Norsk Hydro : Appendix 3 - Board of Director's remuneration report for leading persons for the financial year 2021

Welcome

Governance

Corporate management remuneration

Board of Directors' remuneration

Auditors' statement

Appendix

Remuneration report 2021

© Hydro 2022

Content

Welcome

Dear Reader

On behalf of the Board of Directors, I am pleased to present to you Hydro's Remuneration Report 2021. The report has been prepared in accordance with section 6-16b of the Norwegian Public Limited Liability Companies Act.

The purpose of this report is to give a transparent and comprehensive overview of remuneration to the Board of Directors (BoD) and the Corporate Management Board (CMB) in Hydro. Further to explain how remuneration paid and earned in 2021 is aligned with Hydro's Remuneration Policy for Executive Management and Hydro's long-term interests and sustainability.

Company results

Looking back at 2021, Hydro delivered the strongest financial results since becoming a focused aluminium and energy company in 2007, in a year that was otherwise defined by volatility and uncertainty. The performance results are attributed to the strong sales in historically strong aluminium markets and firm progress on our improvement agenda - but first and foremost due to Hydro's 31,000 employees who managed to maintain solid performance and focus during a global health crisis.

Strong demand, higher prices, robust operations with higher volumes and improved margins, in addition to determined improvement efforts, yielded a strong EBITDA result of 28 BNOK in 2021. We have lifted profitability across all our business areas, and we delivered a return on capital employed of 18.6 percent in 2021, which is well above the target of 10 percent over the cycle.

Over the past two years Hydro has worked with determination to implement our agenda Lifting profitability, Driving sustainability. Through 2021 we have delivered NOK 6.3 billion of the total original improvement program of 7.4 billion. With this momentum, we have now stretched the overall program to NOK 8.5 billion to be delivered by 2025.

Climate, environment and social responsibility are deeply interconnected. Responsible business is a prerequisite for long-term value creation through access to new markets, lower cost of capital and access to the best talent.

Sustainability is also about creating value for society by improving lives and livelihoods where we operate. Our most important responsibility starts with the health and safety of our employees. There were no fatalities, nor life-changing injuries, in 2021.

Remuneration

In 2020, the CEO and the CMB members waived the right to short and long-term incentives due to the Covid-19 pandemic. For the same reason, the CEO and CMB members did not have their base salaries adjusted in 2020. In 2021, the CEO and CMB members base salaries increased by 3 percent, on average, which was in line with the average salary increase of the other employees of the company.

The short-term incentive (STI) plan is designed to support the Company's strategic targets, both short and long-term. Performance measures are closely linked to the Lifting profitability, Driving sustainability agenda. The strong financial results of 2021 combined with solid progress on strategic initiatives, resulted in high performance scores for the CEO and the CMB members.

The long-term incentive (LTI) is a share-based performance plan which measures adjusted return on average capital employed (Adjusted RoaCE) and total shareholder return (TSR) over a three-year period. The TSR performance target measures relative performance compared to a selection of peers (basket of peers). While the 2021 RoaCE result was well above the target of 10 percent over the cycle, the overall performance score is impacted by lower RoaCE results the two previous years. Hydro's TSR in the same period increased by 25 percent; however, relatively less than the basket of peers.

Changes to the CMB

Einar Glomnes and Inger Sethov left their positions in Hydro in 2021. Paul Warton became EVP Hydro Extrusions as of February 1, 2021 and Helena Nonka became EVP Corporate Development as of April 1, 2021. For a detailed presentation of the CMB, please see hydro.com.

Dag Mejdell, Chairman

The purpose of this report is to provide transparency on executive remuneration and to show that variable pay is closely linked to Hydro's long-term interests and sustainability.

Governance

Compensation & People Committee

The Compensation & People Committee (Committee) in Hydro acts as a preparatory body for the BoD on matters related to the compensation of the CEO and other members of the CMB. The Committee also briefs the BoD on strategic people processes related to succession, leadership and talent, and diversity and inclusion. The Committee shall regularly consider the appropriateness and competitiveness of the remuneration arrangements for the CEO and other members of the CMB.

The Committee is chaired by the Chair of the Board, Dag Mejdell, with Irene Rummelhoff (Deputy Chair) and Sten Roar Martinsen (employee representative) as formal members. The Committee held 13 meetings during 2021, with 97 percent attendance rate.

Committee activity in 2021 was to a large extent related to the revising of Hydro's Remuneration Policy for Executive Management and the preparation of the first Hydro Remuneration Report. In addition, the Committee reviewed the current variable pay programs. In general, the Committee believes that the current variable pay programs incentivize the performance of the CEO and other members of the CMB in accordance with Hydro's long-term strategies in a sustainable manner. On the Committee agenda was also succession planning and securing a solid pipeline for Company critical positions.

The full compensation committee mandate is available at hydro.com.

Committee members

Dag Mejdell

Irene Rummelhoff

Sten Roar Martinsen

Mejdell holds an Economic and Business Administration degree from Norwegian School of Economics (NHH). He was CEO of Posten Norge from 2006 to 2016. Mejdell holds several board chair positions, including Chair of Sparebank 1 SR Bank ASA, Chair of International Post Corporation, Chair of Mestergruppen AS, Chair of Torghatten Group AS

Rummelhoff has a Master of Science Degree in Geology/Geophysics, NTNU Norwegian University of Science & Technology. She has held a number of positions in Equinor from 1991 onwards giving her a broad experiences from one of the world's leading energy companies, and is currently EVP Marketing, Midstream and Processing in Equinor.

Martinsen represents members of the Norwegian Confederation of Trade Unions (LO). He has a certificate of apprenticeship in electrochemistry and has undergone work supervisor training. Martinsen is employed in Hydro as a government affairs advisor.

Committee activity

Strategic people processes (20%)Variable pay

(20%)Remuneration policyand report (40%)Remuneration to the CEO and CMB (20%)

Attendance 2021

• Ÿ Dag Mejdell 13/13

• Ÿ Irene Rummelhoff 12/13

• Ÿ Sten Roar Martinsen 13/13

Remuneration policy

Hydro's Remuneration Policy for Executive Management was approved by the shareholders at the Annual General Meeting (AGM) May 6, 20211. A revised remuneration policy will be presented at the AGM on May 10, 2022, and will be subject to approval by the shareholders. The revised policy contains an updated section on variable pay with more detailed information concerning performance measures and how variable pay programs are linked to Hydro's 2025 strategy. The full remuneration policy will be available at Hydro.com following the AGM.

The purpose of the policy is to ensure that the Company attracts and retains qualified people in governing bodies and leadership roles to lead the Company in accordance with long-term strategies in a sustainable manner.

This requires Hydro to offers competitive compensation and benefit packages that are aligned with the practice of relevant external markets. At the same time, Hydro emphasizes moderation and shall not be marketleading.

Remuneration of members of the CMB shall consist of both fixed and variable elements. Variable remuneration plans shall incentivize the right behaviors and actions that will help Hydro deliver on its strategic agenda, increase long-term value for our stakeholders and contribute to a sustainable society.

Furthermore, the policy is built on the same principles as the global remuneration principles for all employees.

Remuneration structure

Remuneration of the CEO and other members of the CMB consists of fixed and variable elements. Fixed remuneration includes base salary, benefits and pension. Variable remuneration consists of a short- and long- term incentive scheme. In addition, Hydro offers an employee share purchase plan (ESPP) to all employees on Norwegian contracts, including the CEO and other CMB members.

The CEO and members of the CMB do not receive remunera-tion for management or board roles in the Company's subsidiaries or cooperating companies (e.g., joint ventures).

A brief description of the various elements offered to the CEO and CMB members in Hydro is presented in the table on the following page.

The purpose of Hydro's Remuneration Policy

To enable Hydro to attract and retain qualified people in governing bodies and in corporate management.

Provide mechanisms to incentivize the right behaviors and actions that will help Hydro deliver on its long-term strategy in a sustainable manner.

Provide a framework for governing remuneration.

The policy is aligned with Hydro's 4 global compensation principles for all employees

Market competitiveness

All employees shall receive a total compensation that is competitive and aligned with the local market (but not market leading).

Holistic

Total compensation should be viewed holistically and be a well-balanced mix of monetary and non-monetary compensation elements, including career opportunities and other recognition elements, having the potential for differentiation, both immediate and over time.

Performance oriented

The total compensation should enhance and encourage performance-oriented behavior, short and long-term, and retention of critical competence and resources.

Transparent

A description of the organization's compensation elements should be available to all employees, and each employee (and her/his leader) should have a clear understanding of the employee's total compensation. The compensation should be based on clear and consistent criteria with due regard to the basic needs of the worker.