Annual report 2021 Cloudberry Clean Energy ASA
Cloudberry Annual report 2021 Introduction 2 Content Cloudberry in brief 3 Letter from the CEO 4 Overview and highlights 6 Executive Management 18 Board of Directors 20 Board of Directors report 23 Sustainability report 32 Corporate Governance report 78 Consolidated financial statements Group 90 Parent company financial statements 158 Responsibility statement 176 Alternative performance measures 177 Auditor’s report 181
3 Cloudberry Annual report 2021 Introduction Cloudberry in brief Cloudberry is a renewable energy company, born, bred, and operating in the Nordics and in accordance with local traditions. We own, develop, and operate hydropower plants and wind farms in Norway and Sweden. We are powering the transition to a sustainable future by providing new renewable energy today and for future generations. We believe in a fundamental long-term demand for renewable energy in Europe. With this as a cornerstone, we are building a sustainable, scalable, efficient, and profitable platform for creation of stakeholder value. Reporting Cloudberry reports consolidated IFRS and proportionate 1 segment reporting to provide enhanced insight to the operation, financing and future prospect of the Group. Proportionate reporting is aligned with internal management reporting, analysis and decision making. The alternative performance measures (abbreviated APMs) provided by Cloudberry are a supplement to the financial statements that are prepared in accordance with IFRS. Cloudberry`s ESG reporting and the company`s approach to sustainability, is in accordance with the World Economic Forum (WEF) Stakeholder Capitalism Metrix, organized into four pillars, Principles of Governance, Planet, People and Prosperity. For more information see the Sustainability report. 1 See Alternative Performance Measure appendix for further definitions. Cloudberry`s growth strategy Our current portfolio consists of 25 hydropower and three wind power assets. We have a local and active ownership strategy and prefer 100 per cent ownership; however, in certain investments we have proportionate ownership with strong, strategic partners. The scalable Cloudberry platform is positioned for valuable growth, both in terms of energy production and our in-house development backlog and pipeline. Cloudberry’s strategy is to continue to grow both organically and inorganically in the Nordic market. We are backed by strong owners and an experienced management team and board. Our shares are traded on Oslo Oslo Børs’ Main list, ticker: CLOUD. Cloudberry`s business model Our business model will from 2022 comprise three revenue generating segments and one cost-efficient corporate segment: Develop, our fully owned development company has a long history of organic, in-house developments of wind and hydropower assets in Norway and Sweden. Production, our fully owned power producing company, is an active owner and manager of producing renewable assets. Operating (from January 2022), a 60 per cent owned company with a scalable operating platform. Our strong commitment to local communities and integrated value chain ensures local presence and optimization of stakeholder alignment and value creation. Our Nordic clean renewable platform Operations Development Production
Cloudberry Annual report 2021 Introduction 4 We have managed to secure financing for all our mature projects and strengthen the company with hydro- and wind power development resources. 2021 has been a very active year for Cloudberry and we are proud of building a leading Nordic Independent Power Producer (“IPP”) – being better positioned for further valuable growth than ever before. The push for more renewable energy production has further strengthened in 2021. We see call for more renewable power, faster development of infrastructure and support for tougher measurements for polluters. The Nordics is very well positioned for solving parts of the problem with some of the world`s best resources and industry capabilities. During 2021 we have seen how important new renewable production is for reaching the ambitious climate goals that the world has agreed upon. Cloudberry is committed to do its share for a greener Europe. Our bold ambitions to develop offshore wind projects has been a game changer. We decided to set up a separate Offshore Wind team and are very happy to have an experienced team lead by Charlotte Bergqvist onboard and in operation at year end. We will hear a lot more from them over the next years with exciting projects both on inland fresh water and in the Baltic Sea. We have also focused on strengthening the Cloudberry team in 2021. We have invested into great people and technology. The up listing to Oslo Børs’ Main list in June 2021 was a new milestone for us and important for building one of the leading IPP in the Nordics. We are convinced that the investments we did in 2021 will take Cloudberry to the next level over the years to come. Despite covid related issues both on the projects side and in the company, the team managed to solve the challenges as they came and delivered according to plan. We have a responsibility to operate our business in a sustainable manner. It is a high priority for us to reduce our environmental footprint as much as possible. Cloudberry has set a goal to be net-zero by 2040, and our development projects and producing power plants shall be as green and sustainable as possible. In 2021 Cloudberry has continued to build our ESG framework and continues our focus to make ESG and sustainability a competitive advantage. We contribute to a more sustainable society by developing new renewable projects in the Nordics. Through 2021 we have focused on growing the project pipeline and moving power projects from development stage into commissioning generating long term cash flow for the company – on time and budget. We doubled the production from 2020 to 2021 and we will be doubling it again during 2022. Letter from the CEO Building a leading Nordic renewable company with an attractive portfolio
5 Cloudberry Annual report 2021 Introduction Anders J. Lenborg Chief Executive Officer Our Sustainability Report 2021 will give you a taste of Cloudberry’s ESG work in practice. The demand for more renewable power in Europe will only increase in the years to come. With the devastating Russian attack on Ukraine, the European energy market is probably changed for good. The EU has put forward plans to cut all imports of Russian gas as soon as possible and with two thirds already in 2022. This comes on top of the already ongoing energy transition in Europe and will further speed up the process. The outlook is heavily influenced by an ongoing war in Ukraine, demand for more renewable power and the ongoing energy transition leading to record high gas- and power prices in 2022 and on the front of the price curve. We are committed to be part of the solution to secure sufficient energy for Europe and at the same time taking part in solving the climate crises. For Cloudberry this most likely means a more active role with further opportunities for new renewable energy projects helping Europe to become less dependent on Russian oil and gas. We are proud to have delivered on our goals and to see that our strategy work. We are more than motivated to continue the valuable growth for Cloudberry and help to power the much-needed energy transition. You will see us doing more of the same in the years to come, so please join us on our quest to a more sustainable society for future generations! Our bold ambitions to develop offshore wind projects has been a game changer.
Cloudberry Annual report 2021 Introduction 6 Overview and highlights Note hydro assets:Jåstadkraft AS (1MW) is not included in the overview, classified as held for sale. Production Producing incl. under construction Hydro assets: 26 Wind assets: 3 Capacity: 150 MW Production: 504 GWh (normalized) Develop Construction permit Wind assets: 4 Capacity: 218 MW Production: 615 GWh (normalized) Backlog Projects: 14 Capacity: 388 MW Pipeline of additional >20 projects and >2 500 MW Norway HQ Oslo Karlstad Office Gothenburg Office Sweden Pipeline Cloudberry delivers sustainable growth. In 2021, the company has scaled its production & development portfolio and strengthened its balance sheet significantly. Cloudberry is currently ramping up the offshore platform with a new office in Gothenburg, Sweden. Below is an overview of our projects and portfolio per reporting date.
7 Cloudberry Annual report 2021 Introduction Main developments in 2021 • Production increased from 21 GWh to 117 GWh (proportionate) • Revenue increased from NOK 4 million to NOK 41 million (consolidated) • Strengthened the balance sheet from NOK 1 055 million to 2 636 million (booked equity) • Increased corporate debt facility from NOK 700 million to NOK 1 400 million • Listed on Oslo Børs’ Main list, ticker: Cloud • 100% owner of the 100 MW shallow-water project, Stenkalles • New offshore team in Gothenburg, Sweden • Increased ownership from 15% to 33.4% in Odal Vind • Started construction of Hån wind farm • Completed several hydro projects on time and budget: Åmotsfoss, Nessakraft & Bjørgelva • Purchased two new hydro projects: Selselva and Usma Subsequent events • Purchased 60% of Captiva, adding an operating segment • Secured two late-stage wind development projects: Kafjarden & Munkhyttan • Secured two new hydro projects: Øvre Kvemma & Tinnkraft Acquisition of Captiva In January 2022, Cloudberry purchased 60% of the Captiva Group. Captiva is a datadriven operator, manager and developer of renewable energy in the Nordics. Captiva adds significant value to Cloudberry’s Nordic renewable strategy: • Development. Strengthen our hydro development capabilities • Operations. Strengthen our operational capabilities. Increased competence and industrial digitalization • Project management & Construction. Expanding project management and construction capacity in order reduce risk and to run more projects in parallel
Cloudberry Annual report 2021 Introduction 8 Project portfolio 1 Cloudberry’s strategy is to develop, own and operate producing assets in the Nordic region. The figures below summarise the status of our projects. 1 Per reporting date
9 Cloudberry Annual report 2021 Introduction Project Technology Location Price area Total capacity (MW) Ownership Cloudberry's proporionate capacity (MW) Cloudberry's estimated production (GWh) Status Finnesetbekken Hydro Norway NO-5 1 100% 1 3 Producing Røyrmyra Wind Norway NO-2 2 100% 2 8 Producing Forte (5 plants, NO-2) Hydro Norway NO-2 26 34% 8 29 Producing Forte (4 plants, NO-3) Hydro Norway NO-3 19 34% 6 21 Producing Forte (6 plants, NO-5) Hydro Norway NO-5 33 34% 11 37 Producing Selselva Hydro Norway NO-3 5 100% 5 20 Producing Nessakraft Hydro Norway NO-5 9 100% 9 34 Producing Bjørgelva Hydro Norway NO-4 3 100% 3 7 Producing Usma Hydro Norway NO-3 9 100% 9 26 Producing Åmotfoss Hydro Norway NO-2 5 100% 5 23 Producing Tinnkraft (new, 2022) Hydro Norway NO-2 2 100% 2 6 Producing Odal Vind Wind Norway NO-1 163 33.4 % 54 176 Const/Prod. H1 2022 Skåråna (2 plants) Hydro Norway NO-2 4 100% 4 14 Const/Prod. H1 2022 Ramsliåna Hydro Norway NO-2 2 100% 2 6 Const/Prod. H1 2022 Hån Wind Sweden NO-1 21 100% 21 74 Const/Prod. H2 2022 Kvemma (new, 2022) Hydro Norway NO-5 8 100% 8 20 Const/Prod. H1 2024 Total 1 (Producing/under constr.) 311 150 504 Käfjarden (new, 2022) 1 Wind Sweden SE-3 40 100% 40 70 Constr. Permit Munkhyttan (new, 2022) Wind Sweden SE-3 18 100% 18 60 Constr. Permit Duvhalllen Wind Sweden SE-3 60 100% 60 165 Constr. Permit Stenkalles (Vanern) Offshore Sweden SE-3 100 100% 100 320 Constr. permit Total 2 (incl. constr. permit) 529 368 1 119 1 Project capacity 20 - 40 MW pending final development and turbine selection. 0 50 100 150 200 250 300 350 400 Total Stenkalles Duvhallen Munkhyttan Käfjarden Total Kvemma Hån Rams. & Skåråna Odal (33.4%) Total Tinnkraft Åmotsfoss Usma Bjørgelva Nessakraft Selselva Forte (34%) Røyrmyra Finnesetbekken Producing Under construction Construction permit 1 2 25 MW 5 9 3 9 5 2 54 61 6 21 8 150 40 18 60 100 368
Cloudberry Annual report 2021 Introduction 10 Project Status Type Location Ownership Production estimate proportionate Finnesetbekken Nesbyen, Norway 100% 1 MW 3 GWh Røyrmyra Hå, Norway 100% 2 MW 8 GWh Forte portfolio Norway 34% 25 MW 87 GWh Selselva Sunnfjord, Norway 100% 2 MW 20 GWh Nessakraft Balestrand, Norway 100% 9 MW 34 GWh Bjørgelva Sørreisa, Norway 100% 3 MW 7 GWh Current portfolio of assets in production and under construction, and projects with construction permit
11 Cloudberry Annual report 2021 Introduction Project Status Type Location Ownership Production estimate proportionate Usma Selbu, Norway 100% 9 MW 26 GWh Åmotsfoss Nissedal, Norway 100% 5 MW 23 GWh Tinnkraft Tinn, Norway 100% 2 MW 6 GWh Odal Vind Innlandet, Norway 33.4% 54 MW 176 GWh Skåråna (2 plants) Lund, Norway 100% 4 MW 14 GWh Ramsliåna Flekkefjord, Norway 100% 2 MW 6 GWh STATUS In production Under construction Construction permit
Cloudberry Annual report 2021 Introduction 12 STATUS In production Under construction Construction permit Project Status Type Location Ownership Production estimate proportionate Hån Årjäng, Sweden 100% 21 MW 74 GWh Kvemma Lærdal, Norway 100% 8 MW 20 GWh Käfjarden Eskilstuna, Sweden 100% 40 MW 70 GWh Munkhyttan Lindesberg, Sweden 100% 18 MW 60 GWh Duvhällen Eskilstuna, Sweden 100% 60 MW 165 GWh Stenkalles (Vänern) Karlstad, Sweden 100% 100 MW 320 GWh
13 Cloudberry Annual report 2021 Introduction
Cloudberry Annual report 2021 Introduction 14
15 Cloudberry Annual report 2021 Introduction Key Performance Measures in 2021 Financials Consolidated FY 2021 (FY 2020) Revenue 41m (4m) EBITDA -32m (-30m) Cash, year-end 1 115m (605m) Interest bearing debt, year-end 304m (263m) Total equity, year-end 2 636m (1 055m) Proportionate FY 2021 (FY 2020) Revenue 83m (5m) EBITDA -25m (-27m) Sustainability 2021 (2020) CO2 reduction EU-27 electricity mix 28 633 tons CO2 eq. (5 378 tons CO2 eq.) Direct and indirect emissions 203 tons CO2 eq. (187 tons CO2 eq.) Compensated -507 tons CO2 eq. (-187 tons CO2 eq.) Production Proportionate 2021 (2020) Production 117 GWh (21 GWh) In operation year-end 58 MW (27 MW) Development Proportionate 2021 (2020) Construction permits year-end 160 MW (151 MW) Backlog year-end 370 MW (370 MW)
Cloudberry Annual report 2021 Introduction 16 Market and power prices In our view, the demand for clean renewable power in Europe will continue to increase. 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. During 2021, we saw an increase of corporates seeking PPAs to cover their own electrical supply. We expect a further increase in the coming years. The war in Ukraine may cause long term effects and changes to the European energy markets. During 2021, Europe, and the Nordics, saw record high power prices, primarily driven by soaring gas prices. A doubling of the CO2 prices, little rain in Norway and less-than-normal wind across Europe drove the prices further up. For the year 2021, the Nordic System price ended at above 62 euro/MWh, the highest ever recorded price. For NO1, NO2 and NO5, the average price for 2021 ended at approximately 75 euro/MWh. However, the internal price difference in Norway were at record levels: In Northern Norway, the average price ended at 35 euro/MWh. Similarly, prices in Southern Sweden (80 euro/MWh) were twice the average price in Northern Sweden (42,5 euro/MWh) for the year. We expect the internal price differences to sustain, although at lower, relative levels in the medium to short term. At long term, additional grid development (such as the upgrade of the 300 kV Aurland-Sogndal line to 420 kV), will reduce the bottleneck between the Norwegian price areas NO3 and NO5. Going forward, we expect the high gas- and CO2-prices to keep the prices higher than normal in especially NO1, NO2 and NO5 in 2022. Morethan-usual rain during the spring/summer/autumn seasons might change the outlook. During 2021, about 90% of Cloudberry’s power sale was sold at spot prices. So far in 2022, 100% of Cloudberry’s power production is exposed to spot prices. We remain positive to Nordic power prices, especially in the southern price areas in Sweden (SE3+4) and Norway (NO1+2+5). However, the Company is actively pursuing opportunities, primarily with corporate off-takers. On 24 February 2022, Russia attacked Ukraine. Russia, as the largest exporter of natural gas to Europe, has since been the subject of heavy sanctions. The Nord Stream 2, a gas pipeline between Russia and Germany has been abandoned, and the EU has put forward plans to cut all imports of Russian gas as soon as possible. The results have been record high gas- and power prices in the first quarter of 2022, and on the front of the price curve. The outlook is heavily influenced by the (at the time of writing) ongoing war, with high energy prices, high volatility, and uncertainty.
17 Cloudberry Annual report 2021 Introduction 0 20 40 60 80 100 2010 2015 2020 2025 2030 Base Dec 2021 High Dec 2021 Low Dec 2021 80 0 10 20 30 40 50 60 70 2010 2015 2020 2025 2030 NO1 NO2 NO3 NO4 NO5 SE1 SE2 SE3 SE4 Forecasted Nordic spot price of base load power EUR/MWh (real 2021) Source: Volue Area Prices in the base scenario 2021-2030, incl. historical prices 2010-2020 EUR/MWh (real 2021)
Cloudberry Annual report 2021 Introduction 18 Executive Management Anders J. Lenborg Chief Executive Officer Anders is the founder of Cloudberry. He is responsible for managing the company’s overall operations and the development and execution of the long-term strategies. Anders is an experienced lawyer within the infrastructure and renewable energy section in the Nordics. Anders was previously a partner and Head of the Energy Sector Group at DLA Piper Norway. He holds a law degree from the University of Oslo and a postgraduate diploma from King’s College in London. Christian A. Helland Chief Value Officer As CVO, Christian is responsible for the finances of the company. Since 2008, he has been a lead investor for renewable projects in the Nordics and Germany. He has 13 years of experience in the investment and finance industries. He was previously partner and portfolio manager at Pareto Asset Management. Christian holds a Master’s degree in Systems Engineering from Cornell University, a Master’s degree in Business Economics from University of California and a Bachelor of Science degree in Mechanical Engineering from University of California. Jon Gunnar Solli Chief Operating Officer Jon Gunnar is responsible for day-to-day operations of the Cloudberry portfolio. He is a former CFO and investment manager with more than 20 years of experience in the asset management industry. Jon Gunnar was previously a CFO/CIO at OVF, Nordea Asset Management, SpareBank 1 Livsforsikring and Storebrand. He holds a Master’s degree in Accounting & Auditing from Norwegian School of Economics (NHH) and is a state authorized public accountant.
19 Cloudberry Annual report 2021 Introduction Charlotte Bergquist Chief Development Officer Charlotte is from 2022 responsible for the Development segment with a special emphasis on Cloudberry’s shallow-water and offshore portfolio. She is a former developer for wpd Offshore, Vice Chair of the Board at the Swedish TSO, Svenska Kraftnet, Chairperson of Power Circle and the Founder of Kraftkvinnorna. Charlotte has a Master of Business Admin. from Gothenburg School of Economics and Commercial Law. Stig J. Østebrøt Chief Technology Officer Stig has been the CEO of the Captiva Group for the last 10 years and responsible for Cloudberry’s operations segment from 2022. He is the Chairperson of Kraftanmelding, Chairperson of Fjord Energi and a former analyst from EY. Stig has an Executive MBA from Norwegian School of Economics and a Master’s degree from BI Norwegian Business School.
Cloudberry Annual report 2021 Introduction 20 Board of Directors Frank J. Berg Chair of the Board Frank J. Berg has more than 30 years of experience in the energy and utility industry including having spent the last 15 years in the Nordic renewables market. He was previously a partner at Arthur Andersen, and the law firm Selmer, with a particular focus on renewables, infrastructure and sustainability. Frank serves as chairman and board member of a number of companies, including Salten Kraftsamband AS and Nordic Wind Power AS. Frank is Chair of the Board and head of the Audit Committee in Cloudberry. Frank holds a Master’s degree in Accounting & Auditing from the Norwegian School of Economics (NHH) and a PED from IMD, Lausanne. Morten Bergesen Board member Morten Bergesen has been the CEO of Havfonn and Snefonn, the Bergesen family’s investment companies since they were founded in 2003. Since inception, sustainability has been at the core of their investment strategy and a guiding star for their role as active shareholders. Morten is a member of the board of directors of Arendals Fossekompani, the chairperson of Cogen Energia, Bergehus Holding, Klynge and IFM AG. Morten is a member of the Audit Committee in Cloudberry. He holds a degree from BI Norwegian Business School. Petter W. Borg Board member Petter W. Borg has more than 35 years of experience in investment banking and asset management. He is the former CEO of Pareto Asset Management, a position he held for 18 years. Petter is the chairperson of Attivo Eiendom, and House of Maverix. In addition, he is a member of the board of directors of Ferd Holding, Grieg Investor, Fearnley Asset Management and Nordic Aquafarms. Petter is head of the Compensation Committee and member of the ESG Committee in Cloudberry. Petter holds a degree in Economics from Handelsakademiet.
21 Cloudberry Annual report 2021 Introduction Benedicte H. Fossum Board member Benedicte Fossum currently chairs the board of Smartfish AS and is a board member of Alliero AS, Salmo Trace AS and family offices. As one of the founders of Pharmaq AS, she has managerial experience in R&D, M&A, and regulatory affairs from the Norwegian Medicines Agency. She maintains a special interest in sustainability, combining biological and economical perspectives. Benedicte is a member of the Audit Committee and the ESG Committee in Cloudberry. Benedicte is a veterinarian from the Norwegian University of Life Sciences. Liv Lønnum Board member Liv Lønnum is currently working as a political adviser to the Progressive Party’s parliamentary group at Stortinget. Part of her responsibility includes energy policy development, with a focus on sustainability. She has been State Secretary/Deputy Minister at the Ministry of Petroleum and Energy and has considerable experience of both business and politics in Norway. She has previously worked at Storebrand ASA, Compass Group and Hammer & Hanborg. Liv is a member of the Compensation Committee in Cloudberry. Liv holds a Bachelor’s degree in Economic and Administration from the Norwegian School of Management and York University in Toronto, Canada.
Cloudberry Annual report 2021 Board of Directors report 22
23 Cloudberry Annual report 2021 Board of Directors report Cloudberry has successfully built a scalable and publicly available Nordic platform for new production, development and operation of Nordic hydro and wind power. During the last year, the Company has ramped up production, scaled the offshore team and strengthened the balance sheet. After a successful listing on Oslo Børs’ main list in June, the company is well financed and positioned to execute on a portfolio close to 1 TWh per year. By locating the projects close to the interconnecting cables, Cloudberry will provide clean energy to the European market. Cloudberry`s business model and strategy The Company has an integrated business model with three business segments, Development, Production and Corporate (Operations is added as a fourth segment from 2022). A sustainable and local approach is key to its strategy, together with a commitment to long-term value creation for all stakeholders. Development holds a portfolio of renewable projects in Sweden and Norway and is responsible for developing the projects with external construction partners. Production is the owner of the operating assets, with power sold in the spot market (NordPool) and under fixed price Power Purchase Agreements (PPAs). Cloudberry cultivates the portfolio to ensure a diversification and balance of risk, returns, assets and geographical scope. Cloudberry considers material financial and ESG related factors when making strategic decisions. The company is building a robust business and uses competitive financing to deliver sustainable and profitable long-term growth. Cloudberry operates in a market with unique characteristics when it comes to renewables. The hydro and the wind resources in the Nordics are among the best in the world. The company uses its local knowledge and network to grow through greenfield developments and acquisitions. Cloudberry is well positioned for taking part in structural opportunities in the rapidly growing Nordic renewable sector. In this landscape, the company uses the listing on Oslo Børs to provide access to capital, transparency, and investment opportunities. The company finalized the uplisting from Euronext Growth to Oslo Børs’ Main List in June 2021. Cloudberry believes in being local, focused and agile. The long-term growth strategy rests upon its ability to create value for all stakeholders, uses the best possible technology available, brings down costs, and enhances sustainable operations. Board of Directors report
Cloudberry Annual report 2021 Board of Directors report 24 Operating our business in a sustainable way Sustainability is at the very core of Cloudberry`s business and crucial for the company`s long-term achievements and value creation. The company wants to be a driver of a positive change and is committed to powering the transition to a sustainable future by providing renewable energy today and for coming generations. Cloudberry creates value in the communities it works, together with and for its employees, customers, business partners, and shareholders. Developing new renewable assets is essential to reduce the global CO2 emissions. Cloudberry believes that a systematic approach towards incorporating sustainability matters in the value chain is imperative to fulfil its purpose. The development and production of renewable energy contribute to the transition to green energy, European and national climate targets, and the UN Sustainable Development Goals. Businesses are shifting their strategies towards net-zero carbon targets and Cloudberry sees increased demand for renewable energy supply. 2021 has been a transitional year for Cloudberry and the company has grown significantly both in developing projects and in adding new assets to its portfolio. Cloudberry`s sustainability management has been strengthened in 2021, and the ESG report highlights the activities from 2021 and describes plans for 2022. Governance Cloudberry adheres to good governance standards and will at all times seek to ensure that the company complies with the Norwegian Code of Practice for Corporate Governance of October 2021, issued by the Norwegian Corporate Governance Board (NUES). This includes disclosure and transparency in Cloudberry`s business to provide shareholders and stakeholders with precise and accurate information concerning all aspects regarding Cloudberry. In 2021, the Board of Directors established an environmental, social and governance (ESG) committee consisting of two Board Directors and the Chief Sustainability Officer. The committee ensures alignment with the company`s sustainability strategy and ESG concerns, evaluates, and follows up the company`s ESG strategy. A due diligence guideline on evaluation of environmental, social and governance aspects was incorporated as an integral part of Cloudberry`s operational and investment decisions. Cloudberry shall conduct its business in a highly ethical manner with integrity, dignity and respect towards all its surroundings. The company’s Code of Conduct is the basis for how the company acts and performs its business. All new employees are introduced to the Code as an integral part of the onboarding, and all personnel are followed up with training in the Code. The Code of Conduct is revised and audited by the Board of Directors annually. Cloudberry wants to be made aware of any irregularities or other concerns regarding the organization and its business, and in 2021 the company rolled out its whistleblowing policy and reporting channel. No instances or suspicion of corruption were raised in 2021. Planet Cloudberry positively impacts the energy transition when producing renewable energy. At the same time, the company impacts the planet through the construction and production of wind farms and hydropower plants. It is foremost to Cloudberry to reduce the environmental footprint as much as possible. Cloudberry made the strategic decision in 2020 to measure its greenhouse gas emissions in accordance with the guidelines of the Greenhouse Gas (GHG) Protocol. In 2021, the reported greenhouse gas emissions from scope 1,2, and 3 were 203 tonnes of CO2e. Cloudberry is a fossil-free company and has zero-emissions in Scope 1. Our climate strategy includes compensating for our emissions by purchasing carbon credits. Cloudberry has therefore been net-zero in its own operations (Scope 1 and 2) by removing CO2 from the atmosphere through restoring mangrove forests. In addition, we take into account the emissions generated by our employees. Moving forward, Cloudberry will conduct the calculation to determine a decarbonization pathway to reach net-zero in the value chain by 2040. In line with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD), Cloudberry updated its risks related to its business development and expansion during 2021. Cloudberry will continuously analyse and assess its climate-related risk strategy and further integrate them into its overall risk management strategy.
25 Cloudberry Annual report 2021 Board of Directors report In 2021 Cloudberry assessed its eligible activities covered by the EU Taxonomy and technical screening criteria and its proportion of Taxonomy-eligible and Taxonomy non-eligible economic activities in its total turnover, capital, and operational expenditure. Assessments are carried out to evaluate Cloudberry`s alignment to the technical screening criteria in the EU Taxonomy. Internal analysis of life cycle greenhouse gas (GHG) emissions from Cloudberry’s producing power assets indicates emissions significantly below the threshold set out in the EU Taxonomy (100g CO2e/kWh). Lifecycle GHG emissions, Do No Significant Harm (DNSH) and Minimum Safeguard principles will be assessed going forward and Cloudberry is prepared to report in accordance with the EU Taxonomy requirements on its hydro- and wind power assets. Cloudberry always considers environmental and social impacts prior to final investment decisions (FID). The Cloudberry`s ESG due diligence guideline is integral for the evaluation of all its development and construction projects. The company strives to reduce its environmental impact and have determined KPIs to monitor project development and related governance and management structures. People Cloudberry strongly focus on gender equality and diversity. This is not only manifested in policy guidelines but is the DNA in the company. During 2022 Cloudberry will implement adequate systems to measure and compare gender balance in the organization. Cloudberry fosters health and wellbeing in the workplace by providing a culture, founded on openness, respect, and care. As Cloudberry grows and the number of employees increases, it is even more important to focus on initiatives that bring new perspectives and ideas from employees and spark innovation and collaboration. The Board of Directors considers the working environment to be healthy and productive. The company did not have any material health and safety incidents in 2021 and absence due to illness was 1,06%. During the year 2021 no incidents causing harm to people`s health was recorded neither on construction projects nor on our producing assets. Of the recordable work-related injuries none were classified as serious injuries but involved handling of tools and construction equipment. Health and safety are addressed in the Supplier Code of Conduct to safeguard a mutual commitment between Cloudberry and its suppliers and contractors, and training and awareness is required in our agreements with contractors. We continue to encourage employee engagement and strengthen our focus on identifying risk activities and preventive measures. The Supplier Code of Conduct is implemented in all our procurement phases starting from 2021. Cloudberry will assess existing human rights due diligence process against the Transparency Act (Åpenhetsloven) during 2022 to comply with the Act going forward. Prosperity Prosperity relates to Cloudberry`s role in contributing to a societal value creation. Cloudberry contributes to economic growth by providing employment, local value creation, and renewable energy supply. Operating and providing renewable energy assets enables the necessary energy transition, to reach the climate goals. Cloudberry`s long-term success is linked to conducting its business in a sustainable way with a long-term growth strategy that rests upon the ability to create value for stakeholders. Local value creation is important for Cloudberry in all its developing, construction and operating projects. The company seeks to identify local stakeholders’ needs and try to accommodate these in the plans. Constructing hydro and wind power plants have an impact on nature, but the production of renewable energy contributes to the necessary renewable energy transition. Cloudberry seeks to thoroughly analyse and assess the impacts to minimise footprint where possible on environment and society. In the sustainability report Cloudberry describes which initiatives the company has implemented. Cloudberry provides details of its sustainability work in its Annual Report and specifically in the sustainability and corporate governance sections. Cloudberry’s reporting requirements under section 3-3 a and c of the Norwegian Accounting Act are as such addressed in this section.
Cloudberry Annual report 2021 Board of Directors report 26 Covid-19 The market situation has been challenging with the risk and potential consequences of the global pandemic. The Covid-19 pandemic has affected more or less all businesses in some way. During 2021, Cloudberry has experienced some adverse impacts of the pandemic. The impacts are mainly related to government approvals or disruptions in our supply chain as a result of delayed deliveries from suppliers, with the addition of travel and entry restrictions, absence due to lockdowns and mandatory quarantine. Despite restrictions due to Covid-19, the company has grown significantly and has delivered all projects without significant deviations from budget or time schedule. Cloudberry continues to assess risks related to the Covid-19 situation. The pandemic will influence the markets and give supply chain disruptions, and there is a risk that the pandemic will result in increased costs related to supply chains. Nevertheless, the company expects the pandemic to have limited overall impact on our projects. Financial Performance Financial summary In 2021 Cloudberry has grown significantly. The balance sheet, the portfolio of producing, under construction, and permit assets/projects has grown significantly. In June 2021, the Company was up listed from Euronext Growth to Oslo Børs’ Main list. At the end of the year Cloudberry entered the LOI to acquire Captiva, the transaction was closed in the beginning of January 2022. The acquisition of Captiva established a fourth business segment, operations to support, production, develop and corporate. Operations will be included in the segment reporting from 2022. Cloudberry Production grew the portfolio during 2021 with closing of several acquisitions, and both power production and revenue were ramped up. By year end, Production had 7 fully owned producing and revenue generating power plants and held significant interests in the Forte portfolio and Odal Vind. Cloudberry Development made a final investment decision (“FID”) on Hån in June 2021, completed the works on the Marker project according to the final report from the Norwegian directorate (“NVE”) and decided to keep 100% control of the shallow-water project, Stenkalles while working on the FID. Other early phase projects i.e., Bjørntjarnsberget has moved closer to a construction permit during the year. An important event during 2021 is the strategic decision for Development to scale up within off-shore wind in Sweden. A new head of Development with focus on this area was hired in 2021. Corporate had an active year, Cloudberry Clean Energy ASA was uplisted to Oslo Børs’ Main list in June, the Company performed several capital raises and was active within merger and acquisitions. The debt facility with SR Bank was expanded in November to finance the Groups’ further growth. By year-end 2021, the total equity of Cloudberry was NOK 2 636m (NOK 1 055m at the end of 2020). The Group has a robust balance sheet with low debt, strong cash position and is fully funded for the portfolio of more than 290MW. Key figures The below information describes the operations of the consolidated Group in 2021, with the corresponding figures for 2020 in brackets. Figures are presented in NOK million. Profit and loss Profit before tax was NOK -64m (NOK -34m). This comprises reported net revenues of NOK 41m (NOK 4m) from sale of power, management services and insurance settlement. Operating expenses were NOK -89m (NOK -30m), share of profit from associated companies was NOK 16m (NOK -4m), depreciations and amortization were NOK -10m (NOK -3m) and net finance items were NOK -22m (NOK -1m). EBITDA was NOK -32m (NOK -30m), and EBIT was NOK -41m (NOK -33m). Profit after tax for the year was NOK -63m (NOK -34m). Other comprehensive income consists of items that may subsequently be reclassified to profit and loss and amounts to NOK -7m (NOK -2m). This relates to movements of cash flow hedges with tax effects and foreign currency translation differences.
27 Cloudberry Annual report 2021 Board of Directors report Total comprehensive income was NOK -70m (NOK -36m), which was attributable to Cloudberry shareholders, while NOK 0m was attributable to non-controlling interests. The total loss of NOK -70m is suggested to be allocated to accumulated loss and retained earnings. Cashflow Cash flow from operating activities for the year was NOK -71m (NOK -4m). Cash flow from investing activities was NOK -829m (NOK -354m). Cash flow from financing activities amounted to NOK 1 411m (NOK 958m). For details, please see the consolidated statement of cash flows in the Group consolidated financial statements. At year-end, cash and cash equivalents were NOK 1 115m (NOK 605m). Financial position Total assets at year-end were NOK 3 118m (NOK 1 397m). The increase from last year primarily reflects acquisitions, business combinations and capital raises. Non-current assets totalled NOK 1 735m (NOK 435m) consisting of investment in producing assets and associated companies, while current assets were NOK 1 383m (NOK 962m), mainly project inventory, other current assets and cash, and cash equivalents. Total equity was NOK 2 636m (NOK 1 055m) at year end, corresponding to an equity ratio of 85% (76%). Total liabilities were NOK 482m (NOK 342m), with NOK 91m due within 12 months. Segments Cloudberry had in 2021 three business segments: Cloudberry Production (“Production”), Cloudberry Development (“Development”), as well as Cloudberry Clean Energy (“Corporate”). From 2022 Cloudberry will in addition report on Cloudberry Operations (“Operations”). Cloudberry Production Cloudberry Production owns long-term yield hydro and wind assets in Norway and Sweden. Power production is sold on a continuous basis through bilateral agreements or through the spot market, Nordpool. Producing assets are entitled to electricity certificates and guarantees of origin. Producing assets are remotely controlled from operational centres and Cloudberry has operational agreements with local partners. Cloudberry Group, consolidated 2021 2020 Operating revenues NOK million 41 4 EBITDA NOK million (32) (30) Profit for the year NOK million (63) (34) Total assets NOK million 3 118 1 397 Cash NOK million 1 115 605 Net interest bearing debt NOK million (811) (342) Total equity NOK million 2 636 1 055 Equity share % 85% 76% Producing during the year 1 GWh 117 21 Secured portfolio (Producing and under construction) MW 150 109 Secured portfolio (construction permit) MW 160 71 Secured portfolio (Backlog) MW 370 380 1 Includes proportionate share of production from associated companies.
Cloudberry Annual report 2021 Board of Directors report 28 Cloudberry Production, segment 2021 2020 Total revenue NOK million 77 5 EBITDA NOK million 43 (2) Production (proportionate) GWh 117 21 Production capacity year-end MW 58 27 Secured portfolio (Producing & under construction) MW 150 109 Main activities The focus during 2021 has been on increasing production volumes and the construction of our new renewable projects · The hydropower plants Nessakraft and Bjørgelva was constructed on time and budget and delivered in June. · Usma and Selselva was purchased during 2021 and in production · Åmotsfoss hydropower plant was taken over in December. The plant is producing from a large reservoir and has been in stable production since it was connected to the grid. · Odal Vind delivered first power to the grid in December. 15 of 34 Siemens turbines were installed per year end. Strong winds have slowed installation, but the project team expect all turbines to be in full operation before end of June 2022. Final cost expected to be slightly higher than budgeted mainly due to Covid related delays (< 5% of capex). Expected equity IRR unchanged ~12% p.a. over the next 30 years. · Ramsliåna was connected to the grid in December and will be taken over by Cloudberry after a threemonth commissioning period. · The hydropower plants in Skåråna Kraft are completed; hence the third-party grid owner has had connection delays. It is expected that the plants will generate revenue in the second quarter of 2022. Power production Cloudberry’s proportionate power production grew from 21 GWh to 117 GWh during the year. With the current projects under construction, Cloudberry expects to reach an annual production slightly above 500 GWh going forward. Cloudberry Development Cloudberry Development has a significant on- and offshore development portfolio with renewable assets in Sweden and Norway. Since inception, ten projects have been fully developed and sold to infrastructure investors and European insurance companies. Going forward Cloudberry has the option to either sell or maintain in-house projects for long-term cash flow. Larger projects may be farmed down in order to diversify risk. Cloudberry Development, segment 2021 2020 Total revenue NOK million 6 - EBITDA NOK million (30) (8) Construction permits MW 160 151 Backlog MW 370 370 In 2021, the main activities have been focused on growing the portfolio and moving existing projects in the portfolio forward. With the acquisition of Captiva in January 2022, further resources within hydro development have joined the Cloudberry team. Projects with construction permit increased from 151 to 160 MW per year end and has grown further in 2022 (218 MW per reporting date). Cloudberry has per year end an exclusive backlog of 370 MW (388 MW at the reporting date). The company has ongoing dialogue with landowners, municipalities and grid companies to clarify opportunities for new wind power projects. In addition to the on-shore activities, we are actively working on shallow water projects in the Baltic Sea, based on the experiences the company is gaining at Stenkalles wind farm (Vänern). It is a long-term goal to have a shallow-water project portfolio of > 2 500 MW in the Baltic Sea by 2030. From 2022 the segment has scaled up both onshore and off-shore with projects and new employees. Charlotte Bergquist will head the Development segment with an increased focus on shallow-water projects.
29 Cloudberry Annual report 2021 Board of Directors report Cloudberry Corporate There was significant corporate activity in 2021. The company has during the year listed on Oslo Børs’ Main list, raised additional NOK 1 700 million in equity, increased the debt facility to NOK 1 400 million, purchased 60% of the Captiva Group and been active in the M&A market. Cloudberry Corporate, segment 2021 2020 Total revenue NOK million - - EBITDA NOK million (38) (16) By year end, there were four employees in the corporate segment. Cloudberry has outsourced several services in connection with Oslo Børs listing, financing and due diligence processes. The corporate management aims to remain a cost-effective, agile and dynamic team. Risk Management The Group is exposed to various risks through its business’ value chain, including operational, political and financial risks. Cloudberry has extensive routines and policies in place to actively manage risks. Key risks are discussed, and policies are reviewed and approved by the Board of Directors on a regular basis. Operational and market risk All processes throughout the value chain are exposed to operational risk. A key operational risk is related to the operating performance of the producing assets, but there is also risk relating to the process of transitioning development projects from the backlog and pipeline stage. Even though the Group has a solid project pipeline, finalizing the projects depends on a number of factors such as project availability, local authority approvals, environmental impact, suppliers, financing, power prices and the regulatory framework in the relevant market. Market risk is mainly related to the attractiveness of small-scale hydropower projects and wind projects in the Nordic markets, as derived from the development in power prices relative to the prices of key construction components. Cloudberry manages the risk through close follow-up and monitoring of operating assets and developing projects. Procedures and guidelines for the business are implemented and reviewed regularly. Additional information about operational and market risk is presented in the sustainability section of the Annual Report. See also further information in the Group Financial Statement, note 8 Commercial and operational risk. Political risk The Group`s activities are subject to the laws and regulations applied by the governmental authorities in connection with obtaining licenses and permits, government guarantees, and other obligations regulated by law in each country. Regulatory authorities exercise considerable discretion in matters of enforcement and interpretation of applicable laws, regulations and standards, the issuance and renewal of licenses and permits, capital transfer restrictions and in monitoring licensees’ compliance with the terms thereof. Cloudberry emphasises the uncertainty these factors have when making investment decisions and continuously monitors changes in the political landscape and includes this in the relevant discussions. The power industry is a highly regulated sector, and thus subject to political risk. The high power prices observed during H2 2021 and so far in 2022 has increased political calls for further regulations of the power market in both countries the Group operates in. Political and public support for wind and hydro projects fluctuates over time and may affect the Group’s ability to obtain concessions for both technologies. In Norway, there has been an effective ban on filing for new land based wind power projects since 2019, and the new set of concession regulations are still not in effect by the time of writing. There is therefore unclear how the Norwegian wind power market will develop in the years to come. For further information risks related to political and regulations, please confer the Group Financial Statement, note 7 Market risks and note 8 Commercial and operational risk.
Cloudberry Annual report 2021 Board of Directors report 30 Financial risk Through its business activities, Cloudberry is mainly exposed to market risks including power prices, interest rate risk, currency risk, credit risk and liquidity risk. Financial risk management is based on the objective of reducing negative cash flow effects and, to a lesser extent, negative accounting effects of these risks. Currency and interest rate risks are regulated by means of mandates and managed by using hedging instruments. Cloudberry’s interest rate exposure is related to its debt portfolio and managed based on a balance between keeping interest cost low over time and contributing to stabilise the group’s cash flows. The construction of the Group’s project will normally be financed with a combination of equity and debt. As a result, any increase of interest rates will lead to higher financing costs, which in turn reduces the Group’s profitability. Subsequently, the Group is dependent on external financing. If the Group is not able to obtain required financing on a timely basis and on attractive terms, the result could be lost business opportunities, shortened lifetime of current assets and/or that the Group is forces to realise its interest in certain projects. Fluctuations in exchange rates could affect the Group’s cash flow and financial position. The Group presents its financial statements in NOK. However, power is traded at Nord Pool, where EUR is the trading currency. The Group is also exposed to SEK through its operations in Sweden, hence the Group is exposed to currency risk through fluctuations in exchange rates between NOK, SEK and EUR. For further details, please confer the Group Financial Statement, note 9 Financial risks. Climate risk Cloudberry is exposed to climate changes related to more extreme weather, primarily driven by increasingly warmer climate, wetter and more windy weather conditions, or simply changes in normal weather conditions in local geographic areas. Such climate risk can pose a significant threat to humans, wildlife and society as a whole. For Cloudberry it can possibly affect the use and damage on producing assets, increased costs of maintenance and other costs, change performance due to change in waterfalls or other disruptions of core activities. Cloudberry has assessed its potential climate-related risks and opportunities in accordance with the recommendations of the Task Force on Climaterelated Financial Disclosure (TCFD). The company continuously analyses and assesses its climate-related risk strategy to detect other risks and opportunities, and to ensure that the company makes the right decisions and assessments on how climate risks might affect Cloudberry. The climate-related risks will be further integrated into overall risk management structure in Cloudberry. The climate-related risks are further described in the Sustainability Report. Covid-19 During 2021, Covid-19 continued to impact operations across the Group. Travel bans, mandatory quarantine and disruptions to the supply chain have resulted in and may continue to result in delayed deliveries from the Group’s suppliers. It is currently not possible to predict the long-term consequences for the Group, but there is a risk that the ongoing pandemic will result in increased cost particularly to the Group’s development projects. See also further information in the Group Financial Statement, note 6 Covid-19. Outlook Cloudberry is financed to carry out our Nordic projects (close to 300 MW). The Company has built a strong and diversified shareholder base that makes us able to implement and finance our long-term growth strategy. In parallel to building a long-term portfolio of producing assets, the Company has succeeded in building an organization and attracting highly qualified employees who ensure that we can implement our plans and strategies. Through the acquisition and integration of Captiva, we ensure control over strategically important segments of our business model. We will further develop and offer many of Captiva’s services to other players in the industry. We have experienced and documented that our business model is scalable and gives the company access to significant growth opportunities in the Nordic region, within both wind and hydro power. We will continue to focus on our role as a local player, with a strong presence across the Nordics.
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