Contents. OX2 in brief at a glance 2 The CEO s view 4 OX2 Realising the energy of the future Focusing on wind power in Finland

Transcription

1 Annual Report 2015

2 Contents OX2 in brief at a glance 2 The CEO s view 4 OX2 Realising the energy of the future Focusing on wind power in Finland 8 and more types of renewable energy in Sweden Map Wind power and bioenergy projects 13 Market Global climate agreement sets framework 15 Sustainable development 24 Board of Directors and auditors 31 Directors report 33 OX2 Group s accounts 38 Notes 48 Audit report 71 Glossary 73 Stage 1 of the Maevaara wind farm (72 MW) was completed in April Photo: Ulrich Mertens.

3 1 OX2 in brief OX2 is a renewable energy company with operations in wind power, solar power, bioenergy and geothermal energy. OX2 develops, builds, sells and manages wind power plants that can generate long-term value and predictable cash flows for their owners. The primary customer groups are institutional financial investors and major electricity consumers. OX2 is the largest independent provider of onshore wind power in the Nordic region. Since its inception, the company has constructed almost 1,000 MW of wind power. More than SEK 15 billion has been invested in the wind power plants developed and constructed by OX2. OX2 is a leader in commercial and technical wind power management in the Nordic region, with contracts for more than 200 wind turbines. In the bioenergy sector, OX2 produces biogas and green district heating in one of Sweden s largest plants. OX2 offers renewable energy systems and geothermal energy solutions for large property owners through Enstar AB. OX2 has 80 employees working at different sites in Sweden, Finland and Poland. Its head office is located in Stockholm, Sweden. OX2 operates one of Sweden s largest biogas plants. Illustration: NSR. Installation of wind turbine at Rödstahöjden, Västernorrland. Photo: Michael Engman. Wind turbine at Mässingberget, Dalarna. Photo: Joakim Lagercrantz.

4 at a glance 2015 was a year of expansion for OX2 with the company beginning to construct wind farms in Finland and establishing more areas of activity within renewable energy. Net sales totalled SEK 1,624 million and operating profit was SEK 73 million. Some of the important events during the year: Large-scale wind power OX2 acquired the project rights for several wind power plants in Finland and Norway in Sale of several projects proceeded during 2015, with the greatest interest shown by international investors. Three projects totalling 29 turbines (96 MW), with one project in Sweden and two in Finland, were sold during the course of the year. All investors in the wind farms were repeat customers was a successful year for construction with OX2 completing the installation of 30 wind turbines (92 MW) at two wind farms in Sweden. At the end of the period, OX2 s technical and commercial management covered 180 operational wind turbines at 23 farms representing a total electricity production of approximately 1.3 TWh. Renewable electricity For the second consecutive year, OX2 s consumer operation came out on top for customer satisfaction amongst private customers in the electricity market in 2015 according to the Svenskt Kvalitetsindex [Swedish Quality Index] (SKI). During the year OX2 launched the opportunity for private customers to invest in PV cells as a complement to renewable electricity and shares in wind turbines. Bioenergy In the autumn of 2015, OX2 was granted the concession to operate and develop one of Sweden s largest biogas plants outside Helsingborg. The plant has a capacity of approximately 80 GWh of biogas and ,000 tonnes of biofertiliser per year. During the year, approximately 15 GWh of green district heating was also produced. Geothermal energy OX2 became the majority shareholder in Enstar AB, which is primarily involved in the field of geothermal energy. The year s figures in brief OX2 completed installation of 30 wind turbines (92 MW) Net sales totalled SEK 1,624 million (1,808) Operating profit was SEK 73 million (57) Profit after tax for the financial year was SEK 65 million (68). Sales SEK million 1,600 1, Operating profit SEK million

5 3 Stage 1 of the Maevaara wind farm (72 MW) was completed in Photo: Ulrich Mertens. Commencing in 2016, city buses operated by Skånetrafiken are to be powered by biogas from OX2. Photo: Karl-Johan Hjertström. The existing turbines at Ajos wind farm in Kemi municipality, northern Finland will be replaced with 13 new, efficient wind turbines (42 MW). Photo: Innopower. Charlie Ringenson is responsible for the technical and commercial management of wind turbines at OX2. Photo: Patrick Miller. Rödstahöjden wind farm (20 MW) in the county of Västernorrland was constructed during Photo: Michael Engman.

6 4 The CEO s view Photo: Christian Gustavsson The past year has been important for our company but also for the development of renewable energy from a global perspective. During the year, OX2 continued to harness more wind power in Sweden and has created new business in neighbouring Finland, where we are now set to start construction on two major wind farms. On the customer side, there has been a continued trend towards major international stakeholders such as IKEA, Google and Allianz. OX2 has also increased its activities in bioenergy, solar power and geothermal energy through acquisitions and partnerships. We intend to expand our position as an implementer of large-scale renewable energy into new geographical markets where we see a clear need for what we can offer. There is a need for a realiser and operations manager with the experience that we have among both local developers such as power companies, major electricity consumers and the sophisticated global investors that we find in our customer circle. We foresee a continued positive downward price trend for renewable energy types such as wind and solar. The production costs for wind power have fallen by 58 percent over the past five years. The corresponding figure for solar power is a decrease of 78 percent. Today no serious players question whether renewable energy will form the basis of the future energy system was also a historic year from a political perspective with the signing of the unique global climate agreement in Paris in December. Politicians no longer hesitate over the direction of the energy transition that we face. China has set some of the most aggressive targets, deciding among others things not to permit the opening of new coal mines and to close a further 1,000 mines this year. In 2014, we reached an important juncture when more renewable energy than fossil fuel production was constructed globally. We leave behind us a power industry that bases its business model and logic on finite resources in the form of fossil fuels with volatile prices in favour of digital and sustainable technologies with low marginal costs. Today, when wind and solar power are already responsible for between percent of electricity production on several major European markets, we can settle the structural approaches that will be natural to fully transform the system. The energy system of the future is renewable, democratic, sustainable and decentralised. OX2 is currently working with several of the technologies that form the basis for this energy system along with our customers who are striving to be at the forefront of the development of a sustainable and economically attractive future. It is fantastic to have the opportunity to do this in collaboration with all the knowledgeable, driven and inspiring colleagues who work together within our Group. Johan Ihrfelt, CEO

7 Rödstahöjden wind farm (20 MW) in Sollefteå municipality, Västernorrland was constructed in Photo: Michael Engman.

8 6 OX2 Realising the energy of the future OX2 has accepted one of the greatest challenges of our time. By increasing access to good investments in renewable energy, the company is constantly driving development towards a common goal a sustainable future. OX2 is currently the largest independent provider of onshore wind power in the Nordic region and the company is expanding into more geographical markets. The focus on wind power dates back some 20 years to when OX2 began accumulating cutting-edge expertise within the value chain of wind power from project development or the acquisition of project rights, through financing, sale and construction, to technical and commercial management. During the course of this journey, the company has accumulated a solid experience base within the industry, along with an in-depth knowledge of financing from institutional and industrial capital. OX2 caters primarily to international financial investors as well as major electricity consumers by providing large-scale wind power plants which can generate long-term value and predictable cash flows. The ability to deliver the best projects, expertise on structured transactions and renewed confidence among customers have proven to be vital success factors in an increasingly competitive global energy market. Wind power is OX2 s core product and by far the most cost-effective form of energy, but as other sources of renewable energy become increasingly competitive, OX2 is gradually broadening its operations and currently also has interests in solar power, biomass and geothermal energy. In the field of bioenergy, OX2 has been producing green district heating since 2014 and as of January 2016 is operating one of Sweden s largest biogas plants. Biogas is the main renewable fuel for road transport in Sweden and OX2 believes that biogas will play an ever increasing role in the future, especially with respect to heavy goods vehicles as a means of reducing the dependency on fossil fuels. OX2 s new subsidiary Enstar AB is primarily involved in geothermal energy. From a commercial perspective, this is expected to be one of the main renewable energy technologies of the future in a more decentralised energy system. A completely renewable energy system OX2 is a driving force in the transition towards a fully renewable energy system and a fossil-free vehicle fleet. Not as an alternative, but as a prerequisite for a growing and sustainable society. In addition, renewable energy is opening up an wide array of new and innovative ownership structures, which is helping to create positive competition within the energy sector and widespread support for the transition to a sustainable future. OX2, realisation of wind power plants , cumulative nameplate capacity MW Year P

9 ABOUT OX2 7 Establishing wind power a multi-stage process OX2 is involved in all stages of the wind power value chain; from project development or the acquisition of project rights, through financing, sale and construction, to technical and commercial management. The current project portfolio of around 1,500 MW is optimised on the basis of long-term potential profitability and environmental benefits. 1 Screening 2 3 Project development alt. acquisition of project rights Sales & financing 4 Procurement & construction 5 Technical & commercial management Identification of suitable sites with respect to wind, electricity network, land ownership and prohibited areas. Modelling of the conditions for a wind farm in the area with respect to production and cost. Contact with landowners and local residents Wind measurement and output calculations Design of electricity network Permit process Acquisition of project rights from other developers or partners. Sales Financial solutions developed and secured Selection of contractors and suppliers Construction of wind farm Test of turbines and production systems Supervising operation Optimising production Inspections and status analyses Equipment management and contract management Accounting and bookkeeping Source: OX2 Screening In the screening phase, a suitable project location is identified with respect to wind, grid, land ownership and conservation areas. This phase also includes creating models of and establishing the dimensions of a potential wind power plant in an area, based on production, operating costs and investment. Project development During the project development phase, the projects with the best development potential are added to the project portfolio. Wind measurements now begin, using masts and sodar systems. Production calculations are made and the electricity grid is designed. Land leases are signed and an open dialogue is established with local residents to bring them on board using meetings and information material. Permit applications, including environmental impact analyses, are submitted to the appropriate authorities. The project development phase comprises four main activities: Wind measurements and electricity production estimates Land leases and local dialogue Permitting process Secure grid connections Acquisition of project rights In addition to its own project development, OX2 continuously evaluates and acquires project rights from other developers and is also entering into strategic partnerships on the development of projects. If a project is considered to have good potential, OX2 may acquire the project and ensure effective implementation. Sale and financing Whole wind farms (preferably) or individual turbines are sold. OX2 customises the project on the basis of the wind farm s ownership structure and the financing prerequisites of the investors, e.g. the provision of equity capital and/or the need for external bank financing. Procurement and construction OX2 uses traditional tendering processes towards established manufacturers to procure, for example, wind turbines, infrastructure and foundations for its projects. The process is carried out in conformity with international requirements and standards. OX2 acts as project manager for the construction of the wind power plant, which normally takes months. Managing wind power plants OX2 manages all issues important to wind power owners, e.g. operational monitoring, optimisation of production, inspections, contract management, finance and administration. The objective is to maximise profitability by securing a high level of production and availability.

10 Focusing on wind power in Finland and more types of renewable energy in Sweden Planning for wind power OX2 s goal is to provide investors with premier wind farms in the markets where the company operates. During 2015, OX2 optimised its project portfolio based on various investment criteria such as production, operating cost and environmental aspects. Its project portfolio currently comprises 30 developed and acquired projects totalling approximately 1,500 MW of wind power in Sweden, Finland, Norway and Poland. Sweden At the end of 2015, the portfolio in Sweden comprised ten projects in a late stage of development. The projects are of varying size, distributed geographically from north to south. Finland During 2015, OX2 acquired project rights for approximately 100 MW of wind power from the Finnish wind power developer Innopower, with two projects sold at a total of 63 MW. At the end of the year, OX2 had a portfolio of around 15 projects, most of which are located on Finland s west coast. Norway In January 2015, OX2 signed a cooperation agreement with Austri Vind to develop three projects in Norway. Poland In 2015, OX2 signed a cooperation agreement with a local developer for a project in Poland. Number of turbines Number of MW Project portfolio 31 Dec Dec Dec Dec 2014 Projects under development 1) ,527 1,893 Projects under construction Total ,623 1,988 1) Projects in different development stages from signed leases to the start of construction. Sale and construction of wind power plants OX2 offers investment in entire wind farms as well as in wholly-owned and shared wind turbines. The company has adopted a proactive approach to developing offers for all market segments in an international market. The sale of several projects took place in 2015, with the greatest interest noted among international investors. Three projects totalling 29 wind turbines (96 MW) were sold before the end of the year. Two of the projects (63 MW) are in Finland and are the first projects constructed by OX2 outside of Sweden. All investors were repeat customers was a year of intensive construction, during which OX2 completed construction of 30 wind turbines (92 MW) across two wind farms in Sweden. At the end of the period, construction was underway on another 10 wind turbines (33 MW) in Sweden and 19 in Finland (63 MW). Installation of nacelle at Rödstahöjden wind farm (20 MW). Photo: Michael Engman.

11 Activities In December 2015, OX2 and IKEA signed an agreement for a wind farm (42 MW) outside Ajos on the coast outside Kemi, northern Finland. Photo: Innopower. Maevaara, Övertorneå and Pajala municipalities, Sweden In April 2015, construction was completed on 24 wind turbines (72 MW) in Maevaara which is located on the border between Övertorneå and Pajala municipalities in the county of Norrbotten. The project was delivered to the international insurance company Allianz which will supply electricity to Google in Finland by means of a 10-year power purchase agreement (PPA). At the beginning of February 2015, a sales agreement was signed for another ten wind turbines (33 MW) in Maevaara which will be completed during The project was sold to Allianz in cooperation with Google in the same way as for the first phase. In total, the plant comprises 34 wind turbines (105 MW). Rödstahöjden, Sollefteå municipality, Sweden The construction of six wind turbines (20 MW) at Rödstahöjden in Sollefteå municipality, Västernorrland, was completed in December 2015 and delivered to the purchasers Eskilstuna municipality (4 turbines) and Finja (2 turbines). Jouttikallio, Lapua municipality, Finland In December 2015, OX2 and Allianz signed an acquisition agreement for a wind farm with six turbines (21 MW) in Lapua municipality. Construction began in December 2015 and the wind farm will be delivered to the purchaser at the end of Official opening of wind farms 2015 saw the official opening of three OX2 wind farms, attended by owners, local residents, suppliers and other stakeholders, for a total of MW. These were Glötesvålen wind farm with 30 wind turbines in the municipality of Härjedalen, Bösjövarden wind farm with nine turbines in Mora municipality and Mässingsberget wind farm with 11 turbines in Orsa municipality. Ajos, Kemi municipality, Finland In December 2015, OX2 and IKEA signed an acquisition agreement for a wind farm (42 MW) outside Ajos on the coast in Kemi. The project is a so-called repowering project where ten existing turbines will be replaced and an additional three new turbines will be built, more than doubling the previous production. Construction started in December 2015 and the new wind farm is scheduled for delivery in Official opening of Mässingberget wind farm (22 MW) in Orsa municipality, Dalarna. Photo: OX2.

12 10 Activities 2015 Interview with David Jones, Head of Renewables at Allianz Capital Partners: Investments in renewable energy are a perfect match for Allianz The international insurance company, Allianz, is one of the world s largest financial investors in renewable energy. In Northern Sweden, they have invested in the 34-turbine (105 MW) Maevaara wind farm, in partnership with OX2. They are now moving into the Finnish market. Why are you investing in renewable energy? Investments in renewable energy are long-term in nature and therefore a perfect match for the investment strategy of Allianz. Based on their attractiveness and their relevance in addressing climate change, the long term growth potential for investments in this sector remains high. While annual revenues from wind and solar parks are naturally volatile due to annual variability of the weather, this volatility is completely uncorrelated to the capital markets which is an additional attraction of the asset class to Allianz. What is your investment strategy? We invest in wind farms and solar parks on a longterm buy-and-hold basis with the return being mostly generated from the sale of electricity or in the US by tax incentives. The aim is to generate long term, low risk and low volatility cash yields. This is achieved by making sound individual asset acquisitions in addition to building a diversified portfolio, spreading risk across different resource regions, different regulatory regimes, and different technology providers. David Jones, Head of Renewables at Allianz Capital Partners. Photo: Allianz. Allianz Capital Partners is one of the world s largest financial investors in renewable energy. Allianz s commitment exceeds 2.9 billion euros in 60 wind farms and 7 solar parks in Austria, Finland, France, Germany, Italy, Sweden and US. These produce enough energy to supply over 800,000 households in Europe. Allianz and OX2 recently signed an agreement for 21 MW of wind power in Finland. What does this mean for you? Finland is a promising European wind market and it will help us to increase and further diversify our renewables portfolio. OX2 and Allianz have already collaborated on the Maevaara wind farm in Northern Sweden. How would you describe the cooperation with OX2? We are very satisfied with the Maevaara wind farm in co-operation with both OX2 and Google and look forward to working with them throughout the long term operation phases.

13 Activities Sale of wind shares, PV cells and green electricity OX2 offers electricity consumers throughout Sweden the opportunity to invest in wind shares and PV cells or alternatively to purchase renewable energy labelled as a Good Environmental Choice by Naturskyddsföreningen [Swedish Society for Nature Conservation]. The target group is private individuals, housing associations and small companies. Those who purchase shares become members of Sweden s largest wind power cooperative, which is administered by OX2. Since the summer of 2015, photovoltaic cells have also been supplied. In addition, producers of photovoltaic cells can receive help in administrating the application for and sale of electricity certificates as well as the purchase of excess electricity. In December 2015, OX2 s consumer operation came out on top for customer satisfaction amongst private customers in the electricity market for the second consecutive year. The survey was conducted by the Svenskt Kvalitetsindex (SKI), which each year asks questions in the categories of customer satisfaction, loyalty, image, expectations, product quality, service quality and value for money. The wind power cooperative owns a total of ten wind turbines at different locations around the country, with a collective annual production of 60 GWh. By the end of 2015, the cooperative had approximately 4,100 members who together had invested SEK 269 million in 45,000 wind shares. Commercial and technical management of wind power plants OX2 offers a complete range of operational and management services, including monitoring, operational optimisation, administration, finance as well as various specialist assignments. These services ensure that the owner of a wind power plant is able to enjoy maximum profitability and problem-free ownership. With the largest management portfolio in Nordic Region, combined with considerable experience of managing turbines of different sizes and ages, as well as working closely with different turbine suppliers, OX2 is able to guarantee a high level of availability and, consequently, excellent production. A stoppage of production which is not resolved quickly means the loss of many valuable megawatt hours. The demand for professional management services is increasing and is due to the fact that a growing number of financial investors and large electricity consumers, for whom wind power is not part of their core business, are becoming owners. At the end of the period, OX2 s technical and commercial management operations covered 180 operational wind turbines in 23 wind farms, equivalent to an output of approximately 1.3 TWh. At the end of the year, OX2 also had contracts for a further 29 turbines, which brings the total number of wind turbines under contract to more than 200. Clients include IKEA, Allianz, REIF, Polarkraft, Finja and a large number of municipalities. In-house wind power production Sjisjka Vind AB Skanska has a 50 percent holding in Sjisjka Vind AB, with OX2 and Jämtkraft each owning 25 percent. The wind farm comprises 30 turbines, erected during 2012 on Sjisjka in Gällivare municipality, Norrbotten. The power plant produced GWh during Bioenergy operations In the autumn of 2015, OX2 was granted the concession to operate and develop one of Sweden s largest biogas plants outside Helsingborg. The plant is owned by NSR (Norra Skånes Renhållningsbolag) and has a capacity of approximately 80 GWh of biogas and ,000 tonnes of biofertiliser per year. OX2 took over operational activities and 13 of the company s employees on 1 January OX2 already owns a district heating plant in the same area as the biogas plant. In 2015, around 15 GWh of green district heating was produced for the benefit of households in the region. The production was sufficient to heat 1,000 large detached homes with an annual consumption of approximately 15 MWh per house. Since the summer of 2015, OX2 has been supplying PV cells to electricity consumers in Sweden. Photo: VioNet.

14 12 Activities 2015 Bioenergy and biogas Bioenergy is currently Sweden s largest renewable energy source. It is created from organic material, so-called biofuels, and is used to produce heat, electricity and fuel. Biogas is formed when organic material is decomposed in an oxygen-free environment. This happens for example when food waste, manure or sewage sludge is decomposed by microorganisms in a digester. Biogas can also be created through the thermal gasification of waste timber for instance. Another production method for biogas is through Power to Gas where surplus electricity from wind power, for example, is converted to gas by means of electrolysis. In order for biogas to be used as a fuel in vehicles, it must be upgraded. The upgrading of biogas involves the separation of carbon dioxide and other impurities in order to increase the energy content of the gas. Biogas which is produced via the anaerobic digestion process also generates another valuable product in addition to the biogas biofertiliser. Biofertiliser contains important nutrients and when it replaces fossil mineral fertilisers on arable land, the benefit for the climate from the biogas are further increased. Source: Swedegas, Swedish Waste Management Association, Swedish Energy Agency. Beginning in 2016, city buses operated by Skåntrafiken are powered by biogas from OX2. Photo: Karl-Johan Hjertström. OX2 is primarily involved in the waste to energy sector as it is the most obvious source from an environmental and social perspective. Today OX2 produces biogas through the anaerobic digestion of organic waste from NSR s landfill, but the company is also investigating other interesting production technologies on the market. These include Power to Gas, for example, where surplus electricity from wind power, for example, is converted to gas by means of electrolysis as well as small-scale gasification technology using timber and garden waste, for example. Concerning small-scale gasification, OX2 has participated in the Smartgas innovation cluster for several years. Operations in renewable energy and geothermal energy solutions Enstar AB In 2015, OX2 became the majority shareholder in Enstar AB which provides cost-effective and renewable energy solutions for building heating and cooling systems. The company has a holistic approach ranging from advice and analysis on energy efficiency to the implementation of geothermal energy solutions and plant operation. Customers are primarily large property owners such as hotels, conference centres and housing associations. OX2 operates one of Sweden s largest biogas plants outside Helsingborg, southern Sweden. Illustration: NSR.

15 Activities OX2 s wind power and bioenergy projects Ajos Jouttikallio The map shows the status as of 10 January 2016.

16 Servicing being carried out at Glötesvålen wind farm (90 MW), Härjedalen municipality, Jämtland. Photo: OX2.

17 15 Market: Global climate agreement sets a new framework 2015 was an historic year with the countries of the world signing the first ever global climate agreement. It was also a record year for the global expansion of renewable energy sources, driven by China, and with growth in many developing countries now taking off. In December 2015, the first global climate agreement in world history was signed. A legally binding agreement, the aim of which is to limit global warming to less than 2 C, with an ambition to reach 1.5 C. The agreement contains three important points: Sustainability, transparency and a review mechanism. The countries climate plans are to be updated every five years from 2020 onwards. Thereby excellent conditions are established for ensuring that politicians and policymakers will focus on climate issues, which will in turn encourage further investment in renewable energy. In the market arena, 2015 was characterised by falling commodity prices worldwide, tracing back to However, this has not had any significant effect on the expansion of renewable energy which has, on the contrary, accelerated since last year (181 GW installed in 2015 v. 126 GW in 2014) 1). In 2015, 64 GW of wind power and 57 GW solar power in total were installed worldwide, an increase of almost 30 percent in comparison with The largest investments in renewable energy took place in China, Africa, the USA, Latin America and India. China is driving the expansion with 76 GW of renewable electricity generation capacity installed in 2015, compared with 25 GW in the EU and 17 GW in the USA has also been a year where the expansion in renewable electricity generation has taken off at an increased pace in many developing countries with spectacular growth figures as a result. For example, the installed capacity of wind and solar power increased throughout Central and South America by 64 percent during the year and by 43 percent in Africa and the Middle East. Great advances have been made in photovoltaic cells, with falling production costs and increasing efficiency, resulting in strong growth (30% growth globally in 2015). In favourable conditions, solar power is today able to compete with wind power as the most cost-effective form of energy. Electricity mix in Europe, nameplate capacity 2015 Historical expansion of wind power in the EU GW % Hydro 15.5% Wind 15.6% Solar 10.5% Biomass/Waste 2.6% Coal 17.5% Gas 21.1% 20 Oil 3.7% Source: EWEA Nuclear 13.2% 0 Before 04 end Cumulative, GW Percentage of EU electricity consumption, % 1) Bloomberg New Energy Finance Source: EWEA, Eurostat.

18 16 Market Continued strong growth in renewable energy in the EU In 2015, a net of 24.9 GW of renewable energy was installed in the EU, an increase of approximately 1 GW on the preceding year. The nameplate capacity of wind power increased by 13.9 GW, equivalent to a growth rate of 10.9 percent 1). This implies a further acceleration from the previous year and in line with the average growth rate over the past five years. Consequently, renewable energy currently represents more than 25 percent of total electricity generation and 15 percent of total energy consumption in the EU 2). It seems increasingly likely that the target of an average of 20 percent of total energy consumption from renewable sources within the EU by 2020 will be achieved. The EU Member States have agreed on new climate targets for 2030 in which renewable energy will represent at least 27 percent of the Union s total energy consumption. However, Bloomberg goes much further in its forecasts and expects a 50 percent share of renewable energy capacity in the EU in 15 years. In order to achieve Bloomberg s forecasts, renewable capacity of around 40 GW is required to be built every year in the EU until ). Phasing out ageing electricity generating capacity in Europe A contributing factor to the expected continued expansion of renewable energy sources in Europe is the existing proportion of electricity generating capacity which is reaching the end of its useful life, and needs to be phased out. Around 85 percent of operational coalfired power stations and 70 percent of nuclear power stations in the EU are now more than 30 years old, and together represent around 300 GW of installed capacity 4). Until now, the refurbishment of existing capacity has been financially viable, since new construction has been too expensive, irrespective of the technology. At the same time, renewable energy sources have continually increased in cost-effectiveness, and can now outcompete traditional energy sources. It is now no longer only environmentally defensible but also financially viable to construct renewable electricity generating capacity, which will guarantee continued strong growth going forward. Moving towards a single European energy market The EU Commission has a clear agenda in favour of increased market integration and a single European energy market. In February 2015, the European Commission launched a strategy for an energy union, which will take an integrated approach to energy issues. As a result of new EU regulations which were introduced in the summer of 2015, it became possible for multiple electricity exchanges to operate in the same area, which is one step closer to the goal of a wellintegrated single market. The new set of regulations makes so-called market coupling legally binding within the Union. Market coupling means that all bids on electricity for cross-border trading from different national electricity exchanges are collected into a single basket, which optimises price matching across borders and is therefore expected to generate savings for EU electricity customers of EUR billion per year 5). Net, new electricity capacity in the EU MW 35,000 30,000 25,000 20,000 15,000 10,000 5, ,000 10,000 15,000 Source: EWEA Solar Wind Biomass/ Peat/Waste Hydro Geothermal Nuclear Gas Oil Coal Age structure for installed electricity capacity in the EU, according to year of commissioning GW Solar Wind Other 1) Bloomberg New Energy Finance 2) 2013, Eurostat 3) BNEF 2030 Market Outlook Overview, June ) The Future of Carbon Capture and Storage in Europe, European Commission, ) Benefits of an Integrated European Energy Market, Booz & Co, 2013 Nuclear Hydro Coal/Oil Gas Source: Platts, EWEA

19 Market 17 Weighted total production costs for onshore wind power in Europe Euro/MWh Weighted total production costs for different types of power in Europe EUR/MWh Sweden France Germany Netherlands Great Britain Denmark Italy Poland Spain Belgium 0 Wind onshore Coal Gas Solar PV Biomass Nuclear Wind offshore High Low Medium High Low Medium Source: Bloomberg New Energy Finance Source: H EMEA LCOE Update Bloomberg New Energy Finance Cross-border cooperation involving both physical infrastructure and financial trading is expected to increase every year. Consequently, the demand for renewable electricity generation may increasingly be met through growing imports and exports, which will also equalise seasonal variations and national differences in electricity prices. The European transmission system operators regularly present joint development plans for the electricity grid, and the Nordic inspection authorities have presented a route map for a common Nordic endcustomer market for electricity. In 2016, the introduction of the Nordic Balance Settlement (NBS) is expected to happen as the result of a collaboration between the Finnish, Norwegian and Swedish transmission system operators Fingrid, Statnett and Svenska kraftnät. Sweden growth of wind power slowed in 2015 Sweden has good prerequisites for renewable energy through its hydropower, which today represents more than 45 percent of the installed electricity generation capacity. The certificate system which was launched in 2003 to further stimulate the development of renewable energy has currently generated more than 5.5 GW of installed capacity of wind power. In 2015, just over 550 MW was installed, which represents a slowdown compared with the previous year, but is still equivalent to an annual growth rate of 11 percent which is in line with the EU average. Furthermore, wind power production increased from 11.5 to 16.5 TWh, equivalent to around 12 percent of Swedish electricity consumption 6). The prospects for wind power expansion in Sweden are favourable in comparison with most EU countries. The main reasons for this are excellent wind conditions, low population density, good infrastructure in the form of roads, grid and balancing power (from hydropower) and a well-functioning permit process 7). Sweden s current official target for new renewable electricity production is 30 TWh by With the current rate of development of primarily wind power and existing support systems, it is expected that this goal will be achieved. The opportunities for the further expansion of wind power in the longer term are also regarded as favourable. A significant proportion of Sweden s energy mix today, around 27 percent, consists of nuclear power stations, all of which are between years old and are in need of replacement. Norway major projects near start of construction Norway is, in principle, self-sufficient in electricity from domestic hydropower. Since the beginning of the 21st century, environmental policy has been designed to increase electricity generation from other types of renewable energy, to achieve a diversified energy mix. For that reason, in 2012, Norway signed up to the Swedish electricity certificate system, with the aim of generating at least 5 TWh of electricity from wind power by ). The focus has primarily been on larger individual installations, and there is currently 6) Svensk Vindenergi, Svensk Energi 7) Europe s onshore and offshore wind energy potential, EEA, ) Norwea 9) Bloomberg New Energy Finance. Bloomberg is a leading independent analytics company within renewable technologies.

20 18 Market A COMMON ELECTRICITY CERTIFICATE MARKET FOR SWEDEN AND NORWAY The Swedish/Norwegian electricity certificate market was launched in Initially it involved only the Swedish market until 2012 when Norway also joined the system. The system entitles producers of renewable energy to electricity certificates for each MWh of renewable electricity generated. The electricity producers can then sell the electricity certificates on an open market (e.g. Nord Pool Spot) where the price is determined between the seller and buyer. In this way, the electricity certificates provide an extra source of income for renewable electricity production, over and above the normal sale of electricity. Buyers are players with a so-called quota obligation, primarily electricity suppliers. Those with a quota obligation must buy a certain number of electricity certificates proportionate to the electricity that they sell or use. The quota obligation is defined by the legislators in Sweden and Norway. The energy sources eligible for electricity certificates are wind power, solar power, wave power, geothermal energy, biofuel, small scale hydropower and peat used in combined power and heating plants. Newly-built plants are entitled to electricity certificates for 15 years after issue, but not later than until In 2015, 66 percent of electricity certificates went to wind power and 18 percent to biofuels 1). In Sweden, the target for the electricity certificate system is to contribute to the construction of 30 TWh of renewable electricity between 2002 and 2020 (which includes an increase in the national target of 5 TWh decided by the Swedish Parliament in 2015). In partnership with Norway, a further 13.2 TWh of renewable energy will be produced between 2012 and From the legislators perspective, the system has been successful in the sense that it brought about a rapid expansion of renewable energy sources at a relatively low cost to society. The market-based element ensures resource efficiency and is driving the industry forward. Wind farms built in Sweden are amongst the most cost-effective in the worl d. In Norway, the expansion has now begun to take hold and several major projects are now nearing the start of construction in a market which is expected to accelerate over the next few years. As in the rest of Europe, falling electricity prices in recent years have put pressure on electricity producers and investors in renewable electricity generation. In 2013, an official enquiry, Kontrollstation 2015 [Control Station 2015], was held into the functionality of the electricity certificate system. It concluded that the quota obligation be adjusted to ensure that the targets set by Sweden and Norway for 2020 would be achieved. In accordance with this, it was decided during 2015 that the quotas will be increased by 8 TWh per year between , which is expected to have a positive impact on the price of electricity certificates 2). 1) Swedish Energy Agency 2) Kontrollstation för elcertifikatsystemet 2015 [Control Station for the electricity certificate system 2015], Swedish Energy Agency, 2014 around 900 MW of installed wind power capacity in Norway 9). Norway has excellent wind conditions, stable permit prerequisites and a successful support system, but suffers from certain geographical limitations and a relatively weak national base grid 10). The development of wind power is expected to gather pace during 2016 as several projects are nearing start of construction. Finland current support system fulfilled two years ahead of schedule Finland is a net importer of electricity, and has a significant dependence on coal-fired generation and nuclear power (30% and 25% of installed capacity respectively). A support system for wind power was introduced in 2011 in the form of an attractive feed-in tariff for stimulating the construction of renewable energy sources. This has accelerated the expansion of wind power development in recent years. During 2015, installed wind power capacity increased by 58 percent. A total of 1,116 MW of wind power is now installed in Finland (2015) 11). Finland has moderate winds, favourable permitting conditions with high allowed tower heights, a significant proportion of balancing hydropower (25%) and a relatively good grid infrastructure. 12) The target of the support scheme and its ceiling of 2,000 MW of installed wind power capacity was previously forecasted not to be reached until 2017, but by the summer of 2015 the total quota was filled in conjunction with many projects being granted permits. The projects that have been given the green light in the system (2,000 MW) will be constructed during 2016 and 2017 while a new support system is being designed. Finland s official target for 2025 is 3,800 MW of installed capacity and wind power output of 9 TWh. Consequently, the new support scheme is also expected to comprise approximately 2,000 MW. Because of its net deficit in the energy mix and relatively high dependence on fossil fuels, Finland is expected to continue to support a significant expansion of renewable energy sources in the medium term. FINLAND S FEED-IN TARIFF SYSTEM Since 2011, Finland has operated a feed-in tariff-based support system for wind power. The system is designed as a CFD (contract for difference), in which the Finnish government reimburses the difference between the most recent three months average spot price for electricity in Finland and the defined compensation level of EUR 83.5/MWh. A ceiling is set at a maximum reimbursement of EUR 53.5/MWh; in other words, the average electricity price over the most recent three months should not fall below EUR 30/MWh. Producers of renewable electricity are entitled to a tariff for a period of twelve years from the date on which a newly-built wind farm becomes operational. Eligibility for the tariff is recognised at the start of construction when legally binding building permits and grid connection have been secured. The system has a ceiling at the first 2500 MVA built (approximately 2,000 MW) after the system enters into force. The total quota has now been utilised and a new support system is being contemplated. 10) Europe s onshore and offshore wind energy potential, EEA, ) Bloomberg New Energy Finance 12) Europe s onshore and offshore wind energy potential, EEA, 2009

21 Installation of wind turbine at Rödstahöjden wind farm (20 MW), Västernorrland. Photo: Michael Engman.

22 20 Market Poland the new support system established The Polish energy mix is dominated by ageing coal power (around 80% of installed capacity in 2015), of which more than 90 percent of installed capacity is more than 30 years old and 60 percent more than 40 years old 13). Poland has a relatively high market price for electricity (EUR 38 per MWh average spot price during 2015), despite substantial domestic coal reserves. This is due, among other things, to high operating costs in ageing production facilities. To diversify its energy mix and reduce its dependence on fossil fuels, Poland has had a support system for renewable sources of energy in place since 2008, which has contributed to a total wind power capacity of just over 4,500 MW in 2015 (around 12% of Poland s total electricity generation capacity) 14). Poland has large areas available for wind power, with good technical conditions for construction, as well as excellent wind conditions, particularly in the north-west of the country 15). Within the framework of the EU 2020 strategy, Poland has a target of 15 percent of its domestic electricity generation from renewable energy, equivalent to approximately 20 TWh. A new support system based on reverse auctions was established in 2015 and is expected to enter into force during Its aim is to provide stability and predictability for investment in wind power, thereby stimulating further growth. In the longer term, Poland must also face up to the severe challenges associated with its ageing coal-fired generating capacity, and this is expected to be a driving force for continued growth in renewables beyond NEW AUCTION SYSTEM IN POLAND During 2015, Poland adopted a new support system for renewable power sources in which the electricity is auctioned through closed auctions. The prices and volumes which are auctioned are fixed and apply for 15 years from the start of operations, but not beyond This means that the volume and price the bidder decides to bid for will remain fixed throughout the contract period. Projects which have valid building permits and grid connection agreements will be eligible to bid at the auctions. A reference price for different technologies will be specified for each auction (i.e. onshore wind power and PV solar power will have different reference prices) which will be based on average spot prices for electricity, average certificate prices and the market LCOE 1) for each renewable technology. After the general elections held in Poland in October 2015, the newly elected government had views on the structure of the recently agreed auction system. An inquiry has therefore been set up to to analyse the system and possibly to make certain modifications. This process will result in a delay in the implementation of the new support system which is therefore not expected to come into force before the second half of ). 1) LCOE = Levelised cost of electricity 2) BNEF Mässingberget wind farm (22 MW) in Orsa municipality, Dalarna. Photo: Joakim Lagercrantz. 13) OX2 research 14) Bloomberg New Energy Finance 15) Europe s onshore and offshore wind energy potential, EEA, 2009

23 Market 21 Interview with Paul Stormoen, Managing Director of OX2 Wind: Wind power is more competitive today than ever before In an increasingly competitive international wind power market, great demands are placed on innovative solutions for success. OX2 is currently the largest independent provider of onshore wind power in the Nordic region and is well positioned for expansion. Paul Stormoen is the Managing Director of OX2 Wind and therefore responsible for the company delivering good results in wind power in both existing and new markets. What is the most enjoyable part of your job? Being involved in and developing a leading company in an industry of the future. It is an honour to work with driven people and to discover that when people with different skills work together we can find innovative solutions to large and complex challenges, says Paul Stormoen, Managing Director of OX2 Wind. How would you describe 2015? 2015 was a year where we focused very much on initiating construction of wind power outside Sweden. We succeeded in Finland and it will not be long before we can start building in Norway and Poland. Sweden will continue to be an important market and we have made significant investments in our Swedish project portfolio. What is OX2 s goal in wind power? We want to continue to develop our product and be at the cutting edge of several markets. What are the market conditions like right now and in the near future? Wind power is more competitive today than ever before, and major global expansion has continued during 2015, despite low electricity prices. But the industry needs long-term rules. Discussion of support systems in the Nordic countries must be put in concrete form in order to ensure good continuity of the industry. Some companies are struggling, how has OX2 fared? The market is moving quickly and our product development must keep pace. OX2 has an advantage here over many other companies. We have always been one step ahead when it comes to finding new and creative solutions, for example regarding the use of the latest technology and financing. We succeeded in achieving our short-term goals in 2015, but we must continue to work hard to position ourselves in an increasingly international market. Paul Stormoen, Managing Director of OX2 Wind. Photo: Christian Gustavsson. Who wants to invest in wind power, and why? There is great interest from international institutional capital such as pension and insurance funds. Many international energy companies are also interested. How does the market look in the longer term? In the longer term, all non-renewable energy will be phased out and replaced with renewable energy. Wind power can deliver a large proportion of the necessary volume and at an unmatched cost.

24 22 Market The market for investment in wind power An energy system based on renewable power sources permits ownership to spread to new players beyond the traditional utility companies. OX2 regards diverse ownership as an important component in a long-term sustainable energy system, as well as a means of opening up new business opportunities. The market for wind power investment can be divided into four major market segments: 1) Financial stakeholders (companies and funds specifically formed for wind power ownership). This segment consists primarily of pension funds, insurance companies, private equity funds and investment companies of various sizes, which acquire electricity generating facilities purely as a financial investment with a long-term return. 2) Energy companies (utility and power companies). These are the traditional owners of electricity generating facilities, i.e. power companies and the regional energy companies that own production resources on their own balance sheets and then distribute electricity to end consumers through their distribution networks. 3) Major electricity consumers (owners with different principal operations). These are companies whose core business is not wind power. By owning their own wind power production, they ensure low and stable electricity costs while at the same time making a significant contribution to achieving climate targets and sustainability. 4) Collective ownership consists primarily of private individuals, housing associations and smaller businesses that own one or more turbines as part of a cooperative. Usually the main purpose of this type of ownership is to reduce electricity costs and make a contribution to the environment. FINANCIAL STAKEHOLDERS Power generation and infrastructure are now considered attractive areas for passive financial investment. They are stable investments with a long-term, cash return. As the market for renewable power generation grows, specialist investors have emerged in the renewables sector. Financial stakeholders currently constitute the largest investor segment and the segment is continuing to grow. For example, this type of investor was responsible for 80 percent of new investments in wind power in the UK in 2013 and ). Financial stakeholders also comprise the largest market segment for OX2 which has built wind farms for companies such as Allianz Capital Partners GmbH, GCG Capital Partners and PWP. ENERGY COMPANIES In general, these players have not kept pace with the strong expansion of wind power in recent years and, consequently, they represent a diminishing share of the European wind power market. At the end of 2015, the ten largest energy companies in the EU had a market share of around 17.5 percent of installed onshore wind power capacity in the region although they are now investing heavily in the expansion of renewable energy sources 17). The largest stakeholders within this segment normally develop and construct their wind power themselves, whereas medium-sized regional energy companies are increasingly turning to specialist players such as OX2 to take advantage of the company s expertise in wind power energy development. OX2 has sold several projects to energy companies, including the sale of one of Sweden s largest onshore wind projects to date, Stor-Rotliden, to Vattenfall in 2009 (78 MW). Joint ventures are also carried out, such as Sjisjka Vind AB, which is co-owned by Jämtkraft, OX2 and Skanska AB (78 MW). MAJOR ELECTRICITY CONSUMERS This target group comprises companies and municipal organisations which do not have wind power as their core business. By owning their own wind power production, they ensure low and stable electricity costs while simultaneously protecting themselves against future price increases. In addition, many companies and municipal organisations have ambitious environmental and climate goals and investment in wind power goes a good way towards achieving them. The investment also has a symbolic value and is often used in marketing and to create goodwill with customers and/or local opinion. The property company Wallenstam was one of the first of this type of investor. Over the years, OX2 has sold a number of wind power plants, primarily to municipal property and management companies. OX2 s partners in this segment include IKEA, Eskilstuna municipality, Polarbröd and Finja. COLLECTIVE OWNERSHIP This form of ownership allows smaller players to invest in wind power. Today it is mainly private individuals, housing associations and small businesses that become members of a cooperative owning the wind turbine. Although the ownership of wind power through shares currently represents a marginal share of investors in wind power, there are various global trends promoting growth in this segment in the future, especially as consumers are becoming more aware and are increasingly valuing the participation and control. There are a number of wind turbines owned by cooperatives. O2 El Ekonomisk Förening, which is managed by OX2, is Sweden s largest wind power cooperative. 16) The European Renewable Energy Investor Landscape, Clean Energy Pipeline, ) Bloomberg New Energy Finance and OX2 research

25 Official opening of Glötesvålen wind farm in the municipality of Härjedalen, Jämtland (90 MW). The farm is owned by IKEA. Photo: Patrick Miller.

26 24 Sustainable development Development that meets the needs of the present without compromising the ability of future generations to meet their own needs The Brundtland Report (1987) Economic sustainability Sustainable development Environmental sustainability Social sustainability The aim of sustainable development is for mankind to be able to live on a planet with limited resources. Living conditions and resource utilisation must be able to meet human needs without compromising sustainability in the ecosystem and the environment so that future generations will be able to meet their own needs. OX2 bases its sustainability policy on the three dimensions of sustainable development which the Brundtland Commission has determined i.e. economic, social and environmental sustainability. Economic sustainability The global energy sector is being reshaped. Renewable energy is competing with other forms of power on both an environmental and an economic basis. Onshore wind power is far and away the most cost-effective alternative to develop, which is the reason why it is OX2 s primary area of operation. As other sources of renewable energy become more competitive, more business opportunities are also opening up. Bioenergy is one type of energy that OX2 is backing. In 2013, OX2 acquired a district heating plant outside Helsingborg in southern Sweden. Beginning in January 2016, OX2 took over the operation and development of one of Sweden s largest biogas plants in the same area. The production utilises waste taken located directly adjacent to the plant. Producing bio - energy from waste is obvious from a social and environmental perspective, because it is about recovery and cycles, contributing to a so-called circular economy. OX2 also sees synergies between bioenergy and wind power, for example Power to Gas (see p. 12). In recent years, great advances have been made in solar power, and photovoltaic cells in particular, with ever lower production costs and increased efficiency as a result. OX2 is pursuing business development within the field and in 2015 initiated a partnership with Solar Supply to offer photovoltaic cells to consumers. Renewable energy attracts investment capital from many different sectors, because investment generates long-term and predictable cash flows as well as providing profit and benefits for both the investors and the environment. Social sustainability Organisation OX2 is a knowledge-intensive organisation which is dependent on its ability to attract and retain skilled personnel. The objective is that OX2 will offer an attractive work environment in which the expertise of the employees is managed and developed. OX2 strives for a corporate culture which is totally non-discriminatory in respect of gender, sexual Employees who took park in the opening ceremony at Glötesvålen wind farm in Jämtland. Photo: Patrick Miller.

27 Sustainable development 25 orientation, race, ethnic origin, religion, disability or age. It also favours a multicultural approach and non-hierarchical structures. Since the company is growing in new markets, both geographically and operationally, this can be a challenge. There is, however, an awareness of the need to consistently promote working methods which are open, inclusive, supportive and tolerant. This culture creates the best possible foundation for OX2 as a viable company for the long term. Local benefit and support OX2 s operations are aimed at expanding renewable energy sources. This means a responsibility to take account of the stakeholders who are affected, directly or indirectly, by such operations. Naturally, social responsibility is important to OX2, and the company is in constant dialogue with local residents to minimise the impact on the environment and ensure that the local area benefits through, for example, jobs and improved infrastructure. When it sets up wind power plants in Sweden, OX2 administers a so-called community fund, which means that part of the revenue from the wind farm is channelled into local projects with a positive impact on the communities involved. Recipients may include residents associations, parish associations or local history societies, for example. How this is regulated is worked out in consultation with the local community and municipality involved to ensure a wide democratic support for each project, and to provide the maximum possible benefit. In Finland, unlike Sweden, property tax is paid to the municipality instead of to the state, which means that the local community receives a natural allocation when a wind power plant is established. The need for community funds is not as great in Finland and is therefore considered on a case-by-case basis. Sound business ethics OX2 believes that business shall be carried out with integrity in an honest, fair and credible manner. Integrity must not be sacrificed for short-term gain. This approach encourages a continuous flow of business and ensures a low level of risk for the company. Ulla Stenberg and Robert Svensson, the secretary and chairman respectively of the Glöte residents association. In the background is Glötesvålen wind farm (90 MW) in Jämtland. Photo: Peter Hamberg.

28 26 Sustainable development Study: Glötesvålen wind farm brought many new jobs to the region Almost fifty percent of the jobs were filled from the regional labour market when Glötesvålen wind farm was established. It is shown in one of the most comprehensive surveys of job opportunities linked to a wind power project. Härjedalen municipality contracted Vindkraftcentrum. se in Jämtland to survey the regional employment effects resulting from the construction of Glötesvålen wind farm. The study shows that almost fifty percent of the work associated with establishing the wind farm was carried out by regional labour, from the Härjedalen, Jämtland, Dalarna and Hälsingland employment market. It is the highest figure so far when compared with similar studies. In total, around 105,000 regional working hours were created, which is equivalent to 78 regional fulltime jobs. Most jobs were created during the construction phase, which took place from 2012 to In addition, seven local permanent full-time jobs were created for servicing of the of the plant during the operational phase that will last for years. Every job is valuable Wind power is being built because it plays an important part in the energy transition, but the major bonus for us as the host municipality are the associated jobs and business. Each job is valuable and it is important to take advantage of the opportunities available. It is about survival in our sparsely populated communities, says Thony Gustafsson, commercial manager in Härjedalen municipality. OX2 procures the major contracts based on standards of quality and competitive pricing. There are certain types of specialised jobs, for example the installation and erection of turbines that are rarely carried out by the regional workforce, while logging and road construction, for example, are frequently and preferably carried out by local labour. Advantages of local workers Involving local companies ensures that the work flows more smoothly. For example, local residents are able to tolerate interruptions from transport differently if they know that it is their children or grandchildren who are behind the wheel. It is a different acceptance. Emerging problems can also be solved more quickly if there is a local network, says Johan Höök, construction project manager at OX2. Johan Höök, construction project manager at OX2. Photo: Joakim Lagercrantz. Many positive side effects The study also describes significant tax revenues and a positive impact on the local economy. For example, the workforce from outside the area generated close to 12,000 overnight stays in the area. There are great opportunities to be had through local and regional involvement. The figures are unbelievably positive, and I believe that they will be even better in the long run. An important prerequisite is to establish an early and constructive dialogue with the project developer, as we have had with OX2. This creates a readiness amongst local businesses and the surrounding business community to participate when the procurement takes place, says Thony Gustafsson.

29 Sustainable development 27 Environmental sustainability OX2 has been certificated in accordance with the ISO global environmental standard since This means that OX2 systematically assesses significant environmental aspects of its operations, and also works towards clear and verifiable environmental targets. Two three-year periods have elapsed since OX2 received its certification, so in the spring of 2016 the company is reviewing and adapting its environmental management and targets in line with the company as it looks today. Environmental performance in 2015 OX2 has three fundamental environmental targets: 1. Increase the amount of renewable electricity in the Nordic electricity system 2. Make the smallest possible impact on the environment 3. Encourage suppliers to provide environmentally assured products and materials Target 1. Increase the amount of renewable electricity in the Nordic electricity system OX2 s primary environmental target is to increase the amount of renewable electricity in the Nordic electricity system. In the present situation, this means that the company is focusing predominantly on wind power which is a clean, infinite and cost-effective source of energy. OX2 works with the best projects with respect to wind conditions and grid connections, for example. The aim is always to generate profit with as little impact on the environment as possible. Outcome: During 2015, construction was under way on 40 wind turbines with a total output of approximately 125 MW. OX2 completed the erection of 30 wind turbines (approximately 92 MW) at two wind farms in Sweden; six turbines at Rödstahöjden and 24 turbines at Maevaara, stage 1. At the end of the period, construction was ongoing at a further ten wind turbines (33 MW) in Sweden and 19 in Finland (63 MW). Sub-target: Availability of 95/97 percent for the turbines managed by OX2 At the end of the year, OX2 s technical and commercial management operations covered 180 operational wind turbines, equivalent to an output of approximately 1.3 TWh. The availability of a turbine is the time during which a wind turbine is technically available in relation to the number of potential operating hours during the year, and is a vital parameter for measuring profitability and environmental benefit. OX2 s target is to deliver an average operational availability of 95 percent for wind turbines less than one year old and 97 percent for those that are more than one year old. Outcome: 2015 was an excellent wind year with high production at most of the wind farms managed by OX2. However availability was adversely affected due to an unusually high number of stoppages related to high wind speeds and turbulence. It has also been a year with several instances of major damage which had a negative effect on availability. The high frequency of damage can be attributed both to the age of the wind turbines and to strong winds during the year. In 2015, scheduled inspections and repairs of rotor blades were also carried out which resulted in a number of longer stops during the summer and autumn for single wind turbines and farms. Among the major measures taken to improve operational reliability are the upgrading of yaw gears and the installation of automatic lubrication systems. The wind turbines that are less than one year old had an availability of 94.2 per cent and the turbines that are more than one year old had an availability of 94.4 percent. The statistics include all production stoppages, irrespective of whether they were unplanned interruptions or scheduled repairs. Availability of turbines managed by OX <1 year >1 year 2015 Target > 1 year Target < 1 year Target 2. Make the smallest possible impact on the environment All construction operations have some kind of impact on the environment. OX2 s goal is to minimise this impact as far as possible. To achieve this, surveys of biodiversity, conservation areas, flora and fauna are made as soon as suitable locations for wind power are identified. The location of turbines and roads is then optimised. Should OX2 decide to build in a certain location, the environmental aspects are followed up continuously in the environmental management plan and during environmental inspections. After years, when wind turbines reach the end of their service life, they are dismantled in less than 24 hours. Around 80 percent of a wind turbine can be recycled and used in new products The area is then restored so that, in the future, there will be no trace of the operation.

30 28 Sustainable development Sub-target 1: Every project must have an environmental management plan OX2 has adopted a proactive approach, using environmental management plans to ensure that all environmental aspects are examined and managed throughout the different phases of the project, from the permit application stage to procurement, construction, operation and decommissioning. This includes, for example, ensuring compliance with the conditions stipulated in the permits and following up parameters from the environmental impact assessments and inventories. Outcome: Since 2012, when OX2 adopted the practice of environmental management plans, the response from the authorities and contractors has been extremely positive. This structured approach has been implemented and is also applied to the new markets in which OX2 is establishing itself. In those cases where OX2 acquires project rights, it is particularly important to be familiar with the requirements and conditions set out by the authorities, and to ensure that these are followed during construction and operation. In 2015, all projects for which permits were granted had their own environmental action plan. Sub-target 2: Every project in the screening phase must be ranked with respect to resource consumption and biodiversity The purpose of the screening process is to identify a suitable location for the construction of wind turbines with respect to wind, grid, land ownership and conservation areas. This sub-process also includes the modelling and dimensioning of a potential wind farm at the location, based on production, operating costs and investment. Outcome: With the help of geographic information systems (GIS), detailed analysis and expert teams, all projects are evaluated and ranked based on costbenefit aspects and environmental impact. Target 3. Encourage suppliers to provide environmentally assured products and materials A large part of OX2 s environmental impact is indirect, since it is realised at sub-contracting level through construction contractors and turbine manufacturers. Consequently, an important part of our environmental policy is to set standards for suppliers right from the tendering process. Through annual follow-ups, suppliers are made aware that OX2 takes this issue seriously and a growing number of suppliers are continuously developing and improving their environmental policies. OX2 s target for 2015 is that 50 percent of its suppliers will be environmentally certified, and that 90 percent of suppliers must be in levels 3 5. For the purpose of influencing the sub-contractors environmental performance, they are divided into five different categories, based on how ambitious their environmental policies are. Levels in suppliers environmental policies 3. Has an environmental policy 2. Has specific environmental procedures 1. Has no documented approach to the environment 5. Has environmental certification 4. Has an action plan and follows up policy Sub-target 1: 90 percent of OX2 s significant suppliers 1) shall be at levels 3 5 by 2015 Sub-target 2: 50 percent of OX2 s significant suppliers 1) shall be at level 5 by 2015 OX2 s suppliers in Classification of suppliers, quantity 1. Has no documented approach to the environment, 23% 2. Has specific environmental procedures, 17% 3. Has an environmental policy, 23% 4. Has an action plan and follows up policy, 21% 5. Has environmental certification, 47% OX2 s suppliers in Classification of suppliers, financial value 1. Has no documented approach to the environment, 2.3% 2. Has specific environmental procedures, 2.8% 3. Has an environmental policy, 5.3% 4. Has an action plan and follows up policy, 28.5% 5. Has environmental certification, 61.1% 1) Significant suppliers are all those that invoice OX2 for more than SEK 100,000 per year.

31 Sustainable development 29 Outcome: Sub-target 1 was that 90 percent of the suppliers should be at levels 3 5. The outcome was 70 percent, equivalent to 95 percent of the total value of procurements. Sub-target 2 was that 50 percent of the suppliers should be at level 5, i.e. be environmentally certified. The outcome was 36 percent in 2015, equivalent to 61 percent of the total value of procurements. If procurement values are considered, OX2 achieves the objectives, which is due to the fact that the major suppliers with high procurement values often have a more ambitious environmental policy than the smaller suppliers. A number of suppliers have the potential to improve, but it is clear that they are developing and improving their environmental policy thanks to OX2 s monitoring and follow-ups. In many of its projects, OX2 works with smaller, local suppliers and continued dialogue with individual contractors plays an important role in improving environmental performance and documentation. In 2015, the survey covered 131 suppliers. REDUCED EMISSIONS DUE TO WIND POWER There are various ways in which to calculate the fall in carbon dioxide emissions due to the increased use of wind power. One frequently-used method is the marginal electricity method. In this method, the reduction in emissions is governed by what happens at the margin of the electricity system, i.e. the electricity generating technology which is added or which disappears as a result of an increase or decrease in the demand for electricity. Since the Swedish grid is linked to the electricity grids of the rest of the Nordic region and Europe, emission-intensive coal power is usually at the margin. It is, therefore, production from coal that is avoided as more wind power becomes available. A wind turbine which produces 7 GWh per year enables carbon dioxide emissions to be cut by up to 5,600 tonnes per year. 1) ENERGY REPAYMENT PERIOD A wind turbine becomes energy-neutral after approximately eight months. This means that, after this period of operation, a wind turbine has generated as much energy as will be used throughout its life cycle, from manufacture to scrapping. 2) ENVIRONMENTAL IMPACT OF WIND POWER FROM A LIFE CYCLE PERSPECTIVE From a life cycle perspective, the greatest environmental impact of wind power is during manufacture of the turbine itself. The construction and operating phases have a significantly lower impact. The most important action OX2 can take to reduce the environmental impact of wind power is, therefore, to make turbine manufacturers subject to stringent requirements, ensuring that their negative impact on the environment is minimised. 1) Swedish Environmental Research Institute 2) Vestas Wind Systems A/S Google awarded Swedish Renewable Energy Award 2015 The Swedish Renewable Energy Award 2015 was presented by Svensk Vindenergi during the conference Wind A renewable Europe? at Stockholm Waterfront on 4 November. The recipient of the award was Google which has signed a power purchase agreement to purchase all the electricity generated by a wind farm of 24 wind turbines (72 MW) in Maevaara, northern Sweden for the next ten years. The jury s verdict: Google has shown its commitment to combating climate change by switching its computer halls to renewable energy. The partnerships it has entered into take it one step further by ensuring that new renewable production capacity will be added. The investments in Sweden can also provide inspiration for a more international approach to energy issues. Anders Berglund, CEO at Google Sweden Photo: Svensk Vindenergi. OX2 took Maevaara wind farm (stage 1) into operation in the spring of 2015 and since then the plant has been generating electricity for Google s data centre in Hamina, Finland. The Swedish Renewable Energy Award was instituted in 2011, with the aim of highlighting business role models which show a deep understanding of the need to use renewable energy and the important role that the business world can play in this transition. Previous recipients are IKEA, Tesla Motors, Audi and Polarbröd. OX2 has built all the wind turbines owned by IKEA (46) and Polarbröd (4) in Sweden.

32 Sunset at Maevaaras wind farm, Norrbotten. Photo: Ulrich Mertens.

33 31 Board of Directors and Auditors Board of Directors The Board of Directors is the company s second-highest decision-making body after the shareholders meeting. The Board is responsible for the company s organisation and the management of the company s business, e.g. setting goals and strategy, establishing procedures and systems for following up goals, continuously assessing the company s financial situation and evaluating the operational management. The Board of Directors of the OX2 Group currently comprises seven board members, including the Chairman of the Board, with no alternates appointed. Johan Ihrfelt, Chairman of the Board Current position: CEO of OX2 Group AB. Other appointments: Chairman of the Board of Enstar AB, board member of several other companies within the OX2 Group and member of the advisory board at a number of external companies. Education: MBA, Stockholm School of Economics and NYU, Stern School of Business in New York. He also studied law at the University of Stockholm. Born: 1967 Anna-Karin Eliasson Celsing, Board member Current position: Owns her own consulting firm. Other appointments: Chairman of the Board of SVT AB. Board member of Lannebo Fonder AB, Kungliga Operan AB, Tengbom Arkitekter, Seven Day Finance AB, Landshypotek Bank AB, St Petersburg Property Company AB and Volati AB. Education: MBA, Stockholm School of Economics. Born: 1962 Margareta Alestig Johnson, Board member Current position: Deputy CEO of Sjätte AP-fonden. Other appointments: Board member of Green Cargo AB. Education: MBA, Örebro University. Born: 1961 Thomas von Otter, Board member Current position: Deputy CEO of OX2 Group AB. Other appointments: Board member of Enstar AB and of several other companies within the OX2 Group. Education: Studied economics at Stockholm University. Born: 1966 Johan Wieslander, Board member Current position: CEO of Influence AB. Other appointments: Board member of companies within the Deseven Group, Aurentor AB, Pamplemousse Holding AB, Inhouse AB, Roccaforte AB, Influence AB as well as J & J Wieslander AB. Education: Masters in Engineering and MBA, Chalmers University of Technology and the School of Economics at Gothenburg University. Born: 1960 Jan Örtegren, Board member Current position: CFO of Grimaldi Industri AB. Other appointments: Board member of companies within the Grimaldi Industri Group. Education: Stockholm School of Economics. Born: 1961 Niklas Midby, Board member Other appointments: Chairman of the Board of Skandiabanken AB and Skandiabanken ASA, Resscapital AB, and board member of Consiglio Capital AB and ByggaBo i Stockholm AB. Education: MBA, Stockholm School of Economics. Born: 1959 Auditors At the annual general meeting held on 1 April 2015, Svante Forsberg of Deloitte AB was re-elected as the company s auditor for the period until the 2016 annual general meeting. The address of Deloitte AB s office is: Deloitte AB, SE Stockholm.

34 Finja owns two of the six wind turbines at Rödstahöjden, Västernorrland (20 MW). Photo: Michael Engman.

35 33 Directors report The Board of Directors and CEO of OX2 Group AB, corporate ID no , with registered office in Stockholm, hereby submit the annual report and consolidated financial statements for the financial year 1 January 2015 to 31 December Market In December 2015, the first global climate agreement in world history was signed. An agreement the aim of which is to limit global warming to less than 2 C, with an ambition to reach 1.5 C. A firm plan for review and follow-up has also been agreed and the different countries climate plans are to be updated every five years from This guarantees that politicians and policymakers will focus on climate issues, which will in turn encourage further investment in renewable energy. In the market arena, 2015 was characterised by falling commodity prices worldwide, a trend that began back in However, this has not had any significant effect on the expansion of renewable energy which has, on the contrary, accelerated since last year (181 GW installed in 2015 v. 126 GW in 2014) 1 ). In 2015, a total of 64 GW of wind power and 57 GW solar power were installed worldwide, an increase of almost 30 percent in comparison with The largest investments in renewable energy took place in China, Africa, the USA, Latin America and India. In 2015, a net of 24.9 GW of renewable energy was installed in the EU, an increase of approximately 1 GW on the preceding year. The nameplate capacity of wind power increased by 13.9 GW, corresponding to growth of 10.9 percent. 1) This means further acceleration from the previous year as well as being in line with the average growth rate over the past five years. Renewable energy therefore currently represents more than 25 percent of total electricity generation and 15 percent of the total energy consumption in the EU 2). It looks increasingly likely that the goal of an average of 20 percent of total energy consumption being from renewable sources in the EU by 2020 will be achieved. The EU Member States have agreed on new climate targets for 2030 in which renewable energy will represent at least 27 percent of the Union s total energy consumption. However, Bloomberg goes much further in its forecasts and expects a 50 percent share of renewable energy in the EU in 15 years. These forecasts will require renewable capacity of around 40 GW to be built every year in the EU until ) Significant events during 2015 A sales agreement was signed in February 2015 with Allianz Capital Partners for further 10 wind turbines providing 33 MW wind power in Maevaara. At the same time, Google signed a power purchase agreement (PPA) to purchase all the electricity generated for the next ten years to power its data centre in Hamina, Finland. This is the second venture between OX2, Allianz and Google. In April 2015, the Maevaara project was handed over with 24 turbines (72 MW). In May 2015, OX2 acquired a Finnish project portfolio comprising four projects from Innopower. The portfolio comprises the Ajos (13 turbines), Jouttikallio (6 turbines), Vihreäsaari (1 turbine) and Kokkola (4 turbines) projects. In June 2015, OX2 increased its holding in Enstar AB. OX2 now owns 52% of the shares and is therefore the majority shareholder. In August 2015, the first part of the Ajos project, 10 turbines (31 MW), and the Jouttikallio project, 6 turbines (20 MW), received positive quota decisions from the Finnish Energy Agency. A quota decision is a prerequisite for projects in Finland to be financed. In October 2015, the second part of the Ajos project, 3 turbines (9 MW), and the Vihreäsaari project, 1 turbine (3 MW), received positive quota decisions from the Finnish Energy Agency. In November 2015, OX2 was granted the concession to operate and develop one of Sweden s largest biogas plants. The plant is owned by NSR and has a capacity of approximately 80 GWh of biogas and ,000 tonnes of biofertiliser per year. December 2015 saw the transfer of 4 turbines (13 MW) in the Rödstahöjden wind farm. 1) Bloomberg New Energy Finance 2) 2013, Eurostat 3) BNEF 2030 Market Outlook Overview, June 2014

36 34 Directors report In December 2015, a sales agreement was signed with IKEA for 13 turbines (42 MW) with respect to the Ajos project in Kemi, northern Finland. The project is IKEA s first investment in wind power on the Finnish market and it is the fourth venture between OX2 and IKEA. In December 2015, a sales agreement was signed with Allianz Capital Partners for 6 turbines (21 MW) with respect to the Jouttikallio project in Lappo, Finland. The project is Allianz s first investment in wind power on the Finnish market and it is the third venture between OX2 and Allianz. In December 2015, OX2 s consumer operation came out on top for customer satisfaction amongst private customers in the electricity market for the second year in a row. The survey was carried out by Svenskt Kvalitetsindex (SKI) which every year asks questions in the categories of customer satisfaction, loyalty, image, expectations, product quality, service quality and value for money. Performance and financial position The earnings trend for individual periods is affected primarily by the rate at which wind power turbines and projects are completed, transferred to the customer and the revenue recognised. Similarly, the statement of financial position is significantly affected by the size of ongoing construction projects and the stage they are at. With projects which are sold to customers as going concerns, the company aims, for liquidity reasons, to match the payment plans from the customers with the payment plans the company itself has towards the largest suppliers for the projects concerned. Revenue Revenue during 2015 amounted to SEK 1,624.3 million (1,808.5) and relates principally to payment for the Maevaara wind farm comprising 24 wind turbines (72 MW) and the Rödstahöjden project with 6 wind turbines (21 MW). In total, 28 wind turbines (85 MW) were commissioned and their accounts settled in The sale of electricity during the year amounted to SEK 45.0 million (37.2). The increase in revenue from electricity is due to the higher revenue from test operation in 2015 compared with the previous year. Revenue generated from the technical and commercial management of wind farms totalled SEK 16.5 million (17.0). Costs The costs for goods and project planning during 2015 totalled SEK 1,439.2 million (1,656.6). The costs are primarily related to the settlement of the Maevaara project, which was handed over to the customer in April, as well as direct costs related to project planning activities. Other external costs during 2015 amounted to SEK 34.8 million (30.8). The increase in external costs compared with the same period in the preceding year is related to the fact that operations have expanded. Personnel costs for 2015 totalled SEK 73.4 million (59.1). The increase is due to an increase in the average number of employees of 13 persons compared with the same period in the previous year. During the period, OX2 increased its holding in Enstar AB and is now the majority shareholder. Consequently, the 11 employees of its partly owned subsidiary Enstar AB have been included in the OX2 Group since the second quarter of Profit The operating profit for 2015 was SEK 72.7 million (56.7). The earnings trend for individual periods is affected primarily by the rate at which wind power projects are completed, transferred to the customer and the revenue recognised. The profit for 2015 amounted to SEK 64.7 million (68.0). Financial position and liquidity Current assets as at 31 December 2015 amounted to SEK million (1,397.1). Cash and cash equivalents as at 31 December 2015 amounted to SEK million (170.8). In addition, OX2 has a bank overdraft facility of SEK 50 million, with a term of three years. The overdraft facility was not utilised during Other non-current liabilities as at 31 December 2015 amounted to SEK 1.4 million (2.5) and relate primarily to financial leasing. Current liabilities as at 31 December 2015 amounted to SEK million (1,219.3). The drop in both current assets and current liabilities as at 31 December 2015 compared with the previous year end is primarily due to the first phase of the Maevaara project (24 turbines 72 MW) having been settled and handed over to the customer during the first half of Cash flow The cash flow from operating activities before changes in working capital during the year totalled SEK 72.3 million (63.1), and is attributable to accrued profits. The cash flow from operating activities during 2015 was SEK 28.4 million ( 30.1). The company aims to match the payment plans from customers with the payments due from the company to significant suppliers in each project, although there may be some adjustments between quarters. The cash flow from investment activities during the year amounted to SEK 3.8 million ( 10.9). The cash flow from financing activities amounted to SEK 20.6 million

37 Directors report 35 ( 70.9) during the year, and related primarily to the dividend paid to shareholders of SEK 20 million in The total cash flow for 2015 was SEK 4.0 million ( 111.8). Parent company Overall Group management and administration are part of the parent company, OX2 Group AB. Revenue during 2015 amounted to SEK 21.8 million (22.1), and relates primarily to internal invoicing of management and other services. The operating loss for 2015 was SEK 5.0 million ( 3.5). The profit for 2015 amounted to SEK 67.3 million (49.3). The parent company s equity as at 31 December 2015 amounted to SEK million (126.4). Cash and cash equivalents as at 31 December 2015 totalled SEK 9.4 million (7.9). In addition, there is a bank overdraft facility of SEK 50 million which was not utilised during Employees On 31 December 2015, the number of employees was 83 (76), of which 24 (30) were women. The increase during the year is mainly attributable to the staff at its subsidiary Enstar AB now being included in the number of employees. The average number of employees during 2015 was 80 (67). Risks and uncertainty factors The wind power industry is dependent on the general economic and political situation. Access to capital and the willingness to invest may affect the company s ability to sell projects. The climate and environmental targets adopted by the EU and individual countries where OX2 operates also affect the potential for the wind power market and the growth potential of the company. The wind power market is regulated by laws and regulations both in respect of the support system and the permit process for establishing turbines. A more rigorous permit application process with more stringent requirements than is currently the case would lead to longer planning periods and require greater resources, with a consequent rise in costs. OX2 is affected by the offset price, i.e. the total of the electricity price and the price of the electricity certificate. The price of electricity is affected by fundamental factors such as water access, access to production capacity, fuel prices, prices of carbon credits and electricity consumption. The euro rate affects OX2 s investment calculations, since the turbine suppliers costs are in euros. At the same time, the sale of wind farms to European purchasers most often takes place in euros, which minimises the total exposure to the euro, since turbines represent more than 70 percent of the total establishment costs for wind power projects. In each project, currency risks are handled in a way which meets the finance policy s requirements for risk minimisation, adapted to the conditions of the particular project. In addition, account is also taken of the Group s total inflows and outflows in euros in the same period. The loan-to-value ratio of an investment in a wind farm is normally around percent and, consequently, changes in the interest market may affect the company s profitability. In most projects, however, it is the customer who is responsible for financing risk. There is a description of financial instruments and risk management in note 4. Research and development OX2 is working in conjunction with the authorities, suppliers and other stakeholders in the industry on a number of research and development projects to develop wind power. During the year, OX2 completed the Storskalig Ekonomisk Vindkraft i Fjällmiljö project [Large-scale Economic Wind Power in Upland Environments] in collaboration with the Swedish Energy Agency. Significant events after the end of the reporting period On 1 January 2016, OX2 took over the operation and development of NSR s biogas plant, including 13 employees. The plant has a capacity of approximately 80 GWh of biogas and ,000 tonnes of biofertiliser per year. The last two turbines at the Rödstahöjden wind farm were handed over in January Outlook and trends A contributing factor to the expected continued expansion of renewable energy sources in Europe is the existing proportion of electrical generating capacity which is reaching the end of its useful life and will be phased out. Approximately 85 percent of installed coal-fired power stations and 70 percent of nuclear power stations in the EU are now more than 30 years old, and together represent about 300 GW of installed capacity. 4) Until now, the refurbishment of existing capacity has been financially viable, since new construction has been too expensive, irrespective of the technology. At the same time, renewable energy sources have continually increased in cost-effectiveness, and can now compete with traditional energy sources. It is now no longer just environmentally defensible but also financially viable to construct renewable electricity generating capacity, which will guarantee continued strong growth in the near future. 4) The Future of Carbon Capture and Storage in Europe, European Commission, 2013

38 36 Directors report The EU Commission has a clear agenda in favour of increased market integration and a single European energy market. In February 2015, the EU Commission launched a strategy for an energy union, that will take an integrated approach to energy issues. New EU rules introduced in the summer of 2015 have made it possible for multiple electricity exchanges to operate in the same area, which is one step closer to the goal of a well-integrated internal market. The European transmission system operators regularly present joint development plans for the electricity grid, and the Nordic inspection authorities have presented a route map for a common Nordic end-customer market for electricity. In 2016, the introduction of the Nordic Balance Settlement (NBS) is expected as the result of a collaboration between the Finnish, Norwegian and Swedish transmission system operators Fingrid, Statnett and Svenska kraftnät. Cross-border cooperation in terms of both the physical grid infrastructure and financial electricity trading is expected to grow every year. Consequently, the demand for renewable electricity generation may increasingly be met through growing imports and exports, which will also equalise seasonal variations and national differences in electricity prices. The work of the Board of Directors during the year At the 2015 Annual General Meeting, a Board of Directors comprising Johan Ihrfelt (Chairman), Thomas von Otter, Anna-Karin Eliasson Celsing, Johan Wieslander, Margareta Alestig Johnson, Niklas Midby, Jan Örtegren as ordinary members of the Board was re-elected for the period until the end of the next Annual General Meeting. During 2015, the Board of Directors of OX2 Group AB held 7 Board meetings. Proposal for allocation of earnings (SEK) The following earnings are at the disposal of the Annual General Meeting: Unrestricted equity 106,326,368 Net profit for the year 67,311,423 Total 173,637,791 Dividend to shareholders SEK per share 25,000,000 The Board proposes the following sum be carried forward to new account 133,637,791 Total 173,637,791 The dividend is calculated on basis of the number of shares issued as of 31 December 2015, i.e. 101,905 shares. Please refer to the income statements and balance sheets, cash flow statements and additional information that follow for the rest of the parent company s and Group s results. All amounts are expressed in SEK thousand, unless otherwise specified. The opinion of the Board concerning the proposed dividend Justification The Group s equity has been calculated in accordance with the EU-approved IFRS standards and their interpretation (IFRIC), and in accordance with Swedish law and by the application of the Council for financial reporting, RFR 1 (Supplementary Accounting Regulations for Corporations). The parent company s equity has been calculated in accordance with Swedish law and application of the Council for financial reporting, RFR 2 (Accounting for legal entities). The Board considers that there is full coverage of the company s restricted equity after the proposed distribution of profits. The Board also finds that the proposed dividend to shareholders is justifiable in accordance with the assessment criteria laid down in the Swedish Companies Act, chapter 17 Section 3, clauses 2 3. The Board wishes to emphasise the following: The nature and scope of the operations and the associated risks The Board is of the opinion that the company s and the Group s equity after the proposed distribution of profits will be sufficiently large in relation to the nature and scope of the operations and the associated risks. In this context, the Board takes into account, inter alia, the company s and the Group s equity ratio, historical trends, budget trends, investment plans and the state of the economy. Consolidation needs, liquidity and financial position in general The Board has undertaken a comprehensive assessment of the status of the company and the financial situation of the Group and their ability to meet their commitments. The proposed dividend amounts to 14 per cent of the company s equity and 10 percent of the Group s equity. The Board is of the opinion that the earnings capacity of the Group is satisfactory. Against this background, the Board considers the company and Group are in a good position to take advantage of future business opportunities and to withstand any losses. Planned investments have been taken into account in the determination of the proposed distribution of profits. The distribution of profits will not adversely affect the company and the Group s ability to make further commercially justified investments according to the plans that have been adopted. Liquidity The proposed distribution of profits is not expected to affect the company s and the Group s ability to honour their payment obligations at the correct time.

39 Directors report 37 Revenue, results and position, SEK thousand Revenue 1,624,303 1,808, ,695 Operating profit 72,724 56,662 44,355 Profit after financial items 72,278 60,352 47,199 Operating margin 4% 3% 10% Balance sheet total 795,507 1,424,086 1,069,546 Equity ratio 1) 31% 14% 18% Return on equity 2) 29% 39% 28% Return on capital employed 3) 34% 31% 21% Average number of employees ) Equity in relation to the balance sheet total 2) Net earnings for the year divided by average equity 3) Operating profit after financial items plus financial expenses in relation to average capital employed Annual General Meeting OX2 Group AB will hold its Annual General Meeting on 19 April 2016 at the company s premises at Lilla Nygatan 1 in Stockholm. The annual report will be available on OX2 s website from 11 April 2016.

40 38 OX2 s accounts The Consolidated Income Statement Amounts in SEK thousand Note 01/01/ /12/ /01/ /12/2014 Operating revenue Net sales 5 1,624,303 1,808,483 Total revenue 1,624,303 1,808,483 Cost of goods and project planning 1,439,259 1,656,570 Other costs 6, 7 34,760 30,832 Staff costs 8 73,433 59,148 Value adjustments of tangible and intangible assets 13, 14 4,128 5,554 Total operating expenses 1,551,578 1,752,104 Result from participations in associated companies Operating profit 72,724 56,662 Financial income 9 3,680 4,636 Financial expenses 10 4, Profit before tax 72,278 60,352 Tax 12 7,616 7,613 Net profit for the year 64,662 67,965 Net profit for the year attributable to: Parent company shareholders 63,436 67,965 Minority share 1,226 CONSOLIDATED REPORT OF COMPREHENSIVE INCOME Profit for the period 64,662 67,965 Other comprehensive income: Items that will be allocated to the income statement Translation difference from translation of foreign subsidiaries Cash flow hedges Changes in fair value ,835 Tax attributable to cash flow hedges 69 3,044 Total comprehensive income for the year, net after tax 63,972 79,106 Comprehensive income for the year attributable to: Parent company shareholders 62,746 79,106 Minority share 1,226

41 OX2 s accounts 39 Consolidated report on financial position Amounts in SEK thousand Note 31/12/ /12/2014 ASSETS Fixed assets Intangible assets Other intangible fixed assets 13 8,037 3,864 8,037 3,864 Tangible fixed assets Plant, equipment and tools 14 8,619 11,141 8,619 11,141 Financial assets Participations in associated companies 16 1,300 Deferred tax assets 12 4,972 9,599 Other financial assets ,260 11,187 Total fixed assets 21,916 26,192 Current assets Work in progress for others account ,133 1,030,256 Accounts receivable 18 18,750 29,202 Other receivables 16,554 44,059 Prepaid expenses and accrued income , ,302 Derivative instruments Cash and cash equivalents , ,791 Total current assets 773,591 1,397,894 TOTAL ASSETS 795,507 1,424,086

42 40 OX2 s accounts Consolidated report on financial position Amounts in SEK thousand Note 31/12/ /12/2014 EQUITY AND LIABILITIES Equity attributable to parent company shareholders Share capital Other contributed capital 22 72,836 72,836 Retained earnings including profit for the year 174, ,062 Total equity attributable to parent company shareholders 243, ,000 Total equity attributable to holdings without a decisive influence 3,341 Total equity , ,000 Provisions Other provisions 1,300 1,300 1,300 1,300 Long-term liabilities Long-term interest-bearing liabilities 24 1,408 2,461 Derivative instruments ,438 2,461 Current liabilities Customer advances ,807 66,829 Accounts payable 37,127 28,930 Tax liabilities Other liabilities 27 33,366 1,060,901 Accrued expenses and deferred income ,386 62, ,686 1,219,325 TOTAL EQUITY AND LIABILITIES 795,507 1,424,086 MEMORANDUM ITEMS Assets pledged , ,520 Contingent liabilities ,147 37,632

43 OX2 s accounts 41 Consolidated report of changes in equity Amounts in SEK thousand Share capital Other contributed capital Translation reserve Hedge fund Balance sheet earnings Total Equity attributable to parent company share holders Total equity attributable to holdings without a decisive influence Total equity Opening balance as at 1 January , , , , ,895 Profit for the period 67,965 67,965 67,965 Other comprehensive income Translation difference from translation of foreign subsidiaries Cash flow hedges 10,791 10,791 10,791 Total other comprehensive income ,791 11,141 11,141 Total comprehensive income for the year ,791 67,965 79,106 79,106 Shareholder dividend 70,000 70,000 70,000 Closing balance as at 31 December , , , ,000 Amounts in SEK thousand Share capital Other contributed capital Translation reserve Hedge fund Balance sheet earnings Total Equity attributable to parent company share holders Total equity attributable to holdings without a decisive influence Total equity Opening balance as at 1 January , , , ,000 Profit for the period 64,662 63,436 1,226 64,662 Other comprehensive income Translation difference from translation of foreign subsidiaries Cash flow hedges Total other comprehensive income Total comprehensive income for the year ,662 62,746 1,226 63,972 Shareholder dividend 20,004 20,004 20,004 Acquisition of minority 2,115 2,115 2,115 Closing balance as at 31 December , , ,742 3, ,083

44 42 OX2 s accounts Consolidated cash flow report Amounts in SEK thousand Note 01/01/ /12/ /01/ /12/2014 Operating activities Profit after financial items 72,278 60,352 Adjustments for items not included in cash flow, etc. 31 4,128 5,271 76,406 65,623 Income tax paid 4,147 2,478 Cash flow from operating activities before changes in working capital 72,259 63,145 Cash flow from changes in working capital Decrease(+)/increase( ) in work in progress 676,123 1, Decrease(+)/increase( ) in accounts receivable 10,453 14,479 Decrease(+)/increase( ) in current receivables 58, ,194 Decrease( )/increase(+) in accounts payable 8,196 16,212 Decrease( )/increase(+) in current liabilities 680,498 1,307,467 Cash flow from current operations 28,387 30,078 Investment activities Acquisition of shares 3,336 10,123 Acquisition of intangible assets 5, Acquisition of tangible fixed assets 1, Cash flow from investment activities 3,769 10,886 Financing activities Dividend paid to shareholders 20,004 70,000 Amortisation of leasing debt Cash flow from financing activities 20,596 70,866 Cash flow for the year 4, ,830 Translation difference for cash and cash equivalents Cash and cash equivalents at beginning of the year 170, ,185 Cash and cash equivalents at year end 174, ,791

45 OX2 s accounts 43 Parent company income statement Amounts in SEK thousand Note 31/12/ /12/2014 Operating revenue Net sales 5 21,764 22,124 Total revenue 21,764 22,124 Operating expenses Other external costs 6, 7 10,339 10,912 Staff costs 8 15,499 13,795 Value adjustments of tangible and intangible fixed assets 13, ,801 25,594 Operating profit 5,037 3,470 Other interest income and similar income statement items 9 70,192 50,829 Interest expenses and similar income statement items ,055 69,274 48,774 Profit after financial items 64,237 45,304 Year-end appropriations 11 2,284 4,267 Profit before tax 66,521 49,571 Tax on profit for the year Net profit for the year 67,311 49,292 COMPREHENSIVE INCOME REPORT Profit for the period 67,311 49,292 Other comprehensive income Total comprehensive income for the year, net after tax 67,311 49,292 COMPREHENSIVE INCOME FOR THE YEAR 67,311 49,292

46 44 OX2 s accounts Parent Company Balance Sheet Amounts in SEK thousand Note 31/12/ /12/2014 ASSETS Fixed assets Intangible fixed assets Other intangible fixed assets Tangible fixed assets Equipment 14 2,381 2,179 2,381 2,179 Financial fixed assets Participations in Group companies , ,141 Participations in associated companies Deferred tax assets Internal long-term receivables 7,000 13,000 Other long-term securities , ,625 Total fixed assets 132, Current assets Current receivables Accounts receivable Receivables from Group companies 83,675 63,446 Other receivables 2,033 1,940 Prepaid expenses and accrued income 19 1,938 1,063 87,696 66,706 Cash and cash equivalents 20 9,367 7,865 Total current assets 97,063 74,571 TOTAL ASSETS 229, ,993

47 OX2 s accounts 45 Parent Company Balance Sheet Amounts in SEK thousand Note 31/12/ /12/2014 EQUITY AND LIABILITIES Restricted equity Share capital Unrestricted equity Profit or loss brought forward 106,327 77,036 Net profit for the year 67,311 49, , ,328 Total equity , ,430 Provisions Other provisions Long-term liabilities Other long-term liabilities to Group companies , ,029 Current liabilities Accounts payable 2,248 1,683 Other liabilities 27 1,761 1,937 Other liabilities to Group companies 47,680 39,482 Accrued expenses and deferred income 28 3,673 3,932 55,362 47,034 TOTAL EQUITY AND LIABILITIES 229, ,993 MEMORANDUM ITEMS Assets pledged , ,080 Contingent liabilities ,365 1,187,955

48 46 OX2 s accounts Parent company changes in equity Amounts in SEK thousand Restricted equity Share capital Profit or loss brought forward Unrestricted equity Profit for the year Total equity Opening balance as at 1 January ,065 94, ,138 Profit for the period 49,292 49,292 Comprehensive income for the year 49,292 49,292 Appropriation of earnings in accordance with the decision by the Annual General Meeting 94,971 0 Shareholder dividend 70,000 70,000 Closing balance as at 31 December ,036 49, ,430 Amounts in SEK thousand Restricted equity Share capital Profit or loss brought forward Unrestricted equity Profit for the year Total equity Opening balance as at 1 January ,036 49, ,430 Profit for the period 67,311 67,311 Comprehensive income for the year 67,311 67,311 Appropriation of earnings in accordance with the decision by the Annual General Meeting 49,292 49,292 0 Shareholder dividend 20,004 20,004 Closing balance as at 31 December ,324 67, ,736

49 OX2 s accounts 47 Parent Company Cash Flow Analysis Amounts in SEK thousand Note 01/01/ /12/ /01/ /12/2014 Operating activities Profit after financial items 64,237 45,304 Adjustments for items not included in cash flow, etc ,200 46,191 Income tax paid Cash flow from operating activities before changes in working capital 65,200 45,347 Cash flow from changes in working capital Decrease(+)/increase( ) in current receivables 13,961 7,100 Decrease( )/increase(+) in current liabilities 3,586 14,893 Cash flow from current operations 54,825 23,354 Investment activities Acquisition of shares in subsidiaries 4, Acquisition of shares in associated companies 44 Acquisition of long-term securities 87 Acquisition of shares Acquisition of tangible fixed assets 992 Cash flow from investment activities 5, Financing activities Dividend paid to shareholders 20,004 70,000 Loans paid 5,000 Amortisation of long-term internal loans 34,029 Refund of long-term receivables received 6,000 Cash flow from financing activities 48,033 75,000 Cash flow for the year 1,502 52,072 Cash and cash equivalents at beginning of the year 7,865 59,937 Cash and cash equivalents at year end 9,367 7,865

50 48 Notes Note 1 General information OX2 Group AB, corporate ID number is a limited company that is registered in Sweden and has its registered office in Stockholm. The address of the head office is Lille Nygatan 1. The mission of the company and its subsidiaries ( the Group ) is to develop, build, own, sell and manage wind farms. The commercial development of several types of renewable energy is also taking place. Note 2 Essential accounting policies The consolidated financial statements for OX2 Group AB have been prepared in accordance with the EU-approved International Financial Reporting Standards (IFRS), as well as interpretations of the International Financial Reporting Interpretation Committee (IFRS IC) for periods beginning on or after 1 January Furthermore, the Group also applies the Swedish Council for Financial Reporting s recommendation RFR 1 Supplementary accounting rules for Groups, which specifies additions to IFRS information required under the provisions of the Swedish Annual Accounts Act. Items have been valued in the consolidated financial statements at acquisition value, except in the case of certain financial instruments that are valued at fair value and at accrued acquisition value. The following is a description of the most important accounting policies that have been applied. New and amended standards and interpretations that apply for 2015 The standards, amendments and interpretations that entered into force for the financial year beginning 1 January 2015 have had no material effect on the consolidated financial statements New standards and interpretations that have not yet been applied by the Group A number of new standards and interpretations will enter into force for the financial years beginning after 1 January 2016 and have not been applied in the preparation of this financial report. None of these are expected to have a material impact on the consolidated financial statements with the exception of the following: IFRS 9 Financial Instruments was issued on 24 July 2014 and replaces IAS 39 Financial instruments, Accounting and Valuation. The standard contains rules for accounting and valuation, devaluation and derecognition, as well as general rules for hedge accounting. The standard has been issued in phases and the version of IFRS 9 that was issued in 2014 replaces all previous versions. It is mandatory for periods beginning 1 January 2018 or later. Earlier application is permitted. IFRS 15 Revenue from contracts with customers was issued on 28 May 2014 and will replace IAS 18 Revenue and IAS 11 Construction Contracts. Application of IFRS 15 is mandatory as from financial years beginning on 1 January 2018 or later. IFRS 15 contains a model for revenue accounting for almost all the revenue arising from contracts with customers, except in the case of leases, financial instruments and insurance contracts. The basic principle for the recognition of revenue is that companies should report revenues when all of the risks and benefits associated with the goods and services are transferred to customers in exchange for remuneration for these goods and services. IFRS 16 Leases was issued on 13 January 2016 and will replace IAS 17 Leases. IFRS 16 introduces a right of use model and means for lessees that virtually all lease agreements must be accounted for in the Balance Sheet, and that no classification into operational and financial leasing agreements should therefore be made. Excluded are leasing agreements with leasing periods of 12 months or less and leasing contracts of negligible value. Depreciation of assets and interest expenses on debt is recognised in the Income Statement. The standard contains more extensive information requirements than the current standard. For the lessor, IFRS 16 entails no actual differences compared with IAS 17. IFRS 16 applies for the financial year beginning 1 January 2019 with earlier application permitted provided that IFRS 15 is applied at the same time. The standard has not yet been adopted by the EU. The Group is currently exploring the effect of the above standards and therefore cannot quantify their possible effects. Parent company accounting policies The parent company prepares its annual accounts in accordance with the Swedish Annual Accounts Act (1995:1554) and the Swedish Council for Financial Reporting s recommendation RFR 2 Accounting for legal entities. The statement from the Swedish Council for Financial Reporting, UFR 3 to 10 is also applied. Application of RFR 2 means that the parent company must apply all EU-approved IFRS standards as far as possible within the framework of the Swedish Annual Accounts Act and the Pension Obligations Vesting Act and take into account the relationship between accounting and taxation. No amendments to RFR 2 Accounting for legal entities have affected the parent company financial statements. Amendments to RFR 2 that have not yet entered into force No future changes in RFR 2 are expected to have any significant impact on the parent company financial statements. Consolidated financial statements The consolidated financial statements include the accounts of the parent company OX2 Group AB and the companies over which the parent company has a controlling influence (subsidiaries). Controlling influence over a company is deemed to occur when the parent company has influence over a company, is exposed to or has the right to variable returns from its holding in the company and has the opportunity to affect the return through its influence in the company. Subsidiaries are included in the consolidated accounts from the date on which the control has been transferred to the Group. They are excluded from the consolidated accounts from the date on which the controlling influence ceases. Please refer to Note 15 for the composition of the Group. If the accounting policies applied in a subsidiary differ from the consolidated accounting policies, the subsidiary s accounts are adjusted in order to follow the same principles applied by the other Group companies.

51 Notes 49 Internal transactions between Group companies, as well as Group balances are eliminated in the preparation of the consolidated accounts. Operational acquisitions The acquisition of subsidiaries is reported in accordance with the purchase method. The fair value of the acquired assets and liabilities is determined by the date on which the dominant influence is obtained over the acquired company. The purchase price for the acquisition consists of the fair value of the transferred assets, liabilities and any shares issued by the Group. The fair value of conditional purchase prices is also included. The acquisition costs are not included in the cost of the subsidiary company but are expensed in the period in which they arise. The difference between the total of the purchase price, the value of minority holding and the fair value of the previous holdings and the fair value of acquired identifiable assets, liabilities and contingent liabilities is reported as goodwill. In the event of a negative difference, the difference is recognised directly in the income statement. The minority shares are recognised either as a proportional share of the acquired net assets or at fair value, which is assessed on an acquisition by acquisition basis. Supplementary purchase prices are reported at estimated fair value with subsequent changes recognised in the income statement. Phased acquisition is valued at fair value at the date on which the dominant influence is achieved. Revaluation effects on previously owned shares before the control is achieved are recognised in the income statement. Increases or decreases in ownership shares of subsidiaries that remain under control are reported as changes in equity. Investments in associated companies Holdings in associated companies are reported in accordance with the equity method. An associated company is a unit in which the Group has a significant, but not a controlling influence, which is usually achieved by a shareholding of between 20 50%. Application of the equity method means that investments in associated companies are reported in the statement of financial position at cost with additions for changes of the Group s share of the associated company s net assets and net of any impairment losses and dividends. The Income Statement reflects the Group s share of the associated company s profit after tax. Transactions that are reported in the associated company s comprehensive income are reported in the Group s other total comprehensive income. If the Group s share of reported losses in the associated company exceeds the reported value of the shares in the Group the value of the shares is reduced to zero. Continued losses are not recognised unless the Group has given guarantees to cover losses arising in the associated company. A positive difference between the acquisition value of the acquired shares and the Group s share of the fair values of identifiable assets and liabilities acquired in the associated company constitutes goodwill that is included in the reported value of the associated company. If a negative difference arises, it is reported as revenue in the period in which the acquisition took place. Impairment of reported participations in associated companies is considered if there is any indication of a decline in value. In transactions between Group companies and associated companies, that part of the unrealised gains is eliminated that corresponds to the Group s share of the associated company. Unrealised losses are eliminated in the same way unless this is an indication of a need for impairment. Revenues The revenues of the OX2 Group consist mainly of the sale of wind power projects and wind turbines, as well as the sale of electricity and operational services. Revenue is recognised after completion of delivery to the customer. Profit is then calculated as revenue minus the product cost. The sale of wind power projects is recognised when the conditions above are fulfilled, which normally occurs when the contract is signed. Wind turbines can either be sold as commissioned or as a construction contract. The sale of commissioned wind turbines consists of three separate identifiable parts, a part relating to the actual site/engineering, a part relating to the project management during the construction period and a part relating to the wind turbine itself. Revenue is recognised at the fair value of the payment received, or that will be received, with deductions for VAT, estimated customer returns, discounts and similar deductions. Revenues from the sale of wind power projects and commissioned wind turbines are recognised when all of the following conditions are met: the Group has transferred the significant risks and benefits associated with the ownership of the product to the purchaser; the Group retains neither continuing managerial involvement to the degree usually associated with ownership and the Group does not exercise any actual control over the product sold; the revenue can be measured reliably; it is probable that the financial benefits associated with the transaction will flow to the Group; and the expenditure incurred, or that will be incurred, in respect of the transaction can be calculated in a reliable way. For those projects that are sold as construction contracts, the revenue is recognised in accordance with the principle of the percentage of completion method. This means that the revenue is matched to the costs on the basis of the work carried out up to the balance sheet date. Revenues and costs are attributed to the accounting period during which the work is performed. Revenue for the project/site is recognised at the date of signature of the contract under the same principle as for the sale of wind power projects. Revenue from project management is reported successively during the construction period and the revenue from the actual wind turbine is normally reported at access by the counterparty, which is the time when the above conditions are fulfilled. Revenue from the sale of electricity and operational services is recognised in the period in which the delivery has been made. Revenue from accrued electricity certificates is recognised in the period in which the certificated delivery of electricity has occurred. State funding Government grants are reported in the Balance Sheet as prepaid income when there is reasonable assurance that the funding will be received and that the Group will meet the conditions attached to the funding. Contributions are capitalised systematically in the Income Statement in the same way, and over the same periods, as the costs for which the funding is intended to compensate. Government grants

52 50 Notes related to assets are reported in the Balance Sheet as prepaid income and are recognised as other operating income over the useful life of the asset. Interest income Interest income is recognised on a time proportion basis using the effective interest method. The effective interest rate is the rate at which the net present value of all future inward and outward payments during the interest period is equal to the carrying amount of the receivable. Leasing contracts A financial lease is an agreement whereby the financial risks and benefits associated with ownership of an object to all material extent are transferred from the lessor to the lessee. Other leasing contracts are classified as operational leasing agreements. The Group as the lessee Assets that are held under financial lease agreements are reported as fixed assets in the consolidated Balance Sheet at fair value at the inception of the lease or at the present value of the minimum lease payments, if this is lower. The corresponding liability to the lessor is recognised in the Balance Sheet as a financial lease liability. Lease payments should be apportioned between the interest rate and the amortisation of the debt. The interest rate is distributed over the term of the lease so that each accounting period is charged with an amount corresponding to a fixed interest rate on the liability for each period. The interest expense is recognised directly in the Income Statement. An asset held under a finance lease is depreciated over the estimated useful life of the asset, as above, or over the leasing period if this is shorter. Lease payments under operating leases are expensed on a straight line basis over the lease term unless another systematic basis is more representative of the user s financial benefit over time. Foreign currency Transactions in foreign currencies are translated into the functional currency at the exchange rate that is in force on the day of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the exchange rate in force on the balance sheet date. Exchange rate differences arising from translation are reported in the Income Statement. Non-monetary assets and liabilities that are reported at their historical acquisition values are translated at the exchange rate at the date of the transaction. Non-monetary assets and liabilities that are recognised at fair value are converted to the functional currency at the rate in effect at the time of the fair value valuation. Exchange rate differences are recognised in the Income Statement in the period in which they arise, with the exception of transactions forming hedges that satisfy the conditions for hedge accounting of cash flow or of net investments, when gains and losses are recognised in equity. Financial reports for foreign operations Items included in the financial statements of the various entities of the Group are recognised in the currency of the primary economic environment in which the unit operates primarily (functional currency). In the consolidated financial statements, all amounts are translated into Swedish kronor (SEK), which is the parent company s functional and presentation currency. Assets and liabilities in foreign operations, including goodwill and other Group surplus and deficit values, are translated from the functional currency to the reporting currency of the Group, Swedish kronor, using the exchange rate on the balance sheet date. Income and expenses in foreign operations are translated into SEK at an average exchange rate comprising an approximation of the exchange rates in effect at the respective transaction dates. Translation differences arising from currency translation of foreign operations are reported in the comprehensive income result and accumulated in a separate component of equity, hereinafter referred to as the translation reserve. In the event of disposal of a foreign operation, the accumulated translation difference attributable to the divested foreign operation is reclassified from equity to the profit for the year as a reclassification adjustment at the time the gain or loss on the sale is reported. Borrowing costs Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale, are included in the acquisition value of the asset until the time when the asset is ready for its intended use or sale. Interest income from the temporary placement of borrowed funds for the above asset is deducted from the borrowing costs that may be included in the acquisition cost of the asset. Other borrowing costs are charged to earnings for the period to which they relate. Remuneration to employees Remuneration to employees in the form of wages, paid leave, sick leave, etc., as well as pensions, is reported as earned. With regard to pensions and other post-employment benefits, these are classified as defined contribution plans or defined benefit pension plans. The Group only has defined contribution pension plans. Defined contribution plans For defined contribution plans, the company pays fixed contributions to a separate independent legal entity and has no obligation to pay further contributions. Costs are charged against consolidated earnings as the benefits are earned, which normally coincides with the time at which the premiums are paid. Taxes The tax cost is the total of current tax and deferred tax. Current tax Current tax is calculated on the taxable profit in the period. Taxable profit differs from the reported results in the Income Statement when it has been adjusted for nontaxable income and non-deductible expenses and for income and costs that are taxable or deductible in other periods. The Group s current tax liability is calculated according to the rates that have been adopted or substantively enacted at the balance sheet date. Deferred tax Deferred tax is accounted for on the difference between the carrying amount of assets and liabilities in the financial statements and the tax value used in the calculation of taxable profit. Deferred tax is reported in accordance with the Balance Sheet method. Deferred tax liabilities are recognised in principle for all taxable temporary differences and deferred tax assets are recognised in principle for all deductible temporary differences to the extent that it is probable that the amounts can be utilised for future taxable surpluses. Deferred tax liabilities and receivables are not recognised if the temporary difference is attributable to goodwill or if it

53 Notes 51 occurs as a consequence of a transaction that constitutes the initial recognition of an asset or liability (which is not a business acquisition) and that, at the time of the transaction, affects neither accounting profit nor taxable profit. The deferred tax liability is recognised for taxable temporary differences relating to investments in subsidiaries and associated companies, except in the cases where the Group is able to control the timing of the reversal of the temporary difference and it is probable that such a reversal will not occur in the foreseeable future. The deferred tax liabilities that are attributable to the deductible temporary differences in respect of such investments and interests is only recognised to the extent that it is probable that the amounts can be utilised against future taxable surpluses and it is probable that such a use will take place in the foreseeable future. The carrying amount of deferred tax assets is tested at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available for use in whole or in part against the deferred tax asset. Deferred tax is calculated in accordance with the tax rates that are expected to apply to the period when the asset is recovered or the liability is settled, based on the tax rates (and tax laws) that have been enacted or substantively enacted at balance sheet date. Current and deferred taxes are offset when they relate to income tax that is levied by the same authority and the Group intends to regulate the tax with a net amount. Current and deferred tax for the period Current and deferred tax is reported as a cost or revenue in the Income Statement, except when the tax is attributable to transactions recognised directly in equity. In such cases, tax is also recognised directly in equity. Fixed assets Tangible fixed assets and intangible assets with finite useful life are reported at acquisition value with deductions for accumulated depreciation and impairment. The cost includes the purchase price and costs directly attributable to bringing the asset to the location and in the condition for use in accordance with the purpose of the acquisition. Borrowing costs are included in the acquisition value when the criteria for this are met. Tangible fixed assets comprising parts with different useful lives are regarded as being separate components of tangible fixed assets. Subsequent expenditure is added to the acquisition value only if it is probable that the future financial benefits associated with the asset will flow to the company and the cost can be calculated in a reliable way. All other subsequent expenditure should be recognised as an expense in the period in which it arises. A subsequent expenditure is added to the acquisition value if the cost relates to the replacement of identified components or parts thereof. Any residual reported values for replaced components are scrapped and expensed in the context of the replacement. Expenditure for repairs and maintenance are expensed on an ongoing basis. Depreciation is based on the acquisition value of the assets with a deduction for estimated residual value at the end of its useful life and is reported on a straight line basis over the estimated useful life of the respective essential component. The useful life of all the components of the wind turbines, foundations and electrical installations is expected to coincide, which is why no further breakdown has taken place. Useful lives and residual values are subject to annual review. The estimated useful lives are as follows: Equipment 4 7 years Intangible assets 5 8 years Gains or losses that occur during scrapping or disposal of material fixed assets make up the intermediate difference between what has been received for the asset and its carrying value and is reported in operating profit. Intangible assets Intangible assets acquired in a company acquisition are identified and reported separately from goodwill when they meet the definition of an intangible asset and their fair values can be calculated in a reliable way. The acquisition value of such intangible assets consists of their fair value at the date of acquisition. After initial recognition, intangible assets acquired through a company acquisition are recognised at cost less accumulated amortisation and any accumulated impairment in the same way as separately acquired intangible assets. Impairment At each balance sheet date, the Group analyses the reported values of tangible and intangible assets to determine whether there is any indication that these assets have decreased in value. If there are any indications in this respect, the recovery value of the asset is calculated in order to determine the size of any impairment. Where it is not possible to estimate the recoverable amount of an individual asset, the Group calculates the recoverable amount of the cash-generating unit to which the asset belongs. In addition, intangible assets with indefinite useful lives are impairment tested each year as well as intangible assets that are not yet available for use. The recoverable amount is the higher of fair value minus the acquisition cost and beneficial value. When calculating the beneficial value the estimated future cash flow is discounted to current value at a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset (or a cash generating unit) is set at a lower value than the reported value, the reported value of the asset (or the cash-generating unit) is reduced to the recovery value. An impairment is recognised directly in the Income Statement. If an impairment is then subsequently reversed, the carrying amount of the asset (the cash-generating unit) is increased to the revalued asset recovery value, but the increased carrying amount may not exceed the carrying amount that would have been set if no impairment of the asset (the cash-generating unit) had taken place in previous years. A reversal of an impairment is recognised directly in the Income Statement. Impairment of goodwill is not reversed. Financial instruments A financial asset or a financial liability is recognised in the Balance Sheet when the company becomes a party to the instrument s contractual terms. A financial asset is removed from the Balance Sheet when the contractual rights have been realised, mature or when the company loses control over it. A financial liability is removed from the Balance Sheet when the obligation in the contract is fulfilled or it becomes otherwise extinct.

54 52 Notes At each balance sheet date the company assesses whether there are objective indications that a financial asset or group of financial assets, which are not valued at fair value with changes in value recognised in profit or loss, require impairment due to past events. Financial instruments are reported at accrued acquisition value or at fair value, depending on their initial assignment under IAS 39. Fair value of financial instruments The fair values of financial assets and financial liabilities are determined according to the following: The fair value of financial assets and liabilities with standard terms and conditions which are traded in an active market is determined in reference to the quoted market price. The fair value of financial assets and liabilities is determined in accordance with generally accepted valuation models, for example models based on discounted cash flow analyses. Observable market data is used as far as possible in the valuation methods applied. The carrying value of financial assets and liabilities is considered to be a good approximation of their fair value, when the term is short, unless otherwise indicated in the following notes on the accounts. Derivatives and hedge accounting All derivatives are recognised at fair value and recognised as either assets or liabilities in the Balance Sheet, depending on whether the fair value is positive or negative at the balance sheet date. Reporting of the changes in value is dependent on whether the derivative is identified as a hedging instrument or not. If a derivative is identified as a hedging instrument in a cash flow hedge, the effective portion of the changes in the derivative s fair value is reported in other comprehensive income and is accumulated in the hedge reserve in equity. The ineffective portion of a cash flow hedge is recognised directly in the consolidated results. Amounts attributed to equity are reversed in the consolidated results during the periods when the hedged item affects the consolidated result. Embedded derivatives An embedded derivative is part of a compound financial instrument that also includes a host contract that is not a derivative instrument, which means that some of the compound agreement s cash flows vary in a manner similar to the cash flows of a standalone derivative instruments. An embedded derivative is separated from the host contract and valued at fair value and reported separately in the Balance Sheet when its financial characteristics are not closely associated with the host contract, provided that the compound agreement is not recognised at fair value through the Income Statement. Valuation at fair value Information must be given about the method for determination of fair value in accordance with a three-level valuation hierarchy. The levels should reflect the extent to which the fair value is based on observable market data and own assumptions. The following describes the various levels for the determination of fair value. Level 1 Financial instruments for which fair value is determined on the basis of observable (unadjusted) quoted market prices in an active market for identical assets and liabilities. A market is considered to be active if listed prices from a stock exchange, brokers, industrial group, pricing service or supervisory authority are readily and regularly available and these prices represent real and regularly occurring market transactions at arm s length. Level 2 Financial instruments for which fair value is determined on the basis of valuation models that are based on other observable data for the asset or liability other than the quoted prices included in level 1, either directly (i.e. price quotations) or indirectly (i.e. derived from quotations). Examples of observable data within level 2 are data that can be used as a basis for the price assessment, for example market interest rates and yield curves. Level 3 Financial instruments for which fair value is determined on the basis of valuation models where substantial input is based on non-observable data. Determining fair value Currency forward contracts The fair value of forward exchange contracts is determined from the current forward rates for the remaining term at the balance sheet date. All forward exchange contracts are assigned at level 2 in the fair value hierarchy above. The fair value of currency options is determined using the Black Scholes model, that is obtained on a quarterly basis. These are assigned at level 2 in the fair value hierarchy above. Offsetting financial assets and liabilities Financial assets and liabilities are offset and recognised as net amounts in the Balance Sheet when there is a legally enforceable right to offset and when the intention is to regulate the items with a net amount or at the same time to realise the asset and settle the liability. No offsets have been made of the financial assets and liabilities in the Group, nor is there any no legal right to offset. Cash and cash equivalents Cash and cash equivalents include cash and bank balances and other short-term investments that can be easily converted into cash and are subject to insignificant risk of changes in value. In order to be classified as cash and cash equivalents, maturity may not exceed three months from the date of acquisition. Cash and bank balances are categorised as Loans and receivables, which means valuation at accrued acquisition value. Because funds in banks are available on demand, the accrued acquisition value is equal to the nominal value. Accounts receivable Accounts receivable are categorised as Loans and receivables, which means valuation at accrued acquisition value. The expected maturity of accounts receivables is short, which is why they are reported at nominal amounts without discounting. Deductions are made for receivables that have been deemed to be uncertain. Impairment of accounts receivable is reported as operating expenses.

55 Notes 53 Accounts payable Accounts payable are categorised as Other financial liabilities, which means valuation at accrued acquisition value. The expected maturity of accounts payable is short, which is why they are reported at nominal amounts without discounting. Liabilities to credit institutions and other loan liabilities Interest-bearing bank loans, bank overdrafts and other loans are categorised as Other financial liabilities and are measured at amortised cost in accordance with the effective interest rate method. Any differences between the loan amount received (net after transaction costs) and the payment or repayment of loans over the duration of the loans are reported in accordance with the consolidated accounting policy for borrowing costs (see above). Provisions Provisions are reported when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made. The amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties associated with the obligation. When a provision is calculated by estimating the expenditure expected to be required to settle the obligation, the carrying amount must be equal to the present value of these payments. Where some or all of the expenditure required to settle a provision is expected to be paid by a third party, the payment must be reported separately as an asset on the Balance Sheet when it is virtually certain that reimbursement will be received if the company settles the obligation and the amount can be calculated in a reliable way. Accounting policies for the parent company The parent company complies with the Swedish Annual Accounts Act and the Swedish Council for Financial Reporting s recommendation RFR 2 Accounting for legal entities. Application of RFR 2 means that the parent company must apply all EU-approved IFRS standards as far as possible within the framework of the Swedish Annual Accounts Act and the Pension Obligations Vesting Act and take into account the relationship between accounting and taxation. The differences between the parent company s and Group s accounting principles are described below: Shares in subsidiaries Shares in subsidiaries are accounted for in accordance with the acquisition value method. Acquisition-related costs to subsidiaries that are expensed in the consolidated financial statements are included as part of the acquisition value of shares in subsidiaries. The carrying amount of shares in subsidiaries are tested for impairment when there is an indication of need for impairment. Group contributions and shareholder contributions Shareholder contributions are recognised directly in the equity of the recipient and reported against shares and participations from the provider, in so far as impairment is not required. Group contributions between the parent company and subsidiaries are reported as year-end dispositions. Pensions The parent company s pension commitments are calculated and reported based on Pension Obligations Vesting Act. Application of the Pensions Obligations Vesting Act is a prerequisite for tax deductibility. Leasing In the parent company, all leasing agreements are reported in accordance with the regulations for operational leasing. Note 3 Assessments and estimates in the financial statements The consolidated financial statements are based on various estimates and assessments made by management that affect the application of the accounting policies and the carrying amounts of assets, liabilities, revenues and costs. Assessments that are made may deviate from future results. The estimates and assumptions are reviewed on a regular basis. The effects of changes in estimates are reported in the period in which the change is made if the change affects that period only, or in the period of the change and future periods, if the change affects both the current period and future periods. Impairment of fixed assets Determination of whether the fixed asset should be impaired or not requires an assessment of the recoverable value. The recoverable amount is the higher of the asset s beneficial value or fair value less sales costs. The calculation of the beneficial value requires estimates of future cash flows and the discount rate. Naturally enough, such assessments always entail a certain degree of uncertainty. The assessment of the degree of completion for the percentage of completion method The Group applies the percentage of completion method in accounting for the projects that are sold as construction contracts. The percentage of completion method means that the Group must make estimates in respect of the completion of the transaction at the balance sheet date. Note 4 Financial risk management and financial instruments Financial policy Through its operations, OX2 is exposed to various financial risks in the form of market risks, which include currency and interest rate risks, credit and financial risks. The Group s overall risk management policy focuses on the unpredictability of the financial markets and strives to minimise potentially adverse effects on the Group s financial results. Risk management is performed in accordance with the financial policy adopted by the Board. The Board has established written policies for both the overall risk handling and for specific areas such as currency risk, interest risk, counterparty risk and the investment of surplus liquidity. The financial policy is adopted by the Board and updated annually and whenever necessary.

56 54 Notes Market risks Introduction OX2 s main business model is to sell commissioned wind power plants. Consequently, most market risks are indirect, i.e. OX2 s customers may manage risks and OX2 suffers indirectly via reduced demand and/or lower sales prices. Currency risks In connection with the project planning and ordering of wind turbines, which primarily takes place from European suppliers in euros, there is a currency risk. The main principle is that OX2 locks the purchase price in SEK at contract signature which means that currency risk is then borne by the supplier. In cases where this is not possible, currency hedging takes place. The sale of commissioned wind farms to European purchasers is usually in euros, which means that there can be an exchange rate risk. In each project, the currency risks are managed in the manner that meets the policy requirements on risk minimisation adapted to the respective project s conditions. It also takes account of the Group s total inflows and outflows in euros within the same period. Given the 2015 flows and no hedge, a change in the EUR/ SEK exchange rate of approximately SEK 0.10 would influence the result with SEK +0.2 million (+ 1.4). In the case of a change to the EUR/SEK exchange rate of SEK 0.10 at the end of the year, the impact on equity is expected to amount to approximately SEK +0.1 million (+ 0.3) given the currency hedging that has been recognised via equity. Interest rate risk OX2 s customers normally borrow a large part, often between 50 70%, of their investments in wind power. Consequently, the interest rate affects the demand for wind power plants. The Group has no loans from financial institutions but is affected in part by the interest component of currency derivatives that are included in the hedging for the currency risks, see also under Currency risks section. In the event of an interest rate change of 0.01, the negative market value of the currency contract would decrease/ increase by SEK 0.0 million (0.0) based on the current currency forward contract in Hedging policy for the electricity and electricity certificate risks When OX2 participates as part owner of wind power plants, the policy is used for the management of electricity and electricity certificate risks that has been developed over many years in the OX2 Group. Hedging must normally be distributed over the price hedging period. The maximum price hedging horizon is normally the available contracts from Nord Pool, currently the current calendar year plus 5 years. Electricity certificates are price hedged with regard to liquidity in the certificate market. OX2 s risk philosophy is based on security before risk but with regard to the commercial opportunities of the markets. Price risk for electricity and electricity certificates The future settlement price for electricity and electricity certificates is the single most important parameter in the customer s investment calculations. Thus, OX2 s activities in both the short and the long term are affected by how the futures market for electricity and electricity certificates develops. OX2 follows the market carefully in order to understand how the market works and how it is linked to the prices of other types of energy, economic activity, etc. Fluctuations in the price of electricity thereby affect the Group s potential customers. Liquidity and financing risk Liquidity risk is understood to be the risk that the Group can be adversely affected by the lack of management and control of cash and cash equivalents and cash flows. Financing risk is the risk that the Group is not able to mobilise sufficient funds to meet its commitments. OX2 is constantly working with cash flow forecasts and with respect to wind turbines sold to customers as commissioned, the company aims to match payment plans from customers with those that the company has with the most important suppliers in the respective projects. Maturity distribution of the contractual payment obligations related to the Group s and parent company s financial assets and liabilities is shown in the table on the next page. Investments The Group s cash flow generated from operating activities and from the sales of projects/commissioned wind turbines will be used for the development of new projects and the financing of operations. Surplus liquidity will be invested with counterparties that have high credit ratings and thus low credit risk. The Group s risk in respect of interest income is relatively limited. Given the 2015 figures, a reduction of revenue interest to 0% would lead to a reduction of interest income of about SEK 0.3 million (1.3).

57 Notes 55 Note 4 Financial risk management and financial instruments, continued Maturity distribution of the contractual payment obligations related to the Group s and parent company s financial assets and liabilities is shown in the tables below. Group (SEK thousand) Assets 0 3 months 3 12 months 1 5 years Total 0 3 months 3 12 months 1 5 years Accounts receivable 18,750 18,750 29,202 29,202 Other current receivables 16,554 16,554 44,059 44,059 Derivative instruments 284 Cash and cash equivalents 174, , , ,791 Total 174,858 35, , ,791 73, ,336 Total Liabilities 0 3 months 3 12 months 1 5 years Total 0 3 months 3 12 months 1 5 years Provisions 1,300 1,300 1,300 1,300 Other long-term liabilities 1,408 1,408 2,461 2,461 Derivative instruments Accounts payable 37,127 37,127 28,930 28,930 Other current liabilities 33,366 33,366 1,060,901 1,060,901 Total 70,523 2,708 73,231 1,089,831 3,761 1,093,592 Total Parent company (SEK thousand) Assets 0 3 months 3 12 months 1 5 years Total 0 3 months 3 12 months 1 5 years Accounts receivable Receivables from Group companies 83,675 83,675 63,446 63,446 Other current receivables 2,033 2,033 1,940 1,940 Cash and cash equivalents 9,367 9,367 7,865 7,865 Total 9,367 85,758 95,125 7,865 65,643 73,508 Total Liabilities 0 3 months 3 12 months 1 5 years Total 0 3 months 3 12 months 1 5 years Other long-term liabilities to Group companies 34,029 34,029 Accounts payable 2,248 2,248 1,683 1,683 Liabilities to Group companies 47,680 47,680 39,482 39,482 Other current liabilities 1,761 1,761 1,937 1,937 Total 51,690 51,690 43,102 34,029 77,131 Total

58 56 Notes Note 4 Financial risk management and financial instruments, continued Credit and counterparty risk Credit risk is the risk that the respondent cannot fulfil its contractual obligations to the Group, resulting in a financial loss. External purchasers assume part of OX2 s credit risk in connection with the sale of wind turbines. The proportion which the external purchasers assume depends on whether delivery has been made or not. External purchasers can provide security for their obligations through OX2. Furthermore, the purchaser makes an advance payment in accordance with a payment plan. The Group and the parent company s maximum exposure to credit risk is represented by the carrying values of all financial assets and is shown in the table below. Group Parent company (SEK thousand) 31/12/ /12/ /12/ /12/2014 Accounts receivable 18,750 29, Receivables from Group companies 83,675 63,446 Other receivables 16,554 44,059 2,033 1,940 Cash and cash equivalents 174, ,791 9,367 7,865 Maximum exposure to credit risk 210, ,052 95,125 73,508 Categorisation of financial instruments The carrying value of financial assets and financial liabilities, divided per evaluation category in accordance with IAS 39, is shown in the table below. Group Parent company (SEK thousand) 31/12/ /12/ /12/ /12/2014 Financial assets Loans and receivables 1) Accounts receivable 18,750 29, Receivables from Group companies 83,675 63,446 Other current receivables 16,554 44,059 2,033 1,940 Derivatives 2) 284 Cash and cash equivalents 174, ,791 9,367 7,865 Total financial assets 210, ,336 95,125 73,508 Financial liabilities Derivatives identified as hedging instruments Derivatives 2) 30 Other financial liabilities 1) Provisions 1,300 1,300 Other long-term liabilities 1,408 2,461 34,029 Liabilities to Group companies 47,680 39,482 Accounts payable 37,127 28,930 2,248 1,683 Other current liabilities 33,366 1,060,901 1,761 1,937 Total financial liabilities 73,231 1,093,592 51,690 77,131 1) Valued at accrued acquisition value. 2) Belongs to category 2. Discounting has no significant effect on short-term financial instruments. Our assessment is that there are no significant changes to the credit risk, which is why the fair value and book value of our long-term liabilities are considered to be essentially the same. There has been no reclassification between the valuation categories above during the period. Management of capital risks The Group target for the management of the capital is to safeguard the Group s ability to continue its activities so that the Group can continue to generate a reasonable return to the shareholders and deliver benefits to other stakeholders. The Group strategy is not to have any debt apart from financing of inventory and accounts receivable.

59 Notes 57 Note 5 Revenue The OX2 Group s reported group revenue comes from the sales of electricity, commissioned wind turbines and management services. (SEK thousand) Group Parent company Net sales Electricity sales 63,071 54,920 Energy tax paid 18,027 17,670 Sales of projects and wind turbines 1,516,678 1,721,703 Sales within Enstar 40,421 Funding from the Swedish Energy Agency 1,324 20,048 Sales of management services 16,494 17,016 2,214 2,215 Sales of project management and other services 1,217 1,797 Sales of biofuel and natural gas 3,124 5,192 Management fee 19,550 19,909 Total 1,624,303 1,803,006 21,764 22,124 Note 6 Information about auditor fees and reimbursement Group Parent company (SEK thousand) Deloitte AB Audit tasks 1, Audit work in addition to audit tasks Tax advice Total 2,548 1, The audit fee refers to the auditor s remuneration for the statutory audit. The work involves the examination of the annual report and accounts, the Board of Directors and the CEO s management and the remuneration for advice given in the context of the audit task. The audit activity in addition to the audit task is mainly concerned with quality assurance services other than the statutory audit. Note 7 Leasing Operational leasing The parent company s operational leasing concerns office machinery and rent for office premises. The rent for the office premises (head office) has been reported in full in the parent company accounts but has been re-invoiced partially to sub si diaries according to the distribution key. The annual cost of operational leasing agreements amounts to SEK 4,075,000 (3,018,000) for the parent company. The Group s operational leasing concerns office machinery, rent for office premises, rent and access rights agreements. The agreements include index clauses that mean that rent is subject to price adjustment according to the CPI. The annual cost of operational leasing contracts amounts to SEK 5,059,000 (5,045,000) in respect of the Group. At the balance sheet date, the Group had outstanding commitments under non-cancellable operating leases, with due dates as follows: Group Parent company (SEK thousand) Year 1 5,310 4,383 4,088 3,018 Between 2 and 5 years 946 5, ,018 Later than 5 years 15 Total 6,256 9,996 4,247 6,035

60 58 Notes Note 8 Number of employees, salaries, other remuneration and social security expenses Average number of employees Number of employees Of whom men Number of employees Of whom men Parent company Sweden Total in parent company Subsidiaries Sweden Finland Poland Total in subsidiaries Total in Group Group Parent company 31/12/ /12/ /12/ /12/2014 The distribution of senior management at balance sheet date Women: Board members other people in the management of the Company, incl. CEO Men: Board members other people in the management of the Company, incl. CEO Total (SEK thousand) Salaries, remuneration, etc. Salaries and other remuneration Soc. costs (of which pension costs) Salaries and other remuneration Soc. costs (of which pension costs) Parent company 8,839 4,866 8,225 5,122 (1,598) (1,662) Subsidiaries 38,121 14,734 28,009 13,818 (5,540) (4,567) Total for Group 46,960 19,600 36,234 18,940 Salaries and remuneration divided between Board members etc. and employees The Board and CEO (of which bonuses, etc.) Other employees The Board and CEO (of which bonuses, etc.) Other employees Parent company 1,849 6,990 1,858 6,367 (0) (0) Subsidiaries 6,989 28,052 5,579 22,430 (593) (153) Total in subsidiaries 6,989 28,052 5,579 22,430 Total in Group 8,838 35,042 7,437 28,797 (593) (153)

61 Notes 59 Note 8 Number of employees, salaries, other remuneration and social security expenses, cont. Remuneration to senior executives The Chairman and other Board members are paid a fee in accordance with the resolution of the Annual General Meeting. In 2015, the costs of remuneration to the Board of Directors amounted to SEK 694,000 (694,000). Remuneration to the CEO and other senior executives consists of basic salary, bonuses, other benefits and pension. Other senior executives are the five individuals who, together with the CEO, form Group Management. Johan Wieslander, who is a member of the Board of Directors of OX2 Group AB has a consulting assignment within the OX2 Group that is invoiced on an ongoing basis and in accordance with market conditions. Bonus A profit-based bonus for 2015 has been reserved for all employees amounting to a total of SEK 2,673,000 (588,000). Pensions The Group only has defined contribution pension plans. Pension cost relates to the cost that will affect earnings for the year. The retirement age for the CEO is 65. Pension premiums may amount to a maximum of 35% of the pensionable salary. The pensionable salary is the basic salary. The retirement age for other senior management is 65. Pension premiums for other senior management are individually agreed and are usually a maximum of 24% of the pensionable salary. For the CEO and and Deputy CEO, however, the pension premiums amount to 32% of the pensionable salary. Severance pay In the event of dismissal by the company, the CEO and Deputy CEO have a period of notice of 6 months and no severance pay. For other senior management, the period of notice is 3 to 6 months. There are no agreements regarding severance pay for other senior executives. Preparation and decision process Remuneration to the CEO in respect of the financial year has been decided by the Board. Remuneration to other senior management has been decided by the CEO after consultation with the Board. Note 9 Financial income Group Parent company (SEK thousand) Interest income 303 1, Internal interest income Exchange rate gains 3,377 3,385 Dividends 70,000 50,000 Total financial income 3,680 4,636 70,192 50,829 All interest income relates in its entirety to financial assets that are not assessed at fair value via the Income Statement. Note 10 Financial costs Group Parent company (SEK thousand) External interest costs Internal interest costs 567 1,702 Interest costs leasing debt Exchange rate losses 3,727 Other financial costs 462 Total financial costs 4, ,055 All interest costs relate in their entirety to financial assets that are not assessed at fair value via the Income Statement. Note 11 Year-end appropriations Group Parent company (SEK thousand) Group contributions received 7,300 6,947 Group contributions provided 5,016 3,120 Additional depreciation 440 Total year-end appropriations 2,284 4,267

62 60 Notes Note 12 Taxes Reported tax expense Group Parent company (SEK thousand) Current tax cost 3, Adjustments recognised in the current year in respect of earlier years current tax Tax attributable to deficits 4,186 7, Temporary differences Provision for deferred tax liability related to untaxed reserves Deferred tax Total reported tax cost 7,616 7, Income tax in Sweden is calculated at 22% on the year s taxable profit. In Finland, the corresponding rate is 20% and in Poland it is 19%. A reconciliation between the reported results and the tax cost for the year is given below. Deferred tax assets and tax on untaxed reserves are calculated at 22%, which is the applicable tax rate as of 1 January Reconciliation of the tax cost for the year Group Parent company (SEK thousand) Profit for the year before tax 72,278 60,352 66,521 49,571 Tax calculated in accordance with the Swedish tax rate 15,901 13,277 14,635 10,906 The tax effect of non-deductible expenses The tax effect of non-taxable revenues 25,562 25,812 15,401 11,000 Temporary differences Tax effect of deficits Tax effect of Group adjustment items 17,812 4,470 Tax effect of branches 42 Adjustments recognised in the current year in respect of earlier years current tax 52 Total reported tax cost for the year 7,616 7, Group Deferred tax assets/tax liabilities 31/12/ /12/2014 Fiscal deficit 3,622 7,605 Financial instruments 7 61 Intangible assets 152 Pre-paid income 1,903 1,903 Tax allocation reserve 560 Total 4,972 9,599 Parent company Deferred tax assets 31/12/ /12/2014 Intangible assets Fiscal deficit 739 Total

63 Notes 61 Note 13 Other intangible fixed assets Group Parent company (SEK thousand) 31/12/ /12/ /12/ /12/2014 Opening acquisition values 7,510 7,828 1, Purchases 5, Disposals for the year Closing acc. acquisition values 12,632 7,510 1,069 1,031 Opening depreciation 3,646 3, Depreciation according to plan 949 1, Disposals for the year 388 Closing acc. acquisition values 4,595 3, Closing residual value according to plan 8,037 3, Estimated utilisation period for intangible assets is 5 to 8 years. Note 14 Equipment Group Parent company (SEK thousand) 31/12/ /12/ /12/ /12/2014 Opening acquisition values 20,662 22,757 4,470 4,470 Purchases 1, Disposals for the year 27 2,181 Closing acc. acquisition values 21,940 20,662 5,462 4,470 Opening depreciation 12,848 11,932 2,291 1,542 Depreciation according to plan 2,482 3, Disposal for the year 9 2,790 Closing acc. depreciation 15,321 12,848 3,081 2,291 Closing residual value according to plan 6,619 7,814 2,381 2,179 Financial leasing agreements The Group s financial leasing agreements relate to the leasing of 15 (15) cars. Group (SEK thousand) 31/12/ /12/2014 Opening acquisition values 5,284 3,947 Purchases 1,497 2,741 Sales 2,882 1,404 Closing acc. acquisition values 3,899 5,284 Opening depreciation 1,957 2,008 Sales Depreciation according to plan Closing acc. depreciation 1,899 1,957 Closing residual value according to plan 2,000 3,327 Total equipment 8,619 11,141

64 62 Notes Note 14 Equipment, cont. Future leasing charges for finance leases with a remaining term: Group 31/12/ /12/2014 (SEK thousand) Nominal Current value Nominal Current value Less than 1 year Longer than 1 year but not more than 5 years Longer than 5 years Total ,909 1,760 Note 15 Participations in Group companies The Group contains the following subsidiaries as at 31 December Parent company (SEK thousand) 31/12/2015 Opening acquisition value 117,141 Paid shareholder contributions OX2 Wind Poland AB 3,300 Acquisition of shares in Enstar AB 960 Reclassification of shares in Enstar AB from associated companies 44 Closing acquisition value 121,445 Parent company (SEK thousand) 31/12/2014 Opening acquisition value 117,041 Acquisition Gamla O2 Vind 100 Closing acquisition value 117,141 The Group contains the following subsidiaries as at 31 December Company name Number of shares Capital share, % Carrying value (SEK thousand) 2015 Carrying value (SEK thousand) 2014 OX2 Wind AB 10, % 116, ,080 OX2 TCM AB 1, % OX2 Vindel AB 1, % OX2 Bio AB % OX2 Wind Finland AB 1, % OX2 Wind Poland AB 1, % 3, Enstar AB 104,000 52% 1,004 Total 121, ,141

65 Notes 63 Note 15 Participations in Group companies, cont Company name Corp. ID no. Reg. office Equity Profit OX2 Wind AB Stockholm 177,203 99,956 OX2 TCM AB Stockholm OX2 Vindel AB Stockholm OX2 Bio AB Stockholm OX2 Wind Finland AB Stockholm OX2 Wind Poland AB Stockholm 3,395 1 Enstar AB Stockholm 9,236 2,555 All subsidiaries are consolidated in the Group. The percentage of voting rights in the subsidiaries that are directly owned by the parent company does not differ from the percentage of ordinary shares owned. Total ownership of non-controlling interests for the period amounts to SEK 3,341,000 (0) of which SEK 3,341,000 comes from Enstar AB and SEK 0 comes from OX2 BIO AB. Note 15 Participations in associated companies The following are the associated companies that the Group owns as at 31 December None of the associated companies are significant to the Group. The associated companies listed below have share capital consisting of only the ordinary shares that are directly owned by the Group. The associated company Sjisjka Wind AB is impaired to SEK 0, the Group has no obligations to cover the accumulated losses in Sjisjka Wind AB. During the year, OX2 increased its ownership in Enstar AB and the holding has thus been reclassified from participations in associated companies to participations in subsidiaries. Group Company name Number of shares Carrying value (SEK thousand) Capital share, 31/12/2015 Sjisjka Vind AB 2) 1,000 25% 0 Total 0 (SEK thousand) Company name Corp. ID no. Reg. office Turnover Profit for period Assets Liabilities Sjisjka Vind AB 2) Stockholm 94,043 32, , ,040 The capital share is consistent with the share of voting power. (SEK thousand) Group 1) Enstar AB 31/12/ /12/2014 Opening carrying value 1,300 1,017 Share of previous years reported results 13 Share of profit for the year* Purchase of additional shares 960 Reclassification of shares in subsidiaries 2,291 Closing reported value 0 1,300 * Share of profit for the year based on unaudited accounts for Enstar AB. (SEK thousand) Group 2) Sjisjka Vind AB 31/12/ /12/2014 Opening carrying value 0 0 Share of profit for the year 0 0 Closing reported value 0 0

66 64 Notes Note 17 Work in progress for others account Group (SEK thousand) 31/12/ /12/2014 Maevaara 885,546 Ajos 256,930 Jouttikallio 70,272 Brobacken 129,496 Rödstahöjden 7,343 Stigshöjden 7,223 Lehtirova 5,658 Högkölen 4,338 Långmossa 3,250 Other projects* 6,463 7,871 Closing reported value 354,133 1,030,256 * Individual projects not exceeding SEK 3 million. Ongoing work refers to the costs incurred for each project. Note 18 Accounts receivable Group Parent company (SEK thousand) 31/12/ /12/ /12/ /12/2014 Accounts receivable, gross 18,798 29, Provision for doubtful debts 49 Total accounts receivable, net of the provision for doubtful debts 18,750 29, Management assesses that the reported value for accounts receivable, net of the provision for doubtful debts, conforms with the fair value. (SEK thousand) 31/12/ /12/2014 Group Age analysis of accounts receivables Gross Reserve doubtful Acc. receivable Gross Reserve doubtful Acc. receivable Not due 13,032 19,271 Due 30 days 5,007 9,854 Due days Due days 3 Due >90 days Total 18,750 29,202 (SEK thousand) 31/12/ /12/2014 Parent company Age analysis of accounts receivables Gross Reserve doubtful Acc. receivable Gross Reserve doubtful Acc. receivable Not due Due 30 days 207 Total

67 Notes 65 Note 19 Prepaid expenses and accrued income Group Parent company (SEK thousand) 31/12/ /12/ /12/ /12/2014 Other prepaid costs 1,220 1, Prepaid rent , Accrued revenue sales of wind turbines 1,171 21,219 Prepaid project costs 909 Prepaid construction costs 45,354 Accrued income electricity sold 10,637 2,296 Accrued project revenue 146,605 96,880 Other accrued revenue 2, Total 209, ,302 1,938 1,063 Note 20 Overdraft facility Group Parent company (SEK thousand) 31/12/ /12/ /12/ /12/2014 Overdraft facility granted 50,000 50,000 50,000 50,000 Unutilised overdraft facility 50,000 50,000 50,000 50,000 Utilised overdraft facility Note 21 Share capital development Registration date at Swedish Companies Registration Office Event Change, share capital SEK Total share capital in SEK Number of A shares/ change Number of B shares/ change Quota Value 06/12/2010 The company was registered 100,00 100,00 1, /02/2011 New share issue 1, , , /02/2011 Conversion of series A shares to series B 101,905 49,977 49, ,905 51,928 49, Share capital: Share capital consists of 101,905 shares with a ratio value of SEK 1 divided into 51,928 series A shares, 49,977 Series B shares and no preferential shares. One series A share entitles the holder to ten votes and series B shares entitle the holder to one vote each. Note 22 Other contributed capital In the context of restructuring in 2011, OX2 Group AB received a capital contribution of SEK 72,836,000. Note 23 Translation reserve and hedging reserve Translation reserve The translation reserve includes exchange differences arising from the translation of the financial statements from the Finnish subsidiaries that have drawn up their financial reports in euros and the Polish subsidiary which presents its financial statements in Polish zloty. Hedging reserve The hedging reserve includes the effective portion of the accumulated net change in the fair value of a cash flow instrument attributable to hedging transactions that have not yet occurred.

68 66 Notes Note 24 Long-term liabilities Group Parent company (SEK thousand) 31/12/ /12/ /12/ /12/2014 Due for payment 2 to 5 years after balance sheet date: Financial leasing 1,408 2,461 Internal Group loans 1) 34,029 Total 1,408 2,461 34,029 1) in connection with restructuring in 2011 the parent company was granted a loan from the subsidiary OX2 Wind AB, Corp. ID no The loan was repaid in Note 25 Derivative instruments Group Parent company (SEK thousand) 31/12/ /12/ /12/ /12/2014 Change in value of currency hedging as at 31/12/ ,835 Total ,835 Outstanding forward exchange contracts 31/12/ /12/2014 Expiration year 2015 EUR EUR Amount (EUR) Average contract rate Forward rate as at 31/12/2015 Expiration year 2016 EUR EUR Amount (EUR) 1,108 13,739 Average contract rate 9,198 9,208 The forward rate as at 31/12/2015 9,135 9,516 A derivative instrument is an unrealised value change relating to exchange hedging that is part of the financing of the Maevaara 2 project. Currency hedging concerns VAT repayment which becomes due in The secured amount in euros corresponds to the amount to be paid to the Swedish Tax Agency. OX2 applies hedge accounting for financial instruments in accordance with IAS 39. This means among other things that changes in the value of derivatives that are obtained for hedging of cash flow risks are recognised in equity via comprehensive income. The nominal value of outstanding currency contracts amount as at end of December 2015 to SEK 10.1 million (76.1). The market value of the outstanding foreign exchange contracts as at 31 December 2015 amounted to SEK 30.3 thousand (76.4). We use the valuation based on information from the bank that we consider to be in accordance with a Level 2 valuation when it is based on the discounted cash flows with the help of market data per year-end date. Note 26 Advance payments from customers Group Parent company (SEK thousand) 31/12/ /12/ /12/ /12/2014 Advance payments from customers, Rödstahöjden project 71,917 17,170 Advance payments from customers, Maevaara 2 project 39,689 Advance payments from customers, Bösjövarden project 38,880 Advance payments from customers, Jouttikallio project 26,208 1,999 Advance payments from customers, Maevaara project 7,424 Advance payments from customers, Mässingberget project Advance payments from customers, other projects 38 State funding 32 1,356 Total 137,807 66,829 State funding OX2 has received support from the Swedish Energy Agency to run a development project called Storskalig Ekonomisk Vindkraft i Fjällmiljö [Large-scale Economic Wind Power in Upland Environments]. The project started in 2008 and the aim of the project is to contribute to the development of a de-icing system for wind turbines, an important part of the development of technology to achieve the most efficient generation of electricity from wind power in cold climates. In addition to undertaken technology development, OX2 is carrying out an ice survey across Sweden within the framework of the project. The project ended during 2015, in accordance with the plan.

69 Notes 67 Note 27 Other current liabilities Group Parent company 31/12/ /12/ /12/ /12/2014 Project financing 1) 12,823 1,024,685 VAT 3,743 21,025 1,502 1,737 Energy tax 1,740 1,711 Withholding tax 1, PWP Produktion AB 2) 8,650 8,650 Supplementary purchase price for acquisition of Stigshöjden 1,838 1,838 Part of the short-term debt financial leasing Reserve relating to Enstar acquisition 2,276 Other items 444 1,193 Total 33,366 1,060,901 1,761 1,937 1) 2015 project financing covers debt to Innopower for the purchase of the project portfolio comprising four Finnish projects related to the project financing for construction of the Maevaara project. 2) SEK 8.65 million to be settled in the event of a future sale of wind turbines to PWP. Note 28 Accrued expenses and pre-paid income Group Parent company (SEK thousand) 31/12/ /12/ /12/ /12/2014 Accrued personnel costs, including social security payments 18,070 11,499 3,130 3,140 Accrued consulting costs 4,906 1, Accrued costs of electricity sold 8,192 10,470 Accrued energy tax 2,124 2,321 Accrued project costs 296,840 19,314 Accrued construction costs 4,690 15,280 Accrued sales costs Pre-paid income Other items 1,928 1, Total 337,386 62,193 3,673 3,932 Note 29 Pledged assets and contingent liabilities Pledged assets Group Parent company (SEK thousand) 31/12/ /12/ /12/ /12/2014 Shares in subsidiaries 1) 177, , , ,080 Bank deposits 408 6,664 Total 177, , , ,080 1) Refers to 10,000 pledged shares in the subsidiary OX2 Wind AB as security to Swedbank AB for overdraft facility. Contingent liabilities Group Parent company (SEK thousand) 31/12/ /12/ /12/ /12/2014 Indemnity bond 1) 129,147 37,632 44, ,421 Parent company guarantee to external suppliers and buyers 2) 126,071 1,065,534 Total 129,147 37, ,365 1,187,955

70 68 Notes Note 29 Assets pledged and contingent liabilities, cont. 1) OX2 Group AB, OX2 Wind AB and OX2 Construction AB have signed an indemnity bond in favour of Atradius Credit Insurance NV because Atradius Credit Insurance NV has issued guarantee obligations to Mässingberget Vind AB on the occasion of the asset transfer agreement with OX2 Wind AB and the EPC agreement with OX2 Construction AB. Both agreements were signed on 4 December Under the indemnity bond OX2 Group AB, OX2 Wind AB and OX2 Construction AB will compensate Atradius Credit Insurance NV in the event that Atradius Credit Insurance NV is forced to honour its guarantees. The compensation shall be paid for the amount paid plus interest and costs incurred by reason thereof. The total amount of the guarantees at Group level amounts to approximately SEK 25.7 million and at the parent company level to approximately SEK 25.7 million. OX2 Group AB and OX2 Wind Production AB have concluded an indemnity bond in favour of Euler Hermes SA in connection with Euler Hermes SA providing a guarantee obligation to Allianz Renewable Energy Partners IV Ltd in respect of the share purchase agreement dated 23 May 2013 for the sale of the shares in Maevaara Wind AB. Under the indemnity bond, OX2 Group AB and OX2 Wind Production AB will compensate Euler Hermes SA in the event that Euler Hermes SA is forced to fulfil its guarantee. The compensation shall be paid for the amount paid plus interest and costs incurred by reason thereof. The total amount of the guarantees at Group level amounts to approximately SEK 18.6 million and at the parent company level to approximately SEK 18.6 million. 2) OX2 Group AB has lodged a parent company guarantee as security for the obligations that OX2 Wind AB, Rävaberget Wind AB and OX2 Construction AB have to Maevaara Wind 2 AB, Rävaberget Nät AB and Allianz Renewable Partners IV Limited in accordance with a share transfer agreement, an asset transfer agreement and an EPC agreement for the construction of Phase 2 of the wind farm at Maevaara (all these agreements were signed on 3 February 2015). The total amount of the guarantees at Group level amounts to approximately SEK 129 million and at the parent company level to approximately SEK 170 million Note 30 Operational acquisitions On 16 January 2015 and 10 February 2015, the Group acquired 100% of the share capital of Windfarm Högkölen AB and Ribäcken Vindpark Ab for SEK 9,302,000. On 8 June 2015, OX2 Group AB acquired 40,000 shares in the associated company Enstar AB and OX2 s ownership stake in the company increased from 44% to 64%. The company therefore changed from being an associated company to being classified as a participation in the Group companies. During November 2015, 24,000 shares were sold and the ownership stake at 31 December 2015 amounts to 52%. The following table summarises the purchase price paid for Windfarm Högkölen AB, Ribäcken Vindpark Ab and Enstar AB and the fair value of the acquired assets and assumed liabilities. Purchase price Cash and cash equivalents and conditional purchase price 11,593 Total purchase price paid 11,593 Reported amounts on the identifiable assets and liabilities acquired Construction projects in progress 4,473 Current receivables 5,793 Cash and cash equivalents 9,205 Long-term liabilities 0 Other current liabilities 8,345 Acquisition of minority 2,115 Total net identifiable assets 9,012 Difference between the purchase price paid and the net identifiable assets 2,581 Surplus value of construction in progress 4,857 Deferred tax on the surplus value of ongoing new construction 0 Other liabilities 2,276 Total 2,581 The fair value of acquired intangible assets has been assessed at SEK 9,012,000. The surplus value of SEK 4,857,000 that occurs through the acquisition relates to investments in progress in Windfarm Högkölen AB and Ribäcken Vindpark Ab. The revenue from Windfarm Högkölen AB that is included in the consolidated Income Statement since 16 January 2015 amounts to SEK 0. Windfarm Högkölen AB contributed with a loss of SEK 35,000 during the same period. If Windfarm Högkölen AB had been consolidated as of 1 January 2015, the consolidated income statement would show an income of SEK 0 and a loss of SEK 35,000.

71 Notes 69 Note 30 Operational acquisitions, cont. The revenue from Ribäcken Vindpark Ab that is included in the consolidated Income Statement since 10 February 2015 amounts to SEK 0. Ribäcken Vindpark AB contributed with a result of SEK 0 during the same period. If Ribäken Vindpark Ab had been consolidated as of 1 January 2015, the consolidated Income Statement would show an income of SEK 0 and a result of SEK 0. The revenue from Enstar AB that is included in the consolidated Income Statement since 8 June 2015 amounts to SEK 40,421,000. Enstar AB contributed with a profit of SEK 2,555,000 during the same period. If Enstar AB had been consolidated as of 1 January 2015, the consolidated Income Statement would show an income of SEK 60,320,000 and a profit of SEK 1,609,000. Note 31 Cash flow statement Adjustments for items not included in cash flow Group Parent company (SEK thousand) 31/12/ /12/ /12/ /12/2014 Share of results from associated companies 283 Depreciation/impairment 4, Total 4,128 5, Disclosure of interest paid and interest received Group During the year the interest paid amounted to SEK 399,000 (483,000) and interest received to SEK 303,000 (1,253,000). Parent company During the year the interest paid amounted to SEK 918,000 (2,055,000) and interest received to SEK 192,000 (829,000). Note 32 Transactions with related parties OX2 has had a company and ownership structure and carried out its activities in a way that means that the related transactions within the OX2 Group and with the Sjisjka Wind Group occurred within the framework of the ongoing operations. Examples of such transactions include asset transfer and invoicing of project management. Transactions between the company and its subsidiaries, which are related to the company, have been eliminated in the consolidation, so that this note does not contain disclosure of these transactions. Information about transactions between the Group and other related parties is presented below. Sale and purchase of goods and services Sale of goods and services Group Parent company (SEK thousand) Sjisjka Vind AB 400 Total 400 Purchase of goods and services No purchase of goods and services from associated companies has taken place during the financial year. There are no claims or liabilities arising from transactions with related parties at the end of the year. Note 33 Approval of financial reports The annual report was adopted by the Board of Directors and approved for publication on 5 April 2016.

72 70 Notes Statement The Board of Directors and the CEO hereby certify that the annual report has been prepared in accordance with the Swedish Annual Accounts Act and RFR 1.3 and 2.3 and gives a true and fair view of the financial position and results, and that the Directors Report gives a fair review of the development of the Group s operations, position and results and describes significant risks and uncertainties facing the company. The Board of Directors and the CEO hereby certify that the consolidated financial statements have been prepared in accordance with the International Financial Standards (IFRS) as adopted by the EU and give a true and fair view of the Group s financial position and results, and that the Directors Report for the Group annual report gives a fair review of the development of the Group s operations, position and results that describe significant risks and uncertainties facing the company. The annual report and consolidated financial statements have, as outlined above, been approved by the Board on 5 April The consolidated Income Statement and Balance Sheet will be subject to adoption by the Annual General Meeting on 19 April Stockholm, 5 April 2016 Johan Ihrfelt Thomas von Otter Anna-Karin Eliasson Celsing Chairman of the Board, Chief Executive Officer Johan Wieslander Margareta Alestig Johnson Jan Örtegren Niklas Midby Our audit report was submitted on 5 April Deloitte AB Svante Forsberg Authorised Public Accountant

73 71 Auditor s Report To the Annual General Meeting of the shareholders of OX2 Group AB Corporate ID no Report on the annual report and consolidated financial statements We have audited the annual report and the consolidated financial statements for OX2 Group AB for the financial year 1 January 2015 to 31 December The company s annual report and the consolidated financial statements are included in the printed version of this document on pages Responsibility of the Board of Directors and the CEO for the annual report and the consolidated financial statements The Board of Directors and the CEO are responsible for preparing an annual report that gives a true and fair view in accordance with the Swedish Annual Accounts Act and consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards, as adopted by the EU and the Swedish Annual Accounts Act and for the internal controls that the Board of Directors and the CEO deem necessary to establish an annual report and consolidated statements that are free of material misstatement, whether these are the result of irregularities or errors. The responsibility of the auditors Our responsibility is to express an opinion on the annual report and the consolidated financial statements based on our audit. We have carried out the audit in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. These standards require that we comply with ethical requirements and plan and perform the audit in order to obtain reasonable assurance that the annual report and the consolidated financial statements are free of material misstatement. An audit includes various measures to obtain audit evidence on the amounts and other information in the annual report and the consolidated financial statements. The auditor chooses which actions are to be carried out, including the assessment of the risk of substantial errors in the annual report and the consolidated financial statements, whether these are the result of irregularities or errors. In this risk assessment, the auditor takes into account the parts of the internal control that are relevant to how the company prepares the annual report and the consolidated financial statements in order to give a true and fair view for the purpose of designing review measures that are appropriate to the circumstances but not in order to make a statement on the effectiveness of the company s internal control. An audit also includes an assessment of the effectiveness of the accounting policies used and of the reasonableness of the accounting estimates made by the Board of Directors and the CEO, as well as an evaluation of the overall presentation of the annual report and the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to form a basis for our statements. Statement It is our belief that the financial statements have been drawn up in accordance with the Swedish Annual Accounts Act and provide in all essential respects a fair picture of the parent company s financial position at 31 December 2015 and of its financial performance and its cash flows for the year in accordance with the Swedish Annual Accounts Act. The consolidated financial statements have been drawn up in accordance with the Swedish Annual Accounts Act and provide in all essential respects a fair picture of the Group s financial position at 31 December 2015 and of its financial performance and its cash flows for the year in accordance with the Swedish Annual Accounts Act. The Board of Directors report is consistent with the other parts of the annual report and the consolidated financial statements. We recommend that the Annual General Meeting adopts the Income Statement and the Balance Sheet for the parent company and the Group.

74 72 Auditor s Report Report on other legal and statutory requirements In addition to our audit of the annual report and the consolidated financial statements we have also carried out an audit of the proposal for the appropriation of the company s profit or loss as well as the Board of Directors and the CEO s management of OX2 Group AB for the financial year 1 January 2015 to 31 December Responsibility of the Board of Directors and CEO The Board is responsible for the proposed appropriation of the company s profit or loss and the Board of Directors and the CEO are responsible for the management of the company pursuant to the Swedish Companies Act. The responsibility of the auditor Our responsibility is to obtain reasonable assurance to give our opinion on the proposal for the distribution of the company s profit or loss and the company s management, based on our audit. We have carried out the audit in accordance with generally accepted auditing standards in Sweden. As a basis for our opinion on the proposal of the Board of Directors for the appropriation of the company s profit or loss, we examined the Board of Directors reasoned opinion as well as a selection of the evidence for this in order to be able to assess whether the proposal is compatible with the Swedish Companies Act. As a basis for our opinion concerning discharge of liability, we have in addition to our audit of the annual report and the consolidated financial statements, examined significant decisions, actions taken and circumstances of the company in order to be able to assess whether any Board member or the CEO is liable for compensation to the company. We also examined whether any Board member or the CEO has in any other way acted in contravention of the Swedish Companies Act, the Swedish Annual Accounts Act or the Articles of Association. We believe that the audit evidence we have obtained is sufficient and appropriate to form a basis for our statements. Statement We recommend to the Annual General Meeting that the profit is allocated in accordance with the proposal in the Directors Report and that the members of the Board of Directors and the CEO are discharged from liability for the financial year. Stockholm, 5 April 2016 Deloitte AB Svante Forsberg Authorised Public Accountant

75 73 Glossary Balancing power Balancing power is the difference between the supply and delivery of energy for a balance manager. Bioenergy Bioenergy is the energy that can be extracted from biofuels, for example through the combustion of wood or organic waste, or through the use of biogas and ethanol. Biogas Biogas consists of, among other components, methane and carbon dioxide and water formed through digestion, i.e. the breakdown of organic material under oxygen-free conditions. Biogas is rich in energy and can be used as fuel for the production of electricity or as a propellant. Electricity certificate Tradeable certificates that are received on the production of renewable energy. Electricity generation capacity The total amount of electricity that it is possible to generate from a specific type of power or area. District heating System for central production of heat which is then distributed to connected buildings via pipelines containing hot water. Fossil fuel energy Energy from fossil fuels such as coal, oil and gas. Renewable energy Renewable energy sources are sources of energy which constantly renew themselves and therefore will not run out in the foreseeable future, such as wind and water and bioenergy. (Nuclear energy is not regarded as renewable since it is based on finite resources.) Nameplate capacity Output in accordance with the design data. Usually measured in MW. Legal force When the appeal period for a decision by a public authority has expired, the decision gains legal force. Nord Pool The Nordic electricity exchange. Normal year The definition of an average year for the quantity of generated. Project in the application stage Project application submitted to the permit authority. Project with approved permit Project for which the environmental permit and building permit have gained legal force. Project planning late stage Project with a minimum of six months of site-specific wind measurement. The preparation of documents for the permit application and design of the grid solution are in progress. Project planning early phase Project with signed land contracts giving the right to start wind measurements. The basic conditions for the project have been examined and are considered to be good. Consultation stage Project is under consultation with local residents, the authorities and organisations. The application for the permit, incl. the environmental impact assessment (EIA), is prepared. Availability Availability means the percentage of total time during which the wind turbine has been available for generating electricity. Turbine Wind turbine. Turbine supplier Supplier of complete wind turbines. Emission rights Emission rights give the holder the right to discharge a specified amount of carbon dioxide. Wind farm Group station consisting of at least 3 turbines. Wind turbine Free-standing wind turbine consisting of tower, nacelle and rotor. Greenhouse gases Gases which surround the earth and impede the escape of heat. The most important greenhouse gases are water vapour (H2O), carbon dioxide (CO2), nitrous oxide (N20), methane (CH4) and CFC (chlorofluorocarbons, freons). Transmission capacity The amount of electricity that can be transferred between different geographical areas via the grid. Units Energy is specified in kilowatt hours. 1 MWh = 1,000 kwh 1 GWh = 1,000,000 kwh 1 TWh = 1,000,000,000 kwh Power is specified in watts 1 MW = 1,000,000 W 1 GW = 1,000,000,00 W

76 IV OX2 s head office Lilla Nygatan 1 Box 2299 SE Stockholm Tel. +46 (0) Ineko Finanstryck Glötesvålen wind farm. Photo: Patrick Miller.