Annual Report 2020 CONTENTS

THE FEHMARNBELT TUNNEL

Preface 3 Management Report 4 Key figures and financial ratios 19 Statement of comprehensive income 20 Balance sheet 21 Statement of change in equity 23 Cash flow statement 24 Notes 25 Statement by the Board of Directors and Board of Management 49 The independent auditor‘s report 50 Board of Directors and Board of Management 53 Femern A/S Annual Report 2020

2020 was also the year when a final decision Preface was made on the German regulatory approval of the Fehmarnbelt project. 2020 was a crucial year for the Fehmarnbelt project, which achieved many important mile- Following a thorough legal process, on 3 No- stones during the year. vember 2020 the German Federal Adminis- trative Court in Leipzig rejected all appeals At the beginning of 2020, Femern A/S com- against the German authorities’ approval of pleted the preparatory activities at Rødby- the Fehmarnbelt project. havn on Lolland. This prepared the tunnel construction site for the main contractors. The Federal Administrative Court’s decision also allows the construction of the Fehmarn- On 20 March 2020, the European Commis- belt Tunnel to be started on the German side sion approved an adjusted state-supported fi- at Fehmarn and in the German part of Feh- nancing model for funding the Fehmarnbelt marnbelt. project. In November 2020, Femern A/S presented a On 23 April 2020, following the approval of proposal for an overall climate strategy for the the European Commission’s financing model, Fehmarnbelt project. the signatory parties to the agreement behind the Fehmarnbelt project concluded a political In December 2020, Femern A/S submitted an agreement to start the construction of the tun- updated financial analysis of the Fehmarnbelt nel element factory, etc., at Rødbyhavn project. The analysis results show that the project economy remains robust with a repay- With the agreement, Femern A/S was asked ment period of 28 years after opening to activate the civil works contracts with the contractor consortium Femern Link Contrac- Overall, 2020 was a very satisfactory year for tors (FLC) with construction work starting on the tunnel project. After the good results in 1 January 2021. This will launch the full build- 2020, 2021 will be the year when the Feh- ing program for the Fehmarnbelt Tunnel itself. marnbelt project will start in earnest in both Denmark and Germany. In 2020, the contractor consortium Fehmarn Belt Contractors (FBC) continued the con- See more about Femern A/S and the Feh- struction of the new work harbour east of marnbelt project at the www.femern.com Rødbyhavn. In June 2020, the FBC consor- website, where you can also subscribe to the tium laid the first stones for the tunnel work company’s newsletter. harbour jetties off the south coast of Lolland. The work harbour is expected to be established by the end of 2021.

Mikkel Haugård Hemmingsen Claus F. Baunkjær Chairman of the Board Managing Director, CEO Femern A/S Femern A/S

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Management Report Appeals were lodged against the plan approval with the German Federal Administra- tive Court in Leipzig, which heard the various Femern A/S is responsible for planning and appeals between 22 September – 6 October constructing the fixed link across Fehmarn- 2020. belt on behalf of the Danish state and providing the data needed for the official approval of The Federal Administrative Court in Leipzig the coast-to-coast link. passed judgement on the appeals against the official approval on 3 November 2020. The The overall framework for the company’s appeals were rejected after comprehensive work is laid down in the agreement signed in legal proceedings, where the plan approval September 2008 between Denmark and Ger- authority and Femern A/S answered a wide many on planning, official approval, financing, range of questions from the court arising from construction and operation of a fixed link the appeals. This was the first occasion in re- across the Fehmarnbelt between Rødbyhavn cent times that the Federal Administrative and Puttgarden. Court rejected all appeals against a German plan approval on their first submission. The treaty was approved in Germany by an act passed in the Bundestag and Bundesrat The Federal Administrative Court’s ruling on in 2009 and, in Denmark, the Danish Parlia- 3 November 2020 is final. The German plan ment passed a planning act, “Act on the plan- approval is legally valid, and construction of ning of a fixed link across the Fehmarnbelt the Fehmarnbelt tunnel can start in Germany with associated landworks”, in April 2009. in 2021 in accordance with the overall time schedule for the Fehmarnbelt project. The Danish Parliament passed the "Act on the construction and operation of a fixed link This is the conclusion of a long process, dur- across the Fehmarnbelt with associated land- ing which the Bundestag in Berlin, the federal works in Denmark" on 28 April 2015. The state authorities in Schleswig-Holstein, and Construction Act is also the final Danish envi- the German legal system have all approved ronmental approval for the project. the Fehmarnbelt project, and laid down the conditions for execution of the construction The total economic framework for the coast- work. to-coast project in the Construction Act is DKK 55.1 billion (2015 price level). In the fi- In November 2020, Femern A/S and the fed- nancial analysis of the overall Fehmarnbelt eral state authorities in Schleswig-Holstein project presented in December 2020, the worked with follow-up on the court ruling pro- capital budget was DKK 52.6 billion (2015 cess regarding the construction phase on the price level) including reserves of DKK 7.3 bil- German side. lion. There is also an additional reserve of DKK 2.5 billion. The Federal Administrative Court’s legal and factual grounds for its ruling on 3 November Plan approval in Germany 2020 are expected to be available during the second quarter of 2021. The German plan approval of the Fehmarn- belt project was issued on 31 January 2019. The Fehmarnbelt project was thus granted political and administrative approval in Ger- many.

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The major civil works contracts The planned construction process is thus under way, as set out in the contracts with FLC, On 30 May 2016, Femern A/S entered into for the construction of a tunnel element fac- four major civil works contracts for the con- tory, the actual tunnel, the portals and the struction of the Fehmarnbelt tunnel with the ramps, within the construction budget of DKK preferred contractors. The contracts were 52.6 billion (2015 prices). Against this back- signed with the condition that the construction ground, the fixed link is expected to be work should only be started when the final opened in mid-2029. German plan approval is obtained or when The Ministry of Transport reaches a decision The civil works contracts with FLC include the on this matter. following activities:

On 26 March 2019, the political parties be-  Building the tunnel element factory at hind the Fehmarnbelt project (Social Democ- Rødbyhavn racy, Venstre - the Liberal Party, the Danish  Building the tunnel portals and ramps at People’s Party, Radikale Venstre - the Danish Rødbyhavn and Puttgarden Social Liberal Party, the Socialist People’s  Production and submersion of the 89 tun- Party, the Conservative People’s Party and nel elements Liberal Alliance) entered into a political agree-  Establishment of residential and adminis- ment on starting the construction works in trative facilities Denmark on the Fehmarnbelt Fixed Link.  Acquisition of special marine tunnel equipment An agreement came into effect on 1 Novem- ber 2019 between Femern A/S and Fehmarn FLC started the construction works on the Belt Contractors (FBC), who will be responsi- Danish side on 1 January 2021, with the con- ble for the construction of the work harbours struction of the tunnel element factory at and dredging the tunnel trench in the Feh- Rødbyhavn, where the tunnel elements will marnbelt and land reclamation, construction be produced. of the work harbour and other facilities at Rødbyhavn. The actual construction phase In the autumn of 2020, FLC started prepara- for the tunnel project was thus commenced tory work at Rødbyhavn, including geotech- on the Danish side. nical boring at the construction site, construction of infrastructure for the factory and de- Construction of the work harbour east of tailed design. Rødbyhavn is well under way. More than half of the over 2 million tonnes of stone for the The ruling passed by the German Federal Ad- harbour’s breakwaters and dykes for the land ministrative Court on 3 November 2020 fur- reclamation off the south coast of Lolland nishes the grounds for commencing the rest were completed in 2020. The work harbour is of the civil works contract with FBC regarding expected to be completed by the end of 2021. starting excavation of the tunnel trench itself between Rødbyhavn and Puttgarden. Dia- The political parties behind the Fehmarnbelt logue with FBC regarding this matter is in pro- project entered into a political agreement on gress. 23 April 2020 on activating the civil works contracts with the contractor consortium Femern Link Contractors (FLC), with effect from 1 January 2021.

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Covid-19 The construction work’s execution follows procedures laid down in the contracts, includ- The contractors working on the Fehmarn pro- ing any changes or differences between the ject have generally been able to fulfil their contractors and Femern A/S commitments, and only a few activities have been delayed during the Covid-19 pandemic. The full launch of the construction phase on 1 In expectation of society's return to normal January 2021 is based on several years of with regard to Covid-19 within the near future, systematic preparation, testing and further the impact on progress in 2021 is not ex- development of Femern A/S’ systems for pected to be serious. Femern A/S continues handling the three main construction tasks to focus strongly on problems caused by the during the construction phase: Covid-19 pandemic.  Management of the contracts relating to State support case the overall management objectives of the project. On 13 December 2018, the General Court of  Monitoring that the contractors’ construc- the European Union passed judgement on tion of the works complies with the re- the financing model for the Fehmarnbelt pro- quirements established in Denmark and ject. With the judgement, the EU Commis- Germany. sion's previous state support approval in 2015  Reporting, information and communica- of the financing of the coast-to-coast project tion on the status and progress. was cancelled. Management, monitoring and reporting in re- The EU Commission reached a new decision lation to the construction work is based on an on 20 March 2020 on approval of state sup- implemented reporting concept, in which port for financing the Fehmarnbelt project. Femern A/S continuously and systematically The decision means that a revised state sup- follows the development of the four overall port model for the project is approved. control objectives on the basis of specific Key Performance Indicators (KPIs) for each con- Based on the Commission’s decision on 20 trol objective: March 2020, Femern A/S compiled a revised, overall financial analysis of the Fehmarnbelt  Time schedule project, which was presented in December  Construction budget 2020.  Handling financial claims and/or reim- bursement of compensation (claim) The financial analysis documents that the  Labour and social clauses project finances are robust, with a total repay-  Climate and environmental conditions, ment period for the Fehmarnbelt tunnel and etc. the Danish landworks of 28 years after open-  Working environment and sick leave, etc. ing.

Management of the construction The reporting concept is based on reporting phase by project contractors who are contractually obliged to provide Femern A/S with documen- Femern A/S’ work on establishing the Feh- tary evidence of compliance with the contract marnbelt Fixed Link is based on the manage- requirements and the company’s own data ment objectives Time, Economy, Quality & every month. Security and Organisation.

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The KPIs are reviewed both in the divisions The monitoring unit works in both Denmark and across Femern A/S and reported monthly and Germany and complements the efforts at Femern A/S’ management meetings. made by public authorities in the two coun- tries with the Fehmarnbelt project, including The Company’s Corporate Social Re- Danish and German environmental authori- sponsibility (CSR) ties, maritime authorities, working environment authorities, and others. Femern A/S has an ambitious CSR policy, which is reflected in the civil works contracts. The UN Sustainable Development Goals In the civil works contracts, the company has Femern A/S is affiliated with the UN’s Global specified requirements that contractors com- Compact through Sund & Bælt Holding. The ply with terms and conditions of employment, 10 Global Compact principles are based on housing conditions, training clauses for the internationally recognised standards of hu- recruitment of apprentices and trainees, as man and labour rights, respect for the envi- well as specific requirements regarding ronment and anti-corruption and constitute health and safety, and climate and environ- the starting point for the company's CSR pol- mental conditions. icy and Code of Conduct.

These are contractual requirements, which Based on this, the company has integrated the contractors are obliged to observe in the the UN’s Sustainable Development Goals in same way as all other contractual require- its strategic work with CSR. ments and terms and the legislation in general. Femern A/S is working on a prioritised classification of the Sustainable Development As owner, Femern A/S monitors the contrac- Goals into one central goal that reflects tors’ compliance with the contractually agreed Femern A/S’ core objectives, five core Sus- requirements. Femern A/S’ work is based on tainable Development Goals that affect and a comprehensive CSR management model are affected by the project and a number of comprising contractual requirements, robust supporting Sustainable Development Goals. sanction mechanisms in case of non-compliance with clauses and Femern A/S’ own monitoring unit that plans, executes, and reports on the monitoring of the contractors.

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Prioritising the UN Sustainable Development Goals

In 2020, Femern A/S launched a number of Climate climate initiatives in connection with the con- In November 2020, the company launched a struction activities. proposal for an overall climate strategy that An important activity is monitoring the climate sets targets and direction for climate initia- impact of the construction work, including tives on the Fehmarn project and green oper- greenhouse gas emissions from the produc- ation of the completed tunnel. Femern A/S is tion of building materials, transport from the working on four main tracks, which form the manufacturer to the worksite, and the con- framework for the company’s efforts to re- struction itself. The company’s preparation of duce CO emissions and contribute to the 2 climate accounts with systematic follow-up on green transition: the project’s climate footprint is a pioneering 1. The Fehmarnbelt Fixed Link is intended to project for a Danish infrastructure project. contribute to the green transition of the During 2020, Femern A/S developed ideas transport sector and the development of for improvements and a reduction in green- the future sustainable European transport house gas emissions. The measures are ex- network pected to save on greenhouse gas emissions 2. The Fehmarnbelt Fixed Link is to be built of over 10,000 tons of CO2 in the coming as climate-friendly as possible years compared with the forecast previously 3. The Fehmarnbelt Fixed Link supports the made in the company’s climate forecast. development of a green building and construction sector. In the coming years, Femern A/S will enter 4. The Fehmarnbelt Fixed Link operations into contracts for the implementation of the shall be climate-friendly. electrical and mechanical installations of the Fehmarn Tunnel. The calls for tender stipu- Femern A/S will continuously review and fol- late requirements designed to ensure that the low-up on the climate strategy in close dia- latest technological achievements are ex- logue with relevant actors and experts. ploited and that the tunnel can be prepared

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for the green vehicles of the future, e-roads, cartel, 3F, and others make use of the prem- electric car superchargers, and green propel- ises. lants in the form of hydrogen and methanol. Apprentices, trainees, and interns Terms and conditions of employment Femern A/S has a firm policy that, in connec- In the civil works contracts, Femern A/S stip- tion with the construction work, trainees, ap- ulated a number of specific minimum stand- prentices, and interns will be employed and ards for terms and conditions of employment, educated in a number of fields, including con- etc., with which the contractors must comply struction, transport, office work, and services. The clauses have been prepared with the purpose of getting as close to Danish and Throughout the construction period, the con- German contractual conditions as permitted. tractors are contractually obliged to employ The contractors must, at all times, ensure that apprentices to the equivalent of a minimum of they and their subcontractors comply with re- 500 full-time workers, distributed on the requirements similar to those of collective spective civil works contracts. In addition, agreements: there are apprenticeships, etc., in the planning phase and in the other smaller contracts  Minimum wage level that, provisionally, have resulted in 33 ap-  Working hours prenticeship and trainee full-time equivalents.  Pay supplements for work on public holi- The majority have been employed by Danish, days local, and regional companies working with  Overtime payment the preparation of the construction site in  Holiday pay Rødbyhavn and by Femern A/S’ own organi-  Pension contributions sation.  Compensation for travel expenses, accommodation and meals for stationed In 2020, Femern A/S, together with the con- employees. tractors, participated in a number of local and regional groups and networks whose work In 2020, with reference to the contractual re- has focused on promoting the recruitment of quirements, contractors submitted monthly apprentices and trainees in the Fehmarn pro- reports to Femern A/S, accounting for both ject with the participation of municipalities, their own and their subcontractors’ compli- educational institutions, and trade unions. ance with the contractual requirements to pay and employment and explaining any non-con- Orderly housing conditions formities. As a part of the effort to promote well-being In 2020, Femern A/S continuously monitored and create a good working environment, the contractors’ compliance. The require- Femern A/S included contractual requirements relate to all employees who, on behalf ments to the contractors stipulating that they of the contractors, contribute to the execution must offer and provide suitable accommoda- of the project-related tasks in Denmark and tion for employees who cannot reasonably Germany. commute between their usual places of resi- dence and the workplace. In 2020, Femern A/S provided office facilities for the permanent representation of the trade In the civil works contracts, the company for- unions at the construction site in Rødbyhavn. mulated a number of minimum requirements Representatives from Dansk Metal, the BAT to the standard of accommodation. In 2019, it established the first 20 residential units close

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to the construction site (camp area) at Rødby- construction site before they are admitted. In havn that illustrate the minimum require- 2020, contractors completed more than ments. 550,000 hours of work on the project as part of the physical construction activities. This Femern A/S has an active monitoring system has resulted in a single accident at work with in place to ensure that the contractors meet absence. the housing standards as set out in the contracts, both inside and outside of the camp Emergency service/management and crisis area. In 2020, the company monitored the ac- organisation commodation conditions at Lolland for more than 90 per cent of the employees employed According to the State Treaty, Femern A/S is in the construction of the work harbour at tasked with developing a safety concept in Rødbyhavn. cooperation with the competent authorities in Denmark and Germany. It is Femern A/S’ re- The working environment and safety sponsibility to ensure that there is an approved safety concept with an emergency re- The working environment and safety aspects sponse plan before the tunnel enters into op- are included in all parts of the construction. eration. In December 2020, Danish and Ger- The civil works contracts contain strict re- man authorities adopted the rescue and quirements to the contractors regarding edu- emergency concept developed by Femern cation and training, documentation, follow-up, A/S for the first construction phase as part of and sanctions systems, etc. the company’s safety documentation.

In order to support a com- As far as the crisis staff is concerned, Femern mon safety culture in all A/S conducted an exercise focusing on the phases of the project, alarming and activation of the crisis staff in Femern A/S launched the accordance with current procedures. “Target Zero - a State of Mind” environmental campaign in 2020. The The environment campaign, which continues throughout the Femern A/S stipulates significant environ- construction phase, will help to make the mental requirements in the civil works con- large construction site at Rødbyhavn one of tracts. The contractors must ensure that envi- Denmark’s safest construction sites. The Tar- ronmental considerations are incorporated get Zero campaign involves implementing rel- into the design and execution methods and evant competency building activities in the that the threshold criteria for emissions and form of training and education. discharges to the air, water, and soil, as well In the civil works contracts, Femern A/S has as waste management, oil, and chemicals are ensured that access to the construction site is not exceeded during the execution of the con- subject to a number of requirements and a struction works. special admission card must be shown upon In 2020, the company monitored the contrac- entry. The card helps to identify all those tors’ compliance with the contracts’ environ- working on the site and contains specific in- mental requirements. In connection with the formation about the employer, etc. The con- establishment of the work harbour at Rødby- tractors are also committed to ensuring that havn, the contractor’s vessels at Fehmarnbelt all employees and guests who are required to and on land were monitored. enter a construction site have completed a safety at work course targeted at the specific

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In 2020, the contractor’s marine construction The development of the newly developed na- activities were started in connection with the ture areas takes place in cooperation with au- construction of the work harbour at Rødby- thorities and nature organisations involved in havn. Prior to the start-up of the works, the design and surveillance of the landscaped Femern A/S implemented a marine monitor- nature areas. ing programme that is continued in both the construction and the operation phases. In 2020, on the island of Fehmarn, a 1,750- meter amphibian fence was established with Monitoring is based on measuring stations associated hibernation habitats as a part of that record waves, currents, underwater prevention and compensatory measures on noise, sediment spills, etc. In addition, bath- the German side. The company’s monitoring ing water quality, coastal and seabed forms, of the nature areas landscaped at Fehmarn and plant and animal life are monitored in so far has shown that the state of the nature Fehmarnbelt. areas is satisfactory.

Throughout the project process, Femern A/S The environmental portal, “ÆGIR”, where all is working to ensure that temporary local im- of the project’s environmental and nature pacts on nature are minimised through pre- studies, including studies of bird species, ventive and compensatory measures. Over- plant and animal life in Fehmarnbelt, etc., are all, the project adds significantly more new presented was published on the company’s nature areas than are occupied by the project website in the autumn of 2020. It is unique in in both Denmark and Germany. Denmark that a large construction project presents environmental data in this way, In 2020, new wetland was created to replace making it possible for the authorities, environ- previous wetland area at the construction site mental organisations, and private citizens to on Lolland. As a substitute for Strandholm follow the Fehmarnbelt project’s nature and Lake, a new 16 ha. lake was established. environmental conditions. Both the wetland and the new lake will help to increase biodiversity in the area.

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CSR Results 2020

Femern A/S’s integration of the UN’s sustainable development goals into the company’s CSR efforts for 2020 is summarised below:

Promote sustainable, robust and reliable high-quality infrastructure

 Presentation of Femern A/S’ climate strategy through the publication of a working paper  Determining the climate requirements in the call for tender for installation contracts  The start of climate accounts for the construction of the Fehmarnbelt Tunnel

Promote responsible growth and employment as well as education/training places

 Determining the CSR clauses in installation contracts, including minimum requirements for apprenticeship full-time equivalents  More than 550,000 hours of work on physical construction activities carried out by contractors with 1 work accident with associated absence from work  Launching the “Target Zero – a State of mind” working environment campaign

Ensure consideration of nature and protect biodiversity

 Implementation of the marine review and monitoring program in the Fehmarnbelt  Publication of the Ægir environmental portal with free access to the project’s environmental data  Prevention and compensatory measures established as planned on Lolland and Fehmarn

Cross-cutting CSR efforts

 Implementation of monitoring strategies across the major civil works contracts  Dialogue and communication on CSR-related issues with relevant stakeholders and neighbours to the project

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CSR objectives and activities, 2021

In 2021, Femern A/S’ work on the UN’s sustainable development goals will focus on:

Promote sustainable, robust and reliable high-quality infrastructure

 Follow-up on the climate strategy with climate dialogue meetings  Prepare the Fehmarn tunnel for the green vehicles of the future  Identify the market’s green solutions in the call for tender for installation contracts

Promote responsible growth and employment as well as education/training places

 Monitoring of apprenticeship schemes for all civil works contracts  Activities and cooperation concerning the recruitment and retention of apprentices and trainees  Monitoring the contractors’ construction of the camp area on Lolland  Implementation of the Target Zero campaign

Ensure consideration of nature and protect biodiversity

 Surveillance of local environmental impacts from the construction works  Development of the Environmental portal Ægir with data from the construction works  Monitoring and care of newly created nature areas on Lolland and Fehmarn

Cross-cutting CSR efforts

 Opening of Femern A/S’s new exhibition centre at Rødbyhavn  Establishment of additional exhibition facilities at the project’s construction sites  Dissemination of the company’s CSR activities on its website, social media, information meetings, etc.

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Corporate Relations lin. In 2020, the company renovated the property “Danhotel” in Rødbyhavn to convert the Femern A/S is a state-owned limited com- property into its Owner’s Office in the con- pany, established under civil law. struction phase. The Owner’s Office with the new exhibition centre is expected to be put Femern A/S is, via A/S Femern Landanlæg, a into service at the beginning of 2021. part of Sund & Bælt Holding A/S , wholly owned by the Danish Ministry of Transport. Organisation With reference to the Planning Act and the Construction Act, respectively, the Minister Femern A/S is a project organisation, still in for Transport is authorised in all significant the structuring process. After the activation of matters to provide general or specific instruc- the civil works contracts, the construction fol- tions to the company concerning matters re- lows the project’s progress, and work contin- lated to the company’s business. ues to be targeted at management, organisation, recruitment, retention, and development. Sund & Bælt Holding A/S is managed by a Board of Directors, elected at the annual gen- The strategic recruitment effort continued in eral meeting on the Minister for Transport rec- 2020, and experienced employees are em- ommendations. ployed in all the owner organisation’s core areas. The company has experienced a great The Board of Directors of Sund & Bælt Hold- deal of interest in the project in the process of ing A/S is responsible for the subsidiaries. attracting strong candidates from both home The members of the Board of Directors are and abroad. appointed by the Government as part of the State’s ownership of Sund and Bælt Holding Retention of current employees is also im- A/S. The Board of Directors of Femern A/S portant for the company since experience and and the other subsidiaries of Sund & Bælt thorough knowledge of civil works contracts, Holding A/S comprises the Managing Director plan approvals, and other framework condi- of Sund & Bælt Holding A/S, Mikkel Hem- tions in both Denmark and Germany are cen- mingsen, as Chairman, Chief Legal Adviser, tral to the continued development and project Louise Friis, as Vice-chairman, and CFO of implementation. Sund and Bælt Holding A/S, Mogens Hansen.

Femern A/S has signed an agreement with Øresundsbro Konsortiet I/S concerning financial management.

The Fehmarnbelt project is a priority project within the trans-European transport network and, as such, receives EU funding. The EU funding has made a significant contribution to financing the planning and feasibility studies and will also contribute significantly to financing the construction works.

Femern A/S has its head office in Copenha- gen. Furthermore, the company has offices in Rødbyhavn, in Burg on Fehmarn and in Ham- burg, as well as a representative office in Ber-

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2020 2019 Of the total project costs, DKK 1,289.7 million Number of employees* 131 104 can be attributed to design work, construction Gender composition activities, and compensation to contractors - Female 40 per cent 43 per cent connected with the later start-up of the civil - Male 60 per cent 57 per cent works contracts and the court case against Gender composition, senior managers the Schleswig-Holstein authorities’ approval. - Female 33 per cent 25 per cent The remaining DKK 665.0 million was used - Male 67 per cent 75 per cent for salaries and administration, including rent Gender composition, other management levels and IT and financing costs. - Female 22 per cent 24 per cent - Male 78 per cent 76 per cent Since Femern A/S was established, project Educational background costs (excluding fair value adjustment of fi- - Higher 71 per cent 70 per cent - Intermediate 19 per cent 22 per cent nancials) have amounted to DKK 7,676 mil- - Short 10 per cent 8 per cent lion, of which DKK 7,486 million has been Staff turnover 3.8 per cent 3.8 per cent capitalised in the balance sheet. EU funding Average age 48 years 47 years is set off totalling DKK 1,695 million. Training per employee DKK 11,087 DKK 10,389 Absenteeism (incl. long-term ab- Financing sence due to illness) 0.6 per cent 1.6 per cent Apart from the company's invested capital, *At the end of 2020, 131 employees, equivalent to 120 full- time employees, were attached to the Fehmarn project. The activities are financed by borrowing and EU average number of employees for 2020, based on ATP pay- funding via the EU Commission's TEN-T/CEF ments, corresponds to 107 employees. programme. The EU Commission selected The organisation includes employees of Dan- the Fehmarnbelt project as a priority project ish, German, Swedish, Italian, Australian and in 2003 within the trans-European transport British nationalities. net (TEN-T/CEF).

Culture, inclusion, and diversity will be a con- The Fehmarnbelt project was granted funding tinued focus area for targeted efforts in the or- from the EU Commission for 2008-2015 total- ganisation’s continued development. ling EUR 204.9 million, corresponding to just over DKK 1.5 billion. In 2017, the EU Com- Finance mission and the Court of Auditors had both given their final evaluation of the funding pe- The company’s result was a loss of DKK riod. After completion of the audit, the total 416.6 million before tax and a loss of DKK disbursed support for the period amounts to 325.0 million after tax, of which fair value ad- DKK 1,351 million. justment of loans entered into constitute DKK 414.9 million. The EU funding programme for the development of an improved European transport net- Valuation adjustments of financial debt and work for the period 2014-2020 is termed TEN- assets are recognised in the statement of T/CEF. In 2015, the EU Commission decided comprehensive income and thus are not cap- to allocate EUR 589 million , or DKK 4.4 bil- italised as a part of the project under road and lion to support the project for 2015-2019. In railway works under construction. 2016, the EU Commission extended the support period to the year 2020, and in 2020, the In 2020, the company incurred total costs of EU Commission further extended the support DKK 1,954.7 million. Estimated EU funding period to include the years 2021-2023. amounts to DKK 225.9 million, which is offset against total costs. The net increase is thus DKK 1,728.8 million. 15 Annual Report 2020 Femern A/S

Thus, it is expected that the support amount period. The net debt is nominally DKK 4,902 of DKK 4.4 billion will be fully utilised. The million, and the fair value has been assessed funding amount awarded is based on the as DKK 5,860 million. CEF-programme awarding a maximum of 40 per cent in support of cross-border railway-re- The placing of liquidity is based on achieving lated activities, which are calculated to consti- a high level of security and liquidity. At the tute 51 per cent of the total activities of the end of 2020, the liquid assets were placed as Fehmarnbelt project. bank deposits, short-term Danish flexible bonds and government securities. The credit Disbursement of the EU funding is in the form quality of the liquidity investments is in the in- of advance payments of the budgeted ternational credit rating agencies’ rating cate- amount of the support payment and as final gory AA to AAA and is thus a minimal credit payment once the company has documented risk. that eligible expenses have been incurred. Net financing costs in 2020, including fair At a later date, additional support may be re- value adjustments, comprised a total of DKK quested under the subsequent CEF II pro- 927.0 million, compared with DKK 479.9 mil- gramme covering the period 2021 - 2028. The lion in 2019. The financial value adjustments EU Commission has announced that the Feh- in 2020 represented total costs of DKK 414.9 marnbelt project is a strong candidate for fur- million against total costs of DKK 408.1 mil- ther funding under the CEF programme. lion in 2019.

From 2015 onwards, the company's finances It is noted that the Danish government pro- are fixed in the Construction Act passed on vides a separate guarantee for interest and 28 April 2015. repayments plus other ongoing obligations in connection with the company’s borrowing The company has two different means of bor- against a guarantee commission. The guar- rowing: antee commission constitutes 2.0 per cent in accordance with the financing model ap-  Direct state loan via Danmarks National- proved by the European Commission on 20 bank (relending) March 2020. At the end of 2020, the interest-  Loans on the money and capital markets bearing net debt amounted to DKK 5,860 mil- based on a state guarantee. lion compared with DKK 3,942 million at the

end of 2019. The company financed its activities in 2020 via EU funding and relending via the National- At the end of 2020, the equity is negative at bank. Financing was provided for the borrow- DKK 220 million after a financial result of mi- ing requirement for the construction of the nus DKK 325.0 million in 2020. The fair value fixed link in the coming years. At the begin- adjustment of long-term loans raised ning of 2020, a total relending principal amounts to minus DKK 414.9 million in 2020, amount of DKK 11,750 million was raised. and constitutes an accumulated amount of Thus, the total loan financing at the end of minus DKK 589.3 million. The fair value ad- 2020 was unchanged at a nominal amount of justment is only an accounting item and, thus, DKK 11,744 million, whilst the fair value con- does not affect the company’s liquidity. The stitutes DKK 12,757 million. fair value adjustment may vary considerably annually, but the risk is reduced in line with The excess loan proceeds are invested in se- the reduction of the loan period. The long- curities with a nominal value of DKK 6,632 term loans are raised in order to increase the million to be used for financing in the coming

16 Femern A/S Annual Report 2020

budget security in the company’s long-term fi- Income in the form of EU subsidies for con- nancing. In 2020, borrowing was resched- struction-related costs in 2021 will be offset uled, so that the maturity is up to 30 years against capitalised costs.

Cash flow In expectation of society's return to normal with regard to Covid-19 within the near future, Cash flow from operations constitutes DKK the impact on progress in 2021 is not ex- 442.8 million, derived primarily from shifts in pected to be serious. Femern A/S continues the working capital, which comprises current to focus strongly on problems caused by the assets and current liabilities. Investments in Covid-19 pandemic. fixed assets constitute DKK 1,954.8 million net and the contractors’ drawing on the loan Risk management and control envi- facility constitutes DKK 128.3 million. Funds ronment from the sale of securities amount to DKK 1,710.4 million As an integral part of Femern A/S’ management concept, risk management is common In addition to EU funding of DKK 137.2 mil- to all processes and phases, not least in the lion, financing activities include debt reduc- construction phase. Risk management is a tion of DKK 291.3 million. continuation of the work carried out in the phases that have been completed, including On 31 December 2020 (year closing), the the Danish plan approval process, the tender- company's liquid assets total DKK 209.4 mil- ing processes, the contract processes for the lion compared with DKK 214.0 million on 31 large contracts and the German plan ap- December 2019 (year closing). proval process. The risk management is based on the principles and guidance of inter- Events after the balance sheet date national standards that are also familiar to the No events of importance for the 2020 Annual project’s contractors and consultants. Report have occurred after the balance Risk management means to identify, quantify, sheet date. assess, address, and manage threats and Outlook for 2021 opportunities in such a way as to promote the project’s objectives. It is a key element of the For the coming year, the budget includes al- risk management process that the entire or- ready decided activities of the order of DKK ganisation of Femern A/S, from the Board of 4.7 billion (equivalent to DKK 4.3 billion at the Management to the individual risk owner, is 2015 price level). able to establish and maintain awareness of “risk” throughout the entire project. The FLC contracts will be implemented in their entirety from the beginning of January Based on the company's and the contractors’ 2021 and FBC will continue to carry out the risk register, as well as the strategic risk pro- activities commenced. The activities are fi- file of the project, a number of key risks have nanced within the total construction budget of been identified. Effective and timely handling DKK 52.6 billion (at the 2015 price level). of these risks is significant for the overall achievement of goals, particularly regarding A result is expected of the order of DKK 1-2 activities in the construction phase and com- million before tax and fair value adjustments pliance with the construction budget. The na- in 2021. Other costs will be capitalised. ture and significance of the risks changes continually depending on the project’s phase of development and the contractors' works.

17 Annual Report 2020 Femern A/S

The development of the risks, including con- work actively with risk management in rela- tractors’ claims is, therefore, assessed con- tion to the contracts. The obligations are re- tinually so that mitigating actions can be initi- flected in the contractors’ set of plans and ated either by the company or by the contrac- daily processes for risk management, where tors. reports are submitted continually to Femern A/S. Risk management takes place for the The risk management process is monitored risks related to construction in close coopera- and evaluated through the Femern A/S Risk tion with the contractors, where Femern A/S Committee. The committee meets regularly to monitors the process through permanent monitor and document the development of monthly reports and evaluations, ongoing risk the project’s overall risk profile (including the workshops, and ad hoc communication when contractors’ core risks), the most significant there are changes in the risk image. All as- risks in the current and subsequent quarters, pects of risk management are documented and develop mitigation strategies for the indi- continually so that there is full transparency in vidual risks. The Risk Committee also moni- the management of individual risks. tors the risk reserve and follows its use closely. Work is ongoing continually to control and evaluate the risk work in cooperation with the The company’s risk management and internal contractors so that the risk management accounting and financial reporting reviews meets the contractual requirements and thus are designed to minimise the risk of errors in follows the international standard ISO 31000 connection with the implementation of the Risk Management Principles and Guidelines. construction work. The internal review system distinguishes clearly between roles and areas of responsibility, reporting requirements and procedures for certification and approval. The internal reviews are examined by the auditors and reported to the Board of Directors. A fixed procedure has been established and documented for the preparation of a quarterly risk report for shareholders and the Board of Di- rectors.

Cooperation with the contractors

The contracts with the contractors are so- called turnkey contracts (Design & Build) where the contractors are responsible for the final design of the solution that they subsequently build. The same is true of the risk management in the project, which is based on the assumption that risks are placed where risks are best managed. This means that risks - and thereby, risk management - are placed with the party that can best influence / mitigate a given risk at the least cost.

The contractors have full ownership of Design & Build risks and are contractually obliged to

18 Femern A/S Annual Report 2020

Key figures and financial ratios (DKK 1,000)

2016 2017 2018 2019* 2020* Operating expenses -2,374 -919 1,451 1,297 -1,699 Operating loss -2,374 -919 -1,451 -1,297 -1,699 Tax 3,595 -993 27,839 90,029 91,599 Profit for the year 1,221 -1,912 -98,887 -319,331 -324,980 Net capital investments during the year 545,875 190,472 358,940 578,928 1,734,396 Equity 525,194 523,282 424,395 105,064 -219,916 Balance sheet total 3,403,112 3,587,894 7,375,020 13,323,491 13,581,959

Financial ratios, per cent: Profit ratio (primary operations) 0.0 0.0 0.0 0.0 0.0 Rate of return (primary operations) 0.0 0.0 0.0 0.0 0.0

The key figures are calculated as stated in note 1, Applied accounting practice

*With effect from 1 January 2019, the company implemented IFRS 16 Leasing contracts. The company’s identified leasing agreements primarily concern the rental of premises. The company applied the modified retrospective transition method, whereby the comparative figures are not adjusted.

19 Annual Report 2020 Femern A/S

Statement of comprehensive income 1 January – 31 December 2020 (DKK 1,000)

Note Statement of comprehensive income 2020 2019

Costs 3 Other operating expenses -970 -625 4 Staff costs -729 -672 Total costs -1,699 -1,297

Operating loss (EBIT) -1,699 -1,297

Financials Net fair value adjustment -414,880 -408,063 Total Financials -414,880 -408,063

Loss before tax -416,579 -409,360

5 Tax 91,599 90,029 Profit for the year and comprehensive income -324,980 -319,331

Profit appropriation: It is proposed that the annual loss of DKK 325.0 million be carried forward to next year.

Femern A/S has no other comprehensive income in the current financial year or comparative year.

20 Femern A/S Annual Report 2020

Balance sheet 31 December 2020 (DKK 1,000)

Note Assets 2020 2019

Non-current assets

Intangible fixed assets 6 Software 8,450 8,299 Total intangible assets 8,450 8,299

Property, plant and equipment

7 Road and railway facilities under construction 5,940,294 4,211,480

8 Land and buildings 15,961 17,082 9 Leasehold improvements 0 0 10 Operating plant 2,286 1,287 11 Leasing assets 36,562 48,749 Total property, plant and equipment 5,995,103 4,278,598

12 Loans to contractors 174,395 137,041 Total Financial Assets 174,395 137,041

Total non-current assets 6,177,948 4,423,938

Current assets Receivables 12 Loans to contractors 90,989 0 13 Receivables 305,763 133,132 19 Debt securities held in portfolio 6,665,065 8,434,511 14 Prepayments and accrued income 132,767 117,914 Total receivables 7,194,584 8,685,557

15 Cash at bank and in hand 209,427 213,996

Total current assets 7,404,011 8,899,553

Total assets 13,581,959 13,323,491

21 Annual Report 2020 Femern A/S

Balance sheet 31 December 2020 (DKK 1,000)

Note Liabilities 2020 2019

Equity 16 Share capital 500,000 500,000 17 Free reserves -719,916 -394,936 Total equity -219,916 105,064

Debt Liabilities Non-current liabilities 18 Deferred tax liabilities 345,833 393,043 19 Bond loans and amounts owed to credit institutions 12,751,483 12,607,366

11 Leasing obligations 24,375 36,562 Total non-current liabilities 13,121,691 13,036,971

Current liabilities

11 Leasing obligations 12,187 12,187 20 Trade creditors and other liabilities 661,831 159,349

19, 21 Derivatives, liability 317 0

22 Prepayments and accrued income 5,849 9,920 Total current liabilities 680,184 181,456

Total liabilities 13,801,875 13,218,427

Total equity and liabilities 13,581,959 13,323,491

1 Accounting policies 2 Significant accounting estimates and assessments 19 Financial risk management 23 Contractual liabilities, contingent liabilities and securities 24 Related parties 25 Events after the balance sheet date 26 Approval of the annual report for publication

22 Femern A/S Annual Report 2020

Statement of Change in equity (DKK 1,000 DKK)

Share Free capital reserves Total

Balance at 1 January 2019 500,000 -75,605 424,395 Profit for the year and comprehensive income 0 -319,331 -319,331 Balance at 31 December 2019 500,000 -394,936 105,064

Balance at 1 January 2020 500,000 -394,936 105,064 Profit for the year and comprehensive income 0 -324,980 -324,980 Balance at 31 December 2020 500,000 -719,916 -219,916

At the end of 2020, the equity is negative at DKK 220 million after a financial result of minus DKK 325.0 million in 2020. The fair value adjustment of long-term loans raised amounts to minus DKK 414.9 million in 2020, and constitutes an accumulated amount of minus DKK 589.3 million. The fair value adjustment is only an accounting item and, thus, does not affect the company’s liquidity. The fair value adjustment may vary considerably annually, but the risk is reduced in line with the maturity of the loan. The long-term loans are raised in order to increase the budget security in the company’s long-term financing. In 2020, borrowing was rescheduled, so that the maturity is up to 30 years

23 Annual Report 2020 Femern A/S

Cash Flow Statement (1,000 DKK)

Note 2020 2019 Cash flow from operating activities

Loss before net financials -1,699 -1,297

Adjustments Tax 91,599 90,029 Cash flows from primary operations prior to a change in 89,900 88,732 working capital

Change in working capital

Receivables, prepayments and accrued income -102,345 93,570 Trade creditors and other liabilities 455,272 13,600 Total cash flow from operating activities 442,827 195,902

Cash flow from investing activities

Purchase of intangible fixed assets -151 -294 Acquisition of tangible fixed assets -1,954,626 -643,729 Purchase of securities 0 -5,267,089 Sale of securities 1,710,437 0 Long-term loans -128,343 -137,041 Total cash flow from investing activities -372,683 -6,048,153

Free cash flow 70,144 -5,852,251

19 Cash flow from financing activities EU subsidy received 137,169 49,051 Borrowing 5,515,968 5,781,269 Reduction of liabilities -5,807,238 0 Financial income 79,388 53,603 Total cash flow from financing activities -74,713 5,883,923

Change for the period in cash at bank and in hand -4,569 31,672

Cash at bank and in hand at 1 January 213,996 182,324 Total cash at bank and in hand on 31 December 209,427 213,996

Cash at bank and in hand is composed as follows: Cash at bank and in hand and deposit accounts 209,427 213,996 15 Total cash at bank and in hand at 31 December 209,427 213,996

24 Femern A/S Annual Report 2020

Notes

Note 1 Applied accounting policies

General Femern A/S is a limited liability company established in Denmark. Femern A/S is a subsidiary of A/S Femern Landanlæg and appears in the consolidated accounts for Sund & Bælt Holding A/S, which is the ultimate parent company.

The annual accounts of Femern A/S for 2020 are presented in accordance with the International Financial Reporting Standards (IFRS), as issued by IASB and approved by the EU, as well as additional Danish disclosure requirements for annual reports for class C accounts, as stipulated in the IFRS public regulation issued under the Danish Financial Statements Act. To assist readers of the accounts, some of the details required according to the IFRS are also included in the Manage- ment Report. Similarly, details not deemed to be important for readers of the accounts have been omitted.

The annual accounts are presented in DKK, which is also the company's functional currency. All amounts are stated in thousand DKK unless otherwise stated.

The applied accounting policies described below are consistent with those used in the annual accounts for 2019. The company has opted to use the so-called Fair Value Option in IFRS 9. This means that all financial assets and liabilities (loans and derivatives) are measured at the fair value, and changes in fair value are included in the statement of comprehensive income. Loans and liquid assets are classified at fair value measurement at the time of first being recognised on the balance sheet, whereas derivatives are always recognised at fair value, cf. IFRS 9.

The reason for opting for the Fair Value Option is that the company consistently applies a portfolio consideration in connection with financial management, which implies that the intended exposure to various financial risks is achieved through a range of different financial instruments - primary and derivative. This means that no distinction is made between, for example, loans and derivatives in the management of the financial market risk; the focus is solely on the overall exposure. The choice of financial instruments for covering financial risk in financial management can, therefore, give rise to accounting asymmetries unless the Fair Value Option is used.

In the opinion of the company, the Fair Value Option is the only measurement principle permitted under IFRS that reflects this view. The reason is that the other principles all give rise to inappropri- ate asymmetries between otherwise identical exposures, depending on whether the exposure was established in the form of loans or derivatives, or necessitate extensive requirements for documentation of hedging as is the case with the rules on "hedge accounting". As derivatives, financial assets and loans are measured at fair value, measurement in the accounts will achieve the same result for loans and associated cover with derivatives when the covering of the financial risk is effective, and the company thus achieves symmetry in its accounting methods. Loans without associated derivatives are measured at their fair value, instead of applying the general rule in IFRS 9, which includes loans at amortised cost. This leads to fluctuations in the result for the year due to value adjustments.

25 Annual Report 2020 Femern A/S

Agreed accounting standards and interpretations that have not yet come into force Currently, no amended accounting standards and interpretations adopted by the IASB and approved by the EU for later entry into force are relevant to the company.

Currency conversions Transactions in foreign currency are converted when first recognised at the rate in effect on the date of the transaction. Exchange rate differences occurring between the transaction date and the payment date are recognised in the statement of comprehensive income as a financial item.

Receivables, debt and other monetary items in foreign currencies are converted to the exchange rate of the balance sheet date. The difference between the exchange rate on the date of the balance sheet and the rate at the time when the receivable or debt arose, or the exchange rate on the date of the preceding balance sheet is included in the calculation of the total income under financial items.

Non-monetary assets and liabilities in foreign currencies that are not revalued at their fair value are converted at the exchange rate that applies on the transaction date.

Exchange rate conversion of financial assets and liabilities is part of the value adjustment, and currency conversion of debtors, creditors, etc. is attributed to financial income and costs.

Segment information According to IFRS, information must be provided on revenue, expenditure, assets and liabilities per segment. It is the company’s assessment that the company comprises one segment. The internal reporting and top management's financial management is effected on the basis of one total segment.

Income statement and statement of comprehensive income The company’s purpose is to undertake project design engineering and the owner’s management of the fixed link across the Fehmarnbelt. The company's expenses are capitalised and included in the cost price for "roads and railways under construction" under plant, property and equipment. Only a part of the company’s general administration costs is recognised in the income statement and statement of comprehensive income.

Public funding Public funding includes EU subsidies and guarantees provided by the Danish government. Gov- ernment grants are included when it is reasonably likely that the funding conditions are fulfilled and the funding will be received.

Funding to cover costs is recognised in the statement of comprehensive income over the periods in which related costs are recognised. Funding is offset against costs incurred. Public funding linked to the construction of roads and railways is deducted from the asset’s cost price.

Financials Financials contain interest income and expenses, capital gains and losses for cash at bank and in hand, securities, debts and derivatives as well as foreign currency transactions. Furthermore, real- ised gains and losses are included as regards derivative financial instruments.

Financial costs for financing assets under construction are included in the cost price for the assets.

26 Femern A/S Annual Report 2020

Tax of the year’s results The company is subject to the Danish rules on mandatory joint taxation of the Sund & Bælt group’s companies. Subsidiaries are jointly taxed from the date on which they are included in the consolidated accounts, and until the date on which they are omitted from the consolidated accounts.

Sund & Bælt Holding A/S is the management company for the joint taxation and, as a result, settles all payments of corporation tax with the tax authorities.

According to the joint taxation agreement, balances under the Danish Corporation Tax Act’s interest deduction limitation rules are distributed among the jointly taxed companies. Deferred tax liabilities concerning such balances are recognised in the balance sheet, but deferred tax assets are only recognised if the criteria for doing so are fulfilled.

The current Danish corporation tax is distributed by the settlement of joint taxation contributions among the jointly taxed companies in proportion to their taxable earnings. Furthermore, the companies with tax losses receive a joint taxation contribution from companies able to use these losses to reduce their own tax profits.

The tax for the year, comprising the current corporation tax for the year, the joint taxation contribution for the year and a change in deferred tax - including as a result of a change in the tax rate - is recognised in the statement of comprehensive income with the part attributable to entries directly in the equity.

Financial assets and liabilities Recognition of financial assets and liabilities is performed for the first time on the trading day.

Cash in hand and at bank is recognised at fair value initially and subsequently when measured in the balance sheet. Differences in fair value between balance sheet dates are recognised in the results under financials. All cash in hand and at bank will be classified when recognised as assets valued at fair value.

Loans are recognised at their fair value in the balance sheet at the first recognition date and subsequently. All loans are classified on the recognition date as financial liabilities measured at fair value via the statement of comprehensive income. Regardless of the extent of interest rate hedging, all loans are measured at fair value with continuous recognition of fair value adjustments that are stated as the difference in fair value between balance sheet dates.

The fair value of loans is determined as their market value in the event of discounting of known future and expected cash flows with the relevant discount rates. Discount rates are determined based on current market rates deemed to be available to the company as a borrower.

Loans with a contractual maturity of more than one year are included as long-term debt.

According to IFRS 13, fair values of financial assets and liabilities are stated according to a 3-level hierarchy for the valuation method. The first level of the valuation hierarchy includes the financial assets and liabilities calculated at liquid and available market prices. Level 2 then follows with the valuation of assets and liabilities at quoted market prices as input to recognised and common valuation methods and pricing formulas. The last level includes assets and liabilities in the balance sheet, which are not based on observable market data and, therefore, require special mention.

27 Annual Report 2020 Femern A/S

The company based the calculation of fair values on relending with liquid and available market prices, i.e., at level 1, while derivatives and other financial liabilities are based on quoted market data as input to current, recognised and standardised valuation methods and pricing formulas at level 2, cf. the valuation hierarchy in IFRS 13. There have not been any transfers between the levels during the year.

Intangible fixed assets Intangible assets are measured at cost price at the time of first recognition. Assets are subsequently measured at cost price, less depreciation and write-downs applied.

Intangible assets comprise IT software and are depreciated linearly over the expected useful life- time, but for no longer than a maximum of 5 years.

Tangible fixed assets Property, plant and equipment are measured at cost price at the time of first recognition. The cost price includes the price of acquisition plus costs directly related to acquisition up to the date when the asset is ready for use. Assets are subsequently measured at cost price, less depreciation and write-downs applied.

Leasing assets relate primarily to the rental of premises. The leasing asset is valued based on the assessed leasing obligation, and the leasing asset’s usage time is defined to be the irrevocable leasing period.

The value of roads and railways during the construction period is assessed according to the following principles:

 Costs of the facilities based on agreements and contracts signed are capitalised directly  Other direct or indirect costs are capitalised as the value of the company’s own work  Net financing costs are capitalised as interim interest during construction.  EU funding received is set off against the cost price

Areas include investments in land and buildings planned for use for the project during the construction and operation phases.

Other assets are stated at cost price and depreciated according to the straight-line method over the useful lives of the assets, which constitute:

Administrative IT systems and programmes (software) 3-5 years Improvements of leased premises, lease term, but max. 5 years Other plant, machinery and equipment 5-10 years Buildings for permanent use 25 years

Depreciation is recognised in road and railways under construction.

The depreciation method and useful lives are reassessed annually and revised if any major change in conditions or expectations has occurred. In the event of a change in the depreciation period, the effect is recognised moving forward as a change in accounting estimate.

28 Femern A/S Annual Report 2020

The basis of depreciation is stated in consideration of the asset’s scrap value and is reduced by any write-downs. The scrap value is determined on the date of acquisition and is revised annually. If the scrap value exceeds the book value of the asset, depreciation will cease.

Gains and losses from disposal of plant, property and equipment are calculated as the difference between sales price less cost of sales and book value on the date of sale. Profit or loss is calculated for the road and railway infrastructure during construction.

Leasing contracts A leasing asset and a leasing obligation are included in the balance sheet when a specific identifi- able asset is available to the group during the leasing period in accordance with a concluded leasing agreement and when the group has the right of access to virtually all the economic benefits from the use of the identified asset and the right to determine the use of the identified asset.

Leasing commitments are measured at the first inclusion to the present value of the future leasing services discounted with an alternative rate of interest. The leasing commitment is measured at the amortised cost price using the effective compound method. The leasing commitment is recalculated when there are changes in the underlying contractual cash flows from changes in the group’s assessment of whether a derogation or termination option is expected to be used with reasonable probability.

The leasing asset is measured at the first factoring in at cost price, which corresponds to the value of the leasing commitment. Subsequently, the asset is measured at cost price minus the accumulated depreciation and write-downs. The leasing asset is depreciated over the shortest period of the leasing period and the leasing asset's service life.

The leasing asset is adjusted for changes in the leasing commitment as a result of changes in the conditions in the leasing agreement or changes in the contract's cash flows in accordance with changes in an index or an interest rate.

The leasing asset is depreciated according to the straight-line method over the expected leasing period that constitutes:

Leasehold premises 5 years

Depreciation is calculated for road and railways construction.

The company has chosen not to include leasing assets with a low value and short-term leasing agreements in the balance sheet.

Write-down of assets Intangible, tangible and financial fixed assets are tested for loss in the event of depreciation (other assets are covered by IFRS 9) when there is an indication that the accounting value may not be recovered. A loss due to impairment is recognised at the amount by which the asset's book value exceeds the recoverable amount, i.e. the asset's net sales price or value in use, whichever the higher. The utility value is calculated at the present value of the expected future cash flow using a discount factor that reflects the market's current required rate of return.

29 Annual Report 2020 Femern A/S

Receivables Receivables are measured at amortised cost price. A write-down is done for counteracting losses where it is considered that the value of an individual receivable or a portfolio of receivables is im- paired. Write-downs are determined based on the experience of historical loss and future expected losses.

Accruals and deferred expenses, assets Prepayments and accrued income recognised under assets include costs paid concerning the subsequent financial year.

Debt securities held in portfolio Listed securities are included as current assets from the day of trading and measured at the fair value on the balance sheet date.

Cash at bank and in hand Cash at bank and in hand includes cash funds and short-term deposits that can be converted to cash funds without hindrance, and which entail only an insignificant risk of changes in value.

Current tax and deferred tax Sund & Bælt Holding A/S and the jointly taxed companies are liable for tax on earnings, etc. and for any obligations to include tax at source on interest, royalties, and dividends for the jointly taxed companies.

Current tax liabilities and current tax receivables are recognised in the balance sheet as tax calculated on taxable income for the year, adjusted for tax on taxable income for previous years and for tax paid on account.

Joint taxation contributions payable and receivable are included in the balance sheet under affiliated companies’ debts.

Deferred tax is measured according to the liability method for all temporary differences between the book value and the value for taxation of assets and liabilities. When the statement definition of value for taxation can be performed according to different taxation rules, deferred tax is measured on the basis of the management's planned use of the assets or settlement of the liability, respectively.

Deferred tax assets, including the value for taxation of tax losses that can be carried forward, are recognised under other non-current assets at the value at which they are expected to be used, either by elimination of the tax on future earnings or by set-off against deferred tax liabilities within the same legal tax entity and jurisdiction.

Balances below the interest deduction limitation rules of the Danish Corporation Tax Act are distributed among the jointly taxed companies according to their joint taxation agreement. Deferred tax liabilities concerning such balances are recognised in the balance sheet, but tax assets are only recognised if the criteria for deferred tax assets are met.

Other financial liabilities Other financial liabilities are measured at amortised cost price, which usually corresponds to the nominal value.

30 Femern A/S Annual Report 2020

Deferred income, liabilities Deferred income recognised under liabilities includes payments received concerning earnings in the subsequent years.

Cash flow statement The company's cash flow statement is compiled according to the indirect method based on the entries in the statement of comprehensive income for the year. The company's cash flow shows cash flow for the year, changes in cash reserves for the year and the company's cash reserves at the start and end of the year.

Cash flows from operations are stated as the result before financials adjusted for non-cash result items, calculated corporation tax and changes in the working capital. The working capital includes the operations-related balance sheet items under current assets and short-term debt.

Cash flows from investment activities include the buying and selling of intangible, tangible and financial assets.

Cash flows from financing activities include borrowing, repayments of debt, repayment of leasing obligations, financing items as well as dividends to shareholders.

Cash and cash equivalents comprise cash and securities that at the time of purchase have a residual maturity of less than three months and which without impediment can be translated into cash equivalents, and with only negligible risks to changes in value.

Financial ratios The financial ratios are compiled in accordance with the CFA Society of Denmark's "Recommen- dations and Financial Ratios".

The financial ratios presented in the key figures and financial ratios summary are calculated as follows:

Profit margin: The result of primary activities less other earnings as a percentage of turnover.

Return on capital employed: The result of main activities less other earnings as a percentage of all assets.

Note 2 Significant accounting estimates and assessments

Determining the carrying amounts of some assets and liabilities requires estimation of the effects of uncertain future events on those assets and liabilities at the end of the reporting period. Esti- mates that are material to the financial reporting are made, inter alia, by calculating the fair value of certain financial assets and liabilities.

For some financial assets and liabilities, an estimate is made of expected future inflation when calculating the fair value.

The calculation of the fair value of financial instruments is associated with estimates of the relevant discount factor for the company, volatility on reference rate of interest, and currency for financial

31 Annual Report 2020 Femern A/S

instruments with optionality in the cash flows and estimates of future development of inflation for real interest rate loans and swaps. The estimates made for the calculation of fair values and depreciation requirements are, as far as possible, based on observable market data, and are regularly assessed with current price indications, cf. note 1.

In connection with the calculation of deferred tax, an estimate is made for the future exploitation of tax losses that can be carried forward, which is based on the expected future earnings of the Group and the expected useful life of the fixed assets. In addition, an estimate is made of capital gains on financials that can be used to recover interest-rate ceiling limitations within a 3-year period. As far as possible, the estimate is based on observable market data and is continuously assessed with developments of inflation and current interest rate indications, cf. note 19.

Note 3 Other operating expenses (DKK 1,000)

Other external costs are costs that are incurred during the year relating to operations and include administrative expenditure, etc. and project workers. A significant part of other external costs is capitalised and included in the cost price for “roads and railways under construction” under intangible fixed assets.

Fees to the auditor, PWC, elected by the company’s Annual General 2020 2019 Meeting Statutory audit 0 74 Other services 51 137 Total fees to the company's auditor elected by the Annual General Meet- ing 51 211 Recognised in road and railway facilities under construction -51 -121 Fees to the company's auditor elected by the Annual General Meeting in the comprehensive income statement 0 90

Fees to the auditor, Deloitte, elected by the Annual General Meeting 2020 2019 Statutory audit 75 0 Other statements of assurance 180 0 Other services 13 0 Total fees to the company's auditor elected by the Annual General Meet- ing 268 0 Recognised in road and railway facilities under construction -193 0 Fees to the company's auditor elected by the Annual General Meeting in the comprehensive income statement 75 0

32 Femern A/S Annual Report 2020

Note 4 staff costs (DKK 1,000)

Staff costs include all costs for personnel, the Board of Management and the Board of Directors. The staff costs include direct payroll costs, pension payments, the cost of courses, and other direct staff costs. The same applies to costs for pay-related taxes, earned holiday allowance and similar expenses. The staff costs are capitalised and included in the cost price for "roads and railways under construction" under plant, property and equipment. However, a share of the costs is included for the remuneration of the management as a cost.

2020 2019 Wages and salaries, remuneration and emoluments 94,593 77,550 Pension contributions 5,954 3,281 Social security 2,123 2,374 Other staff costs 4,745 4,340 Total staff costs 107,415 87,545 Recognised in road and railway facilities under construction -106,685 -86,873 Staff costs in the comprehensive income statement 730 672

Average number of employees 107 87

Remuneration for Board of Management Non- monetary Fixed For 2020 salary Pensions benefits Total Claus F. Baunkjær 2,604 139 3 2,746 Total 2,604 139 3 2,746

Non- monetary Fixed For 2019 salary Pensions benefits Total Claus F. Baunkjær 2,568 100 3 2,671 Total 2,568 100 3 2,671

If the company terminates the employment of the CEO, a contract has been signed for the payment of severance pay corresponding to 12 months’ salary.

There are no incentive payments or bonus schemes for the Board of Management and Board of Directors.

33 Annual Report 2020 Femern A/S

Note 4 Staff costs (DKK 1,000), (cont'd.)

Fees to the Board of Directors 2020 2019 Mikkel Haugård Hemmingsen* 0 0 Louise Friis* (joined on 17 April) 0 0 Mogens Hansen* (joined on April 17) 0 0 Peter Frederiksen (resigned on 17 April) 109 370 Jørn Tolstrup* (resigned on April 17) 0 0 Rainer Feuerhake (resigned April 17) 47 159 Walter Christophersen (resigned on 17 April) 42 142 Claus Jensen* (discontinued April 17) 0 0 Lene Lange (resigned April 17) 42 142 Ruth Schade (discontinued on April 17) 42 142 Jeanne Christensen (resigned April 17) 47 159 Anne Bøgh Johansen (resigned on 17 April) 47 107 Vilads Engstrøm (resigned on 17 April) 47 159 Randi Weihrauch (discontinued on 17 April) 47 159 Kirsten Margrethe Christensen (resigned on April 17) 0 51 Total fees to the Board of Directors 470 1,590

* The members of the Board of Directors receive remuneration from Sund & Bælt Holding A/S.

Note 5 Tax (DKK 1,000)

2020 2019 Tax paid (joint taxation contribution) -41,618 -77,127 Change in deferred tax -49,991 -12,924 Adjustment of tax paid, previous year 10 22 Total tax -91,599 -90,029

Tax on the year's results is specified as follows: Calculated 22.0 per cent tax on year's results -91,647 -90,059 Other adjustments 48 30 Total -91,599 -90,029

Effective tax rate 22% 22%

34 Femern A/S Annual Report 2020

Note 6 Software (DKK 1,000)

2020 2019 Acquisition value on 1 January 20,491 18,638 Additions for the year 2,981 1,853 Acquisition value at 31 December 23,472 20,491 Depreciation and write-downs at year beginning 12,192 10,633 Depreciation and write-downs for the year 2,830 1,559 Depreciation and write-downs at end-of-year 15,022 12,192

Balance at 31 December 8,450 8,299 Depreciation recognised in road and railway facilities under construction 2,830 1,559

Administrative IT systems and programmes are depreciated linearly over the expected useful life, which is a maximum of 5 years.

Note 7 Road and railway facilities under construction (DKK 1,000)

2020 2019 Acquisition value on 1 January 4,211,480 3,645,551 Additions for the year 1,954,748 634,283 Received EU subsidy -225,934 -68,354 Acquisition value at 31 December 5,940,294 4,211,480

Balance at 31 December 5,940,294 4,211,480 Of which areas 194,947 194,947

In road and railway facilities under construction, financing expenses before value adjustments (net) are capitalised at DKK 512.1 million, and the capitalisation rate is 100 per cent. Valuation adjustments are posted in the total income statement.

By political agreement, parts of the civil works contracts with Fehmarn Belt Contractors (FBC) were launched in 2019, and the civil works contracts with Fehmarn Link Contractors (FLC) have been launched in their entirety from 1 January 2021

Prior to the commencement of the civil works contracts, a contractual commitment of DKK 87.8 million was paid in advance. After the execution of the civil works contracts, the advance payment will be included as a payment of the construction contract.

35 Annual Report 2020 Femern A/S

Note 8 Land and buildings (DKK 1,000)

2020 2019 Acquisition value on 1 January 21,137 9,991 Additions for the year 843 11,146 Transfer to inventory -1,550 0 Acquisition value at 31 December 20,430 21,137 Depreciation and write-downs at year beginning 4,055 3,653 Additions for the year 414 402 Depreciation and write-downs at end-of-year 4,469 4,055

Balance at 31 December 15,961 17,082 Depreciation recognised in road and railway facilities under construction 414 402

Buildings are depreciated linearly over the expected useful life of 25 years.

Note 9 Leasehold improvements (DKK 1,000)

2020 2019 Acquisition value on 1 January 30,875 30,875 Additions for the year 0 0 Acquisition value at 31 December 30,875 30,875 Depreciation and write-downs at year beginning 30,875 30,745 Additions for the year 0 130 Depreciation and write-downs at end-of-year 30,875 30,875

Balance at 31 December 0 0 Depreciation recognised in road and railway facilities under construction 0 130

Leasehold improvements are depreciated on a straight-line basis over the term of the lease, however, over a maximum of 5 years.

36 Femern A/S Annual Report 2020

Note 10 Operating equipment (DKK 1,000)

2020 2019 Acquisition value on 1 January 15,146 15,812 Additions for the year 1,758 0 Transfer from land and buildings 1,550 0 Disposals for the year -1,550 -666 Acquisition value at 31 December 16,904 15,146 Depreciation and write-downs at year beginning 13,859 13,357 Depreciation and write-downs for the year 2,309 1,168 Reversed depreciation and write-downs at end of year -1,550 -666 Depreciation and write-downs at end-of-year 14,618 13,859

Balance at 31 December 2,286 1,287 Depreciation recognised in road and railway facilities under construction 2,309 1,168

Operating equipment is depreciated linearly over the expected useful life of 5 years.

Note 11 Lease assets (DKK 1,000)

2020 2019 Leasing assets Leasing assets relating to properties

Acquisition value on 1 January 60,936 0 Effect upon transition on 1 January 2019 0 60,936 Acquisition value at 31 December 60,936 60,936 Depreciation at 1 January 12,187 0 Depreciations for the year 12,187 12,187 Depreciation at 31 December 24,374 12,187

Balance at 31 December 36,562 48,749 Depreciation recognised in road and railway facilities under construction 24,374 12,187

Leasing obligations Maturity of leasing obligations

Less than 1 year 12,187 12,187 From 1 to 3 years 24,375 24,375 Between 3 - 5 years 0 12,187 Total non-discounted leasing obligation at 31 December (year closing) 36,562 48,749

Leasing obligation included in the balance sheet Short-term 12,187 12,187 Long-term 24,375 36,562 36,562 48,749 Leasing is depreciated according to the straight-line method over 5 years.

37 Annual Report 2020 Femern A/S

Note 12 Loans to contractors (1,000 DKK)

2020 2019 Long-term 174,395 137,041 Short-term 90,989 0 265,384 137,041 In accordance with the construction contract and supplementary agreements with the contractors, lending facilities shall be made available. The first tranche of the loan facility was disbursed in 2019.

The loan is repayable continuously over 36 months, 1 year after borrowing.

Note 13 Receivables (DKK 1,000)

2020 2019 Joint taxation contributions 41,618 74,457 EU subsidy receivable 121,678 32,913 VAT receivable 141,892 24,893 Other receivables 575 869 Total 305,763 133,132

Receivables comprise EU subsidies receivable, balances with members and recharged expenditure. The book value of receivables represents the expected realisable value.

Note 14 Prepayments and accrued income (DKK 1,000)

Advance payments include advance payments for the contracts for the construction of the Feh- marnbelt Fixed Link.

2020 2019 Deposits 508 385 Accrued interest financial instruments 23,297 26,923 Advance payments 108,962 90,606 Total prepayments and accrued income 132,767 117,914

Note 15 Cash at bank and in hand (DKK 1,000)

2020 2019 Cash at bank and in hand 209,427 213,996 Total cash at bank and in hand 209,427 213,996

38 Femern A/S Annual Report 2020

Note 16 Share capital

2020 2019 Number of shares with a nominal value of DKK 100, 1 January 5,000,000 5,000,000 Number of shares with a nominal value of DKK 100, 31 December 5,000,000 5,000,000

At 31 December 2020, the share capital comprised 5,000,000 shares at a nominal value of DKK 100.

The entire share capital is owned by A/S Femern Landanlæg, which is wholly owned by Sund & Bælt Holding A/S, wholly owned by the Danish state. The company is included in the consolidated financial statements of Sund & Bælt Holding A/S.

Financial management The Board of Directors regularly evaluates the need to adjust the capital structure, including the need for cash funds, credit facilities and equity. The Danish state guarantees Femern A/S’ financial liabilities.

At the end of 2020, the equity is negative at DKK 220.0 million after a financial result of minus DKK 325.0 million in 2020. The fair value adjustment of long-term loans raised amounts to minus DKK 414.9 million in 2020, and constitutes an accumulated amount of minus DKK 589.3 million. The fair value adjustment is only an accounting item and, thus, does not affect the company’s liquidity. The fair value adjustment may vary considerably annually, but the risk is reduced in line with the maturity of the loan.

Note 17 Free reserves (DKK 1,000)

2020 2019 At 1 January -394,936 -75,605 Profit for the year -324,980 -319,331 At 31 December -719,916 -394,936

Note 18 Deferred tax liability (DKK 1,000)

2020 2019 Balance at 1 January -393,043 -406,068 Deferred tax for the year 49,991 12,924 Adjustment of deferred tax, previous year -2,781 79 Other adjustments 0 22 Balance at 31 December -345,833 -393,043

Deferred tax relates to: Intangible fixed assets and property, plant and equipment -780,362 -695,860 Trimmed net financing costs 263,910 119,667 Tax loss 170,619 183,150 Total -345,833 -393,043

39 Annual Report 2020 Femern A/S

Note 19 Financial risk management

Financing Financial management in the company is performed within the framework set by the company's Board of Directors and applicable guidelines from the Danish Ministry of Finance, which adminis- ters the Danish government's unlimited guarantee for the company's activities. The Board of Direc- tors determines the framework for currency and interest rate exposure, the composition of the company's borrowing and thus the overall financing.

The overall objective of financial management is to achieve the lowest possible cost of financing for the project throughout its useful life with regard to an acceptable level of risk acknowledged by the Board of Directors. The company is subject to the same types of financial risks as other enter- prises, but as a result of the nature of the project, has a very long time horizon. A long-term per- spective in weighing results and risks related to financial management is applied.

The company has access to relending, a form of borrowing provided by Danmarks Nationalbank on behalf of the government to the company, based on a specific government bond and with the same terms as government bonds sold on the market.

The company provided financing for most of the coming years and, by the end of 2020, had raised relending for the principal amount of DKK 11,750 million, which is unchanged from 2019. During 2020, relending was rescheduled to longer-term financing, including DKK 1,850 million rescheduled from maturity in 2023 to 2052, and DKK 3,480 million from maturity in 2027 to 2052. After resched- uling, the breakdown of the maturity of the principal amounts for relending is DKK 6,420 million in 2027 and DKK 5,330 million in 2052. The weighted interest rate on borrowing is approximately 0.1 per cent .

Currency risks The company's currency risks are related to the currency composition of its net debt, including derivatives, cash funds and trade creditors. Currency risks are managed through parameters for the combination of currencies.

The company can freely use DKK and EUR, and the current distribution is determined by the currency and interest rate relationship between the two currencies. Other currencies are always hedged when the counter value of exposure exceeds DKK 5 million.

Currency exposure breaks down to DKK 5,113 million in EUR and DKK 1 million in SEK and GBP that can be attributed to investment in securities and cash funds respectively.

The exchange rate sensitivity expressed as Value-at-Risk amounts to DKK 32 million in 2020 (DKK 19 million in 2019) and expresses the maximum loss resulting from unfavourable exchange rate developments within a 1-year horizon with 95 per cent probability. Value-at-Risk is calculated based on a 1-year history of volatility and correlations in the currencies to which the company is exposed.

Interest rate risk Debt with a variable interest rate or a short remaining term to maturity necessitates interest rate adjustment in the short term, at market interest rates for the debt. This usually involves a higher risk than fixed-rate long-term debt when fluctuations in current interest costs are used as risk objectives. On the other hand, interest expenses are often higher for longer times to maturity, as the

40 Femern A/S Annual Report 2020

rate curve normally has a positive slope and the choice of debt spread is, therefore, a weighting of interest expenses and risk profile.

The company’s financing is primarily exposed to the medium-term (10-year) and long-term (30- year) interest-rate segment for the gross debt, while the excess liquidity is placed in short-term securities. The sensitivity to an interest rate change of 1 percentage point relative to the cash flows during the coming financial year will have an impact of around DKK 57 million, which is attributable solely to the placement of surplus liquidity in securities.

Duration and exchange sensitivity of the net debt

2020 2019 Duration Fair value Duration Fair value BPV1) BPV1) (years) (DKK 1,000) (years) (DKK 1,000) Nominal debt 38.0 22.3 5,860 20.9 8.2 3,942

1) Basis point value (BPV) is the exchange rate sensitivity when the interest curve is parallel offset by 1bp

When market interest rates are changed, this affects the market value (fair value) of the net debt, and here the effect and risk are greatest for long-term fixed-interest debt. This is primarily due to the discounting effect and corresponds to the alternative cost or gain associated with fixed-interest debt claims compared to financing at the current market interest rates.

The duration indicates the average fixed interest period of the net debt. Long-term debt involves a low interest-rate adjustment risk since a relatively small proportion of the net debt shall have ad- justable interest rates.

The duration also expresses the exchange rate sensitivity of the net debt measured at market value.

The company’s duration was 22.3 years at 31 December 2020 (year closing). The interest rate sensitivity is calculated at DKK 22.3 million when the interest rate curve is parallel offset by 1bp and gives a positive fair value adjustment in the financial result and balance sheet if interest rates increase by 1bp, and vice versa.

The sensitivity to an interest rate change of 1 percentage point compared to the fair value adjustment can be measured at a fair value loss of DKK 2,579 million at an interest rate drop and a fair value gain of DKK 1,951 million for an interest rate increase. The assessed sensitivity to changes in interest rates for the fair value adjustment takes account of the convexity in the debt portfolio.

The sensitivity calculations are based on the net debt at the balance sheet date. The effect is the same in the financial result and the balance sheet due to accounting policies where financial assets and liabilities are recognised at fair value.

41 Annual Report 2020 Femern A/S

Fixed interest rate period assessed for nominal principal amounts (DKK 1,000)

For 2020 Fixed interest rate period 0-1 years 1-2 years 2-3 years 3-4 years 4-5 years >5 years Nom. Value Fair value* Cash and cash equivalents 209,427 0 0 0 0 0 209,427 209,427 Debt securities held in portfolio 4,400,563 2,231,790 0 0 0 0 6,632,353 6,688,363 Loan to supplier 0 0 0 0 0 0 0 0 Receivables 0 0 0 0 0 0 0 0 Debt -5,849 0 0 0 0 -11,750,000 -11,744,151 -12,757,332 Trade creditors 0 0 0 0 0 0 0 0 Derivatives, liabilities -317 0 0 0 0 0 -317 -317 Total principal amount 4,603,824 2,231,790 0 0 0 -11,750,000 -4,914,386 -5,859,859

* Fair value includes accrued interest, see note 13 and note 20.

For 2019 Fixed interest rate period 0-1 years 1-2 years 2-3 years 3-4 years 4-5 years >5 years Nom. Value Fair value* Cash and cash equivalents 213,996 0 0 0 0 0 213,996 213,996 Debt securities held in portfolio 5,510,943 2,870,455 0 0 0 0 8,381,398 8,461,434 Loan to supplier 0 0 0 0 0 0 0 0 Receivables 0 0 0 0 0 0 0 0 Prepayments and accrued income 0 0 0 0 0 0 0 0 Debt 0 0 0 -1,850,000 0 -9,900,000 -11,750,000 -12,617,286 Trade creditors 0 0 0 0 0 0 0 0 Derivatives, liabilities 0 0 0 0 0 0 0 -317 Total principal amount 5,724,939 2,870,455 0 -1,850,000 0 -9,900,000 -3,154,606 -3,942,173

* Fair value includes accrued interest, see note 13 and note 20.

The duration indicates the average time to maturity of the net debt. A high duration entails a relatively lower rate adjustment risk and vice versa.

The net debt’s Macaulay duration is 38.0 years in 2020 (20.9 years in 2019). A change in the interest rate of 1 percentage point will have an impact of DKK 2,265 million, by 31 December 2020 (DKK 826 million in 2019).

Sensitivity calculations are performed on the basis of net debt on the balance sheet date.

Credit risks Credit risks are defined as the risk of loss arising as a result of a counterpart failing to fulfil its payment obligations. The company’s exposure to credit risks can be attributed to placing surplus liquidity, receivables from derivative contracts and customer receivables, etc. The credit risk from financial counterparties is controlled and monitored continuously using a special line and limit system that defines the principles for calculating such risks and a maximum for the degree of risk that is acceptable for a single counterparty. The latter is measured in relation to the counterpart's rating with international rating agencies (Moody's, Standard & Poor and Fitch/IBCA).

42 Femern A/S Annual Report 2020

Financial counterparties must meet the requirements for high credit quality, and agreements are basically only entered into with counterparties with a long-term rating better than A1/A+, unless tougher requirements for the provision of securities can be fulfilled. The financial counterparts must also sign a Credit Support Annex (CSA agreement) providing security in the form of a deposit of government or mortgage credit bonds with high credit quality to cover a receivable from derivative contracts.

Credit exposure is effectively limited by the threshold value of the CSA agreement, which depends on the counterpart's rating. The threshold value is the maximum unhedged receivable that can be accepted for a single counterpart.

At the date of the balance sheet, the company had credit exposures in connection with the placement of excess liquidity with bank deposits and securities in the form of Danish mortgage credit bonds and German government bonds with short residual maturities. The bank deposit of DKK 209 million is placed in a bank with an AA-/ Aa3 rating, while the Danish mortgage bonds of DKK 2,718 million and the German government bonds of DKK 3,970 million have a credit quality of AAA / Aaa. The credit exposures are calculated at their fair value. The company's maximum credit exposure is an expression of the receivables recognised in the accounts.

The fair value of the company's receivables and trade creditors measured at amortised cost price is deemed to correspond approximately to the book value.

Liquidity risk The company has a limited liquidity risk due to its access to relending and the Danish government’s guarantee, and the flexibility to maintain a liquidity reserve of up to 6 months’ liquidity requirement. This helps to reduce the risk of having to raise loans on unfavourable terms due to temporary circumstances. With the raising of loans in 2020, including advance loan agreements, the company has covered its financing need for the coming years.

Maturity on receivables, debt and trade creditors (DKK 1,000)

For 2020 Maturity 0-1 years 1-2 years 2-3 years 3-4 years 4-5 years >5 years Total Cash at bank and in hand 209,427 0 0 0 0 0 209,427 Debt securities held in portfolio 4,400,563 2,231,790 0 0 0 0 6,632,353 Loan to supplier 90,989 87,198 87,197 0 0 0 265,384 Receivables 264,145 0 0 0 0 0 264,145 Debt 0 0 0 0 0 -11,750,000 -11,750,000 Derivatives, liabilities -317 0 0 0 0 0 -317 Trade creditors -661,831 0 0 0 0 0 -661,831 Total principal amount 4,302,976 2,318,988 87,197 0 0 -11,750,000 -5,040,839

43 Annual Report 2020 Femern A/S

For 2019 Maturity 0-1 years 1-2 years 2-3 years 3-4 years 4-5 years >5 years Total Cash at bank and in hand 213,996 0 0 0 0 0 213,996 Debt securities held in portfolio 5,510,943 2,870,455 0 0 0 0 8,381,398 Loan to supplier 0 49,487 45,680 41,874 0 0 137,041 Receivables 133,132 0 0 0 0 0 133,132 Derivatives, assets 1,008,085 0 0 0 0 0 1,008,085 Debt 0 0 0 -1,850,000 0 -9,900,000 -11,750,000 Derivatives, liabilities -1,008,085 0 0 0 0 0 -1,008,085 Trade creditors -159,349 0 0 0 0 0 -159,349 Total principal amount 5,698,722 2,919,942 45,680 -1,808,126 0 -9,900,000 -3,043,782

Division of shift in net debt, cf. IFRS 7 (DKK 1,000)

Short term Long term Derivatives, Derivatives, 2020 liabilities liabilities assets liabilities Total 1 January 2020 0 -12,607,366 0 0 -12,607,366 Cash flow 0 291,270 0 0 291,270 Paid interest, reversed 0 -67,334 0 0 -67,334 Amortisation 0 46,706 0 0 46,706 Inflation adjustment 0 0 0 0 0 Currency adjustment 0 0 0 0 0 Fair value adjustment 0 -415,076 0 -317 -415,393 Transfer 0 0 0 0 0 End of 2020 0 -12,751,800 0 -317 -12,752,117

Short term Long term Derivatives, Derivatives, 2019 liabilities liabilities assets liabilities Total 1 January 2019 0 -6,406,764 0 -1,077 -6,407,841 Cash flow 0 -5,783,564 1,251 1,044 -5,781,269 Paid interest, reversed 0 -60,309 0 0 -60,309 Amortisation 0 51,334 0 0 51,334 Inflation adjustment 0 0 0 0 0 Currency adjustment 0 0 -1,218 0 -1,218 Fair value adjustment 0 -408,063 0 0 -408,063 Transfer 0 0 -33 33 0 End of 2019 0 -12,607,366 0 0 -12,607,366

44 Femern A/S Annual Report 2020

Fair value hierarchy 2020* Level 1 Level 2 Level 3 Debt securities held in portfolio 6,665,065 0 0 Derivatives, assets 0 0 0 Financial assets 6,665,065 0 0

Debenture loans and debt -12,751,483 0 0 Derivatives, liabilities 0 -317 0 Financial liabilities -12,751,483 -317 0

Fair value hierarchy 2019* Level 1 Level 2 Level 3 Debt securities held in portfolio 7,934,991 499,520 0 Derivatives, assets 0 0 0 Financial assets 7,934,991 499,520 0

Debenture loans and debt -12,607,366 0 0 Derivatives, liabilities 0 0 0 Financial liabilities -12,607,366 0 0

*The fair value hierarchy constitutes a classification of assets and liabilities measured according to their fair value, and indicates the efficiency and liquidity of a market in which the asset or liability is valued.

Note 20 Trade creditors and other liabilities (DKK 1,000)

2020 2019 Creditors 177,465 83,418 Members 464,193 46,324 Other payables 20,173 29,606 Total 661,831 159,349

Note 21 Derivatives (DKK 1,000)

2020 2020 2019 2019 Assets Liabilities Assets Liabilities Forward exchange contracts 0 317 0 0 Total derivatives 0 317 0 0

Note 22 Prepayments and accrued income (DKK 1,000)

2020 2019 Accrued interest 5,849 9,920 Total 5,849 9,920

45 Annual Report 2020 Femern A/S

Note 23 Contractual obligations, contingent liabilities and securities (DKK 1,000)

As of 1 January 2021, Femern A/S entered into agreements related to land acquisition and compensation for the future decommissioning of wind turbines in the work area on Fehmarn. The contractual liability amounts to DKK 73 million

As a natural part of the contractual relationship between the company and its contractors, the company received a number of claims for additional payments, etc., over and above what was agreed in the contracts concluded between the parties. The requirements are regularly handled in relation to the contractors and recognised in the financial statements when the individual requirement was clarified. The amount of such requirements is subject to uncertainty, but it is estimated that they can be handled within the project's budget framework.

The company is part of a Danish joint taxation scheme with Sund & Bælt Holding A/S as the management company. As of the 2013 financial year, in accordance with the rules of the Danish Cor- poration Tax Act, the company is, therefore, jointly liable with the other jointly taxed companies for a total corporation tax of DKK 60.0 million and, with effect from 1 July 2012, is jointly liable for any obligations to collect withholding tax on interest, royalties and dividends for the jointly taxed companies.

Contractual obligations related to civil works contracts entered into are described in note 7.

Otherwise, the company has no other obligations.

46 Femern A/S Annual Report 2020

Note 24 Related parties (DKK 1,000)

Related parties comprise the Danish government, companies and institutions owned by it.

Registered Related party office Affiliation Transactions Pricing The Danish State Copenhagen 100% ownership of Sund & Bælt Guarantee for the com- Determined by leg- Holding A/S pany’s debt islation. Guarantee commission Accounts for 0.15 per cent of the nominal debt The Danish Ministry Copenhagen 100% ownership via Sund & Bælt Purchase of consultancy Market price of Transport Holding A/S Sund & Bælt Copenhagen 100% ownership of A/S Femern Carrying out operational Market price Holding A/S Landanlæg tasks and joint functions Joint taxation contribution

A/S Femern Copenhagen 100% ownership of Femern A/S Joint settlement VAT Market price Landanlæg Sale of consultancy Market price Guarantee commission Accounts for 1,85 per cent of the nominal debt Sund & Bælt Copenhagen Subsidiary of Sund&Bælt Holding Handling of joint functions Market price Partner A/S A/S A/S Storebælt Copenhagen Subsidiary of Sund&Bælt Holding Sale of consultancy Market price A/S A/S Øresund Copenhagen Subsidiary of Sund&Bælt Holding A/S Øresundsbro Kon- Copenhagen / Partnership owned 50% by Purchase of consultancy Market price sortiet Malmö A/S Øresund BroBizz A/S Copenhagen Subsidiary of Sund&Bælt Holding Handling of joint functions Market price A/S

47 Annual Report 2020 Femern A/S

Note 24 Related parties (DKK 1,000), (cont’d.)

Operation* Operation Balance at ** Balance at Amount Amount 31 December 31 December Related party Description 2020 2019 2020 2019

The Danish State Guarantee commission -17,257 -16,712 -17,625 -16,035

The Danish Ministry Consultancy -754 -1,156 -312 -57 of Transport Sund & Bælt Performance of operational and com- -95,016 -28,112 -12,826 -2,549 Holding A/S mon functions Joint taxation contributions 41,618 77,127 41,618 77,005 A/S Femern Common payment VAT 0 0 -40,751 -46,310 Landanlæg Guarantee commission -410,605 0 -410,605 0 Sund & Bælt Overhead costs 0 31 0 0 Partner A/S A/S Storebælt Consultancy 0 5 0 -10 Øresundsbro Overhead costs and advice -967 -498 0 -1 Konsortiet BroBizz A/S Overhead costs 64 79 -11 -3

* Operations - a positive amount is an expression of revenue, and a negative amount is an expression of expense. ** Balance - a positive amount is an expression of a receivable and a negative number is an expression of debt owed to the related party

Note 25 Events after the balance sheet date

No events of importance for the 2020 Annual Report have occurred after the balance sheet date.

Note 26 Approval of the Annual Report for publication

At the Board of Directors’ meeting on 15 March 2021, the Board of Directors approved the Annual Report for publication. The Annual Report will be presented to Femern A/S shareholders for approval at the Annual General Meeting on 19 April 2021.

48 Femern A/S Annual Report 2020

Statement by the Board of Directors and Board of Management

The Board of Directors and Board of Manage- ber 2020, as well as the result of the com- ment have today considered and approved pany’s activities and cash flows for the finan- the Annual Report for the financial year 1 Jan- cial year 1 January – 31 December 2020. uary - 31 December 2020 for Femern A/S. It is also our view that the Management Re- The Annual Report has been prepared in ac- port gives a true and fair view of develop- cordance with International Financial Report- ments in the company’s activities and finan- ing Standards as adopted by the EU and ad- cial conditions, the annual results and the ditional Danish disclosure requirements in the company’s overall financial position and a de- Financial Statements Act. scription of the significant risks and uncertain- ties to which the company is exposed. It is our view that the annual accounts give a true and fair view of the company’s assets, li- We recommend that the Annual Report be abilities and financial position at 31 Decem- approved at the Annual General Meeting.

Copenhagen, 15 March 2021

Board of Management

Claus F. Baunkjær Managing Director, CEO

Board of Directors

Mikkel Hemmingsen Chairman

Louise Friis Vice-Chairman

Mogens Hansen

49 Annual Report 2020 Femern A/S

The independent auditor's report

To the shareholders of Femern Bælt A/S Opinion on the Management Report The Board of Management is responsible for Conclusion the Management Report. We have audited the annual accounts for Femern Bælt A/S for the financial year of Our conclusion concerning the accounts does 01.01.2020 - 31.12.2020, comprising the not comprise the Management Report, and statement of results, the balance sheet, the with regard hereto, we do not express any statement of changes in shareholders’ equity, form of conclusion with certainty. the cash flow statement, and notes, including the accounting policy applied. The annual ac- In the context of auditing the accounts, it is counts have been compiled according to In- our responsibility to read the Management ternational Financial Reporting Standards as Report and, in that connection, consider approved by the EU and additional require- whether it is significantly inconsistent with the ments in the Danish Financial Statements accounts or our knowledge gained through Act. the audit or in other ways appears to include any significantly incorrect information. It is our view that the annual accounts provide a true and fair view of the company’s assets, Furthermore, it is our responsibility to con- liabilities and financial position as of sider whether the Management Report con- 31.12.2020, as well as the result of the com- tains the required information pursuant to the pany’s activities and cash flow for the finan- Financial Statements Act. cial year 01.01.2020 – 31.12.2020 in accord- Based on the work undertaken, we are of the ance with International Financial Reporting opinion that the information in the Manage- Standards as approved by the EU and addi- ment Report is in accordance with the annual tional requirements in the Danish Financial accounts and prepared in accordance with Statements Act. the requirements of the Financial Statements Basis of conclusion Act. We have not found any significant incor- We have conducted our audit in accordance rect information in the Management Report. with international auditing standards and ad- The Board of Directors’ and Board of ditional requirements under Danish auditing Management’s responsibility for the an- legislation. Our responsibility, according to nual accounts such standards and requirements is de- The Board of Directors and the Board of Man- scribed in more detail under “The auditor’s re- agement are responsible for the preparation sponsibility for auditing the consolidated fi- of the annual accounts that give a true and nancial statements and annual accounts”. We fair view in accordance with International Fi- are independent of the company in compli- nancial Reporting Standards as adopted by ance with international ethical guidelines for the EU and additional requirements in the auditors (IESBA’s ethical guidelines) and any Danish Financial Statements Act. Further- further requirements in Denmark, and we more, the management is responsible for the have complied with any other ethical obliga- internal review deemed necessary to compile tions pursuant to such regulations and re- annual accounts without material misinfor- quirements. In our opinion, the audit evidence mation, whether caused by fraud or error. obtained is sufficient and suitable as the basis of our conclusion. For the preparation of the accounts, the Board of Directors and Board of Management

50 Femern A/S Annual Report 2020

are responsible for evaluating the company’s acy, forgery, deliberate omission, misrep- ability to provide information concerning cir- resentation, or breaches of internal review cumstances regarding the continued opera- and verification. tions where relevant. The Board of Directors and Board of Management are also responsi-  We gain an understanding of internal re- ble for preparing the accounts based on the views for the purpose of the audit in order accounting principle concerning continued to design audit procedures that are appro- operations unless they intend to either liqui- priate in the circumstances, but not to ex- date the company or cease operations or press an opinion on the effectiveness of have no realistic other alternatives. the company's internal reviews.

The auditor’s responsibility for the audit  We consider the suitability of the account- of the accounts ing practices used by the Board of Direc- Our goal is to obtain a high degree of certainty tors and Board of Management as well as as to whether the financial statements as a whether used estimates and information whole are free from material misstatement, are reasonable. whether due to fraud or error and to issue an audit opinion with a conclusion. A high degree  We draw a conclusion as to whether the of certainty is a high level of certainty but is management’s preparation of the finan- not a guarantee that an audit performed in ac- cial statements based on the accounting cordance with international auditing stand- principle of continued operations is appro- ards and the additional requirements applica- priate and whether, based on the audit ble in Denmark will always uncover material certificate obtained, there is significant misstatement when such exists. Misstate- uncertainty associated with events or cir- ments can occur due to fraud or error and can cumstances that may create significant be regarded as material if it can be reasona- doubt about the company’s ability to con- bly expected that they can individually or col- tinue operations. If we conclude that such lectively influence the financial decisions uncertainty is present, we will indicate made by financial statements users based on such information in the accounts or, if the annual accounts. such information is insufficient, qualify our opinion. Our conclusions are based on As part of the audit, according to international the auditing evidence obtained up to the auditing standards and the additional require- date of our audit opinion. Future events or ments applicable in Denmark, we undertake conditions can indicate that the company professional evaluations and maintain profes- will be unable to continue operations. sional scepticism throughout the process.

Furthermore:  We take a position on the overall presen-  We identify and assess the risk of a mate- tation, structure and content of the finan- rial misstatement in the accounts, irre- cial statements, including the information spective of whether due to fraud or error, in notes and whether the financial state- design and undertake auditing actions in ments reflect the underlying transactions response to these risks and collect audit- and events such that a true and fair view ing evidence, where necessary, to sup- is given. port our conclusion. The risk of not detect- ing material misstatement due to fraud is We communicate with the top management greater than for material misstatement about, e.g., the planned scope and timing of due to error, as fraud can include conspir-

51 Annual Report 2020 Femern A/S

the audit as well as significant audit observa- tions, including any significant deficiencies in internal reviews that we identify during the audit.

Copenhagen, 15 March 2021

Deloitte

Chartered Accountant Company

CVR No. 33 96 35 56

Anders Oldau Gjelstrup Jakob Lindberg Chartered accountant Chartered accountant MNE No. 0777 MNE No. 40824

52 Femern A/S Annual Report 2020

Board of Directors and Board of Management

Board of Directors

Mikkel Hemmingsen Mogens Hansen Managing Director of Sund & Bælt Holding Finance Director, CFO of Sund & Bælt A/S. Holding A/S.

Chairman since 2020 Member of the Board of Directors since 2020 Joined the Board of Directors in 2020 Joined the Board of Directors in 2020 Term expires in 2022 Term expires in 2022

Member of the Board of Directors of: CEO in  Femern A/S (Chairman)  A/S Storebælt  A/S Storebælt (Chairman)  A/S Øresund  A/S Øresund (Chairman)  A/S Femern Landanlæg  A/S Femern Landanlæg (Chairman) Member of the Board of Directors of:  Brobizz A/S (Chairman)  A/S Storebælt  BroBizz Operator A/S (Chairman)  A/S Øresund  Sund & Bælt Partner A/S (Chairman)  A/S Femern Landanlæg  Øresundsbro Konsortiet I/S  Femern A/S  Brobizz A/S Louise Friis  BroBizz Operator A/S. Chief Legal Officer of Sund & Bælt Holding  Sund & Bælt Partner A/S A/S

Vice-chairman since 2020

Joined the Board of Directors in 2020 Term expires in 2022

Member of the Board of Directors of:  A/S Storebælt (Vice-chairman) Board of Management  A/S Øresund (Vice-chairman)  A/S Femern Landanlæg (Vice-chairman) Claus F. Baunkjær  Femern A/S (Vice-chairman) Managing Director, CEO  Brobizz A/S (Vice-chairman) Board member in  BroBizz Operator A/S (Vice-chairman)  Sund & Bælt Partner A/S  Sund & Bælt Holding A/S (Vice-chairman)

This publication was compiled by Femern A/S. Femern A/S is tasked with the planning, building and operating the fixed link between Denmark and Germany across the Fehmarnbelt.

Please direct any queries concerning this publication to:

Femern A/S Vester Søgade 10 1601 Copenhagen V Denmark Tel. +45 33 41 63 00 [email protected] www.femern.com VAT 28986564

Published by Femern A/S April 2021

Design Femern A/S and BGRAPHIC Photos Femern A/S Printing Kailow A/S

ISSN 1901-497X Femern A/S Vester Søgade 10 1601 Copenhagen V Denmark Tel. +45 33 41 63 00 VAT 28986564

Co-financed by the Connecting Europe Facility of the European Union www.femern.com