Annual Report 2021

Scatec is a leading renewable energy solutions 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 3.5 GW of installed capacity across four continents today. We are targeting 15 GW of renewable capacity to be in operation or under construction by the end of 2025, delivered by our 600 passionate employees who are driven by a common vision of ‘Improving our Future’. Scatec is headquartered in Oslo, Norway and listed on the Oslo Stock Exchange under the ticker symbol ‘SCATC.

Emerging markets leading the way In addition to the environmental perspective, demand for renewables is also driven by economical and geopolitical factors. The relative competitiveness of renewables has strengthened over time compared to conventional energy and is now the most cost-efficient source of energy in many locations and particularly in emerging economies. Authorities in many countries are also seeing the benefit of not relying on imported fossil fuels given price volatility and geopolitical unrest. Emerging economies will be fundamental in this transition, in which accelerating demand for new renewable energy will be driven by high economic growth, rapidly increasing populations, and improving living standards, in combination with initiatives to reduce the use of fossil fuels.

Capturing the full project value Over time we have developed a business model which allows us to capture the total value of a renewable project while retaining control over health and safety matters and managing the potential effects on people, communities, and the environment. Our business model involves the development, construction, ownership, and operation of renewable energy plants in emerging economies and the sale of power predominantly under long-term power purchase agreements (PPAs). Our approach is to offer the most cost-efficient solution for each project which could either be a single technology or a combination of several integrated renewables technologies.

During 2021, we expanded our team internationally by 187 full-time employees, increasing the total number of employees to 622. With their 51 different nationalities, our employees represent true diversity. In order to meet our growth targets, we implemented a new People and Organisation strategy during 2021 that reflects our aims for growth in our core markets. We are focusing on strengthening our organisation, developing our people, and reinforcing our culture. We will build on our heritage and create a robust organisation with solid leaders who are ready to take on the challenge of taking Scatec to the next level. The strategy also sets out key activities for achieving our goals in respect of diversity, equity, inclusion, and belonging (DEIB). We will continue to recruit business development resources in our core markets to capitalise on new project opportunities early on. We are strengthening our employer brand to ensure long-term access to talent and offer unique career opportunities by promoting growth and development. When we recruit, we look for top candidates who have both a cultural and a business understanding of the markets where we operate. We do this to reduce risk and accelerate growth.

Our integrated operations in emerging economies and renewable technologies mean that we are exposed to a variety of risks. Our ability to manage these risks is fundamental to our success and over time has developed into a key competitive advantage for Scatec. We capitalise on our experience of complex environments and risk management systems in order to de-risk an opportunity and move it forward.

Group – Proportionate Financials 2021 proportionate revenues were NOK 4,615 million, up from NOK 2,844 million in 2020. The increase reflects the acquisition of SN Power in January 2021 and new solar plants in Ukraine and Argentina which started operation during the year. With a larger portfolio of power plants in operation, both revenues and EBITDA increased in Power Production, while decreasing in the Development & Construction segment. This change in segment mix resulted in a higher EBITDA margin for the Group compared with the previous year. The increase in operating expenses and depreciation compared with 2020 is mainly driven by the new power plants in operation, strengthened project development and corporate functions. Scatec’s proportionate share of cash flow to equity was NOK 1,284 million in 2021, up from NOK 324 million in 2020. This is mainly explained by the factors above in addition to NOK 397 million from refinancing of assets in the Philippines. Power Production Power Production revenues increased to NOK 4,176 million (1,708) in 2021, while EBITDA increased by 48% to NOK 2,949 million (1,404). Installed capacity was 3,355 MW at year-end and full year production on proportionate basis reached 3,823 GWh, up from 1,602 GWh in 2020. The increase in production volumes and revenues is mainly driven by the acquisition of SN Power.

Clean energy in a sustainable way 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, Scatec develops, builds, owns and operates solar, wind and hydropower projects and storage solutions. Sustainability is an integral part of our organisation and embedded in all our business units and across our value chain. We have dedicated sustainability resources both at the project and corporate level involved in all project phases for long term approach and impact.

ESG performance and targets Scatec reports on key performance indicators and sets targets across material topics. The table below covers key ESG results and performance from the full year 2021.

Diversity, equity, inclusion and belonging are key business imperatives for Scatec. We embrace these aspects in our practices, policies and procedures, including hiring processes, performance and rewards, learning and development programmes and initiatives.

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.


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