Annual Report

2018 2

Our vision

Improving our future

Our mission

To deliver competitive and sustainable solar energy globally, to protect our environment and to improve quality of life through innovative integration of reliable technology

Our values

Predictable Working together Driving results Changemakers Scatec Solar ASA - Annual Report 2018 3

Contents

Scatec Solar in brief 4 Value chain 6 Market development 7 CEO letter 8 Our people 10 Sustainability highlights 12 Report from the Board of Directors 15 Executive Management 34 Board of Directors 36 Consolidated financial statements Group 40 Notes to the Consolidated financial statements Group 46 Parent company financial statements 112 Notes to the parent company financial statements 116 Other definitions 137 Responsibility statement 138 Alternative Performance Measures 139 Appendix 142 Auditor’s report 144 4

Scatec Solar in brief

Scatec Solar is an integrated independent solar power producer, delivering affordable, rapidly deployable and sustainable source of clean energy worldwide. As a long-term player, Scatec Solar develops, builds, owns, operates and maintains solar power plants, and has solid installation track record of more than 1 GW.

The company has a total of 1.7 GW in operation and under construction in Argentina, Brazil, the , Egypt, Honduras, Jordan, Malaysia, Mozambique, Rwanda, and .

With an established global presence and a significant project pipeline, the company is targeting a capacity of 3.5 GW in operation and under construction by end of 2021. Scatec Solar is headquartered in Oslo, Norway and listed on the Oslo Stock Exchange under the ticker symbol ‘SSO’. Scatec Solar ASA - Annual Report 2018 5

Key facts

Employees In operation FY 2018 Project pipeline at year-end production & backlog

246 584 681 4.7 MW GWh GW

Market capitalisation at year-end Proportionate Revenues & EBITDA NOK BILLION NOK MILLION

10 000

8 000

000

2000

2 1000

0 0 201 201 2018 201 201 2018

Reenue A

Proportionate financials

NOK MILLION FY 2018 FY 2017 FY 2016

PROPORTIONATE FINANCIALS 1) Revenues and other income 4,725 1,680 1,174 EBITDA 961 792 376 Operating profit (EBIT) 773 632 147 Profit/(loss) 398 326 -84 Net interest- bearing debt 4,214 2,013 1,918 Power production (GWh) 318 282 356

SSO proportionate share of cash flow to equity 2) 481 265 104

CONSOLIDATED FINANCIALS 3) Revenues and other income 1,213 1,492 1,085 EBITDA 902 1,241 833 Basic earnings per share (NOK) 1.29 3.36 0.04 Power production (GWh) 681 627 791

1) See Other definitions appendix for definition. 2) See Alternative Performance Measures appendix for definition. 3) Refer to Note 2 Operating Segments in the consolidated financial statement for a reconciliation between proportionate and consolidated financials. Value chain

6

Scatec Solar’s value chain

Project development • Site development and permitting • System design • Business case development • PPA negotiation • Power purchase agreement

Financing • Debt/Equity structuring • Due diligence

Construction • Engineering and procurement • Construction management

Operations • Maximise performance and availability • Maintenance and repair

Ownership (IPP) • Asset management • Financial optimalisation Scatec Solar ASA - Annual Report 2018 7

Market development

The solar market is growing strongly. With further technology improvements and cost reductions for solar components, industry analysts are expecting significant market growth in the years to come.

PV Market Outlook

GW 100 120 110

100 0

0

0 0 10 288 0 18

200 2010 2011 2012 201 201 201 201 201 2018 201 2020 2021

urope na ata apan na S Aa SA ena ure Ret o orl

Source: Bloomberg New Energy Finance, Q1 2019 PV Market Outlook and New energy outlook 2018.

Bloomberg New Energy Finance (BNEF) expects global power to realise a typical utility-scale solar plant is expected reach demand to grow by 57% from 2018 to 2050, representing 80 cents per Watt in 2019, a decline of 45 % from 2015. investments of about USD 11.5 trillion in new power generation. Of this, more than 70%, or USD 250 billion per As the cost of solar power continues to decline, policy makers year is forecasted to be invested in wind and solar. around the world are increasingly looking to solar to cover their power needs and create growth. In emerging economies, According to BNEF it was installed 107 GW of solar globally governments look at private/public partnerships as an attractive in 2018. This represents total investments of USD 131 billion. model where multilateral development banks and private players provide funding to realise new solar projects at a fast In the short term, the solar market volume is expected to pace. Several development banks have long-standing presence grow by 20% to 130 GW by 2021. The highest growth is and experience in emerging markets and are mandated to forecasted to come from new markets in Latin America, the provide non-recourse project financing. These markets continue Middle East and Southeast Asia. The investments required to represent interesting opportunities for Scatec Solar and forms a strong fundament for growth in the years to come.

Annual solar installations are expected to reach 130 GW by 2021 CEO letter

8 Scatec Solar ASA - Annual Report 2018 9

A year of sustainable growth

2018 enters history as a year of growth and several record achievements for Scatec Solar. It was also the start of another highly ambitious period of growth with new targets of 3.5 GW in operation or under construction by the end of 2021.

Growth is not an objective, but an enabler to meet what we Moreover, when operating in emerging markets, sustainability set out to achieve. To continuously keep Scatec Solar on track, efforts are integral to achieve business success and financial I frequently remind myself of what Scatec Solar’s mission is: growth. In 2018, we almost tripled our revenues from 2017, To deliver competitive and sustainable solar energy globally, reaching proportionate revenues of NOK 4,725 million in 2018. to protect our environment and to improve quality of life EBITDA grew to NOK 961 million, up from 792 million in 2017. through innovative integration of reliable technology. The key asset to delivering such growth is our people. In 2018, I firmly believe that we continued delivering in line with our we expanded our global team by 68 highly skilled employees mission in 2018. to 246. However, numbers alone do not create success. Empowered employees from diverse backgrounds are key Firstly, we grew our asset portfolio in operation by 262 MW to innovation and growth. Their creativity and agility enable to 584 MW in 2018, driven by new solar plants in commercial us to stay one step ahead of the competition. I was therefore operation in Brazil, Honduras and Malaysia. The dedication highly encouraged by the results from the employee survey and efforts of our teams to reach these important milestones conducted in the autumn of 2018, where 87 percent of our were impressive. As was the continued support from our employees believe Scatec Solar is a great place to work and multitude of partners, including suppliers, investment 93 percent are proud to tell others they work here. partners, development financing institutions and – at the core of everything we do – our customers. Our partnerships are Such results make me proud to be CEO of Scatec Solar. essential to Scatec Solar’s business model and progress. They also give me reassurance that we are equipped to meet the highly ambitious future growth targets we defined in From an environmental perspective, our operating solar mid-2018. From today’s 1,700 MW in operation and under power plants avoided about 650,000 tons of greenhouse gas construction, we have set a target to reach 3,500 MW by the emissions in 2018, underlining the positive climate impact of end of 2021. With a solid pipeline and backlog of 4,700 MW our company. at year-end 2018, we are on track to reach this target.

Secondly, we secured strong conversion of new projects from Our record achievements in 2018 within several areas give pipeline and backlog into construction. At year-end, 1,071 MW us a solid basis to further develop our business and continue of new projects were under construction in eight countries. growing sustainably in 2019 and beyond. The solar market Starting construction of new projects greatly benefits the local is the fastest growing source and we see communities we operate within, not only through local job and significant opportunities to utilise our track record, business value creation, but also through implementation of sustainability model and new technologies to realise new projects. As set out programmes that improve standards in local communities in the beginning of this letter, Scatec Solar’s mission is clear, close to our project sites. It is important to us that each local and we will constantly strive to improve our performance and community benefits from the solar power plant beyond the simultaneously create positive spin-off effects to the building and operations of the plant. I encourage you to read communities we operate within and the planet we live on. more about how we work with sustainability as an integrated part of our business in the 2018 Sustainability report.

Raymond Carlsen (CEO) Our people

10

We expanded our global team by 68 highly skilled employees in 2018 to 246, representing 32 different nationalities.

Age groups By functions

nance 1 eelopent 1 18 - 2 Soluton 20 0 - oer roucton 2 0 - 0 eal eople 8 ranaton Sutanale une SS Scatec Solar ASA - Annual Report 2018 11

Our people

The key to our success is our people

2018 has been a year of strong growth delivered by our Performance management in Scatec Solar is a continuous dedicated people and teams. This is also reflected in our process to reinforce a value based high performance culture organisation which we have strengthened within all functions with passionate and empowered employees. The core of the and regions. In 2018, we expanded our global team by 68 performance, management and appraisal (PDA) process is the highly skilled employees to 246, whereof women account continuous dialogue between line manager and employee. for 33 %. In addition to our own employees, we had about The PDA process is mandatory for all employees and we track 183 professionals hired in to deliver on our projects in 2018. this to full completion every year. A range of onboarding activities have successfully been implemented to integrate every new hire into our diverse We conducted our first global employee survey in 2018. organisation counting 32 different nationalities. The overall results were strong, and the scores reflecting employee pride were the highest. The survey provides good This year, we will continue our work to take further insight into areas we can improve as well as areas where advantage of this diversity, adding knowledge, skills, gender we can further utilise our strengths. Global follow-up of the and personality to the equation. If we can further capitalise findings, including improvement objectives and supporting on the combined strengths of these assets, we are set for actions, will be ongoing throughout 2019. an even stronger organisation that continues to deliver successful projects in complex environments. Scatec Solar’s operations stretches across 19 countries and four continents. Even though we are growing at a high To further strengthen continuous development of Scatec Solar’s pace, we remain an agile and lean organisation. We utilise people and teams, additional systems were implemented in our strengths throughout the completeSout valueArca chain and 2018. These tools enable efficient administration of global deliver record achievements togetherora with our long-term HR processes to ensure high quality in all phases of training partners. This combination will continuealaa to be key for our and development of a growing organisation. During the future success. oaue ral second half of 2018, 16 different courses were offered to all Sout Arca onura employees. This offering is continuously updated and aligned ora pt with the needs of the business and employees. alaa Arentna oaue rane ral ec Repulc onura e eterlan Geographic distribution of employees Sout Arca pt rance ora Arentna oran alaa rane Rana Sout Arca oaue ec Repulc eran ora ral e eterlan alaa onura rance oaueSout Arca pt oran ralora Arentna Rana onuraalaa rane eran ptoaue ec Repulc Arentnaral e eterlan raneonura rance ecpt Repulc oran eArentna eterlan Rana rancerane eran oranec Repulc Ranae eterlan eranrance oran Rana eran 12

Sustainability highlights

Growing in a responsible way

• 2018 has been an exceptional year with solar plants constructed in eight countries across four continents.

• Our ability to manage risks and challenges in complex markets has been tested on many fronts.

• Several key learnings and experiences are integrated into new projects.

Projects People Learnings

Doubled Zero serious injuries Community relations installed capacity Delivered 6.3 mill working hours Grid connected the Los Prados Grid connected 262 MW in with no serious injuries plant in Honduras after social 2018 - more than doubled unrest locally, in large part our installed capacity 6,000 jobs created caused by misinformation and in projects under construction resolved through a stronger – the majority local and social team and improved 650,000 tons of CO2 emissions reduced from our unskilled labour dialog and interactions with solar plants in operation in 2018 the communities. Diversity Our total global 3.5 GW Targeting 3.5 GW workforce is represented by Resettlement in operation and under 32 nationalities Livelihoodrestoration construction by the end of 2021 programme for 220 local house- holds in Mozambique in line with IFC’s Performance Standards

Compliance Strong efforts with Environmental & Social management to ensure compliance of all contractors and business partners with international standards and requirements in Egypt and other ongoing projects Scatec Solar ASA - Annual Report 2018 13

Read more about Scatec Solar’s sustainability efforts in the Sustainability Report 2018 available on https://annualreport2018.scatecsolar.com/

Sustainability Report

2018 14 Scatec Solar ASA - Annual Report 2018 15

Report from the Board of Directors

A summary of key operational and financial highlights of the year 2018

Article continues 16

Highlights 2018

• Solid financial results with significant year-on-year growth - proportionate revenues of NOK 4,725 million (1,680) and EBITDA of NOK 961 million (792)

• Strong conversion of projects from pipeline and backlog in to construction, pipeline strengthened to more than 4,500 MW

• New solar plants in commercial operation in Brazil, Honduras and Malaysia – increasing asset portfolio in operation by 262 MW to 584 MW

• Construction ongoing for additional 1,071 MW in Argentina, Egypt, Malaysia, Mozambique, South Africa and Ukraine

• On track to reach target of 3,500 MW in operation and under construction by end 2021

• The Board of Directors has proposed dividends of NOK 0.95 per share

Key figures

NOK MILLION FY 2018 FY 2017

PROPORTIONATE FINANCIALS 1) Total revenues and other income 4,725 1,680 Power Production 622 544 Operation & Maintenance 81 69 Development & Construction 4,005 1,054 Corporate 17 13 EBITDA 961 792 Power Production 492 454 Operation & Maintenance 34 28 Development & Construction 488 361 Corporate -53 -50 Operating profit (EBIT) 773 632 Profit/(loss) 398 326 Net interest-bearing debt 4,214 2,013 Power production (GWh) 318 282

SSO proportionate share of cash flow to equity 481 265

CONSOLIDATED FINANCIALS 2) Revenues and other income 1,213 1,492 EBITDA 902 1,241 Basic earnings per Share (NOK) 1.29 3.36 Power Production (GWh) 681 627

1) With proportionate financials, Scatec Solar reports its share of revenues, expenses, profits and cash flows from its subsidiaries without eliminations, based on Scatec Solar’s economic interest in the subsidiaries. 2) Refer to note 3 Operating segments in the consolidated financial statements for a reconciliation between proportionate and consolidated financials.

Scatec Solar ASA - Annual Report 2018 17

Scatec Solar reporting structure

Scatec Solar ASA

Power Operation & Development/ Corporate Eliminations Production Maintenance Construction

• Ownership and • Technical and • Project • Corporate • Elimination of management of operational developement services revenues and power producing services profits from assets • Engineering and • Management internal

Main activites Procurement • Group finance transactions • Construction management

• Quality assurance

South Africa (45%): South Africa (45%): Egypt (51%): Kalkbult, 75 MW Kalkbult, 75 MW Portfolio, 400 MW Linde, 40 MW Linde, 40 MW South Africa (46%): Dreunberg, 75 MW Dreunberg, 75 MW Round 4, 258 MW Rwanda (54%): Rwanda (54%): ASYV, 9 MW ASYV, 9 MW Malaysia (100%): Merchang, 66 MW Czech Republic Czech Republic Jasin, 66 MW (100%): (100%): Portfolio, 20 MW Portfolio, 20 MW Argentina (50%): Guanizuil, 117 MW Honduras (51%): Honduras (51%): Assets / projects with revenues recognized Assets / projects with revenues Agua Fria, 60 MW Agua Fria, 60 MW Ukraine: Los Prados, 35 MW Los Prados, 35 MW Kamianka, 30 MW (100%) Jordan: Jordan: Rengy, 47 MW (51%) Oryx, 10 MW (90%) Oryx, 10 MW (90%) EJRE/GLAE, EJRE/GLAE, Mozambique (52%): 33 MW (50.1%) 33 MW (50.1%) Mocuba, 40 MW

Malaysia (100%): Malaysia (100%): Backlog: Gurun, 65 MW Gurun, 65 MW 225 MW

Brazil (44%): Brazil (44%): Pipeline: Apodi, 162 MW Apodi, 162 MW 4,454 MW 18

Financial review Segment and proportionate financials Presentation of Accounts Scatec Solar reports on three operating business segments: Pursuant to Section 3-3 of the Norwegian Accounting Act, Power Production (PP), Operation & Maintenance (O&M), the Board of Directors confirm that the Financial Statements and Development & Construction (D&C), as well as have been prepared under the assumption that the Scatec Corporate and Eliminations. Solar Group is a going concern and that this assumption was appropriate at the date of approval of the Financial Revenues and costs related to deliveries of D&C and O&M Statements. The Group reports its Consolidated Financial services to companies deemed to be controlled by Scatec Solar Statements in accordance with International Financial are eliminated in the Consolidated Group Financial Statements. Reporting Standards (IFRS) with Norwegian Kroner (NOK) as reporting currency. The notations Scatec Solar, Scatec To improve reporting transparency on underlying value Solar Group, and the Group are used interchangeably creation across Scatec Solar’s business activities the Company throughout the document. has introduced reporting on proportionate financials. With proportionate financials Scatec Solar reports its share of revenues, expenses, profits and cash flows from its subsidiaries based on Scatec Solar’s economic interest in the subsidiaries. Proportionate reporting is in line with how the Management Team assesses the performance of the segments. Scatec Solar ASA - Annual Report 2018 19

Group – Proportionate financials The 2018 proportionate revenues increased almost threefold D&C activities contributed with NOK 488 million of a total from 2017, mainly explained by a significant increase in EBITDA of NOK 961 million for the year. EBITDA for the Development & Construction (D&C) activities. Furthermore, full year increased strongly compared to last year, mainly power revenues increased in the year based on reaching explained by higher contruction activities. The 2017 D&C commercial operation for the Los Prados (Honduras), Gurun EBITDA included a NOK 375 million gain on the partial sale (Malaysia) and Apodi (Brazil) power plants. Revenues and of the Apodi project in Brazil. profitability in the other business segments remained fairly stable. Scatec Solar’s proportionate share of cash flow to equity was NOK 481 million in 2018, up from NOK 265 million in 2017. Operating expenses increased in 2018, mainly driven by operating expenses of the new plants in operation.

Key figures

NOK MILLION 2018 2017

Revenues and other income 4,725 1,680 Operating expenses -360 -276 EBITDA 961 792 D&A and impairment -188 -160 EBIT 773 632 Cash flow to equity 481 265

Revenues & EBITDA by year Key ratios NOK MILLION

PERCENT 2018 2017

EBITDA margin 20% 47% EBIT margin 16% 38%

Reenues 20

Power Production Power Production revenues reached NOK 622 million (544) The increase in operating expenses from last year is explained in 2018. The segment had an installed capacity of 584 MW at by the new plants set in operation, as well as commencement the end of 2018 and reached production on a proportionate of asset management activities for plants under construction. basis of 318 GWh compared with 282 GWh in 2017. The As asset management services yield lower margin than sale increase in production volumes and revenues is mainly driven of electricity, the EBITDA margin for 2018 was reduced by new power plants reaching commercial operation, asset compared to last year. management services rendered to new power plants as well as Scatec Solar’s increased ownership share in the South Scatec Solar’s proportionate share of cash flow to equity from African plants with effect from September 2018. Power Production was NOK 157 million in 2018, up from NOK 143 million in 2017.

Key figures

NOK MILLION 2018 2017

Revenues and other income 622 544 Operating expenses -130 -90 EBITDA 492 454 D&A and impairment -164 -156 EBIT 328 298 Cash flow to equity 157 143

Revenues & EBITDA by year Key ratios NOK MILLION PERCENT 2018 2017

EBITDA margin 79% 83% EBIT margin 53% 55% Production MWH 2018 2017

MWh produced 681 627 Reenues oer roution -net to Scatec Solar 318 282