Underlying EBIT. NOK 2,032 million

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1 report

2 page 2 Financial review Revenues Underlying EBIT Underlying Earnings per share 30,000 25,000 20,000 15,000 10,000 5,000 3,000 2,500 2,000 1,500 1, NOK q 07 2q 07 3q 07 4q 07 1q q 07 2q 07 3q 07 4q 07 1q q 07 2q 07 3q 07 4q 07 1q 08 NOK 21,529 million NOK 2,032 million NOK 1.20 Financial review Introduction 3 Aluminium Metal 5 Aluminium Products 10 Energy 13 Corporate, other and eliminations 14 Items excluded from underlying EBIT and income from continuing operations 15 Finance 16 Tax 17 Discontinued operations 17 Interim financial statements Condensed consolidated statements of income 18 Condensed consolidated balance sheets 19 Condensed consolidated statements of cash flows 20 Condensed consolidated statements of changes in equity 21 Notes to the condensed consolidated statements 23 Other information Additional information 31 Use of non-gaap financial measures 35

3 Financial review page 3 The merger of Hydro s petroleum activities into the combined oil and gas company StatoilHydro was finalized on 1 October. The following discussion is a summary of results of operations for Hydro s ongoing business, which includes the Aluminium Metal, Aluminium Products and Energy operations. Comparisons to periods prior to 1 October exclude the demerged oil and gas activities. See note 4 to this report for a discussion of Hydro s discontinued operations. Underlying EBIT and underlying Income from continuing operations To provide a better understanding of Hydro s underlying performance, the following discussion of operating performance excludes certain items from EBIT (earnings before financial items and tax) such as certain unrealized gains and losses on derivatives, impairment and rationalization charges, effects of disposals of businesses and operating assets, as well as other items that are of a special nature or are not expected to be incurred on an ongoing basis. In order to present Income from continuing operations on a comparable basis, we have calculated the income tax effect of items excluded from underlying EBIT based on Hydro s effective tax rate for the periods presented. We have also excluded realized and unrealized gains and losses on currency hedges and other foreign denominated contracts. See Items excluded from underlying EBIT and income from operations later in this report for more information on these items. Key financial information, except per share data prior prior year Revenue 21,529 21,651 (1)% 25,657 (16)% 94,316 Earnings before financial items and tax (EBIT) 1, >100% 3,672 (68)% 9,025 Items excluded from underlying EBIT 1) 853 1,359 (790) 1,128 Underlying earnings before financial items and tax (EBIT) 2,032 1,697 20% 2,883 (30)% 10,153 Underlying earnings before financial items and tax (EBIT) Aluminium Metal 1,255 1,331 (6)% 2,375 (47)% 8,265 Aluminium Products >100% 498 (26)% 1,352 Energy % % 1,184 Corporate and other 8 (50) >100% (257) >100% (647) Underlying earnings before financial items and tax (EBIT) 2,032 1,697 20% 2,883 (30)% 10,153 Income from continuing operations 1, >100% 3,258 (56)% 9,158 Underlying income from continuing operations 1,442 1,402 3% 2,345 (38)% 8,015 Earnings per share from continuing operations 2) >100% 2.60 (54)% 7.20 Underlying earnings per share from continuing operations 2) % 1.80 (33)% 6.20 Financial data Investments 2,267 2,173 4% 873 >100% 5,206 Adjusted net interest bearing debt to equity / Adjusted equity ratio 3) (0.07) (0.02) 0.05 (0.02) 1) See section later in this report Items excluded from underlying EBIT and income from operations for more information on these items. 2) Earnings per share from continuing operations and Underlying earnings per share from continuing operations are computed using the weighted average number of ordinary shares outstanding. There were no diluting elements. 3) See section later in this report Use of non-gaap financial measures Adjusted net interest-bearing debt to equity.

4 page 4 Financial review Operating statistics 1) prior prior year Realized aluminium price LME (USD/mt) 2) 2,442 2,447-2,588 (6)% 2,559 Realized aluminium price LME (NOK/mt) 2) 13,309 13,921 (4)% 16,480 (19)% 15,522 Primary aluminium production (kmt) (1)% 433-1,742 Rolled Products sales volumes to external market (kmt) % 266 (5)% 1,030 Extrusion sales volumes to external market (kmt) % 134 (4)% 508 Automotive sales volumes to external market (kmt) 3) % 29 7% 117 Power production (GWh) 2,850 2,321 23% 2,654 7% 11,018 1) Operating statistics includes proportionate share of production and prices in equity accounted investments. 2) Including the effect of strategic hedges (hedge accounting applied). 3) Excluding divested businesses Castings, Magnesium and Worchester. Hydro s underlying income from continuing operations amounted to NOK 1,442 million in the first of, up from NOK 1,402 million in the previous and down from NOK 2,345 million in the first last year. Solid operational performance in all business areas combined with higher sales volumes and margins for Hydro s downstream business lifted results, while weaker realized aluminium prices in Norwegian kroner had a negative impact. Global aluminium prices remained strong, but Hydro realized lower prices in Norwegian kroner during the compared with the previous and the same period last year, due to a weaker US dollar against the NOK. Hydro s performance during the first underpins our operational and financial strength, and we are continuously evaluating a range of growth opportunities, says Hydro President and CEO Eivind Reiten. Aluminium Metal is posting satisfactory results after a dynamic first, marked by a significant upward shift in aluminium prices which will start to impact our results from the second, Reiten says, adding: I m also pleased to see our Aluminium Products area showing strong performance, demonstrating that recent restructuring efforts are taking effect. During the first, Hydro completed the sale of its polymer business to UK-based Ineos. Hydro also signed an agreement to sell its maintenance, project and service providers Hydro Production Partner and Hydro Production Services to German Bilfinger Berger Industrial Services AG. Underlying EBIT in the first was NOK 2,032 million, up from NOK 1,697 million in the previous but lower than the strong performance in the first of. Underlying results for Aluminium Metal, Hydro s upstream aluminium business, declined from the previous three-month period and the first of, mainly due to lower realized aluminium prices measured in Norwegian kroner. Hydro s joint venture with Qatar Petroleum on the 585,000-tonne Qatalum smelter project, in which Hydro owns 50 percent, was about 17 percent complete by the end of the first and on track for start-up around the end of For Aluminium Products, Hydro s downstream operations, underlying results rose in the first from a seasonally weak fourth, along with higher volumes and improved margins. - results for Aluminium Products were somewhat weaker than the same year-earlier period, which benefited from favorable market conditions. Hydro s European Extrusion operations continued to deliver strong results. Hydro s Energy business, which includes power production and solar power investments, delivered higher underlying results in the first than both the first and fourth s of, mainly due to higher power production in Norway. Hydro increased its investment in US-based thin-film company Ascent Solar Technologies Inc. and Norwegian wafer producer NorSun AS, contributing to an enhanced position in the solar industry and confirming Hydro s commitment in the area. Reported EBIT and income from continuing operations EBIT for Hydro amounted to NOK 1,179 million in the first, up from NOK 338 million in the previous. EBIT was impacted by significant net unrealized losses on power and LME derivative contracts as a result of a significant upward shift in LME forward prices during the, combined with developments in the forward prices for coal and power. EBIT in the fourth of was also impacted by significant unrealized losses on derivative contracts, as well as higher negative metal effects and other negative non-recurring effects. Income from continuing operations amounted to NOK 1,443 million in the first, up from NOK 527 million in the

5 Financial review page 5 previous. Income from continuing operations included net foreign exchange gains amounting to NOK 854 million compared to net foreign exchange gains of NOK 74 million in the previous. Summary market developments and outlook Aluminium prices on the LME increased significantly throughout the in a volatile market impacted by production curtailments in China and South Africa, the weakening US dollar and increased activity from financial investors. Aluminium inventories are currently low compared to consumption, reflecting a favorable market balance. Hydro expects the production disruptions to reduce supply by about 600,000 mt in. Continued cost pressures on primary production relating to higher energy and raw material prices, together with the expectation of a potential tighter market balance in 2009 and a continued weak US dollar, are expected to support high LME price levels throughout. Total demand for primary aluminium in is expected to grow by 8-9 percent, driven mainly by strong growth in China. Hydro expects a moderate market slowdown for semi-fabricated products in Europe, mainly impacting business in the second half of the year. In the US, Hydro expects the market for semifabricated products to remain at the current depressed levels. The development of the US economy and its potential global impact represents a major uncertainty in Hydro s market outlook. Aluminium Metal Earnings before financial items and tax (EBIT) prior prior year Aluminium Metal EBIT 716 1,194 (40)% 2,534 (72)% 8,365 Items excluded from underlying EBIT (158) (100) Aluminium Metal underlying EBIT 1,255 1,331 (6)% 2,375 (47)% 8,265 Bauxite and Alumina (63)% 257 (96)% 681 Primary Aluminium 872 1,140 (24)% 1,901 (54)% 6,552 Commercial >100% % 946 Other and eliminations (36) 60 >(100)% (37) 3% 84 Aluminium Metal underlying EBIT 1,255 1,331 (6)% 2,375 (47)% 8,265 Operating and financial statistics prior prior year Realized premium above LME (USD/mt) 1) 2) % % 343 Realized premium above LME (NOK/mt) 1) 2) 1,973 1,934 2% 2,056 (4)% 2,037 1) Includes proportionate share of premiums in equity accounted investments. 2) Average realized margin above LME for total metal products sold from Primary Aluminium and Commercial, excluding ingot trading volumes. Market statistics 1) prior prior year LME three month average (USD/mt) 2,772 2,495 11% 2,746 1% 2,661 LME three month average (NOK/mt) 14,705 13,567 8% 17,108 (14)% 15,627 Global production of primary aluminium (kmt) 9,792 9,998 (2)% 9,007 9% 38,104 Global consumption of primary aluminum (kmt) 9,615 9,741 (1)% 9,036 6% 37,804 Reported primary aluminium inventories (kmt) 3,040 2,830 7% 2,712 12% 2,830 1) Industry statistics have been derived from analyst reports, trade associations and other public sources unless otherwise indicated. Amounts presented in prior reports may have been restated based on updated information.

6 page 6 Financial review Market development During the first of aluminium prices increased significantly in a volatile market environment. LME threemonth prices started the at USD 2,410 per mt, reached a peak level of USD 3,250 per mt and closed at USD 2,990 per mt. Average LME three-month prices for the increased substantially measured in both US dollars and Norwegian kroner. Several factors influenced price developments for the. Ongoing production problems in China and South Africa due to energy shortages has led the market to expect a tighter supply/demand balance for. In addition, the continued depreciation of the US dollar is supporting higher prices while the continued, substantial involvement by financial investors has resulted in higher prices but also increased volatility. Both primary production and apparent primary consumption in China decreased 6 percent in the first of compared with the fourth of mainly due to power shortages during a period of extreme winter weather. Export of primary metal from China during January and February was at a ly level of 61,000 mt compared with average ly exports of 66,000 mt in. The extrusion ingot market in Europe slowed during the with weaker extrusion demand especially in the construction market. Activity levels in the transportation and industrial and engineering markets remained firm. The US extrusion ingot market was down in the first of compared with the first of. Demand for sheet ingot in Europe was on a good level in the. Market conditions in the main end-use markets for flat rolled products remained firm during the except for the weakening construction market. Market conditions for foundry alloys in Europe remained positive during the. Outlook Several factors indicate a positive outlook for aluminium price developments in US dollars in the coming s. Aluminium inventories are low compared to consumption indicating a favorable market balance. Demand in Asia is holding up well. While economic conditions remain weak in the US and parts of Europe, Germany and France have had a relatively strong development in industrial production so far this year while the Southern European economies of Italy and Spain are weakening. Cost pressures within the production of primary aluminium relating to energy and other raw materials and the weakening US dollar continue to support high aluminium prices measured in US dollars. These factors, combined with expectations of a potential tighter supply-demand balance for aluminium in 2009, are expected to support aluminium prices throughout the year. There are still uncertainties, however, linked to the developments of the US economy and the potential global impact. China s apparent consumption of primary metal is forecast to increase by 22 percent for the full year of, down from an annual growth of 38 percent in, due to lower growth in the production of semi-finished products for export. The expected decline follows reduced incentives introduced in the second half of, for the export of low value-added products including simpler forms of semi-finished products. We expect total Chinese net export of semi-finished products for to be on the same level as, which doubled from 2006 reaching a level of 1,100,000 mt. Over time, we expect a continued gradual increase in Chinese net exports of fabricated products based on Chinese labor and investment cost advantages and duty incentives. Growth in Chinese production of primary metal is expected to reach 18 percent in, compared with a growth rate of 35 percent last year. The slow down mainly results from initiatives taken by the Chinese authorities to control and reduce the expansion of primary capacity as well as lost production due to power shortages. Production capacity is gradually being restored but losses are expected to amount to around 500,000 mt for in total. On balance, we expect China to move closer during to becoming a net importer of primary metal. Primary aluminium consumption and production in the rest of the world is expected to grow by about 2 percent and 6 percent, respectively, from to. Market conditions for extrusion ingot in Europe are expected to remain at the same level in the coming months, with a slightly weaker demand especially from the building and construction sector. The US market for extrusion ingot in is expected to be slightly below the level mainly due to a continued weak demand from the residential building and construction sector. For sheet ingot in Europe the expected demand outlook remains positive with some slowing possible in the second half of. Demand for foundry alloys in Europe is expected to stabilize for the rest of the year with a slight trend towards increased market demand. Key development activities Construction activity relating to the Qatalum primary aluminium plant, our 50/50 joint venture with Qatar Petroleum, increased during the. Site preparations and the first phase of the construction village are completed. All main contractors have mobilized at the site and the main on-going activities include foundation, excavation and concrete work. Manning at site reached about 3,500 in early April and is continuously increasing. The Qatalum project is being developed in a demanding construction environment in the Gulf area. Proactive measures are being taken by Hydro s experienced project management organization to secure project completion within defined time

7 Financial review page 7 and cost targets. The project was about 17 percent complete at the end of the first and is progressing for an expected start up late in Total investment costs are estimated at USD 5.6 billion. The third expansion of the Alunorte alumina plant in Brazil (Hydro share 34 percent) is progressing according to plan and is expected to commence production in the fourth of. The expansion will increase production capacity at Alunorte to 6.3 million mt. Hydro and the mining group Vale are progressing in developing a final agreement for the construction of a new 1.85 million mt alumina refinery close to the Alunorte refinery in Brazil with a 20 percent Hydro share. Underlying earnings before financial items and tax Underlying EBIT for Aluminium Metal amounted to NOK 1,255 million in the first of, down 6 percent compared with fourth of and 47 percent from the very strong first of. Developments for the were mainly driven by lower realized aluminium prices measured in Norwegian kroner. Primary aluminium production volume was relatively stable compared to previous s. Results from our Bauxite and Alumina operations declined somewhat compared with fourth and were substantially lower than the first of. Lower volumes due to planned maintenance impacted results compared with the fourth, while higher LME linked bauxite prices influenced the decline compared with the first of. Higher energy costs contributed to the weak results compared to both the fourth and first s of. Underlying EBIT for our Commercial operations increased substantially in the, compared with the fourth of which was negatively impacted by losses in our North American remelt operations. Underlying EBIT - Sub Segments Following is a discussion of the underlying operating results for the sub-segments which comprise our Aluminium metal business area. See section later in this report Use of non- GAAP financial measures - Items excluded from underlying EBIT and income from operations for more information on the items excluded from the sub-segments EBIT. Bauxite and alumina Operating and financial statistics prior prior year Underlying earnings before financial items and tax (EBIT) () (63)% 257 (96)% 681 Alumina production (kmt) 1) (6)% 474 7% 2,007 1) Includes proportionate share of production in equity accounted investments. Underlying EBIT for our Bauxite and Alumina operations declined to NOK 10 million in the first of from NOK 27 million in the fourth of and was substantially lower than underlying EBIT of NOK 257 million in the first of. Underlying results the first of include positive effects from a high margin long-term alumina trading contract that expired in. Underlying results from Alunorte amounted to NOK 30 million for the, compared with NOK 52 million in the fourth of and NOK 192 million in the first of. Volumes declined compared to the fourth of due to planned maintenance while bauxite costs and energy costs increased. Realized alumina prices were relatively stable, compared with the fourth of. Alumina prices for Alunorte are adjusted monthly based on the monthly average LME three-month prices, applied with one month delay. Realized US dollar prices were stable compared to the previous but were significantly lower, compared with the first of. The significant increase in LME prices during the first of started in February and therefore had only limited influence on our realized average US dollar alumina prices in the first. Bauxite prices for Alunorte are linked to average LME prices for the past three s with an additional one- delay. Therefore bauxite costs in the first of reflected the high average LME prices during the first three s of. Energy costs increased compared with the fourth of, reaching a peak in January, and were substantially higher compared with the first of. New coal-fired boilers that were started-up in the previous

8 page 8 Financial review reached full operating capacity during the first and will improve the plants energy costs going forward. Further improvements in the plant s energy mix will take place during the second with the implementation of additional cogeneration capacity for electricity, further reducing exposure to local electricity prices. Underlying Results for the first included a loss of NOK 11 million relating to our Alpart alumina operations, compared with a loss of NOK 17 million in the fourth of and a positive underlying EBIT of NOK 60 million in the first of. The negative developments were mainly driven by higher energy costs. Primary aluminium Operating and financial statistics 1) prior prior year Underlying earnings before financial items and tax (EBIT) () 872 1,140 (24)% 1,901 (54)% 6,552 Primary aluminium production (kmt) (1)% 433-1,742 Total casthouse production (kmt) % 535 4% 2,164 Realized aluminium price LME (USD/mt) 2) 2,442 2,447-2,588 (6)% 2,559 Realized aluminium price LME (NOK/mt) 2) 13,309 13,921 (4)% 16,480 (19)% 15,522 Realized NOK/USD exchange rate 3) (4)% 6.37 (14)% ) Operating and financial statistics includes proportionate share of production, prices and exchange rates in equity accounted investments. 2) Including effect of strategic LME hedges (hedge accounting applied). 3) Including effects of strategic currency hedges (hedge accounting applied). Underlying EBIT for our Primary Aluminium operations declined 24 percent to NOK 872 million in the first of, compared with the fourth of and was 54 percent lower than the first of mainly due to lower realized aluminium prices. Our realized aluminium price was stable measured in US dollars, but declined by 4 percent measured in Norwegian kroner, compared with the fourth of, reducing operating results by NOK 245 million. Realized aluminium prices measured in Norwegian kroner decreased by 19 percent compared with the first of, reducing operating results by NOK 1,320 million. Casthouse production in our primary smelters, including our share of production from part-owned companies, increased by 3 percent following a seasonal decline in demand in the fourth of. Compared with the first, production increased by 4 percent mainly due to a new production line in our Sunndal smelter in Norway. Variable costs increased by NOK 116 million in first of compared with fourth mainly due to increased power prices for our Norwegian smelters. Primary aluminium production, including our share of production from part-owned companies, declined by 6,000 mt compared to the previous mainly due to one less production day in the. Primary aluminium production was unchanged compared with the first of. Lost production from the closure of the Søderberg line in Årdal in June was partly offset by one additional production day and by production increases at other plants within our smelter system.

9 Financial review page 9 Commercial Operating and financial statistics prior prior year Underlying earnings before financial items and tax (EBIT) () >100% % 946 Remelt production (kmt) (8)% 190 (26)% 685 Sale of metal products from own production (kmt) 1) 2) % 772 (6)% 2,888 Sale of third-party metal products (kmt) (12)% 76 (16)% 315 Total metal products sales excluding ingot trading (kmt) 1) % 848 (7)% 3,203 External sales (kmt) 1) % 478 (1)% 1,858 External revenue () 8,200 8,441 (3)% 10,663 (23)% 37,952 Sales revenue () 3) 6,646 6,393 4% 8,006 (17)% 29,090 1) Excluding Slovalco sales to local market. 2) Including sales of liquid metal directly to Karmøy Rolling Mill. 3) External sales revenue for our Commercial operations including revenues from our casthouse production, remelters, high purity aluminium business and contracts with external metal sources. Excludes results from our aluminium trading and hedging activities and commercial operations to optimize our physical alumina portfolio on a short and medium term basis. Underlying EBIT for our Commercial operations amounted to NOK 409 million in the first of, compared to NOK 105 million in the fourth of and NOK 254 million in the first of. Underlying EBIT for our commercial products activities amounted to NOK 185 million in the first, up from NOK 67 million in the fourth of and NOK 153 million in the first of. Underlying EBIT for the fourth was heavily influenced by losses from our North American remelt operations amounting to NOK 110 million. In January, the operations of our US wall-towall remelters in St. Augustine, Florida, Monett, Missouri and Phoenix, Arizona were transferred to Aluminium Products in order to increase operational synergies with the extrusion plants located at the same sites. These remelters had a combined production of 122,000 mt in and combined underlying losses of NOK 43 million and NOK 12 million in the fourth and first of, respectively. Following the transfer, US remelters included in our commercial sub-segment are Henderson, Kentucky and Commerce, Texas with a combined production of 162,000 mt in. Our remelters in Europe continued to deliver good results during the. Volumes increased by about 8 percent compared with the fourth of mainly due to seasonally higher off-take from our customers and were down by 3 percent compared to the first of. Our remaining US remelters delivered significantly better sales volumes in the first, increasing by about 36 percent compared to a very weak fourth of. US sales volumes for the first were unchanged compared to the first of. Total remelt production volumes declined by 8 percent compared to the fourth and 26 percent compared to the first of due to the transfer described above and the shutdown of the Ellenville remelter in the third of. Total metal sales volumes excluding ingot trading amounted to 788,000 mt in the first of, increasing by 5 percent compared to the fourth of, mainly due to higher customer off-take compared to a seasonally weaker fourth. Total metal sales decreased by 7 percent compared with the first of. The decline mainly resulted from the transfer of the remelters described above and the shutdown of the Ellenville remelter. Underlying EBIT for our sourcing and trading activities amounted to NOK 144 million in the first compared with NOK 58 million in the fourth of and NOK 190 million in the first of. Results for our commercial operations also include net realized and unrealized effects relating to derivative instruments used to mitigate the risk of losses on our short operational hedge positions that could result from potential forward price developments. Underlying EBIT for the first of included NOK 80 million of net positive effects on these derivative instruments compared to net negative effects of NOK 19 million in the fourth of and net negative effects of NOK 90 million in the first of. See section on Items excluded from underlying EBIT later in this report for more information on these effects.

10 page 10 Financial review Aluminium Products Earnings before financial items and tax (EBIT) prior prior year Aluminium Products EBIT 995 (326) >100% 1,315 (24)% 1,098 Items excluded from underlying EBIT (625) 399 (817) 254 Aluminium Products underlying EBIT >100% 498 (26)% 1,352 Rolled Products 147 (31) >100% 194 (24)% 562 Extrusion % 245 (8)% 852 Automotive (2) (75) 97% 57 >(100)% (67) Other and eliminations >(100)% 5 Aluminium Products underlying EBIT >100% 498 (26)% 1,352 Market statistics 1) Total market consumption (kmt) prior prior year Rolled products - Europe 1,014 1,009 1% 985 3% 4,005 Rolled products - US 1,151 1,118 3% 1,197 (4)% 4,732 Extruded products - Europe % 730 (5)% 2,747 Extruded products - US % 381 (6)% 1,427 1) Industry statistics have been derived from analyst reports, trade associations and other public sources unless otherwise indicated. Amounts presented in prior reports may have been restated based on updated information. Market developments The flat rolled products market in Europe was stable in the first, compared with the fourth, and increased 3 percent compared with first. Demand remained firm across a range of market segments with the exception of the construction sector. However, the volatility of the metal price has had a negative influence on the market, creating uncertainty among buyers. In the US the market demand increased compared to fourth mainly driven by restocking, but declined compared to first. Demand remained weak especially within the construction and transport market segments. The overall growth in European consumption of extruded aluminium products increased compared to fourth primarily due to seasonal effects. Transportation and engineering markets remained firm while the construction market weakened. Within the building systems market signs of somewhat softer markets in southern Europe are emerging, while northern Europe, in particular Germany, is still strong. Higher consumption of extruded aluminium products in North America reflected a seasonal improvement from a very low level in the fourth of, but the market remains weak. The on-going weakness in the US economy continues to impact most market segments, in particular the building and construction industry. Demand continued to grow in Brazil and Argentina driven by robust building and construction activity and continued strength in the transportation and industrial sectors. Margins in the US have been stable but there are signs of softening. The automotive market in Europe developed positively during the first, while the North American market was strongly impacted by the weak economy. Markets in Asia and South America continued their strong growth. Outlook Market demand for flat rolled products in Europe is expected to be stable for the coming months. Demand from the automotive and engineering market segments is expected to continue at current levels, while demand from the construction market segment is expected to continue weakening. US market demand is expected to remain depressed. Combined with a weak US dollar, this could lead to increased imports and put pressure on European margins for rolled products. The overall outlook for the European extrusion market indicates a softer demand in, driven by the weakening con-

11 Financial review page 11 struction market segment in Europe. The market outlook in Germany continues to be strong, in particular within the engineering and transportation market segments. The general softer demand combined with a volatile LME could put further downward pressure on margins in the months to come. The outlook for the US extrusion market shows no signs of recovery. Continuing deterioration in the housing market, the ongoing turmoil in the financial and credit markets and the resulting uncertainty pose the risk for further deteriorating economic developments. Margins could come under increasing pressure the longer the current downturn continues. South American markets are expected to post another strong year, with consumption in Brazil and Argentina expected to grow around 6-7 percent. The outlook for the automotive market is mixed with a stable to strong European market while the North American market is expected to remain weak for. Automotive markets in Asia and South America are expected to continue growing. Increased pressure on fuel economy and emissions reductions, including potential new environmental legislation, is expected to enhance the competitiveness of aluminium in automotive systems and solutions. Key development activities In April, Hydro acquired Expral s.a, a privately owned extrusion operation located near Madrid. Expral is mainly involved with industrial applications and the building industry. The acquisition provides Hydro with a stronger market presence in Spain s two main commercial regions - Barcelona and Madrid. Underlying earnings before financial items and tax Underlying EBIT for Aluminium Products amounted to NOK 370 million for the first, up by NOK 300 million from the seasonally weak fourth results in. Shipments increased mainly in the high added-value foil and lithographic segments, also contributing to improved margins for our rolled products operations, while our extrusion volumes increased 11 percent mainly driven by a 15 percent increase from our European extrusion business. Margins remained strong within our extrusion market segment. Results for our US extrusion operations improved but the market remains at depressed levels. Operating results for our automotive structures activities improved but remain challenging. Underlying EBIT declined by NOK 128 million or 26 percent compared to the first of which included net operating profits from divested operations of around NOK 50 million. Volumes for our rolled products business declined somewhat in the first of. Slightly higher operating costs had a negative impact on the underlying results for our European extrusion operations. Lower costs from measures implemented at our US operations combined with improved results from our South American business more than offset a volume decline of 15 percent for our North American operations. Underlying EBIT - Sub Segments Following is a discussion of the underlying operating results for the sub-segments which comprise our Aluminium products business area. See section later in this report Use of non- GAAP financial measures - Items excluded from underlying EBIT and income from operations for more information on the items excluded from the sub-segments EBIT. Rolled Products Operating and financial statistics prior prior year Underlying earnings before financial items and tax (EBIT) () 147 (31) >100% 194 (24)% 562 Sales volumes to external market (kmt) % 266 (5)% 1,030 Underlying results for our Rolled Products business increased substantially to NOK 147 million from seasonally weak results in the fourth. Shipments increased mainly in the high added-value foil and lithographic product segments also contributing to improved average margins. Costs declined mainly due to lower maintenance activities. Currency effects due to the stronger Euro versus the US dollar had a negative impact on margins. Approximately 20 percent of our total sales volume is sold in dollar-denominated markets. Compared to first underlying results declined by NOK 53 million. Higher contribution due to our margin management efforts improved our results for the but the positive effect was offset by somewhat lower volumes, especially within the general engineering market segment. Overall shipments declined, compared with the first of, influenced by the early Easter holidays in. Operating costs declined by around NOK 30 million due to lower production related costs.

12 page 12 Financial review Extrusion Operating and financial statistics prior prior year Underlying earnings before financial items and tax (EBIT) () % 245 (8)% 852 Sales volumes to external market (kmt) % 134 (4)% 508 Underlying results for our Extrusion business increased by NOK 46 million from fourth. Overall volumes increased 11 percent mainly driven by a 15 percent increase from our European extrusion operations compared to the seasonally weaker fourth of. Margins improved within our building systems operations while margins were stable within our European extrusion business. Volumes for our US extrusion operations improved compared to seasonally low shipments in the previous, but the market remains at depressed levels. Compared to the first of underlying results for our extrusion business declined by NOK 20 million. Positive effects from continued high margins and stable volumes were offset by slightly higher costs within our European operations. Underlying results for our Americas operations improved compared to the same last year mainly driven by improvements in our South American operations, lower costs due to the shutdown of the Ellenville plant and significant measures to align the cost structure of our remaining operations with the sharp decline in market demand experienced in. These measures, together with positive margin developments in US dollar terms mainly in our South American business, more than offset a volume decline of 15 percent. However, the results of our North American operations remain unsatisfactory. The operations relating to three remelters located at our US extrusion sites were integrated with our downstream operations beginning 1 January and will contribute to further improve our metal sourcing and service capabilities towards our customers in North America. Automotive Operating and financial statistics prior prior year Underlying earnings before financial items and tax (EBIT) () (2) (75) 97% 57 >(100)% (67) Sales volumes to external market (kmt) 1) % 29 7% 117 1) Excluding Castings, Magnesium and Worcester Our Automotive operations incurred an underlying loss of NOK 2 million in the first, compared with a loss of NOK 75 million in the fourth of. The improvements were due to positive volume and cost effects in our automotive structures business and positive volume developments for our precision tubing operations. Underlying EBIT declined by NOK 59 million compared to the first of which included net operating profits from divested operations of around NOK 50 million. Underlying results in the first of for our automotive structures operations were impacted by ongoing costs related to production start-up of new product lines and costs relating to new contracts. During the remainder of and throughout 2009, our automotive structures business will go through a period in which products relating to car models going out of production will be replaced by new products for new models at a level somewhat higher than normal. This will result in increased costs.

13 Financial review page 13 Energy Earnings before financial items and tax (EBIT) prior prior year Energy EBIT % % 1,303 Items excluded from underlying EBIT (5) (35) (22) (119) Energy underlying EBIT % % 1,184 Operating and financial statistics prior prior year Direct production cost, incl. transmission () 1) % 156 (15)% 490 Power production (GWh) 2,850 2,321 23% 2,654 7% 11,018 External sourcing (GWh) 2) 2,047 2,267 (10)% 1,968 4% 8,760 Internal contract sales (GWh) 3) 3,501 3,575 (2)% 3,445 2% 14,109 External contract sales (GWh) 4) % % 1,042 Net spot sales (GWh) 5) % % 4,629 1) Includes maintenance and operational costs, transmission costs, property taxes and concession fees. 2) Includes long-term sourcing contracts and industrial sourcing in Germany. 3) Internal contract sales in Norway and Germany, including sales from own production and resale of externally sourced volumes. 4) External contract sales, mainly concession power deliveries and volumes to former Hydro businesses. 5) Spot sales volumes net of spot purchases. Market statistics NOK prior prior year Southern-Norway spot price (NO1) (14)% % 206 Nordic system spot price (10)% % 224 Market developments The average Nordic system price for the first was moderately below the fourth of, however, the spot price declined significantly from NOK 378 per MWh in the first week of January to NOK 259 per MWh in the last week of March. The decline in the spot price was primarily driven by periods of mild weather conditions and high accumulation of snow in the reservoir catchment areas in Southern Norway. The average Southern Norway spot price was at same level as the Nordic system price for most of the first, but was NOK 52 per MWh, or 20 percent, below the system price in the last week of March due to reduced export/import transmission capacity from Southern Norway. Total power production in Norway was reported at 40 TWh in the first of, an increase of 9 percent compared with the same period last year. Total power consumption in the was 37.5 TWh, 2 percent higher than last year. Total net export was 2.5 TWh compared with a net import of 1.7 TWh in the first of. Outlook By the end of the first, the total water and snow balance in Norway was estimated to be approximately 15 percent higher than normal. High reservoir inflows from melting snow are expected to put pressure on spot prices during the summer months. In addition, reduced export/import capacity from Norway due to outages in central grid transmission lines could have a negative impact on the Southern Norway area prices in the second.

14 page 14 Financial review Partly through developments within the EU Emission Trading Directive (ETS) relating to the trading of greenhouse gasses (C02) and through increased interconnector transmission capacity, Nordic power prices are expected to be increasingly influenced by power prices and generation fuel costs on the European Continent. However, hydrological conditions and local supply and demand factors, such as temperature and weather conditions, will continue to have a strong influence on price formation in the Nordic region from to. The balance of Hydro s power portfolio varies both within different periods of the year and from year to year, driven by variations in hydrological conditions and industrial consumption as well as contractual commitments and market developments. These variations also impact grid transmission costs. As a result, reported results can fluctuate significantly from to. Key development activities In February, Hydro participated in a capital expansion of the solar energy company NorSun AS in Norway amounting to NOK 800 million and increased its ownership interest from 16 to18 percent for a total new investment of NOK 250 million. NorSun AS is currently constructing a manufacturing plant in Årdal, Norway to produce monocrystalline silicon wafers. The first phase of the building is now finished, and test production has begun. Norsun has decided to build a new plant for producing wafers in Singapore, and has also entered into a partnership agreement for the production of solar grade silicon in Saudi Arabia. In March, Hydro exercised an option to increase its ownership interest in Ascent Solar Technologies Inc. Hydro invested NOK 144 million, increasing its ownership share from 22 percent to 35 percent. Based in Denver, Colorado, Ascent Solar Technologies Inc. recently announced that it has reached important milestones in test production of thin-film photovoltaic materials and modules. Ascent Solar is presently constructing a pilot plant for further development of the manufacturing process and has plans for larger scale production in 2009/2010. Underlying earnings before financial items and tax Underlying EBIT for Energy amounted to NOK 399 million in the first, up NOK 58 million from the fourth of and up NOK 133 million from the same last year. The increase from the fourth is primarily due to higher production, increased spot sales and increased revenues from contract sales, which have more than offset the effects of lower spot prices. Compared with the first of, the results are positively impacted by increased spot prices, higher production and lower production costs. Hydro s power production in Norway was 2.9 TWh in the first of, 23 percent up from the fourth of and 7 percent higher than in the first of. Net spot sales 1) representing the net of volumes sold and purchased, amounted to 1.0 TWh, up 30 percent from the previous and 19 percent higher than in the same last year. Direct power production costs, which include operation and maintenance, transmission costs, property taxes and concession fees, increased by 18 percent from the fourth of, primarily due to higher grid transmission tariffs. Compared with the same last year, production costs decreased by 15 percent. Hydro s Solar business incurred a loss of NOK 22 million in the first of compared with a loss of NOK 49 million in the fourth of. Results for Solar activities include our share of profit/loss in equity accounted investments, and the losses reflect that our partnership companies are in a developing phase and have not yet started production. Corporate, other and eliminations Underlying EBIT for Corporate activities and eliminations amounted to NOK 8 million in the first of compared to an underlying loss of NOK 50 million in the fourth of and an underlying loss of NOK 257 million for the first of. Net pension and social security costs amounted to a charge of NOK 44 million in the first compared with a charge of NOK 219 million in the fourth of and NOK 65 million in the first of. The higher charge in the fourth of was mainly due to an additional social security tax accrual as a result of the split of one combined pension scheme due to the oil and gas demerger on 1 October. Underlying EBIT for Corporate activities also includes the elimination of unrealized profits on inventories purchased from group companies. Profits are realized in the period when the inventory is sold to external customers and the elimination is reversed, resulting in a credit included in Corporate activities and elimination. Underlying results for the first of included a credit of NOK 108 million compared to a credit of NOK 38 million in the fourth of and a charge of NOK 51 million in the first of. 1) Primarily due to variations in hydrology, Hydro is managing surplus and shortages in its Norwegian power portfolio in the spot market.

15 Financial review page 15 Items excluded from underlying EBIT and income from continuing operations To provide a better understanding of Hydro s underlying performance, the items in the table below have been excluded from EBIT (earnings before financial items and tax) and income from continuing operations. See section later in this report Use of non-gaap financial measures - Items excluded from underlying EBIT for more information on these items. Items excluded from underlying EBIT are comprised mainly of unrealized gains and losses on certain derivatives, impairment and rationalization charges, effects of disposals of businesses and operating assets, as well as other items that are of a special nature or are not expected to be incurred on an ongoing basis. Derivative contracts include various financial contracts entered into for operational hedging purposes as well as derivatives embedded in commercial contracts. Unrealized gains and losses on derivatives can be substantial and highly volatile depending on open positions and market price developments. In order to present Income from continuing operations on a basis comparable with our underlying operating performance, we have calculated the income tax effect of items excluded from underlying EBIT based on Hydro s effective tax rate for the corresponding periods presented. We have also excluded unrealized gains and losses on all foreign denominated contracts included in our balance sheet for the periods presented. The amounts included in the table below mainly relate to forward currency contracts used to hedge net future cash flows from operations, sales contracts and working capital mainly by selling US dollars and Euro where hedge accounting is not applied. We have also excluded certain tax credits which are deemed to be non-recurring in nature. Items excluded from underlying income from continuing operations Unrealized derivative effects on LME related contracts (560) 101 (294) 131 Unrealized derivative effects on power contracts 1, Unrealized derivative effects on currency contracts 9 (5) (33) (137) Metal effect, Rolled Products (149) 235 Significant rationalization charges and closure costs Impairment charges Gains/(losses) on divestments - (5) (691) (641) Correction of elimination of profit in inventory Germany, change in tax rate - (47) - (47) Items excluded from underlying EBIT 853 1,359 (790) 1,128 Net foreign exchange (gain)/loss (854) (74) (464) (2,254) Calculated income tax effect - (359) Germany, change in tax rate - (50) - (300) Items excluded from underlying income from continuing operations (1) 876 (913) (1,143) The main developments impacting items excluded from underlying EBIT for the first of reflect a significant upward shift in LME forward prices resulting in substantial unrealized gains on LME derivatives relating to operational hedges Hydro enters into future contracts with the LME, mainly to hedge our smelter production and physical inventories of aluminium metal. While these contracts result in short LME positions that mature over the next several months, the operational hedging is designed to secure that we realize an average LME aluminium price over time, independent of when our customers place orders and fix the price of future metal deliveries. As customers place orders, and prices are fixed, corresponding LME positions are bought back. Unrealized gains and losses from market valuation of these contracts are included in reported EBIT for each period since hedge accounting is not applied. These unrealized effects are excluded from underlying EBIT. In market situations where forward prices are, or could become, lower than spot prices (backwardation) these operational hedges expose us to potential losses as short positions mature and are replaced with new forward contracts. As a result, we have risk mitigation strategies in place that result in unrealized and realized gains and losses. Beginning with the current we have determined that netting these realized and unreal-