ANNUAL REPORT 2021
Explorer II AS
Langkaia 1, 0150 Oslo. Norway
Booking: +47 810 30 000, Switchboard: +47 970 57 030
Business register number: NO 918 500 812 VAT
DIRECTORS’ REPORT 2021
Explorer II AS
Part of the Hurtigruten Group – The leading adventure travel and expedition cruise company
Hurtigruten Group’s vision is to be the undisputed global leading adventure travel and expedition cruise company
by offering authentic and accessible experiences around the world to travelers who wish to explore and travel in
a sustainable way. Hurtigruten Group will continue to be a frontrunner in adventure travel and expedition
cruising, a niche with substantial global growth potential. Hurtigruten Group’s goal is to reinforce its global
position, differentiated from the rest of the cruise industry by authentic, sustainable and active experiences on
both land and sea. Hurtigruten Group has three main business segments, Hurtigruten Norway – branded as
Hurtigruten in Scandinavia and Hurtigruten – Norwegian Coastal Express in other markets, Hurtigruten
Expeditions branded as Hurtigruten Expeditions in all markets – Hurtigruten Destinations with the Hurtigruten
Svalbard brand. Over the last years, through all its three brands, the Group has been able to fortify its position
as the leading adventure travel and expedition cruise company focusing on sustainable expedition cruising for
the global traveler.
Hurtigruten Group is the world’s largest expedition cruise company, with Hurtigruten Expeditions operating eight
expedition vessels, three of which are battery powered hybrid-electric cruise vessels and Hurtigruten Norway
operating seven vessels.
Explorer II AS operates within the Hurtigruten Expeditions segment, and is a ship owning company located in
Oslo. Its purpose is to invest in, and lease out under bareboat charter agreements, specialised cruise vessels for
the operation in other Hurtigruten Group companies. At 31 December 2021 Explorer II AS owned the two-new
hybrid-powered expedition ships, MS Roald Amundsen and MS Fridtjof Nansen. MS Roald Amundsen was
delivered from the Kleven yard in June 2019 and started its operation in July 2019. In December 2019 the sister
ship, MS Fridtjof Nansen, was delivered and started its operations in Q1 2020 right before the Covid-19 pandemic
hit. The ships are state-of-the-art expedition vessels designed to meet guests’ expectations as well as strict
environmental and safety standards. MS Roald Amundsen and MS Fridtjof Nansen are a key part of Hurtigruten
Expeditions’ strategy of further expansion in the expedition cruise segment. The new ships will operate in new
Hurtigruten Expeditions destinations, such as the Northwest Passage, Alaska, South America, and the Caribbean,
in addition to the current Antarctica and Arctic destinations. MS Roald Amundsen and MS Fridtjof Nansen have
an ice-reinforced hull, a total length of 140 metres and will be able to carry 530 guests. The hybrid technology
engines will reduce fuel consumption substantially and permit periods of emission-free sailing. The investment
in new technology has been partly funded by Enova, a Norwegian government enterprise responsible for the
promotion of environmentally-friendly production and consumption of energy, and as such lives up to
Hurtigruten Group’s vision to be the leading expedition travel company by offering authentic and accessible
experiences around the world to travellers who wish to explore and travel in a sustainable way.
Both vessels are operated by Hurtigruten Expedition Cruises AS, a sister company within the Hurtigruten Group.
These two vessels will fortify Hurtigruten Group’s position in the expedition cruise segment and are a key part of
Hurtigruten Expeditions’ strategy of further expansion in this segment.
Market development
Hurtigruten Group had experienced a significant growth before the pandemic and is of the opinion that this
trend will be even stronger post the pandemic as the attractiveness of the remote and off the beaten track
destinations will increase. Hurtigruten Group also expects that there is a significant amount of pent up demand
for travelling as a result of the pandemic. There is currently a very strong booking development for 2022
compared to earlier periods before the pandemic which shows that the customer is ready to travel as soon as
travel restrictions are lifted, and vaccines have been distributed.
Financial performance
The financial statements have been prepared in accordance with International Financial Reporting Standards
(IFRSs).
The company has liquidity position of EUR 2.5 million as of 31 December 2021.
Statement of profit and loss
Total operating revenues for Explorer II AS was EUR 50.1 million in 2021 (2020: EUR 44.8 million), related to
bareboat charters of MS Roald Amundsen and MS Fridtjof Nansen. The company has limited business activity
except for the fixed bareboat lease agreements with the sister company Hurtigruten Expedition Cruises AS. As
such, the Covid-19 pandemic har not directly impact the company, as both the vessels owned by the company
are operated by Hurtigruten Expedition Cruises AS.
Net financial expenses amounted to EUR 11.9 million (2020: EUR 20.8 million) mainly due to interest expenses
of EUR 11.1. For 2021 the borrowing fees were reduced to ERU 1.1 million from EUR 11.0 in 2020.
During 2021, the company did not have any research and development activities, and thus no cost related to
this.
The profit for the year was EUR 29.7 million, which is proposed transferred to other equity.
Cash flow
Net cash outflow from operating activities amounted to EUR 0.9 million (2020: outflow of EUR 2.3 million).
Net cash flow used in investment activities was EUR 0.1 million (2020: EUR 17.4 million), the outflow in 2020
included remaining deliveries of the vessels.
Net cash inflow from financing activities was EUR 1.0 million and is related to borrowings for group companies.
Financial position
The carrying value of the two ships was EUR 365.9 million at 31 December 2021 (2020: EUR 374.5 million). The
company’s equity at 31 December 2021 was EUR 146.3 million (2020: EUR 116.6 million). The Bareboat lease
agreements for MS Roald Amundsen and MS Fridtjof Nansen are for a period of 5 years, and the profitability in
the lease agreements are deemed satisfactory to ensure a sound financial position going forward.
Share capital and shareholders
As of 31 December 2021, Explorer II AS had one shareholder and a total paid in equity of EUR 105.003 million
spread over 300 shares with a nominal value of NOK 101 (EUR 3) each and a share premium of EUR 105.0.
Going concern
In the opinion of the Board of Directors, the financial statements provide a true and fair view of the financial
performance during 2021, and financial position at 31 December 2021. The Board confirms that the financial
statements have been prepared based on the going concern assumption, and that it is appropriate to make that
assumption.
Key risk and uncertainty factors
Overall view on objectives and strategy
The company is exposed to financial risks in different areas. The goal is to reduce the financial risks as much as
possible. The company’s current strategy does not include the use of financial instruments. This is however,
continuously being assessed by the Board of Directors. In 2021 the exchange risk was very limited by ensuring
that the company’s debt was in EUR which is the functional currency of the company.
Construction risk
The company’s inability to deploy new ships and carry out ship repairs, maintenance and refurbishments on
terms and within timeframes that are favourable or consistent with the company’s expectations could result in
revenue losses and unforeseen costs.
Currency risk
Explorer II AS has limited concentration of currency risk as the external financing is nominated in EUR, and the
company has EUR as its functional currency. The company also has some financing from the parent company.
Price risk
The company has limited business activities except for fixed bareboat lease agreements with Hurtigruten
Expedition Cruises AS, hence no significant price risk.
Interest-rate risk
Loans subject to a variable interest rate present a risk to the company’s overall cash flow, while fixed interest
rates expose the company to fair-value interest rate risk. The company has no hedging strategy to reduce variable
interest rate risk.
Credit risk and Liquidity risk
The company has some credit risk, given that their source of income comes from one party, i.e. Hurtigruten
Expedition Cruises AS (group company). However, the company delivers results and has a good equity and credit
rating, hence the risk for losses on receivables is assessed to be low.
Liquidity risk management includes maintaining a sufficient level of liquid assets geared to operational and
investment plans and ensuring the availability of sufficient funding from committed credit facilities. The Finance
function has the overall responsibility for managing the Group’s liquidity risk. Rolling liquidity forecasts are
prepared so as to ensure that the Group has sufficient liquidity reserves to satisfy the Group’s obligations and
financial loan covenants for all the subsidiaries in the Group
.
Research and development activities
The company conducts no research and development activities other than adaptation of Information and
Communications Technology.
Environmental, social and governance
Our Environmental, Social and Governance (“ESG”) ambition is to be the most sustainable travel operator in the
world, pushing the industry’s boundaries for ESG. We won’t just stop at a license to operate; we will do our
outmost to push beyond local regulations and look to best-in-class ESG solutions globally. With a mission focused
on innovation, technology and concrete measures – sustainability is an integral part of HRG’s operations and
supply chain. Our ESG strategy will ensure that our vessels can operate in a responsible and environmental
manner, improving the value and experience for our guests while minimizing our footprint.
In accordance with the Paris Agreement, Hurtigruten Group will in 2022 commit to Science Based Targets with
the goal of limiting global warming to 1.5 degrees Celsius compared to pre-industrial levels. This means that
Hurtigruten Group will be emission free by 2050 and will commit to aggressive emission reductions over the
next 28 years in accordance with the SBTi framework. We also want to further push our organization towards a
greener and more sustainable future, and we target carbon neutral operations by 2040 (Scope 1). For us
carbon neutral means to have a neutral impact on the environment, meaning to remove the same amount of
CO2 emissions as we put into the atmosphere. Carbon free propulsion alternatives are neither commercially
nor technically feasible at this point, and while we get one step closer day-by-day, we cannot sit idle and wait
for the technology to be in place. We are working closely with industry partners and regulators to drive change
and move boundaries while we utilize the best solutions available already today. We are also in active
discussions with stakeholders about potential pilot solutions, to test the next generation of green propulsion
technology. To us, it is important that we minimize our environmental footprint as we want to build the
greenest fleet of vessels in the industry.
Already in 2019, Explorer II AS lead the way by introducing MS Roald Amundsen, the world’s first hybrid-
powered expedition cruise vessel. A sister ship, MS Fridtjof Nansen, was launched in 2020. The two vessels
already emit about 50 per cent less carbon dioxide (CO2) than the average existing expedition cruise vessel. The
next step in our commitment to green technology innovation is to convert our entire existing coastal fleet to
run on a combination of large battery packs and biofuels. When reaching the full potential and utilization of
biofuel it is estimated that we can lower the added CO2 emissions with up to 80 per cent.
Operating in some of the world’s most vulnerable areas comes with a great responsibility. Fighting the
exploitation and degradation of sites, nature, and local communities by mass tourism is one of HRG’s most
important goals. We support stricter regulations, such as size limitations on cruise vessels, and restrictions on
the number of guests allowed on shore. Our aim is to develop, encourage and maintain sustainable year-round
activity, instead of flooding the valuable sites during peak season and leaving them quiet for the rest of the year.
This is key to developing sustainable destinations, thriving communities and unique experiences. We also work
actively with suppliers and vendors, requiring them to align with key SDG’s and to operate according to our code
of conduct and strict environmental policy. All our major suppliers with a valid frame agreement or a major
project contract are required to agree to these terms.
We are immensely proud of the work we do within ESG and our ability to operate in a sustainable and
responsible manner. This work is also received international recognition; the international ESG rating agency
Sustainalytics assessed our ESG risk rating as “low risk” in their most recent ranking, and with a score of 17
outperforming all other cruise operators.
Corporate Governance
The board and management are committed to maintaining high ethical standards and promoting good
Corporate Governance, dated 14 October 2021(www.nues.no). But with no employees and one single
shareholder the board considers not every aspect to be relevant for the company.
With no employees the board is responsible for everyday business. The board members and chair of the board
are elected by the general
- making. The board
did not receive any remuneration from Explorer II AS in 2021.
reviews the financial statements at the end of every quarter. At least once per year, the board assesses the
Hurtigruten Group has implemented an enterprise risk framework with policies, guidelines and tools to
facilitate risk management across the organization. The framework is inspired by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) ERM framework and the ISO 31000 risk management
guideline. The Group risk management function is reporting to the Chief Financial Officer. The Board of
Directors and Officers Liability Insurance
Hurtigruten Group AS (through Silk Holdings S.a.r.l.) has purchased and maintains a Directors and Officers
Liability Insurance on behalf of the members of the board of directors and the CEO. The insurance also covers
managing directors and directors of controlled subsidiaries. The insurance policy is issued by reputable insurers
with an appropriate rating.
Outlook
The company relies on the payment from Hurtigruten Expediton Cruises AS for the bareboat charters and can be
affected of the result and performance of this company. With increasing demand for expedition travel and strong
booking figures the future income looks secure.
Oslo, 29 April 2022
Board of Directors of Explorer II AS
Torleif Ernstsen Kenneth Andersen
Chairman Board member
Financial Statements 2021
Explorer II AS
Statement of profit and loss
Statement of comprehensive income
(in EUR 1 000) Note 2021 2020
Operating income 11 50 068 44 833
Depreciation 4 (8 521) (11 763)
Operating costs 49 (536)
Operating profit/(loss) 41 597 32 533
Finance income 10 9 35
Finance expenses 10 (11 947) (20 861)
Finance expenses - net (11 938) (20 825)
Profit/(loss) before income tax 29 659 11 708
Income tax expense 5 0 0
Profit/(loss) for the year 29 659 11 708
(in EUR 1 000) Note 2021 2020
Profit/(loss) for the year 29 659
11 708
Other comprehensive income: - -
Total comprehensive income for the year 29 659 11 708
Total comprehensive income for the year attributable to owners of the parent 29 659 11 708
Total comprehensive income for the year 29 659 11 708
Statement of Financial Position
Oslo, 29 April 2022
Board of Directors of Explorer II AS
Torleif Ernstsen Kenneth Andersen
Chairman Board member
(in EUR 1 000) Note 2021 2020
ASSETS
Non-current assets
Ships 4 365 899 374 481
Total non-current assets 365 899 374 481
CURRENT ASSETS
Receivables on group companies
11, 13 108 701 58 321
Other short-term receivables
0 15
Cash and cash equivalents 7, 13 2 547 2 554
Total current assets 111 248 60 891
Total assets 477 147 435 372
EQUITY
Share capital
8 3 3
Share premium
105 000 105 000
Retained earnings
41 265 11 606
Total equity 146 268 116 609
LIABILITIES
Non-current liabilities
Liabilities to financial institutions
6, 13 296 696 295 625
Liabilities to group companies
11, 13 29 197 18 095
Total non-current liabilities 325 893 313 720
Current liabilities
Accounts payable
11, 13 2 0
Income tax payable
5 1 7
Liabilities to group companies
11, 13 1 412 1 372
Other currents liabilities
6 3 572 3 664
Total current liabilities 4 986 5 043
Total equity and liabilities 477 147 435 372
Statement of changes in equity
(in EUR 1 000) Note
Share capital
including
treasury
shares
Share premium
Retained
earnings
Total Equity
Balance at 1 January 2020 3 (101) (98)
Profit/(loss) for the year 11 708 11 708
Total comprehensive income - 11 708 11 708
Transactions with owners:
Convertion of debt to equity - 105 000 105 000
Balance at 31 December 2020 3 11 607 116 610
Balance at 1 January 2021 3 105 000 11 607 116 610
Profit/(loss) for the year 29 659 29 659
Total comprehensive income 29 659 29 659
Balance at 31 December 2021 3 105 000 41 265 146 268
Cash Flow statement
(in EUR 1 000) Note 2021 2020
Cash flows from operating activities
Profit/(loss) before income tax 29 659 11 708
Adjustments for:
Depreciation 4 8 521 11 763
Currency gains/losses 10 (3) 259
Net interest expenses 10 11 941 20 566
Other adjustments 23 -
Change in working capital:
Trade and other receivables 11 (50 365) (49 382)
Trade and other payables 11 (679) 2 852
Taxes paid 5 (7) (3)
Net cash flows from (used in) operating activities (910) (2 236)
Cash flows from investing activities
Purchase of property, plant, equipment (PPE) 4 (71) (20 258)
Net change in restricted cash 7 - 2 820
Net cash flows from (used in) investing activities (71) (17 438)
Cash flows from financing activities
Issuance of new shares 8
Proceeds from borrowings 6 - 300 000
Repayment of borrowings 6 - (254 583)
Paid interest and fees 10 (10 127) (12 389)
Net borrowings from other group companies 11 11 101 (10 822)
Net cash flows from (used in) financing activities 974 22 206
Net (decrease)/increase in cash, cash equivalents and bank overdrafts (7) 2 532
Cash and cash equivalents at 1 January 2 554 22
Cash and cash equivalents at 31 December 2 547 2 554
Restricted cash 7 - -
Cash and cash equivalents in statement of financial position 2 547 2 554
Notes to the annual financial statements
Note 1 General information
Explorer II AS is 100% owned by Hurtigruten AS. The ultimate parent company is Silk Topco AS, headquartered
at Langkaia 1 in Oslo. The consolidated financial statements can be downloaded from the following website:
www.hurtigruten.no
The purpose of Explorer II AS is owning two expedition vessels MS Roald Amundsen and MS Fridtjof Nansen for
the purpose of bareboat charter lease to Hurtigruten Expedition Cruises AS. Both vessels were delivered in 2019.
The financial statements of Explorer II AS for the year ended 31 December 2021 where authorized for issue by
the Board of Directors on April 28. 2022.
Note 2 significant accounting principles
The principal accounting polices applied in the preparation of the financial statements are described below.
Unless otherwise stated in the description, these policies have been consistently applied to all periods presented.
2.1 Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards
(IFRS) and interpretations issued by the IFRS Interpretation Committee (IFRIC), as endorsed by the European
Union.
A) Translation of foreign currencies
(i) Functional and presentation currency
The financial statements are measured in the currency used in the economic area in which the entity primarily
operates (the functional currency), which for Explorer II AS is Euro (EUR), as the revenues and financing of the
company is denoted in EUR.
(ii) Transactions and balance sheet items
Foreign currency transactions are translated into the functional currency using the transaction rate. Realised and
unrealised foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation of exchange rates of monetary assets and liabilities denominated in foreign currencies at the balance
sheet date are recognised in the income statement. Foreign exchange gains and losses on loans, cash and cash
equivalents are presented (net) in the income statement as finance income or expenses.
B) Revenue recognition
The Company’s revenues consist of intra group revenues from bareboat leasing agreements with Hurtigruten
Cruise AS, and revenues from the agreement is recognised on a straight-line basis over the lease term and
classified as operating revenues in the Income Statement.
C) Property, plant and equipment
Property, plant and equipment mainly consist of the owned cruise vessels. Which are recognised at acquisition
cost less accumulated depreciation and any recognized impairment losses. Cost includes expenditures that are
directly attributable to the acquisition of the asset, with addition of directly attributable borrowing costs for
assets that take a substantial period of time to get ready for their intended use.
Subsequent expenditures are only capitalised if it is probable that the future economic benefits associated with
the item will flow to the Company. Such expenditures include major refits and cost of replacement assets.
Subsequent expenditures are included in the carrying amount of the asset or recognised as a separate asset as
appropriate. Repairs and maintenance which are considered as a regular part of the daily operation of the ships
are charged to the income statement as they occur and are included in Other operating expenses.
Generally, ships drydock every five years. An intermediate survey is performed by a shipping classification society
between the second and third year of the five-year drydocking period. The Company capitalises a substantial
portion of the costs incurred during drydocking, including the survey costs and depreciates those costs on a
straight-line basis from the time of completion of a drydocking or intermediate survey based upon the estimated
time until the next intermediate survey or drydocking. Costs related to routine repairs and maintenance incurred
during drydocking that do not improve or extend the useful lives of the ships are expensed.
The cost of ships under construction include progress payments for the construction of new ships, as well as
design and engineering fees, capitalised interest, construction oversight costs and various owner supplied items.
Expected useful life is determined on the basis of historical data, as well as the standard useful economic lifetimes
in the industry. Residual value is calculated on the basis of estimated sales values for operating assets at the end
of their expected useful life.
Expected useful life is:
Ships 20–40 years
The useful life and residual value are assessed on every balance sheet date and amended as necessary. When
material components of operating assets have different useful lives, these operating assets are recognised as
their various components. These components are depreciated separately over each component’s useful life.
Depreciation is recognised on a straight-line basis over the remaining useful life of the asset. Depreciation
commences when the asset is available for use, being in the location and condition necessary to operate as
intended by management.
An asset is derecognised upon disposal or when the asset is no longer expected to generate any future benefits
to the Company. Gain or loss due to disposal of the asset is calculated as the difference between the net proceeds
from the disposal and the carrying value of the asset and is recognised in the income statement.
Impairment and reversal of impairment
Property, plant and equipment is reviewed for impairment whenever events or significant changes in
circumstances indicate that the carrying amount might not be recoverable. If any such indication exists, the
asset’s recoverable amount is estimated in order to determine the extent of any impairment loss. Where the
asset does not generate cash flows that are independent from other assets, the Company estimates the
recoverable amount of the cash-generating unit to which the asset belongs.
The recoverable amount is the higher of fair value less costs of disposal and value in use. Value in use is based
on the present value of discounted cash flows for each separate CGU for its remaining life. Management
considers the current competitive situation, developments in market rates, and macroeconomic trends when
estimating the future cash flows. In assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset. Fair value less cost of disposal is determined as the amount that would
be obtained from sale of the asset in a regular market, less cost of sales, based on third-party valuation report
from an independent ship broker.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds
its recoverable amount.
An impairment loss is assessed for reversal if there is an indication of a subsequent increase of the recoverable
amount. If such indications exist, a previously recognised impairment is reversed partially or in full if there has
been a change in the estimates used to determine the asset’s recoverable amount.
D) Financial assets - Classification and measurement
Explorer II AS classifies financial assets in the following category, based on the management’s object of acquiring
the asset, and the characteristics of the asset:
Financial assets measured at amortised cost
Primarily receivables with fixed payments of principal and interest, where the financial instrument is not
traded, but held to collect the contractual cashflow. Receivables are carried in successive periods at amortised
cost, using the effective interest method. Receivables with maturities less than 12 months are classified as
current assets. Instruments with more than 12 months maturity are classified as non-current assets.
E) Trade receivables
Trade receivables are measured at amortised cost, which normally is equal to the original invoice amount, as the
interest element using the effective interest method normally is insignificant.
F) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and bank deposits.
Cash and cash equivalents are defined differently in the balance sheet and cash flow presentation. Restricted
cash is included in the balance sheet presentation but not in the cash flow presentation. The difference is
reconciled below the cash flow statement.
G) Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of
business from suppliers. Trade payables are classified as current liabilities if payment is due within one year or
less (or in the normal operating cycle of the business if longer). If not, they are classified as non-current liabilities.
Trade payables are valued at fair value on first-time recognition in the balance sheet. Subsequently, trade
payables are measured at amortised cost using the effective interest method. The interest element is disregarded
if it is immaterial.
H) Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Subsequently, borrowings are
recognised at amortised cost using the effective interest method. The difference between the proceeds (net of
transaction costs) and the redemption value is recognised in the income statement over the expected period of
the borrowings as part of the effective interest.
Borrowings are classified as current liabilities unless there is an unconditional right to defer payment of the
liability for at least 12 months after the reporting date. Repayments due within one year are therefore classified
as current liabilities.
I) Borrowing costs
Borrowing costs directly attributable to the acquisition of operating assets are recognised in the statement of
financial position until the asset is ready for its intended use. Other borrowing costs are expensed on an ongoing
basis. In the cash flow statement, interest paid is classified as part of the financing activities.
J) Current and deferred income taxes
The Company is subject to taxation under the Norwegian tonnage tax regime pursuant to chapter 8 of the
Taxation Act. Under the tonnage tax regime, profit from qualifying operations are exempt from taxes. Financial
results are not exempt from taxation. Taxable profit is calculated on the basis of financial income after deduction
of a portion of financial expenses. The portion is calculated as financial assets in percent of total assets. Financial
losses can be carried forward against positive financial income in later years. Tonnage tax is payable based on
the net tonnage of vessels. Tonnage tax is classified as an operating expense.
Taxation under the Tax tonnage regime requires compliance with strict requirements. Voluntary or compulsory
exit from the regime will result in ordinary taxation of the operating results.
K) Provisions
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past
events and it is probable that the Company will have to make a payment or forfeit an asset in order to settle the
obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses;
however, if a contract is deemed unprofitable a provisions for the potential loss is recognised.
L) LEASE AGREEMENTS (AS LESSOR)
The vessels owned by the Explorer II AS are chartered out on long term contracts. The agreement is classified as
an operating lease, as a significant portion of the risks and rewards of ownership are retained by the company.
Lease assets held pursuant to an operating lease are included in the statement of financial position based on the
nature of the asset.
Note 3 Critical accounting judgments and key sources of estimation uncertainty
Estimates and judgments are reviewed on an ongoing basis and are based on experience, consultation with
experts, trend analyses and several other factors, including forecast future events that are deemed probable
under current circumstances.
3.1 Key accounting estimates and assumptions
The management makes estimates and assumptions about the future. Thus, by their very nature, the accounting
estimates that are made because of the above processes will rarely fully correspond with the outcome.
Estimates and assumptions that have a significant risk of causing a material adjustment to the book values of
assets and liabilities within the next financial year are outlined below.
Ships
Useful economic lifetime
The level of depreciation depends on the estimated economic lifetime of the ships. These estimates are based
on history and experience relating to the Company’s vessel, as well as the vessel of the Group. The estimates are
reviewed at regular intervals. A change in the estimate will affect depreciation in future periods.
Impairment of ships
Tangible assets with a defined economic life are tested for impairment if indicators are identified that would
suggest that the carrying amount of the assets exceed the recoverable amount. The recoverable amount is the
higher of an asset’s fair value less cost of disposal and value in use. The impairment test requires management
assumptions and estimates.
The estimated value in use is determined using the present value of projected cash flows for the cash-generating
units. These calculations require the use of estimates for cash flows, the required rate of return for the period
and the growth factor of the cash flows.
The management does not apply a general growth factor beyond expected inflation for cash flows when testing
for impairment. The total required rate of return used to discount cash flows is calculated as a weighted average
return on equity and the required rate of return on interest-bearing debt. This calculation utilises an estimate of
the risk-free interest rate, risk premium, beta and the liquidity premium.
Fair value less cost of disposal is determined as the amount that would be obtained from sale of the asset in a
regular market, less cost of sales, based on third-party valuation report from an independent ship broker.
Note 4 Property, plant and equipment
Lease agreements
Explorer II AS has entered a bareboat lease agreement with Hurtigruten Expedition Cruises AS (transferred from
Hurtigruten Cruise AS from November 2021) for the lease of the vessels MS Fritjof Nansen and MS Roald
Amundsen, with fixed payments for the next five years. The table below summarize the future nominal
contractual lease payments:
Impairment and reversal of impairment
Tangible assets with a defined economic life are tested for impairment if indicators are identified that would
suggest that the carrying amount of the assets exceed the recoverable amount. The Company performs a
quarterly assessment to determine any indicators of impairment or reversal of previous recognised impairment
for its vessels. An impairment loss is recognised if the carrying amount exceeds recoverable amount. The
recoverable amount is the higher of an asset’s fair value less cost of disposal and value in use.
(in EUR 1 000) Ships
Ships under
construction
Total
Acquisition cost
As at 1 January 2020 383 688 - 383 688
Additions 5 559 - 5 559
As at 31 December 2020 389 247 - 389 247
As at 1 January 2021 389 247 - 389 247
Additions 71 - 71
Disposals (133) - (133)
As at 31 December 2021 389 186 - 389 186
Accumulated depreciation and impairment
As at 1 January 2020 (3 002) - (3 002)
Depreciation (11 763) - (11 763)
As at 31 December 2020 (14 765) - (14 765)
As at 1 January 2021 (14 765) - (14 765)
Depreciation (8 521) - (8 521)
As at 31 December 2021 (23 287) - (23 287)
Book value 31 December 2020 374 481 - 374 481
Book value 31 December 2021 365 900 - 365 899
Useful economic lifetime 20 - 40 years N/A
(in EUR 1 000) 2021 2020
Within 1 year
50 000 50 000
Between 1 and 2 years 50 000 50 000
Between 2 and 3 years 50 000 50 000
Between 3 and 5 years 57 123 57 123
Later than 5 years
- -
IMPAIRMENT TESTS PERFORMED IN 2021
The negative impacts of the Covid-19 pandemic on the travel industry is an impairment trigger. As of 31
December 2021, the Company has assessed the carrying values of the ships for impairment.
Fair value less cost of disposal is determined as the amount that would be obtained from sale of the asset in a
regular market, less cost of sales. The estimated ship values, based on third-party valuation report from an
independent ship broker, is higher than the carrying amount of the ships. No impairment has been recognized in
the financial statements as of 31 December 2021.
Note 5 INCOME TAX
Tonnage tax is calculated based on the ship's tonnage and not income and is therefore classified as an operating
expense.
All of the borrowings in the Company is nominated in EUR, giving no revaluation effect in the financial profit and
loss statement. However, the tax papers are filed in NOK, which gives high revaluation effects in the P&L in NOK
for the borrowings. This in return creates a material difference in profit/(loss) before taxes in EUR vs NOK.
(in EUR 1 000) 2021 2020
Income tax payable, current year - -
Change in deferred tax, current year - -
Total income tax expense - -
Tonnage tax payable related to the shipping company tax schemes
0 6
Total Tonnage tax 0 6
(in EUR 1 000) 2021 2020
Profit/(loss) before tax from operations 29 659 11 708
Tax rate 22 % 22 %
Expected income taxes at statutory tax rate in Norway 6 525 2 576
Non-taxable income (-)
(2 303) -
Gifts, representation and other non-deductable expenses (+)
2 620 -
Effect from change in valuation allowance, tax losses (241) 1 754
Currency translation in tax return 2 560 3 118
Shipping company tax schemes - NO Tax Act only (+/-) (9 161) (7 448)
Income tax expense - -
Note 6 BORROWINGS
NOMINAL AND FAIR VALUE OF BORROWINGS
In February 2020 the EUR 255 million Export Credit Agency facility put in place to finance the Company’s two
new expedition vessels, MS Roald Amundsen and MS Fridtjof Nansen was refinanced with a EUR 300 million 5-
year senior secured bond with a coupon of 3,375%. The bond is secured against the two vessels MS Roald
Amundsen and MS Fridtjof Nansen. The bond was listed on Oslo Stock Exchange on 10
th
July 2020.
MOVEMENT IN BORROWINGS
BOOK VALUE OF COLLATERIZED BORROWINGS
31 December 2021
(in EUR 1 000)
Nominal value
Unamortized
transaction costs
Book value Fair value
Liabilities to financial institutions
300 000 (3 304) 296 696 282 000
Liabilities to group companies
29 197 - 29 197 29 197
Total 329 197 (3 304) 325 893 311 197
31 December 2020
(in EUR 1 000)
Nominal value
Unamortized
transaction costs
Book value Fair value
Liabilities to financial institutions
300 000 (4 375) 295 625 261 450
Liabilities to group companies
18 095 - 18 095 18 095
Total 388 501 (4 375) 313 720 279 545
Movement in borrowings
(in EUR 1 000) 2021 2020
Total borrowings 1 January 313 720 379 373
Cash flows
New financing 11 101 300 000
Repayments - (265 405)
Finance fees paid - (5 425)
Non-cash flow
Convertion to equity - (105 000)
Accumulated interest - 688
Amortisation of borrowing fee 1 071 9 490
Total borrowings 31 December 325 893 313 720
Of which Non-Current Liabilities to group companies 29 197 18 095
Of which Non-Current liabilities 296 696 295 625
Of which first year's instalment on non-current liabilities - -
(in EUR 1 000) 2021 2020
Book value of collaterized assets 365 899 374 481
The collaterized borrowings are secured with the Company's assets.
MATURITY PROFILE OF NOMINAL BORROWINGS
1)
For the intragroup non-current borrowings from Hurtigruten AS of EUR 29.2 million, no downpayment plan is specified in
the loan agreement. In the maturity profile above, it is included in the line “More than 5 years”.
BORROWINGS SPECIFIED BY CURRENCY
COVENANTS
EUR 300 million bond
Hurtigruten Group AS must maintain a Minimum Free Liquidity above EUR 15 million and the issuer Explorer II
AS must maintain a minimum free liquidity above 50% of the next interest and amortisation instalment.
Note 7 Cash and cash equivalents
As of December 31. 2021 there were no restricted deposits included within cash and cash equivalents.
Note 8 Paid-in equity
All shares carry the same rights in the company.
(in EUR 1 000) 2021 2020
Less than one year - -
Between 1 and 2 years 15 000 -
Between 3 and 5 years 45 000 45 000
More than 5 years
1)
269 197 273 095
Total 329 197 318 095
(in 1 000) 2021 2020
EUR 329 197 318 095
(in EUR 1 000) 2021 2020
Cash and cash equivalents 2 547 2 554
Restricted bank deposits - -
Cash and cash equivalents in the cash flow statement 2 547 2 554
(in EUR unless otherwise indicated)
Number of
ordinary
shares
Nominal value
(NOK)
Nominal value
of ordinary
shares
(EUR 1,000)
Share
premium and
other paid-in
c
apital
(EUR 1,000)
Total
As of 1 january 2020 300 101 3 105 000 105 003
-
As of 31 December 2021 300 101 3 105 000 105 003
Shareholder as of 31 December 2021
Hurtigruten Expedition Fleet AS 300 100
Number of
shares
Shareholding
(%)
Note 9 Remuneration
VAT is not included in the fees specified above.
Explorer II AS had no employees in 2021 and 2020. The company's executives receive their salaries and other
remuneration from Hurtigruten Pluss AS.
Note 10 Financial income and expenses
Audit remuneration
(in EUR 1 000) 2021 2020
Statutory audit 12 15
Other assurance services - -
Total 12 15
(in EUR 1 000) 2021 2020
Interest income on current bank deposits - -
Foreign exchange gains 9 35
Finance income 9 35
Interest expenses borrowings 10 061 8 890
Borrowing fees 1 123 10 988
Interest to group companies 758 688
Foreign exchange losses 6 294
Finances expenses 11 947 20 861
Finance expenses – net (11 938) (20 825)
Note 11 Related parties
TRANSACTIONS WITH GROUP COMPANIES
INTRAGROUP BALANCES
(in EUR 1 000) 2021 2020
Operating revenues
Bareboat lease to Hurtigruten Coastal AS 41 712 44 833
Bareboat lease to Hurtigruten Expedition Cruises AS 8 356 -
Total 50 068 44 833
Purchase of services
Hurtigruten Globale Services AS 2 2
Total 2 2
Interest expenses
Interest expenses to Hurtigruten Globale Sales AS 757 688
Total 757 688
(in EUR 1 000) 2021 2020
Current assets
Current receivables from Hurtigruten Globale Sales AS 4 380
4 277
Current receivables from Hurtigruten Coastal AS 100 074 54 044
Current receivables from Hurtigruten Expedition Cruises AS 4 247 -
Total 108 701 58 321
Non-Current liabilities
Non-Current liabilites due to Hurtigruten Globale Sales AS 29 197 18 095
Total 29 197 18 095
Current liabilities
Payables to Hurtigruten Gloabale Services AS 124 117
Payables to Hurtigruten Coastal AS 8
Payables to Hurtigruten Sjø AS 687 665
Payables to Hurtigruten Group AS 452 453
Payables to Hurtigruten Globale Sales AS 141 137
Total 1 412 1 372
Note 12 Financial risk management
MARKET RISK
a) Currency risk
Explorer II AS has limited concentration of currency risk as the external financing is nominated in EURO, and the
company has EURO as its functional currency. The company also has financing from the parent company in EUR.
b) Price risk
The company has no significant price risk as it has limited business activities except for a fixed bareboat lease
agreement with Hurtigruten Expeditions AS.
c) Interest rate risk
The company’s borrowings and deposits are made at floating interest rates. Loans subject to a variable interest
rate present a risk to the company’s overall cash flow, while fixed interest rates expose the company to fair-value
interest rate risk. The company has no specific hedging strategy to reduce variable interest rate risk.
Credit and liquidity risk
The company has some credit risk, given that their source of income comes from one party, i.e. Hurtigruten
Expedition Cruises AS (group company). The current situation with pandemic affecting the industry, has
substantially reduced the Groups earnings, but the Group has secured funding to ensure sufficient liquidity for
all the Groups companies.
Liquidity risk management includes maintaining a sufficient level of liquid assets geared to operational and
investment plans and ensuring the availability of sufficient funding from committed credit facilities. The Finance
function has overall responsibility for managing the Group’s liquidity risk. Rolling liquidity forecasts are prepared
so as to ensure that the Group has sufficient liquidity reserves to satisfy the Group’s obligations and financial
loan covenants.
Note 13 Financial Assets and Liabilities
The following principles has been used for subsequent measurement of financial assets and liabilities
Difference between carrying value and fair value for the non-current interest-bearing debt in 2021 is related to
the bond. The carrying amount for short term receivables and payables has been assessed and does not differ
materially from fair value.
CLASSIFICATION BY IFRS FAIR VALUE HIERARCHY
- Level 1: inputs are quoted prices in active markets for identical assets of liabilities.
- Level 2: inputs are other than quoted prices included within level 1 that are observable for the asset or liability,
either directly or indirectly. This is primarily relevant for our derivatives, where the price normally is set by the
counterpart (bank).
- Level 3: inputs are unobservable inputs for the asset or liability.
For Explorer 2 all cash and cash equivalents are classified within level 1. There were no transfers between the
levels in 2021 or 2020.
Note 14 Events after balance sheet date
There are no material events after balance sheet date that would have any material effect on the financial
statements of the Company.
Balance at 31 December 2021
(in EUR 1 000)
Amortised cost
Total carrying
value
Fair value
Assets as per balance sheet
Trade receivables and other receivables (note 11)
108 701 108 701 108 701
Cash and cash equivalents (note 7)
2 547 2 547 2 547
Total 111 248 111 248 111 248
Liabilities as per balance sheet
Non-current interest bearing debt (note 6)
(325 893) (325 893) (311 197)
Trade and other liabilities (note 11)
(4 984) (4 984) (4 984)
Total (330 877) (330 877) (316 180)
(in EUR 1 000)
Amortised cost
Total carrying
value
Fair value
Assets as per balance sheet
Trade receivables and other receivables (note 11)
58 337 58 337 58 337
Cash and cash equivalents (note 7)
2 554 2 554 2 554
Total 60 891 60 891
60 891
Liabilities as per balance sheet
Liabilities to financial institutions (note 6)
(313 720) (313 720)
(279 545)
Trade and other liabilities (note 11)
(5 036) (5 036)
(5 036)
Total (318 756) (318 756)
(284 581)
RESPONSIBILITY STATEMENT
2021.
The financial statements for the Company have been prepared in accordance with International Reporting
Standards (IFRS) as adopted by the European Union.
We confirm to the best of our knowledge that:
The financial statements for the Company for the year ended 31 December 2021 have been prepared
in accordance with applicable accounting standards
The financial statements give a true and fair view of the assets, liabilities, financial position and results
as of December 31, 2021 for the Company
position of the Company and includes a description of the principal risks and uncertainties the Company
faces.
The Board of Directors of Explorer II AS
Oslo, 29 April 2022
Torleif Ernstsen Kenneth Andersen
Chairman Board Member
PricewaterhouseCoopers AS, Dronning Eufemias gate 71, Postboks 748 Sentrum, NO-0106 Oslo
T: 02316, org. no.: 987 009 713 MVA, www.pwc.no
Statsautoriserte revisorer, medlemmer av Den norske Revisorforening og autorisert regnskapsførerselskap
To the General Meeting of Explorer II AS
Independent Auditor’s Report
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of Explorer II AS (the Company), which comprise the
statement of financial position as at 31 December 2021, the statement of profit and loss, statement of
comprehensive income, statement of changes in equity and cash flow statement for the year then
ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion
the financial statements comply with applicable statutory requirements, and
the financial statements give a true and fair view of the financial position of the Company as at
31 December 2021, and its financial performance and its cash flows for the year then ended in
accordance with International Financial Reporting Standards as adopted by EU.
Our opinion is consistent with our additional report to the Audit Committee.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Financial Statements section of our report. We are independent of the Company as
required by laws and regulations and the International Ethics Standards Board for Accountants’
International Code of Ethics for Professional Accountants (including International Independence
Standards) (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
To the best of our knowledge and belief, no prohibited non-audit services referred to in the Audit
Regulation (537/2014) Article 5.1 have been provided.
We have been the auditor of the Company for 5 years from the election by the general meeting of the
shareholders on 18 May 2017 for the accounting year 2017.
Independent Auditor's Report - Explorer II AS
(2)
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial statements of the current period. These matters were addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Key Audit Matter How our audit addressed the Key Audit Matter
Impairment Assessment for vessels
Refer to notes 3.1 and 4, where
management explains how the values of
ships have been assessed.
The company owns two hybrid-power
expedition ships. They have a combined
carrying value of EUR 365 900 thousand.
The ships comprise approximately 77% of
total assets as of 31 December 2021.
Management identified the negative
effects of the Covid-19 pandemic on the
travel industry as a triggering event.
Consequently, the net book values of the
ships were evaluated for impairment. In
order to assess fair value less costs of
disposal, management obtained valuation
certificates for the vessels from a broker.
No impairment was recorded.
We focused on this area due to the
magnitude of amounts and the judgement
inherent in the assessment of ship values.
We evaluated and challenged management’s
assessment of impairment for vessels. We assessed
management’s accounting policy against IFRSs and
obtained explanations from management as to how the
specific requirements of the standards, in particular
IAS 36 Impairment of assets, were met. We also
assessed the consistency year on year of the application
of the accounting policy.
We satisfied ourselves that the external broker had
both the objectivity and the competence to provide the
estimate. We also satisfied ourselves that the broker
was provided with relevant facts in order to determine
such an estimate, by testing key inputs such as build
date, build location and certain key specifications back
to the ships register.
We evaluated if management sufficiently understood
the valuations from third party brokers and the basis of
which they were prepared. Examples of factors we
discussed with management were contract coverage,
future capex in relation to new requirements and the
liquidity in the market for similar vessels. We also
performed a comparison to other available data where
possible.
We read notes 3.1 and 4 and found that the disclosures
were appropriate and in accordance with IFRS
requirements.
No matters of consequence arose from the procedures
described above.
Independent Auditor's Report - Explorer II AS
(3)
Other Information
The Board of Directors and the Managing Director (management) are responsible for the information
in the Board of Directors’ report. The other information comprises information in the annual report,
but does not include the financial statements and our auditor’s report thereon. Our opinion on the
financial statements does not cover the information in the Board of Directors’ report.
In connection with our audit of the financial statements, our responsibility is to read the Board of
Directors’ report. The purpose is to consider if there is material inconsistency between the Board of
Directors’ report and the financial statements or our knowledge obtained in the audit, or whether the
Board of Directors’ report otherwise appears to be materially misstated. We are required to report if
there is a material misstatement in the Board of Directors’ report. We have nothing to report in this
regard.
Based on our knowledge obtained in the audit, it is our opinion that the Board of Directors’ report
is consistent with the financial statements and
contains the information required by applicable legal requirements.
Responsibilities of The Board of Directors for the Financial Statements
The Board of Directors (Management) is responsible for the preparation of financial statements that
give a true and fair view in accordance with International Financial Reporting Standards as adopted by
the EU, and for such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, management is responsible for assessing the Company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless management either intends to liquidate the Company or
to cease operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:
• identify and assess the risks of material misstatement of the financial statements, whether due
to fraud or error. We design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is higher than for one
Independent Auditor's Report - Explorer II AS
(4)
resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
• obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control.
• evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• conclude on the appropriateness of management’s use of the going concern basis of
accounting, and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Company’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the financial statements
or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the
audit evidence obtained up to the date of our auditor’s report. However, future events or
conditions may cause the Company to cease to continue as a going concern.
• evaluate the overall presentation, structure and content of the financial statements, including
the disclosures, and whether the financial statements represent the underlying transactions
and events in a manner that achieves a true and fair view.
We communicate with the Board of Directors regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide the Audit Committee with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with the Board of Directors, we determine those matters that were of
most significance in the audit of the financial statements of the current period and are therefore the
key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes
public disclosure about the matter or when, in extremely rare circumstances, we determine that a
matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
Report on compliance with Regulation on European Single Electronic Format
(ESEF)
Opinion
We have performed an assurance engagement to obtain reasonable assurance that the financial
statements with file name Annual Report Explorer II AS 2021.xhtml have been prepared in accordance
with Section 5-5 of the Norwegian Securities Trading Act (Verdipapirhandelloven) and the
accompanying Regulation on European Single Electronic Format (ESEF).
Independent Auditor's Report - Explorer II AS
(5)
In our opinion, the financial statements have been prepared, in all material respects, in accordance
with the requirements of ESEF.
Management’s Responsibilities
Management is responsible for preparing and publishing the financial statements in the single
electronic reporting format required in ESEF. This responsibility comprises an adequate process and
the internal control procedures which management determines is necessary for the preparation and
publication of the financial statements.
Auditor’s Responsibilities
For a description of the auditor’s responsibilities when performing an assurance engagement of the
ESEF reporting, see: https://revisorforeningen.no/revisjonsberetninger
Oslo, 29 April 2022
PricewaterhouseCoopers AS
Stig Lund
State Authorised Public Accountant
(This document is signed electronically)