Interim report 2H 2024Småkraft Group

During 2H 2024, power revenues was influenced by lower electricity prices. Wet weather in the Eastern regions in Norway led to full reservoirs and reduced prices. Production levels was lower in the Western and Northern price regions, where Småkraft has its strongest presence.

Production in 2H 2024 was 951 GWh compared to 728 GWh in 2H 2023, an increase of 31 percent. The average obtained spot prices per MWh decreased by 24 percent to 22.2 EUR / MWh in 2H 2024 compared to 2H 2023. From 1H 2024 to 2H 2024, there was a price decrease of 43 percent. Småkraft has production capacity in seven different price areas in Norway and Sweden, and the obtained spot prices per MWh varied significantly between price areas.

Recognised total power revenue for 2H 2024 was EUR 21 million, the same as for 2H 2023.

In the second half of 2024, the mark-to-market valuation of energy derivatives resulted in an unrealised positive value change of EUR 9 million, compared to EUR 30 million in 2H 2023. According to IFRS, these future hedge contracts, which will be realised in the coming years, are recognised in the Financial Statements at market value at period end. However, production and revenue are not recognised until the date of production. Therefore, in the second half of 2024, the EBITDA includes unrealised hedge revenues with no cash effect.

Net financial items amounted to EUR 26 million in 2H 2024, compared to EUR 42 million in 2H 2023, reflecting a positive change of EUR 16 million. This decrease is attributed to lower disagio related to external financing in EUR in 2H 2024 compared to 2H 2023. The still negative development in NOK compared to EUR incurred a disagio of EUR 14 million during 2H 2024, compared to a positive EUR 17 million in 2H 2023. The increase in interest expense of EUR 6 million is explained by refinancing of two large loan facilities since 2H 2023 at higher interest rates than the replaced loans.

Småkraft focuses on selected Alternative Performance Measures (APMs) to measure performance from operational activities. Please refer to the Appendix for detailed information.

Adjusted power revenue, which includes realised financial power hedges, increased by 16 percent for 2H 2024 compared to 2H 2023.

Adjusted EBITDA, which isolates operating profit from the unrealised value change of energy derivatives, was EUR 5 million in 2H 2024, consistent with 2H 2023.

Cashflow from operations was a positive EUR 13 million in 2024 compared to a negative EUR 22 million in 2023.

Investment cash flows decreased in 2024 compared to 2023, due to fewer acquired power plants. The investments were financed by capital injections from owners amounting to EUR 32 million in 2024 and EUR 67 million in 2023. During 2H 2024, Småkraft successfully completed a EUR 24.5 million tap issue on its outstanding senior secured green bond at an attractive pricing level. The net proceeds were used to refinance 12 power stations acquired during 2023/2024. Gross inflows from loan raising were EUR 61 million, with dividend payments to owners amounting to EUR 15 million.

As of 31 December 2024, total cash deposits were EUR 28 million, excluding time deposits of EUR 8 million. Småkraft also has an undrawn revolving bank loan facility of EUR 20 million, providing the company with a solid cash position.

This strong cash position enables Småkraft to cover upcoming investments, meet refinancing obligations and manage the current volatile power price environment.

The group’s total assets as of 31 December 2024 were EUR 864 million. The equity ratio at the end of 2024 was 43 percent, which comfortably exceeds the external debt covenant requirement of at least 30 percent equity ratio.

In recent years, Småkraft has acquired several operating hydro power plants and constructed new ones. During the second half of 2024, the company remained focused on construction and development of new power plants. According to the Norwegian Energy Regulatory Authority (NVE), the Norwegian power balance is expected to weaken over the coming years. As society’s demand for renewable energy grows, Småkraft has intensified its efforts to develop renewable energy projects in collaboration with its suppliers and partners.

As of 31 December 2024, Småkraft had 21 power stations under construction, with a total production capacity of 289 GWh. One of the power stations, the 5.6 GWh Øvre Skorilla in north-western part of Norway, was commissioned in January 2025. These hydro power plants will commence operations with 106 GWh in 2025 and 183 GWh in 2026. In total, these projects represent investments amounting to EUR 150 million. Småkraft AS’s investors have committed EUR 84 million of equity, which will be injected into Småkraft before the projects are finalised. Småkraft plans to finance the remaining part of the investments with external debt.

Both in 2023 and 2024, Småkraft was the largest contributor of new renewable energy to the Norwegian grid, to a large degree due to a halt in large-scale wind and hydropower development. The company continues to have the highest capacity of renewable energy (hydro, solar and wind) under construction in Norway.

Småkraft is committed to advancing these projects towards investment decisions, with several opportunities, including acquisitions and new construction projects, approaching final approval.

During the second half of 2024, Småkraft signed 19 new contracts with landowners who wish to build power stations in collaboration with Småkraft. Småkraft is dedicated to progressing these contracts to formal investment decisions.

Småkraft adopts a long-term perspective, balancing healthy production and earnings while also prioritizing the preservation of biodiversity and local value creation. Although small-scale hydropower generally has a relatively small environmental footprint, Småkraft continuously strives to limit environmental risks and negative impacts during both construction and production, complying with governmental requirements

In addition to improving the overall sustainability of new development, Småkraft invests in projects to upgrade older power plants, to enhance co-existence and better conserve local ecosystems.

Fosstveit power plant exemplifies our commitment to preserving biodiversity. After two years of significant reconstruction, we were pleased to re-open the new and improved Fosstveit power plant in August 2024, with oversight from the Norwegian Minister of Energy, Terje Aasland.

Småkraft acquired the power plant in 2022, aware of the high fish mortality rates. Following investments and innovation to improve fish welfare, we are glad to report promising results for the second half of 2024, Data indicates that the smolt and eel are now safely navigating past the turbine, suggesting that the new intake, combined with a surface escape route, effectively ensures safe downstream migration.

Recent measurements indicate that 80 % of the PIT-tagged smolt used the escape route past the power plant, marking an improvement from previous results. No dead smolt or eel has been found in the second half of 2024, suggesting that the modifications effectively prevent the fish from entering the turbine.

Småkraft collaborates with key stakeholders and the small-scale hydropower industry association, Småkraftforeninga, to share knowledge and build competencies aimed at enhancing environmental and social sustainability across the industry in the Nordics.

Småkraft has maintained strong performance on key quality indicators. Short-term sick leave has increased to 2.2% in 2H 2024. Management is closely monitoring this trend and considers the sick leave percentage to be within acceptable levels. Småkraft also tracks incidents that lead to lost time for both employees and its partners/ suppliers. In the second half of 2024, there was one minor incident resulting in lost time with one of the suppliers.

Småkraft stands as the leading sustainable hydroelectric power producer in Europe. In 2024, Småkraft once again secured its strong position in GRESB's annual ESG assessment with scoring of 97 out of 100 and earning 5 out of 5 stars.

Hydrology and power prices remain the main risk factors for the upcoming periods.

The Nordic commodity markets for power are still less liquid than in the past, making financial hedging activities challenging. Småkraft halted its hedging activities during the summer of 2021. Shifts in future power prices lead to changes in the unrealised value of energy derivatives, which affects equity and the equity ratio.

Changed interest rates may also influence our financial results. For Småkraft, it is important to reduce interest rate risk through different final maturity dates on all loan facilities as well as interest rate hedging. Småkraft’s current interest rate hedging covers more than 50% of its loan portfolio.

Due to substantial expansion, Småkraft is continuously working on various financing initiatives involving new equity and debt. As of 31 December 2024, Småkraft has signed construction and modification contracts that will add 320 GWh to its portfolio.

Småkraft’s shareholders have committed equity for at least 50 percent of the agreed price of these investments. The company is actively working with banks and debt investors to secure financing for the remaining investments. Several ongoing construction projects will be finalised, and construction loan facilities are expected to be transitioned to and refinanced with long-term debt structures.

Småkraft’s financial statements are presented in EUR. However, the functional currency of the company is NOK. Therefore, Småkraft’s financial statements are affected by currency exchange fluctuations between NOK and EUR, in addition to interest rate changes. This may lead to changes in equity and equity ratios.

After the year-end, Småkraft has expanded its portfolio of power plants even further. On 31 January 2025, Småkraft completed the acquisition of 100% of the shares in Nye Grøvla Kraft AS, adding an operating power plant with a capacity of 7.3 GWh to its portfolio in Norway. Additionally, on 30 January Småkraft AB acquired Våmåns Kraft AB, including an additional power plant of 4 GWh in Sweden.

The Board of Directors of Småkraft AS,
Bergen, Norway, 26 February 2025