Opcon group in brief. Opcon's business concept. Opcon's objectives. Opcons vision

Transcription

1 annual report 2014

2 contents Contents 2014 in brief 3 Key dates in Opcon's organization 4 CEO s statement 5 Compressor technology / Waste Heat Recovery 6 Bioenergy 8 Opcon group in Opcon in 2015 and beyond 11 Corporate governance report 13 Board of Directors 17 Senior executives and auditor 18 Auditor s statement on corporate governance 18 Articles of association 19 Directors report 20 Consolidated income statements 24 Consolidated balance sheets 25 Changes in consolidated shareholders equity 27 Consolidated cash flow statements 28 Notes, Group 29 Parent company s income statements 46 Parent company s balance sheets 47 Changes in parent company s shareholders equity 48 Parent company s cash flow statements 49 Notes, Parent company 50 Signatures of the Board and President 55 Auditors report 56 5-year summary 57 Definitions 59 Addresses 59 Opcon group in brief Opcon is an energy and environmental technology Group that develops, produces and markets systems and products for eco-friendly, efficient and resource-effective use of energy. Opcon is a leader in a number of technical areas within energy and environmental technology. The Group focuses on the following areas: compressor technology, electricity generation based on waste heat, bioenergy-powered heating and CHP plants, pellets plants, handling systems for biomass, sludge and other recycling activities, handling systems for natural gas, industrial cooling, flue gas condensation, treatment of flue gases and air systems for fuel cells. Opcon has activities in Sweden, Germany, the UK and China. There are around 140 employees. The company s shares are listed on Nasdaq OM Stockholm. Opcon's business concept Opcon is an energy and environmental technology Group that develops, produces and markets products and systems for eco-friendly, efficient and resource-effective use of energy for customers active in the process and manufacturing industries, electricity and power generation, timber and forest industry, greenhouse cultivation and shipping. Opcon's objectives The Group shall generate good and sustainable profitability and aim for growth in order to create long-term growth in value for shareholders, create value for customers and provide a workplace where employees can develop. Opcons vision Opcon s vision is to be actively involved in building a society beyond dependency on fossil fuels. With high-technology products and services Opcon will actively contribute to global development towards a more energyeffective and eco-friendly society. 2 OPCON ANNUAL REPORT 2014

3 2014 in brief / events after 2014 / key dates in in brief Sales for remaining business were SEK million (275.0 m). Operating earnings (EBIT) for remaining business were SEK 18.3 million ( 52.1 m). The profit after tax was SEK 13.0 million ( 61.8 m). Earnings per share attributable to parent company shareholders for remaining business were SEK 0.03 ( 0.19). Opcon and its partner in China, Fujian Snowman Co., Ltd. formed a joint venture, Fujian Opcon Energy Technology Co., Ltd, for development, production and marketing of Opcon Powerbox on the Chinese market and parts of South East Asia. Opcon conducted a private placement of 30,000,000 shares in Opcon at SEK 0.57 per share with Hong Kong Snowman Technology Ltd. The purpose was to strengthen the development of the companies long term strategic cooperation that has begun and to link the companies more firmly together. Opcon s financial position was also strengthened for the activities being implement concerning Opcon Powerbox, and others. Opcon directed a private placement of 4,385,965 shares at SEK 0.57 per share to GEM Global Yield Fund Limited. The purpose was to raise capital and further strengthen the company s financial position. Claes Palm was appointed as the new CFO and deputy CEO of Opcon AB. Opcon decided to end all administration and activities in Åmål, Sweden. Wendy Lin, who was co-opted onto the Opcon board in 2013, was elected as a new member of the Board. Wendy Lin is assistant to the CEO of Fujian Snowman Co., Ltd., the Chinese refrigeration technology business that is a significant partner to Opcon as well as being Opcon s second largest owner through the subsidiary, Hong Kong Snowman Technology Ltd. Opcon won a large bioenergy order for Saxlund s fuel-handling and incineration technology in the UK. The order is worth around SEK 35 million with commissioning in This project is a collaboration between Saxlund in Sweden and the UK. Saxlund will deliver the fuel handling system with transport solutions and bar feeders as well as a high-pressure boiler powered by bioenergy. Opcon received an order for Saxlund s fuel handling equipment and incineration technology from the privately owned sawmill, Hilmer Andersson, HAL, Korterud, Sweden. The order is worth around SEK 28 million, with commissioning set for Opcon AB received an order for Opcon Powerbox state-ofthe-art Waste Heat Recovery technology. The order was from Opcon s strategic partner, Fujian Snowman Co., Ltd., China, for an Opcon Powerbox ORC and an Opcon Powerbox WST that will serve as reference plants in China. Opcon started a Group-wide programme to coordinate European activities within bioenergy to generate extensive savings and liquidate loss-making business. Saxlund International Holding AB will be the umbrella organization for the Group s bioenergy activities with around 80 employees at operations in Sweden, Germany and the UK. important events after the end of the period Continued good incoming orders for Saxlund s material handling systems from treatment plants in the UK. Saxlund International GmbH wins EUR 1.5 million order from Babcock & Wilcox Vølund for handling system at Skaerbaecksvaerket in Denmark. Opcon signs agreements with Fujian Snowman Co., Ltd. concerning development assignments for new compressors. Opcon Energy Systems signs first development agreement with joint venture, Fujian Opcon Energy Technology Co., Ltd. concerning expansion of Opcon Powerbox product line. Opcon raises SEK 10 million bank loan. Key dates in 2015 The Annual General Meeting will be held at 4 p.m. on 7 May 2015 at the premises of IHM Business School, Warfvinges väg 39, entrance floor, Stockholm, Sweden. The premises will be open for registration at 3 p.m. Registration must be completed by 4 p.m. for shareholders to be included in the voting register. Information about the conditions for participation at the meeting can be found at under Finansiell information / Stämmor / Årsstämma. The Q1 report for 2015 will be published on 7 May The Q2 report for 2015 will be published on 26 August The Q3 report for 2015 will be published on 11 November OPCON ANNUAL REPORT

4 Opcon group organization OPCON AB Stockholm, Sweden RENEWABLE ENERGY BUSINESS AREA COMPRESSOR TECHNOLOGY / WASTE HEAT RECOVERY Primary business companies BIOENERGY Primary business companies Fujian Opcon Energy Technology Co., Ltd. Owner share 49% SRM Svenska Rotor Maskiner AB Stockholm, Sweden Saxlund Bioenergy AB Stockholm, Sweden Saxlund International GmbH Germany Opcon s Chinese partner, Fujian Snowman Co., Ltd. sells its products under the trademark Snowkey Ice Systems. OES Opcon Energy Systems AB Stockholm, Sweden Saxlund International Ltd. The UK Boxpower AB Stockholm, Sweden SRE Svensk Rökgasenergi AB Stockholm, Sweden Opcon has businesses in Sweden, Germany, the UK and China. 4 OPCON ANNUAL REPORT 2014

5 Ceo's comments Continued focus on China In 2014 Opcon took the expected step and became a profitmaking business again. After a few years of tough cutbacks and savings the business turned back into profit mainly thanks to the sharp focus we have had in recent years on developing our activities in the Chinese market. Deepening collaboration with Fujian Snowman Co., Ltd. has given us the necessary platform for developing our compressor systems and Opcon Powerbox. Snowman is now Opcon s second largest owner with a holding of around 17% while also currently being one of Opcon s most important and stable customers. The collaboration was further strengthened during the year with the formation of a joint venture, Fujian Opcon Energy Technology Co., Ltd. in China, of which Opcon owns 49%. This building stone will be decisive for the continued development of Opcon Powerbox business by providing access to the largest market in the world and for establishing competitive production in China, which will provide significant competitive advantages globally. Continued improvement During the year the focus has been on achieving improvements in operating profits. Continued cost adjustments, a better purchasing structure and better internal coordination have produced results and will form a platform for continued improvement. The operating margin and operating profit in business operation have improved significantly compared with Despite the new share issue for Snowman, successful licence sales and positive earnings, 2014 still involved liquidity difficulties and the underlying improvement rate was not enough to lift earnings and cash flow sufficiently during the year. Continued savings measures produced a total of SEK 20 million in savings at an annual rate during the year. The effects of completed savings and additional cost adjustments in 2015 will lead to continued improvements. Increased activity level in bioenergy The largest part of the savings measures was implemented in the bioenergy sector where loss-making business was closed down. The bioenergy business is now seeing an increased level of activity internationally, including in the UK, where an increasing amount of the Group s resources in this field are now being directed. Relations with licence holder Axis Industries in Lithuania are also being further developed. Meanwhile the Swedish market remains weak with tough competition for the major projects that have been announced. The Group therefore is continuing its strategic transformation within bioenergy with an increased international focus and concentration on industrial incineration plants, handling systems, flue gas condensation and the aftermarket. Better coordination of European activities in the bioenergy sector will produce the right conditions for an improved selection of projects and produce higher profitability through coordination in the purchasing phase. Growing interest outside Sweden Low electricity prices in Sweden have hindered development of Opcon Powerbox, which is in the early commercialisation stage. However, interest from markets outside Sweden is growing. Throughput times for this type of business can be two to three years, however, which means that the continual market processing that is necessary to create a sufficiently large stock of sufficiently high quality quotations will be decisive for success. Overall the prospects are better than before for achieving profitable growth with the establishment in China and continued cooperation with Snowman being the key components for success and for increased profitability. Stockholm 15 April 2015 Rolf Hasselström President and CEO OPCON ANNUAL REPORT

6 Opcon's business areas: Compressor technology & waste heat recovery Collaboration around Opcon Powerbox with Snowman in China Considerable progress has been made in China in recent years as the strategic collaboration between Opcon and Snowman has grown stronger. In the spring of 2014 Snowman strengthened its ownership in Opcon through a directed placement of new shares. In Fuzhou, Snowman has built a new plant for production of, among other products, compressors developed by Opcon. The assessment is that Opcon s future licence revenue from Snowman s production over the coming ten years will increase successively to jointly exceed SEK 100 million for the period in total. In 2013 sales of compressor development to Snowman tripled and was worth more than SEK 30 million. This level was maintained in 2014 when Snowman also placed additional large development assignments with Opcon. For Opcon, Snowman s commitment and the collaboration that has started means that additional development assignments in cooling compressor technology can be expected from Snowman for a long period in the future as Opcon continues to strengthen its own capabilities. The extension of the collaboration that took place in September 2014 with the formation of a joint venture will be of decisive strategic importance. The joint venture will perform the commercialisation of Opcon s technology for waste heat recovery, Opcon Powerbox. The purpose is to develop the Chinese and other Asian markets while an industrialised production base is meanwhile created for producing Opcon Powerbox in series. For Opcon Powerbox the Chinese market has good prospects of becoming the largest in the world. Calculations show that there are around 500,000 industrial boiler plants in China. As China is still in a very early stage regarding the recovery of waste heat, this technology could significantly contribute to greater energy efficiency and reduced emissions to the benefit of the economy and environment in coming years. Two electricity systems from low-value waste heat In many industrial processes, during a large part of electricity generation throughout the world and during incineration of waste the energy involved is not fully exploited. Instead a lot of energy becomes waste or surplus heat, and it is not fully utilised. In addition to energy losses and decreased system efficiency further electricity supplies are used to cool down surplus heat. Between 20 and 50% of the energy used in industrial processes is being wasted. If energy efficiency increases and waste heat can be recovered there will be major benefits for the economy and the environment. In the US, for instance, it is estimated that industrial waste heat is equivalent to electricity generation from all renewable energy sources in the country. In discussions about waste heat recovery, waste heat is often classified by temperature, with high temperatures given higher value due to having higher energy content. Waste heat under 230 C in this context is usually considered to be low value waste heat, as it cannot be converted into electrical or mechanical energy to the same extent as waste heat at higher temperatures. The base for Opcon s growth platform in energy and environmental technology has primarily been built around energy efficiency with the focus on technology for exploiting low-grade waste heat. Using Opcon s proprietary Lysholm turbine Opcon is currently industrialising and commercialising two different systems for generation of electricity: Opcon Powerbox ORC (Organic Rankine Cycle), which produces electricity from water at temperatures as low as 55 C, and Opcon Powerbox WST (Wet Steam Turbine), which produces electricity from saturated steam with no overheating, providing clear advantages compared with traditional turbines. Opcon Marine develops Opcon s technology in Waste Heat recovery and electricity production for demanding marine applications. World-leading development of compressors Around 90% of all screw compressors produced around the world today are made by companies that have received technology licences from Svensk Rotor Maskiner, SRM. Opcon s Centre of Excellence at SRM in Nacka, Sweden, is a world-leading technological development centre for screw compressor technology, screw compressors and screw expanders. Together with other Group companies and customers, SRM develops unique solutions and new types of compressors. A special competitive advantage is the ability to produce in high tech short-series runs. SRM s solutions raise the efficiency of industrial processes, often with reduced environmental impact. Opcon s Centre of Excellence offers: Leading development Calculation and design Laboratory Short time-to-market Production including short-series production Prototyping Assembly and advanced testing Global licence manufacturing Unique energy and gas handling system A wide range of technical industrial service for compressors and gas handling systems For 107 years since 1908 SRM has played a crucial role in the Swedish and international development of a series of famous industrial products, especially twin-rotating steam turbines, air preheaters, screw compressors and screw expanders. 6 OPCON ANNUAL REPORT 2014

7 Opcon's business areas: Compressor technology & waste heat recovery The main plant in Fuzhou, China, of refrigeration technology company Snowman, with the new plant for production of compressors developed by Opcon. Snowman s plant for production of compressors. Snowman s products are sold under the brand name Snowkey, among other trade marks. Opcon Powerbox will be launched on Asian markets. Screw compressor technology from Opcon / SRM. Compressors from Opcon / SRM in a heat pump facility at energy company EDF in France. OPCON ANNUAL REPORT

8 Opcon's business areas: BIOENERGy Saxlund UK market leader in sludge handling Licensed manufacturing in Lithuania a big success for Saxlund technology Profitable operation thanks to robust flue gas condensation technology During 2014 and the start of 2015 Opcon s subsidiary, Saxlund International, has won a series of orders for material handling solutions for treatment plants in the UK. These orders cover specially designed silos for storage, emptying and transport of sludge cake, Saxlund s industry-leading sliding frame technology, screw conveyors and integrated control system. Saxlund International is a market leader in the UK in specialist material handling of waste sludge and biofuel. Customers operate treatment plants, cement plants and combined heating and power plants. Matt Drew, CEO of Saxlund International, forecasts continued growth for Saxlund s core business. It s a growing trend among treatment plants to develop their biological treatment to make the processes more efficient and recover more energy from the sludge, explains Matt Drew. Our systems are specially designed for storage and removal of materials that are difficult to handle, such as waste sludge. Our equipment has been tested and used at hundreds of installations in the UK and across Europe. We understand these processes and the risks involved, and we are confident that we have the best solutions on the market. Saxlund has 60 years experience of doing business in the UK, Sweden and Germany. The company has a complete range of products and systems for materials handling for bioenergy, combined heating and power, recycling and treatment plants. Orders received for systems for sludge handling at UK treatment plants, December 2014 to March 2015: Barhale Trant Utilities, for Southern Water waste water treatment works (WWTW) at Budds Farm in Havant and Millbrook. United Utilities and KMI Plus, for Leigh Wastewater Treatment Works, Wigan. Anglian Water, for Whitlingham Water Recycling Centre in Norwich. 8 OPCON ANNUAL REPORT 2014 SAXLUND Originalet sedan 1958 Since 2012, Opcon s subsidiary has benefited from a successful agreement concerning licensed manufacturing with Axis Industries in Lithuania. Axis is an established and well-known energy technology company that develops, designs, produces and installs equipment for combined heating and power plants, among other clients. Collaboration with Axis has many advantages for Opcon. One of the most important is that the company participates in a market in Eastern Europe that would otherwise be difficult to enter without establishing its own business. Axis is currently building a large combined heating and power plant in Tallinn based on Saxlund technology. The plant will produce 75 MW of thermal energy for the district heating network from the boiler and condensation system and deliver a further 15 MW of electricity into the supply grid. Right now there is a boom in the Baltic States and there are several projects that we could not have delivered to without our partner, Axis. This collaboration contributed to the development of our technology as we can prove that we are at the leading edge of development, says Stefan Wallerman, CEO of Saxlund Bioenergy AB. Current projects, Saxlund-Axis Combined heating and power plant, Tallinn, Estonia, for the Estonian energy company, Utilitas. Three furnaces from Saxlund and three flue gas condensers of Saxlund brand Svensk Rökgasenergi, SRE. Combined heating and power plant in Kaunas, Lithuania, for energy company Danpower Baltic. One furnace from Saxlund and one flue gas condenser from SRE. Previous projects Kaunas 40MW + biomass-based district heating: Two Saxlund furnaces and two SRE flue gas condensers. Bionovus 40MW + biomass-based district heating: Two Saxlund furnaces and two SRE flue gas condensers. NEO Pet 2x10 MW hot oil: Two Saxlund furnaces Hilmer Andersson sawmill, 12 MW: Saxlund furnace. In all incineration processes some of the energy content is lost as waste or surplus heat. In biofuel power plants, for example, the smoke emitted from the chimney often reaches temperatures of up to 230 C. Svensk Rökgasenergi, SRE, is a leader in energy efficiency and treatment of flue gases. The Renergi GK flue gas condenser is at the heart of System Renergi. This simple technology has special features that enable profitable operation. The product range contains a standardised range of boiler outputs from 1.5 MW to 30 MW that have so far been sold for boilers ranging from 1 MW up to 63 MW in 13 countries. Customers are district heating plants, sawmills, pellets manufacturers and various types of industrial users including greenhouses in Sweden, the Nordic region and the rest of Europe. SVENSK RÖKGASENERGI Originalet sedan 1992 For a district heating plant, the Renergi GK flue gas condenser increases energy efficiency by up to 20-25% depending on the fuel and operation and means that fuel consumption and emissions can be significantly reduced. In more and more countries, industry is meeting increased demands to treat particles in waste gases. SRE s flue gas condenser is an extremely robust and reliable system that ensures low emissions while the energy that goes lost in the flue gas is recycled. Payback in this investment is normally less than three years and particle purification is part of the bargain.

9 Opcon's business areas: BIOENERGy Opcon s partner in the Baltic States, Axis Industries, is building a large combined power and heating plant in Tallinn based on Saxlund s technology, that will be completed in 2016 at a cost of EUR 65 million. The plant will have three furnaces from Saxlund and three flue gas condensers of the Saxlund brand, Svensk Rökgasenergi. Opcon has large capacity for assembly, service and maintenance. A silo for storage and transport of sludge at a treatment plant, delivered by Saxlund International in the UK. A Saxlund furnace in a biofuel plant. The Renergi GK flue gas condenser from Opcon/ Svensk Rökgasenergi. OPCON ANNUAL REPORT

10 Opcon group in 2014 Opcon group in 2014 Sales for remaining business for the January-December period were SEK million (275.0 m). Operating earnings (EBIT) were SEK 18.3 million ( 52.1 m). Profit after tax improved significantly to reach SEK 13.0 million ( 61.8 m). Earnings per share attributable to parent company shareholders were SEK 0.03 ( 0.19). The key factor in the progress made during the year has been the formation of a joint venture, Fujian Opcon Energy Technology Co., Ltd, for Opcon Powerbox on the Chinese market and parts of South East Asia together with Fujian Snowman Technology Co., Ltd. of China. In accordance with the agreement signed during the period, Opcon has received approximately 49% of the shares in the newly started company, with Snowman receiving 51%. The joint venture company s registered share capital amounts to CNY 98 million (around SEK million). Opcon s capital contribution for approximately 49% of the shares in the company, corresponding to CNY 48 million (around SEK 56.6 million at the time of acquisition), comprises part-payment for exclusive and non-exclusive rights under a system licence for production, marketing and sales of the Group s proprietary technology, Opcon Powerbox ORC (Organic Rankine Cycle) and WST (Wet Steam Turbine) within the agreed territory. The joint venture thereby has a licence for exclusive manufacturing rights for Opcon Powerbox in China, Taiwan, Thailand, Vietnam, Indonesia, Malaysia and North Korea, exclusive sales rights in China, and non-exclusive sales rights in Taiwan, Thailand, Vietnam, Indonesia, Malaysia and North Korea. The total value of production and sales rights, assessed by a third party, amounted to CNY 72 million. Of this sum, CNY 48 million (around SEK 56.6 million) constituted payment for Opcon s capital share of approximately 49% of the joint venture. After SEK 27.7 million of this amount was reserved for elimination of internal profit the participation was reported net as other income amounting to SEK 28.9 million. In Q4 the remaining part, CNY 24 million, of the total agreed value of CNY 72 million was invoiced as royalties. This amount, after costs and internal profit elimination, positively affected net sales by SEK 19.3 million and operating profit by SEK 10.2 million in Q4. The joint venture was formed in September 2014 and intensive efforts are being made in China and Sweden to build this business for commercialisation and production of Opcon Powerbox at Snowman in China. Within Waste Heat Recovery / Compressor Technology the comprehensive development assignment for Snowman, with delivery of new compressor models and prototypes within the existing programme, remains the primary activity. At the end of 2014 a new, smaller licensing customer was added in Russia. Opcon has also meanwhile received increased international orders for its proprietary technology for compressors for biogas applications, which have otherwise been a disappointing area in recent years. The remaining bioenergy business has continued to make losses with a couple of older projects burdening the business and the ingoing order stock was not adequate. Losses were reduced thanks to a rationalisation programme that included the closure and winding up of companies. On the positive side, the bioenergy order stock has increased significantly during the year. The best development was on the UK market, in line with the strategy set for Saxlund after reorganisation. The order stock in the UK has increased both within bioenergy plants, including a major order for Twinwoods, and within materials handling, with several orders signed for a number of water treatment works. In Sweden a large order for Saxlund s fuel handling equipment and incineration technology was received from the privately owned sawmill Hilmer Andersson, HAL, Korterud, Sweden. The order is worth around SEK 28 million, with commissioning set for This plant will supply hot water to the timber driers based on incineration of waste products such as sawdust, wood chips and bark. The licence business with Axis has also been significant, with sales in 2014 amounting to around SEK 6.5 million. Development was weaker in Germany, which resulted in major efforts being made to boost sales and improve profit margins. The extensive savings programme that has been completed, and which included reduced financing costs, the closure in Åmål and the cutbacks in bioenergy, with the decommissioning and liquidation of subsidiaries, has delivered results. When the savings programme was initiated, total annual savings of over SEK 30 million were expected, with an effect in 2014 of around SEK 20 million. Despite considerable reductions in overhead levels and staff costs, progress in 2014 was not quite as much as predicted. This was partly due to the fact that the savings programme at Group level was countered mainly on the staffing front by recruitment within the Waste Heat Recovery and compressor technology sectors to strengthen the organization for its activities in China that are now intensifying following the formation of the joint venture with Snowman. 10 OPCON ANNUAL REPORT 2014

11 the opcon group in 2015 and beyond The Opcon group in 2015 and beyond When Opcon set the framework for its strategic move into energy and environmental technology ten years ago it did so based on the background of: Opcon s history and skills within technology for lean, energy-efficient development, Opcon s view of the market where increasing demand for energy due to population increases, economic growth and supply problems in meeting this demand with clean, safe energy would prompt strong market growth. History Svenska Rotor Maskiner (SRM) was formed in 1908 as AB Ljungströms Ångturbin to develop the twin-rotating steam turbine invented by Birger Ljungström and which was later sold to the current turbine producer Siemens Industrial Turbo Machinery AB. For over a century, Svenska Rotor Maskiner developed a series of products for the global market, including Ljungström s air preheater from the 1920s, which in the 1990s was selected as a landmark invention by the American Society of Mechanical Engineers. It made a major contribution to increasing the efficiency of large power stations. Since the 1930s compressor technology has been continually developed and major licensees include Atlas Copco, Hitachi, IR, Carrier, York, Trane, Kobelco, etc. Today, SRM is a key part of Opcon s Renewable Energy business area s focus on recycling waste heat using Opcon Powerbox. Greater demand for energy It is clear that global demand for energy is increasing significantly. This is primarily due to a combination of population growth and rising prosperity. The UN forecasts that the world s population will climb from 5.3 billion in 1990 to around 8.5 billion in Those are remarkable figures, even though the rate of increase by the end of this period will slow to almost half of what it was over the past 20 years. The International Energy Agency (IEA) predicts that overall global demand for energy will rise by two thirds from 2011 to 2035, of which most will be in non-oecd countries, led by China and India. Major efforts will obviously be required to meet targets for limiting global warming. Today, the energy sector accounts for two thirds of all global emissions of greenhouse gases. The need to restrict emissions from fossil fuel sources such as coal and oil, together with rising demand, are expected to result in significant increases in energy prices over time. Meanwhile there will be large regional differences in both demand and prices for energy. Energy prices In 2014 oil prices fell significantly. Meanwhile, electricity prices in Sweden have been very low, which has not favoured sales of parts of Opcon s product portfolio. Electricity prices on other markets are considerably higher, including China where Opcon is focusing an increasing share of its resources and where since 2014 the Group has a joint venture with Fujian Snowman Co., Opcon s sales per market, % Europe incl. Sweden China Other countries Ltd. for the commercialisation of Opcon Powerbox. In many Chinese provinces today electricity prices are twice as high as in Sweden. China the largest energy user As recently as 2000, energy consumption in China was half of what it was in the US. Today the IEA considers that China has exceeded the US as the world s largest energy consumer and that demand in China, especially for electricity, is continuing to rise. Over the next years, the IEA expects China to add further capacity to generate electricity equivalent to joint production in the US and Japan. Chinese energy production is highly dependent on fossil fuel. The country uses as much coal as the rest of the world combined. Meanwhile there is a strong commitment in China to restricting emissions and the IEA expects that growth in renewable energy in China up to 2035 will be stronger than in the EU, US and Japan together. In the immediate forecast period until 2019 alone, and despite the assumptions of a lower economic growth rate in China than in the past of 7% on average, the IEA expects that the bulk of new energy will be generated from carbon. But despite that, is also expected that 1200 TWh of new electricity will come from sources other than carbon. That means from gas, nuclear and renewable while increased energy efficiency will also contribute. When the IEA breaks down the numbers, it gives a perspective on the current development in China. The IEA forecast corresponds to assumptions of new hydropower equivalent to one new Three-Gorges dam per year, 110 GW of new wind power, which is close to the total installed capacity of wind power throughout Europe today, and 80 GW of solar power, which is more than Europe s total installed capacity today. The Chinese market has good prospects of becoming the largest in the world for Opcon Powerbox. It is estimated that there are over 500,000 industrial boilers in China. China is still at an early stage in recovering waste heat, and therefore an increase in capability to recover waste heat would contribute to greater energy efficiency and reduced emissions to the benefit of OPCON ANNUAL REPORT

12 the opcon group in 2015 and beyond the economy and environment in coming years. Higher electricity prices in China, growth and investment in the economy, the political will to increase energy efficiency and significantly lower production costs make Opcon greatly optimistic about the strategic collaboration that has started. Energy efficiency is key to an ecologically sustainable future The decisive factor in meeting demand for energy in a sustainable manner is the efficiency with which energy is consumed. The IEA estimates that up to 2035 as much as two thirds of the economic potential in increased energy efficiency is so far going unexploited and that therefore economically necessary measures could be implemented that would reduce energy demand by a volume equivalent to the entire oil production of Russia and Norway combined. One area that has special importance with regard to energy efficiency is the recycling of waste heat. In industrial processes and within a large part of the world s electricity production the energy involved is not being fully utilised. Instead, large portions of this energy are being converted into heat and either being wasted or not used. According to the IEA, only a third of the energy used to generate electricity eventually becomes electricity. The rest becomes heat. Opcon has concentrated significant resources into developing systems that offer different alternatives for utilising waste and surplus heat. These include systems for district heating and for electricity production, or a combination, depending on what best suits the customer. Opcon has directed its products onto the part of the market that is usually labelled low-grade waste heat, at temperatures below 230 C. Several of the systems, such as Opcon Powerbox ORC and WST, have global potential. The key component at the heart of Opcon Powerbox, is the Lysholm turbine, developed at Opcon s centre-of-excellence for screw compressor technology, Svenska Rotor Maskiner, SRM. One of the main competitive advantages of the Opcon Powerbox ORC is its efficiency at very low temperatures, which enables electricity generation for many more applications. Opcon Powerbox is also being developed and adapted for use in marine applications. Around 90% of global trade goes by sea, and ships are big users of oil. Prices for bunker oil have risen sharply over the past decade. Meanwhile, regulations have become much stricter for emissions of substances such as NOx, sulphur and particles from ships. As regulatory demands from the authorities get tighter, demand increases for better fuel quality and prices thus rise even further. As energy prices rise, the authorities sharpen requirements and actors in the marine industry commit themselves to reducing emissions, there is growing interest in greater energy efficiency. Biomass for electricity and heating Another important part of Opcon s business focuses on the bioenergy sector. Biomass has a special place among renewable fuels. Sweden has a unique position globally as over 60% of our energy used to generate heating comes from renewable energy sources, mostly biomass. There is tough competition on the Swedish market, which is well-developed. Opcon with its Saxlund and Svensk Rökgasenergi brands has a large installed base in the country. In recent years Opcon has driven through an extensive programme of change in its bioenergy business, redirecting activities and closing down several sections. The focus has shifted to activities outside Sweden. The IEA forecasts that global demand for bioenergy for electricity production will almost triple between 2011 and Swedish technology on international markets Over many years Opcon has channeled considerable resources into developing advanced energy-efficient technology. This applies especially to the compressor technology developed by Svenska Rotor Maskiner that is the heart of Opcon Powerbox. It also applies within bioenergy, where through Saxlund and Svensk Rökgasenergi, Opcon has developed a wide product portfolio that has good exporting prospects. Most of the sales in bioenergy are already taking place on markets outside Sweden. With the market growth Opcon sees in several markets overseas, greater efforts are now being made to develop international activities even further. The crucial steps in this development in recent years have been in the closer strategic collaboration with Snowman in China, where a joint venture was formed in 2014 for the commercialization of Opcon Powerbox, and with Axis in Lithuania within bioenergy. System price for electricity in Nordic region Eur/MWh Source: Nord Pool Spot, Nasdaq/OMX Commodities, Swedish Energy 110 Nord Pool, system price 100 Week Month 90 Quarter 80 Year OPCON ANNUAL REPORT 2014

13 corporate governance report Opcon's Corporate Governance Report for 2014 Opcon AB has its registered office in Stockholm, Sweden, and is a Swedish company listed publicly on Nasdaq OMX Stockholm. Opcon AB is the parent company of an energy and environmental technology Group. In addition to all regulations stated in law or other legal statute, the company applies the Swedish code of corporate governance. This Corporate Governance Report is not part of the formal reporting. Shares At the end of 2014 the company had around 7,424 shareholders, a rise of around 474 on the previous year. The largest shareholder was B.O. Intressenter (Mats Gabrielsson) with 18.0%. The next largest shareholder was Hong Kong Snowman Technology Ltd. with 17.0%. As part of ongoing refinancing, Opcon performed in Q a directed issue of 4,385,965 shares to GEM Global Yield Fund Limited. This raised SEK 2,500,000 for Opcon and was settled against debt. A private placement of new shares was also carried out of more strategic significance for the continued development of the long-term strategic collaboration that is joining Snowman and Opcon closer together. The private placement of 30,000,000 shares was agreed with Hong Kong Snowman Technology Ltd., raising SEK 17,100,000 for Opcon before costs. The issue was made with the authorization of the Annual General Meeting. The total number of registered shares at the end of 2014 was 378,800,110, an increase on the previous year of 34,385,965 shares. All shares are of the same category and give the same right to voting and dividends. Shareholders Meeting The rights of shareholders to make decisions concerning the affairs of the Company are exerted at the Annual General Meeting, which is held within six months of the end of the financial year. A number of central matters are addressed at the Annual General Meeting, including the adoption of the Company s income statements and balance sheets for the past year, the dividend, election of board of directors and auditors, etc. The notification of the Annual General Meeting and extra general meetings at which the articles of association are to be addressed, and including information about application to participate, the agenda for the meeting and information about matters to be addressed, shall be produced six weeks before the general meeting at the earliest, and four weeks before it at the latest. Shareholders or their nominees may vote with their full amount of owned or represented shares. Annual General Meeting At the Annual General Meeting of Opcon shareholders held on 6 May 2014 it was decided that the board of directors shall comprise six members without deputies. The meeting re-elected Kenneth Eriksson, Mats Gabrielsson, Rolf Hasselström, Bengt E Johnson and Bill Tunbrant, and the new election of Wendy Lin. Bill Tunbrant was elected chairman. Shiva Farahmandrad, Swedish Association of Graduate Engineers, is the employee representative on the Board. The Annual General Meeting authorised the board to reach a decision on whether to issue new shares or convertibles. The Board was authorised to take a decision on one or more occasions up until the next Annual General Meeting concerning the issue of new shares and/or issue of convertibles and/or subscription Owner ANNUAL GENERAL MEETING board of directors PRESIDENT How Opcon is governed AUDITORS options. Using this authorisation, at most 95,000,000 shares may be issued. The aim is to give the board resources in connection with investments, company acquisitions and raising capital. At the Annual General Meeting decisions were made concerning two incentive schemes. None of the schemes have yet been utilised and no shares have yet been issued to executives. The options scheme for Board members represents a deviation from the Swedish Code of Corporate Governance. The launch of the scheme was proposed by the company s largest shareholder to further increase the shared commitment between Board members and the company s shareholders. The scheme has not yet been utilized. Work of the Board Opcon AB s Board of Directors has six members elected by the Annual General Meeting, none of whom are woman. A presentation of Board members appears on page 17 of this annual report. In addition to members elected by the Annual General Meeting, there is one employee representative and one deputy. The CEO was a member of the Board in A minority of the Board members elected by the Annual General Meeting (Bengt E Johnson and Bill Tunbrant) are independent in relation to the company and the executive team, and can also be considered independent of the company s main shareholders. Only one Board member (CEO Rolf Hasselström) is part of the executive team. During the year, Wendy Lin, who represents Snowman, Opcon s second largest shareholder and largest customer, was elected onto the Board. After Weny Lin replaced the former independent Board member, Ulf Ahlén, the number of independent Board members in relation to the company and senior managers constitutes a minority, which is in deviation of the Swedish code of corporate governance. There are no other links between the two major shareholders, Mats Gabrielsson and Snowman. Working procedures for the Board are adopted annually at the first Board meeting held after the Annual General Meeting. Procedures include details about the division of responsibility among members of the Board, the chairman and the CEO. The Board has decided not to establish any committees and the entire Board thus participates in both the preparation of matters and decisions. The Board will make decisions on issues that are not a OPCON ANNUAL REPORT

14 corporate governance report part of regular administration or are of major importance such as key financial measures, contracts, investments and organisational changes. The Board determines the financial policy of the company. The Board s work follows an annual plan with a fixed agenda for each Board meeting. The company s Chief Financial Officer participates at Board meetings as the secretary. Other Group employees may make presentations to Board meetings. According to the Swedish code of corporate governance, the Board must ensure that either the company s Q2 or Q3 report is reviewed by the auditor. Due to a lack of resources, with a large part of the company s finance staff replaced during the year, the Board decided not to implement this measure this year. During 2014, 14 minuted Board meetings were held. The Board also met the company s auditors without any senior executives present. The CEO presents the economic and market situation at the scheduled Board meetings. The issues addressed by the Board in 2014, in addition to monitoring the current state of the business and the setting of budgets for the coming year, were primarily focused on the formation of the joint venture with Snowman for Opcon Powerbox in China, the restructuring and savings programme as well as financing and future structure of the Group. The chairman of the Board has responsibility for leading and developing the work of the Board. The process for assessing the work of the President and the Board, which has for several years included a regular survey and discussions between the chairman and Board members, has been restricted to discussions between the chairman and Board members following the abolition of the Nomination Committee. The Board has also evaluated the work of the President when he was not present. Guidelines for remuneration to senior executives The Board has not established a remuneration committee but has made the assessment that the entire Board shall both prepare and decide on this matter. This means that Rolf Hasselström, who is both a Board member and President, participates in this matter, which deviates from the Swedish code of corporate governance. The reason for this is that Rolf Hasselström, as owner of Calamus AB which is one of the company s largest shareholders, cannot be considered solely to be an employee of the company and is well suited to take care of the owners interests. Remuneration to the CEO and other senior executives shall comprise a combination of fixed salary, long-term incentive scheme, pension benefits and other benefits along with conditions governing termination of employment and severance pay. The overall compensation package shall be market-based, competitive and performance-based. Fixed salary shall be individual and based on each individual s responsibility, position and competence. Pension benefits shall be defined-contribution plans and give the right to pension benefits to Swedish citizens from age 65. Leading decision makers may be offered variable remuneration, which in Sweden amounts to a maximum of two monthly salaries based on the achievement of specific targets. When the company gives notice of dismissal the dismissal period is 24 months for the CEO and 12 months for other senior executives. The above guidelines applied for the 2014 financial year and were adopted by the 2014 Annual General Meeting. In 2014, no variable remuneration was paid to executives. Nominations committee The company no longer has a nominations committee, which deviates from the Swedish code of corporate governance. Attendance at Board meetings, 2014 Name Role Attendance Bill Tunbrant Chairman 14 of 14 Kenneth Eriksson director 14 of 14 Mats Gabrielsson director 14 of 14 Rolf Hasselström director 14 of 14 Bengt E Johnson director 14 of 14 Wendy Lin director 2 of 14 Shiva Farahmandrad director 14 of 14 The purpose of abolishing the committee was to reduce administration within the company to focus on revenuegenerating business and save resources. Auditors The company s auditors are chosen by the Annual General Meeting of shareholders. The meeting also establishes the fees to be paid to auditors. The auditors attend at least one Board meeting every year, in connection with the presentation of the annual accounts, when they submit their report on the company s results, financial position and internal controls. The Board does not have an audit committee and audit issues are addressed by the Board as a whole. When the auditors make their presentation to the Board the CEO and secretary leave the room to allow Board members to discuss with the auditors privately. The company s auditors attended one Board meeting in At the 2014 Annual General Meeting PricewaterhouseCoopers AB, PwC, was elected as auditing firm for the ensuing one-year period. Internal controls The Board has responsibility for internal control in accordance with the Swedish companies act and the Swedish code for internal controls. Risk assessment Opcon s risk assessment is based on the Group s financial goals for profitability and growth. The overall financial risks are not currently solely industry-specific and variable for different parts of the business, they also involve further risks of a general character associated with economic development and the effects of the financial crisis. There are also company-specific risks associated with the extensive organizational build-up connected with the development of new products. This has also led to failures in reaching targets historically and Opcon identifies significant risks that may constitute a threat to achieving the Group s goals. Measures to limit identified risks are produced at business area level or centrally at corporate level depending on their nature. An economic downturn and disruptions on world financial markets can have a negative effect on demand for the Group s products and also affect the Group s customers and suppliers. Given the global financial instability the company s customers may experience financial problems that could cause losses or disruptions for Opcon. Similarly, Opcon is involved in a number of large bioenergy projects for which disruptions could affect profit margins, profitability and liquidity. Changes in energy and electricity prices can also affect demand, with lower prices having a negative impact. In addition there are financial risks, principally involving liquidity, 14 OPCON ANNUAL REPORT 2014

15 corporate governance report price, currency and interest risks and the Board continues to consider that the level of liquidity is unsatisfactory to ensure uninterrupted and problem-free operation with growth. The company is reporting a profit for the 2014 fiscal year, but as the company s accounts for earlier years show the company has made losses previously. There is no guarantee that the company will make a profit in the future. The Group s ability to receive longterm loans and short-term credit are also significantly affected by the current situation on capital markets, which can affect the company s liquidity and growth opportunities in future. The Group is exposed to a short-term liquidity risk in the form of customers paying invoices after the agreed date. Opcon s view of the various financial risk factors that affect its business are presented in note 1, section 3 of this annual report. Other risk factors include the following: Dependency on business cycle Economic trends affect the overall willingness to invest in the business world in general and thus also Opcon s customer groups. The company s sales are mainly affected by demand in general industry, where a significant part of Opcon customers are active. Thus, Opcon s ability to sell its products and services is indirectly affected by factors affecting economic confidence both in Sweden and abroad, such as interest rates, inflation, exchange rates, energy prices, environmental legislation, political uncertainty and unemployment. Technology development The market areas in which Opcon operates are characterized by long sales cycles. The company s technology must therefore be accepted to a large extent by the leading players on the market, both by suppliers and among customers. The market must be mature enough to understand and embrace the new technology supplied by the company. This can mean that major investments in marketing and sales are required to achieve the expected sales volumes. As markets in which the Company operates grow and the number of players increases, there is a risk that alternative technologies are developed and that the price of comparable products falls. As the company introduces new technology shortcomings and problems can also arise afterwards that were not obvious from the beginning, which can adversely affect the company s operations, performance and financial position. Customer dependence Opcon works continually to actively broaden its customer base to reduce dependence on individual customers. If a major customer becomes insolvent or selects another supplier this could have a negative impact on Opcon s earnings and financial position. At the same time the strategic investment made in China and the developing partnership with Chinese Snowman is a departure from these efforts. Sales to Fujian Snowman Co., Ltd., and the joint venture Fujian Opcon Energy Technology Co., Ltd., amounted in 2014 to a total of 21% of sales. Sales to Snowman and the joint company in 2015 are expected to be substantial, and Opcon is now devoting substantial resources to build up the joint venture for Opcon Powerbox. The rate at which the joint venture Fujian Opcon Energy Technology Co., Ltd. develops therefore is expected to be of great importance for Opcon s earnings and financial position. The speed at which Opcon Powerbox is introduced in Australia depends on Opcon s customer, partner and affiliated company in Australia, Enerji Ltd., gaining adequate funding for its activities. As Australia as a market, and especially the part that lacks electricity supplies, is of interest to Opcon, a failure of Enerji to finance their activities would have an adverse influence on Opcon s earnings and financial position. Opcon has previously had a significant sale of new technology with good prospects to the Russian oil and gas industry. The company sees a risk that the West s relations with Russia may influence Opcon s sales and growth opportunities. Project risks In parts of the business, not least in bioenergy, large portions of sales are conducted as projects where far-reaching guarantees and other commitments are expected from suppliers. These projects can be run over a long time, sometimes over a year. With many parties and complicated technical solutions involved disruptions at subcontractors, on-site or otherwise could cause delays and cost overruns that could result in negative impacts on Opcon s earnings, cash flow and financial position. Competitors and pricing Opcon operates in a competitive market which means that increased competition may adversely affect the company s operations, performance and financial position. For example, customers to a greater extent than previously may select products that compete with Opcon s current and future product offerings. It cannot be excluded that increased competition may affect Opcon s margins. Within bioenergy, where the majority of sales are project sales, the pressure on profit margins due to the recession has been very clear. Dependence on suppliers Some suppliers are necessary for current production and if the Group loses one or more of these, or if alternatively, deliveries are late or of poor quality, it can lead to delays which would mean additional costs for the Group. Dependence on Key Personnel It is important for Opcon to attract and retain qualified staff and management. Key persons are deemed to have a significant impact on the company s future success. If key personnel leave Opcon or if Opcon is unable to attract qualified personnel this could have negative consequences for the company. Reorganization Major reorganizations and restructuring and savings programmes like that implemented within the Renewable Energy business area, carry an increased risk of disruptions in operations not at least in the short term. There is also a risk that desirable financial effects are not fully achieved or will take longer than expected before their full impact is felt. Government regulations and environmental requirements The environmental risks within Opcon s business is mainly attributable to the chemicals present in production processes. It is conceivable that future stringent environmental standards may impose new and stricter requirements for the company s operations, such as requirements for the replacement of chemicals used in operations. Political decisions can also affect the pricing of chemicals used in business. Research and development Opcon s research and development activities are primarily OPCON ANNUAL REPORT

16 corporate governance report focused on the development, construction and testing of new products, or improvement of existing products, in the areas of generating electricity from waste heat and compressor systems. Continual research and development is required in order to maintain Opcon s position. The development and industrialization of Opcon Powerbox is a significant undertaking. This is a large and extensive commitment in which Opcon also depends on other external actors. Overall, there is always the risk that development projects become more costly or take more time than expected. If this should occur on the marine side, because of the size of the project, lead times, etc. it would have greater consequences than for land applications. Product liability and damage claims In the event of production faults or improper use, some of Opcon s products could give rise to personal injury or property damage, whereby the company may become subject to claims regarding product liability, warranty disclaimers and other legal claims. This can also apply to quality defects or late delivery. Such claims can involve large amounts, particularly with regard to the fact that in those industries that Opcon operates in, extensive guarantees and other commitments are expected from suppliers. Protection of intellectual property In relation to its size, Opcon invests significant resources in product development. To ensure the return on these investments, the company actively protects its rights and monitors the activities of competitors. If necessary, the company will protect its intellectual property rights through legal processes. There is always a risk that competitors with or without intent will infringe Opcon s rights. Should this occur, there is a risk that the company cannot assert its rights relating to patents, trademarks, and know-how fully in court proceedings. There is further no guarantee that Opcon s rights will not infringe a competitor s rights, or that Opcon s rights will not be attacked or contested by competitors. It may not be excluded that Opcon could be drawn into litigation by competitors for alleged infringement of competitors rights. Should this occur, there is a risk that the company will suffer significant costs and the company s ability to conduct operations will be adversely affected. Opcon is also dependent on know-how and it cannot be ruled out that competitors may develop corresponding know-how or that Opcon fails to protect its knowledge effectively. These risks will also increase as Opcon expands its operations into new markets, including China. Control activities Risks concerning financial reporting are handled through various control activities. Opcon has gathered its economic function within the Swedish operation to become a corporate function within Opcon AB. This is being done partly to improve efficiency but also to raise the quality of financial reporting and sharpen administration routines, where the company still sees room for improvement. To handle risks, there are automatic checks using IT systems that manage authorisation and verification. Economic analysis is being developed to improve continual monitoring of financial results and follow-up against budget and forecasts to complement the business-specific controls and give overall confirmation that reports maintain the required quality. The investment in a new business system and consolidated accounts system that has taken place in recent years to further improve quality of financial reporting and economic analysis, has proven too complicated and expensive following the sale of SEM, and a review has been initiated. This review will include further development of authorization and attestation systems. Work has continued on developing new, uniform templates and models for identifying and documenting processes and controls, with major efforts to establish new structures for customer and supplier agreements, economic analysis, project control, etc. During 2014 all remaining administration at Åmål was wound up and moved to Stockholm. Consequently the internal IT department was abolished and these services have been outsourced. In 2015 strong efforts will be made to enhance the business system and strengthen the Group-wide economic function and development of controller functions. Information and communication Opcon has clear and straightforward information and communication channels for financial reporting and all managers are aware of existing policies. As part of the review of the business system that has started, communication of practical guidelines intended to improve distribution channels and structure the information requirement will be revised. Follow-up/monitoring The finance department and senior managers continually analyse financial reports for the Group. Activities have been centralized further in order to strengthen control and measures have been implemented to successively improve in areas where weaknesses have been identified. At their Board meetings, directors monitor the financial situation and receive a report once a year from the company s auditors which includes their observations and recommendations. Internal audit The Group s overview and analysis of the control process and internal controls has focused on the fast-growing Renewable Energy business area, where a decision has now been taken to centralize economic control in Sweden into a corporate function. Considering the above work on internal controls, the Board has made a decision that a special internal audit function is not required. Continued work The ongoing work on internal controls within Opcon will focus in the coming year on risk assessment, control activities and follow-up/monitoring. The main focus will remain on the Renewable Energy business area and on integration of international activities with continued organizational changes. Work on the new business system and on the consolidated financial reporting system will also be important. 16 OPCON ANNUAL REPORT 2014

17 corporate governance report: OPCON'S board of directors From left: Bill Tunbrant Shiva Farahmandrad Wendy Lin Rolf Hasselström Kenneth Eriksson Mats Gabrielsson Bengt E Johnson Bill Tunbrant (independent) Born Civil engineer, KTH. Chairman of the Board of Opcon AB since Board member since Other assignments: Board member of Nordic Coag Invest AB, Nordic Biomarker AB, Bio-Yao AB, Sinoreagens AB, Timcon AB and Medirox AB. Part-owner of Timcon AB. Owner of Timcon. Previous assignments: Chairman of the board of Temporent AB. Board member of China Health Labs & Diagnostics Ltd. (Toronto TSX-V), Vikwon Sweden AB, XSpray Microparticles AB, Nordic Modular Leasing AB, Temporent A/S, Denmark, NIBE Industrier AB, Liacon AB, Flexihus Rent i Sverige AB and Rehact AB. Holdings in Opcon as of 31 March 2015: 60,020 shares. Mats Gabrielsson Born Graduate Business Administrator, HHS. Board member of Opcon AB since 2013, Chairman of the Board of Opcon AB Other assignments: Chairman of the Board of Gabrielsson Invest AB, B.O. Intressenter AB, City Dental i Stockholm AB and others. Board member of Music Network Records Group AB, TPC Components AB, Bofast AB, Rapid Larmcentral AB, and others. Previous assignments: Chairman of the Board of Malka Oil AB (publ), board member of Svenska Rotor AB, Tamm & Partners Fondkommission AB, and others. Holdings in Opcon as of 31 March 2015: Via family and companies 68, 129,066 shares (19.4% of total). Bengt E Johnson (independent) Born Civil engineer, KTH. Board member of Opcon since Other assignments: Board member of Somas Instrument AB, Aktiebolaget Somas Ventiler, CS Produktion AB. Previous business: CEO of BTG Källe Inventing AB, Geschäftsfuhrer BTG Processtechnik, member of senior corporate team at Spectris AG, board member of Matkultur i Säffle Aktiebolag. Owns no shares in Opcon. Kenneth Eriksson Born Graduate Business Administrator. Board member of Opcon since Operational business: CEO of Gabrielsson Invest AB. Other Board assignments: Chairman of Bofast AB, Rapid Larmcentral AB, Rapid Bevakning AB, and others. Board member of Gabrielsson Invest AB, B.O. Intressenter AB, TPC Components AB, and others. Previous business: Auditor within Tönnerviksgruppen (now part of Ernst & Young). Previous assignments: Svenska Capital Oil AB, Tamm & Partners Fondkommission AB, and others. Holdings in Opcon as of 31 March 2015: 750,000 shares. Rolf Hasselström Born MBA, Stockholm School of Economics. Board member of Opcon since Operational business: President and CEO of Opcon since Other assignments: Board member or Chairman of the Board of all Opcon subsidiaries, Chairman of the Board of Calamus AB and TPC Components AB. Board member of RMH Holding AB, Rolf Hasselström Konsult- och Förvaltnings AB, Landström arkitekter AB, Calamus Holding AB and Calamus Invest AB. Previous business: KemaNobel AB, Kenobel AB, Nobel Industrier AB, Calamus Aktiebolag, Svenska Rotor Maskiner AB and others. Previous assignments: Chairman of the Board of GEP Action AB, Music Network Records Group AB, Sincyl AB. Board member of Catella Förmögenhetsförvaltning AB, Lysholm Technologies AB, Calamusgruppen AB, Essarem Holding AB, Rotor Holding AB, Rapid Larmcentral Aktiebolag, Mind AB, Skå Edeby Utvecklings AB, MMSA Avveckling AB, GEP Design och Produktkommunikation AB and Enerji Ltd. Holdings in Opcon as of 31 March 2015: Directly and indirectly via companies 8,831,505 shares. Wendy Lin Born BSc in mathematics and finance, University College London. CEO assistant, Fujian Snowman Co., Ltd. Member of Opcon Board since Owns no shares in Opcon. Shiva Farahmandrad Born Civil engineer. Employed by Opcon Energy Systems AB. Board member of Opcon since 2013, employee representative of Swedish Association of Graduate Engineers. Owns no shares in Opcon. OPCON ANNUAL REPORT

18 corporate governance report: opcon's management team and auditors STATEMENT BY THE AUDITOR CONCERNING THE CORPORATE GOVERNANCE REPORT Fr om left: Rolf Hasselström Niklas Johansson Claes Palm Bo Hjalmarsson Rolf Hasselström Born MBA, Stockholm School of Economics. President and CEO of Opcon AB since Employed since Board member since Other assignments, see previous page. Holdings in Opcon as of 31 March 2015: Directly and indirectly companies 8,831,505 shares. Bo Hjalmarsson Born Authorised public accountant, PricewaterhouseCoopers AB, Stockholm. Member of FAR, the professional institute for authorized public accountants. Auditor of Opcon since In addition to Opcon, Bo Hjalmarsson has audit assignments at Eniro, Ericsson, SAS and Teracom, among others. Niklas Johansson Born MBA, Stockholm School of Economics. Deputy CEO of Opcon AB, Investor Relations, Strategic Development and Public Affairs. Employed since Other assignments: Chairman of Friends Agenda AB. Previous roles: political advisor at Government Offices of Sweden, Prime Minister s Office, Ministry of Industry, Employment and Communications, and Ministry for Foreign Affairs. Holdings in Opcon as of 31 March 2015: 336,560 shares. Claes Palm Born Accountant. Deputy CEO and CFO of Opcon AB. Employed since Holdings in Opcon as of 31 March 2015: 20,000 shares. Statement by the auditor concerning the corporate governance report To the Annual General Meeting of Opcon AB (publ), corporate registration no Assignment and division of responsibility We have read the corporate governance report for Responsibility for the corporate governance Report and its compliance with the annual accounts act, rests with the Board of Directors. Our responsibility is to make a statement on the corporate governance report based on our audit. Scope and focus of checks The audit was conducted in accordance with RevU 16 The auditor s examination of the corporate governance report. This means that we have planned and performed the audit to obtain reasonable assurance so that we can state that the corporate governance report does not contain material misstatement. An audit includes examining, on a test basis, evidence supporting the information in the corporate governance report. We believe that our audit provides a reasonable basis for our opinion. Statement We consider that a corporate governance report has been produced, and that its legal contents are in accordance with the annual report and with the consolidated accounts. Stockholm, 15 April 2015 PricewaterhouseCoopers AB Bo Hjalmarsson Authorised public accountant 18 OPCON ANNUAL REPORT 2014