Intake Årvik power plant
Photo: SmÄkraft
2
3
SmÄkraft is a producer of renewable energy. Our fleet of 161 hydropower plants is
spread all across Norway,and delivers a mean annual production capacity of 1,
7 TWh,
making SmĂ„kraft Europe’s largest owner and operator within its niche.
Small
-scale hydropower borrows water which naturally flow in the river and util
izes the
topography of the landscape to produce renewable and sustainable electricity. A
minimum water level is maintained in the original river and the water used to produce
electricity is returned once it passes through the turbine. The electricity grid
transports
and distributes our electricity out to consumers
.
The values created are shared
with our stakeholders including owners, creditors & debt
investors, local landowners, local municipalities, local societies and society in general.
For more than 15
years, SmÄkraft has invested heavily in the generation of new
renewable energy for the Nordic and European power markets. Our contribution to one of
the biggest challenges of our time, the transformation to a renewable and sustainable
society powered by r
enewable energy, is to continue our commitment to grow.
WHAT WE DO
4
Stable and strong equity ratios, as growth
financed by equity and issuance of
second green bond
42
%
5
%
53
%
48
%
52
%
Equity
Subordinated Shareholder loan
Debt
Low precipitation decreased production in
2021 compared to 2020 despite higher
capacity
N
et production delivered on the grid,
excluding grid losses, consumption, and
bilateral agreements.
23% capacity growth in 2021
1,257
1,113
-
200
400
600
800
1,000
1,200
2020 2021
GWh
Adj. EBITDA increased by 183% due to
higher power prices and increased
capacity
*
Adj. EBITDA = operating profit +
impairments + depreciations + unrealiz
ed
hedg
e gain or loss
1,084
1133
1381
1697
163
224
263
243
800
1,000
1,200
1,400
1,600
1,800
2,000
31.12.2018
12/31/2019 12/31/2020 12/31/2021
Signed contracts for new powerplants (GWh)
Current production capacity (GWh)
Adj. EBITDA in mEUR
6.0
17.0
+11
-
5.0
10.0
15.0
20.0
2020 2021
5
Renewable Power Production
Weak hydrology and low precipitation reduced
production in 2021. In total SmÄkraft produced
1133 GWh renewable energy compared to
1257 GWh in 2020 despite growth in the
portfolio in 2021.
Sustainability
SmÄkraft has achieved the highest score and is
Sector leader in the annual Global ESG
Benchmark (GRESB) sustainability assessment
within its peer group. GRESB assessment are
guided by what investors and the industry
consider to be material issues in the
sustainability performance of real asset
investments.
During the reporting period, SmÄkraft
experienced no material Health, Safety and
Environmental-(HSE) incident.
Market update
Fueled by strong CO2- and gas prices, new
inter-connectors and weak hydrology, the
average monthly spot prices in the Nordics
increased from 11 EUR/ MWh in 2020 to 62
EUR/ MWh. In December monthly spot price
increased to all time high of 147 EUR/MWh.
Li
mited interconnector capacity from the
Northern parts to the Southern parts also gave
significant price differences between the Nordic
price areas. The strongest price area had an
average monthly spot price of more than 75
EUR/ MWh, while the weakest one had 41
EUR/ MWh. The difference between the price
zones has never been higher.
Company Objectives
During 2021, SmÄkraft has acquired and
developed in total 34 powerplants of in total 316
GWh. 12 of the powerplants with a capacity of
43 GWh were acquired in Sweden. SmĂ„kraft’s
entry into Sweden extends SmĂ„kraft’s
ambitious and successful strategy in the
consolidation of small hydro operations.
Building Stampaelva power plant
HIGHLIGHTS 2021
6
Improved financial performance despite a dry year
While 2020 was a particularly mild and wet year with low energy prices in Norway, 2021 started out
dry, and during the spring the reservoir filling decreased. The energy prices normalized during the
spring, especially in the southern parts of Norway.
Historically there have been low regional price differences between the prize zones, but gradually
these differences increased. From September the prize level peaked, and in parallel the production
improved especially in October and November.
Utilizing the price increase to improve our financial performance
The global shift towards renewable energy and consensus from the analytics, indicate that Norway
needs to generate an additional 50TWh renewable energy by 2050, further substantiating the
strong potential for SmÄkraft. In 2021 the EBITDA level improved by 177% from 2020, but it was
still somewhat limited by the pre-sold part of our production. Compared to last year this
demonstrates that our business exhibit volatility both in production and power prices, but that our
financial set-up through geographical diversification, landowner risk sharing, and financial
instruments contributes to reduced volatility, even though both 2020 and 2021 have been extreme
years.
2TWh production by 2022 and beyond
In 2021, SmÄkraft acquired and built a total of 34 power plants with a total production capacity of
317GWh. This is enough energy to supply 20 000 households a year (assuming average
consumption of ~16.000 kWh/p.a), and represents a growth of 23% from the previous year. With a
total production capacity of 1698 GWh, this solidifies our positions as Europe's largest operator of
river power plants.
21 -
Dec
21 -
Nov
21 -
Oct
21 -
Sep
21 -
Aug
21 -
Jul
21 -
Jun
21 -
May
21 -
Apr
21 -
Mar
21 -
Feb
21 -
Jan
20 -
Dec
20 -
Nov
20 -
Oct
20 -
Sep
20 -
Aug
20 -
Jul
20 -
Jun
20 -
May
20 -
Apr
20 -
Mar
20 -
Feb
20 -
Jan
Oslo Kr.sand Bergen Molde Tr.heim TromsĂž
Electricity prices in certain price areas in Norway peaked toward the end of year 2021 .
LETTER FROM THE CEO

7
Having close to 200GWh of new power plants under constructions, our ambition of having a
production capacity of 2TWh within the end of 2022 is now within reach.
2021 was also the year where we in SmÄkraft expanded our reach by acquiring our first two
portfolios in Sweden. This unlocks additional potential for growth, and we strongly believe that our
operational model, with a high degree of automation and remote control of the plants, can contribute
to sustainable business in Sweden in the coming years.
Sustainable growth
SmÄkraft has since 2017 worked systematically on
improving the sustainability of our operations,
documenting our performance through yearly
evaluation by the international organization
GRESB, rating the performance of more than 2000
companies every year within real estate and
infrastructure. We are proud that we in 2021 were
awarded as the sector leader, where leadership,
reporting and risk management were areas where
we differentiate most from our peers.
Our sustainability report is available at https://www.smaakraft.no/
CEO Terje Vedeler
Tunafoss one of our new power plants in Sweden.
8
Nature of the business
Established in 2002, SmÄkraft AS is a power company, which invests, develops, and operates
small-scale, hydropower plants in cooperation with local landowners.
The Board of Directors is of the opinion that the Directors Report for 2021 is a fair representation
of the company’s equity and debt, financial situation, and result.
“SmĂ„kraft AS” refers to the parent company SmĂ„kraft AS, and “SmĂ„kraft Group” refers to the
consolidated group of companies controlled by SmÄkraft AS. SmÄkraft is located in Bergen,
Norway, with local offices in Harstad, Flatanger, LillestrĂžm, Sandnes, Oslo and Uppsala, and the
Group employs 26 people. SmĂ„kraft’s business is in Norway and Sweden.
Continued operations
It is hereby confirmed that the conditions for going concern are met. The company is in a healthy
position, economically and financially.
Operating Power Plants
By year end of 2021, SmÄkraft had 161 operating hydropower plants (128 at year end 2020), with
a total accumulated production capacity of 1 697 GWh (1 381).
Results, financing, and liquidity (2020 numbers) – SmĂ„kraft Group
The SmÄkraft Group produced 1 133 GWh of green energy in 2020 (1257 GWh). The portfolio of
power plants has increased considerable during 2020 and 2021, but weak hydrology and low
precipitation reduced the total production by 11% from 2020 to 2021. The weak hydrology
combined with new interconnectors and strong gas prices contributed to record high power prices
in 2021.
Power revenues excluding hedging came in at 55 mEUR (7,6), at an average price excluding
hedging of 50,8 EUR/ MWh (6,3 EUR/ MWh).
SmĂ„kraft has a long-term hedge strategy and ÂŒ of its production is sold on forward contracts three
to five years ahead. According to IFRS, these future hedge contracts (to be realized in the years to
come) are recognised in the Financial Statements at market value at year end. However, production
and revenue are not recognised before the date of production. Thus, the operating income includes
unrealized hedge costs with no cash effect in 2021. In total SmÄkraft had a realized loss on energy
derivates of -19,5 mEUR (8,7), and an unrealized value change of -33,4 mEUR (9,7). Average price
including hedging was 33,2 EUR/ MWh (13,6).
SmĂ„kraft Groups’ total operating costs increased 40% to 38,1 mEUR (27,1). Water right costs and
transmission costs increased in line with increased revenue. New powerplants in 2020 and during
2021 add to operating expenses, payroll, and property tax.
The Group’s operating profit is negative before depreciations and impairments, with an EBITDA of
-16,4 mEUR (15,7). SmÄkraft uses alternative performance indicators such as adjusted EBITDA to
show underlying operational results in a better way. Adjusting for unrealized value change on
energy derivatives, adjusted EBITDA increased with 183% from 6 mEUR to 17 mEUR.
Mainly because of the hedging effects mentioned above, the result after taxes in the SmÄkraft
Group shows a loss of -16,1 mEUR (-9,7). Total comprehensive income for the year was –5,2
mEUR (-21,5).
REPORT FORM THE BOARD OF THE DIRECTORS
9
SmÄkraft Group has a strong net cash flow from operations in 2021 of 20,8 mEUR (1,5). Net cash
flow from investment activities is -115 mEUR (-55,6), and net cash flow from financing activities is
117,4 mEUR (26,6). In 2021 SmÄkraft Group paid out a dividend of 18,6 mEUR (15,9) to the
owners. In total the Group’s bank deposit increased from 19,9 mEUR to 44,4 mEUR.
The SmÄkraft Group has an equity share of 48,0% (42%).
Investments in power plants equals 116,3 mEUR in 2021 (65,6). The SmÄkraft Group has financed
these investments by capital increases, a new green bond issue and loans in acquired subsidiaries.
To the best knowledge of the Board of Directors, no significant events with impact on the financial
results has taken place subsequently to year end.
Results, financing, and liquidity (2020 numbers) – SmĂ„kraft AS
The parent company, SmÄkraft AS, has at the end of 2021, 83 operating powerplants. SmÄkraft
AS’ total energy production was 574 GWh in 2021 (786).
Power revenue excluding hedges came in at 29,7 mEUR (5,2). The total operating income
decreased to -19,7 mEUR(27,8), because of hedge effects. The operating income includes a
significant realized hedge loss of -19,5m EUR and unrealized hedge loss of -33,4 mEUR. SmÄkraft
AS total operating costs were 22,6 (20,5), giving an operating profit of -42,3 (7,3).
The total comprehensive income landed at mEUR -11,6 (-16,7).
SmÄkraft AS has an equity share of 51,0% (46%).
Risks
Risk management is important for the value creation and is an integral part of the business activity
in SmÄkraft Group AS.
The company’s result will be influenced by changes in power & el-certificate prices, climate change
and changes in currency exchange rates & interest levels.
Significant volume, price, and foreign currency exchange risks are associated with the production
and sale of electric power. Only a few of the SmÄkraft AS power plants have reservoirs, and un-
regulated power production is more exposed to fluctuations than other production of electric power.
Around 1/4 of the expected mean production has been hedged with fixed price contracts for power
and el-certificate revenues over the next 4 to 5 years. These contracts are in EUR. To reduce the
cash effect of currency exchange rates, the SmÄkraft Group is financed by currency loans in EUR.
Changes in the fair value of the EUR loan will offset the changes in the fair value in the hedge. The
company does not use hedge accounting, and as a result, these effects are not shown in the
financial statements. That exposes the operating result to changes in the currency exchange rates.
SmÄkraft Group has several interest rate swaps to reduce the risk related to interest rate changes.
The company is exposed to operational risks, such as failure of the power producing equipment or
other vital equipment. To limit these risks, the SmÄkraft Group has well-established procedures
and emergency preparedness plans. All power plants are insured, and the production is covered
by interruptions insurance. Significant emphasis has been put at managing the HSE risks in the
company.
Regulatory risks include changes in tax and fee schemes for producers of electrical power.
SmÄkraft may also be affected by changing climate, and the company has initiated several
measures to identify potential risks and opportunities. Evaluation of new acquisition and
development opportunities are assessed in light of expected changes in hydrology. During detailed
planning of new plants, we now assess how climate change can affect the design criteria for new
installations, both in form of increased run-of, but also the safety of installations in relation to
extreme weather.
10
Future development
The forward prices in the energy market indicates that power prices will remain high in 2022. The
market expects stable low prices for el- cert prices. The production is expected to increase in line
with full year production from power plants acquired in 2021 and new plants coming on stream in
2022. The SmÄkraft Group pursues a growth strategy and intends to invest further in new
production capacity over the next years.
Work environment and personnel
SmÄkraft AS seeks to be an attractive employer focused on employee retention and maintaining a
good working environment. We believe that diversity of background, interests and knowledge is
important to form the most varied and best possible competencies to solve the tasks we face. Any
form of racism or discrimination is unacceptable in SmÄkraft.
SmÄkraft has not recorded any lost time incidents to personnel over the last 36 months at the end
of 2021.
SmÄkraft has an internal control system, which focuses on the operation of power plants. The
system sets the requirements for own employees, subcontractors, and entrepreneurs with regards
to health, safety, and environment.
Key figures
2021
2020
2019
2018
Full time employees at year end
26
20
20
19
Sick leave
1,5%
1.3%
3,9%
0,9%
Lost time injuries
0
0
1
1
The SmÄkraft Group is committed to provide equal opportunities for men and women. The company
acknowledges that women are under-represented in the company, as well as in the industry. The
power sector in general, and specifically the small- scale hydropower sector, has over time been
dominated by men. SmÄkraft has an ambition to work against this imbalance, and we encourage
woman to apply for positions with the company. We do not practice allocation by gender quotas
when recruiting new employees but have received application from highly qualified female
applicants. Two out of five new employees in SmÄkraft in 2021 are female. In total, 20% of
SmĂ„kraft’s full time employees and one out of four in SmĂ„kraft’s top management are female. The
Board has five Directors, out of which three are men. The chairman is a woman.
Environment
The company’s main activity is based on hydropower, which is a clean, environmentally friendly,
and renewable source of energy.
The construction of hydroelectric power plants could affect the environment in the surrounding area.
SmĂ„kraft AS’ power plants take advantage of natural river conditions to produce power in the most
effective way, and with the least intervention. These small-scale hydro plants affect the environment
less than larger hydropower projects.
No new projects are in the pipeline with out-of-norm environmental effects.
Corporate governance
SmÄkraft adheres to the Norwegian Code of Practice for Corporate Governance (NUES) within the
framework established by the company's organization and ownership. SmÄkraft is subject to
11
reporting requirements relating to corporate governance according to Section 3-3b of the
Accounting Act. See separate Corporate Governance Report for more information about corporate
governance, including corporate audit, internal control of financial reporting and the work of the
Board of Director.
Our corporate governance statement is available at https://www.smaakraft.no/
See also our ESG policy at https://www.smaakraft.no/
Board liability Insurance
SmÄkraft has a board liability insurance for CEO, management, and all board members.
Covid 19- effects
The Covid 19 pandemic has had limited effect on SmĂ„kraft’s operations. Travel restrictions have
at times reduced mobility among qualified personnel and technical equipment necessary to operate
or construct power plants. We have been able to mitigate most restrictions well within the infection
control measures without significant negative impact on operations.
Subsequent events
After year end, SmÄkraft has increased the portfolio of powerplants with 34,4 GWh in Norway and
53,7 GWh in Sweden. The total number of powerplants in the SmÄkraft portfolio is 196 in March
2022.
Bergen, Norway, 22 March 2022
The Board of Directors
SmÄkraft AS
Annette Beate Wacknitz Malm Justad Claudia Ahnert Joakim Johnsen
Chairman of the board Member of the Board Member of the Board
Oldrik Nicolaas Frits Verloop Christian Heidfeld Terje Vedeler
Member of the board Member of the board Managing Director
12
ANNUAL ACCOUNTS AND NOTES SMÅKRAFT GROUP
Consolidated Statement of Income and Consolidated Statement of Other Comprehensive
Income.
Amounts in EUR thousand
Note
12 months ended
31.12.2021
12 months ended
31.12.2020
Revenue
56,168
11,926
Unrealized value change on energy derivatives
‐33,397
9,698
Realized value change on energy derivatives
‐19,524
8,712
Other operating income
2,721
805
Total operating income
10
5,967
31,141
Payroll and related costs
11
3,088
2,686
Depreciation and impairment of fixed assets and
intangible assets
17,18
15,830
11,725
Other operating expenses
12
19,263
12,713
Total operating expenses
38,181
27,124
Operating profit/(loss)
‐32,214
4,017
Financial income
15
19,788
3,061
Financial expenses
15
‐7,712
‐20,066
Net financial items
12,076
‐17,004
Profit/(loss) before tax
‐20,138
‐12,987
Tax expense (income
23
3,974
3,225
Profit (loss)
‐16,164
‐9,762
Profit/(loss) is attributable to:
Equity holders of the parent company
‐16,619
‐9,186
Non-controlling interests
456
‐576
Other comprehensive income:
Presentation currency effects
10,950
‐11,732
Total other comprehensive income
10,950
‐11,732
Total comprehensive income for the year
‐5,214
‐21,494
Total comprehensive income is attributable
to:
Equity holders of the parent company
‐6,272
‐20,764
Non-controlling interests
1,059
‐730
13
Consolidated Statement of Financial Position.
Amounts in EUR thousand
Note
31.12.2021
31.12.2020
Goodwill
16
7,924
7,605
Intangible Assets
16
155,062
77,775
Property, plants and equipment
18
479,919
384,341
Deferred tax assets
23
7,311
3,200
Investments, recognised under the
eq.method
19
2,058
1,526
Long-term receivables
20.27
11,110
10,382
Total non-current assets
663,384
484,829
Current assets
Inventory
150
67
Inventory EL certificates
13
149
162
Trade receivables
936
1,334
Other receivables
1,154
3,526
Derivatives
14
1,492
8,083
Other current assets
97
92
Cash and Cash equivalents
24
44,438
19,870
Total current assets
48,415
33,135
Total assets
711,800
517,964
Shareholders equity
Amounts in EUR thousand
Note
31.12.2021
31.12.2020
Share capital
22
20,039
16,706
Not registered capital increase
74,159
-
Share-premium reserve
247,533
188,722
Retained earnings
‐16,792
798
Total shareholders equity
324,940
206,226
Minority interests
14,270
11,796
Total equity
339,209
218,022
Non-current liabilities
Deferred tax liability
23
122
1,564
Borrowings
14
316,047
82,431
Lease liabilty
2,545
-
Derivatives
14
99
287
Total non-current liabilities
318,813
84,282
Current liabilities
Accounts payable
2,886
2,587
Taxes payable
23
1,506
-
Public duties payable
2,842
229
Dividends
2,703
-
Derivatives
14
27,768
490
Borrowings
14
8,960
208,360
Other current liabilities
7,112
3,993
Total current liabilities
53,777
215,660
Total liabilities
372,590
299,942
Total equity and liabilities
711,800
517,964
Bergen, Norway, 22 March 2022
The Board of Directors
SmÄkraft AS
Member of the Board
Chairman of the Board
Member of the Board
Claudia Ahnert
Annette Malm- Justad
Joakim Johnsen
Member of the Board Member of the Board Managing Director
14
Oldrik Verloop Christian Heidfeld Terje Vedeler
15
Consolidated Statement of changes in Equity
Amounts in EUR thousand
Share
capital
Share
premium
Not
registered
capital
increase
Retained
earnings
Total
share‐
holders
equity
Non‐
controlling
interests
Total
equity
Equity at 31.12.2019
16,221
131,452
45,202
11,085
203,960
5,372
209,332
Net profit
‐9,186
‐9,186
‐576
‐9,762
Currency presentation effect
-945
-9,294
-472
-867
-11,578
-154
-11,732
Total comprehensive income
for the period
-945
-9 294
-472
-10,053
-20,764
-730
-21,494
Capital increase previous
period registered current
period
502
44,228
-44,730
0
Capital increase current
period
928
22,336
23,264
23,264
Capital increase current
period not registered
0
7,265
7,265
Minority in acquired
subsidiaries
0
Dividend
-112
-112
Other changes
-235
-235
-235
Equity at 31.20.2020
16,706
188,722
0
798
206,226
11,796
218,022
Net profit
-16,619
-16,619
456
-16,164
Currency presentation effect
829
9,785
-267
10,347
603
10,950
Total comprehensive income
for the period
829
9,785
-16,886
-6,272
1,059
-5,214
Capital increase current
period
2,504
70,750
73,255
73,255
Minority in acquired
subsidiary
0
1,415
1,415
Capital increase current
period not registered
74,159
74,159
74,159
Dividend
-21,724
-21,724
-21,724
Other changes
-704
-704
-704
Equity at 31.12.2021
20,039
247,533
74,159
-16,792
324,940
14,269
339,209
16
Consolidated statement of cash flow
12 months ended
12 months ended
Amounts in EUR thousand
31.12.2021
31.12.2020
Cash Flow from operations
Profit (-loss) before tax
‐20,138
‐12,987
Taxes paid for the period
-
‐1,132
Depreciation, amortization, impairment
16,18
15,830
11,725
Change in unrealized currency
gains/losses
15
‐12,918
13,181
Change in unrealized derivatives
14
33,443
‐10,683
Change in inventory
‐58
851
Change in working capital
4,647
558
Net cash flow from operations
20,806
1,513
Cash flow from investment activities
Outflows due to purchases of fixed assets
‐15,146
‐25,638
Outflows due to investments in
subsidiaries
5
‐101,183
‐39,984
Outflows due to investments in others
-
‐1,119
Outflows from loans to others
-
‐91
Inflows from loans to others
1,249
11,211
Net cash flow from investment
activities
‐115,080
‐55,620
Cash flow from financing activities
Capital increases
145,561
23,172
Dividend payments
‐18,692
‐15,969
Inflows from loan raising
14
56,449
24,416
Outflows from loan payments
14
‐65,843
‐5,003
Net Cash Flow from financing activities
117,475
26,616
Currency translation effects
1,367
‐3,610
Net change in bank deposits and cash
23,201
‐27,491
Bank deposits and cash at beginning of
period
19,870
50,971
Bank deposits and cash at end of
period
44,438
19,870
17
Notes
1.
General information 18
2. General accounting policies 18
3. Key accounting estimates and judgements 25
4. Subsequent events 25
5. Purchase of subsidaries 26
6. Management of capital structure 28
7. Market risk 29
8. Credit risk and liquidity risk 29
9. Alternative Performance Measures (APM) 30
10. Revenues and other income 31
11. Payroll costs, number of employees, loans to employees, etc. 32
12. Other operating expenses 32
13. El certificates inventory 33
14. Financial instruments 33
15. Financial result 35
16. Intangible assets 36
17. Impairment testing 36
18. Property, plant and equipment 38
19. Associated companies 39
20. Receivables; amounts due after more than one year 40
21. Related party transaction and balance items. 41
22. Ownership structure 41
23. Taxes 42
24. Cash and cash equivalents 43
25. Secured borrowings and guarantees 43
26. Concessions 43
27. Water and lease agreements 44
18
1. General information.
The SmÄkraft group comprises Sm
Ă„kraft AS
and the consolidated subsidiaries (SmÄkraft Group or the
Group). SmÄkraft is located in Bergen, Norway, with local offices in Harstad, Flatanger, LillestrÞm,
Sandnes, Oslo and Uppsala, and the Group employs 26 people. SmĂ„kraft’s business is in Norway and
Sweden. SmÄkraft is a supplier of renewable energy based on small scale hydro power plants.
The group consist of SmÄkraft AS
and 42 fully or partly owned subsidiaries at year end 2021.
Sm
Ă„kraft’s consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS) and interpretations from International Financial Reporting
Interpretations Committee (IFRIC), as adopted by the EU and further requirements in Norwegian
Accounting Law (Regnskapsloven).
The statement of comprehensive income, statement of financial position, statement of equity,
statement of cash flow and notes provide comparable information in respect of the previous period.
The financial statements have been prepared on a historical cost basis, except for certain assets,
liabilities, and financial instruments, which are measured at fair value. The preparation of financial
statements in conformity with IFRS requires the use of certain accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’s accounting policies.
Presentation and classification of items in the financial statements is consistent for the periods
presented. Application of the accounting policies by the subsidiaries has been changed where
necessary, to ensure consistency with the Group’s accounting policies.
The
functional currency of SmĂ„kraft AS is the Norwegian krone (NOK). The Group’s accounts are
presented in EUR. SmÄkraft AS presents the financial statement in EUR, as the main revenue is noted
in EUR, its debt is mainly in EUR, and its owners are EUR-based.
2. General accounting policies.
Ba
sis of Consolidation
The consolidated financial statements are comprised of the financial statements of the parent
company SmÄkraft AS and its subsidiaries. Subsidiaries are all entities (including structured entities)
over which SmÄkraft Group has control. SmÄkraft Group controls an entity when the group is exposed
to, or has rights to, variable returns from its involvement with the entity, and has the ability to affect
those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the group. Subsidiaries are no longer consolidated
from the date when control ceases.
Pr
ofits and losses resulting from intercompany transactions have been eliminated, as well as
unrealised gains on transactions between group companies. Unrealised losses are eliminated, unless
the transaction provides evidence of an impairment of the transferred asset.
Investments in joint ventures
Joint ventures are companies or entities where SmÄkraft AS has joint control with one or several other
investors. In a joint venture company, decisions related to relevant activities must be unanimous
between participants who have joint control. The Group’s share of the companies’ profit/loss after tax,
adjusted for amortization of excess value and any deviations from the accounting policies, are
presented on a separate line in the consolidated income statement. Investments in joint ventures are
recognised in the consolidated accounts using the equity method and presented as a non-current
asset.
Equit
y method
Under the equity method of accounting, the investments are initially recognised at cost and adjusted
thereafter to recognise the Group’s share of the post-acquisition profits or losses of the investee in
profit or loss, and the Group’s share of movements in other comprehensive income of the investee in
other comprehensive income. Dividends received or receivable from associates and joint ventures are
recognised as a reduction in the carrying amount of the investment.
19
When the Group’s share of losses in an equity-accounted investment equals or exceeds its interest in
the entity, including any other unsecured long-term receivables, the Group does not recognise further
losses, unless it has incurred obligations or made payments on behalf of the other entity.
Unrealised gains on transactions between the Group and joint ventures are eliminated to the extent of
the Group’s interest in these entities. Unrealised losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred. Accounting policies of equity accounted
investees have been changed where necessary to ensure consistency with the policies adopted by the
group.
Equity-accounted investments are reviewed each period to determine whether there is any objective
evidence that the net investment is impaired.
Business combinations
The acquisition method of accounting is used to account for all business combinations. The
consideration is measured at the fair value of any transferred assets, liabilities or issued equity
instruments. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are, with limited exceptions, measured initially at their fair values at the acquisition date.
The Group recognises any non-controlling interest in the acquired entity on an acquisition-by-
acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the
acquired entity’s net identifiable assets.
Acquisition-related costs are recognised in the balance sheet.
If the consideration transferred (including any non-controlling interests and the fair value of previous
assets) exceeds the fair value of identifiable net assets acquired, this is recognised as goodwill. If
those amounts are less than the fair value of the net identifiable assets of the business acquired, the
difference is recognised directly in profit or loss as a bargain purchase gain.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s
previously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any
gains or losses arising from such remeasurement are recognised in profit or loss.
Foreign currency translation
Functional and presentation currency
All entities of the Group have NOK as its functional currency. The subsidiaries in the group are
consolidated into the functional currency of the parent (NOK) and then translated to the presentation
currency, EUR. The currency differences arising in the translation to the presentation currency are
presented in Other Comprehensive Incomes. Also, in the statement of equity the translation difference
is included in retained earnings. All amounts are rounded to the nearest EUR thousand.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rate at
the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation of monetary assets and liabilities denominated in foreign
currencies at year-end exchange rates are generally recognised in profit or loss. SmÄkraft uses
currency exchange rates from Norges Bank.
Segments
An operating segment is a component of an entity that engages in business activities from which it
may earn revenues and incur expenses. Furthermore, the entity’s component’s operating results are
regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to
be allocated to the segment and to assess its performance, and thus separate financial information is
available. The company has determined that the board of directors is collectively the chief operating
decision maker.
The Group has only one segment: power supply. SmÄkraft produces renewable energy and sells
electricity, el- certs and guarantees of origin on the Nordic power market.
The segment information is reported in accordance with the reporting to board of directors (chief
operating decision makers), and is consistent with financial information used for assessing
performance and allocating resources. EBITDA is defined as segment profit or loss (please see page
30 of this report for definitions of Alternative Performance Measures including EBITDA).
20
Property, plant and equipment
Property, plant and equipment is measured at historical cost less accumulated depreciation. Land is
not depreciated. Historical cost includes expenditures that are directly attributable to the acquisition of
the item.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to
the group and the cost of the item can be measured reliably. The carrying amount of any component
accounted for as a separate asset is derecognised when replaced. Periodic maintenance is capitalised
and depreciated over the period until next maintenance. All other repairs and maintenance are
charged to profit or loss during the reporting period in which they are incurred.
Depreciation is calculated using the straight-line method to allocate costs over their estimated useful
lives. The assets’ residual values and useful lives are reviewed annually and adjusted if appropriate.
Gains and losses on disposals are determined by comparing actual proceeds with the carrying
amount. Gains and losses on disposal are included in profit or loss.
Intangible assets
Intangible assets are carried at cost less accumulated amortisation and accumulated impairment
losses. Costs relating to intangible assets, including goodwill, are recognised in the statement of
financial position when it is probable that the asset will generate future economic benefits and the
costs can be measured reliably.
Intangible assets with an indefinite useful life, such as goodwill and water rights owned are not
amortised but are instead tested annually for impairment.
Goodwill
Goodwill represents the excess of the cost of acquisition over the fair value of the Group’s share of the
net identifiable assets of the acquired business at the date of acquisition. Goodwill is carried at cost
less accumulated impairment losses. Goodwill is allocated to cash-generating units for the purpose of
the impairment testing. The allocation is made to those cash-generating units or groups of cash-
generating units that are expected to benefit from the business combination in which the goodwill
arose.
Leases
The Group’s main lease type of agreements are related to water rights. The rights are considered
intangible assets. SmÄkraft has elected to not recognise these types of agreements under IFRS 16
leases. The accounting treatment of the different water right lease agreements are described below:
Water right lease agreements
SmÄkraft enters into water right lease agreements with landowners, which entitles the company to
utilize the water in the rivers. The agreement typically has a period varying from 40 to 75 years,
starting when the power plant is put into commercial operation.
When SmÄkraft has a commitment to pay rent to the land owners, we account for this as a regular
cost as the commitment arises. Such commitment arises, when:
1. Gross agreement/ revenue-based agreement: SmÄkraft pays landowner a percentage of
the annual power plant revenue. Upon expiration of the agreement the landowners have
the right to purchase the power plant with all rights and technical installations at a price
based on certain specific conditions.
SmÄkraft accounts for this land lease when the relevant power plant generates revenue,
upon which this land lease bases.
2. Fixed amount- agreement: SmÄkraft pays landowner a fixed annual amount. Upon
expiration of the agreement the landowner has the right to purchase the powerplant with
all rights and technical installations at a price based on certain specific conditions.
21
SmÄkraft accounts for this land lease monthly based upon the agreed yearly payment.
3. Profit share agreement: SmÄkraft shares the yearly powerplant- profit with the land owner.
Upon expiration of the agreement the landowners have the right to purchase the power
plant with all rights and technical installations based on certain specific conditions.
SmÄkraft accounts for this land lease type by calculating the actual profit for each individual power
plant on a monthly basis. SmÄkraft then calculates the exact share of the profit, that the
landowners have the right to receive. If SmÄkraft is in a position, where land lease should be paid
to landowners, SmÄkraft accounts for the estimated payment as a cost.
In the case that SmÄkraft has a profit share lease agreement, where there (still) is an accumulated
loss on the powerplant, SmÄkraft has the right to offset all accumulated losses before paying out land
lease rent to the landowners. This will represent a future benefit for the company, that SmÄkraft does
not recognise as an asset. This asset will be off- balance. Any positive or negative changes in these
off- balance items, will not be recognised in SmÄkrafts books. In some instances, SmÄkraft may pay
out loans or minimum payments to landowners. These loans are interest bearing loans and will be
recognised as normal loans in the Group’s Financial Statements.
Other leases
Further, the SmÄkraft Group has some lease related to office rental of which the following principles
applies:
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease, i.e. the date the
underlying asset is available for use. Right-of-use assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The
recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated
useful life and the lease term.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the
present value of lease payments to be made over the lease term.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at
the lease commencement date if the interest rate implicit in the lease is not readily determinable.
Estimates and Judgment when calculating Land lease:
Land lease calculations are estimates based on the current revenue and costs related to the specific
companies. While being estimates, there is minimal judgment involved in these estimates, as they are
technical calculations with low complexity based upon the relevant input. Furthermore, most of the
input is objective, as the revenue and most of the costs are known at the time of the estimate.
Financial instruments
Financial instruments are recognised in the financial statements when the Group becomes party to
contractual conditions relating to the financial instrument. Financial assets and financial liabilities are
classified based on the type and purpose for holding the instruments at fair value, amortised cost or as
a designated hedge accounting instrument (e.g. derivatives used for hedging financial risks).
Financial assets
The group classifies its financial assets in the following measurement categories:
‱ those to be measured subsequently at fair value, and
‱ those to be measured at amortised cost.
The classification depends on the entity’s business model for managing the financial assets and the
contractual terms of the cash flows.
For financial assets measured at fair value, gains and losses will be recorded in profit or loss.
Financial assets recognised at fair value through profit or loss are initially recognised at fair value, and
transaction costs are expensed in the income statement. Gains or losses arising from changes in the
fair value of the financial instruments at fair value through profit or loss, including interest and
22
dividends, are recognised in the income statement. Derivatives are always measured at fair value
through profit or loss.
Financial assets that are held for collection of contractual cash flows where those cash flows represent
solely payments of principal and interest are measured at amortised cost. Interest income from these
financial assets is included in finance income using the effective interest rate method. Any gain or loss
arising on derecognition is recognised directly in profit or loss
Regular way purchases and sales of financial assets are recognised on trade-date, the date on which
the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to
receive cash flows from the financial assets have expired or have been transferred and the Group has
transferred substantially all the risks and rewards of ownership.
Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes
cash on hand, deposits held at call with financial institutions, other short-term, highly liquid
investments with original maturities of three months or less that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in value.
Accounts receivables and accrued revenue
Accounts receivable are measured at initial recognition at fair value. Accounts receivable are held with
the objective to collect the contractual cash flows and therefore are subsequently measured at amortised
cost using the effective interest method. For the purposes of impairment, the Group applies the simplified
approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from the date
of initial recognition of the receivables.
Financial liabilities
The Group classifies all financial liabilities at amortised cost, except for derivatives which are at fair
value and financial guarantees (see below).
Accounts payables and other financial payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of
period which are unpaid. They are recognised at fair value. SmÄkraft does not subsequently measure
at amortised cost using the effective interest method, as the difference is insignificant. Trade and other
payables are presented as current liabilities unless payment is not due within 12 months after the
reporting period.
Financial guarantee contracts
Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued.
The liability is initially measured at fair value and subsequently at the higher of:
‱ the amount determined in accordance with the expected credit loss model under IFRS 9
Financial Instruments and
‱ the amount initially recognised less, where appropriate, the cumulative amount of income
recognised in accordance with the principles of IFRS 15 Revenue from Contracts with
Customers.
The fair value of financial guarantees is determined based on the present value of the difference in
cash flows between the contractual payments required under the debt instrument and the payments
that would be required without the guarantee, or the estimated amount that would be payable to a third
party for assuming the obligations.
Where guarantees in relation to loans or other payables of associates are provided for no
compensation, the fair values are accounted for as contributions and recognised as part of the cost of
the investment.
Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are
subsequently measured at amortised cost. Any difference between the proceeds (net of transaction
costs) and the redemption amount is recognised in profit or loss over the period of the borrowings
using the effective interest method. Fees paid on the establishment of loan facilities are recognised as
transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn
down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence
23
that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a
prepayment for liquidity services and amortised over the period of the facility to which it relates.
Borrowings are removed from the balance sheet when the obligation specified in the contract is
discharged, cancelled or expired. The difference between the carrying amount of a financial liability
that has been extinguished or transferred to another party and the consideration paid, including any
noncash assets transferred or liabilities assumed, is recognised in profit or loss as other income or
finance costs.
Borrowings are classified as current liabilities unless the group has an unconditional right to defer
settlement of the liability for at least 12 months after the reporting period.
Taxes
Group companies that are engaged in energy generation in Norway are subject to the special rules for
taxation of energy companies. The Group’s tax expense therefore includes, in addition to ordinary
income tax, natural resource tax and resource rent tax for those plants exceeding 10,000 KVA,
currently only the Holmen power plant.
Income taxes
Income tax is calculated in accordance with ordinary tax rules and by applying the adopted tax rate.
The tax expense in the statement of comprehensive income comprises taxes payable and changes in
deferred tax liabilities and deferred tax assets. Taxes payable are calculated on the basis of the
taxable income for the year. Deferred tax liabilities and deferred tax assets are calculated on the basis
of temporary differences between the accounting and tax values and the tax effect of losses carried
forward. From 2020 and onward, SmÄkraft uses the initial recognition exemption for the tax effect on
temporary differences relating to purchase of power plants. Deferred tax assets and liabilities are
offset when there is a legally enforceable right to offset current tax assets and liabilities and when the
deferred tax balances relate to the same taxation authority.
Tax related to items recognised in other comprehensive income is also recognised in other
comprehensive income, while tax related to equity transactions is recognised in equity.
Natural resource tax
Natural resource tax is a profit-independent tax that is calculated on the basis of the individual power
plant’s average output over the past seven years. Natural resources tax consists of NOK 0.01 per
kilowatt hour (KWh) to the municipality and NOK 0.002 per kwh to the county. Income tax can be
offset against the natural resource tax paid. Any natural resource tax that exceeds income tax can be
carried forward with interest to subsequent years, and is recognised as prepaid tax.
Resource rent tax
Resource rent tax is a profit-dependent tax levied on the net resource rent revenue generated by each
power plant. Resource rent tax is calculated with 47,4% of the resource rent income for each power
plant. Negative resource rent tax is carried forward against future positive resource rent tax interest.
Negative resource rent tax is included in the deferred tax asset, together with temporary differences
regarding the power plant. Deferred tax assets related to negative resource rent tax and temporary tax
differences are capitalised if it is probable that the power plant has resource rent income within a time
limit of 15 years, and is settled against future payable resource rent tax. Deferred tax
liabilities/deferred tax assets related to resource rent tax is calculated with a tax rate of 47,4%.
Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no
longer at the discretion of the entity, on or before the end of the reporting period but not distributed at
the end of the reporting period.
Contributed equity
Ordinary shares are classified as equity. Issuance of new shares are recognised when paid, based
upon the decision by the General Meeting. Incremental costs directly attributable to the issue of new
shares are shown in equity as a deduction, net of tax, from the proceeds.
24
Adoption of new and revised standards
Based on revised IFRS 3 Business Combinations definitions of purchase of entities and assets,
SmÄkraft decided to change the accounting treatment of purchase of single purpose companies with
power plants from “business combinations” to “purchase of assets”. The definition of “business” in
IFRS 3 Business Combinations changed with effect from 1.1.2020. SmÄkraft has therefore made a
new assessment of the accounting treatment of additions of new power plants through purchase of
companies. It has been concluded that such purchases normally have the characteristics of being
“purchase of assets” rather than business combinations. This new conclusion is considered for all
purchases from 01.01.2020 and onwards, except from Andvik Holding AS with its subsidiary
Svartdalen Kraft AS, which is, because of its nature, treated as business combination.
Other amendments listed below have not had any impact on the amounts recognised in prior periods
and are not expected to significantly affect the future periods.
- Definition of Material – amendments to IAS 1 and IAS 8
- Interest Rate Benchmark Reform – amendments to IFRS 9, IAS 39 and IFRS 7
- Revised Conceptual Framework for Financial Reporting
- Covid-19-Related Rent Concessions – amendments to IFRS 16
Standards and amendments issued but not yet effective
Changes in IAS 1 with regards to classification of short term and long-term debt will not have
significant effects on SmĂ„kraft AS’ Financial Statements.
25
3. Key accounting estimates and judgements
Introduction
The use of reasonable estimates and judgements is a critical element in preparing the financial
statements. Due to the level of uncertainties inherent in SmĂ„kraft’s business activities, management
must make certain estimates and judgements that effect the application of accounting policies, results
of operations, cash flows and financial position as reported in the financial statements.
Areas of significant estimates
Impairment testing of fixed assets and intangible assets
One of the key assumptions used by management in making business decisions is SmĂ„kraft’s long
term price forecasts for power.
SmÄkraft updates its long- term price forecasts continuously, based on market developments.
Fair value measurement of energy derivatives
Significant estimates are applied in the valuation of the Group’s long term power purchase and power
sales contracts. The fair value estimate is based on the amounts for which the assets or liabilities
could be exchanged at the relevant transaction date on the reporting period end. To the extent
possible, the assumptions and inputs used, take into account externally verifiable inputs. However,
such information is by nature subject to uncertainty, particularly where comparable market-based
transactions do often not exist. In such cases SmĂ„kraft’s management is required to make market
based assumptions, see note 14.
4. Subsequent events.
After year end, SmÄkraft has increased the portfolio of Powerplants. On 5
th
of January SmÄkraft
finalized the acquisition of Stampaelva, Senneset and Engesetelva, adding 34,4 GWh to our portfolio
in Norway. In February SmÄkraft acquired 32 power plants with in total 53,7 Gwh in Sweden. The
powerplants were acquired by the newly established SmÄkraft AB. SmÄkraft AB is 100% owned by
SmÄkraft AS.
26
5. Purchase of subsidiaries
A
cquisitions 2021:
* The companies merged with SmÄkraft Green Bond 2 AS and deleted during second half 2021.
** The company merged with Andvik Holding and deleted during second half 2021.
*** Owned 100% by StrÞmfallet SmÄkraft AB. Hence indirectly owned 90.1% by SmÄkraft AS.
27
Acquisitions 2020:
* SmÄkraft AS purchased 100% of Andvik Holding AS which owned 55.2% of Svartdalen Kraft AS per 30.04.2020. At
31.12.2020, SmÄkraft AS purchase the 44% ownership in Svartdalen Kraft AS. Hence SmÄkraft AS controls both Andvik
Holding AS and Svartdalen Kraft AS 100%.
Subsidiaries as of 31.12.2021:
28
6. Management of capital structure.
The main aims of the Group’s management of its capital is to maintain a reasonable balance between
the company’s debt and total assets. The Group has a long- term investment horizon, with contractual
arrangements and investments that will last for decades. The reasonable balance between debt and
total assets is thus set based upon the expectations towards short- term and long- term price
expectations.
Overview of capital included in management of capital structure
SmÄkraft has several debt covenants, which include:
- Equity ratio shall exceed 30%.
- Net debt over EBITDA shall not exceed certain levels.
- Debt service coverage shall not fall below certain levels.
- Liquidity shall exceed interest payments next six months.
29
7. Market risk
Risk and risk management of financial instruments
SmÄkraft is engaged in activities that entail risk in many areas and has a unified approach to the
Group’s market risks. The Group’s risk management policy is based upon assuming the right risk
based on the Group’s ability and willingness to take risks, expertise, financial strength and
development plans. The purpose of risk management is to identify threats and opportunities for the
Group, and to manage the overall risk level to provide reasonable assurance that the Group’s
objectives will be met. In SmÄkraft, market risk will primarily relate to prices of energy and
commodities, interest rates and foreign currency. The following section contains a more detailed
description of the various types of market risks, and how these are managed.
Description of market risk related to prices on energy and commodities
SmÄkraft is exposed to significant market risk in relation to the generation and trading of power.
Revenues from power generation are exposed to volume and power price risk. SmÄkraft manages
market risk in the energy markets by trading physical and financial instruments in the Nordic Market.
Risk management in energy trading in SmÄkraft focuses on residual market exposure after
considering land lease contracts and minority interests. In general, SmÄkraft enters standard fixed
price contracts where SmÄkraft agrees to sell a certain production volume at an agreed price in the
future. Around 1/4 of the expected annual production capacity for the next four to five years have such
contracts to reduce the residual risk after land lease and minority interests. SmÄkraft has set risk-
limits within which trading activities are allowed.
Both realized cash effects and unrealized non- cash effects from trading are presented as a part of
other operating income in the profit and loss statement.
Description of foreign exchange and interest rate risk
SmÄkraft incurs currency risks in the form of transaction risk, mainly in connection with energy sales
revenue and investments. Balance sheet risk is related to debt in NOK and EUR.
SmÄkraft settlement currency at the Nordic power exchange Nord Pool is EUR and NOK, and all
power contracts traded in the Nordic power exchange Nasdaq are denominated in EUR. In addition,
most of SmÄkrafts power purchase agreements in Norway and all power purchase and sales abroad
are denominated in EUR. The objective of SmĂ„kraft’s hedging is to secure the EUR value of future
cash flows exposed to changes in foreign currency rates. Economic hedging is partly achieved by
using debt in EUR- currencies as hedging instruments. Few of these hedging relationships hedge
accounting is not applied.
SmÄkrafts interest rate exposure is related to its debt portfolio. The management of interest rate risk is
based on a balance between keeping interest cost low over time and contributing to stabilize the
Group’s cash flows with regards to interest rate changes.
8. Credit risk and liquidity risk.
Credit risk is the risk that SmÄkraft incurs losses due to the failure of counterparties to honor their
financial obligations. SmÄkraft is facing credit risk when entering transactions with financial institutions.
Credit risk against financial institutions arises from cash or current account, deposit, investment of
interest-bearing securities, derivative transactions and incoming guarantees. SmÄkraft also assumes
credit risk when providing loans to associates and joint ventures. In addition, SmÄkraft assumes credit
risk in connection with physical sales contracts. The total risk of counterparties not being able to meet
their obligations is low. Historically, SmÄkrafts credit losses have been limited.
All of SmÄkrafts main counterparties with regards to revenue settlement and hedging activities are
rated as Investment Grade by well- known rating agencies within the 12 months.
30
9. Alternative Performance Measures (APM).
EBITDA is defined as operating profit (-loss) + depreciation of fixed assets and intangible assets +
impairment of fixed assets and intangible assets. This APM is widely used by analysts comparing
Norwegian Hydropower companies. SmÄkraft uses this APM to visualize performance over time
irrespective of price. This APM is included as new APM during 2020.
Adjusted EBITDA is defined as operating profit (-loss) + depreciation of fixed assets and intangible
assets + impairment of fixed assets and intangible assets – unrealized value change on energy
derivatives. SmÄkraft uses this APM to measure performance from operational activities. Unrealized
value on energy derivatives is deducted in the adjusted figures as the value change on these
derivatives usually be negatively correlated to value changes in future power production that is not
recognised, thus creating an accounting mismatch that is not alleviated through hedge accounting.
Adjusted EBITDA should not be considered as an alternative to operating profit/loss and profit/loss
before tax as an indicator of the company’s operations in accordance with generally accepted
accounting principles. Nor is adjusted EBITDA underlying an alternative to cash flow from operating
activities in accordance with generally accepted accounting principles.
EBIT is defined as operating profit/ loss. This is an APM used to measure performance from
operational activities and compare against similar companies in the same sector.
Adjusted EBIT is an APM used to measure performance from operational activities, excluding
unrealized hedge effects. SmÄkraft sets up this APM, as some of its peers are using hedge
accounting, which excludes unrealized hedge effects.
ROACE is operating profit/loss divided by capital employed. Capital employed is total assets excluding
current liabilities. SmÄkraft uses this APM to measure performance and compare against similar
companies in the same sector.
31
10. Revenues and other income
Sale of electric energy
The revenues originate from the generation of hydropower. With regards to revenue recognition, the
production per powerplant is measured per hour and allocated the hourly spot price for the specific
price region. SmÄkraft sells its product electricity to Nordpool via a broker. Every day the broker report
to Nordpool the expected production the next 24 hours. Every second week SmÄkraft receives cash
settlement from Nordpool via the broker. SmÄkraft considers Nordpool as the customer according to
the definition in IFRS 15.
Electricity-certificates (EL-certificates)
The EL certificate scheme is a market-based support scheme. In this system, producers of renewable
electricity receive one certificate per MWh of electricity they produce for a period of up to 15 years.
When EL-certificates are generated they are measured at fair value and recognised as a government
grant within "Other operating income" and inventory. Upon subsequent sales of the certificates, the
sales price is recognised within "Revenues". Inventory of EL-certificates are measured at fair value
with adjustments to "Other operating income”. SmĂ„kraft sells el- certs and guarantees of origin via
multiple brokers.
Power and currency derivatives
SmÄkraft uses financial hedging contracts and currency futures to hedge future revenue. The Group
does not apply hedge accounting for the hedging of power revenues. Realised and unrealised
changes in value related to these derivatives are recognised as Other operating income. See also
Note 144 Financial instruments.

32
11. Payroll costs, number of employees, loans to employees, etc.
Number of full-time employees 26 20
Managing Director’s remuneration
The company has not issued any loans or guarantees in favour of the CEO, directors or shareholders.
The Board of Directors do not receive any renumeration for its positions as Board Members. One of
the Board Members has a consultant agreement based upon a fixed monthly retainer and hourly
based compensation based.
Fees paid to external auditors
Pension
The Group has an established pension scheme that is classified as a defined contribution plan. The
pension scheme is in line with the requirements of the law. Contributions to the defined contribution
schemes are recognised in the consolidated statement of profit and loss in the period in which the
contribution amounts are earned by the employees. The defined contributions plan does not commit
SmÄkraft beyond the amounts contributed.
12. Other operating expenses
Amo un tsinEURthou sand
2021 2020
Salari es 189 159
Pe nsions 15 13
Otherbenefits 42 3
Sum 246 175
33
Purchase of various services consist of external accounting, audit, legal, transactions and operational
services.
13. El certificates inventory
The holding of received electricity certificates in the power generation business is presented as
inventory in the statement of financial position and is measured at fair market value at the end of the
reporting period.
14. Financial instruments.
This note provides information about the group’s financial instruments.
Borro
wings
Total borrowings of kEUR 325 007 consists out of kEUR 316 047 borrowings included in total non-
current liabilities and kEUR 8 960 included in total current liabilities, please see maturity profiles in
table.
Banks - EUR- loan
The primary facility is a Nordea/SEB/DNB facility amounting to 158mEUR per 31.12.21. The facility
was refinanced in June 2021. The loan is EUR denominated, and interests are determined every 6
months, as EURIBOR plus a margin, with a repayment period of 40 years. There have been one
ordinary instalments in 2021 on the refinanced facility. Before refinancing there were one ordinary
instalment in 2021, and two in 2020. The new facility has a maturity in 2024. Both SmÄkraft AS and
the banks will have options to extend this loan with further two years. It is a requirement that the loans
Amounts in EUR thousand
Lenders Currency 12/
31/2021 12/31/2020
Banks NOK 43,892 213,898
Banks EUR 182,724 2,662
Convertible debt from owners EUR - 25,000
Bond debt1 EUR 50,000 -
Bond debt2 EUR 50,000 50,000
Agent commission SEB/Nordea NOK -1,609 -769
Total 325,007 290,791
Total long term debt 316,047 82,431
Total short term debt 8,960 208,360
34
are hedged against interest rate changes and changes in the power- and el-cert prices. The loan has
first lien security in most of the power plants in SmÄkraft AS.
Banks – NOK -loan
In total there are 18 NOK- based loans in subsidiaries. These loans have typically repayment profiles
over 30 years. They mature at different dates shown in the maturity table above. Interests are
determined every three months, as NIBOR + margin. All these loans have security in the power plants
in the respective subsidiary.
Bond debt 1
The EUR bond loan was established in 2018 and has a five-year maturity. The average annualized
borrowing rate in 2019 was around 1,5% the same for 2020. The bond loan of EUR 50 million is
secured by a mortgage on 8 of the Group's hydropower plants and a mortgage on shares in
companies that own another three power plants. Mortgages, insurance, and bank accounts are linked
to the same power plants. Furthermore, the shares in all the subsidiaries of SmÄkraft Green Bond 1
AS and a bank account in SmÄkraft AS have been pledged. There are special conditions attached to
the bond loan, where, among other things, (i) SmÄkraft Green Bond 1 AS or any of its subsidiaries
shall not provide or maintain a mortgage or other form of security in assets or assets, and (ii) book
equity in the total SmÄkraft Group must be at least 30% of the total capital.
Bond debt 2
The EUR bond loan was established in 2021 and has a five-year maturity. The coupon rate is 1,875%.
The bond loan of EUR 50 million is secured by a mortgage on 24 of the Group's hydropower plants.
Mortgages and insurance are linked to the same power plants. Furthermore, the shares and bank
accounts in all the subsidiaries of SmÄkraft Green Bond 2 AS and a bank account in SmÄkraft Green
Bond 2 AS have been pledged. There are special conditions attached to the bond loan, where, among
other things, (i) SmÄkraft Green Bond 2 AS or any of its subsidiaries shall not provide or maintain a
mortgage or other form of security in assets or assets, and (ii) book equity in the total SmÄkraft Group
must be at least 30% of the total capital.
Maturity profile for financial liabilities
The tables show undiscounted cash flows for each interval and shows only payments of principal:
2021
2020
Derivatives
The Group has derivatives related to the hedging of income from future power production, interests in
connection with interest bearing debt and currency volatility between EUR and NOK.
The table below shows the financial position and profit and loss accounts for the derivatives:

35
All the derivatives are valued at fair value at level 2 in accordance to the fair value hierarchy: “Fair
value is based on data inputs other than quoted prices included in Level 1, which are observable for
the asset, either directly or indirectly”.
15. Financial result
Financial income
Financial expenses
31.12.2021
12monthsended
31.12.2021
P&L
Longterm Shortterm Longterm Shortterm
OverFVPL‐Interestratesswaps ‐ 226 99 ‐ 569
OverFVPL‐Currencyderivati ves ‐ 1237 ‐ ‐ ‐307
OverFVPL‐Powerderivatives ‐ 30 ‐ 27768 ‐52921
Sumderivative s ‐ 1492 99 27768 ‐52659
31.12.2021 31.12.2021
Asse ts Liabilities
31.12.2020
12monthsended
31.12.2020
P&L
Longterm Shortterm Longterm Shortte rm
OverFVPL‐Interestratesswaps ‐ ‐ 287 144 182
OverFVPL‐Currencyderivati ves ‐ 1823 ‐ 346 ‐1057
OverFVPL‐Powerderivati ves ‐ 6260 ‐ ‐ 18410
Sumderivative s ‐ 8083 287 490 17535
Asse ts Liabilities
31.12.2020 31.12.2020
36
16. Intangible assets.
17. Impairment testing
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and
are tested annually for impairment, or more frequently if events or changes in circumstances indicate
that they might be impaired. SmÄkraft typically tests for impairment at least in Q3 each year.
Other non-financial assets are tested for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of
disposal and value in use. For the purposes of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash inflows, which are largely independent of
the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets
other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at
the end of each reporting period.
Cash generating unit
Power plants that are located in the same watercourse and jointly managed are in SmÄkraft regarded
as a single cash-generating unit. However impairment tests for 2021 are carried out by calculating the
present value of future cash flows from each powerplant, which are then tested against associated
carrying amounts.
Budget
The impairment tests carried out for 2021 are based on the budget for 2022 and up to a 100 year
period prior to setting the terminal value. If the power plant has a terminal clause in the land lease
agreement, the period of time up until the date of the clause is used. The power prices used in the
forecast are a mix between the actual power prices traded in the Nordic power market for the first year
and power curves from three independent power consultancies for the entire remaining time period.
SmÄkraft uses longer than 5 years forecast- periods, because the nature of our business is long- term
with land- lease periods ranging from 40 to 100 years.
Discount rate
The applied discount rate is based on the company’s cost of capital, which in turn is based on a
weighted average return requirement for equity and loan capital. The return on equity requirement is
estimated using the capital asset pricing model (CAPM). The return on loan capital requirement is
estimated based on the long-term risk-free interest rate plus a credit margin derived from SmÄkrafts
marginal long-term interest rate. The discount rate is adjusted for the expected debt-to-assets ratio
37
and business risk for the individual cash-generating unit. A discount rate around 5 per cent has been
applied for the various cash-generating units.
Sensitivity
The Group has carried out sensitivity analyses examining the consequences of changes in various
assumptions for the recoverable amount on some of the power plants. For all of the CGUs with
goodwill, the difference between the carrying amounts and the recoverable amounts are significant.
The recoverable amount is particularly sensitive to changes in long- term power prices and changes in
the discount rate. The sensitivities vary among the CGUs, but all CGUs with goodwill have significant
headroom. For the CGU with lowest difference between recoverable amount, the following sensitivities
apply. If the long-term power price curve increases with 10%, the fair value of the typical CGU
increases with approximately 13,4%, while it decreases with approximately 13,4% with 10% price
reduction. If the discount rate increases with 0,1%- point, the fair value of the typical CGU decreases
with approximately 2.4%, while it increases with approximately 2,5% with similar discount rate
reduction. The vast majority of CGUs (>95%) with goodwill have significantly more than 15%
headroom between recognised amounts and recoverable amounts.
.
38
18. Property, plant and equipment
39
19. Associated companies
SmÄkraft AS owns 50% of Luster SmÄkraft AS. The remaining 50% is owned by Luster Energi AS. Per
end of 2020, the company successfully constructed the 3 small- scale hydro power plants: KvÄle,
Holen and VanndĂžla. Combined they have a normalized annual production of about 50 GWh.
SmÄkraft AS owns 35% of Rullestad & Skromme AS, and 65% of this company is owned by local
landowners. The company is established to build small scale hydropower in Rullestad and Skromme,
Etne, Hordaland. The company has water rights in 4 different projects in the area, with a possible
annual production up to approximately 77 GWh. There are no employees in the company.
40
20. Receivables; amounts due after more than one year
The bank has pledged security in operating equipment and accounts receivable, in addition to first
priority to the power plant and related water lease agreements.
Please see note 27 for further details about prepaid water right lease.
41
21. Related party transaction and balance items.
SmÄkraft and its subsidiaries and associates have sought to do transactions on commercial terms.
The companies also have business transactions regarding the corporate account. These are shown i
n
t
he table below.
T
ransactions and balance items between SmÄkraft AS and its subsidiaries are eliminated in the
consolidation and are hence not presented under "Group" in this note.
Lus
ter SmÄkraft AS og Rullestad & Skromme AS are associated companies (note 19).
The individuals stated in note 11 are also related parties of SmÄkraft AS. Apart from the transactions
specified in this note and note 11, there are no significant related party transactions or balance items.
22. Ownership structure
T
he share capital amounts to EUR 20 039 thousand at 31.12.2021.

42
23. Taxes
Temporary differences that arise from the initial recognition of goodwill and assets which is not a
business combination is not recognised as a deferred tax liability.

43
24. Cash and cash equivalents
The company has established a bank guarantee for the payment of tax. Bank deposits, cash etc. does
not include restricted tax deduction funds as of 31.12.2021.
25. Secured borrowings and guarantees.
The bank and bondholders have pledged security in operating equipment, bank accounts and
accounts receivable, in addition to 1. priority pledge in the power plants and related water lease
agreements.
SmÄkraft AS has provided a bank guarantee as a security for the payment of tax deduction.
According to the shareholders agreement with Luster SmÄkraft AS, SmÄkraft AS is obligated to make
capital available to Luster SmÄkraft AS.
26. Concessions.
As of 31.12.2021, SmÄkraft AS has concessions for additional 14 power plants with a total
annual production of approximatel
y
201 GWh.
44
27. Water and lease agreements.
As part of several of the net- agreements, SmÄkraft offers interest bearing loans and/ or minimum
payments in the first years of the land- lease agreements. Net agreements typically have deficits the
first years. SmÄkraft offers interest bearing loans/ minimum payments to offer more stable payouts to
the landowners, while simultaneously not amending the balance in the land lease agreement between
landowner and company.
The loans are normally interest-bearing loans. The minimum payments are interest bearing payments
to the landowners that will be offset against future land lease profits.
Loans from SmÄkraft AS to landowners:
When net- agreements have deficit, SmÄkraft AS finances the landowner share of the deficit. SmÄkraft
AS accrues a receivable against the landowners, against which future profits will offset. This is an
asset to SmÄkraft, that according to IFRS is off balance. It represents a future benefit for the company.
45
SMÅKRAFT AS
COMPANY NUMBERS
2021
46
ANNUAL ACCOUNTS AND NOTES
SMÅKRAFT AS
STATEMENT OF PROFIT AND LOSS
47
STATEMENT OF FINANCIAL POSITION
48
_________________________ _________________________ ________________________
Member of the Board Chairman of the Board Member of the Board
Claudia Ahnert Annette Malm- Justad Joakim Johnsen
________________________ _________________________ ________________________
Member of the Board Member of the Board Managing Director
Oldrik Verloop Christian Heidfeld Terje Vedeler
Bergen, Norway, 22. March 2022
The Board of Directors
SmÄkraft AS
49
STATEMENT OF CHANGES IN EQUITY
50
STATEMENT OF CASHFLOW
51
Notes to the accounts, SmÄkraft AS
Note 1: General information
SmÄkraft (the Company) is located in Bergen, Norway, with local offices in Harstad, Sandnes,
LiillestrÞm, Flatanger and Oslo, and employs 25 people. All of SmÄkrafts business is in Norway.
SmÄkraft is a supplier of renewable energy based on small scale hydro power plants.
The statement of comprehensive income, statement of financial position, statement of equity,
statement of cash flow and notes provide comparable information in respect of the previous period.
The financial statements have been prepared on a historical cost basis except for certain assets,
liabilities and financial instruments which are measured at fair value. The preparation of financial
statements in conformity with IFRS requires the use of certain accounting estimates. It also requires
management to exercise its judgement in the process of applying the Company’s accounting policies.
Presentation and classification of items in the financial statements is consistent for the periods
presented.
Note 2: General accounting policies
Foreign currency translation
Functional and presentation currency
The functional currency of SmÄkraft AS is the Norwegian krone (NOK). The Company accounts are
presented in EUR. SmÄkraft AS presents the financial statement in EUR, as the main revenue is noted
in EUR, its debt is mainly in EUR and its owners are EUR-based.
The currency differences arising in the translation to the presentation currency are presented in Other
Comprehensive Incomes. Also, in the statement of equity the translation difference is included in
retained earnings. All amounts are rounded to the nearest EUR thousand.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rate at
the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation of monetary assets and liabilities denominated in foreign
currencies at year-end exchange rates are generally recognised in profit or loss. SmÄkraft uses
currency exchange rates from Norges Bank.
Segments
An operating segment is a component of an entity that engages in business activities from which it
may earn revenues and incur expenses. Furthermore, the entity’s component’s operating results are
regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to
be allocated to the segment and to assess its performance, and thus separate financial information is
available. The company has determined that the board of directors is collectively the chief operating
decision maker.
The Company has only one segment: Power supply. SmÄkraft produces renewable energy and sells
electricity, el- certs and guarantees of origin on the Nordic power market.
The segment information is reported in accordance with the reporting to board of directors (chief
operating decision makers), and is consistent with financial information used for assessing
performance and allocating resources. EBITDA is defined as segment profit or loss (please see page
30 of this report for definitions of Alternative Performance Measures including EBITDA).
Property, plant and equipment
Property, plant and equipment is measured at historical cost less accumulated depreciation. Land is
not depreciated. Historical cost includes expenditures that are directly attributable to the acquisition of
the item.
52
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to
the Company and the cost of the item can be measured reliably. The carrying amount of any
component accounted for as a separate asset is derecognised when replaced. Periodic maintenance
is capitalised and depreciated over the period until next maintenance. All other repairs and
maintenance are charged to profit or loss during the reporting period in which they are incurred.
Depreciation is calculated using the straight-line method to allocate costs over their estimated useful
lives. The assets’ residual values and useful lives are reviewed annually, and adjusted if appropriate.
Gains and losses on disposals are determined by comparing actual proceeds with the carrying
amount. Gains and losses on disposal are included in profit or loss.
Intangible assets
Intangible assets are carried at cost less accumulated amortisation and accumulated impairment
losses. Costs relating to intangible assets, including goodwill, are recognised in the statement of
financial position when it is probable that the asset will generate future economic benefits and the
costs can be measured reliably.
Intangible assets with an indefinite useful life, such as goodwill and water rights owned are not
amortised but are instead tested annually for impairment.
Goodwill
Goodwill represents the excess of the cost of acquisition over the fair value of the Company's share of
the net identifiable assets of the acquired business at the date of acquisition. Goodwill is carried at
cost less accumulated impairment losses. Goodwill is allocated to cash-generating units for the
purpose of the impairment testing. The allocation is made to those cash-generating units or the
Companys of cash-generating units that are expected to benefit from the business combination in
which the goodwill arose.
Leases
The CompanyÂŽs main lease type of agreements are related to water rights. The rights are considered
intangible assets. SmÄkraft has elected to not recognise these types of agreements under IFRS 16
leases. The accounting treatment of the different water right lease agreements are described below:
Water right lease agreements
SmÄkraft enters into water right lease agreements with landowners, which entitles the company to
utilize the water in the rivers. The agreement typically has a period varying from 40 to 75 years,
starting when the power plant is put into commercial operation.
When SmÄkraft has a commitment to pay rent to the land owners, we account for this as a regular
cost as the commitment arises. Such commitment arises, when:
4. Gross agreement/ revenue-based agreement: SmÄkraft pays landowner a percentage of
the annual power plant revenue. Upon expiration of the agreement the landowners have
the right to purchase the power plant with all rights and technical installations at a price
based on certain specific conditions.
SmÄkraft accounts for this land lease when the relevant power plant generates revenue,
upon which this land lease bases.
5. Fixed amount- agreement: SmÄkraft pays landowner a fixed annual amount. Upon
expiration of the agreement the landowner has the right to purchase the powerplant with
all rights and technical installations at a price based on certain specific conditions.
SmÄkraft accounts for this land lease monthly based upon the agreed yearly payment.
6. Profit share agreement: SmÄkraft shares the yearly powerplant- profit with the land owner.
Upon expiration of the agreement the landowners have the right to purchase the power
plant with all rights and technical installations based on certain specific conditions.
53
SmÄkraft accounts for this land lease type by calculating the actual profit for each individual
power plant on a monthly basis. SmÄkraft then calculates the exact share of the profit, that
the landowners have the right to receive. If SmÄkraft is in a position, where land lease should
be paid to landowners, SmÄkraft accounts for the estimated payment as a cost.
In the case that SmÄkraft has a profit share lease agreement, where there (still) is an accumulated
loss on the powerplant, SmÄkraft has the right to offset all accumulated losses before paying out land
lease rent to the landowners. This will represent a future benefit for the company, that SmÄkraft does
not recognise as an asset. This asset will be off- balance. Any positive or negative changes in these
off- balance items, will not be recognised in SmÄkrafts books. In some instances, SmÄkraft may pay
out loans or minimum payments to landowners. These loans are interest bearing loans and will be
recognised as normal loans in the CompanyÂŽs Financial Statements.
Other leases
Further, SmÄkraft has some lease related to office rental of which the following principles applies:
Right-of-use assets
The Company recognises right-of-use assets at the commencement date of the lease, i.e. the date the
underlying asset is available for use. Right-of-use assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The
recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated
useful life and the lease term.
Lease liabilities
At the commencement date of the lease, the Company recognises lease liabilities measured at the
present value of lease payments to be made over the lease term.
In calculating the present value of lease payments, the Company uses the incremental borrowing rate
at the lease commencement date if the interest rate implicit in the lease is not readily determinable.
Estimates and Judgment when calculating Land lease:
Land lease calculations are estimates based on the current revenue and costs related to the specific
companies. While being estimates, there is minimal judgment involved in these estimates, as they are
technical calculations with low complexity based upon the relevant input. Furthermore, most of the
input is objective, as the revenue and most of the costs are known at the time of the estimate.
Financial instruments
Financial instruments are recognised in the financial statements when the Company becomes party to
contractual conditions relating to the financial instrument. Financial assets and financial liabilities are
classified based on the type and purpose for holding the instruments at fair value, amortised cost or as
a designated hedge accounting instrument (e.g. derivatives used for hedging financial risks).
Financial assets
The Company classifies its financial assets in the following measurement categories:
‱ those to be measured subsequently at fair value, and
‱ those to be measured at amortised cost.
The classification depends on the entity’s business model for managing the financial assets and the
contractual terms of the cash flows.
For financial assets measured at fair value, gains and losses will be recorded in profit or loss.
Financial assets recognised at fair value through profit or loss are initially recognised at fair value, and
transaction costs are expensed in the income statement. Gains or losses arising from changes in the
fair value of the financial instruments at fair value through profit or loss, including interest and
dividends, are recognised in the income statement. Derivatives are always measured at fair value
through profit or loss.
Financial assets that are held for collection of contractual cash flows where those cash flows represent
solely payments of principal and interest are measured at amortised cost. Interest income from these
54
financial assets is included in finance income using the effective interest rate method. Any gain or loss
arising on derecognition is recognised directly in profit or loss
Regular way purchases and sales of financial assets are recognised on trade-date, the date on which
the Company commits to purchase or sell the asset. Financial assets are derecognised when the
rights to receive cash flows from the financial assets have expired or have been transferred and the
Company has transferred substantially all the risks and rewards of ownership.
Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes
cash on hand, deposits held at call with financial institutions, other short-term, highly liquid
investments with original maturities of three months or less that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in value.
Accounts receivables and accrued revenue
Accounts receivable are measured at initial recognition at fair value. Accounts receivable are held with
the objective to collect the contractual cash flows and therefore are subsequently measured at amortised
cost using the effective interest method. For the purposes of impairment, the Company applies the
simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from
the date of initial recognition of the receivables.
Financial liabilities
The Company classifies all financial liabilities at amortised cost, except for derivatives which are at fair
value and financial guarantees (see below).
Accounts payables and other financial payables
These amounts represent liabilities for goods and services provided to the Company prior to the end of
period which are unpaid. They are recognised at fair value. SmÄkraft does not subsequently measure
at amortised cost using the effective interest method, as the difference is insignificant. Trade and other
payables are presented as current liabilities unless payment is not due within 12 months after the
reporting period.
Financial guarantee contracts
Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued.
The liability is initially measured at fair value and subsequently at the higher of:
‱ the amount determined in accordance with the expected credit loss model under IFRS 9
Financial Instruments and
‱ the amount initially recognised less, where appropriate, the cumulative amount of income
recognised in accordance with the principles of IFRS 15 Revenue from Contracts with
Customers.
The fair value of financial guarantees is determined based on the present value of the difference in
cash flows between the contractual payments required under the debt instrument and the payments
that would be required without the guarantee, or the estimated amount that would be payable to a third
party for assuming the obligations.
Where guarantees in relation to loans or other payables of associates are provided for no
compensation, the fair values are accounted for as contributions and recognised as part of the cost of
the investment.
Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are
subsequently measured at amortised cost. Any difference between the proceeds (net of transaction
costs) and the redemption amount is recognised in profit or loss over the period of the borrowings
using the effective interest method. Fees paid on the establishment of loan facilities are recognised as
transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn
down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence
that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a
prepayment for liquidity services and amortised over the period of the facility to which it relates.
Borrowings are removed from the balance sheet when the obligation specified in the contract is
discharged, cancelled, or expired. The difference between the carrying amount of a financial liability
that has been extinguished or transferred to another party and the consideration paid, including any
55
noncash assets transferred or liabilities assumed, is recognised in profit or loss as other income or
finance costs.
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer
settlement of the liability for at least 12 months after the reporting period.
Taxes
Income taxes
Income tax is calculated in accordance with ordinary tax rules and by applying the adopted tax rate.
The tax expense in the statement of comprehensive income comprises taxes payable and changes in
deferred tax liabilities and deferred tax assets. Taxes payable are calculated on the basis of the
taxable income for the year. Deferred tax liabilities and deferred tax assets are calculated on the basis
of temporary differences between the accounting and tax values and the tax effect of losses carried
forward. From 2020 and onward, SmÄkraft uses the initial recognition exemption for the tax effect on
temporary differences relating to purchase of power plants.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current
tax assets and liabilities and when the deferred tax balances relate to the same taxation authority.
Tax related to items recognised in other comprehensive income is also recognised in other
comprehensive income, while tax related to equity transactions is recognised in equity.
Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no
longer at the discretion of the entity, on or before the end of the reporting period but not distributed at
the end of the reporting period.
Contributed equity
Ordinary shares are classified as equity. Issuance of new shares are recognised when paid, based
upon the decision by the General Meeting. Incremental costs directly attributable to the issue of new
shares are shown in equity as a deduction, net of tax, from the proceeds.
Adoption of new and revised standards
The Company has applied the following standards and amendments for the first time for the reporting
period commencing 01.01.2020:
- Definition of Material – amendments to IAS 1 and IAS 8
- Interest Rate Benchmark Reform – amendments to IFRS 9, IAS 39 and IFRS 7
- Revised Conceptual Framework for Financial Reporting
- Covid-19-Related Rent Concessions – amendments to IFRS 16
None of the amendments listed above have had any impact on the amounts recognised in prior
periods and are not expected to significantly affect the future periods.
Standards and amendments issued but not yet effective
Changes in IAS 1 with regards to classification of short term and long-term debt will not have
significant effects on SmĂ„kraft AS’ Financial Statements.
Note 3: Key accounting estimates and judgements
Introduction
The use of reasonable estimates and judgements is a critical element in preparing the financial
statements. Due to the level of uncertainties inherent in SmÄkrafts business activities, management
must make certain estimates and judgements that effect the application of accounting policies, results
of operations, cash flows and financial position as reported in the financial statements.
Areas of significant estimates
Impairment testing of fixed assets and intangible assets
One of the key assumptions used by management in making business decisions is SmÄkrafts long
term price forecasts for power.
SmÄkraft updates its long- term price forecasts continuously, based on market developments.
Fair value measurement of energy derivatives
Significant estimates are applied in the valuation of the Group’s long term power purchase and power
sales contracts. The fair value estimate is based on the amounts for which the assets or liabilities
could be exchanged at the relevant transaction date on the reporting period end. To the extent
possible, the assumptions and inputs used take into account externally verifiable inputs. However,
such information is by nature subject to uncertainty, particularly where comparable market-based
transactions do often not exist. In such cases SmÄkrafts management is required to make market-
based assumptions, see note 14.
Note 4: Subsequent events
After year end, SmÄkraft has increased the portfolio of Powerplants. On 5
th
of January SmÄkraft
finalized the acquisition of Stampaelva, Senneset and Engesetelva, adding 34,4 GWh to our portfolio
in Norway. In February SmÄkraft acquired 32 power plants with in total 53,7 Gwh in Sweden. The
powerplants were acquired by the newly established SmÄkraft AB. SmÄkraft AB is 100% owned by
SmÄkraft AS.
Note 5: Management of capital structure
The main aim of the CompanyÂŽs management of its capital is to maintain a reasonable balance
between the Company’s debt and total assets. The Company has a long- term investment horizon,
with contractual arrangements and investments that will last for decades. The reasonable balance
between debt and total assets is thus set based upon the expectations towards short- term and long-
term price expectations.
SmÄkraft has several debt covenants, which include:
- Equity ratio shall exceed 30%.
- Net debt over EBITDA shall not exceed certain levels.
- Debt service coverage shall not fall below certain levels.
- Liquidity shall exceed interest payments next six months.
Note 6: Market risk
Risk and risk management of financial instruments
SmÄkraft is engaged in activities that entail risk in many areas and has a unified approach to the
Company’s market risks. The risk management policy is based upon assuming the right risk based on
the ability and willingness to take risks, expertise, financial strength, and development plans. The
purpose of risk management is to identify threats and opportunities, and to manage the overall risk
57
level to provide reasonable assurance that the CompanyŽs objectives will be met. In SmÄkraft, market
risk will primarily relate to prices of energy and commodities, interest rates and foreign currency. The
following section contains a more detailed description of the various types of market risk, and how
these are managed.
Description of market risk related to prices on energy and commodities
SmÄkraft is exposed to significant market risk in relation to the generation and trading of power.
Revenues from power generation are exposed to volume and power price risk. SmÄkraft manages
market risk in the energy markets by trading physical and financial instruments in the Nordic Market.
Risk management in energy trading in SmÄkraft focuses on residual market exposure after
considering land lease contracts and minority interests. In general, SmÄkraft enters standard fixed
price contracts where SmÄkraft agrees to sell a certain production volume at an agreed price in the
future. Around 1/4 of the expected annual production capacity for the next four to five years have such
contracts to reduce the residual risk after land lease and minority interests. SmÄkraft has set risk-
limits within which trading activities are allowed.
Both realized cash effects and unrealized non- cash effects from trading are presented as a part of
other revenue in the profit and loss statement.
Description of foreign exchange and interest rate risk
SmÄkraft incurs currency risks in the form of transaction risk, mainly in connection with energy sales
revenue and investments. Balance sheet risk is related to debt in NOK and EUR.
SmÄkraft settlement currency at the Nordic power exchange Nord Pool is EUR and NOK, and all
power contracts traded in the Nordic power exchange Nasdaq are denominated in EUR. In addition,
most of SmÄkrafts power purchase agreements in Norway and all power purchase and sales abroad
are denominated in EUR. The objective of SmÄkrafts hedging is to secure the EUR value of future
cash flows exposed to changes in foreign currency rates. Economic hedging is partly achieved by
using debt in EUR- currencies as hedging instruments. Few of these hedging relationships fulfil the
requirements of hedge accounting.
SmÄkrafts interest rate exposure is related to its debt portfolio. The management of interest rate risk is
based on a balance between keeping interest cost low over time and contributing to stabilize the
Company’s cash flows with regards to interest rate changes.
58
Note 7: Credit Risk and Liquidity risk
Credit risk is the risk that SmÄkraft incurs losses due to the failure of counterparties to honor their
financial obligations. SmÄkraft is facing credit risk when entering transactions with financial institutions.
Credit risk against financial institutions arises from cash or current account, deposit, investment of
interest-bearing securities, derivative transactions, and incoming guarantees. SmÄkraft also assumes
credit risk when providing loans to associates and joint ventures. In addition, SmÄkraft assumes credit
risk in connection with physical sales contracts. The total risk of counterparties not being able to meet
their obligations is low. Historically, SmÄkrafts credit losses have been limited.
Note 8: Alternative Performance Measures
EBITDA is defined as operating profit (-loss) + depreciation of fixed assets and intangible assets +
impairment of fixed assets and intangible assets. This APM is widely used by analysts comparing
Norwegian Hydropower companies. SmÄkraft uses this APM to visualize performance over time
irrespective of price. This APM was included as new APM during 2020.
Adjusted EBITDA is defined as operating profit (-loss) + depreciation of fixed assets and intangible
assets + impairment of fixed assets and intangible assets – unrealized value change on energy
derivatives. SmÄkraft uses this APM to measure performance from operational activities. Unrealized
value on energy derivatives is deducted in the adjusted figures as the value change on these
derivatives usually be negatively correlated to value changes in future power production that is not
recognised, thus creating an accounting mismatch that is not alleviated through hedge accounting.
Adjusted EBITDA should not be considered as an alternative to operating profit/loss and profit/loss
before tax as an indicator of the company’s operations in accordance with generally accepted
accounting principles. Nor is adjusted EBITDA underlying an alternative to cash flow from operating
activities in accordance with generally accepted accounting principles.
EBIT is defined as operating profit/ loss. This is an APM used to measure performance from
operational activities and compare against similar companies in the same sector.
Adjusted EBIT is an APM used to measure performance from operational activities, excluding
unrealized hedge effects. SmÄkraft sets up this APM, as some of its peers are using hedge
accounting, which excludes unrealized hedge effects.
ROACE is operating profit/loss divided by capital employed. Capital employed is total assets excluding
current liabilities. SmÄkraft uses this APM to measure performance and compare against similar
companies in the same sector.
59
60
Note 9 – Operating revenues
Note 10 - Payroll costs, number of employees, loans to employees, etc.
The numbers relate to the current CEO during 2020 and 2021, Terje Vedeler. The CEO's pension is
included in the company's pension scheme.
The company has not issued any loans or guarantees in favour of the CEO, directors, or shareholders.
The Board of Directors do not receive any renumeration for its positions as Board Members. One of
the Board Members has a consultant agreement based upon a fixed monthly retainer and hourly
based compensation based.
Fees paid to external auditors
 61
Pension
SmÄkraft has an established pension scheme that is classified as a defined contribution plan. The
pension scheme is in line with the requirements of the law. Contributions to the defined contribution
schemes are recognised in the consolidated statement of profit and loss in the period in which the
contribution amounts are earned by the employees. The defined contributions plan does not commit
SmÄkraft beyond the amounts contributed.
Note 11: Other operating expenses
Purchase of various services consist of external accounting, audit, legal, transactions and operational
services.
Note 12: El certificates
The holding of received electricity certificates in the power generation business is presented as
inventory in the statement of financial position and is measured at fair market value at the end of the
reporting period.
62
Note 13: Financial instruments
This note provides information about the company’s financial instruments:
B
orrowings
Maturity profile for borrowings
Changes in borrowings
63
Derivatives
The Company has derivatives related to the hedging of income from future power production, as well
as interest rate swaps in connection with interest bearing debt.
F
or the period 2022- 2025, SmÄkraft AS has hedged part of the estimated production against price
fluctuations. Fair value calculations are based on available year- end market prices, and future price-
curve estimates in cases where there are no official closing prices.
T
he Company has entered financial currency swaps from EUR to NOK. The Company has entered
these contracts to make sure that the future capital increases in EUR will fully cover future acquisitions
in NOK.
T
he Company does not apply hedge accounting for contracts for power hedging or for currency
swaps, meaning that unrealised changes in value are recognised through the profit or loss and
presented on the line ’Other operating revenue’ and Financial income/expenses respectively.
Al
l the derivatives are valued at fair value at level 2 in accordance to the fair value hierarchy: “Fair value
is based on data inputs other than quoted prices included in Level 1, which are observable for the asset,
either directly or indirectly”.
Note 14: Financial result
Financial income
64
Fina
ncial expenses
Note 15: Intangible assets
The company’s goodwill comes from historical acquisitions of new power plant companies and mainly
arises because deferred tax is valued at nominal amounts whereas discounted amounts are reflected
in the purchase amount. The difference between deferred tax valued at nominal and discounted
amounts is recognised as goodwill.
Note 16: Impairment testing
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and
are tested annually for impairment, or more frequently if events or changes in circumstances indicate
that they might be impaired. SmÄkraft typically tests for impairment at least in Q3 each year.
Other non-financial assets are tested for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of
disposal and value in use. For the purposes of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash inflows, which are largely independent of
the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets
other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at
the end of each reporting period.
65
C
ash generating unit
Power plants that are located in the same watercourse and jointly managed are regarded as a single
cash-generating unit. Impairment tests are carried out by calculating the present value of future cash
flows from each powerplant, which are then tested against associated carrying amounts.
B
udget
The impairment tests carried out for 2021 are based on the budget for 2022 and up to a 100 year
period prior to setting the terminal value. If the power plant has a terminal clause in the land lease
agreement, the period of time up until the date of the clause is used. The power prices used in the
forecast are a mix between the actual power prices traded in the Nordic power market for the first
years and power curves from three independent power consultancies for the entire remaining time
period. SmÄkraft uses longer than 5 years forecast- periods, because the nature of our business is
long- term with land- lease periods ranging from 40 to 100 years.
2.6
Discount rate
The applied discount rate is based on the company’s cost of capital, which in turn is based on a
weighted average return requirement for equity and loan capital. The return on equity requirement is
estimated using the capital asset pricing model (CAPM). The return on loan capital requirement is
estimated based on the long-term risk-free interest rate plus a credit margin derived from SmÄkrafts
marginal long-term interest rate. The discount rate is adjusted for the expected debt-to-assets ratio
and business risk for the individual cash-generating unit. A discount rate around 5 per cent has been
applied for the various cash-generating units.
Se
nsitivity
The Company has carried out sensitivity analyses examining the consequences of changes in various
assumptions for the recoverable amount on some of the power plants. For all of the CGUs with
goodwill, the difference between the carrying amounts and the recoverable amounts are significant.
The recoverable amount is particularly sensitive to changes in long- term power prices and changes in
the discount rate. The sensitivities vary among the CGUs, but all CGUs with goodwill have significant
headroom. For the CGU with lowest difference between recoverable amount, the following sensitivities
apply. If the long-term power price curve increases with 10%, the fair value of the typical CGU
increases with approximately 13,4%, while it decreases with approximately 13,4% with 10% price
reduction. If the discount rate increases with 0,1%- point, the fair value of the typical CGU decreases
with approximately 2.4%, while it increases with approximately 2,5% with similar discount rate
reduction. The vast majority of CGUs (>95%) with goodwill have significantly more than 15%
headroom between recognised amounts and recoverable amounts.
66
Note 17: Property, plant and equipment
Plants under construction are assets that we currently develop and plan to invest in constructions of
future power plants or upgrades of existing power plants.
67
Note 18: Associated companies
SmÄkraft AS owns 50% of Luster SmÄkraft AS. The remaining 50% is owned by Luster Energi AS. Per
end of 2020, the company successfully constructed the 3 small- scale hydro power plants: KvÄle,
Holen and VanndĂžla. Combined they have a normalized annual production of about 50 GWh.
SmÄkraft AS operates power plants.
SmÄkraft AS owns 35% of Rullestad & Skromme AS, and 65% of this company is owned by local
landowners. The company is established to build small scale hydropower in Rullestad and Skromme,
Etne, Hordaland. The company has water rights in 4 different projects in the area, with a possible
annual production up to approximately 77 GWh. There are no employees in the company.
Note 19: Subsidiaries
Group companies
Date of
acquisition/
Establishm
ent
Registered
office
Ownership
share
Voting
share
SmÄkraft AS Bergen
Holmen Kraft AS 2016 Bergen 100 % 100 %
FollsjÄ Kraft AS 2016 Notodden 82 % 82 %
Muoidejohka Kraft AS 2010 Beiarn 60 % 60 %
Reinli Kraft AS 2005 SĂžr-Aurdal 51 % 51 %
Jorda Kraft AS 2012 Nord-Fron 51 % 51 %
Sigdestad Kraftverk AS 2018 Oslo 52 % 52 %
SmÄkraft Green Bond 1 AS 2018 Bergen 100 % 100 %
Gulen Kraft AS 2019 Bergen 100 % 100 %
NordÄna og DalaÄna AS 2019 Bergen 100 % 100 %
Tesjolo Kraftverk AS 2020 Bergen 100 % 100 %
Andvik Holding AS 2020 Bergen 100 % 100 %
Ytre Kandal Kraft As 2020 Sandane 51 % 51 %
Gosland Kraft AS 2020 Voss 66 % 66 %
Gryta Kraft AS 2020 Bergen 100 % 100 %
Svartefoss Invest AS 2020 Bergen 100 % 100 %
FoldsÊ BergsÄi AS 2020 Bergen 100 % 100 %
Holsen Kraft NordĂžla AS 2020 Bergen 100 % 100 %
FossÄa 1 K AS 2020 SÞr- Fron 66 % 66 %
Rysna SmÄkraftverk AS 2020 Bergen 100 % 100 %
Tokheim Kraft AS 2020 Bergen 100 % 100 %
SmÄkraft Green Bond 2 AS 2020 Bergen 100 % 100 %
Byrkjelo Kraftverk AS 2021 Bergen 100 % 100 %
RĂ„ssafoss Kraft AS 2021 Bergen 100 % 100 %
Straume Kraftverk AS 2021 Bergen 100 % 100 %
Skyggelva Kraft AS 2021 Bergen 100 % 100 %
StĂžldalselva Kraftverk AS 2021 Bergen 100 % 100 %
Salvasskardelva Kraft AS 2021 Bergen 100 % 100 %
Skinvik Kraftverk AS 2021 Bergen 100 % 100 %
Åsedþla Kraft AS 2021 Bergen 100 % 100 %
Aurora Bygg og Anlegg AS 2021 Bergen 100 % 100 %
DeveggÄe Kraft AS 2021 Bergen 100 % 100 %
StrÞmfallet SmÄkraft AB 2021 Uppsala 90 % 100 %
Russvik Kraft AS 2021 Narvik 100% 100 %
Hugla Kraft AS 2021 Vik i Sogn 100% 100 %
SmÄkraft Green Bond 1 AS Bergen 100 % 100 %
Kvemma Kraft AS 2013 LĂŠrdal 66 % 66 %
Saksenvik Kraft AS 2016 Bergen 96 % 96 %
SmÄkraft Green Bond 2 AS Bergen 100 % 100 %
Salvasskardelva Kraft AS 2021 Bergen 100 % 100 %
SagÄna Kraft AS 2021 Bergen 100 % 100 %
StrÞmfallet SmÄkraft AB Uppsala 90,1 % 100 %
StrĂžmfallet AB 2021 Uppsala 100 % 100 %
StrĂžmfallet Tunafors AB 2021 Uppsala 100 % 100 %
Streamgate North AB 2021 Uppsala 100 % 100 %
68
Note 20: Receivables; amounts due after more than one year
Note 21: Related party transaction and balance items.
SmÄkraft and its subsidiaries and associates have seeked to do transactions on commercial terms
The companies also have business transactions regarding the corporate account. These are shown in
the table below.
Luster SmÄkraft AS og Rullestad & Skromme AS are associated companies (note 18). The individuals
stated in note 11 are also related parties of SmÄkraft AS. Apart from the transactions specified in this
note and note 11, there are no significant related party transactions or balance items.
69
Short-term Receivables
Long
-term Loans
70
N
ote 22: Share capital and shareholder information
N
ote 23: Taxes
71
Differences not affecting deferred tax relates to goodwill in connection with former acquisitions and
subsequent mergers with SmÄkraft AS.
D
eferred tax benefit is recognised as SmÄkraft expects to come in tax position over the next years.
N
ote 24: Cash and cash equivalents
Bank deposits, cash etc. does not include restricted tax deduction funds as of 31.12.2021.
The company has established a bank guarantee for the payment of tax.
Note 25: Secured borrowings and guarantees
T
he bank and bond holders have pledged security in operating equipment, bank accounts and
accounts receivable, in addition to 1. priority pledge in the power plants and related water lease
agreements.
The bank has pledged security in the shares in SmÄkraft AS and SmÄkraft AS' shares in Reinli Kraft
AS and Muoidejohka Kraft AS.
SmÄkraft AS has provided a bank guarantee as a security for the payment of tax deduction.
SmÄkraft AS has a deposit regarding rent in a restricted bank account amounting to kEUR 29.
According to the shareholders agreement with Luster SmÄkraft AS, SmÄkraft AS is obligated to make
capital available to Luster SmÄkraft AS.
T
here is a conditional waiver of debt from the bank amounting to KEUR 500, related to whether
Knutfoss AS makes a profit over the next 2 years. Based on current projections, it is considered likely
that the debt will be settled.
72
Note 26: Concessions
As of 31.12.2021, SmÄkraft AS has concessions for additional 14 power plant with a total annual
production of approximately 201 GWh.
N
ote 27 Water land lease agreements
A
s part of several of the net- agreements, SmÄkraft offers interest bearing loans and/ or minimum
payments in the first years of the land- lease agreements. Net agreements typically have deficits the
first years. SmÄkraft offers interest bearing loans/ minimum payments to offer more stable payouts to
the landowners, while simultaneously not amending the balance in the land lease agreement between
landowner and company.
T
he loans are normally interest-bearing loans. The minimum payments are interest bearing payments
to the landowners that will be offset against future land lease profits.
Loans from SmÄkraft AS to landowners:
Amounts in EUR thousand
31.12.2021
31.12.2020
Loans to landowners
1 010
931
Minimum payments to landowners
5 943
4 819
Total
6 953
5 750
Amounts in EUR thousand
31.12.2021
31.12.2020
Receivables towards landowners, off balance
25 807
22 923
Total
25 807
22 923
When net- agreements have deficit, SmÄkraft AS finances the landowner share of the deficit. SmÄkraft
AS accrues a receivable against the landowners, against which future profits will offset. This is an
asset to SmÄkraft, that according to IFRS is off balance. It represents a future benefit for the company.
73
RESPONSIBILITY STATEMENT
In the best judgement of the Board and the CEO, annual the financial statements for 2021 have been prepared
in accordance with current applicable accounting standards, and the information in the financial statements
provide a true and fair view of the assets, liabilities, financial position and profit or loss of the parent company
and the group taken as a whole. In the best judgement of the Board and the CEO the Board of Directors’
Report includes a true and fair view of the development and performance of the business and the position of
the parent company and the group, together with a description of the principal risks and uncertainties facing the
parent company and the group.
Annette Beate Wacknitz Malm Justad Claudia Ahnert Joakim Johnsen
Chairman of the board Member of the Board Member of the Board
Oldrik Nicolaas Frits Verloop Christian Heidfeld Terje Vedeler
Member of the board Member of the board Managing Director
74
Postboks 7050, 5020 Bergen
post@smaakraft.no
smaakraft.no
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