Elkem : Vedlegg Enclosure 3 Annual Accounts for Elkem ASA 2022

Annual report 2022

Dual-play growth & green leadership

Delivering your potential

We are Elkem

Advanced silicon-based materials shaping a better and more sustainable future

Elkem history Highlights Letter from the CEO The Elkem way The Elkem share Board of directors' report Board and management	Corporate governance Overview of main risk areas ESG report Taxonomy report Financial statements Contact

Elkem in brief

Who we are and what we do

Our divisions

Table of contents

45.9

NOK billion total operating income

28%

EBITDA margin

Elkem is one of the world's leading suppliers of advanced silicon-based materials shaping a better and more sustainable future. The company develops silicones, silicon products and carbon solutions by combining natural raw materials, renewable energy and human ingenuity. Elkem helps its customers create and improve essential innovations like electric mobility, digital communications, health and personal care as well as smarter and more sustainable cities.

Silicones

Elkem's history	8
Highlights	10
Elkem's value chain	14
Letter from the CEO	16
The Elkem way	20
Silicones	22
Silicon Products	24
Carbon Solutions	26
The Elkem share	30
Board of directors' report	34
Board and management	50
Corporate governance	52

>80%

renewable electricity

0

net zero emissions by 2050

With a strong track record since 1904, Elkem's global team of more than 7,300 people has a joint commitment to stakeholders: Delivering your potential. Elkem is listed on the Oslo Stock Exchange (ticker: ELK) where it is part of the OBX® ESG Index, a selection of 40 blue-chip companies demonstrating best Environmental, Social and Governance (ESG) practices.

Silicon Products

Carbon Solutions

Overview of main risk areas	68
Risk descriptions	70
ESG report	74
Introduction	76
The Elkem climate roadmap	80
ESG management	84
Environmental	96
Social	120
Governance	136
Third party verification	154
Taxonomy report	156
Financial statements	160
Consolidated financial statements	164
Notes to the consolidated financial statements	170
Financial statements - Elkem ASA	254
Notes to the financial statements - Elkem ASA	259
Declaration by the board of directors	291
Independent auditor's report	292
Alternative Performance Measures (APMs)	298

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Elkem history Highlights Letter from the CEO The Elkem way The Elkem share Board of directors' report Board and management	Corporate governance Overview of main risk areas ESG report Taxonomy report Financial statements Contact

Elkem's history

Foundation		Expansion		Internationalisation
→	Sam Eyde establishes Elkem		→	Producer of aluminium		→	International expantion;
→	Development of electrometal-		→	Partner with Alcoa			steel and ferroalloys
	lurgical processes		→	Rhöne-Poulenc is		→	Acquisition of Union Carbide
				established in 1948

1904		1950

Growth & specialisation

• Rhodia Silicones acquired by Bluestar in 2007, renamed Bluestar Silicones International (BSI)
• Elkem acquired by Bluestar in 2011
• Merger with BSI in 2015
• Spin-offof Elkem Solar

2000	2020

Dual-play growth and green leadership

• Record financial results in 2021 and 2022
• Solid balance sheet enables attractive dividend and growth investments

Innovation

• The Fiskaa Verk, Norway site is purchased in 1917 for experimental and research purposes
• Elkem patents the Söderberg electrode in 1918
• Elkem listed on Oslo Stock Exchange

Industrial giant		Portfolio optimisation
→	Elkem merges with		→	Sold metal business
	Christiania Spigerverk to		→	Acquisition of Icelandic Alloys
	become one of Norway's		→ Start-up of Elkem Solar
	largest companies		→ Elkem acquired by Orkla
→	Xinghuo plant is			and delisted from the Oslo
	established in 1968			Stock Exchange

Integration

• Becoming a global, integrated leader in silicon-based advanced material solutions
• Initial public offering: Re-listing on the Oslo Stock Exchange in 2018
• Integrated with and acquisition of Xinghuo and Yongdeng, with successful branch expansion at Xinghuo

• Well-positionedfor global megatrends like green transition and digitalisation
• Good portfolio balance between East and West - and upstream and downstream
• Awarded double A- scores from CDP on climate and forests
• Aiming to be one of the winners in the green transition
• Vianode, with Elkem as largest shareholder, investing NOK
  2 billion in battery materials plant

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	Elkem history Highlights Letter from the CEO The Elkem way The Elkem share Board of directors' report Board and management	Corporate governance Overview of main risk areas ESG report Taxonomy report Financial statements Contact

10 highlights from 2022

In 2022, Elkem delivered its best financial result in the company's 118-year history. Elkem benefitted from its robust business model and high market prices.

1Q-2022

• Elkem was awarded a platinum rating on sustainability transparency from EcoVadis, one of the world's largest and most trusted providers of sustainability ratings
• Elkem announced a partnership with Hydro and Altor to accelerate the growth of Vianode. Hydro and Altor to have 30% ownership each, while Elkem retained 40% ownership
• Elkem made a decision to invest NOK 150 million in a flagship R&I centre in Shanghai, China to meet the growing demand for advanced silicone products and technologies

3Q-2022

• In September, Elkem celebrated the opening of its new specialised silicones facility in York, S.C., USA for production of high purity silicone materials to medical implantable and pharmaceutical applications
• Elkem Silicones was declared 2022 R&D 100 Awards winner in Mechanical Materials category for safety and reliability for silicone solutions for electric vehicle thermal management
• Supported by Elkem, Hydro and Altor, Vianode made the decision to build the first phase production plant for advanced battery materials at Herøya, Norway

2Q-2022

• Elkem signed a new credit facilities agreement of EUR 1,000 million. The facilities agreement includes sustainability performance targets linked to health and safety and reduction of the group's product carbon footprint
• Elkem entered into new 7-year power contract in Norway starting from 2027 with an aggregate volume of 2.5 TWh

4Q-2022

• Elkem successfully placed a series of floating rate loans in the Schuldschein market, amounting to EUR 200 million
• Inauguration of the world's first carbon capture pilot for smelters in Rana, Norway, with main goal to verify the technology on industrial gases from smelters and other process industries
• Elkem awarded double A- scores from CDP for efforts on climate and forests, and B score on water security

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Elkem history Highlights Letter from the CEO The Elkem way The Elkem share Board of directors' report Board and management

Corporate governance Overview of main risk areas ESG report Taxonomy report Financial statements Contact

Plants

Offices

HQ

Key figures

Total operating income Operating income growth

EBITDA EBIT

Profit (loss) for the period Cash flow from operations Reinvestments in % of D&A Total assets

Net interest-bearing debt Debt leverage

Equity Equity share

Return on capital employed (ROCE) Earnings per share (EPS)

Number of employees

Total recordable injury rate H1+H2 NOx emissions

Total CO2 emissions (Scope 1, 2 and 3)* Energy consumption

Unit	2022	2021	2020	2019	2018	2017	2016
NOK million	45 898	33 717	24 691	22 668	25 230	20 985	16 594
Ratio	36%	37%	9%	-10%	20%	26%
NOK million	12 925	7 791	2 675	2 656	5 793	3 188	1 559
NOK million	10 898	5 899	948	1 189	4 522	1 927	264
NOK million	9 642	4 664	278	897	3 367	1 249	-268
NOK million	9 551	4 100	1 513	2 133	4 031	2 336	627
Ratio	84%	91%	81%	80%	84%	72%	57%
NOK million	52 781	41 850	30 888	29 004	31 129	25 507	23 092
NOK million	2 615	4 827	8 058	5 722	3 264	8 111	9 502
Ratio	0.2	0.6	3.0	2.2	0.6	2.5	6.1
NOK million	28 773	19 874	12 635	12 952	13 722	8 565	5 830
Ratio	55%	47%	41%	45%	44%	34%	25%
Ratio	40%	26%	5%	7%	26%	12%	2%
NOK	15.09	7.49	0.41	1.47	5.74	2.08	(0.52)
Number	7 372	7 074	6 856	6 370	6 280	6 113	6 022
Ratio	3.2	3.7	2.3	2.2	2.2	3.1	5.3
Tonnes	6 519	8 932	6 610	6 718	7 068	7 109	7 309
Mill tonnes	10.74	11.60	10.27
TWh	6.54	6.54	6.40	6.01	6.23	5.28	4.40

* Total scope not reported before 2020.

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Elkem history Highlights Letter from the CEO The Elkem way The Elkem share Board of directors' report Board and management	Corporate governance Overview of main risk areas ESG report Taxonomy report Financial statements Contact

Elkem's value chain

Low cost sustainable	High temperature/chemical
input factors	production processes

Quartz

Silicones

Coal

Silicon Products

Biocarbon

Carbon Solutions

Renewable power

Examples of applications and markets

Mobility and	Science and	Healthcare
transportation	chemicals

Digital	Smart cities and	Energy
communication	construction	and power

Personal care and	Advanced
consumer goods	manufacturing
	and industrial

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Elkem history Highlights Letter from the CEO The Elkem way The Elkem share Board of directors' report Board and management

Corporate governance Overview of main risk areas ESG report Taxonomy report Financial statements Contact

Letter from the CEO

All-time high results in an extraordinary year

The unprecedented market momentum continued into 2022, enabling Elkem to deliver all-time high revenues and financial results. We also continued to position for the future by launching an updated corporate strategy focusing on our integrated business model and green leadership.

Elkem continued to benefit from exceptionally strong markets in 2022. However, the all-time high results were also largely a result of strong cost and market positions, built-up over time through continuous improvement and strategic choices. We have secured access to low-cost and sustainable input factors and been able to maintain and deliver high productivity and quality, despite supply chain challenges and trade restrictions.

Our record results and current solid balance sheet will enable an attractive dividend to shareholders and secure continued investments in growth, driven by global megatrends like the green transition and digitalisation.

Good operational performance

I am impressed by how our entire global team in Elkem has delivered excellent operational performance throughout a challenging year. The restrictions related to the coronavirus pandemic (Covid-19) continued but were eased significantly in most countries during the year.

Russia's invasion of Ukraine has significantly influenced market dynamics, primarily through the impact on energy prices. At the outbreak, Elkem did not have any manufacturing or own employees in Ukraine or Russia and these countries accounted for a very limited part of our revenue. We continuously monitor and comply with all sanctions on Russia relevant to our operations.

At the end of the year, we decided to partially curtail production at two plants in Norway due to high power prices. This enabled us to optimise value creation and contribute to increased flexibility in a tight power market for households and businesses in Norway.

Focus on safety improvement

Regrettably, we have had two high-severity incidents involving contractors during the year, and in general experienced a setback during the pandemic with a high number of low-severity incidents both in 2021 and 2022.

A new and reinforced system for Health, Safety and the Environment (HSE) improvement is now being rolled out globally in Elkem in order to reverse the trend.

Prepared for the future

In the near term, we expect a slowdown in global economic activity and that market prices will come down to more normal levels. However, there is significant uncertainty on how macroeconomic development and inflationary pressure will impact demand, and continued volatility in our markets is likely.

In the longer term, global megatrends remain strong, and the critical raw materials are increasingly important in building a sustainable future.

Helge Aasen

CEO, Elkem ASA

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Elkem history Highlights Letter from the CEO The Elkem way The Elkem share Board of directors' report Board and management	Corporate governance Overview of main risk areas ESG report Taxonomy report Financial statements Contact

Strong growth in Asia combined with re- industrialisation in the western part of the world will create opportunities for Elkem. In the green transition, we have a particular focus on the fast- growing electric mobility segment. An electric vehicle typically contains four times more silicones than a conventional car.

Geopolitical tensions are on the rise, and increasing trade barriers create risks, but also opportunities. Elkem is among very few companies with complete and integrated value chains in different regions, making us less vulnerable to disruptions in supply chains and trade flows.

A strategy of dual-play growth and green leadership

It is on this basis we have set out specific growth ambitions for Elkem: We aim to become among the top three players in the silicones industry worldwide, and to be the number one player in silicon products and carbon solutions in the West.

This means growing not just with the markets we are in, but faster. We aim to grow by more than five per cent per year, but also to do so profitably, with an EBITDA margin of at least fifteen per cent per year.

We have a good balance between Eastern and Western markets, with around 60% of our revenues in the West and 40% in the East. This balance provides more stability in revenue and earnings.

As we have seen during the pandemic, weakness in one region has largely been offset by a more positive development in other regions. In addition, the pandemic showed the vulnerability of global supply chains.

We have experienced that Elkem's integrated value chain provides significant competitive advantage and margin protection.

Green leadership: One of the winners in the green transition

Elkem aims to be part of the solution to combat climate change - and to be one of the winners in the green transition. We will do this through three key levers:

• Reducing our emissions: we already have a strong position with 83% of our energy consumption being renewable. Our target is to
  reduce overall CO2 emissions by 28% within 2031. In December, Elkem was awarded double A- scores from CDP for the company's efforts on climate and forests.
• Supplying to the transition: Elkem aims to grow its supplies of advanced materials to green markets such as better buildings, electric vehicles and renewable energy. Our largest single customer across Elkem globally is now a globally recognised producer of electric vehicles.
• Enabling circular economies: we continue to work closely with customers and researchers to increase recycling within our own operations, as well as developing the eco- design of innovative products.

Unprecedented volatility - but also opportunity

For us in Elkem, and our entire global team, across geographies and divisional lines, from top management to front-line workers, we are aligned around a clear mission: To provide advanced silicon-based materials shaping a better and more sustainable future. This describes what we do, but also why we do it and why it is so important.

I have been in Elkem's top management for twenty- two years, and now more than twelve years as CEO.

I have never seen such volatility in markets combined with inflationary pressure and uncertainty regarding future economic activity as now. At the same time,

I also see an unprecedented opportunity for Elkem given our diversity geographically and culturally, our broad product range, and good positions to take part in the green transition.

This gives me confidence that we will be able to continue to deliver value for all our stakeholders - in line with our purpose: Delivering your potential. Not just in 2022, which has been an exceptional year, but in many years to come.

Helge Aasen,

CEO, Elkem ASA

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Elkem history Highlights Letter from the CEO The Elkem way The Elkem share Board of directors' report Board and management	Corporate governance Overview of main risk areas ESG report Taxonomy report Financial statements Contact

Who we are, how we work and why we are here​

The Elkem way

We are Elkem

→ A leading global provider of silicon-based advanced materials

Our growth ambitions	→	Top 3 in silicones worldwide​
	→	Number 1 in silicon products and carbon solutions in the West

Our mission

Advanced silicon-based materials shaping a better

→ Elkem's products are critical input factors to a vast number of applications

that are necessary in sustainable solutions enabling renewable energy,

energy storage, mobility solutions, infrastructure improvements and

digital communications​

Our corporate strategy

and more sustainable future, adding value to stakeholders globally

→	Elkem develops its business in accordance with the UN Sustainable
	Development Goals and the Paris agreement​
→	It is our belief that companies that act responsibly and create value by
	securing sustainable economic growth with a limited environmental
	footprint will be successful in the long term

Dual-play growth​

→ Balanced between geographic regions (East & West)​

→ Balanced across the value chain (Upstream & Downstream)

Green leadership​

• Strengthening position as best in the industry on low CO2​
• Growing supplies to green transition and creating green ventures​

Our purpose

Delivering​ your potential

→ Elkem's purpose is in our commitment to stakeholders: Delivering

your potential

→ We believe that the long-term megatrends - like sustainability, energy

demand, urbanisation, increased standard of living, ageing and growing

population, and digitalisation - will continue​

→ This will drive growth in demand for advanced materials, including

silicones, silicon and carbon solutions

→ We in Elkem are a team of professionals powered by passion for people.

We bring agile and innovative solutions to our customers and our other

stakeholders, because we care

>5%
Growth per year	Dual-play growth and
		green leadership

-28%

Reduce CO2 (2020-2031)

>15%

0

Our values​

Involvement Respect Precision

Continuous improvement

• Involvement commits people. We know that only people can identify problems and opportunities and find solutions. By involving colleagues, customers and other stakeholders, and by being transparent and committed to teamwork, we increase our ability to learn and develop new solutions​
• We respect the law, the environment, our employees, colleagues, customers, suppliers, owners, local communities and different cultures. Respect is about being fair, open and honest, trusting your colleagues and partners and appreciating diversity
• Commitment to precision expresses itself through our work to develop and follow standards of best practice and safe and stable production. By establishing work and safety standards, we can measure and continuously improve our performance
• We know that the value chain can always be improved. We do this through experimenting, using new technology and looking for ways to eliminating waste. Continuous improvement means that we are always looking for improvement potential, keeping an open mind and always ready to learn and share our knowledge

EBITDA margin per year

Silicones

• Balanced geographical growth​
• Improve cost position​
• Higher degree of specialisation​

Silicon Products

• Selective growth​
• Secure leading cost positions​
• Lower carbon emissions

net zero emissions by 2050

Carbon Solutions

• Selective growth​
• Sustainable low-cost position​
• Preferred supplier with high quality

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