Cloudberry Annual report 2022 Introduction 12 Market and power prices While 2021 was a special year in the power markets, 2022 showed even greater volatility. The war in Ukraine tested the European energy supply to its limits, and has caused significant, long-term changes to the European energy markets. The demand for more power in Europe is expected to increase going forward, and there is clear push towards renewables following EU initiatives. Overall, the outlook caused by the energy transition and the market conditions is expected to serve as a foundation for high power prices going forward. During 2022, Europe and the Nordics, saw record high power prices, primarily driven by soaring gas prices. With a near complete cut-off of gas import from Russia, gas prices skyrocketed to unprecedented levels, pushing power prices to the limits set by the markets. As the year drew to a close, the immediate danger of a real shortfall of gas in Europe during the winter fell, and prices dropped significantly, albeit from exceptional levels. However short- to medium term prices are still, historically, very high. The uncertainty related to the energy crisis, and the associated volatility in the markets, affected the Power Purchase Agreements (“PPA”) market negatively, and the volumes of PPAs in the Nordics dropped. This is both due to soaring prices, and the stress put on the financial power market. This stress is based on, amongst others, a significantly higher associated cost of hedging due to the rise of guarantees needed for trades. A rebound for the PPA market during 2023 is thus expected, especially in a scenario where prices stabilize. For the year 2022, the Nordic System price averaged at 136 euro/MWh, the highest ever recorded price. The previous record was set in 2021, at 62 euro/MWh. For NO1 and NO5, the average price for 2022 ended at approximately 192 euro/MWh, and NO2 ended at 211 euro/MWh. However, the internal price difference in Norway were at record levels: In Northern Norway, the average price ended at 24 euro/MWh. Similarly, prices in Southern Sweden, SE4, (152 euro/MWh) were above twice the average price in Northern Sweden, SE1, (59 euro/MWh) for the year. We expect the internal price differences to remain, although at relatively lower 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), is expected to reduce the bottleneck between the Norwegian price areas NO3 and NO5. Going forward, we expect the supply crunch caused by the war to keep the prices higher than normal in especially NO1, NO2, NO5, DK1, DK2, SE3 and SE4 in 2023. More-than-usual rain during the spring/summer/autumn seasons might change the outlook for Norway. However, the underlying shortage of energy in Europe will affect European energy markets for years to come. In Norway a significant growth in new demand is expected mainly related to emerging electrification projects and power intensive industries. This combined with a limited growth in power production capabilities moves the country’s expected power balance towards negative territory. This may add further pressure on Norwegian, and thus Nordic, power prices. Please see chart on the next page for the expected power balance in Norway from Statnett. During 2022, more than 95% of Cloudberry’s power production was sold at spot prices. We remain positive to elevated Nordic power prices especially in the southern price areas in Sweden (SE3+4) and Norway (NO1+2+5).
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