Cloudberry Clean Energy Annual report 2020

Cloudberry Annual report 2020 Introduction 14 Market and power prices In our view, the demand for clean renewable power in Europe will increase significantly. Businesses are seeking clean energy sources and shifting their strategies towards net-zero carbon emissions, while regulators are speeding up decision making with stricter penalties for emissions. At the same time, the Nordic and EU power markets are becoming increasingly interconnected. Statnett (the Norwegian transmission system operator, “TSO”) is finalizing significant grid connections to Germany (the NorLink cable, 1400 MW) and the UK (the North Sea Link cable, 1400 MW). Large interconnectors will remove local bottlenecks and reduce the downside risk for Norwegian power producers. Whilst long-term power price forecasts have been stable during 2020, short-term prices fluctuated. Heavy snowfall/melting, interconnectors under construction or repair and the impact of Covid-19 resulted in historically low prices. When Cloudberry raised capital for its hydro power portfolio in July 2020, power prices were below EUR 10 per MWh but rose to around EUR 40 per MWh by year-end. Parts of Cloudberry’s production segment is sensi- tive to short-term changes in electricity pricing. In 2020, about 1/3 of Cloudberry’s fully owned pro- duced volumes were affected by short-term fluctua- tions in energy pricing, while about 2/3 was fixed on long-term agreements. In our development segment, our projects have low sensitivity to short-term prices and our valuation is based on long-term expecta- tions. Long-term power expectations normally have low volatility, and range between EUR 40 – 50 per MWh (40 – 50 øre per kWh). Cloudberry also uses third-party analysis from Wattsight (Volue Insight) as part of its strategy for financial modelling and decision making. EUR/MWh (real 2020) 0 10 20 30 40 50 60 2016 2017 2018 2019 2020 2025 2030 2035 2040 Historicals Wattsight NVE Statnett Norway power price outlook (Southern price area) EUR/MWh (real 2020)