Cloudberry Clean Energy Annual report 2020

Cloudberry Annual report 2020 Financial statements 90 the period until December 2021. The remaining part of the Group’s production volume is exposed to fluc- tuations in the market prices for electricity, electricity certificates and guarantees of origin, unless new fixed terms agreements are entered into. Electricity prices are inter alia dependent on substi- tute or adjacent commodity prices such as e.g. oil, gas and coal prices, but also dependent on metro- logical conditions, CO 2 pricing and other supply and demand factors going into the clearing of the market price of electricity. Note 8 Commercial and operational risks Risks related to changes in laws and regulations Laws and regulations may affect the Group’s operations, increase the Group’s operating costs, and reduce demand for its services. Changes in laws and regulations applicable to the Group could increase compliance costs, mandate significant and costly changes to the way the Group implements its services and solutions and threaten the Group’s ability to continue to serve certain markets. For some small-scale power plants and large-scale power plants, license fees and concessionary power must be paid or transferred to the municipality, county or state. Often, such power plants must deliver 10-15% of their power production as conces- sionary power. The power plant must in such cases sell the concession power at the expected “cost price”. Such changes in regulations would affect the Group’s profitability. Changes in tax laws of any jurisdiction in which the Group operates, or any failure to comply with applicable tax legislation, may have a material adverse effect for the Group. The Group is subject to prevailing tax legislation, treaties and regulations in the jurisdictions in which it is operating, and the interpretation and enforcement thereof. The Group’s income tax expenses are based upon its interpretation of the tax laws in effect at the time that the expense is incurred. If applicable laws, treaties or regulations change, or if the Group’s interpretation of the tax laws is at variance with the interpretation of the same tax laws by tax authori- ties, this could have a material adverse effect on the Group’s business, results of operations or financial condition. In Norway, it has been announced that the current political majority has agreed to increase the taxes on revenue from wind power. The govern- ment is expected to announce a specific proposal during H1 2021. Operational risks Power plants are highly technical Investments in power generation and energy-related infrastructure involve technical and operational risks. The Group will seek to invest in power plants of expected good technical standard to reduce the technical risk of the investment. The Group will prioritize technical solutions that are well-proven and delivered by reputable suppliers, so that any repairs can be made within reasonable timeframes and at reasonable cost, and that it is possible with attractive insurance terms. Despite the aim of choosing sound solutions, technical problems may occur meaning possible stops in production or costly reinvestments that reduce the Group’s profitability and/or financial position. Revenues dependent on metrological conditions The metrological conditions (rain and wind) at par- ticular sites at which the Group’s power plants are located can vary materially from season to season and from year to year. If a site proves to have lower resources than anticipated in the Group’s business model or suffers a sustained decline in metrological conditions, such power plants are likely to generate lower electricity volumes and lower revenue than anticipated, which could have a material adverse effect on the Group’s business. Risks related to costs of transmission and distribution Increases in charges relating to the connection to and use of the electricity transmission and distribu- tion networks and relating to balancing of electricity supply and demand, and/or restrictions on the capacity in such networks available for use by the Group’s power plants, may result in higher operating costs, lower revenues and fewer opportunities for growth.