PRESS RELEASE Etrion Releases First Quarter 2018 Results

May 7, 2018, Geneva, Switzerland – Etrion Corporation (“Etrion” or the “Company”) (TSX: ETX) (OMX: ETX), a solar independent power producer, today released its condensed consolidated interim financial statements and related management’s discussion and analysis (“MD&A”) for the three months ended March 31, 2018.

Etrion Corporation delivered strong project-level results in the first quarter of 2018 from its Japanese assets. Higher installed capacity and electricity production, combined with significant reduction in corporate overhead resulted in a significant increase in revenue and consolidated EBITDA compared to the same period in 2017.

Q1-18 HIGHLIGHTS ▪ Strong performance in Japan with production and revenues up by 9% and 12%, respectively, compared to Q1-17. ▪ Consolidated EBITDA increased significantly in comparison with Q1-17 driven by performance in Japan and corporate overhead reduction. ▪ Construction of the 13.2 megawatt (“MW”) Komatsu solar project in western Japan is 96% complete, on budget, on schedule and expected to be fully operational by the end of the second quarter of 2018. ▪ Acquisition of the Greenfield Tk-2 (Niigata) project lands. ▪ Growth opportunities in Japan remain positive with nearly 400 MW of projects in different stages of development, including a backlog of 190 MW and nearly 200 MW of early stage pipeline. ▪ Sound unrestricted cash position to support the growth of the business. Management Comments Marco A. Northland, the Company’s Chief Executive Officer, commented, “Japan continues to deliver very positive results. Cost cutting measures taken in Q4-17 have delivered significant savings in Q1-18 which, combined with a higher installed capacity compared to the same period last year, resulted in consolidated EBITDA improvements. We have also made significant progress on the development of three key projects in the backlog, with an aggregate net capacity of about 100 MW, targeting to commence construction within the next 12-18 months. We continue to have a solid cash position with sufficient liquidity to fund our backlog projects. I am very excited at the prospects over the next 12 months in the Japanese market and look forward to bringing new projects to financial close. On the operational side, our plants are performing well above plan, demonstrating superior design, technology and operations despite facing a first quarter with one of the heaviest snowfalls in nearly 40 years that caused approximately US$0.2 million of lower revenue. We continue to drive costs down and fine tune the business to better support our growth in Japan.”

FINANCIAL SUMMARY Three months ended US$ thousands (unless otherwise stated) Q1-18 Q1-17 Electricity production (MWh) 1 8,086 49,922 Japan 8,086 7,446 Chile - 42,476

Financial performance 2 Revenues 2,910 5,198 Japan 2,910 2,597 Chile - 2,601 EBITDA 658 57 Japan 1,730 1,961 Chile - 375 Corporate (1,072) (2,279) Net loss (3,853) (7,564) Project cash distributions 611 3,342 Cash flow used in operations (2,795) (2,821) Adjusted operating cash flow 829 278

Financial position Mar 18 Dec 17 Unrestricted cash at parent level 21,398 30,385 Restricted cash at project level 16,661 12,818 Working capital 39,350 43,611 Consolidated net debt on a cash basis 154,808 136,173 Corporate net debt 20,163 10,110 1 MWh-Megawatt-hour 2 2017 financial results include the financial performance of the Chilean subsidiary, PV Salvador SpA until September 30, 2017 when the Group lost control for IFRS purposes.

Operations and Finance Update call A conference call webcast to present the Company’s first quarter 2018 Operations and Finance update will be held on Monday, May 7, 2018, at 10:00 a.m. Eastern Daylight Time (EDT) / 4:00 p.m. Central European Time (CET).

Dial-in details: North America: +1-647-788-4991 / Toll Free: +1-877-291-4570 / Sweden Toll Free: 02-079-4343

Webcast: A webcast will be available at https://www.webcaster4.com/Webcast/Page/1297/23918

The Operations and Finance update call presentation and the Company’s condensed consolidated interim financial statements for the three months ended March 31, 2018, as well as the related documents, will be available on the Company’s website (www.etrion.com)

A replay of the telephone conference will be available until May 28th, 2018.

Replay dial-in details: North America: +1-416-621-4642 / Toll Free: +1-800-585-8367 Pass code for replay: 3086538

About Etrion Etrion Corporation is an independent power producer that develops, builds, owns and operates utility-scale solar power generation plants. The Company owns and operates 44 MW of solar capacity and 13 MW solar project under construction, all in Japan. Etrion also has several projects in the backlog and pipeline at different stages of development in Japan. The Company is listed on the Toronto Stock Exchange in Canada and the NASDAQ OMX Stockholm exchange in Sweden under ticker symbol “ETX”. Etrion’s largest shareholder is the Lundin family, which owns approximately 24% of the Company’s shares directly and through various trusts.

For additional information, please visit the Company’s website at www.etrion.com or contact:

Christian Lacueva – Chief Financial Officer Telephone: +41 (22) 715 20 90

Note: The capacity of power plants in this release is described in approximate megawatts on a direct current (“DC”) basis, also referred to as megawatt-peak (“MWp”).

Etrion discloses the information provided herein pursuant to the Swedish Securities Market Act and/or the Swedish Financial Instruments Trading Act. The information was submitted for publication in Sweden at 08:05 Central European Time on May 7, 2018.

Non-IFRS Measures: This press release includes non-IFRS measures not defined under IFRS, specifically EBITDA and Adjusted operating cash flow. Non-IFRS measures have no standardized meaning prescribed under IFRS and therefore such measures may not be comparable with those used by other companies. EBITDA is a useful metric to quantify the Company’s ability to generate cash before extraordinary and non-cash accounting transactions recognized in the financial statements. In addition, EBITDA is useful to analyze and compare profitability between companies and industries because it eliminates the effects of financing and accounting policy decisions. The most comparable IFRS measure to EBITDA is net income (loss). In addition, adjusted operating cash flow is used by investors to compare cash flows from operating activities without the effects of certain volatile items that can positively or negatively affect changes in working capital and are viewed as not directly related to a company’s operating performance. The most comparable IFRS measure to adjusted operating cash flow is cash flow used in operations. Refer to Etrion’s MD&A for the three months ended March 31, 2018, for a reconciliation of EBITDA and adjusted operating cash flow reported during the period.

Forward-Looking Information: This press release contains certain “forward-looking information”. All statements, other than statements of historical fact, that address activities, events or developments that the Company believes, expects or anticipates will or may occur in the future (including, without limitation, statements relating to the Company’s projects in Japan under construction and in development) constitute forward-looking information. This forward-looking information reflects the current expectations or beliefs of the Company based on information currently available to the Company as well as certain assumptions including, without limitation, the ability of the Company to execute on its projects in Japan under construction or in development on economic terms and in a timely manner. Forward-looking information is subject to a number of significant risks and uncertainties and other factors that may cause the actual results of the Company to differ materially from those discussed in the forward-looking information, and even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on the Company. Factors that could cause actual results or events to differ materially from current expectations include, but are not limited to, the risk that the Company may not be able to obtain all applicable permits for the development of projects in Japan and the associated project financing required for the development of such projects on economic terms and the risk of unforeseen delays in the development and construction of its projects under construction or in development. Reference is also made to the risk factors disclosed under the heading “Risk factors” in the Company’s AIF for the year ended December 31, 2017 which has been filed on SEDAR and is available under the Company’s profile at www.sedar.com.

Any forward-looking information speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking information, whether as a result of new information, future events or results or otherwise. Although the Company believes that the assumptions inherent in the forward-looking information are reasonable, forward-looking information is not a guarantee of future performance and accordingly undue reliance should not be put on such information due to the inherent uncertainty therein.

Q118

ETRION CORPORATION MANAGEMENT’S DISCUSSION AND ANALYSIS THREE MONHTS ENDED MARCH 31, 2018

Etrion is an independent power producer that develops, builds, owns and operates utility-scale solar power generation plants.

Shizukuishi solar power project in northern Japan

Etrion is a solar platform with a proven track record successfully operating assets in Japan. The Company has gross installed solar capacity in Japan of 44 MW plus 13 MW under construction, 190 MW of backlog projects and 200 MW of early stage pipeline.

CONTENTS

▪ FIRST QUARTER 2018 HIGHLIGHTS 1 - Operational Highlights 1 - Financial Highlights 1 ▪ BUSINESS REVIEW 2 - Business Overview 2 - Development Activities 5 - Solar Market Overview 7 ▪ FINANCIAL REVIEW 8 - Financial Results 8 - Financial Position 13 - Capital Investments 16 - Critical Accounting Policies and Estimates 17 - Related Parties 18 - Financial Risk Management 18 - Derivative Financial Instruments 18 ▪ RISKS AND UNCERTAINTIES 19 - Financial Risks 19 - Non-Financial Risks 19 ▪ ETRION OUTLOOK AND GUIDANCE 20 ▪ DISCLOSURE CONTROLS AND INTERNAL CONTROL OVER FINANCIAL REPORTING 20 ▪ CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION 21 ▪ ADDITIONAL INFORMATION 21

MANAGEMENT’S DISCUSSION AND ANALYSIS This management’s discussion and analysis (“MD&A”) for Etrion Corporation (“Etrion” or the “Company” and, together with its subsidiaries, the “Group”) is intended to provide an overview of the Group’s operations, financial performance and current and future business opportunities. This MD&A, prepared as of May 4, 2018, should be read in conjunction with the Company’s unaudited condensed consolidated interim financial statements and accompanying notes for the three months ended March 31, 2018. Financial information is reported in United States dollars (“$” or “USD”) and in Euros (“€”) because the Company’s outstanding corporate bonds are denominated in that currency. In addition, certain material financial information has also been reported in Japanese yen (“¥”) because the Company has its main business activities in Japan. Exchange rates for the relevant currencies of the Group with respect to the $ and the ¥ are as follows: €/¥ $/¥ €/$ Closing rate at March 31, 2018 130.86 106.19 1.2321 Closing rate at March 31, 2017 119.54 111.80 1.0691 Three months average rate March 31, 2018 133.13 108.22 1.2295 Three months average rate March 31, 2017 121.08 113.63 1.0647 NON-IFRS FINANCIAL MEASURES AND FORWARD-LOOKING STATEMENTS

The terms “adjusted net income (loss)”, “earnings before interest, tax, depreciation and amortization” (“EBITDA”), “Adjusted EBITDA”, “solar segments EBITDA” and “adjusted operating cash flow”, used throughout this MD&A, are non-IFRS measures and therefore do not have standardized meanings prescribed by IFRS and may not be comparable to similar measures disclosed by other companies. The basis for calculation has not changed and has been applied consistently by the Company over all periods presented. Adjusted net income (loss) is a useful metric to quantify the Company’s ability to generate cash before extraordinary and non-cash accounting transactions recognized in the financial statements (the most comparable IFRS measure is net income (loss) as reconciled on page 10). EBITDA, including solar segments EBITDA, is useful to analyze and compare profitability between companies and industries because it eliminates the effects of financing and certain accounting policy decisions, while Adjusted EBITDA is also useful because it excludes expenses that are expected to be non-recurring (the most comparable IFRS measures for both EBITDA and Adjusted EBITDA is net income (loss) as reconciled on page 11). In addition, adjusted operating cash flow is used by investors to compare cash flows from operating activities without the effects of certain volatile items that can positively or negatively affect changes in working capital and are viewed as not directly related to a company’s operating performance (the most comparable IFRS measure is cash flow used in operations as reconciled on page 10). This MD&A contains forward-looking information based on the Company’s current expectations, estimates, projections and assumptions. This information is subject to a number of risks and uncertainties, many of which are beyond the Company’s control. Users of this information are cautioned that actual results may differ materially from the information contained herein. For information on material risk factors and assumptions underlying the forward-looking information, refer to the “Cautionary Statement Regarding Forward-Looking Information” on page 21.

FIRST QUARTER 2018 HIGHLIGHTS

OPERATIONAL HIGHLIGHTS FINANCIAL HIGHLIGHTS ▪ Advanced on the construction of the 13.2 MW1 Komatsu ▪ Generated revenues and solar segments EBITDA of $2.9 project in Ishikawa prefecture, Japan. The project is million and $1.7 million, respectively. approximately 96% complete, on budget, on schedule and ▪ Closed the first quarter of 2018 with a cash balance of expected to be fully operational by the end of the second $38.1 million, $21.4 million of which was unrestricted and quarter of 2018. held at corporate level, and, working capital of $39.4 ▪ Advanced the development of four backlog solar power million. Etrion has sufficient liquidity to fund the backlog projects in Japan with aggregate capacity of 190 MW on a projects. gross basis. As with any development, these projects remain at risk for delays or abandonment if the Company encounters issues that cannot be resolved. The Company is also evaluating several other early stage projects, defined as pipeline, with an aggregate capacity of 200 MW on a gross basis. ▪ Produced 8.1 million kilowatt-hours (“kWh”) of electricity from the Company’s 44 MW portfolio comprising ten solar power plant sites in Japan.

1 The capacity of power plants in this document is described in approximate megawatts (“MW”) on a direct current basis, also referred to as megawatt-peak. 1

FIRST QUARTER 2018 HIGHLIGHTS Three months ended USD thousands (unless otherwise stated) Q1-18 Q1-17(*)

Electricity production (MWh)2 8,086 49,922

Financial results Revenues 2,910 5,198 Gross profit (loss) 116 (217) EBITDA 658 57 Adjusted EBITDA 658 624 Net loss (3,853) (7,564) Adjusted net loss (1,866) (4,091) Cash flow Project cash distributions 611 3,342 Cash flow used in operations (2,795) (2,821) Adjusted operating cash flow 829 278

March 31 December 31 2018 2017 Balance sheet Total assets 225,039 212,135 Operational assets 115,171 110,622 Unrestricted cash at parent level 21,398 30,385 Restricted cash at project level 16,661 12,818 Working capital 39,350 43,611 Consolidated net debt on a cash basis 154,808 136,173 Corporate net debt 20,163 10,110 (*) 2017 comparative figures include the financial performance of the Company’s Chilean subsidiary, PV Salvador S.A., which is no longer consolidated with the Group.

BUSINESS REVIEW BUSINESS OVERVIEW

Etrion is an independent power producer that develops, builds, Etrion’s current strategy is to focus exclusively on continuing to owns and operates utility-scale power generation plants in develop and operate solar power projects in Japan. Japan. The Company owns and operates 44 MW of installed solar capacity in Japan. Etrion has 13 MW of solar projects The Company’s business model focuses on seven key drivers for under construction and several projects at different stages of success: (1) long term contracts with stable revenues; (2) low development in Japan. The Company has three operational risk jurisdictions; (3) strategic partnerships; (4) low equipment projects (ten solar park sites) and one project under cost and operating expenses; (5) available long-term project construction (one solar park site) in Japan. All operational financing; (6) low cost of debt, and (7) attractive liquid market projects in Japan benefit from revenues generated from 20 for future divesture. year feed-in-tariff (“FiT”) power purchase agreements The Company is listed on the Toronto Stock Exchange in Canada (“PPAs”), fixed price contracts with local utilities for all the and the NASDAQ OMX Stockholm exchange in Sweden. Etrion electricity generated. has corporate bonds listed on the Oslo Stock Exchange in Norway. Etrion is based in Geneva, Switzerland and Tokyo, Effective September 30, 2017, the Group no longer Japan. As of the date of this MD&A, the Company has a total of consolidates PV Salvador SpA, the subsidiary that owns the 70 20 employees. MW Salvador solar power project in Northern Chile. Therefore, the Group’s consolidated financial performance for the three months ended March 31, 2018, is not fully comparable with the same period in 2017. The Group has not restated previous year’s figures because Salvador is still owned by the Group. See “Deconsolidation of Subsidiary” disclosures in MD&A for the year ended December 31, 2017 and the disclosure under “Financial Review” in this MD&A.

2 MWh=Megawatt-hour 2

OPERATIONS REVIEW THREE MONTHS ENDED MARCH 31 During Q1-18, the Group’s revenue increased by 12%, JAPAN compared to the same period in 2017, primarily due to the USD thousands (unless otherwise stated) Q1-18 Q1-17 incremental installed capacity in Japan. However, project-level

EBITDA in Japan decreased by 12%, compared to the same Operational data (1) period in 2017, primarily due to the contractually agreed Electricity production (MWh) 8,086 7,446 additional operational and maintenance (“O&M”) expenses

and the timing for recognition of property taxes. Operational performance (1) Electricity revenue Feed-in-Tariff (2) 2,910 2,597 3 Total revenues 2,910 2,597 EBITDA (3) 1,730 1,961 EBITDA margin (%) 59% 76% 2 Net (loss) income (993) 36

(1) Operational and performance data is disclosed on a gross basis because USD millions Etrion consolidates 100% of its operating subsidiaries. 1 (2) FiT scheme under PPA with utilities. (3) Refers to segment EBITDA as reconciled in the segment information section on page 11. OPERATING PERFORMANCE IN JAPAN 0 Q1-17 (3-months) Q1-18 (3-months) During Q1-18, the Group produced 9% more electricity in Japan Revenue Solar Japan EBITDA compared to the same period in 2017, due primarily to the incremental production from the Misawa solar power project Revenues from Japan are received in Japanese yen and have and the overall better than expected performance of the solar been translated to the Group’s presentation currency ($) using power projects, despite the heavy snow impact during the the corresponding Q1-18 average rates. winter affecting the Shizukuishi project. Accordingly, changes in the ¥/$ applicable exchange rates have The Group receives revenues denominated in Japanese yen an impact in the accounting conversion process of the income from its operating solar projects. Revenues come from the FiT statement to the Group’s reported figures in USD. system, whereby a premium fixed price is received for each Historical production kWh of electricity produced through a 20-year PPA contract with the Japanese public utility, Tokyo Electric Power Company Solar-related production is subject to seasonality over the year (“TEPCO”) or Tohoku Electric Power Co., Inc. (“Tohoku Electric due to the variability of daily sun hours in the summer months Power Utility”) or (“TOHOKU”), as applicable. During Q1-18, the versus the winter months. However, on an annual basis, solar Group received the FiT of ¥40 per kWh applicable to the Mito irradiation is expected to vary less than 10% year-over-year. and Shizukuishi solar park sites and the FiT of ¥36 per kWh The historical quarterly electricity production in Japan is shown applicable to the solar park sites of the Misawa project. below, including the impact of seasonality. 16,000

14,000

12,000

10,000

8,000 MWh 6,000

4,000

2,000

- Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Japan

OPERATING PROJECTS The Group’s 87%-owned operating solar power project in Japan is shown below: The following map shows the locations of the Company’s operating solar plants in Japan. Gross Connection Project Region Sites MW Technology date Shizukuishi Iwate 1 24.7 Fixed-tilt Oct-2016 Total 1 24.7 Shizukuishi’ s solar power plant in Japan is capable of producing approximately 26.1 million kWh of electricity per year. Shizukuishi is a 24.7 MW utility-scale solar photovoltaic power plant on one site in the Iwate Prefecture of Japan. Construction-related work began in October 2014 and on October 20, 2016, Shizukuishi achieved its commercial operation date, became 100% operational and started collecting revenues from its electricity production. The solar power plant was built on 51 hectares of leased land, and the facility was connected to the Tohoku Electric Power utility. The project entered into a 20-year PPA with the TOHOKU to receive ¥40 per kWh produced (approximately $0.34 per kWh). The Mito total project cost of approximately ¥8.9 billion (approximately $87.8 million) is financed 80% with non-recourse project debt As of the date of this MD&A, the remaining PPA contract life of from SuMi Trust, with the remaining approximately 20% equity Mito is approximately 18 years. The Group’s 87%-owned portion already funded by the Group and HHT based on their operating solar power project in Japan is shown below: respective ownership interests of approximately 87% and 13%. Gross Connection Shizukuishi has entered into a long-term fixed price O&M Project Region Sites MW Technology date agreement with HHT. Jun-2015 Mito-site 1 Ibaraki 1 1.3 Fixed-tilt Misawa Mito-site 2 Ibaraki 1 1.3 Fixed-tilt Aug-2015 Mito-site 3 Ibaraki 1 1.3 Fixed-tilt Jul-2015 As of the date of this MD&A, the remaining PPA contract life of Mito-site 4 Ibaraki 1 2.7 Fixed-tilt May-2015 Misawa is approximately 20 years. The Group’s 60%-owned Mito-site 5 Ibaraki 1 2.7 Fixed-tilt Jun-2015 operating solar power project in Japan is shown below: Total 5 9.3 Gross Connection Mito’s solar power sites in Japan are capable of producing more Project Region Sites MW Technology date than 10.3 million kWh of electricity on an annual basis. Mito is Misawa Tohoku 3-4 5.3 Fixed-tilt Feb-2017 a 9.3 MW utility-scale solar photovoltaic power project Misawa Tohoku 1-2 4.2 Fixed-tilt Jul-2017 consisting of five sites in the Ibaraki Prefecture of Japan. Total 4 9.5 Construction began in October 2014, with the last site Misawa is expected to produce approximately 10.7 million kWh connected in August 2015. The solar power plant was built on of solar electricity per year. Misawa is a 9.5 MW utility-scale 28.3 hectares of leased land, and the facilities connect through solar photovoltaic power plant, located in Misawa city in the TEPCO. In December 2014, the project company entered into Aomori prefecture of the Tohoku region in Japan. Construction- two of the five planned 20-year PPAs with TEPCO under which related works began in July 2016. The first two sites of the this the project company receives ¥40 per kWh produced solar project totaling 5.3 MW were connected to the grid and (approximately $0.34 per kWh). The remaining three PPAs started recognizing revenues as of the end of February 2017. were signed in March 2015. The total project cost of The last two solar park sites, representing 4.2 MW were approximately ¥3.4 billion (approximately $33.5 million) was connected in July 2017. The solar power plant was built on 16.3 financed 80% through non-recourse project debt from SuMi hectares of owned land, and the facilities were connect to the Trust with the remaining approximately 20% equity portion Tohoku Electric Power utility. Each project site entered into a funded by the Group and Hitachi High-Tech (“HHT”) based on 20-year PPA with the Tohoku Electric Power utility to receive their respective ownership interests of approximately 87% and ¥36 per kWh produced (approximately $0.31 per kWh). The 13%. Mito entered into a long-term fixed price O&M total project cost of approximately ¥3,483 billion agreement with HHT. (approximately $34 million) was financed 85% with non- Shizukuishi recourse project debt from Sumitomo Mitsui Trust Bank (”SMTB”) with the remaining approximately 15% equity portion As of the date of this MD&A, the remaining PPA contract life of funded by the Group, HHT and Tamagawa Holdings Co Shizukuishi is approximately 19 years. (“Tamagawa”) based on their respective ownership interests of 60%, 10% and 30%, respectively. Misawa entered into a long- term fixed price O&M agreement with HHT.

DEVELOPMENT ACTIVITIES control over the development of the project through the existence of a binding development services agreement PROJECTS UNDER CONSTRUCTION - JAPAN (“DSA”) or other similar arrangement with local developers. In Komatsu addition, Management believes they can reach Notice to Proceed (“NTP”) status within the next 24 months. NTP is generally reached when all permits, authorizations and land have been secured and also the interconnection agreements have been signed. Also at NTP, financing is in place and the company can give the EPC contractor notice to begin building the project. As explained further below, any project under development remains with a high degree of risk which may result in (a) delays to commence construction, (b) changes in the economics, (c) changes in capacity or (d) abandonment of the project. Changes (if any) to previously disclosed project size and details are due to optimizations during the development process. Final size and economics are only confirmed when financial close is reached. The Company classifies projects as Brownfield or Greenfield. Brownfield are projects originally developed by a third party, still in the development stage, with respect to which the Company has secured certain rights. Greenfield are projects originally developed by the Company. The table below lists the current backlog projects. Project MW Target Prefecture Sites Gross NTP Expected Gross Connection Brownfield Tk-1 Kumamoto 1 45 H1-19 Project Region Sites MW Technology date Greenfield Tk-2 Niigata 1 45 Q1-19 Komatsu Honsu 1 13.2 Fixed-tilt Q2-2018 Brownfield Tk-3 Mie 1 60 H1-19 Total 1 13.2 Brownfield Tk-4 Saitama 1 40 TBD Total backlog 4 190 Komatsu is a 13.2 MW utility-scale solar photovoltaic power Total early stage 200 plant under construction, located in the Ishikawa prefecture of Total pipeline 390 the Honsu region in Japan. Pre-construction-related works began in February 2017 and the project is approximately 96% Japanese backlog complete, on budget and on schedule, expected to be fully Brownfield Tk-1. This project, located in the Kumamoto operational by the end of the second quarter of 2018. The solar prefecture, is currently designed as a 45 MW solar park project. power plant is being built on 30.5 hectares of leased land and The project has secured the FiT of ¥36/kWh. It entered into a the facilities will connect through the Hokuriku Electric Power grid connection agreement (i.e. construction cost allocation Co., Inc. ("Hokuriku Electric Power utility"). The project agreement) with the off-taker utility before July 31 , 2016. This company entered into a 20-year PPA with the Hokuriku Electric means this project is not subject to any deadline for Power utility to receive ¥32 per kWh produced (approximately development in order to benefit from the full 20 year FiT $0.27 per kWh). The total project cost of approximately ¥4,285 contract. billion (approximately $38 million) is being financed 83% with non-recourse project debt from SMTB with the remaining The Company continues to advance discussions with land approximately 17% equity portion already funded by the Group owners to secure property. Management believes it will take and HHT based on their respective ownership interests of an additional 4-6 months to assess final land feasibility for the 85.1% and 14.9%, respectively. As of March 31, 2018, the project. Assuming land constraints are solved and final land Group has incurred capital expenditures of $35.5 million configuration is completed the Company will file for the forest associated with the construction of the Komatsu project, with development authorization, a process that typically takes remaining budgeted costs to be incurred in the second half of additional 4-6 months. The project does not require an 2018. Komatsu has entered into a long-term fixed price O&M environmental impact assessment. The Company is targeting to agreement with HHT. Once operational, Komatsu is expected complete all permits, secured all land and finalize the private to produce approximately 14.2 million kWh of solar electricity line easement rights within the first half of 2019. The project per year. remains with a high degree of execution risk primarily due to the uncertainty of securing such property rights critical to the PROJECTS UNDER DEVELOPMENT - JAPAN project. Management remains cautiously optimistic such issues Etrion is advancing the development of several projects that will be resolved so that the project can proceed. Management are at different stages of development and /or negotiation with believes this project could reach financial close within the next third parties. The Company is providing below more detailed 12-18 months. information on a portion of these projects. These “backlog” Greenfield Tk-2. This project, located in the Niigata projects are those in which the Company has substantial prefecture, currently configured as a 45 MW solar park project. 5

The project has secured the FiT of ¥36/kWh. It entered into a The Company is closely monitoring these developments to grid connection agreement (i.e. construction cost allocation assess the impact on the schedule and feasibility. The Company agreement) with the off-taker utility after July 31, 2016 but expects to have further clarity by the summer of 2018. before March 2017. This means that this project is subject to a As of March 31, 2018, the Company has incurred approximately three year limit for development from March 31st 2017. In $11.0 million of project advances and development costs other words, if this project starts operation one year late (i.e. associated with the Japanese backlog as follows: by March 31 , 2021) it will have its FiT period shortened to 19 years. The project does not require an environmental impact Advance to Development TOTAL assessment. The Company completed the purchase of all the Project third parties costs land required for the project, except for certain public land Brownfield Tk-1 1.0 1.8 2.8 parcels which are usually acquired at the later stage of Greenfield Tk-2 - 1.9 1.9 development (after detailed layout design and forest Brownfield Tk-3 5.6 0.7 6.3 development plans). The Company is currently in consultation Total USD million 6.6 4.4 11.0 with local communities and proceeding with land measurement and soil survey activities. It is also advancing on Project advances and incurred development costs will be fully civil works and EPC contract negotiations and expects to reach credited from the net to Etrion equity contribution shown in the shovel ready stage by the first quarter of 2019. The the last column of the table below, upon financial close. Company is targeting to reach financial close within 12 to 18 months. Project Gross Net Equity Net to Project Costs Debt Contribution Etrion Brownfield Tk-3. This project, located in the Mie prefecture, Brownfield Tk-1 166 141 19 16 was originally configured as 50 MW but is in advanced Greenfield Tk-2 157 127 18 18 discussions with local authorities and other stakeholders to be Brownfield Tk-3 200 170 13 7 expanded to a 60 MW solar park project. The project has Total USD million 523 438 50 41 secured the FiT of ¥36/kWh. It entered into a grid connection agreement (i.e. construction cost allocation agreement) with The equity needed to build most of these Japanese backlog the off-taker utility before July 31, 2016. This means that this projects is likely to be contributed throughout the construction project is not subject to any deadline for development to period, typically expended over a two year construction period, benefit from the full 20 year FiT contract. The project required rather than at the start of constuction. The net to Etrion equity an environmental impact assessment which was completed contribution shown on the table above is net of development and published in January 2018. Etrion’s development partner is fees the Company charges to the project companies for completing a consultation process with local communities and securing financing and developing the project at NTP. other stakeholders to address all recommendations outlined in the Environmental Impact Assessment study so they can be Early stage Japanese pipeline properly reflected when filing for the forest development permit. Effective management of the consultation process has The Japanese Ministry of Economy, Trade and Industry (METI) taken place, including public hearings and close interaction reported as of August 2017 total solar projects with valid FiT with the community. The project remains with certain degree agreements but not yet under construction in the aggregate of risk. Target date for this project to be shovel ready is first half capacity of 26 GW. Many of these projects are still in different of 2019 and the Company expects to keep a 50% ownership stages of development and seeking development partners and stake. investors to carry these projects to completion. Brownfield Tk-4. This project, located the Saitama prefecture, is currently configured as a 40 MW solar park project. The Etrion is actively working on several opportunities in the project has secured the FiT of ¥24/kWh. It entered into a grid market, leveraging its network of developers and partners. It is connection agreement (i.e. construction cost allocation currently managing a pipeline of approximately 200 MW of agreement) with the off-taker utility after July 31, 2016 but projects in different stages. Some are at very early stages of due before March 2017. This means that this project is subject to a diligence while others are at advanced stages of negotiations. three year limit for development from March 31, 2017. In other The Company will continue to provide visibility of individual words, if this project starts operation two years late (i.e. by projects once it enters into a binding agreement with March 31, 2022) it will have its FiT period shortened to 18 years. developers and completes due diligences to validate the interconnection agreement with the utilities, evaluate the land The largest uncertainty of this project are the environmental rights acquisition, review status of permits and complete impact assessment requirements and the extensive civil work economic analysis. Given the early stage nature of these cost. The Company believes there is an upside on this solar projects the Company will not provide timing status until the project and is working towards its development, despite the projects reach backlog stage. The estimated aggregate capacity the uncertainty regarding timing of the environmental disclosed for the pipeline is management’s best estimates, assessment requirements and its final impact on the however, final capacity may be adjusted based on permit development of this project. The Group is not capitalizing restrictions, land availability and economics. additional expenses to this project given the uncertainty regarding the assessment requirements.

SOLAR MARKET OVERVIEW JAPANESE MARKET The market for renewable energy sources, including solar, Japan is the world’s third largest energy consumer and today is biomass, wind, hydro and bio fuels, is driven by a variety of among the top five largest solar markets in the world. The use factors, such as legislative and policy support, technology, of solar power in Japan has accelerated since the Japanese FiT macroeconomic conditions, pricing and environmental scheme for renewable energy was introduced in July 2012 to concerns. The overall goal for the solar energy market is to help offset the loss of nuclear power caused by the Fukushima reach grid parity, whereby the price of solar energy is disaster. This in turn led to most of the nation's 52 reactors competitive with traditional sources of electricity, such as coal being idled due to safety concerns. While current renewable and natural gas. Solar technology cost has dropped energy usage remains low (currently 15% of total primary dramatically and continues to decrease. In addition, solar energy), Japan is planning to accelerate further renewable energy has reached grid parity in certain parts of the world energy development. By the end of 2019, Japan is projected to where solar irradiation and electricity prices are high. As the have more than 52 GW of solar capacity. cost of solar technology continues to decrease, new potential On January 22, 2015, the METI officially announced new rules markets are expected to develop in areas where solar with respect to the FiT regime. The rules apply to new projects electricity is price-competitive with other sources of energy. and were designed to streamline the process between Solar power plants are an important source of renewable developers, METI and utilities. Projects with accepted existing energy. They have very low operating and maintenance costs grid connection are not affected. METI’s main objective in with minimal moving parts. The technology is essentially silent, announcing new rules was to address the increasing emission-free and scalable to meet multiple distributed power speculation from developers that have been applying for the requirements. Energy generated from the sun consists of both FiT but not realizing projects, and at the same time to unblock energy from PV cells and energy generated from solar the grid assessment applications that were put on hold by some collectors (i.e., thermal energy or heat). of the utilities facing overloaded capacity. The key drivers for growth within the renewable energy sector The Act to amend the Act on Special Measures Concerning are: Procurement of Electricity from Renewable Energy Sources by Electricity Utilities (the "FIT Amendment Act") was ▪ Increasing global demand for energy due to population and promulgated on June 3, 2016. The FIT Amendment Act makes economic growth combined with finite oil and gas reserves; various changes to the rules for the Japanese renewable energy ▪ Improving technologies like storage and accelerated cost feed in tariff program including: reductions for renewable energy; • to require certain categories of projects to commence ▪ Increased concern about long-term climate change and operations within three years from 1 April 2017 (i.e. by 31 focus on reducing carbon emissions from energy generation March 2020); this will likely result in reduced FiT payment using fossil fuels; periods after such three years period, ▪ Political commitment at national and regional levels to • to allow such projects to change their modules without support the development and use of renewable energy triggering changes in the FIT rate; and sources; and • to allow such projects to also reduce their project size by ▪ Attractive government incentives, such as FiTs, capital more than 20% without triggering a FIT rate reduction. subsidies and tax incentives in markets that have not yet In Japan, the new curtailment system has been changed from reached grid parity. the “30 day rule per annum” to an hourly basis per annum. Uncompensated curtailment up to 30 days, annually based on one‐day units, will be changed to up to 360 hours annually. The hourly basis for curtailment expands the amount available for interconnection. Furthermore, utilities may impose installation of remote curtailment systems on PV plants.

FINANCIAL REVIEW

FINANCIAL RESULTS FIRST QUARTER SELECTED FINANCIAL INFORMATION During the first quarter of 2018, the Group’s performance and results were positively impacted by the incremental production of electricity in Japan. However, on a consolidated basis revenue decreased in comparison with the same period in 2017, due to the deconsolidation of the Chilean operating subsidiary, effective September 30, 2017. Selected consolidated financial information, prepared in accordance with IFRS, is as follows:

Three months ended USD thousands (except per share data) Q1-18 Q1-17

Revenue 2,910 5,198 Japan 2,910 2,597 Chile - 2,601 Gross profit (loss) 116 (217) Net loss attributable to owners of Etrion (3,663) (6,497) Basic and diluted loss per share: From total results attributable to owners of Etrion $(0.01) $(0.02)

Net loss (3,853) (7,564) Adjustments to net loss for: Net income tax expense 295 96 Depreciation and amortization 1,718 2,650 Share-based payment expense 188 263 Net finance costs 2,443 4,862 Other expense (income) 38 (29) Income tax paid (404) (537) Changes in working capital (3,220) (2,562) Operating cash flow (2,795) (2,821) Summarized consolidated balance sheet information, prepared in accordance with IFRS, is as follows: March 31 December 31 USD thousands 2018 2017

Non-current assets 170,627 153,751 Current assets 54,412 58,384 Total assets 225,039 212,135 Non-current liabilities 202,054 187,515 Current liabilities 15,062 14,773 Total liabilities 217,116 202,288 Net assets 7,923 9,847 Working capital 39,350 43,611 Dividends declared - -

SEGMENT INFORMATION Management considers reportable segments from a geographical perspective and measures performance based on EBITDA and reviews and monitors performance of the Group on this basis. The Company has identified one reportable segment which is solar energy Japan. While the Company has determined it has only one reportable segments, the Company has decided to disclose additional information about its corporate activities as it believes that this information is useful for readers of the consolidated financial statements. Following the Chilean subsidiary deconsolidation in September 30, 2017, the Group does no longer reports financial performance of the Solar Chile segment. SEGMENT INFORMATION THREE MONTHS ENDED MARCH 31 Segment consolidated financial information for the three months ended March 31, prepared in accordance with IFRS, is as follows:

USD thousands Q1-18 Q1-17 Solar Solar Solar Japan Corporate Total Chile Japan Corporate Total

Revenue 2,910 - (2,910) 2,601 2,597 - 5,198 Operating expenses (Opex) (1,116) - (1,116) (2,189) (622) - (2,811) General and administrative (G&A) (52) (1,046) (1,098) (37) (56) (2,266) (2,359) Other income (expenses) (12) (26) (38) - 42 (13) 29 EBITDA 1,730 (1,072) 658 375 1,961 (2,279) 57 Depreciation and amortization (1,678) (40) (1,718) (1,330) (1,273) (47) (2,650) Finance income - - - - 12 - 12 Finance costs (892) (1,606) (2,498) (2,633) (709) (1,545) (4,887) Loss before income tax (840) (2,718) (3,558) (3,588) (9) (3,871) (7,468) Income tax (expense) recovery (153) (142) (295) - 45 (141) (96) Net (loss) income for the period (993) (2,860) (3,853) (3,588) 36 (4,012) (7,564)

Solar Japan: During Q1-18, the Group’s Japanese solar segment generated revenues of $2.9 million and EBITDA of $1.7 million, representing an increase of 9% and a decrease of 12%, respectively, in comparison with the same period in 2017. Revenue increased driven by the additional production from the Misawa solar project and excellent performance of the Mito solar project. EBITDA decreased mainly due to the contractually agreed additional O&M expenses and the recognition of property taxes. In addition, the Group’s Japanese segment generated a net loss of $0.9 million, in comparison with the net income results of $36,000 for the same period in 2017. The first quarter of the year is typically one with lower irradiation due to the winter season in the northern hemisphere. Corporate: During Q1-18, the Group’s corporate segment generated negative EBITDA of $1.1 million and a net loss of $2.9 million, respectively. In comparison with the same period in 2017, negative EBITDA decreased primarily as a result of cost reduction initiatives implemented in the last quarter of 2017 to streamline operations resulting in a material reduction of General and Administrative expenses. Solar Chile: Income and expenses are included only in the Group’s consolidated financial statements until September 30, 2017, the date when the Group ceased to control the Chilean subsidiary, in accordance with the control reassessment completed by management under the IFRS guidelines.

NON-GAAP PERFORMANCE MEASURES

Reconciliation of adjusted net loss to net loss Three months ended USD thousands Q1-18 Q1-17(*)

Net loss (3,853) (7,564) Adjustments for non-recurring items: General and administrative expenses 1 - 178 Write off guarantees - 389 Adjustments for non-cash items: Depreciation and amortization 1,718 2,650 Fair value movements (derivative financial instruments) 81 (7) Share-based payment expense 188 263 Adjusted net loss (1,866) (4,091) (1) Relates to extraordinary and non-recurring professional fees.

Reconciliation of adjusted operating cash flows to operating cash flows Three months ended USD thousands Q1-18 Q1-17(*)

Operating cash flow (2,795) (2,821) - Changes in working capital 3,220 2,562 - Income tax paid 404 537 Adjusted operating cash flow 829 278

(*) 2017 comparative figures include the financial performance of the Company’s Chilean subsidiary, PV Salvador SpA., which is no longer consolidated with the Group.

NON-GAAP PERFORMANCE MEASURES

Reconciliation of Solar segments Adjusted EBITDA to EBITDA Three months ended USD thousands Q1-18 Q1-17(*)

Net loss (3,853) (7,564) Adjustments for: Net income tax expense 296 96 Net finance costs 2,498 4,875 Depreciation and amortization 1,718 2,650 EBITDA 658 57 Adjustments for non-recurring items: General and administrative expenses - 178 Write off deposits in guarantee - 389 Adjusted EBITDA 658 624 Plus: Corporate G&A expenses after non-recurring items 1,072 1,712 Solar segments Adjusted EBITDA 1,730 2,336 Less: Solar Chile adjusted EBITDA - 375 Solar Japan Adjusted EBITDA 1,730 1,961

QUARTERLY SELECTED FINANCIAL INFORMATION Selected consolidated financial information, prepared in accordance with IFRS, is as follows:

USD thousands (except per share data) Q1-18 Q4-17 Q3-17 Q2-17 Q1-17 Q4-16 Q3-16 Q2-16 Revenue 2,910 2,603 7,005 7,042 5,198 4,979 3,351 3,141 Japan 2,910 2,603 4,867 5,256 2,597 2,327 1,180 1,258 Chile - - 2,138 1,786 2,601 2,652 2,171 1,883 Net (loss) income (3,853) (4,225) 35,161 (6,865) (7,564) 20,981 (88,295) 1,443 Net (loss) income from continuing operations attributable to (3,853) (4,165) 36,080 (5,865) (6,497) (5,981) (65,476) (1,876) owners of Etrion Net (loss) income attributable to owners of Etrion (3,853) (4,165) 36,080 (5,865) (6,497) 23,128 (61,131) 2,438 Basic and diluted loss (gain) per share: From continuing operations attributable to owners of Etrion $(0.01) $(0.01) $0.11 $(0.02) $(0.02) $(0.02) $(0.20) $(0.01) From total results attributable to owners of Etrion $(0.01) $(0.01) $0.11 $(0.02) $(0.02) $0.07 $(0.18) $0.01 Solar-related production and revenues experience seasonality over the year due to the variability of daily sun hours in the summer months versus the winter months, resulting in lower revenues in the first and fourth quarters each year. In Japan, revenues are received in Japanese Yen and have been translated at the average ¥/$ exchange rate for the corresponding period. Consequently, revenues expressed in $ may fluctuate according to exchange rate variations. The Group’s consolidated financial statements are presented in $, which is the Group’s presentation currency. The Company’s functional currency is the ¥. The consolidated financial statements have been prepared in accordance with IFRS.

(*) 2017 comparative figures include the financial performance of the Company’s Chilean subsidiary, PV Salvador SpA., which is no longer consolidated with the Group.

REVENUE OPERATING EXPENSES Three months ended Three months ended USD thousands Q1-18 Q1-17(*) USD thousands Q1-18 Q1-17(*)

FiT revenue 2,910 2,597 O&M costs 207 674 Market Price revenue - 328 Purchased power - 950 PPA revenue - 2,001 Personnel costs 243 300 Other utility income - 272 D&A 1,678 2,603 Total revenue 2,910 5,198 Property tax 294 31

Insurance 62 120 Consolidated revenues decreased significantly by $2.3 million Land lease 235 234 during Q1-18 compared to the same period of 2017, exclusively Transmission cost - 416 due to the deconsolidation of Salvador, effective September Other expenses 75 87 30, 2017. However, during Q1-18, the Group’s revenue from its Total operating expenses 2,794 5,415 Japanese subsidiaries increased by 12% driven by the additional production from the Misawa solar projects. The During Q1-18, operating expenses decreased by $2.6 million reconciliation of total revenue in Q1-18 versus Q1-17 is as (48%), compared to the same period of 2017, primarily due to follows: the deconsolidation of the Chilean subsidiary, effective September 30, 2017, partially offset by the incremental 6 operational costs (O&M and other operating costs) associated with the Misawa solar project and the recognition of property 5 taxes in Japan.

4 2.6 The chart below shows the historical operating expenses before depreciation and amortization over the last five 3 0.1 quarters including the effect of the recently added projects in 5.2 0.2- USD millions Japan. 2 2.9 3.0 120 1

2.5 100 - Q1-17 Salvador Japanese production Exchange diferences Q1-18 deconsolidation increase 2.0 80 Revenue Decrease Increase 1.5 60

ADJUSTED CONSOLIDATED EBITDA MW USD USD millions During Q1-18, adjusted consolidated EBITDA increased and 1.0 40 significantly improved compared to the same period of 2017, mainly as a result of EBITDA being contributed by the Group’s 0.5 20

Japanese solar segment segment and material reduction of 0.0 0 corporate overhead, partially offset by the deconsolidation of Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 the Chilean subsidiary. Chile Japan MW operational

(*) 2017 comparative figures include the financial performance of the Company’s Chilean subsidiary, PV Salvador SpA., which is no longer consolidated with the Group.

GENERAL AND ADMINISTRATIVE EXPENSES FINANCIAL POSITION Three months ended LIQUIDITY AND FINANCING USD thousands Q1-18 Q1-17(*) CASH POSITION Salaries and benefits 468 763 March 31 December 31 Board of directors fees 69 67 USD thousands 2018 2017 Share-based payments 188 263 Cash and cash equivalents: Professional fees 136 517 Unrestricted at parent level 21,398 30,385 Listing and marketing 73 71 Restricted at project level 16,661 12,818 D&A 40 47 Total cash and cash equivalents 38,059 43,203 Office lease 80 91 UNRESTRICTED CASH ANALYSIS Office, travel and other 84 197 Write off guarantees - 389 The Group’s cash and cash equivalents at March 31, 2018, Total general and admin 1,138 2,405 included unrestricted cash of $21.4 million (December 31, 2017: $30.4 million) held at the corporate level. Unrestricted During Q1-18, general and administrative expenses decreased cash decreased by $8.9 million (30%) mainly due to the land by $1.3 million (53%), compared to the same period in 2017, acquisition for the Greenfield Tk-2 project, and corporate G&A, primarily due to a significant reduction of salary and benefit partially offset by project cash distributions received from the expenses due to internal restructuring, share-based payments Japanese operating projects and exchange rate differences. reduction due to forfeitures, and a decrease in professional fees. The Group has a fully-funded portfolio of operational and under construction projects. In addition, the Group expects to NET FINANCE COSTS generate sufficient operating cash flows in 2018 and beyond Three months ended from its operating solar power projects to meet its obligations USD thousands Q1-18 Q1-17(*) and expects to finance the construction and/or acquisition of new projects with a combination of cash and cash equivalents, Interest project loans 870 3,426 additional corporate equity, assets sale or debt financing and Interest corporate bond 862 897 non-recourse project loans, as required. Fair value movements 81 (7) Foreign exchange loss 629 645 RESTRICTED CASH ANALYSIS Other finance costs 56 13 March 31 December 31 Net finance cost 2,498 4,875 USD thousands 2018 2017

During Q1-18 net finance costs decreased by $2.4 million (49%) Japan 16,661 12,818 compared to the same period in 2017, mainly due to the Total restricted cash 16,661 12,818 deconsolidation of the Chilean subsidiary, effective September 30, 2017. The Group’s cash and cash equivalents at March 31, 2018, included restricted cash held at the project level in Japan that During Q1-18, the Group capitalized $0.1 million (2017: $0.1 is restricted by the lending banks for future repayment of million) of borrowing costs associated with credit facilities interest and principal and working capital requirements related obtained to finance the construction of Komatsu and Misawa. to each project. Restricted cash and cash equivalents can be INCOME TAX EXPENSE distributed from the Group’s projects, subject to approval from the lending banks, through repayment of shareholder loans, Three months ended payment of interest on shareholder loans or dividend USD thousands Q1-18 Q1-17(*) distributions. Restricted cash increased by $3.8 million (30%) mainly due to operating cash flow and proceeds from the credit Current income tax expense 230 288 facilities. Deferred tax expense (recovery) 62 (192) Net income tax expense 295 96

The Group recognized an income tax expense of $0.1 million (2017: $0.2 million) associated with its solar power projects in Japan and an income tax expense of $0.1 million (2017: $0.1 million) associated with its management services subsidiaries. In addition, the Group recognized a deferred income tax expense of $0.1 million (2017: $0.2 million income tax recovery) primarily due to the effect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts.

(*) 2017 comparative figures include the financial performance of the Company’s Chilean subsidiary, PV Salvador SpA., which is no longer consolidated with the Group.

WORKING CAPITAL The Group’s main contractual obligations are related to contracts entered into by the Japanese project companies to At March 31, 2018, the Group had working capital of $39.4 finance, build and/or maintain solar power plants in Japan (i.e. million (December 31, 2017: $43.6 million). This working capital EPC, O&M, operating leases and trade payables). All of the includes the fair market value of interest rate swap contracts contractual obligations will be funded from existing cash that are classified as current liabilities in accordance with IFRS available, future cash flows from operations and/or debt but which are not expected to be settled in cash in the next 12 refinancing with no additional capital investments to be made months without replacement. Excluding these derivative by the Group. financial liabilities that are not expected to be settled in the near-term, the Group’s working capital would have been $40.8 NET EQUITY million. (December 31, 2017: $45.1 million). During the first quarter of 2018, the total equity attributable to At March 31, 2018, the Group’s contractual obligations for the owners of the Company decreased by $1.8 million from a net next five years and thereafter are as follows: asset position of $9.0 million at December 31, 2017, to a net After assets position of $7.2 million at March 31, 2018. This change USD 2018 2019 2020 2021 2022 5 years Total was primarily due to the recognition of $3.6 million of net loss thousands during the period, partially offset by the cumulative foreign EPC contract 1,145 - - - - - 1,145 exchange translation adjustment and unrealized fair value Project loans 10,762 11,984 9,440 9,125 9,363 128,359 179,033 gains recognized within other reserves associated with the Corporate Group’s derivative financial instruments. Total equity bond 3,368 42,528 - - - - 45,896 attributable to owners of the Company at March 31, 2018, was O&M contracts 613 955 1,061 1,298 1,237 15,923 21,087 negatively impacted by the cumulative fair value losses of $13.0 Operating million recognized within other reserves that are associated leases 948 1,053 1,053 1,053 1,053 14,593 19,753 with the Group’s derivative financial instruments. Excluding Trade these fair value losses, the total equity attributable to owners payables 1,972 - - - - - 1,972 of the Company at March 31, 2018, would have resulted in a Total 18,808 56,520 11,554 11,476 11,653 158,875 268,886 net asset position of $20.1 million.

BORROWINGS Corporate borrowings

Non-recourse project loans At March 31, 2018, the Group had €33.7 million of corporate The following is a summary of the Group’s non-recourse bonds outstanding (net). The bonds were issued by the project loans and bond balances: Company in April 2014 at 8.0% annual interest with a 5-year USD March 31 December 31 maturity. The carrying amount of the corporate bond as at thousands MW Maturity 2018 2017 March 31, 2018, including accrued interest net of Shizukuishi 25 December 31, 2034 62,903 59,319 transaction costs, was $42.7 million (December 31, 2017: Mito 9 December 31, 2034 23,315 21,993 $40.7 million). Misawa 10 December 31,2034 30,137 28,415 The corporate bond agreement includes a call option that 35,977 29,286 Komatsu 13 December 31,2034 allows the Company to redeem the bond early (in its Total 152,332 139,013 entirety) at any time at a specified percentage over the par Japanese projects value. The Company can call the bonds after the second year at 4% above par value, after the third year at 2.5% above par The non-recourse project loans obtained by the Group’s value and after the fourth year at 1% above par value. During Japanese subsidiaries to finance the construction costs of 2017, the Company’s corporate bond started trading at a the Group’s Japanese solar power projects, mature between premium, triggering an implicit yield below the 8% fixed-rate 2034 and 2036 and bear annual interest rates of Tokyo coupon and management concluded that the corporate Interbank Offered Rate (“TIBOR”) plus a margin ranging from bond call option was “in-the-money” and therefore the 1.1% to 1.4%. The Japanese non-recourse project loans are embedded derivative had value. During the first quarter of 90% hedged through interest rate swap contracts during the 2018, the Group recognized a fair value loss of $81 thousand operational period at an interest rate ranging from 1.72% to associated with the change in the fair value of the corporate 3.13% all-in. At March 31, 2018, the fair value of the non- bond call option. recourse project loans approximated their carrying values as the loans bear floating interest rates. All the Japanese At March 31, 2018 and December 31, 2017, the Group was interest rate swap contracts qualified for hedge accounting not in breach of any of the imposed operational and financial at March 31, 2018, and December 31, 2017. covenants associated with its corporate borrowings. During the three months ended March 31, 2018, the Group’s Japanese subsidiaries with solar power projects under construction drew down a total of ¥491 million ($4.6 million) and ¥35 million ($0.3 million) under the senior financing agreements and under the VAT credit facility, respectively (2017: ¥2,530 million and ¥210 million, respectively). At March 31, 2018, the combined undrawn gross amount under all the Japanese credit facilities amounted to ¥nil (2017: ¥3,321 million ($29.7 million). At March 31, 2018, the fair value of the non-recourse project loans approximated their carrying values as the loans bear floating interest rates. All the Japanese interest rate swap contracts qualified for hedge accounting at March 31, 2018, and December 31, 2017. At March 31, 2018 and December 31, 2017, the Group was not in breach of any of the imposed operational and financial covenants associated with its Japanese project loans.

Net debt reconciliation OFF-BALANCE SHEET ARRANGEMENTS The Group’s adjusted net debt position on a cash basis, The Group had no off-balance sheet arrangements at March (excluding non-cash items and VAT facilities) is as follows: 31, 2018, and December 31, 2017. March 31 December 31 USD thousands 2018 2017 CAPITAL INVESTMENTS The Group plans to allocate its unrestricted cash by 194,984 179,701 Total borrowings as per IFRS prioritizing the Japanese market. Based on the current (2,915) (2,441) VAT facilities status, the Company does not anticipate beginning (1,976) (620) Accrued interest construction of its Japanese backlog project until late 2018. Transaction costs 2,774 2,736 Adjusted borrowings 192,867 179,376 The equity needs to build the Japanese backlog project are Cash and cash equivalents (38,059) (43,203) likely to be contributed throughout the construction period, Adjusted consolidated net debt 154,808 136,173 rather than at start of constuction. Adjusted corporate net debt 20,163 10,110 The Group will finance the development and/or construction The Group’s consolidated net debt increased during Q1-18, costs associated with its projects under development, as in comparison with December 31, 2018, mainly due well as new projects, with a combination of cash and cash additional funds drawn from the SMTB credit facilities to equivalents, additional corporate debt or equity financing fund the construction costs of Komatsu. and non-recourse project loans, as required. OUTSTANDING SHARE DATA Contractual commitments At the date of this MD&A, the Company had 334,094,324 The Group enters into engineering, procurement and common shares (May 9, 2017: 334,094,324) and options to construction agreements with large international acquire 150,000 common shares of the Company (May 9, contractors that design, construct, operate and maintain 2017: 2,638,000) issued and outstanding. The options expire utility-scale solar photovoltaic power plants. As of March 31, on April 28, 2018, with exercise price Canadian dollar 2018, the Group had a contractual obligation to acquire (“CAD$”) CAD$1.59 per share. construction services in the amount of $1.1 million related to the construction of the 13.2 MW Komatsu solar power In addition, the Company maintains the 2014 Restricted projects in Japan. This contractual obligation will be funded Share Unit Plan pursuant to which employees, consultants, from existing cash available at the project company level or directors and officers of the Group may be awarded RSUs. from future cash flows from operations with no additional The RSUs have a contractual term of four years and are capital investments to be made by the Group or additional subject to certain time-based conditions and in certain cases funding from the Group’s unrestricted cash balance. are also subject to performance-based vesting conditions. At the date of this MD&A, the Company had 22,424,433 RSUs Contingencies outstanding of which 22,099,727 are performance based. On August 10, 2015, the Group received a litigation notice from a former employee alleging unreconciled labor-related differences. The Company’s directors believe the claim is without merit, and the Group intends to vigorously defend itself. Given the stage of the legal process, the Company is unable to make a reliable estimate of the financial effects of the litigation.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES quantitative impact in the Company’s financial statements and therefore there is no impact on the accumulated deficit In connection with the preparation of the Company’s balance. condensed consolidated interim financial statements, the

Company’s management has made assumptions and IFRS 9, Financial Instruments: This standard addresses the estimates about future events and applied judgments that classification, measurement and recognition of financial affect the reported values of assets, liabilities, revenues, assets and liabilities, replacing IAS 39 Financial Instruments: expenses and related disclosures. These assumptions, Recognition and Measurement. Management expects IFRS 9 estimates and judgments are based on historical experience, to affect the Companies’ hedge accounting processes and current trends and other factors that the Company’s controls. The Group has completed the process of evaluating management believes to be relevant at the time the the impact of the IFRS 9 on the financial statements and on consolidated financial statements are prepared. On a regular its internal controls and has adopted this standard on basis, the Company’s management reviews the accounting January 1, 2018. The new accounting policies based on IFRS policies, assumptions, estimates and judgments to ensure 9 will be applied from January 1, 2018 and, in accordance that the consolidated financial statements are presented with the transitional provisions in IFRS 9, comparative fairly in accordance with IFRS. However, because future figures will not be not restated. Etrion will adopt IFRS 9 events and their effects cannot be determined with retrospectively with transition adjustments recognized certainty, actual results could differ from these assumptions through equity as at January 1, 2018, except for the hedge and estimates, and such differences could be material. accounting provisions of IFRS 9, which were applied There has been no change to the critical accounting prospectively effective January 1, 2018. The adoption of IFRS estimates and assumptions used in the preparation of the 9 did not result in any transition adjustments being Company’s condensed consolidated interim financial recognized as at January 1, 2018. statements for the three months ended March 31, 2018, from those disclosed in the notes to the Company’s Classification of financial instruments: IFRS 9 introduces a consolidated financial statements for the year ended new model for classifying financial assets. The classification December 31, 2017, except for the adoption of new of financial assets depends on the financial asset’s standards effective as of January1, 2018, as follows: contractual cash flow characteristics and the entity’s business model for managing the financial assets. The IFRS 15, Revenue from contracts with customers: This classification and measurement of financial liabilities under standard deals with revenue recognition and establishes IFRS 9 remains the same as in IAS 39 except where an entity principles for reporting useful information to users of has chosen to measure a financial liability at fair value with financial statements about the nature, amount, timing and changes through profit and loss. Etrion identified its financial uncertainty of revenue and cash flows arising from an assets under the scope of IFRS 9 and have run them through entity’s contracts with customers. Revenue is recognised the classification principles of the standard in order to assess when a customer obtains control of a good or service and the contractual cash flow characteristics (SPPI test) and to thus has the ability to direct the use and obtain the benefits identify the applicable business model. As a result of this from the good or service. The standard replaces IAS 18 assessment the financial assets of the Company will be Revenue and IAS 11 Construction Contracts and related classified under amortized costs and fair value through profit interpretations. and loss. IFRS 15 assessment: The Group has completed the assessment and full impact of IFRS 15 and has adopted this Impairment of financial assets: IFRS 9 establishes a new standard in the accounting period beginning on January 1, model for recognition and measurement of impairments in 2018. Etrion’s solar power plants produce electricity, which loans and receivables that are measured at Amortized Cost is measured based on kWh. The selling price of electricity is or FVOCI—the so-called “expected credit losses” model. also calculated with reference to kWh and the single Expected credit losses are calculated by: (a) identifying performance obligation is to deliver kWh of electricity scenarios in which a loan or receivable defaults; (b) produced in the measuring point of the electricity grid. estimating the cash shortfall that would be incurred in each Therefore, revenue is recognized when the performance scenario if a default were to happen; (c) multiplying that loss obligation is satisfied. This is overtime, when electricity by the probability of the default happening; and (d) summing produced is measured by the meters and therefore the the results of all such possible default events. Because every Company will use the right to invoice practical expedient as loan and receivable has at least some probability of per IFRS 15.B16. The IFRS 15 right to invoice practical defaulting in the future, every loan or receivable has an expedient method is not different from the Company’s expected credit loss associated with it—from the moment of accounting policies currently in place. its origination or acquisition. Etrion’s accounts receivables arising from the sale of electricity in Japan have a 30 days IFRS 15 transition: The Company has elected to use the payment terms and none of the operating Japanese entities modified retrospective method to all contracts with have experience any payment delays since the first invoice customers. In practice, the IFRS 15 revenue recognition was issued. Based on past experience and also based on requirements have no effect on timing or amount of revenue future expectations and credit rating of the counterparties and cash flows arising from contracts with customers, (Japanese utilities) no calculation or assessment of because of the fixed-price long term contracts with the impairment losses is required as of the adoption date. power utilities in Japan. The IFRS 15 adoption has no 17

RELATED PARTIES FINANCIAL RISK MANAGEMENT For the purposes of preparing the Company’s condensed The Group is exposed to a variety of financial risks relating consolidated interim financial statements, parties are to its operations. These risks include market risk (including considered to be related if one party has the ability to currency risk, interest rate risk and electricity price risk), control the other party, under ordinary control, or if one credit risk and liquidity risk. The Group’s overall risk party can exercise significant influence over the other party management procedures focus on the unpredictability of in making financial and operational decisions. The financial markets, specifically changes in foreign exchange Company’s major shareholder is the Lundin family, which rates and interest rates, and seek to minimize potential collectively owns directly and through various investment adverse effects on the Group’s financial performance. The trust approximately 24.3% of the Company’s common Group seeks to minimize the effects of these risks by using shares. All related party transactions are made on terms derivative financial instruments to hedge interest rate risk equivalent to those made on an arm’s length basis. exposures through interest rate swap contracts. However, the Group has not entered into any foreign exchange rate The related party transactions disclosed in the notes to the hedges as monetary assets and liabilities held by the Group’s Company’s condensed consolidated interim financial subsidiaries are primarily held in the individual subsidiaries’ statements for the three months ended March 31, 2018, are functional currencies. In addition, the Group is directly summarized below. exposed to inflation in Japan, as the FiT contracts are not RELATED PARTY TRANSACTIONS inflation-adjusted, but some of the operating costs will be impacted by inflation, if it increases or decreases in the Lundin Petroleum AB and subsidiaries future. The Group receives professional services from Lundin The Company’s management carries out risk management Petroleum AB and from Lundin Services BV, a wholly-owned procedures with guidance from the Audit Committee and subsidiary of Lundin Petroleum AB for market and investor Board of Directors. Refer to the Company’s audited relation activities in Sweden and general and administrative consolidated financial statements for the year ended expenses, respectively. During Q1-18, the Group incurred December 31, 2017, for further details relating to the general and administrative expenses of $7,000 (2017: Group’s financial risk management. $9,000), respectively, from Lundin Petroleum AB and its subsidiary. At March 31, 2018, the Group had $nil (December 31, 2017: $1,000) outstanding in relation to DERIVATIVE FINANCIAL INSTRUMENTS these expenses. A summary of the Group’s derivative financial instruments is Lundin family as follows: March 31 December 31 During Q1-18, the Group recognized $10,000 (2017: $0.2 USD thousands 2018 2017 million) of interest expense and $1,000 (2017: $10,000) of Derivative financial assets: transaction costs associated with the portion of the Corporate bond call option 245 319 corporate bonds held by investment companies associated Total derivative financial assets 245 319 with the Lundin family. Lundin SA Derivative financial liabilities: Interest rate swap contracts During Q1-18, the Group recognized $30,000 (2017: Current portion 1,534 1,444 $30,000) under a services agreement with Lundin SA to Non-current portion 9,446 8,788 make available fully staffed and equipped premises to serve Total derivative financial instruments 10,980 10,232 members of its Board of Directors. The contract is renewed automatically, unless terminated by either party. During 2017, the Group recognized finance income of $0.3 million associated with the fair value of the corporate bond KEY MANAGEMENT PERSONNEL call option, which is considered an embedded derivative in Key management personnel are those persons having the debt contract and deemed to be in-the-money as of the authority and responsibility for planning, directing and end of 2017. During the first quarter of 2018, the Group controlling the activities of the Group, directly or indirectly. recognized a fair value loss of $81 thousand associated with The key management of the Group includes members of the the change in the fair value of the corporate bond call Board of Directors, the Chief Executive Officer, Marco A. option. Northland and the Chief Financial Officer, Christian Lacueva. The Group enters into interest rate swap contracts in order During Q1-18, the Group recognized $0.2 million (2017: $0.4 to hedge against the risk of variations in the Group’s cash million) within general and administrative expenses flows as a result of floating interest rates on its non-recourse associated with the remuneration of key management project loans in Japan. The fair value of these interest rate personnel, related to salaries and short-term benefits, swap contracts is calculated as the present value of the pension costs, fees paid to the Board of Directors and share- estimated future cash flows, using the notional amount to based payment expenses. At March 31, 2018, the Group had maturity as per the interest rate swap contracts, the $ nil outstanding to key management personnel (December observable TIBOR interest rate forward yield curves and an 31, 2017: $0.4 million). appropriate discount factor.

The fair market value of the interest rate swap contracts at MARKET RISKS March 31, 2018, increased to a liability position of $10.9 The Group is exposed to financial risks such as interest rate million (2017: $10.2 million) due to a decrease in the risk, foreign currency risk, electricity price risk and third- forecasted TIBOR curve in comparison with December 31, party credit risk. The Company’s management seeks to 2017. At March 31, 2018, and December 31, 2017, all of the minimize the effects of interest rate risk by using derivative Group’s derivative financial instruments qualified for hedge financial instruments to hedge risk exposures. accounting with fair value movements accounted for within equity, except for the ineffective portion that is recorded in COST UNCERTAINTY to finance income/costs. The Group’s current and future operations are exposed to cost fluctuations and other unanticipated expenditures that RISKS AND UNCERTAINTIES could have a material impact on the Group’s financial The Group’s activities expose it to a variety of financial and performance. non-financial risks and uncertainties that could have a material impact on the Group’s long-term performance and NON-FINANCIAL RISKS could cause actual results to differ materially from expected LICENSES AND PERMITS and historical results. Certain of such risks are discussed below. For a more detailed discussion of risk factors The Group’s operations require licenses and permits from applicable to the Group, see Etrion’s Annual Information various governmental authorities that are subject to changes Form for the year ended December 31, 2017, which has been in regulation and operating circumstances. There is no filed on SEDAR and is available under Etrion’s profile at assurance that the Group will be able to obtain all the www.sedar.com. Risk management is carried out by the necessary licenses and permits required to develop future Company’s management with guidance from the Audit renewable energy projects. At the date of this MD&A, to the Committee under policies approved by the Board of best of the Company’s knowledge, all necessary licenses and Directors. The Board of Directors also oversees and provides permits have been obtained for projects already built and assistance with the overall risk management strategy and under construction, and the Group is complying in all mitigation plan of the Group. material respects with the terms of such licenses and permits. FINANCIAL RISKS DEBT AND EQUITY FINANCING GOVERNMENTAL REGULATION The Group’s anticipated growth and development activities The renewable energy sector is subject to extensive will depend on the Group’s ability to secure additional government regulation. These regulations are subject to financing (i.e., equity financing, corporate debt, and/or non- change based on current and future economic and political recourse project loans). The Group cannot be certain that conditions. The implementation of new regulations or the financing will be available when needed, and, as a result, the modification of existing regulations affecting the industries Group may need to delay discretionary expenditures. In in which the Group operates could lead to delays in the addition, the Group’s level of indebtedness from time to construction or development of additional solar power time could impair its ability to obtain additional financing projects and/or adversely impair its ability to acquire and and to take advantage of business opportunities as they develop economic projects, generate adequate internal arise. Failure to comply with facility covenants and returns from operating projects and continue operating in obligations could also expose the Group to the risk of seizure current markets. Specifically, reductions in the FiT payable or forced sale of some or all of its assets. to the Group on its existing solar power projects in Italy and Japan as well as other legislative or regulatory changes could CAPITAL REQUIREMENTS AND LIQUIDITY impact the profitability of the Group’s solar power projects. Although the Group is currently generating significant cash COMPETITION flows from its operational projects, the construction and acquisition of additional projects will require significant The renewable energy industry is extremely competitive and external funding. Failure to obtain financing on a timely basis many of the Group’s competitors have greater financial and could cause the Group to miss certain business operational resources. There is no assurance that the Group opportunities, reduce or terminate its operations or forfeit will be able to acquire new renewable energy projects in its direct or indirect interest in certain projects. There is no order to grow in accordance with the Company’s strategy. assurance that debt and/or equity financing, or cash The Group also competes in securing the equipment generated from operations, will be available or sufficient to necessary for the construction of solar energy projects. meet these requirements or for other corporate purposes, Equipment and other materials necessary to construct or, if debt and/or equity financing is available, that it will be production and transmission facilities may be in short available on terms acceptable to the Group. The inability of supply, causing project delays or cost fluctuations. the Group to access sufficient capital for its operations could have a material impact on the Group’s business model, financial position and performance.

PRICES AND MARKETS FOR ELECTRICITY design, construct and operate its renewable energy projects. There is a risk that such contractors are not available or that The Group is not exposed to significant electricity market the price for their services impairs the economic viability of price risk as the revenues generated by its operating solar the Group’s projects. power projects in Japan were secured by long-term contracts based on a FiT. ETRION OUTLOOK AND GUIDANCE INTERNATIONAL OPERATIONS On March 13, 2018, Etrion issued a revenue and project-level Renewable energy development and production activities EBITDA forecast for the fiscal year ending December 31, are subject to significant political and economic 2018. The Group has reviewed the previously released uncertainties that may adversely affect the Group’s guidance in light of the three months’ performance and have performance. Uncertainties include, but are not limited to, concluded that at this stage there is no basis to modify the the possibility of expropriation, nationalization, guidance for the full year. The Group will continue to renegotiation or nullification of existing or future FiTs/PPAs, reassess its guidance and will make any adjustments and a change in renewable energy pricing policies and a change disclosures as may be warranted. in taxation policies or the regulatory environment in the jurisdictions in which the Group operates. These DISCLOSURE CONTROLS AND INTERNAL uncertainties, all of which are beyond the Group’s control, CONTROL OVER FINANCIAL REPORTING could have a material adverse effect on the Group’s financial position and operating performance. In addition, if legal In accordance with National Instrument 52-109 Certification disputes arise relating to any of the Group’s operations, the of Disclosures in Issuers Annual and Interim Filings, the Group could be subject to legal claims and litigation within Company’s Chief Executive Officer and Chief Financial the jurisdiction in which it operates. Officer are required to: RELIANCE ON CONTRACTORS AND KEY EMPLOYEES ▪ design or supervise the design and evaluate the effectiveness of the Group’s disclosure controls and The ability of the Company to conduct its operations is highly procedures (“DC&P”); and dependent on the availability of skilled workers. The labor force in many parts of the world is unionized and politicized, ▪ design or supervise the design and evaluate the and the Group’s operations may be subject to strikes and effectiveness of the Group’s internal controls over other disruptions. In addition, the success of the Company is financial reporting (“ICFR”). largely dependent upon the performance of its management The Company’s Chief Executive Officer and Chief Financial and key employees. There is a risk that the departure of any Officer have not identified any material weakness in the member of management or any key employee could have a Group’s DC&P and ICFR. material adverse effect on the Group. The Group’s business model relies on qualified and experienced contractors to

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION Forward-looking information and statements are included throughout this MD&A and include, but are not limited to, statements with respect to: the Group’s plans for future growth and development activities (including, but not limited to, expectations relating to the timing of the development, construction, permitting, licensing, financing operation and electricity production, as the case may be, of its future solar power plants in Japan); expectations relating to future solar energy production and the means by which, and to whom, such future solar energy will be sold; the need for, and amount of, additional capital to fund the construction or acquisition of new projects and the expected sources of such capital; and expectations relating to grid parity. The above constitute forward-looking information, within the meaning of applicable Canadian securities legislation, which involves risks, uncertainties and factors that could cause actual results or events to differ materially from current expectations, including, without limitation: risks associated with operating exclusively in foreign jurisdictions; risks associated with the regulatory frameworks in the jurisdictions in which the Company operates, or expects to operate, including the possibility of changes thereto; uncertainties with respect to the identification and availability of suitable additional renewable energy projects on economic terms; uncertainties with respect to the Group’s ability to negotiate PPAs with industrial energy users; uncertainties relating to the availability and costs of financing needed in the future; the risk that the Company’s solar projects may not produce electricity or generate revenues and earnings at the levels expected; the risk that the construction or operating costs of the Company’s projects may be higher than anticipated; uncertainties with respect to the receipt or timing of all applicable permits for the development of projects; the impact of general economic conditions and world-wide industry conditions in the jurisdictions and industries in which the Group operates; risks inherent in the ability of the Group to generate sufficient cash flow from operations to meet current and future obligations; stock market volatility; and other factors, many of which are beyond the Group’s control. All such forward-looking information is based on certain assumptions and analyses made by the Company in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors the Company believes are appropriate in the circumstances. In addition to the assumptions set out elsewhere in this MD&A, such assumptions include, but are not limited to: the ability of the Group to obtain the required permits in a timely fashion and project and debt financing on economic terms and/or in accordance with its expectations; the ability of the Group to identify and acquire additional solar power projects, [and assumptions relating to management’s assessment of the impact of the new Japanese FiT regime]. The foregoing factors, assumptions and risks are not exhaustive and are further discussed in Etrion’s most recent Annual Information Form and other public disclosure available on SEDAR at www.sedar.com. Actual results, performance or achievements could differ materially from those expressed in, or implied by, such forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do so, what benefits will be derived therefrom. Investors should not place undue reliance on forward-looking information. Except as required by law, Etrion does not intend to update or revise any forward-looking information, whether as a result of new information, future events or otherwise. The information contained in this MD&A is expressly qualified by this cautionary statement.

ADDITIONAL INFORMATION Additional information regarding the Company, including its Annual Information Form, may be found on the SEDAR website at www.sedar.com or by visiting the Company’s website at www.etrion.com.

NOTICE OF NO AUDITOR

Q118

ETRION CORPORATION CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 2018

CONTENTS

▪ CONDENSED CONSOLIDATED INTERIM STATEMENT OF NET LOSS AND COMPREHENSIVE LOSS 1 For the three months ended March 31, 2018

▪ CONDENSED CONSOLIDATED INTERIM BALANCE SHEET 2 As at March 31, 2018

▪ CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY 3 For the three months ended March 31, 2018

▪ CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOW 4 For the three months ended March 31, 2018

▪ NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 5 As at and for the three months ended March 31, 2018

The accompanying condensed consolidated interim financial statements for Etrion Corporation for the three months ended March 31, 2018, have been prepared by management. The Company’s independent auditor has not performed a review of these financial statements. Readers are cautioned that these condensed consolidated interim financial statements may not be appropriate for their purposes.

CONDENSED CONSOLIDATED INTERIM STATEMENT OF NET LOSS AND COMPREHENSIVE LOSS FOR THE THREE MONTHS ENDED MARCH 31, 2018 Expressed in US$’000

Three months ended Q1-18 Q1-17(*)

Note Revenue 5 2,910 5,198 Operating expenses 6 (2,794) (5,415) Gross profit (loss) 116 (217) General and administrative expenses 7 (1,138) (2,405) Other expense (income) (38) 29 Operating loss (1,060) (2,593) Finance income 8 - 12 Finance costs 8 (2,498) (4,887) Net finance costs (2,498) (4,875) Loss before income tax (3,558) (7,468) Income tax expense 9 (295) (96) Net loss for the period (3,853) (7,564)

Other comprehensive loss Items that may be reclassified to profit and loss: Gain on currency translation 1,628 1,591 Gain (loss) on cash flow hedges, net of tax 18 113 (540) Total other comprehensive gain 1,741 1,051

Total comprehensive loss for the period (2,112) (6,513)

Loss attributable to: Common shareholders (3,663) (6,497) Non-controlling interest 11 (190) (1,067) Total comprehensive loss attributable to: Common shareholders (1,982) (4,355) Non-controlling interest 11 (130) (2,158)

Basic and diluted loss per share from loss of the period 10 $(0.01) $(0.02)

The accompanying notes are an integral part of these condensed consolidated interim financial statements. (*) 2017 comparative figures include the financial performance of the Company’s Chilean subsidiary, PV Salvador SpA., which is no longer consolidated with the Group. Note 1

CONDENSED CONSOLIDATED INTERIM BALANCE SHEET AS AT MARCH 31, 2018 Expressed in US$’000

March 31 December 31 2018 2017 Note Assets Non-current assets Property, plant and equipment 12 155,936 140,608 Intangible assets 13 11,231 9,725 Deferred income tax assets 9 2,794 2,771 Trade and other receivables 666 647 Total non-current assets 170,627 153,751 Current assets Derivative financial instruments 245 319 Trade and other receivables 16,108 14,862 Cash and cash equivalents (including restricted cash) 14 38,059 43,203 Total current assets 54,412 58,384

Total assets 225,039 212,135

Equity Attributable to common shareholders Share capital 15 111,304 111,304 Contributed surplus 12,726 12,538 Other reserves (12,085) (13,766) Accumulated deficit (104,710) (101,047) Total attributable to common shareholders 7,235 9,029

Non-controlling interest 11 688 818 Total equity 7,923 9,847

Liabilities Non-current liabilities Borrowings 17 184,107 170,784 Derivative financial instruments 18 9,446 8,788 Provisions 4,850 4,620 Other liabilities 3,651 3,323 Total non-current liabilities 202,054 187,515 Current liabilities Trade and other payables 1,972 3,493 Current tax liabilities 9 367 535 Borrowings 17 10,877 8,917 Derivative financial instruments 18 1,534 1,444 Other liabilities 312 384 Total current liabilities 15,062 14,773 Total liabilities 217,116 202,288

Total equity and liabilities 225,039 212,135 The accompanying notes are an integral part of these condensed consolidated interim financial statements.

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2018 Expressed in US$’000

Attributable to common shareholders Non- Share Contributed Other Accumulated controlling Total capital surplus reserves deficit Total interest equity

Balance at January 1, 2017 111,304 11,989 (17,340) (120,768) (14,815) (31,474) (46,289) Comprehensive loss: Loss for the period - - - (6,497) (6,497) (1,067) (7,564) Other comprehensive loss: Cash flow hedges (net of tax) - - (476) - (476) (64) (540) Currency translation - - 2,618 - 2,618 (1,027) 1,591 Total comprehensive loss - - 2,142 (6,497) (4,355) (2,158) (6,513)

Transactions with owners in their capacity as owners: Share-based payments - 263 - - 263 - 263 Loans conversion - - - - - 19,510 19,510 Balance at March 31, 2017 111,304 12,252 (15,198) (127,265) (18,907) (14,122) (33,029)

Balance at January 1, 2018 111,304 12,538 (13,766) (101,047) 9,029 818 9,847

Comprehensive loss: Loss for the period - - - (3,663) (3,663) (190) (3,853) Other comprehensive loss: Cash flow hedges (net of tax) - - 99 - 99 14 113 Currency translation - - 1,582 - 1,582 46 1,628 Total comprehensive loss - - 1,681 (3,663) (1,982) (130) (2,112)

Transactions with owners in their capacity as owners: Share-based payments - 188 - - 188 - 188 Balance at March 31, 2018 111,304 12,726 (12,085) (104,710) 7,235 688 7,923 The accompanying notes are an integral part of these condensed consolidated interim financial statements.

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOW FOR THE THREE MONTHS ENDED MARCH 31, 2018 Expressed in US$’000

Three months ended Q1-18 Q1-17 (*)

Note Operating activities: Net Loss for the period (3,853) (7,564) Adjustments for the following non-cash items: Depreciation and amortization 6/7 1,718 2,650 Current income tax expense 9 230 288 Deferred income tax expense 9 65 (192) Share-based payment expense 7/16 188 263 Interest expense 8 1,287 3,882 Interest expense relating to interest rate swap contracts 8 342 309 Amortization of transaction costs 8 104 132 Foreign exchange loss 8 629 546 Fair value changes associated with derivative financial instruments 8 81 (7) Other expenses (income) 38 (29) Sub-total 829 278 Changes in working capital: Trade and other receivables (2,180) 1,821 Trade and other payables (1,040) (4,383) Income tax paid (404) (537) Total cash flow used in operating activities (2,795) (2,821)

Investing activities: Purchases of property, plant and equipment 12 (8,723) (7,616) Purchases of intangible assets 13 (270) (297) Total cash flow used in investing activities (8,993) (7,913)

Financing activities: Interest paid 17 - (2,580) Proceeds from borrowings 17 4,853 23,601 Contributions from non-controlling interest 119 156 Total cash flow from financing activities 4,972 21,177

Net (decrease) increase in cash and cash equivalents (6,816) 10,443 Effect of exchange rate changes on cash and cash equivalents 1,672 1,588 Cash and cash equivalents (including restricted cash) at the beginning of the period 43,203 61,174 Cash and cash equivalents (including restricted cash) at the end of the period: 38,059 73,205 The accompanying notes are an integral part of these condensed consolidated interim financial statements. (*) 2017 comparative figures include the financial performance of the Company’s Chilean subsidiary, PV Salvador SpA., which is no longer consolidated with the Group. Note 1

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS AT AND FOR THE THREE MONTHS ENDED MARCH 31, 2018 Expressed in US$’000 unless otherwise stated

1. GENERAL INFORMATION ended December 31, 2017. These condensed consolidated interim financial statements have been Etrion Corporation (“Etrion” or the “Company” or, prepared on the basis of accounting policies, methods of together with its subsidiaries, the “Group”) is computation and presentation consistent with those incorporated under the laws of the Province of British applied in the audited consolidated financial statements Columbia, Canada. The address of its registered office is for the year ended December 31, 2017. Certain 1600-925 West Georgia Street, Vancouver, British reclassifications have been made to information from Columbia V62 3L2, Canada. The Company is listed on the previous year in order to conform to the current Toronto Stock Exchange in Canada and the NASDAQ OMX presentation. Stockholm exchange in Sweden under the same ticker symbol, “ETX”. (b) GOING CONCERN Etrion is an independent power producer that develops, The Company’s condensed consolidated interim financial builds, owns and operates solar power generation plants. statements for the three months ended March 31, 2018, The Company owns 44 megawatts (“MW”) of installed have been prepared on a going concern basis, which solar capacity in Japan. The Company has 13.2 MW of assumes that the Group will be able to realize its assets solar projects under construction as of the date of and discharge its liabilities in the normal course of approval of this condensed consolidated interim financial business as they become due in the foreseeable future. At statements and 390 MW of greenfield solar power March 31, 2018, the Group had cash and cash equivalents projects which it is pursuing in Japan. of $38.1 million, $21.4 million of which was unrestricted and held at the parent level (December 31, 2017: $43.2 Effective September 30, 2017, the Group no longer million and $30.4 million, respectively) and working consolidates PV Salvador SpA, the subsidiary that owns capital of $39.4 million (December 31, 2017: $43.6 the 70 MW Salvador solar power project in Northern million). During the three months ended March 31, 2018, Chile. Therefore, the Group’s consolidated financial the Group recognized a net loss of $3.9 million (2017: $7.6 performance for the three months ended March 31, 2018, million). The Company’s management is confident that is not fully comparable with the same period in 2017. The the Group will be able to fund its working capital Group has not restated previous year’s figures because requirements for at least twelve months from the date of Salvador is still owned by the Group. See “Deconsolidation these condensed consolidated interim financial of Subsidiary” disclosures in the 2017 audited statements. These condensed consolidated interim consolidated financial statements. financial statements for the three months ended March These condensed consolidated interim financial 31, 2018, do not include the adjustments that would statements are presented in United States (“US”) Dollars result if the Group were unable to continue as a going (“$”), which is the Group’s presentation currency. concern. However, since the Group is listed in both Canada (c) CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES (Primary) and Sweden (Secondary), certain financial The accounting policies adopted in the preparation of the information within the notes to these condensed interim condensed consolidated financial statements are consolidated interim financial statements has been consistent with those followed in the preparation of the presented in Canadian dollars (“CAD$”). The Company’s Group’s annual consolidated financial statements for the Board of Directors approved these condensed year ended 31 December 2017, except for the adoption of consolidated interim financial statements on May 4, 2018. new standards effective as of 1 January 2018. The Group 2. SUMMARY OF SIGNIFICANT ACCOUNTING has not early adopted any other standard, interpretation POLICIES or amendment that has been issued but is not yet effective. The principal accounting policies applied in the preparation of these condensed consolidated interim IFRS 15, Revenue from contracts with customers: This financial statements are set out below. These policies standard deals with revenue recognition and establishes have been consistently applied to all periods presented principles for reporting useful information to users of unless otherwise stated. financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an (a) BASIS OF PREPARATION entity’s contracts with customers. Revenue is recognised These condensed consolidated interim financial when a customer obtains control of a good or service and statements have been prepared in accordance with IAS thus has the ability to direct the use and obtain the 34, Interim Financial Reporting, using accounting policies benefits from the good or service. The standard replaces consistent with International Financial Reporting IAS 18 Revenue and IAS 11 Construction Contracts and Standards (“IFRS”). These condensed consolidated interim related interpretations. The standard is effective for financial statements should be read in conjunction with annual periods beginning on or after January 1, 2018 and the audited consolidated financial statements for the year earlier application is permitted.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS AT AND FOR THE THREE MONTHS ENDED MARCH 31, 2018 Expressed in US$’000 unless otherwise stated

IFRS 15 assessment: The Group has completed the standard in order to assess the contractual cash flow assessment and full impact of IFRS 15 and has adopted this characteristics (SPPI test) and to identify the applicable standard in the accounting period beginning January 1, business model. As a result of this assessment the 2018. Etrion’s solar power plants produce electricity, financial assets of the Company will be classified under which is measured based on kWh. The selling price of amortized costs and fair value through profit and loss. electricity is also calculated with reference to kWh and the single performance obligation is to deliver kWh of Impairment of financial assets: IFRS 9 establishes a new electricity produced in the measuring point of the model for recognition and measurement of impairments electricity grid. Therefore, revenue is recognized when the in loans and receivables that are measured at Amortized performance obligation is satisfied. This is overtime, when Cost or FVOCI—the so-called “expected credit losses” electricity produced is measured by the meters and model. Expected credit losses are calculated by: (a) therefore the Company will use the right to invoice identifying scenarios in which a loan or receivable practical expedient as per IFRS 15.B16. The IFRS 15 right defaults; (b) estimating the cash shortfall that would be to invoice practical expedient method is not different incurred in each scenario if a default were to happen; (c) from the Company’s accounting policies currently in place. multiplying that loss by the probability of the default happening; and (d) summing the results of all such IFRS 15 transition: The Company has elected to use the possible default events. Because every loan and modified retrospective method to all contracts with receivable has at least some probability of defaulting in customers. In practice, the IFRS 15 revenue recognition the future, every loan or receivable has an expected credit requirements have no effect on timing or amount of loss associated with it—from the moment of its revenue and cash flows arising from contracts with origination or acquisition. Etrion’s accounts receivables customers, because of the fixed-price long term contracts arising from the sale of electricity in Japan have a 30 days with the power utilities in Japan. The IFRS 15 adoption has payment terms and none of the operating Japanese no quantitative impact in the Company’s financial entities have experience any payment delays since the statements and therefore there is no impact on the first invoice was issued. Based on past experience and also accumulated deficit balance. based on future expectations and credit rating of the

counterparties (Japanese utilities) no calculation or IFRS 9, Financial Instruments: This standard addresses the assessment of impairment losses is required as of the classification, measurement and recognition of financial adoption date. assets and liabilities, replacing IAS 39 Financial Instruments: Recognition and Measurement. Management expects IFRS 9 to affect the Companies’ 3. ACCOUNTING ESTIMATES AND ASSUMPTIONS hedge accounting processes and controls. The Group has In connection with the preparation of the Company’s completed the process of evaluating the impact of the condensed consolidated interim financial statements, the IFRS 9 on the financial statements and on its internal Company’s management has made assumptions and controls and has adopted this standard on January 1, estimates about future events and applied judgments that 2018. The new accounting policies based on IFRS 9 are affect the reported amounts of assets, liabilities, effective from January 1, 2018 and, in accordance with the revenues, expenses and related disclosures. These transitional provisions in IFRS 9, comparative figures will assumptions, estimates and judgments are based on not be not restated. Etrion has adopted IFRS 9 historical experience, current trends and other factors retrospectively with transition adjustments recognized that the Company’s management believes to be relevant through equity as at January 1, 2018, except for the hedge at the time the condensed consolidated interim financial accounting provisions of IFRS 9, which were applied statements are prepared. On a regular basis, the prospectively effective January 1, 2018. The adoption of Company’s management reviews the accounting policies, IFRS 9 did not result in any transition adjustments being assumptions, estimates and judgments to ensure that the recognized as at January 1, 2018. financial statements are presented fairly in accordance with IFRS. However, because future events and their Classification of financial instruments: IFRS 9 introduces a effects cannot be determined with certainty, actual new model for classifying financial assets. The results may differ from the assumptions and estimates, classification of financial assets depends on the financial and such differences could be material. There has been no asset’s contractual cash flow characteristics and the change to the critical accounting estimates and entity’s business model for managing the financial assets. assumptions used in the preparation of the Company’s The classification and measurement of financial liabilities condensed consolidated interim financial statements for under IFRS 9 remains the same as in IAS 39 except where the three months ended March 31, 2018, from those an entity has chosen to measure a financial liability at fair disclosed in the notes to the Company’s audited value with changes through profit and loss. Etrion consolidated financial statements for the year ended identified its financial assets under the scope of IFRS 9 and December 31, 2017. have run them through the classification principles of the

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS AT AND FOR THE THREE MONTHS ENDED MARCH 31, 2018 Expressed in US$’000 unless otherwise stated

4. SEGMENT REPORTING The Board of Directors considers reportable segments The Group’s country of domicile is Canada. However, all from a geographical perspective and measures consolidated revenues from external customers are performance based on EBITDA and reviews and monitors derived from Japan. The Group’s electricity production in performance of the Group on this basis. The Company’s Japan is sold to the Japanese public utilities, Tokyo Electric management identified two reportable segments, solar Power Company (“TEPCO”) and Tohoku Electric Power energy Chile (“Solar Chile”) and solar energy Japan (“Solar Co.,Inc. (“TOHOKU”). The Group’s revenues, EBITDA and Japan”). Salvador’s income and expenses are included results from continuing operations are presented as only in the Group’s consolidated financial statements until follows: September 30, 2017, the date when the Group ceased to control this subsidiary. While the Company’s management has determined that the Company has only two reportable segments, the Company has decided to disclose additional information about its corporate activities as it believes that this information is useful for readers of the consolidated financial statements. Q1-18 Q1-17 Solar Solar Solar Japan Corporate Total Chile Japan Corporate Total

Revenue 2,910 - 2,910 2,601 2,597 - 5,198 Operating expenses (1,116) - (1,116) (2,189) (622) - (2,811) General and administrative (52) (1,046) (1,098) (37) (56) (2,266) (2,359) Other (expense) income (12) (26) (38) - 42 (13) 29 EBITDA 1,730 (1,072) 658 375 1,961 (2,279) 57 Depreciation and amortization (1,678) (40) (1,718) (1,330) (1,273) (47) (2,650) Finance income - - - - 12 - 12 Finance costs (892) (1,606) (2,498) (2,633) (709) (1,545) (4,887) Loss before income tax (840) (2,718) (3,558) (3,588) (9) (3,871) (7,468) Income tax (expense) recovery (153) (142) (295) - 45 (141) (96) Net (loss) income for the period (993) (2,860) (3,853) (3,588) 36 (4,012) (7,564) The Group’s assets and liabilities can be presented as follows:

March 31, 2018 December 31, 2017

Solar Solar Japan Corporate Total Japan Corporate Total

Property, plant and equipment 155,868 68 155,936 140,563 45 140,608 Intangible assets 6,432 4,799 11,231 5,327 4,398 9,725 Cash and cash equivalents 16,661 21,398 38,059 12,818 30,385 43,203 Other assets 10,803 9,010 19,813 8,747 9,852 18,599 Total assets 189,764 35,275 225,039 167,455 44,680 212,135 Borrowings 152,332 42,653 194,985 139,013 40,688 179,701 Trade and other payables 950 1,022 1,972 1,460 2,033 3,493 Other liabilities 19,126 1,339 20,465 17,603 1,491 19,094 Total liabilities 172,408 45,014 217,116 158,076 44,212 202,288

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS AT AND FOR THE THREE MONTHS ENDED MARCH 31, 2018 Expressed in US$’000 unless otherwise stated

5. REVENUE 8. FINANCE INCOME AND COSTS

Three months ended Three months ended Q1-18 Q1-17(*) Q1-18 Q1-17(*)

Feed-in Tariff (“FiT”) 2,910 2,597 Finance income: Spot market price - 328 Changes in fair values of derivative financial PPA agreement - 2,001 instruments: Other utility income - 272 - Ineffective portion reclassified from other Total revenue 2,910 5,198 comprehensive income - 7 Other finance income - 5 Solar-related production is subject to seasonality over the Total finance income - 12 year due to the variability of daily sun hours in the summer months versus the winter months. Finance costs: Interest rate expense: Spot market price, PPA agreement and other utility - Credit facilities and non-recourse loans income refers to revenue items from the Chilean Note 17 519 3,055 - Interest rate swap contracts associated subsidiary deconsolidated in 2017. Note 1 with non-recourse loans 342 309 6. OPERATING EXPENSES - Corporate bond Note 17/19 806 832 - Credit facility with non-controlling interest 56 65 Three months ended - Amortization of transaction costs 114 146 Changes in fair values of derivative financial Q1-18 Q1-17 (*) instruments: Corporate bond call option 81 - O&M 207 674 Foreign exchange loss 629 546 Purchased power - 950 Other finance costs 56 18 Personnel costs 243 300 Total finance costs before deducting amounts D&A 1,678 2,603 capitalized 2,603 4,971 Property tax 294 31 Amounts capitalized on qualifying assets Insurance 62 120 Note 12 (105) (84) Land lease 235 234 Total finance costs 2,498 4,887 Transmission costs - 416 Net finance costs 2,498 4,875 Other operating expenses 75 87 Total Opex 2,794 5,415 The Group has four floating-rate credit facilities O&M costs relate to fees paid in connection with the outstanding associated with its operating solar power operation and maintenance activities of the Group’s projects and assets under construction in Japan. These operating solar power projects in Japan and Chile. credit facilities are hedged using interest rate swap Purchased power and transmission costs refers to contracts. Refer to Note 17 and Note 18 for further details expense items from the Chilean subsidiary deconsolidated on the Group’s credit facilities and derivative financial in 2017. Note 1 instruments. Depreciation and amortization relate to the Group’s Applicable borrowing costs have been capitalized as operating solar power projects producing electricity assets under construction within property, plant and during the period. equipment. Note 12 7. GENERAL AND ADMINISTRATIVE EXPENSES During the three months ended March 31, 2018, the Group recognized a net fair value gain of $0.2 million Three months ended (2017: net fair value loss of $0.5 million), net of tax, within Q1-18 Q1-17(*) other comprehensive income related to the effective

Salaries and benefits 468 763 portion of the Group’s interest rate swap contracts. Board of directors fees 69 67 Share-based payments 188 263 Professional fees 136 517 Listing and marketing 73 71 D&A 40 47 Office lease 80 91 Office, travel and other 84 197 Write-off guarantees - 389 Total G&A 1,138 2,405

(*) 2017 comparative figures include the financial performance of the Company’s Chilean subsidiary, PV Salvador SpA., which is no longer consolidated with the Group. Note 1

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS AT AND FOR THE THREE MONTHS ENDED MARCH 31, 2018 Expressed in US$’000 unless otherwise stated

9. INCOME TAXES 10. LOSS PER SHARE (a) INCOME TAX EXPENSE Basic and diluted loss per share is calculated by dividing Three months ended the net loss for the period attributable to owners of the Q1-18 Q1-17(*) Company by the weighted average number of shares outstanding during the period. The calculation of basic Current income tax expense: and diluted loss per share is as follows: Corporate income tax (230) (288) Total current income tax expense (230) (288) Three months ended Deferred income tax recovery: Q1-18 Q1-17(*) Temporary differences (65) 192 Total deferred income tax recovery (65) 192 Loss attributable to common shareholders: Total income tax (expense) recovery (295) (96) Total loss for the period (3,663) (6,497)

The Group recognized an income tax expense of $0.1 Number of shares million (2017: $0.2 million) associated with its solar power Weighted average number of projects in Japan and an income tax expense of $0.1 thousand shares outstanding 334,094 334,094 million (2017: $0.1 million) associated with its Total basic and diluted loss per management services subsidiaries. In addition, the Group share $(0.011) $(0.019) recognized a deferred income tax expense of $.1 million (2017: $0.2 million income tax recovery) primarily due to Diluted loss per share equals basic loss per share as, due the effect of temporary differences arising between the to losses incurred in the three months ended March 31, tax bases of assets and liabilities and their carrying 2018 and 2017, there is no dilutive effect from the existing amounts. stock options. Note 16 (b) CURRENT INCOME TAX LIABILITIES 11. NON-CONTROLLING INTERESTS March 31 December 31 The Group’s subsidiaries in which there is a non- 2018 2017 controlling interest (“NCI”) are Shizukuishi Solar GK (“Shizukuishi”), Etrion Energy 1 GK (“Mito”), Etrion Energy Corporate income tax 180 265 4 GK (“Komatsu”), Etrion Energy 5 GK (“Misawa”), all Provincial income tax 187 270 Total current income tax liabilities 367 535 together the “Japanese entities”. The non-controlling interest at March 31, 2018, of $0.7 million (December 31, 2017: $0.8 million), represents the value attributable to non-controlling interests in the Japanese project companies. There are no significant restrictions on the Group’s ability to access or use the assets and settle the liabilities of the Japanese project companies, other than those imposed by the lending banks related to cash distributions.

(*) 2017 comparative figures include the financial performance of the Company’s Chilean subsidiary, PV Salvador SpA., which is no longer consolidated with the Group. Note 1

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS AT AND FOR THE THREE MONTHS ENDED MARCH 31, 2018 Expressed in US$’000 unless otherwise stated

Set out below is summarized financial information for each subsidiary that has non-controlling interests that are material to the Group. The amounts disclosed for each subsidiary are before inter-company eliminations: March 31, 2018 December 31, 2017 Current Non-current Net Current Non-current Net assets assets assets assets assets assets (liabilities) (liabilities) (Liabilities) (liabilities) (liabilities) (Liabilities)

Shizukuishi 1,902 (3,949) (2,047) 1,730 (2,606) (876) Mito 909 819 1,728 663 781 1,444 Misawa 3,210 (1,605) 1,605 2,652 (1,028) 1,624 Komatsu 6,322 (5,723) 599 2,374 (1,739) 635 Total net assets (liabilities) 12,343 (10,458) 1,885 7,419 (4,592) 2,827 The summarized income statement for the Japanese entities and Salvador including the portion allocated to NCI for the three months ended March 31, is as follows: Q1-18 Q1-17

(Loss) Comprehensive Comprehensive (Loss) Comprehensive Comprehensive income for loss for the loss allocated to income for loss for the loss allocated to the period period NCI the period period NCI

Shizukuishi (1,219) (1,165) (153) (520) (310) (41) Mito 148 265 35 157 230 30 Misawa (117) (17) (7) 147 233 93 Komatsu (20) (35) (5) (10) (918) (137) Salvador - - - (3,589) (3,589) (2,103) Total (1,208) (952) (130) (3,815) (4,354) (2,158) The net change in participating non-controlling interests in operating entities is as follows: Shizukuishi Mito Komatsu Misawa Total As at December 31, 2017 (116) 189 95 650 818 Net (loss) income attributable to non-controlling interest (160) 19 (3) (47) (190) Other comprehensive (loss) income attributable to non-controlling interest 7 17 (3) 39 60 As at March 31, 2018 (269) 225 89 642 688 Interest held by third parties 13% 13% 15% 40%

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS AT AND FOR THE THREE MONTHS ENDED MARCH 31, 2018 Expressed in US$’000 unless otherwise stated

12. PROPERTY, PLANT AND EQUIPMENT Solar power Assets under Other Land projects construction PPE Total

Cost: At December 31, 2017 2,673 113,264 29,155 3,863 148,955 Additions 6,932 3 1,946 31 8,912 Disposal - - - (18) (18) Exchange differences 276 6,363 1,607 212 8,458 At March 31, 2018 9,881 119,630 32,708 4,089 166,308

Accumulated depreciation: At December 31, 2017 - 7,969 - 378 8,347 Depreciation - 1,496 - 54 1,550 Disposals - - - (18) (18) Exchange differences - 475 - 18 493 At March 31, 2018 - 9,940 - 432 10,372

Net book value: At December 31, 2017 2,673 105,295 29,155 3,485 140,608 At March 31, 2018 9,881 109,690 32,708 3,657 155,936

During the three months ended March 31, 2018, the Group capitalized as assets under construction $1.9 million (2017: $10.5 million) of incurred capital expenditures associated with the Komatsu solar power project in Japan. In January 2018, the Group completed the acquisition of land plots in Japan of $7.0 million to be used for the construction of one of the solar power projects currently in the development pipeline. In addition, during the first quarter of 2018, advances of $0.2 million associated with land costs were reclassified from trade and other receivables to land. In addition, during the first quarter of 2018, the Group capitalized $0.1 million (2017: $0.1 million) of borrowing costs associated with credit facilities obtained to finance the construction of the Komatsu project. Note 8 and Note 17 13. INTANGIBLE ASSETS

Internally generated Licenses and development permits costs and other Total

Cost: At December 31, 2017 6,906 5,862 12,768 Additions - 1,224 1,224 Impairment - (35) (35) Exchange differences 388 235 623 At March 31, 2018 7,294 7,286 14,580

Accumulated amortization: At December 31, 2017 1,579 1,464 3,043 Amortization 107 35 142 Exchange differences 128 36 164 At March 31, 2018 1,814 1,535 3,349

Net book value: At December 31, 2017 5,327 4,398 9,725 At March 31, 2018 5,480 5,751 11,231

During the months ended March 31, 2018, general and administrative expenses of $0.4 million (2017: $0.3 million) representing internally-generated costs of $0.3 million (2017: $0.3 million) and third-party costs of $0.1 million (2017: $ nil) were capitalized during the period within intangible assets as they directly related to the Group’s development activities in Japan. In addition, during the first quarter of 2018, advances of $0.9 million previously given to developers were reclassified from trade and other receivables to intangible assets.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS AT AND FOR THE THREE MONTHS ENDED MARCH 31, 2018 Expressed in US$’000 unless otherwise stated

14. CASH AND CASH EQUIVALENTS 16. SHARE-BASED PAYMENTS The Group’s cash and cash equivalents (including The Company maintains a Restricted Share Unit (RSU) restricted cash) are held in banks in Canada, Luxembourg, award plan for employees, consultants, directors and Switzerland, United States and Japan with high and officers. RSUs have a contractual term of approximately medium grade credit ratings assigned by international four years and have time-based and performance-based credit agencies. The fair value of cash and cash vesting conditions that are market and non-market based. equivalents approximates their carrying value due to short In addition, the Company maintains an equity-settled maturities. Included within cash and cash equivalents is stock option awards scheme for employees, consultants, restricted cash relating to the Group’s solar power directors and officers. All outstanding stock options have projects as follows: a contractual term ranging from five to ten years and March 31 December 31 generally vest over a period of three years with the 2018 2017 exercise price set equal to the market price at the date of Unrestricted cash at parent level 21,398 30,385 grant. During the three months ended March 31, 2018, Restricted cash at project level 16,661 12,818 the Group recognized share-based payment expenses of Total 38,059 43,203 $0.2 million (2017: $0.3 million) related to its RSUs and Restricted cash relates to cash and cash equivalents held stock option award schemes. Note 7. at the project level that are restricted by the lending banks During the first quarter of 2018, there were no changes in for future repayment of interest and principal and working the Company’s outstanding RSUs totaling 22,424,433, of capital requirements related to each project. Restricted which 22,099,727 are performance based. cash and cash equivalents can be distributed from the Group’s projects, subject to approval from the lending During the first quarter of 2018, there were no changes in banks, through repayment of shareholder loans, payment the Company’s outstanding stock options totaling 150,000 of interest on shareholder loans or dividend distributions. at an exercise price of CAD$1.59. 15. SHARE CAPITAL The Company recognizes an expense within general and administrative expenses when stock options are granted The Company has authorized capital consisting of an to employees, consultants, directors and officers using the unlimited number of common shares, of which fair value method at the date of grant. Share-based 334,094,324 are issued and outstanding at March 31, compensation is calculated using the Black-Scholes option 2018 (December 31, 2017: 334,094,324). In addition, the pricing model for stock options and the grant date share Company is authorized to issue an unlimited number of fair value for RSUs with service and non-market preferred shares, issuable in series, none of which have performance conditions. For RSUs with market-based been issued. The common shares of the Company have no performance conditions share-based compensation is par value, are all of the same class, carry voting rights, and calculated using an adjusted grant date share fair value entitle shareholders to receive dividends as and when calculated with a valuation model that incorporates all the declared by the Board of Directors. No dividends were variables included in the market vesting conditions. declared during the three months ended March 31, 2018 and 2017. Note 16

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS AT AND FOR THE THREE MONTHS ENDED MARCH 31, 2018 Expressed in US$’000 unless otherwise stated

17. BORROWINGS

Corporate bond Project loans Total At January 1, 2018 40,688 139,013 179,701 Proceeds from loans - 4,853 4,853 Accrued interest 806 516 1,322 Amortization of transaction costs 72 42 114 Exchange difference 1,087 7,907 8,994 At March 31, 2018 42,653 152,331 194,984 - Current portion 1,449 9,428 10,877 - Non-current portion 41,204 142,903 184,107

At March 31, 2018, the Group was not in breach of any of (b) NON-RECOURSE PROJECT LOANS the imposed operational and financial covenants Japanese subsidiaries associated with its corporate borrowings and non- recourse project loans. During the three months ended March 31, 2018, the Group’s Japanese subsidiaries with solar power projects (a) CORPORATE BORROWINGS under construction drew down a total of ¥491 million At March 31, 2018, the Group had €33.7 million (net) of ($4.6 million) and ¥35 million ($0.3 million) under the corporate bonds outstanding. The bond was issued by the senior financing agreements and under the VAT credit Company in April 2014 at 8.0% annual interest with a 5- facility, respectively (2017: ¥2,530 million and ¥210 year maturity. The carrying amount of the corporate bond million, respectively). At March 31, 2018, the combined as at March 31, 2018, including accrued interest net of undrawn gross amount under all the Japanese credit transaction costs, was $42.7 million (December 31, 2017: facilities amounted to ¥nil (2017: ¥3,321 million ($29.7 $40.7 million). million). At March 31, 2018, the fair value of the non- recourse project loans approximated their carrying values as the loans bear floating interest rates. All the Japanese interest rate swap contracts qualified for hedge accounting at March 31, 2018, and December 31, 2017.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS AT AND FOR THE THREE MONTHS ENDED MARCH 31, 2018 Expressed in US$’000 unless otherwise stated

18. DERIVATIVE FINANCIAL INSTRUMENTS 19. RELATED PARTIES March 31 December 31 For the purposes of preparing the Company’s condensed 2018 2017 consolidated interim financial statements, parties are Derivative financial assets: considered to be related if one party has the ability to Corporate bond call option 245 319 Total derivative financial assets 245 319 control the other party, under ordinary control, or if one party can exercise significant influence over the other Derivative financial liabilities: party in making financial and operational decisions. The Interest rate swap contracts Company’s major shareholder is the Lundin family, which - Current portion 1,534 1,444 collectively owns through various trusts approximately - Non-current portion 9,446 8,788 Total derivative financial liabilities 10,980 10,232 24.3% of the Company’s common shares (2017: 24.3%). RELATED PARTY TRANSACTIONS Corporate bond call option During the three months ended March 31, 2018, and During the first quarter of 2018, the Group recognized a 2017, the Group entered into the following transactions fair value loss of $81 thousands associated with the with related parties: change in the fair value of the corporate bond call option. Three months ended Interest rate swap contracts Q1-18 Q1-17 The Group enters into interest rate swap contracts in General and administrative expenses: order to hedge against the risk of variations in the Group’s Lundin Services BV - 3 cash flows as a result of floating interest rates on its non- Lundin Petroleum AB 7 6 Lundin SA 30 30 recourse project loans in Japan. The fair value of these Finance costs: interest rate swap contracts is calculated as the present Lundin family: value of the estimated future cash flows, using the - Interest expense 10 127 notional amount to maturity as per the interest rate swap - Transaction costs 1 10 contracts, the observable TIBOR interest rate forward Total transactions with related parties 48 176 yield curves and an appropriate discount factor. Amounts outstanding to related parties at March 31, 2018 At March 31, 2018, all of the Group’s derivative financial and December 31, 2017 are as follows: instruments qualified for hedge accounting with fair value March 31 December 31 movements accounted for within equity, except for the 2018 2017 ineffective portion that is recorded into finance Current liabilities: income/costs. Lundin Services BV: General and administrative expenses - 1 Lundin family share in corporate bond 17 7 Key management personnel 265 384 Total current liabilities 282 392 Non-current liabilities: Lundin family share in corporate bond 490 475 Total non-current liabilities 490 475 Total amounts outstanding 772 867 There were no amounts outstanding from related parties at March 31, 2018 and December 31, 2017.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS AT AND FOR THE THREE MONTHS ENDED MARCH 31, 2018 Expressed in US$’000 unless otherwise stated

21. COMMITMENTS Contractual commitments The Group enters into engineering, procurement and construction agreements with large international contractors that design, construct, operate and maintain utility-scale solar photovoltaic power plants. As of March 31, 2018, the Group had a contractual obligation over one year to acquire construction services in the amount of $1.1 million related to the construction of the 13.2 MW Komatsu solar power projects in Japan. This contractual obligation will be funded from existing cash available at the project company level and/or from the Group’s unrestricted cash balance upon financial close. 22. CONTINGENT LIABILITIES On August 10, 2015, the Group received a litigation notice from a former employee alleging unreconciled labor- related differences. The Company’s directors believe the claim is without merit, and the Group intends to vigorously defend itself. Given the early stage of the legal process, the Company is unable to make a reliable estimate of the financial effects of the litigation and has not included a provision for liability under IAS 37 Provisions, Contingent Liabilities and Contingent Assets, in these condensed consolidated interim financial statements.