Report of Norsk Hydro

Egil Myklebust

Chair

Borger A. Lenth

Deputy Chair

Steinar Skarstein

Elisabeth Grieg

Odd Semstrøm

Geir Nilsen

Ingvild Myhre

Håkan Mogren

Anne Cathrine Høeg Rasmussen

6-K 1 d6k.htm REPORT OF NORSK HYDRO Report of Norsk Hydro

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15a-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

December 1, 2003

Norsk Hydro ASA

(Exact name of registrant as specified in its charter)

Bygdoy Alle 2, N-0240 Oslo, Norway

(Address of Principal Executive Offices)

033-61360

(Commission File Number)

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.) Form 20-F x Form 40-F ¨

(Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.) Yes ¨ No x

Our date

2003-11-28

The Shareholders of Norsk Hydro ASA

Demerger of Norsk Hydro ASA — Extraordinary General Meeting

Hydro’s Board of Directors resolved in June 2003 to commence preparations with a view to establishing the Agri business area as a separate listed company. This resolution was passed in order to provide Agri with a better platform to pursue further value creation, leaving Hydro to concentrate its attention and financial resources on development opportunities in the Oil and Energy and Aluminium business areas.

On 28 November the Board resolved to recommend to the company’s shareholders a demerger of Hydro’s fertilizer business as described in greater detail in the enclosed Demerger Plan and the Information Memorandum.

The Board recommends that the demerger be approved at an Extraordinary General Meeting to be held on 15 January 2004, as described in the enclosed notice.

The enclosed Information Memorandum describes the transaction itself, the new company and Hydro’s two remaining business areas. The considerable scope of the document is due to the different legal requirements applicable in the countries where Hydro is listed on the stock exchange.

Kind regards,

LOGO

Egil Myklebust

Chair

Board of Directors

LOGO

Eivind Reiten

President and C.E.O

Postal Address

Norsk Hydro ASA

N-0240 Oslo

Norway

Visiting Address

Bygdøy Allé 2

Oslo

Telephone

+47 22 53 81 00

Telex

72948 hydro n

Telefax

+47 22 53 22 34

Registration No.

NO 914 778 271 MVA

Head Office Address

Bygdøy allé 2, Oslo

Norway

LOGO



		REF. NO:



EXTRAORDINARY GENERAL MEETING 2004 of Norsk Hydro ASA will be held 15 January 2004 at 5:00 p.m. at “Gamle Logen”, Grev Wedels Plass 2 in Oslo.

ATTENDANCE FORM

Must be received by DnB ASA on Monday 12 January 2004 at 4:00 p.m. at the latest. Postal address: DnB ASA, Verdipapirservice, Stranden 21, N-0021 Oslo, alternatively on telefax +47 22 48 11 71. Registration may also be made via the company’s homepage http://www.hydro.com/register (may not be used for proxies).

The undersigned will attend Norsk Hydro ASA’s Extraordinary General Meeting 2004 on Thursday 15 January 2004 and vote for:

				own shares.
				other shares in accordance with enclosed Power of Attorney.
A total of				shares.

Place/Date

Shareholder’s signature

– – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –

POWER OF ATTORNEY

REF. NO:

If you cannot personally attend the Extraordinary General Meeting, you may appoint a proxy to use this power of attorney, or you can return a blank power of attorney. In this case, the company will appoint the Chair of the Corporate Assembly or one of the members of the Board of Directors as your proxy before the Extraordinary General Meeting takes place.

This power of attorney must be received by DnB ASA on Monday 12 January 2004 at 4:00 p.m. at the latest.

Postal address: DnB ASA, Verdipapirservice, Stranden 21, N-0021 Oslo, alternatively on telefax +47 22 48 11 71.

The undersigned hereby appoints

(Name in block letters)

as my proxy with the authority to attend and vote at Norsk Hydro ASA’s Extraordinary General Meeting 2004 on Thursday 15 January 2004 for my/our ............. shares.

Place/Date

Shareholder’s signature

With regard to rights of attendance and voting we refer you to The Norwegian Public Limited Companies Act, in particular Chapter 5. A written power of attorney dated and signed by the beneficial owner giving such proxy must be presented at the meeting.

To the Shareholders of Norsk Hydro ASA (“Hydro”)

Notice of Extraordinary General Meeting

Notice is hereby given that an Extraordinary General Meeting of Norsk Hydro ASA will be held at “Gamle Logen”, Grev Wedels Plass 2, Oslo on

Thursday 15 January 2004 at 17.00 hours.

The following matters will be dealt with:

1.	Capital reduction by means of the cancellation of treasury shares and the redemption of shares, belonging to the Norwegian state, held by the Ministry of Trade and Industry

The proposed demerger will take place on the basis of the share capital in the company following the cancellation and redemption of the shares that were intended to be cancelled and redeemed when the General Meeting on 7 May 2003 authorised the Board of Directors to re-purchase treasury shares. The Norwegian state has made a commitment to participate in the capital reduction on a proportional basis, when the company’s treasury shares are cancelled, so that the state’s ownership interest of 43.82 percent will remain unchanged. In this respect, the Board of Directors proposes that the General Meeting passes the following resolution:

“The company’s share capital shall be reduced by NOK 52,844,440 from NOK 5,331,933,000 to NOK 5,279,088,560, following the cancellation of 1,484,300 treasury shares and the redemption of 1,157,922 shares owned by the state represented by the Ministry of Trade and Industry against payment of a sum of NOK 444,958,166 to the state, represented by the Ministry of Trade and Industry. The amount is equivalent to the average market price for the re-purchase of treasury shares plus supplementary interest compensation. That portion of the sum exceeding the nominal value of the shares shall be covered by a transfer from the share premium fund and by the share premium fund being reduced by NOK 421,799,726.”

With effect from the date when the share capital reduction comes into force through registration at the Register of Companies, Article 4 of the Articles of Association will be amended to read:

“The share capital is NOK 5,279,088,560 divided into 263,954,428 shares, each with a nominal value of NOK 20. The shares shall be registered in the Norwegian Registry of Securities. The Board of Directors may refuse to consent to the transport of shares and take such other steps as may be necessary to prevent shares from being transferred if in contravention of the restrictions, if any, provided by applicable Norwegian law.”

2.	The demerger of Norsk Hydro ASA

The Board of Directors proposes that Hydro’s business area Agri be established as a separate listed company to provide a better platform for further development and value creation. The Board proposes that this is implemented by means of a demerger in which Hydro’s business area Agri is demerged to AgriHold ASA (“AgriHold”). AgriHold has been established in connection with the demerger and will be 100 percent owned by Hydro until the demerger is consummated. In this respect, the Board of Directors proposes that the General Meeting passes the following resolution:

“The Demerger Plan dated 28 November 2003 is approved.”

The proposed share capital reduction in connection with the demerger, as well as the corresponding proposal for the amendment to the Articles of Association are included in the Demerger Plan that forms Exhibit 1 in the enclosed Information Memorandum dated 28 November 2003. For a more detailed description of the demerger, please refer to the Demerger Plan and the Information Memorandum. Adoption of the Demerger Plan means that share capital in Norsk Hydro ASA, which will following the resolution in section 1 of this notice stand at NOK 5,279,088,560, be further reduced by NOK 448,722,527.60 to NOK 4,830,366,032.40. The number of shares will remain unchanged.

3.	Procedure regarding the election of new shareholders’ representatives to the Board of AgriHold ASA

The Board of AgriHold currently consists of members of Hydro’s Board of Directors. It is proposed that the current Board of AgriHold be replaced by a new Board on the date when the demerger is registered and comes in to force. AgriHold shall not have a Corporate Assembly and, following the demerger, the AgriHold Board shall consist of eight members of whom five shall be chosen by the shareholders and three by and among the employees.

Hydro’s Board proposes that selection is effected by Hydro’s General Meeting nominating five persons. Hydro, as sole AgriHold shareholder until the demerger is consummated, is instructed to select these persons to be shareholders’ representatives at an extraordinary general meeting in AgriHold immediately after Hydro’s Extraordinary General Meeting has been held.

Hydro’s Election Committee will before the date of the General Meeting submit a proposal for new shareholders’ representatives on the Board of AgriHold.

The election of the employee representatives on the new AgriHold Board is anticipated to be completed prior to consummation of the demerger. For a more detailed description of the electoral process, please refer to the Information Memorandum p. 37

4.	Procedure regarding the election of members to the election committee of AgriHold ASA

According to AgriHold’s Articles of Association, the company shall have an election committee consisting of four members chosen by the General Meeting.

Hydro’s Board of Directors proposes that selection is effected by Hydro’s General Meeting nominating four persons. Hydro, as sole AgriHold shareholder until the demerger is consummated, is instructed to select these persons to be members of AgriHold’s election committee at an extraordinary general meeting in AgriHold immediately after Hydro’s Extraordinary General Meeting has been held.

Hydro’s Election Committee will before the date of the General Meeting submit a proposal regarding membership of AgriHold’s election committee. For a more detailed description of the electoral process, please refer to the Information Memorandum p. 37

5.	Procedure in connection with authorising the Board to increase the share capital of AgriHold ASA

It is proposed to establish Agri as a separate listed company to promote the best industrial development possible for the business. In order to contribute to Agri’s financial flexibility, as well as to enable AgriHold’s Board of Directors to establish share-based compensation systems, it is proposed that Hydro’s General Meeting instructs Hydro, as sole AgriHold shareholder until the demerger is consummated, to approve the granting of authority to AgriHold’s Board to increase AgriHold’s share capital by issuing up to 15 million new shares. The authority is in force from the date on which the demerger is consummated until two years after the date on which Hydro, as AgriHold sole shareholder, approved the granting of such authority to the Board of AgriHold.

********

Those of the company’s shareholders who are registered in the Norwegian Register of Securities (VPS) are entitled to meet and cast their vote at the General Meeting. Named shareholders wishing to attend are requested to send notification of this on the enclosed form as soon as possible, and by 16.00 hrs. on 12 January 2004 at the latest, to:

Den norske Bank ASA,

Verdipapirservice,

Stranden 21,

0021 Oslo

Telephone: +4722483584

Telefax: +4722481171

Notification of attendance can also be transmitted electronically from the company’s web site www.hydro.no/register or electronically via “Investortjenester”.

In accordance with Article 10 of the company’s Articles of Association, the General Meeting will be chaired by the Corporate Assembly’s chairperson, or his deputy in the case of absence.

Each shareholder can attend by proxy if he or she provides written authorisation. Admission cards for the General Meeting will not be distributed.

The Demerger Plan dated 28 November 2003 and the company’s most recent annual accounts, annual report and auditor’s report have been included in the Information Memorandum dated 28 November 2003 enclosed with this notice. These documents are also available at the company’s offices in Oslo.

Oslo, 28 November 2003

THE BOARD OF DIRECTORS

DEMERGER INFORMATION MEMORANDUM

In connection with the demerger of

NORSK HYDRO ASA

LOGO

In reviewing this Information Memorandum, you should carefully consider the matters described under the caption “Risk Factors” beginning on page 14.

***

This Information Memorandum does not constitute an offer to sell or the solicitation of an offer to buy any securities.

***

This Information Memorandum is being distributed to all registered holders of Norsk Hydro ASA’s shares as of November 28, 2003, using the addresses held on file by VPS. Further copies of the Information Memorandum and documents referred to in the Information Memorandum are available from the Financial Advisors and Norsk Hydro ASA.

November 28, 2003

Financial Advisors

LOGO

TABLE OF CONTENTS

	NOTICES TO HOLDERS OF SHARES AND AMERICAN DEPOSITARY SHARES OF NORSK HYDRO ASA	(ii	)
	GLOSSARY OF TERMS	(iv	)
	EXCHANGE RATE INFORMATION	(x	)
	CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS	(xi	)
	STATEMENT OF THE BOARD OF DIRECTORS OF NORSK HYDRO ASA	(xii	)
	STATEMENT OF NORWEGIAN LEGAL COUNSEL TO NORSK HYDRO ASA	(xiii	)
	STATEMENT OF FINANCIAL ADVISORS TO NORSK HYDRO ASA	(xiii	)
	STATEMENT OF NORWEGIAN LEGAL COUNSEL TO FINANCIAL ADVISORS	(xiii	)

PART I SUMMARY; PRESENTATION OF FINANCIAL INFORMATION; RISK FACTORS		1
	SUMMARY	1
	PRESENTATION OF FINANCIAL INFORMATION	7
	RISK FACTORS	14

PART II THE DEMERGER		28

PART III HYDRO AGRI		49
	PLANT NUTRIENT FUNDAMENTALS	49
	OVERVIEW OF THE MINERAL FERTILIZER INDUSTRY	53
	HYDRO AGRI’S BUSINESS	61
	SELECTED COMBINED FINANCIAL DATA	86
	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	88
	MANAGEMENT OF AGRIHOLD FOLLOWING THE DEMERGER	119
	DESCRIPTION OF THE SHARES AND SHARE CAPITAL OF AGRIHOLD FOLLOWING THE DEMERGER	123
	TAXATION	129
	DIVIDENDS AND DIVIDEND POLICY	136

PART IV HYDRO		137
	HISTORICAL INFORMATION	137
	OIL AND ENERGY	139
	HYDRO ALUMINIUM	161
	OTHER ACTIVITIES	178
	SELECTED CONSOLIDATED FINANCIAL DATA	182
	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	184
	MANAGEMENT OF HYDRO FOLLOWING THE DEMERGER	201
	DESCRIPTION OF THE SHARES AND SHARE CAPITAL OF HYDRO FOLLOWING THE DEMERGER	209
	DIVIDENDS AND DIVIDEND POLICY	212

PART V FINANCIAL STATEMENTS		213

EXHIBITS		E1-1

	EXHIBIT 1: THE DEMERGER PLAN	E1-1
	EXHIBIT 2: APPENDIXES TO THE DEMERGER PLAN	E2-1
	EXHIBIT 3: FINANCIAL INFORMATION	E3-1

(i)

NOTICES TO HOLDERS OF SHARES

AND

AMERICAN DEPOSITARY SHARES (“ADSs”) REPRESENTING SUCH SHARES

NORSK HYDRO ASA

Notice to Holders of Hydro Shares and ADSs in the United States:

The AgriHold ASA (“AgriHold”) Shares to be distributed to you in connection with the Demerger will not be registered under the United States Securities Act of 1933, as amended (the “Securities Act”) and will be distributed to you in reliance on the position taken by the Division of Corporation Finance of the United States Securities and Exchange Commission (the “SEC”), set forth in Staff Legal Bulletin No. 4, issued on September 16, 1997, that the shares do not require registration under the Securities Act if, as is the case with respect to the Demerger, certain conditions specified in SLB No. 4 are satisfied.

AgriHold intends to apply for an exemption from the filing requirements of Section 12(g) of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), in accordance with Rule 12g3-2(b) thereunder, and AgriHold expects to be advised by the SEC that it has been added to the list of foreign private issuers that claim exemption from the registration requirements of Section 12(g) of the Exchange Act. If AgriHold is added to this list, it will furnish certain documents to the SEC in accordance with that rule. These documents will consist primarily of regularly prepared financial statements and annual reports of AgriHold which, in accordance with the rule, will be in the form prescribed by Norwegian law or practice and are not deemed to be filed with the SEC.

Since the AgriHold Shares will not initially be listed on any exchange or quoted on an inter-dealer quotation system in the United States, it is unlikely that an active trading market will develop in the United States for these shares.

Notice to Holders of Hydro Shares in Germany:

The AgriHold Shares have not been and will not be publicly offered in Germany and, accordingly, no securities sales prospectus (Verkaufsprospekt) for a public offering of the AgriHold Shares in Germany in accordance with the Securities Sales Prospectus Act (Wertpapier-Verkaufsprospektgesetz, the “Prospectus Act”) has been or will be published or circulated in the Federal Republic of Germany. Any resale of the AgriHold Shares in the Federal Republic of Germany may only be made in accordance with the provisions of the Prospectus Act and any other laws applicable in the Federal Republic of Germany governing the sale and offering of securities.

Notice to Holders of Hydro Shares in the United Kingdom:

This document is being distributed in the United Kingdom in accordance with section 67 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 only to shareholders of Hydro (“Relevant Persons”). Any person who is not a Relevant Person should not act or rely on this document or any of its contents.

This document and its contents should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other person.

Notice to Holders of Hydro Shares outside Norway:

This Information Memorandum is not directed to persons whose involvement would require additional documents or other registrations and/or commitments than those required by Norwegian legislation. Persons to whom this Information Memorandum is distributed must ensure that they comply with such restrictions.

**********************

(ii)

The delivery of this Information Memorandum shall not, under any circumstances, create any implication that there has been no change in the affairs of Norsk Hydro ASA, including its Agri business, since the date of the Information Memorandum or that the information contained in the Information Memorandum is correct as of any time subsequent to its date.

This Information Memorandum has been prepared in connection with the Demerger of Norsk Hydro ASA and the listing of the AgriHold Shares on the Oslo Stock Exchange.

This Information Memorandum has been approved as a demerger prospectus by the Oslo Stock Exchange in accordance with applicable Norwegian securities laws. An unofficial Norwegian translation of the Information Memorandum will be prepared by Norsk Hydro ASA. In the event of any discrepancies between the Norwegian-language and English-language versions of the Information Memorandum, the English-language version of the Information Memorandum shall prevail.

(iii)

GLOSSARY OF TERMS

In this Information Memorandum, the following terms have the meanings indicated below:

Term		Definition


“ADRs”		American Depositary Receipts


“ADSs”		American Depositary Shares


“Agri”		AgriHold ASA and its consolidated subsidiaries


“AgriHold’s Board of Directors”		The Board of Directors of AgriHold ASA


“Agri Company”		AgriHold or any of its consolidated subsidiaries following consummation of the Demerger


“AgriHold”		AgriHold ASA


“AgriHold ADR”		AgriHold’s ADRs, each evidencing an AgriHold ADS, each AgriHold ASA ADS representing one AgriHold Share


“AgriHold ADR Depositary”		The ADR depositary under the level I ADR facility to be established by AgriHold in connection with the Demerger


“AgriHold Group”		AgriHold ASA and its consolidated subsidiaries following the Demerger


“AgriHold Share”		One share in AgriHold


“AN”		Ammonium nitrate (AN) – a nitrogen fertilizer produced by reacting nitric acid, an intermediate chemical feedstock produced from ammonia, with ammonia (contains around 34% nitrogen)


“Announcement Date”		June 19, 2003, the day on which the intended separation of Hydro Agri was announced


“AS”		Ammonium sulphate – a fertilizer containing nitrogen (21%) and sulphur (24%)


“ATS”		Hydro Agri’s Ammonia Trade and Shipping unit


“Automotive”		The Automotive sector of Hydro Aluminium which comprises precision tubing, structures and shape casting businesses worldwide


“BAT”		“Best Available Techniques” for pollution prevention and control in the production of fertilizers, as defined by the fertilizer producers of the European Union, including Hydro Agri


“CAN”		Calcium ammonium nitrate, a nitrogen fertilizer produced by mixing AN and a calcium salt (containing 25-28% nitrogen)


“CAP”		European Union Common Agricultural Policy


“cash crops”		High value-added fruit and vegetable segments, as referred to in the industry


“CN”		Calcium nitrate – a fertilizer containing nitrogen in nitrate form (15.5%) and water-soluble calcium (19%)


“Comalco”		Comalco Limited

(iv)

“Completion Date”		The date the Demerger is consummated by registration in the Register of Business Enterprises, which is expected to be on or about March 24, 2004


“CROGI”		Cash return on gross investment


“CRU”		CRU International Limited


“DAP”		Diammonium phosphate fertilizer - a fertilizer containing 46% phosphate as P₂O₅


“Demerger”		The proposed demerger of Norsk Hydro ASA in accordance with the Demerger Plan

“Demerger Plan”		The plan approved by the Boards of Directors of Norsk Hydro ASA and AgriHold ASA on November 28, 2003 attached as Exhibit 1 to this Information Memorandum


“Duke Contract”		A long-term gas sales agreement with Duke Energy Europe Northwest B.V.


“EAA”		European Aluminium Association


“EEA”		European Economic Area


“EEA Agreement”		The European Economic Area Agreement


“EDC”		Ethylene dichloride


“EFTA”		European Free Trade Association


“EFMA”		European Fertilizer Manufacturers Association


“ESA”		The EFTA Surveillance Authority


“EU”		European Union


“Exchange Act”		The U.S. Securities Exchange Act of 1934, as amended


“Extrusion”		The Extrusion sector of Hydro Aluminum


“FAO”		The Food and Agriculture Organization of the United Nations


“FSU”		Former Soviet Union


“GFU”		Gas Negotiation Committee (“Gassforhandlingsutvalget”)


“GWh”		Giga Watt hour, a measurement unit for electrical power which equals 1,000,000 Kilo Watt hours


“HACCP”		Hazard Analysis Critical Control Points, a quality control approach established by the World Health Organization and adopted by the European Commission


“HBP”		Hydro Business Partner, a business unit of Norsk Hydro ASA and Norsk Hydro Produksjon AS


“Hectare”		A measurement unit for land which equals approximately 2.471 acres, or 10,000 square meters


“HISP”		Hydro IS Partner, the business unit of Norsk Hydro ASA and Norsk Hydro Produksjon AS


“HSE”		Health, safety and environment


“Hydro”		Norsk Hydro ASA or Norsk Hydro ASA and its consolidated subsidiaries, as the context requires


“Hydro ADR”		Norsk Hydro ASA’s ADRs, each evidencing a Hydro ADS, each Hydro ADS representing one Hydro Share


“Hydro Agri”		That part of Hydro’s business which will be conducted by the AgriHold Group after consummation of the Demerger

(v)

“Hydro Aluminium”		The aluminium business of Hydro comprising the sub-segments Metal, Rolled Products and Extrusion and Automotive


“Hydro’s Board of Directors”		The Board of Directors of Norsk Hydro ASA


“Hydro Company”		Norsk Hydro ASA or any of its consolidated subsidiaries which will not become subsidiaries of AgriHold following the demerger


“Hydro Group”		Norsk Hydro ASA and its consolidated subsidiaries


“Hydro Oil and Energy”		The oil and energy business of Hydro comprising two sub-segments, Exploration and Production, and Energy and Oil Marketing

“Hydro Share”		One share in Norsk Hydro ASA


“IFA”		The International Fertilizer Industry Association, a trade association whose members include 450 companies in some 80 countries around the world


“Information Memorandum”		This Demerger Information Memorandum dated November 28, 2003


“IPPC”		EU Directive on Integrated Pollution Prevention and Control, which was adopted in September 1996


“KPMG”		KPMG LLP


“LME”		London Metal Exchange


“MAP”		Monoammonium phosphate – a fertilizer containing 52% phosphate as P₂O₅


“MMBTU”		Million British thermal units


“Metals”		Hydro Aluminium’s Metals sub-segment, which comprises the Primary Metal sector and the Metal Products sector


“Ministry”		Norwegian Ministry of Petroleum and Energy


“Minority Interest Company”		A company or other entity in which AgriHold will have a direct or indirect ownership interest following the Demerger, but which does not qualify for treatment as a consolidated subsidiary


“MOP”		Muriate of potash or potassium chloride


“Nasdaq”		The National Association of Securities Dealers’ Automated Quotation System


“NCS”		The Norwegian Continental Shelf


“NGC”		Natural Gas Company of Trinidad and Tobago


“non-consolidated investees”		Companies in which Hydro exercises significant influence (normally by virtue of having an ownership interest of 20-50% of the voting shares of any such company)


“Noon 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 purposes

(vi)

“Norwegian GAAP or N GAAP”		Generally accepted accounting principles in Norway


“NPK”		Complex fertilizers, containing nitrogen, phosphours and potash


“OECD”		The Organisation for Economic Co-operation and Development


“OSE”		Oslo Stock Exchange


“PDO”		Plan for development and operation


“PSA”		Production sharing agreement


“PVC”		Polyvinyl chloride, a plastic raw material also known as vinyl


“Register of Business Enterprises”		In Norwegian: Foretaksregisteret


“Rolled Products”		Hydro Aluminium’s Rolled Products sub-segment


“Sanctions Act”		The Iran and Libya Sanctions Act of 1996, adopted by the United States

“SDFI”		The Norwegian State’s Direct Financial Interest


“SEC”		The United States Securities and Exchange Commission


“Section 355”		Section 355 of the United States Internal Revenue Code of 1986, as amended


“Securities Act”		The United States Securities Act of 1933, as amended


“SLB No. 4”		SEC Staff Legal Bulletin No. 4, issued on September 16, 1997


“SOP”		Sulphate of potash magnesia or potassium magnesium sulphate


“SQM”		Sociedad Quimica y Minera de Chile (Soquimich)


“tonne”		A metric ton. One metric ton = 1.1023 short tons (2,000 pounds)


“TWh”		Terawatt hour (one billion kilowatt hours)


“urea”		Nitrogen fertilizer formed by reacting ammonia with carbon dioxide at high pressure (containing 46% nitrogen)


“U.S. GAAP”		Generally accepted accounting principles in the United States


“U.S. Shareholder”		A beneficial owner of shares or ADRs that is (i) a citizen or resident of the United States, (ii) a corporation, partnership or other business entity organized under the laws of the United States, (iii) a trust subject to the control of a U.S. person and the primary supervision of a U.S. court or (iv) an estate the income of which is subject to U.S. federal income tax regardless of its source.


“VAW”		VAW Aluminum AG


“VPS” or “VPS System”		The Norwegian Central Securities Depository (“Verdipapirsentralen”)


“VCM”		Vinyl chloride monomer


“WTO”		World Trade Organization

(vii)

OIL AND GAS TERMS

Term		Definition


“bbl”		Barrels


“bcm”		Billion cubic meters


“boe”		Barrels of oil equivalents


“boed”		Barrels of oil equivalents per day


“bcf”		Billion cubic feet


“bpd”		Barrels per day


“cf”		Cubic feet


“condensate”		Light hydrocarbon substances produced with natural gas which condense into liquid at normal temperatures and pressures associated with surface production equipment


“LNG”		Liquefied natural gas. A liquid composed chiefly of natural gas (i.e., mostly methane). Natural gas is liquefied to make it easy to transport if a pipeline is not feasible (as across a body of water). Not as easily liquefied as LPG, LNG must be put under low temperature and high pressure or under extremely low (cryogenic) temperature and close to atmospheric pressure to become liquefied


“LPG”		Liquefied petroleum gas, a liquid composed chiefly of butane and propane


“NGLs”		Oil and gas condensate and natural gas liquids


“proved reserves”		The estimated quantities of crude oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions


“proved developed reserves”		Reserves that can be expected to be recovered through existing wells with existing equipment and operating methods. Additional oil and gas expected to be obtained through the application of fluid injection or other improved recovery techniques for supplementing natural forces and mechanisms or primary recovery are included as “proved developed reserves” only after testing by a pilot project or after the operation of an installed program has confirmed through production response that increased recovery will be achieved.


“proved undeveloped reserves”		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, but does not include reserves attributable to any acreage for which an application of fluid injection or other improved recovery techniques is contemplated, unless such techniques have been proved effective by actual tests in the area and in the same reservoir. Reserves on undrilled acreage are limited to those drilling units offsetting productive units that are reasonably certain of production when drilled. Proved reserves for other undrilled units can be claimed only where it can be demonstrated with certainty that there is continuity of production from the existing productive formation.

(viii)


“development 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


“exploratory 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


“field”		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


“reservoir”		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

“Sm³”		Standard cubic meters. For purposes of converting quantities of natural gas cited in this Information Memorandum, 1 Sm³ = 35.3147 cubic feet

(ix)

EXCHANGE RATE INFORMATION

In this Information Memorandum, unless otherwise specified or the context otherwise requires:

•

references to “krone,” “kroner,” and “NOK” are to the currency of Norway;

•

references to “dollar,” “dollars,” and “U.S.$” are to the currency of the United States; and

•

references to “euro,” “euros” or “€” are to the lawful currency of the Member States of the European Union that adopted the single currency in accordance with the Treaty establishing the European Community, as amended by the Treaty on European Union.

Hydro publishes and, upon the completion of the Demerger, Agri will publish its consolidated financial statements in NOK.

The following tables set forth certain information concerning the Norwegian kroner/U.S. dollar exchange rate, based on the average Noon Buying Rate for the periods indicated:

Nine Months

Ended September 30,
2003

Nine Months

Ended September 30,
2002

Year Ended

December 31,

2002

Year Ended

December 31,

2001

Year Ended

December 31,

2000

Average Noon Buying Rate

7.10

8.22

7.99

9.00

8.83

The following table sets forth the Noon Buying Rate for the NOK/U.S.$ on the dates indicated:

Date		Noon Buying Rate
September 30, 2003		7.01
September 30, 2002		7.47
December 31, 2002		6.94
December 31, 2001		9.00
December 31, 2000		8.86

(x)

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Information Memorandum contains statements relating to the future results of Hydro and, after giving effect to the Demerger, Agri, including projections and business trends that are “forward-looking” in nature. Forward-looking statements made in this Information Memorandum relate to matters such as:

•

planned capacity increases and utilization rates;

•

anticipated capital spending;

•

estimates of oil and gas reserves;

•

environmental regulatory matters;

•

legal proceedings;

•

effects of hedging raw material and energy costs and foreign currencies;

•

global and regional economic conditions;

•

supply and demand for grain and other agricultural crops;

•

competition and actions by competitors and others in market areas, including changes to industry capacity and utilization and product pricing;

•

growth opportunities;

•

fluctuations in foreign exchange rates;

•

volume, price, cost, margins and sales;

•

earnings, cash flows, dividends and other expected financial conditions;

•

expectations and strategies for products, segments, businesses and market shares, as well as for each of Hydro and Agri as a whole;

•

cash requirements and uses of available cash;

•

financing plans;

•

cost reduction targets;

•

development, production, commercialization and acceptance of new products, services and technologies; and

•

assets and product portfolio changes.

Forward-looking statements include all statements that are not historical facts, and can be identified by words such as “believes,” “anticipates,” “projects,” “intends,” “expects,” or the negatives of these terms or similar expressions. Any forward-looking statements contained in this Information Memorandum should not be relied upon as predictions of future events. No assurance can be given that the expectations expressed in these forward-looking statements will prove to be correct. Actual results could differ materially from expectations expressed in the forward-looking statements if one or more of the underlying assumptions or expectations proves to be inaccurate or is unrealized. Some important factors that could cause actual results to differ materially from those in the forward-looking statements are included with such forward-looking statements and in the section entitled “Risk Factors” in this Information Memorandum.

Readers are cautioned not to place undue reliance on the forward-looking statements contained in this Information Memorandum, which represent the best judgment of Hydro’s management as of the date of this Information Memorandum. Except as required by applicable law, neither Hydro nor, after giving effect to the Demerger, Agri undertakes responsibility to update these forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further public disclosures made by Hydro or Agri, such as filings made with the Oslo Stock Exchange or press releases.

(xi)

STATEMENT OF THE BOARD OF DIRECTORS OF NORSK HYDRO ASA

This Information Memorandum has been prepared to provide information in connection with the proposed Demerger of Norsk Hydro ASA. The members of the Board of Directors of Norsk Hydro ASA confirm that, to the best of our knowledge, the information contained in this Information Memorandum is in accordance with the facts and contains no omissions likely to affect the meaning of the Information Memorandum. Market conditions and future prospects have been appraised on the basis of best judgment.

Oslo, November 28, 2003

The Board of Directors of Norsk Hydro ASA

(xii)

STATEMENT OF NORWEGIAN LEGAL COUNSEL TO NORSK HYDRO ASA

Wiersholm, Mellbye & Bech, advokatfirma AS has acted as Norwegian Legal Counsel to Norsk Hydro ASA in Connection with the Demerger described in this Information Memorandum. We confirm that in our opinion the Demerger Plan attached as Exhibit 1 to this Information Memorandum is in conformity with Norwegian law requirements.

We have reviewed Part II of the Information Memorandum and confirm that Part II in our opinion fairly reflects the content of the Demerger Plan. Further, we have reviewed the sections of Part III of the Information Memorandum headed “Management of AgriHold following the Demerger”, “Description of the Shares and Share Capital of AgriHold Following the Demerger”, “Taxation” and “Dividends and Dividend Policy” and the sections of Part IV of the Information Memorandum headed “Management of Hydro following the Demerger”, “Description of the Shares and Share Capital of Hydro Following the Demerger” and “Dividends and Dividend Policy”. We confirm that the descriptions pertaining to legal and tax matters given in these sections in our opinion fairly reflects Norwegian law as in force as of the date hereof.

Our statement is limited to the above and does not relate to the content of any other sections of the Information Memorandum, or to any statements of a commercial, accounting or financial nature. Our statement is also limited to Norwegian law.

Oslo, November 28, 2003

Wiersholm, Mellbye & Bech, advokatfirma AS

STATEMENT OF FINANCIAL ADVISORS TO NORSK HYDRO ASA

ABG Sundal Collier Norge ASA and UBS Limited have acted as financial advisors to Norsk Hydro ASA in connection with the Demerger and will not be responsible to anyone other than Norsk Hydro ASA (whether or not a recipient of the Information Memorandum) for providing the protections offered to clients of ABG Sundal Collier Norge ASA and UBS Limited nor for providing advice in relation to the Demerger. Neither ABG Sundal Collier Norge ASA nor UBS Limited accepts responsibility for the contents of the Information Memorandum.

Oslo, November 28, 2003

ABG Sundal Collier Norge ASA UBS Limited

STATEMENT OF NORWEGIAN LEGAL COUNSEL TO FINANCIAL ADVISORS

Thommessen Krefting Greve Lund AS Advokatfirma has acted as Norwegian legal counsel to ABG Sundal Collier Norge ASA and UBS Limited in connection with the Demerger described in the Information Memorandum.

Oslo, November 28, 2003

Thommessen Krefting Greve Lund AS Advokatfirma

(xiii)

PART I

SUMMARY; PRESENTATION OF FINANCIAL INFORMATION; RISK FACTORS

SUMMARY

This summary highlights selected information that is described in greater detail elsewhere in this Information Memorandum. This summary does not contain all of the important information contained in this Information Memorandum. You should read the entire Information Memorandum and the other documents referred to in this Information Memorandum for a more complete understanding of the matters you are being asked to vote upon. For the definitions of certain terms used throughout this Information Memorandum, please refer to the “Glossary of Terms” included in the forepart of this Information Memorandum.

Overview of Hydro

Hydro was organized under Norwegian law as a public company in 1905. Currently, Hydro’s businesses are concentrated in three core areas:

•

Oil and Energy (“Hydro Oil and Energy”);

•

Aluminium (“Hydro Aluminium”); and

•

Agri (“Hydro Agri”).

Hydro Oil and Energy

Hydro Oil and Energy consists of two sub-segments, Exploration and Production, and Energy and Oil Marketing. Exploration and Production’s business activities encompass oil and gas exploration, field development, and the operation of production and transportation facilities. Energy and Oil Marketing’s business activities encompass Hydro’s commercial operations in the oil, natural gas and power sectors, the operation of Hydro’s power stations, management of Hydro’s seaborne transportation of crude oil, natural gas liquids and other petroleum products and Hydro’s interest in the gas transportation system on the Norwegian Continental Shelf (“NCS”) and the marketing and sales of refined petroleum products (e.g., gasoline, diesel and heating oil) to retail customers. For more information on Hydro Oil and Energy, see Part IV of this Information Memorandum.

Hydro Aluminium

Hydro Aluminium is one of the top three integrated aluminium companies in the world. Hydro Aluminium comprises three sub-segments: Metals, Rolled Products and Extrusion and Automotive.

The Metals sub-segment encompasses Hydro Aluminium’s upstream activities, principally the production and sale of primary aluminium produced in Hydro Aluminium’s smelters.

Hydro Aluminium’s Rolled Products sub-segment is centered in Europe, with rolling mills in Germany, Norway, Spain and Italy, as well as a foil rolling mill in Malaysia that provides a foothold in Asia.

Hydro Aluminium’s Extrusion and Automotive sub-segment consists of three sectors: Extrusion, Automotive and North America. Their main products are extruded aluminium profiles, used primarily in the building and construction markets and the transportation segment.

For more information on Hydro Aluminium, see Part IV of this Information Memorandum.

Hydro Agri

Hydro Agri is a global leader in the production, distribution and sale of nitrogen-based mineral fertilizers and related industrial products. Hydro Agri also distributes and sells a wide range of phosphate- and potash-based mineral fertilizers, as well as complex and specialty mineral fertilizer products sourced from third parties. Hydro Agri comprises three sub-segments: Upstream, Downstream and Industrial.

Hydro Agri’s Upstream segment is based on Hydro Agri’s worldwide ammonia and urea production, including the global trade and shipping of ammonia. Upstream also includes nitrate and complex fertilizer production, which is co-located with ammonia production at the global production plants.

The Downstream segment consists of Hydro Agri’s sales and marketing units, which provide Hydro Agri with a presence (including sales offices, chartered dry bulk ships, bulk blending plants, terminals and bagging operations) in approximately 17 countries in Europe and 27 countries outside of Europe and sales in approximately 120 countries. The Downstream segment also includes those of Hydro Agri’s European production facilities that primarily serve the regions in which they are located, as well as Hydro Agri’s fertilizer plants in each of South Africa and Brazil that produce NPK for their respective home markets.

The Industrial segment markets numerous industrial products, mainly originating from Hydro Agri’s Upstream and Downstream fertilizer operations, with certain products being intermediates in the production of fertilizers.

For more information on Hydro Agri, see Part III of this Information Memorandum.

Hydro’s principal corporate offices are located at Bygdøy allé 2, N-0240 Oslo 2 Norway and Hydro’s telephone number is +47 22 53 81 00. Hydro’s internet site is www.hydro.com.

Reasons for the Proposal to the Shareholders

In the second half of 2001, Hydro’s Board of Directors initiated a corporate portfolio strategy project. Upon concluding that project in June 2003, Hydro’s Board of Directors decided that Hydro should commence preparations for establishing Hydro Agri as a separate company. Hydro then announced that it would take such action, with the aim of listing the new company’s shares on the Oslo Stock Exchange in the first half of 2004.

The main reasons for the conclusions reached by Hydro’s Board of Directors were:

•

Hydro could focus its financial resources and management attention fully on the significant opportunities for further development of its Oil and Energy and Aluminium business areas following the separation of Hydro Agri.

•

Hydro Agri’s management similarly could focus exclusively on Hydro Agri.

•

The Hydro Agri turnaround program had been successfully completed.

•

Hydro Agri’s operational results and strategic direction provided a good basis for profitable growth, which would be difficult to capture within Hydro, due to the capital expenditure requirements of the two other businesses and Hydro Agri’s lack of direct access to capital markets.

•

A stand-alone Hydro Agri company would be in a better position to participate in the expected consolidation of the global fertilizer industry.

The Demerger Transaction

Hydro’s Board of Directors has proposed that Hydro Agri be established as a separate publicly traded company by means of a demerger transaction effected in accordance with Chapter 14 of the

Norwegian Public Limited Companies Act and a demerger plan, approved by Hydro’s Board of Directors on November 28, 2003 (the “Demerger Plan”). Under Norwegian law, a demerger is the transfer of part of the assets, rights and liabilities of a company (the transferor company) to one or more newly formed or pre-existing companies (the transferee company or companies) for consideration in the form of shares of the transferee company (or companies) to the holders of shares in the transferor company. Hydro’s Board of Directors chose the demerger structure because it is a well-established structure for transactions of this nature in Norway. Further, it can be carried out on a tax-free basis in Norway for Norsk Hydro ASA and its shareholders and, potentially, in certain other countries where Norsk Hydro ASA has a significant shareholder base. The new company will have its headquarters in Oslo.

To effect the Demerger, Hydro has formed a new company, AgriHold ASA (“AgriHold”), organized under Norwegian law as an allmennaksjeselskap on November 10, 2003. AgriHold is and will remain a wholly owned subsidiary of Hydro until the date the Demerger is consummated (the “Completion Date”). AgriHold has been established solely for the purpose of the Demerger and will have no subsidiaries or operational activity prior to the Completion Date. In the Demerger, Norsk Hydro ASA will transfer to AgriHold ASA all assets, rights and liabilities primarily relating to Hydro Agri. The transferred assets consist primarily of shares and partnership interests held by Norsk Hydro ASA in companies and partnerships forming part of Hydro Agri and a debt due Norsk Hydro ASA. All other assets, rights and liabilities of Norsk Hydro ASA, including the assets, rights and liabilities related to Hydro Oil and Energy and Hydro Aluminium, will be retained by Norsk Hydro ASA. In connection with the Demerger, a number of related transactions will be effected in order to structure Hydro’s ownership of the subsidiaries and other entities that comprise Hydro Agri’s business to make possible a full separation of these subsidiaries and entities from Hydro.

Based on estimates of the relative fair values of Hydro and the assets, rights and liabilities to be transferred to AgriHold ASA in the Demerger, respectively, the members of Hydro’s Board of Directors, in their capacities as members of Hydro’s Board of Directors and as the members of AgriHold’s Board of Directors, determined that an allocation of 91.5% of Norsk Hydro ASA’s share capital to Norsk Hydro ASA and 8.5% of Norsk Hydro ASA’s share capital to the assets, rights and liabilities transferred in the Demerger would be proportional to the relative net values allocated to the two companies in the Demerger, and, thus, comply with the Norwegian legal requirements for tax-free treatment of the Demerger. Further background for the allocation is provided in Part II of this Information Memorandum.

As of the date of this Information Memorandum, Norsk Hydro ASA holds 1,484,300 treasury shares under the share buy-back program approved by Norsk Hydro ASA’s shareholders at the annual general meeting on May 7, 2003. In connection with the establishment of the buy-back program, the Norwegian State agreed to a proportional redemption of its shares in Norsk Hydro ASA.

There will be approximately 319 million AgriHold Shares following the consummation of the Demerger. In order to contribute to AgriHold’s financial flexibility, as well as to enable AgriHold’s Board of Directors to establish share-based compensation systems, Hydro’s Board of Directors is seeking approval by Norsk Hydro’s shareholders of the grant of discretionary authority to the AgriHold Board of Directors, for a period commencing on the Completion Date of the Demerger and ending two years after this authority is given to AgriHold, to issue up to 15 million new AgriHold Shares.

In the Demerger, AgriHold ASA will issue one share for each outstanding Hydro Share. Each holder of Hydro’s American Depositary Receipts (“ADRs”) will receive one AgriHold ADR for each Hydro ADR held by that holder.

The Demerger will result in the split of the share capital of Norsk Hydro ASA through a reduction of the par value of each Hydro Share by NOK 1.70 from NOK 20.00 to NOK 18.30 simultaneously with the issuance of one new AgriHold Share, par value 1.70 per share.

The existing AgriHold Shares, all of which are currently held by Hydro, will correspond to 20.0% of the total number of AgriHold Shares outstanding immediately after the consummation of the

Demerger. The AgriHold Shares to be issued to the holders of Hydro Shares upon consummation of the Demerger will constitute the remaining 80.0%. Hydro intends to sell its AgriHold Shares to investors in connection with or following the Demerger.

Illustrative Balance Sheet Information Reflecting Allocation of Assets and Liabilities

The Demerger will be accounted for based on Hydro’s historical values.

The balance sheet information set forth below illustrates certain balance sheet effects as if the Demerger and the additional following transactions had occurred as of September 30, 2003: (1) Norsk Hydro’s ASA’s redemption of 1,157,922 shares held by the Norwegian State against payment of approximately NOK 0.4 billion, (2) AgriHold ASA’s drawdown of assumed external loans in the aggregate amount of NOK 8.9 billion, (3) AgriHold ASA and its subsidiaries’ settlement of their net interest-bearing debt to Norsk Hydro ASA and its subsidiaries following consummation of the Demerger in the amount of approximately NOK 10.1 billion, and (4) Norsk Hydro ASA’s sale of its AgriHold Shares at book value of approximately NOK 2.0 billion.

This illustration is based on the assumptions briefly described above which relate to future transactions for which there is considerable uncertainty. Accordingly, this illustration should not be viewed as Carve-Out or Pro Forma balance sheets. Carve-Out and Pro Forma balance sheets, presenting the effects of the Demerger only, are presented under the caption “Presentation of Financial Information” in Part V of this Information Memorandum.

NOK billion	Norsk Hydro ASA and subsidiaries before Demerger		Norsk Hydro ASA and subsidiaries after Demerger		Agri Demerged Business⁽¹⁾		AgriHold ASA before Demerger⁽²⁾		AgriHold ASA and subsidiaries after Demerger
Cash and other liquid assets	17.8	⁽⁷⁾	27.4	⁽⁸⁾	0.5	⁽³⁾	2.0	⁽⁴⁾	0.8	⁽⁵⁾
Other current assets	58.1		45.0	⁽⁶⁾	13.5	⁽⁶⁾	—		13.5

Total current assets	75.9		72.4		14.0		2.0		14.3
Non-current assets	143.9		132.7	⁽⁹⁾	11.2		—		11.2

TOTAL ASSETS	219.8		205.1		25.2		2.0		25.5

Interest-bearing debt	36.6		35.7		11.0	⁽³⁾	—		9.3	⁽⁵⁾
Other liabilities	98.2		90.5	⁽⁶⁾	8.1	⁽⁶⁾	—		8.1

Total liabilities	134.8		126.2		19.1		—		17.4

Minority shareholders’ interest	0.7		0.6		0.1		—		0.1
Shareholders’ equity	84.3	⁽⁷⁾	78.3		6.0		2.0		8.0
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	219.8		205.1		25.2		2.0		25.5

Net interest bearing debt⁽¹¹⁾	18.8	⁽¹⁰⁾	8.3	⁽¹⁰⁾	10.5	⁽³⁾	(2.0	)⁽⁴⁾	8.5	⁽⁵⁾

⁽¹⁾	Agri Demerged Business comprises assets, rights and liabilities transferred from Hydro in accordance with the Demerger Plan.

⁽²⁾	AgriHold ASA before the Demerger is the transferee company, which has been established for the purpose of the Demerger. This company will have no operational activity prior to the Effective Date of the Demerger.

⁽³⁾

The net interest-bearing debt of the Agri Demerged Business amounts to NOK 10.5 billion, which consist of NOK 10.1 billion in interest-bearing debt to Norsk Hydro ASA and subsidiaries in addition to NOK 0.9 billion of external interest-bearing loans (in total NOK 11.0 billion of interest-bearing debt), less cash and other liquid assets of NOK 0.5 billion.

⁽⁴⁾	Approximately NOK 2.0 billion was contributed in cash by Norsk Hydro ASA upon formation of AgriHold ASA.

⁽⁵⁾	AgriHold ASA and subsidiaries after the Demerger will have a net interest-bearing debt of NOK 8.5 billion which is assumed to consist of cash and other liquid assets of NOK 0.8 billion and interest-bearing debt of NOK 9.3 billion.

⁽⁶⁾	Figures include internal trade receivables and trade payables totaling NOK 0.4 billion which will be external after the Demerger.

⁽⁷⁾

Cash and other liquid assets for Norsk Hydro ASA and subsidiaries before the Demerger were NOK 18.2 billion as of September 30, 2003. In the illustration above this cash level has been reduced, with a corresponding decrease in shareholders’ equity, by NOK 0.4 billion to NOK 17.8 billion in order to reflect the planned cash payment of NOK 0.4 billion as a result of the redemption of 1,157,922 shares held by the Norwegian State.

⁽⁸⁾

The level of cash and other liquid assets of Norsk Hydro ASA and subsidiaries after the Demerger reflects repayments of net interest-bearing debt by AgriHold ASA and subsidiaries of NOK 10.1 billion to Norsk Hydro ASA and subsidiaries, less cash and other liquid assets in the Agri Demerged Business of NOK 0.5 billion.

⁽⁹⁾	Shares in AgriHold ASA are assumed to have been sold at book value of approximately NOK 2.0 billion.

⁽¹⁰⁾	A payment of petroleum tax for the second half of 2003 of approximately NOK 7.3 billion was due October 1, 2003. Adjusted for this tax payment the net interest-bearing debt was approximately NOK 26.1 billion before the Demerger and approximately NOK 15.6 billion after the Demerger.

⁽¹¹⁾	Net interest-bearing debt defined as interest-bearing debt, less cash and other liquid assets.

Matters Before Hydro’s Shareholders at Extraordinary General Meeting

At an extraordinary general meeting of Norsk Hydro ASA’s shareholders, to be held on January 15, 2004, at 5.00 p.m. (Oslo time) at “Gamle Logen”, Grev Wedels Plass 2, Oslo, Norsk Hydro ASA’s shareholders will vote on the following proposals:

(1)

approval of the reduction of Norsk Hydro ASA’s share capital by NOK 52,844,440 in connection with the cancellation of 1,484,300 treasury shares and redemption of 1,157,922 shares held by the Norwegian State; and

(2)

approval of the Demerger Plan.

Each of these proposals requires the affirmative vote of two-thirds of the votes cast at the extraordinary general meeting in order for the Demerger to be implemented.

At the extraordinary general meeting, the shareholders will be invited to approve the authorization of the Board of Directors of AgriHold, for a period starting on the consummation of the Demerger and ending two years after this authority is given to AgriHold’s Board of Directors to issue up to 15 million new AgriHold shares. In addition, shareholders will vote on specific matters related to governance of AgriHold.

Under Norwegian law, there are no quorum requirements applicable to general meetings.

Recommendation of Hydro’s Board of Directors

Hydro’s Board of Directors believes that each of (i) the Demerger and (ii) the reduction in Norsk Hydro’s share capital in connection with the cancellation of 1,484,300 treasury shares of 1,157,922 shares held by the Norwegian State is in the best interests of Norsk Hydro ASA’s shareholders and recommends that shareholders vote FOR each of these proposals.

Conditions to Consummation of the Demerger

Under the terms of the Demerger Plan, consummation of the Demerger is subject to the satisfaction or waiver of a number of conditions, including that the deadline for objections from Norsk Hydro ASA’s creditors shall have expired and the relationship with any creditors which have raised objections shall have been settled (or the District Court shall have determined that the Demerger may nevertheless proceed) and that the reduction of Norsk Hydro ASA’s share capital in connection with the cancellation of 1,484,300 treasury shares and redemption of 1,157,922 shares held by the Norwegian State shall have been effected. See Part II, “Conditions to Consummation of the Demerger.”

Stock Exchange Listings

AgriHold Shares issued in the Demerger will be listed on the Oslo Stock Exchange from the time the Demerger has become effective. This is expected to occur on or about March 25, 2004. At that time, Hydro Shares will be traded exclusive of the right to receive corresponding AgriHold Shares.

AgriHold does not currently intend to list the AgriHold Shares (or the AgriHold ADRs) on a securities exchange in the United States or on the National Association of Securities Dealers’ Automated Quotation System (“Nasdaq”) or any other inter-dealer quotation system in the United States in conjunction with the Demerger, nor does it intend to otherwise facilitate the creation of a trading market for the AgriHold Shares or AgriHold ADRs in the United States. AgriHold will not be subject to the information reporting requirements of the Exchange Act, but will apply for an exemption from the reporting requirements of that Act. For more information, see Part II, “Information for Holders of Hydro ADRs.”

Tax Consequences of Demerger

Hydro believes that the Demerger complies with the requirements for treatment as a tax-free transaction in Norway. Accordingly, the Demerger should not trigger any Norwegian capital gains taxation on the part of Norsk Hydro ASA, and AgriHold ASA will step into Norsk Hydro ASA’s tax positions with respect to the assets and liabilities transferred in the Demerger. For a more complete description of the tax consequences under Norwegian law, and the tax consequences of the Demerger for shareholders in Norway, the United States, the United Kingdom, France and Sweden, see Part II, “Tax Matters.”

PRESENTATION OF FINANCIAL INFORMATION

The Combined Financial Statements for Hydro and the Hydro Agri Carve-Out Financial Statements have been prepared on the historical cost basis in accordance with accounting principles generally accepted in the United States (U.S. GAAP) and in accordance with accounting principles generally accepted in Norway (N GAAP). All presentations and discussions in this Information Memorandum are based on the Combined Financial Statements prepared in accordance with U.S. GAAP. There are no material differences between U.S. GAAP and N GAAP in the Combined Financial Statements for the periods presented.

The Combined Financial Statements have been derived from Hydro’s audited consolidated financial statements, and include the historical operations being transferred to Agri (Agri Carve-Out Combined Financial Statements) and being retained in Hydro (Hydro After Demerger Combined Financial Statements). Hydro prepared these financial statements using Hydro’s historic basis for assets and liabilities. A further description of Carve-out and Pro Forma Financial Statements is included in Part V of this Information Memorandum.

Hydro Before Demerger

Condensed Consolidated Statements of Income

	Nine months ended⁽³⁾				Year ended
	30.09.2003		30.09.2002		2002		2001		2000
NOK Million, except per share information

Operating revenues	127,249		123,033		167,040		152,999		156,467

Depreciation, depletion and amortization	11,079		10,206		13,912		12,273		12,538
Other operating costs	99,049		98,992		133,297		118,681		115,328
Restructuring costs	—		(10	)	(10	)	962		135

Operating income	17,121		13,845		19,841		21,083		28,466

Equity in net income of non-consolidated investees	850		(451	)	33		566		672
Interest income and other financial income	1,118		1,084		1,418		2,847		1,747
Other income/(loss), net	(1,702	)	219		219		578		3,161

Earnings before interest expense and tax (EBIT)	17,387		14,697		21,511		25,074		34,046

Interest expense and foreign exchange gain/(loss)	(1,288	)	294		517		(3,609	)	(3,905	)

Income before tax and minority interest	16,099		14,991		22,028		21,465		30,141

Income tax expense	(9,301	)	(9,549	)	(13,278	)	(13,750	)	(16,178	)
Minority interest	124		43		15		177		18

Income before cumulative effect of change in accounting principle	6,922		5,485		8,765		7,892		13,981
Cumulative effect of change in accounting principle	281		—		—		—		—

Net income	7,203		5,485		8,765		7,892		13,981


Earnings per share before change in accounting principles	26.80		21.30		34.00		30.50		53.40
Earnings per share	27.90		21.30		34.00		30.50		53.40

Average number of outstanding shares	257,803,672		257,745,113		257,799,411		258,434,202		261,620,982


Financial data

EBITDA⁽¹⁾ - NOK million	30,855		25,203		35,658		37,757		46,609
Cash flow from operating activities - NOK million	23,224		19,784		21,785		26,172		25,626
Investments - NOK million	13,713		39,767		45,716		16,328		16,565
Net interest bearing debt/equity ⁽²⁾	0.24		0.43		0.44		0.28		0.41
Dividends per share - NOK	—		—		10.50		10.00		9.50

⁽¹⁾	EBITDA: Earnings before Interest, Tax, Depreciation and Amortization.

⁽²⁾	Net interest bearing debt divided by shareholders’ equity plus minority interest.

⁽³⁾	Interim figures are unaudited

Hydro Agri After Demerger

Carve-out Condensed Combined Statements of Income (Unaudited)

	Nine months ended				Year ended
	30.09.2003		30.09.2002		2002		2001		2000
NOK million, except per share information

Operating revenues	27,891		26,523		33,477		37,449		36,621

Depreciation, depletion and amortization	837		878		1,183		1,580		1,643
Other operating costs	25,225		23,694		30,151		33,806		33,320
Restructuring costs	—		—		—		—		135

Operating income	1,829		1,951		2,143		2,063		1,523

Equity in net income of non-consolidated investees	363		(17	)	57		330		350
Interest income and other financial income	136		199		245		408		291
Other income/(loss), net	40		142		142		(53	)	—

Earnings before interest expense and tax (EBIT)	2,368		2,275		2,587		2,748		2,164

Interest expense and foreign exchange gain/(loss)	(447	)	(38	)	(16	)	(765	)	(898	)

Income before tax and minority interest	1,921		2,237		2,571		1,983		1,266

Income tax expense	(637	)	(734	)	(845	)	(599	)	(365	)
Minority interest	(19	)	1		(11	)	85		55


Net income	1,265		1,504		1,715		1,469		956


Earnings per share	3.96		4.71		5.37		4.60		2.99

Average number of outstanding shares	319,442,590		319,442,590		319,442,590		319,442,590		319,442,590


Financial data

EBITDA⁽¹⁾ - NOK million	3,240		3,250		3,878		4,345		3,757
Cash flow from operating activities - NOK million	731		1,966		2,755		3,186
Investments - NOK million	800		890		1,549		826		1,335

⁽¹⁾	EBITDA: Earnings before Interest, Tax, Depreciation and Amortization.

Hydro after Demerger

Condensed Combined Statements of Income (Unaudited)

	Nine months ended				Year ended
	30.09.2003		30.09.2002		2002		2001		2000
NOK million, except per share information

Operating revenues	101,231		98,446		136,114		118,332		122,978

Depreciation, depletion and amortization	10,242		9,327		12,729		10,693		10,895
Other operating costs	75,697		77,235		105,697		87,658		85,140
Restructuring costs	—		(10	)	(10	)	961		—

Operating income	15,292		11,894		17,698		19,020		26,943

Equity in net income of non-consolidated investees	487		(434	)	(24	)	236		322
Interest income and other financial income	982		885		1,173		2,439		1,456
Other income/(loss), net	(1,742	)	77		77		631		3,161

Earnings before interest expense and tax (EBIT)	15,019		12,422		18,924		22,326		31,882

Interest expense and foreign exchange gain/(loss)	(841	)	333		533		(2,844	)	(3,007	)

Income before tax and minority interest	14,178		12,755		19,457		19,482		28,875

Income tax expense	(8,664	)	(8,815	)	(12,433	)	(13,151	)	(15,813	)
Minority interest	143		41		26		92		(37	)

Income before cumulative effect of change in accounting principle	5,657		3,981		7,050		6,423		13,025
Cumulative effect of change in accounting principle	281		—		—		—		—

Net income	5,938		3,981		7,050		6,423		13,025


Earnings per share before change in accounting principles	21.90		15.40		27.40		24.90		49.80
Earnings per share	23.00		15.40		27.40		24.90		49.80

Average number of outstanding shares	257,803,672		257,745,113		257,799,411		258,434,202		261,620,982


Financial data

EBITDA⁽¹⁾ - NOK million	27,615		21,953		31,780		33,412		42,852
Cash flow from operating activities - NOK million	22,493		17,818		19,030		22,986
Investments - NOK million	12,913		38,877		44,167		15,502		15,230

⁽¹⁾	EBITDA: Earnings before Interest, Tax, Depreciation and Amortization.

Carve-Out and Pro Forma financial statements for the nine months ended September 30, 2003 and 2002, and for the years ended December 31, 2002, 2001 and 2000 are presented in Part V of this Information Memorandum together with explanatory notes.

Split of Hydro; Explanation of Hydro Agri Carve-out Financial Statements

The split of Hydro’s financial statements as of September 30, 2003 and December 31, 2002 is included in the tables below. This split presents the adjustments to arrive at Hydro Agri Carve-out financial statements after Demerger, and Hydro financial statements after Demerger. For a description of the carve-out principles, and allocation of previously unallocated items, please refer to the Notes to Carve-Out Financial Statements for Hydro and Hydro Agri in Part V of this Information Memorandum.

Condensed Consolidated Statements of Income (Unaudited)

	30.09.2003
Nine months period ended NOK million, except per share information	Hydro Before Demerger		Adjustments ⁽¹⁾	Agri Carve-out After Demerger		Hydro After Demerger

Operating revenues	127,249		1,873	27,891		101,231

Depreciation, depletion and amortization	11,079		—	837		10,242
Other operating costs	99,049		1,873	25,225		75,697

Operating income	17,121		—	1,829		15,292

Equity in net income of non-consolidated investees	850		—	363		487
Interest income and other financial income	1,118		—	136		982
Other income/(loss), net	(1,702	)	—	40		(1,742	)

Earnings before interest expense and tax (EBIT)	17,387		—	2,368		15,019

Interest expense and foreign exchange gain/(loss)	(1,288	)	—	(447	)	(841	)

Income before tax and minority interest	16,099		—	1,921		14,178

Income tax expense	(9,301	)	—	(637	)	(8,664	)
Minority interest	124		—	(19	)	143

Income before cumulative effect of change in accounting principle	6,922		—	1,265		5,657
Cumulative effect of change in accounting principle	281		—	—		281

Net income	7,203		—	1,265		5,938


Earnings per share before change in accounting principles	26.80			3.96		21.90
Earnings per share	27.90			3.96		23.00

Average number of outstanding shares	257,803,672			319,442,590		257,803,672

⁽¹⁾	Adjustments constitute operating revenues from sales from Hydro to Agri and from Agri to Hydro during the period.

Revenues

Operating revenues for Hydro Agri and Hydro after the Demerger include sales previously eliminated in Hydro’s consolidated financial statements. For Hydro Agri, such sales amounted to NOK 197 million for the nine months ended September 30, 2003. For Hydro, such sales amounted to NOK 1,676 million for the nine months ended September 30, 2003. The majority of this revenue derives from energy supplied by Hydro to Hydro Agri.

Condensed Consolidated Balance Sheets (Unaudited)

	30.09.2003
NOK million, except per share information	Hydro Before Demerger	Adjustments ⁽¹⁾	Agri Carve-out After Demerger	Hydro After Demerger

Assets

Cash and cash equivalents	16,461	—	295	16,166
Other liquid assets	1,742	—	161	1,581
Receivables	41,299	—	8,276	33,023
Receivables, Hydro/Agri	—	8,411	104	8,307
Inventories	16,876	—	5,117	11,759

Total current assets	76,378	8,411	13,953	70,836


Property, plant and equipment, less accumulated depreciation, depletion and amortization	114,273	—	7,142	107,131
Other non-current assets	29,572	2,048	4,101	27,519

Total non-current assets	143,845	2,048	11,243	134,650


Total assets	220,223	10,459	25,196	205,486


Liabilities and shareholders’ equity

Bank loans and other interest bearing short-term debt	5,994	—	717	5,277
Current portion of long-term debt	1,192	—	28	1,164
Interest-bearing loans and payables to Hydro/Agri	—	8,411	8,307	104
Other current liabilities	46,663	—	5,280	41,383

Total current liabilities	53,849	8,411	14,332	47,928


Long-term debt	29,423	—	175	29,248
Other long-term liabilities	17,333	—	2,328	15,005
Deferred tax liabilities	34,299	—	253	34,046

Total long-term liabilities	81,055	—	2,756	78,299


Minority shareholders’ interest in consolidated subsidiaries	669	—	114	555


Shareholders’ equity	84,650	2,048	7,994	78,704


Total liabilities and shareholders’ equity	220,223	10,459	25,196	205,486

⁽¹⁾	Adjustments constitute receivables and payables between Hydro and Agri. In addition, Hydro’s cash contribution to AgriHold ASA (transferee company) constitutes an investment for Hydro after the Demerger, and is presented as Other non-current assets in the amount of NOK 2,048 million.

Condensed Consolidated Statements of Income (Unaudited)

	31.12.2002
Year ended NOK million, except per share information	Hydro Before Demerger		Adjustments⁽¹⁾	Agri Carve-out After Demerger		Hydro After Demerger

Operating revenues	167,040		2,551	33,477		136,114

Depreciation, depletion and amortization	13,912		—	1,183		12,729
Other operating costs	133,297		2,551	30,151		105,697
Restructuring costs	(10	)	—	—		(10	)

Operating income	19,841		—	2,143		17,698

Equity in net income of non-consolidated investees	33		—	57		(24	)
Interest income and other financial income	1,418		—	245		1,173
Other income/(loss), net	219		—	142		77

Earnings before interest expense and tax (EBIT)	21,511		—	2,587		18,924

Interest expense and foreign exchange gain/(loss)	517		—	(16	)	533

Income before tax and minority interest	22,028		—	2,571		19,457

Income tax expense	(13,278	)	—	(845	)	(12,433	)
Minority interest	15		—	(11	)	26


Net income	8,765		—	1,715		7,050

Earnings per share	34.00			5.37		27.40

Average number of outstanding shares	257,799,411			319,442,590		257,799,411

⁽¹⁾	Adjustments constitute operating revenues from sales from Hydro to Agri and from Agri to Hydro during the period.

Revenues

Operating revenues for Hydro Agri and Hydro after the Demerger include sales previously eliminated in Hydro’s consolidated financial statements. For Hydro Agri, such sales amounted to NOK 530 million for the year ended December 31, 2002. The majority of this revenue was derived from sale of fertilizers to Treka prior to Hydro’s sale of this business in late 2002. For Hydro, such sales amounted to NOK 2,021 million for the year ended 31 December 2002. The majority of this revenue was derived from the supply of energy by Hydro to Hydro Agri.

Condensed Consolidated Balance Sheets (Unaudited)

	31.12.2002
NOK million	Hydro Before Demerger	Adjustments(1)	Agri Carve-out After Demerger	Hydro After Demerger

Assets

Cash and cash equivalents	5,965	—	419	5,546
Other liquid assets	2,647	—	35	2,612
Receivables	40,553	—	6,488	34,065
Receivables, Hydro/Agri	—	8,866	126	8,740
Inventories	17,232	—	4,383	12,849

Total current assets	66,397	8,866	11,451	63,812

Property, plant and equipment, less accumulated depreciation, depletion and amortization	112,342	—	7,090	105,252
Other non-current assets	28,472	2,048	3,479	27,041

Total non-current assets	140,814	2,048	10,569	132,293


Total assets	207,211	10,914	22,020	196,105


Liabilities and shareholders’ equity

Bank loans and other interest bearing short-term debt	7,306	—	361	6,945
Current portion of long-term debt	1,958	—	84	1,874
Interest-bearing loans and payables to Hydro/ Agri	—	8,866	8,740	126
Other current liabilities	38,593	—	4,235	34,358

Total current liabilities	47,857	8,866	13,420	43,303


Long-term debt	30,902	—	174	30,728
Other long-term liabilities	14,633	—	2,154	12,479
Deferred tax liabilities	36,809	—	255	36,554

Total long-term liabilities	82,344	—	2,583	79,761


Minority shareholders’ interest in consolidated subsidiaries	1,143	—	85	1,058


Shareholders’ equity	75,867	2,048	5,932	71,983


Total liabilities and shareholders’ equity	207,211	10,914	22,020	196,105

⁽¹⁾	Adjustments constitute receivables and payables between Hydro and Agri. In addition, Hydro’s cash contribution to AgriHold ASA (transferee company) constitutes an investment for Hydro after the Demerger, and is presented as Other non-current assets in the amount of NOK 2,048 million.

RISK FACTORS

Holders of Hydro Shares and Hydro ADRs should consider the risks described below, as well as the other information in this Information Memorandum, before voting on the Demerger. These risks are not the only ones of relevance to voting on the Demerger or the businesses of Hydro and/or Agri. Additional risks and uncertainties not known at present or that are deemed immaterial may also impair the business, operating results, financial condition, liquidity and prospects of Hydro and/or Agri.

Risks Relating to the Demerger

Because Agri does not have an operating history as a separate entity, you may have difficulty assessing its historical performance and outlook for future revenues and other operating results.

Following the Demerger, Hydro and Agri will operate as separate, publicly traded companies. Agri has no operating history as a separate entity; Hydro Agri’s financial performance historically has been connected to the results of operations, assets and cash flow of Hydro’s other business segments. The Hydro Agri Carve-Out and Pro Forma Financial Statements included in this Information Memorandum do not reflect what Agri’s results of operations, financial position and cash flows would have been had Agri been a separate, publicly traded company during the periods presented. They may not be indicative of Agri’s future results of operations, financial position and cash flows.

For a further discussion of the basis of presentation of the Hydro Agri Carve-Out Financial Statements, see the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part III of the Information Memorandum.

Agri may not be successful in raising debt financing on a stand-alone basis as planned, which could lead to a delay or cancellation of the Demerger or Hydro assuming risk related to Agri’s debt financing after consummation of the Demerger.

The Demerger Plan provides for AgriHold’s assumption of a liability to pay to Hydro a net debt, the amount of which was NOK 8.1 billion as of October 1, 2003. AgriHold’s repayment of this debt to Hydro is expected to be effected on the Completion Date from the proceeds of debt financing to be arranged through financial institutions. However, it may not be possible for Agri to raise financing in the capital markets sufficient to repay this debt and provide Agri with sufficient working capital before the scheduled Completion Date. In this situation, the consummation of the Demerger could be delayed. Alternatively, Hydro’s Board of Directors could agree that Hydro may continue to provide financing to Agri after the consummation of the Demerger. Such financial support could be provided in the form of an extension of the term of the debt provided for in the Demerger Plan, or in the form of a guarantee or other credit support. There is no assurance that Hydro’s Board of Directors will agree that Hydro will provide such support. If the Demerger has not been consummated on or prior to June 30, 2004, the Demerger will lapse and will not be completed.

Any such financial assistance from Hydro to Agri could involve substantial risk for Hydro. Therefore, although the decision would, under the Demerger Plan, be left to its absolute discretion, Hydro’s Board of Directors does not foresee agreeing to any such arrangements except in the event that Agri’s inability otherwise to satisfy its debt on the Completion Date is due solely to transitory matters unrelated to its creditworthiness on a stand-alone basis.

Norwegian law subjects Hydro and Agri to joint liability after the Demerger.

Through the Demerger, the obligations of Hydro will be divided between Hydro and Agri in accordance with the principles set forth in the Demerger Plan. If either Hydro or Agri is liable under the Demerger Plan for an obligation that arose prior to completion of the Demerger and fails to satisfy

that obligation, the non-defaulting party will be jointly and severally liable for the obligation. This statutory liability is unlimited in time, but is limited in amount to the equivalent of the net value allocated to the non-defaulting party in the Demerger.

The market price of AgriHold Shares may experience fluctuations and volatility after the Demerger, including volatility relating to sales, or the possibility of sales, of substantial numbers of AgriHold Shares in the public market.

There is currently no public market for AgriHold Shares. AgriHold will seek the listing of the AgriHold Shares on the Oslo Stock Exchange concurrent with the completion of the Demerger. While it is a condition to completion of the Demerger that the AgriHold Shares be listed on the Oslo Stock Exchange, there can be no assurance as to the trading price of AgriHold Shares following such listing. Following the distribution of the AgriHold Shares in connection with the Demerger and until an orderly trading market develops, the price of the AgriHold shares may fluctuate significantly. There can be no assurance that an orderly trading market will develop.

Following the Demerger, AgriHold Shares will represent an investment in a smaller company with a different investment profile relative to that of Hydro. The changes brought about by the Demerger may be such that an investment in AgriHold will no longer match the investment objectives of holders of Hydro Shares. Accordingly, holders of AgriHold Shares may be motivated to sell them. This could cause the market price of the AgriHold Shares to decline after the completion of the Demerger.

Immediately following the consummation of the Demerger, Hydro will own 20.0% of the AgriHold Shares. Hydro intends to sell its AgriHold Shares on the Completion Date, but in any case within 18 months of the Completion Date. Sales, or the possibility of sales, of some or all of the AgriHold Shares held by Hydro in the public market following the Demerger could cause volatility in the trading, or otherwise have an adverse effect on the market trading price, of the AgriHold Shares.

Certain aspects of the Demerger could cause Hydro, Agri, or both, to incur tax liabilities.

The Demerger will involve the separation of Hydro Agri’s activities from those of Hydro in a number of countries. These separations may be subject to tax in Norway or in other jurisdictions. In addition, if the separations were initially treated as tax-free in Norway and other key jurisdictions, in certain circumstances, actions taken after the Demerger could cause one or more of the separations, or the Demerger, to be taxable to Hydro, Agri, or both. For a more complete discussion of the tax aspects of the Demerger, see the discussion in Part II of this Information Memorandum under the caption “Tax Matters.”

Certain capital gains taxes, duties and stamp taxes or other taxes may be payable in connection with the Demerger and the required separation of Hydro Agri’s business from the other businesses carried on by Hydro. Such taxes could be material.

Certain aspects of the Demerger could cause holders of Hydro Shares to incur tax liabilities.

The Demerger will involve the separation of Hydro Agri’s activities from those of Hydro. Holders of Hydro Shares in certain jurisdictions may be subject to tax as a result of this separation. For a more complete discussion of the tax aspects of the Demerger, see the discussion in Part II of this Information Memorandum under the caption “Tax Matters.”

After the Demerger, the total tax burden of Hydro and Agri may be higher than the total tax burden of Hydro prior to the Demerger.

As a consequence of the Demerger, Hydro Companies and Agri Companies will no longer be able to consolidate or otherwise share or allocate tax attributes. As a result, the total tax burden of Hydro and Agri may be higher than the tax burden Hydro would have had absent the Demerger.

Because Agri will likely have a structure after the Demerger that differs from the current structure, Agri may have less financial flexibility than Hydro has had to repatriate funds in a tax-efficient manner.

Holders of AgriHold ADSs and AgriHold Shares registered in a nominee account may not be able to exercise voting rights as readily as a shareholder of AgriHold Shares registered directly in the VPS System.

Holders of AgriHold ADSs who would like to vote their underlying AgriHold Shares at AgriHold’s general meetings must instruct the AgriHold ADR Depositary (the “AgriHold ADR Depositary”) to cause the temporary transfer of the underlying AgriHold Shares so as to register the ownership of such shares directly in AgriHold’s share register in the VPS System prior to the meeting. None of AgriHold, the AgriHold ADR Depositary or any other nominee can guarantee that holders of AgriHold ADSs will receive the notice for a general meeting in time to instruct the AgriHold ADR Depositary or any other third party to transfer the underlying AgriHold Shares to the VPS System, and it is possible that holders of AgriHold ADSs, or other persons who hold AgriHold Shares or AgriHold ADSs through brokers, dealers or other third parties, will not have the opportunity to exercise the right to vote. Similarly, beneficial owners of AgriHold Shares registered through other VPS-registered nominees may not be able to vote such Shares unless their ownership is re-registered in the name of the beneficial owner prior to the relevant general meeting.

Risks Relating to Agri

If AgriHold is unable to obtain financing to satisfy its indebtedness to Hydro prior to the scheduled date of completion of the Demerger, or otherwise fails to obtain financing on favorable terms for its capital requirements, Agri’s results of operations and financial condition may be adversely affected.

As a condition precedent to completion of the Demerger, AgriHold must obtain financing to satisfy its indebtedness to Hydro. There is no assurance that AgriHold will be successful in arranging new financing prior to the scheduled Completion Date of the Demerger or that, if it is unable to do so, Hydro’s Board of Directors will agree to extend AgriHold’s indebtedness to Hydro or provide a guarantee or other credit support in connection with AgriHold’s efforts to arrange new financing.

There is also no assurance that the terms of new financing arrangements (or any more detailed agreement that may be entered into with Hydro in connection with an extension of AgriHold’s indebtedness to Hydro or Hydro’s providing a guarantee or other credit support), will not be unfavorable to AgriHold. The debt markets are volatile and rates, terms and availability fluctuate based on conditions in the markets and lenders’ perceptions of a company’s business and financial stability. Further, it is unlikely that AgriHold will obtain as strong a credit rating as Hydro currently has. These financial risks may result in AgriHold incurring higher borrowing costs than would have been incurred as part of Hydro. Should the terms of new financing arrangements be unfavorable, Agri’s results of operations and financial condition may be adversely affected.

As a smaller, less diversified company, AgriHold will have less financial strength and flexibility than Hydro currently has due to lower revenues and earnings than the combined companies and potentially increased volatility in earnings and cash flows given the cyclicality of the fertilizer industry.

Exports from the former Soviet Union and certain Central and Eastern European countries could create a supply/demand imbalance in Western European fertilizer markets.

The decline of agriculture in most parts of the former Soviet Union (“FSU”) and much of Central and Eastern Europe in the late 1980s and early 1990s resulted in increased pressure from imports into Western Europe of fertilizer products produced in these countries. Imports of finished fertilizer products from plants located in Eastern Europe continue to flow into Western European markets. Eastern and Central European producers currently export approximately 75% of their urea production.

Approximately 50% of Hydro Agri’s fertilizer sales volumes are to European markets, such that a market imbalance stemming from increased import volumes could have a material adverse effect on Hydro Agri’s results of operations and financial condition.

As a result of government policy, the price Russian fertilizer producers pay for natural gas, an important raw material for the manufacture of fertilizer, is approximately one-fifth of that paid by major Western European producers. Anti-dumping measures currently imposed by the European Union against certain Russian fertilizer exports to Europe may limit the ability of Russian producers to sell fertilizer in the EU, although these measures are subject to change. In markets where trade measures are not in force, Russian fertilizer would have a greater competitive advantage. While Russia’s entry into the World Trade Organization (the “WTO”) could result in Russian fertilizer plants paying more market-based prices for natural gas, there can be no assurance of the timing and nature of developments in this regard.

The existing EU anti-dumping measures currently applicable to imports from Poland, Lithuania and Estonia will be lifted when those countries become members of the EU in May 2004. Depending upon the actions taken by the EU and the governments of those countries prior to accession, the introduction of this production capacity into the EU market may put downward pressure on fertilizer prices.

If China begins to export urea on a large scale, the global market for fertilizer could be destabilized.

Given the rapid expansion of Chinese urea production and the possibility that other nitrogen-based fertilizers may meet an increasing share of Chinese domestic demand, China may begin to export large volumes of urea, thereby putting downward pressure on the price of urea. This could adversely affect Agri’s results of operations and financial condition.

The European Union could decrease its subsidies for agriculture in Western Europe, which could result in reduced demand for fertilizer.

The European Union has developed a proposal to reform the Common Agricultural Policy (“CAP”), which provides for the form and size of subsidies paid to EU farmers for production and export of their produce. The key element of the CAP reform is the de-coupling of EU support payments from production; if the reforms are adopted, farmers will receive a single payment from the EU. Agricultural activity may decline as reduced subsidies make agriculture less economically attractive, which may, in turn, reduce the demand for fertilizer. The CAP reform also includes set-aside policies that could contribute to an increased withdrawal of cultivated land, which may further adversely affect fertilizer demand. The current CAP reform proposal will extend to the ten Central and Eastern European countries scheduled to join the EU in May 2004. It is unclear how Western European producers will be affected by the expansion of the EU. It could result in a shift in agricultural activity that would be disruptive to established fertilizer markets and distribution systems.

WTO agricultural negotiations are also expected ultimately to lead to a reduction of agriculture tariff barriers, domestic support and export subsidies. A wide range of countries, including the United States and many developing countries, are advocating implementation of the EU CAP reform in these negotiations. Any additional CAP reform arising from WTO commitments will likely have the effect of substantially reducing production-linked payments and export subsidies. This may also adversely affect fertilizer demand, and, in turn, Agri’s results of operations and financial condition.

Agri will be affected by market fluctuations in foreign currencies, which could harm results of operations.

Agri will report its consolidated results and financial position in Norwegian kroner, but most of its revenues and costs will be denominated in other currencies. Agri will have significant revenues based on product prices denominated in (or with reference to) U.S. dollars. Fixed costs in Europe and certain

European revenues will be primarily denominated in euro and other European currencies. Although Agri intends to obtain long-term financing denominated in U.S. dollars, this will only serve partially to offset Agri’s exposure to fluctuations in U.S. dollar exchange rates.

In addition, as a result of its global activities, Agri may be paid for its products in currencies that are subject to sudden and material changes in exchange rates and liquidity. Agri will attempt to hedge these “soft currency” risks, but there can be no assurance that such hedging activities will be successful.

Agri’s operating results may be significantly affected by the supply and price levels of natural gas and other essential raw materials.

Natural gas will be a key raw material used in the manufacture of Agri’s nitrogen-based fertilizer products. Agri’s profitability will be directly affected by the price and availability of natural gas purchased from third parties for its ammonia and fertilizer production. Agri expects to purchase a substantial portion of its natural gas through long-term contracts with a limited number of suppliers. Agri expects to purchase its requirements of phosphate rock and potassium from a limited number of suppliers. While Agri plans to take measures to ensure that it maintains an adequate supply of natural gas and other essential raw materials, there can be no assurance that this supply will not be delayed or interrupted, which may result in production delays or in cost increases if alternative sources of supply prove to be more expensive. If Agri’s cost of raw materials were to increase, or if Agri were to experience an extended interruption in the supply of raw materials to its production facilities, Agri’s business, financial condition and results of operations could be adversely affected.

In addition, if natural gas prices in the United States were to decline to a level that prompts those U.S. producers who have permanently or temporarily closed production facilities to resume fertilizer production, this would likely contribute to a supply/demand imbalance that could adversely affect Agri’s results of operations and financial condition.

The fertilizer business is cyclical, which will expose Agri to potentially significant fluctuations in its financial condition and share price.

Hydro Agri’s products are, to a large extent, commodity products that are used in agriculture, which is a commodity industry. Accordingly, in the normal course of business, Agri will be exposed to fluctuations in supply and demand, which could have significant effects on prices across all of its businesses and products and, in turn, Agri’s operating results and financial condition. The prices of fertilizer products depend on a number of factors, including general economic conditions, cyclical trends in end-user markets, supply and demand imbalances, and weather conditions. Changes in supply result from capacity additions or reductions and from changes in inventory levels. Demand for fertilizer products is dependent, in part, on demand for crop nutrients by the global agricultural industry. Periods of high demand, high capacity utilization and increasing operating margins have tended to result in new plant investment and increased production until supply exceeds demand, followed by periods of declining prices and declining capacity utilization until the cycle is repeated.

Adverse weather conditions during peak fertilizer application periods may have a material adverse effect upon Agri’s results of operations and financial condition.

Sales of Agri’s fertilizer products to agricultural customers will be seasonal in nature and will likely result in Agri’s generating a greater amount of net sales and operating income in the spring. However, quarterly results may vary significantly from one year to the next due primarily to weather-related shifts in planting schedules and purchase patterns, as well as the relationship between natural gas and nitrogen fertilizer product prices. Hydro Agri derives approximately 50% of its business from Europe. Accordingly, an adverse weather pattern affecting European agriculture could have a material adverse effect upon Agri’s results of operations and financial condition.

Expansion into emerging and transitioning markets presents a higher degree of financial, political, economic and other business risks.

Agri will be exposed to financial, political, economic and business risks in connection with its worldwide operations. Agri Companies have made investments and commenced production and marketing activities in various emerging markets, including South Africa and Brazil. In addition to emerging markets, Agri will likely have increasing business in transitioning markets, including China. While these emerging and transitioning markets represent areas where greater relative growth in fertilizer consumption is anticipated or that Agri perceives to be of interest as a production base, they also present a higher degree of risk than more developed markets. In addition to the business risks inherent in developing and servicing new markets, economic conditions may be more volatile, legal systems less developed and predictable, and the possibility of various types of adverse governmental action more pronounced. Unexpected or uncontrollable events or circumstances in these markets could have a material adverse effect on Agri’s operations and financial results.

Agri will be exposed to market and credit risk in its general business operations.

Agri will extend credit in the normal course of business. Agri will also enter into long-term contracts to secure the price and availability of raw materials and energy for manufacturing operations. These activities create the risk that one or more counter-parties will default on obligations to Agri, which could result in direct financial losses, unexpected increased market exposures or higher operating costs. Poor or deteriorating economic conditions on a global, regional or industry sector level increase the risk of counter-party default.

Ammonia and other fertilizer components and products manufactured, processed, stored, handled, distributed and transported by Agri Companies may be very volatile. Accidents involving these substances could cause severe damage or injury to property, the environment and human health.

Agri Companies manufacture, process, store, handle, distribute and transport ammonia and other fertilizer components and products, which substances may be very volatile. Accidents or mishandling involving these substances could cause severe damage or injury to property, the environment and human health, as well as a possible disruption of supplies and markets. Such an event could result in civil lawsuits and regulatory enforcement proceedings, both of which could lead to significant liabilities. Any damage to persons, equipment or property or other disruption of Agri’s ability to produce or distribute its products could result in a significant decrease in revenues and significant additional cost to replace or repair and insure Agri’s assets, which could have a material adverse effect on Agri’s financial condition and results of operations.

In addition, Agri Companies may incur significant losses or costs relating to the operation of vessels used for the purpose of carrying various products and raw material, including ammonia. These vessels and their cargo are subject to perils particular to marine operations, including capsizing, grounding, collision and loss or damage from severe weather or storms. Due to the potentially destructive and dangerous nature of the cargo, in particular ammonia and oil onboard the vessels, any such event may result in uncontrolled or catastrophic circumstances, including fires, explosions, accidents and severe pollution. Such circumstances may result in severe damages and/or injury to property, the environment and humans. Litigation from any such event may result in Agri Companies being named as defendants in lawsuits asserting large claims. In the event of pollution, Agri may be subject to strict liability.

Agri may incur significant costs to comply with, or as a result of, health, safety and environmental laws and regulations.

Hydro Agri’s operations are subject to numerous environmental requirements under the laws and regulations of the various jurisdictions in which it conducts business. Such laws and regulations govern, among other matters, air emissions, wastewater discharges, and solid and hazardous waste

management, and the use, composition, handling, distribution and transportation of hazardous materials. Many of these laws and regulations are becoming increasingly stringent, and the cost of compliance with these requirements can be expected to increase over time.

Agri will own numerous fertilizer manufacturing, distribution, storage and blending facilities in a number of countries, some of which were operated as industrial facilities before Hydro acquired them. There is a potential that past contamination at some sites may lead to required remediation in the future. The taking of remediation measures could have a material adverse effect on Agri’s financial condition.

Agri will not be able to predict the impact of new or changed laws or regulations or changes in the ways that such laws or regulations are administered, interpreted or enforced. The requirements to be met, as well as the technology and length of time available to meet those requirements, continue to develop and change. To the extent that the costs associated with meeting any of these requirements are substantial and not adequately provided for, there could be a material adverse effect on Agri’s results of operations and financial condition.

Agri will be subject to the risk of labor disputes and adverse employee relations, and these disputes and adverse relations may disrupt Agri’s business operations and adversely affect its results of operations and financial condition.

The majority of Agri’s hourly paid employees are represented by labor unions under a large number of collective bargaining agreements. Agri may not be able satisfactorily to renegotiate collective labor agreements when they expire. In addition, Agri’s existing labor agreements may not prevent a strike or work stoppage at any of Agri’s facilities in the future, and any such work stoppage could have a material adverse effect on Agri’s results of operations and financial condition.

Acts of war or terrorism could negatively affect Agri’s business.

Any military strikes or sustained military campaign in areas or regions of the world where Agri has business operations may affect Agri’s business in unpredictable ways, including forcing Agri to increase security measures and causing disruptions of supplies and markets, loss of property, and incapacitation of employees. Instability in the financial markets as a result of war may also affect Agri’s ability to raise capital or significantly affect foreign exchange markets. Further, like other companies with major industrial facilities, Agri’s plants and ancillary facilities may be targets of terrorist activities. The Industrial segment may be vulnerable, for example, since it supplies products utilized in the production of drinks and food for human consumption. Many of these plants and facilities store significant quantities of ammonia products and other items, which can be volatile if mishandled. Any damage to infrastructure facilities, such as electric generation, transmission and distribution facilities, or injury to employees, that could be direct targets of, or indirect casualities of, an act of war may affect Agri’s operations. Any disruption of Agri’s ability to produce or distribute its products could result in a significant decrease in revenues and significant additional costs to replace or repair and insure Agri’s assets, which could have a material adverse impact on Agri’s financial condition and results of operations.

Agri will not be insured against all potential losses and could be seriously harmed by natural disasters, operational catastrophes or deliberate sabotage.

Many of Hydro Agri’s business activities are characterized by substantial investments in complex production facilities, manufacturing and transportation equipment. Many of the production processes, raw materials and certain finished products are potentially destructive and dangerous in uncontrolled or catastrophic circumstances, including fires, explosions, accidents, major equipment failures, etc. Despite insurance coverage, Agri could incur uninsured losses and liabilities arising from such events, including damage to Agri’s reputation, and/or suffer substantial losses in operational capacity, which could have a material adverse effect on Agri’s results of operations and financial condition.

The loss of key management personnel could adversely affect Agri’s business.

Agri’s loss of key management personnel or inability to hire and retain qualified employees could have an adverse effect on its business, financial condition and results of operations. Agri’s operations will depend on the continued efforts of its executive officers and senior management. Agri will not be able to guarantee that any member of management at the corporate or subsidiary level will continue in his or her capacity for any particular period of time. If Agri were to lose one or more key personnel, its operations could be adversely affected.

Risks Relating To Hydro

Hydro’s expansion of business activities in emerging and transitioning markets presents a higher degree of financial, political, economic and other business risks.

Hydro is exposed to financial, political, economic and business risks in connection with its business operations. In recent years, Hydro has made investments and commenced activities in various emerging markets, including Angola and Brazil. In addition to emerging markets, Hydro has business operations in transitioning markets, including Russia and China. Emerging and transitioning markets present a higher degree of risk than more developed markets. In addition to the business risks inherent in developing and servicing new markets, economic conditions may be more volatile, legal systems less developed and predictable, and adverse governmental action more pronounced. Unexpected or uncontrollable events or circumstances in these markets could have a material adverse effect on Hydro’s results of operations and financial condition.

Hydro is exposed to market and credit risk in its general business operations.

Hydro extends credit in the normal course of business operations. In addition, Hydro engages in hedging activities to reduce exposure to short-term swings in the prices of its commodity-based businesses or exposure to fluctuations in currencies and interest rates. Hydro also enters into long-term contracts to secure the price and availability of raw materials and energy for primary aluminium production operations. All of these activities create the risk that one or more counter-parties will default on obligations to Hydro resulting in direct financial losses, unexpected increased market exposures or higher operating costs. Poor or deteriorating economic conditions on a global, regional or industry sector level increase the risk of counter-party default. Such defaults could adversely affect Hydro’s results of operations and financial condition.

Fluctuations in currency exchange rates may cause Hydro’s financial results to decline.

Hydro reports its consolidated results and financial position in Norwegian kroner but revenues and costs are denominated in several currencies. Hydro has exposure to changes in currency rates primarily resulting from having net cash inflows (income) denominated in U.S. dollars (or influenced by the U.S. dollar exchange rate) and net cash outflows (primarily fixed costs) in euro, Norwegian kroner and several other currencies. Exchange rate fluctuations may negatively affect the competitiveness of Hydro’s activities in countries where the local currency appreciates against the U.S. dollar. To reduce the economic effects of adverse exchange rate changes, Hydro maintains a significant portion of its debt in U.S. dollars. Hydro also has loans in other currencies for similar purposes. If the U.S. dollar declines relative to the Norwegian kroner, euro, etc., the value of Hydro’s net cash inflow may be reduced. At the same time, the value of the U.S. dollar-denominated debt, expressed in Norwegian kroner or euro, may decline.

Hydro is subject to the risk of labor disputes and adverse employee relations, and these disputes and adverse relations may disrupt Hydro’s business operations and adversely affect its financial results.

The majority of Hydro’s hourly paid employees are represented by labor unions under a large number of collective bargaining agreements. Hydro may not be able satisfactorily to renegotiate its

collective labor agreements when they expire. In addition, existing labor agreements may not prevent a strike or work stoppage at any of Hydro’s facilities in the future, and any such work stoppage could have a material adverse effect on its results of operations and financial condition.

Acts of war or terrorism could negatively affect Hydro’s business.

Any military strikes or sustained military campaign in areas or regions of the world where Hydro has business operations may affect Hydro’s business in unpredictable ways, including forcing Hydro to increase security measures and causing disruptions of supplies and markets, loss of property and incapacitation of employees. Instability in the financial markets as a result of war may also affect Hydro’s ability to raise capital or significantly affect foreign exchange markets. Further, like other companies with major industrial facilities, Hydro’s plants and ancillary facilities may be targets of terrorist activities. Any damage to infrastructure facilities, such as electric generation, transmission and distribution facilities, or injury to employees, that could be direct targets of, or indirect casualties of, an act of war may affect Hydro’s operations. Any disruption of Hydro’s ability to produce or distribute its products could result in a significant decrease in revenues and significant additional costs to replace or repair and insure Hydro’s assets, which could have a material adverse impact on Hydro’s financial condition and results of operations.

Hydro will not be insured against all potential losses and could be seriously harmed by natural disasters, operational catastrophes or deliberate sabotage.

Many of Hydro’s business activities are characterized by substantial investments in complex production facilities, manufacturing and transportation equipment. Many of the production processes, raw materials and certain finished products are potentially destructive and dangerous in uncontrolled or catastrophic circumstances including fires, explosions, accidents, major equipment failures, etc. Hydro Oil and Energy’s offshore operations (and certain transportation operations) are subject to marine perils, including severe storms and other adverse weather conditions. Despite insurance coverage, Hydro could incur uninsured losses and liabilities arising from such events and/or suffer substantial losses in operational capacity, which could have a material adverse effect on its operations or financial condition.

Risks Relating to Hydro’s Oil and Energy Business

A substantial or extended decline in oil or natural gas prices would have a material adverse effect on Hydro Oil and Energy’s business.

Historically, prices for oil and natural gas have fluctuated widely in response to changes in many factors, including:

•

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; and

•

the ability of the members of the Organization of the Petroleum Exporting Countries (“OPEC”) to agree on and maintain oil price and production controls.

It is impossible to predict future oil and natural gas price movements. Declines in oil and natural gas prices will adversely affect Hydro’s Oil and Energy business, its results of operations and financial condition, and ability to finance planned capital expenditures. Lower oil and natural gas prices also may influence the amount of oil and natural gas that Hydro can produce economically or adversely affect the economic potential and viability of projects being considered or in development.

Hydro Oil and Energy’s future performance depends on the ability to develop additional oil and gas reserves that are economically recoverable.

The majority of Hydro Oil and Energy’s proved reserves (92% as of December 31, 2002) are located on the NCS. The southern part of the NCS (the location of the most easily accessible and

exploitable fields offshore Norway) is a maturing resource province from which reserve additions have been low in recent years. Norway’s oil production has been declining for the last two years. A decision by the Norwegian government as to whether to allow offshore oil and gas exploration in sensitive areas along Norway’s northern coastline and in the Barents Sea is not expected until, at the earliest, 2004, and is dependent upon an environmental impact study expected to be completed before year-end 2003.

Unless Hydro Oil and Energy conducts successful exploration and development activities or acquires properties containing proved reserves, or both, its proved reserves will decline as reserves are produced. In addition, the volume of production from oil and natural gas properties generally declines as reserves from those prospects are depleted. Hydro Oil and Energy’s future production is highly dependent upon its success in finding or acquiring, and developing, additional reserves. If unsuccessful, proved reserves will decline, which will, in turn, adversely affect Hydro’s results of operations and financial condition.

Hydro Oil and Energy’s exploration drilling involves numerous business and financial risks, including the risk that such activity will not lead to the discovery of commercially productive oil or natural gas reservoirs.

Exploration for oil and gas involves a high degree of risk that hydrocarbons will not be found or that they will not be found in commercial quantities. The 3-D seismic data and other appraisal technologies Hydro Oil and Energy uses do not provide conclusive knowledge prior to drilling a well that oil or gas is present or economically feasible to extract. Accordingly, Hydro Oil and Energy’s drilling activity with respect to any particular project area or areas may be unsuccessful.

The cost of drilling, completing and operating a well is often uncertain and cost factors can adversely affect the economics of a project. Offshore drilling in deepwater (such as in Angola and the Gulf of Mexico) is extremely expensive and long-term in nature. Drilling operations may be curtailed, delayed or canceled as a result of factors outside of Hydro’s control, such as unexpected drilling conditions, pressure or irregularities in geological formations, equipment failures or accidents, adverse weather conditions, and shortages or delays in the availability of drilling rigs. Further, completion of a well does not guarantee that it will be profitable or even that it will result in recovery of drilling, completion and operating costs. Any of these situations may adversely affect Hydro’s results of operations and financial condition.

Hydro Oil and Energy is a relatively small producer in its industry, facing intense competition in all areas of its operations from larger international oil and gas companies with greater capital resources and other competitive advantages.

The oil and gas industry is competitive, especially with regard to exploration for, and development of, new oil and natural gas resources. Many of Hydro Oil and Energy’s competitors are much larger companies. These larger companies, including those created by mergers in the past few years, have a number of competitive advantages, including:

•

a greater ability to diversify their exploration and production activity geographically to reduce their risks associated with such activities;

•

greater financial resources, providing additional flexibility with respect to the number and range of properties and prospects that can be considered for exploration and development; and

•

cost efficiencies made possible by a greater scale of operations and infrastructure.

Hydro Oil and Energy’s development projects involve many uncertainties and operating risks that can prevent Hydro from realizing profits and can cause substantial losses.

On the NCS, Hydro Oil and Energy is increasingly developing smaller satellite fields in mature areas. Other Hydro Oil and Energy development projects are in remote locations with limited operational histories and, consequently, the success of these projects is less predictable. In addition,

some of Hydro Oil and Energy’s development projects are located in deepwater or other hostile environments, such as areas on the NCS, the Gulf of Mexico and Angola, or produced from challenging reservoirs. Planning and development of the Ormen Lange field, for example, has been described as one of the most challenging assignments any oil company has tackled, not just in Norway but in a global context, given the combination of deepwater, harsh weather conditions, freezing water temperatures and a very uneven seabed. As a result, Hydro Oil and Energy may face increased challenges maintaining targeted levels of production and production growth in future years. This could negatively affect Hydro’s results of operations and financial condition.

Hydro Oil and Energy’s oil and gas reserves are only estimates and may prove inaccurate.

There are numerous uncertainties inherent in estimating quantities of proved reserves and their values, including many factors beyond the control of the producer. The reserve data included in this Information Memorandum represent only estimates. Reservoir engineering is a subjective and inexact process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact manner. Further, evaluating properties for their recoverable reserves of oil and natural gas entails the assessment of geological, engineering and production data, some or all of which may prove to be unreliable. Accordingly, reserve estimates may be subject to downward or upward adjustment. Actual production, revenues and expenditures with respect to Hydro Oil and Energy’s reserves will likely vary from estimates, and those variances may be material. Any downward adjustment in Hydro Oil and Energy’s reserve data could lead to lower future production and could adversely affect Hydro’s results of operations and financial condition.

Hydro Oil and Energy’s activities expose Hydro to strict and other liability in the event of spills or other discharges of petroleum.

In Hydro’s capacity as a holder of licenses on the NCS under the Norwegian Petroleum Act of November 29, 1996, Hydro is subject to strict statutory liability in respect of losses or damages suffered as a result of pollution caused by spills or discharges of petroleum at or relating to facilities covered by such licenses. Thus, anyone who suffers losses or damages as a result of pollution caused by operations at any of Hydro’s NCS license areas can assert a claim for compensation from Hydro without needing to demonstrate that the damage is due to any fault on Hydro’s part. In addition, Hydro’s operations in other countries (e.g., Canada and Angola) subject it to liability in respect of damages caused by spills or discharges, including in connection with shipping operations.

Hydro may be subject to the imposition of sanctions by the U.S. government in connection with its activities in Iran and/or Libya.

Hydro Oil and Energy is engaged in certain activities in Iran and has an interest in oil and gas exploration licenses in Libya, where exploratory and appraisal wells are in the process of being drilled. In August 1996, the United States adopted the Iran and Libya Sanctions Act of 1996 (the “Sanctions Act”) with the objective of denying Iran and Libya the ability to support acts of international terrorism and fund the development and acquisition of weapons of mass destruction. If the U.S. government were to determine that a person’s activities in Iran or Libya are covered by the Sanctions Act, the Act requires the President of the United States to apply two or more sanctions, including a ban on any license to export goods or technology to a sanctioned person, a prohibition of loans or extensions of credit by U.S. financial institutions in an amount greater than U.S.$10 million in any 12-month period to the sanctioned person, and restrictions on imports into the United States from a sanctioned person. The President also has the authority to grant country-specific and project-specific waivers of these sanctions under certain circumstances. To date, there have not been any sanctions imposed against any person or entity under the Sanctions Act. However, there can be no assurance that the U.S. government will not in the future impose such sanctions.

Risks Relating to Hydro Aluminium’s Business

The price of aluminium is volatile, reflecting the cyclicality of the aluminium industry, and this volatility may adversely affect Hydro Aluminium’s results of operations and financial condition.

The aluminium industry is highly cyclical. Hydro Aluminium’s results of operations could be adversely affected by significant changes in general economic conditions or conditions affecting the aluminium industry specifically. In particular, Hydro Aluminium is exposed to economic conditions in Europe, as a significant portion of its products is sold into the European market. Virtually all aluminium end-use markets, including the building, transportation and packaging industries, are also cyclical. When downturns occur in these industries, decreased demand for aluminium may result in lower prices for Hydro Aluminium’s products, which may have an adverse effect on Hydro Aluminium’s results of operations.

Aluminium product prices, reflecting the cyclicality of the aluminium industry, have been volatile historically. Hydro Aluminium expects such volatility to continue. The London Metal Exchange (“LME”) price, in U.S. dollars, is the main reference price for aluminium contracts worldwide. The variance in the LME price can have a material effect upon Hydro Aluminium’s results as a whole. The operating results of Hydro Aluminium’s Metals sub-segment’s upstream operations, in particular, are negatively affected by lower LME prices. Hydro Aluminium’s Rolled Products and Extrusion and Automotive sub-segments also may be affected by aluminium price volatility, although, as margin businesses, such sub-segments are generally less directly affected by fluctuations in the LME price level. Hydro Aluminium hedges its exposure to the volatility of LME prices. However, Hydro Aluminium’s hedging activities can increase the level of fluctuations in Hydro Aluminium’s operating results from period to period.

Hydro Aluminium is exposed to foreign exchange rate fluctuations.

The LME price for aluminium is denominated in U.S. dollars. Further, a portion of Hydro Aluminium’s production of aluminium is sold in local currencies, including the euro, based on U.S. dollar exchange rates. Accordingly, operating results, which are reported in Norwegian kroner, are adversely affected by the strengthening of the Norwegian kroner against the U.S. dollar. As a result of the acquisition of VAW’s German and overseas smelters, Hydro Aluminium’s Metals sub-segment has reduced Hydro Aluminium’s relative exposure to the U.S.$/NOK exchange rate, but increased the exposure to the U.S.$/euro and NOK/euro exchange rates.

Although alumina prices are denominated in U.S. dollars (as are most raw material costs), Hydro Aluminium’s Brazilian-based alumina business, through its non-consolidated investee, Alunorte, is exposed to the U.S.$/Brazilian real exchange rate, which can affect Hydro Aluminium’s operating results. A decline in the value of the Brazilian real against the U.S. dollar (the U.S. dollar being the predominant financing currency for Alunorte) can lead to a currency loss with respect to the Metals sub-segment’s interest in Alunorte, as occurred in 2002.

Hydro Aluminium’s operations are dependent on substantial amounts of energy and, as a result, its profitability may decline if energy costs rise or if energy supplies are interrupted.

Hydro Aluminium’s operations consume large volumes of energy, mainly electricity, in producing primary aluminium. Hydro Aluminium has long-term electricity supply contracts for its smelters in Norway, Canada and Australia. The electricity supply contracts for Hydro Aluminium’s German smelters, scheduled to expire at the end of 2005, will need to be extended or alternative supply arrangements made. Hydro Aluminium may not be able to renew or replace these contracts on comparable terms following the expiry of these contracts.

Reduction in regulation of electricity markets in Europe continues at varying rates of progress from country to country. There is a possibility of new environmental taxes on electricity. Hydro

Aluminium is particularly exposed to energy tax regimes in Norway and Germany because of its substantial electricity consumption in these countries. If electricity costs rise as a result of market or other factors such as new taxes, or if electricity supplies or supply arrangements are disrupted, Hydro Aluminium’s operating results could be adversely affected.

Hydro Aluminium’s alumina strategy exposes Hydro Aluminium to possible global shortages of alumina.

The principal raw material used in the production of aluminium is alumina. Hydro Aluminium has secured roughly 50% of its long-term alumina supply requirements through equity investments and supplements its own equity alumina production through medium- to longer-term contractual arrangements with third parties. Hydro Aluminium’s alumina strategy reflects its view that new alumina production capacity will materialize to support the growth in global alumina consumption. Industry analysts have expressed concerns about whether the alumina greenfield and expansion projects will be adequate to meet the projected growth in demand over the next several years. Even if Hydro Aluminium is able to secure an adequate supply of alumina to meet its future requirements, the possibility of worldwide demand exceeding supply, together with the concentration of the alumina production industry, creates the potential for a material increase in the price of alumina. Hydro may not be able to pass on the entire amount of any increase in alumina price to its customers. This may result in declining margins and reduced profitability.

Hydro Aluminium is subject to a broad range of environmental laws and regulations in the jurisdictions in which it operates.

Hydro Aluminium is subject to a broad range of environmental laws and regulations in each of the jurisdictions in which it operates. These laws and regulations, as interpreted by relevant agencies and courts, impose increasingly stringent environmental protection standards regarding, among other things, air emissions, the storage, treatment and discharge of waste waters, the use and handling of hazardous or toxic materials, waste disposal practices, and the remediation of environmental contamination. The costs of complying with these laws and regulations, including participation in assessments and remediation of sites, could be significant. In addition, these laws and regulations create the risk of substantial environmental liabilities, including liabilities associated with divested assets and past activities.

Hydro Aluminium’s operations could be adversely affected by government actions or the absence of such actions in respect of third parties, regulating the market and trade in aluminium.

Hydro Aluminium’s operations could be adversely affected by government actions such as controls on imports, exports and prices, new forms of taxation, and increased government regulation in the countries in which Hydro Aluminium operates or services customers. In addition, Hydro Aluminium is subject to the disruptive effects of dumped or subsidized products in markets by producers engaging in unfair competition. Such activities may not result in the application of anti-dumping or countervailing duties by appropriate governmental agencies and any such duties imposed may be insufficient to eliminate all of the potential negative effects of such practices. In addition, Hydro Aluminium’s shipments to certain markets may be subjected to anti-dumping and/or countervailing duties that could negatively affect Hydro’s competitive position. Any such actions could affect Hydro Aluminium’s revenues, expenses and results of operations.

Hydro Aluminium could be adversely affected by disruptions of its operations.

Many of Hydro Aluminium’s customers are, to varying degrees, dependent on planned deliveries from Hydro Aluminium’s plants located in various parts of the world. Breakdown of equipment or other events leading to production interruptions in Hydro Aluminium’s plants, could lead to financial losses. Interruption in the energy supply to a smelter for more than six to eight hours could lead to the metal solidifying in the pots, which would result in Hydro Aluminium incurring significant costs to

restore the smelter to normal operations. Reduced production, itself, could result in reduced income. Further, customers may have to reschedule their own production due to Hydro Aluminium’s missed deliveries, which may result in customers’ pursuing financial claims against Hydro Aluminium. For example, Hydro Aluminium supplies many of the automotive manufacturers in the world and, in a number of cases, is a sole supplier for special products. The automotive industry is particularly dependent on regular, on-time supplies. The consequences of not meeting scheduled deliveries or quality standards might be costly. Hydro Aluminium’s operations may also be unable to meet customers’ quality demands due to obsolete technology or other problems in Hydro Aluminium’s operations. Hydro Aluminium may incur costs to correct any of such problems, in addition to facing claims from customers. Further, Hydro Aluminium’s reputation among actual and potential customers may be harmed, potentially resulting in a loss of business. While Hydro Aluminium maintains insurance policies covering, among other things, physical damage, business interruptions, product liability and transportation, these policies may not cover all of Hydro Aluminium’s losses.

PART II

THE DEMERGER

Introduction

Hydro’s Board of Directors has proposed that Hydro Agri be established as a separate publicly traded company by means of a demerger transaction effected in accordance with Chapter 14 of the Norwegian Public Limited Companies Act. In connection with the Demerger, a number of related transactions will be effected in order to structure Hydro’s ownership of the subsidiaries and other entities that comprise Hydro Agri’s business to make possible a full separation of these subsidiaries and other entities from Hydro. AgriHold ASA will have its headquarters in Oslo.

Under Norwegian law, a demerger is the transfer of part of the assets, rights and liabilities of a company (the transferor company) to one or more newly formed or pre-existing companies (the transferee company or companies) against consideration in the form of shares of the transferee company (or companies) issued to the holders of shares in the transferor company, and possibly other consideration which must not exceed 20% of the total consideration.

In the Demerger, the assets, rights and liabilities primarily related to Norsk Hydro ASA’s activities in connection with fertilizer products and related chemicals and industrial gases which are today part of Hydro Agri will be transferred to AgriHold ASA, which is a wholly owned subsidiary of Norsk Hydro ASA formed solely for the purpose of acting as the transferee company in the Demerger.

Upon consummation of the Demerger, each holder of a Hydro Share will receive one AgriHold Share, par value NOK 1.70, for each Hydro Share held by that shareholder. For holders of Hydro ADRs, AgriHold ASA intends to set up a sponsored, Level I ADR facility in respect of the AgriHold Shares. Each holder of Hydro ADRs shall receive one AgriHold ADR for each Hydro ADR held by that holder. No AgriHold Shares will be issued in respect of Norsk Hydro ASA’s treasury shares.

The existing AgriHold Shares, all of which are held by Norsk Hydro ASA, will correspond to 20.0% of the total number of AgriHold Shares outstanding immediately after the consummation of the Demerger. The AgriHold Shares to be issued to the holders of Hydro Shares and ADRs upon consummation of the Demerger will constitute the remaining 80.0%. As a result of the Demerger, the par value of each Hydro Share will be reduced from NOK 20.00 to NOK 18.30.

The effect of the Demerger is illustrated below:

LOGO

On November 28, 2003, the Boards of Directors of each of Norsk Hydro ASA and AgriHold ASA entered into the Demerger Plan, attached as Exhibit 1 to this Information Memorandum. The Demerger Plan will be submitted for approval by the shareholders of Norsk Hydro ASA at an extraordinary

general meeting on January 15, 2004. In accordance with Norwegian law, the Demerger Plan will also be submitted for approval by Norsk Hydro ASA, as the sole shareholder of AgriHold ASA, at an extraordinary general meeting of AgriHold ASA, also scheduled for January 15, 2004. If the Demerger Plan is approved at Norsk Hydro ASA’s extraordinary general meeting, Norsk Hydro ASA will approve the Demerger Plan at the AgriHold ASA extraordinary general meeting. If Norsk Hydro ASA’s shareholders approve the Demerger Plan and the conditions precedent to consummation of the Demerger are satisfied or, where applicable, waived, the Demerger is expected to be consummated on or about March 24, 2004.

Background and Reasons for the Demerger

Hydro’s current core business areas are Hydro Oil and Energy and Hydro Aluminium (described in Part IV of this Information Memorandum) and Hydro Agri (described in Part III of this Information Memorandum). In addition, Hydro has certain other businesses and investments, some of which have been defined as non-core and are targeted for divestment (e.g., Petrochemicals and Treka).

In recent years, each of Hydro’s Oil and Energy and Aluminium businesses has grown as a result of substantial investments, including several acquisitions. In 1999, Saga Petroleum ASA a Norwegian-based oil company, was merged with Hydro’s oil and gas business, and in 2002, interests in oil and gas licenses on the Norwegian Continental Shelf were acquired from the Norwegian State (the so-called State’s Direct Financial Interest or “SDFI”). In 2002, VAW Aluminium AG, a major integrated international aluminium company based in Germany, and the French building systems supplier, Technal, were acquired.

In the second half of 2001, Hydro’s Board of Directors initiated a corporate portfolio strategy project that was concluded in June 2003. Hydro then announced that it would start preparations for establishing Hydro Agri as a separate company with the aim of listing the shares of such company on the Oslo Stock Exchange in the first half of 2004.

Following a three-year turnaround program commencing in 1999, involving increasing cost-efficiency and productivity in Hydro Agri’s assets and the re-organization, closure or sale of under-performing or non-core production facilities, market organizations and businesses, Hydro’s Board of Directors concluded that Hydro Agri would have an advantageous strategic starting point for a value enhancing, industrial development as an independent and leading global company.

The main reasons for the conclusions reached by Hydro’s Board of Directors were:

•	Hydro could focus its financial resources and management attention fully on the significant opportunities for further development of its Oil and Energy and Aluminium business areas following the separation of Hydro Agri.

•	Hydro Agri’s management similarly could focus exclusively on Hydro Agri.

•	The turnaround program had been successfully completed.

•	Hydro Agri’s operational results and strategic direction provided a good basis for profitable growth, which would be difficult to capture within Hydro, due to the capital expenditure requirements of the two other businesses and Hydro Agri’s lack of direct access to capital markets.

•	A stand-alone Hydro Agri company would be in a better position to participate in the expected consolidation of the global fertilizer industry.

Hydro’s Board of Directors also considered certain adverse effects of a separation for Hydro and Hydro Agri, including potentially diminished synergies and financial flexibility, reduced tax consolidation opportunities, and transaction costs.

When deciding to separate Hydro Agri from Hydro, Hydro’s Board of Directors considered these and other factors, which it deemed to be relevant. Hydro’s Board of Directors did not assign any particular weight to specific factors, and individual directors may have assigned different weights to different factors.

If the Demerger is consummated, Hydro intends to direct its managerial and financial resources towards the implementation of its established strategies for the development of Oil and Energy and Aluminium. Increased value creation will be based on the business areas’ competitive advantages and Hydro’s core expertise in connection with commercial and technological innovation, cost efficient operations and first class project execution. Focus will be maintained on capital discipline and improved profitability.

Reasons for the Choice of Transaction Structure

After considering various possible ways of separating Hydro Agri from Hydro, Hydro’s Board of Directors concluded that distributing AgriHold Shares to Hydro’s shareholders, in combination with a sale of 20.0% of the AgriHold Shares, was the alternative that would best position Hydro Agri in the capital markets and enable the new company to take an active part in the industry consolidation.

Hydro’s Board of Directors chose the demerger structure because it is a well-established structure for transactions of this nature in Norway. Further, it could be carried out generally on a tax-free basis in Norway for Norsk Hydro ASA and its shareholders and potentially in certain other countries where Norsk Hydro ASA has a significant shareholder base.

To ensure that AgriHold would have a fixed capital structure independent of the outcome of an offering of AgriHold Shares, Hydro’s Board of Directors decided that the offering should be structured as a sale of AgriHold Shares held by Norsk Hydro ASA. As a result, the risk of the offering will be borne by Hydro. The best way of implementing this decision was to form AgriHold ASA as a wholly owned subsidiary of Norsk Hydro ASA in advance of the Demerger, and capitalize AgriHold ASA to achieve the intended division of ownership in AgriHold ASA between Norsk Hydro ASA and its shareholders immediately after consummation of the Demerger.

The Demerger and Demerger Plan

Hydro Prior to the Demerger

Norsk Hydro ASA currently has a share capital of NOK 5,331,933,000 divided into 266,596,650 shares, par value NOK 20.00 per share.

As of the date of this Information Memorandum, Norsk Hydro ASA holds 9,884,650 treasury shares, 1,484,300 of which have been acquired as part of a share buy-back program approved by Norsk Hydro ASA’s ordinary general meeting on May 7, 2003. In connection with the establishment of the buy-back program, Norsk Hydro ASA entered into an agreement with the Norwegian State, Norsk Hydro ASA’s largest shareholder. Under that agreement, the Norwegian State agreed to Norsk Hydro ASA’s redemption of shares held by the Norwegian State in connection with Norsk Hydro ASA’s buy-back of shares held by other shareholders so that the Norwegian State’s percentage interest in all Hydro Shares would remain unchanged at 43.82% upon completion of the buy-back program. Consistent with this arrangement, Norsk Hydro ASA intends to cancel 1,484,300 treasury shares and redeem 1,157,922 shares currently held by the Norwegian State prior to the Completion Date. The amount to be paid to the Norwegian State in consideration of the redemption of the 1,157,922 shares will be NOK 444,958,166, corresponding to approximately NOK 374 per share (representing the average price paid for shares purchased from other shareholders in the buy-back program), plus interest compensation. Such action requires the approval of two-thirds of the votes cast at the extraordinary general meeting, to be held on January 15, 2004. As explained below, such cancellation and redemption of shares is a condition precedent to the consummation of the Demerger.

Norsk Hydro ASA will not otherwise buy, sell, issue, cancel or redeem any of its shares prior to the Completion Date. As a result, Norsk Hydro ASA’s share capital will, as of the Completion Date, consist of 263,954,428 shares, of which 8,400,350 will be treasury shares, while the remaining 255,554,078 shares will be outstanding.

As of November 25, 2003 there were 41,033 registered holders of Hydro Shares, of whom about 32,200 held at least one round lot (20 Hydro Shares). 1,354 holders of Hydro Shares had their registered address outside of Norway.

The table below reflects the 20 largest registered holders of Hydro Shares as of November 25, 2003.

Shareholders	Number of shares	Share (%)
Ministry of Trade and Industry, Norway	116,832,770	43.8

State Street Bank & Trust Co. Client accounts and similar	12,739,724	4.8

Morgan Guaranty Trust Co of NY (ADR-Division)	12,583,823	4.7

Norsk Hydro ASA	9,884,650	3.7

National Insurance Fund (Folketrygdfondet)	9,612,775	3.6

JP Morgan Chase Bank. Clients Treaty Account	8,967,270	3.4

JP Morgan Chase Bank	5,205,000	2.0

Mellon Bank	5,204,917	2.0

JP Morgan Chase Bank	4,464,000	1.7

Euroclear Bank Client accounts and similar	4,101,202	1.5

The Northern Trust Client accounts and similar	2,716,511	1.0

Vital Forsikring ASA	2,343,501	0.9

JP Morgan Chase Bank Client accounts and similar	2,039,795	0.8

HSBC Bank PLC Clients Account	1,741,594	0.7

JP Morgan Chase Bank	1,461,100	0.5

SIS Segaintersettle Client accounts and similar	1,358,869	0.5

Morgan Stanley & CO. S/A Customer Segrega	1,324,618	0.5

DNB Norge	1,310,849	0.5

JP Morgan Securities	1,286,926	0.5

Storebrand Livsforsikring	1,180,171	0.4

Total number of shares—20 largest shareholders	206,360,065	77.4

Total number of shares	266,596,650	100.0

The chart below reflects the price and turnover volume of the Hydro Shares on the Oslo Stock Exchange since November 25, 2000.

LOGO

The legal structure of the Hydro Group prior to the Demerger is illustrated in simplified form below.

LOGO

AgriHold ASA Prior to the Demerger

AgriHold ASA was established on November 10, 2003, with a share capital of NOK 108,610,470.40 divided into 63,888,512 shares, par value NOK 1.70 per share. All of these AgriHold Shares have been subscribed for by Norsk Hydro ASA for a total subscription price of NOK 2,048,049,500. AgriHold ASA will remain a wholly owned subsidiary of Norsk Hydro ASA until the Completion Date. AgriHold ASA has been established solely for the purpose of the Demerger and will have no subsidiaries or operational activity prior to the Completion Date. AgriHold’s Board of Directors currently consists of the same individuals as are members of Hydro’s Board of Directors.

AgriHold Shares held by Norsk Hydro ASA will constitute 20.0% of the total outstanding AgriHold Shares following consummation of the Demerger. Norsk Hydro ASA expects to sell these shares in connection with, or following, the consummation of the Demerger. See “Intended Sale of Norsk Hydro ASA’s AgriHold Shares” for a brief description of this anticipated transaction.

The Transaction

Under the Demerger Plan, Norsk Hydro ASA will transfer all assets, rights and liabilities primarily relating to Hydro Agri to AgriHold ASA. The transferred assets, rights and liabilities consist primarily of shares and partnership interests held by Norsk Hydro ASA in companies and partnerships forming part of Hydro Agri and a debt due Norsk Hydro ASA. All other assets, rights and liabilities of Norsk Hydro ASA, including the assets, rights and liabilities related to Hydro Oil and Energy and Hydro Aluminium, will be retained by Norsk Hydro ASA. See Part IV of the Information Memorandum for a description of Hydro’s businesses following the Demerger.

Allocation of Assets, Rights and Liabilities Pursuant to the Demerger Plan

As disclosed above, on the Completion Date, all of the assets, rights and liabilities primarily relating to Hydro Agri will be transferred to AgriHold ASA. The Demerger Plan includes a description of such assets, rights and liabilities. Under the Demerger Plan, if the Demerger occurs, the business carried on by the Agri Companies will be treated as having been carried on for the account and risk of AgriHold ASA and the other Agri Companies from and including October 1, 2003.

Norsk Hydro ASA currently holds an indirect interest, through subsidiaries that are not Agri Companies, in several of the Agri Companies and Minority Interest Companies. Prior to the Demerger, Hydro’s group structure will be modified so that all of Norsk Hydro ASA’s interests in the Agri Companies and the Minority Interest Companies will be held by Norsk Hydro ASA either directly or solely through other Agri Companies.

Through the Demerger, AgriHold ASA will acquire certain assets (in addition to the shares and partnership interests in the Agri Companies and the Minority Interest Companies) and rights and assume certain liabilities. Specifically, AgriHold ASA will assume a liability to pay to Norsk Hydro ASA an interest-bearing debt, the principal amount of which was approximately NOK 11.5 billion as

of October 1, 2003. This debt, together with cash and interest-bearing debt of AgriHold ASA and the other Agri Companies, correspond to a consolidated net interest-bearing debt of approximately NOK 8.5 billion for AgriHold ASA and its subsidiaries as of October 1, 2003. In addition, AgriHold ASA and its subsidiaries will, through the Demerger, assume a consolidated net pension obligation that, as calculated in accordance with U.S. GAAP and Norwegian GAAP, amounted to approximately NOK 2.0 billion as of September 30, 2003 (without taking into account any corresponding tax deductions).

AgriHold ASA’s repayment of the above-described debt to Norsk Hydro ASA is expected to be effected on the Completion Date from the proceeds of debt financing to be arranged through financial institutions prior to the consummation of the Demerger. It is a condition precedent to the consummation of the Demerger that adequate documentation shall have been produced to evidence that AgriHold ASA will satisfy its indebtedness to Norsk Hydro ASA on the Completion Date.

Pursuant to the terms of the Demerger Plan, Hydro’s Board of Directors may consent, subject to more detailed agreement, to the extension of such indebtedness. It may also agree to provide a guarantee or other credit support in connection with AgriHold ASA’s debt financing. Although any such decision on the part of Norsk Hydro ASA would fall within its absolute discretion, Hydro’s Board of Directors does not foresee that it will agree to any such arrangements except in the event that AgriHold ASA’s inability otherwise to satisfy its debt on the Completion Date is due solely to transitory matters unrelated to AgriHold’s creditworthiness on a stand-alone basis.

The Demerger Plan contains provisions regarding a number of cash adjustments that shall be made between Norsk Hydro ASA and AgriHold ASA in certain circumstances, among other things to avoid any unintended transfers of value between Norsk Hydro ASA and AgriHold ASA as a result of dividends or other distributions, or intra-group transactions, effected prior to the consummation of the Demerger. The Demerger Plan further provides for adjustments intended to allocate the ultimate burden of tax liabilities of the Agri Companies accrued prior to October 1, 2003 to the Hydro Companies, while tax liabilities of the Agri Companies accrued thereafter (as calculated without reference to tax consolidation measures involving both Hydro Companies and Agri Companies) are to be allocated to the Agri Companies. The Demerger Plan also contains provisions regarding adjustments in respect of various actual or contingent costs relating to tax and other matters.

Illustrative Balance Sheet Information Reflecting Allocation of Assets and Liabilities

The Demerger will be accounted for based on Hydro’s historical values.

presenting the effects of the Demerger only, are presented under the caption “Presentation of Financial Information” in Part V of this Information Memorandum.

NOK billion	Norsk Hydro ASA and subsidiaries before Demerger		Norsk Hydro ASA and subsidiaries after Demerger		Agri Demerged Business⁽¹⁾		AgriHold ASA before Demerger⁽²⁾		AgriHold ASA and subsidiaries after Demerger
Cash and other liquid assets	17.8	⁽⁷⁾	27.4	⁽⁸⁾	0.5	⁽³⁾	2.0	⁽⁴⁾	0.8	⁽⁵⁾
Other current assets	58.1		45.0	⁽⁶⁾	13.5	⁽⁶⁾	—		13.5

Total current assets	75.9		72.4		14.0		2.0		14.3
Non-current assets	143.9		132.7	⁽⁹⁾	11.2		—		11.2

TOTAL ASSETS	219.8		205.1		25.2		2.0		25.5

Interest-bearing debt	36.6		35.7		11.0	⁽³⁾	—		9.3	⁽⁵⁾
Other liabilities	98.2		90.5	⁽⁶⁾	8.1	⁽⁶⁾	—		8.1

Total liabilities	134.8		126.2		19.1		—		17.4

Minority shareholders’ interest	0.7		0.6		0.1		—		0.1
Shareholders’ equity	84.3	⁽⁷⁾	78.3		6.0		2.0		8.0
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	219.8		205.1		25.2		2.0		25.5

Net interest-bearing debt ⁽¹¹⁾	18.8	⁽¹⁰⁾	8.3	⁽¹⁰⁾	10.5	⁽³⁾	(2.0	)⁽⁴⁾	8.5	⁽⁵⁾

⁽¹⁾	Agri Demerged Business comprises assets, rights and liabilities transferred from Hydro in accordance with the Demerger Plan.

⁽²⁾	AgriHold ASA before the Demerger is the transferee company, which has been established for the purpose of the Demerger. This company will have no operational activity prior to the Effective Date of the Demerger.

⁽³⁾

⁽⁴⁾	Approximately NOK 2.0 billion was contributed in cash by Norsk Hydro ASA upon formation of AgriHold ASA.

⁽⁵⁾	AgriHold ASA and subsidiaries after the Demerger will have a net interest-bearing debt of NOK 8.5 billion which is assumed to consist of cash and other liquid assets of NOK 0.8 billion and interest-bearing debt of NOK 9.3 billion.

⁽⁶⁾	Figures include internal trade receivables and trade payables totaling NOK 0.4 billion which will be external after the Demerger.

⁽⁷⁾

⁽⁸⁾

⁽⁹⁾	Shares in AgriHold ASA are assumed to have been sold at book value of approximately NOK 2.0 billion.

⁽¹⁰⁾	A payment of petroleum tax for the second half of 2003 of approximately NOK 7.3 billion was due October 1, 2003. Adjusted for this tax payment the net interest-bearing debt was approximately NOK 26.1 billion before the Demerger and approximately NOK 15.6 billion after the Demerger.

⁽¹¹⁾	Net interest-bearing debt defined as interest-bearing debt, less cash and other liquid assets.

The Hydro Group’s legal structure after the Demerger as currently anticipated is illustrated in simplified form below:

LOGO

The AgriHold Group’s legal structure after the Demerger as currently anticipated is illustrated in simplified form below:

LOGO

Corporate Names and Logos; Use of Trademarks Following the Demerger

Norsk Hydro ASA will retain its corporate name after the Demerger, but intends to launch a new logo in connection with a planned corporate profiling campaign.

AgriHold ASA will change its name prior to the consummation of the Demerger. Upon determination of the new name, Norsk Hydro ASA will, as AgriHold ASA’s sole shareholder, make the appropriate changes to AgriHold ASA’s Articles of Association at an extraordinary general meeting to be held prior to the consummation of the Demerger.

Pursuant to the Demerger Plan, AgriHold may use as its new logo, or as part of it, the Viking ship symbol as presently incorporated in Hydro’s logo.

Pursuant to the Demerger Plan, Hydro may continue to make use of its present logo for a limited period of time and, in certain cases, for a prolonged period of time. Similar arrangements have been made to allow AgriHold, during a transitional period of time, to make use of Hydro’s present logo, and to keep in place Hydro’s name.

Share Split Ratio; Issuance of Consideration Shares

For a demerger to be effected on a tax-free basis under Norwegian law, the share capital of the demerging company must be split between the transferor company and the transferee company. The split must be proportional to the relative net values allocated to each of the transferor and the transferee company.

In light of this requirement, Hydro estimated its fair market value by reference to its market capitalization during the period from September 15 to October 15, 2003. Hydro used 14 analysts’ estimates of Hydro Agri’s enterprise value published in the weeks immediately following the Announcement Date to value Hydro Agri in a similar manner to that applicable to a publicly-traded company. The concentration of these estimates was in the NOK 18-20 billion range. Hydro compared these estimates to internal valuations of Hydro Agri, including estimates based on comparable company valuation multiples, and concluded that the implied valuation fell within the range of reasonable valuations based on customary valuation methodologies used in the financial community. Based on these estimates of the fair values of Hydro and the assets, rights and liabilities to be transferred to AgriHold ASA in the Demerger, respectively, the members of Hydro’s Board of Directors, in their capacities as members of Hydro’s Board of Directors and as the members of AgriHold’s Board of Directors, determined that an allocation of 91.5% of Norsk Hydro ASA’s share capital to the assets, rights and liabilities to be retained by Norsk Hydro ASA following the Demerger and 8.5% of Norsk Hydro ASA’s share capital to the assets, rights and liabilities transferred in the Demerger would be proportional to the relative net values allocated to the two companies in the Demerger, and, thus, comply with the Norwegian legal requirements for tax-free treatment of the Demerger.

In the Demerger, AgriHold ASA will issue one share for each outstanding Hydro Share. The Demerger will result in the split of the share capital of Norsk Hydro ASA through a reduction of the par value of each Hydro Share simultaneously with the issuance of one new AgriHold Share for each outstanding Hydro Share. Consistent with the above-described relative valuations of the assets, rights and liabilities allocated to each of Norsk Hydro ASA and AgriHold ASA in the Demerger, the par value of each Hydro Share will be reduced from NOK 20.00 to NOK 18.30, while the par value of each AgriHold Share will be NOK 1.70. This will be accomplished in the following manner:

•

Norsk Hydro ASA’s share capital will be reduced by NOK 448,722,527.60 (from NOK 5,279,088,560 to NOK 4,830,366,032.40), by means of a reduction of the par value of each Hydro Share from NOK 20 to NOK 18.30.

•

Simultaneously with the reduction in Norsk Hydro ASA’s share capital, AgriHold ASA’s share capital will be increased by NOK 434,441,932.60 (from NOK 108,610,470.40 to NOK 543,052,403) through the issuance to Norsk Hydro ASA’s shareholders of 255,554,078 new AgriHold Shares, each with a par value of NOK 1.70, in the ratio of one AgriHold Share per Hydro Share.

No AgriHold Shares will be issued to Norsk Hydro ASA with respect to its treasury shares in connection with the Demerger. Accordingly, the number of AgriHold Shares held by Norsk Hydro ASA will not increase as a result of the Demerger, and AgriHold ASA will not receive any treasury shares in the Demerger.

Actions to be Taken by Norsk Hydro ASA’s Shareholders at the Extraordinary General Meeting

At the extraordinary general meeting of Norsk Hydro ASA’s shareholders, to be held on January 15, 2004 at 5.00 p.m. (Oslo time) at “Gamle Logen”, Grev Wedels Plass 2, Oslo, Norsk Hydro ASA’s shareholders will vote on the following proposals:

•

approval of the reduction of Norsk Hydro ASA’s share capital by NOK 52,844,440 in connection with cancellation of 1,484,300 treasury shares and redemption of 1,157,922 shares held by the Norwegian State, and

•

approval of the Demerger Plan.

Each of these proposals must be approved by two-thirds of the votes cast at the extraordinary general meeting in order for the Demerger to be implemented. As noted above, the reduction of Norsk Hydro ASA’s share capital in connection with the cancellation of treasury shares and the redemption of shares held by the Norwegian State is a condition precedent to consummation of the Demerger.

Norsk Hydro ASA’s Articles of Association provide that shareholders who wish to attend the extraordinary general meeting (in person or by proxy) must notify Norsk Hydro ASA of their intention to attend at least five days prior to the meeting. It is necessary to attend the meeting (in person or by proxy) in order to vote on the proposals before the shareholders. A holder of Hydro ADRs, representing Hydro Shares, who desires to vote at the meeting must withdraw the underlying Hydro Shares from the ADR Depositary and register such shares in his own name in Norsk Hydro ASA’s share register in the VPS. A shareholder holding shares through a nominee account must also withdraw his shares from the nominee account and register such shares in his own name in Norsk Hydro ASA’s share register with the VPS. For a description of the VPS System, see “Description of the Shares and Share Capital of AgriHold Following the Demerger – The VPS System and Transfer of Shares.”

Under Norwegian law, there are no quorum requirements applicable to general meetings.

Hydro’s Board of Directors recommends that shareholders approve each of these proposals to be considered at the extraordinary general meeting. If shareholders approve the Demerger Plan by the requisite two-thirds vote, Norsk Hydro ASA will, as the sole shareholder of AgriHold ASA, vote to approve the Demerger Plan at the extraordinary general meeting of AgriHold ASA, to be held immediately after the Norsk Hydro ASA extraordinary general meeting on January 15, 2003.

The Corporate Assembly of Norsk Hydro ASA is expected to consider the Demerger Plan at its meeting on December 10, 2003, and will then issue a statement in respect of the Demerger. The Corporate Assembly has no decision-making authority in respect of the Demerger.

Election of AgriHold’s Board of Directors

As noted above, AgriHold’s Board of Directors currently consists of the present members of Hydro’s Board of Directors. AgriHold’s current Board of Directors will resign upon consummation of the Demerger. At Norsk Hydro ASA’s extraordinary general meeting to be held on January 15, 2004, five individuals will be designated to be directors of AgriHold ASA. In the following extraordinary general meeting of AgriHold ASA, Norsk Hydro ASA will, as sole shareholder of AgriHold ASA, elect the designated individuals to serve as members of AgriHold’s Board of Directors following the consummation of the Demerger. Nominees for these director positions are expected to be announced by Norsk Hydro ASA’s nomination committee in early January 2004.

In addition to the shareholder representatives referred to above, three individuals shall be elected by and among the employees of AgriHold ASA and its Norwegian subsidiaries to serve as members of AgriHold’s Board of Directors following the Demerger. Such employee representatives are expected to be elected prior to consummation of the Demerger, in accordance with the Regulation Relating to Employee Representation, dated December 18, 1998 and a consent from the Norwegian Industrial Democracy Board (“Bedriftsdemokratinemnda”).

AgriHold ASA will have a nomination committee consisting of four members elected by AgriHold ASA’s general meeting. The procedure for designation and election of the individuals who will serve in such positions immediately following the Demerger will be the same as for election of new shareholder representatives on AgriHold’s Board of Directors, as described above. Norsk Hydro ASA’s nomination committee is expected to announce a proposal for the designation of individuals to serve as the initial members of AgriHold ASA’s nomination committee at the time Norsk Hydro ASA’s nomination committee announces its AgriHold ASA director nominees.

Authority to Issue New AgriHold Shares

AgriHold’s strategy will include making selective investments and evaluating strategic acquisition opportunities on a case-by-case basis with the aim to strengthen AgriHold’s business position. In order to contribute to AgriHold’s financial flexibility in this regard, as well as to enable AgriHold’s Board of Directors to establish share-based compensation systems, Hydro’s Board of Directors will propose to Norsk Hydro ASA’s extraordinary general meeting that it approve the grant of authority to AgriHold ASA’s Board of Directors, for a period commencing on consummation of the Demerger and ending two years after this authority is given to AgriHold’s Board of Directors, to issue up to 15 million new AgriHold Shares. If this proposal is approved by at least two-thirds of the votes cast at Norsk Hydro ASA’s extraordinary general meeting, Norsk Hydro ASA will, as the sole shareholder of AgriHold ASA, approve the grant of such authority to AgriHold’s Board of Directors at an extraordinary general meeting of AgriHold ASA.

Conditions to Consummation of the Demerger

Under the terms of the Demerger Plan, consummation of the Demerger is subject to the satisfaction or, where noted below, waiver of each of the following conditions:

•

All material intra-group transactions which are specified in Section 12 and 13 of the Demerger Plan and which are necessary for AgriHold ASA to become the direct or indirect owner of all of Hydro’s current interests in the Agri Companies and the Minority Interest Companies shall have been completed, unless the Boards of Directors of each of Norsk Hydro ASA and AgriHold ASA conclude that the delay in completing, or potential failure to complete, such transactions will not have a material adverse effect on either of the companies after having taken into consideration any compensatory arrangements which may be agreed to in this regard.

•

Adequate documentation shall have been produced to evidence that AgriHold ASA will satisfy its indebtedness to Norsk Hydro ASA on the Completion Date, unless Hydro’s Board of Directors consents, subject to more detailed agreement, to the extension of such indebtedness.

•

All consents required for the assignment of agreements from Norsk Hydro ASA to AgriHold ASA shall have been obtained, and all rights of termination of agreements to which an Agri Company or a Minority Interest Company is a party shall have been waived or the deadline for exercise of any such rights shall have expired without such rights having been exercised. However, this condition shall not apply if, in the opinion of Hydro’s Board of Directors and AgriHold’s Board of Directors, neither the potential failure to obtain consents nor the potential termination of such agreements would individually or in the aggregate have a material adverse effect on the business of the AgriHold Group following the Demerger.

•

The OSE shall have approved the AgriHold Shares for listing promptly after registration of the consummation of the Demerger in the Register of Business Enterprises.

•

1,157,922 Hydro Shares held by the Norwegian State shall have been redeemed and 1,484,300 treasury shares shall have been cancelled, as described above.

•

The deadline for objections from Norsk Hydro ASA’s creditors shall have expired and the relationship with any creditors which have raised objections shall have been settled, or the District Court (“tingretten”) shall have decided that the Demerger may nevertheless be consummated. See the information below under the caption “Relationship with Creditors.”

Filings and Public Approvals

Hydro is not aware of any filings or public approvals required in order to consummate the Demerger, or any of the related transactions to structure Norsk Hydro ASA’s ownership of the subsidiaries and other entities that comprise Hydro Agri’s business so as to make possible a full separation of these subsidiaries and entities from Hydro, except for the filings with the Register of Business Enterprises required by the Norwegian Public Limited Companies Act in connection with a demerger.

Consummation of the Demerger

If the conditions to consummation of the Demerger are satisfied or, where applicable, waived, AgriHold’s Board of Directors will give notice to the Register of Business Enterprises that the Demerger is to be consummated. Such notice is expected to be given on or about March 24, 2004. Upon registration of such notice in the Register of Business Enterprises, the following will occur by operation of Norwegian law:

•

the reduction of Norsk Hydro ASA’s share capital will be effected;

•

the increase in AgriHold ASA’s share capital will be effected;

•

assets, rights and liabilities will be transferred to AgriHold ASA in accordance with the Demerger Plan;

•

the new AgriHold Shares will be issued to Norsk Hydro ASA’s shareholders; and

•

all other rights and obligations provided for in the Demerger Plan will take effect.

If registration of such notice in the Register of Business Enterprises has not occurred on or before June 30, 2004, the Demerger will lapse.

As soon as practicable after the registration of the consummation of the Demerger with the Register of Business Enterprises, AgriHold ASA will cause the new AgriHold Shares to be registered in the name of the registered holders of Hydro Shares in AgriHold ASA’s shareholder register with VPS. This is expected to occur on or about March 30, 2004.

Information for Holders of Hydro ADRs

Prior to the extraordinary general meeting of Norsk Hydro ASA’s shareholders, Norsk Hydro ASA will send to its shareholders, through its ADR Depositary, this Information Memorandum.

In conjunction with the Demerger, AgriHold ASA intends to create for the AgriHold Shares a Level I ADR facility. Norsk Hydro ASA and its financial and legal advisors believe that an ADR facility for the AgriHold Shares will offer a number of benefits to its U.S. investors. Principal among these benefits is the service offered by the AgriHold ADR Depositary in making dividends and other distributions normally payable in Norway in Norwegian kroner available in the United States after conversion to U.S. dollars. This service, among other benefits, will facilitate the investment in AgriHold by U.S. investors that may otherwise be limited in their ability to hold non-U.S. dollar denominated securities. In addition, the deposit agreement will provide for AgriHold to deliver promptly to the AgriHold ADR Depositary all notices and other communications generally delivered to shareholders or filed with the Oslo Stock Exchange. The AgriHold ADR Depositary will undertake to mail or deliver these notices and communications to ADR holders and/or maintain them for inspection at its U.S. corporate trust office. In addition, an ADR facility provides a U.S. registrar and a custody arrangement through a U.S. entity, which are prerequisites for certain U.S. investors, particularly certain investment managers and other fiduciaries.

AgriHold ASA will file with the SEC a registration statement on Form F-6 in respect of the ADSs representing the AgriHold Shares and seek effectiveness of that registration statement prior to the Completion Date. In accordance with SEC rules, AgriHold ASA will apply to the SEC for an exemption from the reporting requirements of the Exchange Act in accordance with Rule 12g3-2(b) thereunder prior to filing the Form F-6. AgriHold ASA intends to comply with the information supplying requirements under Rule 12g3-2(b) so long as it has more than 300 U.S. shareholders. Further, by virtue of its establishing a Level I ADR facility, AgriHold ASA will have agreed to maintain its exemption from the registration and reporting requirements of the Exchange Act and furnish specified information to the SEC under the Exchange Act in accordance with Rule 12g3-2(b) thereunder.

AgriHold ASA presently does not intend that the AgriHold Shares or ADSs will be listed on a securities exchange in the United States or quoted on Nasdaq or any other inter-dealer quotation system in the United States in conjunction with the Demerger, or that AgriHold ASA will otherwise facilitate the creation of a trading market of AgriHold Shares in the United States. The creation of an ADR facility for the AgriHold Shares is intended solely to accommodate the holders of Norsk Hydro ASA’s ADSs, ensuring that Norsk Hydro ASA’s shareholders (including the holders of its ADSs) are treated as fairly as possible in the Demerger. However, AgriHold ASA may at a later time determine to list its shares on a U.S. securities exchange or obtain a quotation on Nasdaq after the Demerger is completed. Accordingly, until such a listing or quotation in the United States, if any (or until AgriHold ASA completes an offering of securities registered under the Securities Act, AgriHold ASA will not be subject to the information reporting requirements of the Exchange Act, but will be entitled to rely on the exemption provided by Rule 12g3-2(b) thereunder. If AgriHold ASA lists or obtains a quotation in the United States, AgriHold ASA will become subject to the reporting requirements under the Exchange Act.

Demerger-Related Business Agreements between Hydro Companies and Agri Companies

Agreements for Hydro’s Continued Provision of Goods and Services to Agri Companies

In connection with the Demerger, Hydro Companies and Agri Companies have entered into, or will enter into, certain agreements that will regulate the continued provision of a number of goods and services by Hydro Companies to Agri Companies (particularly Hydro Agri’s Norwegian operating entities), including:

•

a plant maintenance agreement, which may be terminated by either party with effect from December 31, 2006; and

•

an information services and information technology frame agreement pursuant to which Hydro will be the sole supplier of day-to-day IT/IS services and project related IT/IS services until December 31, 2006, after which time Agri may at its option source such services from either Hydro or third parties until the expiration of the agreement on December 31, 2008.

The terms and conditions of the agreements entered (or to be entered) into between Hydro Companies and Agri Companies are (or will), in general, be similar to the terms and conditions previously applied for intra-group purposes. Those previously applied terms and conditions are reflected in the segment information contained in Hydro’s financial statements. Hydro believes that the amounts paid (or to be paid) pursuant to these agreements are, except as described below, consistent with prevailing market prices for similar services. In the aggregate, Agri Companies are expected to pay approximately NOK 420 million in respect of the 12-month period ending on December 31, 2003 for services of the nature covered by the above-mentioned plant maintenance agreement and information services and information technology frame agreement.

Power Sourcing Contracts

A Hydro Company and certain Agri Companies have entered into agreements under which electrical power will be provided to Hydro Agri’s production facilities in Glomfjord and Porsgrunn, respectively.

•

The two agreements pertaining to the Glomfjord facility provide for the supply of approximately 250 GWh of power per year. In general, the agreements, which expire in 2007, pass through the terms of an agreement with Statkraft, a Norwegian State-owned power company.

•

The agreement pertaining to the Porsgrunn plant provides for the supply of approximately 680 GWh of power per year. This agreement, which expires in 2005, reflects the continuation of an established intra-group power supply arrangement.

Each of the Statkraft agreement and the previous intra-group agreement were entered into on arm’s-length terms when market prices for electrical power in Norway were lower than current price levels, as reflected in, for example, term contracts quoted on the Nord Pool, the Nordic Power Exchange.

Supply of Natural Gas

A Hydro Company and an Agri Company have entered into a cooperation agreement relating to a long-term gas supply contract dated March 10, 1987 with N.V. Nederlandse Gasunie, as supplier (the “Gasunie Contract”), and another long term gas supply contract with Duke Energy Europe Northwest B.V., as supplier (the “Duke Contract”), under which Hydro Agri’s Sluiskil facilities are supplied with natural gas. Hydro has recently entered into an agreement with Duke Energy International to acquire Duke Energy Europe Northwest B.V. Hydro Agri and a Hydro Company are in the process of seeking a transfer of the Gasunie Contract to the Hydro Company. If that occurs, the Hydro Company will provide the Agri Company with the natural gas sourced under the Gasunie Contract on a back-to-back basis. Gasunie has recently provided notice of a substantial price increase.

As a result of Gasunie’s notification of the price increase, Hydro Agri and the Hydro Company will have the right to reduce the off-take under the Gasunie Contract or terminate the Gasunie Contract. The parties to that contract are presently in negotiations about the proposed price increase.

The Duke Contract will be transferred to an Agri Company, but according to the cooperation agreement, the Hydro Company will utilize and pay arm’s-length compensation for the off-take flexibility provided by such contract.

Founder and Subscription Certificates

According to Norsk Hydro ASA’s Articles of Association, holders of unredeemed “founder certificates” and “subscription certificates” have preferential subscription rights in the event of an increase in Norsk Hydro ASA’s share capital, provided that the Norwegian law in effect at the time of the share increase so permits. Norsk Hydro ASA’s Articles of Association provide that these preferential subscription rights shall be reserved for such holders in connection with each share capital increase, on the conditions stipulated by Hydro’s Board of Directors, for up to:

•

0.83% of the increase, for holders of the 83 unredeemed founder certificates; and

•

2.79% of the increase, for holders of the 4,343 unredeemed subscription certificates.

These preferential rights do not apply if the share capital increase is effected to allot shares to third parties as compensation for their transfer of assets to Norsk Hydro ASA.

Holders of unredeemed “founder certificates” and “subscription certificates” will be entitled to the same preferential rights in AgriHold ASA. The Demerger Plan provides that AgriHold ASA’s Articles of Association will include provisions similar to the provisions in Norsk Hydro ASA’s Articles of Association with respect to such rights.

Transfer of Agreements

As noted above, almost all of Hydro Agri’s business is conducted through subsidiaries of Norsk Hydro ASA and non-consolidated investees. Accordingly, most of the agreements relating to Hydro Agri were entered into by these subsidiaries or non-consolidated investees. Under the terms of some of these agreements, other contractual parties would have certain rights with respect to termination or otherwise as a result of the Demerger or the related transactions that will be effected in connection with the Demerger.

Notwithstanding the legal structure described above, Norsk Hydro ASA has entered into a number of agreements relating to Hydro Agri in its own name. Under the terms of several such agreements, consents from other contractual parties may be necessary in order to permit their assignment to AgriHold ASA as part of the Demerger. The Demerger Plan provides that in the event that the necessary consent to the assignment of an agreement is not obtained, the parties shall, as far as possible, ensure that the agreement continues in force in the name of Norsk Hydro ASA but for the account and risk of AgriHold ASA, and, further, that if this is not possible, the parties shall, as far as possible, enter into an agreement between themselves that grants to AgriHold ASA the same rights against and liabilities towards Norsk Hydro ASA as those that Norsk Hydro ASA has against and owes to the contractual party in question.

It is a condition precedent to the consummation of the Demerger that all consents required for the assignment of agreements from Norsk Hydro ASA to AgriHold ASA shall have been obtained, and that all rights of termination of agreements to which an Agri Company or a Minority Interest Company is a party shall have been waived or the deadline for the exercise of any such rights shall have expired without such rights having been exercised. However, this condition shall not apply if in the opinion of each of Hydro’s Board of Directors and AgriHold’s Board of Directors neither the potential failure to obtain consents nor the potential terminations of such agreements would individually or in the aggregate have a material adverse effect on the business of the AgriHold Group following the Demerger.

Norsk Hydro ASA has issued a number of guarantees of the payment and performance obligations of the Agri Companies under various contracts. The aggregate maximum amounts payable under such guarantees limited in amount was approximately NOK 3.2 billion as of October 1, 2003. In addition, Norsk Hydro ASA has issued some guarantees which are not limited in amount. Although each of Norsk Hydro ASA and AgriHold ASA will use commercially reasonable efforts to obtain Norsk Hydro ASA’s release from such guarantees in consideration for the substitution of AgriHold ASA as guarantor, there can be no assurance that such releases will actually be obtained. To the extent that such releases are not obtained, the Demerger Plan provides that the relevant Agri Companies shall pay a commission to Norsk Hydro ASA on the basis of the aggregate amount of the guarantees outstanding. The rate of such commission shall be 0.30% per year for the period through September 30, 2004, and thereafter it will increase by 0.05 percentage points from the end of every second calendar quarter to a maximum of 0.60% per year. Hydro believes that this commission is consistent with prevailing market terms for such guarantees.

Relationship with Creditors

If the requisite shareholder approval of (i) the cancellation of treasury shares and redemption Hydro Shares held by the Norwegian State and (ii) the Demerger Plan is obtained at the extraordinary general meeting of Norsk Hydro ASA (which will result in Norsk Hydro ASA’s approval of the Demerger Plan at the extraordinary general meeting of AgriHold ASA), the resolutions of the extraordinary general meetings will promptly be reported to the Register of Business Enterprises, which will then publish a notice to Norsk Hydro ASA’s creditors. Creditors will then have the right, within the two-month period following publication of that notice, to raise objections to the consummation of (i) the cancellation and redemption of shares and (ii) the Demerger.

If a creditor with an undisputed and due claim raises an objection, the cancellation and redemption of shares or the Demerger, as the case may be, cannot be consummated until the claim has been settled. If a creditor with a disputed or undue claim raises an objection, the cancellation and redemption of shares or the Demerger, as the case may be, cannot be consummated before adequate security has been posted in respect of such claim unless:

•

the District Court (“tingretten”) determines that it is clear that there is no claim or that the Demerger or the cancellation or redemption of shares, as the case may be, will not weaken the creditor’s possibility of achieving satisfaction of the claim, or

•

in respect of the Demerger, following a demand from Norsk Hydro ASA, the District Court decides that the Demerger may nevertheless be consummated.

Based on the scheduled date for the extraordinary general meetings, the creditor notification period is expected to expire on or about March 19, 2004.

If a particular liability accrued prior to the consummation of the Demerger is not satisfied by the party to which the liability has been allocated under the Demerger Plan, be it Norsk Hydro ASA or AgriHold ASA, then the other party will be jointly and severally liable for such liability. This statutory liability is unlimited in time, but is limited in amount to the net value allocated to the non-defaulting party in the Demerger.

As most operational liabilities of the Hydro Group are vested in subsidiaries, the majority of Norsk Hydro ASA’s significant liabilities are obligations under loan agreements and guarantees. As of October 1, 2003, Norsk Hydro ASA had gross interest-bearing debt of approximately NOK 32.2 billion and guarantees limited in amount for liabilities amounting in the aggregate to approximately NOK 8.6 billion, exclusive of guarantees for liabilities of Agri Companies. In addition, Norsk Hydro ASA has issued some guarantees which are not limited in amount. Norsk Hydro ASA and AgriHold ASA will use commercially reasonable efforts to obtain the release of AgriHold ASA from liabilities under loan agreements and guarantees, but there can be no assurance that such releases will actually be obtained.

In addition, Norsk Hydro ASA has unfunded pension liabilities, which, calculated according to U.S. GAAP and Norwegian GAAP, amounted to approximately NOK 3.0 billion as of December 31, 2002, exclusive of that portion of the liability which will be transferred to AgriHold ASA in the Demerger.

The intention has been to allocate all of Norsk Hydro ASA’s liabilities to either Norsk Hydro ASA or AgriHold ASA in the Demerger Plan. If it should nevertheless not be possible to ascertain from the terms of the Demerger Plan which company is liable for a particular obligation which has accrued prior to the consummation of the Demerger, Norsk Hydro ASA and AgriHold ASA will be jointly and severally liable for such claim.

Hydro believes that there are no terms contained in any of its material loan agreements that provide the lender with rights or remedies in connection with the Demerger apart from those rights provided by law described above and in respect of which a waiver has not been obtained.

Employees

As of September 30, 2003, the Agri Companies had 7,606 employees, of whom approximately 325 were employed by Norsk Hydro ASA and the balance by various subsidiaries. For a description of the geographic location of such employees and their allocation among Hydro Agri’s three segments, see Part III of this Information Memorandum, “Hydro Agri’s Business – Employees” in Part III of this Information Memorandum.

Those Norsk Hydro ASA employees whose tasks primarily relate to Hydro Agri will become employees of AgriHold ASA or one of its Norwegian subsidiaries following the Demerger. Their terms of employment, including with respect to pensions, will be substantially unaffected by the transfer of their employment in connection with the Demerger.

The majority of the employees of Norsk Hydro ASA’s various subsidiaries will not be directly affected by the Demerger, although a limited number of individuals will have their employment transferred from an Agri Company to a Hydro Company, or vice versa, in connection with the Demerger.

Consistent with Norwegian labor legislation, the Demerger proposal has been presented to and discussed with representatives of those Norsk Hydro ASA employees whose employment will be transferred to AgriHold ASA in the Demerger. The Demerger Plan and the report on the Demerger from Hydro’s Board of Directors will be made available to the Norsk Hydro ASA employees. Further, information has been given to, and there have been consultations with, employees of Agri Companies in accordance with legal requirements, collective bargaining agreements and ordinary practice in various countries. In Norway, AgriHold ASA and the employees of the Norwegian Agri Companies have entered into an agreement pursuant to which AgriHold ASA will not have any Corporate Assembly. As a consequence of this, three instead of two of the eight members of AgriHold’s Board of Directors will be elected by and among the employees of the Norwegian Agri Companies.

Tax Matters

General

Set forth below is a description of certain tax consequences of the Demerger and the related transactions between subsidiaries of Norsk Hydro ASA.

The description below of tax consequences for shareholders is a summary provided by Hydro’s advisors in each jurisdiction of some of the tax rules relevant to holders of Hydro Shares and ADSs that are effective as of the date of this Information Memorandum. The description is of a general nature and does not cover all tax rules and regulations of relevance in connection with the Demerger. Holders of Hydro Shares and Hydro ADSs should contact professional tax advisors to clarify individual tax consequences in connection with the Demerger.

Tax Consequences for Norsk Hydro ASA and AgriHold ASA

Hydro believes that the Demerger complies with the requirements for treatment of the transaction as a tax-free transaction in Norway. Accordingly, the Demerger should not trigger any Norwegian capital gains taxation on the part of Norsk Hydro ASA, and AgriHold ASA should step into Norsk Hydro ASA’s tax positions with respect to the assets and liabilities transferred in the Demerger. The

Demerger will for Norwegian tax purposes take effect as of January 1, 2004, which means that items of income and expense generated by Norsk Hydro ASA from such date will, to the extent related to the operations transferred to AgriHold ASA in the Demerger, be attributed to AgriHold ASA for tax purposes. Pursuant to the Demerger Plan, Norsk Hydro ASA is ultimately liable for any and all costs arising as a direct result of the Demerger or any of the related intra-group transactions described below.

Norsk Hydro ASA’s current aggregate tax base in its AgriHold Shares is equal to the aggregate subscription price of approximately NOK 2.0 billion. When Norsk Hydro ASA sells AgriHold Shares, it will for Norwegian tax purposes realize gains or losses based on the difference between the net sales price and the tax base in the shares, as adjusted for RISK (Norsk Hydro ASA’s pro rata portion of the retained tax earnings of AgriHold during the period of Norsk Hydro ASA’s ownership). The applicable tax rate is currently 28%.

Tax Consequences of Transactions between Subsidiaries of Norsk Hydro ASA Related to the Demerger

As noted above, the major part of Hydro Agri is organized through the Agri Companies and Minority Interest Companies. Norsk Hydro ASA’s interest in several of these companies is currently held indirectly through subsidiaries that are not Agri Companies. In order to enable Norsk Hydro ASA to transfer direct or indirect ownership of all Agri Companies and Minority Interest Companies to AgriHold ASA, Hydro’s group structure must be modified before the Demerger so that all interests in Agri Companies and Minority Interest Companies are held by Norsk Hydro ASA either directly or solely through other Agri Companies. To this end, Hydro will prior to the Completion Date effect a number of intra-group transactions.

Hydro believes that the majority of the most substantial of such intra-group transactions will be tax-free according to the laws and regulations of the relevant jurisdictions or tax relief rulings obtained from competent authorities. Although the adjustments to Hydro’s current group structure will also involve a number of taxable transactions, Hydro believes that such transactions will neither individually nor in the aggregate lead to material cash tax payments or material tax costs for accounting purposes. It must be stressed, however, that this view is based on a number of assumptions for which there is considerable uncertainty.

Tax Consequences for Shareholders in Norway

As noted above, Hydro believes that the Demerger complies with the requirements for treatment of the transaction as a tax-free transaction in Norway. As a result, the distribution of the new AgriHold Shares to the holders of Hydro Shares will not trigger tax in Norway. The tax base in Hydro Shares, including adjustments for RISK (a shareholder’s pro rata portion of the retained tax earnings during the period of such shareholder’s ownership), will be split between the Hydro Shares and the new AgriHold Shares in the same proportion as the relative fair market values and share capital of Norsk Hydro ASA (91.5%) and the assets, rights and liabilities transferred to AgriHold ASA in the Demerger (8.5%). For each holder of Hydro Shares, the aggregate tax base in the Hydro Shares and the AgriHold Shares immediately after the Demerger will thus be equal to the tax base in the Hydro Shares immediately before the Demerger.

AgriHold Shares will for tax purposes be regarded as having been acquired at the same time as the corresponding Hydro Shares. For example, if a Hydro Share has been acquired on January 1, 2000, the new AgriHold Share issued in respect of such Hydro Share will for tax purposes (including with respect to the application of the first in, first out principle) be regarded as having been acquired on that date.

The issuance of AgriHold Shares in the Demerger will not be subject to any withholding tax in Norway.

Tax Consequences for Shareholders in the United States

The following discussion is a summary based on present law of certain U.S. federal income tax considerations relevant to the Demerger. The discussion addresses only U.S. Shareholders that hold Hydro Shares or Hydro ADRs as capital assets and use the U.S. dollar as their functional currency. It does not address the tax treatment of U.S. Shareholders subject to special rules, such as banks, dealers, insurance companies, regulated investment companies, tax-exempt entities, holders of 10% or more of Norsk Hydro ASA’s voting shares, persons holding Hydro Shares or Hydro ADRs as part of a hedge, straddle, conversion, or other integrated financial transaction, or constructive sale transaction. Hydro believes, and this discussion assumes, that Norsk Hydro ASA is not a passive foreign investment company for U.S. federal income tax purposes.

This summary does not address U.S. state or local taxes. It does not consider any investor’s particular circumstances. It is not a substitute for tax advice. Hydro urges investors to consult their own tax advisers about the tax consequences of the Demerger.

As used in this discussion, “U.S. Shareholder” means a beneficial owner of Hydro Shares or Hydro ADSs that is (i) a citizen or resident of the United States, (ii) a corporation, partnership or other business entity organized under the laws of the United States, (iii) a trust subject to the control of a U.S. person and the primary supervision of a U.S. court or (iv) an estate the income of which is subject to U.S. federal income tax regardless of its source.

A U.S. Shareholder receiving AgriHold Shares will be treated as receiving a distribution from Hydro. The tax consequences of the distribution depend on whether the Demerger will satisfy the conditions for non-recognition treatment imposed by Section 355 of the Internal Revenue Code of 1986, as amended (“Section 355”), including that each of Hydro and AgriHold conducts an active trade or business with a five year history.

KPMG LLP (“KPMG”) expects to provide Hydro with an opinion letter stating that, for U.S. tax purposes, the Demerger should satisfy the conditions for tax-free treatment. KPMG’s opinion will be contingent upon a number of factors, including Hydro providing KPMG with a letter containing certain representations (including a representation that, other than accounts payable related to purchases and sales of inventory in the ordinary course of business, no debt owed by AgriHold ASA to Norsk Hydro ASA will remain outstanding beyond a reasonably short period of time following the consummation of the Demerger). Hydro has not, however, sought a ruling from the U.S. Internal Revenue Service, and can therefore offer no assurance that the Internal Revenue Service might not reach a different conclusion.

If the Demerger qualifies as tax-free, (i) a U.S. Shareholder would not recognize gain or loss upon receipt of the AgriHold Shares; (ii) a U.S. Shareholder would allocate its adjusted tax basis in the Hydro Shares or Hydro ADRs between the AgriHold Shares received and its existing Hydro Shares or Hydro ADRs in proportion to their relative fair market value and (iii) a U.S. Shareholder’s holding period in the AgriHold Shares would include its holding period in the Hydro Shares or Hydro ADSs. A U.S. Shareholder treating the Demerger as tax-free will be required to attach to its tax return for the year in which it receives AgriHold Shares a statement setting forth certain information regarding the application of Section 355.

If the Demerger were not to qualify as tax-free, a U.S. shareholder that receives AgriHold Shares would be treated as receiving a taxable distribution from Hydro in an amount equal to the fair market value of the shares in U.S. dollars. This distribution would be treated as a dividend, taxable as ordinary income, to the extent of the U.S. Shareholder’s share of current and accumulated earnings and profits of Hydro as determined for U.S. federal income tax purposes (which Hydro does not compute). A non-corporate U.S. Shareholder meeting certain conditions (including a holding period) would be taxed on the dividend amount at the same preferential rate allowed for long-term capital gains. If the amount of the distribution were to exceed Hydro’s current and accumulated earnings and profits, the excess would be treated as a recovery of basis to the extent of a U.S. Shareholder’s basis in its Hydro Shares

or Hydro ADSs and then as capital gain. Since Hydro does not calculate earnings and profits for U.S. tax purposes, however, a U.S. Shareholder should expect not to be able to establish that any portion of the distribution would be treated as recovery of basis or capital gain.

If the Demerger were not to qualify as tax-free, a U.S. Shareholder would have a basis in the AgriHold Shares received equal to the fair market value at the time of receipt determined in U.S. dollars on the date of receipt, and the holding period of the AgriHold Shares would commence on the day following the Demerger. A non-corporate U.S. shareholder benefiting from the preferential rate for dividends may be subject to special rules treating any loss realized on the sale of Hydro Shares or Hydro ADSs as long-term capital loss to the extent of the dividend.

Tax Consequences for Shareholders in the United Kingdom

Hydro has been advised that the Demerger is not expected to constitute a disposal for the purposes of taxation of capital gains for those holders of Hydro Shares who are resident or ordinarily resident in the United Kingdom.

It should instead be treated for such purposes as a reorganization. This means that the composite new holding of Norsk Hydro ASA and AgriHold Shares will be treated as the same asset as the original holding of Hydro Shares acquired at the same time as that original holding. The original base cost of the original holding of Hydro Shares will be allocated between the separate holdings of Norsk Hydro Shares and AgriHold Shares by reference to their market values on the first day on which market values are quoted for such shares.

Tax Consequences for Shareholders in France

The issuance of AgriHold Shares to French tax resident holders of Hydro Shares will be treated as distributed income/dividend by Norsk Hydro ASA.

French tax resident individuals owning Hydro Shares as part of their private portfolio:

The fair market value of the AgriHold Shares (converted into euro at the date of their attribution) will be taken into account to determine the global income of the taxpayer in the schedule of distributed/dividend income (“revenus de capitaux mobiliers”).

It will be subject to :

the income tax levied according to the progressive schedule;

the generalized social contribution (“CSG”) which current rate is of 7.5% (article 1600-0 C and article 1600-0 E of the French Tax Code (the “FTC”));

the social levy of 2% (article 1600-0 F bis III 1 of the FTC); and

the 0.5% contribution for the refund of the social debt (“CRDS”) (article 1600-0 L of the FTC).

This income does not give right to the annual relief of € 1,220.00 (€ 2,240.00 for married couples or partners subject to joint taxation having entered into a civil solidarity agreement) provided under article 158-3 of the FTC.

Legal entities subject to French corporate income tax:

The fair market value of the AgriHold Shares (converted into euro at the date of their attribution) will be taxable as ordinary income for French corporate income tax purpose at a rate of 33.1/3% increased by an additional contribution representing (i) 3% for the entities realizing less than € 7,630,000.00 of turnover and whose share capital is totally paid in and owned continuously for at least 75% by individuals (or by entities themselves meeting these conditions), (ii) 3% for the other entities, to which is added a social contribution on profit levied at a rate of 3.3% on corporate income tax after a deduction of €763,000.00.

Tax Consequences for Shareholders in Sweden

Swedish civil law does not include rules on demergers. Thus, it is unclear how a demerger as described in the Demerger Plan would be treated in Sweden if the Demerger had regarded a Swedish company. However, the tax consequences arising for Swedish shareholders in situations similar (but not identical) to the Demerger have been judged in case law.

On the basis of case law, it is likely that no tax would be due for Swedish tax residents holding Hydro Shares at the time of consummation of the Demerger and that the acquisition cost of the Hydro Shares should be split between the Hydro Shares and the corresponding AgriHold Shares in proportion to the market values at the time of consummation of the Demerger. However, since each case is judged on its own facts and circumstances, the risk that the Swedish tax authorities and courts could come to another conclusion cannot be ruled out.

In order to avoid any potential penalties in case the authorities should regard the Demerger as a taxable transaction, each shareholder is advised to disclose the transaction openly in the tax return by, for example, referring to this Information Memorandum that should be added as an appendix to the tax return.

Stock Exchange Listings

The Hydro Shares are presently listed on the Oslo Stock Exchange, as well as the stock exchanges in London, Paris, Hamburg, Düsseldorf and Frankfurt. Hydro ADSs, each representing one Hydro Share, are listed on the New York Stock Exchange. Depository receipts evidencing Hydro Shares are also traded on the stock exchange in Stockholm.

AgriHold Shares will be listed on the Oslo Stock Exchange from the time the Demerger has become effective. This is expected to occur on or about March 25, 2004. At that time, Hydro Shares will be traded exclusive of the right to receive corresponding AgriHold Shares.

Intended Sale of Norsk Hydro ASA’s AgriHold Shares

As noted above, it is Norsk Hydro ASA’s intention, provided that prevailing market conditions so permit, to sell its AgriHold Shares, corresponding to 20.0% of all AgriHold Shares, in an offering at the time of the consummation of the Demerger. The exact structure of such offering has not yet been determined. In the event an offering is completed, it is expected that AgriHold ASA, Norsk Hydro ASA and the Norwegian State would enter into lockup agreements with the managers of the offering. The AgriHold Shares to be offered by Norsk Hydro ASA will not be registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act.

If, due to adverse market conditions, the offering should be withdrawn or reduced in size, Norsk Hydro ASA would sell its remaining AgriHold Shares after the expiration of any lock-up period, but within 18 months after the consummation of the Demerger. Norsk Hydro ASA does not plan on voting any AgriHold Shares that it may retain after consummation of the Demerger.

Expenses Related to the Demerger

No account has been taken of expenses relating to the Demerger in Hydro’s pro forma financial statements included in this Information Memorandum. Under the terms of the Demerger Plan, such expenses will be for the account of Hydro. Expenses related to the Demerger will, in accordance with both U.S. GAAP and Norwegian GAAP, be included as ordinary operating expenses in Hydro’s financial statements.

Expenses incurred in connection with the Demerger are in the aggregate expected to amount to approximately NOK 67 million. The expenses comprise the following:

UBS Limited, London, U.K.		NOK 15 million⁽¹⁾
ABG Sundal Collier ASA, Oslo, Norway		NOK 8 million⁽¹⁾
Wiersholm, Mellbye & Bech, advokatfirma AS, Oslo, Norway
Advokatfirmaet Selmer DA, Oslo, Norway
Thommessen Krefting Greve Lund AS Advokatfirma, Oslo, Norway
Steptoe & Johnson LLP, Washington, D.C. (U.S.)
Cleary, Gottlieb, Steen & Hamilton, London, U.K.
KPMG LLP
Others (Norton Rose, Lefebvre etc)
All law firms employed		NOK 28.7 million⁽²⁾
Deloitte Statsautoriserte Revisorer AS, Oslo, Norway		NOK 4.2 million⁽³⁾
Kjelstrup & Wiggen AS, Oslo, Norway		NOK 0.4 million⁽³⁾
Environ		NOK 0.4 million
Miscellaneous (printing, distribution etc.)		NOK 4.9 million

⁽¹⁾	Additional NOK 5 million will be distributed to UBS Limited and ABG Sundal Collier in a proportion to be determined by Hydro.

⁽²⁾

Based on the estimates of the hours or fees provided by the law firms employed in connection with the Demerger. In connection with Hydro’s intended offering of AgriHold Shares, Hydro intends to disclose the aggregate fees of the law firms and other advisors that have assisted with either or both of the Demerger and the offering in connection with that offering.

⁽³⁾	Based on the estimates of the hours employed.

Timetable

The expected timetable for the Demerger is as follows:

Action/Event		Expected Date of Completion/Occurrence

Extraordinary general meetings		January 15, 2004

Creditor notice period expires		March 19, 2004

Last trading date for Hydro Shares including AgriHold		March 24, 2004

Registration of the Demerger in the Register of Business Enterprises		March 24, 2004

Separate listing of Hydro Shares and AgriHold Shares		March 25, 2004

Announcements

Announcements relating to the Demerger issued by or on behalf of Norsk Hydro ASA and/or AgriHold ASA will be considered made once they are received by the Oslo Stock Exchange and distributed through its electronic information system.

Distribution of the Information Memorandum

This Information Memorandum is being distributed to all registered shareholders of Norsk Hydro ASA as of November 28, 2003 using the addresses held on file by the VPS. The Oslo Stock Exchange has reviewed and approved this Information Memorandum prior to dissemination. Further copies of the Information Memorandum are available from the financial advisors.

Questions

Any questions on this Information Memorandum or the Demerger should be addressed to Peik Norenberg, Director of Investor Relations, Norsk Hydro ASA, Bygdøy allé 2, 0240 Oslo, telephone number: +47 22 53 34 40.

PART III

HYDRO AGRI

PLANT NUTRIENT FUNDAMENTALS

Like humans and animals, plants need nutrients to grow. Commercially produced mineral fertilizers give plants the primary nutrients needed in a form they can readily absorb and use: nitrogen (N), phosphorus (P) and potassium (K). Other major nutrients such as sulphur, calcium and magnesium are required in lesser, but still significant, quantities. Plants also need a number of micronutrients, such as iron, zinc, copper, manganese and boron, in very small, but essential amounts.

Each of the three major nutrients plays a different role in plant development.

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Nitrogen is an essential element for plant growth; it is part of every plant’s proteins and is a component of DNA and RNA. Absorbed by plants in larger amounts than other nutrients, nitrogen makes plants green and is usually most responsible for increasing yields in crop plants.

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Phosphorus is essential to plant root growth. Phosphorus compounds, referred to as phosphates, are needed in plant photosynthesis (i.e., the production, transportation and accumulation of sugars in the plant) to repackage and transfer energy. Phosphorus is involved in seed germination and helps plants use water efficiently.

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Potassium, or potash, is also necessary for photosynthesis. Potash makes plants hearty and helps them withstand the stress of drought, fight off disease, and protect against cold, weeds and insects. Potassium stops wilting, helps roots stay in place and assists in transferring food. Potassium is a regulator, activating plant enzymes and ensuring that the plant uses water efficiently.

Although plants will absorb nitrogen, phosphorus and potassium from organic matter and soil materials, this is usually not sufficient to satisfy the demands of crop plants. The supply of nutrients must, accordingly, be supplemented with fertilizers, to meet the requirements of crops during periods of plant growth, to replenish those removed through crop harvesting, or to provide those nutrients that are not already available in appropriate amounts in the soil. The two most important sources of nutrients are manufactured or mineral fertilizers and organic manures. Farmers determine the types, quantities and proportions of fertilizer to apply to their fields depending on, among other things, the crop, soil and weather conditions, regional farming practices, fertilizer and crop prices.

Plant Nutrient Production; Products

Industry Measurement Conventions Used

When measuring amounts or concentrations (e.g., product declarations) of the primary nutrients, the fertilizer industry measures nitrogen as such, while phosphate materials, by convention, are measured as di-phosphorus pentoxide (P₂O₅), and potassium, as di-potassium oxide (K₂O). These conventions are used consistently throughout this Information Memorandum.

Nitrogen

Nitrogen makes up 78% of the air we breathe. In this form, it is inert and insoluble, and not accessible to plants. Ammonia is the basic building block for producing virtually all other forms of nitrogen-based fertilizers. To a lesser extent, it is also used directly as a commercial fertilizer. Ammonia is produced by reacting nitrogen from the air with hydrogen at high pressure and temperature in the presence of a catalyst. The hydrogen is most often produced by reacting natural gas with water at high temperature and pressure in the presence of a catalyst. Natural gas is also used as a process gas (i.e., an energy source) to generate the heat required in the ammonia production process, but this use is minor compared to its use as a raw material in ammonia production.

Because there are natural gas deposits in many locations, ammonia and nitrogen fertilizers are produced in many countries. British Sulphur, a specialist publisher and independent consultant to the fertilizer industry, has recently reported that ammonia is produced in approximately 68 countries; urea, the most common of nitrogen fertilizer products, is produced in about 56 countries.

Although the number of chemical processes used in the production of nitrogen fertilizer products is small, there is a wide variety of finished products. The diversity of products facilitates site-specific applications, which take into account factors such as soil type and the requirements of the crop, thus making it possible to achieve optimal plant nutrition.

The principal nitrogen-based fertilizer products are:

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Ammonia – used as a fertilizer and as a building block for other nitrogen products, including intermediate products for industrial applications and finished fertilizer products. Ammonia, consisting of 82% nitrogen, is stored as a liquid under pressure or refrigerated. It is gaseous at ambient temperatures and is injected into the soil as a gas. The direct application of ammonia requires a considerable investment by farmers in pressurized storage tanks and injection machinery.

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Urea – formed by reacting ammonia with carbon dioxide (CO₂) at high pressure. From the warm urea liquid produced in the first, wet stage of the process, the finished product is mostly produced as a solid product (containing 46% nitrogen) typically applied in solid form. Urea can be combined with ammonium nitrate solution to make liquid nitrogen fertilizer (urea ammonium nitrate or UAN).

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Ammonium nitrate (AN) – produced by reacting nitric acid, an intermediate chemical feedstock produced from ammonia, with ammonia to form a concentrated, watery solution that is subsequently solidified in a prilling or granulation process. Ammonium nitrate is a solid fertilizer (containing approximately 34% nitrogen) typically applied in solid form. Ammonium nitrate is water soluble and used in various fertilizer solutions.

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Calcium ammonium nitrate (CAN) – a mixture of AN and calcium or magnesium carbonate (containing 25-28% nitrogen), produced by mixing calcium and/or magnesium carbonate into an ammonium nitrate solution before the solidification process. The lime content of CAN also helps to neutralize soil acidity.

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Ammonium sulphate (AS) – has a relatively low nitrogen content (21%). In addition to nitrogen, it contains sulphur (24%). It is used where the lack of sulphur in the soil is a limiting factor in plant growth.

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Calcium nitrate (CN) – produced by dissolving a calcium salt such as limestone or the calcium phosphate of phosphate rock in nitric acid. In the latter case, it is a co-product with nitrophosphate products. (See the product listings under “Phosphorus” below.) CN is used to remedy plant deficiencies in calcium and ameliorate soil acidification. It contains 15.5% nitrogen in nitrate form and 19% water-soluble calcium. The product is water soluble and particularly suited for water-born fertilizer application systems.

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Potassium nitrate (PN) – produced by reacting sodium nitrate with potassium chloride. Potassium nitrate is used as a potassium and nitrogen fertilizer. Potassium nitrate contains 13.5% nitrogen and 45% water-soluble potassium as K₂O. The water suitability makes it particularly suited for liquid-based applications.

Because of their chemical similarity, AN, CAN, CN and PN are often collectively referred to as “nitrates.”

Phosphorus

Phosphorus occurs in natural geological deposits of phosphate rock, which is mined from the Earth’s crust. The largest deposits of phosphate rock are located in North Africa, China, India, the United States, Brazil, Australia and Russia. Most phosphate ores require a treatment referred to as beneficiation, which entails washing, crushing, sizing and flotation before the material is pure enough to be used as phosphate rock raw material for further chemical processing. Phosphate ore deposits are not evenly distributed in the Earth’s crust; some countries and areas are endowed with enormous resources. Major mining today occurs only on deposits where grade, geometry and logistics are most favorable for low-cost production. In 2002, 11 countries were responsible for 83% of the world’s aggregate production of approximately 143 million tonnes of phosphate rock. As of 1999, the total

known reserves of phosphate rock (defined as mineral deposits of established extension that are, or could be, profitably mined under prevailing conditions of costs, market prices and technologies) amounted to 56 billion tonnes, with 60% of this located in Morocco.

To make the phosphorus in phosphate rock soluble and available to plants, the rock is digested with sulphuric or nitric acid to manufacture phosphoric acid, an intermediate product that is further processed to make many different kinds of phosphate-containing fertilizers.

The principal phosphate-based fertilizer products are:

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Monammonium phosphate (MAP) (containing 52% phosphate as P₂O₅) and diammonium phosphate (DAP) (containing 46% phosphate as P₂O₅) – referred to as ammoniated phosphates because phosphoric acid is treated with ammonia to form these products, both of which also contain nitrogen. Both are widely produced in granular form for use as such or for blending with other types of fertilizers, and are also produced in non-granular forms for use in liquid fertilizers.

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Nitrophosphate products – in which part of the nitrogen content is in nitrate form (as opposed to the purely ammonium form found in the MAP and DAP products). Nitrophosphate products are produced when the phosphate rock is dissolved in nitric acid rather than sulphuric acid.

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Single superphosphate – produced by treating phosphate rock with sulphuric acid, single superphosphate contains 16-20% phosphate as P₂O₅.

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Triple superphosphate – produced by treating phosphate rock with phosphoric acid, triple superphosphate is a highly concentrated form of phosphate fertilizer (containing roughly 46% phosphate as P₂O₅) and is produced in both granular and non-granular forms.

Potassium

Potassium salts, or potash, are mined from naturally occurring ore bodies that were formed as seawater evaporated. Potash ores are found as salts of chlorine or sulphate in salt deposits in some sedimentary basins. The ore is never pure enough and must be beneficiated and purified. Some potassium is also found as brines in lakes or in sub-surface deposits. After it is mined, the potassium chloride is separated from the mixture to produce a granular fertilizer.

Potash deposits are even less evenly distributed in the Earth’s crust than phosphate deposits. Only 12 countries mine potash; in 2002, six of those countries (Canada, Russia, Belarus, Germany, Israel and Jordan) produced nearly 90% of the world’s aggregate production of approximately 24 million tonnes, measured as K₂O. Canada is the source of one-third of global production. The known reserves (defined as mineral deposits of established extension that are, or could be, profitably mined under prevailing conditions of costs, market prices and technologies) of potash amount to more than 9 billion tonnes. More than 70% of this amount is located in Saskatchewan in Canada.

The principal potash products are:

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Potassium chloride (also referred to as muriate of potash or MOP) – containing 40-60% potash.

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Potassium sulphate (or sulphate of potash or SOP) – containing 50% potash, potassium sulphate is used for plants that are particularly sensitive to chlorine, such as potatoes, fruits, vegetables and tobacco.

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Sulphate of potash magnesia or potassium magnesium sulphate – for use in magnesium-deficient soils.

Multi-Nutrient Products

In addition to single-nutrient fertilizer products, there are also multi-nutrient products, which can be categorized as follows:

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Complex fertilizers – fertilizers containing at least two of the primary nutrients, obtained by chemical reaction. The granules that result contain a declared ratio of nutrients. MAP, DAP and nitrophosphate products are examples of this type of product.

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Compound fertilizers – fertilizer containing at least two of the primary nutrients, obtained by chemical reaction, blending or a combination of both. The granules produced may contain different nutrients in varying ratios.

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Blended fertilizers or bulk blends – obtained by the dry mixing of several materials. No chemical reaction is involved. Blends should, ideally, involve the mixing of granules of consistent size, weight and surface treatment to avoid segregation, which is undesirable because it reduces the agronomic efficiency of the product.

Multi-nutrient fertilizers often are referred to using their primary nutrient components (e.g., NPK, NP, etc.).

In purely agronomic terms, complex fertilizers offer the most effective way of achieving balanced nutrition, since they contain a declared grade or formula of primary nutrients in each granule and permit an even application due to their stable granule quality and consistent granule size. Complex fertilizers tend to be more expensive and historically have offered better margins than mixtures or blends, but contribute to greater crop yield and quality, especially in the case of the high value-added fruit and vegetable segments (referred to in the industry as “cash crops,” such as fruits and vegetables, as opposed to so-called food crops, like grain), where growers are willing to pay for these benefits.

Bulk blends are produced by a simple process of dry mixing of already-manufactured products. As a result, the capital investment and operating costs associated with bulk blending are small compared to those of manufacturing ammonia and the finished mineral fertilizer products. Similarly, sales margins for bulk blended products are normally much lower than those for chemically manufactured fertilizer products. The discussion of production volumes contained in the description of Hydro Agri’s business distinguishes between chemical manufacturing and bulk blending.

Specialty Fertilizers

Specialty fertilizer products (such as calcium nitrate and potassium nitrate) are targeted for growers of cash crops. The most advanced applications integrate fertilizer application and drip irrigation and adjust input (i.e., the amounts and mix of major and minor nutrients, and trace elements) to optimize plant performance (i.e., growth) continuously. The better margins that tend to be achieved by growers of cash crops relative to those achievable with food crops have led to an increased demand (approximately 5% per year over the last several years) for specially formulated fertilizers demonstrating an ability to enhance yield and crop quality by applying the products according to crop-specific advice. Their use increases the grower’s return, helps meet the market demand for quality crops, and enables higher margins than those normally achieved with high-volume fertilizers.

OVERVIEW OF THE MINERAL FERTILIZER INDUSTRY

Consumption of Mineral Fertilizers: Historical Development and Projected Growth

Global mineral fertilizer consumption (that is, consumption of all three of the primary plant nutrients) has increased ten-fold since 1950. By 2002, the global market for fertilizer products was estimated at U.S.$70 billion. According to information released by the International Fertilizer Industry Association (the “IFA”), a trade association whose members include 450 companies in some 80 countries around the world, consumption has increased from approximately 14 million tonnes during the 1950/51 fertilizer season to an average consumption level of 138 million tonnes per year over the 1998/99 – 2000/01 fertilizer seasons. The relative breakdown of the latter figure, by primary nutrient, is as follows:

Nitrogen		83 million tonnes (approximately 60%)
Phosphate (P₂O₅)		33 million tonnes (approximately 24%)
Potash (K₂O)		22 million tonnes (approximately 16%).

For the most part, there has been a steady increase in consumption throughout this roughly 50-year period. The most notable of the interruptions in consumption growth were attributable to the oil crises in the 1970s and the drop-off in consumption in the late 1980s and early 1990s associated with the break-up of the FSU and the related economic problems experienced in that region of the world.

The consumption growth since 1950 can principally be attributed to the increase in the world’s population and the related decline in the number of hectares per person dedicated to crop production, as illustrated in the graph below.

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In addition, the world’s dietary standard has improved significantly during this period, as reflected by a rise in the per capita caloric intake. Data from The Food and Agriculture Organization of the United Nations (the “FAO”) indicate that, on a per capita basis, the human average daily caloric intake increased by approximately 25% from 1961 to 2001.

Mineral fertilizer has played, and is expected to play, an increasingly important role in crop nutrition over time. Using a typical grain crop as an example, natural soil fertility can only sustain a production of approximately 1.5 tonnes per hectare of land over time. Traditional agricultural practices with animal, grass and grain production combined, and full use of the manures produced by the animals, can lift this to approximately 2.0 tonnes per hectare. Through the use of mineral fertilizers, together with other advances in agricultural technologies and practices, the present production has increased to approximately 6.0 tonnes per hectare.

In a report entitled “Fertilizer Requirements in 2015 and 2030” prepared in 2000, the FAO projected an increase in world crop production from 1995/97 to 2030 of approximately 57%. In order

to attain the yields projected by the FAO, the FAO forecasts that fertilizer consumption will have to increase from the average level of 138 million tonnes (N, P₂O₅ and K₂O together) per year during the 1993/94 to 2000/2001 period to between 167 and 199 million tonnes per year by 2030. This represents an annual growth rate of between 0.7% and 1.3% per year, compared to an average annual increase of 2.4% per year between 1970 and 2000. The lower projected amount of 167 million tonnes assumes a slow-down in the growth of the world’s population and in crop production, as well as greater improvement in fertilizer use efficiency.

Other industry sources and analysts have projected higher annual growth rates in fertilizer consumption. The IFA, for example, has projected an annual growth rate of 2.1% through the 2007/08 fertilizer season, though the IFA’s report includes a statement that this figure is slightly optimistic, indicating that an average annual growth rate in consumption of between 1.5-2.0% may be more realistic.

Beyond the overall growth in worldwide fertilizer consumption, industry sources, including the IFA, have released information reflecting the change in the relative proportion of fertilizer consumption between developed and developing countries. The IFA data indicate that developed countries accounted for 88% of the world fertilizer consumption in the 1960/61 fertilizer season. During the three-fertilizer season period from 1998/99 to 2000/01, that percentage had dropped to 37%; developing countries accounted for 63%. China represented close to 27% of world fertilizer consumption; South Asia (mostly India) and North America (mostly the United States), each 16%; Western Europe, 12%; and Latin America, 8%.

The IFA’s medium-term (i.e., through the 2007/08 fertilizer season) forecasts of annual growth rates in fertilizer consumption in different regions of the world highlight the trend suggested by the percentages in the preceding paragraph: consumption growth rates in the developing countries are expected to continue to exceed those of developed countries. This is, in part, attributable to the historic pattern that improved standards of living lead to the incorporation of a greater proportion of meat (and other proteins) into grain-based diets. Production of high-protein foods such as meat and dairy products requires larger amounts of grain and, thus, more fertilizer. The projected annual growth rates in consumption of developing countries in regions such as South America, Asia and Central and Eastern Europe range from 1.8%-3.5%. In contrast, the projected annual growth rates of fertilizer consumption in North America and Western Europe range from a negative (0.9%) to 0.2%. The IFA’s projected annual growth rates for each of the three primary nutrients vary from region to region, but overall are relatively similar (i.e., phosphate fertilizers, 2.7%; nitrogen and potash, approximately 2.0%).

Capacity and Production Levels of Mineral Fertilizers

The tables below provide information on the worldwide production capacity of nitrogen, phosphate (P₂O₅) and potash (K₂O), the average annual global production level during the 1999-2001 period and the proportion of production within the countries or regions accounting for the largest amounts of that production, all based on information available from the IFA:

Nitrogen

2000 Production Capacity (Ammonia)⁽¹⁾	127.8 million tonnes

1999-2001 Average Annual Global Fertilizer-related Production⁽¹⁾	87.0 million tonnes

Percentage of Global Production:

China	25	%

North America	16	%

Western and Central Europe	15	%

India	13	%

Eastern Europe and Central Asia	10	%

Middle East	7	%

Others	14	%

⁽¹⁾	The difference between the production capacity figure and the production level of nitrogen fertilizer primarily reflects the significant use made of ammonia and nitrogen for industrial applications.

Phosphate (P₂O₅) in mined phosphate rock

2000 Production Capacity	40.0 million tonnes

1999-2001 Average Annual Global Production⁽¹⁾	41.1 million tonnes

Percentage of Global Production:

Africa	29	%

United States	26	%

China	15	%

Russia	9	%

Others	21	%

⁽¹⁾

Refers to phosphate rock production. Actual production may exceed the production capacity because the processing of phosphate rock involves losses in beneficiation. Further, phosphate materials are used in industrial applications. Accordingly, global production of phosphate materials is higher than the consumption of phosphate-based fertilizers.

Potash (K₂O)

2000 Production Capacity	36.8 million tonnes

1999-2001 Average Annual Global Production	25.7 million tonnes

Percentage of Global Production:

Canada	33	%

Russia and Belarus	30	%

Western Europe (principally Germany)	19	%

Israel and Jordan	11	%

Others	7	%

Fertilizer Producers

Given the variety of nutrients required by plants and the different locations of the key raw materials involved in the generation of such nutrients, the mineral fertilizer industry has evolved over the years into a number of nutrient-specific sub-sectors with the geographic scope of producers’ markets reflecting, to a large degree, regional orientations. Many countries have a fertilizer industry of their own, reflecting the desire to secure their own food supply. Nonetheless, based on information available from industry sources such as CRU, IFA and Fertecon, in 2002, 29% of the world’s production of ammonia and the highest-volume fertilizer products were sourced through international trade, as reflected by the table below.

Product	Production (million tonnes)	Trade (million tonnes)	Trade as a % of Production
Ammonia	132	16	12	%
Urea	114	26	23	%
Nitrates	45	15	33	%
Phosphate (MAP, DAP)	38	17	45	%
Potash (MOP)	43	34	79	%
Total	372	108	29	%

Although the fertilizer industry is highly fragmented globally, the European fertilizer market is highly consolidated and the U.S. market is currently undergoing a significant reorganization. In certain regions of the world (e.g., the European Union and the United States), producers are mainly private

enterprises, including some of the larger producers in the industry: Hydro Agri; Potash Corporation of Saskatchewan (PCS), based in Canada; Agrium, based in Canada; K+S Gruppe, based in Germany; IMC Global, based in the United States; and entities that are subsidiaries or divisions of energy or chemical companies (e.g., DSM, Kemira and Total). In other regions (e.g., China, Russia and North Africa), producers are mainly state- or quasi-state-owned entities. None of the industry participants in the main fertilizer production regions of the world can claim to benefit from all the key competitive advantages, such as ready availability of raw materials, low energy costs, modern efficient plants, proximity to markets and favorable distribution logistics.

Sales and Distribution of Mineral Fertilizers

Sales of fertilizer products to end users are generally made through independent retailers, resellers, farmer cooperatives, affiliated dealer organizations and brokers. Markets for fertilizer products are seasonal within a given geographical market, with the timing of application determined by the overall cycle of crop growth, local weather conditions, soil conditions and the type of agricultural activity. Nitrogen, for example, has to be applied to arable crops mainly during the period of active crop growth, which is usually in the spring. Applications of phosphate and potash fertilizers are not necessarily confined to such a short period, although a peak occurs during the spring as these nutrients are usually applied in combination with nitrogen.

Although demand is largely concentrated in one short period within a given geographical market, the most efficient way to operate a fertilizer production plant is to manufacture product evenly throughout the year. As a result, participants in the fertilizer industry benefit by having access to distribution systems that can accommodate large quantities of stored material. Producers often rely on distributors and, to some extent, cooperation from fellow manufacturers, in order to ensure that sufficient quantities of mineral fertilizer are stored in or transported to the vicinity of the farmers at the appropriate time. In general, the greater the extent of a producer’s presence in a number of different regional markets and the greater the size of its distribution network, the better able the producer is to mitigate the effects of the inherent seasonality of the fertilizer industry.

Pricing of Fertilizer Products

The fertilizer industry is cyclical, reflecting the commodity nature of ammonia and the major finished fertilizer products (e.g., urea, DAP, MAP, MOP and SOP). In the normal course of business, industry participants are exposed to fluctuations in supply and demand, which can have significant effects on prices across all participants’ commodity business areas and products and, in turn, their operating results and profitability. Changes in supply can result from capacity additions or reductions and from changes in inventory levels. Demand for fertilizer products is dependent on demand for crop nutrients by the global agricultural industry, which, in turn, depends on, among other things, weather conditions in particular geographical regions. Periods of high demand, high capacity utilization and increasing operating margins tend to result in new plant investment and increased production until supply exceeds demand, followed by periods of declining prices and declining capacity utilization, until the cycle is repeated.

In Europe, plant closures beginning in 1999 and continuing in 2000 resulted in an overall reduction in European production capacity of approximately 2.5 million metric tonnes, representing approximately 20% of the total nitrate capacity prior to such closures. Additional capacity was closed in 2001 and 2002. The plant closures have since contributed to an improved balance between supply and demand in the European nitrate and NPK fertilizer markets, an increase in capacity utilization rates and improved margins.

Based on information available from industry sources, there is limited new capacity expected to come on line worldwide before 2005. However, in 2005, plants currently under construction in Egypt, Iran, Oman, Saudi Arabia, Vietnam, China, Australia and Trinidad and Tobago are scheduled to commence production. Notwithstanding the information available as to anticipated capacity additions over the next several years, there is considerable uncertainty, and market experts have widely varying views, as to future fertilizer prices. Some industry analysts believe production capacity additions will

be more than sufficient to meet anticipated growth in the demand for fertilizer, particularly from 2005 onwards, so that prices, as is currently the case, will be determined by so-called swing producers’ cash costs and are likely to be lower. (See “Cost of Raw Materials” below.) Others believe that project delays in the completion of construction of new plants and further closures will counterbalance supply growth, and that a tight grain supply and demand balance will lead to strong growth in fertilizer demand, such that a downturn in the fertilizer market will not occur until the 2007/08 fertilizer season.

The cyclicality of the mineral fertilizer industry affects price levels and, to a much lesser extent, consumption of the three primary nutrients in different ways. Prices of nitrogen-based fertilizers are more volatile than the other two primary nutrients because this segment of the industry is relatively less consolidated and is affected by raw material (i.e., natural gas) cost swings. There are fewer suppliers of phosphate and potash, both of which involve less energy-intensive production processes. In contrast, sales volumes of nitrogen-based fertilizers vary less from one fertilizer season to the next, because nitrogen must be applied every year if the farmer wants to maintain crop yields. Phosphate and potash are retained in the soil over time to a much higher degree than nitrogen, which makes it easier for the farmer to reduce the use of phosphate and potash in the short term.

In addition to the effect of the industry’s cyclicality, prices of fertilizer products are influenced by a number of other factors, including those discussed below.

Grain Prices

As can be seen from the graphs below, grain consumption has surpassed production in each of the last four years, resulting in declining inventories. Grain production in 2002 was negatively influenced by adverse weather conditions in several key grain exporting regions, most notably the United States, Canada and Australia. This was only partly compensated by strong harvests in FSU countries.

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For the last two years, the grain inventory decline has resulted in higher grain prices. In general, higher grain prices normally stimulate increased grain production, increasing the demand for fertilizer with resulting upward pressure on fertilizer prices. Fertilizer demand increased strongly in 2002, but the positive price effect was offset by the downward pressure on fertilizer prices attributable to lower natural gas prices in the United States. The improved fertilizer prices in 2003 can be partly explained by a continuing tightening of the grain balance. Based on information from Blue-Johnson, a U.S. consulting and market research company, grain prices and fertilizer prices have historically reflected a close correlation, as illustrated by the graph below indicating the price levels of corn and urea since 1994.

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Cost of Raw Materials

Natural Gas Price in the United States Creates Ammonia Price “Floor”

The cost of natural gas accounts for as much as 70-90% of the total cash cost (i.e., excluding such items as depreciation, corporate overhead and debt service) of ammonia production. It takes approximately 36 million British thermal units (“MMBTU”) of natural gas feedstock and fuel to produce one tonne of ammonia. In recent years, U.S. natural gas prices have been the single-most important factor in the pricing of ammonia. From 1999 through 2002 there has been essentially a zero margin between the price of natural gas in the United States and the global price of ammonia.

For approximately 13 years (i.e., 1987-1999), U.S. fertilizer companies enjoyed a competitive advantage over their Western European counterparts by virtue of their access to relatively cheap natural gas. Western European fertilizer producers, then and now, source natural gas under contracts with pricing formulas that are linked to the price of liquid hydrocarbons (most often, low sulphur heavy fuel oil). During the 1987-1999 period, natural gas prices in the United States ranged from a low of approximately U.S.$1 per MMBTU to a high of approximately U.S.$3 per MMBTU. Beginning in 1999, natural gas demand began to outstrip supply in the United States, resulting in natural gas prices rising fairly sharply, with notable peaks during the winters of 2000/01 and 2002/03. Thus far in 2003, U.S. natural gas prices have remained at or near U.S.$5 per MMBTU. According to The Fertilizer Institute, a U.S.-based trade association, the increase in the price of natural gas in the United States has led to the permanent closure of 11 U.S. ammonia plants in the last three years, representing about 20% of U.S. capacity, and the temporary idling of an additional 25% of capacity. The plants closed have tended to be those located along coastal areas or the Mississippi River, where the transportation costs associated with the import of ammonia into the United States make such imports more economic. Many companies with ammonia production facilities in the United States have become swing producers, producing only when natural gas prices are at levels allowing them to cover their cash costs of production.

The sharp rise in U.S. natural gas prices and the resulting curtailment of U.S. fertilizer production have had an upward impact on fertilizer prices throughout the distribution chain. At the farm level, the ammonia price and that of nitrogen-based fertilizers in the United States increased to near-record high levels earlier in 2003. Based on U.S. natural gas forward prices, a price “floor” for ammonia is expected to be at a relatively high level through 2006. In the long-term, the addition of new production capacity with technological, raw material or other cost benefits is expected to determine the price levels of commodity fertilizer products such as ammonia and urea.

Ammonia Price Creates Urea Price “Floor”

Historical data reflect the linkage between the ammonia price and the price of urea.

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It takes approximately 0.57 to 0.59 tonnes of ammonia to produce one tonne of urea. The other cash costs of urea production relate principally to energy and other utility costs and other production costs (including loading of the product). The urea price must reflect a sufficient margin or premium above the ammonia price to cover the cash costs of upgrading the ammonia; otherwise, the fertilizer producer has an economic incentive to simply sell the ammonia.

There is, in turn, a strong correlation between global urea prices and European nitrate prices, the latter reflecting a relatively stable margin above the urea price, when measured in U.S. dollars per tonne of nitrogen for both products. Urea and nitrates are (and are expected to remain) substitute products for one another. European farmers are, in essence, willing to pay only so much more for the preferred nitrate products than for urea.

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Transportation Costs

Prices of fertilizer products vary from region to region based largely on transportation costs. Fertilizer is a bulky and relatively low-cost product and, as such, the cost of handling and transportation is, in relative terms, high. Logistical costs vary by region, but may represent up to 20% of the price paid by the farmer for fertilizer sourced from the region in which the farmer is located and substantially more than that if product is imported from outside that region. As the major sources of competitively priced raw materials (including natural gas) are geographically concentrated, producers’ ability to balance transportation costs between different parts of the production processes to achieve competitive delivered costs becomes important.

National and Regional Agricultural and Industrial Development Policies

National and regional agricultural and industrial development policies, including trade policy measures such as subsidies, quotas, import duties and anti-dumping legislation, and environmental measures, can also affect fertilizer demand, thereby influencing fertilizer prices.

The price of fertilizers sold into the agricultural market, as influenced by all of the above factors, tends ultimately to be determined by negotiation at the time of sale depending on the supply/demand balance for the relevant plant nutrient and the particular form of product being sold and purchased. Because of the issues associated with matching continuous production with seasonal consumption, it is common in the industry for products to be sold using a progressive pricing structure, whereby producers offer products at a progressively increasing price from the off-season to the application period, thus enabling retailers and cooperatives to recover the cost of early purchase and storage of fertilizers.

HYDRO AGRI’S BUSINESS

Overview

Hydro Agri is a global leader in the production, distribution and sale of nitrogen-based mineral fertilizers and related industrial products. Hydro Agri also distributes and sells a wide range of phosphate- and potash-based mineral fertilizers, as well as complex and specialty mineral fertilizer products sourced from third parties. In 2002, Hydro Agri had operating revenues of approximately NOK 33.5 billion, of which approximately NOK 29.0 billion came from the sale of mineral fertilizers and merchant ammonia.

The core of Hydro Agri’s operations is the production and sale of nitrogen-based fertilizers. As of December 31, 2002, Hydro Agri had 5.2 million tonnes of ammonia production capacity, including Hydro Agri’s share of the production capacity of non-consolidated investee companies. Hydro Agri is the world leader in ammonia, as measured by production capacity (its fully-owned plants have an aggregate capacity of 4.2 million tonnes), shipping capacity, trade and maritime storage capacity in deep-sea ports. Hydro Agri is the largest producer of nitrates, the most important fertilizer type in Europe. To complement its nitrogen-based product offerings, Hydro Agri also markets phosphate- and potash-based fertilizers sourced from third parties, and is a leader in sales of value-added specialty fertilizers and complex fertilizers (referred to as “NPK”), which represent the majority of multi-nutrient fertilizers applied in Western Europe. This enables Hydro Agri to offer customers a balanced nutrient portfolio. In addition, Hydro Agri markets certain industrial gases and nitrogen chemicals that, in general, are co-products of its fertilizer operations.

Hydro Agri estimates that, as of year-end 2002, its aggregate sales of nitrogen fertilizers represented approximately 6.5% of global consumption of fertilizer nitrogen, and that its aggregate sales of all fertilizers represented approximately 6% of global consumption. In Europe, Hydro Agri estimates that its sales of nitrogen fertilizers to markets in the EU, Norway and Switzerland during the 2002/03 season represented approximately 25% of fertilizer nitrogen consumption in these markets.

Effective October 1, 2003, Hydro Agri’s management has divided the business into three operating segments: Upstream, Downstream and Industrial. The Upstream segment, based on Hydro Agri’s worldwide ammonia and urea production, consists principally of Hydro Agri’s global production units, joint venture production units and the Ammonia Trade and Shipping (“ATS”) unit. The Downstream segment consists of Hydro Agri’s sales and marketing units, including their locally focused chemical and bulk blending production facilities, and their distribution and logistical assets (i.e., warehouses and bagging facilities). The Industrial segment markets numerous nitrogen chemical products mainly originating from Hydro Agri’s fertilizer operations, with certain of such products being intermediates in the production of fertilizer. The Industrial segment also markets large quantities of carbon dioxide obtained from the Upstream segment’s ammonia plants and a wide range of other industrial gases. For a further description of the activities of each segment, see “Hydro Agri’s Operating Segments” below.

In 2002, Hydro Agri sold a total of approximately 22.5 million tonnes of fertilizers and associated nitrogen chemicals, consisting of approximately 20.5 million tonnes of fertilizers and 2.0 million tonnes of nitrogen chemicals (the latter predominantly sold by the Industrial segment). In addition, Hydro Agri sold other products, such as industrial gases and carbon dioxide and other non-nitrogen products. In some of these products, e.g. cylinders of industrial gases and propane, tonnes is not a meaningful measure of volume. Fertilizer and nitrogen chemical products produced by Hydro Agri aggregated approximately 14.6 million tonnes. The balance consisted of products purchased for resale from joint venture companies (approximately 2.1 million tonnes) and third parties (approximately 5.8 million tonnes). In addition to purchasing products for resale, Hydro Agri purchased approximately 1.6 million tonnes of products as input for bulk blending.

Competitive Position

Hydro Agri’s strong competitive position within its industry is the result of its efforts to reduce its exposure to and, where possible, benefit from the cyclicality of its business, primarily through:

•

its low-cost position and related productivity improvements;

•

capacity reductions in Western Europe, as well as streamlined operations;

•

a global downstream market presence; and

•

the increased proportion of earnings derived from the sale of differentiated products (such as specialty fertilizer) to “high end” fertilizer markets and industrial applications.

Low-Cost Position/Productivity Improvements

Following completion of a three-year turnaround program (1999-2001), Hydro Agri’s management believes, based on statistical information made available by the European Fertilizer Manufacturers Association (“EFMA”), that Hydro Agri has established a cost position below the average of other European producers. Hydro Agri’s relative cost performance development according to these statistics is illustrated below:

LOGO

In response to the intense competition within the fertilizer industry and other market forces, Hydro Agri has steadily strengthened its results by cutting costs and improving productivity, principally through completion of its turnaround program. Hydro Agri exceeded the targeted objectives of the turnaround program, reducing its annual fixed costs (primarily salaries and related costs, purchased services for plant and facility maintenance, and sales and general administration costs) by approximately NOK 2.4 billion (approximately 30%) over the 1999-2001 period. Improvement measures related to savings in raw material and sourcing costs, energy cost reductions and other variable cost improvements were estimated to amount to an additional NOK 500 million in annual savings compared to the 1998 level. This annual cost reduction of NOK 2.9 billion reflects a reduction in the total number of employees by 30% compared to the 1998 level. The graphs below illustrate the cost and productivity improvements achieved through the turnaround program.

LOGO

The level of fixed costs depicted in the above graph have been adjusted by converting costs incurred in other currencies to the Norwegian kroner, using 2002 average exchange rates for such currencies for the years 1999-2001, and adjusting for non-recurring items (mainly relating to the turnaround program). The aggregate adjustments amount to NOK 31 per tonne (1999), NOK 19 per tonne (in 2000), NOK 28 per tonne (in 2001) and NOK 3 per tonne (in 2002).

LOGO

The turnaround program and the continuous improvement program that has followed have resulted in a marked improvement in capacity utilization at Hydro Agri’s production facilities. The difference in capacity utilization between 1999 and 2002 for some of Hydro Agri’s major plants is illustrated in the table below:

	1999 Capacity Utilization⁽¹⁾				2002 Capacity Utilization⁽¹⁾
Production Plant	Ammonia		Fertilizer		Ammonia		Fertilizer
Sluiskil	97.0	%	97.6	%	100.0	%	97.7	%
Porsgrunn	29.0	%⁽²⁾	94.5	%	79.8	%	96.1	%
Brunsbüttel	83.5	%	81.3	%	100.0	%	81.3	%
Trinidad	77.8	%	—		95.4	%	—

⁽¹⁾

The capacity utilization is indexed against the highest achieved production rate in the period considered.

⁽²⁾

The Porsgrunn ammonia plant was in operation for only part of the year in 1999 because of revamping of the facility.

Having implemented measures to improve Hydro Agri’s operating performance as part of the turnaround program, management expects improvements in productivity in the near future to be more moderate than those achieved in the 1999-2001 period.

Hydro Agri’s low cost position is also partly a result of its access to low-cost natural gas. Hydro Agri’s joint venture investments in ammonia and urea manufacturing in the Middle East (Qatar) and the Caribbean (Trinidad and Tobago) are based on the availability of low-cost natural gas in these areas. However, Hydro Agri has less than 50% interests in these entities. Accordingly, the benefits associated with this low-cost natural gas are not reflected in Hydro Agri’s operating income, but instead appear in the income statement as part of the “Equity in net income of non-consolidated investees” line item, which affects EBITDA.

Capacity Reductions

The turnaround program also included capacity reductions. Western Europe, Hydro Agri’s traditional home market, has experienced a downward trend in fertilizer consumption in recent years. Through the late 1990s, the Western European nitrate market was characterized by production over-capacity (estimated to have been between 2.5 and 3.0 million tonnes, roughly 20% of total nitrate capacity). For Hydro Agri and other producers of nitrate fertilizer, this meant low product prices and increasingly severe pressure on margins, as well as reduced capacity utilization at nitrate fertilizer production plants. In response to these unfavorable market conditions, Hydro Agri announced in late 1999 its decision to reduce its nitrate fertilizer production capacity in Europe by approximately 1 million tonnes. Other European producers of nitrate fertilizer implemented capacity reductions of their own. Plant closures in 2000 resulted in an overall reduction in European production capacity of approximately 2.5 million tonnes. Additional capacity was closed in 2001 and 2002. Over the same time period, individual Western European producers of complex fertilizers determined to effect reductions in their production capacity of complex fertilizers (NPK). Hydro Agri’s management believes that plant closures have contributed to an improved balance between supply and demand in the European nitrate and NPK fertilizer markets, an increase in capacity utilization rates and improved margins. Hydro Agri’s management believes that the supply and demand balance for nitrogen-based fertilizers should benefit from the limited capacity additions anticipated prior to 2005, implying that plant utilization rates should remain fairly high during this time. See “Overview of the Fertilizer Industry - Pricing of Fertilizer Products” for a discussion of other views by industry sources.

In addition to the capacity reductions (consisting of the closure or sale of 11 production units) the turnaround program involved Hydro Agri’s closure of 12 market organizations and sale of more than 25 businesses considered non-core.

Global Downstream Market Presence

Hydro Agri has built a global marketing network and distribution system, consisting of sales offices, chartered dry bulk ships, bulk blending plants, terminals and bagging operations. Hydro Agri has a presence in approximately 17 countries in Europe and 27 countries outside of Europe. As a result, Hydro Agri has a local presence on five continents and sales in approximately 120 countries. Although Hydro Agri’s market position in any single market is not unique in its industry, its global presence, built and expanded upon over a period of approximately 30 years, combined with the skills, competencies and cultural understanding of its personnel, constitutes a significant differentiating factor.

Hydro Agri’s global market presence provides several benefits, each of which helps to mitigate the effects of the industry’s cyclicality and strengthen its competitive position:

•

It reduces Hydro Agri’s exposure to adverse market conditions that may exist in a particular region by allowing it to shift products to regions (or portions of regions) with more favorable market conditions. Supply/demand shifts are often specific to one region. Hydro Agri’s infrastructure in planning, product supply through manufacturing and purchasing, logistics, storage and distribution, makes it possible to benefit from the time lag associated with changes in market conditions in any one region by shifting product between or among regions.

•

It enables arbitrage opportunities between or among product markets (e.g., shifting from a more differentiated product to a commodity product at certain times).

•

It mitigates the seasonality inherent in the fertilizer business, as production can be directed to regions with different peak periods of fertilizer application.

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It enables Hydro Agri to take advantage of opportunities such as currently exist with the differential between the lower cost of natural gas sourced from Hydro Agri’s operations in Trinidad and Tobago and the relatively high cost of natural gas prevailing in the United States.

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It positions Hydro Agri to more readily increase its sales volumes in regions of the world experiencing higher rates of growth in fertilizer consumption, such as Asia and Latin America.

Increased Emphasis on Higher Margin Specialty Fertilizers

Hydro Agri is a leading producer of calcium nitrate, which is produced as a co-product from Hydro Agri’s nitro-phosphate production process. In 2001, Hydro Agri entered into a global sales and marketing agreement with Sociedad Quimica y Minera de Chile (“SQM”), a Chilean specialty fertilizer and industrial chemicals company. The relationship with SQM, the world leader in the production of potassium nitrate, has enhanced Hydro Agri’s position within the market for specialty fertilizers.

Production and Sale of Products for Industrial Applications

Hydro Agri’s nitrogen fertilizer manufacturing processes provide access to a wide range of nitrogen chemicals that are used as raw materials for a variety of industrial processes. These products range from ammonia, nitric acid and other intermediates to customized variants of finished fertilizer products such as technical ammonium nitrate, which is used in the manufacture of industrial explosives. Some ammonia production processes involve the production of air gases such as oxygen, nitrogen and argon, in addition to carbon dioxide. These are the core products of the industrial gas industry.

With the production infrastructure in place, Hydro Agri has developed significant market positions for nitrogen chemicals in the areas surrounding its nitrogen manufacturing plants. Hydro Agri has also invested in the development of industrial gas markets, especially in Scandinavia, and in the development of a significant carbon dioxide position in the North Sea basin and in selected other European countries. Hydro Agri has a leading position in the global merchant market for technical ammonium nitrate for the manufacture of industrial explosives, in addition to being a supplier to local explosives companies.

The different characteristics of the industrial market, notably the more even off-take of product throughout the year, and the opportunity to customize to a larger degree than for most plant nutrition products, contribute to relatively stable revenues and profits. In some product segments, Hydro Agri’s research and development efforts have resulted in notable market advances over time.

Strategy

As discussed in Part II of this Information Memorandum, the separation of Hydro Agri is motivated by, among other things, Hydro’s wish to allow Hydro Agri to have greater flexibility to further develop its business model.

Continued Focus on Productivity Improvement and Fixed Cost Reduction

Maintain and Improve Low Cost Base and High Capacity Utilization

Through its turnaround program, Hydro Agri has achieved a favorable cost position. Hydro Agri has taken, and intends to continue to take, positive action to counterbalance cyclicality. Nevertheless, Hydro Agri’s business in general and its Upstream segment in particular is likely to continue to be exposed to the cyclical nature of the fertilizer industry, due to fluctuations in commodity prices (e.g., natural gas, ammonia and urea). Therefore, Hydro Agri sees cost competitiveness as a key success factor in order to ensure a sustainable business. Accordingly, Hydro Agri will continue to focus its efforts on maintaining and further improving its favorable cost position. This includes efforts to decrease fixed costs and at the same time to improve operational procedures and methods so as to increase production capability.

Improve Capital Efficiency

The seasonality of consumption of fertilizers combined with the often great distance between the producer and the point of sale and consumption make logistics and working capital control more important in the fertilizer industry than in many other industries. Through its turnaround program Hydro Agri has been able to make significant progress in optimizing working capital management, and working capital management will continue to be a focus for the company going forward.

Capitalize on Strong Global Platform and Leading Positions in Core Business Areas

Further Expand Downstream Presence

One of Hydro Agri’s principal competitive advantages is the global marketing presence of its Downstream segment. Hydro Agri intends to continue to leverage its extensive marketing and distribution network, its complete product range, and its strong purchasing power. Third-party sourcing reduces the need for heavy investment in new plants and equipment to support growth.

Hydro Agri intends to assess the possibility of gaining access to increased ammonia volumes from locations considered well-placed to serve demand in growth markets for mineral fertilizer, and extending its position in the large North American market, where high domestic natural gas prices are currently weakening domestic producers.

Improve Market Position

Hydro Agri’s management expects that Hydro Agri’s dedication to the key account customers of its global marketing and sales organizations, its well-maintained production facilities and its global competence will create a basis for increasing its market share. For example, based on annual levels of consumption, nitrate is the most important fertilizer in Europe. Hydro Agri is the leader in Europe, both in sales and production volumes, of nitrates. Hydro Agri also enjoys a production cost advantage over the European nitrate industry. While the European fertilizer market is mature, Hydro Agri’s

management is of the view that it has established a good basis to further develop its European market share. Many of Hydro Agri’s competitors are parts of larger corporate entities that do not view the fertilizer industry as a core activity. Since consolidation is ongoing in the distribution chain for fertilizers, Hydro Agri’s key account customer relationships may position Hydro Agri well for access to customers across a broader part of the value chain. Hydro Agri has also successfully developed its business in markets where the potential for growth is higher, such as South America. For example, through the acquisition of Trevo in Brazil and following a successful turnaround of that business, Trevo has been able to double its market share in that country. As a result, Hydro Agri has become one of the leading fertilizer producers in the region.

Actively Participate in Industry Consolidation

As an independent company, Hydro Agri will have improved ability to take part actively in industry consolidation. Hydro Agri intends to evaluate potential strategic acquisition opportunities on a case-by-case basis with the aim to strengthen its market presence and distribution network. Hydro Agri’s management continuously reviews acquisition opportunities, but there are currently no specific plans to make any material acquisitions.

Develop Differentiated Products

Hydro Agri intends to continue to develop its differentiated products and services both for plant nutrition (e.g., specialty fertilizers and nitrophosphate–based complex fertilizer products) and industrial use (industrial gases, carbon dioxide and nitrogen chemicals). Differentiated products require additional competencies in product application and marketing. Hydro Agri’s production capacity and production processes (in particular, its co-production of calcium nitrate through the nitrophosphate production process), combined with its global downstream presence, provide a foundation for the development of further differentiated plant nutrition applications. This will allow Hydro Agri to improve the overall margin of the business as well as enhance its ability to counterbalance the cyclicality of the fertilizer industry.

Selective Capital Expenditures

Successful further development of Hydro Agri’s market positions in its Downstream and Industrial segments will depend on continued availability of stable and competitively priced products. Over the past years, Hydro Agri has developed its market position with limited investment in manufacturing capacity. In the future, however, Hydro Agri may participate in the development of additional fertilizer capacity. The decision in October 2001 to participate in the Qafco-4 ammonia and urea project (see the discussion under “Upstream – Production Facilities”) is an example of this strategy. The decision was based on the combined effects of a long-standing history of cooperation with the joint venture partner, the infrastructure established in Qafco (three ammonia plants and three urea plants in operation) and the favorable location close to natural gas resources and growth markets.

Attract, Retain and Develop Highly Qualified Personnel

Hydro Agri aims to utilize the full breadth and depth of talent that it already possesses. To achieve this, Hydro Agri will establish clear and decisive management processes that include:

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a uniform, transparent, global reporting system and clear decision-making processes for managers;

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clear personnel management processes that appropriately identify, recognize, develop and reward the company’s best talents;

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local empowerment of management with clear accountability and success criteria; and

•

performance-driven employee compensation.

Hydro Agri’s Operating Segments

Hydro Agri’s business is divided into three operating segments: Upstream, Downstream and Industrial.

The Upstream segment is based on Hydro Agri’s worldwide ammonia and urea production, including the global trade and shipping of ammonia, as well as nitrate and complex fertilizer production co-located with ammonia production and serving both domestic and international markets. Virtually all of Hydro Agri’s ammonia and urea production capacity is in the Upstream segment. In terms of assets, the Upstream segment consists of:

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Hydro Agri’s global production units at Porsgrunn (in Norway), Sluiskil (in the Netherlands), Brunsbüttel (in Germany), Le Havre (in France), Ferrara (in Italy) and Point Lisas (in Trinidad and Tobago);

•

joint venture production facilities in Trinidad and Tobago (from which Hydro Agri sources ammonia) and in Qatar (from which Hydro Agri sources urea); and

•

Hydro Agri’s ATS unit, which includes a fleet of owned and chartered ships with an aggregate capacity of approximately 250,000 tonnes and total maritime storage capacity (export and import) of approximately 500,000 tonnes.

In 2002, the Upstream segment’s operations generated operating revenues of approximately NOK 11.1 billion.

The Downstream segment consists of Hydro Agri’s sales and marketing units, but also includes Hydro Agri’s European production facilities that primarily supply their regional home markets, as well as Hydro Agri’s fertilizer plants in South Africa (Potchefstroem) and Brazil (Rio Grande), each of which produces NPK for its home market. The Downstream segment’s global planning unit optimizes the sourcing of products from Hydro Agri’s production facilities, joint ventures in which Hydro Agri has an interest and third parties. The Downstream segment also optimizes the sale and distribution of such products through its global marketing network. In 2002, the Downstream segment’s operations generated operating revenues of approximately NOK 26.7 billion.

The Industrial segment markets numerous industrial products mainly originating from Hydro Agri’s fertilizer operations, with certain of such products being intermediates in the production of fertilizers. Several of Hydro Agri’s fertilizer production plants in Europe supply industrial products. This improves production economics and logistics and provides a source of stable revenues and profits. In 2002, the Industrial segment’s operations generated operating revenues of approximately NOK 4.4 billion.

The table below sets forth Hydro Agri’s operating revenues and the approximate percentage of such revenues accounted for by each operating segment in the 2000-2002 period:

	Year ended December 31,
	2002				2001				2000
Segment	Operating Revenues (in NOK billions)		%		Operating Revenues (in NOK billions)		%		Operating Revenues (in NOK billions)		%
Upstream	11.1		33		13.3		35		12.5		34
Downstream	26.7		80		29.4		79		28.7		78
Industrial	4.4		13		4.9		13		4.8		13
Other and eliminations⁽¹⁾⁽²⁾	(8.7	)	(26	)	(10.1	)	(27	)	(9.4	)	(25	)

Total	33.5		100	%	37.5		100	%	36.6		100	%

⁽¹⁾

Approximately NOK 8.9 billion, NOK 10.7 billion and NOK 9.8 billion of internal revenue has been eliminated in 2002, 2001 and 2000, respectively, reflecting sales between the segments. For each of these years, the distribution of these inter-segment revenues was approximately 90% (Upstream), 9% (Downstream) and 1% (Industrial).

⁽²⁾	External operating revenues generated by minor, non-core activities classified in the table above as “Other and eliminations” were approximately NOK 0.2 billion, NOK 0.6 billion and NOK 0.4 billion in 2002, 2001, and 2000, respectively.

The table below provides a geographic breakdown of 2002 sales volumes of fertilizer products and associated nitrogen chemicals.

Continent		2002 Consolidated Sales Volumes⁽¹⁾ (in millions of tonnes)
Europe		11.4
Latin America		3.3
Asia/Oceania		3.4
Africa		2.2
North America		2.2

Total		22.5

⁽¹⁾

After elimination of intersegment sales volumes. ATS’s ammonia sales are not included.

Sales in Europe were mainly sourced from the Upstream segment’s production facilities (approximately 4.0 million tonnes, of which 85% consisted of nitrates, NPK and urea) and the Downstream segment’s production facilities (approximately 4.7 million tonnes, of which 90% consisted of nitrates, NPK and UAN). Approximately 18% of sales volumes outside of Europe were sourced from the Upstream segment’s production facilities in Europe.

The table below provides a more detailed breakdown of sales volumes of fertilizer products, identifying the source of product, for the periods indicated:

	2002		2001		2000
Sources of Products⁽¹⁾⁽²⁾	(in millions of tonnes)	(%)	(in millions of tonnes)	(%)	(in millions of tonnes)	(%)
Produced by Upstream	6.6	45	6.4	44	6.8	44
Produced by Downstream⁽³⁾	7.8	53	8.0	55	8.5	55
Produced by Industrial	0.2	2	0.2	1	0.2	1

Produced by Hydro Agri	14.6	100	14.6	100	15.5	100

Purchased for resale	7.9	—	6.7	—	7.4	—

Total Products Sold	22.5	—	21.3	—	22.9	—


External sales volumes

Upstream	0.1	0	0.1	0	0.3	0
Downstream	20.7	92	19.6	92	20.9	92
Industrial	1.7	8	1.6	8	1.7	8

Total Products sold	22.5	100	21.3	100	22.9	100

⁽¹⁾	Fertilizers and associated nitrogen chemicals.

⁽²⁾	Volumes of ammonia purchased and sold internally and externally by the ATS unit are not included in the above figures.

⁽³⁾	Includes chemically manufactured fertilizer products and bulk blends.

The Downstream segment markets all of the Upstream segment’s production of finished fertilizer products. Approximately 30% of the Upstream segment’s operating revenues are derived from external sales, predominantly merchant ammonia. The balance consists of sales of ammonia and fertilizer products to the Downstream and Industrial segments (the vast majority of which are to Downstream). In the case of both intermediate and finished products, the product transfer price between the Upstream segment and the Downstream or Industrial segments is tied either to market prices, less an agreed-upon margin, or to the cash costs of production, plus an agreed-upon margin. The transfer pricing mechanism follows generally accepted arm’s-length principles as set forth by OECD transfer pricing guidelines for multinational enterprises. Less than 50% of the products sold by the Downstream segment are purchased from the Upstream segment. Accordingly, except for NPK products, external market price references exist for verification of market prices in determining the inter-segment transfer price.

UPSTREAM

As noted above, Hydro Agri’s Upstream segment is based on Hydro Agri’s worldwide ammonia and urea production, including the global trade and shipping of ammonia. All ammonia and urea production capacity is included in the Upstream segment, except for one small ammonia plant in France (Pardies) that is used purely for industrial products, and is included in the Industrial segment, and a small plant in Italy (Terni) which is included in the Downstream Segment. Upstream also includes nitrate and complex fertilizer production, which is co-located with ammonia production at the global production plants.

Production

The table below sets forth the Upstream segment’s approximate production volumes of intermediates and chemically manufactured finished fertilizer products in 2002 produced at Hydro Agri’s wholly owned plants, and Hydro Agri’s share of the production volumes produced at the plant facilities of entities in which Hydro Agri has an equity interest (described more fully below under “Production Facilities”) that are included in the Upstream segment:

	Intermediates (in millions of tonnes)	Finished Products (in millions of tonnes)
	Ammonia	Urea	Nitrates	NPK	CN⁽¹⁾	UAN
Own Plants	3.8	1.6	1.7	1.8	0.9	0.3
Equity Interest⁽²⁾	0.9	0.4	—	—	—	—

Total	4.7	2.0	1.7	1.8	0.9	0.3

⁽¹⁾

Consists of 0.6 million tonnes of solid and 0.3 million tonnes of liquid products.

⁽²⁾

Volumes reflect Hydro Agri’s percentage ownership in Qafco and Tringen.

Production Facilities

The table below provides the approximate annual production capacities, by product, of each of the wholly owned plants within the Upstream segment.

	Annual Production Capacity (in millions of tonnes)
Site	Ammonia	Urea	Nitrates	NPK	CN Solids
Sluiskil	1.7	0.7	1.7	—	—
Brunsbüttel	0.7	0.5	—	—	—
Porsgrunn	0.5