Annual Report (ESEF) • Mar 22, 2024
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Download Source FileHydrogenPro Integrated report 2023 Clean energy to power future industries POWERING INNOVATION. ENERGIZING TOMORROW. Contents ABOUT US: THIS IS HYDROGENPRO 4 Key Achievements Financial highlights CEO letter Global outlook for green hydrogen About HydrogenPro ASA Stakeholder dialogue OUR IMPACT 18 Introduction Material ESG Agenda UN Sustainable Development Goals Sustainability targets Efficient technology and scalability Sustainable manufacturing and supply chain Innovative product design A safe and attractive place to work GOVERNANCE 48 Board of Directors’ report NUES Corporate Governance report Board of Directors Executive management Ethics in HydrogenPro 76 Consolidated Financial Statements and Notes Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes In Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Financial Statements and Notes for the Parent Company Statement of Profit and Loss Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes to the Parent Company Financial Statements of the Norwegian Securities Trading Act. Alternative Performance Measure (APM’s) Auditor’s report 154 Sustainability factbook 01 About us: This is HydrogenPro HYDROGENPRO / ANNUAL REPORT 2023 54 Key Achievements Industrial partnership with immediate results HydrogenPro announced a new industrial partnership with the Austrian industrial ANDRITZ Group. The partnership combines the manufacture and assembly expertise of ANDRITZ with HydrogenPro’s expertise in high-pressure alkaline electrolyzers. The immediately, as HydrogenPro received a 100 MW GmbH site for 18 of HydrogenPro’s 5.5 MW cell stacks. Production capacity expanded by more than 60% At our production facility in China, HydrogenPro has increased the capacity from 300 to 500 MW, demonstrating the ability to supply high-quality products globally. The increased production capacity complements our strategic partnership with ANDRITZ and the planned units in the US and addressing the increasing international demand for electrolyzers and green hydrogen. Another strong foothold in Europe expansion in Europe and a commitment to sustaining a positive impact. The German government aims to achieve a 10 GW capacity of hydrogen electrolyzers by 2030 through its “National Hydrogen Strategy”. The German representation is essential in meeting the needs and regulations of HydrogenPro’s customers and operators. 40 electrolyzers to the world’s largest storage hub of 40 electrolyzers ordered for the Advanced Clean Energy Storage Hub in Delta, Utah, followed by ACES Delta intends to use excess renewable energy to power the large-scale electrolyzers that will produce lower carbon intensity hydrogen and oxygen. The project journey began in February 2022 when HydrogenPro was awarded one of the largest electrolyzer systems ever contracted. Production at world-leading validation centre Mid 2023, HydrogenPro delivered a 5.5 MW electrolyzer to Mitsubishi Heavy Industries’ Takasago Hydrogen Park, the pioneering validation centre for hydrogen technology. The electrolyzer started hydrogen production in August and was built at HydrogenPro’s new production line in China. In advance of the delivery, according to the KHK (core references for high-pressure gas safety) standard that Japan requires. R&D funding In June, HydrogenPro achieved grants for two new R&D projects with a total value of NOK 153 million. The two projects are funded by Innovation Fund Denmark, MissionGreenFuels (NOK 14.32 million) and Gassnova, Norway (NOK 1 million). Both projects are headed by our R&D team at Advanced Surface Plating in Denmark. Initiated and played a pivotal part in the Norwegian National Hydrogen Strategy Based on the initiative of HydrogenPro, the Labour Union (LO) and the Confederation of Norwegian Enterprises (NHO) gathered the Norwegian hydrogen industry to propose a National Hydrogen Strategy. The strategy was presented to the Norwegian Minister of Energy in June. HydrogenPro played a key role in the development of the strategy, managing several working groups and leading the project management team. HYDROGENPRO / ANNUAL REPORT 2023 76 Financial highlights 2023 NOK Market Capitalization 1.04B Cash and bank deposits 161M Revenues 568M EBITDA -36M Total Assets 644M Our current footprint – building a global brand Manufacturing facilities and oces 500 MW Manufacturing capacity 231 Number of employees Duisburg, Germany Sales oce Tianjin, China Electrolyzer manufacturing, 500 MW capacity Shanghai, China Group Supply chain Aarhus, Denmark R&D & Electrode manufacturing Norway HQ and test center Admin oce US US. Minneapolis, Minnesota Backlog 423.0M Female 30% Male 70% Employee gender ratio HYDROGENPRO / ANNUAL REPORT 2023 98 CEO leer 2023 marked our 10 years’ anniversary and was the year where we delivered on earlier commitments as well as established more new opportunities. The need for green hydrogen is continuing to increase and both the EU and the create a sustainable value chain for the industry. First, we are proud to have produced 40 electrolyzers for a 220 MW electrolysis plant for the ACES project in Utah, USA. The contract was signed in 2022 as the world’s largest contract recorded for the year, and by the end of 2023, the production was completed. This year, our foothold in the US market has been strengthened by the establishment of a US organisation, including a new CEO for the US subsidiary, HydrogenPro Inc. In June we succeeded with a private placement of NOK 122 million, earmarked for the initial phase of this expansion into the US market. We are now in a good position to serve the growing US market, including the seven Hydrogen Hubs that the Biden-Harris Administration presented in October. We are also ready to deliver to DG Fuels when they reach their Final Investment Decision (FID). Also our European presence has increased during 2023. First by the signing of a strategic partnership with the international technology group ANDRITZ to collaborate on scaling up manufacturing and assembly of electrolyzers for the European market. This partnership has already created results with the announcement in September that HydrogenPro is to receive an order for high- pressure alkaline electrolyzers with a total capacity of 100 MW from the ANDRITZ Group, equalling 18 units of HydrogenPro’s 5.5 MW hydrogen plant, which ANDRITZ is delivering instead of coal on an industrial scale. The assembly of the electrolyzers will take place in Duisburg, Germany. was strengthened through the grants obtained by our R&D department in Aarhus, Denmark. Two new projects, MissionGreenFuels and Gassnova, totalling NOK 15.3 million were granted by Innovation Fund Denmark. Based on the increasing demand globally, we have ramped up our manufacturing capacity in China reaching 500 MW. We are proud to have received the ESG Practice Pioneer Award from Dun & Bradstreet. Recently, we also obtained the both environmental aspects as well as a safe and healthy workplace. The Hydrogen industry is dependent on a good political framework that enables sustainable value chains to establish themselves. In the EU and Norway. We have become an active member of Hydrogen Europe, trying to add value to their dialogue with the EU commission. Also, we initiated and was part of the project national hydrogen strategy in Norway that were presented to the Norwegian Government in June last year. Over the year, HydrogenPro has continued to expand its organization and build competence in order to grow the company, meet market needs and become a stronger organization. As we have on all three continents where we are operating, it is great to note how the organization is developing and adopting to our values of Courage, Integrity, Collaboration, and Innovation. It is in order to thank each and every one for team are making to make this journey possible. With yet another exciting year behind us we prosperous year and we all are looking forward to it! 2023 marked our 10 years’ anniversary and was the year where we delivered on earlier commitments as well as established more new opportunities. HYDROGENPRO / ANNUAL REPORT 2023 1110 Global outlook for green hydrogen In the dynamic landscape of sustainable energy, 2023 emerged commitment at COP28 to pivot away from fossil fuels towards the embrace of renewable energy. A pivotal achievement was the consensus among 39 nations advocating for the mutual of a promising era for green hydrogen on the world stage. Despite ambitious plans for major green hydrogen projects, 2023 presented its share of challenges. Delays in crucial subsidy programs, including the clean hydrogen production tax credit in the US, green H2 auctions in Europe, Germany’s H2Global initiative, the UK’s Contracts for Green Hydrogen Mission, and Australia’s Hydrogen Headstart, created roadblocks, hindering and impacting investors and electrolyzer manufacturers. Governments worldwide honed their national hydrogen strategies on decarbonizing hard-to-abate large-scale sectors like fertilizers, chemicals, steel, and long- green steel production emerged as a major hydrogen consumer, securing a substantial 100 MW order alongside ANDRITZ at stage is set for realisation. Green hydrogen is on the verge of dominating the supply mix, with a projected market share of 85% by 2050. The potential impact on expectations of up to two million new jobs created by 2050. However, achieving this vision demands decisive actions from both political leaders and industry players. Several key implementations in 2023 laid the foundation for a more transparent and realistic future. European Union (EU) Initiatives In November 2023, the EU took a notable step forward with the launch of an €800 million pilot auction for competition. The second European Hydrogen Bank auction will take place in spring 2024 with a budget of €2.2 billion. Additionally, the EU introduced guidelines in 2023, emphasising the principle of “additionality” for hydrogen in the Renewable Energy Directive. This principle ensures that renewable hydrogen supplies entering the market by 2030 are linked to new renewable energy production, encouraging an upsurge in renewable energy volume within the EU. Ultimately, the introduction of the continuously increasing CO2 towards more sustainable production processes, thus catalysing the growth of green hydrogen production. United States (US) Advancements hydrogen developers, North, Central, and South America witnessed steady growth in hydrogen projects in 2023. Electrolysis contributed hydrogen by 2040. The long-awaited guidelines Act and the Hydrogen Hubs Programme announced in 2022. These policies are expected to play a pivotal role in the decision-making process for launching the country’s hydrogen projects. In October 2023, the Biden/Harris administration announced a groundbreaking $7 billion investment to launch seven Regional Clean Hydrogen Hubs (H2Hubs) across the nation. This initiative aims to accelerate the commercial-scale deployment of low- cost, clean hydrogen. HydrogenPro, contributing to this momentum, completed the manufacturing of one of the largest (220 MW) electrolyzer purchase orders for the Advanced Energy Storage hub in Utah. With an expanded US presence, including our new US CEO growing demand for green hydrogen directly at the customer’s side. As the world eagerly anticipates 2024, the pathway to a greener, hydrogen-powered future is clearer than ever. Continued collaboration between governments, industry leaders, and stakeholders promises to make the coming year an upswing in global green hydrogen production. Given this optimistic outlook, help create a stable and growing supplier market for electrolyzers, laying the foundation for a sustainable and resilient hydrogen ecosystem. Green hydrogen incentive programmes across geographies (1) nergy.com) EU Carbon Contracts for Difference subsides Hydrogen tender and 1% blending requirement in gas network GERMANY Tender auctions for Hydrogen Purchase Agrements INDIA National Green Hydrogen Mission (USD 2.4 bn) UK Contracts for Difference for clean hydrogen CHINA Green H 2 expected to expand significantly CANADA Tax credits (similar to US) US $3/kg H 2 in tax credits for producers of green hydrogen. Wind/solar/hydro power is a pre-requisite to maximize tax credit. High pressure Alkaline or PEM electrolysis NORWAY Contract for Difference HYDROGENPRO / ANNUAL REPORT 2023 1312 About HydrogenPro ASA Business model and value proposition HydrogenPro was founded in 2013 with a mission to design and de- liver green hydrogen technology & systems in collaboration with glob- al partners and suppliers. Our core product is high-pressure alkaline electrolyzers, and we are proud to have some of the most advanced technologies in the industry. Our team consists of 231 highly skilled and experienced employ- ees, including key personnel with leading global hydrogen expertise. We are currently present with - turing in Denmark, Germany, the US, and China, and aim to grow our global presence further in the years to come. Our headquarters and test facility are located at Herøya, Norway. HydrogenPro's supply chain includes a strategic mix of bro- kers, contractors, and wholesalers spread through China, Europe, and the USA. In 2023, we partnered with 120 suppliers, strategical- second-tier suppliers. First-tier suppliers, comprising more than 70% of spend in 2023 in our network, provide direct materials and services crucial to our product delivery. Second-tier suppliers support our operations indirectly, being essential contributors to our Our relationship with our suppliers, ranges from long-term partner- ships to short-term, project-based engagements. Our proudest achievement is the development of industry-leading high-pressure alkaline electro- lyzers, including our electrode technology, which makes us highly cost-competitive among peers globally. Typically the segments we aim to serve are large-scale industrial companies intending to change their energy consumption from fossil to green hydrogen. In this period we have delivered 40 electrolyzers ordered for the Advanced Clean Energy Storage Hub in Delta, Utah. With a technology that is easy to scale depending on the input energy from renewables, Hydro- genPro’s large-scale electrolyzers have the potential to both enable and strengthen other segments in the energy transition, whether it be wind, solar or other renewable power sources. Through its unique properties as an energy carrier, we believe green hydrogen will be key in facilitating the green energy transition. forefront of the green hydrogen industry, and we believe that our technology and expertise will help to drive the world towards a more sustainable future. Strategy HydrogenPro aims to become the number one provider of large-scale green hydrogen technologies & systems. To succeed, the company technology leadership, global footprint, scalability, and life- cycle partner. To succeed as a global electrolyzer supplier, technology leadership is crucial. The electrolyzer market will be an operational cost game, and will win in the long run. Thus, electrolyzers with low energy losses will be a prerequisite for green hydrogen companies to succeed. HydrogenPro is already amongst peers, but we are not invest in R&D like we did with the acquisition of Advanced Surface Plating (ASP) in Denmark in 2021. This gave us technology ownership of advanced electrode technology, called the 3rd generation electrodes, which makes us able to increase the Testing of electrodes is ongoing and has the potential of providing HydrogenPro with a competitive edge for years to come. Having a global footprint is critical for HydrogenPro as it positions us closer to our customers and markets. This is important not only with regards to sales and local expertise, but also enables us to qualify for the many local incentive schemes that have emerged during the last two years. Local manufacturing also reduces transportation of raw materials business, mitigating geopolitical risks. We are already present in China, Denmark, the US, Germany, and Norway, but aim to grow further through joint ventures, 2023 we enhanced our strategic focus on the US market to fully support the government-promoted green hydrogen value chain that is under development there. scale is a key for green hydrogen to reach its potential. Our standardized electrolyzers have a prepared for upscaling and plant integration. Our modular design enables us to turn electrolyzers on renewable energy sources, such as wind and sun. Moreover, we do not really rely on rare precious metals, reducing the risk of raw material shortages. HydrogenPro provides solutions and services that support the entire lifecycle of the equipment that our customers purchase, from design and installation to operation and maintenance. This ensures recurring revenue on the installed base and reduces risk in the business model. Technology Global Scalability Partner Vision Become #1 provider of large-scale green hydrogen technology & systems Mission Accelerate global decarbonization with world-class sustainable green hydrogen solutions Values ■ Courage ■ Integrity ■ Collaboration ■ Innovation HYDROGENPRO / ANNUAL REPORT 2023 1514 drogen strategy to be presented half of 2023. Organizations HydrogenPro is member of sev- eral strategic associations in the from each other in the range of having either local or multina- tional focus. We believe joined - dustry goals, and HydrogenPro values the commitment from its industry peers and the impor- tance of collaboration. Further, with presence in these arenas, HydrogenPro manages to build strategic relationships, promote our business and technology as well as encourage favourable regulations and legislations for industry growth. Based on a 2022 initiative, we played a pivotal part in launch- ing a National Hydrogen Strat- egy for the Norwegian Govern- ment in June 2023. This was a collaboration with companies and organizations throughout the complete hydrogen value chain, facilitated by The Confed- eration of Norwegian Enterpris- es (NHO) and the Norwegian Labor Union (LO). We also took an active part in the work of Hydrogen Europe, participating in several working groups as well as a task force for the COP 28. stakeholders HydrogenPro operates within local communities where we aim to have a positive social and environmental impact, aligning with the Company’s core objectives. Local Executive Management evaluates and ini- tiates local stakeholder engage- ment and reports back to the Board of Directors. We engage through dialogue and collab- oration with local universities and institutions, using both local talent and suppliers, if suitable and possible. In Denmark, our connection and engagement with Aarhus University’s Department of Bio- logical & Chemical Engineering is a two-way positive impact collaboration. Students work at HydrogenPro for training and education, while contributing to our research, development, and operation. The university provides feedback and insights into the expertise required for our operations, and HydrogenPro contributes to the development of local academics. In relation to our facility at Herøya, we build an experienced and talented engineering envi- ronment which has the poten- tial to spur local employment. HydrogenPro engages with The University of South-Eastern Norway, Faculty of Technology, Natural Science and Maritime Sciences, regarding research and development projects. Our policy remains to collaborate as much as possible with local vendors and suppliers. Stakeholder dialogue Representatives from the Board of Directors, executive manage- ment, and key personnel from the organization have worked together to identify and eval- uate all potential stakeholders of the Company. HydrogenPro engages with a wide range of stakeholders where we have our business today and where we seek to build strategic relations for the future. As a fast-growing company in a major industry, HydrogenPro strives to meet the rising expec- tations from our stakeholders and to be transparent across our value chain. Our stakeholders’ contributions continue to be an integrated part of the development of the company. The views and inter- ests from our stakeholders are material topics and focus areas, as well as potential impact on the economic, environmental, and social dimension. It is equal- ly important for HydrogenPro to gain our shareholders’ under- standing of our Company’s plans, circumstances, and con- straints. We evaluate and initi- ate actions where we are aware of potential negative impacts. prioritized in our assessment, with further strategic initiatives proposed for execution in 2023. Employees Employees are at the core of the HydrogenPro value creation, and we aim to build a strong company culture aligning with our vision and values. To achieve our strategy, it is essential to at- tract, develop and retain talent. Our employees are on-boarded and trained according to the re- quirements for their role and are followed up on a regular basis by their respective manager. We have regular townhall meetings, and active internal social media channels, regular individual follow-up and a yearly em- ployer’s survey through “Great Place To Work”. Investors HydrogenPro emphasises the responsibility for creating long-term sustainable share- holder value. Led by the Investor Relations team, our company is available for both current and potential shareholders as well as regular meetings with analysts and retail brokers. Our share- - ations in Annual and Extraordi- nary General Meetings. We treat all shareholders equally and ensure that material information reaches the market through publishing stock exchange notices in accordance with local regulatory requirements. Customers Customers buy our products and solutions either directly or indirectly through our partners. We engage with our customers through our Project and Key Account Management, both and general support. Customer involvement and feedback are a crucial asset to the optimization of our operations, as we strive to develop and deliver products exceeding customer expec- tations. HydrogenPro aims to establish long-term symbiotic relations with our customers. Suppliers Suppliers provide HydrogenPro with a wide range of services and commodities, where cost, quality, and reliable delivery constitute important priorities for our selection. We aim for carbon neutrality in our supply chain set-up, this includes initia- tives regarding local sourcing of materials and products, emis- sion reduction plans and use of renewable energy. Supply chain involvements, screening and - tinuously monitored and revised accordingly. We work close to our suppliers to ensure that our company standards are met throughout project deliveries and seek to maintain long-term relationships with those match- ing our growth objectives. Governments Governments form the indus- and procedures. HydrogenPro engages in regular dialogue regarding engineering, manu- facturing and assembly facili- ties and projects to make sure industry bodies work for the development of the industry as a whole, and grants are provid- ed to certain projects. In 2022, HydrogenPro initiated talks with the Confederation of Norwegian Enterprise (NHO), which result- ed in the creation of a “National Hydrogen Alliance”. The Group included all key players through- out the hydrogen value chain. Initiated under the auspices of the Confederation of Norwegian Enterprise (NHO) and the Nor- wegian Confederation of Trade Unions (LO), the work will lead to a proposal for a national hy- Powered by Innovation Norway HYDROGENPRO / ANNUAL REPORT 2023 1716 02 Our impact HYDROGENPRO / ANNUAL REPORT 2023 1918 Material ESG (environment, social and governance) topics The concept of materiality is the backbone of a company’s environmental, social and governance (ESG) work as well as reporting. A materiality assessment identies which ESG topics will inuence a company’s ability to create value in a long-term perspective, as well as how the company impacts its surroundings through its activities and business relationships. Process HydrogenPro conducted a thorough stake- holder analysis and materiality assessment in 2022. The materiality assessment was ■ and governance topics impacting Hy- drogenPro’s long term value creation ■ How are HydrogenPro’s business activi- ties impacting the environment and soci- ety around the company (environmental and social materiality)? Both potential opportunities and risks stemming from the relevant ESG topics materiality assessment. To identify and rank material ESG topics, we involved several internal and external stake- holders, including investors, customers, participants. The stakeholders were inter- viewed to get an understanding of how they view HydrogenPro’s ESG challenges and opportunities, as well as where the com- pany can make the greatest impact. With the insights gathered through stakeholder dialogue, the company’s management and Board of Directors prioritized material ESG topics based on potential impact on the company’s long-term value creation. For the materiality assessment to serve its purpose as the backbone of a company’s sustainability work, it is crucial to treat it as a dynamic tool that adapts to new information and evolving circumstances. This is especially true for a company like HydrogenPro, which is at the start of its sus- tainability journey and is undergoing major changes in its operations. HydrogenPro has therefore throughout 2023 kept develop- ing the materiality assessment of 2022 to have done so through ongoing dialogue with internal and external stakeholders that helped us stress-test the material topics previously chosen. - al topics that emerged from last year’s anal- insight in what they mean for HydrogenPro. In addition, we have chosen to include a Conduct (more details can be read in the below summary, as well as from page 48). Introduction Preserving the planet is the fundament of our business model. At HydrogenPro we deliver large-scale green hydrogen technology & systems. We target the hard-to- abate sectors where our industry-leading solutions are perfectly suited to play a signicant role in accelerating the energy transition to reduce global carbon emissions. With global reach comes global responsibility. As a company that operates on a global scale, HydrogenPro recognizes the importance of taking responsibility for our impact on the environment and society. Throughout 2023, HydrogenPro has continued working on our ESG commitments while adapting our sustainability priorities to constantly developing operations. As a part of our work, we have prioritized the areas of social sustainability and governance in Supporting the “Social” pillar of ESG, we have worked on im- proving our screening of suppliers and we have focused on the well-being of our own employees. We have among other things worked on HydrogenPro’s values and organizational culture, carried out a work environment survey and focused on health and safety. When it comes to “Governance”, we have launched a mandatory anti-bribery and corruption training for all employees across all countries, introduced an ethics course with nanolearning lessons, updated our Code of Conduct and Supplier Code of Conduct and carried out a risk assessment in the supply chain. In 2023, we have also strived to improve our ESG reporting has been a challenge to keep up with ramping production, and we still have a lot of work to continue in 2024. In the coming year, we will gradually adapt to the Corporate Sustainability Reporting Directive (CSRD), which we expect will apply to HydrogenPro from 2025. This will include conducting a double materiality assessment to identify risks and opportunities to HydrogenPro’s business and assess where our business has an impact on the en- vironment and society. This will give us a solid base for updating our sustainability strategy. HydrogenPro is at the start of its sustainability journey. This involves trial and error and adjusting to our evolving operations. Nevertheless, sustainability is an integrated part of our DNA, and we strive to ensure that there are both big and small improve- ments every year. HYDROGENPRO / ANNUAL REPORT 2023 2120 3 Innovative product design (read more on page 38) At HydrogenPro we focus on technology leadership and R&D, which contributes to safer products. We work to establish product designs where expectations of func- tionality as well as circular principles are top of mind. The product design deter- mines the materials needed to manufacture the electro- be overhauled, renovated, or changed. Therefore, the design of our electrolyzers is a material ESG topic for HydrogenPro and we strive to reduce material use, prolong the lifetime of our electrolyzer, and reduce disposable waste. 4 place to work (read more on page 40) At the center of our value creation are our people. To be able to deliver on the stra- tegic priorities of the com- pany, HydrogenPro needs place to work. Therefore, this is a material topic for us as it - tain the best candidates. This is a broad topic containing several sub-topics, including health and safety, training and personal development, diversity and inclusion cor- porate culture, etc. 5 Governance and ethical business conduct (read more from page 48) As a result of last year’s materiality assessment, governance was not deemed as one of the most material topics. However, this year, we have reconsidered this and recognised the impor- tance of governance as a fundamental ground to build the rest of our sustainability work on. For HydrogenPro, good governance is about maintaining high ethical standards and preventing all forms of corruption across our business operations. In 2023 we prioritized activities to support this. Agenda 2030: UN Sustainable Development Goals The 17 Sustainable Development Goals (SDGs) is at the heart of Agenda 2030; the United Nations blueprint for peace and prosperity for people and the planet, now and into the future. While the SDGs formally were adopted by the UN member states, and thus are addressing challenges at international and national level, many businesses align their sustainability strat- egies to support the goals. By doing so, we can be sure that we are all pulling in the same direction. HydrogenPro respects and supports all 17 of the Sus- tainable Development Goals. four SDGs that are particularly relevant for our business model and activities, and where we believe we can make the great- est impact. These four goals are aligned with HydrogenPro’s ma- terial ESG topics, and we work strategically to contribute posi- Material topics The ESG topics material to HydrogenPro are a result of the company’s business model, the activities the company executes, as well as where and how these Our industry-leading technolo- gy is perfectly suited to play a energy transition to reduce global carbon emissions, transforming society and adapting to green energy solutions. To manufacture our electrolyzers, HydrogenPro uses input factors such as materi- als, energy, and water, combined with our core technologies and the passion and knowledge of our employees. This is the main busi- ness activity of the company, and the material topics are all related to this value chain. As a result of the company’s business model, business activities and stake- holder assessment, the environ- mental, social, and government topics as considered material to 1 scalability (read more on page 26) HydrogenPro’s most material impact on our surroundings stems directly from our business model. Through the products we sell, we contribute to mitigating climate change and support the green transition of the industries we serve. The magnitude of our positive environmental impact is therefore determined by our ability to get our product into the market. To succeed at this, HydrogenPro must have a leading technology making end-user and the ability to scale up production of elec- trolyzers to meet custom- er demands. 2 Sustainable manufacturing and supply chains (read more on page 32) HydrogenPro’s main busi- ness activity, the manufac- turing of our electrolyzer systems, has however also environmental impact on our surroundings. Therefore, ensuring sustainable man- ufacturing and supply chain is considered material for HydrogenPro. This is a broad topic containing several sub- topics, such as GHG emis- sions in production, energy and water consumption, waste disposal, emissions, and supply chain manage- ment, including human rights and work conditions along the product value chain. H2 HYDROGENPRO / ANNUAL REPORT 2023 2322 electrolyzers in terms of reduced CO2 emissions. Further, the targets electrolyzers more energy and cost tests in 2023 showed achievement of our goal to decrease levelized cost of hydrogen to USD 1.2 per kg. Our focus going forward will be to bring the third generation electro- lyzers on the market and enable hydrogen production than what is possible today. Regarding scalabil- ity, we have continued to increase both our production capacity and much as our original targets aimed scalability of our product still being at the very core of our strategy, we recognize the need to update our environmental targets to also address the potential negative impacts HydrogenPro may have through its operations. This is a work that requires us to carefully analyze our operations through an are the most important for us to fo- cus on in the future. We have there- fore chosen not to renew two of our environmental targets, and we will instead use 2024 as a year where we improve the foundations of our sustainability work and revise our ESG targets in line with the com- pany’s development during the last few years and our ambitions for the future. This will include conducting a double materiality assessment which will be valuable input to an updated sustainability strategy. We will continue to strive towards reaching our ambitions, and report on our progress in a transparent and consistent manner. 1 In 2022 “China” only included the Tianjin we have divided the data by Tianjin 2 The number excludes one case of serious long-term sick leave. A calculation of the same parameter including that one case would lead to a sick leave of 3.6% 3 The target for sick leave is not set at a lower level to avoid sending a wrong message to the employees and encourage them to avoid sick leave when they need it 4 Calculated per 200,000 hours worked (as opposed to the common calculation of accidents per million work hours) 5 The number refers to the potential of our 3rd generation electrolyzer. In 2023 we carried out 850 hours testing that tests to be conducted in 2024 as part of our R&D program 6 The target refers to the contracts HydrogenPro has signed in the reporting year, and the number is an estimate of avoided emissions those projects are expected to generate, as reported by the projects developers 7 The value is an approximation of 126,517 tonn, which is the CO2 reduction the US Department of Energy expects from the energy-storage 8 The value is the sum of 120,000 tonnes CO2 (expected annual saving from the ACES project) and 220,000 tonnes CO2 (CO2 reduction Andritz expects from the presentation from ANDRITZ Sustainability targets In 2021, HydrogenPro formulated a set of ambitions for our sustainabil- targets to reach higher and track our progress along the way. In the following years we have continu- ously worked towards these goals and in 2023 we revised them to and our overall strategy. Our ambition for the ESG pillar - tive place to work. In 2023 we have met our target for overall sick leave in all our locations, and we have increased the ambition for 2024. We have in 2023 achieved our target of zero accidents and work-related ill health in all our locations, apart from our facto- ry in Tianjin where 8 recordable incidents were registered. This increase from the year before production in Tianjin. To further increase our focus on HSE, we have in 2023 added a target on annual completion rate of HSE trainings, which we are aiming to standardize across the company in 2024. We have also added a target for participation in the work environment survey and a target for overall employee satisfaction. The work environment survey was introduced in Norway in 2022. In 2023, Germany was included and in 2024 we aim to extend the survey to all legal entities. Our environmental targets to date have mostly been based on the positive contribution of our Ambition Previous targets Status 2022 Status 2023 Updated targets for 2024 Read more on page place to work at all times Short leave/overall leave less than country • Norway 4% • China 4% • Denmark 4% China 1 2 Overall sick leave less than 3% 3 (annually) p. 40 Zero accidents and work-related ill health (annually) Three recordable work-related injuries. Total HydrogenPro TRIFR 4 : 3,22 (avg US manufacturing = 3,5) Zero accidents and work-related ill health, measured in Total Recordable Injury Frequency Rate (TRIFR) p. 40 Data not available for 2022 89% • TQM 100% • First aid 100% • Information Security Awareness 100% • Work Environment Council - required training – 100% (Norway) • HSE training required for managers – 100% Norway Targets based on target groups p. (Not carried out in any other location) (Not carried out in any other location) Participation to the work environment survey (annually) • Norway 80% • Denmark 80% • Germany 80% • • USA 80% p. 43 (Not carried out in any other location) 70% (Not carried out in any other location) Percentage of employees that believe HydrogenPro is a great • Norway 70% • • • China 70% • p. 43 hydrogen production technology Levelized cost of hydrogen at USD 1.2 per kg (assuming USD20/MWh) by year-end 2022 USD 1.4 pr. kg. USD 1.2 5 pr. kg. Achieved, and not continued p. 56 Contribute to global CO2 reduction Reduce CO2 emissions with at least 1.5 million tonnes annually from our installed production capacity 6 Approximately 127 000 tonnes CO2 7 Approximately 347 000 tonnes CO2 8 Not achieved, and not continued p. 27 Be a global leading provider of large- scale green hydrogen production solutions for industrial applications >1 GW installed global production capacity by year-end 2023 300 MW 500 MW Not achieved, and not continued p. 29 HYDROGENPRO / ANNUAL REPORT 2023 25 Making a positive impact through our projects Avoided GHG (greenhouse gas) emissions and energy security Through our current projects we are contributing positively to the environment, by enabling for the global society to reach a decar- bonized energy system. With a staggering electrolyzer capacity of 220 MW, the ACES-project (see fact box) is expected by the US Department of Energy to prevent approximately 127,000 tonnes of CO2 from reaching the atmo- sphere annually 2 . This based on - green hydrogen as fuels. In 2023, HydrogenPro, announced a new industrial partnership with Austri- an industrial giant ANDRITZ Group (see fact box). ANDRITZ is expect- project to reduce CO2 emissions from their standard steel produc- tion process by 30%. In partic- ular, they expect a reduction of 220,000 tonnes CO2 per year 3 will be enabled by green hydrogen. In addition to the direct contribu- tion to abatement of greenhouse gas emissions, green hydrogen plays a crucial role in allowing for a decentralized and resilient energy system that can be completely based on renewables. Hydrogen can be produced and stored domestically, reducing this way reliance on foreign energy sources and decreasing society’s vulnera- bility to energy supply shortages. Hydrogen provides a clean energy energy sources and stabilize the grid at both local and regional levels. Hydrogen is thus indirectly for an energy system based on production of large-scale renew- able energy from various sources. Ecient technology and scalability The Hydrogen Council estimates the deployment of 75 million metric tonnes (Mt) clean hydrogen by 2030 and 660 Mt by 2050 will be needed to meet the commitments in the Paris Agreement and limit global warming to 1.5 degrees 1 . The transformation to a net zero society by 2050 is contingent upon the development of ecient and scalable solutions to produce green hydrogen. It is therefore HydrogenPro’s ambition to meet the increasing demand for energy ecient hydrogen production equipment by being a key player driving the deployment of electrolyzers across the globe. Therefore, a big part of our contribution to the environment is determined by our ability to get our products out on the market. To meet the rising global demand, it is necessary that we develop competitive technology while also having the capability to expand our production. HydrogenPro is an original equip- ment manufacturer of large-scale green hydrogen technologies and solutions. Our core technologies consist of electrolyzers comprising cell stacks and gas separators, along with their respective con- trols. Together with our partners we are continuing to optimize the product design and selected materials to further increase per- formance for green hydrogen pro- duction. The electrolyzer system delivered by HydrogenPro is ener- - en. Our technology is referred to as a high-pressure alkaline system which delivers the hydrogen and oxygen gas with pressure directly from the cell stack at 15 bar. The high-pressure alkaline technology is suitable for renewable energy input, and the electrolyzer size we deliver is a perfect match for large-scale industrial applications such as power-to-gas, ammonia, and steel production. Global provider of large-scale green hydrogen technology & systems Synthetic Aviation fuel Decarbonization Power-To-Gas Balancing the grid Steel Production Fertilizer/ Ammonia Shipping Hydro Solar Wind Water Renewables World’s largest electrolyzer + O 2 HYDROGENPRO / ANNUAL REPORT 2023 2726 ACES – Delivered the world’s largest renewable energy hub The Advanced Clean Ener- gy Storage (ACES) project 1 is the world’s largest renewable energy storage hub. The facility in Utah combines a 220-mega- - ers delivered from HydrogenPro and has a storage capacity of 4.5 million barrels in on-site salt caverns to store clean hydro- gen. ACES is a system designed to capture surplus renewable energy during peak production periods, convert it into hydro- gen, and store it for later use. The stored hydrogen is then utilized as fuel in a combined natural gas and hydrogen power plant to generate electricity for the Western United States. ACES will help decarbonize the region, with an ambition of in- crementally being 100% fueled by clean hydrogen by 2045. The scale of deployed electrolyzers and the use of salt caverns to - cant innovations. HydrogenPro completed the manufacturing - er systems in 2023. On-site instalments and commissioning will be completed in late 2024. HydrogenPro has also signed a 10-year service and support agreement. Green hydrogen is stored in salt dome caverns Excess Renewable Energy Green Hydrogen For Large -Scale Applications Electrolysers convert water into green hydrogen Wind Solar Geothermal Hydropower Power Industrial Transport elta.com/ gy-storage 2 is a collaboration, announced in 2023, that brings together the manufacturing and - lyzers. The partnership yielded positive results for both parties in a short span of time, as HydrogenPro the use of 18 of HydrogenPro’s 5.5 MW,s. - drogen-plants-from-andritz-21046.html 3 Production to Power Generation, Enters Full-Scale Operation-Electrolysis Hydrogen Production Begins -(mhi.com). Scalability contribute positively to the envi- ronment is by bringing our product out on the market. By successfully deploying the HydrogenPro elec- trolyzer, we can enable customers worldwide to operate large-scale hydrogen production facilities that can store renewable energy and replace fossil fuels. This can be achieved with much lower energy consumption compared to other technologies. During 2023, HydrogenPro has increased its production capacity in the manufacturing facilities in Tianjin, outside of Beijing in China, from 300 MW to 500 MW per year. The investment was carried out to deliver on the large ACES project and have capacity to take on other large projects in the near future. We are creating the foundation for successful growth, by ensur- building a responsible and resilient organization and value chain along with our growth strategy. Given the recent market backdrop combined with the need for further the previously announced plan to establish a manufacturing facility in Texas has been put on hold as both location and manufactur- ing model are being assessed, together with the local supply chain. This does not alter the Com- pany’s strong focus on the North American market. This market is a top priority to HydrogenPro, and the company plans to es- tablish a strong footprint near customers with large projects, building a strong OEM position in the country. The number one metric for elec- trolyzer manufacturers is energy electrolyzer’s ability to produce hydrogen gas at a certain level of input energy. The validation generate 1,100 Nm3/h of hydro- gen at a normal current density, which equals ~100 kg of pure and pressurised green hydrogen per hour 3 . This means that the world’s largest high-pressure alkaline electrolyzer is validated with 80% global standard for large-scale production of green hydrogen. - cy is obtained through Advanced Surface Plating (ASP), utilizing our proprietary electrode activa- tion process. We are constantly working towards improving energy includes continuously optimizing the product design and selecting materials to further increase per- formance. HydrogenPro’s daugh- ter company in Aarhus, Denmark, is continuously expanding its R&D electrode activation processes - ported experimentally and theo- retically by neutron imaging. 2023 was no exception, and the R&D - tionally 3 granted R&D projects. 3rd generation technology In addition to optimizing our exist- ing high-pressure alkaline technol- ogy, we are continuously making progress towards establishing what we call 3rd generation elec- trodes. HydrogenPro’s daughter company in Aarhus, Denmark, is currently developing and testing a new electrode coating includ- ed in the existing high-pressure alkaline system that is based on novel research. Initial tests show that the 3rd generation technology can deliver an impressive energy 29 HYDROGENPRO / ANNUAL REPORT 2023 28 is a 14% improvement from today’s technol- performance of the used electrodes obtained through a surface coating on the electrodes. - ecules into oxygen and hydrogen is done in voltage for hydrogen and oxygen formation. Additionally, research and development activi- ties are underway to improve the performance even further by combining modelling with the optimization of the porosity of the applied electrodes including membrane characteriza- tion. Testing will continue in 2024. One of the commonly cited critiques of a hydrogen-based economy is the high energy consumption involved in the conversion of - eration electrolyzer technology will potentially be a game changer for global deployment of hydrogen as a clean energy carrier. It means that we can mitigate climate change and corresponding economic burden than what today’s solutions are capable of. technology is that it will reduce the need for cooling water by up to 75% since less ener- gy is needed implying that less heat will be produced. This means that our technology is limiting water withdrawal – making it suitable also in regions of the world where water is not an abundant natural resource. The 3rd generation electrodes will reduce end-customers’ operational costs of electroly- 75% of the levelized cost of hydrogen produc- tion, a 14% reduction of electricity needed over The 3rd generation electrodes represent a revolutionary technology within the green hydrogen transition. This is good news for the planet and will undoubtedly ensure Hydrogen- Pro a superior position in the market. Global reach and global responsibility The growth of a new hydrogen economy will require use of natural resources and will - ronment. Our climate and resource footprint will grow hand in hand with the upscaling of our company, and our customers will depend on renewable energy in order to enable the production of green hydrogen based on our technology. There are poten- tial nature related impacts associated with hydrogen production that we want to ap- proach with awareness and precautionary measures. Our mission is to ensure that our positive impact on the environment out- weighs the negative impact we may have. Large-scale green hydrogen production is based on renewable energy infrastructure such as wind turbines or solar panels that may require vast amounts of land. This can lead to displacement of wildlife habitats and potentially harm biodiversity. We recog- nize that we are part of an industry quickly evolving, and that we need to collaborate closely with partners and industry peers to ensure that biodiversity and wildlife habitats are taken into the equation. We will strive to promote the most sustainable solutions both for today and the years to come for development of new renewable power production. Water consumption To produce green hydrogen, the electroly- sis process uses renewable energy to split water molecules into hydrogen and oxygen. The process is regarded as environmen- tally friendly, but it requires large amounts of water and can thus be challenging in regions where water is scarce. In addition to the water used in the electrolysis process, we are dependent on cooling water to keep the electrolyzer at the right temperature in steady state production. Regional con- siderations are therefore important when planning for green hydrogen production. In the future, the use of our 3rd generation demand for cooling water by up to 75% by minimizing energy consumption and heat production. This will reduce water with- drawal, making the technology suitable for regions where water is scarce. When working with areas that have limited water resources, it is crucial to prioritize a compre- hensive evaluation of the advantages and disadvantages for the local community. Je Spethmann, appointed as CEO for US subsidiary. HYDROGENPRO / ANNUAL REPORT 2023 3130 Sustainable manufacturing and supply chain Even though HydrogenPro positively contributes to the environment through the products we sell, it is undeniable that manufacturing electrolyzers has both an environmental and a social impact on our surroundings. We are entering a phase of rapid scaling of our manufacturing activity, and we will establish new manufacturing sites in both Europe and the US in the years to come. The timing is just right for taking a responsible role and working proactively to mitigate potential negative impacts caused by our own operations and operations in our supply chain. Environmental impact from manufacturing HydrogenPro’s electrolyzers are today manufactured in Tianjin, outside of Beijing in China, where we have a manufacturing capacity manufacturing activities in Tianjin have been established through the second half of 2022, and 2023 full production. This also means that 2023 was the year where we got to know our own operations, understood our environmental im- possibilities. In 2024, we will use the data we have collected and the observations we have made - age the environmental impacts of our operations and decrease them overtime. During last year we laid the foundations for this work by hiring a team of two people responsi- ble for environment, health, and safety in our Chinese operations. In addition, we continued working Environmental Management Sys- Quality Management System and the ISO45001 for Occupational Health and Safety Management System, and our Tianjin factory is While working with strengthen- ing our environmental action to address the material areas of our operations, we have strived to across locations. This includes measures to increase water, energy and resource saving, like installing automatic sensors to regulate lighting in our build- ings or implementing electronic approval systems to limit printing. - ment second hand and we have focused on improving recycling our test center. GHG emissions in manufacturing Steel usage is among the major contributors to HydrogenPro’s carbon footprint. Steel production is a carbon-intensive process that emits greenhouse gases during several steps of the production short-term actions we can do are buying steel from a supplier that has sustainability at heart and reducing our steel scrap during manufacturing of electrolyzers. We have therefore chosen a steel supplier that works proactively with ESG topics as part of their corporate strategy and corpo- rate development. A major part of our supplier’s work on ESG is their low-carbon transformation strategy, and they regularly report on their progress. When it comes to reducing the steel wasted, we alternative solutions that mini- mize steel scraps in our manufac- turing (read more in our chapter on Innovative Product Design on page 38). While in the process, we realized that we could nota- bly reduce the emissions from transportation by outsourcing major parts of the steel scrapping process to the steel mill directly. That way, only steel parts that are are transported to our facilities, and less unnecessary waste is transported. HydrogenPro’s absolute green- house gas emissions are expect- ed to increase in the short term. Scaling operations and building a global organization with several manufacturing sites will increase our climate footprint. However, doing this is a necessary step to - tion that can realize a zero-carbon future. With a high focus on ener- advantage from economies of scale, we aim to reduce the carbon emission intensity of our prod- ucts going forward. Currently, the emission intensity of our products is 0.0643 kg CO2/NOK 1 and the energy intensity of our products is 0.0048 kWh/NOK 2 . 1 Emission intensity measured as our total GHG emissions divided by our revenues for 2023. The number provided includes all GHG gases, in form of CO2 equivalents. The value for scope 1 emissions alone is 0.0004 kg CO2/NOK, scope 2 emissions alone 0.0023 kg CO2/NOK and scope 3 0.0643 kg CO2/NOK. 2 Energy intensity is measured as the total energy use for our own operations (including fuel, electricity, heating, steam) divided by our revenues for 2023. The full greenhouse gas emissions accounting can be found in Sus- tainability factbook on page 156. Water management In the manufacturing process of electrolyzers for green hydro- gen production, relatively small amounts of water are needed. Our location in China is not using wa- ter in the manufacturing process, while our location in Denmark has a water recycling facility that can recycle more than 90% of the wa- ter used. Our location in Norway uses water for testing of the elec- trolyzers. None of our current sites are operating in regions where water is scarce. HYDROGENPRO / ANNUAL REPORT 2023 3332 Pollution prevention Since all facilities only use electricity as energy source in the manufacturing process, the emission to air at the manufactur- ing sites is limited. The manufac- turing process at our site in China emits particle dust from a welding machine, but installation of an exhaust treatment system was completed in 2023. All chemical waste is collected and handled by specialized com- panies at all three sites, releasing no pollutants into air or water. The manufacturing site in China is located at a government-owned industry park, with strict regula- tions when it comes to spill-pro- tection and environmental safety. To prevent any leakages and designed without connection to the sewage system. Waste management We can contribute to reduced depletion of natural resources by reducing waste from our manu- facturing process. Our main waste fractions are steel scrap and chemicals (alkaline water, mineral - aging materials that are sorted and recycled according to local legislations and property owner procedures (paper, plastic, food waste, and residual waste). When it comes to hazardous waste, HydrogenPro signs dis- third-party hazardous waste suppliers and, in accordance with local environmental regulations, obtains approval from government environmental regulatory au- thorities to dispose of hazardous waste. A dedicated storage ware- house for hazardous waste (cut- in 2023 in our Tianjin factory, and an entry and exit ledger has been installed to record the quantity of hazardous waste entering and exiting the warehouse. The steel used in the manufactur- ing process is of high quality and high value. Despite having notably reduced the quantity of steel scrap on site by outsourcing major parts of the process to our steel suppli- er, we still have steel scrap from of the steel components. This is recycling suppliers that recycle 100% of the steel to new material. In 2023, the company also had a production facility in Datang, China. The facility was used for nickel plating of steel plates and was located in an industrial park. The facility has previously In 2023, however, we reeval- uated our operational bound- aries and concluded that the nickel plating operations in the industrial park Datang should be therefore included in the ESG report for 2023. This is because the equipment used for the above-mentioned operations was owned by HydrogenPro, and the managers supervising the operations were employees of HydrogenPro. This gives us operational control of the facility and the duty to report on the environmental impact. Water is an essential com- ponent of the nickel plating process and is used in various of chemical waste is discharged through the waste water treat- ment plant of the industrial park. The generated hazardous waste is collected by the industrial park and entrusted to a quali- accordance with national regu- lations. Wastewater represents the main source of waste of the facility in Datang. From primo December 2023 the operations in Datang are dis- continued, and the nickel plating process is now outsourced to two new third-party suppliers. HydrogenPro has carried out a supplier due diligence on both of them and has deemed the environmental management system and the working condi- tions to be adequate and in line with our company standards. Supplier engagement network of suppliers that match our material quality require- ments, delivery times, and capacity needs in the scale-up phase we have ahead of us. As an industrial company with advanced technology, we highly depend on suppliers that can meet our technical specs and standards. Therefore, the process of sourcing from a new supplier requires a thorough assessment that involves close communication with the supplier management and visits to their manufacturing sites. Both when we approach new suppliers and when we assess our existing ones, ESG topics are at the top of our agenda. We operations, but also through collaboration with our suppliers. The supply chain management process previously estab- lished has in 2023 been rolled out to the whole company. The reputation, and transparent communication. While 2022 was mainly the year where HydrogenPro built a supply chain man- agement system, even though some assessment took place, 2023 was the year where we focused on carrying out more assessments. 17 companies, of which 10 new suppliers, were screened in 2023 using environmental and social criteria. This represents 20% of the new suppliers in 2023. We are working our ESG supplier assessment to existing suppliers. None of the suppliers were found to have negative environmental or social impacts, so no remediation measures were needed. None of the suppliers were found violating the right to freedom of asso- ciation and collective bargaining, nor having incidents of child process involves an in-depth review where suppliers are asked to elaborate on general information, management systems, compliance and corporate responsibility, and supply chain management. Documentation of such policies and systems needs to be presented. Health and safety topics covered are among others risk assessment processes, training of employ- ees, preventive actions, follow-up routines of incidents, as well as incidents reported. HYDROGENPRO / ANNUAL REPORT 2023 3534 Environmental topics that are cov- ered are among others emission reduction and sustainability tar- gets, waste management systems, statistics of accidents. The sup- was used to both prequalify and reapprove suppliers. The suppliers that received the questionnaire were prioritized by either spend, assessed risk or importance of The HydrogenPro supplier policy is based on the Supplier Code of Conduct that was developed in the beginning of 2023. The Sup- plier Code of Conduct was then added to the standard documents that all new suppliers sign when entering in a relationship with HydrogenPro. This means that all new suppliers since the start of last year have read and accepted the terms in the Supplier Code of Conduct. The document has also been shared with all the existing suppliers through the yearly sup- plier assessment system, and we are currently following up all the suppliers to ensure everyone will sign it. The Supplier Code of Con- - quirements we expect all suppliers and business partners to adhere to concerning their responsibil- ities towards their stakeholders and the environment. Regarding societal aspects, the policy covers topics such as anti-corruption and bribery, human and labor rights including working condi- tions, working hours and wages, non-discrimination, prohibition of child labor and forced labor, use of safety of employees. Regarding environmental aspects, the policy covers topics such as environmen- tal management systems, pollu- tion prevention and environmental protection. It is important for us to meet our suppliers in person, to get to know them and to build a foundation for trust. This is a crucial aspect for us to innovate together with our suppliers on technology devel- opment, material use, and sus- tainability aspects of our shared value chain. The updated supplier factory inspections and audits for prioritized suppliers as well as non-performing suppliers. This contributes to build trust and a good collaboration environment, and it is necessary to make sure that requirements are followed. We maintain a permanent dia- logue with preferred suppliers and potential new ones for the main sourcing categories, discussing strategic procurement and supply chain topics, such as electrolyzer technology and requirements, product development, partnership agreements, supply chain risks - tion capacity, customer support services, quality, manufacturing While in 2022 the main focus of our Chinese operations was to establish the production facility year of operations as well as the year where the ground was laid for further work with ESG topics both in our own operations and in the supply chain. The newly formed Environment Health and Safety team in China worked very closely with the procurement team to implement the new supplier chain management process and ensure adequate ESG screening of suppliers. To do this we also en- gaged sustainability procurement consultants from KPMG to provide us with a comprehensive training on ESG supplier assessment. This included a two-day workshop on how to carry out ESG evaluation of suppliers, where HydrogenPro’s employees learned what to look for when they conduct an ESG au- dit and which questions to ask to suppliers and to their employees to identify potential gaps in social and environmental standards. The training was open to all employees in China, and around 20 employ- ees took part in both days. The training included then a guided on-site visit to one of our suppli- ers, where KPMG was present to - duct an ESG audit. Ten employee representatives from the EHS department, Quality Control and Procurement took part in the visit. Transparency Act is also undergoing adaptions relat- ed to the Norwegian Transparency Act (“Åpenhetsloven”). This leg- islation establishes requirements for Norwegian enterprises to carry out due diligence of fundamental human rights and decent work- ing conditions in own operations, in the supply chain and among business partners, and to report on the due diligence activities they have carried out. HydrogenPro - ency Act report in June 2023, and is now preparing to report on the progress made later this year. HYDROGENPRO / ANNUAL REPORT 2023 3736 Innovative product design Design for circularity At HydrogenPro, the culture of innovation is thriving as employ- ees consistently seek out opportu- nities for technological advance- ments and process improvements. As a fast-moving actor in the hydrogen sector, we are working day by day to realise a circular economy. We work to establish a product design process where the customer’s expectations of func- tionality as well as circular princi- ples of product design are top of mind. Our long-term goal is that all components and parts in our elec- trolyzers easily can be dismantled, repaired, and reused. If not, then as a minimum be recycled. When developing our 3rd gen- eration electrodes, it has been important for us to create plug- and-play technologies that allow the new electrodes to easily be installed in old cell stack designs during overhaul. We also design the electrolyzers so that the bipolar steel plates can be easily dismantled, returned, and re- placed. Today, our service agree- ments with customers cover repair and refurbishment of 40% of the 20 years. All other steel parts in the electrolyzer, that is end plates, mid plate, and bolts, are reused. Refurbishment can be done if the steel components meet the quality requirements, which can be up to 30 years. Valuable materials All raw materials are valuable resources that should be spent wisely and with moderation. We select raw materials with care, considering the environmental footprint following from extraction, processing and disposal of the raw material. We are continuously bal- ancing material performance and customer requirements with the aim to reduce spent resources. There is a limited number of input materials that are needed to pro- duce HydrogenPro’s electrolyzers. Our main material inputs are steel, polymers, and nickel in addition to some chemicals and lye. Our electrode technology does not rely on any noble metals or rare-earth elements. We have previously stated that our products are PFAS free, but we need to restate this information as we realized it was mistaken. PFAS are actually to be found in some valves, pumps and instruments as well as in the cell stack gaskets. and concluded that reducing the nickel coating thickness on our steel components is possible while keeping consistent high quality. In 2023 we reached im- portant results in this process and were able to reduce the thickness of nickel coating from 80 micron (µm) to 40 micron (µm). This will lead to a reduction in nickel use for this process by 50%, which indirectly contributes to reduced land use, energy consumption, and local pollution. Steel is the major material input in the manufacturing of HydrogenPro electrolyzers. The steel plates that we purchase are not delivered in the exact shapes and sizes that we need for our electrolyzers. This leads to a considerable quantity - our technology department. We continuously work to establish new relationships to sub-suppli- ers with advanced manufacturing methods for goods and parts that would reduce base metals waste invest in new equipment to deliver new shapes, the crucial factor is when we will be able to commit to sourcing enough steel plates in the right dimension. This requires that we reach a certain company size - cial predictability and backing. For further details on how we ap- proach our steel usage, see chap- ter on Sustainable manufacturing and supply chain on page 32. Customer engagement To increase circularity and mini- mize waste throughout the entire value chain, close collaboration with both our suppliers and cus- tomers is crucial. Empowering customers to take wise decisions during operations greatly enhanc- es the lifespan of the equipment. Therefore, we ensure that our customers receive comprehensive guidance on how to operate the electrolyzer, handling its various components, and conducting regular preventive maintenance procedures. Our goal is to provide thoroughly documented equipment complete with information on the origin of all material used. To ensure full traceability of all raw materials and components, we include sourc- ing and quality documentation. This is an ongoing and evolving to optimize. We are also developing customer guidelines and criteria for refur- bishment and material recycling. We aim to provide service and maintenance to our customers in the circularity of our products, and we work to establish procedures and infrastructures that are need- ed to succeed. HYDROGENPRO / ANNUAL REPORT 2023 3938 A safe and aractive place to work At HydrogenPro, the focal point of value cre- ation, culture, and performance is our people and their capabilities. We recognize that securing the strategic priorities – making it imperative for through the impact on our success in addressing the well-being of all employees of HydrogenPro. HydrogenPro delivers high-end technology, engineering, manufacturing, research & devel- opment (R&D) and assembly. To continue the growth and to achieve our ambitious goal of becoming the number one provider of large- scale green hydrogen technologies and systems, having expertise resources and knowledge is essential for our success. To continue developing - phasize occupational health and safety, training and development, diversity, openness, and equal opportunities. Our people HydrogenPro has a mission to accelerate global decarbonization with world-class green hy- drogen solutions that set the gold standard for safety, reliability, and enduring service life. Our commitment to drive the energy transition is fueled by the passion and dedication of our remarkable team. In 2023 we were thrilled to welcome a total of 146 new team members across all locations, including employees at our newly established German branch. HydrogenPro innovation. Together, guided by our shared val- ues, we transform challenges into opportunities, inspiring innovation and shaping a future where HydrogenPro stands as a beacon of excel- lence in the global energy landscape. In total, HydrogenPro counted 231 employees. Norway 1 The number excludes one case of serious long-term sick leave. A calculation of the same parameter including that one case would lead to a sick leave of 3.6% In 2023, HydrogenPro Norway welcomed 14 new employees, in both junior and senior positions, includ- ing executive management roles. The addition of key leadership positions, such as the Chief People & Denmark In Denmark, HydrogenPro was a total of ten full-time employees at year-end, along with one consultant, doubling the workforce from the previous year. Through collaboration with Aarhus University, three indus- trial PhD students from Biological & Chemical Engineering and Insti- tute of Chemistry were employed in 2022, in addition to a PhD student at the Department of Mechanical and Production Engineering through a granted Eurostars project. This collaboration has already yielded more anticipated in 2024. In total, 11 R&D projects were granted in 2022. Most of them were still running in 2023. Two additional R&D projects have been acquired, which will involve several students in the following years. The stu- providing valuable experience for future scientists. HydrogenPro Denmark, Advanced Surface Plating, is - ees, recruitments have been successful. The sick leave in HydrogenPro Denmark was 1.1% 1 in 2023 and is well below the company goal of 4%. HYDROGENPRO / ANNUAL REPORT 2023 4140 China HydrogenPro has two locations In 2023, HydrogenPro Tianjin expanded the workforce by wel- coming 123 new full-time employ- ees at our manufacturing facility, reaching a total of 176 employees by year-end. Sick leave from August to December was 1.7%. HydrogenPro Shanghai was es- tablished in 2023 and welcomed 5 new employees, achieving a total of 6 full-time employees by year-end. Sick leave from August to December was an astonishing 0%. In both locations, sick leave work environment within HydrogenPro China during this crucial period of expansion and production. Following the establishment of the factory and organizational structure from the ground up, 2023 marked The achievements of 2023 underscore the successful integration of HydrogenPro Tianjin and Shanghai into the global hydrogen landscape. In 2023, the company also used a production facility in Datang, China. The facility has been used for nickel plating of steel plates and was located in an industrial park. HydrogenPro started to use the facility at the end of 2022. In 2023, the company discovered that the working conditions on site were unacceptable to - our business with the industry park by about 1/3, we terminated our operations at the facility beginning December 2023. In the 2022 annual report, the facility was treated as a supplier and the above-mentioned deviations were therefore only communicated in the 2022 Transparency Act report. With more information, we realize that the production at this facility should be handled in the same way as HydrogenPro’s own operations when reporting on Health and Safety. The reason being that the supervisors at the facility were HydrogenPro employees. Additionally, even though the blue-collar workers in the industrial park were not HydrogenPro’s own employees, their work and workplace was supervised by our organization. HydrogenPro’s operations were directly linked to potential occupational health and safety impacts on the industrial park’s workers by its business relationships. In 2023 we reported 6 injuries among workers who are not employees, all of which in the facility of Datang. disease examinations for the workers in accordance with national laws and regulations. During 2023, the ventilation facilities in the workshop was strengthened, the air quality in the workshop improved, and the concentration of harmful substances in the workshop air was reduced. Despite this, HydrogenPro deemed the working conditions at the facility to be unsatisfactory and below our company standard. It was therefore decided to liquidate operations in the Datang industrial park. Germany - ward to continued growth in 2024. Notably, sick leave remained low throughout the year, ranging from to health and well-being, contributing to the overall success and productivity of our operations. Employee Survey and Cultural Assessment In 2022, HydrogenPro established a partnership with the Great Place to Work® Institute to conduct - ship continued into 2023 and provided a valuable opportunity to not only benchmark our workplace against other great workplaces, but also to compare our results with those of the previous survey, gaining greater insight into our current standing in various People & Culture related parameters. All employees in the Norwegian and German orga- nization were invited to participate in the survey, answering 61 statements measuring the level of Trust, Pride, Credibility, Respect, Fairness, and Camarade- rie. The survey was conducted in December 2023, achieving a response rate of 80%, which is notably high and above average for similar surveys. The overall Trust Index yielded a score of 61%, a Trust Index, an average of all companies in Norway, improvement. Following a thorough assessment and discussion within departments and at management level, an action plan with goals and key priority areas has been outlined. In 2024, additional entities will be included in the work environment survey. In 2023 we implemented a comprehensive cultural assessment for our European operations including Norway, Denmark and Germany. The US will be in- cluded in the future, and hopefully China as well. The initiative was crucial for gaining deeper insights into our current organizational culture and from there, un- derstanding how to develop our desired culture. This initiative is expected to be completed in 2024, while we emphasize that developing our desired culture is a never-ending process. HYDROGENPRO / ANNUAL REPORT 2023 4342 Collective bargaining agreements At HydrogenPro, none of our em- ployees are covered by collective bargaining agreements. Employ- ees have the right to participate in unions in all countries where we operate. We provide information about employee rights in our em- ployee handbook. In the event of operational changes, we ensure strict compli- ance with local laws and provide employees with timely notice. HydrogenPro is compliant with The Working Environment Act in Norway and complies with rel- evant legislation in all the coun- tries where we operate. In 2022, HydrogenPro became a member of The Federation of Norwegian Industries (Norsk Industri), the largest association within the overall Confederation of Norwe- gian Enterprises (NHO), and this positive partnership has continued throughout 2023. Diversity and inclusion At HydrogenPro, we value team and strategically aligned recruit- ment policies. As outlined in our 2021 Annual Report, our ambition is to achieve a minimum of 25% female representation across all geographies by 2025. In 2022, year-end female representation of 15% in 2021. In 2023, there was a decline to 19%, emphasizing the importance of ongoing initiatives diversity. At the end of February 2024, the female ratio was again increased to 24%. In addition to gender diversity, our dedication extends to maintaining cultural diversity and other forms of diversity at all locations. Our Norwegian, Danish and German nationalities. Our overarching aim is to ensure all employees feel psychologically safe, included, and valued. Adhering to governance and compensation policies, we uphold equal pay for equal work with a ze- ro-tolerance approach to discrimi- nation. Our compensation aver- age exceeds the minimum wage requirements in all geographic locations, enabling us to remain talent and experienced resourc- es to HydrogenPro. In 2023, the remuneration ratio of women to men was 0.78 for our Norwegian operations and 0.88 and 1.3 for Denmark and Tianjin respectively. The remuneration ratios for all our in the table below. Entity Women to Men Remuneration Ratio Norway 0.78 Denmark 1 0.88 Tianjin 1.3 * Signicant entities in this regard are entities with 10 or more employees. 1 Only one female employed in Denmark by year-end 2023 Further details can be found in the Sustainability factbook on page 156. Occupational health and safety The well-being and safety of our personnel are paramount at HydrogenPro, where people constitute our core resource. We strategic goal of zero accidents and work-related injuries. However, with the escalation of manufactur- ing and electrolyzer testing activ- ities, there have been 8 incidents among our employees in 2023, all recorded at our production facili- ties in Tianjin. No accidents were reported at our other entities. This excludes the above-mentioned incidents at the facility in Datang. Six of the reported incidents were characterized by minor to moderate fractures. Two of these occurred outside the production area - one in the cafetria and one in the restrooms. The other four incidents causing fractures were linked to crane operations, a bro ken slipping and one employee slipping accidents were minor injuries from sharp blades and crane operations. from expediting SOP approval, optimizations, implementing crane operator training to adjusting din- ing area spacing. Additionally, we have enhanced our safety training programs, including an examina- tion and emergency preparedness. Daily hazard investigations have been conducted and will continue as an important safety measure. Our commitment to achieving zero accidents and work-related injuries remains a top priority for HydrogenPro. In 2023, no occupational ill-health occurred in any of the company locations. For HydrogenPro China occupational disease hazards and through a third-party evaluation report. Following this report, several actions were taken to eliminate hazards and minimize risks, including introducing dust removal equipment and dust masks, noise reducing earplugs, laser goggles, and regular occupational health examinations. HydrogenPro ASA in Norway covering an occupational health and safety management system. HydrogenPro Tianjin obtained the and assessment procedures are integral to ensuring occupation- al health and safety for all em- ployees, facilitating continuous improvement of safety standards. In the event of incidents, thorough investigations are conducted to learn about preventive measures. This practice has been implement- ed at all our locations. Furthermore, HydrogenPro China has developed environmental and safety emergency plans tailored to the manufacturing process. Any al- terations in the manufacturing pro- cess prompt updates to these plans, responsive to potential risks. Occupational health services are available to all employees, and all employees are covered by an occupational health and safety management system. Person- al health-related information is stored according to GDPR regulations and complies with relevant legislation in all operat- ing countries. Any utilization of employees’ personal health data and their involvement in occupa- favorable or unfavorable treat- ment is strictly forbidden. If such behavior is observed within the organization, it should be prompt- ly reported following an incident review. No incidents of this nature were reported in 2023. In China, the company conducts occupational disease status evalu- ations of the company through qual- on occupational hazards to ensure compliance with relevant regulatory standards, and occupational dis- ease examinations for relevant em- ployees. Further, the evaluation of occupational hazards is publicized for the employees, along with the annual occupational hazard factor detection report, and occupational disease physical examination. In Norway, occupational health services are available to all as needed and a representative from these services is member of the (WEC). HydrogenPro is compliant with The Working Environment Act in Norway and has elected representatives for the Working - ing Safety Representative. The from both the employees and the employer, two of each and has scheduled quarterly meetings in addition to additional meetings if needed. The responsibilities described in the Work Environ- ment Act. Information about the - sibility, minutes from the meetings is available to the employees through SharePoint and TQM. All relevant HSE/OHS information is available through HydrogenPro HSE handbook and regularly a part of the Working Environment delegate is involved on behalf of the employees. Further, a “HSE Moment” is on the agenda in all town-hall meetings. We practice zero-tolerance of discrimination. No incidents of dis- crimination were reported in 2023. incidents of forced, compulsory operations. HYDROGENPRO / ANNUAL REPORT 2023 4544 Training and development In 2023, a total of 9,325.2 hours were dedicated to training across all entities. An average of 15.39 hours of HSE training were conducted by each worker at the Tianjin facility, complemented by an additional average of 7 hours of training by management. The training encom- passed basic elements for all Chinese employ- manufacturing facility safety, culminating in an examination. Factory workers completed more extensive train- - with the company progressing toward achieving reported to local authorities as required. Comprehensive management systems are es- tablished for the training of new employees, with varying durations depending on the complexity involved in electrical, hazardous, and chemical processes. Additionally, all relevant employees - tion, including new employees, as well promotions, termination of employment, retirement etc., are invited to a dialogue with their immediate leader and are supported throughout the transition. Employee development is incorporated into the annual People Dialogue process, including goal development goals. The process also includes a semi-annual follow-up meeting. All managers are expected to complete the dialogue meetings with their team members. Continuing employee development is pivotal for ensuring a sustainable and well-educated work- force. With our growing team across various loca- tions, we aim to implement a systematic approach to optimize training and personal development. As we expand, employees will receive training on local regulations across all facilities, including occupational health service functions. People governance and whistleblower mechanisms for our Norwegian operations To foster a cohesive business and social en- vironment, two primary structures empower system and the employee handbook. The em- ployee handbook is included in the TQM. More information is provided in the chapter “Ethics in HydrogenPro”, page 74. These systems and documents, coupled with - menting organizational policies and responsible business conduct, including the process for raising concerns through an established whistleblow- ing protocol. Employees are introduced to these guiding mechanisms and procedures from the onset of their employment, communicated through routine team meetings, one-on-one dialogues with their immediate managers, and on HydrogenPro’s and reporting critical concerns to the executive and board levels, emphasizing the importance of reporting incidents for the continual develop- ment of our structures, performance, and culture. addressed at the board level. For the reporting pe- riod, 2023, no incidents of concern were reported in HydrogenPro. In 2023, our whistleblower policy was implement- ed throughout the company. To ensure our Code of Conduct and Anti-Bribery and Corruption Policy are known and understood by all employees, a training program in two partis has been imple- mented for all English-speaking employees glob- ally. The training consisted of the annual Anti-Brib- ery and Corruption course and 11 digital learning modules. Beginning 2024, an external third-party channel for whistle blowing is being implemented. The chapter “Ethics in HydrogenPro”, page 74, pro- vides further information. HYDROGENPRO / ANNUAL REPORT 2023 47 03 Governance HYDROGENPRO / ANNUAL REPORT 2023 4948 Board of Directors’ report 1 Highlights 2023, marking our ten years anniversary, was the year where we proved our ability to produce and deliver our large-scale hydrogen systems completing the - ers ordered for the Advanced Clean Energy Storage Hub in Delta, Utah. We also entered new industrial partnerships, notably with the Austrian Industrial Group ANDRITZ. Equally, it was the year we showed that our global business model is sound, proving our delivery capabilities with our unparalleled organiza- tional know-how. During the fall of 2023, HydrogenPro and ANDRITZ Group signed a strategic partnership to combine the ANDRITZ’s industrial expertise with HydrogenPro’s technological expertise. This partnership showed im- mediate results as ANDRITZ announced the contract of building a 100MW electrolysis plant at the Salzgit- ter Flachstahl GmbH site. HydrogenPro was chosen supplier of 18 5.5 MW cell stacks to this large-scale European project. This also marked a new milestone for our global business model as the parts will be shipped from our production facilities in Tianjin, Chi- na, and assembled in Erfurt, Germany, expanding our European footprint. By the end of the year, we completed the manufac- ture and delivery of 40 5.5 MW electrolyzers to the world ‘s largest electrolyzer system. When obtaining the contract in 2022 from Advanced Clean Ener- gy Storage Hub in Delta, Utah, it was the largest hydrogen contract to date. By the end of 2023 all 40 electrolyzers were produced and delivered, proving our ability to provide large-scale and high-quality technology to our customers. In addition to proving our ability to produce and deliver, we also had our unique technology validated by the world leading validation center at Mitsubishi Heavy Industries’ Takasago Hydrogen Park. The test- ed electrolyzer was produced at our new production line in Tianjin, China and started to produce hydrogen in August 2023. HydrogenPro acquired Advanced Surface Plating ApS, Aarhus, Denmark, in 2020 which includes full ownership to the previously licensed plating tech- reduction in kWh/kg H2 which is reducing the cost is the by far largest cost element. The ASP organi- zation is now being integrated into the Group as our main R&D department. Based on this highly skilled research department, we obtained several grants with a total value of NOK 15.3 million in the calendar year 2023. The projects were funded by Innovation Fund Denmark, MissionGreenFuels and Gassnova, Norway. Partners in the projects include the Tech- nical University of Denmark and Aarhus University as well as Sintef, Equinor Energy, EcoFishCircle and TotalEnergies. In order to continue to produce and deliver our unique electrolyzer technology to large-scale customers, we expanded our production capacity by more than 60%. Originally our capacity was 300MW, but we are now able to produce 500MW at our production site in address the increasing global demand for electrolyz- ers and green hydrogen. Our European expansion was equally strengthened Germany. The German market is of great importance as the German Government aims to achieve a 10GW capacity of hydrogen electrolyzers by 2030 through its “National Hydrogen Strategy”. In August 2023, Mr. Jarle Dragvik assumed the role, succeeding Mr. Tarjei Johansen. Mr. Dragvik came from a position as CEO of TM Holding AS, the Company’s second largest shareholder. He knows HydrogenPro well as he served on the Board un- til May 2023 and has for years been chairman of HydrogenPro’s Chinese operation. Mr. Terje Mikalsen was appointed chair of the board in October, succeeding Mrs. Ellen Hanetho. Terje Mikalsen is a major shareholder and has a long list of top management and board positions. He co-found- ed Norsk Data AS and has been an active owner in many companies as well as heading the listings of Norsk Data, Hafslund, Nycomed and NCL at the NY stock exchanges (NYSE/Nasdaq). Terje Mikalsen To further ensure our global expansion, notably in - seeing HydrogenPro’s North American operations and leading the company’s dynamic growth in North America. Recently Mr. Spethmann held the position as Senior Vice President for Industrial Products at Donaldson Company Inc. Donaldson is a leading pro- 13,000 employees worldwide. Mr. Spethmann has a strong track record creating actionable strategies to drive growth and deliver shareholder value. To participate in creating solid political frameworks for our industry, HydrogenPro initiated and played a pivotal part in developing a National Hydrogen strategy that was presented to the Norwegian Gov- ernment in June. To create sustainable markets and value chains both nationally and globally, the politi- cal decisions and support mechanisms are of great importance for every player in the industry. We are therefore active members of also Hydrogen Europe, Hydrogen Forum (Norway) and the Confederation of Norwegian Enterprise. In accordance with the provisions of the Norwegian Accounting Act, that the accounts have been prepared on a going concern basis and that the going concern assumption applies. Pursuant to Accounting Act, HydrogenPro prepares consolidated annual ac- counts in accordance with IFRS® Accounting Standards as adopted by the EU. The statutory accounts of HydrogenPro ASA have been prepared in accordance with the Norwegian regulations concerning annual accounts. Income statement 2023 Restated 2022 Revenue from contracts with customers 568 56 Cost of goods sold -447 -44 Personnel expenses -82 -52 Other operating expenses -66 -54 ADJUSTED EBITDA -27 -94 Non-cash cost of incentive programs/payrolls -3 -10 Non-cash accruals/provisions -6 -1 EBITDA -36 -105 Depreciation and amortization expenses -22 -14 EBIT -58 -119 Net nancial income and expenses -5 5 Prot/(loss) before income tax -63 -114 Income tax expense 0 0 PROFIT/(LOSS) -63 -114 See to Alternative Performance Measures (APM’s) page 146. HYDROGENPRO / ANNUAL REPORT 2023 5150 HydrogenPro generated revenues of NOK 568 million in 2023 (NOK 56 million in 2022) which was mainly related to the purchase order from Mitsubishi Power for the world’s largest single stack high-pressure alkaline electrolyzer system and the ACES project. Cost of goods sold amounted to 447 million (NOK 44 million in 2022) in raw materials and consumables, mainly related to purchase orders from Mitsub- ishi Power. Personnel expenses increased from 63 million in 2022 to 85 million in 2023. The large increase in number of employees is mainly related to the manufacturing site in Tianjin, China. Other operating expenses amounted to 72 million (NOK 55 million in 2022), as the overall ac- vs. the previous year. The increase - tinued build-up of the organization and systems needed to execute and deliver high quality products and services. Depreciation & amortization ex- penses of NOK 22 million (NOK 14 million in 2022). million in 2023 vs. NOK - 119 mil- lion in 2022. Net Financial items 2023 Restated 2022 Interest gain/expense 4 3 Net foreign exchange gain/expense -8 2 Other nance income/expense -1 -1 Net Financial items -5 5 Financial income and expenses amounted to NOK -5 million, which consisted of NOK 4 million Net Financial items NOK 5 million in 2022 is restated with NOK -24 million see Note 9.1 Restatement of comparable information. Tax on ordinary result was NOK 0 million (NOK 0 million in 2022). Annual net loss for the year ended at NOK -63 million (NOK –114 million in 2022 which is restated see Note 8.1 Restatement of com- parable information.) and will be transferred to other equity. Balance sheet 2023 Restated 2022 ASSETS Intangible assets 58 64 Property, plant and equipment 68 56 Financial investment 56 52 Total non-current assets 182 172 Current operating assets 301 122 Cash and cash equivalents 161 257 Total Current Assets 462 379 Total Assets 644 551 EQUITY AND LIABILITIES 2023 Restated 2022 Total equity 453 396 Total non-current liabilites 18 11 Total current liabilites 172 144 Total liabilities 190 155 Total equity and liabilities 644 551 Total assets as of 31 December 2023 were NOK 644 million, where- of NOK 462 million in current assets (NOK 161 million in cash and depos- its, NOK 287 million in total debtors and NOK 14 million in inventories) and NOK 182 million in non-current assets, whereof NOK 58 million in intangible assets, NOK 68 million in tangible assets and NOK 56 million The development in property, plant and equipment are mainly due to production plant at HydrogenPro Tianjin Ltd. For more information, see note 3.1, 3.2 and 3.3 in the Total equity amounted to NOK 453 million and total liabilities of NOK 190 million, whereof NOK 172 million in short-term liabilities and NOK 18 million in long-term liabili- ties/provisions. The equity ratio as of 31 December 2023 was 70.4%. Cash ow statement 2023 Restated 2022 Cash balance start of period 257 382 Net cash ow from operating activities -188 -69 Net cash ow from investing activities -20 -52 Net cash ow from nancing activities 111 -4 Total changes in cash -97 -125 Cash balance end of period 161 257 - tivities was NOK -188 million, com- pared to -69 million in 2022 The increase is mainly due to personnel expenses driven by increase in full- time employees. of NOK -20 million which is invested in the manufacturing capacity which was NOK -52 in 2022 related to purchase of tangible assets with NOK 15 million and acquisition of subsidiary with NOK 33 million. More details on investments, refer to note 3.1, 3.2, and 3.4 in the activities were NOK 111 million in 2023 (NOK – 4 million in 2022), whereof NOK 122 million was relat- ed to the issue of new capital. HYDROGENPRO / ANNUAL REPORT 2023 5352 2023 2022 Number of employees 231 143 Short leave/overall leave less than country average of our locations (annually): Norway 1.1 % 0.62 % Denmark 1.1 % 0.01 % Germany 0.8 % Tianjin, China 1.7% Shanghai, China 0% China 3.3% Zero accidents and work-related ill health (annually): Norway 0 Denmark 0 Germany 0 Tianjin, China 8 Shanghai, China 0 Total HydrogenPro TRIFR4: 3.22 (average) US manufacturing = 3.5 TQM 89 % First aid 100 % Information Security Awareness 89 % Data not available for 2022. 1. 2. The number excludes one case of serious long-term sick leave. A calculation of the same parameter including that one case would lead to a sick leave of 3.6% 3. The target for sick leave is not set at a lower level to avoid sending a wrong message to the employees and encourage them to avoid sick leave when they need it 4. Calculated per 200,000 hours worked (as opposed to the common calculation of accidents per million work hours. 5. results. Further tests to be conducted in 2024 as part of our R&D program. 6. The target refers to the contracts HydrogenPro has signed in the reporting year, and the number is an estimate of avoided emissions those projects are expected to generate. Therefore, we reformulated slightly. 2 Risks The company recognizes the importance of having sound risk management processes underpin- decisions. In January 2024, to further its work towards strong risk awareness, to assist in the facilitation of a - uation exercise. The exercise took - tion and ranking (likelihood, con- sequence) of the Company’s most critical risks. This analysis is an important building block towards establishing an enterprise-wide view of risks and associated man- agement framework and creates a solid foundation for the Company’s future risk work. Through its ordinary operating activities, the Company is exposed to various types of risk. As the Company continues to grow at a fast rate and enters new markets, the risk landscape evolves, with recent evolution focusing largely on threats from protectionism, building a strong company culture and business strategies. Despite the Company proactively work- ing to identify risks and taking risk-mitigating initiatives to the best extent practicable, there may be instances where the Compa- ny’s control activities do not fully mitigate the risk exposure. With the risk landscape changing, additional risks may arise, and per- ceived risk severities and sensitiv- ities may change. The information herein should therefore be read carefully and be understood to represent the risk exposures at the time of writing. Below follows a description of the Company’s main risks and uncertainties. Strategy and business risk The market for services related to hydrogen production is still in de- velopment and market sentiment may be volatile. Client expecta- tions on the Company continue to evolve with the maturity of the - ciently document own technology and performance, standup local presence in key markets, and meet - cial, operational and environmen- tal dimensions may put contractu- al agreements at risk. The Company is currently building a log of performance data from its operational electrolyzers installed in partnership with Mitsubishi Power and through increased testing activity in own facilities. This data will further strengthen the market position of the Compa- ny and mitigate contractual risks. Furthermore, the experience of going through a full delivery and installation further mitigates future delivery and contractual risks as management leverages prior ex- perience. The Company is focus- ing on further commercialization of its R&D to strengthen its market position and to stay competitive. The Company is particularly exposed to political factors. A reduction in government support both the Company’s ability to operate and its ability to expand its business through dampening of customer demand. Furthermore, a development towards protec- tionist sentiment in key markets may cause the Company to face increased local content and delivery demands in the future. To mitigate this risk, the Company is currently undertaking a mapping of the US supplier landscape, with plans to do the same in the Euro- pean market. To further reduce business risks, the Company is currently developing a set of Business Norms that will as- sess contract opportunities across elements and associated thresholds - tunity-related risk analysis into the contract acceptance process. Financial risk The Company is exposed to sever- Fluctuation in commodity prices of steel and nickel may also impact Company has not yet undertaken any hedging activity and may ex- perience both upside and down- side risks from these positions. However, the Company seeks to partly hedge price risk through agreements with suppliers or agents and minimize the commod- ity price exposure through sourc- ing steel raw material with already formed shaped, thus reducing quantity of the raw material and correspondingly reduce the im- also reduces the carbon footprint. - payment obligations. Given the size of projects compared to the size of the Company, this is a potential sig- the customers’ credit standing thoroughly before entering into a contract. The potential failure to obtain - cial guarantees may hamper the Company’s ability to pursue con- tractual negotiations and pursue strategic priorities. This could result in the loss of potential busi- ness opportunities and negatively Company continuously assesses - tions to mitigate this risk. If the Company is not able to obtain necessary funding and/ hinder the Company’s ability to pursue contractual negotiations and strategic priorities. This may result in loss of business oppor- tunities and negatively impact - pany continuously assesses and mitigate this risk. The Group’s Finance department (“CFO”), headquartered in Norway. The CFO reports to the Audit & was established in the autumn of 2022, with a mandate given by the Board of Directors. The leader reports to the Chair of the Board. Head of Group Accounting leads the accounting department and HYDROGENPRO / ANNUAL REPORT 2023 5554 reports to the CFO. In addition, the Finance department includes Business Controlling, Project Controlling and Treasury resourc- es. The subsidiaries in the Group accounting department on a fre- quent basis. People risk As the company grows and works to meet the expectations of a publicly traded company, there is maintaining growth. To mitigate, the company is, establishing more developed governance structures and strengthening operations and control mechanisms. - sion and bridge diverging work practices, the Company has un- - lishing the underlying principles and values of the company culture. half of 2024. ESG risk - ments and market expectations across all dimensions of ESG could increase costs or harm the reputation of the Company. Ensuring compliance and respon- sible behavior from the end-to- undertaking which creates a risk of compliance with the Norwegian Transparency Act and – going forward – CSRD. To reduce this risk, the Company has launched a program of third-party supplier audits to gain assurance on the operations and processes under- taken by its suppliers. Operational risk Disruptions in deliveries by the Company’s suppliers could increase operating costs, lead to delays to customers and adverse- ly impact operations. Today the Company’s supply chain is heavily concentrated in China, and a cer- tain volume of single-source sup- pliers in combination with political chain vulnerable to disruption. The Company is in the process of mitigating this risk through the roll-out of third-party driven supplier audits as well as exam- ination of alternative suppliers to ensure business continuity in case of disruption. The Company uses information technology systems to conduct its business. Disruption, system- failure or security breaches of these systems can materially and IT Technology risks, the Company faces and put increased structure around their management, a Chief leadership team on 1 March 2024. Health, environmental and safety risk The Company faces health, envi- ronmental and safety risks in the Company’s operations. These risks are typically mitigated through established processes and pro- cedures, with special emphasis on the work at the manufacturing site in Tianjin, China, the plating facility and R&D center in Aarhus, Denmark, and the test center in Porsgrunn, Norway. The Company has been awarded the relevant high standards. Shares and dividend HydrogenPro is listed on Oslo Stock Exchange under the ticker “HYPRO“. As of 31 December 2023, the number of shares outstanding was 63,300,046 each with a par value of NOK 0.02/share. All shares are of the same class and with equal voting and dividend rights. The market capitalization as of year-end 2023 was NOK 1 039 million vs NOK 1 680 million as of year-end 2022. Given the Company’s early stage of development and strategic ambitions, the Board of Directors does not recommend a dividend for the year 2023. Directors’ and Ocers’ Liability Insurance The Company maintains a Direc- - ance on behalf of the members of the Board of Directors and CEO. The insurance additionally covers any employee acting in a manage- rial capacity and includes sub- sidiaries owned with more than 50%. The insurance is worldwide. The purpose is to prevent em- ployees and board members of HydrogenPro ASA (incl. subsid- iaries) from being held personally responsible for decisions made by the company. 3 Environmental Our environmental targets to date have mostly been based on the positive contribution of our elec- trolyzers in term of reduced CO2 emissions. Further, the targets elektrolyzers more energy- and scalable. When it comes to cost achievement of our goal to de- crease levelized cost of hydrogen to USD 1.2 per kg (electricity price of USD 20 / MWh). Our focus go- ing forward will be to continue our third-generation electrolyzers on the market and enable more cost- production than what is possible today. Regarding scalability, we have continued to increase both our production capacity and as much as our original targets. scalability of our product still be- ing at the very core of our strategy, we recognize the need to update our environmental targets to also address the potential negative impacts HydrogenPro may have through its operations. This is a work that requires us to carefully analyze our operations through an are the most important for us to focus on in the future. We have therefore chosen not to renew two of our environmental target. In 2024 we will improve the founda- tions of our sustainability work and revise our ESG targets in line with the company’s development and our ambitions for the future. This will include conducting a double materiality assessment which will be valuable input to an updated sustainability strategy. We will continue to strive towards reaching our ambitions, and report on our progress in a transparent and consistent manner. 57 HYDROGENPRO / ANNUAL REPORT 2023 56 4 Sustainability The Board is responsible for the Company’s sustainability strategy and reporting, while the day-to-day responsibility for - cial, environmental, and social, is delegated to the Executive Management. - porate social responsibility work are thoroughly described in this report. In chapter 2 we elaborate on our impact on the environment and social factors, and topics such as work environment (in- cluding work related injuries and sick leave), non-discrimination (including diversity and inclusion), and human rights are covered. Anti-bribery and corruption in the supply chain are described in chapter 2, and our internal work on ethical business conduct is elaborated on in Chapter 3, Gov- ernance. The Company reports annually in accordance with the Transparency Act, and an updat- ed report will be published on the Company’s web site during the Climate risk In the reporting year, Hydrogen- Pro has not taken any particular measures to advance the collec- tive knowledge, skills, and expe- rience of the Board of Directors on sustainable development. However, this will be something that we will look into in 2024, as a part of our journey to prepare for the upcoming Corporate Sustainability Reporting Direc- tive (CSRD). The Board of Directors consid- ers ESG risks as a part of the risk management process, with a particular focus on climate risk and opportunities (see page 26 for information regarding climate opportunities). Physical risk and water access Physical risks involve risks caused by climate change. This will include risks to facili- ties and infrastructure, impact on operations, water and raw material availability and supply chain disruptions. HydrogenPro of physical climate risks. In the short term, we see water availability being the greatest physical climate risk to our oper- ations. Green hydrogen produc- tion needs water, both as an in- put factor in the production and as cooling water to reduce the electrolyzer temperature during production. In areas where water is a scarce resource following climate changes, this of our products as water may be reserved for other purposes. Water consumption from pro- duction of hydrogen is the same, independent of electrolysis manufacturer, as it takes one water molecule (H2O) to pro- duce one hydrogen gas mole- cule (H2). However, the need for market. We aim to reduce the need for cooling water in our electrolyzer by developing 3rd generation electrodes technol- ogy, where the cooling water and lower power consumption. On the longer horizon, Hydro- genPro’s facilities could be at risk for extreme weather events because of climate change. All our facilities are located in established industry parks with We take this risk into consider- ation when deciding on estab- - facturing facilities. Transition risk Transition risks typically refer to risks associated with transition to a low carbon economy. This transition can entail extensive policy, legal, technology and market changes to address mit- igation and adaptation require- ments related to climate chang- es that might impact our ability to do business. HydrogenPro is exposed to several types of transition risks, both in the short, medium, and long term. In the short term, we are facing the risk of moving too fast or too slow to meet customer demands and potentially becoming an early mover with no customers, or a follower that is too slow to catch up. This risk is a result of the rapid and unclear development of the green hydrogen space, where customer demand and competition composition evolve weekly. The regulatory land- scape and incentive programs in Europe and the US are to a high extent driving the evolution of the new hydrogen economy. Our response to this is to follow the market closely and seek to while at the same time build our manufacturing capacity. On a medium-term outlook, HydrogenPro is exposed to the risk that green hydrogen’s importance in a low-carbon - cantly, and by that, the customer demand for electrolyzers could fall. This could follow from technological breakthroughs for other low-carbon hydrogen solutions, such as blue hydrogen using carbon capture and stor- age, or alternatives to hydrogen, shipping and long-haul trans- portation. This is not something HydrogenPro works to mitigate, as these technologies would be important steps to mitigate climate change and reach the 2050 net zero targets. Instead, we aim to diversify our custom- er base to reduce the potential impact of such technological breakthroughs by being a rele- vant supplier for several types of end-users. As an example, our high-pressure alkaline electro- energy storage, where excess renewable energy is captured when it is most abundant and stored as hydrogen. As the world depends on renewable energy to reach the Paris agree- ment, we believe this is a market where green hydrogen will be of high importance. become of higher relevance lately is the risk of reduced development of renewable energy due to environmental considerations besides climate change. This could result in less hydropower to preserve rivers or fewer wind farms to preserve land and biodiversity. Social considerations can also play an important role, as seen in cases where renewable energy infra- structure has been constructed in areas belonging to indigenous communities, threatening in that way their right to practice their culture. HydrogenPro does not develop renewable energy, our custom- ers are dependent on renewable energy as a critical input factor to produce green hydrogen. Therefore, we consider this a risk to our business model. Mitigat- However, we recognize that we are part of an industry quickly evolving, and that we need to collaborate closely with partners and industry peers to ensure that environmental and social considerations are taken into the the most sustainable solutions both for today and the years to come for development of new renewable power production. 5 Transparency act In accordance with the Trans- parency Act, HydrogenPro has - and potential adverse impacts on human rights and decent working conditions in the supply chain. While some of the miti- incorporated by our suppliers, we also acknowledge that there are areas of improvement within our company as well to ensure knowledge about human rights. This involves how we address human rights in our value chain, as well as how we work on the topic internally. Consequently, we have implemented measures to mitigate adverse impacts on human rights and decent working conditions in our supply ■ Our internal code of Conduct was updated spring 2023 to position on human rights, including updated corporate commitments. ■ The Supplier Code of Con- duct was updated in the winter 2022/2023 and pub- lished online. The Supplier Code of Conduct was later translated to Chinese. The Supplier Code of Conduct has been sent to relevant suppliers and will be includ- ed when onboarding new suppliers. HYDROGENPRO / ANNUAL REPORT 2023 5958 ■ Updated our General Terms and Conditions to include human rights and social sus- tainability. ■ - cation process is implement- ed across the whole group including in-depth review of topics such as management systems, compliance, corpo- rate responsibility and supply chain management. The - tions process will be run on relevant existing suppliers in addition to all new suppliers. ■ Additional scrutiny included in due diligence assessment of suppliers located in areas where risk of human rights vi- olation is traditionally higher. We included eight additional questions in the Transparency Act due diligence question- naire for suppliers delivering to our Chinese operations. These questions concen- trated on how the selected suppliers handled risk of human rights and labor rights violations in their own supply chain, and as such, provided us with further knowledge of our suppliers. - plemented are expected to contribute to reduced risk of adverse impact on human rights and decent working conditions through increased knowledge and competence on the topic. Through updated policies, processes, and documents, the necessary governance structure and day to-day management of human rights topics have been presented to all relevant parties, and relevant information has become more accessible for employees and suppliers. Having implemented the same supplier screening process across the whole group, this will make it eas- ier to uphold the high standards we expect from our suppliers. In addition to this, several ■ Primo 2024, an external third-party channel for whistle blowing is being implemented. ■ Establishing a sustainable procurement policy where ESG factors are taken into considerations. ■ Establish a process for con- ducting regular human rights assessments for existing suppliers, including deter- mining criteria for which suppliers to prioritize from a risk-based approach. ■ In addition to sharing the Supplier Code of Conduct with relevant suppliers, a for- of understanding and accep- tance of the Code will be re- quired. This states the impor- tance of higher standards in terms of social accountabil- ity, human rights, and health and safety performance for HydrogenPro partners and their supply chain. ■ Suppliers will be recom- mended to pursue certi- credibility and signal their adherence to international labor rights standards. above are expected to further increase the internal processes for supply chain in HydrogenPro as well as our insight into our suppliers and their potential ad- verse impacts on human rights and decent working conditions. The company will publish its Transparancy Act Report for 2023 in June 2024. 6 Outlook Although some projects have been delayed, the overall outlook for the green hydrogen market which HydrogenPro operates in is developing positively, as projects and players in the industry are becoming more mature. Espe- cially Europe and North America show increase in new hydrogen projects. HydrogenPro is well positioned to take advantage of these developments. As the projects are becoming larger and more complex, HydrogenPro’s demonstrated ability to deliver on large-scale industrial projects makes the company a preferred partner for potential customers. Final investment decisions are still somewhat lagging, and an exponential development must be deployed the next few years to meet the expected demand for green hydrogen. ANDRITZ in November 2023 proves that the cooperation has started to bear fruit, and opportunities with ANDRITZ in Europe going forward. For HydrogenPro, the key to success is to see more projects reach Final Investment Deci- sion, with HydrogenPro as the purchase orders is Hydrogen- Pro’s main priority, to generate further growth. HydrogenPro is continuously working on improving project execution and operational excel- lence. From 2022 to 2023 there in operating results which clear- ly demonstrates the operational leverage in HydrogenPro’s busi- ness model. As HydrogenPro owns the man- ufacturing facilities in China, manufacturing can be adjusted in accordance with demand. Following the completion of the ACES project in 2023, it is ex- pected that manufacturing load will decrease in the beginning of 2024, with corresponding lowering of cost base. Lessons learnt from project de- liveries in the US have demon- strated challenges with regard to logistics and transportation of fully assembled electrolyz- ers and gas separator skids. This, in addition to the life cycle partner strategy of Hydrogen- Pro, indicates need for assembly stations near to customer sites. The company’s core products are well suited for local assem- bly. Moreover, further visibility on US legislative frameworks and funding schemes is needed, including insight into decision on requirement for local US con- tent. The Company has a pru- dent cost and capital discipline major investments as of today. Porsgrunn/Oslo, 21 March 2024 (All signatures electronically signed) Terje Mikalsen Chair of the Board Asta Stenhagen Board member Jarle Tautra Board member Richard Espeseth Board member Jarle Dragvik CEO HYDROGENPRO / ANNUAL REPORT 2023 6160 NUES Corporate Governance report 1 Implementation and reporting on corporate governance HydrogenPro and its subsidiaries (the “Company” or “HydrogenPro”) aim to become a world-leading provider of high- pressure alkaline electrolyzer technologies & solutions that meet the highest standards for safety, reliability, and long service to high standards relating to working environment and personnel welfare, environmental impact, and business practices. We endevaour to comply with principles of corporate responsibility in our daily operations that demonstrate integrity and transparency. HydrogenPro reports and has policy commitments for a responsible business conduct in accordance with the Norwegian guidelines for Multinational Enterprises, sustainability, human rights, employee rights and - tion of corruption, labor violations, harassment, and discrimination. The Corporate Governance ad- dresses the framework of guide- lines and principles regulating the interaction between the Compa- ny’s shareholders, the Board of Directors (the “Board”), the Chief CEO”) and the Company’s executive man- agement team. As a listed Company, Hydrogen- Pro will comply with applicable laws and regulations including the Norwegian Securities Trading Act, the Market Abuse Regulation (MAR), the Continuing obligations for companies listed on Oslo Stock Exchange, and the Norwegian Private Limited Liability Com- panies Act. The Company will work closely with suppliers to en- sure the same integrity, transpar- ency and compliance as expected of HydrogenPro. HydrogenPro’s Board and executive management - gian Code of Practice for Corpo- rate Governance and will provide explanations of any non-compli- ance with the Code. The corporate governance document for Hy- drogenPro covers all sections of The Norwegian Code of Practice for Corporate Governance and is available in the Annual report and on the Company website hydrogenpro.com. For the report- ing period of 2023, HydrogenPro and sustainability report address- ing topics according to the Global Reporting Initiative (”GRI”) core standards. 2 The business HydrogenPro was founded in 2013 with a mission to design and deliver green hydrogen technolo- gy solutions in collaboration with global partners and suppliers. The Company’s core product is high-pressure alkaline electro- lyzers, including one of the most advanced technologies in the industry. HydrogenPro employed 231 highly skilled and experienced people at year-end 2023, includ- ing key personnel with leading global hydrogen expertise. The Company is currently present in Denmark, Germany, the US, and China with operations that include - tion, and aims to grow the global presence further in the years to come. Headquarters and test facility are located at Herøya, Nor- way. In 2020, HydrogenPro was listed on Euronext Growth, and in October 2022, the Company was uplisted to the main list of the Oslo Stock Exchange. HydrogenPro has developed industry-leading high-pressure alkaline electrolyzers, including the Company´s 3rd generation technology, with the potential to - trolysis process by 14 percentage points. With a technology that is easy to scale depending on the input energy from renew- ables, HydrogenPro’s large-scale technology have the potential to both enable and strengthen other segments in the energy transi- tion, whether it be wind, solar and other renewable power sources. Through its unique properties as an energy carrier, hydrogen will be key in facilitating the green energy transition. 3 Equity and dividends The Board aims to ensure that the Company has a capital structure that is appropriate for the Compa- ny’s objective, strategy, and risk balance between equity and other - vant. The Board will continuously assess the Company’s capital requirements related to the Com- pany’s objective, strategy, and risk - ted to creating long-term value for its shareholders. The Company intends to retain future earnings and therefore does not anticipate paying any cash dividends in the foreseeable future. The back- ground for any proposal to the general meeting to approve the distribution of dividends will be explained. General authorisations for the Board to increase the share capital and buy own shares will purposes and will, in general, be limited in time to no later than the date of the next annual general meeting of the Company. 4 Equal treatment of shareholders HydrogenPro upholds equal treatment of its shareholders and potential investors. HydrogenPro has implemented a process for handling sensitive information to ensure that the Company, its employees, and representatives the handling and publication of sensitive information. There is only one class of shares in the Company and all shares carry equal rights. All shareholders will be treated on an equal basis un- less there is a just cause for treat- with applicable laws and regula- tions. In the event of an increase in the share capital of the Com- pany through the issuance of new shares, a decision to waive the existing shareholders’ pre-emptive rights to subscribe for shares will to issue new shares and waives the pre-emptive rights of existing shareholders pursuant to a Board authorisation granted by the gen- be publicly disclosed in a stock exchange announcement issued in connection with the shares issue. The reasons for any deviation from equal treatment of all sharehold- ers in capital transactions will be included in the stock exchange an- nouncement made in connection with the transaction. Any transac- tions carried out by the Company in the Company’s own shares will be carried out through Oslo Stock Exchange and in any case at prevailing stock exchange prices. In the event that there is limited liquidity in the Company’s shares, the Company will consider other ways to ensure equal treatment of shareholders. Any transactions in own shares will be evaluated in relation to the rules on the duty of disclosure as well as in relation to the prohibition against illegal insider trading and market manip- ulation, the requirement for equal treatment of all shareholders, and the prohibition of unreasonable business methods. HYDROGENPRO / ANNUAL REPORT 2023 6362 5 Shares and negotiability All shares in HydrogenPro carry one vote and are freely transferable. The Company will not limit any party’s ability to own, trade or vote for shares in the Company. The Compa- ny will provide an account of any restrictions on owning, trading, or voting for shares in the Company. 6 General Meetings All shareholders have the right to participate in the general meetings of the Company, which exercise the highest authority of the Company. The annual general meeting will normally be held before 30 June each year. The general meeting shall handle - wegian Public Limited Liability Companies Act, in addition to those laid down in the Company’s articles of association, including, ■ approval of annual accounts and annual report, includ- ing distribution of dividends, if relevant, ■ amendments of the articles of association, ■ share issues, ■ election of auditor and board members, ■ board remuneration. The full notice for general meet- ings shall be sent to shareholders no later than 21 calendar days prior to the meeting. The notices for such meetings shall include docu- ments providing the shareholders - holders to form a view of all the cases to be considered as well as all relevant information regarding voting. The notice and the doc- uments may be sent to or made available to the shareholders through electronic communication and any deadline for sharehold- ers’ notice of their intention to close to the date of the meeting as possible. The Board shall ensure that the Chair of the Board and the Chair of the general meetings. The general meeting will normally be chaired by the Chair of the Board or an in- dividual appointed by the Chair of the Board. Having the Chair of the Board or a person appointed by same chairing the general meet- ings simplify the preparations for In the Company’s experience, its procedures for the chairmanship and execution of general meet- ings have proven satisfactory. The Company’s auditor will normally be present. Notices for general meetings shall provide information on the proce- dures to be observed by share- holders in order to participate in and vote at the general meeting. the procedure for representation at the meeting through a proxy, including a form to appoint a proxy, and (ii) the right for share- holders to propose resolutions in by the general meeting. Share- holders shall have the right to refuse electronic participation. In addition, the shareholders have period in advance of the general meeting to the extent allowed in the Company’s article of associa- tion. Shareholders in the Company will be able to vote on each indi- individual candidate nominated for election. Shareholders who be given the opportunity to vote. The Company will design the form for the appointment of a proxy to make voting on each individual a person who can act as a proxy for shareholders. 7 The Company has a nomination shall stipulate guidelines for the duties of the nomination com- and members of the nomination members of the nomination com- the interests of shareholders in general, and the majority of the shall be independent of the Board and the executive management team. Members of the Board and the executive management team shall not be members of the nomi- be approved by the Company’s general meeting. The nomination propose candidates for election to the Board and the nomination - shareholders, the Board, and the company’s executive personnel as part of its work on proposing can- didates for election to the Board. Furthermore, the nomination why it is proposing each candi- date. The Company shall provide information on the members of for proposing candidates. Infor- mation regarding the nomination HydrogenPro’s website. 8 Board of Directors composition and independence The board members, including the Chair of the Board, are elected by the General Meeting. The compo- sition of the Board is structured to represent the interests of all share- holders, meet the Company’s need for expertise, capacity, balanced decision-making, diversity, and to navigate the Company in a sustain- able manner. Pursuant to Article 5 of the Articles of Association, the Board of Directors shall consist of - eral Meeting. The current Board of three women and two men. All members are elected for a term of two years and may be re-elected. Board members are encouraged to own shares in HydrogenPro, please see an overview of shareholdings by each board member included in the notes in the Annual Report. According to the development and evolving nature of the Company, the Board intends to be an inde- pendent function of the Company. It is of utmost importance to the Board to be compliant with prevail- ing laws, regulatory frameworks, and legislations regarding transac- tions, impartiality, instructions, and the work of the Board. The Board body through frequent board meet- ings handling of relevant and stra- Board operates independently of any special interests. An overview of the Board can be found in the annual report and on the Compa- ny website. HYDROGENPRO / ANNUAL REPORT 2023 6564 9 The work of the Board of Directors The Board of Directors ensures that the Company’s business is properly organized with its purpose, values, objectives, strategies and policies developed and managed and that plans and budgets are prepared. The Board’s rules of procedure and board meeting agenda address any material interests pertaining to e.g. business and asset management, accounts subject to controls, tax governance and sustainability topics including health and safety, quality, human rights, and environ- mental topics. This work includes management of material environ- mental topics, potential risks and opportunities and the Company´s potential impact on the economy, environment, and social dimen- sion. Evaluation and initiatives required to address the impact of material topics are delegated to the executive management at HydrogenPro, led by the CEO. The CEO, or any person in which the delegation is given, has the responsibility of reporting back to the Board in a timely and frequent manner, ensuring information, transparency, and management of the topic at the highest govern- mental level. The Board of Direc- tors has issued instructions for its own work and for the executive management with emphasis on their responsibilities and duties. The instructions state how the Board and executive management should handle agreements with related parties, including whether an independent valuation must be obtained. In accordance with Norwegian law, the Board is responsible for among other things supervis- ing the general and day-to-day management of the Company’s business. This includes ensuring proper organisation, preparing plans and budgets for its activi- ties ensuring that the Company’s activities, accounts, and assets management are subject to ade- quate controls and investigations necessary to perform its duties. The Board is responsible for con- and ESG reports. In the event of considering the Chair of the Board, other member of the Board. The Board evaluates its composition, collective know-ledge, and Board work at least once per year. The evaluation may also cover the way in which the Board functions, at both individual and group level, in relation to the objectives that have been set for its work, including like sustainability, diversity, human rights and environmental issues. informed about and handled in accordance with the Norwegian Private Limited Liability Compa- nies Act and potential incapacity. When identifying a potential con- the extent and potential impact - plements measures to avoid this. of interest is resolved by a board member not participating in the consideration and decision that has an impact on his or her own part or related parties, this board member is excluded. Any transactions, agreements or arrangements between the Group and the Company’s shareholders, members of the Board, members of the executive management team or close associates of any such parties may only be entered into as part of the ordinary course of business and on arm’s length market terms. All such transactions shall, where relevant, comply with the procedures set out in the Norwegian Public Limited Liability Companies Act. The Board shall, in principle, arrange for a valuation to be obtained from an indepen- dent third party for transactions with related parties, including agreements that are considered immaterial or covered by section - statements shall provide further information about transactions with related parties in accordance with applicable accounting principles. The Company may engage in business activities with or in cooperation with its shareholders. Such activities shall be handled at Board level with a view to se- curing a foreseeable and consistent practice - est situations, arm’s-length treatment, and sound governance. Board members shall immediately notify the Board, and members of the executive management team shall immediately notify the CEO (who, where relevant, will notify the Board) if they have any material direct or indirect interest in any transaction entered by the Company. 10 Risk management and internal control Risk management and internal controls are important to HydrogenPro and enable the Company to achieve its strategic objectives in a sustainable, safe, and quality-oriented manner. Risk management is an integral part of the Board’s and executive manage- ment’s decision-making processes, organi- zational structure, and internal procedures and systems. Risk management and internal control requirements are frequently, and at least annually, evaluated by the Board of Directors and the executive management, implementing risk-reducing initiatives and establishing appropriate procedures. HydrogenPro ASA, the Norwegian part of the company, has a management system, which includes routines, descriptions, and procedures which all employees have access to and are trained in. The same management system, ISO9001, has also been implemented at the Group’s manufac- turing site inTianjin, China. It is of strategic importance that employees or stakeholders in general report any noncompliance, critical concerns or grievances. All concerns report- ed are managed according to established routines, making sure the Board is involved accordingly. Health, safety and risk mitiga- tion is a mandatory topic in board, man- agement, and operational meetings with learning processes to increase knowledge and make revisions of existing procedures. In the situation of any negative impact, the cooperation in the process of remediation of the impact and addressing the grievances in an appropriate manner. HydrogenPro’s regular business activities and operations entail exposure to various types of risks and actions to remedy the risks experienced. The Company intends to be compliant with local laws, regulations and legislation. The process of identifying, evaluating and imple- menting risk-reducing initiatives in relation other risks and opportunities due to climate change, health and safety, environmental is- sues, operations and suppliers assessed for risks related to corruption, child and forced labor, and the freedom of association and collective bargaining is open, transparent and regulated in the management system. The Board is responsible for monitoring the process and the management of the risks assessed. The Company also engages with external expertise to ensure tax compliance in the countries where it operates. Board of Directors with quality assurance of guidelines, policies, and other governing in- also supports the Board of Directors ensur- ing that the Company has sound manage- HYDROGENPRO / ANNUAL REPORT 2023 6766 11 Remuneration of the Board of Directors The remuneration of the mem- bers of the Board comprises a proposed by the Remuneration annual general meeting. HydrogenPro shall be comprised of at least three directors. The quorum necessary for the trans- action of business shall be three. The chair and the members of the the Company’s Board of Direc- and recommend to the Board the remuneration policies/framework for the Group’s executive/senior ■ Review and recommend for the Board’s approval the terms of employment contracts and arrangements. ■ Review and recommend for the Board’s approval the structure and terms of any executive/ senior management incentive programmes, including any performance-related bonus schemes, pension plans and share-incentive plans. ■ Review and report to the Board on the performance of executive/senior management against the targets set by the ■ Review and recommend for the Board’s approval each year whether bonuses or share awards are to be awarded to executive/senior management and, if so, the amount of such bonuses and share awards. When preparing recommenda- shall take into account all factors which it deems necessary. The objective shall be to ensure that executive/senior management are provided with appropriate incen- tives to encourage enhanced per- formance and are being rewarded in a fair and responsible manner for their individual contributions to the success of the Group. Further, due consideration shall be taken to the Group’s reputation. No director or manager shall be involved in any decisions as to their own as may be requested by the Board. In a building phase of the Compa- ny, share options were granted to board members prior to 2022. In 2023, one member of the Board of Directors took on selected assign- ments for the Company in addition to support the Company. 12 Salary and other remuneration for executive personnel HydrogenPro has a remunera- tion policy established in accor- dance with the Norwegian Public Limited Liability Companies Act (the “Companies Act”) Section for remuneration of executive management. The policy has been prepared by the Board of Directors of HydrogenPro. The principles in this policy apply for the executive management of the Group as de- - panies Act, as well as the mem- bers of the Board of Directors. The executive management currently consists of the CEO, CFO, CPO, CLO, CCO and CPCO of the Group. The Board has taken an ac- tive role in establishing, reviewing, and executing these guidelines. The Board shall prepare a proposal for guidelines for resolution by the general meeting at least every fourth year. The general meeting shall decide on such proposals. Resolved guidelines may also be amended by way of resolution of subsequent general meetings. The guidelines approved by the gen- eral meeting shall be published on the Company’s website. The remuneration for the execu- salary, short-term variable perfor- mance-related salary and a long- term retention scheme consisting of a share option programme awarded based on performance. Remuneration of executive man- agement is a strategic tool for the operational goals while staying within its risk appetite to maximise shareholder value. The evaluation process covered by these guide- participation in stock option incen- tive programmes. 13 Information and communications HydrogenPro complies with all applicable disclosure laws and practices, seeks transparency, shareholders with precise and relevant information to ensure that its true value and prospects. The Board of Directors has established guidelines for the Company’s - tal, social, and governance-related information based on transparen- cy and the requirement for equal treatment of all participants in the securities market. The Inves- tor Relations (”IR”) activities are conducted by the IR team with delegated responsibility from the Board. The IR team includes the CEO and the CFO as well as other personnel appointed by the team. The IR team and the Communica- tions Director can act as spokes- persons on behalf of the Company. The Company has implemented a process for handling sensitive information to ensure that the Company, its employees, and - tions regarding the handling and publication of sensitive infor- calendar, press releases and stock exchange notices are published on is made available on the Company website. The insider lists are main- tained by the CFO or a person the CFO appoints. 14 Take-overs In a take-over process, should it occur, the Board and the executive management team each have an individual responsibility to ensure that the Company’s shareholders are treated equally and that there are no unnecessary interruptions to the Company’s business activ- ities. The Board has a particular responsibility in ensuring to the extent possible that the share- In the event of a take-over pro- ■ the Board will not seek to hinder or obstruct any takeover bid for the Company’s opera- tions or shares unless there are particular reasons for doing so. ■ the Board will not undertake any actions intended to give shareholders or others an unreasonable advantage at the expense of other shareholders or the Company. ■ the Board will not institute measures with the intention of protecting the personal interests of its members at the expense of the interests of the shareholders. ■ the Board shall be aware of the particular duty it has for ensuring that the values and interests of the shareholders are protected. In the event of a take-over bid, the Board will in addition to complying with relevant legislation and reg- ulations seek to comply with the recommendations in the Norwe- gian Code of Practice for Corpo- rate Governance unless there are particular reasons not to. This in- cludes obtaining a valuation from an independent expert. On this basis, the Board will seek to make a recommendation as to whether the shareholders should accept the bid. Any transaction that is in activities shall be decided by a general meeting. 15 Auditor HydrogenPro’s auditor is BDO AS. The partners of BDO AS are mem- bers of The Norwegian Institute Norske Revisorforeningen”). The auditor provides a statement each (see “Independent Auditor’s Re- port”). The fee payable to the audi- - ability report is not subject to as- surance/audit for the reporting pe- the Board meeting at which the approved. The auditor presents an annual audit plan to the Board. The Board has adopted guidelines on the management’s use of the audi- tor for services other than auditing. The Board reviews the Company’s internal control procedures with the auditor at least once a year, by the auditor and proposals for improvement. HYDROGENPRO / ANNUAL REPORT 2023 6968 Board of Directors Terje Mikalsen Chair - ods on HydrogenPro’s Board of Directors. He has a long list of top management and board positions. He co-founded Norsk Data AS and has been an active owner in many companies as well as heading the listings of Norsk Data, Hafslund, Nycomed and NCL at the NY stock exchanges (NYSE/Nasdaq). Mr. Mi- kalsen holds a MSc from NTH, Norwegian Institute of Technology. He is a Norwegian national, non-ex- ecutive, independent and holds several positions as chairperson at other Norwegian companies. Jarle Tautra Board member Jarle Tautra has been on HydrogenPro’s Board of Directors since October 2021. He has held multiple executive management positions in energy-re- lated powerhouses, such as Aker Solutions, Aker Kvaerner E & C Europe, Aker Maritime, Norsk Hydro ASA and Eureka Pumps. Mr. Tautra holds a Master’s degree in chemical engineering from the Norwegian Institute of Technology in Trondheim (NTNU). He is a Norwegian national, non-executive, independent and holds two positions as chairperson at other Norwegian companies. Richard Espeseth Board member and has served several periods on HydrogenPro’s Board of Directors. Mr. Espeseth has 25 years of international industry experience from Norsk Hydro, Statoil, ABB and RPR. He also has more than 10 years’ experience from the hydrogen electrolyzer business. Mr. Espeseth holds a MSc in Mechanical Engineering from South Dakota School of Mine & Technology. Mr. Espeseth is a Norwegian nation- al, non-executive and holds a position as Head of Technology in HydrogenPro. Asta Ellingsen Stenhagen Board member Asta Ellingsen Stenhagen has been on Hydro- genPro’s Board of Directors since May 2023. She has 20 years’ experience as a legal counsel/ lawyer, mainly in TietoEvry (technology) and Wilh. Wilhelmsen group (logistics, shipping and maritime service delivery). Ms. Stenhagen is now employed as General Counsel, Head of Legal and Compli- law from the University of Oslo, with partial exams also from the University of Aarhus, Denmark. Ms. Stenhagen is a Norwegian national, non-executive and currently holds board positions in two other technology companies. HYDROGENPRO / ANNUAL REPORT 2023 7170 Executive management Jarle Dragvik Chief Executive Ocer Jarle Dragvik started his position as CEO in August 2023. He knows Hydro- genPro well as he served on the Board until May 2023 and has for years been chairman of Hydro- genPro’s Chinese oper- ation. Mr. Dragvik came from the position of CEO at TM Holding AS, a major shareholder of Hydrogen- Pro ASA. Has extensive experience from numer- ous senior international management positions and board memberships in companies such as Norske Skog, Norsk Hydro, and Sapa AS. He has also during his career, evidenc- ing his international exper- tise and experience. Mr. Dragvik holds a Master’s degree in Management & Marketing from BI Norwe- gian Business School. He has also completed several management programs, i.e. Orkla Top Management Program in Oslo/Shang- hai, IMD Global Strategy Execution Program in Lausanne, as well as IFL Management Program in Stockholm. Martin Thanem Holtet Chief Financial Ocer Martin Thanem Holtet joined HydrogenPro as CFO in March 2021. Mr. Holtet came from a position as VP, Head of Treasury and IR in Hurtigruten. Prior to this, he worked with strategy and M&A in Yara Inter- national and Corporate Finance in Carnegie. Mr. Holtet holds a MSc in Economics and Busi- ness Administration from Norwegian School of Economics (NHH). Erik Chr. Bolstad Chief Commercial Ocer Erik Chr. Bolstad joined HydrogenPro as CCO in September 2021. Mr. Bolstad has more than 20 years’ experience from various management positions within ABB and others. He has held positions within commer- cial, sales & marketing functions, especially B2B within the global shipping and shipbuilding industry. Mr. Bolstad holds a BSc in Electronic Engineer- ing from University of South-Western Norway. Cathrin Bretzeg Chief People & Culture Ocer Cathrin Bretzeg joined HydrogenPro in June 2023. Ms. Bretzeg has more than 20 years’ experience of senior management positions and came from a position as People, Communica- tions, Sustainability at EVP HR, Communications & Sustainability position at Glitre Energi. Previ- ous experience includes SVP Human Resources and SVP Global HR & HSE at Kongsberg Oil & Gas Technologies and Kongs- berg Digital. Ms. Bretzeg holds a BSc in Business Administration from Pa- (siviløkonom). Marc Jedamzik Chief Project Ocer Marc Jedamzik joined HydrogenPro in 2023 and was appointed CPO in November 2023. Mr. Jedamzik has more than 20 years of experience in engineering, product de- velopment, project man- agement and execution, business development, in globally operating inter- national companies. He holds a MSc in Mechani- cal Engineering and Naval Architecture of Duis- burg-Essen, Germany. Tormod Kløve Chief Legal Ocer Tormod Kløve joined HydrogenPro as CLO in November 2022. Mr. Kløve came from a posi- tion as Senior Legal Coun- sel in PGS and has also served as Senior Lawyer Rein. He has considerable international experience from numerous countries, including three years in Japan. Tormod started his career as a junior research fellow at the University of Oslo and has also served as a deputy judge at dis- trict court level in Norway. He holds a Master of Laws from the University in Oslo. Chief Technology Ocer Odd-Arne Lorentsen joined HydrogenPro as CTO in March 2024. Mr. Lorentsen has more than 20 years of experience from leading positions at both Yara and Hydro, and most recently as CTO at Gen2 Energy. He has also been an adjunct professor in Electrolysis Technology at NTNU. Mr. Lorentsen holds a PhD in technical electrochemistry from NTNU, Trondheim, Norway. HYDROGENPRO / ANNUAL REPORT 2023 7372 Ethics in HydrogenPro Business and workplace ethics is the backbone of the company. HydrogenPro has rapidly grown from nine employees in Norway in 2020 to 231 employees on three continents by the end of 2023. This led to both excitement, development, and challenges in many facets. To foster a cohesive business and social environment, two primary the Total Quality Management (TQM) system and the employee handbook. The employee hand- book is included in the TQM. Further, the TQM encompasses all ■ Health & Safety Policy available to employees through TQM ■ Quality Policy available to em- ployees through TQM ■ Environmental Policy available to employees through TQM ■ Information Security Poli- cy available to employees through TQM ■ Anti-Corruption and Bribery Policy ■ Code of Conduct ■ Supplier Code of Conduct ■ Whistleblower Policy HydrogenPro’s Code of Con- duct was revised in June 2023. The Code of Conduct describes our commitment to responsible business conduct and covers the - interest, Anti Money Laundering, Fair Competition, Sanctions and Export, Control, Human Rights, Diversity, Equal Opportunities and Inclusion, Environment, Property, - tial information, Alcohol and drug abuse, Information provided to media or other external parties. We believe that this is an import- ant framework for a safe work en- vironment. The company ensures that all employees have read, understood, and agreed to follow the Code of Conduct and this is part of the onboarding procedure as well as the aforementioned training program. Facilitating raising of critical concerns is imperative to both a sound business system and a safe workplace. Critical concerns may be raised through various chan- nels and the Chair of the Board is the highest governance body to handle such concerns. This is covered in both the Code of Con- duct and the Whistleblower policy. Concerns may be raised anony- mously and an external channel for handling such communication is being established primo 2024. This will cover the global organi- zation as well. No such concerns were raised in 2023. The Code of Conduct explicitly states that HydrogenPro is com- - ly recognized human rights in the Company’s operations as well as in the supply chain and other col- laborating parties. HydrogenPro supports the following internation- al policies and principles, which also form the base for our Code ■ The International Bill of Human Rights ■ The United Nations Guiding Principles on Business and Human Rights ■ The OECD Guidelines for Mul- tinational Enterprises ■ The core conventions of the International Labor Organi- zation (ILO) Some of HydrogenPro’s operations are in geographical areas that have traditionally had a higher risk of human and labor rights viola- tions. To mitigate the increased risk of human and labor rights be placed on the due diligence assessment in these areas. In situations where the law or its implementation does not provide for adequate protection of human rights, HydrogenPro will adhere to the international policies and principles listed above, to ensure that fundamental human rights are protected. All the above-mentioned poli- cies are approved by either the CEO or the Bord of Directors (by Chair of the Board), who in turn are the highest governing bod- ies of the company. All policies mentioned are included in our business operations, and hence all our business relationships, such as customers and vendors. The policies are communicated to all employees through depart- communications (emails and Viva Engage posts) and training. The policies are also communicated in the onboarding process of new employees. Our commitments in the aforementioned policies are embedded in the organization though the job descriptions of each position and our business operations standards and proce- dures. Our processes to remediate negative impacts are described in each policy. No such cases are noted in 2023. In order to ensure our Code of Conduct and Anti-Bribery and Corruption Policy are known and understood by all employees, a training program in two parts has been implemented globally for all English-speaking employees. Part One was the annual Anti-Bribery and Corruption course. Part two was implemented in Q4. This train- ing consists of 11 digital learning modules and was implemented in Norway, Denmark, Germany, USA - ees). The training was launched in November 2023 in Norway, Denmark, Germany and USA and December in China. By year end, 5 modules were launched with a total of 80,4% completion rate for Norway, Denmark, Germany and USA. Primo February 2024 all 11 modules were launched. The completion rate is tracked and followed-up on. By year end, 3 modules were launched in China and the completion rate was 66%. Primo February 2024, eight modules were launched. The completion rate is tracked and followed-up on. Further, our Code of Conduct and Supplier Code of Conduct were revised and a risk assessment in the supply chain completed. Also, our policy, board documents and governance in general were reviewed. Primo 2024, an external third-party channel for whistle blowing is being implemented. In 2023, the corporate governance and governing documents were revised. This includes revision of the HydrogenPro Code of Conduct and the authorization and mone- tary matrix. To further strengthen the importance of our antibribery and anticorruption, a risk assess- ment and forensic audit of the supply chain is implemented and in process. We ensure implemen- tation of our policy commitments throughout our business activities both internally (e.g. Code of Con- duct and Anti-Bribery and Corrup- tion Policy) as well as externally (e.g. Supplier Code of Conduct, supply chain risk assessments and standard terms & conditions). HYDROGENPRO / ANNUAL REPORT 2023 7574 04 Financial Statements HYDROGENPRO / ANNUAL REPORT 2023 7776 Consolidated Financial Statements and Notes Consolidated Statement of Comprehensive Income NOK ’000 Note 2023 Restated 2022 Operating income and operating expenses Revenue from contracts with customers 2.2 568 233 56 414 Total revenue 568 233 56 414 Cost of goods sold 2.3 -447 442 -44 372 Personnel expenses 2.4, 2.5, 7.1 -85 205 -62 768 Depreciation and amortisation expense 3.1, 3.2, 3.3 -22 281 -13 990 Other operating expenses 2.6 -71 597 -54 526 Operating loss -58 292 -119 242 Financial income 2.7 33 502 17 874 Financial expenses 2.7 -38 147 -13 092 Net financial income and expenses -4 645 4 782 Profit/(loss) before income tax -62 936 -114 460 Income tax expense 2.8 0 -80 Profit/(loss) for the year -62 936 -114 380 Profit/(loss) attributable to: Equity holders of the parent company -64 513 -109 449 Non-controlling interest 1 576 -4 931 Other comprehensive income: Items that may be reclassified to profit or loss: Exchange difference on translation of foreign operations -729 -415 Net Other comprehensive income -729 -415 Total comprehensive profit/(loss) for the year -63 666 -114 795 Total comprehensive profit (loss) for the year attributable to: Equity holders of the parent company -65 243 -109 864 Non-controlling interest 1 576 -4 931 Basic earning per share 6.4 -1.09 -1.89 Diluted earnings per share 6.4 -1.09 -1.89 Consolidated Statement of Comprehensive Income 79 Consolidated Statement of Financial Position 80 Consolidated Statement of Changes In Equity 82 Consolidated Statement of Cash Flows 83 Notes to the Consolidated Financial Statements 84 Note 1.1 Corporate information 84 Note 1.2 Basis of preparation 84 Note 1.3 Significant accounting judgements, estimates and assumptions 85 Note 1.4 General accounting policies 85 Note 2.1 Operational segments 92 Note 2.2 Revenue from contracts with customers 92 Note 2.3 Cost of goods sold 94 Note 2.4 Personnel expenses 94 Note 2.5 Pensions 98 Note 2.6 Other operating expenses 98 Note 2.7 Financial income and expenses 99 Note 2.8 Income tax 100 Note 3.1 Intangible assets 102 Note 3.2 Property, plant and equipment 104 Note 3.3 Right of use assets 105 Note 3.4 Other non-current receivables 107 Note 4.1 Overview of group 108 Note 4.2 Business combination 108 Note 5.1 Inventory 110 Note 5.2 Trade and other receivables 110 Note 5.3 Contract assets and contract liabilities 111 Note 5.4 Trade creditors and other current liabilities 112 Note 6.1 Overview of financial instruments and risk management 112 Note 6.2 Cash and cash equivalents 115 Note 6.3 Share capital and shareholders 115 Note 6.4 Earnings per share 116 Note 7.1 Remuneration and board management 116 Note 8.1 Restatement of comparable information 119 See note 8.1 Restatement of comparable information. HYDROGENPRO / ANNUAL REPORT 2023 7978 Consolidated Statement of Financial Position as of 31 December NOK ’000 Note 2023 Restated 2022 EQUITY AND LIABILITIES EQUITY Share capital 6.3 1 266 1 161 Share premium account 6.3 691 796 575 039 Other equity contributed 6.3 38 558 34 162 Other equity 6.3 -284 221 -219 117 Currency translation difference -625 -588 Equity attributable to HydrogenPros shareholders 446 774 390 657 Non-controlling interest 6 438 4 963 TOTAL EQUITY 453 212 395 620 LIABILITIES Non-current liabilities 5.4 6 785 0 Non-current lease liabilities 3.3 11 428 11 332 Total non-current liabilities 18 213 11 332 CURRENT LIABILITIES Current lease liabilities 3.3 8 933 5 124 Trade creditors 5.4 39 170 20 578 Contract liabilities 5.3 49 641 65 691 Public duties payable 5.4 6 128 10 797 Other current liabilities 5.4 68 338 41 537 Total current liabilities 172 209 143 728 TOTAL LIABILITIES 190 422 155 060 TOTAL EQUITY AND LIABILITIES 643 634 550 680 Consolidated Statement of Financial Position as of 31 December NOK ’000 Note 2023 Restated 2022 ASSETS Non-current assets Intangible assets 3.1 57 932 64 415 Property, plant and equipment 3.2 68 157 55 537 Right of use assets 3.3 20 455 17 625 Financial investments 3.4 30 517 29 572 Other non-current receivables 3.4 4 804 4 820 Total non-current assets 181 865 171 969 Current assets Inventories 5.1 14 554 35 762 Trade receivables 5.2 179 184 18 585 Contract assets 5.3 65 836 19 828 Other receivables 5.2 41 665 47 514 Cash and bank deposits 6.2 160 531 257 022 Total current assets 461 770 378 711 TOTAL ASSETS 643 634 550 680 Porsgrunn/Oslo, 21 March 2024 (All signatures electronically signed) Terje Mikalsen Chair of the Board Asta Stenhagen Board member Jarle Tautra Board member Richard Espeseth Board member Jarle Dragvik CEO See note 8.1 Restatement of comparable information. See note 8.1 Restatement of comparable information. HYDROGENPRO / ANNUAL REPORT 2023 8180 Consolidated Statement of Cash Flows NOK ’000 Note 2023 Restated 2022 Cash flows from operating activities Profit/(loss) before income tax -62 936 -114 460 Depreciation and amortisation expense 3.1, 3.2, 3.3 22 281 13 990 Option cost no cash effect 2.4 3 312 8 592 Change in trade receivable and contract assets 5.2, 5.3 -206 607 -25 371 Change in inventory 5.1 21 207 -35 455 Change in trade payable and contract liabilities 5.3, 5.4 2 542 17 222 Effect of foreign currency translation 1 778 1 893 Change in other accruals 5.2, 5.4 31 788 64 230 Net cash flows from operating activities -186 635 -69 359 Cash flows from investing activities Purchases of tangible assets 3.2 -19 886 -14 701 Acquisition of subsidiary, net of cash acquired 3.1, 4.2 -32 454 Change in other investing activities 3.4 -4 716 Net cash flows from investing activities -19 886 -51 871 Cash flows from financing activities Payment on lease liabilities 3.3 -6 832 -5 175 Proceeds from Equity Issue 6.3 121 902 1 172 Transaction cost on issue of shares -5 040 0 Net cash flows from financing activities 110 030 -4 003 Cash and bank deposits balance start of period 257 022 382 255 Net change in cash -96 491 -125 233 Cash and bank deposits balance end of period 160 531 257 022 Consolidated Statement of Changes in Equity Equity attributable to HydrogenPros shareholders NOK ’000 Notes Share capital Share premium account Other equity contrib. Currency translat. difference Other equity Equity attrib. to share holders Non controlling interest Total equity Equity as at 31.12.2021 58 576 142 26 800 336 -92 080 511 256 - 511 256 The reversal of revenue related to contract 8.1 -17 639 -17 639 -17 639 Restated equity as at 01.01.2022 58 576 142 26 800 336 -109 719 493 617 - 493 617 Total comprehensive income -415 -109 449 -109 864 -4 931 -114 795 Issue of shares 1 103 -1 103 Cost of share-based payment 2.4 7 362 7 362 7 362 Change in non-controlling interests -509 51 -458 9 894 9 436 Equity as at 31.12.2022 1 161 575 039 34 162 -588 -219 117 390 657 4 963 395 620 Equity as at 01.01.2023 1 161 575 039 34 162 -588 -219 117 390 657 4 963 395 620 Total comprehensive income -729 -64 513 -65 242 1 576 -63 666 Reclassification 692 -591 101 -101 - Issue of shares 105 121 797 121 902 121 902 Transaction cost on issue of shares -5 040 -5 040 -5 040 Cost of share-based payment 2.4 4 396 4 396 4 396 Equity as at 31.12.2023 1 266 691 796 38 558 -625 -284 221 446 774 6 438 453 212 See note 8.1 Restatement of comparable information. See note 8.1 Restatement of comparable information. HYDROGENPRO / ANNUAL REPORT 2023 8382 NOTE 1.3 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS The preparation of the consolidated financial statements in accordance with IFRS and applying the chosen accounting policies requires man- agement to make judgments, esti- mates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. The estimates and associated assumptions are based on histor- ical experience and various other factors that are believed to be reasonable under the circumstanc- es. Actual results may differ from these estimates. The estimates and the underlying assumptions are reviewed on an ongoing basis. The accounting policies applied by management which includes a significant degree of estimates and assumptions or judgments that may have the most significant effect on the amounts recognized in the financial statements, are summa- rized below: ■ Revenue recognition from con- tracts with customers (note 2.2 and note 1.4) ■ Estimating fair value for share- based payments transactions (note 2.4) ■ Value in use calculation in re- lation to impairment testing of goodwill (note 3.1) A detailed description of the signif- icant estimates and assumptions are included in the individual note referenced above. NOTE 1.4 GENERAL ACCOUNTING POLICIES HydrogenPro has selected a pre- sentation in which the description of accounting policies as well as estimates, assumptions and judge- mental considerations are disclosed in the accounting policy note. If not, it is disclosed in the specific notes to which the policies relate. A thorough summary of the Group’s general accounting policies not disclosed in the notes, are presented below: Consolidation Subsidiaries are all entities which the Group has control. Control of an enti- ty occurs when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consoli- dated from the day on which control is transferred to the Group. They are also eventual deconsolidated from the date that control ceases. Inter-company transactions, balances and unrealised gains on transactions between group com- panies are eliminated. Unrealised losses are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform with the Group’s account- ing principles. Non-controlling interest Non-controlling interest is when less than 100 % of the interest is acquired in an entity. Non-con- trolling interest is recognised and measured at the proportional share of net identifiable assets. Transactions and balances in foreign currency Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year-end exchange rates are recognised in profit or loss. Revenue recognition The revenue in HydrogenPro is from sale of both hydrogen elec- trolyser systems and engineering services, including installation, com- missioning, and long-term service agreements. Project execution is key in HydrogenPro’s construction projects. The group’s revenues result from the sale of goods or services and re- flect the consideration to which the group is and expect to be entitled. IFRS 15 requires the group to as- sess revenue recognition based on a fivestep model. For its customer Notes to the Consolidated Financial Statements NOTE 1.1 CORPORATE INFORMATION HydrogenPro ASA (“the Compa- ny”) is a public limited company, incorporated in Norway, head- quartered in Porsgrunn and listed on Oslo Stock Exchange, Address headquarters: Hydrovegen 6, 3933 Porsgrunn, Norway. HydrogenPro ASA designs and supplies large scale hydrogen production plants in cooperation with global partners and suppliers. Our core product is the alkaline high-pressure electrolyser. The company was founded in 2013 by individuals with background from the electrolysis industry. We are an experienced engineering team of leading industry experts, drawing upon unparalleled experience and expertise in the hydrogen and renewable energy industry. Our advanced electrode technology enables us to increase the efficiency of each unit by 14%, hence reducing electricity cost with 14%. This is a significant step forward as the cost of electric power, depending on market prices, amounts to 70-90% of the total cost of producing hydro- gen. The value of such increased efficiency equals approximately the investment cost. Unlike traditional alkaline systems, our high-pressure units (up to 30 bar) save compression cost and are superbly suited for variable loads from solar panels and wind turbines. Thus, we compare favour- ably to alternative technologies. We are able to produce hydrogen at a lower cost, without using noble or scarce metals, while using renew- able energy sources. HydrogenPro ASA is listed on Oslo Stock Ex-change under the ticker “HYPRO“. The consolidated financial state- ments of HydrogenPro ASA for the fiscal year 2023 were approved in the board meeting at 21.03.2024. NOTE 1.2 BASIS OF PREPARATION The consolidated financial state- ments of HydrogenPro ASA and its subsidiaries (collectively “the Group”, or “HydrogenPro”) comprise consolidated statement of com- prehensive income, consolidated statement of financial position, con- solidated statement of cash flows, consolidated statement of changes in equity and related notes. The consolidated financial state- ments of HydrogenPro ASA have been prepared in accordance with the IFRS® Accounting Standards (IFRS) and IFRIC interpretations, as adopted by the EU and the additional requirements of the Norwegian Accounting Act as of 31 December 2023. The consolidated financial state- ments have been prepared on a historical cost basis except the con- vertible rights to DG Fuels, which is recognized at fair value. (Note 3.4) Further, the consolidated financial statements are prepared based on the going concern assumption. The consolidated financial state- ments are presented in Norwegian kroner (“NOK”). For each entity, the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency. HydrogenPro ASA has Norwegian krone (“NOK”) as its functional currency. For presentation purposes, balance sheet items are translated from functional currency to presentation currency by using exchange rates at the reporting date. Items within total comprehen- sive income are translated from functional currency to presentation currency by applying yearly average exchange rates. The resulting trans- lation differences are recognized in other comprehensive income. All values are rounded to the nearest thousand, unless when indicated otherwise. As a result of rounding differences numbers of percentages may not add up to the total. HYDROGENPRO / ANNUAL REPORT 2023 8584 revenue has been the main meth- od of recognising revenue from electrolyser projects of largescale electrolyser systems. Engineering services Revenue from engineering services such as design, documentation, drawings for customers can either be recognised over-time measuring progress using input method cost- to-cost, or at pointin time, where the performance obligation is put to an hourby-hour basis. For both revenue streams, if there are circumstance that the unavoid- able costs directly related to project is expected to exceed the economic benefits expected to be received un- der the contract, the estimated loss on the contract will be recognised in its entirety in the period when such loss is identified. Contract balances Equipment contracts with a cus- tomer will usually have milestone payments with variable structures. The contract price will be invoiced when certain criteria are met. A typical milestone structure could be contract acceptance, placement of major supplier purchases, delivery/ shipment and complete installation and commissioning. The payment structure of the contracts typically results in advance payments and progress billings exceed the satis- faction of performance obligations in progress. Consequently, creating a net contract liability. Or, in the op- posite event, if the group performs by transferring goods or services to a customer before the custom- er pays consideration or before payment is due, a contract asset is recognised for the earned consider- ation that is conditional. A contract asset is the right to con- sideration in exchange for goods or services transferred to the custom- er. As of the balance sheet date, the cumulative costs incurred plus recognised profit (less recognised loss) on each contract is compared against the advances and progress billings. Where the cumulative costs incurred plus the recognised profits (less recognised losses) exceed advances and progress billings, the balance is presented as due from customers on con- struction contracts within “contract assets”. When the contract assets become an unconditional right to consideration they are reclassified and presented separately as trade receivables, usually when invoices are issued to the customers. A contract liability is the obligation to transfer goods or services to a cus- tomer for which the group has re- ceived consideration (or an amount of consideration is due) from the customer. If a customer pays consid- eration before the group transfers goods or services to the customer, a contract liability is recognised when the payment is made, or the pay- ment is due (whichever is earlier). Contract liabilities are recognised as revenue when the group performs under the contract. Where advanc- es and progress billings exceed the cumulative costs incurred plus recognised profits (less recognised losses), the balance is presented as due to customers on construction contracts within “contract liabilities”. Please find illustrative tables from the nature of revenues for Hydro- genPro in Note 2.2. contracts, the group identifies the performance obligations (goods or services), determines the transac- tion price, allocates the contract transaction price to the perfor- mance obligations and recognises the revenue when (or as) the per- formance obligations are satisfied. Revenue recognition is determined on a contract-by-contract basis by determining the terms and performance obligations given in a specific contract. Based on the specific contract and its obligations, revenue under IFRS 15 is either recognised at a point in time or over time. Revenue is recognised over-time using the method that best depicts the pattern of the transfer of control over time. The method applied is the cost-to-cost input method to determine the per- centage of completion. This method includes adjustments of time and goods that are delivered to the cus- tomer. Contract costs are expensed as incurred. The Group applied the following judgements that significantly affect the determination of the timing of revenue recognition and amounts of revenue contracts with customers: Performance obligations In determining whether revenue from specific contract can be clas- sified as customised and in turn recognised using a progress-based measurement, several criteria must be evaluated. The first criterion is related to alter- native use. Manufacturing a custom- ised product or piece of equipment for a specific customer that would require significant cost to modify to be able to transfer it to another a customer, then the contract would likely meet the criteria of alternate use. The other important criterion is that an enforceable right to payment exists in the contract between the group and the customer. Right to payment entails that the group has a right to receive payment from the customer if the contract would be terminated. Upon termination at a certain time, the group should be able to recover costs incurred and a reasonable margin. Total contract costs In a customised customer project, HydrogenPro uses cost-to-cost input method when measuring progress; thus, the total cost estimates can significantly impact measured progress and revenue recognition. The total project cost comprises estimates on the ability to execute the planned engineering and design phase, the availability of skilled resources, performance of subcontractors, foreign currency and HydrogenPro’s manufacturing capacity, productivity and quality. Amount – Liquidated damages (LDs) LDs are penalties for not achieving defined milestones on time. LDs are common in construction contracts. As the payment to the customer is not in exchange for a distinct good or service that transfers to Hydro- genPro, LDs must be accounted for as a reduction revenue. If a project does not meet the defined milestone in a contract, a provision reducing the transaction price is made unless it is highly probable that LD will not be imposed. The estimated LD provision is highly judgemental. HydrogenPro esti- mates variable consideration using the most likely amount. Type of goods or services The group generates revenue from customer contracts from two principal sources: i) Equipment and projects and R&D, FEED-stud- ies, service and aftermarket. The equipment and projects sales are generated from both standard and customised electrolysers and gas separators. In the event, the company delivers on standard equipment, the group recognises revenue at the point in time at which it satisfies a perfor- mance obligation by transferring the control of a good or service to the customer. Generally, this upon agreed incoterms, which is mainly at shipment. The customer has control of a good or service when it has the ability to direct the use of and obtain substantially all of the remaining benefits from the good or service. Most of HydrogenPro’s revenue until now stems from sale of cus- tomisation of the equipment. Such sale of customised equipment is recognised as revenue over-time if the equipment cannot be sold to other customers without significant re-work and HydrogenPro has an enforceable right to payment for performance completed to date. Electrolyser systems Revenue from sale of customised equipment and projects is deter- mined to be a bundle of goods where all of the components constitute the combined output, i.e. one performance obligation. The performance obligation is satisfied over time and HydrogenPro recog- nise revenue over the period the performance obligation is satisfied, using a cost-to-cost input method that best depicts the pattern of the transfer of control over time. The progress-based measurement of Notes to the Consolidated Financial Statements HYDROGENPRO / ANNUAL REPORT 2023 8786 Deferred tax and deferred tax assets are measured on the basis of the expected future tax rates applicable to the companies in the Group where temporary differences have arisen. Deferred tax and deferred tax assets are recognised at their nominal value and classified as non-current assets and/or current liabilities in the consolidated statement of financial position. Taxes payable and deferred taxes are recognised directly in equity to the extent that they relate to equity transactions. Deferred tax liabilities and assets are offset if ■ The entity has a legally enforce- able right to set off current tax liabilities and assets; and ■ The deferred tax liabilities and assets relate to income taxes levied by the same authority on either the same taxable entity, or on difference taxable entities, but these entities intend to settle current tax liabilities and assets on a net basis, or their tax assets and liabilities will be realised simultaneously. See note 2.8 for tax. Property, plant and equipment’s Property, plant and equipment’s are valued at their cost less accumu- lated depreciation and impairment losses. When assets are sold or disposed of, the carrying amount is derecognised and any gain or loss is recognised in the statement of comprehensive income. The depreciation period and meth- od are assessed each year. Assets under construction are classified as non-current assets and recognised at cost until the pro- duction or development process is completed. Assets under construc- tion are not depreciated until the asset is taken into use. Intangible assets Goodwill Goodwill acquired through busi- ness combinations is included in intangible assets. Goodwill is recorded at cost less accumulated impairment losses and is subject to annual impairment testing or more frequently if events or changes in circumstances indicate that it might be impaired. Research and development Research costs related to internal projects are recognised in profit or loss as incurred. Development costs are capitalised only if the expendi- ture attributable to the intangible asset can be measured reliably and there is an intention and ability to complete and make the intangible asset commercially available for sale or own use which will generate probable future economic benefits. If condition for capitalisation is not met, the costs is recognised in prof- it or loss as incurred. Subsequent to initial recognition intangible assets is measured at cost less accumulat- ed amortisation and any accumulat- ed impairment loss. Patents, licenses and technology Patents, licenses and technology acquired is measured at cost less accumulated amortisation and any accumulated impairment loss. Amortisation methods Refer to note 3.1 for details about amortisation methods. Business combinations The acquisition of subsidiaries is accounted for using the acquisition method. Identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition are recognized at their fair values at the acquisition date. The acquisition date is the date when the acquirer obtains control of the acquiree. Any contin- gent consideration will be recognized at fair value at the acquisition date. Additional value that cannot be allocated to identifiable assets and liabilities are allocated to goodwill. Non-controlling interest is mea- sured based on the proportionate interest in the recognized amount of the identifiable net asset. Acquisition-related costs incurred are expensed and included in oper- ating expenses. Government grants Government grants are recognized when it is reasonably certain that the group will meet the conditions stipulated for the grants and that the grants will be received. Government grants related to con- struction of an asset is recognized as reduction of the acquisition cost. Grants related to R&D project that are expended are recognizes as a reduction of cost. Financial instruments A financial instrument is any con- tract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial investments and liabili- ties are recognized in the Group’s statement of financial position when The Group becomes a party Leases The group recognises right-of-use assets and lease liabilities for all lease contracts, except leases that are considered short-term (lease term of 12 months or less), or for which underlying assets are of a low value when new. Right-of-use assets The group recognises right-of-use asset at the lease commencement date. The right-of-use assets are initially measured at cost, which comprises the initial amount of the lease liabilities adjusted for any lease payments made at or before the commencement date, adjusted for initial direct costs and lease incentives received. The right-of-use assets are subsequently depreciat- ed using the straight-line method over the shorter of the lease term or the useful life of the underlying asset. In addition, the right-of-use assets are reduced by any impair- ment charges and adjusted for certain remeasurements of the lease liabilities. Lease liabilities The group recognises a lease liability at the lease commencement date. The lease liabilities are measured at the present value of future lease payments at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the group’s incremental borrow- ing rate. HydrogenPro utilises the incremental borrowing rate as the discount rate for virtually all lease agreements. Lease payments includ- ed in the measurement of the lease liabilities comprise the following: ■ Fixed lease payments, less any lease incentives received. ■ Variable lease payments that depend on an index or a rate, initially measured using the in- dex or rate as at the commence- ment date. The lease liability is subsequent- ly measured by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payments made and remeasuring the carrying amount to reflect any reassessment or lease modifica- tions, or to reflect adjustments in lease payments due to an adjust- ment in and index or rate. The Group presents its lease liabil- ities as separate line items in the consolidated statement of financial position. The Group does not act as a lessor. See note 12 for more information. Share-based payments Share-based compensation benefits are provided to employees via the share option plan. Information re- lating to the options scheme is set out in note 2.4. The employee option plan is regard- ed as equity settled share-based payments. The fair value of options granted under the share option plan is recognised as an employee benefits expense or other oper- ating cost (if it is given to external consultants) with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options granted. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognises the impact of the revision to original esti- mates, if any, in profit or loss, with a corresponding adjustment to equity. For further information refer note 2.4 (Personnel expenses). Income tax The tax expense in the consolidat- ed statement of comprehensive income consists of the tax payable and changes to deferred tax. De- ferred tax/tax assets are calculated on all differences between the book value and tax value of assets and liabilities, with the exception of: ■ temporary differences linked to goodwill that are not tax deductible ■ temporary differences related to investments in subsidiaries, associates or joint ventures when the Group controls when the temporary differences are to be reversed and this is not expected to take place in the foreseeable future. Deferred tax assets are recognised when it is probable that the com- pany will have sufficient profit in the future to utilise the deferred tax asset. The companies recognise previously unrecognised deferred tax assets to the extent it has be- come probable that the company can utilise the deferred tax asset. Similarly, the company will reduce a deferred tax asset to the extent that the company no longer regards it as probable that it can utilise the deferred tax asset. Notes to the Consolidated Financial Statements HYDROGENPRO / ANNUAL REPORT 2023 8988 liability. Increase in provisions as a result of time passing, is presented as interest expense. Onerous contracts An onerous contract is a contract in which the unavoidable costs (i.e. the lower of the cost of fulfilling the contract and any compensation or penalties arising from failure to ful- fil it) exceed the economic benefits expected to be received under the contract. For all contracts that are onerous, the present obligation un- der the contract is recognised and measured as a provision. Social security share options Social security stock options are the provision for social security payable in Norway, calculated at the intrin- sic value at year end. The provision fluctuates with the number of active options, timing of exercise and the share price. See note 18 for further information on share option program. Earnings per share Earnings per share are calculated by dividing the profit/loss for the year by the corresponding weighted average of the number of outstand- ing shares during the reporting period. ‘Diluted earnings per share’ is based on the same calculation as for earnings per share, but it also considers all potential shares with dilutive effect that have been outstanding during the period. Po- tential shares relate to agreements that confer the right to issue shares in future. Options are excluded if their effect would have been anti-dilutive. Earnings per share is calculated as profit/ (loss) attributable to the equity holders of the parent company divided by the average number of shares outstanding. See note 6.4 for more details about earnings per share. Going concern The consolidated financial state- ment is presented on the going con- cern assumption under Internation- al Financial Reporting Standards. As per the date of this report the group has sufficient working capital for its planned business activities over the next twelve-month period. to the contractual provisions of the instrument. The Group’s financial instruments are grouped as: ■ Financial assets: Other non-cur- rent receivables, trade receiv- ables, cash and bank deposits. ■ Financial liabilites: Non-current lease liabilites, trade and other payables, and current lease liabilites. ■ Financial investement measured at fair value though profit and loss: Financial investment. The carrying amount of the Group’s financial investments and liabilities are presented in note 6,1 (Financial instruments), along with descrip- tions of the key risk areas and expo- sure for HydrogenPro. Measurement of financial instruments Financial instruments are measured at amortised cost or fair value through profit or loss. Financial investments are measured at amortised cost if the objective is to hold and collect contractual cash flows and contractual cash flows consist solely of principal and in- terest on the principal amount out- standing. If both conditions are not met, the financial asset is measured at fair value through profit or loss. Measurements of financial investments at fair value through profit or loss is based on the fair value hierarchy: ■ Level 1: Fair value is measured using quoted prices from active markets for identical assets and obligations. ■ Level 2: Fair value is decided by using input based on other observable factors; either direct (price) or indirect (derived from prices) rather than noted prices (used in level 1) for the asset or obligation. ■ Level 3: Fair value is measured using inputs that are not based on observable market data. Refer to note 3.4 for classification of financial investments in the fair value hierarchy. Liabilities are initially measured at fair value of the amount required to settle the associated obligation. Subsequently the financial liabilities are measured at amortized cost using the effective interest rate method. Cash and bank deposits Cash includes cash in hand and at bank. Cash equivalents are short- term liquid investments that can be immediately converted into a known amount of cash and have a maximum term to maturity of three months. Equity Financial instruments are classified as liabilities or equity in accordance with the underlying economic realities. Interest, dividend, gains and losses relating to a financial instrument classified as a liability will be pre- sented as an expense or income. Amounts distributed to holders of financial instruments that are classified as equity will be recorded directly in equity. Cost of equity transactions Transaction costs directly related to an equity transaction are recognised directly in equity after deducting tax expenses. Translation differences Translation differences arise in connection with exchange-rate differences of consolidated foreign entities. Exchange-rate in monetary amounts (liabilities or receivables) which are in reality a part of a com- pany’s net investment in a foreign entity are also included as transla- tion differences. Inventories The group have recognised inven- tory in 2023. These are measured and valued at the lower of cost or net realisable value. Net realisable value is the estimated future sales price of the product the group ex- pects to realise when the product is processed and sold, less estimated costs to complete production and bring the product to sale. Provisions The group recognizes a provision when a legal or constructive obliga- tion exists as a result of past events, it is more likely than not that a transfer of financial resources will be required to settle the obligation, and the amount of the obligation can be reliably estimated. When the group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. When the effect is significant, provisions are calculat- ed by discounting expected cash flows at a pre-tax rate that reflects the time value of money and if appropriate the risks specific to the Notes to the Consolidated Financial Statements HYDROGENPRO / ANNUAL REPORT 2023 9190 Primary geographical markets NOK ’000 2023 2022Norway 3 280 4885Europe 7295 -13America 538 499 41 370Asia Pacific 19 159 10 172Total 568 233 56 414 Timing of revenue recognition NOK ’000 2023 2022Revenue recognised over time 565 081 56 051Revenue recognised at point in time 3 152 363Total revenue 568 233 56 414 Major products/service lines NOK ’000 2023 2022Revenue from sale of electrolyser system 557 040 51 521Revenue form sale of Feed and case-studies 11 193 4 893Total revenue 568 233 56 414 Major customer The Group’s major customer are Mitsubishi Power America Inc with 95 percent of revenue in the year 2023. Corresponding figures for 2022 where 75 percent. Advance Payment Bonds In its contractual agreements with customers HydrogenPro is required to provide certain guarantees or bonds to customers in order to fulfil contractual milestones. HydrogenPro has during the course of 2023 issued an irrevocable and unconditional advance payment bond in relation to one of its contracts of NOK 42.2 million. The guarantee is issued under a bond facility provided by Atradius. As per 31 December 2023 no drawing has been made against the bond. Order backlog The performance obligation in contracts with customers vary from a few months to up to ten years regarding the maintenance contract. NOK ’000 2023 2022Partly unsatisfied performance obligations as of 31.12. 422 697 746 965 NOTE 2.1 OPERATIONAL SEGMENTS Operating segments are identified on the basis of internal reports that the entity’s Chief Operating Decision Maker (CODM) regularly reviews in allocating resources to segment and in assessing their performance. The CODM is defined as the executive management group. For HydrogenPro Group the business is treated as one single operating segment. This is consistent with internal reporting provided to the CODM. Intangible assets, Property, plant and equipement and right of use assets by geography Intangible assets Property, plant and equipment Right of use assetsNOK ’000Norway 7 046 3 900 914Europe 28 952 19 533 2 124Asia Pacific 21 934 44 724 17 417Carrying amount at 31.12.2023 57 932 68 157 20 455 Intangible assets Property, plant and equipment Right of use assetsNOK ’000Norway 9 393 5 708 1 423Europe 33 087 18 673 980Asia Pacific 21 935 31 156 15 222Carrying amount at 31.12.2022 64 415 55 537 17 625 NOTE 2.2 REVENUE FROM CONTRACTS WITH CUSTOMERS The Group recognise revenue according to IFRS 15 and applies judgement that significantly affect the determina- tion of timing and amounts of revenue from contracts with customer. The assessements are decisive for weather a contract will be recognized as income on time or over time. See note 1.4 General accounting polices for more details. The Group’s revenue from contracts with customers are recognized from two principal sources: sale of electrolyser systems, and sale of engineering services. The sale of engineering services is either in combination with sale of electrolyser systems or as a separate service as in FEED studies Contracts with clauses on Liquidation Damages are assessed on an ongoing basis. Where it is assessed as likely that Liquidation Damages will occur, the calculated effect is accounted for as a reduction in income. For more details, see note 1.4 General accounting policies. Notes to the Consolidated Financial Statements HYDROGENPRO / ANNUAL REPORT 2023 9392 The purpose of the establishment of the options program is to attract and retain key personnel. The fair value and annual expense/costs of the options are calculated based on the BlackScholes model and expensed over the vest- ing period. The annual costs calculated for the option program for 2023 are based on the Black & Scholes formula with input factors as a risk-free interest rate, volatility factor and share price at grant date. The fair value of the individual options at grant date, are then distributed over the vesting schedule agreement. Social security tax provisions are accrued on a quarterly basis and becomes payable at exercise of the options. The so- cial security tax provisions are estimated based on the intrinsic value multiplied with the relevant social security tax rate. The total expense recognised for the share-based programs, excluding social security, during 2023 was NOK 4.4 (7.4 in 2022) million. The total social security accruals at the end of the year are NOK 0.6 million. The total accumu- lated cost expensed related to share-based payments are NOK 38.6 (34.2 in 2022) million as of 31 December 2023. Options to leading employees and Board of Directors Quantity Granted in Terminated Exercised in Quantity Cost for the Name01.01.23periodin periodperiod31.12.23periodTM Holding (Terje Mikalsen) 163 005 0 0 0 163 005 78 094Jarle Dragvik 0 400 000 0 0 400 000 353 945Elling Nygaard 206 250 0 0 0 206 250 0Erik Christian Bolstad 100 000 0 0 0 100 000 102 684Karoline Aafos 57 396 0 0 -21 875 35 521 9 255Martin Thanem Holtet 150 000 0 0 0 150 000 307 264Cathrin Bretzeg 0 50 000 0 0 50 000 265 323Tormod Kløve 50 000 0 0 0 50 000 868 686 Sindre Utne 68 750 0 0 0 68 750 0Tarjei Johansen 400 000 0 -400 000 0 0 -233 702Ellen Hanetho 1) 2 143 170 0 -101 148 0 2 042 022 1 256 541 1. 1490 000 of Ellen Hanetho’s options hare held by Opulentia Invest AS which is owned 100% by Ellen Hanetho. Quantity Granted in Terminated Cancelled in Quantity Cost for the Name01.01.22periodin periodperiod31.12.22periodEllen Hanetho 1) 2 143 170 0 0 0 2 143 170 2 226 975Elling Nygaard 450 000 0 -243 750 0 206 250 671 023Enern Invest AS (Mårten Lunde) 1 500 000 0 -178 755 0 1 321 245 905 882Erik Christian Bolstad 100 000 0 0 0 100 000 333 121Karoline Aafos 100 000 0 -42 604 0 57 396 -176 924Martin Thanem Holtet 150 000 150 000 0 -150 000 150 000 2 046 804Sindre Utne 150 000 0 -81 250 0 68 750 -525 354Tarjei Johansen 0 400 000 0 0 400 000 233 702TM Holding (Terje Mikalsen) 163 005 0 0 0 163 005 0Tormod Kløve 0 50 000 0 0 50 000 0 Total costs and Social Security Provisions NOK ‘000 2023 2022 Total cost 4 395 7 362 Total Social Security provision -7 550 7 993 NOTE 2.3 COST OF GOODS SOLD NOK ’000 2023 2022Cost of goods sold 1) 441 896 43 221Cost of handling and freight 3 300 787Other cost of gods sold 2 246 364Total cost of gods sold 447 442 44 372 NOTE 2.4 PERSONNEL EXPENSES NOK ’000 2023 2022Salaries 59 672 47 051Social security tax 8 107 5 270Option cost 3 943 6 697Pension costs defined contribution plans 5 777 3 030Other personnel costs 7 706 719Total salaries and personnel expense 85 206 62 768 Option cost related to hired personnel are expensed as other operating expenses. Average number of full time employees 2023 2022Norway 39.8 27.0Europe 10.5 3.5China 171.8 70.0Total 222.1 100.5 Shareholder option plan The company has a share option programme covering certain employees in senior positions. At 2019, employees, board members and guarantors were included in the option programme. Granted options are generally vested or earned during a period of three years according to a predetermined schedule. Options vested and earned can be exercised and must be exercised at latest four years after grant. The vesting requires continued employment or association with the company. Notes to the Consolidated Financial Statements 1. Changes in inventories of finished goods and work in progress/Raw materials and consumables used. HYDROGENPRO / ANNUAL REPORT 2023 9594 Outstanding Instruments Overview 2023 Outstanding Instruments Vested InstrumentsNumber of Weighted Average remaining Weighted Average Vested instruments Weighted Average Strike priceinstrumentscontractual lifeStrike Price31.12.2023Strike Price7.00 2 961 383 1.16 7.00 2 961 383 7.00 16.80 206 250 1.84 16.80 206 250 16.80 17.00 36 000 3.17 17.00 9 000 17.00 17.16 50 000 2.17 17.16 34 377 17.16 17.24 251 745 1.80 17.24 251 745 17.24 17.66 159 584 1.75 17.66 129 376 17.66 18.20 50 000 2.87 18.20 26 042 18.20 18.78 150 000 1.17 18.78 131 250 18.78 20.65 100 000 1.67 20.65 81 252 20.65 20.95 400 000 5.60 20.95 0 026.15 526 925 1.38 26.15 526 925 26.15 28.00 50 000 3.50 28.00 8 334 28.00 32.45 68 750 1.34 32.45 68 750 32.45 66.00 75 000 1.09 66.00 71 886 66.00 5 085 637 4 506 570 2022 Outstanding Instruments Vested InstrumentsNumber of Weighted Average remaining Weighted Average Vested instruments Weighted Average Strike priceinstrumentscontractual lifeStrike Price31.12.2022Strike Price7.00 3 284 409 1.25 7.00 3 283 703 7.0016.80 206 250 2.84 16.80 206 250 16.8017.24 337 170 2.8 17.24 182 635 17.2417.66 170 000 2.75 17.66 92 084 17.6618.78 150 000 2.17 18.78 50 001 18.7820.65 100 000 2.67 20.65 56 252 20.6526.15 506 266 2.38 26.15 431 896 26.1532.45 68 750 2.34 32.45 68 750 32.4536.00 400 000 5.92 36.00 0 0.0066.00 75 000 2.09 66.00 53 130 66.00 5 297 845 4 424 701 Granted instruments 2023 2023 2022Instrument Option OptionQuantity 31.12.2023 (instruments) 486 000 550 000Quantity 31.12.2023 (shares) and Board of Directors 486 000 550 000Contractual life * 5.65 5.11Strike price * 21.38 31.30Share price * 22.24 31.01Expected lifetime * 3.72 3.57Volatility * 61.01% 63.24%Interest rate * 4.01% 2.96%Dividend * 0.00 0.00FV per instrument * 9.68 14.96 * Weighted average parameters at grant of instrument Quantity and weighted average prices 01.01.2023 - 31.12.2023 01.01.2022 - 31.12.2022Number of Weighted aver. Number of Weighted aver. instrumentsstrike priceinstrumentsstrike priceActivityOutstanding OB (01.01.2023) 5 402 811 14.41 5 463 591 13 91Granted 486 000 21.38 550 000 31 30Exercised 271 875 7.00 0.00 0.00Released 0 0.00 0 0.00Adjusted 0 0.00 0 0.00Performance Adjusted 0 0.00 0 0.00Cancelled -13 456 26.15 -150 000 42.35Terminated -517 843 32.12 -565 746 20.97Expired 0 0.00 0 0.00Outstanding CB (31.12.2023) 5 085 637 13.64 5 297 845 14.15Vested CB 4 506 570 12.69 4 424 701 11.38 Notes to the Consolidated Financial Statements HYDROGENPRO / ANNUAL REPORT 2023 9796 Fees to the group auditor NOK ’000 2023 2022Statutory audit 2 056 1 212Other assurance services 384 0Other non-assurance services 174 736Total 2 614 1 948Fees to other auditors elected by subsidiaries NOK ’000 2023 2022Statutory audit 328 81Other assurance services 0Other non-assurance services 22Tax consultant services 0Total 328 103 NOTE 2.7 FINANCIAL INCOME AND EXPENSES NOK ’000 2023 Restated 2022Interest income 3 473 3 434Foreign exchange gain 29 279 14 420Other financial income 750 19Total financial income 33 502 17 874Interest on debt and borrowings 555 307Interest expense lease liabilities 544 368Foreign exchange losses 36 848 12 218Other financial expenses 200 199Total financial expenses 38 147 13 092 NOTE 2.5 PENSIONS Defined contribution plan The Group’s companies in Norway have defined contribution plans in accordance with Pension Act of Norway. The contribution plan covers all employees and amounts between 0 G and 12 G of the salary. The percent of the salary is 7%. The employees may influence the investment management though an agreement with Gjensidige AS. The contri- bution is expended when its accrued. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payment is available. The parent company have pension plans that meets the requirements in Norway. The foreign subsidiaries have pension plans that meet the requirements in their respec- tive countries. NOK ‘000 2023 2022Employees covered by the scheme 223 36Contribution recognised as expense 5 777 3 030Contribution to CEO 144 69 NOTE 2.6 OTHER OPERATING EXPENSES NOK ’000 2023 2022Advertising and direct sale cost 1 582 1 087Repair and maintenance costs 4 558 1530Rental costs 7 559 1 660Travel costs 5 417 2 194Consultancy fees and external personnel 31 243 36 528Provision bad debts 0 1 194Warranties 16 292 0Other operating costs 4 946 10 333Total operating expenses 71 597 54 526 Notes to the Consolidated Financial Statements HYDROGENPRO / ANNUAL REPORT 2023 9998 Overview temporary differences NOK ’000 2023 Restated 2022 ChangeIntangible assets 28 951 33 087 4 136Property, Plant and Equipment 9 703 11 590 1 887Right of use assets 20 455 24 547 4 093Other receivables 0 8 791 8 791Financial investments 5 322 2 379 -2 944Production contracts 94 087 1 504 -92 582Lease liability -20 361 -23 445 -3 084Provisions -33 663 -6 564 27 098Tax loss carry forwards -350 577 -230 562 120 015Total -246 083 -178 673 67 410 NOK ’000 2023 Restated 2022 ChangeTemporary differences not recognised as deferred tax assets/liabilities 28 951 33 087 ¨4136Deferred tax assets 47 769 32 029 -15 740Deferred tax not recognised in the Statement of financial position 47 769 32 029 -15 740Deferred tax in the Statement of financial position 0 0 0 The majority of the deferred tax asset is related to loss carry forward. As of 31 December 2023, it is considered not likely that the tax loss carry forward will be utilised in the near future, therefore the deferred tax assets is not capitalised. Tax losses carry forward by country NOK ’000 2023 Restated 2022Norway -308 651 -189 170Denmark -40 337 -23 859China -1 590 -17 533Balance as of 31.12 -350 577 -230 562 At the end of 2023, HydrogenPro had tax loss carry forwards of NOK 364 million. Of the total, NOK 362 million is without expiration. The tax carry forwards with an expiry date expire after 2027. The Group operates in countries which has enacted the new legislation to implement the global minimum top-up tax. The Group has assessed the potential exposure to the new legislation and does not expect a material impact. The Group has applied a temporary mandatory relief for from the deferred tax accounting for the impact of the top-up tax, under which a company does not recognise or disclose information about deferred tax assets and liabilities related to the global minimum top-up tax. NOTE 2.8 INCOME TAX Income tax expense for the year NOK ’000 2023 Restated 2022Income tax payable 0 0Changes in deferred tax 0 -80Total income tax expense 0 -80 Basis for income tax expense NOK ’000 2023 Restated 2022Loss before taxes -62 937 -114 460Non-deductible expenses 4 728 7 428Transactions cost related to issue of shares -5 040 0Currency translation and other differences -4 162 636Changes in temporary differences -52 605 1 061Basis for tax payable -120 015 -105 335 Reconciliation of tax expense to Norwegian nominal statutory tax rate NOK ’000 2023 Restated 2022Profit / loss (-) before taxes -62 937 -114 460Income tax benefit (expense) at the Company’s domestic tax rate (22%) -13 846 -25 181Tax effect of:Non-deductible expenses 1 040 14Items booked in equity -1 109 0Foreign tax rate and currency translation differences -1 825 990Change in not recognised deferred tax assets 15 740 24 097Tax expense 0 -80Effective tax rate 0.00% 0.07% Notes to the Consolidated Financial Statements HYDROGENPRO / ANNUAL REPORT 2023 101100 Estimated future cash flows are discounted to their present value. The discount rate is derived using capital asset pricing model. The asset beta is based on industry data, and the risk-free rate is based on a Chinese 10-year gov- ernment bond. The discount rate is not adjusted for lease liabilities. An effective tax rate of 25% is applied in the discounted cash flow calculation. When estimating the revenue growth and EBITDA margins, management has utilized forecasts based on existing contracts, expected future income related to qualified pipeline and current production capacity. Several sensitivity analyses have been performed on the key assumptions in the value-in-use calculation. This sen- sitivity analysis of goodwill includes changing various assumptions to consider other potential alternative market conditions. This includes analysing the impact on the value-in-use calculation when changing the EBITDA margin, discount rate and revenue growth. The recoverable amounts exceeded book values for all scenarios in the sensitiv- ity analysis. The discounted rate (WACC) used in the impairment testing of goodwill is shown below. 2023 2022HydrogenPro Tianjin CO Ltd 19.4 % 21.8 % HydrogenPro Tianjin CO Ltd. Is assumed to achieve a steady state in 2027 with a long-term growth rate of 2.0%. HydrogenPro has performed an annual impairment test in December 2023. The recoverable amounts exceed book values for the CGU in the goodwill impairment testing and as such no impairment losses recognised in 2023. Technology The Technology cost corresponds to the acquisition of the subsidiary Advance Surface Plating ApS (ASP) The useful lifetime is expected to be 10 years. The acquisition date was 22nd of December 2020, and depreciation was effec- tive from January 2021. The Group has assessed the carrying value of the development cost as of 31.12.2023 and consider it to be intact. The conclusion is based on: ■ The technical feasibility to development the product for it to be sold, and the groups intention and ability to complete and sell the product. ■ The production line was completed by the end of 2021. ■ The Groups adequate resources available to complete the development. This includes both technical compe- tence and allocated research fund to complete large-scale testing. ■ Calculations for expected earnings in Advanced Surface Plating ApS. Patent and licences As of 31.12.2023 the Group has capitalized NOK 11,7 relating to the FEED (front end and engineering study) to be used in the further development of 100 MW production plants. Useful lifetime is expected to be 5 years, and de- preciation was effective from January 2021. NOTE 3.1 INTANGIBLE ASSETS NOK ’000 Technology Patents and licences Goodwill 2023 TotalAccumulated cost 01.01.2023 41 366 11 741 21 935 75 042Acquisition of subsidiary 0 0 0 0Accumulated cost 31.12.2023 41 366 11 741 21 935 75 042Accumulated depreciation 01.01.2022 8 279 2 348 0 10 627Depreciation for the year 4 135 2 348 0 6 483Exchange differences 0 0 0 0Carrying amount at 31.12.2023 28 952 7 045 21 935 57 932Expected useful life 10 years 5 years Depreciation method Linear Linear NOK ’000 Technology Patents and licences Goodwill 2022 TotalAccumulated cost 01.01.2022 41 366 11 741 0 53 107Acquisition of subsidiary 21 935 21 935Accumulated cost 31.12.2022 41 366 11 741 21 935 75 042Accumulated depreciation 01.01.2022 4 137 0 0 4 137Depreciation for the year 4 136 2 348 0 6 484Exchange differences 6 0 0 6Carrying amount at 31.12.2022 33 087 9 393 21 935 64 415Expected useful life 10 years 5 years Depreciation method Linear Linear Goodwill For the purposes of impairment testing, goodwill has been allocated to the following cash generating units (“CGUs”). NOK ’000 2023 2022HydrogenPro Tianjin CO Ltd 21 935 21 935Total 21 935 21 935 The groups of CGUs that include goodwill are tested for impairment annually or when impairment triggers have been identified. CGUs are tested using the value-in-use approach determined by discounting expected future cash flows. Impairment losses are recognized for assets in CGUs where the recoverable amount is lower than book value. The discounted cash flow analysis is based on management’s forecast for the period 2024 to 2027. The forecasted cash flows are based on signed contracts and identified prospects in addition to other expected revenue. Manage- ment has defined the EBITDA margin, discount rate and revenue growth as the most sensitive assessment in the value-in-use calculation. Notes to the Consolidated Financial Statements HYDROGENPRO / ANNUAL REPORT 2023 103102 Technology centre Herøya Machinery and machinery The Technology centre at Herøya comprises two containers located close to HQ of HydrogenPro in Porsgrunn. The containers are subject for 5 years straight line depreciation during 2023. Advanced Surface Plating Line Additions in 2023 are equivalent to 0.8 MNOK in plant and machinery and 0.6 MNOK in movables. These are costs incurred to establish the production plant facility in Aarhus. HydrogenPro Tianjin CO Ltd Additions in 2023 are equivalent to 13.0 MNOK in plant and machinery and 0.6 MNOK in movables. These are costs incurred to establish the production plant facility in Tianjin. HydrogenPro Shanghai Co Ltd Additions in 2023 are equivalent to 4.7 MNOK in plant and machinery. These are cost for machines for use in the procuction of electrolysers. The machines are leased by HydrogenPro Tianjin CO Ltd. NOTE 3.3 RIGHT OF USE ASSETS The Group as a lessee At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group uses the definition of a lease in IFRS 16. As a result of these assessments the Group has considered leasing for vehicles and the rental contract for office space as leasing according to IFRS 16. The leases do not contain any restrictions on the Group’s dividend policy or financing. The Group does not have significant residual value guarantees related to its leases to disclose. NOK ’000 Buildings Vehicles 2023 TotalAccumulated cost 01.01.2023 21 071 334 21 405Additions 12 345 0 12 345Effect of modification to lease terms -2 554 0 -2 554Exchange differences 177 0 177Accumulated cost 31.12.2023 31 039 334 31 373Accumulated depreciation 01.01.2022 3 472 308 3 780Depreciation for the year 7 251 26 7 277Exchange differences -139 0 -139Carrying amount at 31.12.2023 20 455 0 20 455Expected useful life 2 -8 yearsDepreciation method Linear NOTE 3.2 PROPERTY, PLANT AND EQUIPMENT NOK ’000 Plant and Moveables Machinery and 2023 Totalmachineryplant in progressAccumulated cost 01.01.2023 55 503 4 686 597 60 786Additions 18 644 699 543 19 886From Machinery and plant in progress 636 0 -636 0Disposals -193 0 0 -193Exchange differences 1124 240 39 1 403Accumulated cost 31.12.2023 75 714 5 625 543 81 882Accumulated depreciation 01.01.2023 4 618 630 0 5 248Depreciation for the year 7 682 838 0 8 520Exchange differences -33 -10 0 -43Carrying amount at 31.12.2023 63 447 4 167 543 68 157Expected useful life 5 years 5-10 years Depreciation method Linear Linear NOK ’000 Plant and Moveables Machinery and 2022 Totalmachineryplant in progressAccumulated cost 01.01.2022 17 179 2774 4022 23 975Additions 11 852 1 829 876 14 557Skattefunn 4 301 0 -4 301 0Disposals 22 384 0 0 22 384Exchange differences -212 83 0 -129Accumulated cost 31.12.2022 55 503 4 686 597 60 786Accumulated depreciation 01.01.2022 1 171 167 0 1 337Depreciation for the year 3 393 456 0 3 849Exchange differences 55 8 0 62Carrying amount at 31.12.2022 50 885 4 055 597 55 537Expected useful life 5 years 5-10 years Depreciation method Linear Linear Notes to the Consolidated Financial Statements HYDROGENPRO / ANNUAL REPORT 2023 105104 NOTE 3.4 OTHER NON-CURRENT RECEIVABLES NOK ’000 2023 Restated 2022Receivables from associated companies 4 257 4 308Other receivables 547 512Financial investment 30 517 29 572Carrying amount at 31.12 35 321 34 392 Financial investment NOK ’000 2023 Restated 2022Opening balance 1. January 29 572 26 458Translation effect 945 3 114Balance at 31 December 30 517 29 572 In October 2021, the Company entered into a convertible promissory note purchase agreement with DG Fuels, LLC (“DG Fuels”) and purchased a convertible promissory note with a principal balance of $ 3.0 million/ NOK 30.5 million (the «DG Fuels Note»). The maturity date of each DG Fuels Note is, the earlier of (i) thirty (30) days after a demand for payment is made by the holder of such Note at any time on or after January 1, 2025, (ii) January 1, 2027, (iii) five (5) days following a Financial Close or (iv) upon an event of Default determined at the discretion of a holder of a Note.” The DG Fuels Note has an annual interest rate of 10% and under certain conditions, can be converted into av vari- able number of equity instruments at a future date. The derivative financial instrument is recorded as non-current assets in the consolidated balance sheets. The initial cost has been considered the best estimate of the fair value at 31 December. See further information in note 8.1 - 1. about restating previous numbers. Level 3 has been defined as follows: ■ Value measurements of assets or liabilities that are not based on observed market values. At the end of 2023 the company has considered that the cost is the best estimate of the fair value. See Note 8.1 for further information regarding restating of comparable financial information. Refer to note 6.1 for reconciliation of the financial instruments. NOK ’000 Buildings Vehicles 2022 TotalAccumulated cost 01.01.2022 2 795 334 3 129Additions 18 276 0 18 276Accumulated cost 31.12.2022 21 071 334 21 405Accumulated depreciation 01.01.2022 0 154 154Depreciation for the year 3 472 154 3 626Carrying amount at 31.12.2022 17 599 26 17 625Expected useful life 2 years 2 yearsDepreciation method Linear Linear Lease liabilities NOK ’000 2023 2022Balance as of 01.01. 16 456 2 975Additions 12 493 18 276Effect of modification to lease terms -2 525 0Lease payments -6 832 -5 175Accretions of interest 899 367Exchange differences -130 13Carrying amount at 31.12. 20 361 16 456 Undiscounted lease liabilities and maturity of cash outflows Less than 1 year 8 933 5 1241-3 years 10 150 9 9154-5 years 1 278 1 417Total lease liabilities as of 31.12. 20 361 16 456 Variable lease payments In addition to the lease liabilities above, the Group is committed to pay variable lease payments for some of their leases. The variable lease payments are expensed as incurred. Short-term leases and leases of low value assets The Group has elected to apply the practical expedient of treating short-term leases and low value assets outside the scope of IFRS 16. Notes to the Consolidated Financial Statements HYDROGENPRO / ANNUAL REPORT 2023 107106 Consideration transferred The cash consideration for the 75 percent stake in Tianjin was NOK 50.4 million. The table below summarizes the acquisition date fair value of each major class of consideration transferred. NOK ’000 2022Total consideration 50 389Consideration in cash 2022 32 454Consideration in cash 2021 17 935Net cash outflow 50 389 Acquisition-related costs Transaction costs incurred by HydrogenPro related to the acquisition of Tianjin amounted to NOK 1.7 million. These costs have been reccognised as operating expenses and payroll expenses. Identifiable assets acquired and liabilities assumed NOK ’000 2022AssetsProperty, plant and equipment 22 384Cash and cash equivalents 11 890Other current assets 18 073Total assets 52 347NOK ’000 2022LiabilitiesDeferred tax liability -1 055Other long-term liabilities -721Other short term liabilities -12 634Total liabilities -14 410Net identifiable assets (100%) 37 937 The majority of the identified assets relates to production lines and machinery. Measurement of fair value The fair value of all other assets and liabilities are assumed to equal book values. The trade receivables comprise gross contractual amounts due of NOK 18 million, of which nil was expected to be uncollectible at the date of acquisition. Fair value is measured on a provisional basis. The figures will be revised if new information is obtained within one year of the date of acquisition concerning facts and circumstances, or additional provisions, that existed on the date of acquisition. NOTE 4.1 OVERVIEW OF GROUP Ownership Voting Ownership Voting interestpowerinterestpowerCompany Country of Main 2023 2023 2022 2022incorporationoperationsTechnology Advanced Surface Plating ApS Denmark100 % 100 % 100 % 100 %industriesTechnology HydrogenPro Tianjin CO Ltd China75 % 75 % 75 % 75 %industriesTechnology HydrogenPro Shanghai CO Ltd China100 % 100 % industriesTechnology Kvina Energy AS Norway50 % 50 % 50 % 50 %industriesTechnology HydrogenPro France France100 % 100 % 100 % 100 %industriesTechnology HydrogenPro Inc USA100 % 100 % 100 % 100 %industries NOTE 4.2 BUSINESS COMBINATION On the 9th of June 2022 HydrogenPro acquired 75% of the shares and voting rights of HydrogenPro Tianjin CO Ltd (“Tianjin”). Tianjin has been consolidated by the company form the same date and the business combination is reflected in the consolidated financial position as from 30 June 2022. HydrogenPro Tianjin is a provider of electrolyser systems, headquartered in Tianjin, China. HydrogenPro Tianjin specializes in manufacturing and assembly of hydrogen systems, including steel system structures and high-pres- sure piping, and has its production facilities also in Tianjin, China. HydrogenPro Tianjin brings significant systems assembly capacity and know-how and complement the capabilities of the Group, improving control of the value chain and accelerating time to market. For the period between the date of acquisition and 31 December 2022, Tianjin contributed NOK 0 million to HydrogenPro’s external revenues as all production was delivered to HydrogenPro and negative NOK 19.2 million to net loss. Notes to the Consolidated Financial Statements HYDROGENPRO / ANNUAL REPORT 2023 109108 The allowance for expected credit losses covers the amounts that is more than 30 days past due, and that are assessed as uncertain. Other current receivables NOK ’000 2023 2022Pre-paid costs 5 211 1 906Pre-paid raw material 1 568 26 970Pre-paid tangible assets 45 7 926VAT net receivables 23 444 7 573Other current receivables 11 397 3 139Balance as of 31.12 41 665 47 514 NOTE 5.3 CONTRACT ASSETS AND CONTRACT LIABILITIES Contract assets and contract liabilities NOK ’000 2023 2022Contract assets Balances as of 01.01 19 828 456Transfers from contract assets recognised at the beginning of the period to receivables -19 828 -456Increases due to measure of progress in the period 65 836 19 828Balances as of 31.12 65 836 19 828 Contract assets relate to consideration for work completed, but not yet invoiced at the reporting date. The contract assets are transferred to trade receivables when the right to payment become unconditional, which usually occurs when invoices are issued to customers. Contract assets are reviewed for impairment on an ongoing basis. No im- pairment has been recognized on customer contract assets. Contract liabilities Balances as of 01.01 65 691 1 349Revenue from amounts included in contract liabilities at the beginning of the period -65 691 -1 258Billing and advances received not recognised as revenue in the period 49 641 65 601Balances as of 31.12 49 641 65 692 Contract liabilities is primarily due to a prepayment from Andritz AG, that is to be recognized as revenue in 2024 depending on performance obligations. Goodwill NOK ’000 2022Consideration transferred 50 389Non-controlling interest 9 484Fair value of net identified assets (100%) 37 937Goodwill 21 935 Goodwill amounting to NOK 22 million recognised from the acquisition is mainly related to the scalable platform for new production facilities based on experience from Tianjin. Non-controlling interest is measured based on the proportionate interest in the recognised amount of the identifi- able net assets of the acquire. None of the goodwill recognized is expected to be deductible for tax purposes. NOTE 5.1 INVENTORY NOK ’000 2023 2022Work in progress 2 861Raw material 14 554 32 901Balance as of 31.12 14 554 35 762 Inventories comprises purchased raw materials and work in progress. Raw materials include parts that become an integrated part of final finished goods. Obsolescence is considered for inventories and as of 31.12.2023 where there is a write-down performed on obsolete goods with NOK 5.7 million (0.0 million in 2022). Inventories are mea- sured under the weighted-average cost formula. NOTE 5.2 TRADE AND OTHER RECEIVABLES Trade and other current receivables NOK ’000 2023 2022Total trade receivables (Gross) 180 329 19 730Allowance for expected credit losses 1 145 1 145Balance as of 31.12 179 184 18 585 Notes to the Consolidated Financial Statements Trade receivables are reviewed for impairment on an ongoing basis. The allowance for expected credit covers the amount that are assessed as uncertain. HYDROGENPRO / ANNUAL REPORT 2023 111110 Financial instruments by category 2023NOK ’000 Financial assets Financial Financial Investment Total carrying measured at liabilities measured at fair value throgh amount amortized cost measured at profit and loss (level 3)31.12.2023amortized cost Other non-current receivables 4 804 4 804Financial investment 30 517 30 517Trade receivables 179 184 179 184Cash and bank deposits 160 531 160 531Total financial assets 344 519 30 517 375 036Non-current lease liabilities 11 428 11 428Trade and other payables 39 170 39 170Current lease liabilities 8 933 8 933Total financial liabilities 59 531 59 5312022NOK ’000 Financial assets Financial Financial Investment Restated Total measured at liabilities measured at fair value throgh carrying amount amortized cost measured at profit and loss (level 3)31.12.2022amortized cost Other non-current receivables 4 820 4 820Financial investment 29 572 29 572Accounts receivables 18 585 18 585Cash and bank deposits 257 022 257 022Total financial assets 280 427 29 572 309 999Non-current lease liabilities 11 332 11 332Trade and other payables 20 578 20 578Current lease liabilities 5 124 5 124Total financial liabilities 37 034 37 034 Maturity analysis for lease liability is included in note 3.3. Trade and other payables are due within one year. Financial investement measured at fair value through profit and loss, see note 3.4. See note 8.1 Restatement of comparable information. NOTE 5.4 TRADE CREDITORS AND OTHER CURRENT LIABILITIES NOK ’000 2023 2022Current lease liabilities 8 933 5 124Trade creditors 39 170 20 578Government taxes, tax deductions etc. 6 128 10 797Warranties 10 177 0Other liabilities 58 161 41 538Balance as of 31.12 122 569 78 037 The provision for warranties is calculated on the basis of recognized revenue. Non-current warranties of NOK 6.8 million is included in non-current liabilites. Other liabilites consist of provision for the restated substantive right with (see note 8.1) 20.3 (19.7 in 2022) million, payroll and other personell-related cost with 18.7 (5.3 in 2022) million, and other liabilities of 19.2 (16.5 in 2022) million. NOTE 6.1 OVERVIEW OF FINANCIAL INSTRUMENTS AND RISK MANAGEMENT Overview Through its activities, the Group will be exposed to different types of financial risks: market risk, credit risk and liquidity risk. This note presents information related to the Group’s exposure to such risks, the Group’s objectives, policies and procedures for risk management and handling, as well as the Group’s management of capital. Addi- tional quantitative information is included in these consolidated financial statements. The Group’s overall risk management plan is to ensure the ongoing liquidity in the group, defined as to being able to meet its obligations at any time. The Group do not have any external bank borrowings, and therefore no cove- nants related to borrowings. Risk management of the group is maintained by the operational executives as CEO and CFO along with the Board. This includes tasks to identify, measure, mitigate and report on financial risks in close cooperation with the various operating units. Risk management policies and procedures are reviewed regularly to take into account changes in the market and the Group’s activities. Capital management The Group’s main goal is to maximize shareholder value while ensuring the Group’s ability to continue operations. The Group has a target to maintain a capital structure that gives the Group an optimal capital binding given the current market situation. The Group makes the necessary changes to their capital structure based on an ongoing assessment of the business’ financial situation and future prospects in the short and medium term. Notes to the Consolidated Financial Statements HYDROGENPRO / ANNUAL REPORT 2023 113112 NOTE 6.2 CASH AND CASH EQUIVALENTS NOK ’000 2023 2022CashShort-term bank deposits 160 531 257 022Cash and bank deposits in the balance sheet 160 531 257 022 For the purpose of the statement of cash flows, cash and cash equivalents comprise the following at 31 December: The Group has no credit facilities. Restricted bank deposit 3 816 3 026 NOTE 6.3 SHARE CAPITAL AND SHAREHOLDERS The 20 main shareholders at 31.12.2023 Shareholder Number of shares Ownership interestRichard Espeseth 11 257 458 17.78%Clearstream Banking S.A. 9 982 093 15.77%TM Holding AS 9 635 182 15.22%Mitsubishi Heavy Industries Ltd 5 381 165 8.50%Vivian Yanjin Chen Espeseth 3 090 238 4.88%Nordnet Bank AB 2 771 185 4.38%Avanza Bank AB 2 053 346 3.24%Citibank Europe PLC 1 600 000 2.53%Enern Invest AS 1 408 433 2.23%Tor Danielsen 1 313 872 2.08%DZ Privatbank S.A 1 263 455 2.00%Nordea Bank Abp 753 155 1.19%Jan Fredrik Garvik 738 741 1.17%Unicredit Bank Austria AG 647 167 1.02%Nordea Bank ABP 646 335 1.02%BNP Paribas 588 919 0.93%Caceis Investor Services Bank S.A. 584 244 0.92%Saxo Bank A/S 474 821 0.75%Skandinaviska Enskilda Banken AB 473 100 0.75%KBC Bank NV 418 647 0.66% 55 081 556 87.02%Total other shareholders 8 218 490 12.98%Total number of shares 63 300 046 100.00% As of 31 December 2023, the group’s share capital was NOK 1 266 (1 161) TNOK, consisting of 63 300 046 (58 028 171) shares each with a par value of NOK 0,02 (0,02). Financial risk management The Group is proactively working to identify risks and taking risk mitigating initiatives to the extent this is practica- ble and appropriate. Below follows a description of the Group’s main types of risks; Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the group by failing to settle its obligations. The group is exposed to credit risks in conducting its ordinary activities. The credit risk primarily relates to its trade receivables and its cash and cash equivalents. As our customer base mainly consist of large industrial Groups, the credit risk related to trade receivables are considered limited. The following table provides information about the exposure to credit risk for trade receivables from customers as of 31st of December: 2023 2023 2022 2022NOK ’000 Gross carrying Provision Gross carrying Provision bad Amountbad debtAmountdebtCurrent (not past due) 46 481 9 101 01-30 days past due 118 526 9 484 031-60 days past due 1 98560-260 days past due 12 157More than one year past due 1 180 1 145 1 145 1 145Total 180 329 1 145 19 730 1 145 The trade receivables are largely due from a counterparty with a strong financial position. Also, the Company does not consider the overdue receivables as uncertain. Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabili- ties that are settled by delivering cash or another financial asset. The Group manages its liquidity with a high level of prudency, with rules and policies that ensure an adequate amount of cash and cash equivalents to meet the immediate needs of resources both in the short and long term. Liquidity forecasts are regularly monitored against the contractual maturities or lease liabilities. Financial liabilities are specified in note 5.4. All financial liabilities are due within one year. Market risk Marked risk is the risk that the fair value or future cash flow of a financial instrument will fluctuate because of changes in market prices. Market risks for the Group comprise of both foreign exchange risk and raw material risk. Foreign exchange risk The Group’s functional currency is NOK. The Group operates globally and is therefore exposed to currency fluctu- ations, mainly related to USD, EUR and CNY. The risk is further heightened by the long-running nature of customer contracts. The Company monitors the currency risk exposure closely but has not yet entered into financial instru- ments to hedge currency risk. Raw material risk Fluctation in commodity prices of steel and nickel may impact the Group financially. The Group has not yet under- taken any hedging activity, but seeks to partly hedge price risk trough agreements whit suppliers or agents. Notes to the Consolidated Financial Statements HYDROGENPRO / ANNUAL REPORT 2023 115114 1. Dragvik started 08.08.2023 2. Johansen started 01.12.2022 and resignated 08.08.2023. He ended his empoyment 30.11.2023. 3. Nygaard resignated 21.6.2022 and ended employment 30.09.2022. He received severance pay included the month of June 2023. 4. Espeseth served as CBDO from 01.12.2022 to 01.12.2023 5. Marc Jedamzik started as CPO 01.12.2023 6. Aafos started 15.08.2023, and ended employment 30.11.2023. Benefits in kind includes net gain of exercise 21.875 options with strike NOK 7/sale of shares NOK thousand 249 7. Utne started 01.05.2021 and ended 30.04.2022. He received severance pay including the month of January 2023 8. Bretzeg started 01.06.2023 2022NOK ’000 Salary and Bonus Benefits Pension Total Number Ownership invoiced feesin kindexpenseremunerationof sharesInterestTarjei Johansen (CEO) 1) 250 1 8 259 Martin Thanem Holtet (CFO) 1 591 14 91 1 696 Richard Espeseth (CBDO) 2) 2 225 413 14 93 2 745 11 424 125 19.69%Erik Chr Bolstad (CCO) 1 331 75 14 93 1 513 Karoline Aafos (CPO) 3) 499 7 38 544 Tormod Kløve (CLO) 4) 211 1 12 224 Mårten Lunde (ex-CEO), 2 184 2 184 through Enern Invest AS 5)Elling Nygaard (ex-CEO) 6) 2 004 10 69 2 083 10 0.00%Sindre Utne (ex-COO) 7) 1 739 180 4 53 1 976 4 270 0.01%Tormod Kløve (CLO) 1 510 23 110 1 643 1. Johansen started his employment as CEO 1th of December 2022. 2. Espeseth was Acting CEO in the period 21th of June 2022 - 30th of November 2022. In addition to shares held by Richard Es- peseth, 3.090.238 shares are held by his spouse. They are not included in the table above. 3. Aafos started her employment as CPO 15th of August 2022. 4. Kløve started his employment as CLO 14th of November 2022. 5. Lunde ended his management for hire 31th December 2021. De had a 12 month termination period ended 31th of December 2022. 6. Nygaard resigned his position 21th of June 2022, and his employment 30th of September 2022. He will receive severance pay up to and including June 2023. 7. Utne ended his employment 30th April 2022. He will receive severance pay up to and including January 2023. NOTE 6.4 EARNINGS PER SHARE NOK ’000 2023 Restated 2022Basic earnings per share Profit/(loss) for the year attributable to ordinary shares -64 513 -109 449Issued shares as of 1 January 58 028 171 58 028 171Share issued 5 271 875 0Issued ordinary shares at 31 December 63 300 046 58 028 171Effect of weighting - 3 364 904 0Weighted average number of shares outstanding for the purpose of basic earnings per share 59 935 142 58 028 171Basic earnings per share for income attributable to the equity holder of the parent company -1.09 -1.89Diluted earnings per share Weighted average number of shares outstanding for the purpose of diluted earnings per share 59 935 142 58 028 171Diluted earnings per share for income attributable to the equity holder of the parent company -1.09 -1.89 NOTE 7.1 REMUNERATION AND BOARD MANAGEMENT Executive management remuneration 2023NOK ’000 Salary and Bonus Benefits Pension Total Number Ownership invoiced feesin kindexpenseremunerationof sharesInterestJarle Dragvik (CEO) 1) 1 476 57 40 1 572 41 033 0.06%Tarjei Johansen (CEO) 2) 3 360 134 104 3 599 Elling Nygaard (CEO) 3) 1 265 1 265 10 0,00 %Richard Espeseth (CBDO) 4) 2 513 16 97 2 626 11 257 458 17.78%Martin Thanem Holtet (CFO) 1 832 468 16 95 2 411 1 500 0,00 %Erik Chr Bolstad (CCO) 1 549 363 16 97 2 025 Marc Jedamzik (CPO) 5) 154 7 161 Karoline Aafos (CPO) 6) 1 449 269 86 1 804 Sindre Utne (CPO) 7) 222 222 4 270 0,01 %Cathrin Bretzeg (CPCO) 8) 1 028 12 57 1 097 Tormod Kløve (CLO) 1 510 23 110 1 643 Notes to the Consolidated Financial Statements HYDROGENPRO / ANNUAL REPORT 2023 117116 NOTE 8.1 RESTATEMENT OF COMPARABLE INFORMATION 1. Restatement of contract revenue recognized in 2020 USD 2 million – NOK 17.6 million Based upon an updated assessment related to the delivery of “Study” during 2020 it has been concluded that the re- lated contract included a substantive right that was not identified in 2020. A total of USD 2 million (NOK 17.6 million) of the funds received should have been recognized as a liability by the end of 2020 and not recognized as revenue in 2020. The adjustment has been recorded as a correction of the opening equity in 2022 as the first year of comparable information and in the 2023 financial statements with corresponding recognition of other current liability of USD 2 million (NOK 17.6 million). 2. Restatement of the fair value investment in DG Fuels During the second half of 2023, the Company determined that a reliable estimate of fair value based upon objec- tive identifiable information that could support a fair value above cost has not been possible to obtain. This fact has also indicated uncertainty regarding previously estimates of fair value. Therefore, it has been concluded that cost is the best estimate of the fair value and that previous value adjust- ments above cost should be reversed. See further effect of this in the table below. NOK ‘000 2022 reported Fair value investment Restated 2022restatedFair value adjustment for financial instruments 22 485 -22 485 - Net financial income and expenses 27 267 -22 485 4 782 Profit/(loss) before income tax -91 975 -22 485 -114 460 Profit/(loss) for the year -91 895 -22 485 -114 380 Profit/(loss) attributable to: Equity holders of the parent company -87 014 -22 485 -109 499 Total comprehensive profit/(loss) for the year -92 310 -22 485 -114 795 Total comprehensive profit (loss) for the year attributable to:Equity holders of the parent company -87 379 -22 485 -109 864 Basic earing pr share -1,50 -0,39 -1,89Diluted earnings pr share -1,50 -0,39 -1,89Consolidated Statement of 2022 reported Fair value investment Restated 2022Finacial Position (extract)restatedFinancial investment 52 056 -22 485 29 571 Total non-current assets 194 453 -22 485 171 969 Total assets 573 164 -22 485 550 680 Other equity -196 632 -22 485 -219 117 Total other equity 413 142 -22 485 390 657 Total equity 418 105 -22 485 395 620 Total equity and liabilities 573 164 -22 485 550 680 Board of Directors remuneration 2023NOK ’000 Consultant Board Audit Nomination Total Number of Ownership feesfeecommitteecommitteeremunerationsharesInterestTerje Mikaelsen (Chair) 1) 27 27 9 635 182 15.22%Ellen Hanetho (ex-Chair) 2) 28 953 108 1 089 Richard Espeseth (member) 11 257 458 17.78%Asta Stenhagen (member) Jarle Tautra (member) 248 400 36 684 1 000 0,00 %Jarle Dragvik (ex-member) 600 36 8 644 41 033 0.06%Donna Rennemo 286 286 (ex-member)Arild S. Frick 32 32 (Chair Nom Committee) Bjørn G. Reed 27 27 (member Nom Committee) 1. Terje Mikalsen served on the board in the period 2014-2021. Re-elected 14.05.2023. Started as Chair 04.10.2023 2. Ellen Hanetho has been Chair of the board since 2019. Resigned the board 04.10.2023 2022NOK ’000 Consultant Board fee Total remuneration Number of Ownership feessharesInterestEllen Hanetho (Chair) 275 703 978 Jarle Tautra 1) 126 126 1 000 0.00%Jarle Dragvik 2) 126 126 7 700 0.01%Vivian Espeseth 3 173 571 5.47%Donna Rennemo Kermit Nash (ex-member) 213 213 Terje Mikalsen (ex-member) 227 227 Notes to the Consolidated Financial Statements HYDROGENPRO / ANNUAL REPORT 2023 119118 Statement of Profit and Loss NOK ’000 Note 2023 Restated 2022 Revenue 612 744 56 353 Total revenue 2 612 744 56 353 Cost of materials 3 -527 416 -46 813 Personnel expenses 4, 16 -62 937 -50 895 Depreciation and amortisation expense 9 -3 877 -3 663 Other operating expenses 6 -65 142 -44 737 Operating loss -46 628 -89 755 Financial income 7 33 543 17 452 Financial expenses 7 -36 659 -12 239 Net financial income and expenses -3 116 5 213 Profit/(loss) before income tax -49 744 -84 542 Income tax expense 0 Profit/(loss) for the year -49 744 -84 542 From other equity -49 744 -84 542 Total allocated and equity transfers -49 744 -84 542 Financial Statements and Notes for the Parent Company Statement of Profit And Loss 121 Statement of Financial Position 122 Statement of Changes In Equity 124 Statement of Cash Flows 125 Notes to the Parent Company Financial Statements 126 Note 1 General accounting principles 126 Note 2 Revenue from contracts with customers 130 Note 3 Cost of materials 130 Note 4 Personnel expenses 131 Note 5 Pensions 133 Note 6 Other operating expenses 133 Note 7 Financial income and expenses 134 Note 8 Income tax 134 Note 9 Intangible assets, property, plant and equipment 136 Note 10 List of subsidiaries, joint ventures, and associates 137 Note 11 Financial investment 138 Note 12 Other receivables 138 Note 13 Inventory 139 Note 14 Trade receivables 139 Note 15 Cash and bank deposits 139 Note 16 Share capital and shareholders 140 Note 17 Shareholder option plan 142 Note 18 Trade creditors and other current liabilities 144 Note 19 Restatement of comparable information 144 HYDROGENPRO / ANNUAL REPORT 2023 121120 Statement of Financial Position as of 31 December NOK ’000 Note 2023 Restated 2022 EQUITY AND LIABILITIES EQUITY Share capital 16 1 266 1161 Share premium account 16 691 796 575 039 Other equity contributed 17 38 558 34 162 Other equity 16 -235 161 -185 417 TOTAL EQUITY 496 459 424 945 LIABILITIES Non-current liabilities 18 6 785 0 Total non-current liabilities 6 785 0 Current liabilities Trade creditors 18 57 142 12 698 Contract liabilites 15 49 641 65 691 Public duties payable 18 6 128 6 331 Other current liabilities 18 44 910 35 606 Total current liabilities 157 821 120 326 TOTAL LIABILITIES 164 606 120 326 TOTAL EQUITY AND LIABILITIES 661 065 545 271 Statement of Financial Position as of 31 December NOK ’000 Note 2023 Restated 2022 ASSETS Non-current assets Intangible assets 9 7 045 9 393 Property, plant and equipment 9 3 900 5 366 Investments in subsidiaries 10 137 597 117 095 Loan to group companies 10 25 722 13 051 Investment in shares 1 1 Financial investment 11 30 517 29 571 Other receivables 12 4 891 4 766 Total non-current assets 209 673 179 243 Current assets Inventories 13 7 349 13500 Trade receivables 14 226 044 18 577 Contract assets 14 65 836 19 829 Other receivables 12 5 249 66 490 Cash and bank deposits 15 146 914 247 632 Total current assets 451 392 366 028 TOTAL ASSETS 661 065 545 271 Porsgrunn/Oslo, 21 March 2024 (All signatures electronically signed) Terje Mikalsen Chair of the Board Asta Stenhagen Board member Jarle Tautra Board member Richard Espeseth Board member Jarle Dragvik CEO HYDROGENPRO / ANNUAL REPORT 2023 123122 Statement of Cash Flows NOK ’000 Note 2023 Restated 2022 Cash flows from operating activities Net Income / (Loss) before tax - 49 744 -84 542 Depreciation, amortisation & impairment 9 3 877 3 663 Option cost no cash effect 4 396 7 362 Change in inventory 6 151 -13 500 Change in trade receivable 11 -207 467 -25 364 Change in trade creditors 16 44 444 9 557 Effect of foreign currency translation -946 -1 036 Change in other accruals 12 15 070 16 918 Net cash flows from operating activities -184 219 -86 942 Cash flows from investing activities Purchases of plant and machinery 9 -64 -280 Acquisition of subsidiary, net of cash acquired -20 502 -32 964 Change in other investing activities -125 -879 Net cash flows from investing activities -20 691 -34 123 Cash flows from financing activities Increase of loan to subsidiaries -12 671 -11 995 Transaction not recognized over P&L -5 040 - Proceeds from Equity Issue 121 903 - Net cash flows from financing activities 104 192 -11 995 Cash balance start of period 247 632 380 692 Net change in cash -100 718 -133 060 Cash balance end of period 146 914 247 632 Statement of Changes in Equity Attributable to equity holders of the parent company NOK ’000 Share capital Share premium account Other equity contributed Uncovered loss Total other equity Total equity Equity as at 31.12.2021 58 576 142 26 800 -83 236 -83 236 519 764 Reversal of revenue related to contract -17 639 -17 639 -17 639 Restated equity as at 31.12.2021 58 576 142 26 800 -100 875 -100 875 502 125 Restated equity as at 01.01.2022 58 576 142 26 800 -100 875 -100 875 502 125 Profit for the period -84 542 -84 542 -84 542 Issue of share capital 1103 -1 103 Cost of share-based payment 7 362 7 362 Equity as at 31.12 2022 1 161 575 039 34 162 -185 417 -185 417 424 945 Adjusted equity as at 01.01 2023 1 161 575 039 34 162 -185 417 -185 417 424 945 Profit for the period -49 744 -49 744 -49 744 Issue of share capital 105 116 758 116 863 Cost of share-based payment 4 395 4 395 Equity as at 31.12 2023 1 266 691 797 38 557 -235 161 -235 161 496 459 HYDROGENPRO / ANNUAL REPORT 2023 125124 changes also apply to future peri- ods, the effect is divided among the present and future periods. Judgments The management has, when pre- paring the financial statements; made certain significant assess- ments based on critical judgment when it comes to application of the accounting principles. The follow- ing notes include the Company’s assessments regarding: ■ Revenue recognition, note 2 ■ Taxes, note 8 ■ Assets cost and depreciation – note 9 ■ Share-based payment, note 17 Current versus non-current classification The presents assets and liabilities in the statement of financial position as either current or non-current. The Company classifies an asset as current when it: ■ Expects to realise the asset, or intends to sell or consume it, in its normal operating cycle ■ Holds the asset primarily for the purpose of trading ■ Expects to realise the asset within twelve months after the reporting period Or ■ The asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current, including deferred tax assets. The Company classifies a liability as current when it: ■ Expects to settle the liability in its normal operating cycle ■ Holds the liability primarily for the purpose of trading ■ Is due to be settled within twelve months after the report- ing period Or ■ It does not have an uncondi- tional right to defer settlement of the liability for at least twelve months after the reporting period. All other liabilities are classified as non-current, including deferred tax liabilities. Revenue from contracts with customers The revenue in HydrogenPro is from sale of Hydrogen electrolyser systems and engineering services. Long term fixed-price contracts are valued to the percentage of completion method. The degree of completion is calculated as expenses incurred as a percentage of estimated total expense. Total expenses are reviewed on a regular basis. If projects are expected to result in losses, the total estimated loss is recognised immediately. Income tax The tax expense consists of the tax payable and changes to deferred tax. Deferred tax/ tax assets are calculated on all differences be- tween the book value and tax value of assets and liabilities, with the exception of: ■ temporary differences related to investments in subsidiaries, associates, or joint ventures when the Company controls when the temporary differences are to be reversed and this is not expected to take place in the foreseeable future. Deferred tax assets are recognised when it is probable that the compa- ny will have a sufficient profit for tax purposes in subsequent periods to utilise the tax asset. The company recognise previously unrecognised deferred tax assets to the extent it has become probable that the company can utilise the deferred tax asset. Similarly, the company will reduce a deferred tax asset to the extent that the company no longer regards it as probable that it can utilise the deferred tax asset. Deferred tax and deferred tax assets are measured on the basis of the expected future tax rates. Deferred tax and deferred tax as- sets are recognised at their nominal value and classified as non-current asset investments (long-term liabili- ties) in the balance sheet. Taxes payable and deferred taxes are recognised directly in equity to the extent that they relate to equity transactions. Research and development Expenses relating to research activities are recognised in the statement of comprehensive income as they incur. Expenses relating to development activities are capitalised to the extent that the product or process is technical- ly and commercially viable and the Company has sufficient resources to complete the development work. Expenses that are capital- ised include the costs of materials, direct wage costs and a share of the directly attributable common expenses. Capitalised development costs are recognised at their cost minus accumulated amortisation and impairment losses. Notes to the Parent Company Financial Statements NOTE 1 GENERAL ACCOUNTING PRINCIPLES Hydrogenpro ASA is a public limited company, incorporated in Norway, headquartered in Porsgrunn and listed on Oslo Stock Exchange, Ad- dress headquarters: Hydrovegen 6, 3933 Porsgrunn, Norway. HydrogenPro ASA designs and supplies large scale hydrogen production plants in cooperation with global partners and suppliers. Our core product is the alkaline high-pressure electrolyser. The company was founded in 2013 by individuals with background from the electrolysis industry. We are an experienced engineering team of leading industry experts, drawing upon unparalleled experience and expertise in the hydrogen and renewable energy industry. Our advanced electrode technology enables us to increase the effi- ciency of each unit by 14%., hence reducing electricity cost with 14%. This is a significant step forward as the cost of electric power, depend- ing on market prices, amounts to 70-90% of the total cost of pro- ducing hydrogen. The value of such increased efficiency equals approximately the investment cost for the entire plan in a Total cost of Operation perspective. Unlike traditional alkaline systems, our high-pressure units (up to 30 bar) save compression cost and are superbly suited for variable loads from solar panels and wind turbines. Thus, we compare favour- able to alternative technologies. We are able to produce hydrogen at a lower cost, without using noble or scarce metals, while using renew- able energy sources. HydrogenPro ASA is listed o at Oslo Stock Exchange under the ticker “HYPRO“. The financial statements of Hydrogenpro ASA for the fiscal year 2023 were approved in the board meeting at 21.03.2024. Basis for preparation of the annual accounts The Hydrogenpro AS’s financial statements have been prepared in accordance with the Norwegian Accounting Act of 1998 and Norwe- gian Generally Accepted Accounting Principles (NGAAP). The financial statements are based on historical cost. The financial statements have been prepared on the basis of uniform accounting principles for similar transactions and events under oth- erwise similar circumstances. Functional currency and presentation currency. The Company’s presentation and functional currency is NOK. Transactions in foreign curren- cy are translated to functional currency using the exchange rate at the date of the transaction. At the end of each reporting period foreign currency monetary items are translated using the closing rate, non-monetary items that are measured in terms of historical cost are translated using the exchange rate at the date of the transaction and non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. Changes in the exchange rate are recognised continuously in the accounting period. The use of estimates and assess- ment of accounting policies when preparing the annual accounts Estimates and assumptions The management has used esti- mates and assumptions that have affected assets, liabilities, incomes, expenses and information on potential liabilities. This particularly applies to the depreciation of prop- erty, plant and equipment, intangi- ble assets, sharebased payments and evaluations related to acqui- sitions. Future events may lead to these estimates being changed. Estimates and their underlying assumptions are reviewed on a regular basis and are based on best estimates and historical experience. Changes in accounting estimates are recognised during the period when the changes take place. If the HYDROGENPRO / ANNUAL REPORT 2023 127126 period of three years according to a predetermined schedule. Options vested or earned can be exercised at any time and must be exercised latest four years after award. The vesting requires continued employment or associ- ation with the company. Social security tax on options is recorded as a liability and is recognised over the estimated vesting period. For further information refer note 4 (salary and benefit) and 15 (share option plan). Contingent liabilities and assets Contingent liabilities are not rec- ognised in the annual accounts. Significant contingent liabilities are disclosed, with the exception of contingent liabilities that are unlikely to be incurred. Contingent assets are not rec- ognised in the annual accounts but are disclosed if there is a cer- tain probability that a benefit will be received by the Company. Statement of cash flow The cash flow statement is pre- pared using the indirect method. Going concern The financial statement is pre- sented on the going concern assumption. As per the date of this report HydrogenPro ASA has sufficient working capital for its planned business activities over the next twelvemonth period. The Board of Directors confirmed on this basis that the going concern assumption is valid, and that financial statements are prepared in accordance with this assumption. Events after the reporting period New information on the compa- ny’s financial position on the end of the reporting period which be- comes known after the reporting period is recorded in the annual accounts. Events after the report- ing period that do not affect the company’s financial position on the end of the reporting period, but which will affect the com- pany’s financial position in the future are disclosed if significant. Property, plant and equipment Property, plant and equipment are valued at their cost less ac- cumulated depreciation and im- pairment losses. When assets are sold or disposed of, the carrying amount is derecognised and any gain or loss is recognised in the statement of profit and loss. The depreciation period and method are assessed each year. Assets under construction are classified as non-current assets and recognised at cost until the production or development pro- cess is completed. Assets under construction are not depreciated until the asset is taken into use. Patents and licenses Amounts paid for patents and li- censes are capitalised and amor- tised in a straight line over the ex- pected useful life. The expected useful life of patents and licenses varies from 5 til 10 years. Government grants Government grants are rec- ognised when it is reasonably certain that the company will meet the conditions stipulated for the grants and that the grants will be received. Operating grants are recognised systematically during the grant period. Grants are deducted from the cost which the grant is meant to cover. Investment grants are capitalised and recognised systematical- ly over the asset’s useful life. Investment grants are recognised either as deferred income or as a deduction of the asset’s carrying amount. Financial assets The Company´s financial assets are: Loans to group companies, investements in shares, invest- ments in subsidiaries, financial investment, trade receivable and cash and bank deposits. The classification of financial as- sets at initial recognition depends on the financial asset’s contrac- tual cash flow characteristics and the Company’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component, the Com- pany initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Financial liabilities Financial liabilities are classified, at initial recognition, as loans and borrowings, or payables, as appropriate. Loans, borrowings, and payables are recognised at fair value net of directly attribut- able transaction costs. Inventories The company have recognized in- ventory in 2023. These are mea- sured and valued at the lower of cost or net realisable value. Net realisable value is the estimated future sales price of the product the company expect to realise when the product is processed and sold, less estimated cost to complete production an bring the product to sale. Subsidiaries and investment in associated companies Subsidiaries are entities con- trolled by HydrogenPro ASA. Subsidiaries and investment in associated companies are accounted for using the cost method and are recognised as cost less impairment. Cash and bank deposits Cash includes cash in hand and at bank. Cash equivalents are short- term liquid investments that can be immediately converted into a known amount of cash and have a maximum term to maturity of three months. Employee benefits Wages, salaries, bonuses, pen- sion, and social security contribu- tions, paid annual leave and sick leave are accrued in the period in which the associated services are rendered by employees of the Company. The Company has pen- sion plans for employees that are classified as defined contribution plans. Contributions to defined contribution schemes are rec- ognised in the statement of profit or loss in the period in which the contribution amounts are earned by the employees. Share based payments The Company has an option-pro- gram, including employees, board members and Guarantors. The programs are measured at fair value at the date of the grant, using an appropriate valuation model. That cost is recognised in personnel expenses, together with a corresponding increase in equity over the vesting period. Granted options are general- ly vested or earned during a HYDROGENPRO / ANNUAL REPORT 2023 129128 NOTE 4 PERSONNEL EXPENSES NOK ’000 2023 2022 Salaries 45 861 35 300 Sosial security tax 8 107 5 270 Option cost (note 17) 3 943 6 697 Pension costs defined contribution plans 2 711 3 030 Other personnel costs 2 315 597 Total salaries and personnel expense 62 937 50 895 In addition, some invoices have been received for fees and bonuses, and these are included in other operating expenses. Option cost related to hired personnel is expended as other operating expenses. 2023 2022 Average number of full-time employees 40 27 Executive management remuneration NOK ’000 Salary and invoiced fees Bonus Benefits in kind Pension expense Total remunerat. 2023 Total remunerat. 2022 Jarle Dragvik (CEO) 1) 1 476 0 56 40 1 572 0 Tarjei johansen (CEO) 2) 3 360 0 134 104 3 598 259 Elling Nygaard (CEO) 3) 1 265 0 0 0 1 265 2 083 Richard Espeseth (CBDO) 4) 2 513 0 16 97 2 626 2 745 Martin Thanem Holtet (CFO) 1 832 468 16 95 2 411 1 696 Erik Chr Bolstad (CCO) 1 549 363 16 97 2 025 1 513 Marc Jedamzik (CPO) 5) 154 0 7 0 161 0 Karoline Aafos (CPO) 6) 1 449 0 20 86 1 555 544 Sindre Utne (CPO) 7) 222 0 0 0 222 1 976 Cathrin Bretzeg (CPCO) 8) 1 028 0 12 57 1 097 0 Tormod Kløve (CLO) 1 510 0 23 110 1 643 0 1. Dragvik started his employment as CEO 8th of August 2023. 2. Johansen started as CEO 1st of December 2022, and resigned 8th of August 2023. He ended his employment 30th of November 2023. 3. Nygaard resigned his position 21st of June 2022, and his employment 30th of September 2022. He received severance pay up to and including June 2023. 4. Espeseth was acting as CBDO from 1st of December 2021 to 1st of December 2023 5. Jedamzik started his employment as CPO 1st of December 2023. 6. Aafos started as CPO 15th of August 2023, and she ended her employment 30th of November 2023. 7. Utne ended his employment 30th April 2022. He received severance pay up to and including January 2023. 8. Bretzeg started as CPCO 1st of June 2023. NOTE 2 REVENUE FROM CONTRACTS WITH CUSTOMERS The Group’s revenue from contracts with customers has been disaggregated and presented in the tables below: Geographical region NOK ’000 2023 2022 Norway 3 280 4 866 Europe 7 295 0 America 538 499 41 370 Asia Pacific 63 670 10 117 Total revenue 612 744 56 353 Major products/service lines NOK ’000 2023 2022 Revenue from sale of electrolyser system 557 040 51 468 Revenue from sale of Feed and case-studies 8 694 4 885 Revenue from sale of sub-components, intercompany 47 010 0 Total revenue 612 744 56 353 The revenue in HydrogenPro is from sale of Hydrogen electrolyser systems and engineering services. Fixed-price contracts are measured according to the percentage of completion method. The degree of completion is calculated as expenses incurred as a percentage of estimated total expense. Total expenses are reviewed on a regular basis. If projects are expected to result in losses, the total estimated loss is recognised immediately. NOTE 3 COST OF MATERIALS NOK ’000 2023 2022 Cost of material 525 953 45 661 Cost of handling and freight 1 463 787 Other cost of material 0 364 Total cost of material 527 416 46 813 Notes to the Parent Company Financial Statements HYDROGENPRO / ANNUAL REPORT 2023 131130 NOTE 5 PENSIONS Defined contribution plan The company have defined contribution plans in accordance with local laws. The contribution plan covers all employees and amounts between 0 G and 12 G of the salary. The percent of the salary is 7%. The employees may influence the investment management through an agreement with Gjensidige AS. The contri- bution is expensed when it is accrued. As of 31.12.2023 there were 43 members covered by the scheme. The contributions recognised as expenses equalled TNOK 2 711 in 2023 and TNOK 3 030 in 2022. The contributions to CEO were TNOK 144 in 2023 and TNOK 69 in 2022. NOTE 6 OTHER OPERATING EXPENSES Other operating expenses NOK ’000 2023 2022 Advertising and direct sale cost 289 207 Repair and maintenance costs 901 659 Rental and leasing costs 6 816 3 935 Travel costs 4 818 2 118 Consultancy fees and external personnel 29 377 31 362 Provision bad debts 0 1 194 Warranties 16 962 0 Other operating costs 5 979 5 263 Total operating expenses 65 142 44 737 Specification auditors fee NOK ’000 2023 2022 Statutory audit 2 056 1 212 Other assurance services 384 0 Other non-assurance services 174 736 Total 2 614 1 948 Board of Directors remuneration NOK ’000 Board fees Salary and invoiced fees Total remunerat. 2023 Total remunerat. 2022 Terje Mikalsen (Chair) 27 0 27 227 Ellen Hanetho (ex Chair) 1 061 28 1 089 978 Ricard Espeseth (member) 0 0 0 0 Asta Stenhagen (member) 0 0 0 0 Jarle Tautra (member) 436 248 684 126 Jarle Dragvik (ex member) 644 0 644 126 Donna Rennemo (ex member) 286 0 286 0 No loans/securities have been granted to the CEO, Chair, or other related parties. Options to leading employees and Board of Directors Name Quantity 01/01/2023 Granted in period Terminated in period Exercised in period Quantity 31/12/2023 Cost for the period Ellen Hanetho 1) 2 143 170 - -101 148 - 2 042 022 1 256 541 Jarle Dragvik - 400 000 - - 400 000 353 945 Elling Nygaard 206 250 - - - 206 250 - Erik Christian Bolstad 100 000 - - - 100 000 102 684 Karoline Aafos 57 396 - - -21 875 35 521 9 255 Martin Thanem Holtet 150 000 - - - 150 000 307 264 Cathrin Bretzeg - 50 000 - - 50 000 265 323 Sindre Utne 68 750 - - - 68 750 - Tarjei Johansen 400 000 - -400 000 - - -233 702 TM Holding (Terje Mikalsen) 163 005 - - - 163 005 78 094 Tormod Kløve 50 000 - - - 50 000 868 686 1. 1 490 000 of Ellen Hanetho’s options are held by Opulentia Invest AS which is owned 100% by Ellen Hanetho. Granted options are generally vested or earned during a period of three years according to a predetermined schedule. Options vested or earned can be exercised at any time and must be exercised latest four years after award. The vesting requires continued employment or association with the company. For more details regarding stock option plan see note 17. Notes to the Parent Company Financial Statements HYDROGENPRO / ANNUAL REPORT 2023 133132 Explanation as of why the current year’s tax expense is not 22% of the profit before tax: NOK ’000 2023 2022 Tax on profit before taxes (22%) -10 944 -18 599 Tax on permanent differences (22%) -69 1 633 Change in not recognised deferred tax assets 11 013 16 967 Tax expense 0 0 Effective tax rate 0 00% 0 00% Overview temporary differences NOK ’000 2023 Restated 2022 Change Property, plant and equipment and intangible assets 431 1 082 651 Provisions and intagnible assets -23 710 -1 709 22 001 Non-current receivables or liabilities in other currencies 2 018 2 525 507 Production contracts 94 087 1 504 -92 582 Tax loss carried forward 1) -308 651 -189 170 119 481 Total -235 825 -185 768 50 057 1) Tax carry forward for 2022 has been adjusted due to correction of error. NOK ’000 2023 2022 Change Deferred tax assets (22%) 51 881 40 869 -11 013 Deferred tax not recognised in the Statement of financial position 51 881 40 869 -11 013 Deferred tax in the Statement of financial position 0 0 0 The majority of the deferred tax asset is related to loss carry forward. As of 31 December 2023, it is considered not likely that the tax loss carry forward will be utilised in the near future, therefore the deferred tax assets are not capitalised. The tax losses carried forward have no expiry date. NOTE 7 FINANCIAL INCOME AND EXPENSES Financial income NOK ’000 2023 Restated 2022 Other financial income 36 19 Interest income 4 231 3 434 Foreign exchange gains 29 276 13 999 Total financial income 33 543 17 452 Financial expenses NOK ’000 2023 2022 Interest on debts and borrowings 48 26 Foreign exchange losses 36 611 9 915 Other financial expenses 0 2 298 Total financial expenses 36 659 12 239 NOTE 8 INCOME TAX Income tax expense for the year NOK ’000 2023 Restated 2022 Income tax payable 0 0 Changes in deferred tax 0 0 Total income tax expense 0 0 Basis for income tax expense NOK ’000 2023 2022 Profit / loss (-) before taxes -49 745 -84 542 Permanent differences -312 7 421 Changes in temporary differences -69 424 1 640 Basis for tax payable -119 481 -75 482 Notes to the Parent Company Financial Statements HYDROGENPRO / ANNUAL REPORT 2023 135134 NOTE 10 LIST OF SUBSIDIARIES, JOINT VENTURES, AND ASSOCIATES The table below shows ownership in subsidiaries. Ownership interest corresponds to voting interest if not other- wise stated. Company Ownerhip Registered office Functional currency Total equity in 2023 (Functional currency '000) Net Income/ (loss) 2023 (Functional currency '000) Carrying value NOK '000 2023 Carrying value NOK '000 2022 Advanced Surface Plating ApS 100% Denmark DKK -1 919 -8 547 65 919 65 919 HydrogenPro France 100% France EUR -9 -7 50 50 HydrogenPro Inc 1) 100% United States of America USD -60 -60 177 177 HydrogenPro Tianjin Co Ltd 75% China CNY 17 614 4 033 50 898 50 898 HydrogenPro Shanghai CO Ltd 100% China CNY 13.738 6 20 503 Kvina Energy AS 50% Norway NOK -1 544 -1 282 51 51 Total 137 597 117 095 1) Amounts from 2022 Loans to group companies NOK ’000 2023 2022 Advanced Surface Plating ApS 21 734 11 379 Kvina Energy AS 2 954 1 672 HydrogenPro Inc 1 034 0 Total 25 722 13 051 Other transactions with group companies Purchase Sales Interest Pre-payments NOK ’000 2023 2022 2023 2022 2023 2022 2023 2022 HydrogenPro Tianjin Co Ltd 342 414 8 791 14 590 0 0 0 55 974 HydrogenPro Shanghai CO Ltd 104 140 0 30 901 0 0 0 0 Advanced Surface Plating ApS 0 0 0 0 559 203 0 0 Kvina Energy AS 0 0 0 0 182 72 0 0 HydrogenPro Inc 0 0 17 0 0 Total 446 554 8 791 45 491 0 758 275 0 55 974 NOTE 9 INTANGIBLE ASSETS, PROPERTY, PLANT AND EQUIPMENT NOK ’000 Intangible assets - Patents and licenses Plant and machinery Moveables Machinery and plant in progress Total Accumulated cost 01.01.2023 11 742 7 318 374 0 19 434 Additions 64 64 From machinery and plant in progress Accumulated cost 31.12.2023 11 742 7 382 374 0 19 498 Accumulated depreciation 01.01.2023 2 349 2 154 173 4 676 Depreciation for the year 2 348 1 476 53 3 877 Carrying value 31.12.2023 7 045 3 752 148 0 10 945 Economic life 5 years 5-10 years 5 years Depreciation method linear linear linear Accumulated cost 01.01.2022 11 742 3 017 374 4 021 19 154 Additions 280 280 Skattefunn (Tax compensations) 4301 -4 301 Accumulated cost 31.12.2022 11 742 7 318 374 0 19 434 Accumulated depreciation 01.01.2022 905 106 1 011 Depreciation for the year 2 349 1 249 66 3 664 Carrying value 31.12.2022 9 393 5 164 202 0 14 759 Economic life 5 years 5-10 years 5 years Depreciation method linear linear linear The Technology centre at Herøya comprises two containers located close to HQ of HydrogenPro in Porsgrunn. The containers where acquired in 2020 and 2022 and have been subject for 5 years straight line depreciation from the date of acqusition. The company has assessed the carrying value of the development cost recognized as intangible assets as of 31.12.2023 and consider it to be intact. Notes to the Parent Company Financial Statements HYDROGENPRO / ANNUAL REPORT 2023 137136 NOTE 13 INVENTORY NOK ’000 2023 2022 Raw material 7 349 13 500 Balance as of 31.12 7 349 13 500 Inventories comprises purchased raw material. Raw materials include parts that become an integrated part of final finished goods. Obsolescence is considered for inventories and as of 31.12.2023 there are no write-downs performed on obsolete goods. Inventories are measured under the weighted-average cost formula. NOTE 14 TRADE RECEIVABLES Accounts receivables NOK ’000 2023 2022 Receivables related to revenue from contracts with customers - external 180 270 19 722 Receivables related to sale of free issued material - internal 46 919 0 Total trade receivables (Gross) 227 189 19 722 Allowance for expected credit losses 1 145 1 145 Total trade receivables (Net) as of 31.12 226 044 18 577 Trade payables are non-interest bearing and are normally settled on 30-days terms. NOTE 15 CASH AND BANK DEPOSITS NOK ’000 2023 2022 Cash and bank deposits 146 914 247 632 Cash and cash equivalents in the balance sheet 146 914 247 632 For the purpose of the statement of cash flows, cash and bank deposits comprise the following at 31 December: The company has no credit facilities. Restricted bank deposit 3 816 2 814 NOTE 11 FINANCIAL INVESTMENT Balance as of 31.12 NOK ’000 2023 2022 Convertible receivable DG Fuels 30 517 29 571 In October 2021, the Company entered into a convertible promissory note purchase agreement with DG Fuels, LLC (“DG Fuels”) and purchased a convertible promissory note with a principal balance of $ 3.0 million/ NOK 30.5 million (the «DG Fuels Note»). The maturity date of each DG Fuels Note is, the earlier of (i) thirty (30) days after a demand for payment is made by the holder of such Note at any time on or after January 1, 2025, (ii) January 1, 2027, (iii) five (5) days following a Financial Close or (iv) upon an event of Default determined at the discretion of a holder of a Note.” The DG Fuels Note has an annual interest rate of 10% and under certain conditions, can be converted into a vari- able number of equity instruments at a future date. The DG Fuels Note is recognized in the balance sheet at cost. See further information in note 19 about restated previous numbers. NOTE 12 OTHER RECEIVABLES Other non-current assets NOK ’000 2023 2022 Receivables from associated companies 4 822 4 766 Other non-current receivables 69 0 Total other non-current assets as of 31.12 4 891 4 766 Other current receivable NOK ’000 2023 2022 Pre-paid costs associated companies 0 55 974 Other pre-paid cost 2 791 3 285 VAT net receivables 2 458 7 231 Total other current assets short term as of 31.12 5 249 66 490 Notes to the Parent Company Financial Statements HYDROGENPRO / ANNUAL REPORT 2023 139138 Ordinary shares in 2023 (2022) at NOK 0,02 (0,02) per share: 63 300 046 (58 028 171) Management and board of directors Number of shares Ownership interest Jarle Dragvik (CEO) 1) 41 033 0.06% Tarjei Johansen (ec CEO) 0 0.00% Martin Thanem Holtet (CFO) 1 500 0.00% Richard Espeseth (CBDO) 11 257 458 17.78% Erik Chr Bolstad (CCO) 0 0.00% Marc Jedamzik (CPO) 0 0.00% Tormod Kløve (CLO) 0 0.00% Terje Mikiaelsen (Chair) 2) 9 635 182 15.22% Ellen Hanetho (ex Chair) 0 0.00% Richard Espeseth (member) 11 257 458 17.78% Asta Stenhagen (member) 0 0.00% Jarle Tautra (member) 3) 1 000 0.00% 1. Held by the controlled company Jardis Invest AS. 2. Held by the controlled company TM Holding AS. 3. Held trough the controlled company Jasmig AS. NOTE 16 SHARE CAPITAL AND SHAREHOLDERS The 20 main shareholders at 31.12.23 are: Shareholder Number of shares Ownership interest Richard Espeseth 11 257 458 17.78% Clearstream Banking S.A. 9 982 093 15.77% TM Holding AS 9 635 182 15.22% Mitsubishi heavy Industries Ltd 5 381 165 8.50% Vivan Espeseth 3 090 238 4.88% Nordnet Bank AB 2 771 185 4.38% Avanza Bank AB 2 053 346 3.24% Citibank Europe plc 1 600 000 2.53% ENERN INVEST AS 1 408 433 2.23% TOR DANIELSEN 1 313 872 2.08% DZ Privatbank S.A. 1 263 455 2.00% Nordea Bank Abp 753 155 1.19% Jan Fredrik Garvik 738 741 1.17% UniCredit Bank Austria AG 647 167 1.02% Nordea Bank Abp 646 335 1.02% BNP Paribas 588 919 0.93% CACEIS Investor Services Bank S.A. 584 244 0.92% Saxo Bank A/S 474 821 0.75% Skandinaviska Enskilda Banken AB 473 100 0.75% KBC Bank NV 418 647 0.66% 55 081 556 87.02% Total other shareholders 8 218 490 12.98% Total number of shares 63 300 046 100.00% Notes to the Parent Company Financial Statements HYDROGENPRO / ANNUAL REPORT 2023 141140 Granted instruments Instrument 2023 Option 2022 Option Quantity 31.12.2023 (instruments) 486 000 550 000 Quantity 31.12.2022 (shares) and Board of Directors 486 000 550 000 Contractual life * 5.65 5.11 Strike price * 21.38 31.30 Share price * 22.24 31.01 Expected lifetime * 3.72 3.57 Volatility * 61.01% 63.24% Interest rate * 4.01% 2.96% Dividend * 0.00 0.00 FV per instrument * 9.68 14.96 * Weighted average parameters at grant of instrument Outstanding Instruments Overview Outstanding Instruments Vested Instruments Strike price Number of instruments Weighted Average remaining contractual life Weighted Average Strike Price Vested instruments 31.12.2023 Weighted Average Strike Price 7.00 2 961 383 1.16 7 2 961 383 7 16.80 206 250 1.84 16.8 206 250 16.8 17.00 36 000 3.17 17 9 000 17 17.16 50 000 2.17 17.16 34 377 17.16 17.24 251 745 1.80 17.24 251 745 17.24 17.66 159 584 1.75 17.66 129 376 17.66 18.20 50 000 2.87 18.2 26 042 18.2 18.78 150 000 1.17 18.78 131 250 18.78 20.65 100 000 1.67 20.65 81 252 20.65 20.95 400 000 5.60 20.95 0 20.95 26.15 526 925 1.38 26.15 526 925 26.15 28.00 50 000 3.50 28 8 334 28 32.45 68 750 1.34 32.45 68 750 32.45 66.00 75 000 1.09 66 71 886 66 5 085 637 4 506 570 NOTE 17 SHAREHOLDER OPTION PLAN Option programme The company has a share option programme covering certain employees in senior positions. At 2019, employees, board members and guarantors were included in the option programme. Granted options are generally vested or earned during a period of three years according to a predetermined schedule. Options vested or earned can be exercised at usually one year after it is granted and must be exercised latest four years after. The vesting requires continued employment or association with the company. The purpose of the establishment of the options program is to attract and retain key personnel. The fair value and annual expense/costs of the options are calculated based on the BlackScholes model and expensed over the vest- ing period. The annual costs calculated for the option program for 2022 are based on the Black & Scholes formula with input factors as a risk-free interest rate, volatility factor and share price at grant date. The fair value of the individual options at grant date, are then distributed over the vesting schedule agreement. Social security tax provisions are accrued on a quarterly basis and becomes payable at exercise of the options. The social security tax provisions are estimated based on the gain on the share-based instruments multiplied with the relevant social security tax rate. The total expense recognised for the share-based programs, excluding social security, during 2023 was NOK 4.4 (7.4 in 2022) million. The total social security accruals at the end of the year are NOK 0.6 (1.6 in 2022) million. The total accumulated cost expensed related to share-based payments are NOK 38.6 (34.2 in 2022) million as of 31 December 2023. Total costs and Social Security Provisions NOK ’000 2023 2022 Total cost 4 395 7 362 Total Social security provision -7 550 7 793 Quantity and weighted average prices 01.01.2023 - 31.12.2023 01.01.2022 - 31.12.2022 Activity Number of instruments Weighted aver. strike price Number of instruments Weighted aver. strike price Outstanding OB (01.01.2023) 5 402 811 14.41 5 463 591 13.91 Granted 486 000 21.38 550 000 31.30 Exercised -271 875 7.00 0 00 0.00 Released 0 0.00 0 0.00 Adjusted 0 0.00 0 0.00 Performance Adjusted 0 0.00 0 0.00 Cancelled -13 456 26.15 -150 000 42.35 Terminated -517 843 32.12 -565 746 20.97 Expired 0 0.00 0 0.00 Outstanding CB (31.12.2023) 5 085 637 13.64 5 297 845 14.15 Vested CB 4 506 570 12.69 4 424 701 11.38 Notes to the Parent Company Financial Statements HYDROGENPRO / ANNUAL REPORT 2023 143142 NOTE 18 TRADE CREDITORS AND OTHER CURRENT LIABILITIES NOK ’000 2023 2022 Provisions for warranties long term 6 785 0 Total non-current liabilities 6 785 0 NOK ’000 2023 2022 Trade creditors external 5 430 12 698 Trade creditors internal 51 712 0 Total trade creditors 57 142 12 698 Government taxes, tax deductions etc. 6 128 6 331 Provisions for warranties short term 10 177 0 Other liabilities 34 733 35 606 Total other current liabilites 44 910 35 606 Total 108 180 54 635 Trade creditors are non-interest bearing and are normally settled on 30-day terms. Interest payable is normally settled quarterly. NOTE 19 RESTATEMENT OF COMPARABLE INFORMATION Restatement of contract revenue recognized in 2020 USD 2 million – NOK 17.6 million. Based upon an updated assessment related to the delivery of “Study” during 2020 it has been concluded that the related contract included a substantive right that was not identified in 2020. A total of USD 2 million (NOK 17.6 million) of the funds received should have been recognized as a liability by the end of 2020 and not recognized as revenue in 2020. The adjustment has been recorded as a correction of the opening equity in 2022 as the first year of comparable information in the 2023 financial statements with corresponding recognition of other current liabili- ties of USD 2 million (NOK 17.6 million). Notes to the Parent Company Financial Statements We hereby confirm that the annual accounts for the Group and the Company for 2023 to the best of our knowl- edge have been prepared in accordance with applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and the Company taken as a whole. The Direc- tors’ report gives a true and fair view of the development and performance of the business and the position of the Group and the Company, as well as a description of the principal risks and uncertainties facing the Group. Statement pursuant to section 5-5 of the Norwegian Securities Trading Act Porsgrunn/Oslo, 21 March 2024 (All signatures electronically signed) Terje Mikalsen Chair of the Board Asta Stenhagen Board member Jarle Tautra Board member Richard Espeseth Board member Jarle Dragvik CEO HYDROGENPRO / ANNUAL REPORT 2023 145144 ALTERNATIVE PERFORMANCE MEASURES HydrogenPro discloses alternative performance measures. This is based on the group’s experience that APMs are frequently used by analysts, investors and other parties as supplemental information. The purpose of APMs is to provide an enhanced insight into the operations, financing and future prospect of the group. Management also uses these measures internally to drive performance in terms of monitoring operating performance and long-term target setting. APMs are adjusted IFRS measures that are defined, calculated and used in a consistent and transparent manner over the years and across the group where relevant. Financial APMs should not be considered as a substitute for measures of performance in accordance with the IFRS. HydrogenPro’s financial APMs: Gross profit margin is defined as gross profit (Revenues - Cogs) divided by revenues in percentage. EBITDA is defined as earnings before interest, tax, depreciation, amortisation and impairment, corresponding to operating profit/(loss) plus depreciation, amortisation and impairment. Adjusted EBITDA excludes special items, e.g. non-cash impact of incentive program, to better present the underlying performance in the reported period. Net investments Additions to property, plant and equipment (capital expenditures), plus longterm secu- rities, intangible assets, longterm advances and investments in equity accounted invest- ments, including amounts recognised in business combinations for continuing operations. Order intake is defined as firm purchase order with agreed price, volume, timing, term and conditions entered within a given period. The order intake includes both contracts and change order. For service contracts and contract with uncertain transaction price, the order intake is based on estimated revenue. The measure does not include potential change order. Backlog is defined as a firm purchase order with agreed price, volume, timing, term and condition and where revenue is yet to recognize. The backlog includes both contracts and change order. For service contracts and contract with uncertain transaction price, the backlog is based on estimated revenue. The measure does not include potential change order. APMs NOK MILLION 2023 Restated 2022 Revenue from contracts with customers 568 56 Cost of goods sold 447 44 Gross profit/(loss) 121 12 Gross profit/(loss) 121 12 Revenue from contracts with customers 568 56 Gross profit margin 21.3% 21.3% Gross profit/(loss) 121 12 Personnel expenses 82 63 Other operating expenses 67 55 EBITDA -36.0 -105 EBITDA -36 -105 Non-cash cost of incentive programs/payrolls 3 10 Non-cash provisions with limited predictive value 6 1 Adjusted EBITDA (excl. noncash operating expenses) -27 -94 EBITDA -36 -105 Depreciation and amortization expenses 22 14 Operating profit/(loss) (EBIT) -58 -119 NOK MILLION 2023 2022 Purchases of tangible assets 20 15 Purchases of intangible assets 0 0 Investments before acquisitions 20 15 Investments due to acquisitions 0 33 Investments after acquisitions 20 47 Order backlog start of period 747 33 Order intake 242 773 Revenue from projects contracts with customers -566 -56 Revaluation 1 -3 Order backlog end of period 423 747 HYDROGENPRO / ANNUAL REPORT 2023 147146 Auditor’s Report BDO AS Munkedamsveien 45 PO Box 1704 Vika 0121 Oslo Norway BDO AS, a Norwegian limited liability company, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. The Register of Business Enterprises: NO 993 606 650 VAT. Page 1 of 5 Independent Auditor's Report To the General meeting of Hydrogenpro ASA Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Hydrogenpro ASA. The financial statements comprise: • The financial statements of the parent Company, which comprise the balance sheet as at 31 December 2023, income statement , statement of changes in equity and cash flows for the year then ended, and notes to the financial statements,including a summary of significant accounting policies, and • The financial statements of the Group, which comprise the balance sheet as at 31 December 2023, and income statement, statement of comprehensive income, statement of changes in equity and 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 accompanying 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 the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway. • The accompanying 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 Hydrogenpro ASA for 6 years from the election by the general meeting of the shareholders on 22 November 2018 for the accounting year 2018. BDO AS, a Norwegian limited liability company, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. The Register of Business Enterprises: NO 993 606 650 VAT. Page 2 of 5 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. Description of the key audit matter How the key audit matter was addressed in the audit Recognition of revenue from contracts with customers Revenue from contracts with customers amounts to NOK 568 million, of which 565 million is recognized over time. The cost-to-cost input method is applied to determine the percentage of completion. The contracts with customers may be complex, include multiple performance obligations, include liquidated damages, be executed over a long period of time and may involve significant uncertainty. The estimation of total revenues and costs involves the use of judgements, including estimation of remaining cost, percentage of completion, variable consideration and effects of potential disputes. Accounting for revenue from contracts with customers is a key audit matter as the contracts with customers involves significant use of judgements that can significantly impact a number of accounts in the financial statements, such as revenue from contracts with customers, costs of goods sold, trade receivables, contract assets and contract liabilities. We assessed the application of accounting policies against the IFRS 15 requirements and internal procedures for monitoring and progress reporting related to contract with customers. We inquired regarding the status of contracts with customers with management, finance, and technical staff, aligning estimated revenues and costs with budgets. We verified the estimated revenue against the contracts, also assessing the estimate for variable consideration. Additionally, we tested the mathematical accuracy of percentage of completion calculations and reconciled project accounts against reported figures in the ERP- system. Furthermore, we have verified project costs through detailed testing of invoices and verified hours incurred in the project. We verified that the disclosures in the key notes (note 1.4 and 2.2) are in accordance with the underlying information about the projects, and in accordance with the relevant IFRS requirements. Fair value of financial investment The company has invested in a convertible financial instrument in DG Fuels Llc. Based on the classification criteria’s in IFRS 9, the instrument must be measured at fair value. The fair value measurement is classified as a level 3 measurement in the fair value hierarchy, in accordance with IFRS 13. For details on the investment see note 3.4. The investment is a complex financial instrument that, under certain conditions, can be converted into a variable number of equity instruments at a future date. The underlying equity instruments is in a non-listed US start- up company, for which there are no observable fair value. A level 3 valuation under IFRS 13 should be based on an appropriate valuation technique that maximizes the use of observable input and minimizes the use of unobservable input. The process of measuring fair value of the financial instrument is complex and requires management's judgments and assumptions to prepare a fair value estimate. Given the complex nature of the valuation of the financial instrument, we consider this a key audit matter. Our audit procedures included an assessment of the appropriateness of valuation techniques, and evaluation of the supporting documentation for the relevant key assumptions to be applied in the valuation model. We involved our internal valuation specialists to assist us with our assessment of the appropriateness of the valuation techniques. We also assessed the appropriateness of using cost as the best estimate for fair value. The assessment included: - Assessment of transactions in the equity instruments of the investee. - Assessment of changes in the operating activities of the investee. Furthermore, we have evaluated the adequacy of the disclosures provided in the notes regarding the investment. We refer to the disclosures in note 3.4 and 8.1 in the financial statements for further review. HYDROGENPRO / ANNUAL REPORT 2023 149148 BDO AS, a Norwegian limited liability company, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. The Register of Business Enterprises: NO 993 606 650 VAT. Page 3 of 5 Goodwill and intangible assets Under IFRS, the Group is required to perform an annual impairment test of goodwill and intangible assets with an indefinite useful life. Impairment testing of goodwill and intangible assets is a key aspect of our audit due to the complexity of the assessments and the significance of assumptions related to future market and/or economic conditions that underlie the assessment. The significant amounts involved, and the complexity of the valuation of the assets, lead us to classify the valuation of goodwill and intangible assets as a key audit matter. Our audit procedures have included a detailed review of management’s impairment test for each business unit to which goodwill and intangible assets are allocated. We have also assessed management’s assumptions underlying the valuation and taken into consideration management’s historical accuracy in determining the estimates. Internal specialists have assisted us in this process. We have also considered the assumptions described in note 3.1 and assessed the adequacy of the information provided in the notes against the requirements of IAS 36. Investments in subsidiaries The company has significant investments in subsidiaries that are measured at cost. Investments in subsidiaries are tested for impairment if impairment indicators are present. An impairment loss is recognized if the carrying amount exceeds the recoverable amount. The carrying amount as at 31.12.2023 was NOK 138 million. The significant amounts involved, and the complexity of the valuation of the assets, lead us to classify the valuation of investments in subsidiaries as a key audit matter. Our audit procedures included a detailed review, testing, and assessment of management's impairment tests, including the calculation of recoverable amounts. We have also assessed management's assumptions underlying the valuation and taken into consideration the historical accuracy in determining the estimates. Internal specialists have assisted us in this process. We have also considered the assumptions described in note 10. Other information The Board of Directors and the Managing Director (management) are responsible for the other information. The other information comprises the Board of Directors’ report and other 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 other information. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Opinion on the Board of Directors' report Based on our knowledge obtained in the audit, in our opinion the Board of Directors’ report • is consistent with the financial statements and • contains the information required by applicable statutory requirements. Our opinion on the Board of Director’s report applies correspondingly for the statements on Corporate Governance and Corporate Social Responsibility. BDO AS, a Norwegian limited liability company, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. The Register of Business Enterprises: NO 993 606 650 VAT. Page 4 of 5 Responsibilities of the Board of Directors and the Managing Director for the Financial Statements Management is responsible for the preparation of financial statements of the Company that give a true and fair view in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway, and for the preparation of the financial statements of the Group that give a true and fair view in accordance with IFRS Accounting Standards as adopted by the EU. Management is responsible 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. The financial statements of the Company use the going concern basis of accounting insofar as it is not likely that the enterprise will cease operations. The financial statements of the Group use 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 the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. For further description of Auditor’s Responsibilities for the Audit of the Financial Statements reference is made to: https://revisorforeningen.no/revisjonsberetninger Report on compliance with requirement on European Single Electronic Format (ESEF) Opinion As part of the audit of the financial statements of Hydrogenpro 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 HydrogenPro-ASA-2023-12-31-en, 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. HYDROGENPRO / ANNUAL REPORT 2023 151150 BDO AS, a Norwegian limited liability company, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. The Register of Business Enterprises: NO 993 606 650 VAT. Page 5 of 5 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 Oslo, 21 March 2024 BDO AS Yngve Gjethammer State Authorised Public Accountant HYDROGENPRO / ANNUAL REPORT 2023 153152 05 Appendix 155 HYDROGENPRO / ANNUAL REPORT 2023 154 Sustainability factbook HydrogenPro ASA has reported for the period from 1 January 2023 to 31 December 2023 in accordance with the Global Reporting Initiative (GRI) Standards. In addition, we have added a voluntary but not comprehensive reporting according to the Task Force on Climate-related Financial Disclosures (TCFD) and the EU Taxonomy for sustainable activities. All subsidiaries and units in HydrogenPro ASA that were operating in 2023 are covered by the report. This means the operations in Norway, Denmark, Germany and China were included. For more informa- tion about the company structure, see page 8. Questions about the report and the reported information can be addressed to Martin Thanem Holtet ([email protected]), CFO in HydrogenPro. The ESG report and related data is not subject to external assurance. Two restatements of information are made in the year 2023. The first regards the presence of PFAS in our product (page 39). The second regards a production facility in Datang, China, that has been used for nickel plating of steel plates. The facility has previously been accounted for like a supplier, but in 2023 we have reevaluated our opera- tional boundaries and accounted for it in the ESG report. More information on the reason behind this choice can be found on page 34 and 42. We do not have enough data to restate the information provided in the 2022 report, but we have made sure to account for the nickel plating facility in our 2023 report where relevant (waste, water, energy, materials data as well GHG accounting and health and safety data). Key sustainability data Environment Energy Energy consumption by source [kWh] 2021 2022 2023 Fuels consumption Motor gasoline - 10 634 0 Diesel for forklifts - - 99200 1 Indirect energy 2 Electricity 34 829 1 548 546 1 547 185.37 Heat 67 185 161 087 1 053 298.36 1 The original value of 10 000 liters is converted to kWh using the UK Government GHG Conversion Factors for Company Reporting, DEFRA Materials Materials procured by type [tonnes] 2021 2022 2023 Raw materials Steel - 79.42 2291.1 Nickel - - 25.25 Nickel foam - - 94.6 Associated processing materials Cutting fluids - 0.50 21 1 Argon - - 23189.51 2 Chemicals - 75.8 25.88 Semi-manufactured goods or parts - - 1203.51 Materials for packaging purposes Wrapping plastic - - 20.1 Wooden trays - - 53.8 1 Under the assumption that cutting fluids have the same density as water, the original value of 21000 liters is converted to tonnes by following the convertion factor 1L=1kg 2 The original value of 16640000 liters is converted to tonnes by following the conversion factor 1L liquid argon = 1,3936 kg (Source: https://keengas. com/gases/argon/) All materials except wooden trays are non-renewable. Recycled input material accounts to only 15% of the plastic for packaging purposes. Water Water withdrawal [m3] 2021 2022 2023 Total water withdrawal 148 641 35 352 From municipal water supplies - surface water 23 519 35 225 From municipal water supplies - ground water 125 122 127 Water discharge equals water withdrawal, except neglectable amounts (<1 m3) of evaporated water that comes out of our test electrolyzers in form of hydrogen and oxygen. HYDROGENPRO / ANNUAL REPORT 2023 157156 Waste Waste generated [tonnes] 2021 2022 2023 Non-hazardous waste Paper/cardboard 0.5 1.5 1,67 Plastic 0.05 0.35 3,37 Residual waste - 1.68 4,97 Biological/food waste - 0.32 0,95 Glass 0.05 0.73 0,19 Steel 0.1 53.08 944,10 Packaging (styroform) - 0.1 0,10 Wooden trays - - 24,01 Hazardous waste Water-diluted lye 2 26 0,1 Mineral oils and cutting fluids - 0.74 0,4 Oil drums - - 1,1 Nickel - - 0,1 Gas - - 0,1 Chemicals - - 0,1 General waste - - 0,1 100 % of all non-hazardous waste categories are diverted from disposal, as they are handled by waste companies which are contracted to either prepare them for reuse, recycle them or perform other recovery operations on them. The specific numbers are not known at this time, except the fact that 100% of the steel waste reported is recycled by the waste company handling it. All the hazardous waste fractions above are collected by specialized waste companies which are contracted to han- dle these according to local laws and regulations. However, it is not known at this time how much of the hazardous waste is disposed or diverted from disposal. GHG emissions HydrogenPro’s greenhouse gas emission inventory can be found in our GHG accounts on page 170. We did not have emission of ozone-depleting substances (ODS), nor Nitrogen oxides (NOx), sulfur oxides (SOx), or other signif- icant air emissions in the reporting period. Social The numbers in this section are denoted as headcount at the end of the reporting period, 31.12.2023, unless other information is stated. The average number of FTE’s during the reporting period was 221, with the lowest in January (155) and the highest in July (252). All employees by gender and region Region Female F% of region F% of total Male M% of region M% of total Total Norway 11 30 % 5 % 26 70 % 11 % 37 Denmark 3 19 % 1 % 13 81 % 5 % 16 Germany 1 50 % 0 % 1 50 % 0 % 2 Shanghai 2 33 % 1 % 4 67 % 2 % 6 Tianjin 28 16 % 12 % 148 84 % 62 % 176 Total 45 19 % 192 81 % 237 Permanent employees by gender and region Region Female F% of region F% of total Male M% of region M% of total Total Norway 11 30 % 5 % 26 70 % 11 % 37 Denmark 1 6 % 0 % 9 56 % 4 % 10 Germany 1 50 % 0 % 1 50 % 0 % 2 Shanghai 2 33 % 1 % 4 67 % 2 % 6 Tianjin 28 16 % 12 % 148 84 % 62 % 176 Total 43 18 % 188 79 % 231 Temporary employees by gender and region Region Female F% of region F% of total Male M% of region M% of total Total Norway 0 0 % 0 % 0 0 % 0 % 0 Denmark 2 13 % 1 % 4 25 % 2 % 6 Germany 0 0 % 0 % 0 0 % 0 % 0 Shanghai 0 0 % 0 % 0 0 % 0 % 0 Tianjin 0 0 % 0 % 0 0 % 0 % 0 Total 2 1 % 4 2 % 6 Non-guaranteed hours employees by gender and region Region Female F% of region F% of total Male M% of region M% of total Total Norway 0 0 % 0 % 0 0 % 0 % 0 Denmark 0 0 % 0 % 0 0 % 0 % 0 Germany 0 0 % 0 % 0 0 % 0 % 0 Shanghai 0 0 % 0 % 0 0 % 0 % 0 Tianjin 0 0 % 0 % 0 0 % 0 % 0 Total 0 0 % 0 0 % 0 Full-time employees by gender and region Region Female F% of region F% of total Male M% of region M% of total Total Norway 10 27 % 4 % 25 68 % 11 % 35 Denmark 1 6 % 0 % 9 56 % 4 % 10 Germany 1 50 % 0 % 1 50 % 0 % 2 Shanghai 2 33 % 1 % 4 67 % 2 % 6 Tianjin 28 16 % 12 % 148 84 % 62 % 176 Total 42 18 % 187 79 % 229 Sustainability factbook HYDROGENPRO / ANNUAL REPORT 2023 159158 Part-time employees by gender and region Region Female F% of region F% of total Male M% of region M% of total Total Norway 1 3 % 0 % 1 3 % 0 % 2 Denmark 1 6 % 0 % 2 13 % 1 % 3 Germany 0 0 % 0 % 0 0 % 0 % 0 Shanghai 0 0 % 0 % 0 0 % 0 % 0 Tianjin 0 0 % 0 % 0 0 % 0 % 0 Total 2 1 % 3 1 % 5 Workers who are not employees Region Female F% Male M% Total Norway 2 22 % 6 67 % 8 Denmark 0 0 % 1 11 % 1 Germany 0 0 % 0 0 % 0 Shanghai 0 0 % 0 0 % 0 Tianjin 0 0 % 0 0 % 0 Total 2 22 % 7 0 % 9 The 9 workers who are not employees in Norway and Denmark are performing administrative tasks. All workers had either semi- permanent or temporary contractual relationships with the company. 24 contracted blue collars were working in a nickel plating facility used by HydrogenPro in 2023. These are not reported in the table above, as the facility resulted closed primo December 2023. New employee hires Female <30 30-50 >50 Total % of region % of total Norway 2 4 3 9 64 % 4 % Denmark 2 0 0 2 40 % 1 % Germany 0 1 0 1 50 % 0 % Shanghai 0 1 0 0 20 % 0 % Tianjin 4 25 0 29 16 % 14 % Total 8 31 3 41 20 % Male <30 30-50 >50 Total % of region % of total Norway 1 2 2 5 36 % 2 % Denmark 2 1 0 3 60 % 1 % Germany 0 1 0 1 50 % 0 % Shanghai 0 4 0 4 80 % 2 % Tianjin 31 115 1 147 84 % 73 % Total 34 123 3 160 79 % Total <30 30-50 >50 Total % of region % of total Norway 3 6 5 14 7 % Denmark 4 1 0 5 2 % Germany 0 2 0 2 1 % Shanghai 0 5 0 5 2 % Tianjin 35 140 1 176 87 % Total 42 154 6 202 100 % Employee turnover Female <30 30-50 >50 Total % of region % of total Norway 0 3 2 5 50 % 6 % Denmark 0 0 0 0 0 % 0 % Germany 0 0 0 0 0 % 0 % Shanghai 0 1 0 1 100 % 1 % Tianjin 0 6 0 6 9 % 8 % Total 0 10 2 12 15 % Male <30 30-50 >50 Total % of region % of total Norway 0 1 4 5 50 % 6 % Denmark 0 0 0 0 0 % 0 % Germany 0 0 0 0 0 % 0 % Shanghai 0 0 0 0 0 % 0 % Tianjin 17 45 0 62 91 % 78 % Total 17 46 4 67 85 % Total <30 30-50 >50 Total % of region % of total Norway 0 4 6 10 13 % Denmark 0 0 0 0 0 % Germany 0 0 0 0 0 % Shanghai 0 1 0 1 1 % Tianjin 17 51 0 68 86 % Total 17 56 6 79 100 % Work-related injuries and ill health Work-related ill health Work-related injuries Fatalities as a result of work- related ill health Recordable work- related ill health Fatalities as a result of work- related injury Total fatalities frecuency rate High- consequence recordable work-related injuries Total high- consequence injuries frequency rate Recordable work- related injuries Total recordable injuries (TRI) frequency rate* Total hours worked Employees 0 0 0 0 0 0 8 3,22 497 125 External Workers 0 0 0 0 0 0 6 0 n/a * Frequency rates are calculated using a work hour factor of 200 000 hours. For external workers only the number of cases is reported and not frequency rates, as data on hours worked by external workers is not available. Sustainability factbook HYDROGENPRO / ANNUAL REPORT 2023 161160 Career and development review Female Permanent Temporary Contracted Non-guaranteed Norway 75 % 0 % 0 % n/a Denmark 0 % 0 % n/a n/a Germany n/a n/a n/a n/a Shanghai 100 % n/a n/a n/a Tianjin 63 % n/a n/a n/a Total 60 % 0 % 0 % 0 % Male Permanent Temporary Contracted Non-guaranteed Norway 73 % 0 % 0 % n/a Denmark 0 % 0 % 0 % n/a Germany n/a n/a n/a n/a Shanghai 100 % n/a n/a n/a Tianjin 37 % n/a n/a n/a Total 210 % 0 % 0 % 0 % Total Permanent Temporary Contracted Non-guaranteed Norway 74 % 0 % 0 % n/a Denmark 0 % 0 % 0 % n/a Germany n/a n/a n/a n/a Shanghai 100 % n/a n/a n/a Tianjin 82 % n/a n/a n/a Total 64 % 0 % 0 % 0 % Diversity of governance bodies Age Female F% Male M% Total <30 years 0 0 % 0 0 % 0 30-50 years 1 25 % 0 0 % 1 >50 years 0 0 % 3 75 % 3 Total 1 25 % 3 75 % 4 Sustainability factbook Female <30 years 30-50 years >50 years Total % of EC % of total Permanent 7 34 6 47 20 % 19 % Temporary 4 0 0 4 50 % 2 % Contracted 0 0 0 0 0 % 0 % Non-guaranteed 0 0 0 0 0 % 0 % Total 11 34 6 51 21 % 21 % Male <30 years 30-50 years >50 years Total % of EC % of total Permanent 37 137 10 184 80 % 275 % Temporary 4 0 0 4 50 % 6 % Contracted 1 2 4 7 100 % 10 % Non-guaranteed 0 0 0 0 0 % 0 % Total 42 139 14 195 79 % 79 % Total <30 years 30-50 years >50 years Total % of EC % of total Permanent 44 171 16 231 94 % 345 % Temporary 8 0 0 8 3 % 12 % Contracted 1 2 4 7 3 % 10 % Non-guaranteed 0 0 0 0 0 % 0 % Total 53 173 20 246 100 % 100 % Ratio of basic salary and remuneration of women to men Permanent Temporary Full-Time Part-Time Norway 0,78 n/a n/a n/a Denmark 0,88 n/a n/a n/a Tianjin 1,3 n/a n/a n/a Ratio of the annual total compensation for the organization’s highest-paid individual to the median annual total compensation for all employees (excluding the highest-paid individual) 3,8 Ratio of the percentage increase in annual total compensation for the organization’s highest-paid individual to the median percentage increase in annual total compensation for all employees (excluding the highest-paid individual) 3,08 Full-time employees included. Pay rate has been used for all employees. The total compensation includes yearly salary, car allowance, estimated pension contribution, benefit taxation insurances and electronic communication. HYDROGENPRO / ANNUAL REPORT 2023 163162 Code GRI disclosure title Reference or additional information Page 02-26 Mechanisms for seeking advice and raising concerns IR, NUES Corporate Governance, Ethical Business Conduct, A safe and attractive place to work 46, 67, 74 02-27 Compliance with laws and regulations No significant instances of non-compliance during the reporting period. No monetary fines for instances of non-compliance paid. 02-28 Membership associations IR, Stakeholder dialogue 16 02-29 Approach to stakeholder engagement IR, Stakeholder dialogue 16 02-30 Collective bargaining agreements IR, A safe and attractive place to work 44 GRI 3: Material Topics 2021 03-01 3-1 Process to determine material topics IR, Material ESG topics 21 03-02 3-2 List of material topics IR, Material ESG topics 21 03-03 3-3 Management of material topics IR, Material ESG topics 21 GRI 201: Economic Performance 2016 201-2 Financial implications and other risks and opportunities due to climate change IR, Board of Directors’ report 50 GRI 205: Anti-corruption 2016 205-1 Operations assessed for risks related to corruption IR, NUES Corporate Governance report, Ethics in HydrogenPro 67, 74 205-2 Communication and training about anti-corruption policies and procedures IR, NUES Corporate Governance report, Ethics in HydrogenPro 67, 74 205-3 Confirmed incidents of corruption and actions taken No confirmed incidents of corruption during the reporting year. GRI 301: Materials 2016 301-1 Materials used by weight or volume IR, Sustainability factbook 157 301-2 Recycled input materials used IR, Sustainability factbook 157 GRI 302: Energy 2016 302-1 Energy consumption within the organization IR, Sustainability factbook 156 302-2 Energy consumption outside of the organization Data not available for 2023. 302-3 Energy intensity IR, Sustainable manufacturing and supply chain 33 302-4 Reduction of energy consumption Data not available for 2023. 302-5 Reductions in energy requirements of products and services IR, Efficient technology and scalability 26 GRI 303: Water and Effluents 2018 303-1 Interactions with water as a shared resource IR, Efficient technology and scalability, Sustainable manufacturing and supply chain 31, 33 Sustainability factbook GRI content index Abbreviations: IR - Integrated Report 2023 Code GRI disclosure title Reference or additional information Page GRI 2: General Disclosures 2021 02-01 Organizational details IR, Sustainability factbook 156 02-02 Entities included in the organization’s sustainability reporting IR, Sustainability factbook 156 02-03 Reporting period, frequency and contact point IR, Sustainability factbook 156 02-04 Restatements of information IR, Sustainability factbook 156 02-05 External assurance IR, Sustainability factbook 156 02-06 Activities, value chain and other business relationships IR, About HydrogenPro ASA 14 02-07 Employees IR, Sustainability factbook 158-160 02-08 Workers who are not employees IR, Sustainability factbook 158-160 02-09 Governance structure and composition IR, NUES Corporate Governance report, Board of Directors’ report 54, 62, 65 02-10 Nomination and selection of the highest governance body IR, NUES Corporate Governance report 65 02-11 Chair of the highest governance body The chair of the highest governance body is not a senior executive in the organization. 02-12 Role of the highest governance body in overseeing the management of impacts IR, NUES Corporate Governance report, Board of Directors’ report 57, 66-67 02-13 Delegation of responsibility for managing impacts IR, NUES Corporate Governance report, Board of Directors’ report 57, 66-67 02-14 Role of the highest governance body in sustainability reporting IR, NUES Corporate Governance report, Board of Directors’ report 57, 66 02-15 Conflicts of interest IR, NUES Corporate Governance report 66 02-16 Communication of critical concerns IR, NUES Corporate Governance report, Ethics in HydrogenPro 67, 74 02-17 Collective knowledge of the highest governance body IR, Board of Directors report 58 02-18 Evaluation of the performance of the highest governance body IR, NUES Corporate Governance report 66 02-19 Remuneration policies IR, NUES Corporate Governance report 68 02-20 Process to determine remuneration IR, NUES Corporate Governance report 68 02-21 Annual total compensation ratio IR, Sustainability factbook 163 02-22 Statement on sustainable development strategy IR, Material ESG topics, Sustainability targets 21, 24 02-23 Policy commitments IR, Ethics in HydrogenPro 74 02-24 Embedding policy commitments IR, Ethics in HydrogenPro 74 02-25 Processes to remediate negative impacts IR, NUES Corporate Governance 67 HYDROGENPRO / ANNUAL REPORT 2023 165164 Code GRI disclosure title Reference or additional information Page 403-4 Worker participation, consultation, and communication on occupational health and safety IR, A safe and attractive place to work 45 403-5 Worker training on occupational health and safety IR, A safe and attractive place to work 45 403-6 Promotion of worker health IR, A safe and attractive place to work 45 403-7 Prevention and mitigation of occupational health and safety impacts directly linked by business relationships IR, A safe and attractive place to work 45 403-8 Workers covered by an occupational health and safety management system IR, A safe and attractive place to work 45 403-9 Work-related injuries IR, Sustainability factbook 161 403-1 Work-related ill health IR, Sustainability factbook 161 GRI 404: Training and Education 2016 404-1 Average hours of training per year per employee IR, A safe and attractive place to work 46 404-2 Programs for upgrading employee skills and transition assistance programs IR, A safe and attractive place to work 46 404-3 Percentage of employees receiving regular performance and career development reviews IR, Sustainability factbook 162 GRI 405: Diversity and Equal Opportunity 2016 405-1 Diversity of governance bodies and employees IR, Sustainability factbook 162 405-2 Ratio of basic salary and remuneration of women to men IR, Sustainability factbook 163 GRI 406: Non-discrimination 2016 406-1 Incidents of discrimination and corrective actions taken IR, A safe and attractive place to work 45 GRI 407: Freedom of Association and Collective Bargaining 2016 407-1 Operations and suppliers in which the right to freedom of association and collective bargaining may be at risk IR, Sustainable manufacturing and supply chain, A safe and attractive place to work 35, 44 GRI 408: Child Labor 2016 408-1 Operations and suppliers at significant risk for incidents of child labor IR, Sustainable manufacturing and supply chain, A safe and attractive place to work 35, 45 GRI 409: Forced or Compulsory Labor 2016 409-1 Operations and suppliers at significant risk for incidents of forced or compulsory labor IR, Sustainable manufacturing and supply chain, A safe and attractive place to work 35, 45 GRI 414: Supplier Social Assessment 2016 414-1 New suppliers that were screened using social criteria IR, Sustainable manufacturing and supply chain 35 414-2 Negative social impacts in the supply chain and actions taken IR, Sustainable manufacturing and supply chain 35 Sustainability factbook Code GRI disclosure title Reference or additional information Page 303-2 Management of water discharge-related impacts IR, Efficient technology and scalability, Sustainable manufacturing and supply chain 31, 33 303-3 Water withdrawal IR, Sustainability factbook 157 303-4 Water discharge IR, Sustainability factbook 157 303-5 Water consumption IR, Sustainability factbook 157 GRI 305: Emissions 2016 305-1 Direct (Scope 1) GHG emissions IR, Sustainability factbook, GHG accounts 170 305-2 Energy indirect (Scope 2) GHG emissions IR, Sustainability factbook, GHG accounts 170 305-3 Other indirect (Scope 3) GHG emissions IR, Sustainability factbook, GHG accounts 170 305-4 GHG emissions intensity IR, Sustainable manufacturing and supply chain 33 305-5 Reduction of GHG emissions Data not available for 2023. 305-6 Emissions of ozone-depleting substances (ODS) IR, Sustainability factbook 158 305-7 Nitrogen oxides (NOx), sulfur oxides (SOx), and other significant air emissions IR, Sustainability factbook 158 GRI 306: Waste 2020 306-1 Waste generation and significant waste-related impacts IR, Sustainable manufacturing and supply chain 34 306-2 Management of significant waste-related impacts IR, Sustainable manufacturing and supply chain 34 306-3 Waste generated IR, Sustainability factbook 158 306-4 Waste diverted from disposal IR, Sustainability factbook 158 306-5 Waste directed to disposal IR, Sustainability factbook 158 GRI 308: Supplier Environmental Assessment 2016 308-1 New suppliers that were screened using environmental criteria IR, Sustainable manufacturing and supply chain 35 308-2 Negative environmental impacts in the supply chain and actions taken IR, Sustainable manufacturing and supply chain 35 GRI 401: Employment 2016 401-1 New employee hires and employee turnover IR, Sustainability factbook 158-161 GRI 402: Labor/Management Relations 2016 402-1 Minimum notice periods regarding operational changes IR, A safe and attractive place to work 44 GRI 403: Occupational Health and Safety 2018 403-1 Occupational health and safety management system IR, A safe and attractive place to work 45 403-2 Hazard identification, risk assessment, and incident investigation IR, A safe and attractive place to work 45 403-3 Occupational health services IR, A safe and attractive place to work 45 HYDROGENPRO / ANNUAL REPORT 2023 167166 Sustainability factbook TCFD Index Corporate Governance Disclose the organisation’s governance around climate-related risks and opportunities. TCFD Recommended Disclosures References Describe the board’s oversight of climate-related risks and opportunities Material ESG topics, page 21 Board of Directors, report, page 50 NUES Corporate Governance report, page 62 Material ESG topics, page 21 Describe management’s role in assessing and managing climate-related risks and opportunities Board of Directors, report, page 50 Strategy Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s business- es, strategy, and financial planning where such information is material. TCFD Recommended Disclosures References Describe the climate-related risks and opportunities the organisation has identified over the short, medium, and long term. Board of Directors, report, page 50 Efficient technology and scalability, page 26 Material ESG topics, page 21 Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning. About HydrogenPro, page 14 Board of Directors, report, page 50 Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario. Material ESG topics, page 21 Board of Directors, report, page 50 Risk Management Disclose how the organisation identifies, assesses, and manages climate-related risks. TCFD Recommended Disclosures References Describe the organisation’s processes for identifying and assessing climate-related risks. Material ESG topics, page 21 Board of Directors, report, page 50 NUES Corporate Governance report, page 62 Describe the organisation’s processes for managing climate- related risks. Board of Directors, report, page 50 NUES Corporate Governance report, page 62 Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organisation’s overall risk management. Board of Directors, report, page 50 NUES Corporate Governance, report, page 62 Metrics and Targets Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material. TCFD Recommended Disclosures References Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process. Sustainability targets, page 24 Efficient technology and scalability, page 26 Sustainability Factbook, page 156 Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks. Sustainability Factbook, page 156 Describe the targets used by the organisation to manage climate- related risks and opportunities and performance against targets. Sustainability targets, page 24 Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario. Material ESG topics, page 21 Board of Directors, report, page 50 HYDROGENPRO / ANNUAL REPORT 2023 169168 Sustainability factbook GHG accounts Introduction This report provides a detailed inventory of the company’s emission sources and associated greenhouse gas emissions for the period 1. Jan 2023 - 31. Dec 2023. The emissions are quantified according to the Greenhouse Gas (GHG) Protocol. The company’s activities and transactions are calculated into tonnes of CO2- equivalents using emission factors from vetted sources. A greenhouse gas inventory allows companies to identify emission hot-spots in their operations and in their value chain, and consequently to initiate measures to mitigate their contribution to climate change. This annual report allows the company to measure their emissions over time and thereby manage their progress. Emissions (tCO2e) Emission source 2021 2022 2023 (base year) Mobile combustion 0 2.3 27 Stationary combustion 0 14.0 1 173 Scope 1 total 0 16.3 200 Purchased electricity 2 0 111.3 769 Purchased heat 0 30.0 524 Scope 2 total 0 141.3 1293 Purchased good and services 1200.3 5614.7 33 269 Fuel and energy related emissions 0 0.0 53 Upstream transport and distribution 1.4 279.3 316 Waste generated in operations 0.3 0.7 1 082 Business travel 0 10.3 271 Upstream leased assets 0 2.6 16 Scope 3 total 1202.0 5907.5 35 008 Scope 1, 2 and 3 Total 1202.0 6065,1 36501 1 Mentioned in 2022 as “Purchased Gases” 2 Electricity is calculated using location-based method. Read more about location-based and market-based method under Annual Inventory, Methodology and Sources in this report. 0,5% of emissions in Scope 1 3,5% of emissions in Scope 2 95,9% of emissions in Scope 3 Scope 1 Scope 2 Scope 3 Figure 1: Emissions by Scope Emissions (tCO2e) Emission source 2021 2022 2023 (base year) Electricity market-based method 3 0 383.9 866 Scope 2 market-based method total 0 388.9 866 Scope 1, 2 and 3 total market based method 1202.0 6312.6 36074 3 Electricity is calculated using market-based method. Read more about location-based and market-based method under Annual Inventory, Methodology and Sources in this report. While we did report last year that 2022 would be our basis year, we see the need to reassess this decision. This is primarily due to the fact that our production facility in Tianjin, China was not fully operational until the end of 2022, making 2023 our first year with full production. Thus, we consider our GHG emissions for 2023 to be much more representative of our operations, and we will use it as a benchmark to measure our progress going forward. The compelling change in our operations compared to 2022 is one of the reasons why our GHG emissions are much higher in 2023. The other reason is that we have significantly increased the accuracy of our GHG accounting in 2023 1 . To do so, we have increased the scope of data reported, both from a top-down approach through spend and from a bottom-down approach through activity-based reporting. We have actively involved all our business units in the process to ensure the accuracy and completeness of the reported emissions. Annual Inventory, Methodology and Sources This Greenhouse Gas Inventory is prepared in accordance with the Greenhouse Gas Protocol (GHG Protocol) Cor- porate Accounting and Reporting Standard, and its related updates and guidelines. The GHG Protocol is a partner- ship between the World Resource Institute (WRI) and the World Business for Sustainable Development (WBCSD) that provides standards, guidance, tools and training for business and government to measure and manage climate-warming emissions. The standard covers the accounting and reporting of the seven greenhouse gases covered by the Kyoto Protocol – carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PCFs), and sulphur hexafluoride (SF6). The emissions of each GHG (CO2, CH4, N2O, etc.) are calculated separately and then converted to CO2 equivalents on the basis of their global warming potential. The GHG Protocol differentiates between two approaches for consolidating the inventory: the equity share ap- proach and the control approach. The control approach can then be defined as operational control or financial control. The inventory is based on the Operational Control approach. According to this, a company should account for all the entities over which it has full authority to introduce and implement its operating policies. In line with this approach, we have considered necessary to add this year a nickel plating facility that HydrogenPro used in 2022 and 2023. This facility has previously been accounted for as a suppli- er. The relationship with the industrial park where the facility is located was terminated primo December 2023, and the data related to the facility will therefore not be included in 2024 figures. This will lead to a temporary increase in emissions related to operations in the factory by 2259 tons CO2 in 2023. Around 32% of these emissions come from scope 2 sources, and 67% from scope 3, with purchased heat and electricity and purchased materials being the most important emissions for scope 2 and 3 respectively. HYDROGENPRO / ANNUAL REPORT 2023 171170 Sustainability factbook In line with the GHG Protocol, the inventory divides greenhouse gas emissions, calculated into CO2 equivalents, into three scopes, where Scope 1 & 2 are deemed mandatory by the Protocol, while Scope 3 is encouraged but voluntary. Scope 1 & 2 Scope 1 includes direct GHG emissions from sources that are owned or controlled by the company. These sources are categorized in four groups: mobile combustion (e.g. company-owned vehicles), stationary combustion (e.g. furnace heating of facilities), process emissions (e.g. emissions from chemical production), and fugitive emissions (e.g. leakage of refrigerants). Direct CO2 emissions from the combustion of biomass, also called biogenic emissions, shall not be included in Scope 1 but should be reported separately. Scope 2 includes indirect GHG emissions from the generation of purchased electricity consumed by the company. Purchased electricity is defined as electricity that is purchased or otherwise brought into the organizational bound- ary of the company. Scope 2 emissions physically occur at the facility where electricity is generated. The Protocol mandates that Scope 2 emissions must be reported in two ways: with location- based method and market-based method. Location-based method reflects the average emissions intensity of grids on which energy consumption occurs, which is usually a mix between renewable and non-renewable energy sources. It derives emission factors mostly from grid-averages for defined geographic locations, including local, subnational, or national boundaries. Market-based method reflects emissions from electricity that companies have purposefully chosen (or not chosen). It derives emission factors from contractual instruments, such as Guarantees of Origin (GoOs), Renewable Ener- gy Certificates (RECs) and Power Purchase Agreements (PPAs). If the company has purchased such contractual instruments, the market-based emissions will reflect this, whereas if such instruments are not purchased, the market-based emissions will reflect the residual emissions of the unclaimed electricity mix (often referred to as the “residual mix”), which tends to be much higher than the location-based emission factors. The inventory includes all material emission sources in Scope 1 & 2 and data is complete for both scopes, across all entities. 88,4% of our emissions in Scope 1 & 2 is calculated based on bottom-up activity data, while 11,6% is calculated based on top-down transaction data. We did not have any biogenic emissions during the reporting period. Scope 3 Scope 3 includes other indirect GHG emissions that occur upstream and downstream of the company’s activities. These emissions occur as a consequence of the activities of the company, but stem from sources not owned or controlled by the company. Scope 3 emissions are divided into 15 categories (see diagram below). For the reporting period we have been able to include the following categories: Mobile combustion, Stationary combus- tion, Purchased electricity, Purchased heat, Purchased goods and services, Fuel and energy related emissions, Upstream transport and distribution, Waste generated in operations, Business travel, Upstream leased asset. For all these catego- ries, data is complete across all entities except for Business travel 2 , where only air mileage is complete across all entities, while road transport is only reported for Denmark, Germany and China and not comprehensively. For the other scope 3 categories not mentioned here, evaluations of relevance have not been conducted. We will continue to improve and expand our Scope 3 inventory to include all material categories in the near future. 5,3% of our emissions in Scope 3 is calculated based on bottom-up activity data, while 94,7% is calculated based on top- down transaction data (read more about types of data in the Methodology chapter of this report). Input data The input data used to calculate emissions in the three scopes can either be primary data in the form of activity data that the company retrieves itself or supplier-specific activity data that is retrieved from suppliers, or it can be secondary data in the form of averages for similar activities or transaction data retrieved through accounting systems. The GHG Protocol prefers activity data to be used for calculating emissions in Scope 1 & 2, as activity data will allow for a more granular analysis that will enable decision-making. However, activity data is hard to come by for Scope 3, which leads to incomplete inventories. Thus, average and transaction-based data can be used to popu- late the inventory. In addition to allowing for input of activity data, the tool used for the GHG accounts enables the calculation of transaction-based emissions using an environmentally-extended multi-regional input-output model (EE-MRIO) which estimates emissions resulting from the production and upstream supply chain activities of different sectors and products based on their geographical location. EEIO models are derived by allocating direct sectoral GHG emissions and relate these to the output level in the sector (sectoral intensities or sectoral Scope 1 emissions). All sectoral intensities are further interlinked with material and service input and output relations of all sectors in the world (66 individual economies + ROW group). By combining this model with company business data, we achieve estimated cradle-to-gate GHG emissions, and these are particularly useful when screening emission hot-spots in a global value-chain perspective. This dual approach - a bottom-up activity-based approach combined with a top-down transaction-based approach - allows companies to harness the combined strength of accuracy and completeness in their GHG inventory, there- by maximizing their ability to use the inventory for strategic decision-making in planning their decarbonization. The SaaS platform the GHG accounting tool is based on, always ensures that the GHG emissions are captured either with activity data or by the transaction-based method, thus double counting will not occur. Figure 2: Data Foundation Scope 1 Scope 2 Scope 3 Activity Data Transaction Data 0,5% of emissions in Scope 1 3,5% of emissions in Scope 2 95,9% of emissions in Scope 3 13,3% activity data 86,7% transaction data 100,0% activity data 0,0% transaction data 5,3% activity data 94,7% transaction data HYDROGENPRO / ANNUAL REPORT 2023 173172 Sustainability factbook Changes in methodology from the 2022 GHG accounts: 1 In 2022 emissions from the daughter company HydrogenPro China were calculated entirely through internal spend and accounted as Scope 3. In 2023 internal transactions from HydrogenPro ASA to its Chinese daughter were removed from the calculation and standardized spend data was collected for all entities across HydrogenPro. This led to a much more accurate accounting of the Chinese operations, that are now accounted for in all scopes. 2 In 2022 the emission factors from the travel agency Bennett Norway were used to calculate emissions from business flights from the Norwegian business. In 2023 the emission factors provided by the MoreScope platform was used for all business travels across locations. Voluntary reporting under Article 8 of the EU taxonomy regulation The Taxonomy is a classification system created by the European Union (EU) that determines which economic activities are to be considered environmentally sustainable for investment purposes. In Norway, the EU Taxono- my is incorporated into Norwegian law through the Act on Disclosure of Sustainability-related Information in the Financial Sector that entered into force 1 January 2023. HydrogenPro is not required to report in accordance with the EU Taxonomy, as we do not qualify for the Non-Financial Reporting Directive’s definition of a large company of public interest. However, we acknowledge that this information is of interest to many of our stakeholders and have chosen to do a preliminary voluntary reporting of our taxonomy eligible activities. We will continue to follow best practice with respect to ESG reporting while waiting for harmonized disclosure rules for all non-financial compa- nies. We welcome the Corporate Sustainability Reporting Directive and European Sustainability Reporting Stan- dards coming into effect for accounting year 2025. HydrogenPro has identified two economic activities described in the EU Taxonomy Climate Delegated Act that are of relevance for our company. Most of our business activities are taxonomy eligible under the activity 3.2 Manufac- turing of equipment for hydrogen production, but we also have a small portion of R&D and engineering studies that meet the description stated in activity 9.1 Close to market research, development, and innovation. We have identified the part of our turnover, capital expenditures (CapEx) and operational expenditures (OpEx) that are taxonomy eligible for the accounting year of 2023. ■ Turnover: All our turnover is taxonomy eligible. Our revenue is derived from either sale of electrolyser systems which qualifies under activity 3.2, or revenue from sale of front-end engineering and design (FEED) and case studies, covered by activity 9.1. ■ CAPEX: All investments made in 2023 are related to activity 3.2 Manufacturing of hydrogen and is thus taxono- my eligible. ■ OPEX: We have included costs related to manufacturing of hydrogen equipment as eligible. This includes, among other things, personnel expenses and maintenance material. In addition, we have included non-capital- ised costs related to research and development, which are eligible under 9.1. We have excluded costs that are not directly linked to the economic activities described above, such as costs related to our uplisting to Oslo Børs main market and consultancy fees following the implementation of a new ERP-system. This results in a total of 89% of our OPEX being taxonomy eligible. We do acknowledge that there is no common standardised way of determining how to calculate the OPEX KPI. We will monitor how the reporting requirements evolve going forward. Further down the line, we will start to assess what part of our activities that are taxonomy aligned. This is particu- larly interesting for activity 3.2, which covers the majority of our business. To meet the technical screening criteria set out for taxonomy aligned activities under 3.2 Manufacturing of hydrogen equipment, the equipment manufac- tured must produce hydrogen in accordance with the requirements set out in activity 3.10 Production of hydrogen. Activity 3.10 states that for hydrogen production to be taxonomy aligned, life cycle GHG emissions must be lower than 3tCO2e/tH2, equaling a life cycle GHG emission saving of 73,4%. We expect that our equipment meets the current technical screening criteria for life-cycle emissions posted in 3.10 Production of hydrogen, as our high-pres- sure alkaline electrolysers run on renewable energy. We will take further steps to assess and include the “do no significant harm” and “minimum social safeguard” criteria in our taxonomy reporting for the accounting year 2024. HYDROGENPRO / ANNUAL REPORT 2023 175174 Hydrovegen 6, 3933 Porsgrunn, Norway hydrogen-pro.com [email protected] Tel: +47 990 79 500 549300EW945NUS7PK2142023-01-012023-12-31549300EW945NUS7PK2142022-01-012022-12-31549300EW945NUS7PK2142023-12-31549300EW945NUS7PK2142022-12-31549300EW945NUS7PK2142021-12-31ifrs-full:IssuedCapitalMemberifrs-full:PreviouslyStatedMember549300EW945NUS7PK2142021-12-31ifrs-full:IssuedCapitalMember549300EW945NUS7PK2142022-01-012022-12-31ifrs-full:IssuedCapitalMember549300EW945NUS7PK2142022-12-31ifrs-full:IssuedCapitalMember549300EW945NUS7PK2142021-12-31ifrs-full:SharePremiumMemberifrs-full:PreviouslyStatedMember549300EW945NUS7PK2142021-12-31ifrs-full:SharePremiumMember549300EW945NUS7PK2142022-01-012022-12-31ifrs-full:SharePremiumMember549300EW945NUS7PK2142022-12-31ifrs-full:SharePremiumMember549300EW945NUS7PK2142021-12-31ifrs-full:AdditionalPaidinCapitalMemberifrs-full:PreviouslyStatedMember549300EW945NUS7PK2142021-12-31ifrs-full:AdditionalPaidinCapitalMember549300EW945NUS7PK2142022-01-012022-12-31ifrs-full:AdditionalPaidinCapitalMember549300EW945NUS7PK2142022-12-31ifrs-full:AdditionalPaidinCapitalMember549300EW945NUS7PK2142021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMemberifrs-full:PreviouslyStatedMember549300EW945NUS7PK2142021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember549300EW945NUS7PK2142022-01-012022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember549300EW945NUS7PK2142022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember549300EW945NUS7PK2142021-12-31ifrs-full:OtherReservesMemberifrs-full:PreviouslyStatedMember549300EW945NUS7PK2142021-12-31ifrs-full:OtherReservesMemberifrs-full:FinancialEffectOfCorrectionsOfAccountingErrorsMember549300EW945NUS7PK2142021-12-31ifrs-full:OtherReservesMember549300EW945NUS7PK2142022-01-012022-12-31ifrs-full:OtherReservesMember549300EW945NUS7PK2142022-12-31ifrs-full:OtherReservesMember549300EW945NUS7PK2142021-12-31ifrs-full:EquityAttributableToOwnersOfParentMemberifrs-full:PreviouslyStatedMember549300EW945NUS7PK2142021-12-31ifrs-full:EquityAttributableToOwnersOfParentMemberifrs-full:FinancialEffectOfCorrectionsOfAccountingErrorsMember549300EW945NUS7PK2142021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember549300EW945NUS7PK2142022-01-012022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember549300EW945NUS7PK2142022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember549300EW945NUS7PK2142021-12-31ifrs-full:NoncontrollingInterestsMemberifrs-full:PreviouslyStatedMember549300EW945NUS7PK2142021-12-31ifrs-full:NoncontrollingInterestsMember549300EW945NUS7PK2142022-01-012022-12-31ifrs-full:NoncontrollingInterestsMember549300EW945NUS7PK2142022-12-31ifrs-full:NoncontrollingInterestsMember549300EW945NUS7PK2142021-12-31ifrs-full:PreviouslyStatedMember549300EW945NUS7PK2142021-12-31ifrs-full:FinancialEffectOfCorrectionsOfAccountingErrorsMember549300EW945NUS7PK2142021-12-31549300EW945NUS7PK2142023-01-012023-12-31ifrs-full:IssuedCapitalMember549300EW945NUS7PK2142023-12-31ifrs-full:IssuedCapitalMember549300EW945NUS7PK2142023-01-012023-12-31ifrs-full:SharePremiumMember549300EW945NUS7PK2142023-12-31ifrs-full:SharePremiumMember549300EW945NUS7PK2142023-01-012023-12-31ifrs-full:AdditionalPaidinCapitalMember549300EW945NUS7PK2142023-12-31ifrs-full:AdditionalPaidinCapitalMember549300EW945NUS7PK2142023-01-012023-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember549300EW945NUS7PK2142023-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember549300EW945NUS7PK2142023-01-012023-12-31ifrs-full:OtherReservesMember549300EW945NUS7PK2142023-12-31ifrs-full:OtherReservesMember549300EW945NUS7PK2142023-01-012023-12-31ifrs-full:EquityAttributableToOwnersOfParentMember549300EW945NUS7PK2142023-12-31ifrs-full:EquityAttributableToOwnersOfParentMember549300EW945NUS7PK2142023-01-012023-12-31ifrs-full:NoncontrollingInterestsMember549300EW945NUS7PK2142023-12-31ifrs-full:NoncontrollingInterestsMemberiso4217:NOKiso4217:NOKxbrli:shares
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