Cloudberry Annual report 2022 Financial statements 114 Environmental risks Climate change related risks Climate change itself is a risk for the Group, although society’s climate change mitigation efforts create business opportunities for us. Climate change can alter the precipitation patterns we are used to, which makes hydropower a less dependable source for energy production than in the past. Additionally, climate change is increasing the frequency and severity of extreme weather events, which pose threats to the Group’s assets. The risk assessment and management related to climate risk, is both a specific process in the Group and integrated in the general risk management activities. The Group assesses its risks and opportunities from a short-, medium-, and long-term strategic and financial perspective, and have set threshold values for financial impact. The company identifies the potential financial impact from the risks and opportunities and their significance for the Group. The financial impact is defined by assessing both the actual cost of the impact as well as a consideration of frequency, with the intervals structured as below. Financial Impact Low Medium High MNOK <25 25–100 >100 Frequency <0-1 years 1-5 years >5 years Risk related to changing weather patterns The meteorological conditions (rain and wind) at the particular sites at which the Group’s power plants are located can vary materially from season to season and from year to year. Changes in average temperatures will impact the meteorological conditions. Overall warmer climates can lead to increased rainfall, increased wind, and longer periods of drought. Potential consequences include flooding at hydro plants resulting in less production, severe winds exceeding a wind turbine`s capacity leading to production stops, and droughts leading to low water levels and forcing the company to reduce or even fully stop the electricity production. Also, if a site proves to have lower resources than anticipated in the Group’s business model or suffers a sustained decline in meteorological 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. For more information about climate related risk, see the Group’s separate TCFDreport and Sustainability report 2022.
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