Eolus Vind is a leading Nordic wind pow- er developer. Eolus creates value at every level of project development, establish- ment and operation of renewable energy facilities. We offer attractive and competi- tive investment opportunities in the Nordic region, Baltic countries and the US to both local and international investors.

Founded in 1990, Eolus has been in- volved in the construction of more than 500 of the approximately 3,400 wind ­turbines now operating in Sweden. The Eolus Group currently has customer contracts for asset management services comprising some 350 MW. Eolus Vind AB has about 6,400 shareholders. Eolus’s Class B share is traded on Nasdaq Stockholm, Small Cap.

Eolus Vind AB Box 95, SE-281 21 Hässleholm, Sweden Street address: Tredje Avenyen 3 Tel: +46 (0)10-199 88 00 E-mail: [email protected] www.eolusvind.com

ANNUAL REPORT 2016/2017 THE PAST YEAR

SIGNIFICANT EVENTS DURING THE FISCAL YEAR

RECORD VOLUME IN NORWAY GERMAN KGAL SELECTED EOLUS In November 2016, Eolus was granted a final permit for the In December 2016, Eolus signed an agreement with the ­German Norwegian Øyfjellet project. This is Eolus’ largest permitted asset- and investment manager, KGAL, regarding divestment of project to date, with capacity of up to 330 MW and estimated the ­Gunillaberg and Lunna wind farms. The transaction totaled generation of approximately 1.4 TWh per year. Wind measure- 15.4 MW, divided between seven Vestas V100-2.2 MW wind ments and efforts to optimize the project are currently taking turbines. This is KGAL’s first transaction in Sweden. place to maximize generation and economic value. Both wind farms were handed over in August 2017. Eolus will provide asset management services for both of the farms.

EFFICIENT DEVELOPMENT OF THE JENÅSEN WIND FARM In May 2017, Eolus signed an agreement with Munich Re ­regarding divestment of the Jenåsen wind farm which is under construction in the Municipality of Sundsvall. This is Eolus’s 92.8 ­largest transaction to date, with a combined capacity of 79 MW. During the fiscal year, the In October 2016, Eolus signed an agreement with E.ON Elnät equivalent of 36.8 wind turbines ­regarding grid connection for the wind farm, and an agreement with a combined capacity of with Vestas for the delivery of 23 V126-3.45 MW wind turbines 92.8 MW were handed with a total height of 190 meters. The ongoing investments to over to customers. connect Jenåsen to the grid will also present opportunities to 72.2 connect other wind farms in the area. Eolus owns several projects­ During the fiscal year, in the area. All electricity generated by the Jenåsen wind farm is Eolus deployed 25 wind covered by a ten-year Power Purchase Agreement with Google turbines with a combined and the farm is scheduled for completion in ­summer 2018. capacity of 72.2 MW.

MISSED OPPORTUNITY FOR OFFSHORE WIND POWER In December 2016, the Swedish Government decided not to grant a permit – based on the Environmental Code – for the Blekinge Offshore wind power project, in which Eolus owns a 56% share. WIND WALL The application comprised a project with up to 2,500 MW capacity. – NEW ACQUISITION IN THE US The Government’s negative decision, with reference to the Swedish In December 2016, Eolus acquired a 60% in- Armed Forces’ activities, represents a missed opportunity to add terest in Wind Wall Development LLC through green electricity generation in Electricity Price Area 4, in which electrici- its Eolus North America Inc subsidiary. Wind ty consumption exceeds generation. It also means that many new jobs Wall Development is planning to establish will not be created. Eolus’ objective – to find a balance ­between about 40 MW of wind power in Tehachapi, ­national defense interests and the community benefits ­California, in the US. In connection with the of renewable electricity generation and jobs ­acquisition, Eolus placed an order for the – remains firm. Blekinge Offshore will, therefore, ­delivery of sufficient wind power components continue to monitor potential business to ­receive a full value Production Tax Credit opportunities, as well as market and (PTC) for renewable energy in the US. community developments.

2 ANNUAL REPORT EOLUS VIND AB 2016/2017 THE PAST YEAR

CONTENTS

Significant events during the fiscal year...... 2 Five-year summary...... 3 Message from the CEO...... 4 Eolus in brief...... 6 Market...... 8 Customer groups...... 11 Project development segment...... 12 Project development segment – customer case...... 19 IGLASJÖN AND LÅNGMARKEN HANDED OVER TO CUSTOMERS Asset management segment...... 20 During the fiscal year, the Iglasjön and Långmarken wind farms were completed and handed Electricity generation segment...... 21 over to customers. When Iglasjön, comprising eight Vestas V112-3.3 MW wind turbines with Repowering...... 23 a combined capacity of 26.4 MW, was handed over to Munich Re, Eolus passed the 500 mark Employees and society...... 24 for established turbines. Långmarken, comprising eight Vestas V126-3.3 MW wind turbines, Financial summary...... 27 was handed over to Mirova/the European Investment Bank, Kalmar County Council and the City of Malmö. Key figures for the Group...... 27 Share and ownership structure...... 28 Management...... 30 EOLUS’S CUMULATIVE INSTALLED CAPACITY Directors’ Report...... 32 MW Corporate Governance Report...... 37 900 800 Consolidated statement of income...... 40 700 Consolidated statement 600 of other comprehensive income...... 41 500 400 Consolidated statement 300 of financial position...... 42 200 Consolidated statement 100 of changes in equity...... 44 0 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 Consolidated Installed capacity during the fiscal year + Total installed capacity cash-flow statement...... 45

MW Parent Company income statement.....46 900 Parent Company statement FIVE-YEAR SUMMARY of other comprehensive income...... 47 800 SEK M 2016/2017 2015/2016 2014/2015 2013/2014 2012/2013 Parent Company balance sheet...... 48 700 Net sales 1,065.7 693.4 1,502.1 465.8 1,204.9 Parent Company statement 600 of changes in equity...... 50 Operating profit/loss 40.2 -15.9 90.0 41.5 146.7 500 Parent Company cash-flow Profit/loss before tax 34.2 -29.1 75.2 13.1 135.3 400 statement...... 51 Net profit/loss for the year 24.5 -23.9 80.0 9.9 141.6 300 Notes...... 52 Earnings/loss2011/2012 per share,2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 Signatures...... 80 before and after dilution, SEK 1.02 -0.92 3.25 0.44 5.75 Auditor’s Report...... 81 No. of constructed and operational turbines 25 14 33 27 30 Board of Directors...... 84 Constructed and operational Glossary...... 86 turbines, MW 72.2 37.7 68.6 53.0 62.1 Annual General Meeting, financial Electricity generation, GWh 58.6 123.6 242.3 172.1 220.9 calendar, definitions of alternative performance measures...... 87

ANNUAL REPORT EOLUS VIND AB 2016/2017 3 MESSAGE FROM THE CEO

EOLUS IS FIRMLY POSITIONED FOR A FUTURE DOMINATED BY RENEWABLES

“The cost per megawatt-hour has continued to fall, and wind power is now a seriously competitive source of energy with the absolute lowest cost for new establishments.”

CEO Per Witalison opening the Gunillaberg wind farm in October 2017.

4 ANNUAL REPORT EOLUS VIND AB 2016/2017 MESSAGE FROM THE CEO

Due to a strong finish, we can summarize a In the past fiscal year, we established 25 tur- sessing Eolus’s performance, monitoring the fiscal year in which we achieved most of the bines with a combined capacity of 73 MW. development of our high-priority projects will goals we set ourselves at the beginning of the However, the 25 turbines that we expect to become increasingly important. We have year. The year’s transactions mean that we establish during the 2017/2018 fiscal year will therefore begun to report the current status of successfully delivered wind farms to interna- have a combined capacity of 84 MW. On aver- these projects in our interim reports and on tional investors such as Munich Re, Mirova, age, the turbines will be 16% larger than in the our website. For a summary and description the European Investment Bank and KGAL, as preceding year. Despite the same number of of the projects, refer to pages 14–17. Over well as public players and private investors in turbines year-on-year, the transaction volume the next few years, the estimated transaction Sweden. will increase because the turbines are larger. ­volume of these eight projects is about SEK Technology is advancing fast and over the 9 billion. In addition to these projects, Eolus’s In addition to newly established turbines, we past six months, several manufacturers have project portfolio also contains a number of divested 21 MW net of our own facilities during launched models with a capacity of over 4 MW high-­quality, smaller projects with high realiza- the year. In two years, divestments have re- and rotor diameters of about 150 meters. tion potential. duced our own holding from 58 to 18 MW. The wind farms were largely divested at their The cost per megawatt-hour has continued to The divestment process for the next two pro­ carrying amounts. The carrying amount of fall, and wind power is now a seriously com- jects in our Sundsvall cluster – Kråktorpet and ­remaining facilities is just over SEK 100 M, petitive source of energy with the absolute Nylandsbergen – has moved forward and we corresponding to their estimated market value. lowest cost for new establishments. Since are aiming to finalize transactions with both The locations of several remaining facilities electricity prices have begun to rise and the customers and suppliers over the next few have the potential for being replaced by new playing field for electricity certificates is now in months. Both projects are expected to be modern turbines within a few years. The di- place, development may move fast. In au- ­established and deployed during the 2019 vestments have reduced the amount of tied- tumn, several large Nordic wind power trans- ­calendar year. up capital and released major resources for actions were announced. The Electricity investment in future projects. ­Certificate System will introduce higher quota With net cash of SEK 168 M, an equity/assets obligations for 2018 and 2019. The certificate ratio of 73% and an order backlog of more Establishment of the Jenåsen wind farm is in surplus is expected to continue falling over the than SEK 1 billion, Eolus is firmly positioned for progress. The farm comprises 23 turbines with next few years. Volumes from the coming new, a future increasingly dominated by renewable a combined capacity of 79 MW. Construction large-scale facilities will not be available until electricity generation in all of our high-priority is progressing according to schedule. Roads 2020 and onwards. In a market where buyers markets. and foundations are now in place and grid-­ subject to quotas have a legal obligation to connection construction is ongoing. The new purchase a certain, generally known, volume national grid substation in Nysäter is under every year, I believe that the price of certifi- construction. The farm is scheduled for han- cates will rise in the short to medium term. In PER WITALISSON dover to Munich Re in summer 2018. In addi- the long-term, the price will be determined by Chief Executive Officer tion to Jenåsen, the dual turbine Vilseberga the level required by new facilities on top of the project of 4 MW is also under construction. wholesale electricity price in order to become The project is expected to be ready for hando- profitable. ver to our customers during the second quar- ter of our 2017/2018 fiscal year. Our technical There is a clear trend that larger turbines and and financial management services for cus- larger farms are generating the highest profits tomer facilities are growing. At the end of the for investors. Eolus’s resources, in terms of accounting period, Eolus managed a total of capital and time, will therefore be increasingly 351 MW. At least 83 MW will be added in the focused on a number of large high-priority coming fiscal year, due to the customer con- projects. This will lead to major fluctuations in tracts signed for projects under construction. our sales, earnings and cash flows. When as-

ANNUAL REPORT EOLUS VIND AB 2016/2017 5 EOLUS IN BRIEF

MAJOR CUSTOMERS. HIGH DEMANDS. NO PROBLEM FOR EOLUS

EOLUS IS A LEADING NORDIC WIND POWER DEVELOPER. Eolus aims to create value at all levels of project development, establishment and operation of facilities for renewable energy and energy storage, and to offer attractive and competitive investment objects to both local and international investors in the Nordic region, Baltic countries and the US. Since the company’s inception in 1990, Eolus has been involved in the construction of 516 of the approximately 3,400 wind turbines across Sweden. Eolus divests most of its projects to customers as turnkey facilities. Eolus also offers a sophisticated concept for wind power asset management services.

BUSINESS CONCEPT operations in the Nordic region, Baltic coun- and Vindin. In December 2016, the Swedish Eolus aims to create value at all levels of proj- tries and the US. Eolus generates electricity Government decided not to grant a permit for ect development, establishment and operation from proprietary wind power facilities and the the project, under the stipulations of the Envi- of facilities for renewable energy and energy holdings of these facilities are always for sale. ronmental Code. Although the activities of storage, and to offer attractive and competitive In addition, Eolus offers a full range of asset ­Blekinge Offshore have been reduced, the investment objects to both local and interna- management services to investors, enabling company will continue to monitor future busi- tional investors in the Nordic region, Baltic carefree ownership of wind power facilities ness opportunities for the project. At August countries and the US. constructed by either Eolus or other operators. 31, 2017, Eolus’s Swedish project portfolio The company has three operating segments: contained sites for 934 onshore wind turbines EXTENSIVE EXPERIENCE project development, asset management and with a potential capacity of approximately Since the company’s inception in 1990, electricity generation. Project development is 2,950 MW. Most projects in the foreign port­ ­Eolus’s mission has been to develop and con- by far the dominating segment. folio are in the pre-study or project develop- struct wind power facilities that are divested to Eolus’s strengths are the localization, ment phase, except for Eolus’s largest permit- investors as turnkey solutions. Eolus therefore planning, construction and divestment of turn- ted project to date, Øyfjellet, in Norway. In has extensive experience and expertise in the key wind power facilities in a range of sizes, as terms of volume, the US project portfolio is the construction of wind power facilities and a well as asset management. In combination, largest foreign portfolio. For more information broad network of landowners, authorities, the three operating segments constitute a about the foreign business operations, refer to ­investors, sub-contractors and wind turbine complete and competitive market offering. page 18. manufacturers. A diverse and strong customer As more players have seen the opportunities base is one of the main reasons for the com- offered by developing and investing in renew- OBJECTIVES pany’s success and strong market position. able electricity generation, Eolus has met their Vision Eolus has established a combined capacity of demand. Eolus’s vision is to be the most profitable 845 MW, which is about 13% of the wind ­renewable energy developer and an attractive power constructed in Sweden. THE EOLUS GROUP business partner in the transition to a sustain- The Group comprises the Parent Company, able society. BUSINESS MODEL Eolus Vind AB (publ) and such wholly owned Eolus’s mission is to develop and construct subsidiaries as Ekovind AB, Svenska Vindbo- Financial objective wind power facilities in favorable wind loca- laget AB, Eolus Elnät AB, Eolus Wind Power Eolus aims to achieve an annual return of at tions. Projects are mainly realized through the Management AB, SIA Eolus, Eolus Vind Norge least 10% of equity after tax. divestment of turnkey facilities. The business A/S, Eolus North America Inc, Eolus Oy and model also allows parts of the project portfolio the sub-subsidiary OÜ Baltic Wind Energy. Operational objectives to be realized through the sale of project rights In addition to the above companies, the • that our stakeholders (customers, employ- for permitted projects and projects under de- Group also includes partly owned Blekinge ees, suppliers and shareholders) perceive us velopment. In connection with the 2017 Annu- Offshore AB and several other companies that as an attractive and market-leading wind al General Meeting, the Articles of Association have been formed to manage the develop- power developer in the markets in which we were amended to also include activities related ment of specific wind power projects. Eolus operate. to other forms of renewable energy, and to en- owns 56% of the shares in Blekinge Offshore. • to establish a profitable foreign business ergy storage. The company currently conducts The remaining shares are owned by Vingkraft ­operation.

6 ANNUAL REPORT EOLUS VIND AB 2016/2017 EOLUS IN BRIEF

STRATEGY Eolus normally secures user rights through Eolus’s core business is to construct wind leasehold agreements, rather than owning the power facilities in favorable wind locations land where turbines are constructed. Eolus’s and transfer them to customers as turnkey strategy is to offer landowners a commercial solutions. lease that is normally paid as an annual lease The strategy for the company’s project equivalent to a certain percentage of the value development is to focus on projects that are of the electricity generated by the facility. In most likely to be realized, and to develop them some projects, neighboring landowners are with highest possible quality at the lowest pos- also offered lease revenue. sible cost. This increases opportunities for of- fering end-investors facilities that provide the lowest-possible cost per megawatt-hour over We take responsibility for the transition to a We strive for dialog and engagement with the life of the facility. A careful selection pro- sustainable society. We act responsibly stakeholders affected by our wind cess is therefore vital, combined with an early in our contact with authorities, power projects and offer oppor­ local residents, customers tunities for investment in commercial focus. This ensures that projects TY ILI CO and shareholders. IB M ­renewable energy. with the greatest potential receive sufficient S M N IT priority. A linchpin of project development is to O M P S E only implement projects on sites where the N E T company would actually be interested in own- R

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at least one year, and by the expertise and ex- we will inspire the trust perience of our employees. Eolus therefore we also aim to offer our of shareholders, ­customers, conducts wind measurements for all major customers a profitable banks, authorities, land projects. ­investment and favorable terms for the landowners affected. owners and the public.

ANNUAL REPORT EOLUS VIND AB 2016/2017 7 MARKET

THE REVOLUTION IS HERE – RENEWABLES ARE CHEAP

A revolution is taking place in the global energy electricity generation will not require subsidies These three countries have accumulated the market. The cost of renewable power genera- by that time. Eolus is convinced that these most installed wind power capacity worldwide. tion has fallen sharply, and this trend will prob- events will take place even faster. Close to 62% of all wind power in the world ably continue. Development is thereby moving has been established in these three countries. toward an increasing share of renewable NEW OPPORTUNITIES, NEW This rapid development has meant that wind ­generation capacity, with differences in various TECHNOLOGIES power now represents an increasing and parts of the world. According to Bloomberg This trend is challenging existing business growing share of the total global energy mix. New Energy Finance’s New Energy Outlook models and presenting new business oppor- 2017, global power demand will grow 58% tunities for anyone who wishes to embrace STRONG GLOBAL DRIVING FORCES between now and 2040, while energy efficien- change, rather than sticking to past truths Following the Paris Agreement and subse- cy improvements will decouple power demand and old business models. quent ratification of the long-term goal to hold and GDP. The same report predicts that 72% Modern wind power technology is rela- the average rise of global temperature to well of the new power generation capacity be- tively new compared with hydro or nuclear below 2°C, a strong global willingness to tran- tween now and 2040 will come from renew- power. The technological advancements of re- sition not only the energy sector but also other able sources, with wind as the highest source, cent years include longer rotor blades, higher sectors of society became apparent. This followed by solar. Wind and solar combined towers and higher generating capacity, result- force is far stronger than the objectives and will account for 34% of electricity generation ing in more efficient turbines that can harness actions of national governments. This is partic- worldwide. In 2016, wind power already ac- more energy. Rapid technological advance- ularly evident in the US where, despite the counted for most of the new power generation ments combined with more efficient construc- ­Administration’s decision to withdraw from the in Europe, according to statistics from Wind- tion methods, for example, have reduced the Paris Agreement, individual states, cities and Europe. investment cost per megawatt-hour by ap- businesses are standing firmly by the Agree- proximately 75% since the advent of wind ment and the need for action. One state that SUBSTANTIAL PRICE REDUCTIONS power in the 1980s. has adopted the objectives of the Paris Agree- The cost of establishing both wind and solar ment is California, where Eolus is conducting will continue to fall sharply, according to TROIKA DOMINATES project development operations. Bloomberg, and lead to a significant decline in According to statistics from the Global Wind coal power investments. The cost of establish- Energy Council (GWEC), global installed wind LOW-PRICE ONSHORE GENERATION ing solar power is expected to drop by 66% power capacity in 2016 totaled 54,642 MW. Onshore wind power is one of the cheapest between now and 2040, while the cost of on- Cumulative installed capacity reached methods for adding new generation capacity, shore wind power is expected to drop by 486,790 MW. This is the second-highest according to the Swedish Energy Agency’s 47% during the same period. According to ­annual development figure after the record-­ ­report, Generation costs for wind power, pub- Bloomberg, offshore wind will fall fastest, at a breaking year of 2015. In 2016, China, the US lished in September 2016. The cost of estab- rate of 71% by 2040. In the 2016 version of and Germany remained the countries with the lishing new wind power is now lower than the the World Energy Outlook, the International highest share of cumulative installed capacity. cost of establishing new nuclear power, which Energy Agency (IEA) predicts that these cost China accounted for 42.8% of installed capac- is shown by a comparison with the strike reductions will mean that most renewable ity, the US for 15.0% and Germany for 10.0%. price for electricity (corresponding to nearly

PROPORTION OF INSTALLED CAPACITY PROPORTION OF INSTALLED CAPACITY TOTAL GLOBAL CUMULATIVE INSTALLED IN 2016, GLOBALLY IN 2016, PER EU COUNTRY WIND POWER CAPACITY, 2012-2016 Total 54,642 MW Total 12,490 MW MW Others, 12.3% Others, 11.5% Germany, 43.6% 500,000 486,790 Canada, 1.3% 450,000 432,680 UK, 1.3% China, 42.8% Italy, 2.3% Netherlands, 1.6% Ireland, 2.3% 400,000 369,862 Turkey, 2.5% Sweden, 3.9% 350,000 318,697 France, 2.9% 300,000 282,850 Finland, 4.6% Brazil, 3.7% 250,000 India, 6.6% 200,000 Poland, 5.5% 150,000 100,000 Germany, 10.0% UK, 5.9% 50,000 Netherlands, 7.1% 0 US, 15.0% France, 12.5% 2012 2013 2014 2015 2016

Source: GWEC Source: Wind Europe, Wind in power 2016 European Source: GWEC statistics

8 ANNUAL REPORT EOLUS VIND AB 2016/2017 MARKET

NET GENERATION OF ELECTRICITY IN SWEDEN, 2012–2016 TRENDS IN THE SWEDISH TWh 2012 2013 2014 2015 2016 WIND POWER MARKET: Hydropower 78.0 60.8 64.2 73.9 61.2 • Fewer but larger establishments • Foreign investors account for a Nuclear power 61.4 63.6 62.2 54.3 60.5 major share of the development Wind power 7.2 9.9 11.5 16.6 15.4 • Sharp decline in establishment Cogeneration 8.7 8.6 6.9 7.1 7.8 costs Cogeneration in industry 6.2 6.0 5.9 5.9 5.9 • Major need for professional asset Condensation power 0.6 0.6 0.5 0.4 0.6 management for facilities, including long-term service agreements Total net generation 162.1 149.5 151.2 158.3 151.5 Source: Swedish Energy Agency

SEK 1/kWh) that the UK Government has ­financing for the development of renewable ty system. In 2006, Swedish wind power gen- promised the owners of the Hinkley Point C electricity generation facilities. In the Nordic erated 1 TWh compared with about 15.5 TWh nuclear power plant over 35 years. In Sweden, market, such companies as Google and Norsk in 2016. According to Swedish Wind Energy, a the establishment of onshore wind power cur- Hydro have actively sought Wind Power Pur- forecasted generation of over 17 TWh will rently lies far below that level. This also applies chase Agreements. Norsk Hydro, for example, break new records in 2017. In 2016, wind to many others markets. signed a 19-year PPA for 650 MW from Mark- power accounted for more than 10% of Swe- bygden Ett in autumn 2017. Eolus has signed den’s total electricity generation and for some DECLINING OFFSHORE COSTS two PPAs with Google for 59 plus 79 MW, for years now, has been the third-largest method Offshore wind power holds major potential in which the latter pertains to Jenåsen which is of electricity generation in the country after both the Nordic region and globally, and plays currently under construction and scheduled for ­hydropower and nuclear power. At the end of a key role in the shift toward more renewable completion during summer 2018. Through 2016, there was about 6,500 MW of installed electricity generation. The cost of establishing PPAs signed all over the world, Google is now wind power capacity­ in Sweden, according to offshore wind power has previously been high, the world’s largest corporate buyer of renew- statistics from the Swedish Energy Agency. At but is now falling rapidly. In 2017, offshore able electricity. the end of 2016, Sweden’s wind power devel- wind power projects were auctioned in Ger- opment was ranked eleventh in the world. In many, in which the winning bidder would not NORWEGIAN AND US MARKETS Europe, Sweden is ranked sixth after Germa- require a subsidy. In November 2017, following ATTRACTIVE ny, Spain, the UK, France and Italy. winning bids in offshore wind auctions, Vatten- Eolus is active in several markets outside of fall ordered 113 8-MW turbines for three Dan- Sweden. Norway and the US currently offer ELECTRICITY CERTIFICATES: ish projects. Eolus is following this develop- the most attractive foreign markets. In addition HOW THE SYSTEM WORKS ment carefully and will continue to monitor to high-priority projects in the Swedish market, The Swedish support system for renewable future opportunities for the Blekinge Offshore Eolus has now identified high-­priority projects electricity generation is the Electricity Certifi- project with a capacity of up to 2,500 MW. in these markets in the project portfolio. cate System. This is a technology-neutral sup- port scheme for generation from wind power, POWER PURCHASE AGREEMENTS EUROPE’S LOWEST GENERATION some hydropower, some biofuels, solar ener- – INCREASINGLY COMMON AND COSTS gy, geothermal energy, tide and wave energy IMPORTANT The Swedish electricity market is currently and peat in combined heat and power plants A growing trend in the Swedish and European characterized by historically low prices for (CHPs). Electricity generators in the Electricity electricity markets is Power Purchase Agree- electricity. This creates challenges for all types Certificate System are awarded certificates in ments (PPA). This is a contract between an of power generation. Decisions to decommis- relation to their facility’s generation over 15 electricity generator and an electricity purchas- sion Swedish nuclear reactors before the end years, where one megawatt-hour of electricity er to buy electricity directly from specific facili- of their service life are one example, as well as generated carries the right to one certificate. ties, usually from wind power or photovoltaic the financial complications for wind power The Electricity Certificate System is not linked facilities. Contractual terms can vary from five owners who invested when the cost base was to the national budget and is financed by a years and upwards, with fixed predetermined considerably higher than it is today. Wind pow- surcharge on electricity prices for private con- prices for all electricity generated by the facility. er facilities established today can withstand sumers and for commercial and service com- Long-term agreements with predetermined considerably lower electricity prices than those panies. Other countries have opted for a fixed prices create security for electricity buyers who established six-seven years ago. According to price per megawatt-hour generated, linked to can estimate their costs during the contractual the Swedish Energy Agency’s report Genera- the respective country’s national budget. De- term. The agreements create security for both tion costs for wind power, Sweden has the mand for electricity certificates is regulated by the owner of the facility and the builder by de- lowest wind power generation costs in Europe. a quota obligation, which determines the num- fining the revenue terms. The rapid cost reduction for wind power con- ber of electricity certificates that an electricity This type of agreement is already com- struction in Sweden has attracted interest from consumer needs to purchase in relation to mon in the US and will become more frequent countries with higher construction costs that their annual electricity consumption. By chang- in Europe as wind power establishments be- want to understand how costs can be low- ing the quota obligation, the Swedish Riksdag come fewer but larger. Particularly for investors ered. can control the price of electricity certificates. who do not have electricity generation as their Swedish wind power has developed rap- There is no quota obligation or electricity certif- core business. Power Purchase Agreements idly, and led to a sharp increase in the share of icate cost for electricity-intensive industry in will play a key role in obtaining continued wind-power electricity in the Swedish electrici- Sweden. This enables industry to benefit from

ANNUAL REPORT EOLUS VIND AB 2016/2017 9 MARKET

low electricity prices due to the ongoing ex- pansion of renewable energy. The Electricity Certificate System was introduced in 2003 and Norway became affiliated in 2012. Within the framework of the energy agreement reached by five parliamentary parties, Sweden has decided to extend its Electricity Certificate System by adding 18 TWh of new electricity cer- tificates until 2030. In Norway, facilities established after 2021 will not be included in the System. Since wind power is one of the cheapest methods for adding new electricity generation, it can be assumed that most in- transmission capacity in order to enable ex- INCREASED CONSUMPTION PREDICTED vestments will be made in wind power. ports. The future potential to store electricity Despite energy-efficiency improvements, elec- will present major opportunities for Sweden tricity consumption in the Nordic region is NEWLY DESIGNED SYSTEM and Norway to increase their share of intermit- expected to increase by 21 TWh by 2030, In April 2017, the Swedish and Norwegian tent electricity sources, such as wind and solar according to Bixia’s long-term forecast (pub- governments reached an agreement on how power. lished in November 2017). The increase is at- the Swedish extension of the Electricity Certifi- Despite historically low prices for electrici- tributable to a growing population, more elec- cate System should be designed in relation to ty and electricity certificates, the development tric vehicles and the establishment of more the existing joint Swedish-Norwegian certifi- of recent years is testament to the potential of data centers. Compared with its long-term cate system. The agreement has created clari- the Swedish wind power market. Particularly forecast from November 2016, Bixia has re- ty in relation to future conditions in the certifi- for a company with Eolus’s extensive experi- vised upward its projected growth in electricity cate market. The Electricity Certificate System ence which, in addition to project development consumption. Bixia predicts falling Swedish will have higher quota obligations in 2018 and and turnkey facilities, can also offer investors a electricity prices until 2019 followed by rising 2019, while the declining surplus of certificates comprehensive asset management concept. prices until 2030, with the greatest increase in is expected to continue in coming years. New Despite varying conditions from country to 2020-2022. The price forecast for 2023 is volumes from the large additional facilities will country, there is major potential in other mar- EUR 32 per MWh. Bixia predicts an average not be available until 2020 and onwards. In the kets where Eolus operates. Development has electricity price of EUR 37 per MWh in 2030, short term, this should raise the price of elec- accelerated in the US and Norway in order to compared with EUR 27 per MWh in 2019. tricity certificates. In the long term, the price realize projects within the framework of each will be determined by the level required by respective country’s support system, while a NEW BUSINESS OPPORTUNITIES new facilities on top of the wholesale elec- support system with price guarantees has in- FOR EOLUS tricity price in order to become profitable. tensified development in Finland. Eolus’s In connection with the Annual General Meeting For more information about electricity ­market position allows both existing and new in January 2017, Eolus amended its Articles of certificates, visit: www.energimyndigheten.se shareholders to feel secure in their invest- Association to also include activities related to or www.nve.no. ments, not least because of our professional other forms of renewable energy, and to ener- approach to asset management. This applies gy storage. This is a natural change in order to RENEWABLE FUTURE particularly to investors whose core business be part of a trend where solar power, for ex- The political and partisan energy agreement is not electricity generation. All companies, ample, is becoming an increasingly larger and reached by five parties in summer 2016 set a both large and small, can benefit from ­Eolus’s more important share of the global energy mix. target of 100% renewable electricity genera- services and outsource all, or parts of, their By 2040, most of the new power generation tion by 2040. This means that the develop- technical asset management. will come from wind and solar, according to ment of renewable electricity generation must Bloomberg New Energy Finance’s New Energy continue. EFFICIENCY MAXIMIZES PROFITS Outlook 2017. The rapidly falling costs of re- In recent years, more electricity has been Eolus’s objective is to continue pushing down newable generation from wind and solar pres- generated than consumed in the Swedish the cost per megawatt-hour. Our aim is to ent exciting combination solutions, as well as market, enabling Sweden to become a net reach a position where no extra support is market offers with two independent sources of ­exporter of electricity. Norway and Sweden needed to make the establishment of new fa- energy. The rising share of intermittent energy ­together have major potential to become cilities profitable for investors in the markets sources in the energy mix creates a growing ­Europe’s green battery, with large-scale where Eolus is currently active and may enter need to identify smart solutions for energy carbon-­free electricity generation to replace into in the future. Increased efficiency across storage. New market conditions present op- the dirty fossil-fuel energy used by other coun- the value chain of a wind power project’s life portunities for a range of storage solutions. In tries. Continuing opportunities to export elec- cycle are a necessity for meeting investors’ general, both large-scale industrial batteries tricity are positive for Sweden and Norway, yield requirements. By significantly reducing and small-scale flexible battery solutions are which is why it is important to continue the de- the costs of wind power establishment, the expected to offer major opportunities for stor- velopment of transmission capacity, not only realization of projects with profitability for end-­ age. Just like wind and solar, battery costs are within the country but also to other countries investors can also continue in periods of low falling fast and helping to change market con- in addition to the transmission opportunities overall price levels for electricity and electricity ditions. that already exist and are under construction certificates in Sweden and Norway. This also to Germany and the UK, for example. It is pos- applies to other countries with other types of itive, therefore, that the Swedish energy agree- support systems. ment takes a position on the development of

10 ANNUAL REPORT EOLUS VIND AB 2016/2017 CUSTOMER GROUPS

WIND POWER – ATTRACTIVE TO MANY INVESTORS

Since its inception in 1990, Eolus has built has signed Power Purchase Agreements in ­acceptance and an understanding of the role trust and credibility with customers, landown- Sweden, for example, including two with Eolus that wind power plays in the transition to a ers, shareholders, creditors and employees. to supply Google’s data center in Finland with more sustainable energy system. The cooper- Creating and maintaining a high level of trust is renewable electricity. ative model has also proven highly successful a prerequisite for attracting both capital and for Eolus over the years. Eolus has been sell- the expertise required for continued growth ENERGY COMPANIES ing shares in wind turbines to customers for and new business. With a flexible business Onshore wind power is one of the most cost-­ more than 25 years, thus enabling thousands model and strong balance sheet, Eolus has efficient methods for adding new generation of private individuals and companies to be- adapted to market fluctuations and the prevail- capacity and is therefore attractive. By invest- come wind power shareholders. Although ing market conditions to effectively meet inves- ing in wind power, energy companies are able larger players are gradually accounting for a tor demands. The customer base is broad and to show clearly how they are offering their higher share of total sales, Eolus will continue varied, ranging from global investors in the ­customers green electricity from their own to offer ownership in suitable projects to small- form of insurance companies, infrastructure ­facilities. Over the years, Eolus has divested er investors. funds and energy companies, to small busi- both turnkey facilities and operational turbines nesses and private individuals. Due to the to both Swedish and international energy CLEAR CUSTOMER BENEFITS trend of fewer but larger wind farms, a higher companies. With more than 25 years of experience and proportion of future revenue will be generated involvement in the construction of 516 wind by major investors. PUBLIC-SECTOR INVESTORS turbines as of August 31, 2017, Eolus has built Public-sector investors are mainly municipa­ up expertise across the entire value chain and INSTITUTIONAL INVESTORS lities, county councils/regions and municipal a financial position that makes the company a Institutional investors have different horizons companies. Ownership of electricity generation strong and stable partner. Eolus’s project port- for different types of investments. Ownership facilities creates predictability and control over folio in Sweden and other markets in which the of public infrastructure, such as wind power, is electricity consumption costs in their own op- company operates presents major opportuni- driven by long-term investments with relatively erations. Wind-power investments contribute ties to offer facilities adapted to the specific stable returns and cash flows. This, in turn, to sustainable development and therefore needs of individual investors at the lowest generates security in companies’ commit- meet the environmental and energy targets ­possible cost per megawatt-hour. Eolus’s ments to their customers in reinsurance and that many public players set for their opera- complete asset management concept offers pension investment segments. Anyone who tions. professional management that maximizes rev- invests in renewable electricity generation is enue for both large and small investors. As also supporting the transition to fossil-free WIND TURBINE COOPERATIVES one of the largest players in the industry, Eolus electricity generation, which reduces CO2 Smaller operators can also invest in wind pow- can push investment and operating expenses emissions and, in the long term, reduces risk er by buying shares in wind turbines, where down, which benefits investors in all customer in other green investments and insurance the facilities are then managed by a joint ser- groups. commitments. Major global players have vice company. Diversified ownership of wind ­invested heavily in Swedish wind power in power capacity is important for creating ­recent years, including Munich Re, Allianz, ­Aquila, Black Rock, Mirova, KGAL and HG Capital.

MAJOR CONSUMERS Major consumers are companies and organi- zations that consume large amounts of elec- tricity but do not have energy generation as their core business. This customer group is growing – partly because electricity generated by wind power provides secure, low and sta- ble electricity costs over time, but also be- cause of a sustainability perspective. More and more companies want to be recognized for their role in the transition to a fossil-free future. Investments can take the form of direct invest- ments, or long-term Power Purchase Agree- ments, which are common in the US. Google

ANNUAL REPORT EOLUS VIND AB 2016/2017 11 PROJECT DEVELOPMENT OPERATING SEGMENT

AN EXPERIENCED AND STRONG PLAYER SEES THE WHOLE PICTURE

The company’s project development has a 92–96% of Eolus’s overall revenue. Wind pow- THE IMPACT OF LARGER FARMS multi-dimensional basis. The process aims to er facilities are divested by transferring entire Due to changing market conditions in terms of meet investors’ demands for sustainable in- operational wind farms, individual wind tur- technological advancements, electricity prices vestments in a simple and profitable manner. It bines or shares in wind turbines. Eolus also and investors, Eolus will establish fewer but should be characterized by a clear social pres- offers construction-ready project rights. The larger facilities, with larger wind turbines. This, ence and be environmentally friendly, with the most costly item when establishing a wind in turn, will lead to a greater focus on those lowest-possible carbon footprint throughout power facility is the actual wind turbine. Eolus projects considered most likely to meet inves- the entire life cycle. mainly purchases turbines in EUR, which en- tors’ demands. With fewer but larger con- tails an element of risk. This is managed with structed wind farms, quarterly fluctuations PROJECT DEVELOPMENT PHASES currency futures to hedge the cash flow in for- will be greater in relation to the number of The project phases are: pre-study, project eign currency, or by divestment to customers wind turbines constructed, and to sales and development, construction and divestment of in EUR. Overall, the actual wind turbine ac- earnings. the facilities. After final commissioning, the counts for 65–75% of the costs for a turnkey construction phase is completed by either facility. Others costs are attributable to project handover to the customer, or by transfer to development, foundations, road construction From the company’s inception in 1990 Eolus’s own electricity generation operations and grid connection. The project development until the balance-sheet date on August if a customer contract has not been signed. operations are mainly financed with construc- 31, 2017, Eolus has been involved in The divestment phase is obviously varied, tion loans, advance payments from customers the construction of 516 wind turbines ­depending on the size and frequency of the or equity. At present, Eolus conducts project with a combined capacity of approxi- transactions. If a contract has not been development operations in Sweden, Norway, mately 845 MW. During the 2016/2017 signed when the facility becomes operational, Finland, the US and the Baltic countries. fiscal year, 25 (14) wind turbines, with a operating revenues and expenses are recog- combined capacity of 72.2 (37.7) MW, nized in the Electricity Generation operating COMMUNICATION AND INTERACTION were constructed and completed. Eolus’s work affects and influences a lot of segment until the facility is divested. Eolus At the end of the fiscal year, 25 wind people. Not only those living near a wind farm, has an extensive project portfolio, with proj- turbines were under construction, com- but also people in general and other stake- ects in various phases. This provides good pared with 16 on the corresponding holders such as government agencies and opportunities for meeting a range of investor date of the preceding year. ­future green electricity customers. We are requirements and demands. therefore committed to open dialogue about the effects, both positive and those perceived REVENUE AND EXPENSES as negative. We also provide continuous infor- Revenue in this operating segment comprise mation about the ongoing process, and an- proceeds from the divestment of facilities, swer any questions that may arise in connec- shares in project companies or project rights. tion with both the construction and the Due to the construction rate of the facilities, subsequent operation. Interaction with the lo- and the dates of their divestment, sales and cal community is therefore a crucial part of a earnings vary between quarters and fiscal project. years. Over the past three fiscal years, project development operations have accounted for

PROJECT DEVELOPMENT – KEY FIGURES CONSTRUCTED DURING THE 2016/2017 FISCAL YEAR

Full-year Full-year Name Municipality Capacity in MW Sep 1, 2016 Sep 1, 2015 SEK M -Aug 31, 2017 -Aug 31, 2016 1 Iglasjön Kungsbacka 26.4 Net sales 1,027.4 637.2 2 Långmarken Kristinehamn 26.4 Other operating income 2.9 1.5 3 Gunillaberg Jönköping 8.8 Operating profit/loss 44.5 -17.2 4 Lunna Askersund 6.6 5 Täppeshusen Höganäs 4.0 Total 72.2

12 ÅRSREDOVISNING EOLUS VIND AB 2016/2017 PROJECT DEVELOPMENT OPERATING SEGMENT

EOLUS’S SWEDISH PROJECT PORTFOLIO EOLUS’S OTHER PROJECT PORTFOLIOS

Group Group Group Group Aug 31, 2017 Aug 31, 2016 Aug 31, 2017 Aug 31, 2016 No. of Total No. of Total No. of Total No. of Total turbines capacity, MW turbines capacity, MW Country turbines capacity, MW turbines ­capacity,MW Pre-study 290 915 315 1,028 Norway 110 400 189 651 Project development 368 1,164 429 1,353 Latvia 115 420 106 366 Projects with relevant Estonia 42 150 44 152 permits 251 780 282 831 Finland 14 50 14 48 Under construction 25 84 16 58 US 99–292 258–740 88–280 220–700 Total 934 2,944 1,042 3,270 Offshore 0 0 500-700 ≤ 2,500

Inauguration of the Gunillaberg wind farm.

ANNUAL REPORT EOLUS VIND AB 2016/2017 13 PROJECT DEVELOPMENT OPERATING SEGMENT

HIGH-PRIORITY PROJECTS WITH TRANSACTION VOLUME OF SEK 9 BILLION

As establishments become fewer but larger, the status of these high-priority projects, they does not rule out the establishment of other there is a growing need for a clear focus on will be given a separate heading in Eolus’s projects from Eolus’s high-quality project those projects that best match the market’s ­interim reports. ­portfolio that meet investors’ demands and demands for new generation facilities. Eolus’s The same information will be presented on requirements. The estimated transaction strategic focus will therefore concentrate on ­Eolus’s website. The website will be updated ­volume of these specific high-priority projects the development, establishment and divest- quarterly following the publication of quarterly is about SEK 9 billion. ment of a number of high-priority projects in reports, or due to other significant project coming years, i.e. those with the best condi- events announced via press release. The fol- tions to be realized at the lowest cost per lowing are currently our high-priority projects megawatt-hour. To highlight information about for the coming years. However, the summary

HIGH-PRIORITY PROJECTS

Project Location No. of Capacity, Estimated Planned Comments turbines MW generation, deployment GWh Jenåsen Sundsvall, Sweden, SE2 23 79 275 2018 Ten-year Power Purchase Agreement with Google. The farm is sold to Munich Re, which is expected to take possession of the facility in summer 2018. Turbine supply agreement signed with Vestas. Roads and foundations are under construction. Eolus is financing the establishment with bank ­construction loans.

Nylandsbergen Sundsvall, Sweden, SE2 18 65–76 230–250 2019 Fully permitted. Turbine procurement is ­ongoing. Divestment process is ongoing.

Kråktorpet Sundsvall, Sweden, SE2 43 155–181 550–590 2019 Fully permitted. Turbine procurement is ­ongoing. Divestment process is ongoing.

Wind Wall Tehachapi, California, US 11–12 38–40 135–145 2019 Repowering project. Full-value production tax credit granted for the project.

Stigafjellet Bjerkreim, Norway, NO2 8–9 30 110–130 2019 Fully concessioned. Grid capacity reserved. Divestment process initiated.

Sötterfällan Jönköping, Sweden, SE3 10 35–40 125–135 2019 Fully permitted.

Bäckhammar Kristinehamn/Degerfors, 30 100–130 350–400 2019 Fully permitted. Sweden, SE3 Turbine procurement process initiated.

Øyfjellet Vefsn, Norway, NO4 80–100 330 1,200–1,500 2021 Fully concessioned. Grid capacity reserved.

14 ANNUAL REPORT EOLUS VIND AB 2016/2017 PROJECT DEVELOPMENT OPERATING SEGMENT

THE SUNDSVALL CLUSTER the wind farm to Munich Re, which will take projects Kråktorpet (155–181 MW) and The realization of Eolus’s projects in the Munic- possession of the facility when it is completed Nylandsbergen (65–76 MW). Estimated annual ipality of Sundsvall (Electricity Price Area 2 in in summer 2018. Eolus will manage the facility generation for Kråktorpet is 550–590 GWh, Sweden) is based on the Power Purchase on behalf of the customer. and 230–250 GWh for Nylandsbergen. The Agreement (PPA) signed with Google in De- Under the grid connection agreement projects are located in forest areas with rela- cember 2015 in relation to the Jenåsen wind for Jenåsen between Eolus and E.ON Elnät, tively few local residents, at a height of 300– farm. Under this PPA, which is the second be- ­additional transmission capacity will also be 450 meters above sea level with good wind tween Google and Eolus, Google will purchase installed through the construction of a new resources. all electricity generated by the Jenåsen wind ­national grid substation in Nysäter. This will A wind turbine procurement process is farm, comprising 23 wind turbines and an in- ­enable the development of other wind power ongoing for both Kråktorpet and Nylands­ stalled capacity of approximately 79 MW, over projects in the area, by Eolus as well as other bergen, alongside of the divestment process. a period of ten years. During the 2016/2017 operators. For Eolus, this will enable construc- fiscal year, Eolus signed an agreement to sell tion of the high-priority and fully permitted

Construction of Jenåsen.

ANNUAL REPORT EOLUS VIND AB 2016/2017 15 PROJECT DEVELOPMENT OPERATING SEGMENT

THE NORWEGIAN ØYFJELLET AND which leads to high generation in established the Swedish-Norwegian Electricity Certificate ­STIGAFJELLET PROJECTS facilities. System. The project is currently being opti- Eolus has conducted operations in Norway Eolus has two high-priority projects in mized in terms of farm layout and economic since 2012. In Norway, like Sweden, Eolus is Norway, one of which – Øyfjellet – is Eolus’s value. Wind speeds are being measured at able to develop projects independently, largest permitted project to date in all markets. four sites in the project area and grid ­capacity ­acquire ongoing projects, acquire permitted Øyfjellet, which was granted a final permit by has been reserved. The fully permitted project, projects and divest project rights at any time the Norwegian Ministry of Petroleum and Stigafjellet, in the Municipality of Bjerkreim throughout the value chain. Projects in the ­Energy (OED) in November 2016, comprises comprises 30 MW and has grid capacity Norwegian market are often characterized 80–100 wind turbines with a total maximum reserved. The divestment process has by challenging terrain and complex infrastruc- capacity of 330 MW. Eolus’s aim is that the commenced. ture, but also high average wind speeds, project will be realized within the framework of

Installation of anemometers, Øyfjellet.

16 ANNUAL REPORT EOLUS VIND AB 2016/2017 PROJECT DEVELOPMENT OPERATING SEGMENT

WIND WALL In December 2016, Eolus acquired 60% of the Wind Wall project in Tehachapi, California, in the US. This is a repowering project, in which old turbines are being replaced by new mod- ern turbines. The farm comprises some 400 old wind turbines with an installed capacity of approximately 36 MW. Together with its US partners, Eolus intends to realize a project of 38–40 MW by constructing new wind turbines. By replacing the old wind turbines on site, electricity generation will increase to about 135–145 GWh annually, or three times the ex- isting volume. By ordering the required amount of wind power components, Eolus has been granted a full-value production tax credit (PTC) for the project.

Wind Wall, California, US.

SÖTTERFÄLLAN Sötterfällan, in the Municipality of Jönköping (Electricity Price Area 3 in Sweden), is fully ­permitted and comprises 35–40 MW with esti- mated annual generation of 125–135 GWh. During the 2016/2017 fiscal year, Eolus estab- lished the Gunillaberg wind farm not far from Sötterfällan.

Sötterfällan. The photo has been modified. BÄCKHAMMAR The Bäckhammar project is located in ­Electricity Price Area 3 in Sweden, across the Municipalities of Kristinehamn and Degerfors. The project is fully permitted and comprises 100–130 MW. Estimated annual generation is 350–400 GWh. Eolus’s establishment of the Långmarken wind farm in the Municipality of Kristinehamn in 2016/2017 has given the company good knowledge of the area. A wind turbine procurement process has ­commenced.

Bäckhammar. The photo has been modified.

ANNUAL REPORT EOLUS VIND AB 2016/2017 17 PROJECT DEVELOPMENT OPERATING SEGMENT

EOLUS IN OTHER MARKETS – WITH OTHER CONDITIONS

In addition to Sweden, Eolus is also develop- challenging terrain and complex infrastructure, a renewable energy target of 25% by 2025, ing projects in Norway, the US, Estonia, Latvia but also high average wind speeds. representing major potential. and Finland. These markets are diverse in terms of their current level of wind power THE US FINLAND AND THE BALTIC COUNTRIES ­development and facilities under construction. The US is the second-largest wind power In 2016, 570 MW of wind power was installed The countries also have varying conditions in ­market in the world after China in terms of in Finland, according to statistics from Wind- terms of their geography, infrastructure, grid both total cumulative installed capacity and Europe. This is a sharp increase, adding up to capacity and support systems for re­newable the current rate of development. According to a total installed capacity of 1,540 MW. Devel- electricity generation. In addition to ­Sweden, statistics from the Global Wind Energy Council opment has taken place within the old support the most attractive markets for Eolus are cur- (GWEC), total installed capacity in the US was system with generous feed-in tariffs capping at rently Norway and the US, where Eolus has 82,184 MW at the end of 2016 following the 2,000 MW, following a reduction from the for- also identified high-priority projects. addition of 8,203 MW during the year. mer level of 2,500 MW. In the feed-in tariff Eolus entered into the US market during scheme, the Finnish government reimburses NORWAY the 2015/2016 fiscal year. In December 2016, the generators for the difference between a Norway joined the Electricity Certificate Sys- Eolus acquired a majority holding in the Wind politically determined target price and the aver- tem, a support system for renewable energy, Wall repowering project of up to 40 MW in Cal- age spot price over the past three months for on January 1, 2012. Eolus subsequently es- ifornia. In conjunction with the acquisition, a a period of 12 years. Since the scheme filled tablished operations in Norway in 2012. In full-value production tax credit (PTC) was also the limit in advance, a transition is now taking Norway, as in other markets, Eolus can ac- granted for the project. The production tax place to an auction-based technology-neutral quire ongoing projects and develop new proj- credit (PTC) is a federal incentive that provides support system for renewable generation with ects independently. The Norwegian project financial support over a period of ten years, but the aim of auctioning 2 TWh in the 2018–2020 portfolio comprises a potential capacity of with a gradual step down in the value of the period. The first auction is expected to take about 400 MW, of which the largest project is credit depending on when construction has place in 2018. Eolus’s project development op- Øyfjellet, outside Mosjøen in the Municipality of commenced. The tax credit applies for facilities erations and the company’s future strategy in Vefsn. Øyfjellet comprises a maximum capa­ whose construction commences before the Finland will be determined by the final design city of 330 MW and was granted a final permit end of 2019. Facilities commenced in 2015 of the upcoming auctions. by the Norwegian Ministry of Petroleum and and 2016 qualify for the full value of the credit. The rate of development in the Estonian Energy (OED) in November 2016. The project The value of the credit steps down in 2017, wind power market is slow. According to sta- is included in Eolus’s high-priority projects and 2018 and 2019. Wind Wall is one of Eolus’s tistics from WindEurope, no more than 8 MW is the company’s largest onshore project to high-priority projects for the coming years. of wind power has been constructed over the date to receive a permit. The aim is that the Along the Western Nevada-California past two years, with a total installed capacity project will be realized within the framework border where electricity prices are high, Eolus of 310 MW. One of the reasons for the low of the Swedish-Norwegian Electricity Certifi- has two projects under development: Crescent rate of development is severe restrictions on cate System. Stigafjellet, comprising 30 MW in Peak with a potential capacity of 200–600 MW, the construction of large wind turbines, due to the Municipality of Bjerkreim, is also one of and Comstock comprising 20–100 MW. The claims by the Estonian Armed Forces that the ­Eolus’s high-priority projects for the coming plan is to develop and then divest the con- turbines impact their defense radars. Eolus years. struction-ready projects, with or without a PPA. owns land on the island of Saaremaa. Project According to statistics from the Norwe- In addition to the federal PTC, a number development takes place on this land as well gian Wind Energy Association (NORWEA), of states have ambitious targets for renewable as other privately owned properties, and Eolus Norway’s installed wind power capacity at the energy development that they are maintaining owns two facilities on the island with a com- end of 2016 was 873 MW. In October 2017, despite the federal government’s now positive bined capacity of 1.6 MW. there was about 1,050 MW of installed capaci- views on fossil-based power generation. This The Latvian market is currently cautious ty and another 1,440 MW under construction, indicates the major potential of the US market, due to the uncertainty surrounding a future so wind power is currently under rapid devel- which really should be seen as several markets support system. However, Latvia has excellent opment in the country. This rapid development because of the geography and the wide range wind conditions in both the western and cen- is also characterized by the aspiration to re- of permitting, grid connection and electricity tral regions of the country, entailing major po- ceive electricity certificates. Facilities in Norway trading regulations. The state of Texas has in- tential. At present, Eolus is one of the few ac- must be ready for operation by 2021 to be in- comparably most wind power with an installed tive project developers in the country and had cluded in the Electricity Certificate System. An- capacity of 21,450 MW at September 30, an estimated installed capacity of about 420 other driving force is the opportunity to export 2017, according to statistics from the Ameri- MW in its project portfolio at the end of the fis- renewable electricity to the UK, for example, can Wind Energy Association (AWEA). Califor- cal year. At the end of 2016, the country’s total where transmission capacity already exists nia has the fourth-highest installed capacity, installed wind power capacity was 63 MW, ac- and is also being planned. Projects in the with 5,561 MW at the same date. The state of cording to statistics from WindEurope. ­Norwegian market are often characterized by Nevada has very little wind power to date, but

18 ANNUAL REPORT EOLUS VIND AB 2016/2017 PROJECT DEVELOPMENT SEGMENT – CUSTOMER CASE

LÅNGMARKEN PART OF FRENCH COMPANY MIROVA’S INVESTMENT

One of Eolus’s customers during the fiscal Långmarken was Mirova’s first transaction with year was the French asset management Eolus, and the flexibility shown by Eolus in company Mirova, which made a joint in- terms of meeting investor requirements played a key role, according to Raphael Lance. vestment with the European Investment “We need to highlight how Eolus has Bank (EIB) in six wind turbines at the adapted their preferred transaction structure to Långmarken wind farm, with an installed better fit our investment guidelines and im- capacity of approximately 20 MW. prove the alignment of interests which was key for us. This has been instrumental for the deal Mirova is a subsidiary of Natixis Investment to happen and we appreciate the Eolus team’s Managers and manages assets totaling EUR expertise, pragmatism and the mutual trust we 8.2 billion. The company has helped to finance have built. In addition, the proven track record 1,400 MW of renewable energy generated of Eolus in building and operating wind project from wind, solar, hydropower and biomass, in Sweden has given us a lot of comfort on mainly in France and Sweden. The company their ability to meet our goals.” made its first investments in French wind ­power as early as 2002. Raphael Lance also highlights how the Nordic “Wind has been our primary focus since Raphael Lance, Head of Renewable Energy Funds at market’s low compensation rates in recent the launch of our first fund “Fideme” back in Mirova, at the inauguration of Långmarken. years have fueled innovation and future oppor- 2002 which was a public-private initiative to tunities. support small French wind developers to build “Low electricity prices combined with low new clean energy projects. The wind industry The Nordic region is a key market for Mirova, green certificate value require all market partic- has now matured and it is an increasingly and the company has entered into four joint ipants to find innovative solutions to continu- competitive source of renewable energy sup- transactions in Sweden since 2012, ranging ously reduce production costs and still struc- porting the European energy transition,” says from 20-200 MW, including the joint invest- ture transactions where all parties can find Raphael Lance, Head of Renewable Energy ment with the EIB in Långmarken. mutual benefits. We believe such innovative Funds at Mirova. “Due to attractive site features, Lång- solutions can be exported outside the Nordics marken is one of the most competitive on- as a competitive edge for Swedish developers Mirova has continued to invest in wind power shore wind projects of such a size that can be and investors to grow in the increasing number projects and in 2016, was named “Energy In- built in Europe, with costs in line with grid pari- of countries around the World that are reduc- vestor of the Year, Europe” by Infrastructure ty observed in most European countries. The ing public subsidies to low-carbon initiatives.” Investor, partly because of the company’s in- reasonable size of the project and the equity vestment in Långmarken. contribution of the EIB, under the European “We are convinced that giving access to Fund for Strategic Investments, have enabled wind projects to our investor base is consis- to better mitigate electricity market swings due tent with their search for infrastructure risk ad- to the full equity structure, a feature that was justed returns while reducing their portfolio reinforced by robust offtake agreements with carbon exposure,” says Raphael Lance. Statkraft,” says Raphael Lance.

ABOUT MIROVA. Mirova, an affiliate of Natixis Investment Managers, offers a global responsible investing approach with a single offer revolving around 5 pillars: equities, bonds, infrastructure, Impact investing, voting and engagement. Through a conviction-driven investment approach, ­Mirova’s goal is to combine value creation over the long term with sustainable development. Mirova’s talents have been ­pioneers in many areas of sustainable finance. Our ambition is to keep innovating to propose the best tailored and most impactful solutions to our clients.

ANNUAL REPORT EOLUS VIND AB 2016/2017 19 ASSET MANAGEMENT OPERATING SEGMENT

STRONG GROWTH FOR MANAGED WIND POWER

During the fiscal year, Eolus increased the vol- agement department has evolved into a center ume of its managed operational wind power for expertise, and can offer knowledge on a assets from 293 MW to 351 MW, an increase consultative basis, both externally to turbine 141 of almost 20%. At the end of the fiscal year, customers and manufacturers, and internally During the fiscal year, Eolus asset management agreements had also been within the organization during the project signed new asset management agreements for 141 MW, signed for the Jenåsen (79 MW) and Vilseber- ­development and construction phases. ELECTRICITY ga (4.0 MW) wind farms, which are expected of which 58 had been PRICE AREA 1 to become operational during the 2017/2018 MAJOR FUTURE POTENTIAL deployed by the end of Luleå fiscal year. When these farms are operational, Eolus sees a growing market demand, both the fiscal year. the estimated generation of Eolus’s managed from international investors and other players in wind power assets will amount to 1.3 TWh per this segment. Investors whose core operations year, equivalent to 1% of Sweden’s electricity are neither wind power nor energy generation consumption. represent the strongest and clearest growth ELECTRICITY Eolus offers wind power owners a com- potential. Parties without any business opera- PRICE AREA 2 plete package of asset management services tions in the relevant geographic market also Sundsvall to maximize the revenues generated by their hold potential. Not only does wind power hold 3.0 facilities. The goal of our technical and financial a firm position in a total energy mix, it is also services is to ensure that the owner receives one of the fastest-growing sources of energy. professional management of all aspects relat- This has also led a more professional approach ed to the operation of a facility, ­including sur- to, and view of, asset management for wind 8.0 veillance, control, monitoring, ­administration power facilities, regardless of their size. 79.0 and contact with the owner’s contractual ser- vice company/turbine manu­facturer. In our role TOTAL SOLUTION 10.0 as operator, Eolus works closely with turbine Eolus’s Asset Management department can manufacturers including Vestas, Siemens/ provide technical operation and all administra- Gamesa and Enercon. In ­collaboration with tion of a facility, such as responsibility for them, we ensure that the facility’s availability is electrical operations, occupational health 4.6 ELECTRICITY 9.2 high and that downtime is minimized. The op- and safety, and insurance. The company PRICE AREA 3 erating segment provides recurring, stable and also serves as the point of contact for the Stockholm long-term revenue streams. facility’s ­relevant suppliers, regulators and in­surance companies. Eolus’s 26.4 EXPERTISE CENTER operating engineers check and 44.0 Eolus’s driving force is that we want our cus- monitor the facility via the company’s 1.5 25.4 tomers to see the company as a partner that operations center, ­follow up planned 16.0 4.0 will do anything to maximize generation and and unplanned service, make regular 0.8 20.0 minimize operating expenses over the life of visits to the site, ­conduct ­annual 26.9 their facility. Eolus also takes care of all other inspections of the facility and ensure 0.7 8.8 practical and administrative aspects. compliance with regulatory ­conditions 26.4 Over the years, Eolus has built up exten- and requirements. ELECTRICITY PRICE 44.9 sive expertise in wind farm operation. The Customers can purchase a total solution 13.2 1.5 AREA 4 Estonia company has refined, packaged and offers or purchase some of the services offered Malmö this experience and knowledge to customers. by Eolus and this offer is not limited to the 28.0 0.2 4.4 5.6 1.6 This has also meant that Eolus’s asset man- ­Swedish market. 1.6 3.8 2.0 MW managed capacity. 10.4 2.0 • MW managed capacity, signed • but not yet deployed. ASSET MANAGEMENT – KEY FIGURES

Full-year Full-year Sep 1, 2016 Sep 1, 2015 At the end of the fiscal year, Eolus had asset management assignments SEK M – 2017-08-31 – 2016-08-31 on both its own behalf and that of customers of 351 MW, plus signed Net sales 14.3 10.9 agreements for an additional 83 MW. Investors that have chosen ­Eolus’s asset management concept include ewz, Munich Re, Chorus, Other operating income 10.0 0.0 Tolvmanstegen Drift AB, Mirova/European Investment Bank and a range Operating profit/loss 1.5 1.2 of public-sector investors.

20 ANNUAL REPORT EOLUS VIND AB 2016/2017 ELECTRICITY GENERATION OPERATING SEGMENT

SHARP DECLINE IN OWN WIND POWER HOLDING

The Electricity Generation Operating Segment ELECTRICITY GENERATION – KEY FIGURES comprises generation and sales of renewable At the end of the fiscal year, Eolus owned operational wind power facilities Full-year Full-year electricity from facilities owned by Eolus. Our Sep 1, 2016 Sep 1, 2015 with a total installed capacity of 17.8 holding of operational wind turbines is recog- SEK M – Aug 31 2017 – Aug 31, 2016 (38.3) MW, and estimated annual gene­ nized as either wind turbine inventories or non-­ Net sales 24.8 46.3 current assets. Sales of electricity generation, ration of 40.2 (89.1) GWh. Non-current with the associated electricity certificates and assets com­­prised 17.0 MW and 37.4 Other operating income 4.5 7.3 GWh, ­re­spectively. The remaining por- guarantee of origin certificates, are conducted Operating profit,before tions of 0.8 MW and 2.8 GWh, respec- on either an ongoing basis at the prevailing impairment losses 2.7 2.5 tively, comprise wind turbine inventories. spot price, or by hedging, which can vary in Operating profit/loss, Average revenue for the electricity gen- after impairment losses -5.8 0.0 terms of time. Guarantee of origin certificates erated during the fiscal year was SEK are assigned in relation to generation and sold Electricity generation, 423 (375) per MWh. in the market like electricity certificates. MWh 58,564 123,622 Eolus’s objective is to gradually reduce its own wind turbine holding in order to free up capital for investments in project development and divestment of turnkey facilities to inves- tors. As a result, the effects of this operating 20.6 segment on Eolus’s earnings will gradually de- Eolus reduced its own cline. However, in order to develop and renew wind power holding the wind power portfolio – and to meet cus- by 20.6 MW during tomers’ needs – the holding may sometimes be increased, which means that revenue the fiscal year. streams may vary over time. During the fiscal year, Eolus divested 20.6 MW wind power from its own holding in addition to the newly established facilities ­divested to customers. This reduced the MW of the holding by 75% over two years. The ­divestments meant that the carrying amount of Eolus’s own facilities was only about SEK 100 M at the end of the fiscal year. This re- duced Eolus’s direct exposure to price fluc­ tuations in the electricity market and freed up resources for project development and the ­divestment of new facilities. In the operational phase, costs for a wind power owner usually comprise leasing fees to the landowner, service and maintenance, in- surance, property tax and administration costs. Operating expenses, excluding capital costs, normally range from SEK 100–140 per MWh. The cost of capital is additional and ­varies, depending on the loan-to-value ratio, interest rates and the owner’s capital contribu- tion. Operating expenses are lower for new facilities than for older ones, and normally range from SEK 90–120 per MWh. Over the past three fiscal years, electricity generation’s share of the Group’s overall reve- nue has fallen and during the past fiscal year, accounted for 2%. ­ The Fröreda wind farm.

ANNUAL REPORT EOLUS VIND AB 2016/2017 21 VERKSAMHET Assembly of Täppeshusen.

22 ANNUAL REPORT EOLUS VIND AB 2016/2017 REPOWERING

REPOWERING – NEW OR UP­ GRADED FOR HIGHER CAPACITY

When older wind turbines reach the end of in which Eolus owns a 60% interest, is one ex- their service life or are no longer economically ample of the major difference. In the Wind Wall viable, they present opportunities for repower- project in Tehachapi, about 400 wind turbine ing. Repowering is when old wind turbines are with an approximate installed capacity of 36 replaced or upgraded with more advanced MW are being replaced by 11–12 new wind technology. Replacing old turbines with new turbines. The installed capacity will be roughly technology offers many benefits. These in- the same, but the amount of electricity gener- clude generation data from the site that can be ated will be three times higher. used to estimate the generation of new wind In Sweden, the repowering project in turbines on the site. In some cases, infrastruc- ­Näsudden on southern Gotland is the largest ture such as roads and grids can be used or and best-known to date. Some 58 wind tur- may only need to be improved rather than bines with an installed capacity of 150–600 building from scratch. A site that has previous- kW have been dismantled and replaced by Wind Wall, California, US ly been used for electricity generation may 27 wind turbines with a capacity of 2–3 MW, lead to greater acceptance for new establish- which will increase generation from 50 GWh to ments. 200 GWh per year. The greatest benefit by far, however, is the If a decision is made to not install new new and advanced technology. Modern tur- turbines or upgrade the existing turbines on a bine models harvest significantly more energy site, the site is restored to its previous condi- from the wind than older turbines. Consider- tion when the wind turbines that have reached ably more energy can be harnessed on the the end of their useful life are dismantled. This same site – chosen because of its obvious means that the land can once again be used suitability – with newer, more efficient and larg- for purposes other than generating electricity er turbines. The Californian project in the US, from wind power.

TÄPPESHUSEN During the fiscal year, completion of the Täppeshusen wind farm in the Municipality of Höganäs marked the end of ­Eolus’s first repowering project. Two Vestas V39-500 kW turbines and one Vestas V47-660 kW turbine were re­ placed by the construction of two Vestas V100-2.0 MW turbines. The combined generation of the three turbines was 2.6 GWh, compared with estimated generation of 14.8 GWh per year for the two newly established turbines. The Vestas V39 turbines were dismantled and sold to ­Ireland where they were reassembled. The entire nacelle in the V47 turbine was used to replace the nacelle in ­another older turbine model in Sweden.

ANNUAL REPORT EOLUS VIND AB 2016/2017 23 EMPLOYEES AND SOCIETY

RESPONSIBILITY FOR THE ENVIRONMENT, PEOPLE AND SOCIETY

Eolus considers the company and its opera- tions an important part of the infrastructure development that is benefitting society. Gener- ating electricity from wind power contributes to a sustainable society. The transition to a sustainable society is one of today’s most important issues. The company’s operations touch all parts of the sustainability concept: ecological, economic and social sustainability. Eolus therefore has a corporate social responsibility – in addition to generating a profit for our shareholders, offer- ing cost-efficient solutions to our customers and providing meaningful, stimulating work for our employees. This responsible approach is not contradictory. On the contrary – it is a competitive advantage and a prerequisite for our future success. a wellness program with a financial contribu- LEADING PLAYER IN THE ENERGY tion from the employer. Eolus has a number TRANSITION A POSITIVE WORKPLACE of construction project managers who are Eolus has been a leading Nordic player in the Eolus is a knowledge-intensive company with responsible for the construction of facilities. transition to renewable energy since 1990. The a small-scale organization. This means that The on-site physical work is performed by company has driven the development of high- the experience, knowledge, creativity and sub-contractors under the supervision of er efficiency, and has extensive knowledge of commitment of our employees is important for ­Eolus’s construction project managers. The where and how wind farms should be built for the company, and for the development of contractors are not permitted to commence optimal generation and with consideration for ­Eolus’s market offering. work unless there is an occupational health other community interests. Value creation is To achieve this, Eolus is committed to and safety officer on site. All workplace acci- inherent to our long experience – including the promoting a corporate culture in which every dents must be reported to the relevant authori- ability to account for people, the landscape, employee can find their own work/life balance. ties, as well as internally. the environment and society throughout the Our corporate culture also helps us to recruit The same occupational health and safety value chain. and retain the best employees, and ensures regulations apply to Eolus’s construction pro­ that we are – and are perceived as – an attrac- ject managers, and to the technicians who PROPER AND TRANSPARENT CONDUCT tive employer. manage the wind power facilities owned by Eolus aims to be a respected company that The organization has a functional struc- Eolus as well as its customers. Work perfor­ creates value for its stakeholders. The compa- ture in order to leverage the unique expertise med inside wind turbines is subject to special ny’s employees are expected to act properly, of each employee. The project development regulations to ensure a safe and healthy work- fairly and honestly. The same demands apply department, for example, is divided into small- ing environment. to consultants, suppliers and other business er groups based on specialized functional partners. Impartiality shall prevail in all busi- ­areas such as land acquisition, project devel- CRITICAL SOCIAL RESPONSIBILITY ness relationships. Eolus aims for a high de- opment, wind evaluation and grid. Wind power is a natural part of Sweden’s en- gree of transparency when communicating During the year, the average number of ergy supply and will play an increasing role in with shareholders and society in general. employees in the Group was 33 (33). The the transition to a sustainable energy system, In addition to its own market research, number of female employees was 10 (10), with a political target of 100% renewable elec- Eolus monitors trends in the industry and other corresponding to 30% (30). tricity generation by 2040. Wind is an infinite countries through its membership in Swedish resource – and an energy source that is com- Wind Energy, the Swedish Windpower Associ- OCCUPATIONAL HEALTH AND SAFETY pletely free. A wind turbine is environmentally ation and NORWEA, CALWEA, the Estonian Eolus has high ambitions for reducing the risk friendly and produces very small quantities of Wind Power Association and the Latvian Wind of occupational injuries and illness. The aim is greenhouse gases during operation. It can Association. to reduce illness rates, ensure a faster return generate electricity for 20–25 years. When a Our vision is to be the most profitable to work and to continuously improve proce- turbine reaches the end of its useful life, it can wind power developer and an attractive busi- dures for promoting a positive health and safe- easily be dismantled and recycled, and the ness partner in the transition to a sustainable ty culture. Eolus has no collective bargaining land can be restored and used for new pur- society. agreements. Instead, the company has negoti- poses, or for renewed electricity generation by ated a pension and health insurance plan, and constructing new wind turbines.

24 ANNUAL REPORT EOLUS VIND AB 2016/2017 Inauguration of Täppeshusen.

ANNUAL REPORT EOLUS VIND AB 2016/2017 25 EKONOMISKT SAMMANDRAG OCH KONCERNENS NYCKELTAL The Iglasjön wind farm.

26 ANNUAL REPORT EOLUS VIND AB 2016/2017 FINANCIAL SUMMARY AND THE GROUP’S KEY FIGURES

FINANCIAL SUMMARY

Amounts in KSEK 2016/2017 2015/2016 2014/2015 2013/2014 2012/2013

Income statement Net sales 1,065,668 693,446 1,502,137 465,839 1,204,945 Operating profit/loss 40,233 -15,949 90,040 41,477 146,720 Profit before tax 34,224 -29,057 75,243 13,143 135,316 Net profit/loss for the year 24,504 -23,918 79,994 9,930 141,564

Balance sheet Non-current assets 147,959 291,795 351,787 426,375 462,588 Current assets 752,805 977,821 907,568 1,503,439 1,100,223 Assets 900,764 1,269,616 1,259,355 1,929,814 1,562,811

Equity attributable to Eolus’s shareholders 657,791 671,025 731,313 936,662 962,813 Equity, non-controlling interests 1,719 140 51 47 -1,971 Non-current liabilities 74,617 136,434 248,607 298,224 260,101 Current liabilities 166,637 462,017 279,384 694,881 341,868 Equity, provisions and liabilities 900,764 1,269,616 1,259,355 1,929,814 1,562,811

Cash-flow statement Cash flow from operating activities 90,971 134,190 714,911 -487,767 428,094 Cash flow from investing activities -9,718 -10,395 44,167 10,254 124,102 Cash flow from financing activities -101,037 -143,754 -604,049 200,284 -231,289 Cash flow for the year -19,784 -19,959 155,029 -277,229 320,907 Cash and cash equivalents at beginning of year 221,549 241,522 86,499 363,612 42,703 Exchange-rate differences in cash and cash equivalents -256 -13 -6 116 2 Cash and cash equivalents at year-end 201,509 221,549 241,522 86,499 363,612

KEY FIGURES FOR THE GROUP***

2016/2017 2015/2016 2014/2015 2013/2014 2012/2013 No. of turbines taken into operation 25 14 33 27 30 Turbines taken into operation, MW 72.2 37.7 68.6 53.0 62.1 Electricity generation, GWh 58.6 123.6 242.3 172.1 229.0 Average number of employees, full-time positions 33 33 33 37 40 Operating margin, % 3.8 neg 6.0 8.9 12.2 Profit margin, % 3.2 neg 5.0 2.8 11.2 Return on capital employed, % 5.8 neg 7.8 2.1 11.2 Return on equity after tax, % 3.7 neg 9.7 1.2 15.8 Equity/assets ratio, % 73.0 52.9 58.1 48.5 61.5 Earnings per share, SEK 1.02 -0.92 3.25 0.44 5.75 Equity per share, SEK 26.41 26.94 29.36 37.61 38.66 Dividend per share, SEK 1.50* 1.50 11.50** 1.50 1.50 No. of shares at year-end, 000s 24,907 24,907 24,907 24,907 24,907 Average number of shares during the year, 000s 24,907 24,907 24,907 24,907 24,907

* Proposed dividends ** Extra dividend of SEK 10 paid in July 3, 2015. *** Refer to page 87 for a definition of key figures.

ANNUAL REPORT EOLUS VIND AB 2016/2017 27 SHARE AND OWNERSHIP STRUCTURE

EOLUS SHARE AND OWNERSHIP STRUCTURE

Eolus Vind has classes of shares designated Stennert. At the end of the 2016/2017 fiscal However, dividends will be adapted to the Class A and Class B. The company’s Class B year, Eolus Vind AB did not hold any treasury company’s investment requirements and finan- share has been traded on Nasdaq Stockholm shares. cial position. Eolus may incur net debt over Small Cap since February 2, 2015, under the time in order to continue developing the com- ticker EOLU B. Prior to that, the company’s SHARE CAPITAL pany. For a company such as Eolus, in which Class B share was traded on Nasdaq OMX At August 31, 2017, the nominal amount of the development and sales of wind turbines First North since May 28, 2009, and on Nas- share capital in Eolus Vind AB was SEK are an essential part of the business, main­ daq First North Premier since May 5, 2014. 24,907,000. The total number of shares was taining a strong financial position is imperative. 24,907,000 (24,907,000), divided between The Board of Directors will therefore consider SHARE PRICE PERFORMANCE 1,285,625 Class A shares carrying one (1) vot- the company’s long-term financing require- During the fiscal year, the share price fluctuat- ing right per share, and 23,621,375 Class B ments at all times. ed between a low of SEK 19.60 on September shares, carrying one-tenth (1/10) of a voting In view of Eolus’s strong financial position, 1, 2 and 12, 2016 and a yearly high of SEK right per share. All shares outstanding are fully the Board of Directors proposes to the Annual 26.50 on January 3 and 5, 2017, respectively. paid and entitle the holder to an equal share of General Meeting that a dividend correspond- The closing price at the end of the fiscal year, the company’s assets and earnings. ing to SEK 1.50 (1.50) per share be paid to on August 31, 2017, was SEK 21.60. Eolus’s Each share has a quotient value of SEK shareholders. This corresponds to a transfer of share price increased approximately 8.5% 1.00. Shareholders are entitled to dividends at SEK 37.4 M (37.4), corresponding to a direct during the fiscal year, compared with the Nas- amounts determined by the Annual General yield of 6.9%. daq Stockholm Small Cap’s index, which rose Meeting. There are no restrictions on the about 6.9% during the same period. transfer of shares or the voting rights of each FINANCIAL INFORMATION A total of 9,186,097 Class B shares were shareholder at General Shareholder Meetings Eolus’s Investor Relations (IR) communication traded. The turnover rate decreased about due to provisions in the Articles of Association. is characterized by open, relevant and accu- 6.3% compared with the preceding 12-month Eolus has implemented 11 new share issues rate information to shareholders, investors and period. since the company was founded in 1990. The analysts with the objective of raising know­ purpose of all new share issues has been to ledge of the Group’s operations and share. OWNERSHIP STRUCTURE facilitate faster expansion than the company’s Eolus communicates information in the At August 31, 2017, the number of sharehold- earnings growth has enabled. The share capi- form of interim reports, annual reports and ers in the company was 6,365, up 1,378 tal trend for the period 1990–2017 is present- ­relevant press releases, and provides detailed during the fiscal year. The ten largest share- ed in the table on page 29. information about the company in the IR ­section holders accounted for 33.1% (33.8) of the of the company’s website, www.eolusvind.com. 40 capital, and 50.9% (50.4) of the voting rights. DIVIDENDS Shareholders and other stakeholders may sub- The largest shareholders mainly comprise Eolus’s long-term dividend policy entails that scribe to press releases, the customer maga- 35 Domneåns Kraftaktiebolag and Hans-Göran dividends over a long period of time will be zine New Winds and financial statements via the determined by earnings and correspond to company’s website. Presentations­ and inter- 20-50% of the company’s profit after tax. views with the CEO of Eolus are also available 30 KEY FIGURES PER SHARE on the website.

DIVIDEND PER SHARE, AND 2016/ 2015/ 25 2017 2016 DIRECT YIELD Earnings per share before Dividend, SEK Direct yield, % SHARE PRICE PERFORMANCE dilution, SEK 1.02 -0.92 SEK % SEK MW Earnings per share after 486 790 ** dilution, SEK 1.02 -0.92 432 680 Ordinary dividend, SEK 1.501 1.50 369 862 Direct yield, %2 318 697 6.9 7.6 282 850 Share price at year-end, SEK 21.60 19.80 Market capitalization,SEK M 538.0 493.2 No. of shares * outstanding, 000s 24,907 24,907 Average number of shares during the year, 000s 24,907 24,907 * The dividend from 2016/2017 refers to the Board’s 1 Based on the Board of Director’s dividend proposal proposal ahead of the Annual General Meeting 40 2 Dividend divided by the closing price for each ** During the 2014/2015 fiscal year, and extraordinary Eolus B Nasdaq Stockholm Small Cap fiscal year dividend of SEK 10 was paid in the form of a share split with a redemption procedure. Direct yield including 35 ­extraordinary dividend was 46.9%. 28 ANNUAL REPORT EOLUS VIND AB 2016/2017 30 SEK 25

SHARE AND OWNERSHIP STRUCTURE

SHAREHOLDERS AT AUGUST 31, 2017

No. of Class No. of Class Total % of % of Shareholder A shares B shares no. of shares capital votes Domneåns Kraftaktiebolag 357,900 2,012,869 2,370,769 9.5% 15.3% Hans-Göran Stennert, directly and through endowment insurance 380,100 518,984 899,084 3.6% 11.8% Åke Johansson 194,720 567,200 761,920 3.1% 6.9% Hans Johansson and Borgunda bygghandel, through companies 169,520 58,455 227,975 0.9% 4.8% Försäkringsaktiebolaget Avanza Pension 0 1,579,451 1,579,451 6.3% 4.3% Johan Markensten 0 808,080 808,080 3.2% 2.2% Ingvar Svantesson 43,750 200,175 243,925 1.0% 1.7% Nordnet Pensionsförsäkring AB 500 552,901 553,401 2.2% 1.5% Swedbank Försäkring 0 447,943 447,943 1.8% 1.2% Adlerbertska forskningsstiftelsen 0 350,000 350,000 1.4% 1.0% Other shareholders 139,135 16,525,317 16,664,452 66.9% 49.1% Total 1,285,625 23,621,375 24,907,000 100.0% 100.0%

No. of % of No. of % of Intervals shares capital shareholders shareholders 1-500 599,682 2.4% 4,006 62.9% 501-1 000 665,240 2.7% 784 12.3% 1,001-5,000 2,594,644 10.4% 1,073 16.9% 5,001-10,000 1,777,878 7.1% 237 3.7% 10,001-15,000 798,228 3.2% 63 1.0% 15,001-20,000 791,032 3.2% 44 0.7% 20,001- 17,680,296 71.0% 158 2.5% Total 24,907,000 100.0% 6,365 100.0%

SHARE CAPITAL TREND

Total share Change in share No. of Class No. of Change in Change in Quotient Year Event capital, SEK capital, SEK A shares Class B shares Class A shares Class B shares value, SEK 1990 Company foundation 1,200,000 1,200,000 5,000 7,000 5,000 7,000 100.00 1991 New share issue 3,000,000 1,800,000 5,000 25,000 - 18,000 100.00 1996 New share issue 5,000,000 2,000,000 5,000 45,000 - 27,000 100.00 2001 New share issue 6,000,000 1,000,000 6,000 54,000 1,000 9,000 100.00 2003 New share issue 8,000,000 2,000,000 6,000 74,000 - 20,000 100.00 2005 New share issue 10,000,000 2,000,000 7,500 92,500 1,500 18,500 100.00 2006 New share issue 12,000,000 2,000,000 9,000 111,000 1,500 18,500 100.00 2007 Non-cash issue 14,100,200 2,100,200 9,000 132,002 - 21,002 100.00 2007 New share issue 16,114,400 2,014,200 10,285 150,859 1,285 18,857 100.00 2007 New share issue 18,114,400 2,000,000 10,285 170,859 - 20,000 100.00 2008 Split 100:1 18,114,400 - 1,028,500 17,085,900 1,018,215 16,915,041 1.00 2009 New share issue 22,643,000 4,528,600 1,285,625 21,357,375 257,125 4,271,475 1.00 2011 Non-cash issue 24,907,000 2,264,000 1,285,625 23,621,375 - 2,264,000 1.00 2015 Split 2:1 24,907,000 - 2,571,250 47,242,750 1,285,625 23,621,375 0.50 2015 Stock dividend 49,814,000 24,907,000 - - - - 1.00 2015 Redemption 24,907,000 -24,907,000 1,285,625 23,621,375 -1,285,625 -23,621,375 1.00 24,907,000 1,285,625 23,621,375 1.00

Source: Euroclear and Eolus

ANNUAL REPORT EOLUS VIND AB 2016/2017 29 GROUP MANAGEMENT

EOLUS GROUP MANAGEMENT

Eolus had four senior executives during the Assignments within the Group and assignments 2016/2017 fiscal year: Per Witalisson, Marcus as deputy Board members are not specified. Landelin, Catharina Persson and Karl Olsson. Company shareholdings cover holdings of own Information regarding when they assumed their shares, both direct and indirect, as well as those positions, their dates of birth, experience, share- of related parties. holdings in Eolus at December 1, 2017 and their ongoing assignments is presented below.

PER WITALISSON CEO

Born: 1971 Other assignments: Chairman of the Board of Employed since 2006 and CEO since August Rockneby Vind AB and Långmarken Wind AB. 2012. Master of Business Administration. Board member of Isgrannatorp Drift AB and Previously an auditor at Ernst & Young between Triventus AB. 1996 and 2006, where he was an authorized Shareholding in Eolus: 12,700 Class A shares public accountant between 2003 and 2006. and 50,157 Class B shares

MARCUS LANDELIN Deputy CEO and Chief Operating Officer

Born: 1978 as working with offshore wind power. He has Employed since 2015. Bachelor of Laws degree worked on export and trade issues at the and Master of Business Administration. Most ­Swedish Trade Council in Eastern Europe and ­r­ecently worked at E.ON, where he was the ran his own trading and construction business. Head of Origination and Project Development for Other assignments: None onshore wind power in Northern Europe as well Shareholding in Eolus: None

CATHARINA PERSSON CFO

Born: 1975 Other assignments: Board member of Employed since 2013. Master of Business SD Förvaltning i Malmö AB ­Administration and previously CFO at ACAP Shareholding in Eolus: 2,068 Class B shares ­Invest AB (publ).

KARL OLSSON General Counsel Born: 1963 Other assignments: Board member and CEO Employed since 2011. Bachelor of Laws degree. of Terrier Law AB. Board member of Skogs- Previously employed as a lawyer at Setterwalls kovall AB and Rockneby Vind AB. Agent for and Linklaters legal firms, and General Counsel in service of process for Snickaregatan Holding AB. Vattenfall AB’s Group staff unit. He has also been Shareholding in Eolus: 4,685 Class B shares an employee and member of the management team at Awapatent AB and, prior to joining Eolus, conducted his own business Terrier Law AB.

30 ANNUAL REPORT EOLUS VIND AB 2016/2017 ANNUAL REPORT EOLUS VIND AB 2016/2017 31 DIRECTORS’ REPORT

DIRECTORS’ REPORT

The Board of Directors and CEO of Eolus Vind AB (publ), Corp. Reg. No. 556389-3956, hereby submit the Annual Report and consolidated financial statements for the September 1, 2016-August 31, 2017 fiscal year. All amounts are in thousands of Swedish kronor (KSEK), unless specified otherwise. Figures in parentheses pertain to the preceding fiscal year.

INFORMATION ABOUT BUSINESS OPERATIONS recognized as other operating income. For further information, refer to Eolus aims to create value at all levels of project development, establishment Note 1 Accounting Policies. and operation of facilities for renewable energy and energy storage, and to offer attractive and competitive investment objects to both local and interna- Electricity generation tional investors in the Nordic region, Baltic countries and the US. The Group uses its own wind power facilities to generate electricity, which are Eolus’s main operations are to realize projects primarily through sales recognized as either inventories or a non-current asset. Revenue is derived of turnkey operational facilities to a broad customer base of investors. The from sales of electricity, and from sales of the electricity certificates allocated business model also includes parts of the project portfolio to be realized to renewable electricity producers. New wind turbines may be constructed through sales of project rights, meaning permitted projects and projects un- and existing turbines divested in order to continuously develop and renew the der development. Eolus also uses its own wind power facilities to generate electricity generation asset portfolio. Sales from the Group’s electricity gener- electricity. New wind turbines may be constructed, and existing turbines ation amounted to SEK 24.8 M (46.3). This decline was attributable to lower divested to customers that want to invest in facilities that are already opera- electricity generation – due to the strategy to reduce the number of owned tional, in order to continuously develop and renew the wind power portfolio turbines – but was offset by higher wind speeds and higher average revenue. for electricity generation. Eolus offers a full range of asset management At the end of the fiscal year, the Group owned a combined installed capacity services to wind power owners for carefree ownership. of 17.8 MW with estimated generation of 40.2 GWh per year. Of these fig- The Group consists of the Parent Company, Eolus Vind AB (publ), the ures, 17.0 MW, corresponding to 37.4 GWh, comprised non-current assets. subsidiaries Ekovind AB, Svenska Vindbolaget AB, Blekinge Offshore AB, The remaining 0.8 MW, corresponding to 2.7 GWh, comprised inventories. Eolus Elnät AB, Eolus Wind Power Management AB, SIA Eolus, Eolus Vind Average revenue for the electricity generated during the fiscal year was Norge AS, Eolus Oy, Eolus North America Inc and the sub-subsidiary OÜ SEK 423 (375) per MWh. Baltic Wind Energy. In addition to the companies above, several other com- Eolus’s classification of revenues and expenses related to onward invoic- panies formed to manage the development of specific wind power projects ing in connection with divested turbines was changed as of September 1, are also included. 2016. Comparative periods were not reclassified, which affects comparability. During the fiscal year, SEK 4.2 M was invoiced onwards and recognized as Project development other operating income. For further information, refer to Note 1 Accounting Since its inception in 1990, Eolus has evolved into a leading wind power de- Policies. veloper throughout Sweden and the Nordic region. By the end of the fiscal year, Eolus had participated in the construction of 516 wind turbines with a Asset management combined capacity of 845 MW. Projects are mainly realized by constructing Over the years, Eolus has developed extensive expertise in virtually all areas wind turbines that are divested as turnkey facilities to investors. If a customer related to the construction and operation of wind turbines. For many years, contract has not been signed by the time the facility becomes operational, Eolus has drawn upon its own staff to provide technical and management con- operating income and expenses are recognized in the Electricity Generation sultancy services for wind power stakeholders. Eolus can therefore offer full operating segment until the facility is divested. Projects can also be realized asset management services to wind power owners to provide carefree owner- by selling project rights. Profit recognition after construction takes place after ship that maximizes revenue and minimizes production loss. Eolus sees in- final commissioning. Sales and earnings may vary considerably between creasing demand for these services both from major institutional investors that individual quarters and fiscal years, depending on the rate of wind farm own large wind farms, and from local operators with smaller facilities. These construction, and when the farms are divested. The project development operations provide Eolus with stable, recurring and long-term revenue streams. operations are mainly financed by equity, construction loans and advance Sales from wind power asset management services amounted to SEK payments from customers. 14.3 M (10.9), of which external customers accounted for SEK 13.9 M (10.5). At present, Eolus conducts project development operations in Sweden, At the end of the fiscal year, Eolus’s customer contracts relating to asset Norway, Finland, the Baltic countries and the US. management assignments for its own holdings and on behalf of customers Sales from the development and divestment of turnkey wind power facili- totaled 351 (293) MW, of which external customers accounted for 336 (262). ties amounted to SEK 1,027.4 M (637.2). During the fiscal year, 25 (14) wind In addition to these assignments, agreements were signed for the Jenåsen turbines with a combined capacity of 72.2 MW (37.7) were installed and com- (79 MW) and Vilseberga (4 MW) wind farms, which will be completed during pleted, of which all except 0.4 wind turbines were handed over to customers. the 2017/2018 fiscal year. Other operating income of SEK 2.5 M (1.3) mainly comprised exchange-rate Eolus’s classification of revenues and expenses related to onward invoic- gains attributable to exchanged currency futures, and capital gains on other ing in connection with asset management assignments was changed as of non-current assets. September 1, 2016. Comparative periods were not reclassified, which affects Eolus’s classification of revenues and expenses related to onward invoic- comparability. During the fiscal year, SEK 9.5 M was invoiced onwards and ing in connection with operating and divested turbines was changed as of recognized as other operating income. For further information, refer to September 1, 2016. Comparative periods were not reclassified, which affects Note 1 Accounting Policies. comparability. During the fiscal year, SEK 0.3 M was forward invoiced and

32 ANNUAL REPORT EOLUS VIND AB 2016/2017 DIRECTORS’ REPORT

EARNINGS AND FINANCIAL POSITION

2016/2017 2015/2016 2014/2015 2013/2014 2012/2013 IFRS IFRS IFRS IFRS IFRS Overview Group Net sales 1,065,668 693,446 1,502,137 465,839 1,204,945 Operating profit/loss 40,233 -15,949 90,040 41,600 146,720 Profit before tax 34,224 -29,057 75,243 13,143 135,316 Return on capital employed, % 6 neg 8 2 20 Return on equity after tax, % 4 neg 10 1 16 Total assets 900,764 1,269,616 1,259,355 1,929,814 1,562,811 Equity/assets ratio, % 73 53 58 48 62 Average number of employees 33 33 33 37 40

2016/2017 2015/2016 2014/2015 2013/2014 2012/2013 RFR2 RFR2 RFR2 RFR2 RFR2 Overview Parent Company Net sales 910,062 611,873 1,348,830 423,809 1,079,202 Profit before tax 82,560 26,663 160,261 41,450 28,913 Total assets 890,371 1,176,727 1,088,855 1,602,132 1,210,398 Equity/assets ratio, % 74 47 50 45 60 Average number of employees 32 31 31 34 37

DEFINITIONS OF KEY FINANCIAL FIGURES

Return on equity after tax Net profit for the year expressed as a percentage of average equity Equity/assets ratio Equity expressed as a percentage of total assets Return on capital employed Profit before tax items plus interest expense expressed as a percentage of average capital employed Capital employed Total assets minus non-interest-bearing liabilities.

THE GROUP’S NET SALES AND EARNINGS to be divested as turnkey facilities to customers, the company aims to secure Net sales amounted to SEK 1,065.7 M (693.4), up SEK 372.2 M compared customer financing in pace with the project’s completion. with the preceding year. Operating profit totaled SEK 40.2 M (loss: 15.9), The Group’s equity/assets ratio was 73.2% at end of the fiscal year, up SEK 56.1 M. The sales growth is attributable to the handover of 24.6 op- compared with 52.9% at the end of the preceding fiscal year. erational turbines and 12.2 turbines from inventories. The improved operating profit was mainly due to a higher number of commissioned and handed-over CASH FLOW AND CASH AND CASH EQUIVALENTS turbines year-on-year, despite the negative currency effects. During the year, Cash flow from operating activities amounted to SEK 91.0 M, compared 25 wind turbines with a capacity of 72.2 MW were constructed, of which with SEK 134.2 M in the preceding year. Cash flow from operating activities 24.6 had been handed over to customers by the balance-sheet date. In the remained positive, but is lower year-on-year. The difference is due to the preceding year, 14 wind turbines with a capacity of 37.7 MW were construct- number of ongoing establishments and their current phase. Cash flow from ed, of which 13.5 were handed over to customers. Changes in the fair value financing activities was a negative SEK 9.7 M, compared with a negative of currency derivatives had a negative impact of SEK 4.6 M on operating SEK 10.4 M in the preceding year. Cash flow from financing activities was profit, compared with a negative amount of SEK 1.5 M in the preceding year. a negative SEK 101.0 M, compared with a negative SEK 143.8 M in the pre- Loss from financial items amounted to SEK 6.0 M, compared with a loss of ceding year. The change was mainly attributable to lower loan repayments SEK 13.1 M in the preceding year. Changes in the fair value of interest-rate in connection with electricity generation operations. derivatives had a positive impact of SEK 8.3 M on financial items, compared At the end of the fiscal year, cash and cash equivalents amounted to with a negative impact of SEK 3.4 M in the preceding year. Overall, changes SEK 201.5 M (221.5), down SEK 20 M. In addition to cash and cash equiva- in the fair value of financial currency and interest-rate derivatives had a posi- lents, there was an unutilized overdraft facility of SEK 75 M and two unutilized tive impact of SEK 3.7 M before tax, compared with a negative amount of framework and construction loans totaling SEK 855 M. The construction loan SEK 4.9 M in the preceding year. of SEK 600 M pertains to the Jenåsen wind farm establishment, and the The effective tax rate varies considerably between periods, depending remaining framework loan is attributable to other construction activity. On the on the structure of wind turbine divestments. same date of the preceding year, Eolus had an overdraft facility, a framework loan and construction loan, also unutilized. FINANCIAL POSITION At the end of the fiscal year, net cash amounted to SEK 167.6 M (139.8), Total assets are significantly affected by the size of ongoing wind power up SEK 27.8 M. projects, the phase they are in, and the use of credit facilities. For projects

ANNUAL REPORT EOLUS VIND AB 2016/2017 33 DIRECTORS’ REPORT

WIND TURBINE INVENTORIES, WIND TURBINES UNDER During the fiscal year, Eolus deployed 25 wind turbines with a combined CONSTRUCTION AND PROJECTS UNDER DEVELOPMENT capacity of 72.2 MW, of which 24.6 wind turbines were handed over to At the end of the fiscal year, wind turbine inventories, wind turbines under customers. construction and projects under development amounted to SEK 344.8 M During the same period, 36.8 wind turbines with a combined capacity (462.3), representing a decline of SEK 117.5 M during the fiscal year. of 92.8 MW were handed over to customers. During the fiscal year, Eolus At the end of the fiscal year, there were 25 wind turbines under construc- procured a total of 23 Vestas V126 turbines with a combined capacity of tion, compared with 16 on the corresponding date of the preceding year. 79.4 MW. Wind turbines recognized as non-current assets or inventories, respectively, are attributable to the Electricity Generation operating segment and generate ENVIRONMENTAL IMPACT electricity that the company sells. New wind turbines may be established Through its wind power holdings, the Parent Company and the Ekovind and existing turbines divested in order to continuously develop and renew the subsidiary conduct activities that are licensable or subject to notification electricity generation asset portfolio. During the fiscal year, 12 wind turbines requirements under the Swedish Environmental Code. The company and were reclassified from non-current assets to inventories prior to divestment. the Group hold the relevant environmental permits. When notification require- ments apply, an application under the Environmental Code is a prerequisite LIABILITIES for granting a building permit. Wind power is a clean and renewable source At the end of the fiscal year, net cash amounted to SEK 167.6 M, compared of energy with very little environmental impact throughout the life of a turbine. with SEK 139.8 M on the corresponding date of the preceding year. Liabilities During operation, the negative environmental effects are mainly noise and have declined due to the strategy to reduce the number of owned turbines. shadow casting.

SIGNIFICANT EVENTS DURING THE FISCAL YEAR EMPLOYEES In November 2016, Eolus was granted a final permit for the Norwegian During the year, the average number of employees in the Group was 33 (33). Øyfjellet project. This is Eolus’ largest permitted project to date, with capacity The number of female employees was 10 (10), corresponding to 30% (30). of up to 330 MW and estimated generation of about 1.4 TWh per year. For information regarding distribution of the number of employees and sala- Alongside of the divestment process, the project is also being optimized in ries paid, other remuneration, social security expenses pertaining to the order to maximize generation and economic value. Board and the CEO, as well as remuneration of senior executives, refer In December 2016, Eolus signed an agreement with the German asset to Notes 5 and 6. and investment manager, KGAL, regarding divestment of the Gunillaberg and Lunna wind farms. The total transaction amounted to 15.4 MW, divided be- SIGNIFICANT RISKS AND UNCERTAINTIES tween seven Vestas V100-2.2 MW wind turbines. Both wind farms were handed over in August 2017. Eolus will provide asset management services Significant risks for both of the farms. A number of risk factors considered significant for the future development of In December 2016, Eolus acquired a 60% interest in Wind Wall Develop- Eolus are outlined below. The following risks are not ranked in order of priority ment LLC through its Eolus North America Inc subsidiary. Wind Wall Develop- and do not claim to be comprehensive. ment is planning to establish about 40 MW of wind power in Tehachapi, California, in the US. In connection with the acquisition, Eolus ordered Dependence on regulations, legislation and policy measures sufficient wind power components from Vestas to be granted a full-value The establishment of wind power facilities is covered by a series of regula- Production Tax Credit (PTC) for renewable energy in the US. tions. The law was amended on August 1, 2009 and building permits or de- In December 2016, the Swedish Government decided not to grant a tailed development plans are no longer required for facilities that are granted permit – based on the Environmental Code – for the Blekinge Offshore wind environmental permits according to certain conditions under the Swedish En- power project, in which Eolus owns a 56% interest. The application com- vironmental Code. For environmental permits to be granted, the relevant mu- prised a project with up to 2,500 MW capacity. The Swedish Government’s nicipality must actively recommend that the permit be granted. In practice, negative decision with reference to national defense interests represents a municipalities thus hold a right of veto. Both building permits and environ- missed opportunity to add green electricity generation in Electricity Price mental permits may be appealed, which can lead to delays or make projects Area 4, in which electricity consumption exceeds generation. It also means impossible to implement. Under the Planning and Building Act, municipalities that new jobs will not be created. Eolus’ objective was to find a balance be- in Sweden exercise a planning monopoly. The implementation of projects is tween national defense interests and the community benefits of renewable therefore dependent on the willingness of each individual municipality to con- electricity generation and jobs. tribute to a sustainable energy supply. Political will can swing rapidly due to In May 2017, Eolus signed an agreement with Munich Re regarding changing public opinion, the distribution of seats in building and planning divestment of the Jenåsen wind farm, which is under construction in the committees, and so forth. Municipality of Sundsvall. This is Eolus’s largest transaction to date, with Without accounting for the socio-economic environmental costs, it is a combined capacity of about 79 MW. In October 2016, Eolus signed an currently cheaper to generate electricity from, for example, oil or coal. Wind agreement with E.ON Elnät regarding grid connection for the wind farm, power is therefore dependent on subsidies that make it profitable to generate and an agreement with Vestas for the delivery of 23 V126-3.45 MW wind electricity in an environmentally sustainable manner. Sweden and Norway turbines with a total height of 190 meters. The ongoing investments to have technology-neutral electricity certificate systems, which favor the devel- connect Jenåsen to the grid will also present opportunities to connect other opment of renewable electricity generation. In 2008, the EU adopted the wind farms in the area. All electricity generated by the Jenåsen wind farm is Renewable Energy Directive, through which Sweden has agreed that at least covered by a ten-year Power Purchase Agreement with Google and the farm 49% of its energy consumption will be derived from renewable energy sourc- is scheduled for completion in summer 2018. es by 2020. Through its energy and climate agreement, the former Swedish During the fiscal year, the Iglasjön and Långmarken wind farms were Government raised ambitions by an additional percentage point. In October completed and handed over to customers. When Iglasjön, comprising eight 2014, EU member states decided that the share of renewable energy should Vestas V112-3.3 MW wind turbines with a combined capacity of 26.4 MW, amount to at least 27% of the energy mix by 2030. was handed over to Munich Re, Eolus passed the 500 mark for established On January 1, 2012 a joint Swedish-Norwegian market for electricity cer- turbines. Långmarken, comprising eight Vestas V126-3.3 MW wind turbines, tificates was launched with the objective to increase the amount of electricity was handed over to Mirova/the European Investment Bank, Kalmar County generated from renewable sources by 28.4 TWh between 2012 and 2020. In Council and the City of Malmö. October 2015, the Riksdag decided to introduce technical adjustments to the quota curve in order to correct previous erroneous assumptions, and to raise

34 ANNUAL REPORT EOLUS VIND AB 2016/2017 DIRECTORS’ REPORT

ambitions for the Swedish Electricity Certificate System by 2 TWh, under generation volume, which reduces the volume and profile risk. The main costs an agreement with Norway, from 26.4 TWh to 28.4 TWh. In June 2016, an for wind turbine management are interest expense, depreciation, leases, ser- energy agreement was presented between the two governing parties, the vice and maintenance costs and insurance expenses. Rising market interest Moderate Party, the Centre Party and the Swedish Christian Democrats. rates have a negative impact on earnings. Investment decisions are usually The aim of the agreement is for Sweden to have 100% renewable electricity based on an economic life of 20-25 years. If the actual life falls short of the generation by 2040, zero net emissions of greenhouse gases to the atmo- estimated life, this would have a negative impact on profitability. With such a sphere five years later in 2045 and, ultimately, negative emissions. Under the long time horizon, there is an additional risk that the future costs of service framework of the agreement, Sweden has decided to extend the Electricity and maintenance may differ from the cost basis of the investment decision. Certificate System and expand it by 18 TWh during the 2021-2030 period. To achieve the new goals for the Electricity Certificate System, investments of Competition about SEK 60-70 billion will need to be made in renewable electricity genera- Since development of the wind power industry has accelerated sharply in re- tion during the ten-year period from 2021 to 2030. Wind power is expected cent years, the number of market players has risen. Under current conditions, to account for most of this volume since it is the most cost-efficient way to this has increased the supply of projects and turnkey facilities to the market. add new generation capacity. In the project development phase, Eolus competes with smaller players, ma- Although conditions for the wind power industry have become clearer in jor utilities companies and international wind power developers. In regard to recent years, there is no guarantee that future Swedish parliaments will not sales of electricity, wind power-based electricity competes with all other types make other decisions, entailing weaker terms for wind power in Sweden, of electricity generation since all electricity is sold on a single market. The which could affect Eolus’s operations and financial position. The division Electricity Certificate System is technology-neutral, which favors the genera- of Sweden into four electricity price areas means that the price of electricity tion of renewable electricity using the most cost-efficient technology. In terms generated varies, depending on the supply and demand situation in the of its offering of asset management services, Eolus competes with both major relevant area. wind power developers offering complete managements services and owners who choose to carry out these services themselves. Dependence on agreements Eolus has not concluded any operational or financial agreements with terms FINANCIAL RISKS considered uncommon for the industry. When establishing wind power facili- ties, the company’s activities include signing agreements with manufacturers Capital requirements and financing ability for the supply of wind turbines. Advance payments to wind turbine manufac- Eolus has a large, high-quality project portfolio. The planning of project devel- turers can add up to considerable amounts. Since the size of the company’s opment operations includes monitoring building permits and other permits to wind power projects has increased in recent years, while the number of man- ensure they do not expire before the wind turbines are constructed. Should ufacturers in the market is limited and delivery times are relatively long, the the wind power market show a negative trend, making it more difficult to di- inability of a particular manufacturer to fulfill agreements could have a signifi- vest facilities at acceptable prices and mean that Eolus would thereby need cantly adverse effect on the company’s financial position. to finance more turbines than planned, capital requirements could increase. In July 2016, Eolus secured financing for the next two fiscal years through the Dependence on strategic partners signing of three credit agreements with Handelsbanken. All agreements have Eolus installs wind power facilities from world-class manufacturers using the a 29-month term. The agreements comprise an overdraft facility of SEK 75 M, highest possible technical and overall economic efficiency. The wind power a framework credit agreement of SEK 255 M for project financing and a con- industry is undergoing rapid growth and the number of manufacturers that struction loan of SEK 600 M. The construction loan was signed in order to want to establish a market presence has increased in recent years. This com- finance the establishment of the Jenåsen wind farm, for which Eolus signed a petition among manufacturers has led to better terms and reduced depen- Power Purchase Agreement with Google. At the balance-sheet date, all of the dence on individual suppliers. Although new manufacturers are becoming credit facilities were unutilized. The Board has adopted a finance and risk pol- established in the markets where Eolus operates, it may take time for them icy containing guidelines for the equity/assets ratio, maturity structure of loans to establish construction and service organizations. and the management of liquidity preparedness to reduce refinancing risk.

Dependence on key individuals and employees Exchange-rate changes Eolus is a knowledge-based company with a small organization, where de- A major portion of Eolus’s wind turbine payments are made in EUR. Ex- pendence on the knowledge, experience and creativity of individual employ- change-rate fluctuations against the SEK can thus affect the profitability of ees is high. The loss of key individuals could have significantly adverse effects wind turbine construction. This is offset by either currency futures or sales in on the company in the short term. EUR. The Board has stated in the finance and risk policy that at least 75%, and a maximum of 125%, of the estimated net flow over a 12-month period is Earning capacity to be hedged. On the balance-sheet date, the company’s outstanding curren- The capital cost per MWh generated in a wind turbine varies greatly, depend- cy derivatives amounted to EUR 13.0 M (13.0). These had a negative market ing on the wind conditions at the actual location. Establishing wind power value of SEK 0.5 M (pos: 4.1). facilities on appropriate sites and accurate generation assessments are thus crucial to the company’s earning capacity. The wind conditions at each indi- Interest-rate risk vidual facility can vary from year to year. Generation can vary up to +/- 15%, The electricity generation operations are partly financed by bank loans. compared with a normal wind year. The market price of electricity varies over Changes in market interest rates may therefore affect future earnings and time. The price trend for electricity certificates is dependent on how rapidly profitability. The Board has stated in the finance and risk policy that the aver- renewable electricity generation is developed in proportion to the quota obli- age fixed-interest term in the electricity generation operations is not to be less gation that applies for consumers when purchasing electricity certificates. than 2.5 years. At the end of the 2016/2017 fiscal year, more than 100% of Through a partnership with Axpo Sverige AB, a leading player on the Nord the Group’s liabilities attributable to electricity generation operations to credit Pool Spot power market, Eolus acquires risk management support for sales institutions were covered by interest-rate hedging instruments. The Board of of electricity. The partnership aims to secure future generation revenues, Directors approved this deviation from the policy. On the balance-sheet date, achieve long-term profitability, minimize the risk that market volatility will have these instruments had a negative market value of SEK 14.6 M (neg: 38.8). a negative impact on Eolus’s earnings, generate positive results from price hedging and address the need for load balancing in a cost-efficient manner. In its finance and risk policy, Eolus hedges a predetermined portion of the

ANNUAL REPORT EOLUS VIND AB 2016/2017 35 DIRECTORS’ REPORT

SIGNIFICANT EVENTS To highlight information about the status of these high-priority projects, they AFTER THE END OF THE FISCAL YEAR will be given a separate heading in Eolus’s interim reports from now on. The No significant events took place after the end of the fiscal year. same information will be presented on Eolus’s website. The website will be updated quarterly following the publication of interim reports, or due to OUTLOOK other significant project events announced via press release. The energy market is undergoing a rapid and intense change process. Low price levels for electricity impact the entire energy sector and no method of SHAREHOLDERS generation remains unaffected by this market trend. Although the pricing On August 31, 2017, Eolus had 6,365 shareholders according to the register scenario is largely driven by global prices for fossil-based energy generation, maintained by Euroclear Sweden AB. Shareholders with a direct and indirect investments in renewable generation methods account for a majority of the shareholding who represent more than 10% of the votes are Domneåns new investments at the global level. From a Swedish perspective, wind power Kraftaktiebolag and Hans-Göran Stennert. The largest shareholders of Eolus has undergone tremendous growth – from 1 TWh of generated electricity in shares are presented on page 29. The number of shares held by individuals 2006 to about 15.5 TWh in 2016. Electricity generation in 2017 will be higher with an insider position are presented on Eolus’s website: due to continued development and better wind resources than in 2016. Wind www.eolusvind.com. power is now well-established as the country’s third-largest electricity genera- tion method after hydropower and nuclear power. SHARES The Swedish Energy Agreement from summer 2016 is based on the On August 31, 2017, the share capital in Eolus Vind AB amounted to objective of transitioning to 100%-renewable electricity generation in Sweden. SEK 24,907,000, distributed between 1,285,625 Class A shares and The agreement contains a new development target of 18 TWh for the Elec- 23,621,375 Class B shares. Class A shares carry one voting right, while tricity Certificate System between 2021 and 2030. With the current cost base Class B shares correspond to one-tenth (1/10) of a voting right. All shares for the establishment of new renewable electricity generation, a large propor- carry equal rights to the company’s assets, profit and dividends. tion of these investments will be made in wind power. In recent years, more electricity has been generated than consumed in CORPORATE GOVERNANCE the Swedish market, enabling Sweden to become a net exporter of electricity. For information about the company’s governance during the year, refer to Sweden has an excellent opportunity to become a driving force for sustain- the Corporate Governance Report on pages 37-39. ability in Europe thanks to its extensive carbon-free electricity generation, which could replace the dirty fossil-based power used in other countries. DIVIDEND POLICY A continued ability to export electricity is positive for Sweden, which is why The Board has adopted a dividend policy entailing that dividends issued by it is so important to continue expanding the transmission capacity – not only Eolus in the long term will be determined by the company’s earnings and within Sweden but also to other countries. The fact that the energy agree- correspond to 20-50% of the company’s profit. However, dividends will be ment addresses the need to expand the transmission capacity in order to adapted to the company’s investment requirements and financial position. enable exports is thus positive. The future potential to store electricity will For the 2015/2016 fiscal year, the Annual General Meeting on January present major opportunities for Sweden to increase their share of intermittent 28, 2017 resolved to pay dividends corresponding to SEK 1.50 (1.50) per electricity sources, such as wind and solar power. share. Payment of the dividend took place on February 3, 2017. Eolus is now active in a number of markets beside Sweden. At present, the most attractive markets for Eolus’s operations – in addition to Sweden – PROPOSED DISTRIBUTION OF PROFIT are the Norwegian and US markets. In addition to high-priority projects in The Board of Directors proposes a dividend of SEK 1.50 (1.50) per share the Swedish market, Eolus has now identified high-priority projects in these for the 2016/2017 fiscal year in line with the company’s dividend policy. markets in the project portfolio for the coming years. It is not yet known The proposed record date for the dividends is Tuesday, January 30, whether the US Administration’s positive views on fossil-based electricity 2018. generation will have any effect on the development of renewable generation Payment of the dividend is expected to take place on Friday, February 2, in the US. However, the growth potential is still considered high due to robust 2018. The Board of Directors deems that the proposal is consistent with targets for wind power development at both federal and state level, and long- the prudence rule in Chapter 17, Section 3 of the Swedish Companies Act, term federal tax policy that is driving wind power. as follows: Onshore wind power is one of the cheapest methods for adding new generation capacity. The cost associated with establishing new wind power The following profits are at the disposal of the Annual General Meeting is already lower than the cost of establishing new nuclear power, and Eolus (amounts in SEK): aims to continue pushing down the price per MWh generated. Efficiency en- Share premium reserve 168,662,573 hancements throughout the value chain of a wind power project’s lifespan are crucial in order to meet investors’ yield requirements. By significantly reducing Retained earnings 193,423,282 the costs of wind power establishment, the realization of projects with profit- Net profit for the year 137,710,058 ability for end-investors can also continue in times with low overall price levels Total 499,795,913 for electricity and electricity certificates. Eolus’s extensive experience in the construction of wind power facilities, combined with a full range of asset The Board of Directors proposes that the profits be appropriated as follows: management services, will safeguard the company’s continued ability to offer attractive investment objects to various types of investors, but primarily dividend to the shareholders 37,360,500 to customer groups that invest in major generation facilities. to be carried forward 462,435,413 Eolus’s strategic focus will concentrate on the development, establish- ment and divestment of a number of high-priority projects in coming years, Total 499,795,913 i.e. those with the best conditions to be realized at the lowest cost per mega- watt-hour. With fewer but larger established wind farms, quarterly fluctuations Statement: will be greater in relation to wind turbines constructed, tied-up capital and The proposed dividend is considered justifiable in view of the earnings trend sales and earnings. after the end of the fiscal year. The proposed distribution of profit is also con- sidered justifiable in view of the requirements concerning equity, consolidation requirements, liquidity and financial position in general for both the Parent Company and the Group.

36 ANNUAL REPORT EOLUS VIND AB 2016/2017 CORPORATE GOVERNANCE REPORT

CORPORATE GOVERNANCE REPORT

CORPORATE GOVERNANCE REPORT Annual General Meeting 2018 FOR EOLUS VIND AB (PUBL) The next Annual General Meeting for Eolus’s shareholders will be held at Eolus Vind AB is a Swedish public limited liability company that has been Hässleholms Kulturhus on Saturday, January 27, 2018 at 3:00 p.m. More listed on Nasdaq Stockholm since February 2, 2015. Eolus is governed details about the Annual General Meeting, registration, etc. are available on through General Meetings, the Board of Directors, the CEO and Group man- page 87. agement in accordance with the Swedish Companies Act, the Articles of Association and the rules of procedure for the Board of Directors and CEO. NOMINATION COMMITTEE Representatives from the Eolus Group’s management are also members of The Nomination Committee nominates the people who are proposed for its subsidiaries’ boards. election to Eolus’s Board of Directors at the Annual General Meeting. It also With Nasdaq Stockholm, Eolus has committed to apply the Swedish presents proposals for auditors’ fees, Board fees to the Chairman and other Corporate Governance Code (the “Code”), which is to be applied by all Board members, and remuneration for committee work. All the proposals are Swedish limited liability companies whose shares are traded on a regulated presented at the Annual General Meeting, in the notice and on the website market in Sweden. ahead of the Annual General Meeting. The Nomination Committee comprises the Board Chairman and repre- ARTICLES OF ASSOCIATION sentatives for Eolus’s three largest shareholders in terms of the number of The current Articles of Association were adopted at the Annual General Meet- votes on May 31. Hans-Göran Stennert, Board Chairman, presented the ing on January 28, 2017. It states that the Board’s registered office is to be in composition of the Nomination Committee on July 11, 2017. Hässleholm, Sweden, that the Board’s members be elected every year by the Annual General Meeting for a period up to the next Annual General Meeting, The Nomination Committee comprises the following members: and that one Class A share entitles the holder to one vote while one Class B Name Represents Holding on share entitles one-tenth of a vote. The complete Articles of Association are May 31, 2017 available on Eolus’s website, www.eolusvind.com. Hans-Göran Stennert In his capacity as Chairman of the Board Ingvar Svantesson Domneåns Kraftaktiebolag 15.3% GENERAL MEETINGS Hans Gydell (Chairman) Hans-Göran Stennert 11.8% The shareholders exercise their decision-making rights regarding central is- Hans Johansson Åke Johansson 6.4% sues at the General Meeting. The Meeting resolves on adoption of the income statement and balance sheet, appropriation of the company’s profit or loss, The Nomination Committee held its first meeting on September 7, 2017. discharge of liability for Board members and CEO, election of the Board of Di- The Nomination Committee has held two minuted meetings ahead of the rectors and auditors, and remuneration of the Board of Directors and auditors. 2018 Annual General Meeting. The work of the Nomination Committee begins Notice convening the Annual General Meeting for Eolus must be issued with the members reviewing the evaluation of the Board carried out during the not earlier than six weeks and not later than four weeks prior to the Meeting. year. The Nomination Committee agreed unanimously that the current com- The notice is to be advertised in Post- och Inrikes Tidningar and on position is satisfactory. Two new members were elected at the previous Eolus’s website. The fact that notification has been issued is announced in Annual General Meeting, and the Board’s teamwork can therefore benefit Swedish daily Dagens Industri. Shareholders who wish to participate in the from continuity among members during the forthcoming term of office. The Annual General Meeting are to notify the company by no later than the date number of Board members is considered appropriate and the expertise pos- stipulated in the notice. sessed by the Board is both complementary and relevant. The composition of the Board is also considered satisfactory in terms of equality. 2017 Annual General Meeting Eolus’s 2017 Annual General Meeting was held in Hässelholm, Sweden, on THE BOARD OF DIRECTORS AND ITS WORK Saturday, January 28. Some 92 shareholders, representing 33% of the votes, Eolus’s Board of Directors decides on the company’s business orientation, attended the meeting, personally or through proxy. General Counsel Karl strategy, business plan, resources and capital structure, organization, acquisi- Olsson was elected Chairman of the Meeting. In attendance at the Annual tions, major investments and divestments, annual reports and interim reports, General Meeting were the Board members, CEO, Deputy CEO, CFO and the as well as other comprehensive matters of a strategic nature. The Board also company’s auditor. The minutes of the Meeting are available in Swedish on appoints the CEO who is in charge of the day-to-day management in accor- Eolus’s website, www.eolusvind.com. All resolutions were made in accor- dance with the Board’s instructions. dance with the proposals from the Nomination Committee and the Board of Directors. Board members Board members are elected every year by the Annual General Meeting for the A few of the resolutions made by the Meeting include: period up until the next Annual General Meeting. According to the Articles of • Dividend of SEK 1.50 per share for the 2015/2016 fiscal year. Association, the Board is to comprise no fewer than four and no more than • The Board of Directors is to comprise six members, but no deputy ten regular members and no more than six deputy members. members. The Board comprised six members as of the Annual General Meeting on • Re-election of Board members Hans-Göran Stennert, Fredrik Daveby, January 28, 2017. For a presentation of the Board Chairman and Board Sigrun Hjelmquist and Hans Johansson. Hans Linnarsson and Bodil Rosvall members, see pages 84-85. Eolus’s CEO is not a member of the Board but Jönsson were elected as new members of the Board. participates, as does the Deputy CEO, CFO and General Counsel, as a rule at • Re-election of Hans-Göran Stennert as Board Chairman. the Board meetings as rapporteurs. • Re-election of PricewaterhouseCoopers AB as the company’s auditors with Eva Carlsvi as Auditor in Charge. The work of the Board • Fees to the Board Chairman, Board members and auditor. At the first regular Board meeting following the Annual General Meeting, • Rules for the appointment and work of the Nomination Committee. Eolus’s Board adopts written instructions that describe the Board’s rules of • Amendment of the Articles of Association to allow the company to conduct procedure. The adopted rules of procedure stipulate the division of duties operations including renewable energy and facilities for energy storage. among the Board’s members and how often the Board will convene. Further- more, the rules of procedure regulate the Board’s duties, quorum, instructions for the CEO, the division of responsibilities between the Board and the CEO,

ANNUAL REPORT EOLUS VIND AB 2016/2017 37 CORPORATE GOVERNANCE REPORT

and more. The Board has also internally established a Remuneration Commit- The duties of the Remuneration Committee include: tee comprising three members of the Board and an Audit Committee com- • to prepare and on behalf of the Board make decisions on matters regarding prising the entire Board. remuneration policy, remuneration and other terms of employment for The Board convenes according to a one-year plan proposed in advance senior management including submitting proposals to the Annual General and more meetings are arranged as needed. The Board had ten minuted Meeting on behalf of the Board on the guidelines for remuneration of senior Board meetings during the 2016/2017 fiscal year. executives that the Annual General Meeting is to resolve on, • monitor and evaluate any ongoing and during-the-year adopted Items on the agenda for 2016/2017 included: programs for variable remuneration to company management, • Annual accounts including the auditors’ report, the proposed distribution • monitor and evaluate the application of the guidelines for remuneration of profit and the year-end report. of senior executives decided by the Annual General Meeting as well as • Annual report and preparations ahead of the Annual General Meeting. relevant remuneration structures and levels in the company, • Follow-up with the auditor in charge regarding the year’s audit. • ensure that the company’s auditor submits a written statement to the • Interim reports. Board no later than three weeks before the Annual General Meeting • Rules of procedure for the Board and CEO. regarding whether the guidelines for remuneration of senior executives • Annual review of policies. valid since the previous Annual General Meeting have been followed, and • Budget. • carry out the other duties that are assigned the Remuneration Committee • Strategic issues and risks. in the Swedish Corporate Governance Code and other applicable rules and • Ongoing forecasts. regulations for the company. • Outline plans (prioritized projects for the next three years). • Liquidity planing with respect to future prioritized projects. The Remuneration Committee held two minuted meetings during 2016/2017 • Economic climate and conditions. at which all members were in attendance.

In addition to the Board meetings, the Board Chairman and the CEO have AUDIT COMMITTEE an ongoing dialog regarding the management of the company. The CEO, The company has decided that the Board in its entirety will carry out the Per Witalisson, is in charge of implementation of the business plan, the day- committee’s duties. to-day management of the company’s affairs and the daily operations of the company. Before Board meetings, the Board receives written information in The duties that the Board will carry out in this function include: the form of a CEO report that contains a follow-up of the company’s sales, • monitoring the company’s financial statements, operational results, liquidity forecasts, interest rate and currency hedging, • monitoring the effectiveness of the company’s internal control and risk details concerning order backlog, the number of wind turbines under con- management in relation to financial reporting and provide recommendations struction as well as comments concerning the various market trends. Prior and proposals to ensure the reliability of financial reporting, to the Board meetings, the Board will also have access to the balance state- • annually evaluating the need for an internal audit function that is the ments and cash-flow statements. responsibility of the Board, The Board Chairman presents to the Board the results of the annual • remaining informed about the audit of the annual report and consolidated evaluation of the Board’s work. The evaluation includes the composition accounts, and assessing how the audit contributed to the reliability of of the Board, the individual Board members and the Board’s work and financial reporting. procedures. • regularly meeting the company’s auditor for updates concerning the The Code contains rules concerning the Board members’ independence scope and methodology of the audit and to discuss the approach to and stipulates that the majority of the Board members are to be independent in the company’s risks, relation to the company and company management. At least two of the Board • determine guidelines for non-auditing services that the company may members who are independent in relation to the company and company man- request from the company’s auditor, agement must also be independent in relation to all shareholders who control • review and monitor the auditor’s impartiality and independence, ten percent or more of the shares or the votes in Eolus Vind AB. No more than • assist the Nomination Committee in preparing proposals for the General one person from company management may be a member of the Board. Meeting’s decisions regarding auditors and fees for the audit assignment, • execute the other duties of the Audit Committee required by law, the BOARD ATTENDANCE IN 2016/2017 Swedish Corporate Governance Code, and other relevant rules and regula- tions for the company. Function Inde- Board Remu- pendent1 meet- neration ing Committee CHIEF EXECUTIVE OFFICER (CEO) The CEO of Eolus is Per Witalisson (born 1971), Master of Business Adminis- Hans-Göran Stennert Chairman 2) 10 of 10 2 of 2 tration. The Board has adopted instructions for the work and role of the CEO. Fredrik Daveby Board member X 10 of 10 2 of 2 The CEO is responsible for the day-to-day management of the Group’s busi- Sigrun Hjelmquist Board member X 10 of 10 2 of 2 ness in accordance with the Board’s guidelines. For a presentation of the CEO, refer to page 30. For remuneration of the Jan Bengtsson* Board member X 4 of 10 CEO, refer to Note 6. Hans Johansson Board member X 10 of 10 Hans Linnarson** Board member X 5 of 10 GROUP MANAGEMENT Bodil Rosvall Jönsson** Board member X 6 of 10 Per Witalisson leads the work of Group management and makes decisions in consultation with other members of management. Group management con- * Resigned from the Board at the Annual General Meeting on January 28, 2017. sists of four people, in addition to the CEO, Deputy CEO, CFO and General ** Was elected to the Board at the Annual General Meeting on January 28, 2017. Counsel. During the 2016/2017 fiscal year, management convened on 17 1) According to the definition in the Swedish Corporate Governance Code. 2) Not independent (in relation to Eolus’s major shareholders). occasions in Hässleholm or Malmö in Sweden. The year’s meetings were dominated by continuous reconciliation of the rolling business plan, strategy REMUNERATION COMMITTEE issues and action plans. Standing items on the agenda are minutes from the previous meeting, reports from the operational team, finances, project devel- The Remuneration Committee comprises Hans-Göran Stennert, Sigrun Hjelmquist and Fredrik Daveby. Hans-Göran Stennert is the Committee’s opment, establishment, sales and marketing, operation, foreign operations, Chairman. personnel, occupational health and safety and legal issues.

38 ANNUAL REPORT EOLUS VIND AB 2016/2017 CORPORATE GOVERNANCE REPORT

AUDIT aimed at ensuring high-quality financial reporting to company management At the Annual General Meeting on January 28, 2017, Pricewaterhouse­ and the Board so that decisions can be made on correct grounds. Coopers AB (PwC) was re-elected with Eva Carlsvi as Auditor in Charge. To describe internal control over financial reporting, Eolus proceeds The auditors review the annual accounts and the annual report as well from the five components of internal control defined in the COSO Internal as the company’s ongoing operations and procedures in order to express an Control-Integrated Framework – Control Environment, Risk Assessment, opinion on the accounts and the administration of the Board of Directors and Control Activities, Information and Communication, and Monitoring Activities. the CEO. The annual accounts and the annual report are audited in October The description below therefore relates to Eolus’s internal control system in and November. An examination is then made of whether the Annual General relation to the 1992 edition of the COSO Framework. Meeting’s guidelines for the remuneration of senior executives have been followed. An interim review is performed in May, and Eolus’s second-quarter Control environment report is reviewed in April. In addition to Eolus, Eva Carlsvi is also Auditor in The Board’s rules of procedure and the Board’s instructions for the duties of Charge for Duni (publ), BE Group AB (publ), E.ON Nordic Aktiebolag and the CEO and the Board’s Committees clearly define the division of responsi- KappAhl AB (publ). Eva Carlsvi is an authorized public accountant and bility and powers in order to ensure effective management of risks in the busi- member of FAR. In 2016/2017, fees paid to PwC for non-audit assignments ness operations. In its role as Audit Committee, the Board of Eolus reviews totaled SEK 0.6 M (0.5). the instructions and procedures used in the financial reporting process as well as accounting policies and any amendments of these. The CEO reports REMUNERATION to the Board of Directors, according to established procedures, on the opera- tions and financial performance prior to every Board meeting. Internal control Remuneration of the Board instruments for financial reporting mainly comprise the finance and risk policy, Fees and other remuneration of the Board, including the Chairman of information policy and the Group’s accounting manual, which defines the Eolus’s Board, are determined by the Annual General Meeting. The Annual accounting and reporting rules. General Meeting on January 28, 2017 resolved on total annual fees of SEK 1,100,000, of which SEK 350,000 would be paid to the Chairman and Risk assessment and control structure SEK 150,000 to each of the other Board members. For more information Significant risks for the operations are analyzed by the Board of Directors about remuneration of the Board, refer to Note 6. as part of financial reporting. The risk areas are documented on the basis of probability and their probable impact. Based on this, control processes Remuneration of senior executives are designed to ensure high-quality financial reporting. The organizational Remuneration of the CEO and other members of Group Management (cur- structure, and the division of responsibility and rules of authorization, are rently the Deputy CEO, CFO and General Counsel) is paid in accordance with clearly described and communicated through instructions. The operations the guidelines for the remuneration of senior executives. The guidelines were are organized into segments that are monitored. adopted by the Annual General Meeting on January 28, 2017, for the period until the next Annual General Meeting. Information and communication According to the guidelines, senior executives shall be offered mar- An accounting manual with guidelines and instructions for financial reporting ket-based and competitive remuneration. The level of remuneration for indi- has been produced. The accounting manual is continuously updated and is- vidual senior executives shall be based on such factors as position, expertise, sued to the relevant employees at Eolus. Prior to all quarterly financial state- experience and performance. Remuneration includes fixed salary and pension ments and the annual accounts, specific written instructions are also provided benefits, and may also include variable salary and other non-monetary bene- to ensure accurate information in the external reporting. fits. The company shall able to offer all senior executives maximum variable External communication is governed by Eolus’s information policy and remuneration of one monthly salary per year. communication plan, which address responsibilities, procedures and rules. Variable salary shall be based on the achievement of one or more quanti- The policy is continuously evaluated to ensure that information to the stock tative and/or qualitative targets. The targets shall be formulated with the ob- market maintains high quality and is in accordance with the stock exchange’s jective of promoting the company’s long-term value creation. Furthermore, rules. Financial information such as quarterly reports, annual reports and sig- the company shall also be able to offer senior executives a share ownership nificant events are published through press releases, and on Eolus’s website. program under which the company, three years after payment of variable re- Meetings with financial analysts are arranged regularly in conjunction with the muneration, will reimburse the cost of acquiring half as many shares as the publication of quarterly reports. executive acquired for their variable remuneration and continues to hold. For more information about remuneration of senior executives, refer to Note 6. Monitoring Group management continuously analyzes the financial performance of the Remuneration of auditors Group’s segments. At all levels of the organization, continuous monitoring Fees for the audit assignment are paid against invoice and amounted to SEK is generally performed through comparisons against budget, forecasts and 0.5 M for the 2016/2017 fiscal year. For the 2016/2017 fiscal year, fees paid plans, as well as evaluation of key figures. to PwC for non-audit assignments totaled SEK 0.5 M. For more information Prior to Board meetings, the Board receives financial reporting on about the remuneration of auditors, refer to Note 7. Eolus’s performance. In addition to formal reporting, there are informal infor- mation channels to the CEO and the Board for significant information from THE BOARD’S DESCRIPTION OF INTERNAL CONTROL employees. The Board continuously evaluates the information provided by OVER FINANCIAL REPORTING FOR THE 2016/2017 the CEO. This involves ensuring that measures are taken in regard to any shortcomings and proposed measures that have arisen during the internal FISCAL YEAR control and external audit. The Board’s responsibility for internal control is governed by the Swedish The Board and the auditor engage in regular dialog. All members of Companies Act and Swedish Corporate Governance Code. This includes the Board and the auditor receive a copy of interim reports before they are monitoring Eolus’s financial reporting and the effectiveness of the company’s published. The Board and the auditor meet at least once per year, without internal control and risk assessment. the presence of management. Internal control over financial reporting aims to provide reasonable assur- ance of the reliability of the external financial reporting in the form of annual Opinions on internal audits reports and interim reports published by Eolus every year, and that financial To date, the Board has not found any reason to establish an internal audit reporting is prepared in accordance with the law, applicable accounting stan- function, as the above functions are considered to fulfil this role. However, dards and other requirements for listed companies. Internal control is also the Board annually evaluates the need for such a function.

ANNUAL REPORT EOLUS VIND AB 2016/2017 39 CONSOLIDATED STATEMENT OF INCOME

CONSOLIDATED STATEMENT OF INCOME

KSEK Note 2016/2017 2015/2016

Net sales 3 1,065,668 693,446 Other operating income 8 17,379 2,215 Total operating income 1,083,047 695,661

Change in inventories of wind turbines, wind turbines under construction and projects under development -183,858 73,558 Cost of goods and project development -739,026 -681,186 Other external expenses 7.13 -54,382 -43,615 Employee benefits expenses 5.6 -30,650 -28,175 Depreciation and impairment of property, plant and equipment 12 -23,423 -26,719 Profit/loss from participations in associated companies 17 -2,570 -1,309 Other operating expenses 8 -8,904 -4,165 Total operating expenses -1,042,814 -711,610 Operating profit/loss 40,233 -15,949

Interest income 9 2,187 338 Interest expense 9 -7,464 -11,239 Other financial items 9 -732 -2,206 Loss from financial items -6,009 -13,108 Profit/loss before tax 34,224 -29,057

Tax 11 -9,720 5,139 Net profit/loss for the year 24,504 -23,918

Attributable to Parent Company shareholders 25,317 -22,925 Attributable to non-controlling interests -813 -993 Total 24,504 -23,918

Earnings per share, before and after dilution 21 1.02 -0.92

40 ANNUAL REPORT EOLUS VIND AB 2016/2017 CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

KSEK Note 2016/2017 2015/2016

Net profit/loss for the year 24,504 -23,918

Other comprehensive income Other comprehensive income not to be reclassified to profit or loss in subsequent periods - - Other comprehensive income to be reclassified to profit or loss in subsequent periods - - Exchange differences on translation of foreign operations 172 -3 Total other comprehensive income 172 -3

Comprehensive income for the year 24,677 -23,921

Attributable to Parent Company shareholders 25,729 -22,928 Attributable to non-controlling interests -1,053 -993 Total 24,677 -23,921

ANNUAL REPORT EOLUS VIND AB 2016/2017 41 CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

KSEK Note Aug 31, 2017 Aug 31, 2016

ASSETS

Non-current assets Property, plant and equipment 12 111,443 259,323 Participation in associated companies 17 3,763 8,076 Deferred tax assets 11 2,236 41 Other financial assets 24 30,517 24,356 Total non-current assets 147,959 291,795

Current assets Inventories of wind turbines, wind turbines under construction and projects under development 18 344,840 462,301 Advance payments to suppliers 128,435 204,597 Accounts receivable 19, 24 25,686 28,793 Derivative instruments 24 - 4,130 Current tax assets - 19,095 Other current receivables 19, 24 44,493 29,131 Prepaid expenses and accrued income 20, 24 7,840 8,225 Cash and cash equivalents 24 201,509 221,549 Total current assets 752,805 977,821

TOTAL ASSETS 900,764 1,269,616

42 ANNUAL REPORT EOLUS VIND AB 2016/2017 CONSOLIDATED STATEMENT OF FINANCIAL POSITION

KSEK Note Aug 31, 2017 Aug 31, 2016

EQUITY AND LIABILITIES

Equity Share capital 21 24,907 24,907 Additional paid-in capital 190,843 190,843 Reserves 369 -42 Retained earnings 441,673 455,315 Equity attributable to Eolus’s shareholders 657,791 671,026 Non-controlling interests 1,719 140 Total equity 659,510 671,166

Non-current liabilities Non-current interest-bearing liabilities to credit institutions 22, 24 12,740 50,216 Non-current provisions 23 3,789 7,599 Deferred tax liabilities 11 57,291 77,765 Other non-current liabilities 22 797 854 Total non-current liabilities 74,617 136,434

Current liabilities Current interest-bearing liabilities to credit institutions 22, 24 21,169 31,558 Accounts payable 24 28,276 109,998 Derivative instruments 24 15,097 38,753 Current tax liabilities 15,598 76 Accrued expenses and deferred income 20, 24 32,483 15,678 Advance payments from customers 51,300 237,831 Other current liabilities 24 2,714 28,122 Total current liabilities 166,637 462,017

TOTAL EQUITY AND LIABILITIES 900,764 1,269,616

ANNUAL REPORT EOLUS VIND AB 2016/2017 43 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Share Additional Reserves Retained Total, Non- Total equity capital paid-in earnings Eolus’s controlling capital share- interests KSEK Note 21 holders

At September 1, 2016 24,907 190,843 -42 455,315 671,026 140 671,166 Net profit/loss for the year 25,317 25,317 -813 24,504 Other comprehensive income 412 412 -240 172 Total comprehensive income 412 25,317 25,729 -1,053 24,677 Transactions with shareholders Acquisition of shares from non-controlling interests 10 10 -10 - Non-controlling interests arising on acquisition of subsidiaries - 2,641 2,641 Change in shares of equity in associated companies -1,610 -1,610 - -1,610 Dividends -37,361 -37,361 -37,361 At August 31, 2017 24,907 190,843 369 441,673 657,791 1,719 659,510

Share Additional Reserves Retained Total, Non- Total equity capital paid-in earnings Eolus’s controlling capital share- interests KSEK Note 21 holders

At September 1, 2015 24,907 190,843 -39 515,602 731,313 51 731,364 Net profit/loss for the year -22,925 -22,925 -993 -23,918 Other comprehensive income -3 -3 - -3 Total comprehensive income -3 -22,925 -22,928 -993 -23,921 Transactions with shareholders Capital contribution from non-controlling interests 1,082 1,082 Dividends -37,361 -37,361 -37,361 At August 31, 2016 24,907 190,843 -42 455,315 671,026 140 671,166

44 ANNUAL REPORT EOLUS VIND AB 2016/2017 CONSOLIDATED CASH-FLOW STATEMENT

CONSOLIDATED CASH-FLOW STATEMENT

KSEK Note 2016/2017 2015/2016

Operating activities Operating profit/loss 40,233 -15,949 Non-cash items 25 23,715 28,337 63,948 12,388

Interest received 730 1,081 Interest paid -8,632 -11,650 Income tax paid -1,175 -6,814 Net cash flow from operating activities before changes in working capital 54,871 -4,996

Adjustments of working capital Decrease/increase in inventories of wind turbines, wind turbines under construction, projects under development and advance payments to suppliers 335,260 -56,690 Increase/decrease in operating receivables -22,429 10,423 Decrease/increase in operating liabilities -276,732 185,453 Cash flow from operating activities 90,971 134,190

Cash flow from investing activities Acquisition of participations in subsidiaries/asset acquisitions -4,009 -450 Acquisition of property, plant and equipment 12 -6,698 -2,503 Sale of property, plant and equipment 12 606 13,836 Acquisition of financial assets 17 - -22,152 Sale of financial assets 383 873 Cash flow from investing activities -9,718 -10,395

Cash flow from financing activities Repayment of loans 22 -47,865 -107,141 Redemption derivative instruments -15,810 - Capital contribution - 748 Dividends -37,361 -37,360 Cash flow from financing activities -101,036 -143,754

Cash flow for the year -19,784 -19,959 Cash and cash equivalents at beginning of year 221,549 241,522 Exchange-rate differences in cash and cash equivalents -256 -13 Cash and cash equivalents at year-end 201,509 221,549

ANNUAL REPORT EOLUS VIND AB 2016/2017 45 PARENT COMPANY INCOME STATEMENT

PARENT COMPANY INCOME STATEMENT

KSEK Note 2016/2017 2015/2016

Net sales 4 910,062 611,873 Change in inventories of wind turbines, wind turbines under construction and projects under development -155,556 90,291 Other operating income 8 16,974 1,170 Total operating income 771,480 703,334

Cost of goods and project development -624,097 -642,480 Other external expenses 7.13 -33,439 -21,980 Personnel costs 5, 6 -30,112 -27,671 Depreciation and impairment of property, plant and equipment 12 -4,673 -5,174 Other operating expenses 8 -10,294 -2,840 Total operating expenses -702,615 -700,145 Operating profit/loss 68,865 3,189

Profit from participations in Group companies 15 21,109 23,311 Interest income 9 470 374 Interest expense 9 -1,586 -1,530 Other financial items 9 -6,298 1,319 Loss from financial items 13,695 23,474

Profit after financial items 82,560 26,663 Appropriations 10 89,547 26,392 Profit before tax 172,107 53,055

Tax on profit for the year 11 -34,396 -6,649 Net profit for the year 137,711 46,406

46 ANNUAL REPORT EOLUS VIND AB 2016/2017 PARENT COMPANY STATEMENT OF OTHER COMPREHENSIVE INCOME

PARENT COMPANY STATEMENT OF OTHER COMPREHENSIVE INCOME

KSEK Note 2016/2017 2015/2016

Net profit for the year 137,711 46,406

Other comprehensive income Other comprehensive income not to be reclassified to profit or loss in subsequent periods - - Other comprehensive income to be reclassified to profit or loss in subsequent periods - - Total other comprehensive income - -

Comprehensive income for the year 137,711 46,406

ANNUAL REPORT EOLUS VIND AB 2016/2017 47 PARENT COMPANY BALANCE SHEET

PARENT COMPANY BALANCE SHEET

KSEK Note Aug 31, 2017 Aug 31, 2016

ASSETS

Property, plant and equipment Land and buildings 221 221 Wind turbines 12 35,477 66,702 Equipment 12 3,027 2,540 Constructions in progress 12 4,799 - 12 43,524 69,463 Financial assets Participations in Group companies 15 137,698 187,831 Participations in associated companies 17 3,725 8,700 Other securities held as non-current assets 14 1,242 1,567 Deferred tax assets 11 238 324 Other non-current receivables 5,000 607 147,903 199,029

Total non-current assets 191,427 268,492

Inventories, etc. Inventories of wind turbines 9,325 11,995 Wind turbines under construction and projects under development 173,705 326,595 Advance payments to suppliers 125,804 200,751 308,834 539,341 Current receivables Accounts receivable 23,760 27,480 Receivables from Group companies 161,712 95,590 Current tax assets - 25,353 Other current receivables 18,723 6,190 Prepaid expenses and accrued income 20 4,530 2,812 208,725 157,425

Cash and cash equivalents 181,385 211,469 Total current assets 698,944 908,235

TOTAL ASSETS 890,371 1,176,727

48 ANNUAL REPORT EOLUS VIND AB 2016/2017 PARENT COMPANY BALANCE SHEET

KSEK Note Aug 31, 2017 Aug 31, 2016

EQUITY AND LIABILITIES

Restricted equity 21 Share capital 24,907 24,907 Statutory reserve 22,259 22,259 47,166 47,166 Non-restricted equity Share premium reserve 168,663 168,663 Retained earnings 193,423 184,378 Net profit for the year 137,711 46,406 499,797 399,447

Total equity 546,963 446,613

Untaxed reserves 10 142,951 133,958 Provisions 23 1,449 2,353

Current liabilities Advance payments from customers 51,300 237,831 Accounts payable 26,159 107,490 Liabilities to Group companies 64,210 207,218 Current tax liabilities 23,693 - Other liabilities 2,454 28,512 Accrued expenses and deferred income 20 31,192 12,752 Total current liabilities 199,008 593,803

TOTAL EQUITY AND LIABILITIES 890,371 1,176,727

ANNUAL REPORT EOLUS VIND AB 2016/2017 49 PARENT COMPANY STATEMENT OF CHANGES IN EQUITY

PARENT COMPANY STATEMENT OF CHANGES IN EQUITY

Share capital Additional Reserves Retained Total equity KSEK Note 21 paid-in capital earnings

At September 1, 2016 24,907 22,259 168,663 230,784 446,613 Net profit for the year 137,711 137,711 Total comprehensive income 137,711 137,711 Transactions with shareholders Dividends -37,361 -37,361 At August 31, 2017 24,907 22,259 168,663 331,134 546,963

Share capital Statutory reserve Share premium Retained Total equity KSEK Note 21 reserve earnings

At September 1, 2015 24,907 22,259 168,663 221,737 437,566 Net profit for the year 46,406 46,406 Total comprehensive income 46,406 46,406 Transactions with shareholders Exchange differences on translation of foreign operations - - 2 2 Dividends -37,361 -37,361 At August 31, 2016 24,907 22,259 168,663 230,784 446,613

50 ANNUAL REPORT EOLUS VIND AB 2016/2017 PARENT COMPANY CASH-FLOW STATEMENT

PARENT COMPANY CASH-FLOW STATEMENT

KSEK Note 2016/2017 2015/2016

Operating activities Operating profit/loss 68,865 3,189 Non-cash items 25 9,860 6,085 78,725 9,274

Interest received 485 440 Interest paid -3,292 -1,601 Income tax paid 14,736 -6,303 Net cash flow from operating activities before changes in working capital 90,654 1,810

Adjustments of working capital Decrease/increase in inventories of wind turbines, wind turbines under construction, projects under development and advance payments to suppliers 230,507 -105,677 Increase in operating receivables -81,668 -18,201 Decrease/increase in operating liabilities -276,104 191,000 Cash flow from operating activities -36,611 68,932

Cash flow from investing activities Shareholders’ contributions 15 545 -585 Acquisition of participations in subsidiaries -150 - Divestment of participations in subsidiaries 110 - Acquisition of property, plant and equipment 12 -6,034 -2,073 Sale of property, plant and equipment 12 26,162 13,620 Acquisition of financial assets - 187 Cash flow from investing activities 20,633 11,149

Cash flow from financing activities Repayment of loans 22 - -10,850 Group contributions received/paid 23,255 -50,916 Dividends -37,362 -37,362 Cash flow from financing activities -14,106 -99,128

Cash flow for the year -30,084 -19,047 Cash and cash equivalents at beginning of year 211,469 230,516 Cash and cash equivalents at year-end 181,385 211,469

ANNUAL REPORT EOLUS VIND AB 2016/2017 51 NOTES

NOTES

NOTE 1 GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES

The Parent Company, Eolus Vind AB, Corporate Registration Number IFRS 16 LEASES 556389-3956, is a limited liability company registered and headquartered in IFRS 16 was issued on January 13, 2016 and replaced IAS 17 Leases. IFRS Sweden. The Group’s main operations comprise the development and con- 16 introduces a right-of-use model entailing that the lessee is to recognize struction of wind turbines for divestment or proprietary management. The essentially all leases in the balance sheet, meaning that leases no longer need address of the head office is Tredje Avenyen 3, Hässleholm, Sweden, under to be classified as either operating or finance leases. The exceptions are leas- the postal address Box 95, SE-281 21 Hässleholm, Sweden. The company es with a term of 12 months or less and leases of low value. Depreciation of is listed on Nasdaq Stockholm. the asset and interest expense on the liability are to be recognized in profit The Board of Directors approved these consolidated financial statements or loss. An evaluation of the potential impact of implementing the standard is and the financial statements for the Parent Company on December 4, 2017 ongoing. and they will be presented for adoption at the Annual General Meeting on January 27, 2018. CONSOLIDATION BASIS The most important accounting policies applied to the preparation of The consolidated financial statements encompass the Parent Company and these consolidated financial statements are stated below. These policies its subsidiaries. The financial statements for the Parent Company and subsid- were applied consistently for all years presented, unless otherwise stated. iaries included in the consolidated financial statements pertain to the same period and have been prepared in accordance with the same accounting REGULATIONS APPLIED TO THE CONSOLIDATED policies as for the Group. FINANCIAL STATEMENTS The consolidated financial statements were prepared in accordance with Subsidiaries International Financial Reporting Standards (IFRS) issued by the International Subsidiaries are defined as all companies over which the Group exercises a Accounting Standards Board (IASB) as adopted by the EU. Furthermore, the controlling influence. The Group controls a company when the Group is ex- Swedish Annual Accounts Act and recommendation RFR 1 Supplementary posed to, or has rights to, variable returns from its holding in the company Accounting Rules for Groups were applied. and has the ability to impact those returns through exercising its influence over the company. Subsidiaries are included in the consolidated financial BASIS FOR THE PREPARATION OF THE CONSOLIDATED statements from the acquisition date, meaning the date on which the Group FINANCIAL STATEMENTS gains a controlling influence, and are included in the consolidated financial The consolidated financial statements are based on historical cost, unless statements until the date on which the controlling influence ceases. otherwise stated. The Group’s presentation currency is SEK, which is the Business combinations are recognized in accordance with the acquisition Parent Company’s functional currency. All figures are presented in thousands method. The purchase consideration comprises the fair value of acquired as- of SEK (KSEK), unless otherwise stated. sets, liabilities and issued shares. The purchase consideration also includes the fair value of all assets and liabilities that are part of any contracted, contin- INTRODUCTION OF NEW ACCOUNTING POLICIES gent purchase considerations. Acquisition-related costs are expensed when The Group has decided to comment only on standards and interpretations they arise and are recognized as other expenses. Identifiable assets acquired that are deemed to be, or may in the future be, relevant to the Group and and liabilities assumed are initially measured at fair value on the acquisition its operations. date. For each acquisition, the Group determines whether all non-controlling The standards, interpretations and amendments that are to be applied interests in the acquired company are measured at fair value or at the propor- on or after the 2017/2018 fiscal year are currently being evaluated. Other than tionate share of net assets of the acquired company. that which is stated below, the initial assessment is that they will not have any The amount by which the purchase consideration, any non-controlling significant impact on the consolidated financial statements. interests and the fair value of previous shareholdings exceeds the fair value of the Group’s share of identifiable assets acquired is recognized as goodwill. IFRS 9 FINANCIAL INSTRUMENTS: If the amount is less than the fair value of the acquired subsidiary’s assets, the RECOGNITION AND MEASUREMENT difference is recognized directly in the statement of comprehensive income. IFRS 9 is mandatory for fiscal years beginning on or after January 1, 2018. In accordance with common practice in the industry, wind power proj- The standard includes a reduction in the number of measurement categories ects are often conducted in separate companies. This means that acquisi- for financial assets and entails that the two main classifications for recognition tions and divestments of projects and completed wind turbines are conduct- are amortized cost and fair value through profit or loss. An evaluation of the ed as share transactions. These transactions are classified as asset potential impact of implementing the standard is ongoing. acquisitions since the main aim is to acquire wind power facilities and there are either no other operations or administration, or these are of minor impor- IFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERS tance. The assets that are acquired in this manner are measured at fair value IFRS 15 is the new standard on revenue recognition. IFRS 15 replaces in the consolidated financial statements, and no goodwill arises. IAS 18 Revenue and IAS 11 Construction Contracts. IFRS 15 is based on the principle that revenue is recognized when con- Associated companies trol of the sold good or service is passed to the customer – a principle that Associated companies are all companies over which the Group exercises a replaces the previous principle that revenue is recognized when the risks significant but not a controlling influence, which generally applies to share- and rewards are transferred to the buyer. holdings comprising between 20% and 50% of the votes. Holdings in associ- A company can choose between “full retrospective” or prospective appli- ated companies are recognized in accordance with the equity method and cation with additional disclosures. The standard is to be applied to fiscal years are initially measured at cost and, thereafter, the carrying amount is increased beginning on or after January 1, 2018. The Group will apply IFRS 15 from or decreased to recognize the Group’s share of the associated company’s September 1, 2018. The Group has not yet evaluated the effects of imple- profit or loss after the acquisition date. The Group’s carrying amounts for menting the standard. The Group will perform a detailed evaluation during holdings in associated companies include goodwill identified on acquisition. the coming fiscal year.

52 ANNUAL REPORT EOLUS VIND AB 2016/2017 NOTES

Non-controlling interests REVENUE Non-controlling interests are the portion of the earnings and net assets of Revenue is recognized to the extent that it is probable that the financial bene- a non-wholly owned subsidiary that accrue to other owners than Parent fits will accrue to the Group and if revenue can be reliably measured. Revenue Company shareholders. Their share of earnings is included in net profit for is measured at the fair value of what has been received or will be received, the year in the consolidated income statement and the share of net assets excluding value-added tax. Sales proceeds are recognized when the following is included in equity in the consolidated statement of financial position. criteria have been fulfilled:

Translation of accounts of foreign subsidiaries Sale of wind power facilities Items in the subsidiaries’ balance sheets are presented in their respective Revenue is recognized when the material risks and benefits associated with functional currencies, which is normally the same as the local currency in ownership of the facilities have been transferred to the purchaser and when that specific country. The Group’s financial statements are presented in SEK, the amount of revenue can be reliably measured. The projects comprise which is the Parent Company’s functional currency. The income statements three phases: pre-study, project development and establishment. Following and balance sheets of the foreign subsidiaries are translated to SEK. The bal- final commissioning, the establishment phase is concluded through the ance sheets are translated at the closing day rate. The income statements are divestment of the wind power facility to the customer or by transferring it to translated at the average exchange rate for the period. Exchange-rate differ- our proprietary electricity generation operations where it is classified under ences arising on translation do not impact net profit for the year and instead inventories. Revenue from divestments is recognized in net sales. Since there are recognized in other comprehensive income in the consolidated financial are relatively few projects in the establishment phase at any one time, sales statements. The following exchange rates were used in the translations: and earnings may vary considerably from quarter to quarter. The project de- velopment operations are mainly financed through equity, construction loans RECEIVABLES AND LIABILITIES IN FOREIGN CURRENCIES or advance payments from customers. Receivables and liabilities in foreign currency are translated at the closing day rate, and unrealized exchange-rate gains and losses are included in Sale of electricity profit or loss. Revenue attributable to the sale of produced electricity is recognized in the period in which delivery is made. Revenue from the sale of electricity certifi- EUR NOK USD cates on account with the Swedish Energy Agency is recognized in the period in which the sale took place. Electricity certificates are recognized in the Closing day rate, Aug 31, 2017 9.4839 1.0211 7.9725 balance sheet as intangible current assets when they are registered in the Average exchange rate for the period 2016/2017 9.6278 1.0497 8.7713 Swedish Energy Agency’s account and recognized as accrued income when the certificates have been earned but not yet registered. Closing day rate, Aug 31, 2016 9.5136 1.0230 8.5422

Average exchange rate for the period 2015/2016 9.3400 0.9961 8.4101 Sale of administrative and technical management services Revenue from administrative and technical management services is recog- nized in the period in which the services were essentially carried out. RELATED-PARTY TRANSACTIONS Transactions with related parties take place are subject to market-based con- Interest ditions. Related parties refer to the companies over which the Group exercis- Interest income is recognized as financial income through application of es a controlling or significant influence in terms of operational and financial the effective-interest method. decision-making. The sphere of related parties also includes the companies and natural persons who have the opportunity to exercise a controlling or Dividends significant influence over the Group’s financial and operational decisions. Dividends are recognized in profit or loss when the shareholders’ rights to receive payment have been determined. SEGMENT REPORTING Operating segments are recognized in a manner that corresponds to the in- PROPERTY, PLANT AND EQUIPMENT ternal reporting to the chief operating decision maker (CODM). The CODM Property, plant and equipment are recognized at cost less accumulated is the function that is responsible for allocating resources and assessing the depreciation and any impairment. Expenses for improving the performance performance of the operating segments. For the Group, this function has of the assets beyond the original level increase the carrying amount of the been identified as the CEO. assets. Expenses for repairs and maintenance are recognized as costs in profit or loss. Eolus’s operating segments are described in Note 3 and comprise: Property, plant and equipment are depreciated systematically over the • Project development involving pre-study, project development, establish- estimated useful lives of the assets. The useful life is tested at the end of every ment and sale of wind power facilities. This also includes technical and accounting period and is adjusted as necessary. Any residual value of the management consultancy services for wind power stakeholders. asset is taken into account when determining the depreciable amount of the • Electricity generation encompassing the operation of wholly or partly asset. The straight-line depreciation method is applied to all types of assets. owned wind turbines, the sale of electric power and the divestment of electricity certificates allocated to producers of renewable electricity. The following depreciation periods are applied: • Asset Management which pertains to full asset management services for Number of years external and internal wind power facilities. Buildings and land improvements 20 years Wind turbines, foundations and electrical installations 20 years CASH-FLOW STATEMENT Equipment 5 years The cash-flow statement was prepared in accordance with the indirect method. The recognized cash flow only includes transactions entailing IMPAIRMENT OF NON-FINANCIAL ASSETS incoming and outgoing payments. Cash and cash equivalents are included If there is an indication that an asset subject to depreciation has declined in in cash and bank balances, and current investments with insignificant value value, the recoverable amount of the asset is calculated. The asset is im- fluctuations and original due dates of less than three months. paired to its recoverable amount if the calculated recoverable amount is less than the carrying amount. The recoverable amount is the highest of the net realizable value and value in use in the operations. The recoverable amount is assessed by cash-generating unit, which is the same as the defined operating segments.

ANNUAL REPORT EOLUS VIND AB 2016/2017 53 NOTES

For wind power facilities recognized as non-current assets or inventories, through profit or loss are measured at fair value after the date of acquisition. impairment testing takes place at the end of every quarter by preparing calcu- Loan receivables and accounts receivable are initially recognized after the lations showing the remaining expected cash flows of each asset. The key date of acquisition at amortized cost by applying the effective interest meth- parameters in preparing these calculations are the assumptions regarding od. Dividend income from securities is recognized in profit or loss as a portion future generation, remaining service lives, the market prices of electricity of financial income once the Group’s right to receive payment has been and electricity certificates, operating expenses and the discount rate. established.

FINANCIAL ASSETS Impairment principles for financial assets – Loan receivables and accounts receivable Classification At the end of each reporting period, the Group assesses whether there is The Group classifies its financial assets in the following categories. objective evidence that a financial asset or group of financial assets requires • Available-for-sale financial assets. impairment. A financial asset or group of financial assets requires impairment • Financial assets measured at fair value through profit or loss. and is impaired only if there is objective evidence of an impairment require- • Loan receivables and accounts receivable measured at amortized ment due to one or more events having occurred after the asset was first rec- cost in accordance with the effective interest method. ognized (a loss event) and that this event (or these events) has an effect, that can be reliably estimated, on the estimated future cash flows for the financial Classification depends on the purpose for which the financial asset was asset or group of financial assets. acquired. The classification of financial assets is determined when they For the loan receivables and accounts receivable categories, impairment are first recognized. is calculated as the difference between the carrying amount of the asset and All purchases and sales of financial assets are recognized on the the present value of estimated future cash flows (excluding future loan losses transaction date. that have not occurred), discounted to the original effective interest of the financial asset. The asset’s carrying amount is impaired and this impairment Available-for-sale financial assets loss is recognized in the consolidated income statement. Available-for-sale financial assets are assets that are not derivatives and are either identified as available for sale or cannot be classified into any of FINANCIAL LIABILITIES the other categories. The Group’s available-for-sale financial assets comprise The Group’s financial liabilities are divided into two categories: securities. • Financial liabilities measured at fair value through profit or loss. • Financial liabilities measured at amortized cost. Financial assets measured at fair value through profit or loss Financial assets measured at fair value through profit or loss are financial Financial liabilities measured at fair value through profit or loss comprise cur- assets held for trading. A financial asset is classified in this category if it was rency and interest-rate derivatives. Other financial liabilities are initially mea- principally acquired for the purpose of being sold within the near future. sured at fair value less any transaction costs that have arisen. In subsequent Derivatives are always classified as held for trading. Assets in this category periods, these liabilities are measured at amortized cost in accordance with are classified as current assets if they are expected to be settled within the effective interest method. Eolus’s accounts payable, borrowing and other 12 months, otherwise they are classified as non-current assets. current liabilities and accrued expenses are included in this category. The Group’s assets in this category comprise currency futures and inter- est-rate derivatives. The Group does not apply hedge accounting. Gains and FAIR VALUE MEASUREMENT losses arising as a result of changes in fair value attributable to the category Fair value is the price that would be received at the measurement date on of financial assets measured at fair value through profit or loss are recognized selling an asset or paid on transferring a liability in an orderly transaction in the periods in which they arise. Changes in the fair value of currency between market participants at the measurement date. Financial instruments derivatives are recognized in profit or loss under other income/expenses. measured at fair value are classified either as fair value in profit or loss or available for sale. Measurement can be based on any of the following Loan receivables and accounts receivable conditions: Loan receivables and accounts receivable are non-derivative financial assets • Quoted market prices (unadjusted) in active markets for identical that have fixed or fixable payments that are not listed on an active market. assets or liabilities (level 1). Loan receivables and accounts receivable are initially measured at fair • Inputs other than quoted prices that are observable for the asset or value and are subject to regular and systematic analysis to determine the liability, either directly (quoted prices) or indirectly (derived from quoted amounts at which the receivables are expected to be received. If a loan re- prices) (level 2). ceivable is deemed to be doubtful, a reserve is established comprising the • Unobservable market inputs for the asset or liability (level 3). difference between the carrying amount and the expected cash flow. Losses attributable to doubtful receivables are recognized in profit or loss under other The fair value of financial instruments traded in an active market is based operating expenses, refer to Note 8. Any interest income on loan receivables on quoted market prices on the balance-sheet date. A market is considered is included in financial income. to be active if quoted prices from a stock exchange, broker, industrial group, The Group’s accounts receivable, other current receivables, blocked pricing service or supervisory authority are readily and regularly available and bank balances and accrued interest income are included in this category. these prices represent actual and regularly occurring market transactions at arm’s length. The fair value of financial instruments not traded in an active Recognition and measurement market (for example, OTC derivatives) is determined using valuation tech- Purchases and sales of financial assets are recognized at the trade date, niques. Market information is used for this as far as possible when it is avail- that is, the date on which the Group commits to purchase or sell the asset. able, whereas company-specific information is used as little as possible. Financial instruments are initially measured at fair value plus transaction costs, If all significant inputs required for measurement are observable, then level 2 which applies to all financial assets not measured at fair value through profit measurement is applied. The fair value of unquoted securities is based on or loss. Financial assets measured at fair value through profit or loss are ini- cash flows discounted at an interest rate based on the market interest rate tially measured at fair value, while attributable transaction costs are recog- and a risk mark-up specific to these unquoted securities. The fair value of nized in profit or loss. Financial assets are derecognized from the balance currency futures is determined by using the exchange rates for currency sheet when the right to receive cash flows from the instrument has expired or futures on the balance-sheet date where the resulting value is discounted been transferred and the Group has assumed essentially all risks and benefits to the present value, meaning level 2. Eolus currently recognizes all financial connected with the right of ownership. Financial assets measured at fair value instruments at level 2.

54 ANNUAL REPORT EOLUS VIND AB 2016/2017 NOTES

If one or more significant inputs are not based on observable market informa- not within Eolus’s control. Contingent liabilities may also be a commitment tion, the instrument in question is classified as level 3. Eolus does not cur- originating from events that have occurred but that have not been recognized rently recognize any financial instruments belonging to this category. No re- as a liability or a provision because it is not likely that the commitment will be classifications between the various categories took place during the period. settled or the amount of the commitment cannot be reliably calculated.

INVENTORIES OF WIND TURBINES, WIND TURBINES UNDER EMPLOYEE BENEFITS CONSTRUCTION AND PROJECTS UNDER DEVELOPMENT Inventories of wind turbines are the wind turbines available for sale but Severance pay that are operational and generate electricity since they have not been Severance pay is paid when employment is terminated before the normal divested. At the end of every quarter, if a wind turbine has not been divested age of retirement or when the employee accepts voluntary redundancy in ex- after 12 months, it is reclassified from inventories to non-current assets. change for such remuneration. Eolus recognizes severance pay when the If advanced discussions regarding a sale are in progress that are assessed Group has an existing legal or informal commitment when it is more probably as leading to a divestment, the turbine is not reclassified. that an outflow of resources will be required to settle the commitment than Wind turbines classified as inventories have been measured at adjusted not, and when the amount can be reliably calculated. cost, meaning that the carrying amount of each wind turbine is adjusted each quarter to meet the decline in value that takes place. The procedure Pensions is described in more detail under the heading “Impairment of non-financial Eolus’s pension obligations only encompass defined-contribution plans. assets.” A defined-contribution plan is a pension plan under which the Group pays Wind turbines classified as non-current assets are reclassified to inven- fixed contributions to a separate legal entity. The Group does not have any tories of wind turbines at the end of the quarter if advanced discussions legal or informal obligations to pay additional contributions if this legal entity regarding a sale are in progress that are assessed as leading to a divestment does not have sufficient assets to pay all of the remuneration to the employ- in the next quarter. ees that is associated with the employees’ service in current and earlier Wind turbines under construction are wind turbines that are in the pro- periods. The Group’s payments into defined-contribution pension plans are cess of being built. Projects under development are the project development charged to net profit for the year in the year to which they are attributable. activities being conducted. All projects that have incurred costs of at least KSEK 10 are included in the portfolio. The project portfolio is reviewed at the Leases end of every quarter and impairment is recognized if, for example, the project Non-current assets utilized under leases are classified in accordance with has been rejected by the licensing authority. Wind turbines under construc- the financial implication of the leasing agreement. The leasing of non-current tion and projects under development are measured at the lowest of costs assets, whereby the Group essentially assumes the risks and benefits associ- incurred and fair value. ated with ownership, are classified as finance leases. Financial leases are recognized at the start of the lease period at the lower of the fair value of PROVISIONS the leasing object and the present value of the minimum leasing fees. Other Provisions are recognized when the Group has a legal or informal commit- leasing agreements are classified as operating leases. Payments made over ment due to previous events and when it is probable that a payment will be the lease period are expensed in profit or loss in a straight line over the lease required to settle the commitment and the amount can be reliably calculated. period. Eolus only has leasing agreements classified as operating leases. For cases in which the company expects an established provision to be com- pensated by an external party, for example, within the framework of an insur- INCOME TAX ance contract, such expected compensation is recognized as a separate as- The tax expense for the period includes current and deferred tax. Tax is rec- set, but only when it is essentially certain that compensation will be received. ognized in profit or loss, except when the tax pertains to items recognized If the time value is significant, the future payment is calculated at its present in other comprehensive income or directly in equity. In such cases, the tax value. The calculations are made by applying a discount rate that reflects the is also recognized in other comprehensive income and equity, respectively. short-term market expectations taking into account specific risks associated All tax liabilities and tax assets are valued at nominal amounts in accor- with the commitment. An increase in the commitment is recognized as an dance with the tax rules and at the tax rates decided or announced and interest expense. which, with all likelihood, will be adopted. Deferred tax is recognized on the balance-sheet date in accordance with the balance-sheet method for tempo- Provisions for after-treatment costs rary differences between the tax and accounting values of the assets and According to the Swedish Environmental Code, the regulatory authority is liabilities. Deferred tax assets are recognized for all deductible temporary entitled to require that guarantees be provided for security with respect to differences, including loss carryforwards, to the extent that it is probable dismantling and after-treatment. The future costs are estimated for each that a taxable profit will be available against which the deductible temporary facility with guidance from investigations carried out for the specific turbines. differences can be utilized. Provisions are established at the present value of the calculated future cost. Provisions are continuously adjusted upward using the discount rate and this ASSESSMENTS, ESTIMATES AND ASSUMPTIONS upward adjustment is recognized as a borrowing cost (interest expense). The Certain estimates and assumptions are made when the Board of Directors asset’s carrying amount is adjusted if it is classified as a non-current asset. and CEO prepare the financial statements in accordance with applicable accounting policies that affect the carrying amounts of assets, liabilities, Provisions for restructuring costs income and costs. The areas in which estimates and assumptions are A restructuring provision is recognized during the period in which the Group of great significance to the Group and that could impact the income is legally or informally bound to the plan. Provisions may only be made for the statement and balance sheet if they were to change are described below: expenses arising as a direct effect of the restructuring and that are an effect or the remaining contractual commitments with no lasting financial benefit or Provisions for doubtful receivables that comprise a fine due to the termination of the commitment. Provisions are Accounts receivable are initially measured at fair value and thereafter at the tested at the end of every reporting period. expected realizable value. An estimate of doubtful receivables is based on the conduct of an objective evaluation of all amounts outstanding at the CONTINGENT LIABILITIES end of the year. Losses attributable to doubtful receivables are recognized Contingent liabilities comprise possible commitments originating from events in profit or loss under other operating expenses. Refer to Note 8. that have occurred and whose occurrence is confirmed only by the occur- rence or non-occurrence of one or several uncertain future events, which are

ANNUAL REPORT EOLUS VIND AB 2016/2017 55 NOTES

After-treatment costs PARENT COMPANY’S ACCOUNTING POLICIES The costs for dismantling and after-treatment are estimated for each facility The Parent Company prepares its annual reports in accordance with the with guidance from investigations carried out for specific turbines. The basis Swedish Annual Accounts Act and the Swedish Financial Accounting Stan- is a standard value per megawatt (MW) of installed capacity. The residual val- dards Board’s recommendation RFR 2 Accounting for Legal Entities. RFR 2 ue is handled as a deductible item in the disposal analysis and is taken into entails that the Parent Company’s annual report for the legal entity is to apply account in these standard amounts. The time factor is taken into account all IFRSs and statements approved by the EU as far as possible under the through discounting. The price trend can be assumed to be equal to the framework of the Annual Accounts Act and by taking into account the con- long-term inflation target of 2%, while a certain level of technological progress nection between accounting and taxation. The recommendation also states should reduce the cost trend. These assumptions are continuously evaluated. the exceptions and additions that may be made compared with reporting under IFRS. Legal disputes The Group’s and the Parent Company’s accounting policies have the fol- Provisions for disputes are estimates of the future cash flows required to set- lowing differences. Participations in subsidiaries are recognized in the Parent tle obligations. Disputes primarily refer to contractual obligations pertaining to Company according to the cost method. Certain financial assets are mea- agreements with customers and suppliers, but other types of disputes also sured at fair value in the consolidated financial statements. These are mea- arise in the course of normal business activities. sured at the lower of cost and fair value in the Parent Company’s accounts. The Parent Company applies the exception under RFR2 to disapply IAS 39. ASSESSMENT OF USEFUL LIVES FOR PROPERTY, Instead, financial instruments are recognized and measured based on their PLANT AND EQUIPMENT cost pursuant to the Swedish Annual Accounts Act. The Parent Company Based on experience gained and in light of improvements in technological has recognized Group contributions as appropriations since 2012/2013 in performance, the Board has deemed that a depreciation period of 20 years accordance with the alternative method stated in RFR 2 Accounting for Legal reflects the expected useful life. These assumptions that form the basis of the Entities. The amounts deposited in untaxed reserves comprise taxable tem- assessment are continuously reevaluated and local differences are also taken porary differences. Deferred tax liabilities attributable to the untaxed reserves into consideration. The useful lives for all components of the wind turbines, are not recognized separately in the Parent Company due to the connection foundations and electrical installations are deemed to be the same, which is between accounting and taxation. The amounts are included in untaxed why there is no further division. reserves instead. None of the amendments to RFR 2 Accounting for Legal Entities have ASSESSMENT OF IMPAIRMENT REQUIREMENTS FOR impacted the Parent Company’s financial statements. WIND POWER PROJECTS At the end of each quarter, the carrying amounts of the Group’s project port- AMENDMENTS TO RFR 2 THAT HAVE NOT YET COME INTO FORCE folio are analyzed to determine whether any indications exist that these carry- None of the coming amendments to RFR 2 are expected to have a significant ing amounts have declined. Should such an indication exist, a comparison is impact on the financial statements. made between the estimated final establishment cost and the project’s acqui- sition value to an investor. Impairment is recognized if the estimated establish- ment cost is higher than the acquisition value of the project to an investor. Other factors, such as permits, could also impact the realizability of the proj- ect and thus its value. Any impairment is recognized directly in profit or loss.

NOTE 2 FINANCIAL RISK MANAGEMENT

FINANCIAL RISK MANAGEMENT AT EOLUS The Group’s loans are attributable to financing wind power facilities under Through its operations, Eolus is exposed to a variety of financial risks: market construction and financing the wind power portfolio that is owned and which risk (interest-rate risk, currency risk and energy price risk), credit risk and generates electricity. Interest on these credit facilities is currently floating, refer liquidity and refinancing risk. The Group’s overall risk management focuses to Note 22. Borrowing raised at fixed interest rates exposes the Group to in- on the unpredictably of the financial markets and seeks to minimize potential- terest-rate risk pertaining to fair value. Changes in market interest rates can ly adverse effects on the Group’s earnings. These financial risks include the have an impact on future earnings and profitability, partly regarding the wind impact of changed interest expense for floating interest loans, the impact of power portfolio that is owned and conducts electricity generation, and also exchange-rate fluctuations on wind turbine purchases, the risk of changes in the wind power facilities under construction that are financed by bank loans. electricity and electricity certificate prices, the risk of the company not having Under the adopted finance and risk policy, the average fixed-interest term access to the necessary financing for future projects and the company having linked to electricity generation is not to be less than 2.5 years and the nomi- insufficient short-term liquidity to meet its existing payment commitments. nal amount for interest-rate derivatives is not to exceed 100% of interest- Risk is managed by the finance function following a written finance and risk bearing liabilities to credit institutions. This can be achieved by a combination policy that is adopted every year by the Board of Directors if changes are of fixed-interest loans, loans at variable interest rates and derivative instru- made, otherwise its current form applies. Follow-ups of the Group’s finance ments. The aim of interest-rate derivatives is to swap floating interest rates for and risk policy are reported to the Board every quarter. fixed interest rates. At August 31, 2017, the Group had interest-rate deriva- tives outstanding that amounted to a nominal SEK 90 M (180), of which MARKET RISK SEK 45 M falls due in 2020 and SEK 45 M in 2023. Including interest-rate Eolus’s primary operations comprise developing wind power facilities and derivatives, the loan portfolio had an average fixed-interest period of 3.4 years divesting wind power facilities when they are turnkey facilities and have be- at the end of the accounting period. Interest-bearing liabilities amounted to come operational. Most of the company’s market risks are both direct and SEK 33.9 M (81.8) at August 31, 2017. At the end of the accounting period, indirect since Eolus’s customers also need to manage these risks and Eolus more than 100% (100) of the Group’s liabilities to credit institutions, attribut- may thus be indirectly impacted by lower demand and/or lower sales prices. able to electricity generation operations, were covered by interest-rate hedg- ing instruments. The deviation from the finance and risk policy was approved Interest-rate risk by the Board of Directors. Excluding interest-rate derivatives, the average in- Eolus’s customers usually borrow for their investments in wind power. terest rate was 1.85% (1.82). Including interest-rate derivatives, the average Consequently, interest rates affect demand for wind power facilities. interest rate was 3.6% (3.6). A change in interest rates of +/- 1 percentage

56 ANNUAL REPORT EOLUS VIND AB 2016/2017 NOTES

point would have an earnings impact of +/- SEK 0.3 M (0.8). A corresponding Investments change would have an earnings impact of +/- SEK 11 M (11) attributable to The Group’s cash flow generated from operating activities and from the the market value of interest-rate derivatives. divestment of turnkey operational facilities and wind turbines from inventories/ non-current assets is used for developing new projects and financing operat- Currency risk ing activities. Surplus liquidity is to be invested with counterparties that have Eolus’s currency risk exposure primarily arises by purchasing a large portion high credit ratings and thus low credit risk. The Group’s risks regarding of wind turbines in EUR. Exchange-rate fluctuations can thus affect profitabili- interest income are relatively limited. The current interest rate of 0% on bank ty in the construction of wind turbines. The Group’s finance and risk policy balances entails that there is no interest income from credit institutions for the stipulates guidelines for reducing the negative effects of changes in exchange 2016/2017 fiscal year. rates. The policy entails that at least 75% and at most 125% of the forecast net flow (inward and outward payments in EUR) within 12 months is to be LIQUIDITY AND REFINANCING RISK hedged using, for example, currency futures, currency swaps, loans in foreign The company’s operations are financed by borrowings from credit institutions currency or currency deposits. Calculated flows later than 12 months but in addition to equity. Liquidity risk is defined as the risk of the Group being within 24 months may be hedged at a maximum of 75%. Forecast flows later adversely affected by shortcomings in managing and controlling cash and than 24 months are not hedged. At August 31, 2017, the Group had out- cash equivalents and payment flows. standing currency derivatives and currency swaps amounting to a nominal Refinancing risk pertains to the risk of experiencing difficulties in securing EUR 13.0 M (13.0). All currency futures fall due within 12 months. Signed cur- financing for the operations at a given point in time. Eolus’s project operations rency futures, together with forecast inflows for the next 12 months, amount largely comprise constructing wind turbines for which customer contracts to about 200% of forecast outflows. The forecast net inflow includes the have already been signed, and to only a minor extent constructing turbines agreed purchase consideration for Jenåsen, and raised and repaid loans in that are to be divested at a later date. EUR. The hedged portion exceeds the decided amount under the adopted The company works continuously on preparing 24-month cash-flow finance and risk policy, and the Board has approved the deviation. Only the forecasts for the Group. The management closely monitors rolling forecasts EUR/SEK rate was hedged during the year. A change in the EUR/SEK ex- for trends in net debt/cash flows and to ensure that the Group has sufficient change rate of SEK 0.10 at the end of the fiscal year would result in an earn- liquidity available to meet operational needs. For wind turbines that are sold ings impact of +/- SEK 2.8 M (3.3), given the translation of currency accounts as operational to customers, the company endeavors to match payment and currency futures outstanding at August 31, 2017. plans, in terms of liquidity, from customers with the plans that the company has with the largest suppliers of each specific project. Energy price risk In July 2016, three credit agreements were signed with Handelsbanken. The market price of electricity varies over time and the price trend of electrici- All agreements have a 29-month term. The loans comprise an overdraft ty certificates depends on the rate at which the generation of renewable elec- facility of SEK 75 M, a framework credit agreement of SEK 255 M for project tricity is expanded in relation to the quota obligation that consumers have financing and a construction loan of SEK 600 M. The construction loan was to purchase electricity certificates. Eolus hedges a predetermined portion of signed in order to finance the establishment of the Jenåsen wind farm, for the generation volume, which means that volume and profile risk is reduced. which Eolus signed a Power Purchase Agreement with Google. At the bal- Hedging takes place with a number of the largest electricity traders to mini- ance-sheet date, all of the loans were unutilized. mize counterparty risk. Electricity certificates are recognized in income in Given that some wind power facilities are available for sale and that the conjunction with generation of the corresponding electricity and are physically mortgaged facilities that conduct electricity generation are covered by sepa- received from the Swedish Energy Agency in the month after being earned. rate loans, the Board adopted in its finance and risk policy that new loans The future transfer price of electricity and electricity certificates is the are to be raised with short tenors. However, the company has previous credit single most important parameter in customers’ investment calculations. facilities of SEK 14.7 M (51.4) with long tenors, and that fall due later than Accordingly Eolus’s operations are affected in both the short and long-term five years. Loans are to be raised with different credit institutions to reduce by trends in the forward market for electricity and electricity certificates. refinancing risk. Eolus closely follows the market to understand how it works and its correla- A shorter term structure requires a higher equity/assets ratio and liquidity tion to the price of other energy sources and business cycles, etc. As a result, preparedness. The Group’s equity/assets ratio may not fall below 30%. fluctuations in the price of electricity affect the Group’s potential customers. A continuous dialog is maintained with credit institutions for renegotiating new Existing agreements and contracts are not considered to be financial instru- facilities in good time prior to due dates. To achieve optimal and cost-efficient ments but are regarded as physical deliveries of electricity. No market valua- access to financing, such financing is to be matched to the tenors of ongoing tion takes place since it is deemed that fixed-price contracts do not comprise wind power projects. financial instruments. Separate covenants are in place for liabilities to credit institutions. Covenants for current credit agreements pertain to the equity/assets ratio CREDIT RISK and interest coverage ratio. If these undertakings are not met, the bank can Credit risk, or counterparty risk, is defined as the risk of incurring a loss if the withdraw the credit facilities. In the 2016/2017 fiscal year, all of the covenants counterparty does not fulfill its commitments. Commercial credit risk encom- to credit institutions were met. passes customers’ solvency and is managed by closely monitoring payment Interest-bearing liabilities amounted to SEK 33.9 M (81.7), of which SEK behavior, following up customers’ financial statements and maintaining regu- 14.7 M (50.2) is non-current. The fixed-term period for loans amounted to lar communication. The Group’s total credit risk is divided each year between about three years (six) at the end of the fiscal year, with average interest rate a small number of customers that account for a relatively large percentage of of 1.85% (1.82) excluding interest-rate derivatives. Refer to Note 16 for the Group’s accounts receivable, refer to Note 19. All customers are highly disclosures about remaining liquidity flows pertaining to financial liabilities. transparent, including marketplaces for electricity trading. During periods of temporary excess liquidity, investments may only be made by deposits with CAPITAL RISK banks that are under the supervision of a financial supervisory agency in a The Group’s targets for its capital structure are to safeguard the Group’s Nordic country or by deposits with or purchases of instruments issued by ability to pursue its operations so that it can generate returns for shareholders the Swedish National Debt Office. The fixed-term period for each individual and value for stakeholders, and to maintain an optimal capital structure to investment of surplus liquidity may not be longer than three months. keep costs for capital down. Investments with longer fixed-term periods require separate decisions. To maintain or adjust its capital structure, the Group can change the dividends it pays to shareholders, repay capital to shareholders, issue new shares or sell assets to reduce its liabilities.

ANNUAL REPORT EOLUS VIND AB 2016/2017 57 NOTES

GROUP PARENT COMPANY Loan maturity structure Aug 31, 2017 Aug 31, 2016 Aug 31, 2017 Aug 31, 2016 6 months or less 11,369 11,375 - - 6-12 months 7,840 13,230 - - 1-5 years - 5,779 - - More than 5 years 14,700 51,390 - - Total 33,909 81,774 - -

NOTE 3 OPERATING SEGMENTS

Project development: involving pre-study, project development, construction Electricity generation: encompassing the operation of wholly or partly owned and sale of wind power facilities. This also includes technical and manage- wind turbines, the sale of electric power and the divestment of electricity ment consultancy services for wind power stakeholders. certificates allocated to producers of renewable electricity. Asset Management: pertains to full asset management services for owners of wind power facilities.

Project Electricity Asset Joint Total group 2016/2017 development generation management eliminations Segment revenue Net sales, external customers 1,027,012 24,751 13,905 - 1,065,668 Inter-segment transactions 378 - 374 -752 - Other revenue 2,928 4,472 9,979 - 17,379

Expenses -985,795 -34,976 -22,795 752 -1,042,814 (of which depreciation and impairment) (-1,282) (-22,109) (-32) (-) (-23,423) Operating profit/loss 44,523 -5,753 1,463 - 40,233

Interest income -3,691 Interest expense -2,318 Profit before tax 34,224

Tax -9,720 Net profit for the year 24,504

Segment’s assets at August 31, 2017 520,326 100,908 - 279,530 900,764 Assets include: Purchase of non-current assets 6,698 - - 6,698

The carrying amounts of wind turbines during the period were impaired by KSEK 8,489 to adjust to the changed price levels in the market. The entire amount was charged to the electricity generation segment. The entire amount pertains to the impairment of non-current assets.

58 ANNUAL REPORT EOLUS VIND AB 2016/2017 NOTES

Project devel- Electricity Asset man- Joint Group total 2015/2016 opment generation agement eliminations Segment revenue Net sales, external customers 636,624 46,333 10,489 - 693,446 Inter-segment transactions 618 - 444 -1,062 - Other revenue 1,489 725 - - 2,215

Expenses -655,927 -47,058 -9,688 1,062 -711,610 (of which depreciation and impairment) (-1,989) (-24,730) (-) (-) (-26,719) Operating profit/loss -17,195 1 1,245 0 -15,949

Interest income 1,775 Interest expense -14,883 Profit before tax -29,057

Tax 5,139 Net profit for the year -23,918

Segment’s assets at August 31, 2016 702,283 256,409 - 310,924 1,269,616 Assets include: Purchase of non-current assets 2,503 - - - 2,503

100% (100) of the Group’s revenue is attributable to Sweden. Three customers account for 70% of revenue: 27%, 33% and 20%, respectively. In the preceding year, two customers accounted for 55% of revenue: 36% and 19%, respectively.

Non-current assets Aug 31, 2017 Aug 31, 2016 Sweden 99,320 250,302 Estonia 15,886 17,096 Total 115,206 267,398

NOTE 4 REVENUE

The Parent Company’s sales primarily comprise turnkey wind power projects. The structure of the contracts varies and sales can be made of the following: wind power facilities that are constructed directly for the customer or facility/ parts of wind turbines that are already operational and in inventories, shares in project companies and projects with relevant permits. A separate follow-up assignment after projects with relevant permits or shares in project companies are sold can be constructing wind turbines for customers on the basis of a contractor agreement. The generation of electric power from completed turbines in inventories comprises a small portion of the Parent Company’s revenue. All of the Parent Company’s sales took place in Sweden.

ANNUAL REPORT EOLUS VIND AB 2016/2017 59 NOTES

NOTE 5 SALARIES, REMUNERATION AND NUMBER OF EMPLOYEES

All of the Group’s employees in Sweden are employed in the Parent Company. The members of the Parent Company’s management team also comprise Group Management.

2016/2017 2015/2016 Salaries Social security Salaries Social security and other expenses (of which and other expenses (of which remuneration pension costs) remuneration pension costs) Sweden, Parent Company 23,430 11,505 21,680 11,093 (3,338) (3,058) Estonia 250 87 318 103 (-) (-) Latvia - - 65 19 (-) (-) Group 23,680 11,592 22,063 11,215 (3,338) (3,058)

2016/2017 2015/2016 Salaries and other Pension Salaries and oth- Pension remuneration costs er remuneration costs (of which bonus) (of which bonus) Board of Directors and CEO 3,058 379 2,823 341 (13) (60) Other employees 20,622 2,959 19,240 2,717 (58) (654) Group 23,680 3,338 22,063 3,058 (71) (714)

Aug 31, 2017 Aug 31, 2016 Number at Of whom men Number at Of whom men Gender distribution, Board of Directors balance-sheet balance-sheet and other senior executives date date Board of Directors 6 4 5 4 CEO and other senior executives 4 3 4 3 Group and Parent Company 10 7 9 7

2016/2017 2015/2016 Average number Of whom men Average number Of whom men Average number of employees of employees of employees Sweden, Parent Company 32 22 31 22 Estonia 1 1 2 1 Group 33 23 33 23

Eolus has established a bonus and share ownership program for the compa- shares in the company, and retaining them for three years, for a portion or ny's employees. A bonus is paid if the company achieves earnings targets their entire bonus payment instead of a cash payment. The liabilities under set by the Board of Directors. The bonus is paid in the form of a cash pay- this program amount to insignificant amounts on each balance-sheet date. ment and/or shares. Under the share ownership program, an additional There is no dilution for existing shareholders since no new shares are issued bonus may be paid in the form of bonus shares to individuals acquiring under the program.

60 ANNUAL REPORT EOLUS VIND AB 2016/2017 NOTES

NOTE 6 REMUNERATION OF BOARD OF DIRECTORS, CEO AND OTHER SENIOR EXECUTIVES

CONDITIONS FOR BOARD OF DIRECTORS CONDITIONS FOR SENIOR EXECUTIVES The Annual General Meeting held on January 28, 2017 resolved that the For the 2016/2017 fiscal year, the members of Group Management are con- Chairman of the Board would receive an annual fee of KSEK 350 and other sidered to be senior executives. Remuneration of other senior executives is Directors would each receive a fee of KSEK 150. No remuneration was paid determined by the CEO in consultation with the Chairman of the Board. The to Directors other than the Board fees described below and the transactions level of remuneration is to be based on such factors as position, expertise, reported in Notes 5 and 27. Proposals on remuneration of the Board of experience and performance. Remuneration comprises fixed salary and may Directors are presented by the Nomination Committee. also comprise pension, variable salary and other benefits. The variable salary is to be based on the achievement of quantitative and qualitative targets. CONDITIONS FOR THE CEO The company’s pension obligations are covered in all cases by continuous Remuneration of the CEO is determined by the Board of Directors. CEO pension premiums. No Board fees are paid to employees of the Eolus Group. Per Witalisson received salary, pension benefits and car benefits during the There are no agreements on severance pay. fiscal year. The age of retirement is 65. The employment contract can be terminated with a mutual notice period of six months.

Basic salary/ Variable Pension Car Total Remuneration and other benefits 2016/2017 Board fee remuneration costs benefits Board of Directors: Chairman of the Board Hans-Göran Stennert 350 - - - 350 Director Fredrik Daveby 150 - - - 150 Director Sigrun Hjelmqvist 150 - - - 150 Director Hans Johansson 150 - - - 150 Director Hans Linnarson 150 - - - 150 Director Bodil Rosvall Jönsson 150 - - - 150

Senior executives: Per Witalisson, CEO 1,959 13 379 53 2,404 Marcus Landelin, Deputy CEO 1,499 - 336 44 1,879 Other senior executives (2 individuals) 2,091 13 462 97 2,663 Total 6,649 26 1,177 194 8,046

Basic salary/ Variable Pension Car Total Remuneration and other benefits 2015/2016 Board fee remuneration costs benefits Board of Directors: Chairman of the Board Hans-Göran Stennert 350 - - - 350 Director Fredrik Daveby 150 - - - 150 Director Sigrun Hjelmqvist 150 - - - 150 Director Jan Bengtsson 150 - - - 150 Director Hans Johansson 150 - - - 150

Senior executives: Per Witalisson, CEO 1,873 60 341 48 2,322 Marcus Landelin, Deputy CEO December 1, 2015 to August 31, 2016 1,096 - 284 30 1,410 Hans-Christian Schulze, Deputy CEO September 1, 2015 to November 30, 2015 226 - 41 - 267 Other senior executives (2 individuals) 2,093 82 492 85 2,752 Total 6,238 142 1,158 163 7,701

ANNUAL REPORT EOLUS VIND AB 2016/2017 61 NOTES

NOTE 7 REMUNERATION OF AUDITORS

GROUP PARENT COMPANY 2016/2017 2015/2016 2016/2017 2015/2016 PricewaterhouseCoopers Audit assignment 475 633 475 633 Audit activities in addition to the audit assignment 57 207 57 207 Tax consultancy - - - - Other services 562 265 562 265 Total 1,094 1,105 1,094 1,105

EY Audit assignment - 9 - - Audit activities in addition to the audit assignment - - - - Other services 30 338 30 338 Total 30 347 30 338

KPMG Audit assignment - 16 - - Total - 16 - -

Assertum Audit OÜ Audit assignment 19 - - - Total 19 - - -

Revisorgruppen Tröndelag AS Audit assignment 18 33 - - Total 18 33 - - Total 1,161 1,501 1,124 1,443

62 ANNUAL REPORT EOLUS VIND AB 2016/2017 NOTES

NOTE 8 OTHER OPERATING INCOME AND OTHER OPERATING EXPENSES

GROUP PARENT COMPANY Other operating income 2016/2017 2015/2016 2016/2017 2015/2016 Exchange-rate gains attributable to project activities 2,230 939 2,839 166 Capital gains attributable to sale of wind power facilities - 82 182 82 Capital gains attributable to other non-current assets 319 411 309 383 Fair value of change in currency derivatives - - - - Invoiced expenses* 13,881 - 13,426 - Other 950 783 218 539 Total 17,379 2,215 16,974 1,170

Other operating expenses 2016/2017 2015/2016 2016/2017 2015/2016 Exchange-rate losses attributable to project activities -3,891 -2,043 -3,891 -2,029 Capital losses attributable to sale of wind power facilities - -106 -1,527 -106 Capital losses attributable to other non-current assets - - -4,876 -705 Fair value of change in currency derivatives -4,593 -1,523 - - Other -420 -493 - - Total -8,904 -4,165 -10,294 -2,840

* From September 1, 2016, Eolus changes the classification of revenue and expenses for onward-invoiced operations-related expenses. Comparative periods were not reclassified, which affects comparability. For further information, refer to accounting policies.

Eolus hedges future forecast payment flows in accordance with an established finance and risk policy. The difference between the price paid and the forward rate on maturity results in exchange-rate gains and exchange-rate losses, which are recognized as other operating income and other operating expenses, respectively.

NOTE 9 FINANCIAL INCOME AND EXPENSES

GROUP PARENT COMPANY Interest income 2016/2017 2015/2016 2016/2017 2015/2016 Loans and receivables 2,187 338 113 206 Loans and receivables to Group companies - - 357 168 Total financial income 2,187 338 470 374

Interest expense 2016/2017 2015/2016 2016/2017 2015/2016 Bank loans -7,464 -11,239 -599 -311 Liabilities to Group companies - - -987 - 1,219 Total financial expenses -7,464 -11,239 -1,586 -1,530

Other financial items 2016/2017 2015/2016 2016/2017 2015/2016 Exchange-rate differences intra-Group receivables and liabilities -10,163 222 -8,938 81 Exchange-rate differences in cash and cash equivalents 4,284 1,215 4,346 1,265 Exchange-rate differences, other 1 1 - Other financial expenses -3,162 -214 -1,706 -27 Fair value of change in interest-rate derivatives 8,308 -3,430 - - Total financial expenses -732 -2,206 -6,298 1,319 of which attributable to balance-sheet items measured at fair value 8,308 -3,430 - -

ANNUAL REPORT EOLUS VIND AB 2016/2017 63 NOTES

NOTE 10 APPROPRIATIONS AND UNTAXED RESERVES

PARENT COMPANY Appropriations 2016/2017 2015/2016 Change in tax allocation reserve -13,310 10,920 Depreciation in excess of plan 4,317 -7,783 Group contributions received/paid 98,540 23,255 Total 89,547 26,392

Untaxed reserves Aug 31, 2017 Aug 31, 2016 Tax allocation reserve 107,645 94,335 Accumulated depreciation in excess of plan 35,306 39,623 Total 142,951 133,958

NOTE 11 INCOME TAX

GROUP PARENT COMPANY 2016/2017 2015/2016 2016/2017 2015/2016 Current tax: Current tax on profit for the year -34,328 -6,384 -34,310 -6,687 Current tax attributable to prior periods -1,466 -239 - - Total current tax -35,794 -6,623 -34,310 -6,687

Deferred tax: Origination and reversal of temporary differences 26,074 14,766 -86 38 Tax loss carryforwards utilized during the year - -3,004 - - Total deferred tax 26,074 11,762 -86 38 Tax -9,720 5,139 -34,396 -6,649

GROUP PARENT COMPANY Reconciliation of effective tax rate 2016/2017 2015/2016 2016/2017 2015/2016 Profit/loss before tax 34,224 -29,057 172,107 53,055 Tax calculated at applicable tax rate in Sweden -7,529 6,393 -37,864 -11,672

Difference between Swedish and foreign tax rates 729 4 - - Non-taxable income 179 42 16,688 5,473 Non-deductible expenses -980 -55 -13,181 -341 Interest surcharge for tax allocation reserve -39 -109 -39 -109 Adjustment of current tax attributable to prior periods -1,466 -239 - - Tax losses not recognized -613 -895 - - Total tax expense/tax income -9,720 5,139 -34,396 -6,649

No tax pertains to components of other comprehensive income or has been recognized in equity.

64 ANNUAL REPORT EOLUS VIND AB 2016/2017 NOTES

GROUP 2016/2017 2015/2016 Specification of deferred Deferred Deferred Deferred Deferred tax assets and tax liabilities: tax assets tax liabilities tax assets tax liabilities Property, plant and equipment and intangible assets 190 51 326 688 Assets measured at fair value 5,073 443 8,591 1,858 Provisions 238 - 324 - Untaxed reserves - 42,707 - 66,654 Inventories of wind turbines, wind turbines under construction and projects under development 450 18,363 41 18,365 Recognized tax losses: 559 - 559 - Total 6,510 61,564 9,841 87,565 of which to be utilized/paid after more than 12 months 987 61,121 1,209 85,707 of which to be utilized/paid within 12 months 5,523 443 8,632 1,858

PARENT COMPANY Specification of deferred tax assets: 2016/2017 2015/2016 Provisions 238 324 Total 238 324

Recognized in the statement of GROUP PARENT COMPANY financial position/balance sheet: 2016/2017 2015/2016 2016/2017 2015/2016 Deferred tax assets 2,236 41 238 324 Deferred tax liabilities -57,290 -77,765 - - Deferred tax liabilities (assets), net -55,054 -77,724 238 324

GROUP PARENT COMPANY Change in deferred taxes 2016/2017 2015/2016 2016/2017 2015/2016 At September 1 -77,724 -88,805 324 286 Tax income/expenses recognized in profit or loss 26,074 11,762 -86 38 Reclassification from current tax - 559 - - Reclassification to current tax -3,403 -1,240 - - Acquisition of subsidiaries - - - - At August 31 -55,054 -77,724 238 324

The Group’s tax loss carryforwards at August 31, 2017 amounted to KSEK 166 (167), all attributable to Sweden. Deferred tax assets were recognized on tax deficits amounting to KSEK 0 (0). Deficits have no determined maturity date.

ANNUAL REPORT EOLUS VIND AB 2016/2017 65 NOTES

NOTE 12 PROPERTY, PLANT AND EQUIPMENT

GROUP PARENT COMPANY Land Wind Equip- Construc- Total Wind Equip- Construc- Total Land and turbines ment tions in turbines ment tions in and buildings progress progress buildings and advance and advance 2016/2017 payments payments

Opening accumulated cost 13,645 454,674 24,953 - 493,271 2,533 81,963 21,006 - 105,502 Investments 385 1,514 4,799 6,698 - 1,235 4,799 6,034 Sales and disposals -327 -1,440 - -1,767 - -33,374 -1,430 - -34,804 Reclassifications - -254,915 - - -254,915 - - - - Exchange-rate differences -34 -61 -1 - -96 - - - - Closing accumulated cost 13,669 199,697 25,027 4,799 243,190 2,533 48,589 20,811 4,799 76,732

Opening accumulated depreciation - -136,393 -21,377 - -157,770 - -5,622 -18,466 - -24,088 Depreciation for the year - -13,620 -1,315 - -14,935 - -3,978 -696 - -4,674 Sales and disposals - 1 1,378 - 1,379 - 3,571 1,378 - 4,949 Reclassifications - 62,323 -10 - 62,313 - -1,715 - - -1,715 Exchange-rate differences - 59 1 - 60 - - - - Closing accumulated depreciation - -87,631 -21,322 - -108,953 - -7,744 -17,784 - -25,528

Opening accumulated impairment -2,312 -73,866 - - -76,178 -2,312 -9,639 - - -11,951 Impairment for the year - -8,489 - - -8,489 - - - - - Reclassifications - 61,871 - - 61,871 - 4,271 - - 4,271 Exchange-rate differences ------Closing accumulated impairment -2,312 -20,484 - - -22,796 -2,312 -5,368 - - -7,680 Net carrying amount at year-end 11,357 91,583 3,705 4,799 111,443 221 35,477 3,027 4,799 43,524

During the fiscal year, 0 (2) wind turbines previously recognized as inventories were reclassified as non-current assets.

During the fiscal year, 12 (5) new wind turbines recognized as non-current assets were reclassified to inventories and subsequently sold.

66 ANNUAL REPORT EOLUS VIND AB 2016/2017 NOTES

GROUP PARENT COMPANY Land Wind Equip- Construc- Total Land Wind Equip- Construc- Total and turbines ment tions in and turbines ment tions in buildings progress buildings progress and advance and advance 2015/2016 payments payments

Opening accumulated cost 13,519 564,096 24,354 1,209 603,178 2,533 103,616 20,368 - 126,517 Investments 233 93 2,176 - 2,503 - - 2,073 - 2,073 Sales and disposals -103 -57,975 -1,577 - -59,655 - -28,475 -1,435 - -29,910 Reclassifications - -51,528 - -1,186 -52,714 - 6,822 - - 6,822 Exchange-rate differences -5 -12 1 -23 -40 - - - - - Closing accumulated cost 13,645 454,674 24,953 0 493,270 2,533 81,963 21,006 - 105,502

Opening accumulated depreciation - -160,823 -20,443 - -181,266 - -17,442 -18,123 - -35,565 Depreciation for the year - -22,203 -2,017 - -24,220 - -3,770 -1,404 - -5,174 Sales and disposals - 30,090 1,084 - 31,174 - 15,590 1,061 - 16,651 Reclassifications - 16,556 - - 16,556 - - - - - Exchange-rate differences - -13 - - -13 - - - - - Closing accumulated depreciation - -136,393 -21,377 - -157,770 - -5,622 -18,466 - -24,088

Opening accumulated impairment -2,312 -80,851 - - -83,163 -2,312 -9,639 - - -11,951 Impairment for the year - -2,498 - - -2,498 - - - - - Reclassifications - 9,485 - - 9,485 - - - - - Exchange-rate differences - -2 - - -2 - - - - - Closing accumulated impairment -2,312 -73,866 - - -76,178 -2,312 -9,639 - - -11,951 Net carrying amount at year-end 11,333 244,414 3,576 0 259,323 221 66,702 2,540 - 69,463

INVESTMENTS AND SALES OF PROJECTS AND A number of such transactions were carried out in the 2016/2017 and COMPLETED WIND TURBINES 2015/2016 fiscal years. All of these transactions are deemed to be sales In accordance with industry practice, wind power projects are often con- or investments of assets and thus are not recognized as business combina- ducted in separate companies. This means that certain acquisitions and di- tions. Assets acquired through share transactions are measured at fair vestments of projects and completed wind turbines are conducted as share value on the acquisition date. transactions.

NOTE 13 COMMITMENTS

INVESTMENT COMMITMENTS or loss. The leasing periods vary between three months and three years No agreements regarding the acquisition of property, plant and equipment and most leasing agreements can be extended at the end of the lease or intangible assets had been signed at the end of the accounting period. period on market-based conditions. However, the agreements are usually discontinued. LEASING AGREEMENTS The Group has entered into leasing agreements regarding office premises, Paid and future lease payments pertaining to operating leasing agreements cars and office machines. The related costs for these are included in profit for premises and equipment amounted to the following for the fiscal year:

PREMISES EQUIPMENT KSEK Group Parent Company Group Parent Company 2016/2017 1,891 1,829 767 749 2017/2018 1,641 1,641 668 637 2018/2019 1,399 1,399 340 309 2019/2020 945 945 30 15 2020/2021 719 719 - - Total 6,595 6,533 1,805 1,710

ANNUAL REPORT EOLUS VIND AB 2016/2017 67 NOTES

NOTE 14 OTHER SECURITIES HELD AS FIXED ASSETS

Holdings in other companies Number of participations Equity/votes (%) Aug 31, 2017 Aug 31, 2016 Långmarken Wind AB 50 10/10 Slättens Vind AB 22,575 2/2 1,242 1,567 Carrying amount 1,242 1,567

Information about equity refers to adjusted equity, which means including the equity portion of untaxed reserves. Net profit for the year according to the Annual Report has correspondingly been adjusted, where necessary, by the equity portion of change in untaxed reserves for the year.

Holdings in other companies Corp. Reg. No. Registered office Profit/loss Equity Långmarken Wind AB 559032-9636 Hässleholm Slättens Vind AB 559022-2583 Vara 97 63,234

NOTE 15 PARTICIPATIONS IN GROUP COMPANIES

2016/2017 2015/2016 At September 1 187,831 187,246 Acquisitions 150 - Divestments -100 - Shareholders’ contributions, net -10,343 -22,726 Impairment -54,353 -1,377 Reversal of impairment 14,511 24,688 At August 31 137,696 187,831

Profit from participations in Group companies 2016/2017 2015/2016 Impairment -54,352 -1,377 Reversal of impairment 14,511 24,688 Dividends 60,890 - Gain attributable to divestments 60 - 21,109 23,311

Subsidiaries and sub-subsidiaries are listed in the table below.

Group companies Number of participations Equity/votes (%) Aug 31, 2017 Aug 31, 2016 Eolus Vind Amnehärad AB 1,000 100/100 69 69 Amnehärad Vindkraft Aktiebolag Blekinge Offshore AB 560 60/60 - - Bosberget Vindkraft AB 1,000 100/100 - - Ekovind AB 130,000 100/100 65,002 65,002 Baltic Wind Energy Eolus Elnät AB 1,000 100/100 100 100 Eolus Stensåsa Vindkraft AB 500 100/100 50 Eolus Oy 2,500 100/100 99 88 Eolus Pörtom Vind Oy Eolus Vind Norge AS 23,000 100/100 2,624 2,624 Stigafjell Vind AS Eolus North America Inc. 100/100 Comstock LLC Crescent Peak Renewables LLC Wind Wall Development LLC Wind Wall 1 LLC

68 ANNUAL REPORT EOLUS VIND AB 2016/2017 NOTES

Group companies Number of participations Equity/votes (%) Aug 31, 2017 Aug 31, 2016 Eolus Vindpark Ett AB 500 100/100 50 50 Lörby 8 Drift AB 500 100/100 50 Eolus Vindpark Fem AB 500 100/100 50 50 Eolus Vindpark Sex AB Eolus Vindpark Sju AB 500 100/100 50 50 Vilseberga Vind AB Eolus Vindpark Nio AB 500 100/100 50 658 Eolus Vindpark Elva AB 500 100/100 50 50 Eolus Vindpark Tolv AB Eolus Vindpark Tretton AB 500 100/100 50 50 Eolus Vindpark Femton AB 500 100/100 50 50 Eolus Vindpark Sjutton AB 500 100/100 50 50 Eolus Vindpark Nitton AB 500 100/100 50 50 Eolus Vindpark Tjugo AB Eolus Vindpark 23 AB 500 100/100 50 - Eolus Vindpark 24 AB Eolus Vindpark 25 AB 500 100/100 50 - Eolus Vindpark 26 AB Eolus Vindpark 27 AB 500 100/100 50 - Eolus Vindpark 28 AB Eolus Wind Power Management AB 500 100/100 50 50 Kattegatt Vindkraft AB 16,500 100/100 1,724 1,724 Lunnekullen Vindkraft AB 1,000 100/100 - - Linusvind AB 50,000 100/100 450 450 Långmarken Vindkraft AB 1,000 100/100 100 5,127 Lärkeskogen Vindkraft AB 1,000 100/100 93 93 Näset Vindkraft AB 1,000 100/100 - - SIA Eolus 2,000 100/100 25 25 Andruves wind SIA Virzas wind SIA Gulbji wind SIA Melderi wind SIA Pienava wind SIA Unas wind SIA Dobele wind SIA Osi wind SIA Mekji wind SIA Valpene wind SIA Skogaryd Vindkraft AB 1,000 100/100 100 100 Skuggetorp Vindkraft AB 1,000 100/100 100 100 Svenska Vindbolaget AB 1,430 100/100 63,300 106,861 Svenska Vindbolaget Vindpark ETT AB Svenska Vindbolaget Vindpark TVÅ AB Svenska Vindbolaget Vindpark FYRA AB Eolus Vindpark Tjugoett AB Eolus Vindpark Tjugotvå AB Uddevalla Vind AB 1,000 100/100 102 102 Vingkraft Rönnerum AB 1,000 100/100 100 1,100 Ölme Vindkraft AB 1,000 100/100 3,058 3,058 Carrying amount 137,696 187,831

ANNUAL REPORT EOLUS VIND AB 2016/2017 69 NOTES

Group companies Corp. Registered Group companies Corp. Registered Reg. No. office Reg. No. office Eolus Vind Amnehärad AB 556738-6312 Hässleholm Eolus Vindpark 27 AB 556956-6002 Hässleholm Amnehärad Vindkraft Aktiebolag 556719-3569 Hässleholm Eolus Vindpark 28 AB 559121-3193 Hässleholm Blekinge Offshore AB 556761-1727 Karlshamn Eolus Wind Power Management AB 556912-1352 Hässleholm Bosberget Vindkraft AB 556755-4810 Hässleholm Kattegatt Vindkraft AB 556411-7371 Hässleholm Ekovind AB 556343-8208 Vårgårda Lunnekullen Vindkraft AB 556705-3045 Hässleholm Baltic Wind Energy 10869166 Saare County, Linusvind AB 556832-0054 Hässleholm Estonia Långmarken Vindkraft AB 556773-8033 Hässleholm Eolus Elnät AB 556639-2477 Hässleholm Lärkeskogen Vindkraft AB 556731-4710 Hässleholm Eolus Stensåsa Vindkraft AB 556911-5362 Hässleholm Näset Vindkraft AB 556721-1023 Hässleholm Eolus Oy 2622599-6 Vaasa, Finland SIA Eolus 40103392542 Riga, Latvia Eolus Pörtom Vind Oy 2456946-1 Vaasa, Finland Andruves wind SIA 40103703482 Riga, Latvia Eolus Vind Norge AS 998127068 Stjørdal, Norway Virzas wind SIA 40103702650 Riga, Latvia Stigafjell Vind AS 998390966 Stjørdal, Norway Gulbji wind SIA 40103702769 Riga, Latvia Eolus North America Inc. 47-5083428 Nevada, USA Melderi wind SIA 40103730387 Riga, Latvia Comstock LLC 35-2541188 Nevada, USA Pienava wind SIA 40103730508 Riga, Latvia Crescent Peak Renewables LLC 27-2068025 Delaware, USA Unas wind SIA 40103761071 Riga, Latvia Wind Wall Development LLC 32-0514251 Nevada, USA Dobele wind SIA 40103786319 Riga, Latvia Wind Wall 1 LLC 81-5141504 Nevada, USA Osi wind SIA 40103806530 Riga, Latvia Eolus Vindpark Ett AB 556925-8139 Hässleholm Mekji wind SIA 40103800684 Riga, Latvia Lörby 8 Drift AB 556935-0423 Hässleholm Valpene wind SIA 50103851451 Riga, Latvia Eolus Vindpark Fem AB 556935-0365 Hässleholm Skogaryd Vindkraft AB 556773-9791 Hässleholm Eolus Vindpark Sex AB 556935-0373 Hässleholm Skuggetorp Vindkraft AB 556773-7993 Hässleholm Eolus Vindpark Sju AB 556935-0381 Hässleholm Svenska Vindbolaget AB 556759-9013 Hässleholm Vilseberga Vind AB 556935-0480 Hässleholm Svenska Vindbolaget Vindpark 556814-9636 Hässleholm Eolus Vindpark Nio AB 556935-0472 Hässleholm ETT AB Eolus Vindpark Elva AB 556935-0498 Hässleholm Svenska Vindbolaget Vindpark 556814-9560 Hässleholm TVÅ AB Eolus Vindpark Tolv AB 556924-5094 Hässleholm Svenska Vindbolaget Vindpark 556765-1830 Hässleholm Eolus Vindpark Tretton AB 556935-0449 Hässleholm FYRA AB Eolus Vindpark Femton AB 556935-0464 Hässleholm Eolus Vindpark Tjugoett AB 556924-5110 Hässleholm Eolus Vindpark Sjutton AB 556935-0514 Hässleholm Eolus Vindpark Tjugotvå AB 556924-5102 Hässleholm Eolus Vindpark Nitton AB 556924-5136 Hässleholm Uddevalla Vind AB 556707-1278 Hässleholm Eolus Vindpark Tjugo AB 556924-5128 Hässleholm Vingkraft Rönnerum AB 556796-9836 Hässleholm Eolus Vindpark 23 AB 556956-6168 Hässleholm Ölme Vindkraft AB 556755-5965 Hässleholm Eolus Vindpark 24 AB 556956-6176 Hässleholm Eolus Vindpark 25 AB 556956-6028 Hässleholm Eolus Vindpark 26 AB 556956-6010 Hässleholm

70 ANNUAL REPORT EOLUS VIND AB 2016/2017 NOTES

NOTE 16 FINANCIAL RISK MANAGEMENT

The table below presents the remaining contractual maturities of the financial 4,130) at the end of the accounting period. Contractual interest-rate deriva- liabilities. The amounts stated in the table are the contractual and undis- tives had negative market values at the end of the accounting period. The counted cash flows. All currency derivatives have positive market values. total negative market value of interest-rate derivatives was KSEK 14,634 The negative total market value of currency derivatives was KSEK 463 (pos: (neg: 38,753) at the end of the accounting period.

Aug 31, 2017 <3 months 3 months-1 year 1-2 years 2-5 years >5 years Total Borrowing 11,202 10,357 2,196 6,175 5,011 34,941 Accounts payable 28,276 - - - - 28,276 Derivatives 963 2,890 3,854 8,244 1,959 17,910 Other financial liabilities 2,735 8 - 797 - 3,540 Total 43,176 13,255 6,050 15,216 6,970 84,667

Aug 31, 2016 <3 months 3 months-1 year 1-2 years 2-5 years >5 years Total Borrowing 13,803 22,961 7,447 19,152 23,063 86,426 Accounts payable 109,998 - - - - 109,998 Derivatives 1,977 5,931 7,907 23,722 5,007 44,544 Other financial liabilities 28,269 8 - 854 - 29,131 Total 154,047 28,900 15,354 43,728 28,070 270,099

NOTE 17 PARTICIPATIONS IN ASSOCIATED COMPANIES

GROUP CARRYING AMOUNT Corp. Reg. No. Registered Capital/votes Aug 31, 2017 Aug 31, 2016 Participations in associated companies office (%) Gärdslösa Drift AB 556762-4415 Borgholm 33/33 37 Isgrannatorp Drift AB 556787-6833 Kristianstad 33/33 37 37 Kråge Vind AB 556387-1093 Kristianstad 20/20 102 Triventus AB 556627-3016 Falkenberg 40/40 3,725 7,900 Carrying amount 3,763 8,076

FINANCIAL INFORMATION REGARDING THE GROUP’S ASSOCIATED COMPANIES (RELATES TO ENTIRE ASSOCIATED COMPANIES, NOT ONLY THE GROUP’S PARTICIPATING INTEREST) Income statement 2016/2017 2015/2016 Operating income 13,422 21,736 Operating expenses -21,496 -31,856 Operating loss -8,074 -10,120 Net financial items 1,702 1,501 Tax - -459 Net loss for the period -6,372 -9,078

Balance sheet Aug 31, 2017 Aug 31, 2016 Non-current assets 1,642 4,553 Current assets 28,519 48,863 Total assets 30,161 53,416

Equity 9,347 20,315 Provisions 16,499 17,000 Non-current liabilities 2,100 11,522 Current liabilities 2,215 4,579 Total equity and liabilities 30,161 53,416

ANNUAL REPORT EOLUS VIND AB 2016/2017 71 NOTES

Profit/loss from participations in associated companies 2016/2017 2015/2016 Kråge Vind AB - -3 Triventus AB -2,570 -601 Other -1,604 - Total loss from participations in associated companies -4,175 -604

Change in participations in associated companies 2016/2017 2015/2016 At September 1 8,075 8,703 Share in profits -4,175 -604 Divestments -139 -24 Other - - At August 31 3,761 8,075

PARENT COMPANY CARRYING AMOUNT Corp. Registered Capital/votes Aug 31, 2017 Aug 31, 2016 Participations in associated companies Reg. No. office (%) Kråge Vind AB 556387-1093 Kristianstad 20/20 - 200 Triventus AB 556627-3016 Falkenberg 40/40 3,725 8,500 Carrying amount 3,725 8,700

Change in participations in associated companies 2016/2017 2015/2016 At September 1 8,700 8,720 Impairment -4,775 - Divestments -200 -20 At August 31 3,725 8,700

NOTE 18 INVENTORIES OF WIND TURBINES, WIND TURBINES UNDER CONSTRUCTION AND PROJECTS UNDER DEVELOPMENT

GROUP PARENT COMPANY Aug 31, 2017 Aug 31, 2016 Aug 31, 2017 Aug 31, 2016 Inventories of wind turbines 9,325 11,995 9,325 11,995 Wind turbines under construction and projects under development 335,515 450,306 173,705 326,595 Total 344,840 462,301 183,030 338,590

72 ANNUAL REPORT EOLUS VIND AB 2016/2017 NOTES

NOTE 19 ACCOUNTS RECEIVABLE AND OTHER CURRENT RECEIVABLES

GROUP PARENT COMPANY Aug 31, 2017 Aug 31, 2016 Aug 31, 2017 Aug 31, 2016 Accounts receivable 25,686 28,793 23,760 27,480 Other current receivables 44,493 29,131 18,723 6,190 Total 70,180 57,924 42,483 33,670

Other current receivables relate to: Aug 31, 2017 Aug 31, 2016 Aug 31, 2017 Aug 31, 2016 VAT receivables 2,464 140 2,430 26 Receivables from related parties - 220 - - Blocked accounts 19,632 24,733 - 5,040 Other receivables 22,397 4,038 16,293 1,124 Total 44,493 29,131 18,723 6,190

The credit risk of accounts receivable that have not yet fallen due for payment or been impaired is considered low. Because customers represent various categories, such as municipalities, companies and private individuals, and due to the geographically dispersed nature of these, it is considered unlikely that all would experience financial difficulties at the same point in time. Eolus has historically low bad debt losses and performs a credit rating review of all new customers. Accounts receivables that have fallen due for payment but have not been impaired have undergone a thorough individual assessment and are not considered to carry a material risk of losses.

GROUP PARENT COMPANY Credit exposure Aug 31, 2017 Aug 31, 2016 Aug 31, 2017 Aug 31, 2016 Accounts receivable, not yet fallen due or impaired 6,811 27,679 5,405 27,082 Accounts receivable, past due but not impaired 18,845 1,114 18,355 398 Accounts receivable, past due and impaired - - - - Reserve for doubtful receivables 30 - - - Total accounts receivables 25,686 28,793 23,760 27,480

At August 31, 2017, past due accounts receivable for which no reserve was considered necessary amounted to KSEK 18,815 (1,114).

Age analysis of accounts receivable, past due but not impaired Aug 31, 2017 Aug 31, 2016 Aug 31, 2017 Aug 31, 2016 <30 days 3,302 1,114 3,302 398 30-90 days 2,754 - 2,552 - 91-180 days 208 - 6 - >180 days 12,581 - 12,495 - Total past due but not impaired accounts receivable 18,845 1,114 18,355 398

Age analysis of accounts receivable, past due and impaired Aug 31, 2017 Aug 31, 2016 Aug 31, 2017 Aug 31, 2016 >180 days 30 - - - Total past due and impaired accounts receivable 30 - - -

Provisions for doubtful receivables correspond to 0% (0) of the total accounts receivable.

Provision for doubtful receivables Aug 31, 2017 Aug 31, 2016 Aug 31, 2017 Aug 31, 2016 Provision at beginning of year - -191 - -191 Provision for doubtful receivables for the year 30 - - - Written-off receivables - 191 - 191 Amount at year-end 30 - - -

Provisions for the reversals of reserves for doubtful receivables are included in the item “other operating expenses” in the income statement.

GROUP PARENT COMPANY Recognized amount for accounts receivable per currency Aug 31, 2017 Aug 31, 2016 Aug 31, 2017 Aug 31, 2016 SEK 13,133 1,536 11,207 223 EUR 12,553 27,257 12,553 27,257 Total KSEK 25,686 28,793 23,760 27,480

The ten largest customers represent 83% (99) of the Group’s total accounts receivable. A single customer accounts for 57% (94).

ANNUAL REPORT EOLUS VIND AB 2016/2017 73 NOTES

NOTE 20 ACCRUALS

GROUP PARENT COMPANY Prepaid expenses and accrued income Aug 31, 2017 Aug 31, 2016 Aug 31, 2017 Aug 31, 2016 Prepaid rental charges 148 124 148 124 Other prepaid expenses 3,237 2,912 2,303 1,201 Accrued income 4,455 5,189 2,079 1,487 Total 7,840 8,225 4,530 2,812

Accrued expenses and deferred income Aug 31, 2017 Aug 31, 2016 Aug 31, 2017 Aug 31, 2016 Accrued payroll expenses and personnel costs 6,341 7,628 6,294 7,571 Accrued expenses and deferred income pertaining to projects 23,624 4,397 23,624 4,397 Other accrued expenses 2,517 3,653 1,274 784 Total 32,483 15,678 31,192 12,752

NOTE 21 SHARE CAPITAL AND EARNINGS PER SHARE

Disclosure on number of shares Aug 31, 2017 Aug 31, 2016 Number of issued and fully paid shares Class A shares (number of votes per share 1) quotient value SEK 1 1,285,625 1,285,625 Class B shares (number of votes per share 1/10) quotient value SEK 1 23,621,375 23,621,375 Number of issued and fully paid shares 24,907,000 24,907,000

The specification of changes in equity can be found in the consolidated statement of changes in equity. Reserves consist of exchange-rate differences arising in connection with the translation of the financial statements of foreign subsidiaries.

The Parent Company has no potential common shares, which is why earnings per share are the same before and after dilution for the reported years.

GROUP Earnings per share, before and after dilution 2016/2017 2015/2016 Earnings attributable to Parent Company shareholders 25,317 -22,925 Weighted average number of outstanding common shares 24,907,000 24,907,000 Earnings per share, before and after dilution 1.02 -0.92

74 ANNUAL REPORT EOLUS VIND AB 2016/2017 NOTES

NOTE 22 BORROWING

GROUP PARENT COMPANY Non-current borrowing from credit institutions Aug 31, 2017 Aug 31, 2016 Aug 31, 2017 Aug 31, 2016 Bank loans (fixed interest rate) - 4,000 - - Bank loans (variable interest rate) 12,740 46,216 - - Total non-current borrowing 12,740 50,216 - -

Current borrowing Bank loans (variable interest rate) 21,169 31,558 - - Total current liabilities 21,169 31,558 - -

Total borrowing 33,909 81,774 - -

For information on pledged assets for loans raised, refer to Note 26.

BANK LOANS The Group’s and Parent Company’s exposure, on the basis of loans, to interest-rate changes and contractual dates for renegotiations of interest rates are as follows:

GROUP PARENT COMPANY Aug 31, 2017 Aug 31, 2016 Aug 31, 2017 Aug 31, 2016 6 months or less 33,909 77,774 - - 6-12 months - 4,000 - - 1-5 years - - - - More than 5 years - - - - Total 33,909 81,774 - -

Borrowing per currency Aug 31, 2017 Aug 31, 2016 Aug 31, 2017 Aug 31, 2016 SEK 33,245 79,995 - - EUR 664 1,779 - - Total 33,909 81,774 - -

BANK OVERDRAFT FACILITIES GROUP PARENT COMPANY Aug 31, 2017 Aug 31, 2016 Aug 31, 2017 Aug 31, 2016 Amount granted 75,000 75,000 75,000 75,000

Unutilized credit is included in current borrowing and amounts to - - - -

Special undertakings, known as covenants, are in place for liabilities to credit institutions. If these undertaking are not fulfilled, the credit providers can withdraw the credit facilities. In the 2016/2017 fiscal year, all of the covenants were fulfilled.

NON-CURRENT LIABILITIES Group’s and Parent Company’s non-current liabilities. Maturity dates as presented below:

GROUP PARENT COMPANY Aug 31, 2017 Aug 31, 2016 Aug 31, 2017 Aug 31, 2016 1-5 years 7,840 28,026 - - More than 5 years 4,900 22,190 - - Total 12,740 50,216 - -

ANNUAL REPORT EOLUS VIND AB 2016/2017 75 NOTES

NOTE 23 PROVISIONS

GROUP After-treatment costs for Lease Total disposal of wind turbines fees At September 1, 2016 6,718 881 7,599 Recognized in profit or loss additional provisions, interest 146 - 146 reversed amounts pertaining to divested turbines -3,443 -513 -3,956 At August 31, 2017 3,421 368 3,789

After-treatment costs for Lease Total disposal of wind turbines fees At September 1, 2015 7,995 846 8,841 Recognized in profit or loss additional provisions, interest 621 35 656 reversed amounts pertaining to divested turbines -1,898 - -1,898 At August 31, 2016 6,718 881 7,599

COMMITMENTS REGARDING AFTER-TREATMENT Provisions are established at the present value of the calculated future cost. According to the Swedish Environmental Code, financial guarantees must be In accordance with IAS 37, point 60, provisions are continuously adjusted provided as security for dismantling and after-treating the locations of wind upward using the discount rate and this upward adjustment is recognized turbines. The costs for dismantling and after-treatment are estimated for as a borrowing cost (interest expense). each facility with guidance from investigations carried out for particular turbines. The basis is a normal value of SEK 250 per megawatt (MW) of in- COMMITMENTS REGARDING FUTURE LEASING stalled capacity for steel hubs. About SEK 100 per MW is added if the tur- The provision pertains to the commitment to pay future leases for turbines bine is constructed using concrete. The amounts apply to the cost scenario that have been sold. at September 1, 2011. The residual value is handled as a deductible item in the disposal analysis and is taken into account in these standard amounts. PARENT COMPANY The time factor is taken into account through discounting. The price trend The Parent Company’s provisions at August 31, 2017 comprise KSEK 1,081 can be assumed to be equal to the long-term inflation target of 2%, while (1,472) in after-treatment costs and KSEK 368 (881) in lease fees, or a total a certain level of technological progress should reduce the cost trend. of KSEK 1,449 (2,353).

NOTE 24 FINANCIAL INSTRUMENTS – DISCLOSURE ON FAIR VALUE PER CATEGORY

GROUP Aug 31, 2017 Carrying amount Fair value Level Assets in the balance sheet Available-for-sale financial assets Other financial assets 25,517 25,517 2 Loan receivables and accounts receivable Cash and cash equivalents 201,509 201,509 2 Accounts receivable 25,686 25,686 2 Other current receivables 1,157 1,157 2 Blocked bank balances 24,632 24,632 2 Accrued interest income 328 328 2

76 ANNUAL REPORT EOLUS VIND AB 2016/2017 NOTES

Aug 31, 2017 Carrying amount Fair value Level Liabilities in the balance sheet Liabilities measured at fair value through profit or loss Derivate liabilities Currency futures 154 154 2 Currency swaps 309 309 2 Interest-rate swaps 14,634 14,634 2 Liabilities measured at amortized cost Interest-bearing liabilities 33,909 33,909 2 Accounts payable 28,276 28,276 2 Other liabilities 2 Accrued interest expense 29 29 2

Aug 31, 2016 Carrying amount Fair value Level Assets in the balance sheet Available-for-sale financial assets Other financial assets 24,355 24,355 2 Assets measured at fair value through profit or loss Currency derivatives 4,130 4,130 Loan receivables and accounts receivable Cash and cash equivalents 221,549 221,549 2 Accounts receivable 28,793 28,793 2 Other current receivables 4,398 4,398 2 Blocked bank balances 24,733 24,733 2 Accrued interest income 15 15 2

Liabilities in the balance sheet Liabilities measured at fair value through profit or loss Derivate liabilities Interest-rate swaps 38,753 38,753 2 Liabilities measured at amortized cost Interest-bearing liabilities 81,774 81,774 2 Accounts payable 109,998 109,998 2 Other liabilities 28,122 28,122 2 Accrued interest expense 155 155 2

DERIVATIVE INSTRUMENTS Derivatives Eolus does not apply hedge accounting. Derivative instruments for managing Currency futures are measured at fair value by discounting the difference be- currency and interest-rate risk are recognized as current assets or current tween the contracted forward rate and the forward rate and can be agreed liabilities and classified as held for trading. Changes in the value of currency on the balance-sheet date for the remaining contract period. The fair value of derivatives are recognized in profit or loss as other operating income or other interest-rate swaps is based on a discounting of expected future cash flows operating expenses. Changes in the value of interest-rate derivatives are according to the contracts’ terms and conditions and due dates, using the recognized in net financial items. market interest rate as the baseline.

DESCRIPTION OF FAIR VALUE Other financial assets and liabilities Interest-bearing liabilities For accounts receivable, other receivables/liabilities, accrued income and The fair value of interest-bearing liabilities is calculated by discounting expenses and accounts payable with a remaining term of less than six future cash flows of capital amounts and interest discounted to the current months, the carrying amount is considered to reflect the fair value. market interest rate.

ANNUAL REPORT EOLUS VIND AB 2016/2017 77 NOTES

NOTE 25 RECONCILIATION BETWEEN PROFIT BEFORE TAX AND NET CASH FLOW

GROUP PARENT COMPANY Non-cash items 2016/2017 2015/2016 2016/2017 2015/2016 Depreciation and impairment of property, plant and equipment 23,423 26,719 2,118 5,174 Unrealized exchange-rate differences -148 1,215 4,346 1,265 Capital gains from divestment of non-current assets -319 -390 3,693 -361 Changes in provisions -3,833 -1,240 -904 -266 Measurement of derivatives at fair value 4,592 1,523 - - Other - 511 607 273 Total 23,715 28,337 9,860 6,085

NOTE 26 PLEDGED ASSETS AND CONTINGENT LIABILITIES

GROUP PARENT COMPANY Pledged assets for liabilities 2016/2017 2015/2016 2016/2017 2015/2016 Chattel mortgages 603,000 603,000 580,000 580,000 Wind turbines and leases used as collateral 50,707 109,063 - - Blocked bank balances 19,632 19,693 - - Shares in associated companies 34 34 - - Total 673,373 731,790 580,000 580,000

CONTINGENT LIABILITIES The Group has contingent liabilities pertaining to legal claims that have arisen in the normal business operations. No significant liabilities, other than those for which provisions have been made (Note 23), are expected to arise on the basis of these.

PARENT COMPANY Contingent liabilities 2016/2017 2015/2016 Contingent liabilities for the benefit of subsidiaries 69,885 69,885 Total 69,885 69,885

78 ANNUAL REPORT EOLUS VIND AB 2016/2017 NOTES

NOTE 27 RELATED-PARTY TRANSACTIONS

OWNER STRUCTURE AT AUGUST 31, 2017 No. of No. of Share of Share of votes Largest shareholders Class A shares Class B shares equity (%) (%) Domneåns Kraftaktiebolag 357,900 2,012,869 9.5 15.3 Hans-Göran Stennert, directly and through endowment insurance 380,100 518,984 3.6 11.8 Åke Johansson 194,720 567,200 3.1 6.9 Hans Johansson and Borgunda bygghandel, through companies 169,520 58,455 0.9 4.8 Försäkringsaktiebolaget Avanza Pension - 1,579,451 6.3 4.3 Johan Markensten - 808,080 3.2 2.2 Ingvar Svantesson 43,750 200,175 1.0 1.8 Nordnet Pensionsförsäkring AB 500 552,901 2.2 1.5 Swedbank Försäkring - 447,943 1.8 1.2 Adlerbertska forskningsstiftelsen - 350,000 1.4 1.0 Other shareholders 139,135 16,525,317 66.9 49.1 Total 1,285,625 23,621,375 100.0 100.0

No Board members of other senior executives had any direct or indirect PARENT COMPANY’S TRANSACTIONS WITH OTHER share transactions with the Group in 2016/2017 or 2015/2016, other than GROUP COMPANIES the remuneration stated in Note 6. 0.0% (0.0) of the Parent Company’s sales pertain to intra-Group invoicing. The Parent Company’s operating expenses include intra-Group purchases at only insignificant amounts. The same pricing policies apply to both purchas- es and sales between Group companies as to transactions with external parties.

NOTE 28 SIGNIFICANT EVENTS AFTER THE END OF THE REPORTING PERIOD

No significant events took place after the end of the fiscal year.

ANNUAL REPORT EOLUS VIND AB 2016/2017 79 SIGNATURES

The undersigned affirm that these consolidated financial statements and this Annual Report have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and generally accepted accounting principles, and provide a true and fair view of the Group’s and the Parent Company’s financial position and earnings, and that the Directors’ Report provides a fair review of the Group’s and Parent Company’s operations, financial position and earnings and describes the material risks and uncertainty factors faced by the companies included in the Group.

Hässleholm, December 4, 2017

Hans-Göran Stennert Hans Linnarson Fredrik Daveby Chairman Board member Board member

Hans Johansson Sigrun Hjelmquist Bodil Rosvall Jönsson Board member Board member Board member

Per Witalisson CEO

Our auditor’s report was submitted on December 4, 2017.

PricewaterhouseCoopers AB

Eva Carlsvi Authorized Public Accountant

80 ANNUAL REPORT EOLUS VIND AB 2016/2017 AUDITOR’S REPORT

AUDITOR’S REPORT

To the general meeting of the shareholders of Eolus Vind AB (publ), corporate identity number 556389-3956

REPORT ON THE ANNUAL ACCOUNTS AND Our audit approach CONSOLIDATED ACCOUNTS Audit focus and scope We designed our audit by determining materiality and assessing the risks of Opinions material misstatement in the consolidated financial statements. In particular, we We have audited the annual accounts and consolidated accounts of Eolus Vind considered where management made subjective judgements; for example, in AB (publ) for the year 1st September 2016 to 31 August 2017, excluding the respect of significant accounting estimates that involved making assumptions corporate governance report on pages 37-39. The annual accounts and consoli- and considering future events that are inherently uncertain. As in all of our audits, dated accounts of the company are included on pages 32-80 in this document. we also addressed the risk of management override of internal controls, including In our opinion, the annual accounts have been prepared in accordance with among other matters consideration of whether there was evidence of bias that the Annual Accounts Act and present fairly, in all material respects, the financial represented a risk of material misstatement due to fraud. position of the parent company as of 31 August 2017 and its financial perfor- We tailored the scope of our audit in order to perform sufficient work to en- mance and cash flow for the year then ended in accordance with the Annual able us to provide an opinion on the consolidated financial statements as a Accounts Act. The consolidated accounts have been prepared in accordance whole, taking into account the structure of the Group, the accounting processes with the Annual Accounts Act and present fairly, in all material respects, the fi- and controls, and the industry in which the group operates. nancial position of the group as of 31 August 2017 and their financial perfor- mance and cash flow for the year then ended in accordance with International Materiality Financial Reporting Standards (IFRS), as adopted by the EU, and the Annual The scope of our audit was influenced by our application of materiality. An audit ­Accounts Act. Our opinion does not include the corporate governance report on is designed to obtain reasonable assurance whether the financial statements are pages 37-39. The statutory administration report is consistent with the other free from material misstatement. Misstatements may arise due to fraud or error. parts of the annual accounts and consolidated accounts. They are considered material if individually or in aggregate, they could reasonably We therefore recommend that the general meeting of shareholders adopts be expected to influence the economic decisions of users taken on the basis of the income statement and balance sheet for the parent company and the group. the financial statements. Our opinions in this report on the annual accounts and consolidated ac- Based on our professional judgement, we determined certain quantitative thresh- counts are consistent with the content of the supplementary report that has been olds for materiality, including the overall materiality for the financial statements as submitted to the Parent Company’s Audit Committee in accordance with Article a whole. These, together with qualitative considerations, helped us to determine 11 of the Auditors Ordinance (537/2014). the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on Basis for Opinions the financial statements as a whole. We conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities Key audit matters under those standards are further described in the Auditor’s Responsibilities Key audit matters of the audit are those matters that, in our professional judg- section. We are independent of the parent company and the group in accor- ment, were of most significance in our audit of the annual accounts and consoli- dance with professional ethics for accountants in Sweden and have otherwise dated accounts of the current period. These matters were addressed in the con- fulfilled our ethical responsibilities in accordance with these requirements. This text of our audit of, and in forming our opinion thereon, the annual accounts and means that, based on our best knowledge and belief, no prohibited services consolidated accounts as a whole, but we do not provide a separate opinion on referred to in Article 5.1 of the Auditors Ordinance (537/2014) have been provid- these matters. ed to the audited company or, as the case may be, its parent company or its controlled company within the EU. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.

KEY AUDIT MATTER HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER

Revenue recognition – sale of wind farms Each separate contract for the sale of a wind farm, either directly or via a com- Eolus Vind has a business plan and strategy which implies the construction pany, is individually produced and contains various regulations and clauses. and sale of wind farms, either directly or via companies. In our audit we have: During the financial year, Eolus sold the projects Långmarken, Iglasjön, Guni- • Audited the company’s calculation of capital gains by reconciling the llaberg, Lunna and Täppeshusen. Each separate transaction is individually pro- calculation against the sales contracts duced and the contracts contain specific terms and conditions which, amongst • Audited the company’s bookkeeping regarding sales at company level other things, stipulate the payment model to apply and which also stipulate • Audited the company’s bookkeeping regarding sales at Group level the respective parties’ commitments and requirements for completion of the • Examined to determine if the classification of capital gains has been handled contract within the determined time period. correctly in accordance with the company’s accounting principles. The business approach and associated contract comprises a complex area In performing our audit, we have noted no significant deviations. where various interpretations of the executed transaction and the associated contract terms can have a significant impact on the company’s accounting and revenue recognition.

ANNUAL REPORT EOLUS VIND AB 2016/2017 81 AUDITOR’S REPORT

KEY AUDIT MATTER HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER

Impairment testing of wind farms in operation We have studied company management’s impairment tests. These calculations Refer to Note 1 page 55 of the annual financial statements “Assessments, contain the company’s assessments regarding future cash flows and the choice estimates and assumptions”, and Note 12 page 66 “Tangible fixed assets”. of discount rates. The assumption on future price developments as regards electricity and electricity certificates has been based on price forecasts estimat- The reported value of the commissioned wind farms amounted, as at 31 Au- ed by external expertise. gust 2017, to MSEK 101. The market prices of electricity and electricity certifi- cates have declined in recent years and remain at a relatively low level. These In performing our audit we have obtained an understanding of the manner in price declines are indications of changes in factors which can impact the valua- which macro economic developments impact Eolus Vind, and how the Board tion of the wind farms. Due to this, the company has performed write-downs of Directors and company management work to compile information to serve amounting to MSEK 8. The company undertakes write-down tests on an as the basis of their decision making. The impairment tests have been exam- on-going basis to ensure the correctness of the value of the assets. The com- ined through our: pany has not identified any further impairment requirements. • Assessment of the correctness of the calculation models Certain of the assumptions and assessments made by management in con- • Checking of the calculation and assessment of the applied WACC junction with the impairment testing regarding future cash flows and circum- • Comparison of input data regarding planned production against external data stances are complex and have a major impact on the calculation of the value in and we have undertaken a reasonability assessment comparing such data use. This applies, in particular, to the assessment of the future price levels of with data regarding historical production. electricity and of electricity certificates and of the discount rate, where limited • Comparison of input data regarding estimated operating costs and deviations result in a major impact on the calculation of the value in use. other data against the company’s forecasts and we have undertaken a reasonability assessment comparing such data with historical information. • Executed sensitivity analyses regarding, amongst other things, changes in price developments and the discount rate. In performing our audit, we have noted no significant deviations.

Valuation of projects in progress We have studied company management’s assessments and have challenged Eolus Vind reports projects in progress in its balance sheet associated with them as regarding these assessments. the design of wind farms. The projects are realized when Eolus Vind sells the In performing our audit, we have obtained an understanding of the manner in project as a construction-ready project or when the wind farm is already con- which macro economic developments impact Eolus Vind and how the Board structed and is either sold to a client or moved to the inventory. A project can of Directors and company management work to compile information to serve also be realized through the sale of project rights. as the basis of their decision making. Projects in progress have been audited The reported value of projects in progress amounted at 31 August 2017 to on the basis of our: MSEK 335. • detailed testing to determine that the costs referring to the projects This balance sheet item is significant in its size and with the current electricity actually refer to relevant project costs prices and prices of electricity certificates, the valuation of projects in progress • studied the company’s assessment of the realization of projects in the is a focus area in our audit. short and long term Each project is valued individually and the company considers the realization • assessed the inherent parameters, such as the time plans and budgets, potential of the project in the long and short term. The value of a project which in the projects for which a contract has already been signed with a client is not seen to be realizable is written down immediately. This takes place, • discussed and assessed projects included in the business plan and budget for example, when a project is rejected in the working permit process. with management and followed up the outcome against last year’s business plan and budget • performed random sample testing for the remaining projects included in the project portfolio and obtained comments from project managers regarding the status and assessed value of the projects.

In performing our audit, we have noted no significant deviations.

Other Information than the annual accounts and If we, based on the work performed concerning this information, conclude that consolidated accounts there is a material misstatement of this other information, we are required to This document also contains other information than the annual accounts and report that fact. We have nothing to report in this regard. consolidated accounts and is found on pages 1-31 amd 84-87. The Board of Directors and the Managing Director are responsible for this other information. Responsibilities of the Board of Directors and the Managing Director Our opinion on the annual accounts and consolidated accounts does not cover The Board of Directors and the Managing Director are responsible for the this other information and we do not express any form of assurance conclusion preparation of the annual accounts and consolidated accounts and that they regarding this other information. give a fair presentation in accordance with the Annual Accounts Act and, con- In connection with our audit of the annual accounts and consolidated ac- cerning the consolidated accounts, in accordance with IFRS as adopted by the counts, our responsibility is to read the information identified above and consid- EU. The Board of Directors and the Managing Director are also responsible for er whether the information is materially inconsistent with the annual accounts such internal control as they determine is necessary to enable the preparation and consolidated accounts. In this procedure we also take into account our of annual accounts and consolidated accounts that are free from material mis- knowledge otherwise obtained in the audit and assess whether the information statement, whether due to fraud or error. otherwise appears to be materially misstated. In preparing the annual accounts and consolidated accounts, The Board of Directors and the Managing Director are responsible for the assessment of

82 ANNUAL REPORT EOLUS VIND AB 2016/2017 AUDITOR’S REPORT

the company’s and the group’s ability to continue as a going concern. They dis- Auditor’s responsibility close, as applicable, matters related to going concern and using the going con- Our objective concerning the audit of the administration, and thereby our cern basis of accounting. The going concern basis of accounting is however not opinion about discharge from liability, is to obtain audit evidence to assess applied if the Board of Directors and the Managing Director intends to liquidate with a reasonable degree of assurance whether any member of the Board the company, to cease operations, or has no realistic alternative but to do so. of Directors or the Managing Director in any material respect: The Board’s Audit Committee shall, without affecting the other tasks and • has undertaken any action or been guilty of any omission which can give responsibilities of the Board, monitor the company’s financial reporting, among rise to liability to the company, or other things. • in any other way has acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association. Auditor’s responsibility Our objectives are to obtain reasonable assurance about whether the annual Our objective concerning the audit of the proposed appropriations of the com- accounts and consolidated accounts as a whole are free from material mis- pany’s profit or loss, and thereby our opinion about this, is to assess with rea- statement, whether due to fraud or error, and to issue an auditor’s report that sonable degree of assurance whether the proposal is in accordance with the includes our opinions. Reasonable assurance is a high level of assurance, but is Companies Act. not a guarantee that an audit conducted in accordance with ISAs and generally Reasonable assurance is a high level of assurance, but is not a guarantee accepted auditing standards in Sweden will always detect a material misstate- that an audit conducted in accordance with generally accepted auditing stan- ment when it exists. Misstatements can arise from fraud or error and are con- dards in Sweden will always detect actions or omissions that can give rise to sidered material if, individually or in the aggregate, they could reasonably be liability to the company, or that the proposed appropriations of the company’s expected to influence the economic decisions of users taken on the basis of profit or loss are not in accordance with the Companies Act. these annual accounts and consolidated accounts. A further description of our responsibility for the audit of the administration A further description of our responsibility for the audit of the annual ac- is available on the Swedish Inspectorate of Auditors’ website: www.revisorsins- counts and consolidated accounts is available on the Swedish Inspectorate pektionen.se/rn/showdocument/documents/rev_dok/revisors_ansvar.pdf. This of Auditors’ website: www.revisorsinspektionen.se/rn/showdocument/docu- description is part of the auditor´s report. ments/rev_dok/revisors_ansvar.pdf. This description is part of the auditor´s report. Audit of the corporate governance report The Board of Directors is responsible for the corporate governance report on REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS pages 37-39 and for ensuring that it is prepared in accordance with the Annual Accounts Act. Opinions Our review has been conducted in accordance with FAR’s statement RevU In addition to our audit of the annual accounts and consolidated accounts, 16 Auditor’s examination of the corporate governance report. This means that we have also audited the administration of the Board of Directors and the our review of the corporate governance report has a different focus and a much Managing Director of Eolus Vind AB (publ) for the year 1 September 2016 more limited scope compared to the focus and scope of an audit in accor- to 31 August 2017 and the proposed appropriations of the company’s profit dance with the International Standards on Auditing and generally accepted or loss. auditing standards in Sweden. We believe that this examination provides a We recommend to the general meeting of shareholders that the profit be sufficient basis for our opinion. appropriated in accordance with the proposal in the statutory administration A corporate governance report has been prepared. Disclosure in accor- report and that the members of the Board of Directors and the Managing dance with Chapter 6. § 6 subparagraphs 2-6 of the Annual Accounts Act Director be discharged from liability for the financial year. and Chapter 7. § 31, second paragraph of the same Act are consistent with the annual accounts and consolidated accounts and are in accordance with Basis for Opinions the Annual Accounts Act. We conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities under those standards are further PricewaterhouseCoopers AB was appointed Eolus Vind AB (publ)’s auditor at described in the Auditor’s Responsibilities section. We are independent of the the Annual General Meeting on 28 January 2017, and has been the company’s parent company and the group in accordance with professional ethics for auditor since 24 January 2015. accountants in Sweden and have otherwise fulfilled our 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 opinions. Hässleholm, 4 December 2017 PricewaterhouseCoopers AB Responsibilities of the Board of Directors and the Managing Director The Board of Directors is responsible for the proposal for appropriations of the Eva Carlsvi company’s profit or loss. At the proposal of a dividend, this includes an assess- Authorised Public Accountant ment of whether the dividend is justifiable considering the requirements which the company’s and the group’s type of operations, size and risks place on the size of the parent company’s and the group’s equity, consolidation require- ments, liquidity and position in general. The Board of Directors is responsible for the company’s organization and the administration of the company’s affairs. This includes among other things continuous assessment of the company’s and the group’s financial situation and ensuring that the company’s organization is designed so that the account- ing, management of assets and the company’s financial affairs otherwise are controlled in a reassuring manner. The Managing Director shall manage the ongoing administration according to the Board of Directors’ guidelines and in- structions and among other matters take measures that are necessary to fulfil the company’s accounting in accordance with law and handle the management of assets in a reassuring manner.

ANNUAL REPORT EOLUS VIND AB 2016/2017 83 BOARD OF DIRECTORS

BOARD OF DIRECTORS

HANS-GÖRAN STENNERT CHAIRMAN OF THE BOARD

Born: 1954 Other assignments: Chairman of the Board of Elected: 2008, Chairman since 2009. Entreprenörinvest Sverige AB. Board member of Education and background: Holds a Master of Cuptronic Technology AB and Winplantan AB. Business Administration degree and has exten- Shareholding in Eolus: 380,100 Class A sive experience from positions and assignments shares, of which 378,000 Class A shares are in the IKEA Group, including Board member of held through endowment insurance, and the IKEA Group’s holding company INGKA Hold- 518,984 Class B shares, of which 516,984 Class ing BV in 1993-2007. He served as Chairman of B shares are held through endowment insurance. the Board for the last nine years of this period.

FREDRIK DAVEBY BOARD MEMBER

Born: 1962 and previously held positions at the Swedish Elected: 2009 Government Offices and the Federation of Education and background: Agriculturalist. Swedish Farmers. President of Motormännens Riksförbund since Other assignments: Chairman of the Board 2014. President of Länsförsäkring Kronoberg and President of Motormännens Testcenter AB. 2002-2014. Many Board assignments in the Chairman of the Board of Motormännens Länsförsäkringar Alliance, including Board mem- Försäkringsförmedling AB. President of ber of Länsförsäkringar AB 2010-2014. Head of Motormännens Riksförbund. Members at Södra Skogsägarna 1997-2002 Shareholding in Eolus: 10,000 Class B shares

SIGRUN HJELMQUIST BOARD MEMBER

Born: 1956 Other assignments: Chairman of the Board of Elected: 2011 Facesso AB. Board member of Addnode group Education and background: Master of Science AB (publ), Clavister Holding AB, Edgeware AB, in Engineering and Licentiate of Engineering in Ragn-Sellsföretagen AB and IGOT AB. Applied Physics degrees from the Royal Swedish Shareholding in Eolus: 1,000 Class B shares Institute of Technology. Executive Partner, Faces- so AB. Active in the Ericsson Group 1979-2000, most recently as President of Ericsson Compo- nents AB. Investment Manager at BrainHeart Capital 2000-2005.

HANS JOHANSSON BOARD MEMBER

Born: 1965 Board member of its subsidiaries Borgunda Ex- Elected: 2016 teras Ett AB, Borgunda Exteras Två AB, Borgun- Education and background: Extensive experi- da Exteras Tre AB, Borgunda Exteras Fyra AB ence in the Swedish building materials trade and Borgunda Exteras Fem AB. Chairman of the through duties at the purchasing firm Woody Boards of Borg­unda Tributo AB and Borgunda Bygghandel AB which has 50 member compa- Uterque AB. Member of the Boards of Woody nies, and in operations at the family firm Borgun- Bygghandel AB and Borgunda Gård AB. Partner da Bygghandel where he is the CEO. of Borgunda Fastighet Handelsbolag. Other assignments: CEO and Chairman of the Shareholding in Eolus: 169,520 Class A shares Board of Borgunda Bygghandel AB and CEO or and 58,455 Class B shares.

84 ANNUAL REPORT EOLUS VIND AB 2016/2017 BOARD OF DIRECTORS

HANS LINNARSON BOARD MEMBER

Born: 1952 Other assignments: Chairman of the Board of Elected: 2017 Nibe Industrier AB, Hörberg Petersson Tronic Education and background: Electronics engi- AB, Scandbio AB and Skeppshults Press och neer and B.A. Experience from a number of Svets Aktiebolag. Board member of Inission AB, different assignments as CEO of Swedish inter- LWW Group AB, Nordiska Plast AB, Plastinject national industrial companies for more than 30 Aktiebolag and Zinkteknik i Bredaryd Aktiebolag. years, such as Enertec Component AB, CTC AB, Shareholding in Eolus: 2,500 Class B shares Asko Cylinda AB. Leading positions within the Electrolux Group and CEO of Husqvarna AB.

BODIL ROSVALL JÖNSSON BOARD MEMBER

Born: 1970 2012-2016, CEO of Minc 2006-2012 as well as Elected: 2017 positions within E.on 1996-2006. Education and background: Master of Busi- Other assignments: CEO and Board member ness Administration from the Faculty of Econom- of BRJ Management AB. ics and Business Administration Lund. Senior Shareholding in Eolus: 4,000 Class B shares Advisor at Hypergene and Navet and member of office Board at Handelsbanken Malmö-Triangeln. Former CEO of the Business Region Skåne and Enterprise Manager at Skåne County Council

OTHER DISCLOSURES REGARDING THE No separate agreements with major sharehold- BOARD OF DIRECTORS AND SENIOR ers, customers, suppliers or other parties EXECUTIVES exist under which Board members or senior The assignments of Board members and se- executives have been elected or appointed. nior executives described above pertain to No agreements exist with Eolus or any of its assignments outside the Eolus Group and do subsidiaries concerning benefits after the not include assignments as deputy Board completion of each assignment. There are members. Reported shareholdings comprise no close family ties between the company’s both direct, indirect and related parties’ share- Board members and senior executives. Nor holdings in accordance with the shareholder do any conflicts of interest exist, whereby the register maintained by Euroclear on August 31, private interests of Board members and senior 2017 and thereafter with any changes known executives could conflict with those of Eolus. by Eolus. Members of the Board were elected All Board members and senior executives can at the Annual General Meeting on January 28, be reached by contacting Eolus’s head office. 2017 for the period until the 2018 Annual Gen- eral Meeting.

ANNUAL REPORT EOLUS VIND AB 2016/2017 85 GLOSSARY

A wind turbine that produces 10 GWh (10,000,000 kWh) supplies 2,000 houses with electricity per year.

A normal Swedish house uses about 5,000 kWh of electricity per year. This means that:

1 MWh is sufficient for 0.2 houses 1 GWh is sufficient for 200 houses 1 TWh is sufficient for 200,000 houses

GLOSSARY

Electricity certificates A technology-neutral Nord Pool The Nordic Power Exchange. Volatility A measurement of the price variation system for promoting the expansion of of a product (for example, electricity) over Normal year The definition of an average year renewable electricity generation. Producers a period of time. of a generated amount of electricity. Deter- of renewable electricity receive a certificate mined based on long-term calculations from Transmission capacity The amount of for each MWh (megawatt hour) generated, the Swedish Meteorological and Hydrological electricity that can be transmitted between which is then sold to quota obligation Institute (SMHI). different areas via the electricity grid. electricity consumers. Offshore Wind power constructed in bodies Units Electricity Price Area Geographical divisions of water. The unit of measurement for energy is kilowatt to highlight areas that require transmission and hours. generation capacity to be expanded to better Swept area The area of the circle swept 1 MWh = 1,000 kWh meet consumption in the area in question. by the rotor blades. A turbine with a rotor 1 GWh = 1,000,000 kWh diameter of 126 meters will have a swept Renewable energy Renewable energy 1 TWh = 1,000,000,000 kWh area of more than 12,500 square meters, originates from sources that are continuously nearly the same area as two soccer The unit of measurement for capacity is watts. replenished at a rapid pace, such as wind, pitches. 1 MW = 1,000,000 W water, solar and biomass. Nuclear power is 1 GW = 1,000,000,000 W not considered a renewable energy form Availability A measurement for the amount since it is based on finite resources. of total time that a wind turbine has been available to generate electricity. Operational turbines Turbines that have undergone final commissioning and are Total height Height of a wind turbine when generating electricity. one of the blades is at its highest point. Installed capacity For wind power, capacity Constructed turbines Turbines that have is measured in MW and states the perfor- been constructed, undergone final commis- mance of the wind turbine according to design sioning and have been taken over from the data. turbine supplier. The turbine is either trans- ferred to the customer as a turnkey facility Hub height The height of the hub plus the or is transferred to Eolus’s inventories. drivetrain.

86 ANNUAL REPORT EOLUS VIND AB 2016/2017 ANNUAL GENERAL MEETING, FINANCIAL CALENDAR, DEFINITION OF ALTERNATIVE PERFORMANCE MEASURES

ANNUAL GENERAL MEETING

The Annual General Meeting will be held at Hässleholms Kulturhus on Saturday, January 27, 2018 at 3:00 p.m. In conjunction with the Annual General Meeting, Eolus will hold its traditional wind power seminar.

Anyone wishing to participate in the • To be eligible to participate in the Annual General Annual General Meeting must: Meeting, shareholders whose shares are registered • be registered as a shareholder in the shareholder in the name of a trustee must also request that register maintained by Euroclear Sweden AB on their shares be temporarily re-registered in their January 22, 2018. own names in the shareholder register maintained • have notified the company of their attendance by Euroclear Sweden AB. Shareholders must in- by not later than January 22, 2018 at 4:00 p.m. form the trustee thereof well in advance of January When notifying the company, name, personal 22, 2018, which is the date on which such regis- identity number or corporate registration number, tration must be completed to ensure their inclusion telephone number, address, shareholding and, in the shareholder register printed by Euroclear where applicable, any details concerning proxies Sweden AB on the date specified. and advisors must be included.

FINANCIAL CALENDAR

Interim report Q1, January 25, 2018 Annual General Meeting January 27, 2018 Interim report Q2, April 19, 2018 Interim report Q3, July 5, 2018 Year-end report 2016/2017 October 26, 2018

DEFINITION OF ALTERNATIVE PERFORMANCE MEASURES

This section contains definitions of certain with IFRS. Financial non-IFRS measures are operating activities compared with earlier re- financial non-IFRS measures compared with reported to enhance investors’ assessment of sults, for internal planning and for forecasts. the closest comparable financial IFRS mea- the company’s operational result, to provide The financial non-IFRS measures presented in sure. Financial non-IFRS measures have limita- assistance when forecasting future periods this report may differ from similar measures tions as analytical tools and should not be and to simplify comparisons of earnings be- used by other companies. considered in isolation or as a replacement for tween periods. The management uses these financial measures produced in conformity non-IFRS measures to, for example, evaluate

Return on equity after tax Net profit for the Earnings per share before/after dilution Change in fair value of financial year expressed as a percentage of average Net profit for the period divided by the weight- derivatives Relates to the change in fair value equity. ed average number of shares during the year of financial instruments, which is calculated Return on capital employed Profit before before/after dilution. using methods and based on observable input tax items plus interest expense expressed Operating margin Operating profit expressed data for the asset or liability, either directly as a percentage of average capital employed. as a percentage of net sales. (prices) or indirectly (derived from prices). Equity per share before/after dilution Equity/assets ratio Equity relative to total Profit margin Profit/loss after financial Equity divided by the number of shares at the assets at the end of the period. items expressed as a percentage of net sales. end of the period before/after dilution. Capital employed Total assets minus non- Net liability/cash Interest-bearing liabilities interest-bearing liabilities. minus cash and cash equivalents.

Eolus Vind AB (“Eolus”) is a public company with Corporate Registration Number 556389-3956. The company is based in Hässleholm, Sweden. This Annual Report has been published in Swedish and English. The Swedish Annual Report is the official version. The Annual Report consists of the Directors’ Report (pages 32-36), the Corporate Governance Report (pages 37-39) and the financial statements (pages 40-83). All monetary values are expressed in Swedish kronor (SEK), unless otherwise stated. The value in Swedish kronor is abbreviated SEK, thousand kronor (KSEK) and million kronor (SEK M). Figures in brackets refer to the preceding fiscal year, 2015/2016. Cover photo: Iglasjön wind farm. Photos: Daniel Larsson, Johan Funke, Bildbyrån, MTUH and Eolus. Layout: Mustasch Reklambyrå AB. Printed by: Norra Skåne Offset.

ANNUAL REPORT EOLUS VIND AB 2016/2017 87 Eolus Vind is a leading Nordic wind pow- er developer. Eolus creates value at every level of project development, establish- ment and operation of renewable energy facilities. We offer attractive and competi- tive investment opportunities in the Nordic region, Baltic countries and the US to both local and international investors.

Founded in 1990, Eolus has been in- volved in the construction of more than 500 of the approximately 3,400 wind ­turbines now operating in Sweden. The Eolus Group currently has customer contracts for asset management services comprising some 350 MW. Eolus Vind AB has about 6,400 shareholders. Eolus’s Class B share is traded on Nasdaq Stockholm, Small Cap.

Eolus Vind AB Box 95, SE-281 21 Hässleholm, Sweden Street address: Tredje Avenyen 3 Tel: +46 (0)10-199 88 00 E-mail: [email protected] www.eolusvind.com

ANNUAL REPORT 2016/2017