121 Cloudberry Annual report 2021 Financial statements The contracts at level 2 as of 31 December are the Groups interest rate derivatives. The fair value of interest rate swaps is determined by discounting expected future cash flows to present value through the use of observed market interest rates. Cloudberry’s interest rate derivatives are held for hedging purposes, reference to note 11 Hedge accounting. Purchase Price Agreements (PPA) Cloudberry has in some cases entered into PPA for the sale of electric power and el certificates at a fixed price. A characteristic to these agreements is that they can be accounted for as a financial instrument or as a contract with customer, depending on the terms and conditions. “Own use” contracts: Energy contracts that are entered into and continue to be held for the purpose of the receipt or delivery of the power in accordance with Cloudberry’s expected purchase, sale or usage requirements are accounted for as own use contracts. These contracts do not qualify for recognition in the statement of financial position in accordance with IFRS 9 but are accounted for as contracts with customers after IFRS 15 and energy purchase. “Own use” contracts will typically have a stable customer base e.g. bilateral industry contracts, and are settled by physical delivery. The PPA at Røyrmyra was in 2019 agreed terminated from 31 December 2021. A financial liability of NOK 4.6 million is recognised in the balance sheet and will be due in February 2022. See note 24 Provisions, guarantees and other contractual obligations. From 31 December Cloudberry currently does not have any PPA for sale of electric power. Note 11 Hedge accounting Financial instruments that are designated as hedging instruments or hedged items in hedge accounting are identified based on the intention with entering into a financial instrument. The ineffectiveness from the hedges is recognised in profit and loss. Cloudberrys strategy is to hedge more than 50% of interest risk on producing assets. The objective for the interest rate management is to reduce risk (reduce volatility of future interest payments) and to lock future interest costs at attractive levels. The secured debt and the interest rate swap agreement has equal terms, and the hedge effectiveness is fully covered. All interest rate swaps are designated as hedging instruments. All interest rate swaps are recognised at fair value. As per December 2021 Cloudberry has entered into interest rate swaps, swapping from floating to fixed interest rate, for all long term debt related to power plants, see note 23 Long term debt, the interest swap derivatives are accounted with hedge accounting. The table below shows how the interest rate swap has been accounted for in the statement of comprehensive income. The amounts recognised in OCI is presented net of tax effect. FY 2021 NOK 1 000 Total hedging gain/loss recognised in OCI Amount reclassified fro OCI to profit and loss Line item in the statement of profit and loss Interest swap for long term debt 2 245 (1 648) Financial expense
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