Arendals Fossekompani

Annual Report (ESEF) • Apr 12, 2024

Arendals Fossekompani Asa - 5967007LIEEXZXG4U097 - 2024 5967007LIEEXZXG4U097 2023-01-01 2023-12-31 5967007LIEEXZXG4U097 2021-12-31 ifrs-full:IssuedCapitalMember 5967007LIEEXZXG4U097 2021-12-31 ifrs-full:AdditionalPaidinCapitalMember 5967007LIEEXZXG4U097 2021-12-31 ifrs-full:TreasurySharesMember 5967007LIEEXZXG4U097 2021-12-31 ifrs-full:OtherReservesMember 5967007LIEEXZXG4U097 2021-12-31 ifrs-full:RetainedEarningsMember 5967007LIEEXZXG4U097 2021-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 5967007LIEEXZXG4U097 2021-12-31 ifrs-full:NoncontrollingInterestsMember 5967007LIEEXZXG4U097 2021-12-31 5967007LIEEXZXG4U097 2022-01-01 2022-12-31 ifrs-full:RetainedEarningsMember 5967007LIEEXZXG4U097 2022-01-01 2022-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 5967007LIEEXZXG4U097 2022-01-01 2022-12-31 ifrs-full:NoncontrollingInterestsMember 5967007LIEEXZXG4U097 2022-01-01 2022-12-31 5967007LIEEXZXG4U097 2022-01-01 2022-12-31 ifrs-full:OtherReservesMember 5967007LIEEXZXG4U097 2022-01-01 2022-12-31 ifrs-full:AdditionalPaidinCapitalMember 5967007LIEEXZXG4U097 2022-01-01 2022-12-31 ifrs-full:TreasurySharesMember 5967007LIEEXZXG4U097 2022-12-31 ifrs-full:IssuedCapitalMember 5967007LIEEXZXG4U097 2022-12-31 ifrs-full:AdditionalPaidinCapitalMember 5967007LIEEXZXG4U097 2022-12-31 ifrs-full:TreasurySharesMember 5967007LIEEXZXG4U097 2022-12-31 ifrs-full:OtherReservesMember 5967007LIEEXZXG4U097 2022-12-31 ifrs-full:RetainedEarningsMember 5967007LIEEXZXG4U097 2022-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 5967007LIEEXZXG4U097 2022-12-31 ifrs-full:NoncontrollingInterestsMember 5967007LIEEXZXG4U097 2022-12-31 5967007LIEEXZXG4U097 2023-01-01 2023-12-31 ifrs-full:RetainedEarningsMember 5967007LIEEXZXG4U097 2023-01-01 2023-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 5967007LIEEXZXG4U097 2023-01-01 2023-12-31 ifrs-full:NoncontrollingInterestsMember 5967007LIEEXZXG4U097 2023-01-01 2023-12-31 ifrs-full:OtherReservesMember 5967007LIEEXZXG4U097 2023-01-01 2023-12-31 ifrs-full:AdditionalPaidinCapitalMember 5967007LIEEXZXG4U097 2023-01-01 2023-12-31 ifrs-full:TreasurySharesMember 5967007LIEEXZXG4U097 2023-12-31 ifrs-full:IssuedCapitalMember 5967007LIEEXZXG4U097 2023-12-31 ifrs-full:AdditionalPaidinCapitalMember 5967007LIEEXZXG4U097 2023-12-31 ifrs-full:TreasurySharesMember 5967007LIEEXZXG4U097 2023-12-31 ifrs-full:OtherReservesMember 5967007LIEEXZXG4U097 2023-12-31 ifrs-full:RetainedEarningsMember 5967007LIEEXZXG4U097 2023-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 5967007LIEEXZXG4U097 2023-12-31 ifrs-full:NoncontrollingInterestsMember 5967007LIEEXZXG4U097 2023-12-31 iso4217:NOK iso4217:NOKxbrli:shares GENERATIO FOR GENERATIONS ATIONS FOR GENE Arendals Fossekompani Integrated Report 2023 Annual and Sustainability Report For generations, Arendals Fossekompani has provided people and communities with clean energy and inspiration. Established in 1896 to harness the energy from an everlasting resource, water – we have utilized the benefits of this resource to build and develop high-tech companies. What started as a local producer of hydropower, has transformed into a global industrial investor. While running water continues to power our business, we search for, invest in, and support companies that have the potential to make a difference. To enable the transition to a more sustainable future, we offer human and financial resources to renew and advance industries. Our competence is particularly strong in areas such as energy transition, electrification, materials, digitalization, and big data analytics. We are a proud builder and supporter of technology that impacts the world. This is our legacy, our history, our future. It is what we have done, and what we will continue to do. For generations. GENERATIONS FOR GENERATIONS RATIONS FOR GENERATIONS 2 3 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Highlights 2023 Lower electricity prices, higher hydropower production Significantly lower electricity prices were somewhat offset by higher production, resulting in another year of substantial revenue and operating profit contribution from AFK Vannkraft. 19% growth in AFK Group revenue Total revenue for Arendals Fossekompani Group amounted to NOK 5,441 million in 2023, 19% higher than in 2022. The operating margin was 8%. 2.3% of average market cap paid as dividend Arendals Fossekompani paid quarterly dividends totaling NOK 3.95 per share in 2023. Revenue up 52% Tekna increased revenue by 52% and improved the adjusted EBITDA margin. Increased operating margin ENRX reported revenue growth of 19% in 2023. The operating margin improved from 0% to 6%. Strong underlying performance across several portfolio companies Solid growth Volue reported 20% increase of revenue (16% organic), while also improving the adjusted EBITDA margin. SaaS revenue and ARR grew by 41% and 29%, respectively. Continued strong results NSSLGlobal reported revenue of GBP 91.8 million and a continued strong operating margin of 18%. 22.3% aligned turnover Arendals Fossekompani reports on all six environmental objectives of the EU Taxonomy 4 5 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Content 01 Arendals Fossekompani 8 Letter From the CEO 10 Arendals Fossekompani Around the World 12 Who We Are 14 Value Creation for Generations 16 Arendals Fossekompani Group 18 Group Management 22 Shareholder Information 26 Reporting 100 Years Ago 30 02 Portfolio 32 Assets 34 Digitalisation & Big Data Analytics 36 Volue 38 NSSLGlobal 42 Alytic 46 Electrification & Materials 50 Tekna 52 ENRX 56 Energy Transition 60 AFK Vannkraft 62 Ampwell 66 Vergia 70 Property 72 AFK Property 74 03 From the Boardroom 78 Board of Directors 80 Board of Directors’ Report 82 Corporate Governance Report 86 04 Sustainability 96 Reporting Frameworks and Membership Associations 98 Our Sustainability Priorities 100 E Optimizing Portfolio Companies 107 Biodiversity 107 Economic Performance 108 Strenghtening Environmental Performance 109 Responsible Investments 111 New Investments 111 S A Great Place to Work 113 Diversity and Equality 113 Employee Satisfaction and Talent Attractiveness 114 Health and Safety 115 G Ethical Business Conduct 119 Anti-Corruption and Bribery 119 Information Security 120 Responsible Supply Chain 121 EU Taxonomy Summary 122 05 Financial Statements 126 Annual Accounts and Notes in Full 128 Declaration by the Members of the Board and the CEO 196 Independent Auditor’s Report 198 06 Appendix 204 GRI Content Index 206 GRI Information 212 Materiality 222 Independent Auditor’s Statement 224 List of Abbreviations 226 Additional Reports 228 Activity and Reporting Obligations Report 2023 Carbon Accounting Report 2023 EU Taxonomy Report 2023 Green Bond Report 2023 Human Rights and Transparency Act Report 2023 Remuneration Report 2023 TCFD: Climate-Risk Assessment Report 2023 About This Report 229 6 7 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Letter From the CEO 10 Arendals Fossekompani Around the World 12 Who We Are 14 Value Creation for Generations 16 Arendals Fossekompani Group 18 Group Management 22 Shareholder Information 26 Reporting 100 Years Ago 30 01 Arendals Fossekompani Kirsti Homstøl Business Developer, Arendals Fossekompani 9 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Letter from the CEO 2023 has been a year of geopolitical turmoil and uncertainty. This, in combination with high interest rates and sustained inflation, has generally dampened willingness to invest and take risk across several industries. 2023 was also the year when Europe claimed energy independence from Russia. In just two years Europe has lowered its energy consumption by 6% while shifting its energy mix further toward renewables. This has boosted the energy transition but also driven down electricity prices. Consequently, operating profit from our hydropower generation business was somewhat lower in 2023 than last year. On the positive side Arendals Fossekompani initiated the construction of a new hydropower plant during the year. The Kilandsfoss hydropower plant is scheduled to open in 2026 and will produce 38 GWh per year, equivalent to the energy consump- tion of approximately 2,000 households. As the energy transition in Europe continues to move forward with more renew- able, intermittent energy being introduced, Volue remains uniquely positioned with products and services enabling this transition. The company made significant prog- ress in 2023, delivering 20% topline growth and more than doubling the operating result compared to 2022. Volue also strengthened their energy trading operation through the acquisition of Enerim’s energy market division. 2023 has also been an impressive year for ENRX. Following a slightly negative operating result in 2022, the company delivered a positive result of NOK 116 million. Despite political instability and continuous worldwide supply-chain constraints, most parts of the markets in which ENRX operates had a positive development. The auto- motive industry in Europe remains weak, but ENRX more than compensated for this within the automotive segment in China and other market segments and regions. Tekna recorded an all-time-high revenue, up more than 50% from 2022, driven by high demand from blue chip customers within both advanced material and systems. During the year Tekna has focused on operational excellence to improve profitability and cash generation. The effects are showing. The company also made strides in nano-nickel qualification processes with leading microelectronics manufacturers. The global satellite market is undergoing a fundamental shift with the rapid expan- sion of low earth orbit (LEO) commercial satellite networks. NSSLGlobal is adapting to meet these changing market conditions. During the year the company rolled out a new product offering (Fusion IPLEO ), which combines the trusted benefits of a global, high availability GEO service with the low latency and high capacity from 4G/5G and LEO satellites. Revenue growth in 2023 was largely driven by increased maritime and government engineering projects, as well as continued high airtime related to operational activity caused by global turmoil. Sustainability and corporate social responsibility are important drivers of future value creation. We are committed to the climate targets in the Paris Agreement. We are a UN Global Compact member and continue to support its principles for respon- sible business policies for human rights, labour, environment, and anti-corruption. 2023 marked the first year Arendals Fossekompani reported on EU Taxonomy align- ment for all six environmental objectives. Arendals Fossekompanis portfolio con- tribute to multiple environmental objectives, covering Climate change mitigation, Climate change adaptation, and Water and marine resources. The aligned turnover of 22%, and the high percentage of eligible activities reflect the great potential in our portfolio companies. Overall, 2023 has been a year of improved operations and strong organic growth for Arendals Fossekompani. I would like to thank the team at Arendals Fossekompani, as well as all employees across our portfolio companies for your contributions. Through your hard work, dedication, experience and competency you have created significant value during the past year, demonstrating once again that our people are our most valuable asset, and that we are builders and supporters of technology that moves the world forward in a sustainable way. I sincerely look forward to continuing this exciting journey together with you, our partners and stakeholders in the years to come. Benjamin Golding, Chief Executive Officer 10 11 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Arendals Fossekompani Parent Company (AFK Group Management and AFK Vannkraft), AFK Property Employees 43 Head office Arendal, Norway Countries Norway Volue Employees 825 Head office Oslo, Norway Countries Norway, Germany, Poland, Denmark, Sweden, Switzerland, Finland, Japan, Spain NSSLGlobal Employees 249 Head office London, UK Countries United Kingdom, Germany, Norway, Denmark, Singapore, Israel, Netherlands, Poland, USA, Sweden Alytic Employees 123 Head office Arendal, Norway Countries Norway, Germany, Netherlands Tekna Employees 222 Head office Sherbrooke, Canada Countries Canada, France, China, South Korea ENRX Employees 1,103 Head office Skien, Norway Countries India, China, Norway, Germany, USA, Romania, France, United Kingdom, Poland, Brazil, Thailand, Malaysia, Italy, Japan, Sweden, Spain Ampwell Employees 102 Head office Arendal, Norway Countries Norway, Germany, Spain Vergia Employees 3 Head office Arendal, Norway Countries Norway NUMBER OF EMPLOYEES BY COUNTRY Norway 790 USA 94 Brazil 12 Germany 339 France 76 Malaysia 8 India 251 Denmark 60 Japan 8 China 196 Finland 65 Italy 6 Canada 186 Sweden 52 Netherlands 7 United Kingdom 186 Spain 28 Singapore 6 Poland 156 Switzerland 22 Israel 5 Romania 103 Thailand 13 South Korea 1 Total 2,670 Dots on map reflect approximate locations. Arendals Fossekompani Around the World 12 13 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Who we are Arendals Fossekompani is an industrial investment company that combines industrial, technological, and capital markets expertise to identify and develop opportunities for sustainable value creation. We have an attractive portfolio positioned in verticals driven by global megatrends. Our portfolio companies have more than 2,600 people in 24 countries. Arendals Fossekompani was established in 1896 to harness the everlasting natural resource of running water. We remain a proud producer of hydropower to this day. In addi- tion, we operate globally in forward-looking industries, such as B2B software and analytics, satellite communications, industrial 3D printing, battery and induction technology. Our mission We create lasting value for our stakeholders through long-term and active develop- ment of the companies we own. We invest in B2B technology companies that enable, and benefit from the energy transition, digitisation and industry 4.0. Arendals Fossekompani is a proud builder and supporter of technology that impacts the world. That is our legacy, our history, our future. It is what we have done, and what we will continue to do. For generations. Our values Arendals Fossekompani is a collaborative, dynamic and responsible company with a long-term perspective. Long-term Based on more than a century of industrial history, we continue to develop our companies with a sustainable and long-term perspective. Responsible We act in an ethical and responsible manner in all situations. Collaborative We develop our companies in collaboration with the world around us and our partners. Dynamic We show the ability, energy and motivation to carry out our ambitions. 14 15 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Value Creation for Generations 1896 Company founded 1913 Electricity and industry 1927 More hydropower 1960s Financial investor 1990s New opportunities 2000s International investor Arendals Fossekompani was founded on 30 January 1896 to harness the forces in the Arendal watercourse system and trans- form them into electric power. We acquired rights to several waterfalls, including Bøylefossen and Flatenfossen. Norwegian industrial entrepreneur Sam Eyde was instrumental in the early years. Arendals Fossekompani gradu- ally built a substantial financial capacity. At the end of the 1960s, the company changed its mission statement and built a portfolio of financial investments in listed and unlisted companies. The construction of Bøylefoss Hydropower Plant started in 1911, in parallel with the establishment of new industry in Eydehavn. The first electric power from Bøylefoss was delivered to Eydehavn in the summer of 1913. That same year, Arendals Fossekompani was listed at Oslo Børs. Deregulation of the Norwegian electricity market presented new market opportunities. Arendals Fossekompani played an active role and established a subsidiary, Markedskraft, as an independent provider of services in the Nordic and European wholesale electric- ity market. The growing demand for electric- ity for industrial purposes led to the development of Flatenfoss Hydropower Plant in 1927. The original plant was operational until it was replaced in 2009. The new millennium marked the start of the transformation of Arendals Fossekompani, from a local hydropower producer to an international investment company. A series of successful investments in Norwegian and international companies from the early 2000s till today, have contributed to the current portfolio of companies in forward-looking industries. Consolidated revenues increased from around NOK 250 million in 2004 to NOK 5,400 million in 2023. In 2023, hydropower accounted for approximately 9% of consolidated revenues. 16 17 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 ARENDALS FOSSEKOMPANI 01 Arendals Fossekompani Group Arendals Fossekompani is an industrial investment company holding nine core investments and a portfolio of financial investments. Our portfolio companies employ 2,670 people in 24 countries. FINANCIAL FIGURES (MNOK) 2023 2022 2021 Total revenue 5,441 4,587 4,232 EBITDA 753 726 686 Operating profit (EBIT) 433 429 450 Operating margin 8% 9% 11% Earnings before tax (EBT) 391 426 332 Earnings after tax (EAT) -30 -33 97 Operating cash flow -578 483 857 NIBD 1,015 -947 -1,599 Equity 3,639 3,784 3,909 Equity ratio 40% 48% 57% SUSTAINABILITY KPIs Target Year 2023 2022 2021 Environment Scope 1 GHG (tCO 2 e) 1 2030 1,858 1,744 1,584 Scope 2 GHG (location-based) (tCO 2 e) 1 2030 2,319 2,470 2,838 Scope 3 GHG (tCO 2 e) 2 - 2030 3,494 3,298 2,253 Energy consumption (MWh) - - 27,111 26,516 22,338 Social Lost time injury frequency rate 3 0.0 - 2.2 1.0 0.8 Sick leave <2.0% - 2.7% 3.0% - Turn-over rate <10% - 14% 16% 7.6 % Female employees 30% 2027 21% 20% 19% Women on Board of Directors 50% 2027 25% 28% 30% Governance Reported incidents/breach of CoC 0 - 0 2 - CoC signed 100% - 69% 78% 87% Corruption cases 0 - 0 1 1 1. Emission reduction target for Scope 1 and 2 in line with the Paris Climate Agreement. 2. Scope 3 emissions include the categories Waste, Business Travel. and Fuel-and-Energy-Related Activities 3. Calculated per 1,000,000 hours worked. Currency rates (NOK/CAD) Average 2023: 7.83. Average 2022: 7.38. End 2023: 7.68. End 2022: 7.28. (NOK/GBP) Average 2023: 13.13. Average 2022: 11.85. End 2023: 12.93. End 2022: 11.85. (NOK/EUR) Average 2023: 11.42. Average 2022: 10.10. End 2023: 11.24. End 2022: 10.51. Head office Arendal, Norway Chair Trond Westlie Chief Executive Officer Benjamin Golding Employees 2,670 Countries 24 Arendals Fossekompani has long traditions in power production and owns and oper- ates two hydropower plants. We operate globally in many forward-looking industries including B2B software and analytics, satellite communications, industrial 3D print- ing, battery and induction technology. 18 19 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 2023 IN BRIEF (Figures in parentheses refer to the same period the previous year) In 2023, Arendals Fossekompani reported consolidated revenue of NOK 5,441 million (4,587 million) and operating profit of NOK 433 million (429 million). Ordinary profit after tax amounted to NOK -30 million (-33 million), of which the AFK shareholders’ share of the profit was NOK 33 million (6 million). Consolidated revenues in 2023 increased by 19% year-on- year, with an operating margin of 8% (9%). The year was marked by strong underlying results in key portfolio com- panies Volue, NSSLGlobal and ENRX, along with strong growth and profitability improvements in Tekna. In addition, AFK Vannkraft (hydropower) contributed with significant revenue and operating income, although reduced from the record year of 2022. Operating in international markets, the AFK Group is nat- urally exposed to currency fluctuations. During 2023, the weakening of the Norwegian Krone contributed posi- tively to revenue growth denominated in NOK in ENRX, NSSLGlobal and Tekna. A constant currency analysis based on translating financials from local currency to NOK for these three companies, estimates revenue growth to 11% for the Group in 2023 , all else equal. Arendals Fossekompani Parent Company reported reve- nue of NOK 519 million (628 million) and operating profit of NOK 335 million (450 million), largely driven by the contribu- tion from hydropower production in AFK Vannkraft. Profit before tax amounted to NOK 510 million (996 million). The financial position of Arendals Fossekompani Parent Company remains solid. The company’s cash position as at 31 December amounted to NOK 1,064 million. In addition, the company has undrawn credit facilities of NOK 1,132 mil- lion, securing net available liquidity of NOK 2,196 million at year-end. Volue Volue reported operating revenue of NOK 1,464 million (1,217 million) and adjusted EBITDA of NOK 267 million (203 million) in 2023. Volue continued their strong growth path, reporting organic revenue growth of 16% in 2023. The strong growth was driven by all segments, further fueled by Volue’s acquisition of Enerim’s energy market division in Q2. The acquisition was Volue’s largest to date, creat- ing the undisputed Nordic market leader within Portfolio Management-as-a-Service. Annual recurring revenue grew by 29%, reaching NOK 984 million by year-end, while Software-as-a-service revenue showed 41% growth year- on-year. NSSLGlobal NSSLGlobal reported total revenue of GBP 91.8 million (88.0 million) and an operating profit of GBP 16.1 million (17.7 million) in 2023. Increased maritime and government engineering projects, as well as high airtime volumes con- tributed to a continued solid revenue level for NSSLGlobal. Increased headcount and inflationary costs yielded a somewhat lower operating margin compared to 2022. The company experienced healthy sales throughout the year, including new NAVCOM orders, governmental and maritime engineering orders, as well as defence contracts across Europe. Alytic Alytic reported total revenue of NOK 46 million (41 million) and an operating profit of NOK -85 million (-46 million) in 2023. Alytic continued the development and commercial- isation of its portfolio of data- and technology-driven com- panies during 2023, increasing annual recurring revenue to NOK 42 million (61% growth). Highlights for the year included the launch of new products and analytics plat- forms in the portfolio companies, rebranding of Greenfact to Veyt and appointments of new CEOs in Kontali and Factlines. Tekna Tekna reported operating revenue of CAD 40.9 million (26.9 million) and an adjusted EBITDA of CAD -4.1 million (-12.8 million) in 2023. Growth in operating revenue of 52% was driven by both the Materials and Systems segments. Significant new orders in both segments illustrated a posi- tive shift in the market. During the year, Tekna implemented new capacity and achieved successful capacity upgrades of existing atomizers, while implementing cost-saving ini- tiatives. Milestones reached in the metal powder market during 2023, securing sales of a wider range of the pro- duction yield, is expected to enhance product margins and liquidity. Tekna continues to prioritize improvements in profitability and cash generation. Teknas development of nano nickel powders suited for the manufacturing of multi-layered ceramic capacitors (MLCCs) also progressed well during the year, and the company is engaging with sev- eral global MLCC developers. ENRX ENRX reported total operating revenue of EUR 157.9 mil- lion (132.2 million) and an operating profit of EUR 10.1 million (-0.3 million) in 2023. Revenue growth of 19% was driven by a strong market for induction power source products, larger projects within the Heat division, and a smaller reve- nue contribution from the Charge division. The profitability improvement in 2023 was, in addition to an increased top line, impacted positively by the restructuring of parts of the German operations in 2022. Total order intake in 2023 ended at record-high EUR 166.5 million. ENRX manifested its position within the Charge segment during 2023, being awarded a contract to contribute to the construction of an electrified roadway in Florida, USA. Ampwell Ampwell reported total revenue of EUR 4.9 million and an operating profit of EUR -9.4 million in 2023. Ampwell rev- enue and operating income were below targets in 2023, driven mainly by delayed customer investment decisions in Commeo’s Commercial & Industrial target segment. The year was marked by the construction of Commeo’s new semi-automatic production line, expected to be completed at the end of 2024. In addition, Cellect Energy announced a commercial project with Volkswagen Group Charging GmbH (Elli) delivering automated control and communica- tion solutions. AFK Vannkraft AFK Vannkraft reported operating revenue of NOK 511 mil- lion (606 million) and an operating profit of NOK 414 million (535 million) in 2023. Earnings after tax amounted to NOK 119 million (148 million), as a result of the effective tax rate for AFK Vannkraft in 2023 of 71%. Electricity prices were signifi- cantly down from the record year of 2022, while production increased by 54% due to higher precipitation and inflow. SUSTAINABILITY Arendals Fossekompani Group reported slightly reduced overall emissions in 2023 compared to 2022. Total Scope 1 emissions increased to 1,856 tCO 2 e in 2023, up from 1,744 tCO 2 e in 2022. Scope 2 emissions decreased for the second consecutive year to 2,319 tCO 2 e (2,470 tCO 2 e), while energy consumption increased slightly to 27,111 MWh (26,516 MWh). Scope 3 emissions includes the categories Business Travel, Waste, and Fuel-and-Energy-related activities. These emis- sions increased from 3,298 tCO 2 e in 2022 to 3,494 tCO 2 e in 2023. Throughout 2023, we developed our reporting on the EU Taxonomy in line with the developments and new guidance from the European Commission regarding the EU Taxonomy Regulation. In 2023 we are proud to report on all six envi- ronmental objectives of the EU Taxonomy. The mapping reveals that Arendals Fossekompani contribute to multiple environmental objectives, covering Climate change miti- gation, Climate change adaptation and Water and marine resources. Aligned turnover for the group was 21,2%, with a small decrease of 0.8% from 2022. Eligible, not aligned turn- over for 2023 was 39.6% an increase of roughly 4% from 2022. The high percentage of eligible activities reflects the great potential in our portfolio companies. The lost time injury frequency rate rose to 2.2 in 2023, up from 1.0 in 2022. Our commitment to the safety and well-be- ing of our employees remains a priority as they are our most valuable asset. The sick leave was 2.7% in 2023, down from 3.0% in 2022. The representation of women on the Board of Directors decreased to 25% from 28% in 2022, partly due to the inclusion of more portfolio companies in the report- ing, most of which are predominantly male-dominated. The turn-over rate was 14%, down from 16%. EVENTS AFTER THE CLOSE OF THE YEAR On 8 February, the Board of Directors decided to pay an ordinary cash dividend of NOK 1.00 per share for the fourth quarter of 2023. The dividend was paid on 21 February. OUTLOOK T here is ongoing uncertainty associated with geopolitical turmoil, supply chain constraints, inflation, interest rates, as well as the development of energy prices. In this unpredict- able environment, Arendals Fossekompani’s solid financial position enables continued support of the portfolio com- panies, both in handling short-term challenges but also in continued investments to strengthen their long-term com- petitiveness. In light of the market’s estimated power price trend for 2024 and forecasted production, revenue and operating profit for AFK Vannkraft are expected to be lower than in 2023. AFK Group revenue is expected to be higher in 2024 than in 2023, driven by expected strong underlying growth in port- folio companies and revenue recognition of the third stage of the AFK Property development project Bryggebyen. Lower expected power prices partly offsets the growth. Operating profit is expected to be lower in 2024 compared to 2023, driven by energy prices and reduced margins in NSSLGlobal. In 2024, Arendals Fossekompani will work to prepare for reporting according to Corporate Sustainability Reporting Directive (CSRD). As four new environmental objectives of the EU Taxonomy will become mandatory for alignment reporting in 2024, we will focus on assessments to meet these requirements. Our goal is to further increase both eligible and aligned report- ing in the years to come.The taxonomy will also be audited for the reporting year 2024, leading to increased focus on documentation. As part of our validated Science Based Targets, we have committed science-based emission reduction targets for AFK Parent Company and AFK Hydropower. A roadmap to meeting these targets will be developed in 2024. Portfolio companies must set their own targets within 2027. We aim to reach the goal of 50% female members on our Board of Directors in 2027. In addition, we aim to have 50% women in C-suite positions by 2027. SHARE PRICE There is a total of 55,995,250 shares in the company. The share price on 31 December 2023 was NOK 164.8, com- pared to NOK 250.5 on 31 December 2022, corresponding to a decrease of -34%. When including direct yield (dividend payouts) in the same period, total decrease in shareholder value was -33%. Arendals Fossekompani’s total market capitalization was NOK 9.2 billion at year-end. Compounded annual return to AFK shareholders was 14.0% (24% including dividends) in the period December 2013 to December 2023. 20 21 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Group Management FINANCIAL FIGURES (MNOK) 2023 2022 2021 Revenue and other income 9 22 9 EBITDA -75 -82 -60 Operating profit (EBIT) -79 -86 -63 Operating margin - - - Earnings before tax (EBT) 101 461 1,283 Provision for income tax 5 5 30 Earnings after tax (EAT) 96 456 1,253 Operating cash flow 80 -539 310 NIBD -1,107 -1,216 -931 Equity 2,325 2,228 1,772 SUSTAINABILITY KPIs 2023 2022 2021 Environment Scope 1 GHG (tCO 2 e) 0 0 0 Scope 2 GHG (Location based) (tCO 2 e) 1.8 0.3 0.3 Scope 3 GHG (tCO 2 e) 1 29 34 46 Energy consumption (MWh) 90 32 34 Social Lost time injury frequency rate 0 0 0 Sick leave 2.3% 1.3% - Turn-over rate 14% 5% 0% Female employees 38% 38% 27% Women in Board of Directors 43% 43% 43% Governance Reported incidents/breach of CoC 0 0 - CoC signed 100% 100% 100% Corruption cases 0 0 0 1. Scope 3 emissions include the categories Waste, Business Travel and Fuel-and-Energy-Related Activities. Head office Arendal, Norway Chair Trond Westlie Chief Executive Officer Benjamin Golding Employees 21 Countries 1 Arendals Fossekompani Group Management employs 21 people at the head office in Arendal. The team focuses on active ownership of the portfolio companies, hydropower generation and development of new business opportunities. Group Management identifies and develops opportunities for value creation. As an active owner of our portfolio companies, we create value through the portfolio com- paniesboards and management teams. We develop strategy in dialogue with man- agement, follow up performance and support M&A and financing. Our companies are both listed and privately owned, and Arendals Fossekompani is – as part of our strategy – the majority owner. Arendals Fossekompani's Management Team (left-right): CEO Benjamin Golding. Chief Sustainability Officer Ingunn Ettestøl, Executive Vice President Torkil S. Mogstad, Executive Vice President Håkon Tanem. CFO Lars Peder Fensli, and Executive Vice President Ann-Kari Heier. 22 23 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 2023 IN BRIEF (Figures in parentheses refer to the same period the previous year) In 2023, Arendals Fossekompani Group Management reported operating expenses of NOK 84 million (105 million). The operating profit was NOK -79 million (-86 million). The lower cost level in 2023 compared to 2022 was mainly driven by less M&A activ- ity. Net profit for the year was NOK 96 million, mainly driven by dividend payments from portfolio companies and interest income on intercompany loans. Arendals Fossekompani's financial position remains solid. The Parent Company’s available cash on the 31st of December amounted to NOK 1,064 million. In addition, the company has undrawn credit facilities of NOK 1,132 million, securing available liquidity of NOK 2,196 million as per end of the quarter. In 2023, Benjamin Kristoffer Golding commenced his position as new Chief Executive Officer of Arendals Fossekompani. He came from a previous position as Group Executive Vice President of Products and Innovation at the Norwegian bank DNB and also brings experience from industry and industrial investment compa- nies. Furthermore, during the fourth quarter of 2023, the executive management team welcomed two new members, Håkon Tanem and Ann-Kari Amundsen Heier, who assumed their roles as Executive Vice Presidents. Their appointments bring valuable industrial and financial expertise to the company. Arendals Fossekompani Group Management’s GHG emissions consist of Scope 2 and Scope 3. In 2023, Scope 2 was 0.5 tCO 2 e, a substantial increase from 0.3 in 2022. During 2023, we moved into larger office spaces, which led to a higher Scope 2 and energy consumption than previous years. The sick leave was 2.3% in 2023, up from 1.3% in 2022. The turn-over rate was 14% with two permanent employees and one temporary employee leaving the company, and there were five new hires. As in previous years, the rate of women on the Arendals Fossekompani Board of Directors was 43%. 24 25 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Arendals Fossekompani is committed to maintaining an open dialogue with shareholders, investors, analysts, and the financial markets in general. Our goal is to ensure that the share price reflects underlying value by making all price-relevant information available to the market. Shareholder Information 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 200 400 600 800 1,000 1,200 SHARE PRICE LAST 20 YEARS (NOK) Share price Share price incl. dividend Share price incl. reinvested dividend We work to create shareholder value in the form of dividends and share price growth over time. In accordance with the company’s Corporate Governance Report, approved by the Board of Directors, the company’s dividend policy is defined as fol- lows: “Arendals Fossekompani’s dividend policy is to pay dividends that reflect the company’s long-term strategy, financial position and investment capacity. Arendals Fossekompani’s objective is to pay dividends that will provide shareholders with a competitive return over time.” DIVIDEND FOR 2023 Total dividends paid in 2023 amounted to NOK 217 million, corresponding to NOK 3.95 per share. Total dividends paid were equivalent to 2.3% of the volume-weighted average share price in 2023. SHARES AND SHARE CAPITAL On 31 December 2023, there was a total of 55,995,250 shares in the company, of which 1,137,911 were treasury shares (2.0% of the total number of outstanding shares). Arendals Fossekompani’s three largest shareholders are Ulfoss Invest AS (26.3%), Havfonn AS (26.0%) and Must Invest AS (25.2%). There were 5,295 shareholders at year-end 2023, compared to 4,999 shareholders at the end of 2022. 26 27 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 ANNUAL GENERAL MEETING The Annual General Meeting is held as early in the year as is practically possible after the close of the previous financial year, usually in April or May. 21 days prior to the Annual General Meeting, meeting notices and attendance regis- tration forms are sent to all shareholders with a known address and made available on the company’s webpage and via the Oslo Børs distribution service. The annual report and other enclosures to the meeting notice are made avail- able solely via the company’s webpage and the Oslo Børs distribution service. Shareholders who wish to receive the enclosures by post must contact the company. Shareholders who are unable to attend the meeting may vote by proxy. Representatives from the Board of Directors and the auditor attend the Annual General Meeting. The Chief Executive Officer and the Chief Financial Officer attend on behalf of the management. SHARE PRICE AND MARKET CAP The price of shares in Arendals Fossekompani decreased by 34% in 2023 and closed at NOK 164.8 at year-end, corresponding to a market capitalization of NOK 9 billion. TRADING VOLUME Arendals Fossekompani trading volume was comparable to 2022, with a total of 3,457,029 shares traded in 2023, corresponding to 6.1% of all shares. Overall turn- over from trading of the AFK share in 2023 was NOK 563 million, compared to NOK 1,299 million in 2022. The Group’s shares consist only of Class A shares, all of which have equal rights. In accordance with Article 11 of the company’s Articles of Association, no shareholder may, personally or by proxy, vote for more than one quarter of the total number of shares. Due to Arendals Fossekompani’s hydropower production, the current Norwegian concession legislation stipulates, among other things, that a shareholder who acquires more than 20% of the total number of shares must apply for a concession. The Concession Act requires that the Board of Directors approve such acquisitions. There are several other provisions in the concession legislation that may entail that acquisition of the company’s shares may have consequences for both the company itself and the other shareholders. Thus, the company has found it necessary to have the opportunity to deny approval of the acquisition of shares. In accordance with Article 7 of the Articles of Association, any acquisition by means of transfer is condi- tional on the Board’s consent. Consent may only be denied if there is a valid reason for doing so. STOCK EXCHANGE LISTING Arendals Fossekompani ASA is listed on Oslo Børs under the ticker code AFK. The company was listed in 1913 and is the second oldest company on Oslo Børs. The shares are registered in the Norwegian Central Securities Depository with DNB ASA as the account operator and issuer. The securities identification number for the share is ISIN NO 0003572802. CURRENT AUTHORISATIONS At Arendals Fossekompani’s Annual General Meeting on 4 May 2023, the Board of Directors was authorized to acquire treasury shares up to a maximum of 7.9%. In accordance with this authorization, the Board of Directors is only permitted to acquire treasury shares at a price ranging from a minimum of NOK 10 and a maxi- mum of NOK 2,000 per share. This authorization will remain in effect until the Annual General Meeting in 2024. In 2023, the company acquired a net of 19,592 shares in connection with the company’s incentive program. OPTION SCHEMES As of 31 December 2023, Arendals Fossekompani had no option schemes. INVESTOR RELATIONS Arendals Fossekompani seeks to maintain an open dialogue with shareholders, debtholders, financial analysts, and the stock markets in general. The company reg- ularly holds presentations in connection with the publication of quarterly results. All company press releases, stock exchange announcements and investor relations information are available at arendalsfossekompani.no. The website also includes reports, presentations, Articles of Association, financial calendar and more. AUDIT COMMITTEE The company’s Audit Committee consists of Stine Rolstad Brenna (Chair), Morten Bergesen, and Anne Grethe Dalane. NOMINATION COMMITTEE The company’s Nomination Committee consists of Morten Bergesen (Chair), Simen Flaaten, and Trine Must. REMUNERATION COMMITTEE The company’s Remuneration Committee consists of Trond Westlie (Chair), Christian Must, Didrik Vigsnæs and Lise Lindbäck. KEY FIGURES FOR AFK SHARE (NOK) 2023 2022 2021 2020 2019 Closing price 31/12 1 164.8 250.5 441.0 180.0 103.0 Annual growth (%) -36.0 -43.0 145.0 75.0 -17.0 High/Low 2 273 / 127 471 / 214 503 / 175 195 / 82 137 / 86 Share price average 2 189 322 302 127 112 Market cap 31/12 (million) 9,228 14,027 24,204 9,863 5,639 Dividend per share 3 4.0 7.6 37.1 3.4 2.2 Dividend accumulated 109.7 105.7 98.2 61.1 57.7 Annual turnover (million) 563 1,299 1,113 282 79 Volume 3,457,029 3,430,618 3,472,586 1,979,993 738,500 Total shareholder return (%) -34 . 0 -41 . 5 166 . 0 78 . 3 -15 . 0 1. Numbers adjusted for share split effectuated in 2020. 2. Based on closing price. 3. Paid quarterly. 28 29 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Reporting 100 years ago Production at Bøylefoss Hydropower Plant returned to full capacity in the second half of 1923, mirroring increased activity levels at the two major offtakers of electricity: Det Norske Nitridaktieselskap (producer of aluminum) and Arendal Smelteverk (producer of silicon carbide). 1923 TOTAL REVENUES FOR THE YEAR NOK 1,100,000 NET PROFIT NOK 457,000 DIVIDEND PAID TO SHAREHOLDERS NOK 288,000 Bøylefoss hydropower plant. Photo: Kuben 30 31 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 ARENDALS FOSSEKOMPANI 01 02 Portfolio Karthik Prabhu Sales and Service Engineer, ENRX Assets 34 Digitalisation & Big Data Analytics 36 Volue 38 NSSLGlobal 42 Alytic 46 Electrification & Materials 50 Tekna 52 ENRX 56 Energy Transition 60 AFK Vannkraft 62 Ampwell 66 Vergia 70 Property 72 AFK Property 74 33 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Electrification & Materials Anything that can be electric, will be electric. As a result, demand for electricity and storage will grow, as will demand for new materials and additive manufacturing. We invest in companies that install intellegence into an electric future and who enable more efficient manufacturing of better products. AFK ownership 70% Head office Sherbrooke, Canada Market cap (31.12) NOK 1,039 million Listed on Oslo Børs AFK ownership 95% Head office Skien, Norway Energy Transition We have produced hydropower for generations. As the world is shifting away from fossil fuels, we are looking to capitalize on our competence and history to contribute to a more sustainable energy system. AFK ownership 100% Head office Froland, Norway AFK ownership 100% Head office Arendal, Norway AFK ownership 100% Head office Arendal, Norway Property AFK ownership 100% Head office Arendal, Norway Digitalisation & Big Data Analytics Anything that can be digital, will be digital. By enabling and assisting digital trans- formation and providing critical insight and commmunicaton services, our portfolio of companies are frontrunners in the digital space. AFK ownership 60% Head office Oslo, Norway Market cap (31.12) NOK 3,057 million Listed on Oslo Børs AFK ownership 80% Head office London, UK AFK ownership 95% Head office Arendal, Norway Investments are made based on a long-term perspective and concentrated within four areas: Digitalisation & Big Data Analytics, Electrification & Materials, Energy Transition, and Property. Arendals Fossekompani Assets 34 35 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Our portfolio of Digitalisation & Big Data Analytics Companies Anything that can be digital, will be digital. By enabling and assisting digital transformation and providing critical insight and communication services, our portfolio of companies are frontrunners in the digital space. AFK ownership 60% Head office Oslo, Norway Market cap (31.12) NOK 3,057 million Listed on Oslo Børs AFK ownership 80% Head office London, UK AFK ownership 95% Head office Arendal, Norway 36 37 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Volue Portfolio company Arendals Fossekompani established Volue in 2020 based on the belief that the world of energy would become increasingly volatile, and this would require new ways of thinking, new competence, and new technology. Since then, Volue has continued to build its European presence while expanding to other continents. Serving as a provider of competence and software to enable its customers to succeed in the energy transition, Volue enjoys a profitable and promising position. Volue is a European industrial software & data company based on 50 years of experience. Over 800 employees provide critical products and services to more than 2,500 customers across energy production, power grid, and infrastructure, helping to ensure a sustainable, flexible, and reliable future. Volue is active in 40+ countries. Head office Oslo, Norway Chair Benjamin Golding Chief Executive Officer Trond Straume Ownership 60% Employees 825 Countries 9 FINANCIAL FIGURES (MNOK) 2023 2022 2021 Operating revenue 1,464 1,217 1,041 EBITDA 208 147 138 Adjusted EBITDA 267 203 214 Operating profit (EBIT) 80 40 45 Operating margin 5% 3% 4% Earnings before tax (EBT) 63 36 40 Operating cash flow -97 214 131 NIBD 382 -330 -267 Equity 850 809 767 Equity ratio 40% 43% 44% SUSTAINABILITY KPIs 2023 2022 2021 Environment Scope 1 GHG (tCO 2 e) 18 17 0 Scope 2 GHG (location-based) (tCO 2 e) 224 111 96 Scope 3 GHG (tCO 2 e) 1 403 404 89 Energy consumption (MWh) 2,405 2,040 2,078 Social Lost time injury frequency rate 0 0 0 Sick leave 2.9% 2.7% - Turn-over rate 9% 17% 11% Female employees 23% 23% 23% Women in Board of Directors 50% 50% 50% Governance Reported incidents/breach of CoC 0 1 - CoC signed 89% 97% 89% Corruption cases 0 0 0 1. Scope 3 emissions include the categories Waste, Business Travel and Fuel-and-Energy-Related Activities. 38 39 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 2023 IN BRIEF (Figures in parentheses refer to the previous year) In 2023, Volue reported operating revenue of NOK 1,464 million (1,217 million), con- tinuing the strong path with 20% growth from 2022. EBITDA amounted to NOK 208 million (147 million). Adjusted EBITDA was NOK 267 million (203 million), correspond- ing to an adjusted EBITDA margin of 18%. The operating profit was NOK 80 million (40 million), while the ordinary profit before tax was NOK 63 million (36 million). Organic growth in 2023 came in at 16%, driven by all segments. The Power Grid and Infrastructure segments were stronger contributors to growth than in recent years, with 26% and 21% respectively. The Energy segment grew at a rate of 22% from 2022. Annual recurring revenue (ARR) grew by 29% from 2022, reaching NOK 984 million by year-end. Software-as-a-Service (SaaS) revenue grew by 41% year-on-year. The company is continuing to build a highly sticky customer base and yet again reported an annual churn well below 2%. Volue’s next-generation optimisation suite, Smart Power, was launched in April 2023, and the solution had great momentum during the year. Agreements were made with significant customers in both the Nordic home market and the European growth market. In Japan, the solution attracted its first deal, representing an increased prod- uct offering in the country, following the proven market fit of the Insight platform. Additionally, the solution was brought live by multiple major producers in Europe, fortifying Volue’s position in continental Europe. In the Energy segment, Volue sees significant growth coming from new asset owners entering the power production market. These players will be smaller in size, possess leaner organisations and lack the capabilities to monetise assets twenty-four hours a day. For these players, Volue offers its software with a service layer on top, allowing them to participate in the market through Portfolio-Management-as-a-Service. In this context, the acquisition of Enerim’s energy market division, completed during the second quarter of 2023, provides an excellent platform for scaling this business, and creates an undisputed Nordic market leader, poised for European growth. The Power Grid segment closed new ARR sales of 26 million in 2023, adding to Volue’s robust foundation. Spark, Volue’s initiative targeting Distributed Energy Resources continued its momentum. Four power grid operators joined the 'Spark by Volue' partner ecosystem in 2023 to manage local grid constraints by introducing incentives for grid-aware charging of EVs, water heaters, and batteries. In November, the largest Norwegian energy supplier introduced Spark’s week-long smart charging advise in their consumer app, and by end of year, 16 smart charging service providers have joined Spark. The Infrastructure segment won 100 new logos in 2023, and the Construction prod- uct line has reached 90 customers in Sweden. Volue’s confidence in global scalability for the segment keeps growing. Despite no proactive marketing activities outside the Nordic home market, the Infrastructure segment now has customers in eight countries. This is a testament to the inherent business value of the products for the Construction industry. There has been a significant increase in Scope 2 emissions since 2022, rising from 111 tCO 2 to 224 tCO 2 . This rise is closely linked to the hiring of new employees and the acquisition of new offices. Volue has done a complete reporting on the EU Taxonomy. The share of Taxonomy-aligned turnover for Volue is 34%, which is driven by Volue’s segments Water and communities, Power Grid and Industrial IoT Renewables. 50% of Volue’s Board of Directors are women. OUTLOOK In 2023, Volue continued delivering on its strategy of international expansion. The market remains strong and attractive, and Volue is hard at work towards the goal of being the leading provider in Europe. Volue sees large opportunities to secure continued profitable growth and aims to develop its business both organically and structurally. Volue maintains the following long-term guidance to the market: annual long-term organic growth of 15%, NOK 2 billion in revenue by 2025, including M&A, and year-over-year increase of adjusted EBITDA margin, cash conversion, share of ARR, and SaaS revenue. In 2024, Volue will work to increase the quality of environmental reporting in line with the requirements of CSRD. Volue has also committed to emission reduction targets in line with The Paris Agreement and will set a roadmap for how to reach these targets. 40 41 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 NSSLGlobal Portfolio company Arendals Fossekompani has been the majority owner of NSSLGlobal since 2010. The company provides vital satellite data and communication services in demanding situations anywhere in the world. It builds on more than 50 years of experience within the maritime and military market segments. Leveraging worldclass technology and a unique understanding of its clients, the company has delivered solid results over the last decades. NSSLGlobal is an independent provider of cyber secure satellite and mobile commu- nications, and IT support that delivers high-quality voice and data services across the globe, regardless of location or terrain. NSSLGlobal’s activities are divided into four main areas: Airtime, Projects, Hardware and Service. Its main customers are within the maritime segment, the military and government sector, large international corporations, and the energy sector. The revenue model is to a large degree based on multi-year subscription and support contracts, thereby securing a significant recurring revenues. Head office London, UK Chair Arild Nysæther Chief Executive Officer Sally-Anne Ray Ownership 80% Employees 247 Countries 10 FINANCIAL FIGURES (MNOK) 2023 2022 2021 Operating revenue 1,204 1,042 907 EBITDA 231 255 208 Operating profit (EBIT) 211 209 166 Operating margin 18% 20% 18% Earnings before tax (EBT) 209 236 178 Operating cash flow 122 154 197 NIBD -346 -340 -299 Equity 608 524 458 Equity ratio 57% 57% 57% SUSTAINABILITY KPIs 2023 2022 2021 Environment Scope 1 GHG (tCO 2 e) 208 180 83 Scope 2 GHG (location-based) (tCO 2 e) 201 120 125 Scope 3 GHG (tCO 2 e) 1 286 270 100 Energy consumption (MWh) 2,113 1,563 1,024 Social Lost time injury frequency rate 0 0 0 Sick leave 1.4% 1.8% - Turn-over rate 18% 24% 1.8% Female employees 27% 22% 22% Women in Board of Directors 33% 33% 50% Governance Reported incidents/breach of CoC 0 0 - CoC signed 100% 100% 100% Corruption cases 0 0 0 1. Scope 3 emissions include the categories Waste, Business Travel and Fuel-and-Energy-Related Activities. Currency rates (NOK/GBP) Average 2023: 13.13. Average 2022: 11.85. End 2023: 12.93. End 2022: 11.85. 42 43 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 2023 IN BRIEF (Figures in parentheses refer to the previous year) NSSLGlobal reported revenues of GBP 91.8 million (88.0 million) in 2023. EBITDA amounted to GBP 17.6 million (21.5 million). Operating profit was GBP 16.1 million (17.7 million), while the ordinary profit after tax was GBP 12.5 million (15.0 million). Revenue growth in 2023 was largely driven by increased maritime and government engineering projects, as well as continued high demand for airtime related to oper- ational activity caused by global turmoil. The reduction in operating margin from 20% in 2022 to 18% in 2023 was largely related to increased costs caused by inflation and increased headcount. The company experienced healthy sales throughout the year, including new NAVCOM orders, governmental and maritime engineering orders, as well as defence contracts across Europe. NSSLGlobal remains a significant service provider to the UK Ministry of Defence through a number of long-term framework agreements and recent contract wins for both commercial communication, ICT and entertainment services. Examples of contract wins during Q4 include two maritime contracts, including a GBP 8.5 million 4-year contract with Seapeak - a FusionIPLEO upgrade across its fleet. NSSLGlobal also announced a new contract with the Hannover Fire Brigade Disaster response communications and a partnership with Farsounder to provide NSSLGlobal customers with forward-looking sonars useful for safe navigation and obstacle avoidance. NSSLGlobal’s FusionIPLEO service offering was rolled out to both existing and new customers in 2023. This includes a hybrid of the best of 4G/5G, GEO- and LEO-based satellite constellations. It combines the trusted benefits of a global, high availability GEO service with the low latency and high capacity from 4G/5G and LEO satellites. At the core of this service is NSSLGlobal’s Smart@Sea platform providing secure and seamless solutions to the end user, as well as additional cyber, crew entertainment, IT, and management functionality. 2023 emissions have risen due to expanded office space and staff, along with the implementation of more thorough reporting measures. The share of Taxonomy-eligible, not aligned turnover for NSSL Global is 34%. Eligibility is driven by NSSL Global’s communication system for disaster relief and its refurbishment and resale program. As such, NSSL contributes to both climate change adaptation and circular economy respectively. As of today, NSSL Global does not meet all alignment criteria. An online awareness training program covering the organisation's Code of Conduct, including anti-bribery and corruption, modern slavery, financial, business, personal, data, and trade integrity, was developed and completed by 100% of staff. The turn- over rate has decreased by 6%. since 2022, partly due to the implementation of flexible working schemes and efforts to foster a stronger organisational culture. The portion of female staff is up 5% due to increased focus. OUTLOOK NSSLGlobal expects 2024 revenue to be in line with 2023, driven by a solid pipeline for project sales, both maritime and government. Operating profit is expected to be lower than in 2023, driven by lower expected airtime margins, increased engineering staff to support engineering projects, as well as inflationary cost increases. NSSLGlobal's long-term goal is to reduce greenhouse gas emissions by 50% by 2035. The company aims to engage locally to identify environmental initiatives which can support local communities, and to identify certified schemes which can offset green- house gas emissions. Furthermore, NSSLGlobal will continue its oversight of key ven- dors to ensure legislative compliance of policies and procedures. 44 45 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Alytic Portfolio company Established by Arendals Fossekompani in 2020, Alytic creates value by developing B2B Software- as-a-Service companies, and by leveraging expertise and data. There is significant untapped potential in utilizing data effectively for insights and actions across numerous industries and markets, in addition to a growing demand for more advanced solutions to manage, analyse and present information. Alytic acts as a growth catalyst for future-oriented companies and works to establish leading businesses within their respective industries. The Alytic investment team collaborates closely with their portfolio companies to drive value through strategic development, leadership support, sales enhancement, HR and talent acquisition, and by leveraging data science and technology. The current Alytic portfolio of com- panies includes Kontali, a world-leading aquaculture data and analyses provider, Veyt, a market intelligence provider for low carbon markets, Factlines, a technology provider for ESG reporting., and Utel, a provider of services for telecom network mon- itoring and analysis. Head office Arendal, Norway Chair Lars Peder Fensli Chief Executive Officer Espen Zachariassen Ownership 95% Employees 122 Countries 3 FINANCIAL FIGURES (MNOK) 2023 2022 2021 Total revenue 46 41 27 EBITDA -71 -41 -12 Operating profit (EBIT) -85 -46 -16 Operating margin -184% -112% -58% Earnings before tax (EBT) -85 -45 -16 Operating cash flow -55 -35 -12 NIBD 4 -18 -17 Equity 140 132 80 Equity ratio 62% 67% 74% SUSTAINABILITY KPIs 2023 2022 2021 Environment Scope 1 GHG (tCO 2 e) 0 0 0 Scope 2 GHG (location-based) (tCO 2 e) 6 2.4 Incl. in AFK Scope 3 GHG (tCO 2 e) 1 82 57 - Energy consumption (MWh) 291 324 - Social Lost time injury frequency rate 0 0 - Sick leave 2.0% 3.2% - Turn-over rate 5.5% 13% 17% Female employees 30% 32% 36% Women in Board of Directors 17% 21% 50% Governance Reported incidents/breach of CoC 0 0 - CoC signed 92% 20% 0% Corruption cases 0 0 0 1. Scope 3 emissions include the categories Waste, Business Travel and Fuel-and-Energy-Related Activities. 46 47 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 2023 IN BRIEF (Figures in parentheses refer to the previous year) Alytic reported total revenue of NOK 46 million (41 million) and an operating profit of NOK -85 million (-46 million) in 2023. As a result of robust product development and strong focus on commercialisation, Alytic achieved notable financial milestones in 2023, increasing annual recurring revenues (ARR) to NOK 42 million (+61% year- over-year). Veyt grew ARR by 74% year-over-year. Veyt launched a new analytics platform and underwent a rebranding from Greenfact in Q1. Veyt’s first carbon market coverage and first premium analytics product, a long-term Guarantees-of-Origin price fore- cast, were launched along with the new platform. Maintaining robust product devel- opment throughout the year, Veyt launched the EU ETS product in Q3. Kontali grew ARR by 52% year-over-year. Kontali successfully migrated existing cus- tomers onto Edge, Kontali’s seafood analytics platform, after launching Edge in Q4 of 2022. As a result, Kontali’s legacy analytics offering reached end-of-life in Q2 of 2023. In Q3, Kontali launched a new global shrimp insights offering. Kjetil Angell Kjerstad, a strong technology leader, was appointed CEO of Kontali in Q4. He assumes the position in April 2024. Factlines grew ARR by 128% year-over-year. Factlines had a strong year in terms of both new product launches and ARR growth. Factlines’ rewritten and redesigned supply chain transparency product, SUSAN, was soft-launched in Q2, and as of Q4, all existing customers were migrated onto the new product. Continuing the growth journey, Factlines maintained full speed ahead and launched an EU Taxonomy prod- uct with pilot customers in Q4. Before the end of the year, former Hill+Knowlton top executive Henrik Halvorsen was appointed CEO of Factlines. He assumed the posi- tion in January 2024. Utel grew ARR by 9% year-over-year. Utel continued the testing and development of their general anomaly detection solution. With a particular focus on fraud detection, Utel made significant progress in 2023 with regards to both product development and commercialisation. In Q4, the solution was deployed with a key customer for further testing and development. Utel is going into 2024 with a strong sales pipeline and sees significant growth potential from emerging technologies and an increased market need to fight and prevent fraud. Alytic conducted a thorough analysis of the EU taxonomy. The eligibility percentages of turnover is 53% and 48%, driven by the platforms of Kontali and Veyt. These plat- forms contribute to climate change mitigation and climate change adaptation objec- tives. Regarding OpEx, Alytic's operational expenses fall outside the EU Taxonomy's definition. As of today, Alytic does not fulfill all criteria for alignment. Strong emphasis on developing management groups, teams, and work processes, in conjunction with co-location strategies, led to reduction of the turnover rate from 13% to 6%. OUTLOOK Alytic is positioned to continue its upward trajectory, leveraging strategic accom- plishments from 2023. The company maintains its focus on data-driven products and SaaS solutions and expects this to drive further solid ARR growth and market expansion. Alytic continues to invest in its existing portfolio and to search for new acquisition targets. 3D scene 48 49 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Our portfolio of Electrification & Materials Companies Anything that can be electric, will be electric. As a result, demand for electricity and storage will grow, as will demand for new materials and additive manufacturing. We invest in companies that install smartness into an electric future and that enable more efficient manufacturing of better products. AFK ownership 70% Head office Sherbrooke, Canada Market cap (31.12) NOK 1,039 million Listed on Oslo Børs AFK ownership 95% Head office Skien, Norway 50 51 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Tekna Portfolio company Arendals Fossekompani acquired Tekna in 2013 to pursue the opportunities presented by a unique and promising technology developed at the University of Sherbrooke in Canada. Tekna produces plasma systems and spherical metal powders in different alloys and sizes, suitable for additive manufacturing and with additional future potential in industries such as manufacturing of multi-layer ceramic capacitors. Tekna is a world-leading provider of advanced materials and plasma systems to sev- eral industries. Tekna produces high-purity metal powders for applications such as 3D printing in the aerospace, medical and consumer electronics sectors, as well as optimised induction plasma systems for industrial research and production. With its unique, IP-protected plasma technology, the company is well positioned in the growing market for advanced nanomaterials within the microelectronics industry. Head office Sherbrooke, Canada Chair Dag Teigland Chief Executive Officer Luc Dionne Ownership 70% Employees 222 Countries 5 FINANCIAL FIGURES (MNOK) 2023 2022 2021 Operating revenue 320 199 184 EBITDA -64 -124 -71 Adjusted EBITDA -32 -95 -32 Operating profit (EBIT) -97 -153 -89 Operating margin -30% -77% -49% Earnings before tax (EBT) -107 -166 -98 Operating cash flow -88 -145 -89 NIBD 125 -28 -211 Equity 294 389 531 Equity ratio 50% 72% 82% SUSTAINABILITY KPIs 2023 2022 2021 Environment Scope 1 GHG (tCO 2 e) 589 585 577 Scope 2 GHG (location-based) (tCO 2 e) 30 34 42 Scope 3 GHG (tCO 2 e) 1 520 755 432 Energy consumption (MWh) 11,563 11,508 7,435 Social Lost time injury frequency rate 8.1 2.7 3.4 Sick leave 3.3% 3.0% - Turn-over rate 19% 22% 15% Female employees 27% 26% 23% Women in Board of Directors 57% 40% 0% Governance Reported incidents/breach of CoC 0 1 - CoC signed 78% 91% 82% Corruption cases 0 1 0 1. Scope 3 emissions include the categories Waste, Business Travel and Fuel-and-Energy-Related Activities. Currency rates (NOK/CAD) Average 2023: 7.83. Average 2022: 7.38. End 2023: 7.68. End 2022: 7.28. Space shuttle landing 3D 52 53 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 2023 IN BRIEF (Figures in parentheses refer to the previous year) In 2023, Tekna increased revenue by 52% to CAD 40.9 million (26.9 million). Adjusted EBITDA improved by CAD 8.7 million to CAD -4.1 million (-12.8 million). The company secured significant new orders during 2023, for both systems and aaterials for Additive manufacturing, indicating a positive shift in the market. Total order backlog per year-end amounted to CAD 24.0 million (25.0 million). One of Tekna’s main priorities during 2023 was to build capacity to meet growing demand. The Systems business generated 90% year-over-year top-line growth, driven by sales of PlasmaSonic and R&D scale plasma units. 2023 saw Tekna secur- ing 12 new orders for its innovative plasma systems, including the inaugural sale of the PlasmaSonic ICPT-15 system. Materials revenue increased by 36% from 2022, driven by successful capacity upgrades and the commissioning of a new atomizer, both improving material avail- ability, and reducing delivery times. Tekna achieved important milestones in the metal powder market during 2023 to secure sales of a wider range of the production yield. Capitalizing on the demand for smaller particle sizes, Tekna increased its sales to the consumer electronics industry during the year. Additionally, a new collabo- ration with TriTech Titanium Parts highlighted Tekna's pioneering role in supplying titanium powder for binder jet 3D printing, a promising technology across various industries. Both milestones are expected to enhance product margins and reduce inventory burden going forward. Another priority during 2023 for Tekna was to improve profitability and cash gener- ation. The improvement in adjusted EBITDA underscores Tekna’s consistent organ- isational efforts and determination to improve margin and cash availability. Tekna has implemented several cost-saving initiatives and managed inflationary costs, especially on raw materials. Tekna also signed a CAD 25 million term loan facility agreement with Arendals Fossekompani to support operations and growth. Espen Schie was appointed as new CFO of Tekna in January. Schie brings exten- sive financial management experience. He came from the role as Vice President of Finance & Controlling at Arendals Fossekompani ASA. Tekna continues to improve energy efficiency in its powder production. A kilogram of powder is now produced with 24% less energy than in 2019 (baseline year). Tekna has done a complete reporting on the EU Taxonomy. All of Tekna’s economic activities are eligible under the EU Taxonomy, where 63% represents the aligned turnover. The KPIs are predominantly driven by the production and sale of additive material powders, contributing to climate change mitigation. The state of diversity in the company continues to improve slowly. At year-end, the Board of Directors had 57% (+17%) female directors. 27% (+1%) of all employees were female. The lost time injury rate was impacted by three work-related injuries compared to one in 2022. EVENTS AFTER THE CLOSE OF THE YEAR In February, Tekna announced a provision related to the company’s 50/50 joint ven- ture in conjunction with the Q4-2023 report. Even though no formal decision has been made by the joint venture partners, Tekna considers it unlikely that the business activities of the joint venture will continue unchanged. Tekna expects the contem- plated changes will have a positive impact on cash flow going forward. OUTLOOK In 2024, Tekna anticipates sustained margin improvement, leveraging increased rev- enue and ongoing efforts to enhance organisational productivity. The order back- log and available capacity supports revenue growth in 2024. The company remains committed to expanding its additive materials segment, which continues to be a fast-growing market with significant revenue potential. Tekna will also be prioritising opportunities in microelectronics and leveraging its technology and strong position in the market to drive growth. After a few investment-intensive years, the company plans to ease on capex for one to two years. For additive materials, Tekna now has a satisfactory machine base installed, and available machines to be installed and commissioned. Tekna has R&D capability to further increase the output of the machines and have high ambitions for sales of smaller and larger size powder fractions. The company expects this will improve cash conversion of inventory. The company’s cash position remains satisfactory, with an available undrawn loan facility from its majority shareholder, Arendals Fossekompani. The company is following a plan to carefully manage its cash position going forward. Tekna has a strong pipeline of potential orders for Systems, namely for PlasmaSonic wind tunnel solutions that are pivotal to the development of hypersonic flight and spacecraft. In microelectronics, Tekna's development efforts continues with industry leading customers. The company has also explored opportunities within energy storage but will remain focused on its existing operating segments for the time being. Tekna's roadmap to profitability includes focus on operational excellence, right-siz- ing the organisation, and prioritizing R&D efforts towards PlasmaSonic systems, additive manufacturing and microelectronics. The company will remain strategic in its approach to near-term revenue opportunities. In 2024, Tekna will continue to map scope 3 upstream and downstream emissions and formalise its decarbonisation plans. Tekna will continue to focus on occupational health and safety and keep improving the workplace. Tekna’s GRI reporting will be more extensive. The company will have its sustainability report audited and will fol- low-up after the due diligence process started with Factlines to assess its top 25 suppliers. For the EU Taxonomy mapping, Tekna plans to continue aligning its activ- ities according to technical screening criteria, which mainly relates to retrieving the required documentation. 54 55 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 ENRX Portfolio company Following Arendals Fossekompani’s acquisition of IPT Technology in May 2022, IPT Technology and long-standing portfolio company EFD Induction was comprised in the new company, ENRX. As a frontrunner within both induction charging and induction heating systems, ENRX is established as a global powerhouse for induction technology, serving several large industries. ENRX combines global market leadership for industrial induction heating systems (Heat) with leading technology in the high-growth market for wireless induction charging solutions for mobility and industrial applications (Charge). Industries served by ENRX include automotive, renewable energy/wind energy, pipe fabri- cation, electronics, cable, and mechanical engineering. Leveraging decades of experience, ENRX was established in 2022 and has operations in 20 countries. Head office Skien, Norway Chair Benjamin Golding Chief Executive Officer Bjørn E. Petersen Ownership 95% Employees 1,103 Countries 20 FINANCIAL FIGURES (MNOK) 2023 2022 2021 Operating revenue 1,800 1,338 1,171 EBITDA 198 75 143 Operating profit (EBIT) 116 -3 83 Operating margin 6% 0% 7% Earnings before tax (EBT) 71 -20 72 Operating cash flow 4 46 96 NIBD 777 558 172 Equity 417 384 405 Equity ratio 21% 22% 36% SUSTAINABILITY KPIs 2023 2022 2021 Environment Scope 1 GHG (tCO 2 e) 957 895 980 Scope 2 GHG (location-based) (tCO 2 e) 1,788 2,162 2,559 Scope 3 GHG (tCO 2 e) 1 1,999 1,724 1,534 Energy consumption (MWh) 9,666 10,160 11,490 Social Lost time injury frequency rate 3.1 1.1 2.3 Sick leave 2.8% 3.5% - Turn-over rate 18% 13% 2.2% Female employees 15% 16% 15% Women in Board of Directors 25% 17% 0% Governance Reported incidents/breach of CoC 0 0 - CoC signed 48% 65% 100% Corruption cases 0 0 1 1. Scope 3 emissions include the categories Waste, Business Travel and Fuel-and-Energy-Related Activities. Currency rates (NOK/EUR) Average 2023: 11.42. Average 2022: 10.10. End 2023: 11.24. End 2022: 10.51. Induction road 3D 56 57 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 2023 IN BRIEF (Figures in parentheses refer to the previous year) ENRX reported operating revenue of EUR 157.9 million (132.2 million) in 2023. EBITDA amounted to EUR 17.4 million (7.4 million). The operating profit was EUR 10.1 million (-0.3 million), while the ordinary 2023 profit before tax was EUR 6.3 million (-2.0 million). 19% revenue growth during 2023 was driven by a strong market for induction power source products, larger projects within the Heat division, and a smaller revenue con- tribution from the Charge division. In geographical terms, the company saw solid growth in Europe and Asia, while the growth in North America was somewhat softer due to supply chain disturbances and delayed deliveries. Operating costs increased during the year, backed by the increased revenue, as well as restructuring costs related to parts of the German business (EUR 1.5 million). ENRX IPT (Charge), acquired in 2022, had a negative EBIT contribution of EUR -1.5 million. Adjusted for restructuring costs related to the German operation, operating profit for the full year was EUR 11.6 million, corresponding to an EBIT margin of 7.4% (3.1%). Overall, the Heat segment did well across all activity areas, with difficult market con- ditions in North America offset by strong demand from Asia. Total order intake in 2023 ended at a record-high EUR 166.5 million (157 million), of which induction power sources contributed EUR 61.2 million, the service and after sales reached EUR 54.8 million, and the sale of induction hardening machines ended at an order intake of EUR 37.9 million. The market position within Charge was manifested during 2023, as ENRX was awarded a contract to contribute to the construction of an electrified roadway in Florida, USA. The contract contributed EUR 12.7 million to the 2023 order intake. Scope 1 emissions increased slightly compared to 2022 and are back at 2021 levels. Electricity consumption is significantly reduced due to efforts in all sites, including solar panel installation and a switch to LED armatures. Overall, ENRX is pleased to report reduced CO 2 emissions as a result of conscious actions. According to the EU Taxonomy mapping, the share of Taxonomy-eligible, not aligned turnover for ENRX is 74%, the majority of which comprises sale of induction power generators, contributing to climate change mitigation. ENRX also contributes to the circular economy objective through its sales of spare parts. As of today, ENRX does not meet all alignment criteria ENRX reached a 20% women employee ratio in some locations (China, Thailand, Malaysia, and Norway), while the overall ratio of women employees was reduced to 2021 levels of 15%. Sick leave rate was reduced to 2.8%, down from 3.5% in 2022. The increase in Lost Time Injury frequency rate from 1.1 in 2022 to 3.1 in 2023 was not anticipated as ENRX certified their main production sites to ISO 45001 health & safety management systems. An increase in turn-over rate is related to restructuring of ENRX Germany in 2023. OUTLOOK An order backlog of EUR 86 million (94 million) creates a solid fundament for con- tinued profitable growth in 2024, and the market for heating products is still consid- ered strong. That said, ENRX expects the market to soften somewhat in the coming months as decision processes typically take longer, and orders are pushed. Electrification is likely to experience tremendous growth over the next decade. The global trend is shifting from gas and flame heating to more energy-efficient and eco-friendly alternatives, such as induction heating. To remain at the forefront of induction technology, ENRX continues its R&D efforts. In the second quarter of 2024, the company will launch a small mobile air-cooled induction heating generator that can be used virtually everywhere electricity is found. For several years, ENRX has been the leading supplier of equipment to the renewable power sector. The acquisition of ENRX IPT and establishment of the Charge segment, opens a growing and potential large market within wireless charging solutions. This is expected to generate long-term revenue and cost synergies to further improve the company’s operational leverage. The Charge division activities in 2024 are mainly related to the Dynamic Road project in Florida and R&D activities within the main activities: Charging for public transport, Industrial low power charging, and Industrial high-power charging. Revenue is expected to be in line with 2023 and operating profit is expected to be higher in 2024 than in 2023. Solar energy collection and hydrogen brazing will be implemented in a new produc- tion facility scheduled to open in Poland in Q1 2024. Initiatives to continue to replace energy-intensive devices are ongoing. Assessment to expand solar panel installa- tions will be initiated. 58 59 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Our portfolio of Energy Transition Companies We have produced hydropower for generations. As the world is shifting away from fossil fuels, we are looking to capitalize on our competence and history to contribute to a more sustainable energy system. AFK ownership 100% Head office Froland, Norway AFK ownership 100% Head office Arendal, Norway AFK ownership 100% Head office Arendal, Norway 60 61 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 AFK Vannkraft Portfolio company AFK Vannkraft generates power at two locations in the Arendal watercourse. The Bøylefoss and Flatenfoss hydropower plants produce on average more than 500 GWh annually. Head office Froland, Norway Chair Trond Westlie Operating Manager Jan Roald Evensen Employees 17 Countries 1 Running water is an important part of our running business. For more than 100 years, we have extracted energy from the river Nidelva in the Arendal watercourse and produced around 500 GWh a year, equivalent to the consumption of around 30,000 Norwegian households. Both the Bøylefoss and Flatenfoss hydropower plants have long and proud histories, and it was their development that laid the foundation for a power-intensive industry in the Arendal region. FINANCIAL FIGURES (MNOK) 2023 2022 2021 Operating revenue 511 606 373 Operating profit (EBIT) 414 535 298 Operating margin 81% 88% 80% Earnings before tax (EBT) 414 535 298 Provision for income tax 294 387 130 Earnings after tax (EAT) 119 148 169 SUSTAINABILITY KPIs 2023 2022 2021 Environment Scope 1 GHG (tCO 2 e) 27 20 23 Scope 2 GHG (Location based) (tCO 2 e) 1.3 1.9 2.6 Scope 3 GHG (tCO 2 e) 1 11 7.8 18 Energy consumption (MWh) 322 357 277 Social Lost time injury frequency rate 0 0 0 Sick leave 3.6% 5.0% - Turn-over rate 0% 0% 0% Female employees 12% 13% 13% Women in Board of Directors 43% 43% 43% Governance Reported incidents/breach of CoC 0 0 - CoC signed 100% 100% 100% Corruption cases 0 0 0 1. Scope 3 emissions include the categories Waste, Business Travel and Fuel-and-Energy-Related Activities. 62 63 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Power price in the NO2 price area and power generation for Arendals Fossekompani per week for the period 30/09/2022 – 31/12/2023. 100 200 300 400 500 600 2.5 5.0 7.5 10.0 12.5 15.0 12/18 06/19 12/19 06/20 12/20 06/21 12/21 06/22 12/22 06/23 12/23 AFK Vannkraft reported revenues of NOK 511 million (606 million) in 2023. EBITDA amounted to NOK 425 million (545 million) and an operating profit of NOK 414 million (535 million). Provision for income tax amounted to NOK 294 million (387 million) in 2023. In 2022, the Norwegian government increased the resource rent tax from 37% to 45% and included a high-price contribution tax on realized monthly average elec- tricity prices above NOK 0.7/kWh. The high-price contribution tax was abolished with effect as of 1 October 2023. Electricity prices decreased from the record year of 2022, with an average price in the NO2 price area of 79.4 EUR/MWh (211 EUR/MWh) in 2023. The high price-level in 2022 was a result of several factors, including low hydro reservoir levels, strong interconnections between the NO2 price area, and the European power market. High prices for coal, gas, and CO 2 lifted the European prices for electricity. The lower price levels for 2023 are a result of higher hydro reservoir levels and lower price levels for coal, gas, and CO 2. AFK Vannkraft has a defined strategy of selling hydropower pro- duction in the day-ahead (spot) market. The hydropower plants had some minor interruptions due to planned maintenance and inspections in 2023. Power generation increased to 542 GWh (351 GWh). In 2023, precipitation and inflow in 2023 were around 107% and 108% of the norm for the watercourse. The accumulated amount of snow and the reservoir levels in the water- course were respectively 35% and 95% of the norm. In 2023, AFK Vannkraft started the preparatory work for construction of a new hydropower plant, Kilandsfoss. Located in Nidelva between the two existing hydro- power plants, Bøylefoss and Flatenfoss, the hydropower plant will produce an annual average of 38 GWh once finalized. The estimated build time is around two years. Kilandsfoss hydropower plant is scheduled to start electricity production in 2026. AFK Vannkraft is required by law to improve the power plants and associated dam facilities. Consequently, Arendals Fossekompani is planning upgrades to both Bøylefoss and Flatenfoss plants in the coming years. The reconstruction of dams will start once detailed requirements have been agreed upon with the Norwegian Water Resources and Energy Directorate (NVE). The rehabilitation of the Bøylefoss hydropower plant building started in 2023, and 25% of the rehabilitation has been completed per year-end. The rehabilitation of the exterior will continue in 2024 and is expected to be finalized within the next two to three years. Essential audits and maintenance routines took place during the year with estab- lished control procedures for the hydropower facilities. In 2023, AFK Vannkraft con- ducted a risk and vulnerability assessment regarding impacts on the surrounding environment and nature. There was no unintented impact on the environment in 2023. AFK Vannkraft will conduct yearly environmental supervision on all hydropower sites. Species of fish affected by the hydropower stations have been the subject of an external audit. In 2023, there were three species of fish in the watercourse, the same as in previous years. In 2023, Scope 1 emissions were 27 tCO 2 e, compared to 20 tCO 2 in 2022. The loca- tion-based Scope 2 emissions were 1.3 tCO 2 e, slightly lower than the year before. Led by the sale of electricity produced from run-of-river hydropower plants, AFK Vannkraft has a Taxonomy-aligned turnover of 100%. Moreover, AFK Vannkraft has conducted façade rehabilitation at the Bøylefoss power plant, contributing to its aligned CapEx. Through its operations, AFK Vannkraft contributes to climate change mitigation.AFK Vannkraft works with risk and vulnerability assessment on HSE and work tasks to identify possible hazards and increase awareness. All incidents are recorded. In 2023, there were no incidents. OUTLOOK Considering the market’s estimated power price trends for 2024, water levels and forecasted production, AFK Vannkraft expects revenue and operating profit for 2024 to be lower than in 2023. Actual power prices depend on many factors, including hydrological balance, oil and gas prices, weather conditions, temperatures, and more. With limited reservoir capacity, the production volume will also be depen- dent on precipitation. In 2024, the market price for gas and CO 2 are forecasted to be lower than in 2023, driven by less instability in the markets and increased renewable energy production in Europe, resulting in less need for thermal energy. Within sustainability, AFK Vannkraft will include biodiversity in the environmental supervisions and conduct new TCFD and TNFD analyses on their locations. POWER PRICE & POWER GENERATION Power generation (GWh/Week) Power price (EUR/MWh) 64 65 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Ampwell Portfolio company Arendals Fossekompani established Ampwell in 2022 to build an eco-system for battery technology and a Battery- as-a-Service business model. Efficient energy storage solutions are needed to enable the green transition, to reduce energy cost and increase security of supply. Ampwell’s solutions enable the full utilization of non- flexible and volatile power production from wind and solar, thereby securing a functional and stable energy grid. Ampwell’s solutions can also connect battery units to the power markets, creating new revenue streams from frequency balancing and energy trading. Ampwell currently consists of the German energy storage provider Commeo, acquired in 2022, and the Spanish energy storage software provider Cellect Energy, co-founded in 2022. Per year-end, Arendals Fossekompani owned 54.9% of Commeo Holding GmbH and 61% of Cellect Energy. Commeo provides solutions for commercial and industrial (C&I) energy storage by manufacturing battery modules and rack systems, including control units and soft- ware. Commeo systems typically range from 50 kWh to 2 MWh, lar plug-and-play setup allows for even larger systems. The company’s battery modules offer complex functionality, long cycle life and extended safety features, targeting customers with advanced energy storage needs. Cellect Energy develops and offers an energy management system for monitoring, analysis and control of battery storage systems.The solutions enable the connection of multiple batteries, independent of manufacturer and technology, are specifically designed for the stationary storage market and will help customers optimize the value of stored energy. Head office Arendal, Norway Chair Torkil Mogstad Chief Executive Officer Torkil Mogstad Ownership 100% Employees 102 Countries 3 FINANCIAL FIGURES (MNOK) 2023 2022 2021 Operating revenue 54 105 - EBITDA -83 -38 - Operating profit (EBIT) -108 -53 - Operating margin -201% -50% - Earnings before tax (EBT) -123 -62 - Operating cash flow -206 -64 - NIBD 879 379 - Equity -86 31 - Equity ratio -9% 6% - SUSTAINABILITY KPIs 2023 2022 2021 Environment Scope 1 GHG (tCO 2 e) 38 26 - Scope 2 GHG (location-based) (tCO 2 e) 66 15 - Scope 3 GHG (tCO 2 e) 1 55 36 - Energy consumption (MWh) 375 227 - Social Lost time injury frequency rate 5.2 17 - Sick leave 3.8% 6.4% - Turn-over rate 9.1% 17% - Female employees 21% 17% - Women in Board of Directors 0% 0% - Governance Reported incidents/breach of CoC 0 0 - CoC signed 0% 0% - Corruption cases 0 0 - 1. Scope 3 emissions include the categories Waste, Business Travel and Fuel-and-Energy-Related Activities. Currency rates (NOK/EUR) Average 2023: 11.42. Average 2022: 10.10. End 2023: 11.24. End 2022: 10.51. 66 67 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 2023 IN BRIEF Revenue for 2023 amounted to EUR 4.9 million, and operating profit in the same period was EUR -9.4 million. Revenue was mainly related to battery module sales in Commeo and a small revenue contribution from Cellect Energy. Battery module sales in Commeo during 2023 were adversely impacted by delayed customer investment decisions in Commeo’s target segment, being impacted by a softening German economy. Moreover, a temporary price cap on electricity and proposed bat- tery subsidies in the German market contributed to delayed investments in energy storage in the commercial & industrial segment. Commeo is working on calibrating its sales organization and segment focus, in order to optimize sales going forward. Commeo is expanding its production capacity through the construction of a new semi-automatic production line. When completed at the end of 2024, it will make the company a significant manufacturer of battery modules for the commercial and industrial market in Germany. Cellect was still in a build-up mode throughout 2023, developing the required soft- ware solutions to address the key market segment. Customer revenues were limited during the year. However Cellect was able to build up a pipeline of large utility scale customer prospects with promising revenue potential. In addition, Cellect entered into an agreement to assist the Volkswagen Group Charging GmbH (Elli) in trading on Europe's largest power exchange during 2023. Emissions has increased substantially for Ampwell with 38 tCO 2 e in Scope 1 (26 tCO 2 e) and 66 tCO 2 e in Scope 2 (15 tCO 2 e). Since Ampwell obtained majority owner- ship of Cellect in 2023, emission data from their business has been included in the reporting. These emissions do not impact the overall emissions for Ampwell substan- tially. Scope 3 increased from 227 tCO 2 e in 2022 to 375 tCO 2 e in 2023. According to the EU Taxonomy mapping, the share of Taxonomy-eligible, not aligned turnover for Ampwell is 100%, mainly driven by its development and production of systems and software for energy storage and management solutions. As of today, Ampwell does not meet all alignment criteria. OUTLOOK While Commeo’s 2023 sales were below expectation, the fundamental growth trend for battery storage solutions is still strong. Commeo’s main target segment of Commercial & Industrial customers is estimated to grow its installed energy storage base by an average annual growth rate of 12% towards 2030 in the German market. Commeo was able to secure improved pricing from key suppliers in 2023, expected to contribute positively to sales and margins in 2024. Longer sales processes within Commeo’s target segment will however dampen short-term growth rate. Following last year’s launch of an important pilot project with Volkswagen’s charging company Elli, Cellect Energy is now targeting several companies with utility scale storage portfolios that need to be managed. Being able to provide both monitoring, analytics and control functions as an independent provider makes Cellect’s service offerings unique in the market. Ampwell expects to generate higher revenues in 2024 compared to last year. Operating profit is expected to remain negative due to the ramp-up of Commeo’s new battery module production plant, as well as Cellect’s continuing software devel- opment costs. 68 69 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Vergia Portfolio company Arendals Fossekompani established Vergia early in 2022 to combine all existing green infrastructure projects and related portfolio companies to a new entity. Vergia is a strategic green energy enabler leveraging in-house competence with strategic partners to develop infrastructure projects in alternative verticals within the energy transition sphere. The Vergia ecosystem includes verticals such as small-scale hydropower, energy parks, power-to-x, offshore wind and green fuel. Vergia is 100% owned by Arendals Fossekompani. OFFSHORE WIND Arendals Fossekompani and Ferd, two of Norway’s leading industrial investment com- panies, have come together to establish the offshore wind company Seagust. Seagust is structured as a 50:50 joint venture between Vergia and Ferd, with a mandate to become an offshore wind developer with domestic and international operations. AMMONIA Vergia and Grieg Maritime Group have joined forces to create a leading provider of green ammonia. North Ammonia is dedicated to developing the next generation green fuels for shipping and transportation. The company builds on extensive first- hand experience. Grieg Maritime Group has more than 60 years of experience in shipping. Arendals Fossekompani has more than 125 years of experience in industrial development and green power production. Eydehavn in Arendal is being developed as the first production site. Production is expected to start in 2027. SMALL-SCALE HYDROPOWER Vergia has two small-scale hydropower development projects; Kilandsfoss and Glomsdam, which can contribute to an annual power production of 38 GWh and 7 GWh, respectively. An investment decision to start construction of Kilandsfoss hydropower plant was made in the first quarter of 2023. The project is under con- struction and expected to be completed in 2026. ENERGY PARKS Vergia is developing Bøylestad Energy Park, an industrial and commercial area facili- tating energy intensive industries powered by renewable energy. The area is situated next to one of the largest energy hubs in Southern Norway, which makes it highly suitable for power intensive industries. Bøylestad Energy Park also offers proximity to highway infrastructure, a railway and a port, which increases the strategic value of the area. HYDROGEN Vergia, Kongsberg Maritime and Moreld have partnered to develop a combined off- shore substation and hydrogen factory. HydePoint is a complete solution for receiv- ing, converting and transmitting the full energy potential from offshore wind farms with reduced dependence on the onshore power grid. Placed in the ocean, close to wind farms, HydePoint can convert all or part of the energy into hydrogen. This will reduce the need for upscaling the power grid both to and on land. Head office Oslo, Norway Chair Trond Westlie Chief Executive Officer Martin Kjäll-Ohlsson Ownership 100% Employees 3 Countries 1 FINANCIAL FIGURES (MNOK) 2023 2022 2021 Total revenue 1 1 - EBITDA -8 -7 - Operating profit (EBIT) -8 -7 - Operating margin Earnings before tax (EBT) -28 -18 -2 Operating cash flow -15 -7 NIBD 19 5 -10 Equity -12 9 18 Equity ratio -93% 28% - SUSTAINABILITY KPIs 2023 2022 2021 Environment Scope 1 GHG (tCO 2 e) 0 0 - Scope 2 GHG (location-based) (tCO 2 e) 0.1 0.1 - Scope 3 GHG (tCO 2 e) 1 5.7 2.8 - Energy consumption (MWh) 10 9.1 - Social Lost time injury frequency rate 0 0 - Sick leave 0% 0.8% - Turn-over rate 0% 0% - Female employees 67% 67% - Women in Board of Directors 0% 0% - Governance Reported incidents/breach of CoC 0 0 - CoC signed 100% 100% - No of corruption cases 0 0 - 1. Scope 3 emissions include the categories Waste, Business Travel and Fuel-and-Energy-Related Activities. 70 71 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Our portfolio of properties Arendal Fossekompanis property portfolio includes an urban development project, an airport and center for aviation and other stand-alone properties. All property-related companies and property investments are comprised in AFK Property. AFK ownership 100% Head office Arendal, Norway 72 73 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 AFK Property Portfolio Company AFK Property comprises all property related companies and property investments in Arendals Fossekompani. Head office Arendal, Norway Chair Lars Peder Fensli Chief Executive Officer Tom Krusche Pedersen Ownership 100% Employees 5 Countries 1 FINANCIAL FIGURES (MNOK) 2023 2022 2021 Total revenue 18 35 510 EBITDA 2 6 40 Operating profit (EBIT) -10 -7 27 Operating margin -55% -19% 5% Earnings before tax (EBT) -14 -10 25 Operating cash flow 29 -40 309 NIBD 168 136 70 Equity 185 206 215 Equity ratio 30% 47% 46% SUSTAINABILITY KPIs 2023 2022 2021 Environment Scope 1 GHG (tCO 2 e) 21 20 - Scope 2 GHG (location-based) (tCO 2 e) 1.3 1.5 - Scope 3 GHG (tCO 2 e) 1 103 7.3 34 Energy consumption (MWh) 276 295 - Social Lost time injury frequency rate 0 0 0 Sick leave 0% 3.8% - Turn-over rate 0% 0% - Female employees 0% 0% 0% Women in Board of Directors 0% 0% 0% Governance Reported incidents/breach of CoC 0 0 - CoC signed 40% 100% 0% Corruption cases 0 0 0 1. Scope 3 emissions include the categories Waste, Business Travel and Fuel-and-Energy-Related Activities. The portfolio of AFK Property is diverse. It includes the development of a new urban residential area in Arendal, as well as various properties connected to our portfolio companies. 74 75 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 BRYGGEBYEN The largest company in the property portfolio is Vindholmen Eiendom, which is transforming an old shipyard area into a new urban residential and commercial zone under the name Bryggebyen. The transformation will take 10-15 years to complete and will establish 500–700 residential units in combination with exciting trade and commerce offerings. The third stage of the apartment complex at Bryggebyen is progressing according to plan, with 44 of 48 apartments sold per year-end. The sales will be recognised as revenue upon hand-over of the apartments, which is expected to take place in Q2 2024. Arendals Fossekompani also plans to build an indoor swimming facility at Bryggebyen. Arendal municipality has signed a long-term rental agreement, and a final investment decision is expected within 2024. ARENDAL AIRPORT & PROPERTY GULLKNAPP AFK Property is the majority owner of Gullknapp, which is comprised of an airport and an attractive 200,000 sqm industrial and commercial area. The main user of the airport facility is OSM Aviation Academy which runs a pilot school on the premises. BØLEVEGEN 4 This property located along the Skien River, just one kilometer south of down- town Skien, was acquired in 2020. The 4,700 sqm building is fully lent to Arendals Fossekompani’s portfolio company ENRX on a 15-year bare-house agreement. As the city of Skien expands, this 12,000 sqm river property will be attractive both for commercial and residential development. AFK Property is in the process of developing new facilities for ENRX, providing approximately 2,500 sqm of new offices, production- and storage space. The build- ing process has started and is expected to be completed in Q1 2024. LONGUM PROPERTY This 170,000 sqm property is located outside the city of Arendal, close to the E18 highway and the main production site of the coming Morrow Batteries factory. After the process to regulate the Longum property for commercial development started, the first inquiries for purchasing and/or renting space have been registered. BEDRIFTSVEIEN 17 Bedriftsveien 17 is in the middle of the emerging commercial area Krøgenes, three kilometers east of downtown Arendal. The 3,500 sqm building has been completely refurbished and is now fully let to Volue Industrial IoT (rebranded to Scanmatic as of 1 January 2024) on a 25-year bare-house agreement. The area has grown in attrac- tiveness following the completion of a new feed-in road to the E18 highway. SUSTAINABILITY Scope 1 and Scope 2 emissions are at similar levels as in 2022 and are all from opera- tions at Arendal Lufthavn Gullknapp. Scope 3 emissions have substantially increased from 2022 levels due to emissions from waste at building site 3 at Bryggebyen. For Bryggebyen, there is a focus on reducing carbon emissions and increasing waste management during the construction phase. At Arendal Lufthavn Gullknapp, AFK Property monitors chemical oxygen demand and noise levels. The chemical oxygen demand is well below the 10 tonnes limit, and noise levels are satisfactory. The share of Taxonomy-eligible, not aligned turnover for AFK Property is 28%. The existing buildings and current development projects were built or designed before the EU Taxonomy was adopted and does therefore not meet the alignment criteria. AFK Property aims to increase alignment in the future, primarily focusing on new construction projects. AFK Property had 3 new hires during 2023, increasing the number of employees substantially from 2 to 5. There were no employees leaving the company. All employ- ees and Board of Directors are men. 76 77 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Board of Directors 80 Board of Directors’ Report 82 Corporate Governance Report 86 03 From the Boardroom Ane Schøning Chief Financial Officer, Factlines 79 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Board of Directors Trond Ødegård Westlie Chairperson Trond Westlie (1961) has held the position as Chair of the Board of Directors of Arendals Fossekompani ASA since May 2022. He is an experienced executive and Chief Financial Officer for large international public corporations. Westlie brings a broad understanding of the financial markets and years of relevant board experience. Westlie is a Certified Public Accountant, holding a MSc degree in accounting and auditing from the Norwegian School of Economics. Independent of Executive Management Current positions: Group CFO, Executive Vice President and Member of the Executive Board in Ørsted A/S (from April 1, 2024) Current board positions: Wilh. Wilhelmsen Holding ASA, Shama AS Board meetings attended in 2023: 10 Anne Grethe Dalane Board Member Anne Grethe Dalane (1960) has been a member of the Board of Directors of Arendals Fossekompani ASA since May 2022. She brings extensive leadership expe- rience from Yara and Hydro and is a long-standing board member of several interna- tional companies. Dalane holds a master’s degree from the Norwegian School of Economics. Independent of Executive Management Current board positions: BW LPG, PGS Board meetings attended in 2023: 10 Morten Bergesen Board Member Morten Bergesen (1974) has been a member of the Board of Directors of Arendals Fossekompani ASA since May 2004. He is an experienced chairperson with a demon- strated history of working in a broad range of industries, serving both Norwegian and international companies. Bergesen holds a master’s degree in economics from BI Norwegian Business School. Independent of Executive Management Current board positions: Aksjefonn AS, Bergehus Holding AS, Breifonn AS, IFM AG, Klynge, THF AS, UMC AG Board meetings attended in 2023: 10 Stine Rolstad Brenna Board Member Stine Rolstad Brenna (1965) has been a member of the Board of Directors of Arendals Fossekompani ASA since September 2020. She is an experienced CFO, investor and board professional, serving both Norwegian and international companies. Brenna holds a master’s degree in corporate finance, international business and strategy from BI Norwegian Business School. Independent of Executive Management Current board positions: Incari GmBH, Fount AS, Lyse AS, Lørenskog kommunale pensjonskasse, Rabbalshede Kraft AB, Theion GmBH Board meetings attended in 2023: 10 Lise Lindbäck Board Member Lise Lindbäck (1970) has been a member of the Board of Directors of Arendals Fossekompani ASA since May 2022. She brings exten- sive and broad experience from financial markets, with a proven ability to manage high performing teams in an international environment. Lindbäck holds a master’s degree in economics and business administration from the Norwegian School of Economics. Independent of Executive Management Current position: Investment Director, Abler Nordic Current board positions: Alpha Corporate Finance AS, SEWA Grih Rin Ltd., SubK Impact Solutions Ltd. Board meetings attended in 2023: 10 Didrik Vigsnæs Board Member Didrik Vigsnæs (1966) has been a member of the Board of Directors of Arendals Fossekompani ASA since May 2016. He brings decades of experience as CEO of investment companies, and he is a seasoned board professional serving a wide range of companies. Vigsnæs holds a bachelor’s degree in business administration from the University of Bradford School of Management. Independent of Executive Management Current position: CEO Vicama AS, CEO Ulfoss Invest AS Current board positions: Dima AS, Zone Security AS, Vicama Capital AS, Malling & Co Vekst AS, Oseberget Eiendom AS Board meetings attended in 2023: 10 Christian Must Board Member Christian Must (1973) has been a member of the Board of Directors of Arendals Fossekompani ASA since May 2021. He brings exten- sive business development experience across industry verticals and has served as a board professional for a wide range of companies. Must holds a master’s degree in industrial economics and technology manage- ment from the Norwegian University of Science and Technology and AFA from the Norwegian School of Economics. Independent of Executive Management Current board positions: DN Media Group, Cenate, Must AS, Vedeld AS Board meetings attended in 2023: 10 80 81 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 With more than a century of industrial history, we con- tinue to develop our companies with a sustainable and long-term perspective. Our ambition is to utilize our com- petencies to build world-leading positions in industries driven by global megatrends. We do this by taking the long-term view on objectives, while relentlessly working to improve our performance in our day-to-day efforts. Long-term perspective requires patience. Our ambition is to build Arendals Fossekompani even stronger in order to serve as the best owner for our port- folio companies. This implies developing the portfolio based on industry experience and understanding, finan- cial competence and strength, and identifying synergies in the portfolio. Today, Arendals Fossekompani has an attractive portfolio positioned in verticals driven by global megatrends, such as Digitalisation & Big Data Analytics, Electrification & Materials and Energy transition. Our companies are both listed and privately owned, and Arendals Fossekompani is – as part of our strategy – the majority owner. For details on the 2023 performance of our portfolio com- panies and the Arendals Fossekompani Group, please see chapter 1 and 2 of this report. Arendal is our hometown. We remain committed to con- tributing to the development of this great city and its people. REVIEW OF THE ANNUAL FINANCIAL STATEMENTS In the opinion of the Board of Directors, the annual finan- cial statements provide a true and fair view of the compa- ny’s and the group’s position at the end of the year. There are no material uncertainties associated with the annual financial statements, and there are no other extraor- dinary circumstances that have affected the financial statements. The Board of Directors confirms that the accounts have been prepared based on the assumption that Arendals Fossekompani is a going concern, and that this assumption continues to apply. BOARD OF DIRECTORS At the Annual General Meeting in May 2023, Chair of the Board, Trond Westlie, and all Board members (Stine Rolstad Brenna, Morten Bergesen, Lise Lindbäck, Didrik Vigsnæs, Anne Grethe Dalane and Christian Must) were re-elected for a term of one year. PERSONNEL, EQUAL OPPORTUNITY, WORKING ENVIRONMENT AND THE NATURAL ENVIRONMENT At the end of the year, Arendals Fossekompani Parent Company had 38 employees of which 10 were women. The employment situation is marked by long-term rela- tionships and stability. The company aims to improve the gender balance. The Board of Directors currently consists of three women and four men. The working environment is considered good. Arendals Fossekompani Parent Company has a separate committee for dealing with issues related to health, environment, and safety. There are representatives for employees and corporate man- agement on the committee. The average pay for men and women varies due to dif- ferences in job categories and seniority. A full disclosure of the guidelines for remuneration of the executive lead- ership team can be found in the separate Remuneration Report. Sick leave in the Parent Company amounted to 244 days (non-work related), which corresponds to 3.3% of the total working hours. There were no accidents or personal injuries of significance in 2023, nor any signif- icant material damage. • Sick leave at Volue was 2.9% (2.7%) in 2023. There was a total of 5,201 days of absence due to illness. • Sick leave at Tekna was 3.3% (2.6%) in 2023. There was a total of 1,520 days of absence due to illness. • Sick leave at NSSLGlobal was 1.4% (1.8%) in 2023. There was a total of 925 days of absence due to illness. • Sick leave at ENRX was 2.8% (3.5%) in 2023. The company recorded a total of 6,996 days of absence due to illness. • Sick leave at Ampwell was 3.9% (6.4%) in 2023. The company recorded a total of 783 days of absence due to illness. • Sick leave at Alytic was 2.0% (3.2%) in 2023. There was a total of 536 days of absence due to illness. • Sick leave at Vergia was 0% (0.8%) in 2023. The company recorded a total of 0 days of absence due to illness. • Sick leave at AFK Property was 0% (3.8%) in 2023. The company recorded a total of 0 days of absence due to illness. Arendals Fossekompani’s portfolio companies have health, environment, safety committees and other col- laborative bodies in accordance with national legislation. Arendals Fossekompani Parent Company’s operations have limited negative impact on the natural environ- ment in the form of emissions to water and air. The Parent Company has conducted materiality analyses to find material risks and opportunities for the company related to environment, governance, and social issues. The main Board of Directors’ Report A long-term approach in times of volatility In times marked by geopolitical turmoil, supply-chain constraints, inflation, and global volatility in general, Arendals Fossekompani remains true to its core values: Collaborative, Long-term, Dynamic, and Responsible. 82 83 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 positive contributions from the Parent Company are seen in the strategy for responsible investment and in being an active and demanding owner of its portfolio companies. The Parent Company also makes a positive environmen- tal contribution through the production of renewable hydro power. Operations in Arendals Fossekompani’s portfolio com- panies entail little risk of pollution of the natural environ- ment. All portfolio companies have conducted materiality analyses and climate risk analyses to manage and mea- sure this risk. To the extent that these analyses show that such risks exist, measures have been implemented in accordance with national legislation and guidelines to prevent any negative environmental impact. The com- pany is aligned with the greenhouse gas emission reduc- tion goals for 2030, as described in The Paris Agreement. Arendals Fossekompani has submitted near-term com- pany-wide emissions reduction targets in line with the Science Based Targets initiative. EFFORTS TO PROMOTE THE PURPOSE OF THE ANTI-DISCRIMINATION AND ACCESSIBILITY ACT It is important for Arendals Fossekompani to promote equality in all areas and to prevent discrimination based on ethnicity, religion or disability. The Parent Company has evaluated, examined risks, analyzed causes and will implement measures according to the activity and reporting obligations in The Equality and Anti- discrimination Act. A separate report on Human Rights and Transparancy Act is published and also available on the company's website. RESEARCH AND DEVELOPMENT Capitalised and expensed research and development costs in Arendals Fossekompani’s businesses totaled NOK 335 million (261 million) in 2023. ETHICS AND SOCIAL RESPONSIBILITY A report in accordance with Section 3.3 of the Norwegian Accounting Act regarding corporate social responsibility is included in Chapter 4. This part of the annual report is also available on the company’s website. Chapter 4 elaborates on Arendals Fossekompani’s efforts and guidelines in the areas of environment, social issues, and governance. KPIs and targets for improvements are aligned across the portfolio. We set high ethical standards and communication with the outside world is to be open, clear and honest. The company is responsible for ensuring safe and good work- places in the local communities where it is present. We seek to create value for society, customers, employees and owners. For many years, Arendals Fossekompani Parent Company has based its activities on the utiliza- tion of a local natural resource, and therefore wishes to contribute to value creation and social development within the Arendal region. The same applies to our port- folio companies and their local communities. We support Arendalsuka, an annual national politics and business event, and the Canal Street music festival, in addition to numerous initiatives within sports and culture. IFRS Arendals Fossekompani has prepared the financial state- ments for the Parent Company and the Group in accor- dance with the principles in the International Financial Reporting Standards (IFRS) as adopted by the European Union. THE ARENDALS FOSSEKOMPANI SHARE There are a total of 55,995,250 shares in the company. As of 31 December 2022, a total of 1,137,911 were treasury shares which represents 2.0% of the total number of out- standing shares. The share price on 31 December 2022 was NOK 250.5 and on 31 December 2023 NOK 164.8. The company had 5,295 shareholders at year-end. The Board of Directors will propose that the Annual General Meeting renew the Board’s authorization to purchase treasury shares within a total framework of 10% of the shares and within a price range of NOK 10-2000. LIABILITY INSURANCE Arendals Fossekompani holds a Directors’ and Officers’ Liability Insurance with world-wide coverage. FINANCIAL POSITION The Parent Company’s and Group’s financial standing is good. The Board of Directors assumes that the assets of the Parent Company and Group provide a good founda- tion for future growth. RISKS AND FACTORS OF UNCERTAINTY Arendals Fossekompani is exposed to credit risk, market risk and liquidity risk. These matters are described in detail in Note 16 in the annual financial statements for 2023. There is particular uncertainty associated with geopoliti- cal turmoil, supply chain constraints, inflation and interest rates, as well as the development of energy prices. The company has taken strong measures to ensure embargo compliance across the value chain DIVIDENDS AND ALLOCATION OF NET PROFIT FOR THE YEAR Arendals Fossekompani announces dividends on a quar- terly basis. The Board of Directors approves the quarterly dividends based on an authorization from the General Meeting. When deciding the quarterly dividends, the Board of Directors takes into consideration expected cash flow, capital expenditure plans, financing require- ments and appropriate financial flexibility. In 2023, Arendals Fossekompani paid dividends amounting to NOK 217 million. Arendals Fossekompani's net profit for 2023 amounted to NOK -10 million. The Board of Directors proposes that the net profit is transferred to other equity. OUTLOOK Arendals Fossekompani Group revenues are expected to be higher in 2024 than in 2023, driven by expected strong underlying growth in portfolio companies and rev- enue recognition of the third stage of the AFK Property development project Bryggebyen. Lower expected power prices, partly offsets the growth. Operating profit is expected to be lower in 2024 compared to 2023, driven by the latter, and reduced margins in NSSLGlobal. The Board of Directors emphasises that significant uncertainty is associated with assessments of future cir- cumstances and the exposure to risks, as outlined under “Risks and Factors of uncertainty”. VOLUE Volue expects revenues and operating profit to be higher in 2024 compared to 2023. Volue guides on long term organic growth of 15% as well as improvements in adjusted EBITDA and cash conversion for 2024. NSSLGLOBAL NSSLGlobal expects 2024 revenues to be in line with 2023. Operating profit is expected to decrease in 2024 due to lower high-margin airtime revenues. ALYTIC Alytic expects revenues to be higher in 2024 compared to 2023. Operating profit is expected to remain negative in 2024, as companies in the Alytic portfolio are still in a growth phase. TEKNA Tekna expects revenues to be higher and operating profit to improve in 2024 compared to 2023. ENRX ENRX expects revenues in 2024 to be in line with 2023. Operating profit is expected to increase compared to 2023. AFK VANNKRAFT In light of the market’s estimated power price trend for 2024, revenues and operating profit for AFK Vannkraft is expected to be lower than in 2023. Note that actual energy prices depend on many factors, including hydro- logical balance, oil and gas prices, weather conditions, temperatures and more. With limited reservoir capacity, the production volume will also be dependent on precip- itation. AMPWELL Ampwell expects to generate higher revenues in 2024 compared to 2023. EBIT is expected to remain negative. EVENTS AFTER THE CLOSING OF 2023 On 8 February, the Board of Directors decided to pay an ordinary cash dividend of NOK 1.00 per share for the fourth quarter of 2023. The dividend was paid on 21 February. Froland, 11 April 2024 Trond Westlie, Chairman Stine Rolstad Brenna, Board Member Lise Lindbäck, Board Member Morten Bergesen, Board Member Didrik Vigsnæs, Board Member Anne Grethe Dalane, Board Member Christian Must, Board Member Benjamin Golding, Chief Executive Officer 84 85 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 While listed on the stock exchange Oslo Børs, Arendals Fossekompani is subject to reporting requirements for corporate governance under the Accounting Act section 3-3b, Norwegian securities trading legislation, and the Oslo Stock Exchange continuing obligations of listed companies. CORPORATE GUIDELINES The following guidelines form the basis for corporate gov- ernance at Arendals Fossekompani: • Arendals Fossekompani shall communicate relevant information honestly and openly to the public about our activities and any circum- stances related to corporate governance. • The Board of Directors at Arendals Fossekompani shall be autonomous and independent of group management. • Emphasis shall be placed on avoiding conflicts of interest between shareholders, board members and executive management. • The tasks and functions of the Board and group management at Arendals Fossekompani shall be distinct and clearly defined. • All shareholders shall be treated equally. NORWEGIAN CODE OF PRACTICE Each element of the Norwegian Code of Practice for Corporate Governance (NUES), last revised on 14 October 2021, is addressed below. A total review and amendment of this corporate governance report was performed by the Board of Directors in 2024, following the changes made in the company since the last corporate gover- nance report of March 2023. A description is given of Arendals Fossekompani’s compliance with, and devi- ations from, the Code of Practice. A complete overview of the Code of Practice and official remarks by the Oslo Stock Exchange are available online at nues.no. 1. CORPORATE GOVERNANCE REPORT Arendals Fossekompani has prepared a separate cor- porate governance policy, and the Board has decided to implement the Norwegian Code of Practice for Corporate Governance. We have implemented further instructions for corporate governance, including rules of procedure for the Board of Directors of February 2022, rules of procedure for the CEO of February 2022, instructions for the Audit Committee of May 2021, instructions for the Renumeration Committee, insider instructions, and a policy on disclosure of infor- mation. Our Code of Conduct reflects our commitment to ethical business conduct and addresses topics such as anti-cor- ruption, equality and anti-discrimination, and sustainabil- ity. The Code of Conduct is subject to regular review and the latest version was adopted by the Board of Directors on 9 February 2023. Our expectations and guidelines towards suppliers and business partners are set out in the Business Partner Code of Conduct as approved by the Board of Directors. 2. BUSINESS ACTIVITIES The objective of Arendals Fossekompani is, through in-house production, participation in new infrastructure, purchase, or leasing, to make use of or sell electricity, as well as to participate, directly or indirectly, in other indus- trial activities or business enterprises, including invest- ing in real estate. These objectives are expressly stated in Section 1 of our Articles of Association. The Articles of Association are available on our website: arendalsfosse- kompani.no. Arendals Fossekompani has significant financial capac- ity. Our investment portfolio will, at all times, consist partly of long-term and active ownership commitments, and partly of liquid financial assets. Liquidity will be man- aged mainly via listed shares and bonds. The bulk of our share portfolio will consist of a limited number of major investments. Our investment strategy is based on our belief that active, long-term, and responsible ownership provides the best return for the risk involved. Further descriptions of tar- gets, strategies, risk profile and the objective of creating long-term value for shareholders in a sustainable way, is described elsewhere in the Annual Report, also available at arendalsfossekompani.no/en/investor-relations. Our targets, strategies and risk profile are reviewed annu- ally. Sustainability is regularly on the Board’s agenda. Every year, a materiality analysis of topics relevant for environmental, social issues and governance is pre- sented to the Board of Directors. In Arendals Fossekompani, we integrate considerations related to our broader stakeholders into our business and value creation for our shareholders through our sustain- ability framework and reporting. Our objectives, princi- pal strategies and stakeholder engagement are further described elsewhere in the Annual Report, and on our website arendalsfossekompani.no. In Arendals Fossekompani, we have a clear focus on our corporate responsibility for environmental and social conditions, including a good working environment, diversity, equality, non-discrimination, human rights and anti-corruption and anti-bribery. We are committed to contributing to the UN Sustainable Development Goals. Further details and descriptions on these matters can be found in the Annual report, and on our website. Corporate Governance Report 2024 86 87 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 3. EQUITY AND DIVIDENDS Equity The book value of the Group’s equity as of 31 December 2023 was MNOK 3,639 which amounted to 40% of total assets. Market value is significantly higher, and the com- pany has a solid financial foundation. The Board continu- ally assesses the company’s financial capacity in light of our objectives, strategy and risk profile. Dividend policy It is Arendals Fossekompani’s policy to pay a dividend that reflects our long-term strategy, financial position and investment capacity. The annual dividend shall, over time, ensure that shareholders receive a competitive return on their investment. Since Q2 2020, we have announced our dividends on a quarterly basis. The Board approves the quarterly dividends based on an authorisation from the General Meeting. When deciding the quarterly dividends, the Board takes into consideration expected cash flow, capital expenditure plans, financing requirements and appropriate financial flexibility. The Board believes that quarterly dividend payments provide a flexibility that benefits both the company and its shareholders. From 1 July 2013, the Annual General Meeting can autho- rise the Board of Directors to distribute dividends on the basis of the approved annual accounts. Proposals for such authorisation should be justified. In order to ensure flexibility and efficiency in the implementation of quar- terly dividend payments, the Board proposes that the Annual General Meeting in 2024 continues to authorise the Board to pay dividends, limited in time to the Annual General Meeting in 2025. Capital increase No authorisation to undertake a share issue has been granted to the Board. The most recent capital increase occurred in 2012, when the share capital was raised by NOK 201,582,900 to NOK 223,981,000 through a transfer from other funds. Purchase of treasury shares The General Meeting can authorise the Board to pur- chase up to 10% of the company’s own shares. At the Annual General Meeting on 5 May 2022, the Board was authorised to purchase treasury shares up to a maximum of 7.93% of the total number of shares. The terms of the authorisation permit the Board to acquire treasury shares only between a minimum price of NOK 10 and a maxi- mum price of NOK 2,000 per share. This authorisation will remain in effect until the Annual General Meeting in 2024. As of 31 December 2023, the Group owned a total of 1,137,911 shares, corresponding to 2.0% of all the out- standing shares in the company. These shares are freely negotiable. 4. EQUAL TREATMENT OF SHARE- HOLDERS AND TRANSACTIONS WITH RELATED PARTIES Share class The Group’s shares consist exclusively of A-shares. According to Section 11 of our Articles of Association, no shareholder may personally or by proxy vote for more than one quarter of the total number of shares. Shares transferred to new owners do not confer voting rights until the transfer has been approved by the Board. All shares have equal rights. Transactions involving treasury shares The Board may exercise its authority to acquire treasury shares as long as the shares are acquired at the market price. Correspondingly, the divestment of acquired shares will also be undertaken at market price yet so that the shares can be discounted if the shares are used in connection with programmes for employees and board members. At the same time, the authorisation gives the Board the flexibility to utilise the mechanisms that the Public Limited Liability Companies Act gives access to in situations where the acquisition or disposal of shares is considered advantageous to the company and the com- pany’s shareholders, including for use in share purchase programmes for directors and employees at the company. Transactions with related parties No transactions have occurred between the company and shareholders, board members, senior executives or their related parties in 2023 that could be described as not immaterial transactions. In 2023, 91,143 shares were sold from the company to senior executives and board members, in accordance with the approved share pur- chase program. See Note 4.3 of the 2023 Annual Report. Guidelines for board members and senior executives If a board member or senior executive has a direct or indirect material interest in an agreement that is being entered into by the company, that person must disclose the fact before the matter is put to the Board, and he or she may not participate in discussions or votes on that matter. 5. FREELY NEGOTIABLE SHARES Under current Norwegian legislation on industrial licens- ing, a shareholder who acquires more than 20% of the total number of shares in the company must apply for a license. The law requires the Board’s approval for such acquisitions. A number of other provisions of the Waterfall Rights Act could cause the acquisition of the company’s shares to have consequences for both the company itself and other shareholders. Therefore, the company has found it necessary to reserve the right to refuse approval of share acquisitions. According to Section 7 of the Articles of Association, any acquisition by means of trans- fer is conditional on the Board’s consent. Consent may be refused only on reasonable grounds. Deviations from the Code: The Articles of Association hold that transfer of shares is conditional on the Board’s consent. 6. GENERAL MEETING Notification The Annual General Meeting is held as early as practically possible after the close of the previous financial year, usually in April or May. Meeting notices and attendance registration forms are sent to all shareholders no later than 21 days prior to the General Meeting through digital communication, or through regular mail to shareholders with a known address who do not consent to digital com- munication. Documents are also made available on our website arendalsfossekompani.no and through the Oslo Stock Exchange distribution service. The annual report and other enclosures to the General Meeting notice are made available solely via the website and the Oslo Stock Exchange distribution service. Shareholders who wish to receive the enclosures by regular mail must contact the company. The Board will provide shareholders with all the information necessary to help them take a position on all agenda items, along with proposals relating to the elec- tion of board members. The Articles of Association permits notice of participation to be given up to two days prior to the date of the General Meeting. Our financial calendar will be published online. Participation Shareholders can give notice of their participation either in writing or via email or digital solutions. The Board wishes to arrange the meeting so that as many as possible of the shareholders are able to participate. Shareholders who cannot attend are encouraged to appoint a proxy. We accommodate requests of digital attendance to the General Meeting in line with legal requirements. Representatives of the Board of Directors shall attend the General Meeting, along with the auditor. The Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) shall participate on behalf of Group management. Agenda and execution The Board of Directors will set the agenda according to the list in Section 10 of the Articles of Association. According to Section 10, the participants of the General Meeting appoints a chairperson to lead the meeting. 7. NOMINATIONS COMMITTEE The company has a three-member Nominations Committee established in accordance with item 11 of the Articles of Association. One of the members in the Nomination Committee is currently a member of the Board of Directors. The members of the committee are Morten Bergesen, Trine Must and Simen Flaaten. The latest recommendation from NUES, last revised in October 2021, is to have no member in the Nomination Committee from the Board of Directors. Our current prac- tice will be evaluated further in 2025. Candidates eligi- ble for election to the Board of Directors are announced in conjunction with the invitation to attend the General Meeting. Nominations for other candidates can be sub- mitted before and during the General Meeting itself. According to the rules of procedures for the Nomination Committee approved by the General Assembly in May 2022, the Nomination Committee shall, in the judge- ment of candidates, evaluate the competence required by the company. The nomination committee shall work for diversity in the Board of the company. The Nomination Committee shall also consider that the Board of Directors is fitted to act independently of special interests. Deviations from the Code: A member from the Board of Directors is in the Nomination Committee. The members of the Nomination Committee are elected for a period of one year. There is no maximum length of tenure for the members of the committee. The commit- tee has 1/3 female members. According to Norwegian law, it is prohibited to obtain certain information about job applicants, in particular linked to underrepresented social groups. Although it is the company’s objective to have broad representation at all levels, Arendals Fossekompani do not track or report information relating to underrepresented social groups. The Nomination Committee should be comprised so that it safeguards the interests of the shareholder community and the company’s need for expertise and diversity. This implies that the individual committee members have the necessary experience, competence and capacity to carry out their duties satisfactorily and independently. The competence of the members of the Committee covers a wide range of industries, technologies, board experience, compliance, governance, finance and sus- tainability. These are all competences important to the development of the company. 8. BOARD OF DIRECTORS: COMPOSITION AND INDEPENDENCE The Board consists of seven members and is currently composed of the following: Trond Westlie (Chair, member since 2022), Morten Bergesen (member since 2004), Christian Must (member since 2021), Didrik Vigsnæs (member since 2016), Anne Grethe Dalane (member since 2022), Lise Lindbäck (member since 2022) and Stine Rolstad Brenna (member since 2020), all elected by the shareholders. 88 89 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 The members are elected for a period of one year. There is no maximum length of tenure for the members of the Board of Directors. The Board has 3/7 female members. According to Norwegian law, it is prohibited to obtain certain information about job applicants, in particular linked to underrepresented social groups. Although it is the company’s objective to have broad representation at all levels, Arendals Fossekompani do not track or report information relating to underrepresented social groups. Note 4.1 of the Annual Report contains information about board meeting attendance. Information about the com- petence and independence of board members is pro- vided in subsequent paragraphs. Election of board members The General Meeting elects seven representatives to the Board of Directors. Ahead of the election, the names of candidates may be submitted to the Nominations Committee by an individual shareholder or by several shareholders jointly. Hence, stakeholders’ views will be taken into consideration by the Nomination Committee. Nominations submitted in time will be included in the invi- tation to attend the General Meeting sent to all share- holders and posted on our website. Board members are elected by simple majority. Members are elected for one year at a time, with the possibility of re-election. About half of all board members are elected each year. The composition and competence of the Board of Directors The Board of Directors should be comprised so that it safeguards the interests of the shareholder community and the company’s need for expertise and diversity. This implies that the individual board members have the nec- essary experience, competence and capacity to carry out their duties satisfactorily and independently. The compe- tence of the members of the Board covers a wide range of industries, technologies, board experience, compliance, governance, finance and sustainability. These are all competences important to the development of the com- pany. The presentation of the Board in this report gives an introduction of the individual competences and main positions held by each of the Board members. According to the Articles of Association, the Board shall comprise five to seven members. The Board currently consists of seven members. The CEO is not a member of the Board. The members of the Board are elected for one year at a time and selects its own Chair. Trond Westlie has been elected to chair the Board. Changes to the Board of Directors in 2023 At the Annual General Meeting held in May 2023, no changes were made to the Board of Directors. Independence of the Board of Directors All shareholder-elected board members are considered autonomous and independent of Group management. The same applies to material business connections. At the close of the year, Didrik Vigsnæs is the Managing Director of Vicama AS, the largest shareholder in Ulfoss Invest AS, which owns – directly, indirectly or via related parties – approximately 26% of the Arendals Fossekompani shares. Christian Must was at the close of the year, member of the board in MustInvest, which owns directly, indirectly or via related parties – approximately 25% of the Arendals Fossekompani shares. The Board works actively to ensure that no conflict of interest exists between shareholders, the Board, Group management, and other stakeholders. Stakeholders will be informed if conflicts of interest were to occur. The Code of Conduct describes how Board members should behave if conflicts of interest were to occur. All Board members receive information about the Code of Conduct. Shares owned by board members In addition to the shares held by the representatives of the three principal shareholders, as at 31 December 2023, the board members had the following shareholdings either personally or through wholly owned companies: • Trond Westlie (Chairman): 7,048 shares • Stine Rolstad Brenna (Board member): 7,500 shares • Anne Grethe Dalane (Board member): 1,000 shares Deviations from the Code: The Board elects its own chair, in accordance with Section 4 of the Articles of Association. 9. THE WORK OF THE BOARD OF DIRECTORS The Board’s tasks The Board shall determine the Group’s strategy, carry out necessary control functions and ensure that the Group is satisfactorily managed and organised. The Board shall set the company’s financial objectives and approve its plans and budgets. The Board is also responsible for approving and updating the organisation’s purpose, value statement, policies and goals related to sustainable development. The senior executives in the Company are delegated the task to update and present material to the Board that is relevant to make good decisions regarding plans budgets and policies and goals related to maintain a sustainable development. Furthermore, the Board is overseeing the organisa- tion’s due diligence and other processes to identify and manage the organisation’s impacts on the economy, environment, and people. Stakeholders are encouraged to support these processes with their input during the Annual General Meeting. The targets, strategies and risk profile of the Company are reviewed annually by the Board of Directors. The sustainability strategy, the materiality analyses, stakeholder analyses and the sustainability report are approved by the Board of Directors. The operational implementation of these processes is delegated to the Chief Sustainability Officer (CSO) of the Company. This is in accordance with the Environmental Policy of the Company. The Board of Directors has delegated the formal stake- holder dialogue to the senior executives in the portfolio companies. A review of the systematic stakeholder inter- views is each year presented to the Board of Directors from the CSO. Rules of Procedure for the Board The Rules of Procedure encompass the following: the role of the Board and its tasks, the tasks of the CEO and his or her obligations towards the Board, formal procedures for the handling of matters brought before the Board, notice of board meetings and matters required to be considered by the Board etc. The Rules also stipulate when the Board is in quorum, how minutes are to be kept, how legal dis- qualification is determined and how the duty of confiden- tiality is to apply. The Board may deviate from the Rules of Procedure in certain situations. Providing instructions for executive management A clear distinction has been made between the tasks and work of the Board and that of Group management. The Chairman of the Board is responsible for ensuring that the Board’s proceedings and work are conducted in an effec- tive and correct manner. The CEO is responsible for man- aging company operations. The CEO’s tasks are clearly stated in the instructions drawn up for that position. 90 91 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Notice of board meetings and meeting procedures The Board has an annual plan containing a set of pre- determined topics for consideration at board meetings. The Board normally meets 6 to 8 times a year. Additional meetings are held when necessary. In 2023, a total of 10 board meetings were held. All board members receive information about the compa- ny’s operational and financial performance on a regular basis and in good time before the scheduled meetings. Board members also receive monthly operational reports. The company’s business plan, strategy and risks are reviewed and evaluated regularly by the Board. The final agenda for the board meeting is determined by the Chairman in consultation with the CEO. The CEO attends board meetings together with the board mem- bers. Others are invited to attend when this is deemed necessary. Duty of confidentiality – communication between the Board and shareholders In principle, the minutes of board meetings and the Board’s discussions are confidential, unless the Board decides otherwise or there is no apparent reason to main- tain confidentiality or secrecy. Legal competence The Board complies with the rules for legal competence and disqualification pursuant to Section 6–27 of the Norwegian Public Limited Liability Companies Act and the Board’s own Rules of Procedure. There were no issues in 2023 which a board member was disqualified from dis- cussing or voting on for reasons of legal competence. See also item 4 above, Guidelines for Board Members and Senior Executives. Use of board committees The Group has established an Audit Committee and a Remuneration Committee, both comprising members of the Board. The Audit Committee The company has a three-member Audit Committee established in accordance with the Rules of Procedure for the Audit Committee approved by the Board of Directors. The members are all members of the Board of Directors and consists of Stine Rolstad Brenna (Chair, member since 2020), Morten Bergesen (member since 2010) and Anne Grethe Dalane (member since 2022). The commit- tee has 2/3 female members. There are no underrepre- sented social groups in the committee. All members of the audit committee are elected from the members of the Board of Directors and are indepen- dent of the group management. The competence of the members is covered under the section about the Board of Directors and the presentation of the Board of Directors in the annual report. The Audit Committee is a preparatory committee to the Board of Directors. The committee is also responsible for providing support to the Board in the reporting of annual accounts, audits, internal control, risk manage- ment, sustainability reporting and more. The instruction for the Audit Committee was last revised by the Board of Directors in March 2023, to also include the obligation to supervise the audit of the annual accounts by the auditor in line with the EU regulation (EU) No 537/2014, and to assess and supervise the interdependence of the auditor as included in the amendments to the Auditors Act of 1 January 2021. At least one member shall be independent of the company’s Group management and have qualifica- tions in accounting or auditing. Board members who are also members of the Group management cannot at the same time be members of the Audit Committee. The Remuneration Committee The Remuneration Committee is a preparatory com- mittee to the Board of Directors comprising three board members including the Chairperson of the Board. The committee shall prepare compensation related matters for the Board and prepare the remuneration policy for remuneration of executive management and the remu- neration report to the General Meeting. The company has a four-member Remuneration Committee established in accordance with the rules of procedure for the Remuneration Committee approved by the Board of Directors. The members are all members of the Board of Directors and consists of Trond Westlie (Chair, member since 2022), Christian Must (member since 2022), Didrik Vigsnæs (member since 2019) and Lise Lindbäck (member since 2022). The committee has 1/4 female members. According to Norwegian law, it is prohibited to obtain certain information about job appli- cants, in particular linked to underrepresented social groups. Although it is the company’s objective to have broad representation at all levels, Arendals Fossekompani do not track or report information relating to underrepre- sented social groups. All the members of the Remuneration committee are elected from the members of the Board of Directors and are independent of the group management. The compe- tence of the members is covered under the section about the Board of Directors and in the Annual Report. Self-assessment The Board carries out an assessment of its activities once a year, where the Board considers the outcomes of its processes and tasks as described above, including their own performance in overseeing the management of the organisation’s impacts on the economy, environ- ment, and people. The starting point for this assessement is Arendals Fossekompani’s business activities and the work of the Board, how the Board works and its interac- tions. With regards to this, the Board also evaluates its performance in relation to corporate governance. In 2023, a self-assessment was conducted. The next self-assessment will take place in 2024. Onboarding and competence development To advance the collective knowledge, skills, and experi- ence of the Board related to sustainable development, the Board has an onboarding program covering these topics as the board members enter their roles. Through regular presentations about topics related to sustainability in the board meetings as well as more in-depth strategic presentations about this topic in the strategy meeting, the Board will further advance their collective knowledge on this topic. 10. RISK MANAGEMENT AND INTERNAL CONTROL The Group has no separate internal auditing department. Financial audits are carried out on a task-sharing basis, and in compliance with our guidelines and approval rou- tines. The Board carries out an annual review of the com- pany’s most important risk areas and internal controls and receives a report from the auditor addressing such matters. The Board evaluates the company’s core values and guidelines on ethics and social responsibility every year and verifies the extent of compliance with these guidelines. Group and company financial reporting process The Board receives monthly financial reports, with accompanying comments on the financial performance of the Group, the company and all portfolio companies. Extensive reports are prepared every fiscal quarter, with comments about the financial status of all levels in the Group. The finance department analyses the income statement and balance sheet in connection with each monthly report. A detailed reconciliation of balance sheet and income statement items are prepared each quarter, based on a predetermined plan. The value of material and risk-exposed balance sheet items are assessed. Major and unusual transactions are reviewed. All control procedures are documented. The most significant portfolio companies (see Note 1 – Segment reporting) have similar routines for financial reporting to the Group. FCCS Oracle, a cloud-based data- base solution delivered by Oracle, is used for financial consolidation. Our portfolio companies report all figures to this database online. The finance departments at our portfolio companies are responsible for the quality of the data reported each month and quarter. The quality of the reported data is checked by our auditors in connection with the prepa- ration of the annual financial statements. Portfolio com- pany ENRX also uses FCCS Oracle for its consolidation. Other portfolio companies use spreadsheets for consol- idation. The Audit Committee (see above) carries out and doc- uments a detailed review of the quarterly and annual reports prior to their consideration by the Board. The minutes and documentation from the Audit Committee meetings are available to the Board. Critical concerns Arendals Fossekompani has guidelines for ethical busi- ness conduct (the Code of Conduct) which can be found on the Company website. All employees and the Board receive training in our Code of Conduct and the whis- tleblower policy, which explains the company’s internal guidelines on how to deal with critical concerns if they occur. The Board is alerted about critical events. 11. REMUNERATION TO THE BOARD OF DIRECTORS The Annual General Meeting determines the remunera- tion payable to board members. The 2023 Annual General Meeting resolved that, with effect from May 2023, the Chairman of the Board will receive a fee of NOK 650,000 and NOK 360,000 will be paid to the other board mem- bers. In 2023, the Chairman also received a fee of tNOK 500 for consultancy services provided by his company Shama AS. (See Note 4 and 24). Remuneration paid to board members is not linked to financial performance or option schemes etc. 12. REMUNERATION OF SENIOR EXECUTIVES The Remuneration Policy with guidelines for remunera- tion of executive management and report on the annual remuneration of executive management is subject to approval and advisory vote by the Annual General Meeting in accordance with the Public Limited Companies Act section 6-16 A and B. The General Meeting approves the Remuneration Policy by any material change and at least every fourth year and shall annually provide an advisory vote on the annual remuneration report of the previous year. No consultants are involved in determining remu- neration. The Remuneration Report was adopted in the Annual General Meeting in May 2023. The Remuneration policy was approved by the Annual General meeting in 2022. 92 93 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 The Remuneration Policy and Remuneration Report are available on our website. Shareholders are encouraged to state their opinions regarding remuneration of both the Board of Directors and Senior Executives at the Annual General Meeting. Guidelines The CEO’s employment terms and conditions are deter- mined by the Board of Directors. Each year the Board makes a thorough assessment of the salary and other remuneration paid to the CEO in line with the guidelines in the Remuneration Policy. The Board may also award an annual performance-related bonus to the CEO. The Board’s evaluation is based on market surveys for similar positions. The terms and conditions for other senior executives and employees at the Parent Company are set by the CEO in line with the guidelines in the Remuneration Policy. The CEO informs the Chair of the Board of the terms and conditions. Terms and conditions for the senior executives of portfolio companies are set by the boards of the respective com- panies. The Board takes the position that the company must remain competitive with regards to the remunera- tion paid to senior executives, without being complicated or be wage leading. The remuneration is structured to provide strong alignment between the interests of exec- utives and shareholders, including a focus on delivering on the company’s key strategic objectives, and in support of the business strategy and long-term interests. More information about the purpose and principles for remuneration of senior executives in Arendals Fossekompani can be found in the Remuneration Policy published on our website. A description of how the remu- neration policy for members of the Board and senior executives relate to their objectives and performance in relation to the management of the organisation’s impacts on the economy, environment, and people, can also be found here. Performance-related remuneration Senior executives at the Parent Company benefit from performance-related bonus schemes as described in the Remuneration Policy and Remuneration Report available at arendalsfossekompani.no. Portfolio companies offer performance-based remuner- ation to varying degrees, as stipulated in the employees’ contracts. Terms and conditions Terms and conditions for remuneration of the Board of Directors are described in Note 4 of the Annual Report. 13. INFORMATION AND COMMUNICATION Annual financial statements and annual report – periodic reporting The Group normally publishes its preliminary annual financial statements in February. The complete annual financial statements, along with the Annual Report, are published on our website in March/ April. In addition, accounting figures are reported on a quarterly basis. The company’s financial calendar is published on the company’s website. Other market information It is considered important to the Group to inform owners and investors about our performance and financial status. Emphasis is placed on providing the financial market with the same information at the same time. In conversations with shareholders and analysts, care is taken to avoid giving more information to some than to others. Arendals Fossekompani has developed an Investor Relations Policy that is available on our website. Arendals Fossekompani insider instructions are updated according to the European Market Abuse Regulation (MAR). 14. GUIDELINES FOR EQUALITY AND DIVERSITY Arendals Fossekompani has implemented guidelines for equality and diversity for the composition of our Board of Directors, board committees and management. The guidelines state that diversity shall be an area of priority in nominating people to the governing bodies and man- agement of the company. There is a particular focus on ensuring diversity with regards to gender equality and diverse expertise. The guidelines set out more detailed objectives for the purpose of achieving these overall objectives, with both annual target dates and long-term target dates. The Board of Directors currently consists of three women and four men. The individuals on the Board of Directors have backgrounds from different industry sectors, which increases diversity. The Group management currently consists of two women and four men. The individuals in Group management have backgrounds from different industry sectors, which increases diversity. During 2023, Arendals Fossekompani recruited new col- leagues and is happy to see a growth in the number of female employees, supporting our journey towards better inclusion and greater diversity. 15. TAKEOVERS Based on our current shareholder structure, the condi- tions described for takeovers do not apply to the com- pany. The rules of procedure for the Board of Directors of February 2022 do however include guidelines and principles for the event of a takeover bid and for transac- tions that in fact constitute a disposal of the business of Arendals Fossekompani. 16. AUDITOR The auditor’s formal relationship with the Board of Directors The auditor is at the disposal of the Board of Directors and shall attend board meetings if needed. The auditor shall participate in Audit Committee meetings and attend any board meetings that deal specifically with the annual financial statements. The auditor will at that time inform the Board about any issues or concerns he or she might have regarding the annual financial statements and other matters, including any potential disagreements between the auditor and Group management. The Board holds annual meetings with the auditor to review reports submitted by the latter concerning the company’s accounting policies, risk areas and internal control routines. Auditor’s formal relationship with executive management The Board has drawn up guidelines for the Group’s busi- ness relations with the auditor. The fees paid to the auditor for statutory auditing and consulting services are pre- sented separately in the annual financial statements. PwC is the selected auditor. In addition to an ordinary audit, the firm has also provided consulting services within areas such as accounting, taxation and reporting to the Norwegian Water Resources and Energy Directorate (NVE). The Board regularly assesses whether the auditor’s control function is being carried out satisfactorily. 94 95 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 04 Sustainability Tor Aslak Heldal Mechanical operator, AFK Vannkraft Reporting Frameworks and Membership Associations 98 Our Sustainability Priorities 100 E Optimizing Portfolio Companies 107 Biodiversity 107 Economic Performance 108 Strenghtening Environmental Performance 109 Responsible Investments 111 New Investments 111 S A Great Place to Work 113 Diversity and Equality 113 Employee Satisfaction and Talent Attractiveness 114 Health and Safety 115 G Ethical Business Conduct 119 Anti-Corruption and Bribery 119 Information Security 120 Responsible Supply Chain 121 EU Taxonomy Summary 122 97 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Reporting frameworks GLOBAL REPORTING INITIATIVE (GRI) The Global Reporting Initiative is an international organisation that provides a framwework for sustainability reporting. Arendals Fossekompani uses the GRI Sustainability Standards for voluntary reporting of sustainable development. The standards cover reporting on economic, environmental and social dimensions. SUSTAINABILITY ACCOUNTING STANDARDS BOARD (SASB) The Sustainability Accounting Standards Board provides a set of industry specific standards that are used to guide the disclosure of financial material sustainability information for Arendals Fossekompani. TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES The purpose of the TCFD Standard is to give investors more knowledge on the financial impacts of climate-related issues, based on four core recommendations: Governance, Strategy, Risk Management, and Metrics and Targets. From 2020 to 2022, a climate risk analysis including an assessment of different climate scenar- ios, was carried out for the portfolio based on TCFD recommendations. The TCFD: Climate-Risk Assessment Report 2023 is attached. CARBON DISCLOSURE PROJECT (CDP) The Carbon Disclosure Project is an international reporting framework for compa- nies to manage their environmental impact. It is aimed at increasing transparency and providing an intuitive performance score based on companies’ climate action. 2021 marked the first year AFK publicly disclosed its environmental impacts to CDP. Arendals Fossekompani was awarded the score "B" in 2021 and 2022 and the score A- in 2023. GREENHOUSE GAS PROTOCOL (GHG) The GHG Protocol establishes comprehensive global standardised frameworks to measure and manage greenhouse gas (GHG) emissions from private and public sector operations, value chains and mitigation actions. Arendals Fossekompani and portfolio companies map and report GHG emissions in alignment with the GHG Protocol. UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS (SDG) Arendals Fossekompani supports the United Nations Sustainable Development Goals (SDG). We have chosen six SDGs where we believe we can make the larg- est positive contribution; SDGs 5: Gender Equality, 8: Decent Work and Economic Growth, 13: Climate Action, 7: Affordable and Clean Energy, 9: Industry, Innovation and Infrastructure, and 12: Responsible Consumption and Producion. The SDGs are all linked to our focus areas and material topics. Our portfolio companies have chosen SDGs independently of this. SCIENCE BASED TARGET INITIATIVE (SBTI) The Science Based Targets initiative is a collaboration between the CDP, the United Nations Global Compact, World Resources Institute (WRI) and the World Wide Fund for Nature (WWF), enabling organizations to set science-based emissions reduction targets. Arendals Fossekompani ASA has committed to reduce absolute Scope 1 and 2 GHG emissions with 42% by 2030 from a 2021 base year. The share of electric- ity consumption from renewable energy procurement is targeted to be 100% by 2030. Arendals Fossekompani has in addition committed that 60% of eligible private equity and listed equity portfolio by booked value will be setting SBTi validated tar- gets by 2027 from a 2021 base year. The validation process has been ongoing during the second half of 2023 and was approved by the Science based target initiative in January 2024. UNITED NATIONS GLOBAL COMPACT A UN initiative that supports global companies that are committed to responsible business practices in the areas of human rights, labour, the environment, and cor- ruption. Our annual report on Communication on Progress is a key component of our commitment to UN Global Compact. Furthermore, we cooperate by arranging seminars and attending courses held by UN Global Compact. We pay an annual membership fee FORNYBAR NORGE A part of the Confederation of Norwegian Enterprises (NHO). We participate through membership in an industry forum for the power market. We pay an annual member- ship fee. KLIMAPARTNERE AGDER A network for working together to achieve GHG reductions and a low emission soci- ety. We actively contribute to knowledge sharing by arranging seminars together and participate in professional events held by Klimapartnere. We pay an annual membership fee. Membership Associations To support our sustainability work we are members of these relevant industry organisations. 98 99 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Our sustainability priorities Stakeholder Dialogue Stakeholders are groups that can affect or be affected by Arendals Fossekompani’s decisions and actions. An assessment has defined the following key stakeholder groups for Arendals Fossekompani: Investors, customers, regulators, NGOs and employees. Stakeholder engagement provides us with a representative overview of their sus- tainability expectations and concerns. The method of engagement varies from year-to-year and between different stakeholders. In 2023, we mainly engaged with stakeholders through e-mails and meetings, and we also received valuable feed- back from investors, regulators, and NGOs on a corporate level. We conducted semi-structured interviews with a selection of stakeholders, specifically asking how they perceive Arendals Fossekompani and our sustainability efforts. The dialogue was conducted by a third party to facilitate open and honest feedback. STAKEHOLDER DIALOGUE Stakeholder group Arena for dialogue What they care about … and why that is important for Arendals Fossekompani Investors • Meetings • Quarterly updates • Company presentations • Attractive returns and value growth potential • A future-proof investment • Being taxonomy compliant • Access to equity at favourable terms • Right-priced stock for use as currency in M&A Customers • Meetings • E-mail • Seminars / webinars / conferences • Compliance and improvement in their value chain • Customers buying our products and services Regulators • Reporting requirements • Audits • Operating in line with legislation • Operating in line with legislation (mitigate reputation and financial risk) • Operating in line with expectations from the greater society • Being seen as a transparent and trustworthy company NGOs • Meetings • E-mail • Seminars / webinars / conferences • Improves sustainability impact and reach • Operating in line with expectations from the greater society • Being seen as a transparent and trustworthy company Employees • Employee development talks • Town hall meetings • E-mail / Teams • Pride • Sense of purpose beyond earning a living • Access to great talent • Lower turnover • Lower recruitment costs Materiality Assessment Input received through the stakeholder dialogue (the ‘outside-in perspective’) is always structured for discussion with Arendals Fossekompani’s ESG task force group, led by the Chief Sustainability Officer, who provide their knowledge and expe- rience from within the company (the ‘inside-out’ perspective). Topics or concerns raised by stakeholders are carefully evaluated based on their perceived importance to the company, and on Arendals Fossekompani’s ability to impact each topic (whether directly or indirectly). Such materiality assessments are conducted regularly, approximately every year. The assessment evaluates activities of our primary and secondary value chain and has defined material risks and opportunities. Arendals Fossekompani’s value chain has been identified as follows: ARENDALS FOSSEKOMPANI’S PRIMARY AND SECONDARY VALUE CHAIN Investment Policy & Strategy Financial & Societal Value creation Raw Materials and Supply Chain Production and Distribution Marketing and Management Customer or End-User Secondary value chain (Portfolio companies) Primary value chain (AFK Parent Company) Portfolio Management The assessment is conducted according to the GRI framework and TCFD recom- mendations of best practice. In 2023, we did not only evaluate our impact on the topics mentioned by stakeholders, but we considered each topic from a risk and opportunity perspective (a double materiality approach). More specifically, we eval- uated how the topics / impacts could potentially trigger financial effects for Arendals Fossekompani or our portfolio companies in the short, medium, or long term. 100 101 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 The 2023 assessment defined the following opportunities and risks for Arendals Fossekompani: OPPORTUNITIES RISKS • Frontrunner in the energy transition: Share knowledge and experience with others – both regionally and nationally • Land use and consequences for biodiversity • Continue to invest in green energy and technology • Emissions from own organisation and portfolio companies • Enable innovation • Compliance, i.e. violation of human rights • Develop and challenge portfolio companies • Unsuccessful investments • Be a good employer for employees • Green washing • Contribute to develop new workplaces • Becoming too focused on reporting • Be a positive contributor to the local society FOCUS AREA MATERIAL TOPIC A Great Place to Work Diversity and equality Employee satisfaction and talent attractiveness Health and safety FOCUS AREA MATERIAL TOPIC Optimising Portfolio Companies Biodiversity Economic performance Strengthening environmental performance Responsible Investments New investments Based on this evaluation, we decided to update the list of material topics. First, 'Sponsorships, Partnerships and Other investments' was removed as a material topic. The topic is still important but for Arendals Fossekompani as a group, our impact here is relatively limited. Second, Green Financing was also removed, as the targets for this topic have been achieved. Finally, Biodiversity was added as a new material topic, as our new development projects could potentially have an impact on nature and the environment. All material topics are sorted under four focus areas: Optimising Portfolio Companies, Responsible Investments, A Great Place to Work, and Ethical Business Conduct. A closer description of our impact on each topic can be found on the following pages, and a consequence vs. likelihood-assessment can be found in Appendix Materiality. Environment Social Governance FOCUS AREA MATERIAL TOPIC Ethical Business Conduct Anti-corruption and bribery Information security Responsible supply chain 102 103 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Optimising portfolio companies BIODIVERSITY It is important for Arendals Fossekompani to assess the impact our company has on nature and biodiversity, especially in new development projects. Nature and bio- diversity have in recent years been identified as critical to meet UNs Sustainable Development Goals and the targets to limit global warming to 1.5 °C. During UN’s Biodiversity Conference, COP 15, in December 2022, the global biodiversity framework Kunming-Montreal Global Biodiversity Framework was adopted. The impli- cation of this framework is that a mandatory reporting of nature-related data, including a company’s impact on biodiversity, must be published. In addition, targets for biodiversity will be a mandatory part of corporate gov- ernance. ECONOMIC PERFORMANCE Sustainability is linked to long-term performance; a clear belief of both Arendals Fossekompani and our main stakeholders. It is a long-term goal to link our sustain- able actions to the economic performance we see in the Group. Generally, the green revolution is characterised by regulations and market, and technology risks and oppor- tunities.Necessities for achieving the ambitions of cli- mate mitigation in society. New regulatory requirements, such as the EU Taxonomy and circular economy reporting poses a risk to many businesses. With the green transi- tion, there is a need for technological restructuring of the energy market by phasing out fossil fuels and having an increased emphasis of low impact and zero-emission technologies. This creates valuable opportunities for an industrial investment company like ours. STRENGTHENING ENVIRONMENTAL PERFORMANCE As an industrial investment company, Arendals Fossekompani has a double value chain. First the value chain as an investment company, and then a specific value chain for each portfolio company. An important pri- ority for Arendals Fossekompani is to develop our invest- ments. As seen in the KPI table for all portfolio companies, we follow up on GHG emissions and use of energy. Each portfolio company also performs its own materiality anal- ysis to follow up the environmental performance that is the most material for their business. Responsible investments NEW INVESTMENTS Arendals Fossekompani is looking for potential invest- ments within green energy and technology that contrib- ute to a sustainable society, is future oriented, and will stand the test of generations. As part of our screening criteria, new investments should demonstrate a poten- tial to contribute to, or to be transformed to contribute to, one of the six environmental objectives defined by the EU Taxonomy. This means that our investments should have a positive impact on its surroundings, contribute with new solutions and enable technologies for the green transition. As far as our impact assessment shows, nei- ther Arendals Fossekompani nor our business partners have a negative impact on these topics. It is important for us to be mindful about the impact of a possible investment, both the positive and negative. Investments in green energy and emerging technologies could include larger development projects which again could affect for instance biodiversity and surrounding society. A great place to work DIVERSITY AND EQUALITY Arendals Fossekompani believes that a workforce with a wide array of skills and backgrounds drives produc- tivity and performance. Our ambition is to preserve and continue to build an inclusive company culture with zero tolerance for discrimination based on grounds of gender, age, disability, ethnicity, sexual orientation, or religious belief. We are mindful that if not managed correctly, Arendals Fossekompani could have a potential negative impact on diversity and equality. This is a material topic that Arendals Fossekompani is invested in. Ensuring a diverse and equal workplace is included in our Code of Conduct, to which all portfolio companies are expected to adhere to. EMPLOYEE SATISFACTION & TALENT ATTRACTIVENESS Arendals Fossekompani aspires to be a preferred employer by establishing clear guidelines for manage- ment and employees, and implementing measures aimed at enhancing the working environment and employee satisfaction. The ability to attract and retain talented individuals is crucial for achieving our ambitious goals. Several of our portfolio companies are growth com- panies and are actively seeking new talent. Securing the right talent is paramount for the success of these compa- nies. Additionally, retaining institutional knowledge and experience is vital alongside attracting new talent. We need great people to contribute to the development and advisory roles within our portfolio companies, possessing expertise in both established and emerging technologies. Failure to attract and retain the right individuals could potentially result in unsuccessful projects and hinder our ability to reach company ambitions. HEALTH AND SAFETY The employees at Arendals Fossekompani are consid- ered our most invaluable assets. Safe working condi- tions for our employees is our highest priority. Healthy and safe working conditions are recognized as a human right and involves both the prevention of physical and mental harm, and promotion of workers’ health. Failure to ensure healthy and safe working conditions could lead to employees becoming harmed or injured while at work. In the most severe cases, unsafe working conditions could lead to long-term reduced health or even fatalities which is an unacceptable risk. Ethical business conduct ANTI-CORRUPTION AND BRIBERY We have a long and proud history at Arendals Fossekompani. We will act responsibly and with integ- rity everywhere we operate. We honour our legacy and secure our current and future license to operate. Some of our operations take place in countries associated with high political, corruption and human rights risks. Addressing anti-corruption and anti-bribery measures is of paramount importance to us due to the potential adverse effects of these risks. Several of our portfolio companies regularly conduct risk assessments relating to corruption. INFORMATION SECURITY Cyber security is a critical, board-level issue in Arendals Fossekompani, with potential positive or negative impacts. Our positive influence relates to Arendals Fossekompani’s ability to establish safety guidelines, pro- vide training to employees, and implement secure cyber systems. A lack of cyber security could have an actual or potential negative impact, for example relating to the crit- ical infrastructure offered by some of our portfolio com- panies such as Volue, NSSLGlobal and Alytic. A potential breach could, in the most severe instances, lead to critical downtime, impacting people, the environment and/or the economy. RESPONSIBLE SUPPLY CHAIN Mismanagement of a global supply chain can cause negative environmental and social impacts, as well as impacts related to governance issues, such as corruption and violations of data privacy. Arendals Fossekompani takes a precautionary principal approach to business ethics and responsible supply chain. We recognise our obligation to responsibly manage our relationships with suppliers, monitor their operations and proactively work to diversify our supplier base. COMMUNICATION ABOUT MATERIAL TOPICS Our progress on these and other sustainability topics is communicated back to stakeholders, mainly through this report. 104 105 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Environment Optimising the portfolio companies Biodiversity POLICIES We recognise the actual and potential impact that we can have on the environment, including biodiversity. We consider environmentally responsible business conduct as both an opportunity to ensure long-term performance and growth, and a necessity to reach the objectives set out in The Paris Agreement and in the Kunming-Montreal Global Biodiversity Framework specifically. We have developed an Environmental Policy for the purpose of promoting and main- taining high environmental standards throughout all business operations. The policy is approved by the Board and is applicable to all employees and projects. The policy should be communicated to employees and portfolio companies, suppliers, business partners and other third parties. We strive to ensure that they too are committed to high environmental standards, and we encourage them to implement their own environmental policies. ACTIONS Arendals Fossekompani works to ensure that we and our portfolio companies are committed to respecting and acknowledging our impact on nature and biodiver- sity. Even when a site is not located in a protected area, our activities can impact nature and biodiversity in the surrounding area. Biodiversity is especially important for activities that involve encroachment on nature, such as our hydropower portfolio and real estate businesses. An important part of mapping our impact on biodiversity is to identify the number of operational sites and assess whether they are built on protected areas or areas of high biodiversity value. We also plan to carry out annual environmental audits at our hydropower facilities. In addition, thorough environmental assessments shall be conducted before new hydropower plants are built, to make sure that we do not do more damage to nature than necessary, and that interventions will have a more positive than negative impact. MEASURES The number of operational sites in 2023 was 70. Only three of the operational sites are adjacent to protected areas or in areas of high biodiversity value. As this is the first year we have included biodiversity as a material topic, we have not yet been able to track or follow up the impact from our operations on all locations. However, we have included some information from a selection of portfolio companies; Tekna, ENRX, AFK Property, and AFK Vannkraft. In Brazil and France, ENRX has three operational sites owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value. These sites are: FOCUS AREA MATERIAL TOPIC Optimising Portfolio Companies Biodiversity Economic Performance Strengthening Environmental Performance Responsible Investments New Investments SITE ENRX LTDA ENRX SAS ENRX SAS Location Sorocaba, Brazil Seyssinet-Pariset, France Marcoussis, France Position related to protected area Adjacent to protected area High biodiversity value area outside protected area High biodiversity value area outside protected area Type of operation Office, manufacturing Office, manufacturing Office, manufacturing Size 800 m 2 3,880 m 2 1,110 m 2 Attribute Terrestrial Terrestrial Terrestrial Biodiversity value Wilderness area n/a n/a ENVIRONMENT KPIs Target Target Year 2023 2022 2021 Scope 1 GHG (tCO 2 e) 1 2030 1,858 1,744 1,584 Scope 2 GHG (location-based) (tCO 2 e) 1 2030 2,319 2,470 2,838 Scope 2 GHG (market-based) (tCO 2 e) - - 4,342 4,168 4,310 Scope 3 GHG (tCO 2 e) 2 1,267 2030 3,494 3,298 2,253 Energy consumption (MWh) - - 27,111 26,516 22,338 1. Emission reduction target for Scope 1 and 2 in line with the Paris Climate Agreement. 2. Scope 3 emissions include the categories Waste, Business Travel and Fuel-and-Energy-Related Activities. 106 107 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Red listed species (described in the table above) and national conservation listed species have habitats in areas affected by Tekna’s operations. AFK Property performs regular tests in the surround- ings of Arendal Airport Gullknapp. There is one red listed species in a creek close to the airport, but there are no emissions in that direction and the distance to the creek should be sufficiently long. No biodiversity impact has been identified in this creek. AFK Vannkraft is using natural resources in their elec- tricity production and is therefore affecting the stream of water between their two power plants. The three spe- cies of fish that inhabit this stream of water are tracked to ensure their continued presence. AFK Vannkraft's greatest impact on biodiversity in the river is through the man-made large variations in the flow of water (minimum 40 m 3 /s). TARGETS In 2024, we plan to update the Environmental Policy and the Code of Conduct to include biodiversity, as this will help us reach the objectives set out in the Kunming- Montreal Global Biodiversity Framework. We also plan to conduct a nature risk assessment in line with the Task- Force on Nature-related Financial Disclosures (TNFD) framework. Since biodiversity was identified as a material topic for Arendals Fossekompani as recent as in 2023, we have not yet adopted specific targets for our work related to this topic, but plan to do so in 2024. Economic performance POLICIES We work targeted and systematically to ensure long- term growth in our portfolio companies. The way we work towards this goal is described in our Code of Conduct. As an owner we engage directly in the portfolio companies’ performance, especially when it comes to their sustain- ability efforts. In this work, we help portfolio companies identify opportunities that are likely to increase their economic performance, and measures that can be imple- mented to avoid or reduce risks. Our goal is to secure competitive advantages, such as cost savings, increased consumer demand, risk mitiga- tion, tax incentives, and using resources efficiently in sat- urated or competitive markets. CO Collapsed CR Critically endangered EN Endangered VU Vulnerable NT Near threatened DD No deficient DD Least concerned NE Not evaluated Red listed Threatened ACTIONS We have made separate reports about the perfor- mance of the portfolio companies, which relates to the EU Taxonomy and climate risk assessment. As for the climate risk analysis, we have considered two different scenarios: 1) a green revolution that is characterised by transition risks and opportunities, and 2) a climate crisis scenario which entails considerable physical risks. Our portfolio companies are exposed to transitional risks throughout their value chains, particularly in terms of rising energy prices, as well as prices for products and services in the supply chain. Additionally, regulations aimed at driving the transition to a circular economy will have an impact on the requirements faced by our portfo- lio companies. Arendals Fossekompani’s exposure to physical risks is largely through our supply chains, with tier 2 and tier 3 suppliers located in areas prone to extreme weather and higher temperatures. At the customer end of our value chains, we identified a potential for increased demand for the products and services of our portfolio companies. Transitional and physical risks will create both oppor- tunities and risks. So far, our analysis gives reason to believe that there is a potential upside for the economic performance of our portfolio with regards to transitional climate risk. A TCFD maturity assessment has been conducted for the entire AFK group (see separate TCFD report). In 2023, we continued to support the portfolio companies to improve economic performance. Good collaboration resulted in several important sustainability assessments being finalised. Targets and ambitions related to eco- nomic performance were established for each portfolio company. These will be followed up on an yearly basis and the effectiveness of the actions taken will be evaluated in the annual strategy process. MEASURES Information about our performance on this topic can be found in chapter 2 and the separate climate risk report (TCFD report). Following the new CSRD regulations, Arendals Fossekompani will look closer at appropriate measures and targets in 2024. TARGETS Arendals Fossekompani will continue to focus on eco- nomic performance, to ensure long-term value creation for shareholders and employees. This includes a mapping of actual and potential adverse impacts in the portfolio, for example by updating the TCFD analysis. We will also look closer at the financial implications of climate risks and opportunities, and their actual or potential related costs. Strengthening environmental performance POLICIES As stated in our Environmental Policy, Arendals Fossekompani is committed to strengthening our envi- ronmental performance. We are dedicated to avoiding or minimising any adverse environmental impacts linked to our business operations. This includes indirect impacts, for example through business activities conducted by our portfolio companies, business partners, suppliers, and other third parties. We consider innovation and technology to be principal enablers to further decrease greenhouse gas emissions. It is important to develop sustainable technologies and products that are eco-friendly, recyclable, recoverable and best-in-class in terms of environmental responsibility. We intend to play our part in reaching the environmen- tal objectives set out in the Paris Agreement and have committed to reducing our absolute Scope 1 and 2 GHG emissions by at least 42% by 2030 (base year: 2021). ACTIONS We are continuously working to strengthen the environ- mental performance of our portfolio companies. All our investments are subject to a sustainability onboarding process, which includes an initial materiality assessment and the identification of sustainability focus area for the company. Once onboarded, our portfolio companies are integrated in annual sustainability assessments and reporting processes. Three joint meetings were held with sustainability teams in the portfolio companies in 2023, where we shared knowledge and information. In 2023, several of our new investments were onboarded in the different sustainability frameworks that we have developed. Also, an initial assessment of the EU Taxonomy gave us an indication of eligibility and align- ment of our portfolio. Climate risk assessments (based on the TCFD framework) helped identify material risks and opportunities in the different companies. In 2022, Arendals Fossekompani committed to and sub- mitted scienced-based emission reduction targets, in line with the Science Based Target initiative (SBTi) criteria and recommendations. In 2023, the following targets were validated by SBTi: LEVELS OF EXTINCTION RISK Red list species Number of species Critically endangered 4 Endangered 16 Vulnerable 58 Near threatened 69 Least concern 1,229 108 109 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 • Scope 1 and 2: Arendals Fossekompani com- mits to reducing absolute scope 1 and 2 GHG emissions by 42% by 2030 (base year: 2021). Arendals Fossekompani also commits to con- tinuing active annual sourcing of 100% renew- able electricity within the same timeframe. • Scope 3 Portfolio Targets: By 2027, Arendals Fossekompani will have SBTi validated targets for 60% of its eligible private equity and listed equity portfolio (book value). MEASURES To strengthen the sustainability performance of our port- folio companies, we monitor GHG emissions for Scope 1 and Scope 2, and report on Scope 3 within the categories for business travel, waste, and fuel-and-energy-related activities. The Scope 3 report can be found in Chapter 2. All emissions data are provided on a group level, using the operational control method. 2021 is chosen as the base year for emissions in Arendals Fossekompani Group, since emissions from ENRX (former EFD Induction) was not included in the emissions data collected in 2020. Reported emissions are based on all known emissions, which are documented by invoices. Emissions are assumed to be based on all purchases made in 2023. Our Scope 1 emissions increased from 1,584 tonnes CO 2 e in 2021 to 1,858 tonnes CO 2 e in 2023 (17% increase). The main reason is an increase in the Scope 1 Emissions for NSSLGlobal, due to increased office space and staff. Scope 1 emissions also increased due to new investments that have been included in the reporting after 2021. Our Scope 2 emissions decreased from 2,838 tonnes CO 2 e in 2021 to 2,319 tonnes CO 2 e in 2023 (18% decrease). The main reason for the decrease is energy efficiency measures at all sites, and solar panel installa- tions in India, in this period for ENRX. The electricity emission factors used are based on national gross electricity production mixes from the International Energy Agency’s statistics (IEA Stat). Emission factors per fuel type are based on assumptions in the IEA methodological framework. Factors for district heating/cooling are either based on actual (local) produc- tion mixes or average IEA statistics. In 2023 the total amount of energy produced in Arendals Fossekompani Group was 542 GWh, this equals the amount of energy sold in the power market. Total use of energy in Arendals Fossekompani Group equals energy consumption minus energy sales: 27 GWh-542 GWh= -515 GWh. The energy consumptions is the sum of the energy consumption of Arendals Fossekompani Parent Company and all the portfolio companies. None of our businesses are involved in processing of bio- logically based materials, hence, we did not have any bio- genic CO 2 emissions in 2023. More information about GHG emissions, including the assumptions and emission factors used for calculations, is included in our Carbon Accounting Report, which has been compiled with assistance from CEMAsys. The report is based on the international standard; A Corporate Accounting and Reporting Standard, developed by the Greenhouse Gas Protocol Initiative (GHG Protocol). The GHG Protocol is the most widely used and recognised international standard for measuring greenhouse gas emissions (GHG) and is the basis for the ISO standard 14064-I. TARGETS We will continue to work together with our portfolio com- panies to strengthen their environmental performance, by improving the mapping and reporting of their GHG emissions. We will engage with current and future portfo- lio companies in the process of setting science-based tar- gets in line with the private equity sector science-based target guidance, and we will also assist portfolio compa- nies in reaching their targets, whilst following-up on our own commitments to the SBTi. Arendals Fossekompani has committed to 60% of its eligible private equity and listed equity portfolio by book value setting science based validated targets by 2027 from a 2021 base year. In 2024, we will continue the preparation of reporting in accordance with the Corporate Sustainability Reporting Directive (CSRD) and the related European Sustainability Reporting Standard (ESRS). We also plan to further strengthen our EU Taxonomy assessment, and improve the digitalisation of our sustainability report, to increase its readability and accessibility. Responsible investments New investments POLICIES As an international industrial investment company, Arendals Fossekompani is continuously looking for new investments and M&A opportunities. Possible investments, partnerships and M&A candidates are evaluated according to our responsible investment scope and screening process, which is described in our Environmental Policy. The policy is developed for the pur- pose of promoting and maintaining a focus on high envi- ronmental standards throughout all business operations. The Environmental Policy was adopted by the Board of Directors and is applicable to all Arendals Fossekompani employees and projects. It should be communicated to all employees, portfolio companies, suppliers, business part- ners and other third parties. The Environmental Policy includes commitments to comply with all applicable laws and regulations, and to play its part in reaching the envi- ronmental objectives set out in the Paris Agreement. It also addresses responsible sourcing of natural resources and sourcing of 100% renewable electricity - in addition to reduced waste generation. Investment possibilities that are not in line with our investment criteria and com- pany strategy, will not be considered. ACTIONS Investments and acquisitions of companies lay the foundation for a positive sustainability impact in the management phase. Following our strategy, Arendals Fossekompani’s investments are focused on the energy transition, electrification and materials, and digitalisa- tion. With investment and development goals within these sectors, our portfolio will contribute to a more sus- tainable future. A significant part of onboarding a new investment to our sustainability framework is to perform an EU Taxonomy assessment. Such an assessment will define if the investment’s activities are eligible with the EU Taxonomy criteria. MEASURES During 2023, Arendals Fossekompani started construc- tion of a new run-of-the-river power plant, Kilandsfoss. This facility is located in Nidelva between the existing plants Bøylefoss and Flatenfoss and will produce 38 GWh per year, which will supply approximately 2,000 households with green energy. The hydropower plant will extract more energy from a river that already provides lots of energy to society. As the region needs more energy and the world needs more renewable energy, building Kilandsfoss is a small contribution to this. TARGETS Going forward, we will continue to develop our newly established companies and projects, including our new investments. For future investments, we will continue to have the same long-term ambition. The EU taxonomy eligibility and alignment will be a part of the investment criteria. In addition, we will include climate risk assess- ments as part of the due diligence process of future pos- sible investments. Scope 1 emissions (tCO 2 e) Scope 2 emissions (Location based) (tCO 2 e) Scope 3 GHG (tCO 2 e) 1,584 1,744 1,858 2,838 2,470 2,319 2,253 3,298 3,494 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 MWh 24,931 26,516 27,111 23,500 24,000 24,500 25,000 25,500 26,000 26,500 27,000 27,500 GHG EMISSIONS 2021 2022 2023 ENERGY CONSUMPTION 2021 2022 2023 110 111 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Social FOCUS AREA MATERIAL TOPIC A Great Place to Work Diversity and equality Employee satisfaction and talent attractiveness Health and safety SOCIAL KPIs Target Target Year 2023 2022 2021 Lost time injury frequency rate 0.0 - 2.2 1.0 0.8 Sick leave <2.0% - 2.7% 3.0% - Turn-over rate <10% - 14% 16% 7.6 % Female employees 30% 2027 21% 20% 19% Women on Board of Directors 50% 2027 25% 28% 30% A Great Place to Work Diversity and equality POLICIES In Arendals Fossekompani, we believe that a workforce with a wide array of skills and backgrounds drives productivity and performance. We are mindful that if not managed correctly, Arendals Fossekompani could have a potential negative impact on diversity and equality. That is why this is a strategic focus area not only for us, but also for each of the portfolio companies that we have invested in. Ensuring a diverse and equal workplace is also included in our Code of Conduct, to which all portfolio companies are expected to adhere to. The Code of Conduct was updated in 2023 to include important additions from the Transparency Act. The policy applies to all employees, hired workers, consultants, agents, board members, and others working on behalf of Arendals Fossekompani. The Code of Conduct includes guidelines for whistleblowing, human rights and decent working conditions, openness and trust, EHS, equality and diversity, integrity and anti-corruption, and business conduct. The policy is in line with UN guiding principles, OECD, and the Norwegian Equality and Anti-Discrimination Act. ACTIONS We regularly check in with the portfolio companies to ensure that they are in com- pliance with relevant laws and regulations regarding equality and diversity, and we encourage portfolio companies to conduct their own mapping in accordance with the Activity and Reporting Obligation, to discover the status of diversity and equality in their own organisations. Our Code of Conduct complies with the latest version of the Norwegian Equality and Anti-Discrimination Act, and all portfolio companies are expected to adhere to the Code of Conduct and its guidelines for equality, inclusion and non-discrimination. For more information on how we engage with the specific portfolio companies, please refer to the Optimising Portfolio Companies chapter in this report. To reflect our global operations, we have used the regions Europe, America, and Asia as significant locations of operation. Several of our portfolio companies have more specific indicators on diversity, where diversity in nationalities is the most used. Arendals Fossekompani is certified according to Equal Workplace (Likestilt Arbeidsliv), a certification scheme run by Agder County. This is a certification that needs to be verified every three years. It facilitates continuous work with equality and diversity in the workplace and guides the certified organisations in the right direction with determined focus areas and criteria. Our certification has resulted in the establishment of an action plan for equality and diversity efforts, with targets for 2022 through 2025. We have already set up a new HR system as a part of our action plan, to secure equal follow-up by all employees. This system is also facilitating development conversations so that all leaders follow a standardised template for this conversation. The work we have done to address both the Equality and Anti- Discrimination Act and the Equal Workplace certification, will be a great guidance and roadmap in continuing our journey towards more inclusion and greater diversity. MEASURES Arendals Fossekompani Group has conducted a survey in all portfolio companies to gather the information presented in the table Employee Diversity (in Appendix). GRI’s definitions of full-time, part-time, permanent, and temporary employees has been used. Compared to 2022, the number of employees in AFK Group has increased from 2,451 to 2,670. Arendals Fossekompani Group has employees in 24 countries. 21% of the total workforce is female. ENRX, Ampwell, and NSSLGlobal have workers with non-guaranteed hours who are employees on-call. These are three males and four females, all in Europe. 112 113 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 The number of workers who are not employees and whose work is controlled by the organisation was 142. The reported numbers of employees are on a headcount basis at the end of the reporting period. The workers are mainly freelancers and consultants. The type of work they perform includes engineering, software development, advisory services, communication, and warehousing. There have not been any significant fluctuations. In 2021, we defined specific goals for gender equal- ity, applicable for the group of AFK companies. Gender equality is measured at three corporate levels: Board of Directors and C-suite positions. At year-end 2023, there were 25% women on our Boards, compared to 28% in 2022. The number of women in C-suite positions has increased significantly from 14% in 2022 to 24% in 2023. More details about diversity in governance bodies and diversity per employee category is found in the Appendix: GRI Information under Diversity and Equality. The workforce is divided into different levels, including C-suite position, Board of Directors, and Non-executive level management. The workforce is also described by different job functions with the categories technical and production, administrative, and other functions, such as sales and marketing. The ratio between the annual compensation for the highest paid individual and the average annual compen- sation for employees is 11.5 to 1. The ratio between the percentage increase in annual total compensation for the organization’s highest-paid individual and the aver- age percentage increase in annual total compensation for all employees, was 0.9 to 1. For more information regarding remuneration, please refer to the Appendix: GRI Information under Diversity and Equality, which gives an overview of ratio between women and men, and the separate Remuneration report. Other indicators of diver- sity vary in the different portfolio companies and includes disability and countries and cultures. No significant fluctuation in employees has been seen. The total number of employees is increasing as the Group is growing and all portfolio companies are developing new business. There has been no reported incidents of discrimination during the reporting period, and thereby no actions taken in relation to this. 27% of the total workforce in the group is covered by col- lective bargaining agreements. Information about how the different portfolio companies determine terms and working conditions for those not covered by collective bargaining agreements could be found in the table below. TARGETS As part of the Equal Workplace certification process, an action plan is developed for the next three years. The goals set during the certification process are related to topics such as inclusive working environment, recruit- ment and career, and life phases. The goals include cre- ating and improving routines for a better follow-up of employees in different life situations, training of leaders in managerial positions, professionalising the recruit- ment processes, increasing knowledge about equality and diversity, and generally raising the quality of internal processes related to equality and diversity. Our portfo- lio companies are encouraged to work towards achiev- ing the Equal Workplace certification, and we will create learning sessions on equality and diversity for all portfo- lio companies. Our target is to achieve a share of 50% women in all our boards and C-suite positions by 2027, and 30% female share of employees overall by 2027. Employee satisfaction and talent attractiveness POLICIES The Code of Conduct, described under Diversity and Equality is an important policy for Employee Satisfaction and Talent Attractiveness. In addition, the personnel handbook is an important collection of guidelines and regulations for topics such as vacation and time off (parental leave, military service, education, and others), sickness, competence development, salary, benefits, EHS, and other regulations. ACTIONS Arendals Fossekompani’s actual and potential impact on employee satisfaction and talent attractiveness can be both positive and negative. Poor management of the working environment can potentially lead to dissatisfac- tion, high turnover rate or sick leave, and failure to attract the talents we need. On the other hand, establishing clear guidelines for management and employees, and imple- menting measures aimed at enhancing the working envi- ronment and employee satisfaction, can make Arendals Fossekompani and our portfolio companies preferred employers and provide a workplace where employees thrive and succeed. At Arendals Fossekompani we offer favourable work- ing conditions for our employees: We provide learning opportunities and contribute to the development of our employees’ careers, and we provide our employees with flexibility for how to perform tasks, working hours, and more, if needed. The feedback we receive is that this gives room to combine working life and family life. As part of our Equal Workplace certification, we devel- oped an action plan for the topic “Recruitment and career”, focusing on professionalising the recruitment process, boosting attractiveness towards new talents, as well as developing the competencies of our employees. Another topic is “Life phases”, which addresses different life situations employees can find themselves in, and where they need support. Examples could be parental leave, welfare leave, retirement, and more. We strive for employee satisfaction and the highest pos- sible talent attractiveness across the portfolio. We regu- larly follow-up our portfolio companies to see how they are doing. During 2023, a recruitment/applicant tracking system was implemented. This improves our systems for following up recruitment processes and giving possibili- ties for having a talent database based on inquiries and open applications, and still be compliant with the GDPR regulations. We have set requirements for recruiters to search for diversity when a new position is to be filled. The HR system that was implemented in 2022 have been further incorporated in our employee follow-up during 2023. The system has improved the structure of perfor- mance reviews and check-ins. All employees have now an updated job description which is accessible in the person- nel handbook. Onboarding procedures for new employ- ees and offboarding for employees leaving the company are now also structured and improved with templates in the HR system. MEASURES Our goal for the Arendals Fossekompani Group in 2023 was to have less than 3.0% sick leave. At year-end, the actual number was 2.7%, down from 3.0% in 2022. The turnover rate for Arendals Fossekompani Group was 14.3% in 2023, which is higher than the target of 10%, but better than 16% in 2022. The total number of new hires was 564, and the total number of employees leaving the Group was 368. The average age for new hires were 33 for women and 34 for men. The average age of people leaving the com- pany were 36 for women and 38 for men. More infor- mation about new employee hires by age group and region could be found in table New Employee Hires and Employee Turnover in the Appendix: GRI Information under Employee Satisfaction and Talent Attractiveness. The total number of employees who took parental leave during 2023 was 120, of which 32 were women and 88 were men. As part of our work on employee satisfaction and talent attractiveness, we have professionalised our recruitment processes. These efforts have extended into a process of implementing a new recruitment system. TARGETS In 2024 we will improve policies and follow-up routines for parents-to-be, employees on parental leave, and senior employees. We will ensure that we have good structures for deciding salary and salary reviews to pre- vent systematic differences. A HR group will be formed to share knowledge across the portfolio companies, work together to reach long-term goals, and achieve synergies across industries. A new governmental requirement includes regulations during staff reductions, where there is introduced laws to reorganise employees in a group. This requires good cooperation across the companies in the group. During 2024, we will also establish a working environment com- mittee, which will closely monitor the development of the working environment. Health and safety POLICIES Healthy and safe working conditions are recognized as a human right and addressed in authoritative intergovern- mental instruments. Healthy and safe working conditions are also a Sustainable Development Goal. This involves both the prevention of physical and mental harm, and promotion of workers’ health. Arendals Fossekompani complies with the Norwegian Internal Control Regulations (Internkontrollforskriften), which is controlled by the Norwegian Labor Inspection Authority. Our policies on health and safety are addressed in our Code of Conduct, which is also extended to our sup- pliers through our Business Partner Code of Conduct. ACTIONS Arendals Fossekompani aims to have a positive impact on occupational health and safety. This is a key priority and a strategic focus across our portfolio. We are com- mitted to providing a healthy and safe working envi- ronment for all employees, and we have conducted risk assessments, implemented guidelines, established man- agement systems, and provided training to management and employees to prevent harm and promote health in the workplace. We have an occupational health service where all employees were offered an optional lifestyle and health check-up. As part of the Equal Workplace certifica- tion and the Activity and Reporting Obligation, we plan to work with a HR system for Arendals Fossekompani that will ensure good handling of health and safety. MEASURES Health and safety is closely followed up by each port- folio company and all portfolio companies have devel- oped their own health and safety system customised to the different industries and work tasks they operate in. Information about the health and safety in each portfo- lio company is reported and a summary of procedures in the largest companies could be found in the Appendix: GRI Information under Health and Safety. The summary covers 90% of the workforce. 114 115 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Statistics regarding work-related injuries, could be found in the Appendix: GRI Information under Health and Safety. All companies are included. The rate of injuries is based on 1,000,000 hours worked. No workers have been excluded from this disclosure. ENRX ENRX have determined several hazards, mainly related to machinery used. These hazards are mitigated by safety features in the machinery where possible and specific safety instructions and training where not pos- sible. No hazards have been identified in the reporting period. Actions are taken as part of the risk analysis and integrated into the local management system, which includes: • Inspection forms for the health and safety committee members. • Improvement in the daily inspection forms for lifts and hoist. • Adding a prevention program on same level fall (slips/trip hazard). • Since 2022, ENRX have used the OSHA standard methodologies for OHS reporting. There have been no cases of high-consequence injuries in the reporting period. TEKNA Tekna determines hazards based on: • Audits made with a partner organisation specialised in prevention that helps the company determine where measures can be taken to assure the safety of personnel. • Incident and accident log. • Employee concerns that are brought to the health and safety committee. • Risk analysis. To eliminate hazards and minimize risks, Tekna is cur- rently working on improvement of machines (automation) to limit the human factor that may cause a potentially dangerous situation. Tekna is tracking its project in an OHS plan "A3 SST". Examples of projects include: • Automated powder collection on plasma system. • Improve hydrogen system. • New instrumented system to detect oxygen. There has been one case of high-consequence injuries in the reporting period. Recordable accidents are defined similarly as OSHA and they include: • Fatality • Any injury or illness that result in loss of consciousness, day away from work, restricted work or transfer. • Injury or illness requiring medical treatment beyond first aid. Day away from work is defined as complete stop of work mentioned by a doctor in the medical attestation. NSSLGLOBAL NSSLGlobal's procedures P01 Accident, Incidents and Dangerous Occurrences, and P25 Workplace Precautions and Risk Control System, document processes for determining work-related hazards as described in the Appendix. No high-consequence injuries have occurred during the reporting period. Standards, methodolo- gies, and assumptions used to compile this information includes our ISO 45001 certified OH&S Management System. All accidents, incidents and near misses are recorded. VOLUE Volue’s main business relates to software development, where the risk of high-consequence injuries is very low. Volue’s business related to Industrial IoT will in some cases involve a risk of work-related hazards. These risks are determined individually for each project based on a risk assessment, for example in the case of working with high voltage electricity. There have been no cases of high-consequence injuries in the reporting period. ALYTIC Alytic’s business relates to software development, where the risk of high-consequence injuries is very low. As a result, there have been no cases of high-consequence injuries in the reporting period. VERGIA There have been no cases of high-consequence injuries in the reporting period. ARENDALS FOSSEKOMPANI PARENT COMPANY To identify work-related hazards and assess risks on a routine basis, AFK Parent Company conducts risk and vulnerability analysis for continuous work. To identify work-related hazards and assess risks on a non-routine basis, the company has established a whistleblowing system for employees to report incidents and irregulari- ties, including situations that can potentially cause injury and ill health, and which employees wish to remove them- selves from. Risks identified in the risk assessment will be used to eliminate hazards. The HSE group consists of two worker representatives and two representatives from the management team, who implement changes related to eliminating hazards. There have been no cases of high-consequence injuries in the reporting period. AFK PROPERTY To identify work-related hazards and assess risks on a routine basis, AFK Property conducts risk and vulnerabil- ity analysis for continuous work. To identify work-related hazards and assess risks on a non-routine basis, AFK Property has established a whistleblowing system for employees to report incidents and irregularities, including situations that can potentially cause injury and ill health, and which they wish to remove themselves from. Risks identified in the risk assessment are used to eliminate hazards. The HSE group consisting of two worker repre- sentatives and two representatives from the manage- ment implement changes related to eliminating hazards. There have been no cases of high-consequence injuries in the reporting period. AMPWELL Determination of hazards has been done by Ampwell’s safety expert through an annual hazard assessment, and respective measures are introduced in order to eliminate and/or reduce hazards, if any. On-site inspections by the occupational safety and health committee take place on a quarterly basis. Participants includes the exter- nal safety officer, in-house safety advisers, the external company doctor, the environmental management officer, and head of production. Standards, methodologies, and assumptions used for compiling this information includes operating manuals, risk assessments, hazard assess- ment, safety inspections, CE-conformity of operating plant, training, among others. There have been no cases of high-consequence injuries in the reporting period. TARGETS As part of the Equal Workplace certification and the Activity and Reporting Obligation, we plan to work with a HR system for Arendals Fossekompani Parent Company that will ensure good handling of health and safety. We have conducted an extensive mapping of occupational health and safety risks linked to Arendals Fossekompani and our portfolio’s activities and will continuously work to decrease these risks. 116 117 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Governance Ethical business conduct Anti-corruption and bribery POLICIES Our Code of Conduct constitutes our framework for managing compliance and integrity risks - describing our commitments and requirements regarding business practice and personal conduct. The Code of Conduct outlines clear principles and rules in key compliance and integrity areas like anti-corruption and anti-bribery, facil- itation payments, conflict of interest, gifts and hospitality, human rights and labour rights, fair competition, anti-money laundering or sanctions and trade compliance, and others. The Code of Conduct is endorsed by the Board, and the Audit Committee regularly reviews the company’s compliance with the Code of Conduct and supporting docu- ments. The Chief Sustainability Officer reports to the Audit Committee on the design, implementation and effectiveness of our business integrity program and activities, and reviews performance in this respect. The Code of Conduct applies to all employees, including hired personnel, consul- tants, agents, elected representatives, Board members and any other person repre- senting or acting on behalf of Arendals Fossekompani. Our employees are expected to familiarise themselves with the contents of the Code of Conduct, conduct their duties in compliance with its principles, and seek guidance from their manager or others when necessary. Corresponding ethical guidelines shall be sought to be implemented, with any com- pany specific additions, in subsidiaries where Arendals Fossekompani holds an ownership interest of more than 33%, and shall be implemented where Arendals Fossekompani holds an ownership interest of more than 50%. Board members appointed by Arendals Fossekompani in other companies shall actively work for the implementation of corresponding ethical guidelines. We expect our customers, suppliers, and business partners to adhere to the same high ethical standards that we have set for ourselves. When entering into agree- ments with third parties, Arendals Fossekompani can require that the third party adhere to the Arendals Fossekompani Code of Conduct / Business Partner Code of Conduct, or that the third party shall present their own ethical guidelines that they commit to operate in accordance with. ACTIONS In 2023, Arendals Fossekompani maintained most core elements of its compliance programme, including the anti-corruption and human rights compliance frame- works. At year-end, 1,841 of the Group’s employees (69%) had signed the Code of Conduct. A Code of Conduct e-learning programme was made available to employ- ees, and in 2023, 1,627 (61%) employees undertook such training. We also conducted screenings of potential projects in high-risk countries and of potential business part- ners, and identified no significant risks related to corruption. We also followed up on reports made in the reporting period, and all reports were investigated. FOCUS AREA MATERIAL TOPIC Ethical Business Conduct Anti-corruption and bribery Information security Responsible supply chain GOVERNANCE KPIs Target Target Year 2023 2022 2021 Reported incidents/breach of CoC 0 - 0 2 - CoC signed 100% - 69% 78% 87% Corruption cases 0 - 0 1 1 Employees that have received training in cyber security 57.23% Whistleblower reports 1 0 0 118 119 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 MEASURES In 2023, we communicated our anti-corruption policies and procedures to 1,637 (67%) of our employees, 52 (90%) of our C-suite positions and 151 (71%) of non-execu- tive level management. The policies and procedures were also communicated to 43 (63%) of our Board members and 2,106 (10%) of business partners. Anti-corruption training was conducted during the reporting period. In total, 1,225 (47%) of employees took part in such train- ing, in addition to 34 (59%) of C-suite positions, 126 (59%) of non-executive level management and 15 (22%) of Board members. For a breakdown of communication and training per region, please refer to the Appendix: GRI Information under Ethical Business Conduct. In 2023, Arendals Fossekompani assessed 18 out of 70 (26%) of our operations for risks related to corruption. There were no confirmed incidents of corruption and no public legal cases regarding corruption brought against the Group or its employees during the reporting period. No employees were dismissed or disciplined for corruption, and no contracts with business partners were terminated or not renewed due to violations related to corruption. No critical concerns were reported to the Board in 2023. TARGETS • 100% signing of the Code of Conduct • 100% training in the Code of Conduct • 0 breaches of the Code of Conduct • Continuous improvement of our end-to-end process to follow up on business partners. • Improving our global risk assessment process. • Implementing engaging business ethics training concepts to build awareness and engagement. • Digitalisation or automation of identified compliance processes to increase efficiency. In 2024, we will continue our efforts to secure responsible business conduct and promote a culture of compliance and integrity. We will build a common compliance pro- gramme for all portfolio companies to ensure that these matters remain relevant in a dynamic global context and amid challenges, such as increased regulations, enforce- ment, complexity, and external expectations, as well as sustainability impact and alignment with our strategic sustainability agenda. Information security POLICIES Our Cyber Security Check List and our Information Security Policy outlines our guidelines and principles regarding information security, including: • Roles and responsibilities for information security • Employee training on information security • Information security emergency drills • Procedures and policies that reflect information security best-practice • An Incident Handling Procedure • 24/7 system surveillance with both automated and human response to security alerts Management should regularly report back to the Board regarding the status of information security. The Board regularly discuss information security as part of their Board agenda. ACTIONS New regulations and reporting requirements make information security risk oversight a challenge. The management is therefore responsible for determining information security risks and establishing adequate company preparedness. The goal is to identify gaps and initiate improvement projects which will increase the level of awareness and security in portfolio companies. If gaps are identified, a list of improvement projects is made, which should include a timeline, a responsible person, and a timely report. In 2023 we updated our Privacy Policy to reflect recom- mendations from external evaluations. This was done in order to have a state-of-the-art privacy policy and again to adapt the policy into a more practical stepwise internal procedure. We also provide digital training in information security to several of our portfolio companies, with a pos- sibility of rolling it out to more companies. MEASURES In 2023, 1,528 employees (57%) completed such training. TARGETS In 2024, we will continue to use information security check lists for all portfolio companies. This is important due to increased complexity and external expectations, as well as the increasing risk for cyber security breaches. Our focus areas for 2024 relating to this topic include: • Performing risk assessments • Training of Board members • Conducting penetration testing • Facilitating a common awareness campaign Responsible supply chain POLICIES Arendals Fossekompani shall ensure a responsible supply chain. We do not accept any form of forced labour, includ- ing child labour. We shall comply with all fundamental labour rights and have a continuous focus on providing safe and decent working conditions for all. We commit to the rules and principles laid out in the UN Guiding Principles on Business and Human Rights, includ- ing the principles and rights set out in the eight funda- mental conventions identified in the Declaration of the International Labour Organisation (ILO) on Fundamental Principles and Rights at Work, and the International Bill of Human Rights, and the OECD Guidelines for Multinational Enterprises. Additionally, our Code of Conduct and Business Partner Code of Conduct set guidelines and principles that all employees, suppliers and business partners shall adhere to, including our standards for health and safety, human and labour rights, environment, quality management, business integrity, and corporate social responsibility. We have established a risk-based supplier onboarding process, which includes health and safety, environmen- tal and compliance aspects (such as human and labour rights risks checks), and this allows for comprehensive evaluation (due diligence) of our suppliers. Our Factlines supply chain management system enables us to verify and monitor their performance, and our audit question- naire includes a detailed verification of their adherence to our Supplier Declaration and internationally recognised standards for human and labour rights. We regularly conduct due diligence of existing suppliers and business partners where the goal is to ensure that our supplier base operates in accordance with our principles and requirements. It is important that employees are aware of and report undesirable behaviour, and this can be done through our internal whistleblowing channel. AFK has established an external whistleblowing channel (in addition to the inter- nal notification channel) where third parties or employees wishing to stay anonymous can file their report. The exter- nal whistleblowing channel can be accessed through our website. We are committed to providing for or cooperat- ing in the remediation of any negative impacts our organ- isation has caused or contributed to. ACTIONS To secure that we meet the demands that we set for others, we have revised and assessed our Code of Conduct and Business Partner Code of Conduct, with help from judicial experts. We have also evaluated the portfolio companies’ implementation of the Business Partner Code of Conduct. On 1 July 2022, the Norwegian Transparency Act entered into force. The act relates to the transparency of enter- prises and their efforts regarding fundamental human rights and decent working conditions. More than 8,000 Norwegian businesses now have the duty to carry out due diligence of human rights in their own operations, as well as their value chains. Stakeholders’ right to information about conditions at production facilities concerning a particular product or service, is material in this new act. It is important that Arendals Fossekompani acts according to the law and sets a good example for its portfolio by identifying risks among suppliers. To comply with the Norwegian Transparency Act, a due diligence of all main suppliers and business partners was conducted in 2023 using the Factlines supply chain system. The results classified the suppliers and business partners in different risk groups, which enabled us to identify which of them to follow up first. Additionally, we have created a guideline for handling incoming requests for information, in accordance with the Transparency Act. For more information about our work on human rights and supply chain management, please refer to the sep- arate Human Rights and Transparency Act Report found on our website. MEASURES The 2023 supplier and business partner due diligence process did not identify any significant breaches of human rights, but there are a few potential risks related to production countries that we will follow up. No signifi- cant instances of non-compliance with laws and regula- tions were registered during the reporting period, and we received no fines for instances of non-compliance with laws and regulations. TARGETS In 2024, we will improve the interactions with and fol- low-up of suppliers and business partners in both the parent company and portfolio companies. We will improve the management of human rights and decent working conditions in our value chains, starting with suppliers that have production in high-risk countries. We have set the following targets for this topic for 2024: • 0 significant instances of non-compliance with laws and regulations • 0 fines for instances of non-compliance with laws and regulations • 0 reported incidents regarding breach of human rights in our operations or supply chain 120 121 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 EU Taxonomy Summary As a key part of the European Union’s Green Deal, the EU Taxonomy defines a common and enforceable language on sustainability aiming to scale up sustainable invest- ments and avoid greenwashing. The EU Taxonomy is a classification system for sustainable economic activities, consisting of the following six environmental objectives: 1. Climate change mitigation 2. Climate change adaptation 3. Sustainable use and protection of water and marine resources 4. Transition to a circular economy 5. Pollution prevention and control 6. Protection and restoration of biodiversity and ecosystems The environmental objectives 3-6 were adopted by the EU in June 2023, in addition to amendments for the envi- ronmental objectives 1 and 2. However, due to delays in the legislative process in the European Economic Area, the June 2023 regulations did not enter into force in Norway in 2023. The Norwegian Ministry of Finance has still encouraged Norwegian undertakings to report on the environmental objectives 3-6 for the financial year of 2023. Arendals Fossekompani has decided to include objectives 3-6 in this year’s EU Taxonomy assessment, and reports on eligibility and alignment for environmen- tal objectives 1 and 2 following Commission Delegated Regulation (EU) 2020/852 and on eligibility for economic activities adopted by the EU as of June 2023. Additionally, one of our portfolio companies have chosen to report alignment on one of their activities contributing to water and marine resources. Companies must report the share of aligned, eligible, not aligned and non-eligible economic activities for three KPIs: net revenue (turnover), capital expenditure (CapEx), and operating expenditure (OpEx). An activity is consid- ered eligible if it matches the description of an economic activity according to the EU Taxonomy. An eligible activity needs to fulfil technical screening criteria (TCS) and min- imum safeguards to be considered aligned. The figure below gives a detailed overview of the process for the EU taxonomy assessment. ARENDALS FOSSEKOMPANI AND THE EU TAXONOMY The EU Taxonomy is incorporated in Arendal Fossekompani’s investment strategy, encompassing new investments related to electrification, materials, and energy transition. Such investments should show a potential to contribute to, or to be transformed to contrib- ute to, one of the six environmental objectives defined by the EU Taxonomy. Due to strategic importance and stake- holder expectations, Arendals Fossekompani performed an initial assessment of the EU Taxonomy in 2021 and reported voluntarily on eligibility and alignment for the first two environmental objectives for 2022. In 2023, we are proud to expand our report to also cover the remain- ing four objectives. SCOPE All portfolio companies in the Arendals Fossekompani Group have been considered for reporting on the EU Taxonomy for 2023. We have not included joint ventures and associated companies, as they are not consolidated in the Group’s financial statements. Each portfolio company has identified their business activities and assessed each activity with regards to the EU Taxonomy economic activ- ities within the scope of all six environmental objectives. EU TAXONOMY ASSESSMENT ECONOMIC ACTIVITIES IN THE PORTFOLIO Environmental objective Economic activity as defined in the EU Taxonomy Transitional/ enabling Aligned/eligible, not aligned Relevant companies Climate change mitigation 4.9 Transmission and distribution of electricity Enabling Aligned Volue 4.5 Electricity generation from hydropower Aligned AFK Vannkraft 3.6 Manufacture of other low carbon technologies Enabling Aligned TEKNA 3.6 Manufacture of other low carbon technologies * Eligible, not aligned ENRX, TEKNA 7.1 Construction of new buildings Eligible, not aligned AFK Property, Ampwell, ENRX 7.7 Acquisition and ownership of buildings Eligible, not aligned AFK Property, Volue, ENRX 8.2 Data-driven solutions for GHG emissions reductions * Eligible, not aligned Volue, Alytic 6.15 Infrastructure enabling low-carbon road transport and public transport * Eligible, not aligned ENRX 3.4 Manufacture of batteries * Eligible, not aligned Ampwell 4.10 Storage of electricity * Eligible, not aligned Ampwell 8.1 Data processing, hosting and related activities ** Eligible, not aligned Ampwell 7.2 Renovation of existing buildings ** Eligible, not aligned AFK Vannkraft Identification of business activities in the EU Taxonomy for each portfolio company Substantial contribution Do no significant harm Minimum safeguards Calculation of KPls on portfolio company level Screening the NACE codes of the portfolio companies Identify criteria for substantial contribution Identify criteria for DNSH Identify criteria for minimum safeguards Consolidation of reported figures on group level Assessment of eligible activities per portfolio company Data collection Data collection Reporting group level List of eligible activities Assesment of the impact of the activities against the criteria Assessment of the impact of the activities against the criteria Assessment of compliance on group leve Alignment Eligibility KPIs 122 123 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 ECONOMIC ACTIVITIES IN THE PORTFOLIO Climate change adaptation 7.2 Renovation of existing buildings Aligned AFK Vannkraft 8.2 Computer programming, consultancy and related activities Eligible, not aligned Volue 9.1 Close to market research, development and innovation * Eligible, not aligned Alytic 14.1 Emergency services * Eligible, not aligned NSSLGlobal 7.1 Construction of new buildings Eligible, not aligned AFK Property 4.5 Electricity generation from hydropower Eligible, not aligned AFK Vannkraft Transition to a circular economy 3.1 Construction of new buildings Eligible, not aligned AFK Property, Ampwell, ENRX 5.5 Product-as-a-service and other circular use-and result-oriented service models Eligible, not aligned NSSLGlobal 5.2 Sale of spare parts Eligible, not aligned ENRX 4.1 Provision of IT/OT data-driven solutions * Eligible, not aligned Volue 3.2 Renovation of existing buildings Eligible, not aligned AFK Vannkraft Sustainable use and protec- tion of water and marine resources 4.1 Provision of IT/OT data-driven solutions for leakage reduction Enabling Aligned Volue * Activities that have the potential to be enabling, however are not classified as such since the technical screening criteria are not considered met. ** Activities that have the potential to be transitional, however are not classified as such since the technical screening criteria are not considered met. PROCESS The EU Taxonomy assessment has been conducted by each portfolio company, supported by a core team with representatives from Arendals Fossekompani. Assessments have been performed in accordance with the structure of the EU Taxonomy, starting with eligibil- ity assessments before assessing compliance with the criteria for substantial contribution and do no significant harm (DNSH). The minimum safeguards assessment has been conducted by Arendals Fossekompani on group level, based on policies and procedures covering the group. Eligible activities that meet the criteria for sub- stantial contribution and DNSH, as well as the minimum safeguards, are reported as aligned. We reports the EU Taxonomy on an aggregate of portfolio companies. When assessing the technical screening criteria, we have encountered challenges regarding interpretations and best practice. Some of the criteria refer to EU directives, that may not be, or is only partially, adopted and imple- mented in Norway. Subsequently this may lead to certain requirements and thresholds not being provided. CONCLUSIONS We are proud to report on all six environmental objectives of the EU Taxonomy. Through the exercise, we have found that AFK has the potential to contribute to multiple envi- ronmental objectives, covering Climate change mitiga- tion, Climate change adaptation, Transition to a circular economy and Water and marine resources. Further, we recognize that one of AFK’s main contributions going for- ward may be through enabling others in the transition, through activities that have potential to be enabling. Throughout 2023, AFK has developed its reporting on the EU Taxonomy in line with the developments and new guidance from the European Commission regarding the EU Taxonomy Regulation. This has also led to strength- ened understanding of the EU Taxonomy’s definitions of the KPIs. This year’s reporting show stable developments of the KPIs compared to last year. Aligned turnover is largely consistent, with a small increase of 0.3%. Eligible, not aligned turnover has seen an increase of roughly 1,3%. Aligned, and eligible, not aligned CapEx has both seen an increase of 12.9% and 1% respectively, and we are pleased to observe that the capital expenditures across AFKs portfolio are yielding tangible results that are reflected in the EU Taxonomy. Aligned, and eligible, not aligned OpEx both see decreases of roughly 18% and 14% respectively, compared to the voluntary reporting in 2022. These changes highlight the improvements made to the calculation methodology in the 2023 report, driven by a strengthened understanding of the EU Taxonomy's OpEx definition. The high percentage of eligible activities reflects the great potential in our portfolio companies. Our goal is to further increase both eligible and aligned reporting in the years to come. Turnover 1 Aligned 22.3% Eligible, not aligned 37.6% Non-eligible 40.1% CapEx 2 Aligned 16.6% Eligible, not aligned 46.3% Non-eligible 37.0% OpEx 3 Aligned 6.9% Eligible, not aligned 10.4% Non-eligible 82.7% 1. Within the aligned turnover and the eligible, not aligned turnover, 3.7% and 12.1% respectively are related to the Commission Delegated Regulations of June 2023. 2. Within the aligned CapEx and the eligible, not aligned CapEx, 4.7% and 2,7% respectively are related to the Commission Delegated Regulations of June 2023. 3. Within the aligned OpEx and the eligible, not aligned OpEx, 1.9% and 1.7% respectively are related to the Commission Delegated Regulations of June 2023. EU TAXONOMY ELIGIBILITY AND ALIGNMENT 124 125 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 05 Financial Statements Annual Accounts and Notes in Full 128 Declaration by the Members of the Board and the CEO 196 Independent Auditor’s Report 198 Proadpran B. Piccini Senior Analyst, Renewable Fuels, Veyt 127 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Group Parent Company Note 2023 2022 2023 2022 Revenue 5 400 158 4 568 534 503 750 605 400 Other Income 1,2 40 885 18 002 15 565 22 687 Revenue and other income 1 5 441 042 4 586 536 519 315 628 087 Materials and consumables used 1 813 833 1 446 542 2 002 4 203 Employee benefit expenses 4 1 868 047 1 691 116 75 506 78 370 Other operating expenses 7 1 006 245 722 461 92 090 82 552 Operating expenses 4 688 125 3 860 120 169 599 165 124 EBITDA 752 918 726 417 349 716 462 963 Depreciation 5 179 227 183 679 13 072 11 532 Amortisation 6 140 687 104 308 1 934 1 934 Impairment loss property, plant and equipment 5 202 Impairment loss intangible assets 6 9 489 Operating profit 433 004 428 740 334 711 449 497 Finance income 8 182 626 118 486 267 658 601 459 Finance costs 8 193 221 81 201 92 438 54 503 Net financial items -10 595 37 285 175 220 546 956 Share of profit or loss of associates and joint ventures 11 -31 382 -40 405 Profit before income tax 391 027 425 620 509 931 996 454 Income tax expense 9 420 547 458 139 298 818 392 149 Profit (-loss) -29 520 -32 519 211 112 604 305 Attributable to Equity holders of the company 32 590 5 744 211 112 604 305 Non-controlling interests -62 110 -38 263 Total -29 520 -32 519 211 112 604 305 Basic/diluted earnings per share (NOK) 22 0,59 0,10 3,85 11,02 Group Parent Company Note 2023 2022 2023 2022 Items that may be reclassified to statement of income Total Effect from Foreign Exchange 85 136 56 245 Change on Cash flow hedges 5 535 -8 582 Tax on cash flow hedges that may be reclassified to P&L 9 -1 218 1 888 Items that may be reclassified to statement of income 89 454 49 552 Items that will not be reclassified to statement of income Change in financial assets at fair value through OCI 16 2 088 -3 311 2 088 -3 311 Actuarial gains and Losses -1 431 -2 352 -718 -2 615 Tax on OCI that will not be reclassified to P&L 9 -143 838 158 575 Items that will not be reclassified to statement of income 513 -4 825 1 528 -5 351 Total Other Comprehensive Income (OCI) 89 967 44 727 1 528 -5 351 Profit (-loss) for the year -29 520 -32 519 211 112 604 305 Total Comprehensive Income 60 446 12 208 212 640 598 954 Attributable to Equity holders of the company 99 043 37 690 212 640 598 954 Non-controlling interests -38 597 -25 482 Total 60 446 12 208 212 640 598 954 STATEMENT OF INCOME (1 000 NOK) STATEMENT OF COMPREHENSIVE INCOME (1 000 NOK) 128 129 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 STATEMENT OF FINANCIAL POSITION (1 000 NOK) Group Parent Company Note 2023 2022 2023 2022 Assets Property, plant and equipment 5 1 428 536 1 086 112 227 396 229 477 Intangible assets 6 2 376 559 1 756 782 6 797 8 731 Investments in associates and joint ventures 11 20 315 37 317 16 906 Investment in subsidiaries 3,11 1 811 429 1 751 829 Intercompany loans - non current 1 384 434 320 728 Net pension assets 4 28 270 24 993 13 369 12 041 Non-current receivables 12 177 453 183 154 56 642 90 169 Shares in other companies 12 88 283 80 543 77 275 80 440 Deferred tax assets 9 127 723 108 430 46 285 47 349 Non-current assets 4 247 139 3 277 331 3 623 627 2 557 669 Inventories 13 1 280 223 845 472 Contract assets 13 182 239 136 970 Accounts receivable 14 1 044 423 926 124 22 127 31 233 Other receivables 14 249 648 388 804 221 022 477 062 Derivatives - current assets 16 4 545 11 065 Other current assets 14 107 156 30 371 Cash and cash equivalents 15 1 928 652 2 212 495 1 064 083 1 160 349 Financial assets at fair value through OCI 16 15 907 11 830 15 907 11 830 Current assets 4 812 794 4 563 132 1 323 139 1 680 476 Total assets 9 059 932 7 840 462 4 946 766 4 238 145 * Restated, see note 15. Group Parent Company Note 2023 2022 2023 2022 Equity and liabilities Share capital 10 223 981 223 981 223 981 223 981 Other paid-in capital 25 604 21 800 25 604 21 800 Treasury shares -112 938 -110 012 -112 938 -110 012 Other reserves 59 634 4 749 1 866 -1 833 Retained earnings 2 804 670 2 982 317 2 887 448 2 893 428 Capital and reserves attributable to owners of the company 3 000 952 3 122 836 3 025 962 3 027 365 Non-controlling Interests 11 637 581 661 511 Total equity 3 638 533 3 784 347 3 025 962 3 027 365 Non-current bond loans 17,25 498 042 497 581 498 042 497 581 Non-current interest-bearing debt 17,25 1 745 430 353 067 964 324 153 307 Pension liabilities 4 36 938 23 588 6 623 6 358 Other non-current liabilities 25 30 778 32 079 Non-current provisions 1 950 1 600 Deferred tax liabilities 9 132 939 65 025 Non-current lease liabilities 19,25 226 537 203 076 57 965 60 258 Non-current liabilities 2 670 664 1 176 366 1 526 954 719 105 Current interest-bearing debt 17,25 234 715 170 841 Bank overdraft 25 168 745 110 873 Derivatives - current liabilities 16 3 660 9 196 Accounts payable 18 512 917 969 613 11 852 12 105 Payable income tax 9 369 671 436 746 272 000 374 830 Contract liabilities 13 239 890 233 496 Current interest-bearing debt, intercompany 36 416 17 185 Current lease liabilities 19 65 762 58 454 2 293 2 300 Current provisions 18 56 688 117 662 1 600 Other current liabilities 18 1 098 687 772 868 69 690 85 255 Current liabilities 2 750 736 2 879 748 393 850 491 675 Total liabilities and equity 9 059 932 7 840 462 4 946 766 4 238 145 Froland, 11 April 2024 Trond Westlie, Chairman Stine Rolstad Brenna, Board Member Lise Lindbäck, Board Member Morten Bergesen, Board Member Didrik Vigsnæs, Board Member Anne Grethe Dalane, Board Member Christian Must, Board Member Benjamin Golding, Chief Executive Officer 130 131 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 STATEMENT OF CASH FLOWS (1 000 NOK) STATEMENT OF CASH FLOWS (1 000 NOK) Group Parent Company Note 2023 2022 2023 2022 Cash flow from operating activities Net profit for the year -29 520 -32 519 211 112 604 305 Adjusted for Depreciation, impairment and amortization 319 914 297 677 15 006 13 466 Net financial items 9 653 -37 285 -175 220 -546 956 Share of profit from associates and joint ventures 31 382 40 405 Gain/loss from sales of assets 2 302 -140 -580 -503 Tax expense 420 547 458 139 298 818 392 149 Change in inventories -404 443 -276 034 Change in trade and other receivables 23 957 -223 935 -3 274 3 086 Change in trade and other payables -521 964 180 171 -509 -38 644 Cash flow from internal accounts payable and receivable 10 867 25 924 Change in other current assets -61 962 -15 960 Change in other current liabilities 291 816 248 519 -20 674 61 932 Change in other provisions 1 965 -20 011 -8 400 Change in employee benefits 8 336 -1 861 -1 781 -1 530 Tax paid -490 373 -193 717 -400 427 -112 023 Net cash from operating activities A -398 391 423 448 -66 661 392 806 Cash flow from investing activities Interest received and realized FX gains 8 94 789 60 220 115 151 45 855 Dividends received 8 3 234 3 659 99 627 97 229 Proceeds from the sales of PPE 1 078 4 220 878 503 Purchase of PPE and intangible assets -644 948 -358 488 -11 290 -23 828 Purchase of shares in associates -29 829 Purchase of shares in subsidiaries (reduced by cash balance) 3 -476 565 -224 159 Purchase of financial assets at fair value -2 081 -2 081 Proceed from sale of financial assets at fair value 93 85 93 85 Purchase of other investments -16 161 -53 305 -43 751 Proceed from sale of other investments 21 001 5 916 20 608 Transactions with investments in subsidiaries -78 219 -91 651 Proceeds from the sales of shares in subsidiaries 11 774 5 409 11 776 5 506 Net cash from investing activities B -1 007 787 -586 272 156 542 -10 052 Group Parent Company Note 2023 2022 2023 2022 Cash flow from financing activities Equity payments from/ to non controlling interests -10 260 17 699 Cash from new borrowings 25 1 322 068 268 680 825 485 147 763 Repayment of long-term borrowings 25 -162 291 -256 833 -2 293 -3 958 Cash flow from issuance of receivables 2 283 Cash flow from internal loans and borrowings -761 615 -514 343 Cash flow from net change in current interest-bearing debt 25 277 552 2 686 -7 Interest paid and realized FX losses 8 -137 058 -54 738 -43 809 -33 675 Payment of interest and currency swap Dividend paid -251 175 -230 544 -216 532 -206 292 Group Contribution 9 462 12 278 Cash flow from treasury shares 878 -35 423 878 -35 423 Cash flow from other financing activities 4 092 Net cash from financing activities C 1 043 806 -288 473 -186 148 -633 649 Cash flow A+B+C -362 372 -451 297 -96 267 -250 896 Opening balance for cash and cash equivalents 2 212 495 2 640 922 1 160 349 1 411 245 FX effects on cash accounts 78 530 22 870 Closing Balance for cash and cash equivalents 1 928 652 2 212 495 1 064 083 1 160 349 Unused credit facilities 2 194 085 2 270 996 1 131 526 1 947 000 * Restated, see note 15. 132 133 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 STATEMENT OF CHANGES IN EQUITY (1 000 NOK) Group Note Share capital Other paid-in capital Treasury shares Other reserves Retained earnings Owner's equity Non- controlling Interests Total equity Balance at 1 January 2022 223 981 10 120 -63 119 -47 215 3 239 771 3 363 537 545 306 3 908 843 Profit (-loss) for the year 6 033 6 033 -38 552 -32 519 Total Other Comprehensive Income (OCI) 33 385 -1 728 31 657 13 070 44 727 Effect of share based payment 4 11 357 11 357 3 883 15 240 Treasury shares 11 681 -46 893 -211 -35 423 -35 423 Transactions with non-controlling interests 8 -4 340 128 570 124 230 161 543 285 773 Capital changes from subsidiaries 11 563 18 663 30 196 43 30 238 Dividends paid 10 -408 752 -408 752 -23 783 -432 535 Balance at 31 December 2022 223 981 21 800 -110 012 4 749 2 982 317 3 122 836 661 511 3 784 347 Balance at 1 January 2023 223 981 21 800 -110 012 4 749 2 982 317 3 122 836 661 511 3 784 347 Profit (-loss) for the year 32 590 32 590 -62 110 -29 520 Total Other Comprehensive Income (OCI) 62 625 3 288 65 913 24 054 89 967 Effect of share based payment 4 11 319 11 319 2 708 14 027 Treasury shares 3 804 -2 926 2 166 3 044 2 269 5 313 Capital changes from subsidiaries 3 13 384 - 14 300 -916 26 150 25 234 Transactions with non-controlling interests -32 443 22 863 -9 580 8 958 -622 Dividends paid 10 -224 254 -224 254 -25 958 -250 212 Balance at 31 December 2023 223 981 25 604 -112 938 59 634 2 804 670 3 000 953 637 581 3 638 533 STATEMENT OF CHANGES IN EQUITY (1 000 NOK) Parent Company Note Share capital Other paid-in capital Treasury shares Other reserves Retained earnings Owner's equity Non- controlling Interests Total equity Balance at 1 January 2022 223 981 10 120 -63 119 681 2 700 126 2 871 788 2 871 788 Profit (-loss) for the year 604 305 604 305 604 305 Total Other Comprehensive Income (OCI) -3 311 -2 040 -5 351 -5 351 Effect of share based payment 797 797 797 Treasury shares 11 681 -46 893 -211 -35 423 -35 423 Dividends paid 10 -408 752 -408 752 -408 752 Balance at 31 December 2022 223 981 21 800 -110 012 -1 833 2 893 428 3 027 365 3 027 365 Balance at 1 January 2023 223 981 21 800 -110 012 -1 833 2 893 428 3 027 365 3 027 365 Profit (-loss) for the year 211 112 211 112 211 112 Total Other Comprehensive Income (OCI) 2 088 -560 1 528 1 528 Effect of share based payment 4 1 611 1 611 1 611 Treasury shares 3 804 -2 926 878 878 Dividends paid 10 -216 532 -216 532 -216 532 Balance at 31 December 2023 223 981 25 604 -112 938 1 866 2 887 448 3 025 962 3 025 962 134 135 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 136 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 Notes to the annual and consolidated financial statements for 2023 Accounting policies INFORMATION ABOUT THE COMPANY Arendals Fossekompani ASA is domiciled in Norway, and with headquarters in Bøylefoss, in the Municipality of Froland. The consolidated financial statements for finan- cial year 2023 include the company and its subsidiaries (as a whole, referred to as "the Group"). Information about the companies included in the scope of consolidation is disclosed in Note 11, together with information about Group investments in associates. Basis for preparation The annual and consolidated financial statements have ® been prepared in accordance with IFRS Accounting Standards as adopted by the European Union and asso- ciated interpretations, as well as Norwegian disclosure requirements pursuant to the Norwegian Accounting Act applicable as of 31 December 2023. The annual and consolidated financial statements were approved by the board of directors on 11 April 2024. The annual and consolidated financial statements will be submitted for adoption at the Annual General Meeting scheduled for 15 May 2024. The board is authorised to amend the annual and consolidated financial statements until final adoption. The financial statements are presented in Norwegian kroner (NOK), which is the functional currency of the parent company. All amounts disclosed in the financial statements and notes have been rounded off to the near- est thousand NOK units unless otherwise stated. The financial statements have been prepared using the historical cost principle, with the exception of the follow- ing assets, which are presented at fair value: Financial instruments at fair value through profit or loss and finan- cial instruments at fair value through other comprehen- sive income. The Group recognises changes in equity arising from transactions with owners in the statement of changes in equity. Other changes in equity are presented in the statement of comprehensive income (total return). Preparation of financial statements in accordance with IFRS requires the use of assessments, estimates and assumptions that influence which accounting policies shall be applied, and also influence recognised amounts for assets and liabilities, revenues and costs. Actual amounts can deviate from estimated amounts. Estimates and underlying assumptions are reviewed on an ongoing basis. Changes in accounting estimates are recognised in the period in which they arise if they only apply to that period. If the changes also apply to subse- quent periods, the effect is allocated over the current and subsequent periods. Areas with significant estimation uncertainties, and where assumptions and assessments made have sig- nificantly influenced the application of the accounting policies, are disclosed in Note 21. Accounting policies The accounting policies applied in the preparation of the annual and consolidated financial statements are described below. With the exception of effects described in the section on changes in accounting policies below, the policies are applied consistently for all periods. In case that subsidiaries have used other principles to prepare their separate annual financial statements, adjustments have been made so the consolidated financial state- ments are prepared according to common policies. CHANGES IN ACCOUNTING POLICIES FOR 2023 No new standards have been adopted by the Company and the Group with effect from 1 January 2023. PRINCIPLES OF CONSOLIDATION Segment reporting Financial information for the operating segments is determined and presented based on the information pro- vided to the company's board of directors, which is the Group's ultimate decisionmaker. FOREIGN CURRENCY TRANSLATION Transactions in foreign currencies Transactions in foreign currencies are translated to the functional currency of each individual Group company using the exchange rates at the dates of the transactions. Monetary assets and liabilities in foreign currencies are translated to NOK using the exchange rate at the bal- ance sheet date. Differences that arise from the currency translation are recognised in the income statement. FINANCIAL STATEMENTS OF FOREIGN OPERATIONS Assets and liabilities in foreign currencies are translated to NOK using the exchange rate at the balance sheet date. Foreign exchange gains/losses related to sales are presented as part of sales, foreign exchange gains/ losses related to purchases are presented as part of cost of materials, and foreign exchange gains/losses related to financing is presented as part of financial items. ARENDALS FOSSEKOMPANI PORTFOLIO FROM THE BOARDROOM SUSTAINABILITY 01 02 03 04 HEDGING ACTIVITIES Cash flow hedge When a derivative is designated as a hedging instru- ment on variability in cash flows for a recorded asset or liability, or for a highly probable forecast transaction, the effective portion of a change in fair value is recognised in other comprehensive income. The Group performs a qualitative assesment of hedging effectiveness. A hedg- ing instrument is derecognised when it no longer satisfies hedge accounting criteria, sold, terminated or matures. The accumulated change in fair value recognised in other comprehensive income remains until the forecast transaction occurs. If the hedged item is a financial asset, the amount recognised in other comprehensive income is transferred to to the income statement in the same period as the hedged item affects the income statement. If the hedged transaction is no longer expected to occur, the accumulated unrealised gains or losses are immedi- ately recognised in the income statement. EQUITY Ordinary shares Ordinary shares are classified as equity. Costs associated with the issuance of shares are recognised as a reduction in net equity (share premium) after tax, if applicable. Purchase and sale of treasury shares On the repurchase of treasury shares, the purchase amount including directly attributable costs are rec- ognised as a change in equity. Purchased shares are clas- sified as treasury shares and reduce total equity. When treasury shares are sold, the received amount is recorded as an increase in equity, and the subsequent gain on the transaction is recognised in Other paid-in equity. Depreciation Depreciation is calculated using the straightline method over the estimated useful lifetime for each item of prop- erty, plant and equipment, and charged to the income statement. Land is not depreciated. Estimated economic lifetimes are as follows: ESTIMATED ECONOMIC LIFETIMES Watercourse regulations 40–50 years Power generation Buildings 50 years Dams, water ways, hatches 25-40 years Machine equipment 40 years Thermal power plant (Spain) 25 years Industrial activities Buildings 20–25 years Machinery and equipment 7–15 years Operational moveable property, 3–12 years vehicles, equipment etc. FINANCIAL STATEMENTS APPENDIX 137 05 06 Residual value is assessed annually unless it is immaterial. Construction contracts The booked value of construction contracts consists of earned, non-invoiced income under the percent- age-of-completion method, less received advance pay- ments. The amount is recognised in the balance sheet under trade and other receivables. The net worth is clas- sified as contract assets. Long-term manufacturing con- tracts where the customer has paid more than the earned contract value on the balance sheet date are classified as contract obligations. See also the section below on oper- ating income and Note 13. EMPLOYEE BENEFITS Share-based compensation For share-based compensation by equity instruments granted that do not vest until the employee completes a specified period of service, it is assumed that the services to be rendered as consideration for the equity instru- ments will be received in the future, during the vesting period. Such services are accounted for as they are ren- dered by the employee during the vesting period, with a corresponding increase in equity. OPERATING INCOME Goods sold and services rendered Operating revenue is recognised when performance obligations are satisfied through the transfer of a good or service to the the customer, either over time or at a point in time. By transfer is meant that the customer has obtained control of the good or service. The most cen- tral indicators of transfer of control is that the Group has obtained the right to payment for the good or service, that the customer has obtained the right to the good or service, that the Group has transferred physical control of the good or service, that the customer has taken on the significant risks and rewards related to ownership of the good or service. Operating revenue is presented net of sales-related taxes and rebates. Revenue related to fixed-price contracts where the deliverable is tailored to the customer, does not have an alternative use and where the Group obtains the right to payment based on the projects progress is recognised over time as long as the projects revenue and expenses can be estimated reliably. When the project’s result cannot be estimated reliably, only revenue corresponding to expenses incurred may be recognised. Losses related to onerous contracts are recognosed in the period they are identified. Depending on the type of project, progress is esti- mated based on costs incurred in relation to total esti- mated costs, as direct hours incurred in relation to total expected hours or by assessing technical grade of com- pletion. Estimates related to revenues, expenses and NOTE 1 SEGMENT REPORTING (1 000 NOK) Per 31.12. AFK Vannkraft Group Management Volue NSSLGlobal ENRX 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 Sales at a point in time 503 750 605 400 243 511 233 919 1 203 525 1 042 013 913 885 708 950 Sales over time 1 219 230 981 242 885 888 629 369 Other Income 6 817 618 12 684 22 830 26 607 4 307 2 612 4 289 6 262 Revenue and other income 510 567 606 018 12 684 22 830 1 489 349 1 219 468 1 206 137 1 042 013 1 804 062 1 344 581 Operating expenses 85 382 61 407 87 467 104 620 1 281 076 1 072 845 975 289 787 089 1 605 918 1 269 705 Depreciation, amortization and impairment 11 657 9 567 3 358 3 904 128 469 106 470 19 557 45 712 82 516 78 316 Operating profit 413 528 535 044 -78 140 -85 693 79 805 40 154 211 291 209 211 115 628 -3 439 Share of profit or loss of associ- ates and JV 1 087 Net financial items 175 215 546 954 -17 208 -3 910 -3 234 27 058 -44 224 -16 605 Income tax expense 294 058 387 028 4 971 5 126 26 566 17 078 44 757 58 730 43 361 14 368 Profit (-loss) 119 470 148 016 92 104 456 134 36 030 19 166 164 388 177 540 28 042 -34 413 Total assets 227 280 222 622 4 723 264 4 016 715 2 145 099 1 864 916 1 066 740 915 389 2 014 539 1 765 276 Total liabilities 285 219 447 710 1 638 939 764 312 1 295 387 1 056 191 458 674 391 148 1 597 622 1 381 458 Net interest bearing debt -1 105 443 -1 216 394 381 665 -329 608 -346 420 -340 233 776 613 558 358 NOTE 1 SEGMENT REPORTING (1 000 NOK) Per 31.12. Tekna Property Alytic Ampwell Vergia 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 Sales at a point in time 212 174 161 536 10 941 23 543 45 742 39 342 53 562 105 265 518 938 Sales over time 107 029 37 016 332 71 Other Income 8 528 5 679 6 412 11 628 446 1 221 2 171 769 Revenue and other income 327 730 204 231 17 685 35 171 46 188 40 564 55 804 106 035 518 938 Operating expense 391 661 338 789 15 211 29 111 117 666 81 189 138 739 143 997 8 587 8 116 Depreciation, amortization and impairment 33 036 18 349 12 227 12 652 13 321 4 904 24 727 14 908 Operating profit -96 966 -152 907 -9 753 -6 592 -84 799 -45 528 -107 661 -52 871 -8 070 -7 179 Share of profit or loss of associ- ates and JV -4 755 -11 149 -1 126 -2 100 -16 999 -10 967 Net financial items -4 973 -1 938 -3 847 -3 358 -541 406 -14 348 -7 032 -858 -86 Income tax expense 11 476 839 232 -488 -4 841 -2 604 -552 -650 68 Profit (-loss) -118 170 -166 834 -13 832 -9 462 -80 500 -42 518 -122 584 -61 352 -25 994 -18 232 Total assets 585 469 536 600 621 795 442 547 224 796 197 092 981 665 520 017 14 355 33 840 Total liabilities 291 026 147 705 436 921 236 387 85 263 64 632 1 067 567 489 313 24 208 24 513 Net interest bearing debt 125 011 -28 363 360 721 136 025 4 163 -17 615 879 061 379 257 19 029 4 911 Eliminations Total 2023 2022 2023 2022 Sales at a point in time 3 187 608 2 920 907 Sales over time 2 212 550 1 647 627 Other Income -29 681 -35 312 40 885 18 002 Revenue and other income -29 681 -35 312 5 441 042 4 586 536 Operating expense -18 875 -25 718 4 688 125 3 871 150 Depreciation, amortization and impairment -8 953 -8 135 319 914 286 647 Operating profit -1 853 -1 460 433 004 428 740 Share of profit or loss of associates and joint ventures -9 577 -16 189 -31 382 -40 405 Net financial items -96 193 -504 204 -10 595 37 285 Income tax expense 451 -21 289 420 547 458 139 Profit (-loss) -108 075 -500 563 -29 520 -32 519 Total assets -3 545 070 -2 674 551 9 059 932 7 840 462 Total liabilities -1 770 442 -947 257 5 421 400 4 056 111 Net interest bearing debt -90 066 -93 256 1 015 274 -946 917 progress are revised when assumptions change. Change in estimates are recognised in the income statement in the period management becomes aware of the change of assumptions that caused the change in estimate. In fixed-price contracts the customer normally pays fixed amounts through the project period based on a payment plan. A contract asset is recognised if, at the measure- ment date the value of the deliverable at the exceeds payments received from the customer. A contract liability is recognised payment from the customer exceeds the value of the deliverable at the measurement date. Revenue from energy sales is recognised at the transac- tion date. Government grants Government grants that compensate for incurred expenses are recognised as a cost reduction in the income statement on a systematic basis in the same peri- ods in which the expenses are incurred. Grants related to the acquisition of operating assets are recognised as reduction of cost and amortised by reducing amortisa- tion over the operating asset’s useful economic life. Cash and cash equivalents Cash means cash in hand and in the bank. Cash equiva- lents are short-term liquid investments that can be con- verted to cash within three months to a known amount and which have an insignificant degree of risk. Cash and cash equivalents in the cash flow statement do not include unused overdrafts. Accounting standards and interpretations issued but not adopted The company has not early-adopted any IFRS standards or IFRIC that have been issued but are not mandatory as of 31 December 2023. Based on the assessments made so far, it is assumed that coming standards and IFRIC approved by the EU will not have a material effect on the financial statements. 138 139 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Segment reporting Financial information for the operating segments is determined and presented based on the information provided to the company's board of directors, which is the Group's ultimate decision-maker. Short desription of the operating segments: AFK VANNKRAFT AFK Vannkraft generates hydropower electricity at two locations in the Arendal water - course. The Bøylefoss and Flatenfoss power stations produce more than 500 GWh annually. All financial items have been allocated to the Administration segment. GROUP MANAGEMENT The Parent Company is focused on the development of new sustainable business opportunities and the follow-up of portfolio companies through long-term active ownership, in addition to power generation, property development, and manage- ment of financial investments. AFK Group Management employs 30 people. The head office is in Arendal. Eliminations consist mainly of profit- and loss items related to investments in Tekna and ENRX. VOLUE Volue is a leading supplier of technology and enabler of the green transition. With 50 years of green technology expertise, Volue offers software solutions, systems and market insight that optimise production, trading, distribution and consumption of energy, as well as infrastructure and construction projects. Volue’s critical services paves the way for a clean, flexible, reliable and profitable energy future. NSSL GLOBAL NSSLGIobaI is a leading independent provider of satellite communications and IT solutions in a global market. The company is committed to delivering high-quality voice and data services to customers anywhere in the world. NSSLGlobal’s activities are divided into the areas Airtime, Projects, Hardware and Service. ENRX ENRX was formed through the combination of EFD Induction and the wireless charging solutions provider IPT Technology, which was acquired by AFK during the second quarter. ENRX delivers advanced green power technology based on induc- tion technology, with activities in three main areas: Induction Heating Machines, Induction Power Systems, Spares and Services, and the new area of Wireless Charging Solutions. ENRX’s primary customer base operates within the automotive industry, renewables/wind turbines, pipe production, the electronics industry, the cable industry, and mechanical engineering. TEKNA Tekna is a world-leading provider of advanced materials for 3D printing in the aero- space, medical and automotive sectors, and is well positioned in the growing market for advanced nanomaterials within the global electronics and batteries industries. PROPERTY AFK Property comprises all property related companies and property investments ALYTIC Alytic develops sustainable companies with strong domain competence and data at the core. In many sectors and markets there is a large untapped potential for utilizing data effectively to gain insight and make qualified decisions. This includes better solutions to process, analyze, and visualize available information. AMPWELL Ampwell was established by Arendals Fossekompani in 2022 to build an eco-sys- tem for battery technology and a Battery-as-a-Service business model. Ampwell will accomplish this by combining hardware, software, other technologies and dedicated competence. Ampwell is majority owner in the energy storage specialist Commeo GmBH and software company Cellect Energy S.L. VERGIA Vergia was established by Arendals Fossekompani in 2022. The Vergia ecosystem includes verticals such as small-scale hydropower, energy parks, power-to-x, off- shore wind and green fuel. Vergia is owned 100% by Arendals Fossekompani. NOTE 1 GEOGRAPHICAL SEGMENTS (1 000 NOK) Geographical segments Norway Europe Asia North America Consolidated 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 Revenue 225 211 1 200 009 3 265 501 2 370 382 1 227 905 616 381 722 426 399 765 5 441 042 4 586 536 Segment assets 1 695 075 3 553 373 5 189 719 3 049 811 1 374 982 603 470 800 157 633 809 9 059 932 7 840 462 AFK Vannkraft Group Management Total Parent Company 2023 2022 2023 2022 2023 2022 Revenue and other income 510 567 606 018 8 748 22 070 519 315 628 087 Operating expenses 85 382 61 407 84 216 103 718 169 599 165 124 Depreciation, amortization and impairment 11 657 9 567 3 349 3 899 15 006 13 466 Operating income 413 528 535 044 -78 817 -85 547 334 711 449 497 Net financial items 175 220 546 956 78 827 546 956 Income tax expense 294 058 387 028 4 760 5 121 298 818 392 149 Profit (-loss) 119 470 148 016 91 643 456 289 114 719 604 305 Total assets 227 280 222 622 4 719 486 4 015 522 4 946 766 4 238 145 Total liabilities 285 219 447 710 1 635 585 763 070 1 920 804 1 210 780 Net interest bearing debt -1 107 253 -1 216 569 -1 107 253 -1 216 569 NOTE 2 OTHER INCOME (1 000 NOK) Group Parent Company 2023 2022 2023 2022 Other 12 785 11 646 6 237 4 518 Other income, intercompany 8 748 17 667 Gain sales of assets 25 225 1 886 580 503 Grants/subsidies 2 875 4 470 Other income 40 885 18 002 15 565 22 687 140 141 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 142 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI PORTFOLIO 01 02 NOTE 3 BUSINESS COMBINATIONS (1 000 NOK) ACQUISITION OF CELLECT ENERGY S.L. (SEGMENT AMPWELL) In 2022, Ampwell AS co-founded and acquired 40% of Cellect Energy S.L., a Spanish company currently developing analysis and control software in cooperation with some of the largest energy players in Europe. The solutions are specifically designed for the stationary storage market and will help customers utilize the stored energy in the best possible manner. The solutions will be able to connect to several differ- ent batteries, independent of manufacturer and technology. Ampwell AS is 100% owned by Arendals Fossekompani ASA.On 24 March 2023, Ampwell AS acquired another 11% of the issued share capital of Cellect Energy leading to control over the company with an ownership of 51%. As a result of this transaction, the investment in Cellect Energy is considered a business combination from this date and net identifi- able assets have been recognized at fair value. At acquisition date Cellect employed 10 people.During the third quarter of 2023, Ampwell has increased its ownership in Cellect Energy and went from 51% to 61% ownership in the company. At year-end Cellect employs 18 people. Acquistion of Cellect Energy S.L. Purchase consideration Cash paid for share issuance 5 697 Total purchase consideration 11% 5 697 Total consideration based on 100.00% 51 791 The assets and liabilities recognised as a result of the acquisition of Cellect Energy SL on 100% basis are as follows: Furniture and equipment 379 Non-current Rental deposit 202 Trade account receivables 93 VAT receivables 698 Other current receivables 37 Bank deposits 322 Cash from share issuance 5 375 Trade and other payables -186 Other current liabilities -444 Net identifiable assets acquired 6 475 Added goodwill 44 994 Net assets required 51 469 The acquired intangible assets consist of technology, patents, order backlog and customer relationships. The net identifiable assets are acquired at fair value. The goodwill is attributable to the workforce and the high synergies between the two businesses. It will not be deductible for tax purposes. The acquired business con- tributed revenues of NOK 0.4 million and a net loss of NOK 9.6 million to the group th st for the period March 24 to December 31 2023. If the acquisition had occured on st January 1 2023, consolidated pro-forma revenues and profit for the year ended st December 31 2023 would have been NOK 0.5 million for operating revenues and NOK 12.5 million as a net loss. Outflow of cash to acquire subsidiary, net of cash acquired Cash consideration 5 697 Less cash acquired -322 Net outflow of cash - investing activities 5 375 FROM THE BOARDROOM SUSTAINABILITY FINANCIAL STATEMENTS APPENDIX 143 03 04 05 06 ACQUISITION OF VOLUE OY (ENERIM OY) (SEGMENT VOLUE) On 30th June 2023, Volue made its biggest acquisition to date in the shape of Enerim Oy's Energy Market Services division. The aquired business brings approx. 150 new clients, 63 new employees and combined with Volue Market Services creates a strong foundation for further growth for Portfolio management as a service. Acquisition of Enerim Oy Purchase consideration Cash paid 357 738 Total purchase consideration 100% 357 738 The assets and liabilities recognised as a result of the acquisition of Enerim Oy are as follows: Intangible assets 195 349 Fixed assets 200 Other receivables 11 990 Cash and cash equivalents 11 790 Other current liabilities -23 828 Deffered tax liability -52 737 Net identifiable assets acquired 142 765 Added goodwill 214 973 Net assets required 357 738 The acquired intangible assets consist of technology, patents, order backlog and customer relationships. The amortization time of the intangible assets are defined based on type of asset based on projected life of the assets in use. For Customer relationship 15 years is used as amortization period, due to low churn in the port- folio and following expected lifetime of the customer relationships. For Software and Technology an amortization period of five years is used, following expected life- time ofasset that has been acquired.The net identifiable assets are acquired at fair value. As part of the purchase price allocation an estimation, a basis based on the purchase price, a fair value of identified assets and liabilities. The remaining differ- ence between the fair value of identified assets and the purchase price is classified as goodwill. The goodwill is attributable to the workforce and the high synergies between the two businesses. The acquired business contributed revenues of NOK th 60.4 million and a net profit of NOK 1.1 million to the group for the period June 30 st to December 31 2023. If Volue OY were to be acquired as of 1.1.2023 the business would have contributed with additional 60,4 million NOK in revenues and additional 10.8 million NOK in EBITDA for the year 2023. As part of the acquisition of Volue OY transaction cost of 14.1 million has been booked into the 2023 accounts as other operating expenses. These cost are related to transaction fees and fees to financial and legal advisors. Outflow of cash to acquire subsidiary, net of cash acquired Cash consideration 357 738 Less cash acquired -11 790 Net outflow of cash - investing activities 345 948 NOTE 4 EMPLOYEE BENEFIT EXPENSES ( 1 000 NOK) Group Parent Company 2023 2022 2023 2022 Salaries 1 899 577 1 584 053 55 345 62 573 Social security contributions 228 811 175 828 10 566 7 784 Pension costs 79 355 63 505 4 762 4 242 Capitalised cost -391 829 -207 360 Share-based payments 14 043 15 239 1 611 797 Other benefits 38 090 59 852 3 221 2 973 Total employee benefits 1 868 047 1 691 116 75 506 78 370 Average number of full-time headcounts 2 598 2 341 37 35 2023 Salaries, fees Bonus paid out this year Benefits in kind Total remune- ration Share- based payment Paid-in pension contribution Number of board meetings (i) Senior Executives Benjamin Golding, CEO from 01.05.2023 2 436 14 2 450 146 78 Lars Peder Fensli, CFO, interim CEO from 01.01.2023 until 30.04.2023 3 049 839 34 3 922 250 124 Morten Henriksen, Executive Vice President until 31.03.2023 1 008 566 7 1 581 47 52 Håkon Tanem, Executive Vice President from 09.10.2023, (vi) 578 2 000 13 2 591 16 30 Torkil Mogstad, Executive Vice President 2 126 423 32 2 581 250 93 Ingunn Ettestøl, ESG Director 1 798 326 23 2 147 188 144 Ann-Kari A. Heier, Executive Vice President from 14.11.2023 252 4 256 10 19 Board Members, Audit and Compensation Committees Trond Westlie, Chairman, (iii) (v) 1 220 1 220 10 Morten Bergesen, Deputy Chairman, (ii), (iv) 458 458 10 Didrik Vigsnæs, Board Member, (iii) 386 386 10 Christian Must, Board Member, (iii) 373 373 10 Stine Rolstad Brenna, Board Member, (ii) 443 443 10 Lise Lindback, Board Member, (iii) 376 376 10 Anne Grethe Dalane, Board Member, (ii) 397 397 10 Total remuneration 14 900 4 154 127 19 181 907 540 2022 Salaries, fees Bonus paid out this year Benefits in kind Total remun- eration Share- based payment Paid-in pension contribution Number of board meetings (i) Senior Executives Ørjan Svanevik, CEO until 16.12.2022 4 988 2 379 298 7 665 250 130 Lars Peder Fensli, CFO 2 171 591 27 2 789 125 116 Morten Henriksen, Executive Vice President 2 768 703 27 3 498 125 118 Torkil Mogstad, Executive Vice President 2 028 513 27 2 568 125 96 Ingunn Ettestøl, ESG Director 1 702 376 27 2 105 83 135 Board Members, Audit and Compensation Committees Trond Westlie, Chairman from 06.05.2022 470 470 5 Jon Hindar, Chairman, until 06.05.2022 (iii) 205 205 5 Morten Bergesen, Deputy Chairman, (ii), (iii), (iv) 436 436 10 Didrik Vigsnæs, Board Member 367 367 10 Christian Must, Board Member 387 387 10 Heidi Marie Petersen, Board Member, until 06.05.2022 107 107 1 Kristine Landmark, Board Member, until 06.05.2022 107 107 4 Stine Rolstad Brenna, Board Member, (ii) 419 419 9 Lise Lindback, Board Member from 06.05.2022 250 250 5 Anne Grethe Dalane, Board Member, from 06.05.2022 (ii) 269 269 5 Total remuneration 16 674 4 562 406 21 642 708 595 (i) 10 Board meetings were held in 2023 and 10 in 2022 (ii) Member of Audit Commitee (iii) Member of Compensation Committee (iv) Member of Nomination Committee (v) Including consultancy fee of tNOK 500, refer to note 24 (vi) Sign-on bonus of tNOK 2.000 without binding period In addition, tNOK 62 (155) was paid in pensions to former board members. Senior executives participate in the collective pension scheme for employees of the parent company and subsidiaries. Refer to the description in the note on pensions. All companies in the Group have phased out defined-benefit pension schemes with effect from 31 December 2015. Bonuses, options and other benefits are not pensionable. Senior executives of the Group received no remuner- ation or benefits from other Group companies except as shown above. No additional remuneration was paid for special services beyond normal management duties. Employment terms for the CEO and other senior executives: On 16 December 2022 it was announced that Ørjan Svanevik resigns as CEO of Arendals Fossekompani. New CEO, Benjamin Golding, joined Arendals Fossekompani on 1 May 2023. The following severance pay has been agreed for the new CEO in the event of the termination of his employment: Salary will be paid during the notice period (6 months). In addition he will receive a sever- ance pay amounting to 6 months of salary. As part of the incentive program for senior executives in AFK, the new CEO was given the right to buy 16 750 shares in the company in 2023 at a 20% discount with a tie-in period of three years. Lars Peder Fensli, Torkil Mogstad and Ingunn Ettestøl were given the right to buy 7 200 shares in 2023 on the same terms. New senior executives in 2023, Håkon Tanem and Ann-Kari Heier, were given the right to buy respectively 22 047 and 14 698 shares in 2023 on the same terms. Executives may borrow up to two-thirds of the purchase price for the shares on the same terms as ordinary employee loans. Loans are secured by a mortgage on the shares and run as long as the employment relationship lasts. 144 145 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 PENSION LIABILITIES (1 000 NOK) Group Parent Company 2023 2022 2023 2022 Pension liabilities Present value of unfunded liabilities 17 508 10 626 5 804 5 573 Present value of funded liabilities 82 840 76 592 48 131 45 927 Fair value of pension assets -96 027 -91 682 -61 500 -57 968 Recognised employers’ contributions 1 536 786 818 786 Present value of net liabilities 5 856 -3 679 -6 747 -5 683 Of which presented as pension assets 28 270 24 993 13 369 12 041 Other pension liabilities 2 811 2 274 Gross pension liabilities 36 938 23 588 6 623 6 358 Change in recognised net liability for defined-benefit pensions Net funded defined-benefit pension liability as at 1 January -11 107 -15 049 -12 041 -13 859 Liability for unfunded schemes as at 1 January 6 000 10 327 6 358 7 091 Paid-in contributions -1 022 1 731 -1 475 -997 Paid out from the scheme -282 -3 638 -292 -535 Actuarial (gains) losses from other comprehensive income 1 431 1 095 718 2 615 Exchange rate changes, pension liabilities 805 418 Costs of defined-benefit schemes 483 10 -14 2 Net liability for defined-benefit schemes as at 31 December -3 691 -5 106 -6 747 -5 683 Costs recognised in the income statement Costs relating to this period’s pension entitlements 259 373 Interest on the liabilities 2 550 1 588 1 502 961 Expected return on pension plan assets -2 916 -1 946 -1 721 -1 120 Recognised employers’ contributions 590 -5 205 162 Expenses from defined benefit plans 483 10 -14 2 Costs of defined-contribution pension schemes 76 808 61 954 2 819 2 922 Net interest on pension liabilities transferred to finance 122 222 14 Transfer effect of discontinuation of separate line in income statement 1 943 1 318 1 943 1 318 Total pension costs 79 355 63 505 4 762 4 242 Actual return on pension plan assets 8 939 -1 526 5 652 -950 Development of the Group’s funded pension liabilities Present value of funded liabilities 82 840 76 592 48 131 45 927 Fair value of pension assets -96 027 -91 682 -61 500 -57 968 Net result -13 187 -15 090 -13 369 -12 041 PENSION OBLIGATIONS / COSTS The Group's Norwegian companies are obligated to maintain an occupational pen- sion scheme pursuant to the Mandatory Occupational Pension Scheme. The pension scheme satisfies statutory requirements. The pension scheme includes a retirement pension, disability pension and survivor pension. With effect no later than 31.12.2015, all the companies in the Group discontinued their defined benefit plan. SHARE-BASED PAYMENTS EMPLOYEE SHARE OPTION PLAN - VOLUE GROUP The amended guidelines for remuneration of leading persons in the Volue group including the establishment of the share option plan was approved by the sharehold- ers at the 2021 extraordinary general meeting. The share option plan is based on a structure in which the Company's senior management and certain other key employ- ees are granted share options in the Company. Each share option carries the right to acquire one share in the Company. The total number of share options that may be issued under the plan is 2,397,747 for the first-year grant of options and 2,867,621 for the second-year grant of options and 2,397,747 for the third-year grant. The share options vest three years after the date of grant (service condition) and will lapse if not exercised within seven years following the date of grant. For the share options to vest, a minimum average share price development of 4.5% p.a. is required (per- formance condition). Upon any exercise of share options, the Company may settle its obligations by selling the relevant number of shares or by payment in cash. The share option plan has been treated as an equity-settled plan under IFRS. The strike price of the share options will be based on the volume weighted average share price over the ten last trading days preceding the grant date. The total profit each option holder may achieve shall be limited to 300% of the fair market value of the share at grant. Set out below are summaries of options granted under the plan: 2023 2022 Average exercise price per share option (NOK) Number of options Average exercise price per share option Number of options As at 1 January 48,46 4 331 439 56,10 1 781 085 Granted during the year 17,61 2 633 497 28,90 2 658 229 Exercised during the year 0 0 0 0 Forfeited during the year 28,90 287 875 56,1 107 875 As at 31 December 30,86 6 677 061 48,46 4 331 439 Vested and exercisable at 31 December 0 0 0 0 No options expired during the periods covered by the tables above. No options expired during the periods covered by the tables above. Share options outstanding at the end of the year have the following expiry dates and exercise prices: Grant date Expiry date Exercise price (NOK) Share options 31 December 2023 Share options 31 December 2022 21-Dec -21 20 -Dec -28 56,10 1 531 085 1 673 210 19-Dec -22 18 -Dec -29 28,90 2 748 229 2 658 229 04-Dec -23 03 -Dec -30 17,61 2 397 747 Total 6 677 061 4 331 439 Weighted average remaining contractual life of options outstanding at end of period 5.95 years 6.58 years 146 147 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 FAIR VALUE OF OPTIONS GRANTED The assessed fair value at grant date of options granted during the year ended 31 December 2023 was NOK 5,3 per option (2022 – NOK 7,6). The fair value at grant date is independently determined using an adjusted form of the Black-Scholes model that considers the exercise price, the term of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield, the risk-free interest rate for the term of the option, and the volatilities of the peer group companies. The model inputs for options granted during the year ended 31 December 2023 included: a. Options are granted for no consideration and vest after three years (service con- dition) and based on minimum share price development (performance condition). Vested options are exercisable for a period of four years after vesting. b. Exercise price 17,61 (2022 – 28,99) c. Grant date: 04 December 2023 (2022 – 19 December 2022) d. Expiry date: 03 December 2030 (2022 – 18 December 2029) e. Share price at grant date: 17,61 (2022 – 28,99) f. Expected price volatility of the company’s shares: 40% (2022 – 40%) g. Expected dividend yield: 0.00% (2022 – 0.00%) h. Risk-free interest rate: 4.10% (2021 – 3.86%) The estimated expected price volatility is based on median of volatilities of the peer group companies over an historical period of 5 years since Volue has a short historical period only. The estimated expected lifetime of the options is set at 5 years. EMPLOYEE SHARE SCHEME - ARENDALS FOSSEKOMPANI ASA In 2022, Arendals Fossekompani has established an incentive program for senior management and key employees which implies senior management is allowed to purchase shares in the Company each year up to a predetermined maximum amount. The shares are offered with 20% discount and three years lock-up period. In June 2023, senior management and key employees purchased 44,288 shares from the Company with 20% discount and a lock-up period of three years result- ing in a share price of NOK 179,10. In December 2023, senior management and key employees purchased 36,745 shares from the Company with 20% discount and a lock-up period of three years resulting in a share price of NOK 102,05. The share price was calculated based on a 3-days weighted average stock market price before transaction date. EMPLOYEE SHARE SCHEME - ALYTIC GROUP In 2021, Alytic AS has established an incentive program for senior management and key employees which implies senior management is allowed to purchase a certain maximum number of shares in the Company each year. The shares are offered with 20% discount without any lock-up period. During 2023, senior management and key employees purchased 6,412 shares from the Company with 20% discount resulting in a share price of NOK 93,55. The price has been calculated based on equity investments in the Company resulting in an estimated stock market price of NOK 116,94. EMPLOYEE SHARE SCHEME - ENRX GROUP ENRX group granted performance shares to all employees for the share price of NOK 47,68 per share (exercise price) with a lockup period of 3 years. The cost of the equity settled transactions is determined by the fair value at grant date using an appropriate valuation model in form of a Discounted Cash Flow (DCF) model with several underlying assumptions. The fair value of the shares granted is calculated at NOK 77,64 per share. The value between the exercise price of the performance shares and the calculated fair value of the performance shares is expensed over the vesting period equal to the lockup period. The lockup period started 1 January 2022. EXPENSES ARISING FROM SHARE-BASED PAYMENT TRANSACTIONS Total expenses arising from share-based payment transactions recognized during the period as part of employee benefit expense were as follows: (1 000 NOK) 2023 2022 Options issued under employee share option plan in Volue 10 831 9 100 Shares purchased under employee share scheme in AFK 1 611 800 Shares purchased under employee share scheme in Alytic 150 1 470 Shares purchased under employee share scheme in ENRX 1 435 3 870 Total expenses 14 027 15 240 148 149 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 NOTE 5 PROPERTY, PLANT & EQUIPMENT (1 000 NOK) Group 2022 Cost Hydro power plants Under constr- uction Vehicles, machinery and equip- ment Buildings and land Right- of-use vehicles, machinery and eq. Right- of-use buildings and land Property, plant and equipment Balance at 1 January 2022 311 961 38 308 996 435 588 649 25 305 309 716 2 270 375 Additions 5 946 40 698 91 746 11 748 191 890 151 217 Aquisitions through business combinations 1 075 35 334 10 774 200 2 204 49 587 Disposal -73 -270 080 -1 071 -1 983 -7 844 -281 051 Transferred from under construction -7 441 7 441 No longer in use -53 367 -1 043 -54 410 Change in RoU 5 266 103 042 108 309 Effect of movements in exchange rates 3 008 18 755 7 609 993 8 808 39 173 Balance at 31 December 2023 317 833 62 526 836 310 619 560 30 156 416 816 2 283 200 Depreciation and impairment losses Balance at 1 January 2022 -180 666 -828 145 -182 469 -16 031 -124 388 -1 331 700 Depreciation -6 106 -73 271 -26 810 -7 133 -70 355 -183 674 Impairment -202 -202 Aquisitions through business combinations -3 548 -3 548 Reclassification 174 -174 No longer in use 53 181 1 229 54 410 Disposal 73 267 055 10 1 983 7 844 276 966 Change in RoU 1 435 10 568 12 003 Effect of movements in exchange rates -15 800 -2 601 -479 -2 463 -21 343 Balance at 31 December 2022 -186 699 -597 181 -214 015 -20 400 -178 793 -1 197 088 Book value at 1 January 2022 131 295 38 308 168 290 406 179 9 274 185 328 938 675 Book value at 31 December 2022 131 134 62 526 239 129 405 545 9 756 238 023 1 086 112 PROPERTY, PLANT & EQUIPMENT (1 000 NOK) Group 2023 Cost Hydro power plants Under con- struction Vehicles, machinery and equip- ment Buildings and land Right- of-use vehicles, machinery and eq. Right- of-use buildings and land Property, plant and equipment Balance at 1 January 2023 317 833 62 526 836 310 619 560 30 156 416 816 2 283 200 Additions 217 496 116 066 66 540 492 6 294 406 888 Aquisitions through business combinations 579 579 Disposal -9 320 -2 630 -1 673 -14 836 -28 460 Transferred from under construction -1 347 1 347 Reclassification -10 517 -583 77 No longer in use 3 689 3 689 Change in RoU 11 320 71 744 83 064 Effect of movements in exchange rates 1 513 39 257 9 678 1 484 11 812 63 744 Balance at 31 December 2023 317 833 280 178 988 443 692 565 41 856 491 829 2 812 704 Depreciation and impairment losses Balance at 1 January 2023 -186 699 -597 181 -214 015 -20 400 -178 793 -1 197 088 Depreciation -6 131 -71 502 -22 713 -7 526 -71 355 -179 227 Reclassification -97 131 -34 No longer in use -3 701 -3 701 Disposal 7 650 635 1 673 14 836 24 794 Change in RoU 2 105 9 520 11 625 Effect of movements in exchange rates -29 762 -4 421 -1 046 -5 342 -40 570 Balance at 31 December 2023 -192 831 -694 594 -240 382 -25 227 -231 133 -1 384 168 Book value at 1 January 2023 131 134 62 526 239 129 405 545 9 756 238 023 1 086 112 Book value at 31 December 2023 125 003 280 178 293 849 452 182 16 628 260 696 1 428 536 Provision of security As at 31 December 2023 operating assets in the subsidiaries with a book value of tNOK 421 103 (2022: tNOK 316 762) were pledged as security for bank loans (see Note 17). 150 151 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 PROPERTY, PLANT & EQUIPMENT (1 000 NOK) Parent Company 2022 Cost Hydro power plants Under construc- tion Vehicles, machinery and equip- ment Buildings and land Right- of-use vehicles, machinery and eq. Right- of-use buildings and land Property, plant and equipment Balance at 1 January 2022 311 961 6 235 16 511 4 756 504 23 746 363 713 Additions 5 946 -5 055 22 938 23 828 Disposal -73 -421 -494 Transferred from under construction Change in RoU 47 253 47 253 Balance at 31 December 2022 317 833 1 180 39 028 4 756 504 70 999 434 300 Depreciation and impairment losses Balance at 1 January 2022 -180 666 -7 857 -14 -5 247 -193 785 Depreciation -6 106 -1 742 -168 -3 516 -11 532 Disposal 73 421 494 Balance at 31 December 2022 -186 699 -9 179 -182 -8 763 -204 823 Book value at 1 January 2021 131 295 6 235 8 653 4 756 490 18 499 169 928 Book value at 31 December 2022 131 134 1 180 29 849 4 756 322 62 236 229 477 * Negative addition of under construction assets of tNOK 5 055 is a reversal of wrongly capitalized costs that should have been expensed as operating expenses. PROPERTY, PLANT & EQUIPMENT (1 000 NOK) Parent Company 2023 Cost Hydro power plants Under con- struction Vehicles, machinery and equip- ment Buildings and land Right- of-use vehicles, machinery and eq. Right- of-use buildings and land Property, plant and equipment Balance at 1 January 2023 317 833 1 180 39 028 4 756 504 70 999 434 300 Additions 11 290 11 290 Disposal -1 743 -1 743 Transferred from under construction -1 180 1 180 Change in RoU -5 973 -5 973 Balance at 31 December 2023 317 833 49 755 4 756 504 65 026 437 874 Depreciation and impairment losses Balance at 1 January 2023 -186 699 -9 179 -182 -8 763 -204 823 Depreciation -6 131 -3 292 -126 -3 522 -13 072 Disposal 1 444 1 444 Change in RoU -28 6 001 5 973 Balance at 31 December 2023 -192 831 -11 027 -336 -6 284 -210 477 Book value at 1 January 2023 131 134 1 180 29 849 4 756 322 62 236 229 477 Book value at 31 December 2023 125 003 38 728 4 756 168 58 742 227 396 152 153 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 NOTE 6 INTANGIBLE ASSETS (1 000 NOK) Group 2022 Cost Goodwill Other intangible assets Concessions Capitalised development cost Intangible assets under development Intangible assets and goodwill Balance at 1 January 2022 727 624 299 430 12 250 333 300 29 796 1 402 401 Additions 27 004 176 347 5 175 208 525 Aquisitions through business combinations 331 625 174 383 31 376 537 385 Reclassification 654 -556 -98 Under development 3 838 -3 838 Effect of movements in exchange rates 16 189 9 838 1 859 632 28 518 Balance at 31 December 2022 1 075 438 511 310 12 250 546 165 31 666 2 176 829 Amortization and impairment losses Balance at 1 January 2022 -44 678 -166 541 -7 314 -91 891 -310 424 Amortization -204 -42 175 -245 -61 684 -104 308 Impairment -808 -8 680 -9 489 Aquisitions through business combinations -1 797 -1 797 Reclassification of accumulated depreciations PPE disposal 1 043 1 043 Reclassification 649 -649 Effect of movements in exchange rates 1 750 4 021 -844 4 928 Balance at 31 December 2022 -43 131 -205 609 -7 559 -163 748 -420 047 Book value at 1 January 2022 682 946 132 889 4 936 241 409 29 796 1 091 977 Book value at 31 December 2021 1 032 307 305 701 4 691 382 417 31 666 1 756 782 INTANGIBLE ASSETS (1 000 NOK) Group 2023 Cost Goodwill Other intangible assets Concessions Capitalised development cost Intangible assets under development Intangible assets and goodwill Balance at 1 January 2023 1 075 438 511 310 12 250 546 165 31 666 2 176 829 Additions 4 677 242 614 936 248 228 Aquisitions through business combinations 259 967 177 825 17 797 343 455 932 Reclassification of accumulated depreciations PPE disposal -9 214 -9 214 Effect of movements in exchange rates 49 345 20 956 990 125 71 415 Balance at 31 December 2023 1 384 750 714 768 12 250 798 351 33 070 2 943 189 Amortization and impairment losses Balance at 1 January 2023 -43 131 -205 609 -7 559 -163 748 -420 047 Amortization -56 950 -245 -83 491 -140 687 Reclassification of accumulated depreciations PPE disposal 9 214 9 214 Effect of movements in exchange rates -2 018 -12 489 -604 -15 111 Balance at 31 December 2023 -45 149 -275 048 -7 804 -238 628 -566 630 Book value at 1 January 2023 1 032 307 305 701 4 691 382 417 31 666 1 756 782 Book value at 31 December 2022 1 339 601 439 720 4 446 559 723 33 070 2 376 559 154 155 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 INTANGIBLE ASSETS (1 000 NOK) Parent Company 2022 Cost Goodwill Other intangible assets Concessions Capitalised development cost Intangible assets under development Intangible assets and goodwill Balance at 1 January 2022 8 530 12 250 20 780 Additions No longer in use Balance at 31 December 2022 8 530 12 250 20 780 Amortization and impairment losses Balance at 1 January 2022 -2 802 -7 314 -10 116 Amortization -1 689 -245 -1 934 No longer in use Balance at 31 December 2022 -4 490 -7 559 -12 049 Book value at 1 January 2022 5 728 4 936 10 664 Book value at 31 December 2022 4 040 4 691 8 731 Parent Company 2023 Cost Goodwill Other intangible assets Concessions Capitalised development cost Intangible assets under development Intangible assets and goodwill Balance at 1 January 2023 8 530 12 250 20 780 Additions No longer in use Balance at 31 December 2023 8 530 12 250 20 780 Amortization and impairment losses Balance at 1 January 2023 -4 490 -7 559 -12 049 Amortization -1 689 -245 -1 934 No longer in use Balance at 31 December 2023 -6 179 -7 804 -13 983 Book value at 1 January 2023 4 040 4 691 8 731 Book value at 31 December 2022 2 351 4 446 6 797 INTANGIBLE ASSETS (1 000 NOK) A breakdown of the allocation of intangible assets between the companies is provided below. Other intangible assets Goodwill Concessions Capitalised develop- ment cost Intangible assets under development Total Intangible assets by company Arendals Fossekompani 2 351 4 446 6 797 Volue 212 317 484 598 402 763 2 595 1 102 273 ENRX 71 451 351 336 72 352 2 667 497 807 NSSLGlobal 3 171 855 171 858 Tekna 42 771 6 013 10 980 59 764 Alytic 11 079 47 434 54 062 16 828 129 403 Ampwell 94 089 289 298 24 533 407 921 AFK Property 738 738 Total intangible assets 434 061 1 345 260 4 446 559 723 33 070 2 376 559 Other intangible assets consist mainly of technology, patents and trademarks, cus- tomer relationships and customer contracts. Capitalised development cost consist mainly of software development and platform development. Concession rights in the parent company are amortised over the term of the concession (50 years). Other intan- gible assets are amortised over periods of 4 to 10 years. Goodwill is tested annually for impairment (see accounting policies and Note 21). Goodwill is allocated to and tested for impairment for the operating segments, which is the level goodwill is monitored by group management. The recoverable amount of goodwill is estimated based on value in use for the segments ENRX, NSSLGlobal and Alytic. For the segments Volue, Tekna and Ampwell, fair value less cost to sell is used to calculate the recoverable amount of goodwill. The impairment testing for 2023 did not result in any impairments. Estimated value in use is based on discounted future cash flows. These measure the cash flows based on market requirements of return and risk. Value in use for 2023 has been calculated in the same way as in 2022. Budgets have been applied for 2024 and long-term forecasts from strategy plans for the period up to 2028. In addition, a convergence period of 5 years is applied to bridge 2028 financials to a terminal period with an applied growth rate of 2.0% after the 5+5 year forecasting period. The risk-free interest rate has been assessed separately for each company depending on currency of cash flows. Risk premiums between 3.7% and 6.8% were used in the calculations, depending on relevant markets, the nature of the business, maturity and uncertainty in forecasting. Moreover, scenario weighting and peer multiple analyses are used for sensitivity purposes. Special circumstances relating to the individual calculations are commented on below. VOLUE Volue is listed on Oslo Stock Exchange, and the market capitalization of the company is considered as a best-estimate for fair value less cost to sell, and as such, the recov- erable amount. The market value as per 31.12.2023 was MNOK 3,057 while the booked equity of the company in the group accounts as per 31.12.2023 was MNOK 881. The market value can decrease by more than 71% before an impairment may be needed. ENRX The Required Rate of Return (WACC before tax) has been set to 11.9%. Revenue growth is based 2024 budget and board approved strategy forecast until 2028, outlining 156 157 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 expected growth for the Heat products and services and further commercial devel- opment of the Charge product and services. Revenue growth in the terminal period is set at 2.0%, according to an assumed inflation target. A sensitivity analysis based on a unilateral change in estimated future EBITDA shows that a reduction of more than 43% may lead to impairment. Equivalently, a 5.0 percentage point change in WACC may cause impairment. NSSLGLOBAL The Required Rate of Return (WACC before tax) has been set to 11.8%. Both revenue growth and EBITDA development in the forecast period are assumed moderate, with limited revenue growth and lower EBITDA margins compared to the last three-year average. Revenue growth in the terminal period is set at 2.0%, according to an assumed inflation target. A sensitivity analysis based on a unilateral change in estimated future EBITDA shows that a reduction of more than 73% may lead to impairment. TEKNA Tekna is listed on Oslo Stock Exchange, and the market capitalization of the company is considered as a best-estimate for fair value less cost to sell, and as such, the recov- erable amount. The market value as per 31.12.2023 was MNOK 1,039, while the booked equity of the company in the group accounts as per 31.12.2023 was MNOK 450. The market value can decrease by more than 57% before an impairment may be needed. ALYTIC The Required Rate of Return (WACC before tax) has been set to 13.1%. Revenue growth is based on board approved strategy forecasts from the existing Alytic portfolio. The Alytic group of companies has over the last couple of years been in a build-up and commercialization phase, and expects significant growth in revenue and positive mar- gins during the forecast period. Revenue growth in the terminal period is set at 2.0%, according to an assumed inflation target. A sensitivity analysis based on a unilateral change in estimated future EBITDA shows that a reduction of more than 20% may lead to impairment. AMPWELL Ampwell faced a challenging market in 2023, generating lower revenue and EBITDA than target. Ampwell is currently in a ramp-up phase, positioned in a high-growth and evolving energy storage market. Growth is expected to pick up substantially in the coming years following increased investments from Ampwell’s target segment, and the company is assumed to be well positioned to take at least moderate market shares in Germany and the BeNeLux countries. It is believed that Ampwell possesses technol- ogy that is in demand and attractive for the relevant target segment. To determine fair value less cost of disposal, a scenario-weighted discounted cash flow analysis has been made. Scenarios for revenue growth and EBITDA margin have been assessed until 2028 and weighted due to uncertainty related to timing of cash flows. Ampwell is projected to have a market share in the commercial and industrial segment for battery modules in Germany of 7-9% by the end of the forecast period in 2028. Following the end of the forecast period in 2028, a 5-year convergence period until a terminal period is applied to reflect continued double-digit growth expected for the relevant market. A market share of 9-10% for the relevant segment in Germany is assumed by the end of the convergence period (5+5 years). The Required Rate of Return (WACC before tax) has been set to 13.5%. The terminal growth rate was set at 2.5%, as a result of external market research projecting dou- ble-digit growth for Ampwell’s target segment until the end of the 5+5 year forecasting period 1 . As such, the terminal growth is assumed 0.5 percentage points higher than the assumed inflation target. NOTE 7 OTHER OPERATING COSTS (1 000 NOK) Group Parent Company 2023 2022 2023 2022 Other operating cost Contractors 65 833 9 622 Maintenance property, plant and equipment 45 683 45 556 22 018 19 135 Loss sales of PPE 2 194 128 Loss sales of other non-current assets 213 70 Premises, service and office costs 135 721 76 527 2 716 3 870 Audit and other fees 132 239 191 676 24 785 22 410 Consession fees 3 502 2 903 3 291 2 903 Company cars, lifts and trucks 11 753 3 923 425 317 Communication costs 10 055 9 519 Travelling costs, indirect 45 123 43 670 1 904 2 270 Sales and marketing costs 77 038 69 880 3 007 4 530 Manufacturing indirect costs 24 041 26 855 117 111 Other operating costs (Misc.) 102 256 61 689 11 041 9 620 Insurances 17 624 13 807 2 939 1 822 ICT costs 94 414 67 591 9 250 8 358 Property tax 15 314 9 304 9 544 4 532 R&D costs 1 464 Loss allowance 39 935 5 461 Operating costs, IC 1 052 2 671 Restructuring 18 033 39 388 Operating costs 73 040 Other direct costs 90 770 44 893 Other operating expenses 1 006 245 722 461 92 090 82 552 Remuneration to auditor Statutory audit 20 323 14 420 3 192 2 072 Other assurance services 1 981 1 268 107 27 Tax advice 1 631 1 503 24 27 Other non-audit services 8 344 9 066 2 171 905 Total remuneration to auditor 32 278 26 257 5 495 3 031 A sensitivity analysis based on a unilateral change in estimated future EBITDA shows that a reduction of 5%-11%, depending on scenarios, may lead to impairment. Any mate- rial deterioration in assumptions related to expected market growth rates and attrac- tiveness, Ampwell’s market share and/or the competitiveness of Ampwell’s technology could trigger an impairment. There are no such indications at the time of this report. RESEARCH AND DEVELOPMENT COST In 2023 development costs of tNOK 252 034 were capitalized (2022 tNOK 176 347). Other research and development costs in the Group are expensed as they arise and amounted to tNOK 83 257 in 2023 and tNOK 84 282 in 2022. Volue capitalize development cost related to development of a wide range of software solutions for the energy and infrastructure industries. The development of these soft- ware products will help customers manage and optimize their operations, assets, and resources in the future. 1. Global energy storage market outlook update – Wood Mackenzie 2023 158 159 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 NOTE 8 FINANCE INCOME AND FINANCE COSTS (1 000 NOK) Group Parent Company 2023 2022 2023 2022 Finance income Interest income, intercompany 65 999 14 732 Interest income 77 270 35 778 47 287 24 750 Currency exchange income 63 002 74 616 50 849 40 151 Other finance income *** 39 119 4 433 13 356 Gain on partial sale of subsidiaries * 3 883 325 421 Gain/loss on total sale of subsidiaries Dividend income 3 234 3 659 3 234 3 009 Dividend income, intercompany 96 393 94 220 Group contribution income IFRS, intercompany 98 819 Finance income 182 626 118 486 267 658 601 459 Finance cost Interest expense 93 680 38 268 47 097 23 971 Interest expense cashpool 9 177 2 132 Interest expense on lease 11 456 7 526 3 060 740 Currency exchange expense 19 347 17 567 476 5 751 Other finance cost ** 50 743 15 707 34 016 13 206 Impairment loss on subsidiaries 150 10 836 Impairment loss on associates 7 638 7 638 Translation differences 1 180 Finance costs 193 221 81 201 92 438 54 503 Net financial items -10 595 37 285 175 220 546 956 * Sale of IPT Technlogy and profit from dividend in kind Tekna Holding ASA included in 2022 figures. ** Include fair value adjustments of investments. *** Gain of MNOK 20 related to establishment of Business Combination regarding Cellect Energy SL and finance income Volue Insight of MNOK 14. NOTE 9 TAX EXPENSE ORDINARY INCOME TAX IN NORWAY: • Ordinary income tax on general income. The tax rate was 22% in 2022 and 2023. The 22% tax rate was used to calculate deferred tax assets and deferred tax liabilities as at 31 December 2023. SPECIAL TAX RULES FOR NORWEGIAN ENERGY COMPANIES COMPRISE THE FOLLOWING ELEMENTS: • Natural resource tax of 1.3 øre per kWh of the company’s average annual production in the past 7 years. Estimated natural resource tax is deducted from the company’s tax payable on general income. Natural resource tax still has to be paid in years when no tax is calculated as being payable. The amount is recognised as a receivable and is offset against tax pay- able on general income in subsequent years. Natural resource tax accrues to the municipalities and counties in the concession area.Resource rent tax is taxation of income from use of natural resources like hydropower. The resource rent tax for hydropower is determined for each individual power station and accrues to the state. This tax is based on gross resource rent income less operating costs and tax-free allowances. Resource rent income is based on market prices and therefore differs from the compa- ny’s recognised sales figures. Effective resource rent tax on hydropower has been increased from 37% to 45% with effect from the 2022 fiscal year. Small hydropower stations do not pay resource rent tax. Corporate tax is calculated before resource rent tax on hydropower. An effective resource rent tax rate of 45% therefore means that the formal resource rent tax is set at 57.7%. The total marginal tax (resource rent tax and corporate tax) will then be 67% for hydropower. In addition, high-price contribution is set at 23% of power revenues that exceed NOK 0.70 per kWh. This means that total marginal tax will be 90% for hydropower exceeding NOK 0.70 per kWh. • Resource rent tax is taxation of income from use of natural resources like hydropower. The resource rent tax for hydropower is determined for each individual power station and accrues to the state. This tax is based on gross resource rent income less operating costs and tax-free allowances. Resource rent income is based on market prices and therefore differs from the company’s recognised sales figures. Effective resource rent tax on hydropower has been increased from 37% to 45% with effect from the 2022 fiscal year. Small hydropower stations do not pay resource rent tax. Corporate tax is calculated before resource rent tax on hydropower. An effective resource rent tax rate of 45% therefore means that the formal resource rent tax is set at 57.7%. The total marginal tax (resource rent tax and corporate tax) will then be 67% for hydropower. In addition, high- price contribution is set at 23% of power revenues that exceed NOK 0.70 per kWh. This means that total marginal tax will be 90% for hydropower exceeding NOK 0.70 per kWh. High-price contribution tax was removed from October 2023. • High-price contribution tax is introduced as a new tax for hydropower from 28 September 2022 and was removed from October 2023. The high-price contribution is set at 23% of power revenues that exceed NOK 0.70 per kWh. The tax brings the marginal tax rate for higher profits to 90%. The tax will be calculated based on monthly average spot prices for each price area, but use actual contract price for any industrial contracts. In addition to the standard deduction of NOK 0.70 per kWh, the tax base is adjusted for realised gains and losses on certain hedging instruments and certain deductible expenses. Management therefore considers the tax base to represent a net amount. Furthermore, the tax is imposed on the same tax subjects as for ordinary income tax and resource rent tax. In addition, it is the owners of the tax-transparent energy producers who are responsible for the tax, and the tax is not deductible for any other income tax. If man- agement had concluded that the tax base did not represent a net result, the tax would have been treated as a levy within the scope of IAS 37, with the consequence that the tax would have been presented as an operating expense. Since Arendals Fossekompani do not have any derivative that could influence the level of the high price contribution in future periods, there are no deferred tax consequences related to the tax, and the amount recognised as an expense in 2022 and 2023 would be the same according to IAS 37 and IAS 12. 160 161 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 TAX EXPENSE (1 000 NOK) Group Parent Company 2023 2022 2023 2022 Current tax expense Natural resource tax for the year 6 370 6 266 6 370 6 266 Tax payable on general income less natural resource tax 237 057 206 763 91 630 125 475 High-price tax contribution 26 083 34 130 26 083 34 130 Adjustment for previous years -18 953 -1 955 -486 Resource rent tax payable for the year 174 000 230 700 174 000 230 700 Total current tax 424 557 475 904 297 596 396 570 Deferred tax expense Effect of change in temporary differences -4 676 -12 412 545 920 Effect of changed tax rate -10 -12 Effect of change in temporary differences, resource rent tax 677 514 677 514 Effect of changed tax rate, resource rent tax -5 855 -5 855 Total deferred tax expense -4 010 -17 765 1 222 -4 421 Total tax expense in the income statement 420 547 458 139 298 818 392 149 Reconciliation of effective tax rate Total pre tax income 391 027 425 620 509 931 996 454 Tax based on current ordinary tax rate 127 780 93 636 112 185 219 220 High-price tax contribution 26 083 34 130 34 130 Resource rent tax for the year 174 673 225 359 200 760 225 359 Effect of different tax rates abroad -2 676 -3 701 Calculated tax 325 861 349 425 312 944 478 709 Effect of non-deductible expenses 32 300 89 837 9 133 6 678 Effect of non-taxable income -48 410 -36 573 -22 772 -93 237 Effect of unrecognised tax loss carryforward 97 090 77 812 Effect of changed tax rates 70 -39 Effect of changed tax assessments for previous years 19 065 -20 958 Over-/underprovision relating to previous years -5 429 -1 365 -486 Tax expense in reconciliation of effective tax rate 420 547 458 139 298 818 392 149 Current ordinary tax rate in Norway 22,0% 22,0% 22,0% 22,0% Effective tax rate 103,1% 108,4% 58,6% 39,4% Tax recognised in other comprihensive income (OCI) Tax on OCI that may be reclassified to P&L -1 218 1 888 Tax on OCI that will not be reclassified to P&L -143 838 158 575 Total tax recognised in OCI -1 361 2 726 158 575 Tax payable Tax payable of tNOK 369 671 (2022: tNOK 436 746 ) for the Group and tNOK 272 000 (2022: tNOK 374 830) for the parent company consists of unassessed tax payable for the current period. TAX EXPENSE (1 000 NOK) Group Assets Liabilities Net 2023 2022 2023 2022 2023 2022 Property, plant and equipment 23 711 27 255 -43 712 -38 478 -20 000 -11 223 Goodwill, intangible assets 7 509 5 755 -98 540 -40 505 -91 031 -34 750 Non-current receivables and liabilities in foreign currency 3 838 2 663 -11 737 -1 043 -7 900 1 620 Construction contracts 238 -6 535 -3 733 -6 535 -3 495 Inventories 8 883 12 067 -693 8 190 12 067 Trade and other receivables 1 449 1 150 1 449 1 150 Leases 19 123 18 588 -1 508 -1 547 17 615 17 041 Untaxed gains and losses 445 556 -4 075 -9 -3 630 547 Provisions 17 421 10 912 -691 -280 16 730 10 632 Other assets 3 537 282 -2 759 -5 072 778 -4 789 Financial instruments 805 2 023 -149 -145 656 1 878 Employee benefits 2 408 644 -4 346 -3 755 -1 937 -3 111 Tax loss carryforward 341 560 203 349 341 560 203 349 Unrecognised tax loss carryforward -293 284 -180 311 -293 284 -180 311 Recognised tax loss carryforward 48 277 23 038 48 277 23 038 Total deferred ordinary income tax 137 407 105 172 -174 746 -94 566 -37 339 10 606 PPE, resource rent tax 32 123 32 800 32 123 32 800 Total deferred resource rent tax 32 123 32 800 32 123 32 800 Deferred tax asset/liability 169 530 137 972 -174 746 -94 566 -5 216 43 405 Offsetting of assets and liabilities -41 807 -29 541 41 807 29 541 Net deferred tax asset/liability 127 723 108 430 -132 939 -65 025 -5 216 43 405 Parent Company Property, plant and equipment 15 295 15 732 15 295 15 732 Leases 297 297 Gains and losses account 54 68 54 68 Employee benefits -1 484 -1 250 -1 484 -1 250 Total deferred ordinary income tax 15 646 15 799 -1 484 -1 250 14 162 14 549 PPE, resource rent tax 32 123 32 800 32 123 32 800 Total deferred resource rent tax 32 123 32 800 32 123 32 800 Deferred tax asset/liability 47 769 48 599 -1 484 -1 250 46 285 47 349 Offsetting of assets and liabilities -1 484 -1 250 1 484 1 250 Net deferred tax asset/liability 46 285 47 349 46 285 47 349 162 163 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 CHANGE IN DEFERRED TAX OVER THE YEAR (1 000 NOK) Group 2022 Total Opening Balance Changes in Net Income Reclassi- fication From OCI Change in tax loss carry- forward Mergers and acqui- sitions Group Contri- bution N-GAAP Input Effect from Foreign Exchange Exchange differ- ences on translation of foreign operations Total Effect from Foreign Exchange Closing Balance Ordinary income tax Property, plant and equipment -11 863 -753 2 675 -615 -668 -668 -11 223 Goodwill, intangible assets -16 451 522 -2 675 -14 171 -1 975 -1 975 -34 750 Non-current rec. and liab. in for. currency -177 1 728 70 70 1 620 Construction contracts -4 634 1 146 -7 -7 -3 495 Inventories 10 163 1 389 515 515 12 067 Trade and other receivables 1 150 -31 2 25 30 1 150 Leases 17 168 -491 -30 394 394 17 041 Untaxed gains and losses 684 -137 547 Provisions 7 668 2 777 188 188 10 632 Other items -5 114 559 -49 -185 -185 -4 789 Financial instruments -1 007 997 1 888 1 878 Employee benefits -2 017 -240 -1 728 998 -89 -35 -35 -3 111 Tax loss carryforward 15 947 6 862 -738 39 45 883 927 23 038 Total ordinary income tax 11 693 12 424 2 886 -768 -14 883 45 -796 -746 10 606 Property, plant and equipment 27 459 5 341 32 800 Loss carried forward - Resource rent Total resource rent tax 27 459 5 341 32 800 Total change in deferred tax 39 151 17 765 2 886 -768 -14 883 45 -796 -746 43 405 CHANGE IN DEFERRED TAX OVER THE YEAR (1 000 NOK) Group 2023 Total Opening Balance Changes in Net Income Reclassi- fication From OCI Change in tax loss carry- forward Mergers and acqui- sitions Group Contri- bution N-GAAP Input Effect from Foreign Exchange Exchange differ- ences on translation of foreign operations Total Effect from Foreign Exchange Closing Balance Ordinary income tax Property, plant and equipment -11 223 -14 857 784 6 079 -20 000 Goodwill, intangible assets -34 750 2 302 -51 084 -1 890 -7 499 -91 031 Non-current rec. and liab. in for. currency 1 620 -9 845 -18 282 343 -7 900 Construction contracts -3 495 -3 049 9 9 -6 535 Inventories 12 067 -4 499 622 622 8 190 Trade and other receivables 1 150 306 -1 -6 1 449 Leases 17 041 455 -36 538 155 17 615 Untaxed gains and losses 547 -4 178 -3 630 Provisions 10 632 6 471 359 -373 16 730 Other items -4 789 5 359 -322 208 778 Financial instruments 1 878 -4 -1 218 656 Employee benefits -3 111 1 402 18 -143 -103 -103 -1 937 Tax loss carryforward 23 038 24 825 -573 -61 1 070 987 48 277 Total ordinary income tax 10 606 4 686 -1 361 -36 -51 084 -573 -61 1 349 424 -37 339 Property, plant and equipment 32 800 -677 32 123 Loss carried forward - Resource rent Total resource rent tax 32 800 -677 -3 364 32 123 Total change in deferred tax 43 405 4 010 -1 361 -36 -51 084 -573 -61 1 349 424 -5 216 164 165 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 166 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 CHANGE IN DEFERRED TAX OVER THE YEAR (1 000 NOK) Parent Company 2022 Total Opening Changes in Net From Closing Balance Income OCI Balance Ordinary income tax Property, plant and equipment 16 238 -506 15 732 Leases 60 -60 Gains and losses account 84 -17 68 Financial instruments Employee benefits -1 489 -337 575 -1 250 Tax loss carryforward Total ordinary income tax 14 893 -920 575 14 549 Property, plant and equipment 27 459 5 341 32 800 Loss carried forward - Resource rent Total resource rent tax 27 459 5 341 32 800 Total change in deferred tax 42 352 4 421 575 47 349 Parent Company 2023 Ordinary income tax Property, plant and equipment 15 732 -436 15 295 Leases 297 297 Gains and losses account 68 -14 54 Financial instruments Employee benefits -1 250 -392 158 -1 484 Tax loss carryforward Total ordinary income tax 14 549 -545 158 14 162 Property, plant and equipment 32 800 -677 32 123 Loss carried forward - Resource rent Total resource rent tax 32 800 -677 32 123 Total change in deferred tax 47 349 -1 222 158 46 285 RECOGNISED TAX LOSS CARRYFORWARD PER COUNTRY (1 000 NOK) Group 2023 Finance income Norway 44 159 France 3 801 Spain 8 Other 309 Total 48 277 ARENDALS FOSSEKOMPANI PORTFOLIO FROM THE BOARDROOM SUSTAINABILITY FINANCIAL STATEMENTS APPENDIX 167 01 02 03 04 05 06 NOTE 10 DIVIDEND The Company pay dividend quarterly. The following cash dividend has been paid; In February (for Q4), tNOK 52 067 (tNOK 49 407), in May tNOK 54 807 (tNOK 52 174), in September tNOK 54 836 (tNOK 52 171) and in November tNOK 54 823 (tNOK 52 078). In 2022, shares in Tekna Holding ASA have been distributed as dividend (5 shares in AFK gave 1 share in Tekna ). Value of this dividend was tNOK 202 460. No dividend is paid on treasury shares. Ordinary dividend Approved 2023 Approved 2022 and paid in 2023 and paid in 2022 Paid 216 532 206 292 Value of shares 202 460 Total 216 532 408 752 NOTE 11 GROUP COMPANIES (1 000 NOK) Shareholding Non-controlling Value in parent Subsidiaries Domicile 2023 2022 2023 2022 2023 2022 Volue ASA Oslo 60,0% 60,0% 342 715 327 948 304 295 304 295 NSSL Global Ltd UK 80,0% 80,0% 127 552 104 848 273 298 273 298 ENRX ASA / EFD Induction AS Skien 94,0% 95,1% 20 522 18 354 451 532 453 036 Alytic AS Arendal 95,0% 95,0% 41 240 39 610 140 219 140 219 Tekna Holding ASA Arendal 70,3% 71,1% 81 035 109 136 318 500 321 744 AFK Property AS Arendal 100,0% 100,0% 6 634 7 351 227 692 227 692 Vergia AS / AFK Energy AS Arendal 100,0% 100,0% 31 343 31 343 Ampwell AS Arendal 100,0% 100,0% 17 883 54 263 100 100 AFK Tyskland Holding AS Arendal 100,0% 100,0% 100 100 637 581 661 511 1 747 080 1 751 829 SUBSIDIARIES Shareholding 2023 2022 Subsidiaries in Volue ASA Oslo Norway Subsidiaries in Volue Technology AS Volue Technology AS Trondheim Norway 100,0% 100,0% Volue Technology Denmark A/S Odense Denmark 100,0% 100,0% Volue AB Jönköping Sweden 100,0% 100,0% Volue AG Basel Switzerland 100,0% 100,0% Volue Enerji Cözümleri Istanbul Turkey 100,0% 100,0% Volue Sp. z.o.o. Gdansk Poland 100,0% 100,0% Volue GK Tokyo Japan 100,0% 100,0% Volue GK Tokyo Japan 100,0% Subsidiaries in Volue Industrial IOT AS Scanmatic AS Arendal Norway 100,0% 100,0% Scanmatic Denmark ApS Middelfart Denmark 100,0% 100,0% Scanmatic AB Åkersberga Sweden 100,0% 100,0% Subsidiaries in Volue Market Service AS Volue Market Services AS Arendal Norway 100,0% 100,0% Volue Market Services Stockholm Sweden 100,0% 100,0% Volue Market Services Aarhus Denmark 100,0% 100,0% Volue Market Services Helsinki Finland 100,0% 100,0% Subsidiaries in Volue Insight AS Arendal Norway Volue Insight AS Arendal Norway 100,0% 100,0% Volue Germany GmbH (Likron GmbH) Munchen Germany 100,0% 100,0% Volue Energy GmbH (Procom GmbH) Aachen Germany 100,0% 100,0% Volue UK Ltd Bristol UK 100,0% 100,0% Volue Oy Helsinki Finland 100,0% Subsidiaries in NSSLGlobal Ltd. London UK NSSLGlobal LLC California USA 100,0% 100,0% NSSLGlobal PTE Ltd Singapore Singapore 100,0% 100,0% Nera Satellite Services LTD London UK 100,0% 100,0% NSSL Ltd London UK 100,0% 100,0% Aero-Satcom Ltd. London UK 50,0% 50,0% NSSLGlobal AB Hönö Sweden 100,0% 100,0% NSSLGlobal Technologies AS Oslo Norway 100,0% 100,0% NSSLGlobal Continental Europe APS Brøndby Denmark 100,0% 100,0% NSSLGlobal APS Brøndby Denmark 100,0% 100,0% NSSLGlobal Polska SP. Z.o.o. Warzsawa Poland 100,0% 100,0% NSSLGlobal Israel Ltd Beit Shemesh Israel 100,0% 100,0% NSSLGlobal Kabushiki Kaisha Tokyo Japan 100,0% 100,0% NSSL Global BV Scheemda Netherlands 100,0% 100,0% NSSLGlobal GmbH Barbüttel Germany 100,0% 100,0% NSSLGlobal Distribution GmbH Barbüttel Germany 100,0% 100,0% ESS Hanika GmbH Barbüttel Germany 100,0% 100,0% SUBSIDIARIES Shareholding 2023 2022 Subsidiaries in ENRX ASA Induction Holding AS Skien Norway 100,0% 100,0% IPT GmbH Skien Norway 100,0% 100,0% EFD Induction Group AS Skien Norway 100,0% 100,0% EFD Induction AS Skien Norway 100,0% 100,0% EFD Induction AS Västerås Sweden 100,0% 100,0% EFD Induction GmbH Freiburg Germany 100,0% 100,0% EFD France Holding Eurl Grenoble France 100,0% 100,0% EFD Induction S.A Grenoble France 100,0% 100,0% EFD Induction Ltd. Wolverhampton UK 100,0% 100,0% EFD Induction Inc. Detroit USA 100,0% 100,0% EHE Acquisition Corporation Inc Detroit USA 100,0% 100,0% EFD Induction s.r.l Milano Italy 100,0% 100,0% EFD Induction Ltd. Bangalore India 100,0% 100,0% EFD Induction (Shanghai) Co., Ltd. Shanghai China 100,0% 100,0% EFD Induction Ges.m.b.H Wien Austria 100,0% 100,0% EFD Induction s.l Bilbao Spain 100,0% 100,0% Inductro SRL Bucuresti Romania 100,0% 100,0% EFD Induction SP. Z o.o Gliwice Poland 100,0% 100,0% EFD Induction Co., Ltd Bangkok Thailand 100,0% 100,0% EFD Induction K.K. Yokohama Japan 100,0% 100,0% EFD Inducao Brasil Ltd Sao Paolo Brazil 100,0% 100,0% EFD Induction Oil & Gas Service Pinang Malaysia 100,0% 100,0% EFD Induction Sdn. Bhd. Selangor Malaysia EFD Induction S de R.L Queretaro Mexico 100,0% 100,0% Subsidiaries in Tekna Holding ASA Subsidiaries in Tekna Holdings Canada Inc. Sherbrooke Canada 96,4% 96,4% Tekna Plasma Systems Inc. Sherbrooke Canada 100,0% 100,0% Tekna Advanced Materials Inc. Sherbrooke Canada 100,0% 100,0% Tekna Plasma Europe S.A.S. Mâcon France 100,0% 100,0% Tekna Plasma Systems(Suzhou)Co Ltd. Suzhou China 100,0% 100,0% Tekna Plasma India Private Ltd. Chennai India 100,0% 100,0% Tekna Plasma Korea Co, Ltd Incheon South Korea 100,0% 100,0% Tekna Inc Delawere USA 100,0% 100,0% Subsidiaries in Alytic AS Kontali Holding AS Arendal Norway 100,0% 100,0% Kontali Analyse AS Kristiansund Norway 75,1% 75,1% Seafood TIP Utrecht Netherlands 100,0% 100,0% Utel Holding AS Arendal Norway 100,0% 100,0% Utel Systems AS Grimstad Norway 94,2% 91,8% Veyt Holding AS Arendal Norway 100,0% 100,0% Veyt AS Oslo Norway 61,6% 60,0% Greenfact GmbH Berlin Germany 100,0% 100,0% 168 169 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 INVESTMENTS IN ASSOCIATES AND JOINT VENTURES (1 000 NOK) The Group has the following investments in joint ventures. All businesses are orga- nized as companies with limited liability corresponding to Norwegian corporations. Guidelines for the operation of companies are based on shareholder agreements. According to the shareholder agreements it is required unanimity between the par- ties for making decisions about relevant activities. Accordingly, participants in the companies have joint control over the activities. The Group's responsibility as a par- ticipant in Imphytec Powders SAS, Seagust AS and North Ammonia AS is limited to the capital contribution, and the return equals the Group's share of profit. Thus, the group as a participant is entitled to the arrangements net assets. In the consolidated group accounts the investments in joint ventures and associates are accounted for in accordance with the equity method. In the company accounts the investments in joint ventures and associates are accounted for based on historic cost. Entity Country Ownership interest Imphytec Powders SAS France Production of powders 48,00% North Ammonia AS Norway Green ammonia 50,00% Seagust AS Norway Offshore wind 47,50% Hydepoint AS Norway Hydrogen 33,33% Kilandsfoss AS Norway Hydro powerplant 33,33% Glomsdam Krafverk AS Norway Hydro powerplant 50,00% Aero-Satcom Ltd UK Telecom 50,00% Based on an overall assessment where the size and complexity is taken into con- sideration these investments are considered to be significant joint ventures. Further information regarding these companies is disclosed below. SUBSIDIARIES Shareholding 2023 2022 Greenfact Ltd London UK 100,0% 100,0% Factlines Holding AS Oslo Norway 100,0% 100,0% Factlines AS Oslo Norway 66,7% 62,5% Alytic Blue AS Oslo Norway 100,0% 100,0% Subsidiaries in AFK Property AS Vindholmen Eiendom AS Arendal Norway 100,0% 100,0% Bedriftsveien 17 AS Arendal Norway 100,0% 100,0% Bøleveien 4 AS Skien Norway 100,0% 100,0% Steinodden Eiendom AS Arendal Norway 77,6% 77,6% Arendal Lufthavn Gullknapp AS Arendal Norway 92,3% 92,1% Gullknapp Invest AS Arendal Norway 100,0% 100,0% Longum Property AS Arendal Norway 100,0% 100,0% AFK Longum Invest AS Arendal Norway 100,0% 100,0% Bryggebyen Folkebad AS Arendal Norway 100,0% 100,0% Folkebad Drift AS Arendal Norway 100,0% Bøylestad Energipark AS Froland Norway 100,0% 100,0% Vergia Property AS Arendal Norway 100,0% 100,0% Subsidiaries in Vergia AS Vergia green Fuels AS Arendal Norway 100,0% 100,0% Vergia green system solutions AS Arendal Norway 100,0% 100,0% Vergia Wind AS Arendal Norway 100,0% 100,0% Vergia Solar AS Arendal Norway 100,0% 100,0% Subsidiaries in Vergia Hydropower AS Norway 100,0% Vergia Hydropower AS Arendal Norway 100,0% 100,0% Kilandsfoss AS Froland Norway 100,0% 100,0% Glomsdam Kraftverk AS Vinje Norway 100,0% 100,0% Subsidiaries in Ampwell AS AFK Storage 3 AS Arendal Norway 100,0% 100,0% Cellect Holding AS Arendal Norway 100,0% 100,0% Cellect Energy SL Barcelona Spain 61,0% Commeo Holding AS Arendal Norway 100,0% 100,0% Commeo Holding GmbH Osnabruck Germany 55,0% Commeo GmbH Osnabruck Germany 55,0% 55,0% Commeo Property GmbH Osnabruck Germany 55,0% Commeo Software GmbH Osnabruck Germany 55,0% AFK Storage 3 AS Arendal Norway 100,0% 100,0% Subsidiaries in AFK Tyskland Holding AS Arendals Fossekompani Deutchland GmbH Berlin Germany 100,0% 100,0% 170 171 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 NorSun North Ammonia Seagust Hyde- point Cellect Energy Kilands- foss Glomsdam Kraftverk Aero- Satcom Imphytec Powders Total Balance at 1 January 2022 4 018 3 649 9 256 16 922 Income from associates -16 189 -2 370 -4 986 -3 183 -2 100 -110 -317 -11 149 -40 405 Aquisitions through business combinations 33 095 1 350 -122 4 566 38 889 Investment/dis- posal of companies and businesses -4 -4 Issue of shares from non-con- trolling interests 14 725 2 841 2 147 153 500 20 366 FX differences on foreign operations 2 1 546 1 548 Balance at 31 December 2022 16 906 1 647 13 388 -342 1 399 43 57 4 219 37 317 Balance at 1 January 2023 16 906 1 647 13 388 -342 1 399 43 57 4 219 37 317 Income from associates -9 577 -2 679 -11 230 -2 619 -996 -26 -457 958 -4 755 -31 382 Aquisitions through business combinations -362 6 151 5 789 Investment/dis- posal of companies and businesses -8 934 28 -8 906 Issue of shares from non-con- trolling interests 1 605 5 075 10 099 250 17 029 FX differences on foreign operations -68 537 469 Balance at 31 December 2023 4 043 2 158 -2 961 10 116 -150 7 109 20 315 None of the companies have observable market values in form of market price or similar. NOTE 12 OTHER RECEIVABLES (1 000 NOK) Group Parent Company Long-term investments 2023 2022 2023 2022 Loans to employees 34 231 32 090 2 283 1 663 Contributions to company pension plan 22 001 22 002 22 001 22 002 Natural resource tax receivable 42 334 42 334 Other non-current receivables 79 650 32 685 30 359 20 572 Shares in other companies 88 283 80 543 77 275 80 440 Other investments 41 571 54 043 1 999 3 598 Total long-term investments 265 736 263 696 133 917 170 609 SECURITY PROVIDED FOR LOANS TO EMPLOYEES All loans to employees incur interest at a rate that never triggers a taxable benefit. The loans are repaid over 5 years (vehicles) or 20 years (housing). Loans exceeding NOK 200,000 are secured by mortgages on property or shares. NOTE 13 INVENTORIES AND CONTRACTS WITH CUSTOMERS (1 000 NOK) Group Inventories 2023 2022 Raw materials 429 378 324 986 Work in progress 479 871 253 030 Spare parts 46 653 46 778 Finished goods 324 321 220 679 Total inventories (net after provision for obsolescence) 1 280 223 845 472 Provision for obsolescence 99 885 94 174 The provision for obsolescence in 2023 is mainly related to slow-moving items in ENRX (NOK 55 million), spare parts in NSSL (NOK 8 million) and off-size powders in Tekna (NOK 36 million). Group 2023 2022 Contracts with at-delivery billing Contract assets 182 239 136 970 Contract liabilities 239 890 233 496 Net contract assets / - liabilities -57 651 -96 526 Contract liabilities consist of prepayments from customers for both revenue over time and point in time. CONSTRUCTION CONTRACTS (SALES OVER TIME) The subsidiaries ENRX, Tekna, NSSL and Volue recognise construction contracts in accordance with percentage of completion method. Changes during the year are due to most contracts having a duration less then a year. At year-end these subsid- iaries had the following carrying amounts associated with construction contracts and projects in progress: Group 2023 2022 Booked income from uncompleted contracts per 31.12 Booked accrued income per 31.12 374 894 244 349 Booked accrued expenses per 31.12 -219 136 -204 675 Reported margin per 31.12 155 758 39 673 Group 2023 2022 Remaining income from sales over time contracts Within one year 320 352 326 218 Between one and two years 994 Remaining income (sales over time) 321 347 326 218 172 173 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Contract Assets Posted gross value of contract assets are distributed as follows: Receivables 2023 2022 Volue Group 58 536 54 181 ENRX Group 93 721 81 570 Tekna Group 29 982 1 219 Sum 182 239 136 970 Provisions for expected losses on projects are distributed as follows: Onerous contracts 2023 2022 Volue 13 500 16 963 Sum 13 500 16 963 Provisions are calculated based on historical losses and individual assessment of each item and customer Changes in the period's provisions are explained as follows: Group Onerous contracts 2023 2022 Total Opening Balance 16 963 31 118 Changes in expected losses (loss rates) and outstanding receivables (volume) 1 876 4 145 Realized losses during the period (-) -5 339 -18 300 Exchange differences on translation of foreign operations Closing Balance 13 500 16 963 NOTE 14 TRADE AND OTHER RECEIVABLES (1 000 NOK) Group Parent Company 2023 2022 2023 2022 Accounts receivables Trade accounts receivables 1 104 165 950 095 2 328 822 Loss allowance (Note 16) -59 742 -23 971 Trade accounts receivable, IC 19 799 30 412 Total 1 044 423 926 124 22 127 31 233 Other receivables Current interest-bearing receivable, IC -23 217 777 466 123 Dividends and group contribution receivable, IC 9 462 Other current receivables 249 670 261 635 3 246 1 478 Total 249 623 261 635 221 022 477 062 Advances paid to suppliers 88 375 22 876 Accrued revenues at the point in time 18 782 7 495 Total 107 156 30 371 NOTE 15 CASH AND CASH EQUIVALENTS (1 000 NOK) Group Parent Company 2023 2022 2023 2022 Cash and cash equivalents 1 928 652 2 212 495 1 064 083 1 160 349 Here of restricted cash 35 357 39 277 2 543 2 993 NOTE 16 FINANCIAL RISK MANAGEMENT / FINANCIAL INSTRUMENTS (1 000 NOK) The breakdown of the parent company’s financial assets is as follows: Financial assets at fair value through OCI Number of shares Shareholding in% Fair value 2023 2022 2023 2022 2023 2022 Listed shares Kongsberg Gruppen 25 812 25 812 0,01% 0,01% 11 922 10 727 Spotlio 423 167 423 167 0,21% 0,48% 106 199 Norse Atlantic 320 625 450 000 0,26% 0,22% 3 880 905 Total listed shares 15 907 11 831 Financial assets at fair value through OCI 15 907 11 831 Fair value – change during the year: Financial assets at fair value through OCI 2023 2022 Balance at 1 January 11 830 15 227 Change in financial assets at fair value through OCI 2 088 -3 311 Proceed from sale of financial assets at fair value -93 -85 Purchase of financial assets at fair value 2 081 Balance at 31 December 15 907 11 830 The following dividend is received: Kongsberg Gruppen tNOK 217 (tNOK 310). Change in assets at fair value are based on changes in the market values of listed shares.A sensitivity analysis indicates that a 10% change in fair value as at 31 December 2023 would change equity by tNOK 1.600and profit for the year from continuing operations by tNOK 0 (2022: by tNOK 1.183 and tNOK 0 respectively). FINANCIAL RISK MANAGEMENT The company and the Group are exposed to credit risk, liquidity risk from the use of financial instruments and market risk. The Board of Directors has overall respon- sibility for establishing and supervision of the Group’s guidelines on risk manage- ment. Principles, procedures and systems for risk management in the key areas are reviewed and assessed regularly. Industrial investments consist of a limited number of large investments. The investment strategy is based on the premise that long- term, active engagement provides the greatest return. Other investments are in liquid deposits with no connection to the Group. For 2022 restricted cash tNOK 127.984 related to trading, which is a part of Volue. Market services AS’ business, is included in total cash and cash equivalents. From. 2023 restricted cash related to trading are reported as other receivables. Numbers for 2022 are reclassified. 174 175 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 CREDIT RISK Credit risk is the risk of financial losses if a customer or counterparty to a finan- cial instrument is unable to fulfil their obligations. Credit risk normally arises when the company or Group extends credit to customers or invests in securities. Credit risk associated with investments is considered to be limited since investments are mainly made in liquid securities with a good creditworthiness. A specification of the investments is given earlier in this note. The Group has routines to ensure that credit is only extended for sales to customers that have had no previous payment issues and that stay within their credit limit. The maximum exposure to credit risk associated with receivables at the balance sheet date was: Group Parent Company 2023 2022 2023 2022 Total receivables 1 405 772 1 229 195 243 149 508 296 Account receivables 1 104 165 950 071 2 328 822 Loss allowance 59 743 23 971 Trade receivables Breakdown of the book value of outstanding trade receivables in: Overdue Account receivables 2023 Not due 1-30 days 31-60 days 61-90 days More than 90 days Accounts receivable Arendals Fossekompani ASA 2 283 45 2 328 Volue Group 267 519 84 153 13 387 17 085 11 286 393 430 ENRX Group 302 182 54 533 31 409 9 330 49 197 446 650 NSSL Global Group 114 625 15 563 13 611 4 938 19 663 168 400 Tekna Group 26 662 8 901 10 256 2 732 27 685 76 235 AFK Property Group 408 700 93 1 201 Alytic Group 1 493 2 489 1 793 658 1 247 7 680 Vergia Group 168 168 Ampwell Group 4 506 753 1 542 1 194 46 8 042 AFK Tyskland Group 32 32 Total 719 877 167 091 71 999 35 937 109 261 1 104 166 The company has applied impairment losses for expected credit losses as follows: Overdue Loss allowance 2023 Not due 1-30 days 31-60 days 61-90 days More than 90 days Loss allowance Volue Group 1 125 1 775 2 591 2 857 8 347 ENRX Group 946 91 197 24 9 212 10 469 NSSL Global Group 144 910 97 147 7 676 8 974 Tekna Group 31 283 31 283 Alytic Group 270 270 Total 1 091 2 125 2 338 2 761 51 428 59 743 Expected credit losses (ECL) are measured based on a credit risk assessment on a customer by customer basis, using all available information and updated when appropriate. Credit losses for 2023 and 2022 have been minor. Breakdown of the book value of outstanding trade receivables in: Overdue Account receivables 2022 Not due 1-30 days 31-60 days 61-90 days More than 90 days Accounts receivable Arendals Fossekompani ASA 789 32 822 Volue Group 342 652 41 013 3 313 2 890 5 405 395 272 ENRX Group 240 057 45 521 11 894 5 663 47 253 350 389 NSSL Global Group 90 088 30 358 8 281 7 090 7 096 142 913 Tekna Group 16 574 8 869 6 068 3 375 6 437 41 322 AFK Property Group 966 982 27 27 36 2 037 Alytic Group 4 133 674 827 540 532 6 705 Ampwell Group 10 600 10 600 AFK Tyskland Group 12 12 Total 705 869 127 418 30 409 19 585 66 791 950 071 The company has applied impairment losses for expected credit losses as follows: Overdue Loss allowance 2022 Not due 1-30 days 31-60 days 61-90 days More than 90 days Loss allowance Volue Group 41 64 614 1 719 1 971 4 409 ENRX Group 515 304 27 11 8 934 9 791 NSSL Global Group 9 419 9 419 Tekna Group 302 302 Alytic Group 50 50 Total 556 368 691 1 730 20 627 23 971 Changes in the period’s loss allowance are explained as follows: Group Group Loss allowance 2023 2022 Total Opening Balance 23 971 19 999 Changes in expected losses (loss rates) and outstanding receivables (volume) 39 935 4 527 Realized losses during the period (-) -2 997 -1 088 Exchange differences on translation of foreign operations -1 167 533 Closing Balance 59 743 23 971 LIQUIDITY RISK Liquidity risk is the risk that the Group will not be able to fulfil its financial obligations as they fall due. The aim of liquidity management is to secure sufficient liquidity to fulfil the obligations as they fall due, without this causing unacceptable losses to the company and the Group. Cash flow from the company and the Group’s ordinary oper- ations, combined with significant investments in liquid securities as well as unutilised credit facilities mean that the liquidity risk is considered to be low. Subsidiaries ENRX, NSSLGlobal and Volue have established an group account arrangement covering most of the subsidiaries. This includes currencies NOK, EURO, USD, JPY, SEK, DKK og GBP. This helps increase the flexibility and efficiency of liquidity management The breakdown of the liabilities of the company and the Group is as follows: 176 177 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 (Contractual cash flows include interest calculated based on interest rates at the balance sheet date) (Contractual cash flows of the bond loans that have maturity of 12 months or less are related to interest payments) Group 2023 Carrying amount Contractual cash flows 6 months or less 6 to 12 months 1 to 2 years 2 to 5 years Over 5 years Accounts payable 512 917 512 917 512 917 Current interest-bearing debt 234 715 238 411 233 619 4 792 Bank overdraft 168 745 181 646 47 968 133 678 Current lease liabilities 65 762 73 372 38 117 34 679 241 Total current liabilities 982 140 1 006 347 832 621 173 149 241 Non-current bond loans 498 042 555 569 13 075 13 075 529 419 Non-current interest-bearing debt 1 745 430 2 004 849 38 601 37 493 68 034 786 019 1 074 701 Non-current lease liabilities 226 537 296 663 77 791 120 890 97 982 Total non-current liabilities 2 470 010 2 857 081 38 602 50 569 158 899 1 436 329 1 172 683 Group 2022 Accounts payable 969 613 969 456 969 044 412 Current interest-bearing debt 170 841 174 981 161 730 13 251 Bank overdraft 110 869 113 123 18 738 94 385 4 390 Current lease liabilities 58 453 60 431 29 031 31 401 1 812 1 406 Total current liabilities 1 309 776 1 317 991 1 178 542 139 449 Non-current bond loans 497 581 569 733 13 075 13 075 39 225 504 358 Non-current interest-bearing debt 353 067 435 834 8 549 11 174 86 652 88 418 241 041 Non-current lease liabilities 203 076 209 065 62 373 74 504 72 187 Total non-current liabilities 1 053 724 1 214 632 8 549 24 249 162 100 202 147 817 586 Parent Company 2023 Carrying amount Contractual cash flows 6 months or less 6 to 12 months 1 to 2 years 2 to 5 years Over 5 years Accounts payable 11 852 11 852 11 852 Current interest-bearing liab, IC 36 416 36 416 36 416 Current lease liabilities 2 293 5 360 2 680 2 680 Total current liabilities 55 160 58 227 19 132 39 096 Non-current bond loans 498 042 555 569 13 075 13 075 529 419 Non-current interest-bearing debt 964 324 1 130 653 27 722 27 722 27 722 83 165 964 324 Non-current lease liabilities 57 965 78 314 4 898 14 328 59 088 Total non-current liabilities 1 520 331 1 764 536 27 722 40 797 45 695 626 912 1 023 412 Parent Company 2022 Accounts payable 12 105 12 105 12 105 Current interest-bearing liab, IC 17 185 17 185 17 185 Current lease liabilities 2 300 5 360 2 680 2 680 Total current liabilities 31 590 34 651 14 785 19 865 Non-current bond loans 497 581 569 733 13 075 13 075 39 225 504 358 Non-current lease liabilities 60 258 83 568 5 254 14 694 63 620 Total non-current liabilities 711 146 831 137 2 453 15 528 23 235 68 637 721 285 For other receivables and payables measured at amortised cost the book value is assumed to equal the fair value. For contractual cash flows related to derivatives we refer to hedge accounting further below. MARKET RISK Market risk is the risk that changes in market prices such as exchange rates, interest rates and share prices will impact net income or the value of financial instruments. FOREIGN EXCHANGE RISK The company and the Group are exposed to foreign exchange risk on purchases, sales and loans in currencies other than the companies' functional currency. The Group’s main exposure is to EUR, GBP and USD. The foreign exchange exposure is primarily associated with operations in the Group’s foreign subsidiaries and with the company’s and the Group’s liabilities in foreign currency. The ENRX subgroup uses derivatives to limit foreign exchange risk associated with sales and trade receiv- ables. The parent company and ENRX also use foreign currency loans and currency swaps to limit foreign exchange risk associated with changes in value in the subsid- iaries. The main foreign currency exposure in the parent company and the Group’s Norwegian subsidiaries is to EUR. Exposure at 31 December was as follows (1 000 EUR) Group Parent Company 2023 2022 2023 2022 Bank deposits 9 408 12 814 153 Trade receivables 31 468 26 641 78 Trade payables -3 457 -2 170 -164 -40 Interest-bearing liabilities -20 905 -14 299 Balance sheet exposure (foreign exchange risk) 16 514 22 986 -164 191 A sensitivity analysis indicates that a 5% appreciation of NOK against EUR as at the year-end would impact earnings for the Group in 2023 by the equivalent of MEUR -0,8 and in 2022 by the equivalent of MEUR -1.2. The amounts are stated before taxes. Other subsidiaries have only modest exposure to currencies other than the company’s functional currency. HEDGE ACCOUNTING The derivative financial assets are all net settled. Therefore, the maximum exposure to credit risk at the reporting date is the fair value of the derivative assets which are included in the consolidated statement of financial position. The customer payments in foreign currencies in order backlog is hedged according to NOK according to strategy. Cash flow hedge accounting is generally applied to qualifying foreign currency hedges. Under the ENRX hedge accounting model, the portion of the fair value change related to a change in the spot rate is recognised in the fair value reserve within equity until the cumulative profit or loss is recycled to the statement of income simultaneously with the hedge item.There is no inefficiency in the hedging - see Note 7 Financial items. 178 179 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Nominal value, carrying amount and maturity of forward currency contracts: Currency 2024 2025 2026 Nominal amount (currency) Carrying amount (1 000 NOK) EUR 8 611 1 961 10 573 -566 USD 8 050 8 050 1 197 JPY 14 000 14 000 29 GBP 425 425 225 Total 885 Unrealised gains/losses relating to hedging of future cash flows are recognised in “Other comprehensive income”. The unrealised loss shown in the table is the value before deducting tax. Net unrealised losses/gains are recognised as other current liabilities/assets. Change in carrying amount in the period: 2023 2022 Balance at 1 January 1 869 7 012 Changes in value posted as OCI -5 535 8 582 Reclassifies from equity to income statement 4 551 -13 725 Balance at 31 December 885 1 869 Asset 4 545 11 065 Liabilities 3 660 9 196 Total 885 1 869 INTEREST RATE RISK Most of the company’s and the Group’s interest-bearing financial assets and liabili- ties accrue interest at variable rates. In 2021 the parent company took out a bond of MNOK 500 at an fixed interest rate of 2,615%. An overview of interest-bearing assets can be found earlier in this note and of liabilities in Note 17. A 1% change in interest rates would affect earnings, and profit and financial items through the year, by a net amount of around NOK -1,8 million. The amount is stated before taxes. PRICE RISK FOR ENERGY SALES Most of the company’s and the Group’s energy sales take place in the spot market, which means there is exposure to risk associated with price fluctuations. In the past two years no energy derivatives have been used as hedging instruments to limit the risk. MARKET RISK RELATING TO SECURITIES The company and the Group are exposed to price risk on investments in equity instruments classified as financial assets at fair value through OCI and financial assets at fair value throiugh income statement. All decisions on significant pur- chases and sales are made by the Board of Directors. The main objective of the investment strategy is to maximise the return through ongoing dividends and increases in the value of the portfolio. An overview of the company’s financial assets is given earlier in this note. Group Parent Company 2023 2022 2023 2022 Book value Fair value Book value Fair value Book value Fair value Book value Fair value Liabilities Bond loans 498 042 457 800 497 042 450 000 498 042 457 800 497 042 449 461 Unrecognized income between book- and fair value -40 232 -47 581 -40 242 -47 581 At year-end the companies had the following forward currency contracts specified as hedging (1 000 NOK) Contract value Unrealised gains/losses 2023 Hedging of future cash flows 62 493 885 Fair value hedging Balance sheet exposure (hedging) 62 493 885 2022 Contract value Unrealised gains/losses Hedging of future cash flows 202 708 1 869 Fair value hedging Balance sheet exposure (hedging) 202 708 1 869 180 181 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 182 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 Fair value categories financial assets and liabilities Group Parent Company Fair value Fair value Fair value Fair value through through Amort. through through Amort. 2023 income OCI cost Sum income OCI cost Sum Carrying amount financial assets Trade and other receivables 1 294 088 1 294 088 25 373 25 373 Cash and cash equivalents 1 928 652 1 928 652 1 064 083 1 064 083 Financial assets at fair value through OCI 15 907 15 907 15 907 15 907 Financial assets at fair value through income statement 88 283 88 283 77 275 77 275 Loans to Group companies 1 602 210 1 602 210 Derivatives 4 545 4 545 Sum 92 829 15 907 3 222 740 3 331 475 77 275 15 907 2 691 666 2 784 848 Carrying amount financial liabilities Derivative liabilities 3 660 3 660 Interest-bearing loans and borrowings 2 179 669 2 179 669 964 324 964 324 Bond loans 498 042 498 042 498 042 498 042 Trade and other payables 512 917 512 917 11 852 11 852 Liabilities to Group companies 36 416 36 416 Sum 3 660 3 190 627 3 194 288 1 510 634 1 510 634 2022 Carrying amount financial assets Trade and other receivables 1 187 781 1 187 781 32 711 32 711 Cash and cash equivalents 2 339 664 2 339 664 1 160 349 1 160 349 Financial assets at fair value through OCI 11 830 11 830 11 830 11 830 Financial assets at fair value through income statement 80 543 80 543 80 440 80 440 Loans to Group companies 786 851 786 851 Derivatives 11 065 11 065 Sum 91 608 11 830 3 527 445 3 630 883 80 440 11 830 1 979 911 2 072 182 Carrying amount financial liabilities Derivative liabilities 9 196 9 196 Interest-bearing loans and borrowings 666 856 666 856 153 846 153 846 Bond loans 497 042 497 042 497 042 497 042 Trade and other payables 969 613 969 613 12 105 12 105 Liabilities to Group companies 17 185 17 185 Sum 9 196 2 133 511 2 142 707 680 179 680 179 PORTFOLIO FROM THE BOARDROOM SUSTAINABILITY FINANCIAL STATEMENTS APPENDIX 183 02 03 04 05 06 FAIR VALUE HIERARCHY The table below analyses financial instruments measured at fair value according to valuation method. The different levels are defined as follows: • Level 1: Fair value is measured using listed prices from active markets for identical financial instruments. No adjustment is made to these prices. • Level 2: Fair value is measured using other observable inputs than those used at level 1, either directly (prices) or indirectly (derived from prices). • Level 3: Fair value is measured using inputs that are not based on observable market data (unobservable inputs). 2023 Level 1 Level 2 Level 3 Sum Financial assets at fair value through OCI 15 907 15 907 Financial assets at fair value through income statement 88 283 88 283 Bond loans -457 800 -457 800 Total -441 893 88 283 -353 609 Other derivative financial assets 4 545 4 545 Other derivative financial liabilities -3 660 -3 660 Grand Total -441 008 88 283 -352 724 2022 Financial assets at fair value through OCI 11 831 11 831 Financial assets at fair value through income statement 80 543 80 543 Bond loans -450 000 -450 000 Total -438 169 80 543 -357 626 Other derivative financial assets 11 065 11 065 Interest and currency swaps related to bond loans Other derivative financial liabilities -9 196 -9 196 Grand Total -436 300 80 543 -355 757 The fair value of the Bond loan is determined by using the indexed tax validation rules at year-end. The index is publicly available. NOTE 17 INTEREST-BEARING DEBT AND PROVISIONS (1 000 NOK) This note provides information on the contractual terms of the Group’s interest-bearing loans and borrowings. For more information on the Group’s interest rate risk and foreign exchange risk see Note 16. Group / Parent Bond loans 2023 2022 2,516% 2021 - 2028 500 000 500 000 Capitalised loan costs -1 958 -2 419 Bond loans - booked value 498 042 497 581 Fair value (ref note 16) 457 800 450 000 Parent Company Debenture loans 2023 2022 Euribor + fixed margin Floating interest 968 474 157 707 Capitalised loan costs -4 150 -4 400 Total denenture loans parent company 964 324 153 307 Subsidiaries Volue Group Floating interest 342 023 Tekna Group Fixed interest rate 8 255 4 698 Tekna Group Debenture loans 23 083 37 882 ENRX Group Floating interest 282 183 139 994 AFK Property Group Floating interest 316 628 135 651 Alytic AS Floating interest 10 946 3 232 Ampwell Consolidated Floating interest 32 718 49 144 Total Debenture loans Subsidiaries 1 015 836 370 601 Total Debenture loans Group 1 980 160 523 908 Group Parent Company Loans secured by pledged assets 2023 2022 2023 2022 Non-current interest-bearing debt 457 338 148 800 Bank overdraft 86 973 30 932 Total 544 312 179 733 Loans are secured by the following pledged assets Buildings and land 219 036 175 832 Vehicles, machinery and equipment 202 067 140 930 Inventories 370 041 435 132 Trade receivables 275 177 422 474 Total security 1 066 322 1 174 367 Security for promissory note and bond loans with a countervalue of MNOK 500 taken out in the parent company has been given in the form of negative pledges. Trade receivables in two of the subsidiaries have been pledged as security for bank guaran- tees and overdrafts given. For the Group the value-adjusted equity must be at least 40% and have a value of at least MNOK 1 500. For Volue the equity ratio must be al least least 30% and total net debt to Adjusted EBITDA below 2,5:1. For ENRX the equity must be at least 30%, and cash reserve > MEUR 5. Tekna have some covernants connected to operational activities, but none financial covenants. All the companies are in compliance with the requirements of their covenants at 31 December 2023. NOTE 18 TRADE PAYABLES AND OTHER CURRENT LIABILITIES (1 000 NOK) Group Parent Company 2023 2022 2023 2022 Trade payables 485 561 690 510 10 527 11 036 Other payables 27 356 279 103 Trade acc payable, IC 1 324 1 069 Account Payables 512 917 969 613 11 852 12 105 Specification of Provisions Group 2022 Total Opening Balance Opening balance input (YE) Changes in expected losses (loss rates) and outstanding receivables (volume) Realized losses during the period (-) Total Effect from Foreign Exchange Closing Balance Restructuring 4 339 39 385 -5 072 1 616 40 268 Earn-out 57 253 3 178 60 431 Guarantees Other provisions Onerous contracts 31 118 4 145 -18 300 16 963 Total provisions 92 710 43 530 -23 372 4 794 117 662 Group 2023 Restructuring 40 268 -37 085 3 368 6 551 Earn-out 60 431 -60 431 Guarantees 3 603 -88 170 3 684 Other provisions 33 969 -1 230 214 32 953 Onerous contracts 16 963 1 876 -5 339 13 500 Total provisions 117 662 39 448 -104 173 3 752 56 688 A restructuring provision is recognised when the group has prepared a detailed restructuring plan and started the implementation of the plan or communicated the plan. A restructuring plan shall include the following information: which business is affected; the main units and personnel affected by the restructuring; as well as the costs to be incurred and the timetable of the plan. The restructuring provision (sev- erance pay) is related to the ENRX segment business in Germany, and the part of the business which has been unprofitable for a longer period. Following the restructuring, it is anticipated that the business unit will deliver positive results. A restructuring provision related to severance pay is booked as other operating expenses. 184 185 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 NOTE 19 LEASES (1 000 NOK) Group Parent Company Carrying amount right-of-use assets 2023 2022 2023 2022 Buildings 260 696 238 022 58 742 62 236 Vehicles, machinery and equipment 16 629 9 756 168 322 Sum 277 324 247 777 58 910 62 558 NOTE 20 EVENTS AFTER THE REPORTING PERIOD On 8 February 2024, the Board of Directors decided to pay an ordinary cash divi- dend of NOK 1.00 per share for the fourth quarter 2023. The dividend was paid on 21 February 2024. Summary of Provisions Group Parent Company 2023 2022 2023 2022 Total Opening Balance 117 662 92 710 Changes in expected losses (loss rates) and outstanding receivables (volume) 39 448 43 530 1 600 Realized losses during the period (-) -104 173 -23 372 Total Effect from Foreign Exchange 3 752 4 794 Closing Balance 56 688 117 662 1 600 Specification of Accruals Group Parent Company 2023 2023 Accrued Labor cost / holiday pay 127 080 7 686 Accrued Bonus 91 015 12 000 Paid in collaterals 42 407 Accrued operating cost 276 332 4 680 Other current liability 275 175 Total accruals 812 009 24 366 Specification of Provisions Parent Company 2022 Total Opening Balance Opening balance input (YE) Changes in expected losses (loss rates) and outstanding receivables (volume) Realized losses during the period (-) Total Effect from Foreign Exchange Closing Balance Restructuring - - - - - - Earn-out - - - - - - Guarantees - - - - - - Other provisions - - - - - - Onerous contracts - - - - - - Total provisions - - - - - - Parent Company 2023 Restructuring Earn-out Guarantees Other provisions 1 600 1 600 Onerous contracts Total provisions 1 600 1 600 The provisions of NOK 1.6 million as of 31 December 2023 are mainly related to a guarantee granted by the parent company to purchase ENRX shares from employ- ees at an agreed price within the year 2027 when required. Lease liabilities Current lease liabilities 65 762 58 454 2 293 2 300 Non-current lease liabilities 226 537 203 076 57 965 60 258 Sum 292 299 261 530 60 258 62 558 Income effects Buildings depreciation 71 355 70 355 3 522 3 516 Vehicles, machinery and equipment 7 526 7 132 126 168 Sum depreciation 78 881 77 487 3 648 3 684 Interest expense on lease 11 456 7 526 3 060 740 We refer to note 5 for a specification of the movements of Right-of-Use assets. NOTE 21 ACCOUNTING ESTIMATES AND ASSESSMENTS KEY ACCOUNTING ESTIMATES Key accounting estimates are estimates that are important for the presentation of the company’s and the Group’s financial position and earnings, and which require subjective assessment.Arendals Fossekompani assesses such estimates continu- ally based on historical results and experience, consultation with experts, trends, forecasts and other methods considered reasonable in each individual case. IMPAIRMENT LOSSES Goodwill and other intangible assets with an indefinite life are tested for impairment annually. The company’s investments in subsidiaries and associates are similarly tested for impairment. The assessments are based on analysis of the company's financial position and forecasts/outlook. Recoverable amounts that are measured against carrying amounts are the expected selling price or the present value of cash flows from the investment. Other assets, including property, plant and equip- mentand financial instruments available for sale, are tested for impairment when there is an indication that a fall in value may have occurred. CONSTRUCTION CONTRACTS The Group recognises revenue from individual projects in accordance with the per- centage of completion method. For such projects the degree of completion is cal- culated as costs incurred relative to total estimated costs. The greatest uncertainty is associated with measurement of the project’s total estimated costs. The group has implemented controls to ensure that accounting for revenue over time reflects management's best estimate with respect to total contract revenue, cost, and if applicable stage of completion. The group uses the stage of completion method to determine the contract revenue recognised over time in the period. The method to determine the stage of completion is costs spent compared to total estimated costs or direct labour spent compared to total estimated direct labour. The estimation uncertainty is primarily related to cost calculation and measurement of progress. When project's remaining costs cannot be reliaby estimated, only revenues equal to the accrued project costs will be recognised as revenues. 186 187 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 188 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 NOTE 22 EARNINGS PER SHARE IN NOK BASIC EARNINGS PER SHARE/DILUTED Basic earnings per share are based on profit attributable to the equity holders of the parent and the weighted average number of outstanding ordinary shares during the year, which was 54.832.135 (2022:54.851.441), calculated as follows: Profit attributable to ordinary shares (1 000 NOK) 2023 2022 Net profit for the year -29 520 -32 519 Minority interest -62 110 -38 263 Equity holders of the parent 32 590 5 744 Weighted average number of ordinary shares Issued ordinary shares, 1 January 55 995 250 55 995 250 Effect of treasury shares -1 137 911 -1 188 319 Number of outstanding shares as at 31 Dec 54 857 339 54 806 931 Weighted average number of ordinary shares for the year 54 832 135 54 851 441 Basic earnings per share / diluted earnings per share (NOK) 0,59 0,10 NOTE 23 THE TWENTY LARGEST SHAREHOLDERS Number of shares Shareholding Ulefoss Invest AS 14 709 875 26,3% Havfonn AS 14 567 900 26,0% Must Invest AS 14 106 225 25,2% Arendals Fossekompani ASA 1 137 911 2,0% Svanhild og Arne Must Fond 657 225 1,2% Fabulous AS 453 853 0,8% Per-Dietrich Johansen 375 375 0,7% Fondsfinans Pensjonskasse 356 228 0,6% Fløtemarken AS 323 671 0,6% Erik Bøhler 280 100 0,5% Sverre Valvik AS 266 000 0,5% Bøhler Invest AS 265 000 0,5% Aksel Oland 237 994 0,4% Ropern AS 237 478 0,4% Annelise Altenburg Must 216 675 0,4% Folketrygdfondet 216 001 0,4% Ottersland AS 200 000 0,4% Erik Christian Must 180 000 0,3% Trine Must 180 000 0,3% Falck Frås AS 170 000 0,3% 49 137 511 87,8% With reference to section 7-26 of the Norwegian Accounting Act the following can be disclosed concerning shares owned by individual Board members and the CEO, including shares owned by spouses, children who are minors or by companies in which the person in question has a controlling interest. ARENDALS FOSSEKOMPANI PORTFOLIO FROM THE BOARDROOM SUSTAINABILITY FINANCIAL STATEMENTS APPENDIX 189 01 02 03 04 05 06 Own holdings Related parties Total Board of Directors Trond Westlie 7 048 7 048 Morten Bergesen 14 567 900 14 567 900 Didrik Vigsnæs 18 000 18 000 Christian Must 180 000 14 106 225 14 286 225 Lise Lindback Anne Grethe Dalane 1 000 1 000 Stine Rolstad Brenna 7 500 7 500 188 048 28 699 625 28 887 673 Senior Executives Benjamin Golding 16 750 16 750 Lars Peder Fensli * 15 344 15 344 Håkon Tanem 30 047 30 047 Torkil Mogstad * 15 019 15 019 Ingunn Ettestøl 16 912 16 912 Ann-Kari Heier 14 698 14 698 108 770 108 770 * See Note 4 regarding share-based payments. NOTE 24 RELATED PARTIES The company’s/Group’s related parties comprise subsidiaries, associates and members of the Board of Directors and senior management team. KEY EXECUTIVES Members of the Board of Directors and the company management and their clos- est relations control 51,7% of shares with voting rights in the company. Loans to senior executives (see Note 4) amounted to tNOK 11.687 (2022: tNOK 10.922) as at 31 December. These loans are included in “other investments”. Interest is charged on loans to senior executives at a rate that never triggers a taxable benefit. In addition to regular salaries, senior executives have agreements on other benefits in the form of a defined-contribution pension scheme and share-based payments. (See Note 4). In 2023, the Chairman has received a fee of tNOK 500 for consul- tancy services provided by his company Shama AS. (See Note 4). RELATED PARTY TRANSACTIONS Transactions between Group companies and other related parties are based on the principles of market value and arm’s length.In 2023 Arendals Fossekompani purchased services relating to market management for tNOK 921 from Volue Market Services (2022: tNOK 866). In 2023 Arendals Fossekompani had a gain on foreign currency loans to Volue Market Services of tNOK 2.020 (2022: gain of tNOK 647). In 2023 Tekna sold goods it had produced to ENRX for tCAD 94 (2022: tCAD 2).Arendals Fossekompani ASA supply AFK Property, Vergia, Ampwell and Alytic with administrative services, all invoiced based market value. Interest is charged on loans from the AFK parent company to companies in the Group in accordance with the agreement entered into. NOTE 25 CHANGE IN LOANS AND BORROWINGS (1 000 NOK) Loans maturing after more than one year Loans maturing in less than one year Total interest- bearing liabilities Note 2023 2022 2023 2022 2023 2022 Group Total Opening Balance 1 085 804 828 412 340 163 300 888 1 425 967 1 129 301 Cash from new borrowings CF 1 322 068 268 680 1 322 068 268 680 Repayment of non-current lease liabilities CF -44 767 -46 834 -59 603 -46 834 Repayment of long-term borrowings CF -117 524 -209 999 -102 688 -209 999 Cash flow from net change in current interest bearing debt CF 277 552 2 686 277 552 2 686 Change in lease liabilities without cash flow effects 5 83 064 108 309 83 064 108 309 Unspecified movement 676 116 959 2 962 22 651 3 639 139 610 Reclassification 172 496 -172 496 Total Effect from Foreign Exchange -1 029 20 277 21 041 13 939 20 011 34 216 Closing Balance 2 500 788 1 085 804 469 222 340 163 2 970 010 1 425 967 Parent Company Total Opening Balance 711 146 511 947 2 300 3 897 713 446 515 844 Cash from new borrowings CF 825 485 147 763 825 485 147 763 Repayment of long-term borrowings CF -2 293 -3 958 -2 293 -3 958 Cash flow from net change in current interest bearing debt CF -7 -7 Change in lease liabilities without cash flow effects 48 850 -1 597 47 253 Total Effect from Foreign Exchange -14 007 6 544 -14 007 6 544 Closing Balance 1 520 331 711 146 2 293 2 300 1 522 624 713 446 Group 2023 2022 Bond 498 042 497 581 Interest-bearing liabilities and credits (long-term) 1 745 430 353 067 Other non-current liabilities 30 778 32 079 Non-current lease liabilities 226 537 203 076 Loans maturing after more than one year 2 500 788 1 085 804 Interest-bearing liabilities and credits (short-term) 403 460 281 709 Current lease liabilities 65 762 58 454 Loans maturing in less than one year 469 222 340 163 Total interest-bearing liabilities 2 970 010 1 425 967 Parent Company 2023 2022 Bond 498 042 497 581 Interest-bearing liabilities and credits (long-term) 964 324 153 307 Non-current lease liabilities 57 965 60 258 Loans maturing after more than one year 1 520 331 711 146 Interest-bearing liabilities and credits (short-term) Current lease liabilities 2 293 2 300 Loans maturing in less than one year 2 293 2 300 Total interest-bearing liabilities 1 522 624 713 446 NOTE 26 CLIMATE-RELATED RISKS Arendals Fossekompani (AFK) has assessed climate-related risks based on the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) and has documented the recommended disclosures and responses in a stand-alone TCFD report. The report covers the company’s exposure to climate-related risks, such as physical, regulatory, technology, market and reputational risks, as well as potential opportunities. Related to AFK’s invest- ment strategy and the individual portfolio companies’ exposure to the green tran- sition, transition risks such as increased regulatory requirements, shifts in market demand and the transition to low-emission technologies have been considered. There is a risk of energy price fluctuations due to variable renewable electricity pro- duction, and rising energy prices may increase operational costs. In addition, as reg- ulatory requirements are expanding, carbon tax may affect prices and there is a risk of increased cost following the regulations for non-financial reporting. Technology developed in the portfolio companies is also subject to market and regulatory devel- opments and such potential risks have been reflected in the respective impairment tests of assets. As of 31 December 2023, AFK has not identified any material impacts on financial reporting judgements and estimates due to climate risk. AFK has ongoing assessments related to climate-related risks, and other internal initiatives to reduce its climate risk exposure. Whilst there is currently no material impact expected from climate change in the medium term, AFK follows develop- ments and will regularly assess its portfolio risk exposure to transitional and phys- ical climate risks. 190 191 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 NIBD AFK Vannkraft Group Management Volue NSSLGlobal Group ENRX Group 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 Bond 498 042 497 581 Non-current inter- est-bearing debt 964 324 153 307 342 008 255 531 618 Interest-bearing current borrowings 26 606 1 st year installm. non-current borrowings 45 139 378 Bond Interest and ex rate swap (curr.) Non-current lease liabilities 57 965 60 258 105 454 77 492 12 344 11 180 103 222 102 316 Current lease liabilities 2 293 2 300 24 051 18 970 4 860 4 476 32 660 31 295 Bank overdraft 75 570 6 892 7 990 23 697 85 186 80 280 Current and non current liabilities IC 38 779 17 731 49 326 30 574 -149 409 303 363 423 Total liabilities 1 561 404 731 177 596 409 133 927 25 046 39 353 912 553 717 308 Cash and cash equivalents 1 064 636 1 160 721 178 328 446 350 371 465 379 586 135 939 158 950 Intercompany loans 1 384 434 320 728 Current inter- est-bearing rec., IC 217 777 466 123 36 416 17 185 Financial assets classified as held for trading Total asets 2 666 847 1 947 571 214 744 463 535 371 465 379 586 135 939 158 950 Net interest bearing debt -1 105 443 -1 216 394 381 665 -329 608 -346 420 -340 233 776 613 558 358 Tekna Group AFK Property Group Alytic Group Ampwell Group Vergia Group 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 Bond Interest and ex rate swap n-c Non-current inter- est-bearing debt 28 256 29 991 119 647 130 961 2 946 3 232 32 718 34 958 Interest-bearing current borrowings (inp) 8 717 192 292 8 000 14 185 1 st year installm. non-current borrowings 3 083 3 872 4 689 4 689 Bond Interest and ex rate swap (curr.) Non-current lease liabilities 5 934 8 450 104 601 23 633 26 706 1 640 2 923 Current lease liabilities 4 572 3 345 524 524 135 825 2 975 3 126 Bank overdraft Current and non current liabilities IC 161 072 70 676 35 114 4 710 2 508 876 508 330 523 22 062 23 000 Total liabilities 202 917 54 375 387 931 171 888 39 425 33 272 913 841 385 715 22 062 23 000 Cash and cash equivalents 77 906 82 739 27 232 35 885 35 261 50 887 34 780 6 458 3 033 18 089 Intercompany loans - non current Intercompany loans - current -23 -23 Financial assets classified as held for trading Total asets 77 906 82 739 27 210 35 863 35 261 50 887 34 780 6 458 3 033 18 089 Total asets 82 739 268 223 35 863 108 823 50 887 27 089 6 458 18 089 9 953 Net interest bearing debt 125 011 -28 363 360 721 136 025 4 163 -17 615 879 061 379 257 19 029 4 911 192 193 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Eliminations Total 2023 2022 2023 2022 Bond 498 042 497 581 Interest and ex rate swap n-c Non-current interest-bearing debt 1 745 430 353 067 Interest-bearing current borrowings (inp) 226 898 22 902 1 st year installm. non-current borrowings 7 817 147 938 Bond Interest and ex rate swap (curr.) Non-current lease liabilities -83 757 226 537 203 076 Current lease liabilities -6 307 65 762 58 454 Bank overdraft 168 745 110 869 Current and non current liabilities IC -1 634 833 330 523 4 695 -1 163 Total liabilities -1 724 898 -810 569 2 943 927 1 392 724 Cash and cash equivalents 1 928 652 2 339 664 Intercompany loans -1 384 434 -320 728 Current interest-bearing rec., IC -261 339 -489 841 -23 Financial assets classified as held for trading Total asets -1 645 773 -810 569 1 928 653 2 339 642 Net interest bearing debt -79 126 -93 256 1 015 274 -946 917 FINANCIAL PERFORMANCE MEASURES (1 000 NOK) Group 2023 2022 2021 2020 2019 Sales 5 441 042 4 586 536 4 232 290 3 157 470 3 226 253 Cost of sales 1 813 833 1 446 542 1 585 290 1 062 363 1 036 194 EBITDA 10) 752 918 726 417 685 819 400 973 489 648 Operating profit 433 004 428 740 450 227 160 745 236 825 Net financial items -10 595 37 285 -106 316 -46 935 11 249 Equity company income -31 382 -40 405 -12 173 -14 321 -1 632 Profit before taxes 391 027 425 620 331 738 99 489 236 212 Provision for income tax -420 547 -458 139 -234 733 -33 709 -139 951 Net profit for the year, continuing operations -29 520 -32 519 97 005 65 780 93 671 Net discontinued operations income 28 822 54 355 -46 953 Net profit for the year -29 520 -32 519 125 827 120 135 46 718 Minority interest income 32 590 -38 263 19 118 58 218 -1 313 Total Comprehensive Income 108 098 12 208 159 804 -40 302 269 972 KEY FIGURES Group 2023 2022 2021 2020 2019 Return on equity 1) % -0,8% -0,9% 2,5% 1,8% 2,9% Total profitability 2) % 1,0% 0,2% 2,2% 2,1% 2,5% Gross operating margin 3) % 13,8% 15,8% 16,2% 12,7% 15,2% Net operating margin 4) % 7,96% 9,35% 10,64% 5,09% 7,34% Gross profit margin 5) % -0,5% -0,7% 2,3% 2,1% 2,9% Equity share 6) % 40,2% 48,3% 57,2% 55,2% 54,0% NIBD (tNOK) 7) 1 015 274 -946 917 -1 804 838 -580 420 -199 037 Liquidity ratio 1 8) 1,7 1,6 2,2 1,9 2,2 Result after tax per share 9) NOK -0,54 -0,59 2,29 2,19 0,85 Dividend per share NOK 3,95 7,45 37,04 1,20 2,24 Average power production last 10 years (GWh) 501 501 514 509 502 DEFINITIONS 1. Return on equity Net profit for the year, continuing operations divided onaverage equity. 2. Total profitability Net profit for the year, continuing operations + interest cost divided on average total capital. 3. Gross operating margin Operating profit + depreciation in percentage of net operating income. 4. Net operating margin Operating income in percentage of net operating income. 5. Gross profit margin Net profit for the year, continuing operations divided on net operating income. 6. Equity share Equity divided on total capital. 7. NIBD - Net interest bearing debt Ineterst bearing debt - interest bearing receviables - cash. 8. Liquidity ratio 1 Current assets divided on current liability. 9. Result after tax per share (EPS) Net profit for the year divided on averange number of shares. 10. Result before interest, tax, depreciation, amortization and impairment Operating income- operating cost. 194 195 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Declaration by the members of the Board and the CEO The Board and CEO have reviewed and approved the Annual and Sustainabliity Report and Annual Financial Statements for Arendals Fossekompani ASA, which includes the Group and the Parent Company, for the calendar year 2023 and as at 31 December 2023 (Annual Report for 2023). The single-entity financial statements and consolidated financial statements have been prepared in accordance with IFRS as adopted by the European Union, along with relevant interpretations, and in compliance with further disclosure require- ments pursuant to the Norwegian Accounting Act applicable as at 31 December 2023. The Annual Report for the Group and Parent Company has been prepared in accordance with the provisions of the Norwegian Accounting Act and Norwegian Accounting Standard 16 as at 31 December 2023. TO THE BEST OF OUR KNOWLEDGE: • the Annual Financial Statements for 2023 for the Group and the Parent Company have been prepared in accordance with applicable accounting standards • the information presented in the financial statements provides a true and fair view of Group’s and the Parent Company’s assets, liabilities, financial position and performance as a whole as at 31 December 2023 • the Annual Report for the Group and the Parent Company provides a true and fair view of: • the development, results and financial position of the Group and the Parent Company, and the key risks and uncertainties faced by the Group and the Parent Company. Froland, 11 April 2024 Trond Westlie, Chairman Stine Rolstad Brenna, Board Member Lise Lindbäck, Board Member Morten Bergesen, Board Member Didrik Vigsnæs, Board Member Anne Grethe Dalane, Board Member Christian Must, Board Member Benjamin Golding, Chief Executive Officer 196 197 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 PricewaterhouseCoopers AS, Kystveien 14, NO-4841 Arendal T: 02316, org. no.: 987 009 713 MVA, www.pwc.no Statsautoriserte revisorer, medlemmer av Den norske Revisorforening og autorisert regnskapsførerselskap To the General Meeting of Arendals Fossekompani ASA Independent Auditor’s Report Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Arendals Fossekompani ASA, which comprise: • the financial statements of the parent company Arendals Fossekompani ASA (the Company), which comprise the statement of financial position as at 31 December 2023, the statement of income, statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including material accounting policy information, and • the consolidated financial statements of Arendals Fossekompani ASA and its subsidiaries (the Group), which comprise the statement of financial position as at 31 December 2023, the statement of income, statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including material accounting policy information. In our opinion • the financial statements comply with applicable statutory requirements, • the financial statements give a true and fair view of the financial position of the Company as at 31 December 2023, and its financial performance and its cash flows for the year then ended in accordance with IFRS Accounting Standards as adopted by the EU, and • the consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2023, and its financial performance and its cash flows for the year then ended in accordance with IFRS Accounting Standards as adopted by the EU. Our opinion is consistent with our additional report to the Audit Committee. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company and the Group as required by relevant laws and regulations in Norway and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. To the best of our knowledge and belief, no prohibited non-audit services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided. We have been the auditor of the Company for 6 years from the election by the general meeting of the shareholders on 26 April 2018 for the accounting year 2018. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 2 / 5 The Group’s business activities are largely unchanged compared to last year. We have not identified regulatory changes, transactions or other event that qualified as new Key Audit Matters for our audit of the 2023 financial statements. Furthermore, Revenue over Time from Contracts with Customers and Valuation of Goodwill and Intangible Assets have the same characteristics and risks as in the prior year, and therefore continue to be areas of focus this year. Key Audit Matters How our audit addressed the Key Audit Matter Revenue over Time from Contracts with Customers In 2023, revenue recognised over time from contracts with customers constituted NOK 2 212 550 thousand, equal to approximately 41% of total operating revenues. NOK 374 894 thousand of revenue recognised over time is accrued income from uncompleted contracts at the balance -sheet date. Revenue over time from contr acts with customers is recognised based on expected final outcome. Assessments of total contract cost, revenue and, if applicable, stage of completion are updated on a regular basis. There are several reasons why we consider revenue recognised over time t o be a key audit matter. The Group has a significant volume of contracts where revenues are recognised over time. Additionally, these contracts may have a long duration and the allocation of contract revenue s and costs is subject to management judgement wh ich may be complex. Furthermore, management’s judgement affects several significant financial statement line items, and thus has a pervasive effect on the financial statement. The accounting principles and n otes 1 and 13 to the consolidated financial sta tement include further information on the Group’s recognition of revenue over time from contracts with customers. We obtained a sample of contracts and assessed the accounting treatment against the Group’s accounting principles and IFRS 15 Revenue from contracts with customers. We found that the accounting treatment was consistent with the content of the contracts and that accounting principles were based on IFRS 15. Through meetings with management and project leader s, including review of relevant doc umentation, we tested whether the Group had implemented controls to ensure that accounting for revenue over time reflects management’s best estimates with respect to total contract revenue, cost, and if applicable , stage of completion. We found that contro ls had been implemented at various levels of the organization, and that the controls included periodic meetings to review open contracts. Estimating project revenue and associated costs, and , if applicable, calculating stage of completion requires exercise of judgement. We performed various procedures to assess whether management’s judgements were reasonable, including: • Interviewed project leaders and management challenging judgements made with respect to project estimates. • Compared expenses and hours incurred to budgeted expenses and hours. • Compared actual outcome on completed project against initial budget. • If applicable, assessed whether stage of completion on open projects corresponded to amounts recognised in the financial statements. We found that assumptions used, and judgements made by management were reasonable. We further evaluated the disclosures in the accounting principles and notes 1 and 13 and found them to be adequate and appropriate. 198 199 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 3 / 5 Valuation of Goodwill and Intangible Assets On 31 December 2023 the carrying amount of goodwill and intangible assets in the Group’s financial statements was NOK 2 376 559 thousand, equal to approximately 26 % of total assets. Goodwill and intangible as sets with indefinite economic life are tested for impairment at least annually. Impairment testing is performed at the level of cash generating unit. When testing for impairment, the carrying amount is compared to the recoverable amount. The recoverable am ount is determined based on value in use or fair value less cost of disposal. On 31 December 2023, management’s impairment assessment indicated that the recoverable amount exceeded the carrying amount for all cash generating units where goodwill and intan gible assets were recognised. As a result, no impairment was recorded. We focused on valuation of goodwill and intangible assets because these assets constitute a significant share of the Group’s total assets, and because calculation of the recoverable am ount requires application of significant judgement by management. Refer to note 6 to the consolidated financial statements for further information on goodwill and intangible assets, cash generating units and impairment testing. We obtained and gained an understanding of management’s impairment assessment related to goodwill and intangible assets. Our procedures included an assessment of the valuation method and whether key assumptions used by management appeared reasonable based on our understanding of the business and industry of each relevant cash generating unit. We also traced data used in valuation models to underlying documentation. Based on our audit procedures we found that valuation methods used were reasonable and consistent with our underst anding of the business and industry. Our testing of data against underlying documentation did not uncover material exceptions. While we did not find evidence to indicate that goodwill or intangible assets were impaired, we note that the valuation of cash g enerating units is sensitive to changes in assumptions. Lastly, we evaluated the information provided in note 6 to the consolidated financial statements, and found it to be adequate and appropriate. Other Information The Board of Directors and the Managing Director (management) are responsible for the information in the Board of Directors’ report and the other information accompanying the financial statements. The other information comprises information in the annual report, but does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the information in the Board of Directors’ report nor the other information accompanying the financial statements. In connection with our audit of the financial statements, our responsibility is to read the Board of Directors’ report and the other information accompanying the financial statements. The purpose is to consider if there is material inconsistency between the Board of Directors’ report and the other information accompanying the financial statements and the financial statements or our knowledge obtained in the audit, or whether the Board of Directors’ report and the other information accompanying the financial statements otherwise appears to be materially misstated. We are required to report if there is a material misstatement in the Board of Directors’ report or the other information accompanying the financial statements. We have nothing to report in this regard. Based on our knowledge obtained in the audit, it is our opinion that the Board of Directors’ report • is consistent with the financial statements and • contains the information required by applicable statutory requirements. 4 / 5 Our opinion on the Board of Director’s report applies correspondingly to the statements on Corporate Governance and Corporate Social Responsibility. Responsibilities of Management for the Financial Statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with IFRS Accounting Standards as adopted by the EU, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company’s and the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error. We design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's and the Group's internal control. • evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's and the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company and the Group to cease to continue as a going concern. • evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves a true and fair view. 200 201 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 5 / 5 • obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with the Board of Directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on Other Legal and Regulatory Requirements Report on Compliance with Requirement on European Single Electronic Format (ESEF) Opinion As part of the audit of the financial statements of Arendals Fossekompani ASA, we have performed an assurance engagement to obtain reasonable assurance about whether the financial statements included in the annual report, with the file name AFK Annual Report 2023.zip, have been prepared, in all material respects, in compliance with the requirements of the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) and regulation pursuant to Section 5-5 of the Norwegian Securities Trading Act, which includes requirements related to the preparation of the annual report in XHTML format, and iXBRL tagging of the consolidated financial statements. In our opinion, the financial statements, included in the annual report, have been prepared, in all material respects, in compliance with the ESEF regulation. Management’s Responsibilities Management is responsible for the preparation of the annual report in compliance with the ESEF regulation. This responsibility comprises an adequate process and such internal control as management determines is necessary. Auditor’s Responsibilities For a description of the auditor’s responsibilities when performing an assurance engagement of the ESEF reporting, see: https://revisorforeningen.no/revisjonsberetninger Arendal, 11 April 2024 PricewaterhouseCoopers AS Lars Ole Lindal State Authorised Public Accountant 202 203 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 GRI Content Index 206 GRI Information 212 Materiality 222 Independent Auditor’s Statement 224 List of Abbreviations 226 Additional Reports 228 Activity and Reporting Obligations Report 2023 Carbon Accounting Report 2023 EU Taxonomy Report 2023 Green Bond Report2023 Human Rights and Transparency Act Report 2023 Remuneration Report 2023 TCFD: Climate-Risk Assessment Report 2023 About This Report 229 06 Appendix Pierre Van Wijk Research and Development Engineer, Tekna 205 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 GRI Content Index Arendals Fossekompani has reported in accordance with the GRI Standards for the reporting period 1 January to 31 December 2023. Disclosure Disclosure description Omission Reference 1. THE ORGANIZATION AND ITS REPORTING PRACTICES 2-1 Organisational details Shareholder information (Stock Exchange Listing) Arendals Fossekompani Around the World 2-2 Entities included in the organi - sation's sustainbility reporting Notes to the financial accounts (Note 1) About this report 2-3 Reporting period, frequency and contact point About this report 2-4 Restatements of information About this report 2-5 External assurance About this report Corporate Governance report (Auditor) Independent Auditor's Statement" 2. ACTIVITY AND WORKERS 2-6 Activities, value chain and other business relationships Who we are Arendals Fossekompani Group Our sustainability priorities (Stakeholder Dialogue, Materiality Assessment) Responsible supply chain 2-7 Employees Diversity and equality (Measures) Appendix: GRI Information (Diversity and Equality) 2-8 Workers who are not employees Diversity and equality (Measures) 3. GOVERNANCE 2-9 Governance structure and composition Corporate governance report (Board of directors: Composition and independence, Nominations committee, The work of the Board of Directors, Guidelines for equality and diversity) 2-10 Nomination and selection of the highest governance body Corporate governance report (Board of directors: Composition and independence, Nominations committee) 2-11 Chair of the highest governance body Corporate governance report (Board of directors: Composition and independence) 2-12 Role of the highest gover - nance body in overseeing the management of impacts Corporate governance report (The work of the Board of Directors, The Board's tasks, Self-assessment) Disclosure Disclosure description Omission Reference 2-13 Delegation of responsibility for managing impacts Corporate governance report (The work of the Board of Directors, The Board's tasks and Notice of board meetings and meeting procedures) 2-14 Role of the highest governance body in sustainability reporting Corporate governance report (The work of Board of Directors, The Board's tasks) About this report 2-15 Conflict of interest Corporate governance report (Board of Directors: Composition and independence, Independence of Board of Directors) 2-16 Communication of critical concerns Corporate governance report (Risk management and internal control, Critical concerns) Ethical business conduct (Measures) 2-17 Collective knowledge of the highest governance body Corporate governance report (The work of the Board of Directors, Critical concerns, Onboarding and competence development) 2-18 Evaluation of the performance of the highest governance body Corporate governance report (The work of the Board of Directors, Self-assessment) 2-19 Remuneration policies Corporate governance report (Remuneration of senior executives, Remuneration to the Board of Directors) https://afk-assets.fra1.digitaloceanspaces.com/web- site/documents/Policy-for-remuneration-of-executive- management-in-AFK.pdf" 2-20 Process to determine remuneration Corporate governance report (Remuneration of Senior Executives, The work of the Board of Directors) 2-21 Annual total compensation ratio The disclosure require- ments are met based on calculations using average salary, not median. The reason is that AFK Group does not have access to the salary to all employees and are therefore not able to calculate a median Diversity and equality (Measures) 4. STRATEGY, POLICIES AND PRACTICES 2-22 Statement on sustainable development strategy Letter from the CEO 2-23 Policy commitments Responsible supply chain Anti-corruption and bribery Corporate governance report (Risk management and internal control) 2-24 Embedding policy commitments Human Rights and Transparency Act Report 2023 Corporate Governance report 2-25 Processes to remediate negative impacts Responsible supply chain Human Rights and Transparency Act Report 2023 2-26 Mechanisms for seeking advice and raising concerns Human Rights and Transparency Act Report 2023 (The whistleblowing policy), AFK Parent Company 2-27 Compliance with laws and regulations Responsible supply chain 2-28 Membership associations Reporting frameworks and partnerships (Membership associations) GRI 1 Foundation 2021 GRI 2 General Disclosures 2021 206 207 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Disclosure Disclosure description Omission Reference 5. STAKEHOLDER ENGAGEMENT 2-29 Approach to stakeholder engagement Our sustainability priorities (Stakeholder dialogue) 2-30 Collective bargaining agreements Diversity and equality (Measures) GRI 3 Material topcis 2021 3-1 Process to determine material topcis Our sustainability priorities (Materiality assessment, Stakeholder dialogue) Appendix: GRI Information (Our sustainability priorities) 3-2 List of material topics Our sustainability priorities (Materiality assessment) RESPONSIBLE INVESTMENTS New investments GRI 3: Material topics 2021 3-3 Management of material topics New investments (Policy, Actions, Measures, Targets) Our sustainability priorities (Stakeholder dialogue, Responsible investments) AFK KPI AFK KPI Turnover EU Taxonomy Summary AFK KPI CapEx EU Taxonomy Summary AFK KPI OpEx EU Taxonomy Summary OPTIMIZING PORTFOLIO COMPANIES Economic performance GRI 3: Material topics 2021 3-3 Management of material topcis Economic performance (Policy, Actions, Measures, Targets) Our sustainability priorities (Stakeholder dialogue) Optimising portfolio companies) GRI 201: Economic performance 2016 201-1 Direct economic value generated and distributed Financial statements (Statements of income) 201-2 Financial implications and other risks and opportunities due to climate change TCFD: Climate-risk Assessment Report 2023 Strengthening environmental performance GRI 3: Material topics 2021 3-3 Management of material topcis Strengthening environmental performance (Policy, Actions, Measures, Targets), Our sustainability priorities (Stakeholder dialogue, Optimising portfolio companies) GRI 305: Emissions 2016 305-1 Direct (Scope 1) GHG emissions Strengthening environmental performance (Measures) Carbon Accounting Report 2023 305-2 Direct (Scope 2) GHG emissions Strengthening environmental performance (Measures) Carbon Accounting Report 2023 305-3 Other indirect (Scope 3) GHG emissions Strengthening environmental performance (Measures) Carbon Accounting Report 2023 Disclosure Disclosure description Omission Reference GRI 302: Energy 2016 302-1 Energy consumption within the organization Strengthening environmental performance (Measures) Carbon Accounting Report 2023 Biodiversity GRI 3: Material topics 2021 3-3 Management of material topcis Biodiversity (Policy, Actions, Measures, Targets) Our sustainability priorities (Stakeholder dialogue, Optimising portfolio companies) GRI 304: Biodiversity 2016 304-1 Operational sites owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas Biodiversity (Measures) 304-4 IUCN Red List species and national conservation list species with habitats in areas affected by operations Information unavailable/ incomplete: As this is the first year that we are reporting according to this disclosure, AFK does not have a full overview of the total number of IUCN Red List species and national conservation list species with habitats in areas affected by our operations. We provide information for a selection of our portfolio companies, and will work to gather more information about this topic in 2024. Biodiversity (Measures) ETHICAL BUSINESS CONDUCT Anti-corruption and bribery GRI 3: Material topics 2021 3-3 Management of material topcis Anti-corruption and bribery (Policy, Actions, Measures, Targets) Our sustainability priorities (Stakeholder dialogue, Ethical business conduct) GRI 205: Anti-Corruption (2016) 205-1 Operations assessed for risks related to corruption Anti-corruption and bribery (Measures) Appendix: GRI Information(Anti-corruption and bribery) 205-2 Communication and training about anti-corruption policies and procedures Anti-corruption and bribery (Measures) Appendix: GRI Information(Anti-corruption and bribery) 205-3 Confirmed incidents of cor - ruption and actions taken Anti-corruption and bribery (Measures) Appendix: GRI Information(Anti-corruption and bribery) Responsible supply chain GRI 3: Material topics 2021 3-3 Management of material topcis Responsible supply chain (Policy, Actions, Measures, Targets) Our sustainability priorities (Stakeholder dialogue, Ethical business conduct) 208 209 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Disclosure Disclosure description Omission Reference GRI 414 414-1 New suppliers that were screened using social criteria Responsible supply chain (Measures) Appendix: GRI Information (Responsible supply chain) 414-2 Negative social impacts in the supply chain and actions taken Information not available for 414-2: The company did not manage to gather this information for all portfolio companies in 2023, but will improve data gathering processes and plans to obtain the infor- mation in 2024. Human Rights and Transparency Act Report 2023 (Risk of negative consequences) Information security GRI 3: Material topics 2021 3-3 Management of material topcis Information security (Policy, Actions, Measures, Targets) Our sustainability priorities (Stakeholder dialogue, Ethical business conduct) AFK KPI AFK KPI Training of people in ICT security Information security (Actions, Measures) Appendix: GRI Information (Information Security) A GREAT PLACE TO WORK Diversity and equality GRI 3: Material topics 2021 3-3 Management of material topcis Diversity and equality (Policy, Actions, Measures, Targets) Our sustainability priorities (Stakeholder dialogue, A great place to work) GRI 405: Diversity and Equal Opportunity 2016 405-1 Diversity of governance bodies and employees Diversity and equality (Measures) Appendix: GRI Information (Diversity and equality) 405-2 Ratio of basic salary and remuneration of women to men Diversity and equality (Measures) Appendix: GRI Information (Diversity and equality) GRI 406: Non-discrimination 2016 406-1 Incidents of discrimination and corrective actions taken Diversity and equality (Measures) Employee satisfaction & talent attractiveness GRI 3: Material topics 2021 3-3 Management of material topcis Employee satisfaction and talent attractiveness (Policy, Actions, Measures, Targets) Our sustainability priorities (Stakeholder dialogue, A great place to work) GRI 401: Employment 2016 401-1 New employee hires and employee turnover Employee satisfaction & talent attractiveness (Measures) Appendix: GRI Information (Employee Satisfaction and talent attractiveness) Disclosure Disclosure description Omission Reference 401-2 Benefits provided to full-time employees that are not provided to temporary or part- time employees Employee satisfaction & talent attractiveness (Measures) Diversity and equality (Actions) Appendix: GRI Information (Employee satisfaction and talent attractiveness) 401-3 Parental leave Information not available for 401-3 c., d., and e: The company did not manage to gather this information for all portfolio companies in 2023, but will improve data gathering processes and plans to obtain the information in 2024. Employee satisfaction & talent attractiveness (Measures) Appendix: GRI Information (Employee Satisfaction and talent attractiveness) Health and safety GRI 3: Material topics 2021 3-3 Management of material topcis Health and safety (Policy, Actions, Measures, Targets) Board of Directors' Report for 2023 (Personell, Equal opportunity) Our sustainability priorities (Stakeholder dialogue, A great place to work) GRI 403: Occupational health and safety 2018 403-1 Occupational health and safety management system Health and safety (Measures) Appendix: GRI Information (Health and safety) 403-2 Hazard identification,risk assessment, and incident investigation Health and safety (Measures) Appendix: GRI Information (Health and safety) 403-3 Occupational health services Health and safety (Measures) Appendix: GRI Information (Health and safety) 403-4 Worker participation, consul - tation, and communication on occupational health and safety Health and safety (Measures) Appendix: GRI Information (Health and safety) 403-5 Worker training on occupa - tional health and safety Health and safety (Measures) Appendix: GRI Information (Health and safety) 403-6 Promotion of worker health Health and safety (Measures) Appendix: GRI Information (Health and safety) 403-7 Prevention and mitigation of occupational health and safety impacts directly linked by business relationships Health and safety (Measures) Appendix: GRI Information (Health and safety) 403-9 Promotion of worker health Health and safety (Measures) Appendix: GRI Information (Health and safety) 210 211 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 GRI Information EMPLOYEE DIVERSITY Headcount per 31.12.23 Age group (full-time employees) Total < 30 years 30 -50 years > 50 years Female 507 (20,0%) 89 (3,5%) 301 (11,8%) 117 (4,6%) Male 2,032 (80,0%) 345 (13,6%) 1,110 (43,7%) 577 (22,7%) Non-binary 2 (0,1%) 0 (0,0%) 2 (0,1%) 0 (0,0%) Total headcount 2,541 434 (17,1%) 1,413 (55,6%) 694 (27,3%) Age group (part-time employees ) Total < 30 years 30 -50 years > 50 years Female 46 (35,7%) 8 (6,2%) 20 (15,5%) 18 (14,0%) Male 83 (64,3%) 32 (24,8%) 26 (20,2%) 25 (19,4%) Non-binary 0 (0,0%) 0 (0,0%) 0 (0,0%) 0 (0,0%) Total headcount 129 40 (31,0%) 46 (35,7%) 43 (33,3%) Age group (permanent employees) Total < 30 years 30-50 years > 50 years Female 537 (21,1%) 90 (3,5%) 319 (12,5%) 128 (5,0%) Male 2,011 (78,9%) 313 (12,3%) 1,103 (43,3%) 595 (23,3%) Non-binary 2 (0,1%) 0 (0,0%) 2 (0,1%) 0 (0,0%) Total headcount 2,550 403 (15,8%) 1,424 (55,9%) 723 (28,3%) Age group (temporary employees) Total < 30 years 30-50 years > 50 years Female 17 (14,2%) 12 (10,0%) 1 (0,8%) 4 (3,3%) Male 103 (85,8%) 66 (55,0%) 32 (26,7%) 5 (4,2%) Non-binary 0 (0,0%) 0 (0,0%) 0 (0,0%) 0 (0,0%) Total headcount 120 78 (65,0%) 33 (27,5%) 9 (7,5%) Region (full-time employees) Total Europe America Asia Female 519 (20,4%) 387 (15,2%) 71 (2,8%) 61 (2,4%) Male 2,020 (79,4%) 1,375 (54,1%) 218 (8,6%) 427 (16,8%) Non-binary 2 (0,1%) 2 (0,1%) 0 (0,0%) 0 (0,0%) Total headcount 2,541 1,764 (69,4%) 289 (11,4%) 488 (19,2%) Region (part-time employees) Total Europe America Asia Female 46 (35,7%) 45 (34,9%) 1 (0,8%) 0 (0,0%) Male 83 (64,3%) 80 (62,0%) 3 (2,3%) 0 (0,0%) Social Diversity and Equality Non-binary 0 (0,0%) 0 (0,0%) 0 (0,0%) 0 (0,0%) Total headcount 129 125 (96,9%) 4 (3,1%) 0 (0,0%) Region (permanent employees) Total Europe America Asia Female 538 (21,1%) 419 (16,4%) 58 (2,3%) 61 (2,4%) Male 2,010 (78,8%) 1,409 (55,3%) 221 (8,7%) 380 (14,9%) Non-binary 2 (0,1%) 2 (0,1%) 0 (0,0%) 0 (0,0%) Total headcount 2,550 1,830 (71,8%) 279 (10,9%) 441 (17,3%) Region (temporary employees) Total Europe America Asia Female 17 (14,2%) 13 (10,8%) 1 (0,8%) 3 (2,5%) Male 103 (85,8%) 59 (49,2%) 0 (0,0%) 44 (36,7%) Non-binary 0 (0,0%) 0 (0,0%) 0 (0,0%) 0 (0,0%) Total headcount 120 72 (60,0%) 1 (0,8%) 47 (39,2%) DIVERSITY OF GOVERNANCE BODIES Board of Directors Total < 30 years 30-50 years > 50 years Female 17 (25,0%) 0 (0,0%) 5 (7,4%) 12 (17,6%) Male 51 (75,0%) 1 (1,5%) 21 (30,9%) 29 (42,6%) Total headcount 68 1 (1,5%) 26 (38,2%) 41 (60,3%) C-suite positions Total < 30 years 30 -50 years > 50 years Female 14 (24,1%) 0 (0,0%) 6 (10,3%) 8 (13,8%) Male 44 (75,9%) 0 (0,0%) 22 (37,9%) 22 (37,9%) Total headcount 58 0 (0,0%) 28 (48,3%) 30 (51,7%) Executive level management Total < 30 years 30-50 years > 50 years Female 50 (23,6%) 1 (0,5%) 38 (17,9%) 11 (5,2%) Male 162 (76,4%) 3 (1,4%) 95 (44,8%) 64 (30,2%) Total headcount 212 4 (1,9%) 133 (62,7%) 75 (35,4%) DIVERSITY PER EMPLOYEE CATEGORY Technical and production functions Total < 30 years 30-50 years > 50 years Female 258 (14,1%) 54 (3,0%) 148 (8,1%) 56 (3,1%) Male 1569 (85,9%) 306 (16,7%) 863 (47,2%) 400 (21,9%) Total headcount 1827 360 (19,7%) 1011 (55,3%) 456 (25,0%) Administrative functions Total < 30 years 30-50 years > 50 years Female 245 (41,8%) 37 (6,3%) 141 (24,1%) 67 (11,4%) Male 341 (58,2%) 56 (9,6%) 171 (29,2%) 114 (19,5%) Total headcount 586 93 (15,9%) 312 (53,2%) 181 (30,9%) Other functions Total < 30 years 30-50 years > 50 years Female 36 (18,7%) 13 (6,7%) 19 (9,8%) 4 (2,1%) Male 157 (81,3%) 17 (8,8%) 86 (44,6%) 54 (28,0%) Total headcount 193 30 (15,5%) 105 (54,4%) 58 (30,1%) 212 213 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 NEW EMPLOYEE HIRES AND EMPLOYEE TURNOVER New employee hires by age group Total < 30 years 30-50 years > 50 years Female 131 (23,2%) 47 (8,3%) 70 (12,4%) 14 (2,5%) Male 433 (76,8%) 168 (29,8%) 208 (36,9%) 57 (10,1%) Total headcount 564 215 (38,1%) 278 (49,3%) 71 (12,6%) New employee hires by region Total Europe America Asia Female 136 (24,1%) 111 (19,7%) 16 (2,8%) 9 (1,6%) Male 428 (75,9%) 312 (55,3%) 47 (8,3%) 69 (12,2%) Total headcount 564 423 (75,0%) 63 (11,2%) 78 (13,8%) Leave the company/turnover by age group Total < 30 years 30-50 years > 50 years Female 75 (20,4%) 21 (5,7%) 37 (10,1%) 17 (4,6%) Male 293 (79,6%) 71 (19,3%) 154 (41,8%) 68 (18,5%) Total headcount 368 92 (25,0%) 191 (51,9%) 85 (23,1%) Leave the company/turnover by region Total Europe America Asia Female 124 (33,7%) 64 (17,4%) 55 (14,9%) 5 (1,4%) Male 244 (66,3%) 157 (42,7%) 40 (10,9%) 47 (12,8%) Total headcount 368 221 (60,1%) 95 (25,8%) 52 (14,1%) How does the organization determine their working conditions and terms of employment for employees not covered by collective bargaining agreements? ENRX Partly based on collective bargaining agreement, partly through individual contract negotiations Tekna Internal policies and guidelines NSSL Global Follow Employment Laws and Legislations. Salary reviews are performed annually, and market conditions are investigated Volue Based on the same collective bargaining agreements that covers other employees Alytic Follow the working environment act, holiday act etc. Better agreements than the minimum. Vergia Individual contract negotiations AFK Vannkraft All employees covered by collective bargaining agreement AFK Group management Partly based on collective bargaining agreement, partly through individual contract negotiations AFK Property Partly based on collective bargaining agreement, partly through individual contract negotiations Cellect All employees covered by collective bargaining agreement Commeo Working conditions are determined by e.g. safety officers, privacy officers or other officers Ampwell Individual contract negotiations Employee Satisfaction and Talent Attractiveness RATIO OF BASIC SALARY AND REMUNERATION OF WOMEN TO MEN Europe America Asia Employee category Remuneration Salary Remuneration Salary Remuneration Salary Level C-suite ratio women to men 101% 86% 73% 74% - - BoD ratio women to men 117% 140% - - - - Non-executive ratio women to men 88% 88% 93% 94% 119% 159% Job function Technical and production ratio women to men 100% 102% 97% 101% 86% 114% Administrative ratio women to men 73% 75% 70% 74% 79% 67% Other functions ratio women to men 83% 86% 83% 83% 255% 276% 214 215 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 PARENTAL LEAVE a) Female entitled to parental leave 305 Male entitled to parental leave 1,026 Non-binary entitled to parental leave 0 Total number 1,331 b) Total number of employees that took parental leave, by gender; Female who took parental leave 32 Male who took parental leave 88 Non-binary who took parental leave 0 Total number 120 BENEFITS WHICH ARE STANDARD FOR FULL-TIME EMPLOYEES BUT ARE NOT PROVIDED TO TEMPORARY OR PART-TIME EMPLOYEES Europe America Asia ENRX Brasil / France: Life insurance, health care, parental leave, food voucher, annual bonus Rest Europe: no difference Health Insurance, Life Insurance, Dental Insurance and Retirement (401K) China: life insurance, health care, disability or invalidity coverage, parental leave, retirement provision, stock ownership Rest Asia no difference Tekna Insurance (life insurance, disability, health care, additional compensation for illness), retirement plan, parental leave, holidays, meal costs (restaurant tickets or baskets) Insurance (life insurance, disability, health care, dental care, travel insur- ance), employee assistante program, telemedicine, retirement plan, parental leave, sick leave, holidays, professional order fees reimbursment Insurance (medical, unemployment, injury), endowment (retirement plan), parental leave, holidays, housing provident fund NSSL Global Pension, Private Medical Cover, Life assurance, Hybrid working Employee Assistant Program, Medicial Care, Pension Medical leave, Life insurance, private health insurance Volue Norway: Insurances including health care and disability, extra days off in connection to Christmas/Easter, telephone subscrip- tion, parental leave. Germany: all the same Poland: All the same Sweden: insurances/ health care, pension scheme. Denmark: insurances/health care, pension scheme. Switzerland: all the same Finland: all the same Spain: benefits according to law Benefits according to Japanese law Alytic Insurances (health, grouplife, sickness, travel), Co-investment scheme, pension, parental leave etc Vergia Not applicable AFK Vannkraft Life insurance, occupational health care, discounted stock ownership, travel insurance, phone, internet AFK mor Life insurance, occupational health care, discounted stock ownership, travel insurance, phone, internet AFK Property Life insurance, occupational health care, discounted stock ownership, travel insurance, phone, internet Cellect Remote work, Flex salary (tax deduction) Commeo Company pension + capital-forming benefits Parental leave Annual salary adjustment Training and professional development programs tailored to the individual requirements of every employee" 216 217 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 sidered, and the risk reduced through mitigation and controls. Investigation related to work-related incidents are done by the procedures P01 Accidents, Incidents and Dangerous Occurrences and P25 Workplace Precautions and Risk Control Systems. To identify work-related hazards and assess risks on a routine basis, AFK Hydropower conducts risk and vul- nerability analysis for continuous work by identifying and eliminating hazards, assessing risks and implementing improvement measures. These analyses are reviewed annually and audited when needed, and actions are taken to minimise the identified hazards and risks. Another measure to identify work-related hazards and assess risks, is the weekly safety rounds on the hydro- power plant, in addition to a more comprehensive annual safety round on-sight. We also perform a safe work analysis before starting a job that is not described in a policy, to secure health and safety in every job execution. Employees’ job descriptions contain defined safety roles for each specific area of the on-site hydropower workers. To identify work-related hazards and assess risks on a non-routine basis, AFK Hydropower has established a whistleblowing system for employees to report incidents and irregularities, including situations that can potentially cause injury and ill health. This system also allows anon- ymous reporting of incidents. Occupational health services ENRX’s occupational health services include yearly train- ings, health checks, and specialised trainings for special operations employees. This is quality ensured by commit- tee and management reviews, as well as through internal and external audits. In Tekna, the occupational health service function is con- trolled by the HR department, which is reporting directly to the CEO. The OHS function structure encompasses committees with responsibilities at various levels. Tekna complies with all legal requirements for health and safety in all geographic locations. The Employee H&S committee consists of a combination of factory workers, engineers and managers provided practical insights into hazards. Volue has different occupational health services in the different countries they operate. A OHS representative for each location contribute to the mental well-being of employees and help with facilitating for a secure physical and mental work environment for all employees. Occupational health services for NSSLGlobal are con- tracted as required. A mental health and wellbeing first aid assessor is employee onsite at HQ office. The OHS Manager and OHS Committee conduct hazard identifica- tion as per P25 Workplace Precautions and Risk Control System. AFK Hydropower has established an occupational health services agreement with Avonova Helse, where a coop- eration plan has been developed for activities designed to meet our HSE goals. For training, a first aid course is held annually for employees in AFK Hydropower. For eval- uation, cooperation meetings are conducted. Avonova is supporting with safety rounds and measurements and risk assessments for employees located at the power plant. Worker participation, consultation, and commu- nication on occupational health and safety ENRX is following ISO 45001 for worker participation in OHS. This done through health and safety committee, participation in safety rounds, and through the report- ing system. Also, in accordance with ISO 45001, health and safety committees have decision authority on work environment issues according to local government reg- ulations. The committees have normally minimum four yearly meetings. Tekna’s employee H&S committee consist of a com- bination of factory workers, engineers and managers with representatives elected by the workers. The com- pany has a health and safety committee compliant with regulations and representing all employees. The com- mittee meets 10-12 times a year. The committee is the starting point for workers to report OHS concerns. They give recommendations to management and establish an action plan to monitor progress. Furthermore, the acci- dent investigation and analysis procedure is well applied within the organisation. Investigations and analyses are carried out with the collaboration of workers, supervisors, the OHS committee and management. Volue has a working environment committee in the loca- tions where this is required by local regulations. These have quarterly meetings with a fixed agenda. Workers are represented in these committees. For NSSLGlobal, worker participation and consultation is provided through the OHS committee, which is rep- resenting all departments. For the production of risk assessments, the field service engineers are consulted for the completion. The OHS committee meets at least 3 times a year, or as required due to exceptional circum- stances. The committee consists of managers and work- ers and are responsible for discussing health and safety requirements and recommending actions to the senior management via the OHS manager. Employee elected safety representatives at AFK Hydropower participate in the consultation and imple- mentation of the occupational health and management system. These representatives receive training through a dedicated course for safety representatives. The rep- resentatives are conducting safety rounds annually to Health and Safety OCCUPATIONAL HEALTH AND SAFETY MANAGEMENT SYSTEM ENRX have standardised their main production sites according to ISO 45001, where some plants have legal requirements, and some do not. This includes Italian law 81/08, Norwegian Working Environment Act, and Japanese Legal Health and Safety regulations. For Tekna, the health and safety system are implemented in offices and factories in compliance with national law. The safety system in Canada is in accordance with Law S2-1: Law on Workplace Health and Safety in Quebec, Canada. In France, the system is governed by the Code du travail legislation. Tekna is required to conduct audits and analyse workplace related risk. Workers in Tekna’s factories are covered by strict health and safety systems. The workers considered are factory, laboratory and office workers. Volue does not have any system but are following up occupational health according to local regulations. NSSL follows UK government’s Health and Safety at Work Act 1974. All activities of their undertakings are covered within the management system. Through the implementation of the occupational health and management system, Arendals Fossekompani aim to protect people’s lives and health, to protect nature and the environment against unintended stresses, to protect facilities, equipment, and production, and to ensure a tar- geted and cost-effective operation. AFK Hydropower has implemented a comprehensive internal control system (Internkontrollforskriften), as required by law. Hazard identification, risk assessment, and incident investigation For ENRX, the identification of work-related hazards is based on ISO 45001, and either conducted by an exter- nal safety engineer or by managers/team leaders for the work places. The quality is ensured by training, commit- tee and management reviews and review from external safety consultants. The processes used to evaluate and improve the systems are through KPIs, employee par- ticipation, and safety rounds. Hazardous situations are reported through superiors and collected in a database, in addition to a whistleblower system. Investigation of work-related incidents is done in accordance with the ISO 45001 system through global incident reporting, investi- gation reports and management review. Tekna is following their internal standard, where risk anal- ysis processes is used to identify any work-related haz- ards and how to mitigate them. The occupational health and safety committee’s actions have been successful in integrating prevention in the company’s production activities and encouraging individual responsibility towards identifying, eliminating, and controlling risks. A compulsory training program is used to ensure quality of the processes. Through periodic audits, the company verifies the application of safety rules. To evaluate and improve the system, a program of planned inspections is implemented. Tekna fosters an open dialogue around Health and Safety and invites all employees to contribute and share observations of potentially hazardous situa- tions or configurations. Employees are protected by their open culture as well as the Code of Conduct under whis- tleblower rights. Workers have the right to refuse to work for health and safety reasons. The risk will then be eval- uated by a team including workers to find a solution. The company has developed an Emergency Response Plan according to its specific risks. Managers, supervisors and HR receive OHS training. When a work-related incident is reported, a team evaluate the risk according to internal standards. The causes are then identified, and a plan is made to control the risk. Volue has yearly safety and security assessments with external vendors where any work-related hazards are identified, with physical and psychosocial. Employee engagement surveys are conducted during the year where hazards can be identified. A whistleblower chan- nel is used for workers to report on work-related hazards. Employees are secured and can choose to be anonymous when reporting incidents. Employees are encouraged to inform if they find any discrepancies, without getting any reprisals. When an incident is reported in the whis- tleblower channel Head of People can follow up the case and involve the applicable stakeholders. NSSLGlobal’s procedure P25 Workplace Precautions and Risk Control System documents the company’s pro- cesses. The control of risk is necessary to secure com- pliance with the requirements of the Health and Safety at Work Act and relevant statutory provisions. There are three basic stages in establishing workplace precau- tions: Hazard Identifications – identifying hazards which could cause harm, Risk Assessment – assessing risk which may arise from hazards, Risk Control – deciding on suitable measures to eliminate or control risk. Quality is ensured by auditing, document reviews and planning. Non-conformances and opportunities for improvement are identified and entered into a database for senior management oversight and control. A corrective action plan is completed for all entries. All workers are trained to report work related hazards during the initial joining introduction. The OHS manual states that staff can report concerns without fear of reprisals. An employee that may have concerns about their own or others health and safety should stop work immediately and either contact the occupiers of the premises, the host of the vessel, or the person in charge. Work must not commence or re-com- mence unless it is safe to do so, the Risk Assessment has been reviewed, the additional risks or hazards con- 218 219 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 NEW SUPPLIERS THAT WERE SCREENED USING SOCIAL CRITERIA 2023 Total number of new suppliers 1,008 Total number of new suppliers that were screened using social criteria 511 Percentage of new suppliers that were screened using social criteria 50.69% OPERATIONS ASSESSED FOR RISKS RELATING TO CORRUPTION 2023 2022 Total number of operations 70 152 Total number of operations assessed for risks related to corruption 18 105 Percentage of operations assessed for risks related to corruption 25.71% 69% COMMUNICATION ABOUT ANTI- CORRUPTION POLICIES AND PROCEDURES Total Europe America Asia Board of Directors 43 (63%) 43 0 0 C-suite positions 52 (90%) 36 7 1 Non-executive level management 151 (71%) 40 5 11 Other employees 1,637 (67%) 743 2 221 Business partners 2,106 (10%) 797 220 1,014 TRAINING IN ANTI-CORRUPTION POLICIES AND PROCEDURES Total Europe America Asia Board of Directors 15 (22%) 15 0 0 C-suite positions 34 (59%) 28 0 1 Non-executive level management 126 (59%) 21 0 9 Other employees 1,225 (47%) 388 2 204 CONFIRMED INCIDENTS OF CORRUPTION AND ACTIONS TAKEN There have been no confirmed incidents of corruption and no public legal cases regarding corruption brought against Arendals Fossekompani or the Group’s employees during the reporting period. No employees were dismissed or disciplined for corruption, and no contracts with business partners were terminated or not renewed due to violations related to corruption. TOTAL NUMBER OF EMPLOYEES THAT HAVE RECEIVED TRAINING IN CYBER SECURITY 2023 Total number of employees that have received training in cyber security 1,528 Percentage of employees that have received training in cyber security 57.23% Governance Anti-corruption and bribery Information security Responsible supply chain WORK-RELATED INJURIES For all employees For all workers who are not employees but whose work and/or workplace is controlled by the organization The number of fatalities as a result of work-related injury 0 0 The number of high-consequence work-related injuries (excluding fatalities) 1 0 The number of recordable work- related injuries (including fatalities) 13 2 The rate of fatalities as a result of work-related injury 0 0 The rate of high-consequence work-related injuries (excluding fatalities) 0.22 0 The rate of recordable work- related injuries (including fatalities) 2.81 136.1 The main types of work-related injury Cuts, electrification, back injury Cuts, electrification Number of hours worked 4,621,026 121,424 ensure that all safety standards are fulfilled. To be able to receive input from all employees, a suggestion box is placed out in the hydropower station where employees anonymously can give feedback and improvement sug- gestions. An HSE group is established and consists of two worker representatives and two representatives from the management. The HSE group normally meet twice a year or when needed. Worker training on occupational health and safety ENRX has yearly general safety training, special safety trainings regarding special operations including hazard- ous substances and specific hazards timing, in accor- dance with local law, normally between 1-3 years. Tekna has an extensive training program which is adjusted to the role an employee has in the organisation. This means that the training is more extensive for opera- tors than for an office worker. There is e-learning, in-class training and on-the-job practical training and tests to validate knowledge. Trainings are repeated as per the frequency set for each training. For Volue’s locations in countries where applicable, a Safety Officer course is offered. Fire drills, CPR course and defibrillator course is offered regularly. NSSLGlobal provide training for workers involved with H&S duties. This process is documented through HR. First aid, fire wardens and spillage teams are trained according in accordance with legislation. Any other training is com- pleted as required. Committee members have completed the managing safety course. Bespoke training for staff members is controlled via their respective line manager and aligns with the job descriptions. All staff undergo an initial joining introduction and are required to complete online OHS awareness training. GRI 403-6 Promotion of worker health and GRI 403-7 Prevention and mitigation of occupational health and safety impacts directly linked by business relationships have been evaluated to not be material for Arendals Fossekompani. 220 221 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 Materiality RISKS Description Consequence Likelihood 1. Mismatch between AFK’s ESG ambitions and portfolio companies’ performance may damage reputation as a responsible owner and affect the ability to attract new investments High Medium 2. Reduced market cap as portfolio companies struggle to participate in the green transition High Medium 3. Fail to attract investors due to inaccurate and/or unstructured ESG reporting High Low 4. Increased expenses towards transparency, reporting and communication to meet legal requirements and stakeholder expectations Medium High 5. Lose battle for talent as main office is located outside Norway’s greatest business hubs Medium Medium 6. Unfavorable financial terms if sustainability performance is perceived low and ESG reporting misunderstood Medium Medium 7. Portfolio companies perceiving ESG module as irrelevant and resource intensive, reducing AFK’s overall ESG performance. A “one-size-fits-all” approach not suitable Medium Medium 8. Disruptions in supply chains and portfolio companies’ operations due to extreme weather events Low Medium 9. Risk that area conflicts and biodiversity affect reputation negatively Medium High 10. Unsuccessful investments: the energy transition takes too long Medium High Our Sustainability Priorities Consequence vs. likelihood assessment Low High Consequence Likelihood Low High 3 8 1 1 2 2 5 7 9 4 10 6 2 3 4 5 7 OPPORTUNITIES Description Consequence Likelihood 1. Increased demand for green technologies drives valuation of portfolio companies High High 2. Increase exit multiple of portfolio companies through active ESG management throughout ownership period High High 3. Increase investor and other stakeholder confidence by increasing transparency and providing reliable, non-financial disclosures High High 4. Attract investors and capital by promoting and developing a portfolio that responds to ESG megatrends (e.g. climate and biodiversity) Medium Medium 5. Engage with local stakeholders and local business clusters to develop new partnerships and R&D projects Medium Medium 6. Attract talent by promoting ESG profile, team diversity, and opportunities outside regular business hubs Medium High 7. Be a leader in the energy transition locally and nationally Medium Low 222 223 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 PricewaterhouseCoopers AS, Kystveien 14, 4841 Arendal T: 02316, org. no.: 987 009 713 MVA, www.pwc.no Statsautoriserte revisorer, medlemmer av Den norske Revisorforening og autorisert regnskapsførerselskap To the Board of Directors of Arendals Fossekompani ASA Independent Report on Arendals Fossekompani ASA’s sustainability reporting We have undertaken a limited assurance engagement in respect of Arendals Fossekompani ASA’s (Arendal Fossekompani) sustainability reporting (the Subject Matter) for the period 1 January 2023 - 31 December 2023. The identified Subject Matter Information is summarised below: ● Arendals Fossekompani’s Global Reporting Initiative (GRI) Index for 2023 is an overview of which sustainability topics Arendals Fossekompani considers material to its business and which indicators it uses to measure and report sustainability performance; together with a reference to where the material sustainability information is reported within the 2023 Integrated report. Arendals Fossekompani’s GRI Index for 2023 is available and included in the 2023 Integrated report. We have examined whether Arendals Fossekompani has developed a GRI Index for 2023 and whether mandatory disclosures are reported in accordance with the Standards published by The Global Reporting Initiative ( www.globalreporting.org/standards ) (the Criteria). ● Arendals Fossekompani has prepared its Scope 1 and Scope 2 (location and market based) emissions in line with the Greenhouse Gas Protocol - A Corporate Accounting and Reporting Standard (2004) (the Criteria). We have examined whether the scope 1 and scope 2 emissions have been calculated, estimated and reported in accordance with the Criteria as described in the Integrated Report, chapter 04 Sustainability, subchapter Optimizing Portfolio Companies, section “Strengthening Environmental Performance”. Management’s Responsibility Management is responsible for the preparation of the Subject Matter Information in accordance with the applicable Criteria. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation of a Subject Matter Information that is free from material misstatement, whether due to fraud or error. Greenhouse gas (GHG) quantification is subject to inherent uncertainty because of incomplete scientific knowledge used to determine emissions factors and the values needed to combine emissions of different gases. Our Independence and Quality Management We have complied with the independence and other ethical requirements as required by relevant laws and regulations in Norway and the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. Our firm applies International Standard on Quality Management (ISQM) 1, and accordingly, maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. Our Responsibilities Our responsibility is to express a conclusion on the Subject Matter Information based on the procedures we have performed and the evidence we have obtained. We conducted our limited assurance engagement in 2 / 2 accordance with International Standard on Assurance Engagements (ISAE) 3000 revised – «Assurance Engagements other than Audits or Reviews of Historical Financial Information» and, in respect of greenhouse gas emissions, ISAE 3410 - «Assurance Engagements on Greenhouse Gas Statements», both issued by the International Auditing and Assurance Standards Board. These standards require that we plan and perform this engagement to obtain limited assurance about whether the Subject Matter Information is free from material misstatement. A limited assurance engagement in accordance with ISAE 3000 and ISAE 3410 involves assessing the suitability in the circumstances of management's use of the Criteria as the basis for the preparation of the Subject Matter Information, assessing the risks of material misstatement of the Subject Matter Information whether due to fraud or error, responding to the assessed risks as necessary in the circumstances, and evaluating the overall presentation of the Subject Matter Information. A limited assurance engagement is substantially less in scope than a reasonable assurance engagement in relation to both the risk assessment procedures, including an understanding of internal control, and the procedures performed in response to the assessed risks. The procedures we performed were based on our professional judgement and, among others, included an assessment of whether the criteria used are appropriate, as well as an assessment of the overall presentation of the sustainability reporting. Our procedures, based on assessment of the risk of error, also included meetings with representatives from Arendals Fossekompani who are responsible for the material sustainability topics covered by the sustainability reporting; review of internal control and routines for reporting the GRI Index and scope 1 and scope 2 emissions; obtaining and reviewing relevant information that supports the preparation of scope 1 and scope 2 emissions; assessment of completeness and accuracy of the GRI Index and scope 1 and 2 emissions and controlling the calculations of scope 1 and scope 2 emissions. The procedures performed in a limited assurance engagement vary in nature and timing from, and are less in extent than for, a reasonable assurance engagement. Consequently, the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained had we performed a reasonable assurance engagement. Accordingly, we do not express a reasonable assurance opinion about whether the Subject Matter Information has been prepared, in all material respects, in accordance with the Criteria. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion. Conclusion ● Based on the procedures we have performed and the evidence we have obtained, nothing has come to our attention that causes us to believe that Arendals Fossekompani’s GRI Index for 2023 is not, in all material respects, developed in accordance with the requirements of the Standards published by The Global Reporting Initiative; ● Based on the procedures we have performed and the evidence we have obtained, nothing has come to our attention that causes us to believe that Arendals Fossekompani’s scope 1 and scope 2 (location and market based) emissions for the period 1 January 2023 - 31 December 2023 is not, in all material aspects, calculated, estimated and reported in accordance with the Criteria. Bergen, 11 April 2024 PricewaterhouseCoopers AS Hanne Sælemyr Johansen State Authorised Public Accountant 224 225 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 List of Abbreviations AC Audit Committee AFK Arendals Fossekompani AM Additive Manufacturing AMGTA Additive Manufacturer Green Trade Association ARP Activity and Reporting Obligations BCoC Business Partner Code of Conduct BOD Board of Directors CAD Cash Available for Distribution CSRD Corporate Sustainability Reporting Directive CDP Carbon Disclosure Project CapEx Capital Expenditure CEO Chief Executive Officer CFO Chief Financial Officer CoC Code of conduct CSO Chief Sustainability Officer CSR Corporate Social Responsibility DCF Discounted Cash Flow DNSH Do No Significant Harm EAT Earning after tax EBT Earnings before tax EBIT Earnings before interest and taxes EBITDA Earnings Before Interest, Taxes Depreciation, and Amortization EU European union ERP Enterprise Resource Planning ESG Environmental, Social and Governance GHG Greenhouse Gas GRI Global Reporting Initiative GWh Gigawatt hours HR Human Resources HSE Health, Safety, and Environment HSSE Health, Safety, Security and Environment IFRS International Financial Reporting Standards ICT Information and Communication Technologies IEA International Energy Agency ILO Declaration of the International Labour Organisation inp Interestbearing current borrowings IoT Internet of Things IR Injury Rate ISO International Organisation for Standardisation KPI Key Performance Indicator kWh Kilowatt hours LCA Life Cycle Assessment LEO Low Earth Orbit LTIR Lost Time Incident Rate MACD Moving Average Convergence Divergence MAR Market Abuse Regulation M&A Mergers and Acquisitions MoD Ministry of Defense MoU Memorandum of Understanding MWh Megawatt hours NAA Norwegian Accounting Act NGO Non Governmental Organisation NHO Confederation of Norwegian Enterprises NVE The Norwegian Water Resources and Energy Directorate OCI Other Comprehensive Income OECD The Organisation for Co-operation and Development OHS Occupational Health and Safety OpEx Operating Expenditure R&D Research and Development SaaS Software-as-a-Service SASB Sustainability Accounting Standards Board SBTi Science Based Target initiative SCoC Supplier Code of Conduct SDG Sustainable Development Goal SQM Square meter TCFD Task Force on Climate-related Financial Disclosures TRIR Total Recordable Incident Rate TSC Technical Screening Criteria UN United Nations WACC Weighted Average Cost of Capital 226 227 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 The report was published on 12 April 2024, and the information refers to the reporting period 1 January to 31 December 2023. Arendals Fossekompani publishes financial and sustainability reports on an annual basis, and prior reports can be found on our website arendalsfossekompani.no. The financial statements for the Parent Company and the Group are prepared in accordance with the principles in the International Financial Reporting Standard (IFRS) as adopted by the European Union. This report is prepared in accordance with the 2021 Global Reporting Initiative (GRI) Standard. The information related to the GRI disclosures are provided for all portfolio companies in the group, unless otherwise stated. The information regarding sustainability in the annual report is consolidated in the same way as for the financial information, where consolidated companies are included in the sustainability reporting, except for the climate accounting which is established and consolidated using an operational control method in the GHG Protocol Standard. When writing the report Arendals Fossekompani use the previous year annual report as a starting point. When information from this report is still relevant and accurate, there will be identical information and reuse of information from the previous report. It has been discovered incorrect reported numbers for Scope 1 GHG emissions for ENRX and consequently the consolidated numbers for Arendals Fossekompani Group in 2021 and 2022. The Scope 1 emissions for the group was changed from 1,614 to 1,744 tCO 2 e for 2022 (+130 tCO2e) and from 1581 to 1584 tCO 2 e in 2021 (+3 tCO 2 e). This was due to incorrect calculations and emission factors for natural gas consumption. Some inaccuracies have been discovered in previous years’ reporting which has led to changes in the emission figures for 2021 and 2022 for location- and market based scope 2 emissions. For information about other reporting frameworks, please refer to the 4.0 Sustainability chapter of this report. The report has been read and approved by senior executives and the Board of Directors of Arendals Fossekompani. To ensure transparency and reliability of the reported GRI Index and Scope 1 and Scope 2 GHG emissions, a limited assurance has been carried out by our auditing firm PricewaterhouseCoopers (PwC). A statement on the assurance is available as an appendix to this report. For questions about this report and its contents, please contact our Chief Financial Officer, Lars Peder Fensli at lars.peder.fensli@arendalsfoss.no. For questions related to sustainability, please contact our Chief Sustainability Officer, Ingunn Ettestøl at ingunn.ettestol@arendalsfoss.no Activity and Reporting Obligations Report 2023 Carbon Accounting Report 2023 EU Taxonomy Report 2023 Green Bond Report 2023 Human Rights and Transparency Act Report 2023 Remuneration Report 2023 TCFD: Climate-Risk Assessment Report 2023 Additional Reports About This Report 228 229 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2023 ARENDALS FOSSEKOMPANI 01 PORTFOLIO 02 FROM THE BOARDROOM 03 SUSTAINABILITY 04 FINANCIAL STATEMENTS 05 APPENDIX 06 VISITING ADDRESS Langbryggen 9 4841 Arendal POSTAL ADDRESS Box 280 4803 Arendal +47 37 23 44 00 firmapost@arendalsfoss.no arendalsfossekompani.no © Arendals Fossekompani ASA. All Rights Reserved.