21,780
    
    
    
    14,329
    
    
    
    25,336
    
    
    
    16,426
    
    
    
    8,158Total assets
    
    
    233,993
    
    
    
    227,195
    
    
    
    200,243
    
    
    
    218,629
    
    
    
    207,211Short-term debt
    
    
    3,655
    
    
    
    5,037
    
    
    
    4,353
    
    
    
    6,485
    
    
    
    8,819Long-term debt
    
    
    19,619
    
    
    
    21,387
    
    
    
    19,487
    
    
    
    28,403
    
    
    
    30,728Deferred tax liabilities
    
    
    27,307
    
    
    
    33,713
    
    
    
    29,515
    
    
    
    32,796
    
    
    
    36,554Ordinary shares and additional paid-in capital
    
    
    14,444
    
    
    
    15,240
    
    
    
    15,207
    
    
    
    20,403
    
    
    
    20,420Total shareholders equity
    
    
    96,496
    
    
    
    95,495
    
    
    
    85,890
    
    
    
    88,080
    
    
    
    75,867




---



##### 



96  Financial performance
   Financing activities
  Liquidity
  Short and long-term borrowing




---



##### 



Financial performance  97
      Employee retirement plans




---



##### 



98  Financial performance
  Contractual obligations, commitments and off balance sheet arrangements
   
 Contractual obligations
 Payments due by periodNOK million
    
    Total
    
    
    Less than 1 year
    
    
    1 - 3 years
    
    
    3 - 5 years
    
    
    ThereafterLong-term debt
    
    
    19,699
    
    
    
    422
    
    
    
    2,027
    
    
    
    2,692
    
    
    
    14,557Interest related to long-term debt
    
    
    18,719
    
    
    
    1,409
    
    
    
    2,705
    
    
    
    2,343
    
    
    
    12,262Finance lease obligations
    
    
    361
    
    
    
    19
    
    
    
    111
    
    
    
    80
    
    
    
    152Operating lease obligations
    
    
    15,242
    
    
    
    2,415
    
    
    
    5,893
    
    
    
    3,530
    
    
    
    3,404Unconditional purchase obligations
    
    
    87,401
    
    
    
    18,176
    
    
    
    33,912
    
    
    
    12,113
    
    
    
    23,200Contractual commitments for: PP&E
    
    
    18,608
    
    
    
    6,749
    
    
    
    7,245
    
    
    
    1,810
    
    
    
    2,804 Other future investments
    
    
    117
    
    
    
    69
    
    
    
    48
    
    
    
    
    
    
    
    Benefit payments unfunded defined benefit plans
    
    

    
    
    
    
    385

    
    
    
    882
    
    
    
    1,057
    
    
    }   See1)Termination benefits
    
    
    
    
    
    
    179
    
    
    
    464
    
    
    
    575Other long-term liabilities
    
    
    4,976
    
    
    
    1,359
    
    
    
    1,165
    
    
    
    377
    
    
    
    2,074Total contractual cash obligations
    
    
    
    
    
    
    31,183
    
    
    
    54,452
    
    
    
    24,577
 1)
    
    Annual payments are expected to continue to increase gradually into the foreseeable future
starting in the range of NOK 800 to 900 million. Hydro also has other obligations connected
with pension plans that are not contractually fixed to timing and amount.
 
 Minority interest
   Investments




---



##### 



Financial performance  99
 
 Investments 1)
 NOK million
    
    2006
    
    
    %
    
    
    2005
    
    
    %
    
    
    2004
    
    
    %Exploration and Production
    
    
    20,742
    
    
    
    78
    
    
    
    33,846
    
    
    
    82
    
    
    
    10,606
    
    
    
    54Energy and Oil Marketing
    
    
    2,062
    
    
    
    8
    
    
    
    2,333
    
    
    
    6
    
    
    
    1,460
    
    
    
    8Oil & Energy
    
    
    22,804
    
    
    
    85
    
    
    
    36,179
    
    
    
    88
    
    
    
    12,067
    
    
    
    62Aluminium Metal 2)
    
    
    1,979
    
    
    
    7
    
    
    
    1,792
    3)
    
    
    4
    
    
    
    4,244
    4)
    
    
    22Aluminium Products 2)
    
    
    1,250
    
    
    
    5
    
    
    
    1,970
    3)
    
    
    5
    
    
    
    1,951
    
    
    
    10Other activities
    
    
    647
    
    
    
    2
    
    
    
    1,097
    
    
    
    3
    
    
    
    1,058
    
    
    
    5Corporate and eliminations
    
    
    35
    
    
    
    
    
    
    
    72
    
    
    
    
    
    
    
    145
    
    
    
    1Total
    
    
    26,713
    
    
    
    100
    
    
    
    41,110
    
    
    
    100
    
    
    
    19,464
    
    
    
    100
 1)
    
    Additions to property, plant and equipment (capital expenditures) plus long-term securities,
intangible assets, long-term advances and investments in non- consolidated investees.2)
    
    Effective 1 February 2006, Hydro decided to split Aluminium into two business areas,
Aluminium Metal and Aluminium Products. Aluminium Metal consists of the previous Metals
sub-segment. Aluminium Products consists of the previous Rolled Products and Extrusion and
Automotive sub-segments. Prior periods have been restated to be comparable.3)
    
    Includes effect of change in accounting principles (FIN 47). Non-cash increase in investment
of NOK 186 million for Aluminium Metal and NOK 9 million for Aluminium Products.4)
    
    Includes effect of change in accounting principles (FIN 46R). Non-cash increase in investment
of NOK 1,275 million.
 
   Oil & Energy
    Aluminium Metal




---



##### 



100  Financial performance
 Aluminium Products
  Material commitments
   Critical accounting policies
  Oil and gas exploration costs




---



##### 



Financial performance  101
  Proved oil and gas reserves
     Derivative instruments




---



##### 



102  Financial performance
  Asset retirement obligations
    Impairment of long-lived assets




---



##### 



Financial performance  103
   Contingencies and environmental liabilities
  Business combinations and goodwill




---



##### 



104  Financial performance
    Income taxes




---



##### 



Financial performance  105
 Employee retirement plans




---



##### 



04
 Viability performance
 Innovation
    
    
    119About the reporting
    
    
    121Facts and figures
    
    
    123




---



##### 



Viability
performance  119
 Innovation
 The ability to innovate is crucial to a viable Hydro. Our growth ambitions mean that we need
to come up with breakthroughs while continuing to improve our daily operations. 2006 brought
significant progress on both dimensions.
   Innovation in oil and energy
 2




---



##### 



120 (BLACK BOX) Viability performance
 3
 Continuous improvement in metal production
    Aluminium product development




---



##### 



Viability performance  121
 About the reporting
  Principles for the reporting
    Reporting scope and limitations
    Assurance principles and scope




---



##### 



123 (BLACK BOX) Viability performance
 Facts and figures
 Society
 
 Geographical distribution of sales
 NOK million
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Norway
    
    
    18,138
    
    
    
    24,834
    
    
    
    25,012
    
    
    
    16,363
    
    
    
    16,393Germany
    
    
    27,369
    
    
    
    17,176
    
    
    
    19,030
    
    
    
    17,909
    
    
    
    17,050Other Europe
    
    
    107,595
    
    
    
    98,197
    
    
    
    81,589
    
    
    
    78,763
    
    
    
    78,475Total Europe
    
    
    153,102
    
    
    
    138,032
    
    
    
    125,631
    
    
    
    113,035
    
    
    
    111,918USA
    
    
    21,179
    
    
    
    13,229
    
    
    
    10,224
    
    
    
    10,466
    
    
    
    11,552Canada
    
    
    3,035
    
    
    
    3,439
    
    
    
    5,188
    
    
    
    2,690
    
    
    
    2,742Other Americas
    
    
    8,956
    
    
    
    8,201
    
    
    
    2,519
    
    
    
    1,879
    
    
    
    1,481Africa
    
    
    1,144
    
    
    
    981
    
    
    
    547
    
    
    
    266
    
    
    
    283Asia
    
    
    7,760
    
    
    
    6,313
    
    
    
    5,943
    
    
    
    5,567
    
    
    
    4,813Australia and New Zealand
    
    
    1,058
    
    
    
    1,036
    
    
    
    972
    
    
    
    715
    
    
    
    446Total outside Europe
    
    
    43,132
    
    
    
    33,199
    
    
    
    25,394
    
    
    
    21,583
    
    
    
    21,317Total
    
    
    196,234
    
    
    
    171,231
    
    
    
    151,026
    
    
    
    131,778
    
    
    
    133,335
  
 Geographical distribution of employees and payroll
 Number of employees*
    
    
    Payroll (NOK million)2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Norway
    
    
    11,625
    
    
    
    11,638
    
    
    
    12,133
    
    
    
    12,587
    
    
    
    14,610
    
    
    
    6,949
    
    
    
    6,354
    
    
    
    6,771
    
    
    
    6,771
    
    
    
    6,337Germany
    
    
    5,748
    
    
    
    5,613
    
    
    
    5,591
    
    
    
    5,629
    
    
    
    7,062
    
    
    
    2,370
    
    
    
    1,942
    
    
    
    2,037
    
    
    
    2,155
    
    
    
    2,207Other Europe
    
    
    10,472
    
    
    
    9,760
    
    
    
    10,536
    
    
    
    10,937
    
    
    
    15,859
    
    
    
    3,020
    
    
    
    2,969
    
    
    
    3,258
    
    
    
    3,174
    
    
    
    3,121Total Europe
    
    
    27,845
    
    
    
    27,011
    
    
    
    28,260
    
    
    
    29,153
    
    
    
    37,531
    
    
    
    12,339
    
    
    
    11,265
    
    
    
    12,066
    
    
    
    12,100
    
    
    
    11,665USA
    
    
    3,447
    
    
    
    3,621
    
    
    
    3,780
    
    
    
    3,719
    
    
    
    4,058
    
    
    
    1,268
    
    
    
    1,068
    
    
    
    746
    
    
    
    775
    
    
    
    757Canada
    
    
    362
    
    
    
    363
    
    
    
    372
    
    
    
    374
    
    
    
    377
    
    
    
    297
    
    
    
    155
    
    
    
    142
    
    
    
    173
    
    
    
    189Other Americas
    
    
    769
    
    
    
    633
    
    
    
    779
    
    
    
    782
    
    
    
    1,984
    
    
    
    65
    
    
    
    52
    
    
    
    42
    
    
    
    29
    
    
    
    44Asia
    
    
    653
    
    
    
    582
    
    
    
    811
    
    
    
    949
    
    
    
    4,054
    
    
    
    65
    
    
    
    54
    
    
    
    54
    
    
    
    72
    
    
    
    76Other
    
    
    529
    
    
    
    555
    
    
    
    602
    
    
    
    596
    
    
    
    1,708
    
    
    
    286
    
    
    
    315
    
    
    
    265
    
    
    
    237
    
    
    
    200Total outside Europe
    
    
    5,760
    
    
    
    5,754
    
    
    
    6,344
    
    
    
    6,420
    
    
    
    12,181
    
    
    
    1,982
    
    
    
    1,643
    
    
    
    1,249
    
    
    
    1,287
    
    
    
    1,266Total
    
    
    33,605
    
    
    
    32,765
    
    
    
    34,604
    
    
    
    35,573
    
    
    
    49,712
    
    
    
    14,321
    
    
    
    12,909
    
    
    
    13,316
    
    
    
    13,574
    
    
    
    12,931
 *
    
    Per 31 December




---



##### 



Financial performance
 
 Current income tax
 NOK million
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Norway
    
    
    40,056
    
    
    
    28,784
    
    
    
    22,537
    
    
    
    13,661
    
    
    
    12,166Germany
    
    
    190
    
    
    
    94
    
    
    
    776
    
    
    
    705
    
    
    
    184Other Europe
    
    
    702
    
    
    
    575
    
    
    
    71
    
    
    
    (67
    )
    
    
    618Total Europe
    
    
    40,948
    
    
    
    29,453
    
    
    
    23,384
    
    
    
    14,299
    
    
    
    12,968US
    
    
    22
    
    
    
    12
    
    
    
    1
    
    
    
    (130
    )
    
    
    (130
    )Canada
    
    
    265
    
    
    
    691
    
    
    
    127
    
    
    
    41
    
    
    
    147Other Americas
    
    
    84
    
    
    
    16
    
    
    
    36
    
    
    
    31
    
    
    
    25Africa
    
    
    478
    
    
    
    551
    
    
    
    483
    
    
    
    232
    
    
    
    124Asia
    
    
    115
    
    
    
    4
    
    
    
    2
    
    
    
    2
    
    
    
    (56
    )Australia and New Zealand
    
    
    191
    
    
    
    48
    
    
    
    94
    
    
    
    (11
    )
    
    
    34Total outside Europe
    
    
    1,155
    
    
    
    1,322
    
    
    
    743
    
    
    
    165
    
    
    
    144Total
    
    
    42,103
    
    
    
    30,775
    
    
    
    24,127
    
    
    
    14,464
    
    
    
    13,112
 Community investments, gifts and sponsorships
  Research and development
  Further information
  People
 
 Diversity in management
 Women
    
    
    Men
    
    
    Non-Norwegians2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Board of Directors (nine
members*)
    
    
    33
    %
    
    
    22
    %
    
    
    22
    %
    
    
    33
    %
    
    
    67
    %
    
    
    78
    %
    
    
    78
    %
    
    
    67
    %
    
    
    22
    %
    
    
    22
    %
    
    
    22
    %
    
    
    11
    %Corporate Management Board
    
    
    29
    %
    
    
    20
    %
    
    
    20
    %
    
    
    20
    %
    
    
    71
    %
    
    
    80
    %
    
    
    80
    %
    
    
    80
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Top 50 managers
    
    
    19
    %
    
    
    20
    %
    
    
    25
    %
    
    
    23
    %
    
    
    81
    %
    
    
    80
    %
    
    
    75
    %
    
    
    77
    %
    
    
    11
    %
    
    
    9
    %
    
    
    14
    %
    
    
    14
    %Top 200 managers
    
    
    20
    %
    
    
    23
    %
    
    
    19
    %
    
    
    
    
    
    
    80
    %
    
    
    77
    %
    
    
    81
    %
    
    
    
    
    
    
    19
    %
    
    
    24
    %
    
    
    20
    %
    
    
    
 *
    
    Three of the board members are employee representatives. All are Norwegian men.
 Diversity in Norway
 Women and men at different levels
 Women
    
    
    Men2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Managers
    
    
    20
    %
    
    
    18
    %
    
    
    18
    %
    
    
    17
    %
    
    
    80
    %
    
    
    82
    %
    
    
    82
    %
    
    
    83
    %Salaried employees
    
    
    43
    %
    
    
    44
    %
    
    
    43
    %
    
    
    43
    %
    
    
    57
    %
    
    
    56
    %
    
    
    57
    %
    
    
    57
    %Hourly paid
    
    
    14
    %
    
    
    14
    %
    
    
    14
    %
    
    
    16
    %
    
    
    86
    %
    
    
    86
    %
    
    
    86
    %
    
    
    84
    %Total
    
    
    22
    %
    
    
    22
    %
    
    
    21
    %
    
    
    22
    %
    
    
    78
    %
    
    
    78
    %
    
    
    79
    %
    
    
    78
    %
  Oil & Energy
    
    
    Aluminium
    
    
    Other2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004Managers
    
    
    19
    %
    
    
    17
    %
    
    
    16
    %
    
    
    16
    %
    
    
    15
    %
    
    
    14
    %
    
    
    23
    %
    
    
    22
    %
    
    
    22
    %Salaried employees
    
    
    44
    %
    
    
    46
    %
    
    
    43
    %
    
    
    41
    %
    
    
    40
    %
    
    
    37
    %
    
    
    43
    %
    
    
    44
    %
    
    
    45
    %Hourly paid
    
    
    22
    %
    
    
    12
    %
    
    
    11
    %
    
    
    13
    %
    
    
    14
    %
    
    
    14
    %
    
    
    10
    %
    
    
    16
    %
    
    
    17
    %Total
    
    
    27
    %
    
    
    24
    %
    
    
    22
    %
    
    
    17
    %
    
    
    17
    %
    
    
    17
    %
    
    
    21
    %
    
    
    24
    %
    
    
    25
    %




---



##### 



Viability
performance (BLACK BOX) 125
 RecruitmentWomen
    


    
    
    
    
    
    
    

    

    Men2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    1004Managers
    
    
    22
    %
    
    
    32
    %
    
    
    21
    %
    
    
    78
    %
    
    
    68
    %
    
    
    79
    %Salaried employees*
    
    
    34
    %
    
    
    35
    %
    
    
    38
    %
    
    
    66
    %
    
    
    65
    %
    
    
    62
    %Hourly paid
    
    
    15
    %
    
    
    16
    %
    
    
    13
    %
    
    
    85
    %
    
    
    84
    %
    
    
    87
    %Total
    
    
    26
    %
    
    
    27
    %
    
    
    30
    %
    
    
    74
    %
    
    
    73
    %
    
    
    70
    %
 *
    
    The group salaried employees largely consist of younger persons with higher educational qualifications. They constitute an important group with respect to managerial recruitment.
 
 Equal pay
   Part-time employees
  Health and safety2006
    
    
    2005
    
    
    2004
    
    
    2003Total recordable injuries (TRI) 1)
    
    
    4.0
    
    
    
    5.4
    
    
    
    6.0
    
    
    
    7.0Lost-time injuries (LTI) 1)Employees
    
    
    2.1
    
    
    
    2.7
    
    
    
    2.7
    
    
    
    3.6Contractors
    
    
    2.5
    
    
    
    2.4
    
    
    
    2.4
    
    
    
    2.3Fatalities2)Employees
    
    
    1.4
    
    
    
    1.9
    
    
    
    2.5
    
    
    
    3.7Contractors
    
    
    4.8
    
    
    
    6.5
    
    
    
    6.1
    
    
    
    5.8Sick leave
    
    
    2.6
    %
    
    
    3.2
    %
    
    
    3.1
    %
    
    
    3.0
    %
 1)
    
    Per million working hours2)
    
    Per 100 million
working hours, five-year rolling average
 
 Further information




---



##### 



126
(BLACK BOX) Viability performance
 EnvironmentResource use1,000 tonnes
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Alumina
    
    
    2,576
    
    
    
    2,687
    
    
    
    2,585
    
    
    
    2,347
    
    
    
    2,202Sodium chloride (salt)
    
    
    640
    
    
    
    486
    
    
    
    404
    
    
    
    432
    
    
    
    404Magnesite
    
    
    178
    
    
    
    167
    
    
    
    171
    
    
    
    173
    
    
    
    158Aluminium fluoride
    
    
    25
    
    
    
    26
    
    
    
    23
    
    
    
    19
    
    
    
    19
 Water consumptionMillion m3
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Norway
    
    
    132.8
    
    
    
    133
    
    
    
    120.7
    
    
    
    121.8
    
    
    
    113.5Europe
    
    
    10.6
    
    
    
    9.7
    
    
    
    10.9
    
    
    
    12.5
    
    
    
    12.7Rest of the world
    
    
    13.8
    
    
    
    13.8
    
    
    
    13.6
    
    
    
    13.4
    
    
    
    12.6Total
    
    
    157.2
    
    
    
    156.5
    
    
    
    145.2
    
    
    
    147.7
    
    
    
    138.8
 Energy consumptionPJ
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Electricity
    
    
    94.7
    
    
    
    95.8
    
    
    
    92.3
    
    
    
    86.8
    
    
    
    89.6Oil
    
    
    2.7
    
    
    
    2.2
    
    
    
    3
    
    
    
    3.4
    
    
    
    5.1Coke
    
    
    19.3
    
    
    
    18.6
    
    
    
    17.5
    
    
    
    17.2
    
    
    
    18.8Natural gas
    
    
    58.9
    
    
    
    57.6
    
    
    
    58.4
    
    
    
    49.1
    
    
    
    59.8Natural gas liquid
    
    
    2.2
    
    
    
    2.6
    
    
    
    2.8
    
    
    
    1.8
    
    
    
    1.5Other
    
    
    8.5
    
    
    
    8
    
    
    
    7.6
    
    
    
    7.6
    
    
    
    7.2Total
    
    
    186.3
    
    
    
    184.8
    
    
    
    181.6
    
    
    
    165.9
    
    
    
    182
  Energy consumption per business areaPJ
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Oil & Energy
    
    
    49.7
    
    
    
    50.5
    
    
    
    52.1
    
    
    
    43.8
    
    
    
    55.5Aluminium
    
    
    127.2
    
    
    
    125.7
    
    
    
    121.3
    
    
    
    113.6
    
    
    
    118.3Polymers
    
    
    9.4
    
    
    
    8.6
    
    
    
    8.2
    
    
    
    8.5
    
    
    
    8.3Total
    
    
    186.3
    
    
    
    184.8
    
    
    
    181.6
    
    
    
    165.9
    
    
    
    182
 Greenhouse gas emissionsMillion tonnes C02e
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002N2O
    
    
    0.05
    
    
    
    0.04
    
    
    
    0.03
    
    
    
    0.03
    
    
    
    0.01SF6
    
    
    0.08
    
    
    
    0.31
    
    
    
    1.16
    
    
    
    1.2
    
    
    
    1.08PFC
    
    
    0.99
    
    
    
    1.64
    
    
    
    1.54
    
    
    
    1.41
    
    
    
    1.75CH4
    
    
    0.07
    
    
    
    0.03
    
    
    
    0.04
    
    
    
    0.03
    
    
    
    0.03CO2
    
    
    6.34
    
    
    
    6.18
    
    
    
    6.1
    
    
    
    5.52
    
    
    
    6.32Total
    
    
    7.53
    
    
    
    8.2
    
    
    
    8.87
    
    
    
    8.19
    
    
    
    9.19
 6
 Greenhouse gas emissions per business areaMillion tonnes C02e
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Oil & Energy
    
    
    3.05
    
    
    
    2.89
    
    
    
    2.92
    
    
    
    2.52
    
    
    
    3.25Aluminium
    
    
    4.24
    
    
    
    5.06
    
    
    
    5.72
    
    
    
    5.43
    
    
    
    5.69Polymers
    
    
    0.24
    
    
    
    0.25
    
    
    
    0.23
    
    
    
    0.24
    
    
    
    0.25Total
    
    
    7.53
    
    
    
    8.2
    
    
    
    8.87
    
    
    
    8.19
    
    
    
    9.19




---



##### 



Viability performance (BLACK BOX) 127
 Hazardous wasteTonnes
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Oil & Energy
    
    
    54,414
    
    
    
    11,198
    
    
    
    10,644
    
    
    
    20,461
    
    
    
    42,925Aluminium
    
    
    138,972
    
    
    
    147,355
    
    
    
    117,768
    
    
    
    102,764
    
    
    
    101,409Polymers
    
    
    6,998
    
    
    
    6,638
    
    
    
    1 ,948
    
    
    
    1,241
    
    
    
    524Total
    
    
    200,384
    
    
    
    165,190
    
    
    
    130,360
    
    
    
    124,466
    
    
    
    144,867
   Other wasteTonnes
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Oil & Energy
    
    
    3,323
    
    
    
    8,582
    
    
    
    2,408
    
    
    
    3,442
    
    
    
    4,732Aluminium
    
    
    165,021
    
    
    
    157,225
    
    
    
    174,281
    
    
    
    173,846
    
    
    
    127,597Polymers
    
    
    2,932
    
    
    
    4,401
    
    
    
    7,667
    
    
    
    2,423
    
    
    
    4,847Total
    
    
    171,276
    
    
    
    170,208
    
    
    
    184,356
    
    
    
    179,712
    
    
    
    137,175
 Waste treatment2006
    
    
    2005
    
    
    2004
    
    
    2003Landfill
    
    
    34
    %
    
    
    27
    %
    
    
    28
    %
    
    
    35
    %Energy recovery
    
    
    10
    %
    
    
    5
    %
    
    
    4
    %
    
    
    4
    %Reuse/recycling
    
    
    42
    %
    
    
    46
    %
    
    
    40
    %
    
    
    37
    %Other treatment
    
    
    14
    %
    
    
    22
    %
    
    
    28
    %
    
    
    24
    %
   Emissions2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Oil & Energy
    

CO2 from flaring, tonnes
    
    
    224,623
    
    
    
    196,525
    
    
    
    196,464
    
    
    
    200,969
    
    
    
    Oil and chemical spillages, number
    
    
    75
    
    
    
    70
    
    
    
    54
    
    
    
    70
    
    
    
    87Produced water, mill. m3
    
    
    28
    
    
    
    31
    
    
    
    31
    
    
    
    26
    
    
    
    31Aluminium (Electrolysis)
    
    SO2, tonnes
    
    
    7,145
    
    
    
    6,544
    
    
    
    6,754
    
    
    
    6,465
    
    
    
    6,220Fluorides to air, tonnes
    
    
    613
    
    
    
    763
    
    
    
    659
    
    
    
    595
    
    
    
    775PAH, to air tonnes (incl. carbon
plants)
    
    
    49
    
    
    
    72
    
    
    
    57
    
    
    
    53
    
    
    
    62Ozone depleting substances
    
    HCFC, tonnes
    
    
    0.075
    
    
    
    0.219
    
    
    
    0.787
    
    
    
    0.141
    
    
    
    0.815
 
 2 2
  Financial provisions
  Further information




---



##### 



05
  Risk review
 Risk factors
    
    
    134Market risk
    
    
    141Legal proceedings
    
    
    143




---



##### 



134  Risk review
 Risk factors
 Introduction
  Common
 The pending merger of our oil and gas business with Statoil could adversely affect our
business, and completion of the merger will leave us with a less diversified business portfolio,
which could adversely affect our results of operations.
    Future acquisitions, mergers, or strategic alliances may adversely affect our financial
condition.
    A substantial or extended decline in oil or natural gas prices or aluminium prices would have a
material adverse effect on our business.
  
    
    Global and regional economic and political developments in
resource-producing regions, particularly in the Middle East;
    
    Changes in the supply of and demand for oil and natural gas;
    
    Agreements among the members of the Organization of the
Petroleum Exporting Countries (OPEC) regarding oil price and
production controls; and
    
    Oil companies spending on exploration and production
activities.




---



##### 



Risk review  135
    Expansion of our business in emerging and transitioning market countries presents a higher degree
of financial, political, economic and business risk.
      Emerging and transitioning market countries represent a competitive threat to our businesses that
could be exacerbated by regulatory developments in Europe.




---



##### 



136  Risk review
  Our businesses are exposed to foreign currency exchange rate fluctuations.
    Our reported earnings are subject to substantial volatility as a result of fluctuations in the
market value of commodity contracts.
  We are exposed to risks relating to trading and commercial activities.
   We may suffer a major operational incident resulting in loss of life or extensive damage to the
environment or communities, resulting in substantial damage to our reputation or financial
position.
   We are exposed to the risk of a deterioration or sudden dramatic decline in our reputation
among important stakeholders.




---



##### 



Risk review  137
 We are subject to a broad range of environmental, health and safety laws and
regulations in the jurisdictions in which we operate.
     We may not be successful in attracting and retaining sufficient skilled employees.
   Oil & Energy
 The future performance of the Oil & Energy business depends on the ability to find or gain
access to additional oil and gas reserves that are recoverable in a profitable way.
    A significant portion of our oil and gas production is from third-party operated fields over which
we have less control, which could adversely impact our production stability and our ability to meet
our production targets.




---



##### 



138  Risk review
  Our oil and gas reserves are only estimates and may prove to be inaccurate.
  The Oil & Energy development projects and production involve many uncertainties and operating risks
that can prevent us from realizing profits and can cause substantial losses.
    We may be subject to the imposition of sanctions by the US government in connection with our
activities in Iran.
      Our Oil & Energy business is exposed to tax increases or other changes in fiscal regimes on its
petroleum production.




---



##### 



Risk review  139
  Aluminium
 Our Aluminium operations are dependent on substantial amounts of energy and, as a result,
our profitability may decline if energy costs rise.
  2 2
 We may fail to achieve a sufficiently competitive position through our efforts to reposition our
smelter portfolio or find and gain access to further growth projects with alumina and primary metal
production.
    We may fail to achieve adequate returns for our Aluminium Products operations through our
program of turnaround, divestment and closure.
  Our Aluminium business is dependent on securing adequate supplies of alumina to develop and
grow our upstream primary metal business.
   We participate in highly competitive aluminium markets.




---



##### 



140  Risk review
  Our Aluminium business is exposed to the nonperformance of its contract partners.
  We could be adversely affected by disruptions in our Aluminium operations.
  We could be subject to unusual or significant litigation or other actions arising out of
alleged defects in Aluminium products.
  Hydros shares
 Preferential rights may not be available to US holders
of our shares.
   Holders of our shares that are registered in a nominee account may not be able to exercise voting
rights as readily as shareholders whose shares are registered in their own names with the VPS.
  It may be difficult for investors based in the United States to enforce civil liabilities
predicated on US securities laws against us, our Norwegian affiliates, or our directors and
executive officers.




---



##### 



Risk review  141
 Market risk
 Introduction
       Risk management
    
 Indicative price and currency sensitivities 2007 1)
 NetNOK million
    
    Income before tax
    
    
    income
    
    
    ChangeOil price per barrel
    
    
    1,190
    
    
    
    345
    
    
    1 USDAluminium price per tonne
    
    
    1,000
    
    
    
    655
    
    
    100 USDUS dollar Oil & Energy 2)
    
    
    10,340
    
    
    
    3,780
    
    
    1 NOKUS dollar Aluminium Metal 2)
    
    
    3,280
    
    
    
    2,130
    
    
    1 NOKUS dollar Aluminium Products 2)
    
    
    (90
    )
    
    
    (60
    )
    
    1 NOKUS dollar before financial items
    
    
    13,530
    
    
    
    5,850
    
    
    1 NOKUS dollar financial items 3)
    
    
    (3,600
    )
    
    
    (2,500
    )
    
    1 NOKUS dollar Net income
    
    
    9,930
    
    
    
    3,350
    
    
    1 NOK
 1)
    
    Based on approximate average 2006 prices and expected business volumes for 2007: Oil 65 US dollar/bbl, aluminium 2,575 USD/mt
and Norwegian krone USD 6.45.2)
    
    USD sensitivity for Oil & Energy and Aluminium business areas includes both USD revenues and USD costs.3)
    
    Total USD sensitivity of financial positions is NOK 4,600 million negative and consists of
assets and liabilities in various financial instruments.
Positive USD sensitivity on net working capital of USD 1,000 million reduces the total sensitivity to NOK 3,600 million.




---



##### 



142  Risk review
  Sensitivity analysis
    
    
    The tables only include the effects of the derivative instruments
discussed above and of certain financial instruments (see note
3). The analysis does not include any related physical positions, contracts, and anticipated transactions that many of
the derivative 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 likely that all rates or prices would simultaneously move
in directions that would have negative effects on Hydros portfolio of instruments
  
 Hypothetical loss from +/- 10 percent change in
 Fair value asof 31 December,
    
    
    
    
    
    
    Foreign currency
    
    
    CommodityNOK million (unaudited)
    
    2006 1
    
    
    Interest rates
    
    
    exchange rates
    
    
    prices
    
    
    Volatility
    
    
    OtherDerivative financial instruments 2) 3)
    
    
    1,158
    
    
    
    4
    
    
    
    2,091
    
    
    
    
    
    
    
    
    
    
    
    Other financial instruments 4)
    
    
    (1,092
    )
    
    
    1,014
    
    
    
    1,861
    
    
    
    
    
    
    
    
    
    
    
    207Derivative commodity instruments 3)
    
    
    346
    
    
    
    2
    
    
    
    260
    
    
    
    877
    
    
    
    (10
    )
    
    
    
 Hypothetical loss from +/- 10 percent change in
 Fair value asof 31 December,
    
    
    
    
    
    
    Foreign currency
    
    
    CommodityNOK million (unaudited)
    
    2005 1
    
    
    Interest rates
    
    
    exchange rates
    
    
    prices
    
    
    Volatility
    
    
    OtherDerivative financial instruments 2) 3)
    
    
    727
    
    
    
    1
    
    
    
    1,597
    
    
    
    
    
    
    
    
    
    
    
    Other financial instruments 4)
    
    
    (10,799
    )
    
    
    1,153
    
    
    
    1,856
    
    
    
    
    
    
    
    
    
    
    
    202Derivative commodity instruments 3)
    
    
    (489
    )
    
    
    
    
    
    
    54
    
    
    
    1,236
    
    
    
    144
    
    
    
    
 1)
    
    The change in fair value due to price changes is calculated based on pricing formulas for certain derivatives, relevant option pricing models and the net present value of cash flows for certain financial instruments or
derivatives. Discount rates vary as appropriate for the individual instruments.2)
    
    Includes mainly forward currency contracts, embedded forward currency contracts and currency swaps.3)
    
    Cash-flow hedge derivatives are included. Changes in fair value will affect profit and loss at the same time as the underlying hedged transaction.4)
    
    Includes 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 impact earnings.




---



##### 



Risk review  143
 Legal proceedings




---



##### 



Shareholder information
 Shareholder information
  Dividend policy
    
    146Buyback of shares
    
    146Revised dividend policyfor new Hydro
    
    147Funding and credit rating
    
    147Major shareholders and voting rights
    
    147Information from Hydro
    
    148Annual General Meeting
    
    148Change of address
    
    148Key figures for the Hydro share
    
    149Financial calendar 2007
    
    149Other information
    
    150




---



##### 



146  Shareholder information
    Dividend policy
    Buyback of shares




---



##### 



(GRAPHICS)Shareholder information
    

    
    147
 
 Share repurchases 2006
 Total number of shares
    
    
    Maximum number of sharesTotal number of
    
    
    Average price paid
    
    
    purchased as part of publicly
    
    
    that may yet be purchasedshares purchased
    
    
    per share in NOK
    
    
    announced authorization
    
    
    under the authorization24 - 31 May
    
    
    3,262,000
    
    
    
    168.66
    
    
    
    3,262,000
    
    
    
    19,208,4821 - 30 June
    
    
    5,007,000
    
    
    
    159.17
    
    
    
    5,007,000
    
    
    
    14,201,4821 - 14 July 1)
    
    
    3,644,685
    
    
    
    129.30
    
    
    
    3,644,685
    
    
    
    14,201,48215 - 31 July
    
    
    685,000
    
    
    
    174.80
    
    
    
    685,000
    
    
    
    13,516,4821 - 31 August
    
    
    4,144,000
    
    
    
    172.48
    
    
    
    4,144,000
    
    
    
    9,372,4821 - 30 September
    
    
    3,352,000
    
    
    
    152.66
    
    
    
    3,352,000
    
    
    
    6,020,4821 - 31 October
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,020,4821 - 30 November
    
    
    2,962,000
    
    
    
    153.24
    
    
    
    2,962,000
    
    
    
    3,058,4821 - 13 December
    
    
    2,215,000
    
    
    
    149.02
    
    
    
    2,215,000
    
    
    
    843,482Total
    
    
    25,271,685
    
    
    
    156.25
    
    
    
    25,271,685
    
    
    
    843,482
 1)
    
    Redemption of shares held by the Norwegian state related to the buyback authorization
approved by the Extraordinary General Meeting 1 December 2004.
 
 Revised dividend policy for new Hydro
  Funding and credit rating
  Major shareholders and voting rights




---



##### 



148  Shareholder information
 
 Hydros 20 largest shareholders, 31 December 2006
 Number of
    
    
    OwnershipShareholder
    
    shares
    
    
    interestNorwegian State
    
    
    563,773,605
    
    
    
    43.82
    %Morgan Guaranty Trust (ADR)
    
    
    65,978,114
    
    
    
    5.13
    %Hydro
    
    
    60,279,570
    
    
    
    4.69
    %State Street Bank and Trust (nominee)
    
    
    48,625,179
    
    
    
    3.78
    %Folketrygdfondet
    
    
    47,699,635
    
    
    
    3.71
    %JPMorgan Chase Bank (nominee)
    
    
    22,657,683
    
    
    
    1.76
    %Euroclear Bank (nominee)
    
    
    13,974,448
    
    
    
    1.09
    %Vital Forsikring
    
    
    13,193,640
    
    
    
    1.03
    %Capital EuroPacifi c Growth Fund
    
    
    12,392,000
    
    
    
    0.96
    %Capital New Perspective Fund
    
    
    10,820,000
    
    
    
    0.84
    %Capital World Growth and Income Fund
    
    
    7,329,500
    
    
    
    0.57
    %Mellon Bank (nominee)
    
    
    7,079,451
    
    
    
    0.55
    %Clearstream Banking (nominee)
    
    
    6,835,618
    
    
    
    0.53
    %SIS Segaintersettle (nominee)
    
    
    6,733,723
    
    
    
    0.52
    %JPMorgan Chase Bank (nominee)
    
    
    6,691,798
    
    
    
    0.52
    %Investors Bank & Trust Company (nominee)
    
    
    6,655,176
    
    
    
    0.52
    %DnB NOR Norge (IV)
    
    
    6,652,799
    
    
    
    0.52
    %State Street Bank and Trust (nominee)
    
    
    6,162,353
    
    
    
    0.48
    %Goldman Sachs International
    
    
    6,094,182
    
    
    
    0.47
    %Goldman Sachs & Co (nominee)
    
    
    5,595,742
    
    
    
    0.43
    %
  
 Information from Hydro
    Annual General Meeting
  
   Change of address




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##### 



(GRAPHICS)Shareholder information
    

    
    149
 Key figures for the Hydro share
 
 Share price development per quarter for two most recent fiscal years
 Oslo
    
    
    New YorkStock Exchange
    
    
    Stock ExchangeHigh
    
    
    Low
    
    
    High
    
    
    LowPeriod
    
    (in NOK)
    
    
    (in NOK)
    
    
    (in USD)
    
    
    (in USD)First quarter 2005
    
    
    109.50
    
    
    
    92.50
    
    
    
    17.82
    
    
    
    14.80Second quarter 2005
    
    
    120.00
    
    
    
    97.90
    
    
    
    18.39
    
    
    
    15.18Third quarter 2005
    
    
    149.70
    
    
    
    118.40
    
    
    
    23.43
    
    
    
    18.34Fourth quarter 2005
    
    
    148.30
    
    
    
    121.10
    
    
    
    22.29
    
    
    
    18.58First quarter 2006
    
    
    186.20
    
    
    
    138.50
    
    
    
    28.40
    
    
    
    21.17Second quarter 2006
    
    
    199.40
    
    
    
    142.00
    
    
    
    32.37
    
    
    
    22.50Third quarter 2006
    
    
    180.00
    
    
    
    138.25
    
    
    
    29.59
    
    
    
    21.01Fourth quarter 2006
    
    
    196.50
    
    
    
    135.00
    
    
    
    31.18
    
    
    
    20.93First quarter 2007 1)
    
    
    206.50
    
    
    
    176.25
    
    
    
    32.99
    
    
    
    27.52
 1)
    
    As of 28 February 2007
 Share price development per month for six most recent months
 Oslo
    
    
    New YorkStock Exchange
    
    
    Stock ExchangeHigh
    
    
    Low
    
    
    High
    
    
    LowPeriod
    
    (in NOK)
    
    
    (in NOK)
    
    
    (in USD)
    
    
    (in USD)September 2006
    
    
    169.50
    
    
    
    138.25
    
    
    
    26.88
    
    
    
    21.01October 2006
    
    
    160.50
    
    
    
    135.00
    
    
    
    23.97
    
    
    
    20.93November 2006
    
    
    160.50
    
    
    
    146.25
    
    
    
    25.10
    
    
    
    23.19December 2006
    
    
    196.50
    
    
    
    145.75
    
    
    
    31.18
    
    
    
    23.75January 2007
    
    
    202.25
    
    
    
    176.25
    
    
    
    32.54
    
    
    
    27.52February 2007 1)
    
    
    206.50
    
    
    
    188.50
    
    
    
    32.99
    
    
    
    30.01
 1)
    
    As of 28 February 2007
 
 
 Financial calendar 20078 May
    
    Annual General Meeting9 May
    
    Ordinary shares and ADRs trading ex-dividend11 May
    
    Record date for dividend ADRs12 May
    
    Record date for dividend ordinary shares21 May
    
    Payment of dividend ordinary shares29 May
    
    Payment of dividend ADRs31 May
    
    First quarter results24 July
    
    Second quarter results23 October
    
    Third quarter results




---



##### 



150  Shareholder information
 
 2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Share price high, Oslo (NOK) 1)
    
    
    199.40
    
    
    
    149.70
    
    
    
    104.30
    
    
    
    73.18
    
    
    
    77.77Share price low, Oslo (NOK)
    
    
    135.00
    
    
    
    92.50
    
    
    
    72.30
    
    
    
    46.20
    
    
    
    48.14Share price average, Oslo (NOK)
    
    
    164.05
    
    
    
    119.14
    
    
    
    88.77
    
    
    
    59.96
    
    
    
    61.65Share price year-end, Oslo (NOK)
    
    
    193.50
    
    
    
    138.60
    
    
    
    95.40
    
    
    
    72.39
    
    
    
    54.75Share price high, NYSE (USD)
    
    
    32.37
    
    
    
    23.43
    
    
    
    16.72
    
    
    
    10.95
    
    
    
    9.22Share price low, NYSE (USD)
    
    
    20.93
    
    
    
    14.80
    
    
    
    10.69
    
    
    
    6.33
    
    
    
    6.53Share price average, NYSE (USD)
    
    
    25.73
    
    
    
    18.46
    
    
    
    13.22
    
    
    
    8.49
    
    
    
    7.73Share price year-end, NYSE (USD)
    
    
    30.67
    
    
    
    20.64
    
    
    
    15.74
    
    
    
    10.90
    
    
    
    7.83Earnings per share (EPS) (NOK)
    
    
    14.00
    
    
    
    12.50
    
    
    
    9.90
    
    
    
    8.50
    
    
    
    6.80EPS from continuing operations (NOK)
    
    
    13.90
    
    
    
    12.40
    
    
    
    9.00
    
    
    
    6.50
    
    
    
    5.50P/E 2)
    
    
    13.92
    
    
    
    11.05
    
    
    
    10.58
    
    
    
    11.14
    
    
    
    9.96Dividend per share (NOK) 3)
    
    
    5.00
    
    
    
    4.40
    
    
    
    4.00
    
    
    
    2.20
    
    
    
    2.10Pay-out ratio 4)
    
    
    36
    %
    
    
    35
    %
    
    
    44
    %
    
    
    26
    %
    
    
    31
    %Dividend growth
    
    
    14
    %
    
    
    10
    %
    
    
    82
    %
    
    
    5
    %
    
    
    5
    %Pay-out ratio five year average 5)
    
    
    34
    %
    
    
    34
    %
    
    
    29
    %
    
    
    28
    %
    
    
    31
    %Debt/equity ratio 6)
    
    
    
    
    
    
    0.31
    
    
    
    0.11
    
    
    
    0.38
    
    
    
    0.60Credit rating, Standard & Poors
    
    
    A-
    
    
    
    A
    
    
    
    A
    
    
    
    A
    
    
    
    ACredit rating, Moodys
    
    
    A2
    
    
    
    A1
    
    
    
    A2
    
    
    
    A2
    
    
    
    A2Beta 7)
    
    
    1.91
    
    
    
    1.76
    
    
    
    1.56
    
    
    
    0.84
    
    
    
    0.94Non-Norwegian ownership, year-end
    
    
    38
    %
    
    
    40
    %
    
    
    37
    %
    
    
    35
    %
    
    
    36
    %Outstanding shares, average
    
    
    1,240,804,344
    
    
    
    1,254,036,520
    
    
    
    1,272,057,165
    
    
    
    1,287,642,555
    
    
    
    1,288,997,055Outstanding shares, year-end
    
    
    1,226,175,885
    
    
    
    1,250,692,320
    
    
    
    1,254,196,150
    
    
    
    1,283,560,000
    
    
    
    1,289,802,660
 1)
    
    Adjustment factor 0.881699 used for share prices prior to the demerger of 25 March 2004,
according to Oslo Stock Exchanges calculation methods.2)
    
    Share price at year-end divided by EPS from continuing operations3)
    
    Proposed dividend for 20064)
    
    Dividend per share divided by earnings per share. EPS from continuing operations
in 2004.5)
    
    Total dividend divided by net income for last fi ve years6)
    
    Interest-bearing debt + net pension liability (tax adjusted) + operating lease
commitments (discounted)  cash and cash equivalents  short-term investments divided by
shareholders equity + minority interest7)
    
    Change in share price compared with Oslo Benchmark Index (measured for rolling 48
months)
 
 Other information
 Taxation
 United States federal income tax consequences




---



##### 



(GRAPHICS)Shareholder information
    

    
    151
     Taxation of dividends




---



##### 



152  Shareholder information
  Taxation on sale, exchange, or other disposition
  Passive foreign investment company considerations
  US information and backup withholding
  Norwegian tax consequences taxation of dividends




---



##### 



(GRAPHICS)Shareholder information
    

    
    153
 
 Exchange rate information
 NOK/USD average noon buying rate 1)2002
    
    
    7.932003
    
    
    7.062004
    
    
    6.722005
    
    
    6.462006
    
    
    6.36
 NOK/USD noon buying rate 2)Month
    
    High
    
    
    LowSeptember 2006
    
    
    6.60
    
    
    
    6.34October 2006
    
    
    6.78
    
    
    
    6.53November 2006
    
    
    6.50
    
    
    
    6.15December 2006
    
    
    6.28
    
    
    
    6.09January 2007
    
    
    6.47
    
    
    
    6.18February 2007
    
    
    6.28
    
    
    
    6.11
 1)
    
    The average of the noon buying rates on the last business day of each month during the year
indicated.2)
    
    The noon buying rate on 28 February 2007 was NOK 6.13 = USD 1.00
 
 Exchange controls
  Exchange rate information




---



##### 



07
 Corporate governance
 Regulatory compliance
    
    
    156Corporate directives and code of conduct
    
    
    156Business planning and risk management
    
    
    157Controls and procedures
    
    
    157Transparency and communication
    
    
    158Board of Directors
    
    
    158Corporate Management Board
    
    
    159Management compensation
    
    
    161Governance bodies
    
    
    162




---



##### 



156 (BLACK BOX) Corporate governance
     Regulatory
compliance
      Corporate directives and code of conduct




---



##### 



Corporate governance (BLACK BOX) 157
 
  Business planning and risk management
  The portfolio, strategy and business planning process
 The people process
  Controls and procedures
    Pre-approval of audit services
  
    
    audit-related,
    
    tax, and
    
    non-audit related




---



##### 



158 (BLACK BOX) Corporate governance
   Employment of external auditor personnel
  Transparency and communication
  Board of Directors
 Jan Reinås
 Elisabeth Grieg
 Håkan Mogren
 Grete Faremo
 Lena Olving
 Kurt Anker Nielsen
 Terje Friestad
 
 Name
    
    Place of residence
    
    Year of birth
    
    Position
    
    Term expiresJan Reinås
    
    Oslo, Norway
    
    1944
    
    Chairperson
    
    2008Elisabeth Grieg
    
    Oslo, Norway
    
    1959
    
    Deputy chairperson
    
    2008Håkan Mogren
    
    Stockholm, Sweden
    
    1944
    
    Director
    
    2008Grete Faremo
    
    Oslo, Norway
    
    1955
    
    Director
    
    2008Lena Olving
    
    Hjo, Sweden
    
    1956
    
    Director
    
    2008Kurt Anker Nielsen
    
    Copenhagen, Denmark
    
    1945
    
    Director
    
    2008Terje Friestad
    
    Skudeneshavn, Norway
    
    1952
    
    Director
    
    2007Sten Roar Martinsen
    
    Kopervik, Norway
    
    1962
    
    Director
    
    2007Geir Nilsen
    
    Porsgrunn, Norway
    
    1955
    
    Director
    
    2007




---



##### 



Corporate governance (BLACK BOX) 159
 
 From left to right: Terje Friestad, Lena Olving, Kurt Anker
Nielsen, Jan Reinas, Grete Faremo and Hakan Mogren. Sitting in front:
Sten Roar Martinsen, Elisabeth Grieg and Geir Nilsen.
 Sten Roar Martinsen
 Geir Nilsen
 Corporate Management Board
 Eivind Reiten
 John Ove Ottestad
 Hilde Merete Aasheim




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##### 



160 (PICTURE) Corporate governance
  Cecilie Ditlev-Simonsen
 Tore Torvund
 Svein
Richard Brandtzaeg
 Torstein
Dale Sjøtveit
 
 From left to right: Svein Richard Brandtzaeg, Hilde Merete Aasheim,
Cecilie Ditlev-Simonsen, Eivind Reiten, Tore Torvund, John Ove Ottestad and
Torstein Dale Sjøtveit.




---



##### 



Corporate governance (PICTURE) 161
 
 Name
    
    Place of residence
    
    Year of birth
    
    PositionEivind Reiten
    
    Oslo, Norway
    
    
    1953
    
    
    President and Chief Executive OfficerJohn Ove Ottestad
    
    Lier, Norway
    
    
    1949
    
    
    Executive Vice President and Chief Financial OfficerHilde Merete Aasheim
    
    Oslo, Norway
    
    
    1958
    
    
    Executive Vice President Leadership & CultureCecilie Ditlev-Simonsen
    
    Oslo, Norway
    
    
    1964
    
    
    Executive Vice President and Chief Communication OfficerTore Torvund
    
    Bergen, Norway
    
    
    1952
    
    
    Executive Vice President Oil & EnergyTorstein
Dale Sjøtveit
    
    Baerum, Norway Karmøy,
    
    
    1955
    
    
    Executive Vice President Aluminium MetalSvein Richard Brandtzaeg
    
    Norway
    
    
    1957
    
    
    Executive Vice President Aluminium Products
   Management compensation  Introduction
  Board of directors remuneration
  Corporate Management Board remuneration
  Executive management share-based compensation
   Share ownership
  Loans to members of the BOD and CMB




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##### 



162 (PICTURE) Corporate governance
 
 Governance bodies
 Description
    
    Developments and events in 2006
    
    ReferencesGeneral Meeting of shareholdersCompany shareholders exercise ultimate authority through the General
Meeting. Shareholders registered in VPS, the Norwegian Registry of
Securities, can vote in person or by proxy. Invitations are sent to
share- holders or to the shareholders security deposit bank.
    
    General Meeting in May
    
    The protocols can be found at
www.hydro.com/governanceThe General Meeting of Shareholders:   Elects the shareholders representatives in
the Corporate Assembly    Elects the external auditor and determines
the auditors remuneration   Approves the report according to Norwegian requirements and
financial statements, including the dividend proposed by the Board
of Directors and recommended by the Corporate Assembly   Deals with any other matters listed in the notice 
convening the meetingShareholders may, at least 14 days before an ordinary general meeting,
request that proposals for resolutions are submitted to the General
Meeting, or that points are added to the agenda.Corporate assemblyEighteen members. Twelve are elected by the General Meeting of Share-
holders, six are elected by and among the Groups employees in Norway.
    
    Five meetingsMembers:
    
    See Note 25 to the Consolidated
Financial Statements for remu-
neration paid to, and share
ownership by, members of the
Corporate AssemblyIn accordance with Norwegian law, the Corporate Assembly:   Elects the Board of Directors and determines
their remuneration   Nominates the external auditor to be
elected by the General Meeting
of Shareholders    Based on recommendations from the Board of Directors, makes
decisions in matters relating to investments that are substantial in
relation to Hydros resources, and when closures and reorganizations
will lead to significant changes for the workforce   Provides recommendations to the General Meeting of Shareholders
on the approval of the Board of Directors proposal on financial state-
ments and dividend
    
    Svein Steen Thomassen (chairperson)
Siri Teigum (deputy chairperson) Sven Edin,
Billy Fredagsvik, Anne-Margrethe Firing,
Aase Gudding Gresvig, Westye Høegh, Idar
Kreutzer, Kjell Kvinge, Dag Harald Madsen,
Roger Oterholt, Anne Merete Steensland,
Rune Strande, Sten-Arthur Saelør, Lars
Tronsgaard, Karen Helene Ulltveit-Moe,
Terje Venold, Svein AaserDeputy members:
Nils Roar Brevik, Tore Amund Fredriksen,
Erik Garaas, Sonia F. T. Gjesdal, Line Melkild,
Bjørn Nedreaas, Wolfgang Ruch, Bjørn
øvstetun, Unni Steinsmo, Gunvor Ulstein
    
    See the Articles of Association
§§ 7-8 at
www.hydro.com/governanceNomination Commitee
Four members. Two appointed by the General Meeting of Shareholders,
two appointed by the Corporate Assembly. The Chair of the Corporate
Assembly has a permanent seat on the committee.
Nominates candidates to the Board of Directors and the Corporate
Assembly and proposes remuneration to the Board, its sub-committees
and to the Corporate Assembly.
    
    Seven meetingsMembers:
Svein Steen Thomassen (chairperson)
Siri Teigum
Westye Høegh
Reier Søberg
    
    See Articles of Association § 5A

Biographical information of the
Nomination Committee mem-
bers can be found at
www.hydro.com/governanceBoard of directors
Nine members. Six elected by the Corporate Assembly. Three elected by
and among the Companys employees in Norway. Elections are normally
made for a period of two years.
    
    20 meetings. 95 percent meeting attend-
ance by the board members
    
    The Boards mandate can be
found at
www.hydro.com/governanceIn accordance with Norwegian law, the Board of Directors assumes the
overall governance of the Company, ensures that appropriate steering
and control systems are in place and supervises the day-to-day manage-
ment as carried out by the President and CEO.
All shareholder-elected members are external. No members elected
by employees belong to the Companys executive management. Em-
ployee directors have no other service contractual agreements with the
Company outside of their employee contracts, though they are subject
to their duties as Board members.
    
    In May, Lena Giving and Grete Faremo
were elected to the Board of Directors, re-
placing Borger A. Lenth and Ingvild Myhre.

The Board of Directors conducted a self-
evaluation of its work, competence and
cooperation with management. Compe-
tence development measures included a
dedicated training day for the whole board
as well as an introduction program for new
board members. The board had a one-week
visit to Hydros activities in Qatar and
Libya.

All shareholder-elected members were
deemed to be independent in accord-
ance with Norwegian and New York Stock
Exchange (NYSE) standards. Except as
noted below, none of the Companys non-
employee Board members had any other
service contractual agreements with the
Company. 
Elisabeth Grieg, who is a member of the
Board of Directors and the Audit Com-
mittee, partly owns the family company
Grieg Maturitas AS, which indirectly holds
20 percent of the ownership of AON
    
    See page 158 for biographical
information on the Board
members
See Note 4 to the Consolidated
Financial Statements for remu-
neration, share ownership and
loans to Board members




---



##### 



Corporate governance (PICTURE) 163
 
 Description
    
    Developments and events in 2006
    

ReferencesBoard of directors (cont.)
    
    Grieg. AON Grieg acted as a broker
for Hydro in relation to off-shore
insurance in 2006 and received NOK
5,864,132 in fees from Hydro. Her
husband, Stig Grimsgaard Andersen,
is a Board member in AON Grieg. In
addition, Grieg Maturitas AS holds
indirectly 65 percent of the
ownership of Grieg Logistics. Grieg
Logistics has provided
logistics/transportation services
to Hydro entities, mainly offshore
operations and the Ormen Lange
project. In 2006 the total amount
for transactions to Hydro was NOK
1 23,222,009. In 2005 the total
amount for transactions from Grieg
Logistics to Hydro was NOK
125,745,650.Compensation commiteeConsists of three
of the Board of Directors nine members.
    
    Six meetings
    
    The mandate can be found on
www.hydro.com/governanceThe committee reviews the performance and
recommends proposals on compensation for the
President & CEO to the Board of Directors.
The committee assists in the evaluation of
compensation for the Corporate Management
Board and in determination of
performance-promoting schemes for
management.
    
    Members*:
Jan Reinås (chairperson)
Håkan Mogren, Grete Faremo* The Board concluded that each of the
members of the Compensation
Committee is independent under
Norwegian and NYSE listing standards.Audit commiteeConsists of four of the Board of Directors nine
members. The committee meets the SEC and
NYSE rules and requirements regarding
independence and competence.
    
    Eight meetings
    
    The mandate can be found on 
www.hydro.com/governanceConducted a self-evaluation in accordance with its mandate.
    
    See Pre-Approval of AuditThe committee assists the Board of Directors
relating to the integrity of the Companys
financial statements and financial reporting
processes and internal controls; the
Companys risk assessment and risk
management policies related to financial
reporting; the qualifications, independence
and performance of the external auditor; and the
per- formance of the internal audit function
related to internal controls over financial
reporting.
    
    Members:
Kurt Anker Nielsen* (chairperson)
Elisabeth Grieg
Terje Friestad** 
Lena Olving
    
    Services on page 157 of this report.* Nielsen serves on the committee as a
financial expert as defined by SEC
rules.To ensure the independence of the internal audit
function, the director of Internal Audit may
report any matters directly to the Board Audit
Committee, at his own discretion.
    
    ** Friestad is employed in Hydro and
represents the employees through the
Central Cooperative Council. We rely
on the SECs exemption regarding
independence in Rule 10A-3(b)(1)(iv)(C)
under the Securities Exchange Act of 1934. We believe that such reliance
does not materially adversely affect
the ability of the Audit Committee
to act independently or to satisfy the
other requirements of Rule
10A-3.The committee maintains a pre-approval policy
governing the engagement of the Companys
primary and other external auditors to ensure
auditor independence in accordance with SEC rules
and regulations.President & CEO and Corporate management BoardAccording to Norwegian corporate law, the
President & CEO constitutes a formal
governing body that is responsible for the daily
management of the Company. The division of
functions and responsibilities between the
President & CEO and the Board of Directors is defined
in greater detail in the rules of procedures
established by the Board.
    
    Met on a weekly basis
Svein Richard Brandtzaeg was
appointed EVP and head of Aluminium
Products. Torstein Dale Sjøtveit was appointed
EVP and head of Aluminium
Metal.
    
    See page 159 for biographical
information on the Corporate
Management Board 
See Note 4 to the Consolidated
Financial Statements for remu-
neration, share ownership and
loans to the President & CEO
and members of the Corporate
Management BoardThe Corporate Management Board, including the
President & CEO, has a shared responsibility
for promoting Hydros objectives and secur-
ing the Companys property, organization and
reputation. Members of the Corporate
Management Board are also Executive Vice
Presidents (EVPs) with responsibility for
the respective business areas, Finance,
Communication and Leadership & Culture.
    
    Cecilie Ditlev-Simonsen was appointed
EVP and Chief Communication Officer.
Hilde Aasheim, EVP Leadership &
Culture, resigned from the Corporate
Management Board in January 2007
to head the integration process
related to the merger between
Hydros oil and energy activities
and Statoil.No member of Hydros Board of Directors or the Corporate Management
Board has any family relationship
with any other director or member of the
Corporate Management Board.




---



##### 



08
   Consolidated financial statements US GAAP
    
    
    F1Notes to the consolidated financial statements
    
    
    F6Note 1 Summary of significant accounting policies
    
    
    F6Note 2 Business combinations, dispositions and demerger
    
    
    F13Note 3 Consolidated shareholders equity
    
    
    F16Note 4 Remuneration and share-based compensation
    
    
    F19Note 5 Operating and geographic segment information
    
    
    F24Note 6 Operating cost and expenses
    
    
    F28Note 7 Financial income and expense
    
    
    F28Note 8 Other income and expense
    
    
    F28Note 9 Income taxes
    
    
    F29Note 10 Short-term investments
    
    
    F30Note 11 Inventories and other current assets
    
    
    F30Note 12 Non-consolidated investees
    
    
    F31Note 13 Intangible assets, prepaid pension, investments and
non-current assets
    
    
    F32Note 14 Property, plant and equipment
    
    
    F33Note 15 Goodwill and intangibles
    
    
    F34Note 16 Bank loans and other interest-bearing short-term debt
    
    
    F34Note 17 Other current liabilities
    
    
    F34Note 18 Long-term debt
    
    
    F34Note 19 Employee retirement plans
    
    
    F35Note 20 Contingencies and other long-term liabilities
    
    
    F37Note 21 Secured debt and guarantees
    
    
    F38Note 22 Contractual and other commitments for future investments
and operations
    
    
    F39Note 23 Market risk management and derivative instruments
    
    
    F39Note 24 External audit remuneration
    
    
    F43Note 25 Related parties
    
    
    F43Note 26 Supplementary oil and gas information
    
    
    F44Managements annual report on
internal control over financial reporting
    
    
    F54Supplementary oil and gas information
    
    
    F56Use of non-GAAP financial measures
    
    
    F60IFRS in Hydros financial statements
    
    
    F66




---



##### 



F1
 Consolidated income statements US GAAP
Consolidated statements of comprehensive income
  Year ended 31 December,Amounts in NOK million (except per share amounts)
    
    Notes
    
    
    2006
    
    
    2005
    
    
    2004Operating revenues
    
    
    5
    
    
    
    196,234
    
    
    
    171,231
    
    
    
    151,026Raw materials and energy costs
    
    
    
    
    
    
    98,961
    
    
    
    86,973
    
    
    
    79,728Payroll and related costs
    
    
    4,6,19
    
    
    
    19,404
    
    
    
    17,681
    
    
    
    18,155Depreciation, depletion and amortization
    
    
    5,14,15
    
    
    
    16,937
    
    
    
    14,285
    
    
    
    14,400Impairment losses
    
    
    5,14,15
    
    
    
    5,228
    
    
    
    1,467
    
    
    
    2,182Other
    
    
    6,24
    
    
    
    3,481
    
    
    
    4,588
    
    
    
    4,787Restructuring costs (income)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22
    )Operating costs and expenses
    
    
    
    
    
    
    144,010
    
    
    
    124,994
    
    
    
    119,229Operating income
    
    
    5
    
    
    
    52,224
    
    
    
    46,237
    
    
    
    31,796Equity in net income of non-consolidated investees
    
    
    5,12
    
    
    
    962
    
    
    
    593
    
    
    
    597Financial income (expense), net
    
    
    7,10,23
    
    
    
    1,785
    
    
    
    (1,889
    )
    
    
    121Other income (expense), net
    
    
    5,8
    
    
    
    53
    
    
    
    990
    
    
    
    169Income from continuing operations before taxes and minority interest
    
    
    
    
    
    
    55,024
    
    
    
    45,932
    
    
    
    32,682Income tax expense
    
    
    9
    
    
    
    (37,598
    )
    
    
    (30,271
    )
    
    
    (21,181
    )Minority interest
    
    
    
    
    
    
    (202
    )
    
    
    (118
    )
    
    
    (106
    )Income from continuing operations before cumulative effect
of changes in accounting principles
    
    
    
    
    
    
    17,224
    
    
    
    15,542
    
    
    
    11,394Income from discontinued operations
    
    
    2
    
    
    
    167
    
    
    
    174
    
    
    
    1,166Income before cumulative effect of changes in accounting principles
    
    
    
    
    
    
    17,391
    
    
    
    15,716
    
    
    
    12,560Cumulative effect of changes in accounting principles
    
    
    1,20
    
    
    
    
    
    
    
    (78
    )
    
    
    Net income
    
    
    27
    
    
    
    17,391
    
    
    
    15,638
    
    
    
    12,560Basic and diluted earnings per share from continuing operations before
cumulative effect of changes in accounting principles 1)
    
    
    3
    
    
    
    13.90
    
    
    
    12.40
    
    
    
    9.00Basic and diluted earnings per share from discontinued operations 1)
    
    
    3
    
    
    
    0.10
    
    
    
    0.10
    
    
    
    0.9Basic and diluted earnings per share before cumulative effect of changes in accounting principles 1)
    
    
    3
    
    
    
    14.00
    
    
    
    12.50
    
    
    
    9.90Basic and diluted earnings per share 1)
    
    
    3
    
    
    
    14.00
    
    
    
    12.50
    
    
    
    9.90Consolidated statements of comprehensive income2)Net income
    
    
    
    
    
    
    17,391
    
    
    
    15,638
    
    
    
    12,560Net unrealized loss on available-for-sale securities
    
    
    3
    
    
    
    
    
    
    
    (9
    )
    
    
    (2
    )Minimum pension liability adjustment
    
    
    3
    
    
    
    307
    
    
    
    (510
    )
    
    
    (132
    )Net investment hedge
    
    
    3
    
    
    
    
    
    
    
    33
    
    
    
    320Cash flow hedges
    
    
    3
    
    
    
    (772
    )
    
    
    (751
    )
    
    
    (339
    )Net foreign currency translation adjustments
    
    
    3
    
    
    
    (1,335
    )
    
    
    711
    
    
    
    (1,628
    )Total other comprehensive income (loss), net of tax
    
    
    3
    
    
    
    (1,800
    )
    
    
    (526
    )
    
    
    (1,781
    )Comprehensive income, net of tax
    
    
    
    
    
    
    15,591
    
    
    
    15,112
    
    
    
    10,779
 1)
    
    Previously reported earnings per share and total number of outstanding shares have been
adjusted to reflect the 5-for-1 stock split effective 10 May 2006.2)
    
    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.




---



##### 



F2
 Consolidated balance sheets US GAAP
  31 December,Amounts in NOK million
    
    Notes
    
    
    2006
    
    
    2005AssetsCash and cash equivalents
    
    
    
    
    
    
    6,760
    
    
    
    10,463Short-term investments
    
    
    10
    
    
    
    15,020
    
    
    
    3,865Accounts receivable, less allowances of NOK 813 and NOK 784
    
    
    
    
    
    
    25,608
    
    
    
    23,333Inventories
    
    
    11
    
    
    
    16,497
    
    
    
    14,553Prepaid expenses and other current assets
    
    
    11
    
    
    
    14,025
    
    
    
    15,912Current deferred tax assets
    
    
    9
    
    
    
    3,099
    
    
    
    2,166Current assets held for sale
    
    
    2
    
    
    
    1,122
    
    
    
    Total current assets
    
    
    5
    
    
    
    82,131
    
    
    
    70,293Non-consolidated investees
    
    
    12
    
    
    
    10,455
    
    
    
    10,814Property, plant and equipment, less accumulated
depreciation, depletion, amortization and impairment losses
    
    
    14
    
    
    
    124,976
    
    
    
    128,191Intangible assets
    
    
    13,15
    
    
    
    4,861
    
    
    
    5,153Prepaid pension, investments and other non-current assets
    
    
    13,19
    
    
    
    7,763
    
    
    
    11,910Deferred tax assets
    
    
    9
    
    
    
    1,239
    
    
    
    833Non-current assets held for sale
    
    
    2
    
    
    
    2,569
    
    
    
    Total non-current assets
    
    
    5
    
    
    
    151,862
    
    
    
    156,902Total assets
    
    
    5
    
    
    
    233,993
    
    
    
    227,195Liabilities and shareholders equityBank loans and other interest-bearing short-term debt
    
    
    16
    
    
    
    3,213
    
    
    
    4,658Current portion of long-term debt
    
    
    18
    
    
    
    441
    
    
    
    379Other current liabilities
    
    
    17
    
    
    
    55,550
    
    
    
    47,239Current deferred tax liabilities
    
    
    9
    
    
    
    1,134
    
    
    
    980Current liabilities in disposal group
    
    
    2
    
    
    
    738
    
    
    
    Total current liabilities
    
    
    
    
    
    
    61,076
    
    
    
    53,256Long-term debt
    
    
    18
    
    
    
    19,619
    
    
    
    21,387Accrued pension liabilities
    
    
    19
    
    
    
    12,391
    
    
    
    9,939Other long-term liabilities
    
    
    20
    
    
    
    16,126
    
    
    
    12,424Deferred tax liabilities
    
    
    9
    
    
    
    27,307
    
    
    
    33,713Long-term liabilities in disposal group
    
    
    2
    
    
    
    273
    
    
    
    Total long-term liabilities
    
    
    
    
    
    
    75,715
    
    
    
    77,462Minority shareholders interest in consolidated subsidiaries
    
    
    
    
    
    
    707
    
    
    
    981Share capital
    
    
    3
    
    
    
    4,708
    
    
    
    4,739Additional paid-in capital
    
    
    3
    
    
    
    9,736
    
    
    
    10,501Retained earnings
    
    
    3
    
    
    
    97,811
    
    
    
    85,927Treasury shares at cost
    
    
    3
    
    
    
    (6,624
    )
    
    
    (3,589
    )Accumulated other comprehensive income (loss)
    
    
    3
    
    
    
    (9,135
    )
    
    
    (2,083
    )Shareholders equity
    
    
    3, 27
    
    
    
    96,496
    
    
    
    95,495Total liabilities and shareholders equity
    
    
    
    
    
    
    233,993
    
    
    
    227,195Total number of outstanding shares 1)
    
    
    
    
    
    
    1,226,175,885
    
    
    
    1,250,692,320Nominal value per share 1)
    
    
    
    
    
    
    3.66
    
    
    
    3.66
 1)
    
    Previously reported nominal value per share and total number of outstanding shares have been
adjusted to reflect the 5-for-1 stock split effective
 10 May 2006.




---



##### 



F3
 Consolidated statements of cash flows US GAAP
  Year ended 31 December,Amounts in NOK million
    
    Notes
    
    
    2006
    
    
    2005
    
    
    2004Operating activities:Net income
    
    
    
    
    
    
    17,391
    
    
    
    15,638
    
    
    
    12,560Adjustments to reconcile net income to net cash
provided by operating activities:Income from discontinued operations
    
    
    2
    
    
    
    (167
    )
    
    
    (174
    )
    
    
    (1,166
    )Depreciation, depletion, amortization and impairment losses
    
    
    5
    
    
    
    22,164
    
    
    
    15,752
    
    
    
    16,581Restructuring costs (income)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22
    )Equity in net income of non-consolidated investees
    
    
    5,12
    
    
    
    (962
    )
    
    
    (593
    )
    
    
    (597
    )Dividends received from non-consolidated investees
    
    
    
    
    
    
    417
    
    
    
    323
    
    
    
    326Deferred taxes
    
    
    9
    
    
    
    (4,503
    )
    
    
    (503
    )
    
    
    (2,946
    )Loss (gain) on sale of non-current assets
    
    
    
    
    
    
    493
    
    
    
    (905
    )
    
    
    41Loss (gain) on foreign currency transactions
    
    
    7
    
    
    
    (1,058
    )
    
    
    2,157
    
    
    
    (1,348
    )Net sales (purchases) of trading securities
    
    
    
    
    
    
    29
    
    
    
    (49
    )
    
    
    (177
    )Other
    
    
    
    
    
    
    (201
    )
    
    
    783
    
    
    
    779Working capital changes that provided (used) cash:Receivables
    
    
    
    
    
    
    (2,900
    )
    
    
    (2,095
    )
    
    
    (940
    )Inventories
    
    
    
    
    
    
    (2,060
    )
    
    
    (1,903
    )
    
    
    (1,042
    )Prepaid expenses and other current assets
    
    
    
    
    
    
    3,723
    
    
    
    (7,847
    )
    
    
    1,781Other current liabilities
    
    
    
    
    
    
    6,361
    
    
    
    6,424
    
    
    
    3,355Net cash provided by continuing operating activities
    
    
    
    
    
    
    38,727
    
    
    
    27,008
    
    
    
    27,185Investing activities:Purchases of property, plant and equipment
    
    
    
    
    
    
    (18,580
    )
    
    
    (17,270
    )
    
    
    (15,743
    )Purchases of other long-term investments
    
    
    
    
    
    
    (4,060
    )
    
    
    (17,259
    )
    
    
    (815
    )Purchases of short-term investments
    
    
    
    
    
    
    (22,650
    )
    
    
    (15,162
    )
    
    
    (9,166
    )Proceeds from sales of property, plant and equipment
    
    
    
    
    
    
    481
    
    
    
    1,322
    2)
    
    
    835Proceeds from sales of other long-term investments
    
    
    
    
    
    
    1,532
    
    
    
    1,862
    
    
    
    1,389Proceeds from sales of short-term investments
    
    
    
    
    
    
    11,550
    
    
    
    22,445
    
    
    
    12Net cash used in continuing investing activities
    
    
    
    
    
    
    (31,727
    )
    
    
    (24,062
    )
    
    
    (23,488
    )Financing activities:Loan proceeds
    
    
    
    
    
    
    85
    
    
    
    1,844
    
    
    
    143Principal repayments
    
    
    
    
    
    
    (1,841
    )
    
    
    (2,102
    )
    
    
    (9,271
    )Ordinary shares purchased
    
    
    3
    
    
    
    (3,949
    )
    
    
    (1,589
    )
    
    
    (1,684
    )Ordinary shares issued
    
    
    
    
    
    
    59
    
    
    
    71
    
    
    
    44Dividends paid
    
    
    3
    
    
    
    (5,506
    )
    
    
    (5,021
    )
    
    
    (2,811
    )Net cash used in continuing financing activities
    
    
    
    
    
    
    (11,152
    )
    
    
    (6,797
    )
    
    
    (13,579
    )Foreign currency effects on cash
    
    
    
    
    
    
    315
    
    
    
    (172
    )
    
    
    (264
    )Discontinued operations:Net cash provided by operating activities
    
    
    2
    
    
    
    349
    
    
    
    377
    
    
    
    1,377Net cash provided by (used in) investing activities
    
    
    2
    
    
    
    (173
    )
    
    
    (256
    )
    
    
    8,366Net cash provided by (used in) financing activities
    
    
    2
    
    
    
    4
    
    
    
    
    
    
    
    (109
    )Foreign currency effects on cash
    
    
    2
    
    
    
    1
    
    
    
    (1
    )
    
    
    5Net cash provided by discontinued operations
    
    
    
    
    
    
    181
    
    
    
    120
    
    
    
    9,639Net decrease in cash and cash equivalents
    
    
    
    
    
    
    (3,656
    )
    
    
    (3,903
    )
    
    
    (507
    )Cash and cash equivalents reclassified to assets held for sale
    
    
    
    
    
    
    (47
    )
    
    
    
    
    
    
    Cash and cash equivalents at beginning of year
    
    
    
    
    
    
    10,463
    
    
    
    14,366
    
    
    
    14,873Cash and cash equivalents at end of year
    
    
    
    
    
    
    6,760
    
    
    
    10,463
    
    
    
    14,366Cash disbursements (receipts) regarding:Interest (net of amount capitalized) 3)
    
    
    
    
    
    
    (378
    )
    
    
    (48
    )
    
    
    1,701Income taxes
    
    
    
    
    
    
    37,057
    
    
    
    29,612
    
    
    
    19,758
 2)
    
    In January 2005, Hydro received approximately NOK 1.1 billion relating to the sale of its
10% ownership interest in Snøhvit in 2004, and that was reported as a short-term receivable within
Other current assets as of 31 December 2004.3)
    
    Includes cash disbursements relating to early repayment of long-term debt (breaking costs) of
NOK 15 million, NOK 6 million, and NOK 938 million, for the years ended 2006, 2005, and 2004,
respectively (Note 7).The accompanying notes are an integral part of the consolidated financial statements.




---



##### 



F6
 Notes to the consolidated financial statements
 Note 1
 Summary of significant accounting policies
    Consolidation
     Business combinations
  Assets held for sale and discontinued operations
     Exit costs




---



##### 



F7
  Foreign currency translation
  Foreign currency transactions
  Revenue recognition
    Cash and cash equivalents
  Short-term investments
  Inventories
  Investments
   Exchanges of nonmonetary assets
  Property, plant and equipment




---



##### 



F8
 Periodic maintenance
 Capitalized interest
 Leased assets
 Exploration and development costs of oil and gas reserves
  Depreciation, depletion and amortization
 Machinery and equipment
    
    5 - 25
    percentBuildings
    
    2 - 5
    percentOther
    
    10 - 20
    percent
  Asset retirement obligations
  Intangible assets
  Goodwill
 Emission
rights 2 2 2 2
 Contingencies and guarantees




---



##### 



F9
 Oil and gas royalty
  Shipping costs
  Research and development
  Other income (expense), net
  Income taxes
   Derivative instruments
       Share-based compensation




---



##### 



F10
 Pro-forma Information
   In NOK million,except for earnings per share
    
    2005
    
    
    2004Net income, as reported
    
    
    15,638
    
    
    
    12,560Add: share-based employee
compensation expense included
in reported net income, net of
related tax effects (66 442; 11 003)
    
    
    48
    
    
    
    8Less: Total share-based compensation
expense determined under the fair
value method, net of tax
    
    
    (29
    )
    
    
    (11
    )Pro-forma net income
    
    
    15,657
    
    
    
    12,557Earnings per share: 1)Basic and diluted as reported
    
    
    12.50
    
    
    
    9.90Basic and diluted, pro-forma
    
    
    12.50
    
    
    
    9.90
 1)
    
    Previously reported earnings per share figures are adjusted to reflect the 5-for-1 stock split
effective 10 May 2006.  Employee retirement plans
  Changes in accounting principles
 Recognition of over- or underfunded status of retirement plans
   Inventory counterparty purchases and sales
  Accounting changes and error corrections




---



##### 



F11
 Altersteilzeit (atz) early retirement programs
  Share-based payment
  Asset retirement obligations
  Inventory cost
  Exchanges of nonmonetary assets
  Suspended well cost
  Consolidation of variable interest entities




---



##### 



F12
 Contractual mineral rights
  New pronouncements
 Fair value option
  Fair value measurement
  Major maintenance
   Uncertainty in income tax positions
  Recognition of buy/sell arrangements




---



##### 



F13
 Note 2
 Business combinations, dispositions and demerger
   2006 Acquisitions
 2006 Dispositions
  2005 Acquisitions
    Allocation of purchase price
 Amounts in NOK millionCash and cash equivalents
    
    
    89Other current assets
    
    
    1,094Property, plant and equipment
    
    
    18,087Goodwill
    
    
    3,435Short-term liabilities
    
    
    (886
    )Long-term liabilities
    
    
    (5,284
    )Estimated fair value of the net assets of Spinnaker
    
    
    16,534
  2005 Dispositions
  2004 Acquisitions
 2004 Dispositions
 Variable interest entity




---



##### 



F14
  Assets held for sale, liabilities in disposal group and discontinued operations
    Summary of financial data for Automotive Castings as included in discontinued operations
 NOK million
    
    2006
    
    
    2005
    
    
    2004Operating revenues
    
    
    3,889
    
    
    
    2,970
    
    
    
    2,865Operating income
    
    
    224
    
    
    
    195
    
    
    
    51Non-consolidated investees
    
    
    9
    
    
    
    26
    
    
    
    32Financial income (expense), net
    
    
    
    
    
    
    (1
    )
    
    
    16Income before taxes and minority interest
    
    
    233
    
    
    
    220
    
    
    
    99Income tax expense
    
    
    (66
    )
    
    
    (46
    )
    
    
    (16
    )Net income from discontinued operations
    
    
    167
    
    
    
    174
    
    
    
    83NOK million
    
    
    
    
    
    
    2006
    
    
    
    2005Current assets
    
    
    
    
    
    
    1,122
    
    
    
    Non-current assets
    
    
    
    
    
    
    2,569
    
    
    
    Total assets
    
    
    
    
    
    
    3,691
    
    
    
    Current liabilities
    
    
    
    
    
    
    738
    
    
    
    Long-term liabilities
    
    
    
    
    
    
    273
    
    
    
    Minority interest
    
    
    
    
    
    
    
    
    
    
    Discontinued operations, net
    
    
    
    
    
    
    2,681
    
    
    
    NOK million
    
    
    2006
    
    
    
    2005
    
    
    
    2004Net cash provided by operating activities
    
    
    349
    
    
    
    377
    
    
    
    539Net cash used in investing activities
    
    
    (173
    )
    
    
    (256
    )
    
    
    (474
    )Net cash provided by financing activities
    
    
    4
    
    
    
    
    
    
    
    Foreign currency effects on cash flows
    
    
    1
    
    
    
    (1
    )
    
    
    Net cash provided by discontinued operations
    
    
    181
    
    
    
    120
    
    
    
    65
  Demerger 2004
    Income from discontinued operations




---



##### 



F15
      Summary of financial data for Yara as included in discontinued operations
 NOK million
    
    2006
    
    
    2005
    
    
    2004Operating revenues
    
    
    
    
    
    
    
    
    
    
    10,036Operating income
    
    
    
    
    
    
    
    
    
    
    936Non-consolidated investees
    
    
    
    
    
    
    
    
    
    
    131Financial income (expense), net
    
    
    
    
    
    
    
    
    
    
    (88
    )Income before taxes and minority interest
    
    
    
    
    
    
    
    
    
    
    979Income tax expense
    
    
    
    
    
    
    
    
    
    
    (307
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    26Income before sale of shares
    
    
    
    
    
    
    
    
    
    
    698Gain from sale of shares
    
    
    
    
    
    
    
    
    
    
    533Tax on gain from sale of shares
    
    
    
    
    
    
    
    
    
    
    (148
    )Net income US GAAP
    
    
    
    
    
    
    
    
    
    
    1,083NOK million
    
    
    
    
    
    
    2006
    
    
    
    2005Current assets
    
    
    
    
    
    
    
    
    
    
    Non-current assets
    
    
    
    
    
    
    
    
    
    
    Total assets
    
    
    
    
    
    
    
    
    
    
    Current liabilities
    
    
    
    
    
    
    
    
    
    
    Long-term liabilities
    
    
    
    
    
    
    
    
    
    
    Minority interest
    
    
    
    
    
    
    
    
    
    
    Discontinued operations, net US GAAP
    
    
    
    
    
    
    
    
    
    
    NOK million
    
    
    2006
    
    
    
    2005
    
    
    
    2004Net cash provided by operating activities
    
    
    
    
    
    
    
    
    
    
    838Net cash provided by
(used in) investing activities 1)
    
    
    
    
    
    
    
    
    
    
    8,840Net cash used in financing activities
    
    
    
    
    
    
    
    
    
    
    (109
    )Foreign currency effects on cash flows
    
    
    
    
    
    
    
    
    
    
    5Net cash provided by discontinued operations
    
    
    
    
    
    
    
    
    
    
    9,574
 1)
    
    Includes proceeds from sale of Yara shares and loan repayments from Yara.




---



##### 



F16
 Note 3
 Consolidated shareholders equity




---



##### 



F17
  Consolidated shareholders equity
 Accumulated
    
    TotalAmounts in NOK million
    
    
    Ordinary Shares issued
    
    Additional
    
    Total
    
    
    
    
    
    Treasury Stock
    
    other com-
    
    share-except number of shares
    
    
    Norsk Hydro ASA
    
    paid-in
    
    paid-in
    
    Retained
    
    Norsk Hydro ASA
    
    prehensive
    
    holdersin thousands
    
    
    Number 1)
    
    Amount
    
    capital
    
    capital
    
    earnings
    
    Number 1)
    
    Amount
    
    income
    
    equityBalance 31 December 2003
    
    
    1,332,983
    
    
    
    5,332
    
    
    
    15,071
    
    
    
    20,403
    
    
    
    71,517
    
    
    
    (49,423
    )
    
    
    (3,524
    )
    
    
    (316
    )
    
    
    88,080Net income 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,560
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,560Dividend declared and paid
(NOK 2.20 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,811
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,811
    )Net unrealized gain on securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Minimum pension liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (132
    )
    
    
    (132
    )Hedge of net investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    320
    
    
    
    320Cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (339
    )
    
    
    (339
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,044
    )
    
    
    (1,239
    )
    
    
    
    
    
    
    (1,239
    )Treasury stock reissued to employees
    
    
    
    
    
    
    
    
    
    
    19
    
    
    
    19
    
    
    
    
    
    
    
    1,426
    
    
    
    102
    
    
    
    
    
    
    
    121Cancellation treasury stock
    
    
    (21,466
    )
    
    
    (82
    )
    
    
    (1,511
    )
    
    
    (1,593
    )
    
    
    2
    
    
    
    21,466
    
    
    
    1,591
    
    
    
    
    
    
    
    Redeemed shares, the Norwegian State
    
    
    (16,746
    )
    
    
    (63
    )
    
    
    (1,363
    )
    
    
    (1,426
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,426
    )Demerger Yara International ASA
    
    
    
    
    
    
    (449
    )
    
    
    (1,749
    )
    
    
    (2,198
    )
    
    
    (5,957
    )
    
    
    
    
    
    
    
    
    
    
    540
    
    
    
    (7,615
    )Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,628
    )
    
    
    (1,628
    )Balance 31 December 2004
    
    
    1,294,772
    
    
    
    4,739
    
    
    
    10,467
    
    
    
    15,205
    
    
    
    75,311
    
    
    
    (40,576
    )
    
    
    (3,070
    )
    
    
    (1,557
    )
    
    
    85,890Net income 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,638
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,638Dividend declared and paid
(NOK 4.00 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,021
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,021
    )Net unrealized gain on securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    (9
    )Minimum pension liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (510
    )
    
    
    (510
    )Hedge of net investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33
    
    
    
    33Cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (751
    )
    
    
    (751
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,672
    )
    
    
    (608
    )
    
    
    
    
    
    
    (608
    )Treasury stock reissued to employees
    
    
    
    
    
    
    
    
    
    
    33
    
    
    
    33
    
    
    
    
    
    
    
    1,168
    
    
    
    88
    
    
    
    
    
    
    
    122Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    711
    
    
    
    711Balance 31 December 2005
    
    
    1,294,772
    
    
    
    4,739
    
    
    
    10,501
    
    
    
    15,240
    
    
    
    85,927
    
    
    
    (44,080
    )
    
    
    (3,589
    )
    
    
    (2,083
    )
    
    
    95,495Net income 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,391
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,391Dividend declared and paid
(NOK 4.40 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,506
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,506
    )Minimum pension liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    307
    
    
    
    307Incremental impact of recognizing funded
status of defined benefit pension plans
and postretirement benefits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,253
    )
    
    
    (5,253
    )Cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (772
    )
    
    
    (772
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,627
    )
    
    
    (3,477
    )
    
    
    
    
    
    
    (3,477
    )Treasury stock reissued to employees
    
    
    
    
    
    
    
    
    
    
    56
    
    
    
    56
    
    
    
    
    
    
    
    755
    
    
    
    61
    
    
    
    
    
    
    
    117Cancellation treasury stock
    
    
    (4,672
    )
    
    
    (17
    )
    
    
    (363
    )
    
    
    (380
    )
    
    
    
    
    
    
    4,672
    
    
    
    380
    
    
    
    
    
    
    
    Redeemed shares, the Norwegian State
    
    
    (3,645
    )
    
    
    (13
    )
    
    
    (458
    )
    
    
    (471
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (471
    )Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,335
    )
    
    
    (1,335
    )Balance 31 December 2006
    
    
    1,286,455
    
    
    
    4,708
    
    
    
    9,736
    
    
    
    14,444
    
    
    
    97,811
    
    
    
    (60,280
    )
    
    
    (6,624
    )
    
    
    (9,135
    )
    
    
    96,496
 1)
    
    Previously reported number of shares have been adjusted to reflect the 5-for-1 stock split
effective 10 May 2006.




---



##### 



F18
  Components of total accumulated other comprehensive income
 Funded statusNet unrealized
    
    Net unrealized
    
    Net gain
    
    Minimum
    
    of defined
    
    Net foreign
    
    Total accumulatedgain
    
    gain (loss)
    
    (loss) cash
    
    pension liability
    
    benefit
    
    currency translation
    
    other comprehen-Amounts in NOK million
    
    on securities
    
    investment hedge
    
    flow hedge
    
    adjustment
    
    pension plans
    
    loss
    
    sive income (loss)Balance 31 December 2003
    
    
    11
    
    
    
    (252
    )
    
    
    1,149
    
    
    
    (996
    )
    
    
    
    
    
    
    (228
    )
    
    
    (316
    )Balance 31 December 2004
    
    
    9
    
    
    
    102
    
    
    
    810
    
    
    
    (814
    )
    
    
    
    
    
    
    (1,664
    )
    
    
    (1,557
    )Balance 31 December 2005
    
    
    
    
    
    
    135
    
    
    
    59
    
    
    
    (1,324
    )
    
    
    
    
    
    
    (953
    )
    
    
    (2,083
    )Balance 31 December 2006
    
    
    
    
    
    
    135
    
    
    
    (712
    )
    
    
    
    
    
    
    (6,270
    )
    
    
    (2,288
    )
    
    
    (9,135
    )
  Changes in other comprehensive income and related tax effects
 31 December 2006
    
    
    31 December 2005
    
    
    31 December 2004 1)Amounts in NOK million
    
    Pretax
    
    
    Tax
    
    
    Net
    
    
    Pretax
    
    
    Tax
    
    
    Net
    
    
    Pretax
    
    
    Tax
    
    
    NetNet unrealized gain on securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12
    )
    
    
    3
    
    
    
    (9
    )
    
    
    (3
    )
    
    
    1
    
    
    
    (2
    )Net investment hedge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    445
    
    
    
    (125
    )
    
    
    320Companies sold
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33
    
    
    
    
    
    
    
    33
    
    
    
    
    
    
    
    
    
    
    
    Net investment hedge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33
    
    
    
    
    
    
    
    33
    
    
    
    445
    
    
    
    (125
    )
    
    
    320Cash flow hedge
    
    
    (1,548
    )
    
    
    431
    
    
    
    (1,117
    )
    
    
    (782
    )
    
    
    219
    
    
    
    (563
    )
    
    
    (214
    )
    
    
    60
    
    
    
    (154
    )Reclassification of hedging gain
    
    
    479
    
    
    
    (134
    )
    
    
    345
    
    
    
    (261
    )
    
    
    73
    
    
    
    (188
    )
    
    
    (256
    )
    
    
    71
    
    
    
    (185
    )Net cash flow hedge
    
    
    (1,069
    )
    
    
    297
    
    
    
    (772
    )
    
    
    (1,043
    )
    
    
    292
    
    
    
    (751
    )
    
    
    (470
    )
    
    
    131
    
    
    
    (339
    )Minimum pension liability adjustment
    
    
    437
    
    
    
    (130
    )
    
    
    307
    
    
    
    (744
    )
    
    
    234
    
    
    
    (510
    )
    
    
    (189
    )
    
    
    57
    
    
    
    (132
    )Foreign currency translation
    
    
    (1,366
    )
    
    
    
    
    
    
    (1,366
    )
    
    
    1,081
    
    
    
    
    
    
    
    1,081
    
    
    
    (1,625
    )
    
    
    
    
    
    
    (1,625
    )Companies sold
    
    
    31
    
    
    
    
    
    
    
    31
    
    
    
    (370
    )
    
    
    
    
    
    
    (370
    )
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )Net foreign currency translation
    
    
    (1,335
    )
    
    
    
    
    
    
    (1,335
    )
    
    
    711
    
    
    
    
    
    
    
    711
    
    
    
    (1,628
    )
    
    
    
    
    
    
    (1,628
    )Total change in other
comprehensive income
    
    
    (1,967
    )
    
    
    167
    
    
    
    (1,800
    )
    
    
    (1,055
    )
    
    
    529
    
    
    
    (526
    )
    
    
    (1,845
    )
    
    
    64
    
    
    
    (1,781
    )
 1)
    
    Effects of the Yara demerger, NOK 540 million, are not included in the changes specified.




---



##### 



F19
 Note 4
 Remuneration and share-based compensation
 Board of Directors statement on Corporate
Management Board remuneration
        Board
of Directors remuneration
  
 Outstanding
    
    
    Number ofBoard member
    
    Board fees 1)
    
    
    loans 1)2)
    
    
    shares 3)Jan Reinås
    
    
    490
    
    
    
    
    
    
    
    Borger A. Lenth 4)
    
    
    161
    
    
    
    
    
    
    
    720Elisabeth Grieg
    
    
    354
    
    
    
    
    
    
    
    30,400Håkan Mogren
    
    
    255
    
    
    
    
    
    
    
    Ingvild Myhre 4)
    
    
    94
    
    
    
    
    
    
    
    Kurt Anker Nielsen
    
    
    351
    
    
    
    
    
    
    
    Grete Faremo 5)
    
    
    159
    
    
    
    
    
    
    
    Lena Olving 5)
    
    
    213
    
    
    
    
    
    
    
    Geir Nilsen 6)
    
    
    239
    
    
    
    233
    
    
    
    465Terje Friestad 6)
    
    
    320
    
    
    
    28
    
    
    
    1,370Sten Roar Martinsen 6)
    
    
    239
    
    
    
    
    
    
    
    75Total board fees  2006
    
    
    2,875
 1)
    
    Amount in NOK thousands.2)
    
    Geir Nilsens loan is at an interest rate of
3.5-4.1 percent and has a repayment period of 3.5
years. Terje Friestads loan is at an interest rate
of 4.1 percent and has a repayment period of 1.5
years. Both loans are extended to the board members
under an employee benefit scheme applicable to all
employees in Norway. Since their election to the
Board of Directors, there have been no modifications
to the loan agreements. No additional credit has been
extended after election to the Board of Directors.
The payment plan schedule has remained the same, and
all payments have been made in a timely fashion. The
loans are not in default.3)
    
    Number of shares includes any related party share
holdings, in addition to shares held directly by the
board member.4)
    
    Board member until 18
May 2006.5)
    
    Board member
as of 19 May 2006.6)
    
    Employee representative on the board elected by
the employees in accordance with Norwegian company
law. As such, these three individuals also are paid
regular salary, remuneration in kind and pension
benefits that are not included in the table above.
  Corporate Management Board remuneration




---



##### 



F20
   
 EstimatedRemun-
    
    
    
    
    
    
    change in valueCorporate
    
    
    
    
    
    Exercise of
    
    
    eration in
    
    
    
    
    
    
    of pension
    
    
    OutstandingManagement Board
    
    Salary 1)2)
    
    
    options 1)3)
    
    
    kind 1)2)
    
    
    Bonus 1)4)
    
    
    benefits 5)
    
    
    loans 1)6)Eivind Reiten
    
    
    4,888
    
    
    
    4,407
    
    
    
    252
    
    
    
    1,500
    
    
    
    6,182
    
    
    
    John Ove Ottestad
    
    
    2,677
    
    
    
    3,532
    
    
    
    227
    
    
    
    520
    
    
    
    3,154
    
    
    
    Jon-Harald Nilsen 7)
    
    
    234
    
    
    
    
    
    
    
    17
    
    
    
    443
    
    
    
    2,413
    
    
    
    135Tore Torvund
    
    
    3,350
    
    
    
    8,379
    
    
    
    225
    
    
    
    582
    
    
    
    3,329
    
    
    
    Hilde Aasheim 8)
    
    
    1,808
    
    
    
    
    
    
    
    135
    
    
    
    
    
    
    
    1,893
    
    
    
    Svein Richard Brandtzæg 9)
    
    
    3,912
    
    
    
    1,923
    
    
    
    91
    
    
    
    
    
    
    
    9,065
    
    
    
    309Torstein Dale Sjøtveit 10)
    
    
    1,892
    
    
    
    1,932
    
    
    
    119
    
    
    
    
    
    
    
    5,912
    
    
    
    427Cecilie Ditlev-Simonsen 11)
    
    
    143
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    1,846
    
    
    
    
 1)
    
    Amounts in NOK thousands.2)
    
    Salary disclosed for Jon-Harald Nilsen, Svein Richard Brandtzæg, Torstein Dale Sjøtveit and
Cecilie Ditlev-Simonsen is the actual amount paid during 2006 for the months served on the
corporate management board. Remuneration in kind is pro-rata based on the actual number of
months in 2006 they were on the corporate management board.3)
    
    Disclosure is not given for corporate management board members who exercised options prior to
their appointment to the corporate management board (Cecilie Ditlev-Simonsen), or after
stepping down from the corporate management board (Jon-Harald Nilsen). Eivind Reiten exercised
40,000 options on 1 August 2006 at an exercise price of NOK
64.32. John Ove Ottestad exercised
32,620 options on 1 August 2006 at an exercise price of NOK 66.23. The average share price of
the five trading days preceding 1 August 2006 was NOK 174.50. On 27 December 2006, Tore
Torvund exercised 32,620 options at an exercise price of NOK 66.23 and 35,000 options at an
exercise price of NOK 64.32. The average share price of the five trading days preceding 27
December 2006 was NOK 189.15. Svein Richard Brandtzæg exercised 17,500 options on 15 August
2006 at an exercise price of NOK 64.32. The average share price of the five trading days
preceding 15 August 2006 was NOK 174.20. Torstein Dale Sjøtveit exercised 17,500 options on 2
August 2006 at an exercise price of NOK 64.32. The average share price of the five trading
days preceding 2 August
2006 was NOK 174.70.4)
    
    Bonus is the amount paid in 2006 for corporate management board services rendered during
2005, including any payments made to individuals after leaving the corporate management board.
Any bonus paid prior to appointment to the corporate management board, for services rendered
in 2005 while not on the corporate management board, are not disclosed.5)
    
    The estimated change in the value of pension benefits reflects both the effect of earning an
additional years pension benefit and the adjustment to present value of previously earned
pension rights. For all individuals listed in the table, this is the estimated change from 1
January 2006 to 31 December 2006. The estimated change in the value of the pension benefit is
calculated as the increase in Projected Benefit Obligations (PBO) calculated with stable
assumptions. As such, the number includes both the annual accrual of pension benefits and the
interest element related to the total accrued pension benefits.6)
    
    The loans to Jon-Harald Nilsen, Svein Richard Brandtzæg and Torstein Dale Sjøtveit were
extended under an employee benefit scheme applicable to all employees in Norway. The loan to
Jon-Harald Nilsen was entered into prior to 30 July 2002. The loan has an interest rate of 3.5
percent and a repayment period of 6.5 years. The loan to Svein Richard Brandtzæg has an
interest rate of 3.5-4.1 percent and a repayment period of 10 years. The loan to Torstein Dale
Sjøtveit has an interest rate of 4.1 percent and a repayment period of 4 years. The loans to
Svein Richard Brandtzæg and Torstein Dale Sjøtveit were extended to them prior to their
appointment on the corporate management board. Related to the loans outstanding to Svein
Richard Brandtzæg and Torstein Dale Sjøtveit, since their appointment to the corporate
management board in 2006, there have been no modifications to their loan agreements. No
additional credit has been extended post appointment and the payment plan schedule has
remained the same. Payments have been made in a timely fashion and the loans are not in
default.7)
    
    Jon-Harald Nilsen stepped down from the corporate management board 1 February 2006.8)
    
    Hilde Merete Aasheim stepped down from the corporate management board 16 January 2007.9)
    
    Svein Richard Brandtzæg was appointed as a member of the corporate management board 1
February 2006.10)
    
    Torstein Dale Sjøtveit was appointed as a member of the corporate management board 1 April
2006.11)
    
    Cecilie Ditlev-Simonsen was appointed as a member of the corporate management board 5 December
2006.
  Executive management share-based compensation




---



##### 



F21
    
 Weightedaverageexerciseprice of SARs
    
    
    IntrinsicSARs
    
    
    SARs
    
    
    
    
    
    
    SARs
    
    
    SARs out-
    
    
    outstand-
    
    
    value of
    
    
    Number ofSARs
    
    
    granted
    
    
    vested in
    
    
    SARs
    
    
    exercised
    
    
    standing
    
    
    ing as of
    
    
    outstanding
    
    
    shares heldCorporate Management Board
    
    31.12.2005 1)
    
    
    01.07.2006
    
    
    2006
    
    
    forfeited 2)
    
    
    in 2006
    
    
    31.12.2006
    
    
    31.12.2006
    
    
    options 3)
    
    
    31.12.2006 4)Eivind Reiten
    
    
    200,000
    
    
    
    75,000
    
    
    
    50,000
    
    
    
    0
    
    
    
    40,000
    
    
    
    235,000
    
    
    
    128.67
    
    
    
    15,234,300
    
    
    
    68,395John Ove Ottestad
    
    
    167,620
    
    
    
    50,000
    
    
    
    35,000
    
    
    
    0
    
    
    
    32,620
    
    
    
    185,000
    
    
    
    118.82
    
    
    
    13,816,300
    
    
    
    41,380Jon-Harald Nilsen 5)
    
    
    167,620
    
    
    
    17,500
    
    
    
    35,000
    
    
    
    0
    
    
    
    32,620
    
    
    
    152,500
    
    
    
    106.84
    
    
    
    13,215,050
    
    
    
    6,540Tore Torvund
    
    
    167,620
    
    
    
    50,000
    
    
    
    35,000
    
    
    
    0
    
    
    
    67,620
    
    
    
    150,000
    
    
    
    131.53
    
    
    
    9,295,000
    
    
    
    38,580Hilde Aasheim 6)
    
    
    0
    
    
    
    50,000
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    50,000
    
    
    
    175.00
    
    
    
    925,000
    
    
    
    75Svein Richard Brandtzæg 7)
    
    
    52,500
    
    
    
    50,000
    
    
    
    17,500
    
    
    
    0
    
    
    
    17,500
    
    
    
    85,000
    
    
    
    148.15
    
    
    
    3,854,500
    
    
    
    8,790Torstein Dale Sjøtveit 8)
    
    
    52,500
    
    
    
    50,000
    
    
    
    17,500
    
    
    
    0
    
    
    
    17,500
    
    
    
    85,000
    
    
    
    148.15
    
    
    
    3,854,500
    
    
    
    6,990Cecilie Ditlev-Simonsen 9)
    
    
    35,000
    
    
    
    12,500
    
    
    
    10,000
    
    
    
    0
    
    
    
    10,000
    
    
    
    37,500
    
    
    
    131.53
    
    
    
    2,323,750
    
    
    
    4,085
 1)
    
    Previously reported SAR amounts have been adjusted to reflect the 5-for-1 stock split
effective 10 May 2006.2)
    
    No SARs were forfeited in 2006 as SARs granted in 2003 vesting in 2006 achieved
the total shareholder return target.3)
    
    Share price 31 December 2006 less exercise
price multiplied by the number of SARs outstanding as of year-end.4)
    
    Number of shares held includes related party share holdings as of 31 December 2006, in addition
to the shares held directly by the corporate management board member.5)
    
    Jon-Harald Nilsen stepped down from the corporate management board 1 February 2006.6)
    
    Hilde Merete Aasheim joined Hydro as a member of the corporate management board on 1 October
2005 and stepped down from the corporate management board effective 16 January 2007.7)
    
    Svein Richard Brandtzæg joined the corporate management
board 1 February 2006.8)
    
    Torstein Dale Sjøtveit joined the corporate management
board 1 April 2006.9)
    
    Cecilie Ditlev-Simonsen joined the
corporate management board 5 December 2006.




---



##### 



F22
 
 Fair value at grant date
 2006
    
    
    2005
    
    
    2004Expected option life at grant date
    
    
    3.5
    
    
    
    3.5
    
    
    
    3.3Risk-free interest rate
    
    
    3.93
    %
    
    
    2.48
    %
    
    
    3.05
    %Expected volatility
    
    
    27.67
    %
    
    
    25.45
    %
    
    
    26.26
    %Expected dividend per share
    
    
    4.00
    
    
    
    4.00
    
    
    
    4.00Estimated weighted average fair value per option, NOK
    
    
    31.97
    
    
    
    18.64
    
    
    
    11.72Fair value of total options granted during fiscal year, NOK thousands
    
    
    22,536
    
    
    
    10,999
    
    
    
    7,327
 1)
    
    The disclosure of the fair value at grant date is for information purposes only, as
Hydros options are cash settled. Hydro accrues SAR expense based on the current fair
value, pro-rata over the vesting period. Upon exercise, the total expense recognized over
the life of the option is limited to the cash paid.
   
 Weighted
    
    
    Exerciseaverage exercise
    
    
    price at
    
    
    Market price atShare appreciation rights 1)2)
    
    Options
    
    
    price (NOK)
    
    
    grant date
    
    
    grant date 3)
    
    
    Vesting period
    
    
    Exercise periodOutstanding 1 January 2004
    
    
    1,362,500
    
    
    
    69.2009.09.2004
    
    
    
    01.07.2007Granted 9 September 2004
    
    
    625,000
    
    
    
    
    
    
    
    95.20
    
    
    
    89.30
    
    
    
    - 30.06.2007
    
    
    
    - 30.06.2010Exercised
    
    
    Forfeited
    
    
    (412,500
    )
    
    
    78.08ExpiredOutstanding 31 December 2004
    
    
    1,575,000
    
    
    
    77.14Exercisable 31 December 2004
    
    
    01.07.2005
    
    
    
    01.07.2008Granted 1 July 2005
    
    
    590,000
    
    
    
    
    
    
    
    124.40
    
    
    
    120.60
    
    
    
    - 30.06.2008
    
    
    
    - 30.06.2011Exercised
    
    
    (314,550
    )
    
    
    66.23Forfeited 4)
    
    
    (48,950
    )
    
    
    65.55Expired
    
    
    Outstanding 31 December 2005
    
    
    1,801,500
    
    
    
    94.83Exercisable 31 December 2005
    
    
    116,500
    
    
    
    66.2301.07.2006
    
    
    
    01.07.2009Granted 1 July 2006
    
    
    705,000
    
    
    
    
    
    
    
    175.00
    
    
    
    165.00
    
    
    
    - 30.06.2009
    
    
    
    - 30.06.2012Exercised 5)
    
    
    (436,500
    )
    
    
    68.48Forfeited 6)
    
    
    (82,500
    )
    
    
    114.17ExpiredOutstanding 31 December 2006
    
    
    1,987,500
    
    
    
    128.26Exercisable 31 December 2006
    
    
    175,000
    
    
    
    64.32
 1)
    
    All SARs granted and then cancelled or exercised related to the 2004 Yara de-merger are not
included in this table.2)
    
    Previously reported number of options, exercise prices and market prices have been adjusted to
reflect the 5-for-1 stock split effective 10 May 2006.3)
    
    Close of day share prices, adjusted for
changes in group structure, as appropriate.4)
    
    SARs granted in 2002 totaling 31 450 (6.8 percent of total number options granted) were
forfeited as of 30 June 2005. SARs were forfeited as the total shareholder return target was not
met during the vesting period.5)
    
    Includes exercise of 2004 and 2005 granted SARs that vested upon retirement.6)
    
    SARs granted in 2003 vested at 100 percent as the total shareholder return target of 20% over
the vesting period was met. SARs forfeited in 2006 relate to option holders terminating their
employment with Hydro.




---



##### 



F23
 United Kingdom employee share-based compensation
   
 Average
    
    
    Strikenumber
    
    
    priceof shares
    
    
    (NOK)1)Options outstanding as of 31 December 2005 2)
    
    
    174,585
    
    
    
    67.49Options exercised during 2006
    
    
    26,985
    
    
    
    72.25Options expired during 2006
    
    
    3,630
    
    
    
    78.07Options outstanding as of 31 December 2006
    
    
    143,970
    
    
    
    70.66
 1)
    
    Presentation in NOK is based on a
translation from GBP using the 29 December
2006 exchange rate of 12.268 (unaudited).2)
    
    Previously reported options outstanding and
strike price have been adjusted to reflect the
5-for-1 stock split effective 10 May 2006.
  Employee share purchase plan
   
 01.01.2006
    
    
    01.01.2005
    
    
    01.01.2004
    
    
    01.01.2003Performance measurement period
    
    - 31.12.2006
    
    
    - 31.12.2005
    
    
    - 31.12.2004
    
    
    - 31.12.2003Total shareholder return performance target achieved
    
    
    312
    %
    
    
    312
    %
    
    
    312
    %
    
    
    312
    %Employee rebate, NOK
    
    
    6,000
    
    
    
    6,000
    
    
    
    6,000
    
    
    
    6,000Employee rebate, percent
    
    
    50
    %
    
    
    50
    %
    
    
    50
    %
    
    
    50
    %Award share price, NOK 1)
    
    
    
    
    
    
    77.77
    
    
    
    52.05
    
    
    
    42.45Total number of shares issued to employees 1)
    
    
    
    
    
    
    755,250
    
    
    
    1,168,170
    
    
    
    1,425,760Compensation expense related to the award, NOK thousands
    
    
    
    
    
    
    58,736
    
    
    
    60,803
    
    
    
    60,524
 1)
    
    Previously reported award share price and total number of shares issued to employees have
been adjusted to reflect the 5-for-1 stock split effective 10 May 2006.




---



##### 



F24
 Note 5
 Operating and geographic segment information
       Operating segment information




---



##### 



F25
  External revenues
    
    
    Internal revenues
    
    
    Total operating revenuesNOK million
    
    2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004Exploration and Production
    
    
    21,006
    
    
    
    18,362
    
    
    
    13,519
    
    
    
    55,942
    
    
    
    45,838
    
    
    
    35,444
    
    
    
    76,948
    
    
    
    64,201
    
    
    
    48,962Energy and Oil Marketing
    
    
    73,744
    
    
    
    65,742
    
    
    
    51,303
    
    
    
    7,329
    
    
    
    6,698
    
    
    
    6,017
    
    
    
    81,073
    
    
    
    72,440
    
    
    
    57,319Eliminations 1)
    
    
    72
    
    
    
    
    
    
    
    
    
    
    
    (57,350
    )
    
    
    (50,166
    )
    
    
    (37,136
    )
    
    
    (57,278
    )
    
    
    (50,166
    )
    
    
    (37,136
    )Oil & Energy
    
    
    94,821
    
    
    
    84,104
    
    
    
    64,821
    
    
    
    5,922
    
    
    
    2,371
    
    
    
    4,325
    
    
    
    100,743
    
    
    
    86,475
    
    
    
    69,146Aluminium Metal 2)
    
    
    43,748
    
    
    
    35,642
    
    
    
    33,572
    
    
    
    24,657
    
    
    
    18,937
    
    
    
    18,385
    
    
    
    68,405
    
    
    
    54,579
    
    
    
    51,957Aluminium Products 2)
    
    
    49,587
    
    
    
    41,963
    
    
    
    42,954
    
    
    
    257
    
    
    
    513
    
    
    
    580
    
    
    
    49,844
    
    
    
    42,477
    
    
    
    43,533Other activities 4)
    
    
    8,077
    
    
    
    9,510
    
    
    
    9,665
    
    
    
    3,137
    
    
    
    2,787
    
    
    
    3,204
    
    
    
    11,214
    
    
    
    12,297
    
    
    
    12,869Corporate and eliminations 3) 5)
    
    
    
    
    
    
    11
    
    
    
    14
    
    
    
    (33,972
    )
    
    
    (24,608
    )
    
    
    (26,494
    )
    
    
    (33,972
    )
    
    
    (24,597
    )
    
    
    (26,479
    )Total
    
    
    196,234
    
    
    
    171,231
    
    
    
    151,026
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    196,234
    
    
    
    171,231
    
    
    
    151,026Depreciation, depletion
    
    
    Other operating
    
    
    Operating income (loss)and amortization 6)
    
    
    expenses
    
    
    before fin. and other incomeNOK million
    
    2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004Exploration and Production
    
    
    17,417
    
    
    
    9,961
    
    
    
    9,752
    
    
    
    18,179
    
    
    
    13,645
    
    
    
    10,848
    
    
    
    41,352
    
    
    
    40,594
    
    
    
    28,363Energy and Oil Marketing
    
    
    853
    
    
    
    651
    
    
    
    640
    
    
    
    76,642
    
    
    
    68,214
    
    
    
    54,030
    
    
    
    3,578
    
    
    
    3,575
    
    
    
    2,650Eliminations 1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (58,601
    )
    
    
    (49,447
    )
    
    
    (37,267
    )
    
    
    1,323
    
    
    
    (719
    )
    
    
    132Oil & Energy
    
    
    18,270
    
    
    
    10,612
    
    
    
    10,391
    
    
    
    36,220
    
    
    
    32,412
    
    
    
    27,610
    
    
    
    46,253
    
    
    
    43,451
    
    
    
    31,144Aluminium Metal 2)
    
    
    1,728
    
    
    
    1,687
    
    
    
    3,798
    
    
    
    60,315
    
    
    
    50,198
    
    
    
    47,374
    
    
    
    6,362
    
    
    
    2,694
    
    
    
    785Aluminium Products 2)
    
    
    1,666
    
    
    
    2,913
    
    
    
    1,848
    
    
    
    48,261
    
    
    
    39,934
    
    
    
    40,613
    
    
    
    (83
    )
    
    
    (370
    )
    
    
    1,072Other activities 4)
    
    
    493
    
    
    
    517
    
    
    
    532
    
    
    
    9,444
    
    
    
    11,782
    
    
    
    12,025
    
    
    
    1,277
    
    
    
    (2
    )
    
    
    312Corporate and eliminations 3) 5)
    
    
    7
    
    
    
    22
    
    
    
    12
    
    
    
    (32,395
    )
    
    
    (25,084
    )
    
    
    (24,975
    )
    
    
    (1,584
    )
    
    
    464
    
    
    
    (1,517
    )Total
    
    
    22,164
    
    
    
    15,752
    
    
    
    16,581
    
    
    
    121,846
    
    
    
    109,242
    
    
    
    102,648
    
    
    
    52,224
    
    
    
    46,237
    
    
    
    31,796Equity in net incomenon-consolidated investees
    
    
    Other income (expense), net
    
    
    Adjusted EBITDANOK million
    
    2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004Exploration and Production
    
    
    7
    
    
    
    6
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,804
    
    
    
    50,601
    
    
    
    38,168Energy and Oil Marketing
    
    
    218
    
    
    
    108
    
    
    
    73
    
    
    
    53
    
    
    
    65
    
    
    
    59
    
    
    
    4,827
    
    
    
    4,456
    
    
    
    3,478Eliminations 1)
    
    
    (2
    )
    
    
    (2
    )
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,323
    
    
    
    (719
    )
    
    
    132Oil & Energy
    
    
    223
    
    
    
    112
    
    
    
    75
    
    
    
    53
    
    
    
    65
    
    
    
    59
    
    
    
    64,954
    
    
    
    54,339
    
    
    
    41,777Aluminium Metal 2)
    
    
    837
    
    
    
    272
    
    
    
    281
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,134
    
    
    
    4,821
    
    
    
    5,297Aluminium Products 2)
    
    
    (179
    )
    
    
    47
    
    
    
    68
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,715
    
    
    
    2,670
    
    
    
    3,058Other activities 4)
    
    
    72
    
    
    
    164
    
    
    
    170
    
    
    
    
    
    
    
    925
    
    
    
    110
    
    
    
    2,094
    
    
    
    1,880
    
    
    
    1,363Corporate and eliminations 3) 5)
    
    
    8
    
    
    
    (1
    )
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (678
    )
    
    
    1,223
    
    
    
    (783
    )Total
    
    
    962
    
    
    
    593
    
    
    
    597
    
    
    
    53
    
    
    
    990
    
    
    
    169
    
    
    
    77,219
    
    
    
    64,933
    
    
    
    50,713
 1)
    
    Eliminations Oil & Energy includes elimination of unrealized gains and losses on gas
contracts with a gain of NOK 1,335 million in 2006, loss of NOK 739 million in 2005 and gain of
NOK 144 million in 2004.2)
    
    Effective 1 February 2006, Hydro decided to split the previous Aluminium Business Area into two
business areas, Aluminium Metal and Aluminium Products. Aluminium Metal consists of the previous
Metals sub segment. Aluminium Products consists of the previous Rolled Products and Extrusion and
Automotive sub segments. Prior periods have been restated to be comparable.3)
    
    Corporate and eliminations includes elimination of unrealized gains and losses on power
contracts between Energy and other units in Hydro with a loss of NOK 686 million in 2006, a gain of
NOK 1,391 million in 2005 and a loss of NOK 235 million in 2004. In addition, gains and losses on
electricity contracts, NOK 13 million, NOK 21 million and NOK 13 million are eliminated within
the Oil and Energy Area in 2006, 2005 and 2004, respectively.4)
    
    Other activities consist of the following: Polymers, BioMar AS (sold December 2005), the
industrial insurance company Industriforsikring, and Hydros internal services.5)
    
    Corporate and eliminations operating income (loss) and Adjusted EBITDA includes a net periodic
pension cost of NOK 527 million for 2006, NOK 495 million for 2005 and NOK 1,001 million for
2004.6)
    
    Depreciation, depletion and amortization include impairment losses.




---



##### 



F26
  Current Assets 1)
    
    
    Non-current Assets
    
    
    Assets 1)NOK million
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Exploration and Production
    
    
    16,174
    
    
    
    14,939
    
    
    
    87,839
    
    
    
    87,536
    
    
    
    104,012
    
    
    
    102,475Energy and Oil Marketing
    
    
    14,775
    
    
    
    17,723
    
    
    
    21,482
    
    
    
    21,934
    
    
    
    36,257
    
    
    
    39,657Eliminations
    
    
    (5,042
    )
    
    
    (7,308
    )
    
    
    15
    
    
    
    (287
    )
    
    
    (5,027
    )
    
    
    (7,594
    )Oil & Energy
    
    
    25,907
    
    
    
    25,354
    
    
    
    109,336
    
    
    
    109,183
    
    
    
    135,243
    
    
    
    134,537Aluminium Metal 5)
    
    
    18,337
    
    
    
    16,491
    
    
    
    22,869
    
    
    
    22,749
    
    
    
    41,206
    
    
    
    39,240Aluminium Products 5)
    
    
    17,455
    
    
    
    15,613
    
    
    
    13,025
    
    
    
    16,302
    
    
    
    30,480
    
    
    
    31,916Other activities 6)
    
    
    5,208
    
    
    
    4,740
    
    
    
    5,646
    
    
    
    5,202
    
    
    
    10,854
    
    
    
    9,942Corporate and eliminations
    
    
    14,102
    
    
    
    8,095
    
    
    
    (1,582
    )
    
    
    3,466
    
    
    
    12,520
    
    
    
    11,560Total continued operations
    
    
    81,009
    
    
    
    70,293
    
    
    
    149,293
    
    
    
    156,902
    
    
    
    230,302
    
    
    
    227,195Classified as held for sale
    
    
    1,122
    
    
    
    
    
    
    
    2,569
    
    
    
    
    
    
    
    3,691
    
    
    
    Total
    
    
    82,131
    
    
    
    70,293
    
    
    
    151,862
    
    
    
    156,902
    
    
    
    233,993
    
    
    
    227,195Non-consolidated investees 2)
    
    
    Segment debt 3)
    
    
    Investments 4)NOK million
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005 7)Exploration and Production
    
    
    54
    
    
    
    52
    
    
    
    12,177
    
    
    
    10,090
    
    
    
    20,742
    
    
    
    33,846Energy and Oil Marketing
    
    
    1,957
    
    
    
    2,528
    
    
    
    11,697
    
    
    
    15,117
    
    
    
    2,062
    
    
    
    2,333Eliminations
    
    
    16
    
    
    
    18
    
    
    
    (5,780
    )
    
    
    (7,030
    )
    
    
    
    
    
    
    Oil & Energy
    
    
    2,027
    
    
    
    2,598
    
    
    
    18,094
    
    
    
    18,177
    
    
    
    22,804
    
    
    
    36,179Aluminium Metal
    
    
    4,830
    
    
    
    3,863
    
    
    
    10,443
    
    
    
    8,299
    
    
    
    1,979
    
    
    
    1,792Aluminium Products
    
    
    1,900
    
    
    
    2,495
    
    
    
    9,135
    
    
    
    8,547
    
    
    
    1,250
    
    
    
    1,970Other activities 6)
    
    
    1,135
    
    
    
    1,125
    
    
    
    2,391
    
    
    
    2,346
    
    
    
    647
    
    
    
    1,097Corporate and eliminations
    
    
    563
    
    
    
    732
    
    
    
    (3,507
    )
    
    
    (3,973
    )
    
    
    35
    
    
    
    72Total continued operations
    
    
    10,455
    
    
    
    10,814
    
    
    
    36,555
    
    
    
    33,396
    
    
    
    26,713
    
    
    
    41,110Classified as held for sale
    
    
    279
    
    
    
    
    
    
    
    720
    
    
    
    
    
    
    
    168
    
    
    
    Total
    
    
    10,734
    
    
    
    10,814
    
    
    
    37,275
    
    
    
    33,396
    
    
    
    26,881
    
    
    
    41,110
 1)
    
    Current assets and assets exclude internal cash accounts and accounts receivables related to
group relief.2)
    
    Non-consolidated investees comprises investments and advances, see note 12.3)
    
    Segment debt is defined as short-term interest from liabilities excluding income tax payable
and short-term deferred tax liabilities.4)
    
    Additions to property, plant and equipment plus long-term securities, intangibles assets,
long-term advances and investments in non-consolidated investees.5)
    
    Effective 1 February 2006, Hydro decided to split the previous Aluminium Business Area into two
business areas, Aluminium Metal and Aluminium Products. Aluminium Metal consists of the previous
Metals sub segment. Aluminium Products consists of the previous Rolled Products and Extrusion and
Automotive sub segments. Prior periods have been restated to be comparable.6)
    
    Other activities consist of the following: Polymers, BioMar AS (sold December 2005), the
industrial insurance company, Industriforsikring, and Hydros internal services.7)
    
    Includes non-cash increase in investment from effect of change in accounting principle (FIN 47),
of NOK 186 million in Aluminium Metal and NOK 9 million in Aluminium Products.




---



##### 



F27
  Assets
    
    
    Long-lived assets
    
    
    InvestmentsAmounts in NOK million
    
    2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004Norway
    
    
    146,504
    
    
    
    137,916
    
    
    
    135,005
    
    
    
    92,069
    
    
    
    92,121
    
    
    
    88,096
    
    
    
    15,307
    
    
    
    13,795
    
    
    
    11,988Germany
    
    
    14,785
    
    
    
    15,619
    
    
    
    15,973
    
    
    
    6,575
    
    
    
    8,328
    
    
    
    8,733
    
    
    
    438
    
    
    
    835
    
    
    
    1,107Sweden
    
    
    3,822
    
    
    
    4,299
    
    
    
    4,453
    
    
    
    1,128
    
    
    
    1,085
    
    
    
    1,163
    
    
    
    295
    
    
    
    198
    
    
    
    187Italy
    
    
    2,698
    
    
    
    2,284
    
    
    
    2,037
    
    
    
    985
    
    
    
    876
    
    
    
    704
    
    
    
    185
    
    
    
    291
    
    
    
    160Great Britain
    
    
    2,577
    
    
    
    2,669
    
    
    
    2,724
    
    
    
    894
    
    
    
    1,093
    
    
    
    1,056
    
    
    
    81
    
    
    
    171
    
    
    
    136France
    
    
    2,422
    
    
    
    2,340
    
    
    
    2,483
    
    
    
    587
    
    
    
    627
    
    
    
    690
    
    
    
    64
    
    
    
    60
    
    
    
    99The Netherlands
    
    
    1,306
    
    
    
    2,663
    
    
    
    2,321
    
    
    
    750
    
    
    
    1,194
    
    
    
    1,309
    
    
    
    
    
    
    
    1
    
    
    
    98Denmark
    
    
    1,071
    
    
    
    1,330
    
    
    
    3,664
    
    
    
    585
    
    
    
    944
    
    
    
    1,781
    
    
    
    43
    
    
    
    136
    
    
    
    152Spain
    
    
    996
    
    
    
    962
    
    
    
    1,191
    
    
    
    307
    
    
    
    321
    
    
    
    530
    
    
    
    22
    
    
    
    18
    
    
    
    38Other
    
    
    3,875
    
    
    
    4,928
    
    
    
    4,684
    
    
    
    1,779
    
    
    
    2,824
    
    
    
    2,718
    
    
    
    158
    
    
    
    380
    
    
    
    1,720Total EU
    
    
    33,552
    
    
    
    37,094
    
    
    
    39,530
    
    
    
    13,590
    
    
    
    17,292
    
    
    
    18,685
    
    
    
    1,286
    
    
    
    2,090
    
    
    
    3,696Other Europe
    
    
    1,169
    
    
    
    1,391
    
    
    
    1,597
    
    
    
    869
    
    
    
    1,134
    
    
    
    1,327
    
    
    
    95
    
    
    
    49
    
    
    
    169Total Europe
    
    
    181,226
    
    
    
    176,401
    
    
    
    176,132
    
    
    
    106,528
    
    
    
    110,547
    
    
    
    108,107
    
    
    
    16,688
    
    
    
    15,934
    
    
    
    15,854USA
    
    
    20,641
    
    
    
    28,159
    
    
    
    4,428
    
    
    
    13,630
    
    
    
    21,411
    
    
    
    1,918
    
    
    
    3,213
    
    
    
    21,889
    
    
    
    484Other Americas
    
    
    8,434
    
    
    
    4,787
    
    
    
    3,855
    
    
    
    7,685
    
    
    
    4,272
    
    
    
    3,432
    
    
    
    3,177
    
    
    
    145
    
    
    
    186Africa
    
    
    7,137
    
    
    
    5,728
    
    
    
    4,613
    
    
    
    5,914
    
    
    
    4,937
    
    
    
    4,113
    
    
    
    2,154
    
    
    
    1,653
    
    
    
    1,218Canada
    
    
    6,827
    
    
    
    6,636
    
    
    
    6,746
    
    
    
    5,377
    
    
    
    5,618
    
    
    
    6,062
    
    
    
    905
    
    
    
    806
    
    
    
    1,203Australia and New Zealand
    
    
    3,148
    
    
    
    3,049
    
    
    
    2,588
    
    
    
    2,237
    
    
    
    2,464
    
    
    
    2,081
    
    
    
    125
    
    
    
    320
    
    
    
    280Asia
    
    
    2,890
    
    
    
    2,434
    
    
    
    1,880
    
    
    
    1,822
    
    
    
    1,667
    
    
    
    1,133
    
    
    
    283
    
    
    
    364
    
    
    
    239Total outside Europe
    
    
    49,076
    
    
    
    50,792
    
    
    
    24,111
    
    
    
    36,665
    
    
    
    40,368
    
    
    
    18,738
    
    
    
    9,857
    
    
    
    25,177
    
    
    
    3,610Total continued operations
    
    
    230,302
    
    
    
    227,195
    
    
    
    200,243
    
    
    
    143,193
    
    
    
    150,915
    
    
    
    126,846
    
    
    
    26,545
    
    
    
    41,110
    
    
    
    19,464Classified as held for sale
    
    
    3,691
    
    
    
    
    
    
    
    
    
    
    
    2,449
    
    
    
    
    
    
    
    
    
    
    
    168
    
    
    
    
    
    
    
    Total
    
    
    233,993
    
    
    
    227,195
    
    
    
    200,243
    
    
    
    145,642
    
    
    
    150,915
    
    
    
    126,846
    
    
    
    26,713
    
    
    
    41,110
    
    
    
    19,464
    Operating revenuesNOK million
    
    2006
    
    
    2005
    
    
    2004Norway
    
    
    18,138
    
    
    
    24,834
    
    
    
    25,012Great Britain
    
    
    31,505
    
    
    
    34,583
    
    
    
    27,591Germany
    
    
    27,369
    
    
    
    17,176
    
    
    
    19,030France
    
    
    10,617
    
    
    
    9,706
    
    
    
    6,746Italy
    
    
    10,046
    
    
    
    6,864
    
    
    
    7,357The Netherlands
    
    
    8,512
    
    
    
    6,694
    
    
    
    5,114Sweden
    
    
    8,222
    
    
    
    9,307
    
    
    
    8,131Spain
    
    
    5,925
    
    
    
    4,472
    
    
    
    5,993Denmark
    
    
    1,686
    
    
    
    1,220
    
    
    
    1,201Other
    
    
    20,807
    
    
    
    14,195
    
    
    
    12,195Total EU
    
    
    124,689
    
    
    
    104,218
    
    
    
    93,359Switzerland
    
    
    6,912
    
    
    
    6,631
    
    
    
    5,603Other Europe
    
    
    3,363
    
    
    
    2,349
    
    
    
    1,658Total Europe
    
    
    153,102
    
    
    
    138,032
    
    
    
    125,631USA
    
    
    21,179
    
    
    
    13,229
    
    
    
    10,224Other Americas
    
    
    8,956
    
    
    
    8,201
    
    
    
    2,519Asia
    
    
    7,760
    
    
    
    6,313
    
    
    
    5,943Canada
    
    
    3,035
    
    
    
    3,439
    
    
    
    5,188Africa
    
    
    1,144
    
    
    
    981
    
    
    
    547Australia and New Zealand
    
    
    1,058
    
    
    
    1,038
    
    
    
    972Total outside Europe
    
    
    43,132
    
    
    
    33,199
    
    
    
    25,394Total
    
    
    196,234
    
    
    
    171,231
    
    
    
    151,026




---



##### 



F28
 Note 6
 Operating costs and expenses
   Amounts in NOK million
    
    2006
    
    
    2005
    
    
    2004Research and development expense
    
    
    727
    
    
    
    716
    
    
    
    760Bad debt
    
    
    115
    
    
    
    233
    
    
    
    269Shipping and handling costs
    
    
    3,563
    
    
    
    3,188
    
    
    
    3,142Operating lease expense: 1)Drilling rigs, ships, office space
    
    
    947
    
    
    
    867
    
    
    
    675Office space leased from Hydros
independent pension trust
    
    
    215
    
    
    
    233
    
    
    
    225Total
    
    
    1,161
    
    
    
    1,100
    
    
    
    901Payroll and related costs:Salaries
    
    
    14,321
    
    
    
    12,909
    
    
    
    13,316Social security costs
    
    
    2,200
    
    
    
    2,136
    
    
    
    2,200Social benefits
    
    
    646
    
    
    
    456
    
    
    
    522Net periodic pension cost
(Note 19) 2)
    
    
    2,237
    
    
    
    2,180
    
    
    
    2,116Total
    
    
    19,404
    
    
    
    17,681
    
    
    
    18,155
 1)
    
    Total minimum future rentals of NOK 15,241 million are due under non-cancellable operating
leases as follows (in NOK million): 2007  2,415; 2008  2,805; 2009  3,087; 2010  1,823; 2011 
1,707; and thereafter  3,404.2)
    
    Net periodic pension cost from discontinued operations is excluded for 2006, 2005 and 2004.
   Note 7
 Financial income and expense
  Amounts in NOK million
    
    2006
    
    
    2005
    
    
    2004Interest income
    
    
    1,076
    
    
    
    895
    
    
    
    927Net gain on securities
    
    
    131
    
    
    
    168
    
    
    
    72Dividends received
    
    
    216
    
    
    
    170
    
    
    
    164Interest income and other financial income
    
    
    1,424
    
    
    
    1,233
    
    
    
    1,163Interest expense
    
    
    (1,870
    )
    
    
    (1,743
    )
    
    
    (2,075
    )Capitalized interest
    
    
    1,231
    
    
    
    867
    
    
    
    648Net foreign exchange gain (loss)
    
    
    1,058
    
    
    
    (2,157
    )
    
    
    1,348Other, net 1)
    
    
    (58
    )
    
    
    (89
    )
    
    
    (963
    )Interest expense and foreign exchange gain (loss)
    
    
    361
    
    
    
    (3,122
    )
    
    
    (1,043
    )Financial income (expense), net
    
    
    1,785
    
    
    
    (1,889
    )
    
    
    121
 1)
    
    Other, net includes premium paid for early retirement of long-term debt (breaking costs) of
NOK 15 million for 2006, NOK 6 million for 2005 and NOK 938 million for 2004.
  Note 8
 Other income and expense




---



##### 



F29
 Note 9
 Income taxes
  Amounts in NOK million
    
    2006
    
    
    2005
    
    
    2004Income from continuing operations
before taxes and minority interest:Norway
    
    
    55,635
    
    
    
    40,254
    
    
    
    29,378Other countries
    
    
    (611
    )
    
    
    5,678
    
    
    
    3,304Total
    
    
    55,024
    
    
    
    45,932
    
    
    
    32,682Current taxes:Norway
    
    
    40,056
    
    
    
    28,784
    
    
    
    22,529Other countries
    
    
    2,046
    
    
    
    1,990
    
    
    
    1,599Current income tax expense
    
    
    42,101
    
    
    
    30,774
    
    
    
    24,128Deferred taxes:Norway
    
    
    (929
    )
    
    
    (217
    )
    
    
    (2,340
    )Other countries
    
    
    (3,574
    )
    
    
    (286
    )
    
    
    (607
    )Deferred tax expense (benefit)
    
    
    (4,503
    )
    
    
    (503
    )
    
    
    (2,946
    )Total income tax expense
    
    
    37,598
    
    
    
    30,271
    
    
    
    21,181
 Components of deferred income tax expense
 Amounts in NOK million
    
    2006
    
    
    2005
    
    
    2004Deferred tax expense (benefit),
excluding items below
    
    
    (6,082
    )
    
    
    (1,512
    )
    
    
    (2,299
    )Benefits of tax loss
carryforwards
    
    
    (42
    )
    
    
    (578
    )
    
    
    156Tax expense (benefit)
from recognizing funded status of
defined pension plans and
postretirement benefits to OCI
    
    
    2,076
    
    
    
    
    
    
    
    Tax expense (benefit)
allocated to OCI
    
    
    167
    
    
    
    529
    
    
    
    64Effect of tax law changes
    
    
    58
    
    
    
    5
    
    
    
    (842
    )Net change in valuation allowance
    
    
    (681
    )
    
    
    1,054
    
    
    
    (26
    )Deferred tax expense (benefit)  US GAAP
    
    
    (4,503
    )
    
    
    (503
    )
    
    
    (2,946
    )
   Reconciliation of Norwegian nominal statutory tax rate to effective tax rate
 Amounts in NOK million
    
    2006
    
    
    2005
    
    
    2004Expected income taxes at
statutory tax rate 1)
    
    
    15,407
    
    
    
    12,923
    
    
    
    9,179Petroleum surtax 2)
    
    
    25,553
    
    
    
    18,739
    
    
    
    13,977Uplift benefit 2)
    
    
    (1,321
    )
    
    
    (1,357
    )
    
    
    (967
    )Hydro-electric power surtax 3)
    
    
    120
    
    
    
    84
    
    
    
    163Tax law changes
    
    
    58
    
    
    
    5
    
    
    
    (846
    )Losses and other deductions
with no tax benefit
    
    
    491
    
    
    
    1,067
    
    
    
    139Non-deductible expenses
    
    
    50
    
    
    
    105
    
    
    
    119Foreign tax rate differences
    
    
    (402
    )
    
    
    319
    
    
    
    145Tax free income
    
    
    (456
    )
    
    
    (683
    )
    
    
    (473
    )Dividend exclusion
    
    
    (25
    )
    
    
    (23
    )
    
    
    (37
    )Losses and other benefits not
previously recognized
    
    
    (1,171
    )
    
    
    (579
    )
    
    
    (146
    )Other, net
    
    
    (639
    )
    
    
    (281
    )
    
    
    (56
    )Income tax expense
    
    
    37,665
    
    
    
    30,317
    
    
    
    21,197Reclassified to discontinued operations
    
    
    (66
    )
    
    
    (46
    )
    
    
    (16
    )Income tax expense  US GAAP
    
    
    37,598
    
    
    
    30,271
    
    
    
    21,181Effective tax rate  US GAAP
    
    
    68.3
    %
    
    
    65.9
    %
    
    
    64.8
    %
 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.




---



##### 



F30
   US GAAP Deferred TaxAssets
    
    
    Liabilities
    
    
    Assets
    
    
    LiabilitiesAmounts in NOK million
    
    2006
    
    
    2006
    
    
    2005
    
    
    2005Short-term:Marketable securities
    
    
    14
    
    
    
    
    
    
    
    4
    
    
    
    Inventory valuation
    
    
    271
    
    
    
    (887
    )
    
    
    435
    
    
    
    (410
    )Accrued expenses
    
    
    3,557
    
    
    
    (1,183
    )
    
    
    1,174
    
    
    
    (1,115
    )Unrealized exchange
(gains) losses
    
    
    602
    
    
    
    (1,428
    )
    
    
    958
    
    
    
    (852
    )Uplift benefit
    
    
    1,090
    
    
    
    
    
    
    
    1,068
    
    
    
    Other
    
    
    5
    
    
    
    
    
    
    
    5
    
    
    
    Long-term:Unrealized exchange
(gains) losses
    
    
    1,079
    
    
    
    (1,591
    )
    
    
    736
    
    
    
    (1,350
    )Property, plant
and equipment
    
    
    8,460
    
    
    
    (41,155
    )
    
    
    6,325
    
    
    
    (40,893
    )Capitalized interest
    
    
    
    
    
    
    (3,631
    )
    
    
    
    
    
    
    (3,506
    )Exploration drilling costs
    
    
    
    
    
    
    (2,496
    )
    
    
    
    
    
    
    (2,455
    )Other non-current assets
    
    
    357
    
    
    
    (482
    )
    
    
    544
    
    
    
    (600
    )Accrued expenses
    
    
    1,332
    
    
    
    (982
    )
    
    
    1,179
    
    
    
    (681
    )Pensions
    
    
    4,047
    
    
    
    (1,473
    )
    
    
    2,209
    
    
    
    (1,430
    )Deferred (gains)
losses on sales
    
    
    140
    
    
    
    (459
    )
    
    
    169
    
    
    
    (575
    )Uplift benefit
    
    
    1,668
    
    
    
    
    
    
    
    1,740
    
    
    
    Abandonments and
decommissioning accruals
    
    
    7,234
    
    
    
    
    
    
    
    4,866
    
    
    
    Cash flow hedges
    
    
    306
    
    
    
    (38
    )
    
    
    13
    
    
    
    (42
    )Other
    
    
    931
    
    
    
    (490
    )
    
    
    788
    
    
    
    (697
    )Tax effect tax loss
carryforwards
    
    
    3,244
    
    
    
    
    
    
    
    3,290
    
    
    
    Subtotal
    
    
    34,337
    
    
    
    (56,295
    )
    
    
    25,503
    
    
    
    (54,606
    )Total valuation
allowance
    
    
    (2,144
    )
    
    
    
    
    
    
    (2,591
    )
    
    
    Gross deferred tax
assets and liabilities
    
    
    32,193
    
    
    
    (56,295
    )
    
    
    22,912
    
    
    
    (54,606
    )
     Amounts in NOK million2007
    
    
    22008
    
    
    582009
    
    
    2452010
    
    
    1752011
    
    
    166After 2011
    
    
    6,231Without expiration
    
    
    2,343Total tax loss carryforwards
    
    
    9,220
  Note 10
 Short-term investments
  Amounts in NOK million
    
    2006
    
    
    2005Bank, time deposits
    
    
    12,950
    
    
    
    1,851Marketable equity securities
    
    
    570
    
    
    
    517Debt securities and other
    
    
    1,499
    
    
    
    1,498Total short-term investment
    
    
    15,020
    
    
    
    3,865
   Note 11
 Inventories and other current assets
  Amounts in NOK million
    
    2006
    
    
    2005Finished goods
    
    
    7,500
    
    
    
    6,736Work in progress
    
    
    2,807
    
    
    
    2,598Raw materials
    
    
    6,190
    
    
    
    5,218Total inventories
    
    
    16,497
    
    
    
    14,553Prepaid expenses
    
    
    4,302
    
    
    
    6,171Other current assets
    
    
    9,723
    
    
    
    9,742Total prepaid expenses and other current assets
    
    
    14,025
    
    
    
    15,912




---



##### 



F31
 Note 12
 Non-consolidated investees
  HydroAmounts in NOK million
    
    Naturkraft
    
    
    Texaco
    
    
    Alunorf
    
    
    Alunorte
    
    
    Søral
    
    
    Aluchemie
    
    
    Meridian
    
    
    QVC
    
    
    Noretyl
    
    
    Other
    
    
    TotalBalance 1 January 2005
    
    
    21
    
    
    
    963
    
    
    
    1,532
    
    
    
    1,544
    
    
    
    643
    
    
    
    564
    
    
    
    593
    
    
    
    361
    
    
    
    405
    
    
    
    3,391
    
    
    
    10,017Investments (sale), net
    
    
    300
    
    
    
    
    
    
    
    
    
    
    
    180
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (46
    )
    
    
    435Change in long-term advances, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (70
    )
    
    
    (400
    )
    
    
    (470
    )Transfers (to) from other investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20
    )
    
    
    (20
    )Hydros share of net income (loss)1)
    
    
    (41
    )
    
    
    30
    
    
    
    29
    
    
    
    279
    
    
    
    196
    
    
    
    6
    
    
    
    60
    
    
    
    88
    
    
    
    50
    
    
    
    53
    
    
    
    750Amortization and 
write-down1)
    
    
    
    
    
    
    
    
    
    
    (56
    )
    
    
    (21
    )
    
    
    
    
    
    
    (15
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39
    )
    
    
    (131
    )Dividends and other
payments received by Hydro
    
    
    
    
    
    
    (48
    )
    
    
    (12
    )
    
    
    (27
    )
    
    
    (100
    )
    
    
    (2
    )
    
    
    (35
    )
    
    
    
    
    
    
    
    
    
    
    (99
    )
    
    
    (323
    )Foreign currency translation and other
    
    
    
    
    
    
    (51
    )
    
    
    (63
    )
    
    
    413
    
    
    
    (19
    )
    
    
    (18
    )
    
    
    70
    
    
    
    63
    
    
    
    
    
    
    
    160
    
    
    
    555Balance 31 December 2005
    
    
    280
    
    
    
    895
    
    
    
    1,430
    
    
    
    2,368
    
    
    
    721
    
    
    
    537
    
    
    
    688
    
    
    
    512
    
    
    
    385
    
    
    
    3,000
    
    
    
    10,814Changes in 2006:Investments (sale), net
    
    
    400
    
    
    
    (998
    )
    
    
    
    
    
    
    628
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (99
    )
    
    
    (69
    )Change in long-term advances, net
    
    
    
    
    
    
    
    
    
    
    353
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8
    )
    
    
    (524
    )
    
    
    (178
    )Transfers (to) from other investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Hydros share of net income (loss)1)
    
    
    (21
    )
    
    
    99
    
    
    
    52
    
    
    
    630
    
    
    
    223
    
    
    
    12
    
    
    
    48
    
    
    
    13
    
    
    
    59
    
    
    
    251
    
    
    
    1,365Amortization and 
write-down1)
    
    
    
    
    
    
    
    
    
    
    (56
    )
    
    
    (19
    )
    
    
    
    
    
    
    (17
    )
    
    
    (238
    )
    
    
    
    
    
    
    
    
    
    
    (64
    )
    
    
    (394
    )Dividends and other
payments received by Hydro
    
    
    
    
    
    
    
    
    
    
    (16
    )
    
    
    (55
    )
    
    
    (249
    )
    
    
    (3
    )
    
    
    (31
    )
    
    
    
    
    
    
    
    
    
    
    (64
    )
    
    
    (417
    )Foreign
currency translation andother 2)
    
    
    
    
    
    
    4
    
    
    
    10
    
    
    
    (155
    )
    
    
    (72
    )
    
    
    14
    
    
    
    (35
    )
    
    
    (17
    )
    
    
    
    
    
    
    (137
    )
    
    
    (387
    )Asset held for sale 3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (279
    )
    
    
    (279
    )Balance 31 December 2006
    
    
    659
    
    
    
    0
    
    
    
    1,773
    
    
    
    3,397
    
    
    
    623
    
    
    
    542
    
    
    
    433
    
    
    
    508
    
    
    
    436
    
    
    
    2,084
    
    
    
    10,455
 1)
    
    Share of net income relating to Castech investment classified as held for sale amounted to
NOK 12 million in 2006 and NOK 29 million in 2005. Amortizations amounted to NOK 3 million in
2006 and 2005.2)
    
    Includes FAS 158 fair value adjustment regarding pension and postretirement benefits in
non-consolidated investees of NOK 190 million in 2006.3)
    
    Investment in Castech classified as held for sale in 2006.
   Specification of non-consolidated investees
 Percentage
    
    
    Investments in
    
    
    Hydros currentAmounts
    
    owned
    
    
    and advances
    
    
    receivable (payable),NOK million,
    
    by Hydro
    
    
    to investees
    
    
    net with investeesexcept ownership
    
    2006
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Naturkraft
    
    
    50.0
    %
    
    
    659
    
    
    
    280
    
    
    
    
    
    
    
    Hydro Texaco
    
    
    50.0
    %
    
    
    0
    
    
    
    895
    
    
    
    
    
    
    
    43Alunorf
    
    
    50.0
    %
    
    
    1,773
    
    
    
    1,430
    
    
    
    262
    
    
    
    254Alunorte
    
    
    34.0
    %
    
    
    3,397
    
    
    
    2,368
    
    
    
    
    
    
    
    Søral
    
    
    49.9
    %
    
    
    623
    
    
    
    721
    
    
    
    (178
    )
    
    
    (165
    )Aluchemie
    
    
    36.2
    %
    
    
    542
    
    
    
    537
    
    
    
    (8
    )
    
    
    Meridian
    
    
    49.0
    %
    
    
    433
    
    
    
    688
    
    
    
    
    
    
    
    36QVC
    
    
    29.7
    %
    
    
    508
    
    
    
    512
    
    
    
    1
    
    
    
    1Noretyl
    
    
    50.0
    %
    
    
    436
    
    
    
    385
    
    
    
    52
    
    
    
    25Others
    
    
    
    
    
    
    2,083
    
    
    
    3,000
    
    
    
    277
    
    
    
    (245
    )Total
    
    
    
    
    
    
    10,455
    
    
    
    10,814
    
    
    
    406
    
    
    
    (51
    )




---



##### 



F32
         Non-consolidated
investees  100 percent basis
    Income statement data1)
 Amounts in NOK million(unaudited)
    
    2006
    
    
    2005
    
    
    2004Operating revenues
    
    
    38,839
    
    
    
    34,349
    
    
    
    30,570Operating income
    
    
    7,283
    
    
    
    4,243
    
    
    
    4,117Income before taxes and minority interest
    
    
    6,498
    
    
    
    4,100
    
    
    
    3,733Net income
    
    
    4,614
    
    
    
    3,189
    
    
    
    3,394Hydros share of net income
    
    
    1,354
    
    
    
    721
    
    
    
    1,004
 1)
    
    All periods 2004-2006 are excluding Castech investment classified as held for sale in 2006.
 Balance sheet data
 Amounts in NOK million(unaudited)
    
    20061)
    
    
    2005
    
    
    2004Current assets
    
    
    14,370
    
    
    
    15,721
    
    
    
    15,052Non-current assets
    
    
    33,857
    
    
    
    34,009
    
    
    
    29,759Assets
    
    
    48,228
    
    
    
    49,730
    
    
    
    44,811Current
liabilities
    
    
    8,102
    
    
    
    9,534
    
    
    
    8,572Non-current liabilities
    
    
    12,351
    
    
    
    13,877
    
    
    
    13,275Minority interest
    
    
    35
    
    
    
    30
    
    
    
    19Shareholders equity
    
    
    27,739
    
    
    
    26,289
    
    
    
    22,945Liabilities and shareholders equity
    
    
    48,228
    
    
    
    49,730
    
    
    
    44,811Hydros investments and advances
    
    
    10,455
    
    
    
    10,814
    
    
    
    10,017
 1)
    
    Figures are excluding Castech investment in 2006.
  Note 13
 Intangible assets, prepaid pension, investments and non-current assets
  Amounts in NOK million
    
    2006
    
    
    2005Goodwill for consolidated subsidiaries
    
    
    4,275
    
    
    
    4,100Intangible assets, less accumulated
amortization (Note 15, note 19)
    
    
    586
    
    
    
    1,053Total intangible assets
    
    
    4,861
    
    
    
    5,153Prepaid pension (Note 19)
    
    
    1,205
    
    
    
    4,659Other investments at cost
    
    
    2,185
    
    
    
    2,046Non-current assets
    
    
    4,372
    
    
    
    5,205Prepaid pension, investments
and other non-current assets  US GAAP
    
    
    7,763
    
    
    
    11,910




---



##### 



F33
 Note 14
 Property, plant and equipment
  Land-based activitiesMachinery and
    
    
    
    
    
    Plant under
    
    Oil and gasAmounts in NOK million
    
    Land
    
    equipment
    
    Buildings
    
    construction
    
    activities 1)
    
    TotalCost:Cost 31.12.2005
    
    
    1,056
    
    
    
    53,426
    
    
    
    17,861
    
    
    
    2,414
    
    
    
    174,229
    
    
    
    248,985Additions at cost
    
    
    1
    
    
    
    1,220
    
    
    
    151
    
    
    
    1,857
    
    
    
    21,211
    6)
    
    
    24,440Retirements
    
    
    (14
    )
    
    
    (727
    )
    
    
    (396
    )
    
    
    (84
    )
    
    
    (1,228
    ) 7)
    
    
    (2,448
    )Transfers
    
    
    
    
    
    
    2,185
    
    
    
    290
    
    
    
    (2,725
    )
    
    
    250
    
    
    
    Foreign currency translation
    
    
    15
    
    
    
    (104
    )
    
    
    (57
    )
    
    
    (36
    )
    
    
    (3,427
    )
    
    
    (3,609
    )Reclassified to assets held for sale
    
    
    (59
    )
    
    
    (2,610
    )
    
    
    (570
    )
    
    
    (172
    )
    
    
    
    
    
    
    (3,412
    )Cost 31.12.2006
    
    
    998
    
    
    
    53,390
    
    
    
    17,279
    
    
    
    1,254
    
    
    
    191,035
    
    
    
    263,956Depreciation:Accumulated depreciation 31.12.2005
    
    
    (1
    )
    
    
    (31,187
    )
    
    
    (8,420
    )
    
    
    
    
    
    
    (81,188
    )
    
    
    (120,795
    )Depreciation, depletion
and amortization 2) 3)
    
    (18
    )
    
    
    (3,558
    )
    
    
    (551
    )
    
    
    
    
    
    
    (17,598
    )
    
    
    (21,725
    )Retirements
    
    
    
    
    
    
    679
    
    
    
    365
    
    
    
    
    
    
    
    311
    
    
    
    1,355Foreign currency translation
and transfers
    
    
    1
    
    
    
    218
    
    
    
    8
    
    
    
    
    
    
    
    678
    
    
    
    904Reclassified to assets held for sale
    
    
    
    
    
    
    1,169
    
    
    
    112
    
    
    
    
    
    
    
    
    
    
    
    1,281Accumulated depreciation 31.12.2006
    
    
    (18
    )
    
    
    (32,680
    )
    
    
    (8,486
    )
    
    
    
    
    
    
    (97,797
    )
    
    
    (138,980
    )Net book value 31.12.2005 4)
    
    
    1,055
    
    
    
    22,239
    
    
    
    9,441
    
    
    
    2,414
    
    
    
    93,041
    
    
    
    128,191Net book value 31.12.2006 4)
    
    
    980
    
    
    
    20,710
    
    
    
    8,793
    
    
    
    1,254
    
    
    
    93,238
    
    
    
    124,976
 1)
    
    Includes land-based oil and gas activities and transportation systems for Oil & Energy.2)
    
    NOK 286 million hereof have been reclassified to income from discontinued operations.3)
    
    Impairment losses for 2006, 2005 and 2004 were NOK 5,177 million, NOK 1,467 million and NOK
2,176 million, respectively.4)
    
    Includes NOK 451 million and NOK 542 million related to capital leases for 2006 and 2005,
respectively.6)
    
    Includes purchase price adjustment related to the acquisition of Spinnaker Exploration
Company in December 2005, see note 2.7)
    
    Includes previously capitalized exploration costs, including
acquisition costs, expensed in
the current period, see note 26.




---



##### 



F34
 Note 15
 Goodwill and intangible assets
  Intangible assets
 Finite
    
    
    IndefiniteUseful
    
    
    UsefulAmounts in NOK million
    
    Life
    
    
    Life
    
    
    TotalCost 31.12.2005
    
    
    3,073
    
    
    
    5
    
    
    
    3,077Additions at cost
    
    
    105
    
    
    
    
    
    
    
    105Disposals
    
    
    (620
    )
    
    
    
    
    
    
    (620
    )Foreign currency translation and other
    
    
    62
    
    
    
    
    
    
    
    62Accumulated amortization 31.12.2006
    
    
    (1,992
    )
    
    
    
    
    
    
    (1,992
    )Reclassified to assets held for sale
    
    
    (47
    )
    
    
    
    
    
    
    (47
    )Net book value 31.12.2006
    
    
    581
    
    
    
    5
    
    
    
    586
    2 2
  Goodwill
 Oil &
    
    
    Aluminium
    
    
    AluminiumAmounts in NOK million
    
    Energy
    
    
    Metal
    
    
    Products
    
    
    TotalNet book value 31.12.2005
    
    
    3,005
    
    
    
    275
    
    
    
    819
    
    
    
    4,100Goodwill acquired
    
    
    49
    
    
    
    
    
    
    
    35
    
    
    
    85Currency translation effect
    
    
    (229
    )
    
    
    (16
    )
    
    
    (19
    )
    
    
    (263
    )Purchase price adjustment 1)
    
    
    444
    
    
    
    
    
    
    
    
    
    
    
    444Other
    
    
    (21
    )
    
    
    
    
    
    
    (2
    )
    
    
    (23
    )Reclassified to assets
held for sale
    
    
    
    
    
    
    
    
    
    
    (68
    )
    
    
    (68
    )Net book value 31.12.2006
    
    
    3,249
    
    
    
    260
    
    
    
    766
    
    
    
    4,275
 1)
    
    Purchase price adjustment related to Spinnaker acquisition in 2005.
   Note 16
 Bank loans and other interest-bearing short-term debt
  Weighted averageinterest ratesAmounts in NOK million
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Bank loans and overdraft facilities
    
    
    5.0
    %
    
    
    3.5
    %
    
    
    219
    
    
    
    586Other
    
    
    2.9
    %
    
    
    2.6
    %
    
    
    2,994
    
    
    
    4,071Total bank loans and other
interest-bearing short-term debt
    
    
    
    
    
    
    
    
    
    
    3,213
    
    
    
    4,658
   Note 17
 Other current liabilities
  Amounts in NOK million
    
    2006
    
    
    2005Accounts payable
    
    
    15,788
    
    
    
    14,035Income taxes payable
    
    
    18,995
    
    
    
    13,843Payroll and value added taxes
    
    
    3,623
    
    
    
    2,956Accrued liabilities
    
    
    12,303
    
    
    
    10,605Other liabilities
    
    
    4,841
    
    
    
    5,799Total other current liabilities  US GAAP
    
    
    55,550
    
    
    
    47,239
  Note 18
 Long-term debt




---



##### 



F35
  Long-term debt payable in various currencies
 Weighted
    
    
    Denomi-average
    
    
    nated
    
    
    Balanceinterest rates
    
    
    amount
    
    
    in NOKAmounts in million
    
    
    
    
    
    2006
    
    
    2006
    
    
    2005USD
    
    
    7.3
    %
    
    
    2,618
    
    
    
    16,420
    
    
    
    17,708NOK
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    174GBP
    
    
    6.5
    %
    
    
    1
    
    
    
    13
    
    
    
    117EUR
    
    
    6.3
    %
    
    
    300
    
    
    
    2,479
    
    
    
    2,401Total unsecured debenture bonds
    
    
    
    
    
    
    
    
    
    
    18,912
    
    
    
    20,401USD
    
    
    5.0
    %
    
    
    48
    
    
    
    298
    
    
    
    338EUR
    
    
    3.7
    %
    
    
    3
    
    
    
    28
    
    
    
    39Other
    
    
    5.5
    %
    
    
    
    
    
    
    79
    
    
    
    84Total unsecured bank loans
    
    
    
    
    
    
    
    
    
    
    405
    
    
    
    461Capital lease obligations
    
    
    
    
    
    
    
    
    
    
    361
    
    
    
    517Mortgage loans
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    23Other long-term debt
    
    
    
    
    
    
    
    
    
    
    368
    
    
    
    364Outstanding debt
    
    
    
    
    
    
    
    
    
    
    20,060
    
    
    
    21,766Less: Current portion
    
    
    
    
    
    
    
    
    
    
    (441
    )
    
    
    (379
    )Total long-term debt
    
    
    
    
    
    
    
    
    
    
    19,619
    
    
    
    21,387
     Payments on long-term debt fall due as follows
 Amounts in
    
    
    
    
    
    
    
    
    
    Capital leaseNOK million
    
    Debentures
    
    
    Bankloans
    
    
    and other
    
    
    Total2007
    
    
    
    
    
    
    68
    
    
    
    374
    
    
    
    4412008
    
    
    
    
    
    
    68
    
    
    
    64
    
    
    
    1322009
    
    
    1,882
    
    
    
    66
    
    
    
    59
    
    
    
    2,0062010
    
    
    2,479
    
    
    
    64
    
    
    
    30
    
    
    
    2,5732011
    
    
    
    
    
    
    139
    
    
    
    60
    
    
    
    199Thereafter
    
    
    14,551
    
    
    
    1
    
    
    
    157
    
    
    
    14,709Total
    
    
    18,912
    1)
    
    
    405
    
    
    
    743
    
    
    
    20,060
 1)
    
    Of which Norsk Hydro ASA (the parent company) is responsible for NOK 18,811 million.
   Note 19
 Employee retirement plans
 Pension benefits
   Net periodic pension cost and other amounts recognized in other comprehensive income
 Amounts in NOK million
    
    2006
    
    
    2005
    
    
    2004Defined benefit plans:Benefits earned during the year,
net of participants contributions
    
    
    1,118
    
    
    
    830
    
    
    
    813Interest cost on prior period
benefit obligation
    
    
    1,289
    
    
    
    1,292
    
    
    
    1,355Expected return on plan assets
    
    
    (1,080
    )
    
    
    (1,003
    )
    
    
    (1,000
    )Recognized loss
    
    
    439
    
    
    
    283
    
    
    
    345Amortization of prior
service cost
    
    
    112
    
    
    
    107
    
    
    
    111Amortization of net
transition (asset) obligation
    
    
    
    
    
    
    
    
    
    
    3Curtailment loss
    
    
    
    
    
    
    1
    
    
    
    59Settlement (gain) loss
    
    
    
    
    
    
    
    
    
    
    30Net periodic pension cost
    
    
    1,877
    
    
    
    1,510
    
    
    
    1,716Defined contribution plans
    
    
    23
    
    
    
    45
    
    
    
    32Multiemployer plans
    
    
    19
    
    
    
    26
    
    
    
    35Termination benefits and other 1)
    
    
    318
    
    
    
    604
    
    
    
    338Total net periodic pension cost
    
    
    2,237
    
    
    
    2,185
    
    
    
    2,121Changes in other
comprehensive
income that have not
been recognized
as components of net
periodic pension cost:Additional minimum pension liability
    
    
    (435
    )
    
    
    724
    
    
    
    189Reversal of additional minimum pension
liability
    
    
    (1,471
    )
    
    
    
    
    
    
    Net loss
    
    
    7,776
    
    
    
    
    
    
    
    Prior service cost
    
    
    819
    
    
    
    
    
    
    
    Total recognized in other comprehensive
income
    
    
    6,689
    
    
    
    724
    
    
    
    189Total recognized in net periodic pension
cost and
other comprehensive income
    
    
    8,926
    
    
    
    2,909
    
    
    
    2,310
 1)
    
    For 2006 Termination benefits and other excludes pension cost from discontinued operations
for 2006 of NOK 3 million. For 2004 and 2005 termination benefits and other include pension costs
from discontinued operations of NOK 5 million and NOK 5 million, respectively.




---



##### 



F36
  Change in projected benefit obligation(PBO)
 Amounts in NOK million
    
    2006
    
    
    2005Projected benefit obligation
at beginning of year
    
    
    (31,560
    )
    
    
    (25,399
    )Benefits earned during the year
    
    
    (1,139
    )
    
    
    (851
    )Interest cost on prior period
benefit obligation
    
    
    (1,289
    )
    
    
    (1,292
    )Actuarial loss
    
    
    (629
    )
    
    
    (4,799
    )Plan amendments
    
    
    (50
    )
    
    
    (20
    )Benefits paid
    
    
    914
    
    
    
    875Settlements
    
    
    (5
    )
    
    
    2Special termination benefits
    
    
    (16
    )
    
    
    (80
    )Divestments
    
    
    20
    
    
    
    6Business combinations
    
    
    
    
    
    
    (40
    )Foreign currency translation
    
    
    (252
    )
    
    
    38Projected benefit obligation at end of year
    
    
    (34,007
    )
    
    
    (31,560
    )
 Change in pension plan assets
 Amounts in NOK million
    
    2006
    
    
    2005Fair value of plan assets at beginning of year
    
    
    19,277
    
    
    
    16,504Actual return on plan assets
    
    
    2,966
    
    
    
    2,528Company contributions
    
    
    1,568
    
    
    
    769Plan participants contributions
    
    
    22
    
    
    
    21Benefits paid
    
    
    (613
    )
    
    
    (596
    )Settlements
    
    
    1
    
    
    
    (2
    )Divestments
    
    
    (12
    )
    
    
    (4
    )Foreign currency translation
    
    
    123
    
    
    
    58Fair value of plan assets at end of year
    
    
    23,332
    
    
    
    19,277
 Status of pension plans reconciled to balance sheet
 Amounts in NOK million
    
    2006
    
    
    2005Defined benefit plans:Funded status of the plans
at end of year
    
    
    (10,674
    )
    
    
    (12,282
    )Unrecognized net loss
    
    
    7,776
    
    
    
    9,498Unrecognized prior service cost
    
    
    819
    
    
    
    883Net accrued pension recognized
    
    
    (2,079
    )
    
    
    (1,902
    )Termination benefits and other
    
    
    (1,076
    )
    
    
    (1,247
    )Total net accrued pension recognized
    
    
    (3,155
    )
    
    
    (3,148
    )Amounts recognized in
the balance sheet
consist of:Prepaid pension
    
    
    1,205
    
    
    
    4,659Other current liabilities
    
    
    (564
    )
    
    
    Accrued pension liabilities
    
    
    (12,391
    )
    
    
    (9,939
    )Intangible asset
    
    
    
    
    
    
    225Accumulated other
comprehensive income:Net loss
    
    
    7,776
    
    
    
    Prior service cost
    
    
    819
    
    
    
    Additional minimum pension liability
    
    
    
    
    
    
    1,907Net amount recognized
    
    
    (3,155
    )
    
    
    (3,148
    )
    Plans in which the accumulated benefit obligation exceeds plan assets
 Amounts in NOK million
    
    2006
    
    
    2005Projected benefit obligation
    
    
    (13,595
    )
    
    
    (15,343
    )Accumulated benefit obligation (ABO)
    
    
    (10,986
    )
    
    
    (12,755
    )Plan assets
    
    
    2,350
    
    
    
    4,250
 Weighted-average assumptions used to determine net periodic pension cost
 2006
    
    
    2005
    
    
    2004Discount rate
    
    
    4.1
    %
    
    
    5.2
    %
    
    
    5.8
    %Expected return on plan assets
    
    
    5.5
    %
    
    
    6.2
    %
    
    
    7.0
    %Rate of compensation increase
    
    
    3.1
    %
    
    
    3.1
    %
    
    
    3.5
    %
 Weighted-average assumptions used to determine pension obligation at end of year
 2006
    
    
    2005Discount rate
    
    
    4.5
    %
    
    
    4.1
    %Rate of compensation increase
    
    
    3.5
    %
    
    
    3.1
    %
 Weighted-average investment profile plan assets at end of year
 Target allocation
    
    
    2006
    
    
    2005Asset categoryEquity securities
    
    
    25-42
    %
    
    
    40
    %
    
    
    40
    %Debt securities
    
    
    30-54
    %
    
    
    39
    %
    
    
    41
    %Real estate
    
    
    17
    %
    
    
    14
    %
    
    
    15
    %Other
    
    
    3-10
    %
    
    
    7
    %
    
    
    4
    %Total
    
    
    
    
    
    
    100
    %
    
    
    100
    %




---



##### 



F37
  Expected pension benefit payments
 Amounts in NOK million2007
    
    
    1,0602008
    
    
    1,1302009
    
    
    1,2162010
    
    
    1,3022011
    
    
    1,4042012-2016
    
    
    8,505
  Other retirement benefits
  Note 20
 Contingencies and other long-term liabilities
       Contingencies and other long-term liabilities
 Amounts in NOK million
    
    2006
    
    
    2005Insurance premiums and loss reserves
    
    
    138
    
    
    
    556Asset retirement obligations
    
    
    11,381
    
    
    
    7,447Postretirement benefits other than pensions
    
    
    175
    
    
    
    150Derivatives
    
    
    2,047
    
    
    
    2,336Other
    
    
    2,385
    
    
    
    1,935Total US GAAP
    
    
    16,126
    
    
    
    12,424
  SFAS 143 Accounting
for Asset Retirement Obligations
 FASB Interpretation No. 47 Accounting for Conditional Asset Retirement
Obligations (FIN 47)




---



##### 



F38
  Asset retirement obligations
 Amounts in NOK million
    
    2006
    
    
    2005Total asset retirement obligations 1.1
    
    
    7,694
    
    
    
    6,281Incurred this year
    
    
    316
    
    
    
    761Revision in estimates
    
    
    3,943
    
    
    
    326FIN 47 implementation
    
    
    
    
    
    
    223Settlements
    
    
    (274
    )
    
    
    (356
    )Accretion
    
    
    442
    
    
    
    404Currency translation
    
    
    (61
    )
    
    
    56Total asset retirement obligations 31.12
    
    
    12,060
    
    
    
    7,694Of which:Short-term asset retirement obligations
    
    
    679
    
    
    
    247Long-term asset retirement obligations
    
    
    11,381
    
    
    
    7,447
  
  Pro-forma information (unaudited)
 Amounts in NOK million, except per share data 1)
    
    2005
    
    
    2004Net income
    
    
    15,638
    
    
    
    12,560Depreciation change (after tax)
    
    
    (31
    )
    
    
    (32
    )Other operating cost (after tax)
    
    
    28
    
    
    
    29Cumulative effect of changes in accounting principles
    
    
    78
    
    
    
    Pro-forma net income
    
    
    15,713
    
    
    
    12,557Reported basic and diluted earnings
per share from continuing operations 1)
    
    
    12.40
    
    
    
    9.00Reported basic and diluted earnings
per share from discontinued operations
    
    
    0.10
    
    
    
    0.90Net adjustment changes in accounting
principles earnings per share
    
    
    0.10
    
    
    
    Pro-forma basic and diluted earnings
per share from continuing operations 1)
    
    
    12.50
    
    
    
    9.00Pro-forma asset retirement obligations, 1 January
    
    
    6,500
    
    
    
    5,451
 1)
    
    Previously reported earnings per share
have been adjusted to reflect the 5-for-1 stock
split effective 10 May 2006.
  Note 21
 Secured debt and guarantees
  Amounts in NOK million
    
    2006
    
    
    2005Amount of secured debt
    
    
    14
    
    
    
    23Assets used as security:Machinery and equipment
    
    
    29
    
    
    
    32Buildings
    
    
    56
    
    
    
    57Other
    
    
    3
    
    
    
    2Total
    
    
    88
    
    
    
    91Guarantees (off-balance sheet):Non-consolidated investee debt
    
    
    187
    
    
    
    89Contingency for discounted bills
    
    
    56
    
    
    
    113Tax guarantees
    
    
    
    
    
    
    406Sales guarantees
    
    
    7,694
    
    
    
    7,925Commercial guarantees
    
    
    26,222
    
    
    
    15,191Total
    
    
    34,159
    
    
    
    23,724




---



##### 



F39
 3 3
  Note 22
 Contractual and other commitments
for future investments and operations
  As of 31 December 2006:
    
    
    
    
    
    InvestmentsAmounts in NOK million
    
    2007
    
    
    thereafter
    
    
    TotalContract commitments for
investments in property,
plant and equipment:Land based
    
    
    754
    
    
    
    2,274
    
    
    
    3,028Oil and gas fields and
transport systems
    
    
    5,995
    
    
    
    9,586
    
    
    
    15,581Total
    
    
    6,749
    
    
    
    11,860
    
    
    
    18,609Additional authorized future
investments in property,
plant and equipment:Land based
    
    
    636
    
    
    
    1,235
    
    
    
    1,871Oil and gas fields and
transport systems
    
    
    1,892
    
    
    
    32
    
    
    
    1,924Total
    
    
    2,528
    
    
    
    1,267
    
    
    
    3,794Contract commitments for
other future investments:
    
    
    69
    
    
    
    48
    
    
    
    117
      Take-and-pay and long-term contracts
 Amounts in
    
    Transport
    
    
    Raw
    
    
    Energy
    
    
    Sales com-NOK million
    
    and other
    
    
    materials
    
    
    related
    
    
    mitments2007
    
    
    1,292
    
    
    
    3,739
    
    
    
    13,145
    
    
    
    (40,312
    )2008
    
    
    962
    
    
    
    1,588
    
    
    
    17,072
    
    
    
    (29,443
    )2009
    
    
    1,078
    
    
    
    1,077
    
    
    
    12,135
    
    
    
    (25,081
    )2010
    
    
    1,002
    
    
    
    1,126
    
    
    
    5,796
    
    
    
    (25,540
    )2011
    
    
    1,010
    
    
    
    995
    
    
    
    2,184
    
    
    
    (16,565
    )Thereafter
    
    
    3,632
    
    
    
    7,099
    
    
    
    12,469
    
    
    
    (160,700
    )Total
    
    
    8,974
    
    
    
    15,625
    
    
    
    62,801
    
    
    
    (292,641
    )
     Note 23
 Market risk management and derivative instruments




---



##### 



F40
 Commodity price risk exposure
 Oil
  Natural gas
   Electricity
    Aluminium
       Amounts in NOK million
    
    2006
    
    
    2005Assets:Swaps and futures, crude oil
    
    
    34
    
    
    
    9Electricity contracts
    
    
    1,920
    
    
    
    1,570Natural gas contracts
    
    
    4,184
    
    
    
    4,275Aluminium futures, forwards, swaps and options
    
    
    30
    
    
    
    Total
    
    
    6,168
    
    
    
    5,854Liabilities:Electricity contracts
    
    
    (1,146
    )
    
    
    (391
    )Natural gas contracts
    
    
    (2,276
    )
    
    
    (4,063
    )Swaps and futures, crude oil
    
    
    (285
    )
    
    
    (175
    )Aluminium futures, forwards, swaps and options
    
    
    (893
    )
    
    
    (902
    )Total
    
    
    (4,600
    )
    
    
    (5,530
    )




---



##### 



F41
 Embedded derivatives
  Foreign currency risk exposure
         Amounts in NOK million
    
    2006
    
    
    2005Assets:Currency forwards and swaps
    
    
    908
    
    
    
    310Liabilities:Currency forwards and swaps
    
    
    (136
    )
    
    
    (297
    )
    Currency
    
    Nominal value
    
    
    Fair value
    
    
    Maturity by nominalin currency
    
    
    in NOK
    
    
    amount in currencyAmount in million
    
    
    
    
    
    
    
    
    
    Within one year
    
    
    LaterBuying currencyAUD
    
    
    100
    
    
    
    488
    
    
    
    100
    
    
    
    CAD
    
    
    187
    
    
    
    1,003
    
    
    
    184
    
    
    
    3EUR
    
    
    375
    
    
    
    3,080
    
    
    
    375
    
    
    
    NOK
    
    
    20,734
    
    
    
    20,633
    
    
    
    20,734
    
    
    
    SEK
    
    
    1,200
    
    
    
    1,091
    
    
    
    1,200
    
    
    
    USD
    
    
    63
    
    
    
    315
    
    
    
    
    
    
    
    63Selling currencyGBP
    
    
    (55
    )
    
    
    (673
    )
    
    
    (55
    )
    
    
    JPY
    
    
    (5,242
    )
    
    
    (261
    )
    
    
    (300
    )
    
    
    (4,942
    )EUR
    
    
    (110
    )
    
    
    (903
    )
    
    
    (110
    )
    
    
    SEK
    
    
    (1,200
    )
    
    
    (1,094
    )
    
    
    (1,200
    )
    
    
    USD
    
    
    (3,690
    )
    
    
    (22,986
    )
    
    
    (3,688
    )
    
    
    (2
    )
  Interest rate exposure
  Cash flow hedges




---



##### 



F42
   2007
    
    
    2006
    
    
    2005
    
    
    2004Aluminium sold forward
with hedge accounting
(1,000 mt) 1)
    
    
    
    
    
    
    485
    
    
    
    336
    
    
    
    315of which open at year-end
(1,000 mt) 2)
    
    
    
    
    
    
    410
    
    
    
    312
    
    
    
    287Average prices achieved in
hedges in USD (per mt) 3)
    
    
    
    
    
    
    2,108
    
    
    
    1,750
    
    
    
    1,505Expected to be reclassified to
earnings (after tax) during the
year4) (NOK million)
    
    
    (541
    )
    
    
    (154
    )
    
    
    197
    
    
    
    261Reclassified to earnings from
OCI after tax5) (NOK million)
    
    
    
    
    
    
    (349
    )
    
    
    185
    
    
    
    201
 1)
    
    Remaining volume sold forward at inception of
hedge programs. Hydro has sold forward in the period
2007-2008.2)
    
    Including closed out positions / repurchases of hedge derivatives.3)
    
    Weighted average of remaining volume sold
forward at inception of hedge program.4)
    
    In the period 2004  2007 part of the hedged ingot
has also been hedged for currency risk at an
exchange rate of 9.3-9.5 NOK to USD. For 2007 a
currency gain after tax of NOK 370 million is expected
to be reclassified into earnings, and is included in
the negative NOK 541 million. Negative amounts
indicate a loss.5)
    
    Deviates from expected reclassifications due to
changes in market prices throughout the year.
Negative amounts indicate a loss.
      Amounts in NOK million
    
    2006
    
    
    2005Assets:Cash flow hedging instruments, currency
    
    
    380
    
    
    
    730Total
    
    
    380
    
    
    
    730Liabilities:
    
    
    
    
    
    
    Cash flow hedging instruments, aluminium
    
    
    (1,299
    )
    
    
    (844
    )Total
    
    
    (1,299
    )
    
    
    (844
    )
  Economic hedges
      Fair value of derivative instruments
   Credit risk management




---



##### 



F43
 Note 24
 External audit remuneration
   2006
    
    
    
    
    
    Audit
    
    
    Otherrelated
    
    
    non-auditAmounts in NOK thousand
    
    Audit fees
    
    
    fees
    
    
    fees
    
    
    Tax fees
    
    
    TotalDeloitte Norway 1)
    
    
    51,412
    
    
    
    664
    
    
    
    1,729
    
    
    
    125
    
    
    
    53,930Deloitte Abroad
    
    
    54,929
    
    
    
    451
    
    
    
    186
    
    
    
    6,224
    
    
    
    61,789Total Deloitte
    
    
    106,341
    
    
    
    1,115
    
    
    
    1,915
    
    
    
    6,349
    
    
    
    115,719Others
    
    
    3,014
    
    
    
    
    
    
    
    30
    
    
    
    20
    
    
    
    3,064Total fees
    
    
    109,355
    
    
    
    1,115
    
    
    
    1,945
    
    
    
    6,369
    
    
    
    118,783
 2005
    
    
    
    
    
    Audit
    
    
    Otherrelated
    
    
    non-auditAmounts in NOK thousand
    
    Audit fees
    
    
    fees
    
    
    fees
    
    
    Tax fees
    
    
    TotalDeloitte Norway 1)
    
    
    32,210
    
    
    
    1,796
    
    
    
    1,444
    
    
    
    631
    
    
    
    36,081Deloitte Abroad
    
    
    25,696
    
    
    
    3,126
    
    
    
    131
    
    
    
    6,784
    
    
    
    35,737Total Deloitte
    
    
    57,906
    
    
    
    4,921
    
    
    
    1,575
    
    
    
    7,416
    
    
    
    71,818Ernst & Young
    
    
    11,312
    
    
    
    396
    
    
    
    
    
    
    
    958
    
    
    
    12,667Others
    
    
    3,041
    
    
    
    403
    
    
    
    1,244
    
    
    
    1,149
    
    
    
    5,836Total fees
    
    
    72,259
    
    
    
    5,720
    
    
    
    2,819
    
    
    
    9,523
    
    
    
    90,321
 1)
    
    Reported amount for Deloitte Norway includes fee for audit of license related activities.
  Note 25
 Related parties




---



##### 



F44
  Corporate Assembly members
    
    Shares 1)Svein Steen Thomassen (Chairperson)
    
    
    500Siri Teigum (Deputy Chairperson)
    
    
    Sven Edin
    
    
    1,195Billy Fredagsvik
    
    
    265Anne-Margrethe Firing 2)
    
    
    5,820Aase Gudding Gresvig
    
    
    Westye Høegh
    
    
    64,000Idar Kreutzer
    
    
    Kjell Kvinge
    
    
    685Dag Harald Madsen
    
    
    190Roger Oterholt
    
    
    75Anne Merete Steensland
    
    
    121,360Rune Strande
    
    
    80Sten-Arthur Sælør
    
    
    Lars Tronsgaard
    
    
    Karen Helene Ulltveit-Moe
    
    
    55,000Terje Venold 2)
    
    
    200Svein Aaser
    
    
    9,360Deputy membersNils Roar Brevik
    
    
    80Tore Amund Fredriksen
    
    
    645Erik Garaas
    
    
    Sónia F.T. Gjesdal
    
    
    660Line Melkild
    
    
    140Bjørn Nedreaas
    
    
    270Wolfgang Ruch
    
    
    875Unni Steinsmo
    
    
    Gunvor Ulstein
    
    
    Bjørn Øvstetun
    
    
    75Previous membersSigurd Støren 3)
    
    
    Astrid Sylvi Lem 3)
    
    
    
 1)
    
    Number of shares includes any related
party shareholdings, in addition to the shares
held directly by the corporate assembly member.2)
    
    Members of the Corporate Assembly from 10 May 2006.3)
    
    Members of the Corporate Assembly until 9 May 2006.
  Note 26
 Supplementary oil and gas information




---



##### 



F45
  Costs incurred on oil and gas properties
 Capitalized exploration costs and costs related to property acquisition
 Norway
    
    
    International
    
    
    TotalAmounts in NOK million
    
    2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004Capitalized at beginning of year
    
    
    603
    
    
    
    583
    
    
    
    633
    
    
    
    4,841
    
    
    
    662
    
    
    
    390
    
    
    
    5,444
    
    
    
    1,245
    
    
    
    1,023Exploration well costs capitalized during the year
    
    
    344
    
    
    
    356
    
    
    
    120
    
    
    
    1,407
    
    
    
    351
    
    
    
    277
    
    
    
    1,751
    
    
    
    707
    
    
    
    397Exploration acquisition costs capitalized during the year1)
    
    
    
    
    
    
    
    
    
    
    65
    
    
    
    2,719
    
    
    
    3,918
    
    
    
    148
    
    
    
    2,719
    
    
    
    3,918
    
    
    
    213Capitalized exploration costs charged to expense
    
    
    (16
    )
    
    
    (45
    )
    
    
    (110
    )
    
    
    (761
    )
    
    
    (4
    )
    
    
    (138
    )
    
    
    (777
    )
    
    
    (49
    )
    
    
    (248
    )Transferred to development
    
    
    (65
    )
    
    
    (292
    )
    
    
    (125
    )
    
    
    (1,936
    )
    
    
    (142
    )
    
    
    5
    
    
    
    (2,001
    )
    
    
    (434
    )
    
    
    (120
    )Disposals
    
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    (137
    )
    
    
    
    
    
    
    
    
    
    
    (149
    )
    
    
    
    
    
    
    Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (384
    )
    
    
    56
    
    
    
    (19
    )
    
    
    (384
    )
    
    
    56
    
    
    
    (19
    )Capitalized exploration well costs at end of year
    
    
    854
    
    
    
    538
    
    
    
    518
    
    
    
    1,638
    
    
    
    791
    
    
    
    504
    
    
    
    2,492
    
    
    
    1,329
    
    
    
    1,022Capitalized acquisition costs at end of year
    
    
    
    
    
    
    65
    
    
    
    65
    
    
    
    4,111
    
    
    
    4,050
    
    
    
    159
    
    
    
    4,111
    
    
    
    4,115
    
    
    
    224Capitalized exploration costs at end of year
    
    
    854
    
    
    
    603
    
    
    
    583
    
    
    
    5,749
    
    
    
    4,841
    
    
    
    662
    
    
    
    6,603
    
    
    
    5,444
    
    
    
    1,245Wells in process of drilling at end of year
    
    
    
    
    
    
    
    
    
    
    85
    
    
    
    173
    
    
    
    76
    
    
    
    201
    
    
    
    173
    
    
    
    76
    
    
    
    286Wells in areas where the drilling program is
uncompleted or completed during the year
    
    
    721
    
    
    
    456
    
    
    
    231
    
    
    
    1,465
    
    
    
    715
    
    
    
    301
    
    
    
    2,186
    
    
    
    1,171
    
    
    
    532Wells where drilling program is completed
more than one year ago
    
    
    103
    
    
    
    56
    
    
    
    182
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    103
    
    
    
    56
    
    
    
    182Other cost including acquisition of unproved property
    
    
    30
    
    
    
    91
    
    
    
    85
    
    
    
    4,111
    
    
    
    4,050
    
    
    
    160
    
    
    
    4,141
    
    
    
    4,141
    
    
    
    245Capitalized exploration costs at end of year
    
    
    854
    
    
    
    603
    
    
    
    583
    
    
    
    5,749
    
    
    
    4,841
    
    
    
    662
    
    
    
    6,603
    
    
    
    5,444
    
    
    
    1,245
 1)
    
    The capitalized acquisition costs in 2006 is related to the purchase of licences in Brazil,
Gulf of Mexico, Cuba and Mozambique. Hereof NOK 2,360 million was related to the acquisition of
Peregrino. The capitalized acquisition costs in 2005 was related to the purchase of Spinnaker
Exploration, and licenses in Morocco, Libya and Angola. In 2004, NOK 213 million was related to
the purchase of license PL 248 in Norway and licenses in the Gulf of Mexico and Madagascar.
    Specification of age of category
 More than1 year
    
    
    2 years
    
    
    3 years
    
    
    4 years
    
    
    5 years
    
    
    5 years
    
    
    TotalAmounts (NOK million)
    
    
    
    
    
    
    44
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    56Number of projects
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    2
   Two year from end of drilling program:
 The Idun project
  More than 5 years from end of drilling program:
 The Grane Outside project




---



##### 



F54
 Managements annual report on internal control over financial reporting
  
    
    management is responsible for establishing and
maintaining adequate internal control over financial
reporting
    
    our internal control over financial
reporting is designed to provide reasonable assurance
to our management and the Board of Directors regarding
the preparation and fair presentation of published
financial statements
    
    because of its inherent
limitations, internal control over financial reporting
may not prevent or detect misstatements. Therefore,
even those systems determined to be effective can
provide only reasonable assurances with respect to
financial statement preparation and presentation.
Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that
controls may become inadequate because of changes in
conditions, or that the degree of compliance with the
policies or procedures may decline
    
    management has
used the Committee of Sponsoring Organisations of the
Treadway Commission (COSO) framework to evaluate the
effectiveness of our internal control over financial
reporting
    
    based on the evaluation under the COSO
criteria, management has assessed the effectiveness of
our internal control over fi-nancial reporting, as of
31 December 2006, and has concluded that such internal
control over financial reporting is effective
    
    Deloitte AS, an independent registered public
accounting firm, has issued an attestation report
on managements assessment of the effectiveness
of our internal control over financial reporting.




---



##### 



F56
 Supplementary oil and gas information
  Exploration costs incurred during the year
 Norway
    
    
    International
    
    
    TotalNOK million
    
    2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004Exploration activity
    
    
    1,155
    
    
    
    890
    
    
    
    478
    
    
    
    4,793
    
    
    
    1,692
    
    
    
    934
    
    
    
    5,948
    
    
    
    2,582
    
    
    
    1,412Capitalized exploration costs
    
    
    344
    
    
    
    356
    
    
    
    120
    
    
    
    1,407
    
    
    
    351
    
    
    
    277
    
    
    
    1,751
    
    
    
    707
    
    
    
    397Capitalized exploration costs charged to expense
    
    
    (16
    )
    
    
    (45
    )
    
    
    (110
    )
    
    
    (761
    )
    
    
    (4
    )
    
    
    (138
    )
    
    
    (777
    )
    
    
    (49
    )
    
    
    (248
    )Other 1)
    
    
    (12
    )
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    91
    
    
    
    
    
    
    
    (12
    )
    
    
    82
    
    
    
    Exploration costs expensed during the year
    
    
    839
    
    
    
    587
    
    
    
    468
    
    
    
    4,147
    
    
    
    1,254
    
    
    
    796
    
    
    
    4,986
    
    
    
    1,839
    
    
    
    1,264
 1)
    
    In 2005, NOK 91 million was related to insurance refund in Iran due to an unsuccessful well
drilled in 2004.
 Costs related to development, transportation systems and other
 Norway
    
    
    International
    
    
    TotalAmounts inn NOK million
    
    2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004Net book value at beginning of year
    
    
    63,610
    
    
    
    61,401
    
    
    
    62,672
    
    
    
    23,989
    
    
    
    7,461
    
    
    
    7,540
    
    
    
    87,599
    
    
    
    68,862
    
    
    
    70,212Cost incurred during the year
    
    
    12,838
    
    
    
    10,258
    
    
    
    9,093
    
    
    
    4,653
    
    
    
    2,596
    
    
    
    1,585
    
    
    
    17,491
    
    
    
    12,854
    
    
    
    10,678Acquisition cost
    
    
    
    
    
    
    21
    
    
    
    297
    
    
    
    (732
    )
    
    
    15,069
    
    
    
    
    
    
    
    (732
    )
    
    
    15,090
    
    
    
    297Transferred from exploration cost
    
    
    65
    
    
    
    292
    
    
    
    125
    
    
    
    1,936
    
    
    
    142
    
    
    
    (5
    )
    
    
    2,001
    
    
    
    434
    
    
    
    120Amortization and impairment
    
    
    (8,923
    )
    
    
    (8,330
    )
    
    
    (8,259
    )
    
    
    (8,675
    )
    
    
    (1,473
    )
    
    
    (1,566
    )
    
    
    (17,598
    )
    
    
    (9,803
    )
    
    
    (9,825
    )Disposals
    
    
    (2
    )
    
    
    (32
    )
    
    
    (2,527
    )
    
    
    
    
    
    
    (211
    )
    
    
    (3
    )
    
    
    (2
    )
    
    
    (243
    )
    
    
    (2,530
    )Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,124
    )
    
    
    404
    
    
    
    (90
    )
    
    
    (2,124
    )
    
    
    404
    
    
    
    (90
    )Net book value at end of year
    
    
    67,588
    
    
    
    63,610
    
    
    
    61,401
    
    
    
    19,047
    
    
    
    23,989
    
    
    
    7,461
    
    
    
    86,635
    
    
    
    87,599
    
    
    
    68,862
       Results of operations for oil and gas producing activities




---



##### 



F57
  Results of operations for oil and gas producing activities
 Norway
    
    
    International
    
    
    TotalAmounts in NOK million
    
    2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004Sales to unaffiliated customers
    
    
    12,024
    
    
    
    10,528
    
    
    
    6,817
    
    
    
    7,272
    
    
    
    6,700
    
    
    
    5,039
    
    
    
    19,296
    
    
    
    17,228
    
    
    
    11,856Intercompany transfers1)
    
    
    55,731
    
    
    
    45,344
    
    
    
    35,164
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55,731
    
    
    
    45,344
    
    
    
    35,164Total revenues
    
    
    67,755
    
    
    
    55,872
    
    
    
    41,981
    
    
    
    7,272
    
    
    
    6,700
    
    
    
    5,039
    
    
    
    75,027
    
    
    
    62,572
    
    
    
    47,020Operating costs and expenses:Production costs
    
    
    5,800
    
    
    
    4,774
    
    
    
    3,922
    
    
    
    958
    
    
    
    456
    
    
    
    412
    
    
    
    6,758
    
    
    
    5,230
    
    
    
    4,334Exploration expenses
    
    
    838
    
    
    
    587
    
    
    
    468
    
    
    
    4,147
    
    
    
    1,252
    
    
    
    796
    
    
    
    4,986
    
    
    
    1,839
    
    
    
    1,264Depreciation, depletion
and amortization
    
    
    8,590
    
    
    
    8,201
    
    
    
    8,101
    
    
    
    8,719
    
    
    
    1,699
    
    
    
    1,578
    
    
    
    17,309
    
    
    
    9,900
    
    
    
    9,679Transportation systems
    
    
    2,333
    
    
    
    1,691
    
    
    
    1,647
    
    
    
    188
    
    
    
    140
    
    
    
    118
    
    
    
    2,521
    
    
    
    1,831
    
    
    
    1,765Total expenses
    
    
    17,561
    
    
    
    15,253
    
    
    
    14,138
    
    
    
    14,012
    
    
    
    3,547
    
    
    
    2,904
    
    
    
    31,574
    
    
    
    18,800
    
    
    
    17,042Results of operations before taxes
    
    
    50,194
    
    
    
    40,619
    
    
    
    27,843
    
    
    
    (6,740
    )
    
    
    3,153
    
    
    
    2,135
    
    
    
    43,454
    
    
    
    43,772
    
    
    
    29,978Current and deferred
income tax expense
    
    
    (38,287
    )
    
    
    (30,810
    )
    
    
    (21,279
    )
    
    
    479
    
    
    
    (1,602
    )
    
    
    (965
    )
    
    
    (37,808
    )
    
    
    (32,412
    )
    
    
    (22,244
    )Results of operations
    
    
    11,907
    
    
    
    9,809
    
    
    
    6,564
    
    
    
    (6,261
    )
    
    
    1,551
    
    
    
    1,170
    
    
    
    5,646
    
    
    
    11,360
    
    
    
    7,734
 1)
    
    The majority of intercompany transfers are resold from the Energy and Oil Marketing sub
segment without further processing.
  Proved reserves of oil and gas




---



##### 



F58
  Proved developed and undeveloped reserves of oil and gas
 Norway
    
    
    International
    
    
    TotalOil
    
    
    Natural gas
    
    
    Oil and
    
    
    Oil
    
    
    Natural gas
    
    
    Oil and
    
    
    Oil
    
    
    Natural gas
    
    
    Oil andbillion
    
    
    billion
    
    
    gas
    
    
    
    
    
    
    billion
    
    
    billion
    
    
    gas
    
    
    
    
    
    
    billion
    
    
    billion
    
    
    gasmmboe1)
    
    
    Sm3 2)
    
    
    cf 2)
    
    
    mmboe 3)
    
    
    mmboe1)
    
    
    Sm3 2)
    
    
    cf 2)
    
    
    mmboe 3)
    
    
    mmboe 1)
    
    
    Sm3 2)
    
    
    cf 2)
    
    
    mmboe 3)As of 31 December, 2003
    
    
    839
    
    
    
    206.8
    
    
    
    7,317
    
    
    
    2,134
    
    
    
    154
    
    
    
    
    
    
    
    
    
    
    
    154
    
    
    
    993
    
    
    
    206.8
    
    
    
    7,317
    
    
    
    2,288Revisions of previous estimates 4)
    
    
    43
    
    
    
    (3.0
    )
    
    
    (106
    )
    
    
    25
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    57
    
    
    
    (3.0
    )
    
    
    (106
    )
    
    
    39Purchase (sale)/exchange of
reserves in place
    
    
    (6
    )
    
    
    (9.1
    )
    
    
    (324
    )
    
    
    (65
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    (9.1
    )
    
    
    (324
    )
    
    
    (65
    )Extensions and new discoveries
    
    
    5
    
    
    
    1.4
    
    
    
    51
    
    
    
    14
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    14
    
    
    
    1.4
    
    
    
    51
    
    
    
    23Production for the year
    
    
    (132
    )
    
    
    (8.8
    )
    
    
    (312
    )
    
    
    (188
    )
    
    
    (21
    )
    
    
    
    
    
    
    
    
    
    
    (21
    )
    
    
    (153
    )
    
    
    (8.8
    )
    
    
    (312
    )
    
    
    (209
    )As of 31 December, 2004
    
    
    749
    
    
    
    187.3
    
    
    
    6,626
    
    
    
    1,920
    
    
    
    156
    
    
    
    
    
    
    
    
    
    
    
    156
    
    
    
    905
    
    
    
    187.3
    
    
    
    6,626
    
    
    
    2,076Revisions of previous estimates 4)
    
    
    33
    
    
    
    4.8
    
    
    
    170
    
    
    
    63
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    34
    
    
    
    4.8
    
    
    
    171
    
    
    
    64Purchase (sale)/exchange of
reserves in place
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    5.3
    
    
    
    187
    
    
    
    52
    
    
    
    21
    
    
    
    5.3
    
    
    
    187
    
    
    
    52Extensions and new discoveries
    
    
    36
    
    
    
    3.1
    
    
    
    109
    
    
    
    56
    
    
    
    3
    
    
    
    0.1
    
    
    
    3
    
    
    
    3
    
    
    
    39
    
    
    
    3.2
    
    
    
    112
    
    
    
    59Production for the year
    
    
    (125
    )
    
    
    (9.4
    )
    
    
    (334
    )
    
    
    (185
    )
    
    
    (21
    )
    
    
    
    
    
    
    (1
    )
    
    
    (21
    )
    
    
    (146
    )
    
    
    (9.4
    )
    
    
    (335
    )
    
    
    (206
    )As of 31 December, 2005
    
    
    693
    
    
    
    185.7
    
    
    
    6,571
    
    
    
    1,854
    
    
    
    160
    
    
    
    5.4
    
    
    
    190
    
    
    
    192
    
    
    
    853
    
    
    
    191.1
    
    
    
    6,761
    
    
    
    2,046Revisions of previous estimates 4)
    
    
    29
    
    
    
    3.8
    
    
    
    135
    
    
    
    55
    
    
    
    (11
    )
    
    
    0.2
    
    
    
    8
    
    
    
    (10
    )
    
    
    18
    
    
    
    4.0
    
    
    
    143
    
    
    
    45Purchase (sale)/exchange of
reserves in place
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Extensions and new discoveries
    
    
    10
    
    
    
    2.2
    
    
    
    77
    
    
    
    25
    
    
    
    8
    
    
    
    0.2
    
    
    
    9
    
    
    
    9
    
    
    
    18
    
    
    
    2.4
    
    
    
    86
    
    
    
    34Production for the year
    
    
    (125
    )
    
    
    (10.0
    )
    
    
    (354
    )
    
    
    (189
    )
    
    
    (16
    )
    
    
    (0.7
    )
    
    
    (25
    )
    
    
    (20
    )
    
    
    (141
    )
    
    
    (10.7
    )
    
    
    (379
    )
    
    
    (209
    )As of 31 December, 2006
    
    
    607
    
    
    
    181.7
    
    
    
    6,429
    
    
    
    1,745
    
    
    
    141
    
    
    
    5.1
    
    
    
    182
    
    
    
    171
    
    
    
    748
    
    
    
    186.8
    
    
    
    6,611
    
    
    
    1,916Proved developed reserves:As of 31 December, 2003
    
    
    690
    
    
    
    124.8
    
    
    
    4,415
    
    
    
    1,470
    
    
    
    88
    
    
    
    
    
    
    
    
    
    
    
    88
    
    
    
    778
    
    
    
    124.8
    
    
    
    4,415
    
    
    
    1,558As of 31 December, 2004
    
    
    607
    
    
    
    118.6
    
    
    
    4,197
    
    
    
    1,350
    
    
    
    97
    
    
    
    
    
    
    
    
    
    
    
    97
    
    
    
    704
    
    
    
    118.6
    
    
    
    4,197
    
    
    
    1,447As of 31 December, 2005
    
    
    576
    
    
    
    128.6
    
    
    
    4,551
    
    
    
    1,380
    
    
    
    93
    
    
    
    1.7
    
    
    
    58
    
    
    
    103
    
    
    
    669
    
    
    
    130.3
    
    
    
    4,609
    
    
    
    1,483As of 31 December, 2006
    
    
    474
    
    
    
    119.9
    
    
    
    4,244
    
    
    
    1,224
    
    
    
    94
    
    
    
    1.7
    
    
    
    61
    
    
    
    105
    
    
    
    568
    
    
    
    121.7
    
    
    
    4,305
    
    
    
    1,329
 1)
    
    Includes crude oil, NGL and Condensate. 1 Sm3 Oil/Condensate = 6.2898 boe. 1
tonne NGL = 11.9506 boe.2)
    
    Sm3 = Standard cubic meter at 15 degrees Celcius. cf = cubic feet at 60 degrees
Fahrenheit. 1 Sm3 gas at 15 degrees Celcius = 35.3826 cubic feet gas at 60 degrees
Fahrenheit.3)
    
    Includes crude oil, NGL, Condensate and natural gas. When converting natural gas into barrels of
oil equivalents adjustment for calorific value to an equivalent 40 MJ/Sm3 volume is
calculated, then 1000 Sm3 @ 40 MJ/Sm3 = 6.2898 boe.4)
    
    The revision of previous estimates relates to new information from current year  ́s drilling
operations and additional data which is now available.




---



##### 



F59 US GAAP standardized measure of discounted future net cash flows and changes therein relating
to proved oil and gas reserves
   Standardized measure of discounted future net cash flows
 Norway
    
    
    International
    
    
    TotalAmounts in NOK million
    
    2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004Future cash inflows
    
    
    524,100
    
    
    
    575,900
    
    
    
    382,800
    
    
    
    51,100
    
    
    
    70,900
    
    
    
    35,800
    
    
    
    575,200
    
    
    
    646,800
    
    
    
    418,600Future production costs
    
    
    (102,900
    )
    
    
    (105,200
    )
    
    
    (91,500
    )
    
    
    (11,300
    )
    
    
    (17,500
    )
    
    
    (10,600
    )
    
    
    (114,200
    )
    
    
    (122,700
    )
    
    
    (102,100
    )Future development costs
    
    
    (53,900
    )
    
    
    (42,500
    )
    
    
    (38,500
    )
    
    
    (7,700
    )
    
    
    (7,100
    )
    
    
    (5,600
    )
    
    
    (61,600
    )
    
    
    (49,600
    )
    
    
    (44,100
    )Future income tax expense
    
    
    (279,900
    )
    
    
    (324,700
    )
    
    
    (189,800
    )
    
    
    (8,500
    )
    
    
    (13,100
    )
    
    
    (5,200
    )
    
    
    (288,400
    )
    
    
    (337,800
    )
    
    
    (195,000
    )Future net cash flows
    
    
    87,400
    
    
    
    103,500
    
    
    
    63,000
    
    
    
    23,600
    
    
    
    33,200
    
    
    
    14,400
    
    
    
    111,000
    
    
    
    136,700
    
    
    
    77,400Less: 10% annual discount for
estimated timing of cash flows
    
    
    (35,600
    )
    
    
    (40,100
    )
    
    
    (26,400
    )
    
    
    (6,700
    )
    
    
    (8,800
    )
    
    
    (4,700
    )
    
    
    (42,300
    )
    
    
    (48,900
    )
    
    
    (31,100
    )Standardized measure of discounted 
future net cash flows
    
    
    51,800
    
    
    
    63,400
    
    
    
    36,600
    
    
    
    16,900
    
    
    
    24,400
    
    
    
    9,700
    
    
    
    68,700
    
    
    
    87,800
    
    
    
    46,300Major sources of changes in the standardized measure of discounted future net cash flowsAmounts in NOK million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2006
    
    
    
    2005
    
    
    
    2004Net changes in prices and production costs
    
    
    (3,800
    )
    
    
    127,800
    
    
    
    33,200Sales and transfers of oil and gas produced, net of production costs
    
    
    (65,800
    )
    
    
    (55,500
    )
    
    
    (40,900
    )Extensions, unitizations, discoveries and improved recovery,
net of related costs
    
    
    5,000
    
    
    
    11,200
    
    
    
    2,600Purchase/exchange of interests in fields
    
    
    
    
    
    
    13,200
    
    
    
    800Sale/exchange of interests in fields
    
    
    
    
    
    
    
    
    
    
    (3,600
    )Changes in estimated development costs
    
    
    (17,300
    )
    
    
    (11,300
    )
    
    
    (900
    )Development costs incurred during the year
    
    
    11,900
    
    
    
    9,800
    
    
    
    8,400Net change in income taxes
    
    
    36,300
    
    
    
    (72,200
    )
    
    
    (8,500
    )Accretion of discount
    
    
    6,800
    
    
    
    2,900
    
    
    
    3,100Revisions of previous reserve quantity estimates
    
    
    7,800
    
    
    
    16,300
    
    
    
    5,500Other
    
    
    
    
    
    
    (700
    )
    
    
    300Total change in the standardized measure during the year
    
    
    (19,100
    )
    
    
    41,500
    
    
    
    Development costs for the years 2007, 2008 and 2009 are estimated to NOK 11,500 million, NOK 8,400 million and NOK 7,300 million respectively.Sales price and production cost per unitThe 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
    
    TotalAmounts in NOK million
    
    
    2006
    
    
    
    2005
    
    
    
    2004
    
    
    
    2006
    
    
    
    2005
    
    
    
    2004
    
    
    
    2006
    
    
    
    2005
    
    
    
    2004Average sales price1)crude oil (per barrel)
    
    
    404.03
    
    
    
    342.54
    
    
    
    251.43
    
    
    
    396.60
    
    
    
    340.53
    
    
    
    250.40
    
    
    
    404.01
    
    
    
    342.22
    
    
    
    251.27natural gas (per Sm3)
    
    
    1.95
    
    
    
    1.52
    
    
    
    1.09
    
    
    
    1.62
    
    
    
    2.99
    
    
    
    
    
    
    
    1.93
    
    
    
    1.52
    
    
    
    1.09Average production cost (per boe)2)
    
    
    30.80
    
    
    
    25.80
    
    
    
    20.80
    
    
    
    46.70
    
    
    
    21.90
    
    
    
    19.50
    
    
    
    32.20
    
    
    
    25.30
    
    
    
    20.70
 1)
    
    In the years 2005, 2004 and 2003 Hydro has not had any hedging gain or loss that has
affected the realized oil and gas prices.2)
    
    Includes the cost of purchased gas for injection with NOK 7.9 per barrel in 2006, NOK 5.40 per
barrel in 2005 and NOK 2.80 per barrel in 2004.




---



##### 



F60 Use of non-GAAP financial measures
  Adjusted net interest-bearing debt, adjusted equity and adjusted net debt/equity




---



##### 



F61  Net interest-bearing debt to equity
 31 December
    
    
    31 DecemberNOK million
    
    2006
    
    
    2005Cash and cash equivalents
    
    
    6,760
    
    
    
    10,463Current assets
    
    
    15,020
    
    
    
    3,865Bank loans and other interest-bearing short-term debt
    
    
    (3,213
    )
    
    
    (4,658
    )Current portion of long-term debt
    
    
    (441
    )
    
    
    (379
    )Long-term debt
    
    
    (19,619
    )
    
    
    (21,387
    )Net interest-bearing debt
    
    
    (1,493
    )
    
    
    (12,095
    )Net pension liabilities at fair value
    
    
    (11,750
    )
    
    
    (13,529
    )Expected income tax benefit on pension liability (30%)
    
    
    3,525
    
    
    
    4,059Operating leases commitments discounted at 6.9% 1)
    
    
    (12,068
    )
    
    
    (6,287
    )Adjusted net interest-bearing debt
    
    
    (21,786
    )
    
    
    (27,852
    )Shareholders equity
    
    
    (96,496
    )
    
    
    (95,495
    )Minority interest
    
    
    (707
    )
    
    
    (981
    )Shareholders equity and minority interests
    
    
    (97,202
    )
    
    
    (96,476
    )Net pension liabilities not recognized without equity effect
    
    
    
    
    
    
    8,474Expected income tax benefit (30%)
    
    
    
    
    
    
    (2,542
    )Equity adjustment off-balance sheet pension liabilities
    
    
    
    
    
    
    5,932Adjusted shareholders equity and minority
    
    
    (97,202
    )
    
    
    (90,544
    )Adjusted net debt/equity ratio
    
    
    0.22
    
    
    
    0.311) The discount rate for the operating lease commitments is 6.9%, reflecting Hydros average
interest expense. This also corresponds to amended methodology used by major rating agencies for
the purpose of credit rating.The most directly comparable GAAP figure is considered to be Debt/equity ratio. However, this
ratio measures gross debt relative to equity, and does not measure changes in cash position, and
the non-GAAP measure Adjusted debt/equity ratio is
therefore not directly comparable.Debt/equity ratio
    
    
    0.24
    
    
    
    0.28
  Return on average capital employed (RoaCE)
  
    
    Return on average Capital Employed (RoaCE)
 
    
    Earnings after tax
 
    
    Capital Employed
  
    
    The rate of return on investments over time, in each of its capital intensive businesses
 
    
    The operating results of its business segments




---



##### 



F62    Return on average Capital Employed  Hydro
 Year endedAmounts in NOK million
    
    
    
    
    
    2006
    
    
    2005
    
    
    2004Operating income
    
    
    
    
    
    
    52,224
    
    
    
    46,237
    
    
    
    31,796Equity in net income of non-consolidated investees
    
    
    
    
    
    
    962
    
    
    
    593
    
    
    
    597Other income/expense, net
    
    
    
    
    
    
    53
    
    
    
    990
    
    
    
    169Earnings before tax
    
    
    
    
    
    
    53,239
    
    
    
    47,821
    
    
    
    32,561Adjusted income tax expense
    
    
    
    
    
    
    (38,033
    )
    
    
    (31,647
    )
    
    
    (21,150
    )Earnings after tax
    
    
    
    
    
    
    15,207
    
    
    
    16,174
    
    
    
    11,41231 December
    
    
    31 December
    
    
    31 December
    
    
    31 DecemberAmounts in NOK million
    
    
    2006
    
    
    
    2005
    
    
    
    2004
    
    
    
    2003Current assets 1)
    
    
    59,229
    
    
    
    55,964
    
    
    
    45,070
    
    
    
    45,468Non-consolidated investees
    
    
    10,455
    
    
    
    10,814
    
    
    
    10,017
    
    
    
    10,162Property, plant and equipment
    
    
    124,976
    
    
    
    128,191
    
    
    
    106,117
    
    
    
    107,779Prepaid pension, investments and other non-current assets 2)
    
    
    13,862
    
    
    
    17,897
    
    
    
    13,703
    
    
    
    13,228Other current liabilities 3)
    
    
    (56,684
    )
    
    
    (48,219
    )
    
    
    (41,724
    )
    
    
    (37,725
    )Other long-term liabilities 4)
    
    
    (55,823
    )
    
    
    (56,076
    )
    
    
    (47,218
    )
    
    
    (48,082
    )Capital Employed
    
    
    96,015
    
    
    
    108,571
    
    
    
    85,965
    
    
    
    90,8312006
    
    
    
    2005
    
    
    
    2004Return on average Capital Employed (RoaCE)
    
    
    
    
    
    
    14.9
    %
    
    
    16.6
    %
    
    
    12.9
    %
 1)
    
    Excluding cash and cash equivalents and short-term investments, but including deferred tax
assets2)
    
    Including deferred tax assets3)
    
    Including deferred tax liabilities4)
    
    Including accrued pension liabilities and deferred tax
liabilities




---



##### 



F63 
  Return on average Capital Employed  Oil & Energy
 Year endedAmounts in NOK million
    
    
    
    
    
    2006
    
    
    2005
    
    
    2004Operating income
    
    
    
    
    
    
    46,253
    
    
    
    43,451
    
    
    
    31,144Equity in net income of non-consolidated investees
    
    
    
    
    
    
    223
    
    
    
    112
    
    
    
    75Other income/expense, net
    
    
    
    
    
    
    53
    
    
    
    65
    
    
    
    59Earnings before tax
    
    
    
    
    
    
    46,529
    
    
    
    43,628
    
    
    
    31,278Adjusted income tax expense
    
    
    
    
    
    
    (36,832
    )
    
    
    (31,470
    )
    
    
    (22,051
    )Earnings after tax
    
    
    
    
    
    
    9,697
    
    
    
    12,158
    
    
    
    9,22731 December
    
    
    31 December
    
    
    31 December
    
    
    31 DecemberAmounts in NOK million
    
    
    2006
    
    
    
    2005
    
    
    
    2004
    
    
    
    2003Current assets 1)
    
    
    25,725
    
    
    
    25,084
    
    
    
    15,630
    
    
    
    16,015Non-consolidated investees
    
    
    2,027
    
    
    
    2,598
    
    
    
    2,347
    
    
    
    2,406Property, plant and equipment
    
    
    96,482
    
    
    
    96,321
    
    
    
    73,437
    
    
    
    74,460Prepaid pension, investments and
other non-current assets 2)
    
    
    10,828
    
    
    
    10,264
    
    
    
    4,392
    
    
    
    3,903Other current liabilities 3)
    
    
    (35,635
    )
    
    
    (34,027
    )
    
    
    (23,310
    )
    
    
    (18,829
    )Other long-term liabilities 4)
    
    
    (44,461
    )
    
    
    (43,888
    )
    
    
    (35,985
    )
    
    
    (35,627
    )Capital Employed
    
    
    54,964
    
    
    
    56,353
    
    
    
    36,511
    
    
    
    42,3292006
    
    
    
    2005
    
    
    
    2004Return on average Capital Employed (RoaCE)
    
    
    
    
    
    
    17.4
    %
    
    
    26.2
    %
    
    
    23.4
    %
 1)
    
    Excluding cash and cash equivalents and short-term investments, but including deferred tax
assets2)
    
    Including deferred tax assets3)
    
    Including deferred tax liabilities4)
    
    Including accrued
pension liabilities and deferred tax liabilities
   Return on average Capital Employed  Aluminium Metal
 Year endedAmounts in NOK million
    
    
    
    
    
    2006
    
    
    2005
    
    
    2004Operating income
    
    
    
    
    
    
    6,362
    
    
    
    2,694
    
    
    
    785Equity in net income of non-consolidated investees
    
    
    
    
    
    
    837
    
    
    
    272
    
    
    
    281Other income/expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Earnings before tax
    
    
    
    
    
    
    7,199
    
    
    
    2,966
    
    
    
    1,066Adjusted income tax expense
    
    
    
    
    
    
    (2,227
    )
    
    
    (943
    )
    
    
    (275
    )Earnings after tax
    
    
    
    
    
    
    4,973
    
    
    
    2,023
    
    
    
    79131 December
    
    
    31 December
    
    
    31 December
    
    
    31 DecemberAmounts in NOK million
    
    
    2006
    
    
    
    2005
    
    
    
    2004
    
    
    
    2003Current assets 1)
    
    
    18,001
    
    
    
    16,299
    
    
    
    13,306
    
    
    
    10,855Non-consolidated investees
    
    
    4,830
    
    
    
    3,863
    
    
    
    3,066
    
    
    
    3,384Property, plant and equipment
    
    
    15,933
    
    
    
    16,847
    
    
    
    16,263
    
    
    
    16,388Prepaid pension, investments and
other non-current assets 2)
    
    
    2,060
    
    
    
    1,994
    
    
    
    1,934
    
    
    
    1,999Other current liabilities 3)
    
    
    (12,109
    )
    
    
    (8,983
    )
    
    
    (8,765
    )
    
    
    (5,984
    )Other long-term liabilities 4)
    
    
    (2,858
    )
    
    
    (2,766
    )
    
    
    (1,951
    )
    
    
    (2,145
    )Capital Employed
    
    
    25,858
    
    
    
    27,254
    
    
    
    23,853
    
    
    
    24,4972006
    
    
    
    2005
    
    
    
    2004Return on average Capital Employed (RoaCE)
    
    
    
    
    
    
    18.7
    %
    
    
    7.9
    %
    
    
    3.3
    %
 1)
    
    Excluding cash and cash equivalents and short-term investments, but including deferred tax
assets2)
    
    Including deferred tax assets3)
    
    Including deferred tax liabilities4)
    
    Including accrued
pension liabilities and deferred tax liabilities




---



##### 



F64 
  Return on average Capital Employed  Aluminum Products
 Year endedAmounts in NOK million
    
    
    
    
    
    2006
    
    
    2005
    
    
    2004Operating income
    
    
    
    
    
    
    (83
    )
    
    
    (370
    )
    
    
    1,072Equity in net income of non-consolidated investees
    
    
    
    
    
    
    (179
    )
    
    
    47
    
    
    
    68Other income/expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Earnings before tax
    
    
    
    
    
    
    (261
    )
    
    
    (323
    )
    
    
    1,140Adjusted income tax expense
    
    
    
    
    
    
    30
    
    
    
    (304
    )
    
    
    (375
    )Earnings after tax
    
    
    
    
    
    
    (231
    )
    
    
    (627
    )
    
    
    76531 December
    
    
    31 December
    
    
    31 December
    
    
    31 DecemberAmounts in NOK million
    
    
    2006
    
    
    
    2005
    
    
    
    2004
    
    
    
    2003Current assets 1)
    
    
    17,143
    
    
    
    15,357
    
    
    
    14,667
    
    
    
    13,984Non-consolidated investees
    
    
    1,900
    
    
    
    2,495
    
    
    
    2,391
    
    
    
    2,403Property, plant and equipment
    
    
    8,639
    
    
    
    11,259
    
    
    
    12,433
    
    
    
    13,116Prepaid pension, investments and other non-current assets 2)
    
    
    2,485
    
    
    
    2,228
    
    
    
    2,481
    
    
    
    2,849Other current liabilities 3)
    
    
    (10,417
    )
    
    
    (9,042
    )
    
    
    (9,020
    )
    
    
    (8,092
    )Other long-term liabilities 4)
    
    
    (3,138
    )
    
    
    (2,835
    )
    
    
    (2,869
    )
    
    
    (3,156
    )Capital Employed
    
    
    16,613
    
    
    
    19,462
    
    
    
    20,082
    
    
    
    21,1052006
    
    
    
    2005
    
    
    
    2004Return on average Capital Employed (RoaCE)
    
    
    
    
    
    
    (1.3
    )%
    
    
    (3.2
    )%
    
    
    3.7
    %
 1)
    
    Excluding cash and cash equivalents and short-term investments, but including deferred tax
assets2)
    
    Including deferred tax assets3)
    
    Including deferred tax liabilities4)
    
    Including accrued
pension liabilities and deferred tax liabilities
   Effect on RoaCE of certain events
 Actual RoaCE
 Hydro

    
    
    Oil & Energy

    
    
    Aluminium ProductsYear ended

    
    
    Year ended

    
    
    Year endedAmounts in NOK million
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Earnings after tax
    
    
    15,207
    
    
    
    16,174
    
    
    
    9,697
    
    
    
    12,158
    
    
    
    (231
    )
    
    
    (627
    )Adjustment for write downs
    
    
    3,407
    
    
    
    1,239
    
    
    
    3,407
    
    
    
    
    
    
    
    
    
    
    
    1,239Adjustment for Spinnaker
    
    
    
    
    
    
    241
    
    
    
    
    
    
    
    241
    
    
    
    
    
    
    
    Adjustment for Castings
    
    
    167
    
    
    
    174
    
    
    
    
    
    
    
    
    
    
    
    167
    
    
    
    174Adjusted Earnings after tax
    
    
    18,781
    
    
    
    17,828
    
    
    
    13,104
    
    
    
    12,399
    
    
    
    (64
    )
    
    
    78631 December
    
    
    31 December
    
    
    31 December
    
    
    31 December
    
    
    31 December
    
    
    31 DecemberAmounts in NOK million
    
    
    2006
    
    
    
    2005
    
    
    
    2006
    
    
    
    2005
    
    
    
    2006
    
    
    
    2005Capital Employed
    
    
    96,015
    
    
    
    108,571
    
    
    
    54,964
    
    
    
    56,353
    
    
    
    16,613
    
    
    
    19,462Adjustment for write downs
    
    
    3,407
    
    
    
    1,239
    
    
    
    3,407
    
    
    
    
    
    
    
    
    
    
    
    1,239Adjustment for Spinnaker
    
    
    
    
    
    
    (17,065
    )
    
    
    
    
    
    
    (17,065
    )
    
    
    
    
    
    
    Adjustment for Castings
    
    
    2,643
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,643
    
    
    
    Adjusted Capital Employed
    
    
    102,065
    
    
    
    92,745
    
    
    
    58,371
    
    
    
    39,288
    
    
    
    19,256
    
    
    
    20,7012006
    
    
    
    2005
    
    
    
    2006
    
    
    
    2005
    
    
    
    2006
    
    
    
    2005RoaCE adjusted for certain events
    
    
    17.8
    %
    
    
    20.0
    %
    
    
    22.8
    %
    
    
    32.7
    %
    
    
    (0.3
    )%
    
    
    3.9
    %




---



##### 



F65 Combined information for the aluminium activities
     Aluminium activities
 Operating income (loss)
 NOK million
    
    2006
    
    
    2005
    
    
    2004Aluminium Metal
    
    
    6,362
    
    
    
    2,694
    
    
    
    785Aluminium Products 1)
    
    
    (83
    )
    
    
    (370
    )
    
    
    1,072Eliminations
    
    
    (98
    )
    
    
    (8
    )
    
    
    (103
    )Total
    
    
    6,181
    
    
    
    2,316
    
    
    
    1,754
 1)
    
    The specifications are based on continuing operations.




---



##### 



F66 IFRS in Hydros financial statements




---



##### 



F67




---



##### 



T1




---



##### 



T2
 Terms and definitions
 Term
    
    DefinitionADRs
    
    American Depositary Receipts, evidencing a specified number of ADSsADSs
    
    American Depositary Shares, each ADS representing one deposited ordinary shareAluNorf
    
    Aluminium Norf GmbHArticles of Association
    
    The articles of association of the Company, as amended and currently in effectAudit Committee
    
    The audit committee of the Companys Board of DirectorsBAT
    
    Best Available Techniques for pollution prevention and controlbbl
    
    Barrelsbcf
    
    Billion cubic feetbcm
    
    Billion cubic meters (Sm3)boe
    
    Barrels of oil equivalentsboed
    
    Barrels of oil equivalents per daycf
    
    Cubic feet measured at 60 degrees Fahrenheit. See also Sm3Code
    
    The U.S. Internal Revenue Code of 1986, as amended.Company
    
    Norsk Hydro ASA, a Norwegian public company limited by shares, or Norsk Hydro
ASA and its consolidated subsidiaries, as the context requiresCompensation Committee
    
    The compensation committee of the Companys Board of Directorscondensate
    
    Light hydrocarbon substances produced with natural gas, which condense into
liquid at normal temperatures and pressures associated with surface production
equipment.Consolidated Financial Statements
    
    The consolidated financial statements and notes included in the Companys
annual report to shareholders for the year ended 31 December 2004, included in
Exhibit 10 to this annual report on Form 20-FCorporate Assembly
    
    The corporate assembly, a body contemplated by Norwegian companies law, with
responsibility, among other things, for the election of the members of the
Companys Board of Directors and nomination of the external auditorCorporate Management Board
    
    The corporate management board established by the Companys President and
Chief Executive Officer to assist him in discharging his responsibilitiesCRU
    
    CRU International LimitedCustodian
    
    Den norske Bank, the custodian in connection with the Companys ADR facilityDeposit Agreement
    
    Deposit Agreement, dated as of 3 January 1986, as amended and restated as of 1
October 1987, and as further amended by Amendment No. 1 thereto, dated 27 May
1999, among the Company, the Depositary and the holders from time to time of
the ADRsDepositary
    
    JPMorgan Chase Bank, as depositary of the ADSsDepositarys Office
    
    The Depositarys office located at [60 Wall Street, New York, New York 10260]Deposited Securities
    
    ADRs, together with all securities, property and cash received by the
Depositary or the Custodian in respect of or in lieu of the Companys ordinary
sharesdevelopment well
    
    A well drilled within the proved area of an oil or gas reservoir to the depth
of a stratigraphic horizon known to be productive. See Regulation S-X, Rule
4-10(a)(11).Disclosure Committee
    
    The disclosure committee of the Company, comprised of members of senior
management, which is responsible for reviewing financial and related
information before it is made publicdry well
    
    An exploratory well found to be incapable of producing either oil or gas in
sufficient quantities to justify completion as an oil or gas well.EEA
    
    European Economic AreaEEA Agreement
    
    The European Economic Area AgreementEFTA
    
    European Free Trade Association




---



##### 



T3
  EU
    
    European UnionExchange Act
    
    The U.S. Securities Exchange Act of 1934, as amendedexploratory well
    
    A well drilled to find and produce oil or gas in an unproved area, to find a new
reservoir in a field previously found to be productive of oil or gas in another
reservoir, or to extend a known reservoir. See Regulation S-X, Rule 4-10(a)(10).FDP
    
    Field Development Planfield
    
    An area consisting of a single reservoir or multiple reservoirs all grouped on or
related to the same individual geological structural feature and/or stratigraphic
condition. See Regulation S-X, Rule 4-10(a)(8).FPSO
    
    Floating Production, Storage and OffloadingGFU
    
    The Gas Negotiation Committee (Gassforhandlingsutvalget)gross well
    
    A well in which a whole or fractional working interest is owned.Group
    
    Norsk Hydro ASA and its consolidated subsidiariesHBP
    
    Hydro Business Partner, a business unit of Norsk Hydro ASA and Norsk Hydro Produksjon ASHSE
    
    Health, safety and environmentHydro
    
    Norsk Hydro ASA and its consolidated subsidiariesHydro Aluminium
    
    The aluminium business of Hydro, comprising the sub-segments Metals, Rolled Products,
and Extrusion and AutomotiveHydro Oil and Energy
    
    The oil and energy business of Hydro, comprising two sub-segments, Exploration and
Production, and Energy and Oil MarketingIOR
    
    Increased Oil RecoverykWh
    
    Kilowatt hourLME
    
    London Metal ExchangeLPG
    
    Liquefied petroleum gas, a liquid composed chiefly of butane and propane.Ministry
    
    The Norwegian Ministry of Petroleum and Energymm
    
    MillimeterNCS
    
    Norwegian Continental Shelfnet well
    
    The sum of the whole or fractional working interests in gross wells that equals one.NGLs
    
    Oil and gas condensate and natural gas liquids. For purposes of converting quantities of
NGL cited in this annual report, 1 ton NGL = 11.951 boe.NOC
    
    The National Oil Company of LibyaNOK
    
    Norwegian kronerNomination Committee
    
    The nomination committee provided for in the Companys Articles of Association and
operating under a charter established by the shareholders representatives in the
Corporate AssemblyNoon Buying Rate
    
    The noon buying rate in the City of New York for cable transfers in foreign currencies,
as announced by the Federal Reserve Bank of New York for customs purposesNYSE
    
    New York Stock ExchangeOPEC
    
    Organization of the Petroleum Exporting CountriesOSE
    
    Oslo Stock ExchangePDO
    
    Plan for development and operationP-PVC
    
    Paste PVC




---



##### 



T4
 Terms and definitions
 proved reserves, proved 
developed reserves, proved 
undeveloped reserves
    
    Proved reserves are 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 (i.e.,
prices and costs as of the date the estimate is made). Proved
developed reserves are reserves that can be expected to be recovered
through existing wells with existing equipment and operating methods.
Proved undeveloped reserves are reserves that are expected to be
recovered from new wells on undrilled acreage, or from existing wells
where a relatively major expenditure is required for recompletion. For
a more complete understanding of these terms, see Regulation S-X, Rule
4-10(a) (2), (3) and (4). This information can be accessed on the
website of the SEC at www.sec.gov.PSA
    
    Production sharing agreement.PVC
    
    Polyvinyl chloride, a plastic raw materialreservoir
    
    A porous and permeable underground formation containing a natural
accumulation of producible oil or gas that is confined by impermeable
rock or water barriers and is individual and separate from other
reservoirs. See Regulation S-X, Rule 4-10(a)(9).Sanctions Act
    
    The Iran and Libya Sanctions Act of 1996, adopted by the United StatesSarbanes-Oxley Act
    
    The U.S. Sarbanes-Oxley Act of 2002SDFI
    
    The Norwegian States Direct Financial InterestSEC
    
    The United States Securities and Exchange CommissionSecurities Act
    
    The U.S. Securities Act of 1933, as amendedSm3
    
    Standard cubic meters measured at 15 degrees C. For purposes of
converting quantities of natural gas cited in this annual report, 1
Sm3 = 35.3826 cubic feet. When converting natural gas into
barrels of oil equivalents, Hydro makes an adjustment for calorific
value to an equivalent 40 MegaJoule/Sm3 volume. 1000
Sm3 of natural gas = 6.2898 boe.S-PVC
    
    Suspension PVCtonne
    
    One metric tonne (approximately 1,000 kilograms or 2,205 pounds)TWh
    
    Terawatt hour (one billion kilowatt hours)US GAAP
    
    Generally accepted accounting principles in the United StatesVAW
    
    VAW Aluminium AGVCM
    
    Vinyl chloride monomer, the main raw material for PVCVPS or VPS System
    
    The Norwegian Central Securities Depository, Verdipapirsentralen.WTO
    
    World Trade OrganizationYara
    
    Yara International ASA




---



##### 



Appendix  C1




---



##### 



C2
 Form 20-F Item
    
    Disclosure Item in this Annual Report
    
    Page1.
    
    Identity of Directors, Senior Management and Advisers
    
    Not applicable
    
    
    2.
    
    Offer Statistics and Expected Timetable
    
    Not applicable
    
    
    3.
    
    Key InformationA. Selected Financial Data
    
    Financial performance-  Selected financial data
    
    
    67Shareholder information-  Other information-   Exchange rate information
    
    
    153B. Capitalization and Indebtedness
    
    Not applicable
    
    
    C. Reasons for the Offer and Use of Proceeds
    
    Not applicable
    
    
    D. Risk Factors
    
    Risk review-  Risk factors
    
    
    134 - 1404.
    
    Information on the CompanyA. History and Development of the Company
    
    Business description-  Our business
    
    
    8-  Strategic direction
    
    
    8-  The Hydro way
    
    
    9-   History and development
    
    
    18 - 19-  Other information
    
    
    19Financial performance-   Liquidity and capital resources-   Investing activities
    
    
    95 - 96-   Investments
    
    
    98 - 100-   Material commitments
    
    
    100Financial statements- Note 2: Business combinations,
dispositions and demerger
    
    
    F13 - F15Appendix-  T: Terms and definitions
    
    
    T1 - T4B. Business Overview
    
    Business description
    
    
    8 - 19Operational review
    
    
    22 - 63Viability performance-  About the reporting
    
    
    121-  Facts and figures
    
    
    123 - 127Financial statements-
Use of non-GAAP financial measures
    
    
    F60 - F65Appendix-  T: Terms and definitions
    
    
    T1 - T4Cautionary note in relation to certain forward-lookingstatements
    
    Back coverC. Organizational Structure
    
    Business description-  Organization chart
    
    
    9D. Property, Plants and Equipment
    
    Business description
    
    
    8 - 19Operational review-   Regulation and taxation
    
    
    56 - 63Financial statements-
 Note 14: Property, plant and equipment
    
    
    F33Appendix-  T: Terms and definitions
    
    
    T1 - T44.A
    
    Unresolved Staff Comments
    
    Not applicable
    
    
    




---



##### 



Appendix  C3
 Form 20-F Item
    
    Disclosure Item in this Annual Report
    
    Page5.
    
    Operating and Financial Review and ProspectsA. Operating Results
    
    Financial performance-   Financial review
    
    
    68 - 95-  Critical accounting policies
    
    
    100 - 105Financial statements-
Use of non-GAAP financial measures
    
    
    F60 - F65-
IFRS in Hydros financial statements
    
    
    F66 - F67Appendix-  T: Terms and definitions
    
    
    T1 - T4Cautionary note in relation to certain forward-lookingstatements
    
    Back coverB. Liquidity and Capital Resources
    
    Financial performance-   Liquidity and capital resources
    
    
    95 - 100Financial statements-
Use of non-GAAP financial measures
    
    
    F60 - F65Cautionary note in relation to certain forward-lookingstatements
    
    Back coverC. Research and Development, Patents and Licenses,
    
    Viability performanceetc.
    
    -   Innovation
    
    
    119 - 120D. Trend Information
    
    Financial performance-   Financial review
    
    
    68 - 95Cautionary note in relation to certain forward-lookingstatements
    
    Back coverE. Off-Balance Sheet Arrangements
    
    Financial performance-   Liquidity and capital resources-
Contractual obligations, commitments and off
balance sheet arrangements
    
    
    98Financial statements-
Note 21: Secured debt and guarantees
    
    
    F38 - F39F. Tabular Disclosure of Contractual Obligations
    
    Financial performance-   Liquidity and capital resources-
Contractual obligations, commitments and off balance
sheet arrangements (table)
    
    
    98G. Safe Harbor
    
    Cautionary note in relation to certain forward-lookingstatements
    
    Back cover6.
    
    Directors, Senior Management and EmployeesA. Directors and Senior Management
    
    Corporate governance-   Board of directors
    
    
    158 - 159-  Corporate management board
    
    
    159 - 161Appendix-  T: Terms and definitions
    
    
    T1 - T4B. Compensation
    
    Corporate governance-   Management compensation
    
    
    161-  Governance bodies-   Corporate assembly
    
    
    162Financial statements-
Note 4: Remuneration and share-based compensation
    
    
    F19 - F23-   Note 25: Related parties
    
    
    F43 - F44Appendix-  T: Terms and definitions
    
    
    T1 - T4C. Board Practices
    
    Corporate governance-   Board of directors
    
    
    158 - 159-  Governance bodies
    
    
    162 - 163Appendix-  T: Terms and definitions
    
    
    T1 -T4D. Employees
    
    Viability performance-   Facts and figures-   Society-
Geographical distribution of
employees and payroll (table)
    
    
    123-   People
    
    
    124 - 125




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C4
 Form 20-F Item
    
    Disclosure Item in this Annual Report
    
    PageE. Share Ownership
    
    Corporate governance-   Management compensation-   Share ownership
    
    
    161-  Governance bodies-   Corporate assembly
    
    
    162Financial statements-
Note 4: Remuneration and share-based compensation
    
    
    F19 - F23-   Note 25: Related parties
    
    
    F43 - F44Appendix-  T: Terms and definitions
    
    
    T1 - T47.
    
    Major Shareholders and Related Party TransactionsA. Major Shareholders
    
    Shareholder information
    
    
    147 - 148-
Major shareholders and voting rightsB. Related Party Transactions
    
    Corporate governance-  Governance bodies-   Board of directors
    
    
    162 - 163Financial statements-
Note 4: Remuneration and share-based compensation
    
    
    F19 - F23-
Note 12: Non-consolidated investees
    
    
    F31 - F32-   Note 25: Related parties
    
    
    F43 - F44C. Interests of Experts and Counsel
    
    Not applicable
    
    
    8.
    
    Financial InformationA.
Consolidated Statements and Other Financial
    
    Financial statementsInformation
    
    -
Consolidated financial statements US GAAP
    
    
    F1 - F3-   Notes 1 - 26
    
    
    F6 - F45-
Supplementary oil and gas information
    
    
    F56 - F59Risk review-   Legal proceedings
    
    
    143Shareholder information-   Dividend policy
    
    
    146-
Revised dividend policy for "new" Hydro
    
    
    147B. Significant Changes
    
    None
    
    
    9.
    
    The Offer and ListingA. Offer and Listing Details
    
    Shareholder information-
Key figures for the Hydro share
    
    
    149 - 150B. Plan of Distribution
    
    Not applicable
    
    
    C. Markets
    
    Shareholder information-   Introductory paragraph
    
    
    146D. Selling Shareholders
    
    Not applicable
    
    
    E. Dilution
    
    Not applicable
    
    
    F. Expenses of the Issue
    
    Not applicable
    
    
    10.
    
    Additional InformationA. Share Capital
    
    Not applicable
    
    
    B. Memorandum and Articles of Association
    
    See Item 10.B of the Company's Form 20-F for the year
ended 31 December 2004, as filed with the US Securities
and Exchange Commission on 18 March 2005, except for
the information under "Description of Ordinary Shares -
General" thereunder
    
    
    C. Material Contracts
    
    Business description-   History and development
    
    
    18 - 19D. Exchange Controls
    
    Shareholder information-  Other information-   Exchange controls
    
    
    153




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##### 



Appendix  C5
 Form 20-F Item
    
    Disclosure Item in this Annual Report
    
    PageE. Taxation
    
    Shareholder information-  Other information-  Taxation
    
    
    150 - 152F. Dividends and Paying Agents
    
    Not applicable
    
    
    G. Statement by Experts
    
    Not applicable
    
    
    H. Documents on Display
    
    Not applicable
    
    
    I. Subsidiary Information
    
    Not applicable
    
    
    11.
    
    Quantitative and Qualitative Disclosures About
    
    Risk reviewMarket Risk
    
    -   Market risk
    
    
    141 - 142Appendix-  T: Terms and definitions
    
    
    T1 - T412.
    
    Description of Securities Other than Equity Securities
    
    Not applicable
    
    
    13.
    
    Defaults, Dividend Arrearages and Delinquencies
    
    None
    
    
    14.
    
    Material Modifications to the Rights of Security Holders
    
    None
    
    
    and Use of Proceeds15.
    
    Controls and Procedures
    
    Corporate governance-  Controls and procedures
    
    
    157Financial statements-
Managements annual report on internal control
over financial reporting
    
    
    F54Appendix-  T: Terms and definitions
    
    
    T1 - T4See Item 18 of the Companys Form 20-F for the year
ended
31 December 2006, as filed with the US Securities and
Exchange Commission on 16 March 2007, for the
US Report of Independent Accountants
    
    
    16A
    
    Audit Committee Financial Expert
    
    Corporate governance-  Governance bodies-  Audit committee
    
    
    163Appendix-  T: Terms and definitions
    
    
    T1 - T416B
    
    Code of Ethics
    
    Corporate governance
    
    
    156 - 157-
  Corporate directives and code of conduct16C
    
    Principal Accountant Fees and Services
    
    Corporate governance-  Controls and procedures-
Pre-approval of audit services
    
    
    157 - 158Corporate governance-  Governance bodies-  Audit committee
    
    
    163Financial statements-
Note 24: External audit remuneration
    
    
    F4316D
    
    Exemption from the Listing Standards for Audit
    
    Corporate governanceCommittees
    
    -  Governance bodies-  Audit committee
    
    
    16316E
    
    Purchases of Equity Securities by the Issuer and
    
    Shareholder informationAffiliated Purchasers
    
    -   Buyback of shares
    
    
    146 - 147Financial statements-   Note 25: Related parties
    
    
    F43 - F4417.
    
    Financial Statements
    
    Not applicable
    
    
    18.
    
    Financial Statements
    
    See Item 18 of the Company's Form 20-F for the year
ended
31 December 2006, as filed with the US Securities and
Exchange Commission on 16 March 2007, for the
US Report of Independent Accountants
    
    
    Financial statements-
Consolidated financial statements US GAAP
    
    
    F1 - F3-   Notes 1-26
    
    
    F6 - F4519.
    
    Exhibits
    
    See Item 19 of the Company's Form 20-F for the year
ended
31 December 2006, as filed with the US Securities and
Exchange Commission on 16 March 2007
    
    
    




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Cautionary note in relation to certain forward-looking statements




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Norsk Hydro ASA