Hydro Annual Report 2011b

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48 BusIness DesCrIptIon Regulation and taxation lead to the suspension of aluminium tariffs with such third countries. Chemicals legislation – REACH The European Union Regulation (EC) No. 1907/2006 concerning the Registration, Evaluation, Authorization and Restriction of Chemicals (known as “REACH”) was adopted in late 2006 and entered into force in the EU on June 1, 2007. Aluminium is covered by this regulation and the regulation has also been applicable in Norway since June 2008 through the EEA agreement. The main aim of REACH is to protect European citizens and the environment from exposure to hazardous chemicals. This will be achieved by requiring producers and importers of chemicals to register them formally and to evaluate their health and safety impacts. In some cases, REACH may require producers and importers to replace hazardous chemicals with those of less concern. The registration of chemicals will be a lengthy process over a number of years, and will be prioritized by volumes produced. Hydro is on track to implement REACH, having successfully completed the first stage in the legal process, i.e. the full registration of substances produced and/or imported above 1,000 metric tons/year by the legal deadline of November 30, 2010. The next step in the implementation of REACH is the registration of substances produced and/or imported in volumes above 100 metric tons/year by June 1, 2013. Energy – regulation and taxation The Norwegian regulatory system for hydropower production The ownership and utilization of Norwegian waterfalls for i.e. hydropower production, other than small-scale power production, requires a concession from the Ministry of Oil and Energy. According to new legislation passed in 2008, new concessions may no longer be granted to private entities such as Hydro. Moreover, private entities may not acquire nor own more than one-third of the shares in companies that own hydropower plants. Our waterfall rights and hydropower plants in Norway were acquired and developed under previous legislation that allowed for private ownership. Approximately one-third of our normal annual production in Norway – about 3 TWh per year – was acquired before concession laws were enacted and does not contain any compulsory reversion to the Norwegian state. About two-thirds of our normal annual production, or 6 TWh per year, are subject to concessions granted at the time the waterfall rights were acquired. Such power plants operate under concession terms of Norwegian state reversion, with individual concessions expiring in two main parts around 2022 and 2050. Hydro’s power plants at Røldal-Suldal, with a normal annual production of 2.8 TWh, will be the first significant production facilities to revert to the Norwegian state towards the end of 2022. Reversion to the Norwegian state can be avoided if the power plants, or two-thirds or more of the shares of the entity that owns the power plants, are sold to a public entity prior to reversion. Under the new legislation, private entities like Hydro may be granted a concession to lease a waterfall for up to 15 years. Taxation of hydropower production in Norway Profits from Hydro’s hydropower production in Norway are subject to ordinary income tax, currently 28 percent. Revenue for ordinary income tax purposes is based on realized prices. Dams, tunnels and power stations are, for tax purposes, depreciated on a linear basis over 67 years, and machinery and generators over 40 years. However, such fixed assets are depreciated over the concession period if that is shorter. Transmission and other electrical equipment are depreciated at a 5 percent declining balance. A natural resource tax of NOK 13 per MWh is currently levied on water-generated electricity. The tax is fully deductible from the ordinary income tax. In addition, a special resource rent tax, currently at 30 percent, is imposed on hydropower production in Norway. Unlike the ordinary income tax, financial costs are not deductible against the basis for the resource rent tax. Uplift is a special deduction in the net income, computed as a percentage of the average tax basis of fixed assets (including intangible assets and goodwill) for the income year. The percentage, which is determined annually by the Ministry of finance, essentially provides for a certain return on fixed assets above which income becomes subject to the resource rent tax. The percentage used to calculate the uplift for 2011 was 2.1 percent. Revenue for resource rent tax is, with certain exceptions, calculated based on the plant’s hourly production, multiplied by the area spot price in the corresponding hour. However, revenues from sales under certain long-term contracts are valued at contract price, and power supplied to Hydro’s own industrial production facilities is valued at the price in the so-called “Statkraft’s 1976 contracts” for tax purposes, which for 2011, was 246.46 NOK/MWh. As most of Hydro’s hydropower production is used for our own industrial production or sold under qualifying contracts, only a minor portion of our production has been subject to spot-price taxation. other information As a public limited company organized under Norwegian law, Hydro is subject to the provisions of the Norwegian Public Limited Companies Act. Our principal executive offices are located at Drammensveien 260, vækerø, N-0240 Oslo, Norway; telephone number: +47 2253 8100. Hydro’s internet site is www.hydro.com
Direct greenhouse gas emissions from Hydro’s consolidated activities Million metric tons CO2e 10 8 6 4 2 0 CO2 2007 PFC 2008 2009 Figures include historical emissions from current operations. 2010 2011 vIABIlItY perForMAnCe Edit... Index 49 02: Viability performance viability – The Hydro Way p.50 Energy and climate change p.50 Resource management p.53 Integrity and human rights p.56 Community impact p.59 Organization and work environment p.62 Innovation p.67 About the reporting p.70 Auditor’s report p.72 facts and figures p.74 GRI index p.80 UN Global Compact Communication on Progress p.80 QuICK overvIew Hydro’s mission is to create a more viable society by developing natural resources and products in innovative and efficient ways. In our terms, pursuing viability comprises a specific way of bridging viability and business, and a set of performance areas where we measure our progress. We have an integrated approach to our reporting, and our Viability performance should be seen in context with the other parts of Hydro’s Annual Report 2011. Here we first describe The Hydro Way, a set of guiding principles that govern our activities and underpin our approach to viability. Next, we report on our viability performance in 2011 according to a set of areas that capture our most important viability issues while corresponding to generally acknowledged domains of reporting.
Page 1 and 2: Annual Report - 2011
Page 3 and 4: Annual Report - 2011 HyDRO’S REPO
Page 5 and 6: Aluminium market price weakens LME
Page 7 and 8: cost renewable energy production, w
Page 9 and 10: Corporate Management Board AnnuAl r
Page 11 and 12: • Secure stable production and fi
Page 13 and 14: Key financial information NOK milli
Page 15 and 16: for foundry alloys continued to be
Page 17 and 18: • Using viable energy sources •
Page 19 and 20: Share of non-Norwegian leaders Perc
Page 21 and 22: Capital employed - - upstream focus
Page 23 and 24: petitive supply of standard alumini
Page 25 and 26: Further improved bauxite and alumin
Page 27 and 28: Alumina production Million mt 7 6 5
Page 29 and 30: and Hydro - but both have also rest
Page 31 and 32: Operations Hydro’s primary alumin
Page 33 and 34: Plant Country Employees (per Dec. 3
Page 35 and 36: Active risk management We have deve
Page 37 and 38: Contribution margin to profit EUR p
Page 39 and 40: Flat rolled products consumption We
Page 41 and 42: Build on the high performance of ou
Page 43 and 44: European extrusion consumption (tot
Page 45 and 46: Operations Hydro is a global energy
Page 47: expected remediation costs relating
Page 51 and 52: The Qatalum aluminium plant, in whi
Page 53 and 54: postponed in 2011 due to the market
Page 55 and 56: Water management Enough clean water
Page 57 and 58: The annual business planning proces
Page 59 and 60: Total payments (taxes, fees, etc.)
Page 61 and 62: Qatalum, where Hydro holds a 50 per
Page 63 and 64: Effective organization Hydro had 22
Page 65 and 66: Cooperating for safety at Slovalco
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Page 69 and 70: In 2011, we established an electron
Page 71 and 72: sold or demerged during the year ha
Page 73 and 74: vIABIlItY perForMAnCe Auditor’s R
Page 75 and 76: Current income tax tax vIABIlItY pe
Page 77 and 78: Environment Greenhouse gases gases
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Page 81 and 82: 81 FInAnCIAl AnD operAtInG perForMA
Page 83 and 84: FINANCIAL AND OPERATING PERFORMANCE
Page 85 and 86: Market developments and outlook Mar
Page 93 and 94: Items excluded from underlying EBIT
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Page 97 and 98: Financial income (expense), net Yea
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Primary Metal Operational and finan
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Liquidity and capital resources The
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FINANCIAL AND OPERATING PERFORMANCE
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3) Including provisions for pension
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108 RISK REVIEW Risk factors Risk f
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110 RISK REVIEW Risk factors or var
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112 RISK REVIEW Risk factors leadin
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Share price development in 2011 Sha
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Major shareholders and voting right
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Key figures for the Hydro share Key
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Tittel Hydro present Based in Norwa
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Corporate directives and code of co
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Pre-approval of audit services The
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Billy Fredagsvik, employee represen
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Hans-Joachim Kock Key experience: H
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Description Developments and events
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Topic Comments References Transacti
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Topic Comments References 8 Corpora
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Topic Comments References 13 Inform
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F2 FINANCIAL STATEMENTS Consolidate
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F8 FINANCIAL STATEMENTS Note 1 - Si
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F10 FINANCIAL STATEMENTS Note 1 - S
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F16 FINANCIAL STATEMENTS Note 3 - B
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F20 FINANCIAL STATEMENTS Note 5 - A
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F28 FINANCIAL STATEMENTS Note 9 - R
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F30 FINANCIAL STATEMENTS Note 10 Bo
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F32 FINANCIAL STATEMENTS Note 11 -
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F56 Financial assets, classified as
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F64 FINANCIAL STATEMENTS Financial
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F66 FINANCIAL STATEMENTS Financial
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F70 FINANCIAL STATEMENTS Note 2 - E
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F72 FINANCIAL STATEMENTS Note 4 - P
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F74 FINANCIAL STATEMENTS Note 9 - R
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F76 FINANCIAL STATEMENTS Responsibi
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F78 FINANCIAL STATEMENTS Auditor's
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PENDIX A2 Appendix A1 APPENDIX Term
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Hydro is a global supplier of alumi
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Hydro Annual Report 2011b

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