• NOK 588 million underlying LAJIR
  
  
• Decline of upstream results in realized aluminum prices, partially offset by the insurance payment by Qatalum
  
  
• Weaker downstream and midstream results due to higher costs and lower seasonal sales, margin remains stable
  
  
• Better results in the energy sector due to high prices and high production
  
  
• Expectation of a 7% increase in demand for primary aluminum in Hydro's main markets in 2011
  
  
• Expectation that the Qatalum aluminum unit will reach total production capacity as of June 2011
  
  
• Completion of the deal with Vale will probably occur in the first quarter of 2011
  
  
• Proposed dividend of NOK 0.75 per share for 2010

“2010 was a year of great changes for Hydro and these transformations will be noticed in 2011. I hope that Qatalum's production will reach full capacity from June 2011 and I hope that the planned acquisition of the Vale's aluminum business is completed in the first quarter, consolidating this audacious move, ”says President and CEO, Sven Richard Brandtzæg.

“Currently, the price of aluminum & nbsp; is at a comfortable level. We note that demand was growing throughout 2010 and that it continues to grow in 2011, in addition to the fact that an important part of our downstream business already has solid orders for the first half of 2011. However, the results for the fourth quarter confirm the need to focus on improving costs, says Brandtzæg.

The underlying results of Primary Metals decreased during the fourth quarter, mainly due to the lower realized aluminum prices, although partially offset by the insurance payment for the August 2010 power outage at Qatalum, & nbsp; joint venture between Qatar Petroleum and Hydro. The underlying results of Alumina and Raw Materials have remained stable, thanks to the profitability of commercial alumina activities.

Qatalum's negative operating results increased in the fourth quarter, as expected and production restarted only in September. At the end of the fourth quarter, 321 of the 704 cells were operating at full capacity. The final start of total production capacity was delayed by the delay in starting the plant's steam turbines. Qatalum is expected to reach full production capacity as of June 2011.

Hydro's downstream and midstream operations resulted in lower underlying EBITDA compared to the third quarter, especially because of higher operating costs, including costs for planned maintenance activities and lower seasonal sales volume. The margins remained stable. The underlying LAJIR for Energy grew substantially compared to the previous quarter, due to higher spot prices and significantly higher production levels.

For the year 2010 as a whole, Hydro achieved an underlying LAJIR of NOK 3.351 million, compared to the underlying losses of NOK 2.555 million in 2009. This marked improvement is due to the market recovery, which raised prices and increased demand, and reducing costs and personnel. Sales volume in the market increased by 17%, compared to the 18% drop in the previous year, which partially reflects the increase in inventories by customers. Excess supply in the market decreased, but inventories continued to record levels.

The underlying results improved enormously for the upstream businesses during 2010, basically due to the higher realized aluminum prices and better performance in the existing activities in the area of alumina and raw materials. The focus was kept on reducing operating costs in Hydro's foundry portfolio. At the end of 2010, a cost improvement of USD 50 was reached & nbsp; per ton of the USD 300 per ton that the cost improvement program aims to achieve in full by the end of 2013.

The underlying LAJIR for the midstream businesses was strongly influenced by the negative effects of the exchange rate in 2009. The underlying results & nbsp; downstream activities were much higher as a result of sales volume almost reaching the same levels as before the financial crisis. Continued focus on cost reduction measures and stable operating margins have given good results along with the positive development of the market and the fact that the operations of rolled products have achieved record results for the year. & Nbsp; The underlying LAJIR for the energy business improved in 2010, given the high spot price and higher production.

Net operating activities amounted to NOK 3.6 billion in the fourth quarter and investments totaled NOK 1.6 billion in the period, including about NOK 0.6 billion invested in Qatalum. At the end of the fourth quarter, Hydro's liquidity was NOK 11 billion.

Hydro's Board of Directors suggests that the 2010 dividend should be NOK 0.75 per share, reflecting the company's goal of providing its shareholders with a cash return. The decision is based on greater profitability and good market prospects, as well as Hydro's solid financial position and its ability to generate money.

More in English: & nbsp;

Key financial information
NOK million, except per share data	Fourth quarter 2010	Third quarter 2010	% change prior quarter	Fourth quarter 2009	% change prior year quarter	Year 2010	Year 2009
& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;
Revenue	19,406	18,424	5%	16,427	18%	75,754	67,409
& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;
Earnings before financial items and tax (EBIT)	768	274	& gt; 100%	(938)	& gt; 100%	3,184	(1.407)
Items excluded from underlying EBIT 1)	(180)	690	& nbsp;	287	& nbsp;	167	(1,148)
Underlying EBIT	588	965	(39)%	(651)	& gt; 100%	3,351	(2,555)
& nbsp;
Underlying EBIT:
Primary Metal	191	399	(52)%	(717)	& gt; 100%	1,198	(2,556)
Metal Markets	62	163	(62)%	(20)	& gt; 100%	321	(83)
Rolled Products	105	227	(54)%	57	84%	864	26
Extruded Products	24	102	(77)%	68	(65)%	444	(67)
Energy	482	169	& gt; 100%	295	63%	1,416	1,240
Other and eliminations	(277)	(95)	& gt; (100)%	(334)	17%	(893)	(1,114)
Underlying EBIT	588	965	(39)%	(651)	& gt; 100%	3,351	(2,555)
& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;
Net income (loss)	658	(63)	& gt; 100%	(587)	& gt; 100%	2,118	416
& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;
Underlying net income (loss)	376	545	(31)%	(791)	& gt; 100%	1,852	(3,066)
& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;
Earnings per share	0.39	(0.07)	& gt; 100%	(0.45)	& gt; 100%	1.33	0.24
& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;
Underlying earnings per share	0.21	0.33	(35)%	(0.61)	& gt; 100%	1.14	(2.5)
& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;
Financial data:
Investments	1,613	1,591	1%	2,371	(32)%	6,231	5,947
Adjusted net interest-bearing debt	(6,427)	(8,280)	22%	(15,645)	59%	(6,427)	(15, 645)
& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;
Key operational information
Primary aluminum production (kmt)	360	355	2%	332	8%	1,415	1,396
Realized aluminum price LME (USD / mt)	2,074	2,179	(5)%	1,804	15%	2,113	1,698
Realized aluminum price LME (NOK / mt)	12,436	13,503	(8)%	10,452	19%	12,674	10,764
Realized NOK / USD exchange rate	6.00	6.20	(3)%	5.80	3%	6.00	6.34
Metal Markets sales volumes to external market (kmt)	417	429	(3)%	375	11%	1,717	1,468
Rolled Products sales volumes to external market (kmt)	234	239	(2)%	211	11%	945	794
Extruded Products sales volumes to external market (kmt)	127	134	(5)%	119	6%	529	463
Power production (GWh)	2,263	1,479	53%	1,929	17%	8,144	7,897

& nbsp;

See "Fourth quarter report 2010" for footnotes.

About Hydro's reporting

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) and net income. See "Items excluded from underlying EBIT and net income" for more information on these items.

Reported EBIT and net income

Reported EBIT for Hydro amounted to NOK 768 million in the fourth quarter including net positive effects of NOK 180 million. These effects were comprised of net unrealized derivative gains of NOK 132 million, positive metal effects of NOK 92 million, insurance proceeds of NOK 90 million relating to the Qatalum power outage and other net negative effects of NOK 134 million including rationalization and closure costs. < br /> & nbsp;
In the previous quarter, reported EBIT for Hydro amounted to NOK 274 million including net negative effects of NOK 690 million. These effects were comprised of net unrealized derivative losses of NOK 524 million, negative metal effects of NOK 52 million and impairment charges relating to Qatalum amounting to NOK 114 million.
& nbsp;
Net income for the fourth quarter amounted to NOK 658 million including net foreign exchange gains of NOK 232 million. In the third quarter Hydro incurred a net loss amounting to NOK 63 million including net foreign exchange losses of NOK 246 million.

Market developments and outlook

Upstream

LME prices continued to increase in the fourth quarter. Average three month prices started the quarter at a level of around USD 2,370 per mt and ended around USD 2,470 per mt. Market volatility continued with prices fluctuating within the range of USD 2,250 - 2,500 per mt in the quarter.
& nbsp;
Global demand for primary aluminum excluding China increased 4 percent in the fourth quarter compared to the third quarter partly due to customer restocking. Annualized consumption and production amounted to 25.3 million mt and 25.7 million mt respectively. Primary aluminum consumption outside China grew 19 percent from 2009. We expect corresponding growth of about 7 percent in 2011 and somewhat slower growth in 2012. The market is expected to be within a manageable surplus in 2011.
& nbsp;
Production in China declined in the fourth quarter by around 10 percent compared to the previous quarter, assumed to be due to the need to meet energy saving targets. Total production amounted to about 17 million mt for 2010. Demand increased by around 2 percent in the fourth quarter resulting in a decline in inventories.
& nbsp;
LME stocks were relatively stable around 4.3 million mt during the quarter . Global inventories days have been falling as a result of improved demand.
& nbsp;
Demand for metal products, in particular extrusion ingot and sheet ingot was strong and unchanged from the previous quarter. Demand for primary foundry alloys improved in Northern Europe, in particular in Germany and was also stronger in export markets in Asia.

Rolled products

Consumption in the European rolled products market was seasonally lower in the fourth quarter compared with the previous quarter. Demand increased around 17 percent in 2010 compared to 2009, but remained below the peak achieved in 2007. We expect a healthy demand to continue into the first half of 2011.

Extruded products

European demand for extruded aluminum products improved significantly compared to fourth quarter of the previous year, but remained weak within the building and construction sector. In North America demand was seasonally lower compared with the third quarter of 2010, and also lower than the fourth quarter of 2009. Developments in South America continued to be positive, especially in Brazil. Demand for precision tubing remains strong. Overall demand in the European and US extrusion markets is expected to continue to grow into the seasonally stronger first quarter of 2011. Recovery in the building and construction segment is expected to remain slow.

Energy

Nordic electricity spot prices increased during the fourth quarter in parallel with deteriorating hydrological conditions. Water reservoir levels in Norway declined to about 45 percent of full capacity by the end of 2010. Snow accumulation levels were 50 percent below normal. Colder weather beginning in the middle of November lifted spot prices further due to very high demand. Prices declined in January due to milder weather and more stable nuclear output, but reservoir levels remain at historically low levels. Prices are expected to remain fairly high throughout the first quarter of 2011.

Additional factors impacting Hydro

Hydro has sold forward substantially all of its primary aluminum production for the first quarter at a price level of around USD 2,325 per mt, excluding expected Qatalum production.
& nbsp;
Qatalum is expected to produce roughly 500,000 mt of primary metal in 2011
& nbsp;
Hydro's water and snow reservoirs were lower than normal at the end of January and also lower than the corresponding period in 2009. Due to the high spot price levels, Hydro's power production during the first quarter of 2011 is expected to be at the same level as for fourth quarter 2010.

Primary Metal

Underlying results for Primary Metal declined during the quarter compared to the third quarter mainly due to lower realized aluminum prices partly offset by insurance proceeds relating to the power outage at Qatalum in the previous quarter.
& nbsp;
Alumina and raw materials underlying results improved slightly in the quarter compared with the third quarter. For Alunorte, positive effects of higher realized alumina prices were partly offset by lower sales, higher bauxite, caustic costs and other operating costs. Underlying earnings for our alumina commercial activities were somewhat higher than the previous quarter driven by higher volumes and good margins on third party sales contracts.
& nbsp;
Lower realized aluminum prices had a negative effect on underlying results for Primary aluminum amounting to about NOK 350 million in the quarter. Our cost improvement program continued according to plan, however, fourth quarter operating costs were somewhat higher than in the third quarter due to seasonal effects.
& nbsp;
Operating losses for Qatalum increased in the fourth quarter due to higher depreciation charges and higher fixed costs including costs relating to restart of the ramp up at the plant. Insurance proceeds amounting to NOK 300 million were recorded in the fourth quarter of which NOK 210 million was included in underlying EBIT. Ramp-up of the plant restarted in the middle of September and at the end of the fourth quarter 321 out of 704 cells were fully operational. Final ramp-up to full production capacity will be hampered by delayed commissioning of the power plant steam turbines. It is expected that the plant will reach full output from June 2011.

Metal Markets

Underlying EBIT for Metal Markets declined in the fourth quarter. Currency and ingot inventory valuation effects were relatively neutral in the fourth quarter compared with substantial net positive effects in the previous quarter.
& nbsp;
Excluding currency and ingot inventory valuation effects, underlying EBIT for Metal Markets also declined in the quarter. Our remelt operations delivered lower underlying results during the quarter mainly due to planned maintenance activities. Lower sales volumes for resale of third party products also had a negative impact on underlying results for the quarter. Underlying results for our metal sourcing and trading activities continued to be firm.
& nbsp;
Total metal product sales excluding ingot trading was slightly lower mainly due to seasonally lower shipments of extrusion ingots in all markets.

Rolled Products

Underlying EBIT for Rolled Products declined compared to the third quarter of 2010 due to higher operating costs, including costs for planned maintenance activities, and somewhat lower sales volume.
& nbsp;
Volume developments varied between our different business sectors. Lithography shipments increased together with a good production performance. General engineering sales were stable while automotive, heat exchanger sales were slightly higher supported by continued firm demand. Volumes for our thin gauge foil, beverage can and other packaging and building products declined mainly due to seasonal maintenance and other capacity constraints. Margins remained firm.

Extruded Products

Underlying EBIT for Extruded Products declined compared with the third quarter of 2010 mainly due to higher operating costs and seasonally lower volumes. The cost increases were due to planned maintenance activities and charges for ongoing improvement programs mainly related to rationalization initiatives, the implementation of a new IT system and increased marketing efforts. In the previous quarter, operating costs were positively impacted by seasonally lower employee related costs. Margins were firm for most business sectors in the fourth quarter.
& nbsp;
Volumes for our European, North American and South American extrusion operations were all seasonally lower in the fourth quarter. Recovery in the building systems markets continued to lag the general extrusion market, in particular in southern Europe, where demand fell in the fourth quarter due to reduced public spending and increased uncertainty concerning economic developments. As a result, we have initiated further rationalization programs to improve the results of this business.

Energy

Underlying EBIT for Energy increased substantially compared to the previous quarter due to higher spot prices and significantly higher production. Cold winter weather, marginal precipitation and outages of nuclear power in Sweden resulted in high spot prices during the period.

Other and eliminations

Underlying EBIT for Other and eliminations amounted to a charge of NOK 277 million for the fourth quarter compared with a charge of NOK 95 million in the previous quarter and a charge of NOK 334 million in the fourth quarter of 2009. Eliminations included in underlying EBIT amounted to a charge of NOK 12 million in the fourth quarter compared with an income of NOK 39 million in the previous quarter and a charge of NOK 108 million in the fourth quarter of 2009.
& nbsp;
Underlying results for the fourth quarter included increased costs for integration planning and other transaction costs relating to the Vale aluminum acquisition, as well as year-end adjustments for employee and pension costs.

Items excluded from underlying EBIT and net income

To provide a better understanding of Hydro's underlying performance, the items in the table below have been excluded from EBIT and net income.
& nbsp;
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.
& nbsp;
Linked to the agreement to acquire the majority of Vale's aluminum businesses in Brazil (Vale Aluminum) it was decided to hedge the majority of the net aluminum price exposure in Vale Aluminum until the end of 2011. The hedges are aimed at mitigating the risk of a weaker aluminum price and will secure a robust cash flow from the acquired assets in the transition phase. The hedges are not conditional upon completion of the transaction. The significant part of the positions expiring after closing of the transaction are subject to hedge accounting and included in other comprehensive income. Recognized unrealized and realized effects of positions not subject to hedge accounting are classified as items excluded from underlying EBIT.

Items excluded from underlying net income
NOK million	Fourth quarter 2010	Third quarter 2010	Fourth quarter 2009	Year 2010	Year 2009
& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;	& nbsp;
Unrealized derivative effects on LME related contracts	(162)	515	(728)	489	(2,630)
Derivative effects on LME related contracts (Vale Aluminum)	55	99	-	(166)	-
Unrealized derivative effects on power contracts	151	(25)	318	609	(198)
Unrealized derivative effects on currency contracts	(20)	(65)	(19)	(50)	(345)
Unrealized derivative effects on raw material contracts	(156)	-	-	(156)	-
Metal effect, Rolled Products	(92)	52	(157)	(560)	588
Significant rationalization charges and closure costs	131	-	65	130	518
Impairment charges (PP & amp; E and equity accounted investments)	12	114	138	187	438
Pension	-	-	-	(151)	(52)
Insurance compensation	(91)	-	(13)	(91)	(152)
(Gains) / losses on divestments	(7)	-	684	(74)	684
Items excluded from underlying EBIT	(180)	690	287	167	(1,148)
Net foreign exchange (gain) / loss	(232)	246	(216)	(513)	(2,774)
Calculated income tax effect	129	(328)	(275)	80	441
Items excluded from underlying net income	(282)	608	(204)	(266)	(3,481)

& nbsp;

Finance

Financial income amounted to NOK 292 million in the fourth quarter compared with Financial expense of NOK 218 million in the previous quarter.
& nbsp;
Financial income was relatively unchanged in the fourth quarter compared with the previous quarter. Interest expense in fourth quarter is lower than previous quarter due to lower interest on tax claims in Germany.
& nbsp;
The net currency gain in the fourth quarter included gains amounting to NOK 274 million relating to intercompany balances denominated in Euro due to a weaker Euro against the Norwegian kroner.1) Other net currency losses amounted to NOK 42 million.

Tax

Income tax expense amounted to a charge of NOK 401 million in the fourth quarter compared with a charge of NOK 119 million in the previous quarter and a credit of NOK 183 million in the fourth quarter of 2009.
& nbsp;
For 2010 income tax expense was roughly 43 percent of pre-tax income. The tax rate for the year was influenced by the effects of power sur-tax and results from equity accounted investments which are recognized net of tax.

• See links in the right-hand column for & nbsp; web TV, web presentation,
  complete quarterly report, slides presentation and & nbsp; comments