Scatec ASA

Scatec Annual Report 2022 5967007LIEEXZXIARK36 2022-01-01 2022-12-31 5967007LIEEXZXIARK36 2022-12-31 5967007LIEEXZXIARK36 2021-12-31 5967007LIEEXZXIARK36 2021-12-31 5967007LIEEXZXIARK36 2021-01-01 2021-12-31 5967007LIEEXZXIARK36 2020-12-31 5967007LIEEXZXIARK36 2020-12-31 ifrs-full:IssuedCapitalMember 5967007LIEEXZXIARK36 2021-01-01 2021-12-31 ifrs-full:IssuedCapitalMember 5967007LIEEXZXIARK36 2021-12-31 ifrs-full:IssuedCapitalMember 5967007LIEEXZXIARK36 2020-12-31 ifrs-full:SharePremiumMember 5967007LIEEXZXIARK36 2021-01-01 2021-12-31 ifrs-full:SharePremiumMember 5967007LIEEXZXIARK36 2021-12-31 ifrs-full:SharePremiumMember 5967007LIEEXZXIARK36 2020-12-31 ifrs-full:RetainedEarningsMember 5967007LIEEXZXIARK36 2021-01-01 2021-12-31 ifrs-full:RetainedEarningsMember 5967007LIEEXZXIARK36 2021-12-31 ifrs-full:RetainedEarningsMember 5967007LIEEXZXIARK36 2020-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 5967007LIEEXZXIARK36 2021-01-01 2021-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 5967007LIEEXZXIARK36 2021-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 5967007LIEEXZXIARK36 2020-12-31 ifrs-full:ReserveOfGainsAndLossesOnHedgingInstrumentsThatHedgeInvestmentsInEquityInstrumentsMember 5967007LIEEXZXIARK36 2021-01-01 2021-12-31 ifrs-full:ReserveOfGainsAndLossesOnHedgingInstrumentsThatHedgeInvestmentsInEquityInstrumentsMember 5967007LIEEXZXIARK36 2021-12-31 ifrs-full:ReserveOfGainsAndLossesOnHedgingInstrumentsThatHedgeInvestmentsInEquityInstrumentsMember 5967007LIEEXZXIARK36 2020-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 5967007LIEEXZXIARK36 2021-01-01 2021-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 5967007LIEEXZXIARK36 2021-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 5967007LIEEXZXIARK36 2020-12-31 ifrs-full:NoncontrollingInterestsMember 5967007LIEEXZXIARK36 2021-01-01 2021-12-31 ifrs-full:NoncontrollingInterestsMember 5967007LIEEXZXIARK36 2021-12-31 ifrs-full:NoncontrollingInterestsMember 5967007LIEEXZXIARK36 2021-12-31 ifrs-full:IssuedCapitalMember 5967007LIEEXZXIARK36 2022-01-01 2022-12-31 ifrs-full:IssuedCapitalMember 5967007LIEEXZXIARK36 2022-12-31 ifrs-full:IssuedCapitalMember 5967007LIEEXZXIARK36 2021-12-31 ifrs-full:SharePremiumMember 5967007LIEEXZXIARK36 2022-01-01 2022-12-31 ifrs-full:SharePremiumMember 5967007LIEEXZXIARK36 2022-12-31 ifrs-full:SharePremiumMember 5967007LIEEXZXIARK36 2021-12-31 ifrs-full:RetainedEarningsMember 5967007LIEEXZXIARK36 2022-01-01 2022-12-31 ifrs-full:RetainedEarningsMember 5967007LIEEXZXIARK36 2022-12-31 ifrs-full:RetainedEarningsMember 5967007LIEEXZXIARK36 2021-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 5967007LIEEXZXIARK36 2022-01-01 2022-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 5967007LIEEXZXIARK36 2022-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 5967007LIEEXZXIARK36 2021-12-31 ifrs-full:ReserveOfGainsAndLossesOnHedgingInstrumentsThatHedgeInvestmentsInEquityInstrumentsMember 5967007LIEEXZXIARK36 2022-01-01 2022-12-31 ifrs-full:ReserveOfGainsAndLossesOnHedgingInstrumentsThatHedgeInvestmentsInEquityInstrumentsMember 5967007LIEEXZXIARK36 2022-12-31 ifrs-full:ReserveOfGainsAndLossesOnHedgingInstrumentsThatHedgeInvestmentsInEquityInstrumentsMember 5967007LIEEXZXIARK36 2021-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 5967007LIEEXZXIARK36 2022-01-01 2022-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 5967007LIEEXZXIARK36 2022-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 5967007LIEEXZXIARK36 2021-12-31 ifrs-full:NoncontrollingInterestsMember 5967007LIEEXZXIARK36 2022-01-01 2022-12-31 ifrs-full:NoncontrollingInterestsMember 5967007LIEEXZXIARK36 2022-12-31 ifrs-full:NoncontrollingInterestsMember iso4217:NOK iso4217:NOK xbrli:shares Annual Report 2022 2 Scatec ASA - Annual Report 2022 3 4 Scatec ASA - Annual Report 2022 5 6 Scatec ASA - Annual Report 2022 7 8 Scatec ASA - Annual Report 2022 9 10 Scatec ASA - Annual Report 2022 11 12 Scatec ASA - Annual Report 2022 13 14 Scatec ASA - Annual Report 2022 15 16 Scatec ASA - Annual Report 2022 17 18 Scatec ASA - Annual Report 2022 19 20 Scatec ASA - Annual Report 2022 21 22 Scatec ASA - Annual Report 2022 23 24 Scatec ASA - Annual Report 2022 25 26 Scatec ASA - Annual Report 2022 27 28 Scatec ASA - Annual Report 2022 29 30 Scatec ASA - Annual Report 2022 31 32 Scatec ASA - Annual Report 2022 33 34 Scatec ASA - Annual Report 2022 35 36 Scatec ASA - Annual Report 2022 37 38 Report from the Board of Directors Scatec ASA - Annual Report 2022 39 - 1,000 2,000 3,000 4,000 5,000 6,000 7,000 2019 2020 2021 2022 Revenues EBITDA Highlights 2022 ● Proportionate revenues of NOK 5,957 million (4,329) and EBITDA of NOK 2,550 million (2,686) ¹⁾ ● Stable operational performance across the portfolio, while financials were impacted by the Russian invasion of Ukraine ● Started construction of new power plants totalling 1.2 GW in South Africa, Brazil, and Pakistan, representing 25% of Scatec’s NOK 10 billion 2027 equity investment target ● Announced sharpened strategy and revised growth targets ● Received ‘A’ score in ESG reporting by Position Green, and recognised with ‘A’ score by CDP ● The Board proposes dividends of NOK 1.94 per share and adjusted dividend policy for 2023 and onwards Proportionate revenues and EBITDA by year Key figures NOK million FY 2022 FY 2021 Proportionate Financials ²⁾ Total revenues and other income 5,957 4,329 Power Production⁴⁾ 4,521 3,890 Services 312 260 Development & Construction 1,069 137 Corporate 56 42 EBITDA 2,550 2,686 Power Production 2,835 2,949 Services 74 75 Development & Construction -221 -223 Corporate -138 -114 Operating profit (EBIT) 460 1,606 Power Production 917 1,977 Services 68 70 Development & Construction -358 -301 Corporate -167 -140 Profit/loss -1,213 285 Net interest- bearing debt ²⁾ 18,215 15,175 Power production (GWh) ³⁾ 3,898 3,823 Scatec share of distribution from operation companies 1,231 1,603 Consolidated Financials Revenues and other income 3,751 3,803 EBITDA ²⁾ 2,555 2,903 Operating profit (EBIT) 723 2,012 Profit/(loss) -1,228 456 Net interest- bearing debt ²⁾ 19,578 14,949 Basic earnings per share (NOK) -8.40 2.45 Power Production (GWh) 9,381 9,729 1) Amounts from same period last year in brackets 2) See Alternative Performance Measures appendix for definition 3) Production volume on a 100% basis from all entities, including JV companies 4) Revenue from power production for 2021 has been adjusted due to change in accounting policy as disclosed in Note 29 40 Introduction Scatec is a leading renewable energy solutions provider, accelerating access to reliable and affordable clean energy in emerging markets. As a long-term player, we develop, build, own and operate renewable energy plants, with 4.6 GW in operation and under construction across four continents today. We are committed to grow our renewable energy capacity, delivered by our close to 800 passionate employees and partners who are driven by a common vision of ‘Improving our Future’. 2022 Summary Business strategy and growth ● Sharpened strategy centred around growing renewables in our focus markets, advancing green hydrogen and optimising our portfolio ● Started construction of new power plants in South Africa, Brazil and Pakistan, totalling 1.2 GW, and finalised 10 percent of the construction work during 2022 ● The green hydrogen project in Egypt with an electrolyser capacity of 100 MW was further progressed and moved into backlog ● Project pipeline and backlog of 16.7 GW was further matured during the year, with 85% held in our focus markets Operational ● Stable operations and production in line with guidance across the asset portfolio ● Total proportionate power production of 3,898 GWh generating an EBITDA of NOK 2,835 million ● Financial performance in Ukraine impacted by the Russian invasion Organisation and people ● Terje Pilskog started as new CEO on 1 May 2022 ● Executive Management Team expanded to strengthen regional set-up ● Expanded the full-time workforce with 156 employees to 778 employees during 2022 ● 50 different nationalities, a truly global company ● 29% female employees in management positions at the end 2022, compared to the 2022 target of 32%. ● DEIB programme launched to enhance attributes that are already embedded in our culture ● 2022 Statement on Equality and Non-discrimination is available on the corporate website Climate ● Annual GHG emissions avoided from our power plants reached 4.7 million tonnes (100%) ● On the ‘A’ List for tackling climate change by the Carbon Disclosure Project (CDP) ● Climate targets approved by SBTi in January 2023 – minimise direct emissions by 2030 and net zero across the value chain by 2040 EU Taxonomy 1) and reporting • All revenues, opex and investments are derived from EU Taxonomy eligible activities • Scatec’s revenue is 100%, Capex 91% and Opex 86% aligned to the Taxonomy • Detailed site-specific climate risk assessments completed for all solar, wind and hydropower projects • Quarterly reporting on key ESG indicators externally • Received ‘A’ score in ESG reporting by Position Green • Limited assurance on all GRI indicators according to ISAE 3000 HSSE • Delivered more than 4.5 million working hours with no fatalities or serious injuries during 2022 • The lost time incident frequency rate (LTIF) was 0.7 per million working hours resulting from three incidents • Certified to ISO 9001, 45001 and 14001 by DNV Human rights/supply chain ● Addressed forced labour concerns in China – collaboration with key suppliers on traceability ● Well prepared to report according to Transparency act as per 2023 requirements 2) ● EcoVadis supplier management programme implemented to screen suppliers of key procurement categories ● 151 grievances received, 87% were resolved and the remaining in the process of being resolved Anti-corruption and Compliance ● Scatec provides mandatory anti-corruption and code of conduct training to all employees. 100% of all employees have completed the training 1) For details, please refer to our EU Taxonomy Report 2022 available under ESG resources on the Company’s website 2) For the third party gap analysis summary and Scatec's action taken towards best practice and compliance to the Transparency Act, refer to the Company’s ESG Performance Report 2022 Scatec ASA - Annual Report 2022 41 Group – Proportionate Financials Please refer to Note 3 for details of the segment financials. Power Production Power Production revenues increased to NOK 4,521 million (3,890) in 2022. The reported revenues for 2022 are reflecting sale of electricity from solar power plants in Brazil, Czech Republic, Egypt, Honduras, Jordan, Malaysia, Mozambique, Rwanda, South Africa, Argentina and Ukraine, from hydro power plants in Philippines, Uganda and Laos and wind power in Vietnam. The increased revenues compared to 2021 is mainly explained by the Philippines, driven by significantly higher power sales at higher power prices, new power plants in operation and foreign currency effects, partly offset by lower revenues in Ukraine due to the ongoing war, and lower water inflow and production in Laos. In the Philippines, power is purchased in the power market in periods when contract sales volumes exceed production volumes, which generally occur during the dry season in the first half of the year, and sold in the market when production volumes exceed contract sales volumes, which generally occur during the wet season in the second half of the year. Production is further optimised to catch the highest possible spot prices which creates variances between actual production volumes and contract sales volumes in any given period. As such, some power will also be bought in the market in periods when production volumes exceed contract sales volumes and sold in the market when production volumes fall short of contract sales volumes. The purchase of power is captured in costs of sales. High power production and high power prices in the Philippines in 2022 lead to cost of sales of NOK 852 million (270) and gross profit of NOK 3,669 million (3,620). Operating expenses increased from last year due to more plants in operation and a credit loss provision of NOK 87 million on accounts receivable in Ukraine. Power Production EBITDA decreased to NOK 2,835 million ( 2,949 ) in 2022 explained by the factors above. Additionally, the decreased EBIT compared to 2021 is mainly explained by an impairment charge of NOK 770 million in the first quarter 2022 triggered by the Russian invasion of Ukraine. Installed capacity was 3,375 MW at year-end and full year production on proportionate basis reached 3,898 GWh, up from 3,823 GWh in 2021. The increase in production volumes is mainly driven by the Philippines, Argentina and Ukraine partly offset by a decrease in Laos and minor variations across the other power plants. Scatec’s proportionate share of cash flow to equity from Power Production was NOK 1,487 million, down from NOK 1,640 million in 2021. The decreased cash flow to equity compared to last year is mainly explained by the decrease in EBITDA. Cash flow to equity in 2022 includes NOK 363 million from debt refinancing of assets in South Africa and Vietnam. In 2021, NOK 397 million from debt refinancing of assets in the Philippines was included. For further details on financial results on a country-by-country basis please refer to Scatec’s Q1 to Q4 2022 historical financial information’ published on Scatec’s web page. Development & Construction (D&C) Revenues in Development & Construction ended at NOK 1,069 million (137) and gross profit at NOK 106 million (16) in 2022. The increase in revenues is explained by the projects under construction in South Africa, Brazil, and Pakistan. Operating expenses increased from last year due to higher spending on new project opportunities and higher construction activity. In 2022, operating expenses comprised of approximately NOK 237 million (179) for early-stage project development and NOK 90 million (60) related to construction activities. EBITDA for the year amounted to NOK -221 million (-223) in 2022 explained by the factors above. Scatec’s proportionate share of cash flow to equity from D&C was negative NOK 149 million, compared to negative NOK 164 million in 2021. Services Revenues in the Services segment reached NOK 312 million (260). The revenue growth is explained by the growing portfolio of producing assets. Operating expenses of NOK 237 million (186) in the segment mainly constitute fixed expenses such as personnel and recurring maintenance cost reflecting fixed maintenance schedules. The increase in operating expenses is explained by the growing portfolio of producing assets. EBITDA reached NOK 74 million (75), corresponding to an EBITDA margin of 24% (29%). The decrease in EBITDA margin compared with last year is explained by slightly higher operating expenses and a general reduction of margins on new contracts in the portfolio. 42 Scatec’s proportionate share of cash flow to equity from Services was NOK 58 million in 2022, slightly decreased from NOK 60 million in 2021. Corporate Corporate consists of activities such as corporate services, management, and group finance . The segment reported an EBITDA of NOK -138 million (-114) in 2022. Revenues in the corporate segment refers to management fees charged to other operating segments for corporate services rendered across the Group. Corporate incurred NOK 193 million (156) in operating expenses. The increase in operating expenses reflects continued strengthening of corporate function with a growing asset portfolio and project pipeline, and higher construction activities. Consolidated financial statements Consolidated income statement NOK million 2022 2021 Revenues 3,002 3,038 Net income/(loss) from JV and associated companies 749 765 Total revenues and other income 3,751 3,803 EBITDA 2,555 2,903 Operating profit (EBIT) 723 2,012 Profit before income tax -1,095 759 Profit/(loss) for the period -1,228 456 Profit/(loss) to Scatec -1,334 388 Profit/(loss) to non-controlling interests 106 68 Revenues Revenues from power sales was NOK 3,751 million (3,803) in 2022, broadly in line with last year. Operating Profit Earnings before interest, taxes, depreciation and amortisation (EBITDA) reached NOK 2,555 million in 2022, a decrease from NOK 2,903 million in 2021. The EBITDA was negatively impacted by a credit loss provision of NOK 98 million on accounts receivable in Ukraine, recognised in the first quarter 2022, and higher operating expenses related to construction activities and strengthening of corporate function with a growing asset portfolio and project pipeline. Depreciation, amortisation and impairment amounted to NOK 1,832 million in 2022, compared to NOK 892 million in 2021. The increase is mainly explained by impairments during 2022. In 2022, the Group recognised an impairment expense of NOK 948 million (76), of which 132 million related to discontinued development of projects in Mali, Bangladesh, India and Lesotho and NOK 816 million related to the solar power plants in Ukraine. Refer to Note 12 Impairment for further details. Operating profit (EBIT) ended at NOK 723 million in 2022, down from NOK 2,012 million in 2021 explained by the factors as above. Net financial items NOK million 2022 2021 Interest and other financial income 115 47 Interest and other financial expenses -1,666 -1,368 Net foreign exchange gains/(losses) -268 69 Net financial expenses -1,818 -1,253 The net financial expenses for the year are impacted by significant currency movements and increased interest rates compared with last year. Interest and other financial income of NOK 115 million (47) mainly relates to income on cash balances. Interest and other financial expenses of NOK 1,666 million (1,368) consist of interest expenses of NOK 1,424 million (NOK 1,303 million), an unrealised non-cash loss of NOK 89 million (-) on an USD/ZAR currency hedging contract related to RMIPPP, and other financial expenses of NOK 154 million (NOK 67 million). Scatec manages interest rate risk with a hedge ratio of approximately 80% for the non-recourse project level debt and approximately 20% for the corporate debt. The increase in interest expenses compared with last year is primarily explained by increased debt after refinancing in Egypt and South Africa and increased interest rates on unhedged debt at the corporate level. The increase in other financial expenses is mainly explained by non-recurring fees recognised for the refinancing of the power plants in Egypt, South Africa and Vietnam. The increase in foreign exchange losses in 2022 from positive NOK 69 million to negative NOK 268 million primarily driven by significant movements of USD and EUR against local currencies in countries where the group has USD and EUR as functional currencies. The losses for the year are mainly unrealised losses, primarily incurred in Egypt and Ukraine on translation of monetary assets and liabilities denominated in local currencies. Profit before tax and net profit The tax expense amounted to NOK 132 million in 2022, down from NOK 303 million in 2021. The difference between tax expense and calculated tax expense based on the Norwegian tax rate of 22% is impacted by different tax rates in the jurisdictions in which the companies operate, withholding taxes paid on Scatec ASA - Annual Report 2022 43 dividends, currency effects and effects from non-recognised tax losses. Further, the profit/loss from JVs and associates are reported net after tax which also impacts the effective tax rate. The difference between effective tax expense for the year 2022 and a calculated tax expense based on the Norwegian tax rate of 22% is also impacted by non-recognised deferred tax asset related to the impairment of the assets in Ukraine. For further details, refer to Note 7 Tax. Non-controlling interests (NCI) represent equity-investors in power plants co-owned by Scatec. The allocation of profits between NCI and Scatec is impacted by the fact that non- controlling interests (NCI) only represent shareholdings in the power plants that are fully consolidated, while Scatec also carries the cost of project development, construction, operation & maintenance and corporate functions. Profits allocated to NCI do not include net income from JVs and associated companies. Other comprehensive income, which comprises items that may subsequently be reclassified to profit or loss, amounted to NOK 986 million (317) in 2022. This relates to after-tax net movement of cash flow hedges of positive NOK 514 million (278) and foreign currency translation differences of NOK 472 million (40). During the year, NOK depreciated against the key currencies USD, MYR and BRL compared to the average rates of last year. On a net basis, the movement in average rates positively affected the translation of consolidated revenues to NOK by approximately NOK - 304 million, while the net impact on translation of net profit was approximately NOK - 84 million. Total comprehensive income was thus negative NOK 242 million (773) for 2022 of which negative NOK 648 million (595) was attributable to Scatec, while NOK 406 (178) million is attributable to non-controlling interests. Consolidated statement of cash flow Cash flow NOK million 2022 2021 Net cash flow from operating activities 756 2,072 Net cash flow from investing activities -1,406 -8,081 Net cash flow from financing activities 221 2,413 Net increase/(decrease) in cash and cash equivalents -428 -3,597 Net cash flow from consolidated operating activities amounted to NOK 756 million (2,072) in 2022, compared to EBITDA of NOK 2,550 million (2,686). The difference is primarily explained by change in net income from JVs and associated companies and changes in other assets and liabilities. Net cash flow from consolidated investing activities was negative NOK 1,406 million (8,081) driven by investments in property, plant and equipment related to power plants under construction in South Africa, Pakistan and Release projects and investments in associates and JV, mainly related to Mendubim. This was partly offset by distributions from JVs. The 2021 figures include a consideration of NOK 7,848 million paid for SN Power. Net cash flow from financing activities amounted to NOK 221 million (2,413). The main financing activities in 2022 is issuance of new debt in South Africa, refinancing of the existing non-recourse debt in South Africa, payment of interests and repayment of non- recourse financing in project companies as well as payment of dividend to equity holders of the parent company and NCI. In total, the Group’s cash balance was reduced by NOK 428 million (-3,597). Of the total cash balance of NOK 4,132 million (4,171), NOK 2,057 million (1,711) was restricted cash in power plant companies, NOK 223 million (91) represented other restricted cash while NOK 1,743 million (2,335) represented free cash at the Group level. Proportionate share of cash flow to equity Scatec’s “proportionate share of cash flow to equity”, is an alternative performance measure that seeks to estimate the Group’s ability to generate funds for equity investments in new power plant projects and/or for shareholder dividends over time. NOK million 2022 2021 Power production 1,487 1,640 Services 58 60 Development & Construction -149 -164 Corporate -347 -252 Sum 1,050 1,284 The cash flow to equity for Power Production for 2022 decreased compared to last year, mainly explained by the decrease in EBITDA and lower refinancing proceeds. Cash flow to equity in 2022 includes NOK 363 million from debt refinancing of assets in South Africa and Vietnam. The full year 2021 included NOK 397 million from debt refinancing of assets in the Philippines. The cash flow to equity in Services was approximately at the same level compared to last year. The cash flow to equity in the D&C segment for 2022 was impacted by construction activity in addition to increased development and construction costs. The cash flow to equity for the Corporate segment for 2022 primarily relates to operating expenses and interest expenses on corporate funding. The increase for the Corporate segment in 44 2022 is primarily explained by the increased interest rates on unhedged debt. Consolidated statement of financial position Assets NOK million 2022 2021 Property, plant and equipment and intangible assets 18,068 16,682 Investments in JV and associated companies 10,674 9,745 Other non-current assets 1,476 957 Total non-current assets 30,218 27,385 Other current assets 2,380 1,474 Cash and cash equivalents 4,132 4,171 Total current assets 6,512 5,645 Total assets 36,730 33,030 Total assets amounted to NOK 36,730 million at year-end 2022, up from NOK 33,030 million at the end of 2021. Non-current assets totaled NOK 30,218 million (27,385), the increase in non-current assets is primarily driven by construction activities in South Africa, Release and Pakistan, in addition to currency translations from weakening of NOK against USD, EUR and MYR. The increase is partly offset by NOK 742 million impairment of the Ukrainian solar plants, impairment of development projects of NOK 132 million and yearly depreciation of NOK 864 million. See Note 9 Property, plant and equipment and Note 12 Impairment for more information. The balance of investments in JVs and associated companies have increased due to appreciation of the functional currencies in the JVs, and investments in JVs mainly related to Mendubim. Net income from JVs and associated companies was NOK 749 million in 2022 and NOK 669 million was received as dividend. See Note 13 Investments in joint venture and associated companies for full reconciliation. Current assets amounted to NOK 6,512 million (5,645). The increase in current assets is primarily driven by working capital changes related to the construction of the RMIPPP project in South Africa. The cash balance is stable compared to 31 December 2021. Operating activities contribute positively with NOK 756 million in cash inflow for the financial year 2022. Cash outflows are mainly related to construction of plants and payment of non-recourse financing, dividends to NCI and payment of dividend to equity holders of the parent company. See the consolidated statement of cash flows for further details and Note 14 Cash, cash equivalents for a detailed breakdown of cash balances as well as an overview of movement of cash at the Recourse Group level. Equity and liabilities NOK million 2022 2021 Equity 8,803 9,919 Non-current non-recourse project financing 13,297 10,708 Non-current corporate financing 7,987 7,264 Other non-current liabilities 2,604 2,224 Total non-current liabilities 23,888 20,197 Current non-recourse project financing 1,963 1,147 Current corporate financing - - Trade payables and other current liabilities 2,076 1,766 Total current liabilities 4,039 2,913 Total liabilities 27,927 23,110 Total equity and liabilities 36,730 33,030 Book equity ratio 24% 30% Total equity decreased by NOK 1,117 million compared to 31 December 2021, driven by negative total comprehensive income for the period and dividend distributions to the equity holders of the parent company and NCI. Further details are given in the consolidated statement of changes in equity. Corporate financing consists of a listed green bond as well as financing secured in relation to the acquisition of SN Power in 2021. Changes in balance in 2022 is due to foreign currency translation. See Note 21 Corporate Financing for further details. Total non-recourse financing increased as of 31 December 2022 mainly as a result of issuance of NOK 3 080 million in project debt to the RMIPPP project in South Africa. Down payments of NOK 1,175 million have decreased the balance in 2022. The non- current portion of the Ukrainian debt was reclassified to current during the first quarter 2022 due to breach of covenants. See Note 21 for further details. Parent Company Scatec ASA prepares its financial statements according to Norwegian Generally Accepted Accounting Principles (NGAAP). Scatec ASA is a holding company comprising parts of corporate services, management and group finance. In addition, Scatec ASA provides certain services related to project development and construction for its subsidiaries. Scatec ASA reported revenues of NOK 751 million and operating loss (EBIT) of NOK 665 million in 2022, compared to revenues of NOK 166 million and operating loss (EBIT) of NOK 343 million in 2021. Scatec ASA - Annual Report 2022 45 Revenues increased from 2021 to 2022 due to higher construction activity. All revenues are Group internal and based on agreements established between Scatec ASA and its subsidiaries, joint ventures and associated companies. Cost of sales and operating expenses (excluding depreciation, amortisation and impairment) increased to NOK 1,266 million from NOK 456 million in 2021, reflecting higher construction activity. The number of employees increased from 116 to 146 following the Company’s growth. The Company recognised a write down of NOK 948 million booked to interest and other financial expenses in 2022. The write-down is related to both impairment of shares (NOK 341 million) and impairment of receivables to group companies in Ukraine (NOK 607 million). External interest expense was NOK 363 million (250). Dividends from subsidiaries was NOK 1,384 million in 2022 up from NOK 277 million in 2021. Profit after tax was NOK -480 million, compared to a profit after tax of NOK -74 million in 2021. Total equity for the parent company Scatec ASA stood at NOK 10,265 million at 31 December 2022, up from NOK 9,761 million in 2021. Total assets amounted to NOK 20,591 million at 31 December 2022, up from NOK 20,048 million a year earlier. Overview of project portfolio Project stage 2022 Capacity (MW) 2021 Capacity (MW) In operation 3,375 3,355 Under construction 1,267 195 Project backlog 953 1,818 Project pipeline 15,712 14,775 Total 21,307 20,144 Total annual production from the 5,315 MW of solar, wind and hydro in operation, under construction and in backlog, is expected to reach about 14,100 GWh (on 100% basis). Projects under construction and backlog Project backlog is defined as projects with a secure off-take agreement and assessed to have more than 90% likelihood of reaching financial close. When financial close is obtained the project moves into construction generally with Scatec as the turn- key Engineering, Procurement & Construction (EPC) provider. Prior to financial close, environmental and social baseline studies or impact assessments (ESIAs) are conducted to identify potential environmental and social risks and impacts of the Company’s activities. During construction Scatec is compensated for early- stage development expenditures and construction services through a Development & Construction (D&C) margin. The D&C margin is used as a funding source for Scatec’s equity investment in the project company. Total initial capex for the projects under construction amounts to approximately NOK 15.3 billion on a 100% basis. The capex will be financed by non-recourse project debt and equity from the sponsors with an expected average leverage of approximately 65%. Scatec is holding an average of 50% of the equity in the projects under construction equivalent to an initial equity investment of NOK 2.5 billion, of which NOK 1.7 billion were remaining at the end of 2022. The remaining portion is well covered by expected D&C margins, cash flow from operations and free cash. All figures in NOK have been updated based on currency rates per the end of 2022. For more information about the projects under construction and in backlog, refer to our website: scatec.com/investor. Under construction Sukkur, Pakistan 150 MW solar Construction of the 150 MW Sukkur project in Pakistan has progressed during 2022. Key activities included groundworks, piling, orders for main equipment, and tracker installations ramped up towards the end of the year. Most of the material and equipment have arrived on site, such as modules, trackers, inverters and cables. At the end of 2022 there were about 700 contractors and Scatec employees involved in construction work on site, and 250,000 safe manhours completed without lost time incidents. Power from the solar power plant will be sold to Pakistan Authorities under a 25-year PPA. Capex for the project is approximately USD 110 million to be financed by approximately 70% non-recourse project finance debt and equity from the sponsors. Scatec owns 75% of the project and provide EPC services as well as Operation & Maintenance (O&M) and Asset Management (AM) services to the power plants. Mendubim, Brazil 531 MW solar Construction activities have progressed well during 2022 for the 531 MW Mendubim solar project, in partnership with Equinor and Hydro Rein. Key construction activities included drainage, foundations, levelling and road works, and clearance work for a transmission line. All purchase orders for main equipment have been placed. More than 500 contractors and Scatec employees are involved in the construction work on site. 46 The 20-year PPA signed with Alunorte, will cover approximately 60% of the power produced with the remaining volume to be sold in the Brazilian power market. The estimated total capital expenditure for the project is USD 430 million to be financed by a mix of non-recourse project debt and equity from partners. All three partners have an equal economic interest of 33.3% in the power plant and will jointly provide EPC services. Scatec will further provide O&M as well as AM services to the power plants together with Equinor. Kenhardt, South Africa, 540 MW solar with 225 MW/1,140 MWh battery storage In July 2022 Scatec started construction of the RMIPPP project after reaching financial close. Construction activities in 2022, included piling, orders for main equipment, work on modules substructure foundations, grid connections and access roads. More than 500 Scatec employees and contractors are working on site. All site labour is sourced from the local community, and the project has established a dedicated community communication hub in Kenhardt . Once operational the project will provide 150 MW of dispatchable power to the Kenhardt region under a 20-year Power Purchase Agreement with Eskom, the South African state-owned power utility. The project has a total capex of about ZAR 16.4 billion (USD 962 million) to be financed by equity from the owners and non- recourse project debt. Equity will be paid in after final drawdown of the project debt. Lenders includes The Standard Bank Group as arranger and British International Investment. Scatec will own 51% of the equity, and H1 Holdings, Scatec’s local Black Economic Empowerment partner, will hold the remaining 49%. Scatec will be the EPC provider and provide O&M and AM services to the power plants together with H1. Release Release has a project portfolio of 26.5 MW under construction, of which the main project consists of 18 MW remaining under a 36 MW solar and 20 MWh battery project in Cameroon, with a contract with ENEO the main utility of Cameroon. Philippines, 20 MW BESS Construction of the 20 MW battery energy storage system (BESS) at the Magat hydropower plant is progressing well. The facility is Scatec’s first BESS project connected to a hydropower plant, and has been developed by SN Aboitiz Power, a joint venture between Scatec and AboitizPower. Hitachi Energy is providing engineering, procurement, and construction services for the project. The Bank of the Philippine Islands and China Banking Corporation have provided debt financing. The facility will be capable of dispatching energy to the grid at times of peak demand and is expected to be used primarily for ancillary services. Backlog Construction start of the backlog projects relies on final governmental approval processes, completion of project finance processes and component price development. During the fourth quarter 2022 a 60 MW solar project in Botswana has been added to the backlog. Grootfontein, South Africa, 273 MW solar In October 2021, Scatec was awarded preferred bidder status on three solar projects totalling 273 MW by the Department of Mineral Resources and Energy in South Africa under the Renewable Energy Independent Power Producers Procurement Programme (REIPPPP). In December 2022, the power purchase and implementation agreements for the projects were signed. The power will be sold under 20-year PPAs. Scatec will own 51% of the equity in the projects with H1 Holdings, our local Black Economic Empowerment partner owning 46.5% and a Community Trust holding 2.5%. Scatec will be the EPC provider and provide O&M as well as AM services to the power plants. Tunisia portfolio, 360 MW solar In December 2019, Scatec was awarded three solar projects in Tunisia totalling 360 MW. The three projects will hold 20-year PPAs with Société Tunisienne de l’Electricité et du Gaz (STEG). During the fourth quarter, Scatec engaged with the Tunisian authorities to negotiate the PPA tariff in order to improve the economics of the projects. These discussions are ongoing. Scatec will have an ownership share of 51% of the project and provide EPC, O&M and AM services to the project company. Egypt, 100 MW green hydrogen facility Scatec has partnered with, Fertiglobe, The Sovereign Fund of Egypt and Orascom Construction to develop, build, own and operate a 100 MW green hydrogen production facility in Ain Sokhna in Egypt. When the project is fully developed the facility will be powered by 260 MW of solar and wind capacity. The partners have signed a term sheet with Fertiglobe for a 20- year offtake agreement for 100% of the volumes produced. The Scatec ASA - Annual Report 2022 47 green hydrogen will be used as feedstock for production of green ammonia. The estimated total capital expenditure for the project is USD 430 million to be financed by 75% non-recourse project debt and equity from partners. Scatec will be the lead equity investor in the project with an ownership share of 52% and provide EPC services in collaboration with Orascom Construction. Scatec will further provide O&M and AM services for the project alongside key technology providers and project partners. Botswana, 60 MW solar In August 2022, Scatec signed a binding 25-year PPA with Botswana Power Corporation, a state-owned utility in Botswana, for a 60 MW solar power plant at Selebi-Phikwe. The solar project is the first of its kind in the country. The estimated total capital expenditure for the project is BWP 640 million (USD 49 million) to be financed by 70% non-recourse project debt and equity from partners. Scatec currently owns 100% of the project, and will provide EPC services, as well as Asset Management and O&M services. Pipeline Location 2022 Capacity (MW) 2021 Capacity (MW) Latin America 1,276 2,147 Africa and the Middle East 7,597 5,389 Europe & Central/South Asia 2,975 1,690 Southeast Asia 3,864 5,549 Total pipeline 15,712 14,775 In addition to the projects in backlog Scatec holds a solid pipeline of projects totalling 15,712 MW across technologies. Approximately 85% of the projects in the pipeline are located within our focus markets. Solution 2022 Capacity (MW) 2021 Capacity (MW) Solar 5,005 6,311 Wind 6,223 5,150 Hydro 2,684 2,514 Green Hydrogen 1) 1,500 500 Release 300 300 Total 15,712 14,775 The pipeline projects are in different stages of development and maturity, but they are all typically in markets with an established government framework for renewables and where project finance is available. The project sites and concessions have been secured and negotiations related to power sales and other project implementation agreements are in various stages of completion. Other matters Russian war in Ukraine On 24 February, Russia attacked Ukraine, and started a war that has now been going on for almost a year. We witness a country under siege and countless lives lost in defense of their homes. This situation has given rise to a major humanitarian and geopolitical crisis. Scatec currently operates five solar power plants with a total capacity of 336 MW, located in the central and southern parts of the country. The situation is very challenging and highly uncertain, and Scatec's top priority is the safety of our Ukrainian employees. All of Scatec’s employees are accounted for. Approximately 95% of the power plants owned and operated by Scatec are intact and available, however power demand is down, and production is being curtailed by the grid operator on an ad hoc basis. On 28 March 2022 the Ministry of Energy of Ukraine issued an Order to reduce the amounts paid to the renewable power producers to 15% of the agreed tariff to cover for operating expenses for the duration of the martial law. On 29 June 2022 the Ministry of Energy issued a new order which increased the payment level from a minimum of 15% to a minimum of 18% after 2 July 2022. The unpaid amounts are postponed to a later period. Due to the uncertainty related to future settlement, Scatec has from 24 February 2022 only recognised revenues in accordance with actual paid amounts and expect to do so until the new regulation is lifted. The payments levels have increased during the year and reached 66% in the fourth quarter 2022. From 24 February 2022 until end of 2022, the average payment level from the off-taker has been 42%. 1) Renewable capacity for use in production of green hydrogen and green ammonia 48 The Russian invasion triggered an impairment assessment in the first quarter 2022 and Scatec recognised an impairment charge of NOK 770 million in the proportionate financials (NOK 816 million in the consolidated financials) related to tangible and intangible assets in Ukraine. On 31 December 2022 the impairment tests have been updated with new information on cash flow assumptions and discount rates, however no further impairments have been recognised. After the impairment recognised in the first quarter 2022, total fixed assets and intangible assets in Ukraine amounts to NOK 2,107 million in the consolidated financials as of 31 December 2022. Refer to Note 12 Impairment for details on the impairment of the plants. Scatec recognised an expected credit loss provision in the first quarter 2022 with respect to trade and other receivables which amounted to NOK 87 million in the proportionate financials (NOK 98 million in the consolidated financials). In the period second to fourth quarter 2022 no further loss provisions have been made. The provision is included in other operating expenses in the 2022 figures. Total outstanding receivables in Ukraine has during 2022 decreased from NOK 390 million to NOK 167 million (excluding the credit loss provision) in the consolidated financials, due to payments of accounts receivables from the period before the war and changes in other receivables. Refer to Note 3 Operating Segments for more details. Scatec’s power plant companies in Ukraine are not in compliance with covenants in the loan agreements for the non-recourse project debt at year-end. The situation is unchanged from the first quarter 2022, when NOK 603 million of the non-recourse financing was reclassified from non-current to current. As of 31 December 2022, all n on-recourse financing in Ukraine, amounting to NOK 964 million, continues to be classified as current in the consolidated financials. Scatec has continuous and constructive dialogue with the lenders and the parties have agreed on a non- formalised “stand still”. Additionally in Ukraine, please refer to the first quarter report and the annual report 2021 for information related to the construction loan provided by PowerChina Guizhou Engineering Co (“PowerChina”) to Scatec for the Progressovska power plant in Ukraine. Scatec and PowerChina has signed a revised payment plan for the construction loan where part of the loan was paid in August 2022 and of the remaining EUR 44 million, EUR 22 million will be paid at the end of 2023 and EUR 22 million by mid-2025. Scatec ASA has provided a corporate and bank guarantee to PowerChina in support of this obligation. In the third quarter 2022 the construction loan was reclassified from trade payables to other non-current interest-bearing liabilities. In the fourth quarter, EUR 22 million related to the instalment due in 2023 has been reclassified from non-current to current interest-bearing liabilities. Refer to Note 17 Other Non-current and current liabilities and Note 24 Guarantees and commitments for further details. Potential PPA changes and overdue receivables in Honduras Scatec has over time experienced delayed payments from the state owned off-taker in Honduras (ENEE) and overdue receivables have accumulated to a varying degree since second quarter 2020. During 2022, the off taker has paid on average two thirds of total recognised revenues until December when additional NOK 214 million of outstanding receivables were paid. As a result, a large part of the accumulated overdue receivables in Honduras in the consolidated financials was settled and decreased from NOK 232 million at the end of the third quarter 2022 and NOK 172 million at the end of fourth quarter 2021 to NOK 66 million at the end of the fourth quarter 2022. In May 2022, a new Energy law came into force as introduced by the new Government of Honduras. In accordance with the new law, the state owned off-taker has proposed certain changes to the existing PPAs for all renewable power plants in the country, including Scatec’s solar plants Agua Fria and Los Prados. Negotiations have continued and matured during the fourth quarter with proposed changes to the PPA and settlement of outstanding receivables. A new agreement can include changes to tariff level and PPA tenor. As described above, part of outstanding receivables is settled, and remaining amount is subject to the ongoing negotiations. The outcome of the negotiations is not concluded, and an unfavorable result may have negative impact on payment of outstanding receivables by ENEE and the future financial performance of the assets. Covenants Except for Ukraine, Scatec was in compliance with financial covenants for both the recourse and non-recourse debt on 31 December 2022. Refer to Note 21 Corporate financing and Note 22 Non-recourse financing for more details. COVID-19 Scatec has not experienced any material effects related to COVID-19 on its operations of power plants in 2022. The COVID- 19 situation has however influenced the markets where Scatec develops projects and has been causing delays in government approvals for some of the development projects. Organisation Scatec has an international and diverse workforce which at the end of 2022 was represented by 50 nationalities and 778 employees in 29 countries. The organisation was strengthened across key functions and regions by expanding the team by 156 Scatec ASA - Annual Report 2022 49 highly skilled full-time employees during the year. In addition to the full-time workforce, Scatec had 146 short-term employees and 61 consultants supporting its functions. The organisation remains flexible, and the workforce continues to deliver strong results and growth. The Company’s reporting on diversity and equal opportunity is available in the Statement of equality and non-discrimination on https://scatec.com/sustainability/esg-resources/ . For further information on work environment, including HSSE, statistics refer to the Company’s 2022 ESG Performance report. Risk factors and risk management In Scatec, risk management is an integrated part of our operating system. The company has over the last years systemised the approach to risk management through policies and procedures, which are followed up by the management team and relevant functions including Solutions, Finance, Internal Audit, Legal, Sustainability, HSSE, Compliance and O&M. The main risk management policies are reviewed and approved by the Board of Directors on a regular basis. With integrated operations within emerging economies and across renewable technologies, we are exposed to a variety of risks. Scatec’s ability to manage these risks is fundamental for the Company’s success and has over time developed into a key competitive advantage for Scatec. Scatec capitalise on the experience from complex environments and risk management systems to de-risk an opportunity and move it forward. As part of the risk management system, all risks related to a project are identified and addressed in management- and project- reviews and reported upon on a regular basis. These reports represent an important part of Scatec’s decision gate reviews. An annual and quarterly risk review are performed by the Executive Management Team, and the output of the reviews are reported to the Board of Directors. Insurance Scatec uses comprehensive global insurance programmes as risk mitigating tools which covers a broad range of potential risks such as general third-party liability, professional indemnity, directors’ and officers’ liability, cyber security, and in certain countries political violence insurance. Scatec’s operational assets are insured through the programmes against physical damage, including natural catastrophes and weather-related events, through a property damage & business interruption insurance. A similar insurance programme is also designed for projects under construction which cover physical damage, loss of income and transportation risks. Below we have summarised the key inherent risks that Scatec is exposed to as per year end 2022 and key mitigation activities. Project development risk Scatec’s growth relies on successful project development which is impacted by a number of factors including availability of attractive sites, grid capacity and securing interconnection, power prices, component prices, interest rate level, government approval process, permits and access to competitive financing. Scatec manages this risk through a well-proven approach to screening of new projects as well as holding a large and broad project pipeline. Component price risk From the date when Scatec enters into long-term contract for the sale of electricity and to the date of the investment decision the Company is exposed to the risk of component price fluctuations and supply chain disruptions. Scatec manages such risk by seeking to work with a broad set of suppliers and contractors and ensure that both capex and EPC budgets for new projects hold sufficient contingencies to absorb the most likely price fluctuations in the relevant timeframe. The resilience to price fluctuations do however vary between projects. During 2022 Scatec decided not to move forward with several projects in backlog as a result of increasing component prices. Additionally, Scatec has entered into negotiations with the Tunisian authorities to increase the PPA tariff for the Tunisian projects. At the same time Scatec started construction of new projects in South Africa, Brazil, Pakistan and the Philippines which, despite cost increases, meet return and margin within guidance. Compliance and integrity risk Scatec is opposed all forms of corruption and strives to meet the highest ethical standards across its business activities. As a global company, it has implemented an Anti-Corruption Compliance Programme designed to meet the risks of diverse and challenging business environments. The Scatec Code of Conduct sets out the commitment to prevent corruption and places clear requirements on its employees. The Company trains employees on how to manage the corruption risks they may face, and encourages them to ask for guidance if they are unsure, and reminds them of their duty to speak-up if they suspect misconduct. In 2022, Scatec focused on tightening internal controls around high-risk partners and activities, and in 50 2023 the focus will be on targeted training for exposed positions within the Company. Scatec expects all business partners and suppliers to conduct their activities in a way that is consistent with the Code of Conduct and embeds this contractually in its Supplier Conduct Principles. The Company screens all potential suppliers and systematically assesses higher-risk business partners to avoid unsuitable third parties. The assessment goes beyond corruption to include environment, labour, human rights and sanction risks. Scatec mitigates potential risks through transparent and fair tender processes, robust contracting, pre-production audits and monitoring during production. Scatec’s whistleblower channel is available to all employees, suppliers, partners, customers and external stakeholders through internal channels and the corporate website. The channel is operated by a neutral third-party to protect the anonymity of reporters, should they so wish, and is available in multiple languages. All reports are taken seriously and investigated according to an established investigation procedure. Scatec’s finance partners, including Norfund and the World Bank International Finance Corporation, are widely acknowledged for having high ethical standards and rigorous due diligence requirements and, together with partners, Scatec ensures that its projects and operations are conducted with integrity. Political risk Scatec sells electricity to state-owned utilities typically supported by sovereign guarantees. The Company’s financial performance therefore relies on government adherence to contractual obligations and various laws and regulations. Consequently, Scatec is subject to political risk in the countries it operates. Scatec mitigates political risk through a comprehensive contractual framework for each individual project and asset. Risk is also mitigated through partnerships with multilateral development banks as project finance lenders and/or through establishing project risk insurance cover from the World Bank and others. A large and broad asset portfolio also gives diversification effects and reduces the overall political risk related to the asset portfolio. Cyber risk Cyber risk is an increasing concern in society today. The main cyber risks in 2022 were ransomware/cryptolocker, phishing, supply chain attacks and zero-day vulnerabilities. To mitigate these risks Scatec is protecting and monitoring all endpoints with a well-known EDR (Endpoint Detection and Response) solution, and another dedicated tool to reveal crypto locker activity at an early stage. All user accounts are protected with multi-factor authentication and users yearly need to complete IT security awareness training. Scatec’s offices and managed power plants are all connected to the global enterprise network where all network traffic is passing through next-generation firewalls that are monitored by our service providers Security Operations Center (SOC) at all times. All computers, servers and network devices are updated regularly by following the best-practice schedules by the vendors. Any urgent security vulnerabilities are patched immediately. The network is protected against distributed denial-of-service (DDoS) attacks and all the central server infrastructure is backed up to three different physical locations. The security set-up is audited by third party experts on a regular basis. Scatec has not had any major cyber incidents in 2022. Financial risk Through its business activities, Scatec is exposed to financial risk, mainly currency risk, credit risk, liquidity risk and interest rate risk. Financial risk management is based on the objective of reducing negative cash flow effects and to a less extent negative accounting effects of these risks. For a more detailed description and management of financial risk, refer to Note 18 Financial risk management. Power market price risk The Company has exposure to power market price risk. Scatec has entered into long-term fixed price contracts for the sale of electricity from most of its power plants in operation at year end 2022. In the Philippines, Scatec has exposure to the long-term power market price with about 70-80% of the electricity from power plants sold under 1 - 3 year contracts to hedge the short to mid-term market price exposure. Health, Safety and Security risk Through the construction of large-scale renewable energy plants with between 500-5,000 workers on the project site, and when providing operations and maintenance services during the operational phase, the Company is exposed to health and safety risk. Scatec is continuously working to achieve the goal of zero harm to personnel, materials and the environment. Scatec takes responsibility, sets requirements and monitors HSSE performance in the development, construction and operations phases of the projects. Further, the health and safety standards are defined and communicated to employees and contractors. Contractor management is identified as a key risk area for the Company, and Scatec continuously works to monitor that all Scatec ASA - Annual Report 2022 51 subcontractors operate in accordance with its corporate policy and principles. For countries with a high-risk rating, Scatec follows special security measures for all travel in line with the recommendations of the Company’s third-party risk advisor. Scatec works systematically to strengthen its approach to security management and emergency preparedness. Climate risk Scatec’s business model and strategy is based on the need to transition from fossil fuels to reduce greenhouse gas (GHG) emissions, a key climate opportunity. However, climate risk, both physical risk and transition risk, could also have a range of potential impacts on Scatec’s business. The most serious climate- related risks involve the physical impact of extreme weather events, including droughts and floods. Extreme weather can cause physical damage to the plants and directly affect power generations. The risk is mitigated through adequate engineering in the design phase, regular inspections and emergency plans. Transitional risks such as increased regulation, new technologies and changes to markets also affect Scatec. As climate ambitions increase, there is likely to be increased competition that can affect among others component prices and power prices. Refer to our Task Force on Climate related Financial Disclosure (TCFD) report 2022 for corporate climate risk assessments and more information. For further environmental and social responsibilities refer to the 2022 ESG Performance report. Other risks Other inherent risk with low likelihood and/or lower potential business impact is briefly described here. Risk of war and civil unrest – Scatec is generally not making investments in regions with high risk of war and civil unrest. This risk is assessed before starting development of new project opportunities. The risk has unfortunately materialised in Ukraine where Russia started a military invasion in February 2022. Refer to ‘Other matters’ for update on Ukraine. Human rights – the risk relating to the breach of fundamental human rights in renewable energy projects and the supply chain. The main risk relating to the Company’s supply chain is related to labour and working conditions in exposed regions such as Xinjiang, China. The Company conducts human rights due diligence in projects and the supply chain as per the Transparency Act requirements and has a corporate human rights policy aligned with the United Nations Guiding Principles on Business and Human Rights. Pandemic risk - Scatec with its external risk advisors, regularly assess risks related to global health issues such as pandemics. The impact of COVID-19 on Scatec’s operations has been limited as we operate critical infrastructure. The COVID-19 situation has however influenced the markets where Scatec develops projects and has caused delays in government approvals for some of the development projects. Corporate governance The Board of Directors has made a strong commitment to ensure trust in the Company and to enhance shareholder value through effective decision-making and open communication between the management, the Board of Directors, the shareholders and other stakeholders. The Company’s framework for corporate governance is intended to decrease business risk, maximise value and utilise the Company’s recourses in an efficient, sustainable manner, to the benefit of shareholders, employees and society at large. The Company’s corporate governance framework is subject to annual reviews and discussions by the Board of Directors. The Company comply with the Norwegian Code of Practice for Corporate Governance and the Board of Directors’ Corporate Governance report is available on the corporate website under the Investor section. Scatec ASA has purchased and maintains a Directors and Officers Liability Insurance on behalf of the members of the Board of Directors and CEO. The insurance additionally covers any employee acting in a managerial capacity and includes subsidiaries owned with more than 50%. The insurance policy is issued by a reputable, specialised insurer with appropriate rating. Market outlook According to Bloomberg New Energy Finance (BNEF), global investments in the low-carbon energy transition reached USD 1.1 trillion in 2022, 31 per cent up from last year. Despite the record high investment, it is below what is needed for the net zero target. BNEF’s Net Zero Scenario calls for USD 194 trillion of investments in the energy transition to 2050. The demand for renewables is growing rapidly, spurred on by increasingly urgent climate warnings, along with escalating economical and geopolitical factors. The relative competitiveness of renewables has strengthened over time, and it is now the most cost-efficient power source in much of the world. BNEF expects global solar new build to accelerate and see new installations of around 316 GW in 2023, up from an estimated 268 GW in 2022. For wind, new installations are expected to reach 110 GW, up from 98 GW in 2022. The global energy storage market is expected to continue to grow, estimated installations in 2023 increase to 28 GW from 16 GW in 2022. 52 Hydropower will continue to play an important role in the energy transition. International Renewable Energy Agency IRENA estimates in the 2022 Outlook, capacity to increase to 1,500 GW by 2030. Green hydrogen and green ammonia are set to play a major role in decarbonisation of hard-to-abate sectors globally in the coming years, driven by volatile gas prices, cheap renewables, ambitious net zero targets and an increasing number of national hydrogen strategies being adopted. Global demand for green hydrogen and green ammonia is expected to reach more than 500 million tonnes and 200 million tonnes, respectively, by 2050. Long term, BNEF expects all renewables to see massive growth and to dominate the power sector in 2050. In its Net Zero Scenario, BNEF highlights six key actions to be on track to reach net zero by 2050: ● Accelerate deployment of mature climate solutions ● Support the development of new climate solutions ● Manage the transitions or phase-out of carbon-intensive activities ● Create appropriate climate transition governance structures ● Support the transition in emerging markets and developing countries ● Scale up the supply of critical materials Forward-looking statements reflect current views about future events and are, by their nature, subject to significant risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. Although Scatec believes that these assumptions were reasonable when made, the Group cannot assure that the future results, level of activity or performances will meet these expectations. Scatec growth targets and outlook In September 2022 Scatec announced a sharpened strategy and updated growth targets. Scatec will continue to develop, build, own and operate renewable energy in emerging markets and secure long-term, profitable, and sustainable growth in the strategy period towards 2027. The strategy outlines three primary focus areas; i) grow renewables, ii) advance green hydrogen and iii) optimise portfolio, including financial ambitions and targets. i. Scatec will continue to grow its renewables business, including solar, wind and hydro, by building scale in selected focus markets to improve predictability and value creation. ii. Scatec will build on its core strengths to take a leadership role in green hydrogen by developing prime locations in emerging markets, securing long-term offtake, and funding, and applying the integrated business model. iii. Scatec will optimise its portfolio, by simplifying and consolidating, capturing additional value in power markets, and scaling and launching Release as an independent platform. Scatec targets to invest NOK 10 billion of equity in new power plants with a required return of 1.2 times the cost of equity. The company has a solid financial platform for growth, including a diversified asset portfolio, prudent financial risk management, continued focus on cost discipline, and solid cash flow. For the full year 2023 Scatec is estimated to generate proportionate power production EBITDA of NOK 2,700 – 3,000 million based on an estimated power production of 3,500 – 3,900 GWh. Share capital and the Scatec share Scatec ASA is listed on the Oslo Stock Exchange under the ticker “SCATC”. The share capital of Scatec was NOK 3,972,932 divided on 158,917,275 shares at year end 2022, each with a nominal value of NOK 0.025. All shares are of the same class and with equal voting and dividend rights. Per 31 December 2022, the number of shareholders were 16,463. Refer to Note 25 - Share capital, shareholder information and dividend for further information. During 2022 Scatec’s share price declined by 50 percent. Scatec aims at informing all interested parties about important events and the Company’s developments through annual reports and quarterly financial presentations, stock exchange notices and other Company updates. Further information can be found in the investor section of Scatec’s website at www.scatec.com/investor. Dividend policy In line with the current dividend policy, the Board of Directors have resolved to propose to the 2023 Annual General Meeting of Scatec that a dividend of NOK 1,94 per share should be paid for 2022. The Board of Directors have further proposed to change the payment ratio from 25% to 15% of free cash distributed from producing power plants, to support Scatec’s growth ambitions while retaining the Group’s objective to pay shareholder dividends. Financial review Presentation of Accounts Pursuant to Section 3-3 of the Norwegian Accounting Act, the Board of Directors confirm that the Financial Statements have Scatec ASA - Annual Report 2022 53 been prepared under the assumption that the Scatec Group and Scatec ASA is a going concern and that this assumption was appropriate at the date of approval of the Financial Statements. The Group reports its Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS) with Norwegian Kroner (NOK) as reporting currency. The notations Scatec, Scatec Group, the Company and the Group are used interchangeably throughout the document. Figures in parentheses are for the corresponding period of the previous year. Segment and proportionate financials Scatec reports on four operating business segments: Power Production (PP), Services, Development & Construction (D&C) and Corporate. To improve earnings visibility and reporting transparency on underlying value creation across Scatec’s business activities, the Company is reporting on proportionate financials in addition to consolidated financials. With proportionate financials Scatec reports its share of revenues, expenses, profits and cash flows from its subsidiaries based on Scatec’s economic interest in the subsidiaries. Proportionate reporting is in line with how the Management Team assesses the performance of the segments. Please refer to Note 3 Operating Segments for further descriptions of the proportionate financials as well as reconciliation to the IFRS financial statement. 54 Subsequent events No adjusting events have occurred after the balance sheet date. Non-adjusting events Refinancing of Bridge-to-Bond USD 193 million On 2 February 2023, Scatec refinanced USD 100 million of the USD 193 million Bridge to Bond facility with a new USD 100 million term loan with maturity in the fourth quarter 2027 provided by DNB, Nordea and Swedbank. The new term loan is amortised through semi-annual repayments of USD 5 million starting from 2024. The existing USD 180 million Revolving Credit Facility, provided by the same banks and BNP Paribas, is further extended by 1.5 years with maturity in the third quarter of 2025. On 10 February 2023, Scatec placed NOK 1,000 million in new unsecured green bonds to refinance the remaining USD 93 million of the Bridge to Bond facility established when Scatec acquired SN Power in 2021. The new bonds have maturity in February 2027 and carries a coupon rate of 3-month NIBOR plus 6.60%. Sale of Upington in South Africa On 2 February 2023, Scatec signed an agreement with a subsidiary of STANLIB Infrastructure Fund II, managed by STANLIB Asset Management Proprietary Limited (“Stanlib”), to sell its 42% equity share in the 258 MW Upington solar power plant for a gross consideration of ZAR 979 million (NOK 569 million). The transaction is in line with Scatec’s strategy to optimise the portfolio as presented at the Capital Markets Update in September 2022 and will release capital for new investments in renewable energy. The solar plant in Upington reached COD in 2020 and were awarded in the fourth bidding round under the Renewable Energy Independent Power Producer Programme. The plant generates approximately one third of the proportionate power production EBITDA in South Africa for Scatec. Scatec will continue to provide Operations & Maintenance and Asset Management services to the Upington power plant. South Africa remains a focus market for Scatec, and the Company continues to build scale by investing into new projects, including the Kenhardt and Grootfontein projects. The transaction is expected to generate a net accounting gain of approximately NOK 760 million on a consolidated basis and NOK 310 million on a proportionate basis. The difference is primarily explained by the D&C margin related to the projects which has been eliminated in the consolidated statement of financial positions. The final accounting effects will be determined on closing of the transaction. Norfund is also selling its 18% equity share to Stanlib as part of the same transaction. The transaction is subject to the customary consents and is expected to close in the first half of 2023. Please refer to note 30 Subsequent events for further details. Oslo, 21 March 2023 The Board of Directors Scatec ASA Scatec ASA - Annual Report 2022 55 Consolidated financial statements Group 56 Consolidated statement of profit or loss 57 Consolidated statement of comprehensive income 58 Consolidated statement of financial position 59 Consolidated statement of changes in equity 61 Consolidated statement of cash flow 63 Notes to the Consolidated financial statements 63 General information Note 1 Corporate information 63 Note 2 Basis for preparation, basis for consolidation and key sources of estimation uncertainty 63 Statement of profit or loss (and comprehensive income) Note 3 Operating segments 64 Note 4 Employee benefits 69 Note 5 Other operating expenses 71 Note 6 Financial income and expenses 72 Note 7 Tax 72 Note 8 Earnings per share 75 Statement of financial position Note 9 Property, plant and equipment 76 Note 10 Goodwill and intangible assets 77 Note 11 Leases 78 Note 12 Impairment testing 80 Note 13 Investments in joint venture and associated companies 82 Note 14 Cash and cash equivalents 86 Note 15 Trade receivables 87 Note 16 Other non-current and current asset 88 Note 17 Other non-current and current liabilities 88 Financial risk and capital management Note 18 Financial risk management and risk sensitivities 89 Note 19 Financial instruments 92 Note 20 Derivative financial instruments 94 Note 21 Corporate financing 96 Note 22 Non-recourse financing 98 Note 23 Project equity financing provided by co-investors 100 Note 24 Guarantees and commitments 102 Other information Note 25 Share capital, shareholder information and dividend 103 Note 26 Consolidated subsidiaries 104 Note 27 Non-controlling interests 105 Note 28 Transactions with related parties 107 Note 29 Changes in accounting policies 108 Note 30 Subsequent events 109 Scatec ASA - Annual Report 2022 57 Consolidated statement of profit and loss 1 JANUARY - 31 DECEMBER NOK million Note 2022 2021 Revenues 3 3,002 3,038 Net income/(loss) from JV and associated companies 3, 13 749 765 Total revenues and other income 3,751 3,803 Personnel expenses 4 -528 -397 Other operating expenses 5 -668 -503 Depreciation, amortisation and impairment 9, 10, 11 -1,832 -892 Operating profit (EBIT) 723 2,012 Interest and other financial income 6 115 47 Interest and other financial expenses 6 -1,666 -1,368 Net foreign exchange gain/(loss) 18, 6 -268 69 Net financial expenses -1,818 -1,253 Profit/(loss) before income tax -1,095 759 Income tax (expense)/benefit 7 -132 -303 Profit/(loss) for the period -1,228 456 Profit/(loss) attributable to: Equity holders of the parent -1,334 388 Non-controlling interest 27 106 68 Basic earnings per share (NOK) 8 -8.40 2.45 Diluted earnings per share (NOK) 8 -8.40 2.43 58 Consolidated statement of comprehensive income 1 JANUARY - 31 DECEMBER NOK million Notes 2022 2021 Profit/(loss) for the period -1,228 456 Other comprehensive income: Items that may subsequently be reclassified to profit or loss Net movement of cash flow hedges 20 664 386 Income tax effect from net movement of cash flow hedges 7 -150 -108 Foreign currency translation differences 472 40 Net other comprehensive income to be reclassified 986 317 Total comprehensive income for the year, net of tax -242 773 Attributable to: Equity holders of the parent -648 595 Non-controlling interest 27 406 178 Scatec ASA - Annual Report 2022 59 Consolidated statement of financial position NOK million Note 31 December 2022 31 December 2021 Assets Non-current assets Deferred tax assets 7 860 748 Property, plant and equipment 9 17,310 15,885 Goodwill and intangible assets 10 758 797 Investments in JVs and associated companies 13 10,674 9,745 Other non-current assets 16, 28 616 210 Total non-current assets 30,218 27,385 Current assets Trade and other receivables 15 497 740 Other current assets 16, 28 1,883 734 Cash and cash equivalents 14 4,132 4,171 Total current assets 6,512 5,645 Total assets 36,730 33,030 60 Consolidated statement of financial position NOK million Note 31 December 2022 31 December 2021 Equity and liabilities Equity Paid in capital Share capital 25 4 4 Share premium 9,819 9,775 Total paid in capital 9,823 9,779 Other equity Retained earnings -2,231 -493 Other reserves 671 -16 Total other equity -1,560 -508 Non-controlling interests 27 540 649 Total equity 8,803 9,919 Non-current liabilities Deferred tax liabilities 7 743 589 Corporate financing 21 7,987 7,264 Non-recourse project financing 22 13,297 10,708 Other financial liabilities 19, 20 12 249 Other interest-bearing liabilities 17 231 - Other non-current liabilities 17, 28 1,618 1,387 Total non-current liabilities 23,888 20,197 Current liabilities Non-recourse project financing 22 1,963 1,147 Income tax payable 7 37 24 Trade and other payables 594 812 Other financial liabilities 19, 20 108 90 Other interest-bearing liabilities 17 231 - Other current liabilities 17, 28 1,106 841 Total current liabilities 4,039 2,913 Total liabilities 27,927 23,110 Total equity and liabilities 36,730 33,030 Oslo, 21 March 2023 The Board of Directors Scatec ASA Scatec ASA - Annual Report 2022 61 Consolidated statement of changes in equity Other reserves NOK million Note Share capital Share premium Retained earnings Foreign currency translation Hedging reserves Total Non- controlling interests Total equity At 1 January 2021 4 9,720 -708 40 -261 8,794 673 9,467 Profit for the period - - 388 - - 388 68 456 Other comprehensive income - - 1 55 150 207 110 317 Total comprehensive income - - 390 55 150 595 178 773 Share-based payment 4 - 12 - - - 12 - 12 Share capital increase 25 - 42 - - - 42 - 42 Share purchase program - -1 - - - -1 - -1 Dividend distribution 25 - - -173 - - -173 -217 -390 Capital increase from NCI 27 - - - - - - 14 14 At 31 December 2021 4 9,775 -493 95 -111 9,271 649 9,919 At 1 January 2022 4 9,775 -493 95 -111 9,271 649 9,919 Profit for the period - - -1,334 - - -1,334 106 -1,228 Other comprehensive income - - - 377 309 686 300 986 Total comprehensive income - - -1,334 377 309 -648 406 -242 Share-based payment 4 - 39 - - - 39 - 39 Share capital increase 25 - 5 - - - 5 - 5 Dividend distribution 25 - - -404 - - -404 -526 -929 Capital increase from NCI 27 - - - - - - 11 11 At 31 December 2022 4 9,819 -2,231 472 199 8,263 540 8,803 62 Consolidated statement of cash flow NOK million Notes 2022 2021 Cash flow from operating activities Profit before taxes -1,095 759 Taxes paid 7 -170 -234 Depreciation and impairment 9, 10, 11 1,832 892 Net gain/loss from sale of fixed assets 9 45 9 Net income from JV and associated companies 13 -749 -765 Interest and other financial income 6 -115 -47 Interest and other financial expenses 6 1,666 1,368 Unrealised foreign exchange (gain)/loss 6 268 -69 Increase/(decrease) in current assets and current liabilities -926 158 Net cash flow from operating activities 756 2,072 Cash flows from investing activities Interest received 6 115 47 Consideration paid for SN Power, net of cash acquired 21 - -7,848 Investments in property, plant and equipment 9 -1,986 -967 Distributions from JV and associated companies 13 669 819 Investments in JV and associated companies 13 -204 -131 Net cash flow used in investing activities -1,406 -8,081 Cash flow from financing activities Proceeds from non-controlling interests 23 18 - Distributions to non-controlling interests 23 -8 -12 Interest paid 19 -1,108 -1,180 Proceeds from non-recourse project financing 22, 19 3,468 43 Repayment of non-recourse project financing 22, 19 -1,175 -750 Payments of principal portion on lease liabilities 11 -26 -25 Interest paid on lease liabilities 11 -20 -15 Net proceeds from corporate financing 21, 19 - 4,699 Share capital increase 25 - 42 Dividends paid to equity holders of the parent company and non-controlling interests 25 -929 -390 Net cash flow from financing activities 221 2,413 Net increase/(decrease) in cash and cash equivalents -428 -3,597 Effect of exchange rate changes on cash and cash equivalents 389 -20 Cash and cash equivalents at beginning of the period 4,171 7,788 Cash and cash equivalents at end of the period 14 4,132 4,171 Scatec ASA - Annual Report 2022 63 Notes to the Consolidated financial statements Group Note 1 Corporate information Scatec ASA is incorporated and domiciled in Norway . The address of its registered office is Askekroken 11, NO-0277 Oslo, Norway. Scatec ASA was established on 2 February 2007. Scatec ASA (“the Company”), its subsidiaries and investments in associated companies and joint ventures (“the Group” or “Scatec”) is a leading renewable energy solution provider, accelerating access to reliable and affordable clean energy in high growth markets. As a long-term player, we develop, build, own and operate renewable energy plants, with 4.6 GW in operation and under construction across four continents today (refer to Note 3 – Operating segments). Information on the Group’s structure is provided in Note 26 – Consolidated subsidiaries. The Company is listed on the Oslo Stock Exchange under the ticker symbol ‘SCATC’ . For further details on shareholder matters, refer to Note 25 – Share capital, shareholder information and dividend. The consolidated financial statements for the full year 2022 were authorised for issue in accordance with a resolution by the Board of Directors on 21 March 2023. The Company is pursuing an integrated business model across the complete lifecycle of renewable power plants including project development, financing, construction, ownership, and operation and maintenance. Note 2 Basis for preparation, basis of consolidation and key sources of estimation uncertainty Basis for preparation The Scatec Group’s consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and interpretations issued by the International Accounting Standards Board (IASB) and as adopted by the European Union (EU). In compliance with the Norwegian Accounting Act, additional disclosure requirements are included in the notes to the financial statements of Scatec ASA. The consolidated financial statements have been prepared on a historical cost basis, except for financial instruments measured at fair value. The statement of cash flows is prepared under the indirect method. The segment financials are reported on a proportionate basis in line with how the management team assesses the segments performance. For further description of the proportionate financials as well as a reconciliation between proportionate financials and the consolidated financials please refer to Note 3 - Operating segments and the section on Alternative Performance Measures (APM). The functional currency of the companies in the Group is determined based on the nature of the primary economic environment in which each company operates. The consolidated financial statements are presented in Norwegian kroner (NOK) and on consolidation, the assets and liabilities of foreign entities with functional currencies are translated into NOK at the rate of exchange prevailing at the end of reporting period and their income statements are translated at average monthly exchange rates. All values are rounded to the nearest million (NOK 1,000,000) except when otherwise indicated. Because of these rounding adjustments, the figures in some columns may not add up to the total of that column. Basis of consolidation The consolidated financial statements comprise the financial statements of the Parent and its subsidiaries as of 31 December 2022. When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee. Control is achieved when the Group has power over the investee, is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. i 64 When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Estimation uncertainty In preparation of the Group’s consolidated financial statements, management has made assumptions and estimates about future events and applied judgements that affect the reported values of assets, liabilities, revenues, expenses and related disclosures. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. The assumptions and estimates are based on historical experience, current trends and other relevant factors available when the consolidated financial statements are prepared. The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below and in individual notes. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the financial statements when the changes in assumptions occur. Information about estimation uncertainty, judgements and assumptions in the annual report are largely incorporated into the individual notes. The Company’s management believes the following critical accounting items represent the more significant judgements and estimates not naturally belonging in the individual notes, but used in the preparation of the consolidated financial statements: Consolidation of power plant companies Scatec’s value chain comprises all downstream activities such as project development, financing, construction, operations as well as having an asset management role through ownership of the power plants. Normally Scatec enter partnerships for the shareholding of the power plant companies. To be able to fully utilise the business model, Scatec normally seeks to obtain operational and financial control of the power plant companies. Operational control is obtained through governing bodies, shareholder agreements and other contractual arrangements. Other contractual arrangements may include Scatec’s role as the developer of the project, EPC provider (construction), operation and maintenance service provider and asset management service provider. Scatec would normally seek to undertake the following distinct roles in its projects: 1. As the largest shareholder providing equity financing to the project 2. As (joint) developer, including obtaining project rights, land permits, off taker agreements and other local approvals 3. As EPC contractor, responsible for the construction of the project 4. As provider of operation & maintenance services to the projects, responsible for the day to day operations of the plant 5. As provider of management services to the power plant companies Even though none of the projects Scatec is involved with are identically structured, the five roles/activities described above constitute the main and relevant activities which affect the variable return. When assessing whether Scatec controls a power plant company, all facts and circumstances, including the above agreements are analysed. For the power plant companies consolidated in the financial statement, Scatec has concluded that it through its involvement controls the entities. Scatec has considered that it has the current ability to direct the relevant activities of the entities and has the ability to affect the variable returns through its power over the companies. The assessment of whether Scatec controls the investee is performed upon first time consolidation and is renewed annually or more often, if and when facts that could impact the conclusion change. Please see individual notes and sections “Estimation uncertainty” for further details around other estimations, judgements and assumptions. Note 3 Operating segments Operating segments align with internal management reporting to the Group’s chief operating decision makers, defined as the Executive Management team. The operating segments are determined based on differences in the nature of their operations, products and services. Scatec manages its operations in four segments: Power Production (PP), Services, Development & Construction (D&C) and Corporate. Power Production The Power Production segment manages the Group’s power producing assets and derives its revenue from the production and sale of solar, winds and hydro generated electricity based on long-term Power Purchase Agreements or Feed-in-tariffs. In addition, the segment includes revenues from the Release concept, and energy trading activities. The electricity is primarily sold on long-term Power Purchase Agreements or feed-in-tariffs except for in the Philippines where the electricity Scatec ASA - Annual Report 2022 65 is sold on bilateral contracts, in the spot market and as ancillary services. Revenue is recognised upon delivery of electricity produced to the local operator of the electricity grid. The performance obligation is to deliver a series of distinct goods (power) and the performance obligation is satisfied over time which entails that revenue should be recognised for each unit delivered at the transaction price. Revenue is recognised upon transfer of electricity produced to the local operator of the electricity grid, based on periodic meter readings. The Group applies a practical expedient under IFRS 15 whereby the revenue from power for most of the contracts is recognised at the amount of which the entity has a right to invoice. The right to invoice power arises when power is produced and delivered on to the electricity grid. The right to invoice the consideration will normally correspond directly with the value delivered to the customer. Delivery is deemed complete when all the risks and rewards associated with ownership have been transferred to the buyer as contractually agreed, compensation has been contractually established and collection of the resulting receivable is probable. For all sales contracts the Group had per the end of year, indexation of tariffs is recognised when they come into force. Finance and operation of the plants is mainly ring-fenced in power plant companies with a non-recourse finance structure. This implies that the project debt is only secured and serviced by project assets and the cash flows generated by the project, and that there is no obligation for project equity investors to contribute additional funding in the event of a default. Free cash flows after debt service are distributed from these power plant companies to Scatec, and any other project equity investors in accordance with the shareholding and the terms of the finance documents. Services The Services segment comprises Operations & Maintenance (O&M) and Asset Management services provided to power production plants where Scatec has economic interest. The services are delivered to ensure optimised operations of power producing assets through a complete and comprehensive range of services for technical and operational management. O&M revenues are generated based on fixed service fees with additional profit-sharing arrangements. Asset Management services typically include financial reporting to sponsors and lenders, regulatory compliance, environmental and social management, as well as contract management on behalf of the power plant companies. Revenues are based on service agreements with a periodic base fee as well as a potential performance bonus. These revenues are recognised as the service is provided. The potential performance revenues from the profit-sharing agreements are considered as variable consideration under IFRS 15 and are recognised when it is highly probable that the recognition will not be reversed in future periods. Development & Construction The Development & Construction segment derives its revenue from the sale of development rights and construction services to project entities set up to operate the Group’s power production plants. These transactions are primarily made with entities that are under the control of the Group and hence eliminated when consolidated. Construction services include operations where Scatec is responsible for the total scope of a turnkey installation of a power plant through a contract covering Engineering, Procurement and Construction. Revenues from construction services are based on fixed price contracts and are accounted for using the percentage of completion method. The percentage of completion of a contract is determined by actual cost incurred over total estimated costs to complete. Scatec periodically revise contract profit estimates and immediately recognises any losses on contracts. Incurred costs include all direct materials, costs for modules, labor, subcontractor costs, and other direct costs related to contract performance. Scatec recognises direct material costs as incurred costs when the main direct materials have been installed. Scatec considers direct materials to be installed when they are permanently attached or fitted to the power production systems as required by engineering designs. Some construction contracts include product warranties. The expected warranty amounts are recognised as an expense at the time of sale and are adjusted for subsequent changes in estimates or actual outcomes. The group has currently ongoing construction projects in Pakistan, Brazil and South Africa, as well as projects related to Release in Cameroon and South Africa. Corporate Corporate consists of the activities of corporate and management services. No segments have been aggregated to form these reporting segments. Revenues from transactions between the D&C, Services and PP segments, where Scatec is deemed to hold a controlling interest, are presented as internal revenues in the segment reporting, and eliminated in the consolidated statement of profit or loss. Use of proportionate financials The segment financials are reported on proportionate basis. With proportionate financials Scatec reports its share of revenues, expenses, profits and cash flows from its subsidiaries without eliminations based on Scatec’s economic interest in the subsidiaries. The Group introduced Proportionate Financials as the Group is of the opinion that this method improves earnings visibility and to improve transparency on underlying value creation across Scatec’s business activity. Revenues from transactions between group companies, where Scatec is deemed to hold a controlling interest, are presented as internal revenues in the segment reporting. These transactions are based on international contract standards and terms negotiated at arm’s length with lenders and co-investors 66 in each power plant company. No operating segments have been aggregated to form these reporting segments. The consolidated revenues and profits are mainly generated in the Power Production segment. Activities in the Services and Development & Construction segment mainly reflect deliveries to other companies controlled by Scatec, or which revenues and profits are eliminated in the consolidated financial statements. The key differences between the proportionate and the consolidated (IFRS) financials are that: ● In the consolidated financials fully consolidated companies are presented on a 100% basis. In the proportionate financials the fully consolidated companies are presented based on Scatec’s ownership percentage/economic interest. The residual ownerships interests in the table below represent the share of the proportionate financials in fully consolidated subsidiaries where Scatec do not have 100% economic interest. ● In the consolidated financials joint venture and associate companies are equity consolidated and are presented with Scatec’s share of the net profit on a single line in the statement of profit or loss. In the proportionate financials the joint venture and associate companies are presented in the same way as other subsidiaries on a gross basis in each account in the statement of profit or loss. In the table below is the column elimination of equity consolidated entities the elimination of proportionate financials from equity consolidated entities adjusted for Scatec’s share of net income/(loss). ● Internal gains are eliminated in the consolidated financials but are retained in the proportionate financials. These internal gains primarily relate to gross profit on D&C goods and services delivered to project companies. Hence, the consolidated financials have lower book value of solar plants and corresponding lower depreciation charges because internal gain is eliminated. Internal gain eliminations also include profit on Operations and Maintenance - and Asset Management services delivered to project companies. ● The management team assesses the performance of the operating segments based on a measure of gross profit and operating profit; hence interest income/expense is not disclosed on proportionate basis. Scatec ASA - Annual Report 2022 67 Bridge proportionate – to consolidated financials 2022 2022 Proportionate financials NOK million Power Production Services Development & Construction Corporate Total Residual ownership for fully consolidated entities Elimination of equity consolidated entities Other eliminations Consolidated financials External revenues 4,513 18 5 7 4,542 1,120 -2,661 - 3,002 Internal revenues 8 294 1,064 49 1,415 188 -138 -1,465 - Net income from JV and associates 1) - - - - - - 749 - 749 Total revenues and other income 4,521 312 1,069 56 5,957 1,309 -2,050 -1,465 3,751 Cost of sales -852 1 -962 1 -1,813 -145 914 1,044 - Gross profit 2) 3,669 312 106 57 4,144 1,163 -1,136 -421 3,751 Personnel expenses -125 -120 -215 -113 -574 -9 68 -12 -528 Other operating expenses -709 -118 -112 -81 -1,020 -221 253 320 -668 EBITDA 2,835 74 -221 -138 2,550 933 -815 -113 2,555 D&A and impairment -1,918 -6 -137 -29 -2,090 -414 510 162 -1,832 Operating profit (EBIT) 917 68 -358 -167 460 519 -306 49 723 1) Refer to Note 13 Investments in joint venture and associated companies for details on Net income from JV and associates 2) Equivalent to Net revenues In 2022 the Group has recognised an impairment charge of NOK 770 million in the Power Production segment in the proportionate financials related to the solar power plants and intangible assets in Ukraine. In the consolidated financials the impairment charge amounts to NOK 816 million as disclosed in the Note 12 Impairment testing. The Group has also recognised an impairment charge (in both consolidated and proportionate financials in the D&C segment) of NOK 132 million related to discontinued development projects in Lesotho, Bangladesh, Mali and India. From March the Group has recognised revenue from power production in Ukraine to the extent that Scatec believe it is probable to collect consideration. The recognised amount is NOK 129 million in proportionate financials (NOK 146 million in the consolidated financials) in the period from March to December, which is in line with the paid amounts for the period. Total revenue from power production in Ukraine in the proportionate financials for 2022 is NOK 153 million (NOK 175 million in the consolidated financials). Scatec has further recognised an expected credit loss provision in 2022 with respect to trade and other receivables related to Ukraine which amount to NOK 87 million in the proportionate financials (NOK 98 million in the consolidated financials), which is included in other operating expenses. Bridge proportionate – to consolidated financials 2021 2021 Proportionate financials NOK million Power Production Services Development & Construction Corporate Total Residual ownership for fully consolidated entities Elimination of equity consolidated entities Other eliminations Consolidated financials External revenues 3) 3,889 5 3 6 3,903 1,162 -2,025 -1 3,038 Internal revenues 1 256 134 36 426 34 -22 -438 - Net income from JV and associates 1) - - - - - - 765 - 765 Total revenues and other income 3,890 260 137 42 4,329 1,196 -1,282 -439 3,803 Cost of sales 3) -270 1 -120 - -389 -10 274 126 - Gross profit 2) 3,620 261 16 42 3,939 1,186 -1,009 -313 3,803 Personnel expenses -99 -97 -162 -92 -449 -7 49 10 -397 Other operating expenses -572 -90 -78 -65 -804 -208 208 302 -503 EBITDA 2,949 75 -223 -114 2,686 970 -752 -1 2,903 D&A and impairment -972 -5 -78 -26 -1,081 -330 369 151 -892 Operating profit (EBIT) 1,977 70 -301 -140 1,606 640 -383 149 2,012 3) Refer to Note 29 for details of the change in presentation of revenue and cost of sales for the electricity sold on bilateral contracts in the Philippines 68 Geographical break down of consolidated revenues and PPE In presenting information based on geographical areas, revenues from external customers are attributed to the country of the legal entity recording the sales. The allocation of property, plant and equipment is based on the geographical location of the assets. Projects that have not yet reached construction are allocated to the parent company being the main developer. The tables and information below include consolidated subsidiaries. Consolidated revenues per country External revenue NOK million 2022 2021 South Africa 1,106 1,135 Egypt 644 596 Malaysia 346 348 Ukraine 175 303 Honduras 200 197 Jordan 158 143 Czech Republic 128 122 Mozambique 93 83 Vietnam 83 70 Rwanda 23 20 Netherlands 29 5 Other 16 16 Total 3,002 3,038 Property, plant and equipment per country Property, plant and equipment NOK million 2022 2021 South Africa 4,155 3,245 Egypt 3,411 3,074 Malaysia 2,728 2,683 Ukraine 1,922 2,616 Honduras 1,302 1,359 Jordan 905 820 Mozambique 558 456 Vietnam 454 444 Norway 428 348 Cameroon 427 98 Pakistan 375 108 Czech Republic 336 330 Netherlands 160 158 Rwanda 141 136 Other 8 12 Total 17,310 15,885 Major customers In South Africa, revenues (3 plants which commenced operations in 2013 and 2014 and 3 plants which commenced operations in 2020) are earned under 20-year Power Purchase Agreements (PPA) with Eskom Holdings (South African incumbent utility), which was awarded under the Renewable Independent Power Producer Procurement Programme (REIPPPP) administrated by the Department of Energy. Eskom’s financial commitments under the PPA are guaranteed by the South African National Treasury under the Implementation Agreement. The Benban plant in Egypt commenced operation in 2019. The electricity is sold under a 25-year Power Purchase Agreement with Egyptian Electricity Transmission Company, S.A.E. The financial commitments of Egyptian Electricity Transmission Company, S.A.E under the PPA are guaranteed by the sovereign guarantee from The Ministry of Finance under the Egyptian Law. The Gurun plant in Malaysia commenced operation in 2018, the Merchang and Jasin plant commenced operation in 2019, and RedSol commenced operations in 2020. The electricity is Scatec ASA - Annual Report 2022 69 sold under 21-year Power Purchase Agreements with the country’s largest electricity utility, Tenaga Nasional Berhad (TNB). The PPA is not guaranteed by the Government as TNB is a reputable AAA rated listed company in Malaysia. The Rengy plant in Ukraine commenced operation in 2019, Boguslav and Kamianka commenced operations in 2020 and Chigrin and Progressovka commenced operations in 2021. The electricity is sold under Power Purchase Agreement’s all ending 31 December 2029 with the state-owned company Guaranteed Buyer. The financial commitments of Guaranteed Buyer under the PPA are guaranteed by the State under the law on Alternative Energy Sources and the Law on Electric Energy Market. The Agua Fria power plants in Honduras commenced operations in 2015, whereas the Los Prados plants in Honduras commenced operation in 2018. The electricity from the plants is sold under a 20-year Power Purchase Agreement with the utility Empresa Nacional de Energia Electricia (ENEE). The financial commitments of ENEE under the PPA are guaranteed by the sovereign guarantee executed by the Honduran attorney general and the secretary of finance, approved by the National Congress of Honduras. The Oryx, GLAE and EJRE power plants in Jordan commenced operations in 2016. The electricity is sold under a 20-year Power Purchase Agreement with National Electric Power Company (NEPCO). NEPCO’s financial commitments under the PPA are guaranteed by the Government of Jordan represented by its Ministry of Finance under the Government Guarantee Agreement. The Czech power plants commenced operations in 2009 (1 plant) and 2010 (3 plants) and have entered into power purchase agreements with utilities CEZ Distribuce and EON Distribuce, based on the terms of the Czech Energy Act and Czech Renewable Energy Act. This legislation requires the utilities to purchase the power produced from renewable energy sources for a period of 20 years at the Feed-in-Tariff (FiT) prescribed by law and applicable regulation, adjusted annually. The Mocuba plant in Mozambique commenced operation in 2019. The electricity is sold under a 25-year Power Purchase Agreement with Electricidade de Moçambique (EDM). The financial commitments of EDM under the PPA are guaranteed by The Mozabican government under the concession agreement approved under law 88/2016 of 5 December 2016 for 30 years. The Dam Nai wind farm in Vietnam was acquired by SN Power on 27 January 2021 and has a capacity of 39.4 MW. The wind farm was constructed in two phases and Phase I started operations in October 2017 (7.9 MW) and Phase II in December 2018 (31.5 MW). The electricity is sold under a 20- year Power Purchase Agreement with Vietnam Electricity; a state-owned company established by the government in Vietnam. The ASYV power plant in Rwanda commenced operations in 2014. The power is sold under a 25-year Power Purchase Agreement with the state-owned utility EWSA, with an annual price adjustment of 100% of Rwandan CPI. EWSA’s financial commitments under the PPA are guaranteed by the Government of Rwanda represented by its Ministry of Finance and Economic Planning under the Government Guarantee Agreement. Note 4 Employee benefits Wages, salaries, bonuses, pension and social security contributions, paid annual leave and sick leave are accrued in the period in which the associated services are rendered by employees of the Company. The cost of equity-settled transactions is recognised in personnel expenses, together with a corresponding increase in equity over the vesting period. To calculate the fair value of the options that meets the definition of an equity-settled share-based payment transaction (IFRS 2 app. A), the BlackScholes-Merton option-pricing model is applied on each tranche. Share price (spot), exercise price, expected option lifetime, expected volatility, expected dividend and risk-free interest rate are the input parameters in the model. Salaries and other personnel costs NOK million 2022 2021 Salaries 463 363 Share-based payment 39 27 Payroll tax 43 31 Pension costs 38 24 Other personnel costs 31 21 Capitalised to PP&E (project assets) -87 -68 Total 528 397 70 Salaries and personnel expenses for the management NOK million 2022 2021 Salary and bonus 45 35 Pension 2 1 Total 47 36 For further details on employee benefits and management remuneration, refer to Note 4 Personnel expenses, number of employees and auditor’s fee in the separate financial statements for the Parent Company . Reference is also given to the separate remuneration report issued by the parent company . No severance package agreements have been established with management. Long term incentive programmes In line with the terms adopted by the Annual General Meeting of Scatec ASA on 4 May 2016, and prolonged in the following years, the Board of Directors have established an option programme for leading employees of the company. Options are vested in tranches over a three-year period, with the first tranche vesting one year from award . As of 31 December 2022, there are options not fully vested from the grants awarded in 2020 and onwards. Each share option gives the right to subscribe for and be allotted one share in Scatec ASA. The strike prices are equivalent to the volume weighted average price of the shares the ten preceding trading days of the grant. Date granted Amount Strike price 02/01/2019 494,510 72.03 02/01/2020 595,140 114.83 04/01/2021 251,242 314.91 24/02/2021 32,999 314.91 06/05/2021 219,566 244.28 04/01/2022 1,049,596 150.79 28/03/2022 10,000 134.53 The options awarded in 2019 are fully vested. A total of 26 employees were awarded options in 2019 of which 3 has subsequently left the Company. A total of 39 employees were awarded options in 2020 of which 5 have subsequently left the company. A total of 82 employees were awarded options in 2021 of which 10 have subsequently left the company. A total of 98 employees were awarded options in 2022 of which 13 have subsequently left the company. For the options granted in 2022 the assumptions used in calculating the fair value of the options are as follows: 2.98 years (2.84 years) for expected lifetime, 49.02% (44.87%) for the expected volatility and 0 (0) for expected dividend. The calculations are based on average values. During 2022 the employees exercised 51 thousand options (515 thousand) at the weighted average strike and share price of NOK 89.26 and NOK 130.30 (NOK 80.10 and NOK 279.18) respectively. Total number of outstanding options under the long-term incentive programme is 1,767 thousand (978 thousand) as of 31 December 2022, whereas 430 thousand are vested at the weighted average strike price of NOK 158.19. The fair value of the options is expensed over the vesting period, and in 2022 NOK 39 million (27) have been expensed. Summary of movements in options Opening balance Granted Exercised Forfeited Closing balance Closing balance vested options Numbers of instruments 997,258 1,090,607 -50,818 -269,782 1,767,265 429,604 Weighted average strike price 186.84 147.07 89.26 183.04 165.68 158.19 Pensions schemes The Group has established pension schemes that are classified as defined contribution plans. Contributions to defined contribution schemes are recognised in the consolidated statement of profit and loss in the period in which the contribution amounts are earned by the employees. Scatec ASA - Annual Report 2022 71 Number of FTE’s employed during the financial year in the consolidated entities 2022 2021 South Africa 219 179 Norway 146 116 Egypt 72 48 Ukraine 45 37 Malaysia 33 34 Netherlands 28 17 Honduras 20 18 India 11 5 Vietnam 9 8 France 9 4 Mozambique 7 7 Pakistan 6 4 Other 26 25 Total 631 502 Note 5 Other operating expenses NOK million 2022 2021 Facilities 210 182 Professional fees 175 138 Other office costs 74 56 Travel costs 32 14 Social development contributions 18 54 O&M external fees 23 20 Impairment of expected credit loss 98 - Other costs 38 39 Total other operating expenses 668 503 The impairment of expected credit loss is related to receivables in Ukraine, refer to note 15 Trade receivables for further details. Government grants are recognised when it is reasonably certain that the company will meet the conditions stipulated for the grants and that the grants will be received. Grants are recognised either as cost reduction or as a deduction of the asset’s carrying amount. Scatec has in 2022 recognised government grants of NOK 27 million (4) in cost reductions and NOK 29 million (58) as deductions of the development and construction asset’s carrying amount. Remuneration to the auditors (PwC and other independent auditors) NOK million 2022 2021 Audit services 9 9 Other attestation services 1 - Tax services 1 3 Other services 1 1 Total remuneration 11 13 VAT is not included in the numbers above. The Scatec Group changed group auditor from EY to PwC as of 2022. 72 Note 6 Financial income and expenses NOK million 2022 2021 Interest income 92 43 Other financial income 23 4 Interest and other financial income 115 47 Interest expenses 1,424 1,303 Change in fair value of forward exchange contracts 89 -2 Other financial expenses 154 67 Interest and other financial expenses 1,666 1,368 Net foreign exchange gain/(loss) -268 69 Net fiancial expenses 1,818 1,253 The increase in other financial expenses is mainly explained by non-recurring fees recognised for the refinancing of the power plants in Egypt, South Africa and Vietnam. See Note 18 Financial risk management for interest rate sensitivity. See Note 22 Non-recourse financing for details on project financing and Note 21 for details on corporate financing. Note 7 Tax Accounting principle Income tax expense comprises current tax and change in net deferred tax. The amount of net deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the consolidated statement of financial position date. Deferred tax assets and liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. Estimation uncertainty Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised based upon the likely timing and the level of future taxable profits. When assessing the probability of utilising these losses several factors are considered, including if the entity in question has a history of losses, if there is an expiration date on the entity’s ability to carry the losses forward and/or if the losses may be used to offset taxable income elsewhere in the Group. The majority of the Group’s tax losses are related to favorable tax rules for depreciation of power plants and its reversal is merely a timing effect. Refer to paragraph below under specification of tax losses carried forward for further description. Uncertain tax positions and potential tax exposures are analysed individually and, the best estimate of the probable amount for liabilities to be paid (unpaid potential tax exposure amounts, including penalties) and assets to be received (disputed tax positions for which payment has already been made), are recognised within current tax or net deferred tax as appropriate. Scatec ASA - Annual Report 2022 73 Effective tax rate NOK million 2022 2021 Tax payable -197 -84 Change in deferred tax 108 -232 Withholding tax -45 -49 Adjustments of tax concerning previous years 1 63 Income tax expense -132 -303 Reconciliation of Norwegian nominal tax rate to effective tax rate Profit before income tax -1,095 759 Nominal tax rate (22%) 241 -167 Tax effect of: Permanent differences -28 -25 Tax rate different from Norwegian rate -39 -5 Current tax on dividend received and withholding tax -45 -49 Valuation allowance loss carried forward -248 -177 Adjustments of tax concerning previous years - - Share of net income from associated companies 165 168 Non-recognised tax effects from impairment in Ukraine -175 - Use and capitalisation of previously unrecognised losses carried forward 14 9 Other items -27 -11 Currency translation 11 -46 Calculated tax expense -132 -303 Effective tax rate NA 40% The Group recognised an income tax expense of NOK -132 million (-303) in 2022. The difference between the Group’s actual tax expense and a calculated tax expense based on the Norwegian tax rate of 22% is mainly due to different tax rates in the jurisdictions in which the companies operates, withholding taxes paid on dividends, currency effects, effects from non-recognised tax losses and revised assessment of deferred tax assets. Further, the profit/loss from JVs and associates are reported net after tax which also impacts the effective tax rate. The effective tax rate is also impacted by non-recognised deferred tax asset related to the impairment of the assets in Ukraine. The underlying tax rates in the companies in operation are in the range of 0% to 33%. In some markets, Scatec receives special tax incentives intended to promote investments in renewable energy. The effective tax rate has been and will be impacted by the volume of construction activities as the tax rate in the construction companies normally is higher than in the power plant companies. This means that the full tax expense on the internal profit will not be eliminated and hence increases the effective tax rate during construction. The opposite effect will occur when the eliminated internal profit is reversed through lower depreciation at the tax rate of the power plant company. Significant components of deferred tax assets NOK million 2022 2021 Tax losses carried forward 1,997 1,724 Valuation allowance of deferred tax assets -458 -530 Financial instruments 48 87 Property, plant and equipment and intangible assets 60 100 Construction projects 124 - Lease liabilities 61 51 Other items 40 14 Offsetting of tax balances 1) -1,012 -699 Total deferred tax assets 860 748 74 Significant components of deferred tax liabilities NOK million 2022 2021 Property, plant and equipment and intangible assets 1,658 1,282 Construction projects - 1 Financial instruments 88 4 Other items 6 1 Offsetting of tax balances 1) -1,012 -699 Total deferred tax liabilities 743 589 1) Deferred tax assets and liabilities are offset to the extent that the deferred taxes related to the same fiscal authority and there is a legally enforceable right to offset current tax assets against current tax liabilities Specification of tax loss carried forward NOK million 2022 2021 Country Loss carried forward Deferred tax asset Loss carried forward Deferred tax asset Norway 2,890 251 2,054 260 South Africa 2,690 753 2,444 675 Ukraine 2,048 369 899 162 Egypt 1,371 143 1,050 78 Jordan 453 23 480 18 Netherlands 214 - 339 - Malaysia 168 - 231 - Other 11 - 18 - Total 9,845 1,540 7,514 1,195 The Group has NOK 9,845 million (7,514) of tax losses carried forward. The balances are offset against taxable temporary differences within the same fiscal authority. In Norway a net deferred tax asset balance of NOK 226 million is recognised which is primarily related to tax losses carried forward (NOK 251 million) and partly offset by other temporary differences. In South Africa a net deferred tax asset of NOK 73 million is recognised. The difference between net position and deferred tax asset related to tax losses carried forward (NOK 753 million) is mainly due to offsetting temporary differences on property, plant and equipment. Net deferred tax asset balance in Ukraine is NOK 58 million and is related to tax losses carry forward (NOK 369 million) offset by the increased deferred tax liability on property, plant and equipment. Net deferred tax liability in Egypt of NOK 309 million is primarily related to temporary differences on property, plant and equipment as well as on the financial instruments. The losses carried forward in countries with power plant assets are mainly related to accelerated depreciation rates for power plant assets compared to the accounting depreciations which are determined by the useful life of the assets. The increase in losses carried forward for the Group in 2022 mainly derives from losses in Ukraine entities and in Scatec ASA. We assessed the probability of utilising the tax losses in all countries where tax losses were recognised to ensure that tax losses are recorded to the extent that the Group expects there will be sufficient future taxable profits available to utilise the losses. At year-end 2022 the Group has recorded a valuation allowance of NOK -458 million (-530) related to tax losses carried forward which are not expected to be used to offset future taxable income. The valuation allowance is recognised in Norway (NOK 203 million), Egypt (NOK 166 million), Malaysia (NOK 40 million) and in other countries. The tax losses in Egypt and Jordan can be carried forward for 5 years while losses in Netherlands can be carried forward indefinitely. The Group had at the end of 2022 capitalised approximately NOK 6 million (6) in deferred tax asset related to deferred interest expenses, which can be carried forward for 10 years until 2027 in Norway. All other tax losses in the group can be carried forward indefinitely. Scatec ASA - Annual Report 2022 75 Movement in net deferred tax asset NOK million 2022 2021 Net deferred tax asset at 1 January 159 517 Recognised in the consolidated statement of profit or loss 108 -232 Deferred tax other comprehensive income -150 -108 Deferred tax on excess values from acquisition of SN Power - -19 Translation differences - 2 Net deferred tax asset at 31 December 117 159 Note 8 Earnings per share NOK million 2022 2021 Profit/(loss) attributable to the equity holders of the company and for the purpose of diluted shares -1,334 388 Weighted average number of shares outstanding for the purpose of calculating basic earnings per share 158.9 158.8 Earnings per share for income attributable to the equity holders of the company - basic (NOK) -8.40 2.45 Effect of potential dilutive shares: Weighted average number of shares outstanding for the purpose of calculating diluted earnings per share 158.9 159.7 Earnings per share for income attributable to the equity holders of the company - diluted (NOK) -8.40 2.43 Diluted earnings per share is affected by the option programme for equity-settled share-based payment transactions, refer to Note 4 Employee benefits. There is no diluted effect on earnings per share in case of loss. 76 Note 9 Property, plant and equipment Accounting principle Power plants in operation The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into operation, the initial estimate of an asset retirement obligation and, for qualifying assets, borrowing costs incurred in the construction period. All other borrowing cosats are recognised in the profit or loss in the period in which they incur. Maintenance expenses are recognised in the statement of profit or loss as incurred. Replacement of damaged components is accounted for as an impairment with capitalisation of the replacement cost as a new item of PPE. Depreciation of a power plant commences when the plant is ready for management’s intended use, normally at the date of grid connection and commissioning. Asset retirement obligations Asset retirement costs is recognised when the Group has an obligation to dismantle and remove a power plant and to restore the site on which it is located. Expenditures related to asset retirement obligations are expected to be paid in the period between 2030 and 2046. Power plants under development Expenses relating to research activities (project opportunities) are recognised in the statement of profit or loss as they incur. Expenses relating to development activities (project pipeline and backlog) are capitalised to the extent that the project is technically and commercially viable and the Group has sufficient resources to complete the development work. Expenses that are capitalised include the costs of materials, direct wage costs and other directly attributable expenses. Other fixed assets Other fixed assets mainly include office lease, fixtures and equipment. For accounting principles related to right to use lease assets, details are provided in Note 11 Leases. Estimation uncertainty Estimated useful life of power plants The estimated useful lives of power plants are reviewed on an annual basis and changes in useful lives are accounted for prospectively. In most of these markets the sale of electricity depends on having a PPA, hence, the length of the PPA is deemed to be the critical factor for determine useful life. The power plants currently in operation have 15 to 25 years off-take agreements. Whether or not these agreements will be extended is not currently known. Technical useful life for the power plants is deemed to be at least 30 years, a factor also considered when assessing depreciation period. The assessment is made on a plant by plant basis, and most of the Group’s power plants are depreciated over the length of the PPA. Existing Ukrainian regulation allow to choose to sell electricity under a PPA agreement or directly in the electricity spot market, thus the solar plants in Ukraine are not dependent on an PPA agreement and will be able to sell produced electricity in the existing electricity spot market in the country during and/or after expiry of the current PPA contracts. There are no limitations on the terms and validity of the market energy sales agreements. Consequently, the Group has revised the estimated useful life of its five solar plants in Ukraine from 25 to 30 years per 31 December 2022. This change in estimate will be applied prospectively from 1 January 2023 and will not result in any restatement to the current or prior year consolidated financial statements. Capitalisation of development costs Expenses relating to development activities (project pipeline and backlog) are capitalised to the extent that the project is technically and commercially viable and the Group has sufficient resources to complete the development work. The assessment of project viability is based on completion of key development activities and includes management judgment. The carrying value of development projects that have not yet reached the construction phase was NOK 232 million (364) at 31 December 2022. Asset retirement obligations Scatec’s future asset retirement obligation depends on several factors such as the possible existence of a power market for the plants after the end of the PPA, future recycling arrangements and/or their second-hand value, future value of steel and copper as well as future development of interest and currency exchange rates. The calculation of the asset retirement obligation includes significant judgment and is done on a plant-by-plant basis, taking into consideration relevant project specifics. Impairments Power plants and projects under development/ construction are tested for impairment to the extent that indicators of impairment exist, please refer to Note 12 Impairment testing for details. During 2022, the Group impaired NOK 742 million related to solar power plants in Ukraine and NOK 132 million (76) related to discontinued development projects. Scatec ASA - Annual Report 2022 77 Property, plant and equipment NOK million Power plants Power plants under development and construction Other fixed assets Total Accumulated cost at 1 January 2022 18,026 698 316 19,040 Additions 141 1,783 62 1,986 Transfers 233 -233 - - Disposals - -45 - -45 Effect of movements in foreign exchange rates 1,427 48 36 1,511 Accumulated cost at 31 December 2022 19,828 2,250 414 22,492 Accumulated depreciation and impairment losses at 1 January 2022 2,918 116 118 3,152 Depreciation for the year 818 - 46 864 Impairment losses 742 113 19 872 Effect of movements in foreign exchange rates 264 22 4 291 Accumulated depreciation and impairment losses at 31 December 2022 4,743 251 186 5,179 Carrying amount at 31 December 2022 15,083 1,997 229 17,310 Estimated useful life (years) 20-25 N/A 3-5 Accumulated cost at 1 January 2021 15,938 2,142 290 18,370 Additions 620 435 10 1,065 Transfers 1) 1,572 -1,856 18 -266 Disposals - -2 -10 -12 Effect of movements in foreign exchange rates -103 -21 8 -116 Accumulated cost at 31 December 2021 18,026 698 316 19,040 Accumulated depreciation and impairment losses at 1 January 2021 2,173 46 82 2,301 Depreciation for the year 766 - 37 803 Impairment losses 6 70 - 76 Accumulated depreciation and impairment losses disposals - - -3 -3 Effect of movements in foreign exchange rates -26 -1 3 -24 Accumulated depreciation and impairment losses at 31 December 2021 2,918 116 118 3,152 Carrying amount at 31 December 2021 15,106 580 198 15,885 Estimated useful life (years) 20-30 N/A 3-5 1) NOK 266 million of Transfer of assets relates to reclassification of concept assets for Release and right to transmit electricity from PPE to intangible assets in 2021. Of the NOK 266 million, approximately NOK 90 million are additions in 2021. Refer to note 10. Note 10 Goodwill and other intangible assets Overview The Group’s goodwill is associated with the acquisitions of Solar competence GmbH in 2007 and SN Power in 2021. The Group had no other intangible assets with an indefinite useful life than goodwill as of 31 December 2022 and 2021. The Group’s Other intangible assets consist of renewable operating license, right to transmit electricity, software and internally developed asset related to the Release concept with a finite useful life. The estimated useful life of intangible assets with a finite lifetime are reviewed on an annual basis, and are amortised over 3-25 years. In 2022, the Group impaired NOK 74 million of other intangible assets in Ukraine related to the right to transmit electricity for the power solar plants. No impairment charges were recognised in 2021 related to intangible assets. Please refer to Note 12 Impairment testing. Estimation uncertainty There is considerable estimate uncertainty associated to the value of intangible assets. Please refer to Note 12 Impairment testing for assessment of recoverable amount. 78 Carrying value of goodwill and other intangible assets NOK million Goodwill Other intangible assets Total Accumulated cost at 1 January 2022 321 492 813 Effect of movements in foreign exchange 35 33 68 Accumulated cost at 31 December 2022 357 525 889 Accumulated depreciation and impairment losses at 1 January 2022 - 16 16 Depreciation for the year - 26 26 Impairment losses - 74 74 Effect of movements in foreign exchange - 8 8 Accumulated depreciation and impairment losses at 31 December 2022 - 124 124 Carrying amount at 31 December 2022 357 401 758 Accumulated cost at 1 January 2021 25 20 45 Additions 290 198 488 Transfer 1) - 266 266 Effect of movements in foreign exchange 6 8 14 Accumulated cost at 31 December 2021 321 492 813 Accumulated depreciation and impairment losses at 1 January 2021 - 5 5 Depreciation for the year - 11 11 Accumulated depreciation and impairment losses at 31 December 2021 - 16 16 Carrying amount at 31 December 2021 321 476 797 Estimated useful life N/A 3-25 1) NOK 266 million relates to reclassification of assets related to the Release concept and right to transmit electricity from Property, plant and equipment to Intangible assets Note 11 Lease Accounting principle The group primarily leases office and land where the power production plants are located, accounted for in accordance with IFRS 16. IFRS 16 requires a lessee to account for lease contracts by recognising a liability representing the future lease payments, and an asset representing the right to use the underlying asset. The Group applies the recognition exemptions and recognises the lease payments as other operating expenses in the statement of profit or loss for leases of low value and leases with lease term less than 12 months. The future lease payments includes fixed lease payments and variable lease payments that depends on an index or a rate. The Group does not include variable lease payments dependent on future events in the lease liability. Instead, the Group recognises these costs in profit or loss in the period in which the event that triggers those payments occurs. Land leases where the lease payment is based on power production have been excluded from the liability measure. Estimation uncertainty When calculating the lease liability and the right-of-use asset, the discount factor is a significant estimate. In the absence of an identifiable discount rate, implicit in the lease agreement, the discount rate used is the Group’s incremental borrowing rate. The incremental borrowing rate has been estimated by each subsidiary on an individual basis. For power producing entities, the interest rate on the non-recourse loans has been central when estimating the incremental borrowing rate. For other subsidiaries, non-secured debt has been used as a benchmark for the discount rate. Several of the Group’s lease agreements contain options to extend the lease agreement beyond the contractual lease term. As the extension period is 20-25 years ahead for land leases it is uncertain whether the option will be exercised. The Group has evaluated all these options, but it’s not deemed Scatec ASA - Annual Report 2022 79 reasonably certain that the Group will exercise the options, and hence, the period covered by these options has not been included in the lease liability. The Group reevaluate the options on a continuously basis. Reconciliation of movement in right-of-use asset NOK million Land Office & cars Total Right-of-use asset at 1 January 2022 138 90 228 Additions 67 21 88 Depreciation for the year -10 -25 -36 Effect of movement in foreign exchange and other changes 8 14 21 Right-of-use asset at 31 December 2022 202 98 301 Reconciliation of movement in lease liabilities NOK million 2022 2021 Lease liability at 1 January 246 262 Lease agreements entered into during the year 65 18 Lease payments made during the year -46 -41 Interest expense on lease liabilities 18 15 Effect of movement in foreign exchange and other changes 30 -8 Lease liability at 31 December 313 246 Leases in the income statement NOK million 2022 2021 Operating expenses Short term- low value and variable lease payment expenses -41 -39 Depreciation expenses Depreciation of right-of-use assets (land lease) -10 -8 Depreciation of right-of-use assets (office lease and other) -25 -23 Total depreciation -36 -31 Financial expenses Interest expense on lease liability -18 -15 Total lease expense in the income statement -94 -85 Leases in the statement of financial position NOK million 2022 2021 Assets Right-of-use assets - land lease 202 138 Right-of-use assets - office lease and other 98 90 Total right-of-use assets 301 228 The land lease portion of the Right-of-use asset is presented under “power plants” and “Power plants under development and construction“ in note 9, while the office lease portion of the Right-of-use asset is presented under the line “Other fixed assets”. Liabilities Non-current liabilities Lease liabilities (see Note 17 Other non-current and current liabilities) 270 206 Current liabilities Lease liabilities (see Note 17 Other non-current and current liabilities) 43 39 Lease liabilities included in the balance sheet 313 246 80 Leases in the statement of cash flows NOK million 2022 2021 Cash flow from operating activities Short-term and variable lease payments 41 39 Cash flow from financing activities Payments of principal portion on lease liabilities 26 26 Interest paid on lease liabilities 20 15 Maturity analysis – Undiscounted contractual cash flows NOK million 2022 2021 One year 38 38 One to two years 42 31 Two to three years 37 28 Three to four years 36 28 Four to five years 34 27 More than five years 315 206 Total undiscounted lease liabilities 501 358 Lease liabilities included in the balance sheet 313 246 Note 12 Impairment testing Accounting policy The Group assesses property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Goodwill and intangible assets with an indefinite useful life are tested for impairment annually or more frequently if there are circumstances indicating that the carrying amount may be impaired. The recoverable amount is the higher of the assets fair value less costs to sell and its value in use. An impairment loss is recognised when an asset or cash generating units carrying value exceeds the recoverable amount. Per 31 December 2022 and 2021, the Group had no intangible assets with indefinite useful life other than goodwill. Estimation uncertainty Factors which trigger impairment testing include, but is not limited to, political changes, macroeconomic fluctuations, changes to the Group’s strategy, project delays, underperforming, changes to tariffs and similar. Value in use calculation is based on a discounted cash flow model. The future cash flows include a number of estimates and assumptions, including future market conditions, discount rates and estimated useful life and others. Climate risks such as more extreme weather and changes to the market for renewable energy may impact the future cash flows. The estimates are based on the Group’s budgets and long-term outlooks approved by management. The recoverable amount is sensitive to changes in discount rate, expected production rates, demand and price forecasts for power assets with variable income. The Group monitors changes in government legislation related to climate matters on a continuous basis. Legal changes may impact key assumptions in the value in use calculations in future periods. Impairment test – plants in operation Tests for impairment have been performed for CGUs with mandatory annual tests and the CGUs where impairment indicators have been identified. The recoverable amount for these units have been determined estimating the value in use of the assets and comparing against the carrying value of the CGUs. Impairment indicators were identified during 2022 for Scatec’s five solar plants in Ukraine triggered by Russia’s invasion on 24 February 2022. The situation in Ukraine at the end of December 2022 is still very challenging and highly uncertain, and Scatec's top priority is the safety of our Ukrainian employees. The outcome of the situation and the impact of Scatec’s assets are highly uncertain. Per 31 December 2022, approximately 95 percent of the power plants are intact and available, but power demand is down, and production is being curtailed by the grid operator on an ad hoc basis. For the months after the invasion the Ukrainian off-taker has approximately paid 42% of the revenues Scatec ASA - Annual Report 2022 81 generated on the defined Feed-in-Tariff for Scatec’s assets. The payments levels have increased during the year and the payment level in November and December were 83% and 69% respectively. In the fourth quarter 2022, the impairment tests from the first quarter 2022 were updated with new information on cash flow assumptions and WACC. Three scenarios have been assessed and weighted to arrive at the value in use for the solar power plants. The main assumptions used in the impairment test were: Future cash flows: The solar power plants in Ukraine operate under 10-years Feed-in-Tariffs (tariff) which all end in 2029. For the cash flow periods after 2029, the estimates are based on available power market data and Scatec’s long-term power market outlook. In a best-case scenario, we assume a continued reduction in government payment for the power produced with a 65% payment level in 2023 before the situation stabilises and return to normal level from the beginning of 2024. The revenues not paid for 2022 and 2023 are assumed to be deferred and paid in 2024 and 2025. In a mid-case scenario, it is assumed cash flow to be reduced also in 2024-2026 with a 65% payment level before we return to normal level of cash flows from the beginning of 2027. In a worst-case scenario, no future revenues are assumed. The three scenarios have been equally weighted to reflect the high uncertainty on the impact of Scatec’s assets in Ukraine. Discount rate: The value in use calculations include significant estimate uncertainty, which has been reflected in the future cash flow assumptions and estimates and not in the discount rate. The after-tax discount rate applied in on the cash flows was 8.7%. This corresponds to the average pre-tax discount rate of 9.4%. The result of the analysis above equals an impairment assessment including pre-war cash flows discounted at a WACC approximately at 18.4%. Sensitivity: The value in use calculation is sensitive to changes in discount rate. Sensitivity analysis shows that an increase in the discount rate of 1% would results in an increased impairment charge of NOK 170 million, assuming all other factors remain unchanged. The sensitivity analysis is for indicative purposes only. Impairment: A total impairment charge of NOK 816 million was recognised in the first quarter, whereof NOK 742 million related to solar power plants and NOK 74 million related to intangible assets. Intangible assets in Ukraine relate to right to transmit electricity for the solar power plants. The recoverable amount for the solar power plants and intangible assets in Ukraine were NOK 2,107 million as per 31 December 2022. NOK million Power plants in Ukraine Other Intangible assets in Ukraine Total Carrying value at 31 December 2022 2,681 242 2,923 Impairment charge -742 -74 -816 Recoverable amount at 31 December 2022 1,939 168 2,107 Scatec has secured Political Violence Insurance (PVI) in Ukraine which covers physical damage of the power plants up to a predetermined amount. The insurance covers the replacement value for rebuilding the power plants as well as for business interruptions for 12 months for Rengy and Progressovka. As communicated in the first quarter 2022 report, the Political Violence Insurance for Boguslav, Kamianka and Chigirin expired on 31 May 2022. Given the uncertainty in Ukraine, (international) insurance markets are no longer able to provide this cover going forward, hence Scatec has not been able to renew the Political Violence Insurance for these assets. This means that if Scatec suffered war related damages at these sites, this would no longer be covered by (PV) insurance. For information related to revenues and receivables refer to Note 3 Operating segments, Note 22 Non-recourse financing for financing commitments, covenants and guarantees and Note 14 for cash in this report. Impairment test – development projects In 2022 Scatec impaired NOK 132 million related to discontinued development projects in Lesotho, Mali, Bangladesh and India. Annual mandatory impairment test - goodwill The goodwill of the Group mainly relates to the acquisition of SN Power AS in 2021 (NOK 331 million). The goodwill relates to the portfolio of identified project development opportunities and assembled workforce. Consequently, the goodwill is allocated to and tested for impairment on the global Development & Construction operating segment. The goodwill has been tested for impairment with the following key assumptions and estimates: Discount rate: The discount rates are based on the Weighted Average Cost of Capital (WACC) methodology. The discount rate used in the impairment calculations represent the current market assessment of the risks specific to a group of CGUs, 82 taking into consideration any individual risks of the underlying assets that have not been incorporated in the cash flow estimates. Discount rates used in the value in use calculation is based on a discount rate after tax . The pre-tax discount rate applied in 2022 is 7.4%. Future cash flows: The recoverable amount has been determined based on the value in use calculations. The estimated cash flows correspond to the business plan a five- year period, which is based on the Group’s project backlog and pipeline. The business plan is approved by the Board of Directors. Cash revenues have been calculated based on estimated project volumes and an average margin related to project execution. Cash expenses have been calculated based on budgeted operating expenses attributable to project execution activities. To the best of management’s judgement, capital expenditure and changes in working capital are insignificant in relation to this calculation and are therefore excluded. The discounted free cash flows exceed the carrying amount and the asset is not impaired. Sensitivity: The Group is of the view that no reasonably likely change in the key assumptions listed above would cause the carrying value to materially exceed the recoverable amount for any of the CGUs. An increase in WACC by 2 percentage point would not lead to impairment loss. The Group has not recognised any impairments related to goodwill in 2022 or 2021 as the recoverable amounts exceed the carrying amount. Note 13 Investments in joint venture and associated companies Accounting principle A joint venture or associate is an entity over which the Group has joint control or significant influence. The Group’s investments in its associates and joint ventures are accounted for using the equity method. Under the equity method, the investment is initially recognised at cost and subsequently adjusted for further investments, distributions, and the Group’s share of the net income from the associate or joint venture. Estimation uncertainty The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries. Refer to Note 2 Key sources of estimation uncertainty for significant judgements related to the assessment of whether Scatec controls an entity. There is also considerable estimate uncertainty associated with the estimation of the excess values included in the net investment in joint venture and associated companies. The excess values mainly relate to water rights, and the estimated useful life of the water rights are reviewed on an annual basis and amortised over the remaining concession period. The tables below show the material joint ventures and associated companies recognised in the Group and the reconciliation of the carrying amount. Scatec ASA - Annual Report 2022 83 Material joint ventures and associated companies Company Registered office 2022 2021 Kube Energy AS Oslo, Norway 25.00% 25.00% Scatec Solar Brazil BV Amsterdam, Netherlands 50.00% 50.00% Apodi I Energia SPE S.A Quixeré, Brazil 43.75% 43.75% Apodi II Energia SPE S.A Quixeré, Brazil 43.75% 43.75% Apodi III Energia SPE S.A Quixeré, Brazil 43.75% 43.75% Apodi IV Energia SPE S.A Quixeré, Brazil 43.75% 43.75% Mendubim Holding B.V. 1) Amsterdam, Netherlands 33.33% 51.00% Mendubim Geração de Energia Ltda. 1) Assu, Brazil 33.33% 50.00% Mendubim (I-XIII) Energia Ltda. 1) Assu, Brazil 33.33% - Mendubim Solar EPC Ltda. 1) Assu, Brazil 33.33% - Scatec Solar Solutions Brazil B.V. Amsterdam, Netherlands 50.00% 50.00% Scatec Solar Brasil Servicos De Engenharia LTDA Recife, Brazil 50.00% 50.00% Scatec Equinor Solutions Argentina S.A Buenos Aires, Argentina 50.00% 50.00% Cordilleras Solar VIII S.A Buenos Aires, Argentina 50.00% 50.00% Theun-Hinboun Power Company Vientiane, Laos 20.00% 20.00% SN Aboitiz Power – Magat Inc Manila, Phillippines 50.00% 50.00% Manila-Oslo Reneweable Enterprise Manila, Phillippines 16.70% 16.70% SN Aboitiz Power – Benguet Inc Manila, Phillippines 50.00% 50.00% SN Aboitiz Power – RES Inc Manila, Phillippines 50.00% 50.00% SN Aboitiz Power – Generation Inc Manila, Phillippines 50.00% 50.00% SN Power Uganda Ltd. Kampala, Uganda 51.00% 51.00% Bujagali Energy Ltd. Jinja, Uganda 28.28% 28.28% Compagnie Générale DHydroelectricité de Volobé SA Antananarivo, Madagascar 12.75% 12.75% Ruzizi Energy Ltd Kigali, Rwanda 20.40% 20.40% SN Power Africa Ltd Nairobi, Kenya 51.00% 51.00% SN Power Invest Netherlands B.V. Amsterdam, Netherlands 51.00% 100.00% SN Development B.V. Amsterdam, Netherlands 51.00% - 1) Mendubim project structure includes 13 SPVs, EPC and an operating company. Carrying amount of investments in material joint venture and associated companies Country Carrying value 31 December 2021 Additions/ disposals Net income from joint venture and associated companies Dividends Net movement of cash flow hedges recognized in OCI Foreign currency translations Carrying value 31 December 2022 Philippines 6,366 -46 472 -402 - 144 6,535 Laos 1,632 1 79 -86 - 195 1,822 Uganda 1,101 -1 155 -182 85 134 1,292 Other 2 ⁾ 646 251 42 - - 87 1,026 Total 9,745 204 749 -669 85 560 10,674 2) Other includes Brazil, Argentina, Rwanda, Madagascar, Kenya, Norway and the Netherlands. 84 100% figures of summarised profit and loss for material joint venture and associated companies (standalone basis) 2022 NOK million Philippines Uganda Laos Other Revenues 4,010 1,234 1,257 681 Operating expenses -407 -93 -169 -156 Operating profit/(loss) 1,576 877 842 109 Net financial items -224 45 -16 126 Profit before income tax 1,352 923 826 236 Income tax -197 -6 -123 95 Profit/(loss) after tax 1,155 917 703 331 Scatec’s share of profit/(loss) after tax 579 259 141 179 Amortisaton of excess values (net of tax) - Scatecs share -105 -22 -61 - Elimination of internal transacitions and internal profit -2 -82 -1 -136 Net profit/(loss) 472 155 79 42 2021 NOK million Philippines Uganda Laos Other Revenues 3,582 1,103 1,486 280 Operating expenses -355 -70 -178 -91 Operating profit/(loss) 1,556 822 1,090 137 Net financial items -302 -113 28 -130 Profit before income tax 1,254 709 1,118 7 Income tax -145 -20 -168 18 Profit/(loss) after tax 1,109 689 950 25 Scatec’s share of profit/(loss) after tax 545 195 195 14 - - - SN Power January figures not included in consolidated figures -86 -47 -17 - Amortisaton of excess values (net of tax) - Scatecs share -58 -44 -53 - Elimination of internal transacitions and internal profit 50 34 9 30 Net profit/(loss) 451 138 133 44 The joint ventures in the Philippines are subject to tax reviews by the local tax authorities on a regular basis, and one entity received a final assessment notice related to the year 2019 of NOK 178 million equivalent (at 31 December 2022) in March 2022. The matter is disputed, and the amount is not included in net income from JV and associated companies for the year. Under the Share Purchase Agreement with Norfund, Scatec has secured full indemnity against historical tax claims in the Philippines up until the SN Power acquisition closing. Scatec has in Argentina a non-recourse construction financing from Equinor of NOK 614 million (at 31 December 2022) that has been extended after COD and is due in May 2023. The financing from Equinor is pledged in the shares of the project company. The sponsors are currently working on different alternatives for the project and expect to find a solution before due date of the financing. Scatec ASA - Annual Report 2022 85 100% figures of summarised financial positions for material joint venture and associated companies (standalone basis) 2022 NOK million Philippines Uganda Laos Other Non-current assets 7,764 7,825 4,193 6,839 Current assets 837 269 188 516 Cash and cash equivalents 901 427 744 319 Total assets 9,501 8,521 5,125 7,674 Non-current liabilities 5,351 5,197 729 1,785 Current liabilities 893 362 792 1,209 Total liabilities 6,243 5,559 1,521 2,994 Total Equity 3,258 2,962 3,604 4,680 Scatec share of equity 1,614 841 722 2,133 Excess value at acquistion date of SN Power 3,319 127 239 - Excess values from previous acquisitions 1,674 304 979 - Amortisation of excess values -182 -44 -146 - Loan to joint venture as investment 69 - 1 410 Other / foreign currency translation 41 65 26 -14 Elimination of equity investments - - - -1,504 Net investment in joint venture 6,535 1,292 1,822 1,026 2021 NOK million Philippines Uganda Laos Other Non-current assets 7,766 7,104 3,973 2,911 Current assets 497 235 265 125 Cash and cash equivalents 633 419 678 57 Total assets 8,895 7,758 4,915 3,093 Non-current liabilities 5,528 5,313 1,238 1,918 Current liabilities 829 64 707 445 Total liabilities 6,086 5,377 1,945 2,363 Total Equity 2,808 2,381 2,970 730 Scatec share of equity 1,392 674 594 346 Excess value at acquistion date of SN Power 3,319 127 239 - Excess values from previous acquisitions 1,674 304 979 - Amortisation of excess values -65 -19 -64 - Loan to joint venture as investment 137 2 - - Other / foreign currency translation -91 14 -115 300 Net investment in joint venture 6,366 1,101 1,632 646 86 Note 14 Cash and cash equivalents scatec Accounting principle Cash includes cash in hand and at bank. Cash equivalents are short-term liquid investments that can be immediately converted into a known amount of cash and have a maximum term to maturity of three months. Restricted cash is cash reserved for a specific purpose and therefore not available for immediate and general use by the Group. Refer to Note 21 Financial instruments by category for the accounting principles for financial instruments. Cash and cash equivalents NOK million 2022 2021 Cash in power plant companies in operation 2,057 1,711 Cash in power plant companies under development / construction 109 34 Other restricted cash 223 91 Free cash 1,743 2,335 Total cash and cash equivalents 4,132 4,171 Cash in power plant companies in operation includes free cash, restricted cash in proceeds accounts, debt service reserve accounts, disbursements accounts, maintenance and insurance reserve accounts and similar. These cash and cash equivalents are only available to the Group through distributions as determined by shareholder and non-recourse financing agreements. Cash in power plant companies under development and construction comprise shareholder financing and draw down on loan facilities to settle outstanding external EPC invoices. Other restricted cash comprises restricted deposits for withholding tax, guarantees, VAT and rent, NCI’s share of free cash as well as collateralised shareholder financing of power plant companies not yet distributed to the power plant companies. Reconciliation of movement in free cash at Group level (in recourse group as defined in bond & loan facilities) NOK million 2022 2021 Distributions received by Scatec ASA from the power plant companies 1,231 1,603 Cash flow to equity D&C 1) -149 -164 Cash flow to equity Services 1) 58 60 Cash flow to equity Corporate 1) -347 -252 Working capital/other 16 -556 Cash flow from operations 809 691 Capitalised expenditures and Scatec’s share of equity investments in projects under development -454 -307 Scatec's share of equity investments in projects under construction -543 -564 Net cash considerations from purchase of SNP - -3,262 Cash flow from investments -996 -4,132 Dividend distribution to Scatec ASA shareholders -404 -173 Cash flow from financing -404 -173 Change in cash and cash equivalents -592 -3,615 Free cash at beginning of period 2,335 5,949 Free cash at end of period 1,743 2,335 Available undrawn credit facilities 1,827 1,632 Total free cash and undrawn credit facilities at the end of period 3,570 3,967 1) Proportionate share of cash flow to equity is defined in Alternative Performance Measures Appendix Refer to Note 21 Corporate Financing for further information on credit facilities. Scatec ASA - Annual Report 2022 87 Note 15 Trade receivables Trade receivables are recognised for unconditional amounts due from the customer. Accrued income represents contract assets related to energy production in the last month of the year, which is invoiced in January the following year. Trade receivables are measured at the transaction price determined under IFRS 15. The assessment of whether there is objective evidence that trade receivables is impaired is conducted based on the expected credit loss (ECL) approach. Under the approach, lifeatime expected credit loss is recognised based on forward-looking information about possible default events. Information on credit risk and foreign exchange risk regarding trade receivables used in the ECL assessment is provided in Note 18 - Financial risk management. Trade receivables NOK million 2022 2021 Trade receivables 384 557 Accrued income and other receivables 210 183 Impariment for expected credit loss (98) - Total trade and other receivables 497 740 Ageing of trade receivables at year-end was as follows: NOK million Total Not due Overdue 2022 384 278 105 2021 557 306 251 Expected credit loss is assessed on an individual instrument basis. There is no evidence of change in credit risk for the performing trade receivables which cover all the outstanding amounts, except for the trade receivables in Ukraine and Honduras. The overdue receivables are mainly related to sale of electricity from power plants in Ukraine and Honduras. In all other countries, there are no indications that the off-takers will not be able to meet their payment obligations, and hence no expected credit loss impairment have been recognised. Ukraine On 28 March 2022 the Ministry of Energy of Ukraine issued an Order to reduce the amounts paid to the renewable power producers to 15% of the agreed tariff to cover for operating expenses for the duration of the martial law. On 29 June 2022 the Ministry of Energy issued a new order which increased the payment level from a minimum of 15% to a minimum of 18% after 2 July 2022. The unpaid amounts are postponed to a later period. Due to the uncertainty related to future settlement, Scatec has from 24 February 2022 only recognised revenues in accordance with actual paid amounts and expect to do so until the new regulation is lifted. The payments levels have increased during the year and reached 66% in the fourth quarter 2022. From 24 February 2022 until end of 2022, the average payment level from the off-taker has been 42%. Due to the high uncertainty related to future settlement of trade receivables and other receivables related to the period prior to the war, Scatec has made an expected loss impairment of NOK 98 million as of 31 December 2022. The impairment is included in other operating expenses in the 2022 figures. Total outstanding receivables in Ukraine has during 2022 decreased from NOK 390 million to NOK 167 million in the consolidated financials, due to payments of trade receivables from the period before the war and changes in other receivables. Honduras Scatec has also experienced increased delays in payments from the state-owned off-takers of power in Honduras. Overdue payments have accumulated in Honduras to a varying degree since the second quarter of 2020. At the end of 2022, the total accumulated overdue receivables amounted to NOK 66 million (NOK 153 million) after settlement of NOK 214 million in outstanding amounts in December 2022. In May 2022, a new Energy law came into force as introduced by the new Government of Honduras. In accordance with the new law, the state owned off-taker has proposed certain changes to the existing PPAs and settlement of outstanding receivables. Part of the outstanding receivables was settled in 2022, and the remaining amount is, based on the ongoing negotiations, expected to be settled 88 and risk related to remaining amount is therefore deemed limited . Payments are secured by sovereign guarantees and no expected credit loss impairment has hence been recognised Ageing of overdue trade receivables at year-end was as follows: Overdue NOK million Less than 30 days 30 - 60 days 60 - 90 days More than 90 days Total 2022 14 10 11 71 105 2021 10 26 18 198 251 Note 16 Other non-current and current assets Other non-current assets NOK million 2022 2021 Loan to non-controlling interest - 1 Other non-current investments 125 32 Non-current derivative financial assets (ref Note 20) 375 26 Other non-current receivables 116 151 Total other non-current assets 616 210 Other current assets NOK million 2022 2021 Prepayments related to assets under development/construction 1336 22 Receivables from public authorities/prepaid taxes, VAT etc 235 393 Current derivative financial assets (ref Note 20) 21 0 Other receivables and prepaid expenses 292 320 Total other current assets 1883 734 Prepayments related to assets under development and construction The prepayments relates to the ongoing construction projects in South Africa and Brazil. The balance comprises upfront payments of project costs under the EPC-contracts. Note 17 Other non-current and current liabilities Other non-current liabilities comprise the following: NOK million 2022 2021 Shareholder loan from co-investors (ref Note 23) 708 610 Non-current lease liability (ref Note 11) 270 206 Asset retirement obligations (ref Note 9) 475 270 Other long-term provisions and accruals 165 301 Total other non-current liabilities 1,618 1,387 Scatec ASA - Annual Report 2022 89 Other current liabilities comprise the following: NOK million 2022 2021 Accrued expenses related to assets under development/construction 237 237 Public dues other than income taxes 76 44 Accrued interest expenses 112 65 Accrued payroll 75 57 Current lease liability (ref Note 11) 43 39 Deferred income 106 103 Other current liabilities and accruals 457 296 Total other current liabilities 1,106 841 Liabilities related to power production plants reflects both working capital requirements for development/construction contracts and cost accruals on completed projects. Accrued interest expenses are related to corporate financing in the parent company. Asset retirement obligations are provided for in the case where the Group has a legal obligation to dismantle and remove a power plant and restore the site on which it is located at a future date. The estimate for the asset retirement cost is capitalized as part of the carrying value of the power plant and depreciated over the useful life. The estimate is reassessed annually for each power plant, based on updates in assumptions and key input data. The 2022 reassessment has resulted in an increase from NOK 270 million in 2021 to NOK 475 million in 2022, primarily driven by increases in estimated dismantling costs. Other interest-bearing liabilities include current and non-current portions of the liability to PowerChina of NOK 462 million in total (NOK 231 million in non-current and current other interest-bearing liabilities). Scatec and PowerChina have signed a revised payment plan for the construction loan where part of the loan was paid in August 2022 and of the remaining EUR 44 million, EUR 22 million will be paid at the end of 2023 and EUR 22 million by mid-2025. Scatec ASA has provided a corporate and bank guarantee to PowerChina in support of this obligation. In the third quarter 2022 the construction loan was reclassified from trade payables to other non-current interest-bearing liabilities. In the fourth quarter, EUR 22 million related to the instalment due in 2023 has been reclassified from non-current to current interest-bearing liabilities. Refer to Note 24 Guarantees and commitments for further details. Note 18 Financial risk management Through its business activities Scatec is exposed to the following financial risks: ● Market risk (including commodity price risk, currency risk and interest rate risk) ● Liquidity risk ● Credit risk Guidelines for risk management have been approved by the Board of Directors and are carried out by Scatec’s group finance department in cooperation with the individual operational units. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments to hedge certain risk exposures. Market risk Scatec is exposed to various market risks, including fluctuations in commodity prices, foreign currency rates and interest rates that can affect the revenues and costs of operating, investing and financing activities. Commodity price risk Scatec’s sales of electricity constitute a material share of its revenues. As a result, the Group’s business, financial position, results of operation and cash flow are affected by changes in electricity prices. The Group seeks to reduce the effect of price fluctuation by entering into long term, fixed price contracts. The power plants produce electricity primarily sold under long term bilateral power purchase agreements (PPAs), with state owned utilities or corporate off-takers, or under government- based feed-in tariff schemes. The weighted average remaining PPA duration for power plants in operation is 15 years. The electricity produced from the power plants in the Philippines is sold on bilateral contracts in the spot market under a renewable operating license, and as ancillary services. 90 Some of the off-take agreements entered into do not contain inflation-based price increase provisions or provisions that only partially allows for inflation-based increases. Some of the countries in which the Company operates, or into which the Company may expand in the future, have in the past experienced high inflation. The fixed price contracts are classified as “own use” contracts (with reference to IFRS 9.2.4), and hence not considered to be in scope of IFRS 9. The price of electricity is influenced by government support schemes, the development of the renewable power production industry and development in prices on other sources of electricity. Transitional climate risk related to new technology and change in power markets is expected to affect power prices. This includes development in cost and efficiency of renewable energy technologies. A decline in the costs of other sources of electricity and primary energy sources, such as fossil fuel or nuclear power, could reduce the wholesale price of electricity. A significant amount of new electricity generation capacity becoming available could also reduce the wholesale price of electricity. Broader regulatory changes to the electricity market, such as climate related regulations, changes to energy trading, allocation of transmission cost and grid capacity , could have an impact on electricity prices. A decline in the market price of electricity could materially adversely affect the financial attractiveness of new projects. Currency risk Scatec operates internationally and is subject to currency exposure when transactions and monetary balances are denominated in currencies other than the functional currency. For the Group’s power plant entities, currency risk is managed based on functional currency and expected cash flows. This is done through the setup of the SPVs with natural hedges where non-recourse financing, revenue and other transactions to a large extent is denominated in the same currency. Construction revenues, cost of sales and gross profit may be subject to significant currency fluctuations. However, multi- currency construction contracts contribute to a natural hedge of cost of sales. To the extent that the Group hedges foreign currency exposure, it is based on cash flow considerations and not with regards to foreign currency translation effects in the financial statements. The Group is also exposed to currency fluctuations with regards to dividend payment from the operating companies and dividend payment to the shareholders of the parent company. The general policy of the Group is not to hedge foreign currency exposure on long term cash flows from the companies operating the power plants. As the Group reports its consolidated results in NOK, any change in exchange rates between NOK and functional currencies for the reporting entities, which mainly are USD, ZAR, EUR, MYR, BRL, CZK, PHP and VND, affects the consolidated statements when the results of those reporting entities are translated into NOK. The sensitivity analysis shows the profit and loss effect of reevaluation of monetary items due to changes in currencies the Group is exposed to. The sensitivities have been calculated based on what Scatec views to be reasonably possible changes in the foreign exchange rates for the coming year and net balances in different currencies as of 31 December 2022. NOK million Profit (loss) before taxes At 31 December 2022 EUR - Net gain/(loss) (5%) -45 USD - Net gain/(loss) (5%) 3 BRL - Net gain/(loss) (5%) -4 ZAR - Net gain/(loss) (5%) -13 MYR - Net gain/(loss) (5%) -6 EGP - Net gain/(loss) (5%) -21 UAH - Net gain/(loss) (5%) -21 NOK million Profit (loss) before taxes At 31 December 2021 EUR - Net gain/(loss) (5%) 154 USD - Net gain/(loss) (5%) 24 BRL - Net gain/(loss) (5%) - ZAR - Net gain/(loss) (5%) -2 MYR - Net gain/(loss) (5%) -6 Interest rate risk Scatec is exposed to interest rate risks through funding and cash management activities. The interest rate risk management objective is to keep the borrowing costs at a minimum and to keep the volatility of future interest payments within acceptable limits. The Group manages its interest rate risk by either using long-term financing at fixed rates or using floating to fixed interest rate swaps for either parts or full exposure of external loans. Based on the current Group interest bearing debt portfolio, the interest rate hedge ratio (weighted average) is 62% for the period 2022-2041. This includes corporate debt of NOK 8.0 billion of which approximately 19% is swapped to fixed rate. Including the JVs, the interest rate hedge ratio (weighted average) is 69%. Scatec ASA - Annual Report 2022 91 The interest rate risk on the debt at the power plant level is predominantly hedged by way of interest rate swaps subject to hedge accounting, fixed rate loans or inflation rate adjusted interest following the indexed PPAs. For more information on the Group’s financial liabilities, refer to Note 21 – Corporate Financing and Note 22 – Non-recourse financing. The sensitivity analysis shows how profit and loss would have been affected by changes in unhedged interest rates. NOK million At 31 December 2022 At 31 December 2021 At 31 December 2022 1% 1% Net gain/(loss) -65 -27 The impact on the profit and loss including the JVs with a decrease or increase in interest rate of 1% would result in a gain or loss of NOK 65 million. Interest rate benchmark reform Scatec is exposed to the effects of the interest rate benchmark reform, in which Interbank offered rates (IBORs) will be phased out and replaced by new reference rates. The Groups subsidiaries and the parent company currently have several contracts which reference IBOR rates. Scatec has identified and implemented necessary changes to contracts that is required to transition to new reference rates. The 3-month USD Libor will cease on 30 June 2023 and is to be replace by Secured Overnight Financing Rate (SOFR). There is no indication that 6- month KLIBOR and 3-month JIBAR will cease in the near future. Liquidity risk Liquidity risk is the risk that Scatec will not be able to meet financial obligations when due. The Group manages liquidity risk through a regular review of future commitments, cash flows from operations and credit facilities. Due to the dynamic nature of the underlying business, the Group maintains flexibility in funding by maintaining availability under committed credit facilities. In addition, the Group has available funding through the USD 180 million Revolving Credit Facility (RCF) and the USD 5 million Overdraft Facility. Scatec has per 31 December 2022 not drawn on the revolving credit facility or the overdraft facility. For information about the Group’s financial liabilities including maturity, refer to Note 21 – Corporate Financing, Note 22 – Non-recourse financing and Note 11 Leases. In some of the countries where Scatec operates, governments have imposed regulations on repatriation of funds out of the country. This may halt or delay flow of funds between group companies under certain circumstances. Scatec seek to minimise such risk through assessments of the relevant jurisdictions and regulations and adapt accordingly. Scatec’s ability to seek liquidity and comply with financial obligations is related to the capability to comply with extended ESG targets and reporting requirements. Transitional climate risk including new regulations and shifting in global financing may affect Scatec’s liquidity. A break-down of free and restricted cash is provided in Note 14 – Cash and cash equivalents. Credit risk Credit risk is the risk that Scatec’s customers or counterparties will cause financial loss by failing to honour their obligations. The Group is exposed to third party credit risk in several instances, including off-take partners who have committed to buy electricity produced by or on behalf of the Group, suppliers and/or contractors who are engaged to construct or operate assets held by the Group, property owners who are leasing land to the Group, banks providing financing and guarantees of the obligations of other parties, insurance companies providing coverage against various risks applicable to the Group’s assets, and other third parties who may have obligations towards the Group. Except for the energy sold to the whole sale market in the Philippines, most of the electric power generated by the Group’s current portfolio of projects in operation or under construction is, or will be, sold under long-term off-take agreements with public utilities or other partners, or under Feed-in Tariff (“FiT”) arrangements, Power Purchase Agreements (PPAs) or similar support mechanisms governed by law. If, for any reason, any of the counterparties to these contracts are unable or unwilling to fulfil their contractual obligations, refuse to accept delivery of power delivered thereunder or if they otherwise terminate such agreements prior to the expiration thereof, our assets, liabilities, business, financial condition, results of operations and cash flows could be materially and adversely affected. For the Group’s current projects in operation, the majority of these are supported by government guarantees or have obligations regulated by law. However, there is still a risk of legislative or other political action that may impair their contractual performance. The Group’s main credit risks arise from credit exposures with accounts receivables and deposits with financial institutions. All major deposits and investments with financial institutions are kept with entities carrying a minimum international credit rating from Moodys/ S&P of at least A-. 92 Theoretically, the Group’s maximum credit exposure for financial assets is the aggregated statement of financial position carrying amounts of financial loans and receivables before expected credit loss provision, as well as cash and cash equivalents, equaling NOK 6,709 million at 31 December 2022. Refer to Note 15 – Trade receivables for information on the expected credit loss provision related to trade receivables. Note 19 Financial instruments Accounting principle Financial assets The Group initially measures financial assets at amortised cost, its fair value plus, in the case of a financial asset at fair value through OCI, transaction costs. The classification of financial assets depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. The Group’s financial assets at amortised cost mainly include trade receivables and cash and cash equivalents. Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment assessment. See note 15 for accounting policy and ECL approach on trade receivables. Financial assets at fair value through profit or loss include derivatives, including separated embedded derivatives, unless they are designated as effective hedging instruments. The Group’s financial assets at fair value through OCI include effective cash flow hedges. Financial liabilities All financial liabilities are initially recognised at fair value, in the case of loans, borrowings and payables, net of directly attributable transaction costs. The Group’s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts and derivative financial instruments. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss. The Group’s financial liabilities at fair value through OCI include effective cash flow hedges. A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, the exchange or modification is treated as de-recognition of the original liability and recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss. Estimation uncertainty Fair value measurement All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy from IFRS 13 based on the lowest level input that is significant to the fair value measurement as a whole: ● Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or ● Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable ● Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. During the reporting period ending 31 December 2022, there have been no transfers between the fair value levels. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on the observable yield curves (level 2). The fair value of a foreign exchange embedded derivative is calculated as the present value of the difference between the forward rate and the spot rate at the balance sheet date (level 2). This imply to take into account input from external parties and compare the terms agreed under each derivative contract to the market terms for Scatec ASA - Annual Report 2022 93 a similar contract on the valuation date. Changes in the fair value relate to daily changes in market prices of the derivative contracts and the volume of contracts. Refer to Note 20 Derivative financial instruments for details. Financial instrument by measurement category NOK million Measurement category 2022 2021 Assets Derivatives Interest rate swap Fair value – hedging instruments through OCI 396 26 Debt instruments Cash and cash equivalents Amortised cost 4,132 4,171 Trade receivables Amortised cost 286 557 Other debt instruments and receivables Amortised cost 451 759 Total financial assets 5,264 5,513 Total current 4,774 5,303 Total non-current 490 210 Liabilities Interest bearing loans and borrowings Corporate financing Amortised cost 7,987 7,264 Non-recourse financing loans Amortised cost 15,260 11,855 Derivatives Interest rate swap Fair value – hedging instruments through OCI 28 339 Foreign exchange forward contracts Fair value – hedging instruments through PL 92 - Other financial liabilities Shareholder loan from non-controlling interests Amortised cost 708 610 Trade and other financial liabilities Amortised cost 1,285 1,148 Total financial liabilities 25,360 21,217 Total current 3,008 2,114 Total non-current 22,351 19,103 There are no significant differences between total carrying value and fair value for financial instruments measured at amortised cost. The table below provides a reconciliation of the movement of liabilities arising from financing activities, disaggregated by cash and non- cash movements. Please refer to Note 11 Leases for a reconciliation of lease liabilities. Movement in liabilities recognised at amortised cost 2022 Non-cash changes NOK million 2021 Cashflows Foreign exchange movement Fair value changes Accrued interest expense/ Reclassifications 2022 Corporate financing 7,264 (298) 903 - 118 7,987 Non-recourse financing 11,855 1,483 1,049 - 872 15,260 Total liabilities arising from financing activities 19,120 1,185 1,952 - 990 23,247 2021 Non-cash changes NOK million 2020 Cashflows Foreign exchange movement Fair value changes Accrued interest expense/ Reclassifications 2021 Corporate financing 748 4,448 - - 2,068 7,264 Non-recourse financing 12,263 (1,637) (103) - 1,332 11,855 Total liabilities arising from financing activities 13,011 2,811 (103) - 3,400 19,120 94 Note 20 Derivative financial instruments Hedge accounting The Group uses derivative financial instruments, such as interest rate swaps, to hedge its interest rate risks related to financing of renewable power production plants. Such derivative financial instruments are initially recognised at fair value on the date of which a derivative contract is entered and are subsequently re-measured at fair value. The effective portion of cash flow hedges is recognised in OCI and later reclassified to profit or loss when the underlaying hedge item affects profit or loss. The Group only applies hedge accounting for cash flow hedges that meet the criteria in IFRS 9. At the inception of each hedge relationship, the Group designates and documents the hedge accounting relationship, the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in expected cash flows from the hedged item. Such hedges are expected to be highly effective in achieving offsetting changes in the expected cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated. If a hedge of a forecasted transaction subsequently results in the recognition of a non-financial asset or liability, the gain or loss on the hedge instrument that was recognised in other comprehensive income is reclassified to the income statement in the same period or periods during which the asset acquired or liability assumed affects the statement of profit or loss. If the forecast transaction is no longer expected to occur, amounts previously recognised in other comprehensive income are reclassified to the statement of profit or loss. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognised in other comprehensive income remain in other comprehensive income until the forecasted transaction occurs. Derivative financial assets and liabilities NOK million 2022 2021 Interest rate swap contracts financial assets measured at level 2 in the fair value hierarchy Current portion 21 - Non-current portion 375 26 Total derivative financial assets 396 26 NOK million 2022 2021 Interest rate swap contracts financial liabilities measured at level 2 in the fair value hierarchy Current portion 16 90 Non-current portion 12 249 Total Interest rate swap contracts derivative financial liabilities 28 339 Foreign exchange contracts financial liabilities measured at level 2 in the fair value hierarchy Current portion 92 - Non-current portion - - Total Foreign exchange contracts financial liabilities 92 - Total derivative financial liabilities 120 339 The tables above show the market value of the derivatives for the year ending 2022 and 2021, carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. The derivative financial instruments are presented on a gross basis in the consolidated statement of financial position, since the Group did not have the legal right to offset these cash flows. Scatec ASA - Annual Report 2022 95 Interest rate swaps per country 2022 Country Notional amount (NOK million) Fixed rate(s) Floating rate reference rate(s) Maturity Norway 1,457 0.40% 3-month USD LIBOR 2025 South Africa 2,197 8.40% - 8.70% 3-month JIBAR 2024-2028 Egypt 2,471 2.15% USD-SOFR-COMPOUND 2041 Mozambique 364 3.30% 6-month USD LIBOR 2035 Malaysia 212 4.30% 6-month KLIBOR 2028 Interest rate swaps per country 2021 Country Notional amount (NOK million) Fixed rate(s) Floating rate reference rate(s) Maturity Norway 1,323 0.40% 3-month USD LIBOR 2025 South Africa 2,082 8.40% - 8.70% 3-month JIBAR 2024-2028 Egypt 2,811 5.40% - 8.00% 6-month USD LIBOR 2035 Mozambique 346 3.30% 6-month USD LIBOR 2035 Malaysia 216 4.30% 6-month KLIBOR 2028 The Egyptian power plant companies refinanced non-recourse debt by the issuance of USD 334.5 million bond in Q2 2022, of which a USD 250 million tranche is subject to floating interest rates. As part of the refinancing, the power plant companies entered new interest rate swaps matching the interest rate terms on the USD 250 million floating rate tranche. NOK Reconciliation of hedging reserve - interest rate swap contracts NOK million 2022 2021 Opening balance -242 -522 Recycling during the year to profit or loss, gross 348 203 Recycling during the year to profit or loss, tax effect -85 -61 Unrealised gain/(loss) during the year 353 193 Unrealised gain/(loss) during the year, tax effect OCI -83 -56 Closing balance 291 -242 Of which equity holders of the parent company 199 -111 The interest rate swap contracts described in this note are exposed to the effects of the Interest Rate Benchmark Reform, as the fair values of interest rate swaps today are based on the following reference rates; 6-month KLIBOR, 3-month USD Libor, 6-month USD Libor and 3-month JIBAR, and a change from these reference rates to the new reference rates described in the Interest Rate Benchmark Reform could affect the fair value of the financial instruments. The Group pays attention to the development of the IBOR transition, and will work with the contractual counterparts on the transition to new reference rates. Foreign exchange derivatives F oreign exchange derivatives consist of USD/ZAR currency forward contracts related to the power plants under construction in Kenhardt, South Africa, to mitigate currency exposure on equipment purchases denominated in USD. The foreign exchange derivatives are recognized in the statement of financial position at fair value, with the change in value recognized in the statement of profit and loss as financial income/expense. 96 Note 21 Corporate financing Currency Denominated currency value (million) Maturity Interest terms Carrying value 31 December 2022 (NOK million) Carrying value 31 December 2021 (NOK million) Green Bond (Ticker: SCATC03 NO0010931181) EUR 250 Q3 2025 3M EURIBOR + 2,50% 2,625 2,475 Total unsecured bonds 2,625 2,475 Green Term Loan USD 150 Q1 2025 1,481 1,323 Bridge to Bond USD 193 Q1 2024 1,906 1,702 Total secured acquisition financing 3,387 3,025 Vendor Financing (Norfund) USD 200 Q1 2028 1,975 1,764 Total unsecured acquisition financing 1,975 1,764 Revolving credit facility USD 180 Q1 2024 - - Overdraft facility USD 5 - - Total secured back-stop bank facilities - - Total 7,987 7,264 As of non current 7,987 7,264 As of current - - Scatec ASA - Annual Report 2022 97 Green bond In the first quarter of 2021 Scatec issued a EUR 250 million senior unsecured green bond with maturity in August 2025. The bond carries a coupon of 3-months EURIBOR (with no floor) + 2.50%, margin to be settled on a quarterly basis. The bond was listed on the Oslo Stock Exchange 23 June 2021 with ticker SCATC03 ESG. The proceeds from the bond issue were used to ● Redeem in whole the NOK 750 million senior unsecured green bond issued in 2017, with ticker SSO02 ESG, including any call premium and accrued interest. ● To partially refinance the bridge to bond facility that was committed in 2020 in relation to the acquisition of SN Power. ● Cover for other eligible activities as set out in Scatec’s Green Financing Framework. During the term of the bond, Scatec shall comply with the following financial covenants at all times: ● Minimum liquidity: free cash of minimum NOK 150 million ● Maximum debt to capitalisation ratio: 50% ● Minimum interest coverage ratio: 3.0x. Refer to the loan agreement available on www.scatec.com/investor-overview for further information and definitions. Outstanding acquisition finance As of 31 December 2022, the following facilities and amounts are outstanding of the initial USD 1,030 million financing package related to the acquisition of SN Power in the first quarter of 2021: ● USD 150 million Green Term Loan provided by Nordea, Swedbank and DNB with maturity in the first quarter of 2025. ● USD 193 million outstanding of the USD 400 million bridge to bond facility provided by Nordea, Swedbank and DNB. The maturity date for the facility was extended to January 2024 in the third quarter of 2022. ● USD 200 million Vendor Financing provided by Norfund with maturity in the first quarter of 2028. Refer to note 30 Subsequent events for information about refinancing of the bridge to bond facility. Revolving credit facility In the first quarter of 2021 Scatec increased the existing revolving credit facility (RCF) from USD 90 million to USD 180 million, with Nordea Bank as agent and Nordea Bank, DNB, Swedbank and BNP Paribas as equal Lenders. The facility can be drawn in USD, NOK, EUR or an optional currency agreed with the banks. The facility is ESG (Environmental, Social and Governance) linked and has a three-year tenor. The facility margin is linked to the following ESG KPIs: ● A targeted level for LTIFR (Lost time incident frequency rate) for the Group ● Anti-Corruption training for all employees ● Environmental and social baseline studies and risk assessment on all power plants by external experts Scatec has not drawn on the revolving credit facility per 31 December 2022. Overdraft facility In the second quarter of 2018 Scatec entered into a USD 5 million overdraft facility with Nordea Bank. Scatec has not drawn on the overdraft facility per 31 December 2022. Per 31 December 2022, Scatec was in compliance with all financial covenants for the above facilities. The book equity of the recourse group, as defined in the facility agreements, was NOK 10,598 million per year end . During 2022, interest expense net of gains/(loss) on interest rate swaps amounting to NOK 344 million ( 250 ) was expensed for the bond, acquisition finance, overdraft- and revolving credit facility. Guarantee facilities The guarantee facility (GFA) has Nordea Bank as agent and issuer, with Nordea Bank, Swedbank, DNB and BNP Paribas as guarantee instrument lenders. The guarantee facility is mainly used to provide advance payment-, performance and warranty bonds under construction agreements, as well as trade letter of credits. In addition to the GFA, Scatec has guarantee facilities with Standard Bank South Africa, Lombard insurance company in South Africa and MBank in Malaysia. These facilities are mostly used to cover short term bid bonds. Refer to note 24 Guarantees for further information 98 Note 22 Non-recourse financing See Note 19 Financial instruments for accounting principle for financial liabilities recognised to amortised cost. The table below specifies non-recourse financing at 31 December 2022 and 2021. The rate of interest is a calculated average per portfolio. All loans are fixed or swapped to fixed rate interests, except for the loans in South Africa Upington where the interest rates are inflation-linked to match the profile of the PPA indexations. NOK million Interest rate Maturity date 2022 2021 Loan facilities (ZAR) - South Africa portfolio Kalkbult. Linde, Dreunberg 10.05% 12/31/2032 1,910 1,616 Loan facilities (ZAR) - South Africa portfolio Upington 1) 8.23% 3/31/2037 2,267 2,157 Loan facilities (ZAR) - South Africa portfolio Kenhardt 10.14% 10/31/2041 2,582 - Loan facilities (CZK) – Czech portfolio 4.90% 5/11/2029 315 318 Loan facilities (USD) - Gigawatt Global Rwanda Ltd (ASYV) 8.23% 1/11/2030 116 108 Loan facilities (USD) – Jordan portfolio 6.39% 1/10/2032 685 644 Loan facilities (USD) – Produccion De Energia S.A (Aqua Fria) 7.21% 10/31/2026 387 346 Loan facilities (MYR) – Quantum Solar Park (Semenanjung) SDN. 6.02% 4/30/2035 1,784 1,796 Loan facilities (MYR) – Red Sol 4.22% 12/23/2028 264 267 Loan facilities (USD) - Aswan portfolio Egypt 5.21% 3/31/2041 3,138 2,847 Loan facilities (USD) - Central Solar de Mocuba, Mozambique 6.45% 1/31/2035 468 438 Loan facilities (EUR) - Ukraine 6.86% 12/31/2029 987 969 Loan facilities (VND) - Vietnam 6.00% 1/31/2035 356 347 Total non-recourse financial liabilites 15,260 11,854 Of which non-current non-recourse financial liabilities 13,297 10,708 Of which current non-recourse financial liabilities 1,963 1,147 1) Parts of the loans in South Africa Upington are structured as CPI-linked loans where the principal loan amount is uplifted based on the yearly observed CPI factor. Hence, the effective interest including the CPI factor is higher than the nominal interest rate of the loan. For 2021 the CPI factor applied to the loans was 1.17% . Scatec mainly uses non-recourse financing for constructing and/or acquiring assets, exclusively using as guarantee the assets and cash flows of the special purpose vehicle carrying out the activities financed. Compared to corporate financing, non-recourse financing has certain key advantages, including a clearly defined and limited risk profile. In this respect, the banks recover the financing solely through the cash flows generated by the projects financed. For four of the five companies operating in the Czech Republic, the non-recourse financing agreements include a cross default clause within the Czech group. Please refer to Note 24 Guarantees and commitments for information on the use of parent company guarantees in favor of power plant companies. The project entities’ assets are pledged as security for the non- recourse financing. The Group’s book value of the pledged power plants is NOK 15,676 million (14,508) at 31 December 2022. Scatec ASA - Annual Report 2022 99 Repayment structure NOK million Loan repayment Interest payment Total 2023 1066 1088 2,154 2024 951 1111 2,062 2025 1010 1031 2,041 2026 1085 966 2,051 2027 1017 892 1,909 2028 1173 821 1,994 2029 996 702 1,698 2030 1010 636 1,646 2031 1111 563 1,674 2032 849 489 1,338 2033 787 435 1,222 2034 908 377 1,285 2035 852 312 1,164 2036 738 256 994 2037 713 196 909 2038 503 148 651 2039 519 106 625 2040 405 64 468 2041 469 23 492 Total future loan repayment 16,161 10,217 26,378 Covenants Scatec has financial covenants related to the non-recourse financing in the different countries, for example different Debt Service Coverage Ratios (DSCR) and Equity ratios. The Agreements also contain further restrictions on, inter alia, hedging policies, subsidiaries and new activities, amendments to the key agreements and insurance policies, new consents, pledges and guarantees, financial indebtedness and giving financial support, capital expenditures and changes of shareholder structure and auditors, as well as several undertakings related to e.g., budgets, financial and operational reporting and information. Except for Ukraine, Scatec was in compliance with financial covenants for the non-recourse debt on 31 December 2022. Ukraine Scatec’s power plant companies in Ukraine are not in compliance with covenants in the loan agreements for the non-recourse project debt at year-end. The situation is unchanged from the first quarter 2022, when NOK 603 million of the non-recourse financing was reclassified from non- current to current. As of 31 December 2022, all n on-recourse financing (including accrued interest) in Ukraine, amounting to NOK 987 million, continues to be classified as current in the consolidated financials. Scatec has continuous and constructive dialogue with the lenders and the parties have agreed on a non-formalised “stand still” 100 Note 23 Project financing provided by co-investors In relation to the structuring and financing of the power plant companies in the Group, financial instruments are issued to both the controlling and non-controlling interests. Such financing can be both paid-in equity and shareholder loans. Issued capital and shareholder loans are considered equity instruments if repayment is on the discretion of the power plant company. At 31 December 2022, the following financing have been granted by co-investors to consolidated power plant companies: Shareholder loan recognized NOK million Country of incorporation Total financing Paid-in equity in equity as financial liability Scatec Solar SA 166 (Pty) Ltd (Kalkbult) South Africa 54 54 0 0 Simacel 155 (Pty) Ltd (Linde) South Africa 21 21 0 0 Simacel 160 (Pty) Ltd (Dreunberg) South Africa 41 41 0 0 Gigawatt Global Rwanda (ASYV) Rwanda 20 5 15 0 Anwar Al Ardh for Solar Energy Generation PSC (EJRE) Jordan 91 1 90 0 Ardh Al Amal for Solar Energy Generation PSC (GLAE) Jordan 43 1 42 0 Producción de Energía Solar y Demás Renovables, S.A. (Agua Fria) Honduras 265 111 0 155 Los Prados Honduras 207 207 0 0 Aswan Solar Power SAE (BB1) Egypt 33 33 0 0 Zafarana Solar Power SAE (ZAF1) Egypt 89 37 0 52 Red Sea Solar Power SAE (ZAF2) Egypt 167 33 0 134 Upper Egypt Solar Power (BB2) Egypt 100 36 0 64 Kom Ombo Renewable Energy SAE (BB3) Egypt 97 43 0 54 Daraw Solar Power SAE (BB4) Egypt 79 40 0 40 Egypt Green Hydrogen Egypt 44 0 0 44 Kamianka / Chysta Energiya Ukraine 59 1 0 58 Rengy Bioenergy Ukraine 83 1 0 82 Central Solar de Mocuba, Mozambique Mozambique 49 29 0 20 Dyason's Klip 1 South Africa 111 111 0 0 Dyason's Klip 2 South Africa 112 112 0 0 Sirius Solar PV Project One South Africa 110 110 0 0 Helios Power (Private) Limited Pakistan 14 14 0 1 Meridian Energy (Private) Limited Pakistan 14 14 0 1 HNDS Energy (Private) Limited Pakistan 14 14 0 1 Total project financing from co-investors 1,921 1,070 147 708 Scatec ASA - Annual Report 2022 101 At 31 December 2021, the following financing have been granted by co-investors to consolidated power plant companies: Shareholder loan recognized NOK million Country of incorporation Total financing Paid-in equity in equity as financial liability Scatec Solar SA 166 (Pty) Ltd (Kalkbult) South Africa 52 52 0 0 Simacel 155 (Pty) Ltd (Linde) South Africa 20 20 0 0 Simacel 160 (Pty) Ltd (Dreunberg) South Africa 40 40 0 0 Gigawatt Global Rwanda (ASYV) Rwanda 17 5 12 0 Anwar Al Ardh for Solar Energy Generation PSC (EJRE) Jordan 81 1 80 0 Ardh Al Amal for Solar Energy Generation PSC (GLAE) Jordan 38 1 37 0 Producción de Energía Solar y Demás Renovables, S.A. (Agua Fria) Honduras 226 99 0 127 Los Prados Honduras 192 192 0 0 Aswan Solar Power SAE (BB1) Egypt 29 29 0 0 Zafarana Solar Power SAE (ZAF1) Egypt 119 33 0 86 Red Sea Solar Power SAE (ZAF2) Egypt 98 29 0 68 Upper Egypt Solar Power (BB2) Egypt 83 33 0 50 Kom Ombo Renewable Energy SAE (BB3) Egypt 124 38 0 86 Daraw Solar Power SAE (BB4) Egypt 65 35 0 29 Kamianka / Chysta Energiya Ukraine 52 1 0 51 Rengy Bioenergy Ukraine 85 1 0 84 Central Solar de Mocuba, Mozambique Mozambique 43 26 0 17 Dyason's Klip 1 South Africa 107 107 0 0 Dyason's Klip 2 South Africa 108 108 0 0 Sirius Solar PV Project One South Africa 106 106 0 0 Helios Power (Private) Limited Pakistan 9 6 0 3 Meridian Energy (Private) Limited Pakistan 9 6 0 3 HNDS Energy (Private) Limited Pakistan 9 6 0 3 Total project financing from co-investors 1,711 973 130 610 For the year 2022, interest expenses on financing from co-investors of NOK 45 million have been expensed (NOK 38 million for 2021), of which NOK 2 million is recognised directly in equity (NOK 1 million for 2021). The equity and loan financing provided by the co-investors is repaid according to a pre-determined waterfall structure, meaning that the financing presented above will be settled after external non-recourse financing, and only when distributable cash as defined by the financing agreements is available. Normally this would occur twice a year. For some of the project companies in the above table the co-investor funding has been provided indirectly through jointly owned holding companies. 102 Note 24 Guarantees and commitments Guarantee exposure The amounts specified below are total exposure on guarantees issued by Scatec ASA at each balance sheet date based on when the guarantees expire. The guarantees expire haphazardly during the year. The fair value of the guarantees is immaterial on a consolidated basis; hence no liability is recognised. NOK million 31.12.2022 31.12.2023 31.12.2024 31.12.2025 Bid Bonds 401 170 170 0 SPV Performance / Commitments 256 202 202 156 O&M Performance (3rd party) 16 - - - Other Payment Guarantees 1,800 1,620 46 46 Total 2,474 1,992 418 202 Guarantees For projects under development, Scatec is often required to issue bid bonds to secure commitment during submission of project bids. The bid bonds are mainly related to projects under development in Tunisia, South Africa, India, Brazil and Egypt. Guarantees are issued to secure power plant company performance for plants in operations. This includes SPV performance and commitment guarantees to cover the obligations under PPAs and Implementation Agreements. These obligations are connected to project performance where Scatec is in control and hold the O&M and asset management agreements. SPV performance gurantee mainly relate to the project in Botswana and RMIPPP in South Africa. In addition, Scatec provides payment guarantees. This includes for equity injection in project companies where project lenders disburse debt before equity is paid in and Debt Service Reserve to replace cash reserves in the project companies. The main outstanding payment guarantees are related to the RMIPPP project in South Africa, as well as to Power China and Sukkur. The payment guarantee of NOK 264 million to Power China is related to the construction loan on the Progressovska solar plant in Ukraine. For four of the power plants in Ukraine, Scatec has provided additional corporate guarantees of NOK 58 million related to establishment of debt service reserve accounts and contingent equity. Guarantee facility The guarantees issued by Scatec ASA and other recourse group entities are issued under the guarantee facility with Nordea Bank as agent, and Nordea Bank, BNP Paribas, Swedbank and DNB as guarantee instrument lenders. In addition to this facility, Scatec have guarantee facilities with other financial institutions in countries where Scatec operates. These facilities are mostly used to cover short term bid bonds. The Norwegian Export Credit Guarantee Agency (Eksfin) normally counter guarantee for the guarantees issued by the banks. Eksfin can issue counter indemnity of 50% in favor of the issuing banks. The financial covenants in the Guarantee Facility Agreement are: • Free cash of no less than NOK 150,000,000 • Debt to capitalization ratio 50% • Minimum interest coverage ratio 3.0x Per 31 December 2022, Scatec was in compliance with all covenants in the Guarantee Facility Agreement. Scatec ASA - Annual Report 2022 103 Note 25 Share capital, shareholder information and dividend Share capital and shareholder information At year-end 2022 the total number of shareholders in Scatec was 16,463 (16,487). The total number of outstanding shares was 158,917,275 (158,864,018) at par value NOK 0.025 per share as of 31 December 2022. In February 2022, Scatec increased the share capital by issuing 53,257 new shares as part of the share option programme. In May 2022,, Scatec bought back 89,200 shares at an average volume weighted price per share of NOK 93.78 related to the employee share purchase programme. Refer to Note 12 – Equity and shareholder information in the Parent financial statement for an overview of the largest shareholders of Scatec ASA and shares held by Management and Board of Directors at 31 December 2022. Refer to Note 4 – Employee benefits for information on share options granted to the management. Dividend The Company recognises a liability to make cash or non-cash distributions to equity holders of the parent when the distribution is authorised, and the distribution is no longer at the discretion of the Company. As per the corporate laws in Norway, a distribution is authorised when it is approved by the General Meeting. The Group’s objective is to pay shareholders consistent and growing cash dividends. On 2 February 2023, the Board of Directors announced its intention to propose to the Annual General Meeting to change the payment ratio from 25% to 15% of free cash distributed from producing power plants, this to support Scatec’s growth ambitions while retaining the Group’s objective to pay shareholder dividends. On 2 February 2022, the Board of Directors announced its intention to propose a dividend of NOK 2.54 per share to the Annual General Meeting, totaling NOK 404 million. The amount was paid out in May 2022. 104 Note 26 Consolidated subsidiaries The consolidated financial statement of Scatec comprises more than 200 legal companies that are controlled by Scatec . The following table include material consolidated subsidiaries, including material holding companies. Consolidated economic interests correspond to the voting interests if not otherwise stated. For subsidiaries of the ultimate Parent’s subsidiaries, the economic interests stated is the mathematically indirect consolidated economic interests. For information on associated companies and joint venture companies, refer to Note 13 Investments in JV and associated companies Company Registered office Consolidated economic interests 2022 SN Power AS Oslo, Norway 100.00% Scatec Solar Netherlands BV Amsterdam, Netherlands 100.00% Release Management B.V. Amsterdam, Netherlands 100.00% Release Africa B.V. Amsterdam, Netherlands 100.00% Release South Africa Pty (Ltd) Cape Town, South Africa 100.00% Release Cameroon SARL Douala, Cameroon 100.00% Signo Solar PP01 s.r.o. Prague, Czech 100.00% Scatec Solar s.r.o. Prague, Czech 100.00% Signo Solar PP01 s.r.o. Prague, Czech 100.00% Signo Solar PP02 s.r.o. Prague, Czech 100.00% Signo Solar PP03 s.r.o. Prague, Czech 100.00% Signo Solar PP04 s.r.o. Prague, Czech 100.00% Signo Solar PV1 s.r.o. Prague, Czech 100.00% Scatec Solar Solutions Ukraine LLC Kyiv, Ukraine 100.00% Chysta Energhiaa 2011 LLC Kyiv, Ukraine 60.00% Boguslav Energy LLC Bohuslav, Ukraine 100.00% Greenteco SES LLC Kyiv, Ukraine 100.00% Rengy Bioenergy LLC Kyiv, Ukraine 51.00% PV Progressovka Gamma LLC Berezanka, Ukraine 100.00% PV Progressovka ALpha LLC Berezanka, Ukraine 100.00% PV Progressovka Beta LLC Berezanka, Ukraine 100.00% Scatec Solar Jordan (EPC) Amman, Jordan 100.00% Scatec Solar AS/ Jordan PSC Amman, Jordan 100.00% Anwar Al Ardh For Solar Energy Generation PSC Amman, Jordan 50.10% Ardh Al Amal For Solar Energy Generation PSC Amman, Jordan 50.10% Scatec Solar Africa (Pty) Ltd Cape Town, South Africa 100.00% Scatec Solar Management Services (Pty) Ltd Sandton, South Africa 100.00% Scatec Solar SA 163 (Pty) Ltd. Sandton, South Africa 92.00% Scatec Solar SA (pty) Ltd. Sandton, South Africa 100.00% Scatec Solar SA 165 (Pty) Ltd. Sandton, South Africa 76.60% Scatec Solar SA 166 (Pty) Ltd. Sandton, South Africa 46.00% Scatec Solar SA 164 (Pty) Ltd. Sandton, South Africa 80.70% Simacel 155 (Pty) Ltd. Sandton, South Africa 44.40% Simacel 160 (Pty) Ltd. Sandton, South Africa 44.40% Dyason's Klip 1 (Pty) Ltd Cape Town, South Africa 45.50% Dyason's Klip 2 (Pty) Ltd Cape Town, South Africa 45.50% Scatec Solar Construction R4 Cape Town, South Africa 51.00% Scatec Solar Operations R4 Cape Town, South Africa 51.00% Sirius Solar PV Project One (RF) (Pty) Ltd Cape Town, South Africa 45.50% Scatec Hybrid EPC (Pty) Ltd Cape Town, South Africa 100.00% Scatec Kenhardt 1 (Pty) Ltd Cape Town, South Africa 100.00% Scatec Kenhardt 2 (Pty) Ltd Cape Town, South Africa 100.00% Scatec Kenhardt 3 (Pty) Ltd Cape Town, South Africa 100.00% Continues on following page Scatec ASA - Annual Report 2022 105 Company Registered office Consolidated economic interests 2022 Scatec Solar Honduras SA Tegucigalpa, Honduras 100.00% Energias Solares S.A. Tegucigalpa, Honduras 70.00% Fotovoltaica Los Prados S.A. Tegucigalpa, Honduras 70.00% Fotovoltaica Surena S.A. Tegucigalpa, Honduras 70.00% Generaciones Energeticas S.A. Tegucigalpa, Honduras 70.00% Produccion de Energia Solar Demas Renovables S.A Tegucigalpa, Honduras 40.00% Central Solar de Mocuba S.A. Maputo, Mozambique 52.50% Scatec Solar Mozambique Limitada Maputo, Mozambique 100.00% Scatec Solar Solutions Egypt LLC Cairo, Egypt 100.00% Aswan Solar Power SAE Cairo, Egypt 51.00% Daraw Solar Power SAE Cairo, Egypt 51.00% Kom Ombo Renewable Energy SAE Cairo, Egypt 51.00% Red Sea Solar Power SAE. Cairo, Egypt 51.00% Upper Egypt Solar Power Cairo, Egypt 51.00% Zafarana Power SAE Cairo, Egypt 51.00% Scatec Solar Solutions Malaysia Sdn Bhd Kuala Lumpur, Malaysia 100.00% Quantum Solar Park (Kedah) Sdn Bhd ¹⁾ Kuala Lumpur, Malaysia 100.00% Quantum Solar Park (Melaka) Sdn Bhd ¹⁾ Kuala Lumpur, Malaysia 100.00% Quantum Solar Park (Terengganu) Sdn Bhd ¹⁾ Kuala Lumpur, Malaysia 100.00% Quantum Solar Park Semenanjung Sdn Bhd ¹⁾ Kuala Lumpur, Malaysia 100.00% Red Sol Kuala Lumpur, Malaysia 100.00% Helios Power Ltd Clifton Karachi, Pakistan 100.00% HNDS Energy Ltd Clifton Karachi, Pakistan 100.00% Meridian Energy Ltd Clifton Karachi, Pakistan 100.00% Scatec Solar Pvt Ltd (Pakistan) Clifton Karachi, Pakistan 100.00% Scatec Solar Solutions Vietnam Co. Ltd. Ho Chi Minh City, Vietnam 100.00% Dam Nai Wind Power JSC Ninh Thuan, Vietnam 100.00% 1) The consolidated economic interest in the Malaysian project companies represents Scatec’s share of the contributed equity and retained earnings in the project companies as of the reporting date. Scatec’s average economic interest through the PPA tenor is estimated to be 95% based on the Group’s right to economic return obtained through shareholdings and other contractual arrangements. The average economic interest may be subject to change. Note 27 Non-controlling interests Non-controlling interests Scatec’s value chain comprises all downstream activities such as project development, financing, construction, operations as well as having an asset management role trough ownership of the solar power plants. Normally Scatec enter into partnerships for the shareholding of the power plant company owning the power plants while maintaining control, leading to material non-controlling interest. Consolidation of power plant companies are identified as a significant judgement for the consolidated financial statements, please refer to Note 2 for further information. Note 26 Consolidated subsidiaries include all material entities with an NCI share. The NCI share is the share of interest not owned by Scatec. Accumulated balances of non-controlling interest and the allocation of profit and loss are presented below by sub- group. The change in NCI balance from year to year is driven by the NCIs share of profit or loss and other comprehensive income, capital injections from- and dividends paid to NCIs, as well as foreign exchange differences. Accounting principle Non-controlling interests are calculated on the respective subsidiaries’ stand-alone reporting, before eliminations of intercompany transactions. Furthermore, unrealised intercom- pany profits relating to depreciable assets (power plants) are viewed as being realised gradually over the remaining economic life of the asset. Consequently, the specification of non-controlling interest in the group financial statements will differ from the non-controlling interests calculated based on the respective subsidiaries’ stand-alone reporting. 106 When recognising a non-controlling interest through an acquisition, the difference between the cost of the non- controlling interest and the non-controlling interest’s share of the assets and liabilities is reflected in the consolidated statement of financial position at the date of acquisition as an equity transaction. Total balances of material non-controlling interest NOK million 2022 2021 Egypt 99 -24 Honduras 323 318 Jordan 183 149 Mozambique 56 -5 Pakistan 30 11 Rwanda 5 7 South Africa -48 178 Ukraine -108 14 Total non-controlling interests 540 649 Profit/(loss) allocated to material non-controlling interest NOK million 2022 2021 Egypt -6 -41 Honduras 4 8 Jordan 13 10 Mozambique 12 -1 Pakistan -4 -6 Rwanda -2 -3 South Africa 188 82 Ukraine -97 18 Total non-controlling interests 106 68 Financial information of subsidiaries that have material non-controlling interests is provided below: Summarised statement of profit or loss for 2022 (before group eliminations) NOK million Revenues Operating expenses Operating profit Net financial expenses Profit before income tax Profit/(loss) for the period Profit/loss attributable to non-controlling interest Dividends paid to non- controlling interest 1) #REF! Egypt 637 (281) 356 (353) 3 (13) (6) - Honduras 200 (132) 68 (52) 16 16 4 - Jordan 121 (62) 59 (33) 27 25 13 - Mozambique 91 (43) 48 (3) 46 26 12 - Pakistan - (4) (4) (11) (15) (15) (4) - Rwanda 23 (13) 10 (15) (5) (5) (2) - South Africa 1,842 (1,154) 688 (84) 602 584 188 526 Ukraine 47 (176) (129) (89) (217) (221) (97) - 1) Excluding repayments of shareholders loans Scatec ASA - Annual Report 2022 107 Summarised statement of profit or loss for 2021 (before group eliminations) NOK million Revenues Operating expenses Operating profit Net financial expenses Profit before income tax Profit/(loss) for the period Profit/loss attributable to non-controlling interest Dividends paid to non- controlling interest 1) #REF! Egypt 596 (250) 345 (215) 130 (85) (42) - Honduras 196 (128) 68 (44) 24 24 8 - Jordan 109 (56) 54 (32) 22 20 10 - Mozambique 82 (40) 42 (41) 1 (2) (1) - Pakistan - (34) (34) (1) (34) (25) (6) - Rwanda 20 (12) 8 (14) (5) (5) (3) - South Africa 1,245 (628) 617 (369) 248 217 83 209 Ukraine 119 (47) 73 (22) 50 38 18 - 1) Excluding repayments of shareholders loans Summarised statement of financial position as at 31 December 2022 Attributable to NOK million Property, plant and equipment Other non- current asstes Cash and cash equivalent Other current assets Non-resource financing Other non- current liabilities Current liabilities Total equity Non- controlling interests Equity holders of the parent #REF! Egypt 3,360 1,712 485 114 (3,138) (2,078) (160) 296 99 197 Honduras 1,287 9 268 103 (387) (325) (27) 929 323 605 Jordan 888 (0) 373 22 (685) (78) (93) 427 183 244 Mozambique 555 8 135 17 (468) (80) (68) 100 56 44 Pakistan 363 11 97 18 - (161) (209) 120 30 90 Rwanda 139 1 11 4 (116) (55) (3) (20) 5 (25) South Africa 4,048 1,143 762 3,257 (6,759) (731) (2,297) (577) (48) (531) Ukraine 414 387 17 (11) (377) (937) 242 (265) (108) (157) Summarised statement of financial position as at 31 December 2021 Attributable to NOK million Property, plant and equipment Other non- current asstes Cash and cash equivalent Other current assets Non-resource financing Other non- current liabilities Current liabilities Total equity Non- controlling interests Equity holders of the parent #REF! Egypt 3,035 1,226 316 94 (2,847) (1,854) (84) (113) (24) (89) Honduras 1,194 3 40 186 (346) (271) (15) 791 318 473 Jordan 792 - 298 21 (658) (49) (79) 325 149 176 Mozambique 478 4 99 11 (438) (84) (105) (35) (5) (29) Rwanda 137 - 5 4 (108) (56) (1) (19) 7 (26) South Africa 3,819 774 466 503 (3,773) (807) (325) 657 178 479 Ukraine 578 361 63 77 (404) (639) (22) 14 14 (0) Note 28 Transactions with related parties Related parties include affiliates, associates, joint ventures, and other companies where the Group have significant influence, as well as the Executive Management and the Board of Directors. All related party transactions have been carried out as part of the normal course of business and at arm’s length terms. See Note 26 for information about consolidated subsidiaries. Intercompany balances and transactions between consolidated companies are eliminated in the consolidated accounts. 108 See Note 13 Investments in JV and associated companies for overview of the companies included and further information about the investments. Transactions with joint ventures and associates are primarily financing provided to the companies and dividends received from the companies. Transactions also include sale of development rights, asset management and OM services from consolidated entities to equity consolidated entities. For remuneration to Management, see Note 4 Employee benefits and further details in Note 4 - Personnel expenses in the Parent financial statement. The Note also includes remuneration to Board of Directors. The company has no significant agreements with companies in which a board member has a material interest. Scatec has loans to Executive Management given in relation to the long- term incentive programme amounting to NOK 0.2 million (0.2) as of 31 December 2022. Note 29 Change in accounting policies Presentation of external revenues and cost of sales in the proportionate segment financials The hydropower companies in the Philippines are presented in the condensed interim consolidated financial statements as investments in JVs and associated companies which are accounted for using the equity method. The companies were acquired as part of the business combination of 100% of the shares of SN Power AS, which effectively took place on 29 January 2021. The Group has re-assessed its accounting policy for the presentation of external revenues and cost of sales in the proportionate financials. The power market settlement mechanism for bilateral contracts in the Philippines applies net settlement within the settlement period although all volumes are reported gross. On 1 January 2022, the Group elected to voluntarily change the method of accounting for external revenues and cost of sales related to electricity sold on bilateral contracts in the proportionate financials. The Group had previously accounted for such external revenues and cost of sales on a gross basis in accordance with the reported volumes. Going forward the Group will present the figures net in accordance with the financial settlement mechanism. The change has no impact on net revenues or EBITDA. The Group believes that the net presentation provides more relevant information to the users of the proportionate financials as it will reduce the fluctuation in external revenues from the business in the Philippines and is more aligned to the practices adopted by its peers. The Group applied the change retrospectively to the proportionate financials. The change is not applicable to the consolidated financials as the investment in JVs are accounted for using the equity method. The voluntary change in accounting policies is applied retrospectively in 2021 as follows Proportionate financials - NOK million Reported FY 2021 Adjustment Adjusted FY 2021 External revenues - Power Production 4,176 -287 3,890 Cost of sales - Power Production -556 287 -269 EBITDA - Power Production 2,949 - 2,949 New standards and interpretations The Group have elected early adoption of the amendments to IAS 1 and IFRS Practice Statement 2 compromising accounting policy information. The material accounting principles in the Annual Report are largely incorporated into the individual notes. The Group have not elected to early adopt Amendments to IAS 1 Presentation of Financial Statements effective from 1 January 2024. Requirements related to classification and disclosed of non-current and current liabilities with covenants is not expected to have material effect on the Group in 2022. There are no other new standards, not yet adopted, expected to have material effect for the Group in 2022. Scatec ASA - Annual Report 2022 109 Note 30 Subsequent events Accounting principle Subsequent events are viewed as new information on the Groups financial position that becomes known after the reporting period. In evaluating such, the Group distinguishes between adjusting and non-adjusting events after the reporting period. Adjusting events refer to those that provide evidence of conditions that existed at the end of the reporting period, whereas non-adjusting events refer to those that are indicative of conditions that arose after the reporting period. Events after the reporting period that do not affect the Groups financial position at the end of the reporting period, but which will affect the Groups financial position in the future, are disclosed if significant. Adjusting subsequent events No adjusting events have occurred after the balance sheet date. Non-adjusting subsequent event Refinancing of Bridge-to-Bond USD 193 million On 2 February 2023, Scatec refinanced USD 100 million of the USD 193 million Bridge-to-Bond facility with a new USD 100 million term loan with maturity in the fourth quarter 2027 provided by DNB, Nordea and Swedbank. The new term loan is amortised through semiannual repayments of USD 5 million starting from 2024. The existing USD 180 million Revolving Credit Facility, provided by the same banks and BNP Paribas, is further extended by 1.5 years with maturity in the third quarter of 2025. On 10 February 2023, Scatec placed NOK 1,000 million in new unsecured green bonds to refinance the remaining USD 93 million of the Bridge-to-Bond facility established when Scatec acquired SN Power in 2021. The new bonds have maturity in February 2027 and carries a coupon rate of 3-month NIBOR plus 6.60%. Sale of Upington in South Africa On 2 February 2023, Scatec signed an agreement with a subsidiary of STANLIB Infrastructure Fund II, managed by STANLIB Asset Management Proprietary Limited (“Stanlib”), to sell its 42% equity share in the 258 MW Upington solar power plant for a gross consideration of ZAR 979 million (NOK 569 million). The transaction is in line with Scatec’s strategy to optimise the portfolio as presented at the Capital Markets Update in September 2022 and will release capital for new investments in renewable energy. The solar plant in Upington reached COD in 2020 and were awarded in the fourth bidding round under the Renewable Energy Independent Power Producer Programme. The plant generates approximately one third of the proportionate power production EBITDA in South Africa for Scatec. Scatec will continue to provide Operations & Maintenance and Asset Management services to the Upington power plant. South Africa remains a focus market for Scatec, and the Company continues to build scale by investing into new projects, including the Kenhardt and Grootfontein projects. The transaction is expected to generate a net accounting gain of approximately NOK 760 million on a consolidated basis and NOK 310 million on a proportionate basis. The difference is primarily explained by the D&C margin related to the projects which has been eliminated in the consolidated statement of financial positions. The final accounting effects will be determined on closing of the transaction. Norfund is also selling its 18% equity share to Stanlib as part of the same transaction. The transaction is subject to the customary consents and is expected to close in the first half of 2023. 110 Parent company financial statements Scatec ASA - Annual Report 2022 111 Statement of income 112 Statement of financial position - assets 113 Statement of financial position – equity and liabilities 114 Statement of cash flow 115 Notes to the parent company financial statements 116 Note 1 General information 116 Note 2 Accounting principles 116 Note 3 Revenues 118 Note 4 Personnel expenses, number of employees and auditor’s fee 119 Note 5 Other operating expenses 121 Note 6 Provision for bad debt 121 Note 7 Financial income and expenses 122 Note 8 Tax 123 Note 9 Property, plant and equipment 124 Note 10 Investments in subsidiaries, joint ventures and associated companies 124 Note 11 Inventory 125 Note 12 Cash and cash equivalents 125 Note 13 Equity and shareholder information 126 Note 14 Corporate financing 127 Note 15 Other current liabilities 128 Note 16 Guarantees, contractual obligations and contingent liabilities 128 Note 17 Transactions with related parties 129 Note 18 Subsequent events 130 112 Statement of income 1 JANUARY – 31 DECEMBER NOK million Note 2022 2021 Revenues 3 751 166 Total revenues 751 166 Costs of sales -797 -104 Personnel expenses 4 -268 -209 Other operating expenses 5, 6, 17 -201 -143 Depreciation, amortisation and impairment 9, 11 -150 -53 Operating profit/(loss) -665 -343 Interest and other financial income 7, 17 1,570 402 Interest and other financial expenses 6, 7, 17 -1,311 -262 Net foreign exchange gain/(loss) -5 33 Profit/(loss) before tax -411 -171 Income tax (expense)/benefit 8 -68 97 Profit/(loss) for the period -480 -74 Allocation of profit/(loss) for the period Dividend 13 308 404 Transfer to/(from) other equity 13 -788 -478 Total allocation of profit/(loss) for the period -480 -74 Scatec ASA - Annual Report 2022 113 Statement of financial position 1 JANUARY – 31 DECEMBER NOK million Note 2022 2021 Non-current assets Deferred tax assets 8 226 261 Property plant and equipment 9 73 60 Investments in subsidiaries, joint ventures and associated companies 10 15,000 14,666 Loan to group companies 17 2,327 2,633 Interest rate swap (cash flow hedge) 14 115 26 Other non-current receivables 63 57 Total non-current assets 17,804 17,702 Current assets Inventory 11 1,390 311 Trade and other receivables 6 42 49 Trade and other receivables group companies 3, 17 498 301 Other current assets 46 64 Cash and cash equivalents 12 811 1,620 Total current assets 2,787 2,345 Total assets 20,591 20,048 114 Statement of financial position AS OF 31 DECEMBER NOK million Note 2022 2021 Paid in capital Share capital 13 5 4 Share premium 13 11,378 10,122 Total paid in capital 11,382 10,126 Other equity Other equity 13 -1,203 -385 Reserve for valuation variances 85 20 Total other equity -1,117 -365 Total equity 10,265 9,761 Non-current liabilities Corporate financing 14 7,987 7,264 Liabilities to group companies 17 350 549 Other non-current liabilities 3 4 Total non-current liabilities 8,339 7,818 Current liabilities Trade and other payables 431 16 Trade payables group companies 60 127 Public duties payable 18 19 Dividend 13 308 404 Other current liabilities 15 1,170 1,903 Total current liabilities 1,987 2,469 Total liabilities 10,326 10,287 Total equity and liabilities 20,591 20,048 Oslo, 21 March 2023 The Board of Directors Scatec ASA Scatec ASA - Annual Report 2022 115 Statement of cash flow 1 JANUARY – 31 DECEMBER NOK million Notes 2022 2021 Cash flow from operating activities Profit/(loss) before tax -411 -171 Depreciation, amortisation and impairment 9 150 53 Interest and other financial income 7 -1,570 -402 Interest and other financial expenses 7 1,311 262 Foreign exchange gain/(loss) 5 -33 Increase)/decrease in inventories 11 -1,079 -125 (Increase)/decrease in trade and other receivables -285 -22 Increase/(decrease) in trade and other payables 147 146 Taxes paid 8 - - (Increase)/decrease in current assets and current liabilities / other adjustments 1,067 261 Net cash flow from operating activities -665 -31 Cash flows from investing activities Investments in property, plant and equipment 9 16 -56 Net increase in loans to subsidiaries 17 -301 -100 Interest received 175 127 Investments in subsidiaries and associated companies 10 -675 -8,577 Dividends from and capital decrease in subsidiaries 7 1,384 277 Net cash flow used in investing activities 599 -8,329 Cash flow from financing activities Proceeds from share capital increase 13 5 41 Dividends paid to equity holders 13 -404 -173 Interest paid -344 -251 Proceeds from corporate financing 14 - 4,699 Net cash flow from financing activities -743 4,316 Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period 1,620 5,664 Cash and cash equivalents at end of period 811 1,620 Net increase/(decrease) in cash and cash equivalents -809 -4,044 116 Notes to the parent company financial statements Note 1 General information Scatec ASA is incorporated and domiciled in Norway. The address of its registered office is Askekroken 11, NO-0277 OSLO, Norway. Scatec was established on 2 February 2007. Scatec ASA (“the Company”), its subsidiaries and investments in associated companies and joint ventures (“the Group” or “Scatec”) is a leading renewable power producer, delivering affordable and clean energy worldwide. As a long-term player, Scatec develops, builds, owns and operates solar, wind and hydro power plants and storage solutions. The Company is listed on the Oslo Stock Exchange. The consolidated financial statements for the full year 2022 were authorized for issue in accordance with a resolution by the Board of Directors on 21 March 2022. Note 2 Accounting principles Basis for preparation The financial statements of Scatec ASA are prepared in accordance with the Norwegian Accounting Act of 1998 and Norwegian Generally Accepted Accounting Principles (NGAAP). The financial statements have been prepared on a historical cost basis. Accounting estimates and judgements In preparing the financial statements, management has made assumptions and estimates about future events and applied judgements that affect the reported values of assets, liabilities, revenues, expenses, and related disclosures. Therefore, future actual results may differ from current figures. Foreign currency translation The functional currency of the Company is US dollar (USD). USD is the currency which primarily affects the financials including corporate financing, income from dividends and revenue from construction activities. The financial statements are presented in NOK. The assets and liabilities are translated into NOK at the rate of exchange prevailing at the end of reporting period and their income statement is translated at average exchange rates. The exchange differences arising on translation are recognised in equity. Revenues and cost of sales Scatec ASA develops project rights that are the basis for construction of power plants. Revenues from sale of project rights are recognised upon the transfer of title. Projects in work in progress are expensed as cost of sale upon the transfer of title or when a project is abandoned and impaired. Revenues from construction services are based on fixed price contracts and are accounted for using the percentage of completion method. The stage of completion of a contract is determined by actual cost incurred over total estimated costs to complete. Incurred costs include all direct materials, costs for modules, labour, subcontractor costs, and other direct costs related to contract performance. Scatec recognises direct material costs as incurred costs when the direct materials have been installed when they are permanently attached or fitted to the power systems as required by engineering designs. Scatec ASA periodically revise contract margin estimates and immediately recognises any losses on onerous contracts. Some construction contracts include product warranties. The expected warranty amounts are expensed at the time of sale and are adjusted for subsequent changes in assumptions or actual outcomes. Further, Scatec ASA derives revenues from the allocation of headquarter costs to its subsidiaries. Revenues from the sale of intercompany services are recognised when the services are delivered. Employee benefits Wages, salaries, bonuses, pension and social security contributions, paid annual leave and sick leave are accrued in the period in which the associated services are rendered by Scatec ASA - Annual Report 2022 117 employees of the Company. The Company has pension plans for employees that are classified as defined contribution plans. Contributions to defined contribution schemes are recognised in the statement of profit or loss in the period in which the contribution amounts are earned by the employees. The Board of Directors has established an option program for leading employees of the company. The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model. That cost is recognised in personnel expenses, together with a corresponding increase in equity over the vesting period. For further information on accounting principle and share options refer to Note 4 – Employee benefits in the consolidated financials. For further information refer Note 4 – Personnel expenses, number of employees and auditor’s fee. Interest income and expenses Interest income and expenses are recognised in the income statement as they accrue, based on the effective interest method. Income tax expense Income tax expense comprises current tax and changes in deferred tax. Current tax is the expected tax payable on the taxable income for the year and any adjustment to tax payable in respect of previous years. Deferred tax assets and liabilities are recognised for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities and their respective tax bases. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. In order for a deferred tax asset to be recognised based on future taxable profits, convincing evidence is required. Balance sheet classification Current assets and liabilities consist of receivables and payables due within one year, as well as project rights. Other balance sheet items are classified as non-current assets and liabilities. Property, plant and equipment Property, plant and equipment are stated at cost, less accumulated depreciation and accumulated impairment losses. Property, plant and equipment are depreciated on a straight- line basis over their expected useful life, from the date the assets are taken into use. Subsidiaries and investment in associated companies Subsidiaries are entities controlled by Scatec ASA. Subsidiaries and investment in associated companies are accounted for using the cost method and are recognised at cost less impairment. The cost is increased when funds are added through capital increases. Dividends to be received are recognised at the date the dividend is declared by the general meeting of the subsidiary. To the extent that the dividend relates to distribution of results from the period Scatec ASA has owned the subsidiary, it is recognised as income. Dividends which are repayment of invested capital are recognised as a reduction of the investment in the subsidiary. Inventories Inventories are measured at the lower of cost and net realisable value. Inventories consist primarily of project assets in various stages of development. Capitalised development costs include legal, consulting, permitting, and other similar costs such as interconnection or transmission upgrade costs as well as directly attributable payroll expenses, travel expenses and other expenses related to developing the project rights. Scatec reviews project assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company considers a project commercially viable if it is anticipated to be realised with a margin once it is either fully developed or fully constructed. Scatec considers a partially developed project commercially viable if the anticipated selling price is higher than the carrying value of the related project assets. A number of factors are assessed to determine if the project will be profitable, the most notable is whether there are any changes in environmental, ecological, permitting, or regulatory conditions that impact the project. Cash and cash equivalents Cash includes cash in hand and at bank. Cash equivalents are short-term liquid investments that can be immediately converted into a known amount of cash and have a maximum term to maturity of three months. In the statement of cash flows, the overdraft facility is presented gross as part of changes in current liabilities. Financial liabilities Interest-bearing borrowings are initially recognised at cost. After initial recognition, such financial liabilities are measured at amortised costs using the effective interest method. 118 Transaction costs are taken into account when calculating amortised cost. Trade payables are carried at cost. Dividends Distribution of dividends is resolved by a majority vote at the Annual General Meeting of the shareholders of Scatec ASA, based on a proposal from the Board of Directors. Dividends are recognised as a liability at the reporting date of the financial year that the proposal of dividend relates to. Additional proposed dividends based on the previous fiscal year approved financial statements (i.e. between 1 January and the date that the current year financial statements will be approved) are recognised as a liability at the balance sheet date. Events after the reporting period New information on the Company’s financial position on the end of the reporting period which becomes known after the reporting period, is recorded in the annual accounts. Events after the reporting period that do not affect the Company’s financial position on the end of the reporting period, but which will affect the Company’s financial position in the future, are disclosed if significant. Statement of cash flow The cash flow statement is prepared using the indirect method. Note 3 Revenues Revenue by business area NOK million 2022 2021 Services 732 153 Other revenue 19 13 Sum 751 166 Services comprise EPC services, sale of project rights and management services – all rendered to Group companies and associates. Revenue by geographical distribution NOK million 2022 2021 Pakistan 153 67 Netherlands 63 25 South-Africa 459 22 Ukraine 3 15 Egypt 6 7 Brazil 31 6 Argentina 4 5 Malaysia 4 3 Honduras 1 2 Mozambique 1 1 France 1 - India 1 - Phillipines 1 - Rwanda 4 - Sum 732 153 Refer to Note 14 - Transactions with related parties for further information. Scatec ASA - Annual Report 2022 119 Note 4 Personnel expenses, number of employees and auditor’s fee Personnel expenses NOK million 2022 2021 Salaries 216 171 Share-based payment 39 27 Payroll tax 31 19 Pension costs 18 14 Other benefits and personnel costs 3 6 Capitalised to inventory -39 -28 Total personnel expenses 268 209 The average number of FTEs that has been employed in the company through 2022 was 146 (116). Pension costs The Company has a defined contribution plan in line with the requirement of the law. NOK 18 million (14) is expensed related to the defined contribution plan in 2022. Paid salaries and personnel expenses for the management of Scatec ASA 2022 Annual bonus accrued 2) Number of options awarded Exercise of share options Out- standing share options Loans out- standing NOK thousand Title Salary 1) Other benefits 3) Pension cost Raymond Carlsen 4) Chief Executive Officer 2,418 - 43 - - 4,678 a) 80 - Terje Pilskog 5) Chief Executive Officer 3,460 1,163 39 - 84 15 170 23 Mikkel Tørud Chief Financial Officer 2,939 936 30 - 80 15 169 23 Snorre Valdimarsson EVP General Counsel 2,483 - 26 - 66 15 169 23 Roar Haugland EVP Sustainable Business & HSSE 2,244 720 23 - 62 15 172 23 Torstein Berntsen 6) EVP MENA/Green H2 2,575 840 27 - 68 15 174 23 Pål Helsing EVP Solutions 2,568 828 27 - 68 15 169 23 Toril Haaland EVP People & Organisation 2,104 684 22 - 57 2,086 b) 170 23 Ann Mari Lillejord 7) EVP Latam/Europe 1,266 443 14 - 14 10 112 23 Kate Bragg 7) EVP People, Strategy & Digital 1,560 522 10 - 10 15 162 23 Pål Strøm 8) EVP Operations & Maintenance 1,781 597 12 -4 26 15 166 - Jarl Arve Korberg 9) EVP Project Development Hydropower 628 - - - - 1 18 - 2021 NOK thousand Title Salary 1) Annual bonus accrued 2) Number of options awarded Exercise of share options Out- standing share options Other benefits 3) Pension cost Loans out- standing Raymond Carlsen Chief Executive Officer 3,995 1,345 18 -59 68 15 157 22 Mikkel Tørud Chief Financial Officer 2,718 949 13 -43 50 15 165 22 Snorre Valdimarsson EVP General Counsel 2,292 799 11 -34 40 15 162 22 Terje Pilskog EVP Project Development & Project Finance 2,594 901 12 -38 45 15 162 22 Roar Haugland EVP Sustainable Business & HSSE 2,105 732 10 -34 38 15 164 22 Torstein Berntsen EVP Power Production & Asset Management 2,383 827 11 -36 41 15 172 22 Pål Helsing EVP Solutions 2,396 829 11 -21 41 15 160 22 Toril Haaland EVP People & Organisation 1,978 689 9 -18 35 15 161 22 Jarl Arve Kosberg EVP Hydropower Project Development 1,943 647 13 - 13 13 143 22 1) Including paid out holiday allowance and car allowance. 120 2) Changed to accrued bonus. 2021 report showed actual paid out bonus. 3) Other benefits include benefits such as insurance and free phone. a) Including severance package (3 800) and vested stock Options converted to cash payment (839), b) Including severance package 4) Until 30.04.22, 5) CEO from 01.05.22. EVP Project Development before CEO 6) Interim EVP Mena/Green H2 from 21.11.22 7) Joined EMT 01.05.2022 8) Joined EMT 21.11.2022 9) Left EMT 31.01.2022 Remuneration for the Board of Directors 1) 2022 2021 NOK thousand Board remuner- ation Audit committee Remuner- ation committee Nominatio n committee Board remuner- ation Audit committee Remuner- ation committee Nomination committee John Andersen jr. 557 90 75 - 530 65 50 - Jan Skogseth 357 - 55 - 340 - 35 - Gisele Marchand 357 150 - - 340 90 - - Maria Moræus Hanssen 357 - 55 - 340 - 35 - Jørgen Kildahl 357 90 - - 340 65 - - Mette Krogsrud 357 - 55 - - - - - Espen Gundersen 357 90 - - - - - - Kristine Ryssdal - - - 60 - - - 57 Svein Høgseth - - - 40 - - - 39 Mats Holm - - - 40 - - - 39 Annie Bersagel - - - 40 - - - 39 1) Annual fees paid for 2021 and accrued for 2022 respectively. For more information about remuneration to management, refer to Note 4 Employee benefits in the consolidated financial statement of the Group and the Remuneration Report for 2022. Audit NOK million 2022 2021 Audit fees 2 3 Other attestation services - - Tax services 2 2 Other services - - Total 4 5 PwC replaced Ernst & Young as the Companys auditor in 2022. The audit fee for 2022 is related to both former auditor Ernst & Young and current auditor PwC. VAT is not included in the numbers above. Scatec ASA - Annual Report 2022 121 Note 5 Other operating expenses NOK million 2022 2021 Facilities 27 23 Professional fees 100 51 IT and communications 43 36 Travel costs 11 4 O&M costs - 1 Other costs 20 28 Total other operating expenses 201 143 Note 6 Provision for bad debt The Company has during 2022 recognised NOK 6.8 million in realised bad debt losses on receivables related to discontinued development projects. Per 31 December 2022 the Company recognised an impairment loss of NOK 607 million for receivables to group companies in Ukraine as a result of increased collection risk associated with Russia’s invasion in Ukraine. The situation in Ukraine at the end of December 2022 is still very challenging and highly uncertain. The outcome of the situation and the impact of Scatec’s assets are highly uncertain. Refer to Note 12 in the consolidated financial statement of the Group for details related to the impairment testing. No further provision for bad debt has been made as the collection risk of the outstanding receivables is considered low. 122 Note 7 Financial income and expenses Interest and other financial income NOK million 2022 2021 Interest income from group companies 156 114 Other interest income 19 13 Gain/(loss) on sale of financial investments 7 -2 Dividend from group companies 1,384 277 Gain from financial investment 3 - Total interest and other financial income 1,570 402 Interest and other financial expenses NOK million 2022 2021 Interest expenses from group companies - -1 Other interest expenses -346 -250 Impairment of financial assets -949 - Other financial expenses -17 -11 Total interest and other financial expenses -1,311 -262 The write down of financial assets in 2022 is related to Scatec Solar Netherlands BV investments in Ukraine. The write-down is related to both impairment of shares (NOK 341 million) and impairment of receivables to group companies in Ukraine (NOK 607 million). Refer to Note 12 in the consolidated financial statement of the Group for details related to the impairment testing. During 2022, interest amounting to NOK 346 million (250) was expensed for corporate financing, refer to Note 21 Corporate Financing in the consolidated financial statement of the Group for further details. The increase in interest expenses is primarily explained by increase in interest rates. Scatec ASA - Annual Report 2022 123 Note 8 Tax NOK million 2022 2021 Income tax expense: Current taxes - - Withholding tax on received dividends 21 10 Change in deferred tax 34 -104 Taxes related to previous years 13 -3 Total tax expense/(income) 68 -97 Tax basis: Profit before taxes -411 -171 Permanent differences 1) -434 -297 Changes in temporary differences -2 -16 Increase of tax losses carried forward 846 484 Tax base - - Current taxes according to statutory tax rate (22%) - - 1) Net permanent differences are related to non-taxable dividends partly offset by non-deductible impairment loss on investments and receivables in Ukraine and share based payment expenses. Reconciliation of nominal statutory tax rate to effective tax rate NOK million 2022 2021 Expected income tax expense according to statutory tax rate (22%) -90 -38 Non-taxable expense/ (income) -85 -65 Allowance for losses carried forward 219 25 Withholding tax on received dividends 21 10 Taxes related to previous years 13 -3 Foreign exchange variations between functional and tax currency -10 -26 Income tax expense/(income) 68 -97 Effective tax rate (%) 16.55% 56.71% Temporary differences as of 31 December NOK million 2022 2021 Change Tax loss carried forward -2,146 -1,301 846 Allowance for deferred tax assets 1,106 114 -992 Work in progress - 6 6 Shared based payments and amortised Interests on corporate financing 4 -4 -8 Total temporary differences -1,037 -1,185 -148 Recognised tax liability/(asset) -226 -261 -34 The change in deferred tax asset is recognised in tax expense, except for changes which are related to transaction cost from capital increases which are booked directly to equity. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised based upon the likely timing and the level of future taxable profits. Reference is made to Note 7 in the Consolidated financial statements for the assessment of estimation uncertainty. We assessed the probability of utilising the tax losses to ensure that deferred taxare recognised to the extent that Scatec ASA expects there will be sufficient future taxable profits available to utilise the losses. The tax losses in Norway can be carried forward indefinitely. 124 Note 9 Property, plant and equipment Office equipment NOK million 2022 2021 Accumulated cost at 1 January 87 75 Additions 16 11 Foreign currency translation 10 2 Accumulated cost at 31 December 114 87 Accumulated depreciation at 1 January 28 19 Depreciations for the year 10 7 Foreign currency translation 4 2 Accumulated depreciation at 31 December 42 28 Carrying amount at 31 December 73 60 Estimated useful life (years) 3-10 3-10 Note 10 Investments in subsidiaries, joint ventures and associated companies The table below include material subsidiaries of Scatec ASA. Ownership interest corresponds to voting interest if not otherwise stated. NOK million Company Registered office Ownership interest Carryring value 2022 Carryring value 2021 SN Power AS Norway 100.00% 1,050 2,595 Scatec Solar Netherlands BV Netherlands 100.00% 12,268 10,933 Release Management BV Netherlands 100.00% 623 409 Scatec Solar SA (pty) Ltd. Sandton, South-Africa 100.00% 3 - Scatec Solar SA 163 (Pty) Ltd. South-Africa 100.00% 18 1 Scatec Solar SA 164 (Pty) Ltd. Sandton, South-Africa 80.70% 82 5 Scatec Solar SA 165 (Pty) Ltd. Sandton, South-Africa 76.60% 110 7 Gigawatt Global Rwanda Ltd Rwanda 54.00% 8 7 Scatec Solar Mozambique Limitada Mozambique 0.50% 9 9 Scatec Solar SAS Paris, France 100.00% 82 - Scatec Solar Jordan Amman, Jordan 100.00% 39 44 Anwar Al Ardh For Solar Energy Generation PSC Amman, Jordan 50.10% 95 86 Ardh Al Amal For Solar Energy Generation PSC Amman, Jordan 50.10% 42 38 Aswan Solar Power SAE (BB1) Egypt - - 2 Scatec Solar Honduras S.A. Honduras 100.00% 3 3 Produccion de Energia Solar Demas Renovables S.A Honduras 40.00% 69 62 Fotovoltaica Los Prados Honduras 70.00% 82 74 Fotovoltaica Surena Honduras 70.00% 159 150 Generaciones Energeticas S.A Honduras 70.00% 152 144 Energias Solares S.A Honduras 70.00% 94 88 Foto Sol S.A Honduras 70.00% 6 6 Scatec Solar PV1 S.R.O Prague, Czech 100.00% 2 - Scatec Solar S.R.O Prague, Czech 100.00% 1 - 15,000 14,666 Scatec ASA - Annual Report 2022 125 Per 31 December 2022, carrying value of the investment in Scatec Solar Netherlands B.V. has been impaired by NOK 341 million related to the Company`s investments in Ukraine. For details of the assessment and significant assumptions reference is made to Note 12 Impairment testing in the Consolidated financial statements. A list of all material companies in the Scatec Group is listed in Note 26 Consolidated subsidiaries of the Consolidated financial statements. NOK million Associates and joint ventures Office Ownership Carrying value 2022 Carrying value 2021 Kube Energy AS Oslo, Norway 25% 2 2 Total 2 2 Note 11 Inventory The carrying value of projects under development are presented as inventories and are stated at the lower of cost and net realisable value. The project assets are related to solar, hydro and wind power plants under development and construction. The increase from last year is mainly explained by construction in South Africa and Pakistan. Project geography NOK million 2022 2021 Asia 303 149 Europe 12 38 West Africa 8 34 South Africa 990 49 North Africa 56 24 South America 18 16 East Africa 2 - Carrying value of inventory at 31 December 2021 1,390 311 Impairment charges in 2022 were NOK 140 million (45) for development projects in Ukraine, Mali, Bangladesh and India. Note 12 Cash and cash equivalents NOK million 2022 2021 Restricted cash 58 37 Free cash 753 1,584 Total cash and cash equivalents 811 1,620 Scatec ASA has not drawn on the revolving credit facility per 31 December 2022. For more information about external financing and facilities, refer to Note 21 Corporate Financing in the consolidated financial statement of the Group. 126 Note 13 Equity and shareholder information Nok million Issued capital Share premium Other equity Total equity Equity as of 31 December 2021 4 10,122 -365 9,761 Profit/(loss) for the period - - -480 -480 Share-based payment - 39 - 39 Capital increase from exercised employee share options, net of transaction cost after tax 1) - 5 - 5 Accrued dividend - - -308 -308 Reserve for valuation variances - - 70 70 Foreign currency translation 1 1,212 -35 1,177 Equity as of 31 December 2022 5 11,378 -1,118 10,265 1) On 9 February 2022 as part of the Group’s incentive program, NOK 5 million was raised in a share capital net of transaction cost after tax, through an exercise of employee share options consisting of 30 379 new shares at a price of NOK 69,99 per share, 22 878 new shares at a price of NOK 112,79 per share. At 31 December 2022, the share capital amounted to NOK 3,972 million. All shares rank in parity with one another and carry one vote per share. On 2 February 2023, the Board of Directors announced its intention to propose a dividend of NOK 1,94 per share to the Annual General Meeting. On 29 April 2022, the Annual General Meeting of Scatec ASA resolved to pay a dividend of NOK 2,54 per share, totaling NOK 404 million. The dividend was paid to the shareholders on 10 May 2022. This equal to amount accrued for in 2021. The table below show the largest shareholders of Scatec ASA at 31 December 2022. Shareholder Number of shares Ownership EQUINOR ASA 20,776,200 13.07% SCATEC INNOVATION AS 19,482,339 12.26% FOLKETRYGDFONDET 13,521,678 8.51% State Street Bank and Trust Comp 3,618,391 2.28% CLEARSTREAM BANKING S.A. 3,399,872 2.14% The Bank of New York Mellon 3,267,711 2.06% VERDIPAPIRFONDET DNB MILJØINVEST 3,099,748 1.95% J.P. Morgan SE 2,875,587 1.81% RAIFFEISEN BANK INTERNATIONAL AG 2,622,845 1.65% Euroclear Bank S.A./N.V. 2,546,789 1.60% Pictet & Cie (Europe) S.A. 2,525,354 1.59% State Street Bank and Trust Comp 2,414,283 1.52% JPMorgan Chase Bank 2,384,753 1.50% State Street Bank and Trust Comp 2,310,681 1.45% The Bank of New York Mellon SA/NV 2,197,886 1.38% Citibank Europe plc 2,158,187 1.36% ARGENTOS AS 2,000,000 1.26% VERDIPAPIRFONDET STOREBRAND NORGE 1,517,574 0.95% VPF DNB AM NORSKE AKSJER 1,514,033 0.95% VERDIPAPIRFONDET DNB NORGE 1,508,210 0.95% Total 20 largest shareholders 95,742,121 60.25% Total other shareholders 63,175,154 39.75% Total shares outstanding 158,917,275 100% Scatec ASA - Annual Report 2022 127 The tables below show shares held by Management and Board of Directors at 31 December 2022. Board of Directors Number of shares Ownership John Andersen, Jr. 1) - 0.00% Jan Skogseth 23,000 0.01% Gisele Marchand 3,586 0.00% Maria Moræus Hanssen 2) 5,510 0.00% Jørgen Kildahl 3,000 0.00% Mette Krogsrud 1,000 0.00% Espen Gundersen 10,000 0.01% Total at 31 December 2022 46,096 0.03% 1) Related parties control 19,482,339 shares through Scatec Inovation AS. 2) Held through the controlled company MMH Nysteen Invest AS. Management Number of shares Ownership Raymond Carlsen 1) 2,000,593 1.26% Terje Pilskog 2) 542,204 0.34% Mikkel Tørud 227,544 0.14% Roar Haugland 3) 79,566 0.05% Torstein Berntsen 4) 711,813 0.45% Snorre Valdimarsson 12,025 0.01% Pål Helsing 6,204 0.00% Toril Haaland 4,904 0.00% Jarl Kosberg 419 0.00% Ann-Mari Lillejord 10,129 0.01% Kate Bragg 920 0.00% Pål Strøm 1,844 0.00% Total at 31 December 2022 3,598,165 2.26% 1) End date 31.04.2022. Held through the controlled company Argentos AS, whereof 593 shares held by Raymond Carlsen directly 2) Held through the controlled company Océmar AS, whereof 2,204 shares held by Terje Pilskog directly 3) Held through the controlled company Buzz Aldrin AS, whereof 2,204 shares held by Roar Haugland directly 4) Held through the controlled company Belito AS, whereof 19,204 shares held by Torstein Berntsen directly. In addition, 895 shares are held by held by Torstein Berntsen’s spouse. These are not included in the total presented in the table above. Refer to Note 4 – Personnel expenses, number of employees and auditor’s fee for information on share options granted to the management. Note 14 Corporate financing For information about Corporate financing refer to Note 21 Corporate financing in the consolidated financial statement of the Group. For information about interest rate swap refer to Note 20 Derivative financial instruments in the consolidated financial statement of the Group. 128 Note 15 Other current liabilities Nok million 2022 2021 Deferred income EPC projects 997 128 Liabilities to co-developers - 19 Accrued interest expenses 118 52 Vacation allowances, bonus accruals etc. 49 41 Other 7 43 Liability to Norfund 1) - 1,620 Total current liabilities 1,170 1,903 1) Norfund’s 49% ownership stake in SN Power’s Sub-Saharan Africa hydro assets which will be exchanged for shares in the Sub-Saharan Africa JV without cash impact after completion of agreed restructuring activities. Note 16 Guarantees, contractual obligations and contingent liabilities Scatec ASA issue certain guarantees on behalf of the Group. The amounts specified below are total exposure on guarantees issued by Scatec ASA at each balance sheet date based on when the guarantees expire. The guarantees expire haphazardly during the year. NOK million 31.12.2022 31.12.2023 31.12.2024 31.12.2025 Advance Payment guarantees 81 - - - Performance guarantees 1,629 - - - Warranty Guarantees 352 176 - - Bid Bonds 401 170 170 0 SPV Performance / Commitments 256 202 202 156 O&M Performance (3rd party) 16 - - - Other Payment Guarantees (including 25 MEUR to Power China) 1,838 1,658 46 46 Total 4,574 2,205 418 202 The guarantees are mainly related to EPC performance, EPC payments, plant performance, bid bonds related to bid performance and payment guarantees. Guarantees issued as security for performance on EPC contracts entered between project companies and construction companies include: ● Advance Payment Guarantees in exchange for advance payment under the EPC contract (typically represents 15%- 20% of the contract value), ● Performance Guarantees to cover contract obligations (typically represents 10%-15% of the contract value) ● Warranty Bonds (typically 5%-10% of the contract value) to cover operational performance for the first two years of operation. The performance guarantees issued by Scatec ASA mainly relate to the RMIPPP project in South Africa that expire in Q4 2023. See note 24 Guarantee and commitments in the consolidated financial statement of the Group for more information on the other guarantees issued to third parties. Contractual obligations Scatec ASA has contractual obligations primarily through office lease. NOK million 2023 2024 2025 >2025 Leases (office rental) 14 14 14 60 Total contractual oblications 14 14 14 60 Scatec ASA - Annual Report 2022 129 Further, as an EPC contractor Scatec ASA may enter into purchase commitments with suppliers of equipment and sub-EPC services related to the plants under construction. Contingent liabilities Scatec ASA have no material contingent liabilities. Note 17 Transactions with related parties Related parties Subsidiaries, joint ventures and associates Key management personnel Board of Directors Transactions Management, development and EPC services and financing Loan and payroll Board remuneration Transactions with related parties All related party transactions have been carried out as part of the normal course of business and at arm’s length. The most significant transactions in 2022 and 2021 are: Subsidiaries – EPC services In 2022 Scatec ASA sold EPC services amounting to NOK 572 million. The company has been EPC contractor for the construction of power plants in South-Africa and Pakistan. During 2022 total revenue on these contracts amounted to NOK 543 million. Scatec ASA sold EPC services amounting to NOK 76 million in total during 2021. Scatec ASA has been EPC contractor for the construction of power plants in Ukraine, Egypt, Malaysia and Pakistan. During 2021 total revenue on these contracts amounted to NOK 73 million. Subsidiaries – development services During 2022 the company sold development project rights amounting to NOK 26 million, of which NOK 16 million relates to the transfer of rights for the Pakistan projects. Subsidiaries - management service income Scatec ASA has during 2022 charged NOK 48 million (31) for corporate services provided to its subsidiaries and associates. Subsidiaries and associates – financing In the course of the ordinary business, inter-company financing is provided from Scatec ASA to its subsidiaries. Long-term financing is interest bearing and priced at arm’s length. Refer to Note 6 for specification of interest income/expenses from/to subsidiaries and Note 9 Investments in subsidiaries, joint ventures and associated companies. Refer to Note 4 – Personnel expenses, number of employees and auditor’s fee for information regarding transactions with key management personnel and board members. 130 Note 18 Subsequent events Adjusting subsequent events No adjusting events have occurred after the balance sheet date. Non-adjusting subsequent event Refinancing of Bridge-to-Bond USD 193 million On 2 February 2023, Scatec refinanced USD 100 million of the USD 193 million Bridge-to-Bond facility and on 10 February 2023, Scatec placed NOK 1,000 million in new unsecured green bonds to refinance the remaining USD 93 million of the Bridge-to-Bond facility. Refer to note 30 Subsequent events in the consolidated financial statement of the Group Sale of Upington in South Africa On 2 February 2023, Scatec signed an agreement to sell its 42% equity share in the 258 MW Upington solar power plant for a gross consideration of ZAR 979 million (NOK 569 million). Refer to note 30 Subsequent events in the consolidated financial statement of the Group. Scatec ASA - Annual Report 2022 131 Responsibility statement We confirm to the best of our knowledge, that the consolidated financial statements for 2022 has been prepared in accordance with IFRS as adopted by EU, and that the information gives a true and fair view of the Group’s assets, liabilities, financial position and result for the period. We also confirm that presented information provides a fair overview of important events that have occurred during the period and their impact on the financial statements, key risk and uncertainty factors that Scatec is facing during the next accounting period. Oslo, 21 March 2023 The Board of Directors Scatec ASA 132 Alternative Performance Measures Scatec discloses alternative performance measures (APMs) in addition to those normally required by IFRS. This is based on the Group’s experience that APMs are frequently used by analysts, investors and other parties for supplemental information. The purpose of APMs is to provide an enhanced insight into the operations, financing and future prospect of the Group. Management also uses these measures internally to drive performance in terms of long-term target setting. APMs are adjusted IFRS measures that are defined, calculated and used in a consistent and transparent manner over the years and across the Group where relevant. Financial APMs should not be considered as a substitute for measures of performance in accordance with IFRS. Disclosures of APMs are subject to established internal control procedures. Definition of alternative performance measures used by the Group for enhanced financial information Cash flow to equity: is a measure that seeks to estimate value creation in terms of the Group’s ability to generate funds for equity investments in new power plant projects and/or for shareholder dividends over time. Management believes that the cash flow to equity measure provides increased understanding of the Group’s ability to create funds from its investments. The measure is defined as EBITDA less net interest expense, normalised loan repayments and normalised income tax payments, plus any proceeds from refinancing. The definition excludes changes in net working capital, investing activities and fair value adjustment of first-time recognition of joint venture investments. Normalised loan repayments are calculated as the annual repayment divided by four quarters for each calendar year. However, loan repayments are normally made bi-annually. Loan repayments will vary from year to year as the payment plan is based on a sculpted annuity. Net interest expense is here defined as interest income less interest expenses, excluding shareholder loan interest expenses, non-recurring fees and accretion expenses on asset retirement obligations. Normalised income tax payment is calculated as operating profit (EBIT) less normalised net interest expense multiplied with the nominal tax rate of the jurisdiction where the profit is taxed. EBITDA: is defined as operating profit adjusted for depreciation, amortisation and impairments. EBITDA margin: is defined as EBITDA divided by total revenues and other income. EBITDA and EBITDA margin are used for providing consistent information of operating performance which is comparable to other companies and frequently used by other stakeholders. Gross profit: is defined as total sales revenue including net gain/loss from sale of project assets and net gain/ loss from associates minus the cost of goods sold (COGS). Gross profit is used to measure project profitability in the D&C segment. Net revenues: include energy sales revenues net of significant cost items directly linked to the energy sales volume (such as cost of energy purchase) in the PP segment. Refer to note 3 Operating segments for further details. Gross interest-bearing debt: is defined as the Group’s total debt obligations and consists of non-current and current external non-recourse financing and external corporate financing and other interest-bearing liabilities, irrespective of its maturity as well as bank overdraft. Net interest-bearing debt (NIBD): is defined as gross interest-bearing debt, less cash and cash equivalents. NIBD does not include shareholder loans. Net working capital includes trade- and other receivables, other current assets, trade- and other payables, income tax payable and other current liabilities. Scatec ASA - Annual Report 2022 133 Proportionate Financials The group’s segment financials are reported on a proportionate basis. The consolidated revenues and profits are mainly generated in the Power Production segment. Activities in Services and Development & Construction segment mainly reflect deliveries to other companies controlled by Scatec (with from 39% to 100% economic interest), for which revenues and profits are eliminated in the Consolidated Financial Statements. With proportionate financials Scatec reports its share of revenues, expenses, profits and cash flows from all its subsidiaries without eliminations based on Scatec’s economic interest in the subsidiaries. The Group introduced Proportionate Financials as the Group is of the opinion that this method improves earnings visibility. The key differences between the proportionate and the consolidated IFRS financials are that; • Internal gains are eliminated in the consolidated financials but are retained in the proportionate financials. These internal gains primarily relate to gross profit on D&C goods and services delivered to project companies which are eliminated as a reduced group value of the power plant compared to the stand-alone book value. Similarly, the consolidated financials have lower power plant depreciation charges than the proportionate financials since the proportionate depreciations are based on power plant values without elimination of internal gain. Internal gain eliminations also include profit on Services delivered to project companies. • The consolidated financials are presented on a 100% basis, while the proportionate financials are presented based on Scatec’s ownership percentage/economic interest. • In the consolidated financials joint venture companies are equity consolidated and are presented with Scatec’s share of the net profit on a single line in the statement of profit or loss. In the proportionate financials the joint venture companies are presented in the same way as other subsidiaries on a gross basis in each account in the statement of profit or loss. In 2022 Scatec reports a proportionate operating profit of NOK 460 million compared with an operating profit of NOK 723 million in the consolidated financials. To arrive at the proportionate operating profit from the consolidated operating profit the Group has; 1. added back to the proportionate statement of profit or loss the internal gain on transactions between group companies with a negative amount of NOK 80 million. Where NOK 106 million comprise Scatec’s share of gross profit on D&C contracts, NOK -146 million comprise increased depreciation charges from internal gains and NOK -41 million comprise other items. 2. removed the non-controlling interests share of the operating profit of NOK 519 million to only leave the portion corresponding to Scatec’s ownership share, 3. replaced the consolidated net profit from joint venture companies of NOK 749 million with Scatec’s share of the Operating profit from the joint venture companies with NOK 1,086 million. See Note 3 for further information on the reporting of proportionate financial figures, including reconciliation of the proportionate financials against the consolidated financials. 134 Consolidated Financials NOK million 2022 2021 EBITDA Operating profit (EBIT) 723 2,012 Depreciation, amortisation and impairment 1,832 892 EBITDA 2,555 2,903 Total revenues and other income 3,751 3,803 EBITDA margin 68% 76% Gross profit Total revenues and other income 3,751 3,803 Cost of sales - - Gross profit 3,751 3,803 Gross interest-bearing debt Non-recourse project financing 13,297 10,708 Bonds 7,987 7,264 Non-recourse project financing - current 1,963 1,147 Other non-current interest-bearing liabilities 231 - Other current interest-bearing liabilities 231 - Gross interest-bearing debt 23,709 19,120 Net interest-bearing debt Gross interest-bearing debt 23,709 19,120 Cash and cash equivalents 4,132 4,171 Net interest-bearing debt 19,578 14,949 Net working capital Trade and other receivables 497 740 Other current assets 1,863 734 Trade and other payable -594 -812 Income tax payable -37 -24 Other current liabilities -1,106 -841 Non-recourse project financing-current -1,963 -1,147 Other current interest-bearing liabilitie -231 - Net working capital -1,571 -1,351 Break-down of proportionate cash flow to equity FY 2022 NOK million Power Production Services Development & Construction Corporate Total EBITDA 2,835 74 -221 -138 2,550 Net interest expenses -780 -1 -5 -316 -1,101 Normalised loan repayments -815 - - - -815 Proceeds from refinancing 363 - - - 363 Normalised income tax payment -116 -15 78 106 53 Cash flow to equity 1,487 58 -149 -347 1,050 1 FY 2021 NOK million Power Production Services Development & Construction Corporate Total EBITDA 2,949 75 -223 -114 2,686 Net interest expenses -776 1 -8 -217 -1,000 Normalised loan repayments -790 - - - -790 Proceeds from refinancing 397 - - - 397 Normalised income tax payment -140 -16 68 78 -9 Cash flow to equity 1,640 60 -164 -252 1,284 Scatec ASA - Annual Report 2022 135 Other definitions Backlog Project backlog is defined as projects with a secure off-take agreement assessed to have more than 90% probability of reaching financial close and subsequent realisation. Pipeline The pipeline projects are in different stages of development and maturity, but they are all typically in markets with an established government framework for renewables and for which project finance is available (from commercial banks or multilateral development banks). The project sites and concessions have been secured and negotiations related power sales and other project implementation agreements are in various stages of completion. Lost time injury (LTI) An occurrence that results in a fatality, permanent disability or time lost from work of one day/shift or more. Scatec’s economic interest Scatec’s share of the total estimated economic return from its subsidiaries. For projects in development and construction the economic interest is subject to change from the development of the financial model. Cash in power plant companies in operation Comprise restricted cash in proceed accounts, debt service reserve accounts, disbursements accounts, maintenance and insurance reserve accounts and similar. These cash and cash equivalents are only available to the Group through distribution as determined by shareholder and non-recourse financing agreements. Cash in power plant companies under development/construction Comprise shareholder financing and draw down on term loan facilities by power plant companies to settle outstanding external EPC invoices. Project equity Project equity comprise of equity and shareholder loans in power plant companies. Recourse Group Recourse Group means all entities in the Group, excluding renewable energy companies (each a recourse group company). Definition of project milestones Commercial Operation Date (COD): A scheduled date when certain formal key milestones have been reached, typically including grid compliance, approval of metering systems and technical approval of plant by independent engineers. Production volumes have reached normalised levels sold at the agreed off-taker agreement price. This milestone is regulated by the off-taker agreement with the power off-taker. In the quarterly report grid connection is used as a synonym to COD. Financial close (FC): The date on which all conditions precedent for drawdown of debt funding has been achieved and equity funding has been subscribed for, including execution of all project agreements. Notice to proceed for commencement of construction of the power plant will normally be given directly thereafter. Projects in Scatec defined as “backlog” are classified as “under construction” upon achievement of financial close. Start of Production (SOP): The first date on which the power plant generates revenues through sale of power under the off- take agreement. Production volumes and/or the price of the power may be lower than when commercial operation date (COD) is reached. This milestone is regulated by the off-take agreement with the power off-taker. This milestone may be reached prior to COD if the construction of a power plant is completed earlier than anticipated in the off-take agreement. Take Over Date (TOD): The date on which the EPC contractor hands over the power plant to the power plant company. COD must have been reached, in addition to delivery of training and all technical documentation before TOD takes place. The responsibility for Operations & Maintenance (O&M) of the plant is handed over from the EPC contractor to the O&M contractor at the TOD. This milestone will normally occur shortly after the COD date. 136 Auditor’s Report Scatec ASA - Annual Report 2022 137 138 Scatec ASA - Annual Report 2022 139 140 Scatec ASA - Annual Report 2022 141 142

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