27 Cloudberry Annual report 2022 Board of Directors report A number of broader regulatory changes to the electricity market, such as changes to integration of transmission allocation, changes in the tax regulation, changes to energy trading, potential caps on energy prices and transmission charging, are being implemented or evaluated across Europe. These changes have an impact on the electricity prices and the costs of selling electrical power, which may reduce the Group’s profitability. 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 Group also has several projects under development, which require support from local and/or national authorities. Changes in the political landscape may imply that certain of the Group’s projects under development must be abandoned due to lack of political support or regulatory changes which result in the projects no longer being expected to meet the Group’s minimum profitability requirements. 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. During 2022, Cloudberry’s power production has increased to a level where there are opportunities to evaluate both financial power price hedges, and long term PPA’s. 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 projects 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. 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 forced 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 and EUR through its operations in Sweden and investments in associated companies, hence the Group is exposed to currency risk through fluctuations in exchange rates between NOK, SEK and EUR. 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 risks can pose a significant threat to humans, wildlife and society as a whole. For Cloudberry it can possibly damage producing assets, increase costs of maintenance and other costs, reduce 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. The Norwegian tax proposal In September 2022, the Norwegian government proposed significant changes to the taxation of Norwegian renewables, primarily introducing a ground rent tax for onshore wind and a windfall tax for wind- and hydropower. Cloudberry has invested a significant amount of time on the proposed new tax regime to meet with and inform the Government, the Ministry of Finance, Ministry of Petroleum and Energy, the Parliament, and the public in general of the negative consequences it will have for development and production of renewable energy in Norway if implemented. Our two key messages are that: i) Tax implementation cannot be retroactive in principle i.e.,
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