EAM Solar ASA Annual Report 2017

48 Pages·2017·7.27 MB·English

EAM SOLAR ASA

ANNUAL REPORT 2 017
Contents | EAM Solar in brief | Directors’ report | Corporate governance | Financial review | Financial statement 2/48
Contents | EAM Solar in brief | Directors’ report | Corporate governance | Financial review | Financial statement 3/48
CONTENTS
EAM Solar in brief 4
Directors’ report 6
Corporate governance 10
Financial review 14
Financial statement 15
Consolidated financial statement
Consolidated statement of c omprehensive income 16
Consolidated statement of f inancial position 17
Consolidated statement of c ash flow 18
Consolidated statement of c hanges in equity 19
Notes t o the consolidated financial statement 20
Parent company financial statement
Profit and loss s tatement 32
Balance sheet 33
Cash flow statement 34
statement of c hanges in equity 35
Notes t o the parent company financial statement 36
Power production 38
Power plant c apacity 39
Responsibility s tatement 40
Auditor’s r eport 41
Contents | EAM Solar in brief | Directors’ report | Corporate governance | Financial review | Financial statement 4/48
EAM SOLAR ASA

IN BRIEF
EAM Solar ASA (EAM or the Company) is a public limited
liability company, incorporated and domiciled in Norway, with
registered address at Dronningen 1, Oslo, Norway.
Energeia Asset Management AS established ity sales contract for 17 of the 21 PV power market valuation dropped to EUR 10 million
EAM on 5 January 2011. The Company was plants transferred to EAM in July 2014. The in the beginning of 2016, 80 per cent below
established with the purpose of owning Solar Administrative Court of Lazio legalized GSE’s the invested equity capital of EUR 55 million.
PV power plants under long-term electricity termination decision in June 2016. During 2016 and 2017 the market value has
sales contracts and distributing dividends EAM’s calculated loss of revenues due to increased to EUR 22 million.
on a regular basis to its shareholders. The terminated FIT contracts and permanent clo- Throughout 2017 the Company has con-
Company was listed on the Oslo Stock Ex- sure of power plants because of lacking tech- tinued to fight for its rights in various legal
change under the ticker EAM in March 2013, nical certification, amounts to an amount in venues. This is summarized below.
becoming the worlds first publicly listed pure excess of EUR 300 million. This has resulted In the criminal proceedings the Com-
solar PV “YieldCo”. in the bankruptcy of the SPVs affected by the pany’s status as victim is maintained and
EAM has no employees and is managed criminal proceedings in 2016. Enovos Luxembourg S.A., Avelar Energy Ltd
by Energeia Asset Management AS. EAM The annual accounts of 2017 have identi- and Aveleos S.A. are still financially liable for
Solar Park Management AS, a subsidiary of fied a total loss of EUR 7.2 million, stemming the actions of the former directors of Aveleos
Energeia Asset Management AS, conducts mainly from extraordinary legal costs and S.A., Marco Giorgi and Igor Akhmerov. In May
all administrative and technical tasks with write down of assets on a group level. Most 2017 the Criminal Court of Milan ordered a
own employees and subcontractors. The of the economic loss was recognized in the conservative seizure on all assets connected
annual general meeting of EAM elects the 2015 annual accounts. to Marco Giorgi and Igor Akhmerov, up to the
Company’s board of directors, who make On the basis of the fundamental breach total amount of Euro 33 062 632.62 in favour
all material investments, divestments and of contract and contractual guarantees in of EAM Solar ASA and EAM Solar Italy Hold-
contractual decisions. the Share Purchase Agreement, resulting in ing S.r.l. Hearings have been conducted in
EAM acquired the first power plant in Italy losses now suffered by EAM, and the lack of February and March 2018 in the criminal pro-
in 2011. At the end of 2017 EAM owned and willingness from the sellers to remedy the ceedings in Milan where amongst others the
operated 6 power plants with a combined flawed sale, EAM has been forced to initiate Company’s CEO has appeared as a witness.
capacity of 8.6 MW generating an average legal proceedings against the sellers to re- No conclusive rulings have been reached so
annual production of 12.7GWh annually (P50 cover losses and damages in excess of EUR far, and the Company does not expect any
production). 300 million. This situation has changed EAM ruling in the first instance until the end of
EAM entered into a Share Purchase Agree- from a electricity producing YieldCo to a also the year at the earliest.
ment with Aveleos S.A. in July 2014 to acquire becoming a litigation company. The Company has summoned Aveleos
31 PV power plants in Italy, for a total consid- As a consequence of the fraud, EAMs S.A. before the arbitration court of Milan
eration of EUR 115 million. One week after the
transfer of 21 of the 31 power plants, it ap- Valuation
(EUR million)
peared that 27 of 31 power plants comprised
by the Share Purchase Agreement, and two 60
directors of the sellers, were already the tar-
50
gets of a criminal investigation conducted by
the Prosecutors Office of Milan. 40
Based on the criminal investigation, the
30
companies contractual counterparty for pur-
chase of electricity under the FIT contracts, 20
the state owned utility company Gestore dei 10
Servizi Energetici (GSE), firstly suspended
0
and then terminated the long-term electric- 2 Aug 2013 3 Apr 2014 14 Jan 2015 1 Oct 2015 23 Jun 2016 3 Mar 2017
Contents | EAM Solar in brief | Directors’ report | Corporate governance | Financial review | Financial statement 5/48
6.23%
INCREASE
IN POWER PRODUCTION FROM 2016
to have the Share Purchase Agreement en- tor’s action on the criminal complaint filed a share capital increase by the issuance of
tered into in July 2014 declared null and void. in Luxembourg. 532 210 shares in the Company to EAM Solar
Hearings have been conducted throughout The Company received in February 2018 Park Management AS (“the Manager”). The
2017 and continued in 2018 where, amongst a new summons for allegedly false and mis- shares were consideration for the financial
others, the Company’s CEO has appeared as leading statements filed by Aveleos SA in Lux- participation mechanism in the Management
a witness. No conclusive rulings have been embourg in conjunction with the statements Agreement, and were non-dilutive for the
reached so far, and the Company does not the Company made in its third quarter report shareholders. As part of the transaction the
expect any ruling in the first instance until 2017 where the Company made a provision Company recognised an intangible asset and
the end of the third quarter at the earliest. for impairment on the receivables against debt of EUR 1 888 thousand, the debt was
The criminal complaint in Luxembourg Aveleos SA and explained the reasons for settled with the shares.
is residing with prosecutor’s office awaiting such impairment. A hearing will take place In the third quarter the Company also
their evaluation. in May 2018. conducted a fully underwritten rights issue
The standstill proceeding in Luxembourg On 26 June 2017 the Company entered with gross proceeds of NOK 30 million, result-
is put to a halt awaiting the outcome of the into a Litigation Funding Agreement with ing in 1 250 000 shares being issued.
arbitration proceedings in Milan. the international specialist litigation fund In the third quarter the Company made a
A summoning for allegedly false accusa- Therium Litigation Funding IC and resolved provision for doubtful debt against Aveleos
tions filed by Enovos Luxembourg S.A., Ence- to carry out a fully underwritten rights’ issue SA of EUR 4 418 thousand, given that Ave-
vo S.A. (formerly: Enovos International S.A.) with gross proceeds of NOK 30 million. The leos SA in the Company’s opinion is de-facto
and the directors Jean Lucius, Michel Schaus, litigation funding agreement and equity bankrupt and is running the company at the
Peter Hamacher and Martin Technau in 2016 issue secures EAM Solar ASA’s capability to creditors’ expense.
against the Company has also been put to a pursue legal actions in the foreseeable future.
halt awaiting the outcome of the prosecu- In the third quarter the Company made
Contents | EAM Solar in brief | Directors’ report | Corporate governance | Financial review | Financial statement 6/48
REPORT
DIRECTORS’
The 2017 annual report acquisition” has changed EAM from a elec- In May 2017 the Criminal Court of Milan
EAM Solar ASA (EAM or the Company) is a tricity producing YieldCo to a also becom- ordered a conservative seizure on all as-
public limited liability company, incorpo- ing a litigation company. Consequently the sets connected to Marco Giorgi and Igor
rated and domiciled in Norway, with regis- share price of EAM Solar ASA on the Oslo Akhmerov, up to the total amount of Euro
tered address at Dronningen 1, Oslo, Norway. Stock Exchange has dropped considerably. 33 062 632.62 in favour of EAM Solar ASA and
Energeia Asset Management AS established The board of directors and the manage- EAM Solar Italy Holding S.r.l. Hearings have
EAM on 5 January 2011. ment are directing all their effort and atten- been conducted in February and March 2018
The Company’s activity is to own and op- tion to resolve this challenging situation in the in the criminal proceedings in Milan where
erate Solar PV power plants under long-term appropriate legal venues as fast as possible amongst others the Company’s CEO has ap-
electricity sales contracts and distribute divi- in order to restore the value of the Company peared as a witness.
dends on a regular basis to its shareholders. and return the outome to the shareholders. It is expected that the criminal case will
The geographical focus of EAM has since continue with hearings, as scheduled for 2018.
its inception been to acquire power plants Operational review The length of the criminal case is highly
under long-term contracts in Europe. EAM Throughout 2017 EAM owned and operated uncertain. The first instance of the criminal
acquired its first power plant in Italy in 2011. 6 power plants having a combined installed case can last for years, followed by a poten-
Since then EAM has acquired in total 25 capacity of 8.6MW with an average annual tial appeal which can be filed to the second
power plants with a combined capacity of power production of 12.7 GWh (P50 instance and finally to the Supreme Court.
27.1MW generating 38.3 GWh annually, rep- production). No conclusive rulings have been reached so
resenting annual revenue of EUR 13.5 million. Power production for the full year far, and the Company does not expect any
At the beginning of 2015, EAM had EUR amounted to 13 274 MWh, 7 per cent above ruling in the first instance until the end of
110 million in capital employed, EUR 180 mil- estimated production for the year. the year at the earliest.
lion in contractual revenue reserve, EUR 50
million in future market price sales and an Corporate status and legal proceedings Arbitration proceedings
expected EBITDA from the 17-year contract Legal proceedings In the 3rd quarter 2016 the Company sum-
period of EUR 200 million. In the opinion of the board of directors the moned Aveleos S.A. to the Milan Chamber
However, the period from 2014–2016 be- Company has during 2017 further strength- of Arbitration in order to have the Share
came very challenging for EAM on the back of ened its legal position. The description of Purchase Agreement entered into in 2014
the flawed acquisition of 21 PV power plants legal proceedings below also includes sub- declared null and void based on the alleged
from Enovos Luxembourg S.A. and Avelar En- squent events. fundamental breach of contract conducted
ergy Ltd. through their jointly owned single by Aveleos SA and its directors.
purpose vehicle Aveleos S.A. Criminal proceedings Hearings have been conducted through-
17 of the 21 PV power plants transferred to The Criminal Court of Milan has in 2016 ruled out 2017 and continued in 2018 where
EAM in July 2014 did not have valid long-term that Enovos Luxembourg SA, Avelar Energy amongst others the Company’s CEO has
feed-in-tariff contracts (FIT) according to the Ltd and Aveleos S.A. are financially liable for appeared as a witness. No conclusive rul-
contractual counterparty Gestore dei Servizi the economic damages suffered by EAM and ings have been reached so far, and the Com-
Energetici GSE S.p.A, owned by the State of related parties due to the criminal actions pany does not expect any ruling in the first
Italy, as warranted by Enovos Luxembourg conducted by their directors Marco Giorgi instance until the end of the third quarter
S.A. and Avelar Energy Ltd under the Share and Igor Akhmerov. at the earliest.
Purchase Agreement. Should the directors be sentenced on the
In the 4th quarter 2015, GSE terminated Milan Prosecutors indictment point “F”, con- Criminal complaint with civil action in Luxem-
the FIT contracts, which had been suspend- cerning fraud against the Company, Enovos bourg against Encevo S.A. Group (formerly
ed since August 2014, and demanded a repay- Luxembourg SA, Avelar Energy Ltd and Ave- known as Enovos International S.A. Group),
ment of previously received FIT from 5 of the leos S.A. will be responsible for paying the and managing directors in Encevo S.A.
7 companies acquired by EAM. damages incurred by the Company. In February 2016, based on the evidence at
Due to Enovos Luxembourg S.A. and Ave- To the extent the Company can provide hand, EAM and associated companies and
lar Energy Ltd lack of willingness to assume adequate documentation, there is no limita- individuals filed two criminal complaints
what the Company believes is their contrac- tion to the damages that can be claimed. It is with civil damages actions to the Court of
tual obligation as owners of Aveleos S.A. and also the sole decision of the Company how Luxembourg. One criminal complaint was
to remedy the situation, EAM has been forced much damages it will seek from each party, filed against Aveleos S.A., and one criminal
to initiate legal proceedings in Italy, Luxem- in other words, the Company may seek at its complaint against Enovos Luxembourg SA,
bourg and Switzerland. own discretion the full compensation from Encevo S.A. (formerly known as Enovos Inter-
The events following the so-called “P31 only one party. national S.A.), Avelar Energy Ltd and Aveleos
Contents | EAM Solar in brief | Directors’ report | Corporate governance | Financial review | Financial statement 7/48
S.A., Jean Lucius, Michel Schaus, Peter Ha- In a ruling communicated in March 2017 GSE in the 4th quarter of 2015, the 5 criminally
macher and Martin Technau (all employees the court decided that the Luxembourg civil affected SPVs filed for a financial restruc-
in the Encevo Group), and the Aveleos S.A. proceedings regarding the standstill agree- turing procedure (“Concordato Preventivo”)
board directors, Igor Akhmerov and Marco ment shall be put to a halt until the award with creditor protection. This was granted
Giorgi (employees of Avelar Energy Ltd). before the Arbitration Court of Milan is ren- by the bankruptcy Court of Milan until 8 July
The Prosecutor’s office in Luxembourg dered i.e. all claims of Aveleos S.A. have been 2016, and then further extended to 6 Sep-
currently handles the criminal complaints. suspended until further. tember 2016.
The timing is highly uncertain. EAM has been forced to act as a custodi-
The civil action contains damages claims Defamation case - allegations of false an for the SPVs affected by the criminal pro-
in excess of EUR 250 million stemming from complaint to be tried in the Luxembourg ceedings since July 2014. EAM has performed
the contractual fraud against EAM in con- District Court this task in order to protect the values of the
junction with the P31 Acquisition. The companies EAM and EAM Solar Italy SPVs and minimize any financial damage
Holding srl, as well as their CEO and Manag- arising from the criminal proceedings and
Breach of standstill agreement proceedings ing Director, Mr Viktor E. Jakobsen, received its legal and operational consequences.
against Aveleos S.A. in the Court of in January 2017 a subpoena to meet in court Following legal and technical clarifica-
Luxembourg in Luxembourg on 13 March 2017. The plain- tions achieved during July and August 2016,
In October 2014, EAM entered into a so-called tiffs are Encevo S.A. (formerly known as Eno- the SPVs, in an understanding with the Bank-
standstill agreement with Aveleos S.A. that vos International S.A.), Enovos Luxembourg ruptcy Court of Milan, determined that a fi-
also encompassed Enovos Luxembourg SA, S.A. and their directors Jean Lucius, Michel nancial restructuring would be unachievable
Avelar Energy Ltd and its directors. The pur- Schaus, Peter Hamacher and Martin Technau. under the laws governing such procedures,
pose of the standstill agreement was to give The plaintiffs claim that the criminal com- mainly due to the fact that the SPVs are
the sellers time to resolve the payment sus- plaint filed by EAM in February 2016 is false criminally indicted, but also due to techni-
pension measures of GSE and to document and not merited. As the board of directors cal administrative reasons. Therefore the
the necessary facts confirming the validity of sees it, this is an attempt by the directors companies filed for a voluntary liquidation
the FIT contracts and the technical feasibil- to evade the ongoing investigation by the and bankruptcy procedure with the Bank-
ity of the power plants within a limited time criminal court of Luxembourg that followed ruptcy Court of Milan on 22 September 2016.
frame of 6 months. In exchange for this the after the criminal complaint was filed. The bankruptcy proceedings continued
sellers pledged to finance the running costs In a communication received in early with hearings in 2017. The Company has had
of the criminally affected power plants with March 2017 the Company has been informed its position as creditor recognised, and in the
a minimum of EUR 5 million in liquidity until that the case will not be heard until the Pros- process also appealed the fact that Aveleos
the above matters was resolved. ecutor’s Office have decided on the criminal was recognised as a creditor.
In exchange for this pledge and the prom- complaints filed in February 2016 that are
ises given by the sellers, EAM lifted the in- still in their hands. Business operations in 2017
junction achieved on the bank accounts of Therefore, the case was not pleaded on 13 At the end of 2017 EAM owned 6 power plants
Aveleos S.A. in Luxembourg in September March 2017 and will be rescheduled. operating under normal conditions and con-
2014 in order to avoid the immediate bank- tracts, with a combined installed capacity of
ruptcy of Aveleos S.A. in October 2014 as Defamation case - allegations of false 8.6 MW with an average annual power pro-
threatened by the Enovos Luxembourg SA, complaint to be tried in the Luxembourg duction of 12.7 GWh (P50 production).
and Avelar Energy Ltd directors. District Court The financial statements and annual re-
Aveleos S.A. and its directors had already The Company received in February 2018 a port are prepared under the assumption of
breached the agreement by November 2014, new summons for allegedly false and mis- going concern. It is the board’s opinion that
as confirmed in the ruling by the Civil Court leading statements filed by Aveleos SA in the Group has sufficient liquidity to support
of Milan (Enterprise Matters Specialized Sec- Luxembourg in conjunction with the state- operations for the next twelve months.
tion) in September 2015 and by the Criminal ments in the Company made in its third quar- Reported revenue in 2017 was EUR 4.2 mil-
Court of Milan in the ruling of 13 September ter report 2017 where the Company made lion and EBITDA came to EUR -4.9 million and
2016. a provision for impairment on the receiva- EBIT at EUR -6.8 million. The Group reduced
In the autumn of 2015 Aveleos summoned bles against Aveleos SA and explained the total asset to EUR 30.1 million following the
EAM again in Luxembourg court in order to reasons for such impairment. A hearing is write down of receivables.
misuse the standstill agreement to achieve expected to take place 26 March 2018. Accumulated extraordinary costs related
exclusion from the criminal proceedings in The statements regards a provision for to the fraudulent sale amounted to approxi-
Milan in order for Enovos Luxembourg S.A., doubtful debt against Aveleos SA of EUR 4 418 mately EUR 6.7 million in 2017 including funds
and Avelar Energy Ltd to escape legal pro- thousand made in third quarter, given the received from Therium.
ceedings. On 20 September 2016 Aveleos S.A. fact that Aveleos SA in the Company’s opin- At current EAM has engaged legal teams
asked the court of Luxembourg for a post- ion is de-facto bankrupt and is running their in 6 different law firms to assist the Company
ponement of these proceedings, which was company at the creditors’ expense. in all the various legal proceedings in Italy,
granted until January 2017. Luxembourg and Switzerland.
The first hearing in the standstill agree- Financial restructuring and voluntary liqui- Cash flow from operation was negative
ment procedures in Luxembourg took place on dation plan for the criminally indicted SPVs with EUR -1.3 million for the year. The working
17 January 2017 where both parties filed their in the Bankruptcy Court of Milan capital is positive with EUR 1.4 million.
note of pleadings and presented to the judge. Following the FIT termination decision by
Contents | EAM Solar in brief | Directors’ report | Corporate governance | Financial review | Financial statement 8/48
Going concern Business strategy Treaty’s (ECT) protection of International
The financial statements and annual report EAM’s strategy was in the outset to create Infrastructure Investors. On 31 December
is made under the assumption of going con- value by acquiring operational power plants 2014 Italy notified the Depository of its with-
cern. The basis for this assumption is that and through an active ownership to optimise drawal from the Energy Charter Treaty (ECT).
the Company has annual revenues of EUR operations and achieve the best possible Therefore, the withdrawal from the ECT by
4 million from fixed price contracts for the electricity yield, lowest possible cost of op- the Italian Republic took effect on 1 January
next 14 years from 6 power plants that are erations, and highest possible dividend yield. 2016, however, this means any new invest-
operating under normal conditions. In light of the legal proceedings and their ments in the energy sector in Italy are not
The EBITDA contribution from the 6 power impact on the Company value, EAM has protected anymore by the ECT, while existing
plants in the fixed contract period to 2031 is changed from a pure electricity producing investments will remain protected until 2036.
sufficient to cover the long-term debt obliga- YieldCo to a also becoming a litigation com- The new regulatory environment of the
tion relating to these assets. pany. As previously stated; the directors and operation of solar PV power plants in Italy,
In conjunction with the “P31 acquisition”, the management directs all their effort and partially implemented in 2015, poses a sig-
EAM Solar Italy Holding Srl entered into a so- attention to resolve the legal issues in order nificant risk to PV power plant owners since
called patronage letter and an equity contri- to restore the value of the Company. these rules may be exploited in order to re-
bution agreement with UBI Leasing and Uni- duce or revoke long-term FIT contracts for
Credit respectively. These agreements may Events after the balance sheet date non-material or non-technical reasons. This
under certain circumstances require EAM Events after the balance sheet date concerns creates significant risk for irregularities in
Solar Italy Holding Srl to inject additional the legal proceedings and updates are de- conjunction with administrative processes
equity into the debt financed SPVs to cover scribed in Corporate status and legal pro- since the legal treatment of administrative
any shortfall or breach of the debt repay- ceedings above. decisions takes several years, in breach of
ment obligations of the SPVs. Italy’s administrative law, exposing owners
The FIT contracts of the SPVs have been Risk factors to financial default and bankruptcy without
terminated by GSE due to a criminal fraud Apart from the direct risk mentioned before, having administrative measures judged in a
against the State of Italy. EAM has been ac- EAM is exposed to a number of risk factors. court of law.
knowledged as civil victim of contractual The largest risk to our current operation
fraud. It is EAMs belief that an important mo- is regulatory risk in Italy, i.e. retroactive Financial risk
tive behind the fraud conducted against EAM changes in government incentives schemes, For one of the external financing contracts
by the directors of Aveleos, was in order for changes to regulatory framework for opera- with floating interest rate there is an inter-
Aveleos and their respective shareholders to tion and changes in taxation of assets and est rate swap agreement in place for the full
escape their debt repayment responsibilities renewable energy operations. duration of the contact period and the full
by transferring this to EAM through the sale EAM is also exposed to risk related to lending amount.
of the companies. Consequently, EAM con- market power price fluctuations and gen-
siders the patronage letter/equity contribu- eral technical operational risks. The Com- Litigation risk
tion agreement as an integrated part of the pany mitigate these risks as far as possible The Company is involved in several legal pro-
criminal contractual fraud, thus being void. through long-term electricity sales contracts cesses where the outcome is unknown. There
If any of the financing banks should try with limited counterparty risk, hands-on op- is a risk that the Company might loose some
to enforce the fraudulent debt repayment eration and insurance. or all of these processes and that it can re-
agreements it would for EAM constitute an ad- sult in a counter claim from the other party
dition to the criminal acts conducted against Regulatory risk in such legal processes. It is also a risk that
EAM, and EAM will respond accordingly. In 2015 the Italian state conducted a unilat- the counterpart is unable to settle an award
During 2017 the Company has both con- eral and retroactive 8 per cent reduction of in favour of the Company.
ducted an equity issue raising NOK 30 mil- the long-term electricity price FIT contracts.
lion in proceeds and entered into a Litiga- It is unfortunately impossible to hedge Credit risk
tion Funding Agreement with Therium to against this type of regulatory risk in Italy at Under normal circumstances the risk of
strengthen the financial position. this point in time. The international market losses is considered low, since the main con-
Finally, in order to ensure that EAM has the for insurance against State Government risk tractual counterparty is GSE, a state owned
necessary buffer needed to meet future legal is only possible to achieve for countries clas- entity. The Group has not made any set-off
cost, the Company may consider to make sified as “underdeveloped” or “developing” or other derivate agreements to reduce the
funding available through sale of existing by the United Nations system through the credit risk against GSE.
assets, share issue, litigation finance or loan. World Bank Group insurance institute MIGA The Company’s gross credit risk exposure
(MIGA underwrite insurance against state against GSE on 31 December 2017 was EUR 1.2
Market overview confiscation, unlawful punitive taxation etc.). million. EAM has made no financial arrange-
Power prices in Italy Since Italy is classified as a developed coun- ments to limit the credit risk further.
The average wholesale power price in Italy try, insurance against regulatory risk in Italy
for 2017 was EUR 54 per MWh. The price fluc- is not possible to obtain. Asset value risk
tuated between EUR 43 and EUR 72 during EAM is informed of current lawsuits in EAM’s cash balance was EUR 1.1 million at the
the year with peak prices at the beginning international arbitration courts directed 31st of December 2017, of which the Prosecu-
and end of the year and lower prices during against the State of Italy for fundamental tors Office of Milan has seized EUR 62 thou-
the period from March to May. breach of the International Energy Charter sand.
Contents | EAM Solar in brief | Directors’ report | Corporate governance | Financial review | Financial statement 9/48
During the annual impairment test, EAM this process, the board of directors proposed The manager is responsible for requirements
has identified no further indicators for im- that the Royalty was converted into 532.210 related to gender neutrality, non-discrimina-
pairment as described in IAS 36 after write new shares in the Company. tion and equal opportunities. The manager
downs conducted in 2015 and the second Accordingly, in the third quarter the Com- recruits employees on a gender-neutral and
quarter of 2016. The assumptions used in the pany made a share capital increase by the non-discriminatory basis.
impairment test represent business develop- issuance of 532 210 shares in the Company Solar power plants offer a power source
ment scenarios EAM finds most likely at the to EAM Solar Park Management AS (“the that is environmentally superior to fos-
reporting date, although the actual outcome Manager”). The shares were consideration sil fuels. The power plants do not expose
may be materially different due to on-going for the financial participation mechanism the environment to any harm, other than
legal processes. in the Management Agreement, and were by occupying land and possibly altering its
Finally, on a positive note, equipment non-dilutive for the shareholders. As part of visual appearance. EAM’s power plants are
prices have continued to drop during 2017. the transaction the Company recognised an built with silicon-based solar panels, and
Consequently, the replacement cost risk of intangible asset and debt of EUR 1 888 thou- the power production facilities produce no
equipment fault is reduced in 2017. EAM ex- sand, the debt was settled with the shares. harmful waste.
pects the replacement cost to continue being The amendment was conducted to secure Activities related to the management of
reduced going forward. that SPM’s interests are fully aligned with the business have no impact on the natural
EAM in the pursuit of the claims against Ave- environment apart from effects related to
Transactions with related parties leos, its directors, Enovos and Avelar. normal office work.
Energeia Asset Management AS and its EAM entered on 20 June 2014 into a short-
subsidiary EAM Solar Park Management term acquisition credit facility agreement of Values and guidelines for business ethics
AS (“SPM”) are providing management and NOK 65 million with the largest shareholder and CSR
consulting services for EAM on a continuous in the Company, Sundt AS. The credit facil- Honesty, transparency and trust are essen-
basis under a long-term Management Agree- ity, which is secured against EAM Solar Nor- tial to the success of the Company. EAM is
ment. All transactions are conducted as part way Holding AS and EAM Solar Italy Holding committed to transparency in its manage-
of ordinary operations and in accordance II Srl, originally expired on 10 December 2014, ment practices, and in particular in the re-
with the Management Agreement. but has been extended twice thereafter. In lationship between EAM and Energeia Asset
Under the original Management Agree- March 2015 the parties agreed to convert Management AS. The board of directors have
ment SPM was entitled to revenue equal to the short-term facility to a long-term facil- at all times access to all information and as-
its directly attributable costs for providing ity with 15 years duration, carrying an all- sistance from the employees of the manager.
the services to the Company, without margin. inclusive interest of 10 per cent. In August The Company has not established sepa-
In addition SPM was entitled to 12.5 per cent 2016 the Company made and extra down rate guidelines for corporate social respon-
of the annual pre-tax profit (the “Royalty”) in payment of EUR 1 million and renegotiated sibility (CSR) as recommended by the code.
the Company. In 2017 the Company and SPM the terms. At current the loan carries a run- The Company was listed on Oslo Axess in
were in agreement that the Management ning interest rate of 7 per cent with a bal- 2013 and aims to establish guidelines for
Agreement in its original form no longer loon at the end of the term. The lender has CSR when the Company has entered into a
works in the best interest of the Company, given a waiver for payment of instalments normal mode of operation.
and therefore decided to amend the Man- and interest for the period from February
agement Agreement. The board of directors to July 2017. At the end of 2017 the Company Presentation of the financial state-
of the Company has taken the view that the was in line with the original payment plan. ments
Company is best served by having the upside Pursuant to Section 4-5 of the Norwe-
interest which the Royalty constitutes con- Health, safety and the environment gian Accounting Act, the board of direc-
verted into ordinary share ownership, so as EAM has no employees, and therefore no tors of EAM confirms that the financial
to ensure full alignment of interests between statistics related to health issues, recruit- statements have been prepared under
EAM Solar ASA and SPM. The board of direc- ing processes, salaries or working conditions. the assumption that the enterprise is
tors, with the assistance of an external finan- The board of directors comprised two a going concern, and that this assump-
cial adviser, carried out an assessment of male and one female director in 2017. tion was appropriate at the date when
the appropriate exchange rate at which the Energeia Asset Management AS and sub- the financial statements were approved.
Royalty can be converted into shares without suppliers to the manager provide all admin-
being dilutive to the shareholders. Based on istrative, technical and commercial services.
Oslo, 12 April 2018
Pål Hvammen Erling Christiansen Ragnhild Wiborg Viktor E Jakobsen
Non-executive Non-executive Chair CEO
director director
Contents | EAM Solar in brief | Directors’ report | Corporate governance | Financial review | Financial statement 10/48
CORPORATE

GOVERNANCE
EAM Solar ASA is committed to pursuing corporate governance
practices that supports the trust in the Company, its directors and
management, and thereby contribute to value creation.
The objective of corporate governance is the current code, issued on the 30th of Octo- activities, such as ownership in similar com-
to regulate the roles and responsibilities of ber 2014 with the exception of the following: panies. In addition, the Company’s business
shareholders, directors and management 1. Pursuant to the Company’s articles of as- is lawsuits in relation Solar power plants.”
in a more comprehensive manner than is sociation, the manager has the right to
required by legislation. suggest to the Company’s nomination Equity and dividends
committee two of the directors in the Equity
Implementation and reporting on cor- board. The general meeting elects the Total equity for the Group amounted to EUR
porate governance Company’s directors. 13.8 million at 31 December 2017, represent-
Implementation The manager’s right of suggestion is ing an equity ratio of 42 per cent.
EAM Solar ASA’s board of directors is responsi- intended to ensure good communica- The equity of the parent company amount-
ble for executing best practice corporate gov- tion between the Company’s board and ed to EUR 24.1 million at 31 December 2017,
ernance, and has prepared and approved the the manager based on the fact that the representing an equity ratio of 74 per cent.
Company’s policy for corporate governance. Company has no employees and that all
Through its board and management, the day-to-day management activities are Dividend policy
Company conducts a review and evaluation conducted by the Manager. The Company’s primary objective is to gener-
of its principles for corporate governance on At year-end 2017 the Manager had made ate capital return from the sale of electric-
an annual basis. no suggestion to the Company’s nomina- ity and distribute this to its shareholders
EAM Solar ASA is a Norwegian public lim- tion committee through dividends.
ited company listed on the Oslo Stock Ex- 2. The Company has not established sepa- Article 11 of the Company’s articles of asso-
change. Section 3-3b of Norway’s Accounting rate guidelines for corporate social re- ciation specifies that the entire annual cash
Act requires the Company to provide an an- sponsibility (CSR) as recommended by surplus will be distributed as dividend to the
nual statement of its corporate governance the code. The Company has decided not shareholders to the extent permitted by ap-
principles and practices. These provisions to prioritise this work given the challeng- plicable law. Changes to, or exemptions from
also specify the minimum requirements for ing situation the Group is in. EAM aims this article require the support of at least
the content of this report. to establish guidelines for CSR when the 90 per cent of the votes cast, of the share
The Norwegian Corporate Governance situation for the Group is normalised and capital represented, at the general meeting.
Board (NCGB) has issued the Norwegian the need for such guidelines again will Based on the status of the Company no
code of practice for corporate governance materialise. dividend will be declared for 2017.
(the code). Adherence to the code is based
on the “comply or explain” principle, which EAM Solar ASA provides a statement on its Equal treatment of shareholders and
means that a company must comply with principles for corporate governance in its transactions with close associates
the recommendations of the code or explain annual report, and this information is also Equal treatment
why it has chosen an alternative approach available on its website at www.eamsolar.no. All the shares in the Company and sharehold-
to specific recommendations. ers have equal rights, including voting rights.
The Oslo Stock Exchange requires listed Business Each share carries the right to one vote at the
companies to publish an annual statement The business purpose of EAM is defined in Company’s general meeting.
of their policy on corporate governance in article 3 of the Company’s articles of associa- In the event that the board is mandated
accordance with the code in force at the time. tion, which states that: to buy the Company’s own shares and de-
Rules on the continuing obligations of listed “"The company’s business activities in- cides to exercise this mandate, the transac-
companies are available at www.oslobors.no. clude identification, analysis, financing, op- tions will be conducted through the stock
EAM Solar ASA will comply with the erating, purchase and sale of Solar power exchange or at prevailing market prices if
above-mentioned rules and regulations, and plants outside Norway, and naturally related conducted in any other way.