Arendals Fossekompani

Arendals Fossekompani Asa - 5967007LIEEXZXG4U097 - 2023 5967007LIEEXZXG4U097 2022-01-01 2022-12-31 5967007LIEEXZXG4U097 2022-01-01 2022-12-31 ifrs-full:RetainedEarningsMember 5967007LIEEXZXG4U097 2022-01-01 2022-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 5967007LIEEXZXG4U097 2022-01-01 2022-12-31 ifrs-full:NoncontrollingInterestsMember 5967007LIEEXZXG4U097 2020-12-31 ifrs-full:IssuedCapitalMember 5967007LIEEXZXG4U097 2020-12-31 ifrs-full:SharePremiumMember 5967007LIEEXZXG4U097 2020-12-31 ifrs-full:TreasurySharesMember 5967007LIEEXZXG4U097 2020-12-31 ifrs-full:OtherReservesMember 5967007LIEEXZXG4U097 2020-12-31 ifrs-full:RetainedEarningsMember 5967007LIEEXZXG4U097 2020-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 5967007LIEEXZXG4U097 2020-12-31 ifrs-full:NoncontrollingInterestsMember 5967007LIEEXZXG4U097 2020-12-31 5967007LIEEXZXG4U097 2021-01-01 2021-12-31 ifrs-full:RetainedEarningsMember 5967007LIEEXZXG4U097 2021-01-01 2021-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 5967007LIEEXZXG4U097 2021-01-01 2021-12-31 ifrs-full:NoncontrollingInterestsMember 5967007LIEEXZXG4U097 2021-01-01 2021-12-31 5967007LIEEXZXG4U097 2021-01-01 2021-12-31 ifrs-full:OtherReservesMember 5967007LIEEXZXG4U097 2021-01-01 2021-12-31 ifrs-full:SharePremiumMember 5967007LIEEXZXG4U097 2021-01-01 2021-12-31 ifrs-full:TreasurySharesMember 5967007LIEEXZXG4U097 2021-12-31 ifrs-full:IssuedCapitalMember 5967007LIEEXZXG4U097 2021-12-31 ifrs-full:SharePremiumMember 5967007LIEEXZXG4U097 2021-12-31 ifrs-full:TreasurySharesMember 5967007LIEEXZXG4U097 2021-12-31 ifrs-full:OtherReservesMember 5967007LIEEXZXG4U097 2021-12-31 ifrs-full:RetainedEarningsMember 5967007LIEEXZXG4U097 2021-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 5967007LIEEXZXG4U097 2021-12-31 ifrs-full:NoncontrollingInterestsMember 5967007LIEEXZXG4U097 2021-12-31 5967007LIEEXZXG4U097 2022-01-01 2022-12-31 ifrs-full:OtherReservesMember 5967007LIEEXZXG4U097 2022-01-01 2022-12-31 ifrs-full:SharePremiumMember 5967007LIEEXZXG4U097 2022-01-01 2022-12-31 ifrs-full:TreasurySharesMember 5967007LIEEXZXG4U097 2022-12-31 ifrs-full:IssuedCapitalMember 5967007LIEEXZXG4U097 2022-12-31 ifrs-full:SharePremiumMember 5967007LIEEXZXG4U097 2022-12-31 ifrs-full:TreasurySharesMember 5967007LIEEXZXG4U097 2022-12-31 ifrs-full:OtherReservesMember 5967007LIEEXZXG4U097 2022-12-31 ifrs-full:RetainedEarningsMember 5967007LIEEXZXG4U097 2022-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 5967007LIEEXZXG4U097 2022-12-31 ifrs-full:NoncontrollingInterestsMember 5967007LIEEXZXG4U097 2022-12-31 iso4217:NOK iso4217:NOKxbrli:shares GENERATIO FOR GENERATIONS ATIONS FOR GENE Arendals Fossekompani Integrated Report 2022 Annual and Sustainability Report For generations, Arendals Fossekompani has provided people and communities with clean energy and inspiration. Established in 1896 to harness the energy from an everlasting resource, water – we have utilized the beneﬁts of this resource to build and develop high-tech companies. What started as a local producer of hydropower, has transformed into a global industrial investor. While running water continues to power our business, we search for, invest in, and support companies that have the potential to make a difference. To enable the transition to a more sustainable future we offer human and ﬁnancial resources to renew and advance industries. Our competence is particularly strong in areas such as renewable energy, electriﬁcation, materials, digitalization, and big data analytics. We are a proud builder and supporter of technology that impacts the world. That is our legacy, our history, our future. It is what we have done, and what we’ll continue to do. For generations. GENERATIONS RATIONS FOR GENERATIONS 2 3 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 ANNUAL AND SUSTAINABILITY REPORT Financial and Sustainability Highlights 2022 Record-high electricity prices, increased hydropower tax The average price of electricity in the NO2 spot market reached record-high levels. An increased tax burden on Norwegian hydro- power producers reduced net proﬁt for the year. NOK 7.55 1.9% of market cap paid as dividend In addition to quarterly cash dividends of NOK 3.75 per share, Arendals Fossekompani paid extraordinary dividend totaling NOK 3.80 per share, as dividend in kind. SaaS growth continues Volue reported revenue growth in all segments in 2022. Total revenues grew by 17% to NOK 1.2 billion compared with 2021, while SaaS revenues grew by 28%. A global player within induction heating and wireless charging Following the acquisition of wireless charging solutions provider IPT Technology, ENRX (formerly known as Evolgy) was established to combine IPT Technology (Charge) with EFD Induction (Heat). ENRX saw high order intake during 2022 and an all-time-high order backlog at year-end. 64% Strong increase in Tekna backlog Tekna saw a 64% increase in its backlog at year-end compared to 2021. The Tekna share made the transition to Oslo Børs, the main list of the Oslo Stock Exchange on 1 July 2022. Establishing energy storage company Following the acquisition of the German energy storage specialist Commeo in Q2, AFK established Ampwell to build an eco-system for battery technology and Battery- as-a-Service business model. Sustainability linked loan facilities Renewal of loan facilities totaling NOK 1.8 billion was ﬁnalized in June. As part of the new terms, Arendals Fossekompani will be rewarded for its performance related to a selection of sustainability targets. Certiﬁed as Equal Workplace Following a thorough evaluation of how equality and diversity are implemented in the company strategy, Arendals Fossekompani was certiﬁed as an Equal Workplace in 2022. Science Based Targets We have in 2022 submitted science based emission reduction targets in line with the Science Based Target initiative criteria and recommendation. We are committed to reducing absolute Scope 1 and Scope 2 greenhouse gas emissions by 42% by 2030. Reduced greenhouse gas emissions Continuous focus on sustainability resulted in reduction of our total Scope 1 and Scope 2 emissions from 4,404 tCO 2 e in 2021 to 4,061 tCO 2 e in 2022. FINANCIAL AND SUSTAINABILITY HIGHLIGHTS 2022 4 5 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 ANNUAL AND SUSTAINABILITY REPORT Content 01 Arendals Fossekompani 8 CEO Statement 10 Arendals Fossekompani in the World 12 Who We Are 14 Value Creation for Generations 16 Arendals Fossekompani Group 18 AFK Group Managment 24 Shareholder Information 28 Reporting 100 Years Ago 32 02 Portfolio 34 Assets 36 Green Energy AFK Vannkraft 38 Ampwell 42 Vergia 46 Digitalization & Big Data Analytics NSSLGlobal 50 Volue 54 Alytic 58 Electriﬁcation & Materials Tekna 62 ENRX 66 Property AFK Property 70 03 From the Boardroom 74 Board of Directors 76 Board of Directors’ Report 78 Corporate Governance Report 84 04 Sustainability 98 Integrity 100 Reporting Frameworks 100 EU Taxonomy Summary 102 Stakeholder Dialogue and Materiality Analysis 105 Sustainability Priorities 106 Updated Materiality Assessment 106 Strategic Focus Areas 107 Membership Associations 108 Ethical Business Conduct 109 Responsible Investments 115 Optimizing the Portfolio Companies 118 A Great Place to Work 122 Community Engagement 135 Ambitions and Targets for 2023 138 05 Financial Statements 142 Annual Accounts and Notes in Full 144 Declaration by the Members of the Board and the CEO 228 Independent Auditor’s Report 230 06 Appendix 236 GRI Content Index 238 Independent Auditor’s Statement 246 List of Abbreviations 248 Additional Reports 250 Activity and Reporting Obligations Report 2022 Carbon Accounting Report 2022 EU Taxonomy Report 2022 Human Rights and Transparency Act Report 2022 Remuneration Report 2022 TCFD: Climate-Risk Assessment Report 2022 About This Report 251 6 7 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 ANNUAL AND SUSTAINABILITY REPORT CONTENT CEO Statement 10 Arendals Fossekompani in the World 12 Who We Are 14 Value Creation for Generations 16 Arendals Fossekompani Group 18 AFK Group Management 24 Shareholder Information 28 Reporting 100 Years Ago 32 01 Arendals Fossekompani 9 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 9 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT Building a 2030 compliant, high value portfolio Arendals Fossekompani is further developing an advanced technology and industry portfolio that is positioned in high-growth global megatrends and aligned with global sustainable development goals for 2030. Lars Peder Fensli, Interim CEO Based on more than a century of renewable energy production, Arendals Fossekompani has a broad and well-diversiﬁed portfolio with a strong sustain- ability proﬁle. Major investments are in hydro, wind and solar power, software for management of renewable energy, battery technology, optimisation of resources, electriﬁcation, mobile communication solutions, and additive manufacturing. All our businesses are well positioned in global megatrends, and they have strong organi- sations and valuable customer bases. Our portfolio is very exciting, and we believe it has a strong potential for value enhancement towards 2030 and beyond. POSITIONING THE PORTFOLIO, BUILDING NEW BUSINESSES In a busy 2022, Arendals Fossekompani completed various structural and strategic actions, including the acquisition of energy storage specialist Commeo and induction charging expert IPT Technology. With the acquisition of Commeo, Arendals Fossekompani established the company Ampwell, which will combine hardware from Commeo with technology from start-up Cellect Energy, to build an eco-system for battery technology and a Battery-as-a- Service business model. IPT Technology was grouped with EFD Induction in a company called Evolgy, now rebranded as ENRX. ENRX combines EFD Induction’s global market leadership in industrial induction heating systems (Heat) with IPT Technology’s leading technology in the high growth market for wireless induction charging solutions for mobility and industrial applications (Charge). A third acquisition, Factlines, was made through our portfolio company Alytic. Offering a digital solution, Factlines makes supply chain mapping efﬁcient, support- ing the process from requirements and code of conduct – to risk analysis, follow-up, and dialogue. CREATING LONG-TERM VALUE Today, our portfolio companies have approximately 2,400 employees in 25 coun- tries. The most important tasks for the AFK Group are to continue to create lasting value for our shareholders, our employees and society at large and to exercise good corporate governance of our portfolio companies. AFK Group has a decentralised management model. The management and boards of our portfolio companies have the main responsibility for shaping the development of their companies. The Group is always represented on the boards and contributes with strategic direction, ﬁnancial strength, a genuine interest in their businesses, and a network that strengthens the position of both the Group and the companies. SUSTAINABILITY AND SOCIAL RESPONSIBILITY Our portfolio of companies has a clear green proﬁle and contributes in several ways to the UN Sustainable Development Goals. Sustainability and corporate social responsibility are important drivers of future value creation, in the form of require- ments from customers, increased access to talent, increased access to capital and increased interest in our share. We are committed to the climate targets in the Paris Agreement. We are a UN Global Compact member and continue to support its principles for responsible business policies for human rights, labour, environment and anti-corruption. Arendals Fossekompani has a strong organisation with highly skilled and dedicated people. We also have a substantial ﬁnancial capacity, and a global customer base which we will continue to serve in the best possible manner. The outlook for our companies is good, and we have identiﬁed clear opportunities to strengthen and build our position in selected segments and markets. 10 11 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT Arendals Fossekompani in the world NUMBER OF EMPLOYEES BY COUNTRY Norway 745 USA 89 Thailand 12 Israel 5 Germany 359 Romania 80 Malaysia 8 Spain 5 India 229 France 72 Japan 7 South Korea 2 China 192 Denmark 65 Italy 6 Austria 1 Canada 179 Sweden 59 Netherlands 6 United Kingdom 155 Switzerland 22 Singapore 6 Poland 126 Brazil 16 Finland 5 Arendals Fossekompani Parent Company (AFK Group Management, AFK Vannkraft), AFK Property Employees 38 Head ofﬁce Arendal, Norway Countries Norway Vergia Employees 3 Head ofﬁce Arendal, Norway Countries Norway Ampwell Employees 60 Head ofﬁce Arendal, Norway Countries Norway, Germany Alytic Employees 86 Head ofﬁce Arendal, Norway Countries Norway, Germany, Netherlands Volue Employees 778 Head ofﬁce Oslo, Norway Countries Norway, Germany, Poland, Denmark, Sweden, Switzerland, Finland, Japan, Spain NSSLGlobal Employees 223 Head ofﬁce London, UK Countries United Kingdom, Germany, Norway, Denmark, Singapore, Israel, Netherlands, Poland, USA, Sweden Tekna Employees 216 Head ofﬁce Sherbrooke, Canada Countries Canada, France, China, South Korea ENRX Employees 1,047 Head ofﬁce Skien, Norway Countries India, China, Norway, Germany, USA, Romania, France, United Kingdom, Poland, Brazil, Thailand, Malaysia, Italy, Japan, Sweden, Spain, Austria 13 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 12 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 Who we are Arendals Fossekompani is an industrial investment company that combines industrial, technological, and capital markets expertise to identify and develop opportunities for value creation. We have an attractive portfolio positioned in verticals driven by global megatrends. Our portfolio companies have 2,400 employees in 25 countries. Established in 1896 to harness the energy from an everlasting natural resource; water, Arendals Fossekompani is still a proud producer of hydropower. In addition, we operate globally in many forward-looking industries including 3D printing, algo trading, satellite services, battery and solar technology, software and digitalisation, as well as various green energy technologies. Collaborative We develop our companies in collaboration with the world around us and our partners. Long-term Based on more than a century of industrial history, we continue to develop our companies in a sustainable and long-term perspective. Dynamic We show the ability, energy and motivation to carry out our ambitions. Responsible We act in an ethical and responsible manner in all situations. We develop our companies in a sustainable manner. Our mission Arendals Fossekompani shall create lasting value for its stakeholders through long- term and active development of the companies we own. We invest in and own com- panies that make energy from renewable sources more usable and accessible, and that contribute to a more sustainable use of resources. Based on our industrial and ﬁnancial expertise, we also invest in technology and energy companies that enable the green transition. Arendals Fossekompani is a proud builder and supporter of technology that impacts the world. That is our legacy, our history, our future. It is what we have done, and what we’ll continue to do. For generations. Our values 14 15 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT Value creation for generations 1896 Company founded 1913 Electricity and industry 1927 More hydropower 1960s Financial investor 1990s New opportunities 2000s International investor Arendals Fossekompani was founded on 30 January 1896 to harness the forces in the Arendal watercourse system and transform them into elec- tric power. We acquired rights to several waterfalls, including Bøylefossen and Flatenfossen. Norwegian industrial entrepre- neur Sam Eyde was instrumental in the early years. Arendals Fossekompani gradu- ally built a substantial ﬁnancial capacity. At the end of the 1960s, the company changed it's mission statement and built a portfolio of ﬁnancial investments in listed and unlisted companies. The construction of Bøylefoss Hydropower Plant started in 1911, in parallel with the establishment of new industry in Eydehavn. The ﬁrst electric power from Bøylefoss was delivered to Eydehavn in the summer of 1913. That same year, Arendals Fossekompani was listed at Oslo Børs. Deregulation of the Norwegian electricity market presented new market opportunities. Arendals Fossekompani played an active role and established a subsidiary, Markedskraft, as an independent provider of services in the Nordic and European wholesale electric- ity market. Growing demand for electricity for industrial purposes, led to the development of Flatenfoss Hydropower Plant in 1927. The original plant was operational until it was replaced in 2009. The new millennium marked the start of the transformation of Arendals Fossekompani, from a local hydropower producer to an international investment company. A series of successful investments in Norwegian and international companies, since the early 2000’s up until today, have contributed to today’s portfolio of companies within forward-looking industries such as Green Energy, Technology, Electriﬁcation, Materials and Property. Consolidated revenues increased from around NOK 250 million in 2004 to nearly NOK 4,600 million in 2022. In 2022, hydropower accounted for approximately thirteen percent of consolidated revenues. 17 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 16 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 Arendals Fossekompani Group Arendals Fossekompani is an industrial investment company holding nine core investments and a portfolio of ﬁnancial investments. These operations employ 2,400 people in 25 countries. FINANCIAL FIGURES (MNOK) 2022 2021 2020 Total revenue 4,587 4,232 3,157 EBITDA 726 686 401 Operating proﬁt (EBIT) 429 450 161 Operating margin 9% 11% 5% Earnings before tax (EBT) 426 332 99 Earnings after tax (EAT) -33 97 66 Operating cash ﬂow 483 857 135 NIBD -1,208 -1,805 -580 Equity 3,784 3,909 3,856 Equity ratio 48% 57% 55% SUSTAINABILITY KPIs 2022 2021 2020 Environment Scope 1 GHG (tCO 2 e) 1,614 1,581 656 1 Scope 2 GHG (location-based) (tCO 2 e) 2,447 2,823 238 Scope 3 GHG (tCO 2 e) 3,394 1,276 175 Energy consumption (MWh) 25,859 24,449 10,336 Social Lost time injury rate 1.0 0.8 - Sick leave 3.0% - - Absentee rate 3.0% 1.5% 2.9% Turn-over rate 16% 7.6% 4.5% Women in Board of Directors 28% 30% 13% Governance CoC signed 78% 87% 87% No of reported incidents/breach of CoC/SCoC 2 - - Operations assessed for corruption risks 69% 100% - Training in CoC and Whistleblower policy 45% 87% - 1. Former portfolio company, Cogen, is not included. ENRX did not report GHG emissions in 2020. Head ofﬁce Arendal, Norway Chair Trond Westlie Chief Executive Ofﬁcer Lars Peder Fensli Employees 2,400 Countries 25 Arendals Fossekompani (AFK) has proud traditions in power production and owns and operates two hydropower plants. In addition, Arendals Fossekompani operates globally in many forward-looking industries including 3D printing, algo trading, satellite services, battery and solar technology, software, and digitalisation, as well as various green energy technologies. 18 19 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 2022 IN BRIEF (Figures in parentheses refer to the same period the previous year) In 2022, Arendals Fossekompani reported consolidated revenues of NOK 4,587 mil- lion (4,232 million) and operating proﬁt of NOK 429 million (450 million). Ordinary proﬁt after tax amounted to NOK -33 million (97 million), of which the AFK sharehold- ers’ share of the proﬁt was NOK 6 million (107 million). Including currency differences, changes in the value of available-for-sale ﬁnancial assets, minority interests, and other comprehensive income items, the Group’s total comprehensive income was NOK 12 million (160 million). The Arendals Fossekompani’s ﬁnancial position remains solid. The cash position as at 31 December amounted to NOK 1,160 million. In addition, the company has undrawn credit facilities of NOK 1,947 million, securing net available liquidity of NOK 3,107 million at year-end. Consolidated revenues in 2022 increased by 8% year-on-year. Adjusted for AFK Property’s revenue recognition of the first phase of the development project Bryggebyen in 2021, consolidated revenues grew by 23% in 2022, compared to 2021. 2022 was marked by high electricity prices and high activity levels in the portfolio companies. AFK also completed two strategic transactions during 2022, including the acquisition of energy storage specialist Commeo, forming the basis for establish- ing the energy storage company Ampwell, as well as the acquisition of the induction charging company IPT Technology, which was merged with EFD Induction, forming ENRX Group. Volue Volue continues the transformation towards recurring revenues and Software-as-a- Service (SaaS), with SaaS revenues growing by 28% from 2021 to 2022. Growth was particularly strong within the Energy segment, driven by volatile power markets and high demand for forecast, analytics, and trading services. The SaaS transformation builds a platform that can handle a large number of new customers, enabling fur- ther revenue growth. Recurring revenue constituted 63 percent of total revenues and reached NOK 765 million in 2022, an increase of 15 percent compared to 2021. Strategic contracts won within all segments during the year conﬁrms Volue’s capa- bilities and position in the market. Tekna Tekna reported operating revenues of CAD 26.9 million in 2022, in line with 2021. The order backlog as per year-end saw a 64% increase from 2021, reﬂecting grow- ing demand for additive materials and strong pipeline of systems projects. Tekna initiated a machine capacity increase program during 2022 to meet the demand from additive manufacturing, targeting 70% capacity increase. Steps were taken during the year to improve proﬁtability and cash position. Tekna uplisted to Oslo Børs during 2022. ENRX ENRX (previously Evolgy) was formed through the combination of induction heating company EFD Induction and the wireless charging solutions provider IPT Technology, the latter acquired during 2022. ENRX combines EFD Induction’s global market lead- ership in industrial induction heating systems (Heat) with IPT’s leading technology in the high-growth market for wireless induction charging solutions for mobility and industrial applications (Charge). Total operating revenues increased by 15% to EUR 132 million in 2022, driven by both higher activity level within the Heat segments, as well as a smaller revenue contribution from the Charge segment. Order intake in 2022 amounted to EUR 157 million as at 31 December, corresponding to a 22% increase year-over-year. The backlog at year-end was at an all-time high. NSSLGlobal NSSLGlobal reported continued strong revenue growth of 13% and proﬁtability increase during 2022, with airtime revenues and expansion of maritime and gov- ernment project work as main drivers. NSSLGlobal experienced healthy sales throughout the year, including new VSAT leasing orders, governmental and maritime engineering orders, as well as defense contracts across Europe. The company’s long- term backlog provides a stable outlook going forward. Alytic Alytic continued the development of its portfolio of data- and technology-driven companies during 2022. Highlights for the year included the launch of Kontali’s new seafood analytics portal Edge and expansive investments in Greenfact to position the company as a global provider of market data analytics and insight withing green certiﬁcates and carbon markets. In addition, Alytic established itself in the ESG ser- vices vertical through the acquisition of Factlines. AFK Vannkraft AFK Vannkraft (Hydropower) contributed with substantial revenues and operating proﬁt in 2022 due to signiﬁcant uplift in electricity prices. The average spot price in the NO2 price area was EUR 211/MWh (71/MWh) in 2022 while production reached 351 GWh (517 GWh). Operating revenues for the year reached NOK 606 million (373 million) with an operating proﬁt of NOK 537 million (300 million). Earnings after tax amounted to NOK 156 million (170 million), including a NOK 75 million incremental tax provision from changes in the tax regime for Norwegian hydropower producers implemented during 2022. SUSTAINABILITY For the ﬁrst time, our Annual Report is compliant with the Global Reporting Initiative (GRI). The GRI standards are the most widely used standards for sustainability reporting. Total Scope 1 emissions for Arendals Fossekompani as a group was 1,614 tCO 2 e in 2022, up from 1,581 in 2021. Scope 2 emissions decreased to 2,447 tCO 2 e (2,823), while the energy consumption increased slightly. Scope 3 emissions increased to 3,394 tCO 2 e (1,276), mainly because all portfolio companies began reporting waste in 2022. In 2022, the AFK Group did an assessment of the Group’s activities against the EU taxonomy. 58% of the Group’s turnover is eligible with the EU Taxonomy. An align- ment of 22% shows that the Group contributes positively. Our investment strategy has resulted in 69% eligibility and 25% alignment of the Group’s CapEx. For OpEx, the numbers are 50% eligibility and 14% alignment. The OpEx KPI are based on our reporting on both turnover and CapEx, as no activities have been identiﬁed solely for OpEx. The lost time injury rate was 1.0 in 2022, a slight increase from 0.8 in 2021. The absentee rate increased to 3.0% (1.5%). The Women in Board of Directors rate decreased slightly because of some start-up portfolio companies which have not yet established a Board of Directors. The share of employees that has signed the Code of Conduct decreased to 78%, mainly due to new acquisitions and newly established companies, especially the acquisitions of Commeo and IPT Technology. EVENTS AFTER THE CLOSE OF THE YEAR On 16 December 2022, it was announced that Ørjan Svanevik would resign as CEO of Arendals Fossekompani, and CFO Lars Peder Fensli would function as interim CEO as of 1 January 2023 until a new CEO was appointed. On 10 January 2023, it was 20 21 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT announced that Benjamin Kristoffer Golding was appointed new CEO of Arendals Fossekompani. Golding will assume his position at Arendals Fossekompani as soon as his job at DNB comes to an end, but no later than 1 August 2023. On 11 April 2023, Arendals Fossekompani and Tekna signed a loan facility agreement totaling MCAD 25 to ﬁnance operations and further growth in Tekna. The facility will be made available in three tranches (MCAD 5+10+10). On 9 February 2023, the Board of Directors decided to pay an ordinary cash divi- dend of NOK 0.95 per share for the fourth quarter 2022. The dividend was paid on 22 February. On 8 March 2023, the construction of Kilandsfoss Hydropower Plant began. When ﬁnalized in 2025, Kilandsfoss will produce approximately 38 GWh. Project partners are the municipalities of Froland and Åmli, each with one-third ownership. OUTLOOK There is ongoing uncertainty associated with the war in Ukraine, the tax regime for the hydropower industry, supply chain constraints, soaring inﬂation, rising interest rates, as well as the development of energy prices. In this unpredictable environment, Arendals Fossekompani’s solid ﬁnancial position enables continued support of the portfolio companies, both in handling short-term challenges but also in continued investments to strengthen their long-term competitiveness. In light of the market’s estimated power price trend for 2023 and forecasted produc- tion, the revenues and operating proﬁt for AFK Hydropower are expected to be lower than the all-time-high in 2022. Following high activity levels in all portfolio companies, somewhat offset by lower power price expectations, 2023 revenues are expected to be on par with 2022. Operating proﬁt is expected to be lower than 2022. Our main sustainability target for 2023 is to ensure that our governance is in accor- dance with the OECD Guidelines for Multinational Enterprises and NUES. AFK will apply to become a member of Princibles for Responsible Investments (PRI). In Norway, 2023 marks the ﬁrst year of mandatory reporting on the EU Taxonomy. During the 2022 assessment, we identiﬁed areas of improvement, and these will be included in the strategy for 2023. Our focus will be on documentation and scope of alignment assessments. As a part of our Science Based Target project, we have committed and submitted science-based emission reduction targets for AFK Parent Company and AFK Hydropower. The targets will be validated by the Science Based Target initiative (SBTi) in 2023. Portfolio companies must set their own targets within ﬁve years. We will also commit to setting net-zero targets to align with the ambitious goals in the Paris Agreement, which means to reduce emissions to limit global warm- ing to 1.5 °C by 2050. We aim to reach the goal of 40% female members on our Board of Directors in 2023. In addition, we aim to have 40% women in C-suite positions by 2027. SHARE PRICE There is a total of 55,995,250 shares in the company. The share price on 31 December 2022 was NOK 250.5, compared to NOK 445 on 31 December 2021, corresponding to a decrease of -43.7%. When including direct yield (dividend payouts) in the same period, total decrease in shareholder value was -42.0%. Arendals Fossekompani’s total market capitalization was NOK 14.0 billion at year-end. Compounded annual return to AFK shareholders was 18.0% (29.5% including dividends) in the period December 2012 to December 2022. 22 23 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT Group Management FINANCIAL FIGURES (MNOK) 2022 2021 2020 Revenue and other income 23 9 7 EBITDA -82 -60 -52 Operating proﬁt -86 -63 -53 Operating margin - - - Earnings before tax (EBT) 461 1,283 504 Provision for income tax 5 30 -15 Earnings after tax 456 1,253 519 Operating cash ﬂow -539 310 -3,237 NIBD -1,279 -950 -400 Equity 2,228 1,772 519 SUSTAINABILITY KPIs 2022 2021 2020 Environment Scope 1 GHG (tCO 2 e) 0 0 0 Scope 2 GHG (Location based) (tCO 2 e) 0.3 0.3 0.6 Scope 3 GHG (tCO 2 e) 34 46 22 Energy consumption (MWh) 32 33.7 32.9 Social Lost time injury rate 0 0 0 Sick leave 1.3% - - Absentee rate 1.4% 0.8% 0% Turn-over rate 5% 0% 0% Women in Board of Directors 43% 43% 43% Governance CoC signed 100% 100% 100% No of reported incidents/breach of CoC/SCoC 0 - - Operations assessed for corruption risks 100% 100% - Training in CoC and Whistleblower policy 100% 76% - Equity ratio 74% 75% 43% Head ofﬁce Arendal, Norway Chair Trond Westlie Chief Executive Ofﬁcer Lars Peder Fensli Employees 21 Countries 1 Arendals Fossekompani Group Management employs 21 people at the head ofﬁce in Arendal. The team focuses on the development of new sustainable business opportunities, active ownership of portfolio companies, hydropower generation, property projects, and management of ﬁnancial investments. Combining industrial, technological, and capital markets expertise, Group Management identiﬁes and develops opportunities for value creation. As an active owner of our portfolio companies, we drive strategy developments, ﬁnancing, restructuring and transactions, to ensure long-term sustainable value creation. 24 25 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT Arendals Fossekompani has an attractive portfolio positioned in verticals driven by global megatrends, such as Green Energy, Digitalisation & Big Data Analytics, and Electriﬁcation & Materials. Our companies are both listed and privately own, and Arendals Fossekompani is – as part of our strategy – the majority owner. 2022 IN BRIEF (Figures in parentheses refer to the same period the previous year) In 2022, AFK Group Management reported revenues of NOK 22 million (9 million). Operating expences increased to NOK 105 million (69 million), mainly due to costs of several acquisition processes and increased number of employees. The operating proﬁt was NOK -86 million (-63 million). Net proﬁt for the year was NOK 456 million, mainly driven by dividend payments from portfolio companies and proﬁt from trans- actions. Arendals Fossekompani's ﬁnancial position remains solid. The cash position as at 31 December amounted to NOK 1,160 million. In addition, the company has undrawn credit facilities of NOK 1,947 million, securing net available liquidity of NOK 3,107 million per year-end. During 2022, we made two strategic investments through the acquisitions of IPT Technology and Commeo. Both companies have already proven to be highly relevant additions to our portfolio, expanding our offering in two attractive megatrends and utilizing and creating synergies within our portfolio. On 7 April, Arendals Fossekompani acquired the German energy storage special- ist Commeo GmbH and formed the new company Ampwell. With Commeo as a key building block, Ampwell will build an eco-system for battery technology and a Battery-as-a-Service business model. On 19 May, the wireless charging solution provider IPT Technology GmbH was acquired, which led to the establishment of the Evolgy Group, which initially consists of EFD Induction and IPT Technology (Evolgy changed its name to ENRX in March 2023). In June, loan facilities totaling NOK 1.8 billion were renewed at improved terms and with links to sustainability targets. As such, Arendals Fossekompani is rewarded for its continuous sustainability work. GHG emissions consist of Scope 2 and Scope 3. In 2022, Scope 2 was 0.3 tCO 2 and Scope 3 was 34 tCO 2 e. During 2022, we committed and set reduction targets in line with the criteria and recommendations of the Science Based Targets initiative (SBTi). This commitment includes reduction of absolute Scope 1 and Scope 2 GHG emissions with 42% by 2030 from a 2021 base year. The absentee rate was 1.4% in 2022. The turn-over rate was 5.0% with one tem- porary employee leaving the company, while there were 5 new hires. As in previous years, the rate of women in Board of Directors was 43%. 100% of employees have signed and received training in AFK’s Code of Conduct. During 2022, a new Business partner Code of Conduct (BCoC) was developed. We have a whistleblowing channel, so that employees can report on unwanted situations anonymously. There were no reported incidents in the whistleblowing channel during 2022. In 2022, the Transparency Act entered into force. To comply with this act, we have completed a project where we gathered information from all main suppliers. The goal of this assessment was to understand the most important risks in our value chain. The results are published in the separate report Human Rights and Transparancy Report. In addition, we have created a guideline for handling incoming requests for information, in accordance with the Transparency Act. 26 27 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT Arendals Fossekompani is committed to maintaining an open dialogue with its shareholders, investors, analysts, and the ﬁnancial markets in general. Our goal is to ensure that the share price reﬂects its underlying value by making all price-relevant information available to the market. Shareholder Information 200 400 600 800 1,000 1,200 1,400 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 SHARE PRICE LAST 20 YEARS (NOK) Share price Share price incl. dividend Share price incl reinv. dividend We work to create shareholder value in the form of dividends and share price growth over time. In accordance with the document Corporate Governance in Arendals Fossekompani (last revised on 30 March 2021), the company’s dividend policy is deﬁned as follows: “AFK’s dividend policy is to pay dividends that reﬂect the company’s long-term strategy, ﬁnancial position and investment capacity. AFK’s objective is to pay dividends that will provide shareholders with a competitive return over time.” DIVIDEND FOR 2022 Total dividends paid in 2022 amounted to NOK 409 million, corresponding to NOK 7.55 per share. In addition to quarterly cash dividends of NOK 3.75 per share, Arendals Fossekompani distributed a total of 11,300,000 shares in Tekna Holding ASA, equal to one share for every 5 shares held in Arendals Fossekompani and corresponding to NOK 3.80 per share, as dividend in kind. Total dividends paid was equivalent to 1.9% of the volume-weighted average share price in 2022. SHARES AND SHARE CAPITAL As at 31 December 2022, there were a total of 55,995,250 shares in the company, of which 1,118,319 were treasury shares (2.0 percent of the total number of outstanding shares). The three largest shareholders of Arendals Fossekompani are Ulfoss Invest AS (26.3%), Havfonn AS (26.0%) and Must Invest AS (25.2%). There were 4,999 shareholders at year-end 2022, compared to 5,289 shareholders at the end of 2021. 28 29 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT ANNUAL GENERAL MEETING The Annual General Meeting is held as early in the year as is practically possible after the close of the previous ﬁnancial year, usually in April or May. 21 days prior to the Annual General Meeting, meeting notices and attendance registration forms are sent to all shareholders with a known address, and made avail- able on the company’s webpage and via the Oslo Børs distribution service. The annual report and other enclosures to the meeting notice are made available solely via the company’s webpage and the Oslo Stock Exchange distribution service. Shareholders who wish to receive the enclosures by post must contact the company. Shareholders who are unable to attend the General Meeting may vote by proxy. Representatives from the Board of Directors and the auditor attend the General Meeting. The Chief Executive Ofﬁcer and the Chief Financial Ofﬁcer attend on behalf of the management. SHARE PRICE AND MARKET CAP The price of shares in Arendals Fossekompani decreased by 43% in 2022 and closed at 250.5 at year-end, corresponding to a market capitalization of NOK 14 billion. TRADING VOLUME AFK trading volume was comparable to 2021, with a total of 3,430,618 shares traded in 2022, corresponding to 6.1 percent of all shares. Overall turnover from trading of the AFK share in 2022 was NOK 1,299 million, compared to NOK 1,114 million in 2021. The Group’s shares consist only of Class A shares, all of which have equal rights. In accordance with Article 11 of the company’s Articles of Association, no shareholder may, personally or by proxy, vote for more than one quarter of the total number of shares. Due to Arendals Fossekompani’s hydropower production, the current Norwegian concession legislation stipulates, among other things, that a shareholder who acquires more than 20 percent of the total number of shares must apply for a con- cession. The Concession Act requires that the Board of Directors approve such acquisitions. There are several other provisions in the concession legislation that may entail that acquisition of the company’s shares may have consequences for both the company itself and the other shareholders. Thus, the company has found it necessary to have the opportunity to deny the approval of the acquisition of shares. In accordance with Article 7 of the Articles of Association, any acquisition by means of transfer is conditional on the Board’s consent. Consent may only be denied if there is a valid reason for doing so. STOCK EXCHANGE LISTING Arendals Fossekompani ASA is listed at Oslo Børs under the ticker code AFK. The company was listed in 1913 and is the second oldest company at Oslo Børs. The shares are registered in the Norwegian Central Securities Depository with DNB ASA as the account operator and issuer. The securities identiﬁcation number for the share is ISIN NO 0003572802. CURRENT AUTHORISATIONS Currently AFK Parent Company owns 2.1% treasury shares. At Arendals Fossekompani’s Annual General Meeting on 5 May 2022, the Board of Directors was authorized to acquire treasury shares up to a maximum of 10 percent. In accordance with this authorization, the Board of Directors is only permitted to acquire treasury shares at a price ranging from a minimum of NOK 10 and a maximum of NOK 2,000 per share. This authorization will remain in effect until the Annual General Meeting in 2023. In 2022, the company sold 44,306 shares to Executive Management in connection with the company’s incentive program. OPTION SCHEMES As at 31 December 2022, Arendals Fossekompani had no option schemes. INVESTOR RELATIONS Arendals Fossekompani seeks to maintain an open dialogue with shareholders, debt holders, ﬁnancial analysts, and the stock markets in general. The company regularly holds presentations in connection with the publication of quarterly results. All com- pany press releases, stock exchange announcements and investor relations infor- mation are available at www.arendalsfossekompani.no. The website also includes quarterly reports, annual report, presentations, Articles of Association, and the ﬁnan- cial calendar. NOMINATION COMMITTEE The company’s Nomination Committee consists of the following members: Morten Bergesen (Chair), Simen Flaaten, and Trine Must. AUDIT COMMITTEE The company’s Audit Committee consists of the following members: Stine Rolstad Brenna (Chair), Morten Bergesen, and Anne Grethe Dalane. KEY FIGURES FOR AFK SHARE (NOK) 2022 2021 2020 2019 2018 Closing price 31/12 1 250.5 441 180 103 123 Annual growth (%) -43 145 75 -17 24 High/Low 2 471 / 214 503 / 175 195 / 82 137 / 86 167 / 98 Share price average 2 322 302 127 112 134 Market cap 31/12 (million) 14,027 24,204 9,863 5,639 6,775 Dividend per share 3 7.55 37.08 3.44 2.24 34.81 Dividend accumulated 105.72 98.17 61.09 57.65 55.41 Annual turnover (million) 1,299 1,113 282 79 94 Volume 3,430,618 3,472,586 1,979,993 738,500 673,425 Total shareholder return (%) -41.5 166.0 78.3 -15.0 58.9 1. Numbers adjusted for share split effectuated in 2020 2. Based on closing price 3. Paid quarterly 30 31 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT Reporting 100 years ago In 1922, production at Bøylefoss hydropower plant increased compared to the year before, but activity levels at the two major consumers at the time, Det Norske Nitridaktieselskap (producer of aluminum) and Arendal Smelteverk (producer of silicon carbide), was still below average. Only two of the three turbines at Bøylefoss were needed to produce enough energy to supply demand. 1922 TOTAL REVENUES FOR THE YEAR NOK 1,097,000 NET PROFIT NOK 503,000 DIVIDEND PAID TO SHAREHOLDERS NOK 288,000 33 ARENDALS FOSSEKOMPANI ANNUAL AND SUSTAINABILITY REPORT 32 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 Portfolio 02 Assets 36 Green Energy AFK Vannkraft 38 Ampwell 42 Vergia 46 Digitalization & Big Data Analytics NSSLGlobal 50 Volue 54 Alytic 58 Electriﬁcation & Materials Tekna 62 ENRX 66 Property AFK Property 70 35 PORTFOLIO ANNUAL AND SUSTAINABILITY REPORT Digitalization & Big Data Analytics Anything that can be digital, will be digital. By enabling and assisting a digital transformation and providing decision-making data analytics, our portfolio of companies are frontrunners in the digital energy space. AFK ownership 60% Head ofﬁce Oslo, Norway Market cap (31.12) 4,050 MNOK Listed at Oslo Børs AFK ownership 80% Head ofﬁce London, UK AFK ownership 95% Head ofﬁce Arendal, Norway Electriﬁcation & Materials Anything that can be electric, will be electric. As a result, demand for electricity will of course grow, as will demand for smart electric solutions. We invest in companies that install smartness into the electric future. AFK ownership 71% Headquarter Sherbrooke, Canada Market cap (31.12) 739 MNOK Listed at Oslo Børs AFK ownership 95% Head ofﬁce Skien, Norway Property AFK ownership 100% Head ofﬁce Arendal, Norway Green energy Based on more than a century of hydropower production, we are looking to expand our green energy portfolio. As the world is in dire need of more green power, we are looking to capitalize on our competence and history to develop more fossil-free energy sources. AFK ownership 100% Head ofﬁce Froland, Norway AFK ownership 100% Head ofﬁce Arendal, Norway AFK ownership 100% Head ofﬁce Arendal, Norway Investments are based on an understanding of Arendals Fossekompani having the competence and energy necessary to be the best owner in a long-term perspective. Our investments are concentrated within four areas: Green Energy, Digitalization & Big Data Analytics, Electriﬁcation & Materials, and Property. Arendals Fossekompani Assets 36 37 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 PORTFOLIO ANNUAL AND SUSTAINABILITY REPORT AFK Vannkraft Portfolio company AFK Vannkraft generates power at two locations in the Arendal watercourse. The Bøylefoss and Flatenfoss hydropower plants produce on average more than 500 GWh annually. Head ofﬁce Froland, Norway Chair Trond Westlie Operating Manager Jan Roald Evensen Employees 15 Countries 1 Running water is an important part of our running business. For more than 100 years, we have extracted energy from the river Nidelva in the Arendal watercourse. FINANCIAL FIGURES (MNOK) 2022 2021 2020 Operating revenue 606 373 63 Operating proﬁt (EBIT) 535 298 -2 Operating margin 88% 80% -3% Earnings before tax (EBT) 535 298 -2 Provision for income tax 387 130 -3 Earnings after tax (EAT) 148 169 1 SUSTAINABILITY KPIs 2022 2021 2020 Environment Scope 1 GHG (tCO 2 e) 20 23 12 Scope 2 GHG (Location based) (tCO 2 e) 1.9 2.6 3.0 Scope 3 GHG (tCO 2 e) 7.8 18 0.2 Energy consumption (MWh) 357 277 173 Social Lost time injury rate 0 0 0 Sick leave 5% - - Absentee rate 6% 1.3% 7.9% Turn-over rate 0% 0% 0% Women in Board of Directors 43% 43% 43% Governance CoC signed 100% 100% 100% No of reported incidents/breach of CoC/SCoC 0 - - Operations assessed for corruption risks 100% 100% - Training in CoC and Whistleblower policy 100% 100% - 38 39 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 PORTFOLIO ANNUAL AND SUSTAINABILITY REPORT Power price in the NO2 price area and power generation for Arendals Fossekompani per week for the period 30/09/2021 – 31/12/2022. POWER PRICE & POWER GENERATION Power generation (GWh/Week) Power price (EUR/MWh) 100 200 300 400 500 600 2.5 5.0 7.5 10.0 12.5 15.0 10/21 01/22 04/22 07/22 10/22 01/23 AFK Vannkraft is required by law to improve the power plants and associated dam facilities, and consequently Arendals Fossekompani is planning upgrades to both plants in the coming years. The reconstruction of dams will start once detailed requirements have been agreed with the Norwegian Water Resources and Energy Directorate (NVE). AFK Vannkraft reported revenues of NOK 606 million (373 million) in 2022. EBITDA amounted to NOK 545 million (308 million) and operating proﬁt to NOK 535 million (298 million). Net ﬁnancial items consist primarily of internal and external dividends and transactions effects, currency effects, and interest costs. Provision for income tax amounted to NOK 378 million (130 million) in 2022. The tax provision reﬂects the following changes in the tax regime for Norwegian hydropower producers, as presented by the Norwegian government on 28 September 2022: i) increased resource rent tax from 37% to 45% as of 1 January 2022 and ii) high-price contribution tax of 23% applicable from 28 September 2022 on realized monthly average electricity prices above NOK 0.7/kWh. These changes resulted in an incre- mental provision for income tax amounting to NOK 75 million in 2022. Electricity prices in southern Norway rose in the three ﬁrst quarters of the year. However, in the fourth quarter the prices started to decrease, resulting in an aver- age price in the NO2 price area for 2022 of 211 EUR/MWh (71 EUR/MWh). This is the highest annual price level seen in the NO2 price area. The high price level was a result of several factors, including i) low hydro reservoir levels, due to low inﬂow and low snow reservoirs from the winter season, ii) strong interconnections from the NO2 price area to the European power market, and iii) high prices for coal, gas, and CO 2 lifting the European prices for electricity. Our hydropower plants had some minor interruptions due to planned maintenance and inspections in 2022. Power generation amounted to 351 GWh (517 GWh). The Norwegian Water Resources and Energy Directorate issued a special permission for the minimum water ﬂow regulation in the watercourse to be reduced from 40 to 30 m 3 /s for the summer season and until 1 November, which resulted in record low production in this period. AFK has a deﬁned strategy of selling hydropower produc- tion in the day-ahead (spot) market. Precipitation and inﬂow by the end of the year were respectively around 91% and 76% of the norm for the watercourse. The accumulated amount of snow and the reservoir levels in the water course was higher than normal by year-end. Essential audits and maintenance routines took place during the year with established control procedures for the hydropower facilities. In 2022, our Scope 1 emissions were 20 tCO 2 e, compared to 23 tCO 2 e in 2021. Our location-based Scope 2 emissions were 2,2 tCO 2 e, slightly lower than the year before. Our Scope 3 emissions were 52 tCO 2 e in 2022. During 2022 we conducted a risk and vulnerability assessment regarding HSE and worktasks to identify possible hazards and increase awareness. All incidents are recorded. In 2022 there was no incidents. Species of ﬁsh affected by our hydropower stations have been subject of an external audit. In 2022, there were three species of ﬁsh in the watercourse, which is the same as in previous years. OUTLOOK Considering the market’s estimated power price trends for 2023, water levels and forecasted production, AFK Hydropower expects revenues and operating proﬁt for 2023 to be lower than in the record-breaking year 2022. Actual energy prices depend on many factors, including hydrological balance, oil and gas prices, weather conditions, temperatures, and more. With limited reservoir capacity, the production volume will also be dependent on precipitation. AFK Hydropower will perform a complete environmental risk and vulnerability assessment in 2023, to further map and improve the impact on the surrounding environment. Rehabilitation of the exterior of the Bøylefoss hydropower plant building will start in 2023. We aim to distribute a new Business Partner Code of Conduct in 2023. 40 41 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 PORTFOLIO ANNUAL AND SUSTAINABILITY REPORT Ampwell Portfolio company Ampwell was established by Arendals Fossekompani in 2022 to build an eco-system for battery technology and a Battery-as-a-Service business model. Efﬁcient energy storage solutions are needed to reduce energy costs and enable the green transition. With Ampwell, it is possible to fully utilize non-ﬂexible power production, like wind and solar, to secure a functional and stable energy grid. In April 2022, Arendals Fossekompani acquired 54.9 percent of Commeo, a German company specializing in energy storage and energy management solutions. Commeo provides solutions for commercial and industrial energy storage by manu- facturing battery modules and rack systems, including control units and software for monitoring and data logging. Commeo’s energy storage solutions could for example be used for ‘peak-shaving’ purposes (using energy from the battery racks during peak price periods to avoid steep tariffs charged by the energy system operators) or time shifting (to reduce energy costs by shifting energy consumption to low price periods). Head ofﬁce Arendal, Norway Chair Torkil Mogstad Chief Executive Ofﬁcer Torkil Mogstad Ownership 100% Employees 60 Countries 2 FINANCIAL FIGURES (MNOK) 2022 2021 2020 Operating revenue 105 - - EBITDA -38 - - Operating proﬁt -53 - - Operating margin -50% - - Earnings before tax (EBT) -62 - - Operating cash ﬂow -64 - - NIBD 373 - - Equity 31 - - Equity ratio 6% - - SUSTAINABILITY KPIs 2022 2021 2020 Environment Scope 1 GHG (tCO 2 e) 26 - - Scope 2 GHG (location-based) (tCO 2 e) 15 - - Scope 3 GHG (tCO 2 e) 36 - - Energy consumption (MWh) 227 - - Social Lost time injury rate 17 - - Sick leave 6.4% - - Absentee rate 6.4% - - Turn-over rate 17% - - Women in Board of Directors 0% - - Governance CoC signed 0% - - No of reported incidents/breach of CoC/SCoC 0 - - Operations assessed for corruption risks 0% - - Training in CoC and Whistleblower policy 0% - - 42 43 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 PORTFOLIO ANNUAL AND SUSTAINABILITY REPORT Established in 2014, Commeo has over the years developed its proprietary energy storage system and is now in a position where the product can be manufactured on an industrial scale. Commeo systems typically range from 50 kWh to 1 MWh, but the modular plug-and-play setup allows for even larger systems. The company is on a strong growth trajectory and has started the construction of a new production facility which will be one of Germany’s largest. In 2022, Arendals Fossekompani acquired 40% of Cellect Energy, a Spanish com- pany currently developing analysis and control software in cooperation with some of the largest energy players in Europe. The solutions are speciﬁcally designed for the stationary storage market and will help customers utilize the stored energy in the best possible manner. The solutions are meant to be agnostic, which means they will be able to connect to several different batteries, independent of manufacturer and technology. Arendals Fossekompani will reach majority ownership by the end of H1 of 2023. 2022 IN BRIEF Revenues for 2022 (June-December) amounted to EUR 10.5 million, and operating proﬁt in the same period was EUR -5.8 million. Revenues were driven by increasing battery module sales in Commeo throughout the year and increased production capabilities. Investments in growth in Commeo and Cellect Energy, as well as at Ampwell parent level, contributed to negative margins in 2022. The construction of Commeo’s new semi-automatic production facility is currently ongoing. The ﬁrst part of the new production facilities is estimated to be ﬁnalized in mid-2024 and will over time enable production capacity above 1 GWh. The demand for stationary storage, and the sales pipeline for Commeo, continues to increase. Since the beginning of 2022, Cellect Energy has rapidly developed its software plat- form, with new applications being developed according to plan. In parallel, the com- pany has built a strong pipeline of leads and trial customers, from small commercial & industrial operations, to large and international utility-scale clients. In 2022 Ampwell performed a double materiality analysis resulting in the following focus areas: Reliable and resilient energy, Circularity and lifecycle management, Material sourcing and supply chains, Attractive employer, and Business ethics. In its ﬁrst year of business, Ampwell started to report on its Scope 1, Scope 2 and Scope 3 emissions. Emissions stem almost entirely from the Commeo production facility. Scope 1 emissions in 2022 were 26 tCO 2 e, mainly from transportation. Scope 2 emissions are related to consumption of electricity at the production facility in Germany and was 15 tCO 2 e in 2022, where most of the energy is bought with guar- antees of origin. Scope 3 emissions in 2022 were 36 tCO 2 e and related to waste and business travel. Ampwell did its first assessment of activities against the EU Taxonomy, where Commeo’s activities were assessed. 100% of Commeo’s revenue was found to be aligned with the activity ‘storage of electricity’. OUTLOOK Driven by strong demand for energy storage solutions, Ampwell expects to generate strong revenue growth in 2023, which will be its ﬁrst full year of operation. EBIT is expected to improve from the 2022 level but remain negative for the year due to the ramp-up phase of production of battery modules and development of related software solutions. Uncertainty remains high due to the strained global supply situ- ation related to components. In 2023, a sustainability strategy will be developed. 44 45 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 PORTFOLIO ANNUAL AND SUSTAINABILITY REPORT Vergia Portfolio company Arendals Fossekompani established Vergia early in 2022 to combine all existing green infrastructure projects and related portfolio companies in a new entity. Vergia is a strategic green energy enabler leveraging in-house competence with strategic partners to develop infrastructure projects in alternative verticals within the energy transition sphere. The Vergia ecosystem includes verticals such as small-scale hydropower, energy parks, power-to-x, offshore wind, and green fuel. Vergia is owned 100% by Arendals Fossekompani. Head ofﬁce Oslo, Norway Chair Trond Westlie Chief Executive Ofﬁcer Martin Kjäll-Ohlsson Ownership 100% Employees 3 Countries 1 FINANCIAL FIGURES (MNOK) 2022 2021 2020 Total revenue 1 EBITDA -7 Operating proﬁt -7 Operating margin Earnings before tax (EBT) -18 -2 Operating cash ﬂow -7 NIBD 5 -10 Equity 9 18 Equity ratio 28% 100% SUSTAINABILITY KPIs 2022 2021 2020 Environment Scope 1 GHG (tCO 2 e) 0 - - Scope 2 GHG (location-based) (tCO 2 e) 0.1 - - Scope 3 GHG (tCO 2 e) 2.8 - - Energy consumption (MWh) 9.1 - - Social Lost time injury rate 0 - - Sick leave 0.8% - - Absentee rate 0.8% - - Turn-over rate 0% - - Women in Board of Directors 0% - - Governance CoC signed 100% - - No of reported incidents/breach of CoC/SCoC 0 - - Operations assessed for corruption risks 0% - - Training in CoC and Whistleblower policy 100% - - 46 47 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 PORTFOLIO ANNUAL AND SUSTAINABILITY REPORT OFFSHORE WIND Arendals Fossekompani and Ferd, two of Norway’s leading industrial investment companies, have come together to establish the offshore wind company Seagust. Seagust is structured as a 50:50 joint venture between Vergia and Ferd, with a mandate to become an offshore wind developer with operations domestically and internationally. Seagust and Swedish energy major Vattenfall have joined forces with the intension to bid on two areas in the upcoming Norwegian offshore wind licensing round. AMMONIA Vergia and Grieg Maritime Group have joined forces to create a leading provider of green ammonia. North Ammonia is dedicated to developing the next gen- eration green fuels for shipping and transportation. The company builds on extensive ﬁrst-hand experience: Grieg Maritime Group has more than 60 years of experi- ence in shipping. Arendals Fossekompani has 126 years of experience in industrial developments and green power production. Eydehavn in Arendal has been chosen as the ﬁrst production site for North Ammonia. Eydehavn is being developed as a mari- time hub and is ideally located for green ammonia production and distribution. MoUs have been signed with maritime end-users. World-class technology, engineering and maritime cooperation partners are in place to develop the project and production facility. SMALL-SCALE HYDROPOWER Demand for electricity is expected to grow signiﬁcantly in years to come, due to electriﬁcation of the transportation and industry sectors, increased household con- sumption, and interconnectors between the Nordics and Europe. Vergia has two small-scale hydropower development projects; Kilandsfoss and Glomsdam, which can contribute with an annual production of 38 and 7.3 GWh respectively. ENERGY PARKS Vergia is developing Bøylestad Energy Park, an industrial and commercial area facilitating energy intensive industry, powered by renewable energy. The area is situated next to one of the largest energy hubs in Southern Norway, which makes for a highly suitable area for power intensive industries. Bøylestad Energy Park also offers proximity to highway systems, railway, and a port, which further increases the strategic value of the area. HYDROGEN Vergia, Kongsberg Maritime and Moreld have joined forces to develop a combined offshore substation and hydrogen factory. Hydepoint is a complete solution for receiving, converting, and transmitting the full energy potential from offshore wind farms, with reduced dependence on the onshore power grid. Placed in the ocean, close to wind farms, Hydepoint can convert all or part of the energy into hydrogen. This will reduce the need for upscaling the power grid both to and on land. SUSTAINABILITY In 2022, Vergia performed a double materiality assessment for two areas; Vergia’s own operations and Vergia’s projects. For its own operations, Vergia will focus on business ethics and strive to be a great place to work. For its projects, Vergia will focus on enabling the green transition, minimising impact on nature, and creating value for local communities. Vergia’s GHG emissions include Scope 2 and Scope 3 emissions. Scope 2 is electric- ity consumption in ofﬁce spaces and was 0.1 tCO 2 e in 2022. Scope 3 emissions are from waste and business travel and was 2.8 tCO 2 e in 2022. OUTLOOK In 2023, Seagust will enter a bid in the ﬁrst Norwegian offshore wind licensing round. Kilandsfoss Hydropower Plant will begin construction. Vergia will work to meet the requirements of the EU Taxonomy. 48 49 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 PORTFOLIO ANNUAL AND SUSTAINABILITY REPORT NSSLGlobal Portfolio company Building on more than 50 years of experience in the maritime and military mobility markets, NSSLGlobal is a well-run company with solid results over the last decades. With world-class technology and a unique understanding of its clients, NSSLGlobal is able to provide vital services in demanding situations anywhere in the world. This provides for solid revenues and attractive margins. Arendals Fossekompani has been the majority owner of NSSLGlobal since 2010. NSSLGlobal is an independent provider of cyber secure satellite and mobile commu- nications and IT support that delivers high-quality voice and data services across the globe, regardless of location or terrain. NSSLGlobal’s activities are divided into four main areas: Airtime, Projects, Hardware and Service. Its main customers are within the maritime segment, the military and government sector, large international cor- porations and the energy sector. Head ofﬁce London, UK Chair Arild Nysæther Chief Executive Ofﬁcer Sally-Anne Ray Ownership 80% Employees 223 Countries 10 FINANCIAL FIGURES (MNOK) 2022 2021 2020 Operating revenue 1,042 907 898 EBITDA 255 208 214 Operating proﬁt (EBIT) 209 166 162 Operating margin 20% 18% 18% Earnings before tax (EBT) 236 178 154 Operating cash ﬂow 154 197 166 NIBD -356 -322 -274 Equity 524 458 424 Equity ratio 57% 57% 56% SUSTAINABILITY KPIs 2022 2021 2020 Environment Scope 1 GHG (tCO 2 e) 180 83 167 Scope 2 GHG (location-based) (tCO 2 e) 120 125 134 Scope 3 GHG (tCO 2 e) 270 100 41 Energy consumption (MWh) 1,563 1,024 576 Social Lost time injury rate 0 0 0 Sick leave 1.8% - - Absentee rate 1.8% 1.0% 1.0% Turn-over rate 24% 1.8% 13% Women in Board of Directors 33% 50% 50% Governance CoC signed 100% 100% 100% No of reported incidents/breach of CoC/SCoC 0 - - Operations assessed for corruption risks 0% 0% - Training in CoC and Whistleblower policy 100% 100% - 50 51 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 PORTFOLIO ANNUAL AND SUSTAINABILITY REPORT NSSLGlobal has more than 50 years of experience in the maritime and military mobility markets. The company operates its own Global VSAT network using its own patented Satlink Hub and Modem technology, as well as partnering with other established satellite and mobile operators such as Inmarsat IridiumThuraya and Vodaphone and more recently with LEO operator Starlink. Customers are supported locally via global sales and service ofﬁces, 24/7 network operations centers, teleports and a global network of local service partners. NSSLGlobal is headquartered in the United Kingdom, but also has ofﬁces in Germany, Denmark, Norway, Sweden, Poland, Netherlands, Singapore, USA, Israel, and Japan. The revenue model is to a large degree based on multi-year subscription and sup- port contracts, thereby securing a signiﬁcant degree of recurring revenues. Its main customers are found in the maritime segment, in the military and government sector, and in the energy sector. 2022 IN BRIEF (Figures in parentheses refer to the same period the previous year) NSSLGlobal reported revenues of GBP 88.0 million (76.7 million) in 2022. EBITDA amounted to GBP 21.5 million (17.6 million). Operating proﬁt was GBP 17.7 million (14.0 million), while the ordinary proﬁt after tax was GBP 15 million (12.0 million). Revenue growth in 2022 was largely driven by increased government airtime, equip- ment sales and projects related to increased operational activity caused by the war in Ukraine. In addition, expansion of maritime and government projects contributed positively, while delays in component and hardware deliveries had a slight negative impact on growth during the year. Operating margin for the year of 20% (18%) was largely related to higher airtime and project revenues with a positive margin impact. The company experienced healthy sales throughout the year, including new VSAT leasing orders, governmental and maritime engineering orders, as well as defense contracts across Europe. NSSLGlobal and its team partners did not win the spe- ciﬁc Skynet Service Delivery Wrap contract to operate and manage UK Ministry of Defence’s (MoD) constellation of military satellites beyond 2024, but remains a sig- niﬁcant service provider to the MoD through a number of other framework agree- ments and recent contract wins. Examples of contract wins during Q4 include a new multi-million 3-year Ships Alongside contract with Defence Digital, UK Ministry of Defence, including service management, engineering services and support for a number of UK and International Dockyards and including installations in ships and submarines. The company was also awarded a contract with the Bavarian State Ministry of the Interior to strengthen the state’s critical communications infrastructure. The company secured a 3-year contract with Mitsui OSK LNG Transport (Europe) Ltd, for their ﬂeet, including VSAT, Entertainment and Cyber services as well as FusionIPLeo trials which will be rolled out in the ﬁrst quarter of 2023. NSSLGlobal’s FusionIPLeo service offers a hybrid of the best of GEO, LTE and LEO- based satellite constellations. It combines the trusted beneﬁts of a global, high avail- ability GEO service with the low latency and high capacity from LTE, incorporating the rapidly expanding LEO constellations as of Q1 2023. At the core of this service is NSSLGlobal’s Smart@Sea platform providing secure and seamless solutions to the end user, as well as additional cyber, Crew entertainment, IT and Management functionality. In 2022, Scope 1 GHG emmissions were 180 tCO 2 e, related to company-owned fos- sil-fueled cars and gas usage for stationary combustion. Emissions will decrease as NSSLGlobal makes its ﬂeet of vehicles hybrid or fully electric over the next 2-3 years. Scope 2 emissions was 120 tCO 2 e in 2022, a slight reduction from 125 tCO 2 e in 2021. Scope 3 emissions consists of waste, business travel and fuel-and-energy-related activities. NSSLGlobal conducted an EU Taxonomy eligibility assessment and found two eligible activities. These have not yet been assessed for alignment. 100% of the employees received training in and signed the Code of Conduct. The sick leave remained low at 1.8%, and the turnover rate was 24%. 33% of Board of Directors in NSSLGlobal are women. OUTLOOK NSSLGlobal expects 2023 revenues to be in line with 2022, driven by a solid pipeline for sales and bid, somewhat offset by lower expected airtime. Operating proﬁt is expected to be lower than in 2022, driven by the latter, as well as inﬂation-driven cost increases. A long-term goal is to reduce greenhouse gas emissions by 50% by 2035. In 2023, NSSLGlobal will roll out phase 3 of its Energy Savings Opportunities Scheme and the Streamlined Energy and Carbon Reporting programmes for the UK part of the company. NSSLGlobal will continue its oversight of key vendors to ensure legislative compli- ance to policies and procedures. The company aims to engage locally to identify envi- ronmental initiatives which can support local communities, and to identify certiﬁed schemes which can offset greenhouse gas emissions. 52 53 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 PORTFOLIO ANNUAL AND SUSTAINABILITY REPORT Volue Portfolio company Arendals Fossekompani created Volue in 2020 based on the belief that the world of energy would become increasingly volatile, and that this would require new ways of thinking, new competence, and new technology. As a testament to this vision being right, Volue continues to build its European presence while expanding to other continents. As a provider of competence and software that enable its customers to succeed in the green transition, Volue enjoys a proﬁtable and promising position. Volue is a market leader in technologies and services that power the green transition. Based on 50 years of experience, Volue provides innovative solutions, systems and insights to industries critical to society. 750 employees work with more than 2,200 customers across energy, power grid, water and infrastructure projects that ensure a sustainable, ﬂexible and reliable future. Volue operates within three segment, Energy, Power Grid and Infrastructure. The company is active in 40+countries. Head ofﬁce Oslo, Norway Chair Ørjan Svanevik Chief Executive Ofﬁcer Trond Straume Ownership 60% Employees 778 Countries 9 FINANCIAL FIGURES (MNOK) 2022 2021 2020 Operating revenue 1,217 1,041 891 EBITDA 147 138 148 Operating proﬁt (EBIT) 40 45 82 Operating margin 3% 4% 9% Earnings before tax (EBT) 36 40 73 Operating cash ﬂow 214 131 190 NIBD -426 -382 -432 Equity 809 767 743 Equity ratio 43% 44% 50% SUSTAINABILITY KPIs 2022 2021 2020 Environment Scope 1 GHG (tCO 2 e) 17 0 0 Scope 2 GHG (location-based) (tCO 2 e) 111 96 641 Scope 3 GHG (tCO 2 e) 404 89 112 Energy consumption (MWh) 2,040 2,078 - Social Lost time injury rate 0 0 - Sick leave 2.7% - - Absentee rate 2.7% 2.2% 2.0% Turn-over rate 17% 11% 11% Women in Board of Directors 50% 50% 12% Governance CoC signed 97% 89% - No of reported incidents/breach of CoC/SCoC 1 - - Operations assessed for corruption risks 100% - - Training in CoC and Whistleblower policy 0% - - 54 55 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 PORTFOLIO ANNUAL AND SUSTAINABILITY REPORT 2022 IN BRIEF (Figures in parentheses refer to the same period the previous year) Volue reported operating revenues of NOK 1,217 million (1,041 million), corresponding to 17 percent growth year-on-year. EBITDA amounted to NOK 147 million (141 million). The operating proﬁt was NOK 40 million (45 million), while the ordinary proﬁt before tax was NOK 36 million (40 million). Revenue growth was mainly driven by the Energy Segment, which increased by 28% from NOK 595 million in 2021 to NOK 762 million in 2022. Volue`s Software-as-a- Service (Saas) revenues grew at a higher pace than the top line, underpinning the shift in business model. Adjusted EBITDA for the group was NOK 203 million (214 million) with an adjusted EBITDA margin of 17%. The company is continuing to build a highly sticky customer base and yet again reported an annual churn well below 2 percent, statistically suggesting an average customer lifecycle of 50 years. Annual recurring revenues reached NOK 765 million in 2022, a 15 percent growth from 2021, while SaaS revenues showed a 28 percent growth year-on-year. Energy Market Operations contributed with strong non-recurring revenues in 2022, driven by unparalleled volatility in energy markets. Volue has taken steps to integrate climate risk assessments into the company’s risk management process. GHG emission reporting has been expanded to include waste and electricity upstream in the Scope 3 emissions. In 2022, the Scope 3 emis- sions were 404 tCO 2 e. Scope 1 emissions were 17 tCO 2 e, which is from 5 fossil-fuelled company cars. Location-based Scope 2 increased to 111 tCO 2 e from 96 tCO 2 e during 2022. There is an ongoing preparation for committing to targets in line with the Paris agreement and the 1.5 degree scenario. Volue did an EU taxonomy assessment and found 4 eligible activities. 3 of these activities were found to be aligned. Turn-over rate increased from 11% in 2021 to 17% in 2022. 50 % of Volue’s Board of Directors are women. 97% of employees have conﬁrmed that they have read and understood the Code of Conduct. Volue is in an ongoing process to have all suppliers sign the Supplier Code of Conduct or to provide documentation of compliance with Volue’s Code of Conduct. In 2022, there was one reported Code of Conduct or Supplier Code of Conduct inci- dents. KEY DEVELOPMENTS The year brought sales of strategic magnitude in all segments. Volue made a break- through deal with a German power major in the Energy segment. The customer has split its business into “Green” and “Brown” power production, and chose a cross-port- folio platform of capabilities from Volue with the goal to digitise the entire value-chain of its renewable portfolio. The contract was signed less than ﬁve months after the ﬁrst point of contact, which demonstrates that Volue’s customer-base is moving faster, and perhaps becoming less conservative. This puts Volue in pole position for winning market-shares. After conducting a comprehensive market analysis, the customer found Volue to be unmatched in the competitive landscape. Winning this breakthrough contract, also brings validation to Volue’s ambitions for continental Europe. Volue is also very excited to announce its ﬁrst customer in Japan, following the entrance into the Japanese market during 2022. Volue also signed a transformative deal in the Power Grid segment. To meet the expectations of fast and efﬁcient electriﬁcation of society, Volue and a major Nordic utility have signed a strategic contract. The joint goal is to launch a set of solutions that will enable the utility to digitise the end-to-end process of planning and con- structing new grids. These solutions will be modular, targeting a wider European market, deployable across different geographical markets and regulations. By auto- mating what is today manual work processes and enabling mobile access, the end result is a streamlined workﬂow and high efﬁciency improvements for electrical util- ities. This will signiﬁcantly strengthen Volue’s offering in Europe. In the Infrastructure segment, the Construction division reached 1,000 customers and added 100 in 2022. All of them were SaaS contracts and 30 were in Sweden. To remain an attractive employer to a diverse pool of talents, Volue launched a diver- sity and inclusion policy in March. A new and common standard for performance reviews for all employees was implemented in January. A Volue Sustainable Leader programme was established, with 90 participating leaders attending during the year. Volue’s 24/7 security monitoring and response capabilities has been strengthened. The number of employees that have signed the information security policy has increased during the year and a common contingency plan has been implemented. OUTLOOK Volue continues to prioritise strategic investments in its SaaS platform and expan- sion into new markets. This creates short- to mid-term EBITDA impact and increased R&D capitalisation in line with plans. Measures are in place to counter margin effects, and Volue will work diligently to improve proﬁtability going forward. The long-term ambition of NOK 2 billion in revenues, including M&A, by 2025 is maintained. The long-term target of 15% annual organic revenue growth is also maintained, with 2023 growth expected somewhat under the long-term target. The 2025-targets for adjusted EBITDA margin are under review. For 2023 Volue sees adjusted EBITDA margin improving from 2022 levels. ARR and SaaS are expected to improve in line with 2022 performance. For 2023, Volue has outlined the following priorities and ambitions: • Capitalize on changing energy market dynamics. • Focus on margin-improving initiatives. • Continue to grow ARR business in line with 2022 performance. • Strategic investments for international growth. • Structural growth through M&A. • Expand activities outside the Nordics. • Implement a diversity initiative across gender and ethnicity. The goal is to have 25% female share by the end of 2023 and 30% by 2025. • Increase effort and focus on systematic HSE work, risk assessment and reporting of occupational incidents. Volue will build a succession plan for all key roles, with female successors for at least 50% of the roles. • Conduct a mapping of business partners in terms of potential risks to human rights and decent working conditions. • Finalise and implement environmental policy. • Implement a framework to include EU Taxonomy eligibility assessment for new business cases. 56 57 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 PORTFOLIO ANNUAL AND SUSTAINABILITY REPORT Alytic Portfolio company Established by Arendals Fossekompani in 2021, Alytic builds on the competence and methodology that grew former AFK portfolio company Wattsight (now part of Volue) to become a digital European powerhouse for energy market data. The main goal for Alytic is to grow companies to world-class businesses within their respective industries. An investment team work closely with the portfolio companies to drive value through strategic development and implementation, leadership support, sales enhancement, HR and talent acquisition, and by leveraging data science and technology. Alytic creates value by developing sustainable companies that centre around exper- tise and data. There is signiﬁcant untapped opportunity in utilizing data effectively for insights and actions across numerous industries and markets. There is a growing demand for more advanced solutions to manage, analyse, and present information. Head ofﬁce Arendal, Norway Chair Lars Peder Fensli Chief Executive Ofﬁcer Espen Zachariassen Ownership 95% Employees 86 Countries 3 FINANCIAL FIGURES (MNOK) 2022 2021 2020 Total revenue 41 27 2 EBITDA -41 -12 -1 Operating proﬁt (EBIT) -46 -16 -1 Operating margin -112% -58% -66% Earnings before tax (EBT) -45 -16 -1 Operating cash ﬂow -35 -12 NIBD -45 -25 -32 Equity 132 80 59 Equity ratio 67% 74% 80% SUSTAINABILITY KPIs 2022 2021 2020 Environment Scope 1 GHG (tCO 2 e) 0 0 - Scope 2 GHG (location-based) (tCO 2 e) 2.4 Incl. in AFK - Scope 3 GHG (tCO 2 e) 57 - - Energy consumption (MWh) 324 - - Social Lost time injury rate 0 0 - Sick leave 3.2% - - Absentee rate 3.2% 0.7% - Turn-over rate 13% 17% - Women in Board of Directors 21% 50% - Governance CoC signed 20% 0% - No of reported incidents/breach of CoC/SCoC 0 - - Operations assessed for corruption risks 94% - - Training in CoC and Whistleblower policy 20% 18% - 58 59 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 PORTFOLIO ANNUAL AND SUSTAINABILITY REPORT 2022 IN BRIEF (Figures in parentheses refer to the same period the previous year) Alytic reached three signiﬁcant milestones in 2022: The ﬁrst was to establish itself in the ESG services vertical, which was done through the acquisition of Factlines, a Norwegian SaaS company. The second was to develop a new, expansive strategy for Greenfact, with further investment to position the company as a global provider of insights in markets supporting the transition to net-zero. In line with this strategy, Greenfact was rebranded to Veyt in the ﬁrst quarter of 2023. The third was the launch of Edge by Kontali, a new seafood analytics portal and API offering. During the second quarter, Alytic acquired a majority stake in Factlines AS, a Norwegian SaaS company specializing in supply chain mapping and transparency. Factlines’ streamlined software covers the entire process from OECD requirements and Code of Conduct, to risk analysis, monitoring, and communication. The acqui- sition of Factlines aligns with Alytic’s strategy and goal to create a European hub for responsible supply chains, ESG reporting, and product life cycle assessment (LCA). Since the acquisition, the focus has been on building a robust management team and enhancing the product, technology, and design capabilities within the organization. In 2022, Alytic followed up on its ambition to develop Veyt into a globally leading pro- vider of insights and analytics for renewable energy and decarbonisation. During the year, the company went from being a niche supplier of market analysis to positioning itself as a globally leading expert on both renewable energy certiﬁcates markets, the compliance carbon markets and the voluntary carbon markets. A new product platform was developed along with a suite of analytics tools to deliver these insights and support clients with advanced analytics and forecasts. Building on an existing base of more than 120 international clients, Veyt is well positioned to take advantage of the increased focus on the renewable energy sector and decarbonisation through a line-up of new products, reports, webinars, and podcasts. Alytic’s ﬁrst acquisition, Kontali, a premier knowledge-based consultancy and data provider for the ﬁsh farming industry, achieved a major accomplishment in 2022. Through extensive tech talent acquisition in 2021, Kontali doubled in size and successfully launched its seafood insights platform, Edge, in the fourth quarter of 2022. Edge has received positive market reception, with Kontali successfully onboarding a growing number of new and existing clients to the platform. Utel, an Alytic portfolio company since 2021, acquired senior machine learning engi- neering and UX design talent to strengthen its technology team. Throughout the year, Utel worked closely with customers to test prototypes for their new network anomaly detection solution, building on its existing telco fraud detection solution. The development of a more general solution opens new application areas for Utel, with signiﬁcant growth potential expected from emerging technologies such as 5G and an increased market need to ﬁght and prevent fraud. Reported for the ﬁrst time ever, Scope 3 emission for 2022 were 57 tCO 2 e and related to travel and waste. Scope 2 emissions are from the portfolio companies, and Scope 1 emissions remained at zero. An EU Taxonomy assessment has been conducted and Alytic has identiﬁed two eligible activities. It has been concluded that these activities are not yet aligned with the EU taxonomy. Assessments of each portﬁlio company ’s value chain was performed in a due dili- gence process. Alytic is continuously addressing relevant issues with the manage- ment of the portfolio companies to ensure that all workers and contractors have good working conditions. 21% of Alytic’s Board of Directors are women. 20% of Alytic’s employees have signed and received training in the Code of Conduct. OUTLOOK In 2023, Alytic’s portfolio companies are transitioning from a development phase to a growth and commercialization phase. Throughout the year, the Alytic companies expect to see innovative new products brought to market, creating substantial value for customers, driving both revenue growth and stronger positions in their relevant markets. Alytic continues to invest in its existing portfolio and to search for new acquisition targets. In 2023, a sustainability strategy with associated targets will be developed for each portfolio company. 60 61 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 PORTFOLIO ANNUAL AND SUSTAINABILITY REPORT Tekna Portfolio company Arendals Fossekompani acquired Tekna in 2013 to pursue the opportunities presented by a unique and promising technology developed at the University of Sherbrooke in Canada. Tekna produces plasma systems and spherical metal powders in different alloys and sizes, suitable for additive manufacturing and industries such as electronics and batteries. This gives Tekna an attractive position in global megatrends. Tekna is a world-leading provider of advanced materials and plasma systems to several industries. Tekna produces high-purity metal powders for applications such as 3D printing in the aerospace, medical and automotive sectors, as well as optimized induction plasma systems for industrial research and production. With its unique, IP-protected plasma technology, the company is well positioned in the growing market for advanced nanomaterials within the electronics and batteries industries. Head ofﬁce Sherbrooke, Canada Chair Dag Teigland Chief Executive Ofﬁcer Luc Dionne Ownership 71% Employees 216 Countries 4 FINANCIAL FIGURES (MNOK) 2022 2021 2020 Operating revenue 199 184 150 EBITDA -124 -71 10 Operating proﬁt (EBIT) -153 -89 -24 Operating margin -77% -49% -16% Earnings before tax (EBT) -166 -98 -48 Operating cash ﬂow -145 -89 2 NIBD -40 -215 150 Equity 389 531 128 Equity ratio 72% 82% 36% SUSTAINABILITY KPIs 2022 2021 1 2020 Environment Scope 1 GHG (tCO 2 e) 585 577 474 Scope 2 GHG (location-based) (tCO 2 e) 34 42 3 Scope 3 GHG (tCO 2 e) 755 432 - Energy consumption (MWh) 11,583 7,435 5,799 Social Lost time injury rate 2.7 3.4 0 Sick leave 3% - - Absentee rate 3% 2% 2.4% Turn-over rate 22% 15% 6% Women in Board of Directors 40% 0% 0% Governance CoC signed 91% 82% 99% No of reported incidents/breach of CoC/SCoC 1 - - Operations assessed for corruption risks 0% 0% - Training in CoC and Whistleblower policy 0% 0% - 1. 2021 numbers were revised in 2022. 62 63 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 PORTFOLIO ANNUAL AND SUSTAINABILITY REPORT 2022 IN BRIEF (Figures in parentheses refer to the same period the previous year) Tekna reported revenues of CAD 26.9 million (CAD 26.8 million) in 2022. Adjusted EBITDA amounted to CAD -12.8 million (-4.6 million). The operating proﬁt was CAD -20.7 million (-12.5 million), while earnings before tax was CAD -22.5 million (-14.3 million). Throughout 2022, Tekna continued experiencing rising demand for its materials for Additive Manufacturing, further conﬁrming the company’s position in this market. Tekna’s additive material sales grew by 8% in 2022, despite capacity constraints and R&D work impacting the production. Signiﬁcant new orders were signed during the year, and Tekna is experiencing a gradual shift towards larger orders and long-term supply agreements. Total order backlog at the end of 2022 was CAD 25.0 million. This is a 64% increase year-on-year, which provides a strong momentum going into 2023. The backlog for additive materials amounted to CAD 14.1 million. On 1 July 2022, Tekna Holding was uplisted to the main list at Oslo Børs. This further increases the company’s visibility in the marketplace and cements its position as a global provider of advanced material solutions. Tekna has seen the Systems market rebound with several contracts awarded during the year. In October, an order in excess of CAD 9 million was conﬁrmed to deliver PlasmaSonic equipment to a leading aerospace original equipment manufacturer, with delivery planned for early 2024. In January 2023, two more plasma system sales valued at CAD 1.6 million for delivery by end of 2023 were announced. Tekna achieved ISO 13485:2016 certiﬁcation for its Additive Materials division in 2022. This certiﬁcation establishes that the processes Tekna uses to manufacture its commercial powders meet the highest global standards for medical products. Tekna Plasma Systems laboratory achieved ISO 17025:2017, which certiﬁes the analytical services in competence of testing and calibration. Strong demand and Tekna’s increasing market share have made capacity expansion a key priority for the company. The additive material capacity increase program has been progressing well throughout 2022. Increasing capacity will translate into higher material availability, shorter delivery lead-times and increased sales, which is syn- chronized with the customer roll-out plan. Tekna is continuously striving to achieve a climate-friendly production. As a part of this, Tekna completed a ﬁrst alignment study for the EU taxonomy. In addition, Tekna have updated their system maintenance manuals to recommend green maintenance and guidance on end-to-life disposal. A new prototype for a multi- usage powder transportation vessel got certiﬁed for road and sea freight. After some design optimization, operations will start in 2023. Tekna has developed a carbon reduction action plan for more sustainable produc- tion. To improve reporting of emissions, the baseline measurement for Scope 3 is continuing. In 2022 Tekna mapped the employee commute and deepened the understanding of the waste category. A productivity improvement of Tekna’s plasma systems has been implemented for greater energy conservation. Scope 1 emissions were 585 tCO 2 e in 2022, all these emissions come from use of natural gas. Location- based Scope 2 emissions were 34 tCO 2 e in 2022, down from 42 tCO 2 e in 2021. Tekna appointed several new board members in 2022, increasing female represen- tation from 0% in 2021 to 40% in 2022. Turn-over has increased from 15% in 2021 to 22% in 2022. A Tekna Code of Conduct was approved by the Board of Directors in 2022 and signed by 91% of the employees. Tekna’s suppliers and business partners should respect human rights. To comply with the Transparency Act, Tekna has signed a partnership with Factlines to apply a solid and consistent approach. To handle the climate risk of supply chain, Tekna has mapped the transport routes of critical suppliers and have assessed them for potential risk. Mitigation plans are continuously being developed. EVENTS AFTER THE CLOSE OF THE YEAR In January 2023, Espen Schie was appointed Chief Financial Ofﬁcer of Tekna. Schie brings long-term ﬁnancial management experience and comes from the role as Vice President of Finance & Controlling at Arendals Fossekompani. AFK reiterates its long-term support of Tekna. In the ﬁrst quarter of 2023, Arendals Fossekompani and Tekna signed a CAD 25 million term loan facility agreement to support operations and growth in Tekna. OUTLOOK Operating revenues and margins are expected to increase during 2023, supported by the strong order backlog. Increasing production and delivery of additive materials remain top priority to serve the Additive Manufacturing industry, which remains the most prominent segment for Tekna. The company will prioritize near-term revenue opportunities within additive manufacturing and microelectronics in 2023 including the commissioning of three additional powder manufacturing systems. Tekna has taken important and immediate steps towards improving proﬁtability and cash position. A roadmap to proﬁtability has been drawn up, emphasizing operational excellence, right-sizing of organisation, strict prioritisation of R&D efforts towards AM and Microelectronics, and strategic focus on near term revenue opportunities. Tekna’s strategy, technology and products are considered highly relevant in today’s global markets, which are marked by geopolitical turmoil, economic uncertainty, and an urge for sustainability and increased predictability. The company’s customers are transitioning towards new technology, moving manufacturing closer to markets whilst considering more sustainable production processes. Tekna aims to reduce greenhouse gas emissions. The goal for carbon reduction is 50% for Scope 1 and Scope 2. To meet these goals, science-based targets will be developed in accordance with the Science Based Target initiative. After the ﬁrst EU Taxonomy alignment study was performed in 2022, formal reporting will start in 2023. Tekna aims to increase Supplier Code of Conduct self-assessment participation by 10%. 64 65 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 PORTFOLIO ANNUAL AND SUSTAINABILITY REPORT ENRX Portfolio company Following Arendals Fossekompani’s acquisition of IPT Technology in May 2022, IPT Technology and long-standing portfolio company EFD Induction was comprised in the new company ENRX. As a frontrunner within both induction charging and induction heating systems, ENRX is established as a global powerhouse for induction technology, serving several large industries. ENRX combines EFD Induction’s global market leadership in industrial induction heating systems (Heat) with IPT Technology’s leading technology in the high growth market for wireless induction charging solutions for mobility and industrial applications (Charge). Among the industries served by ENRX are automotive, renewable energy, pipe fabrication, electronics, cable, and mechanical engineering. Head ofﬁce Skien, Norway Chair Ørjan Svanevik Chief Executive Ofﬁcer Bjørn E. Petersen Ownership 95% Employees 1,047 Countries 17 FINANCIAL FIGURES (MNOK) 2022 2021 2020 Operating revenue 1,338 1,171 1,104 EBITDA 75 143 109 Operating proﬁt (EBIT) -3 83 41 Operating margin 0% 7% 4% Earnings before tax (EBT) -20 72 30 Operating cash ﬂow 46 96 69 NIBD 425 31 52 Equity 384 405 374 Equity ratio 22% 36% 35% SUSTAINABILITY KPIs 2022 2021 2020 Environment Scope 1 GHG (tCO 2 e) 766 898 - Scope 2 GHG (location-based) (tCO 2 e) 2,162 2,557 - Scope 3 GHG (tCO 2 e) 1,820 1,643 - Energy consumption (MWh) 9,428 11,008 - Social Lost time injury rate 1.1 2.3 - Sick leave 3.5% - - Absentee rate 3.5% 2.8% 2% Turn-over rate 13% 2.2% 11% Women in Board of Directors 17% 0% 0% Governance CoC signed 65% 100% - No of reported incidents/breach of CoC/SCoC 0 - - Operations assessed for corruption risks 0% - - Training in CoC and Whistleblower policy 78% - - 66 67 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 PORTFOLIO ANNUAL AND SUSTAINABILITY REPORT 2022 IN BRIEF (Figures in parentheses refer to the same period the previous year) ENRX reported revenues of EUR 132.2 million (115.2 million) in 2022. EBITDA amounted to EUR 7.4 million (14.1 million). The operating proﬁt was EUR -0.3 million (8.2 million), while the ordinary 2022 proﬁt before tax was EUR -2.0 million (7.1 million). Revenue growth of 15% during 2022 was driven by higher activity level within Heat, as well as a smaller revenue contribution from the Charge division following the acquisition of IPT Technology in May 2022. In geographical terms, the company saw solid growth in all regions during 2022. The growth was in some regions hampered by supply chain disturbances and delayed deliveries. Operating costs saw an uptick during the year, primarily related to the recognition of a restructuring provision of EUR 3.9 million related to parts of the German operation, component cost increase, and general cost inﬂation. In addition, costs related to M&A and ERP implementation impacted the cost level in 2022. IPT Technology, acquired during the year, had a negative EBIT contribution of EUR 2.2 million. Adjusted for restructuring costs related to the German operation and one-time costs related to the acquisition of IPT Technology, operating proﬁt for the full year 2022 was EUR 4.1 million, corresponding to an EBIT margin 3.1%. Overall, the Heat segment did well across all activity areas. The order intake for induction power sources reached an all-time high of EUR 70.1 million, up 52% from 2021. The service and after sales segment reached EUR 51.4 million in order intake, while the sale of induction hardening machines ended up slightly below budget at EUR 35.2 million, due to difﬁcult market conditions in the EU and North America, partly offset by strong demand from Asia. Despite the acquisition of IPT Technology in 2022, Scope 1 greenhouse gas emissions for the ENRX group was 766 tCO 2 e, down from 898 tCO 2 the year before. Scope 2 emissions were 2,162 tCO 2 e in 2022, down from 2,557 in 2021. Scope 3 emissions were from business travel, waste, and fuel-and-energy-related activities and was 1,820 tCO 2 e in 2022. Through an EU taxonomy assessment, three activities were identiﬁed as eligible, where two of these were concluded to not yet be aligned, and one was not assessed for alignment. To achieve a more resource efﬁcient production, Evolgy is undergoing an ISO 14001 certiﬁcation process for all plants. During 2022, such certiﬁcations were given to the ENRX plants in Germany, India and China. Moving closer to its target of 20% female employees in 2025, ENRX Heat increased the ratio from 15.5% in 2021 to 16.1% in 2022, but with the acquisition of IPT Technology, the overall female ratio was still at 15.5%. With a continuous focus on HSE and a vision of zero injuries across all operations, ENRX had 2 injuries in 2022, down from 4 in 2021. In 2022, all prioritized suppliers in Norway and India completed a self-assessment used by ENRX to evaluate supplier performance. A similar self-assessment is under- way in China, Germany, and the US. OUTLOOK Order intake held up well throughout the year. Already in October, the Heat segment passed the full year’s order intake budget. 2022 ended nearly 30% ahead of target, at an all-time high of EUR 157 million. The current order backlog creates a strong fun- dament for continued proﬁtable growth in 2023, and the market for heating products is still considered strong. Electriﬁcation is likely to experience tremendous growth over the next decade. The global trend is a shift from gas and ﬂame heating to more energy-efﬁcient and eco- friendly alternatives, such as induction heating. To remain at the forefront of induc- tion technology, ENRX continues its R&D efforts. In the second quarter of 2023, the company will launch a small mobile air-cooled induction heating generator that can be used virtually everywhere electricity is found. For several years, ENRX has been the leading supplier of equipment to the renew- able power sector. The company aims to contribute to the development of electric vehicles. The acquisition of IPT Technology opens a growing and potentially large market within wireless charging solutions, which is expected to generate long-term revenue and cost synergies to further improve the company’s operational leverage. Both revenue and operating proﬁt is expected to be higher in 2023 than in 2022. ENRX is committed to reducing its CO 2 footprint and plans to introduce more digital solutions that advance remote assistance and reduce the need for travel. Induction technology is inherently eco-friendly, and ENRX constantly strives to make prod- ucts even more energy efﬁcient. The ISO 14001 certiﬁcation of production facilities continues in 2023. Going forward, ENRX will further expand its portfolio by providing sustainable alternatives for charging electric vehicles as well as power supply solu- tions for industrial applications. Being part of a major global industry, ENRX must demonstrate a sustainable supply chain. ENRX demands from its suppliers in Europe, North America and Asia that they complete a self-assessment questionnaire and sign off on ENRX’s Supplier Code of Conduct. For 2023, the goal is to complete this assessment for the remaining pro- duction facilities. On route to increasing its ratio of female workforce to 20% by 2025, ENRX’s target for 2023 is 18%. ENRX aims to train 83% of the workforce in Code of Conduct in 2023. 68 69 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 PORTFOLIO ANNUAL AND SUSTAINABILITY REPORT AFK Property Portfolio Company AFK Property comprises all property related companies and property investments in Arendals Fossekompani. Head ofﬁce Arendal, Norway Chair Torkil Mogstad Chief Executive Ofﬁcer Tom Krusche Pedersen Ownership 100% Employees 2 Countries 1 FINANCIAL FIGURES (MNOK) 2022 2021 2020 Total revenue 35 510 10 EBITDA 6 40 -2 Operating proﬁt (EBIT) -7 27 -11 Operating margin -19% 5% -106% Earnings before tax (EBT) -10 25 -13 Operating cash ﬂow -40 309 -200 NIBD 135 68 355 Equity 206 215 198 Equity ratio 47% 46% 31% SUSTAINABILITY KPIs 2022 2021 2020 Environment Scope 1 GHG (tCO 2 e) 20 - 3 Scope 2 GHG (location-based) (tCO 2 e) 1.5 - - Scope 3 GHG (tCO 2 e) 7.3 34 26 Energy consumption (MWh) 295 - - Social Lost time injury rate 0 0 - Sick leave 3.8% - - Absentee rate 3.8% - - Turn-over rate 0% - - Women in Board of Directors 0% 0% 0% Governance CoC signed 100% 0% - No of reported incidents/breach of CoC/SCoC 0 - - Operations assessed for corruption risks 100% - - Training in CoC and Whistleblower policy 100% - - The portfolio of AFK Property is diverse. It includes the development of a new urban residential area in Arendal, featuring an outdoor recreational space and a public water park – and the management of several properties in Southern Norway. 70 71 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 PORTFOLIO ANNUAL AND SUSTAINABILITY REPORT BRYGGEBYEN The by far largest company in the property portfolio is Vindholmen Eiendom AS, which is transforming an old shipyard area into a new urban residential/commercial zone right outside the center of Arendal City under the name Bryggebyen. The trans- formation will take 10-15 years to complete and will create 500-700 residential units in combination with exciting and highly relevant trade and commerce offerings. The ﬁrst and second stage of the development was concluded in 2021 and all 113 apart- ments were sold before year-end 2021. Not only was this the largest residential proj- ect in the region that year, but it also had the quickest sell-out time, demonstrating the attractiveness of the Bryggebyen area. To satisfy the market’s desire to be part of Bryggebyen, Arendals Fossekompani made the decision to initiate phase 3 of the Bryggebyen project, adding 48 new apartments. These went on sale in the second quarter of 2022, of which 41 were sold as at 31 December 2022. AFK also plans to build an indoor water park in the area. The municipality of Arendal has signed a long- term rental agreement with the water park. ARENDAL AIRPORT & PROPERTY GULLKNAPP AFK Property is the majority owner of this property which comprises a relatively new airport facility and an attractive area of 200,000 sqm. The main user of the airport facility is OSM Aviation Academy which runs a pilot school at the premises. Future plans include developing the airport facility into a center for drones as well as a hub for electriﬁed aviation under the name Gullknapp Aerial Center. The signiﬁcant size of the area combined with direct access to the high voltage grid has made the property attractive for industrial players, including those drawn to Arendal in connection with Morrow Batteries’ plan for establishing a giga-factory for battery cell production. Gullknapp is located about 15 km north of Arendal and therefore in close vicinity to both the new E18 highway and the Port of Arendal. Having its own airport facility is of course also an advantage. Real estate areas for industrial use are becoming scarce around Arendal, and Gullknapp is highly relevant for power and transportation inten- sive industries such as battery-related production of cells, electrodes and electrode materials, as well as hydrogen and ammonia production to support the transition into a sustainable future. BØLEVEGEN 4 This property, located along the Skien River, just one kilometer south of downtown Skien, was acquired in 2020. The 4,700 sqm building is fully let to ENRX on a 15-year bare-house agreement. As the city of Skien expands, this 12,000 sqm river property will be attractive both for commercial and residential development. LONGUM PROPERTY In the second quarter, AFK Property acquired 170,000 sqm of mostly commercial land located outside the city of Arendal. The property is close to the E18 highway on route to the main production site of the coming Morrow battery factory. The land is also in the vicinity of Bedriftsveien 17, which is also in the portfolio of AFK property. BEDRIFTSVEIEN 17 The commercial property Bedriftsveien 17 has been part of Arendals Fossekompani since 2015. The 3,500 sqm building has been completely refurbished and is now fully let to Volue Industrial IoT on a 25-year bare-house agreement. Bedriftsveien 17 is located in the middle of the emerging commercial area Krøgenes, 3 kilometers east of down-town Arendal. The area has grown in attractiveness with a new feed-in road to the new E18 highway recently completed. SUSTAINABILITY AFK Property is reporting Scope 1 emissions of 20 tCO 2 e for 2022. These emissions are all at Gullknapp and is from fossil-fuelled cars and chemical de-icing. Scope 2 emissions was 1.5 tCO 2 e and Scope 3 emissions was 7.3 tCO 2 e in 2022. AFK Property conducts annual environmental audits. For the largest project Bryggebyen, there is a focus on reducing carbon emissions and increasing waste management during the construction phase. At Gullknapp, AFK Property monitors chemical oxygen demand and noise levels. The chemical oxygen demand is well below the 10 tonnes limit, and noise levels are satisfactory. In 2023, AFK Property will continue work with suppliers throughout the value chain to secure basic human rights and safety and health of people. An updated Business Code of Conduct will be sent out as a part of the supplier contract. OUTLOOK In 2023, AFK Property will proceed with the building of 48 units in the Bryggebyen apartment project. All units are scheduled to be ﬁnalized in 2024. Regulation of the fourth stage of the Bryggebyen project will be initiated during the year. AFK Property will also proceed with the regulation process for Longum Næringspark, in addition to building a 2,500 square meter facility for ENRX. 72 73 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 PORTFOLIO ANNUAL AND SUSTAINABILITY REPORT From the Boardroom 03 Board of Directors 76 Board of Directors Report 78 Corporate Governance Report 84 75 FROM THE BOARDROOM ANNUAL AND SUSTAINABILITY REPORT Board of Directors Trond Ødegård Westlie Director of Board Trond Westlie (1961) has held the position as Chairman of the Board of Directors of Arendals Fossekompani ASA since May 2022. He is an experienced executive and Chief Financial Ofﬁcer for large international public corporations. Westlie brings a broad understanding of the ﬁnancial markets and years of relevant board experience. Westlie is a Certiﬁed Public Accountant, holding a degree from the Norwegian School of Economics. Independent of Executive Management Current Board positions: Wilh. Wilhelmsen Holding ASA, Shama AS, Vergia AS Board meetings attended in 2022: 5 Anne Grethe Dalane Board Member Anne Grethe Dalane (1960) has been a member of the Board of Directors of Arendals Fossekompani ASA since May 2022. She brings extensive leadership expe- rience from Yara and Hydro and is a long-standing board member of several interna- tional companies. Dalane holds a master’s degree from the Norwegian School of Economics. Independent of Executive Management Current Board positions: BW LPG, PGS Board meetings attended in 2022: 5 Morten Bergesen Board Member Morten Bergesen (1974) has been a member of the Board of Directors of Arendals Fossekompani ASA since May 2004. He is an experienced chairperson with a demon- strated history of working in a broad range of industries, serving both Norwegian and international companies. Bergesen holds a master’s degree in economics from BI Norwegian Business School. Independent of Executive Management Current Board positions: IFM AG, Aksjefonn AS, Klynge AS, Bergehus Holding AS, Breifonn AS, THF AS Board meetings attended in 2022: 10 Stine Rolstad Brenna Board Member Stine Rolstad Brenna (1965) has been a member of the Board of Directors of Arendals Fossekompani ASA since September 2020. She is an experienced CFO, investor and board professional, serving both Norwegian and international companies. Brenna holds a master’s degree in corporate ﬁnance, international business and strategy from BI Norwegian Business School. Independent of Executive Management Current Board positions: Lyse AS, Theion GmBH, Rabbalshede Kraft AB, Sporveien AS, Lørenskog kommunale pensjonskasse Board meetings attended in 2022: 9 Lise Lindbäck Board Member Lise Lindbäck (1970) has been a member of the Board of Directors of Arendals Fossekompani ASA since May 2022. She brings exten- sive and broad experience from ﬁnancial markets, with a proven ability to manage high performing teams in an international environment. Lindbäck holds a master’s degree in economics and business administration from the Norwegian School of Economics. Independent of Executive Management Current Board positions: Alpha Corporate Finance AS, SEWA Grih Rin Ltd., SubK Impact Solutions Ltd. Board meetings attended in 2022: 5 Didrik Vigsnæs Board Member Didrik Vigsnæs (1966) has been a member of the Board of Directors of Arendals Fossekompani ASA since May 2016. He brings decades of experience as CEO of investment companies, and he is a seasoned board professional serving a wide range of companies. Vigsnæs holds a bachelor’s degree in business administration from the University of Bradford School of Management. Independent of Executive Management Current Board positions: Dima AS, Zone Security AS, Vicama Capital AS, Malling & Co Vekst AS, Oseberget Eiendom AS Board meetings attended in 2022: 10 Christian Must Board Member Christian Must (1973) has been a member of the Board of Directors of Arendals Fossekompani ASA since May 2021. He brings exten- sive business development experience across industry verticals and has served as a board professional for a wide range of companies. Must holds a master’s degree in industrial economics and technology manage- ment from the Norwegian University of Science and Technology and AFA from the Norwegian School of Economics. Independent of Executive Management Current Board positions: DN Media Group, Cenate, Must AS, Vedeld AS Board meetings attended in 2022: 10 76 77 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FROM THE BOARDROOM ANNUAL AND SUSTAINABILITY REPORT With more than a century of industrial history, we continue to develop our companies in a sustainable and long-term perspective. Our ambition is to utilize our compe- tencies to build world-leading positions in industries driven by global megatrends. We do this by taking the long term view on objectives, but relentlessly working to improve our performance in our day to day efforts. Long term perspective requires urgent patience. Our ambition is to build the Arendals Fossekompani even stronger, to serve as the best owner of our portfolio companies. This implies developing the portfolio based on industry experience and understanding, ﬁnancial competence and strength, and by identifying synergies in the portfolio. Today, Arendals Fossekompani has an attractive portfolio positioned in verti- cals driven by global megatrends, such as Green Energy, Digitalisation & Big Data Analytics, and Electriﬁcation & Materials. Our companies are both listed and privately own, and Arendals Fossekompani is – as part of our strategy – the majority owner. In recent years, Arendals Fossekompani has been responsible for the creation of Volue, ENRX, Alytic, Ampwell and Vergia – all serving as examples of overall strategic decisions to further value-creation. For details on the 2022 performance of our port- folio companies and the AFK Group, please see chapter 1 and 2 of this report. Arendal is our hometown. We remain committed to contributing to the development of this great city and its people. REVIEW OF THE ANNUAL FINANCIAL STATEMENTS In the opinion of the Board of Directors, the annual ﬁnancial statements provide a true and fair view of the company’s and the group’s position at the end of the year. There are no material uncertainties associated with the annual ﬁnancial statements, and there are no other extraordinary circumstances that have affected the ﬁnancial statements. The Board of Directors conﬁrms that the accounts have been prepared based on the assumption that AFK is a going concern, and that this assumption con- tinues to apply. BOARD OF DIRECTORS At the Annual General Meeting in May 2022, Didrik Vigsnæs and Stine Rolstad Brenna were re-elected as board members for a term of one year. Trond Westlie, Lise Lindbäck, and Anne Grethe Dalane were elected to the Board for a term of one year. PERSONNEL, EQUAL OPPORTUNITY, WORKING ENVIRONMENT AND THE NATURAL ENVIRONMENT At the end of the year, Arendals Fossekompani Parent Company had 36 employees, of which 9 were women. The employment situation is marked by long-term relation- ships and stability. The company aims to improve the balance between the genders. The Board currently consists of three women and four men. The working environ- ment at AFK is considered good. The Parent Company has a separate committee for dealing with issues related to health, environment, and safety. There are representa- tives for employees and corporate management on the committee. The average pay for men and women varies due to differences in job categories and seniority. A full disclosure of the guidelines for remuneration of the executive leader- ship team can be found in the separate Remuneration Report. Sick leave in the Parent Company amounted to 244 days (non-work related), which corresponds to 3.3 percent of the total working hours. There were no accidents or personal injuries of signiﬁcance in 2022, nor any signiﬁcant material damage. • Sick leave at Volue was 2.7% (2.2%) in 2022. There was a total of 4,484 days of absence due to illness. Board of Directors’ Report A long-term approach in times of volatility In times marked by a war in Europe, supply-chain disturbances in the aftermath of the pandemic, increased inﬂation, and – in general; global volatility, Arendals Fossekompani remains true to its core values: Collaborative, Long-term, Dynamic, and Responsible. 78 79 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FROM THE BOARDROOM ANNUAL AND SUSTAINABILITY REPORT • Sick leave at Tekna was 2.6% (2.0%) in 2022. There was a total of 1,221 days of absence due to illness. • Sick leave at NSSLGlobal was 1.8% (1.0%) in 2022. There was a total of 1,192 days of absence due to illness. • Sick leave at ENRX was 3.5% (2.8%) in 2022. The company recorded a total of 8,318 days of absence due to illness. • Sick leave at Ampwell was 6.4% in 2022. The company recorded a total of 587 days of absence due to illness. • Sick leave at Alytic was 3.2% in 2022. There was a total of 456 days of absence due to illness. • Sick leave at Vergia was 0.8% in 2022. The company recorded a total of 2 days of absence due to illness. • Sick leave at AFK Property was 3.8% in 2022. The company recorded a total of 15 days of absence due to illness. Arendals Fossekompani’s portfolio companies have health, environment and safety committees and other collaborative bodies in accordance with national legislation. The Parent Company’s operations have only limited negative impact on the natural environment in the form of emissions to water and air. The Parent Company has con- ducted materiality analyses to ﬁnd material risks and opportunities for the company related to environment, governance, and social issues. The main positive contributions from the Parent Company are seen in the strategy for responsible investment and in being an active and demanding owner of its port- folio companies. The Parent Company also makes a positive environmental contri- bution through the production of renewable hydro power. Operations in AFK’s portfolio companies entail little risk of pollution of the natural environment. All portfolio companies have conducted materiality analyses and cli- mate risk analyses to manage and measure this risk. To the extent that these analy- ses show that such risks exist, measures have been implemented in accordance with national legislation and guidelines to prevent any negative environmental impact. The company is aligned with the greenhouse gas emission reduction goals for 2030, as described in the Paris Agreement. EFFORTS TO PROMOTE THE PURPOSE OF THE ANTI-DISCRIMINATION AND ACCESSIBILITY ACT It is important for Arendals Fossekompani to promote equality in all areas and to pre- vent discrimination based on ethnicity, religion, or disability. The Parent Company has evaluated, examined risks, analyzed causes, and will implement measures according to the activity and reporting obligations in The Equality and Anti-discrimination Act. A separate report on Human Rights and Transparancy Act published and also avail- able on the AFK website. In addition, Arendals Fossekompani has submitted near- term company-wide emissions reduction targets in line with the Science Based Targets initiative. RESEARCH AND DEVELOPMENT Capitalised and expensed research and development costs in AFK’s businesses totaled NOK 261 million (194 million) in 2022. ETHICS AND SOCIAL RESPONSIBILITY A report in accordance with Section 3.3 of the Norwegian Accounting Act regarding corporate social responsibility is included in Chapter 4. This part of the annual report is also available on the company’s website. Chapter 4 elaborates on Arendals Fossekompani’s efforts and guidelines in the areas of environment, social issues, and governance. KPIs and targets for improvements are aligned across the portfolio. We set high ethical standards, and communication with the outside world is to be open, clear, and honest. The company is responsible for ensuring safe and good workplaces in the local communities where it is present. We seek to create value for society, customers, employees, and owners. For many years, Arendals Fossekompani Parent Company has based its activities on the utilization of a local natural resource, and therefore particularly wishes to contribute to value creation and social devel- opment in the Arendal region. The same applies to our portfolio companies in their local communities. We support Arendalsuka, an annual national politics and business event, and the Canal Street music festival, in addition to various initiatives within sports and culture. IFRS Arendals Fossekompani has prepared the financial statements for the Parent Company and the Group in accordance with the principles in the International Financial Reporting Standards (IFRS) as adopted by the European Union. THE AFK SHARE There are a total of 55,995,250 shares in the company. As at 31 December 2022 a total of 1,118,319 were treasury shares, which represents 2.0 percent of the total number of outstanding shares. The share price on 31 December 2021 was NOK 445 and on 31 December 2022 NOK 250.5. The company had 4,999 shareholders at year- end. The Board of Directors will propose that the Annual General Meeting renew the Board’s authorization to purchase treasury shares within a total framework of 10 percent of the shares and within a price range of NOK 10-2000. LIABILITY INSURANCE Arendals Fossekompani holds a Directors’ and Ofﬁcers’ Liability Insurance with world-wide coverage. FINANCIAL POSITION The Parent Company’s and Group’s ﬁnancial standing is good. The Board of Directors assumes that the assets of the Parent Company and Group provide a good founda- tion for future growth. RISKS AND FACTORS OF UNCERTAINTY Arendals Fossekompani is exposed to credit risk, market risk and liquidity risk. These matters are described in detail in Note 16 to the annual ﬁnancial statements for 2022. The ongoing war in Ukraine continues to pose supply chain risks and disruptions on the energy markets. The company has taken strong measures to ensure embargo compliance across the value chain. DIVIDENDS AND ALLOCATION OF NET PROFIT FOR THE YEAR Arendals Fossekompani announces dividends on a quarterly basis. The Board of Directors approves the quarterly dividends based on an authorization from the General Meeting. When deciding the quarterly dividends, the Board of Directors takes into consideration expected cash ﬂow, capital expenditure plans, ﬁnanc- ing requirements and appropriate ﬁnancial ﬂexibility. In 2022, AFK paid dividends amounting to NOK 409 million. AFK’s net proﬁt for 2022 amounted to NOK -33 mil- lion. The Board of Directors proposes that the net proﬁt is transferred to other equity. 80 81 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FROM THE BOARDROOM ANNUAL AND SUSTAINABILITY REPORT OUTLOOK 2023 revenues for AFK Group are expected to be on par with 2022, driven by high activity levels in all portfolio companies and their position within attractive megatrends, offset by lower estimated power prices. Operating proﬁt is expected to be lower than 2022 due to reduced earnings from AFK Hydropower because of lower estimated price trend. Note that there is uncertainty associated with the war in Ukraine, supply chain constraints, soaring inﬂation, rising interest rates, the develop- ment of energy prices, and tax regulations for the Norwegian hydropower industry. AFK HYDROPOWER In light of the market’s estimated power price trend for 2023, revenues and operating proﬁt for AFK Hydropower are expected to be lower than in 2022. Net cash generated from hydropower production will also be impacted by the increase in resource rent tax from 37% to 45% (effective as of 1 January 2022), as well as ‘high-price contribu- tion’ tax on monthly average realized electricity prices in excess of NOK 0.70 per kWh (effective as of 28 September 2022). These taxes were presented by the Norwegian government on 28 September 2022. Actual energy prices depend on many factors, including hydrological balance, oil and gas prices, weather conditions, temperatures and more. With limited reservoir capacity, the production volume will also be depen- dent on precipitation. VOLUE Volue revenues are expected to be on par with 2022, while operating proﬁt for 2023 is expected to be higher than in 2022. TEKNA Tekna expects 2023 revenues and operating proﬁt to be higher than in 2022. NSSLGLOBAL NSSLGlobal expects 2023 revenues to be in line with 2022, while operating proﬁt is expected to be lower than in 2022. ENRX ENRX expects 2023 revenues and operating proﬁt to be higher than in 2022. AMPWELL Ampwell expects to generate continued revenue growth throughout 2023. EBIT is expected to improve but remain negative for 2023. The Board of Directors emphasizes that signiﬁcant uncertainty is associated with assessments of future circumstances. EVENTS AFTER THE CLOSING OF 2022 On 16 December, it was announced that Ørjan Svanevik was to resign as CEO of Arendals Fossekompani, and CFO Lars Peder Fensli would function as interim CEO as of 1 January 2023 until a new CEO was appointed and operational. On 10 January 2023, it was announced that Benjamin Golding was appointed new CEO. Golding will assume his position at Arendals Fossekompani as soon as his job in DNB comes to an end but no later than 1 August 2023. Froland, 11 April 2023 Trond Westlie, Chairman Stine Rolstad Brenna, Board Member Lise Lindbäck, Board Member Morten Bergesen, Board Member Didrik Vigsnæs, Board Member Anne Grethe Dalane, Board Member Lars Peder Fensli, Acting CEO and CFO Christian Must, Board Member 82 83 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FROM THE BOARDROOM ANNUAL AND SUSTAINABILITY REPORT Being listed on the stock exchange Oslo Børs, Arendals Fossekompani is subject to reporting requirements for corporate governance under the Accounting Act section 3-3b, Norwegian securities trading legislation, and the Oslo Stock Exchange continuing obligations of listed companies. CORPORATE GUIDELINES The following guidelines form the basis for corporate governance at Arendals Fossekompani: • Arendals Fossekompani shall communicate relevant information honestly and openly to the public about our activities and any circumstances related to corporate governance. • The Board of Directors at Arendals Fossekompani shall be autonomous and independent of group management. • Emphasis shall be placed on avoiding conﬂicts of interest between shareholders, board members and executive management. • The tasks and functions of the Board and group management at Arendals Fossekompani shall be distinct and clearly deﬁned. • All shareholders shall be treated equally. NORWEGIAN CODE OF PRACTICE Each element of the Norwegian Code of Practice for Corporate Governance, last revised on 14 October 2021, is addressed below. A total review and amendment of this corporate governance report was performed by the Board of Directors in 2023, following the changes made in the company since the last corporate governance report of 30 March 2022. A description is given of Arendals Fossekompani’s com- pliance with, and deviations from, the Code of Practice. A complete overview of the Code of Practice and ofﬁcial remarks by the Oslo Stock Exchange are available online at www.nues.no. 1. CORPORATE GOVERNANCE REPORT Arendals Fossekompani has prepared a separate corporate governance policy, and the Board has decided to implement the Norwegian Code of Practice for Corporate Governance. We have implemented further instructions for corporate governance, including rules of procedure for the Board of Directors of February 2022, rules of procedure for the CEO of February 2022, instructions for the Audit Committee of May 2021, instruc- tions for the Renumeration Committee, insider instructions, and a policy on disclo- sure of information. Our Code of Conduct reﬂects our commitment to ethical business conduct and addresses topics such as anti-corruption, equality and anti-discrimination, and sustainability. The Code of Conduct is subject to regular review and the latest ver- sion was adopted by the Board of Directors on 9 February 2023. Our expectations and guidelines towards suppliers and business partners are set out in the Business Partner Code of Conduct as approved by the Board of Directors. 2. BUSINESS ACTIVITIES The object of Arendals Fossekompani is, through in-house production, participation in new infrastructure, purchase, or leasing, to make use of or sell electricity, as well as to participate, directly or indirectly, in other industrial activities or business enter- prises, including investing in real estate. These objectives are expressly stated in Section 1 of our Articles of Association. The Articles of Association are available on our website: www.arendalsfossekompani.no. Arendals Fossekompani has signiﬁcant ﬁnancial capacity. Our investment portfolio will, at all times, consist partly of long-term and active ownership commitments, and partly of liquid ﬁnancial assets. Liquidity will be managed mainly via listed shares Corporate Governance Report 84 85 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FROM THE BOARDROOM ANNUAL AND SUSTAINABILITY REPORT and bonds. The bulk of our share portfolio will consist of a limited number of major investments. Our investment strategy is based on our belief that active, long-term and responsible ownership provides the best return for the risk involved. Further descriptions of targets, strategies, risk proﬁle and the objective of creating long-term value for shareholders in a sustainable way, is described elsewhere in the Annual Report, also available at www.arendalsfossekompani.no/en/investor-rela- tions. Our targets, strategies and risk proﬁle are reviewed annually. Sustainability is reg- ularly on the Board’s agenda. Every year a materiality analysis of topics relevant for environmental, social issues and governance is presented to the Board of Directors. In Arendals Fossekompani, we integrate considerations related to our broader stakeholders into our business and value creation for our shareholders through our sustainability framework and reporting. Our objectives, principal strategies and stakeholder engagement are further described elsewhere in the Annual Report, and on our website www.arendalsfossekompani.no. In Arendals Fossekompani, we have a clear focus on our corporate responsibility for environmental and social conditions, including work environment, diversity, equality, non-discrimination, human rights and work against corruption and bribery. We are committed to contributing to the UN Sustainable Development Goals, and our work with diversity and equality is further described in the separate chapter Diversity and Equality in the Annual Report. Further details and descriptions on our work on these matters can be found in the Annual report, and on our website. 3. EQUITY AND DIVIDENDS Equity The book value of the Group’s equity as at 31 December 2022 was MNOK 3,950 which amounted to 49 % of total assets. Market value is signiﬁcantly higher, and the company has a solid ﬁnancial foundation. The Board constantly assesses the com- pany’s ﬁnancial capacity in light of our objectives, strategy and risk proﬁle. Dividend policy It is Arendals Fossekompani’s policy to pay a dividend that reﬂects our long-term strategy, ﬁnancial position and investment capacity. The annual dividend shall, over time, ensure that shareholders receive a competitive return on their investment. Since Q2 2020, we have announced our dividends on a quarterly basis. The Board approves the quarterly dividends based on an authorization from the General Meeting. When deciding the quarterly dividends, the Board takes into consideration expected cash ﬂow, capital expenditure plans, ﬁnancing requirements and appropri- ate ﬁnancial ﬂexibility. The Board believes that quarterly dividend payments provide a ﬂexibility that beneﬁts both the company and its shareholders. From 1 July 2013, the Annual General Meeting has the opportunity to authorize the Board of Directors to distribute dividends on the basis of the approved annual accounts. Proposals for such authorization should be justiﬁed. In order to ensure ﬂexibility and efﬁciency in the implementation of quarterly dividend payments, the Board proposes that the Annual General Meeting in 2023 continues to authorize the Board to pay dividends, limited in time to the Annual General Meeting in 2024. Capital increase No authorization to undertake a share issue has been granted to the Board. The most recent capital increase occurred in 2012, when the share capital was raised by NOK 201,582,900 to NOK 223,981,000 through a transfer from other funds. Purchase of treasury shares The General Meeting can authorize the Board to purchase up to 10% of the com- pany’s own shares. At the Annual General Meeting on 5 May 2022, the Board was authorized to purchase treasury shares up to a maximum of 7.93 percent of the total number of shares. The terms of the authorization permit the Board to acquire treasury shares only between a minimum price of NOK 10 and a maximum price of NOK 2,000 per share. This authorization will remain in effect until the Annual General Meeting in 2023. As at 31 December 2022, the Group owned a total of 1,118,319 shares, corresponding to 2.0% of all the outstanding shares in the company. These shares are freely nego- tiable. 4. EQUAL TREATMENT OF SHAREHOLDERS AND TRANSACTIONS WITH RELATED PARTIES Share class The Group’s shares consist exclusively of A-shares. According to Section 11 of our Articles of Association, no shareholder may personally or by proxy vote for more than one quarter of the total number of shares. Shares transferred to new owners do not confer voting rights until the transfer has been approved by the Board. All shares have equal rights. Transactions involving treasury shares The Board may exercise its authority to acquire treasury shares as long as the shares are acquired at the market price. Correspondingly, the divestment of acquired shares will also be undertaken at market price yet so that the shares can be discounted if the shares are used in connection with programs for employees and board members. At the same time, the authorization gives the Board the ﬂexibility to utilize the mecha- nisms that the Public Limited Liability Companies Act gives access to in situations where the acquisition or disposal of shares is considered advantageous to the com- pany and the company’s shareholders, including for use in share purchase programs for directors and employees of the company. Transactions with related parties No transactions have occurred between the company and shareholders, board members, senior executives or their related parties in 2022 that could be described as not immaterial transactions. In 2022, 51806 shares were sold from the company to senior executives and board members, in accordance with the approved share purchase program. See Note 4.1 of the 2022 Annual Report. Guidelines for board members and senior executives If a board member or senior executive has a material direct or indirect interest in an agreement that is being entered into by the company, that person must disclose the fact before the matter is put to the Board, and he or she may not participate in discussions or votes on that matter. 5. FREELY NEGOTIABLE SHARES Under current Norwegian legislation on industrial licensing, a shareholder who acquires more than 20% of the total number of shares in the company must apply for a license. The law requires the Board’s approval for such acquisitions. A number of other provisions of the Waterfall Rights Act could cause the acquisition of the com- pany’s shares to have consequences for both the company itself and other share- holders. Therefore, the company has found it necessary to reserve the right to refuse approval of share acquisitions. According to Section 7 of the Articles of Association, any acquisition by means of transfer is conditional on the Board’s consent. Consent may be refused only on reasonable grounds. 86 87 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FROM THE BOARDROOM ANNUAL AND SUSTAINABILITY REPORT Deviations from the Code: The Articles of Association hold that transfer of shares is conditional on the Board’s consent. 6. GENERAL MEETING Notiﬁcation The Annual General Meeting is held as early as practically possible after the close of the previous ﬁnancial year, usually in April or May. Meeting notices and atten- dance registration forms are sent to all shareholders no later than 21 days prior to the General Meeting through digital communication, or through regular mail to share- holders with a known address who do not consent to digital communication. Documents are also made available on our website www.arendalsfossekomani.no and through the Oslo Stock Exchange distribution service. The annual report and other enclosures to the General Meeting notice are made available solely via the website and the Oslo Stock Exchange distribution service. Shareholders who wish to receive the enclosures by regular mail must contact the company. The Board will provide shareholders with all the information necessary to help them take a position on all agenda items, along with proposals relating to the election of board members. The Articles of Association permits notice of participation to be given up to two days prior to the date of the General Meeting. Our ﬁnancial calendar will be published online. Participation Shareholders can give notice of their participation either in writing or via email or digital solutions. The Board wishes to arrange the meeting so that as many as possi- ble of the shareholders are able to participate. Shareholders who cannot attend are encouraged to appoint a proxy. We accommodate requests of digital attendance to the General Meeting in line with legal requirements. Representatives of the Board of Directors shall attend the General Meeting, along with the auditor. The Chief Executive Ofﬁcer (CEO) and the Chief Financial Ofﬁcer (CFO) shall participate on behalf of Group management. Agenda and execution The Board of Directors will set the agenda according to the list in Section 10 of the Articles of Association. According to Section 10, the participants of the General Meeting appoint a chairperson to lead the meeting. 7. NOMINATIONS COMMITTEE The company has a three-member Nominations Committee established in accordance with item 11 of the Articles of Association. One of the members in the Nomination Committee is currently a member of the Board of Directors. The latest recommendation from NUES, last revised in October 2021, is to have no member in the Nomination Committee from the Board of Directors. Our current practice will be evaluated in 2023. Candidates eligible for election to the Board of Directors are announced in conjunction with the invitation to attend the General Meeting. Nominations for other candidates can be submitted before and during the General Meeting itself. According to the rules of procedures for the Nomination Committee approved by the General Assembly in May 2022, the Nomination Committee shall, in the judgement of candidates, evaluate the competence required by the company. The nomination committee shall work for diversity in the board of the company. The Nomination Committee shall also consider that the Board of Directors is ﬁtted to act inde- pendently of special interests. Deviations from the Code: A member from the Board of Directors is in the Nomination Committee. 8. BOARD OF DIRECTORS: COMPOSITION AND INDEPENDENCE The Board consists of seven members and is currently composed of the following: Trond Westlie (Chair, member since 2022), Morten Bergesen (member since 2004), Christian Must (member since 2021), Didrik Vigsnæs (member since 2016), Anne Grethe Dalane (member since 2022), Lise Lindbäck (member since 2022) and Stine Rolstad Brenna (member since 2020), all elected by the shareholders. The members are elected for a period of one year. There is no maximum length of tenure for the members of the Board of Directors. The Board has 3/7 women members. According to Norwegian law, it is prohibited to obtain certain information about job applicants, in particular linked to underrepresented social groups. Although it is the company’s objective to have broad representation at all levels, Arendals Fossekompani do not track or report information relating to underrepresented social groups. Note 4.1 of the Annual Report contains information about board meeting attendance. Information about the competence and independence of board members is provided in subse- quent paragraphs. Election of board members The General Meeting elects seven representatives to the Board of Directors. Ahead of the election, the names of candidates may be submitted to the Nominations Committee by an individual shareholder or by several shareholders jointly. Hence, stakeholders’ views will be taken into consideration by the Nomination Committee. Nominations submitted in time will be included in the invitation to attend the General Meeting sent to all shareholders and posted on our website. Board members are elected by simple majority. Members are elected for one year at a time, with the possibility of re-election. About half of all board members are elected each year. The composition and competence of the Board of Directors The Board of Directors should be composed so that it safeguards the interests of the shareholder community and the company’s need for expertise and diversity. This implies that the individual board members have the necessary experience, com- petence and capacity to carry out their duties satisfactorily and independently. The competence of the members of the Board covers a wide range of industries, technol- ogies, board experience, compliance, governance, ﬁnance and sustainability. These are all competences important to the development of the company. The presenta- tion of the Board in this report gives a presentation of the individual competences and main positions held by each of the Board members. According to the Articles of Association, the Board shall comprise ﬁve to seven mem- bers. The Board currently consists of seven members. The CEO is not a member of the Board. The members of the Board are elected for one year at a time and selects its own Chair. Trond Westlie has been elected to chair the Board. Changes to the Board of Directors in 2022 At the Annual General Meeting held in May 2022, Trond Westlie, Anne Grethe Dalane and Lise Landbäck were elected Board Members. Jon Hindar, Kristine Landmark and Heidi Pettersen resigned from the Board of Directors. Independence of the Board of Directors All shareholder-elected board members are considered autonomous and indepen- dent of Group management. The same applies to material business connections. At the close of the year, Didrik Vigsnæs is the Managing Director of Vicama AS, the larg- est shareholder in Ulfoss Invest AS, which owns – directly, indirectly or via related par- ties – approximately 26% of the Arendals Fossekompani shares. Morten Bergesen was Managing Director of Havfonn AS at the close of the year, which owns directly, indirectly or via related parties—approximately 26% of the Arendals Fossekompani shares. Christian Must was at the close of the year, member of the board in Must 88 89 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FROM THE BOARDROOM ANNUAL AND SUSTAINABILITY REPORT Invest, which owns directly, indirectly or via related parties – approximately 25% of the Arendals Fossekompani shares. The Board works actively to ensure that no conﬂict of interest exists between share- holders, the Board, Group management, and other stakeholders. Stakeholders will be informed if conﬂicts of interest were to occur. The Code of Conduct describes how Board members should behave if conﬂicts of interest were to occur. All Board members receive information on the Code of Conduct. Shares owned by board members In addition to the shares held by the representatives of the three principal sharehold- ers, as at 31 December 2022, board member Stine Rolstad Brenna had the following shareholdings, either personally or through wholly-owned companies: 7,500 shares. Deviations from the Code: The Board elects its own chair, in accordance with Section 4 of the Articles of Association. 9. THE WORK OF THE BOARD OF DIRECTORS The Board’s tasks The Board shall determine the Group’s strategy, carry out necessary control func- tions and ensure that the Group is satisfactorily managed and organized. The Board shall set the company’s ﬁnancial objectives and approve its plans and budgets. The Board is also responsible for approving and updating the organization’s purpose, value statement, policies and goals related to sustainable development. The senior executives in the Company are delegated the task to update and present material to the Board that are relevant to make good decisions regarding plans budgets and policies and goals related to maintain a sustainable development. Furthermore, the Board is overseeing the organization’s due diligence and other processes to identify and manage the organization’s impacts on the economy, envi- ronment, and people. Stakeholders are encouraged to support these processes with their input during the Annual General Meeting. The targets, strategies and risk proﬁle of the Company are reviewed annually by the Board of Directors. The sustainability strategy, the materiality analysis, stakeholder analyses and the sustainability report are approved by the Board of Directors. The operational imple- mentation of these processes is delegated to the Chief Sustainability Ofﬁcer (CSO) of the Company. This is in accordance with the Environmental Policy of the Company. The Board of Directors has delegated the formal stakeholder dialogue to the senior executives in the companies. A review of the systematic stakeholder interviews is each year presented to the Board of Directors from the CSO. Rules of Procedure for the Board The Rules of Procedure encompass the following: the role of the Board and its tasks, the tasks of the CEO and his or her obligations towards the Board, formal procedures for the handling of matters brought before the Board, notice of board meetings and matters required to be considered by the Board etc. The Rules also stipulate when the Board is in quorum, how minutes are to be kept, how legal disqualiﬁcation is determined and how the duty of conﬁdentiality is to apply. The Board may deviate from the Rules of Procedure in certain situations. Providing instructions for executive management A clear distinction has been made between the tasks and work of the Board and that of Group management. The Chairman of the Board is responsible for ensuring that the Board’s proceedings and work are conducted in an effective and correct manner. The CEO is responsible for managing company operations. The CEO’s tasks are clearly stated in the instructions drawn up for that position. Notice of board meetings and meeting procedures The Board has an annual plan containing a set of predetermined topics for consid- eration at board meetings. The Board normally meets 6 to 8 times a year. Additional meetings are held when necessary. In 2022, a total of 10 board meetings were held. All board members receive information about the company’s operational and ﬁnan- cial performance on a regular basis and in good time before the scheduled meetings. Board members also receive monthly operational reports. The company’s business plan, strategy and risks are reviewed and evaluated regularly by the Board. The ﬁnal agenda for the board meeting is determined by the Chairman in consulta- tion with the CEO. The CEO attends board meetings together with the board mem- bers. Others are invited to attend when this is deemed necessary. 90 91 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FROM THE BOARDROOM ANNUAL AND SUSTAINABILITY REPORT Duty of conﬁdentiality – communication between the Board and shareholders In principle, the minutes of board meetings and the Board’s discussions are conﬁden- tial, unless the Board decides otherwise or there is no apparent reason to maintain conﬁdentiality or secrecy. Legal competence The Board complies with the rules for legal competence and disqualiﬁcation pur- suant to Section 6–27 of the Norwegian Public Limited Liability Companies Act and the Board’s own Rules of Procedure. There were no issues in 2022 which a board member was disqualiﬁed from discussing or voting on for reasons of legal compe- tence. See also item 4 above, Guidelines for Board Members and Senior Executives. Use of board committees The Group has established an Audit Committee and a Remuneration Committee, both comprising members of the Board. The Audit Committee The company has a three-member Audit Committee established in accordance with the Rules of Procedure for the Audit Committee approved by the Board of Directors. The members are all members of the Board of Directors and consists of Stine Rolstad Brenna (Chair, member since 2020), Morten Bergesen (member since 2010) and Anne Grethe Dalane (member since 2022). The committee has 2/3 women mem- bers. There are no underrepresented social groups in the committee. All the members of the audit committee are elected from the members of the Board of Directors and are independent of the group management. The competence of the members is covered under the section about the Board of Directors and the presen- tation of the Board of Directors in the annual report. The Audit Committee is a preparatory committee to the Board of Directors. The committee is also responsible for providing support to the Board in the reporting of annual accounts, audits, internal control, risk management, sustainability reporting and more. The instruction for the Audit Committee was last revised by the Board of Directors in March 2023, to also include the obligation to supervise the audit of the annual accounts by the auditor in line with the EU regulation (EU) No 537/2014, and to assess and supervise the interdependence of the auditor as included in the amend- ments to the Auditors Act of 1 January 2021. At least one member shall be indepen- dent of the company’s Group management and have qualiﬁcations in accounting or auditing. Board members who are also members of the Group management cannot at the same time be members of the Audit Committee. The Remuneration Committee The Remuneration Committee is a preparatory committee to the Board of Directors comprising three board members including the Chairperson of the Board. The com- mittee shall prepare compensation related matters for the Board and prepare the remuneration policy for remuneration of executive management and the remun- er-ation report to the General Meeting. The company has a four-member Remuneration Committee established in accor- dance with the rules of procedure for the Remuneration Committee approved by the Board of Directors. The members are all members of the Board of Directors and con- sists of Trond Westlie (Chair, member 2022), Christian Must (member since 2022), Didrik Vigsnæs (member since 2019) and Lise Lindbäck (member since 2022). The committee has 1/4 women members. According to Norwegian law, it is prohibited to obtain certain information about job applicants, in particular linked to underrepre- sented social groups. Although it is the company’s objective to have broad represen- tation at all levels, Arendals Fossekompani do not track or report information relating to underrepresented social groups. All the members of the Remuneration committee are elected from the members of the Board of Directors and are independent of the group management. The compe- tence of the members is covered under the section about the Board of Directors and in the Annual Report. Self-assessment The Board carries out an assessment of its activities once a year, where the Board considers the outcomes of its processes and tasks as described above, including their own performance in overseeing the management of the organization’s impacts on the economy, environment, and people. The starting point for this assessement is Arendals Fossekompani’s business activities and the work of the Board, how the Board works and its interactions. With regards to this, the Board also evaluates its performance in relation to corporate governance. In 2022, no self-assessment was conducted as there were many changes to the Board during the year, hence, no actions were taken in response to the evaluations. The next self-assessment will take place in 2023 as the members of the Board have held their positions for some time. Deviations from the Code: In 2022, no self-assessment was conducted as there were many changes to the Board during the year. Onboarding and competence development To advance the collective knowledge, skills, and experience of the Board related to sustainable development, the Board has an onboarding program covering these topics as the board members enter their roles. Through regular presentations about topics related to sustainability in the board meetings as well as more in-depth strategic presentations about this topic in the strategy meeting, the Board will further advance their collective knowledge in this topic. 10. RISK MANAGEMENT AND INTERNAL CONTROL The Group has no separate internal auditing department. Financial audits are car- ried out on a task-sharing basis, and in compliance with our guidelines and approval routines. The Board carries out an annual review of the company’s most important risk areas and internal controls and receives a report from the auditor addressing such matters. The Board evaluates the company’s core values and guidelines on ethics and social responsibility every year and veriﬁes the extent of compliance with these guidelines. Group and company ﬁnancial reporting process The Board receives monthly ﬁnancial reports, with accompanying comments on the ﬁnancial performance of the Group, the company and all portfolio companies. Extensive reports are prepared every ﬁscal quarter, with comments about the ﬁnan- cial status of all levels in the Group. The ﬁnance department analyses the income statement and balance sheet in con- nection with each monthly report. A detailed reconciliation of balance sheet and income statement items are prepared each quarter, based on a predetermined plan. The value of material and risk-exposed balance sheet items are assessed. Major and unusual transactions are reviewed. All control procedures are documented. The most signiﬁcant portfolio companies (see Note 1 – Segment reporting) have similar routines for ﬁnancial reporting to the Group. 92 93 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FROM THE BOARDROOM ANNUAL AND SUSTAINABILITY REPORT FCCS Oracle, a cloud-based database solution delivered by Oracle, is used for ﬁnan- cial consolidation. Our portfolio companies report all ﬁgures to this database online. The ﬁnance departments at our portfolio companies are responsible for the quality of the data reported each month and quarter. The quality of the reported data is checked by our auditors in connection with the preparation of the annual ﬁnancial statements. Portfolio company ENRX also uses FCCS Oracle for its consolidation. Other portfolio companies use spreadsheets for consolidation. The Audit Committee (see above) carries out and documents a detailed review of the quarterly and annual reports prior to their consideration by the Board. The minutes and documentation from the Audit Committee meetings are available to the Board. Critical concerns Arendals Fossekompani has guidelines for ethical business conduct (the Code of Conduct) which can be found on the Company website. All employees and the Board receive training in our Code of Conduct and the whistleblower policy, which explains the company’s internal guidelines on how to deal with critical concerns if they occur. The Board is alerted about critical events. 11. REMUNERATION TO THE BOARD OF DIRECTORS The Annual General Meeting determines the remuneration payable to board mem- bers. The 2022 Annual General Meeting resolved that, with effect from May 2022, the Chairman of the Board will receive a fee of NOK 635,000, and NOK 340,000 will be paid to the other board members. Remuneration paid to board members is not linked to ﬁnancial performance or option schemes etc. None of the Board’s shareholder-elected members work for the company in other capacities. 12. REMUNERATION OF SENIOR EXECUTIVES The Remuneration Policy with guidelines for remuneration of executive manage- ment and report on the annual remuneration of executive management is subject to approval and advisory vote by the Annual General Meeting in accordance with the Public Limited Companies Act section 6-16 A and B. The General Meeting approve the Remuneration Policy by any material change and at least every fourth year and shall annually provide an advisory vote on the annual remuneration report of the previous year. No consultants are involved in determining remuneration. The Remuneration Report and the Remuneration policy for 2022 were adopted unani- mously in the Annual General Meeting in May 2022. The Remuneration Policy and Remuneration Report are available on our website. Shareholders are encouraged to state their opinions regarding remuneration of both the Board of Directors and Senior Executives at the Annual General Meeting. Guidelines The CEO’s employment terms and conditions are determined by the Board of Directors. Each year the Board makes a thorough assessment of the salary and other remuneration paid to the CEO in line with the guidelines in the Remuneration Policy. The Board may also award an annual performance-related bonus to the CEO. The Board’s evaluation is based on market surveys for similar positions. The terms and conditions for other senior executives and employees at the Parent Company are set by the CEO in line with the guidelines in the Remuneration Policy. The CEO informs the Chair of the Board of the terms and conditions. Terms and conditions for the senior executives of portfolio companies are set by the boards of the respective companies. The Board takes the position that the company must remain competitive with regard to the remuneration paid to senior executives, without being complicated or be wage leading. The remuneration is structured to provide strong alignment between the interests of executives and shareholders, including a focus on delivering on the company’s key strategic objectives, and in sup- port of the business strategy and long-term interests. More information about pur- pose and principles for remuneration of senior executives in Arendals Fossekompani can be found in the Remuneration Policy published on our website. 94 95 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FROM THE BOARDROOM ANNUAL AND SUSTAINABILITY REPORT A description of how the remuneration policy for members of the Board and senior executives relate to their objectives and performance in relation to the management of the organization’s impacts on the economy, environment, and people, can also be found here. Performance-related remuneration Senior executives at the Parent Company beneﬁt from performance-related bonus schemes as described in the Remuneration Policy and Remuneration Report avail- able at www.arendalsfossekompani.no. Portfolio companies offer performance-based remuneration to varying degrees, as stipulated in the employees’ contracts. Terms and conditions Terms and conditions for remuneration of the Board of Directors are described in Note 4 of the Annual Report. 13. INFORMATION AND COMMUNICATION Annual ﬁnancial statements and annual report – periodic reporting The Group normally publishes its preliminary annual ﬁnancial statements in February. The complete annual ﬁnancial statements, along with the Annual Report, are pub- lished on our website in March/April. In addition, accounting ﬁgures are reported on a quarterly basis. The company’s ﬁnancial calendar is published on the company’s websites. Other market information It is considered important to the Group to inform owners and investors about our per- formance and ﬁnancial status. Emphasis is placed on providing the ﬁnancial market with the same information at the same time. In conversations with shareholders and analysts, care is taken to avoid giving more information to some than to others. Arendals Fossekompani has developed an Investor Relations Policy that is available on our website. Arendals Fossekompani insider instructions are updated according to the European Market Abuse Regulation (MAR). 14. GUIDELINES FOR EQUALITY AND DIVERSITY Arendals Fossekompani has implemented guidelines for equality and diversity for the composition of our Board of Directors, board committees and management. The guidelines set forth that diversity shall be an area of priority in nominating people to the governing bodies and management of the company. There is a particular focus on ensuring diversity with regards to gender equality and diverse expertise. The guidelines set out more detailed objectives for the purpose of achieving these overall objectives, with both annual target dates and long-term target dates. The Board of Directors currently consists of three women and four men. The indi- viduals on the Board of Directors have backgrounds from different industry sectors, which increases diversity. The Group management currently consists of one woman and four men. The indi- viduals in Group management have backgrounds from different industry sectors, which increases diversity. The company has set the following objectives for diversity: • Within 2023, at least 40% of the members of Board of Directors shall be women. • Within 2023, at least 40% of the Group management shall be women. During 2022, Arendals Fossekompani recruited new colleagues and is happy to see a growth in the number of female employees, which is a good start for our journey towards better inclusion and greater diversity. 15. TAKEOVERS Based on our current shareholder structure, the conditions described for takeovers do not apply to the company. The rules of procedure for the Board of Directors of February 2022 do however include guidelines and principles for the event of a take- over bid and for transactions that in fact constitute a disposal of the business of Arendals Fossekompani. 16. AUDITOR The auditor’s formal relationship with the Board of Directors The auditor is at the disposal of the Board of Directors and shall attend board meet- ings if needed. The auditor shall participate in Audit Committee meetings and attend any board meetings that deal speciﬁcally with the annual ﬁnancial statements. The auditor will at that time inform the Board about any issues or concerns he or she might have regarding the annual ﬁnancial statements and other matters, including any potential disagreements between the auditor and Group management. The Board holds annual meetings with the auditor to review reports submitted by the latter concerning the company’s accounting policies, risk areas and internal control routines. Auditor’s formal relationship with executive management The Board has drawn up guidelines for the Group’s business relations with the audi- tor. The fees paid to the auditor for statutory auditing and consulting services are presented separately in the annual ﬁnancial statements. PwC is the selected auditor. In addition to an ordinary audit, the ﬁrm has also pro- vided consulting services within areas such as accounting, taxation and reporting to the Norwegian Water Resources and Energy Directorate (NVE). The Board regularly assesses whether the auditor’s control function is being carried out satisfactorily. 96 97 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FROM THE BOARDROOM ANNUAL AND SUSTAINABILITY REPORT Sustainability 04 Integrity 100 Reporting Frameworks 100 EU Taxonomy Summary 102 Stakeholder Dialogue and Materiality Analysis 105 Sustainability Priorities 106 Updated Materiality Assessment 106 Strategic Focus Areas 107 Membership Associations 108 Ethical Business Conduct 109 Responsible Investments 115 Optimizing the Portfolio Companies 118 A Great Place to Work 122 Community Engagement 135 Ambitions and Targets for 2023 138 99 SUSTAINABILITY ANNUAL AND SUSTAINABILITY REPORT Integrity Over the past few years, our sustainability and social responsibility efforts have become more known due to open and transparent communication. We have pub- lished an increasing set of sustainability related documents, including our Code of Conduct, Business Code of Conduct, our annual sustainability report, and other important policy documents, which are all available on our website. We are proud that also our portfolio companies are communicating more proac- tively about their sustainability efforts, and several of the companies, including Volue, Tekna and ENRX, now publish their own sustainability reports. Reporting frameworks GLOBAL REPORTING INITIATIVE The Global Reporting Initiative (GRI) is an independent, international organisation that provides a global common language to both the reporting and communica- tion of impacts. The GRI Standards are the world’s most widely used standards for sustainability reporting. The Standards are advancing the practice of sustain- ability reporting, and enabling organizations and their stakeholders to take action that creates economic, environmental, and social beneﬁts for everyone. Arendals Fossekompani and portfolio companies report on material impacts for a variety of sustainability issues, such as climate change, health and safety, and corporate gov- ernance, in accordance with GRI’s recommendations. SUSTAINABILITY ACCOUNTING STANDARDS BOARD (SASB) The Sustainability Accounting Standards Board (SASB) provides a set of industry- specific standards that are used to guide the disclosure of financially material sustainability information for Arendals Fossekompani. TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES The purpose of the TCFD Standard is to give investors more knowledge on the ﬁnancial impacts of climate-related issues, based on four core recommendations: Governance, Strategy, Risk Management, and Metrics and Targets. From 2020 to 2022, a climate risk analysis, including an assessment of different climate scenar- ios, was carried out for the portfolio, based on TCFD recommendations. The TCFD: Climate-Risk Assessment Report 2022 is attached. Arendals Fossekompani con- ducted climate risk assessments in accordance with the TCFD recommendations in 2020 and 2021. Based on these assessments, we developed an ambitious target to limit our negative climate impact. CARBON DISCLOSURE PROJECT Carbon Disclosure Project (CDP) is an international reporting framework for companies to manage their environmental impacts. It is aimed at increasing transparency and providing an intuitive performance score based on companies’ climate action. 2021 marked the ﬁrst year AFK publicly disclosed its environmental impacts to CDP. AFK was awarded a score "B" in 2021 and 2022. GREENHOUSE GAS PROTOCOL The GHG Protocol establishes comprehensive global standardized frameworks to measure and manage greenhouse gas (GHG) emissions from private and public sector operations, value chains and mitigation actions. The GHG Protocol Corporate Accounting and Reporting Standard provides requirements and guidance for com- panies and other organizations preparing a corporate-level GHG emissions inven- tory. UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS Arendals Fossekompani supports the United Nations Sustainable Development Goals (SDG). We have chosen six SDGs where we think we can make the largest positive contribution, which are all linked to our focus areas and material topics. Our portfolio companies have chosen SDGs independently of this. Our commitments to the SDGs have been tied in with these strategic focus areas to further emphasize how they are addressed. We have chosen SDGs 5: Gender Equality, 8: Decent Work and Economic Growth, 13: Climate Action, 7: Affordable and Clean Energy, 9: Industry, Innovation and Infrastructure, and 12: Responsible Consumption and Producion. SCIENCE BASED TARGET INITIATIVE In 2022, Arendals Fossekompani committed and submitted science-based emission reduction targets in line with the Science Based Target initiative (SBTi) criteria and recommendation. Validation of targets are booked for 2023. When the targets are approved by SBTi, it will be communicated through their website. Arendals Fossekompani will, after validation, continue to report on our emissions and prog- ress towards meeting our 2030 targets. Arendals Fossekompani has committed to reducing absolute Scope 1 and Scope 2 GHG emissions with 42% by 2030 from a 2021 base year. Our portfolio companies will set their own science based targets within 2027, as part of the Portfolio Coverage approach. In 2023, we will commit to also setting net zero targets to align with the ambitious aim of the Paris Agreement. This means that we will commit to what science dictates is necessary to reduce emissions to meet net-zero global emissions by 2050 to limit global warming to 1.5 °C. This target is approved by the Board of Directors. 100 101 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 SUSTAINABILITY ANNUAL AND SUSTAINABILITY REPORT EU Taxonomy Summary As a key part of the European Union’s Green Deal, the EU Taxonomy was created to deﬁne a common and enforceable language on sustainability to scale up sustainable investments and avoid greenwashing. The EU Taxonomy establishes a European classiﬁcation system for sustainable economic activities. It includes six environ- mental objectives, of which the ﬁrst two are adopted by the EU and the others are not yet adopted: 1. Climate change mitigation. 2. Climate change adaptation. 3. Sustainable use and protection of water and marine resources. 4. Transition to a circular economy. 5. Pollution prevention and control. 6. Protection and restoration of biodiversity and ecosystems. Companies must report the share of aligned, eligible and non-eligible economic activities for three ﬁnancial KPIs: net revenue (turnover), capital expenditure (CapEx) and operating expenditure (OpEx). An activity is considered eligible if it matches the description of an economic activity in the EU Taxonomy. An eligible activity needs to fulﬁl technical screening criteria (TCS) to be considered aligned. Refer to the ﬁgure below for a detailed overview of the process. ARENDALS FOSSEKOMPANI AND THE EU TAXONOMY Arendals Fossekompani carried out a stakeholder analysis in 2021, where the EU Taxonomy was one of the most material topics addressed. We have incorporated the EU taxonomy into our investment strategy, encompassing new investments related to electriﬁcation, materials and green energy. Such investments should show a potential to contribute to, or to be transformed to contribute to, one of the six envi- ronmental objectives deﬁned by the EU Taxonomy. Due to strategic importance and stakeholder expectations, AFK performed an initial assessment of the EU Taxonomy in 2021, which provided an indication of eligibility and alignment of the portfolio. In 2022, we expanded our assessment to cover alignment, in addition to eligibility. SCOPE All portfolio companies in the AFK group have been considered for reporting on the EU Taxonomy for 2022. Vergia is recently established, and therefore not considered ﬁnancially material for the group, and therefore scoped out of the 2022 reporting. We have not included joint ventures and associated companies, as they are not con- solidated in the group’s ﬁnancial statements. Each portfolio company has identiﬁed their core activities by assessing the ﬁnancial materiality and strategic relevance of their economic activities. Activities not assessed as core to the portfolio companies, have been scoped out from reporting for 2022. In addition to the adopted Climate Delegated Act, we assessed the activities proposed by the Platform on Sustainable Finance. Since the technical screening criteria (TSC) for the four remaining environ- mental objectives have not been adopted by the EU, the reporting on these activities is limited to eligibility, pending ﬁnalization of the criteria. KPIs Identiﬁcation of business activities in the EU Taxonomy for each portfolio company Screening the NACE codes of the portfolio companies Assessment of eligible activities per portfolio company List of eligible activities Identify criteria for substantial contribution Data collection Assessment of the impact of the activities against the criteria Identify criteria for DNSH Data collection Assessment of the impact of the activities against the criteria Identify criteria for minimum safeguards Assessment of compliance on group level Alignment Calculation of KPls on portfolio company level Consolidation of reported ﬁgures on group level Reporting group level Substantial contribution Do no signiﬁcant harm Minimum safeguards Elegibility ECONOMIC ACTIVITIES IN THE PORTFOLIO Environmental objective Economic activity as deﬁned in the EU Taxonomy Transitional/ Enabling Relevant companies Climate change mitigation 3.6 Manufacture of low carbon technologies Enabling ENRX, Tekna 4.5 Electricity generation from hydropower - AFK Vannkraft 4.9 Transmission and distribution of electricity Enabling Volue 4.10 Storage of electricity Enabling Ampwell 8.2 Data-driven solutions for GHG emissions reductions Enabling Alytic, Volue 9.1 Close to market research, development and innovation Enabling Alytic, ENRX Climate change adaptation 7.7 Emergency services - Technical protection response and Assistance - NSSLGlobal 8.2 Computer programming, consultancy and related activities - Volue Transition to a circular economy 2.6 Manufacture of durable electrical and electronic equipment - ENRX 14.1 Provision of electrical and electronic equipment through circular business models - NSSLGlobal EU TAXONOMY ASSESSMENT 102 103 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 SUSTAINABILITY ANNUAL AND SUSTAINABILITY REPORT STAKEHOLDER DIALOGUE Why ESG matter for … … and why that is important for Arendals Fossekompani Arena for dialogue Investors Attractive returns and value growth potential A future-proof investment Being taxonomy compliant Access to equity at favourable terms Right-priced stock for use as currency in M&A Meetings Quarterly updates Company presentations Customers Customers buying our products and services Meetings E-mail Seminars / webinars / conferences Regulators Operating in line with legislation Operating in line with legislation (mitigate reputation and ﬁnancial risk) Operating in line with expectations from the greater society Being seen as a transparent and trustworthy company Reporting requirements Audits NGOs Operating in line with expectations from the greater society Being seen as a transparent and trustworthy company Meetings Seminars / webinars / conferences Employees Pride Sense of purpose beyond earning a living Access to great talent Lower turnover Lower recruitment costs Employee development talks Town-hall meetings E-mail / Teams PROCESS The EU Taxonomy assessment has been conducted by each portfolio company, sup- ported by a core team with representatives from AFK. Assessments have been per- formed in accordance with the structure of the EU Taxonomy, starting with eligibility assessments before assessing compliance with the TSC for substantial contribution and do no signiﬁcant harm (DNSH). The minimum safeguards assessment has been conducted by AFK on Group level, based on policies and procedures covering the AFK Group. Eligible activities that met the TSC for substantial contribution and DNSH, as well as the minimum safeguards, are reported as aligned. AFK reports the EU Taxonomy on an aggregate level of portfolio companies. CONCLUSIONS Achieving the goal set out in our 2021 reporting, Arendals Fossekompani is proud to report on alignment for 2022. Given the high percentage of eligible activities, we see a great potential within the portfolio companies’ business activities. Our goal is to increase both eligible and aligned reporting in the years to come. For future reporting we will focus on activities that have not been fully evaluated for alignment, as well as the non-core activities that are not reported on this year. We are looking forward to the 2023 Taxonomy reporting where we expect to have a complete taxonomy reporting covering all AFK portfolio companies and business activities. Stakeholder Dialogue and Materiality Analysis A stakeholder assessment has deﬁned the following key stakeholder groups for Arendals Fossekompani: Investors, customers, regulators, NGOs, and employees. Arendals Fossekompani is continuously engaging with our stakeholders. Stakeholder dialogue is important because it gives us a representative overview of the expecta- tions of those around us and ensures that we are on the right track. The method of engagement varies between the different stakeholders and from year-to-year. In 2022 we mainly engaged through systematic in-depth interviews, as well as regular meetings and dialogue, and our annual and quarterly reports. The two-way communication has resulted in meaningful engagement. The results from the stakeholder dialogue have provided us with valuable insights into our stake- holders’ expectations regarding sustainability and has impacted the selection of our strategic focus areas and material topics. Our progress in this area is communicated back to stakeholders, mainly through this sustainability report. EU TAXONOMY ELIGIBILITY AND ALIGNMENT Aligned Eligible, not aligned Non-eligible 22% aligned 36% eligible, not aligned 42% non-eligible 25% aligned 44% eligible, not aligned 31% non-eligible 14% aligned 36% eligible, not aligned 50% non-eligible Turnover OpEx CapEx 104 105 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 SUSTAINABILITY ANNUAL AND SUSTAINABILITY REPORT ARENDALS FOSSEKOMPANI’S PRIMARY AND SECONDARY VALUE CHAIN To further analyse our sustainability impacts, we have evaluated each activity of our primary and secondary value chain, and deﬁned material risks and opportuni- ties. This analysis has been conducted according to the GRI reporting framework and TCDF recommendations of best practice. A GRI content index is provided as an appendix to this report. Ethical business conduct Anti-corruption and bribery Responsible supply chain Information security Responsible investments New investments Green ﬁnancing Optimizing portfolio companies Economic performance Strengthening sustainability performance A great place to work Diversity and equality Employee satisfaction and talent attractiveness Health and safety Community engagement Sponsorship, partnerships and other investments Investment Policy & Strategy Financial & Societal Value creation Raw Materials and Supply Chain Production and Distribution Marketing and Management Customer or End-User Secondary value chain (Portfolio companies) Primary value chain (AFK Parent Company) Portfolio Management Sustainability Priorities Based on the analyses of our stakeholders and the primary and secondary value chain, a consequence vs likelihood analysis has been conducted to deﬁne the material topics for Arendals Fossekompani. MAIN RISKS • Failure to meet potential legal requirements and stakeholder expectations. • Potential gap in ambitions between AFK Parent Company and portfolio companies. MAIN OPPORTUNITIES • Increased demand for our green technologies. • Active sustainability management. • Transparency through non-ﬁnancial disclosures. Updated Materiality Assessment In 2022, AFK Parent Company did a review of the material topics for reporting. The review included an internal and external assessment of the focus areas and material topics, with speciﬁc interviews with a selection of our stakeholders. The double materiality assessment was carried out in three main parts: 1. An assessment of Arendals Fossekompani’s impact on sustainability factors including a consequence analysis of the value chain, as well as sector impacts and relevant standards. 2. An assessment of how sustainability impacts Arendals Fossekompani, including in-depth interviews and dialogue with stakeholders, analysis of how megatrends shape and impact us, and risks and opportunities. 3. Anchoring of focus areas and material topics: Focus areas are identiﬁed, and the actual approach to follow up the material topics and reporting of performance. The 2022 materiality assessment did not result in any changes to our focus areas, however, the list of material topics were speciﬁed, as this had not been done before (hence, no change to the material topics). Strategic Focus Areas and Material Topics The outcome of the 2022 materiality assessment was a detailed overview of Arendals Fossekompani’s stakeholders and their expectations, a consequence vs likelihood matrix, where our material topics were singled out based on the signiﬁ- cance of our actual or potential impact, and the identiﬁcation of ﬁve strategic focus areas that will guide our sustainability strategy moving forward. These ﬁve focus areas are: Ethical business conduct, Responsible investments, Optimizing the port- folio companies, A great place to work, and Community engagement. For each focus area we have identiﬁed material topics for our business environment. 106 107 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 SUSTAINABILITY ANNUAL AND SUSTAINABILITY REPORT 1. https://afk-assets.fra1.digitaloceanspaces.com/website/documents/Code-of-Conduct- Arendals-Fossekompani.pdf Membership Associations To support the work with these ﬁve focus areas we are members of these relevant industry organisations: UNITED NATIONS GLOBAL COMPACT A UN initiative that supports global companies that are committed to responsible business practices in the areas of human rights, labour, the environment, and cor- ruption. Our annual report on Communication on Progress is a key component of our commitment to UN Global Compact. Furthermore, we cooperate by arranging seminars, our employees have participated in courses held by UN Global Compact, and we pay an annual membership fee. KLIMAPARTNERE AGDER A network for working together to achieve GHG reductions and a low emission society. We actively contribute to knowledge sharing by arranging seminars together and participate in professional events held by Klimapartnere. We pay an annual mem- bership fee. FORNYBAR NORGE A part of the Confederation of Norwegian Enterprises (NHO). We participate through membership in the industry forum for the power market. We pay an annual mem- bership fee. Ethical Business Conduct Anti-corruption and Bribery MATERIALITY At Arendals Fossekompani, we have a long and proud history. We will always act responsibly and with integrity everywhere we operate. In this way we honour our legacy and secure our current and future license to operate. Some of our operations take place in countries associated with high political, corruption and human rights risks. The potential negative impact from these risks makes anti-corruption and anti-bribery material topics for us. Several of the portfolio companies regularly conduct risk assessments relating to corruption. Corruption risks typically includes the risk of bribery, extortion, fraud, embezzlement and money laundering, and the signiﬁcance of such risks are often linked to location of operation. Our portfolio companies are operating in an interna- tional environment, where our operations in China and India are perceived to consti- tute a higher risk, ref. the Transparency International Corruption Perception Index. When we are involving in activities in our supply chain, that means activities both in, procurement of products to our production or in sale of our products. APPROACH Our Code of Conduct constitutes our framework for managing compliance and integrity risks. The Code of Conduct describes our commitments and requirements regarding business practice, personal conduct and expectations towards business partners. The Code of Conduct outlines clear principles and rules in key compliance and integrity areas like anti-corruption and anti-bribery, facilitation payments, con- ﬂict of interest, gifts and hospitality, human rights and labour rights, fair competition, anti-money laundering, sanctions and trade compliance, and more. Our Code of Conduct is endorsed by the Board of Directors and is publicly available on our webpage 1 . The Audit Committee regularly reviews the company’s compliance with the Code of Conduct and supporting documents, and the Chief Sustainability Ofﬁcer reports to the Audit Committee on the design, implementation and effec- tiveness of our business integrity program and activities, and reviews performance in this respect. PERFORMANCE In 2022, Arendals Fossekompani maintained most core elements of its compliance program including the anti-corruption and human rights compliance frameworks. • We conducted screenings of potential projects in high-risk countries and of potential business partners. • All whistleblower reports received were investigated. • A Code of Conduct e-learning program was made available to company personnel. There was one conﬁrmed incident of corruption in the reporting year, which was a false representation. One employee was dismissed or disciplined for corruption and one contract with a business partner was terminated due to violations related to corruption. 108 109 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 SUSTAINABILITY ANNUAL AND SUSTAINABILITY REPORT COMMUNICATION ABOUT ANTI-CORRUPTION POLICIES AND PROCEDURES Total Europe America Asia Board of Directors 35 (61%) 35 0 0 C-suite positions 38 (67%) 31 6 1 Non-executive level management 140 (84%) 118 10 12 Other employees 1,686 (76%) 1,104 166 416 Business partners 1,287 (5.7%) 230 (1.1%) 46 (8.9%) 1,011 (52%) TRAINING IN ANTI-CORRUPTION POLICIES AND PROCEDURES Total Europe America Asia Board of Directors 20 (35%) 20 0 0 C-suite positions 30 (53%) 29 0 1 Non-executive level management 86 (52%) 74 0 12 Other employees 931 (42%) 519 2 410 Responsible Supply Chain MATERIALITY Mismanagement of a global supply chain can cause negative environmental and social impacts, as well as impacts related to governance issues, such as corruption and data privacy violations. Arendals Fossekompani takes a precautionary principle approach to business ethics and responsible supply chain. We have a duty to respon- sibly manage our relationships with our suppliers, monitor their activities and actively work to diversify our supplier portfolio. With a multitude of suppliers in our supply chain, ensuring a responsible approach and management of this network to mitigate negative impacts, is a material topic for Arendals Fossekompani. Arendals Fossekompani is committed to respecting human rights in all our oper- ations. This includes the rules and principles laid out in the UN Guiding Principles on Business and Human Rights, including the principles and rights set out in the eight fundamental conventions identiﬁed in the Declaration of the International Labour Organisation (ILO) on Fundamental Principles and Rights at Work and the International Bill of Human Rights, and the OECD Guidelines for Multinational Enterprises. We do not accept any form of forced labour, including child labour. We comply with all fundamental labour rights and have a continuous focus on providing safe working conditions for all. APPROACH Our policies on ethical business conduct are addressed in our Code of Conduct, which all our employees have signed, and which is also extended to our suppliers through our Business Partner Code of Conduct. To secure that we meet the demands that we set for others, we have revised and assessed our Code of Conduct and Business Partner Code of Conduct, with help from judicial experts. All portfolio companies have their own Code of Conduct and Business Partner Code of Conduct. Our commitment to sustainability includes our external operations related to our suppliers and customers, as well as our internal operations. Suppliers are expected to adhere to our business ethics guidelines as outlined in the Business Partner Code of Conduct, including our standards for health and safety, human and labour rights, environment, quality management, business integrity and corporate social respon- sibility. We also expect suppliers and business partners to act in a trustworthy and transparent way. The Business Partner Code of Conduct and Arendals Fossekompani’s expectations towards suppliers and business partners are further outlined on our website. Suppliers and business partners are controlled and followed up through our Factlines supply chain management system, which enables us to verify and monitor suppliers’ performance. Our risk-based supplier onboarding process, which includes health and safety, environmental and compliance aspects (such as human and labour rights risks checks), allows for comprehensive evaluation of our qualiﬁed suppliers. The goal is to ensure that our supply base is aligned with our principles and requirements. Our audit questionnaire includes a detailed veriﬁcation of adherence to our Supplier Declaration and internationally recognized standards for human and labour rights (e.g., UN Guiding Principles for Business and Human Rights). It is important that employees are aware of and report undesirable behaviour through our internal whistleblowing channel. Arendals Fossekompani is committed to provide for or cooperate in the remediation of negative impacts that the organization identiﬁes it has caused or contributed to, weather this relates to negative local community impact, occupational health and safety breaches, corruption or the like. The company conducts risk assessments on a regular basis, as stated throughout this report. Although the company has not estab- OPERATIONS ASSESSED FOR RISKS RELATED TO CORRUPTION Total number of operations 152 Total number of operations assessed for risks related to corruption 105 Percentage of operations assessed for risks related to corruption 69% LOOKING FORWARD In 2023, we will continue our efforts to secure responsible business conduct and promote a culture of compliance and integrity. We will build a common compliance program for all portfolio companies to ensure that these matters remain relevant in a dynamic global context and amid challenges, such as increased regulations, enforcement, complexity and external expectations, as well as sustainability impact and alignment with our strategic sustainability agenda. 110 111 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 SUSTAINABILITY ANNUAL AND SUSTAINABILITY REPORT lished nor participates in ofﬁcial grievance mechanisms, Arendals Fossekompani has established a whistleblowing channel and provides contact details for key employ- ees on the company’s website. We are also continuously engaging with relevant stakeholder groups about our sustainability impact, both systematically and on a day-to-day basis, to map questions or complaints on topics that they are interested in or concerned with. Should we receive complaints from stakeholders, our procedure is to follow the steps as outlined in our whistleblower policy. THE TRANSPARENCY ACT On 1 July 2022, the Norwegian Transparency Act entered into force. The act relates to enterprises’ transparency and work on fundamental human rights and decent working conditions. More than 8,000 Norwegian businesses now have the duty to carry out due diligence of human rights in their own operations, as well as their value chains. Stakeholders’ right to information about conditions at production facilities concerning a particular product or service that the business provides, is material in this new act. It is important that Arendals Fossekompani acts according to the law and sets a good example for the portfolio by identifying risks among suppliers. To comply with the new Transparency Act, we have completed a project in which we gathered information from all main suppliers. This due diligence was conducted through a Factlines CSR self-reporting form, which is based on the OECD guidelines and the UNGC principles, as well as the Transparency Act. The goal was to gather information to measure and understand the most important risks in our value chain. The results classiﬁed the suppliers in different risk groups, which enabled us to iden- tify which to follow up ﬁrst. In addition, we have created a guideline for handling incoming requests for information, in accordance with the Transparency Act. In 2023, we publish a Human Rights and Transparency Act Report to address the content in the Transparency Act. For more information about how Arendals Fossekompani works with human rights and a responsible supply chain, includ- ing screening of new suppliers on social criteria and negative social impact in the supply chain and actions taken, please refer to the separate Human Rights and Transparency Act Report found on our website. PERFORMANCE Improvements and actions taken in 2022 includes: • A mapping of our suppliers. • Implementing the Factlines system to follow up suppliers. • Updating our Supplier Code of Conduct. • Establishing a new Transparency Act routine. Our survey of suppliers showed no signiﬁcant breaches of human rights, but there are a few risks related to production countries that we will follow up in 2023. Arendals Fossekompani had no signiﬁcant instances of non-compliance with laws and regula- tions during the reporting period and received no ﬁnes for instances of non-compli- ance with laws and regulations. We had zero reported incidents regarding breach of human rights in our operations or supply chain in the reporting period. LOOKING FORWARD In 2023, we will establish a common business partner conduct procedure for all portfolio companies. This is important due to challenges like increased regulations, enforcement, complexity and external expectations, as well as sustainability impact and alignment with our strategic sustainability agenda. We also plan to continue the work with our suppliers, nudging them to improve on securing basic human rights, safety and health of people involved in all parts of their value chains. As a follow-up from our human right’s due diligence, we will start a dialogue with suppliers that have production in high-risk countries. Information Security MATERIALITY Cyber security is the application of technologies, processes, and controls to protect systems, networks, programs, devices, and data from cyber-attacks. Cyber secu- rity reduce the risk of cyber-attacks and protect against the unauthorized exploita- tion of systems, networks, and technologies. Cyber security is a critical, board-level issue in Arendals Fossekompani and our portfolio companies, and we can have both an actual and potential positive or negative impact on cyber security. Our positive impact relates to Arendals Fossekompani’s ability to establishing safety guidelines, providing training to employees, and implementing cyber secure systems. A lack of cyber security could have an actual or potential negative impact, for exam- ple relating to the critical infrastructure offered by some of our portfolio companies, such as Volue, NSSLGlobal and Alytic, where a potential breaches could, in the most severe instances, lead to critical downtime, impacting people, the environment and/ or the economy. The 2022 IBM study “Cost of a data breach” documents that the average cost of a data breach is USD 4.35 million. 83% of the organisations studied have had more than one breach. Average cost savings associated with fully deployed security AI and automation was USD 3.05 million. The cost of breaches is lower for organisations that deploy zero trust technology. System error or human error account for 45% of the incidents leading to loss of data, according to IBM. APPROACH New regulations and reporting requirements make cyber security risk oversight a challenge. In Arendals Fossekompani, the Board requires assurance from manage- ment that cyber risk strategies will reduce the risk of attacks and limit ﬁnancial and operational impacts. The Board, in cooperation with portfolio company management groups, has a central role in putting cyber security on the agenda. The goal is to iden- tify gaps and initiate improvement projects to close the gaps. Improvement projects will increase the level of awareness and security in portfolio companies. Cyber security should be a regular and natural part of the agenda and the annual schedule for the Board. Management should regularly report back to the Board regarding topics important for cyber security. If gaps are identiﬁed, a list of improve- ment projects should be made, with a timeline, a responsible person, and a timely report. The management is responsible for determining cyber security risks and adequate company preparedness, and report back to the Board. The most important steps in securing cyber security are deﬁned in our Cyber Security Check List for AFK Boards: • Deﬁning roles and responsibilities for cyber security. • Training employees (ambition to train 100% of employees by end of 2024, up from 19% in 2022). • Performing emergency drills. • Updating procedures and policies to reﬂect cyber security best practices. • Ensuring that the company has an Incident Handling Procedure, and that it is tested and key employees are trained in using it. 112 113 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 SUSTAINABILITY ANNUAL AND SUSTAINABILITY REPORT • Implementing best practices in the organisation. • Implementing 24/7 systems surveillance with both automated and human response to security alerts. PERFORMANCE Our performance relating to cyber security in 2022 includes: • Establishing cyber security check-list for all our Boards. • Information security policy update. • Provide training for employees on cyber security. We currently provide training to several of our portfolio companies, with a possibility of rolling out training to more companies shortly. LOOKING FORWARD In 2023, we will continue to use cyber security check lists for all portfolio companies. This is important due to increased complexity and external expectations, as well as the increasing risk for cyber security breaches. Our focus areas for 2023 relating to this topic includes: • Performing risk assessments. • Training Board Members. • Conduct penetration testing. • Facilitate a common awareness campaign in all portfolio companies. Responsible Investments New Investments MATERIALITY Arendals Fossekompani is looking for potential investments within green energy and technology that can support our long-term ambition to have a portfolio that will stand the test of generations, that contributes to a sustainable society, and that is future-oriented. As part of our screening criteria, new investments should demonstrate a potential to contribute to, or to be transformed to contribute to, one of the six environmental objectives deﬁned by the EU Taxonomy. As far as our impact assessment shows, neither Arendals Fossekompani nor our business partners have a negative impact on this topic. APPROACH As an international industrial investment company, Arendals Fossekompani is continuously looking for new investments and M&A opportunities. Possible invest- ments, partnerships and M&A candidates are evaluated according to Arendals Fossekompani’s responsible investment scope and screening process. Investment possibilities that are not in line with our investment criteria and company strategy, will not be considered. Investments and acquisitions of companies lay the foundation for a positive sustainability impact in the management phase. Following our strategy, Arendals Fossekompani’s investments are focused on the areas green energy, electriﬁcation and materials and digitalisation. With investment and development goals within these sectors, our portfolio will contribute to a more sustainable future. A signiﬁcant part of onboarding a new investment to our sustainability framework is to perform an EU Taxonomy assessment. Such an assessment will deﬁne if the investment’s activities are eligible with the EU Taxonomy criteria. PERFORMANCE In 2022, Arendals Fossekompani established the battery technology company Ampwell, which consists of the newly acquired companies Commeo and Cellect. Ampwell has the potential to become an attractive partner in the green transition based on the company’s fully integrated energy storage services. Commeo’s battery solutions are enabling increased use of intermittent renewable energy and Cellect’s software services increase energy efficiency. Ampwell has performed assess- ments for EU Taxonomy eligible and aligned activities for their subsidiary company Commeo. Based on this assessment, 100% of Commeo’s revenue was found to be aligned with the EU Taxonomy. The strategic green energy enabler Vergia was established in 2022 to combine all existing green infrastructure projects and related portfolio companies in a new entity. Vergia has invested in offshore wind, green fuels, and hydropower, and there- fore has attractive energy positions driving the green transition. During 2022, Arendals Fossekompani has also improved its position in the electri- ﬁcation segment by acquiring the induction charging company IPT Technology. By merging our portfolio company EFD Induction and IPT Technology, we established the induction company ENRX. These companies have now been rebranded to ENRX Heat and ENRX Charge. ENRX Charge solutions for wireless and dynamic charging enable electriﬁcation of new sectors, both within industrial and mobility segments. ENRX Charge has identiﬁed six eligible activities, of which ﬁve are categorized in the environmental objective climate change mitigation. The last one is categorized in the transition to a circular economy category. 114 115 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 SUSTAINABILITY ANNUAL AND SUSTAINABILITY REPORT All these new investments are all well positioned for the green transition, in line with our investment and development strategy, and have high eligibility towards the EU Taxonomy. LOOKING FORWARD Going forward, we will continue to develop our newly established companies, includ- ing our new investments. The new companies are onboarded to our sustainability framework, to ensure continuous focus. For future investments, we will continue to have the same long-term ambition. The EU taxonomy eligibility and alignment will be a part of the investment criteria. In addition, we will include climate risk assessments as part of the due diligence process of future possible investments. Green Financing MATERIALITY Arendals Fossekompani aims to be a leading Norwegian industrial investment com- pany that promotes renewable energy and sustainable utilization of resources. Green investments and projects provide us with ﬁnancing agreements with favourable terms, which incentivise us to stay focused on green developments. In this manner, the green ﬁnancing criteria are important for future investments and potential projects. In addition, being granted green ﬁnancing will be seen as a quality sign by stakeholders. Our impact assessment shows that Arendals Fossekompani does not have an actual or potential negative impact on this topic. APPROACH Arendals Fossekompani has two different green ﬁnancing facilities: Green bonds and sustainability linked loans. Our Green Bond Framework is aligned with the Green Bond Principles published by the International Capital Market Association. This deﬁnes investments eligible for green bonds. In addition, Arendals Fossekompani has renewed its ﬁnancial facilities linked to sustainability targets. Green bond loans are earmarked for speciﬁc environmental or sustainability projects and are typically asset-linked. The Green Bond Framework has deﬁned a process used to identify, select, and report on eligible projects. Issuing bonds under the Green Bond Framework is part of our broader commitment to making signiﬁcant contribu- tions to a low-carbon and environmentally sustainable society. The green bonds are related to two categories: Renewable energy and eco-efﬁcient and/or circular economy adapted products, production technologies and processes. A renewal of Arendals Fossekompani’s ﬁnancing facilities was ﬁnalized in June 2022. This agreement is linked to our sustainability strategy and performance related to a selection of sustainability targets. Through sustainability linked loans, companies receive better ﬁnancial terms as they strive to make a planet-positive contribution. If and when we reach the agreed-upon targets, it will trigger a lower interest rate. The discount is in itself small, but the principle of being rewarded for continuously improving our sustainability position is important to us. PERFORMANCE Arendals Fossekompani currently has a positive net cash position. However, it is essential to have instruments in place to provide ﬁnancial capacity when needed, for instance to make new acquisitions or to support the existing portfolio companies. Thus, three new revolving loan facilities are provided by Handelsbanken and Danske Bank for a duration of ﬁve to seven years, including options for extensions. Currently, 88% of our loan facilities have a green proﬁle. LOOKING FORWARD Our goal is to develop green and sustainable companies. We will continue to ﬁnance projects and developments that support our ambitions, so that we remain a leading Norwegian industrial investment company. We will continuously follow up on our goal to have loan facilities with a green proﬁle. In 2023, we will publish a report on use of proceed related to the green bonds and follow up KPIs and report on requirements of sustainability linked loan to our stakeholders. 116 117 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 SUSTAINABILITY ANNUAL AND SUSTAINABILITY REPORT Optimizing the Portfolio Companies Economic Performance MATERIALITY Sustainability is linked to long-term performance; this is a clear belief of both Arendals Fossekompani and our main stakeholders. It is a long-term goal for Arendals Fossekompani to link our sustainability actions to the economic performance we see in the group. Generally, the green revolution is characterized by regulations and market and technology risks and opportunities. These are necessities for achieving the ambi- tions of climate mitigation in society. New regulatory requirements, such as the EU Taxonomy and circular economy reporting, as well as strict regulations for mineral mining, poses a risk to many businesses. A more volatile energy market and increas- ing energy prices, due to increased renewable energy production and carbon taxes, affect businesses that are heavily dependent on electricity. Finally, and perhaps most prevalent in the green transition, is the need for a technological restructuring of the energy market, phasing out fossil fuels, and an increased emphasis of low impact- and zero-emission technologies. This creates valuable opportunities for an industrial investment company like ours. APPROACH Our actual and potential impact relating to economic performance is mainly positive: As an owner and a parent company we engage directly in the sustainability perfor- mance of our portfolio companies, and through individual materiality assessments and climate risk analysis, we focus on material topics that will increase our economic performance and reduce the risks in the portfolio. We recognise the impact compa- nies have on the environment and consider environmentally sustainable business conduct as an opportunity to ensure long-term performance and growth. Arendals Fossekompani is committed to environmental sustainability in all our busi- ness decisions and operations, and our Environmental Policy has been adopted by the Board of Directors and is applicable to all employees and projects. We have made separate reports about the performance of the portfolio related to the EU Taxonomy and climate risk assessment. As for the climate risk analysis, we have considered two different scenarios: 1) a green revolution that is characterized by transition risks and opportunities, and 2) a climate crisis scenario which entails considerable physical risks. Our portfolio companies are exposed to transitional risks throughout their value chains, particularly in terms of rising energy prices, as well as prices for products and services in the supply chain. Additionally, regulations aimed at driving the transition to a circular economy will have an impact on the requirements our portfolio com- panies face. Arendals Fossekompani’s exposure to physical risks is largely through our supply chains, with tier 2 and tier 3 suppliers located in areas prone to extreme weather and higher temperatures. At the customer end of our value chains, we identi- ﬁed the potential for increased demand for the products and services of our portfolio companies. Transitional and physical risks will create both opportunities and risks for us. So far, our analysis gives reason to believe that there is a potential upside for the economic performance for our portfolio with regards to transitional climate risk. A TCFD maturity assessment has been conducted for the AFK Group. Documentation on TCFD risk assessment performed in the group is found as an attachment to the annual report. PERFORMANCE In 2022, Arendals Fossekompani Parent Company continued to support the portfolio companies. Good collaboration resulted in several important sustainability assess- ments being ﬁnalized. Targets and ambitions related to economic performance are established for each portfolio company and followed up on an annual basis. The effectiveness of the actions taken are evaluated in the annual strategy process. Other activities conducted in 2022 includes: • A materiality analysis has been conducted for seven portfolio companies and joint ventures. • Three joint meetings were held with sustainability teams of portfolio companies to share knowledge and information. • A joint EU Taxonomy project was arranged for all portfolio companies. • A TCFD assessment report was established. LOOKING FORWARD The following activities have been planned for 2023: • Strengthening our EU Taxonomy assessment. • Digitalizing our sustainability reporting. • Further investigate and, in time, report in accordance with the Corporate Sustainability Reporting Directive (CSRD). Strengthening Environmental Performance MATERIALITY As an industrial investment company, Arendals Fossekompani has a double value chain, ﬁrst the value chain as an investment company and then the speciﬁc value chain for each portfolio company. The most material topic will be how we work with and improve our portfolio companies. To address the adverse impact of our portfolio, we do materiality updates of all our portfolio companies. Common denominators for the group are GHG emissions, use of energy, and waste management. In a diverse portfolio these topics are regarded as the most material KPIs to follow up across companies. Each portfolio company also performs its own materiality analysis in order to follow up the environmental performance that is the most material for their business. APPROACH Continuously strengthening the sustainability performance is essential for optimis- ing our portfolio of green-tech companies. Arendals Fossekompani seeks to achieve long-term value through our investments. Crucial to our long-term success is a solid sustainability framework, ensuring proper governance and compliance, a great working environment, and a focus on our contribution to the green transition. All our investments are subject to a sustainability onboarding processes, which include an initial materiality assessment and the identiﬁcation of sustainability focus areas for the company. Once onboarded, our portfolio companies are integrated in the annual sustainability assessments and reporting processes. To be aware of risks and opportunities, we conduct climate risk assessments of all our companies annually. Each year, we will also be screening eligibility and alignment with the EU Taxonomy Regulations for all companies. 118 119 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 SUSTAINABILITY ANNUAL AND SUSTAINABILITY REPORT 1. Former portfolio company, Cogen, is not included. EFD Induction did not report GHG emissions in 2020. GHG EMISSIONS 1 2020 2021 2022 ENERGY CONSUMPTION 2021 2022 Carbon accounting is a fundamental tool in identifying tangible measures to reduce GHG emissions. Our annual Carbon Accounting Report enables Arendals Fossekompani to benchmark performance indicators and evaluate progress over time for all portfolio companies. From the nature of the businesses in the AFK Group comes that we have not registered any biogenic CO 2 -emissions in 2022. None of our businesses are involved in processing of biologically based materials. Our Carbon Accounting Report for 2022 has been compiled with assistance from CEMAsys and is based on the international standard; A Corporate Accounting and Reporting Standard, developed by the Greenhouse Gas Protocol Initiative (GHG Protocol). The GHG Protocol is the most widely used and recognised international standard for measuring greenhouse gas emissions (GHG) and is the basis for the ISO standard 14064-I. Our Carbon Accounting Report provides an overview of the group’s GHG emissions, which is an integrated part of Arendals Fossekompani’s climate strategy. In order to strengthen the sustainability performance of our portfolio companies, we monitor GHG emissions for Scope 1 and Scope 2 , in addition to a limited Scope 3 reporting. All emissions data are provided on a group level, using the operational control method. 2021 is chosen as the base year for emissions in AFK Group, since emissions from ENRX (former EFD Induction) was not included in the emissions data collected in 2020. Reported emissions are based on all known emissions, which are docu- mented by invoices. Emissions are assumed to be based on all purchases made in 2022. The assumptions and emission factors used for calculations are included in the Carbon Accounting Report 2022. PERFORMANCE Scope 1 includes all direct emission sources. For the group, we are reporting emis- sions related to transportation, chemical processes, stationary combustion, and refrigerants, which amounted to 1,614 tons of CO 2 e in 2022. Scope 2 includes indirect emissions related to purchased energy; electricity and heating/cooling where the organisation has operational control. For the group, we are reporting emissions related to electricity use, district heating, and electrical vehicles. Using a location based approach 1 , this amounted to 2,447 tons of CO 2 e in 2022. With market based electricity calculations, the total Scope 2 is 4,052.7 tons of CO 2 . The electricity emission factors used are based on national gross electricity production mixes from the International Energy Agency’s statistics (IEA Stat), and emission factors per fuel type are based on assumptions in the IEA methodological framework. Factors for district heating/cooling are either based on actual (local) pro- duction mixes, or average IEA statistics. In 2022 the total amount of energy produced from these two hydropower plants was 351 GWh, this equals the amountof energy sold in the power market. Total pro- duction of energy from the AFK Group, equals the production from our hydropower plants at Bøylefoss and Flatenfoss. Total use of energy in AFK Group is equals energy consumption minus energy sales: 26 GWh-351 GWh= -325 GWh. The energy con- sumptions is the sum of the energy consumption of AFK Parent Company and all the portfolio companies. The two major energy consumers of the portfolio companies in the group is ENRX and Tekna, which both have industrial processes that require use of energy in order to produce their end products. The rest of the portfolio companies are less material energy consumers, since their consumptions mostly are related to use of energy in ofﬁce buildings and in transportations, with some exceptions. Scope 3 includes indirect emissions resulting from value chain activities. The Scope 3 emissions are a result of the upstream and downstream activities, which are not controlled by the company, i.e. they are indirect. For the group, we are reporting Scope 3 emissions related to waste generation and management, other fuel- and energy related activities, business travel and employee commuting, which amounted to 3,394 tons of CO 2 e in 2022. In total, Arendals Fossekompani and its portfolio companies emitted 7,455 tons of CO 2 e in 2022. Using a market-based approach, this amounts to 9,061 tons of CO 2 e. In 2022, several sustainability projects were carried out together with our portfolio companies: • Sustainability onboarding of new AFK investments marked the initial implementation of sustainability frameworks for several companies. • An initial assessment of the EU Taxonomy gave us an indication of eligibility and alignment of our portfolio. • Climate risk assessments, based on TCFD recommendations, helped identify material risks and opportunities in our portfolio companies. LOOKING FORWARD We will continue to work together with our portfolio companies to support their sus- tainability efforts and encourage improvements in their materiality assessments. Our objective is to be in full compliance with the EU Taxonomy, and we will map the consequences and changes necessary for our reporting requirements to be accord- ing to the new sustainability reporting directives. In 2022, Arendals Fossekompani committed to and submitted science-based emis- sion reduction targets, in line with the Science Based Target initiative (SBTi) criteria and recommendation. The targets will be validated in 2023, and after this, we will continue to report on our emissions and progress towards meeting our 2030 targets. Arendals Fossekompani are committed to reducing absolute Scope 1 and Scope 2 GHG emissions from 2021 level by 42% by 2030. The following activities are planned for 2023: • Map the ﬁnancial implications of climate risk and opportunities, as well as mapping the costs we have taken to manage such risks. • Map other important adverse environmental impacts in the portfolio. • Follow up on our commitment to the Science Based Targets initiative. Scope 1 emissions (tCO 2 e) Scope 2 emissions (Location based) (tCO 2 e) Scope 3 GHG (tCO 2 e) 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 656 237.5 175.4 1,581 2,823 1,276 1,614 2,447 3,394 21,000 22,000 23,000 24,000 25,000 26,000 27,000 24,449 25,859 MWh 120 121 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 SUSTAINABILITY ANNUAL AND SUSTAINABILITY REPORT A Great Place to Work Diversity and Equality MATERIALITY In Arendals Fossekompani, we believe that a workforce with a wide array of skills and backgrounds drives productivity and performance. We are mindful that if not managed correctly, Arendals Fossekompani could have a potential negative impact on diversity and equality. That is why this is a strategic focus area not only for us, but also for each of the portfolio companies that Arendals Fossekompani is invested in. Ensuring a diverse and equal workplace is also men- tioned in our Code of Conduct, to which all portfolio companies are expected to adhere. Today, Arendals Fossekompani’s actual and potential impact on diversity and equal opportunity is ﬁrst and foremost positive: We are a global company empowered by a diverse workforce of 2,445 employees from 25 countries. The number of female employees is steadily increasing and women are ﬁlling important roles across our global portfolio. This is important for our future value creation both in the short, medium and long term. Our ambition is to preserve and continue to build an inclusive company culture with zero tolerance for discrimination, whether it is based on grounds of gender, age, disability, ethnicity, sexual orientation, or religious belief. APPROACH In 2022, Arendals Fossekompani Parent Company carried out a project to address the Norwegian Equality and Anti-Discrimination Act and Arendals Fossekompani’s Activity and Reporting Obligation. This work resulted in a separate report where we map the status of equality and diversity. The Activity and Reporting Obligation Report is also linked to the certiﬁcation program Equal Workplace. The report is found on our webpage. We regularly check in with the portfolio companies to ensure that they are in com- pliance with relevant laws and regulations regarding equality and diversity, and we encourage portfolio companies to conduct their own mapping in accordance with the Activity and Reporting Obligation, to discover the status of diversity and equality in their own organisations. Our Code of Conduct was updated in 2022 to comply with the latest version of the Norwegian Equality and Anti-Discrimination Act, and all portfolio companies are expected to adhere to the Code of Conduct and its guide- lines for equality, inclusion and non-discrimination. For more information on how we engage with the speciﬁc portfolio companies, please refer to the Optimizing Portfolio Companies chapter of this report. To reﬂect our global operations, we have used the regions Europe, America, and Asia as signiﬁcant location of operation. Several of our portfolio companies have more speciﬁc indicators on diversity, where diversity in nationalities is the most used. Arendals Fossekompani is certiﬁed according to Equal Workplace (Likestilt Arbeidsliv), a certiﬁcation scheme run by Agder County.This is a certiﬁcation that needs to be veriﬁed every three years. It facilitates continuous work with equality and diversity in the workplace and guides the certiﬁed organisations in the right direction with deter- mined focus areas and criteria. Our certiﬁcation has resulted in the establishment of an action plan for equality and diversity efforts, with targets for 2022 through 2025. We have already set up a new HR system as a part of our action plan, to secure equal follow-up by all employees. The work we have done to address both the The Equality and Anti-Discrimination Act and the Equal Workplace certiﬁcation, will be a great guidance and roadmap in continuing our journey towards better inclusion and greater diversity. PERFORMANCE AFK Group has conducted a survey in all portfolio companies to gather the informa- tion presented in the table Employee Diversity. GRI’s deﬁnitions of full-time, part- time, permanent, and temporary employee has been used.Compared to 2021, the number of employees in AFK Group has increased. This is mainly due to acquisi- tion of IPT Technology, establishment of Ampwell and acquisition of Commeo, and many new hires in Alytic.ENRX, Ampwell, Alytic and NSSLGlobal have workers with non-guaranteed hours. Information about gender and region could not be obtained for 2022. In 2021, we deﬁned speciﬁc goals for gender equality, applicable for the entire group of AFK companies. Gender equality is measured at three corporate levels: Board of Directors, C-suite positions, and total work force. At year-end 2022, there were 28% women on our Boards, 14% women in C-suite positions and 20% women in the total work force. The decrease of 2% of women on the Boards is the result of three new companies that have been included in the portfolio during 2022. These companies do not yet have a full Board in place, leaving the CEOs as Chair of the Boards as of now. If we exclude these newly acquired companies, the percentage of women on the Boards would be 30%. Annual total compensation for the highest paid individual (CEO) was NOK 7,665,484 in 2022 (percentage decrease from 2021: 16.18%). Annual total compensation for all employees was NOK 629,672 in 2022 (percentage increase from previous report- ing period is not reported as we did not collect this information for 2021). The ratio between the annual compensation for the highest paid individual and the average annual compensation for employees is 8.2%. For more information regarding remu- neration, please refer to the separate Remuneration report. In November 2022, we hosted a Girls & Technology event in cooperation with The Confederation of Norwegian Enterprises (NHO). The project aims to increase the number of girls in technical education and professions and raise awareness about technical ﬁelds of study. By sharing our personal and company stories we hope to inspire these young girls, and perhaps welcome them as future employees in a few years. LOOKING FORWARD As part of the Equal Workplace certiﬁcation process, an action plan is developed for the next three years. The goals set during the certiﬁcation process are related to topics such as inclusive working environment, recruitment and career, and life phases. The goals include creating and improving routines for a better follow-up of employees in different life situations, training of leaders in managerial positions, pro- fessionalising the recruitment processes, increasing knowledge about equality and diversity, and generally raising the quality of internal processes related to equality and diversity. Our portfolio companies are encouraged to work towards achieving the Equal Workplace certiﬁcation, and we will create learning sessions on equality and diver- sity for all portfolio companies. Our target is to achieve a share of 50% women in all our boards and C-suite positions by 2027. 122 123 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 SUSTAINABILITY ANNUAL AND SUSTAINABILITY REPORT EMPLOYEE DIVERSITY All numbers are per 31.12.2022 Age group (AFK Group total): < 30 years 30-50 years > 50 years Female 495 (20%) 96 (4%) 277 (11%) 122 (5%) Male 1,956 (80%) 322 (13%) 1,082 (44%) 552 (23%) Total 2,451 418 (17%) 1,359 (55%) 674 (27%) Age group (full-time employees): < 30 years 30 -50 years > 50 years Female 438 (19%) 85 (4%) 251 (11%) 102 (4%) Male 1,863 (81%) 279 (12%) 1,061 (46%) 523 (23%) Total 2301 364 (16%) 1,312 (57%) 625 (27%) Age group (part-time employees): < 30 years 30 -50 years > 50 years Female 57 (38%) 11 (7%) 26 (17%) 20 (13%) Male 93 (62%) 43 (29%) 21 (14%) 29 (19%) Total 150 54 (36%) 47 (31%) 49 (33%) Age group (permanent employees): Europe America Asia Female 475 (21%) 81 (4%) 274 (12%) 120 (5%) Male 1,794 (79%) 256 (11%) 997 (44%) 541 (24%) Total 2269 337 (15%) 1,271 (56%) 661 (29%) Age group (temporary employees): Europe America Asia Female 22 (12%) 18 (10%) 2 (1%) 2 (1%) Male 160 (88%) 73 (40%) 80 (44%) 7 (4%) Total 182 91 (50%) 82 (45%) 9 (5%) Region (organisation total): Europe America Asia Female 495 (20%) 385 (16%) 53 (2%) 57 (2%) Male 1,956 (80%) 1,342 (55%) 215 (9%) 399 (16%) Total 2,451 1,727 (70%) 268 (11%) 456 (19%) Region (full-time employees): Europe America Asia Female 438 (19%) 330 (14%) 53 (2%) 55 (2%) Male 1,863 (81%) 1,262 (55%) 213 (9%) 388 (17%) Total 2301 1,592 (69%) 266 (12%) 443 (19%) Region (part-time employees): Europe America Asia Female 57 (38%) 55 (37%) 0 (0%) 2 (1%) Male 93 (62%) 80 (53%) 2 (1%) 11 (7%) Total 150 135 (90%) 2 (1%) 13 (9%) Region (permanent employees): Europe America Asia Female 475 (21%) 368 (16%) 53 (2%) 54 (2%) Male 1,794 (79%) 1,218 (54%) 215 (9%) 361 (16%) Total 2,269 1,586 (70%) 268 (12%) 415 (18%) Region (temporary employees): Europe America Asia Female 21 (12%) 19(10%) 0 (0%) 3 (2%) Male 155 (88%) 122 (67%) 0 (0%) 38 (21%) Total 182 141 (77%) 0 (0%) 41 (23%) DIVERSITY OF GOVERNANCE BODIES Board of Directors < 30 years 30-50 years > 50 years Female 16 (28%) 0 (0%) 9 (16%) 7 (12%) Male 41 (72%) 0 (0%) 13 (23%) 28 (50%) Total 2445 0 (0%) 22 (39%) 35 (61%) C-suite positions < 30 years 30 -50 years > 50 years Female 8 (14%) 0 (0%) 5 (9%) 3 (5%) Male 49 (86%) 0 (0%) 26 (46%) 23 (40%) Total 57 0 (0%) 31 (54%) 26 (46%) Executive level management < 30 years 30-50 years > 50 years Female 34 (21%) 2 (1%) 26 (16%) 6 (4%) Male 132 (79%) 2 (1%) 78 (47%) 52 (31%) Total 166 4 (2%) 104 (63%) 58 (35%) Organisation total < 30 years 30-50 years > 50 years Female 495 95 (4%) 277 (11%) 122 (5%) Male 1956 322 (13%) 1,082 (44%) 552 (23%) Total 2,441 418 (17%) 1,359 (55%) 674 (27%) EMPLOYEE FUNCTIONS Technical and production functions < 30 years 30-50 years > 50 years Female 223 48 (3%) 133 (8%) 42 (3%) Male 1,447 239 (14%) 821 (49%) 387 (23%) Total 1670 287 (17%) 954 (57%) 429 (26%) Administrative functions < 30 years 30-50 years > 50 years Female 201 (50%) 28 (7%) 116 (29%) 57 (14%) Male 199 (50%) 19 (5%) 109 (27%) 71 (18%) Total 400 47 (12%) 225 (56%) 128 (32%) Other functions < 30 years 30-50 years > 50 years Female 32 (20%) 7 (4%) 19 (12%) 6 (4%) Male 132 (80%) 13 (8%) 80 (49%) 39 (24%) Total 164 20 (12%) 99 (60%) 45 (27%) 124 125 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 SUSTAINABILITY ANNUAL AND SUSTAINABILITY REPORT REMUNERATION BETWEEN GENDERS AND EMPLOYEE CATEGORY Europe America Asia Job function # NOK # NOK # NOK C-suite men Remuneration 23 2,346,813 1 - 1 - Salary 36 1,839,879 * * * * C-suite women Remuneration - - - - - - Salary 6 1,559,676 - - - - C-suite ratio women to men Remuneration - - - - - - Salary - 85% - - - - BoD men Remuneration 17 233,840 - - - - Salary 6 400,383 - - - - BoD women Remuneration 8 535,353 - - - - Salary 9 411,255 - - - - BoD ratio women to men Remuneration - 229% - - - - Salary - 103% - - - - Non-executive women Remuneration 63 643,492 3 - 2 - Salary 77 641,943 * * * * Non-executive men Remuneration 192 787,941 9 1,246,501 10 1,211,055 Salary 258 726,486 9 1,004,477 10 893,871 Non-executive ratio women to men Remuneration - 82% - - - - Salary - 88% - - - - Technical and production men Remuneration 462 538,491 172 636,117 331 249,316 Salary 829 598,264 172 502,710 331 215,201 Technical and production women Remuneration 44 567,181 35 590,419 20 96,008 Salary 136 639,336 35 487,526 20 72,799 Technical and production ratio women to men Remuneration - 105% - 93% - 39% Salary - 107% - 97% - 34% Administrative men Remuneration 97 865,812 25 822,782 43 136,455 Salary 110 766,403 25 650,212 43 103,394 Administrative women Remuneration 105 485,391 18 882,892 32 105,465 Salary 136 486,435 18 719,370 32 88,624 Administrative ratio women to men Remuneration - 56% - 107% - 77% Salary - 63% - 111% - 86% Other functions men Remuneration 32 1,052,140 8 937,635 9 574,471 Salary 83 732,272 8 781,368 9 509,984 Other functions women Remuneration 7 1,291,617 2 - - - Salary 12 793,753 * * - - Other functions ratio women to men Remuneration - 123% - - - - Salary - 108% - - - - * Not displayed salary/remuneration of employee categories with less than 5 employees. NON-DISCRIMINATION Total number of incidents of discrimination during the reporting period 2 Incident reviewed by the organization 1 Remediation plans being implemented 1 Remediation plans that have been implemented, with results reviewed through routine internal management review processes 1 Incident no longer subject to action 1 Employee Satisfaction & Talent Attractiveness MATERIALITY Arendals Fossekompani aspires to be a preferred employer. It is important to retain knowledge and experience in the company, in addition to attracting new talents.We need great people to help develop and advise our portfolio companies, based on knowledge about new technologies. This is why ‘Great Place to Work’ is singled out as a strategi- cally important focus area, and why employee satisfaction and talent attractiveness is a material topic. Arendals Fossekompani’s actual and potential impact on employee satisfaction and talent attractiveness can be both positive and negative. Poor management of the working environment can potentially lead to dissatisfaction, high turnover rate or sick leave, and failure to attract the talents we need. On the other hand, establish- ing clear guidelines for management and employees, and implementing measures aimed at enhancing the working environment and employee satisfaction, can make Arendals Fossekompani and our portfolio companies a preferred employer and a workplace where employees thrive and succeed. APPROACH At Arendals Fossekompani we offer favourable working conditions for our employ- ees: We provide learning opportunities and contribute to the development of our employees’ careers, and we provide our employees with ﬂexibility, adjust tasks, working hours etc. if needed. The feedback we receive is that this gives room to combine a working life and a family life. We are currently in the process of mapping employee beneﬁts in Arendals Fossekompani’s portfolio companies, including ben- eﬁts provided to full-time employees that are not provided to temporary or part-time employees. As part of our Equal Workplace certiﬁcation, we developed an action plan for the topic “Recruitment and career”, focusing on professionalising the recruitment pro- cess, boosting attractiveness towards new talents, as well as developing the com- petencies of our employees. Another topic is “Life phases” which addresses different life situations employees can ﬁnd themselves in, and where they need support, for example maternity/paternity leave, welfare leave, retirement, and more. We strive for employee satisfaction and the highest possible talent attractiveness across the portfolio. We regularly follow-up our portfolio companies to see how they are doing. 126 127 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 SUSTAINABILITY ANNUAL AND SUSTAINABILITY REPORT NEW EMPLOYEE HIRES AND EMPLOYEE TURNOVER New employee hires Total < 30 years 30-50 years > 50 years Female 132 (25%) 48 (9%) 68 (13%) 16 (3%) Male 395 (75%) 163 (31%) 197 (37%) 35 (7%) Total 527 211 (40%) 265 (50%) 51 (10%) New hires per region Total Europe America Asia Female 132 (25%) 108 (20%) 15 (3%) 9 (2%) Male 395 (75%) 295 (56%) 41 (8%) 59 (11%) Total 527 (22%) 403 (76%) 56 (11%) 68 (13%) Employee turnover Total < 30 years 30-50 years > 50 years Female 95 (19%) 21 (22%) 41 (15%) 33 (27%) Male 285 (15%) 66 (21%) 150 (14%) 69 (13%) Non-binary 1 (-) 0 (0%) 1 (-) 0 (0%) Total 381 (16%) 87 (21%) 192 (14%) 102 (15%) Employee turnover per region Total Europe America Asia Female 95 (19%) 72 (19%) 14 (26%) 9 (16%) Male 285 (15%) 199 (15%) 51 (24%) 35 (9%) Non-binary 1 (-) 1 (-) 0 (0%) 0 (0%) Total 381 (16%) 272 (16%) 65 (24%) 44 (10%) Turnover calculated as number of employees leaving divided by number of employees in the organisation for each employee category. Health and Safety MATERIALITY Healthy and safe working conditions are recognized as a human right and addressed in authoritative intergovernmental instruments. Healthy and safe working condi- tions are also a Sustainable Development Goal. Healthy and safe working conditions involve both the prevention of physical and mental harm, and promotion of workers’ health. Failure to ensure healthy and safe working conditions could lead to an actual or potential negative impact, in which employees are harmed or injured while at work. In the most severe cases, unsafe working conditions could lead to long-term reduced health or even fatalities, which is an unacceptable risk. APPROACH Arendals Fossekompani aims to have a positive impact on occupational health and safety, and this is a key priority and a strategic focus across our portfolio. We are committed to providing a healthy and safe working environment for all employees, and have conducted risk assessments, implemented guidelines, established man- agement systems, and provided training to management and employees to prevent harm and promote health in the workplace. Our policies on health and safety are addressed in our Code of Conduct, which all our employees (100%) have signed, and which is also extended to our suppliers through our Business Partner Code of Conduct. PERFORMANCE Occupational health and safety management system AFK Vannkraft has implemented a comprehensive internal control system, as required by law (the Norwegian Internal Control Regulations (Interkontrollforskriften)). Through the implementation of the occupational health and management system, we aim to protect people’s lives and health, to protect nature and the environment against unintended stresses, to protect facilities, equipment and production, and to ensure a targeted and cost-effective operation. All of our hydropower plant workers are included in the occupational health and safety management system. The main activities at the plants are to generate elec- tricity at two locations in the Arendal watercourse, whereas the activities related to the production of hydropower are the main scope for the health and safety manage- ment system. Hazard identiﬁcation, risk assessment, and incident investigation To identify work-related hazards and assess risks on a routine basis, AFK Vannkraft conducts risk and vulnerability analysis for continuous work by identifying and elim- inating hazards, assessing risks and implementing improvement measures. These analyses are reviewed annually and audited when needed, and actions are taken to minimise the identiﬁed hazards and risks. Another measure to identify work-related hazards and assess risks, is the weekly safety rounds on the hydropower plant, in addition to a more comprehensive annual safety round on-sight. We also perform a safe work analysis before starting a job that is not described in a policy, to secure health and safety in every job execution. Employees’ job descriptions contains deﬁned safety roles for each speciﬁc area of the on-site hydropower workers. To identify work-related hazards and assess risks on a non-routine basis, AFK Vannkraft has established a whistleblowing system for employees to report inci- dents and irregularities, including situations that can potentially cause injury and ill health. This system also allows anonymous reporting of incidents. The process of reporting is described in the Whistle Blowing Policy which is found on our webpage. There is also a system for registration of any identiﬁed discrepancy that is identiﬁed. PERFORMANCE Our goal for the Arendals Fossekompani Group in 2022 was to have less than 3% absentee rate, the actual number was 3.0%. The turnover rate for Arendals Fossekompani Group was 16% in 2022. The total number of new hires was 165, and the total number of employees leaving the Group was 137. The total number of employees who took parental leave during the year was 89, of which 30 were women and 59 were men. As part of our work on employee satisfaction and talent attractiveness, we have pro- fessionalized our recruitment processes. These efforts have extended into a process of implementing a new recruitment system. We also increased employee beneﬁts. LOOKING FORWARD Improvement plans for 2023 include the implementation of a new HR system for better structures for performance reviews and check-ins, updated job descriptions for all employees, and policies for parents-to-be, employees on parental leave, and senior employees. We will also acquire a recruitment/applicant tracking system, and include templates for pre-, on- and off-boarding in the HR system. We will ensure that we have good structures for deciding salary and salary reviews to prevent system- atic differences and implement an employee handbook as part of the HR system. A HR group will be formed to share knowledge across the portfolio companies, work together to reach long-term goals, and achieve synergies across industries. 128 129 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 SUSTAINABILITY ANNUAL AND SUSTAINABILITY REPORT Every inquiry or reported incident in these systems are treated by management and followed up with concrete actions. The results of these measures are evaluated and reviewed on a regular basis, in order to improve both the occupational health and safety management system, as well as the measures taken. Occupational health services Arendals Fossekompani has established an occupational health services agreement with Avonova Helse, where a cooperation plan has been developed for activities designed to meet our HSE goals. Arendals Fossekompani has a zero vision for injuries and work-related sick leave. These activities have been implemented to meet this goal: regular risk assessments, training, and evaluation. As part of the risk assess- ment, employees are offered health checks, including a hearing and sight check. For training, a ﬁrst aid course is held annually for employees in AFK Vannkraft. For evalua- tion, cooperation meetings are conducted. Avonova is supporting with safety rounds and measurements and risk assessments for employees located at Bøylefoss. During 2022, Avonova assisted us with several activities. An occupational hygienist did a safety round and risk assessment at Bøylefoss. An HSE review was conducted, and an occupational hygienist gave advise with regards to drafting an instruction on the use of acid washing. In total ten health checks were conducted with employees at Bøylefoss and four health checks were conducted with employees in Arendal. Worker participation, consultation, and communication on occupational health and safety Employee elected safety representatives at Arendals Fossekompani participate in the consultation and implementation of the occupational health and manage- ment system These representatives receive training through a dedicated course for safety representatives. The representatives are conducting safety rounds annually to ensure that all safety standards are fulﬁlled. To be able to receive input from all employees, a suggestion box is placed out in the hydropower station where employ- ees anonymously can give feedback and improvement suggestions. During the health checks with the occupational health services, a survey is con- ducted where topics such as working environment and social conditions are covered. An ergonomics review, which includes a workstation check, is scheduled annually. Finally, an assessment of light and noise is regularly conducted. An HSE group is established and consists of two worker representatives and two representatives from the management. For Arendals Fossekompani, this includes a safety representative and a union representative. The CEO and the operations man- ager represents the management. The HSE group is an arena for exchange of expe- rience and consultancy. The group can discuss any question related to employee wellbeing, working environment and safety - and recommend solutions. However, it is the organisation which is responsible for implementing the solution. The group is also assisting with training for the organisation. The HSE group normally meet twice a year or when needed. Worker training on occupational health and safety A ﬁrst-aid course with focus on electrical incidents is conducted annually. In 2022 this was done in March. For personnel conducting work in overhead line installations, a course must be carried out yearly. A ﬁre drill is conducted every second year. For employees that are particularly exposed (e.g. employees that are working in a heated environment, at heights / on scaffolds), necessary courses are provided. Promotion of worker health All employees are yearly offered ﬂu vaccines. In 2022, the occupational health ser- vices provided vaccines for employees both in Arendal and at Bøylefoss. All employ- ees are covered by the company’s health insurance. This insurance covers expenses for treatments of work-related illness or injuries. In addition, employees are covered by the company’s work illness insurance, leisure accident insurance, collective acci- dent insurance, group life insurance, and travel insurance. All employees are offered health check-ups with focus on lifestyle. This health check-up gives employees advise on lifestyle topics such as diets and workouts. Prevention and mitigation of occupational health and safety impacts directly linked to business relationships The Business Partner Code of Conduct is based on the ten Principles of the United Nations Global Compact concerning human rights, labour rights, environmental responsibility and anti-corruption, and aims to prevent and mitigate negative occu- pational health and safety impacts that are directly or indirectly linked to our opera- tions, products, or services by our business partners. Extract from the Business Partner Code of Conduct: “AFK does not accept any invol- untary labour and expects all its business partners to comply with all fundamental labour rights and applicable laws and regulations. Business partners shall ensure fair salaries, safe working conditions (including necessary supervision and protection from ﬁre and other dangers), the right to organize, a good workplace environment, and have in place a whistleblowing procedure for the reporting concerns by employ- ees.” “AFK and its business partners shall comply with applicable laws and regulations regarding the use, prohibition and restriction of hazardous substances and shall avoid the use of conﬂict materials, i.e. materials that originate from conﬂict areas and contribute to fund governments and movements which violate fundamental human rights.” ENRX Vergia Ampwell Tekna AFK Property Alytic NSSL Global Volue AFK Parent Company The number and rate of fatalities as a result of work-related injury 0 0 0 0 0 0 0 0 0 The number and rate of high-consequence work-related injuries (excluding fatalities) 0 0 0 0 0 0 0 0 0 The number of recordable work- related injuries 67 0 1 4 0 0 1 0 0 The rate of recordable work-related injuries 36 0 17 11 0 0 2,4 0 0 The main types of work-related injury Cuts n/a Lacerations, bruises Cuts and scratches n/a n/a Minor cuts n/a n/a The number of hours worked 1,853,609 1,907 60,720 372,839 2,978 106,493 414,497 1,262,085 54,930 130 131 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 SUSTAINABILITY ANNUAL AND SUSTAINABILITY REPORT ARENDALS FOSSEKOMPANI PARENT COMPANY To identify work-related hazards and assess risks on a routine basis, AFK Parent Company conducts ROS analysis (risk and vulnerability analysis) for continuous work. To identify work-related hazards and assess risks on a non-routine basis, AFK has established a whistle blowing system for employees to report incidents and irregu- larities, including situations that can potentially cause injury and ill health and which employees wish to remove themselves from. Risks identiﬁed in the risk assessment will be used to eliminate hazards. The HSE group consists of two worker representa- tives and two representatives from the management team, who implement changes related to eliminating hazards. There have been no cases of high-consequence inju- ries in the reporting period. AMPWELL Determination of hazards has been done by Ampwell’s safety expert through an annual hazard assessment, and respective measures are introduced in order to shut down and/or reduce hazards, if any. On-site inspections by the occupational safety and health committee are taking place on a quarterly basis (participants includes the external safety ofﬁcer, in-house safety advisers, the external company doctor, the environmental management ofﬁcer, and head of production). Standards, meth- odologies, and assumptions used for compiling this information includes: • operating manual. • risk assessments. • hazard assessment. • safety inspections. • maintenance intervals of operating plant. • CE-conformity of operating plant. • application/implementation of legal provisions from DIN EN ISO 14001. • training of in-house safety advisers • training of in-house ﬁrst aiders. • training of in-house ﬁre protection assistants. • training of in-house adviser for hazardous goods. • training of in-house environmental management ofﬁcer • training of in-house laser advisers. • training of in-house waste management ofﬁcers. There have been no cases of high-consequence injuries in the reporting period. VERGIA There have been no cases of high-consequence injuries in the reporting period. VOLUE Volue’s main business relates to software development, where the risk of high-con- sequence injuries is very low. Volue’s business related to Industrial IoT will in some cases involve a risk of work-related hazards. These risks are determined individually for each project based on a risk assessment, for example in the case of working with high voltage electricity. There have been no cases of high-consequence injuries in the reporting period. NSSLGLOBAL NSSLGlobal determines hazards by conducting Hazard IDs. The company conducts risk assessments to eliminate hazards and minimize risks using the hierarchy of con- trols. Standards, methodologies, and assumptions used to compile this information includes ISO 45001 certiﬁed our OH&S Management System. All accidents, incidents and near misses are recorded. There have been no cases of high-consequence inju- ries in the reporting period. ALYTIC Alytic’s business relates to software development, where the risk of high-conse- quence injuries is very low. As a result, there have been no cases of high-conse- quence injuries in the reporting period. TEKNA Tekna determines hazards based on: • Audits made with a partner organisation specialised in prevention that helps the company determine where measures can be taken to assure the safety of our personnel (mutuelle de prevention). • Incident and accident log. • Employee concerns that are brought to the health and safety committee. • Risk analysis. To eliminate hazards and minimize risks the company is currently working on: • Improvement on some machines (automation) to reduce the human factor that may cause a potentially dangerous situation. • Improvement to the lock out procedure and training to make it easier to use by employees. • Improvement in the work methods and training in the machining department. • Improvement on the hydrogen network to make it safer. To eliminate other work-related hazards and minimize risks, the company: • Complete inspection forms for the health and safety committee members. • Look at improvement in the daily inspection forms for lifts and hoist. • Adds the Prevention program on same level fall (slips/trip hazard). Since 2022, Tekna have used OSHA standard methodologies for OHS reporting. For example, Tekna’s internal LTIR and TRIR is calculated on a 200,000 hours basis. There have been no cases of high-consequence injuries in the reporting period. Workers who are not employees have been excluded from the calculations, as the information is not tracked. 132 133 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 SUSTAINABILITY ANNUAL AND SUSTAINABILITY REPORT ENRX ENRX have determined several hazards, mainly related to machinery used. These hazards are mitigated by safety features at the machinery where possible and speciﬁc safety instructions and training where not possible. IPT identify hazards through yearly risk analyses. The results including actions taken are part of the safety instruction for all employees. No hazards have been identiﬁed in the reporting period. Actions are taken as part of the risk analysis and integrated into the local manage- ment system, which includes: • Inspection forms for the health and safety committee members. • Improvement in the daily inspection forms for lifts and hoist. • Adding the Prevention program on same level fall (slips/trip hazard). Since 2022, ENRX have used the OSHA standard methodologies for OHS report- ing. For example, ENRX’ internal LTIR and TRIR is calculated on a 200,000 hours basis. There have been no cases of high-consequence injuries in the reporting period. Workers who are not employees have been excluded from the calculations, as the information is not tracked. AFK PROPERTY To identify work-related hazards and assess risks on a routine basis, AFK Property conducts ROS analysis (risk and vulnerability analysis) for continuous work. To iden- tify work-related hazards and assess risks on a non-routine basis, AFK Property has established a whistle blowing system for employees to report incidents and irregu- larities, including situations that can potentially cause injury and ill health and which they wish to remove themselves from. Risks identiﬁed in the risk assessment are used to eliminate hazards. The HSE group consisting of two worker representatives and two representatives from the management implement changes related to eliminating hazards. There have been no cases of high-consequence injuries in the reporting period. LOOKING FORWARD As part of the Equal Workplace certiﬁcation and the Activity and Reporting Obligation, we plan to work with a HR system for AFK Parent Company that will ensure good han- dling of health and safety. We have conducted an extensive mapping of occupational health and safety risks linked to Arendals Fossekompani and our portfolio’s activi- ties, and in 2023 we will also set key performance indicators that will be measured and followed up on a regular basis. In 2023 we will evaluate the effectiveness of the actions taken and possibly consider implementing other measures and activities. Community Engagement Sponsorship, Partnerships and Other Investments MATERIALITY Since 1896, Arendals Fossekompani has contributed to building local societies. We are passionate about developing and contributing to sustainable local value creation, making the Agder region more attractive to visit and move to. Our ambition is to con- tribute to quality of life, strengthen local businesses, and attract and retain a compe- tent workforce. We realize that contribution and participation in partnerships and local initiatives go beyond our own business goals. APPROACH Arendals Fossekompani Parent Company has a positive impact on local communi- ties through sponsorships, partnerships, and cooperation with universities. Parts of our efforts are also directed at larger infrastructure initiatives and projects. In 2022 we established a Sponsor- and Partnership Policy with a regional approach aimed at southern Norway where our presence is strongest. In this policy we specify our focus areas and criteria for support, which include culture, sports, education, and humanitarian and community-oriented purposes. We support partners and projects that promote sustainability, gender equality and societal development, and prioritize children and young people, and non-proﬁt purposes and organizations. Through our support, we seek to actively inﬂuence that our partners also contribute to community-oriented purposes and make a difference beyond their own core activity. The sponsor- and partnership committee in Arendals Fossekompani man- ages these activities. Local community engagement is based on a mapping of local communities’ needs, stakeholder engagement, local communty consultation and more. Our sponsor and partnership criteria and examples of supported partners are disclosed at our web- page in the section: Local Communities. Arendals Fossekompani Parent Company's support to infrastructure projects is sub- ject to ongoing initiatives in the region, and vary from year to year. The sponsor- and partnership committee evaluates the initiatives. Any support to these projects is determined by the Board of Directors. PERFORMANCE All of Arendals Fossekompani Parent Company’s operations (100%) have imple- mented local community engagement activities, impact assessments and/or development programs, for example including the use of social impact assess- ments, public disclosure of results of environmental and social impact assessments (through the annual report), local community development programs based on local communities’ needs, and stakeholder engagement plans based on stakeholder map- ping. In 2022, Arendals Fossekompani Parent Company supported 45 organisations and projects. The socially beneﬁcial activities of our portfolio companies are organised and implemented by each company, and the different companies have a variety of focus areas, depending on relevance to their business strategy, material topics and operations. As a result, there is no central collection of data that could be used to calculate the percentage of business locations where measures that involve local communitites have been implemented. 134 135 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 SUSTAINABILITY ANNUAL AND SUSTAINABILITY REPORT Examples of our community engagement include: Arendalsuka Arendalsuka is an annual national meeting place for politics and business. Ever since its inception in 2012, Arendals Fossekompani has been a supporter and main sponsor. Local sports teams We proudly partner with local handball club ØIF Arendal, and footballers in Jerv and Arendal Fotball, which are all engaged in contributing to the society beyond sports achievements. Together with ØIF Arendal we collaborate on "Strandryddedagen" where young teams clean the beaches in and around Arendal. The support for Jerv has been earmarked for the establishment of a fund to help children in low-in- come families, as well as the club's street team. The support for Arendal Fotball is divided equally between the women's team and the men's team. Other sponsorship towards sports include Arendal Tennisklubb, Froland IL, IK Grane, Arendal Thriathlon, IL Express, and more. Agder Kunstfagskole Support to the establishment of a higher education school for art education. Trainee Sør & internships Through the regional trainee program, offering young graduates a unique opportu- nity to get professional experience from a variety of businesses, we have engaged several trainees. In addition, we hire summer interns to offer young undergraduates and graduates the opportunity of professional experience. Our commitment to the regional trainee program Trainee Sør and the hiring of summer interns both contrib- ute to increasing the overall competence in our region and are unique opportunities for recruitment of young professionals to Arendals Fossekompani. Other local engagement activities from 2022 include: First Lego League Agder, a competition for elementary and middle school within science, technology, engineering, and math, Froland Skolemusikkorps, Tromøy Fritidsklubb and Idrettsleiren. Additionally, in recent years, Arendals Fossekompani Parent Company has sup- ported a variety of infrastruture projects. Formerly an industrial area, Løkholmen in Arendal was in 2021 transformed into a popular green islet for recreational activi- ties. Together with Arendal Municipality we are currently working on realising a new swimming facility. In 2022 we supported «Kanalselskapet» which is working to rees- tablish the Arendal canals. LOOKING FORWARD We are further developing our community engagement approach and strategy, with the aim of becoming more proactive in areas and projects we support, to make an even greater impact. Moving forward we will also concider broadening our scope and goals. 136 137 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 SUSTAINABILITY ANNUAL AND SUSTAINABILITY REPORT Ambitions and Targets for 2023 Arendals Fossekompani is committed to improving our sustainability work and further reducing the impact we have on our planet. In 2023, we will continue measuring and improving our work related to our ﬁve focus areas for the whole group. For 2023, our main target is to ensure that AFK governance is in accordance with the OECD Guidelines for Multinational Enterprises and NUES. In 2023, AFK will apply to become a member of PRI: Principles for Responsible Investments, a UN-supported network working together to promote sustainable investments. Ethical Business Conduct In 2023, we will continue to improve our way of working with governance, risk, and compliance. We will have a particular focus on the implementation of the Corporate Sustainability Reporting Directive. All enterprises that are covered by the act should perform due diligence assessments. AFK has launched a project to implement measures and plans to meet the requirements in the Transparency Act. AFK will also further assess the EU Taxonomy and publish numbers on eligibility and alignment according to the EU Taxonomy for 2023. Improvement Activities in 2023 • Continuous improvement of our end-to-end process to follow up on business partners. • Improving our global risk assessment process. • Implementing engaging business ethics training concepts to build awareness and engagement. • Digitalization or automation of identiﬁed compliance processes to increase efﬁciency. Targets • 100% of employees receive training in Code of Conduct. • 100% of employees sign Code of Conduct. • 100% of employees receive training in Whistleblower Policy. • 100% of employees receive training in ICT security. Responsible Investments Responsible investment is an important topic to attract investors and long-term shareholder. AFK is looking for investments in the three core sectors where we have our strengths and competences: Digitalization, electriﬁcation and materials, and green energy. To ensure that all new investments and joint ventures comply with our standards related to ethical business conduct, we have established an onboarding process for all new investments. The key element in the onboarding process is to perform a materiality analysis according to the GRI standard. Improvement Activities in 2023 • Onboarding according to our sustainability framework. • EU taxonomy eligibility and alignment as investment criteria. • Publish report on use of proceed related to green bonds. Targets • 100% sustainability onboarding of new investments. • 100% EU Taxonomy eligibility potential in new investments. 138 139 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 SUSTAINABILITY ANNUAL AND SUSTAINABILITY REPORT Optimizing the Portfolio Companies Arendals Fossekompani is an industrial investment company, supporting the green transition. Together with our portfolio companies, we will provide green, enabling technologies to accelerate global efforts to meet the goals of the Paris Agreement. We will provide a disclosure of our Scope 1 and Scope 2 emissions, together with a selection of our material Scope 3 emissions for the entire portfolio. Our pledge to meet the goals of the Paris Agreement requires us to evaluate how to reach this target. A roadmap will be developed in 2023, based on the Science Based Target initiative (SBTi). Improvement Activities in 2023 • Conduct an assessment of the portfolio’s alignment with the EU Taxonomy, in which the new Technical Screening Criteria will be evaluated. • Re-evaluate our eligibility. The targets will be validated in 2023, and after this, we will continue to report on our emissions and progress towards meeting our 2030 targets. • Map the ﬁnancial implications of climate risk and opportunities, as well as mapping the costs we have taken to manage such risks. • Map other important adverse environmental impacts in the portfolio. • Follow up on our commitment to the Science Based Targets Initiative. Targets • Reducing absolute Scope 1 and Scope 2 GHG emissions by 42% by 2030. Great Place to Work Protecting labour rights and promoting a safe and secure work environment for our employees, continues to be our main priority for 2023. We will also advance in our work towards gender equality on all levels of our portfolio. Human rights are import- ant for AFK, and we strive to work in compliance with the UN Guiding Principles for human rights. In 2023, AFK will continue to measure and report on health and safety, including injuries, turnover, and absentee rate. Our long-term ambition is to ensure low levels in all these areas. For gender equality, our KPIs will be to measure the percentage of women in various parts of the organization. Improvement Activities in 2023 Through the process of preparing the Activity and Reporting Obligations Report 2022, a set of strategic improvements projects for 2023 were deﬁned. Primarily, we will expand our set of governing policies related to recruitment, wages, job descrip- tions, and career development. AFK will work towards our goals from the ARP. To improve communication with potential new attractive employees, we will further develop the career section on our website and improve our dialogue with Norwegian universities. Targets • 50% women in Board of Directors by 2027. • At least 40% women in C-suite positions by 2027. • Less than 3.0% absentee rate in 2023. Community Engagement Ever since the establishment of Arendals Fossekompani 127 years ago we have been passionate about developing the Arendal region. Moving forward, we will continue to support urban community projects, local sports teams, and cultural events and initiatives. Improvement Activities in 2023 • Further developing our community engagement approach and strategy, with the aim of becoming more proactive in areas and projects we support, to make an even greater impact. • Digitalization of the sponsorship processes and follow-up of existing partners and initiatives. • Concider broadening our scope and goals. 140 141 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 SUSTAINABILITY ANNUAL AND SUSTAINABILITY REPORT Financial Statements 05 Annual Accounts and Notes in Full 144 Declaration by the Members of the Board and the CEO 228 Independent Auditor’s Report 230 143 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT Group Parent Company Note 2022 2021 2022 2021 Revenue 4 568 534 4 196 380 605 400 370 658 Other Income 1,2 18 002 35 910 22 687 11 713 Revenue and other income 1 4 586 536 4 232 290 628 087 382 372 Materials and consumables used 1 446 542 1 585 290 4 203 2 496 Employee beneﬁt expenses 4 1 691 116 1 421 931 78 370 65 700 Other operating expenses 7 722 461 539 251 82 552 65 370 Operating expenses 3 860 120 3 546 472 165 124 133 566 EBITDA 726 417 685 819 462 963 248 805 Depreciation 5 183 679 170 718 11 532 11 367 Amortisation 6 104 308 58 370 1 934 1 934 Impairment loss property, plant and equipment 5 202 606 Impairment loss intangible assets 6 9 489 5 897 Operating proﬁt 428 740 450 227 449 497 235 505 Finance income 8 118 486 46 574 601 459 1 470 955 Finance costs 8 81 201 152 889 54 503 125 486 Net ﬁnancial items 37 285 -106 316 546 956 1 345 469 Share of proﬁt or loss of associates and joint ventures 11 -40 405 -12 173 Proﬁt before income tax 425 620 331 738 996 454 1 580 974 Income tax expense 9 458 139 234 733 392 149 159 421 Proﬁt (-loss) from continuing operations -32 519 97 005 604 305 1 421 553 Proﬁt (-loss) from discontinued operations 26 28 822 Proﬁt (-loss) for the year -32 519 125 827 604 305 1 421 553 Attributable to Equity holders of the company 5 744 106 709 604 305 1 421 553 Non-controlling interests -38 263 19 118 Total -32 519 125 827 604 305 1 421 553 Basic/diluted earnings per share (NOK) 22 0,10 1,95 11,02 25,92 Group Parent Company Note 2022 2021 2022 2021 Items that may be reclassiﬁed to statement of income Total Effect from Foreign Exchange 56 245 -69 907 Change on Cash ﬂow hedges -8 582 -3 861 Tax on cash ﬂow hedges that may be reclassiﬁed to P&L 9 1 888 1 335 OCI from discontinued operations 6 550 Items that may be reclassiﬁed to statement of income 49 552 -65 883 Items that will not be reclassiﬁed to statement of income Change in ﬁnancial assets at fair value through OCI 16 -3 311 95 193 -3 311 95 193 Actuarial gains and Losses -2 352 5 852 -2 615 2 823 Tax on OCI that will not be reclassiﬁed to P&L 9 838 -1 185 575 -621 Items that will not be reclassiﬁed to statement of income -4 825 99 860 -5 351 97 396 Total Other Comprehensive Income (OCI) 44 727 33 977 -5 351 97 396 Proﬁt (-loss) for the year -32 519 125 827 604 305 1 421 553 Total Comprehensive Income 12 208 159 804 598 954 1 518 949 Attributable to Equity holders of the company 37 690 156 310 598 954 1 518 949 Non-controlling interests -25 482 3 494 Total 12 208 159 804 598 954 1 518 949 Total Comprehensive Income per share (NOK) 0,69 2,85 10,92 27,69 STATEMENT OF INCOME (1 000 NOK) STATEMENT OF COMPREHENSIVE INCOME (1 000 NOK) 144 145 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT STATEMENT OF FINANCIAL POSITION (1 000 NOK) Group Parent Company Note 2022 2021 2022 2021 Assets Property, plant and equipment 5 1 086 112 938 675 229 477 169 928 Intangible assets 6 1 756 782 1 091 977 8 731 10 664 Investments in associates and joint ventures 11 37 317 16 922 16 906 4 750 Investment in subsidiaries 3,11 1 751 829 1 623 119 Intercompany loans 320 728 5 050 Net pension assets 4 24 993 28 365 12 041 13 859 Non-current receivables and investments 12 263 696 264 323 170 609 173 548 Deferred tax assets 9 108 430 91 927 47 349 42 352 Non-current assets 3 277 331 2 432 190 2 557 669 2 043 269 Inventories 13 845 472 502 272 Contract assets 13 136 970 150 780 Accounts receivable 14 926 124 772 808 31 233 58 278 Other receivables 14 261 635 219 347 477 062 100 654 Derivatives - current assets: 16 11 065 11 317 Other current assets 14 30 371 25 545 Cash and cash equivalents 15 2 339 664 2 708 412 1 160 349 1 411 245 Financial assets at fair value through OCI 16 11 830 15 227 11 830 15 227 Current assets 4 563 132 4 405 709 1 680 476 1 585 404 Total assets 7 840 462 6 837 898 4 238 145 3 628 673 Group Parent Company Note 2022 2021 2022 2021 Equity and liabilities Share capital 10 223 981 223 981 223 981 223 981 Other paid-in capital 21 800 10 120 21 800 10 120 Treasury shares -110 012 -63 119 -110 012 -63 119 Other reserves -6 608 -47 215 -2 630 681 Retained earnings 2 993 674 3 239 771 2 894 225 2 700 126 Capital and reserves attributable to owners of the company 3 122 836 3 363 537 3 027 365 2 871 788 Non-controlling Interests 11 661 511 545 306 Total equity 3 784 347 3 908 843 3 027 365 2 871 788 Non-current bond loans 17,25 497 581 496 581 497 581 496 581 Non-current interest-bearing debt 17,25 353 067 169 850 153 307 Pension liabilities 4 23 588 25 353 6 358 7 091 Other non-current liabilities 25 32 079 20 380 Non-current provisions 1 950 10 300 1 600 10 000 Deferred tax liabilities 9 65 025 52 776 Non-current lease liabilities 19,25 203 076 141 601 60 258 15 365 Non-current liabilities 1 176 366 916 841 719 105 529 037 Current interest-bearing debt 17,25 170 841 122 333 Bank overdraft 25 110 873 114 100 Derivatives - current liabilities 16 9 196 4 305 Accounts payable 18 969 613 753 718 12 105 51 777 Payable income tax 9 436 746 187 002 374 830 112 023 Contract liabilities 13 233 496 166 505 Current interest-bearing debt, intercompany 17 185 35 672 Current lease liabilities 19 58 454 64 449 2 300 3 897 Current provisions 18 117 662 92 710 Other current liabilities 18 772 868 507 092 85 255 24 478 Current liabilities 2 879 748 2 012 214 491 675 227 848 Total liabilities and equity 7 840 462 6 837 898 4 238 145 3 628 673 Froland, 11 April 2023 Trond Westlie, Chairman Stine Rolstad Brenna, Board Member Lise Lindbäck, Board Member Morten Bergesen, Board Member Didrik Vigsnæs, Board Member Anne Grethe Dalane, Board Member Lars Peder Fensli, Acting CEO and CFO Christian Must, Board Member 146 147 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT STATEMENT OF CASH FLOWS (1 000 NOK) STATEMENT OF CASH FLOWS (1 000 NOK) Group Parent Company Note 2022 2021 2022 2021 Cash ﬂow from operating activities Net proﬁt for the year, continuing operations -32 519 97 005 604 305 1 421 553 Adjusted for Depreciation, impairment and amortization 297 677 235 592 13 466 13 301 Net ﬁnancial items -37 285 106 315 -546 956 -1 345 469 Share of proﬁt from associates and joint ventures 40 405 12 173 Gain/loss from sales of assets -140 -468 -503 -348 Tax expense 458 139 234 733 392 149 159 421 Change in inventories -276 034 176 267 Change in trade and other receivables -164 258 -278 692 3 086 -32 098 Change in trade and other payables 180 171 164 892 -38 644 31 936 Cash ﬂow from internal accounts payable and receivable 25 924 -45 124 Change in other current assets -15 960 8 948 20 422 Change in other current liabilities 248 519 171 554 61 932 10 847 Change in other provisions -20 011 -25 497 -8 400 Change in employee beneﬁts -1 861 -7 905 -1 530 -1 520 Tax paid -193 717 -37 627 -112 023 3 224 Net cash from operating activities A 483 124 857 290 392 806 236 144 Cash ﬂow from investing activities Interest received and realized FX gains 8 60 220 16 917 45 855 11 563 Dividends received 8 3 659 2 698 97 229 87 191 Proceeds from the sales of PPE 4 220 5 479 503 348 Purchase of PPE and intangible assets -358 488 -252 918 -23 828 -7 562 Purchase of shares in associates -29 829 Purchase of shares in subsidiaries (reduced by cash balance) 3 -224 159 -33 539 Purchase of ﬁnancial assets at fair value -9 000 -9 000 Proceed from sale of ﬁnancial assets at fair value 85 833 940 85 823 940 Purchase of other investments -53 305 -76 749 -43 751 -51 452 Proceed from sale of other investments 5 916 35 167 35 167 Purchase of non controlling intrests -91 651 -46 900 Proceeds from the sales of shares in subsidiaries 5 409 1 183 245 5 506 1 333 515 Net cash from investing activities B -586 272 1 705 240 -10 052 2 176 809 Group Parent Company Note 2022 2021 2022 2021 Cash ﬂow from ﬁnancing activities Equity payments from/ to non controlling interests 17 699 636 748 Cash from new borrowings 25 268 680 560 221 147 763 496 775 Repayment of long-term borrowings 25 -256 833 -673 015 -3 958 -525 131 Cash ﬂow from internal loans and borrowings -514 343 182 623 Cash ﬂow from net change in current interest-bearing debt 25 2 686 -95 029 Interest paid and realized FX losses 8 -54 738 -72 292 -33 675 -42 934 Payment of interest and currency swap -105 916 -105 916 Dividend paid -230 544 -1 797 893 -206 292 -1 775 958 Group Contribution 12 278 Cash ﬂow from treasury shares -35 423 3 192 -35 423 3 192 Net cash from ﬁnancing activities C -288 473 -1 543 985 -633 649 -1 767 349 Cash ﬂow A+B+C -391 621 1 018 545 -250 896 645 604 Opening balance for cash and cash equivalents 2 708 412 1 688 228 1 411 245 765 641 FX effects on cash accounts 22 873 1 651 Closing Balance for cash and cash equivalents 2 339 664 2 708 412 1 160 349 1 411 245 Unused credit facilities 2 194 085 2 270 996 1 947 000 2 000 000 148 149 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT STATEMENT OF CHANGES IN EQUITY (1 000 NOK) Group Note Share capital Other paid-in capital Treasury shares Other reserves Retained earnings Owner's equity Non- controlling Interests Total equity Balance at 1 January 2021 223 981 7 675 -63 866 704 379 2 680 261 3 552 430 303 100 3 855 530 Proﬁt (-loss) for the year 105 581 105 581 20 246 125 827 Total Other Comprehensive Income (OCI) 45 752 4 977 50 729 -16 752 33 977 Treasury shares 2 445 747 3 192 3 192 Transactions with non-controlling interests 8 1 282 985 1 282 985 1 282 985 Realization of ﬁnancial asset at fair value through OCI -797 829 797 829 Issue of shares from non-con- trolling interests 515 925 515 925 130 154 646 079 Capital changes from subsidiaries 484 -114 432 -113 948 137 537 23 589 Dividends paid 10 -2 033 356 -2 033 356 -28 979 -2 062 335 Balance at 31 December 2021 223 981 10 120 -63 119 -47 215 3 239 771 3 363 537 545 306 3 908 843 Balance at 1 January 2022 223 981 10 120 -63 119 -47 215 3 239 771 3 363 537 545 306 3 908 843 Proﬁt (-loss) for the year 6 034 6 033 -38 552 -32 519 Total Other Comprehensive Income (OCI) 33 385 -1 728 31 657 13 070 44 727 Effect of share based payment 4 11 327 11 327 3 883 15 210 Treasury shares 11 681 -46 893 -211 -35 423 -35 423 Transactions with non-controlling interests 3,10 -4 340 128 570 124 230 161 543 285 773 Capital changes from subsidiaries 11 563 18 664 30 226 43 30 269 Dividends paid 10 -408 752 -408 752 -23 783 -432 535 Balance at 31 December 2022 223 981 21 800 -110 012 -6 608 2 993 674 3 122 836 661 511 3 784 347 STATEMENT OF CHANGES IN EQUITY (1 000 NOK) Parent Company Note Share capital Other paid-in capital Treasury shares Other reserves Retained earnings Owner's equity Non- controlling Interests Total equity Balance at 1 January 2021 223 981 7 675 -63 866 703 317 2 511 897 3 383 004 3 383 004 Proﬁt (-loss) for the year 1 421 553 1 421 553 1 421 553 Total Other Comprehensive Income (OCI) 95 193 2 202 97 396 97 396 Treasury shares 2 445 747 3 192 3 192 Dividends paid 10 -2 033 356 -2 033 356 -2 033 356 Balance at 31 December 2021 223 981 10 120 -63 119 681 2 700 126 2 871 788 2 871 788 Balance at 1 January 2022 223 981 10 120 -63 119 681 2 700 126 2 871 788 2 871 788 Proﬁt (-loss) for the year 604 305 604 305 604 305 Total Other Comprehensive Income (OCI) -3 311 -2 040 -5 351 -5 351 Effect of share based payment 4 797 797 797 Treasury shares 11 681 -46 893 -211 -35 423 -35 423 Dividends paid 10 -408 752 -408 752 -408 752 Balance at 31 December 2022 223 981 21 800 -110 012 -2 630 2 894 225 3 027 365 3 027 365 150 151 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT Notes to the annual and consolidated ﬁnancial statements for 2022 Accounting policies INFORMATION ABOUT THE COMPANY Arendals Fossekompani ASA is domiciled in Norway, and with headquarters in Bøylefoss, in the Municipality of Froland. The consolidated ﬁnancial statements for ﬁnancial year 2022 include the company and its subsidiaries (as a whole, referred to as "the Group"). Information about the companies included in the scope of consoli- dation is disclosed in Note 11, together with information about Group investments in associates. BASIS FOR PREPARATION The annual and consolidated ﬁnancial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted by the European Union and associated interpretations, as well as Norwegian disclosure requirements pursuant to the Norwegian Accounting Act applicable as of 31 December 2022. The annual and consolidated ﬁnancial statements were approved by the board of directors on 11 April 2023. The annual and consolidated ﬁnancial statements will be submitted for adoption at the Annual General Meeting scheduled for 4 May 2023. The board is authorised to amend the annual and consolidated ﬁnancial statements until ﬁnal adoption. The ﬁnancial statements are presented in Norwegian kroner (NOK), which is the func- tional currency of the parent company. All amounts disclosed in the ﬁnancial state- ments and notes have been rounded off to the nearest thousand NOK units unless otherwise stated. The ﬁnancial statements have been prepared using the historical cost principle, with the exception of the following assets, which are presented at fair value: Financial instruments at fair value through proﬁt or loss and ﬁnancial instruments at fair value through other comprehensive income. The Group recognises changes in equity arising from transactions with owners in the statement of changes in equity. Other changes in equity are presented in the state- ment of comprehensive income (total return). Preparation of ﬁnancial statements in accordance with IFRS requires the use of assessments, estimates and assumptions that inﬂuence which accounting policies shall be applied, and also inﬂuence recognised amounts for assets and liabilities, rev- enues and costs. Actual amounts can deviate from estimated amounts. Estimates and underlying assumptions are reviewed on an ongoing basis. Changes in accounting estimates are recognised in the period in which they arise if they only apply to that period. If the changes also apply to subsequent periods, the effect is allocated over the current and subsequent periods. Areas with signiﬁcant estimation uncertainties, and where assumptions and assess- ments made have signiﬁcantly inﬂuenced the application of the accounting policies, are disclosed in Note 21. ACCOUNTING POLICIES The accounting policies applied in the preparation of the annual and consolidated ﬁnancial statements are described below. With the exception of effects described in the section on changes in accounting policies below, the policies are applied consis- tently for all periods. In case that subsidiaries have used other principles to prepare their separate annual ﬁnancial statements, adjustments have been made so the con- solidated ﬁnancial statements are prepared according to common policies. Changes in accounting policies for 2022 No new standards have been adopted by the Company and the Group with effect from 1 January 2022. Principles of consolidation BUSINESS COMBINATIONS The acquisition method of accounting is used to account for the acquisition of shares that lead to control over another company. The Group's consideration is allocated to identiﬁable assets and liabilities. These are recognised in the consolidated ﬁnancial statements at fair value at the date when control is obtained. Goodwill is calculated when the consideration exceeds identiﬁable assets and liabilities: • The consideration transferred; plus. • Any non-controlling interest in the acquired entity; plus any gradual acquisition, the fair value of existing share-holdings in the acquired entity; less. • Net value (normally fair value) of identiﬁable net assets included in the transaction. If those amounts are less than the fair value of the net identiﬁable assets of the busi- ness acquired, the difference is recognised directly in proﬁt or loss as a bargain pur- chase. If the business combination is achieved in stages, the investment changes classiﬁcation from associated company to subsidiary, the upward adjustment of the ex-isting shareholding at fair value is recognised as a gain in the income statement. A buyout of non-controlling interests is considered a transaction with owners and does not require a calculation of goodwill. Non-controlling interests for such transac- tions are adjusted based on a proportionate share of the subsidiary's equity. SUBSIDIARIES Subsidiaries are all entities over which the Group has control. Control exists when the investor is exposed or has rights to variable returns from its investment in the company and when it has the ability to inﬂuence the return through its power over the company. To determine the level of control, the potential voting rights that can be exercised or converted must be considered. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. ASSOCIATED COMPANIES Associated companies are entities where the company and/or the Group has signiﬁ- cant inﬂuence, but not control over ﬁnancial and operational management. Signiﬁcant inﬂuence is assumed to exist when the Group has between 20 per cent to 50 per cent of the voting rights in a company. The consolidated ﬁnancial statements include the Group's share of the proﬁts/losses from associated companies are accounted for using the equity method, from the date signiﬁcant inﬂuence was achieved until it ceases. 152 153 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT ELIMINATION OF INTERCOMPANY TRANSACTIONS Intercompany transactions, balances and unrealised gains and losses on transactions between group companies are eliminated. ACCOUNTING IN THE PARENT COMPANY FINANCIAL STATEMENTS Investments in subsidiaries and associates are recognised at historical cost less any impairment losses in the parent company’s ﬁnancial statements. When an invest- ment is reclassiﬁed from fair value through other comprehensive income to subsidi- ary or associated company, the investment’s carrying amount at the time control or signiﬁcant inﬂuence is obtained is used as recognised cost. DISCONTINUED OPERATIONS A discontinued operation is a component of the entity that has been disposed of or is classiﬁed as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the state-ment of proﬁt or loss. SEGMENT REPORTING Financial information for the operating segments is determined and presented based on the information provided to the company's board of directors, which is the Group's ultimate decision-maker. Foreign currency translation TRANSACTIONS IN FOREIGN CURRENCIES Transactions in foreign currencies are translated to the functional currency of each individual Group company using the exchange rates at the dates of the transactions. Monetary assets and liabilities in foreign currencies are translated to NOK using the exchange rate at the balance sheet date. Differences that arise from the currency translation are recognised in the income statement. FINANCIAL STATEMENTS OF FOREIGN OPERATIONS Assets and liabilities in foreign currencies are translated to NOK using the exchange rate at the balance sheet date. Revenues and expenses for foreign operations are translated to NOK at the approximate rates of exchange at the transaction date. Translation differences are recognised in other comprehensive income and presented as a translation difference in equity. For subsidiaries which are not wholly-owned, a proportional share of the translation difference is allocated to the non-controlling interests. On divestment of foreign operations which result in a loss of control, an accumulated share of the translation differences is recognised in the income state- ment as part of the proﬁt calculation. NET INVESTMENTS IN FOREIGN OPERATIONS Translation differences arising from the translation of net investments in foreign oper- ations are speciﬁed as translation differences in equity, and recognised in the income statement at the time of the divestment. Financial instruments NON-DERIVATIVE FINANCIAL INSTRUMENTS Non-derivative ﬁnancial instruments consist of investments in debt and equity instru- ments, trade and other receivables, cash and loans, trade payables and other debts. Trade and other receivables that fall due in less than three months are not discounted. Non-derivative ﬁnancial instruments are measured on initial recognition at fair value plus any directly attributable transaction costs. After initial recognition, the instru- ments are measured as described below. Interest-bearing loans are valued at fair value less transaction costs on initial recogni- tion in the balance sheet. Instruments are subsequently measured at amortised cost, with any differences between cost and redemption value recognised over the term of the loan as part of the effective interest rate. Financial assets are derecognised when the contractual rights to the cash ﬂows from an asset expire, or when the Group has transferred the contractual rights in a transac- tion where the risk and return of ownership of the ﬁnancial asset have substantively been transferred. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME In accordance with the Group's investment strategy, investments in equity instru- ments are mainly classiﬁed as fair value through other comprehensive income. After initial recognition, these instruments are measured at fair value. Changes in fair value are recognised in other comprehensive income. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS A ﬁnancial instrument is classiﬁed at fair value through proﬁt or loss if it is held for trading. The instrument is measured at fair value and the changes in fair value are recognised in the income statement. OTHER Other non-derivative ﬁnancial instruments are measured at amortised cost less any impairment losses. DERIVATIVES The Group uses derivatives to limit exposure to interest risk, currency risks and price risk that arise from operational and ﬁnancial activities. Derivatives that do not qualify for hedge accounting are recognised at fair value through proﬁt or loss. When derivatives qualify for hedge accounting, the recognition of fair value changes will depend on what is being hedged (see below). Hedging activities CASH FLOW HEDGE When a derivative is designated as a hedging instrument on variability in cash ﬂows for a recorded asset or liability, or for a highly probable forecast transaction, the effec- tive portion of a change in fair value is recognised in other comprehensive income. The Group performs a qualitative assesment of hedging effectiveness. A hedging instrument is derecognised when it no longer satisﬁes hedge accounting criteria, sold, terminated or matures. The accumulated change in fair value recognised in other comprehensive income remains until the forecast transaction occurs. If the hedged item is a ﬁnancial asset, the amount recognised in other comprehensive in-come is transferred to to the income statement in the same period as the hedged item affects the income statement. If the hedged transaction is no longer expected to occur, the accumulated unrealised gains or losses are immediately recognised in the income statement. 154 155 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT FAIR VALUE HEDGING When a ﬁnancial derivative is designated as a hedging instrument on variability in the value of a recognised asset, a ﬁrm agreement or liability, the gain or loss on the deriv- ative is recognised in the income statement in the period it incurs. Similarly, changes in the fair value of the hedged item is recognised in the income statement in the same period. Principles related to hedging effectiveness and derecognition are the same as for cash ﬂow hedges. Equity ORDINARY SHARES Ordinary shares are classiﬁed as equity. Costs associated with the issuance of shares are recognised as a reduction in net equity (share premium) after tax, if applicable. PURCHASE AND SALE OF TREASURY SHARES On the repurchase of treasury shares, the purchase amount including directly attrib- utable costs are recognised as a change in equity. Purchased shares are classiﬁed as treasury shares and reduce total equity. When treasury shares are sold, the received amount is recorded as an increase in equity, and the subsequent gain on the transac- tion is recognised in Other paid-in equity. DIVIDENDS Provision is made for the amount of any dividend declared, for the applicable report- ing period. Property, plant and equipment OWN ASSETS Property, plant and equipment is recognised in the balance sheet at cost less accumulated depreciation (see below) and any impairment losses. The cost for capital equipment produced by the company includes material costs, direct costs of labour and a rea- sonable share of indirect production costs. Operating assets with different useful economic lives are recognised as separate components of property, plant and equipment. Borrowing costs that are directly attributable to the acquisition of an asset are capi- talised during the period of time that is required to complete and prepare the asset for its intended use or sale. These borrowing costs are capitalised as part of the asset's cost when it is probable that they will lead to future beneﬁts for the Group, and the costs can be measured in a reliable manner. Other borrowing costs are recognised in the income statement in the period in which they incur. POST-ACQUISITION COSTS The company and the Group include expenses of replacing parts of operating assets in the cost of property, plant and equipment when such expenses are expected to generate future economic beneﬁts and the expenses for the replaced parts can be reliably measured. All other costs are recognised in the income statement in the period in which they occur. DEPRECIATION Depreciation is calculated using the straight-line method over the estimated useful lifetime for each item of property, plant and equipment, and charged to the income statement. Land is not depreciated. Estimated economic lifetimes are as follows: Watercourse regulations 40–50 years Power generation Buildings 50 years Dams, water ways, hatches 25-40 years Machine equipment 40 years Thermal power plant (Spain) 25 years Industrial activities Buildings 20–25 years Machinery and equipment 7–15 years Operational moveable property, vehicles, equipment etc. 3–12 years Residual value is assessed annually unless it is immaterial. LEASES The company's and the group's leases consist mainly of ofﬁce space, machines, cars, IT equipment and other ofﬁce machines. Some contracts have extension options. Assets and liabilities arising from a lease are initially measured on a pres- ent value basis. Right-of-use assets are measured at cost comprising the following: • the amount of the initial measurement of lease liability • any lease payments made at or before the commencement date less any lease incentives received • any initial direct costs • restoration costs Lease liabilities include the net present value of the following lease payments: • ﬁxed payments (including in-substance ﬁxed payments), less any lease incentives receivable • variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date • amounts expected to be payable by the group under residual value guarantees • the exercise price of a purchase option if the group is reasonably certain to exercise that option • payments of penalties for terminating the lease, if the lease term reﬂects the group ex-ercising that option Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the lessee’s incremental borrowing rate, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. To determine the incremental borrowing rate, the group: 156 157 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT • where possible, uses recent third-party ﬁnancing received by the individual lessee as a starting point, adjusted to reﬂect changes in ﬁnancing conditions since third party ﬁnancing was received • makes adjustments speciﬁc to the lease, e.g. term, country, currency and security If a readily observable amortising loan rate is available to the individual lessee (through recent ﬁnancing or market data) which has a similar payment proﬁle to the lease, then the group entities use that rate as a starting point to determine the incre- mental borrowing rate. The group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset. Lease payments are allocated between principal and ﬁnance cost. The ﬁnance cost is charged to proﬁt or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Intangible assets GOODWILL Goodwill represents the amount that arises on the acquisition of subsidiaries and investments in associates. For acquisitions after 1 January 2010, goodwill is calculated as described above. For acquisitions between 1 January 2003 and 31 December 2009, goodwill represents the difference between the cost on acquisition and the fair value of the net identiﬁed assets acquired. For acquisitions prior to this, goodwill is based on the estimated cost that corresponds to the amount that was recognised under previous Norwegian accounting principles. Goodwill is recognised in the balance sheet at cost, less any accumulated impairment losses. Goodwill is allocated to the cash-ﬂow-generating units and is not amortised, but it is tested each year for impairment. For associates, the balance sheet value of goodwill is included in the investment's book value in the consolidated ﬁnancial state- ments. OTHER INTANGIBLE ASSETS Other intangible assets that are acquired are recognised in the balance sheet at cost, less accumulated amortisation (see below) and less any im-pairment losses. Research and development expenditures which are directly attributable to develop- ment and testing of the Group's products, and which are identiﬁable and unique, and which is controlled by the Group, is recognised in the balance sheet as an intangible asset when all of the following criteria are satisﬁed: • It is technically feasible to complete the product so that it will be available for use. • Management intends to complete, use and sell the product. • It is an ability to use and sell the product. • It can be proven that the product will generate probable economic beneﬁts. • Adequate technical, ﬁnancial and other resources to complete the development and to use or sell the product are available. • The expenditure attributable to the product during its development can be reliably measured. Costs recognised in the balance sheet include material costs, direct costs of labour and directly attributable overheads that are included to make the product available for use. Other development costs that do not satisfy these criteria are recognised as an expense as incurred. Development costs that are expensed cannot subsequently be recognised in the balance sheet. SUBSEQUENT COSTS Future costs concerning intangible assets recognised in the balance sheet are only capitalised if they increase future economic beneﬁts related to this asset. All other costs are expensed in the period in which they occur. AMORTISATION Amortisation is calculated and recognised in income using the straight-line-method over the estimated useful economic life of the intangible assets, unless the life- time is indeﬁnite. Goodwill is annually tested for impairment, at balance sheet date. Capitalised costs associated with the granting of concessions are amortised over the period until the next concession application. The amortisation period is 50 years. Excess values associated with customer relations, customer contracts, brands and own software development and other development costs are amortised over a period of 3–10 years. Inventories Inventories are recognised at the lower of cost and net sales value. Net sales value is the estimated sales price in ordinary operations, less the estimated costs for com- pletion and sales costs. Cost is based on the ﬁrst-in ﬁrst-out principle and includes costs incurred upon pro- curement of goods and the costs of bringing them to their present condition and location. For ﬁnished goods and work in progress, cost is calculated as a share of the indirect costs based on normal utilisation of capacity. Construction contracts The booked value of construction contracts consists of earned, non-invoiced income under the percentage-of-completion method, less received advance payments. The amount is recognised in the balance sheet under trade and other receivables. The net worth is classiﬁed as contract assets. Long-term manufacturing contracts where the customer has paid more than the earned contract value on the balance sheet date are classiﬁed as contract obligations. See also the section below on operating income and Note 13. Determining fair value The accounting policies and notes require fair value to be determined for ﬁnancial and certain non-ﬁnancial assets and liabilities. Fair value is deﬁned as the value the individual asset or liability can be sold for, in an orderly transaction, between market participants at the measurement date under current market conditions. Various methods and techniques are used to calculate fair value depending on the type of asset or liability and to what extent they are traded in active markets. Financial instruments are classiﬁed in their entirety at one of three valuation levels based on the lowest level of the valuation information which has an impact on the valuation of the instruments. Please refer to the disclosures on the different valuation levels in Note 16. Based on the above principles, the following methods are normally used to determine fair value: 158 159 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT Property, plant and equipment In connection with acquisitions and business combinations, property, plant and equip- ment is recognised at fair value. The market value is determined based on valuations or observable market prices on similar assets. Trade and other receivables The fair value of trade and other receivables is calculated as the present value of net future cash ﬂows discounted at the market interest rate at the balance sheet date. Intangible assets The fair value of intangible assets is based on discounted forecast cash ﬂows from the use and any subsequent sale of the assets. Investments in shares, bonds and funds The fair value of listed ﬁnancial instruments is equivalent to the quoted bid price at the balance sheet date. For non-listed instruments, fair value is based on the known market prices close to the balance sheet date or valuations made by investment ﬁrms applying generally applied valuation methods. Non-derivative ﬁnancial liabilities Fair value of ﬁnancial liabilities for disclosure purposes is calculated as the present value of future cash ﬂows discounted at the market interest rate at the balance sheet date. Derivatives The fair value of swap agreements is the estimated amount that the company and/ or the Group will receive or be required to pay to settle the agreement at the bal- ance sheet date, taking into account current interest rates and the counterparty's own creditworthiness. The fair value of energy-related derivatives (futures, forwards and options) is the market price at the balance sheet date. The fair value of forward exchange contracts is the market price at the balance sheet date. Impairment The carrying amount of the company's and Group's assets is, with the exception of inventories and deferred tax assets, reviewed each balance sheet date to assess whether there are indications of impairment. If any such indication exists, the asset's recoverable amount will be estimated. An impairment loss is recognised when the carrying amount of an asset or cash-gen- erating unit (valuation unit) exceeds the recoverable amount. Impairment losses are recognised in the income statement. Impairments for cash-ﬂow generating entities are allocated by reducing the carrying amount of any goodwill in cash-generating units ﬁrst. Subsequently, the remaining impairments on the other assets in the unit are allocated pro-rata based on the car- rying amounts. Calculation of recoverable amounts The recoverable amount of assets is the highest of the net selling price and value in use. The value in use is calculated by discounting the forecast future cash ﬂows to their present value using a discount rate before tax that reﬂects current market pricing of the time value of money and the risks speciﬁc to the asset. For assets that do not essentially generate independent cash ﬂows,the recoverable amount is determined forthe valuation entity to which the asset belongs. Reversal of impairment Impairments of goodwill are not reversed. For other assets, impairment losses are reversed if there is a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depre- ciation or amortisation, if no impairment loss had been recognised. Employee beneﬁts DEFINED CONTRIBUTION PENSION PLANS Obligations to provide contributions to deﬁned contribution pension plan are rec- ognised as costs in the income statement in the period in which they occur. DEFINED BENEFIT PENSION PLANS The net liability related to deﬁned beneﬁt pension plans is calculated separately for each plan by estimating the size of the future beneﬁts that the employees have earned through their work efforts in the current and prior periods. These future ben- eﬁts are discounted to present value, and the fair value of the pension assets is sub- tracted to establish the net obligation. The discount rate corresponds to the market interest rate for high-quality corporate bonds (OMF interest rate) with approximately the same term as the Group's obligations. The calculations are performed by a quali- ﬁed actuary and based on the straight-line earnings model. When the beneﬁts in a pension plan improve, the share of the increase in beneﬁts that the employee has earned the right to are recognised as a cost in the income state- ment on a straight-line basis over the average period until the employees have earned an unconditional right to the increased beneﬁts. The cost is recognised immediately in the income statement if the employees have already acquired an unconditional right to in-creased beneﬁts at the time of allotment. Actuarial gains and losses on the calculation of the company's obligation for a pension plan are recognised in other comprehensive income when they incur. Pension costs / earnings, as well as gains and losses on curtailment / termination are recognised in the income statement. The net interest on the calculation of pension obligations is reported as ﬁnancial items in the income statement. When the calculations result in an asset for the company, recognition of this asset is limited to the net amount of the total of unrealised actuarial losses and the cost of previous periods' pension earnings, and the present value of future refunds from the scheme or reductions in payments to the scheme. SHARE-BASED COMPENSATION For share-based compensation by equity instruments granted that do not vest until the employee completes a speciﬁed period of service, it is assumed that the services to be rendered as consideration for the equity instruments will be received in the future, during the vesting period. Such services are accounted for as they are ren-dered by the employee during the vesting period, with a corresponding increase in equity. Provisions A provision is recognised when the Group has a present legal or constructive obliga- tion, as a result of a past event and it is probable that this will result in an outﬂow of resources to settle the obligation, and the obligation can be reliably estimated. Provisions for restructuring are recognised when the Group has approved a detailed and formal restructuring plan, and the restructuring has either begun or has been announced to those affected. 160 161 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT Operating income GOODS SOLD AND SERVICES RENDERED Operating revenue is recognised when performance obligations are satisﬁed through the trans-fer of a good or service to the the customer, either over time or at a point in time. By transfer is meant that the customer has obtained control of the good or ser- vice. The most central indicators of transfer of control is that the Group has obtained the right to payment for the good or service, that the customer has obtained the right to the good or service, that the Group has transferred physical control of the good or service, that the customer has taken on the signiﬁcant risks and rewards related to ownership of the good or service. Operating revenue is presented net of sales-related taxes and rebates. Revenue related to ﬁxed-price contracts where the deliverable is tailored to the cus- tomer, does not have an alternative use and where the Group obtains the right to pay- ment based on the projects progress is recognised over time as long as the projects revenue and expenses can be estimated reliably. When the project’s result cannot be estimated reliably, only revenue corresponding to expenses incurred may be rec- ognised. Losses related to onerous contracts are recognosed in the period they are identiﬁed. Depending on the type of project, progress is estimated based on costs incurred in relation to total estimated costs, as direct hours incurred in relation to total expected hours or by assessing technical grade of completion. Estimates related to revenues, expenses and progress are revised when assumptions change. Change in estimates are recognised in the income statement in the period management becomes aware of the change of assumptions that caused the change in estimate. In ﬁxed-price contracts the customer normally pays ﬁxed amounts through the proj- ect period based on a payment plan. A contract asset is recognised if, at the measure- ment date the value of the deliverable at the exceeds payments received from the customer. A contract liability is recognised payment from the customer exceeds the value of the deliverable at the measurement date. Revenue from energy sales is recognised at the transaction date. FINANCIAL INCOME Financial income consists of realised gains fair value changes related to debt and equity instruments held for trading, dividends received, share of results from invest- ments in limited partnerships, interest income and foreign exchange gains. Interest income is recognised in the income statement based on the effective interest method as it is earned. Dividend income is recognised as income on the date the right to receive payment is established. GOVERNMENT GRANTS Government grants that compensate for incurred expenses are recognised as a cost reduction in the income statement on a systematic basis in the same periods in which the expenses are incurred. Grants related to the acquisition of operating assets are recognised as reduction of cost and amortised by reducing amortisation over the operating asset’s useful economic life. Costs LEASE PAYMENTS FOR OPERATING LEASES Lease payments for operating leases are recognised in the income statement on a linear basis over the lease term. Any lease incentives received are recognised as an integral part of total lease costs. FINANCIAL EXPENSES Financial expenses consist of interest expenses on loans, currency translation losses, negative changes in the value of derivatives and ﬁnancial instruments held-for-trad- ing and derivatives that are recognised in income, and other realised impairment losses for debt and equity instruments. Taxes Income tax on the proﬁt for the period consists of current and deferred tax. Income tax is recognised in the income statement with the exception of tax on items that are recognised directly in equity or in other comprehensive income. The tax effect of the latter items is recognised directly in equity or in other comprehensive income. Current tax is the forecast tax payable on the year's taxable income at current tax rates at the balance sheet date, and any adjustments of tax payable for previous years less tax paid in advance. Deferred tax liabilities are calculated based on the balance sheet oriented liability method taking into account temporary differences between the carrying amount of assets and liabilities for ﬁnancial reporting and tax values. The following temporary differences are not taken into account: goodwill not deductible for income tax pur- poses, the initial recognition of assets or liabilities that affect neither accounting nor taxable proﬁt, and differences relating to investments in subsidiaries that are not expected to reverse in the foreseeable future. The provision for deferred tax is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, measured at the tax rates in force at the balance sheet date. Deferred tax assets are recognised only to the extent that it is probable that the asset can be utilised against future taxable results. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax asset will be realised. Tax assets that can only be utilised via group contributions from the parent company are not recognised until the contribution has actually been paid and is recognised in the individual companies. Cash and cash equivalents Cash means cash in hand and in the bank. Cash equivalents are short-term liquid investments that can be converted to cash within three months to a known amount and which have an insigniﬁcant degree of risk. Cash and cash equivalents in the cash ﬂow statement do not include unused overdrafts. Accounting standards and interpretations issued but not adopted The company has not early-adopted any IFRS standards or IFRIC that have been issued but are not mandatory as of 31 December 2022. Based on the assessments made so far, it is assumed that coming standards and IFRIC approved by the EU will not have a material effect on the ﬁnancial statements. 162 163 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT NOTE 1 SEGMENT REPORTING (1 000 NOK) Per 31.12. Hydropower Group Management Volue NSSLGlobal ENRX 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 Sales at a point in time 605 400 370 658 233 919 184 353 1 042 013 907 325 708 950 563 008 Sales over time 981 242 854 722 629 369 607 799 Other Income 618 2 568 22 830 9 146 4 307 21 603 6 262 8 389 Revenue and other income 606 018 373 226 22 830 9 146 1 219 468 1 060 678 1 042 013 907 325 1 344 581 1 179 196 Operating expenses 61 407 64 906 104 620 68 661 1 072 845 922 553 787 089 699 022 1 269 705 1 036 214 Depreciation, amortization and impairment 9 567 9 989 3 904 3 312 106 470 93 097 45 712 42 689 78 316 59 638 Operating proﬁt 535 044 298 332 -85 693 -62 827 40 154 45 028 209 211 165 613 -3 439 83 344 Share of proﬁt or loss of associ- ates and JV Net ﬁnancial items 546 954 1 345 469 -3 910 -5 525 27 058 12 155 -16 605 -10 973 Income tax expense 387 028 129 584 5 126 29 837 17 078 11 884 58 730 35 850 14 368 20 427 Proﬁt (-loss) continuing operations 148 016 168 748 456 134 1 252 805 19 166 27 619 177 540 141 918 -34 413 51 945 Total assets 222 622 238 329 4 016 715 3 390 344 1 864 916 1 746 235 915 389 800 901 1 765 276 1 140 618 Total liabilities 447 710 170 891 764 312 585 994 1 056 191 979 359 391 148 342 850 1 381 458 735 622 Net interest bearing debt -1 278 952 -950 260 -426 070 -382 075 -355 888 -321 947 424 747 30 963 NOTE 1 SEGMENT REPORTING (1 000 NOK) Per 31.12. Tekna Property Alytic Ampwell Vergia 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 Sales at a point in time 152 489 129 447 23 543 500 151 39 342 26 904 105 265 938 Sales over time 46 063 52 012 Other Income 5 679 5 704 11 628 9 869 1 221 102 769 Revenue and other income 204 231 187 164 35 171 510 020 40 564 27 006 106 035 938 Operating expense 327 759 258 057 29 111 469 918 81 189 39 166 143 997 8 116 7 Depreciation, amortization and impairment 29 380 18 266 12 652 13 002 4 904 3 445 14 908 Operating proﬁt -152 907 -89 159 -6 592 27 101 -45 528 -15 605 -52 871 -7 179 -7 Share of proﬁt or loss of associ- ates and JV -11 149 -10 093 -2 100 -10 967 -2 081 Net ﬁnancial items -1 938 863 -3 358 -2 032 406 -106 -7 032 -86 Income tax expense 839 -781 -488 8 202 -2 604 -721 -650 Proﬁt (-loss) continuing operations -166 834 -97 607 -9 462 16 866 -42 518 -14 991 -61 352 -18 232 -2 088 Total assets 536 600 643 883 442 547 471 007 197 092 107 778 520 017 33 840 17 619 Total liabilities 147 705 113 070 236 387 255 740 64 632 27 515 489 313 24 513 10 Net interest bearing debt -40 158 -214 578 134 901 68 404 -45 146 -25 394 373 209 4 911 -9 953 Eliminations Total 2022 2021 2022 2021 Sales at a point in time 2 911 860 2 681 847 Sales over time 1 656 674 1 514 533 Other Income -35 312 -21 470 18 002 35 910 Revenue and other income -35 312 -21 470 4 586 536 4 232 290 Operating expense -25 718 -12 033 3 860 120 3 546 472 Depreciation, amortization and impairment -8 135 -7 845 297 677 235 592 Operating proﬁt -1 460 -1 593 428 740 450 227 Share of proﬁt or loss of associates and joint ventures -16 189 -40 405 -12 173 Net ﬁnancial items -504 204 -1 446 166 37 285 -106 316 Income tax expense -21 289 451 458 139 234 733 Proﬁt (-loss) continuing operations -500 563 -1 448 211 -32 519 97 005 Total assets -2 674 551 -1 718 817 7 840 462 6 837 898 Total liabilities -947 257 -281 989 4 056 111 2 929 061 Net interest bearing debt -1 208 447 -1 804 838 164 165 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT Segment reporting Financial information for the operating segments is determined and presented based on the information provided to the company's board of directors, which is the Group's ultimate decision-maker. Hydropower Hydropower generates electricity at two locations in the Arendal water - course. The Bøylefoss and Flatenfoss power stations produce more than 500 GWh annually. All ﬁnancial items have been allocated to the Administration segment. Group Management The Parent Company is focused on the development of new sustainable business opportunities and the follow-up of portfolio companies through long-term active ownership, in addition to power generation, property development, and manage- ment of ﬁnancial investments. AFK Group Management employs 30 people. The head ofﬁce is in Arendal. Eliminations consist mainly of proﬁt- and loss items related to investments in Tekna and ENRX. Volue Volue is a leading supplier of technology and enabler of the green transition. With 50 years of green technology expertise, Volue offers software solutions, systems and market insight that optimise production, trading, distribution and consumption of energy, as well as infrastructure and construction projects. Volue’s critical services paves the way for a clean, ﬂexible, reliable and proﬁtable energy future. NSSL Global NSSLGIobaI is a leading independent provider of satellite communications and IT solutions in a global market. The company is committed to delivering high-quality voice and data services to customers anywhere in the world. NSSLGlobal’s activities are divided into the areas Airtime, Projects, Hardware, and Service. ENRX ENRX was formed through the combination of EFD Induction and the wireless charging solutions provider IPT Technology, which was acquired by AFK during the second quarter. ENRX delivers advanced green power technology based on induc- tion technology, with activities in three main areas: Induction Heating Machines, Induction Power Systems, Spares and Services, and the new area of Wireless Charging Solutions. ENRX’s primary customer base operates within the automotive industry, renewables/wind turbines, pipe production, the electronics industry, the cable industry, and mechanical engineering. Tekna Tekna is a world-leading provider of advanced materials for 3D printing in the aero- space, medical and automotive sectors, and is well positioned in the growing market for advanced nanomaterials within the global electronics and batteries industries. Property AFK Property comprises all property related companies and property investments. Alytic Alytic develops sustainable companies with strong domain competence and data at the core. In many sectors and markets there is a large untapped potential for utilizing data effectively to gain insight and make qualiﬁed decisions. This includes better solutions to process, analyze, and visualize available information. Ampwell Ampwell was established by Arendals Fossekompani in 2022 to build an eco-sys- tem for battery technology and a Battery-as-a-Service business model. Ampwell will accomplish this by combining hardware, software, other technologies and dedicated competence. Ampwell is majority owner in the energy storage specialist Commeo GmBH and 40% ownership in the software company Cellect Energy S.L. Vergia Vergia was established by Arendals Fossekompani in 2022. The Vergia ecosystem includes verticals such as small-scale hydropower, energy parks, power-to-x, off- shore wind and green fuel. Vergia is owned 100% by Arendals Fossekompani. NOTE 1 GEOGRAPHICAL SEGMENTS (1 000 NOK) Geographical segments Norway Europe Asia North America Consolidated 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 Revenue 1 200 009 2 366 197 2 370 382 1 802 931 616 381 483 647 399 765 366 916 4 586 536 4 232 290 Segment assets 3 553 373 14 164 847 3 049 811 2 296 486 603 470 516 987 633 809 517 030 7 840 462 6 837 898 Hydropower Group Management Total Parent Company 2022 2021 2022 2021 2022 2021 Revenue and other income 606 018 373 226 22 070 9 146 628 087 382 372 Operating expenses 61 407 64 906 103 718 68 661 165 124 133 566 Depreciation, amortization and impairment 9 567 9 989 3 899 3 312 13 466 13 301 Operating income 535 044 298 332 -85 547 -62 827 449 497 235 505 Net ﬁnancial items 546 956 1 345 469 546 956 1 345 469 Income tax expense 387 028 129 584 5 121 29 837 392 149 159 421 Proﬁt (-loss) continuing operations 148 016 168 748 456 289 1 252 805 604 305 1 421 553 Total assets 222 622 238 329 4 015 522 3 390 344 4 238 145 3 628 673 Total liabilities 447 710 170 891 763 070 585 994 1 210 780 756 885 Net interest bearing debt -1 279 127 -950 260 -1 279 127 -950 260 NOTE 2 OTHER INCOME (1 000 NOK) Group Parent Company 2022 2021 2022 2021 Other income 11 646 32 030 4 518 4 527 Other income, intercompany 17 667 6 839 Gain sales of assets 1 946 396 503 348 Grants/subsidies 4 470 3 484 Other income 18 002 35 910 22 687 11 713 166 167 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT NOTE 3 BUSINESS COMBINATIONS (1000 NOK) ACQUISITION OF COMMEO GMBH (AMPWELL SEGMENT) On 6 April 2022 Arendals Fossekompani ASA acquired 54.9% of the issued share cap- ital in Commeo GmbH, a German company specialising in energy storage and energy management solutions. Commeo provides solutions for commercial and industrial energy storage by manufacturing battery modules and rack systems, including con- trol units and software for monitoring and data logging. Commeo's battery system is modular and therefore scalable from kW to MW scale. At acquisition date Commeo employs 50 people and plans to build new production facilities. Acquistion of Commeo GmbH Purchase consideration Cash paid 72 126 Deferred consideration 21 194 Total purchase consideration 54.9% 93 319 Total consideration based on 100.00% 169 981 The assets and liabilities recognised as a result of the acquisition of Commeo GmbH on 100% basis are as follows: Order backlog 7 554 Customer relationships 23 625 Technology 82 416 Property and plant 1 862 Vehicles, machinery and equipment 37 055 Inventory 43 561 Accrued revenues over time 1 052 Trade and other receivables 6 983 Cash and cash equivalents 6 Subordinated loan from shareholders () -32 487 Deferred tax liability -4 676 Loans and Borrowings -100 780 Accruals -2 580 Provisions -34 141 Trade and other payables -15 438 Other current liabilities -62 732 Net identiﬁable assets acquired -48 718 Added goodwill 218 699 Net assets required 169 981 The net identiﬁable assets are acquired at fair value. () In addition, Arendals Fossekompani has taken over as debtor for shareholders loans of total NOK 32.5 million. The goodwill is attributable to the workforce and allocated to Ampwell segment. This acquisition is part of the Ampwell growth strategy to build an eco-system for battery technology and a Battery-as-a-Service business model. There is believed to be a signiﬁcant growth potential for the products and services Commeo will be able to deliver within the Ampwell strategy. The acquired business contributed with revenues of NOK 105 million and a net loss of NOK 47 million to the group for the period 6 April to 31 December 2022. If the acquisition had occurred on 1 January 2022, consolidated pro-forma revenues and proﬁt for the year ended 31 December 2022 would have been NOK 123 million for revenues and NOK 56 million as a net loss. Outﬂow of cash to acquire subsidiary, net of cash acquired Cash consideration 72 126 Less cash acquired -6 Net outﬂow of cash - investing activities 72 119 ACQUISITION OF FACTLINES AS (ALYTIC SEGMENT) On 28 April 2022 Alytic AS acquired 62.4% of the issued share capital in Factlines AS, a Norwegian company spexcialising in offering a digital solution for securing respon- sible supply chains. Factlines supports the process from requirements and code of conduct - to risk analysis, follow-up and dialogue. On 1 July 2022 the Transparancy Act entered into force in Norway. The purpose of the act is to promote enterprises' respect for fundamental human rights and decent working conditions in connection with the production of goods and the provision of services. Documentation of supply chains is now required by law, and Factlines offers a digital solution to ensure com- pliance with these new requirements. Acquistion of Factlines AS Purchase consideration Cash paid 983 Liquidity infusion by Alytic on behalf of NCI of 37.56% 9 059 Total purchase consideration 62.44% 10 043 Total consideration based on 100.00% 16 082 The assets and liabilities recognised as a result of the acquisition of Factlines AS on 100% basis are as follows: Other intangible assets 6 546 Vehicles, machinery and equipment 23 Trade and other receivables 2 518 Cash and cash equivalents () 179 Loans and Borrowings -2 344 Provisions -717 Trade and other payables -2 818 Other current liabilities -1 085 Net identiﬁable assets acquired 2 301 Added goodwill 13 781 Net assets required 16 082 The net identiﬁable assets are acquired at fair value. () Cash and cash equivalents before Alytic's liquidity infusion of total tNOK 24 123 into Factlines AS. The goodwill is attributable to the workforce and allocated to Alytic segment. Factlines offers a highly competent team, a great software-as-a-service solution, a solid customer base and is believed to have a huge potential. 168 169 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT The acquired business contributed with revenues of tNOK 2 471 and a net loss of tNOK 5 063 to the group for the period April 28th to December 31st 2022. If the acqui- sition had occurred on January 1st 2022, consolidated pro-forma revenues and proﬁt for the year ended 31st December 2022 would have been tNOK 4 385 for revenues and tNOK 6 830 as a net loss. Outﬂow of cash to acquire subsidiary, net of cash acquired Cash consideration 10 043 Less cash acquired -179 Net outﬂow of cash - investing activities 9 864 ACQUISITION OF IPT TECHNOLOGY GMBH (ENRX SEGMENT) On 19 May 2022 Induction Holding AS acquired 100% of the issued share capital in IPT Technology GmbH, a German company specialising in wireless energy for indus- trial and e-mobility applications. ENRX Group was estabished when ENRX Group acquired 100% of the shares in Induction Holding AS from Arendal Fossekompani ASA end of June 2022. IPT Technology GmbH and EFD Induction have complemen- tary induction technology and with the trend towards electriﬁcation that is taking place in the industrial segment, and the general trend towards electric vehicles, it is believed to be a signiﬁcant growth potential for the products and services these companies will be able to deliver together. Acquistion of IPT Technology GmbH Purchase consideration Cash paid 151 554 Total purchase consideration 151 554 The assets and liabilities recognised as a result of the acquisition of IPT Technology GmbH are as follows: Order backlog 7 745 Customer relations 2 454 Technology 77 373 Vehicles, machinery and equipment 1 158 Inventory 11 048 Advances paid to suppliers 698 Trade accounts receivables 1 378 Other current receivables 1 202 Bank deposits 18 455 Deferred tax liability -9 837 Trade and other payables -6 501 Other current liabilities -42 112 Advances received from customer -9 914 Net identiﬁable assets acquired 53 147 Added goodwill 98 407 Net assets required 151 554 The acquired intangible assets consist of technology, patents, order backlog and customer relationships. The net identiﬁable assets are acquired at fair value. Outﬂow of cash to acquire subsidiary, net of cash acquired Cash consideration 151 554 Less cash acquired -18 455 Net outﬂow of cash - investing activities 133 099 ACQUISITION OF LONGUM PROPERTY AS (PROPERTY SEGMENT) In April 2022, AFK Property acquired 100% of the shares in Longum Property AS. Longum Property owns 170,000 sqm of mostly commercial land located outside the city of Arendal. The property is close to the E18 highway on route to the main production site of the coming Morrow battery factory. The land is also in the vicinity of Bedriftsveien 17, which is also in the portfolio of AFK property. The goodwill is solely related to deferred tax liability regarding added fair value of the acquired land. The acquired business contribution to revenues and cost for the group for the period are insigniﬁcant. Acquistion of Longum Property AS Total purchase consideration 9 282 Cash paid 9 282 The assets and liabilities recognised as a result of the acquisition of Longum Property AS are as follows: Land 9 002 Trade accounts receivables 102 Cash and cash equivalents 205 Deferred tax liability -738 Other current liabilities -27 Net identiﬁable assets acquired 8 544 Added goodwill 738 Net assets required 9 282 The goodwill is attributable to the workforce and the high synergies between the two businesses. It will not be deductible for tax purposes. The acquired business contributed revenues of NOK 13,1 million and a net loss of NOK 23,2 million to the group for the period May 19th to December 31st 2022. If the acquisition had occured on January 1st 2022, consolidated pro-forma revenues and proﬁt for the year ended December 31st 2022 would have been NOK 16,7 million for operating revenues and NOK 35,4 million as a net loss. Outﬂow of cash to acquire subsidiary, net of cash acquired Cash consideration 9 282 Less cash acquired -205 Net outﬂow of cash - investing activities 9 077 SUBSIDIARIES ACQUIRED IN 2021 Volue acquired 100% of the shares in Procom Gmbh, Alytic acquired 97% of the shares in Utel systems AS and 60% of the shares in Greenfact AS. None of these transactions were signiﬁcant for the AFK Group. 170 171 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT NOTE 4.1 EMPLOYEE BENEFIT EXPENSES ( 1 000 NOK) Group Parent Company 2022 2021 2022 2021 Salaries 1 579 526 1 336 072 62 573 53 199 Social security contributions 180 354 135 431 7 784 7 096 Pension costs 63 505 56 719 4 242 3 617 Capitalised cost -207 360 -156 125 Share-based payments 15 239 797 Other beneﬁts 59 852 49 834 2 973 1 789 Total employee beneﬁts 1 691 116 1 421 931 78 370 65 700 Average number of full-time headcounts 2 381 2 179 35 28 2022 Salaries, fees Previous year’s bonus paid out this year Beneﬁts in kind Total remune- ration Share- based payment Accrued pension costs Number of board meetings (i) Senior executives Ørjan Svanevik, CEO 4 988 2 379 298 7 665 250 130 Lars Peder Fensli, CFO 2 171 591 27 2 789 125 116 Morten Henriksen, Executive Vice President 2 768 703 27 3 498 125 118 Torkil Mogstad, Executive Vice President 2 028 513 27 2 568 125 96 Ingunn Ettestøl, CSO 1 702 376 27 2 105 83 135 Board members, audit and compensation committees Trond Westlie, Chairman from 06.05.2022 470 470 5 Jon Hindar, Chairman, til 06.05.2022 (iii) 205 205 5 Morten Bergesen, Deputy Chairman, (ii), (iii), (iv) 436 436 10 Didrik Vigsnæs, Board Member 367 367 10 Christian Must, Board member 387 387 10 Heidi Marie Petersen, Board Member, until 06.05.2022 107 107 1 Kristine Landmark, Board Member, until 06.05.2022 107 107 4 Stine Rolstad Brenna, Board Member, (ii) 419 419 9 Lise Lindback, Board Member from 06.05.2022 250 250 5 Anne Grethe Dalane, Board member, from 06.05.2022 (ii) 269 269 5 Total remuneration 16 674 4 562 406 21 642 708 595 2021 Salaries, fees Previous year’s bonus paid out this year Beneﬁts in kind Total remun- eration Share- based payment Accrued pension costs Number of board meetings (i) Senior executives Ørjan Svanevik, CEO 4 851 4 001 293 9 145 122 Lars Peder Fensli, CFO 2 089 888 23 3 000 109 Morten Henriksen, Executive Vice President 2 664 2 581 31 5 276 115 Torkil Mogstad, Executive Vice President 1 955 754 28 2 737 100 Ingunn Ettestøl, ESG Director 1 541 520 22 2 083 127 Board members, audit and compensation committees Jon Hindar, Chairman, (iii) 614 614 13 Morten Bergesen, Deputy Chairman, (ii), (iii), (iv) 324 324 13 Didrik Vigsnæs, Board Member 341 341 13 Arild Nysæther, Board Member, til 06.05.2021 (ii), (iii) 160 160 7 Christian Must, from 06.05.2021 (ii) 253 253 6 Heidi Marie Petersen, Board Member 347 347 13 Kristine Landmark, Board Member 321 321 13 Stine Rolstad Brenna, Board Member, (ii) 394 394 13 Total remuneration 15 854 8 744 397 24 995 573 (i) 10 Board meetings were held in 2022 and 13 in 2021. (ii) Member of Audit Commitee (iii) Member of Compensation Committee (iv) Member of Nomination Committee In addition, tNOK 155 (186) was paid in pensions to former board members. Senior executives participate in the collective pension scheme for employees of the parent company and subsidiaries. Refer to the description in the note on pensions. All companies in the Group have phased out deﬁned-beneﬁt pension schemes with effect from 31 December 2015. Bonuses, options and other beneﬁts are not pensionable. Senior executives of the Group received no remuner- ation or beneﬁts from other Group companies except as shown above. No additional remuneration was paid for special services beyond normal management duties. Regarding loans and security provided to members of the management team, the Board of Directors and other elected bodies of the company refer to Note 24. Employment terms for the CEO and other senior executives: On 16 December 2022 it was announced that Ørjan Svanevik resigns as CEO of Arendals Fossekompani. Formal resignation date is 30 June 2023. The following severance pay has been agreed for the CEO in the event the termination of his employment: Salary will be paid during the notice period (6 months). In addition he will receive a severance pay amounting to 6 months of salary. Total accrued cost for severance pay for the CEO amounts to NOK 6,2 million including social security taxes. As part of new incentive program for senior executives in AFK in May 2022, the CEO was given the right to buy 15 637 shares in the company at a 20% discount with a tie-in period of three years. Each year, Lars Peder Fensli, Morten Henriksen, Torkil Mogstad and Ingunn Ettestøl have the right to buy 7 819 shares on the same terms. As part of the severance agreement, the CEO may keep these shares after resignation. The shares are subject to the original requirements including the lock-up period. Executives may borrow up to two-thirds of the purchase price for the shares on the same terms as ordinary employee loans. Loans are secured by a mortgage on the shares and run as long as the employment relationship lasts. As part of the severance agreement, the loan granted to the CEO may be continued after resignation and subject to the existing loan terms. 172 173 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT NOTE 4.2 PENSION LIABILITIES (1 000 NOK) Group Parent Company 2022 2021 2022 2021 Pension liabilities Present value of unfunded liabilities 10 626 10 871 5 573 6 215 Present value of funded liabilities 76 592 79 341 45 927 45 891 Fair value of pension assets -91 682 -95 967 -57 968 -59 750 Recognised employers’ contributions 786 876 786 876 Present value of net liabilities -3 679 -4 878 -5 683 -6 768 Of which presented as pension assets 24 993 28 365 12 041 13 859 Other pension liabilities 2 274 1 866 Gross pension liabilities 23 588 25 353 6 358 7 091 Change in recognised net liability for deﬁned-beneﬁt pensions Net funded deﬁned-beneﬁt pension liability as at 1 January -15 049 -3 586 -13 859 -9 621 Liability for unfunded schemes as at 1 January 10 327 7 197 7 091 7 197 Paid-in contributions 1 731 -815 -997 -1 070 Paid out from the scheme -3 638 -4 378 -535 -549 Actuarial (gains) losses from other comprehensive income 1 095 -3 218 2 615 -2 823 Exchange rate changes, pension liabilities 418 -70 Costs of deﬁned-beneﬁt schemes 10 534 2 98 Net liability for deﬁned-beneﬁt schemes as at 31 December -5 106 -4 337 -5 683 -6 768 Costs recognised in the income statement Costs relating to this period’s pension entitlements 373 444 Interest on the liabilities 1 588 1 297 961 881 Expected return on pension plan assets -1 946 -1 802 -1 120 -950 Recognised employers’ contributions -5 595 162 168 Expenses from deﬁned beneﬁt plans 10 534 2 98 Costs of deﬁned-contribution pension schemes 61 954 54 477 2 922 2 178 Net interest on pension liabilities transferred to ﬁnance 222 438 70 Transfer effect of discontinuation of separate line in income statement 1 318 1 270 1 318 1 270 Total pension costs 63 505 56 719 4 242 3 617 Actual return on pension plan assets -1 526 8 178 -950 5 515 Development of the Group’s funded pension liabilities Present value of funded liabilities 76 592 79 341 45 927 45 891 Fair value of pension assets -91 682 -95 967 -57 968 -59 750 Net result -15 090 -16 625 -12 041 -13 859 PENSION OBLIGATIONS / COSTS The Group's Norwegian companies are obligated to maintain an occupational pen- sion scheme pursuant to the Mandatory Occupational Pension Scheme. The pension scheme satisﬁes statutory requirements. The pension scheme includes a retirement pension, disability pension and survivor pension. With effect no later than 31.12.2015, all the companies in the Group discontinued their deﬁned beneﬁt plan. NOTE 4.3 SHARE-BASED PAYMENTS 4.3.1 EMPLOYEE SHARE OPTION PLAN - VOLUE GROUP The amended guidelines for remuneration of leading persons in the Volue group including the establishment of the share option plan was approved by the share- holders at the 2021 extraordinary general meeting. The share option plan is based on a structure in which the Company's senior manage- ment and certain other key employees are granted share options in the Company. Each share option carries the right to acquire one share in the Company. The total number of share options that may be issued under the plan is 2,397,747 for the ﬁrst- year grant of options and 2,867,621 for the second-year grant of options. The share options vest three years after the date of grant (service condition) and will lapse if not exercised within seven years following the date of grant. For the share options to vest, a minimum average share price development of 4.5% p.a. is required (performance condition). Upon any exercise of share options, the Company may settle its obligations by selling the relevant number of shares or by payment in cash. The share option plan has been treated as an equity-settled plan under IFRS. The strike price of the share options will be based on the volume weighted average share price over the ten last trading days preceding the grant date. The total proﬁt each option holder may achieve shall be limited to 300% of the fair market value of the share at grant. Summary of share options granted under the plan: 2022 2021 Average exercise price per share option (NOK) Number of options Average exercise price per share option Number of options As at 1 January 70,00 1 781 085 0 0 Granted during the year 34,90 2 658 229 70,00 1 781 085 Exercised during the year 0 0 0 0 Forfeited during the year 70,00 107 875 0 0 As at 31 December 48,46 4 331 439 70,00 1 781 085 Vested and exercisable at 31 December 0 0 No options expired during the periods covered by the tables above. Share options outstanding at the end of the year have the following expiry dates and exercise prices: Grant date Expiry date Exercise price (NOK) Share options 31 December 2022 Share options 31 December 2021 21-Dec -21 20 -Dec -28 70,00 1 673 210 1 781 085 19-Dec -22 18 -Dec -29 34,90 2 658 229 0 Total 4 331 439 1 781 085 Weighted average remaining contractual life of options outstanding at end of period 6.58 years 6.97 years 174 175 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT FAIR VALUE OF OPTIONS GRANTED The assessed fair value at grant date of options granted during the year ended 31 December 2022 was NOK 7,6 per option (2021 – NOK 15,2). The fair value at grant date is independently determined using an adjusted form of the Black-Scholes model that considers the exercise price, the term of the option, the share price at grant date and expected price volatility of the underlying share, the expected divi- dend yield, the risk-free interest rate for the term of the option, and the volatilities of the peer group companies. The model inputs for options granted: a. Options are granted for no consideration and vest after three years (service con- dition) and based on minimum share price development (performance condition). Vested options are exercisable for a period of four years after vesting. b. Exercise price 34,90 (2021 – 70.00) c. Grant date: 19 December 2022 (2021 – 21 December 2021). d. Expiry date: 18 December 2029 (2021 – 20 December 2028). e. Share price at grant date: 28,99 (2021 – 56,15). f. Expected price volatility of the company’s shares: 40% (2021 – 40%). g. Expected dividend yield: 0.00% (2021 – 0.00%). h. Risk-free interest rate: 3.86% (2021 – 3.86%). The estimated expected price volatility is based on median of volatilities of the peer group companies over an historical period of 5 years since Volue has a short historical period only. The estimated expected lifetime of the options is set at 5 years. Total expenses arising from share options are recognized during the period as part of employee beneﬁt expenses and based on expected vesting of 75% regarding service condition. 4.3.2 Employee share scheme - Arendals Fossekompani ASA In May 2022, the Board of Directors in Arendal Fossekompani ASA approved a new incentive program for senior management and key employees which implies senior management is allowed to purchase a certain maximum number of shares in the Company each year. The shares are offered with 20% discount and three years lock-up period. In May 2022, senior management and key employees purchased 49,856 shares from the Company with 20% discount and a lock-up period of three years resulting in a share price of NOK 287,78. The price has been calculated based on a weighted aver- age stock market price of NOK 359,72 for the period 4-6 May. 4.3.3 Employee share scheme - Alytic Group In 2021, the Board of Directors in Alytic AS approved a new incentive program for senior management and key employees which implies senior management is allowed to purchase a certain maximum number of shares in the Company each year. The shares are offered with 20% discount without any lock-up period. During 2022, senior management and key employees purchased 63,100 shares from the Company with 20% discount resulting in a share price of NOK 93,33. The price has been calculated based on equity investments in the Company resulting in an estimated stock market price of NOK 116,66. 4.3.4 Employee share scheme - ENRX group ENRX group granted performance shares to all employees for the share price of NOK 47,68 per share (exercise price) with a lockup period of 3 years. The cost of the equity settled transactions is determined by the fair value at grant date using an appropriate valuation model in form of a Discounted Cash Flow (DCF) model with several underlying assumptions. The fair value of the shares granted is calculated at NOK 77,64 per share. The value between the exercise price of the performance shares and the calculated fair value of the performance shares is expensed over the vesting period equal to the lockup period. The lockup period started 1 January 2022. 4.3.5 Expenses arising from share-based payment transactions Total expenses arising from share-based payment transactions recognized during the period as part of employee beneﬁt expense were as follows: (1000 NOK) 2022 2021 Options issued under employee share option plan in Volue 9 100 0 Shares purchased under employee share scheme in AFK 800 0 Shares purchased under employee share scheme in Alytic 1 470 0 Shares purchased under employee share scheme in ENRX 3 870 0 Total expenses 15 240 0 176 177 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT NOTE 5 PROPERTY, PLANT & EQUIPMENT (1 000 NOK) Group 2021 Cost Hydro power plants Under constr- uction Vehicles, machinery and equip- ment Buildings and land Right- of-use vehicles, machinery and eq. Right- of-use buildings and land Property, plant and equipment Balance at 1 January 2021 311 951 26 449 979 509 580 017 17 674 272 580 2 188 180 Additions 11 17 955 54 764 40 926 113 655 Aquisitions through business combinations 1 346 514 1 860 Disposal 42 -17 771 -33 918 8 846 -22 723 -65 523 Disposal of companies and businesses Transferred from under construction -6 988 6 988 No longer in use -38 496 -400 -38 896 Change in RoU -825 56 235 55 409 Effect of movements in exchange rates 850 10 095 2 024 -389 3 110 15 689 Balance at 31 January 2021 311 961 38 308 996 435 588 649 25 305 309 716 2 270 375 Depreciation and impairment losses Balance at 1 January 2021 -174 467 -792 661 -167 331 -3 934 -64 312 -1 202 704 Depreciation -6 200 -69 752 -26 257 -6 414 -62 095 -170 718 Impairment -606 -606 Reallocated to operating cost * -11 030 -11 030 Aquisitions through business combinations -270 -270 No longer in use 38 465 421 38 886 Disposal 16 107 11 036 -9 318 492 18 316 Change in RoU 3 425 2 936 6 361 Effect of movements in exchange rates -8 397 -338 210 -1 410 -9 935 Balance at 31 January 2021 -180 666 -828 145 -182 469 -16 031 -124 388 -1 331 700 Book value at 1 January 2021 137 484 26 449 186 849 412 686 13 740 208 268 985 476 Book value at 31 December 2021 131 295 38 308 168 290 406 179 9 274 185 328 938 675 NOTE 5 PROPERTY, PLANT & EQUIPMENT (1 000 NOK) Group 2022 Cost Hydro power plants Under con- struction Vehicles, machinery and equip- ment Buildings and land Right- of-use vehicles, machinery and eq. Right- of-use buildings and land Property, plant and equipment Balance at 1 January 2022 311 961 38 308 996 435 588 649 25 305 309 716 2 270 375 Additions 5 946 40 698 91 746 11 748 191 890 151 217 Aquisitions through business combinations 1 075 35 334 10 774 200 2 204 49 587 Disposal -73 -270 080 -1 038 -1 983 -7 844 -281 018 Transferred from under construction -7 441 7 441 Reclassiﬁcation -13 123 10 046 2 893 183 No longer in use -53 367 -1 043 -54 410 Change in RoU 5 266 103 042 108 309 Effect of movements in exchange rates 3 008 18 755 7 609 993 8 808 39 173 Balance at 31 December 2022 317 833 62 526 836 310 619 560 30 156 416 816 2 283 201 Depreciation and impairment losses Balance at 1 January 2022 -180 666 0 -828 145 -182 469 -16 031 -124 388 -1 331 700 Depreciation -6 106 -73 271 -26 810 -7 133 -70 355 -183 674 Impairment -202 -202 Aquisitions through business combinations -3 548 -3 548 Reclassiﬁcation 0 174 -174 No longer in use 53 181 1 229 54 410 Disposal 73 267 055 10 1 983 7 844 276 966 Change in RoU 1 435 10 568 12 003 Effect of movements in exchange rates 0 -15 800 -2 601 -565 -2 463 -21 429 Balance at 31 December 2022 -186 699 0 -597 181 -214 015 -20 400 -178 793 -1 197 089 Book value at 1 January 2022 131 295 38 308 168 290 406 179 9 274 185 328 938 675 Book value at 31 December 2022 131 134 62 526 239 129 405 545 9 756 238 023 1 086 112 * Reallocation is due to change in accounting principles regarding cloud computing (SaaS arrangements) Provision of security As at 31 December 2022 operating assets in the subsidiaries with a book value of tNOK 316 762 (2021: tNOK 343 078) were pledged as security for bank loans (see Note 17). 178 179 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT NOTE 5 PROPERTY, PLANT & EQUIPMENT (1 000 NOK) Parent Company 2021 Cost Hydro power plants Under construc- tion Vehicles, machinery and equip- ment Buildings and land Right- of-use vehicles, machinery and eq. Right- of-use buildings and land Property, plant and equipment Balance at 1 January 2021 311 951 2 966 13 940 4 756 22 576 356 188 Additions 11 5 222 1 954 7 187 Disposal -1 336 -1 336 Transferred from under construction -1 953 1 953 Change in RoU 504 1 170 1 673 Balance at 31 December 2021 311 961 6 235 16 511 4 756 504 23 746 363 713 Depreciation and impairment losses Balance at 1 January 2021 -174 467 -7 338 -1 949 -183 753 Depreciation -6 200 -1 855 -14 -3 298 -11 367 Disposal 1 336 1 336 Balance at 31 December 2021 -180 666 -7 857 -14 -5 247 -193 785 Book value at 1 January 2021 137 484 2 966 6 602 4 756 20 627 172 435 Book value at 31 December 2021 131 295 6 235 8 653 4 756 490 18 499 169 928 NOTE 5 PROPERTY, PLANT & EQUIPMENT (1 000 NOK) Parent Company 2022 Cost Hydro power plants Under con- struction Vehicles, machinery and equip- ment Buildings and land Right- of-use vehicles, machinery and eq. Right- of-use buildings and land Property, plant and equipment Balance at 1 January 2022 311 961 6 235 16 511 4 756 504 23 746 363 713 Additions 5 946 -5 055 22 938 23 828 Disposal -73 -421 -494 Transferred from under construction Change in RoU 47 253 47 253 Balance at 31 December 2022 317 833 1 180 39 028 4 756 504 70 999 434 300 Depreciation and impairment losses Balance at 1 January 2022 -180 666 -7 857 -14 -5 247 -193 785 Depreciation -6 106 -1 742 -168 -3 516 -11 532 Disposal 73 421 494 Balance at 31 December 2022 -186 699 -9 179 -182 -8 763 -204 823 Book value at 1 January 2022 131 295 6 235 8 653 4 756 490 18 499 169 928 Book value at 31 December 2022 131 134 1 180 29 849 4 756 322 62 236 229 477 * Negative addition of under construction assets of tNOK 5 055 is a reversal of wrongly capitalized costs that should have been expensed as operating expenses. 180 181 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT NOTE 6 INTANGIBLE ASSETS (1 000 NOK) Group 2021 Cost Goodwill Other intangible assets Concessions Capitalised development cost Intangible assets under development Intangible assets and goodwill Balance at 1 January 2021 700 526 431 062 12 250 462 079 46 1 605 963 Additions 1 476 120 171 16 750 138 396 Aquisitions through business combinations 25 879 23 978 7 158 57 015 Reclassiﬁcation -20 779 9 387 11 392 No longer in use -138 674 -266 812 -405 487 Under development -1 489 1 489 Effect of movements in exchange rates 1 219 3 857 1 317 120 6 513 Balance at 31 January 2021 727 624 299 430 12 250 333 300 29 796 1 402 401 Amortization and impairment losses Balance at 1 January 2021 -39 459 -282 983 -7 069 -312 107 -641 618 Amortization -16 468 -245 -41 658 -58 370 Impairment -1 174 -73 -4 650 -5 897 Aquisitions through business combinations -591 -591 No longer in use 138 674 266 767 405 441 Effect of movements in exchange rates -4 045 -5 101 -242 -9 388 Balance at 31 January 2021 -44 678 -166 541 -7 314 -91 891 -310 424 Book value at 1 January 2021 661 068 148 079 5 181 149 972 46 964 345 Book value at 31 December 2021 682 946 132 889 4 936 241 409 29 796 1 091 977 NOTE 6 INTANGIBLE ASSETS (1 000 NOK) Group 2022 Cost Goodwill Other intangible assets Concessions Capitalised development cost Intangible assets under development Intangible assets and goodwill Balance at 1 January 2022 727 624 299 430 12 250 333 300 29 796 1 402 401 Additions 27 004 176 347 5 175 208 525 Aquisitions through business combinations 331 625 174 383 31 376 523 302 Reclassiﬁcation 654 -556 -98 No longer in use -11 587 -11 587 Under development 3 838 -3 838 Effect of movements in exchange rates 16 189 21 425 1 859 632 54 188 Balance at 31 January 2022 1 075 438 511 310 12 250 546 165 31 666 2 176 829 Amortization and impairment losses Balance at 1 January 2022 -44 678 -166 541 -7 314 -91 891 -310 424 Amortization -204 -42 175 -245 -61 684 -104 308 Impairment -808 -8 680 -9 489 Aquisitions through business combinations -1 797 -1 797 Reclassiﬁcation 649 -649 No longer in use 10 544 10 544 Effect of movements in exchange rates 1 750 -5 480 -844 -4 573 Balance at 31 December 2022 -43 131 -205 609 -7 559 -163 748 -420 047 Book value at 1 January 2022 682 946 132 889 4 936 241 409 29 796 1 091 977 Book value at 31 December 2022 1 032 307 305 701 4 691 382 417 31 666 1 756 782 182 183 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT NOTE 6 INTANGIBLE ASSETS (1 000 NOK) Parent Company 2021 Cost Goodwill Other intangible assets Concessions Capitalised development cost Intangible assets under development Intangible assets and goodwill Balance at 1 January 2021 8 539 12 250 46 20 835 Additions 375 375 No longer in use -384 -46 -430 Balance at 31 December 2021 8 530 12 250 20 780 Amortization and impairment losses Balance at 1 January 2021 -1 497 -7 069 -8 566 Amortization -1 689 -245 -1 934 No longer in use 384 384 Balance at 31 December 2021 -2 802 -7 314 -10 116 Book value at 1 January 2021 7 042 5 181 12 268 Book value at 31 December 2021 5 728 4 936 10 664 Parent Company 2022 Cost Goodwill Other intangible assets Concessions Capitalised development cost Intangible assets under development Intangible assets and goodwill Balance at 1 January 2022 8 530 12 250 20 780 Balance at 31 December 2022 8 530 12 250 20 780 Amortization and impairment losses Balance at 1 January 2022 -2 802 -7 314 -10 116 Amortization -1 689 -245 -1 934 Balance at 31 December 2022 -4 490 -7 559 -12 049 Book value at 1 January 2022 5 728 4 936 10 664 Book value at 31 December 2022 4 040 4 691 8 731 NOTE 6 INTANGIBLE ASSETS (1 000 NOK) A breakdown of the allocation of intangible assets between the companies is provided below. Other intangible assets Goodwill Concessions Capitalised develop- ment cost Intangible assets under development Total Intangible assets by company Arendals Fossekompani 4 040 4 691 8 731 Volue 49 407 271 184 290 221 12 552 623 364 ENRX 80 558 219 611 55 675 1 139 356 983 NSSLGlobal 640 271 145 271 785 Tekna 46 656 6 642 8 860 62 158 Alytic 13 429 47 434 20 247 9 116 90 227 Ampwell 110 970 222 195 9 632 342 797 AFK Property 738 738 Total intangible assets 305 701 1 032 307 4 691 382 417 31 666 1 756 782 Other intangible assets consist mainly of technology, patents and trademarks, cus- tomer relationships and customer contracts. Capitalised development cost consist mainly of software development and platform development. Concession rights in the parent company are amortised over the term of the concession (50 years). Other intangible assets are amortised over periods of 4 to 10 years. Goodwill is tested annually for impairment (see accounting policies and Note 21). In this testing each segment/subgroup is assessed as a cash-generating unit. The recoverable amount of goodwill is estimated based on value in use. Estimated value in use is based on discounted future cash ﬂows. These measure the cash ﬂows based on market requirements of return and risk. Value in use for 2022 has been calcu- lated in the same way as in 2021. Budgets have been used for 2023 andlong-term forecasts from strategy plans for the period up to 2027. In addition, a convergence period of 5 years is applied to bridge 2027 ﬁnancials to a terminal period with an applied growth rate of 2.0%. The risk-free interest rate has been assessed sepa- rately for each company. A risk premium between 5.9% and 7.0% was used in the calculations. Moreover, scenario weighting and peer multiple analyses are used for sensitivity purposes. Special circumstances relating to the individual calculations are commented on below. Volue Volue is listed on Oslo Stock Exchange and the value as per 31.12.2022 was MNOK 4,050 while the booked equity of the company as per 31.12.2022 was MNOK 809. The marked value can decrease by more than 80% before an impairment may be needed. ENRX The Required Rate of Return (WACC before tax) has been set to 11.5%. When cal- culating the WACC consideration is given to the fact that the company's earnings are in EUR and USD, and that the business is cyclical. The risk-free rate of return has been set to 3.0%. A sensitivity analysis based on a unilateral change in estimated future EBITDA shows that a reduction of more than 31% may lead to impairment. Equivalently, a 2.7 percentage point change in WACC may cause impairment. 184 185 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT NSSLGlobal The Required Rate of Return (WACC before tax) has been set to 11.2%. The risk-free rate of return has been set to 3.3%. When calculating the WACC consideration is given to the fact that the company's earnings are in GBP and USD. A sensitivity anal- ysis based on a unilateral change in estimated future EBITDA shows that a reduction of more than 73% may lead to impairment. Tekna Tekna is listed on Oslo Stock Exchange and the value as per 31.12.2022 was MNOK 739, while the booked equity of the company as per 31.12.2022 is MNOK 389. The marked value can decrease by more than 47% before an impairment my be needed. Alytic The Required Rate of Return (WACC before tax) has been set to 12.6%. When calcu- lating the WACC, consideration is given to the fact that the company’s earnings are mainly in NOK, and that the portfolio companies to a large degree have a SaaS busi- ness model. The risk-free rate of return has been set to 2.8%. A sensitivity analysis based on a unilateral change in estimated future EBITDA shows that a reduction of more than 52% may lead to impairment. Ampwell Goodwill of NOK 222 million is related to the acquisition of Commeo GmbH in 2022. We refer to note 3 for the purchase price analysis at acquisition date. Goodwill is determined in Euro and subject to FX translation effects at reporting date. SUMMARY For the cash-generating units in the AFK Group the impairment testing suggests signiﬁcant excess value. Reasonable changes in the assumptions will not result in additional impairment losses. RESEARCH AND DEVELOPMENT COST In 2022 development costs of tNOK 176 347 were capitalized (2021 tNOK 120 171). Other research and development costs in the Group are expensed as they arise and amounted to tNOK 84 282 in 2022 and tNOK 74 288 in 2021. Volue capitalize development cost related to development of a wide range of soft- ware solutions for the energy and infrastructure industries. The development of these software products will help customers manage and optimize their operations, assets, and resources in the future. The software products that Volue develop and capitalize include: Energy Trading and Risk Management software: Enables energy traders to manage their physical and ﬁnancial trades, as well as monitor and analyze market data and risks. Energy Market Analysis software: Provides customers with up-to-date market information and analytics, helping them make informed deci- sions about energy trading and pricing. Power System Analysis software: Helps cus- tomers manage and optimize their power grids, by providing real-time monitoring, forecasting, and optimization tools. Asset Management software: Helps customers manage their assets throughout their lifecycle, from planning and construction to operation and maintenance. Geographic Information System software: Enables customers to manage and analyze geographical data, helping them make informed decisions about infrastructure planning and management. Water and Wastewater Management software: Helps customers manage their water and wastewater treat- ment plants, by providing real-time monitoring, forecasting, and optimization tools. NOTE 7 OTHER OPERATING COSTS (1 000 NOK) Group Parent Company 2022 2021 2022 2021 Other operating cost Contractors 9 622 16 447 Maintenance property, plant and equipment 45 556 37 819 19 135 14 294 Loss sales of other non-current assets 70 116 Premises, service and ofﬁce costs 76 527 47 089 3 870 2 923 Audit and other fees 191 676 130 788 22 410 15 676 Consession fees 2 903 3 482 2 903 2 888 Company cars, lifts and trucks 3 923 11 419 317 244 Communication costs 9 519 5 177 Travelling costs, indirect 43 670 15 404 2 270 690 Sales and marketing costs 69 880 23 538 4 530 52 Manufacturing indirect costs 26 855 21 132 111 128 Other operating costs (Misc.) 61 689 14 833 9 620 12 203 Insurances 13 807 10 899 1 822 1 789 ICT costs 67 591 98 194 8 358 7 853 Property tax 9 304 10 953 4 532 5 545 Loss allowance -311 257 Bad debts 5 461 6 245 Operating costs, IC 2 671 1 084 Restructuring 39 388 1 386 Other direct costs 44 893 84 332 Other operating expenses 722 461 539 251 82 552 65 370 Remuneration to auditor Statutory audit 14 420 14 520 2 072 3 058 Other assurance services 1 268 1 381 27 23 Tax advice 1 503 1 137 27 74 Other non-audit services 9 066 5 201 905 120 Total remuneration to auditor 26 257 22 240 3 031 3 276 186 187 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT NOTE 8 FINANCE INCOME AND FINANCE COSTS (1 000 NOK) Group Parent Company 2022 2021 2022 2021 Finance income Interest income, intercompany 14 732 3 272 Interest income 35 778 14 287 24 750 8 203 Currency exchange income (net) 74 616 27 979 40 151 6 791 Other ﬁnance income 4 433 1 610 356 88 Gain on partial sale of subsidiaries * 325 421 1 282 985 Gain/loss on total sale of subsidiaries 82 425 Dividend income 3 659 2 698 3 009 2 698 Dividend income, intercompany 94 220 84 494 Group contribution income IFRS, intercompany 98 819 Finance cost Interest expense 38 268 44 933 23 971 30 188 Interest expense cashpool 2 132 1 281 Interest expense on lease 7 526 7 257 740 581 Currency exchange expense (net) 17 567 12 011 5 751 9 890 Other ﬁnance cost ** 15 707 87 408 13 206 84 828 Impairment loss on subsidiaries 10 836 Finance costs 81 201 152 889 54 503 125 486 Net ﬁnancial items 37 285 -106 316 546 956 1 345 469 * Sale of IPT Technlogy and proﬁt from dividend in kind Tekna Holding ASA included in 2022 ﬁgures In 2021 partial sale and listing of Volue ASA (gain of NOK 1 145 million) and Tekna Holding ASA (gain of NOK 138 million) were included. In the group accounts these gains has been recognized directly in equity. ** 2022 ﬁgures includes impairment of investment in NorSun AS with tNOK 10 835 (77 737). NOTE 9.1 TAX EXPENSE Ordinary income tax in Norway: • Ordinary income tax on general income. The tax rate was 22% in 2021 and 2022. The 22% tax rate was used to calculate deferred tax assets and deferred tax liabilities as at 31 December 2022. Special tax rules for Norwegian energy companies comprise the following elements: • Natural resource tax of 1.3 øre per kWh of the company’s average annual production in the past 7 years. Estimated natural resource tax is deducted from the company’s tax payable on general income. Natural resource tax still has to be paid in years when no tax is calculated as being payable. The amount is recognised as a receivable and is offset against tax payable on general income in subsequent years. Natural resource tax accrues to the municipalities and counties in the concession area. • Resource rent tax is taxation of income from use of natural resources like hydropower. The resource rent tax for hydropower is determined for each individual power station and accrues to the state. This tax is based on gross resource rent income less operating costs and tax-free allowances. Resource rent income is based on market prices and therefore differs from the company’s recognised sales ﬁgures. Effective resource rent tax on hydropower has been increased from 37% to 45% with effect from the 2022 ﬁscal year. Small hydropower stations do not pay resource rent tax. Corporate tax is calculated before resource rent tax on hydropower. An effective resource rent tax rate of 45% therefore means that the formal resource rent tax is set at 57.7%. The total marginal tax (resource rent tax and corporate tax) will then be 67% for hydropower. In addition, high- price contribution is set at 23% of power revenues that exceed NOK 0.70 per kWh. This means that total marginal tax will be 90% for hydropower exceeding NOK 0.70 per kWh. • High-price contribution tax is introduced as a new tax for hydropower from 28 September 2022. The high-price contribution is set at 23% of power revenues that exceed NOK 0.70 per kWh. The tax brings the marginal tax rate for higher proﬁts to 90%. The tax will be calculated based on monthly average spot prices for each price area, but use actual contract price for any industrial contracts. In addition to the standard deduction of NOK 0.70 per kWh, the tax base is adjusted for realised gains and losses on certain hedging instruments and certain deductible expenses. Management therefore considers the tax base to represent a net amount. In addition, the tax is imposed on the same tax subjects as for ordinary income tax and resource rent tax. Furthermore, it is the owners of the tax-trans- parent energy producers who are responsible for the tax, and the tax is not deductible for any other income tax. If management had concluded that the tax base did not represent a net result, the tax would have been treated as a levy within the scope of IAS 37, with the consequence that the tax would have been presented as an operating expense. Since Arendals Fossekompani do not have any derivative that could inﬂuence the level of the high price contribution in future periods, there are no deferred tax con- sequences related to the tax, and the amount recognised as an expense in 2022 would be the same according to IAS 37 and IAS 12. Based on statements made by the government, the high-price contribution is considered as a situational and temporary high-price tax that is expected to be removed within the end of the year 2024. INCREASED TAX BURDEN The tax provision for 2022 reﬂects the changes in the tax regime for Norwegian hydropower producers. Increase of resource rent tax and introduction of high-price contribution has resulted in an incremental income tax expense amounting to NOK 75 million in 2022. 188 189 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT Group Parent Company 2022 2021 2022 2021 Current tax expense Natural resource tax for the year 6 266 8 028 6 266 6 592 Tax payable on general income less natural resource tax 206 763 119 595 125 475 16 766 High-price tax contribution 34 130 34 130 Adjustment for previous years -1 955 -288 Resource rent tax payable for the year 230 700 95 533 230 700 105 431 Total current tax 475 904 222 868 396 570 128 790 Deferred tax expense Effect of change in temporary differences -12 412 15 597 920 29 816 Effect of changed tax rate -12 -3 956 Effect of change in temporary differences, resource rent tax 514 224 514 815 Effect of changed tax rate, resource rent tax -5 855 -5 855 Total deferred tax expense -17 765 11 865 -4 421 30 631 Total tax expense in the income statement 458 139 234 733 392 149 159 421 Reconciliation of effective tax rate Total pre tax income 425 620 331 738 996 454 1 580 974 Tax based on current ordinary tax rate 93 636 72 982 219 220 347 814 High-price tax contribution 34 130 34 130 Resource rent tax for the year 225 359 106 246 225 359 106 246 Effect of different tax rates abroad -3 701 -5 505 Calculated tax 349 425 173 724 478 709 454 060 Effect of non-deductible expenses 89 837 53 116 6 678 26 662 Effect of non-taxable income -36 573 -21 933 -93 237 -321 302 Effect of unrecognised tax loss carryforward 77 812 42 095 Effect of changed tax rates -39 -4 729 Effect of changed tax assessments for previous years -20 958 -9 547 Over-/underprovision relating to previous years -1 365 2 007 Tax expense in reconciliation of effective tax rate 458 139 234 733 392 149 159 421 Current ordinary tax rate in Norway 22,0% 22,0% 22,0% 22,0% Effective tax rate 108,4% 70,8% 39,4% 10,1% Tax recognised in other comprihensive income (OCI) Tax on OCI that may be reclassiﬁed to P&L 1 888 1 335 Tax on OCI that will not be reclassiﬁed to P&L 838 -1 185 575 -621 Total tax recognised in OCI 2 726 150 575 -621 Tax payable Tax payable of tNOK 436 746 (2021: tNOK 187 002 ) for the Group and tNOK 374 830 (2021: tNOK 112 023) for the parent company consists of unassessed tax payable for the current period. NOTE 9.2 DEFERRED TAX (1 000 NOK) Group Assets Liabilities Net 2022 2021 2022 2021 2022 2021 Property, plant and equipment 27 598 31 923 -38 478 -43 825 -10 880 -11 902 Goodwill, intangible assets 7 211 7 509 -40 505 -23 960 -33 293 -16 451 Non-current receivables and liabilities in foreign currency 2 663 698 -1 043 -519 1 620 179 Construction contracts -3 733 -4 634 -3 733 -4 634 Inventories 11 655 10 410 -247 11 655 10 163 Trade and other receivables 991 1 150 991 1 150 Leases 18 396 17 338 -1 547 -180 16 849 17 158 Untaxed gains and losses 556 817 -9 -11 547 806 Provisions 10 632 8 075 -280 -229 10 352 7 846 Other assets 611 35 -5 072 -5 353 -4 460 -5 318 Financial instruments 2 023 -145 -1 007 1 878 -1 007 Employee beneﬁts 51 1 717 -3 755 -3 708 -3 704 -1 991 Tax loss carryforward 203 094 158 474 1 377 203 094 159 851 Unrecognised tax loss carryforward -180 311 -144 045 -111 -180 311 -144 156 Recognised tax loss carryforward 22 783 14 429 1 266 22 783 15 695 Total deferred ordinary income tax 105 172 94 100 -94 566 -82 407 10 606 11 693 PPE, resource rent tax 32 800 27 459 32 800 27 459 Total deferred resource rent tax 32 800 27 459 32 800 27 459 Deferred tax asset/liability 137 972 121 559 -94 566 -82 407 43 405 39 151 Offsetting of assets and liabilities -29 541 -29 631 29 541 29 631 Net deferred tax asset/liability 108 430 91 927 -65 025 -52 776 43 405 39 151 Parent Company Property, plant and equipment 15 732 16 238 15 732 16 238 Leases 60 60 Gains and losses account 68 84 68 84 Employee beneﬁts -1 250 -1 489 -1 250 -1 489 Total deferred ordinary income tax 15 799 16 382 -1 250 -1 489 14 549 14 893 PPE, resource rent tax 32 800 27 459 32 800 27 459 Total deferred resource rent tax 32 800 27 459 32 800 27 459 Deferred tax asset/liability 48 599 43 841 -1 250 -1 489 47 349 42 352 Offsetting of assets and liabilities -1 250 -1 489 1 250 1 489 Net deferred tax asset/liability 47 349 42 352 47 349 42 352 190 191 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT NOTE 9.3 CHANGE IN DEFERRED TAX OVER THE YEAR (1 000 NOK) Group 2021 Total Opening Balance Changes in Net Income Reclassi- ﬁcation From OCI Change in tax loss carry- forward Mergers and acqui- sitions Group Contribution Received/ Paid Total Effect from Foreign Exchange Closing Balance Ordinary income tax Property, plant and equipment -8 229 6 441 -7 509 1 -3 084 518 -11 863 Goodwill, intangible assets -22 131 -294 7 509 -2 397 862 -16 451 Construction contracts -5 046 383 29 -4 634 Inventories 11 289 -985 -141 10 163 Trade and other receivables 1 042 65 2 41 1 150 Leases 12 858 4 678 -115 -252 17 168 Untaxed gains and losses 855 -171 684 Provisions 8 718 -1 333 282 7 668 Other items -7 710 4 226 342 -2 175 203 -5 114 Financial instruments 22 429 -24 768 1 332 0 -1 007 Employee beneﬁts 1 818 -2 552 -1 185 -41 -57 -2 017 Tax loss carryforward 29 343 3 261 -9 806 425 -7 234 -43 15 947 Total ordinary income tax 45 237 -11 050 342 148 -9 806 -7 385 -7 234 1 441 11 693 Property, plant and equipment 28 303 -845 27 459 Loss carried forward - Resource rent 3 334 30 -3 364 Total resource rent tax 31 637 -815 -3 364 27 459 Total change in deferred tax 76 874 -11 864 342 148 -13 170 -7 385 -7 234 1 441 39 151 NOTE 9.3 CHANGE IN DEFERRED TAX OVER THE YEAR (1 000 NOK) Group 2022 Total Opening Balance Changes in Net Income Reclassi- ﬁcation From OCI Change in tax loss carry- forward Mergers and acqui- sitions Group Contribution Received/ Paid Total Effect from Foreign Exchange Closing Balance Ordinary income tax Property, plant and equipment -11 863 -753 2 675 -615 -668 -11 223 Goodwill, intangible assets -16 451 522 -2 675 -14 171 -1 975 -34 750 Non-current rec. and liab. in for. currency -177 1 728 70 1 620 Construction contracts -4 634 1 146 -7 -3 495 Inventories 10 163 1 389 515 12 067 Trade and other receivables 1 150 -31 2 30 1 150 Leases 17 168 -491 -30 394 17 041 Gains and losses account 684 -137 547 Provisions 7 668 2 777 188 10 632 Other items -5 114 559 -49 -185 -4 789 Financial instruments -1 007 997 1 888 0 1 878 Employee beneﬁts -2 017 -240 -1 728 838 -89 125 -3 111 Tax loss carryforward 15 947 6 862 -738 39 927 23 038 Total ordinary income tax 11 693 12 424 2 726 -768 -14 883 -586 10 606 Property, plant and equipment 27 459 5 341 32 800 Total resource rent tax 27 459 5 341 32 800 Total change in deferred tax 39 151 17 765 2 726 -768 -14 883 -586 43 405 192 193 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT NOTE 9.3 CHANGE IN DEFERRED TAX OVER THE YEAR (1 000 NOK) Parent Company 2021 Total Opening Balance Changes in Net Income Reclassi- ﬁcation From OCI Change in tax loss carry- forward Mergers and acqui- sitions Group Contribution Received/ Paid Total Effect from Foreign Exchange Closing Balance Ordinary income tax Property, plant and equipment 16 704 -467 16 238 Leases 4 56 60 Gains and losses account 106 -21 84 Financial instruments 23 506 -23 506 Employee beneﬁts -533 -334 -621 -1 489 Tax loss carryforward 12 246 -5 544 -6 702 Total ordinary income tax 52 033 -29 816 -621 -6 702 14 893 Property, plant and equipment 28 303 -845 27 459 Loss carried forward - Resource rent 3 334 30 -3 364 Total resource rent tax 31 637 -815 -3 364 27 459 Total change in deferred tax 83 670 -30 631 -621 -10 066 42 352 Parent Company 2022 Ordinary income tax Property, plant and equipment 16 238 -506 15 732 Leases 60 -60 Gains and losses account 84 -17 68 Employee beneﬁts -1 489 -337 575 -1 250 Total ordinary income tax 14 893 -920 575 14 549 Property, plant and equipment 27 459 5 341 32 800 Total resource rent tax 27 459 5 341 32 800 Total change in deferred tax 42 352 4 421 575 47 349 NOTE 10 EQUITY Share capital Ordinary shares 2022 2021 Issued as at 31 December – fully paid 55 995 250 55 995 250 55 995 250 55 995 250 Owners of shares are entitled to the dividend approved in each individual case by the annual general meeting, and are entitled to one vote per share at the company’s annual general meeting. No shareholder may personally or by proxy vote for more than a quarter of the total number of shares. Shares transferred to a new owner do not confer voting rights until at least three weeks have passed since the acquisition was notiﬁed to the company. The rights to the company’s treasury shares (see Note 22) are suspended until the shares have been acquired by others. DIVIDEND The Company pay dividend quarterly. The following dividend has been paid; In February (for Q4), tNOK 49 407 (tNOK 38 419), in May tNOK 52 174 (tNOK 1 646 605 - Q1 and additonal), in September tNOK 52 171 (tNOK 43 819) and in November tNOK 52 078 (tNOK 46 620). In additon shares in Tekna Holding ASA (in 2021 Volue ASA) have been distributed as dividend (5 shares in AFK gave 1 share in Tekna ). Value of this dividend was tNOK 202 460 (tNOK 257 398). No dividend is paid on treasury shares. Ordinary dividend Approved 2022 and paid in 2022 Approved 2021 and paid in 2021 Paid 206 292 1 775 958 Value of shares 202 460 257 398 Total 408 752 2 033 356 NOTE 11 GROUP COMPANIES (1 000 NOK) Shareholding Non-controlling Value in parent Subsidiaries Domicile 2022 2021 2022 2021 2022 2021 Volue ASA Oslo 60,1% 60,1% 327 948 311 968 304 295 304 295 NSSL Global Ltd UK 80,0% 80,0% 104 848 91 610 273 298 273 298 ENRX ASA / EFD Induction AS Skien 95,1% 96,1% 18 354 5 661 453 036 410 988 Alytic AS Arendal 95,0% 96,0% 39 610 20 025 140 219 74 100 Tekna Holding ASA Arendal 71,1% 79,9% 109 136 108 104 321 744 361 426 AFK Property AS Arendal 100,0% 100,0% 7 351 7 937 227 692 184 060 Vergia AS / AFK Energy AS Arendal 100,0% 100,0% 31 343 14 950 Ampwell AS Arendal 100,0% 54 263 100 AFK Tyskland Holding AS Arendal 100,0% 100 661 511 545 306 1 751 829 1 623 119 194 195 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT NOTE 11.2 SUBSIDIARIES Shareholding 2022 2021 Subsidiaries in Volue ASA Oslo Norway Subsidiaries in Volue Technology AS Volue Technology AS Trondheim Norway 100,0% 100,0% Volue Technology Denmark A/S Odense Denmark 100,0% 100,0% Volue AB Jönköping Sweden 100,0% 100,0% Volue AG Basel Switzerland 100,0% 100,0% Volue Enerji Cözümleri Istanbul Turkey 100,0% 100,0% Volue Sp. z.o.o. Gdansk Poland 100,0% 100,0% Volue Gmbh Dusseldorf Germany 100,0% Volue GK Tokyo Japan 100,0% Subsidiaries in Volue Industrial IOT AS Volue Industial IoT AS Arendal Norway 100,0% 100,0% Volue Denmark ApS Middelfart Denmark 100,0% 100,0% Volue in Situ AB Åkersberga Sweden 100,0% 100,0% Volue Instrument Technology AS Ås Norway 100,0% Subsidiaries in Volue Market Service AS Volue Market Services AS Arendal Norway 100,0% 100,0% Volue Market Services Stockholm Sweden 100,0% 100,0% Volue Market Services Aarhus Denmark 100,0% 100,0% Volue Market Services Helsingfors Finland 100,0% 100,0% Subsidiaries in Volue Insight AS Arendal Norway Volue Insight AS Arendal Norway 100,0% 100,0% Volue Insight GmbH Berlin Germany 100,0% Volue Germany GmbH (Likron GmbH) Munchen Germany 100,0% 100,0% Volue Energy GmbH (Procom GmbH) Aachen Germany 100,0% 100,0% Volue UK Ltd Bristol UK 100,0% Subsidiaries in NSSLGlobal Ltd. London UK NSSLGlobal LLC California USA 100,0% 100,0% NSSLGlobal PTE Ltd Singapore Singapore 100,0% 100,0% Nera Satellite Services LTD London UK 100,0% 100,0% NSSL Ltd London UK 100,0% 100,0% Aero-Satcom Ltd. London UK 50,0% 50,0% NSSLGlobal AB Hönö Sweden 100,0% NSSLGlobal Technologies AS Oslo Norway 100,0% 100,0% NSSLGlobal Continental Europe APS Brøndby Denmark 100,0% 100,0% NSSLGlobal APS Brøndby Denmark 100,0% 100,0% NSSLGlobal Polska SP. Z.o.o. Warzsawa Poland 100,0% 100,0% NSSLGlobal Israel Ltd Beit Shemesh Israel 100,0% 100,0% NSSLGlobal Kabushiki Kaisha Tokyo Japan 100,0% 100,0% NSSL Global BV Scheemda Netherlands 100,0% NOTE 11.2 SUBSIDIARIES Shareholding 2022 2021 NSSLGlobal GmbH Barbüttel Germany 100,0% 100,0% NSSLGlobal Distribution GmbH Barbüttel Germany 100,0% 100,0% ESS Hanika GmbH Barbüttel Germany 100,0% 100,0% Subsidiaries in ENRX ASA Induction Holding AS Skien Norway 100,0% 100,0% IPT GmbH Skien Norway 100,0% 100,0% EFD Induction Group AS Skien Norway 100,0% 100,0% EFD Induction AS Skien Norway 100,0% 100,0% EFD Induction AS Västerås Sweden 100,0% 100,0% EFD Induction GmbH Freiburg Germany 100,0% 100,0% EFD France Holding Eurl Grenoble France 100,0% 100,0% EFD Induction S.A Grenoble France 100,0% 100,0% EFD Induction Ltd. Wolverhampton UK 100,0% 100,0% EFD Induction Inc. Detroit USA 100,0% 100,0% EHE Acquisition Corporation Inc Detroit USA 100,0% 100,0% EFD Induction s.r.l Milano Italy 100,0% 100,0% EFD Induction Ltd. Bangalore India 100,0% 100,0% EFD Induction (Shanghai) Co., Ltd. Shanghai China 100,0% 100,0% EFD Induction Ges.m.b.H Wien Austria 100,0% 100,0% EFD Induction s.l Bilbao Spain 100,0% 100,0% Inductro SRL Bucuresti Romania 100,0% 100,0% EFD Induction SP. Z o.o Gliwice Poland 100,0% 100,0% EFD Induction Co., Ltd Bangkok Thailand 100,0% 100,0% EFD Induction K.K. Yokohama Japan 100,0% 100,0% EFD Inducao Brasil Ltd Sao Paolo Brazil 100,0% 100,0% EFD Induction Oil & Gas Service Pinang Malaysia 100,0% 100,0% EFD Induction Sdn. Bhd. Selangor Malaysia 100,0% EFD Induction S de R.L Queretaro Mexico 100,0% 100,0% Subsidiaries in Tekna Holding ASA Subsidiaries in Tekna Holdings Canada Inc. Sherbrooke Canada 96,4% 96,4% Tekna Plasma Systems Inc. Sherbrooke Canada 100,0% 100,0% Tekna Advanced Materials Inc. Sherbrooke Canada 100,0% 100,0% Tekna Plasma Europe S.A.S. Mâcon France 100,0% 100,0% Tekna Plasma Systems(Suzhou)Co Ltd. Suzhou China 100,0% 100,0% Tekna Plasma India Private Ltd. Chennai India 100,0% 100,0% Tekna Plasma Korea Co, Ltd Incheon South Korea 100,0% 100,0% Tekna Inc Delawere USA 100,0% 196 197 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT NOTE 11.3 INVESTMENTS IN ASSOCIATES AND JOINT VENTURES (1 000 NOK) The Group has the following investments in joint ventures. All businesses are orga- nized as companies with limited liability corresponding to Norwegian corporations. Guidelines for the operation of companies are based on shareholder agreements. According to the shareholder agreements it is required unanimity between the par- ties for making decisions about relevant activities. Accordingly, participants in the companies have joint control over the activities. The Group's responsibility as a par- ticipant in Imphytec Powders SAS, Seagust AS and North Ammonia AS is limited to the capital contribution, and the return equals the Group's share of proﬁt. Thus, the group as a participant is entitled to the arrangements net assets. In the consolidated group accounts the investments in joint ventures and associates are accounted for in accordance with the equity method. In the company accounts the investments in joint ventures and associates are accounted for based on historic cost. Entity Country Ownership interest Imphytec Powders SAS France Production of powders 48,00% NorSun AS Norway Solar energy 20,80% North Ammonia AS Norway Green ammonia 50,00% Seagust AS Norway Offshore wind 47,50% Hydepoint AS Norway Hydrogen 33,33% Kilandsfoss AS Norway Hydro powerplant 33,33% Glomsdam Kraftverk AS Norway Hydro powerplant 50,00% Cellect Energy S.L. Spain Software for energy storage 40,00% Based on an overall assessment where the size and complexity is taken into consid- eration these investments are considered to be signiﬁcant joint ventures. Further information regarding these companies is disclosed below. NOTE 11.2 SUBSIDIARIES Shareholding 2022 2021 Subsidiaries in Alytic AS Kontali Holding AS Arendal Norway 100,0% 100,0% Kontali Analyse AS Kristiansund Norway 75,1% 71,0% Seafood TIP Utrecht Netherlands 100,0% 100,0% Utel Holding AS Arendal Norway 100,0% 100,0% Utel Systems AS Grimstad Norway 91,8% 92,5% Greenfact Holding AS Arendal Norway 100,0% 100,0% Greenfact AS Oslo Norway 60,0% 60,0% Greenfact GmbH Berlin Germany 100,0% Greenfact Ltd London UK 100,0% Factlines Holding AS Oslo Norway 100,0% 100,0% Factlines AS Oslo Norway 62,5% Alytic Blue AS Oslo Norway 100,0% Subsidiaries in AFK Property AS Vindholmen Eiendom AS Arendal Norway 100,0% 100,0% Bedriftsveien 17 AS Arendal Norway 100,0% 100,0% Bøleveien 4 AS Skien Norway 100,0% 100,0% Steinodden Eiendom AS Arendal Norway 77,6% 77,6% Arendal Lufthavn Gullknapp AS Arendal Norway 92,1% 92,1% Songe Træsliperi AS Tvedestrand Norway 50,8% Gullknapp Invest AS Arendal Norway 100,0% 100,0% Gullknapp Utvikling AS Arendal Norway 100,0% 50,0% Longum Property AS Arendal Norway 100,0% AFK Longum Invest AS Arendal Norway 100,0% Bryggebyen Folkebad AS Arendal Norway 100,0% Subsidiaries in Vergia AS Arendal Norway 100,0% Vergia green Fuels AS Arendal Norway 100,0% Vergia green system solutions AS Arendal Norway 100,0% Vergia Hydropower AS Arendal Norway 100,0% Vergia Wind AS Arendal Norway 100,0% Vergia Solar AS Arendal Norway 100,0% Vergia Property AS Arendal Norway 100,0% Subsidiaries in Ampwell AS Cellect Holding AS Arendal Norway 100,0% Commeo Holding AS Arendal Norway 100,0% Commeo GmbH Arendal Norway 55,0% AFK Storage 3 AS Arendal Norway 100,0% Subsidiaries in AFK Tyskland Holding AS Arendals Fossekompani Deutchland GmbH Berlin Germany 100,0% 198 199 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT NorSun North Ammonia Seagust Hyde- point Kilands- foss Glomsdam Kraftverk Cellect Energy Imphytec Powders Total Balance at 1 January 2021 9 422 9 422 Income from associates -980 -1 101 -10 093 -12 173 Aquisitions through business combinations -4 997 -4 997 Investment/dis- posal of companies and businesses 10 165 10 165 Issue of shares from non-con- trolling interests 4 997 4 997 4 750 14 744 FX differences on foreign operations -238 -238 Balance at 31 December 2021 4 018 3 649 9 256 16 922 Balance at 1 January 2022 4 018 3 649 9 256 16 922 Income from associates -16 189 -2 370 -4 986 -3 183 -110 -317 -2 100 -11 149 -40 405 Aquisitions through business combinations 33 095 -122 1 350 4 566 38 889 Investment/dis- posal of companies and businesses -4 -4 Issue of shares from non-con- trolling interests 14 725 2 841 153 500 2 147 20 366 FX differences on foreign operations 2 1 546 1 548 Balance at 31 December 2022 16 906 1 647 13 388 -342 43 57 1 399 4 219 37 317 Seagust AS is directly owned by Arendals Fossekompani ASA and booked at historic cost of TNOK 4 750 in the company accounts. None of the companies have observable market values in form of market price or similar. DESCRIPTION OF THE BUSINESS IN ASSOCIATES AND JV NorSun NorSun is a Norwegian solar energy company that manufactures and markets high performance monocrystalline silicon ingots and wafers for the global solar energy industry. Dedicated to high efﬁciency N-type wafers and sustainable production with low CO 2 emissions, NorSun is an established supplier to tier-one cell manufacturers. NorSun is headquartered in Oslo in Norway and operates a modern production facility located in Årdal in Norway. NorSun became an associate company from 1 July 2022. North Ammonia North Ammonia is domiciled in Norway, where the head office is in Arendal. The group is one of two partners who collaborate on production of green ammonia. This is a strategically important business as a result of the Group's focus on becoming a worldwide supplier of green ammonia - the future sustainable fuel. The other partner is Grieg Edge, a Norwegian innovation company with focus on sustainable solutions only. The owners of North Ammonia are committed to further capital contributions in 2023 to secure ﬁnancing of the company. The partners have an agreement with North Ammonia that proﬁts of the company will not be distributed until it has the consent of both the partners. Seagust Seagust is domiciled in Norway, where the head ofﬁce is in Arendal. The group is one of two partners who collaborate on utilization of offshore wind resources in the North Sea. This is a strategically important business as a result of the Group's focus on expansion in the offshore wind market to develop more renewable energy. The other partner is Ferd, a large Norwegian industrial investment company. The owners of Seagust are committed to further capital contributions in 2023 to secure ﬁnancing of the company. The partners have an agreement with Seagust that proﬁts of the company will not be distributed until it has the consent of both the partners. In 2022 Vattenfall and Seagust have formed a joint venture to bid for offshore wind areas in Norway's upcoming licensing round. The joint venture intends to bid on licenses in both the Utsira Nord and Sørlige Nordsjø II areas in the North Sea. The licensing rounds are expected to take place within 2023. Hydepoint Hydepoint is a complete solution for receiving, converting, and transmitting the full energy potential from offshore wind farms, with reduced dependence on the onshore power grid. Placed in the ocean, close to wind farms, Hydepoint can convert all or part of the energy into hydrogen. Arendals Fossekompani, Kongsberg Gruppen and Moreld are industrial partners and equally large owners of the company Hydepoint AS. Moreld contributes with offshore infrastructure solutions, Kongsberg Gruppen contributes with power and management systems, and Arendals Fossekompani contributes with solutions for optimized planning and operation through its in-depth knowledge of the power market, including through the portfolio company Volue. Hydepoint is headquartered in Oslo, Norway. The owners of Hydepoint are commit- ted to further capital contributions in 2023 to secure ﬁnancing of the company. Kilandsfoss Arendals Fossekompani has started the construction phase of the new hydropower plant Kilandsfoss, located in the river Nidelva in Norway. The run-of-the-river facility will produce 38 GWh per year. Partner in the Kilandsfoss project are the municipali- ties of Froland and Åmli, each with one-third ownership. Estimated build time is two years and Kilandsfoss hydropower plant is scheduled to produce electricity in 2025. Glomsdam kraftverk Glomsdam kraftverk is owned by Vergia Hydropower AS (Arendals Fossekompani) and Vest-Telemark Kraftlag AS. The Company has raised capital from the owners in January 2023 to enable the planning of the project phase of Glomsdam Kraftverk. Cellect Energy Cellect Energy is a provider of smart software for energy storage systems that helps to operate and optimizes lifetime and proﬁt. The company was established by Arendal Fossekompani together with key employees and is headquartered in Barcelona, Spain. Imphytek Powders Imphytek Powders S.A.S. has it's headquarters and operations in Macon in France. The company is combining Aperam's expertise in Nickel & Specialty Alloys with Tekna's unique wire plasma atomization technology. The joint venture has the exclusive right to sell nickel alloy powder in Europe, and beneﬁts from all market and product developments made by Tekna and Aperam in the past years. The compa- ny's main activities are the production of high-performance powder for advanced manufacturing technologies. The company is organized as a company with limited liability similar to Norwegian private limited liability companies, and the company is not publicly traded. The company is strategically important company within Tekna Group in the business area Advanced Manufacturing. 200 201 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT NOTE 11.3 INVESTMENTS IN ASSOCIATES AND JOINT VENTURES CONT. (1 000 NOK) The table below shows the condensed ﬁnancial information of the associates and joint ventures, based on 100% Imphytec Powders NorSun North Ammonia Seagust Income Statement 2022 2021 2022 2021 2022 2021 2022 2021 Revenue 3 956 6 809 301 769 932 Operating expenses 19 130 28 394 357 648 5 606 1 959 10 501 2 318 Depreciation and amortisation 1 134 1 941 17 944 Net ﬁnancial items -11 -4 182 4 Proﬁt before income tax -16 308 -23 537 -79 494 -4 740 -1 959 -10 497 -2 318 Income tax expense 17 Proﬁt (-loss) for the year -16 308 -23 554 -79 494 -4 740 -1 959 -10 497 -2 318 Balance Sheet Non-current assets 11 320 10 968 97 129 234 889 267 Cash and cash equivalents 60 5 674 45 944 3 351 8 308 30 972 7 829 Other current assets 20 620 18 492 183 068 59 1 751 18 Non-current liabilities 46 941 20 941 123 705 Current liabilities 1 034 5 780 101 311 320 273 4 551 423 Equity -15 976 8 414 81 280 3 295 8 035 28 185 7 682 Hydepoint Kilandsfoss Glomsdam Kraftverk Cellect Energy Income Statement 2022 2021 2022 2021 2022 2021 2022 2021 Revenue 253 Operating expenses 9 551 329 635 6 096 Depreciation and amortisation 24 Net ﬁnancial items -5 Proﬁt before income tax -9 551 -329 -635 -5 872 Income tax expense Proﬁt (-loss) for the year -9 551 -329 -635 -5 872 Balance Sheet Non-current assets 318 Cash and cash equivalents 2 830 125 221 3 001 Other current assets 47 1 364 Non-current liabilities Current liabilities 3 856 21 107 503 Equity -1 027 128 114 3 497 NOTE 12 OTHER RECEIVABLES AND INVESTMENTS (1 000 NOK) Group Parent Company Long-term investments 2022 2021 2022 2021 Loans to employees 32 090 38 525 1 663 1 642 Contributions to company pension plan 22 002 22 002 22 002 22 002 Natural resource tax receivable 42 334 63 780 42 334 63 780 Other non-current receivables 32 685 22 136 20 572 17 180 Other investments 134 585 117 881 84 038 68 944 Total long-term investments 263 696 264 323 170 609 173 548 Security provided for loans to employees All loans to employees incur interest at a rate that never triggers a taxable beneﬁt.The loans are repaid over 5 years (vehicles) or 20 years (housing). Loans exceeding NOK 200,000 are secured by mortgages on property or shares. NOTE 13 INVENTORIES AND CONTRACTS WITH CUSTOMERS (1 000 NOK) Group Inventories 2022 2021 Raw materials 324 986 174 574 Work in progress 253 030 138 926 Spare parts 46 778 37 071 Finished goods 220 679 151 701 Total inventories (net after provision for obsolescence) 845 472 502 272 Provision for obsolescence 94 174 81 979 The provision for obsolescence in 2022 is mainly related to slow-moving items in ENRX (NOK 48 million), spare parts in NSSL (NOK 10 miillion) and off-size powders in Tekna (NOK 36 million). 202 203 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT Group 2022 2021 Contracts with at-delivery billing Booked income 193 656 236 909 Payments recieved -56 686 -86 129 Contract assets 136 970 150 780 Contracts with advance billing Payments recieved 253 113 215 549 Booked income -19 617 -49 044 Contract liabilities 233 496 166 505 Net contract assets / - liabilities -107 812 -15 725 Group 2022 2021 Booked income from uncompleted contracts per 31.12 Booked accrued income per 31.12 244 349 300 917 Booked accrued expenses per 31.12 -204 675 -289 925 Reported margin per 31.12 39 673 10 992 Group 2022 2021 Remaining income from sales over time contracts Within one year 326 218 254 708 Remaining income (sales over time) 326 218 254 708 CONSTRUCTION CONTRACTS (SALES OVER TIME) The subsidiaries ENRX, Tekna, NSSL and Volue recognise construction contracts in accordance with percentage of completion method. Changes during the year are due to most contracts having a duration less then a year. At year-end these subsid- iaries had the following carrying amounts associated with construction contracts and projects in progress: NOTE 13 INVENTORIES AND CONTRACTS WITH CUSTOMERS CONT. (1 000 NOK) Contract Assets Posted gross value of contract assets are distributed as follows: Receivables 2022 2021 Volue Consolidated 54 181 65 595 ENRX 81 570 77 978 Tekna Group 1 219 7 208 Sum 136 970 150 780 Provisions for expected losses on projects are distributed as follows: Provision for loss onerous contracts 2022 2021 Volue 16 963 31 118 Sum 16 963 31 118 Provisions are calculated based on historical losses and individual assessment of each item and customer Changes in the period's provisions are explained as follows: Group Provision for loss onerous contracts 2022 2021 Total Opening Balance 31 118 10 668 Changes in expected losses (loss rates) and outstanding receivables (volume) 4 145 33 758 Realized losses during the period (-) -18 300 -13 308 Exchange differences on translation of foreign operations Closing Balance 16 963 31 118 NOTE 14 TRADE AND OTHER RECEIVABLES (1 000 NOK) Group Parent Company 2022 2021 2022 2021 Accounts receivables Trade accounts receivables 950 095 792 808 822 916 Loss allowance (Note 16) -23 971 -19 999 Trade accounts rec, IC 30 412 57 362 Total 926 124 772 808 31 233 58 278 Other receivables Current interest-bearing rec., IC 466 123 66 218 Dividends and group contribution receivable, IC 9 462 Other current receivables 261 635 219 347 1 478 34 436 Total 261 635 219 348 477 062 100 654 Advances paid to suppliers 22 876 13 390 Accrued revenues at the point in time 7 495 12 155 Total 30 371 25 545 NOTE 13 INVENTORIES AND CONTRACTS WITH CUSTOMERS (1 000 NOK) 204 205 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT NOTE 15 CASH AND CASH EQUIVALENTS (1 000 NOK) Group Parent Company 2022 2021 2022 2021 Cash and cash equivalents 2 339 664 2 708 412 1 160 349 1 411 245 Here of restricted cash 167 558 97 490 2 993 2 821 NOTE 16 FINANCIAL RISK MANAGEMENT / FINANCIAL INSTRUMENTS CONT. (1 000 NOK) The breakdown of the parent company’s ﬁnancial assets is as follows: Financial assets at fair value through OCI Number of shares Shareholding in% Fair value 2022 2021 2022 2021 2022 2021 Listed shares Kongsberg Gruppen 25 812 25 812 0,01% 0,01% 10 727 7 382 Canopy Holding 423 167 423 167 0,48% 0,48% 199 1 117 Norse Atlantic 450 000 450 000 0,22% 0,58% 905 6 728 Total listed shares 11 831 15 227 Financial assets at fair value through OCI 11 831 15 227 Fair value – change during the year: Financial assets at fair value through OCI 2022 2021 Balance at 1 January 15 227 734 973 Change in ﬁnancial assets at fair value through OCI -3 311 95 193 Proceed from sale of ﬁnancial assets at fair value -85 -823 940 Purchase of ﬁnancial assets at fair value 9 000 Balance at 31 December 11 830 15 227 The following dividend is received: Kongsberg Gruppen tNOK 310 (tNOK 206). Change in assets at fair value are based on changes in the market values of listed shares. A sensitivity analysis indicates that a 10% change in fair value as at 31 December 2022 would change equity by tNOK 1.183 and proﬁt for the year from continuing oper- ations by tNOK 0 (2021: by tNOK 1.523 and tNOK 0 respectively). FINANCIAL RISK MANAGEMENT The company and the Group are exposed to credit risk, liquidity risk from the use of ﬁnancial instruments and market risk. The Board of Directors has overall respon- sibility for establishing and supervision of the Group’s guidelines on risk manage- ment. Principles, procedures and systems for risk management in the key areas are reviewed and assessed regularly. Industrial investments consist of a limited number of large investments. The investment strategy is based on the premise that long- term, active engagement provides the greatest return. Other investments are in liquid deposits with no connection to the Group. CREDIT RISK Credit risk is the risk of ﬁnancial losses if a customer or counterparty to a ﬁnan- cial instrument is unable to fulﬁl their obligations. Credit risk normally arises when the company or Group extends credit to customers or invests in securities. Credit risk associated with investments is considered to be limited since investments are mainly made in liquid securities with a good creditworthiness. A speciﬁcation of the investments is given earlier in this note. The Group has routines to ensure that credit is only extended for sales to customers that have had no previous payment issues and that stay within their credit limit. The maximum exposure to credit risk associated with receivables at the balance sheet date was: Group Parent Company 2022 2021 2022 2021 Total receivables 1 229 195 1 029 018 508 296 158 932 Outstanding trade receivables 950 071 792 805 822 916 Loss allowance 23 971 19 999 Trade receivables Breakdown of the book value of outstanding trade receivables in: Overdue Outstanding trade receivables 2022 Not due 1-30 days 31-60 days 61-90 days More than 90 days Trade accounts receivable Arendals Fossekompani ASA 789 32 822 Volue Consolidated 342 652 41 013 3 313 2 889 5 405 395 272 ENRX 240 057 45 521 11 894 5 663 47 253 350 389 NSSLGlobal Consolidated 90 088 30 358 8 281 7 090 7 096 142 913 Tekna Group 16 574 8 869 6 068 3 375 6 437 41 322 AFK Property Group 966 982 27 27 36 2 037 Alytic (Cons) 4 133 674 827 540 532 6 705 Ampwell Group 10 600 10 600 AFK Tyskland Group 12 12 Total 705 870 127 418 30 408 19 585 66 791 950 071 The company has applied impairment losses for expected credit losses as follows: Overdue Loss allowance 2022 Not due 1-30 days 31-60 days 61-90 days More than 90 days Loss allowance Volue Consolidated 41 64 614 1 719 1 971 4 409 ENRX 515 304 27 11 8 934 9 791 NSSLGlobal Consolidated 9 419 9 419 Tekna Group 302 302 Alytic (Cons) 50 50 Total 556 368 691 1 730 20 627 23 971 Loss allowance is calculated based on historical losses and individual assessment of each item and customer. 206 207 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT Breakdown of the book value of outstanding trade receivables in: Overdue Outstanding trade receivables 2021 Not due 1-30 days 31-60 days 61-90 days More than 90 days Trade accounts receivable Arendals Fossekompani ASA 756 19 3 137 916 Volue Consolidated 311 531 46 597 6 721 4 286 3 388 372 523 ENRX 205 237 28 898 12 950 7 320 21 349 275 754 NSSLGlobal Consolidated 43 793 16 728 29 419 15 861 8 371 114 172 Tekna Group 7 766 4 618 4 739 3 546 4 252 24 921 AFK Property Group 329 107 139 69 76 720 Alytic (Cons) 3 210 178 238 173 3 799 Total 572 620 97 127 54 225 31 259 37 574 792 805 The company has applied impairment losses for expected credit losses as follows: Overdue Loss allowance 2021 Not due 1-30 days 31-60 days 61-90 days More than 90 days Loss allowance Volue Consolidated 350 350 938 1 638 ENRX 1 249 39 102 2 8 044 9 437 NSSLGlobal Consolidated 8 874 8 874 Alytic (Cons) 25 25 50 Total 1 249 64 477 352 17 856 19 999 Changes in the period’s loss allowance are explained as follows: Group Group Loss allowance 2022 2021 Total Opening Balance 19 999 17 912 Changes in expected losses (loss rates) and outstanding receivables (volume) 5 382 901 Realized losses during the period (-) -1 088 1 002 Exchange differences on translation of foreign operations 533 184 Closing Balance 23 971 19 999 LIQUIDITY RISK Liquidity risk is the risk that the Group will not be able to fulﬁl its ﬁnancial obligations as they fall due. The aim of liquidity management is to secure sufﬁcient liquidity to fulﬁl the obligations as they fall due, without this causing unacceptable losses to the company and the Group. Cash ﬂow from the company and the Group’s ordinary operations, combined with signiﬁcant investments in liquid securities as well as unutilised credit facilities mean that the liquidity risk is considered to be low. Subsidiaries ENRX, NSSLGlobal and Volue have established an group account arrangement covering most of the subsidiaries. This includes currencies NOK, EURO, USD, JPY, SEK, DKK og GBP. This helps increase the ﬂexibility and efﬁciency of liquid- ity management The breakdown of the liabilities of the company and the Group is as follows: (Contractual cash ﬂows include interest calculated based on interest rates at the balance sheet date) (Contractual cash ﬂows of the bond loans that have maturity of 12 months or less are related to interest payments) Group 2022 Carrying amount Contractual cash ﬂows 6 months or less 6 to 12 months 1 to 2 years 2 to 5 years Over 5 years Accounts payable 969 613 969 456 969 044 412 Current interest-bearing debt 170 841 174 981 161 730 13 251 Bank overdraft 110 869 113 123 18 738 94 385 Current lease liabilities 58 454 60 432 29 031 31 401 Total current liabilities 1 309 776 1 317 991 1 178 543 139 448 Non-current bond loans 497 581 569 733 13 075 13 075 39 225 504 358 Non-current interest-bearing debt 353 067 435 834 8 549 11 174 86 652 88 418 241 041 Non-current lease liabilities 203 076 209 065 62 373 74 504 72 187 Total non-current liabilities 1 053 724 1 214 632 8 549 24 249 162 101 202 147 817 586 Group 2021 Accounts payable 753 718 753 718 753 627 92 Current interest-bearing debt 122 333 126 025 30 942 95 083 Bank overdraft 114 106 114 563 64 387 50 176 Current lease liabilities 64 449 66 712 29 756 36 956 Total current liabilities 1 054 607 1 061 019 878 712 182 307 Non-current bond loans 496 582 591 525 13 075 13 075 39 225 526 150 Non-current interest-bearing debt 169 849 199 685 1 392 1 459 18 587 54 439 123 808 Non-current lease liabilities 141 601 141 601 75 431 66 170 Total non-current liabilities 808 032 932 810 1 392 14 534 107 093 159 833 649 958 208 209 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT Parent Company 2022 Carrying amount Contractual cash ﬂows 6 months or less 6 to 12 months 1 to 2 years 2 to 5 years Over 5 years Accounts payable 12 105 12 105 12 105 Current interest-bearing liab, IC 17 185 17 185 17 185 Current lease liabilities 2 300 5 360 2 680 2 680 Total current liabilities 31 590 34 651 14 785 19 865 Non-current bond loans 497 581 569 733 13 075 13 075 39 225 504 358 Non-current interest-bearing debt 153 307 177 836 2 453 2 453 4 906 14 717 153 307 Non-current lease liabilities 60 258 83 568 5 254 14 694 63 620 Total non-current liabilities 711 146 831 137 2 453 15 528 23 235 68 637 721 285 Parent Company 2021 Accounts payable 51 777 51 777 51 777 Current interest-bearing liab, IC 35 672 35 672 35 672 Current lease liabilities 3 897 3 897 1 949 1 949 Total current liabilities 91 346 91 346 53 725 37 621 Non-current bond loans 496 581 590 986 12 536 13 075 39 225 526 150 Non-current lease liabilities 15 365 16 690 3 637 9 879 3 174 Total non-current liabilities 511 947 607 675 12 536 16 712 49 104 529 324 For other receivables and payables measured at amortised cost the book value is assumed to equal the fair value. For contractual cash ﬂows related to derivatives we refer to hedge accounting further below. MARKET RISK Market risk is the risk that changes in market prices such as exchange rates, interest rates and share prices will impact net income or the value of ﬁnancial instruments. FOREIGN EXCHANGE RISK The company and the Group are exposed to foreign exchange risk on purchases, sales and loans in currencies other than the companies' functional currency. The Group’s main exposure is to EUR, GBP and USD. The foreign exchange exposure is primarily associated with operations in the Group’s foreign subsidiaries and with the company’s and the Group’s liabilities in foreign currency. The ENRX subgroup uses derivatives to limit foreign exchange risk associated with sales and trade receiv- ables. The parent company and ENRX also use foreign currency loans and currency swaps to limit foreign exchange risk associated with changes in value in the subsid- iaries. The main foreign currency exposure in the parent company and the Group’s Norwegian subsidiaries is to EUR. (1 000 EUR) Exposure at 31 December was as follows Group Parent Company 2022 2021 2022 2021 Bank deposits 12 814 19 329 153 466 Trade receivables 26 641 24 690 78 Trade payables -2 170 -4 620 -40 Interest-bearing liabilities -14 299 -12 086 Balance sheet exposure (foreign exchange risk) 22 986 27 313 191 466 A sensitivity analysis indicates that a 5% appreciation of NOK against EUR as at the year-end would impact earnings for the Group in 2022 by the equivalent of MEUR -1.2 and in 2021 by the equivalent of MEUR -1.4. The amounts are stated before taxes. Other subsidiaries have only modest exposure to currencies other than the company’s functional currency. HEDGE ACCOUNTING Some customer contracts are currency-hedged when entered into. Currency hedg- ing is also carried out for budgeted cash ﬂows in foreign currency. The relevant deriv- atives are forward contracts towards banks. The Group companies ENRX and Volue report cash ﬂow hedging as hedging contracts. At year-end the companies had the following forward currency contracts speciﬁed as hedging (1 000 NOK) Contract value Unrealised gains/losses 2022 Hedging of future cash ﬂows 202 708 1 869 Fair value hedging Balance sheet exposure (hedging) 202 708 1 869 2021 Contract value Unrealised gains/losses Hedging of future cash ﬂows 395 196 11 614 Fair value hedging -4 305 Balance sheet exposure (hedging) 395 196 7 309 Unrealised gains/losses relating to hedging of future cash ﬂows are recognised in “Other comprehensive income”. The unrealised loss shown in the table is the value before deducting tax. Net unrealised losses/gains are recognised as other current liabilities/assets. Nominal value, carrying amount and maturity of forward currency contracts: Currency 2023 2024 2025 Nominal amount (currency) Carrying amount (1 000 NOK) EUR 8 504 6 836 187 15 528 10 814 USD 10 350 1 300 11 650 -8 992 JPY GBP 370 370 47 Total 1 869 210 211 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT INTEREST RATE RISK Most of the company’s and the Group’s interest-bearing ﬁnancial assets and liabili- ties accrue interest at variable rates. In 2021 the parent company took out a bond of MNOK 500 at an ﬁxed interest rate of 2,615%. An overview of interest-bearing assets can be found earlier in this note and of liabilities in Note 17. A 1% change in interest rates would affect earnings, and proﬁt and ﬁnancial items through the year, by a net amount of around NOK -0,4 million. The amount is stated before taxes. PRICE RISK FOR ENERGY SALES Most of the company’s and the Group’s energy sales take place in the spot market, which means there is exposure to risk associated with price ﬂuctuations. In the past two years no energy derivatives have been used as hedging instruments to limit the risk. MARKET RISK RELATING TO SECURITIES The company and the Group are exposed to price risk on investments in equity instruments classiﬁed as ﬁnancial assets at fair value through OCI and ﬁnancial assets at fair value throiugh income statement. All decisions on signiﬁcant purchases and sales are made by the Board of Directors. The main objective of the investment strategy is to maximise the return through ongoing dividends and increases in the value of the portfolio. An overview of the company’s ﬁnancial assets is given earlier in this note. Group Parent Company 2022 2021 2022 2021 Book value Fair value Book value Fair value Book value Fair value Book value Fair value Liabilities Bond loans 497 581 450 000 496 581 492 500 497 581 450 000 496 581 491 961 Unrecognized income between book- and fair value -47 581 -4 621 -47 581 -4 621 Fair value categories ﬁnancial assets and liabilities Group Parent Company 2022 Fair value through income Fair value through OCI Amort. cost Sum Fair value through income Fair value through OCI Amort. cost Sum Carrying amount ﬁnancial assets Trade and other receivables 1 187 781 1 187 781 32 711 32 711 Cash and cash equivalents 2 339 664 2 339 664 1 160 349 1 160 349 through OCI 11 830 11 830 11 830 11 830 Loans to Group companies 786 851 786 851 Derivatives 11 065 11 065 Sum 11 065 11 830 3 527 445 3 550 341 11 830 1 979 911 1 991 742 Carrying amount ﬁnancial liabilities Derivative liabilities 9 196 9 196 Interest-bearing loans and borrowings 666 856 666 856 153 307 153 307 Bond loans 497 581 497 581 497 581 497 581 Trade and other payables 969 613 969 613 12 105 12 105 Liabilities to Group companies 17 185 17 185 Sum 9 196 2 134 050 2 143 246 680 179 680 179 2021 Carrying amount ﬁnancial assets Trade and other receivables 1 017 701 1 017 701 92 714 92 714 Cash and cash equivalents 2 708 412 2 708 412 1 411 245 1 411 245 through OCI 15 227 15 227 15 227 15 227 Loans to Group companies 71 268 71 268 Derivatives 11 317 11 317 Sum 11 317 15 227 3 726 113 3 752 657 15 227 1 575 228 1 590 454 Carrying amount ﬁnancial liabilities Derivative liabilities 4 305 4 305 Interest-bearing loans and borrowings 426 670 426 670 Bond loans 496 581 496 581 496 581 496 581 Trade and other payables 753 718 753 718 51 777 51 777 Liabilities to Group companies 35 672 35 672 Sum 4 305 1 676 969 1 681 274 584 030 584 030 Change in carrying amount in the period: 2022 2021 Balance at 1 January 7 012 -4 109 Changes in value posted as OCI 8 582 3 861 Reclassiﬁes from OCI to income statement -8 582 7 260 Balance at 31 December 1 869 7 012 Asset 11 065 11 317 Liabilities 9 196 4 305 Total 1 869 7 012 212 213 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT FAIR VALUE HIERARCHY The table below analyses ﬁnancial instruments measured at fair value according to valuation method. The different levels are deﬁned as follows: • Level 1: Fair value is measured using listed prices from active markets for identical ﬁnancial instruments. No adjustment is made to these prices. • Level 2: Fair value is measured using other observable inputs than those used at level 1, either directly (prices) or indirectly (derived from prices). • Level 3: Fair value is measured using inputs that are not based on observable market data (unobservable inputs). 2022 Level 1 Level 2 Level 3 Sum Financial assets at fair value through OCI 11 831 11 831 Financial assets at fair value through income statement Bond loans -450 000 -450 000 Total -438 169 -438 169 Other derivative ﬁnancial assets 11 065 11 065 Interest and currency swaps related to bond loans Other derivative ﬁnancial liabilities -9 196 -9 196 Grand Total -436 300 -436 300 2021 Financial assets at fair value through OCI 15 227 15 227 Financial assets at fair value through income statement Bond loans -492 500 -492 500 Total -477 273 -477 273 Other derivative ﬁnancial assets 11 317 11 317 Interest and currency swaps related to bond loans Other derivative ﬁnancial liabilities -4 305 -4 305 Grand Total -470 261 -470 261 The fair value of the Bond loan is determined by using the indexed tax validation rules at year-end. The index is publicly available. NOTE 17 INTEREST-BEARING DEBT AND PROVISIONS (1 000 NOK) This note provides information on the contractual terms of the Group’s interest-bearing loans and borrowings. For more information on the Group’s interest rate risk and foreign exchange risk see Note 16. Group / Parent Bond loans 2022 2021 2,516% 2021 - 2028 500 000 500 000 Capitalised loan costs -2 419 -3 419 Bond loans - booked value 497 581 496 581 Fair value (ref note 16) 450 000 492 500 Parent Company Debenture loans 2022 2021 Euribor + ﬁxed margin Floating interest 157 707 Capitalised loan costs -4 400 Total denenture loans parent company 153 307 Subsidiaries Tekna Consolidated Fixed interest rate 4 698 34 857 Tekna Consolidated Debenture loans 37 882 18 723 ENRX consolidated Floating interest 139 994 90 425 AFK Property Group Floating interest 135 651 146 463 Alytic AS Floating interest 3 232 1 714 Ampwell Consolidated Floating interest 49 144 Total Debenture loans Subsidiaries 370 600 292 182 Total Debenture loans Group 523 907 292 182 Group Parent Company Loans secured by pledged assets 2022 2021 2022 2021 Non-current interest-bearing debt 148 800 159 047 Bank overdraft 30 932 27 754 Total 179 733 186 801 Loans are secured by the following pledged assets Buildings and land 175 832 119 541 Vehicles, machinery and equipment 140 930 223 537 Inventories 435 132 318 187 Trade receivables 209 974 400 723 Total security 961 867 1 061 989 Security for promissory note and bond loans with a countervalue of MNOK 500 taken out in the parent company has been given in the form of negative pledges. Trade receivables in two of the subsidiaries have been pledged as security for bank guarantees and overdrafts given. For the Group the value-adjusted equity must be at least 40% and have a value of at least MNOK 1 500. For Volue the equity must be al least MNOK 100 and at least 25% of total balance value. For ENRX the equity must be at least 27%, gearing ratio (NIBD/ EBITDA) <3 and cash reserve > MEUR 10. Tekna have some covernants connected to operational activities, but none ﬁnancial covenants. All the companies are in compliance with the requirements of their covenants at 31 December 2022. 214 215 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT NOTE 18 TRADE PAYABLES AND OTHER CURRENT LIABILITIES (1 000 NOK) Group Parent Company 2022 2021 2022 2021 Trade payables 690 510 476 529 11 036 49 680 Other payables 279 103 277 194 Trade acc payable, IC 1 069 2 097 Account Payables 969 613 753 722 12 105 51 777 Social security taxes and VAT 160 194 102 622 44 581 Advance payments from customers point-in-time 15 230 1 068 Accrued interest cost 11 456 11 454 10 444 10 803 Other current liabilities 586 011 391 983 30 230 13 675 Other current liabilities 772 891 507 126 85 255 24 478 Earn-out liabilities Procom GmbH 60 431 57 253 Onerous contracts Volue group (note 13) 16 963 31 118 Restructuring provision ENRX 40 268 4 339 Current provisions 117 662 92 710 Restructuring provision ENRX Provision 1 January 4 339 18 250 Increases 39 385 1 382 Provisions used -5 072 -14 454 FX adjustments 1 615 5 178 Provision 31 December 40 268 4 339 A restructuring provision is recognised when the group has prepared a detailed restructuring plan and started the implementation of the plan or communicated the plan. A restructuring plan shall include the following information: which business is affected; the main units and personnel affected by the restructuring; as well as the costs to be incurred and the timetable of the plan. The restructuring provision (severance pay) at 31 December 2022 is related to the ENRX segment business in Germany, and the part of the business which has been unproﬁtable for a longer period. Following the restructuring, it is anticipated that the business unit will deliver positive results. A restructuring provision related to severance pay is booked as other operating expenses. The non-current provisions of NOK 1.9 million as of 31 December 2022 are mainly related to a guarantee granted by the parent company to purchase ENRX shares from employees at an agreed price within the year 2027 when required. NOTE 19 LEASES (1 000 NOK) Group Parent Company Carrying amount right-of-use assets 2022 2021 2022 2021 Buildings 238 022 185 328 62 236 18 499 Vehicles, machinery and equipment 9 670 9 274 322 490 Sum 247 692 194 602 62 558 18 989 Lease liabilities Current lease liabilities 58 454 64 449 2 300 3 897 Non-current lease liabilities 203 076 141 601 60 258 15 365 Sum 261 530 206 050 62 558 19 263 Income effects Buildings depreciation 70 355 62 095 3 516 3 298 Vehicles, machinery and equipment 7 132 6 414 168 14 Sum depreciation 77 487 68 509 3 684 3 312 Interest expense on lease 7 526 7 257 740 581 We refer to note 5 for a speciﬁcation of the movements of Right-of-Use assets. 216 217 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT NOTE 20 EVENTS AFTER THE REPORTING PERIOD NOTE 21 ACCOUNTING ESTIMATES AND ASSESSMENTS On 10 January 2023 Arendals Fossekompani announced that Benjamin Kristoffer Golding has been appointed as new CEO of the company. On 9 February 2023, the Board of Directors decided to pay an ordinary cash divi- dend of NOK 0.95 per share for the fourth quarter 2022. The dividend was paid on 22 February. On 8 March 2023, the construction of Kilandsfoss Hydropower Plant began. When ﬁnalized in 2025, Kilandsfoss will produce approximately 38 GWh. Project partners are the municipalities of Froland and Åmli, each with one-third ownership. On XX, Arendals Fossekompani and Tekna signed a loan facility agreement totaling MCAD 25 to ﬁnance operations and further growth in Tekna. The facility will be made available in three tranches (MCAD 5+10+10). Re-ﬁnancing ENRX available in three tranches (MCAD 5+10+10). KEY ACCOUNTING ESTIMATES Key accounting estimates are estimates that are important for the presentation of the company’s and the Group’s ﬁnancial position and earnings, and which require subjective assessment. Arendals Fossekompani assesses such estimates contin- ually based on historical results and experience, consultation with experts, trends, forecasts and other methods considered reasonable in each individual case. IMPAIRMENT LOSSES Goodwill and other intangible assets with an indeﬁnite life are tested for impairment annually. The company’s investments in subsidiaries and associates are similarly tested for impairment. The assessments are based on analysis of the company's ﬁnancial position and forecasts/outlook. Recoverable amounts that are measured against carrying amounts are the expected selling price or the present value of cash ﬂows from the investment. Other assets, including property, plant and equip- mentand ﬁnancial instruments available for sale, are tested for impairment when there is an indication that a fall in value may have occurred. CONSTRUCTION CONTRACTS The Group recognises revenue from individual projects in accordance with the per- centage of completion method. For such projects the degree of completion is cal- culated as costs incurred relative to total estimated costs. The greatest uncertainty is associated with measurement of the project’s total estimated costs. The group has implemented controls to ensure that accounting for revenue over time reﬂects management's best estimate with respect to total contract revenue, cost, and if applicable stage of completion. The group uses the stage of completion method to determine the contract revenue recognised over time in the period. The method to determine the stage of completion is costs spent compared to total estimated costs or direct labour spent compared to total estimated direct labour. The estimation uncertainty is primarily related to cost calculation and measurement of progress. When project's remaining costs cannot be reliaby estimated,only revenues equal to the accrued project costs will be recognised as revenues. 218 219 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT NOTE 22 EARNINGS PER SHARE IN NOK BASIC EARNINGS PER SHARE/DILUTED Basic earnings per share are based on proﬁt attributable to the equity holders of the parent and the weighted average number of outstanding ordinary shares during the year, which was 54.851.441 (2021:54.890.000), calculated as follows: Proﬁt attributable to ordinary shares (1 000 NOK) 2022 2021 Net proﬁt for the year -32 519 125 827 Minority interest -38 263 19 118 Equity holders of the parent 5 744 106 709 Weighted average number of ordinary shares Issued ordinary shares, 1 January 55 995 250 55 995 250 Effect of treasury shares -1 188 319 -1 099 300 Number of outstanding shares as at 31 December 54 806 931 54 895 950 Weighted average number of ordinary shares for the year 54 851 441 54 890 000 Basic earnings per share / diluted earnings per share (NOK) 0,10 1,94 NOTE 23 THE TWENTY LARGEST SHAREHOLDERS Number of shares Shareholding Ulefoss Invest AS 14 709 875 26,3% Havfonn AS 14 567 900 26,0% Must Invest AS 14 106 225 25,2% Arendals Fossekompani ASA 1 188 319 2,1% Svanhild og Arne Must Fond 657 225 1,2% Fabulous AS 453 853 0,8% Per-Dietrich Johansen 375 375 0,7% Fondsﬁnans Pensjonskasse 356 228 0,6% Fløtemarken AS 348 094 0,6% Folketrygdfondet 332 000 0,6% Erik Bøhler 280 100 0,5% Sverre Valvik AS 266 000 0,5% Bøhler Invest AS 265 000 0,5% Aksel Oland 237 994 0,4% Ropern AS 237 478 0,4% JP Morgan Chase Bank, N.A., London 218 156 0,4% Annelise Altenburg Must 216 675 0,4% Erik Christian Must 180 000 0,3% Trine Must 180 000 0,3% Falck Frås AS 170 000 0,3% 49 346 497 88,1% With reference to section 7-26 of the Norwegian Accounting Act the following can be disclosed concerning shares owned by individual Board members and the CEO, including shares owned by spouses, children who are minors or by companies in which the person in question has a controlling interest. Own holdings Related parties Total Board of Directors Trond Westlie - Morten Bergesen 14 567 900 14 567 900 Didrik Vigsnæs 18 000 18 000 Christian Must 180 000 14 106 225 14 286 225 Lise Lindback - Anne Grethe Dalane - Stine Rolstad Brenna 7 500 7 500 180 000 28 699 625 28 879 625 Senior Executives Ørjan Svanevik 17 637 17 637 Lars Peder Fensli * 8 144 8 144 Morten Henriksen * 7 819 7 819 Torkil Mogstad * 7 819 7 819 Ingunn Ettestøl* 7 212 7 212 - 48 631 48 631 * See Note 4 regarding share-based payments. NOTE 24 RELATED PARTIES The company’s/Group’s related parties comprise subsidiaries, associates and mem- bers of the Board of Directors and senior management team. KEY EXECUTIVES Members of the Board of Directors and the company management and their clos- est relations control 51.7% of shares with voting rights in the company. Loans to senior executives (see Note 4) amounted to tNOK 10.922 (2021: tNOK 9.855) as at 31 December. These loans are included in “other investments”. Interest is charged on loans to senior executives at a rate that never triggers a taxable beneﬁt. In addition to regular salaries, senior executives have agreements on other beneﬁts in the form of a deﬁned-contribution pension scheme. (See Note 4). RELATED PARTY TRANSACTIONS Transactions between Group companies and other related parties are based on the principles of market value and arm’s length.In 2022 Arendals Fossekompani pur- chased services relating to market management for tNOK 866 from Volue Market Services (tNOK 1.017). In 2022 Arendals Fossekompani had a gain on foreign currency loans to Volue Market Services of tNOK 647 (loss of tNOK 2.259 in 2020). In 2022 Tekna sold goods it had produced to EFD Induction for tCAD 2 (tCAD 358). Arendals Fossekompani ASA supply AFK Property, Vergia, Ampwell and Alytic with adminis- trative services, all invoiced based market value. Interest is charged on loans from the AFK parent company to companies in the Group in accordance with the agree- ment entered into. We also refer to note 4 for information regarding share-based payments within the group. 220 221 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT NOTE 25 CHANGE IN LOANS AND BORROWINGS (1 000 NOK) Loans maturing after more than one year Loans maturing in less than one year Total interest- bearing liabilities Note 2022 2021 2022 2021 2022 2021 Group Total Opening Balance 828 412 613 241 300 888 677 482 1 129 301 1 290 723 Cash from new borrowings CF 268 680 560 221 268 680 560 221 Repayment of long-term borrowings CF -256 833 -673 015 -256 833 -673 015 Cash ﬂow from net change in current interest bearing debt CF 2 686 -95 029 2 686 -95 029 Other changes with no cash effect 225 268 320 701 22 651 -280 231 247 918 40 470 Total Effect from Foreign Exchange 20 277 7 264 13 939 -1 334 34 216 5 930 Closing Balance 1 085 804 828 412 340 164 300 888 1 425 968 1 129 301 Parent Company Total Opening Balance 511 947 233 887 3 897 303 443 515 844 537 330 Cash from new borrowings CF 147 763 496 775 147 763 496 775 Repayment of long-term borrowings CF -3 958 -525 131 -3 958 -525 131 Other changes with no cash effect 48 850 301 219 -1 597 -299 546 47 253 1 673 Closing Balance 711 146 511 947 2 300 3 897 713 446 515 844 Group 2022 2021 Bond 497 581 496 581 Interest-bearing liabilities and credits (long-term) 353 067 169 850 Other non-current liabilities 32 079 20 380 Non-current lease liabilities 203 076 141 601 Loans maturing after more than one year 1 085 804 828 412 Interest-bearing liabilities and credits (short-term) 281 709 236 440 Current lease liabilities 58 454 64 449 Loans maturing in less than one year 340 163 300 888 Total interest-bearing liabilities 1 425 967 1 129 301 Parent Company 2022 2021 Bond 497 581 496 581 Interest-bearing liabilities and credits (long-term) 153 307 Non-current lease liabilities 60 258 15 365 Loans maturing after more than one year 711 146 511 947 Interest-bearing liabilities and credits (short-term) Current lease liabilities 2 300 3 897 Loans maturing in less than one year 2 300 3 897 Total interest-bearing liabilities 713 446 515 844 NOTE 26 SALE OF SUBSIDIARY (1000 NOK) SALE OF COGEN ENERGIA ESPANA IN 2021 In July 2021 Arendals Fossekompani sold its 100% shareholding in Cogen Energia Espana. Consequently, the company’s ﬁnancial ﬁgures have been recognised on separate lines in the income statement as discontinued operations and in the bal- ance sheet as assets held for sale. The gain on disposal of Cogen of tNOK 21 264 is included in “Proﬁt/loss from discontinued operations”. Cogen’s key ﬁgures relating to the income statement for 2021 are presented below. 2022 2021 Operating revenues and operating costs YTD Full year Operating revenue 280 935 Operating expense 262 329 Depreciation 9 347 Operating proﬁt 9 238 Net ﬁnancial items -1 681 Proﬁt before income tax 7 557 Income tax expense Proﬁt (-loss) from discontinued operation 7 557 Proﬁt from the sale of Cogen Energia Espana 21 264 Net discontinued operations income (after tax) 28 822 Basic/diluted earnings per share (NOK) 0,00 0,53 * The gain on disposal of Cogen of tNOK 21 264, including tNOK 6 550 of accumulated currency translation differences reclassiﬁed from other comprehensive income, is included in proﬁt/loss from discontinued operations. 222 223 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT NOTE 27 CLIMATE-RELATED RISKS Arendals Fossekompani (AFK) has assessed climate-related risks based on the recommendations of the Financial Stability Board's Task Force on Climate-related Financial Disclosures (TCFD) and has documented the recommended disclosures and responses in a stand-alone TCFD report. The report covers the company's exposure to climate-related risks, such as physical, regulatory/liability, technology, market, and reputational risks, as well as potential opportunities. AFK has not at this time identiﬁed any material impact on ﬁnancial reporting judgements and estimates due to climate risks. AFK has ongoing assessments related to EU Taxonomy, and other internal initiatives to reduce its climate risk exposure. Whilst there is currently no material impact expected from climate change in the medium term, AFK follows developments and will regularly assess its portfolio risk exposure to transitional and physical climate risks. NOTE 28 CONTINGENT LIABILITIES A claim has been raised towards Volue Market Services AS related to ﬁnancial market operations. No provisions has been made related to the claim at 31 December 2022. NIBD Hydropower Group Management Volue NSSLGlobal Consolidated ENRX FY22 FY21 FY22 FY21 FY22 FY21 FY22 FY21 FY22 FY21 Bond 497 042 497 121 Non-current inter- est-bearing debt 153 846 -539 618 142 Interest-bearing current borrowings 1st year installm. non-current borrowings 139 378 90 284 Bond Interest and ex rate swap (curr.) Bank overdraft 6 892 17 529 23 697 16 185 80 280 80 392 Current and non current liabilities IC 17 731 35 672 30 574 40 458 363 423 807 Total liabilities 668 619 532 254 37 465 57 987 23 697 16 185 583 698 171 624 Cash and cash equivalents 1 160 721 1 411 245 446 350 404 390 379 586 338 132 158 950 140 661 Intercompany loans 320 728 5 050 Current inter- est-bearing rec., IC 466 123 66 218 17 185 35 672 Financial assets classiﬁed as held for trading Total asets 1 947 571 1 482 513 463 535 440 062 379 586 338 132 158 950 140 661 Net interest bearing debt -1 278 952 -950 260 -426 070 -382 075 -355 888 -321 947 424 747 30 963 Tekna Group AFK Property Group Alytic (Cons) Ampwell Group Vergia Group FY22 FY21 FY22 FY21 FY22 FY21 FY22 FY21 FY22 FY21 Bond -539 Interest and ex rate swap n-c Non-current inter- est-bearing debt 29 991 26 219 130 961 141 774 3 232 1 714 34 958 539 Interest- bearing current borrowings (inp) 8 717 25 970 14 185 1st year installm. non-current borrowings 3 872 1 391 4 689 4 689 Bond Interest and ex rate swap (curr.) Bank overdraft Current and non current liabilities IC 65 35 114 30 764 2 508 -19 330 523 23 000 Total liabilities 42 580 53 646 170 764 177 227 5 740 1 695 379 667 23 000 Cash and cash equivalents 82 739 268 223 35 885 108 719 50 887 27 089 6 458 18 089 9 953 Intercompany loans Current inter- est-bearing rec., IC -23 104 Financial assets classiﬁed as held for trading Total asets 82 739 268 223 35 863 108 823 50 887 27 089 6 458 18 089 9 953 Net interest bearing debt -40 158 -214 578 134 901 68 404 -45 146 -25 394 373 209 4 911 -9 953 224 225 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT Eliminations Total FY22 FY21 FY22 FY21 Bond 497 581 497 121 Interest and ex rate swap n-c Non-current inter- est-bearing debt 353 067 169 310 Interest- bearing current borrowings (inp) 22 902 25 970 1st year installm. non-current borrowings 147 938 96 364 Bond Interest and ex rate swap (curr.) Bank overdraft 110 869 114 106 Current and non current liabilities IC -810 569 -1 163 703 Total liabilities -810 569 -107 044 1 131 194 903 574 Cash and cash equivalents 2 339 664 2 708 412 Intercompany loans -320 728 -5 050 Current inter- est-bearing rec., IC -489 841 -101 994 -23 Financial assets classiﬁed as held for trading Total asets -810 569 -107 044 2 339 642 2 708 412 Net interest bearing debt -1 208 447 -1 804 838 FINANCIAL PERFORMANCE MEASURES Group 2022 2021 2020 2019 2018 Sales 4 586 536 4 232 290 3 157 470 3 226 253 3 170 686 Cost of sales 1 446 542 1 585 290 1 062 363 1 036 194 975 389 EBITDA 10) 726 417 685 819 400 973 489 648 428 055 Operating proﬁt 428 740 450 227 160 745 236 825 207 013 Net ﬁnancial items 37 285 -106 316 -46 935 11 249 22 471 Equity company income -40 405 -12 173 -14 321 -1 632 -3 061 Proﬁt before taxes 425 620 331 738 99 489 236 212 226 423 Provision for income tax -458 139 -234 733 -33 709 -139 951 -121 593 Net proﬁt for the year, continuing operations -32 519 97 005 65 780 93 671 105 032 Net discontinued operations income 28 822 54 355 -46 953 35 703 Net proﬁt for the year -32 519 125 827 120 135 46 718 140 735 Minority interest income 5 744 19 118 58 218 -1 313 -28 322 Total Comprehensive Income 12 208 159 804 -40 302 269 972 762 375 KEY FIGURES Group 2022 2021 2020 2019 2018 Return on equity 1) % -0,8% 2,5% 1,8% 2,9% 2,8% Total proﬁtability 2) % 0,2% 2,2% 2,1% 2,5% 2,2% Gross operating margin 3) % 15,8% 16,2% 12,7% 15,2% 13,5% Net operating margin 4) % 9,35% 10,64% 5,09% 7,34% 6,53% Gross proﬁt margin 5) % -0,7% 2,3% 2,1% 2,9% 3,3% Equity share 6) % 48,3% 57,2% 55,2% 54,0% 53,8% NIBD (tNOK) 7) -1 208 447 -1 804 838 -580 420 -199 037 53 426 Liquidity ratio 1 8) 1,6 2,2 1,9 2,2 2,0 Result after tax per share 9) NOK -0,59 2,29 2,19 0,85 2,57 Dividend per share NOK 7,45 37,04 1,20 2,24 2,24 Average power production last 10 years (GWh) 501 514 509 502 502 DEFINITIONS 1. Return on equity Net proﬁt for the year, continuing operations divided onaverage equity 2. Total proﬁtability Net proﬁt for the year, continuing operations + interest cost divided on average total capital 3. Gross operating margin Operating proﬁt + depreciation in percentage of net operating income 4. Net operating margin Operating income in percentage of net operating income. 5. Gross proﬁt margin Net proﬁt for the year, continuing operations divided on net operating income 6. Equity share Equity divided on total capital 7. NIBD - Net interest bearing debt Ineterst bearing debt - interest bearing receviables - cash 8. Liquidity ratio 1 Current assets divided on current liability 9. Result after tax per share (EPS) Net proﬁt for the year divided on averange number of shares 10. Result before interest, tax, depreciation, amortization and impairment Operating income- operating cost 226 227 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT Declaration by the members of the Board and the CEO The Board and CEO have reviewed and approved the Annual Report and Annual Financial Statements for Arendals Fossekompani ASA, which includes the Group and the Parent Company, for the calendar year 2022 and as at 31 December 2022 (Annual Report for 2022). The single-entity ﬁnancial statements and consolidated ﬁnancial statements have been prepared in accordance with IFRS as adopted by the European Union, along with relevant interpretations, and in compliance with further disclosure require- ments pursuant to the Norwegian Accounting Act applicable as at 31 December 2022. The Annual Report for the Group and Parent Company has been prepared in accordance with the provisions of the Norwegian Accounting Act and Norwegian Accounting Standard 16 as at 31 December 2022. TO THE BEST OF OUR KNOWLEDGE: • the Annual Financial Statements for 2022 for the Group and the Parent Company have been prepared in accordance with applicable accounting standards • the information presented in the ﬁnancial statements provides a true and fair view of Group’s and the Parent Company’s assets, liabilities, ﬁnancial position and performance as a whole as at 31 December 2022 • the Annual Report for the Group and the Parent Company provides a true and fair view of: • the development, results and ﬁnancial position of the Group and the Parent Company, and the key risks and uncertainties faced by the Group and the Parent Company. Froland, 11 April 2023 Trond Westlie, Chairman Stine Rolstad Brenna, Board Member Lise Lindbäck, Board Member Morten Bergesen, Board Member Didrik Vigsnæs, Board Member Anne Grethe Dalane, Board Member Lars Peder Fensli, Acting CEO and CFO Christian Must, Board Member 228 229 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT PricewaterhouseCoopers AS, Kystveien 14, NO-4841 Arendal T: 02316, org. no.: 987 009 713 MVA, www.pwc.no Statsautoriserte revisorer, medlemmer av Den norske Revisorforening og autorisert regnskapsførerselskap To the General Meeting of Arendals Fossekompani ASA Independent Auditor’s Report Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Arendals Fossekompani ASA, which comprise: • the financial statements of the parent company Arendals Fossekompani ASA (the Company), which comprise the statement of financial position as at 31 December 2022, the statement of income, statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and • the consolidated financial statements of Arendals Fossekompani ASA and its subsidiaries (the Group), which comprise the statement of financial position as at 31 December 2022, the statement of income, statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion • the financial statements comply with applicable statutory requirements, • the financial statements give a true and fair view of the financial position of the Company as at 31 December 2022, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU, and • the consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2022, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting 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 Au ditor’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’ I nternational Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. To the best of our knowledge and belief, no prohibited non-audit services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided. We have been the auditor of the Company for 5 years from the election by the general meeting of the shareholders on 26 April 2018 for the accounting year 2018. 2 / 6 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. The Group’s business activities are largely unchanged compared to last year. We have not identified regulatory changes, transactions or other event that qualified as new Key Audit Matters for our audit of the 2022 financial statements. Furthermore, Revenue over time from contracts with customers and Valuation of goodwill and intangible assets have the same characteristics and risks as in the prior year, and therefore continue to be areas of focus this year. Key Audit Matters How our audit addressed the Key Audit Matter Revenue over time from contracts with customers In 2022, revenue recognised over time from contracts with customers constituted NOK 1 656 674 thousand, equal to approximately 36% of total operating revenues. NOK 244 349 thousand of revenue re cognised over time is accrued income form uncompleted contracts at the balance -sheet date. Revenue over time from contracts with customers is recognized based on expected final outcome. Assessments of total contract cost, revenue and, if applicable, stage of completion are updated on a regular basis. There are several reasons why we consider revenue recognised over time to be a key audit matter. The Group has a significant volume of contracts where revenues are recognised over time. Additionally, these contracts may have a long duration and the allocat ion of contract revenue and costs is subject to management judgement which may be complex. Furthermore, management’s judgement affects several significant financial statement line items, and thus has a pervasive effect on the financial statement. Notes 1 and 13 to the consolidated financial statement, and the accounting principles, include additional information on the Group’s recognition of revenue over time from contracts with customers. We obtained a sample of contracts and assessed the accounting treatment against the Group’s accounting principles and IFRS 15 Revenue from contracts with customers . We found that the accounting treatment was consistent with the content of the contracts and that accounting principles were based on IFRS 15. Through meetings with management and project leader, including review of relevant documentation, we tested whether the Group had implemented controls to ensure that accounting for revenue over time reflects management’s best estimates with respect to total contract revenue, cost, and if applicable stage of completion. We found that controls had been implemented at various levels of the organisation, and that the controls included periodic meetings to review open contracts. Estimating project revenue and associated costs, and if applicable calculating stage of completion requires judgement. We performed various procedures to assess whether management’s judgements were reasonable, including: • Interviewed project leaders and management challenging judgements made with respect to project estimates. • Compared expenses and hours incurred to budgeted expenses and hours. • Compared actual outcome on completed project against initial budget. 230 231 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT 3 / 6 • If applicable assessed whether stage of completion on open projects corresponds to amounts recognised in the financial statements. We found that assumptions used, and judgements made by management were reasonable. We further evaluated the disclosures in note 1 and 13 and found them to be adequate and appropriate. Valuation of goodwill and intangible assets On 31 December 2022 the carrying amount of goodwill and intangible assets in the Group’s financial statements was NOK 1 756 782 thousand, equal to approximately 22% of total assets. Goodwill and intangible assets with indefinite economic life are tested for impairment at least annually. Impairment testing is performed at the level of cash generating unit. When testing for impairment, the carrying amount is compared to the recoverable amount. The recoverable amount is determined based on value in use or fair value less cost of disposal. On 31 December 2022, management’s impairment assessment indicated that the recoverable amount exceeded the carrying amount for all c ash generating units where goodwill and intangible assets were recognised. As a result, no impairment was recorded. We focused on valuation of goodwill and intangible assets because these assets constitute a significant share of the Group’s total assets, and because calculation of the recoverable amount requires application of significant judgement by management. Refer to note 6 to the consolidated financial statements for further information on goodwill and intangible assets, cash generating units and im pairment testing. We obtained and gained an understanding of management’s impairment assessment related to goodwill and intangible assets. Our procedures included an assessment of the valuation method and whether key assumptions used by management appeared reasonable based on our understanding of the business and industry of each relevant cash generating unit. We also traced data used in valuation models to underlying documentation. Based on our audit procedures we found that valuation methods used were reasonable and consistent with our understanding of the business and industry. Our testing of data against underlying documentation did not uncover material exceptions. While we did not find evidence to indicate that goodwill or intangible assets were impaired, we note that the valuation of cash generating units is sensitive to changes in assumptions. Lastly, we evaluated the information provided in note 6 to the consolidated financial statements where management describes the Group’s goodwill and intangible assets and the results of the impairment testing. We found that the disclosures described management’s valuation of goodwill and intangible assets appropriately. 4 / 6 Other Information The Board of Directors and the Managing Director (management) are responsible for the information in the Board of Directors’ report and the other information accompanying the financial statements. The other information comprises information in the annual report, but does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the information in the Board of Directors’ report nor the other information accompanying the financial statements. In connection with our audit of the financial statements, our responsibility is to read the Board of Directors’ report and the other information accompanying the financial statements. The purpose is to consider if there is material inconsisten cy between the Board of Directors’ report and the other information accompanying the financial statements and the financial statements or our knowledge obtained in the audit, or whether the Board of Directors’ report and the other information accompanying the financial statements otherwise appear to be materially misstated. We are required to report if there is a material misstatement in the Board of Directors’ report or the other information accompanying the financial statements. We have nothing to report in this regard. Based on our knowledge obtained in the audit, it is our opinion that the Board of Directors’ report • is consistent with the financial statements and • contains the information required by applicable statutory requirements. Our opinion on the B oard of Director’s report applies correspondingly to the statements on Corporate Governance and Corporate Social Responsibility. Responsibilities of Management for the Financial Statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company’s and the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error. We design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The 232 233 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT 5 / 6 risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's and the Group's internal control. • evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's and the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company and the Group to cease to continue as a going concern. • evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves a true and fair view. • obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the Board of Directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. 6 / 6 Report on Other Legal and Regulatory Requirements Report on Compliance with Requirement on European Single Electronic Format (ESEF) Opinion As part of the audit of the financial statements of Arendals Fossekompani ASA, we have performed an assurance engagement to obtain reasonable assurance about whether the financial statements included in the annual report, with the file name AFK Annual Report 2022.zip, have been prepared, in all material respects, in compliance with the requirements of the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) and regulation pursuant to Section 5-5 of the Norwegian Securities Trading Act, which includes requirements related to the preparation of the annual report in XHTML format, and iXBRL tagging of the consolidated financial statements. In our opinion, the financial statements, included in the annual report, have been prepared, in all material respects, in compliance with the ESEF regulation. Management’s Responsibilities Management is responsible for the preparation of the annual report in compliance with the ESEF regulation. This responsibility comprises an adequate process and such internal control as management determines is necessary. Auditor’s Responsibilities For a description of the auditor’s responsibilities when performing an assurance engagement of the ESEF reporting, see: https://revisorforeningen.no/revisjonsberetninger Arendal, 11 April 2023 PricewaterhouseCoopers AS Lars Ole Lindal State Authorised Public Accountant 234 235 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 FINANCIAL STATEMENTS ANNUAL AND SUSTAINABILITY REPORT Appendix 06 GRI Content Index 238 Independent Auditor’s Statement 246 List of Abbreviations 248 Additional Reports 250 Activity and Reporting Obligations Report 2022 Carbon Accounting Report 2022 EU Taxonomy Report 2022 Human Rights and Transparency Act Report 2022 Remuneration Report 2022 TCFD: Climate-Risk Assessment Report 2022 About This Report 251 237 APPENDIX ANNUAL AND SUSTAINABILITY REPORT GRI Content Index Arendals Fossekompani has reported in accordance with the GRI Standards for the reporting period 1 January to 31 December 2022. Disclosure Disclosure description Omission Reference 1. THE ORGANIZATION AND ITS REPORTING PRACTICES 2-1 Organizational details Shareholder information (Stock Exchange Listing) Arendals Fossekompani in the world 2-2 Entities included in the organization’s sustainability reporting Notes to the ﬁnancial accounts (Note 1) About this report 2-3 Reporting period, frequency and contact point About this report 2-4 Restatements of information About this report 2-5 External assurance About this report Corporate Governance report (Auditor) 2. ACTIVITY AND WORKERS 2-6 Activities, value chain and other business relationships Who we are Arendals Fossekompani Group Stakeholder dialogue and materiality analysis Responsible supply chain 2-7 Employees The disclosure requirements are met with one minor exception: AFK did not manage to gather information about non-guarenteed hour employ- ees in 2022, but will improve data gathering processes and plans to obtain the information in 2023. Diversity and equality 2-8 Workers who are not employees Information not available: The company did not manage to gather this information for all portfolio companies in 2022, but will improve data gathering processes and plans to obtain the information in 2023. Disclosure Disclosure description Omission Reference 3. GOVERNANCE 2-9 Governance structure and composition Corporate governance report (Board of Directors: Composition and independence, Nominations committee, The work of the Board of Directors, Guidelines for equality and diversity) 2-10 Nomination and selection of the highest governance body Corporate governance report (Board of Directors: Composition and Independence, Nominations committee) 2-11 Chair of the highest governance body Corporate governance report (Board of Directors: Composition and Independence) 2-12 Role of the highest governance body in overseeing the management of impacts Corporate governance report (The work of the Board of Directors, The Board’s tasks) 2-13 Delegation of responsibility for managing impacts Corporate governance report (The work of the Board of Directors, The Board's tasks og Notice of board meetings and meeting procedures.) 2-14 Role of the highest governance body in sustainability reporting Corporate governance report (The work of the Board of Directors, The board's tasks) About this report 2-15 Conﬂict of interest Corporate governance report (Board of Directors: Composition and independence, Independence of Board of Directors) 2-16 Communication of critical concerns Corporate governance report (Risk management and internal control, Critical concerns) 2-17 Collective knowledge of the highest governance body Corporate governance report (The work of the Board of Directors, Critical concerns) 2-18 Evaluation of the per - formance of the highest governance body Corporate governance report (The work of the Board of Directors, Self-assessment) 2-19 Remuneration policies Corporate governance report (Remuneration of senior executives) https://afk-assets.fra1.digitaloceanspaces.com/web- site/documents/Policy-for-remuneration-of-executive- management-in-AFK.pdf 2-20 Process to determine remuneration Corporate governance report (Remuneration of Senior Executives, The work of the Board of Directors) 2-21 Annual total compensation ratio a. The disclosure require- ments are met based on calculations using average salary, not median. b. As this is a new requirement we did not collect salary information in 2021 and could therefore not calculate percentage increase for 2022. Diversity and equality (performance) Remuneration report GRI 2 - General Disclosures 2021 238 239 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 APPENDIX ANNUAL AND SUSTAINABILITY REPORT Disclosure Disclosure description Omission Reference 4. STRATEGY, POLICIES AND PRACTICES 2-22 Statement on sustainable development strategy CEO statement 2-23 Policy commitments Responsible supply chain Anti-corruption and bribery Corporate governance report (Risk management and internal control) 2-24 Embedding policy commitments Human Rights and Transparency Act Report 2022 Corporate Governance report 2-25 Processes to remediate negative impacts Responsible supply chain 2-26 Mechanisms for seeking advice and raising concerns Human Rights and Transparency Act Report 2022 AFK Parent Company 2-27 Compliance with laws and regulations Responsible supply chain 2-28 Membership associations Membership associations 5. STAKEHOLDER ENGAGEMENT 2-29 Approach to stakeholder engagement Stakeholder dialogue and materiality analysis 2-30 Collective bargaining agreements Information not available: The company did not manage to gather this information for all portfolio companies in 2022, but will improve data gathering processes and plans to obtain the information in 2023. GRI 3 - Material topcis GRI 3: Material topics 2021 3-1 Process to determine material topcis Stakeholder dialogue and materiality analysis Strategic focus areas 3-2 List of material topics Stakeholder dialogue and materiality analysis RESPONSIBLE INVESTMENTS New investments GRI 3: Material topics 2021 3-3 Management of material topics New investments Stakeholder dialogue and materiality analysis AFK KPI AFK KPI Turnover EU Taxonomy Summary AFK KPI Capex EU Taxonomy Summary AFK KPI Opex EU Taxonomy Summary Disclosure Disclosure description Omission Reference Green ﬁnancing GRI 3: Material topics 2021 3-3 Management of material topcis Green ﬁnancing Stakeholder dialogue and materiality analysis AFK KPI AFK KPI Percentage of loans with green proﬁle Green ﬁnancing (Performance) OPTIMIZING PORTFOLIO COMPANIES Economic performance GRI 3: Material topics 2021 3-3 Management of material topcis Economic performance Stakeholder dialogue and materiality analysis GRI 201: Economic performance 2016 201-1 Direct economic value generated and distributed Financial statements 201-2 Financial implications and other risks and opportunities due to climate change TCFD: Climate-Risk Assessment Report 2022 Strenghtening sustainability performance GRI 3: Material topics 2021 3-3 Management of material topcis Strengthening environmental performance Reporting frameworks Stakeholder dialogue and materiality analysis GRI 305: Emissions 2016 305-1 Direct (Scope 1) GHG emissions Strengthening environmental performance (Performance) 305-2 Direct (Scope 2) GHG emissions Strengthening environmental performance (Performance) Carbon Accounting Report 2022 305-3 Other indirect (Scope 3) GHG emissions Strengthening environmental performance (Performance) GRI 302: Energy 2016 302-1 Energy consumption within the organization Strengthening environmental performance (Performance) 240 241 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 APPENDIX ANNUAL AND SUSTAINABILITY REPORT Disclosure Disclosure description Omission Reference ETHICAL BUSINESS CONDUCT Anti-corruption GRI 3: Material topics 2021 3-3 Management of material topcis Anti-corruption and bribery Stakeholder dialogue and materiality analysis GRI 205: Anti-Corruption (2016) 205-1 Operations assessed for risks related to corruption Anti-corruption and bribery (Performance) 205-2 Communication and training about anti-corruption policies and procedures The disclosure requirements are met with one minor exception: AFK did not manage to gather this for business partner in 2022, but will improve data gathering processes and plans to obtain the information in 2023. Anti-corruption and bribery (Performance) 205-3 Conﬁrmed incidents of corruption and actions taken Anti-corruption and bribery (Performance) Responsible supply chain GRI 3: Material topics 2021 3-3 Management of material topcis Responsible supply chain Stakeholder dialogue and materiality analysis GRI 414 414-1 New suppliers that were screened using social criteria The disclosure require- ment is met for Arendals Fossekompani Parent company. Information on other portfolio companies is not available. We will improve data gathering processes and plan to report for the entire group in 2023. Human Rights and Transparancy Act Report 2022 414-2 Negative social impacts in the supply chain and actions taken Human Rights and Transparency Act Report 2022 (Risk of negative consequences) Information security GRI 3: Material topics 2021 3-3 Management of material topcis Information security Stakeholder dialogue and materiality analysis AFK KPI AFK KPI Training of people in ICT security Information security (Approach) Disclosure Disclosure description Omission Reference A GREAT PLACE TO WORK Diversity and equality GRI 3: Material topics 2021 3-3 Management of material topcis Diversity and equality GRI 405: Diversity and Equal Opportunity 2016 405-1 Diversity of governance bodies and employees Diversity and equality (Performance) 405-2 Ratio of basic salary and remuneration of women to men Diversity and equality (Performance) GRI 406: Non-discrimination 2016 406-1 Incidents of discrimi - nation and corrective actions taken Diversity and equality (Performance) Employee satisfaction & talent attractiveness GRI 3: Material topics 2021 3-3 Management of material topcis Employee satisfaction & talent attractiveness GRI 401: Employment 2016 401-1 New employee hires and employee turnover Employee satisfaction & talent attractiveness 401-2 Beneﬁts provided to full-time employees that are not provided to temporary or part- time employees Information not available: The company did not manage to gather this information for all portfolio companies in 2022, but will improve data gathering processes and plans to obtain the information in 2023. AFK KPI AFK KPI Parental leave Employee satisfaction & talent attractiveness (Performance) 242 243 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 APPENDIX ANNUAL AND SUSTAINABILITY REPORT Disclosure Disclosure description Omission Reference Health and safety GRI 3: Material topics 2021 3-3 Management of material topcis Health and safety (Materiality, Approach, Looking forward) Board of Directors' Report for 2022 (Personell, Equal opportunity) Stakeholder dialogue and materiality analysis GRI 403: Occupational health and safety 2018 403-1 Occupational health and safety management system Information not available: Information only for AFK Hydropower. The company did not manage to gather this information for all portfolio companies in 2022, but will improve data gathering pro- cesses and plans to obtain the information in 2023. Health and safety (Performance) 403-2 Hazard identiﬁcation, risk assessment, and incident investigation Information not available: Information only for AFK Hydropower. The company did not manage to gather this information for all portfolio companies in 2022, but will improve data gathering pro- cesses and plans to obtain the information in 2023. Health and safety (Performance) 403-3 Occupational health services Information not available: Information only for AFK Hydropower. The company did not manage to gather this information for all portfolio companies in 2022, but will improve data gathering pro- cesses and plans to obtain the information in 2023. Health and safety (Performance) 403-4 Worker participation, consultation, and communication on occupational health and safety Information not available: Information only for AFK Hydropower. The company did not manage to gather this information for all portfolio companies in 2022, but will improve data gathering pro- cesses and plans to obtain the information in 2023. Health and safety (Performance) 403-5 Worker training on occupational health and safety Information not available: Information only for AFK Hydropower. The company did not manage to gather this information for all portfolio companies in 2022, but will improve data gathering pro- cesses and plans to obtain the information in 2023. Health and safety (Performance) Disclosure Disclosure description Omission Reference 403-6 Promotion of worker health Information not available: Information only for AFK Hydropower. The company did not manage to gather this information for all portfolio companies in 2022, but will improve data gathering pro- cesses and plans to obtain the information in 2023. Health and safety (Performance) 403-7 Prevention and mitigation of occupa- tional health and safety impacts directly linked by business relationships Information not available: Information only for AFK Hydropower. The company did not manage to gather this information for all portfolio companies in 2022, but will improve data gathering pro- cesses and plans to obtain the information in 2023. Health and safety (Performance) COMMUNITY ENGAGEMENT Sponsorship, partnerships and other investments 3-3 Management of material topics Community Engagement Stakeholder dialogue and materiality analysis GRI 413: Local communities 2016 413-1 Operations with local community engagement, impact assessments and development programs Community Engagement (Performance) AFK KPI AFK KPI No. of projects supported Community Engagement (Performance) 244 245 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 APPENDIX ANNUAL AND SUSTAINABILITY REPORT PricewaterhouseCoopers AS, Kystveien 14, 4841 Arendal T: 02316, org. no.: 987 009 713 MVA, www.pwc.no Statsautoriserte revisorer, medlemmer av Den norske Revisorforening og autorisert regnskapsførerselskap To the Board of Directors of Arendals Fossekompani ASA Independent statement regarding Arendals Fossekompani ASA’s sustainability reporting We have undertaken a limited assurance engagement of Arendals Fossekompani ASA’s GRI Index and Scope 1 and Scope 2 (location and market based) emissions for the period 1 January 2022 - 31 December 2022 as presented in Arendals Fossekompani Integrated Report 2022 (sustainability reporting). Our assurance engagement was conducted to obtain limited assurance. Arendals Fossekompani’s GRI index for 2022 is an overview of which sustainability topics Arendals Fossekompani considers material to its business and which sustainability disclosures Arendals Fossekompani uses to measure and report its sustainability performance, together with a reference to where material sustainability information is reported. Arendals Fossekompani’s GRI Index for 2022 is available and included in Arendals Fossekompani’s Integrated Report 2022 for the period ending 31 December 2022. We have examined whether Arendals Fossekompani has developed a GRI Index for 2022 and whether mandatory disclosures are reported according to the Standards published by the Global Reporting Initiative ( www.globalreporting.org/standards ) (criteria) Arendals Fossekompani has prepared its Scope 1 and Scope 2 (location and market based) emissions in line with the Greenhouse Gas Protocol - A Corporate Accounting and Reporting Standard (2004) (the Criteria). We have examined whether the scope 1 and scope 2 emissions have been calculated, estimated and reported in accordance with the Criteria as presented in the Integrated Report, chapter 04 Sustainability, subchapter Optimizing Portfolio Companies, section “Strengthening Environmental Performance”. Management's responsibility Management is responsible for Arendals Fossekompani’s sustainability reporting and for ensuring that it is prepared in accordance with criteria as described above. The responsibility includes designing, implementing and maintaining an internal control that ensures the development and reporting of the GRI Index and scope 1 and scope 2 emissions . GHG quantification is subject to inherent uncertainty because of incomplete scientific knowledge used to determine emissions factors and the values needed to combine emissions of different gases. Our independence and quality control We are independent of the company in accordance with the law and regulations 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 ethical obligations in accordance with these requirements. We use ISQM 1 - Quality management for firms that perform audits or reviews of financial statements, or other assurance or related services engagements and maintain a comprehensive system of quality control including documented guidelines and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory claim. Auditor's responsibilities Our responsibility is to express a limited assurance conclusion on Arendals Fossekompani’s sustainability reporting based on the procedures we have performed and the evidence we have (2) obtained. We conducted our work in accordance with the Standard on Assurance Engagements ISAE 3000: “Assurance engagements other than audits or review of historical financial information",and, in respect of greenhouse gas emissions, “International Standard on Assurance Engagements 3410, Assurance Engagements on Greenhouse Gas Statements”. A limited assurance engagement involves assessing the suitability in the circumstances of management's use of the criteria as the basis for the preparation of the sustainability reporting, assessing the risks of material misstatement of the sustainability reporting whether due to fraud or error, responding to the assessed risks as necessary in the circumstances, and evaluating the overall presentation of the sustainability reporting. A limited assurance engagement is substantially less in scope than a reasonable assurance engagement in relation to both the risk assessment procedures, including an understanding of internal control, and the procedures performed in response to the assessed risks. The procedures we performed were based on our professional judgement and, among others, included an assessment of whether the criteria used are appropriate, as well as an assessment of the overall presentation of the sustainability reporting. Our procedures also included meetings with representatives from Arendals Fossekompani who are responsible for the material sustainability topics covered by the sustainability reporting; review of internal control and routines for reporting GRI Index and scope 1 and 2 emissions; obtaining and reviewing relevant information that supports the preparation of scope 1 and scope 2 emissions; assessment of completeness and accuracy of GRI sustainability disclosures and scope 1 and 2 emissions; and controlling the calculations of scope 1 and scope 2 emissions based on an assessment of the risk of error. The procedures performed in a limited assurance engagement vary in nature and timing from, and are less in extent than for, a reasonable assurance engagement. Consequently, the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained had we performed a reasonable assurance engagement. Accordingly, we do not express a reasonable assurance opinion about whether the sustainability reporting has been prepared, in all material respects, in accordance with the criteria. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion. Conclusion Based on the procedures we have performed and the evidence we have obtained, nothing has come to our attention that causes us to believe that Arendals Fossekompani ASA’s GRI Index for 2022 is not, in all material respects, developed in accordance with the requirements of the Standards published by The Global Reporting Initiative. Based on the procedures we have performed and the evidence we have obtained, nothing has come to our attention that causes us to believe that Arendals Fossekompani ASA’s Scope 1 and Scope 2 (location and market based) emissions for the period 1 January 2022 - 31 December 2022 is not prepared, in all material respects, in accordance with the Criteria. Arendal, 11 April 2023 PricewaterhouseCoopers AS Hanne Sælemyr Johansen State Authorized Public Accountant 246 247 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 APPENDIX ANNUAL AND SUSTAINABILITY REPORT List of Abbreviations AC Audit Committee AFK Arendals Fossekompani AM Additive Manufacturing AMGTA Additive Manufacturer Green Trade Association ARP Activity and Reporting Obligations BCoC Business Partner Code of Conduct BOD Board of Directors CAD Cash Available for Distribution CSRD Corporate Sustainability Reporting Directive CDP Carbon Disclosure Project CapEx Capital Expenditure CEO Chief Executive Ofﬁcer CFO Chief Financial Ofﬁcer CoC Code of conduct CSO Chief Sustainability Ofﬁcer CSR Corporate Social Responsibility DCF Discounted Cash Flow DNSH Do No Signiﬁcant Harm EAT Earning after tax EBT Earnings before tax EBIT Earnings before interest and taxes EBITDA Earnings Before Interest, Taxes Depreciation, and Amortization EU European union ERP Enterprise Resource Planning ESG Environmental, Social and Governance GHG Greenhouse Gas GRI Global Reporting Initiative GWh Gigawatt hours HR Human Resources HSE Health, Safety, and Environment HSSE Health, Safety, Security and Environment IFRS International Financial Reporting Standards ICT Information and Communication Technologies IEA International Energy Agency ILO Declaration of the International Labour Organisation inp Interestbearing current borrowings IoT Internet of Things IR Injury Rate ISO International Organisation for Standardisation KPI Key Performance Indicator kWh Kilowatt hours LCA Life Cycle Assessment LEO Low Earth Orbit LTIR Lost Time Incident Rate MACD Moving Average Convergence Divergence MAR Market Abuse Regulation M&A Mergers and Acquisitions MoD Ministry of Defense MoU Memorandum of Understanding MWh Megawatt hours NAA Norwegian Accounting Act NGO Non Governmental Organisation NHO Confederation of Norwegian Enterprises NVE The Norwegian Water Resources and Energy Directorate OCI Other Comprehensive Income OECD The Organisation for Co-operation and Development OHS Occupational Health and Safety OpEx Operating Expenditure R&D Research and Development SaaS Software-as-a-Service SASB Sustainability Accounting Standards Board SBTi Science Based Target initiative SCoC Supplier Code of Conduct SDG Sustainable Development Goal SQM Square meter TCFD Task Force on Climate-related Financial Disclosures TRIR Total Recordable Incident Rate TSC Technical Screening Criteria UN United Nations WACC Weighted Average Cost of Capital 248 249 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 APPENDIX ANNUAL AND SUSTAINABILITY REPORT This is Arendals Fossekompani’s ﬁrst fully integrated ﬁnancial and sustainability report. The report was published on 12 April, and the information refers to the reporting period 1 January to 31 December 2022. Arendals Fossekompani publishes ﬁnancial and sustainability reports on an annual basis, and prior reports can be found on our website: www.arendalsfossekompani.no. No restatement of information has been made from previous reporting periods. The ﬁnancial statements for the Parent Company and the Group are prepared in accordance with the principles in the International Financial Reporting Standard (IFRS) as adopted by the European Union. This report is prepared in accordance with the 2021 Global Reporting Initiative (GRI) Standard. The information related to the GRI disclosures are provided for all portfolio companies in the group, unless otherwise stated. The information regarding sustainability in the annual report is consolidated in the same way as for the ﬁnancial information, except for the climate accounting which is established and consolidated using an operational control method in the GHG Protocol Standard. For information about other reporting frameworks, please refer to the 4.0 Sustainability chapter of this report. The report has been read and approved by senior executives and the Board of Directors of Arendals Fossekompani. To ensure transparency and reliability of the reported GRI Index and Scope 1 and Scope 2 GHG emissions, a limited assurance has been carried out by our auditing ﬁrm PricewaterhouseCoopers (PwC). A statement on the assurance is available as an appendix to this report. For questions about this report and its contents, please contact our Interim Chief Executive Ofﬁcer, Lars Peder Fensli at [email protected]. For questions related to sustainability, please contact our Chief Sustainability Ofﬁcer, Ingunn Ettestøl at [email protected] Activity and Reporting Obligations Report 2022 Carbon Accounting Report 2022 EU Taxonomy Report 2022 Human Rights and Transparency Act Report 2022 Remuneration Report 2022 TCFD: Climate-Risk Assessment Report 2022 Additional Reports About This Report 250 251 ARENDALS FOSSEKOMPANI INTEGRATED REPORT 2022 ANNUAL AND SUSTAINABILITY REPORT APPENDIX VISITING ADDRESS Langbryggen 9 4841 Arendal POSTAL ADDRESS Box 280 4803 Arendal +47 37 23 44 00 ﬁ[email protected] arendalsfossekompani.no © Arendals Fossekompani ASA. All Rights Reserved.

AI Terminal

More from Arendals Fossekompani

Talk to a Data Expert