ANNUAL REPORT ANNUAL 2017/2018

EOLUS VIND AB ANNUAL REPORT 2017/2018 -

E-mail: [email protected] www.eolusvind.com Box 95, Box 95, SE-281 21 Hässleholm, address: Street 3 Avenyen Tredje +46 (0)10-199 88 00 Tel: Eolus Vind AB for services with an installed for asset management services with an installed Eolus Vind AB has than 400 MW. capacity of more Class B Eolus’s 8,200 shareholders. approximately is traded on Nasdaq Stockholm, Small Cap. share 540 wind turbines with a capacity of nearly 930 MW. MW. 540 wind turbines with a capacity of nearly 930 has customer contracts currently The Eolus Group Since the company’s inception in 1990, Eolus has inception in 1990, Eolus has Since the company’s than been involved in the construction of more ment, establishment and operation of renewable ment, establishment and operation of renewable attractive and competitive offer energy facilities. We Baltic region, investment opportunities in the Nordic countries and the US to both local and international investors. Eolus Vind is a leading Nordic developer. wind power developer. Eolus Vind Nordic is a leading develop value at every level of project Eolus creates THE PAST YEAR

SIGNIFICANT EVENTS DURING THE FISCAL YEAR

232 MW OF WIND POWER TO AQUILA CAPITAL In December 2017, Eolus signed an agreement with Aquila Capital regarding the divestment of Kråktorpet and Nylandsbergen wind farms, comprising 61 wind turbines and a total installed capacity of 232 MW. Kråktorpet will comprise 43 V136-3.8 MW wind turbines, and Nylandsbergen will comprise 18 Vestas V136-3.8 MW wind turbines. Both wind farms are scheduled KGAL RE-SELECTED EOLUS for handover to Aquila Capital in the second half of 2019. Eolus In December 2017, Eolus signed an agreement with the German will provide asset management services for both of the farms. fund manager KGAL regarding divestment of the Sötterfällan and Anneberg wind farms. The total transaction comprised 47 MW, divided between 13 Vestas V136-3.6 MW wind turbines, of which POWER PURCHASE AGREEMENT ten will be constructed in Sötterfällan and three in Anneberg. This FOR ØYFJELLET is KGAL’s second transaction with Eolus in a short time, and the wind farms are scheduled for handover in December 2018 and In March 2018, Eolus signed a 15-year Power Purchase Agree- the summer of 2019, respectively. Eolus will provide asset manage- ment with Alcoa for the Norwegian Øyfjellet project. This is Eolus’ ment services for both of the farms. largest permitted project to date, with capacity of up to 330 MW and estimated generation of about 1.2 TWh per year. Alcoa will purchase all electricity generated by the new with deployment planned for 2021, with the JENÅSEN HANDED OVER TO CUSTOMER aim of supplying its production facility In August 2018, Eolus handed over the Jenåsen wind farm to in Mosjøen with local electricity. Munich Re. This wind farm is Eolus’s largest establishment to date, Deployment in 2021 will qualify with a total capacity of 79 MW divided between 23 Vestas wind the wind farm for certifi- turbines of model V126-3.45 MW. All electricity generated by the cates under the joint Jenåsen wind farm is covered by a ten-year Power Purchase Swedish-Norwegian Agreement (PPA) with Google, and the farm was completed in Electricity Certificate System. summer 2018. Eolus provides asset management services for As part of the arrangement, the wind farm, which is located in the Municipality of Sundsvall. Eolus has signed a power guarantee with the Norwegian Export Credit Guarantee Agency (GIEK). The guaranteed amount is EUR 256 M.

STIGAFJELLET TO BE THE FIRST PROJECT IN NORWAY In July 2018, Eolus signed an agreement with ewz regarding divestment of the Stigafjellet wind farm in Norway with an installed capacity of 30 MW. The wind farm is scheduled for deployment in the second half of 2020 and ewz will contribute financing during the construction phase. Eolus will provide asset management servic- es for the wind farm, which is located in Bjerkreim, south of Stavanger, and this will be the first wind farm completed by Eolus in Norway.

2 ANNUAL REPORT EOLUS VIND AB 2017/2018 THE PAST YEAR

CONTENTS

Significant events during 84 the fiscal year...... 2 During the fiscal year, Eolus Five-year summary...... 3 deployed 25 wind turbines Message from the CEO...... 4 93 with a total capacity During the fiscal year, the of 84 MW. Eolus in brief...... 6 equivalent of 31 wind turbines Market...... 8 were handed over to Customer groups...... 11 customers, with a total Project development...... 12 capacity of 93 MW. 330 Asset management...... 20

Eolus signed its largest-ever Electricity generation...... 21 Power Purchase Agreement during the year, regarding Customer case...... 22 330 MW from Øyfjellet Sustainability...... 24 with Alcoa. Financial summary...... 27 Key figures for the Group...... 27 Share and ownership structure...... 28 Management...... 30 EOLUS’S CUMULATIVE INSTALLED CAPACITY Directors’ Report...... 32 MW 1,000 Corporate Governance Report...... 37 Consolidated statement of income...... 40 800 Consolidated statement 600 of other comprehensive income...... 41

400 Consolidated statement of financial position...... 42 200 Consolidated statement 0 of changes in equity...... 44 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 Consolidated Installed capacity during the fiscal year + Total installed capacity cash flow statement...... 45 Parent Company income statement.....46 Parent Company statement FIVE-YEAR SUMMARY of other comprehensive income...... 47 SEK M 2017/2018 2016/2017 2015/2016 2014/2015 2013/2014 Parent Company balance sheet...... 48 Net sales 1,366.0 1,065.7 693.4 1,502.1 465.8 Parent Company Operating profit 202.4 40.2 -15.9 90.0 41.5 statement of changes in equity...... 50 Profit/loss before tax 198.9 34.2 -29.1 75.2 13.1 Parent Company cash flow statement...... 51 Net profit/loss for the year 194.3 24.5 -23.9 80.0 9.9 Notes...... 52 Earnings/loss per share, before and after dilution, SEK 7.81 1.02 -0.92 3.25 0.44 Signatures...... 80 No. of turbines constructed Auditor’s Report...... 81 and deployed 25 25 14 33 27 Board of Directors...... 84 Turbines constructed and Glossary...... 86 deployed, MW 83.8 72.2 37.7 68.6 53.0 Annual General Meeting, financial Managed turbines, MW 415 351 293 303 125 calendar, definitions of alternative Electricity generation, GWh 30.2 58.6 123.6 242.3 172.1 performance measures...... 87

ANNUAL REPORT EOLUS VIND AB 2017/2018 3 MESSAGE FROM THE CEO

COMPETENCE, FLEXIBILITY AND AN EAGERNESS TO IMPROVE HAVE LIFTED EOLUS TO RECORD-BREAKING HEIGHTS

I am delighted to confirm that Eolus’s earn- High awareness ings for the 2017/2018 fiscal year are the – now it’s time for action company’s highest-ever. The largest single In its latest report, the UN Intergovernmental reason for these excellent results is the Panel on Climate Change (IPCC) analyses handover of the Jenåsen wind farm to our the impact of limiting the temperature in- customer Munich Re. The farm was handed crease to 1.5°C above pre-industrial levels. over on schedule in August 2018 and the According to the report,the temperature has construction costs were lower than budget- already risen 1.0°C and to meet the target, ed. The establishment is Eolus’s largest to global greenhouse gas emissions must be date and we will obviously be using the les- halved by 2030. Moreover, the longer it sons learned from this project in both future takes to introduce effective initiatives, the and larger ongoing establishments. The greater the adverse effects on people and success is the result of genuine project the economy. Awareness among politicians, development skills, a proactive divestment investors and consumers is high. Now it’s process and a high-quality, cost-conscious time to move fast and take action! Eolus is establishment. I feel privileged to be leading ready to do its part, and more. The Nordic an organization that can deliver such pro- countries have ideal conditions to lead the jects at a time when the need for renewable transition to an economically, environmental- electricity generation is becoming increas- ly and socially sustainable energy supply. ingly obvious!

”With a high-quality project portfolio, a strong financial position and dedicated employees, Eolus has a fantastic opportunity to be a driving force in the ongoing energy revolution.”

4 ANNUAL REPORT EOLUS VIND AB 2017/2018 MESSAGE FROM THE CEO

Crucial to credibility The expansion of renewable electricity gener- ation in the Nordic region is now moving for- ward at a rapid rate. Sweden’s objective to extend the Electricity Certificate System until 2030 in combination with expansion in Nor- The Jenåsen wind farm way could actually be achieved with existing facilities by 2021. In times of rapid change, a total capacity of 30 MW and will be the first of Eolus’s business model. The project is in it is vital that politicians and authorities moni- wind farm completed by Eolus in Norway. the early stages of development, but if permits tor developments closely. The design of the After these divestments, there are only two are granted, it will combine up to 500 MW stop mechanism in the Electricity Certificate more projects to divest from the original of solar PV capacity with 250 MW of battery System that the Swedish Energy Agency is portfolio of high-priority projects – Øyfjellet storage. Our analyses shows that such a facil- expected to announce in December 2018 is in Norway and Wind Wall in the US. Final- ity could generate electricity at a lower cost crucial to Sweden’s credibility among inves- stage project development is now underway per megawatt-hour than an equivalent wind tors in renewable electricity generation. The for both projects and divestment processes power facility in the same area. Solar PV and discontinuation of the system must be bal- have commenced. A Power Purchase Agree- wind power are complementary technologies anced in order to create confidence among ment has been signed with Alcoa for Øyfjellet. that, to various degrees in various markets, investors, consumers and other market More projects will be added to the list of will play a key role in the transition to a players. The is ready high-priority projects as ongoing projects sustainable energy supply. to deliver and expansion will continue even are realized. when the Electricity Certificate System’s EOLUS IS EXPANDING targets have been achieved. Example of a tailored solution As indicated by the high rate of development As part of the Jenåsen transaction, Eolus in all of our markets and the advancement of High-priority projects soon realized acquired the rights to 96% of all future elec- our own project portfolio, Eolus has entered With the handover of the Jenåsen wind farm, tricity certificates for electricity generated by a period of expansion. At the time of writing, we have now delivered the first of our eight the farm. The purchase consideration was the order backlog of projects to be estab- most prioritized projects, comprising a joint SEK 96 M and paid as a lump sum. Over the lished by 2020 is SEK 4.2 billion. To secure transaction volume of some SEK 9 billion. next 15 years, the farm is expected to receive financing for our future expansion, we signed Five farms have been divested and are sched- almost four million electricity certificates. To a 4-year credit agreement with Swedbank in uled for construction in 2019 and 2020. These date, we have hedged sales of approximately September. The agreement comprises credit include Kråktorpet and Nylandsbergen with 391,000 certificates totaling SEK 64.7 M for facilities of just over SEK 1 billion. With a a total capacity of 232 MW, which were di- delivery and payment in 2019 and 2020. The high-quality project portfolio, a strong financial vested to Aquila Capital. The transaction was arrangement whereby Eolus acquire the rights position and dedicated employees, Eolus completed in December 2017 and is Eolus’s to the electricity certificate is one example has a fantastic opportunity to be a driving largest single transaction to date. In two sepa- of Eolus’s ability to tailor solutions to suit the force in the ongoing energy revolution. rate transactions, KGAL acquired Sötterfällan needs of our customers. with 36 MW and after the end of the fiscal year, Bäckhammar with 130 MW. In July, we Stored changes the game concluded an agreement with ewz (energy In September 2018, we announced the supplier for the City of Zurich in Switzerland) acquisition of a solar PV and battery storage for the establishment and delivery of Stigafjel- project in southwestern US – our first project PER WITALISSON let. The project includes seven turbines with in these technologies following the broadening Chief Executive Officer

ANNUAL REPORT EOLUS VIND AB 2017/2018 5 EOLUS IN BRIEF

COMPETITIVE INVESTMENTS IN

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 , 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 541 wind turbines across Sweden and Estonia. 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 offers a full range of asset management ser- under the Environmental Code. Although Eolus aims to create value at all levels of vices to investors, enabling carefree owner- the activities of Blekinge Offshore have project development, establishment and ship of wind power facilities constructed by been reduced, the company will continue operation of facilities for renewable energy either Eolus or other operators. Eolus still to monitor future business opportunities for and energy storage, and to offer attractive generates electricity from its own wind power the project. and competitive investment objects to facilities but the holdings have been reduced At August 31, 2018, Eolus’s Swedish both local and international investors. and the remaining facilities are also for sale. project portfolio contained sites for 735 on- The company has three operating seg- shore wind turbines with a potential capacity EXTENSIVE EXPERIENCE ments: project development, asset manage- of approximately 2,950 MW in the pre-study, Since the company’s inception in 1990, Eolus ment and electricity generation. Project devel- project development, granted permits and has developed, constructed and divested opment is by far the dominating segment. establishment phases. Most projects in the turnkey wind power facilities to investors. The asset management segment is steadily foreign portfolio are in the pre-study or project Eolus therefore has extensive experience and growing, while the electricity generation seg- development phase, except for Eolus’s largest expertise in the construction of wind power ment has declined in line with the strategy permitted project to date, Øyfjellet, in Norway, facilities and a broad network of landowners, to reduce Eolus’s own wind power holding. and Stigafjellet which is currently in the estab- authorities, investors, sub-contractors and Eolus’s strengths are the localization, lishment phase. In terms of volume, the larg- manufacturers. A diverse and planning, construction and divestment of est foreign portfolio is in the US and Eolus’s strong customer base is one of the main rea- turnkey wind power facilities in a range first solar and battery storage project was sons for the company’s success and strong of sizes, as well as asset management. added to this portfolio after the balance- market position. Eolus has established a total sheet date. For more information about the capacity of 929 MW, which is about 13% of THE EOLUS GROUP foreign business operations, refer to page 18. the wind power constructed in Sweden. The Group comprises the Parent Company, Eolus Vind AB (publ) and such wholly owned OBJECTIVES BUSINESS MODEL subsidiaries as Ekovind AB, Svenska Vind- Vision Eolus’s mission is to develop and construct bolaget AB, Eolus Elnät AB, Eolus Wind Eolus’s vision is to be the most profitable wind power facilities in favorable wind loca- Power Management AB, SIA Eolus, Eolus renewable energy developer and an attractive tions. Projects are mainly realized through the Vind Norge Holding A/S, Eolus North America business partner in the transition to a sustain- divestment of turnkey facilities. The business Inc, Eolus Oy and the sub-subsidiary OÜ able society. model also allows parts of the project portfolio Baltic Wind Energy. to be realized through sales of project rights In addition to the above companies, the Eolus’s overall objectives for the next three for permitted projects and projects under Group also includes partly owned Blekinge years are: development. In connection with the 2017 Offshore AB and several other companies • that our stakeholders (customers, employ- Annual General Meeting, the Articles of Asso- that have been formed to manage the devel- ees, suppliers and shareholders) perceive ciation were amended to also include activi- opment of specific wind power projects. Eolus us as an attractive and leading renewable ties related to other forms of renewable ener- owns 56% of Blekinge Offshore. The remain- energy player in all of the markets in which gy, and to energy storage. The company ing shares are owned by Vingkraft and Vindin. we operate. currently conducts operations in the Nordic In December 2016, the Swedish Government • average return of at least 10% on equity region, Baltic countries and the US. Eolus decided not to grant a permit for the project after tax.

6 ANNUAL REPORT EOLUS VIND AB 2017/2018 EOLUS IN BRIEF

The Iglasjön wind farm

• to broaden the technological platform This ensures that projects with the greatest Eolus’s strategy is to offer landowners of our operations by participating in the potential receive sufficient priority. To assess a commercial lease that is normally paid establishment of at least one solar farm wind resources, Eolus conducts wind meas- as an annual lease equivalent to a certain or energy storage facility. urements for all large projects. percentage of the value of the electricity • to initiate the development of new wind Eolus normally secures user rights generated by the facility. In some projects, power projects in Nordic and Baltic coun- through leasehold agreements, rather than neighboring landowners are also offered tries to secure a long-term and commercial- owning the land on which turbines are lease revenue. ly viable portfolio for establishment from installed. 2022 and onwards.

STRATEGY Eolus’s core business is to construct turnkey We take responsibility for the transition We strive for dialog and engagement wind power facilities in favorable wind loca- to a sustainable society. We act with stakeholders affected by

tions and transfer them to customers. The responsibly in our contact with our wind power projects

authorities, local residents,

and offer opportunities company is also active in solar power and Y

T

I C

L O I

B M

customers and share- I for investment in re-

energy storage. M S

N I

holders. T newable energy.

The strategy for the company’s project O

M

P

E

S

development is to focus on projects that are N E

T

R

most likely to be realized, regardless of mar-

ket, and to develop them with the highest

EOLUS’S

possible quality at the lowest possible cost. Our income statement By acting in a

CORE VALUES

is positive and our consistent manner

This increases opportunities for offering

R

balance sheet shows in regard to respon-

end-investors facilities that provide the E E

S C

financial strength. With U sibility, participation

lowest-possible cost per megawatt-hour N

L E

T

our wind power facilities, D and results, we will

S I

over the useful life of the facility. A careful

F

N selection process based on access to wind we also aim to offer our CO inspire the trust of or solar, opportunities for grid connection, customers a profitable shareholders, customers, and constructability in terms of roads and investment and favorable banks, authorities, land foundations is paramount, combined with terms for the landowners affected. owners and the public. a commercial focus in the early stages.

ANNUAL REPORT EOLUS VIND AB 2017/2018 7 MARKET

RAPID GROWTH FOR WIND AND SOLAR

The future looks to belong to renewable ener- Modern wind power technology is relatively cheaper now than the cost of establishing gy sources. The global energy market is un- new compared with hydro or . new nuclear power. dergoing nothing short of a revolution, driven The technological advancements of recent holds major potential in both the Nordic by wind and solar energy combined with a years include longer rotor blades, higher tow- region and globally, and plays a key role in better economy for energy storage technolo- ers and higher generating capacity, resulting the shift toward more renewable electricity gies. While the power generation mix can in more efficient turbines that can generate generation. Once high, the cost of establish- vary from market to market, the trend is clear more energy from the wind. Rapid technologi- ing offshore wind power is now falling rapidly – the share of renewable electricity generation cal advancements combined with more and some of the winning bids in auctions is growing steadily. According to Bloomberg efficient construction methods, for example, conducted recently in Europe have not NEF’s New Energy Outlook 2018, the world have reduced the investment cost per mega- required subsidies. Eolus will continue to is poised to see a transition from fossil fuels watt-hour by approximately 75% since the follow these developments closely and accounting for 2/3 of the global electricity gen- advent of wind power in the 1980s. monitor future opportunities for the Blekinge eration mix in 2017, to renewables accounting Offshore project with up to 2,500 MW in for 2/3 by 2050. The pathway to achieve this, THREE COUNTRIES DOMINATE capacity, for which the Swedish Government according to the same report, is via wind According to statistics from the Global Wind prioritized the Swedish Armed Forces’ and solar technologies jointly accounting for Energy Council (GWEC), global installed wind interests and denied a permit in 2016. more than 70% of investments in new power power capacity in 2017 totaled 54,642 MW. generation. Wind and solar technologies are Cumulative installed capacity reached WIND POWER IN THE NORDIC REGION predicted to account for 50% of the world’s 539,581 MW. In 2017, China, the US and The development of wind power in Sweden electricity generation by 2050. In this transi- Germany remained the countries with the has been fantastic. In 2006, wind power tion, will shrink and be the biggest loser. highest share of cumulative installed capacity. accounted for approximately 1 TWh, or less China accounted for 37% of the installed than 0.5%, of the country’s electricity genera- OPPORTUNITIES FOR INNOVATORS capacity, while the US and Germany account- tion. In 2017, Swedish wind power account- The establishment costs for both wind and ed for approximately 13%, respectively. These ed for 17.3 TWh, or 11%. Wind power is solar will continue to fall sharply, according three countries jointly account for most of the now well-established as the country’s to Bloomberg. The cost of establishing solar wind power installed globally – about 62% third-highest source of electricity after power is expected to drop by 71% by 2050, of all wind energy has been established in hydropower and nuclear power. According and the cost of onshore wind power by 58% one of them. to Swedish Wind Energy’s forecast from during the same period. The falling costs will the third quarter of 2018, the estimated reduce the need for subsidies in the market LOW GENERATION COSTS generation capacity of facilities in operation and technologies will be able to stand on their Onshore wind power is one of the cheapest at the end of 2018 is 19.8 TWh annually. own feet moving forward. This trend is chal- methods for adding new generation capacity, The same forecast shows that wind-power lenging existing business models and present- according to the Swedish Energy Agency’s generation could amount to 30 TWh annually ing new business opportunities for anyone who report, Generation costs for wind power, by 2021, given the current rate of expansion. wishes to embrace change, rather than stick- published in September 2016. The cost Swedish Wind Energy’s assessment shows ing to past truths and old business models. of establishing new wind power is already that Swedish wind power could generate

PROPORTION OF INSTALLED CAPACITY PROPORTION OF INSTALLED CAPACITY TOTAL GLOBAL CUMULATIVE INSTALLED IN 2017, GLOBALLY IN 2017, PER EU COUNTRY WIND POWER CAPACITY, 2013-2017 Total 54,642 MW Total 54,642 MW MW Others 11% Italy 1.6% Others 5.1% 600,000 Greece 1.8% 539,581 Belgium 1% China 37% Denmark 2.2% Mexico 1% Ireland 2.7% 500,000 486,790 Turkey 1% Belgium 3,0% 432,680 France 3% Finland 3.4% 400,000 369,862 Brazil 4% 318,697 India 8% 300,000 France 10.8% UK 8% 200,000

Germany 13% 100,000 Germany 42.0% 0 US 13% UK 27.2% 2013 2014 2015 2016 2017

Source: GWEC Source: Wind Europe, Wind in power 2017 Source: GWEC European statistics MW 500 000 486 790 450 000 432 680

400 000 369 862 8 ANNUAL REPORT EOLUS VIND AB 2017/2018 350 000 318 697 300 000 282 850 250 000 200 000 150 000 100 000 50 000 0 2012 2013 2014 2015 2016 MARKET

ABOUT ELECTRICITY CERTIFICATES The Swedish-Norwegian support system for renewable electricity generation is the called the Electricity Certificate System. This is a technology-neutral support scheme for gener- ation from wind power, some hydropower, some , solar energy, geothermal ener- gy, tide and wave energy and peat in com- bined heat and power plants (CHPs). Electrici- ty generators in the Electricity Certificate System are awarded certificates in relation to their facility’s generation over 15 years, where one megawatt-hour of electricity generated carries the right to one certificate. The Electric- 70 ity Certificate System is not linked to the Wind and solar combined countries’ national budgets and is financed will account for more by a surcharge on electricity prices for private than 70% of investments consumers and for commercial and service companies. Other countries have opted for in new power 70 TWh by 2040 and, combined with a fixed price per megawatt-hour generated, generation. hydropower, become the leading source linked to the respective country’s national of power generation. budget. Demand for electricity certificates is regulated by a quota obligation, which deter- GREEN BATTERY POTENTIAL mines the number of electricity certificates that At the end of 2017, with an installed capaci- When planned or ongoing establishments an electricity consumer needs to purchase in ty of 6,691 MW, Sweden was ranked 12th are completed, generation is expected to relation to their annual electricity consumption. in the world in terms of wind power penetra- reach 12 TWh. By changing the quota obligation, the parlia- tion. In Europe, Sweden is ranked seventh In recent years, more electricity has ment of each country can control the price of after Germany, Spain, the UK, France, been generated than consumed in the electricity certificates. There is no quota obli- Italy and Turkey. According to the Swedish Swedish market, enabling Sweden to be- gation or electricity certificate cost for electrici- Energy Agency’s report Generation costs come a net exporter of electricity. Norway ty-intensive industry in Sweden. This enables for wind power in Sweden, Sweden has and Sweden combined have major potential industry to benefit from low electricity prices the lowest generation costs for wind power to become Europe’s green battery, with due to the expansion of renewable energy. of any country in Europe. large-scale carbon-free electricity generation In Norway, expansion began later but to replace the dirty fossil-fuel energy used Continued high expansion rate is now gathering momentum. In 2017, wind by other countries. Further opportunities Sweden introduced the Electricity Certificate power accounted for 2.85 TWh, or 1.9%, to export electricity are positive for Sweden System in 2003 and Norway became affiliated of Norway’s electricity generation according and Norway, making expansion of the trans- in 2012. Within the framework of the energy to statistics from the Norwegian Water mission capacity even more important, not agreement reached by five parliamentary par- Resources and Energy Directorate (NVE). only within these countries but also to other ties in 2016, Sweden decided to extend the Electricity Certificate System by adding 18 TWh of new electricity certificates until 2030. In Norway, facilities established after 2021 will NET GENERATION OF ELECTRICITY IN SWEDEN, 2013-2017 not be included in the System. Considering TWh 2013 2014 2015 2016 2017 that wind power is one of the cheapest meth- Hydropower 60.8 64.2 73.9 61.2 63.9 ods for adding new generation capacity, the vast majority of investing decisions have been Nuclear power 63.6 62.2 54.3 60.5 63.0 related to wind power. Wind power 9.9 11.5 16.6 15.4 17.3 In April 2017, the Swedish and Norwegian 8.6 6.9 7.1 7.8 7.9 governments reached an agreement on how the Swedish extension of the Electricity Certifi- Cogeneration in industry 6.0 5.9 5.9 5.9 6.1 cate System would be designed in relation Condensation power 0.6 0.5 0.4 0.6 1.0 to the existing joint Swedish-Norwegian certifi- Total net generation 149.5 151.2 158.3 151.5 159.1 cate system. The agreement created clear incentives for further expansion and the pace Source: Swedish Energy Agency of development under the System has ex- ceeded all expectations. The investments that are needed to meet the objectives of TRENDS IN THE SWEDISH WIND POWER MARKET: the Electricity Certificate System will probably • Fewer but larger establishments have been implemented by 2020. The market • Foreign investors account for a major share of the expansion will therefore meet the objective long before • Power Purchase Agreements (PPA) are becoming more common 2030 which, in turn, will create a need for policy decisions and mechanisms to maintain • Sharp decline in establishment costs the legitimacy of the System. For more infor- • Major need for professional asset management for facilities, including mation about electricity certificates, visit: long-term service agreements www.energimyndigheten.seor www.nve.no.

ANNUAL REPORT EOLUS VIND AB 2017/2018 9 MARKET

countries, in addition to the transmission opportunities that already exist or are under POWER PURCHASE AGREEMENTS – GROWING TREND IN THE NORDIC REGION construction to Germany and the UK, for A growing trend in the Swedish and European electricity markets is Power Purchase example. The future potential to store electrici- Agreements (PPA). So called Corporate PPAs are contracts between an electricity genera- ty will present major opportunities for Sweden tor and an electricity purchaser to buy electricity directly from specific facilities, usually and Norway to increase their share of intermit- from wind power or photovoltaic (PV) facilities. The contractual terms can vary from five tent energy sources, such as wind and solar. years and upwards, with fixed predetermined prices for all electricity generated by the In 2018, the price of electricity and elec- facility. Long-term contracts with predetermined prices provide security for electricity tricity certificates rose considerably compared purchasers and clarity in relation to costs during the contractual term. The also provide with recent years, making the market even security for both the owner of the facility and the builder by defining the revenue terms. more attractive to investors. According to Bixia’s long-term forecast (published in No- Highly significant agreement vember 2018), electricity consumption in the This type of contract is common in the US, and becoming increasingly common in Nordic region is expected to increase by Europe, particularly for facilities owned by institutional investors who do not have 25 TWh by 2030, despite energy efficiencies electricity generation as their core business. Power Purchase Agreements (PPA) have and increased solar PV , in played a pivotal role in the rapid expansion of wind power in the Nordic market and will particular. The increase is due a growing popu- continue to do so in the future financing of facilities for renewable electricity generation. lation, more electric vehicles and the establish- In the Nordic market, such companies as Google, Norsk Hydro, Vattenfall and Alcoa ment of more data centers. Compared with its have actively sought PPAs with wind power facilities. In March 2018, Eolus signed a long-term forecast from November 2017, Bixia 330 MW-PPA with Alcoa for Øyfjellet. Eolus has signed two PPAs with Google for 59 has revised upward its growth forecast for and 79 MW, respectively, the latter relating to Jenåsen which was completed in 2018. electricity consumption by 4 TWh. In its base- With PPAs signed all over the world, Google is now the world’s largest corporate buyer line scenario, Bixia predicts a price of SEK 440 of renewable electricity. per MWh by 2025, and SEK 460 per MWh by 2030. The increase is linked to rising fuel pric- es, but simultaneously dampened by the ex- pansive development of renewable generation. BETTER BATTERIES BY ITS OWN POWER The rising share of intermittent energy sources Eolus’s objective is to continue pushing down NEW BUSINESS OPPORTUNITIES in the energy mix is also creating a growing costs per megawatt-hour. The aim is to reach Since 2017, Eolus’s Articles of Association need to identify smart solutions for storing a position where no extra support is needed have included other types of renewable energy. New market conditions are presenting to make the establishment of new facilities energy in addition to wind power, as opportunities for a range of storage solutions. profitable for investors in the markets where well as energy storage. This is a natural In general, both large-scale industrial batteries Eolus is currently active and may enter into change in order to be part of a trend in and small-scale flexible battery solutions are in the future. Value-chain efficiencies through- which solar power, for example, is be- expected to offer major opportunities for out the lifespan of a wind power project are coming an increasingly larger and more storage. Just like wind and solar, battery essential for meeting return on investment important share of the global energy mix. costs are falling fast and helping to change requirements. By significantly reducing the By 2050, wind and solar will account for market conditions. In September 2018, Eolus costs of wind power establishment, projects most of the world’s new power generation acquired an early-stage solar and battery can be profitable for end-investors in a range capacity, according to Bloomberg NEF’s storage project in southwestern US. The of markets. New Energy Outlook 2018. The rapidly project comprises up to 500 MW of solar falling costs of renewable generation from capacity and 250 MW of battery storage. wind and solar present exciting combi- nation solutions, as well as market offers with independent sources of energy.

HIGH TIME FOR A COLLABORATIVE EFFORT

A social shift, with lower greenhouse gas emis- to keep the average global temperature well sions, such as CO2, is vital. The latest report below 2°C, a strong global willingness to transi- from the UN Intergovernmental Panel on Climate tion not only the energy sector but also other Change (IPCC) warns that we have 12 years to sectors of society became apparent. This force significantly reduce carbon emissions to keep is far stronger than the objectives and actions global warning to a maximum of 1.5°C. Beyond of national governments. Federal states, regions that, even half a degree could significantly worsen and cities from all over the world must unite the of drought, floods, extreme heat and with companies and organizations that want poverty. A transitioning energy market is playing to contribute to these efforts. In a cross-party a key role in meeting this challenge, which the energy agreement in 2016, Sweden adopted a IPCC claims is possible to achieve both economi- target of 100% renewable electricity generation cally and time-wise. After the Paris Agreement by 2040. and subsequent ratification of the long-term goal

10 ANNUAL REPORT EOLUS VIND AB 2017/2018 CUSTOMER GROUPS

BENEFITS FOR EVERYONE. WIND POWER AS AN INVESTMENT

Since its inception in 1990, Eolus has built Investments can take the form of direct in- trust and credibility with customers, landown- vestments, or long-term PPAs, which are ers, shareholders, creditors and employees. common in the US. A PPA is a contract Creating and maintaining a high level of trust whereby a party agrees to purchase the is a prerequisite for attracting both capital and power generated by a specific facility for the expertise required for continued growth a certain period of time and can thereby and new business. With a flexible business contribute to expanded capacity without model and strong balance sheet, Eolus has owning any facilities. This type of agreement adapted to market fluctuations and the pre- has become increasingly common in the vailing market conditions to effectively meet Nordic region in recent years and Eolus, investor demands. The customer base is for example, has entered into two PPAs broad and diverse, ranging from global inves- with Google and one with Alcoa. tors in the form of insurance companies, pension funds, infrastructure funds and ENERGY COMPANIES energy companies, to small businesses and Onshore wind power is one of the most cost- private individuals. Due to the trend toward efficient methods for adding new generation fewer but larger wind farms, it is only natural capacity and is therefore attractive to compa- that the vast majority of sales are generated nies with energy generation as their business by major investors. mission. In addition to adding cost-efficient generation capacity, by investing in wind INSTITUTIONAL INVESTORS power, energy companies are able to offer Institutional investors, including various types customers green electricity from their own of funds, insurance companies and reinsur- facilities. Over the years, Eolus has divested ance companies, now account for most in- both turnkey facilities and operational turbines vestments in the Nordic wind power market. to both Swedish and international energy Ownership of public infrastructure, such as companies. wind power, is driven by long-term invest- ments with relatively stable returns and cash PUBLIC-SECTOR INVESTORS flows. This, in turn, generates security in Public-sector investors are mainly municipali- companies’ commitments to their customers ties, county councils/regions and municipal in reinsurance and pension investment seg- companies. Ownership of electricity genera- ments. Anyone who invests in renewable tion facilities creates predictability and control The Fröreda wind farm electricity generation is also supporting the over costs for electricity consumption in their transition to fossil-free electricity generation, own operations. Investments in wind power which reduces CO2 emissions and, in the long contribute to sustainable development and CLEAR CUSTOMER BENEFITS term, reduces in other climate-related thus meet the environmental and energy With more than 25 years of experience and investments and insurance commitments. objectives that many public-sector players involvement in the construction of 541 wind In recent years, major global players such have set for their operations. turbines as of August 31, 2018, Eolus has as Aquila Capital, Munich Re, Allianz, Black built up expertise across the entire value chain Rock, Mirova, KGAL and HG Capital have WIND TURBINE COOPERATIVES and a financial position that makes the com- invested heavily in Swedish wind power. Eolus has been selling shares in wind turbines pany a strong and stable partner. Eolus’s pro- to customers for more than 25 years, thus ject portfolio in Sweden, and in other markets MAJOR CONSUMERS enabling thousands of private individuals in which the company operates, presents Major consumers are companies and organi- and companies to become wind power major opportunities to offer facilities tailored zations that consume large amounts of elec- shareholders. This cooperative model has to the specific needs of individual investors at tricity but do not have energy generation also been a success factor for Eolus over the lowest possible cost per megawatt-hour. as their core business. This customer group the years. Due to new market conditions Eolus’s complete asset management concept is growing – partly because electricity from and a greater focus on large establishments, offers professional management that maximiz- wind power provides secure, low and stable fewer shared-ownership projects will be es- es revenue for both large and small investors. electricity costs over time, but also because tablished. During the fiscal year, the Vilseber- As one of the largest players in the industry, of a sustainability perspective. More and more ga wind farm, comprising two Vestas V100- Eolus can push investment and operating companies want to be recognized for their 2.2 MW wind turbines, was divested by expenses down, which benefits investors in role in the transition to a fossil-free future. selling shares to investors. all customer groups.

ANNUAL REPORT EOLUS VIND AB 2017/2018 11 PROJECT DEVELOPMENT

LARGER, BUT FEWER: NEW FOCUS

The company’s project development rests on years. Over the past four fiscal years, project THE IMPACT OF LARGER FARMS several pillars. The aim is to advance projects development operations have accounted As market conditions change due to techno- that meet investors’ needs for sustainable in- for 92-98% of Eolus’s overall revenue. Wind logical advancements, electricity prices and vestments in a simple and profitable manner. power facilities are divested by transferring investors, Eolus will establish fewer but larger The process must also be based on clear entire operational wind farms, individual wind facilities in the future, with larger wind tur- public benefit with the ability to create, in turbines or shares in wind turbines. Eolus bines. Despite signing agreements for the co-existence with other interests, the condi- also offers construction-ready project rights. largest wind turbines in the company’s history tions for generating green electricity with The most costly item when establishing a during the fiscal year, Eolus signed contracts the lowest carbon footprint as possible over wind power facility is the actual wind turbine. for even larger turbines after the end of the the entire life cycle. This should be carried Eolus mainly purchases turbines in EUR, fiscal year – nine Vestas V150-4.2 MW wind out as profitably as possible for the company, which entails an element of risk. This is turbines for the Bäckhammar wind farm. which requires a clear focus on the projects managed with currency futures to With fewer but larger established with the greatest chance of being realized. the cash flow in foreign currency, by raising wind farms, the fluctuations between individu- loans in EUR or by divestment to customers al quarters and fiscal years in relation to the PROJECT DEVELOPMENT PHASES in EUR. Overall, the actual wind turbine ac- number of constructed wind turbines, and The project phases are: pre-study, project counts for 65-75% of the costs for a turnkey sales and earnings, could be considerable. development, construction and divestment facility. Others costs include project develop- of the facilities. After final commissioning, ment, foundations, road construction and the construction phase is completed by grid connection. The project development From the company’s inception in 1990 either customer handover, or by transfer to operations are mainly financed with advance until the balance sheet date on August Eolus’s own electricity generation operations payments from customers, construction loans 31, 2018, Eolus has been involved in if a customer contract has not been signed. or equity. At present, Eolus conducts project the construction of 541 wind turbines The divestment phase is obviously varied, development operations in Sweden, Norway, with a total capacity of approximately depending on the size and frequency of Finland, the US and Baltic countries. 929 MW. During the 2017/2018 fiscal the transactions. If a contract has not been year, 25 wind turbines (25), with a total signed when all, or some, of a wind farm COMMUNICATION AND INTERACTION capacity of 83.8 (72.2) MW, were con- becomes operational, revenue and expenses Eolus’s work affects and impacts many structed and completed. At the end of from operations are recognized in the Electric- people. Those living close to a wind farm the fiscal year, 74 wind turbines were ity Generation operating segment until the en- are obviously affected, but also people in under construction, compared with tire facility has been divested. Eolus has general and other stakeholders such as 25 on the corresponding date of the an extensive project portfolio, with projects authorities and future green electricity cus- preceding year. in various phases. This provides good oppor- tomers. Open dialog about both positive and tunities for meeting a range of investor perceived negative effects is therefore impor- requirements and demands. tant, as well as providing continuous updates about the ongoing process, and answering REVENUE AND EXPENSES any questions that may arise in connection Revenue in this operating segment comprises with both the construction and the subse- proceeds from the divestment of facilities, quent operation. Interaction with the local shares in project companies or project rights. community is therefore a crucial part of a Due to the construction rate of the facilities, project. and the dates of their divestment, sales and earnings vary between quarters and fiscal

PROJECT DEVELOPMENT – KEY FIGURES CONSTRUCTED DURING THE 2017/2018 FISCAL YEAR

Full-year Full-year Name Municipality Capacity in MW Sep 1, 2017 Sep 1, 2016 SEK M -Aug 31, 2018 -Aug 31, 2017 Vilseberga Vadstena 4.4 Jenåsen Sundsvall 79.4 Net sales 1,336.5 1,027.4 Other operating income 14.5 2.9 Total 83.8 Operating profit 201.4 44.5

12 ANNUAL REPORT EOLUS VIND AB 2017/2018 PROJECT DEVELOPMENT

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

Group Group Group Group Aug 31, 2018 Aug 31, 2017 Aug 31, 2018 Aug 31, 2017 No. of Total No. of Total No. of Total No. of Total turbines capacity, turbines capacity, turbines capacity, turbines capacity, MW MW Country MW MW Pre-study 201 767 290 915 Norway 100 400 110 400 Project development 298 1,139 368 1,164 Latvia 117 468 115 420 Projects with relevant Estonia 42 168 42 150 permits 162 586 251 780 Finland 14 56 14 50 Under construction 74 279 25 84 US 99-292 258-740 99-292 258-740 Total 735 2,771 934 2,944 541 Eolus has been involved in the construction of 541 wind turbines since 1990.

The Fröreda wind farm

ANNUAL REPORT EOLUS VIND AB 2017/2018 13 PROJECT DEVELOPMENT

EOLUS’S HIGH-PRIORITY PROJECTS

As establishments have become fewer but website. The website is updated quarterly the 2017/2018 fiscal year. For the Øyfjellet larger, the need for a clear focus on the pro- following the publication of each quarterly wind farm, a Power Purchase Agreement jects that best meet market demands for report, or due to other significant project has been signed with Alcoa and a divestment new generation facilities has increased. events announced in a press release. process is ongoing. The rapid advancement Eolus’s strategic direction is focused on the The following projects currently have of Eolus’s projects is an indication of how development, establishment and divestment highest priority. The Jenåsen project was attractive these projects are for investors. of a number of high-priority projects that are completed and handed over during the As existing high-priority projects are com- considered to have the best chances of being 2017/2018 fiscal year and is no longer in­ pleted, new projects are added to the compi- realized at the lowest cost per megawatt-hour. cluded in the compilation of high-priority lation. However, the compilation does not rule The compilation of high-priority projects and projects. The remaining high-priority projects out the establishment of other projects from how they are being developed is addressed have an estimated transaction volume of Eolus’s high-quality project portfolio that meet under a separate heading in Eolus’s interim about SEK 8 billion and customer contracts investors’ demands and requirements. reports and presented on the company’s were signed for most of them during or after

HIGH-PRIORITY PROJECTS

Project Location No. of Capacity, Estimated Planned Comments turbines MW generation, deployment GWh Nylandsbergen Sundsvall, Sweden, SE2 18 68 230-250 2019 The farm was divested to Aquila Capital, which is expected to take possession of the facility in the second half of 2019. Turbine supply agreement signed with Vestas. Grid connec- tion agreement signed with E.ON. Under construction. Kråktorpet Sundsvall, Sweden, SE2 43 163 550-590 2019 The farm was divested to Aquila Capital, which is expected to take possession of the facility in the second half of 2019. Turbine supply agreement signed with Vestas. Grid connec- tion agreement signed with E.ON. Under construction. Wind Wall Tehachapi, California, US 11-12 38-40 135-145 2020 project. Full-value Production Tax Credit granted for the project. Stigafjellet Bjerkreim, Norway, NO2 7 30 110-130 2020 The farm was divested to ewz, which is expected to take possession of the facility in the second half of 2020. Grid capacity reserved. Turbine supply agreement signed with . Sötterfällan Jönköping, Sweden, SE3 10 36 125-135 2019 The farm was sold to KGAL, which is expect- ed to take possession of the facility in summer 2019. Turbine supply agreement signed with Vestas. Bäckhammar Kristinehamn/ 31 130 400 2020 The farm was sold to KGAL, which is expect- Degerfors, Sweden, SE3 ed to take possession of the facility in summer 2020. Turbine supply agreement signed with Vestas. Øyfjellet Vefsn, Norway, NO4 80-100 330-400 1,200-1,500 2021 Fully concessioned. Grid capacity reserved. 15-year Power Purchase Agreement with Alcoa. Divestment process initiated.

14 ANNUAL REPORT EOLUS VIND AB 2017/2018 PROJECT DEVELOPMENT

THE SUNDSVALL CLUSTER agreement signed with E.ON Elnät, a new on behalf of the customer. For Kråktorpet, All three wind farms in the “Sundsvall cluster” national grid substation was built in Nysäter Aquila Capital has signed a 15-year Power have been, or are, high-priority projects. which, in turn, led to higher transmission Purchase Agreement with Vattenfall. A high level of activity has characterized all capacity and new wind farms in the area. The projects are all located in forest areas projects. Jenåsen was first to be completed, Eolus is currently establishing the Kråktorpet with relatively few local residents, at a height and handed over in August 2018. The Jen- (163 MW) and Nylandsbergen (68 MW) wind of 300-450 meters above sea level with good åsen wind farm comprises 23 Vestas V126- farms, which are scheduled for completion in wind resources. 3.45 MW wind turbines with a total installed 2019 and then handed over to Aquila Capital capacity of 79 MW and is covered by a ten- under the agreement signed in December year Power Purchase Agreement with Google. 2017. Kråktorpet will comprise 43 Vestas Eolus manages the facility’s assets on behalf V136-3.8 MW wind turbines and Nylands­ of the owner, Munich Re. Due to the con- bergen will have 18 wind turbines of the same struction of Jenåsen and the grid connection model. Eolus will manage the farm’s assets

The Jenåsen wind farm Construction of Nylandsbergen

ANNUAL REPORT EOLUS VIND AB 2017/2018 15 PROJECT DEVELOPMENT

THE NORWEGIAN ØYFJELLET with Alcoa for the Norwegian Øyfjellet project. (GIEK). The guaranteed amount is EUR AND STIGAFJELLET PROJECTS The project is Eolus’s largest permitted 256 M. The divestment process and procure- Eolus has been active in Norway since 2012. project to date. The original concession was ment of turbines has commenced. In Norway, like Sweden, Eolus is able to de- for 330 MW but in October 2018, the Norwe- In July 2018, Eolus signed an agreement velop projects independently, acquire ongoing gian Water Resources and Energy Directorate with ewz regarding divestment of the Stiga­ projects, acquire permitted projects and (NVE) raised the concession to 400 MW. fjellet wind farm (30 MW). The wind farm divest project rights at any time throughout Alcoa will purchase all electricity generated is scheduled for deployment in the second the value chain. Projects in the Norwegian by the new wind farm with deployment half of 2020 and ewz will contribute financing market are often characterized by challenging planned for 2021, with the aim of supplying during the construction phase. The wind terrain and complex infrastructure, but also its production facility in Mosjøen with local farm will comprise seven Siemens SWT- high average wind speeds, which leads to electricity. Deployment in 2021 will qualify DD-130 4.3 MW wind turbines. Eolus will high productivity in established facilities. the wind farm for certificates under the joint provide asset management services for the During the fiscal year, the high-priority Swedish-Norwegian Electricity Certificate wind farm, which is located in Bjerkreim, Norwegian projects, Øyfjellet and Stigafjellet, System. As part of the arrangement, Eolus south of Stavanger, and this is the first developed favorably. In March 2018, Eolus has signed a power guarantee with the wind farm completed by Eolus in Norway. signed a 15-year Power Purchase Agreement Norwegian Export Credit Guarantee Agency

Öyfjellet

16 ANNUAL REPORT EOLUS VIND AB 2017/2018 PROJECT DEVELOPMENT

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 modern turbines. The farm comprises some 400 old wind turbines with an installed capaci- ty of approximately 36 MW. Together with its US partners, Eolus intends to realize a project of 38-40 MW by constructing new wind tur- bines. By replacing the old wind turbines on site, electricity generation will increase to about 135-145 GWh annually, or three times the existing volume. By ordering the required amount of wind power components, Eolus has received a full-value Production Tax Credit (PTC) for the project.

Wind Wall, California, US.

SÖTTERFÄLLAN In December 2017, Eolus signed an agree- ment with the German fund manager, KGAL, regarding divestment of the Sötterfällan wind farm (36 MW). Sötterfällan lies close to the Gunillaberg wind farm, which Eolus also constructed on behalf of KGAL. The wind farm will comprise 10 Vestas V136-3.6 MW wind turbines and is scheduled for customer handover in summer 2019. Eolus will provide asset management services to maximize the facility’s output.

Sötterfällan. The photo has been modified.

BÄCKHAMMAR In October 2018, Eolus signed a new agree- ment with the German fund manager KGAL. This time regarding divestment of the Bäck- hammar wind farm with a capacity of 130 MW. Bäckhammar will comprise 22 Vestas V136-4.2 MW and nine Vestas V150-4.2 MW wind turbines. The Vestas V150 wind turbines are the largest turbine contract ever signed by Eolus in relation to rotor diameter. Bäck- hammar is scheduled for customer handover in August 2020 and after deployment, Eolus will provide asset management services for the facility. KGAL’s co-investor is Kempen Private Markets Fund.

Bäckhammar. The photo has been modified.

ANNUAL REPORT EOLUS VIND AB 2017/2018 17 PROJECT DEVELOPMENT

EOLUS AROUND THE WORLD

In addition to Sweden, Eolus is also develop- At that same time, additional capacity of ap- for the development of renewable energy. ing projects in Norway, the US, Estonia, Latvia proximately 2,170 MW was under construc- This indicates the major potential of the US and Finland. These markets are diverse in tion. The rapid expansion in Norway is also market, which really should be seen as sever- terms of their current level of wind power de- characterized by the aspiration to be eligible al markets because of its geography, and velopment and facilities under establishement. for electricity certificates. Facilities in Norway the regulatory diversity in regard to permitting, The countries also have varying conditions in must be completed by 2021 to be included grid connection and electricity trading. The terms of their geography, infrastructure, grid in the Electricity Certificate System. Another five states with the most wind power installed capacity and support systems for renewable driving force is being able to export renewable to date are Texas, Oklahoma, Iowa, California electricity generation. In addition to Sweden, electricity to the UK, for example, where and Kansas. According to statistics from the most attractive markets for Eolus are cur- transmission capacity already exists and is the AWEA, Texas has the largest installed rently Norway and the US, where Eolus has also being planned. Projects in the Norwegian capacity by far, with 22,637 MW, which is projects that are included in the compilation market are often characterized by challenging 15,000 MW more than Oklahoma. of high-priority projects. For more information terrain and complex infrastructure, but also about high-priority projects, see page 14. high average wind speeds. FINLAND AND THE BALTIC COUNTRIES Of the other markets in which Eolus is active, NORWAY US the country with the most wind power in- Norway joined the Swedish-Norwegian Elec- Eolus established operations in the US during stalled is Finland. At the end of 2017, Fin- tricity Certificate System on January 1, 2012. the 2015/2016 fiscal year. The operations are land’s installed capacity was 2,071 MW, of Eolus has been active in Norway since 2012 run by the subsidiary Eolus North America Inc, which 535 MW was added in 2017, according and the first agreement to divest a wind farm with a geographic focus on Western US. to statistics from WindEurope. The relatively in this market was signed in the 2017/2018 Eolus’s portfolio comprises wind, solar high rate of expansion in recent years is due fiscal year. The Stigafjellet project, with an in- and battery storage projects. Along the to a generous support system in the form stalled capacity of 30 MW, was divested to Western Nevada-California border, Eolus has of feed-in tariffs, combined with technical ewz. This is the second wind farm completed two projects under development: Crescent advances enabling larger and more powerful by Eolus in a non-Swedish market. The wind Peak with a potential installed capacity of 200- turbines. Projects with new investment deci- farm is scheduled for customer handover in 600 MW, and Comstock with 20-100 MW. sions are not covered by the feed-in tariff the second half of 2020. The plan is to develop the projects and then system, which was capped at 2,000 MW. The During the year, Eolus’s largest-ever per- divest them construction-ready, with or with- feed-in tariff system has now been replaced mitted project (regardless of market), Øyfjellet out a PPA. In California, Eolus is a majority by an auction-based scheme. Eolus’s project outside Mosjøen in the Municipality of Vefsn shareholder in the Wind Wall repowering pro- portfolio in Finland comprises 56 MW. in Norway, moved closer to realization when ject in California, with up to 40 MW in installed In Estonia and Latvia, no new wind a 15-year Power Purchase Agreement was capacity. A full-value Production Tax Credit power was added in 2017. In Estonia, severe signed with Alcoa to supply their production (PTC) has been granted for the project. Eolus restrictions have been placed on the con- facility in Mosjøen with local renewable elec- has selected Wind Wall as a high-priority pro- struction of large wind turbines because the tricity. In autumn 2018, the Norwegian Water ject for for the coming years. In September Armed Forces claim that interference with Resources and Energy Directorate (NVE) an- 2018, Eolus acquired its first-ever PV and their radar activities is the reason for lack nounced that the wind farm’s concession of battery storage project. The project, located of investment. According to WindEurope’s 330 MW had been increased to a maximum in western US, is in an early stage of develop- statistics, Estonia’s total installed capacity is capacity of 400 MW. The divestment process ment and comprises 500 MW solar PV and 310 MW. 1.6 MW of this capacity is divided has commenced and is running parallel to the 250 MW battery storage. between two wind turbines constructed and procurement of turbines. The aim is that the There is a federal incentive scheme in owned by Eolus on the island of Saaremaa, project will be realized within the framework the US to promote the development of wind where Eolus also owns land. Eolus’s project of the Swedish-Norwegian Electricity Certifi- power. A PTC is granted for the first ten years, portfolio in Estonia amounts to 168 MW. cate System. with a gradual step down in the value of the Latvia has excellent wind conditions in In Norway, as in other markets, Eolus credit over the ten-year period depending both the western and central regions of the can acquire ongoing projects and develop on when construction commenced. The tax country, presenting major potential. At pres- new projects independently. The Norwegian credit applies for facilities whose construction ent, Eolus is one of the few active project project portfolio comprises a potential capaci- commences before the end of 2019. Facilities developers in Latvia and, at the end of the ty of 430 MW, of which the largest project is commenced in 2015 and 2016 qualify for the fiscal year, had an estimated capacity of Øyfjellet. full value of the credit. The value of the credit approximately 468 MW in its project port- According to statistics from NVE, Nor- steps down in 2017, 2018 and 2019. folio. At the end of 2017, the country’s total way’s installed wind power capacity was In addition to the federal PTC incentive, installed wind power capacity was 66 MW, approximately 1,425 MW in October 2018. a number of US states have offensive targets according to statistics from WindEurope.

18 ANNUAL REPORT EOLUS VIND AB 2017/2018 The Gunillaberg wind farm

ANNUAL REPORT EOLUS VIND AB 2017/2018 19 ASSET MANAGEMENT

RELIABLE PARTNER WITH OVERALL RESPONSIBILITY

During the fiscal year, Eolus increased the in- has refined, packaged and offers this 854 stalled capacity of its managed wind power experience and knowledge to customers. At November 11, 2018, Eolus assets from 351.0 MW to 415.4 MW, corre- This has also meant that Eolus’s asset had signed asset management sponding to approximately 18%. 408.1 MW management department has evolved into agreements for 854 MW. of these wind power assets is managed on be- a center for expertise, and can offer knowl- These have either been half of external customers. At the end of the edge on a consultative basis, both externally deployed, or are scheduled fiscal year, asset management agreements had to turbine customers and manufacturers, and for deployment in also been signed with external customers for internally within the organization during the 2019 and 2020. Kråktorpet (163 MW), Nylandsbergen (68 MW), project development and construction stages. ELECTRICITY Sötterfällan (36 MW), Anneberg (11 MW) and PRICE AREA 1 Luleå Stigafjellet (30 MW), which are scheduled for MAJOR FUTURE POTENTIAL ELECTRICITY deployment during 2019 and 2020. When Eolus sees growing market demand, from international PRICE AREA 2 Sundsvall these farms are deployed, the estimated annual investors as well as other players in this segment. generation of Eolus’s managed assets will be Investors whose core operations are neither wind more than 2.1 TWh, compared with just over power nor energy generation represent the strongest 1.2 TWh at the end of the fiscal year. and clearest growth potential. Parties without any Eolus offers wind power owners a complete business operations in the relevant geographic package of asset management services to maxi- market also hold potential. Not only does wind 231.8 mize the revenue generated by their facilities power hold a firm position in a total energy mix, over time. The goal of our technical and financial it is also one of the fastest-growing sources of services is to ensure that the owner receives energy. This has also led a more professional professional management of all aspects related approach to, and view of, asset management 90.4 to the operation of a facility, including surveil- for wind power facilities, regardless of their size. lance, control, monitoring, administration and contact with the owner’s contracted service TOTAL SOLUTION company/turbine manufacturer. As the responsi- Eolus’s Asset Management department can pro­- 3 ble operator, Eolus works closely with turbine vide technical operation and all administration Stockholm 13.8 manufacturers including Vestas, Siemens Game- of a facility, such as responsibility for electrical sa and . In partnership with them, Eolus operations, occupational health and safety, ensures that the facility’s availability is high and accounting and financial statements, and downtime is minimized. This operating segment insurance policies. The company also 26.4130.0 provides recurring, stable and long-term revenue serves as the point of contact for the 44.8 streams. facility’s own suppliers, regulators and 1.5 25.4 insurance companies. Eolus’s operating 15.2 20.0 4.2 EXPERTISE CENTER engineers check and monitor the facility 0.8 Eolus’s driving force is that we want our custom- via the company’s operations center, follow 26.0 46.8 ers to see the company as a partner that will do up planned and unplanned service, make 8.8 anything to maximize generation and minimize regular visits to the site, conduct annual in- 27.1 operating expenses over the life of their facility. spections of the facility and ensure compliance ELECTRICITY 44.9 PRICE Eolus also takes care of all other practical and with regulatory conditions and requirements. 13.2 1.5 AREA 4 1.2 Estonia administrative aspects. Customers can purchase either a total Malmö Over the years, Eolus has built up extensive solution or some of the services offered by 24.4 0.2 expertise in wind farm operation. The company Eolus and this offer is not limited to the 30.0 Norway 25.5 Swedish market. MW, managed capacity. ASSET MANAGEMENT – KEY FIGURES • MW managed capacity, signed • but not yet deployed. Full-year Full-year Sep 1, 2017 Sep 1, 2016 SEK M – Aug 31, 2018 – Aug 31, 2017 At the end of the fiscal year, Eolus had asset management assignments Net sales 16.3 14.3 on both its own behalf and that of customers of 415 MW, plus signed Other operating income 6.8 10.0 agreements for an additional 309 MW. After the end of the fiscal year, contracts for an additional 130 MW were signed. Investors that have Operating profit 2.5 1.5 chosen Eolus’s asset management concept include ewz, Munich Re, Managed turbines, MW 415 351 Aquila Capital, KGAL, Tolvmanstegen Drift AB, Mirova/European Signed agreement, not yet Investment Bank and a range of public-sector investors. deployed farms, MW 309 83

20 ANNUAL REPORT EOLUS VIND AB 2017/2018 ELECTRICITY GENERATION

CONTINUED REDUCTION OF OWN WIND POWER HOLDING

The Electricity Generation operating seg- halved during 2017/2018. The MW holding ment comprises generation and sales of has fallen by approximately 85% over the At the end of the fiscal year, Eolus owned opera- renewable electricity from facilities owned past three years. These divestment meant tional wind power facilities with a total installed by Eolus. Our holding of operational wind that the carrying amount of Eolus’s own capacity of 8.2 (17.8) MW, and estimated annual turbines is recognized as either wind tur- facilities was only about SEK 32 M at generation of 17.2 (40.2) GWh. All turbines bine inventories or non-current assets. the end of the fiscal year. Due to Eolus’s are recognized as non-current assets. Average Sales of electricity generation, with the strategy of being a player that develops, revenue for the electricity generated during associated electricity and guarantee of constructs and manages facilities rather the fiscal year was SEK 470 (423) per MWh. origin certificates, are conducted on either than owning them, the significance of this an ongoing basis at the prevailing spot operating segment will be marginal for ELECTRICITY GENERATION – KEY FIGURES price, or by hedging, which can vary in Eolus’s earnings. The remaining facilities terms of time. Guarantee of origin certifi- will be either divested or run until the end Full-year Full-year cates are assigned in relation to generation of their useful lives. Sep 1, 2017 Sep 1, 2016 and traded like electricity certificates. In the operational phase, a wind pow- SEK M – Aug 31, 2018 – Aug 31, 2017 Eolus’s objective has been to gradual- er owner’s costs usually comprise leasing Net sales 14.2 24.8 ly reduce its own wind turbine holding in fees to the landowner, service and mainte- Other operating income 1.2 4.5 order to free up capital for investments in nance, insurance, property tax and admin- Operating profit, before project development and the divestment istration costs. Operating expenses, impairment losses 0.8 2.7 of turnkey facilities to customers. This ob- excluding capital costs, are normally Operating loss, after jective has been achieved and during the within the range of SEK 90-120 per MWh. impairment losses -1.4 -5.8 fiscal year, Eolus divested 9.6 MW of wind Over the past four fiscal years, elec- Electricity generation, power from its own holding in addition to tricity generation’s share of the Group’s MWh 30,233 58,564 the newly established facilities divested to overall revenue has fallen and during customers. The holding was subsequently the fiscal year accounted for about 1%. 54 Eolus reduced its wind power holding by 54% during the fiscal year.

The Långmarken wind farm

ANNUAL REPORT EOLUS VIND AB 2017/2018 21 CUSTOMER CASE The Jenåsen wind farm Long-lasting partnerships and strong new relationships

A prerequisite for Eolus’s success is satisfied and recurring customers. Customer relationships do not end with divestment but continue in the form of asset management assignments during the operational phase of the facilities.

22 ANNUAL REPORT EOLUS VIND AB 2017/2018 CUSTOMER CASE

“Customers are choosing to come back to us and make new investments, while also entrusting us with management of the facilities we have divested.”

ver the past fiscal year, Eolus has Premiere in Norway signed large-scale wind farm divest- During the fiscal year, Eolus divested its first Oment contracts with Aquila Capital, wind farm in Norway. Swiss energy company ewz and KGAL. Both KGAL and ewz are ewz became the historic customer that invest- recurring customers, while Aquila Capital ed in the wind farm with an installed capacity was ewz’s co-investor when Eolus completed of 30 MW. the first Power Purchase Agreement for “After the success of our first investment 59 MW with Google in 2014. in Sweden we are now happy to again work with Eolus on their first project in Norway. Attractive market Building strong relations and repeated busi- The high level of investment in recent years ness are key to an ever consolidating market,” is proof that the Nordic market is attractive says Hans Gunnervall, Head of Transactions to investors. A clear trend in this market is at ewz. that large institutional investors account for Eolus secured its first business arrange- a very high share of total investments. And ment with a major foreign player in 2012 when the majority are foreign investors. This is also MEAG, on behalf of Munich Re, invested in true for Eolus. operational wind farms that Eolus had con- “The rapid development of wind power structed. MEAG’s most recent acquisition in the Nordic region would not have been is the Jenåsen wind farm, whose 79 MW possible without foreign capital, but I would of installed capacity is covered by a Power obviously have preferred that Swedish institu- in the Nordic power market. This market Purchase Agreement with Google. Holger tional investors were equally as offensive as shows a rather good dynamic driven by the Kerzel from MEAG commented on the their foreign counterparts,” says Eolus’s increasing investment activities of institutional transaction as follows: CEO Per Witalisson. investors,” says Aquila’s CEO and co-founder “We are pleased to announce a further Roman Rosslenbroich. He continues, project acquisition in Sweden. The investment Award-winning partners “Aquila Capital is well positioned to take makes an attractive and lasting contribution One currently offensive player in the Nordic advantage of this development – not at least to the risk diversification of our portfolio and market is Aquila Capital. In October 2018, thanks to our field-tested network to leading helps to cover Munich Re’s long-term liabilities Aquila Capital was awarded the Swedish Re- market participants like Eolus, whom we deriving from its insurance business. newable Energy Award. This prize is awarded want to thank for the again very good and The Jenåsen wind farm was handed over annually by Swedish Wind Energy Association constructive cooperation”. in August 2018. to recognize role models in the business sec- Eolus’s most-recent large-scale transac- tor (outside the energy industry) with an un- tion was completed in October, after the end Delighted with the confidence derstanding of the need to use renewable en- of the fiscal year, when KGAL chose to trans- All customers that entered into transactions ergy, and the role of the business sector in act with Eolus for the third time. This time for with Eolus during the year have also engaged this transition. Previous prizewinners include the Bäckhammar wind farm with an installed Eolus to manage the facilities they acquired. Google, Tesla and Wallenstam. Aquila Capital capacity of 130 MW. KGAL has now invested “Eolus is obviously delighted that cus- received the award in 2018 for its numerous in in a total of five wind farms developed by tomers have chosen to come back to us and investments in Swedish wind power, including Eolus. make new investments, while also entrusting 232 MW in Kråktorpet and Nylandsbergen “We are delighted to have acquired us with management of the facilities we have that the company purchased from Eolus, in another wind farm from our long-standing divested,” says Per Witalisson. a transaction known as ‘Zlatan’ (after football partner Eolus, equipped with state of the icon Zlatan Ibrahimovic) because of its size art turbines from Vestas. The investment and strength. strengthens our footprint in the Scandinavian “Wind energy investments in the Nordics renewable market and leverages the co- region are getting more and more attractive investment structure we have implemented,” and with the acquisition of the Zlatan portfolio says Michael Ebner, CEO, KGAL Investment we are further strengthening our position Management.

ANNUAL REPORT EOLUS VIND AB 2017/2018 23 SUSTAINABILITY

SUSTAINABLE PRIORITIES AND TARGETS

The transition to a sustainable society is one Eolus aims for a high degree of transparency An attractive workplace of today’s most important issues. The compa- when communicating with shareholders and Target: In 2018/2019, management will ny’s operations touch all parts of the sustaina- society in general. Our vision is to be the assess the need for a separate HR position bility concept: ecological, economic and most profitable wind power developer and and should a need exist, propose the duties social sustainability. Eolus therefore has a an attractive business partner in the transition involved in such a position. A report will corporate social responsibility – in addition to to a sustainable society. be presented in connection with the next generating a profit for our shareholders, offer- Sustainability Report. ing cost-efficient solutions to our customers SUSTAINABILITY REPORT and providing meaningful, stimulating work This is the first year that Eolus has prepared for our employees. This responsible approach a Sustainability Report. The report is present- Anti-corruption is not contradictory. On the contrary – it is ed in a separate document, and is available Target: In 2018/2019, the company will a competitive advantage and a prerequisite on Eolus’s website www.eolusvind.com prepare anti-corruption guidelines and for our future success. The company has conducted an analysis to define a target of zero corruption-incidents Eolus considers the company and its determine the material sustainability aspects per year. operations an important part of the infrastruc- for Eolus and where the company has the ture development that is benefiting society. greatest impact. Generating electricity from wind power helps The sustainability aspects that the UN SUSTAINABLE DEVELOPMENT to make our society more sustainable. Wind company considers high-priority and that GOALS power is a natural part of Sweden’s energy it intends to focus on are: Our work with sustainable development is supply and will play an increasingly greater • The supply chain based on the 2030 Agenda for Sustainable role in the transition to a sustainable energy • An attractive workplace Development and its 17 Sustainable Develop- system, with a political target of 100% renew- • Anti-corruption ment Goals (SDGs) set by the United Nations able electricity generation by 2040. Wind is General Assembly in 2015. The SGDs affect an infinite resource, and an energy source SUSTAINABILITY TARGETS all sectors of society, and the business sector that is completely free. A wind turbine is envi- We intend to focus on the following targets has a key role to play in their achievement. ronmentally friendly and generates minimal in the coming fiscal year: Eolus’s mission embraces several SDGs, greenhouse gas emissions throughout its such as combating climate change, ensuring lifespan. It can generate electricity for 20- The supply chain access to sustainable energy for all, and 25 years. When a turbine reaches the end Target: In 2018/2019, create a Code of promoting decent working conditions and of its useful life, it can be dismantled and Conduct for the companies that are sustainable economic growth. recycled, or sometimes renovated and re- contracted for the establishment of facilities installed on a new site. The land on which constructed by Eolus. wind power has been established can be restored and used either for new purposes, or for new electricity generation by construct- ing new wind turbines. UN SUSTAINABLE DEVELOPMENT GOALS

A VALUE-CREATING PARTNER Eolus has been a leading Nordic player in the transition to renewable energy since 1990. The company has driven the development of greater efficiency, and has extensive knowl- edge of where and how wind farms should be built to optimize electricity generation while also accounting for other community interests. Eolus aims to be a respected company that creates value for its stakeholders. The company’s employees are expected to act properly, fairly and honestly. The same stand- ards are imposed on consultants, suppliers and other business partners. Impartiality shall prevail in all business relationships.

24 ANNUAL REPORT EOLUS VIND AB 2017/2018 SUSTAINABILITY

The Jenåsen wind farm

OUR IMPORTANT EMPLOYEES The aim is to reduce illness rates, ensure a Eolus is a knowledge-intensive company with faster return to work and to continuously a small-scale organization. This means that improve procedures for promoting a positive the experience, knowledge, creativity and health and safety culture. Eolus is not bound commitment of our employees is important by any collective bargaining agreements. for the company, and for the development Instead, the company has negotiated a pen- of Eolus’s market offering. Reaching this goal sion and health insurance plan, and an em- requires a corporate culture where every em- ployer-sponsored wellness program. During ployee can achieve a balance between work, the year, the average number of employees life and personal development. Our corporate in the Group was 35 (33). The number of culture also helps us to recruit and retain the women employees was 10 (10), correspond- best employees. ing to 29% (30). Eolus has high ambitions for reducing the risk of occupational injuries and illness.

ANNUAL REPORT EOLUS VIND AB 2017/2018 25 The Stångby wind farm

26 ANNUAL REPORT EOLUS VIND AB 2017/2018 FINANCIAL SUMMARY AND THE GROUP’S KEY FIGURES

FINANCIAL SUMMARY

Amounts in KSEK 2017/2018 2016/2017 2015/2016 2014/2015 2013/2014

Income statement Net sales 1,365,977 1,065,668 693,446 1,502,137 465,839 Operating profit 202,411 40,233 -15,949 90,040 41,477 Profit/loss after financial items 198,879 34,224 -29,057 75,243 13,143 Net profit/loss for the year 194,313 24,504 -23,918 79,994 9,930

Balance sheet Non-current assets 177,271 147,959 291,795 351,787 426,375 Current assets 1,717,730 752,805 977,821 907,568 1,503,439 Assets 1,895,002 900,764 1,269,616 1,259,355 1,929,814

Equity, Eolus’s shareholders 814,013 657,791 671,025 731,313 936,662 Equity, non-controlling interests 1,912 1,719 140 51 47 Non-current liabilities 124,145 74,617 136,434 248,607 298,224 Current liabilities 954,932 166,637 462,017 279,384 694,881 Equity, provisions and liabilities 1,895,002 900,764 1,269,616 1,259,355 1,929,814

Cash flow statement Cash flow from operating activities 241,724 90,971 134,190 714,911 -487,767 Cash flow from investing activities -952 -9,718 -10,395 44,167 10,254 Cash flow from financing activities 296,832 -101,037 -143,754 -604,049 200,284 Cash flow for the year 537,604 -19,784 -19,959 155,029 -277,229 Cash and cash equivalents at beginning of year 201,509 221,549 241,522 86,499 363,612 Exchange rate differences in cash and cash equivalents 712 -256 -13 -6 116 Cash and cash equivalents at year-end 739,825 201,509 221,549 241,522 86,499

KEY FIGURES FOR THE GROUP***

2017/2018 2016/2017 2015/2016 2014/2015 2013/2014 No. of turbines taken into operation 25 25 14 33 27 Turbines taken into operation, MW 83.8 72.2 37.7 68.6 53.0 Managed turbines, MW 415 351 293 303 125 Electricity generation, GWh 30.2 58.6 123.6 242.3 172.1 Average number of employees, full-time positions 35 33 33 33 37 Operating margin, % 14.8 3.8 neg. 6.0 8.9 Profit margin, % 14.6 3.2 neg. 5.0 2.8 Return on capital employed, % 21.9 5.8 neg. 7.8 2.1 Return on equity after tax, % 26.4 3.7 neg. 9.7 1.2 Equity/assets ratio, % 43.0 73.0 52.9 58.1 48.5 Earnings/loss per share, SEK 7.81 1.02 -0.92 3.25 0.44 Equity per share, SEK 32.68 26.41 26.94 29.36 37.61 Dividend per share, SEK 1.50* 1.50 1.50 11.50** 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 dividend ** Extra dividend of SEK 10 paid on July 3, 2015. *** Refer to page 87 for a definition of key figures.

ANNUAL REPORT EOLUS VIND AB 2017/2018 27 SHARE AND OWNERSHIP STRUCTURE

EOLUS’S SHARE AND OWNERSHIP STRUCTURE

Eolus Vind has two share classes, Class A SHARE CAPITAL over time in order to continue developing the and Class B. The company’s Class B share At August 31, 2018, the nominal amount of company. For a company such as Eolus, in has been traded on Nasdaq Stockholm Small share capital in Eolus Vind AB was SEK which the development and divestment of Cap since February 2, 2015, under the ticker 24,907,000 and the total number of shares wind turbines are an essential part of the busi- EOLU B. Prior to that, the company’s Class B was 24,907,000 (24,907,000), divided be- ness, maintaining a strong financial position is share has been traded on Nasdaq OMX First tween 1,285,625 Class A shares carrying imperative. The Board will therefore consider North since May 28, 2009, and on Nasdaq one (1) voting right per share, and 23,621,375 the company’s long-term financing require- First North Premier since May 5, 2014. Class B shares, carrying one-tenth (1/10) of a ments on each occasion. In view of Eolus’s voting right per share. All shares outstanding strong financial position, the Board of Direc- SHARE PRICE PERFORMANCE are fully paid and entitle the holder to an equal tors proposes that a dividend of SEK 1.50 During the fiscal year, the share price fluctuat- share of the company’s assets and earnings. (1.50) per share be adopted by the Annual ed from the lowest price of SEK 21.40 on Each share has a quotient value of SEK 1.00. General Meeting. This corresponds to a trans- September 1 and 8, 2017 and the highest Shareholders are entitled to dividend pay- fer of SEK 37.4 M (37.4), corresponding to price of SEK 39.15 on July 18, 2018. At the ments in amounts determined by the Annual a direct yield of 3.9%. end of the fiscal year, on August 31, 2018, General Meeting. There are no restrictions on the closing price was SEK 38.40. Eolus’s the transfer of shares, or on the voting rights FINANCIAL INFORMATION share price rose approximately 77.8% during of each shareholder at Annual General Meet- Eolus’s Investor Relations (IR) communication the fiscal year, compared with the Nasdaq ings, due to provisions in the Articles of Asso- is characterized by open, relevant and accu- Stockholm Small Cap’s index, which rose ciation. Eolus has implemented 11 new share rate information to shareholders, investors about 14.8% during the same period. A total issues since the company was founded in and analysts with the aim of raising aware- of 7,602,355 Class B shares were traded. The 1990. The purpose of all new share issues ness of the Group’s operations and share. turnover rate decreased about 17.2% com- has been to facilitate faster expansion than Eolus communicates information in the form pared with the preceding 12-month period. the company’s earnings growth has enabled. of interim reports, annual reports and relevant The share capital trend for the 1990-2018 press releases and provides detailed informa- OWNERSHIP STRUCTURE period is presented in the table on page 29. tion about the company in the IR section of At August 31, 2018, the company had 8,177 the company’s website, www.eolusvind.com shareholders, up 1,378 during the fiscal year. DIVIDENDS Shareholders and other stakeholders may The ten largest shareholders accounted for Eolus’s long-term dividend policy entails that subscribe to press releases, the customer 33.9% (33.1) of the capital, and 51.4% (50.9) dividends over a long period of time will be magazine New Winds and financial state- of the voting rights. The largest shareholders determined by earnings and correspond to ments via the company’s website. Presenta- were mainly Domneåns Kraftaktiebolag and 20-50% of the company’s profit after tax. tions and interviews with the CEO of Eolus Hans-Göran Stennert. At the end of the However, dividends will be adapted to the are also available on the website. 2017/2018 fiscal year, Eolus Vind AB did company’s investment requirements and not hold any treasury shares. financial position. Eolus may incur net debt

KEY FIGURES PER SHARE DIVIDEND PER SHARE, AND DIRECT YIELD SHARE PRICE PERFORMANCE

Dividend, SEK Direct yield, % SEK 2017/ 2016/ 40 2018 2017 SEK % MW 10 10 Earnings500000 per share, before 486 790 ** 9 9 35 and 450000after dilution, SEK 7.81 432 680 1.02 8 8 400000 369 862 1 Ordinary dividend, SEK 1.50 1.50 7 7 350000 318 697 30 Direct300000 yield, %2 282 850 3.9 6.9 6 6 250000 5 5 Share price at year-end, SEK 38.4 21.6 200000 4 4 25 Market150000 capitalization, SEK M 956 538 3 3 100000 No. of shares 2 2 20 50000 outstanding, 000s 24,907 24,907 1 * 1 0 0 0 Average number2012 of shares2013 2014 2015 2016 2013/ 2014/ 2015/ 2016/ 2017/ 15 during the year, 000s 24,907 24,907 2014 2015 2016 2017 2018 2017-09-01 2018-08-31

1 Based on the Board of Director’s dividend proposal. * The 2017/2018 dividend is based on the Board’s Eolus B Nasdaq Stockholm Small Cap 40 2 Dividend divided by the closing price for each 10 proposal to the Annual General Meeting. ** During the 2014/2015 fiscal year, and extra dividend fiscal year. 9 of SEK 10 was paid in the form of a share split with 8 a redemption procedure. Direct yield including extra 35 7 dividend was 46.9%. 6 5 30 4 28 ANNUAL REPORT EOLUS VIND AB 2017/2018 3 2 25 1 0 SHARE AND OWNERSHIP STRUCTURE

SHAREHOLDERS AT AUG 31, 2018

No. of No. of Total no. of % of % of Shareholder Class A shares Class B shares 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 58,506 228,026 0.9% 4.8% Försäkringsaktiebolaget Avanza Pension 0 1,491,679 1,491,679 6.0% 4.1% Johan Markensten 0 808,080 808,080 3.2% 2.2% Nordnet Pensionsförsäkring AB 500 659,675 660,175 2.7% 1.8% Ingvar Svantesson 43,750 200,175 243,925 1.0% 1.7% M A C O Business Development AB 0 490,471 490,471 2.0% 1.3% Swedbank Försäkring AB 0 487,967 487,967 2.0% 1.3% Other shareholders 139,135 16,325,769 16,464,904 66.1% 48.6% 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 1-500 746,463 3.0% 5,765 70.5% 501-1,000 682,990 2.7% 823 10.1% 1,001-5,000 2,579,742 10.4% 1,103 13.5% 5,001-10,000 1,616,639 6.5% 218 2.7% 10,001-15,000 798,243 3.2% 64 0.8% 15,001-20,000 942,966 3.8% 53 0.6% 20,001- 17,539,957 70.4% 151 1.8% Total 24,907,000 100.0% 8,177 100.0%

SHARE CAPITAL TREND

Total share Change in share No. of No. of Change in Change in Quotient Year Event capital, SEK capital, SEK Class 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 2017/2018 29 GROUP MANAGEMENT

EOLUS’S GROUP MANAGEMENT

During the 2017/2018 fiscal year, Eolus’s had four senior executives: Per Witalisson, Marcus Landelin, Catharina Persson and Karl Olsson. Since the opening of the new fiscal year on September 1, Richard Larsson has also been a member of Eolus’s Group Management. Information regarding when these executives assumed their positions, their dates of birth, experience, sharehold- ings in Eolus at November 15, 2018 and their ongoing assignments is presented be- PER WITALISSON MARCUS LANDELIN low. Assignments within the Group and the CEO DEPUTY CEO AND CHIEF assignments of deputy Board members OPERATING OFFICER are not specified. Company shareholdings Born: 1971. Employed since 2006 and include own shares, both direct and CEO since August 2012. Master of Busi- Born: 1978. Employed since 2015. Bachelor indirect, and those of related parties. ness Administration. Previously an auditor of Laws degree and Master of Business at Ernst & Young from 1996-2006, where Administration. Most recently worked at he was an authorized public accountant E.ON, where he was Head of Origination and from 2003-2006. Project Development for onshore wind power Other assignments:Chairman of the Board in Northern Europe, as well as working with of Rockneby Vind AB and Långmarken offshore wind power. He also worked with Wind AB. Board member of Isgrannatorp export and trade issues at the Swedish Trade Drift AB and Triventus AB. Council in Eastern Europe and ran his own Shareholding in Eolus: 12,700 Class A trading and construction businesses. shares and 51,196 Class B shares Other assignments: None. Shareholding in Eolus: None

CATHARINA PERSSON KARL OLSSON RICHARD LARSSON CFO GENERAL COUNSEL HEAD OF PROJECT DELIVERY

Born: 1975. Employed since 2013. Born: 1963. Employed since 2011. Bache- Born: 1979. Employed since 2011. Master Master of Business Administration and lor of Laws degree. Previously employed of Electrical Engineering. Came to Eolus previously CFO at ACAP Invest AB (publ). as a lawyer at Setterwalls and Linklaters through the acquisition of Svenska Vind- Other assignments: Chairman of the law firms, and General Counsel in Vattenfall bolaget, where he was responsible for Board of Wind Farms Götaland Svealand AB’s Group staff unit. He has also been an onshore wind power project development, AB, Wind Farms Västra Götaland AB, employee and member of the management mainly in Sweden. Has has also worked Windfarm Iglasjön AB, Wind Farm Jenasen team of Awapatent AB and, prior to joining in several consultant companies where he AB. Board member of SD Förvaltning i Eolus, ran his own business Terrier Law AB. undertook technical assignments in the Malmö AB Other assignments:Board member and field of engineering for the power industry. Shareholding in Eolus: 3,102 Class B CEO of Terrier Law AB. Board member of Other assignments: None. shares Skogskovall AB and Rockneby Vind AB. Shareholding in Eolus: 2,000 Class B Agent for service of process for Snickare­ shares gatan Holding AB. Shareholding in Eolus: 5,719 Class B shares

30 ANNUAL REPORT EOLUS VIND AB 2017/2018 The Fröreda wind farm

ANNUAL REPORT EOLUS VIND AB 2017/2018 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, 2017-August 31, 2018 fiscal year. All amounts are in thousands of Swedish kronor (KSEK), unless otherwise specified. Figures in parentheses pertain to the preceding fiscal year.

INFORMATION ABOUT BUSINESS OPERATIONS that own large wind farms, and from local operators with smaller facilities. Eolus aims to create value at all levels of project development, establishment These operations provide Eolus with stable, recurring and long-term revenue and operation of facilities for renewable energy and energy storage, and to streams. offer attractive and competitive investment objects to both local and interna- Sales from wind power asset management services amounted to SEK tional investors in the Nordic region, Baltic countries and the US. 16.3 M (14.3), of which external customers accounted for SEK 15.7 M Eolus’s main operations are to realize projects primarily through sales (13.9). At the end of the fiscal year, Eolus’s customer contracts relating to of turnkey operational facilities to a broad customer base of investors. The asset management assignments for its own holdings and on behalf of cus- business model also includes parts of the project portfolio to be realized tomers totaled 415 MW (351), of which external customers accounted for through sales of project rights, meaning permitted projects, and projects 408 MW (336). In addition to these assignments, the company has signed under development. Eolus also uses its own wind power facilities to generate asset management agreements for the following wind farms that have not electricity. New wind turbines may be constructed, and existing turbines yet been deployed: Kråktorpet (163 MW), Nylandsbergen (68 MW), Sötter­ divested to customers that want to invest in facilities that are already opera- fällan (36 MW), Anneberg (11 MW) and Stigafjellet (30 MW). Anneberg, tional, in order to continuously develop and renew the wind power portfolio Sötterfällan and Nylandsbergen will be deployed and handed over to cus- for electricity generation. Eolus offers a full range of asset management tomers in 2018/2019. Kråktorpet will be deployed and handed over to the services to wind power owners for carefree ownership. customer in 2019/2020 and Stigafjellet will be deployed and handed over The Group consists of the Parent Company, Eolus Vind AB (publ), the to the customer in the second half of 2020. subsidiaries Eolus Wind Power Management AB, Ekovind AB, Svenska Vindbolaget AB, Blekinge Offshore AB, Eolus Elnät AB, SIA Eolus, Eolus Electricity generation Vind Norge Holding AS, Eolus Oy, Eolus North America Inc and the sub- The Group uses its own wind power facilities to generate electricity, which subsidiary OÜ Baltic Wind Energy. In addition to the companies above, are recognized as either a non-current asset or inventories. Revenue is several other companies formed to manage the development of specific derived from sales of electricity, and from sales of the electricity certificates wind power projects are also included. allocated to renewable electricity producers. New wind turbines may be constructed and existing turbines divested in order to continuously develop Project development and renew the electricity generation asset portfolio. Sales from the Group’s Since its inception in 1990, Eolus has evolved into a leading wind power electricity generation amounted to SEK 14.2 M (24.8). This decline was developer throughout Sweden and the Nordic region. By the end of the attributable to lower electricity generation – due to the strategy to reduce fiscal year, Eolus had participated in the construction of 541 wind turbines the number of owned turbines – but was offset by higher average revenue. with a combined capacity of 929 MW. Projects are mainly realized by estab- In comparable facilities, generation was lower than in the year-earlier period lishing wind turbines that are divested as turnkey facilities to investors. Proj- due to lower wind energy content. At the end of the fiscal year, the Group ects can also be realized by selling project rights. Profit recognition after owned a combined installed capacity of 8.2 MW with estimated generation construction takes place after final commissioning. Sales and earnings may of 17.2 GWh per year, recognized as non-current assets. Average revenue vary considerably between individual quarters and fiscal years, depending for the electricity generated during the fiscal year was SEK 470 (423) per on the rate of wind farm construction, and when the farms are divested. MWh. The project development operations are mainly financed by equity, advance payments from customers and construction loans. THE GROUP’S NET SALES AND EARNINGS At present, Eolus conducts project development operations in Sweden, Net sales amounted to SEK 1,366.0 M (1,065.7), up SEK 300.3 M compared Norway, Finland, the Baltic countries and the US. with the preceding year. Operating profit amounted to SEK 202.4 M (40.2), Sales from the development, establishment and divestment of turnkey up SEK 162.2 M. The higher sales and earnings were due to the sale of wind power facilities amounted to SEK 1,336.5 M (1,027.4). During the project rights for the Kråktorpet wind farm and the handover of the Jenåsen fiscal year, 25 (25) wind turbines with a combined capacity of 83.8 MW (72.2) wind farm. During the year, 25 wind turbines with a capacity of 83.8 MW were installed and completed, all of which were handed over to customers. were constructed, all of which were handed over to customers. In the pre- Other operating income amounted to SEK 14.5 M (2.9) and primarily com- ceding year, 25 wind turbines with a capacity of 72.7 MW were constructed, prised exchange rate gains and capital gains for other non-current assets. of which 24.6 were handed over to customers. Changes in the fair value of currency derivatives had a negative impact of SEK 0.4 M on operating profit, Asset management compared with a negative impact of SEK 4.6 M in the preceding year. Loss Over the years, Eolus has developed extensive expertise in virtually all areas from financial items amounted to SEK 3.5 M, compared with a loss of SEK related to the establishment and operation of wind turbines. Eolus offers full 6.0 M in the preceding year. Changes in the fair value of interest rate deriva- asset management services to wind power owners to provide carefree own- tives had a positive impact of SEK 2.8 M on operating profit, compared with ership that maximizes revenue and minimizes production loss. Eolus sees a positive impact of SEK 8.3 M in the preceding year. In total, changes in the increasing demand for these services both from major institutional investors fair value of financial currency and interest rate derivatives had a positive

32 ANNUAL REPORT EOLUS VIND AB 2017/2018 DIRECTORS’ REPORT

EARNINGS AND FINANCIAL POSITION

2017/2018 2016/2017 2015/2016 2014/2015 2013/2014 Amounts in KSEK IFRS IFRS IFRS IFRS IFRS Overview Group Net sales 1,365,977 1,065,668 693,446 1,502,137 465,839 Operating profit/loss 202,411 40,233 -15,949 90,040 41,600 Profit/loss after financial items 198,879 34,224 -29,057 75,243 13,143 Return on capital employed, % 22 6 neg. 8 2 Return on equity after tax, % 26 4 neg. 10 1 Total assets 1,895,002 900,764 1,269,616 1,259,355 1,929,814 Equity/assets ratio, % 43 73 53 58 48 Average number of employees 35 33 33 33 37

2017/2018 2016/2017 2015/2016 2014/2015 2013/2014 Amounts in KSEK RFR2 RFR2 RFR2 RFR2 RFR2 Overview Parent Company Net sales 1,115,620 910,062 611,873 1,348,830 423,808 Profit/loss after financial items 288,869 82,560 26,663 160,261 41,450 Total assets 2,039,782 890,371 1,176,727 1,088,855 1,602,132 Equity/assets ratio, % 44 74 47 50 45 Average number of employees 25 32 31 31 34

DEFINITIONS OF KEY FINANCIAL FIGURES Return on equity after tax Rolling 12-month earnings relative to average equity. Equity/assets ratio Equity expressed as a percentage of total assets. Return on capital employed Profit after financial items plus interest expense expressed as a percentage of average capital employed. Capital employed Total assets minus non-interest-bearing liabilities.

impact of SEK 2.4 M before tax, compared with a positive amount of SEK WIND TURBINE INVENTORIES, WIND TURBINES UNDER 3.7 M in the preceding year. The effective tax rate varies considerably CONSTRUCTION AND PROJECTS UNDER DEVELOPMENT between periods, depending on the structure of wind turbine divestments. At the end of the fiscal year, wind turbine inventories, wind turbines under construction and projects under development amounted to SEK 574.7 M FINANCIAL POSITION (344.8), up SEK 229.9 M. The difference is due to the number of ongoing Total assets are significantly affected by the size of ongoing wind power establishments and their current phase. projects, the phase they are in, and the use of credit facilities. For projects At the end of the fiscal year, there were 74 wind turbines under con- to be divested as turnkey facilities to customers, the company aims to struction, compared with 25 on the corresponding date in the preceding secure customer financing in pace with the projects completion. year. Wind turbines recognized as non-current assets or inventories, respec- The Group’s equity/assets ratio was 43.1% at end of the fiscal year, tively, are attributable to the Electricity Generation operating segment and compared with 73.2% at the end of the preceding fiscal year. generate electricity that the company sells. New wind turbines may be established and existing turbines divested in order to continuously develop CASH FLOW AND CASH AND CASH EQUIVALENTS and renew the electricity generation asset portfolio. There were no wind Cash flow from operating activities amounted to SEK 241.7 M, compared turbines in inventories at the end of the fiscal year. During the fiscal year, with SEK 91.0 M in the preceding year. The higher cash flow was due five wind turbines were reclassified from non-current assets to inventories to a decline in ongoing projects after the handover of the Jenåsen wind in preparation for sale. farm and an increase in advance payments from customers for ongoing establishments. Cash flow from investing activities was a negative SEK LIABILITIES 1.0 M, compared with a negative SEK 9.7 M in the preceding year. Cash At the end of the fiscal year, net cash amounted to SEK 371.1 M, compared flow from financing activities was SEK 296.8 M, compared with a negative with SEK 167.6 M on the corresponding date in the preceding year. Inter- SEK 101.0 M in the preceding year. The change was mainly attributable est-bearing liabilities to credit institutions amounted to SEK 368.7 M (33.9) to loans raised. at the end of the fiscal year. Liabilities are affected by the size of ongoing At the end of the fiscal year, cash and cash equivalents amounted to wind power projects and the phase they are in. SEK 739.8 M (201.5), an increase of SEK 538.3 M. In addition to cash and cash equivalents, there was an unutilized overdraft facility of SEK 75 M. SIGNIFICANT EVENTS DURING THE FISCAL YEAR There was a framework credit agreement totaling SEK 255 M at the end In December, Eolus signed an agreement to divest 47 MW of wind power of the fiscal year that had been utilized. Both the overdraft facility and to KGAL for a preliminary purchase consideration of EUR 57.7 M. The Söt- framework credit agreement were ununtilized at this point in time last year. terfällan wind farm (36.0 MW) is scheduled to be handed over as a turnkey At the end of the fiscal year, net cash amounted to SEK 371.1 M facility in summer 2019 and the Anneberg wind farm (11.0 MW) is scheduled (167.6), up SEK 203.5 M. to be handed over as a turnkey facility in December 2018. These farms will be recognized in profit or loss on completion and handover to the customer.

ANNUAL REPORT EOLUS VIND AB 2017/2018 33 DIRECTORS’ REPORT

Eolus will manage the farms’ assets on behalf of the customer. In December, Dependence on regulations, legislation and policy measures Eolus signed an agreement to divest 232 MW of wind power to Aquila Capi- The establishment of wind power facilities is covered by a series of regula- tal for a preliminary purchase consideration of EUR 264 M. The transaction tions. For environmental permits to be granted, the relevant municipality includes the sale of all shares in each project company that owns the rights must actively recommend that the permit be granted. In practice, municipali- to the wind farms. Eolus will construct both wind farms and Aquila will pro- ties thus holds a right of veto. Both building permits and environmental vide financing during construction for the Kråk­torpet wind farm comprising permits may be appealed, which can lead to delays or make projects impos- 43 wind turbines with a capacity of 163.4 MW. The preliminary purchase sible to implement. Under the Planning and Building Act, municipalities consideration for the Kråktorpet wind farm amounts to EUR 182 M. Revenue in Sweden exercise a planning monopoly. The implementation of projects from the sale of project rights for the Kråktorpet wind farm was recognized is therefore dependent on the willingness of each individual municipality during the fiscal year. For the Nylandsbergen wind farm, comprising 18 wind to contribute to a sustainable energy supply. Political will can swing rapidly turbines with a capacity of 68.4 MW, the purchase consideration will be fully due to changing public opinion, the distribution of seats in building and paid on completion and handover. The preliminary purchase consideration planning committees, and so forth. for the Nylandsbergen wind farm amounts to EUR 82 M. Both wind farms Sweden and Norway have technology-neutral electricity certificate will be deployed in the second half of 2019. Eolus will manage the farms’ systems, which favor the development of renewable electricity generation. assets on behalf of the customer. In 2008, the EU adopted the Renewable Energy Directive, through which In December, Eolus signed an agreement with Vestas for the delivery Sweden has agreed that at least 49% of its energy consumption will be of 74 wind turbines of the V136 model comprising 279 MW for the Kråk- derived from renewable energy sources by 2020. Through its energy and torpet, Nylandsbergen, Sötterfällan and Anneberg wind farms. All four farms climate agreement, the former Swedish Government raised ambitions by also have a full-service agreement with Vestas signed for 15–20 years from an additional percentage point. In October 2014, EU member states startup. decided that the share of renewable energy should amount to at least 27% In January, Eolus signed an agreement with Veidekke regarding turnkey of the energy mix by 2030. contracts for the construction of the Kråktorpet and Nylandsbergen wind Sweden introduced the Electricity Certificate System in 2003 and farms and an agreement with E.ON Elnät for grid connections for the farms. Norway became affiliated in 2012, and had the target of increasing renewable In March, Eolus signed a Power Purchase Agreement (PPA) with Alcoa electricity generation by 28.4 TWh between 2012 and 2020. Within the Norway ANS entailing that Alcoa will purchase all electricity generated in the framework of the energy agreement reached by five parliamentary parties in Øyfjellet wind farm in Norway when it is deployed in 2021. Annual generation 2016, Sweden decided to extend the Electricity Certificate System by adding is expected to amount to 1.2 TWh. As part of the deal, Eolus has signed 18 TWh of new electricity certificates until 2030. In Norway, facilities estab- a power guarantee with the Norwegian Export Credit Guarantee Agency lished after 2021 will not be included in the System. Considering that wind (GIEK). The guaranteed amount is EUR 256 M. power is one of the cheapest methods for adding new generation capacity, In December, Eolus signed an agreement to divest the Stigafjellet wind the vast majority of investing decisions have been related to wind power. farm (30 MW) in Norway to ewz for a preliminary purchase consideration of In April 2017, the Swedish and Norwegian Governments reached EUR 40.7 M. The transaction includes the sale of all shares in the project an agreement on how the Swedish extension of the Electricity Certificate company that owns the rights to the wind farms. Eolus will construct the System would be designed in relation to the existing joint Swedish- wind farm and ewz will provide financing during construction. The wind Norwegian certificate system. The agreement created clear incentives farm is scheduled for deployment in the second half of 2020. for further expansion and the pace of development under the System In August, the Jenåsen wind farm (79 MW) in the Municipality of Sunds- has exceeded all expectations. The investments that are needed to meet vall was completed and handed over to Munich Re. The wind farm is subject the objectives of the Electricity Certificate System will probably have been to a PPA with Google and comprises 23 wind turbines of the Vestas V126- implemented by 2020. The market will therefore be able to meet the objec- 3.45 MW. Eolus will provide asset management services for the wind farm. tive long before 2030 which, in turn, will create a need for policy decisions It was announced in August that Richard Larsson, Head of Project and mechanisms to maintain the legitimacy of the System. Delivery, would join Eolus Group Management on September 1, 2018. Although conditions for the wind power industry have become clearer in recent years, there is no guarantee that future Swedish parliaments will ENVIRONMENTAL IMPACT not make other decisions, entailing weaker terms for wind power in Sweden, Through its wind power holdings, the Parent Company and the Ekovind sub- which could affect Eolus’s operations and financial position. The division sidiary conduct activities that are licensable or subject to notification require- of Sweden into four electricity price areas means that the price of electricity ments under the Swedish Environmental Code. The company and the Group generated varies, depending on the supply and demand situation in the hold the relevant environmental permits. When the duty to notify applies, relevant area. notification is a prerequisite for granting a building permit under the Environ- mental Code. Wind power is a clean and renewable source of energy with Dependence on agreements very little environmental impact throughout the turbine’s lifespan. During Eolus has not concluded any operational or financial agreements with terms operation, the environmental impact mainly consists of noise and shadow considered uncommon for the industry. When establishing wind power facili- casting. ties, the company’s activities include signing agreements with manufacturers for the supply of wind turbines. Advance payments to wind turbine manufac- EMPLOYEES turers can add up to considerable amounts. Since the size of the company’s During the year, the average number of employees in the Group was 35 (33). wind power projects has increased in recent years, while the number of The number of women employees was 10 (10), corresponding to 28% (30). manufacturers in the market is limited and delivery times are relatively long, For information regarding distribution of the number of employees and the inability of a particular manufacturer to fulfill agreements could have a salaries paid, other remuneration, social security expenses pertaining to significantly adverse effect on the company’s financial position. the Board and the CEO, as well as remuneration of senior executives, refer to Notes 5 and 6. Dependence on strategic partners Eolus installs wind power facilities from world-class manufacturers using the SIGNIFICANT RISKS AND UNCERTAINTIES highest possible technical and overall economic efficiency. The wind power Significant risks industry is undergoing rapid growth and the number of manufacturers that A number of risk factors considered significant for the future development want to establish a market presence has increased in recent years. This of Eolus are outlined below. The following risks are not ranked in order competition among manufacturers has led to better terms and reduced of priority and do not claim to be comprehensive. dependence on individual suppliers. Although new manufacturers are be- coming established in the markets where Eolus operates, it may take time for them to establish construction and service organizations.

34 ANNUAL REPORT EOLUS VIND AB 2017/2018 DIRECTORS’ REPORT

Dependence on key individuals and employees Exchange rate changes Eolus is a knowledge-based company with a small organization, where A major portion of Eolus’s wind turbine payments and sales of wind farms dependence on the knowledge, experience and creativity of individual are made in EUR. Exchange rate fluctuations against the SEK can thus affect employees is high. The loss of key individuals could have significantly the profitability of wind turbine construction. This is offset by currency futures adverse effects on the company in the short term. or sales and borrowing in EUR. The Board has stated in the and risk policy that at least 75%, and a maximum of 125%, of the estimated net flow Earning capacity over a 12-month period is to be hedged. On the balance sheet date, the The capital cost per MWh generated in a wind turbine varies greatly, depend- company’s outstanding currency futures for selling contracts amounted to ing on the wind conditions at the actual location. Establishing wind power EUR 10.0 M (0.0) and for purchasing contracts to EUR 0.0 M (4.0). These facilities on appropriate sites and accurate generation assessments are thus had a negative market value of SEK 0.8 M (0.5). crucial to the company’s earning capacity. The wind conditions at each indi- vidual facility can vary from year to year. Generation can vary up to +/- 15%, compared with a normal wind year. The market price of electricity varies over The electricity generation operations are partly financed by bank loans. time. The price trend for electricity certificates is dependent on how rapidly Changes in market interest rates may therefore affect future earnings and renewable electricity generation is developed in proportion to the quota profitability. The Board has stated in the finance and risk policy that the obligation that applies for consumers when purchasing electricity certificates. average fixed-interest term in the electricity generation operations is not to Through a partnership with Axpo Sverige AB, a leading player on the Nord be less than 2.5 years. At the end of the 2017/2018 fiscal year, more than Pool Spot power market, Eolus acquires risk management support for sales 100% of the Group’s liabilities to credit institutions attributable to electricity of electricity. The partnership aims to secure future generation revenues, generation operations were covered by interest rate hedging instruments. achieve long-term profitability, minimize the risk that market volatility will have The Board of Directors approved this deviation from the policy. On the a negative impact on Eolus’s earnings, generate positive results from price balance sheet date, these instruments had a negative market value of hedging and address the need for load balancing in a cost-efficient manner. SEK 11.8 M (14.6). In its finance and risk policy, Eolus hedges a predetermined portion of the generation volume, which reduces the volume and profile risk. The main SIGNIFICANT EVENTS AFTER costs for wind turbine management are interest expense, depreciation, THE END OF THE FISCAL YEAR leases, service and maintenance costs and insurance expenses. Rising In September, Eolus’s wholly owned subsidiary Eolus North America, Inc market interest rates have a negative impact on earnings. Investment deci- acquired a solar and battery storage project in the western US with a sions are usually based on an economic life of 25 years. If the actual life falls capacity of 500 MW and 250 MW, respectively. The project is in an early short of the estimated life, this would have a negative impact on profitability. stage of development and is on the waiting list for a grid connection to With such a long time horizon, there is an additional risk that the future costs deliver electricity to California. of service and maintenance may differ from the cost basis of the investment In September, Eolus signed an agreement with Siemens Gamesa for the decision. delivery of seven wind turbines of the SWT-DD-130 model with a capacity of 4.3 MW each to the Norwegian Stigafjellet project, located in Bjerkreim south Competition of Stavanger. This wind farm will be deployed in the second half of 2020 and Since development of the wind power industry has accelerated sharply in is subject to a sale agreement with ewz. recent years, the number of market players has risen. Under current condi- In September, Eolus signed a credit agreement with Swedbank com- tions, this has increased the supply of projects and turnkey facilities to the prising liquidity and construction loans totaling SEK 1,050 M. The four-year market. In the project development phase, Eolus competes with smaller agreement ensures financing for Eolus’s expansion in this forthcoming period players, major utilities companies and international wind power developers. in terms of both financing ongoing and future establishments for which In regard to sales of electricity, wind power-based electricity competes with Eolus provides the financing during the construction phase, and ensuring all other types of electricity generation since all electricity is sold on a single high liquidity for the operating activities. market. The Electricity Certificate System is technology-neutral, which favors In October, Eolus signed an agreement to divest the Bäckhammar wind the generation of renewable electricity using the most cost-efficient technolo- farm (130 MW) in Sweden to KGAL for a preliminary purchase consideration gy. In terms of its offering of asset management services, Eolus competes of EUR 131 M. At the same time, Eolus placed an order for wind turbines with both major wind power developers offering complete managements from Vestas. Bäckhammar will comprise 22 Vestas V136-4.2 MW and services and owners who choose to carry out these services themselves. 9 Vestas V150-4.2 MW. Eolus will construct the wind farms and KGAL will provide financing during construction. Bäckhammar is scheduled to be FINANCIAL RISKS completed in August 2020 and Eolus was commissioned to deliver asset Capital requirements and financing ability management services for the facility. Eolus has a large, high-quality project portfolio. The planning of project development operations includes monitoring building permits and other per- OUTLOOK mits to ensure they do not expire before the wind turbines are constructed. A social shift, with lower greenhouse gas emissions, such as CO2, is vital. In July 2016, Eolus secured financing for the next two fiscal years through The latest report from the UN Intergovernmental Panel on Climate Change the signing of three credit agreements with Handelsbanken. All agreements (IPCC) warns that we have 12 years to significantly reduce carbon emissions have a 29-month term. The agreements comprise an overdraft facility of SEK to keep global warming to a maximum of 1.5°C. Beyond that, even half a 75 M, a framework credit agreement of SEK 255 M for project financing degree could significantly worsen the risks of drought, floods, extreme heat and a construction loan of SEK 600 M. The construction loan was signed and poverty. A transitioning energy market is playing a key role in meeting to finance the establishment of the Jenåsen wind farm. The loan was termi- this challenge, which the IPCC claims is possible to achieve both economi- nated when the farm was handed over to the customer. The overdraft facility cally and time-wise. of SEK 75 M was unutilized on the balance sheet date, while the framework The energy market is undergoing a process of rapid and major change. credit agreement totaling SEK 255 M was fully utilized. All credit facilities The cost of renewable electricity generation is falling every year and new were ununtilized at this point in time last year. The Board has adopted business models are emerging to challenge existing structures in the energy a finance and risk policy containing guidelines for the equity/assets ratio, market. Although the pricing scenario is largely driven by global prices for maturity structure of loans and the management of liquidity preparedness fossil-based energy generation, investments in renewable generation meth- to reduce . ods account for a majority of the new investments at the global level. From a Swedish perspective, wind power has undergone tremendous growth. In 2006, wind power accounted for approximately 1 TWh, or less than 0.5%, of Swedish electricity generation. In 2017, Swedish wind power accounted

ANNUAL REPORT EOLUS VIND AB 2017/2018 35 DIRECTORS’ REPORT

for 17.6 TWh, or 11%, of Swedish electricity generation. Wind power is now SHARES well-established as the country’s third-highest source of electricity generation On August 31, 2018, the share capital in Eolus Vind AB amounted to after hydropower and nuclear power. SEK 24,907,000, distributed between 1,285,625 Class A shares and The Swedish Energy Agreement from 2016 is based on the objective of 23,621,375 Class B shares. Class A shares carry one voting right, while transitioning to 100%-renewable electricity generation in Sweden. The agree- Class B shares correspond to one-tenth (1/10) of a voting right. All shares ment contains a new development target of 18 TWh for the Electricity Certifi- carry equal rights to the company’s assets, profit and dividends. cate System between 2021 and 2030. With the current cost base for the establishment of new renewable electricity generation, a large proportion CORPORATE GOVERNANCE of these investments will be made in wind power. After the rules were clari- For information about the company’s governance during the year, refer to fied in 2017, a decision was made to invest in the generation of more than the Corporate Governance Report on pages 37-39. 2,000 MW compared with a total capacity expansion of 180 MW in 2017. The investments that are needed to meet the objectives of the Electricity SUSTAINABLE PERFORMANCE Certificate System will probably have been implemented by 2020. The Eolus proactively assumes responsibility for people and the environment market will therefore be able to meet the objective long before 2030. throughout its operations. In accordance with Chapter 6, Section 11 of In recent years, more electricity has been generated than consumed the Annual Accounts Act, Eolus Vind AB must prepare a Sustainability in the Swedish market, enabling Sweden to become a net exporter of elec- Report that is separate from the Annual Report. This Sustainability Report tricity. The Nordic region has an excellent opportunity to become a driving is available on www.eolusvind.com. The Sustainability Report was submitted force for sustainability in Europe thanks to its extensive carbon-free electricity to the auditor at the same time as the Annual Report. A summary of the generation, which could replace the dirty fossil-based power used in other Sustainability Report is provided on pages 24-25 of this Annual Report. countries. A continued ability to export electricity is positive for Sweden, which is why it is so important to continue expanding the transmission DIVIDEND POLICY capacity – not only within Sweden but also to other countries. The fact The Board has adopted a dividend policy entailing that dividends issued by that the energy agreement addresses the need to expand the transmission Eolus in the long term will be determined by the company’s earnings and capacity in order to enable exports is thus positive. The future potential to correspond to 20-50% of the company’s profit. However, dividends will be store electricity will present major opportunities for Sweden to increase adapted to the company’s investment requirements and financial position. their share of intermittent electricity sources, such as wind and solar power. For the 2016/20167 fiscal year, the Annual General Meeting on Eolus is now active in a number of markets beside Sweden. At present, January 27, 2018 resolved to pay dividends corresponding to SEK 1.50 the most attractive markets for Eolus’s operations – in addition to Sweden (1.50) per share. Payment of the dividends took place on February 2, 2018. – are the Norwegian and US markets. In addition to high-priority projects in the Swedish market, Eolus has now identified high-priority projects in these PROPOSED DISTRIBUTION OF PROFIT markets in the project portfolio for the coming years. These include the large The Board of Directors proposes a dividend of SEK 1.50 (1.50) per share onshore Øyfjellet projects (330 MW) for which Eolus has signed a PPA with for the 2017/2018 fiscal year in line with the company’s dividend policy. Alcoa. The proposed record date for the dividends is Tuesday, January 29, After the end of the reporting period, Eolus’s US subsidiary Eolus 2019. North America, Inc acquired a solar and battery storage project in the Payment of the dividends is expected to take place on Friday, February western US with a capacity of 500 MW and 250 MW, respectively. This 1, 2019. The Board of Directors deems that the proposal is consistent with is Eolus’s first acquisition in these sectors and shows the potential in the the prudence rule in Chapter 17, Section 3 of the Swedish Companies Act, renewables industry. 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 enhancements throughout the value chain of a wind power project’s lifespan Share premium reserve 168,662,573 are crucial in order to meet investors’ yield requirements. By significantly Retained earnings 293,772,840 reducing the costs of wind power establishment, the realization of projects with profitability for end-investors can also continue in times with low overall Net profit for the year 286,345,382 price levels for electricity and electricity certificates. For the Swedish market, Total 748,780,795 2018 entailed considerably higher prices for electricity and electricity certifi- cates compared with recent years, making the market even more attractive The Board of Directors proposes that the profits to investors. be appropriated as follows: Eolus’s extensive experience in the construction of wind power facilities, combined with a full range of asset management services, will safeguard the dividend to the shareholders 37,360,500 company’s continued ability to offer attractive investment objects to various to be carried forward 711,420,295 types of investors, but primarily to customer groups that invest in major Total 748,780,795 generation facilities. With fewer but larger established wind farms in Eolus’s prioritized markets, quarterly fluctuations will be greater. This applies to Statement: both the number of wind turbines constructions, sales and earnings. The proposed dividend is considered justifiable in view of the earnings trend after the end of the fiscal year. The proposed distribution of profit is SHAREHOLDERS also considered justifiable in view of the requirements concerning equity, On August 31, 2018, Eolus had 8,177 shareholders according to the register consolidation requirements, liquidity and financial position in general for maintained by Euroclear Sweden AB. Shareholders with a direct and indirect both the Parent Company and the Group. shareholding who represent more than 10% of the votes are Domneåns Kraftaktiebolag and Hans-Göran Stennert. The largest shareholders of DEFINITIONS OF KEY FINANCIAL FIGURES Eolus shares are presented on page 29. The number of shares held by Return on equity after tax Rolling 12-month earnings relative to individuals with an insider position are presented on Eolus’s website: average equity. www.eolusvind.com. Equity/assets ratio Equity expressed as a percentage of total assets. Return on capital employed Profit after financial items plus interest expense expressed as a percentage of average capital employed. Capital employed Total assets minus non-interest-bearing liabilities.

36 ANNUAL REPORT EOLUS VIND AB 2017/2018 CORPORATE GOVERNANCE REPORT

CORPORATE GOVERNANCE REPORT

CORPORATE GOVERNANCE REPORT Annual General Meeting 2019 FOR EOLUS VIND AB (PUBL) The next Annual General Meeting of 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 26, 2019 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 through General Meetings, the Board of Directors, the CEO and Group on page 87. management in accordance with the Swedish Companies Act, the Articles of Association and the rules of procedure for the Board of Directors and NOMINATION COMMITTEE CEO. Representatives from the Eolus Group’s management are also The Nomination Committee nominates the people who are proposed for members of 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 votes on May 31. Hans-Göran Stennert, Board Chairman, presented the Meeting on January 28, 2017. It states that the Board’s registered office is composition of the Nomination Committee on July 11, 2017. to be in Hässleholm, Sweden, that the Board’s members are to be elected every year by the Annual General Meeting for a period up to the next Annual The Nomination Committee comprises the following members: General Meeting, and that one Class A share entitles the holder to one Name Represents Holding on vote while one Class B share entitles the holder to one-tenth of a vote. May 31, 2018 The complete Articles of Association are available on Eolus’s website, Hans-Göran Stennert In his capacity as Chairman of the Board www.eolusvind.com. Ingvar Svantesson Domneåns Kraftaktiebolag 15.3% Hans Gydell (Chairman) Hans-Göran Stennert 11.8% GENERAL MEETINGS Hans Johansson Åke Johansson 6.9% The shareholders exercise their decision-making rights regarding central issues at the General Meeting. The Meeting resolves on adoption of the The Nomination Committee held its first meeting on August 28, 2018. The income statement and balance sheet, appropriation of the company’s profit Nomination Committee has held two minuted meetings ahead of the 2019 or loss, discharge of liability for Board members and CEO, election of the Annual General Meeting. The work of the Nomination Committee begins Board of Directors and auditors, and remuneration of the Board of Directors with the members reviewing the evaluation of the Board carried out during and auditors. the year. The Nomination Committee agreed unanimously that the current Notice convening the Annual General Meeting for Eolus must be issued composition is satisfactory. The number of Board members is considered not earlier than six weeks and not later than four weeks prior to the Meeting. appropriate and the expertise possessed by the Board is both complemen- The notice is to be advertised in Post- och Inrikes Tidningar and on tary and relevant. The composition of the Board is also considered satisfac- Eolus’s website. The fact that notification has been issued is to be an- tory in terms of equality. nounced in the Swedish daily Dagens Industri. Shareholders who wish to participate in the Annual General Meeting are to notify the company THE BOARD OF DIRECTORS AND ITS WORK by no later than the date stipulated in the notice. Eolus’s Board of Directors decides on the company’s business orientation, strategy, business plan, resources and capital structure, organization, 2018 Annual General Meeting acquisitions, major investments and divestments, annual reports and interim Eolus’s 2018 Annual General Meeting was held in Hässleholm, Sweden, on reports, as well as other comprehensive matters of a strategic nature. Saturday, January 27. Some 92 shareholders, representing 34% of the votes, The Board also appoints the CEO who is in charge of the day-to-day attended the meeting, personally or through proxy. General Counsel Karl management in accordance with the Board’s instructions. Olsson was elected Chairman of the Meeting. In attendance at the Annual General Meeting were the Board members, CEO, Deputy CEO, CFO and the Board members company’s auditor. The minutes of the Meeting are available in Swedish on Board members are elected every year by the Annual General Meeting Eolus’s website, www.eolusvind.com. All resolutions were made in accor- for the period up until the next Annual General Meeting. According to the dance with the proposals from the Nomination Committee and the Board Articles of Association, the Board is to comprise no fewer than four and of Directors. no more than ten regular members and no more than six deputy members. The Board comprised six members as of the Annual General Meeting A few of the resolutions made by the Meeting include: on January 27, 2018. For a presentation of the Board Chairman and Board • Dividend of SEK 1.50 per share for the 2016/2017 fiscal year. members, see pages 84-85. Eolus’s CEO is not a member of the Board • The Board of Directors is to comprise six members, with no deputy but participates as a rule at the Board meetings as a rapporteur, as do the members. Deputy CEO, CFO and General Counsel. • Re-election of Board members Hans-Göran Stennert, Fredrik Daveby, Sigrun Hjelmquist. Hans Johansson, Hans Linnarson and Bodil Rosvall The work of the Board Jönsson. At the first regular Board meeting following the Annual General Meeting, • Re-election of Hans-Göran Stennert as Board Chairman. Eolus’s Board adopts written instructions that describe the Board’s rules of • Re-election of PricewaterhouseCoopers AB as the company’s auditors procedure. The adopted rules of procedure stipulate the division of duties with Eva Carlsvi as Auditor in Charge. among the Board’s members and how often the Board will convene. Further- • Fees to the Board Chairman, Board members and auditor. more, the rules of procedure regulate the Board’s duties, quorum, instruc- • Rules for the appointment and work of the Nomination Committee. tions for the CEO, the division of responsibilities between the Board and the CEO, and more. The Board has also internally established a Remuneration Committee comprising three members of the Board and an Audit Committee comprising the entire Board.

ANNUAL REPORT EOLUS VIND AB 2017/2018 37 CORPORATE GOVERNANCE REPORT

The Board convenes according to a one-year plan proposed in advance • monitoring and evaluating the application of the guidelines for remunera- and more meetings are arranged as needed. The Board held 12 minuted tion of senior executives decided by the Annual General Meeting as well Board meetings during the 2017/2018 fiscal year. Items on the agenda for as relevant remuneration structures and levels in the company, 2017/2018 included: • ensuring that the company’s auditor submits a written statement to the • Annual accounts including the auditors’ report, the proposed distribution Board no later than three weeks before the Annual General Meeting of profit and the year-end report. regarding whether the guidelines for remuneration of senior executives • Annual report and preparations ahead of the Annual General Meeting. valid since the previous Annual General Meeting have been followed, and • Follow-up with the Auditor in Charge regarding the year’s audit. • carrying out the other duties that are assigned to the Remuneration • Interim reports. Committee in the Swedish Corporate Governance Code and other • Rules of procedure for the Board and CEO. applicable rules and regulations for the company. • Annual review of policies. • Budget. The Remuneration Committee held two minuted meetings during 2017/2018 • Strategic issues and risks. at which all members were in attendance. • Ongoing forecasts. • Outline plans (prioritized projects for the next three years). AUDIT COMMITTEE • Liquidity planning with respect to future prioritized projects. The company has decided that the Board in its entirety will carry out the • Economic climate and conditions. committee’s duties.

In addition to the Board meetings, the Board Chairman and the CEO have The duties that the Board will carry out in this function include: an ongoing dialog regarding the management of the company. The CEO, • monitoring the company’s financial statements, Per Witalisson, is in charge of implementation of the business plan, the day- • monitoring the effectiveness of the company’s internal control and risk to-day management of the company’s affairs and the daily operations of the management in relation to financial reporting and providing recommenda- company. Before Board meetings, the Board receives written information in tions and proposals to ensure the reliability of financial reporting, the form of a CEO report that contains a follow-up of the company’s sales, • annually evaluating the need for an internal audit function that is the operational results, liquidity forecasts, interest rate and currency hedging, responsibility of the Board, details concerning order backlog, the number of wind turbines under con- • remaining informed about the audit of the annual report and consolidated struction as well as comments concerning the various market trends. Prior accounts, and assessing how the audit contributed to the reliability of to the Board meetings, the Board will also have access to the balance financial reporting, sheets and cash flow statements. • regularly meeting the company’s auditor for updates concerning the The Board Chairman presents to the Board the results of the annual scope and methodology of the audit and to discuss the approach to evaluation of the Board’s work. The evaluation includes the composition the company’s risks, of the Board, the individual Board members and the Board’s work and • determining guidelines for non-auditing services that the company may procedures. request from the company’s auditor, The Code contains rules concerning the Board members’ independence • reviewing and monitoring the auditor’s impartiality and independence, and stipulates that the majority of the Board members are to be independent • assisting the Nomination Committee in preparing proposals for the General in relation to the company and company management. At least two of the Meeting’s decisions regarding auditors and fees for the audit assignment, Board members who are independent in relation to the company and com- • executing the other duties of the Audit Committee required by law, the pany management must also be independent in relation to all shareholders Swedish Corporate Governance Code, and other relevant rules and who control ten percent or more of the shares or the votes in Eolus Vind AB. regulations for the company. No more than one person from company management may be a member of the Board. CHIEF EXECUTIVE OFFICER (CEO) The CEO of Eolus is Per Witalisson (born 1971), Master of Business Admin- BOARD ATTENDANCE IN 2017/2018 istration. The Board has adopted instructions for the work and role of the Function Inde- Board Remu- CEO. The CEO is responsible for the day-to-day management of the Group’s pendent1 meeting neration business in accordance with the Board’s guidelines. For a presentation of Committee the CEO, refer to page 30. For remuneration of the CEO, refer to Note 6. Hans-Göran Stennert Chairman 2) 12 of 12 2 of 2 GROUP MANAGEMENT Fredrik Daveby Board member X 12 of 12 2 of 2 Per Witalisson leads the work of Group management and makes decisions Sigrun Hjelmquist Board member X 12 of 12 2 of 2 in consultation with other members of management. Group management Hans Johansson Board member X 11 of 12 consists of four people, in addition to the CEO, Deputy CEO, CFO and Gen- Hans Linnarson Board member X 12 of 12 eral Counsel. During the 2017/2018 fiscal year, management convened on 17 occasions in Hässleholm or Malmö in Sweden. The year’s meetings were Bodil Rosvall Jönsson Board member X 12 of 12 dominated by continuous reconciliation of the rolling business plan, strategy 1) According to the definition in the Swedish Corporate Governance Code. issues and action plans. Standing items on the agenda are minutes from the 2) Not independent (in relation to Eolus’s major shareholders). previous meeting, reports from the operational team, , project devel- opment, establishment, sales and marketing, operation, foreign operations, REMUNERATION COMMITTEE personnel, occupational health and safety and legal issues. The Remuneration Committee comprises Hans-Göran Stennert, Sigrun Hjelmquist and Fredrik Daveby. Hans-Göran Stennert is the Committee’s AUDIT Chairman. The duties of the Remuneration Committee include: At the Annual General Meeting on January 27, 2018, Pricewaterhouse- • preparing and on behalf of the Board make decisions on matters regarding Coopers AB (PwC) was re-elected with Eva Carlsvi as Auditor in Charge. the remuneration policy, remuneration and other terms of employment for The auditors review the annual accounts and the annual report as well senior management including submitting proposals to the Annual General as the company’s ongoing operations and routines in order to express an Meeting on behalf of the Board on the guidelines for remuneration of opinion on the accounts and the administration of the Board of Directors and senior executives that the Annual General Meeting is to resolve on, the CEO. The annual accounts and the annual report are audited in October • monitoring and evaluating any ongoing and during-the-year adopted and November. An examination is then made of whether the Annual General programs for variable remuneration to company management, Meeting’s guidelines for the remuneration of senior executives have been

38 ANNUAL REPORT EOLUS VIND AB 2017/2018 CORPORATE GOVERNANCE REPORT

followed. Eolus’s second-quarter report is reviewed in April and an interim Control environment review is performed in May. In addition to Eolus, Eva Carlsvi is also Auditor The Board’s rules of procedure and the Board’s instructions for the duties in Charge for Bygghemma Group First AB (publ), BE Group AB (publ), of the CEO and the Board’s Committees clearly define the division of respon- E.ON Nordic Aktiebolag and KappAhl AB (publ). Eva Carlsvi is an authorized sibility and powers in order to ensure effective management of risks in the public accountant and member of FAR. In 2017/2018, fees paid to PwC for business operations. In its role as Audit Committee, the Board of Eolus re- non-audit assignments totaled SEK 1.0 M (0.6). views the instructions and procedures used in the financial reporting process as well as accounting policies and any amendments of these. The CEO REMUNERATION reports to the Board of Directors, according to established procedures, on the operations and financial performance prior to every Board meeting. Remuneration of the Board Internal control instruments for financial reporting mainly comprise the Fees and other remuneration of the Board, including the Chairman of Eolus’s finance and risk policy, information and insider policy and the Group’s Board, are determined by the Annual General Meeting. The Annual General accounting manual, which defines the accounting and reporting rules. Meeting on January 27, 2018, resolved on total annual fees of KSEK 1,100, of which KSEK 350 was to be paid to Board Chairman and KSEK 150 to Risk assessment each of the other Board members. For more information about remuneration Significant risks for the operations are analyzed by the Board of Directors of the Board, refer to Note 6. as part of financial reporting. These are described in the Company’s guide- lines for risk management and internal control. The risk areas are document- Remuneration of senior executives ed on the basis of probability and their probable impact. Based on this, Remuneration of the CEO and other members of Group Management control processes are designed to ensure high-quality financial reporting. (currently the Deputy CEO, CFO and General Counsel) is paid in accordance with the guidelines for remuneration of senior executives. The guidelines Control structures were adopted by the Annual General Meeting on January 27, 2018, for the The organizational structure, and the division of responsibility and rules of period up until the next Annual General Meeting. authorization, are clearly described and communicated through instructions. According to the guidelines, senior executives shall be offered market- The operations are organized into segments that are monitored. The compa- based and competitive remuneration. The level of remuneration for individual ny performs an annual self-assessment of internal controls in management, executives is to be based on such factors as position, expertise, experience core and support processes. The results of these self-assessments form and performance. Remuneration includes fixed salary and pension benefits, the basis for ongoing improvement initiatives within risk management and and may also include variable salary and other non-monetary benefits. The internal control. company shall be able to offer all senior executives maximum variable remu- neration of one monthly salary per year. Information and communication Variable salary shall be based on the achievement of one or more quan- An accounting manual with guidelines and instructions for financial reporting titative and/or qualitative targets. The targets shall be formulated with the has been produced. The accounting manual is continuously updated and objective of promoting the company’s long-term value creation. Furthermore, issued to the relevant employees at Eolus. Prior to all quarterly financial the company shall also be able to offer senior executives a share ownership statements and the annual accounts, specific written instructions are also program under which the company, three years after payment of variable provided to ensure accurate information in the external reporting. remuneration, will reimburse the cost of acquiring half as many shares as the External communication is governed by Eolus’s information and insider executive acquired for their variable remuneration and continues to hold. For policy and communication plan, which address responsibilities, procedures more information about remuneration of senior executives, refer to Note 6. and rules. The policy is continuously evaluated to ensure that information to the stock market maintains high quality and is in accordance with the stock Remuneration of auditors exchange’s rules. Financial information such as quarterly reports, annual Fees for the audit assignment are paid against invoice and amounted to reports and significant events are published through press releases, and SEK 0.5 M for the 2017/2018 fiscal year. For the 2017/2018 fiscal year, fees on Eolus’s website. Meetings with financial analysts are arranged regularly paid to PwC for non-audit assignments totaled SEK 1.0 M. For more infor- in conjunction with the publication of quarterly reports. mation about the remuneration of auditors, refer to Note 7. Monitoring THE BOARD’S DESCRIPTION OF INTERNAL CONTROL Group management continuously analyzes the financial performance of OVER FINANCIAL REPORTING FOR THE 2017/2018 the Group’s segments. At all levels of the organization, continuous monitor- FISCAL YEAR ing is generally performed through comparisons against budget, forecasts The Board’s responsibility for internal control is governed by the Swedish and plans, as well as evaluation of key figures. Companies Act and Swedish Corporate Governance Code. This includes Prior to Board meetings, the Board receives financial reporting on monitoring Eolus’s financial reporting and the effectiveness of the company’s Eolus’s performance. In addition to formal reporting, there are informal internal control and risk assessment. information channels to the CEO and the Board for significant information Internal control over financial reporting aims to provide reasonable from employees. The Board continuously evaluates the information provided assurance of the reliability of the external financial reporting in the form of by the CEO. This involves ensuring that measures are taken in regard to any annual reports and interim reports published by Eolus every year, and that shortcomings and proposed measures that have arisen during the internal financial reporting is prepared in accordance with the law, applicable ac- control and external audit. counting standards and other requirements for listed companies. Internal The Board and the auditor engage in regular dialog. All members of control is also aimed at ensuring high-quality financial reporting to company the Board and the auditor receive a copy of interim reports before they are management and the Board so that decisions can be made on correct published. The Board and the auditor meet at least once per year, without grounds. the presence of management. To describe internal control over financial reporting, Eolus proceeds from the five components of internal control defined in the COSO Internal Control-Integrated Framework – Control Environment, Risk Assessment, INTERNAL AUDIT OPINION Control Activities, Information and Communication, and Monitoring Activities. To date, the Board has not found any reason to establish an internal audit The description below therefore relates to Eolus’s internal control system in function, as the above functions are deemed to fulfil this duty. However, relation to the 2013 edition of the COSO Framework. the Board annually evaluates the need for such a function.

ANNUAL REPORT EOLUS VIND AB 2017/2018 39 CONSOLIDATED STATEMENT OF INCOME

CONSOLIDATED STATEMENT OF INCOME

KSEK Note 2017/2018 2016/2017

Net sales 3 1,365,977 1,065,668 Other operating income 8 22,533 17,379 Total operating income 1,388,511 1,083,047

Change in inventories of wind turbines, wind turbines under construction and projects under development 171,724 -183,858 Cost of goods and project development -1,248,858 -739,026 Other external expenses 7, 14 -51,542 -54,382 Employee benefits expenses 5, 6 -32,702 -30,650 Depreciation and impairment of property, plant and equipment 13 -14,765 -23,423 Profit/loss from participations in associated companies 18 -4,589 -2,570 Other operating expenses 8 -5,367 -8,904 Total operating expenses -1,186,100 -1,042,814 Operating profit 202,411 40,233

Interest income 9 2,727 2,187 Interest expense 9 -6,586 -7,464 Other financial items 9 327 -732

Loss from financial items -3,532 -6,009 Profit before tax 198,879 34,224

Tax 11 -4,566 -9,720 Net profit for the year 194,313 24,504

Attributable to Parent Company shareholders 194,460 25,317 Attributable to non-controlling interests -147 -813 Total 194,313 24,504

Earnings per share, before and after dilution 22 7.81 1.02

40 ANNUAL REPORT EOLUS VIND AB 2017/2018 CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

KSEK Note 2017/2018 2016/2017

Net profit for the year 194,313 24,504

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 -538 172 Total other comprehensive income -538 172

Comprehensive income for the year 193,775 24,677

Attributable to Parent Company shareholders 193,582 25,729 Attributable to non-controlling interests 193 -1,053 Total 193,775 24,677

ANNUAL REPORT EOLUS VIND AB 2017/2018 41 CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

KSEK Note Aug 31, 2018 Aug 31, 2017

ASSETS

Non-current assets Intangible assets 12 96,162 - Property, plant and equipment 13 52,024 111,443 Participation in associated companies 18 37 3,763 Deferred tax assets 11 3,095 2,236 Other financial assets 25 25,953 30,517 Total non-current assets 177,271 147,959

Current assets Wind turbine inventories, wind turbines under construction and projects under development 19 574,666 344,840 Advance payments to suppliers 307,225 128,435 Accounts receivable 20, 25 53,018 25,686 Other current receivables 20, 25 37,023 44,493 Prepaid expenses and accrued income 21, 25 5,973 7,840 Cash and cash equivalents 25 739,825 201,509 Total current assets 1,717,730 752,805

TOTAL ASSETS 1,895,002 900,764

42 ANNUAL REPORT EOLUS VIND AB 2017/2018 CONSOLIDATED STATEMENT OF FINANCIAL POSITION

KSEK Note Aug 31, 2018 Aug 31, 2017

EQUITY AND LIABILITIES

Equity Share capital 22 24,907 24,907 Additional paid-in capital 190,843 190,843 Reserves -496 369 Retained earnings 598,759 441,673 Equity attributable to Eolus’s shareholders 814,013 657,791 Non-controlling interests 1,912 1,719 Total equity 815,924 659,510

Non-current liabilities Non-current interest-bearing liabilities to credit institutions 23, 25, 27 81,780 12,740 Non-current provisions 24 2,107 3,789 Deferred tax liabilities 11 39,994 57,291 Other non-current liabilities 23, 27 264 797 Total non-current liabilities 124,145 74,617

Current liabilities Current interest-bearing liabilities to credit institutions 23, 25, 27 286,960 21,169 Accounts payable 25 140,806 28,276 Derivative instruments 25 12,647 15,097 Current tax liabilities 35,099 15,598 Accrued expenses and deferred income 21, 25 61,606 32,483 Advance payments from customers 318,782 51,300 Other current liabilities 25 99,031 2,714 Total current liabilities 954,932 166,637

TOTAL EQUITY AND LIABILITIES 1,895,002 900,764

ANNUAL REPORT EOLUS VIND AB 2017/2018 43 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Share Additional Reserves Retained Total, Non- Total capital paid-in earnings Eolus’s controlling equity capital share- interests KSEK Note 22 holders

At September 1, 2017 24,907 190,843 369 441,673 657,791 1,719 659,510 Net profit for the year 194,460 194,460 -147 194,313 Other comprehensive income -864 -14 -878 340 -538 Total comprehensive income -864 194,446 193,582 193 193,775 Transactions with shareholders Dividends -37,361 -37,361 -37,361 At August 31, 2018 24,907 190,843 -496 598,759 814,013 1,912 815,924

Share Additional Reserves Retained Total, Non- Total capital paid-in earnings Eolus’s controlling equity capital share- interests KSEK Note 22 holders

At September 1, 2016 24,907 190,843 -42 455,315 671,026 140 671,166 Net profit 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

44 ANNUAL REPORT EOLUS VIND AB 2017/2018 CONSOLIDATED CASH FLOW STATEMENT

CONSOLIDATED CASH FLOW STATEMENT

KSEK Note 2017/2018 2016/2017

Operating activities Operating profit/loss 202,411 40,233 Non-cash items 26 15,399 23,715 217,810 63,948

Interest received 2,667 730 Interest paid -7,174 -8,632 Income tax paid -3,424 -1,175 Net cash flow from operating activities before changes in working capital 209,879 54,871

Adjustments of working capital Increase/decrease in wind turbine inventories, wind turbines under construction, projects under development and advance payments to suppliers -347,147 335,260 Increase in operating receivables -11,975 -22,429 Decrease/increase in operating liabilities 390,967 -276,732 Cash flow from operating activities 241,724 90,971

Cash flow from investing activities Acquisition of participations in subsidiaries/asset acquisitions - -4,009 Acquisition of property, plant and equipment 13 -1,388 -6,698 Sale of property, plant and equipment 13 437 606 Sale of financial assets - 383 Cash flow from investing activities -952 -9,718

Cash flow from financing activities Borrowings 23, 27 360,000 - Repayment of loans 23, 27 -25,807 -47,865 Redemption derivative instruments - -15,810 Dividends -37,361 -37,361 Cash flow from financing activities 296,832 -101,036

Cash flow for the year 537,604 -19,784 Cash and cash equivalents at beginning of year 201,509 221,549 Exchange rate differences in cash and cash equivalents 712 -256 Cash and cash equivalents at year-end 739,825 201,509

ANNUAL REPORT EOLUS VIND AB 2017/2018 45 PARENT COMPANY INCOME STATEMENT

PARENT COMPANY INCOME STATEMENT

KSEK Note 2017/2018 2016/2017

Net sales 4 1,115,620 910,062 Change in wind turbine inventories, wind turbines under construction and projects under development 209,495 -155,556 Other operating income 8 20,420 16,974 Total operating income 1,345,535 771,480

Cost of goods and project development -1,194,017 -624,097 Other external expenses 7, 14 -31,378 -33,439 Employee benefits expenses 5, 6 -25,429 -30,112 Depreciation and impairment of property, plant and equipment 13 -5,524 -4,673 Other operating expenses 8 -12,033 -10,294 Total operating expenses -1,268,381 -702,615 Operating profit 77,154 68,865

Profit from participations in Group companies 16 209,898 21,109 Interest income 9 582 470 Interest expense 9 -2,232 -1,586 Other financial items 9 3,467 -6,298

Loss from financial items 211,715 13,695

Profit after financial items 288,869 82,560 Appropriations 10 20,484 89,547 Profit before tax 309,353 172,107

Tax on profit for the year 11 -23,008 -34,396 Net profit for the year 286,345 137,711

46 ANNUAL REPORT EOLUS VIND AB 2017/2018 PARENT COMPANY STATEMENT OF OTHER COMPREHENSIVE INCOME

PARENT COMPANY STATEMENT OF OTHER COMPREHENSIVE INCOME

KSEK Note 2017/2018 2016/2017

Net profit for the year 286,345 137,711

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 286,345 137,711

ANNUAL REPORT EOLUS VIND AB 2017/2018 47 PARENT COMPANY BALANCE SHEET

PARENT COMPANY BALANCE SHEET

KSEK Note Aug 31, 2018 Aug 31, 2017

ASSETS

Intangible assets 12 96,162 -

Property, plant and equipment Land and buildings 13 221 221 Wind turbines 13 5,458 35,477 Equipment 13 6,285 3,027 Constructions in progress 13 - 4,799 11,964 43,524 Financial assets Participations in Group companies 16 64,529 137,698 Participations in associated companies 18 - 3,725 Other securities held as non-current assets 15 722 1,242 Deferred tax assets 11 71 238 Other non-current receivables 5,000 5,000 70,322 147,903

Total non-current assets 178,448 191,427

Inventories, etc. Wind turbine inventories - 9,325 Wind turbines under construction and projects under development 392,045 173,705 Advance payments to suppliers 304,490 125,804 696,535 308,834 Current receivables Accounts receivable 51,505 23,760 Receivables from Group companies 388,519 161,712 Current tax assets - - Other current receivables 13,299 18,723 Prepaid expenses and accrued income 2,145 4,530 455,468 208,725

Cash and cash equivalents 709,331 181,385 Total current assets 1,861,334 698,944

TOTAL ASSETS 2,039,782 890,371

48 ANNUAL REPORT EOLUS VIND AB 2017/2018 PARENT COMPANY BALANCE SHEET

KSEK Note Aug 31, 2018 Aug 31, 2017

EQUITY AND LIABILITIES

Restricted equity 22 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 293,773 193,423 Net profit for the year 286,345 137,711 748,781 499,797

Total equity 795,947 546,963

Untaxed reserves 10 140,457 142,951 Provisions 24 511 1,449

Non-current liabilities to credit institutions 23 75,000 -

Current liabilities Liabilities to credit institutions 23 285,000 - Advance payments from customers 203,782 51,300 Accounts payable 137,872 26,159 Liabilities to Group companies 208,960 64,210 Current tax liabilities 34,954 23,693 Other liabilities 97,862 2,454 Accrued expenses and deferred income 21 59,437 31,192 Total current liabilities 1,027,867 199,008

TOTAL EQUITY AND LIABILITIES 2,039,782 890,371

ANNUAL REPORT EOLUS VIND AB 2017/2018 49 PARENT COMPANY STATEMENT OF CHANGES IN EQUITY

PARENT COMPANY STATEMENT OF CHANGES IN EQUITY

Share capital Additional Reserves Retained Total equity KSEK Note 22 paid-in capital earnings

At September 1, 2017 24,907 22,259 168,663 331,134 546,963 Net profit for the year 286,345 286,345 Total comprehensive income 286,345 286,345 Transactions with shareholders Dividends -37,361 -37,361 At August 31, 2018 24,907 22,259 168,663 580,118 795,947

Share capital Statutory Share premium Retained Total equity KSEK Note 22 reserve reserve 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

50 ANNUAL REPORT EOLUS VIND AB 2017/2018 PARENT COMPANY CASH FLOW STATEMENT

PARENT COMPANY CASH FLOW STATEMENT

KSEK Note 2017/2018 2016/2017

Operating activities Operating profit/loss 77,154 68,865 Non-cash items 26 9,234 9,860 86,388 78,725

Interest received 582 485 Interest paid -2,800 -3,292 Income tax paid -11,580 14,736 Net cash flow from operating activities before changes in working capital 72,590 90,654

Adjustments of working capital Increase/decrease in wind turbine inventories, wind turbines under construction, projects under development and advance payments to suppliers -386,079 230,507 Increase in operating receivables -246,743 -81,668 Increase/decrease in operating liabilities 644,702 -276,104 Cash flow from operating activities 84,470 -36,611

Cash flow from investing activities Shareholders’ contributions 16 - 545 Acquisition of participations in subsidiaries 250 -150 Divestment of participations in subsidiaries - 110 Acquisition of property, plant and equipment 13 -1,054 -6,034 Sale of property, plant and equipment 13 23,101 26,162 Cash flow from investing activities 22,297 20,633

Cash flow from financing activities Borrowings 23 360,000 - Group contributions received/paid 98,540 23,255 Dividends -37,361 -37,362 Cash flow from financing activities 421,179 -14,106

Cash flow for the year 527,946 -30,084 Cash and cash equivalents at beginning of year 181,385 211,469 Cash and cash equivalents at year-end 709,331 181,385

ANNUAL REPORT EOLUS VIND AB 2017/2018 51 NOTES

NOTES

NOTE 1 GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES

The Parent Company, Eolus Vind AB, Corporate Registration Number as opposed to the existing basis of transfer of risks and benefits. IFRS 15 556389-3956, is a limited liability company registered and headquartered introduces a new method for determining when and how revenue is to be in Sweden. The Group’s main operations comprise the development, divest- recognized. Eolus has two significant income streams that could be impact- ment and establishment of wind turbines and performance of operating ser- ed by IFRS 15. vices on behalf of wind farm owners. The address of the head office is Tredje Avenyen 3, Hässleholm, Sweden, under the postal address Box 95, Revenue from transfer of project rights and signed SE-281 21 Hässleholm, Sweden. The company is listed on Nasdaq construction contracts Stockholm. Revenue from wind farm contracts whereby the customer takes over the The Board of Directors approved these consolidated financial state- project rights and signs a construction contract with Eolus was recognized ments and the financial statements for the Parent Company on November under IAS 18 and IAS 11 on the sale of the project company that normally 28, 2018 and they will be presented for adoption at the Annual General includes project rights and permits for the farm, and on the date of the han- Meeting on January 26, 2019. dover of the wind farm under the construction contract with Eolus for the The most important accounting policies applied to the preparation of construction of the wind farm. Under IFRS 15, revenue is to be recognized these consolidated financial statements are stated below. These policies either by Eolus satisfying the performance obligation over time (successively) were applied consistently for all years presented, unless otherwise stated. or at a point in time. Since the construction contracts entail that Eolus carries out work on land that the customer controls under leases, Eolus creates REGULATIONS APPLIED TO THE CONSOLIDATED an asset that the customer controls as the asset is completed. In turn, this FINANCIAL STATEMENTS means that Eolus will apply the percentage of completion method from The consolidated financial statements were prepared in accordance with September 1, 2018. International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) as adopted by the EU. Furthermore, the Revenue from transfer of wind farms being built Swedish Annual Accounts Act and recommendation RFR 1 Supplementary Revenue from wind farm contracts whereby Eolus establishes the wind farm Accounting Rules for Groups were applied. on the customer’s behalf was recognized under IAS 18 and IAS 11 on the date of the handover of the wind farm. Under IFRS 15, revenue is to be rec- BASIS FOR THE PREPARATION OF THE CONSOLIDATED ognized over time (successively) for a successive transfer of control in the FINANCIAL STATEMENTS accounts if Eolus does not have any alternative use for the sold wind farm The consolidated financial statements are based on historical cost, unless and Eolus is entitled to receive payment from the customer for the work otherwise stated. The Group’s presentation currency is SEK, which is the performed at any time. If one of these criteria is not fulfilled, revenue is to Parent Company’s functional currency. All figures are presented in thousands be recognized on completion and handover to the customer, following the of SEK (KSEK), unless otherwise stated. current process. Since Eolus contracts the delivery of a certain wind farm to the customer, Eolus does not normally under IFRS 15’s definition have any INTRODUCTION OF NEW ACCOUNTING POLICIES alternative use for the sold wind farm. The extent to which Eolus is entitled to The Group has decided to comment only on standards and interpretations receive payment for work performed at any time depends on the contractual that are deemed to be, or may in the future be, relevant to the Group and terms and the legislation applicable at any time, and is an assessment that is its operations. to be made on a contract-by-contract basis. The standards, interpretations and amendments that are to be applied on or after the 2018/2019 fiscal year are currently being evaluated. Other Accounting policies for revenue under IFRS 15 from than that which is stated below, the initial assessment is that they will not September 1, 2018 have any significant impact on the consolidated financial statements. Percentage of completion for construction of wind farms When applying the percentage of completion method, earnings are generat- IFRS 9 FINANCIAL INSTRUMENTS ed in line with the degree of completion of the wind farm. Information about IFRS 9 is mandatory for fiscal years beginning on or after January 1, 2018. the following components is required to determine the earnings This standard addresses the recognition, measurement and impairment of generated at any given time: financial assets and liabilities and introduces new rules on hedge accounting. • Revenue from construction: the nature of revenue must be that Eolus IFRS 9 replaces the parts of IAS 39 that address the recognition and mea- can credit the revenue in the form of actual payments or consideration surement of financial instruments and introduces a new impairment model. to the company. In accordance with the standard’s transition rules, Eolus will not restate com- • Expense: expenses attributable to Eolus’s construction corresponding parative figures for the 2017/2018 fiscal year. The new recognition and mea- to the revenue. surement rules will not have a material impact on Eolus’s financial position • Degree of completion: stages of completion of wind farms. on the transition date since the regulations will not entail any change to the recognition or measurement of the financial instruments. IFRS 9 introduces The fundamental condition for the percentage of completion method is that a new impairment model that is based on expected credit losses, instead it must be possible to reliably quantify revenue and expenses based on the of incurred credit losses, and that takes into account future information. degree of completion. The effect of the percentage of completion method There will be no material impairment effect for Eolus. Hedge accounting is that the earnings trend of construction in progress is directly reflected in is not currently applied and thus will not impact Eolus’s financial position the accounts. Percentage of completion involves an element of uncertainty. either. Sometimes unforeseen events occur that make the end result of construction projects either higher and lower than expected. It is particularly difficult to IFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERS assess results at the start of construction projects and for projects that ex- From 2018, IFRS 15 Revenue from Contracts with Customers replaces tend over a long period of time. Provisions for losses are established as existing standards related to revenue recognition, such as IAS 18 Revenue soon as they become known. and IAS 18 Construction Contracts. IFRS 15 is based on revenue being Balance sheet items, accrued income and advance payments from cus- recognized when control of the good or service is passed to the customer, tomers will be recognized net on a project-by-project basis. The construction

52 ANNUAL REPORT EOLUS VIND AB 2017/2018 NOTES

projects that have higher accrued income than advance payments from ed as share transactions. These transactions are classified as asset customers will be recognized as current assets, while the projects that acquisitions since the main aim is to acquire wind power facilities and have higher advance payments from customers than accrued income will there are either no other operations or administration, or these are of minor be classified as non-interest-bearing current liabilities. importance. The assets that are acquired in this manner are measured at fair value in the consolidated financial statements, and no goodwill arises. Financial effects of transition to IFRS 15 Eolus will apply the percentage of completion method for construction proj- Associated companies ects, once the terms have been fulfilled, for the fiscal year beginning Septem- Associated companies are all companies over which the Group exercises a ber 1, 2018. Total revenue for a contract will remain unchanged and will not significant but not a controlling influence, which generally applies to share- impact Eolus’s cash flows. We have completed our assessment of the finan- holdings comprising between 20% and 50% of the votes. Holdings in asso- cial effects of the transition to the percentage of completion method. Since ciated companies are recognized in accordance with the equity method and work on construction in progress commenced on September 1, 2018, but are initially measured at cost and, thereafter, the carrying amount is increased no stages have been completed, there will be no change to the financial or decreased to recognize the Group’s share of the associated company’s statements on the transition to IFRS 15. However, opening equity will be profit or loss after the acquisition date. The Group’s carrying amounts for negatively impacted by approximately SEK 20 M on September 1, 2018 holdings in associated companies include goodwill identified on acquisition. due to a variable parameter for determining the final price in a contract with a customer. Non-controlling interests Non-controlling interests are the portion of the earnings and net assets of IFRS 16 LEASES a non-wholly owned subsidiary that accrue to other owners than Parent Eolus is making preparations for the introduction of IFRS 16, which will come Company shareholders. Their share of earnings is included in net profit for into force on September 1, 2019. An assessment of how the standard will the year in the consolidated income statement and the share of net assets impact the balance sheet is continuing. Based on the preliminary assess- is included in equity in the consolidated statement of financial position. ment, the change in the recognition of leases will require capitalization of leases in an insignificant amount compared with the total assets. Under the Translation of accounts of foreign subsidiaries new standard, lease payments will be divided in two: amortization and inter- Items in the subsidiaries’ balance sheets are presented in their respective est expense, compared with the current standard under which they are rec- functional currencies, which is normally the same as the local currency in ognized as operating expenses. The exceptions are leases with a term of that specific country. The Group’s financial statements are presented in SEK, 12 months or less and leases of low value. Eolus intends to introduce the which is the Parent Company’s functional currency. The income statements standard based on the simplified transition method, entailing that the com- and balance sheets of the foreign subsidiaries are translated to SEK. The parative year is not restated and instead the accumulated effect is adjusted balance sheets are translated at the closing day rate. The income statements in the opening balance of retained earnings on August 31, 2019. are translated at the average exchange rate for the period. Exchange rate differences arising on translation do not impact net profit for the year and CONSOLIDATION BASIS instead are recognized in other comprehensive income in the consolidated The consolidated financial statements encompass the Parent Company financial statements. The foreign exchange rates recognized under the and its subsidiaries. The financial statements for the Parent Company and section “Receivables and liabilities in foreign currencies” were used. subsidiaries included in the consolidated financial statements pertain to the same period and have been prepared in accordance with the same RECEIVABLES AND LIABILITIES IN FOREIGN CURRENCIES accounting policies as for the Group. Receivables and liabilities in foreign currencies are translated at the closing day rate, and unrealized exchange rate gains and losses are included in Subsidiaries profit or loss. Subsidiaries are defined as all companies over which the Group exercises a controlling influence. The Group controls a company when the Group is ex- EUR NOK USD posed to, or has rights to, variable returns from its holding in the company and has the ability to impact those returns through exercising its influence Closing day rate, Aug 31, 2018 10.6372 1.0929 9.1044 over the company. Subsidiaries are included in the consolidated financial Average exchange rate for the statements from the acquisition date, meaning the date on which the Group period 2017/2018 10.0493 1.0497 8.4305 gains a controlling influence, and are included in the consolidated financial Closing day rate, Aug 31, 2017 9.4839 1.0211 7.9725 statements until the date on which the controlling influence ceases. Business combinations are recognized in accordance with the acquisi- Average exchange rate for the period 2016/2017 9.6278 1.0497 8.7713 tion method. The purchase consideration comprises the fair value of ac- quired assets, liabilities and issued shares. The purchase consideration also includes the fair value of all assets and liabilities that are part of any contract- RELATED-PARTY TRANSACTIONS ed, contingent purchase considerations. Acquisition-related costs are ex- Transactions with related parties take place are subject to market-based pensed when they arise and are recognized as other expenses. Identifiable conditions. Related parties refer to the companies over which the Group assets acquired and liabilities assumed are initially measured at fair value exercises a controlling or significant influence in terms of operational and on the acquisition date. For each acquisition, the Group determines whether financial decision-making. The sphere of related parties also includes the all non-controlling interests in the acquired company are measured at fair companies and natural persons who have the opportunity to exercise a value or at the proportionate share of net assets of the acquired company. controlling or significant influence over the Group’s financial and operational The amount by which the purchase consideration, any non-controlling decisions. 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. SEGMENT REPORTING If the amount is less than the fair value of the acquired subsidiary’s assets, Operating segments are recognized in a manner that corresponds to the the difference is recognized directly in the statement of comprehensive internal reporting to the chief operating decision maker (CODM). The CODM income. is the function that is responsible for allocating resources and assessing the In accordance with common practice in the industry, wind power proj- performance of the operating segments. For the Group, this function has ects are often conducted in separate companies. This means that acquisi- been identified as the CEO. tions and divestments of projects and completed wind turbines are conduct-

ANNUAL REPORT EOLUS VIND AB 2017/2018 53 NOTES

Eolus’s operating segments are described in Note 3 and comprise: PROPERTY, PLANT AND EQUIPMENT • Project development involving pre-study, project development, divestment Property, plant and equipment are recognized at cost less accumulated and establishment of wind power facilities. This also includes technical depreciation and any impairment. Expenses for improving the performance and management consultancy services for wind power stakeholders. of the assets beyond the original level increase the carrying amount of the • Asset management which pertains to full asset management services assets. Expenses for repairs and maintenance are recognized as costs in for external and internal wind power facilities. profit or loss. • Electricity generation encompassing the operation of wholly or partly Property, plant and equipment are depreciated systematically over the owned wind turbines, the sale of and electricity certificates estimated useful lives of the assets. The useful life is tested at the end of ev- pertaining to these wind turbines. ery accounting period and is adjusted as necessary. Any residual value of the asset is taken into account when determining the depreciable amount of the CASH FLOW STATEMENT asset. The straight-line depreciation method is applied to all types of assets. The cash flow statement was prepared in accordance with the indirect meth- od. The recognized cash flow only includes transactions entailing incoming The following depreciation periods are applied: and outgoing payments. Cash and cash equivalents are included in cash Number of years and bank balances, and current investments with insignificant value fluctua- Buildings and land improvements 20 years tions and original due dates of less than three months. Wind turbines, foundations and electrical installations 20 years Equipment 5 years REVENUE Revenue is recognized to the extent that it is probable that the economic IMPAIRMENT OF NON-FINANCIAL ASSETS benefits will accrue to the Group and if revenue can be reliably measured. If there is an indication that an asset subject to depreciation has declined Revenue is measured at the fair value of what has been received or will be in value, the recoverable amount of the asset is calculated. The asset is received, excluding value-added tax. Sales proceeds are recognized when impaired to its recoverable amount if the calculated recoverable amount is the following criteria have been fulfilled: less than the carrying amount. The recoverable amount is the highest of the net realizable value and value in use in the operations. Sale of wind power facilities For wind power facilities recognized as non-current assets or invento- Revenue is recognized when the material risks and benefits associated with ries, impairment testing takes place at the end of every quarter by preparing ownership of the facilities have been transferred to the purchaser and when calculations showing the remaining expected cash flows of each asset. The the amount of revenue can be reliably measured. The projects comprise key parameters in preparing these calculations are the assumptions regard- three phases: pre-study, project development and establishment. The estab- ing future generation, remaining service lives, the market prices of electricity lishment stage is completed after final commissioning. Revenue is recog- and electricity certificates, operating expenses and the discount rate. nized in net sales in connection with handover to the customer. For cases in which the customer takes over the project rights and signs a construction FINANCIAL ASSETS contract with Eolus, revenue is recognized on the sale of the project compa- ny that normally includes project rights and permits for the farm, and on the Classification date of the handover of the wind farm under the construction contract with The Group classifies its financial assets in the following categories. Eolus for the construction of the wind farm. Since there are relatively few, • Available-for-sale financial assets. but large, projects in the establishment stage at any one time, sales and • Financial assets measured at fair value through profit or loss. earnings may vary considerably from quarter to quarter and fiscal year to • Loan receivables and accounts receivable measured at amortized cost fiscal year. The project development operations are mainly financed by using the effective interest method. equity, advance payments from customers and credit facilities. Classification depends on the purpose for which the financial asset was Sale of administrative and technical management services acquired. The classification of financial assets is determined when they Revenue from administrative and technical management services is recog- are first recognized. nized in the period in which the services were essentially carried out. All purchases and sales of financial assets are recognized on the transaction date. Sale of electricity Revenue attributable to the sale of produced electricity is recognized in the Available-for-sale financial assets period in which delivery is made. 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 the Interest other categories. The Group’s available-for-sale financial assets comprise Interest income is recognized as financial income through application of the securities. effective-interest method. Financial assets measured at fair value through profit or loss Dividends Financial assets measured at fair value through profit or loss are financial Dividends are recognized in profit or loss when the shareholders’ rights to assets held for trading. A financial asset is classified in this category if it was receive payment have been determined. principally acquired for the purpose of being sold within the near future. Derivatives are always classified as held for trading. Assets in this category INTANGIBLE ASSETS are classified as current assets if they are expected to be settled within In connection with the divestment of the Jenåsen wind farm, Eolus acquired 12 months, otherwise they are classified as non-current assets. the right to 96% of the electricity certificates that the wind farm will generate The Group’s assets in this category comprise currency futures and inter- over the 15-year certificate period. This right was acquired for a non-recur- est rate derivatives. The Group does not apply hedge accounting. Gains and ring amount and recognized as an intangible asset. Electricity certificates are losses arising as a result of changes in fair value attributable to the category recognized as inventory as they are issued, at which point production-based of financial assets measured at fair value through profit or loss are recognized amortization of the intangible asset item will take place. in the periods in which they arise. Changes in the fair value of currency deriv- atives are recognized in profit or loss under other income/expenses.

54 ANNUAL REPORT EOLUS VIND AB 2017/2018 NOTES

Loan receivables and accounts receivable measured at fair value are classified either as fair value in profit or loss Loan receivables and accounts receivable are non-derivative financial assets or available for sale. Measurement can be based on any of the following that have fixed or fixable payments that are not listed on an active market. conditions: Loan receivables and accounts receivable are initially measured at fair • Quoted market prices (unadjusted) in active markets for identical assets value and are subject to regular and systematic analysis to determine the or liabilities (level 1). amounts at which the receivables are expected to be received. If a loan • Inputs other than quoted prices that are observable for the asset or liabili- receivable is deemed to be doubtful, a reserve is established comprising ty, either directly (quoted prices) or indirectly (derived from quoted prices) the difference between the carrying amount and the expected cash flow. (level 2). Losses attributable to doubtful receivables are recognized in profit or loss • Unobservable market inputs for the asset or liability (level 3). under other operating expenses, refer to Note 8. Any interest income on loan receivables is included in financial income. The fair value of financial instruments traded in an active market is based The Group’s accounts receivable, other current receivables, blocked on quoted market prices on the balance sheet date. A market is considered bank balances and accrued interest income are included in this category. to be active if quoted prices from a stock exchange, broker, industrial group, pricing service or supervisory authority are readily and regularly available and Recognition and measurement these prices represent actual and regularly occurring market transactions at Purchases and sales of financial assets are recognized at the trade date, arm’s length. The fair value of financial instruments not traded in an active that is, the date on which the Group commits to purchase or sell the asset. market (for example, OTC derivatives) is determined using valuation tech- Financial instruments are initially measured at fair value plus transaction niques. Market information is used for this as far as possible when it is avail- costs, which applies to all financial assets not measured at fair value through able, whereas company-specific information is used as little as possible. profit or loss. Financial assets measured at fair value through profit or loss If all significant inputs required for measurement are observable, then level 2 are initially measured at fair value, while attributable transaction costs are measurement is applied. The fair value of unquoted securities is based on recognized in profit or loss. Financial assets are derecognized from the cash flows discounted at an interest rate based on the market interest rate balance sheet when the right to receive cash flows from the instrument has and a risk mark-up specific to these unquoted securities. The fair value of expired or been transferred and the Group has assumed essentially all risks currency futures is determined by using the exchange rates for currency and benefits connected with the right of ownership. Financial assets mea- futures on the balance sheet date where the resulting value is discounted sured at fair value through profit or loss are measured at fair value after the to the present value, meaning level 2. Eolus currently recognizes all financial date of acquisition. Loan receivables and accounts receivable are initially instruments at level 2. recognized after the date of acquisition at amortized cost by applying the If one or more significant inputs are not based on observable market effective interest method. Dividend income from securities is recognized information, the instrument in question is classified as level 3. Eolus does in profit or loss as a portion of financial income once the Group’s right to not currently recognize any financial instruments belonging to this category. receive payment has been established. No reclassifications between the various categories took place during the period. Impairment principles for financial assets – Loan receivables and accounts receivable WIND TURBINE INVENTORIES, WIND TURBINES UNDER At the end of each reporting period, the Group assesses whether there is CONSTRUCTION AND PROJECTS UNDER DEVELOPMENT objective evidence that a financial asset or group of financial assets requires Wind turbine inventories are the wind turbines that are available for sale, impairment. A financial asset or group of financial assets requires impairment but that are operational and generate electricity because they have not been and is impaired only if there is objective evidence of an impairment require- divested. At the end of every quarter, a wind turbine that has not been ment due to one or more events having occurred after the asset was first divested after 12 months is reclassified from an inventory to a tangible asset. recognized (a loss event) and that this event (or these events) has an effect, An exception can be made if divestment discussions are advanced and ex- that can be reliably estimated, on the estimated future cash flows for the pected to lead to divestment of the turbine in the near future. financial asset or group of financial assets. Wind turbines classified as inventories have been measured at adjusted For the loan receivables and accounts receivable categories, impair- cost, meaning that the carrying amount of each wind turbine is adjusted ment is calculated as the difference between the carrying amount of the each quarter to meet the decline in value that takes place. The procedure asset and the present value of estimated future cash flows (excluding future is described in more detail under the heading “Impairment of non-financial loan losses that have not occurred), discounted to the original effective assets.” interest of the financial asset. The asset’s carrying amount is impaired and Wind turbines classified as non-current assets are reclassified to wind this impairment loss is recognized in the consolidated income statement. turbine inventories before being divested. Reclassification also takes place in cases where divestment discussions are advanced and expected to lead FINANCIAL LIABILITIES to divestment of the turbine in the next quarter. Sales of wind turbines in The Group’s financial liabilities are divided into two categories: inventories are recognized under net sales. • Financial liabilities measured at fair value through profit or loss. Wind turbines under construction are wind turbines that are being built. • Financial liabilities measured at amortized cost. Projects under development are the project development activities being conducted. All projects that have incurred costs of at least KSEK 10 are in- Financial liabilities measured at fair value through profit or loss comprise cluded in the portfolio. The project portfolio is reviewed at the end of every currency and interest rate derivatives. Other financial liabilities are initially quarter and impairment losses are recognized if, for example, a project has measured at fair value less any transaction costs that have arisen. In subse- not been approved by the regulator. Wind turbines under construction and quent periods, these liabilities are measured at amortized cost in accordance projects under development are measured at the lowest of costs incurred with the effective interest method. Eolus’s accounts payable, borrowing and and fair value. other current liabilities and accrued expenses are included in this category. PROVISIONS FAIR VALUE MEASUREMENT Provisions are recognized when the Group has a legal or informal commit- Fair value is the price that would be received at the measurement date on ment due to previous events and when it is probable that a payment will selling an asset or paid on transferring a liability in an orderly transaction be- be required to settle the commitment and the amount can be reliably calcu- tween market participants at the measurement date. Financial instruments lated. For cases in which the company expects an established provision to

ANNUAL REPORT EOLUS VIND AB 2017/2018 55 NOTES

be compensated by an external party, for example, within the framework of All tax liabilities and tax assets are valued at nominal amounts in accordance an insurance contract, such expected compensation is recognized as a sep- with the tax rules and at the tax rates decided or announced and which, with arate asset, but only when it is essentially certain that compensation will be all likelihood, will be adopted. Deferred tax is recognized on the balance- received. If the time value is significant, the future payment is calculated at sheet date in accordance with the balance sheet method for temporary its present value. The calculations are made by applying a discount rate that differences between the tax and accounting values of the assets and reflects the short-term market expectations taking into account specific risks liabilities. Deferred tax assets are recognized for all deductible temporary associated with the commitment. An increase in the commitment is recog- differences, including loss carryforwards, to the extent that it is probable nized as an interest expense. that a taxable profit will be available against which the deductible temporary differences can be utilized. Provisions for after-treatment costs According to the Swedish Environmental Code, the regulatory authority is ASSESSMENTS, ESTIMATES AND ASSUMPTIONS entitled to require that guarantees be provided for security with respect to Certain estimates and assumptions are made when the Board of Directors dismantling and after-treatment of the wind power facility. The main costs and CEO prepare the financial statements in accordance with applicable for dismantling and after-treatment are estimated for each facility with guid- accounting policies that affect the carrying amounts of assets, liabilities, in- ance from investigations carried out for specific turbines. Provisions are come and costs. The areas in which estimates and assumptions are of great established at the present value of the calculated future cost. Provisions significance to the Group and that could impact the income statement and are continuously adjusted upward using the discount rate and this upward balance sheet if they were to change are described below: adjustment is recognized as a borrowing cost (interest expense). The asset’s carrying amount is adjusted if it is classified as a non-current asset. Provisions for doubtful receivables Accounts receivable are initially measured at fair value and thereafter at the CONTINGENT LIABILITIES expected realizable value. An estimate of doubtful receivables is based on Contingent liabilities comprise possible commitments originating from events the conduct of an objective evaluation of all amounts outstanding at the end that have occurred and whose occurrence is confirmed only by the occur- of the year. Losses attributable to doubtful receivables are recognized in rence or non-occurrence of one or several uncertain future events, which profit or loss under other operating expenses. Refer to Note 8. are not within Eolus’s control. Contingent liabilities may also be a commit- ment originating from events that have occurred but that have not been After-treatment costs recognized as a liability or a provision because it is not likely that the commit- The costs for dismantling and after-treatment are estimated for each facility ment will be settled or the amount of the commitment cannot be reliably with guidance from investigations carried out for specific turbines. The basis calculated. is a standard value per megawatt (MW) of installed capacity. The residual value is handled as a deductible item in the disposal analysis and is taken EMPLOYEE BENEFITS into account in these standard amounts. The time factor is taken into ac- count through discounting. The price trend can be assumed to be equal Severance pay to the long-term inflation target of 2%, while a certain level of technological Severance pay is paid when employment is terminated before the normal progress should reduce the cost trend. These assumptions are continuously age of retirement or when the employee accepts voluntary redundancy in evaluated. exchange for such remuneration. Eolus recognizes severance pay when the Group has an existing legal or informal commitment when it is more probably Legal disputes that an outflow of resources will be required to settle the commitment than Provisions for disputes are estimates of the future cash flows required to not, and when the amount can be reliably calculated. settle obligations. Disputes primarily refer to contractual obligations pertain- ing to agreements with customers and suppliers, but other types of disputes Pensions also arise in the course of normal business activities. Eolus’s pension obligations only encompass defined-contribution plans. A defined-contribution plan is a pension plan under which the Group pays ASSESSMENT OF USEFUL LIVES FOR PROPERTY, fixed contributions to a separate legal entity. The Group does not have any PLANT AND EQUIPMENT legal or informal obligations to pay additional contributions if this legal entity Based on experience gained and in light of improvements in technological does not have sufficient assets to pay all of the remuneration to the employ- performance, the Board has deemed that a depreciation period of 20 years ees that is associated with the employees’ service in current and earlier reflects the expected useful life. These assumptions that form the basis of periods. The Group’s payments into defined-contribution pension plans are the assessment are continuously reevaluated and local differences are also charged to net profit for the year in the year to which they are attributable. taken into consideration. The useful lives for all components of the wind tur- bines, foundations and electrical installations are deemed to be the same, Leases which is why there is no further division. Non-current assets utilized under leases are classified in accordance with the financial implication of the leasing agreement. The leasing of non-current ASSESSMENT OF IMPAIRMENT REQUIREMENTS FOR WIND assets, whereby the Group essentially assumes the risks and benefits asso- POWER PROJECTS ciated with ownership, are classified as finance leases. Financial leases are At the end of every quarter, the carrying amounts of the Group’s project port- recognized at the start of the lease period at the lower of the fair value of folio are analyzed to determine whether any indications exist that these carry- the leasing object and the present value of the minimum leasing fees. Other ing amounts have declined. Should such an indication exist, a comparison leasing agreements are classified as operating leases. Payments made over is made between the estimated final establishment cost and the project’s the lease period are expensed in profit or loss in a straight line over the lease acquisition value to an investor. An impairment requirement exists if the esti- period. Eolus only has leasing agreements classified as operating leases. mated establishment cost is higher than the acquisition value of the project to an investor. Other factors, such as permits, could also impact the realiz- INCOME TAX ability of the project and thus its value. Any impairment is recognized directly The tax expense for the period includes current and deferred tax. Tax is rec- in profit or loss. ognized in profit or loss, except when the tax pertains to items recognized in other comprehensive income or directly in equity. In such cases, the tax is also recognized in other comprehensive income and equity, respectively.

56 ANNUAL REPORT EOLUS VIND AB 2017/2018 NOTES

PARENT COMPANY’S ACCOUNTING POLICIES accounts. The Parent Company applies the exception under RFR2 to disap- The Parent Company prepares its annual reports in accordance with the ply IAS 39. Instead, financial instruments are recognized and measured Swedish Annual Accounts Act and the Swedish Financial Accounting Stan- based on their cost pursuant to the Swedish Annual Accounts Act. The dards Board’s recommendation RFR 2 Accounting for Legal Entities. RFR 2 Parent Company recognizes appropriations in accordance with the alterna- entails that the Parent Company’s annual report for the legal entity is to apply tive method stated in RFR 2 Accounting for Legal Entities. The amounts all IFRSs and statements approved by the EU as far as possible under the deposited in untaxed reserves comprise taxable temporary differences. framework of the Annual Accounts Act and by taking into account the con- Deferred tax liabilities attributable to the untaxed reserves are not recognized nection between accounting and taxation. The recommendation also states separately in the Parent Company due to the connection between account- the exceptions and additions that may be made compared with reporting ing and taxation. The amounts are included in untaxed reserves instead. under IFRS. None of the amendments to RFR 2 Accounting for Legal Entities have The Group’s and the Parent Company’s accounting policies have the impacted the Parent Company’s financial statements. following differences. Participations in subsidiaries are recognized in the Parent Company according to the cost method. Certain financial assets AMENDMENTS TO RFR 2 THAT HAVE NOT YET COME INTO FORCE are measured at fair value in the consolidated financial statements. These None of the coming amendments to RFR 2 are expected to have a are measured at the lower of cost and fair value in the Parent Company’s significant impact on the Parent Company’s financial statements.

NOTE 2 MANAGEMENT

FINANCIAL RISK MANAGEMENT AT EOLUS electricity generation operations, were covered by interest rate hedging in- Through its operations, Eolus is exposed to a variety of financial risks: market struments. The deviations from the finance and risk policy were approved by risk (interest rate risk, currency risk and energy price risk), and li- the Board of Directors. Excluding interest rate derivatives, the average inter- quidity and refinancing risk. The Group’s overall risk management focuses est rate was 1.85% (1.85). Including interest rate derivatives, the average on the unpredictably of the financial markets and seeks to minimize poten- interest rate was 2.3% (3.6). A change in interest rates of +/- 1 percentage tially adverse effects on the Group’s earnings. These financial risks include point would have an earnings impact of +/- SEK 3.7 M (0.3). A correspond- the impact of changed interest expense for floating interest loans, the impact ing change would have an earnings impact of +/- SEK 11 M (11) attributable of exchange rate fluctuations on wind turbine purchases, the risk of changes to the market value of interest rate derivatives. in electricity and electricity certificate prices, the risk of the company not hav- ing access to the necessary financing for future projects and the company Currency risk having insufficient short-term liquidity to meet its existing payment commit- Eolus’s currency risk exposure primarily arises due to a large portion of ments. Risk is managed by the finance function following a written finance purchases of wind turbines and sales of wind farms taking place in EUR. and risk policy that is adopted every year by the Board of Directors if chang- Exchange rate fluctuations can thus affect the profitability of wind farm proj- es are made, otherwise its current form applies. Follow-ups of the Group’s ects. The Group’s finance and risk policy stipulates how the risk of negative finance and risk policy are reported to the Board every quarter. effects of changes in exchange rates is to be managed. 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 managed using, for ex- Eolus’s primary operations comprise developing wind power facilities and ample, currency futures, currency swaps, loans in foreign currency or curren- divesting wind power facilities when they are turnkey facilities and have be- cy deposits. Calculated flows later than 12 months but within 24 months come operational. Most of the company’s market risks are both direct and may be managed at a maximum of 75%. The risk inherent in forecast flows indirect since Eolus’s customers also need to manage these risks and Eolus later than 24 months is not managed. At August 31, 2018, the Group had may thus be indirectly impacted by lower demand and/or lower sales prices. outstanding currency hedges amounting to a nominal EUR 10.0 M (13.0). All currency futures fall due within 12 months and pertain to sales forwards. Interest rate risk Signed currency futures, together with forecast inflows for the next Eolus’s customers usually borrow for their investments in wind power. Con- 12 months, amount to about 102% of forecast outflows. The forecast sequently, interest rates affect demand for wind power facilities. The Group’s net inflow includes the agreed purchase consideration for wind farms under loans are primarily attributable to the construction of wind power facilities construction, and raised and repaid loans in EUR. Only the EUR/SEK rate and financing the wind power portfolio that is owned and which generates was hedged during the year. A change in the EUR/SEK exchange rate of electricity. Interest on these credit facilities is currently floating, refer to Note SEK 1 at the end of the fiscal year would result in a net earnings impact 23. Borrowing raised at fixed interest rates exposes the Group to interest of +/- SEK 2.9 M (28.3), given the translation of currency accounts and rate risk pertaining to fair value. Changes in market interest rates can have currency futures outstanding at August 31, 2018. an impact on future earnings and profitability, mainly regarding wind power facilities under construction that are financed by bank loans. Under the ad- Energy price risk opted finance and risk policy, the average fixed-interest term linked The market price of electricity varies over time and the price trend of electric- to electricity generation is not to be less than 2.5 years and the nominal ity certificates depends on the rate at which the generation of renewable amount for interest rate derivatives is not to exceed 100% of interest- electricity is expanded in relation to the quota obligation that consumers bearing liabilities to credit institutions. This can be achieved by a combination have to purchase electricity certificates. Eolus hedges a predetermined por- of fixed-interest loans, loans at variable interest rates and derivative instru- tion of the generation volume, which means that volume and profile risk is ments. The aim of interest rate derivatives is to swap floating interest rates reduced. Hedging takes place with a number of the largest electricity traders for fixed interest rates. At August 31, 2018, the Group had interest rate to minimize counterparty risk. Electricity certificates are recognized in income derivatives outstanding that amounted to a nominal SEK 90 M (90), of in conjunction with generation of the corresponding electricity and are physi- which SEK 45 M falls due in 2020 and SEK 45 M in 2023. Including interest cally received from the Swedish Energy Agency in the month after being rate derivatives, the loan portfolio had an average fixed-interest period earned. The future transfer price of electricity and electricity certificates is of 0.9 years on the closing date. Interest-bearing liabilities amounted to the single most important parameter in customers’ investment calculations. SEK 368.7 M (33.9) at August 31, 2018. On the closing date, more than Accordingly, Eolus’s operations are affected in both the short and long 100% (100) of the Group’s liabilities to credit institutions, attributable to term by trends in the forward market for electricity and electricity certificates.

ANNUAL REPORT EOLUS VIND AB 2017/2018 57 NOTES

Eolus closely follows the market to understand how it works and its correla- ensure that the Group has sufficient liquidity available to meet operational tion to the price of other energy sources and business cycles, etc. As a re- needs. For wind turbines that are sold as operational to customers, the sult, fluctuations in the price of electricity affect the Group’s potential custom- company endeavors to match payment plans, in terms of liquidity, from ers. Existing agreements and contracts are not considered to be financial customers with the plans that the company has with the largest suppliers instruments but are regarded as physical deliveries of electricity. No market of each specific project. valuation takes place since it is deemed that fixed-price contracts In July 2016, three credit agreements were signed with Handelsbanken. do not comprise financial instruments. All agreements have a 29-month term. The loans comprise an overdraft facil- ity of SEK 75 M, a framework credit agreement of SEK 255 M for project CREDIT RISK financing and a construction loan of SEK 600 M. Construction loans for Credit risk, or counterparty risk, is defined as the risk of incurring a loss if the establishing the Jenåsen wind farm were terminated when the wind farm counterparty does not fulfill its commitments. Commercial credit risk encom- was handed over to the customer. The overdraft facility was unutilized on the passes customers’ solvency and is managed by closely monitoring payment balance sheet date, while the framework credit agreement was fully utilized. behavior, following up customers’ financial statements and maintaining regu- Given that some wind power facilities are available for sale and that the lar communication. The Group’s total credit risk is divided each year between mortgaged facilities that conduct electricity generation are covered by sepa- a small number of customers that account for a relatively large percentage rate loans, the Board adopted in its finance and risk policy that new loans of the Group’s accounts receivable, refer to Note 20. All customers are highly are to be raised with short tenors. However, the company has previous credit transparent, including marketplaces for electricity trading. During periods of facilities of SEK 8.7 M (14.7) with long tenors, and that fall due later than temporary excess liquidity, investments may only be made by deposits with five years. Loans are to be raised with different credit institutions to reduce banks that are under the supervision of a financial supervisory agency in a refinancing risk. Nordic country or by deposits with or purchases of instruments issued by A shorter term structure requires a higher equity/assets ratio and liquidi- the Swedish National Debt Office. The fixed-term period for each individual ty preparedness. The Group’s equity/assets ratio may not fall below 30%. investment of surplus liquidity may not be longer than three months. Continuous dialog is maintained with credit institutions for renegotiating Investments with longer fixed-term periods require separate decisions. new facilities in good time prior to due dates. To achieve optimal and cost- efficient access to financing, such financing is to be matched to the tenors Investments of ongoing wind power projects. The Group’s cash flow generated from operating activities and from the Separate covenants are in place for liabilities to credit institutions. divestment of turnkey operational facilities and wind turbines from invento- Covenants for current credit agreements pertain to the equity/assets ratio ries/non-current assets is used for developing new projects and financing and interest coverage ratio. If these undertakings are not met, the bank operating activities. Surplus liquidity is to be invested with counterparties that can withdraw the credit facilities. In the 2017/2018 fiscal year, all of the have high credit ratings and thus low credit risk. The Group’s risks regarding covenants to credit institutions were met. Interest-bearing liabilities amounted interest income are relatively limited. The current interest rate of 0% on bank to SEK 368.7 M (33.9), of which SEK 8.7 M (14.7) is non-current. The fixed- balances entails that there is no interest income from credit institutions for term period for loans amounted to about one year (three) at the end of the the 2017/2018 fiscal year. fiscal year, with an average interest rate of 1.85% (1.85) excluding interest- rate derivatives. Refer to Note 17 for disclosures about remaining liquidity LIQUIDITY AND REFINANCING RISK flows pertaining to financial liabilities. The company’s operations are financed by borrowings from credit institutions in addition to equity. is defined as the risk of the Group being CAPITAL RISK adversely affected by shortcomings in managing and controlling cash and The Group’s targets for its capital structure are to safeguard the Group’s cash equivalents and payment flows. ability to pursue its operations so that it can generate returns for sharehold- Refinancing risk pertains to the risk of experiencing difficulties in secur- ers and value for stakeholders, and to maintain an optimal capital structure ing financing for the operations at a given point in time. Eolus’s project to keep costs for capital down. operations largely comprise constructing wind turbines for which customer To maintain or adjust its capital structure, the Group can change the contracts have already been signed. The company works continuously on dividends it pays to shareholders, repay capital to shareholders, issue new preparing 36-month cash flow forecasts for the Group. The management shares or sell assets to reduce its liabilities. closely monitors rolling forecasts for trends in net debt/cash flows and to

GROUP PARENT COMPANY Loan maturity structure Aug 31, 2018 Aug 31, 2017 Aug 31, 2018 Aug 31, 2017 6 months or less 255,000 11,369 255,000 - 6-12 months 30,000 7,840 30,000 - 1-5 years 75,000 - 75,000 - More than 5 years 8,740 14,700 - - Total 368,740 33,909 360,000 -

58 ANNUAL REPORT EOLUS VIND AB 2017/2018 NOTES

NOTE 3 OPERATING SEGMENTS

Project development: involving pre-study, project development, construction and sale of wind power facilities. This also includes technical and management consultancy services for wind power stakeholders.

Asset management: pertains to full asset management services for owners of wind power facilities.

Electricity generation: encompassing the operation of wholly or partly owned wind turbines, the sale of electric power and the divestment of electricity certificates allocated to producers of renewable electricity.

Project Asset Electricity Joint Total 2017/2018 development management generation eliminations Group Segment revenue Net sales, external customers 1,336,048 15,722 14,207 - 1,365,977 Inter-segment transactions 405 606 - -1,011 - Other revenue 14,492 6,835 1,206 - 22,533

Expenses -1,149,589 -20,692 -16,829 1,011 -1,186,100 (of which depreciation and impairment) (-5,297) (-70) (-9,398) - (-14,765) Operating profit/loss 201,356 2,471 -1,416 - 202,411

Interest income 10,737 Interest expense -14,269 Profit before tax 198,879

Tax -4,566 Net profit for the year 194,313

Segment’s assets at August 31, 2018 1,026,806 4,655 32,180 831,361 1,895,002 Assets include: Purchase of non-current assets 1,388 - - - 1,388

Of net sales in the Electricity Generation operating segment, KSEK 2,593 (4,701) refers to sales of electricity certificates. The carrying amounts of wind turbines during the period were impaired by KSEK 6,315 to adjust to the changed price levels in the market. The entire amount pertains to the impairment of non-current assets.

ANNUAL REPORT EOLUS VIND AB 2017/2018 59 NOTES

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

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

100% (100) of the Group’s revenue is attributable to Sweden. One customer accounts for 83% of revenue. In the preceding year, three customers accounted for 70% of income: 33%, 27% and 20%.

Non-current assets Aug 31, 2018 Aug 31, 2017 Sweden 35,531 99,320 Estonia 16,530 15,886 Total 52,061 115,206

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 divested may involve 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.

60 ANNUAL REPORT EOLUS VIND AB 2017/2018 NOTES

NOTE 5 SALARIES, REMUNERATION AND NUMBER OF EMPLOYEES

The members of the Parent Company’s management team also comprise Group Management.

2017/2018 2016/2017 Salaries Social security Salaries Social security and other expenses and other expenses remuneration (of which remuneration (of which pension costs) pension costs) Sweden – Parent Company 20,931 9,907 23,430 11,505 (2,600) (3,338) Sweden – subsidiaries 4,521 1,978 - (418) (-) Estonia 281 100 250 87 (-) (-) Group 25,733 11,985 23,680 11,592 (3,018) (3,338)

2017/2018 2016/2017 Salaries Pension Salaries Pension and other costs and other costs remuneration remuneration (of which bonus) (of which bonus) Board of Directors and CEO 3,726 527 3,058 379 (-) (13) Other employees 22,007 2,491 20,622 2,959 (-) (58) Group 25,733 3,018 23,680 3,338 (-) (71)

Aug 31, 2018 Aug 31, 2017 Number Of whom men Number Of whom men Gender distribution, Board of Directors at balance- at balance- and other senior executives sheet date sheet date Board of Directors 6 4 6 4 CEO and other senior executives 4 3 4 3 Group and Parent Company 10 7 10 7

2017/2018 2016/2017 Average number Of whom men Average number Of whom men Average number of employees of employees of employees Sweden – Parent Company 25 17 32 22 Sweden – subsidiaries 9 7 Estonia 1 1 1 1 Group 35 25 33 23

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

ANNUAL REPORT EOLUS VIND AB 2017/2018 61 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, 2018 resolved that the For the 2017/2018 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 28. 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. CEO Per Witalisson pension premiums. No Board fees are paid to employees of the Eolus received salary, pension benefits and car benefits during the fiscal year. Group. There are no agreements on severance pay. 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 benefits Total Remuneration and other benefits 2017/2018 Board fee remuneration costs Board of Directors: Chairman of the Board Hans-Göran Stennert 350 - - - 350 Director Fredrik Daveby 150 - - - 150 Director Sigrun Hjelmquist 150 - - - 150 Director Hans Johansson 150 - - - 150 Director Hans Linnarson 150 - - - 150 Director Bodil Rosvall Jönsson 150 - - - 150

Senior executives: Per Witalisson, CEO 1,758 - 399 53 2,210 Marcus Landelin, Deputy CEO 1,522 - 337 45 1,904 Other senior executives (2 individuals) 2,086 - 462 110 2,658 Total 6,466 - 1,198 208 7,872

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

62 ANNUAL REPORT EOLUS VIND AB 2017/2018 NOTES

NOTE 7 REMUNERATION OF AUDITORS

GROUP PARENT COMPANY 2017/2018 2016/2017 2017/2018 2016/2017 PricewaterhouseCoopers Audit assignment 484 475 484 475 Audit activities in addition to the audit assignment 165 57 15 57 Tax consultancy - - - - Other services 890 562 1,040 562 Total 1,539 1,094 1,539 1,094

EY Other services 150 30 150 30 Total 150 30 150 30

Assertum Audit OÜ Audit assignment 20 19 - - Total 20 19 - -

Revisorgruppen Tröndelag AS Audit assignment 18 18 - - Total 18 18 - - Total 1,727 1,161 1,689 1,124

NOTE 8 OTHER OPERATING INCOME AND OTHER OPERATING EXPENSES

GROUP PARENT COMPANY Other operating income 2017/2018 2016/2017 2017/2018 2016/2017 Exchange rate gains attributable to project activities 13,835 2,230 13,832 2,839 Capital gains attributable to sale of wind power facilities - - - 182 Capital gains attributable to other non-current assets 232 319 101 309 Invoiced expenses 8,051 13,881 6,247 13,426 Other 416 950 240 218 Total 22,533 17,379 20,420 16,974

Other operating expenses 2017/2018 2016/2017 2017/2018 2016/2017 Exchange rate losses attributable to project activities -5,016 -3,891 -4,972 -3,891 Capital losses attributable to sale of wind power facilities - - -2,553 -1,527 Capital losses attributable to other non-current assets - - -4,508 -4,876 Fair value of change in currency derivatives -351 -4,593 - - Other - -420 - - Total -5,367 -8,904 -12,033 -10,294

Eolus manages the risk in future forecast payment flows in accordance with an established finance and risk policy. The difference between the price paid and 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.

ANNUAL REPORT EOLUS VIND AB 2017/2018 63 NOTES

NOTE 9 FINANCIAL INCOME AND EXPENSES

GROUP PARENT COMPANY Interest income 2017/2018 2016/2017 2017/2018 2016/2017 Loans and receivables 2,727 2,187 -10 113 Loans and receivables to Group companies - - 592 357 Total financial income 2,727 2,187 582 470

Interest expense 2017/2018 2016/2017 2017/2018 2016/2017 Bank loans -6,586 -7,464 -1,951 -599 Liabilities to Group companies - - -281 -987 Total financial expenses -6,586 -7,464 -2,232 -1,586

Other financial items 2017/2018 2016/2017 2017/2018 2016/2017 Exchange rate differences intra-Group receivables and liabilities 15,574 -10,163 13,819 -8,938 Exchange rate differences in cash and cash equivalents 914 4,284 -81 4,346 Exchange rate differences, other -8,478 1 -8,846 - Other financial expenses -10,484 -3,162 -1,425 -1,706 Fair value of change in interest rate derivatives 2,801 8,308 - - Total financial expenses 327 -732 3,467 -6,298 of which attributable to balance sheet items measured at fair value 2,801 8,308 - -

NOTE 10 APPROPRIATIONS AND UNTAXED RESERVES

PARENT COMPANY Appropriations 2017/2018 2016/2017 Change in tax allocation reserve -21,068 -13,310 Depreciation in excess of plan 23,564 4,317 Group contributions received/paid 17,988 98,540 Total 20,484 89,547

Untaxed reserves Aug 31, 2018 Aug 31, 2017 Tax allocation reserve 128,714 107,645 Accumulated depreciation in excess of plan 11,743 35,306 Total 140,457 142,951

NOTE 11 INCOME TAX

GROUP PARENT COMPANY 2017/2018 2016/2017 2017/2018 2016/2017 Current tax: Current tax on profit for the year -22,927 -34,328 -22,842 -34,310 Current tax attributable to prior periods - -1,466 - - Total current tax -22,927 -35,794 -22,842 -34,310

Deferred tax: Origination and reversal of temporary differences 15,395 26,074 -166 -86 Deferred tax due to changes in tax rate 2,966 - - - Total deferred tax 18,361 26,074 -166 -86 Tax -4,566 -9,720 -23,008 -34,396

64 ANNUAL REPORT EOLUS VIND AB 2017/2018 NOTES

GROUP PARENT COMPANY Reconciliation of effective tax rate 2017/2018 2016/2017 2017/2018 2016/2017 Profit before tax 198,879 34,224 309,353 172,107 Tax calculated at applicable tax rate in Sweden -43,753 -7,529 -68,058 -37,864

Difference between Swedish and foreign tax rates -96 729 - - Non-taxable income 39,948 179 66,141 16,688 Non-deductible expenses -3,141 -980 -21,006 -13,181 Interest surcharge for tax allocation reserve -85 -39 -85 -39 Adjustment of current tax attributable to prior periods - -1,466 - - Deferred tax due to changes in tax rate 2,966 - - - Non-capitalized loss carryforwards -405 -613 - - Total tax expense/tax income -4,566 -9,720 -23,008 -34,396

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

GROUP 2017/2018 2016/2017 Deferred Deferred Deferred Deferred Specification of deferred tax tax tax tax tax assets and tax liabilities: assets liabilities assets liabilities Property, plant and equipment 57 - 190 51 Assets measured at fair value 5,218 - 5,073 443 Provisions 141 - 238 - Untaxed reserves - 33,681 - 42,707

Wind turbine inventories, wind turbines under construction and projects under development 457 9,614 450 18,363 Recognized tax losses: 523 - 559 - Total 6,396 43,295 6,510 61,564 of which to be utilized/paid after more than 12 months 1,178 43,295 987 61,121 of which to be utilized/paid within 12 months 5,218 - 5,523 443

PARENT COMPANY Specification of deferred tax assets: 2017/2018 2016/2017 Provisions 71 238 Total 71 238

Recognized in the statement of GROUP PARENT COMPANY financial position/balance sheet: 2017/2018 2016/2017 2017/2018 2016/2017 Deferred tax assets 3,095 2,236 71 238 Deferred tax liabilities -39,994 -57,290 - - Deferred tax liabilities (assets), net -36,899 -55,054 71 238

GROUP PARENT COMPANY Change in deferred taxes 2017/2018 2016/2017 2017/2018 2016/2017 At September 1 -55,053 -77,724 238 324 Tax income/expenses recognized in profit or loss 18,344 26,074 -166 -86 Reclassification to current tax -190 -3,403 - - At August 31 -36,899 -55,054 72 238

The Group’s non-capitalized loss carryforwards attributable to the Swedish operations amounted to KSEK 142 (166) on August 31, 2018. Deferred tax assets were recognized on tax deficits amounting to KSEK 523 (559). Deficits have no determined maturity date.

ANNUAL REPORT EOLUS VIND AB 2017/2018 65 NOTES

NOTE 12 INTANGIBLE ASSETS

GROUP PARENT COMPANY Certificates Aug 31, 2018 Aug 31, 2017 Aug 31, 2018 Aug 31, 2017 Opening accumulated cost - - - - Investments 96,162 - 96,162 - Closing accumulated cost 96,162 - 96,162 -

In connection with the divestment of the Jenåsen wind farm, Eolus 264,000 electricity certificates per year over a 15-year period, meaning acquired the right to 96% of the electricity certificates that the wind farm a total of 3,960,000 electricity certificates. Electricity certificates are will generate over the 15-year certificate period. This intellectual property recognized as inventory as they are issued, at which point the intangible right was acquired for a non-recurring amount of EUR 9 M, corresponding asset item will be impaired. to SEK 96.2 M. The total acquired volume is expected to amount to

NOTE 13 PROPERTY, PLANT AND EQUIPMENT

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 2017/2018 payments payments

Opening accumulated cost 13,669 199,696 25,027 4,799 243,190 2,533 48,589 20,811 4,799 76,732 Investments 251 - 118 1,019 1,388 - - 35 1,019 1,054 Sales and disposals -151 - -643 - -794 - -41,767 -583 - -42,350 Reclassifications - -91,963 4,560 -5,818 -93,221 - - 4,280 -5,818 -1,538 Exchange rate differences 1,287 2,382 55 - 3,724 - - - - -

Closing accumulated cost 15,056 110,115 29,116 - 154,286 2,533 6,822 24,543 - 33,898

Opening accumulated depreciation - -87,631 -21,322 - -108,953 - -7,744 -17,784 - -25,528 Depreciation for the year - -7,187 -1,263 - -8,450 - -2,414 -1,058 - -3,472 Sales and disposals - - 584 - 584 - 8,794 584 - 9,378 Reclassifications - 26,485 - - 26,485 - - - - - Exchange rate differences - -1,801 -16 - -1,816 - - - - - Closing accumulated depreciation - -70,134 -22,017 - -92,150 - -1,364 -18,258 - -19,622

Opening accumulated impairment -2,312 -20,484 - - -22,796 -2,312 -5,368 - - -7,680 Impairment for the year - -6,315 - - -6,315 - -2,052 - - -2,052 Reclassifications - 19,008 - - 19,008 - 7,420 - - 7,420 Exchange rate differences - -10 - - -10 - - - - - Closing accumulated impairment -2,312 -7,801 - - -10,113 -2,312 - - - -2,312 Net carrying amount at year-end 12,744 32,180 7,100 - 52,024 221 5,458 6,285 - 11,964

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

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

66 ANNUAL REPORT EOLUS VIND AB 2017/2018 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 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 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

INVESTMENTS AND SALES OF PROJECTS AND A number of such transactions were carried out in the 2017/2018 and COMPLETED WIND TURBINES 2016/2017 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 value vestments of projects and completed wind turbines are conducted as share on the acquisition date. transactions.

NOTE 14 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 on the closing date. 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 2017/2018 1,825 1,509 803 648 2018/2019 1,789 1,481 746 615 2019/2020 1,165 868 409 367 2020/2021 948 651 212 212 2021/2022 79 54 - - Total 5,806 4,563 2,170 1,842

ANNUAL REPORT EOLUS VIND AB 2017/2018 67 NOTES

NOTE 15 OTHER SECURITIES HELD AS NON-CURRENT ASSETS

Holdings in other companies Number of participations Equity/votes (%) Aug 31, 2018 Aug 31, 2017 Långmarken Wind AB 50 10/10 Slättens Vind AB 22,575 2/2 722 1,242 Carrying amount 722 1,242

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 -16,758 1,298 Slättens Vind AB 559022-2583 Vara 1,490 65,290

NOTE 16 PARTICIPATIONS IN GROUP COMPANIES

2017/2018 2016/2017 At September 1 137,696 187,831 Acquisitions 250 150 Divestments - -100 Shareholders’ contributions, net 3,083 -10,343 Impairment -76,500 -54,353 Reversal of impairment - 14,511 At August 31 64,529 137,696

Profit from participations in Group companies 2017/2018 2016/2017 Impairment -90,743 -54,352 Reversal of impairment - 14,511 Dividends 300,641 60,890 Gain attributable to divestments - 60 209,898 21,109

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

Group companies Number of participations Equity/votes (%) Aug 31, 2018 Aug 31, 2017 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 25,002 65,002 Baltic Wind Energy Eolus Elnät AB 1,000 100/100 100 100 Eolus Oy 2,500 100/100 99 99 Eolus Pörtom Vind Oy Eolus Vind Norge AS 23,000 100/100 5,707 2,624 Stigafjell Vind AS Eolus North America Inc. 100/100 Comstock LLC Crescent Peak Renewables LLC ENA BESS 1 LLC ENA BESS 2 LLC Wind Wall Development LLC Wind Wall 1 LLC

68 ANNUAL REPORT EOLUS VIND AB 2017/2018 NOTES

Group companies Number of participations Equity/votes (%) Aug 31, 2018 Aug 31, 2017 Eolus Vindpark Ett AB 500 100/100 50 50 Eolus Vindpark Fem AB 500 100/100 50 50 Eolus Vindpark Sju AB 500 100/100 50 50 Eolus Vindpark Nio AB 500 100/100 50 50 Eolus Vindpark Elva AB 500 100/100 50 50 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 50 Eolus Vindpark 24 AB Eolus Vindpark 25 AB 500 100/100 50 50 Eolus Vindpark 26 AB Eolus Vindpark 27 AB 500 100/100 50 50 Eolus Vindpark 28 AB Eolus Vindpark 29 AB 500 100/100 50 - Eolus Vindpark 30 AB Eolus Vindpark 31 AB 500 100/100 50 - Vindpark Sötterfällan AB Eolus Vindpark 33 AB 500 100/100 50 - Eolus Vindpark 34 AB Eolus Vindpark 35 AB 500 100/100 50 - Eolus Vindpark 36 AB Eolus Vindpark 37 AB 500 100/100 50 - Eolus Vindpark 38 AB Eolus Wind Power Management AB 500 100/100 50 50 Kattegatt Vindkraft AB 16,500 100/100 1,724 1,724 Linusvind AB 50,000 100/100 50 450 Lunnekullen Vindkraft AB 1,000 100/100 - - Långmarken Vindkraft AB 1,000 100/100 100 100 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 27,200 63,300 Eolus Vindpark Tjugoett AB Uddevalla Vind AB 1,000 100/100 102 102 Vingkraft Rönnerum AB 1,000 100/100 100 100 Ölme Vindkraft AB 1,000 100/100 3,058 3,058 Carrying amount 64,529 137,696

ANNUAL REPORT EOLUS VIND AB 2017/2018 69 NOTES

Corp. Registered Corp. Registered Group companies Reg. No. office Group companies Reg. No. office Eolus Vind Amnehärad AB 556738-6312 Hässleholm Eolus Vindpark 31 AB 559135-9988 Hässleholm Amnehärad Vindkraft Aktiebolag 556719-3569 Hässleholm Vindpark Sötterfällan AB 559121-3185 Hässleholm Blekinge Offshore AB 556761-1727 Karlshamn Eolus Vindpark 33 AB 559163-5106 Hässleholm Bosberget Vindkraft AB 556755-4810 Hässleholm Eolus Vindpark 34 AB 559164-6798 Hässleholm Ekovind AB 556343-8208 Hässleholm Eolus Vindpark 35 AB 559193-5114 Hässleholm Baltic Wind Energy 10869166 Saare County, Eolus Vindpark 36 AB 559164-6541 Hässleholm Estonia Eolus Vindpark 37 AB 559163-5122 Hässleholm Eolus Elnät AB 556639-2477 Hässleholm Eolus Vindpark 38 AB 559164-6996 Hässleholm Eolus Oy 2622599-6 Vaasa, Finland Eolus Wind Power Management AB 556912-1352 Hässleholm Eolus Pörtom Vind Oy 2456946-1 Vaasa, Finland Kattegatt Vindkraft AB 556411-7371 Hässleholm Eolus Vind Norge AS 998127068 Stjørdal, Norway Lunnekullen Vindkraft AB 556705-3045 Hässleholm Stigafjell Vind AS 998390966 Stjørdal, Norway Linusvind AB 556832-0054 Hässleholm Eolus North America Inc. 47-5083428 Nevada, USA Långmarken Vindkraft AB 556773-8033 Hässleholm Comstock LLC 35-2541188 Nevada, USA Lärkeskogen Vindkraft AB 556731-4710 Hässleholm Crescent Peak Renewables LLC 27-2068025 Delaware, USA Näset Vindkraft AB 556721-1023 Hässleholm ENA BESS 1 LLC 61-1906369 Nevada, USA SIA Eolus 40103392542 Riga, Latvia ENA BESS 2 LLC 35-2645294 Nevada, USA Andruves wind SIA 40103703482 Riga, Latvia Wind Wall Development LLC 32-0514251 Nevada, USA Virzas wind SIA 40103702650 Riga, Latvia Wind Wall 1 LLC 81-5141504 Nevada, USA Gulbji wind SIA 40103702769 Riga, Latvia Eolus Vindpark Ett AB 556925-8139 Hässleholm Melderi wind SIA 40103730387 Riga, Latvia Eolus Vindpark Fem AB 556935-0365 Hässleholm Pienava wind SIA 40103730508 Riga, Latvia Eolus Vindpark Sju AB 556935-0381 Hässleholm Unas wind SIA 40103761071 Riga, Latvia Eolus Vindpark Nio AB 556935-0472 Hässleholm Dobele wind SIA 40103786319 Riga, Latvia Eolus Vindpark Elva AB 556935-0498 Hässleholm Osi wind SIA 40103806530 Riga, Latvia Eolus Vindpark Tretton AB 556935-0449 Hässleholm Mekji wind SIA 40103800684 Riga, Latvia Eolus Vindpark Femton AB 556935-0464 Hässleholm Valpene wind SIA 50103851451 Riga, Latvia Eolus Vindpark Sjutton AB 556935-0514 Hässleholm Skogaryd Vindkraft AB 556773-9791 Hässleholm Eolus Vindpark Nitton AB 556924-5136 Hässleholm Skuggetorp Vindkraft AB 556773-7993 Hässleholm Eolus Vindpark Tjugo AB 556924-5128 Hässleholm Svenska Vindbolaget AB 556759-9013 Hässleholm Eolus Vindpark 23 AB 556956-6168 Hässleholm Eolus Vindpark Tjugoett AB 556924-5110 Hässleholm Eolus Vindpark 24 AB 556956-6176 Hässleholm Uddevalla Vind AB 556707-1278 Hässleholm Eolus Vindpark 25 AB 556956-6028 Hässleholm Vingkraft Rönnerum AB 556796-9836 Hässleholm Eolus Vindpark 26 AB 556956-6010 Hässleholm Ölme Vindkraft AB 556755-5965 Hässleholm Eolus Vindpark 27 AB 556956-6002 Hässleholm Eolus Vindpark 28 AB 559121-3193 Hässleholm Eolus Vindpark 29 AB 559136-0002 Hässleholm Eolus Vindpark 30 AB 559121-3292 Hässleholm

70 ANNUAL REPORT EOLUS VIND AB 2017/2018 NOTES

NOTE 17 FINANCIAL RISK MANAGEMENT

The table below presents the remaining contractual maturities of the financial (neg: 463) on the closing date. Contractual interest rate derivatives had liabilities. The amounts stated in the table are the contractual and undis- negative market values on the closing date. The total negative market counted cash flows. All currency derivatives have negative market values. value of interest rate derivatives was KSEK 11,833 (neg: 14,634) on the The negative total market value of currency derivatives was KSEK 814 closing date.

Aug 31, 2018 <3 months 3 months-1 year 1-2 years 2-5 years >5 years Total Borrowing 257,199 33,434 4,137 83,191 812 378,773 Accounts payable 140,806 - - - - 140,806 Derivatives 950 2,850 3,800 6,261 - 13,861 Other financial liabilities 99,840 8 - 264 - 100,112 Total 498,795 36,292 7,937 89,716 812 633,552

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

NOTE 18 PARTICIPATIONS IN ASSOCIATED COMPANIES

GROUP CARRYING AMOUNT Corp. Registered Capital/votes Aug 31, 2018 Aug 31, 2017 Participations in associated companies Reg. No. office (%) Isgrannatorp Drift AB 556787-6833 Kristianstad 33/33 37 37 Triventus AB 556627-3016 Falkenberg 40/40 - 3,725 Carrying amount 37 3,763

FINANCIAL INFORMATION REGARDING THE GROUP’S ASSOCIATED COMPANIES (RELATES TO ENTIRE ASSOCIATED COMPANIES, NOT ONLY THE GROUP’S PARTICIPATING INTEREST) Income statement 2017/2018 2016/2017 Operating income 5,753 13,422 Operating expenses -5,836 -21,496 Operating loss -83 -8,074 Net financial items -4,310 1,702 Tax - - Net loss for the period -4,393 -6,372

Balance sheet Aug 31, 2018 Aug 31, 2017 Non-current assets 3,210 1,642 Current assets 11,225 28,519 Total assets 14,435 30,161

Equity 11,811 9,347 Provisions - 16,499 Non-current liabilities - 2,100 Current liabilities 2,624 2,215 Total equity and liabilities 14,435 30,161

ANNUAL REPORT EOLUS VIND AB 2017/2018 71 NOTES

Profit/loss from participations in associated companies 2017/2018 2016/2017 Triventus AB -3,725 -2,570 Other -864 -1,604 Total loss from participations in associated companies -4,589 -4,175

Change in participations in associated companies 2017/2018 2016/2017 At September 1 3,761 8,075 Share in profits -3,725 -4,175 Divestments - -139 Other 1 - At August 31 37 3,761

PARENT COMPANY CARRYING AMOUNT Corp. Registered Capital/votes Aug 31, 2018 Aug 31, 2017 Participations in associated companies Reg. No. office (%) Triventus AB 556627-3016 Falkenberg 40/40 - 3,725 Carrying amount - 3,725

Change in participations in associated companies 2017/2018 2016/2017 At September 1 3,725 8,700 Impairment -3,725 -4,775 Divestments - -200 At August 31 - 3,725

NOTE 19 WIND TURBINE INVENTORIES, WIND TURBINES UNDER CONSTRUCTION AND PROJECTS UNDER DEVELOPMENT

GROUP PARENT COMPANY Aug 31, 2018 Aug 31, 2017 Aug 31, 2018 Aug 31, 2017 Wind turbine inventories - 9,325 - 9,325 Wind turbines under construction and projects under development 574,666 335,515 392,045 173,705 Total 574,666 344,840 392,045 183,030

72 ANNUAL REPORT EOLUS VIND AB 2017/2018 NOTES

NOTE 20 ACCOUNTS RECEIVABLE AND OTHER CURRENT RECEIVABLES

GROUP PARENT COMPANY Aug 31, 2018 Aug 31, 2017 Aug 31, 2018 Aug 31, 2017 Accounts receivable 53,018 25,686 51,505 23,760 Other current receivables 37,023 44,493 13,299 18,723 Total 90,041 70,180 64,804 42,483

Other current receivables relate to: Aug 31, 2018 Aug 31, 2017 Aug 31, 2018 Aug 31, 2017 VAT receivables 12,689 2,464 11,682 2,430 Receivables from related parties - - - - Blocked accounts - 19,632 - - Other receivables 24,334 22,397 1,617 16,293 Total 37,023 44,493 13,299 18,723

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, 2018 Aug 31, 2017 Aug 31, 2018 Aug 31, 2017 Accounts receivable, not yet fallen due or impaired 9,386 6,811 9,152 5,405 Accounts receivable, past due but not impaired 43,632 18,845 42,353 18,355 Reserve for doubtful receivables - 30 - - Total accounts receivables 53,018 25,686 51,505 23,760

At August 31, 2018, past due accounts receivable for which no reserve was considered necessary amounted to KSEK 43,632 (18,815).

The amount of KSEK 24,169 of past due accounts receivable was settled after the balance sheet date.

Age analysis of accounts receivable, past due but not impaired Aug 31, 2018 Aug 31, 2017 Aug 31, 2018 Aug 31, 2017 <30 days 24,169 3,302 24,169 3,302 30-90 days 840 2,754 643 2,552 91-180 days 195 208 - 6 >180 days 18,428 12,581 17,541 12,495 Total past due but not impaired accounts receivable 43,632 18,845 42,353 18,355

Age analysis of accounts receivable, past due and impaired Aug 31, 2018 Aug 31, 2017 Aug 31, 2018 Aug 31, 2017 >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, 2018 Aug 31, 2017 Aug 31, 2018 Aug 31, 2017 Provision at beginning of year 30 - - - Provision for doubtful receivables for the year - 30 - - Written-off receivables -30 - - - Amount at year-end - 30 - -

Provisions for the reversals of reserves for doubtful receivables are included in the item “other operating expenses” in profit or loss.

GROUP PARENT COMPANY Recognized amount for accounts receivable per currency Aug 31, 2018 Aug 31, 2017 Aug 31, 2018 Aug 31, 2017 SEK 15,098 13,133 13,585 11,207 EUR 37,920 12,553 37,920 12,553 Total KSEK 53,018 25,686 51,505 23,760

The ten largest customers represent 99% (83) of the Group’s total accounts receivable. A single customer accounts for 46% (57).

ANNUAL REPORT EOLUS VIND AB 2017/2018 73 NOTES

NOTE 21 ACCRUALS

GROUP PARENT COMPANY Prepaid expenses and accrued income Aug 31, 2018 Aug 31, 2017 Aug 31, 2018 Aug 31, 2017 Prepaid rental charges 321 148 321 148 Other prepaid expenses 3,313 3,237 1,414 2,303 Accrued income 2,339 4,455 410 2,079 Total 5,973 7,840 2,145 4,530

Accrued expenses and deferred income Aug 31, 2018 Aug 31, 2017 Aug 31, 2018 Aug 31, 2017 Accrued payroll expenses and personnel costs 9,047 6,341 8,065 6,294 Accrued expenses and deferred income pertaining to projects 45,044 23,624 45,044 23,624 Other accrued expenses 7,516 2,517 6,328 1,274 Total 61,606 32,483 59,437 31,192

NOTE 22 SHARE CAPITAL AND EARNINGS PER SHARE

Disclosure on number of shares Aug 31, 2018 Aug 31, 2017 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 2017/2018 2016/2017 Earnings attributable to Parent Company shareholders 194,460 25,317 Weighted average number of outstanding common shares 24,907,000 24,907,000 Earnings per share, before and after dilution 7.81 1.02

74 ANNUAL REPORT EOLUS VIND AB 2017/2018 NOTES

NOTE 23 BORROWING

GROUP PARENT COMPANY Non-current borrowing from credit institutions Aug 31, 2018 Aug 31, 2017 Aug 31, 2018 Aug 31, 2017 Bank loans (variable interest rate) 81,780 12,740 75,000 - Total non-current borrowing 81,780 12,740 75,000 -

Current borrowing Bank loans (variable interest rate) 286,960 21,169 285,000 - Total current liabilities 286,960 21,169 285,000 -

Total borrowing 368,740 33,909 360,000 -

For information on pledged assets for loans raised, refer to Note 28.

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, 2018 Aug 31, 2017 Aug 31, 2018 Aug 31, 2017 6 months or less 368,740 33,909 360,000 - Total 368,740 33,909 360,000 -

Borrowing per currency Aug 31, 2018 Aug 31, 2017 Aug 31, 2018 Aug 31, 2017 SEK 368,740 33,245 360,000 - EUR 0 664 - - Total 368,740 33,909 360,000 -

BANK OVERDRAFT FACILITIES GROUP PARENT COMPANY Aug 31, 2018 Aug 31, 2017 Aug 31, 2018 Aug 31, 2017 Amount granted 75,000 75,000 75,000 75,000

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

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

GROUP PARENT COMPANY Aug 31, 2018 Aug 31, 2017 Aug 31, 2018 Aug 31, 2017 1-5 years 80,980 7,840 75,000 - More than 5 years 800 4,900 - - Total 81,780 12,740 75,000 -

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 2017/2018 fiscal year, all of the covenants were fulfilled.

ANNUAL REPORT EOLUS VIND AB 2017/2018 75 NOTES

NOTE 24 PROVISIONS

GROUP After-treatment costs for Lease Total disposal of wind turbines fees At September 1, 2017 3,421 368 3,789 Recognized in profit or loss additional provisions, interest 115 - 115 reversed amounts pertaining to divested turbines -1,615 -182 -1,797 At August 31, 2018 1,921 186 2,107

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

COMMITMENTS REGARDING AFTER-TREATMENT reduce the cost trend. Provisions are established at the present value of According to the Swedish Environmental Code, financial guarantees must the calculated future cost. In accordance with IAS 37, point 60, provisions be provided as security for dismantling and after-treating the locations of are continuously adjusted upward using the discount rate and this upward wind turbines. The costs for dismantling and after-treatment are estimated adjustment is recognized as a borrowing cost (interest expense). for each facility with guidance from investigations carried out for particular turbines. The basis is a normal value of SEK 250 per megawatt (MW) of COMMITMENTS REGARDING FUTURE LEASING installed capacity for steel hubs. About SEK 100 per MW is added if the The provision pertains to the commitment to pay future leases for turbine is constructed using concrete. The amounts apply to the cost sce- turbines that have been sold. nario 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 PARENT COMPANY amounts. The time factor is taken into account through discounting. The Parent Company’s provisions at August 31, 2018 comprise The price trend can be assumed to be equal to the long-term inflation KSEK 325 (1,081) in after-treatment costs and KSEK 186 (368) target of 2%, while a certain level of technological progress should in lease fees, or a total of KSEK 511 (1,449).

NOTE 25 FINANCIAL INSTRUMENTS – DISCLOSURE ON FAIR VALUE PER CATEGORY

GROUP Aug 31, 2018 Carrying amount Fair value Level Assets in the balance sheet Loan receivables and accounts receivable Cash and cash equivalents 739,825 739,825 2 Accounts receivable 53,018 53,018 2 Other current receivables 25 25 2 Blocked bank balances 5,000 5,000 2 Other financial assets 20,953 20,953 2 Accrued interest income 388 388 2

Liabilities in the balance sheet Liabilities measured at fair value through profit or loss Derivate liabilities Currency futures 814 814 2 Interest rate swaps 11,833 11,833 2 Liabilities measured at amortized cost Interest-bearing liabilities 368,740 368,740 2 Accounts payable 140,806 140,806 2 Accrued interest expense 849 849 2

76 ANNUAL REPORT EOLUS VIND AB 2017/2018 NOTES

Aug 31, 2017 Carrying amount Fair value Level Assets in the balance sheet 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 Other financial assets 25,517 25,517 2 Accrued interest income 328 328 2

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 Accrued interest expense 29 29 2

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

NOTE 26 RECONCILIATION BETWEEN PROFIT BEFORE TAX AND NET CASH FLOW

GROUP PARENT COMPANY Non-cash items 2017/2018 2016/2017 2017/2018 2016/2017 Depreciation and impairment of property, plant and equipment 14,765 23,423 -1,896 2,118 Unrealized exchange rate differences 2,195 -148 2,195 4,346 Capital gains from divestment of non-current assets -231 -319 9,871 3,693 Changes in provisions -1,682 -3,833 -936 -904 Measurement of derivatives at fair value 351 4,592 - - Other - - - 607 Total 15,399 23,715 9,234 9,860

ANNUAL REPORT EOLUS VIND AB 2017/2018 77 NOTES

NOTE 27 CHANGES IN LIABILITIES ATTRIBUTABLE TO FINANCING ACTIVITIES

Loan liabil- Loan liabil- Other Total ities falling ities falling liabilities due within due after 1 year 1 year At September 1, 2017 -21,169 -12,740 -797 -34,706 Cash flow -265,752 -69,040 599 -334,193 Exchange rate differences -39 - -66 -105 At August 31, 2018 -286,960 -81,780 -264 -369,004

Loan liabil- Loan liabil- Other Total net ities falling ities falling liabilities liability due within due after 1 year 1 year At September 1, 2016 -31,558 -50,216 -854 -82,628 Cash flow 10,389 37,476 - 47,865 Exchange rate differences - - 57 57 At August 31, 2017 -21,169 -12,740 -797 -34,706

NOTE 28 PLEDGED ASSETS AND CONTINGENT LIABILITIES

GROUP PARENT COMPANY Pledged assets for liabilities to credit institutions 2017/2018 2016/2017 2017/2018 2016/2017 Chattel mortgages 603,000 603,000 580,000 580,000 Wind turbines and leases used as collateral 15,288 50,707 - - Blocked bank balances - 19,632 - - Shares in associated companies 34 34 - - Total 618,322 673,373 580,000 580,000

CONTINGENT LIABILITIES The Group has contingent liabilities pertaining to legal claims that have arisen in the normal business operations. No significant provisions, other than those that have been made (Note 24), are expected to arise on the basis of these.

PARENT COMPANY Contingent liabilities 2017/2018 2016/2017 Contingent liabilities for the benefit of subsidiaries 5,000 69,885 Total 5,000 69,885

78 ANNUAL REPORT EOLUS VIND AB 2017/2018 NOTES

NOTE 29 RELATED-PARTY TRANSACTIONS

OWNER STRUCTURE AT AUGUST 31, 2018 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 58,506 0.9 4.8 Försäkringsaktiebolaget Avanza Pension - 1,491,679 6.0 4.1 Johan Markensten - 808,080 3.2 2.2 Nordnet Pensionsförsäkring AB 500 659,675 2.7 1.8 Ingvar Svantesson 43,750 200,175 1.0 1.8 M A C O Business Development AB - 490,471 2.0 1.3 Swedbank Försäkring - 487,967 2.0 1.3 Other shareholders 139,135 16,325,769 66.0 48.7 Total 1,285,625 23,621,375 100.0 100.0

No Board members or other senior executives had any direct or indirect PARENT COMPANY’S TRANSACTIONS WITH OTHER share transactions with the Group in 2017/2018 or 2016/2017, other GROUP COMPANIES than 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 purchases and sales between Group companies as to transactions with external parties.

NOTE 30 SIGNIFICANT EVENTS AFTER THE END OF THE REPORTING PERIOD

In September, Eolus acquired the wholly owned subsidiary Eolus North ment ensures financing for Eolus’s expansion in this forthcoming period America, Inc, a solar and battery storage project in western US with a in terms of both financing ongoing and future establishments for which capacity of 500 MW and 250 MW, respectively. The project is in an early Eolus provides the financing during the construction phase, and ensuring stage of development and is on the waiting list for a grid connection to high liquidity for the operating activities. deliver electricity to California. In October, Eolus signed agreement with KGAL to divest the Bäckhammar In September, Eolus signed an agreement with Siemens Gamesa for the wind farm in Sweden with an installed capacity of 130 MW for a preliminary delivery of seven wind turbines of the SWT-DD-130 model with a capacity purchase price of EUR 131 M. At the same time, Eolus placed an order of 4.3 MW, each to the Norwegian Stigafjellet project, located in Bjerkreim for wind turbines from Vestas. Bäckhammar will comprise 22 Vestas V136- south of Stavanger. These wind farms will be deployed in the second half 4.2 MW and nine Vestas V150-4.2 MW. Eolus will construct the wind of 2020 and are subject to a sale agreement with ewz. farm and KGAL will provide financing during construction. Bäckhammar is scheduled to be completed in August 2020 and Eolus was commissioned In September, Eolus signed a credit agreement with Swedbank comprising to deliver asset management services for the facility. liquidity and construction loans totaling SEK 1,050 M. The four-year agree-

ANNUAL REPORT EOLUS VIND AB 2017/2018 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, November 28, 2018

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 November 28, 2018.

PricewaterhouseCoopers AB

Eva Carlsvi Authorized Public Accountant

80 ANNUAL REPORT EOLUS VIND AB 2017/2018 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 within the EU. We believe that the audit evidence we have obtained is CONSOLIDATED ACCOUNTS sufficient and appropriate to provide a basis for our opinions.

Opinions Our audit approach We have audited the annual accounts and consolidated accounts of Audit focus and scope Eolus Vind AB (publ) for the year 1st September 2017 to 31 August 2018, We designed our audit by determining materiality and assessing the risks excluding the corporate governance report on pages 37-39. The annual of material misstatement in the consolidated financial statements. In parti- accounts and consolidated accounts of the company are included on cular, we considered where management made subjective judgements; pages 32-80 in this document. for example, in respect of significant accounting estimates that involved In our opinion, the annual accounts have been prepared in accordance making assumptions and considering future events that are inherently un- with the Annual Accounts Act and present fairly, in all material respects, certain. As in all of our audits, we also addressed the risk of management the financial position of the parent company as of 31 August 2018 and its override of internal controls, including among other matters consideration financial performance and cash flow for the year then ended in accordance of whether there was evidence of bias that represented a risk of material with the Annual Accounts Act. The consolidated accounts have been misstatement due to fraud. prepared in accordance with the Annual Accounts Act and present fairly, We tailored the scope of our audit in order to perform sufficient work in all material respects, the financial position of the group as of 31 August to enable us to provide an opinion on the consolidated financial statements 2018 and their financial performance and cash flow for the year then ended as a whole, taking into account the structure of the Group, the accounting in accordance with International Financial Reporting Standards (IFRS), as processes and controls, and the industry in which the group operates. adopted by the EU, and the Annual Accounts Act. Our opinion does not include the corporate governance report on pages 37-39. The statutory Materiality administration report is consistent with the other parts of the annual The scope of our audit was influenced by our application of materiality. accounts and consolidated accounts. An audit is designed to obtain reasonable assurance whether the financial We therefore recommend that the general meeting of shareholders statements are free from material misstatement. Misstatements may arise adopts the income statement and balance sheet for the parent company due to fraud or error. They are considered material if individually or in and the group. aggregate, they could reasonably be expected to influence the economic Our opinions in this report on the annual accounts and consolidated decisions of users taken on the basis of the financial statements. accounts are consistent with the content of the supplementary report Based on our professional judgement, we determined certain quantita- that has been submitted to the Parent Company’s Audit Committee in tive thresholds for materiality, including the overall materiality for the financi- accordance with Article 11 of the Auditors Ordinance (537/2014). al statements as a whole. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and Basis for Opinions extent of our audit procedures and to evaluate the effect of misstatements, We conducted our audit in accordance with International Standards on both individually and in aggregate on the financial statements as a whole. Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Key audit matters Auditor’s Responsibilities section. We are independent of the parent com- Key audit matters of the audit are those matters that, in our professional pany and the group in accordance with professional ethics for accountants judgment, were of most significance in our audit of the annual accounts in Sweden and have otherwise fulfilled our ethical responsibilities in accor- and consolidated accounts of the current period. These matters were dance with these requirements. This means that, based on our best know- addressed in the context of our audit of, and in forming our opinion there- ledge and belief, no prohibited services referred to in Article 5.1 of the on, the annual accounts and consolidated accounts as a whole, but we Auditors Ordinance (537/2014) have been provided to the audited compa- do not provide a separate opinion on these matters. ny or, as the case may be, its parent company or its controlled company

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

ANNUAL REPORT EOLUS VIND AB 2017/2018 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 calcula- Refer to Note 1 page 56 of the annual financial statements “Assessments, tions contain the company’s assessments regarding future cash flows and estimates and assumptions”, and Note 13 page 66 “Tangible fixed assets”. the choice of discount rates. The assumption on future price developments as regards electricity and electricity certificates has been based on price The reported value of the commissioned wind farms amounted, as at forecasts estimated by external expertise. 31 August 2018, to MSEK 32. The market prices of electricity and electrici- ty certificates have been low for a couple of years, but has increased during In performing our audit we have obtained an understanding of the manner 2017/2018. Low prices are indications of factors which can impact the in which macro economic developments impact Eolus Vind, and how the valuation of the wind farms. Due to this, the company has performed Board of Directors and company management work to compile information write-downs amounting to MSEK 6. The company undertakes write- to serve as the basis of their decision making. The impairment tests have down tests on an on-going basis to ensure the correctness of the value been examined through our: of the assets. The company has not identified any further impairment • Assessment of the correctness of the calculation models requirements. • Checking of the calculation and assessment of the applied WACC Certain of the assumptions and assessments made by management in • Comparison of input data regarding planned production against external conjunction with the impairment testing regarding future cash flows and data and we have undertaken a reasonability assessment comparing circumstances are complex and have a major impact on the calculation such data with data regarding historical production. of the value in use. This applies, in particular, to the assessment of the • Comparison of input data regarding estimated operating costs and other future price levels of electricity and of electricity certificates and of the data against the company’s forecasts and we have undertaken a reaso- discount rate, where limited deviations result in a major impact on the nability assessment comparing such data with historical information. calculation of the value in use. • 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 challeng- Eolus Vind reports projects in progress in its balance sheet associated ed them as regarding these assessments. with the design of wind farms. The projects are realized when Eolus Vind In performing our audit, we have obtained an understanding of the manner sells the project as a construction-ready project or when the wind farm is in which macro economic developments impact Eolus Vind and how the already constructed and is either sold to a client or moved to the inventory. Board of Directors and company management work to compile information A project can also be realized through the sale of project rights. to serve as the basis of their decision making. Projects in progress have The reported value of projects in progress amounted at 31 August 2018 been audited on the basis of our: to MSEK 575. • detailed testing to determine that the costs referring to the projects This balance sheet item is significant in its size and with the current electri- actually refer to relevant project costs city prices and prices of electricity certificates, the valuation of projects in • studied the company’s assessment of the realization of projects in the progress is a focus area in our audit. short and long term Each project is valued individually and the company considers the realiza- • assessed the inherent parameters, such as the time plans and budgets, tion potential of the project in the long and short term. The value of a in the projects for which a contract has already been signed with a client project which is not seen to be realizable is written down immediately. • discussed and assessed projects included in the business plan and This takes place, for example, when a project is rejected in the working budget with management and followed up the outcome against last permit process. 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 consolidated accounts that there is a material misstatement of this other information, we are This document also contains other information than the annual accounts required to report that fact. We have nothing to report in this regard. and consolidated accounts and is found on pages 1-31 and 84-87. The Board of Directors and the Managing Director are responsible for Responsibilities of the Board of Directors and this other information. the Managing Director Our opinion on the annual accounts and consolidated accounts The Board of Directors and the Managing Director are responsible for the does not cover this other information and we do not express any form preparation of the annual accounts and consolidated accounts and that of assurance conclusion regarding this other information. they give a fair presentation in accordance with the Annual Accounts Act In connection with our audit of the annual accounts and consolidated and, concerning the consolidated accounts, in accordance with IFRS as accounts, our responsibility is to read the information identified above and adopted by the EU. The Board of Directors and the Managing Director are consider whether the information is materially inconsistent with the annual also responsible for such internal control as they determine is necessary accounts and consolidated accounts. In this procedure we also take to enable the preparation of annual accounts and consolidated accounts into account our knowledge otherwise obtained in the audit and assess that are free from material misstatement, whether due to fraud or error. whether the information otherwise appears to be materially misstated.

82 ANNUAL REPORT EOLUS VIND AB 2017/2018 AUDITOR’S REPORT

In preparing the annual accounts and consolidated accounts, The Board affairs otherwise are controlled in a reassuring manner. The Managing of Directors and the Managing Director are responsible for the assessment Director shall manage the ongoing administration according to the Board of the company’s and the group’s ability to continue as a going concern. of Directors’ guidelines and instructions and among other matters take They disclose, as applicable, matters related to going concern and using measures that are necessary to fulfil the company’s accounting in accor- the going concern basis of accounting. The going concern basis of ac- dance with law and handle the management of assets in a reassuring counting is however not applied if the Board of Directors and the Managing manner. Director intends to liquidate the company, to cease operations, or has no realistic alternative but to do so. Auditor’s responsibility The Board’s Audit Committee shall, without affecting the other tasks Our objective concerning the audit of the administration, and thereby and responsibilities of the Board, monitor the company’s financial reporting, our opinion about discharge from liability, is to obtain audit evidence to among other things. assess with a reasonable degree of assurance whether any member of the Board of Directors or the Managing Director in any material respect: Auditor’s responsibility • has undertaken any action or been guilty of any omission which can Our objectives are to obtain reasonable assurance about whether the give rise to liability to the company, or annual accounts and consolidated accounts as a whole are free from mate- • in any other way has acted in contravention of the Companies Act, rial misstatement, whether due to fraud or error, and to issue an auditor’s the Annual Accounts Act or the Articles of Association. report that includes our opinions. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance Our objective concerning the audit of the proposed appropriations of with ISAs and generally accepted auditing standards in Sweden will always the company’s profit or loss, and thereby our opinion about this, is to detect a material misstatement when it exists. Misstatements can arise assess with reasonable degree of assurance whether the proposal is from fraud or error and are considered material if, individually or in the in accordance with the Companies Act. aggregate, they could reasonably be expected to influence the economic Reasonable assurance is a high level of assurance, but is not a decisions of users taken on the basis of these annual accounts and guarantee that an audit conducted in accordance with generally accepted consolidated accounts. auditing standards in Sweden will always detect actions or omissions A further description of our responsibility for the audit of the annual that can give rise to liability to the company, or that the proposed appropri- accounts and consolidated accounts is available on Revisorsinspektionen’s ations of the company’s profit or loss are not in accordance with the website: www.revisorsinspektionen.se/revisornsansvar. This description Companies Act. is part of the auditor´s report. A further description of our responsibility for the audit of the adminis- tration is available on Revisorsinspektionen’s website: www.revisorsinspek- REPORT ON OTHER LEGAL AND REGULATORY tionen.se/revisornsansvar. This description is part of the auditor’s report. REQUIREMENTS

Audit of the corporate governance report Opinions The Board of Directors is responsible for the corporate governance report In addition to our audit of the annual accounts and consolidated accounts, on pages 37-39 and for ensuring that it is prepared in accordance with we have also audited the administration of the Board of Directors and the the Annual Accounts Act. Managing Director of Eolus Vind AB (publ) for the year 1 September 2017 Our examination of the corporate governance statement is conducted to 31 August 2018 and the proposed appropriations of the company’s in accordance with FAR’s auditing standard RevU 16 The auditor’s exami- profit or loss. nation of the corporate governance statement. This means that our exami- We recommend to the general meeting of shareholders that the profit nation of the corporate governance statement is different and substantially be appropriated in accordance with the proposal in the statutory adminis- less in scope than an audit conducted in accordance with International tration report and that the members of the Board of Directors and the Standards on Auditing and generally accepted auditing standards in Managing Director be discharged from liability for the financial year. Sweden. We believe that the examination has provided us with sufficient basis for our opinions. Basis for Opinions A corporate governance report has been prepared. Disclosure in ac- We conducted the audit in accordance with generally accepted auditing cordance with Chapter 6. § 6 subparagraphs 2-6 of the Annual Accounts standards in Sweden. Our responsibilities under those standards are further Act and Chapter 7. § 31, second paragraph of the same Act are consistent described in the Auditor’s Responsibilities section. We are independent of with the annual accounts and consolidated accounts and are in accordan- the parent company and the group in accordance with professional ethics ce with the Annual Accounts Act. for accountants in Sweden and have otherwise fulfilled our ethical responsi- PricewaterhouseCoopers AB was appointed Eolus Vind AB (publ)’s bilities in accordance with these requirements. auditor at the Annual General Meeting on 28 January 2017, and has been We believe that the audit evidence we have obtained is sufficient and the company’s auditor since 24 January 2015. appropriate to provide a basis for our opinions.

Responsibilities of the Board of Directors and the Managing Director Hässleholm, 28 November 2018 The Board of Directors is responsible for the proposal for appropriations PricewaterhouseCoopers AB of the company’s profit or loss. At the proposal of a dividend, this includes an assessment of whether the dividend is justifiable considering the require- Eva Carlsvi ments which the company’s and the group’s type of operations, size and Authorised Public Accountant risks place on the size of the parent company’s and the group’s equity, consolidation requirements, 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 accounting, management of assets and the company’s financial

ANNUAL REPORT EOLUS VIND AB 2017/2018 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 Cuptronic Technology AB and Winplantan AB. of Business Administration degree and has Shareholding in Eolus: 380,100 Class A extensive experience from positions and assign- shares, of which 378,000 Class A shares ments in the IKEA Group, including Board are held through endowment insurance, member of the IKEA Group’s holding company and 518,984 Class B shares, of which INGKA Holding BV in 1993-2007. He served 516,984 Class B shares are held through as Chairman of the Board for the last nine years endowment insurance. of this period.

FREDRIK DAVEBY BOARD MEMBER

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

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 AB (publ), Edgeware AB (publ), Ragn-Sells- Science in Engineering and Licentiate of Engi- företagen AB, Transcendent Group AB and neering in Applied Physics degrees from the IGOT AB. Royal Swedish Institute of Technology. Executive Shareholding in Eolus: 1,000 Class B shares Partner, Facesso AB. Active in the Ericsson Group 1979-2000, most recently as President of Ericsson Components AB. Investment Manager at BrainHeart Capital 2000-2005.

HANS JOHANSSON BOARD MEMBER

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

84 ANNUAL REPORT EOLUS VIND AB 2017/2018 BOARD OF DIRECTORS

HANS LINNARSON BOARD MEMBER

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

BODIL ROSVALL JÖNSSON BOARD MEMBER

Born: 1970 County Council 2013-2016, CEO of Minc Elected: 2017 2006-2013 as well as positions within E.On Education and background: Master of Busi- 1996-2006. ness Administration from the Faculty of Econom- Other assignments: CEO and Board member ics and Business Administration, Lund Universi- of BRJ Management AB. ty. Senior Advisor at Hypergene and Navet Shareholding in Eolus: 4,000 Class B shares and member of office Board at Handelsbanken Malmö-Triangeln. Former CEO of the Business Region Skåne and Enterprise Manager at Skåne

OTHER DISCLOSURES REGARDING THE No separate agreements with major share- BOARD OF DIRECTORS AND SENIOR holders, customers, suppliers or other parties EXECUTIVES exist under which Board members or senior The assignments of Board members and executives have been elected or appointed. senior executives described above pertain No agreements exist with Eolus or any of its to assignments outside the Eolus Group and subsidiaries concerning benefits after the do 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 register maintained by Euroclear on August 31, the private interests of Board members and 2018 and thereafter with any changes known senior executives could conflict with those by Eolus. Members of the Board were elected of Eolus. All Board members and senior at the Annual General Meeting on January 27, executives can be reached by contacting 2018 for the period until the 2019 Annual Eolus’s head office. General Meeting.

ANNUAL REPORT EOLUS VIND AB 2017/2018 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 x 2,000 1 GWh is sufficient for 200 houses 1 TWh is sufficient for 200,000 houses

GLOSSARY

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

86 ANNUAL REPORT EOLUS VIND AB 2017/2018 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 26, 2019 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 regis- • be registered as a shareholder in the shareholder tered in the name of a trustee must also request register maintained by Euroclear Sweden AB that their shares be temporarily re-registered in on January 21, 2019. their own names in the shareholder register main- • have notified the company of their attendance tained by Euroclear Sweden AB. Shareholders by not later than January 21, 2019 at 4:00 p.m. must inform the trustee thereof well in advance When notifying the company, name, personal of January 21, 2019, which is the date on which identity number or corporate registration number, such registration must be completed to ensure telephone number, address, shareholding and, their inclusion in the shareholder register printed where applicable, any details concerning proxies by Euroclear Sweden AB on the date specified. and advisors must be included.

FINANCIAL CALENDAR

Interim report Q1, January 24, 2018 Annual General Meeting January 26, 2018 Interim report Q2, April 25, 2019 Interim report Q3, July 4, 2019 Year-end report 2018/2019 October 23, 2019

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 sure. Financial non-IFRS measures have lim- assistance when forecasting future periods in this report may differ from similar measures itations 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 tween periods. The management uses these for financial measures produced in conformity non-IFRS measures to, for example, evaluate

Return on equity after tax Rolling 12-month Earnings per share before/after dilution Change in fair value of financial earnings relative to average equity. Net profit for the period divided by the derivatives Relates to the change in fair value weighted average number of shares during of financial instruments, which is calculated Return on capital employed Profit after the year before/after dilution. using methods and based on observable in- financial items plus interest expense ex- put data for the asset or liability, either directly pressed as a percentage of average capital Operating margin Operating profit ex- (prices) or indirectly (derived from prices). employed. pressed as a percentage of net sales. Profit margin Profit/loss after financial items Equity per share before/after dilution Equity/assets ratio Equity relative to total expressed as a percentage of net sales. Equity divided by the number of shares at assets at the end of the period. the end of the period before/after dilution. Capital employed Total assets minus Net liability/cash Interest-bearing liabilities non-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, 2016/2017. Cover photo: The Jenåsen Wind Farm. Photos: Daniel Larsson, Johan Funke, Fotograf Cecilia, Barman Consulting AB and Eolus. Layout: Mustasch Reklambyrå AB. Printed by: Norra Skåne Offset. Translation: The Bugli Company.

ANNUAL REPORT EOLUS VIND AB 2017/2018 87

ANNUAL REPORT ANNUAL 2017/2018

EOLUS VIND AB ANNUAL REPORT 2017/2018 -

E-mail: [email protected] www.eolusvind.com Box 95, Box 95, SE-281 21 Hässleholm, Sweden address: Street 3 Avenyen Tredje +46 (0)10-199 88 00 Tel: Eolus Vind AB for asset management services with an installed for asset management services with an installed Eolus Vind AB has than 400 MW. capacity of more Class B Eolus’s 8,200 shareholders. approximately is traded on Nasdaq Stockholm, Small Cap. share 540 wind turbines with a capacity of nearly 930 MW. MW. 540 wind turbines with a capacity of nearly 930 has customer contracts currently The Eolus Group Since the company’s inception in 1990, Eolus has inception in 1990, Eolus has Since the company’s than been involved in the construction of more ment, establishment and operation of renewable ment, establishment and operation of renewable attractive and competitive offer energy facilities. We Baltic region, investment opportunities in the Nordic countries and the US to both local and international investors. Eolus Vind is a leading Nordic wind power developer. wind power developer. Eolus Vind Nordic is a leading develop value at every level of project Eolus creates